Chairman's Statement
I am very pleased to present an update on the
Group for the year ended 31 December 2023. This is my inaugural
Chairman's address, following my appointment to the role of
Chairman on 20 December 2023 upon our admission to trading on
AIM.
A Platform for
Growth
It will be recalled that Dial Square Investments
Plc ("Dial Square") listed on the Main Market of the London Stock
Exchange on 30 November 2022. Following the evaluation of a
number of acquisition opportunities, it announced on 10 March 2023
that it had entered into heads of terms to acquire the entire share
capital of EnergyPathways UK Holdings Ltd., a private company and
the ultimate holder of the Marram Gas Field licence in the East
Irish Sea (the "Acquisition"), with the agreement to acquire the
entire share capital of EnergyPathways UK Holdings Ltd. to be
satisfied by the issue of 68,013,885 Consideration Shares at a
price of 4.0p per share. The Acquisition constituted a
reverse takeover ("RTO") under the Listing Rules.
Concurrent with the Acquisition the Company
raised £2m (before expenses) through the issue of 50,000,000 new
ordinary shares in a placing and subscription at a price of 4.0p
per share, as well as issuing 13,352,674 new ordinary shares at a
price of 4.0p per share to directors and management in settlement
of accrued remuneration. Dial Square formally changed its
name to EnergyPathways plc upon completion of the
acquisition.
EnergyPathways plc is an integrated energy
transition company, initially targeting UK gas assets, with the aim
of bringing into production, in the near-term, low emission energy
solutions to assist with the UK's transition to Net Zero while also
providing critical supply to ensure domestic energy
security.
An Active Period of
Progress
I should take this opportunity to remind
shareholders of the progress made since the RTO and admission to
trading on AIM.
The primary focus for the team is our flagship
Marram gas field project (the "Marram Project" or "Marram") and to
progress the Front End Engineering and Design ("FEED") as we move
towards the Final Investment Decision. We are targeting first
gas in 2025.
This ongoing engineering and design work has
substantially confirmed the potential to fully electrify the Marram
Project and has confirmed the feasibility of EnergyPathways' plan
to develop Marram in a way so as to facilitate future gas storage
there. The future potential for Marram includes integrating
it into a wider UK Irish Sea energy storage project, incorporating
other geo-storage reservoirs, storage infrastructure and hydrogen
production to support the UK energy market's future
needs.
Our efforts to date have excited interest from
renewable energy generators, energy off-takers, debt financiers
and, major engineering houses indicating support for the Marram
Project and of our planned UK Irish Sea low carbon energy storage
project.
We have formed a partnership with subsea
engineering houses Mermaid Subsea Services and Cortez Subsea of the
MCS Group and the partnership is progressing tie-back development
concept engineering. In addition, the Company is progressing
supply chain engagement and scheduling of lead times for certain
long lead items including subsea controls, electro-hydraulic
umbilicals, wellheads, subsea flowlines and other major
items.
The technical team is progressing engineering
and design for an all-electric, zero-emission, subsea production
system with industry stakeholders, including Verlum, Advanced
Mechatronics and Proserv and has also commenced the next phase of
FEED for drilling and completions engineering with Zenith
Energy.
"Out-of-Round" licence requests have been
submitted to the North Sea Transition Authority ("NSTA", the UK's
oil and gas, offshore hydrogen, and gas and carbon storage
industries regulator). The "Out-of-Round" licence requests include
gas production licences for the "ready for development" Knox and
Lowry fields, and gas storage licences for the Marram, Knox and
Lowry fields. If these are won, EnergyPathways will incorporate
them into its UK Irish Sea energy storage project.
Underlying all our work is the determination
to demonstrate clear alignment with the NSTA's aims for:
· decarbonisation of existing
infrastructure; and
· Net Zero objectives for new
gas developments.
We also hope to qualify for any relevant
financial incentives that may be forthcoming from the UK
Government.
Financial Results
The Group incurred a loss for the year to 31
December 2023 of £1,860,916 (31 December 2022 - loss of
£1,257,193). The 2022 comparative numbers are that of the wholly
owned subsidiaries EnergyPathways UK Holdings Limited Group. Refer
to note 2.2 for further detail.
In the year to 31 December 2023, the loss mainly
arose from expenses in connection to the transaction, costs
associated with the admission process including staff remuneration
and consultancy fees, along with general administration expenses.
These expenses have been met from the proceeds of the issue of
shares.
Cash used in operations totalled £372,913 (31
December 2022 - £850,004).
Business
Outlook
EnergyPathways' admission to trading on AIM, in
December 2023, marked a very significant milestone for your Company
and was the culmination of a long period of concept development and
determined management by our CEO, his team and the assembled
Board.
It is also the start of a new journey - one as
an AIM quoted business with a strong commitment to generating
meaningful, long-term, sustainable value for our
shareholders.
Above all, we need to ensure the successful
development of our foundation asset in Marram where we are planning
for first gas in 2025. Our ongoing engineering and design
work has substantially confirmed the potential to fully electrify
the Marram Project and has confirmed the feasibility of
EnergyPathways' plan to develop the Marram Project in a way so as
to enable the project for future gas storage use.
We are, and will remain, wholly focused on what
we can control in terms of the Group's corporate strategy and
technical progress. However, it will be well understood by
all our shareholders, that our industry continues to face
significant headwinds.
We can assure our shareholders that we have
determined and are confident that all the investments on which we
are focused can deliver strong rates of returns and have relatively
low-risk profiles and we will continue to promote what we believe
to be a differentiated and compelling investment proposition for
investors as we compete for capital in what we hope is becoming a
more favourable investment environment.
Our focus on proven "ready-to-go" developments
supports our ability to attract debt financing, which we expect to
fund the large majority of any development. We have already had
positive debt finance discussions and we will continue to build
those relationships. The difference will likely come from a
variety of different sources, including industry partnership, and
we continue to explore the most accessible and least dilutive
options for our shareholders.
The other major headwind is that the Oil &
Gas ("O&G") industry has attracted a great deal of negative
attention for some years now. O&G continues to be as
polarising an issue as any in the public space. In recent times,
the Conservative-led government has seemed to come to its senses to
some extent, and realised that O&G, and gas in particular, is
going to be with us for a very long time to come. It seems to have
realised too that, for both commercial and environmental reasons,
the UK needs to prioritise security of supply, to develop and
exploit its own resources.
With the upcoming general election in the UK in
July 2024, however, the Labour Party has alluded to even more
punitive fiscal measures against producers and is yet to announce
any similar sort of change of heart or mind.
Our role is to continue to engage
collaboratively with the government of whatever colour, as well as
with the NSTA to ensure alignment. We will continue to promote the
benefits of domestic gas production versus higher cost LNG imports
with a significantly larger environmental footprint. We will not
shy away either from engagement with the general public through any
and all media, if and when the occasion presents itself to do
so.
Despite our initial focus on the Marram Project,
it is important to emphasise that EnergyPathways is not a
traditional oil and gas company but is instead the embodiment of a
responsible Energy Transition company - producing vital supply of a
more cost effective and environmentally friendly gas supply vs
importation while progressing plans for the UK's much needed
storage potential.
EnergyPathways plc has a clear long-term
vision:
·
we believe the Company has an important role to play in
'joining up the dots' that form the basis of the UK's energy policy
requirements in both Energy Security and the Energy
Transition;
·
we have a first mover advantage in a unique region with
supportive market dynamics;
·
we are well positioned to leverage that advantage for the
benefit of our shareholders; and
·
we are pragmatic about our current scale versus the size of
our ambition and so will adopt a logical pathway to achieve both
our near-term and longer-term ambitions.
This is a critical year for the Company as we
seek to progress our foundation asset to development and look
forward to updating all our stakeholders on the progress towards
that key milestone.
In conclusion, I would like to thank the wider
Board and management team for their dedication and focus through
what has been a very busy and complex period for the Company - your
efforts have provided a great growth platform for
EnergyPathways.
I would also like to thank all our shareholders,
both old and new, for their support and belief in the team and its
strategic vision, and look forward to rewarding that faith over
time as we deliver on our strategic objectives.
Mark Steeves
Chairman and Non-Executive Director
4 June 2024
1.
General Information
EnergyPathways plc (the "Company" or
"EnergyPathways") is a company incorporated in England and Wales
under the Companies Act 2006 with the registered number 13201653.
The Company's registered office is Highdown House, Yeoman
Way, Worthing, West Sussex, BN99 3HH.
The principal activity of the Group is
delivering clean, home-grown energy for the UK. On 3 March 2022,
the Group acquired a 100% interest in, and is administrator for the
Marram gas field located in the East Irish Sea, with proven
reserves 38.8 Bcf of natural gas.
The financial statements presented for Group are
for the year ended 31 December 2023.
2.
Summary of significant accounting policies
The principal accounting principles applied in
the preparation of these financial statements are set out below.
These principles have been consistently applied to all years
presented, unless otherwise stated.
2.1. Basis of preparation
The financial statements have been prepared in
accordance with UK adopted International Accounting Standards
(IAS).
The financial statements have been prepared
under the historical cost convention.
2.2. Basis of Consolidation
The financial statements consolidate the
financial information of the Company and its subsidiaries
EnergyPathways UK Holdings Ltd and EnergyPathways Irish Sea Limited
(together "the Subsidiaries") at the reporting date. Subsidiaries
are consolidated into the Group when control is achieved, defined
as where the Company has the power to govern the financial and
operating policies of an investee entity, has the rights to
variable returns from its involvement with the investee and has the
ability to use its power to affect its returns. The results of the
Subsidiaries included in the financial information are from the
effective date of acquisition. All intra-Group transactions,
balances, income and expenses are eliminated on consolidation. The
financial statements of all Group companies are adjusted, where
necessary, to ensure the use of consistent accounting
policies.
The Company has two subsidiaries as
follows:
|
Company
|
Country of
Incorporation
|
Incorporated
|
Interest
|
|
EnergyPathways UK
Holdings Ltd
|
United
Kingdom
|
16 July
2021
|
100%
|
|
EnergyPathways Irish
Sea Limited
|
United
Kingdom
|
11 August
2021
|
100%
|
EnergyPathways plc has used
the exemption granted under s408 of the Companies Act 2006 that
allows for the non-disclosure of the Income Statement of the parent
company. The after-tax loss attributable to EnergyPathways plc for
the 10-month period ended 31 December 2023 was £730,971 (year to 28
February 2023: £611,775).
2.3. Going concern
The Group meets its working capital requirements
from its cash and cash equivalents. The Group is pre-revenue, and
to date has raised finance for its activities through the issue of
equity. The Directors have prepared a detailed forecast for
the 12 months following the date of signing this report based on
forecasted expenditure, including all required spend to meet short
term licence requirements. This forecast has been stress tested by
Management. However the Group's ability to meet future
operational objectives through to first production of gas from the
Marram Gas Project will be reliant on raising further
finance.
The Directors are confident that further funds
can be raised and it is appropriate to prepare the financial
statements on a going concern basis, however there can be no
certainty that any financing will complete. These conditions
indicate existence of a material uncertainty related to events or
conditions that may cast significant doubt about the Group's
ability to continue as a going concern, and, therefore, that it may
be unable to realise its assets and discharge its liabilities in
the normal course of business. The auditors have made reference to
this material uncertainty within their audit report. These
financial statements do not include the adjustments that would be
required if the Group could not continue as a going
concern.
2.4. Changes in accounting policies
2.4.1. New standards, amendments
to standards and interpretations
i) New and
amended standards adopted by the Group
The International Accounting Standards Board
(IASB) issued various amendments and revisions to International
Financial Reporting Standards and IFRIC interpretations. A number
of amendments and revisions were applicable for the period ended 31
December 2023 but did not result in any material changes to the
financial statements of the Group.
Of the other IFRS and IFRIC amendments, none are
expected to have a material effect on the future Group Financial
Statements.
ii)
New and amended standards not yet adopted by the Group
The Directors do not believe that the
implementation of new standards, amended standards and
interpretations issued but not yet effective and have not been
early adopted early will have a material impact once implemented in
future periods.
2.5. Foreign currency
2.5.1. Functional and presentation
currency
Items in the Company's financial statements are
measured in the currency of the primary economic environment in
which the entity operates (functional currency). The functional
currency of the Company is Pounds sterling (£), which is also the
presentation currency for these financial statements.
Monetary amounts in these financial statements
are rounded to the nearest £.
2.5.2.Transactions and balances
Foreign currency transactions are translated into the
functional currency using the exchange rates prevailing at the
dates of the transactions or valuation where items are re-measured.
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 income statement, except when
deferred in other comprehensive income as qualifying cash flow
hedges and qualifying net investment hedges. Foreign exchange gains
and losses that relate to borrowings and cash and cash equivalents
are presented in the income statement within 'finance income or
costs.' All other foreign exchange gains and losses are presented
in the income statement within 'Other (losses)/gains.'
2.6. Taxation
Tax is recognised in the Consolidated Statement
of Comprehensive Loss, except to the extent that it relates to
items recognised in other comprehensive income or directly in
equity. In this case, the tax is also recognised in other
comprehensive income or directly in equity respectively. Deferred
tax assets are not brought to account in the Consolidated Statement
of Financial Position until there is a reasonable expectation that
these assets will be realised.
2.7. Intangible assets
Exploration and evaluation expenditures
(E&E)
The Group applies the successful
efforts method of accounting for oil and gas assets, having regard
to the requirements of IFRS 6 'Exploration for and Evaluation of
Mineral Resources'. Costs incurred prior to obtaining the legal
rights to explore an area are expensed immediately to the Statement
of Comprehensive Income.
All licence acquisitions, exploration and evaluation
costs are capitalised, a share of administration costs is
capitalised insofar as they relate to exploration, evaluation and
development activities. These costs are written off unless
commercial reserves have been established or the determination
process has not been completed and there are no indications of
impairment. If a project is deemed commercial, all of the
attributable costs are transferred into Property, Plant and
Equipment. These costs are then depreciated from the commencement
of production on a unit of production basis.
2.8. Impairment of non-financial
assets
The Group assesses at each reporting date whether
there is an indication that an asset may be impaired. If any such
indication exists, or when annual impairment testing for an asset
is required, the Group makes an estimate of the asset's recoverable
amount.
An asset's recoverable amount is the higher of its
fair value less costs to sell and its value in use.
In assessing value in use, estimated future cash
flows are discounted to their present value using a pre-tax
discount rate that reflects current market assessments of the time
value of money and the risks specific to the asset.
2.9. Financial Instruments
2.9.1 Initial recognition
A financial asset or financial liability is
recognised in the statement of financial position of the
Group when it arises or when the Group becomes a
party to the contractual terms of the financial
instrument.
2.9.2 Classification
Financial assets at amortised cost
The Group measures financial assets at amortised cost
if both of the following conditions are met:
(1) the asset is held within a business model
whose objective is to collect contractual cash flows; and
(2) the contractual terms of the financial
asset generating cash flows at specified dates only pertain to
capital and interest payments on the balance of the initial
capital.
Financial assets which are measured at amortised cost,
are measured using the Effective Interest Rate Method (EIR) and are
subject to impairment. Gains and losses are recognised in profit or
loss when the asset is derecognised, modified or impaired.
Financial liabilities at amortised cost
Financial liabilities measured at amortised cost
using the effective interest rate method include current trade and
other payables that are short term in nature. Financial liabilities
are derecognised if the Group's obligations specified
in the contract expire or are discharged or cancelled.
Amortised cost is calculated by taking into
account any discount or premium on acquisition and fees or costs
that are an integral part of the effective interest rate ("EIR").
The EIR amortisation is included as finance costs in profit or
loss. Trade payables other payables are non-interest bearing and
are stated at amortised cost using the effective interest
method.
2.9.3. Derecognition
A financial asset is derecognised when:
(1) the rights to
receive cash flows from the asset have expired, or
(2) the Group has
transferred its rights to receive cash flows from the asset or has
undertaken the commitment to fully pay the cash flows received
without significant delay to a third party under an arrangement and
has either (a) transferred substantially all the risks and the
assets of the asset or (b) has neither transferred nor held
substantially all the risks and estimates of the asset but has
transferred the control of the asset.
2.9.4 Impairment
The Group recognises a provision
for impairment for expected credit losses regarding all financial
assets. Expected credit losses are based on the balance between all
the payable contractual cash flows and all discounted cash flows
that the Group expects to receive. Regarding trade receivables, the
Group applies the IFRS 9 simplified approach in order to calculate
expected credit losses. Therefore, at every reporting date,
provision for losses regarding a financial instrument is measured
at an amount equal to the expected credit losses over its lifetime
without monitoring changes in credit risk. To measure expected
credit losses, trade receivables and contract assets have been
grouped based on shared risk characteristics.
2.10. Trade and other
receivables
Trade and other receivables are initially
recognised at fair value when related amounts are invoiced then
carried at this amount less any allowances for doubtful debts or
provision made for impairment of these receivables.
2.11. Cash and cash
equivalents
Cash and cash equivalents comprise cash at bank
and in hand and are subject to an insignificant risk of changes in
value.
2.12. Share capital
Ordinary shares are classified as equity.
Incremental costs directly attributable to the issue of new shares
or options are shown in equity as a deduction, net of tax, from the
proceeds.
2.13. Share premium
Share premium account represents the excess of
the issue price over the par value on shares issued. Incremental
costs incurred directly, or warrants issued in connection with the
issue of new ordinary shares or are shown in equity as a deduction,
net of tax, from the proceeds.
2.14. Trade payables
These financial liabilities are all non-interest
bearing and are initially recognised at the fair value of the
consideration payable.
2.15. Finance income and finance
costs
Finance income comprises interest income on bank
funds. Interest income is recognised as it accrues in profit
or loss, using the effective interest method. Finance costs
comprise interest expense on borrowings. Borrowing costs are
recognised in profit or loss in the period in which they are
incurred.
2.16. Earnings per share
Basic Earnings per share is calculated as profit
attributable to equity holders of the parent for the period divided
by the weighted average number of ordinary shares, adjusted for any
bonus element.
2.17.
Operating segments
The Chief Operating Decision Maker (CODM) is
considered to be the Board of Directors. They consider that
the Group operates in a single segment, that of
natural gas exploration, appraisal and development, in a single
geographical location, the East Irish Sea of the United Kingdom. As
a result, the financial information of the single segment is the
same as set out in the Consolidated Statement of Comprehensive
Loss, Consolidated Statement of Financial Position, Consolidated
Statement of Changes in Equity and Consolidated Statement of
Cashflows.
2.18.
Share Based Payments
Where options or warrants are awarded for
services, the fair value, at the grant date, of equity-settled
share awards is charged to income or loss over the period for which
the benefits of employees and others providing similar services are
expected to be received. The corresponding accrued
entitlement is recorded in the share based payments reserve.
The amount recognised as an expense is adjusted to reflect the
number of share options or warrants expected to vest. The fair
value of options and warrants awards is calculated using the
Black-Scholes option pricing model which considers the following
factors:
|
·
Exercise price
|
·
Current market price of the underlying shares
|
|
·
Expected life of the award
|
·
Risk-free interest rate
|
|
·
Expected volatility
|
|
When equity instruments are modified, if the
modification increases the fair value of the award, the additional
cost must be recognised over the period from the modification date
until the vesting date of the modified award.
3.
Significant accounting estimates and judgements, estimates
and assumptions
The preparation of financial statements using
accounting policies consistent with IFRS requires the Directors to
make estimates and assumptions that affect the reported amounts of
assets and liabilities, disclosure of contingent assets and
liabilities and the reported amounts of income and expenses. The
preparation of financial statements also requires the Directors to
exercise judgement in the process of applying the accounting
policies. Changes in estimates, assumptions and judgements can have
a significant impact on the financial statements.
Recoverable value of intangible
assets (refer to note 11)
As at 31 December 2023, the Group held gas
development intangible assets of £729,931 (2022: £318,001). The
carrying values of intangible assets are assessed for indications
of impairment, as set out in IFRS 6, on an annual basis. As part of
this impairment assessment, the recoverable value of the intangible
assets is required to be estimated.
When estimating the recoverable value of the
intangibles Management consider the proved, probable and potential
resources per the latest CPR, likely production costs and the
forecasted gas prices.
As a result of the budget development costs, the
licence being valid and the assessed recoverable value of the
intangibles being in excess of the carrying value, Management do
not consider that any intangible assets are impaired as at 31
December 2023.
These estimates and assumptions are subject to
risk and uncertainty and therefore a possibility that changes in
circumstances will impact the assessment of impairment
indicators.
There was only one critical judgement
identified, being the determination on impairment of intangible
assets, apart from those involving estimations (which are dealt
with separately above) that the Directors have made in the process
of applying the Group's accounting policies and that
have the most significant effect on the amounts recognised in the
financial statements.
Fair value of share based
payments
The Company has made awards of Director and
Management options and warrants over its unissued share
capital.
The valuation of these options and warrants
involves making a number of critical estimates relating to price
volatility, future dividend yields, expected life of the options
and forfeiture rates. The key judgement involved the
determination of an appropriate of volatility, which has been
estimated based on the average historic volatility of the share
prices of a selection of three peer companies for a period equal to
the expected term from the grant date. Further detail on the
assumptions has been described in more detail in note 18 to these
Group Financial Statements.
4.
Reverse acquisition and admission to AIM
On 20 December 2023, the Company
acquired the entire issued share capital of EnergyPathways UK
Holdings Ltd, a private company incorporated in the United Kingdom, by way of a share for share
exchange.
Although the transaction resulted
in EnergyPathways UK Holdings Ltd becoming a wholly owned
subsidiary of the Company, the transaction constitutes a reverse
acquisition in as much as the shareholders of EnergyPathways UK
Holdings Ltd own a substantial majority of the outstanding ordinary
shares of the Company and all 6 members of the Board of Directors
of the Company are EnergyPathways UK Holdings Ltd shareholders and
management.
In substance, the shareholders
of EnergyPathways UK Holdings Ltd
acquired a controlling interest in the Company and
the transaction has therefore been accounted for as a reverse
acquisition ("RTO"). As the Company previously discontinued its
investment activities and was engaged in acquiring
EnergyPathways UK Holdings Ltd and raising
equity financing to provide the required funding for the operations
of the acquisition and admission of the Company's shares to trading
on the AIM market of the London Stock Exchange ("AIM"), it did not
meet the definition of a business according to the definition in
IFRS 3. Accordingly, this reverse acquisition does not
constitute a business combination and was accounted for in
accordance with IFRS 2 Share-based payment and IFRIC guidance, with
the difference between the equity value given up by the
EnergyPathways UK Holdings Ltd shareholders and the share of the fair value of net assets
gained by the EnergyPathways UK Holdings
Ltd shareholders charged to the statement
of comprehensive income as the cost of admission to
AIM.
Following the completion of the transaction
the Company changed its name to EnergyPathways plc.
4. Reverse
acquisition and admission to AIM (continued)
In accordance with reverse
acquisition accounting principles, these consolidated financial
statements represent a continuation of the consolidated financial
statements of EnergyPathways UK Holdings
Ltd and include:
a. The assets and liabilities of EnergyPathways UK Holdings Ltd at
their pre-acquisition carrying amounts and the results for both
periods; and
b. The assets and liabilities of the Company as at 31 December
2023 and its results from 20 December
2023 to 31 December 2023,
On 20 December 2023, the Company
issued 68,013,885 shares for all 143,333,324 ordinary shares,
15,100,000 performance shares and 20,000,000 warrants of
EnergyPathways UK Holdings Ltd.
As of 20 December 2023, the last
quoted share price of Dial Square Investments Plc (renamed
EnergyPathways PLC upon completion of the transaction) was £0.0325
and therefore this valued the investment in EnergyPathways UK
Holdings Ltd at £862,875.
Because the legal subsidiary,
EnergyPathways UK Holdings Ltd, was treated as the accounting
acquirer and the legal Parent Company, Dial Square Investments Plc,
was treated as the accounting subsidiary, the fair value of the
shares deemed to have been issued by EnergyPathways UK Holdings Ltd
was calculated at £1,213,303 based on an assessment of the purchase
consideration for an 100% holding in EnergyPathways plc.
The fair value of net assets of
Dial
Square Investments plc was as follows:
|
|
£
|
|
Cash and cash equivalents
|
238,320
|
|
Other assets
|
205,545
|
|
Liabilities
|
(245,832)
|
|
Net assets
|
198,033
|
The difference between the deemed
cost and the fair value of the net assets acquired of £1,015,270
has been expensed in accordance with IFRS 2, Share based
payments, reflecting the economic cost to the EnergyPathways UK Holdings Ltd shareholders of acquiring a quoted entity.
The transfers to retained earnings that arose
pursuant to the RTO are as follows:
|
|
Year
Ended 31 December 2023
|
|
|
£
|
|
As at start of year
|
-
|
|
Pre-acquisition losses of
EnergyPathways plc 1
|
(695,748)
|
|
EnergyPathways UK Holdings Ltd
issued capital at acquisition2
|
1,108,510
|
|
Investment in EnergyPathways UK
Holdings Ltd 3
|
(2,734,160)
|
|
Reverse acquisition
expense4
|
1,015,270
|
|
Total
|
(1,306,128)
|
4. Reverse
acquisition and LSE listing (continued)
The movements within retained
earnings relating to the RTO are as follows:
1) These
consolidated financial statements present the legal capital
structure of the Company. However, under reverse acquisition
accounting rules, the Company was not acquired until 20 December
2023 and therefore the entry above is required to eliminate the
initial retained losses of the Company.
2) EnergyPathways UK Holdings Ltd had issued share capital of
equivalent to £1,108,510 as at 20 December
2023. As these financial statements present the capital structure
of the parent entity, the issue of equity by EnergyPathways UK
Holdings Ltd has been transferred to this reserve.
3) The Company issued 68,013,885 shares at 4 pence each,
totalling £2,720,555 for the entire issued capital of
EnergyPathways UK Holdings Ltd, as well as stamp duty of £13,605.
The above entry is required to eliminate the balance sheet impact
of this transaction.
4) The
reverse acquisition accounting is described in detail in note 4.
The entry above represents the difference between the value of the
equity issued by the Company, and the deemed consideration given by
EnergyPathways UK Holdings Ltd to acquire the Company.
5.
Administrative expenses
|
|
Group
2023
|
|
Group
2022
|
|
|
£
|
|
£
|
|
Consultants and advisors
|
228,393
|
|
234,684
|
|
Insurance
|
15,832
|
|
2,021
|
|
Other
|
10,812
|
|
11,557
|
|
Professional fees
|
35,833
|
|
170,176
|
|
Share based payments
|
202,000
|
|
43,200
|
|
Travel
|
(3,121)
|
|
67,341
|
|
Wages & salaries
|
105,363
|
|
87,738
|
|
Foreign Exchange
|
1,264
|
|
5,247
|
|
|
596,376
|
|
621,964
|
6.
Finance income & finance costs
|
|
Group
2023
|
|
Group
2022
|
|
|
£
|
|
£
|
|
Finance
income
|
|
|
|
|
Interest received
|
72
|
|
-
|
|
|
|
|
|
|
Finance
costs
|
|
|
|
|
Interest expense
|
(809)
|
|
-
|
|
Net finance
costs
|
(737)
|
|
-
|
7.
Auditor's Remuneration
|
|
Group
|
|
Group
|
|
|
2022
|
|
2022
|
|
|
£
|
|
£
|
|
Audit of the financial statements
|
30,000
|
|
-1
|
|
|
30,000
|
|
-
|
1
The comparatives are of the Group comprised of
EnergyPathways UK Holdings Limited and EnergyPathways Irish Sea
Limited which was exempt from statutory audit prior to the Reverse
Take Over.
8. Staff
numbers and costs
|
|
Group
|
|
Group
|
|
|
2023
|
|
2022
|
|
Staff costs
(including directors)
|
£
|
|
£
|
|
Consultancy fees
|
219,431
|
|
165,787
|
|
Wages and salaries
|
105,363
|
|
87,738
|
|
Share based payments
|
40,000
|
|
32,313
|
|
|
364,794
|
|
285,838
|
The average number of persons (including
directors) employed by the Company during the 10-month period to 31
December 2023 was:
|
Group and Company
|
10-month period to
31 December 2023
|
|
Year to 28 February
2023
|
|
|
|
|
|
|
Directors
|
2
|
|
3
|
|
|
2
|
|
3
|
|
|
|
Group
|
|
Group
|
|
|
|
2023
|
|
2022
|
|
Director
emoluments
|
Note
|
£
|
|
£
|
|
Wages and salaries
|
|
89,289
|
|
42,000
|
|
Share based payments
|
18
|
29,000
|
|
-
|
|
|
|
118,289
|
|
42,000
|
The number of Directors that are members of a
defined contribution pension scheme is 1 (2022: nil). Pension
contributions paid to a defined contribution scheme in respect of
the highest paid Director amounted to £nil (2022: £nil).
9.
Taxation
Analysis of charge for the
period:
|
|
Group
2023
£
|
|
Group
2022
£
|
|
Current income tax charge
|
-
|
|
-
|
|
Deferred tax charge
|
-
|
|
-
|
|
Total taxation
credit/(charge)
|
-
|
|
-
|
9.1 Taxation
reconciliation
The below table reconciles the tax charge for
the period to the theoretical charge based on the result for the
year and the corporation tax rate.
|
|
2023
£
|
|
2022
£
|
|
Loss before income tax
|
(1,860,916)
|
|
(1,257,193)
|
|
Tax at the applicable rate of 19%
(2022: 19%)
|
(353,574)
|
|
(238,867)
|
|
Effects of:
|
|
|
|
|
Expenses not deducted for tax
purposes
|
113,959
|
|
9,445
|
|
Tax losses not recognised
|
239,615
|
|
229,422
|
|
Total income tax credit /
(expense)
|
-
|
|
-
|
As at 31 December 2023, the Group had unused tax
losses of £1,323,416 (2022: £893,255) for which no deferred tax
asset has been recognised. This is due to uncertainty over the
availability of future taxable profits to offset these losses
against.
10. Earnings
per share
The calculation of the Basic and fully diluted
earnings per share is calculated by dividing the loss for the year
from continuing operations of £1,860,916 (2022: £1,257,193) for the
Group by the weighted average number of ordinary shares in issue
during the year of 72,773,014 (2022: 68,013,885).
The weighted average number of shares is
adjusted for the impact of the reverse acquisition as
follows:
- Prior to the reverse takeover,
the number of shares is based on EnergyPathways UK Holdings Ltd,
adjusted using the share exchange ratio arising on the reverse
takeover; and
- From the date of the
reverse takeover, the number of share is based on the Company.
There is no difference between the basic and
diluted earnings per share as there were no securities in issue as
at 31 December 2023 that would have a dilutive effect on earnings
per share. Refer to note 18 for details on details of warrants on
issue as at 31 December 2023, that can be converted into ordinary
shares and thus would have a dilutive effect on earnings per
share.
|
|
2023
£
|
|
2022
£
|
|
|
|
|
|
|
Loss for the purposes of basic
earnings per share being net loss attributable to the
owners
|
(1,860,916)
|
|
(1,257,193)
|
|
Weighted average number of Ordinary
Shares
|
72,773,014
|
|
68,013,885
|
|
|
|
|
|
|
Loss per share - pence
|
(2.55)
|
|
(1.85)
|
11. Intangible
assets
|
|
Gas development
assets
|
|
|
£
|
|
As at 16 July 2021
|
|
|
Additions
|
318,001
|
|
As at 31 December 2022
|
318,001
|
|
Additions
|
411,930
|
|
As at 31 December 2023
|
729,931
|
The carrying value of the prospecting and
exploration rights is supported by the estimated resource and
current market values as contained in the Competent Person's Report
date 20 November 2023 which was prepared by Risk Advisory Pty Ltd
and included in the Company's AIM admission document which is
available on the Company's website.
12. Trade and
other receivables
|
|
|
Group
As at 31
December
2023
|
|
Group
As at 31
December
2022
|
|
Company
As at 31
December
2023
|
|
Company
As at 28
February
2023
|
|
|
|
£
|
|
£
|
|
£
|
|
£
|
|
Other receivables
|
|
1,714,645
|
|
137,455
|
|
1,714,645
|
|
-
|
|
Prepayments
|
|
56,050
|
|
21,815
|
|
56,050
|
|
4,352
|
|
VAT receivable
|
|
58,584
|
|
-
|
|
49,123
|
|
15,846
|
|
|
|
1,829,279
|
|
159,270
|
|
1,819,818
|
|
20,198
|
The fair value of other receivables is the same
as their carrying values as stated above.
The maximum exposure to credit risk of Other
receivables at the reporting date is the carrying value. The entire
amount of £1,714,645 has been received as at the date of signing
this report.
13. Cash and
cash equivalents
|
|
|
Group
As at 31
December
2023
|
|
Group
As at 31
December
2022
|
|
Company
As at 31
December
2023
|
|
Company
As at 28
February
2023
|
|
|
|
£
|
|
£
|
|
£
|
|
£
|
|
Cash at bank and in hand
|
|
494,658
|
|
71,061
|
|
485,780
|
|
709,138
|
|
|
|
494,658
|
|
71,061
|
|
485,780
|
|
709,138
|
There is no material difference
between the fair value of cash and cash equivalents and their book
value.
14. Loan to
subsidiaries
|
Company:
|
|
|
|
|
|
EPL
£
|
EPISL
£
|
Total
£
|
|
As at 1
March 2023
|
-
|
|
-
|
|
Loan
drawdowns
|
200,000
|
375,961
|
575,961
|
|
Repayments
|
-
|
(20,160)
|
(20,160)
|
|
As at 31
December 2023
|
200,000
|
355,801
|
555,801
|
EnergyPathways plc made a loan to
EnergyPathways UK Holdings Limited ("EPL") of £200,000 on 10 March
2023. The loan is interest free and will be repaid when EPL's
operational cash flow allows. Management has undertaken an
impairment assessment of the loan as at 31 December 2023, and has
determined that that there was no impairment required. The interest
rate and impairment assessment are reviewed on an annual
basis.
EnergyPathways plc has made net cumulative
loans to EnergyPathways IrishSea Limited ("EPISL") of £355,801 as
at 31 December 2023. The loan is interest free and will be repaid
when EPISL's operational cash flow allows. Management has
undertaken an impairment assessment of the loan as at 31 December
2023, and has determined that that there was no impairment
required. The interest rate and impairment assessment are reviewed
on an annual basis.
15. Investment
in subsidiaries
|
Company
|
Country of
Incorporation
|
Incorporated
|
Registered address
|
Interest
|
|
EnergyPathways UK
Holdings Ltd
|
United
Kingdom
|
16 July
2021
|
Highdown House,
Yeoman House, Worthing, West Sussex, BN99 3HH
|
100%
|
|
EnergyPathways Irish
Sea Limited
|
United
Kingdom
|
11 August
2021
|
Highdown House,
Yeoman House, Worthing, West Sussex, BN99 3HH
|
100%
|
The acquisition of EnergyPathways UK Holdings
Ltd took place on 20 December 2023. Refer to note 4 for further
details.
|
|
£
|
|
As at 1 March 2023
|
-
|
|
Additions
|
2,734,160
|
|
As at 31 December 2023
|
2,734,160
|
16. Trade and
other payables - due within one year
|
|
|
Group
As at 31
December
2023
|
|
Group
As at 31
December
2022
|
|
Company
As at 31
December
2023
|
|
Company
As at 28
February
2023
|
|
|
|
£
|
|
£
|
|
£
|
|
£
|
|
Trade payables
|
|
782,647
|
|
284,825
|
|
397,585
|
|
73,200
|
|
Accruals
|
|
405,141
|
|
368,991
|
|
118,081
|
|
158,609
|
|
|
|
1,187,788
|
|
653,816
|
|
515,666
|
|
231,809
|
The carrying values of trade and other payables
are considered to be a reasonable approximation of the fair value
and are considered by the Directors as payable within one
year.
17. Ordinary
share capital and share premium
|
Group
|
|
|
|
|
Issued
|
Number of
shares
|
Ordinary share
capital
£
|
Share
premium
£
|
Performance
shares
£
|
|
As at 31 December 2021 (Unaudited)
|
158,433,324
|
14,333
|
1,092,667
|
1,510
|
|
As at 31 December 2022
|
158,433,324
|
14,333
|
1,092,667
|
1,510
|
|
Transfer of EPL paid up capital to Reverse
acquisition reserve 20 Dec 2023
|
(158,433,324)
|
(14,333)
|
(1,092,667)
|
(1,510)
|
|
Issued capital of plc at acquisition 20 Dec
2023
|
26,550,000
|
265,500
|
628,281
|
-
|
|
Issue of shares for acquisition of
subsidiary
|
68,013,885
|
680,139
|
2,040,417
|
-
|
|
Issue of shares for services
|
13,352,674
|
133,527
|
400,580
|
-
|
|
Issue of shares - share subscription
|
50,000,000
|
500,000
|
1,500,000
|
-
|
|
Share issue costs
|
-
|
-
|
(117,326)
|
-
|
|
As at 31 December 2023
|
157,916,559
|
1,579,166
|
4,451,952
|
-
|
The issued capital of the Group for the period
31 December 2021 to 20 December 2023 is that of EnergyPathways UK
Holdings Ltd. ("EPL"). Upon completion of the acquisition the share
capital of EPL was transferred to the Reverse acquisition reserve
(see note 4) and the share capital of EnergyPathways plc was
brought to account.
|
Company
|
|
|
|
Issued
|
Number of
shares
|
Ordinary share
capital
£
|
Share
premium
£
|
|
As at 28 February 2023
|
26,550,000
|
265,500
|
628,281
|
|
Issue of shares for acquisition of
subsidiary
|
68,013,885
|
680,139
|
2,040,417
|
|
Issue of shares for services
|
13,352,674
|
133,527
|
400,580
|
|
Issue of shares - share subscription
|
50,000,000
|
500,000
|
1,500,000
|
|
Share issue costs
|
-
|
-
|
(117,326)
|
|
As at 31 December 2023
|
157,916,559
|
1,579,166
|
4,451,952
|
The ordinary shares have a nominal value of 0.01
pence per share and confer the right to vote at general meetings of
the Company, to a repayment of capital in the event of liquidation
or winding up and certain other rights as set out in the Company's
articles of association.
On 20 December 2023, 68,013,885 ordinary shares
were issued at 4.0 pence each for the entire issued share capital
of EPL.
On 20 December 2023, 13,352,674 ordinary shares
were issued at 4.0 pence each to directors & management in
settlement of accrued remuneration.
On 20 December 2023, 50,000,000 ordinary shares
were issued to subscribers at 4.0 pence each.
17. Ordinary share
capital and share premium (continued)
The following describes the nature and purpose
of each reserve within equity:
|
Equity and
Reserve
|
Description and
purpose
|
|
Ordinary share capital
|
Represents the nominal value of shares
issued
|
|
Share premium account
|
Amount subscribed for share capital in excess of
nominal value
|
|
Share based payments reserve
|
Represents the value of warrants
issued
|
|
Reverse acquisition reserve
|
Reserve created in accordance with the
acquisition of EnergyPathways UK Holdings Ltd on 20 December 2023,
in accordance with IFRS 2.
|
|
Retained earnings
|
Cumulative net gains and losses recognised in
the Consolidated Statement of Comprehensive Income
|