For Immediate Release 30 April 2018
United Oil & Gas Plc
(“UOG”, “United” or the “Company”)
Annual Report and Financial Statements for the Year Ended 31 December 2017
United Oil & Gas Plc is pleased announce its audited annual report and financial statements for the year ended 31 December 2017 (“2017 Report”), extracts of which are set out below.
The Company’s 2017 Report is being posted to shareholders and will shortly be made available from the Company’s website at: https://www.uogplc.com/investors/reports-presentations-and-meetings/
In addition, a copy of the 2017 Report will be uploaded to the National Storage Mechanism and will be available for viewing shortly at http://www.morningstar.co.uk/uk/NSM
The financial information set out below does not constitute the Company’s statutory accounts for the year ending 31 December 2017. The financial information for 2016 is derived from the statutory accounts for that year. The auditors, UHY Hacker Young LLP, have reported on the 2017 accounts and their report is set out below.
This announcement contains inside information for the purposes of Article 7 of Regulation (EU) 596/2014
For more information please visit the Company’s website at www.uogplc.com or contact:
| United Oil & Gas Plc (Company) | |
| Brian Larkin | brian.larkin@unitedoilandgas.eu |
| Beaumont Cornish Limited (Financial Adviser) | |
| Roland Cornish and Felicity Geidt | +44 (0) 20 7628 3396 |
| Murray (PR Advisor) | +353 (0) 87 6909735 |
| Joe Heron | jheron@murrayconsultanta.ie |
Extracts from 2017 Report
CHAIRMAN’S STATEMENT
FORE THE YEAR ENDED 31 DECEMBER 2017
Dear shareholders,
Introduction
I was very pleased to be invited to join the Board of Directors and become Chairman of United Oil & Gas plc (“United Oil & Gas”) in February 2018. I had been very impressed by the clear energy and enthusiasm of your management team and the company’s achievements to date, and am therefore delighted to present this annual report for the year to 31st December 2017.
Strategy
The company has a clear and focussed strategy of building a portfolio of low-risk assets in Europe to underpin the addition of high impact growth opportunities in Latin America, the Caribbean and Africa and 2017 was a very busy and impressive year of growth for the company in pursuit of that strategy.
Key activities in 2017
At the beginning of 2017 the company had one licence in the UK, which included the Wadddock Cross Field and an adjacent exploration area, but by the end of the year the company had either added or was in the process of adding a further six licence areas including four more in the UK, one in Italy and one in Jamaica.
Within nine months of farming in to the Podere Gallina licence in Italy the company had participated in the drilling of a successful well from which strong gas flows confirmed a significant commercial discovery which is now being progressed to development as quickly as possible. In Jamaica, where United Oil & Gas farmed in to Tullow’s very extensive Walton Morant licence area, the management team worked closely with Tullow in preparation for the acquisition of 3D seismic in 2018.
As well as the operational activities in 2017, a substantial amount of time was devoted by the management team to the successful reverse takeover of Senterra Energy plc in July 2017 which resulted in the listing of the company on the main market of the London Stock Exchange by way of a Standard Listing.
Share price performance and capital raising
At the time of listing in July 2017 the company’s share price was 2.5p, but by the end of the year it had almost doubled to 4.5p. In conjunction with the reverse takeover of Senterra Energy plc (“Senterra”) in July a placing of 120,000,000 shares at 2.5 p raised £3 million and in December a further placing of 31,250,000 shares at 4p raised a further £1.25 million. In each case the funds raised have been or will be used in support of the company’s 2017/18 work programmes and further asset deals.
We are very grateful for the support shown to the company in those fundraisings by our existing shareholders and of course by our new shareholders who we welcome to the company.
Financial Results for 2017
As expected at this stage in the company’s history with no cash flow yet from operations the company made a loss for the year. This loss of £593,414 principally comprises administrative expenditure in support of the company’s activities, including licence fees, the costs of its work programmes during the year and the expenses associated with the reverse takeover of Senterra and the fundraisings.
Events since year end
In 2018 to date the company has continued the impressive pace of its activities; including by completing a farm in to Corallian’s Licence P1918, which include the Colter structure on which a well will be drilled later this year, and agreeing an option to farm in to a prospective block in the Southern North Sea. In support of these and its other activities the company announced on 20 April 2018 a placing, conditional on shareholder approval, of 58,823,530 shares at 4.25p to raise £2.5 million. We hope you will support the proposals.
Conclusion
2017 was a hectic but very successful year for the company and on your behalf, I would like to thank the management team for their commitment and enthusiasm and I look forward with confidence to an equally successful 2018.
Graham Martin
Chairman
GROUP STRATEGIC REPORT
FOR THE YEAR ENDED 31 DECEMBER 2017
The directors are pleased to present their Strategic Report for the year ended 31 December 2017.
Strategy, objectives and business model
Our strategy is to build a portfolio of low risk assets in Europe to underpin the addition of high-impact growth opportunities in Latin America, the Caribbean and Africa.
- The management team at United Oil & Gas has a proven track record of successfully evaluating and recommending farm-in deals, and will actively seek appropriate opportunities to acquire assets in which full value is not currently being realised.
- Once licences are acquired, we will use our experience of actively working operated and non-operated equity holdings to instigate activity and unlock the identified additional value.
- In Europe and the UK, United Oil & Gas are aiming to create value through building an actively managed portfolio of production, development, and low-risk exploration / appraisal assets.
- United Oil & Gas will also consider assets in other regions on an opportunist basis. Given the management team’s previous experience, our focus here will be on Latin America and Africa, where we believe we will be able to access opportunities with low Capex entry costs and potentially transformational upside
- The management team have an extensive network of senior oil and gas executives which we will use to access early divestment opportunities and avoid auctioned transactions.
Business review and future developments
During the year under review, the company made considerable progress in our development. We started the year with one licence and closed the year with three licences and a successful well in Northern Italy. In addition, we strengthened our cash position by completing an oversubscribed placing at virtually no discount to our share price in December. Since the turn of the year, we have added another three exciting licences to our portfolio along with an option over the Acle prospect located in the Southern North Sea and we look forward to drilling the Colter well this year. All in all, we now have a portfolio of seven licences all of which contain exciting near-term activity.
In addition, we have strengthened our cash position further in April of this year when we announced a placing of £2.5million pounds which ensures that our work program is funded for the next twelve months.
The appointment of Graham Martin as Non-Executive Chairman is also a significant development milestone for our company. Graham spent almost two decades on the board of Tullow Oil Plc where he was centrally involved in their entire M&A program. Graham brings a wealth of corporate experience to our team and we are delighted to have him on board.
The strengthening of commodity prices has certainly helped with potential deal flow. The most important factor for commodity prices is stability. Asset valuations can be difficult to agree with potential sellers in an unstable price environment and over the course of 2017 we saw a consistent and steady path to $60 a barrel. Whilst, we evaluate opportunities at various cost and price scenarios we believe that a price above $50 per barrel will see continued deal flow.
The implementation of our strategy will continue to focus on acquisition and farm-in opportunities but supported by a stronger balance sheet and asset base, we can start looking at opportunities that are larger in scale and potential returns. During 2017, we added to our team in order to continue to review new opportunities whilst also ensuring that the existing portfolio is developed further.
In terms of our existing portfolio, we are very pleased with the execution of the various work programs throughout the year. The obvious highlight was the successful well on the Podere Gallina licence in Northern Italy. After the year end, we successfully flow tested the Selva well and to the next stage will be to move to production. The Colter well remains on track and will spud in September. In addition, we continue to work with our joint venture partners on licence PL090 and aim to drill a well in 2019. On our Jamaica licence, the operator, Tullow Oil, has recently announced the commencement of our 3D seismic acquisition survey and we look forward to reviewing the early fast track volume over the summer period.
Europe
Podere Gallina Licence, Onshore Italy
The Podere Maiar 1 well was drilled in November/December 2017 into an updip area of the Selva Field. This proved up a clearly commercial gas accumulation, and we are working with the operator, Po Valley Energy, to ensure that this is brought into production as quickly as possible. The well results also served to de-risk the exploration upside on the Licence, including the East Selva prospect. We intend to acquire 3D seismic data over the block and aim to commence this in 2019.
Wessex Basin, UK
In January 2018, United Oil & Gas completed a farm-in deal with Corallian Energy Limited on the Colter well (Licence P1918) and the adjacent licences (PEDL330 and PEDL345). The Colter well is an appraisal of the discovery made by the 98/11-3 well. Recent work by Corallian has demonstrated that this well was on the edge of a much larger structure, and the planned Colter well will target the updip volumes. Well-planning is proceeding as planned for a September 2018 spud date.
In the PL090 licence, work to optimise the location of a development well has been continuing on the seismic data over the Waddock Cross field. The latest estimate is that the technical work should be completed in Q2 2018, at which point well-planning would be able to commence. United Oil & Gas are targeting a well-spud in 2019.
In all of our licences in the Wessex Basin, technical work is continuing to work up further prospectivity in the Sherwood Sandstone play.
Southern North Sea, UK
In January 2018, United Oil & Gas agreed a farm-in option agreement with Swift Exploration on their low-risk Acle prospect (Licence P2264, Block 49/29c). This option will be executed once other partners have been found to participate in the drilling of the well. This is an exciting opportunity close to existing infrastructure, which we hope to be drilling at some point in 2019.
Latin America, the Caribbean, and Africa
Walton-Morant Licence, offshore Jamaica
In November 2017, United Oil & Gas agreed a farm-in deal with Tullow Oil Plc on the Walton-Morant Licence, offshore Jamaica. 3D seismic acquisition commenced at the beginning of April and is expected to be completed by mid-May.
Principal risks and uncertainties
The Directors have identified the following as key risks in the first six months of this financial year:
The Oil and Gas sector – exploration, development and production
The estimating of reserves and resources is a subjective process and there is significant uncertainty in any reserve or resource estimate. In addition, the exploration for and production of oil and other natural resources is speculative and involves a high degree of risk, in particular a company’s operations may be disrupted by a variety of tasks and hazards which are beyond its control such as environmental regulation, governmental regulations or delays, increase in costs, the availability of equipment or services and the volatility of oil and gas prices.
Liquidity Risk
Prudent liquidity risk management includes maintaining sufficient cash balances to ensure the Group can meet liabilities as they fall due. In managing liquidity risk, the main objective of the Group is therefore to ensure that it has the ability to pay all of its liabilities as they fall due. The Group monitors its levels of working capital to ensure that it can meet its debt repayments as they fall due.
Foreign exchange risk
The Group’s transactions are carried out in GBP, EUR and USD. Fundraising transactions and parent company operating transactions are carried out in GBP. Operational transactions are carried out predominantly in EUR but also in USD.
Exposures to foreign currency exchange rates arise from the Group’s overseas sales and purchases, which are denominated in a number of currencies, primarily EUR and USD. Cash balances held in these currencies are relatively immaterial (see note 10) and transactional risk is considered manageable.
The Group does not hold material non-domestic balances and currently does not consider it necessary to take any action to mitigate foreign exchange risk due to the immateriality of that risk.
This report was approved by the board on 27 April 2018 and signed on its behalf.
Brian Larkin
Chief Executive Officer
INDEPENDENT AUDITORS’ REPORT TO THE MEMBERS OF UNITED OIL & GAS PLC
FOR THE YEAR ENDED 31 DECEMBER 2017
Opinion
We have audited the financial statements of United Oil & Gas Plc for the year ended 31 December 2017 which comprise the Consolidated Income Statement, the Consolidated Statement of Total Comprehensive Income, the Consolidated Balance sheet, the Consolidated Statement of Changes in Equity, the Consolidated Cash Flow Statement and related notes to the financial statements, the Parent Company Balance sheet, the Parent Company Statement of Changes In Equity and the related notes. The financial reporting framework that has been applied in the preparation of the consolidated financial statement is applicable law and International Financial Reporting Standards as adopted by the European Union (IFRSs). The financial reporting framework that has been applied in the preparation of the parent company financial statements is applicable law and United Kingdom Accounting Standards (United Kingdom Generally Accepted Accounting Practice), including Financial Reporting Standard 101 ‘Reduced Disclosure Framework’.
In our opinion:
- give a true and fair view of the state of the Group and Parent Company’s affairs as at 31 December 2017 and of the Group and Parent company’s loss and cash flows for the year then ended;
- the group financial statements have been properly prepared in accordance with IFRSs as adopted by the European Union;
- the parent company financial statements have been properly prepared with Financial Reporting Standard 101 Reduced Disclosure Framework and as applied in accordance with the provisions of the Companies Act 2006; and
- the group and parent financial statements have been prepared in accordance with the requirements of the Companies Act 2006. and, as regards the group financial statements, Article 4 of the IAS Regulation.
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 financial statements section of our report. We are independent of the Company in accordance with the ethical requirements that are relevant to our audit of the financial statements in the UK, 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.
Use of our report
This report is made solely to the company’s members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006. 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.
Emphasis of matter – going concern
We have considered the adequacy of the going concern disclosures made in the going concern accounting policy to the financial statements concerning the Group’s and Company’s ability to continue as a going concern. The Group incurred an operating loss of £593,414 during the period ended 31 December 2017 and is still incurring losses. As discussed in the going concern accounting policy, the Group and Company require further funding in order to meet their commitments over the next 12 months. The company has however conditionally raised £2.5 million gross by the issue of 58,823,530 new ordinary shares in the capital of the Company. The issue of shares remains contingent on shareholder approval at the general meeting scheduled for 10 May 2018 to grant the Directors the authority to allot equity securities and to dis-apply statutory pre-emption rights in respect of an allotment of equity securities for cash in connection with the fundraising. These conditions, along with other matters discussed in note principal accounting policies indicate the existence of an inherent material uncertainty which may cast significant doubt about the Group’s and company’s ability to continue as a going concern. The financial statements do not include the adjustments (such as impairment of assets) that would result if the Group and Company were unable to continue as a going concern.
Our opinion is not modified in respect of the above matter.
Key audit matters
Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the financial statements of the current period and include the most significant assessed risks of material misstatement (whether or not due to fraud) we identified, including those which 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 financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.
Our assessment of risks of material misstatements
We identified the following risks of material misstatement that we believe had the greatest impact on our overall audit strategy and scope, the allocation of resources in the audit; and directing the efforts of the engagement team. This is not a complete list of all risks identified by our audit.
| Key audit matter | How our audit addressed the key audit matter |
| Impairment exploration and evaluation assets and loans due from subsidiary companies The Groups has capitalised significant costs in respect of the group’s licence interests in accordance with IFRS 6 ‘Exploration for and Evaluation of Mineral Resources’ (IFRS 6), therefore there is a risk of impairment. The renewal and good standing of the licences is key in order to ensure no impairment of the exploration assets. |
In accordance with IFRS 6 we reviewed the exploration and evaluation (E&E) assets for indications of impairment. We discussed the exploration and evaluation assets with the directors and considered their assessment in conjunction with the Competent Persons Reports commissioned, to ensure that all licenses are in good standing. We did not identify any indicators of impairment. We reviewed the future plans and budgets of the projects in respect of funding. |
| Key audit matter | How our audit addressed the key audit matter |
| Determining the correct accounting treatment for the reverse takeover IFRS 3 sets out a number of conditions in order for a transaction to qualify as a reverse takeover and for reverse takeover accounting to be applied. |
In accordance with IFRS 3 we reviewed the conditions that must be met in order to qualify as a reverse takeover. It was determined that United Oil & Gas Plc (formerly Senterra Energy Plc) was a cash shell and therefore did not meet the definition of a ‘business’. As a result, merger accounting was deemed to be the appropriate basis. |
| Key audit matter | How our audit addressed the key audit matter |
| Management override of controls Intrinsically there is always a risk of material misstatement due to fraud as a result of possible management override of internal controls. |
We reviewed the nominal ledger accounts, journals and cash transactions to identify any unusual or exceptional transactions. We investigated and tested a sample of items to ensure amounts paid during the year related to business expenses and that transactions were appropriate. We reviewed and enquired into the accounting systems, processes, controls and segregation of duties that existed in the Company and the Group. We also evaluated whether there was evidence of bias by the directors that represented a risk of material misstatement of fraud. |
| Going concern The group has recently signed various farm-in agreements committing the group to significant exploration costs over the next 12 months. If the wells are unsuccessful or require significantly higher levels of funding than budgeted it may create an uncertainty in respect of going concern. |
We have reviewed the group’s cashflow forecasts for the period projections to 31 December 2019 and the current financial position. Subsequent to the year end the company has conditionally raised £2.5 million gross by the issue of 58,823,530 new ordinary shares in the capital of the Company. The issue of shares remains contingent on shareholder approval at the general meeting scheduled for 10 May 2018 to grant the Directors the authority to allot equity securities and to dis-apply statutory pre-emption rights in respect of an allotment of equity securities for cash in connection with the fundraising. Should approval be granted then the group is expected to operate as a going concern for the next 12 months form the date of these financial statements. We have included an emphasis of matter paragraph regarding going concern due to the contingent nature of the placing. |
Our application of materiality
The scope and focus of our audit was influenced by our assessment and application of materiality. We apply the concept of materiality both in planning and performing our audit, and in evaluating the effect of misstatements on our audit and on the financial statements.
We define financial statement materiality as the magnitude by which misstatements, including omissions, could reasonably be expected to influence the economic decisions taken on the basis of the financial statements by reasonable users.
We also determine a level of performance materiality which we use to determine the extent of testing needed to reduce to an appropriately low level the probability that the aggregate of uncorrected and undetected misstatements exceeds materiality for the financial statements as a whole.
Overall materiality We determined materiality for the financial statements as a whole to be £84,000.
How we determine it Based on the main key indicator, being 2% of net assets of the Group.
Rationale for benchmarks applied We believe an average of loss before tax, the net assets and the gross assets value is the most appropriate benchmarks due to the size and stage of development of the Company and Group and due to the Group not yet generating any revenue.
Performance materiality On the basis of our risk assessment, together with our assessment of the Company’s control environment, our judgement is that performance materiality for the financial statements should be 60% of materiality, and this was rounded to £50,000.
We agreed with the Audit Committee that we would report to them all misstatements over £4,500 identified during the audit, as well as differences below that threshold that, in our view, warrant reporting on qualitative grounds. We also report to the Audit Committee on disclosure matters that we identified when assessing the overall presentation of the financial statements.
An overview of the scope of our audit
As part of designing our audit, we determined materiality and assessed the risks of material misstatement in the financial statements. In particular, we looked at where the directors made subjective judgements, for example in respect of significant accounting estimates that involved making assumptions and considering future events that are inherently uncertain.
We tailored the scope of our audit to ensure that we performed enough work to be able to give an opinion on the financial statements as a whole, taking into account an understanding of the structure of the Company and the Group, their activities, the accounting processes and controls, and the industry in which they operate. Our planned audit testing was directed accordingly and was focused on areas where we assessed there to be the highest risk of material misstatement. Our Group audit scope includes all of the group companies. At the parent company level, we also tested the consolidation procedures. The audit team communicated regularly throughout the audit with the finance team in order to ensure we had a good knowledge of the business of the Group.
During the audit we reassessed and re-evaluated audit risks and tailored our approach accordingly.
The audit testing included 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 and the management of specific risk.
We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant findings, including any significant deficiencies in internal control that we identify during the audit.
Other information
The directors are responsible for the other information. The other information comprises the information included in the annual report, other than the financial statements and our auditors’ report thereon. Our opinion on the 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 financial statements, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the 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 in the financial statements or a material misstatement of the other information.
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.
Opinions on other matters prescribed by the Companies Act 2006
In our opinion, based on the work undertaken in the course of the audit:
- the information given in the strategic report and the directors’ report for the financial year for which the financial statements are prepared is consistent with the financial statements; and
- the strategic report and the directors’ report have been prepared in accordance with applicable legal requirements.
In the light of the knowledge and understanding of the group and the parent company and its environment obtained in the course of the audit, we have not identified material misstatements in the strategic report or the directors’ report.
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 Act 2006 requires us to report to you if, in our opinion:
- adequate accounting records have not been kept by the Company, or returns adequate for our audit have not been received from branches not visited by us; or
- the financial statements are not in agreement with the accounting records and returns; or
- certain disclosures of directors’ remuneration specified by law are not made; or
- we have not received all the information and explanations we require for our audit.
Responsibilities of directors
As explained more fully in the statement of directors’ responsibilities, the directors are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view, and for such internal control as the directors determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.
In preparing the financial statements, the directors are responsible for assessing the company’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 Company or to cease operations, or have no realistic alternative but to do so.
Auditor’s responsibilities for the audit of the financial statements
Our objectives are to obtain reasonable assurance about whether the 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 financial statements.
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/apb/scope/private.cfm.This description forms part of our auditor’s report.
Daniel Hutson (senior statutory auditor)
for and on behalf of
UHY Hacker Young
Chartered Accountants
Registered Auditors
Quadrant House
4 Thomas More Square
London
E1W 1YW
27 April 2018
Consolidated Income Statement for the year ended 31 December 2017
| Notes | Year to 31 December 2017 | Year to 31 December 2016 | ||
| £ | £ | |||
| Revenue | – | – | ||
| Cost of sales | – | – | ||
| Gross profit | – | – | ||
| Administrative expenses | (593,414) | (185,204) | ||
| Operating loss and loss before taxation | 2 | (593,414) | (185,204) | |
| Taxation | 4 | – | – | |
| Loss for the financial year attributable to the Company’s/ Group’s equity shareholders | (593,414) | (185,204) | ||
| Loss per share from continuing operations expressed in pence per share: |
||||
| Basic and diluted | 5 | (0.59) | (3.40) | |
Consolidated Statement of Comprehensive Income
| 2017 | 2016 | |||
| £ | £ | |||
| Loss for the financial year | (593,414) | (185,204) | ||
| Foreign exchange difference | (26,214) | (8,117) | ||
| Total comprehensive income for the financial year attributable to the Company’s equity shareholders | (619,628) | (193,321) | ||
Consolidated Balance Sheet as at 31 December 2017
| Notes | 2017 | 2016 | ||
| Assets | £ | £ | ||
| Non-current assets | ||||
| Intangible assets | 7 | 1,166,169 | 117,310 | |
| Property, plant and equipment | 8 | 2,342 | – | |
| 1,168,511 | 117,310 | |||
| Current assets | ||||
| Trade and other receivables | 9 | 124,870 | – | |
| Cash and cash equivalents | 10 | 3,034,968 | 75,804 | |
| 3,159,838 | 75,804 | |||
| Total Assets | 4,328,349 | 193,114 | ||
| Equity and liabilities | ||||
| Capital and reserves | ||||
| Share capital | 11 | 2,321,850 | 259,250 | |
| Share premium | 11 | 4,213,944 | 259,250 | |
| Share based payment reserve | 12 | 455,493 | 176,099 | |
| Merger reserve | 11 | (2,048,084) | (332,712) | |
| Translation reserve | (34,557) | (8,343) | ||
| Retained earnings | (788,868) | (195,454) | ||
| Shareholders’ funds | 4,119,778 | 158,090 | ||
| Current liabilities: | ||||
| Trade and other payables | 13 | 208,571 | 35,024 | |
| Total equity and liabilities | 4,328,349 | 193,114 |
The financial statements were approved by the Board of Directors on 27 April 2018 and were signed on its behalf by:
Brian Larkin
Chief Executive Officer
Registered number: 09624969
Consolidated Statement of Changes in Equity
| Share capital |
Share premium | Share based payments reserve | Retained earnings |
Translation reserve | Merger reserve | Total | ||
| £ | £ | £ | £ | £ | £ | £ | ||
| For the period ended 31 December 2017 | ||||||||
| United Oil & Gas plc consolidated | ||||||||
| Balance at 1 January 2017 (UOG Holdings plc) | 259,250 | 259,250 | 176,099 | (195,454) | (8,343) | (332,712) | 158,090 | |
| Loss for the period | – | – | – | (593,414) | – | – | (593,414) | |
| Foreign exchange difference | – | – | – | – | (26,214) | – | (26,214) | |
| Total comprehensive income | – | – | – | (593,414) | (26,214) | – | (619,628) | |
| Issue of share capital in UOG Holdings plc | 125,000 | 125,000 | – | – | – | – | 250,000 | |
| Share issue expenses | – | (12,638) | – | – | – | – | (12,638) | |
| Effect of combination resulting in United Oil & Gas plc becoming the parent company of the group | 425,100 | 1,382,914 | – | – | – | (1,715,372) | 92,642 | |
| Share placing | 1,512,500 | 2,737,500 | – | – | – | – | 4,250,000 | |
| Share issue expenses | – | (278,082) | – | – | – | – | (278,082) | |
| Cancellation of share warrants in UOG Holdings plc | – | – | (176,099) | – | – | – | (176,099) | |
| Issue of share warrants in United Oil & Gas plc | – | – | 455,493 | – | – | – | 455,493 | |
| Balance at 31 December 2017 | 2,321,850 | 4,213,944 | 455,493 | (788,868) | (34,557) | (2,048,084) | 4,119,778 | |
| For the year ended 31 December 2016 | ||||||||
| UOG Holdings plc consolidated | ||||||||
| Balance at 1 January 2016 (United Oil & Gas Ltd) | 73 | – | – | (10,250) | (226) | – | (10,403) | |
| Loss for the year | – | – | – | (185,204) | – | – | (185,204) | |
| Foreign exchange difference | – | – | – | – | (8,117) | – | (8,117) | |
| Total comprehensive income | – | – | – | (185,204) | (8,117) | – | (193,321) | |
| Issue of share capital in United Oil & Gas Ltd | 12,533 | 242,547 | – | – | – | – | 255,080 | |
| Redemption of share capital in United Oil & Gas Ltd | (11,766) | – | – | – | – | – | (11,766) | |
| Effect of share for share transaction to incorporate UOG Holdings plc as parent company | 199,160 | (42,547) | 176,099 | – | – | (332,712) | – | |
| Issue of share capital in UOG Holdings plc | 59,250 | 59,250 | – | – | – | – | 118,500 | |
| Balance at 31 December 2016 | 259,250 | 259,250 | 176,099 | (195,454) | (8,343) | (332,712) | 158,090 | |
Consolidated Statement of Cash Flows for the year ended 31 December
| 2017 | 2016 | |||
| £ | £ | |||
| Cash flow from operating activities | ||||
| Loss for the financial year before tax | (593,414) | (185,204) | ||
| Shares issued to directors in lieu of fees | – | 113,798 | ||
| Share options issued as acquisition expenses | 25,377 | – | ||
| Depreciation | 452 | – | ||
| Foreign exchange movements | (1,916) | 14,668 | ||
| (569,501) | (56,738) | |||
| Changes in working capital | ||||
| Increase in trade and other receivables | (124,870) | – | ||
| Increase in trade and other payables | 138,795 | 4,737 | ||
| Cash outflow from operating activities | (555,576) | (52,000) | ||
| Cash outflow from investing activities | ||||
| Cash acquired from United Oil & Gas plc (formerly Senterra Energy plc) | 332,538 | – | ||
| Purchase of property, plant & equipment | (2,794) | – | ||
| Purchase of intangible exploration assets | (1,048,859) | (117,310) | ||
| Net cash used in investing activities | (719,115) | (117,310) | ||
| Cash flow from financing activities | ||||
| Issue of ordinary shares | 4,256,862 | 259,783 | ||
| Net cash generated by financing activities | 4,256,862 | 259,783 | ||
| Net increase in cash and cash equivalents | 2,982,171 | 90,472 | ||
| Cash and cash equivalents at beginning of financial year | 75,804 | – | ||
| Effects of exchange rate changes | (23,007) | (14,669) | ||
| Cash and cash equivalents at end of financial year | 3,034,968 | 75,804 | ||
Notes to the consolidated financial statements
Principal Accounting Policies
Company information
United Oil & Gas plc (formerly Senterra Energy plc) is a public limited company incorporated and domiciled in the United Kingdom.
Basis of preparation
The consolidated financial statements of United Oil & Gas plc and its subsidiaries (together “the Group” or “United Oil & Gas”) have been prepared in accordance with International Financial Reporting Standards (“IFRS”), as adopted by the European Union, IFRIC interpretations, and with those parts of the Companies Act 2006 applicable to companies reporting under IFRS.
The results for the year ended 31 December 2017 include the results of United Oil & Gas plc and its subsidiaries; those for the year ended 31 December 2016 include the results of UOG Holdings plc and its subsidiaries.
IFRS is subject to amendment and interpretation by the IASB and the IFRS Interpretations Committee, and there is an on-going process of review and endorsement by the European Commission. These accounting policies comply with each IFRS that is mandatory for accounting periods ending on 31 December 2017.
The principal accounting policies set out below have been consistently applied to all periods presented.
Basis of consolidation
The financial statements for the year ended 31 December 2017 incorporate the results of United Oil & Gas plc (“the Company”) and entities controlled by the Company (its subsidiaries). Control is achieved where the Company has the power to govern the financial and operating policies of an investee entity so as to obtain benefits from its activities.
The addition of United Oil & Gas plc (formerly Senterra Energy plc) to the Group in 2017 was not accounted for as a business combination, due to the Company being considered to be a cash shell, but instead the consolidated accounts are presented as a continuation of the financial statements of the UOG Holdings plc Group, adjusted only to reflect the share capital of the new legal parent.
All intra-Group transactions, balances, income and expenses are eliminated in full on consolidation. Accounting policies of subsidiaries have been changed where necessary to ensure consistency with the policies adopted by the Group.
Going Concern
The Group’s business activities, together with the factors likely to affect its future development, performance and position are set out in the Chairman’s Statement and the Strategic Report.
The Directors’ forecasts demonstrate that the Group will meet its day-to-day working capital and financial commitments over the forecast period (being at least 12 months from the date the financial statements were approved) from the cash held on deposit on 31 December 2017 and funds raised subsequent to the year end, including the conditional placing for £2.5 million. However this is subject to the passing of shareholder resolutions at the General Meeting on 10 May 2018 which creates a material uncertainty.
Subject to the passing of the shareholder resolutions and completion of the £2.5m placing the Group has sufficient funding to meet planned financial commitments in relation to operational activities and a level of contingency. The directors have a reasonable expectation that the Group has adequate resources to continue in operational existence for the foreseeable future, therefore they continue to adopt the going concern basis of accounting in preparing the financial statements.
Finance income and costs
Interest is recognised using the effective interest method which calculates the amortised cost of a financial asset or liability and allocates the interest income or expense over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash receipts or payments through the expected life of the financial asset or liability to the net carrying amount of the financial asset or liability.
Exploration and evaluation assets
The group accounts for oil and gas expenditure under the full cost method of accounting.
Costs (other than payments to acquire the legal right to explore) incurred prior to acquiring the rights to explore are charged directly to the profit and loss account. All costs incurred after the rights to explore an area have been obtained, such as geological, geophysical, data costs and other direct costs of exploration and appraisal are accumulated and capitalised as intangible exploration and evaluation (“E&E”) assets.
E&E costs are not amortised prior to the conclusion of appraisal activities. At the completion of appraisal activities if technical feasibility is demonstrated and commercial reserves are discovered, then following development sanction, the carrying value of the relevant E&E asset will be reclassified as a development and production asset within tangible fixed assets.
If after completion of appraisal activities in an area, it is not possible to determine technical feasibility or commercial viability, then the costs of such unsuccessful exploration and evaluation are written off to the profit and loss account. The costs associated with any wells which are abandoned are fully amortised when the abandonment decision is taken.
Development and production assets, are accumulated generally on a field by-field basis and represent the costs of developing the commercial reserves discovered and bringing them into production, together with the E&E expenditures incurred in finding commercial reserves which have been transferred from intangible E&E assets.
The net book values of development and production assets are depreciated generally on a field-byfield basis using the unit of production method based on the commercial proven and probable reserves. Assets are not depreciated until production commences.
Property, plant and equipment
Property, plant and equipment are stated at cost on acquisition less depreciation. Depreciation is provided on a straight-line basis at rates calculated to write off the cost less the estimated residual value of each asset over its expected useful economic life. The residual value is the estimated amount that would currently be obtained from disposal of the asset if the asset were already of the age and in the condition expected at the end of its useful life.
The annual rate of depreciation for each class of depreciable asset is:
Computer equipment 33%
The carrying value of property plant and equipment is assessed annually and any impairment is charged to the income statement.
Impairment of non-financial assets
At each balance sheet date, the Directors review the carrying amounts of the Group’s tangible and intangible assets, other than goodwill, to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss, if any. Where the asset does not generate cash flows that are independent from other assets, the Group estimates the recoverable amount of the cash-generating unit to which the asset belongs.
Recoverable amount is the higher of fair value less costs to sell and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset for which the estimates of future cash flows have not been adjusted.
If the recoverable amount of an asset or cash-generating unit is estimated to be less than its carrying amount, the carrying amount of the asset or cash-generating unit is reduced to its recoverable amount. If the recoverable amount of a cash-generating unit is less than its carrying amount, the impairment loss is allocated first to reduce the carrying amount of any goodwill allocated to the unit and then to the other assets of the unit pro rata based on the carrying amount of each asset in the unit.
An impairment loss is recognised as an expense immediately. An impairment loss recognised for goodwill is not reversed in subsequent periods. Where an impairment loss subsequently reverses, the carrying amount of the asset or cash-generating unit is increased to the revised estimate of its recoverable amount, but so that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognised for the asset or cash-generating unit in prior periods. A reversal of an impairment loss is recognised in the Income Statement immediately.
Cash and cash equivalents
Cash and cash equivalents comprise cash on hand, deposits held at call with banks and other short-term highly liquid investments with original maturities of three months or less.
Financial instruments
Financial assets and financial liabilities are recognised when the Group becomes a party to the contractual provisions of the financial instrument.
Financial assets and financial liabilities are measured initially at fair value plus transactions costs. Financial assets and financial liabilities are measured subsequently as described below.
Financial assets
The Group classifies its financial assets as ‘loans and receivables’. The Group assesses at each balance sheet date whether there is objective evidence that a financial asset or a group of financial assets is impaired.
Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. They are included in current assets, except for maturities greater than 12 months after the balance sheet date, which are classified as non-current assets. Loans and receivables are classified as ‘trade and other receivables’ in the Balance Sheet.
Trade receivables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method, less provision for impairment.
A provision for impairment of trade receivables is established when there is objective evidence that the Group will not be able to collect all amounts due according to the original terms of the receivables. Significant financial difficulty, high probability of bankruptcy or a financial reorganisation and default are considered indicators that the trade receivable is impaired. The amount of the provision is the difference between the asset’s carrying amount and the present value of the estimated future cash flows discounted at original effective interest rate. The loss is recognised in the Income Statement. When a trade receivable is uncollectible, it is written off against the allowance account for trade receivables. Subsequent recoveries of amounts previously written off are credited in the Income Statement.
Financial assets are derecognised when the contractual rights to the cash flows from the financial asset expire, or when the financial asset and all substantial risks and rewards are transferred.
Financial liabilities
The Group’s financial liabilities include trade and other payables.
Trade payables and borrowings are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method.
A financial liability is derecognised when it is extinguished, discharged, cancelled or expires.
Taxation
Current taxation for each taxable entity in the Group is based on the local taxable income at the local statutory tax rate enacted or substantively enacted at the balance sheet date and includes adjustments to tax payable or recoverable in respect of previous periods.
Deferred taxation
Deferred taxation is calculated using the liability method, on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the financial information. However, if the deferred tax arises from the initial recognition of an asset or liability in a transaction other than a business combination that at the time of the transaction affects neither accounting nor taxable profit or loss, it is not accounted for. Deferred tax is determined using tax rates and laws that have been enacted or substantively enacted by the balance sheet date and are expected to apply when the related deferred tax asset is realised, or the deferred tax liability is settled.
Deferred tax liabilities are provided in full.
Deferred tax assets are recognised to the extent that it is probable that future taxable profits will be available against which the temporary differences can be utilised.
Changes in deferred tax assets or liabilities are recognised as a component of tax expense in the Income Statement, except where they relate to items that are charged or credited directly to equity in which case the related deferred tax is also charged or credited directly to equity.
Deferred tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets against current tax liabilities and when the deferred tax assets and liabilities relate to taxes levied by the same taxation authority on either the same taxable entity or different taxable entities where there is an intention to settle the balances on a net basis.
Foreign currency
Transactions in foreign currencies are recorded at the rate ruling at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies are translated at the rate of exchange ruling at the year-end date. All differences are taken to the Income Statement.
Assets and liabilities of subsidiaries that have a functional currency different from the presentation currency (pound sterling), if any, are translated at the closing rate at the date of each balance sheet presented. Income and expenses are translated at average exchange rates. All resulting exchange differences are recognised in other comprehensive income (loss), if any.
Share based payments
Where share warrants have been granted, IFRS 2 has been applied whereby the fair value of the warrants is measured at the grant date and spread over the period during which the warrants vest. A warrants valuation model is used to assess the fair value, taking into account the terms and conditions attached to the warrants. The fair value at grant date is determined including the effect of market-based vesting conditions, to the extent such vesting conditions have a material impact.
The cost of equitysettled transactions is recognised, together with a corresponding increase in equity, over the period in which the performance and/or service conditions are fulfilled, ending on the date on which the holders become fully entitled to the award (“the vesting date”).
The cumulative expense recognised for equitysettled transactions at each reporting date until the vesting date reflects the extent to which the vesting period has expired and the Group’s best estimate of the number of equity instruments that will ultimately vest.
Equity
Equity comprises the following:
- “Share capital” represents amounts subscribed for shares at nominal value.
- “Share premium” represents amounts subscribed for share capital, net of issue costs, in excess of nominal value.
- “Share based payment reserve” represents the accumulated value of share-based payments.
- “Retained earnings” represents the accumulated profits and losses attributable to equity shareholders.
- “Translation reserve” represents the exchange differences arising from the translation of the financial statements of subsidiaries into the Group’s presentational currency.
- “Merger reserve” represents amounts arising from statutory merger relief arising on business combinations.
Adoption of New and Revised International Financial Reporting Standards
At the date of authorisation of this financial information, the IASB and IFRS Interpretations Committee have issued standards, interpretations and amendments which are applicable to the Group.
Whilst these standards and interpretations are not effective for, and have not been applied in the preparation of, this financial information, the following may have an impact going forward:
Other than minor changes to standards arising from annual improvements, there have been no new or revised standards adopted in the preparation of the financial statements for the current financial year that have had any material impact on the financial statements of the Group.
The following EU-adopted revised or new standards have yet to be adopted by the Group. These standards will be adopted for the years ended 31 December 2018 and 31 December 2019 as shown below:
- IFRS 9 Financial Instruments (2018)
- IFRS 15 Revenue from contracts with customers (2018)
- IFRS 16 Leases (2019)
IFRS 9 ‘Financial Instruments’ will supersede IAS 39 ‘Financial Instruments: Recognition and Measurement’ and is effective for annual periods beginning on or after 1 January 2018. IFRS 9 covers classification and measurement of financial assets and financial liabilities, impairment of financial assets and hedge accounting.
IFRS 15 ‘Revenue from Contracts with Customers’ provides a single model for accounting for revenue arising from contracts with customers, focusing on the identification and satisfaction of performance obligations, and is effective for annual periods beginning on or after 1 January 2018. IFRS 15 will supersede IAS 18 ‘Revenue’.
The Group expects to adopt IFRS 9 and IFRS 15 on 1 January 2018. The Group’s evaluation of the effect of adoption of these standards is ongoing but it is not currently anticipated that either IFRS 9 or IFRS 15 will have a material effect on the financial statements.
IFRS 16 ‘Leases’ provides a new model for lessee accounting in which all leases, other than short-term and small-ticket-item leases, will be accounted for by the recognition on the balance sheet of a right-to-use asset and a lease liability, and the subsequent amortisation of the right-to-use asset over the lease term. IFRS 16 will be effective for annual periods beginning on or after 1 January 2019.
The Group expects to adopt IFRS 16 on 1 January 2019. The Group’s evaluation of the effect of adoption of the standard is ongoing but it is not currently expected that it will have a material effect on the Group’s financial statements.
There are no other standards and interpretations in issue but not yet adopted that the directors anticipate will have a material effect on the reported income or net assets of the Group.
Critical accounting judgements and key sources of estimation uncertainty
The preparation of financial information in conformity with generally accepted accounting practice requires management to make estimates and judgements that affect the reported amounts of assets and liabilities as well as the disclosure of contingent assets and liabilities at the balance sheet date and the reported amounts of revenues and expenses during the reporting period.
Estimates and judgements are continually evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances.
The following are the significant judgements used in applying the accounting policies of the Group that have the most significant effect on the financial information:
Impairment of exploration licenses
Management reviews intangible exploration assets for indicators of impairment under IFRS 6 at the end of each reporting period. This review of assets for potential indicators of impairment requires judgement including whether renewal of licences is planned, interpretation of the results of exploration activity and the extent to which the Group plans to continue substantive expenditure on the assets. In determining whether substantive expenditure remains in the Group’s plan, management considers factors including future oil prices, plans to develop or renew licences and future exploration plans. If impairment indicators exist the assets are tested for impairment and carried at the lower of the estimated recoverable amount and net book value.
Management did not consider there to be any impairment indicators at any reporting date presented.
Notes to the Consolidated Financial Statements
- Segmental reporting
Operating segments
Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision maker. The chief operating decision maker, who is responsible for allocating resources, assessing the performance of the operating segment and making strategic decision, has been identified as the Board of Directors. The Board of Directors consider that the Group has only one operating segment at corporate level, being the exploration and evaluation of oil and gas prospects, therefore no additional segmental information is presented.
The Group operates in three geographic areas – the UK, other EU and Latin America. The Group’s revenue from external customers and information about its non-current assets (other than financial instruments, investments accounted for using the equity method, deferred tax assets and post-employment benefit assets) by geographical location are detailed below.
| 2017 | |||||
| £ | UK | Other EU | Latin America | Total | |
| Revenue | – | – | – | – | |
| Non-current assets | 203,805 | 862,712 | 99,652 | 1,166,169 |
| 2016 | |||||
| £ | UK | Other EU | Latin America | Total | |
| Revenue | – | – | – | – | |
| Non-current assets | 117,310 | – | – | 117,310 |
- Operating loss
| 2017 | 2016 | ||
| £ | £ | ||
| Operating loss is stated after charging/(crediting): | |||
| Fees payable to the Company’s auditors for the audit of the annual financial statements | 18,000 | 5,400 | |
| Fees payable to the Company’s auditors and its associates for other services to the Group: | |||
| – Tax compliance services | 2,000 | 900 | |
| – Reporting accountant services | 24,000 | – |
- Directors and employees
The aggregate payroll costs of the employees, including both management and Executive Directors, were as follows:
| 2017 | 2016 | ||
| £ | £ | ||
| Staff costs | |||
| Wages and salaries | 200,658 | 16,274 | |
| Shares issued in lieu of salaries | – | 110,174 | |
| Social security | 1,072 | 2,445 | |
| 201,730 | 128,893 |
Average monthly number of persons employed by the Group during the year was as follows:
| 2017 | 2016 | ||
| Number | Number | ||
| By activity: | |||
| Administrative | 1 | – | |
| Directors | 3 | 2 | |
| 4 | 2 |
| 2017 | 2016 | ||
| £ | £ | ||
| Remuneration of Directors | |||
| Emoluments for qualifying services | 191,792 | 16,274 | |
| Shares issued in lieu of remuneration | – | 110,174 | |
| Social security | – | 2,445 | |
| 191,792 | 128,893 |
Key management personnel are identified as the Executive Directors.
No share warrants have been exercised by any of the directors, nor have any payments of pensions contributions been made on behalf of directors in any of the periods presented.
- Taxation
| 2017 | 2016 | ||
| £ | £ | ||
| Loss before tax | (593,414) | (185,204) | |
| Loss on ordinary activities multiplied by standard rate of corporation tax in the UK of 20% | (118,683) | (37,041) | |
| Tax effects of: | |||
| Unrelieved tax losses carried forward | 118,683 | 37,041 | |
| Corporation tax charge | – | – |
The Group has accumulated tax losses of approximately £780,000 (2016: £185,000). No deferred tax asset was recognised in respect of these accumulated tax losses as there is insufficient evidence that the amount will be recovered in future years.
- Loss per share
The Group has issued share warrants over Ordinary shares which could potentially dilute basic earnings per share in the future. Further details are given in note 12.
Basic loss per share is calculated by dividing the loss attributable to ordinary shareholders by the weighted average number of ordinary shares outstanding during the year.
Due to the losses incurred during the year, a diluted loss per share has not been calculated as this would serve to reduce the basic loss per share. There were 37,260,000 (2016: 20,000,000) share warrants outstanding at the end of the year that could potentially dilute basic earnings per share in the future.
Basic and diluted loss per share
| 2017 | 2016 | ||
| £ | £ | ||
| Loss per share from continuing operations | (0.59) | (3.40) |
The loss and weighted average number of ordinary shares used in the calculation of basic loss per share are as follows:
| 2017 | 2016 | ||
| £ | £ | ||
| Loss used in the calculation of total basic and diluted loss per share | (593,414) | (185,204) |
| Number of shares | 2017 | 2016 | |
| Number | Number | ||
| Weighted average number of ordinary shares for the purposes of basic and diluted loss per share | 100,814,356 | 5,448,224 |
- Subsidiaries
Details of the Group’s subsidiaries in 2017 are as follows:
| Name & address of subsidiary | Principal activity | Class of shares | Place of incorporation and operation |
% ownership held by the Group | |
| 2017 | 2016 | ||||
| UOG Holdings plc 200 Strand, London, WC2R 1DJ |
Intermediate holding company | Ordinary | England and Wales | 100 | – |
| United Oil and Gas Limited* 9 Upper Pembroke Street, Dublin 2, Ireland |
Intermediate holding company | Ordinary | Ireland | 100 | 100 |
| UOG PL090 Limited*^ 200 Strand, London, WC2R 1DJ |
Oil and gas exploration | Ordinary | England and Wales | 100 | 100 |
| UOG Italia Srl* Viale Gioacchino Rossini 9, 00198, Rome,Italy |
Oil and gas exploration | Ordinary | Italy | 100 | – |
| UOG Jamaica Ltd 200 Strand, London, WC2R 1DJ |
Oil and gas exploration | Ordinary | England and Wales | 100 | – |
*held indirectly by United Oil & Gas (2017)
^held indirectly by UOG Holdings plc (2016)
- Intangible assets
| Exploration and Evaluation assets £ |
||
| Cost | ||
| At 1 December 2015 | – | |
| Additions | 117,310 | |
| At 31 December 2016 | 117,310 | |
| Additions | 1,048,859 | |
| At 31 December 2017 | 1,166,169 | |
| Net book value | ||
| At 31 December 2016 | 117,310 | |
| At 31 December 2017 | 1,166,169 | |
United Oil & Gas farmed into licences in Italy and Jamaica in the year to 31 December 2017. In July a farm in agreement was signed with PO Valley and to 31 December 2017 £862,712 has been incurred by United Oil & Gas. In November 2017 UOG farmed into the Tullow Jamaica Limited operated Walton-Morant Licences in Jamaica, for a 20% equity stake. To 31 December 2017, £99,652 has been incurred and capitalised.
The Group has continued exploration activities in the Waddock Cross Licence it farmed into with Egdon Resources in 2016 and to 31 December 2017 have capitalised costs of £203,805.
Management review the intangible exploration assets for indications of impairment at each balance sheet date based on IFRS 6 criteria. Commercial reserves have not yet been established and the evaluation and exploration work is ongoing. The Directors do not consider that any indication of impairment have arisen and accordingly the assets continue to be carried at cost.
- Property, plant and equipment
| Computer equipment | ||
| Cost | ||
| At 1 December 2015 & 31 December 2016 | – | |
| Additions | 2,794 | |
| At 31 December 2017 | 2,794 | |
| Depreciation | ||
| At 1 December 2015 & 31 December 2016 | – | |
| Charge for the year | 452 | |
| At 31 December 2017 | 452 | |
| Net book value | ||
| At 31 December 2016 | – | |
| At 31 December 2017 | 2,342 | |
Depreciation is recognised within administrative expenses.
- Trade and other receivables
| 2017 | 2016 | ||
| £ | £ | ||
| Unpaid share capital receivable | 117,500 | – | |
| Prepayments | 7,370 | – | |
| 124,870 | – |
- Cash and cash equivalents
| 2017 | 2016 | ||
| £ | £ | ||
| Cash at bank (GBP) | 2,497,543 | 75,804 | |
| Cash at bank (EUR) | 389,313 | – | |
| Cash at bank (USD) | 148,112 | – | |
| 3,034,968 | 75,804 |
At 31 December 2017 and 2016 all significant cash and cash equivalents were deposited in the UK and Ireland with large international banks.
- Share capital, share premium and merger reserve
Allotted, issued, and fully paid:
| 2017 | ||||
| United Oil & Gas plc | Share capital | Share premium | ||
| No | £ | £ | ||
| Ordinary shares of £0.01 each | ||||
| Opening balance | 27,000,000 | 270,000 | 945,501 | |
| Allotments: | ||||
| 31 July 2017 | 173,935,001 | 1,739,350 | 2,609,025 | |
| 27 December 2017 | 31,250,000 | 312,500 | 937,500 | |
| Share issue costs | – | – | (278,082) | |
| At 31 December | 232,185,001 | 2,321,850 | 4,213,944 | |
| 2016 | ||||
| UOG Holdings plc | Share capital | Share premium | ||
| No | £ | £ | ||
| Ordinary shares of £0.01 each | ||||
| Opening balance | – | – | – | |
| Allotments: | ||||
| 1 October 2016 | 20,000,000 | 200,000 | 200,000 | |
| 6 December 2016 | 5,925,000 | 59,250 | 59,250 | |
| At 31 December | 25,925,000 | 259,250 | 259,250 | |
As regards income and capital distributions, all categories of shares rank pari passu as if the same constituted one class of share.
The 20,000,000 ordinary shares detailed during 2016 above were issued in addition to the 20,000,000 share warrants (see note 12) as part of the share for share exchange executed to add UOG Holding plc as a parent company to the group.
Merger reserve
Following the reverse takeover of Senterra Energy Plc (subsequently renamed United Oil & Gas Plc) on 31 July 2017, the results of this entity have been combined with those of the UOG Holdings plc group on a merger accounting basis, however United Oil & Gas comparatives have not been included in prior years comparatives.
The merger reserve arising on consolidation is effectively the difference between the fair value of consideration from the share for share exchange less the net assets at the time and is calculated as shown below.
The merger reserve in the year ended 31 December 2017 is made up as follows:
| £ | £ | |
| At 1 January 2017 | 332,712 | |
| Investment in UOG Holdings plc Group | 1,554,810 | |
| United Oil & Gas share capital | (384,250) | |
| United Oil & Gas share premium | (371,650) | |
| United Oil & Gas (formerly Senterra Energy plc) pre-combination retained deficit | 916,462 | |
| 1,715,372 | ||
| At 31 December 2017 | 2,048,084 |
Prior to the year ended 31 December 2016, the only entity that existed was United Oil & Gas Limited, therefore following the formation of UOG Holding plc during 2016, along with UOG PL090 Limited, a share for share exchange was completed whereby UOG Holdings became the parent company of United Oil and Gas Limited.
This has been presented on a merger accounting basis, therefore the results and cash flows of all the combining entities have been brought into the financial statements of the combined entity from the beginning of the financial year in which the combination occurred with no adjustments to fair value, adjusted so as to achieve uniformity of accounting policies.
Merger reserve arising in the year ended 31 December 2016:
| £ | |
| At 1 January 2016 | – |
| Investment in United Oil and Gas Limited | 576,199 |
| United Oil and Gas Limited share capital | (940) |
| United Oil and Gas Limited share premium | (242,547) |
| At 31 December 2016 | 332,712 |
- Share based payments
Details of the number of share warrants and the weighted average exercise price (WAEP) outstanding during the year are as follows:
| 2017 | ||
| Number of Warrants |
WAEP £ |
|
| Outstanding at the beginning of the year | 20,000,000 | 0.02 |
| Cancelled | (20,000,000) | (0.02) |
| Pre-existing warrants in United Oil & Gas | 60,000 | 0.05 |
| Issued | 37,200,000 | 0.02 |
| Outstanding at the year end | 37,260,000 | 0.02 |
| Number vested and exercisable at 31 December 2017 | 37,260,000 | 0.02 |
| 2016 | ||
| Number of Warrants |
WAEP £ |
|
| Outstanding at the beginning of the year | – | – |
| Issued | 20,000,000 | 0.02 |
| Outstanding at the year end | 20,000,000 | 0.02 |
| Number vested and exercisable at 31 December 2016 | 20,000,000 | 0.02 |
If the warrants remain unexercised after 31 July 2022, the warrants expire.
The fair values of share warrants issued or extended in the current financial year were calculated using the Black Scholes model as follows:
| Share warrants | Share warrants | |
| Date of grant | 31 July 2017 | 31 July 2017 |
| Number granted | 28,000,000 | 9,200,000 |
| Share price at date of grant | £0.03 | £0.03 |
| Exercise price | £0.01 | £0.03 |
| Expected volatility | 59% | 59% |
| Expected life from date of grant (years) | 2.5 | 2.5 |
| Risk free rate | 0.5555% | 0.5555% |
| Expected dividend yield | 0% | 0% |
| Fair value / incremental fair value at date of grant | £382,533 | £72,959 |
| Earliest vesting date | 31 July 2017 | 31 July 2017 |
| Expiry date | 31 July 2022 | 31 July 2022 |
Expected volatility was determined based on the historic volatility of a comparable company’s shares for a period averaging 1 year. The expected life used in the model has been adjusted, based on management’s best estimate, for the effects of non-transferability, exercise restrictions and behavioural considerations.
The Group recognised total expenses of £455,492 in relation to share warrants accounted for as equity-settled share-based payment transactions during the year in relation (2016: £176,099). These were recognised as follows:
£25,377 (2016: £nil) in relation to the combination of United Oil & Gas (formerly Senterra Energy plc) with the UOG Holdings plc group – recognised as expenses in the income statement.
£382,533 (2016: £176,099) as cost of investment in subsidiary held by United Oil & Gas (2016: held by UOG Holdings plc) arising on the formation of the new group structure, and thus results in an increase in the merger reserve recognised in the group consolidation (see Statement of Changes in Equity).
£47,582 (2016: £nil) as a deduction from share premium related to share warrants accounted for as equity-settled share-based payment transactions during the year.
- Trade and other payables
| 2017 | 2016 | ||
| £ | £ | ||
| Trade payables | 22,935 | 12,192 | |
| Tax and social security | 10,694 | 998 | |
| Other payables | 9,894 | 12,912 | |
| Deferred shares (note 14) | 30,000 | – | |
| Accruals | 135,048 | 8,922 | |
| 208,571 | 35,024 |
- Deferred shares
On 12 October 2015, the Company issued 30,000 Deferred Shares of £1 for £30,000 to the Founder, which have an entitlement to a non-cumulative annual dividend at a fixed rate of 0.1 per cent of their nominal value. The Deferred Shares have no voting rights attached to them, and may be redeemed in their entirety by the Company for an aggregate redemption payment of £1.
- Financial instruments
Categories of financial instruments
The tables below set out the Group’s accounting classification of each class of its financial assets and liabilities.
| Financial assets | 2017 | 2016 | |
| £ | £ | ||
| Unpaid share capital receivable (note 9) | 117,500 | – | |
| Cash and cash equivalents (note 10) | 3,034,968 | 75,804 | |
| 3,152,468 | 75,804 |
All of the above financial assets’ carrying values are approximate to their fair values, as at 31 December 2017 and 2016.
| Financial liabilities | Measured at amortised cost | ||
| 2017 | 2016 | ||
| £ | £ | ||
| Trade payables (note 13) | 22,935 | 12,192 | |
| Other payables (note 13) | 9,894 | 12,912 | |
| Accruals (note 13) | 135,048 | 8,922 | |
| 167,877 | 34,026 | ||
In the view of management, all of the above financial liabilities’ carrying values approximate to their fair values as at 31 December 2017 and 2016.
Fair value measurements
This note provides information about how the Group determines fair values of various financial assets and financial liabilities.
Fair value of financial assets and financial liabilities that are not measured at fair value on a recurring basis
The directors consider that the carrying amounts of financial assets and financial liabilities recognised in the consolidated financial statements approximate their fair values (due to their nature and short times to maturity).
- Financial instrument risk exposure and management
The Group’s operations expose it to degrees of financial risk that include liquidity risk, credit risk, interest rate risk.
This note describes the Group’s objectives, policies and process for managing those risks and the methods used to measure them. Further quantitative information in respect of these risks is presented in notes 9, 10, 13, 14, 15 and 17.
Liquidity risk
Liquidity risk is dealt with in note 17 of these financial statements.
Credit risk
The Group’s credit risk is primarily attributable to its cash balances.
The credit risk on liquid funds is limited because the third parties are large international banks.
The Group’s total credit risk amounts to the total of cash and cash equivalents.
Interest rate risk
The Group’s only exposure to interest rate risk is the interest received on the cash held on deposit, which is immaterial. The Group does not have any borrowings.
Foreign exchange risk
The Group’s transactions are carried out in GBP, EUR and USD. Fundraising transactions and parent company operating transactions are carried out in GBP. Operational transactions are carried out predominantly in EUR but also in USD.
Exposures to foreign currency exchange rates arise from the Group’s overseas sales and purchases, which are denominated in a number of currencies, primarily EUR and USD. Cash balances held in these currencies are relatively immaterial (see note 10) and transactional risk is considered manageable.
The Group does not hold material non-domestic balances and currently does not consider it necessary to take any action to mitigate foreign exchange risk due to the immateriality of that risk.
- Liquidity risk
Prudent liquidity risk management includes maintaining sufficient cash balances to ensure the Group can meet liabilities as they fall due.
In managing liquidity risk, the main objective of the Group is therefore to ensure that it has the ability to pay all of its liabilities as they fall due. The Group monitors its levels of working capital to ensure that it can meet its debt repayments as they fall due. The table below shows the undiscounted cash flows on the Company’s / Group’s financial liabilities as at 31 December 2017 and 2016, on the basis of their earliest possible contractual maturity.
| Total | Payable on demand | Within 2 months |
Within 2 -6 months |
Within 6 – 12 months |
Within 1-2 years |
||||||
| £ | £ | £ | £ | £ | £ | ||||||
| At 31 December 2017 | |||||||||||
| Trade payables | 22,935 | – | 22,935 | – | – | – | |||||
| Other payables | 9,894 | 9,894 | – | – | – | – | |||||
| Accruals | 135,048 | – | – | 135,048 | – | – | |||||
| 167,877 | 9,894 | 22,935 | 135,048 | – | – | ||||||
| At 31 December 2016 | |||||||||||
| Trade payables | 12,192 | – | 12,192 | – | – | – | |||||
| Other payables | 12,912 | 12,912 | – | – | – | – | |||||
| Accruals | 8,922 | – | – | 8,922 | – | – | |||||
| 34,026 | 12,912 | 12,192 | 8,922 | – | – | ||||||
Other payables comprise loans from directors which are repayable on demand.
- Capital management
The Group’s capital management objectives are:
- To ensure the Group’s ability to continue as a going concern; and
- To provide long-term returns to shareholders
The Group defines and monitors capital on the basis of the carrying amount of equity less cash and cash equivalents as presented on the face of the balance sheet and as follows:
| 2017 | 2016 | ||
| £ | £ | ||
| Equity | 4,119,778 | 158,090 | |
| Cash and cash equivalents | (3,034,968) | (75,804) | |
| 1,084,810 | 82,286 |
The Board of Directors monitors the level of capital as compared to the Group’s commitments and adjusts the level of capital as is determined to be necessary by issuing new shares. The Group is not subject to any externally imposed capital requirements.
These policies have not changed in the year. The Directors believe that they have been able to meet their objectives in managing the capital of the Group.
- Related party transactions
Key management personnel are identified as the Executive Directors, and their remuneration is disclosed in note 3.
Loan from director
| Brian Larkin | ||
| £ | ||
| Principal | ||
| At 1 April 2015 | – | |
| Loans issued | 10,086 | |
| At 31 December 2015 | 10,086 | |
| Loans issued | 2,826 | |
| At 31 December 2016 | 12,912 | |
| Loans repaid | (4,352) | |
| At 31 December 2017 | 8,560 | |
The loan balance is repayable on demand with no formal terms.
- Financial commitments
As at 31 December 2017, the Group’s commitments comprise their exploration expenditure interests in Waddock Cross, Po Valley and the Walton-Morant licence. These commitments have been summarised below:
| Exploration licence | Year ending 31 December2018 |
Year ending 31 December2019 |
| £ | £ | |
| Waddock Cross | 367,071 | – |
| Po Valley | 877,867 | – |
| Walton-Morant licence | 1,655,232 | 355,488 |
| 2,900,170 | 355,488 |
- Ultimate controlling party
The directors do not consider there to be an ultimate controlling party.
- Events after the balance sheet date
Subsequent to the balance sheet date, United Oil & Gas has announced the following agreements:
- On 15 January United Oil & Gas signed an agreement to farm-in for an initial 10 per cent interest in the Corallian Energy Limited (“Corallian”) southern UK oil and gas assets. Each of the three licences are held by a joint venture between Corallian (60%) as operator and Corfe Energy Limited (“Corfe”) (40%) offshore and onshore southern UK (“Initial Farmed Interest”), by way of paying 13.33 per cent. of the costs associated with the Colter well, planned for later in 2018.
In addition, an option has been granted, which expires at the end of March 2018, under which United Oil & Gas can exercise a right to purchase an additional 10 per cent. Interest in these licences on the same terms as the Initial Farmed Interest. The expiry date of the option has subsequently been extended to 30 April 2018.
Corallian and Corfe jointly hold equity in licence P1918, offshore southern UK, and onshore UK licences PEDL330 and PEDL345.
Additionally, United Oil & Gas and Corallian have established an Area of Mutual Interest for the area, enabling the partnership to identify and target further opportunities within the same play.
- On 23 January a no cost option agreement to farm into offshore Block 49/29c UK Licence P2264 which contains the Acle prospect (“Option Agreement”), jointly owned by Swift Exploration Limited (“Swift”) (50 per cent.) and Stelinmatvic Industries Ltd (“Stelinmatvic”) (50 per cent.)
On exercise of this Option Agreement, United Oil & Gas will sign a farm-in agreement with Swift and Stelinmatvic and will acquire 24 per cent interest in the licence, being 12 per cent from each of Swift and Stelinmatvic. For the combined 24 per cent interest, the group will pay 30 per cent of the costs associated with the drilling of the first exploration well. In addition, group will pay £20,000 in cash to each partner on signing of the farm-in agreement.
The Option Agreement is exercisable upon a firm commitment being made to drill the well, and is valid until expiry of the licence, which will be no earlier than 30 June 2018 or such other date as the Oil and Gas Authority may specify as being an amendment to the 30 June 2018 date, by which “Swift will have negotiated the Sale and Purchase Agreement” as specified in the 27 November 2017 letter from the Oil and Gas Authority to Swift.”.
- On 20 April United Oil and Gas announced that it has conditionally raised £2.5m gross by the issue of 58,823,530 new ordinary shares in the capital of the company at a price per share of 4.25p. The placing is conditional on the passing of certain shareholder resolutions at the General Meeting to be held on 10 of May 2018 and on Admission occurring on or around 11 May 2018.
The company is conducting the placing in order to support the business growth of the group, and the funds will primarily be used to fund the £1m Corallian drilling costs in relation to the development of the Colter exploration well in the UK, and also for the £1.1m remaining requirements for completion of the 3D Seismic work on Colabri project under the farm-in agreement with Tullow Jamaica.
Company Balance Sheet as at 31 December
| Notes | 2017 | 2016 | ||
| Assets | £ | £ | ||
| Non-current assets | ||||
| Investments | 2 | 1,554,910 | – | |
| Current assets | ||||
| Trade and other receivables | 3 | 4,357,886 | 3,609 | |
| Cash and cash equivalents | 703 | 680,835 | ||
| 4,358,589 | 684,444 | |||
| Total Assets | 5,913,499 | 684,444 | ||
| Equity and liabilities | ||||
| Capital and reserves | ||||
| Share capital | 7 | 2,321,850 | 270,000 | |
| Share premium | 4,213,944 | 945,501 | ||
| Share-based payment reserve | 455,493 | – | ||
| Retained earnings: | ||||
| Opening retained earnings | (644,965) | (151,910) | ||
| Loss for the year | (497,087) | (493,055) | ||
| Total retained earnings | (1,142,052) | (644,965) | ||
| Shareholders’ funds | 5,849,235 | 570,536 | ||
| Current liabilities Trade and other payables |
5 |
34,264 | 83,908 | |
| Deferred shares | 30,000 | 30,000 | ||
| Total liabilities | 64,264 | 113,908 | ||
| Total equity and liabilities | 5,913,499 | 684,444 |
The notes to these financial statements form an integral part of these financial statements.
The financial statements were approved by the Board of Directors on 27 April 2018 and were signed on its behalf by:
Brian Larkin
Chief Executive Officer
Registered number: 09624969
Company Statement of Changes in Equity
| Share capital |
Share premium | Share-based payment reserve | Retained earnings |
Total | ||
| £ | £ | £ | £ | |||
| For the period ended 31 December 2017 | ||||||
| Balance at 1 January 2017 | 270,000 | 945,501 | – | (644,965) | 570,536 | |
| Loss for the financial period | – | – | – | (497,087) | (497,087) | |
| Total comprehensive income | – | – | – | (497,087) | (497,087) | |
| Transactions with owners: | ||||||
| Share issued to combine with United Oil & Gas | 539,350 | 809,025 | – | – | 1,348,375 | |
| Share placing | 1,512,500 | 2,737,500 | – | – | 4,250,000 | |
| share issue expenses | – | (278,082) | – | – | (278,082) | |
| Issue of share warrants in United Oil & Gas | – | – | 455,493 | – | 455,493 | |
| Total transactions with owners | 2,051,850 | 3,268,443 | 455,493 | – | 5,775,786 | |
| Balance at 31 December 2017 | 2,321,850 | 4,213,944 | 455,493 | (1,142,052) | 5,849,235 | |
| For the period ended 31 December 2016 | ||||||
| Balance at 1 January 2016 | 270,000 | 945,501 | – | (151,910) | 1,063,591 | |
| Loss for the financial year | – | – | – | (493,055) | (493,055) | |
| Total comprehensive income | – | – | – | (493,055) | (493,055) | |
| Balance at 31 December 2016 | 270,000 | 945,501 | – | (644,965) | 570,536 | |
The notes to these financial statements form an integral part of these financial statements.
Notes to the Parent Company Financial Statements
for the period ended 31 December 2017
- Accounting Policies
Basis of Preparation
The annual financial statements of United Oil & Gas (the Parent Company financial statements) have been prepared in accordance with Financial Reporting Standard 100 Application of Financial Reporting Requirements (“FRS 100”) and Financial Reporting Standard 101 Reduced Disclosure Framework (“FRS 101”).
Disclosure exemptions adopted
In preparing these financial statements the Company has taken advantage of all disclosure exemptions conferred by FRS 101. Therefore, these financial statements do not include:
- certain disclosures regarding the company’s capital;
- a statement of cash flows;
- the effect of future accounting standards not yet adopted;
- the disclosure of the remuneration of key management personnel; and
- disclosure of related party transactions with the Company’s wholly owned subsidiaries.
In addition, and in accordance with FRS 101 further disclosure exemptions have been adopted because equivalent disclosures are included in the Company’s Consolidated Financial Statements. These financial statements do not include certain disclosures in respect of:
- Financial instruments (other than certain disclosures required as a result of recording financial instruments at fair value)
- Fair value measurement (other than certain disclosures required as a result of recording financial instruments at fair value)
- Related party transactions
- Share based payments
First time application of FRS 100 and 101
In the current period the company has adopted FRS 100 and FRS 101.
As permitted by section 408 of Companies Act 2006, a separate Income Statement for the Company has not been included in these financial statements. The Company’s loss for the year ended 31 December 2017 was £497,087 (2016: 493,055).
Going Concern
The Company’s business activities, together with the factors likely to affect its future development, performance and position are set out in the Chairman’s Statement and the Strategic Report.
The Directors’ forecasts demonstrate that the Company will meet its day-to-day working capital and financial commitments over the forecast period (being at least 12 months from the date the financial statements were approved) from the cash held on deposit on 31 December 2017 and funds raised subsequent to the year end, including the conditional placing for £2.5 million. However this is subject to the passing of shareholder resolutions at the General Meeting on 10 May 2018 which creates a material uncertainty.
Subject to the passing of the shareholder resolutions and completion of the £2.5m placing the Company has sufficient funding to meet planned financial commitments in relation to operational activities and a level of contingency. The directors have a reasonable expectation that the Company has adequate resources to continue in operational existence for the foreseeable future, therefore they continue to adopt the going concern basis of accounting in preparing the financial statements.
Investments
Fixed asset investments are stated at cost. Investments are tested for impairment when circumstances indicate that the carrying value may be impaired.
Impairment of non-financial assets
At each balance sheet date, the Directors review the carrying amounts of the Company’s tangible and intangible assets, other than goodwill, to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss, if any. Where the asset does not generate cash flows that are independent from other assets, the Company estimates the recoverable amount of the cash-generating unit to which the asset belongs.
Recoverable amount is the higher of fair value less costs to sell and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset for which the estimates of future cash flows have not been adjusted.
If the recoverable amount of an asset or cash-generating unit is estimated to be less than its carrying amount, the carrying amount of the asset or cash-generating unit is reduced to its recoverable amount. If the recoverable amount of a cash-generating unit is less than its carrying amount, the impairment loss is allocated first to reduce the carrying amount of any goodwill allocated to the unit and then to the other assets of the unit pro rata based on the carrying amount of each asset in the unit.
An impairment loss is recognised as an expense immediately.
An impairment loss recognised for goodwill is not reversed in subsequent periods.
Where an impairment loss subsequently reverses, the carrying amount of the asset or cash-generating unit is increased to the revised estimate of its recoverable amount, but so that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognised for the asset or cash-generating unit in prior periods. A reversal of an impairment loss is recognised in the Income Statement immediately.
Financial instruments
Financial assets and financial liabilities are recognised when the Company becomes a party to the contractual provisions of the financial instrument.
Financial assets and financial liabilities are measured initially at fair value plus transactions costs. Financial assets and financial liabilities are measured subsequently as described below.
Financial assets
The Company classifies its financial assets as ‘loans and receivables’. The Company assesses at each balance sheet date whether there is objective evidence that a financial asset or a group of financial assets is impaired.
Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. They are included in current assets, except for maturities greater than 12 months after the balance sheet date, which are classified as non-current assets. Loans and receivables are classified as ‘trade and other receivables’ in the Balance Sheet.
Financial assets are derecognised when the contractual rights to the cash flows from the financial asset expire, or when the financial asset and all substantial risks and rewards are transferred.
Financial liabilities
The Company’s financial liabilities include trade and other payables.
Trade payables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method.
A financial liability is derecognised when it is extinguished, discharged, cancelled or expires.
Current taxation
Current taxation is based on the local taxable income at the local statutory tax rate enacted or substantively enacted at the balance sheet date and includes adjustments to tax payable or recoverable in respect of previous periods.
Deferred taxation
Deferred taxation is calculated using the liability method, on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the consolidated financial statements. However, if the deferred tax arises from the initial recognition of an asset or liability in a transaction other than a business combination that at the time of the transaction affects neither accounting nor taxable profit or loss, it is not accounted for. Deferred tax is determined using tax rates and laws that have been enacted or substantively enacted by the balance sheet date and are expected to apply when the related deferred tax asset is realised or the deferred tax liability is settled.
Deferred tax liabilities are provided in full.
Deferred tax assets are recognised to the extent that it is probable that future taxable profits will be available against which the temporary differences can be utilised.
Changes in deferred tax assets or liabilities are recognised as a component of tax expense in the Income Statement, except where they relate to items that are charged or credited directly to equity in which case the related deferred tax is also charged or credited directly to equity.
Deferred income tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets against current tax liabilities and when the deferred income tax assets and liabilities relate to income taxes levied by the same taxation authority on either the same taxable entity or different taxable entities where there is an intention to settle the balances on a net basis.
Foreign currency
Transactions in foreign currencies are recorded at the rate ruling at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies are translated at the rate of exchange ruling at the year-end date. All differences are taken to the Income Statement.
Share-based payments
Where share-based payments have been issued, IFRS 2 has been applied whereby the fair value of the share-based payment is measured at the grant date and spread over the vesting period. A valuation model is used to assess the fair value, taking into account the terms and conditions attached to the share-based payments. The fair value at grant date is determined including the effect of market based vesting conditions, to the extent such vesting conditions have a material impact.
The cost of equity-settled transactions is recognised, together with a corresponding increase in equity, over the period in which the performance and/or service conditions are fulfilled, ending on the date on which the relevant employees become fully entitled to the award (“the vesting date”).
The cumulative expense recognised for equity-settled transactions at each reporting date until the vesting date reflects the extent to which the vesting period has expired and the Company’s best estimate of the number of equity instruments that will ultimately vest.
The charge or credit for a period to the income statement represents the movement in cumulative expense recognised as at the beginning and end of that period.
No expense is recognised for awards that do not ultimately vest, except for awards where vesting is conditional upon a market condition, which are treated as vesting irrespective of whether or not the market condition is satisfied, provided that all other performance and/or service conditions are satisfied. Where the terms of an equity-settled award are modified, the minimum expense recognised is the expense as if the terms had not been modified. An additional expense is recognised for any modification, which increases the total fair value of the share-based payment arrangement or is otherwise beneficial to the recipient as measured at the date of modification.
Where an equity-settled award is cancelled, it is treated as if it had vested on the date of cancellation, and any expense not yet recognised for the award is recognised immediately. However, if a new award is substituted for the cancelled award, and designated as a replacement award on the date that it is granted, the cancelled and new awards are treated as if they were a modification of the original award, as described in the previous paragraph.
Where an equity-settled award is forfeited, the cumulative charge expensed up to the date of forfeiture is credited to the income statement.
Equity
Equity comprises the following:
- “Share capital” represents amounts subscribed for shares at nominal value.
- “Share premium” represents amounts subscribed for share capital, net of issue costs, in excess of nominal value.
- “Share-based payment reserve” represents amounts credited to equity as part of the accounting for share based payments.
- “Retained earnings” represents the accumulated profits and losses attributable to equity shareholders.
- Investments
| |
Investments in Subsidiaries |
| £ | |
| Cost | |
| As at 1 January 2017 | – |
| Additions | 1,554,910 |
| As at 31 December 2017 | 1,554,910 |
The Company’s subsidiaries are detailed in note 6 to the consolidated financial statements.
- Trade and other receivables
| 2017 | 2016 | ||
| Unpaid share capital receivable | 117,500 | – | |
| Amounts due from group undertakings | 4,240,386 | – | |
| Prepayments | – | 3,609 | |
| 4,357,886 | 3,609 |
- Cash and cash equivalents
| 2017 | 2016 | ||
| Cash at bank | 703 | 680,835 |
- Trade and other payables
| 2017 | 2016 | ||
| Accruals | 34,264 | 83,908 | |
| 34,264 | 83,908 |
- Deferred shares
On 12 October 2015, the Company issued 30,000 Deferred Shares of £1 for £30,000 to the Founder, which have an entitlement to a non-cumulative annual dividend at a fixed rate of 0.1 per cent of their nominal value. The Deferred Shares have no voting rights attached to them and may be redeemed in their entirety by the Company for an aggregate redemption payment of £1.
- Share Capital
Allotted, issued, and fully paid:
| 2017 | ||||
| Share capital | Share premium | |||
| No | £ | £ | ||
| Ordinary shares of £0.01 each | ||||
| Opening balance | 27,000,000 | 270,000 | 945,501 | |
| Allotments: | ||||
| 31 July 2017 | 173,935,001 | 1,739,350 | 2,609,025 | |
| 27 December 2017 | 31,250,000 | 312,500 | 937,500 | |
| Share issue costs | – | – | (278,082) | |
| At 31 December 2017 | 232,185,001 | 2,321,850 | 4,213,944 | |
The Company has one class of ordinary shares which carry no fixed right to income.
- Events After the Balance Sheet Date
See note 22 of the Notes to the Consolidated Financial Statements.