Final Results
Certain of the information contained within this announcement is deemed by the Company to constitute inside information as stipulated under The Market Abuse Regulation (EU 596/2014) pursuant to the Market Abuse (Amendment) (EU Exit) Regulations 2018. Upon the publication of this announcement via a Regulatory Information Service ("RIS"), this inside information is now considered to be in the public domain.
29 September 2023
Echo Energy plc
("Echo Energy", "Echo" or the "Company")
Publication of Annual Report and Accounts, Notice of General Meeting
Resumption of Share Trading and Equity Raise
Echo Energy PLC is pleased to announce its results for the year ended 31 December 2022. In a separate announcement being issued today, the Company will also publish its interim results for the period ended 30 June 2023. The Company understand that following publication of its results, the suspension its Shares from trading on the AIM market of the London Stock Exchange will be lifted at 7.30am on Monday 2 October 2023.
Furthermore, the Company is pleased to announce an equity raise, following the approach from an existing shareholder, to raise gross proceeds of £80,000 through the issue of 285,714,286 new ordinary shares in the Company at an issue price of 0.028p per new ordinary share, being the last closing price of the Company's ordinary shares prior to their suspension.
The proceeds from the share issue will enable the Company's existing financial resources to be focused on pursuing the previously announced growth strategy and application for the new ordinary shares, which will rank pari passu with the Company's existing ordinary shares, to be admitted to AIM at 8.00 a.m. on or around 6 October 2023 ("Admission").
Following Admission, the Company's total issued ordinary share capital will consist of 5,961,717,451 Ordinary Shares with one voting right per share. The Company does not hold any Ordinary Shares in treasury. Accordingly, the total number of voting rights in the Company is 5,961,717,451. The above figure of 5,961,717,451 may be used by shareholders as the denominator for the calculations by which they will determine if they are required to notify their interest in, or a change to their interest in the Company under the FCA's Disclosure Guidance and Transparency Rules.
The Company also announces that following completion of due diligence and identification of other more exciting opportunities which it is actively pursuing, that it has declined to take forward its previously announced option to farm into an opportunity in Columbia.
In conjunction with the announcement of the results for the year ended 31 December 2022, the Company is pleased to confirm that its audited 2022 Annual report and accounts have now been published, are being sent to shareholders and are available on the Company's website at www.echoenergyplc.com together with a notice convening a general meeting of the Company to be held at 14.00 on 31 October 2023 at the offices of Field Fisher LLP, Riverbank House, 2 Swan Lane, London EC4R 3TT.
Following the successful completion of the transaction to partially divest of the Company's assets in Argentina, Echo has undertaken a rigorous cost reduction programme with ongoing fixed G&A costs reduced by approximately 40%. Cash management remains a priority and the Company continues to work with suppliers and creditors closely. Total cash, cash equivalent and other short term liquid assets (after the placing) are circa £415,000 of which approximately £230,000 is held in shares of Interoil Exploration and Production ASA and the cash balance after receipt of the placing proceeds will be approximately £185,000.
Progress at the Company's assets in Argentina continues with the operator finalising investment plans to increase production in conjunction with improved commercial arrangements to reflect the improving energy market outlook and prices in Argentina and globally. Gross production in August was approximately 1,600 BOEPD (c. 80 BOEPD net to Echo's 5% interest) .
The Company is actively pursuing long term growth strategies and expects to make announcements updating on these efforts in the future.
Change of Name of Nominated Adviser
The Company also announces that its Nominated Adviser has changed its name to Cavendish Securities plc following completion of its own corporate merger.
|
Echo Energy Martin Hull, Chief Executive Officer
|
via Vigo Consulting |
|
Vigo Consulting (IR & PR Advisor) Patrick d'Ancona Finlay Thomson
|
+44 (0) 20 7390 0230 |
|
Cavendish Securities (Nominated Adviser) Ben Jeynes Adrian Hadden
|
+44 (0) 20 7397 8900 |
|
Zeus (Corporate Broker) Simon Johnson |
+44 (0) 20 3829 5000 |
Chairman's and Chief Executive Officer's Statement
Chairman and Chief Executive Statement:
Echo Energy, similar to many companies in the oil and gas sector, faced exceptional challenges during recent years, with the global pandemic impacting all aspects of the Company's operations and finances in Argentina. The Company emerged from the COVID-19 period (during which the assets were sub economic) with a large creditor position, 100%+ per annum inflation in Argentina and Argentine currency exchange controls, which have prevented funds being withdrawn from the country without significant penalties. As a result of these factors, the raising of additional equity for an Argentine business was challenging and the Company took the decision in November 2022 to partially sell its Santa Cruz Sur portfolio.
This partial sale enabled to the Company to:
· Address its near-term funding challenges by providing near term cash, enabling the Company to transfer to Buyers the significant in-country creditors which had built up during the COVID-19 period and providing access to funding for the Santa Cruz assets.
· Benefit from continued exposure (both directly through the retained 5% working interest, the contingent payments, the further 5% option and the indirect holding in the Operator) to a well-funded Santa Cruz portfolio, with the concessions likely to be extended as a result of the provision of guarantee.
The Company, now with significantly reduced creditors and a heavily reduced cost base, sits with a 5% interest in a producing Santa Cruz Sur portfolio and an equity position in the operator InterOil Exploration and Production ASA. In addition to the divestment the Company successfully completed a restructuring of its legacy debt position, converting the majority of previously outstanding debt into equity, substantially improving the balance sheet and providing the additional flexibility to best manage the financial requirements going forward. The Board see significant opportunities at this point in the economic cycle to secure new energy assets at attractive valuations and is currently exploring a number of these opportunities.
|
James Parsons |
Martin Hull |
|
Non-Executive Chairman |
Chief Executive Officer |
Financial Review
Income Statement
The Group's loss from continuing operations for the year to 31 December 2022 was US $4.4 million (2021: US $1.9 million) and total Group loss including discontinued operations was of US $9.6million (2021: US $11.8 million).
For the year ended 31 December 2022, Group revenue (including within discontinued operations) was US $14.1 million (2021: US $11.1 million), The spilt between the two commodity revenue sources were;
Ø Oil sales - US $ 5.4 million (2021: $4.1 million)
Ø Gas sales- US $ 8.7 million (2021: $7.0 million)
The increase in Oil sales was a result of some wells re-opening and production increasing combined with price increases.
Group operational costs (including within discontinued operations) were US $18.3 million (2021: US $13.4 million).,
Ø Exploration expenses of US $0.3 million (2021: US $0.2 million) relates to on-going business development activity in Latin America before the decision was made to divest of the SCS operations.
Ø Gross administration expenses were US $3.0 million (2021: US $2.5 million)
Ø Finance costs are largely composed of interest payable and unwinding of discount costs of US $3.0 million (2021: US $3.4 million), and the amortisation of debt fees.
Balance Sheet
Careful management of cash balances, successful debt renegotiation and equity fund raises supported business flexibility and stability. The Group ended the year with US $1.1 million cash at bank compared to the prior year balance of US $0.7 million.
The balance sheet reflects the Board's commitment in December 2022, to divest of the SCS operations. Accordingly, assets and liabilities of the operations in Argentina have been separated out within the balance sheet and the accounts.
Post Balance Sheet
Note 25 to 27 provides more detail around some of the extensive debt restructuring in 2022, as well as raising funds through share issues.
In particular, the reduction in amount, extension of the repayment date for the Euro bonds to 2032 and reduction in interest rate from 8% to 2% relieve a funding pressure on the business.
This Strategic Report was approved by the Board on 29 September 2023 and signed on its behalf by:
Martin Hull
Chief Executive Officer
29 September 2023
Financial Statements
Consolidated Statement of Comprehensive Income
Year ended 31 December 2022
|
|
Notes |
Year to 31 December 2022 US $ |
Year to 31 December 2021 US $ |
|
Continuing operations |
|
|
|
|
Revenue |
4 |
86 |
23,318 |
|
Cost of sales |
5 |
- |
- |
|
Gross profit |
|
86 |
23,318 |
|
Exploration expenses |
|
- |
- |
|
Administrative expenses |
|
(2,951,806) |
(2,454,739) |
|
Operating loss |
6 |
(2,951,720) |
(2,431,421) |
|
Financial income |
8 |
1,618,844 |
4,105,983 |
|
Financial expense |
9 |
(2,981,409) |
(3,630,649) |
|
Derivative financial gain |
|
- |
62,477 |
|
Loss before tax |
|
(4,314,285) |
(1,893,610) |
|
Taxation |
12 |
(68,142) |
- |
|
Loss from continuing operations |
|
(4,382,427) |
(1,893,610) |
|
Discontinued operations |
|
|
|
|
Loss after taxation for the year from discontinued operations |
11 |
(5,204,409) |
(9,876,301) |
|
Loss for the year |
|
(9,586,836) |
(11,769,911) |
|
Other comprehensive income: |
|
|
|
|
Other comprehensive income to be reclassified to profit or loss in subsequent periods (net of tax) |
|
|
|
|
Exchange difference on translating foreign operations |
|
- |
211,820 |
|
Total comprehensive loss for the year |
|
(9,586,836) |
(11,558,091) |
|
Loss attributable to: Owners of the parent |
|
(9,586,836) |
(11,558,091) |
|
Total comprehensive loss attributable to: Owners of the parent |
|
(9,586,836) |
(11,558,091) |
|
Loss per share (US cents) |
13 |
|
|
|
Basic |
|
(0.50) |
(0.78) |
|
Diluted |
|
(0.50) |
(0.78) |
|
Loss per share (cents) for continuing operations |
|
|
|
|
Basic |
|
(0.27) |
(0.15) |
|
Diluted |
|
(0.27) |
(0.15) |
|
|
|
|
|
The notes form an integral part of these financial statements.
Consolidated Statement of Financial Position
Year ended 31 December 2022
|
|
Notes |
31 December 2022 US $
Total |
31 December 2021 US $
|
|
Non-current assets |
|
|
|
|
Property, plant and equipment |
15 |
2,299 |
2,674,405 |
|
Intangibles assets |
16 |
- |
7,131,907 |
|
|
|
2,299 |
9,806,312 |
|
Current Assets |
|
|
|
|
Inventories |
18 |
- |
1,365,225 |
|
Trade and other receivables |
19 |
769,551 |
2,108,438 |
|
Cash and cash equivalents |
20 |
1,132,616 |
742,339 |
|
|
|
1,902,166 |
4,216,002 |
|
Assets of disposal group held for sale |
10 |
18,739,291 |
-- |
|
Total Assets |
|
20,643,756 |
14,022,314 |
|
|
|
|
|
|
Current Liabilities |
|
|
|
|
Trade and other payables |
22 |
(1,329,991) |
(16,023,500) |
|
|
|
(1,329,991) |
(16,023,500) |
|
Liabilities of disposal group held for sale |
10 |
(29,620,264) |
- |
|
Non-current liabilities |
|
|
|
|
Loans due in over one year |
26 |
(5,463,301) |
(28,768,380) |
|
Provisions |
27 |
- |
(3,039,911) |
|
|
|
(5,463,301) |
(31,808,291) |
|
Total Liabilities |
|
(36,413,556) |
(47,831,791) |
|
Net Liabilities |
|
(15,769,800) |
(33,809,477) |
|
|
|
|
|
|
Equity attributable to equity holders of the parent |
|
|
|
|
Share capital |
24 |
19,795,863 |
7,209,086 |
|
Shares not issued |
24 |
97,523 |
- |
|
Share premium |
25 |
83,790,504 |
64,977,243 |
|
Capital contribution reserve |
|
7,212,492 |
- |
|
Warrant reserve |
24 |
1,433,428 |
12,177,786 |
|
Share option reserve |
24 |
644,560 |
1,522,499 |
|
Foreign currency translation reserve |
|
(3,481,041) |
(3,531,587) |
|
Retained earnings |
|
(125,263,129) |
(116,164,504) |
|
Total Equity |
|
(15,769,800) |
(33,809,477) |
These financial statements were authorised for issue and approved by the board of directors on 29 September 2023
Martin Hull
Company registration number 05483127
The notes form an integral part of these financial statements.
Company Statement of Financial Position
Year ended 31 December 2022
|
|
Notes |
31 December 2022 US $ |
31 December 2021 US $ |
|
Non-current assets |
|
|
|
|
Property, plant and equipment |
15 |
1 |
2,177 |
|
Intangible assets |
16 |
- |
445,585 |
|
Interest in subsidiary undertakings |
17 |
1,562,321 |
16,005,044 |
|
Amounts receivable from Group undertakings |
10 |
- |
11,813,525 |
|
|
|
1,562,322 |
28,266,330 |
|
Current assets |
|
|
|
|
Other receivables |
19 |
234,178 |
172,589 |
|
Cash and cash equivalents |
20 |
146,928 |
37,007 |
|
|
|
381,106 |
209,596 |
|
Total assets |
|
1,943,428 |
28,475,926 |
|
|
|
|
|
|
Current liabilities |
|
|
|
|
Trade and other payables |
22 |
(944,369) |
(864,697) |
|
|
|
(944,369) |
(864,697) |
|
Non-current liabilities |
|
|
|
|
Loans due in over one year |
26 |
(5,463,301) |
(28,768,380) |
|
|
|
|
|
|
Total Liabilities |
|
(6,407,670) |
(29,633,077) |
|
|
|
|
|
|
Net Liabilities |
|
(4,464,242) |
(1,157,151) |
|
|
|
|
|
|
|
|
|
|
|
Equity |
|
|
|
|
Share capital |
24 |
19,795,863 |
7,209,086 |
|
Shares not issued |
24 |
97,523 |
- |
|
Share premium |
25 |
83,790,504 |
64,977,243 |
|
Capital contribution reserve |
|
7,212,492 |
- |
|
Warrant reserve |
24 |
1,433,428 |
12,177,786 |
|
Share option reserve |
24 |
644,560 |
1,522,499 |
|
Foreign currency translation reserve |
|
(2,228,569) |
(2,255,402) |
|
Retained earnings |
|
(115,210,043) |
(84,788,363) |
|
Equity Shareholders' Funds |
|
(4,464,242) |
(1,157,151) |
These financial statements were authorised for issue and approved by the board of directors on 29 September 2023.
The Company has not presented its own profit and loss account. Its loss for the year was
US $30,909,889 (2021: US $10,045,487).
Martin Hull
Company registration number 05483127
The notes form an integral part of these financial statements.
Consolidated Statement of Changes in Equity
Year ended 31 December 2022
|
|
Retained earnings US $ |
Share capital US $ |
Shares to be issued |
Share premium US $ |
Capital contribution reserve US $ |
Warrant reserve US $ |
Share option reserve US $ |
Foreign currency translation reserve US $ |
Total equity US $ |
|
1 January 2021 |
(104,772,035) |
6,288,019 |
- |
64,961,905 |
- |
11,373,966 |
1,417,285 |
(3,319,767) |
(24,050,627) |
|
Loss for the year |
(1,681,991) |
- |
- |
- |
|
- |
- |
- |
(1,681,991) |
|
Discontinued operations |
(9,876,301) |
- |
- |
- |
|
- |
- |
- |
(9,876,301) |
|
Exchange Reserve |
- |
- |
- |
- |
|
- |
- |
(211,820) |
(211,820) |
|
Total comprehensive loss for the year |
(11,558,292) |
- |
- |
- |
- |
- |
- |
(211,820) |
(11,770,112) |
|
New shares issued |
- |
646,265 |
- |
813,207 |
|
- |
- |
- |
1,459,472 |
|
Warrants exercised |
- |
274,803 |
- |
105,484 |
- |
(19,362) |
- |
- |
360,925 |
|
Warrants |
- |
- |
- |
(823,182) |
- |
823,182 |
- |
- |
- |
|
Share issue costs |
- |
- |
- |
(80,173) |
|
|
- |
- |
(80,173) |
|
Share options lapsed |
165,824 |
- |
- |
- |
- |
- |
(165,824) |
- |
- |
|
Share-based payments |
- |
- |
- |
- |
- |
- |
271,038 |
- |
271,038 |
|
31 December 2021 |
(116,164,503) |
7,209,087 |
- |
64,977,241 |
- |
12,177,786 |
1,522,499 |
(3,531,587) |
(33,809,477) |
|
|
|
|
|
|
|
|
|
|
|
|
1 January 2022 |
(116,164,503) |
7,209,086 |
- |
64,977,243 |
- |
12,177,786 |
1,522,499 |
(3,531,587) |
(33,809,477) |
|
Loss for the year |
(4,382,425) |
- |
- |
- |
|
- |
- |
- |
(4,382,425) |
|
Discontinued operations |
(5,204,409) |
- |
- |
- |
|
- |
- |
- |
(5,204,409) |
|
Exchange Reserve |
- |
- |
- |
- |
|
- |
- |
50,546 |
50,546 |
|
Total comprehensive loss for the year |
(9,586,834) |
- |
- |
- |
-- |
- |
- |
50,546 |
(9,536,288) |
|
New shares issued |
- |
12,586,777 |
- |
7,521,415 |
|
- |
- |
- |
20,108,192 |
|
Capital contribution on debt restructuring |
- |
- |
- |
- |
7,212,492 |
- |
- |
- |
7,212,492 |
|
Cash received for shares not issued |
|
|
97,523 |
|
|
|
|
|
97,523 |
|
Warrants lapsed |
(547,488) |
- |
- |
- |
- |
547,488 |
- |
- |
- |
|
Warrants issued |
- |
- |
- |
11,291,846 |
- |
(11,291,846) |
- |
- |
- |
|
Share options lapsed |
1,035,696 |
- |
- |
- |
- |
- |
(1,035,696) |
- |
- |
|
Share-based payments |
- |
- |
- |
- |
- |
- |
157,757 |
- |
157,757 |
|
31 December 2022 |
(125,263,129) |
19,795,863 |
97,523 |
83,790,504 |
7,212,492 |
1,433,428 |
644,560 |
(3,481,041) |
(15,769,800) |
The notes form an integral part of these financial statements.
Company Statement of Changes in Equity
Year ended 31 December 2022
|
|
Retained earnings US $ |
Share capital US $ |
Shares to be issued |
Share Premium US $ |
Capital contribution reserve US $ |
Warrant reserve US $ |
Share option reserve US $ |
Foreign currency translation reserve US $ |
Total equity US $ |
|
1 January 2021 |
(82,993,147) |
6,288,019 |
|
64,961,905 |
|
11,373,966 |
1,417,285 |
(2,255,402) |
(1,207,374) |
|
Loss for the year |
(1,961,039) |
- |
|
- |
|
- |
- |
- |
(1,961,039) |
|
New shares issued |
- |
646,264 |
|
813,207 |
|
- |
- |
- |
1,459,471 |
|
Warrants exercised |
- |
274,803 |
|
105,484 |
|
(19,362) |
- |
- |
360,925 |
|
Warrants issued |
- |
- |
|
(823,182) |
|
823,182 |
- |
- |
- |
|
Share issue costs |
- |
- |
|
(80,171) |
|
|
- |
- |
(80,171) |
|
Share options lapsed |
165,824 |
- |
|
- |
|
- |
(165,824) |
- |
- |
|
Share-based payments |
|
- |
|
- |
|
- |
271,038 |
- |
271,038 |
|
31 December 2021 |
(84,788,362) |
7,209,086 |
|
64,977,243 |
|
12,177,786 |
1,522,499 |
(2,255,402) |
(1,157,151) |
|
|
|
|
|
|
|
|
|
|
|
|
1 January 2022 |
(84,788,362) |
7,209,086 |
|
64,977,243 |
|
12,177,786 |
1,522,499 |
(2,255,402) |
(1,157,151) |
|
Loss for the year |
(30,115,152) |
- |
|
- |
|
- |
- |
- |
(30,115,152) |
|
Discontinued operations |
(794,736) |
- |
|
- |
|
- |
- |
- |
(794,736) |
|
Exchange reserve |
|
|
|
|
|
|
|
26,834 |
26,834 |
|
Total comprehensive loss for the year |
(30,909,889) |
- |
|
- |
|
- |
- |
26,834 |
(30,883,055) |
|
New shares issued |
- |
12,586,777 |
|
7,521,415 |
|
- |
- |
- |
20,108,192 |
|
Capital contribution on debt restructuring |
|
|
|
|
7,212,492 |
|
|
|
7,212,492 |
|
Cash received for shares not issued |
|
|
97,523 |
|
|
|
|
|
97,523 |
|
Warrants lapsed |
(547,488) |
- |
|
- |
- |
547,488 |
- |
- |
- |
|
Warrants issued |
- |
- |
|
11,291,846 |
|
(11,291,846) |
- |
- |
- |
|
Share options lapsed |
1,035,696 |
- |
|
- |
|
- |
(1,035,696) |
- |
- |
|
Share-based payments |
- |
- |
|
- |
|
- |
157,757 |
- |
157,757 |
|
31 December 2022 |
(115,210,043) |
19,795,863 |
97,523 |
83,790,504 |
7,212,492 |
1,433,428 |
644,560 |
(2,228,569) |
(4,464,242) |
Share premium represents the amounts subscribed for share capital in excess of the nominal value of the shares issued, net of cost of issue.
Capital Contribution Reserve represents a contribution to Group made as part of the 2022 debt restructuring, through forgiveness of debt.
Warrant reserve represents the cumulative fair value of share warrants granted which are not lapsed, cancelled or exercised.
Share options reserve represents the cumulative fair value of share options granted.
Foreign currency translation reserve arises on the retranslation of the prior period results and financial position of foreign operations into presentation currency.
Retained earnings represents the cumulative net gains and losses recognised in the income statement.
The notes form an integral part of these financial statements.
Consolidated Statement of Cash Flows
Year ended 31 December 2022
|
|
|
Year to 31 December 2022 US $ |
Year to 31 December 2021 US $ |
|
Cash flows from operating activities |
|
|
|
|
Loss from continuing operations |
|
(4,382,425) |
(1,893,811) |
|
Loss from discontinued operations |
|
(5,204,409) |
(9,664,481) |
|
|
|
(9,586,834) |
(11,558,292) |
|
Adjustments for: |
|
|
|
|
Depreciation and depletion of property, plant and equipment |
|
16,537 |
127,656 |
|
Depreciation and depletion of intangible assets |
|
1,419,193 |
1,498,431 |
|
Loss on disposal of property, plant and equipment |
|
- |
1,858 |
|
Impairment of intangible assets and goodwill |
|
506,818 |
- |
|
Share-based payments |
|
157,757 |
271,038 |
|
Right of use liability |
|
- |
- |
|
Financial income |
|
- |
(4,355,334) |
|
Financial expense |
|
2,980,994 |
8,993,432 |
|
Exchange differences |
|
(1,582,441) |
(5,612,490) |
|
Derivative financial gain |
|
- |
(62,477) |
|
Total adjustments |
|
3,498,858 |
862,114 |
|
Decrease/(Increase) in inventory |
|
863,196 |
(823,995) |
|
(Increase)/Decrease in other receivables |
|
978,758 |
5,120,825 |
|
increase in trade and other payables |
|
2,150,092 |
5,072,974 |
|
Total working capital movement |
|
3,992,046 |
9,369,804 |
|
Net cash used in operating activities |
|
(2,095,912) |
(1,326,374) |
|
Cash flows from investing activities |
|
|
|
|
Purchase of intangible assets |
|
(61,233) |
(118,716) |
|
Purchase of property, plant and equipment |
|
(217,578) |
(251,226) |
|
Net cash used in investing activities |
|
(278,811) |
(369,942) |
|
Cash flows from financing activities |
|
|
|
|
Interest received |
|
- |
249,351 |
|
Bank fees and other finance costs |
|
- |
(169,991) |
|
Issue of share capital |
|
2,714,574 |
1,459,472 |
|
Share issue costs Warrants exercise |
|
- - |
(80,171) 360,925 |
|
Net cash from financing activities |
|
2,714,574 |
1,819,586 |
|
Net increase in cash and cash equivalents |
|
339,853 |
123,270 |
|
Cash and cash equivalents at 1 January |
|
742,339 |
682,159 |
|
Foreign exchange gains/(losses) on cash and cash equivalents |
|
50,424 |
(63,090) |
|
Cash and cash equivalents at 31 December |
|
1,132,616 |
742,339 |
The notes form an integral part of these financial statements.
Company Statement of Cash Flows
Year ended 31 December 2022
|
|
|
Year to 31 December 2022 US $ |
Year to 31 December 2021 US $ |
|
Cash flows from operating activities |
|
|
|
|
Loss from continuing operations |
|
(5,081,487) |
(1,961,039) |
|
Loss from discontinued operations |
|
- |
- |
|
Loss before taxation |
|
(5,081,487) |
(1,961,039) |
|
Adjustments for: |
|
|
|
|
Depreciation of property, plant and equipment |
|
2,176 |
5,862 |
|
Impairment of intangible assets and goodwill |
|
506,818 |
118,716 |
|
Share-based payments |
|
157,757 |
271,038 |
|
Exchange differences |
|
(1,582,441) |
- |
|
Financial expense |
|
2,980,994 |
(475,965) |
|
Derivative financial gain |
|
- |
(62,477) |
|
|
|
(2,065,304 |
(142,826) |
|
(Increase)/Decrease in other receivables |
|
(61,589) |
(16,555) |
|
(Decrease)/Increase in trade and other payables |
|
(79,672) |
(142,872) |
|
Decrease/(Increase) in amounts owing by subsidiary undertakings |
|
454,680 |
690,583 |
|
|
|
472,763 |
531,156 |
|
Net cash used in operating activities |
|
(6,674,028) |
(1,572,709) |
|
Cash flows from investing activities |
|
|
|
|
Purchase of intangible assets |
|
(61,233) |
(118,716) |
|
Net cash (used in)/from investing activities |
|
(61,233) |
(118,716) |
|
Cash flows from financing activities |
|
|
|
|
Issue of share capital |
|
2,714,574 |
1,459,472 |
|
Share issue costs |
|
- |
(80,171) |
|
Net cash from financing activities |
|
2,617,052 |
1,379,301 |
|
Net (decease)/increase in cash and cash equivalents |
|
109,922 |
(312,124) |
|
Cash and cash equivalents at 1 January |
|
37,008 |
437,230 |
|
Foreign exchange gains/(losses) on cash and cash equivalents |
|
- |
(88,099) |
|
Cash and cash equivalents at 31 December |
|
146,930 |
37,008 |
The notes form an integral part of these financial statements.
Notes to the Financial Statements
Year ended 31 December 2022
1. Accounting Policies
General Information
The Company is registered, and domiciled, in England and Wales and incorporated under the Companies Act 2006. The nature of the Company's operations and its principal activities are set out in the Directors' Report.
The financial information set out above does not constitute the Group's statutory financial statements for 2022 or 2021 but is derived from these financial statements. Statutory financial statements for 2021 have been delivered to the Registrar of Companies and those for 2022 will be delivered shortly. The statutory financial statements for the year ended 31 December 2022 included a disclaimer of opinion. Further details are included in the independent auditors' report included within the financial statements.
The Company's functional currency is the United States dollar (US $). Transactions arising in currencies other than the US $ are translated at average exchange rates for the relevant accounting period, with material transactions being accounted at the rate of exchange on the date of the transaction.
The Group presents its financial information in US $. The results and position of subsidiary undertakings that have a different functional currency to US $ are treated as follows:
Ø Assets and liabilities for each financial reporting date presented are translated at the closing rate of that financial reporting period.
Ø Income and expenses for each income statement (including comparatives) is translated at exchange rates at the dates of transactions. For practical reasons, the Company applies straight average exchange rates for the period.
Ø All resulting changes are recognised as a separate component of equity.
Ø Equity items are translated at exchange rates at the dates of transactions.
The principal accounting policies are summarised below:
(a) Basis of preparation
The financial statements have been prepared in accordance with UK-adopted international accounting standards. These financial statements are for the year 1 January 2022 to 31 December 2022. The comparatives shown are for the year 1 January 2021 to 31 December 2021
New standards and interpretations not applied
At the date of authorisation of these financial statements, a number of standards and interpretations were in issue but not yet effective. The directors do not anticipate that the adoption of these standards and interpretations, or any amendments to existing standards as a result of the annual improvements cycle, will have a material effect on the financial statements in the year of initial application.
(b) Basis of consolidation
The Group financial statements consolidate the financial statements of the Company and its subsidiaries under the acquisition method. The financial statements of subsidiaries are included in the consolidated financial statements from the date that control commences until the date control ceases. Control is achieved where the Company has the power to govern the financial and operating policies of an investee entity so as to obtain benefits from its activities.
(c) Joint Arrangements
A joint arrangement is one in which two or more parties have joint control. Joint control is the contractually agreed sharing of control of an arrangement, which exists only when decisions about the relevant activities require the unanimous consent of the parties sharing control. Certain of the Group's licence interests are held jointly with others. Accordingly, when the company holds a majority stake, the Group accounts for its share of assets, liabilities, income and expenditure of these joint operations, classified in the appropriate statement of financial position and income statement headings.
Where the Group's interest is in a minority, relinquishing control and having only a right to profits, with an indemnity against future costs, the Group account on an investment basis, only recognising income on receipt of, effectively, dividend income.
(d) Revenue
Revenue comprises the invoice value of goods and services supplied by the Group, net of value added taxes and trade discounts. Revenue is recognised in the case of oil and gas sales when goods are delivered and title has passed to the customer. This generally occurs when the product is physically transferred into a pipeline or vessel. Echo recognised revenue in accordance with IFRS 15. Our joint venture partner markets gas and crude oil on our behalf. Gas is transferred via a metred pipeline into the regional gas transportation system, which is part of national transportation system, control of the gas passes at the point at which the gas enters this network, this is the point at which gas revenue would be recognised. Gas prices vary from month to month based on seasonal demand from customer segments and, production in the market as a whole. Our partner agrees pricing with their portfolio of gas clients based on agreed pricing mechanisms in multiple contracts. Some pricing is regulated by government such as domestic supply. Oil shipments are priced in advance of a cargo and revenue is recognised at the point at which cargoes are loaded onto a shipping vessel at terminal.
(e) Property, plant and equipment
Property, plant and equipment is stated at cost, or deemed cost less accumulated depreciation, and any recognised impairment loss. Depreciation is charged so as to write off the cost or valuation of assets less any residual value over their estimated useful lives, using the straight- line method, on the following bases:
|
Fixtures & fittings |
12% to 33.3% straight-line |
Oil and gas properties are depleted on a unit of production basis commencing at the start of commercial production or depreciated on a straight-line basis over the relevant asset's estimated useful life. Expenditure is depreciated on a unit of production basis; the depletion charge is calculated according to the proportion that production bears to the recoverable reserves for each property. Depreciation will not be charged on an asset in the course of construction, depreciation commences when the asset is brought into use and will be depleted according to the proportion that production bears to the recoverable reserves for each property.
(f) Property right of use asset
The Group recognises a right-of-use asset and a lease liability at the lease commencement date. The right of use lease is initially measured at cost, which comprises the initial amount of the lease liability adjusted for any lease payments made at or before commencement date plus any initial direct costs incurred and an estimate of costs to dismantle and remove the underlying asset. The right-of-use asset is subsequently depreciated using the straight-line method from the commencement date to the earlier of the end of the useful life of the right-of-use asset or the end of the lease term. The lease liability is initially measured at the present value of the lease payments that are not paid at the commencement date discounted using the incremental borrowing rate of the individual Company which is the lessee.
(g) Other intangible assets - exploration and evaluation costs
Exploration and evaluation (E&E) expenditure comprises costs which are directly attributable to researching and analysing exploration data. It also includes the costs incurred in acquiring mineral rights, the entry premiums paid to gain access to areas of interest and amounts payable to third parties to acquire interests in existing projects. When it has been established that a mineral deposit has development potential, all costs (direct and applicable overhead) incurred in connection with the exploration and development of the mineral deposits are capitalised until either production commences or the project is not considered economically viable. In the event of production commencing, the capitalised costs are amortised over the expected life of the mineral reserves on a unit of production basis. Other pre-trading expenses are written off as incurred. Where a project is abandoned or is considered to be of no further interest, the related costs are written off.
(h) Impairment of tangible and intangible assets excluding goodwill
At the date of each statement of financial position, the Group reviews the carrying amounts of its tangible and intangible assets to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss (if any). Where it is not possible to estimate the recoverable amount of an individual asset, the Group estimates the recoverable amount of the cash-generating unit ("CGU") to which the asset belongs.
The recoverable amount is the higher of fair value less costs to sell or value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects the current market assessments of the time value of money and the risks specific to the asset. If the recoverable amount of an asset (or CGU) is estimated to be less than its carrying amount, the carrying amount of the asset is reduced to its recoverable amount. An impairment loss is recognised immediately in profit or loss, unless the relevant asset is carried at a revalued amount, in which case the impairment loss is treated as a revaluation decrease.
Where an impairment loss subsequently reverses, the carrying amount of the asset is increased to the revised estimate of its recoverable amount, but so that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognised for the asset (CGU) in prior years. A reversal of an impairment loss is recognised immediately in profit or loss, unless the relevant asset is carried at a re-valued amount, in which case the reversal of the impairment loss is treated as a revaluation increase.
(i) Discontinued operations, assets and businesses held for sale
Cash flows and operations that relate to a major component of the business or geographical region that has been sold or is classified as held for sale are shown separately from continuing operations.
Assets and businesses classified as held for sale are measured at the lower of carrying amount and fair value less costs to sell. No depreciation is charged on assets and businesses classified as held for sale.
Assets and businesses are classified as held for sale if their carrying amount will be recovered or settled principally through a sale transaction rather than through continuing use. This condition is regarded as being met only when the sale is highly probable and the assets or businesses are available for immediate sale in their present condition. Management must be committed to the sale, which should be expected to qualify for recognition as a completed sale within one year from the date of classification.
Finance income or costs are included in discontinued operations only in respect of financial assets or liabilities classified as held for sale or derecognised on sale.
(j) Taxation
Current taxation
Current tax assets and liabilities for the current and prior periods are measured at the amount expected to be recovered from, or paid to, the tax authorities. The tax rates and the tax laws used to compute the amount are those that are enacted, or substantively enacted, by the balance sheet date.
Deferred taxation
Deferred tax is the tax expected to be payable or recoverable on differences between the current year amounts of assets and liabilities in the financial statements and the corresponding tax basis used in the computation of taxable profit.
Deferred tax assets are recognised to the extent the temporary difference will reverse in the foreseeable future and it is probable that future taxable profit will be available against which the asset can be utilised.
(k) Taxation (continued)
Deferred tax is recognised for all deductible temporary differences arising from investments in subsidiaries, branches and associates, and interests in joint ventures, to the extent it is probable that the temporary difference will reverse in the foreseeable future.
(l) Conversion of foreign currency
Foreign currency transactions are translated at the average exchange rates over the year, material transactions are recorded at the exchange rate ruling on the date of the transaction. Assets and liabilities are translated at the rates prevailing at the balance sheet date. The Group has significant transactions and balances denominated in Euros and GBP. The year-end exchange rate to USD was US $1 to GBP £0.8292 and US $1 to €0.8869 (2021: US $1 to GBP £0.7388, US $1 to €0.8790) US $1 to ARS $147.423 2021: US $1 to ARS $102.397) and the average exchange rate during 2022 was US $1 to GBP £0.8019 (2021: US $1 to GBP £0. 7253).
In the Company financial statements, the income and expenses of foreign operations are translated at the exchange rates ruling at the dates of the transactions. The assets and liabilities of foreign operations, both monetary and non-monetary, are translated at exchange rates ruling at the balance sheet date. The reporting currency of the Company and group is United Stated Dollars (US $).
(m) Share-based payments
The fair value of equity instruments granted to employees is charged to the income statement, with a corresponding increase in equity. The fair value of share options is measured at grant date, using the binomial option pricing model or Black-Scholes pricing model were considered more appropriate, and spread over the period during which the employee becomes unconditionally entitled to the award. The charge is adjusted to reflect the number of shares or options that vest.
(n) Financial instruments
Financial assets and financial liabilities are recognised on the Group's balance sheet when the Group becomes a party to the contractual provisions of the instrument.
Trade and other receivables
Trade and other receivables are initially measured at fair value and are subsequently reassessed at the end of each accounting period.
Cash and cash equivalents
Cash and cash equivalents comprise cash in hand and demand deposits.
Financial liabilities and equity
Financial liabilities and equity instruments issued by the Group are classified according to the substance of the contractual arrangements entered into and the definitions of a financial liability and an equity instrument. An equity instrument is any contract that evidences a residual interest in the assets of the Group after deducting all of its liabilities. The accounting policies adopted for specific financial liabilities and equity instruments are set out below.
Trade payables
Trade payables are initially measured at fair value and are subsequently measured at amortised cost, using the effective interest rate method.
(n) Financial instruments
Equity instruments
Financial instruments issued by the Group are treated as equity only to the extent that they meet the following two conditions, in accordance with IAS 32:
· They include no contractual obligations upon the Group to deliver cash or other financial assets or to exchange financial assets or financial liabilities with another party under conditions that are potentially unfavourable to the Group; and
· Where the instrument will or may be settled in the Group's own equity instruments, it is either a non-derivative that includes no obligation to deliver a variable number of the Group's own equity instruments or is a derivative that will be settled by the Group exchanging a fixed amount of cash or other financial assets for a fixed number of its own equity instruments.
To the extent that this definition is not met, the financial instrument is classified as a financial liability.
(o) Borrowings
Borrowings are recognised initially at the fair value of the proceeds received which is determined using a discount rate which reflects the cost of borrowing to the Group. In subsequent periods borrowings are recognised at amortised costs, using an effective interest rate method. Any difference between the fair value of the proceeds costs and the redemption amount is recognised as a finance cost over the period of the borrowings.
(p) Inventory
Echo has chosen to value crude oil inventories, a commodity product, at net realisable value, the value is based on a discounted observable year-end market price. Other inventory items are valued at the lower of net realisable value and cost.
(q) Going Concern
The financial information has been prepared assuming the Group will continue as a going concern. Please see note 2 Accounting Estimates and Judgements for an extended disclosure on this issue.
(r) Government assistance grants
Government assistance grants such as the Coronavirus Job Retention Scheme (CJRS) which relates to staff who have been furloughed due to COVID-19 are recognised as income and have been included in the consolidated statement of comprehensive income as other income. During 2021, the Group received grants totalling US $23,118 for furloughed staff. Grants ceased, in line with Government policy, during H2 of 2021.
2. Accounting Estimates and Judgements
Going Concern
The financial information has been prepared assuming the Group will continue as a going concern. Under the going concern assumption, an entity is ordinarily viewed as continuing in business for the foreseeable future with neither the intention nor the necessity of liquidation, ceasing trading or seeking protection from creditors pursuant to laws or regulations.
The consolidated statement of financial position at 31 December 2022 again shows a negative net asset position. Moreover, after persistent difficulties, the board made the difficult decision in late 2022 to divest its operating assets in Argentina. This decision came to fruition in June 2023 when, apart from a small 5% retention holding, Echo Energy sold its interest in the SCS assets to its joint venture partner and obtained a full, 100%, indemnity against any future costs arising from those SCS operations.
The cash received from that sale was sufficient to partly, but not fully, pay down backlog creditors. Further, the delay in publishing the December 2022 Annual Report gave rise to an automatic suspension of the trading in the company's shares on AIM, preventing any equity fund raising until the Annual Report is published and the suspension lifted.
Nevertheless, the directors have held positive discussions with potential financial intermediaries with a view to raise additional funding and also are in advanced negotiations to acquire a number of assets including outside South America to replace the SCS assets.
Consequently, the directors consider the going concern assumption continues to be appropriate although there remain material uncertainties as to;
1. Successfully raising sufficient funds.
2. Finding an appropriate investment within a suitable timescale
3. That investment being sufficiently cash-positive to fund the Group going forwards.
Use of Estimate and Judgements
The preparation of financial statements in conforming with adopted IFRSs requires management to make judgements, estimates and assumptions that affect the reported amounts of assets and liabilities as well as the disclosure of contingent assets and liabilities as at the balance sheet date and the reported amount of revenues and expenses during the period. Actual outcomes may differ from those estimates. The key sources of uncertainty in estimates that have a significant risk of causing
material adjustment to the carrying amounts of assets and liabilities, within the next financial year, are the impairment of assets and the Group's going concern assessment.
Amounts Capitalised to the Consolidated Statement of Financial Position
In accordance with the Group policy, expenditures are capitalised only where the Group holds a licence interest in an area. All expenditure relating to the Bolivian company has been expensed to the statement of comprehensive income, as the Group has not yet been assigned any licence interests in the country. The Group has capitalised its participation in the SCS assets.
Prior to the decision to dispose of the majority of its SCS interest, expenses incurred in the UK relating to SCS were capitalised. All such capitalised UK costs were then impaired to nil value following the disposal decision.
Valuation of Assets
In line with the requirements of IFRS 5, management have considered impairment in the assets held for sale by comparing the expected fair value less costs to sell (which was agreed in June 2023 and the carrying value of the disposal group. On the basis the fair value less costs to sell were in excess of the carrying value of the disposal group no impairments were considered necessary.
The parent company's investment in subsidiary has been written down to the fair value less costs to sell as the value achieved is indicative of the value at the balance sheet date and the majority of the activity of the subsidiaries is linked to the discontinued operations.
Management have impaired $506,818 of intangible assets which were costs associated with asset capitalised in the parent company. This intangible has not been disposed of but is linked to the activities of the discontinued operations and therefore have been fully impaired at 31 December 2022.
Functional currency
The groups principal activities, prior to the criteria of discontinued operation being met, are undertaken in Argentina. Judgement is required to assess to the functional currency of the group's subsidiaries. Consistent with previous years, management have determined that the functional currency is USD on the basis that revenues, a portion of the cost base and financing activities are denominated in USD. If a different judgement was made and if Argentine Peso was considered the functional currency management would need to consider the impacts of IAS 29. On the basis the activities have been discontinued, this judgement will not impact the group significantly in future accounting periods.
Settlement of financial liabilities
As detailed in Note 26, during the year the company renegotiated and / or settled certain financial liabilities. These were on favourable terms to the group judgement is required to assess whether the counterparties to the liabilities were acting in their capacity as shareholders of the group. On the basis of the favourable terms management have determined they were acting in their capacity as shareholders and have accounted for the renegotiation or settlement accordingly as detailed in Note 26.
CARRYING VALUE OF INVESTMENT IN SUBSIDARIES
An impairment provisions has been made on the carrying value of investment in subsidiaries, writing them down to the disposal value achieved on the sale of the underlying SCS interests in June 2023.
3. Business Segments
The Group has adopted IFRS 8 Operating Segments. Per IFRS 8, operating segments are regularly reviewed and used by the board of directors being the chief operating decision maker for strategic decision-making and resources allocation, in order to allocate resources to the segment and assess its performance.
At the balance sheet date, there is only one business segment, being the company, its activity disclosed in within continuing operations.
Activity in Argentina, being the Santa Cruz Sur operations are set out within discontinued operations within note 10.
Activity within the group's Bolivian subsidiary is immaterial.
4. Revenue
|
|
Year to 31 December 2022 US $ |
Year to 31 December 2021 US $
|
|
Oil revenue |
- |
- |
|
Gas revenue |
- |
- |
|
Other income |
86 |
23,318 |
|
Total Revenue |
86 |
23,318 |
Revenue for 2022 all derives from discontinued operations held for resale and is shown in Note 10.
5. Cost of Sales
|
|
Year to 31 December 2022 US $ |
Year to 31 December 2021 US $
|
|
Production costs |
- |
- |
|
Selling and distribution costs |
- |
- |
|
Movement in stock of crude oil |
- |
- |
|
Depletion |
- |
- |
|
Total Costs |
- |
- |
Cost of sales for 2022 all derives from discontinued operations held for resale and is shown in Note 10
6. Expenses and Auditor's Remuneration
|
|
Year to 31 December 2022 US $ |
Year to 31 December 2021 US $ |
|
The operating loss is stated after charging the following amounts: |
|
|
|
Depreciation of property, plant and equipment - owned |
92 |
127,656 |
|
Loss on disposal of property, plant and equipment |
- |
1,858 |
|
Fees payable to the Company's auditor for the audit of the Company's annual accounts |
60,587 |
53,977 |
|
Fees payable to the overseas auditor and its associates for other services: |
|
|
|
- Corporate finance services |
- |
11,456 |
|
- Audit and subsidiaries |
10,502 |
10,499 |
|
Share-based payments |
- |
271,038 |
7. Staff Costs and Numbers
The average number of persons employed by the Group during the year including executive directors is analysed below:
|
|
Year to 31 December 2022 |
Year to 31 December 2021 |
|
Administration |
10 |
7 |
Group employment costs - all employees including executive directors:
|
|
Year to 31 December 2022 US $ |
Year to 31 December 2021 US $ |
|
Wages and salaries |
1,159,651 |
1,066,589 |
|
Social security costs |
147,922 |
131,487 |
|
Pension contributions |
37,574 |
45,764 |
|
Share-based payments - equity-settled |
157,757 |
271,038 |
|
Total |
1,502,904 |
1,514,878 |
Directors' remuneration is set out in the Directors Remuneration Report of this report.
Remuneration of Key Personnel is set out in the table below.
|
|
Year to 31 December 2022 US $ |
Year to 31 December 2021 US $ |
|
Wages and salaries |
541,915 |
583,974 |
|
Social security costs |
61,098 |
103,329 |
|
Bonus |
- |
59,288 |
|
Pension Contributions |
12,239 |
25,099 |
|
Private Health Insurance |
5,963 |
13,107 |
|
Share-Based Payments |
157,757 |
244,383 |
|
Total |
621,215 |
1,029,180 |
8. Financial Income
|
|
Year to 31 December 2022 US $ |
Year to 31 December 2021 US $ |
|
Interest income |
622 |
249,351 |
|
Net foreign exchange gain |
1,618,222 |
4,105,983 |
|
Total |
1,618,884 |
4,355,334 |
9. Financial Expense
|
|
Year to 31 December 2022 US $ |
Year to 31 December 2021 US $ |
|
Interest payable |
415 |
11,912 |
|
Net foreign exchange losses |
- |
5,122,810 |
|
Unwinding of discount on long- term loan |
2,980,994 |
3,394,647 |
|
Unwinding of abandonment provision |
- |
59,955 |
|
Bank fees and overseas transaction tax |
- |
170,007 |
|
Total |
2,981,409 |
8,993,432 |
10. Discontinued Operations
In November 2022 the company committed to selling virtually all of its interest in the Santa Cruz oil and gas operations in Argentina to its joint-venture partner Interoil. A term of the sale was for Echo to relinquish any management and accounting in respect of the joint venture, instead receiving a profit share in proportion to the remaining 5% holding in the joint venture, effectively as investment income.
The sale was completed on 26 June 2023, satisfied by £750,000 in cash, shares to the value of £400,000 in Interoil and £150,000 investment in Echo Energy PLC shares by Interoil. At 31 December 20222 the Argentinian operations were classified as a disposal group held for sale and as discontinued operations.
With the classification as discontinued operations, the Santa Cruz operations in Argentina have been excluded from the segmental note (note 3).
The results of the Argentinian operations for the year are presented below
|
|
31 December 2022 US $ |
31 December 2021 US $ |
|
Revenue |
|
|
|
Oil revenue |
5,365,928 |
4,060,802 |
|
Gas revenue |
8,748,402 |
7,036,861 |
|
Other income |
- |
3,707 |
|
|
14,114,331 |
11,101,369 |
|
Cost of sales |
|
|
|
Production costs |
(16,933,985) |
(12,024,454) |
|
Selling and distribution costs |
- |
(1,684,320) |
|
Movement in stock of crude oil |
- |
181,274 |
|
Depletion |
(1,419,193) |
(1,620,279) |
|
Total cost of sales |
(18,353,178) |
(15,147,779) |
|
Gross loss |
(4,238,847) |
(4,046,410) |
|
Exploration expenses |
(287,919) |
(205,651) |
|
Impairment of plant and equipment |
(506,818) |
- |
|
Administrative expenses |
(578,011) |
(510,807) |
|
Operating loss from discontinued operations |
(5,611,595) |
(4,762,869) |
|
Finance revenue |
- |
249,351 |
|
Finance expense |
(788,847) |
(5,362,783) |
|
Foreign exchange gain |
1,208,083 |
- |
|
Loss for the year before taxation from discontinued operations |
(5,192,359) |
(9,876,301) |
|
Deferred tax asset write-off |
(12,050) |
- |
|
Loss for the year after taxation from discontinued operations |
(5,204,409) |
(9,876,301) |
The major classes of assets and liabilities of the Argentinian operations classified as held for sale as at 31 December 2022 are as follows
|
|
31 December 2022 US $ |
|
Assets |
|
|
Property, plant and equipment |
2,658,382 |
|
Intangible assets |
5,267,129 |
|
Inventories |
716,794 |
|
Joint venture receivables |
9,729,937 |
|
Other receivables |
279,012 |
|
Prepayments |
87,916 |
|
Cash |
121 |
|
Assets of disposal group held for sale |
18,739,291 |
|
Liabilities |
|
|
Trade and other payables |
(14,095) |
|
Joint venture payables |
26,594,448 |
|
Provisions |
3,039,911 |
|
|
|
|
Liabilities of disposal group held for sale |
29,620,264 |
|
Net liabilities |
(10,880,974) |
The net cash flows of the Argentinian operations were
|
|
31 December 2022 US $ |
31 December 2021 US $ |
|
Net cash flow from operating activites |
(5,830,067) |
(434,026) |
|
Net cash flow from investing activities |
(217,578) |
- |
|
Net cash flow from financing activites |
- |
249,351 |
|
Net cash outflow |
(6,047,645) |
(184,675) |
11. Joint Arrangements
As described in both the strategic and governance reports, in particular in the Financial Review, Echo has joint arrangements within the SCS concessions. Previously, the Group accounted for its share of assets, liabilities, income and expenditure of these joint operations in accordance with its equity interest in each, being 70% of the SCS working interest. Joint venture assets and liabilities were separately disclosed throughout the financial statements.
As set out in Note 10, in December 2022 to the decision was made to divest the SCS concessions, following which, in June 2023 that interest was reduced to a 5% holding and the joint arrangement thereby has been treated in the accounts as discontinued operations.
12. Taxation
|
|
Year to 31 December 2022 US $ |
Year to 31 December 2021 US $ |
|
Tax on profit on ordinary activities |
|
|
|
Taxation charged based on profits for the period |
- |
- |
|
UK corporation tax based on the results for the period |
- |
- |
|
Deferred tax asset write-off in Bolivian subsidiary |
68,142 |
|
|
Total tax expense in income statement |
68,142 |
- |
Reconciliation of the Tax Expense
The tax assessed for the year is different from the standard rate of corporation tax in the UK of 19% (2021: 19%). The references are explained below:
|
|
Year to 31 December 2022 US $ |
Year to 31 December 2021 US $ |
|
Loss on ordinary activities before taxation |
(4,382,425) |
(11,770,112) |
|
Loss from discontinued operations |
(5,204,409) |
- |
|
Loss for the year before tax |
(9,586,834) |
(11,770,112) |
|
Loss on ordinary activities multiplied by standard rate of corporation tax in the UK of 19% |
(1,821,498) |
(2,236,321) |
|
Effects of: |
|
|
|
Expenses disallowed for tax purposes |
92 |
40,246 |
|
Deferred tax not provided - tax losses carried forward |
1,821,406 |
2,196,075 |
|
Deferred tax asset in Bolivian subsidiary written off |
68,142 |
- |
|
Total current tax |
68,142 |
- |
The parent entity has tax losses available to be carried forward, and further tax losses are available in certain subsidiaries. With anticipated substantial lead times for the Group's projects, and the possibility that these may expire before their use, it is not considered appropriate to anticipate an asset value for them. The amount of tax losses carried forward for which a deferred tax asset has not been recognised is US $50,533,098 (2021: US $48,711,692)
No amounts have been recognised within tax on the results of the equity-accounted joint ventures.
13. Loss Per Share
The calculation of basic and diluted loss per share at 31 December 2022 was based on the loss attributable to ordinary shareholders. The weighted average number of ordinary shares outstanding during the year ended 31 December 2022 and the effect of the potentially dilutive ordinary shares to be issued are shown below.
|
|
Year to 31 December 2022 |
Year to 31 December 2021 |
|
Net loss for the year (US $) before exchange on translating foreign operations |
(9,586,834) |
(1,893,811) |
|
Net loss on continuing operations (US $) |
(4,382,425) |
(9,876,301) |
|
Basic weighted average ordinary shares in issue during the year (No.) |
1,909,205,746 |
1,270,891,563 |
|
Diluted weighted average ordinary shares in issue during the year (No.) |
1,909,205,746 |
1,270,891,563 |
|
Loss per share (cents) |
|
|
|
Basic and diluted (cents) |
(0.50) |
(0.15) |
|
Loss per share on continuing operations (cents) |
(0.23) |
(0.78) |
In accordance with IAS 33 and as the entity is loss making, including potentially dilutive share options in the calculation would be anti-dilutive.
14. Loss of the Parent Company
The parent company is not required to produce its own profit and loss account (or IFRS equivalent) because of the exemption provision in Section 408 of the Companies Act 2006.
15. Property, Plant and Equipment (Group)
|
|
|
PPE - O&G Properties US $ |
Fixtures & Fittings US $ |
Total US $ |
|
|
31 DECEMBER 2022 |
|
|
|
|
|
|
Cost |
|
|
|
|
|
|
1 January 2022 |
|
2,873,147 |
95,397 |
2,968,544 |
|
|
Additions |
|
- |
2,813 |
2,813 |
|
|
Reclassification of assets of disposal group held for sale (note 10) |
|
(2,873,147) |
- |
(2,873,147) |
|
|
31 December 2022 |
|
- |
98,210 |
98,210 |
|
|
Depreciation |
|
|
|
|
|
|
1 January 2022 |
|
202,718 |
91,421 |
294,139 |
|
|
Charge for the year |
|
12,047 |
4,490 |
16,537 |
|
|
Reclassification of assets of disposal group held for sale (note 10) |
|
(214,765) |
- |
(214,765) |
|
|
31 December 2022 |
|
- |
95,911 |
95,911 |
|
|
Carrying amount |
|
|
|
|
|
|
31 December 2022 |
|
- |
2,299 |
2,299 |
|
|
31 December 2021 |
|
2,670,429 |
3,976 |
2,674,405 |
|
|
|
|
|
|
|
|
|
31 DECEMBER 2021 |
|
|
|
|
|
|
Cost |
|
|
|
|
|
|
1 January 2021 |
|
2,621,921 |
97,255 |
2,719,176 |
|
|
Additions |
|
251,226 |
- |
251,226 |
|
|
Disposals |
|
- |
(1,858) |
(1,858) |
|
|
31 December 2021 |
|
2,873,147 |
95,397 |
2,968,544 |
|
|
Depreciation |
|
|
|
|
|
|
1 January 2021 |
|
79,941 |
86,542 |
166,483 |
|
|
Charge for the year |
|
122,777 |
4,879 |
127,656 |
|
|
Disposals |
|
- |
- |
- |
|
|
31 December 2021 |
|
202,718 |
91,421 |
294,139 |
|
|
Carrying amount |
|
|
|
|
|
|
31 December 2021 |
|
2,670,429 |
3,976 |
2,674,405 |
|
|
31 December 2020 |
|
2,541,980 |
10,713 |
2,552,693 |
|
Included within property, plant and equipment are amounts of US $nil (2021: US $996,505) in relation to assets in construction and as a result these are not depreciated on the unit of production basis; this commenced when they became available for use.
15. Property, Plant and Equipment (Company)
|
|
|
|
Fixtures & Fittings US $ |
|
31 DECEMBER 2022 |
|
|
|
|
Cost |
|
|
|
|
1 January 2022 |
|
|
92,903 |
|
Additions |
|
|
- |
|
Disposals |
|
|
- |
|
31 December 2022 |
|
|
92,903 |
|
Depreciation |
|
|
|
|
1 January 2022 |
|
|
90,726 |
|
Charge for the year |
|
|
2,176 |
|
Disposals |
|
|
- |
|
31 December 2022 |
|
|
90,902 |
|
Carrying amount |
|
|
|
|
31 December 2022 |
|
|
1 |
|
31 December 2021 |
|
|
2,177 |
|
|
|
|
|
|
31 DECEMBER 2021 |
|
|
|
|
Cost |
|
|
|
|
1 January 2021 |
|
|
92,903 |
|
Additions |
|
|
- |
|
Disposals |
|
|
- |
|
31 December 2021 |
|
|
92,903 |
|
Depreciation |
|
|
|
|
1 January 2021 |
|
|
84,864 |
|
Charge for the year |
|
|
5,862 |
|
Disposals |
|
|
- |
|
31 December 2021 |
|
|
90,726 |
|
Carrying amount |
|
|
|
|
31 December 2021 |
|
|
2,177 |
|
31 December 2020
|
|
|
8,039 |
16. Intangible Assets (Group)
|
|
|
|
SCS Production Assets US $ |
|
31 DECEMBER 2022 |
|
|
|
|
Cost |
|
|
|
|
1 January 2022 |
|
|
10,875,022 |
|
Additions |
|
|
61,233 |
|
Reclassification of assets of disposal group held for sale (note 10) |
|
|
(10,429,437) |
|
31 December 2022 |
|
|
506,818 |
|
Depletion |
|
|
|
|
1 January 2022 |
|
|
3,743,115 |
|
Depletion |
|
|
1,419,193 |
|
Depreciation decommissioning assets |
|
|
- |
|
Impairment |
|
|
506,818 |
|
Reclassification of assets of disposal group held for sale (note 10) |
|
|
(5,162,308) |
|
31 December 2022 |
|
|
506,818 |
|
Carrying amount |
|
|
|
|
31 December 2022 |
|
|
- |
|
31 December 2021 |
|
|
7,131,907 |
|
|
|
|
|
|
31 DECEMBER 2021 |
|
|
|
|
Cost |
|
|
|
|
1 January 2021 |
|
|
10,756,306 |
|
Additions |
|
|
118,716 |
|
Disposals |
|
|
- |
|
Transfers |
|
|
- |
|
31 December 2021 |
|
|
10,875,022 |
|
Depletion and impairment |
|
|
|
|
1 January 2021 |
|
|
2,244,684 |
|
Disposals |
|
|
- |
|
Depletion |
|
|
1,375,931 |
|
Depreciation decommissioning assets |
|
|
122,500 |
|
Impairment charge for the year |
|
|
- |
|
31 December 2021 |
|
|
3,743,115 |
|
Carrying amount |
|
|
|
|
31 December 2021 |
|
|
7,131,907 |
|
31 December 2020 |
|
|
8,511,622 |
All intangible assets relate to oil & gas activities. The Group's oil & gas assets were assessed for impairment at 31 December 2022. The intangibles are held within one CGU, the SCS licence concession.
In 2022, the Santa Cruz operations were reclassified as Discontinued operations held for sale. No further general impairment was considered necessary as the proceeds of the sale exceed the net liabilities of the discontinued operations. However, in exception, the value of UK costs capitalised up to the time of the decision to sell of $506,818 was assessed as irrecoverable and has been fully impaired.
16. Intangible Assets continued (Company)
|
|
Argentina Production assets US $ |
Total US $ |
|
31 DECEMBER 2022 |
|
|
|
Cost |
|
|
|
1 January 2022 |
445,585 |
445,585 |
|
Additions |
61,233 |
61,233 |
|
31 December 2022 |
506,818 |
506,818 |
|
Impairment |
|
|
|
1 January 2022 |
- |
- |
|
Provided |
516,818 |
516,818 |
|
31 December 2022 |
506,818 |
506,818 |
|
Carrying amount |
|
|
|
31 December 2022 |
- |
- |
|
31 December 2021 |
445,585 |
445,585 |
|
|
|
|
|
31 DECEMBER 2021 |
|
|
|
Cost |
|
|
|
1 January 2021 |
326,869 |
326,869 |
|
Additions |
118,716 |
118,716 |
|
31 December 2021 |
445,585 |
445,585 |
|
Impairment |
|
|
|
1 January 2021 |
- |
- |
|
Impairment charge for the year |
- |
- |
|
31 December 2021 |
- |
- |
|
Carrying amount |
|
|
|
31 December 2021 |
445,585 |
445,585 |
|
31 December 2020 |
326,869 |
326,869 |
17. Interest in Subsidiary Undertakings
|
|
Year to 31 December 2022 US $ |
Year to 31 December 2021 US $ |
|
Cost |
|
|
|
1 January |
30,521,648 |
30,521,648 |
|
Additions in year |
- |
- |
|
31 December |
30,521,648 |
30,521,648 |
|
Impairment |
|
|
|
1 January |
14,516,604 |
14,516,604 |
|
Impairment |
14,442,723 |
- |
|
31 December |
28,959,327 |
14,516,604 |
|
Carrying amount |
|
|
|
31 December |
1,562,321 |
16,005,044 |
Details of the subsidiaries are as follows:
|
Subsidiary |
Class of Share |
% Owned |
Country of Registration |
Nature of Business |
|
Echo Energy Holdings (UK) Limited |
Ordinary |
100% |
England & Wales |
Holding company |
|
Echo Energy Argentina Holdings Limited |
Ordinary |
100% |
England & Wales |
Holding company |
|
Echo Energy Tapi Aike Limited |
Ordinary |
100% |
England & Wales |
Holding company |
|
Eco Energy TA Op Limited |
Ordinary |
100% |
England & Wales |
Holder of Argentinian branch assets |
|
Echo Energy C D & LLC Limited |
Ordinary |
100% |
England & Wales |
Holding company |
|
Eco Energy CDL Op Limited |
Ordinary |
100% |
England & Wales |
Holder of Argentinian branch assets |
|
Echo Energy Bolivia (Hold Co 1) Limited |
Ordinary |
100% |
England & Wales |
Holding company |
|
Echo Energy Bolivia (Op Co 1) Limited |
Ordinary |
100% |
England & Wales |
Holder of Bolivian branch assets |
|
Echo Energy Bolivia (Hold Co 2) Limited |
Ordinary |
100% |
England & Wales |
Holding company |
|
Echo Energy Bolivia (Op Co 2) Limited |
Ordinary |
100% |
England & Wales |
Dormant |
The registered address for all of the above subsidiaries is: 85 Great Portland Street, London, W1W 7LT
18. Inventories
|
|
31 December 2022 |
31 December 2021 |
||
|
|
Group US $ |
Company US $ |
Group US $ |
Company US $ |
|
Crude oil |
- |
- |
691,528 |
- |
|
Parts and supplies |
- |
- |
673,697 |
- |
|
Total |
- |
- |
1,365,225 |
- |
19. TRADE AND Other Receivables
|
|
31 December 2022 |
31 December 2021 |
||
|
|
Group US $ |
Company US $ |
Group US $ |
Company US $ |
|
Non-current |
|
|
|
|
|
Amounts owing by subsidiary undertakings |
- |
11,358,845 |
- |
11,813,525 |
|
Impairment in year |
- |
(11,358,845) |
|
|
|
Total |
- |
- |
- |
11,813,525 |
|
Current |
|
|
|
|
|
Trade receivables |
531,815 |
- |
387,965 |
- |
|
Accrued income |
- |
- |
291,336 |
- |
|
Other receivables |
61,243 |
57,685 |
1,322,407 |
82,818 |
|
Prepayments |
176,493 |
176,493 |
106,730 |
89,771 |
|
Total |
769,551 |
234,178 |
2,108,438 |
172,589 |
Other receivables in the Group principally comprise recoverable Value Added Tax and, in 2021, joint venture receivables and, for the company, inter-company balances. The directors consider that the carrying amount of trade and other receivables approximated to their fair value.
20. Cash and Cash Equivalents
|
|
31 December 2022 |
31 December 2021 |
||
|
|
Group US $ |
Company US $ |
Group US $ |
Company US $ |
|
Cash held by joint venture partners |
- |
- |
500,719 |
37,007 |
|
Cash and cash equivalents |
1,132,616 |
146,928 |
241,620 |
- |
|
Total |
1,132,616 |
146,928 |
742,339 |
37,007 |
In 2021 Echo had advanced cash to joint venture partners; this cash was held by our partners in a ring-fenced account. We recognised our equity share of the balance held.
21. Financial Instruments and Treasury Risk Management
Fair Value of Financial Assets and Liabilities
The carrying values of financial assets and liabilities are considered to be materially equivalent to their fair values, with the exception of the Eurobond loan which is calculated at present value as disclosed in note 26. The fair value is approximately $7.2m higher due to the impact of using a market rate of interest.
Treasury Risk Management
The Group manages a variety of market risks, including the effects of changes in foreign exchange rates, liquidity and counterparty risk.
Credit Risk
The Group's principal financial assets are bank balances and cash and other receivables.
The credit risk on liquid funds is limited because the counterparties are UK, Argentine and Bolivian banks with high credit ratings. The Group operates with positive cash and cash equivalents as a result of issuing share capital in anticipation of future funding requirements. The Group's policy is therefore one of achieving high returns with minimal risks. In order to provide a degree of certainty, the Group looks, when appropriate, to invest in short-term fixed-interest treasury deposits giving a low risk profile to these assets.
In Echo's SCS assets, acquired in November 2019, operating partner Interoil marketed our hydrocarbons primarily to well established utilities. Echo carried a marginally higher credit risk exposure as Echo dealt directly with counterparties for payment, however as the Group's principal customers were substantial oil and gas utility companies and refiners, as such credit risk is considered to be low. There is no history of credit loss, non-payment or default by the inherited counterparties and the calculated amount of the potential 12-month credit risk loss is not material. The Company had low credit risk in respect of receivables as a result of supplying reputable oil and gas purchasers. The group has applied the expected credit loss model under IFRS 9. Given current contractual arrangements where pricing has already been determined at the point where receivables from hydrocarbon sales are recognised as revenue, and the fact that contract counterparties are large corporate entities or utilities no provision was made for losses as any potential losses would be immaterial.
The maximum exposure due to credit risk for the Group on other receivables and amounts due from equity accounted joint operations during the year was US $1,880,113 (2021: US $3,253,335). No collateral is held in respect of these amounts.
The maximum exposure due to credit risk for the Company on inter-company receivables and other receivables during the year was US $27,818,569 (2021: US $28,509,152). No collateral is held in respect of these amounts. Inter-group funding is assessed for indications of impairment on a periodic basis. Investments and subsidiaries and inter-group loans in the amount of US $25,801,568 (2021: US $14,516,604) are considered to be impaired and have been provided against down to the level of the disposal consideration. All other amounts are expected to be received in full.
Currency Risk
The Group's operations are primarily located in South America, and the United Kingdom, with the main exchange risk being between the US Dollar and the Argentine Peso. The Argentine Peso has devalued by approximately 72% (2021: 9%) over the year. The Group addressed this risk by minimising exposure to the currency. The majority of Group revenues for the year were denominated in US Dollars but certain liabilities and revenues were denominated in Argentine Pesos. In certain instances the counterparty for settlement of Pesos income and expenditure was the same. In these instances Pesos balances were offset. Balances were held in dollars until settlement was due, and where short-term Pesos balances were held these were placed on overnight deposit.
The Group does hold substantial receivable VAT balances denominated in Pesos and have sought to expedite recovery to mitigate devaluation losses.
At year-end the Group held the following cash and cash equivalent balances:
|
|
31 December 2022 US $ |
31 December 2021 US $ |
|
US Dollars |
45 |
5,248 |
|
GBP Sterling |
146,903 |
35,419 |
|
Euro |
(19) |
41 |
|
Argentine Peso |
985,436 |
699,578 |
|
Bolivian Boliviano |
250 |
2,053 |
|
Total |
1,132,616 |
742,339 |
The consolidated statement of comprehensive income would be affected by US $14,690 (2021: US $4,247) if the exchange rate between US $ and GBP changed by 10%. There would be a loss of US $98,543 (2021: US $199,162) if the exchange rate between the Argentine Peso and the US Dollar weakened by 10%.
The Group has exposure to the Euro, Echo hold €3.9million (2021: €25million) bond notes, the Group held Euro-denominated funds at the beginning of the period to cover servicing of debt during the accounting year. The primary source of funds for the Group in the period was equity raised in GBP, these funds are predominantly translated into USD to fund exploration, acquisition and production activity in Argentina. No hedging products were used during this accounting period, but management actively review currency requirements to assess the suitability of hedging products. The Group consolidated statement of income would be affected by approximately US $417,009 (2021: US $2,782,192) by a reasonably possible 10 percentage points fluctuation in the exchange rate between US Dollars and Euros.
The VAT regime in Argentina differs from international practice as VAT investment activities are not immediately recoverable but must be offset against revenue streams. The Company made substantial investments in Argentina in 2018, 2019 and 2021 and has accordingly built up a material VAT receivable balance. A new mechanism has been approved by government through Law No. 27430 and Decree 813/2018. The mechanism will allow Technical VAT credits associated with the purchase of capital assets from 1 January 2018 to be recovered through application if the Company has not been able to recover the VAT within six months. Echo received a VAT refund during 2022, but going forward withholds VAT received from customers to offset any VAT credit balances.
The Group used Blue-Chip Swaps during the year to repatriate funds from Argentina to the UK. A Blue-Chip Swap is when a domestic investor purchases a foreign asset and then transfers the purchased asset to an offshore entity. The Group's Argentine subsidiary purchased shares in highly stable and liquid companies that are traded on both domestic and offshore stock exchanges. These shares were held for a fixed period in accordance with Argentinian regulation. Following the end of the fixed period the shares were sold offshore and the resulting funds were then repatriated to the parent company. This type of transaction is therefore exposed to stock price volatility during the hold period and incurs
transaction fees. During the year, the Group swapped 132,500,000 Pesos into $471,105 net of transaction fees and forex losses.
Interest Rate Risk
The Group holds debt instruments that were issued at a fixed rate. As part of the Group's policy to maximise returns on cash held, cash held is placed in interest-bearing accounts where possible. During the course of 2022, Echo invested cash into operations and did not hold significant cash balances for prolonged periods of time. The consolidated statement of comprehensive income would be affected by US $6 (2021: US $30) by a one percentage point change floating interest rate on a full-year basis.
Liquidity Risk
The Group's actively manages its working capital to ensure the Group has sufficient funds for operations and planned activities. Operational cash flow represents receipts from revenue, together with on-going direct operational support costs, exploration, appraisal, administration and business development costs. The Group manages its liquidity requirements by the use of both short-term and long-term cash flow forecasts. The Group's policy is to ensure facilities are available as required, to issue equity share capital and form strategic alliances in accordance with long-term cash flow forecasts. The Group had no undrawn committed facilities as at 31 December 2022.
The Group's financial liabilities are primarily obligations under joint operations, trade payables and operational costs. All amounts are due for payment in accordance with agreed settlement terms with suppliers or statutory deadlines and all within one year.
The Group holds Euro-denominated long-term debt. See Note 26. Other than long-term debts, all financial liabilities are due for settlement within 12 months. The Group held cash balances of US $1,132,616 (2021: US $742,33).
The Group does not currently use derivative financial instruments to hedge currency and commodity price risk as it is not considered necessary. Should the Group identify a requirement for the future use of such financial instruments, a comprehensive set of policies and systems as approved by the directors will be implemented.
Commodity Price Risk
The Group is now exposed to the risk of fluctuations on prevailing commodity market prices. The Group does not use commodity forward contracts and futures to hedge against price risk in commodities as current volumes and market conditions mean they are not yet appropriate for Echo.
A 10% increase in the price of Gas would have increased revenue in the discontinued operations by approximately US $874,840 (2021: US $703,686).
A 10% increase in the price of Oil would have increased revenue in the discontinued operations by approximately US $536,593 (2021: US $406,080).
Capital management
The Group's legacy strategy has led to its capital structure being a mixture of debt and equity. The directors will reassess the future capital structure when new projects are sufficiently advanced and restructure accordingly.
The Group's financial strategy is to utilise its resources to further appraise and test the Group's projects, forming strategic alliances for specific projects where appropriate together with assessing target acquisitions. The Group keeps investors and the market informed of progress with its projects through regular announcements and raises additional equity finance at appropriate times.
Categories of financial instruments
All of the Group's financial assets are carried at amortised cost. The Group's embedded derivative is classified at fair value through profit or loss, the remaining Group's financial liabilities are classified as financial liabilities at amortised cost.
22. Trade and Other Payables
|
|
31 December 2022 |
31 December 2021 |
||
|
|
Group US $ |
Company US $ |
Group US $ |
Company US $ |
|
Trade payables |
657,923 |
556,536 |
495,379 |
492,190 |
|
Taxation and social security costs |
388,422 |
105,121 |
395,684 |
269,311 |
|
Non-trade payables |
120,244 |
120,244 |
39,042 |
39,023 |
|
Accruals |
163,401 |
162,468 |
131,137 |
64,173 |
|
Total |
1,329,991 |
944,369 |
1,061,242 |
864,697 |
23. Derivative financial liabilities
Level 3 fair value measurements
Warrants instruments are deemed to be Level 3 liabilities under the fair value hierarchy as fair value measures of these liabilities are not based on observable market data. The movement in their fair values is shown in the table below:
|
|
31 December 2022 US $ |
31 December 2021 US $ |
|
At 1 January |
- |
62,477 |
|
Fair value movements recognised through profit or loss |
- |
(62,477) |
|
Total |
- |
- |
|
|
|
|
24. Share Capital
|
|
31 December 2022 |
31 December 2021 |
||
|
|
Group US $ |
Company US $ |
Group US $ |
Company US $ |
|
Issued, Called Up and Fully Paid |
|
|
|
|
|
5,527,427,674 0.31¢ (2021 1,309,013,085 0.31¢) ordinary shares |
|
|
|
|
|
1 January |
7,209,086 |
7,209,086 |
6,288,019 |
6,288,019 |
|
Equity shares issued |
12,586,777 |
12,586,777 |
921,067 |
921,067 |
|
31 December |
19,795,863 |
19,795,863 |
7,209,086 |
7,209,086 |
The holders of 0.31¢ (0.25p) ordinary shares are entitled to receive dividends from time to time and are entitled to one vote per share at meetings of the Company.
The following shares were issued to be used to support SCS operations and fund potential E&P growth projects as well as for general working capital:
· On 14 January 2022, Echo issued 143,478,260 ordinary shares at 0.46p per share to raise gross cash proceeds of £660,000 (US$880,189).
· On 29 August 2022, Echo issued 242,000,000 ordinary shares at 0.25p per share to raise gross cash proceeds of £605,000 (US$709,271). In addition 48,220,000 shares were issued to settle adviser fees.
The following shares were issued pursuant to the restructuring of the company's debt:
· On 29 August 2022, Echo issued 213,949,943 ordinary shares in settlement of accrued interest on the Lombard facility totalling €625,803.
· On 2 December 2022, Echo issued 3,570,766,386 ordinary shares to in settlement of financial liabilities as part of the debt restructuring as detailed in note 26.
Pursuant to the exercise of share warrants, on 22 December 2022 the company received cash of £87,977 (US$97,523), but the 33,190,876 ordinary shares were not issued until 2 January 2023. These are shown within shareholders' funds as 'cash received on shares to be issued'.
No further shares options were issued in the year, however a combination of warrants were issued in relation to fund raises and debt renegotiation.
Further shares issued during the year was as follows:
|
|
Date |
Shares |
Price (p) |
Prices (US $) |
|
1 January 2022 |
|
1,309,013,085 |
|
|
|
Shares issued @ 0.25p |
25/01/2022 |
143,478,260 |
0.46 |
0.55 |
|
Shares issued @ 0.25p |
29/08/2022 |
504,169,943 |
0.25 |
0.30 |
|
Shares issued @ 0.25p |
02/12/2022 |
3,570,766,386 |
0.27 |
0.54 |
|
31 December 2022 |
|
5,527,427,674 |
|
|
(A) Share Options
The Group has a share option scheme established to reward and incentivise the executive management team and staff for delivering share price growth. The share option scheme is administered by the remuneration committee. The expected life of the options is based on the expected time through to exercise and is not necessarily indicative of exercise patterns.
Share options are valued using the stochastic Black-Scholes model. The inputs to the model are the market price at date of grant, the exercise price set out in the option agreement, expected life, the risk-free rate of return and the expected volatility. A 10-year gilt rate is used as an equivalent to risk-free rate and the expected volatility was determined with reference to the Company's share price.
The expected life used in the model has been adjusted, based on management's best estimate, for the effects of non-transferability, exercise restrictions and behavioural considerations. The cost of options is amortised to the statement of comprehensive income over the service period of the option.
Details of the tranches of share options outstanding at the year-end are as follows:
|
Share Options |
Number 31/12/2022 |
WAEP* (¢) 31/12/2022 |
Number 31/12/2021 |
WAEP* (¢) 31/12/2021 |
|
Outstanding as at 1 January |
120,254,120 |
3 |
95,491,107 |
5 |
|
Granted during the year |
- |
- |
35,750,000 |
1 |
|
Forfeited during the period |
(8,987,636) |
2 |
(8,236,987) |
4 |
|
Cancelled during the year |
(40,000,001) |
3 |
(2,750,000) |
1 |
|
Options outstanding as at 31 December |
71,266,483 |
3 |
120,254,120 |
3 |
|
Exercisable at 31 December |
33,266,483 |
4 |
41,195,714 |
3 |
|
*Weighted Average Exercise Price (WAEP) |
|
|
|
|
The fair values on the grant date and each reporting date were determined using the Black-Scholes option pricing model. The following key assumptions were used in determining the derivative's fair value at the reporting date:
The weighted average outstanding life of vested share options is 1.5 years. The price for outstanding options ranges between 0.8¢ and 16¢ (0.7p and 13.2p). The outstanding share options are not subject to any share performance-related vesting conditions, but vesting is conditional upon continuity of service.
The Group recognised total expenses of US $157,757 (2021: US $271,038) related to equity-settled, share-based payment transactions during the year.
A deferred taxation asset has not been recognised in relation to the charge for share-based payments due to the availability of tax losses to be carried forward.
(B) Warrants Over Ordinary Shares
The Company issued warrants over ordinary shares to subscribers of new ordinary shares and as fundraising commission in respect of debt restructuring completed during the year to 31 December 2022.
Details of the tranches of warrants outstanding at the year-end are as follows:
|
Warrants |
Number 2022 |
WAEP* (¢ ) 2022 |
Number 2021 |
WAEP* (¢ ) 2021 |
|
Outstanding as at 1 January |
551,716,990 |
9 |
460,222,521 |
10 |
|
Granted during the year |
402,418,260 |
1 |
170,939,567 |
1 |
|
Exercised during the year |
- |
- |
(79,445,098) |
4 |
|
Lapsed in year |
(389,118,950) |
8 |
- |
- |
|
Outstanding as at 31 December |
565,016,300 |
1 |
551,716,990 |
9 |
|
*Weighted Average Exercise Price (WAEP)
|
|
|
|
|
Warrants values are calculated using the Black-Scholes option pricing model using the following inputs.
|
Warrants |
14 January 2022 |
28 June 2022 |
10 October 2022 |
|
Market stock price |
0.49p |
0.31p |
0.25p |
|
Option strike price |
0.65p |
0.65p |
0.25p |
|
Volatility |
102.64% |
73.32% |
68.32% |
|
Expiration of the option |
2 years |
2 years |
2 year |
|
Risk-free rate |
0.797% |
2.121% |
4.353% |
|
Future value |
$579,447 |
$620,853 |
$714,610 |
|
Expense |
$201,469 |
$60,175 |
$285,844 |
The weighted average price for outstanding warrants as at 31 December 2022 ranges between 0.28¢ and 0.91¢ (0.25p and 0.75p). The residual weighted average contractual life for the warrants is 1.2 years.
25. Share Premium Account
|
|
31 December 2022 |
31 December 2021 |
||
|
|
Group US $ |
Company US $ |
Group US $ |
Company US $ |
|
1 January |
64,977,243 |
64,977,243 |
64,961,905 |
64,961,905 |
|
Premium arising on issue of equity shares |
7,521,415 |
7,521,415 |
813,207 |
813,207 |
|
Warrants lapsed |
- |
- |
(717,698) |
(717,698) |
|
Warrants issued |
11,291,846 |
11,291,846 |
- |
- |
|
Transaction costs |
- |
- |
(80,171) |
(80,171) |
|
31 December |
83,790,504 |
83,790,504 |
64,977,243 |
64,977,243 |
26. Loans Due in Over One Year
|
|
|
|
|
31 December 2022 US $ |
31 December 2021 US $ |
|
|
|
Five-year secured bonds |
|
|
(4,170,086) |
(21,385,663) |
|
||
|
Additional net funding |
|
|
|
- |
(6,059,126) |
|
|
|
Other loans |
|
|
|
(1,293,215) |
(1,323,591) |
|
|
|
Total |
|
|
|
(5,463,301) |
(28,768,380) |
|
|
|
|
Balance as at 31 December 2021
US $ |
Amortised finance charges US $ |
Exchange adjustments
US $ |
Capital contribution reserve US$ |
Swap to equity
US$ |
31 December 2022
US $ |
|
|
€20 million five-year secured bonds |
21,385,663 |
2,337,007 |
(1,074,839) |
(7,212,492) |
(11,265,253) |
4,170,086 |
|
|
€5 million Lombard Odier secured convertible debt facility |
6,059,124 |
509,771 |
(343,008) |
- |
(6,225,887) |
- |
|
|
Other loans |
1,323,593 |
134,216 |
(164,594) |
- |
|
1,293,215 |
|
|
Total |
28,768,380 |
2,980,994 |
(1,582,441) |
(7,212,492) |
(17,491,140) |
5,463,301 |
|
Lombard Odier secured convertible debt facility renegotiation
On 2 December 2022, the company announced a settlement in full of the Lombard Odier outstanding principle plus interest of $6.2m by Ordinary shares in the company, issuing 1,347,777,877 ordinary shares. On the basis the settlement of the loan was on favourable terms to the group, management considered Lombard Odier were acting in their capacity as shareholders of the Group and therefore the criteria in IFRIC 19 - Extinguishment of financial liabilities with Equity Instruments did not apply. Therefore the value of the shares issued have been deemed to be the same as the carrying value of the loan.
Lombard Odier are considered a Related Party to the Group by virtue of them being a shareholder.
Euro-bond renegotiation
On the same date, a partial (50%) settlement of the principle and accrued interest was agreed on the existing Euro-secured denominated bonds, $11.3m of the debt being settled by the issue of 2,436,938 ordinary shares. On the basis the settlement of the loan was on favourable terms to the group management considered the counterparty was acting in their capacity as shareholders of the Group, and therefore the criteria in IFRIC 19 - Extinguishment of financial liabilities with Equity Instruments did not apply. Therefore the value of the shares issued has been deemed to be the same as the carrying value of the loan.
In addition and at the same time, the repayment date for the remaining bonds was moved back from 2024 until 2032 and the interest rate reduced from 8% to 2%. This is a substantial modification to the loan terms, management calculated the present value of the new loan and compared to the carrying value. The difference has been recorded as a capital contribution to the group of $7.2m.
The Euro bondholders are also considered to be Related Parties by virtue of them being shareholders.
Maturity Analysis
Contractual undiscounted cash flows:
|
|
31 December 2022 US $ |
31 December 2021 US $ |
|
Amounts due within one year |
- |
- |
|
Amounts due between one and five years |
1,293,215 |
28,768,380 |
|
Amounts due over five years |
4,170,086 |
- |
|
|
5,463,301 |
28,768,380 |
27. Provisions
|
|
31 December 2022 US $ |
31 December 2021 US $ |
|
Assessment of decommissioning provision |
- |
3,039,911 |
|
|
- |
3,039,911 |
Historically, provision has been made for the discounted future cost of abandoning wells and restoring sites to a condition acceptable to the relevant authorities. The provisions were based on Operators' internal estimate. Assumptions were based on the current experience from decommissioning wells. The estimates are reviewed regularly to take account of any material changes to the assumptions. Actual decommissioning costs will ultimately depend upon future costs for decommissioning which will reflect market conditions and regulations at that time. Furthermore, the timing of decommissioning is uncertain and is likely to depend on when the fields cease to produce at economically viable rates. This, in turn, will depend on factors such as future oil and gas prices, which are inherently uncertain.
On sale of (the majority of) the interests in the SCS licences, decommissioning becomes a liability that will no longer fall upon the group and, accordingly, no further provision was made by the Group in 2022.
28. Related Party Transactions
Inter-Group Balances
In order for individual subsidiary companies to carry out the objectives of the Group, amounts are loaned to them on an unsecured basis. At the year-end the following amounts were outstanding:
|
|
31 December 2022 US $ |
31 December 2021 US $ |
|
Amounts owed to Echo Energy plc from: |
|
|
|
Echo Energy Bolivia Op Co 1 |
562,130 |
551,500 |
|
Eco Energy CDL Op Limited |
1,156,518 |
1,627,623 |
|
Eco Energy TA Op Limited |
9,640,324 |
9,634,402 |
|
|
11,358,972 |
11,813,525 |
Lombard Odier is a significant shareholder in the Company. Please refer to Note 26 for details of the debt transactions which relate to these counterparties.
Phoenix Global Resources plc, from whom Echo acquired the SCS assets in late 2019, is also a significant shareholder in the Company following the issue by the Company of consideration shares to Phoenix Global Resources plc in respect of the Company's acquisition of the SCS assets.
29. Controlling Party
The directors do not consider there to be a controlling party.
30. Commitments
Echo had no committed expenditure in relation to capital projects in the SCS asset at the end of 31 December 2022. It will continue to pay operational costs as cash called by the joint venture partner.
31. Subsequent Events
As described in note 11, on 27 June 2023, the company completed the previously announced sale of 65% of its 70% interest in the joint venture operating the SCS licences.
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