going concern3 May 2020 14:17
The Directors note the substantial losses that the Group has made for the year ended 30 September 2019. The Directors have prepared cash flow forecasts for the period ending 31 March 2021, which takes into account anticipated costs savings, the current forward curve of Brent crude oil and external funding. In addition, within the forecasts, the Group has delayed its capital expenditure programme across its assets as the effects of Covid-19 have significantly constrained the supply of specialist oil sector services, equipment and civil engineering activities.
The cost structure of the Group comprises a high proportion of discretionary spend and therefore in the event that cash flows become constrained, costs can be quickly reduced to enable the Group to operate within its available funding.
The oil price assumptions within the cash flow forecasts are based on forward rates. However, given the current effects of Covid-19 and the "OPEC+" meeting on 5/6 March 2020, there is a high degree of uncertainty around these forward rates.
These forecasts demonstrate that the Group has sufficient cash funds available to allow it to continue in business for a period of at least twelve months from the date of approval of these financial statements. Accordingly, the financial statements have been prepared on a going concern basis.
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Note that the cash flow forecasts were prepared for the period ending 31 March 2021 and that the accounts were signed off on 31/03/20, well after the stand-off between Saudi Arabia and Russia sent the oil price crashing and the coronavirus restrictions began in the UK.
As an optimist, I think the implications for oil flows at HH are positive.
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