TIDMBLOE
RNS Number : 0495O
Block Energy PLC
30 September 2019
30 September 2019
Block Energy Plc
("Block" or the "Company")
Interim Results for the 12 Months Ended 30 June 2019
Block Energy Plc ("Block" or "the Company"), the exploration and
production company focused on the Republic of Georgia, is pleased
to announce its interim results for the 12 month period ended 30
June 2019. This follows the change of accounting reference date to
31 December, which was announced in June 2019.
Highlights
-- Fully funded for a five well work programme, including the
appraisal well WR-16aZ, through 2019 and 2020 to increase oil
production and appraise gas discoveries at the West Rustavi ("West
Rustavi" or "the Field") field in which the Company held a 71.5%
working interest ("WI") at 30 June 2019 and increased to 100% WI
during July 2019.
-- Work programme includes:
o Drilling six wells across West Rustavi - four wells targeting
0.9 MMbbls gross 2P oil reserves and 38 MMbbls gross unrisked 2C
contingent oil resources and one re-entry gas well and one new well
targeting the 608 BCF of gross unrisked 2C contingent gas
resources.
o Acquisition of a 3D seismic survey to illuminate the Field's
subsurface and optimal locations for new drilling.
o Construction of new central production facility ("CPF") to
handle production capacity of 4,000-5,000 bbl/d.
-- Continuous review of fresh opportunities in Georgia and beyond.
-- Continued production at Norio (100% WI) and Satskhenisi (90% WI).
-- Strengthening the team with recruitment of new executive,
technical, operations, communications and administrative staff in
Georgia and London.
-- Excellent HSE record across extensive daily operations with no reported lost time incidents.
-- Raised GBP12 million through an equity placing at 11p per share in May 2019
Chief Executive Officer's Business Review
I am pleased to review the progress we have made over the past
12 months towards demonstrating and realising the potential of our
assets.
In April 2019, we were pleased to announce that the horizontal
sidetracking of the appraisal well WR-16aZ had delivered strong
test flow rates, demonstrating the Field's promise, which has an
estimated 0.9 MMbbls of gross 2P oil reserves, 38 MMbbls of gross
unrisked 2C contingent resources of oil in the Middle, Upper and
Lower Eocene and 608 BCF of gross unrisked 2C contingent resources
of gas in the Eocene and Cretaceous (Source: CPR by Gustavson
Associates, 1 January 2018). The Company plans to update the CPR
next year to incorporate the results of its drilling programme and
the 3D seismic survey.
Work programme
We have a fully-funded multi-well work programme and will roll
out the following programme through 2019 and 2020:
-- Drill four wells across the field - in addition to WR-16aZ -
beginning with well WR-38Z, analogous and updip to well WR-16aZ,
and targeting the same Middle Eocene formation.
-- Test one of the Field's gas discoveries and drill one new gas
well (to be funded from future cash flow).
-- Acquire a 3D seismic survey to provide a critical
understanding of West Rustavi's subsurface, enable pinpointing of
optimal locations for drilling, and accurately steer the path of
new horizontal wells.
-- Acquire well testing equipment.
-- Build new CPF at West Rustavi to handle production capacity of 4,000-5,000 bbl/d.
Executing the work programme
To date, we have worked systematically to implement each stage
of the programme:
-- Resumed production on 11 July 2019 at well WR-16aZ.
-- Engaged leading engineering consultants, NRG Well Management
Ltd, to provide operations planning and execution assistance. On 1
July 2019, secured an agreement with GOGC for immediate access to
up to 90,000 bbls of capacity at GOGC's principal storage facility
near the town of Sartichala, located some 30 km from West Rustavi
and readily accessible from the Khakheti motorway that runs by the
Field.
-- In July 2019, entered into an agreement with Georgia Oil and
Gas Limited ('GOG') for the hire of drilling and workover rigs and
equipment, saving the significant time and cost of negotiating with
individual suppliers and mobilising from abroad.
-- In August 2019, mobilised ZJ40 drilling rig for the
horizontal sidetracking of well WR-38Z and commenced drilling in
September 2019, targeting the Middle and Upper Eocene formations.
Well WR-38Z is being drilled on-trend with and updip of WR-16aZ,
with the benefit of valuable new information gained from operations
at WR-16aZ.
-- In September 2019, mobilised contractor for 3D seismic data
acquisition. The survey is designed to define the fault system and
fracture network within West Rustavi's Middle Eocene reservoir and
to image the contingent gas resources in the Lower Eocene and
Cretaceous formations. It will allow Block to identify optimal
locations for new oil and gas development wells across the Field.
Acquisition of the data will take two months to complete.
-- Following the Memorandum of Understanding executed last year
with Bago Ltd ("Bago"), one of the largest private gas suppliers
and purchasers in Georgia, the Company is currently negotiating the
terms of the final agreement. Under the terms of the Memorandum of
Understanding, Bago will acquire all gas produced from West Rustavi
and finance infrastructure the Field requires, including pipelines
to local infrastructure.
In parallel to working through our programme, in March 2019, we
increased our WI in West Rustavi from 25% to 71.5% and, in July
2019, to 100%, further to an agreement entered into with GOG in
February 2019. Block now benefits from a 100% economic interest in
the contractor's share of oil revenue (per the Production Sharing
Contract) and has greater control over the development of the
Field.
Financial Review
For the 12 month period ended 30 June 2019, Block reported a net
loss of US$3,484,000 (2018: US$1,835,000). This was higher than the
comparable period to 30 June 2018 due to an increase in business
activities following the ramp-up of operations in Georgia during
the second half of 2018 and 2019.
During the 12 month period ended 30 June 2019, Block incurred a
net operating cash outflow of US$2,154,000 (2018: US$534,000). The
Group held cash at 30 June 2019 of US$13,192,000 (2018:
US$5,278,000).
In May 2019, Block raised GBP12 million from investors through
an equity placing with our new brokers, Mirabaud Securities
Limited, to fund the work programme.
Subsequent to the period end, Block paid US$750,000 (comprising
US$250,000 in cash and US$500,000 in shares) to GOG as
consideration for the increase in its WI in the West Rustavi
licence from 71.5% to 100%.
Business Development Outlook
We used the GBP5 million we raised at the time of our IPO in
June 2018 to demonstrate our capacity to undertake disciplined
low-cost operations and prove the value of our assets. We look
forward to continuing to execute our West Rustavi work programme
during the remainder of 2019 and 2020, and to reviewing new
opportunities in Georgia and the wider region. We are a dynamic and
ambitious company ever open to prospects for applying the low-cost,
innovative drilling technologies we have deployed and demonstrated
across our current licences. We have a fuly funded five well
drilling programme in the months ahead, providing our investors
multiple, near-term value creating opportunities.
Paul Haywood
Chief Executive Officer
Roger McMechan, Technical Director, has reviewed the reserve,
resource and production information contained in this announcement.
Mr McMechan has a BSc in Engineering from the University of
Waterloo, Canada and is a Professional Engineer registered in
Alberta.
This announcement contains inside information which is disclosed
in accordance with the Market Abuse Regulation which came into
effect on 3 July 2016.
The Directors of the Company accept responsibility for this
announcement.
For further information please visit
http://www.blockenergy.co.uk/ or contact:
Paul Haywood Block Energy Plc Tel: +44 (0)20 7997 6136
(Chief Executive Officer)
Neil Baldwin Spark Advisory Partners Limited Tel: +44 (0)20 3368 3554
(Nominated Adviser)
Peter Krens Mirabaud Securities Limited Tel: +44 (0)20 3167 7221
(Corporate Broker)
Billy Clegg / Owen Roberts / Violet Wilson Camarco Tel: +44 (0)20 3757 4980
(Financial PR)
Notes to Editors
Block Energy is an AIM-listed independent oil and gas company
focused on production and development in the Republic of Georgia,
applying innovative, modern technology to realise the full
potential of previously discovered fields. The Company is pursuing
a fully-funded multi-well programme through 2019/20 designed to
convert contingent resources to reserves, and reserves to
revenue.
The Company has a 100% working interest in the highly
prospective West Rustavi onshore oil and gas field with multiple
wells that have tested oil and gas from a range of geological
horizons. The Field has so far produced 50 Mbbls of light sweet
crude, and has 0.9 MMbbls of gross 2P oil reserves in the Middle
Eocene. It also has 38 MMBbls of gross 2C contingent resources of
oil and 608 BCF of gross unrisked 2C contingent resources of gas in
the Middle, Upper and Lower Eocene formations (Source: CPR by
Gustavson Associates: 1 January 2018).
Block also holds 100% and 90% working interests in the onshore
oil producing Norio and Satskhenisi fields.
The Company offers a clear entry point for investors to gain
exposure to Georgia's under-developed opportunities and strong
regional demand for oil and gas.
Glossary
1. Block is using the suffix 'Z' in a well number to indicate a horizontal sidetrack.
2. Wells have been referred to as '16aZ' and '38Z' in previous
updates. The Company is now prefixing well numbers with the
initials of the field in which they are located. '16aZ' at West
Rustavi, for example, is now referred to as 'WR-16aZ'.
3. bbls and bbl/d: barrels and barrels per day. A barrel is 35 imperial gallons.
4. bopd: barrels of oil per day.
5. boepd: barrels of oil equivalent per day.
6. updip: located up the slope of a dipping plane or surface.
INDEPENT REVIEW REPORT TO Block energy PLC
Introduction
We have been engaged by the Company to review the condensed set
of financial statements in the interim financial report for the
twelve months ended 30 June 2019 which comprises the Condensed
Consolidated Interim Statement of Comprehensive Income, the
Condensed Consolidated Statement of Financial Position, the
Consolidated Statement of Changes in Equity and the Condensed
Consolidated Interim Statement of Cash Flows.
We have read the other information contained in the half-yearly
financial report and considered whether it contains any apparent
misstatements or material inconsistencies with the information in
the condensed set of financial statements and the related
notes.
Directors' responsibilities
The interim report, including the financial information
contained therein, is the responsibility of and has been approved
by the directors. The directors are responsible for preparing the
interim report in accordance with the rules of the London Stock
Exchange for companies trading securities on AIM which require that
the interim report be presented and prepared in a form consistent
with that which will be adopted in the Company's annual accounts
having regard to the accounting standards applicable to such annual
accounts.
Our responsibility
Our responsibility is to express to the Company a conclusion on
the condensed set of financial statements in the interim financial
report based on our review.
Scope of review
We conducted our review in accordance with International
Standard on Review Engagements (UK and Ireland) 2410, "Review of
Interim Financial Information Performed by the Independent Auditor
of the Entity", issued by the Financial Reporting Council for use
in the United Kingdom. A review of interim financial information
consists of making enquiries, primarily of persons responsible for
financial and accounting matters, and applying analytical and other
review procedures. A review is substantially less in scope than an
audit conducted in accordance with International Standards on
Auditing (UK) and consequently does not enable us to obtain
assurance that we would become aware of all significant matters
that might be identified in an audit. Accordingly, we do not
express an audit opinion.
Conclusion
Based on our review, nothing has come to our attention that
causes us to believe that the condensed set of financial statements
in the interim financial report for the twelve months ended 30 June
2019 is not prepared, in all material respects, in accordance with
the rules of the London Stock Exchange for companies trading
securities on AIM.
Use of our report
Our report has been prepared in accordance with the terms of our
engagement to assist the Company in meeting the requirements of the
rules of the London Stock Exchange for companies trading securities
on AIM and for no other purpose. No person is entitled to rely on
this report unless such a person is a person entitled to rely upon
this report by virtue of and for the purpose of our terms of
engagement or has been expressly authorised to do so by our prior
written consent. Save as above, we do not accept responsibility for
this report to any other person or for any other purpose and we
hereby expressly disclaim any and all such liability
BDO LLP
Chartered Accountants
London
29 September 2019
BDO LLP is a limited liability partnership registered in England
and Wales (with registered number OC305127).
Condensed Consolidated Interim Statement of Comprehensive
Income
For the period ended 30 June 2019
12 months
ended Year ended
30 June
30 June 2019 2018
Unaudited
Unaudited Restated
$'000 $'000
Continuing operations
Revenue 151 179
Cost of sales (489) (327)
--------------------------------------- -------------- -----------
Gross loss (338) (148)
Administrative expenses (3,137) (1,811)
Results from operating activities (3,475) (1,959)
Finance income - 1
Finance expense (9) (48)
Loss for the year before taxation (3,484) (2,006)
Taxation - -
Loss for the year from continuing
operations (attributable to the
equity holders of the parent) (3,484) (2,006)
--------------------------------------- -------------- -----------
Discontinued operations
Discontinued operations - Antubia
Ltd - 171
--------------------------------------- -------------- -----------
Loss for the year (3,484) (1,835)
Items that may be reclassified
subsequently to profit or loss:
Exchange differences on translation
of foreign operations (638) 50
Total comprehensive income for
the year attributable to the equity
holders of the parent (4,122) (1,785)
Condensed Consolidated Statement of Financial Position
As at 30 June 2019
30 June 30 June
2019 2018
Unaudited
Unaudited Restated
$'000 $'000
Non-current assets
Intangible assets 7 - 1,894
Property, plant and equipment 8 7,127 1,803
----------------------------------- ---------- ----------
7,127 3,697
Current assets
Inventory 360 334
Trade and other receivables 1,651 168
Cash and cash equivalents 13,192 5,278
----------------------------------- ---------- ----------
Total current assets 15,203 5,780
-----------------------------------
Total assets 22,330 9,477
Equity and liabilities
Capital and reserves attributable
to equity holders of the
Company:
Share capital 9 2,606 2,192
Share premium 27,330 12,221
Other reserves 869 460
Foreign exchange reserve (688) (50)
Accumulated deficit (9,181) (5,623)
Total Equity 20,936 9,200
Liabilities
Trade and other payables 1,136 218
Borrowings - 59
Provisions 258 -
----------------------------------- ---------- ----------
Total current liabilities 1,394 277
----------------------------------- ---------- ----------
Total equity and liabilities 22,330 9,477
----------------------------------- ---------- ----------
Consolidated Statement of Changes in Equity
As at 30 June 2019
Share Share Accumulated Other Foreign Total
capital premium deficit reserve exchange equity
reserve
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Balance at 30 June
2017 (as previously
stated) 1,217 2,721 (2,808) - - 1,130
------------------------- --------- --------- ------------ --------- ---------- --------
$'000 $'000 $'000 $'000 $'000 $'000
Balance at 30 June
2017 (restated in
US$ and unaudited) 1,581 3,536 (3,649) - - 1,468
------------------------- --------- --------- ------------ --------- ---------- --------
Prior year restatement - - (189) 189 - -
------------------------- --------- --------- ------------ --------- ---------- --------
Balance at 30 June
2017 (restated and
unaudited) 1,581 3,536 (3,838) 189 - 1,468
------------------------- --------- --------- ------------ --------- ---------- --------
Loss for the year
(restated in US$) - - (1,681) - - (1,681)
Prior year restatement,
share based payments - - (154) - - (154)
------------------------- --------- --------- ------------ --------- ---------- --------
Loss for the year
(restated) - - (1,835) - - (1,835)
Exchange differences
on translation of
foreign operations - - 50 - (50) -
------------------------- --------- --------- ------------ --------- ---------- --------
Total comprehensive
loss for the year - - (1,785) - (50) (1,835)
------------------------- --------- --------- ------------ --------- ---------- --------
Issue of shares 611 9,182 - - - 9,793
Cost of issue - (507) - - - (507)
------------------------- --------- --------- ------------ --------- ---------- --------
Share based payments - - - 127 - 127
Prior year restatement,
share based payments - - - 154 - 154
Prior year restatement,
Taoudeni - 10 - (10) - -
------------------------- --------- --------- ------------ --------- ---------- --------
Share based payments
(restated) - 10 - 271 - 281
------------------------- --------- --------- ------------ --------- ---------- --------
Total transactions
with owners (restated) 611 8,685 - 271 - 9,567
Balance at 30 June
2018 (restated and
unaudited) 2,192 12,221 (5,623) 460 (50) 9,200
------------------------- --------- --------- ------------ --------- ---------- --------
Loss for the year - - (3,484) - - (3,484)
Exchange differences
on translation of
operations in foreign
currency - - - - (638) (638)
------------------------- --------- --------- ------------ --------- ---------- --------
Total comprehensive
loss for the year - - (3,484) - (638) (4,122)
------------------------- --------- --------- ------------ --------- ---------- --------
Shares issued 414 16,000 - - - 16,414
Cost of issue - (891) - - - (891)
Share based payments - - - 335 - 335
------------------------- --------- --------- ------------ --------- ---------- --------
Total transactions
with owners 414 15,109 - 335 - 15,858
Balance at 30 June
2019 (unaudited) 2,606 27,330 (9,107) 795 (688) 20,936
------------------------- --------- --------- ------------ --------- ---------- --------
Condensed Consolidated Interim Statement of Cash Flows
For the 12 months ended 30 June 2019
12 months
ended Year ended
30 June 2019 30 June 2018
Unaudited Unaudited
Restated
$'000 $'000
Operating activities
Loss for the period before income
tax (3,484) (2,006)
Profit/(loss) from discontinued
operations - 171
Adjustments for:
Finance income - (1)
Finance expense - 48
Depreciation and depletion 169 48
Share based payments expense 597 246
Gain on sale of subsidiary - (171)
Foreign exchange movement (58) (5)
AIM admission costs - 518
---------------------------------------- -------------- --------------
Net cash flows used in operating
activities before changes in working
capital (2,776) (1,152)
---------------------------------------- -------------- --------------
(Increase) / decrease in trade
and other receivables (511) 149
Increase in trade and other payables 1,239 135
Increase / (decrease) in inventory (106) 334
---------------------------------------- -------------- --------------
Net cashflows used in operating
activities (2,154) (534)
---------------------------------------- -------------- --------------
Investing activities
Income received - 1
Expenditure in respect of intangible
assets (264) (796)
Expenditure in respect of PP&E (3,157) (709)
Considerations received on sale
of subsidiary - 611
---------------------------------------- -------------- --------------
Cash used in investing activities (3,421) (893)
---------------------------------------- -------------- --------------
Financing activities
Convertible loan notes issued - 484
Issue of ordinary share capital 14,574 7,061
Costs of issue of ordinary share
capital (891) (1,024)
Interest paid - (48)
---------------------------------------- -------------- --------------
Net cash flows from financing
activities 13,683 6,473
---------------------------------------- -------------- --------------
Net increase in cash and cash
equivalents 8,108 5,046
Cash and cash equivalents at the
beginning of year 5,278 280
Effects of foreign exchange rate
changes on cash and cash equivalents (194) (48)
Cash and cash equivalents at end
of year 13,192 5,278
---------------------------------------- -------------- --------------
Notes to the Condensed Consolidated Interim Financial
Statements
1. Interim Financial Statements
The Condensed Consolidated Interim Financial Statements of the
Group, which comprises Block Energy plc and its subsidiaries for
the 12 month period from 1 July 2018 to 30 June 2019, were approved
by the Directors on 29 September 2019.
The Condensed Consolidated Interim Financial Statements have
been reviewed by the Group's auditors.
The Company's shares are traded on AIM and the trading symbol is
BLOE.
2. Basis of accounting
The report has been prepared using accounting policies,
consistent with IFRSs as endorsed by the EU, that the Group has
adopted and were used for the accounting period ended 30 June 2018.
The information does not constitute statutory accounts within the
meaning of section 435 of the Companies Act 2006.
The financial statements are prepared under the historical cost
convention.
The comparative financial information for the year ended 30 June
2018 in this interim report does not constitute statutory accounts
for that year. Statutory accounts for the year ended 30 June 2018
have been delivered to the Registrar of Companies. The Auditors'
Report on those accounts was unqualified, did not draw attention to
any matters by way of emphasis, and did not contain a statement
under 498(2) or 498(3) of the Companies Act 2006.
During the period, the Group changed its accounting reference
date to 31 December and consequently will report again for the 18
month period ending 31 December 2019.
3. Change of accounting policy
The functional currency of the Company is the British pound
sterling. At 30 June 2019, to enable easier comparison with most of
its oil & gas sector peer group, the presentational currency
for the consolidated accounts was changed from the British pound
sterling to US dollars with effect from 1 July 2017. The current
and comparative period balances have been translated using the
average exchange rate for the year (2019: $1.29702, 2018: $1.34497)
for the Statement of Comprehensive Income and the balance sheet
date exchange rate (30 June 2019: $1.26992, 30 June 2018: $1.32050,
30 June 2017: $1.29946) for the Statement of Financial Position,
except for share capital, which was translated using historical
exchange rates.
New accounting standards IFRS 15 and IFRS 9 have been applied
during the period and the impacts for the period were immaterial.
IFRS 16 will become effective from the reporting period beginning
on 1 January 2020, but, owing to the short-term nature of the
Group's leases, is not expected to have a material impact on the
consolidated financial statements.
4. Significant accounting policies
The accounting policies applied by the Group in this
consolidated interim financial report are the same as those applied
by the Group in its consolidated financial statements for the
period ended 30 June 2018, with the exception thatthe following
accounting policies have been revised to incorporate the changes
introduced by the Group's adoption of IFRS 9 and IFRS 15.
Revenue
Revenue for oil sales is recognised when a contract for the sale
of crude oil and gas has been executed and the parties are
committed to perform their respective obligations, the payment
terms can be identified and it is probable that the consideration
payable by the customer will be received the Company. The control
of the crude oil is transferred to the customer when it is removed
from the oil storage tanks and loaded into trucks.
The amount of revenue recognised is the amount that the Company
expects to be entitled to under the terms of the Production Sharing
Contract ("PSC") and the oil sales agreement for each oil sale.
Entitlement has two components: cost oil, which is the mechanism by
which the Company recovers its costs incurred on an asset, and
profit oil, which is the mechanism through which profits are shared
between the Company, its partner and the Georgian Oil & Gas
Corporation ("GOGC").
The Company's oil sales are made to different customers and are
valued at an agreed price, which is calculated from the Brent price
less a quality discount for each barrel of oil sold.
Income tax arising from the Company's activities under its PSC
is settled by the GOGC on behalf of the Company. Although the
Company can measure the amount of income tax that has been paid on
its behalf by GOGC, the notional income tax amounts have not been
included in revenue or in the tax charge.
Intangible Assets
Exploration and evaluation costs
The Group applies the full cost method of accounting for
Exploration and Evaluation ("E&E") costs, having regard to the
requirements of IFRS 6 'Exploration for and Evaluation of Mineral
Resources'. Under the full cost method of accounting, costs of
exploring and evaluating properties are accumulated and capitalised
by reference to appropriate cash generating units ("CGUs"). Such
CGUs are based on geographic areas, such as a licence area, type or
a basin and are not larger than an operating segment - as defined
by IFRS 8 'Operating segments'.
E&E costs are initially capitalised within 'Intangible
assets'. Such E&E costs may include costs of licence
acquisition, technical services and studies, seismic acquisition,
exploration drilling and testing, but do not include costs incurred
prior to having obtained the legal rights to explore an area, which
are expensed directly to the statement of comprehensive income as
they are incurred. Plant and equipment assets acquired for use in
exploration and evaluation activities are classified as property,
plant and equipment. However, to the extent that such an asset is
consumed in developing an unproven oil and gas asset, the amount
reflecting that consumption is recorded as part of the cost of the
unproven oil and gas asset.
Exploration and unproven oil and gas assets related to each
exploration licence/prospect are not amortised, but are carried
forward until the technical feasibility and commercial feasibility
of extracting a mineral resource are demonstrated.
Impairment of Exploration and Evaluation assets
All capitalised E&E assets and property, plant and equipment
are monitored for indications of impairment. Where a potential
impairment is indicated, assessment is made for the Group of assets
representing a CGU.
In accordance with IFRS 6, the Group firstly considers the
following facts and circumstances in their assessment of whether
the Group's E&E assets may be impaired, whether:
-- the period for which the Group has the right to explore in a
specific area has expired during the period or will expire in the
near future, and is not expected to be renewed;
-- unexpected geological occurrences render the resource
uneconomic;
-- a significant fall in realised prices or oil and gas price
benchmarks render the project uneconomic; or
-- an increase in operating costs occurs.
If any such facts or circumstances are noted, the Group perform
an impairment test in accordance with the provisions of IAS 36.
The aggregate carrying value is compared against the expected
recoverable amount of the CGU. The recoverable amount is the higher
of value in use and the fair value less costs to sell. An
impairment loss is reversed if the asset's or CGU's recoverable
amount exceeds its carrying amount. A reversal of impairment loss
is recognised in the income statement immediately.
Expenditure is transferred from E&E assets to development
and production assets, which is a subcategory of property, plant
and equipment once the work completed to date supports the future
development of the property and such development receives
appropriate approvals.
Property, plant and equipment - development and production
("D&P") assets
Capitalisation
The costs associated with determining the existence of
commercial reserves are capitalised in accordance with the
preceding policy and transferred to property, plant and equipment
as development assets following impairment testing. All costs
incurred after the technical feasibility and commercial viability
of producing hydrocarbons, including costs for future restoration
and decommissioning, have been demonstrated are capitalised within
development assets on a field-by-field basis. Subsequent
expenditure is only capitalised where it either enhances the
economic benefits of the development asset or replaces part of the
existing development asset (where the remaining cost of the
original part is expensed through the income statement).
Costs of borrowing related to the ongoing construction of
development and production assets and facilities are capitalised
during the construction phase. Capitalisation of interest ceases
once an asset is ready for production.
Depreciation
Capitalised D&P assets are not subject to depreciation until
commercial production starts. Depreciation is calculated on a
unit-of-production ("UOP") basis in order to write off the cost of
an asset as the reserves that it represents are produced and sold.
The UOP basis uses the ratio of oil and gas production in the
period to the remaining commercial reserves plus the production in
the period. Costs used in the calculation comprise the net book
value of the field, and any further anticipated costs to develop
such reserves and bring them into production.
Commercial reserves are proven and probable ("2P"), developed
and undeveloped, reserves, which are estimated using standard
recognised evaluation techniques. The estimate is regularly
reviewed by independent consultants. Any periodic reassessment of
reserves will affect the depreciation rate on a prospective basis.
Infrastructure that is common to a number of fields, such as
gathering systems, treatment plants and pipelines are depreciated
on a UOP basis using an aggregate measure of reserves or on a
straight line basis depending on the expected pattern of use of the
underlying asset.
Property, plant and equipment -oil and gas properties
Oil and gas properties are stated at cost less accumulated
depreciation and impairment losses. The initial cost comprises the
purchase price or construction cost including any directly
attributable cost of bringing the asset into operation and any
estimated decommissioning provision.
Once a project reaches the stage of commercial production and
production permits are received, the carrying values of the
relevant exploration and evaluation asset are assessed for
impairment and transferred to proven oil and gas properties and
included within property plant and equipment.
Proven oil and gas properties are accounted for in accordance
with provisions of the cost model under IAS 16 "Property Plant and
Equipment" and are depleted on unit of production basis based on
the estimated proven and probable reserves of the pool to which
they relate.
Impairment of development and production assets
A review is performed for any indication that the value of the
Group's D&P assets may be impaired such as:
-- significant changes with an adverse effect in the market or
economic conditions which will impact the assets; or
-- obsolescence or physical damage of an asset; or
-- an asset becoming idle or plans to dispose of the asset
before the previously expected date; or
-- evidence is available from internal reporting that indicates
that the economic performance of an asset is or will be worse than
expected.
For D&P assets when there are such indications, an
impairment test is carried out on the CGU. CGUs are identified in
accordance with IAS 36 'Impairment of Assets', where cash flows are
largely independent of other significant asset groups and are
normally, but not always, single development or production areas.
When an impairment is identified, the depletion is charged through
the Consolidated Statement of Comprehensive Income if the net book
value of capitalised costs relating to the CGU exceeds the
associated estimated future discounted cash flows of the related
commercial oil reserves.
An assessment is made at each reporting date as to whether there
is any indication that previously recognised impairment charges may
no longer exist or may have decreased. If such an indication
exists, the Group estimates the recoverable amount. A previously
recognised impairment charge is reversed only if there has been a
change in the estimates used to determine the assets recoverable
amount since the last impairment charge was recognized. If this is
the case the carrying amount of the asset is increased to its
recoverable amount, not to exceed the carrying amount that would
have been determined, net of depreciation, had no impairment
charges been recognized for the asset in prior years.
Property, plant and equipment and depreciation
Property, plant and equipment which are awaiting use in the
drilling campaigns, and storage, are recorded at historical cost
less accumulated depreciation. Property, plant and equipment are
depreciated using the straight line method over their estimated
useful lives, as follows:
PPE - 6 years
The carrying value of property, plant and equipment is assessed
annually and any impairment charge is charged to the Consolidated
Statement of Comprehensive income.
Inventories
Inventories of drilling tubulars and drilling chemicals are
valued at the lower of cost or net realisable value, where cost
represents the weighted average unit cost for inventory lines on a
line by line basis. Cost comprises all costs of purchase, costs of
conversion and other costs incurred in bringing the inventories to
their present location and condition.
Decommissioning provision
A provision is made for the decommissioning of oil and gas
wells. The cost of decommissioning is determined through
discounting the amounts expected to be payable to decommission the
assets at the end of their useful lives to their present value at
the date the provision is recognised. Provisions are reassessed at
each reporting date.
IFRS 9 Financial Instruments
The Group has adopted IFRS 9 for the first time in the current
year. The standard requires an entity to address the
classification, measurement and recognition of financial assets and
liabilities. The impact of this adoption has not had a material
impact on the Group's financial statements.
The Group's financial assets consist of bank accounts and other
receivables. Trade and other receivables are stated initially at
fair value and subsequently at amortised cost.
The Group's financial liabilities consist of trade and other
payables. All are non-derivative assets. The trade and other
payables are stated initially at fair value and subsequently at
amortised cost.
5. Operating segments
The Group is engaged in the exploration for, and development of
oil and gas resources in the Republic of Georgia, and is therefore
considered to operate in a single geographical and business
segment.
6. Restatement of prior year financial statements
During the year ended 30 June 2018, the share based payments
charge included GBP35,514 ($47,000) in respect of 4,400,000 options
with a value of GBP152,501 ($201,000) granted to Paul Haywood on 6
April 2018. All of these options vested on listing on AIM on 11
June 2018 and, therefore, the whole value of GBP152,501 ($201,000)
should have been charged in the year ended 30 June 2018. This
resulted in an understatement of the expense by GBP116,987
($154,000) in the year ended 30 June 2018. Consequently, the
results for the year ended 30 June 2018 have been restated to
include the additional share based payments charge of $154,000.
During the year ended 30 June 2016, the Company acquired 100% of
the share capital of Taoudeni Resources Limited. The consideration
payable comprised GBP29,307 ($38,000) cash, 599,177,916 ordinary
shares (with nominal value and fair value of 0.05 pence per share)
payable on acquisition ("Initial Consideration Shares") and
617,702,713 ordinary shares payable at a later stage ("Deferred
Consideration Shares"). At the time of the acquisition, the
Company's shares were trading at 0.05 pence per share, resulting in
a fair value of GBP299,589 ($388,000) for the Initial Consideration
Shares and GBP308,851 ($400,000) for the Deferred Consideration
Shares.
However, in the financial statements for the year ended 30 June
2016, the GBP308,851 ($400,000) value of the Deferred Consideration
Shares was not included in the cost of acquisition and the
consideration payable. As at 30 June 2016, the effect of the error
was to understate the value of the E&E assets (included in
intangible assets) and other reserves (share based payments) by
GBP308,851 ($400,000).
In the financial statements for the year ended 30 June 2017, the
principal asset that had been acquired with Taoudeni Resources
Limited (i.e. 100% of the shares in Antubia Resources Limited) was
held for sale and it was fair valued at its carrying value of
GBP329,000 ($426,000) and there was gain or loss recorded in the
income statement. However, if the GBP308,851 ($400,000) value of
the Deferred Consideration Shares had been included in the value of
the asset held for sale, it would have been written down to its
fair value of GBP329,000 ($426,000) and there would have been a
GBP308,851 ($400,000) reduction in the value of the E&E assets
and a loss of GBP308,851 ($400,000) recognised in the income
statement for that year.
During the year ended 30 June 2017, some of the sellers of the
shares of Taoudeni Resources Limited waived their rights to receive
Deferred Consideration Shares, but this transaction was not
recognised in the financial statements for the year ended 30 June
2017. If the waiver of rights to receive Deferred Consideration
Shares had been recognised in the financial statements for the year
ended 30 June 2017, there would have been a gain of GBP163,425
($211,000) recognised in the income statement for those two periods
and other reserves (share based payments) would have decreased by
GBP163,425 ($211,000).
During the year ended 30 June 2018, some of the Deferred
Consideration Shares were issued. 72,120 ordinary shares were
issued instead of 18,029,997 Deferred Consideration Shares to
adjust for a 1 for 50 share split and a 1 for 5 share consolidation
that had taken place. Consequently, to adjust for the share split
and the share consolidation, the share price at the time of
acquisition was also adjusted from 0.05 pence per share to 12.5
pence per share. However, in the financial statements for the year
ended 30 June 2018, the 72,120 ordinary shares that were issued
were valued using a share price of 4 pence per share (being the
share price at the time of issue) instead of the share price at the
time of the acquistion of Taoudeni Resources Limited as adjusted
for for two share consolidations of 12.5 pence per share. As at 30
June 2016, the effect of the error was to understate share premium
by GBP7,663 ($10,000) and overstate other reserves (share based
payments) by GBP7,663 ($10,000).
All the interim and annual financial statements between 30 June
2016 and 30 June 2018 were affected by the lack of recognition of
the Deferred Consideration Shares. The financial statements for the
12 month period ended 30 June 2019 include restated balances in
respect of the transactions detailed above.
7. Intangible assets
Exploration
and Evaluation
Unaudited Licences cost Total
Cost $'000 $'000 $'000
---------------------------- --------- ---------------- --------
At 1 July 2018 1,894 - 1,894
Additions 250 14 264
Transfer to PP&E (2,144) (14) (2,158)
At 30 June 2019 - - -
---------------------------- --------- ---------------- --------
Exploration
and Evaluation
Restated Licences cost Total
Cost $'000 $'000 $'000
---------------------------- --------- ---------------- --------
At 1 July 2017 813 49 862
Additions 1,796 - 1,796
Transfer to PP&E (706) (50) (756)
Foreign exchange movements (9) 1 (8)
At 1 July 2018 1,894 - 1,894
---------------------------- --------- ---------------- --------
During the year, assets amounting to $2,158,000 (2018: $756,000)
were transferred from intangible assets to property, plant and
equipment (Licences) to reflect that the assets had matured from
exploration and evaluation assets into development and production
assets.
8. Property, plant and equipment
Property,
Licence plant and
Unaudited area equipment Total
Cost $'000 $'000 $'000
--------------------------- -------- ----------- ------
At 1 July 2018 1,641 208 1,849
Transfer from intangibles 2,158 - 2,158
Additions 3,322 13 3,335
At 30 June 2019 7,121 221 7,342
--------------------------- -------- ----------- ------
Accumulated depreciation
--------------------------- -------- ----------- ------
At 1 July 2018 18 28 46
Charge 145 24 169
At 30 June 2019 163 52 215
--------------------------- -------- ----------- ------
Carrying amount
At 30 June 2019 6,958 169 7,127
--------------------------- -------- ----------- ------
Property, plant and equipment
cont.
Property,
Licence plant and
Restated area equipment Total
Cost $'000 $'000 $'000
------------------------------- -------- ----------- ------
At 1 July 2017 - - -
Transfer from intangibles 756 - 756
Additions 885 208 1,093
At 30 June 2018 1,641 208 1,849
------------------------------- -------- ----------- ------
Accumulated depreciation
------------------------------- -------- ----------- ------
At 1 July 2017 - - -
Charge 19 28 47
Foreign exchange movements (1) - (1)
At 30 June 2018 18 28 46
------------------------------- -------- ----------- ------
Carrying amount
At 30 June 2018 1,623 180 1,803
------------------------------- -------- ----------- ------
9. Share capital
Called up, allotted, issued and fully No. Ordinary No. Deferred Nominal
paid Shares Shares $
---------------------------------------- -------------- -------------- ----------
As at 30 June 2017 379,841,048 2,095,165,355 1,580,858
Issue of equity on 3 July 2017 10,588,235 - 6,855
Issue of equity on 1 August 2017 70,000,000 - 46,325
Issue of equity on 31 August 2017 29,411,765 - 19,038
Consolidation of Ordinary shares at
15 November 2017 (391,872,839) - -
Issue of equity on 11 June 2018 161,079,392 - 538,951
As at 30 June 2018 259,047,601 2,095,165,355 2,192,027
---------------------------------------- -------------- -------------- ----------
Issue of equity on 7 March 2019 1,846,791 - 6,045
Issue of equity on 19 March 2019 9,550,000 - 31,654
Issue of equity on 23 April 2019 1,837,500 - 5,941
Issue of equity on 8 May 2019 3,624,326 - 11,783
Issue of equity on 21 May 2019 225,000 - 715
Issue of equity on 22 May 2019 42,820,000 - 135,406
Issue of equity on 30 May 2019 1,723,650 - 5,434
Issue of equity on 5 June 2019 66,270,000 - 210,175
Issue of equity on 11 June 2019 1,469,125 - 4,672
Issue of equity on 18 June 2019 375,000 - 1,178
Issue of equity on 19 June 2019 275,674 - 874
As at 30 June 2019 389,064,667 2,095,165,355 2,605,904
---------------------------------------- -------------- -------------- ----------
The Ordinary Shares consist of full voting, dividend and capital
distribution rights and they do not confer any rights for
redemption. The Deferred Shares have no entitlement to receive
dividends or to participate in any way in the income of profits of
the Company, nor is there entitlement to receive notice of, speak
at, or vote at any general meeting or annual general meeting.
On 5 June 2019, 66,270,000 Ordinary Shares were issued at a
price of 11p per share. Of the proceeds, US$1,367,000 was unpaid at
30 June 2019, but was received on 5 July 2019.
10. Share based payments
Under IFRS 2, an expense is recognised in the statement of
comprehensive income for share based payments, to recognise their
fair value at the date of grant over the vesting period of the
options and over the expected life of the warrants. The application
of IFRS 2 gave rise to a charge of $508,000. The equivalent charge
for the year ended June 2018 was $281,000. This balance was
restated as of 30 June 2018, please see note 6.
The Group recognised total expenses (all of which related to
equity settled share-based payment transactions) under the current
plans of:
30 June 30 June
2019 2018
unaudited restated
$'000 $'000
--------------- ---------- ---------
Share options 412 275
Warrants 96 6
508 281
--------------- ---------- ---------
11. Subsequent events
During July 2019, the Company increased its working interest in
the West Rustavi licence from 71.5% to 100%, further to an
agreement ('the Agreement') reached with Georgia Oil and Gas
Limited ('GOG') on 26 February 2019. In accordance with the
Agreement, Block paid US$250,000 in cash and issued 3,326,268
ordinary shares at a share price of 11.99 pence per share as
settlement of the US$500,000 due to GOG as total and final
consideration of US$750,000 for the increase to 100%.
12. Related party transactions
On 5 June 2019, the Company issued:
a) 1,091,291 Ordinary Shares as payment of deferred
consideration per the Taoudeni Resources Limited share purchase
agreement (details of which were set out in the Company's AIM
Admission Document dated 4 June 2018). 977,383 of these Ordinary
Shares were allotted to Plutus Strategies Limited, a company in
which Paul Haywood, Chief Executive, and Niall Tomlinson, Executive
Director, have an interest. The agreement to issue these shares was
completed on 3 March 2016 at a time when the Company's share price
(adjusted for subsequent share consolidations) was 15p.
b) 163,418 Ordinary Shares to Philip Dimmock, Non-Executive
Chairman, at an average price of 3.67p in payment of fees amounting
to GBP6,000 due to him and 69,957 Ordinary Shares to Chris Brown,
Non-Executive Director, at an average price of 3.81p in payment of
fees of GBP2,667 due to him. The issue price of these shares has
been calculated monthly, based on the 30 day volume weighted
average price for the periods to which these fees relate. The
agreement to issue shares semi-annually in lieu of fees was made in
2018. The reason these shares were not issued until 5 June 2019 is
that, for a large part of 2019, the Company was in a closed period
and unable to issue shares to directors.
13. Other matters
A copy of this report is available from the Group's website,
www.blockenergy.co.uk
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
IR DGGDCXBDBGCC
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