The directors present the strategic report on Murzuq Oil Services Limited and its subsidiary for the year ended 31 December 2023.
The results for the year ended 31 December 2023 are set out in the Group Statement of Comprehensive Income on page 9.
The Group’s primary focus is to assist its clients (namely, its ultimate holding company, The National Oil Corporation of Libya NOC (LNOC), and its affiliates based in Libya), to increase oil and gas production and to improve their employees’ skillsets and achieve further efficiencies in the workplace.
The financial year of 2023 has been another positive one for the Group, marked by continued growth in turnover and investment in its business. The Company has deepened its consultancy engineering services to its clients and has developed its training academy. Its subsidiary company, Murzuq Technical Support Limited SUARL incorporated in Tunis in 2022, has continued to grow, offering sub-surface studies in oilfields, both on and offshore, together with providing training courses to the Libyan oil and gas sector.
There were some delays to clients’ budget approvals from the Libyan government during the period, which significantly impacted Group turnover in 2023, however, the Group has seen strong demand for services in 2024 and expects continued growth.
Since the year end, in late 2024 the Group established a new subsidiary, Penta Energies B.V., in the Netherlands. This entity’s primary mission is to develop oil and gas assets on behalf of the Group’s clients in Libya and establish itself as an operating company. Feasibility studies will be undertaken during 2025 with a view to product extraction in 2026. This development represents an exciting opportunity for the Group, with the potential to secure a long-term revenue stream.
The management of the business and the execution of the Group's strategy are subject to a number of risks. The key risks are acknowledged below.
Credit Risk - Although the Group’s business is principally focused on one country its clients are relatively large and well-established companies, and all are wholly or majority nationally owned fellow affiliates. Trade debtor exposure is spread across a large number of clients and there is no significant concentration of risk on any particular client.
Liquidity Risk - The Group manages its liquidity risk internally and, at present, has no need for external banking facilities.
Cashflow Risk - Cash is monitored closely by management and reported regularly to the Board of Directors. Particular attention is given to ensuring commitments are entered into only if sufficient client funding is on hand or is expected within a reasonable time frame.
Foreign Exchange Risk - The Group is not exposed to currency fluctuations, as contracts are agreed with both clients and subcontractors in the same currency.
Market Risk - The Group is exposed to changing economic and market conditions, particularly in the oil and gas sector. The Board reviews operational and cash management regularly. Given this sector's historic resilience during downturns, including the recent Covid-19 pandemic, the Group is confident in its ability to weather medium-term market fluctuations.
The result for FY 2023 at the Group level was £21.5m in turnover, £7.8m in gross profit and £1.2m in profit before tax. This compares to an FY 2022 Group result of £15.3m in turnover, £3.6m in gross profit and £(0.9)m in loss before tax.
The Group strengthened its balance sheet in 2023 by the issue of 15m Ordinary shares of £1 each at par, resulting in improved liquidity. The latest cashflow projections continue to forecast a strong balance sheet and significant liquidity headroom. The Group reported a net asset position of £13.9m at 31 December 2023, a significant improvement from the net liabilities of £(2.2)m recorded at 31 December 2022.
The Group continues to make strong gains in the Libyan oil and gas industry and is closely aligned with the priorities of the LNOC. It is recognised as a strategic partner for consultancy engineering services and its training academy.
Demand for these services has increased during 2024, with further growth anticipated for 2025. Management is committed to closely monitoring expenditures, ensuring alignment with approved budgets, and implementing efficiency measures to reduce costs and increase productivity.
On behalf of the board
The directors present their annual report and financial statements for the year ended 31 December 2023.
No ordinary dividends were paid. The directors do not recommend payment of a dividend (2022: £nil).
The directors who held office during the year and up to the date of signature of the financial statements were as follows:
The auditor, Moore Kingston Smith LLP, is deemed to be reappointed under section 487(2) of the Companies Act 2006.
As the group has not consumed more than 40,000 kWh of energy in this reporting period, it qualifies as a low energy user under these regulations and is not required to report on its emissions, energy consumption or energy efficiency activities.
Qualified opinion
We have audited the financial statements of Murzuq Oil Services Limited (the 'parent company') and its subsidiaries (the 'group') for the year ended 31 December 2023 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, the Group Statement of Cash Flows 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).
Basis for qualified opinion on financial statements
Conclusions relating to going concern
In auditing the financial statements, we have concluded that the directors' use of the going concern basis of accounting in the preparation of the financial statements is appropriate.
Based on the work we have performed, we have not identified any material uncertainties relating to events or conditions that, individually or collectively, may cast significant doubt on the group's and parent company’s ability to continue as a going concern for a period of at least twelve months from when the financial statements are authorised for issue.
Our responsibilities and the responsibilities of the directors with respect to going concern are described in the relevant sections of this report.
Other information
Opinions on other matters prescribed by the Companies Act 2006
Except for the possible effect of the matter referred to in the basis for qualified opinion section of our report in our opinion, based on the work undertaken in the course of our audit:
the information given in the Strategic Report and the Directors' Report for the financial year for which the financial statements are prepared is consistent with the financial statements; and
the Strategic Report and the Directors' Report have been prepared in accordance with applicable legal requirements.
As part of an audit in accordance with ISAs (UK) we exercise professional judgement and maintain professional scepticism throughout the audit. We also:
Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.
Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purposes of expressing an opinion on the effectiveness of the group’s internal control.
Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by the directors.
Conclude on the appropriateness of the directors’ use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the group’s or the parent company’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause the group or the parent company to cease to continue as a going concern.
Evaluate the overall presentation, structure and content of the financial statements, including the disclosures, and whether the financial statements represent the underlying transactions and events in a manner that achieves fair presentation.
Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the group to express an opinion on the consolidated financial statements. We are responsible for the direction, supervision and performance of the group audit. We remain solely responsible for our audit opinion.
We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.
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.
The objectives of our audit in respect of fraud, are; to identify and assess the risks of material misstatement of the financial statements due to fraud; to obtain sufficient appropriate audit evidence regarding the assessed risks of material misstatement due to fraud, through designing and implementing appropriate responses to those assessed risks; and to respond appropriately to instances of fraud or suspected fraud identified during the audit. However, the primary responsibility for the prevention and detection of fraud rests with both management and those charged with governance of the company.
Our approach was as follows:
We obtained an understanding of the legal and regulatory requirements applicable to the company and considered that the most significant are the Companies Act 2006, UK financial reporting standards as issued by the Financial Reporting Council, and UK taxation legislation.
We obtained an understanding of how the company complies with these requirements by discussions with management and those charged with governance.
We assessed the risk of material misstatement of the financial statements, including the risk of material misstatement due to fraud and how it might occur, by holding discussions with management and those charged with governance.
We inquired of management and those charged with governance as to any known instances of non-compliance or suspected non-compliance with laws and regulations.
Based on this understanding, we designed specific appropriate audit procedures to identify instances of non-compliance with laws and regulations. This included making enquiries of management and those charged with governance and obtaining additional corroborative evidence as required.
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.
Use of our report
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 for no purpose other than to draw to the attention of the company’s members those matters we are required to include in an auditor's report addressed to them. To the fullest extent permitted by law, we do not accept or assume responsibility to any party 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.
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 £161,662 (2022: £326,127 loss).
Murzuq Oil Services Limited (“the company”) is a private limited company domiciled and incorporated in England and Wales. The registered office is 8th Floor, 100 Bishopsgate, London, EC2N 4AG.
The group consists of Murzuq Oil Services Limited and its subsidiary Murzuq Technical Support Limited SUARL.
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, the principal accounting policies adopted are set out below.
The company is a qualifying entity for the purposes of FRS 102, being a member of a group where the parent of that group prepares publicly available consolidated financial statements, including this company, which are intended to give a true and fair view of the assets, liabilities, financial position and profit or loss of the group. The company has therefore taken advantage of exemptions from the following disclosure requirements for parent company information presented within the consolidated financial statements:
Section 7 ‘Statement of Cash Flows’: Presentation of a statement of cash flow and related notes and disclosures;
Section 11 ‘Basic Financial Instruments’ and Section 12 ‘Other Financial Instrument Issues: Interest income/expense and net gains/losses for financial instruments not measured at fair value; basis of determining fair values; details of collateral, loan defaults or breaches, details of hedges, hedging fair value changes recognised in profit or loss and in other comprehensive income;
Section 26 ‘Share based Payment’: Share-based payment expense charged to profit or loss, reconciliation of opening and closing number and weighted average exercise price of share options, how the fair value of options granted was measured, measurement and carrying amount of liabilities for cash-settled share-based payments, explanation of modifications to arrangements; and
Section 33 ‘Related Party Disclosures’: Compensation for key management personnel.
At 31 December 2023 the group's balance sheet shows net assets of £13,898,191 (2022: net liabilities of £2,233,895). The group made a profit of £1,166,008 (2022: £889,151 loss) in the year.
The company issued 15,000,000 Ordinary shares of £1 each at par on 6 February 2023. The company received funding of £15,000,000 from its immediate parent undertaking during the prior year, in advance of the issue of the Ordinary shares. The directors have prepared a detailed cash flow forecast for the period to 31 March 2026 which shows that the company and group will be able to meet its ongoing liabilities as they fall due. Thus the directors continue to adopt the going concern basis of accounting in preparing these financial statements.
The consolidated group financial statements consist of the financial statements of the parent company, Murzuq Oil Services Limited, together with all entities controlled by the parent company (its subsidiaries).
All financial statements are made up to 31 December 2023. 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.
Subsidiaries are consolidated in the group’s financial statements from the date that control commences until the date that control ceases.
Turnover is recognised at the fair value of the consideration received or receivable for services provided in the normal course of business, and is shown net of VAT and other sales related taxes. The fair value of consideration takes into account trade discounts, settlement discounts and volume rebates.
Revenue from contracts for the provision of professional services is recognised by reference to the stage of completion when the stage of completion, costs incurred and costs to complete can be estimated reliably. The stage of completion is calculated by comparing costs incurred, mainly in relation to contractual hourly staff rates and materials, as a proportion of total costs. Where the outcome cannot be estimated reliably, revenue is recognised only to the extent of the expenses recognised that it is probable will be recovered.
Turnover arose entirely outside of the United Kingdom.
The gain or loss arising on the disposal of an asset is determined as the difference between the sale proceeds and the carrying value of the asset, and is recognised in the profit and loss account.
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, 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.
At each reporting period end date, 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 company estimates the recoverable amount of the cash-generating unit to which the asset belongs.
The carrying amount of the investments accounted for using the equity method is tested for impairment as a single asset. Any goodwill included in the carrying amount of the investment is not tested separately for impairment.
Recoverable amount is the higher of fair value less costs to sell and 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 current market assessments of the time value of money and the risks specific to the asset for which the estimates of future cash flows have not been adjusted.
If the recoverable amount of an asset (or cash-generating unit) is estimated to be less than its carrying amount, the carrying amount of the asset (or cash-generating unit) 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.
Recognised impairment losses are reversed if, and only if, the reasons for the impairment loss have ceased to apply. Where an impairment loss subsequently reverses, the carrying amount of the asset (or cash-generating unit) 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 (or cash-generating unit) in prior years. A reversal of an impairment loss is recognised immediately in profit or loss, unless the relevant asset is carried at a revalued amount, in which case the reversal of the impairment loss is treated as a revaluation increase.
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, 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.
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, 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 are subsequently carried at amortised cost, using the effective interest rate method.
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.
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.
The tax expense represents the sum of the tax currently payable and deferred tax.
The tax currently payable is based on taxable profit for the year. Taxable profit differs from net profit as reported in the profit and loss account because it excludes items of income or expense that are taxable or deductible in other years and it further excludes items that are never taxable or deductible. The group’s liability for current tax is calculated using tax rates that have been enacted or substantively enacted by the reporting end date.
Deferred tax liabilities are generally recognised for all timing differences and deferred tax assets are recognised to the extent that it is probable that they will be recovered against the reversal of deferred tax liabilities or other future taxable profits. Such assets and liabilities are not recognised if the timing difference arises from goodwill or from the initial recognition of other assets and liabilities in a transaction that affects neither the tax profit nor the accounting profit.
The carrying amount of deferred tax assets is reviewed at each reporting end date and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered. Deferred tax is calculated at the tax rates that are expected to apply in the period when the liability is settled or the asset is realised. Deferred tax is charged or credited in the profit and loss account, except when it relates to items charged or credited directly to equity, in which case the deferred tax is also dealt with in equity. Deferred tax assets and liabilities are offset if, and only if, there is a legally enforceable right to offset current tax assets and liabilities and the deferred tax assets and liabilities relate to taxes levied by the same tax authority.
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.
Payments to defined contribution retirement benefit schemes are charged as an expense as they fall due.
Rentals payable under operating leases, including any lease incentives received, are charged to profit or loss on a straight line basis over the term of the relevant lease except where another more systematic basis is more representative of the time pattern in which economic benefits from the leased asset are consumed.
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.
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.
The key areas where estimates and assumptions have a significant risk of causing a material adjustment to the carrying value of assets and liabilities are as follows:
Determining the carrying value of the intangible assets requires an estimate of the useful economic life, residual value and amortisation method of the individual class of asset and an assessment of any indication in a given year that may suggest an impairment at the year end date.
Trade debtors of £7,488,947 (2022: £5,487,479) are subject to the directors' assessment of the likelihood of their recovery including an assessment of relevant factors that may influence recoverability. The directors are of the opinion that no bad debt provision is required at the year end and consider that the carrying value of trade debtors is fully recoverable.
The group has estimated trade losses of £1,823,604 (2022: £1,813,009) to carry forward against future taxable income. The directors are required to determine the amount of a deferred tax asset that can be recognised, based upon the likely timing and level of future taxable profits together with an assessment of the effect of future tax planning strategies.
The company and group were loss making in the prior year and the company was loss making in the current year and the timing of future recurring company and group taxable profits are considered to be uncertain. A deferred tax asset has therefore not been recognised in the financial statements for the year under review.
The average monthly number of persons (including directors) employed by the group and company during the year was:
Their aggregate remuneration comprised:
The number of directors for whom retirement benefits are accruing under defined contribution schemes amounted to 1 (2022: 1).
The remuneration of the highest paid director in the year was £585,317 (2022: £623,385) including grossed up UK income tax of £299,618 (2022: £318,864).
The directors consider that the key management personnel for reporting purposes are the directors themselves and the Deputy Chief Executives. The remuneration of key management personnel in the year excluding pension costs but including grossed up UK income tax was £868,521 (2022: £755,944).
The actual charge for the year can be reconciled to the expected charge/(credit) for the year based on the profit or loss and the standard rate of tax as follows:
The group has estimated trade losses of £1,823,604 (2022: £1,813,009) and the company has estimated trade losses of £1,735,137 (2022: £1,743,074) available to carry forward against future taxable profits at 31 December 2023. A deferred tax asset has not been recognised at 31 December 2022 or 31 December 2023 due to the uncertainty of the timing of the recurring future taxable profits against which the losses can be utilised.
On 8 June 2023 the company signed an Activation Funding Loan Agreement with its subsidiary Murzuq Technical Support Limited SUARL. The agreement provides a loan to the subsidiary of $1,750,000 which is unsecured and bears interest at 0.5% above the Bank of England base rate. The loan is due for repayment in instalments as follows:
$250,000 on 28 November 2024;
$500,000 on 28 November 2025; and
$1,000,000 on 28 November 2026.
Amounts of £34,724 (2022: £nil) in the group balance sheet and amounts of £348,524 (2022: £1,692,315) in the company balance sheet are unsecured, interest free and repayable on demand.
On 9 March 2021 an Activation Funding Loan Agreement with its immediate parent company, Mediterranean Oil Services Company, came into effect. The agreement provides a loan to the company of £3m which is unsecured and bears interest at 0.5% above the Bank of England base rate. The loan was due for repayment in instalments as follows:
£0.5m on 9 March 2022;
£1m on 9 March 2023; and
£1.5m on 9 March 2024.
Subsequent to the provision of the loan, the repayment terms were amended in May 2022 to defer the repayments detailed above for a further two years, meaning they are now due on 9 March 2024, 9 March 2025 and 9 March 2026.
At the date of signing these financial statements the company is in the process of renegotiating the repayment terms and the repayment due on 9 March 2024 has not yet been paid, as agreed with the company's immediate parent company.
Advanced client deposits represent funds received from clients to fund future supplies of consultancy and business services by the company to them. The foregoing sum of £6,742,539 (2022: £16,947,277) is matched by funds held in client bank accounts disclosed within cash at bank in hand at 31 December 2023 (2022: £16,947,277).
As detailed in note 15, the loan principal and interest due to Mediterranean Oil Services Company is due in three instalments now commencing on 9 March 2024.
The following are the major deferred tax liabilities and assets recognised by the group and company, and movements thereon:
The deferred tax liability set out above is expected to reverse within 12 months and relates to accelerated capital allowances that are expected to mature within the same period.
A defined contribution pension scheme is operated for all qualifying employees. The assets of the scheme are held separately from those of the group in an independently administered fund.
The company issued 15,000,000 Ordinary shares of £1 each at par on 6 February 2023.
At the reporting end date the group and company had outstanding commitments for future minimum lease payments under non-cancellable operating leases, which fall due which fall due as follows:
During the year, the company did not enter into any transactions with related parties that require disclosure.
On 8 November 2024 the company incorporated in the Netherlands a 100% subsidiary, Penta Energies B.V.