CONSOLIDATED STATEMENT OF CASH FLOWS

FOR THE YEAR ENDED 30 JUNE 2023

There were no significant non-cash transactions in the year to 30 June 2023.

The notes below form part of these financial statements.

COMPANY STATEMENT OF CASH FLOWS

FOR THE YEAR ENDED 30 JUNE 2023

There were no significant non-cash transactions in the year to 30 June 2023.

The notes below form part of these financial statements.

NOTES TO THE FINANCIAL STATEMENTS

1.    General Information

Orcadian Energy PLC (the "Company") is a public limited company which is domiciled and incorporated in England and Wales under the Companies Act 2006 with the registered number 13298968. The Company's registered office is 6^th floor, 60 Gracechurch Street, London, EC3V 0HR, and its ordinary shares are admitted to trading on AIM, a market of the London Stock Exchange.

The principal activity of the Group is managing oil and gas assets and the Group holds a 100% interest in, and is licence administrator for, UKCS Seaward Licences P2244, which contains the Pilot and Harbour heavy oil discoveries and P2482 which contains the Elke and Narwhal discoveries. The Group also had a 50% working interest in P2516, which contains a small part of the Fynn discoveries. P2516 was administered by the Parkmead Group and covers blocks 14/20g and 15/16g, which lie midway between the Piper and Claymore fields. P2516 expired in November 2023.

The financial statements presented for Group are for the year ended 30 June 2023 and these have are shown alongside figures for the year ended 30 June 2022 for comparative purposes.

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 on a going concern basis using the historical cost convention and in accordance with the UK-Adopted International Accounting Standards, and in accordance with the provisions of the Companies Act 2006.

The financial statements have been prepared under the historical cost convention unless otherwise stated.

2.2. Consolidation and acquisitions

The financial statements consolidate the financial information of the Group and companies controlled by the Group (its subsidiaries) at each reporting date. Control is achieved 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 subsidiaries acquired or sold are included in the financial information from the effective date of acquisition or up to the effective date of disposal, as appropriate. Where necessary, adjustments are made to the results of acquired subsidiaries to bring their accounting policies into line with those used by the Group. 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's shares were admitted to trading on AIM, a market operated by the London Stock Exchange, on 15 July 2021. In connection with the admission to AIM, in the financial year to 30 June 2021, the Group undertook a Group reorganisation of its corporate structure which resulted in the Company becoming the ultimate holding company of the Group. Prior to the reorganisation there was no ultimate holding company as Orcadian Energy (CNS) Ltd ("CNS") was a standalone entity. The transaction was accounted for as a capital reorganisation rather than a reverse acquisition since it did not meet the definition of a business combination under IFRS 3. In a capital reorganisation, the consolidated financial statements of the Group reflect the predecessor carrying amounts of CNS with comparative information of CNS presented for all periods since no substantive economic changes have occurred. The difference arising on acquisition has been accounted for with the recognition of a merger reserve on the balance sheet following the reorganisation of the share capital of the Group at the point of completion of the transaction.

2.3. Going concern

The financial statements have been prepared on a going concern basis. The Group is not yet revenue generating and an operating loss has been reported. The Group has historically been reliant on raising finance, both debt and equity, to enable it to meet its obligations as they fall due.

The Directors have reviewed a detailed forecast based on the funds expected to be raised and forecasted expenditure, including all required spend to meet licence requirements. This forecast has been stress tested by management in reaching their going concern conclusion. Having made due and careful enquiry, the Directors acknowledge that funds will need to be raised within the next 12 months to enable the Group to meets its obligations as they fall due, however, the Directors are confident that the required funds will successfully be raised through the equity market to fund its operations over the next 12 months.

The Directors, therefore, have made an informed judgement, at the time of approving financial statements, that the Group is a going concern but they acknowledge that the dependence on raising further funds during the next 12 months represents a material uncertainty.

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 30 June 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 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). Τhe functional currency of the Group and 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.'

Translation differences on non-monetary financial assets and liabilities such as equities held at fair value through profit or loss are recognised in profit or loss as part of the fair value gain or loss. Translation differences on non-monetary financial assets measure at fair value are included in other comprehensive income.

2.6. Other income

Grants are accounted for under the accruals model. Grants of a revenue nature are recognised in the Consolidated Statement of Comprehensive Income in the same period as the related expenditure, in accordance with the attached conditions.

2.7. Taxation

Tax currently payable is based on taxable profit for the period. Taxable profit differs from profit as reported in the income statement because it excludes items of income and expense that are taxable or deductible in other years and it further excludes items that are never taxable or deductible. The Group's liability for current tax is calculated using tax rates that have been enacted or substantively enacted by the balance sheet date.

Deferred tax is recognised on differences between the carrying amounts of assets and liabilities in the financial statements and the corresponding tax bases used in the computation of taxable profit, and is accounted for using the balance sheet liability method. Deferred tax liabilities are generally recognised for all taxable temporary differences and deferred tax assets are recognised to the extent that it is probable that taxable profits will be available against which deductible temporary differences can be utilised. Such assets and liabilities are not recognised if the temporary difference arises from initial recognition of goodwill or from the initial recognition (other than in a business combination) of other assets and liabilities in a transaction that affects neither the taxable profit nor the accounting profit. Deferred tax liabilities are recognised for taxable temporary differences arising on investments in subsidiaries and associates, and interests in joint ventures, except where the Group is able to control the reversal of the temporary difference and it is probable that the temporary difference will not reverse in the foreseeable future. The carrying amount of deferred tax assets is reviewed at each balance sheet date and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered. Deferred tax is calculated at the tax rates that are expected to apply in the period when the liability is settled, or the asset realised. Deferred tax is charged or credited to profit or loss, except when it relates to items charged or credited directly to equity, in which case the deferred tax is also dealt with in equity. Deferred tax assets and liabilities are offset when there is a legally enforceable right to set off current tax assets against current tax liabilities and when they relate to income taxes levied by the same taxation authority and the Group intends to settle its current tax assets and liabilities on a net basis.

2.8. Leases

The Group assesses whether a contract is or contains a lease at the inception of the contract. The Group recognises a right-of-use asset and a corresponding lease liability with respect to all lease arrangements in which it is the lessee, except for short-term leases (defined as leases with a lease term of 12 months or less) and leases of low value assets (such as tablets and personal computers, small items of office furniture and telephones). For these leases, the Group recognises the lease payments as an administrative expense on a straight-line basis over the term of the lease unless another systematic basis is more representative of the time pattern in which economic benefits from the leased assets are consumed.

2.9. 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 to the Consolidated Statement of Comprehensive Loss 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 will then be depreciated from the commencement of production on a unit of production basis.

2.10.  Impairment of non-financial assets

The Group assesses at each reporting date whether there is an indication that an asset may be impaired. This includes consideration of the IFRS 6 impairment indicators for any intangible exploration and evaluation assets capitalised as intangible costs, and investment in the subsidiary. 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. This is determined for an individual asset, unless the asset does not generate cash inflows that are largely independent of those from other assets or Groups of assets, and the asset's value in use cannot be estimated to be close to its fair value. In such cases, the asset is tested for impairment as part of the cash-generating unit to which it belongs. When the carrying amount of an asset or cash-generating unit exceeds its recoverable amount, it is considered impaired and is written down to its recoverable amount.

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. Impairment losses relating to continuing operations are recognised in those expense categories consistent with the function of the impaired asset, unless the asset is carried at revalued amount (in which case the impairment loss is treated as a revaluation decrease). An assessment is also made at each reporting date as to whether there is any indication that previously recognised impairment losses may no longer exist or may have decreased. If such indication exists, the recoverable amount is estimated.

A previously recognised impairment loss is reversed only if there has been a change in the estimates used to determine the asset's recoverable amount since the last impairment loss was recognised. If that is the case, the carrying amount of the asset is increased to its recoverable amount. That increased amount cannot exceed the carrying amount that would have been determined, net of depreciation, had no impairment loss been recognised for the asset in prior years. Such reversal is recognised in the Statement of Comprehensive Income unless the asset is carried at revalued amount, in which case the reversal is treated as a revaluation increase. After such a reversal, the depreciation charge is adjusted in future periods to allocate the asset's revised carrying amount, less any residual value, on a systematic basis over its remaining useful life.

2.11.  Property, plant and equipment

Property, plant and equipment is stated at cost less accumulated depreciation and any accumulated impairment losses. Depreciation is provided on all property, plant and equipment to write off the cost less estimated residual value of each asset over its expected useful economic life on a straight-line basis at the following annual rates:

·    Property, plant and equipment - 3 years straight line.

All assets are subject to annual impairment reviews.

2.12.  Financial Instruments

2.12.1 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 part of the contractual terms of the financial instrument.

2.12.2 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.

There were no financial assets measured at fair value as at 30 June 2023, or 30 June 2022.

Financial liabilities at amortised cost

Financial liabilities measured at amortised cost using the effective interest rate method include current borrowings and 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.

Financial liabilities at fair value through profit or loss

Financial liabilities at fair value through profit or loss include financial liabilities held for trading and financial liabilities designated upon initial recognition as at fair value through profit or loss. Financial liabilities are classified as held for trading if they are incurred for the purpose of repurchasing in the near term. Gains or losses on liabilities held for trading are recognised in the statement of profit or loss and other comprehensive income.

2.12.3. 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.

2.12.4 Impairment of financial assets

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.

2.13.  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.

2.14.  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.

2.15.  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.

2.16.  Share premium

Share premium account represents the excess of the issue price over the par value on shares issued. Incremental costs directly attributable to the issue of new ordinary shares or options are shown in equity as a deduction, net of tax, from the proceeds.

2.17.  Shares to be issued

Shares to be issued qualifies as equity as it satisfies the requirements under IAS 32, whereby subscription agreements for Ordinary shares ("the Obligation") represents a contract that will be settled by the Company delivering a fixed number of its Ordinary shares in exchange for a fixed amount of cash. When the Obligation arises the net value of share subscriptions to be received is recognised as an equity reserve, net of costs, with a corresponding receivable being recognised as an asset, and costs recorded as an accrued expense. Upon issue of the Ordinary shares, the Shares to be issued reserve is transferred to Share capital and Share premium. The receivable is discharged upon receipt of cash subscriptions from shareholders, and the accrued expense discharged upon payment to third party suppliers.

2.18.  Trade payables

These financial liabilities are all non-interest bearing and are initially recognised at the fair value of the consideration payable.

2.19.  Convertible loan notes and borrowings

Convertible loan notes classified as financial liabilities and borrowings are recognised initially at fair value, net of transaction costs incurred. After initial recognition, loans are measured at the amortised cost using the effective interest rate method. Any difference between the proceeds (net of transaction costs) and the redemption value is recognised in the income statement over the period of the borrowings using the effective interest rate method.

2.20.  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 year in which they are incurred.

2.21.  Earnings per share

Basic Earnings per share is calculated as profit attributable to equity holders of the parent for the period, adjusted to exclude any costs of servicing equity (other than dividends), divided by the weighted average number of ordinary shares, adjusted for any bonus element.

2.22.  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 oil and gas exploration, appraisal and development, in a single geographical location, the North Sea of the United Kingdom. As a result, the financial information of the single segment is the same as set out in the statement of comprehensive income, statement of financial position, statement of Changes in Equity and Statement of Cashflows.

2.23.  Investment in subsidiaries

The consolidated financial statements incorporate the financial statements of the company and entities controlled by the Group (its subsidiaries).  Control is achieved where the Group has the power to govern the financial and operating policies of an entity so as to obtain benefits from its activities.

The results of subsidiaries acquired or disposed of during the year are included in total comprehensive income from the effective date of acquisition and up to the effective date of disposal, as appropriate using accounting policies consistent with those of the parent.  All intra-group transactions, balances, income and expenses are eliminated in full on consolidation.

Investments in subsidiaries are accounted for at cost less impairment in the individual financial statements. Advances that are made to the subsidiary that are not expected to be repaid in the short term are capitalised by the Company. All advances made for the year have been capitalised.

2.24.  Share-based payments

The fair value of services received in exchange for the grant of share warrants is recognised as an expense in share premium or profit or loss, in accordance with the nature of the service provided. A corresponding increase is recognised in equity.

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 13)

As at 30 June 2023, the Group held oil and gas exploration and evaluation intangible assets of £3,871,362 (2022: £3,303,400). 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 (https://orcadian.energy/wp-content/uploads/2021/07/110650.Orcadian.FinalReport.pdf), likely production costs and the forecasted oil prices.

The Group  held 100% interest in UKCS Seaward Licence P2320 ("the Licence"), which contains the Blakeney, Feugh, Dandy & Crinan discoveries. The Licence had Phase A work commitments that were due to be completed by 14 May 2023. The Group applied to the North Sea Transition Authority ("NSTA") for an extension to completion time of Phase A work commitment. The NSTA declined the request for extension and the Licence determined on 14 May 2023. The Group has impaired the full value of the Licence recognised as an Intangible Asset on the Consolidated Statement of Financial Position with an impairment charge of £356,532 being charged to the Consolidated Statement of Comprehensive Loss.

As a result of the budget exploration costs, the licenses being valid and the assessed recoverable value of the intangibles being in excess of the carrying value, Management do not consider that any further impairment of intangible assets are impaired as at 30 June 2023, with the exception of the impairment charge detailed above.

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, 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.

4.   Group reorganisation under common control

The acquisition in the year ended 30 June 2021 met the definition of a group reorganisation due to the Company and the subsidiary being under common control at the date of acquisition. As a result, and since Orcadian Energy Plc did not meet the definition of a business per IFRS 3, the acquisition fell outside of the scope of IFRS 3 and the predecessor value method was used to account for the acquisition.

These consolidated financial statements represent a continuation of the consolidated financial statements of Orcadian Energy (CNS) Ltd and include:

a.   The assets and liabilities of Orcadian Energy (CNS) Ltd at their pre-acquisition carrying amounts and the results for both periods; and

b.   The assets and liabilities of the Company as at 11 May 2021 and its results from 11 May to 30 June 2021.

On 11 May 2021, the Company issued 52,201,601 shares entire issued share capital of Orcadian Energy (CNS) Ltd.

The net assets of Orcadian Energy (CNS) Ltd at the date of acquisition was as follows:

The  reserve that arose from the acquisition is made up as follows:

5.   Administrative expenses

*refer to note 13 for details on wages and salaries capitalised to intangible assets.

6.   Auditor's Remuneration

During the year, the Company obtained the following services from the Company's auditors and its associates:

7.   Other Income

In January 2023 the Company applied for certain licences in the 33^rd Seward licencing round. One of the applications was in partnership with Triangle Energy Pty. To enter into the joint application Triangle Energy Pty paid the Company £50,000.

In December 2021 Orcadian was awarded a grant of £466,667 by the OGA (now NSTA) to evaluate an alternative concept for the electrification of key producing oil and gas fields in the Central Graben area of the North Sea. All attached conditions in respect of the grant were met during the year and therefore this income has been recognised in full as the underlying costs have been incurred in the year.

8.   Staff numbers and costs

Refer to the Directors Remuneration Report for further information on Director wages and salaries.

Wages and salaries includes £305,972 that was capitalised to the value of the intangible asset (2022: £405,250) (refer to note 13).

No pension benefits are provided for any Directors (2022: £nil).

The average number of persons (including directors) employed by the Company during the year was:

9.   Finance costs

10.  Taxation

Analysis of charge for the year:

Taxation reconciliation

The below table reconciles the tax charge for the year to the theoretical charge based on the result for the year and the corporation tax rate.

As at 30 June 2023, the Group had potential deferred tax assets not recognised in respect of unused tax losses of £560,656 (2022: £439,912) which is due to uncertainty over the availability of future taxable profits to offset these losses against.

11.  Earnings per share

The calculation of the basic and diluted earnings per share is calculated by dividing the loss for the year for continuing operations for the Company by the weighted average number of ordinary shares in issue during the year.

There is no difference between the basic and diluted earnings per share as the Group recorded a loss for the year, and where a loss is recorded the basic and diluted loss is the same. Refer to note 19 for details on details of warrants on issue as at 30 June 2023 that would have a dilutive effect on earnings per share.

12.  Property, plant and equipment

The depreciation expense is recognised in administrative expenses as set out in note 5.

13.  Intangible assets

Wages and salaries totalling £305,972 (2022: £405,250) were capitalised during the year (refer to note 8).

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 1 April 2021 which was prepared by Sproule B.V.

https://orcadian.energy/wp-content/uploads/2021/07/110650.Orcadian.FinalReport.pdf

Refer to Note 3 for details of impairment charge.

14.  Trade and other receivables

Other receivables of £1,000,000 in the year to 30 June 2022 represented the gross value of share subscriptions receivable as at reporting date pursuant to a share placement that was announced on 30 June 2022 but for which shares were not formally issued until post-reporting date, in July 2022. There were £98,800 of share issue costs which were accrued for as at 30 June 2022 in respect of this placing. (Refer to notes 2.17 and 20).

The fair value of other receivables is the same as their carrying values as stated above.

The maximum exposure to credit risk at the reporting date is the carrying value of each class of receivable mentioned above. The Company does not hold any collateral as security.

15.  Cash and cash equivalents

There is no material difference between the fair value of cash and cash equivalents and their book value.

16.  Investment in subsidiary

The acquisition of Orcadian Energy (CNS) Ltd took place on 11 May 2021. Refer to note 4 for further details.

The additions during the year were advances to enable the subsidiary to continue work on the oil and gas exploration assets owned directly by the subsidiary. These costs have been capitalised rather than treated as an intercompany loan as they represent capital contributions and hence increase in value of the parent's investment.

17.  Borrowings

The STASCO loan was entered in to on 22 July 2019. The total loan facility was US$1,000,000 which has been fully drawn down. The term of the loan facility is 4 years and is subject to interest at LIBOR plus 5% which is accrued quarterly. The total interest charge for the year was US$98,427 £80,007 (2022: $57,118 (£41,869)), and a £44,852 unrealised foreign exchange gain (2022: loss of £151,629) was incurred in the year in respect of this loan. The loan is due to be repaid by 13 March 2024 (Refer to note 26 for further detail).

On 15 July 2021, all Convertible Loan Notes ("CLNs") were converted in to ordinary shares at a price of 28 pence each, which was a 30% discount to the fundraise price. In total 3,928,572 ordinary shares were issued in full discharge of the CLNs. No interest was paid on the CLNs as they were converted in to ordinary shares.

On 15 July 2021, all CLNs were converted in to ordinary shares at a price of 28 pence each, which was a 30% discount to the fundraise price. In total 3,928,572 ordinary shares were issued in full discharge of the CLNs. No interest was paid on the CLNs as they were converted in to ordinary shares.

18.  Trade and other payables - due within one year

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.

19.  Ordinary share capital and share premium

The ordinary shares 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.

Share warrants

On 15 July 2021 the Company issued 75,000 broker warrants in connection with the Raise. These warrants are fully vested, have an exercise price of 40p and are exercisable for a period of three years.

The fair value of warrants is valued using the Black-Scholes pricing model. A fair value charge of £15,000 has been applied as a direct deduction to the Share Premium Reserve in the year to 30 June 2022.

The inputs into the Black-Scholes pricing model are as follows:

Volatility 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.

Nature and purpose of equity and reserves

20. Shares to be issued

As at 30 June 2022 the Shares to be issued represented the issue of 2,857,143 shares at 35 pence each that completed on 6 July 2022. The value of the Shares to be issued reserve reflected the gross proceeds of the share placement of £1,000,000, less £98,800 of share issue costs which were accrued for at 30 June 2022. Upon completion the value of Shares to be issued were re-allocated to Share capital and Share premium (Refer to note 2.17 for the Group's accounting policy for Shares to be issued).

21.  Related parties

21.1 Transactions with related parties

The Company had the following related party transactions:

(1)  The Company makes use of an office at 70 Claremont Road which is currently provided to the Company by Mrs Julia Cane-Honeysett and Mr Stephen Brown at a rental of £1,000 per calendar month. The company pays for the services and business rates associated with the property.

21.3. Key management personnel

Directors of the Company are considered to be key management personnel.  The remuneration of the Directors has been set out in note 8.

22. Ultimate controlling party

The Directors consider Stephen Brown and Julia Cane-Honeysett to be the ultimate controlling parties given their combined holding of 40.22% of the issued capital of the Company.

23. Financial instruments

The Company holds the following financial instruments:

Financial assets

The maximum exposure to credit risk at the end of the reporting period is the carrying amount of each class of financial assets mentioned above.

Financial liabilities

Group

24. Financial risk management

24.1     Financial risk factors

The Group's activities expose it to a variety of financial risks: market risk, credit risk and liquidity risk. The Group's overall risk management programme focuses on the unpredictability of financial markets and seeks to minimise potential adverse effects on the Group's financial performance.

Risk management is carried out by the executive management team.

a)   Market risk

The Group is exposed to market risk, primarily relating to interest rate, foreign exchange and commodity prices. The Group does not hedge against market risks as the exposure is not deemed sufficient to enter into forward contracts. The Group has not sensitised the figures for fluctuations in interest rates, foreign exchange or commodity prices as the Directors are of the opinion that these fluctuations would not have a significant impact on the Financial Statements at the present time. The Directors will continue to assess the effect of movements in market risks on the Group's financial operations and initiate suitable risk management measures where necessary.

b)   Credit risk

Credit risk arises from cash and cash equivalents as well as outstanding receivables. To manage this risk, the Group periodically assesses the financial reliability of customers and counterparties.

The amount of exposure to any individual counter party is subject to a limit, which is assessed by the Board.

The Group considers the credit ratings of banks in which it holds funds in order to reduce exposure to credit risk. The Group will only keep its holdings of cash with institutions which have a minimum credit rating of 'A'.

c)   Liquidity risk

The Group's continued future operations depend on the ability to raise sufficient working capital through the issue of equity share capital or debt. The Directors are reasonably confident that adequate funding will be forthcoming with which to finance operations. Controls over expenditure are carefully managed.

The following table summarizes the Group's significant remaining contractual maturities for financial liabilities at 30 June 2023, and 30 June 2022.

There were no contractual liabilities with maturity of greater than 5 years as at 30 June 2022.

d)   Foreign exchange risk

Foreign exchange risk arises where the Group has financial assets and liabilities in a different currency to the functional currency of the Group. Where this arises the Group will be exposed to gains and losses that arise on movements in the base currency of the financial asset/liability and the functional currency of the Group. For the year ended 30 June 2023, the Group's borrowings were denominated in US Dollars and thus is exposed to gains and losses arising on the value of the US Dollar relative to Pound Sterling (Refer to note 17).

24.2     Capital risk management

The Group's objectives when managing capital are to safeguard the Group's ability to continue as a going concern, in order to enable the Group to continue its exploration and development of oil and gas resources. In order to maintain or adjust the capital structure, the Group may adjust the issue of shares or sell assets to reduce debts.

The Group defines capital based on the total equity and reserves of the Group. The Group monitors its level of cash resources available against future planned operational activities and may issue new shares in order to raise further funds from time to time.

25. Commitments

The Group has the following non-cancellable ongoing commitments required in order to maintain the Group's licences in good standing:

26. Events after the reporting period

On 23 August 2023, the Company announced that the US$1 million loan agreement with STASCO (refer to note 17) was extended to 13 September 2023.

On 13 September 2023, the Company announced that the US$1 million loan agreement with STASCO (refer to note 17) was extended to 13 March 2024.

On 18 September the Company announced that it had entered into a non-binding Heads of Agreement to farm out a 81.25% interest in the Pilot field development for a full carry to first oil and certain other payments.

On 2 October the Company announced that it had issued 2,916,666 ordinary shares at 12p per share to raise new funds of £350,000.

On 30 November 2023 P2516 expired and an impairment adjustment of £144,971 has been made in respect of the costs capitalised relating to the expired licence. As at reporting date the directors did not have sufficient reason to believe that the licence would expire and applied judgement that the most appropriate date to make the impairment was the date of expiry.

On 1 December 2023 the Company announced that it had submitted a request to the NSTA to

1.   consent to an assignment under, and in accordance with, clause 40(1) of the Licence to the Operator; and

2.   approval of appointment of the Operator as operator under, and in accordance with, clause 24 of the P2244 Licence.

On 7 December 2023 the Company announced the signature of an SPA for the disposal of an 81.25% interest in the Pilot field licence P2244 with Ping Petroleum UK PLC.

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