Company Registration No. 07482335 (England and Wales)
SHALCO ENERGY LIMITED
ANNUAL REPORT AND CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 JANUARY 2024
SHALCO ENERGY LIMITED
COMPANY INFORMATION
Directors
Sean Mooney
Patrick Scott
Secretary
Sean Mooney
Company number
07482335
Registered office
Cannon Place
78 Cannon Street
London
United Kingdom
EC4N 6AF
Auditor
UHY Farrelly Dawe White Limited
Unit 4A
Fingal Bay Business Park
Balbriggan
Co. Dublin
Ireland
Business address
Cannon Place
78 Cannon Street
London
United Kingdom
EC4N 6AF
Bankers
Barclays Bank Ireland PLC
Two Park Place
Hatch Street
Dublin 2
Co. Dublin
Ireland
Solicitors
Meier & Associates
10015 South Pennsylvania Suite B
Oklahoma City
Oklahoma
United States of America
SHALCO ENERGY LIMITED
CONTENTS
Page
Directors' report
1 - 2
Directors' responsibilities statement
3
Independent auditor's report
4 - 6
Group statement of comprehensive income
7
Group balance sheet
8
Company balance sheet
9
Group statement of changes in equity
10
Company statement of changes in equity
11
Notes to the financial statements
12 - 21
SHALCO ENERGY LIMITED
DIRECTORS' REPORT
FOR THE YEAR ENDED 31 JANUARY 2024
- 1 -

The directors present their annual report and financial statements for the year ended 31 January 2024.

Principal activities

The holding company did not trade during the year.

 

The group received a small amount of passive income from royalties.

 

Principal Risk and Uncertainties

The main risks facing the group relate to the exploration, financial and commercialisation risks associated with oil and gas projects.

 

As an investor in the upstream oil and gas industry, the group is inherently exposed to significant risks and uncertainties. There is no absolute assurance that the current drilling will be successful. Exploration and development activities may be delayed or adversely affected by factors outside the group's control, in particular, unknown geological conditions, climatic conditions, performance of joint venture partners, delays or failures in installing and commissioning plant and equipment, and actions of host governments or other regulatory factors.

 

The market price of hydrocarbon products is volatile and is not within the control of the group.

Results and dividends

The results for the year are set out on page 7.

No ordinary dividends were paid. The directors do not recommend payment of a final dividend.

Directors

The directors who held office during the year and up to the date of signature of the financial statements were as follows:

Sean Mooney
Patrick Scott
Future developments

The directors are currently exploring the possibility of selling the override held by Shalco Energy (Delaware) LLC. At the time of approval of these financial statements, no definitive timeframe has been set by the board and until then the company plans to continue its association with Silver Creek in the hope that Silver Creek's drilling campaign is successful.

Auditor

In accordance with the company's constitution, a resolution proposing that UHY Farrelly Dawe White Limited be reappointed as auditor of the group will be put at a General Meeting.

Statement of disclosure to auditor

So far as each person who was a director at the date of approving this report is aware, there is no relevant audit information of which the auditor of the company is unaware. Additionally, the directors individually have taken all the necessary steps that they ought to have taken as directors in order to make themselves aware of all relevant audit information and to establish that the auditor of the company is aware of that information.

Going Concern

The company has suffered further losses during the year ended 31 January 2024. The directors have carried out an assessment on the company's ability to continue as a going concern and are satisfied that with the continued forbearance of its loan note holder the company can continue as a going concern for the foreseeable future.

Special provisions relating to small companies

The above report has been prepared in accordance with the special provisions relating to small companies within Part 15 of the Companies Act 2006.

SHALCO ENERGY LIMITED
DIRECTORS' REPORT (CONTINUED)
FOR THE YEAR ENDED 31 JANUARY 2024
- 2 -
On behalf of the board
Sean Mooney
Director
5 September 2024
SHALCO ENERGY LIMITED
DIRECTORS' RESPONSIBILITIES STATEMENT
FOR THE YEAR ENDED 31 JANUARY 2024
- 3 -

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

 

Company law requires the directors to prepare financial statements for each financial year. Under that law the directors have elected to prepare the financial statements in accordance with United Kingdom Generally Accepted Accounting Practice (United Kingdom Accounting Standards and applicable law). Under company law the directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the group and company, and of the profit or loss of the group for that period. In preparing these financial statements, the directors are required to:

 

 

The directors are responsible for keeping adequate accounting records that are sufficient to show and explain the group’s and company’s transactions and disclose with reasonable accuracy at any time the financial position of the group and company and enable them to ensure that the financial statements comply with the Companies Act 2006. They are also responsible for safeguarding the assets of the group and company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.

On behalf of the board
Sean Mooney
Director
5 September 2024
SHALCO ENERGY LIMITED
INDEPENDENT AUDITOR'S REPORT
TO THE MEMBERS OF SHALCO ENERGY LIMITED
- 4 -
Opinion

We have audited the financial statements of Shalco Energy Limited (the 'parent company') and its subsidiaries (the 'group') for the year ended 31 January 2024 which comprise the group statement of comprehensive income, the group balance sheet, the company balance sheet, the group statement of changes in equity, the company statement of changes in equity and notes to the financial statements, including significant accounting policies. The financial reporting framework that has been applied in their preparation is applicable law and United Kingdom Accounting Standards, including Financial Reporting Standard 102 The Financial Reporting Standard applicable in the UK and Republic of Ireland (United Kingdom Generally Accepted Accounting Practice).

In our opinion the financial statements:

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 group and parent company in accordance with the ethical requirements that are relevant to our audit of the financial statements in the UK, including the FRC’s Ethical Standard, and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Material uncertainty related to going concern

There is a material uncertainty related to events or conditions that may cast significant doubt on the entity's ability to continue as a going concern and, therefore, that it may be unable to realise its assets and discharge its liabilities in the normal course of business.

 

In forming our opinion on the financial statements, which is not modified, we have considered the adequacy of the disclosure made in note 1.4 to the financial statements concerning the group’s ability to continue as a going concern. The group incurred a net loss of £7,344,316 (2023: £5,909,907) during the year ended 31 January 2024 and, at that date, the group’s current liabilities exceeded its total assets by £40,724,450 (2023: £33,380,134). These conditions, along with the other matters explained in note 1.4 to the financial statements, indicate the existence of a material uncertainty which may cast significant doubt about the company’s ability to continue as a going concern.

 

The financial statements do not include the adjustments that would result if the company was unable to continue as a going concern.

Other information

The other information comprises the information included in the annual report other than the financial statements and our auditor's report thereon. The directors are responsible for the other information contained within the annual report. 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. 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 course of 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 this gives rise to a material misstatement in the financial statements themselves. 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.

SHALCO ENERGY LIMITED
INDEPENDENT AUDITOR'S REPORT (CONTINUED)
TO THE MEMBERS OF SHALCO ENERGY LIMITED
- 5 -

Opinions on other matters prescribed by the Companies Act 2006

In our opinion, based on the work undertaken in the course of our audit:

Matters on which we are required to report by exception

In the light of the knowledge and understanding of the group and parent company and its environment obtained in the course of the audit, we have not identified material misstatements in the directors' report.

 

We have nothing to report in respect of the following matters where the Companies Act 2006 requires us to report to you if, in our opinion:

 

Responsibilities of directors

As explained more fully in the directors' responsibilities statement, 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 parent 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 parent 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.

 

Irregularities, including fraud, are instances of non-compliance with laws and regulations. We design procedures in line with our responsibilities, outlined above, to detect material misstatements in respect of irregularities, including fraud. The extent to which our procedures are capable of detecting irregularities, including fraud, is detailed below.

 

As part of designing our audit, we determined materiality and assessed the risks of material misstatement in the financial statements, including how fraud may occur by enquiring of management of its own consideration of fraud. In particular, we looked at where management made subjective judgements, for example in respect of significant accounting estimates that involved making assumptions and considering future events that are inherently uncertain. We also considered potential financial or other pressures, opportunity and motivations for fraud. As part of this discussion we identified the internal controls established to mitigate risks related to fraud or noncompliance with laws and regulations and how management monitor these processes.

 

We gained an understanding of the group and industry, we identified that the principal risks of non-compliance with relevant laws and regulations. We focused on laws and regulations that could give rise to a material misstatement in the financial statements, including, Companies Act 2006 and tax legislation.

 

Our tests included tests of details to agree the financial statements to underlying supporting documentation and enquiries with management. Using these tests, we also addressed the risk of management override of internal controls that represented a risk of material misstatement due to fraud.

 

SHALCO ENERGY LIMITED
INDEPENDENT AUDITOR'S REPORT (CONTINUED)
TO THE MEMBERS OF SHALCO ENERGY LIMITED
- 6 -

There are inherent limitations in the audit procedures described above. We are less likely to become aware of instances of non-compliance with laws and regulations that are not closely related to events and transactions reflected in the financial statements. Also, the risk of not detecting a material misstatement due to fraud is higher than the risk of not detecting one resulting from error, as fraud may involve deliberate concealment by, for example, forgery or intentional misrepresentations, or through collusion.

 

A further description of our responsibilities is available on the Financial Reporting Council’s website at: https://www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditor's report.

The purpose of our audit work and to whom we owe our responsibilities

This report is made solely to the company’s members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006. Our audit work has been undertaken so that we might state to the company’s members those matters we are required to state to them in an auditor's report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company and the company’s members as a body, for our audit work, for this report, or for the opinions we have formed.

Thomas McDonagh (Senior Statutory Auditor)
for and on behalf of UHY Farrelly Dawe White Limited
Chartered Certified Accountants
Statutory Auditor
Unit 4A
Fingal Bay Business Park
Balbriggan
Co. Dublin
Ireland
5 September 2024
SHALCO ENERGY LIMITED
GROUP STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEAR ENDED 31 JANUARY 2024
- 7 -
2024
2023
Notes
£
£
Turnover
3
21,232
26,232
Administrative expenses
(167,300)
(14,090)
Operating (loss)/profit
4
(146,068)
12,142
Interest receivable and similar income
6
56
19
Interest payable and similar expenses
7
(7,198,304)
(5,922,068)
Loss before taxation
(7,344,316)
(5,909,907)
Tax on loss
8
-
0
-
0
Loss for the financial year
16
(7,344,316)
(5,909,907)
Loss for the financial year is all attributable to the owners of the parent company.
Total comprehensive income for the year is all attributable to the owners of the parent company.
SHALCO ENERGY LIMITED
GROUP BALANCE SHEET
AS AT
31 JANUARY 2024
31 January 2024
- 8 -
2024
2023
Notes
£
£
£
£
Current assets
Debtors
11
4,880
6,159
Cash at bank and in hand
35,126
31,124
40,006
37,283
Creditors: amounts falling due within one year
12
(40,764,456)
(33,417,417)
Net current liabilities
(40,724,450)
(33,380,134)
Capital and reserves
Called up share capital
14
2,785,892
2,785,892
Share premium account
15
18,278,159
18,278,159
Profit and loss reserves
16
(61,788,501)
(54,444,185)
Total equity
(40,724,450)
(33,380,134)
The financial statements were approved by the board of directors and authorised for issue on 5 September 2024 and are signed on its behalf by:
05 September 2024
Sean Mooney
Director
Company registration number 07482335 (England and Wales)
SHALCO ENERGY LIMITED
COMPANY BALANCE SHEET
AS AT 31 JANUARY 2024
31 January 2024
- 9 -
2024
2023
Notes
£
£
£
£
Fixed assets
Investments
10
65
65
Current assets
Cash at bank and in hand
6,950
19,190
Creditors: amounts falling due within one year
12
(40,784,807)
(33,436,417)
Net current liabilities
(40,777,857)
(33,417,227)
Net liabilities
(40,777,792)
(33,417,162)
Capital and reserves
Called up share capital
14
2,785,892
2,785,892
Share premium account
15
18,278,159
18,278,159
Profit and loss reserves
16
(61,841,843)
(54,481,213)
Total equity
(40,777,792)
(33,417,162)

As permitted by s408 Companies Act 2006, the company has not presented its own profit and loss account and related notes. The company’s loss for the year was £7,360,630 (2023 - £5,933,464 loss).

These financial statements have been prepared in accordance with the provisions applicable to companies subject to the small companies regime.

The financial statements were approved by the board of directors and authorised for issue on 5 September 2024 and are signed on its behalf by:
05 September 2024
Sean Mooney
Director
Company registration number 07482335 (England and Wales)
SHALCO ENERGY LIMITED
GROUP STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 JANUARY 2024
- 10 -
Share capital
Share premium account
Profit and loss reserves
Total
£
£
£
£
Balance at 1 February 2022
2,785,892
18,278,159
(48,534,278)
(27,470,227)
Year ended 31 January 2023:
Loss and total comprehensive income
-
-
(5,909,907)
(5,909,907)
Balance at 31 January 2023
2,785,892
18,278,159
(54,444,185)
(33,380,134)
Year ended 31 January 2024:
Loss and total comprehensive income
-
-
(7,344,316)
(7,344,316)
Balance at 31 January 2024
2,785,892
18,278,159
(61,788,501)
(40,724,450)
SHALCO ENERGY LIMITED
COMPANY STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 JANUARY 2024
- 11 -
Share capital
Share premium account
Profit and loss reserves
Total
£
£
£
£
Balance at 1 February 2022
2,785,892
18,278,159
(48,547,749)
(27,483,698)
Year ended 31 January 2023:
Loss and total comprehensive income for the year
-
-
(5,933,464)
(5,933,464)
Balance at 31 January 2023
2,785,892
18,278,159
(54,481,213)
(33,417,162)
Year ended 31 January 2024:
Profit and total comprehensive income
-
-
(7,360,630)
(7,360,630)
Balance at 31 January 2024
2,785,892
18,278,159
(61,841,843)
(40,777,792)
SHALCO ENERGY LIMITED
NOTES TO THE GROUP FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 JANUARY 2024
- 12 -
1
Accounting policies
Company information

Shalco Energy Limited (“the company”) is a private limited company domiciled and incorporated in England and Wales. The registered office is Cannon Place, 78 Cannon Street, London, United Kingdom, EC4N 6AF.

 

The group consists of Shalco Energy Limited and all of its subsidiaries.

1.1
Accounting convention

These financial statements have been prepared in accordance with FRS 102 “The Financial Reporting Standard applicable in the UK and Republic of Ireland” (“FRS 102”) and the requirements of the Companies Act 2006.

The financial statements are prepared in sterling, which is the functional currency of the company. Monetary amounts in these financial statements are rounded to the nearest £.

The financial statements have been prepared under the historical cost convention, modified to include the revaluation of freehold properties and to include investment properties and certain financial instruments at fair value. The principal accounting policies adopted are set out below.

1.2
Business combinations

In the parent company financial statements, the cost of a business combination is the fair value at the acquisition date of the assets given, equity instruments issued and liabilities incurred or assumed, plus costs directly attributable to the business combination. The excess of the cost of a business combination over the fair value of the identifiable assets, liabilities and contingent liabilities acquired is recognised as goodwill. The cost of the combination includes the estimated amount of contingent consideration that is probable and can be measured reliably, and is adjusted for changes in contingent consideration after the acquisition date. Provisional fair values recognised for business combinations in previous periods are adjusted retrospectively for final fair values determined in the 12 months following the acquisition date. Investments in subsidiaries, joint ventures and associates are accounted for at cost less impairment.

 

Deferred tax is recognised on differences between the value of assets (other than goodwill) and liabilities recognised in a business combination accounted for using the purchase method and the amounts that can be deducted or assessed for tax, considering the manner in which the carrying amount of the asset or liability is expected to be recovered or settled. The deferred tax recognised is adjusted against goodwill or negative goodwill.

1.3
Basis of consolidation

The consolidated group financial statements consist of the financial statements of the parent company Shalco Energy Limited together with all entities controlled by the parent company (its subsidiaries) and the group’s share of its interests in joint ventures and associates.

 

All financial statements are made up to 31 January 2024. Where necessary, adjustments are made to the financial statements of subsidiaries to bring the accounting policies used into line with those used by other members of the group.

 

All intra-group transactions, balances and unrealised gains on transactions between group companies are eliminated on consolidation. Unrealised losses are also eliminated unless the transaction provides evidence of an impairment of the asset transferred.

SHALCO ENERGY LIMITED
NOTES TO THE GROUP FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 JANUARY 2024
1
Accounting policies
(Continued)
- 13 -
1.4
Going concern

These financial statements are prepared on the going concern basis. The directors have a reasonable expectation that the company will continue in operational existence for the foreseeable future. However, the directors are aware of certain material uncertainties which may cause doubt on the company's ability to continue as a going concern.

 

At 31 January 2024, the group's shareholder deficit amounted to £40.7m. The group had debt of £40.6m at 31 January 2024 and is dependent on the continued financial support of the holders of the preferred cumulative convertible loan notes ('the Notes'). Notwithstanding this, the directors have considered the business plan and reviewed cash flow projections for the group and the underlying assumptions and, on the basis of the review and discussions held with the holder of the Notes, believe it is appropriate to adopt the going concern basis in preparing the financial statements.

 

The directors have concluded the performance of the group may be affected by exploration activity and funding uncertainties but have reasonable expectation that subject to the continued financial support of the holders of the Notes, the group will have sufficient cash resources available to meet their liabilities for at least 12 months from the date of approval of these financial statements. In the event that the exploration activities scheduled to occur in the coming year are commercially unsuccessful it is the intention of the directors to dispose of the assets of the group and to use the funds to pay creditors.

1.5
Turnover

Revenue relates to income from the sale of oil and related royalties. Turnover is recognised when the significant risks and rewards of ownership have been transferred, which is when the title passes to the customer. Revenue is measured at the fair value of the consideration receivable net of value added tax

1.6
Fixed asset investments

Equity investments are measured at fair value through profit or loss, except for those equity investments that are not publicly traded and whose fair value cannot otherwise be measured reliably, which are recognised at cost less impairment until a reliable measure of fair value becomes available.

 

In the parent company financial statements, investments in subsidiaries, associates and jointly controlled entities are initially measured at cost and subsequently measured at cost less any accumulated impairment losses.

A subsidiary is an entity controlled by the group. Control is the power to govern the financial and operating policies of the entity so as to obtain benefits from its activities.

An associate is an entity, being neither a subsidiary nor a joint venture, in which the company holds a long-term interest and where the company has significant influence. The group considers that it has significant influence where it has the power to participate in the financial and operating decisions of the associate.

 

Investments in associates are initially recognised at the transaction price (including transaction costs) and are subsequently adjusted to reflect the group’s share of the profit or loss, other comprehensive income and equity of the associate using the equity method. Any difference between the cost of acquisition and the share of the fair value of the net identifiable assets of the associate on acquisition is recognised as goodwill. Any unamortised balance of goodwill is included in the carrying value of the investment in associates.

 

Losses in excess of the carrying amount of an investment in an associate are recorded as a provision only when the company has incurred legal or constructive obligations or has made payments on behalf of the associate.

 

In the parent company financial statements, investments in associates are accounted for at cost less impairment.

SHALCO ENERGY LIMITED
NOTES TO THE GROUP FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 JANUARY 2024
1
Accounting policies
(Continued)
- 14 -

Entities in which the group has a long term interest and shares control under a contractual arrangement are classified as jointly controlled entities.

1.7
Cash and cash equivalents

Cash and cash equivalents are basic financial assets and include cash in hand, deposits held at call with banks, other short-term liquid investments with original maturities of three months or less, and bank overdrafts. Bank overdrafts are shown within borrowings in current liabilities.

1.8
Financial instruments

The group has elected to apply the provisions of Section 11 ‘Basic Financial Instruments’ and Section 12 ‘Other Financial Instruments Issues’ of FRS 102 to all of its financial instruments.

 

Financial instruments are recognised in the group's balance sheet when the group becomes party to the contractual provisions of the instrument.

 

Financial assets and liabilities are offset and the net amounts presented in the financial statements when there is a legally enforceable right to set off the recognised amounts and there is an intention to settle on a net basis or to realise the asset and settle the liability simultaneously.

Basic financial assets

Basic financial assets, which include debtors and cash and bank balances, are initially measured at transaction price including transaction costs and are subsequently carried at amortised cost using the effective interest method unless the arrangement constitutes a financing transaction, where the transaction is measured at the present value of the future receipts discounted at a market rate of interest. Financial assets classified as receivable within one year are not amortised.

Other financial assets

Other financial assets, including investments in equity instruments which are not subsidiaries, associates or joint ventures, are initially measured at fair value, which is normally the transaction price. Such assets are subsequently carried at fair value and the changes in fair value are recognised in profit or loss, except that investments in equity instruments that are not publicly traded and whose fair values cannot be measured reliably are measured at cost less impairment.

Impairment of financial assets

Financial assets, other than those held at fair value through profit and loss, are assessed for indicators of impairment at each reporting end date.

 

Financial assets are impaired where there is objective evidence that, as a result of one or more events that occurred after the initial recognition of the financial asset, the estimated future cash flows have been affected. If an asset is impaired, the impairment loss is the difference between the carrying amount and the present value of the estimated cash flows discounted at the asset’s original effective interest rate. The impairment loss is recognised in profit or loss.

 

If there is a decrease in the impairment loss arising from an event occurring after the impairment was recognised, the impairment is reversed. The reversal is such that the current carrying amount does not exceed what the carrying amount would have been, had the impairment not previously been recognised. The impairment reversal is recognised in profit or loss.

Derecognition of financial assets

Financial assets are derecognised only when the contractual rights to the cash flows from the asset expire or are settled, or when the group transfers the financial asset and substantially all the risks and rewards of ownership to another entity, or if some significant risks and rewards of ownership are retained but control of the asset has transferred to another party that is able to sell the asset in its entirety to an unrelated third party.

SHALCO ENERGY LIMITED
NOTES TO THE GROUP FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 JANUARY 2024
1
Accounting policies
(Continued)
- 15 -
Classification of financial liabilities

Financial liabilities and equity instruments are classified according to the substance of the contractual arrangements entered into. An equity instrument is any contract that evidences a residual interest in the assets of the group after deducting all of its liabilities.

Basic financial liabilities

Basic financial liabilities, including creditors, bank loans, loans from fellow group companies and preference shares that are classified as debt, are initially recognised at transaction price unless the arrangement constitutes a financing transaction, where the debt instrument is measured at the present value of the future payments discounted at a market rate of interest. Financial liabilities classified as payable within one year are not amortised.

 

Debt instruments (other than those wholly repayable or receivable within one year), including loans and other accounts receivable and payable, are initially measured at the present value of the future cash flows and subsequently at amortised cost using the effective interest rate method. Debt instruments that are payable or receivable within one year, typically trade payables or receivables, are measured, initially and subsequently, at the undiscounted amount of the cash or other consideration, expected to be paid or received. However if the arrangements of a short-term instrument constitute a financing transaction, like the payment of a trade debt deferred beyond normal business terms or financed at a rate of interest that is not a market rate or in the case of an out-right short-term loan not at market rate, the financial asset or liability is measured, initially, at the present value of the future cash flow discounted at a market rate of interest for a similar debt instrument and subsequently at amortised cost.

 

Investments in non-convertible preference shares and in non-puttable ordinary and preference shares are measured:

i) at a fair value with changes recognised in the Income Statement if the shares are publicly traded or their fair value can otherwise be measured reliably;

ii) at cost less impairment for all other investments;

 

Trade creditors are obligations to pay for goods or services that have been acquired in the ordinary course of business from suppliers. Amounts payable are classified as current liabilities if payment is due within one year or less. If not, they are presented as non-current liabilities. Trade creditors are recognised initially at transaction price and subsequently measured at amortised cost using the effective interest method.

Other financial liabilities

Derivatives, including interest rate swaps and forward foreign exchange contracts, are not basic financial instruments. Derivatives are initially recognised at fair value on the date a derivative contract is entered into and are subsequently re-measured at their fair value. Changes in the fair value of derivatives are recognised in profit or loss in finance costs or finance income as appropriate, unless hedge accounting is applied and the hedge is a cash flow hedge.

 

Debt instruments that do not meet the conditions in FRS 102 paragraph 11.9 are subsequently measured at fair value through profit or loss. Debt instruments may be designated as being measured at fair value through profit or loss to eliminate or reduce an accounting mismatch or if the instruments are measured and their performance evaluated on a fair value basis in accordance with a documented risk management or investment strategy.

Derecognition of financial liabilities

Financial liabilities are derecognised when the group's contractual obligations expire or are discharged or cancelled.

SHALCO ENERGY LIMITED
NOTES TO THE GROUP FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 JANUARY 2024
1
Accounting policies
(Continued)
- 16 -
1.9
Compound instruments

The component parts of compound instruments issued by the group are classified separately as financial liabilities and equity in accordance with the substance of the contractual arrangement. At the date of issue, the fair value of the liability component is estimated using the prevailing market interest rate for a similar non-convertible instrument. This amount is recorded as a liability on an amortised cost basis using the effective interest method until extinguished upon conversion or at the instrument's maturity date. The equity component is determined by deducting the amount of the liability component from the fair value of the compound instrument as a whole. This is recognised and included in equity net of income tax effects and is not subsequently remeasured.

1.10
Equity instruments

Equity instruments issued by the group are recorded at the proceeds received, net of transaction costs. Dividends payable on equity instruments are recognised as liabilities once they are no longer at the discretion of the group.

1.11
Employee benefits

The costs of short-term employee benefits are recognised as a liability and an expense, unless those costs are required to be recognised as part of the cost of stock or fixed assets.

 

The cost of any unused holiday entitlement is recognised in the period in which the employee’s services are received.

 

Termination benefits are recognised immediately as an expense when the company is demonstrably committed to terminate the employment of an employee or to provide termination benefits.

1.12
Foreign exchange

Transactions in currencies other than pounds sterling are recorded at the rates of exchange prevailing at the dates of the transactions. At each reporting end date, monetary assets and liabilities that are denominated in foreign currencies are retranslated at the rates prevailing on the reporting end date. Gains and losses arising on translation in the period are included in profit or loss.

1.13

Intangible assets and impairment - exploration and evaluation assets

Under FRS 102.34.11 an entity is engaged in the exploration for and/or evaluation of mineral resources (extraction activities) shall apply the requirement of IFRS 6 Exploration for and evaluation of Mineral Resources.

 

Expenditure incurred prior to obtaining the legal rights to explore an area is recognised in the Income Statement as incurred. All expenditure relating to licence acquisition, exploration, evaluation and appraisal of oil and gas interests, including an appropriate share of directly attributable overheads, is capitalised on a licence by licence basis.

 

Exploration and evaluation assets are carried at cost until the exploration phase is complete or commercial reserves have been discovered. The Group regularly reviews the carrying amount if exploration and evaluation assets for indicators of impairment and capitalised costs are written off where the carrying amount of assets may not be recoverable. Where commercial reserves have been established and development is approved by the Board, the relevant expenditure is transferred to oil and gas properties following assessment of impairment.

SHALCO ENERGY LIMITED
NOTES TO THE GROUP FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 JANUARY 2024
- 17 -
2
Judgements and key sources of estimation uncertainty

In the application of the group’s accounting policies, the directors are required to make judgements, estimates and assumptions about the carrying amount of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on historical experience and other factors that are considered to be relevant. Actual results may differ from these estimates.

 

The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised where the revision affects only that period, or in the period of the revision and future periods where the revision affects both current and future periods.

Critical judgements

The following judgements (apart from those involving estimates) have had the most significant effect on amounts recognised in the financial statements.

Impairment of Intangible Assets

In the process of evaluating the potential impairment of intangible assets, the Company is required to make subjective judgments in determining the useful lives, expected future revenue and expenses related to the specific asset held for the purposes of oil and gas exploration. Any changes in these estimates based on changed economic conditions or business strategies could result in significant impairment charges or reversal in future years.

Impairment of Financial Investments

In the process of evaluating the potential impairment of financial investments, the Company is required to make subjective judgments in determining the open market value and expected future revenue. Any changes in these estimates based on changed economic conditions or business strategies could result in significant impairment charges or reversal in future years.

Key sources of estimation uncertainty

The estimates and assumptions which have a significant risk of causing a material adjustment to the carrying amount of assets and liabilities are as follows.

Accruals

Estimates for accrual of directors' fees and consultancy fees are made based on fees approved at a board meeting on 5 July 2024. The subsequent payment of these fees is dependent of the future sale of the override and on reaching a settlement agreement with the convertible loan note holders.

3
Turnover and other revenue
2024
2023
£
£
Turnover analysed by class of business
Royalties
21,232
26,232
2024
2023
£
£
Other revenue
Interest income
56
19
SHALCO ENERGY LIMITED
NOTES TO THE GROUP FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 JANUARY 2024
- 18 -
4
Operating (loss)/profit
2024
2023
£
£
Operating (loss)/profit for the year is stated after charging/(crediting):
Exchange losses/(gains)
992
(27)
5
Directors' remuneration
2024
2023
£
£
Remuneration for qualifying services
75,000
-
6
Interest receivable and similar income
2024
2023
£
£
Interest income
Interest on bank deposits
56
19
2024
2023
Investment income includes the following:
£
£
Interest on financial assets not measured at fair value through profit or loss
56
19
7
Interest payable and similar expenses
2024
2023
£
£
Interest on financial liabilities measured at amortised cost:
Interest on convertible loan notes
7,198,304
5,922,068
8
Taxation

The actual charge for the year can be reconciled to the expected credit for the year based on the profit or loss and the standard rate of tax as follows:

2024
2023
£
£
Loss before taxation
(7,344,316)
(5,909,907)
Expected tax credit based on the standard rate of corporation tax in the Republic of Ireland of 12.50% (2023: 12.50%)
(918,040)
(738,738)
Effect of Non Case 1 tax losses
918,040
738,738
Taxation charge
-
-
SHALCO ENERGY LIMITED
NOTES TO THE GROUP FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 JANUARY 2024
- 19 -
9
Subsidiaries

Details of the company's subsidiaries at 31 January 2024 are as follows:

Name of undertaking
Registered office
Class of
% Held
shares held
Direct
Shalco Energy (Delaware) LLC
251 Little Falls Drive, Wilmington, New Castle, Delaware, 19808
Ordinary Shares
100.00
10
Fixed asset investments
Group
Company
2024
2023
2024
2023
Notes
£
£
£
£
Investments in subsidiaries
9
-
0
-
0
65
65
Movements in fixed asset investments
Group
Shares in subsidiaries
Other investments
Total
£
£
£
Cost or valuation
At 1 February 2023 and 31 January 2024
-
-
-
Impairment
At 1 February 2023 and 31 January 2024
-
-
-
Carrying amount
At 31 January 2024
-
-
-
At 31 January 2023
-
-
-

The above other investment represents shares purchased in Post Rock Energy Corporation and subsequently fully impaired.

Movements in fixed asset investments
Company
Shares in subsidiaries
Other investments
Total
£
£
£
Cost or valuation
At 1 February 2023 and 31 January 2024
65
-
65
Carrying amount
At 31 January 2024
65
-
65
At 31 January 2023
65
-
65
SHALCO ENERGY LIMITED
NOTES TO THE GROUP FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 JANUARY 2024
- 20 -
11
Debtors
Group
Company
2024
2023
2024
2023
Amounts falling due within one year:
£
£
£
£
Prepayments and accrued income
4,880
6,159
-
0
-
0
12
Creditors: amounts falling due within one year
Group
Company
2024
2023
2024
2023
Notes
£
£
£
£
Convertible loans
13
40,600,313
33,402,009
40,600,313
33,402,009
Amounts owed to group undertakings
-
0
-
0
21,293
21,293
Accruals and deferred income
164,143
15,408
163,201
13,115
40,764,456
33,417,417
40,784,807
33,436,417
13
Convertible loan notes
Group
Company
2024
2023
2024
2023
£
£
£
£
Liability component of convertible loan notes
40,600,313
33,402,009
40,600,313
33,402,009

On 10 September 2012, the company issued £7,500,000 fixed rate preferred cumulative convertible loan notes (‘the Notes’). The Notes carry a coupon of 15% with a minimum interest payment of £1,000,000 and were repayable on 10 August 2013. The company did not meet the repayment date and under the terms of the Notes, a default rate of interest of 20%, compoundable quarterly, has been applied to the Notes.

 

The Notes have conversion rights into shares and are secured by a fixed and floating charge over the assets of the group.

14
Share capital
Group and company
2024
2023
2024
2023
Ordinary share capital
Number
Number
£
£
Issued and fully paid
Ordinary Shares of 1p each
278,589,161
278,589,161
2,785,892
2,785,892
15
Share premium account
Group
Company
2024
2023
2024
2023
£
£
£
£
At the beginning and end of the year
18,278,159
18,278,159
18,278,159
18,278,159

The amount carried forward is the premium that arose from the issue of shares in 2011.

SHALCO ENERGY LIMITED
NOTES TO THE GROUP FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 JANUARY 2024
- 21 -
16
Profit and loss reserves
Group
Company
2024
2023
2024
2023
£
£
£
£
At the beginning of the year
(54,444,185)
(48,534,278)
(54,481,213)
(48,547,749)
Loss for the year
(7,344,316)
(5,909,907)
(7,360,630)
(5,933,464)
At the end of the year
(61,788,501)
(54,444,185)
(61,841,843)
(54,481,213)
17
Financial commitments, guarantees and contingent liabilities

Group

The group had no contingent liabilities at the year ended 31 January 2024.

 

Company

The company had no contingent liabilities at the year ended 31 January 2024.

18
Capital commitments

Group

The group had no material capital commitments at the year ended 31 January 2024.

 

Company

The company had no material capital commitments at the year ended 31 January 2024.

19
Related party transactions

The company is the parent entity of its group and is incorporated in the United Kingdom. The company has availed of the exemption under FRS 102 in relation to the disclosure of transactions with group companies.

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