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PROSPEX ENERGY PLC
Annual / Quarterly Financial Statement • May 14, 2024
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Annual / Quarterly Financial Statement
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National Storage Mechanism | Additional information 
RNS Number : 2434O
Prospex Energy PLC
14 May 2024
Prospex Energy PLC / Index: AIM / Epic: PXEN / Sector: Oil and Gas
14 May 2024
Prospex Energy PLC
('Prospex' or the 'Company')
Final Results for Year ended 31 December 2023
and
Notice of Annual General Meeting
Prospex Energy plc, the AIM quoted investment company, is pleased to announce its audited Final Results for the year ended 31 December 2023 and Notice of Annual General Meeting ("AGM") on 12 June 2024.
Corporate and Financial Highlights
· Exemplary safety performance by our operators, contractors and partners with just one minor lost time incident at our Spanish asset and no environmental issues or incidents.
· Two operating and revenue generating onshore natural gas investments situated in stable European countries.
· The Company recorded a loss for the year of £1,231,400 (2022: profit: £7,136,907). This was caused by the re-adjustment of commodity prices to more normal levels, following the unsustainable and inflated high prices of 2022 attributable to the commencement of the Russian-Ukraine conflict. This resulted in the revaluation of investments at fair value leading to a reduction of 2.9% to £15,594,931 from £16,064,640 in 2022 and the unrealised loss of £469,709 compared to an unrealised gain in 2022 of £9,367,435 (which was largely due to the Company's increased working interest in Selva from 17% to 37% in April 2022).
· By September 2023, all of the convertible loan notes issued in July 2022 were converted to equity at 4.25p per share. The £1.87 million raised through the issue of these convertible loan notes helped to fund the Selva development project to first gas.
· In April 2023, the Company strengthened the board with the appointment of Mr. Andrew Hay as Non-Executive Director.
· Significantly strengthened the balance sheet as a result of the conversion or repayment of the bulk of its interest-bearing debts.
Post period highlights
· All remaining interest-bearing debt outstanding plus accrued interest, was repaid by 31 March 2024.
· No further debt or equity raises have occurred between the reporting date and the date of this report.
· The Company is debt free, cash generative and well positioned for growth.
Operational Highlights
Selva Field - Northern Italy
· 18-month gas sales contract with BP Gas Marketing ("BPGM") signed by Po Valley Operations Limited ("PVO"), on behalf of the Joint Venture in February 2023.
· In May 2023, construction of the gas processing facility at the Podere Maiar-1 wellsite at the Selva field was completed on schedule and within 3% of budget with successful connection to the Italian National Transmission System Operator ("SNAM") gas grid.
· PVO successfully recovered the €757,000 performance bond (€280,090 net to PXEN) previously deposited with SNAM.
· In June 2023, Italian Energy Ministry issued the formal documentation to enable the commencement of gas production from the Selva field.
· First gas was achieved from the Selva field on 4 July 2023.
· By year end, following completion of the commissioning of the new gas processing facilities at Selva, production has steadily increased to a stable rate of ≈ 80,000 scm/d.
El Romeral - Southern Spain
· In 2023, the El Romeral power plant generated gross revenues from electricity production of €1.8 million (≈€0.9 million net to PXEN).
· In May 2023 through Tarba Energía Srl ("Tarba") the operating company, 20 hectares of land adjacent to the El Romeral power plant was leased for 25 years for Project Helios a 5MW solar photovoltaic project.
Notice of Annual General Meeting
The Company also gives notice that its AGM will be held at the offices of Shakespeare Martineau LLP, 6th Floor 60 Gracechurch Street, London, United Kingdom, EC3V 0HR at 11.00 a.m. on 12 June 2024.
The Financial Results for the year ended 31 December 2023 together with the Notice of AGM will be available to download from the Company's website: https://prospex.energy/ and will also be posted to shareholders on or around 15 May 2024.
Commenting on the results, Mark Routh, Prospex's CEO, said:
"It has been an extremely successful year for Prospex, with the Company having reached a number of significant milestones. Perhaps the most noteworthy being the start of gas production from the Selva Field in Italy, further de-risking our business with two onshore producing and revenue generating investments in two European countries.
"Despite having strengthened the balance sheet during the year, the Company is reporting a loss for the period. This in my view, is in no way reflective of the performance of the Company but attributable to events outside of our control, mainly an adjustment of the inflated and unsustainable commodity prices attributable to global tensions in 2022 and the subsequent revaluation of our assets.
"Nevertheless, we remain well positioned for growth. The Company is debt-free, has no warrants outstanding and is self-sustaining on a business-as-usual basis. Prospex is in a much stronger financial position than it was at the end of the prior year. None of this would have been possible without the continued support of our existing and new shareholders and importantly the debt holders, who demonstrated continued belief in our vision by converting their debt into equity, having funded the development and transition of Selva into a producing field."
This announcement contains inside information for the purposes of Article 7 of the Market Abuse Regulation (EU) 596/2014 as it forms part of UK domestic law by virtue of the European Union (Withdrawal) Act 2018 ("MAR") and is disclosed in accordance with the Company's obligations under Article 17 of MAR.
* * ENDS * *
For further information visit www.prospex.energy or contact the following:
| Mark Routh | Prospex Energy PLC | Tel: +44 (0) 20 7236 1177 |
| Ritchie Balmer Rory Murphy |
Strand Hanson Limited | Tel: +44 (0) 20 7409 3494 |
| Lional Therond / Daniel Fox-Davies | Fox-Davies Capital Limited | Tel: +44 (0) 20 3884 8450 |
| Andrew Monk (Corporate Broking) Andrew Raca / Alex Cabral (Corporate Finance) |
VSA Capital Limited | Tel: +44 (0) 20 3005 5000 |
| Ana Ribeiro / Susie Geliher | St Brides Partners Limited | Tel: +44 (0) 20 7236 1177 |
Notes
Prospex Energy PLC is an AIM quoted investment company focused on high impact onshore and shallow offshore European opportunities with short timelines to production. The Company's strategy is to acquire undervalued projects with multiple, tangible value trigger points that can be realised within 12 months of acquisition and then applying low-cost re-evaluation techniques to identify and de-risk prospects. The Company will rapidly scale up gas production in the short term to generate internal revenues that can then be deployed to develop the asset base and increase production further.
About Selva:
The Selva Malvezzi Production Concession is in the Po Valley region of northern Italy. The concession contains the Selva gas-field as well as exciting exploration and development opportunities. The Podere Maiar-1 well at Selva was completed in December 2017 and successfully found a commercial gas accumulation up-dip of the previous wells on the Selva field. The Company has a 37% working interest in the Production Concession held via Prospex's two wholly owned subsidiaries, PXOG Marshall Ltd (17% of the Concession) and UOG Italia Srl (20% of the Concession).
The Selva Malvezzi Production Concession holds independently verified 2P gross proven reserves of 13.4 Bcf (5.0 Bcf net to Prospex at 37% WI) in Selva, gross Contingent 2C Resources of 14.1 Bcf (5.2 Bcf net) and a further 88.2 Bcf of gross Best Estimate Prospective Resources (un-risked) (32.6 Bcf net).[1]
An independent Competent Person's Report of the Podere Gallina Licence which was converted into the Selva Malvezzi Production Concession at first gas in July 2023, was prepared by CGG Services (UK) Limited in July 2022 on behalf of the joint venture.[1] It attributed a total of 379 MMscm (13.4 Bcf) gross 2P reserves for the Selva redevelopment project.
References:
[1] Source: "Competent Person's Report Podere Gallina Licence, Italy" prepared by CGG Services (UK) Limited in July 2022 : https://bit.ly/44VF02A
Glossary:
scm Standard cubic metres
scm/d Standard cubic metres per day
MMscm Million standard cubic metres
Bcf Billion standard cubic feet
MMscfd million standard cubic feet per day
MWh Mega Watt hour
TTF The 'Title Transfer Facility' - a virtual trading point for natural gas in the Netherlands.
Qualified Person Signoff
In accordance with the AIM notice for Mining and Oil and Gas Companies, the Company discloses that Mark Routh, the CEO and a director of Prospex Energy plc has reviewed the technical information contained herein. Mark Routh has an MSc in Petroleum Engineering and has been a member of the Society of Petroleum Engineers since 1985. He has over 40 years operating experience in the upstream oil and gas industry. Mark Routh consents to the inclusion of the information in the form and context in which it appears.
Prospex Energy Plc
Chairman's Report
for the year ended 31 December 2023
Prospex Energy is an AIM quoted investment company with interests in two producing fields, in Spain and Italy, both of which are operated by the Company's partners. During 2023 the Company, through its investment in Tarba Energía S.L. (held via PXOG Muirhill Ltd) continued with electricity sales from its gas to power facility in southern Spain and from July 2023 also had production income from the sale of natural gas from the Selva field in northern Italy. Operations in the Company's investment portfolio were carried out with an exemplary safety performance by our operators, contractors and partners with just one minor lost time incident at our Spanish asset and no environmental issues or incidents. The Company continues to monitor its HSE performance by promoting a high level of HSE awareness and rewarding good practices and culture with its partners, operators and subcontractors.
The 2023 financial and corporate highlights for Prospex Energy were strengthened by revenue generated from production at two onshore gas assets situated in stable European countries. However, the year saw commodity prices soften following the unsustainable and inflated high prices experienced in 2022, attributable to global tensions, perceived risk and concerns regarding energy supply in Europe. Naturally, and with commodity pricing having returned to more normal levels, there has been a consequent adjustment to the share price.
In February 2023, Po Valley Operations Limited ("PVO"), the operator of the Selva Malvezzi production concession, in which Prospex has a 37% working interest, signed an 18-month gas sales contract with BP Gas Marketing ("BPGM") to commence on 1 April 2023 with potential to extend, on behalf of the Joint Venture. The joint venture partners are confident that the BPGM contract will be renewed before the end of its 18-month term on 1 October 2024. An estimated 37 million standard cubic metres of natural gas is expected to be supplied to BPGM under the contract. The gas supply price is linked to Italy's "Heren PSV day ahead mid-price assessment." During the period, the Company also announced that the Joint Venture was fully funded to complete the Podere Maiar-1 production facility development with first gas on track for Q2 2023.
The El Romeral gas and power project in Spain, with gas production wells supplying gas to an 8.1MW power plant near Carmona in Southern Spain is owned and operated by Tarba Energía Srl ("Tarba"), the operating company. It is currently operating at about 30% of its full capacity because Tarba is waiting on permits to drill further natural gas wells on the concessions to increase production. Prospex owns a 49.9% working interest in the El Romeral project via Tarba which is owned through its investment in PXOG Muirhill Limited. The remaining 50.1% working interest is owned by Warrego Energy Limited. Tarba sells electricity generated from the plant on the spot market in Spain. The El Romeral licences comprise three contiguous production concessions.
In February 2023, Hancock Energy (PB) Pty Ltd completed the acquisition of 100% of the shares of Warrego Energy Ltd, which was then de-listed from the ASX exchange in Sydney, Australia.
Mr. Andrew Hay was appointed as Non-Executive Director of Prospex Energy plc in April 2023. Andrew has more than 30 years of experience in the corporate finance sector and capital markets and a deep understanding of the upstream energy markets.
In May 2023, construction of the gas processing facility at the Podere Maiar 1 wellsite at the Selva field in the Po Valley was completed on schedule and within 3% of budget with successful connection to the Italian National Transmission System Operator ("SNAM") gas grid. PVO successfully recovered the €757,000 performance bond (€280,090 net to PXEN) previously deposited with SNAM. The return of the bond was conditional on the completion of the SNAM pipeline tie in connection, the Gas Sales Agreement and the transportation arrangements.
In May 2023, through Tarba, 20 hectares of land adjacent to the El Romeral power plant in Spain was leased for 25 years for Project Helios, a 5MW solar photovoltaic project. The project, which involves the installation of an array of solar panels with a maximum power output of 5MW peak, was tendered with five companies based in Spain. Permitting, procurement and installation is expected to take less than 12 months. Tarba has an existing grid connection with 8.2MW output allocated to El Romeral which is currently utilising just 2.7 MW. Further grid capacity is expected to be available to accept increased output with the existing infrastructure.
In June 2023, final safety checks by the local Fire Department were successfully completed and formal documentation was issued by the Italian Energy Ministry to enable the commencement of gas production from the Selva field.
On 4 July 2023 the Company announced the start of gas production from the Selva field in the Po Valley region of northern Italy. This was a transformational milestone securing production income from two onshore assets in two European countries.
In July 2023, the Company launched a new corporate website at www.prospex.energy .
In early August 2023, PVO completed a four-week ramp-up and commissioning programme at the new gas processing facilities at the Podere Maiar-1 well site in the Selva gas field.
By September 2023, all of the convertible loan notes issued in July 2022 were converted to equity at 4.25p per share. The £1.87 million raised through their issue helped to fund the Selva development project to first gas.
In October 2023, PVO reported that production at the Podere Maiar-1 gas well was running at 62,000 scm/d in line with the outlined ramp-up and testing programme. Longer term production rates from the well were set at targeting at least 80,000 scm/d. (scm = standard cubic metres).
Gross quarterly production from the Selva field for the third quarter of 2023 was reported at 5,658,117 scm (2,093,503 scm attributable to Prospex) and gross revenue for the quarter was €1,937,072 (€716,717 attributable to Prospex).
In 2023, the El Romeral power plant in Spain generated gross revenues from electricity production of €1.8 million (≈€0.9 million net to PXEN).
Gross quarterly production from the Selva field for the fourth quarter of 2023 was reported at 4,180,015 scm of gas (1,546,605 scm attributable to Prospex) and gross revenue for the quarter €1,773,302 (€656,122 attributable to Prospex).
The operator PVO is progressing with the other projects in the Selva Malvezzi production concession including interactions with local landowners and progressing the permitting process with the regulatory authorities. Following a successful project of reprocessing the existing 2D seismic lines across the production concession, the Joint Venture is evaluating the potential for a new seismic acquisition programme over the licence area in order to optimise the drilling programmes of the identified contingent resources at Selva North, Selva South and the East Selva and Riccardina prospects.
Post period end:
Gross Quarterly production from the Selva field for the first quarter of 2024 was 6,385,255 scm of gas (2,362,544 scm attributable to Prospex) and gross revenue for the quarter was €1,906,891 (€705,549 attributable to Prospex).
Also post period end, all remaining interest-bearing debt outstanding at the reporting date, and accrued interest, was repaid to our supportive Loan Note holders by 31 March 2024. No further debt or equity raises have occurred between the reporting date and the date of this report.
The Company now has no outstanding debts and has general and administrative costs from this point forward covered by its production income.
Financial Review
The Company recorded a loss for the year of £1,231,400 (2022: profit - £7,136,907).
The current year's loss includes an unrealised loss on revaluation of investments of £469,709 predominantly reflecting the impact on the Company's investments of the decline in the forward curve of prices for European natural gas during 2023.
The prior year's profit was due to a £9,367,435 surplus on the revaluation of investments predominantly reflecting an increased working interest, from 17% to 37%, acquired in the Italian Podere Gallina licence (now the Selva Malvezzi Production Concession) during 2022.
Administrative expenses increased by £136,788 (14%) to £1,112,513 (2022: £975,725).
Net finance income increased by £127,897 to £278,926 (2022: £151,029).
The Company is reporting an increase in shareholder equity (net asset value) at 31 December 2023 of £1,426,447, to £20,577,048 (2022: £19,150,601).
Total Assets decreased by £1,263,429 to £21,799,310 (2022: £23,062,739).
Total Liabilities decreased by £2,689,876 to £1,222,262 (2022: £3,912,138).
The revaluation of investments at fair value resulted in a reduction of 2.9% to £15,594,931 (2022: £16,064,640) and the unrealised loss of £469,709 (2022: Gain - £9,367,435). This was predominantly a result of the decline during the reporting period in the forward curve of European gas prices, and the after-tax impact of this on the Company's 37% working interest in the Podere Gallina licence in Italy.
(Note - The Podere Gallina exploration permit was converted into the Selva Malvezzi production concession at the time of the first gas production from the field in July 2023).
The Italian asset has been re-valued using the same valuation methodology which was used in the audited financial statements at the end of the prior year, updated to reflect underlying future gas pricing based on the benchmark Title Transfer Facility ("TTF") European forward contract gas prices applicable on 31 December 2023.
Due to extreme market volatility during the prior reporting period, the prior year's valuation was based on TTF forward contract prices as at 11 May 2023.
At 31 December 2023, the Company held cash and cash equivalents of £3,186 (2022: £1,482,762).
The funds held at the end of the prior year were predominantly applied to completion of the construction of the gas processing facility at Podere Maiar 1, resulting in an increase during the year in the amounts owed to the Company by its group undertakings.
Amounts owed to the Company by its investment vehicles earn interest and are repaid out of surplus funds arising from after-tax net earnings in the underlying undertakings.
The strengthening of the Company's balance sheet during the year was primarily a result of the conversion or repayment of the bulk of its interest-bearing debts. Subsequent to year-end, in March 2024, the Company repaid all remaining debt, and no further debt finance has been required or raised.
Preparation of consolidated financial statements
Prospex Energy Plc is an investment Company, as such the results of its subsidiaries are not consolidated up to the parent company. These financial statements therefore represent the financial statements of the Company alone. The Company's interests in its subsidiaries are recognised at fair value through profit and loss. The effect of this is that although the Group has been selling gas from its Selva Malvezzi Concession in northern Italy since July 2023 and has been selling electricity from its El Romeral power plant in southern Spain since March 2021, the only actual income the parent company Prospex Energy plc has received to date is from the interest on the intercompany loans from the parent company to its subsidiaries. However there have been regular loan repayments from the subsidiaries in which the Italian asset is held, PXOG Marshall Ltd. and UOG Italia Ltd. and from the subsidiary PXOG Muirhill Ltd. in which the Company's investment in the Spanish operator Tarba Energía S.L. is held. The effect of this is to significantly improve the balance sheet of the parent company. The intercompany loans were made to realise a return on the investments in the activities of the subsidiaries. In Italy the parent company loans were for drilling the well, acquiring the further 20% of the licence from UOG and to fund the Company's share of the gas plant development to first gas. In Spain the loans were to acquire and optimise the asset.
Business Development
During 2023, Prospex either identified or was offered more than 25 potential deals or farm-in opportunities in its core geographical area of interest of Europe focussing on natural gas and power projects. The Prospex technical team undertook in depth evaluations on 12 of these opportunities and recommended that the Board should progress to make an offer on two deals which were advanced to the heads of terms stage. One of those was ultimately not concluded since the Board considered, on more detailed investigation, that it involved onerously high drilling and development costs in the context of the geological chance of success. The other opportunity passed our due diligence process and the Company was ready to invest, subject to a fundraise. At that time, the Board was advised and determined that challenging stock market conditions meant that such a fundraise could only be completed on terms deemed to be unattractive to shareholders, so the Company did not commit to the farm-in.
The Company continues to focus on onshore natural gas and power assets in Europe. The Company's leadership considers that this geographical and product focus is an essential ingredient to setting Company strategy and defining the boundaries within which we operate. Natural gas has been widely recognised as the transition fuel as Europe progresses to rely upon less carbon intensive energy sources.
Outlook
The Board is satisfied with the progress made during the year under review, and subsequently. The Company is now debt-free, self-sustaining on a business-as-usual basis, and in a much stronger financial position than it was at the end of the prior year.
None of this would have been possible without the support of the Company's investors, and in particular of the erstwhile debt-holders of the Company, who funded the development and conversion of Selva Malvezzi into a producing asset and many of whom have shown ongoing support for the Company by subsequently converting a substantial portion of the debt owed to them into equity. Amongst this group of individuals are employees and the directors of the Company. I take this opportunity to thank them all for their long-standing and valued support.
Having strengthened the balance sheet during 2023, and with both capital and energy commodities markets stabilising, if not strengthening, the outlook for the Company is one of growth. It is anticipated that this growth will be both organic, with prospects for increasing the output and diversification of existing assets, and external, with the active pursuit of new assets which meet the Company's discerning investment requirements, to add to the portfolio. The Board and staff are very active on both fronts and good progress is being made. The Board looks forward to being able to make announcements in these regards in the near future.
Bill Smith
Non-Executive Chairman
14 May 2024
Statement of Profit or Loss and Other Comprehensive Income
for the year ended 31 December 2023
| 2023 | 2022 | |||
| Notes | £ | £ | ||
| CONTINUING OPERATIONS | ||||
| Other operating income | 5 | 36,936 | - | |
| Administrative expenses | (1,112,513) | (975,725) | ||
| Share-based payment charges | (296,191) | (187,417) | ||
| OPERATING LOSS | (1,371,768) | (1,163,142) | ||
| (Loss)/gain on revaluation of investments | 12 | (469,709) | 9,367,435 | |
| (1,841,477) | 8,204,293 | |||
| Finance income | 7 | 519,982 | 324,052 | |
| Finance costs | 7 | (241,056) | (173,023) | |
| (LOSS)/PROFIT BEFORE INCOME TAX | 8 | (1,562,551) | 8,355,322 | |
| Income tax | 9 | 331,151 | (1,218,415) | |
| (LOSS)/PROFIT FOR THE YEAR | (1,231,400) | 7,136,907 | ||
| (LOSS)/EARNINGS PER SHARE | 10 | |||
| Basic (loss)/earnings pence per share | (0.41)p | 2.88p | ||
| Diluted (loss)/earnings pence per share | (0.41)p | 2.66p |
Statement of Financial Position
31 December 2023
| 2023 | 2022 | |||
| Notes | £ | £ | ||
| ASSETS | ||||
| NON-CURRENT ASSETS | ||||
| Property, plant and equipment | 11 | - | - | |
| Investments | 12 | 15,594,931 | 16,064,640 | |
| 15,594,931 | 16,064,640 | |||
| CURRENT ASSETS | ||||
| Trade and other receivables | 13 | 6,201,093 | 5,515,237 | |
| Investments | 14 | 100 | 100 | |
| Cash and cash equivalents | 15 | 3,186 | 1,482,762 | |
| 6,204,379 | 6,998,099 | |||
| TOTAL ASSETS | 21,799,310 | 23,062,739 | ||
| EQUITY | ||||
| SHAREHOLDERS' EQUITY | ||||
| Called up share capital | 16 | 7,279,630 | 7,225,893 | |
| Share premium | 17,158,847 | 14,850,928 | ||
| Merger reserve | 2,416,667 | 2,416,667 | ||
| Capital redemption reserve | 43,333 | 43,333 | ||
| Fair value reserve | 14,617,174 | 14,755,732 | ||
| Retained earnings | (20,938,603) | (20,141,952) | ||
| TOTAL EQUITY | 20,577,048 | 19,150,601 | ||
| LIABILITIES | ||||
| NON-CURRENT LIABILITIES | ||||
| Financial liabilities - borrowings | ||||
| - Interest bearing loans and borrowings | 18 | - | 799,145 | |
| Deferred taxation | 19 | 927,658 | 1,258,809 | |
| 927,658 | 2,057,954 | |||
| CURRENT LIABILITIES | ||||
| Trade and other payables | 17 | 126,117 | 41,440 | |
| Financial liabilities - borrowings | ||||
| - Interest bearing loans and borrowings | 18 | 168,487 | 1,812,744 | |
| 294,604 | 1,854,184 | |||
| TOTAL LIABILITIES | 1,222,262 | 3,912,138 | ||
| TOTAL EQUITY AND LIABILITIES | 21,799,310 | 23,062,739 |
The financial statements were approved by the Board of Directors and authorised for issue on 14 May 2024 and were signed on its behalf by:
Mark Routh
Director
Statement of Changes in Equity
for the year ended 31 December 2023
| Share capital | Share premium | Merger reserve | Capital redemption reserve | Fair value reserve | Retained earnings | Total | |
| £ | £ | £ | £ | £ | £ | ||
| Balance at 1 January 2022 | 7,124,355 | 11,599,333 | 2,416,667 | 43,333 | 6,067,267 | (18,748,005) | 8,502,950 |
| Changes in equity | |||||||
| Profit for the year | - | - | - | - | - | 7,136,907 | 7,136,907 |
| Issue of shares | 101,538 | 3,333,893 | - | - | - | - | 3,435,431 |
| Costs of shares issued | - | (112,104) | - | - | - | - | (112,104) |
| Lapse of share options | - | 29,806 | - | - | - | (29,806) | - |
| Equity-settled share-based payments | - | - | - | - | 187,417 | 187,417 | |
| Transfer to fair value reserve | - | - | - | - | 8,688,465 | (8,688,465) | - |
| Balance at 31 December 2022 | 7,225,893 | 14,850,928 | 2,416,667 | 43,333 | 14,755,732 | (20,141,952) | 19,150,601 |
| Changes in equity | |||||||
| Loss for the year | - | - | - | - | - | (1,231,400) | (1,231.400) |
| Issue of shares | 53,737 | 2,307,919 | - | - | - | - | 2,361,656 |
| Equity-settled share-based payments | - | - | - | - | - | 296,191 | 296,191 |
| Transfer to fair value reserve | - | - | - | - | (138,558) | 138,558 | - |
| Balance at 31 December 2023 | 7,279,630 | 17,158,847 | 2,416,667 | 43,333 | 14,617,174 | (20,938,603) | 20,577,048 |
Share capital - The nominal value of the issued share capital
Share premium account - Amounts received in excess of the nominal value of the issued share capital less costs associated with the issue of shares
Merger reserve - The difference between the nominal value of the share capital issued by the Company and the fair value of the subsidiary at the date of acquisition
Capital redemption reserve - The amounts transferred following the redemption or purchase of the Company's own shares
Fair value reserve - the cumulative fair value changes of the company's fixed asset investment, net of deferred tax
Retained earnings - Accumulated comprehensive income for the year and prior periods
Statement of Cash Flows
for the year ended 31 December 2023
| 2023 | 2022 | |||
| Notes | £ | £ | ||
| Cash outflow from operations | 1 | (1,161,712) | (4,113,537) | |
| Cash flows from investing activities | ||||
| Interest received | 4,938 | 2,247 | ||
| Interest paid | (166,365) | (124,338) | ||
| Net cash outflow from investing activities | (161,427) | (122,091) | ||
| Cash flows from financing activities | ||||
| New loan notes | - | 2,370,000 | ||
| Bank loan repayment | - | (42,394) | ||
| Loan repayments | (214,454) | (131,353) | ||
| Share issue | 58,017 | 3,414,181 | ||
| Costs of shares issued | - | (112,104) | ||
| Net cash (outflow)/inflow from financing activities | (156,437) | 5,498,330 | ||
| (Decrease)/increase in cash and cash equivalents | (1,479,576) | 1,262,702 | ||
| Cash and cash equivalents at beginning of year | 2 | 1,482,762 | 220,060 | |
| Cash and cash equivalents at end of year | 2 | 3,186 | 1,482,762 |
Notes to the Statement of Cash Flows
for the year ended 31 December 2023
1. RECONCILIATION OF LOSS BEFORE INCOME TAX TO CASH GENERATED FROM OPERATIONS
| 2023 | 2022 | |||
| £ | £ | |||
| Cash flows from operations | ||||
| (Loss)/profit before income tax | (1,562,551) | 8,355,322 | ||
| Loss/(gain) on revaluation of fixed asset investments | 469,709 | (9,367,435) | ||
| Finance income | (519,982) | (324,052) | ||
| Finance costs | 241,056 | 173,023 | ||
| Operating loss | (1,371,768) | (1,163,142) | ||
| Increase in trade and other receivables | (170,812) | (3,126,358) | ||
| Increase/(decrease) in trade and other payables | 84,677 | (11,454) | ||
| Equity settled share-based payments | 296,191 | 187,417 | ||
| Net cash outflow from operations | (1,161,712) | (4,113,537) | ||
2. CASH AND CASH EQUIVALENTS
The amounts disclosed on the Statement of Cash Flows in respect of cash and cash equivalents are in respect of these Statement of Financial Position amounts:
| Year ended 31 December 2023 | 31.12.23 | 01.01.23 | ||
| £ | £ | |||
| Cash and cash equivalents | 3,186 | 1,482,762 | ||
| Year ended 31 December 2022 | 31.12.22 | 01.01.22 | ||
| £ | £ | |||
| Cash and cash equivalents | 1,482,762 | 220,060 |
1. STATUTORY INFORMATION
Prospex Energy Plc is a public limited company, is registered in England and Wales and is quoted on the AIM Market of the London Stock Exchange Plc. The Company's registered number and registered office address can be found on the Company Information page.
The presentation currency of the financial statements is the Pound Sterling (£), rounded to the nearest £1.
2. ACCOUNTING POLICIES
Basis of preparation
The Company's financial statements have been prepared in accordance with International Accounting Standards in conformity with the requirements of the Companies Act 2006 as they apply to the financial statements of the Company for the year ended 31 December 2023 and as applied in accordance with the provisions of the Companies Act 2006.
The Company financial statements have been prepared under the historical cost convention or fair value where appropriate.
Preparation of consolidated financial statements
The Company is an investment entity and, as such, does not consolidate the investment entities it controls. The Company's interests in subsidiaries are recognised at fair value through profit and loss.
Going concern
The Company has reported an operating loss for the 2023 year of £1,371,768. In 2024 it is expected that the Company will have increased receipts resulting from ongoing gas sales from its investment in Italy. These receipts will initially be received as loan repayments together with interest charged, reimbursing the Company for capital advances made in prior years which were applied to acquisition, exploration and development costs. As a result, it is expected that the Company will again record an operating loss during 2024, but an increase in cash inflows and balance sheet strength.
The Directors have prepared detailed financial forecasts and cash flows looking beyond 12 months from the date of the approval of these financial statements. In developing these forecasts, the Directors have made assumptions based upon their view of the current and future economic conditions that are expected to prevail over the forecast period. The Directors estimate that the cash held by the Company together with known receivables and anticipated income from its Italian asset will be sufficient to support the current budgeted activities in 2024. Furthermore, the Company's asset in Spain is fully self-funding at current operating levels and is expected to have sufficient cash resources and income to fund existing operations beyond the end of 2024.
The Board expects to raise additional funding only as and when required to cover any shortfall between the Group's own cash resources and its development and expansion of activities. Should regulatory approval be received which allows for an expansion of current operations, or appropriate new investment opportunities arise which meet the Company's objectives and criteria, then the Directors will explore all potential sources of funding available to meet such shortfall. Based on the Company's track-record, assets and prospects, the Directors have a reasonable expectation that they will be able to secure such further funding should the need arise.
The Directors have therefore prepared the financial statements on a going concern basis.
Property, plant and equipment
Depreciation is provided at the following annual rates in order to write off the cost less estimated residual value of each asset over its estimated useful life.
| Computer equipment | - | 25% per annum on reducing balance |
Financial instruments
Financial assets and financial liabilities are recognised on the statement of financial position when the Company becomes a party to the contractual provisions of the instrument.
Loans and receivables
These assets are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. The principal financial assets of the Company are loans and receivables, which arise principally through the provision of goods and services to customers (e.g. trade receivables) but also incorporate other types of contractual monetary asset. They are included in current assets, except for maturities greater than 12 months after the statement of financial position date. These are classified as non-current assets.
The Company's loans and receivables are recognised and carried at the lower of their original amount less an allowance for any doubtful amounts. An allowance is made when collection of the full amount is no longer considered possible.
The Company's loans and receivables comprise trade and other receivables and cash and cash equivalents in the consolidated statement of financial position.
2. ACCOUNTING POLICIES -
Financial liabilities and equity
Financial liabilities and equity instruments are classified according to the substance of the contractual arrangements entered into. An equity instrument is any contract that evidences a residual interest in the assets of the entity after deducting all of its financial liabilities.
Where the contractual obligations of financial instruments (including share capital) are equivalent to a similar debt instrument, those financial instruments are classed as financial liabilities. Financial liabilities are presented as such in the statement of financial position. Finance costs and gains or losses relating to financial liabilities are included in the profit and loss account. Finance costs are calculated so as to produce a constant rate of return on the outstanding liability.
Where the contractual terms of share capital do not have any terms meeting the definition of a financial liability then this is classed as an equity instrument. Dividends and distributions relating to equity instruments are debited direct to equity.
Equity comprises the following:
- Share capital represents the nominal value of equity shares;
- Share premium represents the excess over nominal value of the fair value of consideration received for equity shares, net of expenses of the share issue;
- Profit and loss reserve represents retained deficit;
- The capital redemption reserve arises on redemption of shares in previous years and own share reserve;
- Merger reserve represents the difference between the nominal value of the share capital issued by the Company and the fair value of the subsidiary at the date of acquisition;
- Fair value reserve represents the cumulative fair value changes of the company's fixed asset investment, net of deferred tax.
Leases
Leases are recognised as finance leases. The lease liability is initially recognised at the present value of the lease payments which have not yet been made and subsequently measured under the amortised cost method. The initial cost of the right-of-use asset comprises the amount of the initial measurement of the lease liability, lease payments made prior to the lease commencement date, initial direct costs and the estimated costs of removing or dismantling the underlying asset per the conditions of the contract.
Where ownership of the right-of-use asset transfers to the lessee at the end of the lease term, the right-of-use asset is depreciated over the asset's remaining useful life. If ownership of the right-of-use asset does not transfer to the lessee at the end of the lease term, depreciation is charged over the shorter of the useful life of the right-of-use asset and the lease term.
Taxation
Current taxes are based on the results shown in the financial statements and are calculated according to local tax rules, using tax rates enacted or substantially enacted by the statement of financial position date.
Deferred tax is provided in full, using the liability method, on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes. Deferred tax is determined using tax rates that have been enacted or substantially enacted at the balance sheet date and are expected to apply when the related deferred income tax asset is realised, or the deferred tax liability is settled. Deferred tax is charged or credited in the income statement, except when it relates to items charged or credited to equity, in which case the deferred tax is also dealt with in equity. Deferred tax assets are only recognised to the extent that it is probable that future taxable profit will be available against which the asset can be utilised.
Cash and cash equivalents
Cash and cash equivalents include cash at bank and in hand and short-term deposits with an original maturity of three months or less.
Trade and other payables
Trade and other payables are initially measured at fair value and subsequently measured at amortised cost using the effective interest rate method.
Foreign currency translation
Items included in the Financial Statements are measured using the currency of the primary economic environment in which the Company operates (the functional currency) which is UK sterling (£). The Financial Statements are accordingly presented in UK Sterling.
Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the transactions or at an average rate for a period if the rates do not fluctuate significantly. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at year-end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in the Statement of Profit or Loss. Non-monetary items that are measured in terms of historical cost in a foreign currency are not retranslated.
Finance income and finance costs
Finance income is recognised when it is probable that the economic benefits will flow to the Company and the amount of income can be measured reliably. It is accrued on a time basis by reference to the principal outstanding and at the effective interest rate applicable.
Borrowing costs are recognised as an expense in the period in which they are incurred.
Equity-settled share-based payment
The Company makes equity-settled share-based payments. The fair value of options granted is recognised as an expense, with a corresponding increase in equity. The fair value is measured at grant date and spread over the vesting period, which is the period over which all of the specified vesting conditions are to be satisfied. The fair value of the options granted is measured based on the Black-Scholes framework, taking into account the terms and conditions upon which the instruments were granted. At each statement of financial position date, the Company revises its estimate of the number of options that are expected to become exercisable. It recognises the impact of the revision to original estimates, if any, in the income statement, with a corresponding adjustment to equity.
Accounting standards issued but not yet effective and/or adopted
As at the date of approval of these financial statements, the following standards were in issue but not yet effective. These standards have not been adopted early by the Company as they are not expected to have a material impact on the Company's financial statements.
| Effective date (period beginning on or after) | ||
| IFRS S1 | General requirements for Disclosure of Sustainability-related Financial Information | 01/01/2024 |
| IFRS S2 | Climate-related Disclosures | 01/01/2024 |
| IAS 1 | Amendment - Classification of Liabilities as Current or Non-Current | 01/01/2024 |
| IFRS 16 | Amendment - Lease Liability in a Sale and Leaseback | 01/01/2024 |
| IAS 1 | Amendment - Non-current Liabilities with Covenants | 01/01/2024 |
| IAS 7, IFRS 7 | Amendment - Supplier Finance Arrangements | 01/01/2024 |
| IAS 21 | Amendment - Lack of Exchangeability | 01/01/2025 |
| SASB Standards | Amendment - To enhance SASB standards international applicability | 01/01/2025 |
The International Financial Reporting Interpretations Committee has also issued interpretations which the Company does not consider will have a significant impact on the financial statements.
Revenue recognition
Revenue is measured at the fair value of consideration receivable, net of any discounts and VAT. It is recognised to the extent that the transfer of promised services to a customer has been satisfied and the revenue can be reliably measured.
Revenue from the rendering of services to the customer is considered to have been satisfied when the service has been undertaken.
Revenue which is not related to the principal activity of the Company is recognised in the Statement of Profit or Loss as other operating income. Such income includes consultancy fees and rent receivable.
3. CRITICAL ACCOUNTING JUDGEMENTS AND KEY SOURCES OF ESTIMATION UNCERTAINTY
The preparation of the financial information in conformity with IFRS requires the use of certain critical accounting estimates that affect the reported amounts of assets and liabilities at the date of the financial information and the reported amounts of revenue and expenses during the reporting period. Although these estimates are based on management's best knowledge of the amounts, events or actions, actual results ultimately may differ from these estimates. The estimates and underlying assumptions are as follows:
Investment entities
The judgements, assumptions and estimates involved in the Company's accounting policies that are considered by the Board to be the most important to the portrayal of its financial condition are the fair valuation of the investment and the assessment regarding investment entities. The investment portfolio is held at fair value. The Directors review the valuations policies, process and application to individual investments.
Entities that meet the definition of an investment entity within IFRS 10 are required to account for most investments in controlled entities, as well as investments in associates and joint ventures, at fair value through profit and loss. The Board has concluded that the Company continues to meet the definition of an investment entity as its strategic objective of investing in portfolio investments for the purpose of generating returns in the form of investment income and capital appreciation remains unchanged.
Fair value is the underlying principle and is defined as "the price that would be received to sell an asset in an orderly transaction between market participants at the measurement date". Fair value is therefore an estimate and, as such, determining fair value requires the use of judgement. The quoted assets in our portfolio are valued at their closing bid price at the statement of financial position date. The largest investment in the portfolio, however, is represented by an unquoted investment.
Impairment of assets
The Company's principal investments are in wholly owned unquoted subsidiaries which each have a minority interest in overseas entities with energy assets.
The Company is required to test, on an annual basis, whether its non-current assets have suffered any impairment. Determining whether these assets are impaired requires an estimation of the value in use of the cash-generating units to which the assets have been allocated. The value in use calculation requires the Directors to estimate the future cash flows expected to arise from the cash-generating unit and a suitable discount rate to calculate the present value. Subsequent changes to the cash generating unit allocation or to the timing of cash flows could impact on the carrying value of the respective assets.
The calculation of value-in-use for energy assets under development or in production is most sensitive to the following assumptions:
- Commercial reserves
- production volumes;
- commodity prices;
- fixed and variable operating costs;
- capital expenditure; and
- discount rates.
A potential change in any of the above assumptions may cause the estimated recoverable value to be lower than the carrying value, resulting in an impairment loss. The assumptions which would have the greatest impact on the recoverable amounts of the fields are production volumes and commodity prices
Share based payments
The estimates of share-based payments requires that management selects an appropriate valuation model and make decisions on various inputs into the model including the volatility of its own share price, the probable life of the options before exercise and behavioural consideration of employees.
Deferred tax assets
Deferred taxation is provided for using the liability method. Deferred tax assets are recognised in respect of tax losses where the Directors believe that it is probable that future profits will be relieved by the benefit of tax losses brought forward. The Board considers the likely utilisation of such losses by reviewing budgets and medium-term plans for the Company. The Directors have decided that no deferred tax asset should be recognised at 31 December 2023. If the actual profits earned by the Company differs from the budgets and forecasts used then the value of such deferred tax assets may differ from that shown in these financial statements.
4. REVENUE
Segmental reporting
The Company is an Investing Company. The results for this continuing operation, all of which were carried out in the UK, are disclosed in the Income Statement. The net assets as at 31 December 2023 as shown on the Statement of Financial Position all relate to the Investment activity.
5. OTHER OPERATING INCOME
| 2023 | 2022 | |||
| £ | £ | |||
| Consultancy fees | 36,936 | - |
6. EMPLOYEES AND DIRECTORS
| 2023 | 2022 | |||
| £ | £ | |||
| Wages and salaries | 464,802 | 484,633 | ||
| Social security costs | 48,244 | 56,425 | ||
| Other pension costs | 5,483 | 10,140 | ||
| Share-based payments | 296,191 | 179,971 | ||
| 814,720 | 731,169 |
The average number of employees during the year was as follows:
| 2023 | 2022 | |||
| Number | Number | |||
| Directors | 4 | 4 | ||
| Staff | 3 | 3 | ||
| 7 | 7 |
Under the Pensions Act 2008, every employer must put certain staff into a pension scheme and contribute to it. The Company auto-enrolled its eligible employees in a defined contribution scheme. The charge to the Statement of Profit or Loss represents the amounts paid to the scheme. At the year end, the amount due to the pension scheme was £nil (2022: £nil).
Details of Directors' remuneration can be found in note 24.
7. NET FINANCE COSTS
| 2023 | 2022 | |||
| £ | £ | |||
| Finance income | ||||
| Interest receivable on group loan | 515,044 | 321,805 | ||
| Bank interest receivable | 4,938 | 2,247 | ||
| 519,982 | 324,052 | |||
| Finance costs | ||||
| Loan interest payable | 240,709 | 166,718 | ||
| Bank loan interest | - | 821 | ||
| Interest on overdue tax | 347 | 5,484 | ||
| 241,056 | 173,023 | |||
| Net finance income | 278,926 | 151,029 |
8. PROFIT BEFORE INCOME TAX
The profit before income tax is stated after charging:
| 2023 | 2022 | |||
| £ | £ | |||
| Auditors' remuneration | 42,900 | 27,000 | ||
| Foreign exchange differences | 6,577 | 1,733 |
9. INCOME TAX
| 2023 | 2022 | ||
| £ | £ | ||
| Current tax charge | |||
| UK corporation tax on profit for the period at 23.52% (2022: 19%) | - | - | |
| Deferred tax | (331,151) | 1,218,415 | |
| Tax charge for the year | (331,151) | 1,218,415 |
Factors affecting the tax expense
The tax assessed for the year is higher than the standard rate of corporation tax in the UK. The difference is explained below:
| 2023 | 2022 | ||
| £ | £ | ||
| (Loss)/profit before income tax | (1,562,551) | 8,355,322 | |
| (Loss)/profit before income tax multiplied by effective rate of UK corporation tax of 23.52% (2022: 19.00%) | (367,512) | 1,587,511 | |
| Effects of | |||
| Non-deductible expenses | 70,100 | 36,560 | |
| Losses used for group relief | - | 17,638 | |
| Tax losses not utilised | 186,937 | 138,104 | |
| Unrealised chargeable losses/(gains) | 110,475 | (1,779,813) | |
| Deferred tax | (331,151) | 1,218,415 | |
| 36,361 | (369,096) | ||
| Current tax charge | (331,151) | 1,218,415 |
There is no provision for UK Corporation Tax due to adjusted losses for tax purposes, subject to agreement with HM Revenue and Customs. The deferred tax asset, measured at the standard rate of 25%, of approximately £2.3m (2022: 25% - £2.1m) arising from the accumulated tax losses of approximately £9.2m (2022: £8.4m) carried forward has been used to reduce the deferred tax charge on the unrealised gain arising on the revaluation of investments. This will be subject to agreement with HMRC.
The main UK corporation tax rate changed from 19% to 25% with effect from 1 April 2023, resulting in an effective rate in the year of 23.52%. The deferred tax liability arising on the revaluation of the Company's fixed asset investments has been calculated using 25%, reduced by the availability of tax losses.
10. EARNINGS PER SHARE
| Year ended 31 December 2023 | Year ended 31 December 2022 | ||||||
| Earnings | Number of shares | Per share amount | Earnings | Number of shares | Per share amount | ||
| £ | £ | ||||||
| Basic EPS | |||||||
| Profit for the year and earnings available to ordinary shareholders | (1,231,400) | 298,729,117 | (0.41)p | 7,136,907 | 247,635,519 | 2.88p | |
| Effect of dilutive securities | |||||||
| Options and warrants | - | - | - | 3,057,387 | |||
| Convertible loan notes | 129,734 | 22,296,906 | |||||
| Diluted EPS | |||||||
| Adjusted earnings | (1,231,400) | 298,729,117 | (0.41)p | 7,266,641 | 272,989,812 | 2.66p |
For 2023, the loss and weighted average number of shares used for calculating the diluted loss per share are identical to those for the basic loss per share. The outstanding share options (note 23) would have the effect of reducing the loss per share and would therefore not be dilutive under IAS 33 'Earnings per share'.
11. PROPERTY, PLANT AND EQUIPMENT
| Computer equipment | ||||
| COST | £ | |||
| At 1 January 2022 and 2023 and 31 December 2023 | 1,699 | |||
| DEPRECIATION | ||||
| At 1 January 2022 and 2023 and 31 December 2023 | 1,699 | |||
| NET BOOK VALUE | ||||
| At 31 December 2023 | - | |||
| At 31 December 2022 | - |
12. INVESTMENTS
| Shares in group undertakings | Unlisted investments | Total | |||
| £ | £ | £ | |||
| COST | |||||
| At 1 January 2022 | 6,647,305 | 50,000 | 6,697,305 | ||
| Reclassified to current asset investments | (100) | - | (100) | ||
| Revaluations | 9,367,435 | - | 9,367,435 | ||
| At 31 December 2022 | 16,014,640 | 50,000 | 16,064,640 | ||
| Revaluations | (469,709) | - | (469,709) | ||
| At 31 December 2023 | 15,544,931 | 50,000 | 15,594,931 |
Shares in group undertakings represent investments in PXOG Marshall Limited of £15,544,931 (2022: £6,647,205) and PXOG Muirhill Limited of £100 (2022: £100).
The Company's investments at the Statement of Financial Position date in the share capital of companies include the following:
| PXOG Marshall Limited | |||||
| Registered office: 60 Gracechurch Street, London EC3V 0HR | |||||
| Nature of business: Investment entity | % holding | ||||
| Ordinary shares | 100.00 | ||||
| 2023 | 2022 | ||||
| £ | £ | ||||
| Aggregate capital and reserves | 15,544,831 | 16,014,540 | |||
| (Loss)/profit for the year | (469,709) | 9,367,335 | |||
| The underlying value of PXOG Marshall Limited is based on the underlying value of the Selva Malvezzi Production Concession, Po Valley, Italy, of which it owned 37% at the year end. Consistent with prior years, a discounted cash flow ("DCF") model was produced at the year end, based on proved and probable (2P) reserves supported by a Competent Person Report (CPR) produced in 2022. The DCF model has been updated to reflect forward gas prices as at 31 December 2023 using the Dutch TTF Gas Futures contracts for 2024 and subsequent production years. The DCF model has also been updated to account for a decelerated annual production rate which lengthens the cashflow period from 10 years to 15 years. The decreased annual production rate is based on actual and planned production rates. The DCF cashflows were discounted at 10% p.a. In addition, consistent with the prior year, a risked valuation of 2C contingent resources in the Selva North and South fields in the 2022 CPR has been updated and included. With the achievement of 1st production at the Podere Maiar 1 well, and successful conversion of the exploration licence to a production licence, the likelihood of realising the contingent resources, which are on the same production licence, has increased. This has resulted in an increase in the valuation of these resources. |
|||||
| PXOG Muirhill Limited | |||||
| Registered office: 60 Gracechurch Street, London EC3V 0HR | |||||
| Nature of business: Investment entity | % holding | ||||
| Class of shares: | |||||
| Ordinary shares | 100.00 | ||||
| 2023 | 2022 | ||||
| £ | £ | ||||
| Aggregate capital and reserves | 3,415 | 17,311 | |||
| (Loss)/profit for the year | (13,896) | 37,295 |
PXOG Muirhill Limited holds its interests in the Tesorillo and El Romeral projects through its holdings of A and B shares respectively in Tarba Energía S.L. Consistent with the prior year, these investments are being held at the cost of investment in Prospex Energy Limited and in PXOG Muirhill Limited.
All of the subsidiaries are incorporated in the UK and registered in England & Wales.
Investments are recognised and de-recognised on the date when their purchase or sale is subject to a relevant contract and the associated risks and rewards have been transferred. The Company manages its investments with a view to profiting from the receipt of investment income and capital appreciation from changes in the fair value of investments.
All investments are initially recognised at the fair value of the consideration given and, with the exception of PXOG Muirhill Limited, are subsequently measured at fair value through profit and loss.
Unquoted investments, including both equity and loans are designated at fair value through profit and loss and are subsequently carried in the statement of financial position at fair value. Fair value is determined in line with the fair value guidelines under IFRS.
In accordance with IFRS 10, the proportion of the investment portfolio held by the Company's unconsolidated subsidiaries is presented as part of the fair value of investment entity subsidiaries, along with the fair value of their other assets and liabilities.
The holding period of the Company's investment portfolio is on average greater than one year. For this reason, the portfolio is classified as non-current. It is not possible to identify with certainty investments that will be sold within one year.
Investments in investment entity subsidiaries are accounted for as financial instruments at fair value through profit and loss and are not consolidated in accordance with IFRS10.
These entities hold the Company's interests in investments in portfolio companies. The fair value can increase or reduce from either cash flows to/from the investment entities or valuation movements in line with the Company's valuation policy.
The fair value of these entities is their net asset values.
The Directors determine that in the ordinary course of business, the net asset values of an investment entity subsidiary are considered to be the most appropriate to determine fair value. At each reporting period, they consider whether any additional fair value adjustments need to be made to the net asset values of the investment entity subsidiaries. These adjustments may be required to reflect market participants' considerations about fair value that may include, but are not limited to, liquidity and the portfolio effect of holding multiple investments within the investment entity subsidiary.
13. TRADE AND OTHER RECEIVABLES
| 2023 | 2022 | |||
| £ | £ | |||
| Current: | ||||
| Trade debtors | 3,346 | - | ||
| Amounts owed by group undertakings | 6,185,765 | 5,496,676 | ||
| Other debtors | - | 1,883 | ||
| VAT | 6,926 | 5,760 | ||
| Prepayments and accrued income | 5,056 | 10,918 | ||
| 6,201,093 | 5,515,237 |
The Directors consider that the carrying amount of trade and other receivables approximates to their fair value.
14. CURRENT ASSET INVESTMENTS
| 2023 | 2022 | |||
| Shares held for sale | £ | £ | ||
| Shares in group undertakings | 100 | 100 |
The investment in PXOG Massey Limited is held at £100, based on the SPA agreement which is pending completion of sale to H2Oil Limited. In August 2020, Prospex signed a sale and purchase agreement ('SPA') with H2Oil Limited ('H2Oil') regarding the sale of the entire issued share capital of PXOG Massey Limited ('Massey'). Under the terms of the SPA, the Company will receive up to £215,000 in cash in respect of historical debt owed to the Company by Massey and nominal consideration for shares in Massey of which 85% of the funds (£182,650) had been received by Prospex by 31 December 2020. As at the statement of financial position date, although it is still expected, the final condition of the SPA had not been met.
Should the final condition of the SPA (being the approval of the regulator in Romania for the transfer of the asset) not be met, the asset would need to be reinstated at fair value which is considered to be higher than the carrying value. The Directors have taken a prudent view not to recognise this asset at fair value unless it is virtually certain that the final condition of the SPA will not be met.
15. CASH AND CASH EQUIVALENTS
| 2023 | 2022 | |||
| £ | £ | |||
| Bank accounts | 3,186 | 1,482,762 |
The Directors consider that the carrying amount of cash and cash equivalents approximates to their fair value. All of the Company's cash and cash equivalents are at floating rates of interest.
16. CALLED UP SHARE CAPITAL
| 2023 | 2022 | 2023 | 2022 | |||||
| Number | Number | £ | £ | |||||
| Allotted, called up and fully paid | ||||||||
| Ordinary shares of 0.1p each - new | 332,584,535 | 278,847,512 | 332,585 | 278,848 | ||||
| Deferred shares of 0.1p each | 942,462,000 | 942,462,000 | 942,462 | 942,462 | ||||
| Deferred shares of £24 each | 54,477 | 54,477 | 1,307,459 | 1,307,459 | ||||
| Deferred shares of 0.9p each | 285,785,836 | 285,785,836 | 2,572,073 | 2,572,073 | ||||
| Deferred shares of £4.80 each | 442,719 | 442,719 | 2,125,051 | 2,125,051 | ||||
| 7,279,630 | 7,225,893 | |||||||
Share issues
In January 2023, options over 850,400 were exercised, and 450,400 and 400,000 new ordinary shares of £0.001 each were issued at a price of 4 pence per share and 5 pence per share respectively, raising £38,017 before expenses.
In February 2023, 666,684 new ordinary shares of £0.001 were issued at a price of 3.00 pence each on the exercise of warrants, raising £20,000 before expenses.
During the year, 45,476,551 and 6,743,388 new ordinary shares of £0.001 were issued at a price of 4.25 pence each and 5.50 pence each respectively on the conversion of loan notes, valued at £2,303,639 including capitalised interest.
Deferred shares rights
The deferred shares have no rights to vote, attend or speak at general meetings of the Company or to receive any dividend or other distribution and have limited rights to participate in any return of capital on a winding-up or liquidation of the Company.
17. TRADE AND OTHER PAYABLES
| 2023 | 2022 | |||
| £ | £ | |||
| Current: | ||||
| Trade creditors | 28,889 | - | ||
| Social security and other taxes | 9,358 | 15,419 | ||
| Accruals and deferred income | 87,870 | 26,021 | ||
| 126,117 | 41,440 |
The Directors consider that the carrying amount of trade and other payables approximates to their fair value.
18. FINANCIAL LIABILITIES - BORROWINGS
| 2023 | 2022 | |||
| £ | £ | |||
| Current : | ||||
| Unsecured loan notes | 168,487 | 1,812,744 | ||
| 168,487 | 1,812,744 | |||
| 2023 | 2022 | |||
| £ | £ | |||
| Non-current: | ||||
| Unsecured loan notes | - | 799,145 | ||
| - | 799,145 |
Terms and debt repayment schedule:
| 1 year or less | 1-2 years | Total | |||
| 2023 | £ | £ | £ | ||
| Unsecured loan notes | 168,487 | - | 168,487 | ||
| 168,487 | - | 168,487 | |||
| 1 year or less | 1-2 years | Total | |||
| 2022 | £ | £ | £ | ||
| Unsecured loan notes | 1,812,744 | 799,145 | 2,611,889 | ||
| 1,812,744 | 799,145 | 2,611,889 |
Loan notes
| Loan notes | |||||||
| 2018 | 2021 | 2022 | Total | ||||
| £ | £ | £ | |||||
| At 1 January 2022 | 24,126 | 321,681 | - | 345,807 | |||
| Issued in year | - | - | 2,370,000 | 2,370,000 | |||
| Interest capitalised | - | - | 48,685 | 48,685 | |||
| Converted into shares | - | - | (21,250) | (21,250) | |||
| Repaid in year | (24,126) | (107,227) | - | (131,353) | |||
| At 31 December 2022 | - | 214,454 | 2,397,435 | 2,611,889 | |||
| Interest capitalised | - | - | 74,691 | 74,691 | |||
| Converted into shares | - | - | (2,303,639) | (2,303,639) | |||
| Repaid in year | - | (214,454) | - | (214,454) | |||
| At 31 December 2023 | - | - | 168,487 | 168,487 |
2021 Non-Convertible Loan note
The 2021 Notes pay 12% interest biannually. The 2021 Notes were repaid in full during 2023.
July 2022 Convertible Loan note
The July 2022 Convertible Loan Notes totalling £1.87 million pay interest at 12% per annum, on a quarterly basis. The first interest payment on 30 September 2022 was capitalised and added to the loan principal.
The July 2022 Convertible Loan Notes, together with capitalised interest, were all converted into 45,476,551 new ordinary shares of 0.1p at 4.25p per ordinary share during 2023.
September 2022 Convertible Loan note
The September 2022 Convertible Loan Notes totalling £0.5 million pay interest at 15% per annum, on a quarterly basis. The first interest payment on 30 September 2022 was capitalised and added to the loan principal.
The September 2022 Convertible Loan Notes are convertible at 5.50p per ordinary share at any time at the election of the Noteholder. During 2023, £188,745 of the September 2023 Convertible Loan Notes, including capitalised interest, were converted into 3,431,734 new ordinary shares of 0.1p each.
In December 2023, £182,141 September 2023 Convertible Loan Notes were converted into 3,113,654 new ordinary shares of 0.1p each.
19 DEFERRED TAXATION
| 2023 | 2022 | |||
| £ | £ | |||
| At 1 January 2023 | 1,258,809 | 40,394 | ||
| On revaluation of investments | (331,151) | 1,218,415 | ||
| At 31 December 2023 | 927,658 | 1,258,809 |
20. FINANCIAL INSTRUMENTS
The principal financial instruments used by the Company, from which financial instrument risk arises are as follows:
- Trade and other receivables
- Cash and cash equivalents
- Trade and other payables
A summary of the financial instruments held by category is provided below:
| 2023 | 2022 | ||
| Financial assets measured at amortised costs: | £ | £ | |
| Trade and other receivables | 10,272 | 7,643 | |
| Cash and cash equivalents | 3,186 | 1,482,762 | |
| Amounts owing from group undertakings | 6,185,765 | 5,496,676 | |
| 6,199,223 | 6,987,081 |
| 2023 | 2022 | ||
| Financial liabilities measured at amortised costs: | £ | £ | |
| Unsecured loan notes | 168,487 | 2,611,889 | |
| Trade and other payables | 126,117 | 41,440 | |
| Total financial liabilities | 294,604 | 2,653,329 |
Financial assets at fair value through profit or loss
Financial instruments that are measured at fair value are classified using a fair value hierarchy that reflects the source of inputs used in deriving the fair value. The three classification levels are:
- Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities;
- Level 2: inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices); and
- Level 3: inputs for the asset or liability that are not based on observable market data (unobservable market inputs).
The following table presents the Company's assets carried at fair value by valuation method:
The financial assets at fair value through profit and loss are the Company's holdings in subsidiary undertakings and one unquoted security and within Level 3 of the fair value hierarchy.
The fair value is determined to be equal to the cost of the investment and is reviewed periodically based on information available about the performance of the underlying business. Where cost is deemed to be inappropriate, t he following table shows the valuation technique used in measuring Level 3 fair values for financial instruments measured at fair value in the statement of financial position, as well as the significant unobservable inputs used. The only method used is that of NPV.
| Valuation technique | Significant unobservable inputs | Inter-relationship between significant unobservable inputs and fair value measurement |
| NPV - The valuation model considers the present value of expected receipts, discounted using a risk-adjusted discount rate. The expected receipt is determined by considering the possible scenarios of forecast revenue and gas prices, the amount to be received under each scenario and the probability of each scenario. | Forecast annual revenue growth rate Forecast gas prices Risk-adjusted discount rate |
The estimated fair value would increase (decrease) if: - the annual revenue growth rate were higher (lower); - the gas prices were higher (lower); or - the risk-adjusted discount rate were lower (higher). Generally, a change in the any of the above variables would be accompanied by a directionally similar change in revenue receipts and a consequential change in the valuation of the investment |
Financial risk management
The Company's activities expose it to a variety of risks including market risk (foreign currency risk and interest rate risk), credit risk and liquidity risk. The Company manages these risks through an effective risk management programme and through this programme, the Board seeks to minimise potential adverse effects on the Company's financial performance.
The Board provides written objectives, policies and procedures with regards to managing currency and interest risk exposures, liquidity and credit risk including guidance on the use of certain derivative and non-derivative financial instruments.
Credit risk
Credit risk is the risk of financial loss to the Company if a customer or counterparty to a financial instrument fails to meet its contractual obligations. The Company's credit risk is primarily attributable to its receivables and its cash deposits. It is Company policy to assess the credit risk of new customers before entering contracts. The credit risk on liquid funds is limited because the counterparties are banks with high credit-ratings assigned by international credit-rating agencies.
Liquidity risk and interest rate risk
Liquidity risk arises from the Company's management of working capital. It is the risk that the Company will encounter difficulty in meeting its financial obligations as they fall due. The Board regularly receives cash flow projections for a minimum period of 12 months, together with information regarding cash balances monthly.
The Company is principally funded by equity and invests in short-term deposits, having access to these funds at short notice. The Company's policy throughout the period has been to minimise interest rate risk by placing funds in risk free cash deposits but also to maximise the return on funds placed on deposit.
All cash deposits attract a floating rate of interest. The benchmark rate for determining interest receivable and floating rate assets is linked to the UK base rate.
Foreign currency exposure
At 31 December 2023, the Company's monetary assets and liabilities are denominated in GBP Sterling, the functional currency of the Company and therefore at the year end the company had no exposure to net currency gains and losses.
Although the Company's subsidiary undertakings operate in the Eurozone and the Company provides working capital to those companies, it has no formal policies in place to hedge the Company's activities to the exposure to currency risk. It is the Company's policy to ensure that it enters into transactions in its functional currency wherever possible.
Management regularly monitor the currency profile and obtain informal advice to ensure that the cash balances are held in currencies which minimise the impact on the results and position of the Company from foreign exchange movements.
21. RELATED PARTY DISCLOSURES
Included in loans to group undertakings is an amount of £13 (2022: £13) due from PXOG Massey Limited, the Company's wholly owned subsidiary.
Included in trade and other receivables is an amount of £5,510,556 (2022: £4,821,467) due from PXOG Marshall Limited, the Company's wholly owned subsidiary. Interest receivable of £515,044 (2022: £324,805) has been accounted for in the Statement of Profit or Loss.
Included in trade and other receivables is an amount of £675,196 (2022: £675,196) due from PXOG Muirhill Limited, the Company's wholly owned subsidiary.
Included in trade and other receivables is an amount of £3,346 (2022: £nil) due from Tarba Energía S.L. ("Tarba"). Mark Routh is a director of Tarba.
At the statement of financial position date, the Directors had the following interests in the unsecured loan notes (note 18):
| 2023 | 2022 | |||
| £ | £ | |||
| Mark Routh | - | 51,164 | ||
| Richard Mays (resigned 7 February 2023) | - | 87,589 | ||
| William Smith | - | 51,164 | ||
| Alasdair Buchanan | - | 51,042 |
22. ULTIMATE CONTROLLING PARTY
In the opinion of the Directors, there is no ultimate controlling party.
23. SHARE-BASED PAYMENT TRANSACTIONS
Share options
At 31 December 2022 and 31 December 2023 outstanding awards to subscribe for ordinary shares of 0.1p each in the Company, granted in accordance with the rules of the share option scheme, were as follows:
| Number of shares | Weighted average remaining contractual life (years) | Weighted average exercise price (pence) | ||||
| 2023 | ||||||
| Brought forward | 11,464,813 | 2.84 | 6.61 | |||
| Granted during the year | 7,900,000 | - | ||||
| Exercised during the year | (850,400) | - | ||||
| Lapsed during the year | (600,529) | - | ||||
| Carried forward | 17,913,884 | 3.12 | 8.05 |
| Number of shares | Weighted average remaining contractual life (years) | Weighted average exercise price (pence) | ||||
| 2022 | ||||||
| Brought forward | 5,820,544 | 1.46 | 6.27 | |||
| Granted during the year | 10,300,000 | - | ||||
| Exercised during the year | (4,654,131) | - | ||||
| Lapsed during the year | (1,600) | - | ||||
| Carried forward | 11,464,813 | 2.84 | 6.61 |
All options were exercisable at the year end. 850,400 options were exercised during the year.
The following share-based payment arrangements were in existence at the year-end.
| Options | Number | Expiry date | Exercise price | Fair value at grant date | ||
| 1 | Granted 16 April 2015 | 113,884 | 15/04/2025 | 76.25p | 1.94p | |
| 2 | Granted 18 March 2022 | 6,300,000 | 18/03/2025 | 5.00p | 2.10p | |
| 3 | Granted 23 September 2022 | 3,600,000 | 23/09/2027 | 8.15p | 2.91p | |
| 4 | Granted 28 February 2023 | 3,700,000 | 27/02/2028 | 12.25p | 5.18p | |
| 5 | Granted 26 July 2023 | 4,200,000 | 25/07/2028 | 7.00p | 2.49p |
The fair value of remaining share options has been calculated using the Black Scholes model. The assumptions used in the calculation of the fair value of the share options outstanding during the year are as follows:
23. SHARE-BASED PAYMENT TRANSACTIONS - continued
| Options | Grant date share price | Exercise price | Expected volatility | Expected option life (years) | Risk-free interest rate | |
| 1 | Granted 16 April 2015 | 100.00p | 76.25p | 71.50% | 3.00 | 0.71% |
| 2 | Granted 18 March 2022 | 3.85p | 5.00p | 89.40% | 2.00 | 1.21% |
| 3 | Granted 23 September 2022 | 7.85p | 8.15p | 87.40% | 2.00 | 4.03% |
| 4 | Granted 28 February 2023 | 11.54p | 12.25p | 87.20% | 3.00 | 3.73% |
| 5 | Granted 26 July 2023 | 6.25p | 7.00p | 79.90% | 3.00 | 4.52% |
The fair value has been calculated assuming that there will be no dividend yield.
Volatility was determined by reference to the standard deviation of expected share price returns based on a statistical analysis of daily share prices over a 3-year period to grant date. All of the above options are equity settled.
All of the share options are equity settled and the charge for the year is £296,191 (2022: £187,417).
Warrants
At 31 December 2022 and 31 December 2023, outstanding warrants to subscribe for ordinary shares of 0.1p each in the Company, granted in accordance with the warrant instruments issued by Prospex, were as follows:
| Number of shares | Weighted average remaining contractual life (years) | Weighted average exercise price (pence) | ||||
| 2023 | ||||||
| Brought forward | 666,684 | 0.23 | 3.00 | |||
| Exercised in the year | (666,684) | 3.00 | ||||
| Carried forward | - | - | - |
| Number of shares | Weighted average remaining contractual life (years) | Weighted average exercise price (pence) | ||||
| 2022 | ||||||
| Brought forward | 27,245,000 | 1.22 | 3.03 | |||
| Exercised during the year | (26,253,316) | 3.02 | ||||
| Lapsed during the year | (325,000) | 10.00 | ||||
| Carried forward | 666,684 | 0.23 | 3.00 |
All warrants were exercised during the year.
24. DIRECTORS' EMOLUMENTS
Key management personnel are those persons having authority and responsibility for planning, directing and controlling activities of the Company, including all directors of the Company.
| 2023 | 2022 | |||
| £ | £ | |||
| Salaries and other short-term employee benefits | 278,350 | 254,833 | ||
| Share-based payment | 169,406 | 163,994 | ||
| 447,756 | 418,827 |
| Salaries and fees | Benefits in kind | Share-based payment | 2023 | 2022 | |
| £ | £ | £ | £ | £ | |
| Mark Routh | 217,500 | 7,017 | 93,757 | 318,274 | 252,927 |
| William Smith | 28,000 | - | 26,635 | 54,635 | 61,300 |
| Alasdair Buchanan | 23,333 | - | 26,635 | 49,968 | 52,300 |
| Andrew Hay - appointed 19 April 2023 | - | - | 22,379 | 22,379 | - |
| Richard Mays - resigned 7 February 2023 | 2,500 | - | - | 2,500 | 52,300 |
| 271,333 | 7,017 | 169,406 | 447,756 | 418,827 |
The Directors interests in share options as at 31 December 2023 are as follows:
| Director | Number of share options | Exercise price | Date of grant | First date of exercise | Final date of exercise |
| Mark Routh | 2,100,000 | 5.00p | 18/03/2022 | 18/03/2022 | 18/03/2025 |
| Mark Routh | 900,000 | 8.15p | 23/09/2022 | 23/09/2022 | 23/09/2027 |
| Mark Routh | 1,233,333 | 12.25p | 28/02/2023 | 28/02/2023 | 27/02/2028 |
| Mark Routh | 1,200,000 | 7.00p | 26/07/2023 | 26/07/2023 | 25/07/2028 |
| 5,433,333 | |||||
| William Smith | 21,669 | 76.25p | 14/04/2015 | 14/04/2015 | 14/04/2025 |
| William Smith | 900,000 | 5.00p | 18/03/2022 | 18/03/2022 | 18/03/2025 |
| William Smith | 900,000 | 8.15p | 23/09/2022 | 23/09/2022 | 23/09/2027 |
| William Smith | 370,000 | 12.25p | 28/02/2023 | 28/02/2023 | 27/02/2028 |
| William Smith | 300,000 | 7.00p | 26/07/2023 | 26/07/2023 | 25/07/2028 |
| 2,491,669 | |||||
| Alasdair Buchanan | 900,000 | 5.00p | 18/03/2022 | 18/03/2022 | 18/03/2025 |
| Alasdair Buchanan | 900,000 | 8.15p | 23/09/2022 | 23/09/2022 | 23/09/2027 |
| Alasdair Buchanan | 370,000 | 12.25p | 28/02/2023 | 28/02/2023 | 27/02/2028 |
| Alasdair Buchanan | 300,000 | 7.00p | 26/07/2023 | 26/07/2023 | 25/07/2028 |
| 2,470,000 | |||||
| Andrew Hay | 900,000 | 7.00p | 26/07/2023 | 26/07/2023 | 25/07/2028 |
| 900,000 |
25. EVENTS AFTER THE REPORTING PERIOD
All remaining interest-bearing debt outstanding at the reporting date, and accrued interest, was repaid to debt-holders by 31 March 2024. No further debt or equity raises have occurred between the reporting date and the date of this report.
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