NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEAR ENDED 30 JUNE 2023

1.         Accounting policies & General Information

Pantheon Resources Plc was listed on the London Stock Exchange's AIM in 2006. Pantheon, through its subsidiaries, has a 100% working interest in oil projects located onshore Alaska, USA. The Company is domiciled in the United Kingdom and incorporated and registered in England and Wales, with registration number 05385506.

A summary of the principal accounting policies, all of which have been applied consistently throughout the year, is set out below.

1.1       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 ("IASs") and in accordance with the provisions of the Companies Act 2006.

The Group's financial statements for the year ended 30 June 2023 were authorised for issue by the Board of Directors on 18 December, 2023 and were signed on the Board's behalf by Mr J Hondris.

The Group and Company financial statements are presented in US dollars.

1.2       Basis of consolidation

Subsidiaries are fully consolidated from the date on which control is transferred to the Group. They are de-consolidated from the date that control ceases. The purchase method of accounting is used to account for the acquisition of subsidiaries by the Group. The cost of an acquisition is measured as the fair value of the assets given, equity instruments issued, and liabilities incurred or assumed at the date of exchange. Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are measured initially at their fair values at the acquisition date, irrespective of the extent of any minority interest. The excess of the cost of acquisition over the fair value of the Group's share of the identifiable net assets acquired is recorded as goodwill. Goodwill arising on acquisitions is capitalised and subject to impairment review, both annually and when there are indications that the carrying value may not be recoverable.

Inter-company transactions, balances and unrealised gains on transactions between group companies are eliminated.

All the companies over which the Company has control apply, where appropriate, the same accounting policies as the Company.

 

1.3       Interests in joint arrangements

IFRS 11 Joint Operations defines a joint arrangement as an arrangement over which two or more parties have joint control. Joint control is the contractually agreed sharing of control of an arrangement, which exists only when decisions about the relevant activities (being those that significantly affect the returns of the arrangement) require unanimous consent of the parties sharing control.

Joint operations

A joint operation is a type of joint arrangement whereby the parties that have joint control of the arrangement have rights to the assets and obligations for the liabilities, relating to the arrangement. The Group has a 100% working interest in all of its projects and accordingly does not have interests in joint operations at the balance date. At the present time the Group is not actively seeking a farmout partner and  is advancing towards development of its projects on its own, aiming to achieve FID on the Ahpun project by end 2025 and FID on the Kodiak project by end 2028. This is not to say that the Company is ruling out a potential farmout, however given the disparity between the market capitalisation of Pantheon and management's assessment of project NPV, it believes that materially better terms could be achieved once the project is further advanced. If at some point the Group were to farm out, then joint interest accounting would be applicable in future periods.

 

 

1.4       Going concern

In June 2023 Pantheon communicated to shareholders via RNS and accompanying webinar, its aggressive strategy to target sustainable market recognition of a value of $5 - $10 per barrel of 1P/1C recoverable resource by the end of 2028, FID (Final Investment Decision) on the Ahpun project by the end of 2025, and FID on the Kodiak project by the end of 2028. Executing such a strategy requires significant additional capital, most of which the Company seeks to access through non equity sources. This process is presently underway. In November 2023 management provided a detailed stock exchange announcement accompanied by a webinar, which provided a detailed overview of the estimated $120 million capital required to achieve first production at Ahpun. This sum includes the drilling of 3 new wells, a hot tap into the TAPS pipeline, upgrading production facilities and 3 years of G&A. In accessing additional capital, Pantheon's goal is to achieve this in the least dilutive manner for shareholders, minimising the use of equity capital and by prioritising three main alternate funding sources: (i) Vendor financing (ii) Offtaker financing and (iii) Reserve based lending.  Pantheon is presently in discussions with multiple parties with respect to those potential non-equity financing alternatives. The Group will need to secure additional funding for general working capital, to cover future liabilities as they fall due and to continue to progress its key projects as planned within the 12 months following the approval of these financial statements. As previously disclosed to shareholders, the Group seeks to secure such funding by Q2 or Q3 2024, in the least dilutive manner for shareholders, ideally through one of the non equity funding sourced discussed above. The auditors have made reference to this material uncertainty within their audit report.

In Q3 2023, Netherland Sewell & Associates estimated a 2C Contingent Resource for Pantheon's Kodiak project totalling 962.5 million barrels of marketable liquids. The directors believe the enormous size of the resource already appraised on Pantheon's acreage provides the potential for 1,000 - 2,000 wells. Whilst in absolute terms this would entails cumulative investment estimated in the billions of dollars over the lifetime of the project, Pantheon estimates c. $300 million on the Ahpun development (plus potentially $50 million of Kodiak appraisal costs) to be the maximum cumulative cash requirement. Once in full development, it is believed that production revenues have the potential to self-finance a great majority of the development costs, as is typically the case in such developments.

The Group has no contractual obligation to drill any future wells and the only obligation is to suspend the Talitha-A test well, the estimated cost of which ($0.7m) has already been provided for in the financial accounts. Given the quality of the assets, the directors are confident in their ability to raise capital as and when required. Accordingly, the financial statements have been prepared on a going concern basis.

 

1.5       Revenue

During the year oil sales commenced as a result of testing at Alkaid-2. This is considered to be non-recurring because it only occurred during the testing phase and production and thus production revenues stopped once flow testing operations ended. Once in production, revenue from contracts with customers will be recognised in accordance with IFRS15 Revenue from Contacts with Customers, at an amount that reflects the consideration to which the Group expects to be entitled in exchange for those goods.

Contract balances

A contract asset is the right to consideration in exchange for goods transferred to the customer. If the Group performs by transferring goods to a customer before the customer pays consideration or before payment is due, a contract asset is recognised for the earned consideration that is conditional. The Group does not have any contract assets as performance and a right to consideration occurs within a short period of time and all rights to consideration are unconditional.

Interest revenue is recognised on a proportional basis taking into account the interest rates applicable to the financial assets.

 

 

1.6       Foreign currency translation

(i)   Functional and presentational currency

The financial statements for the Group and the Company are presented in US Dollars ("$") and this is the Group's Presentation currency. The Functional currency of all entities within the Group, excluding the Parent Company, is $USD. The Functional currency of the Parent Company is £GBP.

(ii)  Transactions and balances

Transactions in foreign currencies are translated into US dollars at the spot rate on the date of the transaction. Monetary assets and liabilities denominated in foreign currencies are translated at the rate of exchange ruling at the balance sheet date. The resulting exchange gain or loss is dealt with in the income statement.

The assets and liabilities of the Parent Company are translated into US dollars at the rates of exchange ruling at the year end. The results of the Parent Company are translated into US dollars at the average rates of exchange during the year. Exchange differences resulting from the retranslation of currencies are treated as movements on reserves.

1.7       Cash and cash equivalents

The Company considers all highly liquid investments with a maturity of 90 days or less to be cash equivalents, carried at the lower of cost or market value.

1.8       Deferred taxation

Deferred tax is provided in full, using the liability method, on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the financial statements. Deferred tax is determined using tax rates (and laws) that have been enacted or substantially enacted by the balance sheet date and expected to apply when the related deferred tax is realised, or the deferred liability is settled.

Deferred tax assets are recognised to the extent that it is probable that the future taxable profit will be available against which the temporary differences can be utilized.

1.9       Exploration and evaluation costs and developed oil and gas properties

The Group follows the 'successful efforts' method of accounting for exploration and evaluation costs. At the point of production, all costs associated with oil, gas and mineral exploration and investments are classified into and capitalised on a 'cash generating unit' ("CGU") basis, in accordance with IAS 36. Costs incurred include appropriate technical and administrative expenses but not general corporate overheads. If an exploration project is successful, the related expenditures will be transferred to Developed Oil and Gas Properties and amortised over the estimated life of the commercial reserves on a 'unit of production' basis.

The recoverability of all exploration and evaluation costs is dependent upon the discovery of economically recoverable reserves, the ability of the Group to obtain necessary financing to complete the development of the reserves and future profitable production or proceeds from the disposition thereof. All balance sheet carrying values are reviewed for indicators of impairment at least twice yearly. The prospect acreage has been classified into discrete "projects" or, upon production, CGU's. When production commences the accumulated costs for the specific CGU is transferred from intangible fixed assets to tangible fixed assets i.e., 'Developed Oil & Gas Properties' or 'Production Facilities and Equipment', as appropriate. Amounts recorded for these assets represent historical costs and are not intended to reflect present or future values.

1.10     Impairment of exploration costs and developed oil and gas properties, depreciation of assets, plug & abandonment and goodwill

In accordance with IFRS 6 'Exploration for and Evaluation of Mineral Resources' (IFRS 6), exploration and evaluation assets are reviewed for indicators of impairment. Should indicators of impairment be identified an impairment test is performed.

In accordance with IAS 36, the Group is required to perform an "impairment test" on assets when an assessment of specific facts and circumstances indicate there may be an indication of impairment, specifically to ensure that the assets are carried at no more than their recoverable amount. Where an impairment test is required, any impairment loss is measured, presented and disclosed in accordance with IAS 36.

In accordance with IAS 36 the Group has determined an accounting policy for allocating exploration and evaluation assets to specific 'cash-generating units' ("CGU") where applicable.

Exploration and evaluation costs

The Alaskan exploration and evaluation leasehold assets were subject to a fair value assessment as at the date of acquisition. The carrying value at 30 June 2023 represents the cost of acquisition plus any fair value adjustment, where appropriate, and subsequent capitalised costs, in accordance with UK adopted IAS.

Decommissioning Charges

Decommissioning costs will be incurred by the Group at the end of the operating life of some of the Group's facilities and properties. The Group assesses its decommissioning provision at each reporting date. The ultimate decommissioning costs are uncertain and cost estimates can vary in response to many factors, including changes to relevant legal requirements, the emergence of new restoration techniques or experience at other production sites. The expected timing, extent and amount of expenditure may also change - for example, in response to changes in reserves or changes in laws and regulations or their interpretation. Therefore, significant estimates and assumptions are made in determining the provision for decommissioning. As a result, there could be significant adjustments to the provisions established which would affect future financial results. The provision at reporting date represents management's best estimate of the present value of the future decommissioning costs required.

For all wells the Group has adopted a Decommissioning Policy in which all decommissioning costs are recognised when a well is either completed, abandoned, suspended or a decision taken that the well will likely be plugged and abandoned in due course. For completed or suspended wells, the decommissioning charge is provided for and subsequently depleted over the useful life of well using unit of production method.

Goodwill

Goodwill, when carried, is tested for impairment annually (as at 30 June) and when circumstances indicate that the carrying value may be impaired. Impairment is determined for goodwill, if applicable, by assessing the recoverable amount of the asset or group of assets to which the goodwill relates. Where the recoverable amount is less than its carrying amount, an impairment loss is recognised. If an impairment is recognised it is reflected in the statement of profit or loss and other comprehensive income as part of other operating expenses.

Developed Oil and Gas Properties

Developed Oil and Gas Properties only represent the capitalised costs associated with oil and gas properties, assessed on a CGU (cash generating unit) basis which have been transferred from "Exploration and Evaluation costs" to "Developed Oil & Gas properties" when the well was commissioned. Wells are depleted over the estimated life of the commercial reserves based on the "unit of production basis". The carrying values of Developed Oil and Gas properties are tested for indicators of impairment, and the 'recoverable amount', being the asset's fair value less costs to sell and value in use, is compared to the asset's carrying value. Any excess of the asset's carrying value over its recoverable amount is expensed to the income statement.

Other property, plant and equipment

Other property, plant and equipment are stated at historical cost less depreciation. Depreciation is provided at rates calculated to write off the costs less estimated residual value of each asset over its estimated useful life, as follows:

-           Office equipment is depreciated by equal annual instalments over their expected useful lives, being 3 years.

1.11     Financial instruments

Recognition and derecognition

Financial assets and financial liabilities are recognised when the Group becomes a party to the contractual provisions of the financial instrument.

Financial assets, if/where applicable, are derecognised when the contractual rights to the cash flows from the financial asset expire, or when the financial asset and substantially all the risks and rewards are transferred.

A financial liability is derecognised when it is extinguished, discharged, cancelled or expires.

Classification and measurement of financial liabilities

The Group's financial liabilities include borrowings (convertible bond debt), trade and other payables and embedded derivative financial instruments.

Financial liabilities are initially measured at fair value, and, where applicable, adjusted for transaction costs unless the Group designated a financial liability at fair value through profit or loss.

Subsequently, financial liabilities are measured at amortised cost using the effective interest method except for derivatives and financial liabilities designated which are carried subsequently at fair value with gains or losses recognised in profit or loss.

All interest-related charges and, if applicable, changes in an instrument's fair value that are reported in profit or loss are included within finance costs or fair value gains/(losses) on derivative financial instruments.

Embedded derivative financial instruments

A borrowing arrangement structured as a convertible bond repayable in cash or stock over 20 quarterly instalments, in addition to the right of the lender to voluntarily convert part or all of the outstanding principal prior to the maturity date of the bond, has a derivative embedded in it. This is considered to be a separable embedded derivative of a loan instrument.

At the date of issue, the fair value of the embedded derivative is estimated by considering the derivative as a series of individual components with modelling of the fixed and floating legs to determine a repayment schedule and derive a net present value for the forward contract embedded derivative.

This amount is recognised separately as a financial liability or financial asset and measured at fair value through the income statement. The residual amount of the loan is then recorded as a liability on an amortised cost basis using the effective interest method until extinguished upon conversion or at the instrument's maturity date.

IFRS 9 Expected Credit Loss Model

IFRS 9 requires that credit losses on financial assets are measured and recognised using the "expected credit loss" (ECL) approach. Other than cash, the only other financial assets held are $2.4m in drilling deposits lodged with the state of Alaska. These drilling deposits are to cover future obligations to the state of Alaska for Great Bear Pantheon to perform dismantle, removal and restoration activities at Alkaid #2.  Funds held by the state of Alaska are considered to have virtually no risk of credit loss. 

1.12     Leases

All contracts entered into by the group are assessed to determine if they are either a lease contract or contain a lease contract. Where a lease is identified the Group recognises a right of use asset and a corresponding lease liability with respect to all lease arrangements in which it is a lessee.

There are three key evaluations in determining a lease contract:

I.          The contract contains an identified asset, which is either explicitly identified in the contract or implicitly specified by being identified at the time the asset is made available to the group.

II.         The Group has the right to obtain substantially all of the economic benefits from use of the identified assets throughout the period of use, considering rights within the defined scope of the contract.

III.       The Group has the right to direct the use of the identified asset throughout the period of use.

Lease liabilities are initially measured at the discounted present value of all future lease payments, excluding prepayments made up to and including the commencement date of the lease. The discount rate used is either the rate implicit in the lease, or if that is not readily determined, the incremental borrowing rate.

The lease liability is presented as a separate line item in the balance sheet.

Subsequent measurement of the lease liability includes increases to the carrying amount of the liability to reflect the interest on the lease liability (using the effective interest method) and by reducing the carrying amount for the lease payments made.

The Group remeasures the lease liability (and makes a corresponding adjustment to the related right-of-use asset) whenever:

A.        There is a change in the lease term. In such cases the lease liability is remeasured by discounting the revised lease payments using the revised discount rate.

B.         Change of lease payments (due to changes in the reference index or rate) or any changes in expected payments under a guaranteed residual value. In such instances the lease liability is remeasured using unchanged discount rates; a revised discount rate is used where the lease payments are changed due to a change in a floating interest rate.

C.         Where a lease modification is not accounted for as a separate lease. In such a case the lease liability is remeasured based on the modified lease term, using the revised discount rate at the date of the modification.

The initial carrying value of a right-of-use assets consists of:

•           The corresponding lease liability

•           All and any prepayments prior to the lease commencement

•           Less: Any lease incentive received by the lessee

•           Less: Any initial direct costs incurred by the lessee

Right-of-use assets are depreciated over the shorter period of lease term and useful life of the underlying asset. The depreciation starts at the commencement date of the lease. The asset is subsequently measured at initial carrying value less accumulated depreciation and impairment losses.

Where an impairment indicator has been identified, an impairment test is conducted. In assessing whether an impairment is required, the carrying value of the asset is compared with its recoverable value. The recoverable amount is the higher of the assets fair value less the costs to sell and value in use.

1.13     Critical accounting estimates and judgements

The preparation of financial statements in conformity with UK adopted International Accounting Standards requires the use of accounting estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of income and expenses during the reporting period. Although these estimates are based on management's best knowledge of current events and actions, actual results ultimately may differ from those estimates. IFRSs also require management to exercise its judgement in the process of applying the Group's accounting policies.

The areas involving a higher degree of judgement or complexity, or areas where assumptions and estimates are significant to the financial statements are as follows:

Impairment of tangible and intangible assets

The first stage of the impairment process is the identification of an indication of impairment. Such indications can include significant geological or geophysical information which may negatively impact the existing assessment of a project's potential for recoverability, significant reductions in estimates of resources, significant falls in commodity prices, a significant revision of Group Strategy or of the plan for the development of a field, operational issues which may require significant capital expenditure to remediate, political or regulatory impacts and others. This list is not exhaustive and management judgement is required to decide if an indicator of impairment exists. The Group regularly assesses the tangible and non-tangible assets for indicators of impairment. When an impairment indicator exists an impairment test is performed; the recoverable amount of the asset, being the higher of the asset's fair value less costs to sell and value in use, is compared to the asset's carrying value. Any excess of the asset's carrying value over its recoverable amount is expensed to the income statement.

 

Impairment of loans between Parent and Subsidiaries

The carrying amount of the loans made to the subsidiaries is tested for impairment annually and this process is considered to be key judgement along with determining whenever changes circumstances or events  indicate that the carrying amounts of those loans may not be recoverable. When assessing the recovery of these loans, the Board of Directors consider the likelihood that the subsidiaries will be able to settle the amounts owing , either out of future anticipated cashflows or through divestment of assets.

 

Contingent liabilities

Pursuant to IAS 37, a contingent liability is either: (1) a possible obligation arising from past events whose existence will be confirmed only by the occurrence or non-occurrence of some uncertain future event not wholly within the entity's control, or (2) a present obligation that arises from a past event but is not recognized because either: (i) it is not probable that an outflow of resources embodying economic benefits will be required to settle the obligation, or (ii) the amount of the obligation cannot be measured with sufficient reliability.

Kinder Morgan Treating L.P. ("Kinder Morgan") initiated a dispute over an East Texas gas treating agreement between Kinder Morgan and Vision Operating Company, LLC ("VOC"). VOC ceased making payments to the service provider in July 2019. The service provider subsequently issued a demand to VOC and, in February 2021, served Pantheon Resources plc with a petition, seeking to recover not less than $3.35m in respect of this VOC contract. Pantheon held ownership of less than 0.1% of VOC via a 66.6% interest in Vision Resources LLC. Both Vision Resources LLC and VOC filed for Chapter 7 Bankruptcy in the United States Bankruptcy Court for the Southern District of Texas Houston Division in April 2020.

No Pantheon entity is a signatory to the gas treating agreement and none are named in the agreement. Pantheon has taken legal advice on the matter and believes it has no liability to the service provider. Accordingly, Pantheon does not consider a provision should be included with the final statements and will contest any claim made.

In, July 2021, the court dismissed Kinder Morgan's claims against Pantheon Resources plc. Kinder Morgan has also asserted the same claims against two subsidiaries, Pantheon Oil & Gas, LP and Pantheon East Texas, LLC. Pantheon Oil & Gas, LP and Pantheon East Texas, LLC are contesting these claims.

Value of exploration assets on acquisition

In accordance with IFRS 3 Business Combinations, exploration assets acquired as part of a business acquisition, and hence combination, are recorded at their fair value as opposed to the fair value of the consideration paid.

Share-based payments

The Group records charges for share-based payments.

For option-based share-based payments, to determine the value of the options management estimate certain factors used in the option pricing model, including volatility, vesting date, exercise date of options and the number of options likely to vest. At each reporting date during the vesting period management estimate the number of shares that will vest after considering the vesting criteria. If these estimates vary from actual occurrence, this will impact on the value of the equity carried in the reserves.

Calculation of fair value of the derivative and debt components of the Unsecured Convertible Bond

Implicit within the convertible bond is an element of debt and a derivative element, reflecting the optionality of receiving stock, potentially at a profit, instead of cash in the case of quarterly repayments (amortisations) or partial voluntary conversions of the bond at the bondholders election. Pantheon contracted a third party expert valuation group in order to calculate these amounts, using Monte Carlo analysis.

Segment Reporting

The operating segments, namely Head Office and Alaska, are reported in a way that is consistent with the internal reporting and provided to the chief operating decision maker as required by IFRS 8 "Operating Segments". The Board of Directors, have been identified as the chief operating decision-maker. As such, the Board of Directors are responsible for allocating resources and assessing performance of the operating segments.

The accounting policies of the reporting segments are consistent with the accounting policies of the Group as a whole. The segment profit and loss represents the profit or loss earned by each segment. This is the measure of profit that reported to the Board of Directors for the purpose of resource allocation and the assessment of each segment's performance. When assessing segment performance and considering the allocation of resources, the Board of Directors review each segment's assets and total liabilities; For this purpose, all assets and liabilities are allocated to reportable segments.

1.14     New and amended International Financial Reporting Standards adopted by the Group

 

New standards and interpretations not applied

 

At the date of authorisation of these financial statements, the following standards and interpretations relevant to the Group and which have not been applied in these financial statements, were in issue but were not yet effective.

 

 

Standard	Impact on initial application	Effective date
IAS 1	Amendments - classifications of current and non-current liabilities	01 January 2024
IAS 8	Amendments - accounting policies, changes to accounting estimates and errors	01 January 2023
IAS 12	Amendments - income taxes - deferred tax arising from a single transaction	01 January 2023
IAS 1	Amendments - presentation of financial statements and IFRS practice statement. Disclosure of accounting policies	01 January 2023

 

The Group does not anticipate that the adoption of these standards will have a material effect on its financial statements in the period of initial adoption.

1.15     Share based payments

On occasion, the Company has made share-based payments to certain Directors, staff and consultants by way of issue of ordinary shares and share options. In the case of share options, the fair value of these payments is calculated by the Company using the Black-Scholes option pricing model. The expense is recognised on a straight-line basis over the period from the date of award to the date of vesting, based on the Company's best estimate of the expected number of shares that will eventually vest. There were no new issues of share options made during the year.

 

2.         Loss per share

The total loss per ordinary share from continuing operations for the group is 0.18 US cents (2022: 1.93 US cents - loss). The loss is calculated by dividing the loss for the year by the weighted average number of ordinary shares in issue of 791,082,592 (2022: 724,563,153 ).

The diluted profit per share has been kept the same as the basic profit per share because, although some of the 50,438,921 options and warrants in issue were in the money as at 30 June 2023, the Company reported a loss, hence including the additional dilution would have resulted in a reduction of the loss per share.

The diluted weighted average number of shares in issue is 841,521,513 (2022: 779,527,074 ).

 

3.         Segmental information

The Group's activities involve the exploration for oil and gas. There are two reportable operating segments: USA (Alaska) and Head Office. Non-current assets, and operating liabilities are attributable to the USA (Alaska), whilst much of the corporate administration is conducted through Head Office.

Each reportable segment adopts the same accounting policies.

In compliance with IFRS 8 'Operating Segments', the following tables reconcile the operational loss and the assets and liabilities of each reportable segment with the consolidated figures presented in these Financial Statements, together with comparative figures for the year ended 30 June 2023.

Year ended 30 June 2023

Geographical segment (Group)	Head Office	Alaska	Consolidated
	$	$	$
Revenue	-	803,689	803,689
Production royalties	-	(97,990)	(97,990)
Cost of sales	-	(575,300)	(575,300)
Administration expenses	997,106	(4,867,779)	(3,870,673)
Share based payments (Options & RSUs)	(3,146,170)	-	(3,146,170)
Convertible Bond - Interest Expense	(6,111,118)	-	(6,111,118)
Convertible Bond - Revaluation of Derivative Liability	11,321,514	-	11,321,514
Interest receivable	337,894	311	338,205
Other Income	-	30,000	30,000
Taxation	-	(138,844)	(138,844)
Loss by reportable segment	3,399,226	(4,845,913)	(1,446,687)
Exploration & evaluation assets	-	286,668,349	286,668,349
Property, plant & equipment	38,570	-	38,570
Trade and other receivables	154,161	2,405,361	2,559,522
Cash and cash equivalents	19,518,284	1,142,727	20,661,011
Intercompany balances	279,494,628	(279,494,628)	-
Total assets by reportable segment	299,205,643	10,721,809	309,927,452
Total liabilities by reportable segment	(28,003,014)	(9,495,832)	(37,498,847)
Net assets by reportable segment	271,202,629	1,225,978	272,428,606

 

Year ended 30 June 2022

Geographical segment (Group)	Head Office	Alaska	Consolidated
	$	$	$
Administration expenses	(3,419,596)	(4,011,058)	(7,430,654)
Share option expense	(8,256,575)	-	(8,256,575)
Convertible Bond - Interest Expense	(4,640,537)	-	(4,640,537)
Convertible Bond - Revaluation of Derivative Liability	4,310,773	-	4,310,773
Interest receivable	42,674	-	42,674
Taxation	-	2,022,334	2,022,334
Loss by reportable segment	(11,963,261)	(1,988,724)	(13,951,985)
Exploration & evaluation assets	-	237,722,294	237,722,294
Property, plant & equipment	91,691	-	91,691
Trade and other receivables	93,086	2,405,361	2,498,447
Cash and cash equivalents	54,610,306	3,173,815	57,784,121
Intercompany balances	(211,053,821)	211,053,821	-
Total assets by reportable segment	265,848,904	32,247,650	298,096,553
Total liabilities by reportable segment	(46,592,850)	(12,101,315)	(58,694,166)
Net assets by reportable segment	219,256,054	20,146,334	239,402,388

 

 

 

4.         Operating loss

		2023	2022
		$	$
Operating loss is stated after charging:
Depreciation - office equipment		1,869	303
Depreciation Right of use assets		55,700	54,472
Auditor's remuneration
- group and parent company audit services		133,000	112,500
Auditor's remuneration for non-audit services
- taxation services and compliance services		-	-

5.         Employment costs

The employee costs of the Group, including Directors' remuneration, are as follows:

		2023	2022
		$	$
Wages and salaries		2,680,169	2,739,035
Social security costs		170,861	255,446
Statutory pension costs		21,087	33,430
Share based payments		3,146,170	8,256,574
		6,018,287	11,284,485

The summary of the directors' remuneration is shown in the directors' report on page 26. The Directors are considered to be the key management.

 

		2023	2022
Number of employees (including Executive Directors) at the end of the year		number	number
Management and administration		15	14

 

 

6.         Interest receivable

	2023	2022
	$	$
Bank interest received	338,205	42,674

 

7.         Taxation

	2023	2021
	$	$
Current tax
US federal corporate tax	-	-
US state and local tax	-	-
UK corporate tax	-	-
Factors affecting the tax charge for the period		-
Income (loss) on ordinary activities before taxation	(1,307,843)	(15,974,318)
Income (loss) on ordinary activities before taxation multiplied by the standard US corporate tax rate of 21% (2022: US corporate tax rate of 21%)	(274,647)	(3,354,607)
Effects of:
State of Alaska tax benefits associated with temporary book-to-tax differences	(335,421)	(267,455)
US federal tax benefit associated with temporary book-to-tax differences	748,912	1,599,728
US federal tax benefit associated with reassessed future utilization of loss carry forward		-
Total tax charge /(credit)	138,844	(2,022,334)

Factors that may affect future tax charges

The Group's deferred tax assets and liabilities as at 30 June 2023 have been measured at 21% for items subject to US federal income tax only, items subject to state of Alaska and US federal income tax are reflected at an Alaska rate of 9.4% and a US federal rate, net of state of Alaska tax deduction, of 28.426%.No deferred tax has been provided for the UK tax losses as there is no expectation of the utilisation in the near future.

At the year-end date, the Group has unused losses carried forward of $123.6m (2022: $125.5m) available for offset against suitable future profits. Unused US tax losses incurred prior to January 1, 2018 expire in general within 20 years of the year in which they are sustained. Losses sustained after December 31, 2017 do not expire. The UK tax losses carried forward are approximately $11.5m (2022: $16m). A deferred tax asset in respect of the unutilised carried forward losses has not been recognised due to the uncertainty of the timing of any future profits.

The deferred tax liability at 30 June 2023 is 1,822,247 (2022: 1,683,403). The deferred tax liability is comprised of future tax benefits (deferred tax asset) primarily associated with net operating losses generated in prior years and the estimated loss generated in the current year, combined with future tax expenses (deferred tax liability) associated with the book gain on bargain purchase not yet recognized for income tax. Net operating losses will offset future taxable income and reduce the tax liability that would otherwise be incurred. The tax deferred gain on bargain purchase will result in future taxable income greater than book net income.

 

 

 

8.         Subsidiary entities

The Company currently has the following wholly owned subsidiaries:

Name	Country of Incorporation	Percentage ownership	Activity	Registered office address
Hadrian Oil & Gas LLC	United States	100%	Holding Company	5718 Westheimer, Suite 1600, Houston, Texas, 77057
Agrippa LLC	United States	100%	Holding Company	5718 Westheimer, Suite 1600, Houston, Texas, 77057
Pantheon Oil & Gas LP	United States	100%	Oil & Gas exploration	5718 Westheimer, Suite 1600, Houston, Texas, 77057
Great Bear Petroleum Ventures I, LLC	United States	100%	Lease Holding Company	3705 Arctic Blvd. # 2324 Anchorage, Alaska, 99503
Great Bear Petroleum Ventures II, LLC	United States	100%	Lease Holding Company	3705 Arctic Blvd. # 2324 Anchorage, Alaska, 99503
Great Bear Pantheon, LLC	United States	100%	Holding Company	3705 Arctic Blvd. # 2324 Anchorage, Alaska, 99503
Pantheon East Texas, LLC	United States	100%	Holding Company	5718 Westheimer, Suite 1600, Houston, Texas, 77057
Pantheon Operating Company, LLC	United States	100%	Operating Company	P.O. Box 11082 Spring, Texas, 77391-1082
Borealis Petroleum LLC	United States	100%	Holding Company	3705 Arctic Blvd. # 2324 Anchorage, Alaska, 99503

Pantheon Oil & Gas LP is 99% owned by Agrippa LLC as its limited partner and 1% by Hadrian Oil & Gas LLC as its general partner.

 

9.         Trade and other receivables

	Group	Group	Company	Company
	2023	2022	2023	2022
	$	$	$	$
Amounts falling due within one year:
Prepayments & accrued income	55,199	46,000	52,500	43,301
Other receivables	2,504,323	2,452,447	101,661	49,785
Total	2,559,522	2,498,447	154,161	93,086

 

	Group	Group	Company	Company
	2023	2022	2023	2022
	$	$	$	$
Amounts falling due after one year:
Loans to subsidiaries	-	-	279,494,628	211,053,821

An annual impairment review of the amount due from subsidiary undertakings (loans to subsidiaries) is performed by comparing the expected recoverable amount of the subsidiary's underlying tangible and intangible assets to the carrying value of the loan in the Company's statement of financial position. This has been assessed in line with IFRS 9 for credit losses however recoverability is supported by the underlying assets.

On the basis of ongoing annual assessments, the lifetime expected credit losses are recognised against loans and receivables when they are identified and are recorded in the statement of comprehensive income.

10.       Cash and cash equivalents

	Group	Group	Company	Company
	2023	2022	2023	2022
	$	$	$	$
Cash at bank and in hand
	20,661,012	57,784,121	19,518,284	54,610,306

11.       Trade and other payables

	Group	Group	Company	Company
	2023	2022	2023	2022
	$	$	$	$
Trade creditors	251,617	79,417	250,539	78,339
Accruals	2,588,994	6,298,569	366,886	632,134
Total	2,840,611	6,377,986	617,425	710,473

12.       Provisions

Plug and Abandonment Provision

The Group recognises a decommissioning liability where it has a present legal or constructive obligation as a result of past events, and it is probable that an outflow of resources will be required to settle the obligation, and a reliable estimate of the amount of obligation can be made. The obligation generally arises when the asset is installed, or the ground/environment is disturbed at the field location. A breakdown of these costs is detailed at Note 21.

Legal Costs

Legal costs have been provided for due to an ongoing dispute with a third-party vendor as detailed in Note 26.

 

	Provisions	Group		Group		Company		Company
		2023		2022		2023		2022
		$		$		$		$
	Plug and Abandonment	5,200,400		4,500,400		-		-
	Legal costs	250,000		250,000		-		-
	Other provision - Irrecoverable VAT	566,838		535,040		566,838		535,040
	Total	6,017,238		5,285,440		566,838		535,040
Provisions					Group		Group
					2023		2022
					$		$
Opening balance					5,285,440		1,250.000
Increase in period					731,798		4,035,440
Amounts unused					6,017,238		5,285,440
Closing balance					6,017,238		5,285,440

 

		Company	Company
		2023	2022
		$	$
Opening balance		535,040	-
Increase in period		31,798	535,040
Amounts used		-	-
Amounts unused		566,838	535,040
Closing balance		566,838	535,040

 

13.       Exploration and evaluation assets                                                         Group                Group

				2023		2022
				$		$
Cost
At 1 July				237,852,406		189,084,831
	Additions				48,246,055		45,267,175
Additions to Asset Retirement bligations				700,000		3,500,400
At 30 June				286,798,461		237,852,406
Impairment
As at 1 July				130,112		130,112
Charge for year				-		-
At 30 June				130,112		130,112
Net book value
At 30 June				286,668,349		237,722,294

The Group additions for the year comprise the direct costs associated with the preparation of drilling of oil and gas wells, together with costs associated with leases and seismic acquisition and processing.

An assessment for indicators for impairment was conducted on all of the Group's exploration and evaluation assets. Indicators of impairment included asset specific criteria such as, but not limited to, the emergence of negative geological/geophysical analysis, unsuccessful drilling results, a deterioration in the Group's lease position, and the presence of relevant regional drilling data.  The successful drilling campaign over recent years, reinforced by the external validation from third party experts on the Group's geological data, including, amongst other, receipt in August 2023 of a certified C2 Contingent Resource estimate of 962.5 barrels of marketable liquids, has caused the Group to conclude that no impairment was required.  In making assessments for indicators of impairment other criteria were considered such as, but not limited to, changes to commodity prices, a worsening of regulatory or environmental factors and macroeconomic conditions. The Group considered such indicators for impairment and concluded that no impairment was required.

14.       Leases

Right of use assets

The Group used leasing arrangements relating to property, plant and equipment. As the Group has the right of use of the asset for the duration of the lease arrangement, a "right of use" asset is recognised within property, plant and equipment.

When a lease begins, a liability and right of use asset are recognised based on the present value of the lease payments.

	Company & Group	Company & Group
	2023	2022
	$	$
Interest expense on lease liabilities	5,746	4,964
Total cash outflow for leases	(60,913)	(55,083)
As at 1 July	88,627	30,308
Additions to right-of-use assets	-	111,949
Depreciation charge - right of use assets	(55,700)	(54,472)
Foreign exchange movement on right of use assets	1,198	842
Carrying amount at the end of the year: Right of use assets	34,124	88,627

 

Lease liabilities

	Company & Group	Company & Group
	2023	2022
	$	$
Current	36,435	60,297
Non-current	-	30,004
	36,435	90,301

 

15.       Other Liabilities

The Company assists in the mechanics of the exercise of shares options for staff and consultants, sale of resultant shares externally through a facility operated through the Company's broker, remittances of relevant income tax and other obligations.  Employees are subject to full income tax on any profits upon the exercise of share options and sale (if at a profit), which are processed through the Company's payroll facility. The amount of $Nil (2022: $1,964,441) represents the net amount payable for the exercise of  options that was being processed at the year end and payable.

 

16.       Unsecured Convertible Bond

In December 2021, the Company issued $55 million worth of senior unsecured convertible bonds to a fund advised by Heights Capital Ireland LLC, a global equity and equity-linked focused investor. After settlement of the 13^th December 2023 convertible bond repayment, the remaining principal outstanding is $29.4million.

The Convertible Bonds have a maturity of 5 years, a coupon of 4.0% per annum and are repayable in 20 quarterly repayments ("amortisations") of principal and interest over the 5 year term of the convertible bond, with the last repayment due in December 2026. Such quarterly amortisations are repayable at the Company's option, in either cash at face value, or in ordinary shares ("stock") at the lower of the conversion price (presently USD$0.9096 Wper share) or a 10% discount to volume weighted average price ("VWAP") in the 10 or 3 day trading period prior to election date. Additionally, the bondholder has the option to partially convert the convertible bond at their discretion. A full summary of the terms of Convertible Bonds is detailed in the Company's RNS dated 7 December, 2021.                                                                                                                                                                                                                                     

The bond agreement contains embedded derivatives in conjunction with an ordinary bond. As a result, and in accordance with the accounting standards, the convertible bonds are shown in the Consolidated Statement of Financial Position, in two separate components, namely Convertible Bond - Debt and Convertible Bond - Derivative. At the time of recognition (Dec 2021) the $55m bonds were split, $39,175,363 for the Debt Component and $15,824,637 for the Derivative Component.

 

In order to value the derivative component, Pantheon engaged a third party expert valuation specialist group to perform the valuations, who determined that the valuation of the instrument required a Monte Carlo simulation of share price outcomes over the 5 year life to determine the ultimate value of the conversion option. This produced a calculated Effective Interest Rate ("EIR") of 20.41%. For the year end date of 30 June 2023, the third party expert valuation group performed their Monte Carlo simulation and valuation calculations to determine the new value for the equity component to be $407,566. The resulting movement of $11,321,514 was posted to the consolidated statement of comprehensive income to the account "Revaluation of derivative liability". These amounts will be revalued every balance date with the differences being accounted for in the consolidated statement of comprehensive income.

 

 

As at 30 June 2023 six quarterly repayments (amortisations) have been made, and in all cases ordinary shares were issued in full settlement.

 

At 30 June 2023 the Unsecured Convertible Bond is shown in the Consolidated Statement of Financial Position in the following categories;

 

Convertible Bond - Debt Component (Current Liability)	$9,755,688
Convertible Bond - Debt Component (Non-current Liability)	$16,619,062
Convertible Bond - Derivative Component (Non-current Liability)	$407,566
Total	$26,782,316

 

17.       Property Plant and Equipment

Group and Company	Office Equipment	Right of Use Assets	Total
	$	$	$
Cost
At 30 June 2021	16,099	103,913	120,012
Additions	3,368	111,949	115,317
At 30 June 2022	19,467	215,862	235,329
Exchange Difference	(1,068)	(3,216)	(4,284)
Additions	3,113	-	3,113
At 30 June 2023	21,512	212,646	234,158
Depreciation
At 30 June 2021	16,098	73,605	89,703
Depreciation for the year	303	54,472	54,775
Exchange difference	1	(840)	(839)
At 30 June 2022	16,402	127,237	143,639
Depreciation for the year	1,869	55,700	57,569
Exchange difference	(1,206)	(4,414)	(5,620)
At 30 June 2023	17,065	178,523	195,588
Net book value
As at 30 June 2023	4,447	34,123	38,570
As at 30 June 2022	3,065	88,625	91,690

 

 

 

 

 

18.       Share Capital

		2023	2022
		$	$
Allotted, issued and fully paid: 907,206,399  (2022: 767,705,537) ordinary shares of £0.01 each		12,464,677	10,720,459
Issued share capital:		Number	Issued and fully paid capital $
As at 30 June 2023
907,206,399 ordinary shares of £0.01 each (2022: 767,705,537)		907,206,399	12,464,677
Total		907,206,399	12,464,677

 

A summary of movements in share capital is summarised in the table below.

Movement in ordinary shares	Number	Share  Capital  $	Share Premium  $
As at 1 July 2022	693,258,674	9,739,203	208,683,935
September 21 - Exercise of share options	1,950,000	26,959	700,927
October 21 - Exercise of share options	1,000,000	13,757	398,953
December 21 - Equity fundraising - issue of new shares	48,218,529	638,462	40,861,537
January 22 - Exercise of share options	2,575,000	34,983	945,247
February 22 - Partial Conversion of Unsecured Convertible Bonds	1,937,608	26,319	2,026,527
March 22 - Exercise of Warrants	4,803,922	65,540	1,900,657
March 22 - Settlement of 1st quarterly principal & interest repayment of Convertible Bond	3,080,798	40,263	3,100,247
March 22 - Partial Conversion of Unsecured Convertible Bonds	3,681,457	45,970	3,539,717
May 22 - Exercise of share options	4,375,000	54,998	1,597,774
June 22 - Settlement of 2nd quarterly principal & interest repayment of Convertible Bond	2,824,549	34,005	2,618,365
As at 30 June 2022	767,705,537	10,720,459	264,879,194
September 22 - Convertible Bond: Third Amortisation	2,800,813	33,894	2,857,106
December 22 - Convertible Bond: Fourth Amortisation	3,276,374	39,649	2,826,851
September 22 - Exercise of Share Options	4,525,000	54,759	1,701,259
February 23 - Conversion of 100% of RSUs	290,000	3,685	178,744
March 23 - Convertible Bond: Fifth Amortisation	9,257,328	117,645	2,724,354
May 23 - Placement - First Tranche	95,395,134	1,192,010	19,072,158
May 23 - Placement - Second Tranche	8,783,893	109,759	1,756,146
June 23 - Convertible Bond: Sixth Amortisation	15,172,320	192,816	2,624,684
As at 30 June 2023	907,206,399	12,464,677	297,830,078

 

 

 

 

 

 

 

19.       Net cash outflow from operating activities

		Group	Group
		2023	2022
		$	$
Loss for the year		(1,446,687)	(13,951,984)
Net interest received		(338,205)	(42,674)
Share Based Payments non-cash expense		3,146,170	8,256,575
Depreciation of office equipment		1,869	303
Depreciation of right of use assets		55,700	54,472
Interest Expense		6,111,118	4,640,537
Convertible Bond - Revaluation of derivative liability		(11,321,514)	(4,310,773)
Other provisions - irrecoverable VAT		7,302	535,040
Decrease/ (increase) in trade and other receivables		(61,076)	11,430
(Decrease)/Increase in trade and other payables		(4,648,183)	7,235,337
Effect of translation differences		(3,041,194)	(1,347,435)
Taxation		138,844	(2,022,334)
Net cash outflow from operating activities		(11,395,855)	(941,506)

 

		Company	Company
		2023	2022
		$	$
Profit / (Loss) for the year		3,399,226	(11,963,260)
Net interest received		(337,894)	(42,674)
Share Based Payments non-cash expense		3,146,170	8,256,575
Depreciation		1,869	303
Depreciation of right of use assets		55,700	54,472
Interest Expense		6,111,118	4,640,537
Convertible Bond - Revaluation of derivative liability		(11,321,514)	(4,310,773)
Other provisions - irrecoverable VAT		7,302	535,040
Increase in trade and other receivables		(56,878)	(1,034)
(Decrease) / Increase in trade and other payables		(1,324,123)	2,141,889
Effect of translation differences		(1,118,080)	(1,142,868)
Net cash outflow from operating activities		(1,507,104)	(1,831,793)

20.       Control

No one party controls the Company.

 

21.       Decommissioning expenditure

Plug & Abandonment

The Directors have considered the environmental issues and the need for any necessary provision for the cost of rectifying any environmental damage, as might be required under local legislation. As at 30 June 2023 the Group has fully provided for the future plug and abandonment charges in relation to its wells on the Alaskan North Slope. Where a well will be used as a future disposal well then this is taken into account.

The Group provides for the estimated costs of future plug/abandonment and environmental remediation and rehabilitation for all wells drilled if not abandoned at that time, and for the estimated costs of future decommissioning, remediation and rehabilitation costs for the gravel pad at Alkaid #2 at such time as those wells/pad(s) come to the end of their respective useful life. By way of example, in a case where a successful well produces hydrocarbons for a period of 15 years, then the abandonment/rehabilitation provision would be made at the time the well is completed and comes on stream, however, the actual expenditure would occur when the works are performed in 15 years' time, ie the provision is made today for work expected in 15 years' time.  Similarly, the end of the life of the gravel pad supporting Alkaid#2 and future wells drilled from that location, would occur at such time as all producing wells have depleted and the pad would serve no further purpose. 

 

	Group	Group
	2023	2022
Alaska	$	$
Alkaid Well	666,000	666,000
Alkaid #2 Well	2,970,400	2,970,400
Talitha #A Well	1,564,000	864,000
As at 30 June	5,200,400	4,500,400

22.       Exploration and evaluation commitments

There were no firm drilling commitments at 30 June 2023. The group has an obligation to perform additional downhole isolation work to suspend the Talitha #A well, for future re-entry. Work must be completed by June 2024. The estimated capital commitment to perform this work is $700,000.

 

23.       Financial instruments

The Group's principal financial instruments comprise cash and cash equivalents, trade and other receivables and trade and other payables. Financial assets and liabilities are initially measured at fair value plus transaction costs.

The main purpose of cash and cash equivalents financial instruments is to finance the Group's operations. The Group's other financial assets and liabilities, such as receivables and trade payables, arise directly from its operations. It is, and has been throughout the entire period, the Group's policy that no trading in financial instruments shall be undertaken.

The main risk arising from the Group's financial instruments is market risk. Other minor risks are summarised below. The Board reviews and agrees policies for managing each of these risks.

 

Market risk

Market risk is the risk that changes in market prices, and market factors such as foreign exchange rates and interest rates will affect the entity's income or the value of its holdings of financial instruments.

The objective of market risk management is to manage and control market risk exposures within acceptable parameters while optimising the return.

Sensitivity Analysis - how does foreign exchange and interest rate changes affect income

The Oil and Gas operational activities of the group are pre-production. The revenue earned this financial year was a one-off, resulting from flow testing for a limited period of time; this testing has now ceased and is non-repetitive. Hence, there is very limited potential impact on income and no impact on equity.

Sensitivity Analysis - how does foreign exchange and interest rate changes affect holdings in financial instruments

Regarding the cash at bank, the interest receivable is a function of the interest rate that the depositing bank assigns to the account. There is limited potential impact on income and no impact on equity.

 

Interest rate risk

The Group's exposure to the risks of changes in market interest rates relates primarily to the Group's cash and cash equivalents with a floating interest rate. These financial assets with variable rates expose the Group to cash flow interest rate risk. The Group managed its cash balance by applying certain non committed cash deposits to higher yielding short term deposit accounts, yielding c. 5% per annum on those deposits towards the end of the financial year when interest rates had risen. All other financial assets and liabilities in the form of receivables and payables are non-interest bearing. The Group does not engage in any hedging or derivative transactions to manage interest rate risk.

In regard to its interest rate risk, the Group continuously analyses its exposure. Within this analysis consideration is given to potential renewals of existing positions, alternative investments and the mix of fixed and variable interest rates. The Group has no policy as to maximum or minimum levels of fixed or floating instruments.

The Convertible Bond has a fixed interest coupon rate payable of 4% per annum. This rate is fixed throughout the life of the bond. However, due to the presence of a derivative component within the convertible bond as described in Note 16, from an accounting perspective an Effective Interest Rate of 22.15% has been calculated to apply to the debt component of the convertible bond and has been charged to the Income Statement.

 

Interest rate risk is measured as the value of assets and liabilities at fixed rate compared to those at variable rate.

                                                   Weighted average                                 Fixed               Non-interest

                                                             interest rate                     interest rate                       bearing      

                                                                         2023                                  2023                           2023

Financial assets:                                                   %                                        $                                 $

 

Cash on deposit                                                  1.5                                                              1,142,728

Trade and other receivables                                    -                                          -                                  -

 

Net fair value

The net fair value of financial assets and financial liabilities approximates to their carrying amount as disclosed in the statement of financial position and in the related notes.

 

Currency risk

The functional currency for the Group's North American operating activities and exploration activities is the US dollar. The Group incurs general administration and advisory expenses in the Parent Company in Pounds Sterling, which is its functional currency. The Group does not use derivative products to hedge foreign exchange risk and has exposure to foreign exchange rates prevailing up to the dates when funds are transferred into different currencies. The Group raises equity capital in Pounds Sterling and converts the majority of this to US dollars to minimise currency risk. The Group continues to keep the matter under review.

The convertible bond is denominated in US dollars with all repayments paid in US dollars. Quarterly repayments are made, at the Company's election, either in cash or shares. When paid in shares the Relevant Share Settlement Price of shares for the purpose of the calculation is the lower of a 10% discount to the 3 day or 10 day volume weighted average share price (VWAP) or a predetermined reference price, currently US$0.9096. For the purpose of calculating VWAP, the daily USD/GBP exchange rate is applied, introducing a currency risk which may or may not result in a differing number of shares being used to settle a repayment, dependent upon the exchange rate.

 

Financial risk management

The Directors recognise that this is an area in which they may need to develop specific policies should the Group become exposed to wider financial risks as the business develops.

 

Liquidity risk

Prudent liquidity risk management includes maintaining sufficient cash balances to ensure the Group can meet liabilities as they fall due.

In managing liquidity risk, the main objective of the Group is therefore to ensure that it has the ability to pay all of its liabilities as they fall due. The Unsecured Convertible Bond liabilities can, at the Company's election, be met through the issuance of ordinary shares rather than cash. The Group monitors its levels of working capital to ensure that it can meet its liabilities as they fall due. The Group monitors its liquidity position carefully and considers equity fundraising, debt or farmouts when additional liquidity is required.

The table below shows the undiscounted cash flows on the Groups financial liabilities as at 30 June 2023 and 2022, on the basis of their earliest possible contractual maturity.

	Total	Payable on demand	Within 1-3 months	Within 3-6 months	Within 6-12 months	Greater than 1 year
	$	$	$	$	$	$
As at 30 June 2023
Trade creditors	251,617	-	251,617	-	-	-
Accruals	2,588,994	-	2,588,994	-	-	-
Lease liabilities	36,435	-	15,365	15,740	5,330	-
Unsecured Convertible Bond	34,300,000	-	2,940,000	2,915,500	2,891,000	25,553,500
Provisions	6,017,238	566,838	-	-	-	5,450,400
	43,194,284	566,838	5,795,975	2,931,240	2,896,330	31,003,900
As at 30 June 2022
Trade creditors	79,417	-	79,417	-	-	-
Accruals	6,298,569	-	6,298,569	-	-	-
Lease liabilities	90,301	-	13,354	13,680	28,405	34,862
Other liabilities	1,964,441	-	1,964,441	-	-	-
Unsecured Convertible Bond	48,289,500	-	2,891,000	2,866,500	5,659,500	36,872,500
Provisions	5,285,440	535,040	-	-	1,780,000	2,970,400
	62,007,668	535,040	11,246,781	2,880,180	7,467,905	39,877,762

 

Credit risk management

Credit risk refers to the risk that a counterparty will default on its contractual obligations resulting in financial loss to the Group.

The Group has adopted a policy of only dealing with what it believes to be creditworthy counterparties and would consider obtaining sufficient collateral where appropriate, as a means of mitigating the risk of financial loss from defaults. The Group's exposure and the credit ratings of its counterparties are continuously monitored, and the aggregate value of transactions concluded is spread across approved counterparties.

The maximum exposure to credit risk is $2,559,522 (2022: $2,498,447).

 

Capital management

The Group's capital management objectives are:

·      To provide long-term returns to shareholders

·      To ensure the Group's ability to continue as a going concern

The Group defines and monitors capital to ensure that the Company meets its objectives above, focussing on long-term share price growth, long term growth in production and resources, and a short-term requirement to ensure a going concern.

The Board of Directors monitors the available capital as well as the Group's commitments and adjusts the level of capital as is determined to be necessary by issuing new shares. The Group is not subject to any externally imposed capital requirements.

These policies have not changed in the year. The Directors believe that they have been able to meet their objectives in managing the capital of the Group.

24.       Share-based payments

Movements in share options in issue
Exercise price	Number of options as of  30 June 2022	Issued during year	Expired / Exercised during year		Number of options as of 30 June 2023
£0.30(1)	8,125,000	-	(3,300,000)		4,825,000
£0.27(3)	7,900,000	-	(900,000)		7,000,000
£0.33(4)	12,430,000	-	-		12,430,000
£0.67(5)	21,705,000	-	(325,000)		21,380,000
Total	50,160,000	-	(4,525,000)		45,635,000

 

Movements in share warrants in issue
Exercise price	Number of warrants as of  30 June 2022	Issued during year	Expired / Exercised during year		Number of warrants as of 30 June 2023
£0.30(2)	4,803,921	-	-		4,803,921
Total	4,803,921	-	-		4,803,921

 

Movements in restricted stock units
	Number of units issued as of 30 June 2022	Issued during year	Expired / Exercised during year		Number of units as of 30 June 2023
£0.675(6)	290,000	-	290,000		-
Total	290,000	-	290,000		-

 

(1)  Fully vested. Issued 2014. Expire September 2024. Exercise price £0.30/share. Previously fully expensed.

(2)  Fully vested. Issued 2019. Exercisable into non-voting shares, which are convertible into ordinary fully paid shares on a 1:1 basis. Expire September 2024. Exercise price £0.30/share. Previously fully expensed.

(3)  Fully vested and expire on the 6 July 2030. Issued 2020. Exercise price £0.27/share. Previously fully expensed.

(4)  Fully vested and expire on 27 January 2031. Issued 2021. Exercise price £0.33/share. Previously fully expensed.

(5)  Fully vested and expire 14 January 2027. Issued 2022. Exercise price £0.671/share.

(6)  All 290,000 RSUs converted 1:1 into ordinary shares during the year.

The Group has previously granted share options to directors, employees and consultants under the Staff share option plan, although none have been granted since January 2022. Such share options are equity settled share-based payments as defined in IFRS 2 Share-based payments. A recognised valuation methodology (using the Black-Scholes valuation model) was employed to determine the fair value of options granted with the associated charge being expensed to the Income Statement on a pro rate basis based on vesting. The weighted average exercise price of share options outstanding and exercisable at the end of the period was £0.484 (2022: £0.463).

In 2019 the Group issued 9,607,843 warrants as part of the consideration for the acquisition of Great Bear Petroleum. The terms of these warrants mirror the terms of the share options referenced in footnote (1) above, however upon exercise they convert on a 1:1 basis into non-voting shares as opposed to ordinary shares.  4,803,921 of these remain unexercised at period end.

The Share Option and Restricted Stock Units expense charge to the Consolidated Statement of Comprehensive Income for the year ending 30 June 2023 is $3,146,170 (2022: $8,256,575) which represented the pro rata Black-Scholes-derived charge (share options) and account charge (RSUs) attributable to the year with respect to previously issued share options and RSUs.

The equity reserve account represents current year expenses for unexpired options and warrants and the historical balance on vested option and warrants.

 

25.       Related party transactions

There were no related party transactions during the year other than the payment of remuneration.

 

26.       Contingent Liabilities

Pursuant to IAS 37, a contingent liability is either: (1) a possible obligation arising from past events whose existence will be confirmed only by the occurrence or non-occurrence of some uncertain future event not wholly within the entity's control, or (2) a present obligation that arises from a past event but is not recognized because either: (i) it is not probable that an outflow of resources embodying economic benefits will be required to settle the obligation, or (ii) the amount of the obligation cannot be measured with sufficient reliability.

Kinder Morgan Treating L.P. ("Kinder Morgan") initiated a dispute over an East Texas gas treating agreement between Kinder Morgan and Vision Operating Company, LLC ("VOC"). VOC ceased making payments to the service provider in July 2019. The service provider subsequently issued a demand to VOC and, in February 2021, served Pantheon Resources plc with a petition, seeking to recover not less than $3.35m in respect of this VOC contract. Pantheon held ownership of less than 0.1% of VOC via a 66.6% interest in Vision Resources LLC. Both Vision Resources LLC and VOC filed for Chapter 7 Bankruptcy in the United States Bankruptcy Court for the Southern District of Texas Houston Division in April 2020

No Pantheon entity is a signatory to the gas treating agreement and none are named in the agreement. Pantheon has taken legal advice on the matter and believes it has no liability to the service provider. Accordingly, Pantheon does not consider a provision should be included with the final statements and will contest any claim made.

In, July 2021, the court dismissed Kinder Morgan's claims against Pantheon Resources plc. Kinder Morgan has also asserted the same claims against two subsidiaries, Pantheon Oil & Gas, LP and Pantheon East Texas, LLC. Pantheon Oil & Gas, LP and Pantheon East Texas, LLC are contesting these claims.

 

27.       Reserves

Share Capital

The share capital account represents the consideration received for the shares issued at their nominal or par value.

Share Premium

The share premium reserve represents the excess of consideration received for shares issued above their nominal value net of transaction costs.

Retained Earnings

Retained losses represent the cumulative profit and loss.

Currency Reserve

The currency reserve represents the foreign exchange gains and losses that have arisen on the translation of £GBP  into $USD.

Share-Based Payments Reserve

The share-based premium reserve represents the cumulative charge for options and RSUs granted, still outstanding and not exercised.

 

28.       Revenue

For year ended 30 June 2023, the Alaska CGU recognized gross revenue of $803,689 from sales of oil produced during an extended production test. Sales during a test period are recognized as revenue under IAS 16-20. Associated cost of sales including, processing, transportation, royalty, and tax totaled $673,290.

 

29.       Other Income

The Employee Retention Credit (ERC) - sometimes called the Employee Retention Tax Credit or ERTC - is a refundable tax credit for businesses and tax-exempt organizations that had employees and were affected during the COVID-19 pandemic.

 

30.       Translation differences

The financial statements for the Group and the Company are presented in US Dollars ("$") and this is the Group's Presentation currency. The Functional currency of all entities within the Group, excluding the Parent Company, is $USD. The Functional currency of the Parent Company is £GBP.

The assets, liabilities of the Parent Company are translated into US dollars at the rates of exchange ruling at the year end. The income and expenses of the Parent Company are translated into US dollars at the average rates of exchange during the year. Exchange differences resulting from the retranslation of currencies are shown in the "Other Comprehensive Income for the Year" section of the Statement of Comprehensive Income and are treated as movements on reserves.

 

31.       Reconciliation of liabilities arising from financing activities and major non-cash transactions

Significant non-cash transactions, from financing activities in relation to unsecured convertible bond, are as follows:

Unsecured Convertible Bond	Group
	2023
	$
Opening Balance 1 July 2022	43,292,594
Non-cash flow Bond amortisation	(11,417,000)
Non-cash flow Forex movement	122,864
Non-cash flow Interest	6,105,372
Non-cash flow Revaluation of Derivative Liability	(11,321,514)
Closing Balance 30 June 2023	26,782,316

 

Significant non-cash transactions from financing activities in relation to raising new capital are disclosed in note 18.

There were no significant non-cash transactions from investing and operating activities in the current year.

 

 

32.       Subsequent events

In July 2023, Allegra Hosford Scheirer was appointed as an independent non-executive director.  Allegra has a Ph.D in marine geology and geophysics from MIT and for the past 15 years has been a co-director of the Basin Processes and Subsurface Modelling Consortium at Stanford University.

In late August 2023, Pantheon received an Independent Expert Report from Netherland Sewell & Associates ("NSAI") certifying a 2C Contingent Resource of 962.5 million barrels of marketable liquids (oil, condensate, NGLs) on its Kodiak project. NSAI have been contracted to provide an Independent Expert Report on its Ahpun project, expected in Q2 2024.

In August 2023 Pantheon outlined its updated Corporate strategy, describing its plans to move towards FID at Ahpun by end 2025 and Kodiak by end 2028. As part of this the Company announced that it had commenced the process to achieve a hot-tap into the trans Alaska Production System, and outlined an estimation of capex required to meet various milestones. There are described in greater detail in the CEO & Chairman's reports at the beginning of this document.

In September 2023, Pantheon announced a private placement to a long term shareholder, IPGL, approximately for 11.9 million shares at £0.1878 per share to raise $2.793 million, being the exact amount due for the September 2023 quarterly Convertible Bond repayment, enabling the Company to make the repayment to the bondholder in cash, rather than shares. The net result was materially similar dilution to having made the bond repayment in shares, however IPGL was considered to be a longer term shareholder and less likely to dispose of the shares. 

In late September 2023, Pantheon re-entered the Alkaid-2 wellbore to conduct a fracture stimulation operation and flow test on the shallower and independent Shelf Margin Deltaic (SMD) horizon in the Alkaid-2 wellbore. The operation had 3 primary objectives; (i) to obtain the best possible fluid samples for PVT analysis, (ii) to determine initial reservoir pressure, and (iii) to test the effectiveness of the revised frac design. In October 2023, Pantheon announced that all three objectives were successfully achieved, with the frac efficiency estimated at c.50%, a material improvement over the estimated 20% efficiency in the deeper Alkaid test. The gas oil ratio was also significantly better than that experienced in the deeper Alkaid test. These improvements are considered to have very positive implications for future project economics.

In November 2023 Pantheon announced that it was seeking to appoint an additional independent non-executive director, and was presently in the screening process.

In December 2023, Pantheon announced a private placement of approximately 16.3 million shares at £0.208 per share to raise $4.15 million, to allow the Company the ability to pay the December 23 Convertible Bond repayments of $2.8m in cash rather than shares, which has now occurred. Receipt of the $4.15m placing proceeds is expected in late January 2024.  This action was believed to remove the perceived overhang of shares while the Company continues to mature potential vendor and offtaker financial funding options and to seek to minimise dilution to shareholders.

In December 2023 Pantheon announced the appointment of a new independent non-executive director, Linda Havard, to the board of Directors, effective 1 January 2024. Linda has decades of experience in financial/CFO roles, and an MBA in Finance and a Ph.D. in Business. Linda will chair the Company's Audit Committee.

 

In Dec 2023 Pantheon was the successful bidder on 66,240 acres in the State of Alaska's 2023 North Slope Areawide Lease Sale. The leases capture additional reservoir potential to the west of the Company's existing acreage in the Kodiak field, and to the east of Ahpun. The new acreage contains material resource potential and classification of the potentially recoverable resources will be determined in the coming months in consultation with NSAI and SLB. Full details are contained in the Company's RNS dated 14 December, 2023.

 

 

GLOSSARY

bbl                   barrel of oil                                          mcfd                     thousand cubic feet per day

bopd                barrels of oil per day                            Mmboe                 million barrels of oil equivalent

mmbo              million barrels of oil                            NPV                     net present value

boepd              barrels of oil equivalent per day           NPV10                 net present value at 10%pa discount rate

mcf                  thousand cubic feet                               $                          United States dollar

NCI                  non-controlling interest                        OIP                      Oil in place

FID                  Final Investment Decision

NGL                Natural Gas Liquids