TIDMSCIR
RNS Number : 4594N
Scirocco Energy PLC
30 September 2021
30 September 2021
Scirocco Energy plc
("Scirocco Energy" or "the Company")
Unaudited Interim Results for the six months ended 30 June
2021
Scirocco Energy (AIM: SCIR), the AIM investing company targeting
attractive assets within the European sustainable energy and
circular economy markets, is pleased to announce its unaudited
interim results for the six months ended 30 June 2021.
Period Highlights:
-- The Board announced its proposed investment into Energy
Acquisitions Group Ltd ("EAG"), a specialist acquisition and
operating vehicle in the sustainable energy sector signaling the
Company's first investment as part of the Company's revised
strategy that targets opportunities within the sustainable energy
and circular economy markets in Europe;
-- Invested in EAG which allows Scirocco Energy to leverage
EAG's strong network and industry leading expertise to gain access
to a series of already identified acquisition opportunities within
the Anaerobic Digestion ("AD") sector totalling c.GBP30 million in
value;
-- Provided initial investment for EAG which will be used to
acquire 100% of Greenan Generation Limited ("GGL") and associated
0.5 MWe AD plant located in County Londonderry, Northern Ireland.
AD is a process that creates biogas, a renewable energy source that
will help the UK deliver on its decarbonisation commitments:
-- The initial investment of GBP1.2 million will be funded from current cash resources;
-- Scirocco and EAG will jointly explore further opportunities; and
-- GGL is a cash generative, operational AD plant and EAG has
identified steps to optimize and enhance EBITDA margins and free
cash flow.
-- The Company made progress on its Tanzanian asset sales
process, which is key to delivering its broader strategy;
-- Amended the financing facility, announced to the market on 29
June 2020, with Prolific Basins LLC which ensures that the Company
is able to fund its near-term commitments. As a result of the
amendment, Scirocco's access to the potential investment of up to
US$1,000,000 (to be provided at the option of the Subscriber) has
been extended until 31 December 2021;
-- The Company partially exited its shareholding in Helium One
realizing c. GBP3.3 million in proceeds during the period;
-- Continued the Company's focus on cost discipline and cash preservation; and
-- Held group cash at 30 June 2021 of GBP2.3million
Post Period Highlights:
-- The Company announced that the operator of the Ruvuma joint
venture, ARA Petroleum Tanzania Limited ("APT"), secured a two-year
extension to its licence under the Ruvuma PSA from the Ministry of
Energy of Tanzania which will run from 15 August 2021. The
extension allows for the completion of the following:
-- Acquisition of 200 km(2) (surface coverage) of 3D seismic data;
-- Drilling of the Chikumbi-1 well; and
-- Conclusion of negotiations of the Gas Terms for the Ruvuma PSA.
-- The joint venture completed the tender for the acquisition of
3D seismic and awarded the seismic acquisition contract to Africa
Geophysical Services Limited ("AGS"). The operator secured a
Lumpsum contract considerably below the joint venture's expected
budget for the activity. AGS intends to commence activities in the
Ntorya location within the Ruvuma PSA area from October 2021.
-- The acquisition will consist of approximately 338 km(2) of 3D
seismic data focusing on the area of primary interest. AGS will
mobilise, weather permitting, and focus on the proposed location
for the Chikumbi-1 well ("CH-1") to acquire as much data as
possible before the start of the rainy season with the programme
re-commencing after that with no additional cost to the JV
partners.
-- The Company announced that following technical work by APT
earlier this year, their revised mapping and internal management
estimates suggest a mean risked gas initially in place ("GIIP") for
the Ntorya accumulation of 3,024 Bcf, in multiple lobes to be
tested and a mean risked recoverable gas resource of 1,990 Bcf,
which will be appraised by the planned seismic and drilling
programme.
-- Announced a new investment policy - focusing on asset
opportunities within the European sustainable energy and circular
economy markets - which was approved by Shareholders at the
Company's AGM on 9 July 2021
-- Sale of Helium One shares held by the Company continued
realizing a further c. GBP0.2 million in proceeds after the end of
the period
Commenting on the Interim Results, Alastair Ferguson,
Non-Executive Chairman said:
"Since we emerged from 2020 the board of directors has
implemented a change of investment policy which targets assets
within the European sustainable energy and circular economy
markets. This policy will see Scirocco allocating capital in assets
which support the energy transition and offer a stable, growing
source of cash flow going forward.
Scirocco is itself in transition and I was delighted to see the
Company taking the first concrete steps under the new investment
policy with its investment in EAG. Although a small initial
investment this is strategically very significant as it creates a
platform for a series of acquisitions.
We have also seen concrete progress in our most significant
legacy asset at Ruvuma with the award of a two-year licence
extension and the much-awaited seismic acquisition project being
kicked off with the award of a contract to AGS. We expect this work
programme to be an important catalyst for value as the project is
better defined and derisked.
With the pivot to investment in assets within the sustainable
energy and circular economy we have set out our stall that we
intend to recycle value delivered from Scirocco's legacy assets to
fund new investment. The funding of the initial investment in EAG
predominantly from proceeds delivered by the sale of Helium One
shares is an excellent demonstration of this. From a funding
perspective, we were also pleased to see continued support from
Prolific Basins with the extension and amendment of the
facility.
We now look forward to growing the portfolio and the team are
working hard to deliver this."
The information contained within this announcement is deemed by
the Company to constitute inside information as stipulated under
the Market Abuse Regulations (EU) No. 596/2014 ("MAR").
For further information:
Scirocco Energy plc
Tom Reynolds, CEO +44 (0) 20 7466
Doug Rycroft, COO 5000
Strand Hanson Limited, Nominated Adviser +44 (0) 20 7409
James Spinney / Ritchie Balmer / Rory Murphy 3494
WH Ireland Limited, Broker +44 (0) 207 220
Harry Ansell / Katy Mitchell 1666
Buchanan, Financial PR +44 (0) 20 7466
Ben Romney / Jon Krinks / James Husband 5000
Chairman's Statement
Introduction
I am pleased to be providing this statement in my capacity as
Non-Executive Chairman of Scirocco. The Company emerged from 2020
with a new investment policy and positive developments within its
legacy asset portfolio.
The Board's focus in the first half of the year was
three-fold:
o To Implement the new investment policy to invest in attractive
assets within the sustainable energy and circular economy with a
view to growing a portfolio of cash generative assets over
time;
o To Grow the company's access to resources and personnel within
the target space; and
o To Review, on an ongoing basis, new opportunities and
progressing the EAG investment.
Additionally, the Company has continued to focus on the
monetization opportunities for its existing natural gas portfolio.
The underlying assets, particularly the Ruvuma PSA containing the
Ntorya Gas development onshore Tanzania, has made significant
operational progress so far in 2021. The securing of a 2-year
licence extension allows the Joint Venture to progress with seismic
and drilling programmes in the near-term providing catalyst for
value in the Scirocco portfolio.
Strategy and Business Development
From 2007 until 2018, the Company focused on investments in a
diverse portfolio of direct and indirect interests within natural
resources and principally in the oil and gas sector, as well as
other subsurface gas assets of potential commercial significance.
These assets were located worldwide but predominantly in the
Americas, Europe and Africa.
In March 2019, the Company announced a new strategy to create
long-term, sustainable value within the European energy market.
Since announcing the new strategy, the Board observed market
dynamics which led to a re-assessment of the opportunities
available to Scirocco and the Company's strategic direction:
1. a deterioration of the level of funding support for small oil
and gas companies, driven by environmental concerns which could
undermine a sustainable access to growth capital;
2. a growing demand for environmentally positive investments,
with a limited supply of companies in which to invest, particularly
on the AIM Market; and
3. a large and growing market of investment opportunities within
the sustainable energy and circular economy space.
The Board concluded that the conditions were in place to support
the development of the Company's acquisition-led strategy within
the European sustainable energy market. The Company therefore
focused on identifying near-term, cash generative investment
opportunities within the low-carbon space, including renewable
energy, circular economy and energy storage and transfer
sectors.
The Board believes the evolution of its strategy will better
enable long-term value creation for its shareholders. The areas of
investment being screened represent a compelling market
opportunity, with strategically consistent assets that complement
Scirocco's ambitions to be part of the energy transition space, as
the world looks to embrace a more sustainable energy future.
Scirocco's objective is to acquire a portfolio of cash generative
assets within the following three core areas:
-- Energy - assets which generate energy for sale through
sustainable or renewable means in the form of biogas or electrical
power;
-- Circular - assets which recover a valuable component of an
industrial, municipal or agricultural waste stream for re-use,
generally reducing the system carbon footprint in parallel; and
-- Vector - assets involved in the storage, transmission, or
delivery of energy within a low carbon context.
The Board believes it will offer Shareholders and investors
exposure to an asset portfolio with an attractive risk/reward
profile within the sustainable energy ecosystem. Over time, the
Board believes shareholder value can be delivered through
operational improvement, driving improved profitability;
reinvestment of cash flow to fund further acquisition; the periodic
refinancing of the portfolio as it grows, supporting lower cost
asset finance; and ultimately the payment of a regular
dividend.
Board Changes
To support the new strategy Muir Miller joined the Board in the
capacity as Non-executive Director on 18(th) February 2021. Mr
Miller brings a wealth of specialist experience to support this
strategy development as Scirocco moves into the execution phase of
its strategy.
Mr Miller is a Chartered Engineer and Member of the Institution
of Mechanical Engineers with over two decades of senior executive
experience, with a particular focus on the renewable energy sector.
Most recently, Mr Miller was Managing Director of Peel Energy, part
of the privately owned, diverse and entrepreneurial Peel Group, a
leading infrastructure, transport and real estate investor in the
UK, with collective investments owned and under management of more
than GBP5 billion. Peel Energy is an agile low carbon development
company that is active in a number of technology sectors with the
capacity to develop, build, own and operate assets. During a
10-year period, Mr Miller lead a team that developed and sold
GBP121 million of assets without requiring any long-term equity
investment from Peel Holdings, clearing over GBP61 million in cash
profit.
Prior to joining Peel Energy, he was Business Development
Manager at Energy Power Resources, with an installed capacity of
113 MW of dedicated biomass assets, 70 MW of landfill gas assets,
and 100 MW of wind assets in France, UK and Sweden. Between 2005
and 2007, Mr Miller was CEO of Novera Macquarie Renewable Energy, a
joint venture with annual turnover of GBP32 million and one of the
largest independent renewable energy operators in the UK with a
total installed generating capacity of 117.5 MW across 53
geographically diverse sites.
Mr Miller will chair Scirocco's Sustainability Committee which
is in the process of being formed.
In line with previous guidance, Jon Fitzpatrick resigned from
the Board. The Board wish to thank Mr Fitzpatrick for his
considerable contribution to the Company in recent years which has
been pivotal in stabilising the business and getting it to a
position where it can deliver long-term growth for
shareholders.
Cash Management
Throughout the first half of 2020 the Board's efforts to
conserve capital and carefully manage costs continued. The
following key elements relate to this activity:
-- The payment of share options in lieu of cash salary/fees for
Board and Executive Management continued;
-- The Company also had the opportunity to raise cash through
the sale of Helium One shares following its successful listing in
December 2020. As at 30 June 2021, the Company had realized, in
aggregate, GBP3.3 million from the sale of Helium One shares with
further sales after the end of the period realizing a further
GBP0.2 million; and
-- The facility with Prolific Basins was extended on 25 June
2021 providing continued access to up to a further $1 million of
funding until the end of 2021.
Outlook
The first half of 2021 has been a period of significant change
within Scirocco with the formal adoption of a new investment
policy, the delivery of realization proceeds from the sale of
legacy Helium One shareholding which then supported the Company's
first investment in sustainable energy through the investment in
EAG.
In Tanzania, the Company is very encouraged by the recent
developments surrounding its working interest investment in the
Ruvuma PSA, and believes that the 2-year extension granted by the
Government is a clear indication of significant progress. The
project is about to enter a period of significant activity, both on
the operational and commercial fronts, and the Board continues to
believe that the project represents a high-quality opportunity to
develop indigenous gas into an existing infrastructure network and
market. The planned seismic acquisition and drilling programmes are
expected to offer a significant value catalyst and the Board
continues to explore monetization opportunities for its legacy
natural gas assets.
The Company is seeing a significant number of new investment
opportunities which represent an excellent fit with its new
investment policy. The new opportunities span the full range of
target investments including further investment with EAG in the
Anaerobic Digestion space as well as new parallel investments
within each of the Energy, Circular and Vector channels. Crucially
all of the targets present the opportunity to deliver cash flow to
Scirocco and its partners which offers to change the character of
the business and provide a critical source of funding for the group
moving forward. We look forward to continuing the forward momentum
established during the first half of the year and announcement of
further investments in due course.
Alastair Ferguson
Non-Executive Chairman
Date: 30(th) September 2021
Principle Risks and Uncertainties
The principal risks facing the Company were set out in the
Company's Annual Report and Accounts to 31 December 2020
As the new investment policy is implemented, the Company's risk
profile will change due to its exposure to different assets and
markets, and a full statement of risks will be published in its
subsequent Annual Report and Accounts.
On behalf of the board
Alastair Ferguson
Non-Executive Chairman
Date: 30(th) September 2021
Directors' Responsibilities
The Directors are responsible for preparing the Interim Report
in accordance with applicable law and regulations.
Company law requires the Directors to prepare Company financial
statements for each financial year. Under AIM Rules for Companies
of the London Stock Exchange they are required to prepare the
Company financial statements in accordance with International
Financial Reporting Standards in conformity with the requirements
of the Companies Act 2006. Under Company law the Directors must not
approve the financial statements unless they are satisfied that
they give a true and fair view of the state of affairs of the
Company and of the profit or loss of the Company for that period.
The Directors are also required to prepare financial statements in
accordance with the rules of the London Stock Exchange for
companies trading securities on AIM.
Company law requires the Directors to prepare Company financial
statements for each financial year. Under AIM Rules for Companies
of the London Stock Exchange they are required to prepare the
Company financial statements in accordance with International
Financial Reporting Standards (IFRSs) in conformity with the
Companies Act 2006.
In preparing these financial statements, the Directors are
required to:
-- select suitable accounting policies and then apply them consistently;
-- make judgements and accounting estimates that are reasonable, relevant and reliable;
-- state whether they have been prepared in accordance with IFRS; and
-- prepare the financial statements on the going concern basis
unless it is inappropriate to presume that the company will
continue in business.
The Directors are responsible for keeping adequate accounting
records that are sufficient to show and explain the company's
transactions and disclose with reasonable accuracy at any time the
financial position of the company and enable them to ensure that
the financial statements comply with the requirements of the
Companies Act 2006. They are also responsible for safeguarding the
assets of the company and hence for taking reasonable steps for the
prevention and detection of fraud and other irregularities.
Website publication
The Directors are responsible for ensuring the annual report and
the financial statements are made available on the Company's
website. Financial statements are published on the Company's
website in accordance with legislation in the United Kingdom
governing the preparation and dissemination of financial
statements, which may vary from legislation in other jurisdictions.
The maintenance and integrity of the Company's website is the
responsibility of the Directors. The Directors' responsibility also
extends to the ongoing integrity of the financial statements
contained therein.
CONDENSED INTERIM STATEMENT OF PROFIT OR LOSS AND OTHER
COMPREHENSIVE INCOME
Six months ended Six months ended
Notes 30 June 2021 30 June 2020
(Unaudited) (Unaudited)
(Restated)
Continuing operations GBP 000 GBP 000
Administrative expenses (713) (1,302)
Loss before investment activities (713) (1,302)
Loss on disposal of shares (15) -
Costs to sell investments (330) -
Exchange (loss)/gain (17) 25
Fair value through profit and
loss 2,910 -
---------------- ----------------
Profit/(Loss) on ordinary activities
before taxation 1,835 (1,277)
Income tax expense - -
---------------- ----------------
Total comprehensive profit/(loss)
for the period from continuing
operations 1,835 (1,277)
---------------- ----------------
Discontinued operations 9 9
Assets held for sale (337) (9)
Loss recognised on classification
as held for sale
---------------- ----------------
Loss for the period from discontinuing (328) -
operations
---------------- ----------------
Profit/(Loss) and total comprehensive
income for the period 1,507 (1,277)
---------------- ----------------
Total comprehensive income attributable
to owners of the parent 1,507 (1,277)
---------------- ----------------
Earnings per share (pence) 8
Basic and diluted 0.20 (0.20)
Earnings per share from continuing
operations 0.25 (0.00)
Basic and diluted
Earnings per share from discontinued (0.05) (0.20)
operations
Basic and diluted
---------------- ----------------
CONDENSED INTERIM STATEMENT OF FINANCIAL POSITION
As at As at
Notes 30 June 2021 31 December 2020
(Unaudited) (Audited)
GBP 000 GBP 000
Non-current assets
Investments 13 1,320 1,667
------------ ----------------
Total non-current assets 1,320 1,667
Current assets
Trade and other receivables 16 1,825 421
Cash and cash equivalents 2,293 1,168
Assets held for sale 15 14,628 14,803
------------ ----------------
Total current assets 18,746 16,392
------------ ----------------
Total assets 20,066 18,059
------------ ----------------
Current liabilities
Trade and other payables 17 (450) (248)
Liabilities held for sale 15 (166) (166)
Total current liabilities (616) (414)
------------ ----------------
Net current assets 18,130 15,978
------------ ----------------
Total liabilities (616) (414)
------------ ----------------
Net assets 19,450 17,645
============ ================
Equity
Share capital 18 1,448 1,448
Deferred share capital 18 1,831 1,831
Share premium reserve 38,399 38,399
Share-based payments 19 1,768 1,470
Retained earnings (23,996) (25,503)
------------ ----------------
Total equity 19,450 17,645
============ ================
CONDENSED INTERIM STATEMENT OF CASH FLOWS
Six months ended Six months ended
30 June 2021 30 June 2020
(Unaudited) (Unaudited)
(Restated)
GBP 000 GBP 000
Cash flows from operating activities
Cash absorbed by continuing operations 25 (92) (876)
Interest paid (1) (1)
Net cash outflow from operating activities (93) (877)
-------------------------- -------------------------
Cash flows from investing activities
Payments to acquire intangible assets (classified
as held for sale) (237) (151)
Payments to acquire investments (45) -
Proceeds from disposal of investments 1,500 -
Refund from unsuccessful transaction - 670
Net cash inflow from investing activities 1,218 519
-------------------------- -------------------------
Net increase / (decrease) in cash and cash equivalents 1,125 (358)
Cash and cash equivalents at beginning of period 1,168 1,064
-------------------------- -------------------------
Cash and cash equivalents at end of period 2,293 706
========================== =========================
CONDENSED STATEMENT OF CHANGES IN EQUITY
Share Capital Deferred Share premium Share Retained Total
share based earnings
capital payments
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
------------------------------- ------------------------ ----------------- ------------- ------------ -----------
Balance at 31
December 2019 1,264 1,831 37,316 1,135 (21,385) 20,161
Loss for the
period (as
restated) - - - - (1,277) (1,277)
Credit to
equity for
equity-settled
share-based
payments - - - 133 - 133
------------------------------- ------------------------ ----------------- ------------- ------------ -----------
Balance at 30
June 2020 (as
restated) 1,264 1,831 37,316 1,268 (22,662) 19,017
------------------------------- ------------------------ ----------------- ------------- ------------ -----------
Loss for the
period - - - - (2,841) (2,841)
Issue of share
capital 184 - 1,083 - - 1,267
Credit to
equity for
equity-settled
share-based
payments - - - 202 - 202
Balance at 31
December 2020 1,448 1,831 38,399 1,470 (25,503) 17,645
------------------------------- ------------------------ ----------------- ------------- ------------ -----------
Profit for the
period - - - - 1,507 1,507
Credit to equity
for
equity-settled
share-based
payments - - - 298 - 298
Balance at 30
June 2021 1,448 1,831 38,399 1,768 (23,996) 19,450
------------------------------- ------------------------ ----------------- ------------- ------------ -----------
NOTES TO CONDENSED INTERIM FINANCIAL INFORMATION
1 BASIS OF PREPARATION
The financial information has been prepared under the historical
cost convention and on a going concern basis and in accordance with
International Financial Reporting Standards and as applied in
accordance with the provisions of the Companies Act 2006. The
principal accounting policies adopted by the Company are set out
below.
The condensed interim financial information for the period ended
30 June 2021 has not been audited or reviewed in accordance with
the International Standard on Review Engagements 2410 issued by the
Auditing Practices Board. The figures were prepared using
applicable accounting policies and practices consistent with those
adopted in the statutory accounts for the period ended 31 December
2020. The figures for the period ended 31 December 2020 have been
extracted from these accounts, which have been delivered to the
Registrar of Companies, and contained an unqualified audit
report.
The condensed interim financial information contained in this
document does not constitute statutory accounts. In the opinion of
the Directors the financial information for this period fairly
presents the financial position, result of operations and cash
flows for this period.
This Interim Financial Report was approved by the Board of
Directors on 29(th) September 2021.
Statement of compliance
These condensed company interim financial statements have been
prepared in accordance with International Financial Reporting
Standards (IFRS) as adopted by the European Union with the
exception of International Accounting Standard ('IAS') 34 - Interim
Financial Reporting. Accordingly, the interim financial statements
do not include all of the information or disclosures required in
the annual financial statements and should be read in conjunction
with the Company's 2020 annual financial statements.
2 ADOPTION OF NEW AND REVISED STANDARDS
The accounting policies adopted in the preparation of the
interim financial statements are consistent with those followed in
the preparation of the Company's annual financial statements for
the year ended 31 December 2020, except for the adoption of new
standards effective as of 1 January 2021. The Company has not early
adopted any standard, interpretation or amendment that has been
issued but is not yet effective.
Several amendments and interpretations apply for the first time
in 2021, but do not have an impact on the interim financial
statements of the Company.
Amendments to IFRS 9, IAS 39, IFRS 7, IFRS 4 and IFRS 16:
Interest Rate Benchmark Reform
The amendments in Interest Rate Benchmark Reform - Phase 2,
introduce a practical expedient for modifications required by the
reform, clarify that hedge accounting is not discontinued solely
because of the IBOR reform, and introduces disclosures that allow
users to understand the nature and extent of risks arising from the
IBOR reform to which the entity is exposed to and how the entity
manages those risks as well as the entity's progress in
transitioning from IBORs to alternative benchmark rates, and how
the entity is managing this transition.
Amendments to IFRS 16: Covid-19-Related Rent Concessions beyond
30 June 2021
The amendment extends, by one year, the May 2020 amendment that
provides lessees with an exemption from assessing whether a
Covid-19-related rent concession is a lease modification.
These amendments had no impact on the interim financial
statements of the Company.
3 CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS
The Company makes estimates and assumptions regarding the
future. Estimates and judgements are continually evaluated based on
historical experience and other factors, including expectations of
future events that are believed to be reasonable under the
circumstances. In the future, actual experience may differ from
these estimates and assumptions. The estimates and assumptions that
have a significant risk of causing a material adjustment to the
carrying amounts of assets and liabilities within the next
financial period are discussed below.
Useful lives of intangible assets and property, plant and
equipment (note 11)
Intangible assets and property, plant and equipment are
amortised or depreciated over their useful lives. Useful lives are
based on the management's estimates of the period that the assets
will generate revenue, which are based on judgement and experience
and periodically reviewed for continued appropriateness. Changes to
estimates can result in significant variations in the carrying
value and amounts charged to the income statement in specific
periods.
Share-based payments (note 19)
The Company utilised an equity-settled share-based remuneration
scheme for employees. Employee services received, and the
corresponding increase in equity, are measured by reference to the
fair value of the equity instruments at the date of grant,
excluding the impact of any non-market vesting conditions. The fair
value of share options is estimated by using Black-Scholes
valuation method as at the date of grant. The assumptions used in
the valuation are described in Note 19 and include, among others,
the expected volatility, expected life of the options and number of
options expected to vest.
Hydrocarbon reserve and resource estimates (note 12)
Hydrocarbon reserves are estimates of the amount of hydrocarbons
that can be economically and legally extracted from the Company's
oil and gas properties. The Company estimates its commercial
reserves and resources based on information compiled by
appropriately qualified persons relating to the geological and
technical data on the size, depth, shape and grade of the
hydrocarbon body and suitable production techniques and recovery
rates. Commercial reserves are determined using estimates of oil
and gas in place, recovery factors and future commodity prices, the
latter having an impact on the total amount of recoverable reserves
and the proportion of the gross reserves which are attributable to
the host government under the terms of the Production-Sharing
Agreements. A breakdown of reserves can be found below. Future
development costs are estimated using assumptions as to the number
of wells required to produce the commercial reserves, the cost of
such wells and associated production facilities, and other capital
costs. The current long-term gas price assumption used in the
estimation of commercial reserves currently held by the Company is
US$3/MMTBU. The carrying amount of oil and gas development and
production assets at 30 June 2021 is shown in note 12.
The Company estimates and reports hydrocarbon reserves in line
with the principles contained in the SPE Petroleum Resources
Management Reporting System (PRMS) framework. As the economic
assumptions used may change and as additional geological
information is obtained during the operation of a field, estimates
of recoverable reserves may change. Such changes may impact the
Company's financial position and results which include:
-- The carrying value of exploration and evaluation assets; oil
and gas properties; property and plant and equipment may be
affected due to changes in estimated future cash flows
-- Depreciation and amortisation charges in the income statement
may change where such charges are determined using the Units of
Production (UOP) method, or where the useful life of the related
assets change
-- Provisions for decommissioning may require revision - where
changes to the reserve estimates affect expectations about when
such activities will occur and the associated cost of these
activities.
Resource summary - Ntorya Field
Gross Licence Basis (bcf)
Gross Mean
unrestricted
Licence 1C 2C 3C GIIP
Development
Mtwara pending 26 81 213
Development
Mtwara unclarified 324 682 950 1,870
---- ---- ------
350 763 1,173
Resource summary excluding Ntorya Field
Prospective Resources (bcf)*
Gross on Licence
Prospect/Lead 1U 2U 3U Mean unrisked Pg %
---- ---- ------ -------------- -----
Chikumbi Jurassic 399 936 1,798 1,351** 8***
---- ---- ------ -------------- -----
* Assuming development licence is ratified
** P50
*** RPS assessment of PG
Exploration and evaluation expenditures (note 12)
The application of the Company's accounting policy for
exploration and evaluation expenditure requires judgement to
determine whether future economic benefits are likely, from either
future exploitation or sale, or whether activities have not reached
a stage which permits a reasonable assessment of the existence of
reserves. The determination of reserves and resources is itself an
estimation process that involves varying degrees of uncertainty
depending on how the resources are classified. These estimates
directly impact when the Company defers exploration and evaluation
expenditure. The deferral policy requires management to make
certain estimates and assumptions about future events and
circumstances, in particular, whether an economically viable
extraction operation can be established. Any such estimates and
assumptions may change as new information becomes available. If,
after expenditure is capitalised, information becomes available
suggesting that the recovery of the expenditure is unlikely, the
relevant capitalised amount is written off in the income statement
and in the period when the new information becomes available.
Units of production (UOP) depreciation of oil and gas assets
(note 12)
Oil and gas properties are depreciated using the UOP method over
total proved development and undeveloped hydrocarbon reserves. This
results in a depreciation/amortisation charge proportional to the
depletion of the anticipated remaining production from the
field.
The life of each item, which is assessed at least annually, has
regard to both its physical life limitations and present
assessments of economically recoverable reserves of the field at
which the asset is located. These calculations require the use of
estimates and assumptions, including the amount of recoverable
reserves and estimates of future capital expenditure. The
calculation of the UOP rate of depreciation/amortisation will be
impacted to the extent that actual production in the future is
different from current forecast production based on total proved
reserves, or future capital expenditure estimates change. Changes
to the proved reserves could arise due to changes in the factors or
assumptions used in estimating reserves, including:
-- The effect on proved reserves of differences between actual
commodity prices and commodity price assumptions
-- Unforeseen operational issues
Recoverability of oil and gas assets (note 12)
The Company assesses each asset or cash generating unit (CGU)
each reporting period to determine whether any indication of
impairment exists. Where an indicator of impairment exists, a
formal estimate of the recoverable amount is made, which is
considered to be the higher of the fair value less costs of
disposal (VLCD) and value in use (VIU). The assessments require the
use of estimates and assumptions such as long-term oil prices
(considering current and historical prices, price trends and
related factors), discount rates, operating costs, future capital
requirements, decommissioning costs, exploration potential reserves
(see(a) Hydrocarbon reserves and resource estimates above) and
operating performance (which includes production and sales
volumes). These estimates and assumptions are subject to risk and
uncertainty. Therefore, there is possibility that changes in
circumstances will impact these projections, which may impact the
recoverable amount of assets and/or CGUs.
Recoverability of trade receivables (note 16)
The Company considers the recoverability of trade receivables to
be a key area of judgement. The Company considers trade receivables
to be credit impaired once there is evidence a loss has been
incurred. An expected credit loss is calculated on an annual basis.
The Directors believe that the debtor is still recoverable based on
their knowledge of the market in Tanzania and historical evidence
of similar receivables being paid. The Directors have recognised
the asset as they believe they are still legally entitled to
receive it. The Tanzanian Government have a history of building up
receivables with other companies and billing them at a future
date.
4 OPERATING SEGMENTS
Based on risks and returned, the Directors consider that the
primary reporting format is by business segment. The Directors
consider that there are two business segments:
-- Head office support from the UK
-- Segment assets for Canada relate to an investment in Corallian Energy
-- Discontinued operations on its investments in Tanzania
Continuing Operations Discontinuing
Operations
6 months to 30 June Canada UK Total Tanzania Total
2021
GBP000 GBP000 GBP000 GBP000 GBP000
Administrative
expenses - (1,043) (1,043) - (1,043)
Interest income - - - 9 9
Other gains and losses - (32) (32) (337) (369)
Fair value through
profit
and loss - 2,910 2,910 - 2,910
--------------------
Profit/(loss) from
operations
per reportable
segment - 1,835 1,835 (328) 1,507
==================== ====================== ===================== ============== ========
Additions to
non-current
assets - 123 123 237 360
Reportable segment
assets 125 5,313 5,438 14,628 20,066
Reportable segment
liabilities - (450) (450) (166) (616)
6 months to 30 June 2020 Canada UK Total Tanzania Total
(Restated)
GBP000 GBP000 GBP000 GBP000 GBP000
Administrative expenses - (1,302) (1,302) - (1,302)
Interest income - - - 9 9
Other gains and losses - 25 25 (9) 16
--------
Profit/(loss) from operations
per reportable segment - 1,277 1,277 - 1,277
======== ======== ======== ========= ========
Additions to non-current
assets - - - 112 112
Reportable segment assets 125 1,022 1,147 18,774 19,921
Reportable segment liabilities - (641) (641) (183) (824)
5 REVENUE
6 months 6 months
to to 30 June
30 June 2021 2020
GBP000 GBP000
Other significant revenue
Interest income relating to discontinuing
operations 9 9
Contract balances 30 June 30 June 2020
2021
GBP000 GBP000
Trade receivables 271 302
Accrued income and interest 98 81
Trade receivables accrued interest for non-payment. Outstanding
debtors accrue interest at a rate in accordance with the joint
venture agreement and are generally on terms of 30 days. In 2021,
there is a provision of GBP54k (June 2020: GBP30k) for expected
credit losses on trade receivables.
Interest income relates to interest charged on outstanding
invoices.
6 EXPENSES BY NATURE
6 months 6 months
to 30 June to 30 June
2021 2020
GBP000 GBP000
Continuing Operations
Exchange losses (17) 19
Fees payable to the Company's auditor for the audit
of the Company's financial statements (8) (8)
Professional, legal and consulting
fees (276) (391)
Costs to sell investments (330) -
AIM related costs including
investor relations (62) (49)
Costs relating to One-Dyas
transaction - (665)
Accounting-related services (55) (37)
Travel and subsidence - (17)
Office and administrative
expenses (9) (8)
Other expenses (12) 26
Fair value through profit or loss 2,910 -
Loss on disposal of investments (15) -
Share-based payments (298) -
Directors' remuneration (17) (104)
Wages and salaries and other
related costs 24 (43)
----------------- ------------------
1,835 (1,277)
================= ==================
7 EMPLOYEES
6 months 6 months
to to
30 June 30 June
2021 2020
Average number of employees (excluding executive directors): - 1
========== =========
6 months 6 months
to to
30 June 30 June
2021 2020
(unaudited) (unaudited)
GBP000 GBP000
Their aggregate remuneration comprised:
Wages and salaries - 25
============== =============
6 months 6 months
to to
30 June 30 June
2021 2020
(unaudited) (unaudited)
GBP000 GBP000
Directors remuneration 17 104
============= =============
Salary and Share-based Termination Total
fees payments payments
GBP000 GBP000 GBP000 GBP000
Period ended 30 June 2021
Jonathan Fitzpatrick - 37 - 37
Alastair Ferguson (7) 73 - 66
Tom Reynolds 24 112 - 136
Donald Nicolson - 49 - 49
Muir Miller (appointed 18 February
2021) - 15 15
Douglas Rycroft - 12 - 12
17 298 - 315
=========== ============ ============ =======
Salary and Share-based Termination Total
fees payments payments
GBP000 GBP000 GBP000 GBP000
Period ended 30 June 2020
Jonathan Fitzpatrick 6 18 - 24
Alastair Ferguson 9 29 - 38
Tom Reynolds 8 16 - 24
Donald Nicolson 6 19 - 25
Don Strang (resigned 26 November
2018) (7) - - (7)
----------- ------------ ------------ -------
22 82 - 104
=========== ============ ============ =======
From February 2020, the Directors opted to defer their salaries
with payments resuming from 2022. Shares in lieu of salary will be
issued for deferred amounts (note 19).
No directors received pension contributions in 2021 or 2020.
8 OTHER GAINS AND LOSSES
6 months 6 months
to to
30 June 30 June
2021 2020
GBP000 GBP000
Gain on disposal of Helium One shares 36 -
Loss on disposal of Helium One shares (51) -
--------- ---------
(15) -
========= =========
9 DISCONTINUED OPERATIONS
The Company has a 25% interest in a high-quality development
project in Tanzania in which the Directors are actively seeking to
monetise. This stake has been valued at $20m and operations
relating to this stake are detailed below.
The results of the discontinued business, which have been
included in the income statement, balance sheet and cash flow
statement, were as follows:
6 months 6 months
to to
30 June 30 June
2021 2020
GBP000 GBP000
Revenue 9 9
Impairment on fair value revaluation (337) (9)
Loss before taxation (328) -
--------- ---------
Net loss attributable to discontinuation (328) -
========= =========
The Loss after tax on disposal of the assets held for sale is
made up as follows:
GBP000
GBP000
Fair value less costs to sell 14,462
Assets and liabilities classified as held for sale at
31 December 2020 (note 15) 14,637
Additions in 6 months to 30 June 2021 162
14,799
Movement on fair value revaluation at 30 June 2021 (337)
=======
Loss per share impact from discontinued operations:
6 months 6 months
to to
30 June 30 June
2021 2020
GBP000 GBP000
Basic and diluted impact (pence) (0.05) 0.00
========= =========
Cash flow statement
6 months 6 months
to to
30 June 30 June
2021 2020
GBP000 GBP000
Net cash flows from investing activities (162) (151)
--------- ---------
Net cash flows from discontinued operations (162) (151)
========= =========
10 EARNINGS PER SHARE
The calculation of earnings per share is based on the loss after
taxation divided by the weighted average number of shares in issue
during the period:
Six months to Six months
to
30 June 2021 30 June 2020
(Unaudited) (Unaudited)
(Restated)
Weighted average number of ordinary shares used in
calculating
basic and diluted earnings per share (millions) 723.95 631.70
GBP000 GBP000
Earnings
Continuing operations
Profit/(loss) for the period from continued operations 1,833 (1,277)
========================== ========================
Discontinued operations
(Loss)/profit for the period from discontinued operations (328) -
========================== ========================
Basic and diluted earnings per share (pence) 0.25 (0.20)
From continuing operations (0.05) 0.00
From discontinuing operations
-------------------------- ------------------------
0.20 (0.20)
========================== ========================
As the inclusion of the potential ordinary shares would result
in a decrease in the loss per share they are considered to be
anti-dilutive and, as such, a diluted loss per share is not
included.
11 INTANGIBLE ASSETS
Exploration and
evaluation expenditure
Cost GBP000
At 1 January 2020 17,625
Additions at cost 293
Disposals (2,658)
Transfer to held for sale (15,260)
At 31 December 2020 and 30 June 2021 -
------------------------
Impairment
At 1 January 2020 2,658
Eliminated on disposals (2,658)
------------------------
At 31 December 2020 and 30 June 2021 -
------------------------
Carrying amount
At 31 December 2020 and 30 June 2021 -
========================
The additions to deferred exploration and evaluation expenditure
during the period relate mainly to the completion of drilling
operations for the Ntorya-2 appraisal and subsequent testing of the
well.
During the year to 31 December 2020 the interest in the Ausable
Reef gas assets was fully disposed for nominal consideration and no
gain or loss was recognized because the asset was fully impaired at
the date of disposal.
At the date of authorization of these interim financial
statements the Directors were actively seeking sale of all
Tanzanian intangible assets and the assets were reclassified as
held for sale at 31 December 2020 (note 15).
Following a review of the carrying value and future prospects
for Scirocco's assets no impairment has been recognised as the
carrying value is deemed appropriate based on the future
outlook.
12 OIL AND GAS PROPERTIES
Cost GBP000
At 1 January 2020 1,117
Foreign exchange (3)
Transfers to held for sale (1,114)
At 31 December 2020 and 30 June 2021 -
------------------------
Accumulated depreciation
At 1 January 2020 759
Transfers to held for sale (759)
------------------------
At 31 December 2020 and 30 June 2021 -
------------------------
Carrying amount
At 31 December 2020 and 30 June 2021 -
========================
The Oil & Gas properties comprise the 8.29% participating
interest in the Kiliwani North Development Licence, in
Tanzania.
Accumulated amortisation has been calculated on a units of
production basis. As there was no production during the period, the
amortisation is nil (Year to 31 December 2020: nil).
At the date of authorisation of these interim financial
statements the Directors were actively seeking sale of all
Tanzanian oil and gas properties and the assets were reclassified
as held for sale at 31 December 2020 (note 15).
13 INVESTMENTS
Quoted Equity Investments
Cost GBP000
At 1 January 2020 2,927
Fair value revaluation to mark-to-market value (1,385)
-------
At 31 December 2020 1,542
Additions 103
Disposals (3,380)
Fair value revaluation to mark-to-market value 2,910
At 30 June 2021 1,175
-------
Impairment
-------
At 31 December and 30 June 2021 -
Carrying amount
At 30 June 2021 1,175
=======
At 31 December 2020 1,542
=======
The quoted investments in the current period relate to an equity
investment held in Helium One Ltd, a company incorporated in the
British Virgin Islands. Their subsidiaries hold helium mining
licences across Tanzania. Helium One listed on the London Stock
Exchange on 4 December 2020 for 4.25p per share and the shares have
been valued at mark-to-market value of 24.70p on 30 June 2021.
During the period to 30 June, the Company disposed of 17,541,300
shares and acquired 1,000,000 through the exercise of 1,000,000
share options granted to the Company with an exercise price of c.
2.84p/share. On disposal of the shares the investment was revalued
to the mark-to-market value on the various dates of disposal and a
subsequent gain or loss recognised.
Unquoted Equity Investments
Cost GBP000
At 1 January 2020 (as restated) and 31 December 2020 125
Additions 20
------
At 30 June 2021 145
Impairment
------
At 31 December and 30 June 2021 -
Carrying amount
At 30 June 2021 145
======
At 31 December 2020 125
======
The unquoted investments in the current period relate to an
equity investment held in Corallian Energy Limited, a company
incorporated in England which holds interests in oil and gas basins
in the United Kingdom, and Energy Acquisitions Group Limited, a
company incorporated in England which acquires interests in
renewable energy assets in the United Kingdom.
GBP000
Total investments at 30 June 2021 1,320
======
14 SUBSIDIARY COMPANY
The only subsidiary of Scirocco Energy Plc is Scirocco Energy
International Limited a wholly-owned, UK incorporated micro-entity,
which is dormant, and has been since incorporation with an issued
share capital of GBP1. The registered office of the subsidiary is 1
Park Row, Leeds, United Kingdom, LS1 5AB. The subsidiary has not
been consolidated into these accounts as it does not have a
material impact on Scirocco Energy Plc as it is dormant.
The Company has taken advantage of the exemption under the
Companies Act 2006 s405 not to consolidate this subsidiary as it
has been dormant from the date of incorporation and is not material
for the point of giving a true and fair view.
The Board announced on 25(th) of August that the Company had
completed an investment into Energy Acquisitions Group Ltd ("EAG"),
a specialist acquisition and operating vehicle in the sustainable
energy sector. On completion of the investment, the Company owns
50% of the share capital of EAG.
15 ASSETS AND LIABILITIES CLASSIFIED AS HELD FOR SALE
30 June 2021 31 December
2020
GBP000 GBP000
Intangible assets 14,274 14,449
Oil and gas properties 354 354
-------------------------- ------------
Total assets classified as held for sale 14,628 14,803
========================== ============
Decommissioning provision 166 166
-------------------------- ------------
166 166
========================== ============
At the date of authorisation of these interim financial
statements, the Directors were actively seeking a sale of the above
items within the next 12 months (note 9).
16 TRADE AND OTHER RECEIVABLES
30 June 2021 31 December
2020
GBP000 GBP000
Trade receivables 271 273
Less provision for expected credit losses (54) (55)
-------------------------- ------------
217 218
Loan to Helium One Ltd - 73
VAT recoverable 26 16
Prepayments and accrued income 148 114
Other debtors 1,434 -
-------------------------- ------------
1,825 421
========================== ============
The Directors consider that the carrying amount of trade and
other receivables approximates to their fair value.
On 1 March 2019 the Company subscribed to USD $1,000,000
convertible loan notes from Helium One Limited for USD $100,000. In
accordance with the terms of the agreement, a redemption note can
be issued with five days notice. During the period to 30 June 2021
a redemption note was issued and this was subsequently converted to
share capital in Helium One Limited.
17 TRADE AND OTHER PAYABLES
30 June 2021 31 December
2020
GBP000 GBP000
Trade payables 76 152
Other payables 330 34
Social security and other taxation - 5
Accruals 44 57
------------------------- ------------
450 248
========================= ============
The Directors consider that the carrying amount of trade
payables approximates to their fair value.
18 SHARE CAPITAL
Number of shares Nominal value
GBP000
a) Called up, allotted, issued and fully paid: Ordinary
shares of 0.2p each
As at 31 December 2019 631,704,118 1,264
2 July 2020 - placing for cash at 0.02p 15,805,681 32
20 October 2020 - placing for cash at 0.02p 40,604,191 81
20 October 2020 - placing for cash at 0.02p 35,835,585 72
------------------------ --------------
At 31 December 2020 and 30 June 2021 723,949,575 1,448
======================== ==============
30 June 2020 31 December
GBP000 2020
GBP000
b) Deferred shares
Deferred shares of 265,324,634 at 0.69 pence each 1,831 1,831
======================== ==============
c) Total share options in issue
During the period no options were granted.
Exercise price Amended Expiry date Amended Original
(original) options in
issue at
30 June 2021
0.35p 7p 31 October 2021 10,625,000 212,500,000
----------- --------------
10,625,000 212,500,000
=========== ==============
d) Total warrants in issue
No warrants lapsed in the period and no warrants were issued,
cancelled or exercised during the period (2020: nil).
As at 30 June 2021 there were nil outstanding (31 December 2020:
nil).
19 SHARE BASED PAYMENT
The Company has opted to remunerate the directors for the period
to 30 June 2021 by a grant of an option over the ordinary shares of
the capital of the Company as detailed in the deed of option
grants. The life of the options is 18 months, which was 1 January
2020. There are 3 executive directors and 2 non-executive director
who are members of the plan. The following table summarises the
expense recognised in the Statement of Comprehensive Income since
the options were granted.
30 June 2021 31 December
2020
GBP000 GBP000
Directors options 199 236
Incentive options 99 99
Credit to equity for equity-settled share-based payments 298 335
========================= ============
During June 2020 (and the height of the Covid-19 pandemic) the
Company sought to put in place a strategy that would help to
conserve the Company's cash position in the near term and also to
maximise alignment between the Board, Management Team and
Shareholders.
Accordingly, the Company proposed to grant nominal cost options
over new Ordinary Shares of 0.2p (GBP0.002) to Directors and select
members of the Management Team ("the Director Options"). The
Director Options were granted over a total of 8,990,039 Ordinary
Shares and have an aggregate value equal (on a net basis, after
deduction of the nominal exercise price per Ordinary Share) to the
fair value of salary and/or fees due to the relevant option holders
up to 30 June 2021.
Members of the Management Team were also awarded options over
Ordinary Shares with an exercise price of 1.3p (GBP0.013) ("the
Incentive Options"), which was approximately a 24% premium to the
closing mid-market price of the Company's Ordinary Shares on 26
June 2020. Each Incentive Option is ordinarily exercisable on the
3rd anniversary of the grant date (being 30 June 2023), except in
the event of specified corporate events or, exceptionally, if the
option holder leaves as a 'good leaver'.
The Company used the Black-Scholes model to determine the value
of the incentive options and the inputs. There were no incentive
share options for the period ended 30 June 2021. The value of the
options and the inputs for the period ended 30 June 2021 were as
follows:
Issue 30 June
2020
Incentive options
Share price at grant (pence) 1.09
Exercise price at grant (pence) 1.30
Expected volatility (%) 84.42
Expected life (years) 6
Risk free rate (%) 0.17
Expected dividends (pence) nil
Expected volatility was determined using the Company's share
price for the preceding 3 years.
The total share-based payment expense in the period for the
Company was GBP99,207 in relation to the issue of incentive options
(2020: GBP99,207) and GBPnil finance charges in relation to
warrants (2020: GBPnil).
The Incentive Options granted represent approximately 7.9% of
the Company's issued share capital (excluding warrants issued to
Prolific Basins LLC). The Board has retained additional headroom
for additional Incentive Options as it recognises that the future
performance of the Company will be dependent on its ability to
retain the services of key executives.
20 FINANCIAL INSTRUMENTS
Categories of financial instruments
The following table combines information about:
-- Classes of financial instruments based on their nature and characteristics; and
-- The carrying amounts of financial instruments
30 June 2021 31 December
2020
GBP000 GBP000
Financial assets at amortised cost
Trade receivables 217 218
Other debtors 1,433 -
Cash and cash equivalents 2,293 1,168
3,943 1,386
========================= ============
Book value Fair value Book value Fair value
30 June 2021 30 June 2021 31 Dec 2020 31 Dec 2020
GBP000 GBP000 GBP000 GBP000
Financial assets at fair
value
Non-current investment -
Helium One 1,175 1,175 1,542 1,542
Non-current investment -
Corallian Energy Limited 125 125 125 125
Non-current investment -
Energy Acquisitions Group
Limited 20 20 - -
Current loans - Helium One - - 73 73
1,320 1,320 1,740 1,740
============== ============== ========================= =============
30 June 2021 31 December
2020
GBP000 GBP000
Financial liabilities at amortised cost
Trade payables 76 152
Other payables 330 -
Accruals and deferred income 44 57
450 209
========================= ================
The table below analysis financial instruments carried at fair
value, by valuation method.
Fair values are categorised into different levels in a fair
value hierarchy based on the inputs used in the valuation
techniques as follows:
-- Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities.
-- Level 2: inputs other than quoted prices included in Level 1
that are observable for the asset or liability, either directly
(i.e. as prices) or indirectly (i.e derived from prices).
-- Level 3: inputs for the asset or liability that are not based
on observable market data (unobservable inputs).
The fair values for the Company's assets and liabilities are not
materially different from their carrying values in the financial
statements.
The following table presents the Company's financial assets that
are measured at fair value:
Level 1 Level 2 Level 3 Total
GBP000 GBP000 GBP000 GBP000
Non-current investment -
Helium One 1,175 - - 1,175
Non-current investment -
Corallian Energy Limited - - 125 125
Non-current investment -
Energy Acquisitions Group
Limited - - 20 20
1,175 - 145 1,320
======== ======== ======== =======
The Company does not have any liabilities measured at fair
value. There have been no transfers in to or transfers out of fair
value hierarchy levels in the period.
Financial instruments in level 1
The fair value of financial instruments traded in active markets
is based on quoted market prices at the reporting date. A market is
regarded as active if quoted prices are readily and regularly
available from an exchange, dealer, broker, industry group, pricing
service, or regulatory agency, and those prices represent actual
and regularly occurring market transactions on an arm's length
basis. The quoted market price used for financial assets held by
the Company is the current bid price. No investments are valued
using level 1 inputs in the period.
Financial instruments in level 2
The fair value of financial instruments that are not traded in
an active market is determined by using valuation techniques. These
valuation techniques maximise the use of observable market data
where it is available and rely as little as possible on entity
specific estimates. If all significant inputs required to fair
value an instrument are observable, the instrument is included in
level 2. No investments are valued using level 2 inputs in the
period.
Financial instruments in level 3
If one or more of the significant inputs is not based on
observable market data, the instrument is included in Level 3.
Following the guidance of IFRS 9, these financial instruments have
been assessed to determine the fair value of the instrument. In
their assessment, the Directors have considered both external and
internal indicators to decide whether an impairment charge must be
made or whether there needs to be a fair value uplift on the
instrument. Instruments included in Level 3 comprise of convertible
loan notes held with Helium One. Details of this can be found at
Note 13.
The carrying value of the Company's financial assets and
liabilities measured at amortised cost are approximately equal to
their fair value.
The Company is exposed through its operations to one or more of
the following financial risk:
-- Fair value or cash flow interest rate risk
-- Foreign currency risk
-- Liquidity risk
-- Credit risk
-- Market risk
-- Expected credit losses
Policy for managing these risks is set by the Board. The policy
for each of the above risks is described in more detail below.
Fair value and cashflow interest rate risk
Generally the Company has a policy of holding debt at a floating
rate. The Directors will revisit the appropriateness of this policy
should the Company's operations change in size or nature.
Operations are not permitted to borrow long-term from external
sources locally.
Foreign currency risk
Foreign exchange risk arises because the Company has operations
located in various parts of the world whose functional currency is
not the same as the functional currency in which the Company's
investments are operating. The Company's net assets are exposed to
currency risk giving rise to gains or losses on retranslation into
sterling. Only in exceptional circumstances will the Company
consider hedging its net investments in overseas operations as
generally it does not consider that the reduction in volatility in
net assets warrants the cash flow risk created from such hedging
techniques.
The Company's exposure to foreign currency risk at the end of
the reporting period is summaries below. All amounts are presented
in GBP equivalent.
30 June 2021 31 Dec 2020
GBP000 GBP000
USD USD
Trade and other receivables 271 274
Cash and cash equivalents 653 1,006
Trade and other payables - (142)
Net exposure 924 1,138
============= ============
Sensitivity analysis
As shown in the table above, the Company is primarily exposed to
changes in the GBP:USD exchange rate through its cash balance held
in USD and trading balances and to changes in the GBP:EUR exchange
rate due to the deposit denominated in EUR. The table below shows
the impact in GBP on pre-tax profit and loss of a 10%
increase/decrease in the GBP to USD exchange rate, holding all
other variables constant. Also shown is the impact of a 10%
increase/decrease in the GBP to EUR exchange rate, being the other
primary currency exposure.
30 June 2021 31 December
2020
GBP000 GBP000
GBP:USD exchange rate increases 10% 93 126
GBP:USD exchange rate decreases 10% (114) (154)
Liquidity risk
The liquidity risk of each entity is managed centrally by the
treasury function. Each operation has a facility with treasury, the
amount of the facility being based on budgets. The budgets are set
locally and agreed by the board annually in advance, enabling the
cash requirements to be anticipated. Where facilities of entities
need to be increased, approval must be sought from the finance
Director. Where the amount of the facility is above a certain level
agreement of the board is needed.
All surplus cash is held centrally to maximise the returns on
deposits through economies of scale. The type of cash instrument
used and its maturity date will depend on the forecast cash
requirements.
The table below analyses the company's financial liabilities
into relevant maturity groupings based on their contractual
maturities. The amounts presented are the undiscounted cash
flows.
Less than 6 to 12 months Between 1 Between 2
6 months and 2 years and 5 years
GBP000 GBP000 GBP000 GBP000
30 June 2021
Trade and other payables 426 - - -
Total 426 - - -
========== =============== ============= =============
31 December 2020
Trade and other payables 152 - - -
Total 152 - - -
====
Credit risk
The Company is mainly exposed to credit risk from credit sales.
It is Company policy, implemented locally, to assess the credit
risk of new customers before entering contracts. Such credit
ratings are taken into account by local business practices.
The Company does not enter into complex derivatives to manage
credit risk, although in certain isolated cases may take steps to
mitigate such risks if it is sufficiently concentrated.
Market risk
As the Company is now investing in listed companies, the market
risk will be that of finding suitable investments for the Company
to invest in and the returns that those investments will return
given the markets that in which investments are made.
Expected credit losses
Allowances are recognised as required under the IFRS 9
impairment model and continue to be carried until there are
indicators that there is no reasonable expectation of recovery.
For trade and other receivables which do not contain a
significant financing component, the Company applies the simplified
approach. This approach requires the allowance for expected credit
losses to be recognised at an amount equal to lifetime expected
credit losses. For other debt financial assets the Company applies
the general approach to providing for expected credit losses as
prescribed by IFRS 9, which permits for the recognition of an
allowance for the estimated expected loss resulting from default in
the subsequent 12-month period. Exposure to credit loss is
monitored on a continual basis and, where material, the allowance
for expected credit losses is adjusted to reflect the risk of
default during the lifetime of the financial asset should a
significant change in credit risk be identified.
The majority of the Company's financial assets are expected to
have a low risk of default. A review of the historical occurrence
of credit losses indicates that credit losses are insignificant due
to the size of the Company's clients and the nature of the services
provided. The outlook for the oil and gas industry is not expected
to result in a significant change in the Company's exposure to
credit losses. As lifetime expected credit losses are not expected
to be significant the Company has opted not to adopt the practical
expedient available under IFRS 9 to utilise a provision matrix for
the recognition of lifetime expected credit losses on trade
receivables. Allowances are calculated on a case-by-case basis
based on the credit risk applicable to individual
counterparties.
Exposure to credit risk is continually monitored in order to
identify financial assets which experience a significant change in
credit risk. In assessing for significant changes in credit risk
the Company makes use of operational simplifications permitted by
IFRS 9. The Company considers a financial asset to have low credit
risk if the asset has a low risk of default; the counterparty has a
strong capacity to meet its contractual cash flow obligations in
the near term; and no adverse changes in economic or business
conditions have been identified which in the longer term may, but
will not necessarily, reduce the ability of the counterparty to
fulfil its contractual cash flow obligations. Where a financial
asset becomes more than 30 days past its due date additional
procedures are performed to determine the reasons for non-payment
in order to identify if a change in the exposure to credit risk has
occurred.
Should a significant change in the exposure to credit risk be
identified the allowance for expected credit losses is increased to
reflect the risk of expected default in the lifetime of the
financial asset. The Company continually monitors for indications
that a financial asset has become credit impaired with an allowance
for credit impairment recognised when the loss is incurred. Where a
financial asset becomes more than 90 days past its due date,
additional procedures are performed to determine the reasons for
non-payment in order to identify if the asset has become credit
impaired.
The Company considers an asset to be credit impaired once there
is evidence that a loss has been incurred. In addition to
recognising an allowance for expected credit loss, the Company
monitors for the occurrence of events that have a detrimental
impact on the recoverability of financial assets. Evidence of
credit impairment includes, but is not limited to, indications of
significant financial difficulty of the counterparty, a breach of
contract or failure to adhere to payment terms, bankruptcy or
financial reorganisation of a counterparty or the disappearance of
an active market for the financial asset.
A financial asset is only written off when there is no
reasonable expectation of recovery.
A provision matrix can be used based on historical data of
default rates adjusted for a forward-looking estimate. The history
of default rates needs to be accessed in conjunction with the aging
of the trade receivable balance. The aging of a balance alone does
not require a provision but can be used as a structure to apply the
rates calculated. The historical default rates are used in
accordance with forward looking information. From a commercial
perspective the TPDC has continued to delay settlement of the trade
receivables balance based on requests from the TPDC to Aminex for
payments of certain amounts which they wish to offset against the
trade receivables. Until this issue is resolved there will be no
payment of the invoices and as such an ECL is required to be
recognised.
In order to determine the amount of ECL to be recognised in the
financial statements, Scirocco is using a provision matrix based on
its historical observed default rates which is adjusted for
forward-looking estimates and establishes that ECL should be
calculated as:
None-past due 0.5% of carrying value
30 days past due 2% of carrying value
31-60 past due 4% of carrying value
61-90 past due 6% of carrying value
90 days -3 years past due 10% of carrying value
Over 3 years past due 20% of carrying value
The simplified approach enables Scirocco to make an estimate of
ECL as they are unable to track the credit worthiness of customers.
The matrix above reflects the best estimate of the Directors that
the claim by TPDC will be successful and is the lifetime credit
loss expected.
The total outstanding amount is GBP271k at 30 June 2021 which is
all over 3 years past due resulting in an ECL of GBP54k in the
current period.
21 RELATED PARTY TRANSACTIONS
The Company had the following amounts outstanding from its
investee companies (note 13) at the balance sheet date.
30 June 2021 31 December
2020
GBP000 GBP000
Helium One Ltd opening balance 73 76
Foreign exchange movement - (3)
Conversion to share capital in Helium One Limited (73) -
------------------------- ------------
Closing balance - 73
========================= ============
There were no transactions between the parent and its dormant
subsidiary, which are related parties, during the period. Details
of Director's remuneration, being key personnel, are given in Note
7.
The Company entered into transactions with the following related
parties who have common directors during the current period:
30 June 2021 31 December
2020
GBP000 GBP000
Gneiss Energy Limited - provision of corporate finance
advisory - common director Jonathan Fitzpatrick 453 225
Quixote Advisors Ltd - provision of management services
- common director Tom Reynolds (16) 27
During the period the Company paid related party Gneiss Energy
Limited fees related to corporate financial advice and management
services.
22 ULTIMATE CONTROLLING PARTY
In the opinion of the Directors there is no controlling
party.
23 COMMITMENTS
As at 30 June 2021, the Company had no material commitments (31
December 2020: GBPnil).
24 RETIREMENT BENEFIT SCHEME
The Company operates only the basic pension plan required under
UK legislation, contributions thereto during the period amounted to
GBPnil (31 December 2020: nil).
25 CASH GENERATED BY OPERATIONS
30 June 2021 30 June 2020
GBP000 GBP000
Profit/(loss) for the period from continuing operations 1,835 (1,279)
(Loss)/profit for the period for discontinuing operations (328) -
Adjustments for:
Finance costs 1 1
Exchange movement 6 -
(Gain)/loss on disposal of investments 15 -
Revaluation of investments to mark-to-market value (2,910) -
Loss on fair value revaluation of available for sale
assets 337 9
Equity settled share-based payment expense 298 82
(Decrease)/increase in provisions - 15
Movements in working capital:
Decrease in trade and other receivables 456 194
Increase in trade and other payables 198 102
Cash absorbed by operations (92) (876)
========================= ===================
26 EVENTS AFTER THE REPORTING DATE
Sale of Tanzanian Assets
The sale process announced by the Board on the 2(nd) March 2020
continues although the process was disrupted by the COVID-19
pandemic. The Board continues to be confident in the inherent value
of its 25% interest in the Ruvuma asset, particularly taking
account of recent operational progress on the licence, and will
consider reasonable offers that reflect the quality of the asset
and its significant upside potential.
Investment in Energy Acquisition Group
The Board announced on 25(th) of August 2021 that the Company
had completed an investment into Energy Acquisitions Group Ltd
("EAG"), a specialist acquisition and operating vehicle in the
sustainable energy sector. On completion of the investment, the
Company owns 50% of the share capital of EAG.
27 A copy of this interim statement is available on the
Company's website www.sciroccoenergy.com.
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END
IR FLFLAAVIAFIL
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September 30, 2021 02:00 ET (06:00 GMT)
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