TIDMLBE
RNS Number : 6535Z
Longboat Energy PLC
22 September 2020
Longboat Energy PLC
("Longboat Energy", the "Company" or "Longboat")
Results for Half Year Ended 30 June 2020
London, 22 September 2020 - Longboat Energy, established by the
former management team of Faroe Petroleum plc to build a
significant North Sea-focused E&P business, announces its
half-year results for the six months ended 30 June 2020.
Highlights
Financial Summary
-- Cash reserves of GBP8.1 million at 30 June 2020 with no debt
(31 Dec 2019: GBP9.2 million) which allows the Company ample
headroom to continue to pursue its business development
activities.
-- Low fixed running costs of GBP125k per month, together with
low variable due diligence costs triggered by the impact of
COVID-19 on the A&D market, allows the Company significant
capacity to pursue attractive opportunities as activity picks
up.
Business Summary
-- During Q1 2020, the Company was engaged in a number of
processes to acquire portfolios with positive cash flow, 2P
reserves and growth, with negotiations curtailed due to
Covid-related market conditions.
-- As business and market activity returns, Longboat is actively
leveraging relationships, testing creative and new business
development ideas and is making good progress on several
fronts.
-- Recently introduced Norwegian tax changes have lowered
breakeven oil prices and increased Internal Rate of Return (IRR)
for non-sanctioned projects which will accelerate new project
developments and drilling plans. The impact of these changes allows
Longboat to now consider modest exposure to Norwegian development
assets in combination with a production acquisition.
Outlook
-- The Company's core strategy remains unchanged and the market
dislocation presents an exciting opportunity as the backlog of
transactions begins to unwind.
-- Many of the Majors and large E&P players in the North Sea
have announced significant changes in strategic direction which
will involve a substantial divestment of assets.
-- Longboat is well positioned to pursue the expected
forthcoming transactional opportunities, guided by a management
team with a strong track record of delivering value through
M&A.
Helge Hammer, Chief Executive Officer of Longboat Energy
commented:
"We floated the business in November 2019 having identified an
opportunity to build a new, North Sea-focused E&P business
through value-accretive M&A transactions. At the beginning of
the year, we were engaged in a number of opportunities but our
business development activities were curtailed by the onset of the
coronavirus pandemic as the sector entered a period of huge
uncertainty and market volatility.
"Despite the challenging times, we see encouraging signs of
recovery and have remained active throughout the period as we
leverage the experience and creativity of our team and our industry
relationships to generate business opportunities. As a result of
policy changes and strategic shifts by existing players, we believe
there will be increased opportunities to secure quality assets on
attractive terms in the period ahead, and we remain focused on
delivering the best possible deal for our shareholders."
This announcement does not contain inside information.
Enquiries:
Longboat Energy via FTI
Helge Hammer, Chief Executive Officer
Jon Cooper, Chief Financial Officer
Stifel (Nomad) Tel: +44 20 7710 7600
Callum Stewart
Jason Grossman
Simon Mensley
Ashton Clanfield
FTI Consulting (PR adviser) Tel: +44 20 3727 1000
Ben Brewerton
Sara Powell
Ntobeko Chidavaenzi longboatenergy@fticonsulting.com
OPERATIONAL REPORT FOR THE 6 MONTH PERIODED 30 JUNE 2020
CEO Introductory Statement
We floated Longboat on AIM last November having identified an
opportunity to replicate the success of Faroe Petroleum by building
a new, North Sea-based E&P business through value-accretive
M&A transactions. Commodity prices had enjoyed a period of
stability, and the M&A market was active and favourable for the
buy side. These factors, together with Longboat's proximity to a
number of potential transactions, positioned us well to launch the
Company with a view to building significant shareholder value in
short order. As we now know, the first half of 2020 heralded
unprecedented changes to all aspects of society and the global
economy with the energy sector particularly hard hit as we
witnessed an historic fall in demand.
This initial period of uncertainty resulted in a number of our
active opportunities being put on hold by vendors, as there was too
large a gap between buyer and seller value expectations. However,
commodity prices have begun to stabilise and this will narrow the
gap between buyer and seller expectations and ultimately prove
attractive for us as an asset acquirer.
Despite these challenging times, we have remained extremely
active, leveraging strong relationships, testing new deal
structures and ideas and continuing to pursue attractive business
development opportunities. We believe the lack of M&A activity
during the past six months and shifting strategies of the European
Majors has created a backlog of transactions which will lead to an
increase in deal activity in the months ahead. We remain confident
in Longboat's strategy and, as we experience increasing levels of
deal dialogue, believe we are entering an exciting period in which
the Company will be well positioned to capitalise on any
opportunities to secure attractive assets with material upside, on
favourable terms.
Directors Statement
The Directors are pleased to present to shareholders the interim
report and audited financial statements of Longboat Energy plc for
the six-month period ended 30 June 2020. The Company was
incorporated on 28 May 2019 and successfully admitted to AIM on 28
November 2019 and is currently an investment company, pending
completion of its first oil and gas asset acquisition. The
Company's time and resources are being deployed fully in meeting
the Company's investment objectives as set out below.
Given the improved market conditions, the Company has arranged
for these interim accounts to be audited so that in the event that
a transaction is entered into and a re-admission document or
prospectus required, the Company will have recent audited numbers
available for inclusion.
Market Update
Oil & gas: This year's volatility in the oil market
fundamentals has been unprecedented with a collapse in demand and
an OPEC+ price war combining to create a significant over supply in
April. In the short term, there is likely to be continued oil price
volatility as authorities continue to control the Covid-19 virus
with local and/or national lockdowns which will continue to impact
demand. However, there is broad consensus amongst oil and gas
analysts for an increasing oil price derived from an expectation
that the market will become undersupplied, possibly from as early
as 2021. This undersupply is driven by OPEC+, which has cut
production significantly due to good compliance from its members,
and an expectation that a rebound from US shale production will
fade through a combination of base decline rates and lower activity
and investment levels.
The recovery of oil demand has continued since its initial
collapse in April, down by 21.8mb/d year on year. There is an
expectation for this to continue with demand predicted to reach
pre-Covid levels during 2022. Oil and gas capex cuts resulting from
the pandemic are estimated to be around $180bn, which is in the
order of 30% year-on-year. Balancing oil supply with demand, to
meet the supply shortfall, in the medium-term will require a
significant shale recovery and another investment cycle in offshore
projects. The recent fallout from the Covid-19 pandemic makes
capital allocation to such projects more challenging as i) capital
is scarce and balance sheets have been weakened, ii) companies have
tightened criteria for investment, in particular projects need to
be more robust at lower oil prices and iii) the energy transition
has moved up the agenda, and tight finances come at a time of
aggressive decarbonisation strategies and the beginning of a
significant shift in capital allocation by the majors. This will
ultimately result in lower ongoing capex levels and fewer projects
being sanctioned. 2020 capex across the industry will be the lowest
in 15 years and will remain low in 2021. The recognised oil and gas
consultancy firm Wood Mackenzie estimates an increase in
conventional E&P spend will need an oil price in excess of
US$55bbl.
Longboat recognises the need for energy transition to lower
carbon emissions in order to meet the goals of the Paris Agreement,
however, hydrocarbons will continue to play a vital role in the
global energy mix as we move towards net zero. As long as demand
for hydrocarbons continues to be significant, it will be crucial to
maximise, responsibly, economic recovery value from North Sea
production, minimise greenhouse gas emissions and reduce reliance
on hydrocarbon imports. The basin has lower levels of carbon
intensity from production compared with many other oil producing
regions and is at the forefront of research, development and
application of emissions reduction technologies such as carbon
capture and storage. Thunder Said Energy, the energy technology and
transition consultancy, estimates the size of the oil market in
2050 to be 85Mb/d , assuming that new technologies eliminate 45Mb/d
of prospective oil demand.
Acquisition and Development (A&D): In March, the market
A&D dynamics were altered significantly as a consequence of the
Covid-19 outbreak and the subsequent commodity price collapse. In
the short term, companies have been fully focused on operational
matters and reducing both capital and operational expenditure to
mitigate the impact of the oil price crash, while the plans for
A&D activities were put on hold in many cases. According to
Wood Mackenzie, 2020 has so far recorded the lowest number of deals
in any quarter or half-year. The monthly average spend on
transactions has been just 5% of the run rate of the last 15 years.
The few oil and gas deals that have completed in recent months were
generally agreed before the price collapse before becoming subject
to re-negotiation. During this time, Longboat has continued its
business development activities apace although these have also been
impacted by the downturn with a number of opportunities that were
relatively advanced, put on hold.
Whilst the current situation has slowed down M&A activity,
the market dislocation presents an exciting opportunity for
Longboat in the forthcoming period as the backlog of transactions
begins to be unwound. Many of the Majors and large E&P players
in the North Sea have announced significant changes in strategic
direction which will require a substantial divestment of assets in
order to be delivered. This is expected to result in an increasing
number of material opportunities for Longboat which continues to
benefit from a clean capital structure and strong shareholder
support.
Norwegian Fiscal Stimulus
In June, the Norwegian government approved temporary tax reforms
for the offshore oil and gas industry, which significantly improve
the economics of new development projects and provide stimulus for
companies to make final investment decisions. The tax changes
include:
-- immediate expensing, for tax purposes, of capex with a 24%
uplift (previously 20.8%) against the special tax (whilst expensing
against corporate tax remains 6 years);
-- these temporary changes apply to projects with development
plans submitted before the end of 2022 and for all capex incurred
to the year of the commencement of production; and
-- tax losses incurred during 2020 and 2021 will be paid out
early, including the use of negative instalment tax payments
"terminskatt".
These tax changes lower the breakeven prices for non-sanctioned
development projects and it is estimated that they increase the
associated economic resources offshore Norway from 5bn boe to 7bn
boe (source Wittemann E&P Consulting). It is projected that
whilst globally, budgets are being cut significantly, Norway will
see up to $40bn of new developments, redevelopments and project
upgrades brought forward.
Many new development projects are also being brought forward
simultaneously for sanctioning as a result of the fiscal changes,
forcing less-well financed, minority partners to consider trimming
capex through active portfolio management. This has led Longboat to
now also consider modest exposure to Norwegian development assets
to take advantage of increased returns and accessibility to debt
finance facilitated by the fiscal stimulus.
Financial Results
The period end cash position was GBP8,123,612, with no debt (31
December 2019: GBP9,204,257). The loss for the period was
GBP1,111,571. The fixed running costs remain relatively low at
approximately GBP125,000 per month. The largest costs since IPO, in
the period ended 31 December 2019, were those associated with the
IPO which totalled GBP741,340. Salaries and pension costs in the
six month period were GBP350,079. Other significant costs were
those associated with the analysis and review of potential
transactions, such as consultant costs of GBP273,132 and legal and
professional fees of GBP160,786. Outsourced accounting fees were
GBP69,000. The IFRS2 non-cash charge for the period in relation to
the Founders' Incentive Plan was GBP52,185.
Acquisition Strategy
The investment objectives of the Company are to create a
full-cycle North Sea E&P company in order to deliver
significant value to investors. The Company's Board of Directors
has excellent relationships across the oil and gas industry which
it believes will provide the Company with unique access to deal
opportunities.
Through focus on and investment in acquired assets, the
Directors believe that they will be able to achieve the investment
objectives of the Company and create value:
-- by targeting assets that are non-core to existing owners;
-- through geological expertise, technical knowledge and
understanding in addition to deep experience across the E&P
life cycle;
-- through more efficient operations, cost reductions and
targeted investments in the assets to be acquired; and
-- by focusing on assets that have the potential to provide material upside to Longboat Energy.
The Company aims to deliver value by applying the business model
of growing production and reserves through value-creative M&A,
field investment and near-field exploration. Longboat will focus
its low-risk near-field exploration plans on good infrastructure
access and the existence of nearby fields and discoveries.
The Company is targeting its initial acquisition to deliver
asset(s) that are able to meet its investment criteria as well as
provide an appropriate basis to build on the Company's investment
objectives. Typical initial acquisition targets are likely to
be:
-- located offshore Norway and the UK or the wider EEA region;
-- producing and/or near producing assets, providing cash flows
to fund organic growth with robust economics, sustainable in a low
oil price environment;
-- assets with identifiable upsides via organic growth through
further field investment (infill drilling etc.), potential
near-field exploration and with follow-on opportunities to deliver
a hub strategy;
-- assets with aligned partnerships where the Company can influence and optimise operations; and
-- assets where the management team's experience is valued by
the other licence partners and the authorities and can be leveraged
to add value.
An objective in any acquisition will be a focus on investments
where the Directors believe that their expertise, knowledge and
experience can be deployed to facilitate material growth and unlock
inherent value.
It is likely that the Company's financial resources will be
invested initially in either a small number of projects or one
large investment, which may be deemed to be a reverse takeover
under the AIM Rules. In every case, the Directors will mitigate
risk by undertaking appropriate due diligence and transaction
analysis. Any transaction constituting a reverse takeover under the
AIM Rules will also require shareholder approval.
Any farm-ins to exploration assets are expected to be funded
mainly in the form of equity. In the event of exploration
discoveries, following successful appraisal and approval of a field
development plan, it is intended that an appropriate level of debt
would be raised to cover in part the financing of development of
such assets. Portfolio management including divestment or
part-divestment of discoveries that move into development will also
be considered in order to balance and manage risk. Acquisitions of
producing and near-producing assets are more likely to include an
element of debt to equity gearing.
As a key strategic requirement the Company will, irrespective of
the equity ownership acquired, take an active role in targeting
work and investments in the acquired assets, in order to unlock
their inherent value. In Norway the "see to duty", a central part
of industry regulations, allows and requires a non-operating
partner to have significant input into the asset partnership.
The Directors consider that as acquisitions are made, and new
acquisition opportunities arise, further equity funding of the
Company will be required.
Investing Policy
Under the AIM Rules (8.), the Company's 'investing policy',
which is substantially reflected in the Acquisition Strategy,
should be regularly notified and so is included in full in Note 12
to these accounts.
Outlook
Events year-to-date have been unprecedented causing deals under
negotiation to be put on hold on several occasions, due to matters
beyond Longboat's control.
As we progress further into the second half of the year, we have
good reason to be increasingly optimistic about the M&A market
and our ability to source and close attractive opportunities. While
overall Covid-19 infection levels have begun to creep up again in
Europe, hospitalisation and death rates are at relatively low
levels as governments and authorities have become increasingly
adept at using new measures to control the spread and impact of the
pandemic. Central banks have also managed successfully to avert
severe economic fallout and bring markets back from their previous
lows through unprecedented financial and fiscal stimulus. Commodity
prices have also stabilised somewhat through a combination of
returning demand levels and OPEC support, with the medium term
consensus view being for prices continuing to increase, both for
oil and gas.
With business development again on sellers' agendas in the North
Sea, we have recently strengthened our own reach into the market
through the appointment of Nick Ingrassia to head up our Business
Development activities. Nick has over 19 years' experience across a
wide range of corporate roles in and around the oil & gas
industry. Nick started his career in banking with roles at Morgan
Stanley (energy investment banking) and RBS (structured energy
lending & debt advisory) before joining the oil and gas
industry, working in business development roles with Valiant
Petroleum plc (sold to Ithaca Energy inc in 2013), Salamander
Energy plc (sold to Ophir Energy plc in 2015) and Faroe Petroleum
plc (sold to DNO in 2019).
Despite the market disruption in the first part of this year,
and the resultant delays and postponements, we see the M&A
market activity returning and remain confident of delivering
value-accretive opportunities to our shareholders and building
Longboat into a successful full-cycle North Sea E&P
company.
On behalf of the board
Helge Ansgar Hammer
Director
21 September 2020
PRINCIPAL RISKS AND UNCERTAINTIES FACING THE BUSINESS FOR THE 6
MONTH PERIODED 30 JUNE 2020
The principal risks facing the Company were set out in the
Company's annual report and accounts to 31 December 2019 and there
has been one appreciable change in those risks, of which we are all
aware.
The impact of Coronavirus on the global demand for oil and gas
and the subsequent impact on oil and gas prices has been very
evident in H1 2020, and in response we have seen the Majors
downgrade their long-term commodity price assumptions. There exists
a risk that there will be significant further outbreaks of
Coronavirus across the world which may detrimentally impact the
Company's ability to meet its Investing Policy, specifically due to
delays in sales processes, the bridging of buyer / seller pricing
expectations and its ability to access equity capital and debt.
When the Company meets its investment objectives and secures an
acquisition, the Company's risk profile will change and a full
statement of risks will be published in the subsequent Annual
Report and accounts.
On behalf of the board
Helge Ansgar Hammer
Director
21 September 2020
DIRECTORS' RESPONSIBILITIES STATEMENT FOR THE 6 MONTH PERIODED
30 JUNE 2020
The directors are responsible for preparing the interim report
in accordance with applicable law and regulations.
Company law requires the directors to prepare financial
statements for each financial year. Under that law the directors
have elected to prepare the financial statements in accordance with
International Financial Reporting Standards (IFRSs) as adopted by
the European Union. 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 Group
and of the profit or loss of the Group for that period. The
directors are also required to prepare the financial statements in
accordance with the rules of the London Stock Exchange for
companies trading securities on AIM.
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 and prudent;
-- state whether they have been prepared in accordance with
IFRSs as adopted by the European Union, subject to any material
departures disclosed and explained in the financial statements;
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 and
interim reports and financial statements are made available on a
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.
INDEPENT AUDITOR'S REPORT TO THE MEMBERS OF LONGBOAT ENERGY
PLC
Opinion
We have audited the non-statutory financial statements of
Longboat Energy Plc (the 'Company') and its subsidiaries (the
'Group') for the six month period ended 30 June 2020 in accordance
with our engagement letter dated 18 August 2020 which comprise the
Consolidated Statement of Comprehensive Income, Consolidated
Statement of Financial Position, Consolidated Statement of Changes
in Equity, Consolidated Statement of Cash flows and notes to the
financial statements, including a summary of significant accounting
policies.
The financial reporting framework that has been applied in the
preparation of the financial statements is applicable law and
International Financial Reporting Standards (IFRSs) as adopted by
the European Union.
In our opinion:
-- the financial statements give a true and fair view of the
state of the Group's affairs as at 30 June 2020 and of the Group's
loss for the period then ended;
-- the financial statements have been properly prepared in
accordance with IFRSs as adopted by the European Union;
Basis for opinion
We conducted our audit in accordance with International
Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our
responsibilities under those standards are further described in the
Auditor's responsibilities for the audit of the financial
statements section of our report. We are independent of the Company
in accordance with the ethical requirements that are relevant to
our audit of the financial statements in the UK, including the
FRC's Ethical Standard as applied to listed entities, and we have
fulfilled our other ethical responsibilities in accordance with
these requirements. We believe that the audit evidence we have
obtained is sufficient and appropriate to provide a basis for our
opinion.
Conclusions relating to going concern
We have nothing to report in respect of the following matters in
relation to which the ISAs (UK) require us to report to you
where:
-- the Directors' use of the going concern basis of accounting
in the preparation of the financial statements is not appropriate;
or
-- the Directors have not disclosed in the financial statements
any identified material uncertainties that may cast significant
doubt about the Company's ability to continue to adopt the going
concern basis of accounting for a period of at least twelve months
from the date when the financial statements are authorised for
issue.
Key audit matters
Key audit matters are those matters that, in our professional
judgment, were of most significance in our audit of the financial
statements of the current period and include the most significant
assessed risks of material misstatement (whether or not due to
fraud) we identified, including those which had the greatest effect
on: the overall audit strategy, the allocation of resources in the
audit; and directing the efforts of the engagement team. This
matter was addressed in the context of our audit of the financial
statements as a whole, and in forming our opinion thereon, and we
do not provide a separate opinion on this matter.
Key audit matter How our audit responded to this
matter
Share based payments
The Company granted awards under Our audit procedures included
its Founder Incentive Plan on the following:
3 July 2020 that was previously
detailed in the IPO Admission * We reviewed the report prepared by management's
Document. external expert and, in conjunction with our own
internal valuation experts, calculated our own
A share based payment of charge valuation of the awards independently. We held
of GBP52,185 has been recorded discussions with management's experts to understand
in the period by management in and evaluate the valuation methodology and inputs
respect of the awards as detailed used by the management expert.
in notes 3, 4 and 18 to the financial
statements.
* We assessed the objectivity and competence of
Management were required to exercise management's expert.
judgment and estimation when determining
the inputs to the valuation and
the accounting treatment of the * We agreed the terms of the awards to supporting
awards. Management engaged an documentation and compared them to the IPO Admission
external valuation expert to assist Document.
with the valuation of the awards.
* We evaluated the accounting treatment applied against
the requirements of IFRS. In doing so we considered
management's judgment that the IPO Admission Document
created sufficient mutual understanding of the terms
of the awards prior to them being legally granted in
July 2020. In doing so we reviewed the disclosures in
the IPO Admission Document.
* We recalculated the share based payment charge for
the period and agreed the charge to the ledger.
Our application of materiality
Our materiality level was determined as GBP130,000 (FY 2019:
GBP140,000) based on 1.5% of total assets. Total assets was
considered to be the most relevant financial metric to users of the
financial statements given the Group's cash balance is its
principal asset with no current oil and gas operations.
We apply the concept of materiality both in planning and
performing our audit, and in evaluating the effect of
misstatements. We consider materiality to be the magnitude by which
misstatements, including omissions, could influence the economic
decisions of reasonable users that are taken on the basis of the
financial statements. Importantly, misstatements below these levels
will not necessarily be evaluated as immaterial as we also take
account of the nature of identified misstatements, and the
particular circumstances of their occurrence, when evaluating their
effect on the financial statements as a whole.
Materiality for the one significant component of the Group was
set at GBP123,500. This was the first period for which consolidated
financial statements had been prepared.
Performance materiality is the application of materiality at the
individual account or balance level set at an amount to reduce to
an appropriately low level the probability that the aggregate of
uncorrected and undetected misstatements exceeds materiality for
the financial statements as a whole. Performance materiality was
determined based on 75% of materiality being GBP97,500 (FY 2019:
GBP105,000).
We agreed with the audit committee that we would report to the
committee all individual audit differences identified during the
course of our audit in excess of GBP2,400 (FY 2019: GBP2,700). We
also agreed to report differences below these thresholds that, in
our view, warranted reporting on qualitative grounds.
An overview of the scope of our audit
Our audit was scoped by obtaining an understanding of the Group
and its environment, as well as assessing the risks of material
misstatement in the financial statements at Group level. In
approaching the audit, we considered how the Group is organised and
managed. We assessed there to be one significant component being
the parent company. This component was subject to a full scope
audit and the audit was conducted by the Group audit team.
The remaining component of the Group was considered
non-significant and was subject to analytical review procedures by
the Group audit team.
Other information
The Directors are responsible for the other information. The
other information comprises the information included in the Interim
Report and financial statements, other than the financial
statements and our auditor's report thereon. Our opinion on the
financial statements does not cover the other information and,
except to the extent otherwise explicitly stated in our report, we
do not express any form of assurance conclusion thereon.
In connection with our audit of the financial statements, our
responsibility is to read the other information and, in doing so,
consider whether the other information is materially inconsistent
with the financial statements or our knowledge obtained in the
audit or otherwise appears to be materially misstated. If we
identify such material inconsistencies or apparent material
misstatements, we are required to determine whether there is a
material misstatement in the financial statements or a material
misstatement of the other information. If, based on the work we
have performed, we conclude that there is a material misstatement
of this other information, we are required to report that fact. We
have nothing to report in this regard.
Responsibilities of Directors
As explained more fully in the statement of Directors'
responsibilities set out on page 6, the Directors are responsible
for the preparation of the financial statements and for being
satisfied that they give a true and fair view, and for such
internal control as the Directors determine is necessary to enable
the preparation of financial statements that are free from material
misstatement, whether due to fraud or error.
In preparing the financial statements, the Directors are
responsible for assessing the Company's ability to continue as a
going concern, disclosing, as applicable, matters related to going
concern and using the going concern basis of accounting unless the
Directors either intend to liquidate the Company or to cease
operations, or have no realistic alternative but to do so.
Auditor's responsibilities for the audit of the financial
statements
Our objectives are to obtain reasonable assurance about whether
the financial statements as a whole are free from material
misstatement, whether due to fraud or error, and to issue an
auditor's report that includes our opinion. Reasonable assurance is
a high level of assurance, but is not a guarantee that an audit
conducted in accordance with ISAs (UK) will always detect a
material misstatement when it exists.
Misstatements can arise from fraud or error and are considered
material if, individually or in the aggregate, they could
reasonably be expected to influence the economic decisions of users
taken on the basis of these financial statements.
A further description of our responsibilities for the audit of
the financial statements is located on the website of the Financial
Reporting Council at:
http://www.frc.org.uk/auditorsresponsibilities. This description
forms part of our auditor's report.
Use of our report
This report is made solely to the Group's members, as a body, in
accordance with Chapter 3 of Part 16 of the Companies Act 2006.
Our audit work has been undertaken so that we might state to the
Group's members those matters we are required to state to them in
an auditor's report and for no other purpose. To the fullest extent
permitted by law, we do not accept or assume responsibility to anyone
other than the Group and the Group's members, as a body, for our
audit work, for this report, or for the opinions we have formed.
Ryan Ferguson (Senior Statutory Auditor)
for and on behalf of BDO LLP 21 September 2020
Chartered Accountants
Statutory Auditor 55 Baker Street
London
W1U 7EU
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME FOR THE 6 MONTH
PERIODED 30 JUNE 2020
6 months
ended 30 From incorporation From incorporation
June to 30 June to 31 December
2020 2019 2019
audited unaudited unaudited
Notes GBP GBP GBP
Administrative expenses (1,118,850) (4,058) (198,051)
Operating loss 7 (1,118,850) (4,058) (198,051)
Investment revenues 6 10,719 - 1,750
Loss before taxation (1,108,131) (4,058) (196,301)
Income tax expense 9 - - -
Loss for the period (1,108,131) (4,058) (196,301)
Items that may be reclassified to profit
or loss
Currency translation differences (3,440) - 25
Total items that may be reclassified to
profit or loss (3,440) - 25
Total comprehensive loss (1,111,571) (4,058) (196,276)
Earnings per share 10
Basic and diluted (11.08) (405,773) (9.52)
Earnings per share is expressed in pence per share.
The income statement has been prepared on the basis that all operations
are continuing operations.
CONSOLIDATED STATEMENT OF FINANCIAL POSITION AS AT 30 JUNE
2020
30 June 30 June 31 December
2020 2019 2019
Audited Unaudited Unaudited
Notes GBP GBP GBP
Non-current assets
Property, plant and equipment 11 8,545 - 2,245
Current assets
Trade and other receivables 14 74,383 223 83,104
Cash and cash equivalents 8,123,612 - 9,204,257
8,197,995 223 9,287,361
Total assets 8,206,540 223 9,289,606
Current liabilities
Trade and other payables 17 203,542 4,280 227,222
Total liabilities 203,542 4,280 227,222
Equity
Called up share capital 15 1,000,000 1 1,000,000
Share premium account 16 7,808,660 - 7,808,660
Other reserves 16 450,000 - 450,000
Currency translation reserve 16 (3,415) - 25
Share based payment reserve 18 52,185 - -
Retained earnings (1,304,432) (4,058) (196,301)
Total equity 8,002,998 (4,057) 9,062,384
Total equity and liabilities 8,206,540 223 9,289,606
The financial statements were approved by the board of directors
and authorised for issue on 21 September 2020 and are signed on
its behalf by:
Helge Ansgar Hammer
Director
Company Registration No. 12020297
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR THE 6 MONTH
PERIODED 30 JUNE 2020
Share Share Currency Share Other Retained Total
capital premium translation based reserves earnings
account reserve payment
reserve
Notes GBP GBP GBP GBP GBP GBP GBP
Balance at 28
May 2019 - - - - - - -
Period ended
30 June 2019
Issue of share capital 1 - - - - 1
Loss and total
comprehensive
income for the period - - - - - (4,058) (4,058)
Balance at 30 June
2019 1 - - - - (4,058) (4,057)
Period ended
31 December
2019:
Loss and total
comprehensive
income for the period - - - - - (192,243) (192,243)
Issue of share capital 229,999 270,000 - - - - 499,999
Share buy-back and
cancellation
of share premium (180,000) (270,000) - - 450,000 - -
Initial Public
Offering 950,000 8,550,000 9,500,000
Costs of share issue (741,340) (741,340)
Other
comprehensive
income:
Currency translation
differences - - 25 - - - 25
Balance at 31 December
2019 1,000,000 7,808,660 25 - 450,000 (196,301) 9,062,384
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY (CONTINUED) FOR THE
6 MONTH PERIODED 30 JUNE 2020
Share Share Currency Share Other Retained Total
capital premium translation based reserves earnings
account reserve payment
reserve
Notes GBP GBP GBP GBP GBP GBP GBP
Period ended
30 June 2020:
Loss and total
comprehensive
income for
the period - - - - - (1,108,131) (1,108,131)
Credit to
equity for
equity
settled
share-based
payments 18 - - - 52,185 - - 52,185
Other comprehensive
losses:
Currency
translation
differences - - (3,440) - - - (3,440)
Balance at 30 June
2020 1,000,000 7,808,660 (3,415) 52,185 450,000 (1,304,432) 8,002,998
CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE 6 MONTH PERIODED 30
JUNE 2020
30 June 31 December
2020 2019
Notes GBP GBP GBP GBP
Cash flows from operating activities
Cash absorbed by operations 23 (1,081,261) (60,711)
Net cash outflow from operating
activities (1,081,261) (60,711)
Investing activities
Purchase of property, plant and equipment (7,254) (2,245)
Interest received 10,719 1,750
Net cash generated from/(used
in) investing activities 3,465 (495)
Financing activities
Proceeds from issue of shares - 9,258,660
Net cash (used in)/generated
from financing activities - 9,258,660
Net (decrease)/increase in cash and
cash equivalents (1,077,796) 9,197,454
Cash and cash equivalents at beginning
of period 9,204,257 -
Effect of foreign exchange rates (3,440) 25
Cash and cash equivalents at
end of period 8,123,021 9,197,479
Relating to:
Bank balances and short term
deposits 8,123,612 9,211,035
Bank overdrafts (591) (6,778)
No bank account was held at 30 June 2019 therefore no interim statement
of cash flows has been prepared.
NOTES TO THE FINANCIAL STATEMENTS FOR THE 6 MONTH PERIODED 30
JUNE 2020
1 Accounting policies
Company
information
Longboat Energy PLC is a private company limited by shares incorporated
in England and Wales. The registered office is 5th Floor, One
New Change, London, EC4M 9AF. The company's principal activities
and nature of its operations are disclosed in the directors'
report.
1.1 Accounting
convention
The consolidated interim financial statements have been prepared
in accordance with International Financial Reporting Standards
(IFRS) as adopted for use in the European Union, except as otherwise
stated.
This interim financial information does not constitute accounts
within the meaning of section 434 and of the Companies Act 2006.
Statutory accounts for the year ended 31 December 2019 were approved
by the Board of Directors on 5 February 2020 and delivered to
the Registrar of Companies. The report of the auditors on those
accounts was unqualified. The audited financial statements for
the period from incorporation to 31 December 2019 were individual
company accounts rather than consolidated financial statements
as the subsidiary was immaterial.
The financial statements are prepared in sterling, which is the
functional currency of the company. Monetary amounts in these
financial statements are rounded to the nearest GBP.
The financial statements have been prepared under the historical
cost convention. The principal accounting policies adopted are
set out below.
The Group interim financial statements consolidate the financial
statements of the parent company and its subsidiary undertakings
drawn up to 30 June 2020. The results of subsidiaries acquired
or sold are consolidated for periods from or to the date on which
control passed.
Business combinations are accounted for in accordance with International
Financial Reporting Standards. Acquisitions of subsidiaries and
businesses are accounted for using the acquisition method. The
consideration of each acquisition is measured as the aggregate
of the fair values (at the date of exchange) or cash and other
assets given, liabilities incurred or assigned and equity instruments
issued by the Group in exchange for control of the acquiree.
1.2 Going concern
The Directors, having made due and careful enquiry and preparing
forecasts, are of the opinion that the Company has adequate working
capital to execute its operation over the next 12 months. The
directors, therefore, have made an informed judgement, at the
time of approving the financial statements, that there is a reasonable
expectation that the Company has adequate resources to continue
in operational existence for the foreseeable future. As a result,
the directors have continued to adopt the going concern basis
of accounting in preparing the interim statements.
1.3 Property, plant
and equipment
Property, plant and equipment are initially measured at cost
and subsequently measured at cost or valuation, net of depreciation
and any impairment losses.
Depreciation is provided at the following annual rates in order
to write off the cost less estimated residual value of each asset
over its estimated useful life.
Computers 33.33%
The gain or loss arising on the disposal of an asset is determined
as the difference between the sale proceeds and the carrying
value of the asset, and is recognised in the income statement.
1 Accounting policies
1.4 Cash and cash
equivalents
Cash and cash equivalents include cash in hand, deposits held
at call with banks, other short-term liquid investments with
original maturities of three months or less, and bank overdrafts.
Bank overdrafts are shown within borrowings in current liabilities.
1.5 Financial
instruments
A financial instrument is a contract that gives rise to a financial
asset of one entity and a financial liability or equity instrument
of another entity. Financial assets and liabilities comprise
non-derivative and derivative receivables and payables.
Classification: Financial assets
The Group classifies financial assets in the following measurement
categories:
* financial assets subsequently measured at fair value
(either through other comprehensive income or through
profit or loss), and
* financial assets measured at amortised cost.
The Group has no financial assets subsequently measured at fair
value through other comprehensive income or through profit or
loss.
Classification depends on the business model used for managing
financial assets and on the characteristics of the contractual
cash flows involved.
All financial assets held by the Group, have contractual cash
flows representing solely the payment of principal and interest.
The Group holds all these assets to collect the contractual cash
flows. These assets are classified as held at amortised cost.
Classification: Financial
liabilities
Financial liabilities other than derivatives are classified as
measured at amortised cost. The Group has no derivatives.
Measurement on initial recognition
A financial asset or financial liability is initially measured
at its fair value, plus, in the case of a financial asset or
financial liability not subsequently measured at fair value through
profit or loss, the transaction costs directly attributable to
the acquisition of the asset or issuing of the liability.
Transaction costs of financial assets measured at fair value
through profit or loss are recognised as an expense in the income
statement.
The fair value is defined as the amount for which an asset could
be exchanged, or a liability settled, between knowledgeable,
willing parties in an arm's length transaction.
Subsequent measurement
The subsequent measurement of debt instruments depends on the
classification of the financial asset or liability, described
above.
Financial assets and liabilities measured at amortised cost are
accounted for using the effective interest rate method. Interest
income and expense is reported as financial income and expense.
Gains or losses arising on the derecognition of the financial
asset or liability are recognised directly in profit or loss
as other operating income/expense together with foreign currency
gains and losses.
1 Accounting policies
Impairment
Trade receivables and other receivables are measured and carried
at amortised cost using the effective interest method, less any
impairment.
The carrying amount is reduced by the expected lifetime losses.
The Group does not hold other financial assets for which an expected
credit loss would be material to record.
1.6 Taxation
Taxation, comprised of current and deferred tax, is charged or
credited to the income statement unless it relates to items recognised
in other comprehensive income or directly in equity. In such
cases, the related tax is also recognised in other comprehensive
income or directly in equity.
Current tax
Current tax liabilities are measured at the amount expected to
be paid, based on tax rates and laws that are enacted or substantively
enacted at the balance sheet date.
Deferred tax
Deferred tax is accounted for using the balance sheet liability
method and is calculated using rates of taxation enacted or substantively
enacted at the balance sheet date which are expected to apply
when the asset or liability is settled.
Deferred tax liabilities are generally recognised for all taxable
temporary differences. Deferred tax assets are only recognised
to the extent that it is probable that taxable profits will be
available against which deductible temporary differences can
be utilised. Deferred tax is not recognised in respect of investments
in subsidiaries and associates where the reversal of any taxable
temporary differences can be controlled and are unlikely to reverse
in the foreseeable future. Deferred tax assets and liabilities
are offset when there is a legally enforceable right to offset
and there is an intention to settle the balances on a net basis.
Tax provisions are recognised when there is a potential exposure
under changes to International tax legislation.
1.7 Retirement benefits
Payments to defined contribution retirement benefit schemes are
charged as an expense as they fall due.
1 Accounting policies
1.8 Share-based payments
For cash-settled share-based payments, a liability is recognised
for the goods and services acquired, measured initially at the
fair value of the liability. At the balance sheet date until
the liability is settled, and at the date of settlement, the
fair value of the liability is remeasured, with any changes in
fair value recognised in profit or loss for the 6 month period.
Equity-settled share-based payments are measured at fair value
at the date of grant by reference to the fair value of the equity
instruments granted using the Monte Carlo model. Non-market vesting
conditions are taken into account by adjusting the number of
equity instruments expected to vest at each reporting date so
that, ultimately, the cumulative amount recognised over the vesting
period is based on the number of options that eventually vest.
Non-vesting conditions and market vesting conditions are factored
into the fair value of the options granted. As long as all other
vesting conditions are satisfied, a charge is made irrespective
of whether the market vesting conditions are satisfied. The cumulative
expense is not adjusted for failure to achieve a market vesting
condition or where a non-vesting condition is not satisfied.
The fair value determined at the grant date is expensed on a
straight-line basis over the vesting period, based on the estimate
of shares that will eventually vest. A corresponding adjustment
is made to equity.
When the terms and conditions of equity-settled share-based payments
at the time they were granted are subsequently modified, the
fair value of the share-based payment under the original terms
and conditions and under the modified terms and conditions are
both determined at the date of the modification. Any excess of
the modified fair value over the original fair value is recognised
over the remaining vesting period in addition to the grant date
fair value of the original share-based payment. The share-based
payment expense is not adjusted if the modified fair value is
less than the original fair value.
Cancellations or settlements (including those resulting from
employee redundancies) are treated as an acceleration of vesting
and the amount that would have been recognised over the remaining
vesting period is recognised immediately.
1.9 Leases
All leases are accounted for by recognising a right-of-use asset
and a lease liability except for:
* Leases of low value assets; and
* Leases with a duration of 12 months or less.
Lease liabilities are measured at the present value of the
contractual
payments due to the lessor over the lease term, with the discount
rate determined by reference to the rate inherent in the lease
unless (as is typically the case) this is not readily determinable,
in which case the Group's incremental borrowing rate on commencement
of the lease is used. Variable lease payments are only included
in the measurement of the lease liability if they depend on an
index or rate. In such cases, the initial measurement of the
lease liability assumes the variable element will remain unchanged
throughout the lease term. Other variable lease payments are
expensed in the period to which they relate.
1.10 Foreign exchange
Assets and liabilities in foreign currencies are translated into
sterling at the rates of exchange ruling at the statement of
financial position date. Transactions in foreign currencies are
translated into sterling at the rate of exchange ruling at the
date of transaction. Exchange differences are taken into account
in arriving at the operating result.
1 Accounting policies
1.11 Reserves
Share capital
Share capital represents the nominal value of shares issued less
the nominal value of shares repurchased and cancelled.
Share Premium
This reserve represents the difference between the issue price
and the nominal value of shares at the date of issue, net of
related issue costs and share premium cancelled.
Retained Earnings
Net revenue profits and losses of the Group which are revenue
in nature are dealt with in this reserve.
Other reserves
Other reserves relate to the nominal value of share capital repurchased
and cancelled.
2 Adoption of new and revised standards and changes in accounting
policies
The accounting policies adopted in the preparation of the interim
condensed consolidated financial statements are consistent with
those followed in the preparation of the Group's annual consolidated
financial statements for the year ended 31 December 2019, except
for the adoption of new standards effective as of 1 January 2020.
The Group 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 2020, but do not have an impact on the interim financial statements
of the Group.
Amendments to IFRS 3: Definition of a Business
The amendment to IFRS 3 clarifies that to be considered a business,
an integrated set of activities and assets must include, at a
minimum, an input and a substantive process that together significantly
contribute to the ability to create output. Furthermore, it clarified
that a business can exist without including all of the inputs
and processes needed to create outputs. These amendments had no
impact on the consolidated financial statements of the Group,
but may impact future periods should the Group enter into any
business combinations.
Amendments to IFRS 7, IFRS 9 and IAS 39: Interest Rate Benchmark
Reform
The amendments to IFRS 9 and IAS 39 Financial Instruments: Recognition
and Measurement provide a number of reliefs, which apply to all
hedging relationships that are directly affected by interest rate
benchmark reform. A hedging relationship is affected if the reform
gives rise to uncertainties about the timing and or amount of
benchmark-based cash flows of the hedged item or the hedging instrument.
These amendments had no impact on the consolidated financial statements
of the Group as it does not have any interest rate hedge relationships.
Amendments to IAS 1 and IAS 8: Definition of Material
The amendments provide a new definition of material that states
"information is material if omitting, misstating or obscuring
it could reasonably be expected to influence decisions that the
primary users of general purpose financial statements make on
the basis of those financial statements, which provide financial
information about a specific reporting entity."
The amendments clarify that materiality will depend on the nature
or magnitude of information, either individually or in combination
with other information, in the context of the financial statements.
A misstatement of information is material if it could reasonably
be expected to influence decisions made by the primary users.
These amendments had no impact on the consolidated financial statements
of, nor is there expected to be any future impact to the Group.
2 Adoption of new and revised standards and changes in accounting
policies
Conceptual Framework for Financial Reporting issued on 29 March
2018
The Conceptual Framework is not a standard, and none of the concepts
contained therein override the concepts or requirements in any
standard. The purpose of the Conceptual Framework is to assist
the IASB in developing standards, to help preparers develop consistent
accounting policies where there is no applicable standard in place
and to assist all parties to understand and interpret the standards.
The revised Conceptual Framework includes some new concepts, provides
updated definitions and recognition criteria for assets and liabilities
and clarifies some important concepts.
These amendments had no impact on the consolidated financial statements
of the Group.
3 Critical accounting estimates and judgements
In the application of the Group's accounting policies, the directors
are required to make judgements, estimates and assumptions about
the carrying amount of assets and liabilities that are not readily
apparent from other sources. The estimates and associated assumptions
are based on historical experience and other factors that are
considered to be relevant. Actual results may differ from these
estimates.
The estimates and underlying assumptions are reviewed on an ongoing
basis. Revisions to accounting estimates are recognised in the
period in which the estimate is revised, if the revision affects
only that period, or in the period of the revision and future
periods if the revision affects both current and future periods.
Shared based payments (note 18)
Estimation was required in determining inputs to the share based
payment calculations including share price volatility as detailed
in note 18.
Judgment was required in determining the point at which the Company
and recipients had a shared mutual understanding of the terms
of the awards. Whilst the awards were legally granted in July
2020, the Board consider that IPO Admission Document provided
such a shared mutual understanding given the detailed disclosure
of the terms of the scheme. Accordingly, the estimated fair value
of the awards has been spread over the vesting period which commenced
at IPO. A charge of GBP52,185 has been recorded which includes
the one month period relevant to the period ended 31 December
2019 as the charge of GBP7,973 was immaterial to the prior period.
4 Employees
There are no additional staff members within the Group who are
not staff members of the Company.
The average monthly number of persons (including directors) employed
by the company during the period was:
Six month Six month From incorporation
period ended period ended
30 June 30 June to 31 Dec
2020 2019 2019
Number Number Number
Executive
Directors 2 - 2
Non-Executive
Directors 4 - 4
Staff 1 - 1
Total 7 - 7
Their aggregate remuneration comprised:
Six month Six month From incorporation
period ended period ended
30 June 30 June to 31 Dec
2020 2019 2019
GBP GBP GBP
Wages and
salaries 298,814 - 52,163
Share based
payment 52,185 - -
Social security
costs 33,610 - 6,504
Pension costs 17,655 - 3,447
402,264 - 62,114
The Executive Directors entered into service agreements with
the Company on 28 November 2019, the date of Admission to AIM.
Pursuant to letters of appointment dated 28 November 2019, the
Non-executive Directors of the Company were appointed as of that
date and on an ongoing basis. Each Non-executive Director is
entitled to an annual fee, including in respect of any service
on any Board committee.
As stated at the time of Admission to AIM, the Remuneration Committee
will, at the time of making the first acquisition, undertake
an executive salary benchmarking exercise for the purposes of
determining what shall constitute a competitive market salary
and pension contribution for the Executive Directors.
5 Directors' remuneration
Six month Six month From incorporation
period ended period ended
30 June 30 June to 31 Dec
2020 2019 2019
GBP GBP GBP
Remuneration for
qualifying
services 248,095 - 43,780
Pension
contributions
to defined
contribution
schemes 12,676 - 2,515
260,771 - 46,295
6 Investment Income
Six month Six month From
period ended period ended incorporation
30 June 30 June to 31 Dec
2020 2019 2019
GBP GBP GBP
Interest income
Bank deposits 10,719 - 1,750
Total interest income for financial assets that are not held at
fair value through profit or loss is GBP10,719 (2019: GBP1,750).
7 Operating loss
Six month Six month From incorporation
period ended period ended
30 June 30 June to 31 Dec
2020 2019 2019
GBP GBP GBP
Operating profit/(loss) for the period is stated after
charging/(crediting):
Exchange gains 74,120 - (86,792)
Fees payable to
the company's
auditor
for the audit
of the
company's
financial
statements 16,000 - 8,000
Depreciation of
property, plant
and
equipment 954 - -
Share-based
payments 52,185 - -
8 Auditor's remuneration
Six month Six month From incorporation
period ended period ended
30 June 30 June to 31 Dec
2020 2019 2019
Fees payable to the GBP GBP GBP
company's auditor
and associates:
For audit services
Audit of the financial
statements of
the company 16,000 - 8,000
For other services
Non-audit services - - 15,000
During the prior period the auditor provided non-audit
services
of GBP15,000 in their role as Reporting Accountant in
relation
to the Company's Admission to AIM. There were no non-audit
services
provided in the six months to 30 June 2020.
9 Income tax expense
Six month Six month From incorporation
period ended period ended
30 June 30 June to 31 Dec
2020 2019 2019
GBP GBP GBP
UK corporation tax on
profits for the
current period - - -
The charge for the 6 month period can be reconciled to the loss
per the income statement as follows:
Six month Six month From incorporation
period ended period ended
30 June 30 June to 31 Dec
2020 2019 2019
GBP GBP GBP
Loss before taxation (1,108,131) (4,058) (196,301)
Expected tax charge/(credit)
based
on a corporation tax rate of
19.00%
(2019: 19.00%) (210,545) (771) (37,297)
Effect of expenses not
deductible in
determining taxable profit 2,499 - 8,321
Adjust closing mainstream
unrecognized
deferred tax to average rate
of 19% - - 363
Adjust closing ring fence
unrecognized
deferred tax to average rate
of 19% - - (28,217)
Deferred tax not recognised 288,114 771 56,830
Remeasurement of deferred tax
for changes
in tax rates (110,016) - -
Foreign tax and losses 29,948 - -
Taxation charge for the
period - - -
9 Income tax expense
No deferred tax asset has been recognised because there is uncertainty
of the timing of suitable future profits against which they can
be recovered. The company has losses carried forward of GBP345,870
(2018: GBP57,756).
10 Earnings per share 30 June 30 June 31 Dec
2020 2019 2019
GBP GBP GBP
Number of shares
Weighted average number of ordinary
shares for basic earnings per share 10,000,000 1 2,062,213
Earnings
Continuing operations
Loss for the period from continued
operations (1,108,131) (4,058) (196,301)
Earnings for basic and diluted earnings
per share being net profit attributable
to equity shareholders of the company
for continued operations (1,108,131) (4,058) (196,301)
Basic and diluted earnings per share (11.08) (405,773) (9.52)
Earnings per share is expressed in pence per share.
11 Property, plant and equipment
Computers
GBP
Cost
Additions 2,245
At 31 December 2019 2,245
Additions 7,254
At 30 June 2020 9,499
Accumulated depreciation and impairment
Charge for the 6 month period 954
At 30 June 2020 954
Carrying amount
At 30 June 2020 8,545
At 31 December 2019 2,245
12 Investing Policy
The Company will look to achieve its investment objectives and
strategy by taking an active approach in investments made in line
with the following parameters:
* Geographic focus: initially the Company's principal
focus will be acquiring assets or corporate
opportunities based in or principally operating in
Norway, the United Kingdom, or in the wider EEA
region. The Company may consider acquiring assets
globally, including in emerging markets.
* Sector focus: the Company intends to focus on the oil
and gas sector.
* Proposed targets: the proposed acquisitions to be
made by the Company may be licence applications,
direct interests in oil and gas assets, quoted or
unquoted companies, made by acquisition or through
farm-ins, either in companies, partnerships or joint
ventures.
* Types of investment and control of investments: it is
anticipated that the Company will acquire and control
one or more working interests, assets, businesses or
companies on a long-term basis. The Company's equity
interest in a proposed acquisition may range from a
minority position to 100 per cent. ownership. The
Company intends, where possible, to be actively
involved in the management and development of the
assets that it acquires irrespective of the equity
ownership acquired in the assets with a view to
improving performance and adding value to the assets.
The Board may issue new ordinary shares of 10p each
in the share capital of the Company ('Ordinary
Shares') as acquisition consideration to vendors of
working interests, assets, or businesses as
appropriate, and the Board would expect such new
Ordinary Shares to represent a non-controlling or
minority shareholding in the Company at that time.
* Investment size: the Company intends to use the net
funds received from the placing of Ordinary Shares
undertaken in November 2019 (the 'Placing'),
principally to investigate and pursue potential
acquisitions, perform due diligence, contribute
towards professional costs associated with an
acquisition and fund the initial working capital
requirements of the Company. It is envisaged that the
Company's first acquisition will be in the region of
an enterprise value of US$10-US$500 million, which
will be funded through further equity issuance and
debt to appropriate and prudent levels.
* Nature of returns: it is anticipated that returns to
shareholders will be delivered through a combination
of an appreciation in the Company's share price and,
at an appropriate time, dividends paid out of
retained earnings or a one off capital return, if
appropriate.
Any material change to the Investing Policy will be made only
with the approval of shareholders.
The Directors believe that the Investing Policy can be substantially
implemented within 18 months of Admission to AIM, which occurred
on 28 November 2019. If this is not achieved, the Company, in
accordance with the AIM Rules for Companies, will seek the consent
of its shareholders for its Investing Policy or any changes thereto
at the 2021 annual general meeting of the Company and on an annual
basis thereafter, until such time that its Investing Policy has
been substantially implemented. If it appears unlikely that the
Investing Policy will be substantially implemented, the Directors
may consider returning the remaining proceeds from the Placing
to shareholders.
Given the nature of the Investing Policy, the Company does not
intend to make regular periodic disclosures or calculations of
its net asset value.
13 Financial risk management
The Group is exposed to financial risks through its various business
activities. In particular, changes in interest rates exchange
rates can have an effect on the capital, financial and revenue
situation of the Group. In addition, the Group is subject to credit
risks.
The Group has adopted internal guidelines, which concern risk
control processes and which regulate the use of financial instruments
and thus provide a clear separation of the roles relating to operational
financial activities, their implementation and accounting, and
the auditing of financial instruments. The guidelines on which
the Group's risk management processes are based are designed to
ensure that the risks are identified and analysed across the Group.
They also aim for a suitable limitation and control of the risks
involved, as well as their monitoring.
The Group controls and monitors these risks primarily through
its operational business and financing activities.
Credit Risks
The credit risk describes the risk from an economic loss that
arises because a contracting party fails to fulfil their contractual
payment obligations. The credit risk includes both the immediate
default risk and the risk of credit deterioration, connected with
the risk of the concentration of individual risks. For the Group,
credit and default risks are concentrated in the financial institutions
in which it places cash deposits.
The Group's policy is to place its cash with reputable clearing
banks. The Group's cash is deposited across one bank with credit
ratings of AA-.
Notwithstanding existing collateral, the amount of financial assets
indicates the maximum default risk in the event that counterparties
are unable to meet their contractual payment obligations. The
maximum credit default risk amounted to GBP8,197,995 at the balance
sheet date, of which GBP8,123,612 was cash on deposit at banks.
Liquidity Risks
Liquidity risk is defined as the risk that a company may not be
able to fulfil its financial obligations. The Group manages its
liquidity by maintaining cash and cash equivalents sufficient
to meet its expected cash requirements to implement its investment
policy. In the event that there is a risk that the cash required
to follow the investment policy is greater than the Group's liquid
resources, the Group would seek confirmation of the continuation
of the policy and the raising of further financing at a shareholder
general meeting.
At 30 June 2020, the Group has cash on deposit of GBP8,123,612.
Market Risks
Interest Rate Risks
Interest rate risks exist due to potential changes in market interest
rates and can lead to a change in the fair value of fixed-interest
bearing instruments, and to fluctuations in interest payment for
variable interest rate financial instruments.
The Group is exposed to interest rate risk on cash held on deposit
at banks. Interest income for the period to 30 June 2020 was GBP10,719.
The interest rate risk is not considered material to the Group
Currency Risks
The Group operates in the UK and Norway, incurs expenses predominantly
in sterling and NOK, and holds cash in sterling, USD and NOK.
The Group incurs some expenditure in foreign currency when the
investment policy requires services to be obtained overseas and
when its NOK balances are retranslated into GBP at period ends.
The foreign exchange risk on these costs is not considered material
to the Group.
14 Trade and other
receivables
30 June 30 June 31 Dec
2020 2019 2019
GBP GBP GBP
VAT recoverable 8,295 222 45,060
Other receivables 4,696 1 -
Prepayments 61,392 - 38,044
74,383 223 83,104
15 Share Capital
GBP
Balance at 28 May 2019 and 30 June 2019 1
Additions 1,179,999
Share buy-back and cancellation of shares (180,000)
Other movements -
Balance at 31 December 2019 1,000,000
Balance at 30 June 2020 1,000,000
Share capital history over the period:
* On incorporation on 28 May 2019, one subscriber share
with a nominal value of GBP1.00 was issued
* On 3 September 2019 the subscriber share of GBP1.00
was subdivided into 10 Ordinary Shares and a further
999,990 Ordinary Shares were issued at par
* On 23 October 2019 1,000,000 Ordinary Shares were
issued at par
* On 25 November 2019 300,000 Ordinary Shares were
issued at a premium of 90p per Ordinary Share and
from the total Ordinary Shares in issue (2,300,000
Ordinary Shares), 1,800,000 Ordinary Shares were
repurchased, cancelled and transferred to other
reserves leaving 500,000 Ordinary Shares in issue
with total subscription monies of GBP500,000 (which
was carried out in order to ensure that the founders'
subscription price for Ordinary Shares was equal to
the price paid by the new subscribers in the initial
public offering i.e. GBP1.00 per share).
* On 25 November 2019 a capital reduction was
undertaken to convert GBP270,000 of share premium to
other reserves.
* On 28th November 2019 9,500,000 Ordinary Shares were
allotted to the new subscribers at a premium of 90p
per Ordinary Share
16 Other reserves
Other reserves Currency translation Share Premium
reserve
GBP GBP GBP
Balance at 28 May
2019 and
30 June 2019 - - -
Additions - 25 -
Issue of share
capital - - 270,000
Share buy-back and
cancellation of
share
premium - - (270,000)
Initial Public
Offering - - 8,550,000
Costs of share issue - - (741,340)
Other movements 450,000 - -
Balance at 31
December
2019 450,000 25 7,808,660
Additions - (3,440) -
Balance at 30 June
2020 450,000 (3,415) 7,808,660
17 Trade and other
payables
30 June 30 June 31 Dec
2020 2019 2019
GBP GBP GBP
Trade payables 50,275 4,280 94,452
Accruals 114,691 - 63,877
Social security and
other taxation 36,552 - 6,504
Other payables 2,024 - 62,389
203,542 4,280 227,222
18 Share-based payment transactions
The Company operates a Founder Incentive Plan (FIP) under which
awards are legally granted in the form of performance units to
the participants which was detailed in the IPO Prospectus. Subject
to the achievement of performance conditions, the FIP award may
be converted into nil cost options over a number of shares on
three measurement dates during the life of the FIP. The life
of the FIP is five years from the date of the initial IPO, which
was November 2019. There are two executive directors, one non-executive
director, one non-employee, and one staff member who are members
of the plan. The following table summarises the expense recognised
in the Statement of Comprehensive Income since the IPO.
18 Share-based payment transactions
Six month Six month From incorporation
period ended period ended
30 June 30 June to 31 Dec
2020 2019 2019
GBP GBP GBP
Founder Incentive Plan 52,815 - -
The Founder Incentive Plan has a five year term, with awards
granted on 3 July 2020. Under the FIP, awards are granted in
the form of performance units to the participants. Subject to
the achievement of performance conditions, the FIP award may
be converted into nil cost options over a number of shares on
three Measurement Dates during the life of the FIP. The value
of the award is dependent on the extent to which the Measurement
Total Shareholder Return (Measurement TSR) exceeds the Threshold
Total Shareholder Return (Threshold TSR) at each Measurement
Date. Measurement Dates will be on the third, fourth and fifth
anniversaries of the IPO date. The performance condition is based
on the relative Total Shareholder Return (TSR) of doubling the
value of the company at each respective measurement date.
The Threshold TSR growth rates will be the following:
* Measurement Date 1 - 25.99%
* Measurement Date 2 - 18.92%
* Measurement Date 3 - 14.87%
For Measurement Dates 2 and 3, should the Threshold TSR be met
at a previous Measurement Date, the Threshold TSR will be the
higher of:
* Threshold TSR calculated using the relevant growth
rate set out above from the Initial Price; or
* the highest previous Measurement TSR at any prior
Measurement Date, where nil-cost options have been
awarded.
The IFRS 2 'Share-based Payments' fair value of each performance
share granted under the FIP is estimated as of the grant date
using a Monte Carlo simulation model with weighted average assumptions
as follows:
Six month Six month From incorporation
period ended period ended
30 June 30 June to 31 Dec
2020 2019 2019
GBP GBP GBP
Weighted average share price at grant
date 0.78 - -
TSR performance - - -
Expected volatility 50.44% - -
Risk free rate (0.08)% - -
Dividends yield 0.00% - -
The expected share price volatility is based upon the share price
volatility from the IPO to the Date of Grant.
19 Other leasing information
Lessee
Amounts recognised in profit or loss as an expense during the
period in respect of lease arrangements are as follows:
2020 2019
GBP GBP
Expense relating to short-term leases 47,744 -
20 Related party transactions
Remuneration of key management personnel
Members of the Board of Directors are deemed to be key management
personnel. Key management personnel compensation for the financial
period is the same as the Director remuneration set out in note
6 to the accounts.
Other information
Directors' interests in the shares of the Company in the current
and prior period, including family interests, were as follows:
Ordinary
shares
Helge Hammer 300,000
Jonathan Cooper 125,000
Graham Stewart 150,000
Jorunn Saetre 25,000
Julian Riddick 100,000
There were no other transactions or balances with related parties
in the period.
21 Cash used by operations
30 June 30 June 31 Dec
2020 2019 2019
GBP GBP GBP
Loss for the 6 month period after tax (1,108,131) (4,058) (196,301)
Adjustments for:
Investment income (10,719) - (1,750)
Depreciation and impairment of property,
plant and equipment 954 - -
Equity settled share based payment
expense 52,185 - -
Movements in working capital:
Decrease/(increase) in trade and other
receivables 8,721 - (83,104)
(Decrease)/increase in trade and other
payables (24,271) 4,058 220,444
Cash absorbed by operations (1,081,261) - (60,711)
22 Other information
A copy of this interim report and financial statements is available
on the Company's website www.longboatenergy.com.
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END
IR LBMTTMTBTTJM
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September 22, 2020 02:00 ET (06:00 GMT)
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