ADV.L Regulatory News (ADV)

10 October 2022

Advance Energy plc

("Advance Energy" or the "Company") 

Final Results

Advance Energy ( AIM:ADV ), the energy company seeking growth through acquisition or farm-in to interests in discovered upstream projects, announces its Final Results for the year ended 30 April 2022.

Copies of the Annual Report and Accounts will be posted to shareholders and made available on the Company's website at: www.advanceplc.com.

Enquiries:

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CHAIRMAN'S REPORT

On behalf of the Board of Directors, I hereby present the financial statements of Advance Energy plc ("Advance" or the "Company") for the year ended 30 April 2022.

Without doubt, the year under review has been a challenging one for the Company, with a disappointing outcome on the Buffalo well announced in January 2022.

Since that time, the Board has refocused the strategy for the Company and substantially reduced its cost base.

The Board has implemented measures to reduce the Company's costs by more than 50% through a number of initiatives including reducing salaries and Director fees by over 60%. To support these initiatives, CEO Leslie Peterkin and CFO Stephen West agreed to leave the Company. We thank Leslie and Stephen for their efforts and contributions. The CEO position has been filled by Non-Executive Director Larry Bottomley.

In addition to a forensic focus on costs, the Board has refined the strategy for the Company, which is to create a self-funding oil & gas production company to take advantage of growth opportunities being generated as industry players reshape their portfolios to manage the energy transition to net-zero emissions.

Post period end, on 26 July 2022 the Company successfully raised £425,000 from new and existing shareholders, including £80,000 from Directors of the Company, to support the pursuit of acquisition opportunities. The Board appreciates the continued support shown by shareholders during this fund raise.

On 9 September 2022, the Company announced that it had entered into a non-binding Heads of Terms ("HoT") with the majority owner of a European oil and gas company. Under the HoT, Advance would acquire the European company for a combination of new shares in Advance and an earn out based on oil production (the "Potential Acquisition"). The HoT includes standard conditions, including an exclusivity period up to 29 October 2022 and the completion of satisfactory due diligence.

The Potential Acquisition would be considered a reverse transaction under the AIM Rules for Companies and is therefore subject, inter alia, to the issue of a new AIM Admission Document and obtaining shareholder approval for the Potential Acquisition. 

As a result of the announcement, the Company's shares were temporarily suspended and will remain so until Advance is in a position to publish the associated AIM Admission Document for the Potential Acquisition. In the event that the Potential Acquisition does not proceed for whatever reason, it is expected that the temporary suspension in the Company's shares would be lifted.

It should be noted there is no certainty that the Potential Acquisition, or any transaction, will take place.

Outlook

The Board remains confident that its refocused strategy is the right one. Whilst there can be no guarantee any acquisition will be completed, the Board's extensive industry relationships and the tenacity of the team provide a strong basis for confidence. I look forward to updating shareholders as the Potential Acquisition progresses.

Mark Rollins

Non-Executive Chairman

7 October 2022

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

The Statement of Comprehensive Income has been prepared on the basis that all operations are continuing.

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

CONSOLIDATED CASH FLOW STATEMENT

NOTES TO FINANCIAL STATEMENTS

1 Reporting Entity

Advance Energy plc (the "Company") is domiciled in the Isle of Man. The Company's registered office is at 55 Athol Street, Douglas, Isle of Man IM1 1LA. These consolidated financial statements comprise the Company and its subsidiaries (together referred to as the "Group"). The Group is primarily involved in the E&P business. The Company is listed on AIM of the London Stock Exchange.

2 Basis of accounting

These consolidated financial statements have been prepared in accordance with International Financial Reporting Standards as adopted by the European Union ("IFRS"). They were authorised for issue by the Company's board of directors on 7 October 2022.

Details of the Group's accounting policies are included below:

Standards and amendments effective for periods beginning 1 May 2021 or later

A number of other new standards are effective from 1 May 2021, but they do not have a material effect on the Company's financial statements:

· Amendments to IFRS 16 COVID - 19 Related Rent Concessions

A number of new standards are effective for annual periods beginning after 1 May 2021 and earlier application is permitted; however, the Group has not early adopted the new or amended standards in preparing these consolidated financial statements.

The following amended standards and interpretations are not expected to have a significant impact on the Group's consolidated financial statements:

· IFRS 17 Insurance Contracts (effective on or after 1 January 2023)

· Amendments to IAS 1: Classification of Liabilities as Current or Non-current (effective on or after 1 January 2023)

· Reference to the Conceptual Framework - Amendments to IFRS 3 (effective on or after 1 January 2022)

· Property, Plant and Equipment: Proceeds before Intended Use - Amendments to IAS 16 (effective on or after 1 January 2022)

· Onerous Contracts - Costs of Fulfilling a Contract - Amendments to IAS 37 (effective on or after 1 January 2022)

· IFRS 1 First-time Adoption of International Financial Reporting Standards - Subsidiary as a first-time adopted (effective on or after 1 January 2022)

· IFRS 9 Financial Instruments - Fees in the '10 per cent' test for derecognition of financial liabilities (effective on or after 1 January 2022)

· IAS 41 Agriculture - Taxation in fair value measurements (effective on or after 1 January 2022)

A. Basis of consolidation

i. Subsidiaries

Subsidiaries are entities controlled by the Group. The Group 'controls' an entity when it is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity. The financial statements of subsidiaries are included in the consolidated financial statements from the date on which control commences until the date on which control ceases.

ii. Non-controlling interests ("NCI")

NCI are measured initially at their proportionate share of the acquiree's identifiable net assets at the date of acquisition. Changes in the Group's interest in a subsidiary that do not result in a loss of control are accounted for as equity transactions.

iii. Interests in equity-accounted investees

The Group's interests in equity-accounted investees comprise interests in associates.

Associates are those entities in which the Group has significant influence, but not control or joint control, over the financial and operating policies.

Interests in associates are accounted for using the equity method. They are initially recognised at cost, which includes transaction costs. Subsequent to initial recognition, the consolidated financial statements include the Group's share of the profit or loss and other comprehensive income ("OCI") of equity accounted investees, until the date on which significant influence ceases.

iv. Transactions eliminated on consolidation

Intra-group balances and transactions, and any unrealised income and expenses arising from intra-group transactions, are eliminated. Unrealised gains arising from transactions with equity accounted investees are eliminated against the investment to the extent of the Group's interest in the investee. Unrealised losses are eliminated in the same way as unrealised gains, but only to the extent that there is no evidence of impairment.

B. Foreign currency

i. Foreign currency transactions

Transactions in foreign currencies are translated into the respective functional currencies of Group companies at the exchange rates at the dates of the transactions.

Monetary assets and liabilities denominated in foreign currencies are translated into the functional currency at the exchange rate at the reporting date. Non-monetary assets and liabilities that are measured at fair value in a foreign currency are translated into the functional currency at the exchange rate when the fair value was determined. Non-monetary items that are measured based on historical cost in a foreign currency are translated at the exchange rate at the date of the transaction. Foreign currency differences are generally recognised in profit or loss and presented within finance costs.

However, foreign currency differences arising from the translation of the following items are recognised in OCI:

- an investment in equity securities designated as at FVOCI (except on impairment, in which case foreign currency differences that have been recognised in OCI are reclassified to profit or loss);

- a financial liability designated as a hedge of the net investment in a foreign operation to the extent that the hedge is effective; and

- qualifying cash flow hedges to the extent that the hedges are effective.

ii. Foreign operations

The assets and liabilities of foreign operations, including goodwill and fair value adjustments arising on acquisition, are translated into USD at the exchange rates at the reporting date. The income and expenses of foreign operations are translated into USD at the exchange rates at the dates of the transactions.

Foreign currency differences are recognised in OCI and accumulated in the translation reserve, except to the extent that the translation difference is allocated to NCI.

When a foreign operation is disposed of in its entirety or partially such that control, significant influence or joint control is lost, the cumulative amount in the translation reserve related to that foreign operation is reclassified to profit or loss as part of the gain or loss on disposal. If the Group disposes of part of its interest in a subsidiary but retains control, then the relevant proportion of the cumulative amount is reattributed to NCI. When the Group disposes of only part of an associate or joint venture while retaining significant influence or joint control, the relevant proportion of the cumulative amount is reclassified to profit or loss.

C. Employee benefits

i. Short-term employee benefits

Short-term employee benefits are expensed as the related service is provided. A liability is recognised for the amount expected to be paid if the Group has a present legal or constructive obligation to pay this amount as a result of past service provided by the employee and the obligation can be estimated reliably.

ii. Share-based payment arrangements

The grant-date fair value of equity-settled share-based payment arrangements granted to employees and other service providers is generally recognised as an expense, with a corresponding increase in equity, over the vesting period of the awards. The amount recognised as an expense is adjusted to reflect the number of awards for which the related service and non-market performance conditions are expected to be met, such that the amount ultimately recognised is based on the number of awards that meet the related service and non-market performance conditions at the vesting date. For share-based payment awards with non-vesting conditions, the grant-date fair value of the share-based payment is measured to reflect such conditions and there is no true-up for differences between expected and actual outcomes.

D. Income tax

Income tax expense comprises current and deferred tax. It is recognised in profit or loss except to the extent that it relates to a business combination, or items recognised directly in equity or in OCI.

The Group has determined that interest and penalties related to income taxes, including uncertain tax treatments, do not meet the definition of income taxes, and therefore accounted for them under IAS 37 Provisions, Contingent Liabilities and Contingent Assets.

i. Current tax

Current tax comprises the expected tax payable or receivable on the taxable income or loss for the year and any adjustment to the tax payable or receivable in respect of previous years. The amount of current tax payable or receivable is the best estimate of the tax amount expected to be paid or received that reflects uncertainty related to income taxes, if any. It is measured using tax rates enacted or substantively enacted at the reporting date. Current tax also includes any tax arising from dividends.

Current tax assets and liabilities are offset only if certain criteria are met.

ii. Deferred tax

Deferred tax is recognised in respect of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. Deferred tax is not recognised for:

- temporary differences on the initial recognition of assets or liabilities in a transaction that is not a business combination and that affects neither accounting nor taxable profit or loss;

- temporary differences related to investments in subsidiaries, associates and joint arrangements to the extent that the Group is able to control the timing of the reversal of the temporary differences and it is probable that they will not reverse in the foreseeable future; and

- taxable temporary differences arising on the initial recognition of goodwill.

Deferred tax assets are recognised for unused tax losses, unused tax credits and deductible temporary differences to the extent that it is probable that future taxable profits will be available against which they can be used. Future taxable profits are determined based on the reversal of relevant taxable temporary differences. If the amount of taxable temporary differences is insufficient to recognise a deferred tax asset in full, then future taxable profits, adjusted for reversals of existing temporary differences, are considered, based on the business plans for individual subsidiaries in the Group. Deferred tax assets are reviewed at each reporting date and are reduced to the extent that it is no longer probable that the related tax benefit will be realised; such reductions are reversed when the probability of future taxable profits improves.

Unrecognised deferred tax assets are reassessed at each reporting date and recognised to the extent that it has become probable that future taxable profits will be available against which they can be used.

Deferred tax is measured at the tax rates that are expected to be applied to temporary differences when they reverse, using tax rates enacted or substantively enacted at the reporting date, and reflects uncertainty related to income taxes, if any.

The measurement of deferred tax reflects the tax consequences that would follow from the manner in which the Group expects, at the reporting date, to recover or settle the carrying amount of its assets and liabilities.

Deferred tax assets and liabilities are offset only if certain criteria are met.

E. Exploration expenditure

Costs incurred prior to acquiring the right to explore an area of interest are expensed as incurred. Exploration and evaluation assets are intangible assets.

Exploration and evaluation assets represent the costs incurred on the exploration and evaluation of potential hydrocarbon resources, and include costs such as seismic acquisition and processing, exploratory drilling, activities in relation to the evaluation of technical feasibility and commercial viability of extracting hydrocarbons, and general administrative costs directly relating to the support of exploration and evaluation activities.

The Group assesses exploration and evaluation assets for impairment when facts and circumstances suggest that the carrying amount may exceed its recoverable amount. The recoverable amount is the higher of the assets fair value less costs to sell and value in use. Assets are allocated to cash generating units not larger than operating segments for impairment testing. Purchased exploration and evaluation assets are recognised as assets at their cost of acquisition or at fair value if purchased as part of a business combination. They are subsequently stated at cost less accumulated impairment. Exploration and evaluation assets are not amortised.

F. Share capital

Incremental costs directly attributable to the issue of ordinary shares are recognised as a deduction from equity. Income tax relating to transaction costs of an equity transaction is accounted for in accordance with IAS 12.

G. Impairment

At each reporting date, the Group reviews the carrying amounts of its non-financial assets (other than deferred tax assets) to determine whether there is any indication of impairment. If any such indication exists, then the asset's recoverable amount is estimated.

Impairment losses are recognised in profit or loss. They are allocated first to reduce the carrying amount of any goodwill allocated to the CGU, and then to reduce the carrying amounts of the other assets in the CGU on a pro rata basis.

H. Fair value measurement

'Fair value' is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date in the principal or, in its absence, the most advantageous market to which the Group has access at that date. The fair value of a liability reflects its non-performance risk.

A number of the Group's accounting policies and disclosures require the measurement of fair values, for both financial and non-financial assets and liabilities.

When one is available, the Group measures the fair value of an instrument using the quoted price in an active market for that instrument. A market is regarded as 'active' if transactions for the asset or liability take place with sufficient frequency and volume to provide pricing information on an ongoing basis.

If there is no quoted price in an active market, then the Group uses valuation techniques that maximise the use of relevant observable inputs and minimise the use of unobservable inputs. The chosen valuation technique incorporates all of the factors that market participants would take into account in pricing a transaction.

If an asset or a liability measured at fair value has a bid price and an ask price, then the Group measures assets and long positions at a bid price and liabilities and short positions at an ask price.

The best evidence of the fair value of a financial instrument on initial recognition is normally the transaction price - i.e. the fair value of the consideration given or received. If the Group determines that the fair value on initial recognition differs from the transaction price and the fair value is evidenced neither by a quoted price in an active market for an identical asset or liability nor based on a valuation technique for which any unobservable inputs are judged to be insignificant in relation to the measurement, then the financial instrument is initially measured at fair value, adjusted to defer the difference between the fair value on initial recognition and the transaction price. Subsequently, that difference is recognised in profit or loss on an appropriate basis over the life of the instrument but no later than when the valuation is wholly supported by observable market data or the transaction is closed out.

I. Going concern

The financial statements have been prepared on a going concern basis. The Group monitors its cash position, cash forecasts and liquidity on a regular basis and takes a conservative approach to cash management. At 30 April 2022, the Group had cash resources of US$662,000. Cash resources increased following the £425,000 equity fund raise completed in July 2022.

On 9 September 2022, the Group announced that it had signed a Heads of Terms and Exclusivity Agreement in relation to a potential acquisition. The Company expects to incur due diligence and other transaction costs associated with the proposed acquisition.

Management's base case is that the potential acquisition will complete in late 2022 and that as part of the acquisition the Company will seek to raise additional equity funding.

Management have also considered a number of downside scenarios including scenarios where the potential acquisition does not complete, or where completion is delayed beyond December 2022.

Under the base case forecast, the Group will have sufficient financial headroom to meet forecast cash requirements for the 12 months from the date of approval of these consolidated financial statements. However, in the downside scenarios, in the absence of any mitigating actions, the Group may have insufficient funds to meet its forecast cash requirements. Potential mitigants include deferral of expenditure and raising additional equity.

Accordingly, after making enquiries and considering the risks described above, the Directors have assessed that following closing of the proposed acquisition the cash balance provides the Group with adequate headroom over the forecast expenditure for the following 12 months - as a result, the Directors are of the opinion that the Group is able to operate as a going concern for at least the next twelve months from the date of approval of these financial statements.

Nonetheless, these conditions indicate the existence of a material uncertainty which may cast doubt on the Group's ability to continue as a going concern. The financial statements do not include the adjustments that would be required if the Group were unable to continue as a going concern.

3 Functional and presentation currency

These consolidated financial statements are presented in US Dollars ("USD" or "US$"), which is the Group's functional currency. All amounts have been rounded to the nearest thousand, unless otherwise indicated.

4 Use of judgements and estimates

In preparing these consolidated financial statements, management has made judgements and estimates that affect the application of the Group's accounting policies and the reported amounts of assets, liabilities, income and expenses. Actual results may differ from these estimates.

Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to estimates are recognised prospectively.

A. Judgements

Information about judgements made in applying accounting policies that have the most significant effects on the amounts recognised in the financial statements is included in the following notes:

- Note 11 - equity-accounted investees: whether the Group has significant influence over an investee;

- Note 15 - consolidation: whether the Group has de facto control over an investee. 

B. Assumptions and estimation uncertainties

The preparation of financial statements in conformity with IFRS requires the use of certain critical accounting estimates. It also requires management to exercise its judgement in the process of applying the group's accounting policies. The areas involving a higher degree of judgement or complexity, or areas where assumptions and estimates are significant to the consolidated financial statements, are disclosed below:

Share based payments (note 8)

The Group has made awards of options and warrants over its unissued capital. The valuation of these options and warrants involve making a number of estimates relating to price volatility, future dividend yields, expected life and forfeiture rates.

Acquisition of associate (Note 11)

The Group acquired a 50% holding in an associate during the year and has fair valued the assets acquired including the rights to the Buffalo Field. The investment in the associate was not successful and has been fully impaired at 30 April 2022.

i) Measurement of fair values

A number of the Group's accounting policies and disclosures require the measurement of fair values, for both financial and non-financial assets and liabilities. The Group has an established control framework with respect to the measurement of fair values.

When measuring the fair value of an asset or a liability, the Group uses observable market data as far as possible. Fair values are categorised into different levels in a fair value hierarchy based on the inputs used in the valuation techniques as follows.

- Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities.

- Level 2: inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices).

- Level 3: inputs for the asset or liability that are not based on observable market data (unobservable inputs).

If the inputs used to measure the fair value of an asset or a liability fall into different levels of the fair value hierarchy, then the fair value measurement is categorised in its entirety in the same level of the fair value hierarchy as the lowest level input that is significant to the entire measurement.

The Group recognises transfers between levels of the fair value hierarchy at the end of the reporting period during which the change has occurred.

5 Operating Segments

Operating segments are reported in a manner consistent with the internal reporting provided to the Chief Operating Decision Maker ("CODM"). The CODM, who is responsible for allocating resources and assessing performance of the operating segments and make strategic decisions, has been identified as the Directors of the Group. In the opinion of the Directors, the operations of the Group comprise two operating segments comprising firstly of that of developer of gas to power projects in the Republic of Indonesia and secondly with projects within the UK. The Group considers that it only has one reportable segment, and the Directors consider that the primary financial statements presented substantially reflect all the activities of the Company. 

6 Administrative expenses

Administration fees and expenses consist of the following:

7 Earnings per share

Basic loss per share is calculated by dividing the loss attributable to ordinary shareholders by the weighted average number of ordinary shares outstanding during the year.

In accordance with International Accounting Standard 33 'Earnings per share', no diluted earnings per share is presented as the Group is loss making. Details of potentially dilutive share instruments are detailed in notes 8.

8 Share-based payment arrangements

The following is a summary of the share options and warrants outstanding and exercisable as at 30 April 2022 and 30 April 2021, and the changes during each year:

The above weighted average exercise prices have been expressed in pence and not cents due to the terms of the options and warrants. The following share options or warrants were outstanding and exercisable in respect of the ordinary shares:

The options and warrants issued during year were valued using the Black-Scholes valuation method and the assumptions used are detailed below. The expected future volatility has been determined by reference to the historical volatility:

17.03.22 0.03p 0.03p 231% 5 years 0% 1.5% 0.025p

The Group recognised US$552,000 (30 April 2021: US$1,609,000) relating to equity-settled share-based payment transactions during the year arising from Option or Warrant grants, which was charged US$Nil (2021: US$838,000) in respect of services performed in connection with the issue of new shares charged to share premium, US$559,000 (2021: US$667,000) in respect of directors' fees and US$7,000 reversed (2021: US$104,000) in respect of employee costs to the income statement. Shares totalling US$Nil (2021: US$570,000) were issued to three of the Directors following the share raise and re-admission to AIM on 19 April 2021 in relation to options earned during the period.

The 83,710,000 options granted on 19 April 2021 will vest on 1 January 2022 and 1 January 2023 in equal amounts. Vesting of the options is subject to the option holder providing continuous service during the vesting period and there are no other performance conditions attached to the options.

There were 68,750,000 of unvested options at the 30 April 2020 held by current Directors and consultants, which vested on 1 February 2021. 

The 30,000,000 options granted on 17 March 2022 will vest on 17 September 2022 and 17 March 2023 in equal amounts. Vesting of the options is subject to the option holder providing continuous service during the vesting period and there are no other performance conditions attached to the options.

For the share options and warrants outstanding as at 30 April 2022, the weighted average remaining contractual life is 4.64 years (30 April 2021: 4.14 years).

9 Employee benefits (including directors)

The group employed an average of 5 individuals during the year, including the directors (2020: 5).

Key management of the Group are considered to be the Directors.

The remuneration of the directors during the year ended 30 April 2022 was as follows:

The remuneration of the directors during the year ended 30 April 2021 was as follows:

10 Income tax expense

The Company is resident for tax purposes in the Isle of Man and is subject to Isle of Man tax at the current rate of 0% (2020: 0%). 

Taxation reconciliation

The charge for the year can be reconciled to the loss per the consolidated statement of comprehensive income as follows:

The deferred tax asset has not been recognised for in accordance with IAS 12. The Group does not have a material deferred tax liability at the year end.

11 Business combination

On 19 April 2021, Advance Energy plc, via its wholly owned subsidiary Advance Energy TL Limited, acquired a 50% equity interest in Carnarvon Petroleum Timor Unipessoal Lda which in turn is the holder of a 100% working interest in, and the contractor of, the Buffalo Production Sharing Contract ("PSC").

Details of the purchase consideration and the net assets acquired are as follows:

Purchase consideration

On 24 January 2022 the company announced that the Buffalo project had not been successful. The Operator, Carnarvon Petroleum Timor, Lda, had advised the company that the wireline logging operations have been completed with only residual oil being encountered. The Company announced that the well will therefore be plugged and abandoned, and the rig demobilised. As a result of this, the carrying amount of the investment in the associate of US$19,834,000 will be written off and a share of the losses for 2022 will be recognised in the consolidated statement of comprehensive income US$428,000 (2021: loss US$12,000). The investment in associate has been fully impaired at 30 April 2022.

The assets and liabilities recognised as a result of the acquisition are as follows:

* Carnarvon Petroleum Timor Unipessoal Lda owns the Buffalo Oil Field re-development project located in the Buffalo PSC Contract Area (the "Buffalo Project") and is the Contractor and Operator of the Buffalo PSC. The rights attached to this have been fair valued by Advance Energy in determining the purchase price apportionment.

Equity investment in associate

Summarised financial information for associate

The table below provide summarised financial information for those associates that are material to the group. The information disclosed reflects the amounts presented in the financial statements of the relevant associate and not Advance Energy's share of those amounts. They have been amended to reflect adjustments made by the entity when using the equity method, including fair value adjustments and modifications for differences in accounting policy.

Summarised statement of comprehensive income for the 12 months to 30 April 2022

12 Capital and reserves

All shares are Nil Coupon fully paid and each ordinary share carries one vote. No warrants have been exercised at the reporting date.

13 Trade and other payables

Trade and other payables are obligations to pay for goods or services that have been acquired in the ordinary course of business. Accounts payable are classified as current liabilities if payment is due within one year or less (or in the normal operating cycle of the business if longer). If not, they are presented as non-current liabilities. Trade payables are recognised initially at fair value, and subsequently measured at amortised cost using the effective interest method.

14 Risk Management

Financial Risks

The Group's activities expose it to a variety of financial risks: market risk (including foreign currency exchange risk and interest rate risk), credit risk and liquidity risk. The Board of Directors seek to identify and evaluate financial risks.

Market risk

A. Foreign currency exchange risk

Foreign exchange risk arises because the Group entities enter into transactions in currencies that are not the same as their functional currencies, resulting in gains and losses on retranslation into US Dollars. It is the Group's policy to ensure that individual Group entities enter into local transactions in their functional currency wherever possible and that only surplus funds over and above working capital requirements should be transferred to the treasury of the Parent Company. The Group and Company considers this policy minimises any unnecessary foreign exchange exposure. Despite this policy, the Group cannot avoid being exposed to gains or losses resulting from foreign exchange movements, at the reporting date a 5% decrease in the strength of the US Dollar would result in a corresponding reduction of US$6,000 (2021: US$373,000) in the net assets of the Group.

B. Cash flow interest rate risk

The Group's cash and cash equivalents are invested at short term market interest rates. As market rates are low, the Group is not subject to significant cash flow interest rate risk and no sensitivity analysis is provided. The Group is also not subject to significant fair value interest rate risk.

Credit risk

Credit risk arises on investments, cash balances and receivable balances. The amount of credit risk is equal to the amounts stated in the Statement of Financial Position for each of these assets. Cash balances and transactions are limited to high-credit-quality financial institutions. There are no impairment provisions as at 30 April 2022 (2021: nil).

Liquidity risk

Prudent liquidity risk management implies maintaining sufficient cash and marketable securities, the availability of funding through an adequate amount of committed credit facilities and the ability to close out market positions. The Group has adopted a policy of maintaining surplus funds with approved financial institutions.

Management of liquidity risk is achieved by monitoring budgets and forecasts against actual cash flows. Should the Group enter into borrowings during the year, management monitor the repayment and servicing of these arrangements against the contractual terms and reviewed cash flows to ensure that sufficient cash reserves were maintained.

Capital Risks

The Directors determine the appropriate capital structure of the Group, specifically, how much is raised from shareholders (equity) and how much is borrowed from financial institutions (debt), in order to finance the Group's business strategy. The Group's policy in the long term is to seek to maintain the level of equity capital and reserves to maintain an optimal financial position and gearing ratio which provides financial flexibility to continue as a going concern and to maximise shareholder value. The capital structure of the Group consists of shareholders' equity together with net debt (where relevant). The Group's funding requirements are met through a combination of debt, equity and operational cash flow.

15 List of subsidiaries and associates

The parent of the Group has shareholdings in the following entities:

On 7 January 2022 Resolute Oil & Gas (UK) Limited made an application to strike the company off the register and on 5 April 2022 the company was dissolved.

16 Commitments

There were no capital commitments authorised by the Directors or contracted other than those provided for in these financial statements as at 30 April 2022 (30 April 2021: None).

17 Related parties

Parties are considered to be related to the Group if the Group has the ability, directly or indirectly, to control the party or exercise significant influence over the party in making financial and operating decisions, or vice versa, or where the Group and the party are subject to common control or common significant influence.

Related parties may be individuals (being members of key management personnel, significant shareholders and/or their close family members) or other entities and include entities which are under significant influence of related parties of the Group where those parties are individuals, and post-employment benefit plans which are for the benefit of employees of the Group or of any entity that is a related party of the Group.

Details of Directors remuneration are disclosed in Note 9 Directors Remuneration. For details of any related party transactions entered into after the year-end please refer to Note 18 Subsequent Events. 

18 Subsequent events

On 26 July 2022, the Company successfully raised £425,000 from new and existing shareholders, through share placing. The £425,000 included £40,000 each from the existing directors Mark Rollins and Larry Bottomley. A total of 500,000,000 shares placed at £0.00085 were issued for a consideration of £425,000 and this was inclusive of broker fees of 5% which is £21,250. One warrant was issued for every share at a price of £0.0013 at any time from the issue of the warrant up to 26 July 2025.

On 9 September 2022, the Company announced that it had entered into a non-binding Heads of Terms ("HoT") with the majority owner of a European oil and gas company. Under the HoT, Advance would acquire the European company for a combination of new shares in Advance and an earn out based on oil production (the "Potential Acquisition"). The HoT includes standard conditions, including an exclusivity period up to 29 October 2022 and the completion of satisfactory due diligence.

The Potential Acquisition would be considered a reverse transaction under the AIM Rules for Companies and is therefore subject, inter alia, to the issue of a new AIM Admission Document and obtaining shareholder approval for the Potential Acquisition. 

As a result of the announcement, the Company's shares were temporarily suspended and will remain so until Advance is in a position to publish the associated AIM Admission Document for the Potential Acquisition. In the event that the Potential Acquisition does not proceed for whatever reason, it is expected that the temporary suspension in the Company's shares would be lifted.