11th May 2023
Block Energy Plc
("Block" or the "Company")
Audited Results for the Year Ended 31st December 2022
Block Energy plc, the development and production company focused on Georgia, is pleased to announce its audited results for the year ended 31st 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 AMENDED. 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 (Chief Executive Officer) | Block Energy plc | Tel: +44 (0)20 3468 9891 |
| Neil Baldwin (Nominated Adviser) | Spark Advisory Partners Limited | Tel: +44 (0)20 3368 3554 |
| Peter Krens (Corporate Broker) | Tennyson Securities | Tel: +44 (0)20 7186 9030 |
| Philip Dennis / Mark Antelme / Ali AlQahtani (Financial PR) | Celicourt Communications | Tel: +44 (0)20 8434 2643 |
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 CO2 footprint, including targeting zero-flaring of gas from operations. During the year, total reported emissions were 618.42 tCO2 from operations, mainly a result of the need to flare 283,802mᶟ 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 €150m 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 30th 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 31st December 2022 (31st 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
| | Note | Year ended 31st December 2022 | Year ended 31st December 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
| | | 31st December 2022 | 31st December 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 10th 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
|
| Share Capital $'000 | Share Premium $'000 | Accumulated Deficit $'000 | Other Reserves $'000 | Foreign Exchange Reserve $'000 | Total Equity $'000 |
| Balance at 31st 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 31st 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 31st 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
| | Note | Year ended 31st December 2022 $'000 | Year ended 31st December 2021 $'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 11th 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 31st December 2022 were authorised for issue in accordance with a resolution of the Directors on 10th 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 31st 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 28 (Amendments) | Long term interests in associates and joint ventures | Unknown |
| Amendments to IAS 1 | Classification of liabilities as current or non- current | 1st January 2023 |
| Amendments to IAS 1 | Disclosure of material rather than significant accounting policies. | 1st January 2023 |
| Amendments to IAS 8 | Clarification on how companies should distinguish between changes in accounting policies and accounting estimates | 1st January 2023 |
| Amendments to IFRS 12 | Deferred tax assets and liabilities arising from a single transaction | 1st January 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/£1 (2021: $1.35/£1). 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 31st 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 31st 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 Extraction | Corporate and other | Group Total | |||
| Year ended 31st 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 Extraction | Corporate and other | Group Total | |||
| Year ended 31st 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 | |||
|
Segmental Assets | 31st December 2022 $'000 | 31st December 2021 $'000 |
| |||
| | | |
| |||
| Oil exploration - Georgia | 30,206 | 23,745 |
| |||
| Corporate and other | 410 | 7,181 |
| |||
| | 30,616 | 30,926 |
| |||
| Segmental Liabilities | 31st December 2022 | 31st December 2021 |
| | $'000 | $'000 |
| | | |
| Oil exploration - Georgia | 2,591 | 3,087 |
| Corporate and other | 825 | 774 |
| | 3,416 | 3,861 |
|
| | |
4. Revenue
| | Year ended 2022
$'000 | Year ended 2021
$'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 2022
$'000 | Year ended 2021
$'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 2022
| Year ended 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 2022
$'000 | Year ended 2021
$'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 2022
| Year ended 2021
|
| Management | 9 | 18 |
| Technical | 129 | 135 |
| Administration | 30 | 23 |
| | 168 | 176 |
| |
| |
| | Year ended 2022
$'000 | Year ended 2021
$'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 2022
$'000
| Year ended 2021
$'000 |
| Sale of materials Insurance claim | - 281 | 5 - |
| | 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 31st December 2022
$'000 | Year ended 31st December 2021
$'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:
|
UK taxation | Year ended 31st December 2022
$'000 | Year ended 31st December 2021
$'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: $13,109,000 - estimated).
11. Loss per share
The calculation for loss per Ordinary Share (basic and diluted) is based on the consolidated loss attributable to the equity shareholders of the Company is as follows:
|
| Year ended 31st December 2022
| Year ended 31st December 2021
|
| | | |
| Loss attributable to equity Shareholders ($'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
| |
Development & Production Assets | PPE/Computer / Office Equipment / Motor Vehicles | Total |
| | $'000 | $'000 | $'000 |
| Cost | | | |
| At 1st 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 31st 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 31st December 2022 | 29,115 | 2,072 | 31,187 |
|
| | |
|
| Accumulated depreciation | | | |
| At 1st 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 31st 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 31st December 2022 | 5,711 | 661 | 6,372 |
| |
|
|
|
| Carrying Amount | | |
|
| At 1st January 2022 | 22,933 | 1,412 | 24,345 |
| At 31st December 2022 | 23,404 | 1,411 | 24,815 |
Carrying amount of property plant and equipment by cash generative unit:
|
| Norio | Satsk henisi | West Rustavi |
Rustaveli | Corporate |
Total |
|
| $'000 | $'000 | $'000 | $'000 | $'000 | $'000 |
| Carrying amount | | | | | | |
| At 31st December 2022 | 2,126 | 174 | 14,625 |
7,488 | 402 |
24,815 |
| At 31st 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
| | 31st December 2022
$'000 | 31st December 2021
$'000 |
| Spare parts and consumables | 3,606 | 3,174 |
| Crude oil | 1,185 | 1,411 |
| | 4,791 | 4,585 |
14. Trade and other receivables
| | 31st December 2022
$'000 | 31st December 2021
$'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
| | 31st December 2022
$'000 | 31st December 2021
$'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
| | 31st December 2022
$'000 | 31st December 2021
$'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
| | 31st December 2022
$'000 | 31st December 2021
$'000 |
| Decommissioning provision | 1,723 | 2,040 |
| Baseline oil liability | - | 265 |
| | 1,723 | 2,305 |
| Decommissioning provision | 31st December 2022
$'000 | 31st December 2021
$'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 |
| |
|
|
| Baseline oil liability | 31st December 2022
$'000 | 31st December 2021
$'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 and fully paid | No. Ordinary Shares | No. Deferred Shares | Nominal Value |
| | | | |
| As at 1st January 2021 | 614,542,093 | 2,095,165,355 | 3,352,509 |
| Issue of equity on 4th January 2021 | 617,571 | - | 2,098 |
| Issue of equity on 12th January 2021 | 397,904 | - | 1,362 |
| Issue of equity on 1st February 2021 | 839,996 | - | 2,937 |
| Issue of equity on 15th February 2021 | 180,715 | - | 632 |
| Issue of equity on 1st March 2021 | 232,248 | - | 800 |
| Issue of equity on 12th March 2021 | 865,896 | - | 2,983 |
| Issue of equity on 16th March 2021 | 6,590,707 | - | 22,752 |
| Issue of equity on 7th April 2021 | 58,972 | - | 204 |
| Issue of equity on 5th May 2021 | 171,715 | - | 611 |
| Issue of equity on 7th June 2021 | 125,696 | - | 434 |
| Issue of equity on 2nd July 2021 | 1,355,805 | - | 4,713 |
| Issue of equity on 2nd September 2021 | 62,005 | - | 209 |
| Issue of equity on 15th September 2021 | 24,877,230 | - | 83,684 |
| Issue of equity on 4th October 2021 | 746,668 | - | 2,556 |
| Issue of equity on 8th October 2021 | 299,412 | - | 1,025 |
| Issue of equity on 2nd November 2021 | 262,403 | - | 873 |
| Issue of equity on 5th December 2021 | 522,489 | - | 1,766 |
| | | | |
| As at 31st December 2021 | 652,749,525 | 2,095,165,355 | 3,482,148 |
| | | | |
| Issue of equity on 5th January 2022 | 324,102 | - | 1,087 |
| Issue of equity on 2nd February 2022 | 1,768,705 | - | 5,903 |
| Issue of equity on 3rd February 2022 | 233,232 | - | 778 |
| Issue of equity on 11th February 2022 | 636,832 | - | 2,126 |
| Issue of equity on 1st March 2022 | 400,219 | - | 1,313 |
| Issue of equity on 2nd March 2022 | 280,117 | - | 919 |
| Issue of equity on 1st April 2022 | 404,838 | - | 1,273 |
| Issue of equity on 3rd April 2022 | 376,773 | - | 1,184 |
| Issue of equity on 4th May 2022 | 636,077 | - | 2,004 |
| Issue of equity on 1st June 2022 | 273,392 | - | 793 |
| Issue of equity on 6th June 2022 | 586,133 | - | 1,700 |
| Issue of equity on 6th July 2022 | 902,395 | - | 2,751 |
| Issue of equity on 2nd August 2022 | 1,378,658 | - | 4,073 |
| Issue of equity on 2nd September 2022 | 2,551,864 | - | 7,125 |
| Issue of equity on 4th October 2022 | 1,632,875 | - | 4,698 |
| Issue of equity on 14th October 2022 | 464,457 | - | 1,336 |
| Issue of equity on 1st November 2022 | 233,047 | - | 506 |
| Issue of equity on 2nd November 2022 | 656,382 | - | 1,889 |
| Issue of equity on 1st December 2022 | 303,268 | - | 917 |
| Issue of equity on 2nd December 2022 | 1,569,850 | - | 4,749 |
| Issue of equity on 13th December 2022 | 12,000,000 | - | 36,303 |
| | | | |
| As at 31st December 2022 | 680,362,741 | 2,095,165,355 | 3,565,575 |
On 5th 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 £3,033 ($4,067).
On 2nd 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 3rd 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 £3,033 ($4,049).
On 11th February 2022, the Company issued 636,832 Ordinary Shares to a consultant on exercise of their nil cost options.
On 1st March 2022, the Company issued 400,219 Ordinary Shares to three Non-Executive Directors on exercise of their nil cost options.
On 2nd 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 £3,033 ($3,981).
On 1st April 2022, the Company issued 404,838 Ordinary Shares to three Non-Executive Directors on exercise of their nil cost options.
On 3rd 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 £4,033 ($5,071).
On 4th 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 £4,033 ($5,081).
On 1st June 2022, the Company issued 273,392 Ordinary Shares to three Non-Executive Directors on exercise of their nil cost options.
On 6th 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 £8,183 ($9,494).
On 6th 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 £10, 641 ($12,976).
On 2nd 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 £11,473 ($13,557) and 397,169 Ordinary Shares to a former consultant following the exercise of their nil cost options.
On 2nd 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 £31,400 ($35,070).
On 4th 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 £21,950 ($25,262).
On 14th October 2022, the Company issued 464,457 Ordinary Shares to a consultant on exercise of their nil cost options.
On 1st November 2022, the Company issued 233,047 Ordinary Shares to three Non-Executive Directors on exercise of their nil cost options.
On 2nd 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 £12,198 ($14,038).
On 1st December 2022, the Company issued 303,268 Ordinary Shares to three Non-Executive Directors on exercise of their nil cost options.
On 2nd 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 £28,640 ($34,657).
On 13th 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 4th 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 £20,984 ($28,509).
On 12th January 2021, the Company issued 397,904 Ordinary Shares to a Chris Brown, Non-executive Director, on exercise of his nil cost options.
On 1st 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 £29,251 ($40,914).
On 15th February 2021, the Company issued 180,715 Ordinary Shares to a former employee/Director on exercise of their nil cost options.
On 1st 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 £7,542 ($10,395).
On 12th March 2021, the Company issued 865,896 Ordinary Shares to Philip Dimmock, Chairman and a Contractor, on exercise of their nil cost options.
On 16th 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 £72,134 ($100,000).
On 7th 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 £1,717 ($2,372).
On 5th 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 £4,751 ($6,765).
On 7th 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 £3,234 ($4,468).
On 2nd 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 2nd 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 £155 ($209).
On 15th September 2021, the Company issued 24,877,230 Ordinary Shares at their nominal value to the Employee Benefit Trust.
On 4th 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 £20,148 ($27,589).
On 8th October 2021, the Company issued 299,412 Ordinary Shares to a former Director, on exercise of their nil cost options.
On 2nd 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 £5,533 ($7,367).
On 5th 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 £8,033 ($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 1st January 2022 | | 34,625 |
| Premium arising on issue of equity shares | 140 | |
| Share issue costs | | - |
| Balance at 31st December 2022 |
| 34,765 |
| | | |
| | | $'000 |
| Balance at 1st January 2021 | | 34,234 |
| Premium arising on issue of equity shares | 391 | |
| Share issue costs | | - |
| Balance at 31st 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 1st January 2022 | | 10,260 |
| Share based payments | 1,072 | |
| Options movement | | (6,807) |
| Balance at 31st December 2022 |
| 4,525 |
| | | |
| | | $'000 |
| Balance at 1st January 2021 | | 9,120 |
| Share based payments | 1,494 | |
| Options movement | (354) | |
| Balance at 31st December 2021 | | 10,260 |
On 30th 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
| | Number of Warrants | 31st December 2022 weighted average exercise price | Number of Warrants | 31st December 2021 weighted average 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 31st 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 31st December 2022. The equivalent charge for the year ended 31st 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 31st December 2022
| Year ended 31st December 2021
|
| | $'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 |
|
| Options | Weighted average exercise price | Options | Weighted average exercise 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 31st December 2022 is $0.02 (31st December 2021: $0.03). The weighted average contractual life of the share-based payments outstanding at 31st December 2022 is 7.96 years (31st 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 grant | Number of options | Estimated fair value | Share price | Exercise price | Expected volatility | Expected life | Risk free rate | Expected dividends |
| 30th June 2017 | 1,200,000 | $0.04 | $0.01 | $0.03 | 84% | 5.5 years | 1.16% | 0% |
| 6th April 2018 | 4,400,000 | $0.05 | $0.04 | $0.03 | 84% | 10 years | 1.34% | 0% |
| 11th June 2018 | 18,098,332 | $0.04 | $0.05 | $0.05 | 84% | 10 years | 1.23% | 0% |
| 21st October 2019 | 6,325,000 | $0.05 | $0.06 | $0.15 | 109% | 9.0 years | 0.63% | 0% |
| 1st March 2021 | 10,800,00 | $0.04 | $0.04 | $0.06 | 192% | 9.5 years | 0% | 0% |
| 8th April 2022 | 25,200,000 | $0.01 | $0.02 | $0.02 | 105% | 10 years | 1.75% | 0% |
|
| Warrants |
|
|
|
|
|
|
|
| 31st 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 30th June 2018, expected volatility was determined by reviewing benchmark values from comparator companies. For the options granted after 30th 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 31st 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 (31st 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:
| | 31st December 2022
$'000 | 31st December 2021
$'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 31st December 2022, the Group consists of the following subsidiaries, which are wholly owned by the Company.
|
Company | Country of Incorporation | Proportion of voting rights and equity interest | Proportion of voting rights and equity 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 Limited | British Virgin Islands | 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 28th 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 31st December 2022 and 31st December 2021, the total of future minimum lease payments under non-cancellable operating leases for each of the following periods was:
| | 31st December 2022
$'000 | 31st December 2021
$'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 10th 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 2nd 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 9th March 2023, the Company announced that it had closed the farm-out of part of XIB to GOGL.
On 3rd 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
| | Note |
2022 $'000 |
2021 $'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 10th 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
| | Share capital
| Share premium
| Accumulated deficit |
Other reserve | Foreign currency reserve
| Total equity
|
| | $'000 | $'000 | $'000 | $'000 | $'000 | $'000 |
| Balance at 31st 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 31st 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 31st 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
| | Note | 2022 $'000 | 2021 $'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 2022 $'000 | Year ended 2021 $'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 2022 $'000 |
Year ended 2021 $'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
| Shares in Group undertakings | 2022 $'000 | 2021 $'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 31st 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 equipment | Office equipment | Total |
|
| $'000 | $'000 | $'000 |
| Cost |
| | |
| At 1st January 2022 | 16 | 1 | 17 |
| Additions | - | - | - |
| At 31st December 2022 | 16 | 1 | 17 |
| | | | |
| Depreciation | | | |
| At 1st January 2022 | (13) | - | (13) |
| Depreciation charge | (3) | - | (3) |
| At 31st December 2022 | (16) | - | (16) |
| | | | |
| Carrying amount | | | |
| At 1st January 2022 | 3 | 1 | 4 |
| At 31st December 2022 | - | 1 | 1 |
6. Trade and other receivables
| | 2022 $'000 | 2021 $'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 $'000 | 2021 $'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 $'000 | 2021 $'000 |
| | | |
| Trade and other payables | 316 | 296 |
| Accruals | 508 | 478 |
| | 824 | 774 |
Trade and other payables at 31st 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:
| | 31st December 2022 | 31st 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.
|
| 31st December 2022 | 31st 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 31st 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 31st December, the total of future minimum lease payments under non-cancellable operating leases for each of the following periods was:
| | 2022 $'000 | 2021 $'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 31st December 2022, the following subsidiaries owed the parent Company for payments made and recovered on their behalf.
· Block Norioskhevi Ltd - $3,860,614 (31st December 2021: $3,815,000)
· Georgia New Ventures Inc - $19,950,781 (31st December 2021: $18,212,000)
· Satskhenisi Ltd - $314,044 (31st December 2021: $310,000)
· Block Operating Company LLC - $2,029,351 (31st December 2021: $1,819,000)
· Block Rustaveli Limited - (Debtor of: $1,115,554); (31st 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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