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The GG 2020 fixed assets note shows that depreciation is charged at 4% on land and buildings freehold yet land is not morally depreciated unless it is a mine etc.
This has to mean that there is no cost for the land that is included in the 2020 accounts fixed asset heading called land and buildings freehold.
The depreciation charge in the 2020 accounts for land and buildings is 900 and 900 divided by 22,500 multiplied by 100 is 4% and this depreciation rate is the same as that stated in the accounting policies note.
The 2021 accounts shows that the Board have revalued the land so it has has valuation of 240,000.
The notes state in arriving at the valuation the directors gave consideration to a lease value of 30,000 per annum and feel the new carrying value is reflective of the market value. The directors felt is was not necessary to engage an independent valuer in this regard occasion!
From the above I get the impression that GG are earning 30,000 pounds pa for leasing some of the land that it owns to a third party.
If it owns the land then why was it not previously shown in the fixed assets note?
Who owns the land that the leased AD plant is sited on and that is being financed by a finance leased asset value KKV Loan Fund a company registered in Guernsey who own the legal title to the AD plant?
The fact the AD plant is shown in the fixed assets note does not mean GG own the legal title it is just an accounting standard requirement that you include the AD plant as if you own it and then the balance sheet includes a liability for the finance lease payments in creditors due within one year and there should also be disclosure in creditors due more than one year under a heading called finance lease obligations but yet again they have described it as Other creditors.
AGE
In effect
On effect gives them another year to disclose.
All done for a reason.
I should add that that loss of 132,049 for EAG only goes up to the 30 September 2021 yet the SCIR PLC accounts go up to 31 December 2021 so the year ends are not coterminous .i.e. the associates (EAG)and wholly owned subsidiary of EAG being GG do not end on the same date as the accounts produced for SCIR which ends on the 31 December 2021.
This is allowed under accounting rules as long as the difference does not exceed 3 months!
AGE
There was no P&L submitted with EAG’s accounts at Companies House but from the balance sheet and the notes on page 67 of SCIR’s accounts we can see that it made a loss of £132,049.
Accounting standards state that the incidental costs of acquisition have to be written off to the P&L account and EAG spent 80,000 on legal fees and 100,000 on due diligence costs so a total of 880,000 for 100 shares that originally cost just 100 pounds.
The 180,000 has been charged to the P&L and there is around 44,000 of interest charged to EAG by SCIR Energy (U.K.) although the summary P&L in SCIR’s accounts only shows 6,000?
The EAG balance sheet shows a carrying value for Investments of 617,735 yet they paid 700,000 pounds for the 100 shares of 1 pound each in GG.
We can therefore deduce that the Directors have impaired (reduced) the carrying value of the 700,000 by 86,625 and charged the reduction to the P & L account.
Therefore the 132,029 loss is after the 180,000 write off and the impairment of 86,625 and the 44,000 of interest charged on the 1.2m loan that SCIR Energy (U.K.) gave to EAG.
After adding back all the charges above we arrive at a profit of 178,576 when excluding the costs detailed above.
Including the 44,000 interest charge we arrive at a profit of 134,576.
It will be interesting to find out what discount rate the Board used and the cash flow projections to support a carrying value of 617,375 being the impaired value of the 100 shares acquired in GG Ltd
AGE
The accounts of Energy Acquisitions Group state
that members have not required the Company to obtain an audit of its financial statements and it also says the Directors of the Company have elected not to include a copy of the P&L on the financial statements.
On the basis of the information the Board of SCIR have stated on page 21 of SCIR’s accounts that the Board, through the chairman in particular, maintains regular contact with advisers and public relations consultants in order to ensure that the Board develops an understanding of the views of major shareholders about the Company.
In accordance with the Boards words on transparency they will have no objection when shareholders request that an audit should be carried out on both EAG and GG and that a P&L is submitted to Companies House next year!
AGE
Unadjusted balance sheet!
AF has over 40 years of experience
DM has more than 35
MM does say but use say 30
TR has over 25
So that is over 130 years of experience!
It will be interesting to eventually find out who received the 100k for due diligence!
What information did the Board have when they made the decision to proceed with buying just 50% of the shares in EAG who own 100% of the shares in GG who have an a adjusted balance negative net assets value of 503,751.
AGE
£180k for fees and due diligence.
I could have spent 30 seconds looked at the balance sheet due diligence done.
I assumed the directors with all their experience would have done this themselves.
Seems everything is sourced out.
Probably get a subcontractor to change the light bulb in the office.
The Directors have revalued the land and increased its value by 240,000 pounds and they have reversed past years deprecation amounting to 238,213 and yet the balance sheet still shows negative net assets for 2021 in the sum of 25,358.
The statement of changes in equity shows a profit of 184,214 for the year but that includes a credit for reversal of depreciation of 238,213 so 184,214 less 238,213 gives a loss of 53,919 for the year when ignoring a depreciation write back!
If they would have not have made those revaluation and depreciation adjustments then the balance sheet for 2021 would have been negative 503,751 pounds and EAG paid 700k for the 90 shares but now we find out there are not 90 but there are 100 shares and they paid 80k for legal costs and 100k for due diligence fees so 880k in total for a company with unadjusted negative net assets of 503,751
AGE
Last year GG had just 90 shares but the restated balance sheet for 2020 and the current year balance sheet now shows there are 100 shares!
AGE
EAG and GG accounts now filed at Companies House.
Page 9 to 11 include a large number of prior year adjustments which have been included in the accounts. Prior year adjustments are made to correct what are called fundamental errors in prior year accounts!
You just have to love this sentence, “It became clear that a material error had occurred in the calculation of interest and repayments relating to the finance lease”
The finance leased asset is the AD plant!
I wonder if that 100k of due diligence fees picked all this up before GG was acquired?
AGE
Being as the Tanz gov have opted out, one would assume its now all approved and in APT's hands and that the deal would now be wrapped up quickly. I wonder if WEN can now legally increase their offer in hopes to buy Ruvuma or whether the deal is the deal being as it was formally agreed. Does anyone have any educated insight?
Not one bit of rambling 44RJ, a good summary no less.
Hi Steve, I don't think the board ever had an appetite to fund the drill, despite the several RNS statements alluding to the contrary. Personally, I stayed invested here based upon those words (more fool me); the smart money jumped ship to Aminex well beforehand. This whole debacle has taught me a good lesson not to put too much faith into the wording found within RNS in general. When I look back at those words they were probably just loose enough for the BoD to get away with it. It seems the text in an RNS can be very "aspirational" and will not have to demonstrably backed up by robust and transparent supporting evidence.
The question I ask myself now is what would the outcome have been if Neil Ritson was still in charge. The man had his weaknesses (don't we all!) but I reckon he would have fought harder to hang on to Ruvuma, but we would need a crystal ball to know for sure. As you said, it was Neil Ritson and Solo that effectively discovered this natural gas field and now are walking away with a paltry $3M for it. Very sad and could have been avoided by our leadership team if they had hung on to some cash and postponed the renewable energy strategy until a more appropriate time.
Anyway, I'm rambling now so best pour myself a beer or something....
Definitely worth a try.
Still can't fathom out why all the money has been spent when they knew that they may have to fund the drill.
Business is business Steve. If ARA has the contractual right to purchase our 25% in staged payments then I see no reason why it would stump up the whole $16m in one go. Its a terrible situation, but let's not forgot who masterminded this dreadful deal; our illustrious BoD. Not ARA.
I completely agree that we deserve better that this, but we don't have a leg to stand on with regards to renegotiation. I would be genuinely amazed if ARA give us the full $16m in upfront charity.
Why would they bother spending money anyway ad I'm sure they take 16% tax at the well head so the government gets its share by spending nothing.
More annoying that is was solo oil that discovered it in the first place.
Talking in a constructive manner.
Maybe they want the deal sweetened in some way.
The only way imo us if they just let us have the whole $16 million up front.
We get all the money and they get their 25%.
That way at least we have about $14 million in the bank.
Mrc …..wrong again with your scaremongering:
“My main concern would be that TPDC are a Tanz government body and no doubt horribly inefficient and bureaucratic.
An alternative scenario is that they (or a key official) want ARA to have it and are deliberately slowing it down to squeeze SCIR out. Wouldn’t be the first time in Africa that a brown envelope did the talking.”
I think that one is quite easy Frank, I expect no delay as the Zubairs are most likely to now be the owners of a further 25% but this time on even better terms than the AEX farmout so they will only be paying for what's ultimately their asset anyway.
$16 million and not even a small free carry.
Gas prices are much higher than when Aminex farmed out their 50% for up to $40 million expenditure and som cash.
Our board could have done much better.
If this deal does go to ARA they are well aware that we are basically skint and can’t meet the cash calls so have us over a barrel so to speak. Take it or leave the paltry offer as if cash calls are not met we could end up with nothing and probably millions in fees still to pay.
If this asset is so good why can’t they just give us the $16 million up front and that will be the end of it.
$16 million to a multi billion dollar company is petty cash.
it should still be ok for SCIR if this is the case but if there is delay in the decison who will pay for the upcoming drill or will ARA/Zubairs delay it ?
As expected, congratulations ARA and the Zubairs...