TIDMBLOE
RNS Number : 0242Z
Block Energy PLC
11 May 2023
11(th) May 2023
Block Energy Plc
("Block" or the "Company")
Audited Results for the Year Ended 31(st) December 2022
Block Energy plc, the development and production company focused
on Georgia, is pleased to announce its audited results for the year
ended 31(st) December 2022.
Highlights:
-- Average production during the year increased 5% over the prior year to 450boepd.
-- Post-year end, Company production sees record levels at over
620 boepd (April average rate), reflecting the further success of
well WR-B01Za.
-- Production increase in 2022 primarily driven by the success
of well JKT-01Z and continued positive production from mature wells
sustained by the 23 well workover programme in the first half of
the year.
-- Material revenue growth in 2022, increasing 35% over 2021 to
$8.26m, driven by the increase in production, combined with
improved oil pricing.
-- Total loss for 2022 decreased significantly to $1.16m (2021:
$4.58m) due to the increase in revenue and careful management of
costs, including a material decrease in G&A costs.
-- Three successful wells in 2022 and post-year end,
substantially increasing production and proving the concept of
un-swept oil in Georgia's most prolific field.
-- Successful farmout of non-core areas for a gross $3m work
programme, exposing the Company at no cost to Block . This provides
the Company with direct exposure to 3.1 TCF gas and 1,400 MMbbl oil
unrisked prospective resources within GOGL's portfolio, of which,
the state of Georgia is a 22% partner, via a cash investment into
the project.
-- All obligations under the minimum work programme for license
XIF completed, securing the licence until 2043.
-- One minor lost time incident was reported across the 382,542
operational man-hours worked in 2022.
-- Post-year end, secured additional funding through a senior
secured loan facility of up to $2m to accelerate Projects I and
III.
Block Energy plc's Chief Executive Officer, Paul Haywood,
said:
" Since announcing the Company's three project strategy
approximately 12 months ago, marking the start of concurrent
development and appraisal activity, Block has made material
progress. It has successfully delivered on its operational plans
for 2022, which included increasing near-term production and
cashflows from Project I, proving the concept of un-swept oil in
the Patardzueli field under Project II and advancing the Project
III high-impact 1 TCF contingent gas resource opportunity.
Additionally, Block secured a $3m farm-out of non-core areas,
establishing Project IV, providing the Company with direct exposure
to high-impact exploration".
"As revenue continues to grow, so can the Company. This is why
we remain focussed on accelerating our Projects which are intended
to create significant shareholder value and cash flow whilst
providing the Georgian Government and society with greater energy
security. Our plan is clear, the strategy is working, and the team
is energised to execute operationally and strategically. As we
enter our next drilling phase, the Company has never been in a more
exciting position".
Stephen James BSc, MBA, PhD (Block Energy's Subsurface Manager)
has reviewed the reserve, resource and production information in
this announcement. Dr James is a geoscientist with over 40 years of
experience in field development and reservoir management.
THIS ANNOUNCEMENT CONTAINS INSIDE INFORMATION AS STIPULATED
UNDER THE UK VERSION OF THE MARKET ABUSE REGULATION NO 596/2014
WHICH IS PART OF ENGLISH LAW BY VIRTUE OF THE EUROPEAN (WITHDRAWAL)
ACT 2018, AS AMED. ON PUBLICATION OF THIS ANNOUNCEMENT VIA A
REGULATORY INFORMATION SERVICE, THIS INFORMATION IS CONSIDERED TO
BE IN THE PUBLIC DOMAIN.
For further information, please visit
http://www.blockenergy.co.uk/ or contact:
Paul Haywood Block Energy plc Tel: +44 (0)20 3468
(Chief Executive 9891
Officer)
Neil Baldwin Spark Advisory Partners Tel: +44 (0)20 3368
(Nominated Adviser) Limited 3554
Peter Krens Tennyson Securities Tel: +44 (0)20 7186
(Corporate Broker) 9030
Philip Dennis Celicourt Communications Tel: +44 (0)20 8434
/ Mark Antelme 2643
/ Ali AlQahtani
(Financial PR)
Notes to editors
Block Energy plc is an AIM-listed independent oil and gas
company focused on production and development in Georgia, applying
innovative technology to realise the full potential of previously
discovered fields.
Block has a 100% working interest in Georgian onshore licence
blocks IX and XIB. Licence block XIB is Georgia's most productive
block. During the mid-1980s, production peaked at 67,000 bopd and
cumulative production reached 100 MMbbls and 80 MMbbls of oil from
the Patardzeuli and Samgori fields, respectively.
The remaining 2P reserves across block XIB are 64 MMboe,
comprising 2P oil reserves of 36 MMbbls and 2P gas reserves of 28
MMboe. (Source: CPR Bayphase Limited: 1 July 2015). Additionally,
following an internal technical study designed to evaluate and
quantify the undrained oil potential of the Middle Eocene within
the Patardzeuli field, the Company has estimated gross unrisked 2C
contingent resources of 200 MMbbls of oil.
The Company has a 100% working interest in licence block XIF
containing the West Rustavi onshore oil and gas field. Multiple
wells have tested oil and gas from a range of geological horizons.
The field has so far produced over 75 Mbbls of light sweet crude
and has 0.9 MMbbls of gross2P oil reserves in the Middle Eocene. It
also has 38 MMbbls of unrisked 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 Gustavson
Associates: 1 January 2018).
Block also holds 100% and 90% working interests, respectively,
in the onshore oil-producing Norio and Satskhenisi fields.
The Company offers a clear entry point for investors to gain
exposure to Georgia's growing economy and the strong regional
demand for oil and gas.
Chairman's Statement
Dear Shareholder,
The Company's operations over the last year reflect the wider
strategy to create a solid springboard from which Block can deliver
further growth by unlocking the potential of its significant asset
base in Georgia while mitigating, through diversification, risks to
shareholders and lenders, including those related to operations,
revenue and cashflows.
Block's portfolio of assets offers material potential to deliver
on this strategy, with opportunities to increase production and
revenue in the near and medium term and in the longer term through
Company making opportunities in substantial deep gas resources.
Along this journey, there will inevitably be operations that
deliver better results and returns than others. While this is a
general feature of oil & gas, it is particularly true for our
business in Georgia, which is weighted towards production rather
than exploration due to the complexity of the reservoirs when
compared to many other regions of the world.
The best way to regard Block, therefore, is to consider the
totality of the opportunities in the planned portfolio of wells
rather than on a well-by-well basis. The best way to unlock the
value is through multi-well operations.
Reflecting that approach in 2022, the Company introduced its
four-project strategy, initially focusing on developing production,
revenues and cashflow from Projects I & II. The results from
Projects I and II to date have been very encouraging, including the
completion of two successful Project I wells, one during the year
and one in 2023, and of a successful Project II well, which proved
the concept of unswept oil in the Patardzeuli Field .
The success of these wells was based on the culmination of the
knowledge gained from previous wells, which have all added to the
Company's understanding of the sub-surface and its ability to build
a model that informs and supports future drilling. I am, therefore
now confident that our geoscientists can use 3D seismic attribute
analysis to accurately locate the natural fractures that give high
levels of productivity and that our operational staff can drill
horizontal sidetracks through pressure-depleted, faulted reservoirs
with cost-effective efficiency.
The three successful wells are delivering a material increase in
production rate, which, along with higher crude oil and gas pricing
and the benefit of a successful workover campaign in the first half
of the year, has already contributed to a stronger financial
performance. During 2022, the Company saw the loss on the year
reduce materially from $4,581k in 2021 to $1,160k. This
year-on-year performance improvement is continuing into 2023, and I
am confident that this year will see a profit for the first
time.
All of this is only possible with a rigorous approach to
managing and mitigating the inevitable day-to-day risks facing the
business, including those of costs and financing, safety and the
wider business environment, among others.
Cost management is part of the Company's culture and has been
effectively delivered through improved efficiencies, aggressive
supplier contracting, careful and considered investment planning
and by employing innovative solutions to unforeseen problems, a
good example of which being the use of internal resources, to
undertake very low-cost remedial operations on well WR-B01Za,
resulting in the Company's most successful producing well.
Effective management of the cost base not only improves the
returns from successful wells but also minimises the costs of those
wells that could be more successful. During 2022, the keen focus on
cost management was reflected in overall costs remaining relatively
flat and G&A costs decreasing substantially.
Of utmost importance to the Board is the safety of our people
and our contractors, the protection of the environment and the
wellbeing of nearby communities. The review of HSES management
performance is always the first agenda point at Board meetings. It
is of paramount importance that our people work in a safe
environment, and it is also vital to the efficient operations of
the business. By taking the wellbeing of our people and local
communities seriously, along with the protection of the
environment, we are best placed to be able to attract and retain
the best people and suppliers, and we limit the chance of our
operations being delayed or postponed, due to injury or the
influence of third parties.
The Company cannot influence a number of external factors, such
as global crude oil prices. During 2022, Block Energy enjoyed
relatively high crude oil prices, but markets are volatile, and
accordingly, the Company puts in place measures to mitigate this
exposure.
The Company was otherwise able to operate during 2022 unfettered
by external influences. With the pandemic having receded, Block was
no longer subject to the restrictions imposed by it, and while the
war in Ukraine has caused terrible anxiety and harm for many, it
has not impacted the Company's operations.
Key to ensuring effective management of the business in the
interest of all stakeholders is governance. Block has always kept a
keen focus on this, as reflected in the structure and experience of
the Board, along with the regularity and structure in which Board
meetings take place.
Alongside meeting of the whole board, Block has a rigorous
system of sub-committees covering key areas of the business, from
finance and nominations to ESG. These committees meet regularly and
report to meetings of the whole Board.
The balance of the Board was maintained despite changes that
occurred, including Ken Seymour moving from a non-executive to an
executive management position and William McAvock resigning as CFO
and leaving the Board.
While 2022 was not without its challenges, the Company and team
can be proud of what has been delivered. With three successful
wells, all adding materially to production, the return on
investment that has been achieved is significant.
Furthermore, as the enhanced levels of production continue to
feed into a stronger cash position, the Company will be
increasingly well placed to execute its multi-well strategy across
its four projects and deliver additional value at reduced risk
without the need to dilute shareholders.
I would therefore like to take the opportunity to thank our team
of 120 people in Georgia and six in London for the consistent
dedication and commitment they show the Company. That of the
operational and geoscience teams is obvious from the increasing
production rate. But they are kept safe and the environment
protected by our ever vigilant HSES team. Our commercial team
negotiates effective contracts with suppliers, sells the produced
oil and gas into limited local markets, procures the necessary
permits and ensures that our neighbours in the local communities
are kept undisturbed by our operations. Last but not least, our
dedicated accountants maintain the accurate records you see in this
Annual Report.
We are also very grateful for the support and encouragement from
all within the Georgian state agencies with whom we interact.
Our Company now has a stronger platform on which to realise its
potential. On behalf of the Board, I would like to thank you all
for your support. We look forward to engaging with you with further
updates as the rest of the year unfolds.
Philip Dimmock
Non- Executive Chairman
Chief Executive Officer's Statement
Dear Shareholder,
Since announcing the Company's three project strategy
approximately 12 months ago, marking the start of concurrent
development and appraisal activity, Block has made material
progress. This has included the safe and successful delivery of
multiple wells, increased production, material revenue growth, a
successful farm out, and fulfilling the XIF licence minimum work
programme ("MWP") commitments.
The achievements would not have been possible without the
continued hard work, dedication, and experience of the Company's
team. Since 2020 they have successfully navigated macro and micro
headwinds associated with a global pandemic, a commodity price
collapse, war, and significant cost inflation, all while delivering
on our operational and strategic plans.
Health, Safety and Environment
The safety of the Company's operations and team is of the
highest importance and central to delivering the Company's
transformative growth strategy. Block continues to focus on
enhancing the effectiveness of its safety measures, process and
procedures whilst supporting personal development and rigorously
building and incentivising a culture of care for others.
The strength of our systems and procedures in place is reflected
in the Company's HSES record, with one minor lost time incident
reported across the 382,542 operational man-hours worked in
2022.
We continued to build on our commitment to the environment and
local communities and established a board-level ESG committee. In
line with our commitment to the environment, the Company monitors
its emissions to minimise its CO(2) footprint, including targeting
zero-flaring of gas from operations. During the year, total
reported emissions were 618.42 tCO(2) from operations, mainly a
result of the need to flare 283,802m of gas due to unplanned
shutdowns.
Operations
The Company delivered on its operational plans for 2022, which
included increasing near-term production and cashflows from Project
I, proving the concept of un-swept oil in the Patardzueli field
under Project II and advancing the Project III high-impact 1 TCF
contingent gas resource opportunity. Additionally, Block secured a
farm-out of non-core areas within XIB, establishing Project IV and
providing the Company with direct exposure to high-impact
exploration.
Project I
Early in the year, the Company announced the safe and successful
execution of well JKT-01Z, which achieved a stable production rate
of 310boepd, in line with our guidance to the Market, significantly
boosting the Company's total production at that time.
JKT-01Z is performing in line with the 3P (or high) case, as
presented in the Project I Competent Person's Report ("CPR"),
announced in August, which attributed gross 3P field reserves of
3.01 MMbbls and a 3P NPV of $57m.
That CPR focused on part of the West Rustavi and Krtsanisi oil
fields only, auditing internal plans for the phase one, five-well
development programme. The Company's Contingent resource report
ascribed 2C of 19.5 MMbbl to the entire West Rustavi / Krtsanisi
Middle Eocene reservoir, providing plenty of scope for significant
reserve upgrades in the future, on further drilling success.
The planning and construction of facilities for WR-B01Za, the
next well in the five-well programme, was completed later in the
year, enabling the rapid monetisation of production from future
wells. Post-year-end, well WR-B01Za was successfully drilled,
completed and tested at 269bopd. Since being tied into the
production facilities and handed over to the production team, the
well continues to perform, providing another material boost to
total production.
Recent drilling success has significantly increased our
confidence in Project I. We plan to drill three further wells (as
defined in the CPR), and will prioritise this work programme moving
forward. In parallel, the team is working on a full field
development plan consisting of five additional back-to-back
drilling phases.
Project II
In September, the Company commenced Project II with the drilling
of well JSR-01 and successfully proved the concept of un-swept oil
within the Patardzeuli oil field, Georgia's most prolific field.
Well, JSR-01 was safely drilled to the base of the 600m thick
middle Eocene located at a depth of approximately 2,800 metres, on
plan and below budget. JSR-01 was brought into production at a rate
of 45boepd, proving recovery of commercial volumes of oil and
supporting plans to appraise additional targets.
Following these results, the drilling team upgraded the
Company's service rig to enable it to be better utilised across a
multi-well drilling programme, where four candidates have been
risked, ranked, and prioritised. Following this initiative, Project
II can advance in parallel to planned drilling under Project I.
Project III
Project III exposes the Company to a large undeveloped gas
resource within the Lower Eocene, Palaeocene and Upper Cretaceous
reservoirs of licence blocks XIB and XIF. Work throughout the
period has focused on internal resource auditing, producing a
conceptual development plan, negotiating long-term gas sales
agreements with the state of Georgia and scoping out facility
requirements to handle a plateau phase one production rate of
approximately 30 mmcf/d rising to 60 mmcf/d within 18 - 24
months.
The appraisal and development plan will kick off with the side
track of the PatE1 well. This well is in close proximity (c. 8km)
to the state-owned Samgori South Dome Underground Gas Storage
Project (SSDUGS). The $290m Government-backed project is designed
to store approximately 300 million cubic metres of gas, equivalent
to roughly 15% of Georgia's annual consumption. To date, the State
has assigned EUR150m to the SSDUGS. Success at Project III will see
Block deliver gas volumes to SSDUGS, the growing domestic gas
market and/or export to Europe via the southern caucuses
pipeline.
Production
Production for the year was relatively stable, reflecting the
success of well JKT-01Z and the extensive 23-well workover
programme in the first half of 2022, offset by natural decline.
This resulted in average production during the year of over 450
boepd, representing a 5 % increase over the prior year (2021:
427boepd).
Post-year end, the Company sees record production levels of over
620 boepd in April 2023, reflecting the added benefit of production
from well WR-B01Za, alongside stable and strong levels of
production from well JKT-01Z and rapid and efficient routine
maintenance across other mature wells.
Corporate
As a result of the successful development of the XIF license,
which included geological studies, a 3D seismic campaign and the
drilling of multiple wells, Georgia's State Agency of Oil and Gas,
confirmed that all requirements under the XIF minimum work
programme had been fulfilled. Integrity over the XIF license is
therefore secured until 2043.
The Company also completed the successful farm-out of 50% of the
non-core areas of licence XIB, to Georgia Oil & Gas Limited
("GOGL"), for a work programme valued at c.$3m, which significantly
advances the exploration potential of non-core areas within the
licence at no cost to Block. This provides the Company with direct
exposure to 3.1 TCF gas and 1,400 MMbbl oil unrisked prospective
resources within GOGL's portfolio, of which, the state of Georgia
is a 22% partner via a cash investment into the project.
Under the farm-out terms, the work programme committed by GOGL
consists of $2.5m of 2D seismic acquisition and $0.5m of seismic
reprocessing. The farm-out has no impact on the Company's current
operator status, existing production and/or development plans
associated with Projects I, II or III.
Financials
Total Group revenue from the sale of oil & gas during 2022
was $8.26m, representing a 35% increase over the prior year.
Revenue was predominantly from oil sales, which increased to c
$7.5m during the year, with the remaining $0.77m from the sale of
gas.
The year's revenue increase, combined with relatively flat
operating costs, including a decrease in G&A, resulted in a
significant decrease in the operating loss for the year to $1.8m
(2021: $4.7m).
Post reporting period, the Company secured additional funding
through a senior secured loan facility of $2.0m, with various
shareholders and members of Block's management team. The facility
is in place to accelerate Project I and III plans, and $1.06m has
been drawn down.
Looking forward
As revenue grows, so can the Company. This is why we remain
focussed on accelerating the Project I development programme
alongside Projects II, III and IV. Success will create significant
shareholder value and cash flow and provide the Georgian Government
and society with greater energy security.
Our plan is clear, the strategy is working, and the team is
highly motivated to execute operationally and strategically. As we
enter our next drilling phase, the Company has never been in a more
exciting position.
I want to thank our shareholders for their continued support
throughout a challenging yet highly exciting year and finish by
thanking the entire team at Block Energy for their continued drive
and passion towards delivering the plan and growing our
business.
Paul Haywood
Chief Executive Officer
Financial Review
Balance Sheet
On 30(th) November 2022, the Company announced that the
outstanding Consideration due to Schlumberger Production Management
("SLB"); (the seller of XIB) had not been taken up and that the
108,000,000 nil-cost options issued to SLB were to be cancelled.
This decision has significantly improved the Company's accumulated
deficit, reducing the deficit to $16,349,000 (2021:
$21,548,000).
The Group's assets have remained stable, with non-current assets
at $24,815,000 (2021: $24,345,000). At the end of the year, the
Group's cash balance was $450,000 (2021: $1,244,000).
Income Statement
The Group's revenue from oil and gas sales increased to
$8,262,000 (2021: $6,114,000) and other income included $281,000
from an insurance claim. The current year revenue from sales of
crude oil of $7,492,000 (2021: $5,519,000) comprised the sale of
89,900 barrels (2021: 86,700 barrels), which equated to an average
revenue of $83.34 (2021: $60.65) per barrel.
During the year, the Group produced 120,359 barrels of crude oil
(2021: 108,000 barrels), with the increase in production primarily
due to the JKT-01 well, which was brought online in January 2022.
Gas production stood at 267 mmcf (2021: 288 mmcf). This gross
production includes the State of Georgia's share of production
before cost recovery and profit sharing.
In addition, the Group had over 9,000 barrels of crude oil
inventory as of 31(st) December 2022 (31(st) December 2021: 20,000
barrels). Following the year end, during Q1 of 2023, the Group sold
13,300 barrels for net revenue of $999,000 and additionally
successfully tested WR-B01Za, the second of the Project I
development wells, which established stable production above
pre-drill estimates.
In the year, the Group sold gas to the value of $770,000 (2021:
$596,000).
The total loss for the year was $1,160,000 (2021: $4,581,000),
representing a significant improvement on last year's results.
Liquidity, Counterparty Risk and Going Concern
The Group monitors its cash position, cash forecasts and
liquidity regularly and has a conservative approach to cash
management, with surplus cash held on term deposits with major
financial institutions.
The directors have prepared cash flow forecasts for 24 months
from the date of signing these financial statements. The Group's
forecasts are reviewed regularly to assess whether actions to
curtail expenditure or cut costs are required.
The Group's operations presently generate sufficient revenues to
cover operating costs and capital expenditures, supporting the
continued preparation of the Group's accounts on a going concern
basis.
The directors are conscious that oil prices have been volatile
during the past few years and could rise further but could also
fall back in the year ahead and that future production levels
depend on both depletion rates from existing wells and the success
of future drilling. As part of their going concern assessment, the
directors have examined multiple scenarios in which oil prices
and/or future production levels fall substantially and have
concluded that it remains possible that future revenues in at least
some scenarios might not cover all operating costs and planned
capital expenditures, creating a material uncertainty that may cast
doubt over the Group's ability to continue as a going concern.
Whilst acknowledging this material uncertainty, the directors
remain confident of making cost savings if required; therefore,
they consider it appropriate to prepare the financial statements on
a going concern basis. The financial statements do not include the
adjustments that would result if the Group were unable to continue
as a going concern.
Results and Dividends
The results for the year and the financial position of the Group
are shown in the following financial statements:
- The Group has incurred a pre-tax loss of $1,608,000 (2021: loss of $4,783,000).
- The Group has net assets of $27,200,000 (2021: $27,065,000).
- The Directors do not recommend the payment of a dividend (2021: $nil).
Financial Statements
Consolidated Statement of Comprehensive Income for the Year
Ended 31st December 2022
Year ended Year ended
31(st) December 31(st) December
Note 2022 2021
------------------------------------- ------------ ----------------- -----------------
Continuing operations $'000 $'000
Revenue 4 8,262 6,114
Other cost of sales (3,992) (2,982)
Depreciation and depletion of
oil and gas assets 5 (1,956) (2,901)
----------------- -----------------
Total cost of sales (5,948) (5,883)
----------------- -----------------
Gross profit 2,314 231
Other administrative costs (3,040) (3,432)
Share based payments charge 22 (1,072) (1,494)
----------------- -----------------
Total administrative expenses 6,7 (4,112) (4,926)
Foreign exchange movement (24) (6)
----------------- -----------------
Operating loss (1,822) (4,701)
Other income 8 281 5
Finance expense 9 (67) (87)
----------------- -----------------
Loss for the year before taxation (1,608) (4,783)
Taxation 10 - -
Loss for the year from continuing
operations (attributable to the
equity holders of the parent) (1,608) (4,783)
----------------- -----------------
Items that may be reclassified
subsequently to profit and loss:
Exchange differences on translation
of foreign operations 448 202
----------------- -----------------
Total comprehensive loss for
the year (attributable to the
equity holders of the parent) (1,160) (4,581)
================= =================
Loss per share basic and diluted 11 (0.24)c (0.76)c
----------------- -----------------
All activities relate to continuing operations.
The notes on pages 50 to 74 form part of these consolidated
financial statements.
Consolidated Statement of Financial Position as at 31st December
2022
31(st) December 31(st) December
2022 2021
Note $'000 $'000
----------------------------------- ----- ---------------- ----------------
Non-current assets
Property, plant and equipment 12 24,815 24,345
Current assets
Inventory 13 4,791 4,585
Trade and other receivables 14 560 752
Cash and cash equivalents 15 450 1,244
Total current assets 5,801 6,581
Total assets 30,616 30,926
Equity and liabilities
Capital and reserves attributable
to equity holders of the
Parent Company:
Share capital 18 3,565 3,482
Share premium 19 34,765 34,625
Other reserves 20 4,525 10,260
Foreign exchange reserve 694 246
Accumulated deficit (16,349) (21,548)
Total equity 27,200 27,065
Liabilities
Trade and other payables 16 1,693 1,556
Provisions 17 1,723 2,305
Total current liabilities 3,416 3,861
Total equity and liabilities 30,616 30,926
================ ================
The financial statements were approved by the Board of Directors
and authorised for issue on 10(th) May 2023 and were signed on its
behalf by:
Paul Haywood
Director
The notes on pages 50 to 74 form part of these consolidated
financial statement
Consolidated Statement of Changes in Equity as at 31st December
2022
Foreign
Share Share Accumulated Other Exchange Total
Capital Premium Deficit Reserves Reserve Equity
$'000 $'000 $'000 $'000 $'000 $'000
Balance at 31(st)
December 2020 3,353 34,234 (17,057) 9,120 44 29,694
------------------------ --------- --------- ----------- ---------- ---------- --------
Loss for the
year - - (4,783) - - (4,783)
Exchange differences
on translation
of foreign operations - - - - 202 202
------------------------ --------- --------- ----------- ---------- ---------- --------
Total comprehensive
loss for the
year - - (4,783) - 202 (4,581)
------------------------ --------- --------- ----------- ---------- ---------- --------
Issue of shares 52 255 - - - 307
Share based payments - - - 1,494 - 1,494
Options exercised 77 136 210 (272) - 151
Options expired - - 82 (82) - -
------------------------ --------- --------- ----------- ---------- ---------- --------
Total transactions
with owners 129 391 292 1,140 - 1,952
Balance at 31(st)
December 2021 3,482 34,625 (21,548) 10,260 246 27,065
------------------------ --------- --------- ----------- ---------- ---------- --------
Loss for the
year - - (1,608) - - (1,608)
Exchange differences
on translation
of foreign operations - - - - 448 448
------------------------ --------- --------- ----------- ---------- ---------- --------
Total comprehensive
loss for the
year - - (1,608) - 448 (1,160)
------------------------ --------- --------- ----------- ---------- ---------- --------
Issue of shares 27 140 - - - 167
Share based payments - - - 1,072 - 1,072
Options exercised 56 - - - - 56
Options expired - - 418 (418) - -
Options relinquished - - 6,389 (6,389) - -
------------------------ --------- --------- ----------- ---------- ---------- --------
Total transactions
with owners 83 140 6,807 (5,735) - 1,295
------------------------ --------- --------- ----------- ---------- ---------- --------
Balance at 31(st)
December 2022 3,565 34,765 (16,349) 4,525 694 27,200
------------------------ --------- --------- ----------- ---------- ---------- --------
The notes on pages 50 to 74 form part of these consolidated
financial statements.
Consolidated Statement of Cashflows for the Year Ended 31st
December 2022
Year ended Year ended
31(st) December 31(st) December
2022 2021
Note $'000 $'000
--------------------------------------------- ------- ------------------ -----------------
Cash flow from operating activities
Loss for the year before tax (1,608) (4,783)
Adjustments for:
Depreciation and depletion 5 1,956 2,901
Decommissioning finance charge 17 66 66
Disposal of PP&E at nil value - 49
Other income 8 (281) (5)
Finance expense 1 3
Creditors paid in shares 167 -
Share based payments expense 7 1,072 1,494
Foreign exchange movement (29) 6
--------------------------------------------- ------- ------------------ -----------------
Operating cash flows before movements
in working capital 1,344 (269)
Decrease/ (increase) in trade and
other receivables 192 (4)
Increase in trade and other payables 194 179
(Increase) in inventory (206) (471)
--------------------------------------------- ------- ------------------ -----------------
Net cash used in operating activities 1,524 (565)
Cash flow from investing activities
Cash received from acquisition of BRL - 278
Income received 281 5
Expenditure in respect of PP&E (2,730) (6,407)
--------------------------------------------- ------- ------------------ -----------------
Net cash used in investing activities (2,449) (6,124)
Cash flow from financing activities
Proceeds from issue of equity - 1,465
Interest paid (1) (3)
--------------------------------------------- ------- ------------------ -----------------
Net cash (outflow) /inflow from financing
activities (1) 1,462
Net (decrease) in cash and cash equivalents
in the year (926) (5,227)
Cash and cash equivalents at start
of year 1,244 6,331
Effects of foreign exchange rate changes
on cash and cash equivalents 132 140
--------------------------------------------- ------- ------------------ -----------------
Cash and cash equivalents at end of
year 450 1,244
--------------------------------------------- ------- ------------------ -----------------
The notes on pages 50 to 74 form part of these consolidated
financial statements.
Significant non-cash transactions
The only significant non-cash transactions were the issue of
shares and share options detailed in notes 18 and 22.
Notes Forming Part of the Consolidated Financial Statements
Corporate Information
Block Energy plc ("Block Energy") gained admission to AIM on
11(th) June 2018, trading under the symbol of BLOE.
The Consolidated financial statements of the Group, which
comprises Block Energy Plc and its subsidiaries, for the year ended
31(st) December 2022 were authorised for issue in accordance with a
resolution of the Directors on 10(th) May 2023 . Block Energy is a
Company incorporated in the UK whose shares are publicly traded.
The address of the registered office is given in the officers and
advisers section of this report. The Company's administrative
office is in London, UK.
The nature of the Company's operations and its principal
activities are set out in the Strategic Report on pages 4 to 22 and
the Report of the Directors on pages 23 to 25.
1. Significant Accounting policies
IAS 8 requires that management shall use its judgement in
developing and applying accounting policies that result in
information which is relevant to the economic decision-making needs
of users, that are reliable, free from bias, prudent, complete and
represent faithfully the financial position, financial performance
and cash flows of the entity.
Basis of preparation
The principal accounting policies adopted in the preparation of
these consolidated financial statements are set out below. The
policies have been consistently applied to all the years presented,
unless otherwise stated. All amounts presented are in thousands of
US dollars unless otherwise stated. Foreign operations are included
in accordance with the policies set out below.
The consolidated financial statements have been prepared in
accordance with UK-adopted international accounting standards and
as regards the Company financial statements, as applied in
accordance with the requirements of the Companies Act 2006 . The
Financial Statements have also been prepared under the historical
cost convention, as modified by the revaluation of financial assets
at fair value through profit or loss.
The preparation of financial statements in accordance with
UK-adopted international accounting standards requires management
to make judgements, estimates and assumptions that affect the
application of policies and reported amounts of assets and
liabilities, income and expenses. The estimates and associated
assumptions are based on historical experience and factors that are
believed to be reasonable under the circumstances, the results of
which form the basis of making judgements about carrying values of
assets and liabilities that are not readily apparent from other
sources. Actual results may differ from these estimates.
The estimates and underlying assumptions are reviewed on an
ongoing basis. Changes in accounting estimates may be necessary if
there are changes in the circumstances on which the estimate was
based, or as a result of new information or more experience. Such
changes are recognised in the period in which the estimate is
revised.
New and amended standards adopted by the Group
There were no new or amended accounting standards that required
the Group to change its accounting policies for the year ended
31(st) December 2022 and no new standards, amendments or
interpretations were adopted by the Group.
New accounting standards issued but not yet effective
The standards and interpretations that are relevant to the
Group, issued, but not yet effective, up to the date of the
Financial Statements are listed below. The Group intends to adopt
these standards, if applicable, when they become effective.
Standard Impact on initial application Effective
date
------------------- --------------------------------------- --------------
IFRS 10 and IAS Long term interests in associates Unknown
28 (Amendments) and joint ventures
Amendments to IAS Classification of liabilities 1(st) January
1 as current or non- current 2023
Amendments to IAS Disclosure of material rather 1(st) January
1 than significant accounting 2023
policies.
Amendments to IAS Clarification on how companies 1(st) January
8 should distinguish between changes 2023
in accounting policies and accounting
estimates
Amendments to IFRS Deferred tax assets and liabilities 1(st) January
12 arising from a single transaction 2023
The Directors have evaluated the impact of transition to the
above standards and do not consider that there will be a material
impact of transition on the financial statements.
Basis of consolidation
Where the Company has control over an investee, it is classified
as a subsidiary. The Company controls an investee if all three of
the following elements are present: power over the investee,
exposure to variable returns from the investee, and the ability of
the investor to use its power to affect those variable returns.
Control is reassessed whenever facts and circumstances indicate
that there may be a change in any of these elements of control.
De-facto control exists in situations where the Company has the
practical ability to direct the relevant activities of the investee
without holding the majority of the voting rights. In determining
whether de-facto control exists the Company considers all relevant
facts and circumstances, including:
-- The size of the Company's voting rights relative to both the
size and dispersion of other parties who hold voting rights;
-- Substantive potential voting rights held by the Company and by other parties;
-- Other contractual arrangements; and
-- Historic patterns in voting attendance.
Business combinations and goodwill
The consolidated financial statements incorporate the results of
business combinations using the purchase method. In the
consolidated statement of financial position, the acquiree's
identifiable assets, liabilities and contingent liabilities are
initially recognised at their fair values at the acquisition date.
The difference between the consideration paid and the acquired net
assets is recognised as goodwill. The results of acquired
operations are included in the consolidated income statement from
the date on which control is obtained. Any difference arising
between the fair value and the tax base of the acquiree's assets
and liabilities that give rise to a deductible difference results
in recognition of deferred tax liability. No deferred tax liability
is recognised on goodwill.
Acquisitions
The Group and Company measure consideration at the acquisition
date as:
-- The fair value of the consideration transferred; plus
-- The recognised amount of any non-controlling interests in the acquiree
-- Plus, if the business combination is achieved in stages, the
fair value of the existing equity interest in the acquiree; less
the net recognised amount (generally fair value) of the
identifiable assets acquired and liabilities assumed.
When the excess is negative, a bargain purchase gain is
recognised immediately in profit or loss.
Cost related to the acquisition, other than those associated
with the issue of debt or equity securities, that the Group incurs
in connection with a business combination, are expensed as
incurred.
Asset acquisition
Acquisitions of mineral exploration licences through the
acquisition of non-operational corporate structures that do not
represent a business, and therefore do not meet the definition of a
business combination, are accounted for as the acquisition of an
asset. An example of such would be increases in working interests
in licences.
The consideration for the asset is allocated to the assets based
on their relative fair values at the date of acquisition.
Going concern
The Directors have prepared cash flow forecasts for a period of
24 months from the date of signing these financial statements. The
Group's forecasts are reviewed regularly to assess whether any
actions to curtail expenditure or cut costs are required.
The Group's operations presently generate sufficient revenues to
cover operating costs and capital expenditures, supporting the
continued preparation of the Group's accounts on a going concern
basis.
The Directors are nevertheless conscious that oil prices have
been volatile during the past few years, and could rise further but
could also fall back in the year ahead, and that future production
levels depend on both depletion rates from existing wells and the
success of future drilling. As part of their going concern
assessment, the Directors have examined multiple scenarios in which
oil prices and/or future production levels fall substantially and
have concluded that it remains possible that future revenues in at
least some scenarios might not cover all operating costs and
planned capital expenditures, creating a material uncertainty that
may cast doubt over the Group's ability to continue as a going
concern. Whilst acknowledging this material uncertainty, the
Directors remain confident of making cost savings if required and,
therefore, the Directors consider it appropriate to prepare the
financial statements on a going concern basis. The financial
statements do not include the adjustments that would result if the
Group were unable to continue as a going concern.
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
CGU's 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 license/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 exploration and evaluation 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 cash generating unit.
In accordance with IFRS 6 the Group firstly considers the
following facts and circumstances in their assessment of whether
the Group's exploration and evaluation 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 cash generating unit. 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
cash-generating unit's recoverable amount exceeds its carrying
amount. A reversal of impairment loss is recognised in the profit
or loss immediately.
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 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 oil assets are not subject to depreciation until
commercial production starts. Depreciation is calculated on a
unit-of-production basis in order to write off the cost of an asset
as the reserves that it represents are produced and sold. Any
periodic reassessment of reserves will affect the depreciation rate
on a prospective basis. The unit-of-production depreciation rate is
calculated on a field-by-field basis using proved, developed
reserves as the denominator and capitalised costs as the numerator.
The numerator includes an estimate of the costs expected to be
incurred to bring proved, developed, not-producing reserves into
production. Infrastructure that is common to a number of fields,
such as gathering systems, treatment plants and pipelines are
depreciated on a unit-of-production basis using an aggregate
measure of reserves or on a straight line basis depending on the
expected pattern of use of the underlying asset.
Proven 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.
The CGU's identified by the company are Corporate along with
West Rustavi, Rustaveli, Satskhenisi and Norio given they are
independent projects under individual Production Sharing Contracts
("PSCs"). An assessment is made at each reporting 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 recognised.
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 recognised 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:
-- PP&E - 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.
Leases
The Group assesses whether a contract is or contains a lease, at
inception of the contract. The Group recognises a right-of-use
asset and a corresponding lease liability with respect to all lease
arrangements in which it is the lessee, except for short-term
leases (defined as leases with a lease term of 12 months or less)
and leases of low value assets (such as tablets and personal
computers, small items of office furniture and telephones). For
these leases, the Group recognises the lease payments as an
operating expense on a straight-line basis over the term of the
lease unless another systematic basis is more representative of the
time pattern in which economic benefits from the leased assets are
consumed.
Inventories
Crude oil inventories are stated at the lower of cost and net
realisable value. The cost of crude oil is the cost of production,
including direct labour and materials, depreciation and an
appropriate portion of fixed overheads allocated based on normal
operating capacity of the production facilities, determined on a
weighted average cost basis. Net realisable value of crude oil is
based on the market price of similar crude oil at the balance sheet
date and costs to sell, adjusted if the sale of inventories after
that date gives additional evidence about its net realisable value
at the balance sheet date.
The cost of crude oil is expensed in the period in which the
related revenue is recognised.
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
Provisions for decommissioning are recognised in full when wells
have been suspended or facilities have been installed.
A corresponding amount equivalent to the provision is also
recognised as part of the cost of either the related oil and gas
exploration and evaluation asset or property, plant and equipment
as appropriate. The amount recognised is the estimated cost of
decommissioning, discounted to its net present value, and is
reassessed each year in accordance with local conditions and
requirements.
Changes in the estimated timing of decommissioning or
decommissioning cost estimates are dealt with prospectively by
recording an adjustment to the provision, and a corresponding
adjustment to the related asset.
The unwinding of the discount on the decommissioning provision
is included as a finance cost.
Taxation and deferred tax
Income tax expense represents the sum of the current tax and
deferred tax charge for the period.
The Group's liability for current tax is calculated using tax
rates that have been enacted or substantively enacted by the
reporting date.
Deferred tax is recognised on differences between the carrying
amounts of assets and liabilities in the financial information and
the corresponding tax bases and is accounted for using the balance
sheet liability method .
Deferred tax assets are recognised to the extent that it is
probable that taxable profits will be available against which
deductible temporary differences can be utilised.
Judgement is applied in making assumptions about future taxable
income, including oil and gas prices, production, rehabilitation
costs and expenditure to determine the extent to which the Group
recognises deferred tax assets, as well as the anticipated timing
of the utilisation of the losses.
Deferred tax is calculated at the tax rates that have been
enacted or substantively enacted and are expected to apply in the
period when the liability is settled, or the asset realised.
Deferred tax is charged or credited to the statement of
comprehensive income, except when it relates to items charged or
credited directly to equity, in which case the deferred tax is also
dealt with in equity.
Foreign currencies
Monetary assets and liabilities denominated in foreign
currencies are translated into US dollars at the rates of exchange
prevailing at the reporting date: $1.21/GBP1 (2021: $1.35/GBP1).
Transactions in foreign currencies are translated at the exchange
rate ruling at the date of the transaction. Exchange differences
are taken to the Statement of Comprehensive Income.
The Company's functional currency is the pound sterling and its
presentational currency is the US dollar and accordingly the
financial statements have also been prepared in US dollars. The
functional currencies of Block Norioskhevi Ltd, Satskhenisi
Limited, Georgia New Ventures Inc and Block Rustaveli Limited are
the US dollar and the functional currencies of their branches in
Georgia are the Georgian Lari.
Foreign operations
The assets are translated into US dollars at the exchange rate
at the reporting date and income and expenses of the foreign
operations are translated at the average exchange rates. Exchange
differences arising on translation are recognised in other
comprehensive income and presented in the other reserves category
in equity.
Determination of functional currency and presentational
currency
The determination of an entity's functional currency is assessed
on an entity by entity basis. A company's functional currency is
defined as the currency of the primary economic environment in
which the entity operates. The functional currency of the Parent
Company is the pound sterling, because it operates in the UK, where
the majority of its transactions are in pounds sterling. The
functional currencies of Block Norioskhevi Ltd, Satskhenisi
Limited, Georgia New Ventures Inc and Block Rustaveli Limited are
the US dollar, because the majority of their transactions by value
is in US dollars, and the functional currencies of their branches
in Georgia are the Georgian Lari, because the majority of their
transactions by value is in Georgian Lari.
The presentational currency of the Group for year ended 31(st)
December 2022 is US dollars. The presentational currency is an
accounting policy choice.
Revenue
Revenue from contracts with customers is recognised when the
Group satisfies its performance obligation of transferring control
of oil or gas to a customer. Transfer of control is usually
concurrent with both transfer of title and the customer taking
physical possession of the oil or gas, which is determined by
reference to the oil or gas sales agreement. This performance
obligation is satisfied at that point in time.
The transaction price is agreed between the Group and the
customer, with the amount of revenue recognised being determined by
considering the terms of the Production Sharing Contract ("PSC")
and the oil sales agreement for each oil sale or the gas sales
agreement for each gas sale.
Finance income and expenses
Finance costs are accrued on a time basis, by reference to the
principal outstanding and at the effective interest rate
applicable. Finance expenses comprise interest or finance costs on
borrowings.
Financial instruments
Financial assets and financial liabilities are recognised on the
Group's balance sheet when the Group becomes party to the
contractual provisions of the instrument.
Fair value
Fair value is the price that would be received to sell an asset
or paid to transfer a liability in an orderly transaction between
market participants at the measurement date. All assets and
liabilities, for which fair value is measured or disclosed in the
Financial Statements, are categorised within the fair value
hierarchy, described as follows, based on the lowest-level input
that is significant to the fair value measurement as a whole:
Level 1 - quoted (unadjusted) market prices in active markets
for identical assets or liabilities;
Level 2 - valuation techniques for which the lowest-level input
that is significant to the fair value measurement is directly or
indirectly observable; and
Level 3 - valuation techniques for which the lowest-level input
that is significant to the fair value measurement is
unobservable.
Financial assets
Financial assets are initially recognised at fair value, and
subsequently measured at amortised cost, less any allowances for
losses using the expected credit loss model, being the difference
between all contractual cash flows that are due to the Group in
accordance with the contract and all the cash flows that the Group
expects to receive.
Impairment provisions for receivables from related parties and
loans to related parties are recognised based on a forward looking
expected credit loss model. The methodology used to determine the
amount of the provision is based on whether there has been a
significant increase in credit risk since initial recognition of
the financial asset.
For those where the credit risk has not increased significantly
since initial recognition of the financial asset, twelve month
expected credit losses along with gross interest income are
recognised. For those for which credit risk has increased
significantly, lifetime expected credit losses along with the gross
interest income are recognised. For those that are determined to be
credit impaired, lifetime expected credit losses along with
interest income on a net basis are recognised.
Financial liabilities
Financial liabilities are classified as either financial
liabilities at fair value through profit and loss ("FVTPL") or as
other financial liabilities. The Group derecognises financial
liabilities when, and only when, the Group's obligations are
discharged or cancelled, or they expire.
Financial liabilities are classified at FVTPL when the financial
liability is either held for trading or it is designated at FVTPL.
A financial liability is classified as held for trading if it has
been incurred principally for the purpose of repurchasing it in the
near term or is a derivative that is not a designated or effective
hedging instrument.
Financial liabilities at FVTPL are measured at fair value, with
any gains or losses arising on changes in fair value recognised in
profit or loss. The net gain or loss recognised in profit or loss
incorporates any interest paid on the financial liability.
Other financial liabilities, including borrowings, are initially
measured at fair value, net of transaction costs and are
subsequently measured at amortised cost using the effective
interest method, with interest expense recognised on an effective
yield basis.
The effective interest method is a method of calculating the
amortised cost of a financial liability and of allocating interest
expense over the relevant period. The effective interest rate is
the rate that exactly discounts estimated future cash payments
through the expected life of the financial liability, or, where
appropriate, a shorter period, to the net carrying amount on
initial recognition.
Share based payments
The fair value of options granted to Directors and others in
respect of services provided is recognised as an expense in the
Statement of Comprehensive Income with a corresponding increase in
equity reserves - 'other reserves'.
On exercise of, or expiry of unexercised share options, the
proportion of the share based payment reserve relevant to those
options is transferred from other reserves to the accumulated
deficit. On exercise, equity is also increased by the amount of the
proceeds received.
The fair value is measured at grant date and charged over the
accounting periods which the option becomes unconditional.
The fair value of options are calculated using the Black-Scholes
model, taking into account the terms and conditions upon which the
options were granted. Vesting conditions are non-market and there
are no market vesting conditions. These vesting conditions are
included in the assumptions about the number of options that are
expected to vest. At the end of each reporting period, the Company
revises its estimate of the number of options that are expected to
vest. The exercise price is fixed at the date of grant and no
compensation is due at the date of grant. Where equity instruments
are granted to persons other than employees, the statement of
comprehensive income is charged with the fair value of the goods
and services received.
Warrants issued for services rendered are accounted for in
accordance with IFRS 2 recognising either the costs of the service
if it can be reliably measured or the fair value of the warrant
(using the Black-Scholes model). The fair value is recognised as an
expense in the accounting period that the warrant is granted and
there is no revision to this estimate in future accounting
periods.
Warrants issued as part of share issues have been determined as
equity instruments under IAS 32. Since the fair value of the shares
issued at the same time is equal to the price paid, these warrants,
by deduction, are considered to have been issued at nil value.
2. Critical accounting judgments, estimates and assumptions
The Group makes estimates and assumptions regarding the future.
Estimates and judgements are continuously evaluated based on
historical experiences and other factors, including expectations of
future events that are believed to be reasonable under the
circumstances. In the future, actual experience may deviate from
these estimates and assumptions. The key assumptions concerning the
future and other key sources of estimation uncertainty at the
reporting date that have a significant risk of causing a material
adjustment to the carrying amounts of assets and liabilities within
the next financial year, are described below.
Recoverable value of Development & Production assets
-judgement, estimates and assumptions
Costs capitalised in respect of the Group's development and
production assets are required to be assessed for impairment under
the provisions of IAS 36. Such an estimate requires the Group to
exercise judgement in respect of the indicators of impairment and
also in respect of inputs used in the models which are used to
support the carrying value of the assets. Such inputs include
estimates of oil and gas reserves, production profiles, oil price,
oil quality discount, capital expenditure (including an allocation
of salary costs), inflation rates, and pre-tax discount rates that
reflect current market assessments of (a) the time value of money;
and (b) the risks specific to the asset for which the future cash
flow estimates have not been adjusted. The Directors concluded that
there was no indication of impairment in the current year.
Asset decommissioning provisions -estimates and assumptions
The Group's activities are subject to various laws and
regulations governing the protection of the environment. The Group
recognises management's best estimate of the asset decommissioning
costs in the period in which they are incurred. Such estimates of
costs include pre-tax discount rates that reflect current market
assessments of (a) the time value of money; and (b) the risks
specific to the asset for which the future cash flow estimates have
not been adjusted. Actual costs incurred in future periods could
differ materially from the estimates.
Additionally, future changes to environmental laws and
regulations, life of development and production assets, estimates
and discount rates could affect the carrying amount of this
provision. The Board assessed the extent of decommissioning
required as at 31(st) December 2022 and concluded that a provision
of $1,723,000 (2021: $2,040,000) should be recognised in respect of
future decommissioning obligations at Rustaveli, West Rustavi,
Satskhenisi and Norio (see note 17).
Share options - estimates and assumptions
Share options issued by the Group relates to the Block Energy
plc Share Option Plan. The grant date fair value of such options is
calculated using a Black-Scholes model whose input assumptions are
derived from market and other internal estimates.
The key estimates include volatility rates and the expected life
of the options, together with the likelihood of non-market
performance conditions being achieved (see note 22).
Impairment of investments and loans to subsidiaries - Parent
Company only
The Company assesses at each reporting date whether there is any
objective evidence that investments/receivables in subsidiaries are
impaired. To determine whether there is objective evidence of
impairment, a considerable amount of estimation is required in
assessing the ultimate realisation of these
investments/receivables, including valuation, creditworthiness and
future cashflow. No impairment of investments was indicated at year
end.
In prior years the Company carried out an assessment of the
expected credit loss arising on intercompany receivables. This was
calculated as a total loss allowance of $3,710,000 and was provided
for in the parent Company financial statements. The Company has
judged that as there has been no impairment of the underlying
assets then no further loss allowance is required in the current
year.
3. Segmental disclosures
IFRS 8 requires segmental information for the Group on the basis
of information reported to the chief operating decision maker for
decision making purposes. The Company considers this role as being
performed by the Board of Directors. The Group's operations are
focused on oil and gas development and production activities (Oil
Extraction segment) in Georgia and has a corporate head office in
the UK (Corporate segment). Based on risks and returns the
Directors consider that there are two operating segments that they
use to assess the Group's performance and allocate resources being
the Oil Extraction in Georgia, and the corporate segment including
unallocated costs.
The segmental results are as follows:
Oil Corporate Group
Extraction and other Total
Year ended 31(st) December 2022 $'000 $'000 $'000
Revenue 8,262 - 8,262
Cost of sales (3,992) - (3,992)
Depreciation and depletion (1,906) (50) (1,956)
Administrative costs (1,012) (3,100) (4,112)
Other income 18 263 281
Net Finance costs and Forex (82) (9) (91)
--------------- -------------------- -------------------------
Profit/(loss) from operating activities 1,288 (2,896) (1,608)
--------------- -------------------- -------------------------
Total non-current assets 24,814 1 24,815
--------------- -------------------- -------------------------
Oil Corporate Group
Extraction and other Total
Year ended 31(st) December 2021 $'000 $'000 $'000
Revenue 6,114 - 6,114
Cost of sales (2,982) - (2,982)
Depreciation and depletion (2,896) (5) (2,901)
Administrative costs (1,201) (3,725) (4,926)
Other income 5 - 5
Net Finance costs and income (90) (3) (93)
--------------- -------------------- -------------------------
Loss from operating activities (1,050) (3,733) (4,783)
--------------- -------------------- -------------------------
Total non-current assets 24,341 4 24,345
--------------- -------------------- -------------------------
31(st) December 2022 31(st) December 2021
Segmental Assets $'000 $'000
Oil exploration - Georgia 30,206 23,745
Corporate and other 410 7,181
------------------------ ---------------------
30,616 30,926
------------------------ ---------------------
Segmental Liabilities 31(st) December 2022 31(st) December 2021
$'000 $'000
Oil exploration - Georgia 2,591 3,087
Corporate and other 825 774
--------------------- ---------------------
3,416 3,861
--------------------- ---------------------
4. Revenue
Year ended Year ended
31(st) December 31(st) December
2022 2021
$'000 $'000
Crude oil revenue 7,492 5,519
Gas revenue 770 595
----------------- -----------------
8,262 6,114
----------------- -----------------
5. Depreciation and Depletion on Oil and Gas assets
Year ended Year ended
31(st) December 31(st) December
2022 2021
$'000 $'000
Depreciation of PP&E 273 238
Depletion of oil and gas assets 1,683 2,663
----------------- -----------------
1,956 2,901
----------------- -----------------
6. Expenses by nature
Year ended Year ended
31(st) December 31(st) December
2022 2021
$'000 $'000
Employee benefit expense 1,705 1,720
Share option charge 1,072 1,224
Warrants charge - 270
Security expense 15 162
Fees to Auditor in respect of the Group audit 96 93
Fees to Auditor for other non-audit services - 7
Regulatory fees 31 51
Operating lease expense 81 49
7. Directors and employees
Year ended Year ended
31(st) December 31(st) December
2022 2021
$'000 $'000
Employment costs (inc. Directors' remuneration):
Wages and salaries 1,563 1,453
Pensions 49 55
Social security costs 93 212
----------------- -----------------
1,705 1,720
Share based payments 1,035 1,449
2,740 3,169
----------------- -----------------
The share based payments comprised the fair value of options
granted to Directors and employees in respect of services
provided.
Wages and salaries include amounts that are recharged between
subsidiaries. Some of these costs are then capitalised as
development and production assets and others are administration
expenses.
The average monthly number of employees during 2022 was 168
(2021: 176) split as follows:
Year ended Year ended
31(st) December 31(st) December
2022 2021
Management 9 18
Technical 129 135
Administration 30 23
----------------------- -----------------------
168 176
----------------------- -----------------------
Year ended Year ended
31(st) December 31(st) December
2022 2021
$'000 $'000
Amounts attributable to the highest paid Director:
Director's salary and bonus 426 358
Pension 25 27
Share based payments 104 183
----------------------- -----------------------
555 568
----------------------- -----------------------
Key management and personnel are considered to be the
Directors.
8. Other income
Year ended Year ended
31(st) December 31(st) December
2022 2021
$'000 $'000
Sale of materials - 5
Insurance claim 281 -
----------------- -----------------
281 5
----------------- -----------------
In the prior year, materials to be used in the construction of
the gas pipeline from the Early Production Facility at West Rustavi
were sold for $5,000.
9. Finance expense
Year ended Year ended
31(st) December 2022 31(st) December 2021
$'000 $'000
Finance expense 67 87
---------------------- ----------------------
67 87
---------------------- ----------------------
10. Taxation
Based on the results for the year, there is no charge to UK or
foreign tax. This is reconciled to the accounting loss as
follows:
Year ended Year ended
31(st) December 31(st) December
2022 2021
UK taxation $'000 $'000
UK Group loss on ordinary activities (1,608) (4,783)
----------------- -----------------
Loss before taxation at the average UK standard rate of 19% (2021:19%) (306) (909)
Effect of:
Zero tax rate income (1,570) (1,162)
Disallowable expenses 302 457
Tax losses for which no deferred income tax asset was recognised 2,876 5,488
Current tax - -
----------------- -----------------
The Group offsets deferred tax assets and liabilities if, and
only if, it has a legally enforceable right to offset current tax
assets and current tax liabilities and the deferred tax assets and
deferred tax liabilities related to corporation taxes levied by the
same tax authority. Due to the tax rates applicable in the
jurisdictions of the Group's subsidiary entities (being 0%) no
deferred tax liabilities or assets are considered to arise.
For any other jurisdictions which the Group has not recognised
deferred income tax assets for tax losses carried forward for
entities in which it is not considered probable that there will be
sufficient future taxable profits available for offset.
Unrecognised deferred income tax assets related to unused tax
losses. The Company has UK corporation tax losses available to
carry forward against future profits of approximately $14,414,000
(2021: $13,109,000 - estimated).
11. Loss per share
The calculation for loss per Ordinary Share (basic and diluted)
is based on the consolidated loss attributable to the equity
shareholders of the Company is as follows:
Year ended Year ended
31(st) December 2022 31(st) December 2021
Loss attributable to equity Shareholders ($'000) (1,608) (4,783)
Weighted average number of Ordinary Shares 660,223,772 630,629,894
Loss per Ordinary share ($/cents) (0.24)c (0.76)c
Loss and diluted loss per Ordinary Share are calculated using
the weighted average number of Ordinary Shares in issue during the
year. Diluted share loss per share has not been calculated as the
options and warrants have no dilutive effect given the loss arising
in the year.
12. Property, Plant and Equipment
PPE/Computer / Office Equipment /
Development & Production Assets Motor Vehicles Total
$'000 $'000 $'000
Cost
At 1(st) January 2021 22,096 777 22,873
Reallocation of assets (780) 780 -
Additions 6,182 290 6,472
Disposals (38) (12) (50)
Reduction in BLO (see note 17) (498) - (498)
Foreign exchange movements - (33) (33)
---------------------------------- --------------------------------------- -------
At 31(st) December 2021 26,962 1,802 28,764
---------------------------------- --------------------------------------- -------
Additions 2,397 333 2,730
Disposals - (89) (89)
Reduction in BLO (see note 17) (265) - (265)
Foreign exchange movements 21 26 42
---------------------------------- --------------------------------------- -------
At 31(st) December 2022 29,115 2,072 31,187
---------------------------------- --------------------------------------- -------
Accumulated depreciation
At 1(st) January 2021 1,457 105 1,562
Reallocation of assets (91) 91 -
Disposals - (1) (1)
Charge for the year 2,663 238 2,901
Foreign exchange movements - (43) (43)
---------------------------------- --------------------------------------- -------
At 31(st) December 2021 4,029 390 4,419
---------------------------------- --------------------------------------- -------
Disposals - (2) (2)
Charge for the year 1,683 273 1,956
Foreign exchange movements (1) - (1)
---------------------------------- --------------------------------------- -------
At 31(st) December 2022 5,711 661 6,372
---------------------------------- --------------------------------------- -------
Carrying Amount
At 1(st) January 2022 22,933 1,412 24,345
---------------------------------- --------------------------------------- -------
At 31(st) December 2022 23,404 1,411 24,815
---------------------------------- --------------------------------------- -------
Carrying amount of property plant and equipment by cash
generative unit:
Satsk
Norio henisi West Rustavi Rustaveli Corporate Total
$'000 $'000 $'000 $'000 $'000 $'000
Carrying amount
At 31(st) December 2022 2,126 174 14,625 7,488 402 24,815
------ -------- ------------- ------------ ---------- ---------
At 31(st) December 2021 2,222 176 14,045 7,721 181 24,345
------ -------- ------------- ------------ ---------- ---------
At the end of the current year, the Directors concluded there
were no impairment indicators in the current year that warranted
impairment testing to be prepared with respect to the carrying
value of the assets of the Group.
13. Inventory
31(st) December 2022 31(st) December 2021
$'000 $'000
Spare parts and consumables 3,606 3,174
Crude oil 1,185 1,411
4,791 4,585
--------------------- ---------------------
14. Trade and other receivables
31(st) December 2022 31(st) December 2021
$'000 $'000
Other receivables 347 657
Prepayments 213 95
560 752
--------------------- ---------------------
The fair value at amortised cost is considered to be equivalent
to the book value as none of these receivables are considered to be
impaired.
15. Cash and cash equivalents
31(st) December
2022 31(st) December 2021
$'000 $'000
Cash and cash equivalents 450 1,244
---------------- ---------------------
Cash and cash equivalents consist of balances in bank accounts
used for normal operational activities. The vast majority of the
cash was held in an institution with a Standard & Poor's credit
rating of A-1.
16. Trade and other payables
31(st) December 31(st) December
2022 2021
$'000 $'000
Trade and other payables 1,182 845
Accruals 511 711
1,693 1,556
---------------- ----------------
Trade and other payables principally comprise amounts
outstanding for corporate services and operational expenditure.
17. Provisions
31(st) December 2022 31(st) December 2021
$'000 $'000
Decommissioning provision 1,723 2,040
Baseline oil liability - 265
--------------------- ---------------------
1,723 2,305
--------------------- ---------------------
31(st) December 31(st) December
2022 2021
Decommissioning provision $'000 $'000
Brought forward 2,040 1,917
Unwinding of discount on provision 66 -
Change in decommissioning provision
in the year (383) 123
Carried forward 1,723 2,040
---------------- ----------------
31(st) December 31(st) December
2022 2021
Baseline oil liability $'000 $'000
Brought forward 265 745
Baseline oil liability reducing from
the acquisition (265) (498)
Additional baseline oil liability provided
in the year - 18
---------------- ----------------
Carried forward - 265
---------------- ----------------
Decommissioning provisions are based on management estimates of
work and the judgement of the Directors. By its nature, the
detailed scope of work required, and timing of such work is
uncertain.
The baseline oil liability arose from the acquisition of BRL in
2020. Under the production sharing contract for Block XIB, BRL was
obliged to deliver a certain quantity of oil to the State of
Georgia in quarterly instalments by May 2022. This was all
delivered and there were no further liabilities at year end.
18. Share capital
Called up, allotted, issued Nominal
and fully paid No. Ordinary No. Deferred Value
Shares Shares $
As at 1(st) January 2021 614,542,093 2,095,165,355 3,352,509
------------- -------------- ----------
Issue of equity on 4(th) January
2021 617,571 - 2,098
Issue of equity on 12(th) January
2021 397,904 - 1,362
Issue of equity on 1(st) February
2021 839,996 - 2,937
Issue of equity on 15(th) February
2021 180,715 - 632
Issue of equity on 1(st) March
2021 232,248 - 800
Issue of equity on 12(th) March
2021 865,896 - 2,983
Issue of equity on 16(th) March
2021 6,590,707 - 22,752
Issue of equity on 7(th) April
2021 58,972 - 204
Issue of equity on 5(th) May
2021 171,715 - 611
Issue of equity on 7(th) June
2021 125,696 - 434
Issue of equity on 2(nd) July
2021 1,355,805 - 4,713
Issue of equity on 2(nd) September
2021 62,005 - 209
Issue of equity on 15(th) September
2021 24,877,230 - 83,684
Issue of equity on 4(th) October
2021 746,668 - 2,556
Issue of equity on 8(th) October
2021 299,412 - 1,025
Issue of equity on 2(nd) November
2021 262,403 - 873
Issue of equity on 5(th) December
2021 522,489 - 1,766
As at 31(st) December 2021 652,749,525 2,095,165,355 3,482,148
------------- -------------- ----------
Issue of equity on 5(th) January
2022 324,102 - 1,087
Issue of equity on 2(nd) February
2022 1,768,705 - 5,903
Issue of equity on 3(rd) February
2022 233,232 - 778
Issue of equity on 11(th) February
2022 636,832 - 2,126
Issue of equity on 1(st) March
2022 400,219 - 1,313
Issue of equity on 2(nd) March
2022 280,117 - 919
Issue of equity on 1(st) April
2022 404,838 - 1,273
Issue of equity on 3(rd) April
2022 376,773 - 1,184
Issue of equity on 4(th) May
2022 636,077 - 2,004
Issue of equity on 1(st) June
2022 273,392 - 793
Issue of equity on 6(th) June
2022 586,133 - 1,700
Issue of equity on 6(th) July
2022 902,395 - 2,751
Issue of equity on 2(nd) August
2022 1,378,658 - 4,073
Issue of equity on 2(nd) September
2022 2,551,864 - 7,125
Issue of equity on 4(th) October
2022 1,632,875 - 4,698
Issue of equity on 14(th) October
2022 464,457 - 1,336
Issue of equity on 1(st) November
2022 233,047 - 506
Issue of equity on 2(nd) November
2022 656,382 - 1,889
Issue of equity on 1(st) December
2022 303,268 - 917
Issue of equity on 2(nd) December
2022 1,569,850 - 4,749
Issue of equity on 13(th) December
2022 12,000,000 - 36,303
As at 31(st) December 2022 680,362,741 2,095,165,355 3,565,575
------------- -------------- ----------
On 5(th) January 2022, the Company issued 324,102 Ordinary
Shares to two service providers in lieu of cash settlement for
services provided to the Company with a total value of GBP3,033
($4,067).
On 2(nd) February 2022, the Company issued 1,768,705 Ordinary
Shares to three Non-Executive Directors and a consultant, on
exercise of their nil cost options.
On 3(rd) February 2022, the Company issued 233,232 Ordinary
Shares to two service providers in lieu of cash settlement for
services provided to the Company with a total value of GBP3,033
($4,049).
On 11(th) February 2022, the Company issued 636,832 Ordinary
Shares to a consultant on exercise of their nil cost options.
On 1(st) March 2022, the Company issued 400,219 Ordinary Shares
to three Non-Executive Directors on exercise of their nil cost
options.
On 2(nd) March 2022, the Company issued 280,117 Ordinary Shares
to two service providers in lieu of cash settlement for services
provided to the Company with a total value of GBP3,033
($3,981).
On 1(st) April 2022, the Company issued 404,838 Ordinary Shares
to three Non-Executive Directors on exercise of their nil cost
options.
On 3(rd) April 2022, the Company issued 376,773 Ordinary Shares
to three service providers in lieu of cash settlement for services
provided to the Company with a total value of GBP4,033
($5,071).
On 4(th) May 2022, the Company issued 329,458 Ordinary Shares to
three Non-Executive Directors on exercise of their nil cost
options. Additionally on this date, the Company issued 306,619
Ordinary Shares to three service providers in lieu of cash
settlement for services provided to the Company with a total value
of GBP4,033 ($5,081).
On 1(st) June 2022, the Company issued 273,392 Ordinary Shares
to three Non-Executive Directors on exercise of their nil cost
options.
On 6(th) June 2022, the Company issued 586,133 Ordinary Shares
to three service providers in lieu of cash settlement for services
provided to the Company with a total value of GBP8,183
($9,494).
On 6(th) July 2022, the Company issued 243,395 Ordinary Shares
to three Non-Executive Directors on exercise of their nil cost
options. Additionally on this date, the Company issued 659,000
Ordinary Shares to three service providers in lieu of cash
settlement for services provided to the Company with a total value
of GBP10, 641 ($12,976).
On 2(nd) August 2022, the Company issued 309,767 Ordinary Shares
to three Non-Executive Directors on exercise of their nil cost
options. Additionally on this date, the Company issued 671,722
Ordinary Shares to two service providers in lieu of cash settlement
for services provided to the Company with a total value of
GBP11,473 ($13,557) and 397,169 Ordinary Shares to a former
consultant following the exercise of their nil cost options.
On 2(nd) September 2022, the Company issued 307,978 Ordinary
Shares to three Non-Executive Directors on exercise of their nil
cost options. Additionally on this date, the Company issued
2,243,886 Ordinary Shares to three service providers in lieu of
cash settlement for services provided to the Company with a total
value of GBP31,400 ($35,070).
On 4(th) October 2022, the Company issued 233,192 Ordinary
Shares to three Non-Executive Directors on exercise of their nil
cost options. Additionally on this date, the Company issued
1,399,683 Ordinary Shares to three service providers in lieu of
cash settlement for services provided to the Company with a total
value of GBP21,950 ($25,262).
On 14(th) October 2022, the Company issued 464,457 Ordinary
Shares to a consultant on exercise of their nil cost options.
On 1(st) November 2022, the Company issued 233,047 Ordinary
Shares to three Non-Executive Directors on exercise of their nil
cost options.
On 2(nd) November 2022, the Company issued 656,382 Ordinary
Shares to a service provider in lieu of cash settlement for
services provided to the Company with a total value of GBP12,198
($14,038).
On 1(st) December 2022, the Company issued 303,268 Ordinary
Shares to three Non-Executive Directors on exercise of their nil
cost options.
On 2(nd) December 2022, the Company issued 1,569,850 Ordinary
Shares to three service providers in lieu of cash settlement for
services provided to the Company with a total value of GBP28,640
($34,657).
On 13(th) December 2022, the Company issued 12,000,000 Ordinary
Shares to Jindal Petroleum (Georgia) Limited on exercise of the nil
cost options which were granted in 2020 as part of the
consideration for the acquisition of Schlumberger Rustaveli Company
Limited.
On 4(th) January 2021, the Company issued 617,571 Ordinary
Shares to a service provider in lieu of cash settlement for
services provided to the Company with a total value of GBP20,984
($28,509).
On 12(th) January 2021, the Company issued 397,904 Ordinary
Shares to a Chris Brown, Non-executive Director, on exercise of his
nil cost options.
On 1(st) February 2021, the Company issued 839,996 Ordinary
Shares to six service providers in lieu of cash settlement for
services provided to the Company with a total value of GBP29,251
($40,914).
On 15(th) February 2021, the Company issued 180,715 Ordinary
Shares to a former employee/Director on exercise of their nil cost
options.
On 1(st) March 2021, the Company issued 232,248 Ordinary Shares
to four service providers in lieu of cash settlement for services
provided to the Company with a total value of GBP7,542
($10,395).
On 12(th) March 2021, the Company issued 865,896 Ordinary Shares
to Philip Dimmock, Chairman and a Contractor, on exercise of their
nil cost options.
On 16(th) March 2021, the Company issued 4,400,000 Ordinary
Shares to Paul Haywood, Executive Director, on exercise of his
options, at an exercise price of 2.5 pence per share. Additionally
on this date, the Company issued 2,190,707 Ordinary Shares to a
service provider in lieu of cash settlement for services provided
to the Company with a total value of GBP72,134 ($100,000).
On 7(th) April 2021, the Company issued 58,972 Ordinary Shares
to one service provider in lieu of cash settlement for services
provided to the Company with a total value of GBP1,717
($2,372).
On 5(th) May 2021, the Company issued 171,715 Ordinary Shares to
two service providers in lieu of cash settlement for services
provided to the Company with a total value of GBP4,751
($6,765).
On 7(th) June 2021, the Company issued 125,696 Ordinary Shares
to two service providers in lieu of cash settlement for services
provided to the Company with a total value of GBP3,234
($4,468).
On 2(nd) July 2021, the Company issued 1,355,805 Ordinary Shares
to a former employee on exercise of their nil cost options at a
value of $44,269 to the Company as it met the income tax cost of
this issue.
On 2(nd) September 2021, the Company issued 62,005 Ordinary
Shares to a service provider in lieu of cash settlement for
services provided to the Company with a total value of GBP155
($209).
On 15(th) September 2021, the Company issued 24,877,230 Ordinary
Shares at their nominal value to the Employee Benefit Trust.
On 4(th) October 2021, the Company issued 746,668 Ordinary
Shares to four service providers in lieu of cash settlement for
services provided to the Company with a total value of GBP20,148
($27,589).
On 8(th) October 2021, the Company issued 299,412 Ordinary
Shares to a former Director, on exercise of their nil cost
options.
On 2(nd) November 2021, the Company issued 262,403 Ordinary
Shares to two service providers in lieu of cash settlement for
services provided to the Company with a total value of GBP5,533
($7,367).
On 5(th) December 2021, the Company issued 522,489 Ordinary
Shares to two service providers in lieu of cash settlement for
services provided to the Company with a total value of GBP8,033
($10,863).
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 or profits of
the Company, nor is there entitlement to receive notice of, speak
at, or vote at any general meeting or annual general meeting.
19. Share premium account
$'000
Balance at 1(st) January
2022 34,625
Premium arising on issue of equity shares 140
Share issue costs -
-------
Balance at 31(st) December
2022 34,765
-------
$'000
Balance at 1(st) January
2021 34,234
Premium arising on issue of equity shares 391
Share issue costs -
-------
Balance at 31(st) December
2021 34,625
-------
20. Reserves
The following describes the nature and purpose of each reserve
within owners' equity.
Reserves Description and purpose
Share capital Amount subscribed for share capital at nominal value.
Share premium account Amount subscribed for share capital in excess of nominal value, less
attributable costs.
Other reserves The other reserves comprises the fair value of all share options and warrants
which have been
charged over the vesting period, net of the amount relating to share options
which have expired,
been cancelled and have vested. It also comprises of the fair value of the
share options issued
as part of the consideration paid for the acquisition of the subsidiary BRL
and subsequently
relinquished in the year. This movement has been shown in the Consolidated
Statement of the
Changes in Equity and is also set out in the table below
Foreign exchange reserve Exchange differences on translating the net assets of foreign operations
Accumulated deficit Cumulative net gains and losses recognised in the income statement and in
respect of foreign
exchange.
Other reserves $'000
Balance at 1(st) January
2022 10,260
Share based payments 1,072
Options movement (6,807)
--------
Balance at 31(st) December
2022 4,525
--------
$'000
Balance at 1(st) January
2021 9,120
Share based payments 1,494
Options movement (354)
--------
Balance at 31(st) December
2021 10,260
--------
On 30(th) November 2022, the Company announced that the
outstanding Consideration due to Schlumberger Production Management
("SLB"); (the seller of XIB) had not been taken up and that the
108,000,000 nil-cost options issued to SLB were to be relinquished.
This decision has significantly improved the Company's accumulated
deficit, with $6,389,000 of the movement in options being
attributable to this relinquishment of options and their subsequent
recycling of this amount through the reserves.
21. Warrants
31(st) December 2022 31(st) December 2021
weighted average weighted average
Number of Warrants exercise price Number of Warrants exercise price
Outstanding at the
beginning of the
year 16,820,502 6p 16,820,502 6p
Expired in the year (6,011,308) 11p - -
Outstanding at the
end of the year 10,809,194 4p 16,820,502 6p
------------------- ----------------------- ------------------- ------------------------
As at 31(st) December 2022, all warrants were available to
exercise and were exercisable at prices between 3p and 12.5p (31
December 2021: 3p and 12.5p). The weighted average life of the
warrants is 2.89 years (31 December 2021: 2.65 years). No new
warrants were issued and no existing warrants were exercised during
the year. 6,011,308 warrants expired during the year. The fair
value of additions during the year was $nil (2021: $nil).
22. Share based payments
During the year, the Group operated a Block Energy plc Share
Option Plan (Share Option Scheme).
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. The application of IFRS 2 gave
rise to a charge of $1,072,000 for the year ended 31(st) December
2022. The equivalent charge for the year ended 31(st) December 2021
was $1,494,000. The Group recognised total expenses (all of which
related to equity settled share-based payment transactions) under
the current plans of:
Year ended Year ended
31(st) December 31(st) December 2021
2022
$'000 $'000
Share option scheme 1,072 1,224
Warrants charge - 270
1,072 1,494
----------------- ----------------------
Share Option Scheme
The vesting period varies between 0 days to 3 years. The options
expire if they remain unexercised after the exercise period has
lapsed and have been valued using the Black Scholes model.
The following table sets out details of all outstanding options
granted under the Share Option Scheme.
2022 2022 2021 2021
Weighted Weighted
average exercise average exercise
Options price Options price
Outstanding at beginning
of year 47,065,951 $0.05 31,338,713 $0.05
Granted during the
year 85,637,597 $0.02 44,136,726 $0.02
Exercised during
the year (15,111,350) $0.01 (25,211,024) $0.01
Expired during the
year (17,486,046) $0.06 (3,198,464) $0.04
-------------------------- ------------- ------------------ ------------- ------------------
Outstanding at the
end of the year 100,106,152 $0.02 47,065,951 $0.03
-------------------------- ------------- ------------------ ------------- ------------------
Exercisable at the
end of the year 59,272,819 29,161,323
-------------------------- ------------- ------------------ ------------- ------------------
The weighted average exercise price of the share options
exercisable at 31(st) December 2022 is $0.02 (31(st) December 2021:
$0.03). The weighted average contractual life of the share-based
payments outstanding at 31(st) December 2022 is 7.96 years (31(st)
December 2021: 9.8 years).
The estimated fair values of these share options, and the inputs
used in the Black-Scholes model to calculate those fair values are
as follows:
Date of Number Estimated Share Exercise Expected Expected Risk Expected
grant of options fair price price volatility life free dividends
value rate
30(th) June 5.5
2017 1,200,000 $0.04 $0.01 $0.03 84% years 1.16% 0%
6(th) April
2018 4,400,000 $0.05 $0.04 $0.03 84% 10 years 1.34% 0%
11(th) June
2018 18,098,332 $0.04 $0.05 $0.05 84% 10 years 1.23% 0%
21(st) October 9.0
2019 6,325,000 $0.05 $0.06 $0.15 109% years 0.63% 0%
1(st) March 9.5
2021 10,800,00 $0.04 $0.04 $0.06 192% years 0% 0%
8(th) April
2022 25,200,000 $0.01 $0.02 $0.02 105% 10 years 1.75% 0%
Warrants
31(st) December
2020 8,750,167 $0.04 $0.04 $0.04 190% 5 years 0% 0%
All share-based payment charges are calculated using the fair
value of options.
For the options granted prior to 30(th) June 2018, expected
volatility was determined by reviewing benchmark values from
comparator companies. For the options granted after 30(th) June
2018, expected volatility was determined by reference to the
volatility of historic trading prices of the Company's shares.
23. Financial instruments
Capital risk management
The Company manages its capital to ensure that entities in the
Group will be able to continue as a going concern while maximising
the return to stakeholders. The overall strategy of the Company and
the Group is to minimise costs and liquidity risk.
The capital structure of the Group consists of equity
attributable to equity holders of the parent, comprising issued
share capital, foreign exchange and other reserves and retained
earnings as disclosed in the Consolidated Statement of Changes of
Equity.
The Group is exposed to a number of risks through its normal
operations, the most significant of which are interest, credit,
foreign exchange and liquidity risks. The management of these risks
is vested to the Board of Directors.
The sensitivity has been prepared assuming the liability
outstanding was outstanding for the whole period. In all cases
presented, a negative number in profit and loss represents an
increase in finance expense / decrease in interest income.
Credit risk
Credit risk is the risk that the Group will suffer a financial
loss as a result of another party failing to discharge an
obligation and arises from cash and other liquid investments
deposited with banks and financial institutions and receivables
from the sale of crude oil.
For deposits lodged at banks and financial institutions these
are all held through a recognised financial institution. The
maximum exposure to credit risk is $450,000 (2021: $1,244,000). The
Group does not hold any collateral as security.
The carrying value of cash and cash equivalents and financial
assets represents the Group's maximum exposure to credit risk at
year end. The Group has no material financial assets that are past
due.
The Company has made unsecured loans at a simple interest rate
of 5% to its subsidiary companies. Although the loans are repayable
on demand, they are unlikely to be repaid until the projects become
successful and the subsidiaries start to generate revenues. An
assessment of the expected credit loss arising on intercompany
loans is detailed in note 6 to the parent Company financial
statements.
Market risk
Market risk is the risk that the fair value or future cash flows
of a financial instrument will fluctuate because of changes in
market prices. Market risk for the Company comprises of currency
risk (discussed below) and interest rate risk. Since there are no
variable interest-bearing loans in the Group. No risk is therefore
identified.
Currency risk
Foreign currency risk can only arise on financial instruments
that are denominated in a currency other than the functional
currency in which they are measured. Translation-related risks are
therefore not included in the assessment of the entity's exposure
to currency risks. Translation exposures arise from financial and
non-financial items held by an entity (for example, a subsidiary)
with a functional currency different from the Group's
presentational currency. However, foreign currency-denominated
inter-company receivables and payables which do not form part of a
net investment in a foreign operation would be included in the
sensitivity analysis for foreign currency risks; this is because,
even though the balances eliminate in the consolidated balance
sheet, the effect on profit or loss of their revaluation under IAS
21 is not fully eliminated.
A 10% increase in the strength of the pound sterling against the
US dollar would cause an estimated increase of $161,000 (2021:
$480,000 increase) in the loss after tax of the Group for the year
ended 31 December 2022, with a 10% weakening causing an equal and
opposite decrease. The impact on equity is the same as the impact
on loss after tax.
The Group's cash and cash equivalents and liquid investments are
mainly held in US dollars, pounds sterling and Georgian Lari. At
31(st) December 2022, 12% of the Group's cash and cash equivalents
and liquid investments were held in pounds sterling. 74% in
Georgian Lari and the remainder in US dollars, Euros and Canadian
dollars (31(st) December 2021: 3% in pounds sterling, 88% in
Georgian Lari and the remainder in US dollars, Euros and Canadian
dollars).
Liquidity risk
Liquidity risk arises from the possibility that the Group and
its subsidiaries might encounter difficulty in settling its debts
or otherwise meeting its obligations related to financial
liabilities. In addition to equity funding, additional borrowings
have been secured in the past to finance operations. The Company
manages this risk by monitoring its financial resources and
carefully plans its expenditure programmes. Financial liabilities
of the Group comprise trade payables which mature in less than
twelve months.
24. Categories of financial instruments
In terms of financial instruments, these solely comprise of
those measured at amortised cost and are as follows:
31(st) December 2022 31(st) December 2021
$'000 $'000
Liabilities at amortised cost 1,694 1,556
1,694 1,556
--------------------- ---------------------
Cash and cash equivalents at amortised cost 450 1,244
Financial assets at amortised cost 347 657
--------------------- ---------------------
798 1,901
--------------------- ---------------------
No collateral has been pledged in relation thereto.
25. Subsidiaries
At 31(st) December 2022, the Group consists of the following
subsidiaries, which are wholly owned by the Company.
Proportion of voting Proportion of voting
Country of rights and equity rights and equity
Company Incorporation interest interest
2022 2021
Block Norioskhevi Ltd British Virgin Islands 100% 100%
Satskhenisi Ltd Marshall Islands 100% 100%
Georgia New Ventures Inc. Bahamas 100% 100%
Block Operating Company LLC Georgia 100% 100%
Block Rustaveli Limited British Virgin Islands 100% 100%
South Samgori Limited British Virgin Islands 100% -
Didi Lilo & Nakarala British Virgin Islands
Limited 100% -
Subsidiaries - Nature of business
The principal activity of Georgia New Ventures Inc, Satskhenisi
Ltd, Block Norioskhevi Ltd and Block Rustaveli Limited is oil and
gas development and production.
The principal activity of Block Operating Company LLC is to be
the operator of the oil and gas licenses held in Georgia.
The principal activity of South Samgori Limited and Didi Lilo
& Nakarala Limited is oil and gas exploration. These companies
were both incorporated on 28(th) October 2022.
Registered office
The registered office of Georgia New Ventures Inc. is Bolam
House, King and George Streets, P.O. Box CB 11.343, Nassau,
Bahamas.
The registered office of Satskhenisi Ltd is Trust Company
Complex, Ajeltake road, Ajeltake Island, Majuro, Marshall Islands
MH96960.
The registered office of Block Norioskhevi Ltd is Trident
Chambers, P.O.Box 146, Road Town, Tortola, British Virgin
Islands.
The registered office of Block Operating Company LLC is 13A
Tamarashvili Street, Tbilisi 0162, Georgia.
The registered office of Block Rustaveli Limited is Craigmuir
Chambers, Road Town, Tortola, VG1110, British Virgin Islands.
The registered office of South Samgori Limited and Didi Lilo
& Nakarala Limited is Woodbourne Hall, Road Town, Tortola,
British Virgin Islands.
26. Commitments
Commitments at the reporting date that have not been provided
for were as follows:
Operating lease commitment
At 31(st) December 2022 and 31(st) December 2021, the total of
future minimum lease payments under non-cancellable operating
leases for each of the following periods was:
31(st) December 31(st) December 2021
2022
$'000
$'000
Within 1 year 269 -
Between 1 and 5 years - -
Total 269 -
---------------- ---------------------
Short term leases are leases with a lease term of 12 months or
less without a purchase option and are recognised on a
straight-line basis as an expense in the profit or loss
account.
27. Related party transactions
Key management personnel comprises of the Directors and details
of their remuneration are set out in Note 7 and the Remuneration
Report.
The Company secured a $2m loan facility after the year end (see
note 28 for more details). The draw down on this loan included the
following related parties:
Paul Haywood - $90,000
Key Seymour - $100,000
28. Events occurring after year end
On 10(th) January 2023, the Company announced that Ken Seymour
had stood down from the Board to take up a position as the
Company's Chief Operating Officer.
On 2(nd) February 2023, the Company announced that it had
secured additional funding through a senior secured loan facility
of $2m, of which US$1.06 million was drawn down with various
existing shareholders and member of Block's Management team. The
facility is for a term of 18 months and carries an interest rate of
16% per annum. Each lender will also receive warrants with a 3 year
expiry date and exercise price of 1.7p per Ordinary share. A total
of 25,330,249 warrants were issued in relation to this draw
down.
On 9(th) March 2023, the Company announced that it had closed
the farm-out of part of XIB to GOGL.
On 3(rd) April 2023, the Company announced the successful test
of well WR-B01Za.
Parent Company Statement of Financial Position as at 31st
December 2022
Company number: 05356303
2022 2021
Note $'000 $'000
Non- current assets
Investments 4 6,209 6,939
Property, plant and equipment 5 1 4
--------- ---------
6,210 6,943
Current assets
Trade and other receivables 6 25,340 25,628
Cash and cash equivalents 7 112 133
--------- ---------
Total current assets 25,452 25,761
Total assets 31,662 32,704
--------- ---------
Capital and reserves attributable to equity shareholders
Share capital 8 3,565 3,482
Share premium 34,765 34,625
Other reserves 4,525 10,260
Foreign exchange reserve (360) 366
Accumulated deficit (11,657) (16,803)
--------- ---------
Total equity 30,838 31,930
--------- ---------
Current liabilities
Trade and other payables 9 824 774
Total current liabilities 824 774
Total equity and liabilities 31,662 32,704
--------- ---------
The Company has taken advantage of the exemption under section
408 of the Companies Act 2006 by choosing not to present its
individual Statement of Comprehensive Income and related notes that
form part of these approved financial statements.
The Company's loss for the year from continuing operations is
$1,661,000 (2021: loss of $4,384,000).
The financial statements were approved by the Board of Directors
and authorised for issue on 10(th) May 2023 and were signed on its
behalf by:
Paul Haywood
Director
The notes on pages 78 to 82 form part of these financial
statements.
Parent Company Statement of Changes in Equity as at 31st
December 2022
Foreign
Share Share Accumulated Other currency Total
capital premium deficit reserve reserve equity
$'000 $'000 $'000 $'000 $'000 $'000
----------------------------- --------- --------- ----------- ---------- ---------- --------
Balance at 31(st)
December 2020 3,336 34,234 (12,711) 9,121 449 34,429
----------------------------- --------- --------- ----------- ---------- ---------- --------
Comprehensive income
Loss for the year - - (4,384) - - (4,384)
Exchange differences
on translation of foreign
operations - - - - (66) (66)
----------------------------- --------- --------- ----------- ---------- ---------- --------
Total comprehensive
income for the year - - (4,384) - (66) (4,450)
Transactions with
owners recognised directly
in equity
Shares issued 52 255 - - - 307
Foreign exchange rate
correction 17 - - (1) (17) (1)
Share based payments - - - 1,494 - 1,494
Options exercised 77 136 210 (272) - 151
Options expired - - 82 (82) - -
----------------------------- --------- --------- ----------- ---------- ---------- --------
Total transactions
with owners 146 391 292 1,139 (17) 1,951
----------------------------- --------- --------- ----------- ---------- ---------- --------
Balance at 31(st)
December 2021 3,482 34,625 (16,803) 10,260 366 31,930
----------------------------- --------- --------- ----------- ---------- ---------- --------
Comprehensive income
Loss for the year - - (1,661) - - (1,661)
Exchange differences
on translation of foreign
operations - - - - (726) (726)
----------------------------- --------- --------- ----------- ---------- ---------- --------
Total comprehensive
income for the year - - (1,661) - (726) (2,387)
Transactions with
owners recognised directly
in equity
Shares issued 27 140 - - - 167
Share based payments - - - 1,072 - 1,072
Options exercised 56 - - - - 56
Options relinquished - - 6,389 (6,389) - -
Options expired - - 418 (418) - -
----------------------------- --------- --------- ----------- ---------- ---------- --------
Total transactions
with owners 83 140 6,807 (5,735) - 1,295
----------------------------- --------- --------- ----------- ---------- ---------- --------
Balance at 31(st)
December 2022 3,565 34,765 (11,657) 4,525 (360) 30,838
----------------------------- --------- --------- ----------- ---------- ---------- --------
Parent Company Statement of Cashflows for the Year Ended 31st
December 2022
2022 2021
Note $'000 $'000
Cash flow from operating activities
Loss for the year before income tax (1,661) (4,384)
Adjustments for :
Depreciation 3 5
Intercompany interest/ finance income (1,188) (2,558)
Increase in ECL provisions for loans - 3,205
Creditors paid in shares 167 -
Share based payments expense 2 1,035 1,449
Foreign exchange movement 9 4
--------- --------
Operating cash flows before movements
in working capital (1,635) (2,279)
Decrease/(increase) in trade and other
receivables 6 113 (9)
Increase/(decrease) in trade and other
payables 9 52 (26)
--------- --------
Net cash used in operating activities (1,470) (2,314)
Cash flow from investing activities
Cash from acquisition of BRL - 278
Finance income - -
Expenditure in respect of property,
plant and equipment - (1)
Inter-Group amounts received/ (drawn
down) 1,452 (4,920)
--------- --------
Net cash used in investing activities 1,452 (4,643)
Cash flow from financing activities
Proceeds from issue of ordinary share
capital - 1,465
Finance costs (1) -
--------- --------
Net cash inflow from financing activities (1) 1,465
Net (decrease) in cash and cash equivalents
in the year (19) (5,492)
--------- --------
Cash and cash equivalents at start
of year 133 5,657
Effects of foreign exchange (2) (32)
--------- --------
Cash and cash equivalents at end of
year 7 112 133
--------- --------
Notes Forming Part of the Parent Company Financial
Statements
1. Accounting policies
Basis of preparation
These financial statements have been prepared on a historical
cost basis and in accordance with UK-adopted international
accounting standards and as regards the Company financial
statements, as applied in accordance with the requirements of the
Companies Act 2006. All accounting policies are consistent with
those adopted by the Group. These accounting policies are detailed
in the notes to the consolidated financial statements, note 1. Any
deviations from these Group policies by the Company are detailed
below.
Going concern
The Directors have prepared cash flow forecasts for 24 months
from the date of signing these financial statements. The Group's
forecasts are reviewed regularly to assess whether any actions to
curtail expenditure or cut costs are required.
The Group's operations presently generate sufficient revenues to
cover operating costs and capital expenditures, supporting the
continued preparation of the Group's accounts on a going concern
basis.
The directors are conscious that oil prices have been volatile
during the past few years and could rise further but could also
fall back in the year ahead and that future production levels
depend on both depletion rates from existing wells and the success
of future drilling. As part of their going concern assessment, the
directors have examined multiple scenarios in which oil prices
and/or future production levels fall substantially and have
concluded that it remains possible that future revenues in at least
some scenarios might not cover all operating costs and planned
capital expenditures, creating a material uncertainty that may cast
doubt over the Group's ability to continue as a going concern.
Whilst acknowledging this material uncertainty, the directors
remain confident of making cost savings if required; therefore,
they consider it appropriate to prepare the financial statements on
a going concern basis. The financial statements do not include the
adjustments that would result if the Group were unable to continue
as a going concern.
Investments in subsidiaries
Investments in subsidiaries are recorded at cost. The Company
assesses investments for impairment whenever events or changes in
circumstances indicate that the carrying amount may not be
recoverable. If any such indication of impairment exists, the
Company makes an estimate of its recoverable amount. Where the
carrying amount of an investment exceeds its recoverable amount,
the investment is considered impaired and is written down to its
recoverable amount. Where these circumstances have reversed, the
impairment previously made is reversed to the extent of the
original cost of the investment.
2. Employees
Year ended Year ended
31(st) December 31(st) December
2022 2021
$'000 $'000
Employment costs consist of:
Wages and salaries 813 651
Pension 49 55
Share based payments 1,035 1,449
Social security costs 91 210
1,988 2,365
------------------ ------------------
The average monthly number of employees during the year was 10
(2021: 13) split as follows:
Year ended Year ended
31(st) December 31(st) December
2022 2021
$'000 $'000
Management 6 5
Technical 3 6
Administration 1 2
10 13
------------------- -------------------
3. Directors' emoluments
Directors' Emoluments are disclosed in the Remuneration Report
of the consolidated financial statements.
4. Investments
2022 2021
Shares in Group undertakings $'000 $'000
Balance at 1 January 6,939 7,027
FX movement on translation of assets (730) (88)
-------- -------
Balance at 31 December 6,209 6,939
-------- -------
Investments in subsidiaries are recorded at cost, which is the
fair value of the consideration paid.
At 31(st) December 2022, the carrying amount of the Company's
net assets of $30,838,000 exceeded the Group's net assets of
$27,200,000. This is identified by IAS 36 Impairment of Assets as
an indicator that assets may be impaired. Following a review of the
assets held by the Company, the Directors do not believe an
impairment is necessary at this time, but will keep this under
review.
5. Property, plant and equipment
Computer Office
equipment equipment Total
$'000 $'000 $'000
Cost
At 1(st) January 2022 16 1 17
Additions - - -
At 31(st) December 2022 16 1 17
----------- ----------- ------
Depreciation
At 1(st) January 2022 (13) - (13)
Depreciation charge (3) - (3)
----------- ----------- ------
At 31(st) December 2022 (16) - (16)
----------- ----------- ------
Carrying amount
At 1(st) January 2022 3 1 4
----------- ----------- ------
At 31(st) December 2022 - 1 1
----------- ----------- ------
6. Trade and other receivables
2022 2021
$'000 $'000
Prepayments 195 27
Other receivables 102 383
Amounts due from Group undertakings 25,043 25,218
25,340 25,628
-------- -------
All of the above amounts are due within one year.
All trade and other receivables are denominated in pounds
sterling. Amounts due from Group undertakings are denominated in US
dollars and repayable on demand. The Company charges 5% interest
per annum on intercompany loans.
Under IFRS 9, the Expected Credit Loss ("ECL") Model is required
to be applied to the intercompany loans receivable from subsidiary
companies, which are held at amortised cost. An assessment of the
expected credit loss arising on intercompany loans has been
calculated and a loss allowance of $3,710,000 has been provided for
in the parent Company financial statements ($3,710,000 in 2021). No
further impairment was indicated in the current year.
7. Cash at bank
2022 2021
$'000 $'000
Cash and cash equivalents 112 133
-------- -------
Cash and cash equivalents consist of balances in bank accounts
used for normal operational activities. The bank account is held
within an institution with a credit rating of A-1.
At 31 December 2022, 53% of the cash balances held by the
Company were held in US Dollars and the remained in UK
sterling.
8. Share capital
Details of share capital and movements in the year are set out
in note 18 to the consolidated financial statements.
9. Trade and other payables
2022 2021
$'000 $'000
Trade and other payables 316 296
Accruals 508 478
-------- -------
824 774
-------- -------
Trade and other payables at 31(st) December 2022 comprised
balances in US dollars and pounds sterling.
10. Categories of financial instruments
In terms of financial instruments, these solely comprise of
those measured at amortised cost and are as follows:
31(st) December 2022 31(st) December 2021
$'000 $'000
Trade and other payables 824 774
--------------------- ---------------------
Total financial liabilities at amortised cost 824 774
--------------------- ---------------------
The carrying amounts of trade and other payables are considered
to be the same as their fair values due to their short-term
nature.
31(st) December 2022 31(st) December 2021
$'000 $'000
Other receivables 102 383
Amounts due from Group undertakings 25,043 25,218
Cash and cash equivalents at amortised cost 112 133
--------------------- ---------------------
Total financial assets at amortised cost 25,257 25,734
--------------------- ---------------------
The amounts due from Group undertakings includes a loss
allowance of $3,710,000 (2021: $3,710,000). The loans are repayable
on demand and include a 5% per annum interest rate charge. They are
all denominated in US dollars, which differs from the parent
Company's functional currency of pounds sterling, and therefore
there is an exposure to foreign currency risk. There is no exposure
to price risk as the underlying investments are expected to be held
to maturity.
11. Financial and capital risk management
The Company's exposure to financial risks is managed as part of
the Group. Full details about the Group's exposure to financial
risks and how these risks could affect the Group's future financial
performance are given in note 23 to the consolidated financial
statements. Information specific to the Company is given below.
Credit risk
For deposits lodged at banks and financial institutions these
are all held through a recognised financial institution. The
maximum exposure to credit risk is $112,000 (2021: $133,000). The
Company does not hold any collateral as security.
The Company has made unsecured interest payable loans to its
subsidiary companies and repayments have commenced during the year.
Although the loans are repayable on demand, they are unlikely to be
fully repaid until the projects become more developed and the
subsidiaries start to generate increased revenues. An assessment of
the expected credit loss arising on intercompany loans has been
calculated and a loss allowance of $3,710,000 has been provided for
in the parent Company financial statements.
Currency risk
Foreign currency risk is the risk that fair value or future cash
flows of a financial instrument will fluctuate because of changes
in foreign exchange rates.
The Company undertakes transactions denominated in currencies
other than its functional currency (which is the pound sterling).
For transactions denominated in US dollars, the Company manages
this risk by holding US dollar against actual or expected US dollar
commitments to act as an economic hedge against exchange rate
movements.
The Company's cash and cash equivalents and liquid investments
are mainly held in pounds sterling and US dollars. At 31(st)
December 2022, 47% of the Group's cash and cash equivalents and
liquid investments were held in pounds sterling. A 10% movement in
the strength of the pound sterling against the US dollar would
increase the net assets of the Company by $3,084,000.
The exposure to other foreign currency exchange movements is not
material. This sensitivity analysis includes foreign currency
denominated monetary items and assumes all other variables remain
unchanged. Whilst the effect of any movement in exchange rates upon
revaluing foreign currency denominated monetary items is charged or
credited to the income statement, the economic effect of holding
pounds sterling against actual or expected commitments in pounds
sterling is an economic hedge against exchange rate movements.
Capital management
The capital of the Company is managed as part of the capital of
the Group as a whole. Full details, are contained in note 23 to the
consolidated financial statements.
12. Commitments
Commitments at the reporting date that have not been provided
for were as follows:
UK operating lease commitment
At 31(st) December, the total of future minimum lease payments
under non-cancellable operating leases for each of the following
periods was:
2022 2021
$'000 $'000
Within 1 year 81 -
Between 1 and 5 years - -
Total 81 -
-------- -------
Short term leases are leases with a lease term of 12 months or
less without a purchase option and are recognised on a
straight-line basis as an expense in the profit or loss
account.
13. Related party transactions
At 31(st) December 2022, the following subsidiaries owed the
parent Company for payments made and recovered on their behalf.
-- Block Norioskhevi Ltd - $3,860,614 (31(st) December 2021: $3,815,000)
-- Georgia New Ventures Inc - $19,950,781 (31(st) December 2021: $18,212,000)
-- Satskhenisi Ltd - $314,044 (31(st) December 2021: $310,000)
-- Block Operating Company LLC - $2,029,351 (31(st) December 2021: $1,819,000)
-- Block Rustaveli Limited - (Debtor of: $1,115,554); (31(st) December 2021: $1,063,000)
-- South Samgori Limited - $2,000
-- Didi Lilo & Nakarala Limited - $2,000
A total loss allowance of $3,710,000 was recognised in prior
year and no further loss was recognised in the current year. This
amount was recognised in relation to the loans to Satskhenisi Ltd
and Georgia New Ventures Inc. Further detail on related party
transactions can be found in note 27 to the consolidated financial
statements. The disclosure of fees paid to consultancy companies
for key management services can be seen in the Remuneration
Report.
14. Information included in the notes to the consolidated financial statements
Some of the information included in the notes to the
consolidated financial statements is directly relevant to the
financial statements of the Company. Please refer to the
following:
Note 6 - Auditors' remuneration
Note 22 - Share based payments
Note 25 - Subsidiaries
Note 28 - Events occurring after the year end
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