29 September 2023

Indus Gas Limited

 

("Indus" or the "Company")

 

Audited Final Results for the 12 months ended 31 March 2023

 

Indus Gas Limited (AIM:INDI), an oil & gas exploration and development company with assets in India, announces its full year results for the 12 months to 31 March 2023.

 

Highlights

 

·   With effect from 1^st April 2022, the sales gas price was agreed to be the price as per the Domestic Natural Gas Price (APM Price) on GCV basis  as notified by Petroleum Planning & Analysis Cell (PPAC) from time to time.  The gas price revision had resulted in the gas price being revised to US$ 6.1 per MMBTU (Metric Million British Thermal Unit) on GCV basis from 1 April 2022 to 30 September 2022 and to US$ 8.57 per MMBTU on GCV basis from 1st October 2022 to 31st March 2023. As per revised Domestic gas pricing Guidelines, Sales gas price shall be 10 pct of monthly average of Indian crude basket as notified by PPAC on monthly basis from 8th April, 2023.

·   New development wells produced rich Gas with lower CO2.

·   PNGRB is evaluating the options for pipelines infrastructure/route for evacuation of the gas from the block.

 

OPERATIONAL

 

§  Preparations continued on site during the year for the planned ramp up in production including the drilling of additional wells.

§ Drilling and completion of production wells for the SGL field development continued as planned to meet the planned gas sale requirements.

§ Continued testing of previously drilled wells.

 

FINANCIAL

 

§ Total Revenues were US$ 63.03 million (2021-22: US$ 53.71 million).

§ Operating profit increased to US$ 54.76 million (2021-22: increased to US$ 45.94million).

§ Profit before tax increased to US$ 54.87 million (2021-22: US$ 45.96 million).

§ Net Investments made in property, plant and equipment amounting to US$ 74.21 million (2021-22: US$ 68.27 million).

§ All repayments under the existing debt terms were made on a timely basis.

Chairman's Statements

 

This has been a good year and the Company has been able to achieve higher  Gas Revenues. 

 

The Company's strong operational and financial performance is highlighted by another year of good profit generation.

 

The Board would like to thank employees, shareholders, bankers and all other stakeholders for their loyalty and continued support. The management team will continue to focus on the execution of the Company's long-term strategy of achieving both growth in reserves and commercial production.  The Indian government continues to prioritize the increase of domestic gas production to make India Self-reliant thereby reducing the dependence on expensive imported energy and enhancing energy security.

The Board also wishes to thank Mr Clive Gibbons, who steps down from his role as a Non-Executive Director, effective today following the publication of these financial statements, for his time and contribution to the Company and wish him all the best in future endeavours.

 

Jonathan Keeling

Chairman

 

Board of Director's Review

           

We are pleased to announce another strong year of consolidated total revenues totaling US$ 63.03 million (2021-22: US$ 53.71 million). We continued to have good operating profits and our stated long-term business plan remains on track. The revised Field Development Plan for the SGL area and an integrated Field Development Plan for SSG & SSF area of the Block, for the future enhancement of revenues, had been previously approved by the Management Committee.

 

Operations

Operational activities over the last year have followed the Group's objectives and are summarized below:

 

a)    drilling of additional wells to support the integrated field development plan;

b)    drilling and completion of production wells for the SGL, SSG and SSF field development continued;

c)    testing various wells previously drilled where gas shows were encountered to enable the Group to increase its reserve base; and

d)    Testing the B&B gas recovery potential in addition to gas discovered in the Pariwar formation.

 

 

The current drilling programme is progressing on schedule and producing positive results. Following the approval of the FDP for SSG & SSF Development area, we continue to test concepts and obtain log and core data for analysis outside of the SGL area. In the SGL area, work continues to increase our knowledge of the producing intervals. Additional testing is an important element of the operational programme to enhance production and maximize recovery of gas through efficient asset management. Activities such as these will continue to increase as we obtain and act on new data and production history. An important development in respect of the SGL Field was the discovery of new intervals within Pariwar. These were located below the existing producing P10 sands. These reservoirs were successfully exploited for production and going forward will add to the reserves and production from both existing and new wells.

 

Financials

During the financial year, the Company achieved total revenue of US$ 63.03million (2021-22: US$ 53.71 million), resulting in reported operating profit of US$ 54.76 million (2021-22US$ 45.94 million). The reported profit after tax was US$ 30.87 million (2021-22 US$ 35.21 million).

 

While the Company is not expected to pay any significant taxes on its income for many years in view of the 100% deduction allowed on the capital expenses incurred in the Block, the Company has accrued a deferred tax liability of US$ 23.99 million (2021-22: US$ 10.75 million) as per IFRS requirements.           

 

Post this deferred tax liability provision, the net profit for the year was US$ 30.87 million.

 

The net expenditure on the purchase of property, plant & equipment was US$ 74.21million (2021-22: US$ 68.27 million). The property plant and equipment, including development assets and production assets, increased to US$ 1,223.43million (2021-22: US$ 1,149.22 million). 

The current assets (excluding cash) as of 31 March 2023 stood at US$ 123.92 million (2021-22: US$ 149.97 million), which majorly includes US$ 9.93 million (2021-22: US$ 9.46 million) of inventories, US$ 101.07 million (2021-22: US$ 120.41 million) of receivables from related party and US$ 6.60 million (2021-22: US$ 20.11 million) of trade receivables and another receivable. Receivables of US$ 4.54 million of this total of US$ 6.60 million have been realized subsequent to 31 March 2023. The current liabilities of the Company, excluding the related party liability of US$ 0.33 million (2021-22: US$ 0.35 million) and current portion of long-term debt of US$ 28.46 million (2021-22: US$ 172.75 million), stood at US$ 6.78 million (2021-22: US$ 6.58 million). This comprised mainly of deferred revenue of US$ 4.75 million (2021-22: US$ 5.08 million) (GAIL-Take or Pay Obligation) and other liabilities of US$ 2.03 million (2021-22: US$ 1.50 million).

As of 31 March 2023, the outstanding debt of the Company to banks was US$ 40.02million (2021-22: US$ 58.32 million), of which US$ 24.16 million (2021-22: US$ 19.08 million) was categorized as repayable within a year and the remaining US$ 15.86million (2021-22: US$ 39.24 million) has been categorized as a long-term liability. During the year, the Company repaid an amount of US$ 21.94 million of the outstanding term loan facilities, as per the scheduled repayment plan. As of 31 March 2023, the outstanding unsecured debt from bonds was US$ 163.92million (2021-22: US$ 153.68 million), of which US$ 4.30million (2021-22: US$ 153.68 million) was categorized as repayable within a year and the remaining US$ 159.62million (2021-22: US$ Nil) has been categorized as a long-term liability.

Outlook

During the next twelve months, we expect that the Company  look forward to continued drilling success in both Pariwar and B&B combined with delivering further progress on the commercialization of our gas reserves.

Jonathan Keeling 

Executive Chairman

 

Board of Directors

 

JONATHAN KEELING - EXECUTIVE CHAIRMAN

Jonathan was a founding partner and a main board member of Arden Partners plc, a small and mid-cap institutional stockbroker and Jonathan's career in equity capital markets spans in excess of 30 years.  Prior to Arden, Jonathan worked at Albert E Sharp, Harris All day and Old Mutual Securities. Jonathan is a Fellow of the Chartered Institute for Securities and Investment.

 

 

CLIVE GIBBONS -DIRECTOR

Mr Clive Gibbons joined the board of directors with effect from 17 September 2020, Clive is an experienced Operations Director, specialising in the corporate and fiduciary services sector and currently works at the Newhaven Group, based in Guernsey. Clive is a qualified Independent Investment Financial Advisor Level 3, compliance manager, accredited director, approved by the Guernsey GFSC (Guernsey regulator), BVI FSC (BVI regulator), with over 18 years in the sector. He was previously a Managing Director in the Cayman Islands for Vistra and previously worked at Close Brothers (Close Finance), Kleinwort Benson and Royal Bank of Scotland International.

 

 

  ATIQ ANJARWALLA - DIRECTOR

 During the year, Mr. Atiq joined the board of director as independent non-executive   director on 3^rd October 2022. Mr. Atiq is an experience Lawyer and is a Solicitor of the Supreme Court of England and Wales Advocate of the High Court of Kenya and a Legal Consultant in Dubai. Atiq has a Master of Law from Jesus College Cambridge, England. Atiq's legal experience spans Corporate, Private Client, Banking, Project Finance and Capital Markets.

 

 

ELIZABETH POWELL - DIRECTOR

During the year, Mrs. Elizabeth Powell joined the board of director as independent non-executive director on 7^th March 2023. Liz's background is primarily in Human Resources through her work with a major Guernsey based independent fiduciary.  She has a CIPD qualification in HR and has become skilled in international payroll matters. In recent years, in addition to her personnel skills, she has taken on directorships in companies employing staff in the Oil & Gas sector as well as companies owning assets for international oil companies.

 

NICHOLAS SAUL - DIRECTOR

During the year, Mr. Nicholas Saul joined the board of director as independent non-executive director on 7^th March 2023. Nick started his career as a Merchant Navy Officer with Texaco in 1980 and has been working in the Oil & Gas industry since. Today, he owns successful Guernsey business that manages the employment of thousands working in the hydrocarbons industry as well over 10,000 mariners. Nick has a BSc in Maritime Commerce, is an Associate Fellow of the Nautical Institute and a Chartered Member of The Chartered Institute of Logistics and Transport.

 

Directors' Report

 

The Directors present their report and the financial statements of Indus Gas Limited ("the Company") and its subsidiaries, iServices Investments Ltd and Newbury Oil Co. Ltd (collectively the "Group"), which covers the year from 1 April 2022 to 31 March 2023.

 

PRINCIPAL ACTIVITY AND REVIEW OF THE BUSINESS

The principal activity of the Company and Group is that of oil and gas exploration, development and production and other related services.

 

RESULTS AND DIVIDENDS

The trading results for the year and the Group's financial position at the end of the year are shown in the attached financial statements. The Group has earned a profit before tax of USD 54.87 million (2021-22: US$ 45.96 million) during the year, which is a significant aspect for measurement of the effectiveness of company's operations.

The Directors have not recommended a dividend for the year (2022-23: Nil).

 

REVIEW OF BUSINESS AND FUTURE DEVELOPMENTS

A review of the business and likely future developments of the Company are contained in the Chairman's statement and the Board of Director's review, given above.

 

BOARD AND SECRETARIAL CHANGES

 

The Company announces the following changes to its Board:  

 

·      Mrs. Elizabeth Powell has been appointed as a Non-Executive Director with effect from 7^th March 2023.

·      Mr. Nicholas Saul has been appointed as a Non-Executive Director with effect from 7^th March 2023.

·      Mr. Atiq Anjarwalla has been appointed as a Non-Executive Director with effect from 3^rd October 2022.

·      Mr. Clive Gibbons is stepping down from the Board effective today.

 

The Company announces following other changes with effect from 7^th March 2023:

 

·      Beauvoir Trust Limited have resigned as the Company Secretary of the Company and Bachmann Secretarial Services Limited have been appointed as the new Company Secretary of the Company.

 

·      Registered office of the Company has changed from 1st Floor, Tudor House, Le Bordage, St Peter Port, Guernsey GY1 1DB to the new office at PO Box 112, St Martins House, Le Bordage, St Peter Port, Guernsey GY1 4EA.

 

DIRECTORS REMUNERATION

 

The Directors' remuneration for the year ended 31 March 2023 was:

 

	Remuneration (£)	Remuneration (US $)
Jonathan Keeling	100,000	119,166
Clive Gibbons	14,620	17,323
Atiq Anjarwalla	3,655	4,405
Fareed Soreefan*	759	1,000
Sangeeta Bissessur*	759	1,000
Angelos Alexandrou*	745	981
Paschalis Magnitis*	745	981
Total Directors' Remuneration	121,283	144,856

 *Directors of subsidiary companies (I Services and Newbury)

 

The two new non-executive directors have only been paid in the current financial year due to appointment on 7^th March 2023.

           

 The Directors' remuneration for the year ended 31 March 2022 was:

	Remuneration (£)	Remuneration (US $)
Peter Cockburn	75,000	101,304
Jonathan Keeling	100,000	135,851
Clive Gibbons	14,620	19,930
Antonia Kyriakou*	1,490	1,962
Fareed Soreefan*	759	1,000
Sangeeta Bissessur*	759	1,000
Total Directors' Remuneration	192,628	261,047

*Directors of subsidiary companies (iServices and Newbury)

 

 

The Director remuneration consists of monthly/quarterly compensation as per the agreed terms. There are no further cash payments or benefits provided to Directors.

 

GAS MARKETS IN INDIA

India has a significant deficit of hydrocarbons which we believe will result in a long-term, steady demand for gas produced by our Block.  According to the Petroleum and Natural Gas Regulatory Board ("PNGRB") Report, Vision 2030, India's natural gas demand will grow significantly to 746 MMSCM/d (26.3 BCF/d) by the end of Fiscal 2030.  India is expected to have approximately 32,727 km of natural gas pipeline with a design capacity of 815 MMSCM/d in place by 2030. In order to further boost the consumption of natural gas in the country, the Government established a Gas Trading Hub/ Exchange (GTHE), where natural gas can be traded and supplied through a market-based mechanism instead of multiple formula driven prices. Initial trading has already started on Indian Gas Exchange.

 

The gas pricing policy announced by Government of India clearly outlined that the pricing restriction under this policy is not applicable to RJ-ON/6. Gas sold from Block RJ-ON/06 does not require any approval from the government for the gas price. As a result, we are able to negotiate the price of natural gas with our customers without such price restriction. The Gas sales are currently being invoiced at a price of US$ 8.57per MMBTU on Net Calorific Value (NCV) basis. From April 2023 the gas prices have been agreed to be US$ 9.16 per MMBTU on Gross Calorific Value (GCV) basis. The prices for existing gas contract will be linked to domestic gas prices on GCV basis as notified by Petroleum planning and analysis cell of Government of India. The floor price will continue to be existing price being US$ 4.5146 per MMBTU on GCV (US$ 5 per MMBTU on NCV).

 

FINANCIAL INSTRUMENTS

Details of the use of financial instruments by the Company are contained in note 29 to the attached financial statements.

 

RELATED PARTY TRANSACTIONS

Details of significant related party transactions are contained in note 16 and note 23 to the attached financial statements.

 

INTERNAL CONTROL

The Directors acknowledge their responsibility for the Company's system of internal control and for reviewing its effectiveness. The system of internal control is designed to manage the risk of failure to achieve the Company's strategic objectives. It cannot totally eliminate the risk of failure but will provide reasonable, although not absolute, assurance against material misstatement or loss.

 

GOING CONCERN

After making enquires, the Directors have a reasonable expectation that the Company will have adequate resources to continue in operational existence for the foreseeable future. This expectation is based on estimates of future potential revenues from the RJ-ON/6 Block that the Company will derive from the sale of hydrocarbon reserves/resources and availability of adequate debt funding from banks, financial markets as well as related parties to support capital investment to enable the Company to undertake development activities in the Block. For this reason, they continue to adopt the going concern basis in preparing the financial statements. Refer note 27.

 

DIRECTORS' RESPONSIBILITIES

The Directors are responsible for preparing the Directors' report and consolidated financial statements for each financial year which give a true and fair view of the state of affairs of the Group and of the consolidated statement of comprehensive income of the Group for that year. In preparing those financial statements the Directors are required to:

o   Select suitable accounting policies and apply them consistently;

o   Make judgements and estimates that are reasonable and prudent;

o   State whether International Financial Reporting Standards as adopted by EU have been followed subject to any material departures disclosed and explained in the financial statements; and

o   Prepare consolidated financial statements on a going concern basis unless it is inappropriate to presume that the Group will continue in business.

 

The Directors confirm that the financial statements comply with the above requirements.

The Directors are responsible for keeping proper accounting records which disclose with reasonable accuracy at any time the financial position of the Company and of the Group to enable them to ensure that the financial statements comply with the requirements of the Companies (Guernsey) Law, 2008. They are also responsible for safeguarding the assets of the Company and hence for taking reasonable steps for the provision and detection of fraud and other irregularities.

 

The Directors are responsible for maintaining the integrity of the corporate financial information included on the Group's website. Legislation in Guernsey governing the preparation and dissemination of financial information may differ from legislation in other jurisdictions.

 

To the best of our knowledge and belief:

·      The financial statements have been prepared in accordance with International Financial Reporting Standards, as adopted by the European Union;

·      Give a true and fair view of the financial position and results of the Group; and

·      The financial statements include an analysis of the principal financial instruments specific risks and uncertainties faced by the Group.

 

 

 

AUDITOR

 

All of the current Directors have taken all steps that they oughts to have taken to make themselves aware of any information needed by the Group's Auditor for the purposes of their audit and to establish that the Auditor is aware of that information. The Directors are not aware of any relevant audit information of which the Auditor is unaware.

 

 

By order of the Board

 

Jonathan Keeling

 

Risks and Risk Management

 

In planning our future activities and reacting to changes in our ongoing business environment, we seek to identify, assess, mitigate and monitor the risks that we face. Considerable effort is made during our planning process to reduce and mitigate the various risks to the extent that this is practical and commercially sound. Ideally large decisions taken early means that any later adaptation or reaction should be small.

 

We cannot remove the Company from all risk and the oil and gas industry brings with it many special challenges in specific risks. What we can and do strive to achieve is to understand and manage the risk environment we work within.

 

The Company faces the appraisal, development and production risks of the oil and gas industry. The business relies on extensive engineering, geological and geophysical judgements.

 

As activities on the Block have grown and generated actual data and experience, we have used this knowledge to reduce these risks. There has been an increase in the number of wells to find hydrocarbons through the knowledge gained from almost complete 3D seismic data and analysis of drilling results. We shall continue to de-risk this area of our operations but the risk of a dry hole will never reach zero. The risk of mechanical issues or well construction failing remains. However, with greater standardization of well design and repetition of activities this has reduced.

 

We currently depend on two customers for the sale of gas and substantially all of our revenues. Discussions are on-going to find and develop new customer relationships.

 

GAIL has significant financial resources and maintains a strong credit rating providing comfort in meeting any obligations under our Agreement. Our gas is purchased at our field and shipped via a GAIL owned pipeline to the power plant. The pipeline is purpose built and operating well within its design specification.

 

Further, the Company had entered into a Gas sale and purchase agreement with another customer wherein the Company shall arrange to supply gas to its plant. This provides good opportunity to the Company to expand its production. However, the buyer's plant has been delayed and consequently the customer is liable to pay Take or Pay charges.

 

The Company has one bank debt facility outstanding from its group of lenders. These facilities were obtained on attractive terms in difficult lending markets. Debt service for the facility remains strong and contributes to our sound borrower track record. Additional amounts were raised during 2018 through unsecured bonds, which were further re-financed with the additional bond offering made by the Company in November 2022. The Company has benefited from consistent support of the majority shareholder particularly reducing the risk of any funding gaps due to the delay in closing external finance. The Production Sharing Contract that includes cost recovery and the long-term sales contract for gas provide an enhanced cash flow to service debt and give protection to lenders.

 

 

Our business, revenues and profits may fluctuate with changes in oil and gas prices. Our production is mainly gas and has been sold on strong "Take or Pay" contracts that significantly reduce the impact of fluctuations in the wider global energy market. However, the prevailing prices of oil and gas can have some bearing on new contracts and price revisions.

 

 

With effect from 1st April, 2022, the Sales Gas price was agreed to be the price as per  the Domestic Natural  Gas Price (APM Price) on GCV basis  as notified by Petroleum Planning & Analysis Cell (PPAC) from time to time.  The gas price revision had resulted in the gas price being revised to US$ 6.1 per MMBTU on GCV basis from 1 April 2022 to 30 September 2022 and to  US$ 8.57 per MMBTU on GCV basis from 1st October 2022 to 31st March 2023. As per the revised Domestic gas pricing Guidelines, Sales gas price shall be 10 pct of monthly average of Indian crude basket as notified by PPAC on a monthly basis from 8th April, 2023.      

 

The oil and gas industry are subject to laws and regulations relating to environmental and safety matters in exploration for and the development and production of hydrocarbons. We are bound by the environmental laws and regulations applicable to India and satisfy and in some areas exceed these requirements by using good industry practice, trained staff and quality equipment.

 

We are committed to upholding procedures to protect the environment and enforce environmental, health, safety and security mechanisms through accountability at all levels, suitable policies, feedback and full compliance by each employee and contractor to all policies we develop.

 

Indus is subject to regulation and supervision by the Government of India covering various aspects of our business. The Government has historically played a key role, and is expected to continue to play a key role in regulating, reforming and restructuring the Indian oil and natural gas industry. A major platform for shaping the industry has been the award of assets by various rounds under the NELP. Our Block was awarded before the formation of NELP and therefore places greater emphasis on our Production Sharing Contract (PSC) in our dealings with Government in various forms. To date the Block Management Committee created under our PSC and including multiple Government agencies has assisted the development progress we have made so far. The Field Development Plan for the area beyond SGL has also been approved by Management Committee consisting representatives of DGH and government created under PSC.

 

Corporate Governance

 

The Directors recognize the importance of sound corporate governance and have chosen to apply the Quoted Companies Alliance ("QCA") Corporate Governance Code and Guernsey regulations in so far as they are appropriate given the Company's size and stage of development. The Company may take additional Corporate Governance measures beyond QCA guidelines and Guernsey regulations as may be appropriate considering the Company's operations from time to time.

 

The Company has not adopted the UK Corporate Governance Code ("the Code") and has chosen to apply the QCA Corporate Governance Code for Small and Mid-Size Quoted Companies which is in line with most growing AIM companies adopted practices. The disclosure requirements under the code have been complied with and the detailed report is available on the official website (http://www.indusgas.com/) of the company.

 

Corporate Governance standards and procedures adopted by the Company are regularly reviewed by the Chairman who has maintained dialogue and answered questions of shareholders throughout the year. The Chairman has consulted the Nomad on the objectives of Corporate Governance within the Company.

 

BOARD OF DIRECTORS

The Board is responsible for the proper management of the Company. The resumes of the current board members are as outlined in the section 'Board of Directors' on page no. 6.

 

Mr. Ajay Kalsi brings knowledge of the oil and gas industry and a range of general business skills and continues to be an advisor to the company. The other Directors had formed a number of committees to assist in the governance of the Company and these are detailed below.

 

All Directors have access to independent professional advice, at the Company's expense, when required.

 

SUB-COMMITTEES

The Board had constituted the three sub-committees outlined below, which were then disbanded in March 2022 as a result of the Board's reduced size. Given the Board's new directors appointed recently these sub committees will reform in the future.

 

AUDIT COMMITTEE

The committee is responsible for ensuring that the financial performance of the Company is monitored and reported on, for meeting with the Auditor and reviewing findings of the audit with the external auditor. It is authorized to seek any information it properly requires from any employee and may ask questions of any employee. It meets the Auditor once per year without and is responsible for considering and making recommendations regarding the engagement and remuneration of the Auditor.

 

REMUNERATION COMMITTEE

The committee considers and recommends to the Board the framework for the remuneration of the executive director of the Company and any other member of senior management. It considers and recommends to the Board the total individual termination package of each executive director including bonuses, incentive payments and share options or other share awards. In addition, subject to existing contractual obligations, it reviews the design of all share incentive plans for approval by the Board and the Company's shareholders and, for each such plan, recommends whether awards are made and, if so, the overall amount of such awards, the individual awards to executive directors and performance targets to be used in assessing performance. Board of directors determines director remuneration. No director is involved in decisions concerning his own remuneration.

 

NOMINATION COMMITTEE

The committee considers the selection and re-appointment of Directors. It identifies and nominates candidates to all board vacancies and regularly reviews the structure, size and composition of the board (including the skills, knowledge and experience) and makes recommendations to the Board with regard to any changes.

 

SHARE DEALING

The Company has adopted a share dealing code (based on the Model Code) and the Company takes all proper and reasonable steps to ensure compliance by Directors and relevant employees.

 

THE CITY CODE ON TAKEOVERS AND MERGERS

Being a Channel Islands incorporated company, the Company is subject to the UK City Code on Takeovers and Mergers.

 

DISCLOSURE AND TRANSPARENCY RULES

As a Company incorporated in Guernsey, Shareholders are not obliged to disclose their interests in the Company in the same way as shareholders of certain companies incorporated in the UK. In particular, the relevant provisions of chapter 5 of the Disclosure and Transparency Rules (DTR) do not apply. While the Articles contain provisions requiring disclosure of voting rights in Ordinary Shares, which are similar to the provisions of the DTR, this may not always, ensure compliance with the requirements of Rule 17 of the AIM Rules. Furthermore, the Articles may be amended in the future by a special resolution of the Shareholders.

 

CONTROL BY SIGNIFICANT SHAREHOLDER

Gynia Holdings Limited, along with its wholly owned subsidiary Focus oil Inc. own a significant percentage of outstanding shares of the Company. As a significant shareholder, Gynia could exercise significant influence over certain corporate governance matters requiring shareholder approval, including the election of directors and the approval of significant corporate transactions and other transactions requiring a majority vote.

 

The Company, Strand Hanson Limited (Nomad & Broker), Gynia and Mr. Ajay Kalsi have entered into a relationship agreement to regulate the arrangements between them. The relationship agreement applies for as long as Gynia directly or indirectly holds in excess of thirty per cent of the issued share capital of the Company and the Company's shares remain admitted to trading on AIM. The relationship agreement includes provisions to ensure that:

 

a)   The Board and its committees are able to carry on their business independently of the personal interests of Gynia;

b)   The constitutional documents of the Company are not changed in such a way which would be inconsistent with the relationship agreement.

c)   All transactions between the Group and Gynia (or its affiliates) are on a normal commercial basis and at arm's length;

d)   In the event of a conflict of interest between Gynia and the Board, no person who is connected with Gynia is appointed as a Non-Executive Director of the Company and no existing Non-Executive Director is removed as a director of the Company unless such an appointment or removal has been previously approved by the nomination committee of the Board and that to the extent that any previously approved by the nomination committees concerns the composition of the Board which has been approved by the Board requiring the approval of the shareholders of the Company then Gynia will vote its Ordinary Shares in favour; and

e)   The Shareholder puts certain restrictions in place to prevent interference with the business of the Company.

Consolidated Financial Statements and Independent Auditor's Report

Indus Gas Limited and its subsidiaries

31 March 2023

Independent auditor's report

To the members of Indus Gas Limited

 

 

 

Opinion

 

 

We have audited the Consolidated financial statements of Indus Gas Limited (the 'Company') and its subsidiaries (the 'Group')  for the year ended 31 March 2023 which comprise the Consolidated Statement of Financial Position, the Consolidated Statement of Comprehensive Income, the Consolidated Statement of Changes in Equity, the Consolidated Statement of Cash Flows  and notes to the consolidated financial statements, including a summary of significant accounting policies. The financial reporting framework that has been applied in their preparation is applicable law and International Financial Reporting Standards (IFRSs) as adopted by the European Union.

 

In our opinion, the consolidated financial statements:

·      give a true and fair view of the state of the Group's affairs as at 31 March 2023 and of the Group's profit for the year then ended;

·      are in accordance with IFRSs as adopted by the European Union; and

·      comply with The Companies (Guernsey) Law, 2008.

 

 

Basis for opinion

 

We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our responsibilities under those standards are further described in the 'Auditor's responsibilities for the audit of the consolidated financial statements' section of our report. We are independent of the Group in accordance with the ethical requirements that are relevant to our audit of the consolidated financial statements in Guernsey, including the FRC's Ethical Standard as applied to listed entities, and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

 

Conclusions relating to going concern

 

We are responsible for concluding on the appropriateness of the directors' use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Group's ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our report to the related disclosures in the financial statements or, if such disclosures are inadequate, to modify the auditor's opinion. Our conclusions are based on the audit evidence obtained up to the date of our report. However, future events or conditions may cause the Group to cease to continue as a going concern.

 

Our evaluation of management's assessment of the entity's ability to continue as a going concern

Our evaluation of the directors' assessment of the Group's ability to continue to adopt the going concern basis of accounting included the following:

 

·      The audit engagement leader increased time spent directing and supervising the audit procedures on going concern;

·      We assessed the determination, made by the Board of Directors of the Group, that the Group is a going concern and the appropriateness of the financial statements to be prepared on a going concern;

·      We obtained the 12 month going concern assement performed by management, including the assumptions and sensitivities prepared by management;

·      We challenged the appropriateness of management's forecasts by;

o  checking the mathematical accuracy of the cash flow forecasts

o  assessing the key assumptions used in the going concern assessment based on our knowledge of the Group and the current economic climate; and

o  challenging management's consideration of downside sensitivity by applying further sensitivies to understand the impact on liquidity reverse stress stressing.

·      We assessed the disclosures in the financial statements relating to going concern to ensure that they were fai, balanced and understandable and in compliance with IFRS as adopted by the European Union and

·      We obtained verbal and written representations from management and those charged with governance detailing their basis on their decision to continue adopting the going concern assumption

In our evaluation of the directors' conclusions, we considered the inherent risks associated with the Group's business model , we assessed and challenged the reasonableness of estimates made by the directors and the related disclosures and analysed how those risks might affect the Group's financial resources or ability to continue operations over the going concern period.  

In auditing the financial statements, we have concluded that the directors' use of the going concern basis of accounting in the preparation of the financial statements is appropriate.

Based on the work we have performed, we have not identified any material uncertainties relating to events or conditions that, individually or collectively, may cast significant doubt on the Group's ability to continue as a going concern for a period of at least twelve months from when the financial statements are authorised for issue.

Our responsibilities and the  responsibilities of the directors with respect to going concern are described in the relevant sections of this report.  

Our approach to the audit

	Overview of our audit approach
	Overall materiality: US$ 2,669,500 which represents 5% of the Group's profit before taxation, determined at the planning stage of the audit.
	Key audit matters were identified as ·      impairment of production and development assets (same as previous year) Our audit report for the year ended 31 March 2022 included a key audit matter relating to the material uncertainty regarding going concern of the Group for which management's forecasts assumed the bonds would be fully repaid in December 2022 through a fund raise that was anticiapated at the end of the 2022 calendar year. The key audit matter has not been reported in our current year's report as this was addressed by the refinancing which occurred in the current year.
	Full scope audit procedures have been performed on the financial information of Indus Gas Limited and its subsidiary companies. There is no change in scope of the audit from the prior year.

 

Key audit matters

Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the consolidated financial statements of the current period and include the most significant assessed risks of material misstatement (whether or not due to fraud) that we identified. These matters included those that had the greatest effect on: the overall audit strategy; the allocation of resources in the audit; and directing the efforts of the engagement team. These matters were addressed in the context of our audit of the consolidated financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.

In the graph below, we have presented the key audit matters, significant risks and other risks relevant to the audit.

 

Key audit matter

Significant risk

Other risk

 

 

 

Key Audit Matter	How our scope addressed the matter
Impairment of production and development assets ("P&D assets") We identified the impairment of P&D assets as one of the most significant assessed risks of material misstatement due to error.   At 31 March 2023, the Group held P&D assets of US$  1,212,726,514 (31 March 2022: US$ 1,142,120,102).   Recoverability of P&D assets is dependent on the expected future success of exploration and development  activities. Under International Accounting Standard (IAS) 16 "Property, plant and equipment", an impairment test is required, using the principles of IAS 36 "Impairment of Assets", for P&D assets.   Based on our professional judgement, we determined the recoverability of the carrying amount of P&D assets amounting to US$1,212,726,514 is dependent upon the future cashflows of the business. The Group has capitalised taking into account the IFRS 6  "Exploration for and Evaluation of Mineral Resources" and IAS 16 "Property, Plant and Equipment" recognition criteria. In the previous years, the Group obtained approval on the reserves for the SSG and SSF field from the Directorate General of Hydrocarbons ('DGH'). Further the Management Committee has also approved the revised Field Development Plan ('FDP') in respect of the SGL area for the enhancement of production. Bearing in mind the generally long-lived nature of the Group's assets, the most critical assumption in relation to the management's assessment of future cash flows, which are used to project the recoverability of P&D assets are management's views on sales volume and gas price outlook.   Impairment of P&D assets has been identified as a key audit matter as the assessment of the recoverable amount of the Company's cash generating units (CGUs) and investments involves significant judgements about the future cash flow forecasts and the discount rate applied.	In responding to the key audit matter, we performed the following audit procedures: o    We have compared the carrying value of assets to management's assessment of the recoverable amount to assess that the carrying value is not in excess of recoverable amount. o    We agreed the recoverable amount to management's future cash flow model and performed the following detailed procedures over the model, along with impairment assessment and disclosures in financial statements:   -     We corroborated, through obtaining supporting documentation and audit evidence, estimates of future cash flows and challenged whether these were appropriate in light of the future price, volume assumptions and the costs budgets. -     We assessed the sensitivity analysis over inputs to the cash flow models wherein we have challenged the assumptions taken by management (including price, discount rate, operating cost etc); -     We have assessed the appropriateness of management's defined cash generating units ("CGUs") and impairment testing methodology under IFRSs as adopted by the European Union and whether disclosures in the consolidated financial statements are appropriate, complete and in accordance with IFRSs as adopted by the European Union; and -     We examined the methodology used at the CGU level by the management to assess the carrying value of P&D assets assigned to the Group's principal CGU to evaluate its compliance with accounting standards and consistency of application.
Relevant disclosures in the Annual Report and Accounts 2022-23 ·      Consolidated Financial statements: Note 6.7, Impariment testing for exploration and evaluation assets and property,plant and equipment; ·    Consolidated Financial Statements: Note 7, Property, plant and equipment.	Our results   Based on our procedures we have not identified any material misstatements in relation to the impairment of production and development costs.

Our application of materiality

We apply the concept of materiality both in planning and performing the audit, and in evaluating the effect of identified misstatements on the audit and of uncorrected misstatements, if any, on the consolidated financial statements and in forming the opinion in the auditor's report.

Materiality was determined as follows:

Materiality measure	Group
Materiality for consolidated financial statements as a whole	We define materiality as the magnitude of misstatement in the consolidated financial statements that, individually or in the aggregate, could reasonably be expected to influence the economic decisions of the users of these consolidated financial statements. We use materiality in determining the nature, timing and extent of our audit work.
Materiality threshold	US$ 2,669,500 which is 5% of the Group's profit before tax determined at the planning stage.
Significant judgements made by auditor in determining the materiality	In determining materiality, we made the following significant judgements ·      Profit before tax is considered to be the most appropriate benchmark as this is used by investors to judge the performance of the Group and is a significant aspect for measurement of the effectiveness of the Group's operations for management.   Materiality for the current year is higher than the level that we determined for the year ended 31 March 2022 due to increase in profit before tax for the year ended 31 March 2023.
Performance materiality used to drive the extent of our testing	We set performance materiality at an amount less than materiality for the consolidated financial statements as a whole to reduce to an appropriately low level the probability that the aggregate of uncorrected and undetected misstatements exceeds materiality for the consolidated financial statements as a whole.
Performance materiality threshold	US$ 1,601,712 which is 60% of financial statement materiality.
Significant judgements made by auditor in determining the performance materiality	In determining performance materiality, we made the following significant judgements ·      We considered the Group's overall control environment to be effective based on the results of our risk assessment procedures; and ·      There were no misstatement identified in the previous year.
Specific materiality	We determine specific materiality for one or more particular classes of transactions, account balances or disclosures for which misstatements of lesser amounts than materiality for the consolidated financial statements as a whole could reasonably be expected to influence the economic decisions of users taken on the basis of the consolidated financial statements.
Specific materiality	We determined a lower level of specific materiality for the following areas: Related party transactions and balances as a class of transactions, account balances or disclosures.
Communication of misstatements to the audit committee	We determine a threshold for reporting unadjusted differences to the audit committee.
Threshold for communication	US$ 133,500 and misstatements below that threshold that, in our view, warrant reporting on qualitative grounds.

 

The graph below illustrates how performance materiality interacts with our overall materiality and the tolerance for potential uncorrected misstatements.

Overall materiality

FSM: Financial statements materiality, PM: Performance materiality, TFPUM: Tolerance for potential uncorrected misstatements

 

An overview of the scope of our audit

 

 

We performed a risk-based audit that requires an understanding of the Group's business and in particular matters related to:

 

Understanding the Group, its components, and their environments, including Group-wide controls

 

·      The engagement team obtained an understanding of the Group and its environment, including Group-wide controls, and assessed the risks of material misstatement at the Group level;

 

·      All significant elements of the group's finance and accounting function are situated and managed centrally and operate under one common internal control environment; all operations of the group are also managed from this location; and

 

 

 

Identifying significant components and the type of work performed on financial information of parent and other components (including how it addressed the key audit matters)

 

·      The financial significance of the two significant components. In assessing the risk of material misstatement to the consolidated financial statements, and to ensure we had adequate quantitative coverage of significant accounts in the consolidated financial statements, we performed full scope audit procedures the two components. This enabled us to obtain coverage of 100% of consolidated revenue, 100% coverage of consolidated profit before tax and 100% coverage of total  assets for the group;

 

·      We undertook substantive testing on significant transactions, balances and disclosures, the extent of which was based on various factors such as our overall assessment of the control environment, the effectiveness of controls over individual systems and the management of specific risks.

 

·      Our audit procedures in respect of key audit matters have been described in the 'Key audit matter's section or our report

 

 

The approach adopted for the scope of the audit is same as that of the previous year and there has been no change.

 

 

Other information

 

The other information comprises the information included in the annual report, other than the consolidated financial statements and our auditor's report thereon. The directors are responsible for the other information contained within the annual report. Our opinion on the consolidated financial statements does not cover the other information and, except to the extent otherwise explicitly stated in our report, we do not express any form of assurance conclusion thereon.

 

In connection with our audit of the consolidated financial statements, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the consolidated financial statements or our knowledge obtained in the audit or otherwise appears to be materially misstated. If we identify such material inconsistencies or apparent material misstatements, we are required to determine whether there is a material misstatement of the consolidated financial statements themselves. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact.

 

We have nothing to report in this regard.

 

 

Matters on which we are required to report by exception

 

We have nothing to report in respect of the following matters in relation to which the Companies (Guernsey) Law, 2008 requires us us to report to you, in our opinion:

 

·      proper accounting records have not been kept by the Company; or

·      the Company's financial statements are not in agreement with the accounting records; or

·      we have not obtained all the information and explanations, which to the best of our knowledge and belief, are necessary for the purposes of our audit.

 

 

Responsibilities of directors

 

As explained more fully in the directors' responsibilities statement set out on page 11, the directors are responsible for the preparation of the consolidated financial statements which give a true and fair view in accordance with IFRSs, and for such internal control as the directors determine is necessary to enable the preparation of consolidated financial statements that are free from material misstatement, whether due to fraud or error.

 

In preparing the consolidated financial statements, the directors are responsible for assessing the Group's  ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the directors either intend to liquidate the Group  or to cease operations, or have no realistic alternative but to do so.

 

Auditor's responsibilities for the audit of the consolidated financial statements

 

Our objectives are to obtain reasonable assurance about whether the consolidated financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor's report that includes our opinion.

 

Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these consolidated financial statements.

 

 

Irregularities, including fraud, are instances of non-compliance with laws and regulations. We design procedures in line with our responsibilities, outlined above, to detect material misstatements in respect of irregularities, including fraud.  Owing to the inherent limitations of an audit, there is an unavoidable risk that material misstatements in the consolidated financial statements may not be detected, even though the audit is properly planned and performed in accordance with the ISAs (UK).

The extent to which our procedures are capable of detecting irregularities, including fraud is detailed below:

·    We obtained an understanding of the legal and regulatory frameworks applicable to the Group and industry in which it operates. We determined that the following laws and regulations were most significant: IFRS as adopted by the European Union, Companies (Guernsey) Law, 2008, and the relevant tax compliance regulations in the jurisdictions in which the Group operates. In addition, we concluded that there are certain significant laws and regulations that may have an effect on the determination of the amounts and disclosures in the consolidated financial statements such as those laws and regulations relating to health and safety, employee matters, and bribery and corruption practices ;

·    We obtained an understanding of how the Group is complying with those legal and regulatory frameworks by making inquiries of management and those responsible for legal and regulatory procedures. We corroborated our inquiries through our review of board minutes and papers provided to the Board;

·    We assessed the susceptibility of the Group's financial statements to material misstatement, including how fraud might occur. Audit procedures performed by the engagement team included ;

- identifying and assessing the design and implementation of controls management has in place to prevent and detect fraud;

-challenging assumptions and judgements made by management in its significant accounting estimates;

- identifying and testing journal entries, in particular any journal entries posted with unusual account combinations; and

·    These audit procedures were designed to provide reasonable assurance that the financial statements were free from fraud or error. The risk of not detecting a material misstatement due to fraud is higher than the risk of not detecting one resulting from error and detecting irregularities that result from fraud is inherently more difficult than detecting those that result from error, as fraud may involve collusion, deliberate concealment, forgery or intentional misrepresentations. Also, the further removed non-compliance with laws and regulations is from events and transactions reflected in the financial statements, the less likely we would become aware of it.

·    The engagement partner's assessment of the appropriateness of the collective competence and capabilities of the engagement team including consideration of the engagement teams :

-     understanding of, and practical experience with audit engagements of a similar nature and complexity through appropriate training and participation;

-     knowledge of industry in which the client operates; and

-     understanding of the legal and regulatory requirements specific to the Group

·    We communicated relevant laws and regulations and potential fraud risk areas to all engagement team members, and remained alert to any indications of fraud or non compliance with laws and regulations throughout the audit.

 

·    In assessing the potential risks of material misstatement, we obtained an understanding of :

-     the Group's operations, including the nature of its revenue sources, products and services and of its objectives and strategies to understand the classes of transactions, account balances, expected financial statement disclosures and business risks that may result in risks of material misstatement;

-     the applicable statutory provisions; and

-     the adequacy of procedures for authorisation of transactions, internal review procedures over Group's compliance with statutory requirements;

 

A further description of our responsibilities for the audit of the financial statements is located on the Financial Reporting Council's website at: www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditor's report.

Use of our report

This report is made solely to the Company's members, as a body, in accordance with Section 262 of the Companies (Guernsey) Law, 2008. Our audit work has been undertaken so that we might state to the Company's members those matters we are required to state to them in an auditor's report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company and the Company's members as a body, for our audit work, for this report, or for the opinions we have formed.

 

 

 

Michael Carpenter

For and on behalf of Grant Thornton Limited

Chartered Accountants

St Peter Port

Guernsey

 

Date: xx September 2023