Source - LSE Regulatory
RNS Number : 6536Q
Westmount Energy Limited
29 October 2021
 

29 October 2021

 

WESTMOUNT ENERGY LIMITED

("Westmount" or the "Company")

 

Final Results & Notice of AGM

 

The Company is pleased to announce its Final Results for the year ended 30 June 2021, and hereby gives notice that the Annual General Meeting of Westmount Energy Limited will be held at No 2 The Forum, Grenville Street, St Helier, Jersey JE1 4HH, Channel Islands on 9 December 2021 at 11.00.

 

Copies of the Company's results and Notice of AGM are available on the Company's website, www.westmountenergy.com, and will be posted to shareholders today.

 

CHAIRMAN'S REVIEW

 

2021 Highlights

 

·      High quality reservoirs identified in first drilling campaign on Kaieteur and Canje blocks - but no standalone commercial discoveries to date1

 

·      Tanager-1 Discovery contains gross 65.3 MMbbls (42.7 MMbbls Net to Kaieteur Block) contingent resources (2C, unrisked)2 in high quality Maastrichtian reservoir - but is non-commercial as a standalone development

 

·      Detailed analysis and integration of multi-play drilling results and newly acquired sub-surface data into regional petroleum system models to high-grade potential follow-on drilling targets

 

·      Applications for environmental authorisation submitted by operator to the Guyanese EPA with respect to potential new drilling programs on the Canje and Kaieteur blocks from 2022

 

·      Shares commenced cross trading on the US OTCQB market under the ticker symbol "WMELF"

 

·      Final repayment of the 10% Convertible Unsecured Loan Notes 2021; the company is now debt free

 

·      Cash balance of £1.2M at year end, 30 June 2021

 

Global economic recovery, the ebb and flow of the COVID-19 pandemic, an accelerating energy transition in parallel with an Opec+ stabilization of oil markets have been the central themes in the upstream sector over the past 12 months. The green shoots of economic recovery that were in evidence in the second half of 2020 have continued to sprout in 2021. Vaccination programs and improving management strategies are pointing towards light at the end of the pandemic tunnel. Increasing economic activity, population mobility and oil demand, combined with OPEC+ supply discipline, has driven a sustained oil price rally over this period with Brent crude trading consistently above US$80/bbl since the start of October. While the clean energy transition has also gained momentum during this period, the redirected capital flows and poor regional performance of some renewable sources (wind and hydro) during summer 2021 have had some unintended consequences - such as gas shortages in Europe and Asia boosting demand for crude - while adding significantly, at least in the near term, to gas and oil pricing pressures. So, while pandemic threats remain in the form of mutant strains, other economic threats are now moving centre stage - such as rising inflation driven by rebound demand and spiking energy prices - together with uncertainties around future energy policies, the pace and direction of decarbonisation and energy capital allocation decisions in the face of an array of technologies with variable cost, carbon and reliability profiles, not to mention societal impacts. As the 'unintended consequences' in 2021 have shown energy transition is complex and multi-dimensional which suggests that reliable sources of energy such as low cost, low carbon oil and gas that can be rapidly commercialised, will have a role to play in the energy system for decades to come.

 

During the last 12 months the development of the upstream sector in Guyana has continued to power ahead making Guyana the world's fastest growing economy in 2020 with standout economic growth of over 40%. Building on the foundations of a world class petroleum province the country continues its transformation towards a significant oil producing nation - with potential for the installation of at least 6 Floating Production Storage and Offloading (FPSO) units on the Stabroek Block by 2027 and a discovered resource inventory, to date, which underpins up to 10 FPSOs3.  Three of these FPSOs are already operating or are under construction - with the Liza Phase 1 (Destiny FPSO) reaching its plateau production rate of 120,000 BOPD during the past year, Liza Phase 2 (Unity FPSO) about to commence installation and hook-up offshore Guyana and on track to achieve first oil in early 2022, with a capacity of 220,000 BOPD and with a third field development, Payara (Prosperity FPSO), also with 220,000 BOPD capacity, undergoing topsides fabrication at drydock in Singapore and targeting first oil in 2024. In addition, it is anticipated that the Stabroek consortium will submit to the government a 4th development plan, for the Yellowtail discoveries, by the end of 2021, targeting a gross production capacity of 220,000-250,000 BOPD and first oil in 2025. At this stage a number of follow-on developments are also envisaged including development of the Mako/Uaru and Whiptail discoveries, subject to government approvals and project sanctioning4

 

Six years on since the world-class Liza-1 discovery, the Guyana-Suriname Basin continues to manifest the hallmarks of a prolific emerging hydrocarbon province. With more than 50 wells drilled in the basin since 2015, in excess of 11 billion oil equivalent barrels discovered between Stabroek and Block 58 (with estimated 70% oil or liquids)5 and a total basin potential now estimated to be more than twice the discovered resource6, the basin continues to be an outlier in terms of global exploration performance and investment growth.  Large prospects, high success rates and continuous aggressive exploration and appraisal drilling has catapulted Guyana to the number three position for proven oil reserves in the Latin America-Caribbean region7.These advantaged barrels, characterised by low breakeven costs, low carbon emissions and potential for rapid commercialisation, are likely to continue to make Guyana a preferred destination for deepwater exploration and production investment.

 

In October 2021, on the back of a string of exploration successes, estimates of gross discovered resources to date on the Stabroek Block alone have been revised upwards to approximately 10 billion barrels of oil equivalent8. Successful exploration and appraisal wells reported during the last 15 months include Redtail-1, Yellowtail-2, Uaru-2, Mako-2, Longtail-3, Turbot-2, Whiptail-1, Whiptail-2, Pinktail-1 and Cataback-1 bringing the total number of reported significant discoveries to date on the Stabroek Block to twenty-one. In addition, circa 15m of oil bearing, Santonian, sandstone was reported in the Hassa-1 well, which is located proximal to the Canje block boundary. These frenetic activity levels are supported by the current deployment of six drillships, offshore Guyana, with a 7th drillship plus one semi-submersible rig operating offshore Suriname.

 

In the Surinamese sector, at the south-eastern end of the basin two additional stacked pay discoveries were announced by the Total/Apache consortium in Block 58, during this period - Kwaskwasi-1 and East Keskesi-1 - bringing the number of reported discoveries on the block to four. These discoveries reported light oil and gas-condensate pay in the shallower Campanian reservoirs overlying light oil pay in deeper Santonian reservoirs. Appraisal of these discoveries has commenced, with Total as operator, targeting FID for the first development in early 2022 and first oil by the end of 2025. Initial appraisal progress has been mixed with early success at Sapakara South-1, disappointments at Kwaskwasi and Keskesi East-1, and the general challenges around valorization of large associated gas volumes.  In December 2020, Petronas announced a discovery at the Sloanea-1 exploration well on Block 52, where several hydrocarbon-bearing sandstone packages with good reservoir qualities were encountered in the Campanian.

 

Exploration drilling results continue to support the presence of multiple plays, quality reservoirs and the potential for stacked-pay drilling opportunities within the basin. Although the Upper Cretaceous Maastrichtian-Campanian Liza play dominates in terms of number of discoveries and discovered volumes to date the deeper Santonian pools on Block 58, in conjunction with the deeper hydrocarbons reported at Liza-3, Tripletail-1, Yellowtail-2, Uaru-2, Turbot-2, Longtail-3 and Hassa-1 on the Strabroek Block, suggest an extensive emerging deeper play fairway within the basin.

 

It is against this backdrop that the first 'large step-out play extension wells' have been drilled on the Kaieteur and Canje blocks during the last 15 months - with results to date confirming the presence of high-quality reservoirs and the extension of the Cretaceous petroleum system outboard of the Liza-Sloanea trend. 

 

Kaieteur Block

 

The first well on the Kaieteur block, Tanager-1, remains the deepest well drilled in the Guyana-Suriname Basin to date. It was spudded on the 11 August 2020, using the Stena Carron drillship. The well was drilled in a water depth of 2,900 metres and reached a total depth of 7,633 metres circa mid-November 2021. Evaluation of LWD, wireline logging and sampling data confirmed 16 metres of net oil pay (20oAPI oil) in high-quality sandstone reservoirs of Maastrichtian age. Although high quality reservoirs were also encountered at the deeper Santonian and Turonian intervals, initial interpretation of the reservoir fluids was reported to be equivocal, requiring further analysis - results of which have yet to be disclosed. Post well analysis and integration of the data collected continues with a view to high grading the next drilling target on the Kaieteur block.

 

A post-well Netherland, Sewell & Associates Inc. ("NSAI") published CPR (14 February 2021) indicates that the Tanager-1 Maastrichtian discovery contains a 'Best Estimate' Unrisked Gross (2C) Contingent Oil Resource of 65.3 MMBBLs (Low to High Estimates 17.7 MMBBLs to 131 MMBBLs) - with a 'Best Estimate' Unrisked Net (2C) Contingent Oil Resource attributable to the Kaieteur Block of 42.7 MMBBLs (Low to High Estimates 11.3 MMBBLs to 86 MMBBLs). However, this discovery is currently considered to be non-commercial as a standalone development.

 

Subsequent to the Tanager-1 discovery, on 24 May 2021, it was announced that Hess Corporation ("Hess") had increased its working interest ("WI") in the Kaieteur Block, offshore Guyana, from 15% to 20% via the farm-down of a 5% WI by Cataleya Energy Limited ("CEL"). Although the details of this farm-in transaction were not disclosed this farm-in, by one of the Stabroek block partners and a leading player in the Guyana-Suriname basin, suggests confidence in the prospective resource potential of the Kaieteur Block and augurs well for the continuing exploration of the area.

 

On the 23 August 2021 it was announced that the date for elective nomination, by the operator, of the prospect target for the 2nd well on the Kaieteur Block has been extended by seven months to the 22 March 2021. The Kaieteur Block partners agreed to this extension to facilitate continuing analysis by the operator and integration of extensive multi-play drilling results and comprehensive data collection programs into regional petroleum system models and the prospect nomination decision.

 

Subsequently, in September 2021, the operator, ExxonMobil, submitted an application for environmental authorization to the Environmental Protection Agency (EPA) to proceed with a 12 well exploration campaign on the Kaieteur Block.

 

The Kaieteur Block is currently operated by an ExxonMobil subsidiary, Esso Production & Exploration Guyana Limited (35%), with Cataleya Energy Limited ("CEL") (20%), Ratio Guyana Limited ("RGL") (25%) and a subsidiary of Hess Corporation, Hess Guyana (Block B) Exploration Limited (20%) as partners. Westmount retains a holding of approximately 5.3% of the issued share capital of Cataleya Energy Corporation ("CEC") the parent company of CEL and circa 0.04% of the issued share capital of Ratio Petroleum Energy Limited Partnership ("Ratio Petroleum") the ultimate holding entity with respect to RGL.

 

Canje Block

 

The first well on the Canje block, Bulletwood-1, was spudded on the 31 December 2020 using the Stena Carron drillship and was completed in early March. The well was safely drilled in a water depth of 2,846 metres to its planned target depth of 6,690 meters. The primary target in the well was a Campanian age confined channel complex. The well encountered quality reservoirs but non-commercial hydrocarbons. There has been limited disclosure of the well results to date as detailed analysis of the data collected is ongoing.  However, the initial results confirm the presence of the Guyana-Suriname petroleum system and the potential prospectivity of the Canje Block.

 

Initial drilling operations at the second well on the Canje block, Jabillo-1, commenced on the 14 March 2021 using the Stena Carron drillship. Previously published information indicated that Jabillo-1 was targeting a Late Cretaceous, Liza-age equivalent, basin floor fan9. After interruption for a brief period of maintenance work on the drillship drilling operations at Jabillo-1 recommenced circa the 5 June 2021 and were completed in early July. The well was safely drilled in a water depth of 2,903 metres to its planned target depth of 6,475 meters. The well did not encounter commercial hydrocarbons.

 

The third well on the Canje block, Sapote-1, was spudded circa the 29 August 2021, using the Stena DrillMAX drillship. This well is located in the southeast of the Canje Block, approximately 60kms north of the Campanian and Santonian Maka Central-1 stacked pay discovery, in a new depositional setting linked to the Berbice canyon system. It is an independent multi-layer prospect, with several Upper Cretaceous targets, and is potentially the largest prospect drilled on the Canje block to date. Drilling of Sapote-1 is anticipated to take 60 days, with results anticipated in late October. At the time of going to press the results of the well are pending.

 

Westmount holds an indirect interest in the Canje Block as a result of its circa 7.2% interest in the issued share capital of JHI Associates Inc. ("JHI")10. The company also holds an additional indirect interest in the Canje Block as a result of its shareholding in Eco (Atlantic) Oil and Gas Ltd. ("EOG") and following the investment in JHI Associates Inc. ("JHI") announced by EOG on the 28 June 2021. Subsequent to this EOG transaction and a previous 2018 farm-out to Total JHI is fully carried/funded for the 2021 three well drilling campaign and is also funded for the drilling of additional wells.

 

The Canje Block is currently operated by an ExxonMobil subsidiary, Esso Exploration & Production Guyana Limited (35%), with TotalEnergies E&P Guyana B.V. (35%), JHI Associates (BVI) Inc. (17.5%) and Mid-Atlantic Oil & Gas Inc. (12.5%) as partners.

 

Orinduik Block

 

Westmount continues to hold an indirect interest in the Orinduik Block as a result of its circa 0.75% interest in the issued share capital of Eco (Atlantic) Oil and Gas Ltd. ("EOG"). Over the last 12 months the focus of the Orinduik Block JV partners has been on the analysis and assimilation of the 2019/20 drilling results and data gathering program, the reprocessing and re-interpretation of the 3D seismic data, and the high grading of the Cretaceous light oil prospect inventory with a view to the next drilling campaign on the Orinduik Block. EOG remains fully funded for its 15% working interest share of further planned/near term drilling on the block, which is anticipated to commence as soon as it is practical to do so.

 

The Orinduik Block is currently operated by Tullow Guyana B.V. (60%), with TOQAP Guyana B.V. (25%) and EOG (15%) as partners. TOQAP Guyana B.V. is jointly owned by TotalEnergies E&P Guyana B.V. (60%) and Qatar Petroleum (40%).

 

Block 47, Suriname

 

Westmount retains a minor indirect interest in Block 47, Suriname, via its circa 0.04% holding in Ratio Petroleum. The first well on Block 47, the Goliathberg-Voltzberg North-1 ("GVN-1") well was spudded circa 25 January 2021, using the Stena Forth Drillship and was reported by the operator Tullow Oil to have reached total depth on the 18 March 2021. The well was drilled to a total depth of 5,060 metres in a water depth of 1,856 metres and was targeting Turonian-Cenomanian stacked reservoirs. The well is reported to have encountered good quality reservoir with minor oil shows and was subsequently plugged and abandoned.  

 

Block 47 is operated by Tullow Suriname B.V. (50%), with Petroandina Resources Corporation N.V (30%) and Ratio Suriname Ltd. (20%) as partners.

 

Portfolio Effect

 

Westmount's investment strategy has been to provide shareholders exposure to a portfolio of drilling outcomes in the Guyana-Suriname Basin. Since 2019, we have participated, indirectly via our investee companies, in six wells (Jethro-1, Joe-1, Tanager-1, Bulletwood-1, Jabillo-1 and Sapote-11), offshore Guyana, which have yielded 3 oil discoveries (Jethro, Joe and Tanager), but no standalone commercial success to date.  While these initial drilling outcomes are below our expectations for the portfolio, the results provide encouragement and must be viewed in the context of 'large step-out' wells evaluating giant stratigraphic prospects while seeking to establish the perimeter of the multiple Tertiary and Cretaceous play fairways both to the northeast and southwest of the prolific Stabroek block. 

 

In any case, the drilling to date has confirmed the presence of high-quality reservoirs of various stratigraphic ages in the Kaieteur, Canje and Orinduik areas, which are capable of supporting deep-water developments when containing commercial volumes of light oil. Recent public domain presentation and commentary suggests that trap adequacy and hydrocarbon migration/timing are the key exploration risks inferred from these initial drilling results, out with of the Stabroek Block sweet-spot. These results together with the analysis and synthesis of the extensive well data gathering programs executed by the respective operators should improve understanding of the plays, reduce sub-surface risk and inform prospect selection for the next round of drilling on these blocks.  We remain hopeful that the geoscience learning curve combined with the portfolio effect provided by drilling an extended sequence of prospects in this prolific basin will win out over individual prospect risks to yield a commercial discovery. We look forward to the next drilling campaign across these blocks which will potentially commence in early 2022. ExxonMobil, the operator of the Kaieteur and Canje blocks, has already submitted an application for environmental authorization to the Environmental Protection Agency (EPA) with respect to potential 12 well drilling programs on both the Kaieteur and Canje blocks. 

 

Investment portfolio rebalancing and optimisation of exposure to 2021 drilling activity

 

During the period under review your company executed a number of transactions with a view to rebalancing the investment portfolio and optimising exposure to the more immediate and material drilling opportunities that were presented by the scheduled three well campaign on the Canje block in 2021.

 

On the 10 September 2020 the company announced that it had purchased 1,550,000 common shares in JHI by way of the issue of 18,290,000 new ordinary shares of no par value in Westmount ("New Ordinary Shares"), representing approximately 12.7% of Westmount's enlarged issued share capital. This share exchange transaction was agreed with the counterparties on the basis of a share swap metric of 11.8 new ordinary shares in Westmount for each common share in JHI - with Westmount shares being valued at 14.745p per share and JHI shares being valued at CAD$3 per share.

 

Two additional 'cash only' JHI share purchase transactions were also entered into by Westmount during the period under review. On the 22 December 2020 the company announced that it had purchased 250,000 common shares in JHI at an aggregate cost of US$400,000. On the 18 January 2021 the company announced that it had purchased 287,500 common shares at an aggregate cost of CAD$718,750. Following these purchases, Westmount holds a total of 5,651,270 shares in JHI, representing approximately 7.2% of the issued common shares in JHI as of 30 June 2021.

 

On the 17 November 2020 Westmount sold 1,200,000 shares in Ratio Petroleum for an aggregate consideration of ILS 1,514,681 (£338,480 after costs). On the same date the company sold 300,000 WL2 Warrants for an aggregate consideration of ILS 69,251 (£15,282 after costs). A residual holding of 89,653 WL2 warrants were exercised on the 14 January 2021 for an aggregate consideration of ILS 116,280 (£27,378). After rebalancing and the WL2 warrants exercise, Westmount continues to hold 89,653 shares in Ratio Petroleum representing approximately 0.04% of the issued share capital.


Westmount continues to hold a total of 567,185 common shares in CEC, representing approximately 5.3% of the issued share capital of CEC as of 10 August 2020.

 

Westmount continues to hold 1,500,000 shares in EOG, representing approximately 0.75% of the common shares in issue as of 6 September 2021.

 

On the 1 April 2021 the company announced that final repayment had been made with respect to the 10% p.a. convertible unsecured loan notes 2021 ("Convertible Loan Notes"), due on 31 March 2021. The final repayment was a total of £456,548 cash, consisting of £400,000 residual principal of Convertible Loan Notes plus £56,548 in accrued interest. This transaction completed the repayment in full of all Convertible Loan Notes issued on the 23 October 2018 and the company is now debt free.

 

The reported financial loss for the period is primarily made up of a non-cash loss on financial assets held at fair value through the profit and loss, some of which is as a result of Foreign Exchange movements on the portfolio Investments when valued at the period end.

 

US OTCQB Cross Trading Facility

 

On 1 December, 2020 we announced that the company's ordinary shares of no par value each ("Ordinary Shares") commenced cross-trading on the "OTCQB Market" in New York, U.S., under the ticker symbol "WMELF".

 

The cross-trading facility on the OTCQB Market will allow Westmount's Ordinary Shares to be traded in US Dollars by broker-dealers in the United States. Westmount's Ordinary Shares continue to trade on the AIM market of the London Stock Exchange with the ticker symbol "WTE".

 

Summary/Outlook

 

The green shoots of economic recovery that were in evidence in the second half of 2020 have continued to sprout in 2021. Vaccination programs and improving management strategies are pointing towards light at the end of the pandemic tunnel. Increasing economic activity, population mobility and oil demand, combined with OPEC+ supply discipline, has driven a sustained oil price rally over the past 12 months with Brent crude trading consistently above US$80/bbl since the start of October 2021. While the clean energy transition has also gained momentum during this period, the redirected capital flows and poor regional performance of some renewable sources (wind and hydro) during summer 2021 have had some unintended consequences - such as gas shortages in Europe and Asia boosting demand for crude - while adding significantly, at least in the near term, to gas and oil pricing pressures.

 

Drilling activity in the Guyana-Suriname basin continues to accelerate driven by the industry's focus on 'advantaged barrels' as a result of the unique combination of prospect sizes, reservoir quality, low carbon intensity and low breakeven metrics (US$25/bbl-US$35/bbl) that are available offshore Guyana. While the initial drilling outcomes from the Westmount portfolio have yet to deliver a standalone commercial discovery, the results to date provide encouragement and must be viewed in the context of initial 'large step-out' wells evaluating giant stratigraphic prospects while seeking to establish the perimeter of the multiple play fairways both to the northeast and southwest of the prolific Stabroek block. We are also heartened by the industry's continuing appetite for exploration acreage in the Guyana-Suriname basin - such as the Hess 5% farm-in on the Kaieteur Block (post Tanager-1) and the award of 3 blocks in the Surinamese Shallow Offshore Bid Round 2020/21 to Chevron (Block 5) and TotalEnergies + Qatar Petroleum (Blocks 6 and 8). Furthermore, the applications for environmental authorisation submitted to the Guyanese EPA by ExxonMobil the operator of the Canje and Kaieteur blocks augurs well for potentially extensive new drilling programs on these blocks from 2022.

 

Westmount's strategy remains one of offering shareholders exposure to high impact drilling outcomes in the Guyana-Suriname Basin via material indirect holdings in some key licences. In this context, and in spite of the access challenges, your Board remains focused on investment opportunities and deployment of capital that gives additional exposure to drilling in this prolific emerging basin. In addition, subject to future drilling outcomes, there are likely to be some consolidation opportunities within the basin amongst the junior players, as exploration matures and in response to risk management demands of investor capital. For the moment Westmount remains the only US OTCQB and London AIM listed junior player offering exposure to drilling outcomes across 3 blocks offshore Guyana. We travel in hope.

 

GERARD WALSH

Chairman

28 October 2021

 

Notes

1At time of going to press results of the Sapote-1 well are pending
2CPR by Netherland, Sewell & Associates Inc. ("NSAI") dated 14 February 2021- published by Ratio Petroleum
3Hess Corporation Presentation, 9 September 2021
4Hess Corporation Q2 2021 Earnings Conference Call remarks
5Westwood Global Energy Group
6ExxonMobil 2021 Investor Day Presentation
7https://oilnow.gy/featured/guyana-has-3rd-highest-crude-oil-reserves-in-latin-america-caribbean-region/
8ExxonMobil Corporation press release, 7 October 2021
9JHI's Website
https://www.jhiassociates.com
10Based on JHI's issued share capital inferred from JHI transaction dated 28 June 2021

For further information, please contact:

 

Westmount Energy Limited                               www.westmountenergy.com

David King, Director                                              Tel: +44 (0) 1534 823059

Anita Weaver                                        

 

Cenkos Securities plc (Nomad and Broker)       Tel: +44 (0) 20 7397 8900

Nicholas Wells/Peter Lynch (Corporate Finance)

 

DIRECTORS' REPORT FOR THE YEAR ENDED 30 JUNE 2021

 

The Directors present their annual report and the audited financial statements of Westmount Energy Limited (the "Company") for the year ended 30 June 2021.

 

PRINCIPAL ACTIVITIES

 

The principal activity of the Company is, and continues to be, an energy investment company. Development of the Company's activities and its prospects are reviewed in the Chairman's Review on pages 3 to 8.

 

The Company was incorporated in Jersey on 1 October 1992 under the Companies (Jersey) Law 1991, as amended, and is a public company with registered number 53623. The Company is listed on the London Stock Exchange Alternative Investment Market ("AIM"). On 1 December 2020 the Company commenced cross-trading on the OTCQB Market in New York, U.S., under the ticker symbol "WMELF".

 

DIRECTORS AND DIRECTORS' INTERESTS

 

The Directors who served during the year and subsequently to the date of this report were as follows:

 

 

 

Shares held at

 

Options held at

 

 

30 June 2021

 

30 June 2021

G Walsh (Chairman)

 

11,933,565

 

1,000,000

D R King                          

 

-

 

500,000

T P O'Gorman        

 

4,650,000

 

750,000

D Corcoran

 

5,250,000

 

1,750,000

 

RESULTS AND DIVIDENDS

 

The result for the year is set out on page 19 in the Statement of Comprehensive Income. The Directors do not recommend the payment of a dividend in respect of these financial statements (2020: £Nil). 

 

DIRECTORS' BIOGRAPHICAL INFORMATION

 

Gerard Walsh, Chairman, age 58, a Swiss resident, is a member of the Chartered Institute of Management Accountants and has been involved in financing oil and gas companies for over 20 years. Mr Walsh maintains his knowledge and skills via direct contact with senior industry investors and other operators, and via monitoring of significant market activities within the global energy sector.

 

David R King, age 63, a Jersey resident, is a Fellow of the Institute of Chartered Accountants in England and Wales and has over 25 years' experience in capital markets and cross border structuring gained from senior positions in a number of offshore jurisdictions, notably the Cayman Islands, Hong Kong, Luxembourg and Jersey. He is an experienced professional Non-Executive Director and is regulated personally by the Jersey Financial Services Commission. He maintains his knowledge and skills via fulfilment of regular continuing professional development obligations and by close monitoring of significant market activities within the sector.  Mr King acts as an independent director and oversees the efficient operation of Company Secretarial, Registrar and Administrative operations of the Company. 

 

Thomas P O'Gorman, age 69, a Northern Ireland resident, is a long term investor in the resource sector and is the former Chairman of Cove Energy Plc (formerly Lapp Platts Plc) who has been involved in financing oil and gas companies for over 40 years. Mr O'Gorman maintains his knowledge and skills via direct contact with senior industry investors and other operators, and via monitoring of significant market activities within the global energy sector.

 

Dermot Corcoran, age 62, a Republic of Ireland resident, is a petroleum geologist and geophysicist, with more than 30 years' experience working with both major and minor hydrocarbon exploration companies globally. Mr Corcoran has wide experience in technical and commercial aspects of petroleum exploration and production, gained from employment and investment experience in Europe, North Africa, West Africa, Kurdistan, Syria, Pakistan and the USA. Mr Corcoran maintains his knowledge and skills via direct contact with senior industry investors and other operators, attendance and engagement at industry conferences and seminars and via monitoring of significant market activities within the global energy sector.

 

SECRETARY

 

The Secretary of the Company is Stonehage Fleming Corporate Services Limited.

 

AUDITOR

 

The auditor, Moore Stephens Audit & Assurance (Jersey) Limited, has indicated its willingness to continue in office, and a resolution that it is re-appointed will be proposed at the next annual general meeting.

 

STATEMENT OF DIRECTORS' RESPONSIBILITIES WITH REGARD TO THE FINANCIAL STATEMENTS

 

The Directors are responsible for preparing the Directors' Report and the financial statements in accordance with applicable law and regulations.

 

Jersey Company law requires the Directors to prepare financial statements for each financial year. Under that law the Directors have elected to prepare the financial statements in accordance with International Financial Reporting Standards as adopted by the European Union (IFRS) and applicable law. Under Company law the Directors must prepare financial statements that give a true and fair view of the state of affairs of the Company and of the profit or loss of the Company for that period. In preparing these financial statements, the Directors are required to:

·      select suitable accounting policies and then apply them consistently;

·      make judgements and accounting estimates that are reasonable and prudent;

·      state whether the financial statements have been prepared in accordance with IFRS as adopted by the European Union; and

·      prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Company will continue in business.

 

The Directors are responsible for keeping proper accounting records that are sufficient to show and explain the Company's transactions and disclose with reasonable accuracy at any time the financial position of the Company and enable them to ensure that the financial statements comply with the Companies (Jersey) Law 1991. They are also responsible for safeguarding the assets of the Company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.

 

As far as the Directors are aware, there is no relevant audit information of which the Company's auditor is unaware and each Director has taken all the steps that he ought to have undertaken as a director in order to make himself aware of any relevant audit information and to establish that the Company's auditor is aware of that information.

 

The Directors are responsible for the maintenance and integrity of the corporate and financial information included on the Company's website. The Company's website is maintained in compliance with AIM Rule 26 and the applicable OTCQB Market standards.

 

Legislation in Jersey governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.

 

The Directors confirm that they have complied with all of the above requirements in preparing these financial statements.

 

On behalf of the Board

 

D R KING

Director

28 October 2021

 

CORPORATE GOVERNANCE

 

The Board have adopted the Quoted Companies Alliance Corporate Governance Code ("the QCA Code") following the London Stock Exchange's requirement for AIM listed companies to adopt and comply with a recognised corporate governance code.

 

Strategy and Business Model

 

The strategy of the Company is to invest in and provide follow on capital to small and medium sized companies which have significant growth possibilities operating in the oil and gas sector. Members of the Board have specialist knowledge and experience in the upstream sector of the oil and gas industry (gained from extensive investing activity over a number of decades) allowing them to identify projects and growth companies with potentially higher returns, commensurate with acceptable levels of risk. The Company undertakes extensive due diligence on potential investment opportunities and monitors performance of its investments via close contact with the companies concerned and analysis of their public announcements and presentations. In common with other investment companies in this sector, access as a minority shareholder to projects and valuable investments is challenging but the Board is confident of its ability to continue to source attractive investment opportunities given close relationships with a number of companies and their management teams, and recognition of the Board's experience and strong network.

 

Shareholder Relations

 

The Company engages closely with its principal shareholders, a number of whom are Directors of the Company, primarily via face-to-face meetings and publishes announcements of significant activity consistent with market requirements. Shareholders receive annual and half-year financial statements and are invited to the Company's Annual General Meeting. Contact details for the Company are maintained on the website and on Regulatory News Service announcements. The Board seeks to build strong relationships with its institutional shareholders which are managed by the Chairman and supported by other members of the Board.

 

Gerard Walsh, Chairman, and Dermot Corcoran, Director, are primarily responsible for shareholder liaison, and can be contacted via the Contact Page on the Company's website.

 

Stakeholder and Social Responsibilities

 

The Board has identified its key stakeholders as being its shareholders and investee companies, given it has no employees and a small range of contracted service providers. It maintains contact with shareholders, of whom a significant proportion are Directors, via Regulatory News Service and periodic feedback from these parties. Contact with investee companies is operated via the Chairman and individual Board directors responsible for the relevant investment recommendation, and is geared to key operational, project and transactional cycles identified for the company concerned.

 

Risk Management

 

The Company actively monitors and manages risk in its activities, principally through oversight and operation of its investment portfolio. The Company identifies key risks in all of its investments during the selection and due diligence cycle, and subsequent recommendations for investment by the Company consider for each proposal a range of risks and mitigating factors. Identification of these risks is achieved by direct engagement with the companies in which Westmount seeks to invest, close analysis of their market opportunities and threats, combined with detailed knowledge of the market sector where they operate and their competitors.

 

Board Composition, Evaluation and Decision Making

 

The Board comprises three shareholder Directors (including the Chairman Gerard Walsh) and one Non-Executive Director (David King) resident in Jersey, who is considered to be independent.

 

The Company deviates from the requirements of the QCA Code in that it has only one independent non-executive director. The Directors consider that the structure of the Board is appropriate and proportionate for the business at this stage of the Company's growth, and that the Independent Director, in conjunction with the Company's Nominated Adviser, provides appropriate challenge to the executive directors on all corporate governance matters. The Board intends to keep all aspects of its corporate governance - independence and the balance of executive and non-executive roles in particular - under review going forward.

 

Each of the four directors has considerable experience in their respective fields and act collectively in all decision making of the Company. The Board is satisfied that it has a suitable balance between independence on the one hand and knowledge of the Company's activities, to allow it to properly discharge its responsibilities and duties. Directors are expected to use their judgement and experience to challenge and assess the appropriateness of operations and decision making at all times.

 

The Board has met 5 times this financial year and Directors each dedicate between 12 and 150 daystime to the Company per annum.

 

The Board regularly takes advice from its Nominated Advisor, Cenkos Securities plc, and other external advisors (principally its external lawyers) in relation to periodic investment opportunities and fund raising.

 

The Board completes an annual self-evaluation of its performance based on externally determined guidelines appropriate to the composition of the Board and the Company's operation, including Board Sub Committees. The scope of the self-evaluation exercise will be re-assessed each year to ensure appropriate depth and coverage of the Board's activities consistent with corporate best practice. The Board has adopted a board effectiveness questionnaire, which assesses the composition, processes, behaviours and activities of the board through a range of criteria, including board size and independence, mix of skills and experience, and general corporate governance considerations in line with the QCA code.

 

Given the stage of the business' maturity, the responsibilities of a nomination committee are delegated to the Board, and there are no formal succession planning processes in place. The Board intends to keep this under review as the business develops.

 

Corporate Culture

 

Westmount Energy supports the growing awareness of social, environmental and ethical matters when considering business practices. These statements provide an outline of the policies in place that guide the Company and its employees when dealing with social, environmental and ethical matters in the workplace.

 

Code of Conduct

 

Westmount Energy maintains and requires the highest ethical standards in carrying out its business activities in regards to dealing with gifts, hospitality, corruption, fraud, the use of inside information and whistle-blowing.

 

Westmount Energy maintains a zero-tolerance policy towards bribery and corruption.

 

Equal Opportunity and Diversity

 

Westmount Energy promotes and supports the rights and opportunities of all people to seek, obtain and hold employment without discrimination.

 

It is our policy to make every effort to provide a working environment free from bullying, harassment, intimidation and discrimination on the basis of disability, nationality, race, sex, sexual orientation, religion or belief.

 

Joint Venture Partners, Contractors and Suppliers

 

Westmount Energy is committed to being honest and fair in all its dealings with partners, contractors and suppliers.

 

Procedures are in place to ensure that any form of bribery or improper behaviour is prevented from being conducted on Westmount Energy's behalf by joint venture partners, contractors and suppliers. Westmount Energy also closely guards information entrusted to it by joint venture partners, contractors and suppliers, and seeks to ensure that it is never used improperly.

 

Operating Responsibility and Continuous Improvement

 

Westmount Energy adopts an environmental policy which sets standards that meet or exceed industry guidelines and host government regulations. This is reviewed on a regular basis. Wherever we operate we will develop, implement and maintain management systems for sustainable development that will strive for continual improvement.

 

Westmount Energy is committed to maintaining and regularly reviewing its Health and Safety and Environmental Policies.

 

Periodic feedback from stakeholders, as described in relation to Stakeholder and Social Responsibilities (above), allows the Board to monitor the culture of the Company, as well as its ethical values and behaviours.

 

Governance Structures

 

The Board operates to manage and direct the affairs of the Company via close contact between Board members and through both regular scheduled and ad-hoc Board meetings. The Board aims to meet at least quarterly with a timetable set by the external Company Secretary with formal agendas and papers delivered in advance supporting key matters for consideration or approval. Additionally, contact is maintained between the directors via email and telephone given the geographic separation of the Board.

 

Mr Walsh as Chairman is responsible for setting the strategy of the Company and maintaining performance of the Board in line with the broad objectives set in that strategy. He is responsible for liaison with key stakeholders, including shareholders and prospective investee companies, and also with advisers and regulatory authorities.

 

Mr King, as a Jersey resident, maintains close contact with the Company Secretary and other contracted service providers from Jersey. The Board does not operate separate sub-committees (Audit, Remuneration or Nomination) given its small size and close contact for key decisions. The Company does not plan to establish new sub-committees for the foreseeable future.

 

The Board retains full authority for the Company such that all decisions on behalf of the Company are reserved for the Board. 

 

Communication with Stakeholders

 

The Company communicates with shareholders through the Annual Report and Audited Financial Statements, annual and half year results announcements, the Annual General Meeting, and periodic meetings with significant institutional shareholders and analysts.

 

Corporate information (including all Company publications and announcements) is available to all shareholders, prospective investors and the public and is maintained on the Company's website, www.westmountenergy.com.

 

In the last 12 months there were no votes of shareholders where a significant proportion voted against a resolution.

 

INDEPENDENT AUDITOR'S REPORT TO THE SHAREHOLDERS OF WESTMOUNT ENERGY LIMITED

 

Opinion

 

We have audited the financial statements of Westmount Energy Limited (the 'Company') as at and for the year ended 30 June 2021 which comprise the Statement of Comprehensive Income, the Statement of Financial Position, Statement of Changes in Equity, the Statement of Cash Flows and the notes to the financial statements, including a summary of significant accounting policies. The financial reporting framework that has been applied in their preparation is International Financial Reporting Standards ('IFRSs') as adopted by the European Union and the requirements of the Companies (Jersey) Law 1991.

 

In our opinion, the financial statements:

·    give a true and fair view of the state of the Company's affairs as at 30 June 2021 and of its loss for the year then ended;

·    have been properly prepared in accordance with the IFRSs as adopted by the European Union; and

·    have been prepared in accordance with the requirements of the Companies (Jersey) Law 1991.

 

Basis for opinion

 

We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our responsibilities under those standards are further described in the Auditor's responsibilities for the audit of the financial statements section of our report.

 

We are independent of the Company in accordance with the ethical requirements that are relevant to our audit of the financial statements in Jersey, including the Financial Reporting Council's Ethical Standard, and we have fulfilled our ethical responsibilities in accordance with these requirements.

 

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

 

Conclusions relating to going concern

 

In auditing the financial statements, we have concluded that the Director's use of the going concern basis of accounting in the preparation of the financial statements is appropriate.

 

Our evaluation of the directors' assessment of the Company's ability to continue to adopt the going concern basis of accounting included understanding the nature of the Company, its business model, system of internal control and related risks including relevant impact of the COVID-19 pandemic to the business, reviewing the performance of the underlying investments, critically assessing the key assumptions made by management including its appropriateness in the context of the financial reporting framework, and evaluating the directors' plans for future actions in relation to their assessment.

 

Based on the work we have performed, we have not identified any material uncertainties relating to events or conditions that, individually or collectively, may cast significant doubt on the Company's ability to continue as a going concern for a period of at least twelve months from when the financial statements are authorised for issue.

 

Our responsibilities and the responsibilities of the directors with respect to going concern are described in the relevant sections of this report.

 

Emphasis of matter

 

We draw your attention to note 8 and note 15 of the financial statements, which include unlisted investments held by the Company and carried at £13,989,918 (2020: £10,943,867) based on Directors' valuations. These are Level III investments and have been valued based on the recent sales price of the investments and/or using relevant market proxies where available. The Directors have also considered market expectations of future performance of the entity's industry sector, in particular known interest in the area of current exploration, in arriving at their valuations. Our audit opinion is not modified in respect of this matter.

 

Key audit matters

 

 

Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the financial statements of the current period and include the most significant assessed risks of material misstatement (whether or not due to fraud) we identified, including those which had the greatest effect on the overall audit strategy; the allocation of resources in the audit; and directing the efforts of the engagement team. These matters were addressed in the context of our audit of the financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.

 

·       Valuation of Investments. The valuation of the Company's investments is a key driver of the Company's investment return and investments represent a material proportion of the Company's financial assets. The relevant accounting policies and investment composition are discussed in note 2 and note 8, respectively, to the financial statements.

 

The investments represent listed and unlisted equity instruments amounting to £0.47 million and
£13.99 million, respectively, as at 30 June 2021. The identified risk predominantly relates to the unquoted investment which valuation carries a greater degree of judgement by the directors and has been valued based upon the price of recent investments which is a valuation basis included in the International Private Equity and Venture Capital Guidelines (IPEVC Guidelines).

 

Our main audit procedures to address the identified risk in respect of the unlisted investment were (a) we discussed with management their unlisted valuation methodology, and assessed the recognition and measurement of the unlisted investment held for compliance with IFRSs, and whether it had been accounted for in accordance with the stated accounting policy and with IPEVC Guidelines; and (b) we substantiated the nature and background of recent transactions which had been used as the basis of the valuation. We have not identified any material issues from the completion of the above procedures.

 

·       Risk of management override of controls. In accordance with ISAs (UK), we are required to consider the risk of management override of internal controls. Due to the unpredictable nature of this risk, we are required to assess it as a significant risk requiring special audit consideration.

 

Our audit work included, but was not restricted to, specific procedures relating to the risk that are required by ISA (UK) 240, The Auditor's Responsibilities Relating to Fraud in an Audit of Financial Statements, which includes the testing of journal entries, evaluation of judgements and assumptions in management's estimate, and test of significant transactions outside the normal course of business. We have not identified any material issues from the completion of the above procedures.

 

Our application of materiality

 

We apply the concept of materiality both in planning and performing our audit, and in evaluating the effect of misstatements on our audit and on the financial statements. For the purposes of determining whether the financial statements are free from material misstatement we define materiality as the level of misstatement that would probably influence the economic decisions of a reasonably knowledgeable person.

 

We have used approximately 2% of gross assets rounded down, or £313,000 (2020: £270,000) which reflects the fact that this is an investment fund where its market value is determined predominantly by its gross asset value.

 

An overview of the scope of our audit

 

During our audit planning, we determined materiality and assessed the risks of material misstatement in the financial statements including the consideration of where directors made subjective judgements, for example, in respect of the assumptions that underlie significant accounting estimates and their assessment of future events that are inherently uncertain. We tailored the scope of our audit in order to perform sufficient work to enable us to provide an opinion on the financial statements as a whole taking into account the Company, its accounting processes and controls and the industry in which it operates.

 

Other information

 

The directors are responsible for the other information. The other information comprises the information included in the annual report, other than the financial statements and our auditor's report thereon. Our opinion on the financial statements does not cover the other information and, except to the extent otherwise explicitly stated in our report, we do not express any form of assurance conclusion thereon.

 

In connection with our audit of the financial statements, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements, or our knowledge obtained in the audit or otherwise appears to be materially misstated.  If we identify such material inconsistencies or apparent material misstatements, we are required to determine whether there is a material misstatement in the financial statements or a material misstatement of the other information.  If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact.

We have nothing to report in this regard.

 

Matters on which we are required to report by exception

 

In the light of the knowledge and understanding of the Company and its environment obtained in the course of the audit, we have not identified material misstatements in the chairman's review or the directors' report.

 

We have nothing to report in respect of the following matters where the Companies (Jersey) Law 1991 requires us to report to you if, in our opinion:

·    adequate accounting records have not been kept, or

·    returns adequate for our audit have not been received from branches not visited by us; or

·    the financial statements are not in agreement with the accounting records and returns; or

·    we have not received all the information and explanations we require for our audit.

 

Responsibilities of directors

 

As explained more fully in the statement of directors' responsibilities with regard to the financial statements set out on page 9, the directors are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view, and for such internal control as the directors determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.

 

In preparing the financial statements, the directors are responsible for assessing the Company's ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the directors either intend to liquidate the company or to cease operations, or have no realistic alternative but to do so.

 

Auditor's responsibilities for the audit of the financial statements

 

Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor's report that includes our opinion.  Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists.  Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.

 

Explanation as to what extent the audit was considered capable of detecting irregularities, including fraud

 

The objectives of our audit in respect of fraud, are to identify and assess the risks of material misstatement of the financial statements due to fraud; to obtain sufficient appropriate audit evidence regarding the assessed risks of material misstatement due to fraud, through designing and implementing appropriate responses to those assessed risks; and to respond appropriately to instances of fraud or suspected fraud identified during the audit. However, the primary responsibility for the prevention and detection of fraud rests with both management and those charged with governance of the Company.

 

Our approach was as follows:

·      We obtained an understanding of the legal and regulatory requirements applicable to the Company and considered that the most significant but not limited to the Companies (Jersey) Law 1991. We also reviewed the laws and regulations applicable to the Company that has indirect impact to the financial statements.

·      We obtained an understanding of how the Company complies with these requirements by discussions with management and those charged with governance.

·      We assessed the risk of material misstatement of the financial statements, including the risk of material misstatement due to fraud and how it might occur, by holding discussions with management and those charged with governance.

·      We inquired of management and those charged with governance as to any known instances of non-compliance or suspected non-compliance with laws and regulations.

·      We reviewed the compliance reports and minutes of the meeting to see whether there is non-compliance reported to management and those charged with governance.

·      Based on this understanding, we designed specific appropriate audit procedures to identify instances of non-compliance with laws and regulations. This included making enquiries of management and those charged with governance and obtaining additional corroborative evidence as required.

 

A further description of our responsibilities for the audit of the financial statements is located on the Financial Reporting Council's website at: www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditor's report.

 

Use of our report

 

This report is made solely to the Company's shareholders as a body, in accordance with Article 113A of the Companies (Jersey) Law 1991. Our audit work has been undertaken so that we might state to the Company's shareholders those matters we are required to state to them in an auditor's report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company and the Company's shareholders as a body, for our audit work, for this report, or for the opinions we have formed.

 

Jeff Vincent

 

For and on behalf of Moore Stephens Audit & Assurance (Jersey) Limited

1 Waverley Place

Union Street
St Helier Jersey
Channel Islands JE4 8SG

 

28 October 2021
 

STATEMENT OF COMPREHENSIVE INCOME

FOR THE YEAR ENDED 30 JUNE 2021

 

 

 

 

 

 

 

 

 

 

Year ended 30 June 2021

 

Year ended 30 June 2020

Notes

 

£

 

£

 

 

 

 

 

 

 

 

 

 

 

 

Net fair value (losses)/gains on financial assets held at fair value through profit or loss

8

 

 

(692,288)

 

201,252

Net fair value gains on financial liabilities held at fair value through profit or loss

Impairment of intangible assets

Finance costs

Administrative expenses

11

 

6

7

4

 

 

103,205

-

(33,702)

(267,397)

 

 

 

75,419

(33,333)

(54,575)

(319,297)

Foreign exchange (losses)/gains

 

 

     (100,160)

 

          17,988

Share options (expense)/credit

14

 

(25,877)

 

1,053

 

 

 

 

 

 

Operating loss

 

 

(1,016,219)

 

(111,493)

 

 

 

 

 

 

 

 

 

 

 

 

Loss before tax

 

 

(1,016,219)

 

(111,493)

 

 

 

 

 

 

Tax

3

 

-

 

-

 

 

 

 

 

 

 

 

 

 

 

 

Loss after tax

 

 

(1,016,219)

 

(111,493)

 

 

 

 

 

 

Other comprehensive income

 

 

-

 

-

 

 

 

 

 

 

Total comprehensive loss for the year

 

 

(1,016,219)

 

(111,493)

 

 

 

 

 

 

 

 

 

 

 

 

Basic earnings per share (pence) continuing and total operations

5

 

(0.72)

 

(0.11)

 

 

 

 

 

 

Diluted earnings per share (pence) continuing and total operations

5

 

(0.69)

 

(0.11)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

The Company has no items of other comprehensive income.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

STATEMENT OF FINANCIAL POSITION

AS AT 30 JUNE 2021

 

 

 

 

 

 

 

 

 

 

 

As at

 

As at

 

 

 

 

30 June 2021

 

30 June 2020

 

 

Notes

 

£

 

£

 

 

 

 

 

 

 

ASSETS

 

 

 

 

 

 

Non-current assets

 

 

 

 

 

 

    Financial assets held at fair value through profit or loss

8

 

14,465,631

 

12,079,736

 

 

 

 

14,465,631

 

12,079,736

 

 

 

 

 

 

 

Current assets

 

 

 

 

 

 

    Other receivables and prepayments

 

9

 

4,441

 

-

    Cash and cash equivalents

 

10

 

1,218,922

 

2,435,664

 

 

 

 

 

 

 

 

 

 

 

1,223,363

 

2,435,664

 

 

 

 

 

 

 

Total assets

 

 

 

15,688,994

 

14,515,400

 

 

 

 

 

 

 

LIABILITIES AND EQUITY

 

 

 

 

 

 

Current liabilities

 

 

 

 

 

 

    Trade and other payables

    Derivative financial instruments

    Borrowings

 

12

11

11

 

39,534

-

-

 

46,406

133,333

392,718

 

 

 

 

39,534

 

572,457

 

 

 

 

 

 

 

Total Liabilities

 

 

 

39,534

 

572,457

 

EQUITY

 

 

 

 

 

 

    Stated capital

 

13

 

16,652,482

 

13,955,623

    Share based payment reserve

 

14

 

469,670

 

443,793

    Retained earnings

 

 

 

(1,472,692)

 

(456,473)

 

 

 

 

 

 

 

Total equity

 

 

 

15,649,460

 

13,942,943

 

 

 

 

 

 

 

Total liabilities and equity

 

 

 

15,688,994

 

14,515,400

 

 

 

 

 

 

 

 

 

These financial statements were approved and authorised for issue by the Board of Directors on 28 October 2021 and were signed on its behalf by:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

D R King

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Director

28 October 2021

 

 

 

 

 

 

 

                   

 

 

 

STATEMENT OF CHANGES IN EQUITY

FOR THE YEAR ENDED 30 JUNE 2021

 

 

 

 

 

 

 

 

 

 

 

 

Stated

 

Share-based

Retained

Total

 

 

Notes

capital

payment reserve

earnings

equity

 

 

 

£

£

£

£

 

 

 

 

 

 

 

 

 

 

 

 

 

 

As at 1 July 2019

 

 

5,829,872

444,846

(344,980)

5,929,738

 

 

 

 

 

 

 

Comprehensive income

 

 

 

 

 

 

Total Comprehensive loss for the year ended 30 June 2020

 

 

-

-

(111,493)

(111,493)

Share issue

 

13

8,125,751

-

-

8,125,751

Transactions with owners

 

 

 

 

 

 

Share options credit

 

14

-

(1,053)

-

(1,053)

 

 

 

 

 

 

 

As at 30 June 2020

 

 

13,955,623

443,793

(456,473)

13,942,943

 

 

 

 

 

 

 

Comprehensive income

 

 

 

 

 

 

Total Comprehensive loss for the year ended 30 June 2021

 

 

-

-

(1,016,219)

(1,016,219)

Share issue

 

13

2,696,859

-

-

2,696,859

Transactions with owners

 

 

 

 

 

 

Share options expense

 

14

-

25,877

-

25,877

 

 

 

 

 

 

 

As at 30 June 2021

 

 

16,652,482

469,670

(1,472,692)

15,649,460

 

 

STATEMENT OF CASH FLOWS

FOR THE YEAR ENDED 30 JUNE 2021

 

 

 

 

 

 

 

 

 

 

Year ended 30 June 2021

 

Year ended 30 June 2020

 

Notes

 

£

 

£

 

 

 

 

 

 

Cash flows from operating activities

 

 

 

 

 

 

 

 

 

 

 

Loss for the year

 

 

(1,016,219)

 

(111,493)

Adjustments for:

 

 

 

 

 

Net loss/(gain) on financial assets at fair value through profit or loss

 

 

692,288

 

(201,252)

Net gain on financial liabilities at fair value through profit or loss

 

 

(103,205)

 

(75,419)

Impairment of intangible assets

6

 

-

 

33,333

Interest on borrowings

 

 

33,702

 

54,575

Share options expense/(credit)

14

 

25,877

 

(1,053)

Movement in other receivables and prepayments

 

 

(4,441)

 

7,001

Movement in trade and other payables

 

 

(6,874)

 

984

Proceeds from sale of investments

8

 

356,011

 

-

Purchase of investments

8, 13

 

(737,334)

 

(5,132,689)

Net cash used in operating activities

 

 

(760,194)

 

(5,426,013)

 

 

 

 

 

 

Cash flows from financing activities

 

 

 

 

 

 

 

 

 

 

 

Repayment of convertible loan notes

11

 

(456,548)

 

-

Proceeds from issue of ordinary shares

13

 

-

 

7,798,303

Net cash generated from financing activities

 

 

(456,548)

 

7,798,303

 

 

 

 

 

 

Net (decrease)/increase in cash and cash equivalents

 

 

(1,216,742)

 

2,372,290

 

 

 

 

 

 

 

 

 

 

 

 

Cash and cash equivalents at beginning of year

 

 

2,435,664

 

63,374

 

 

 

 

 

 

Cash and cash equivalents at end of year 

10

 

1,218,922

 

2,435,664

 

 

                                                

 

 

 

 

 

 

 

 

 

 

 

NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEAR ENDED 30 JUNE 2021

 

1.         GENERAL INFORMATION AND STATEMENTS OF COMPLIANCE WITH INTERNATIONAL FINANCIAL REPORTING STANDARDS AS ADOPTED BY THE EUROPEAN UNION

 

Westmount Energy Limited (the "Company") operates solely as an energy investment company. The investment strategy of the Company is to invest in and provide follow on capital to small and medium sized companies that have significant growth possibilities.

                                                                                                           

The Company was incorporated in Jersey on 1 October 1992 under the Companies (Jersey) Law 1991, as amended, and is a public company with registered number 53623. The Company is listed on the London Stock Exchange Alternative Investment Market ("AIM"). On 1 December 2020 the Company commenced cross-trading on the OTCQB Market in New York, U.S., under the ticker symbol "WMELF".

 

Basis of Preparation

The financial statements are prepared on a going concern basis in accordance with International Financial Reporting Standards as adopted by the European Union ("IFRS") and applicable legal and regulatory requirements of the Companies (Jersey) Law 1991. The financial statements have been prepared under the historical cost convention as modified by the valuation of financial assets held at fair value through profit or loss.

 

The financial statements have been prepared on a going-concern basis as, in the opinion of the Directors, the Company has adequate resources to continue for the foreseeable future.

 

COVID-19

The Directors acknowledge the continued outbreak of Coronavirus ("COVID-19") and its potentially adverse economic impact. The Directors consider that at this stage the Company is not experiencing any major disruption to its business model from COVID-19 nor its effect on the oil and capital markets. The Directors will continue however, to closely monitor the ongoing impact of COVID-19 on the Company's operations.

 

2.         ACCOUNTING POLICIES                                                                                                         

 

The significant accounting policies that have been applied in the preparation of these financial statements are summarised below. These accounting policies have been used throughout all periods presented in the financial statements.

 

New standards, amendments and interpretations to existing standards that are effective in the current year

There are no new standards or amendments to standards that have been applied for the first time for the reporting period commencing 1 July 2020.

 

New standards, amendments and interpretations to existing standards that are not yet effective and have not been adopted early by the Company

At the date of authorisation of these financial statements there are no other standards that are not yet effective and that would be expected to have a material impact on the Company in the current or future reporting periods and on foreseeable future transactions.

 

Use of estimates and judgements

The preparation of financial statements in conformity with IFRS requires the use of accounting estimates and the exercise of judgement by management while applying the Company's accounting policies in relation to the impairment of intangible assets, value of options issued and derivative financial instruments, as set out in notes 6, 11, 14 and 15. Derivative financial instruments, which are embedded in the convertible loan notes issued by the Company, have been presented separately from the host contract. The bifurcation of the embedded derivative financial instruments requires judgement by management to estimate the fair value of the derivatives on initial recognition of the financial instrument. The valuation and subsequent impairment reviews of the Company's intangible assets requires the use of accounting estimates and judgement by the management.

 

 

 

 

 

NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEAR ENDED 30 JUNE 2021

 

2.          ACCOUNTING POLICIES (continued)

 

Use of estimates and judgements (continued)

These estimates are based on the management's best knowledge of the events which existed at the date of issue of the financial statements and at the statement of financial position date however, the actual results may differ from these estimates

 

Financial assets at fair value through profit and loss that are not listed have been valued in accordance with IFRS using the International Private Equity and Venture Capital ("IPEVC") Guidelines and information received from the investment entity. The inputs to value these assets require significant estimates and judgements to be made by the Directors.  The Directors have considered the sensitivity of the valuations as detailed in note 15.

 

Functional and presentation currency

The functional currency of the Company is United Kingdom Pounds Sterling ("Sterling"), the currency of the primary economic environment in which the Company operates. The presentation currency of the Company for accounting purposes is also Sterling.

 

Foreign currency monetary assets and liabilities are translated into Sterling at the rate of exchange ruling on the last day of the Company's financial year. Foreign currency non-monetary items that are measured at fair value in a foreign currency are translated into Sterling using the exchange rates at the date when the fair value was determined. Foreign currency transactions are translated at the exchange rate ruling on the date of the transaction. Gains and losses arising on the currency translation are included in administrative expenses in the Statement of Comprehensive Income in the year in which they arise.

 

Financial instruments

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

 

(a)        Classification

The Company classifies its financial assets in the following measurement categories:

-           those to be measured subsequently at fair value (either through other comprehensive income or through profit or loss); and

-           those to be measured at amortised cost.

 

The classification depends on the entity's business model for managing the financial assets and the contractual terms of the cash flows. The Company determines the classification of its financial assets and financial liabilities at initial recognition.

 

Financial liabilities which are not financial liabilities held at fair value through profit or loss are classified as other financial liabilities and held at amortised cost.

 

(b)        Recognition and measurement

Financial assets and financial liabilities are initially measured at fair value. Transaction costs that are directly attributable to the acquisition or issue of financial assets and financial liabilities (other than financial assets and financial liabilities at fair value through profit or loss) are added to or deducted from the fair value of the financial assets or financial liabilities, as appropriate, on initial recognition. Transaction costs directly attributable to the acquisition of financial assets or financial liabilities at fair value through profit or loss are recognised immediately in the statement of comprehensive income.

 

Subsequent to initial recognition, financial assets at fair value through profit or loss are re-measured at fair value. For listed investments, fair value is determined by reference to stock exchange quoted market bid prices at the close of business at the end of the reporting year, without deduction for transaction costs necessary to realise the asset. For non-listed investments fair value is determined by using recognised valuation methodologies, in accordance with the IPEVC Guidelines.  Gains or losses arising from changes in the fair value of financial assets at fair value through profit or loss are presented in the statement of comprehensive income in the period in which they arise.

 

 

 

NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEAR ENDED 30 JUNE 2021

 

2.         ACCOUNTING POLICIES (continued)

 

(b)        Recognition and measurement (continued)

Subsequent measurement of the Company's debt instruments depends on the model for managing the asset and the cash flow characteristics of the asset.

 

The Company measures debt instruments at amortised cost if they are held for collection of contractual cash flows where those cash flows represent solely payments of principal and interest are measured at amortised cost. The Company recognises any impairment loss on initial recognition and any subsequent movement in the impairment provision in the statement of comprehensive income.

 

Debt instruments which do not represent solely payments of principal and interest are measured at fair value through profit or loss.

 

Financial liabilities, which includes borrowings, are measured at amortised cost using the effective interest method. The effective interest rate is the rate that exactly discounts estimated future cash payments through the expected life of the financial liability or, where appropriate, a shorter period, to the net carrying amount on initial recognition.

 

Financial liabilities at fair value through profit or loss are re-measured at fair value. The fair value of the derivative financial instruments is determined by reference to stock exchange quoted market bid prices at the close of business at the end of the reporting year, without deduction for transaction costs incurred by the Company on realisation of the liability, see note 11. Gains or losses arising from changes in fair value of financial liabilities at fair value through profit or loss are presented in the statement of comprehensive income in the period in which they arise.

 

(c)        Impairment

Under IFRS 9, the impairment model requires the recognition of impairment provisions based on expected credit losses ("ECL") rather than only incurred credit losses as was the case under IAS 39. IFRS 9 permits a simplified approach to trade and other receivables which allows the Company to recognise the loss allowance at initial recognition and throughout its life at an amount equal to lifetime ECL. ECL are a probability-weighted estimate of credit losses. A credit loss is the difference between the cash flows that are due to an entity in accordance with the contract and the cash flows that the entity expects to receive discounted at the original effective interest rate. ECL consider the amount and timing of payments, thus a credit loss arises even if the entity expects to be paid in full but later than when contractually due.

 

The historical default rate has been considered by the Directors and there is no history of bad debt. Under IFRS 9 ECL Model as well, which is forward looking, all factors that could contribute to expected future losses have been considered by the Directors and there is no expectation of credit loss in the future. As such the Directors concluded that there is no material impact on the financial statements.

 

(d)        Derecognition

A financial asset or part of a financial asset is derecognised when the rights to receive cash flows from the asset have expired and substantially all risks and rewards of the asset have been transferred.

 

The Company derecognises a financial liability when the obligation under the liability is discharged, cancelled or expired.

 

Intangible assets

Separately acquired Net Profit Interest licences ("NPI licences") are classified as intangible assets and are shown at historical cost. Such NPI licences, which are not subject to amortisation, allow the Company to benefit from exploration and extraction of energy resources, if successful, from investee companies granting such NPI licences.

 

 

 

 

 

 

 

NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEAR ENDED 30 JUNE 2021

 

2.         ACCOUNTING POLICIES (continued)

 

Intangible assets (continued)

The value of the NPI licences are assessed periodically for possible impairment when events indicate that the fair value of the intangible asset may be below the Company's carrying value. When such a condition is deemed to be other than temporary, the carrying value of the investment is written down to its fair value, and the amount of the write-down is included in net profit or loss on financial assets held at fair value through profit or loss. In making the determination as to whether a decline is other than temporary, the Company considers such factors as the duration and extent of the decline, the investee company's financial performance, and the Company's ability and intention to retain its investment for a period that will be sufficient to allow for any anticipated recovery in the NPI licences' market value.

 

Cash and cash equivalents

Cash and cash equivalents include cash in hand, deposits held on call with banks and cash with broker. For the purpose of the Statement of Cash Flows, cash and cash equivalents are considered to be all highly liquid investments with maturity of three months or less at inception.

 

Equity, reserves and dividend payments

Ordinary shares are classified as equity. Transaction costs associated with the issuing of shares are deducted from stated capital. Retained earnings include all current and prior period retained profits. Shares are classified as equity when there is no obligation to transfer cash or other assets.

 

Expenditure

The expenses of the Company are recognised on an accruals basis in the Statement of Comprehensive Income.

 

Share options

Equity-settled share-based payment transactions are measured at the fair value of the goods and services received unless that cannot be reliably estimated, in which case they are measured at the fair value of the equity instruments granted. Fair value is measured at the grant date and is estimated using valuation techniques as set out in note 14. The fair value is recognised in the Statement of Comprehensive Income, with a corresponding increase in equity via the share option account. When options are exercised, the relevant amount in the share option account is transferred to stated capital.

 

3.         TAXATION                                                                                                       

The Company is subject to income tax at a rate of 0%. The Company is registered as an International Services Entity under the Goods and Services Tax (Jersey) Law 2007 and a fee of £300 has been paid, which has been included in administrative expenses.

 

 

4.       ADMINISTRATIVE EXPENSES

 

 

 

2020

 

 

 

 

£

 

 

 

 

 

 

Administration and consultancy fees

 

 

95,952

 

Advisory fees

 

 

25,550

 

Audit fees

 

 

17,500

 

Directors' fees

 

 

60,000

 

Legal and professional fees

 

 

44,357

 

Printing and stationery

 

 

11,101

 

Registered agent's fees

 

 

7,265

 

Other expenses

 

 

57,572

 

 

 

 

 

 

 

 

5.          EARNINGS PER SHARE

 

 

267,397

 

319,297

 

 

Basic earnings per share (pence)

(0.72)

(0.11)

 

Diluted earnings per share (pence)

(0.69)

(0.11)

               

 

 

NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEAR ENDED 30 JUNE 2021

 

5.          EARNINGS PER SHARE (continued)

 

 

Current year loss

The calculation of diluted earnings per share is not required this year as a loss for the year is not diluted. The calculations have been left in for information.

 

The table below presents information on the profit attributable to the shareholders and the weighted average number of shares used in the calculating the basic and diluted earnings per share.

 

 

2021

2020

Basic earnings per share

£

£

Loss attributable to the shareholders of the Company

(1,016,219)

(111,493)

 

 

 

Diluted earnings per share

 

 

(Loss)/profit attributable to the shareholders of the Company:

 

 

Used in calculating basic earnings per share

(1,016,219)

(111,493)

Add interest expense

33,702

54,575

Loss attributable to the shareholders of the Company used in calculating diluted earnings per share

(982,517)

(56,918)

 

No. of  shares

No. of shares

Weighted average number of ordinary shares used as the denominator in calculating basic earnings per share

140,364,390

103,708,120

Adjustments for calculating of diluted earnings per share:

 

 

Share options

1,407,808

1,094,178

Convertible loan notes

-

4,044,477

Weighted average number of ordinary shares and potential ordinary shares used as the denominator in calculating diluted earnings per share

141,772,198

108,846,775

       

Share options

 

The share options have been included in the determination of the diluted earnings per share to the extent to which they are dilutive. The share options granted prior to 30 June 2020 are considered to be dilutive, and will be included in the calculation of diluted earnings per share, as the option price is below the average share price.

 

750,000 share options were granted on 6 August 2020.  These will not be included in the calculation of diluted earnings per share because they are antidilutive as at 30 June 2021.  These potentially dilute earnings per share in the future as these may not be exercised before their expiration date.

 

Convertible loan notes

Conversion options over convertible loan notes are considered to be potential ordinary shares and have been included in the determination of comparative diluted earnings per share from their date of issue. Interest accrued on the convertible loan notes, which may be converted to ordinary shares, is also considered to be dilutive and is included in the comparative diluted earnings per share. On 31 March 2021 the loan notes were repaid in full along with the accrued interest.

 

6.     INTANGIBLE ASSETS

 

2021

2020

 

£

£

At 1 July

-

33,333

Acquisition

-

-

Impairment

-

(33,333)

At 30 June

-

-

         

 

 

 

NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEAR ENDED 30 JUNE 2021

 

6.          INTANGIBLE ASSETS (continued)

 

In the year ending 30 June 2019, the Company acquired Net Profit Interest licences ("NPI") in three offshore UK blocks for £100,000. The NPI licences allowed the Company to benefit from near term exploration and appraisal drilling targets, with independent prospect risks, if such exploration and drilling is successful. The NPI licences required no additional investment from the Company. The licences were initially recorded in the books of the Company at cost.  An impairment test was performed on an annual basis by the Directors and these were subsequently measured at cost less any adjustments for impairment losses.  All of the licences were deemed to be fully impaired by the Directors as at 30 June 2020, as the underlying operating licences had been relinquished by the company granting each NPI licence.

 

7.       FINANCE COSTS

 

The Company previously issued 10% convertible loan notes as set out in note 11. Interest was payable to each of the relevant Noteholders on the principal amount of the Loan Note for the time being outstanding at a rate calculated in accordance with the Instrument.  The interest payable at 10% per annum on the Loan Notes held by any Noteholder can be converted into a corresponding number of new fully paid Ordinary Shares at the Noteholder Conversion Price when certain conditions within the Instrument are met.

 

As at 30 June 2020 £1.2 million of the principal had been repaid early leaving a residual balance of £400,000 advanced at 30 June 2020.  On 31 March 2021 the remaining principal of £400,000 was repaid in full along with the accrued interest of £56,548.

 

The interest charge through the statement of comprehensive income during the year was £33,702 (2020: £54,575). 

 

8.         FINANCIAL ASSETS AT FAIR VALUE THROUGH PROFIT OR LOSS

 

2021

 

2020

 

£

 

£

Equity investments

 

 

 

Argos Resources Ltd ("Argos")

27,300

 

24,800

Cataleya Energy Corporation ("Cataleya")

4,105,846

 

4,590,523

Eco Atlantic Oil & Gas Ltd ("Eco Atlantic")

433,500

 

359,250

JHI Associates Inc ("JHI")

9,884,072

 

6,353,344

Ratio Petroleum Energy Limited Partnership ("Ratio")

14,913

 

643,446

Ratio Petroleum Energy Limited Partnership Warrants

("Ratio Warrants")

-

 

108,373

Total investments

14,465,631

 

12,079,736

 

 

Net changes in fair value of financial assets designated at fair value through profit or loss

 

 

 

 

 

2021

 

2020

 

£

 

£

Opening cumulative unrealised gain

2,191,024

1,989,772

Net unrealised movement

(586,666)

 

201,252

Cumulative unrealised gain on financial assets at fair value through profit or loss

1,604,358

 

2,191,024

 

 

2021

 

2020

 

£

 

£

Unrealised (loss)/gain

(586,666)

201,252

Realised loss on disposal of financial assets

(105,622)

 

-

Net changes in fair value of financial assets at fair value through profit or loss

(692,288)

 

201,252

 

 

 

NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEAR ENDED 30 JUNE 2021

 

8.         FINANCIAL ASSETS AT FAIR VALUE THROUGH PROFIT OR LOSS (continued)

 

On 30 June 2021, the fair value of the Company's holding of 1,000,000 (2020: 1,000,000) ordinary fully paid shares in Argos, representing 0.43% (2020: 0.45%) of the issued share capital of the company, was £27,300 (2020: £24,800) (2.73p per share (2020: 2.48p per share)). No shares were disposed of in the current or prior year.

 

On 30 June 2021, the fair value of the Company's holding of 1,500,000 (2020: 1,500,000) ordinary fully paid shares in Eco Atlantic, representing 0.75% (2020: 0.81%) of the issued share capital of the

company, was £433,500 (2020: £359,250) (28.90p per share (2020: 23.95p per share)).  No shares were disposed of in the current year (2020: nil).

 

On 30 June 2021, the fair value of the Company's holding of 89,653 (2020: 1,200,000) ordinary fully paid shares in Ratio, representing 0.04% (2020: 0.70%) of the issued share capital of the Company, was £14,913 (2020: £643,446) (16.63p per share (2020: 53.62p per share)). In November 2020 the Company disposed of all 1,200,000 shares in Ratio for a consideration of £338,481 (excluding transaction costs) representing 28.20p per share.  In January 2021, the 89,653 Ratio Warrants were exercised and converted into ordinary shares for a consideration of £27,378.

 

In November 2020 the Company sold 300,000 of the Ratio Warrants for a consideration of £15,282 (excluding transaction costs) (5.10p per warrant).  In January 2021, the Company exercised its remaining Ratio Warrants (89,653) in exchange for Ratio ordinary shares for a consideration of £27,378 (30.54p per warrant).  In the prior year the Company purchased 389,653 warrants in Ratio for £209,489 (53.76p per warrant). The value of the warrants at 30 June 2021 was nil (2020: £108,373 (27.81p per warrant). 

 

On 30 June 2021, the Directors' estimate of the fair value of the Company's holding of 567,185 (2020: 567,185) shares in Cataleya was £4,105,846 (2020: £4,590,523) (£7.24 per share (2020: £8.09)).  No shares were purchased during the year (2020: 313,500 ordinary fully paid shares were purchased in Cataleya for £2,574,321 (£8.21 per share).

 

During the year the Company purchased 2,087,500 (2020: 1,350,000) ordinary fully paid shares in JHI for a total consideration of £3,411,939 (2020: £2,348,879) which includes a share issue by the Company of 18,290,000 (2020: 15,930,000) new nil par value ordinary shares as part consideration for JHI shares received during the year (see note 13). On 30 June 2021, the Directors' estimate of the fair value of the Company's holding in JHI was £9,884,072 (2020: £6,353,344), £1.75 per share (2020: £1.78 per share). No shares were disposed of in the current or prior year.

 

 

9.         OTHER RECEIVABLES AND PREPAYMENTS

 

2021

 

2020

 

£

 

£

Prepayments

4,441

 

-

 

10.        CASH AND CASH EQUIVALENTS

 

 

2021

 

2020

 

£

 

£

Cash at bank

681,066

 

2,223,801

Cash at broker

537,856

 

211,863

 

1,218,922

 

2,435,664

 

11.        DERIVATIVE FINANCIAL INSTRUMENTS AND BORROWINGS

 

The Company issued £1,600,000 10% convertible loan notes on 24 October 2018. The notes were convertible into ordinary shares of the Company, at the option of the holder, or repayable on 31 March 2021. The conversion price was the higher of £0.08 per share or a 25% discount on the volume weighted average price ("VWAP") 5 days prior to the repayment date. 

 

 

 

NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEAR ENDED 30 JUNE 2021

 

11.        DERIVATIVE FINANCIAL INSTRUMENTS AND BORROWINGS (Continued)

 

Interest accrued up to and payable on 31 October 2019 may be converted into shares, at the option of the Company, at a conversion price of a 10% discount of VWAP 5 days prior to the payment date.  Interest accrued up to and payable on 31 October 2020 may be converted into shares, at the option of the holder, at a conversion price of the higher of £0.08 per share or a 25% discount of VWAP 5 days prior to the payment date.  On 31 October 2019 both the 1st interest payment due (£67,447) and the early repayment of £260,000 principal of the residual £660,000 of 10% p.a. convertible unsecured loan notes was made.

 

On 18 March 2019 the Company repaid £940,000 of the principal of the convertible loan notes, the interest accrued on the repaid portion of the convertible loan note was waived by the holder.

 

On 31 March 2021 the remaining principal of £400,000 was repaid in full along with the accrued interest of £56,548.

 

 

Interest

Principal

Total

 

£

£

£

Face value of notes issued

-

1,600,000

1,600,000

Value of conversion rights

-

(100,000)

(100,000)

Issue costs

-

(49,395)

(49,395)

 

-

1,450,605

1,450,605

 

 

 

 

Repayment of convertible loan notes

-

(1,087,954)

(1,087,954)

Interest expense

100,815

-

100,815

Interest paid

(70,748)

-

(70,748)

Total borrowings at 30 June 2020

30,067

362,651

392,718

 

Repayment of convertible loan notes

-

(400,000)

(400,000)

Interest expense

33,702

-

33,702

Interest paid

(56,548)

-

(56,548)

Movement in fair value on final conversion

(7,221)

37,349

30,128

Total borrowings at 30 June 2021

-

-

-

 

 

Interest

Principal

Total

 

£

£

£

Conversion rights measured at fair value through profit or loss

 

 

 

Opening balance at 1 July 2020

8,876

124,457

133,333

Initial recognition of conversion rights from issue of convertible loan notes

-

-

-

Repayment of convertible loan notes (cancellation of conversion rights)

-

-

-

Movement in fair value

(8,876)

(124,457)

(133,333)

Total derivative financial instruments at 30 June 2021

-

-

-

 

 

Conversion rights measured at fair value through profit or loss

 

 

 

Opening balance at 1 July 2019

3,592

221,411

225,003

Initial recognition of conversion rights from issue of convertible loan notes

-

-

-

Repayment of convertible loan notes (cancellation of conversion rights)

-

-

-

Movement in fair value

5,284

(96,954)

(91,670)

Total derivative financial instruments at 30 June 2020

8,876

124,457

133,333

 

 

 

NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEAR ENDED 30 JUNE 2021

 

11.        DERIVATIVE FINANCIAL INSTRUMENTS AND BORROWINGS (Continued)

 

The initial fair value of the derivative portion of the convertible loan notes was determined by the potential loss on ordinary shares if converted on the date the convertible loan notes were issued. The derivative financial instruments were recognised as a financial liability measured at fair value through profit or loss. The remainder of the proceeds was allocated to the liability which is subsequently recognised on an amortised cost basis until extinguished on conversion or maturity of the convertible loan notes.

 

12.        TRADE AND OTHER PAYABLES

 

2021

 

2020

 

£

 

£

 

 

 

 

Accrued expenses

39,534

 

46,406

 

13.        STATED CAPITAL

 

Allotted, called up and fully paid:

Ordinary shares

 

Ordinary shares

 

No.

 

£

 

 

 

 

1 July 2019

64,766,745

 

5,829,872

Additions

60,994,741

 

8,125,751

 

1 July 2020

Additions

 

 

125,761,486

18,290,000

 

 

13,955,623

2,696,859

At 30 June 2021

144,051,486

 

16,652,482

 

 

On 9 September 2020, in accordance with the terms of the JHI share purchase agreements, the Company issued a total of 8,850,000 new nil par value ordinary shares for 750,000 JHI shares. This represented a non-cash transaction. The total valuation of the Company's share issue was £1,304,933.

 

On 14 September 2020, in accordance with the terms of the JHI share purchase agreements, the Company issued a total of 9,440,000 new nil par value ordinary shares for 800,000 JHI shares.  This represented a non-cash transaction. The total valuation of the Company's share issue was £1,391,928.

 

There were no share redemptions during the year ended 30 June 2021 (2020: £Nil).

 

 

14.        SHARE-BASED PAYMENT RESERVE

 

 

2021

 

2020

 

£

 

£

 

 

 

 

At 1 July

443,793

 

444,846

Share options expense/(credit)  

25,877

 

(1,053)

 

 

 

 

At 30 June

469,670

 

443,793

 

On 6 August 2020 750,000 share options were granted with an exercise price of 17.0 pence per share and an expiration date of 31 July 2023. The options issued on 3 January 2017 were extended on 1 November 2019 with a new expiry date of 31 December 2021.

 

 

 

 

 

 

 

 

NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEAR ENDED 30 JUNE 2021

 

14.        SHARE-BASED PAYMENT RESERVE (Continued)

 

The following assumptions were used to determine the fair value of the options for 2020 and 2021:

 

2020  

2021

Weighted average share price at grant date (pence)

13.75

15.00

Exercise price (pence)

14.0

17.0

Expected volatility (%)

42.2%

45.8%

Average option life (years)

5.0

7.7

Risk free interest rate (%)

0.380%

0.550% 

 

The expected volatility is based on the historic volatility of the Company's share prices over the last five years.

 

The number and weighted average exercise price of share options are as follows:

 

 

2021

 

2021

 

2020

 

2020

 

Weighted average exercise price (p)

 

 

 

Number of options

 

 

Weighted average exercise price (p)

 

 

 

Number of options

 

Outstanding at start of the year

10.10

 

3,750,000

 

10.10

 

3,750,000

Granted during the year

17.00

 

750,000

 

-

 

-

Exercised during the year

-

 

-

 

-

 

-

Outstanding at end of the year

11.25

 

4,500,000

 

10.10

 

3,750,000

Exercisable at end of the year

11.25

 

4,500,000

 

10.10

 

3,750,000

 

 

None of the options expired during the year.

 

15.        FINANCIAL RISK

 

The Company's investment activities expose it to a variety of financial risks: market risk (including foreign exchange risk, price risk and interest rate risk), credit risk and liquidity risk. The Company's overall risk management programme focuses on the unpredictability of financial markets and seeks to minimise potential adverse effects on the Company's financial performance.

 

a)    Market risk

i)     Foreign exchange risk

The Company's functional and presentation currency is sterling. The Company is exposed to currency risk through its investments in Cataleya, JHI and Ratio. The directors have not hedged this exposure.

 

Currency exposure as at 30 June:

 

 

 

Assets and net exposure

2021

 

Assets and net exposure

2020

Currency

 

 

£

 

£

US Dollars

 

 

4,717,997

 

5,786,083

Canadian Dollars

 

 

9,271,921

 

6,175,069

Israeli Shekel

 

 

14,913

 

751,819

 

 

 

 

 

 

Total

 

 

14,004,831

 

12,712,971

 

 

 

 

 

 

 

 

NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEAR ENDED 30 JUNE 2021

 

15.        FINANCIAL RISK (continued)

 

If the value of sterling had strengthened by 5% against all of the currencies, with all other variables held constant at the reporting date, the equity attributable to equity holders and the profit for the period would have decreased by £700,242 (2020: £635,649). The weakening of sterling by 5% would have an equal but opposite effect. The calculations are based on the foreign currency denominated financial assets as at year end and are not representative of the period as a whole.

 

ii)    Price risk

Price risk is the risk that the fair value of the future cash flows of a financial instrument will fluctuate due to changes in market prices.  The Company is exposed to price risk on the investments held by the Company and classified by the Company on the Statement of Financial Position as at fair value through profit or loss.  To manage its price risk, management closely monitor the activities of the underlying investments.

 

The Company's exposure to price risk is as follows:

 

Fair value

£

Fair Value Through Profit or Loss, as at 30 June 2021

14,465,631

Fair Value Through Profit or Loss, as at 30 June 2020

12,079,736

 

 

With the exception of JHI and Cataleya, the Company's investments are all publicly traded and listed on either the AIM, OTCQB or the Tel Aviv Stock Exchange.  A 30% increase in market price would increase the pre-tax profit for the year and the net assets attributable to ordinary shareholders by £142,714 (2020: £340,761).  A 30% reduction in market price would have decreased the pre-tax profit for the year and reduced the net assets attributable to shareholders by an equal but opposite amount.  30% represents management's assessment of a reasonably possible change in the market prices.

 

A 30% increase in the market price of JHI and Cataleya would increase the pre-tax profit for the year and the net assets attributable to ordinary shareholders by £4,196,975 (2020: £3,283,160).  A 30% reduction in market price would have decreased the pre-tax profit for the year and reduced the net assets attributable to shareholders by an equal but opposite amount. 30% represents management's assessment of a reasonably possible change in the market price of JHI and Cataleya based on the price of share purchases over the last two years.

 

iii)   Interest rate risk

Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market interest rates.  The Company is not exposed to interest rate risk as the interest rate on borrowings is fixed and the Company's cash deposits do not currently earn interest.

 

b)      Credit Risk

Credit risk is the risk that an issuer or counterparty will be unable or unwilling to meet commitments it has entered into with the Company.  The Directors do not believe the Company is subject to any significant credit risk exposure regarding trade receivables.

 

At the end of the reporting period, the Company's financial assets exposed to credit risk amounted to the following:

 

2021

 

2020

 

£

 

£

 

 

 

 

Cash and cash equivalents

1,218,922

 

2,435,664

 

The Company considers that all the above financial assets are not impaired or past due for each of the reporting dates under review and are of good credit quality.

 

 

 

 

 

NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEAR ENDED 30 JUNE 2021

 

15.        FINANCIAL RISK (continued)

 

c)   Liquidity Risk

Liquidity risk is the risk that the Company cannot meet its liabilities as they fall due. The Company's primary source of liquidity consists of cash and cash equivalents and those financial assets which are publicly traded and held at fair value through profit or loss and which are deemed highly liquid.

 

The following table details the contractual, undiscounted cash flows of the Company's financial liabilities

 

As at 30 June 2021

 

Up to 3 months

Up to 1 year

Over 1 year

Total

 

£

£

£

£

Financial liabilities

 

 

 

 

Trade and other payables

39,534

-

-

39,534

 

39,534

-

-

39,534

 

As at 30 June 2020

 

Up to 3 months

Up to 1 year

Over 1 year

Total

 

£

£

£

£

Financial liabilities

 

 

 

 

Borrowings1

-

426,630

-

426,630

Trade and other payables

46,406

-

-

46,406

 

46,406

426,630

-

473,036

 

1Borrowings are presented in the above tables at their nominal value which represents the undiscounted cash flow amount of the convertible loan notes. These are measured at amortised cost. The amount may differ from the discounted cash flow amount included in the statement of financial position.

 

Capital Management

The Company's objective when managing capital is to safeguard the Company's ability to continue as a going concern in order to provide optimum returns for shareholders and benefits for other stakeholders and to maintain an optimal capital structure to reduce cost of capital.

 

In order to maintain or adjust the capital structure, the Company may issue new shares, return capital to shareholders or sell assets. The Company does not have any debt nor is the Company subject to any external capital requirements.

 

Fair Value Estimation

The Company has classified its financial assets as fair value through profit or loss and fair value is determined via one of the following categories:

 

Level I - An unadjusted quoted price in an active market provides the most reliable evidence of fair value and is used to measure fair value whenever available. As required by IFRS 7, the Company will not adjust the quoted price for these investments, (even in situations where it holds a large position and a sale could reasonably impact the quoted price). 

 

Level II - Inputs are other than unadjusted quoted prices in active markets, which are either directly or indirectly observable as of the reporting date, and fair value is determined through the use of models or other valuation methodologies.

 

Level III - Inputs are unobservable for the investment and include situations where there is little, if any, market activity for the investment.  The inputs into the determination of fair value require significant management judgment or estimation.

 

 

 

 

NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEAR ENDED 30 JUNE 2021

 

15.        FINANCIAL RISK (continued)

 

The following table shows the classification of the Company's financial assets and liabilities:

 

 

Level I

Level II

Level III

Total

 

£

£

£

£

At 30 June 2021

475,713

-

13,989,918

14,465,631

At 30 June 2020

1,135,869

(133,333)

10,943,867

11,964,403

 

 

 

 

 

 

 

The Company has classified quoted investments as Level I, derivative financial instruments as Level II and unquoted investments as Level III.  The Level III investment is at an early stage of development and therefore has been valued based on the recent price of the investment. The Directors have considered market expectations of future performance of the entity's industry sector, in particular known interest in the area of current exploration.  As such, the Directors consider that the recent price of the investment in Cataleya and JHI fairly reflects the value of the investments as at 30 June 2021.  There have been no movements in classifications during the year.

 

A reconciliation of the movements in Level III investments is shown below:

 

 

2021

 

2020

 

£

 

£

At start of the year

10,943,867

 

4,655,621

Purchases

3,411,939

 

4,923,200

Change in fair value

(365,888)

 

1,365,046

 

 

 

 

At end of the year

13,989,918

 

10,943,867

 

 

16.        DIRECTORS' REMUNERATION AND SHARE OPTIONS

 

 

2021

 

2020

 

2021

 

2020

 

Directors' fees

£

 

Directors' fees

£

 

Options outstanding

 

 

Options outstanding

 

D R King

20,000

 

20,000

 

500,000

 

500,000

D Corcoran

-

 

-

 

1,750,000

 

1,000,000

G Walsh

20,000

 

20,000

 

1,000,000

 

1,000,000

T O'Gorman

20,000

 

20,000

 

750,000

 

750,000

M Bradlow

(resigned 11 April 2017)

-

 

-

 

500,000

 

500,000

 

60,000

 

60,000

 

4,500,000

 

3,750,000

 

At the year end the Company owed £10,000 (2020: £10,000) in outstanding directors' fees.

 

During the year consultancy fees of £21,517 (2020: £21,551) were paid to D Corcoran.

 

On 6 August 2020, 750,000 share options were granted to D Corcoran with an exercise price of 17.0 pence per share and an expiration date of 31 July 2023 (2020: nil).  Nil (2020: nil) options were exercised during the year.

 

The shares held by the Directors are declared in the Directors' report.

 

The Company does not employ any staff except for its Board of Directors. The Company does not contribute to the pensions or any other long-term incentive schemes on behalf of its Directors.

 

 

 

 

NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEAR ENDED 30 JUNE 2021

 

17.       RELATED PARTIES

 

On 31 October 2019 £100,000 of the principal, and £51,096 of the interest, payable to Mr Walsh under the terms of the Convertible Loan Notes was converted into 1,012,027 nil par value shares of the Company.

 

On 31 March 2021 the convertible loan notes plus accrued interest were repaid in full in the sum of £456,548 consisting of £400,000 of residual principal and £56,548 of accrued interest. Details of the convertible loan notes are disclosed in note 11.  The convertible loan notes were held by Mr Walsh.

 

Canaccord Genuity as a significant shareholder of the Company is considered a related party under AIM rules.

 

The shares held by the Directors are declared in the Directors' report.

 

18.       CONTROLLING PARTY

 

            In the opinion of the Directors, the Company does not have a controlling party.

 

19.        SUBSEQUENT EVENTS

 

In the opinion of the Directors, there are no significant events subsequent to the year-end that require adjustment or disclosure in the financial statements.

 

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