Block Energy P. Regulatory News (BLOE)

30 April 2020

Block Energy Plc

("Block Energy" or the "Company")

Audited results for the 18 months period ending 31 December 2019

Block Energy Plc, the exploration and production company focused on Georgia, is pleased to announce its preliminary results for the 18 months period ending 31 December 2019.

The Company's Annual Report will shortly be made available on the Company's website at www.blockenergy.co.uk and posted to shareholders by 15 May 2020.

Highlights

Equity placing

· In May 2019, Block Energy Plc completed a placing of 109,090,000 new Ordinary Shares, raising approximately £12 million, equivalent to $15.2 million, (before expenses) with institutional investors at a placing price of 11 pence, equivalent to $0.14, per share.

Acquisition and business growth

· The Group continued to grow its portfolio of oil and gas assets in Georgia by increasing its working interest in the West Rustavi Production Sharing Contract ("PSC") from 25% to 100% for total cash payments of $500,000 and the issue of 12,876,268 Ordinary Shares with a value $1,000,000.

· At 31 December 2019, Block Energy held three operating licences - Norio (100% working interest ("WI")), Satskhenisi (90% WI) and West Rustavi (100% WI).

· Following the period end, on 25 March 2020, the Company entered into a conditional sale and purchase agreement with Schlumberger B.V. ("Schlumberger") to acquire its subsidiary Schlumberger Rustaveli Company Limited ("SRCL"), which on closing will hold two PSCs in Georgia.

· Cash at 31 December 2019 was $6,494,000 (30 June 2018: $5,278,000).

Operations

· The Group successfully drilled two horizontal wells (WR-16aZ and WR-38Z) in its West Rustavi licence area. Tests from both WR-16aZ and WR-38Z showed encouraging production rates.

· Gas sales agreement signed with Bago LLC, one of the largest private gas suppliers and purchasers in Georgia, for the offtake of gas produced at the Company's flagship West Rustavi field at a price of $5.24 per MCF.

· Construction underway for an Early Production Facility ("EPF"), with capacity for 6 wells, to exploit Block Energy's contingent gas resources of over 600 BCF, with gas sales expected to commence in H2 2020.

· 100 km2 of 3D seismic survey acquired over and beyond the entire area of the Company's West Rustavi licence with results exhibiting good subsurface imaging of the main producing and prospective formations in the licence.

· Prior to the recent shutdown to conserve oil that would otherwise be sold at a low price and gas that would otherwise be flared, the Group was producing 325 boepd from the West Rustavi field. It continues to produce approximately 20 bopd from the Norio and Satskhenisi fields.

· The Group maintains a strong focus on assuring Health, Safety and Environmental ("HSE") management.

· Secured an agreement with the national oil company, Georgia Oil and Gas Corporation ("GOGC"), for access to 90,000 bbls of capacity at GOGC's principal storage facility.

· Entered into an agreement with Georgia Oil and Gas Limited ("GOG") for the hire of drilling and workover rigs and equipment.

Chairman's Statement

During the 18 months period ended 31 December 2019, the Company has learnt valuable lessons whilst making significant progress in reaching its goal of becoming the leading independent oil and gas company in Georgia. Everyone at Block Energy has worked tirelessly to achieve its corporate and operational objectives.

A crucial milestone during the period was the signing of a gas sales agreement with Bago LLC. This agreement has paved the way for Block to install an EPF at West Rustavi, which will see gas sales commence in H2 2020. This timely addition to Block's portfolio is ever relevant given the prevailing low crude oil prices, and means that Block will be able to gain revenue from its large gas resource at West Rustavi. The advent of gas sales will also align with Block's commitment to high environmental standards, as it looks to cease gas flaring and commence supplying Georgia with a clean efficient fuel source, decreasing the consumption of gasoline and diesel in the country. Incidentally, the Company already uses a combination of electricity from the national grid and diesel to power its contracted drilling rig, keeping its carbon footprint to a minimum.

I am excited by the Company's transaction with Schlumberger for two further licences, one with proven resources and reserves and another with excellent exploration potential.

Following the end of the accounting period, we have used the current period of low oil price to suspend production and conserve our valuable gas resources until the EPF is commissioned and gas sales can commence. Depending on the oil price, the Company will continue to produce and, if necessary, store oil from its Norio and Satskhenisi licences, as the quantity of gas produced from these fields is small.

As always, the health and safety of Block's staff and its wider stakeholders are a number one priority. It was disappointing that we incurred one lost time incident in the period. But, overall, the safety record was good for a new company that has brought a number of innovative and modern technologies to Georgia.

In order to adhere to all the regulations and guidance laid down by the governments of Georgia and the United Kingdom to combat the COVID-19 crisis, most of our staff work from home but remain very effective. Our staff who have to attend the field maintain social distancing and have their temperatures measured and health checked on a daily basis.

The improvement of corporate governance continued during the period with the establishment of a Technical Committee and more frequent meetings of the board and its committees. We continue to adhere to the Quoted Company Alliance's ("QCA") Corporate Governance Code for Small and Mid-Size Quoted Companies 2018 version ("QCA Code"). Furthermore, I plan to bolster the stewardship of the Board through the appointment of a well-qualified, third non-executive director.

In November 2019, Niall Tomlinson retired from the Board to concentrate on his interests in the mining sector. Our thanks are due to him for his contributions to the founding of the Company and to building corporate governance. We wish him well with his future endeavours. We welcome William McAvock, Chief Financial Officer, to the Board and the Company. We are already benefitting from his knowledge and experience of managing the financial aspects of an international oil and gas business.

We are prepared for an extended period of weak demand for oil and low prices well into next year. However, our fundamentals are strong; we have learnt a number of lessons from our initial operations and, even in the lock down, continue to implement our programme. We are accelerating the exploitation of gas resources in West Rustavi and are planning the increase of oil production and exploitation of gas resources in the blocks being acquired from Schlumberger. We are confident the market will recognise our inherent value and re-rating potential.

I would like to thank all our team for their focus, skill and hard work, particularly in today's difficult circumstances. We look forward to updating shareholders with further news in the months to come.

Philip Dimmock

Chairman

Chief Executive Officer's Statement

Introduction

We are an agile energy start up, making intelligent use of a broad skill set and deep understanding of Georgia. Our position is further complemented by the use of efficient drilling technology and our focus on establishing the Company as Georgia's leading independent oil and gas operator. We draw on the collective knowledge of the industry to source appropriate techniques and technologies for opening-up the full potential of our Georgian assets.

Our Company successfully listed on AIM in June 2018, raising £5 million ($6.6 million) to perform low-cost development operations, which provided early confirmation of the potential in our West Rustavi licence. After strong test results at the field's appraisal well WR-16aZ, we undertook a £12 million ($15.2 million) fundraise to execute a development and acquisition programme targeted at accelerating our plan to increase West Rustavi's oil production and appraise its gas potential.

Our enhanced programme has allowed us to sidetrack additional wells, expand the field's infrastructure with new processing facilities and carry out a 3D seismic survey of West Rustavi's subsurface to identify optimal locations for new oil and gas wells. The results of the survey are currently under review.

We have also negotiated oil storage and gas offtake agreements and continue to strengthen our management and operations teams across the Group.

Serving Georgia's growing energy market

Our oil and gas sales serve Georgia's intense demand for energy. Georgia has achieved strong economic growth over the past decade, growing at an average annual rate of 5%. The country relies on gas for 40% of its total energy use and is highly dependent on gas imports from neighbouring countries. Local gas production currently accounts for less than 0.5% of annual consumption.

Building relationships in Georgia

In addition to pursuing our West Rustavi drilling programme, we have continued production at our Norio and Satskhenisi fields. We have further consolidated our presence in country by establishing an operating subsidiary, Block Operating Company LLC, in Tbilisi.

Until COVID-19 curtailed travel, our directors regularly travelled to the country to oversee and develop our Georgian management and mature our excellent relationships with local and national tiers of government.

Our Company continues to work closely with the Georgian Technical University ("GTU") to help train the next generation of Georgian production engineers through a programme that will allow GTU students to visit Block's fields to gain hands-on experience of our operations.

Future horizons

Following the end of the period, Block Energy entered into a conditional sale and purchase agreement with Schlumberger to acquire its Georgian subsidiary and thereby significantly increase its acreage position in Georgia from 82 km2 to 2,622 km2. The Company will acquire producing Block XIB and exploration Block IX, which together bring 200 bopd of production and 64 million boe of proven and probable oil and gas reserves to Block's portfolio as well as many synergies between the two businesses. Block XIB is Georgia's most productive block, with over 180 million bbls of oil produced from the Middle Eocene, peaking in the 1980s at 67,000 bopd.

We remain an ambitious and growing oil and gas start-up, ever alert to fresh opportunities. We look forward to sharing news of our progress in Georgia and beyond.

Paul Haywood

Chief Executive Officer

Chief Financial Officer's Statement

This report covers the 18 months period ended 31 December 2019, because, in June 2019, in order to bring its financial reporting into line with peer companies and to carry out its year-end work when there is a seasonal reduction in operational activities, the Company changed its accounting reference date from 30 June to 31 December. Therefore, the current 18 months period ended 31 December 2019 is not directly comparable with the prior 12 months period ended 30 June 2018.

During the 18 months period ended 31 December 2019, Block Energy Plc continued to build its production and development base whilst maintaining a strong balance sheet.

Following the period end, owing to the combined impacts of lower demand for oil caused by COVID-19 and the Russia-Saudi Arabia oil price war, the Brent oil price collapsed from over $50 per barrel at the start of March 2020 to less than $20 per barrel in April 2020. The Company has responded to the low oil price by postponing all new capital expenditure and reducing the monthly cash burn in Georgia by 40% from $107,000 to $64,000 through a combination of cost-cutting and deferral of operating and administration expenses. In the UK, directors and employees have agreed a scheme in which, with effect from 1 April 2020, 40% of their salaries will be paid in nil-cost options to acquire ordinary shares in the Company, reducing monthly cash salary costs. Options will be priced at a volume-weighted average price ("VWAP") over the monthly salary period and the first options are expected to be based on the VWAP for the month of April 2020 and issued in early May 2020.

Balance sheet - acquisitions and asset growth

Block Energy Plc increased its working interest in the West Rustavi PSC from 25% to 100% for total consideration of $1,500,000, comprising cash payments of $500,000 and the issue of 12,876,268 Ordinary Shares with a value of $1,000,000.

In May 2019, Block Energy Plc completed a placing of 109,090,000 new Ordinary Shares, raising approximately £12 million (equivalent to $15.2 million) before expenses with institutional investors at a placing price of 11 pence, (equivalent to $0.14) per share.

The Group's financial position has changed significantly over the past 12 months, with Group net assets increasing from $9,200,000 as at 30 June 2018 to $20,610,000 as at 31 December 2019 owing to the $15.2 million cash raised in the equity placing, much of which had been spent and capitalised during the period, including the costs of drilling two wells and the 3D seismic data acquisition at West Rustavi. At the end of the period, the Group's cash balance was $6,494,000 (2018: $5,278,000).

Income statement

The Group's revenue increased to $314,000 (2018: $179,000). The current period revenue of $314,000 was for 5,210 barrels of oil, which equates to average revenue of $60.29 per barrel, from West Rustavi, Norio and Satskhenisi.

In addition, the Group had over 14,000 barrels of crude oil inventory as at 31 December 2019. Following the period end, the Group sold 6,879 barrels of crude oil inventory for net revenue of $325,083, which equates to average revenue of $47.26 per barrel.

The loss for the period was $6,130,000 as compared with a $1,835,000 loss in the prior year. The Company listed on AIM on 11 June 2018, just before the end of the prior accounting year. The main reasons for the increase in the loss are the income statement covers a longer period of 18 months compared with 12 months in the prior period and includes new costs associated with an AIM-listed company that has raised significant funding and embarked on a capital expenditure programme and increased operational activities in Georgia.

The Company has always been focused on controlling administration costs and continues to endeavour to keep these to a minimum. We maintain a low-cost operation, and our Georgian portfolio offers a low-cost short-cycle production base.

Liquidity, counterparty risk and going concern

The Group monitors its cash position, cash forecasts and liquidity regularly, and has a conservative approach to cash management, with surplus cash held on term deposits with major financial institutions.

The directors have prepared cash flow forecasts for a period of 14 months from the date of signing of these financial statements. The Group's forecasts include a number of enacted cost saving measures and the forecasts are reviewed regularly in order to assess whether any further actions are required. The Group is in the final stages of negotiating to engage Bago LLC to construct a gas pipeline and to revise the sales agreement for West Rustavi gas. The forecasts assume the gas pipeline will be constructed and the gas will be sold, and indicate the Group has sufficient funds to complete the construction of the gas project and to meet its liabilities as they fall due until April 2021. The financial benefit of any additional capital projects would be assessed against capital requirements and balanced with ensuring that the Company can continue to meet its liabilities and commitments through to April 2021. The Parent Company's forecasts are considered together with the Group's forecasts.

The directors note that COVID-19 has had a significant negative impact on the global economy and oil prices have fallen significantly, which may mean it is harder to secure additional funding than it has historically been. The global pandemic may also bring practical challenges to the timetables for the construction of the gas pipeline and the consequent sale of gas. The directors are confident that current capital projects are funded and have a reasonable expectation that they could secure additional funding, if needed, to fund additional capital projects. However, these conditions are necessarily considered to represent a material uncertainty which may cast significant doubt over the Group's ability to continue as a going concern. Whilst acknowledging this material uncertainty, the directors remain confident of making further cost savings when required and therefore the directors consider it appropriate to prepare the financial statements on a going concern basis. The financial statements do not include the adjustments that would result if the Group were unable to continue as a going concern.

Restatement of prior year financial statements

The comparative figures have been restated for two prior period adjustments relating to deferred consideration and share options issued. Please refer to note 4 of the financial statements for details of the restatements.

Results and dividends

The results for the period and the financial position of the Group are shown in the following financial statements. The Group has incurred a pre-tax loss of $6,030,000 (2018: loss of $1,835,000).

The Group has net assets of $20,610,000 (2018: net assets of $9,200,000).

The directors do not recommend the payment of a dividend (2018: nil).

William McAvock

Chief Financial Officer

Consolidated Statement of Comprehensive Income

for the 18 months period ended 31 December 2019

Consolidated Statement of Financial Position

at 31 December 2019

The financial statements were approved by the Board of Directors and authorised for issue on 30 April 2020 and were signed on its behalf by:

William McAvock Paul Haywood

Director Director

Consolidated Statement of Changes in Equity

at 31 December 2019

Consolidated Statement of Cashflows

for the 18 months period ended 31 December 2019

Notes forming part of the Consolidated Financial Statements

Corporate information

Block Energy Plc traded on NEX until March 2018 and gained admission to AIM on the 11 June 2018, trading under the symbol of BLOE.

The Consolidated financial statements of the Group, which comprises Block Energy Plc and its subsidiaries, for the 18 months period ended 31 December 2019 were authorised for issue in accordance with a resolution of the directors on 27 April 2020. Block Energy is a Company incorporated in the UK whose shares are publicly traded. The address of the registered office is given in the officers and advisors section of this report. The Company's administrative office is in London, UK.

The nature of the Company's operations and its principal activities are set out in the Strategic report and the Report of the Directors on pages 5 and 21, respectively.

1. Significant Accounting policies

IAS 8 requires that management shall use its judgement in developing and applying accounting policies that result in information which is relevant to the economic decision-making needs of users, that are reliable, free from bias, prudent, complete and represent faithfully the financial position, financial performance and cash flows of the entity.

Basis of preparation

The principal accounting policies adopted in the preparation of these consolidated financial statements are set out below. The policies have been consistently applied to all the years presented, unless otherwise stated. The functional currency of the Company is the pound sterling. At 30 June 2019, to enable easier comparison with most of its oil & gas sector peer group, the presentational currency for the consolidated accounts was changed from the pound sterling to the United States dollar (US dollar) with effect from 1 July 2017 This change of presentational currency represents a change in accounting policy. The current and comparative period balances have been translated using the average exchange rate for the year (2019: $1.29702, 2018: $1.34497) for the Statement of Comprehensive Income and the balance sheet date exchange rate (31 December 2019: $1.26992, 30 June 2018: $1.32050, 30 June 2017: $1.29946) for the Statement of Financial Position, except for share capital, which was translated using historical exchange rates. All amounts presented are in thousands of US dollars unless otherwise stated.

During the period, the Group changed its accounting reference date from 30 June to 31 December and consequently the current period covers the 18 months period ended 31 December 2019. The comparative period covers the year ended 30 June 2018.

These financial statements have been prepared on a historical cost basis in accordance with International Financial Reporting Standards (IFRS) and IFRIC interpretations issued by the International Accounting Standards Board (IASB) adopted by the European Union and in accordance with applicable UK Law. The adoption of all of the new and revised Standards and Interpretations issued by the IASB and the IFRIC of the IASB that are relevant to the operations and effective for annual reporting periods beginning on 1 July 2017 are reflected in these financial statements.

The preparation of financial statements in conformity with IFRS requires management to make judgements, estimates and assumptions that affect the application of policies and reported amounts of assets and liabilities, income and expenses. The estimates and associated assumptions are based on historical experience and factors that are believed to be reasonable under the circumstances, the results of which form the basis of making judgements about carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates.

The estimates and underlying assumptions are reviewed on an ongoing basis. Changes in accounting estimates may be necessary if there are changes in the circumstances on which the estimate was based, or as a result of new information or more experience. Such changes are recognised in the period in which the estimate is revised.

New and amended standards adopted by the Group

IFRS 9: Financial Instruments

IFRS 9 is effective for accounting periods starting on or after 1 January 2018 and deals with the classification and measurement of financial instruments. Financial instruments will include loans receivable/payable, derivative financial instruments and accounts payable and receivable balances. Measurement remains broadly consistent with previous guidance with financial assets and liabilities at fair value or amortised cost. Where financial assets and liabilities are carried at fair value, the standard provides guidance on where to recognise periodic changes in fair value with the primary options being through the income statement or directly to reserves. The standard also provides guidance on hedge accounting where a company elects to apply hedge accounting. The most significant change in the new standard that impacts the Group relates to the measurement of credit risk and the recognition of that risk through adjusting the carrying value of the underlying instrument. The standard requires a company to assess the '12-month expected credit losses' on inception of a financial instrument (generally an asset) and recognise those expected losses in the income statement by way of an allowance. Where the expected credit risk increases significantly and is not considered to be low, the full credit loss that is expected over the lifetime of the asset is recorded.

The Group has assessed the particular impact of IFRS 9 on the Group as immaterial, but the adoption of IFRS 9 has impacted the parent company. This is a result of the existing incurred loss approach under IAS 39 being replaced by the forward-looking expected credit losses ("ECL") model approach of IFRS 9. The ECL model is required to be applied to the intercompany loans receivable from subsidiary companies, which are held at amortised cost. Please refer to note 1 of the parent company financial statements on page 82 for the detail on the impact and the financial assets accounting policy included in this note on pages 54 to 55.

The Company has opted for the transition method, requiring a retrospective application for the first time adoption of IFRS 9. No differences were identified to be processed at the date of initial application (i.e. 1 July 2018).

IRFS 15

IFRS 15 is effective for accounting periods starting on or after 1 January 2018 and provides a single comprehensive model for revenue recognition. The core principle of the standard is that an entity shall recognise revenue to depict the transfer of promised goods or services to customers at an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services.

The standard introduced a new contract-based revenue recognition model with a measurement approach that is based on an allocation of the transaction price. This is described further in the accounting policies below. Contracts with customers are presented in an entity's statement of financial position as a contract liability, a contract asset, or a receivable, depending on the relationship between the entity's performance and the customer's payment.

New Accounting Standards issued but not yet effective

Standards issued and relevant to the Group, but not yet effective at the date of these Group financial statements are listed below. The standards discussed are those that the Group reasonably expects to be applicable to the financial statements in the future, and therefore do not include those standards or interpretations that the directors consider will not be relevant to the Group. The Group intends to adopt these standards when they become effective. The directors do not expect that the adoption of these standards will have a material impact on the Group's financial statements either in the period of initial application or thereafter. An assessment of the impact of each relevant standard is included below.

No new standards and amendments to standards and interpretations effective for annual periods commencing on or after 1 July 2018 have had a material impact on the Group.

There are a number of standards, amendments to standards, and interpretations which have been issued by the IASB that are effective in future accounting periods that the group has decided not to adopt early. The following amendments are effective for the period beginning 1 January 2020:

· IAS 1 Presentation of Financial Statements and IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors (Amendment - Definition of Material)

· IFRS 3 Business Combinations (Amendment - Definition of Business)

· IFRS 16 Leases

· Revised Conceptual Framework for Financial Reporting

In January 2020, the IASB issued amendments to IAS 1, which clarify the criteria used to determine whether liabilities are classified as current or non-current. These amendments clarify that current or non-current classification is based on whether an entity has a right at the end of the reporting period to defer settlement of the liability for at least twelve months after the reporting period. The amendments also clarify that 'settlement' includes the transfer of cash, goods, services, or equity instruments unless the obligation to transfer equity instruments arises from a conversion feature classified as an equity instrument separately from the liability component of a compound financial instrument. The amendments are effective for annual reporting periods beginning on or after 1 January 2022.

IFRS 16: Leases

The new standard recognises a lease asset and a lease liability for almost all leases and requires them to be accounted for in a consistent manner. This introduces a single lessee accounting model and eliminates the previous distinction between an operating lease and a finance lease. Management have identified material lease arrangements, and have assessed the potential impact of the Standard as immaterial.

The Group is currently assessing the impact of the remaining new accounting standards and amendments. The Group does not believe that the amendments to IAS 1 will have a significant impact on the classification of its liabilities.

The Group does not expect any other standards issued by the IASB, but not yet effective to have a material impact on the group.

Basis of consolidation

Where the Company has control over an investee, it is classified as a subsidiary. The Company controls an investee if all three of the following elements are present: power over the investee, exposure to variable returns from the investee, and the ability of the investor to use its power to affect those variable returns. Control is reassessed whenever facts and circumstances indicate that there may be a change in any of these elements of control. De-facto control exists in situations where the Company has the practical ability to direct the relevant activities of the investee without holding the majority of the voting rights. In determining whether de-facto control exists the Company considers all relevant facts and circumstances, including:

· The size of the Company's voting rights relative to both the size and dispersion of other parties who hold voting rights;

· Substantive potential voting rights held by the Company and by other parties;

· Other contractual arrangements; and

· Historic patterns in voting attendance.

Business combinations and Goodwill

The consolidated financial statements incorporate the results of business combinations using the purchase method. In the consolidated statement of financial position, the acquiree's identifiable assets, liabilities and contingent liabilities are initially recognised at their fair values at the acquisition date. The difference between the consideration paid and the acquired net assets is recognised as goodwill. The results of acquired operations are included in the consolidated income statement from the date on which control is obtained. Any difference arising between the fair value and the tax base of the aquiree's assets and liabilities that give rise to a deductible difference results in recognition of deferred tax liability. No deferred tax liability is recognised on goodwill.

Acquisitions

The Group and Company measure goodwill at the acquisition dates as:

· The fair value of the consideration transferred; plus

· The recognised amount of any non - controlling interests in the acquiree

· Plus, if the business combination is achieved in stages, the fair value of the existing equity interest in the aquiree; less the net recognised amount (generally fair value) of the identifiable assets acquired and liabilities assumed.

When the excess is negative, a bargain purchase gain is recognised immediately in profit or loss.

Cost related to the acquisition, other than those associated with the issue of debt or equity securities, that the Group incurs in connection with a business combination, are expensed as incurred.

Asset Acquisition

Acquisitions of mineral exploration licences through the acquisition of non-operational corporate structures that do not represent a business, and therefore do not meet the definition of a business combination, are accounted for as the acquisition of an asset. An example of such would be increases in working interests in licences.

The consideration for the asset is allocated to the assets based on their relative fair values at the date of acquisition.

Going concern

The directors note that COVID-19 has had a significant negative impact on the global economy and oil prices have fallen significantly, which may mean it would be more difficult to secure additional funding than it has historically been. The global pandemic may also bring practical challenges to the timetables for the construction of the gas pipeline and the consequent sale of gas. The directors are confident that current capital projects are funded and have a reasonable expectation that they could secure additional funding, if needed, to fund additional capital projects. However, these conditions necessarily indicate that a material uncertainty exists which may cast significant doubt over the Group and Company's ability to continue as a going concern and therefore their ability to realise their assets and discharge their liabilities in the normal course of business. Whilst acknowledging this material uncertainty, the directors remain confident of making further cost savings when required and, therefore, the directors consider it appropriate to prepare the financial statements on a going concern basis. The financial statements do not include the adjustments that would result if the Group were unable to continue as a going concern.

Intangible Assets

Exploration and evaluation costs

The Group applies the full cost method of accounting for Exploration and Evaluation (E&E) costs, having regard to the requirements of IFRS 6 'Exploration for and Evaluation of Mineral Resources'. Under the full cost method of accounting, costs of exploring and evaluating properties are accumulated and capitalised by reference to appropriate cash generating units ("CGUs"). Such CGU's are based on geographic areas such as a licence area, type or a basin and are not larger than an operating segment - as defined by IFRS 8 'Operating segments.

E&E costs are initially capitalised within 'Intangible assets'. Such E&E costs may include costs of licence acquisition, technical services and studies, seismic acquisition, exploration drilling and testing, but do not include costs incurred prior to having obtained the legal rights to explore an area, which are expensed directly to the statement of comprehensive income as they are incurred. Plant and equipment assets acquired for use in exploration and evaluation activities are classified as property, plant and equipment.

However, to the extent that such an asset is consumed in developing an unproven oil and gas asset, the amount reflecting that consumption is recorded as part of the cost of the unproven oil and gas asset.

Exploration and unproven oil and gas assets related to each exploration license/prospect are not amortised but are carried forward until the technical feasibility and commercial feasibility of extracting a mineral resource are demonstrated.

Impairment of Exploration and Evaluation assets

All capitalised exploration and evaluation assets and property, plant and equipment are monitored for indications of impairment. Where a potential impairment is indicated, assessment is made for the Group of assets representing a cash generating unit.

In accordance with IFRS 6 the Group firstly considers the following facts and circumstances in their assessment of whether the Group's exploration and evaluation assets may be impaired, whether:

· the period for which the Group has the right to explore in a specific area has expired during the period or will expire in the near future, and is not expected to be renewed;

· unexpected geological occurrences render the resource uneconomic;

· a significant fall in realised prices or oil and gas price benchmarks render the project uneconomic; or

· an increase in operating costs occurs.

If any such facts or circumstances are noted, the Group perform an impairment test in accordance with the provisions of IAS 36.

The aggregate carrying value is compared against the expected recoverable amount of the cash generating unit. The recoverable amount is the higher of value in use and the fair value less costs to sell. An impairment loss is reversed if the asset's or cash-generating unit's recoverable amount exceeds its carrying amount. A reversal of impairment loss is recognised in the profit or loss immediately.

Property, plant and equipment - development and production (D&P) assets 

Capitalisation 

The costs associated with determining the existence of commercial reserves are capitalised in accordance with the preceding policy and transferred to property, plant and equipment as development assets following impairment testing. All costs incurred after the technical feasibility and commercial viability of producing hydrocarbons have been demonstrated are capitalised within development assets on a field-by-field basis. Subsequent expenditure is only capitalised where it either enhances the economic benefits of the development asset or replaces part of the existing development asset (where the remaining cost of the original part is expensed through the income statement). Costs of borrowing related to the ongoing construction of development and production assets and facilities are capitalised during the construction phase. Capitalisation of interest ceases once an asset is ready for production.

Depreciation

Capitalised oil assets are not subject to depreciation until commercial production starts. Depreciation is calculated on a unit-of-production basis in order to write off the cost of an asset as the reserves that it represents are produced and sold. Any periodic reassessment of reserves will affect the depreciation rate on a prospective basis. The unit-of-production depreciation rate is calculated on a field-by-field basis using proved, developed reserves as the denominator and capitalised costs as the numerator. The numerator includes an estimate of the costs expected to be incurred to bring proved, developed, not-producing reserves into production. Infrastructure that is common to a number of fields, such as gathering systems, treatment plants and pipelines are depreciated on a unit-of-production basis using an aggregate measure of reserves or on a straight line basis depending on the expected pattern of use of the underlying asset.

Proven oil and gas properties

Oil and gas properties are stated at cost less accumulated depreciation and impairment losses. The initial cost comprises the purchase price or construction cost including any directly attributable cost of bringing the asset into operation and any estimated decommissioning provision.

Once a project reaches the stage of commercial production and production permits are received, the carrying values of the relevant exploration and evaluation asset are assessed for impairment and transferred to proven oil and gas properties and included within property plant and equipment.

Proven oil and gas properties are accounted for in accordance with provisions of the cost model under IAS 16 "Property Plant and Equipment" and are depleted on unit of production basis based on the estimated proven and probable reserves of the pool to which they relate.

Impairment of development and production assets

A review is performed for any indication that the value of the Group's D&P assets may be impaired such as:

· significant changes with an adverse effect in the market or economic conditions which will impact the assets; or

· obsolescence or physical damage of an asset; or

· an asset becoming idle or plans to dispose of the asset before the previously expected date; or

· evidence is available from internal reporting that indicates that the economic performance of an asset is or will be worse than expected.

For D&P assets when there are such indications, an impairment test is carried out on the CGU. CGUs are identified in accordance with IAS 36 'Impairment of Assets', where cash flows are largely independent of other significant asset Groups and are normally, but not always, single development or production areas. When an impairment is identified, the depletion is charged through the Consolidated Statement of Comprehensive Income if the net book value of capitalised costs relating to the CGU exceeds the associated estimated future discounted cash flows of the related commercial oil reserves.

The CGU's identified by the company are Corporate along with West Rustavi, Satskhenisi and Norio given they are independent projects under individual Production Sharing Contracts ("PSC's). An assessment is made at each reporting as to whether there is any indication that previously recognised impairment charges may no longer exist or may have decreased. If such an indication exists, the Group estimates the recoverable amount. A previously recognised impairment charge is reversed only if there has been a change in the estimates used to determine the assets recoverable amount since the last impairment charge was recognised. If this is the case the carrying amount of the asset is increased to its recoverable amount, not to exceed the carrying amount that would have been determined, net of depreciation, had no impairment charges been recognised for the asset in prior years.

Property, plant and equipment and depreciation

Property, plant and equipment which are awaiting use in the drilling campaigns, and storage, are recorded at historical cost less accumulated depreciation. Property, plant and equipment are depreciated using the straight line method over their estimated useful lives, as follows:

· PPE - 6 years

The carrying value of Property, plant and equipment is assessed annually and any impairment charge is charged to the Consolidated Statement of Comprehensive income.

Leases

The Group assesses whether a contract is or contains a lease, at inception of the contract. The Group recognises a right-of-use asset and a corresponding lease liability with respect to all lease arrangements in which it is the lessee, except for short-term leases (defined as leases with a lease term of 12 months or less) and leases of low value assets (such as tablets and personal computers, small items of office furniture and telephones). For these leases, the Group recognises the lease payments as an operating expense on a straight-line basis over the term of the lease unless another systematic basis is more representative of the time pattern in which economic benefits from the leased assets are consumed. 

Inventories

Crude oil inventories are stated at the lower of cost and net realisable value. The cost of crude oil is the cost of production, including direct labour and materials, depreciation and an appropriate portion of fixed overheads allocated based on normal operating capacity of the production facilities, determined on a weighted average cost basis. Net realisable value of crude oil is based on the market price of similar crude oil at the balance sheet date and costs to sell, adjusted if the sale of inventories after that date gives additional evidence about its net realisable value at the balance sheet date.

The cost of crude oil is expensed in the period in which the related revenue is recognised.

Inventories of drilling tubulars and drilling chemicals are valued at the lower of cost or net realisable value, where cost represents the weighted average unit cost for inventory lines on a line by line basis. Cost comprises all costs of purchase, costs of conversion and other costs incurred in bringing the inventories to their present location and condition.

Decommissioning provision

Provisions for decommissioning are recognised in full when wells have been suspended or facilities have been installed.

A corresponding amount equivalent to the provision is also recognised as part of the cost of either the related oil and gas exploration and evaluation asset or property, plant and equipment as appropriate. The amount recognised is the estimated cost of decommissioning, discounted to its net present value, and is reassessed each year in accordance with local conditions and requirements.

Changes in the estimated timing of decommissioning or decommissioning cost estimates are dealt with prospectively by recording an adjustment to the provision, and a corresponding adjustment to the related asset.

The unwinding of the discount on the decommissioning provision is included as a finance cost.

Asset held for sale

Non-current assets (or disposal Groups) are classified as held for sale if their carrying amount will be recovered principally through a sale transaction rather than through continuing use. This condition is regarded as met only when the sale is highly probable and the asset (or disposal Group) is available for immediate sale in its present condition subject only to terms that are usual and customary.

Immediately before classification as held for sale, the measurement of the non-current assets (or all the assets and liabilities in a disposal Group) is brought up-to-date in accordance with applicable IFRSs. Then, on initial classification as held for sale, non--current assets (other than investment properties, deferred tax assets, financial assets and inventories) are measured in accordance with IFRS 5 that is at the lower of carrying value and fair value.

The Asheba asset ($329,000) held within the Ensign Resources Ltd subsidiary was classed as 'Held for sale' in the year ended 30 June 2017. The transaction was finalised in February 2018 and therefore there is no 'Held for sale' balance as at 30 June 2018 or 31 December 2019.

Taxation and deferred tax

Income tax expense represents the sum of the current tax and deferred tax charge for the period.

The Group's liability for current tax is calculated using tax rates that have been enacted or substantively enacted by the reporting date.

Deferred tax is recognised on differences between the carrying amounts of assets and liabilities in the financial information and the corresponding tax bases and is accounted for using the balance sheet liability method.

Deferred tax assets are recognised to the extent that it is probable that taxable profits will be available against which deductible temporary differences can be utilised.

Judgement is applied in making assumptions about future taxable income, including oil and gas prices, production, rehabilitation costs and expenditure to determine the extent to which the Group recognises deferred tax assets, as well as the anticipated timing of the utilisation of the losses.

Deferred tax is calculated at the tax rates that have been enacted or substantively enacted and are expected to apply in the period when the liability is settled, or the asset realised. Deferred tax is charged or credited to the statement of comprehensive income, except when it relates to items charged or credited directly to equity, in which case the deferred tax is also dealt with in equity.

Foreign currencies

Monetary assets and liabilities denominated in foreign currencies are translated into US dollars at the rates of exchange prevailing at the reporting date. Transactions in foreign currencies are translated at the exchange rate ruling at the date of the transaction. Exchange differences are taken to the Statement of Comprehensive Income.

The Company's functional currency is the pound sterling and its presentational currency is the US dollar and accordingly the financial statements have also been prepared in US dollars. The functional currencies of Block Norioskhevi Ltd, Satskhenisi Limited, Georgia New Ventures Inc and Ensign Resources Limited are the US dollar and the functional currencies of their branches in Georgia are the Georgian Lari.

Foreign operations

The assets are translated into US dollars at the exchange rate at the reporting date and income and expenses of the foreign operations are translated at the average exchange rates. Exchange differences arising on translation are recognised in other comprehensive income and presented in the other reserves category in equity.

Determination of functional currency and presentational currency

The determination of an entity's functional currency is assessed on an entity by entity basis. A company's functional currency is defined as the currency of the primary economic environment in which the entity operates. The functional currency of the Parent Company is the pound sterling, because it operates in the UK, where the majority of its transactions are in pounds sterling. The functional currencies of Block Norioskhevi Ltd, Satskhenisi Limited, Georgia New Ventures Inc and Ensign Resources Limited are the US dollar, because the majority of their transactions by value is in US dollars, and the functional currencies of their branches in Georgia are the Georgian Lari, because the majority of their transactions by value is in Georgian Lari.

The presentational currency of the Group for the 18 months period ended 31 December 2019 is US dollars. The presentational currency is an accounting policy choice.

Revenue  

Revenue from contracts with customers is recognised when the Group satisfies its performance obligation of transferring control of oil to a customer. Transfer of control is usually concurrent with both transfer of title and the customer taking physical possession of the oil, which is determined by reference to the oil sales agreement. This performance obligation is satisfied at that point in time.

The transaction price is agreed between the Group and the customer, with the amount of revenue recognised being determined by considering the terms of the Production Sharing Contract ("PSC") and the oil sales agreement for each oil sale.

Entitlement has two components:

1. Cost oil: which is the mechanism by which the Company recovers its costs incurred on an asset; and

2. Profit oil: which is the mechanism through which the profits are shared between the Company, its partner and the Georgian Oil & Gas Corporation. ("GOGC").

Finance income and expenses

Finance costs are accrued on a time basis, by reference to the principal outstanding and at the effective interest rate applicable. Finance expenses comprise interest or finance costs on borrowings.

Borrowings

Borrowings are recorded initially at fair value, net of attributable transaction costs. Borrowings are subsequently carried at their amortised cost and finance charges, including any premium payable on settlement or redemption, are recognised in the profit or loss over the term of the instrument using the effective rate of interest.

Financial instruments

The Group has adopted the amendments to IFRS 9 for the first time in the current year. The amendments to IFRS 9 clarify that for the purpose of assessing whether a prepayment feature meets the 'solely payments of principal and interest' (SPPI) condition, the party exercising the option may pay or receive reasonable compensation for the prepayment irrespective of the reason for prepayment. In other words, financial assets with prepayment features with negative compensation do not automatically fail SPPI.

Financial assets and financial liabilities are recognised on the Group's balance sheet when the Group becomes party to the contractual provisions of the instrument.

Fair value 

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. All assets and liabilities, for which fair value is measured or disclosed in the Financial Statements, are categorised within the fair value hierarchy, described as follows, based on the lowest-level input that is significant to the fair value measurement as a whole:

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

Level 2 - valuation techniques for which the lowest-level input that is significant to the fair value measurement is directly or indirectly observable; and

Level 3 - valuation techniques for which the lowest-level input that is significant to the fair value measurement is unobservable.

Financial assets

Financial assets are initially recognised at fair value, and subsequently measured at amortised cost, less any allowances for losses using the expected credit loss model, being the difference between all contractual cash flows that are due to the Group in accordance with the contract and all the cash flows that the Group expects to receive.

Impairment provisions for receivables from related parties and loans to related parties are recognised based on a forward looking expected credit loss model. The methodology used to determine the amount of the provision is based on whether there has been a significant increase in credit risk since initial recognition of the financial asset.

For those where the credit risk has not increased significantly since initial recognition of the financial asset, twelve month expected credit losses along with gross interest income are recognised. For those for which credit risk has increased significantly, lifetime expected credit losses along with the gross interest income are recognised. For those that are determined to be credit impaired, lifetime expected credit losses along with interest income on a net basis are recognised.

Financial liabilities

Financial liabilities are classified as either financial liabilities at fair value through profit and loss (FVTPL) or as other financial liabilities. The Group derecognises financial liabilities when, and only when, the Group's obligations are discharged or cancelled, or they expire.

Financial liabilities are classified at FVTPL when the financial liability is either held for trading or it is designated at FVTPL. A financial liability is classified as held for trading if it has been incurred principally for the purpose of repurchasing it in the near term or is a derivative that is not a designated or effective hedging instrument.

Financial liabilities at FVTPL are measured at fair value, with any gains or losses arising on changes in fair value recognised in profit or loss. The net gain or loss recognised in profit or loss incorporates any interest paid on the financial liability.

Other financial liabilities, including borrowings, are initially measured at fair value, net of transaction costs and are subsequently measured at amortised cost using the effective interest method, with interest expense recognised on an effective yield basis.

The effective interest method is a method of calculating the amortised cost of a financial liability and of allocating interest expense over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash payments through the expected life of the financial liability, or, where appropriate, a shorter period, to the net carrying amount on initial recognition.

Convertible loan notes ("CLN")

In accordance with IAS 32, the Group has classified the convertible debt in issue as a compound financial instrument.

The CLNs were issued in pounds sterling (the functional currency of the Company). Under the terms of these CLNs, the loan instruments were considered to be financial liabilities since there is an obligation to settle cash which the issuer cannot avoid. Since the CLNs include a term whereby a 10% discount is given on the IPO issue price, and since the value of the 10% discount cannot be known at inception of the CLN the number of potential shares is not known. This will mean that the CLN fails the "fixed for fixed" criteria and the conversion feature must therefore be accounted for as a derivative liability. For convertible loan notes which have been identified as containing embedded derivative liabilities, the embedded derivative liability is valued first, with the residual balance (after deducting the value of the embedded derivative from the CLN) being considered to be the host loan financial instrument. The embedded derivative is accounted for at fair value through profit or loss and the loan liability is carried at amortised cost. The embedded derivative must be fair valued at each reporting date and the changes recognised in the income statement. Interest expense is calculated using an effective interest rate method.

Share based payments

The fair value of options and warrants granted to directors and others in respect of services provided is recognised as an expense in the Statement of Comprehensive Income with a corresponding increase in equity reserves - 'other reserves'.

On exercise or cancellation of share options and warrants, the proportion of the share based payment reserve relevant to those options and warrants is transferred from other reserves to the accumulated deficit. On exercise, equity is also increased by the amount of the proceeds received.

The fair value is measured at grant date charged in the accounting period during which the option and warrants becomes unconditional.

The fair value of options and warrants are calculated using the Black-Scholes model, taking into account the terms and conditions upon which the options and warrants were granted. Vesting conditions are non-market and there are no market vesting conditions. These vesting conditions are included in the assumptions about the number of options and warrants that are expected to vest. At the end of each reporting period, the Company revises its estimate of the number of options and warrants that are expected to vest. The exercise price is fixed at the date of grant and no compensation is due at the date of grant. Where equity instruments are granted to persons other than employees, the statement of comprehensive income is charged with the fair value of the goods and services received.

2. Critical accounting judgments, estimates and assumptions

The Group makes estimates and assumptions regarding the future. Estimates and judgements are continuously evaluated based on historical experiences and other factors, including expectations of future events that are believed to be reasonable under the circumstances. In the future, actual experience may deviate from these estimates and assumptions. The key assumptions concerning the future and other key sources of estimation uncertainty at the reporting date that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year, are described below.

Recoverable value of Development & Production assets -judgement, estimates and assumptions

Costs capitalised in respect of the Group's development and production assets are required to be assessed for impairment under the provisions of IAS 36. Such an estimate requires the Group to exercise judgement in respect of the indicators of impairment and also in respect of inputs used in the models which are used to support the carrying value of the assets. Such inputs include estimates of oil and gas reserves, production profiles, oil price, oil quality discount, capital expenditure, inflation rates, and discount rates. The directors concluded there were impairment indicators in the current period. Therefore, the carrying value of the assets of the Group was tested for impairment and sensitivities around the main inputs above were considered, but the impairment testing supported the current carrying value of the assets of the Group and no impairment to the carrying value of the assets was considered necessary.

An assessment of impairment took place at the time that the West Rustavi intangible assets were transferred to Property, Plant and Equipment. There were no significant changes from the net present value model that would indicate impairment at that point.

Asset Decommissioning Provisions -estimates and assumptions

The Group's activities are subject to various laws and regulations governing the protection of the environment. The Group recognises management's best estimate of the asset decommissioning costs in the period in which they are incurred. Actual costs incurred in future periods could differ materially from the estimates.

Additionally, future changes to environmental laws and regulations, life of development and production assets, estimates and discount rates could affect the carrying amount of this provision. The Board assessed the extent of decommissioning required as at 31 December 2019 and concluded that a provision of $276,000 (2018: nil) should be recognised in respect of future decommissioning obligations at West Rustavi, Satskhenisi and Norio (refer note 19).

Share Options - estimates and assumptions

Share options issued by the Group relates to the Block Energy Plc Share Option Plan. The grant date fair value of such options is calculated using a Black-Scholes model whose input assumptions are derived from market and other internal estimates.

The key estimates include volatility rates and the expected life of the options, together with the likelihood of non-market performance conditions being achieved. Refer note 28.

Accounting for business combinations and fair value - estimates and assumptions 

Business combinations are accounted for at fair value. The assessment of fair value is subjective and depends on a number of assumptions. These assumptions include assessment of discount rates, and the amount and timing of expected future cash flows from assets and liabilities. In addition, the selection of specific valuation methods for individual assets and liabilities requires judgment. The specific valuation methods applied will be driven by the nature of the asset or liability being assessed. The consideration given to a seller for the purchase of a business or a company is accounted for at its fair value. When the consideration given includes elements that are not cash, such as shares, then the fair value of the consideration given is calculated by reference to the specific elements of the consideration given to the seller.

3. Segmental disclosures

IFRS 8 requires segmental information for the Group on the basis of information reported to the chief operating decision maker for decision making purposes. The Company considers this role as being performed by the Board of Directors. The Group's operations are focused on oil and gas development and production activities (Oil extraction segment) in Georgia and has a corporate head office in the UK (corporate function). Based on risks and returns the directors consider that there are two operating segments that they use to assess the Group's performance and allocate resources being the Oil extraction in Georgia, and the Corporate function including unallocated costs.

The segmental results are as follows:

4. Restatement of prior year financial statements

During the year ended 30 June 2018, the share based payments charge included £35,514 ($47,000) in respect of 4,400,000 options with a value of £152,501 ($201,000) granted to Paul Haywood on 6 April 2018. All of these options vested on listing on AIM on 11 June 2018 and, therefore, the whole value of £152,501 ($201,000) should have been charged in the year ended 30 June 2018. This resulted in an understatement of the expense by £116,987 ($154,000) in the year ended 30 June 2018. Consequently, the results for the year ended 30 June 2018 have been restated to include the additional share based payments charge of $154,000.

During the year ended 30 June 2016, the Company acquired 100% of the share capital of Taoudeni Resources Limited. The consideration payable comprised £29,307 ($38,000) cash, 599,177,916 ordinary shares (with a nominal value and fair value of 0.05 pence per share) payable on acquisition ("Initial Consideration Shares") and 617,702,713 ordinary shares payable at a later stage ("Deferred Consideration Shares"). At the time of the acquisition, the Company's shares were trading at 0.05 pence per share, resulting in a fair value of £299,589 ($388,000) for the Initial Consideration Shares and £308,851 ($400,000) for the Deferred Consideration Shares.

However, in the financial statements for the year ended 30 June 2016, the £308,851 ($400,000) value of the Deferred Consideration Shares was not included in the cost of acquisition and the consideration payable. As at 30 June 2016, the effect of the error was to understate the value of E&E assets (included in intangible assets) and other reserves (share based payments) by £308,851 ($400,000).

In the financial statements for the year ended 30 June 2017, the principal asset that had been acquired with Taoudeni Resources Limited (i.e. 100% of the shares in Antubia Resources Limited) was held for sale and it was fair valued at its carrying value of £329,000 ($426,000) and there was gain or loss recorded in the income statement. However, if the £308,851 ($400,000) value of the Deferred Consideration Shares had been included in the value of the asset held for sale, it would have been written down to its fair value of £329,000 ($426,000) and there would have been a £308,851 ($400,000) reduction in the value of the E&E assets and a loss of £308,851 ($400,000) recognised in the income statement for that year.

During the year ended 30 June 2018, it was identified that some of the sellers of Taoudeni Resources Limited waived their rights to receive Deferred Consideration Shares during the year ended 30 June 2017, but this transaction was not recognised in the financial statements for the year ended 30 June 2017. If the waiver of rights to receive deferred consideration shares had been recognised in the financial statements, the effect would have been to decrease other reserves by £163,425 ($211,000) and increase the retained deficit by the same amount.

During the year ended 30 June 2018, some of the Deferred Consideration Shares were issued. 72,120 ordinary shares were issued instead of 18,029,997 Deferred Consideration Shares to adjust for a 1 for 50 share consolidation and a 1 for 5 share consolidation that had taken place. Consequently, to adjust for the share split and consolidation, the share price at the time of acquisition was also adjusted from 0.05 pence per share to 12.5 pence per share. However, in the financial statements for the year ended 30 June 2018, the 72,120 ordinary shares were issued and valued using a share price of 4 pence per share (being the share price at the time of issue) instead of the share price at the time of the acquisition of Taoudeni Resources Limited as adjusted for the share split and share consolidation of 12.5 pence per share. As at 30 June 2016, the effect of the error was to understate share premium by £7,663 ($10,000) and overstate other reserves (share based payments) by £7,663 ($10,000).

5. Revenue

The first crude oil sale was made in December 2017 from the Norioskhevi and Satskhenisi oil fields, and in November 2019 from the West Rustavi oil field.

6. Depreciation and Depletion on Oil and Gas assets

7. Administration costs

8. Employees

The average monthly number of employees during 2019 was 37 (2018: 2) split as follows:

The wages and salaries of the Company are equivalent to those of the Group. The share based payments comprised the fair value of options granted to directors and employees in respect of services provided.

Key management and personnel are considered to be the directors.

9. Finance Income

During the current period, the Company reached a settlement agreement on the loan for $59,000, whereby it was agreed to settle the loan for an amount of £20,000 ($27,000), through the issue of 500,000 at £0.04p, resulting in a gain on settlement of loan of £24,550 ($32,000) being recorded in finance income.

10. Taxation

Based on the results for the period, there is no charge to UK or foreign tax. This is reconciled to the accounting loss as follows:

The Group offsets deferred tax assets and liabilities if, and only if, it has a legally enforceable right to offset current tax assets and current tax liabilities and the deferred tax assets and deferred tax liabilities related to corporation taxes levied by the same tax authority. Due to the tax rates applicable in the jurisdictions of the Group's subsidiary entities (being 0%) no deferred tax liabilities or assets are considered to arise.

For any other jurisdictions which the Group has not recognised deferred income tax assets for tax losses carried forward for entities in which it is not considered probable that there will be sufficient future taxable profits available for offset. Unrecognised deferred income tax assets related to unused tax losses. The Company has UK corporation tax losses available to carry forward against future profits of approximately$8,296,000 (2018: $2,262,000).

11. Loss per share

1 Refer note 4.

The basic loss per share is derived by dividing the loss for the period attributable to ordinary shareholders by the weighted average number of shares in issue.

1 Refer note 4.

Diluted share earnings per share has not been calculated as the options and warrants have no dilutive effect given the loss arising for the period/year.

12. Acquisition of Subsidiaries and associated PSC interests

Acquisition of interest in the West Rustavi PSC

The initial 5% interest in the West Rustavi PSC was acquired from Georgia Oil and Gas Limited ("GOG") for $100,000 in cash in the year ended 30 June 2017. On admission to AIM in June 2018, Block Energy acquired a further 20% working interest in the West Rustavi PSC from GOG for the consideration of $1milion in shares and $500,000 in cash. At 30 June 2018, the total Group interest in the West Rustavi PSC was 25%.

During the 18 months period ended 31 December 2019, Block Energy Plc, through Georgia New Ventures Inc. ("GNV"), increased its working interest in the West Rustavi PSC to 100% through a three staged settlement, as follows:

· Stage 1: Increase from 25% to 71.5% working interest by acquiring an additional 46.5% working interest for the consideration of $250,000 cash and $500,000 in shares -completed on 13 March 2019.

· Stage 2: increase from 71.5% to 90% working interest by acquiring an additional 18.5% working interest for the consideration of $250,000 in cash -completed on 12 July 2019.

· Stage 3: increase from 90% to 100% working interest by acquiring an additional 10% working interest for the consideration of $500,000 in shares -completed on 19 July 2019.

The increases in working interest on this transaction have been treated as asset acquisitions and recorded at cost.

Acquisition of Satskhenisi Ltd and associated 90% interest in the Satskhenisi PSC

On 1 August 2017, the Company acquired 100% of the share capital of Satskhenisi Limited ("Satskhenisi"), a Marshall Islands registered company, and through this transaction a 90% interest in the Satkhenisi PSC.

On acquisition, the company paid $1,000 for the issuance of 1,000 ordinary Satskhenisi shares. 70,000,000 ordinary shares valued at 0.85 pence were additionally issued as part of the consideration for the interest in the Satskhenisi PSC.

Satskhenisi's principal activity is oil and gas extraction, and it was acquired for the purpose of facilitating petroleum operations under the Satskhenisi PSC. Petroleum operations include all activities relating to exploration, development, production and transportation of oil and gas to the sales point.

The transaction has been classed as a business combination under IFRS 3.

Details of the fair value of identifiable assets and liabilities acquired, purchase consideration and goodwill are as follows:

During the period since acquisition, Satskhenisi Ltd contributed $149,000 to the Group loss and revenue of $62,000.

The intangible asset fair value was derived from the Competent Persons Report (CPR), and is based on P50 NPV with a discount rate of 10%. The PPE and Spare parts were fair valued based on the condition of the items, and application of an industry accepted discount to the original cost. The oil inventory was fair valued by Management based on the post-acquisition recoverable value.

Increase in Interest in Norio PSC and transfer into Norioskhevi Ltd

On 20 April 2017, Block Energy Plc acquired Block Norioskhevi Ltd (Norio), a BVI incorporated company. During the year ended 30 June 2018, the interest increased from 38% to 100%, through $610,0000 cash consideration payment, and $250,000 share issue on AIM listing. In total, the consideration paid for the 100% interest in the Norio PSC was a cash payment of $1,300,000 and an issue of $250,000 worth of Block Energy Plc ordinary shares.

This transaction has been treated as an asset acquisition and recorded at cost.

13. Sale of Taoudeni Resources SARL

On the 8 November 2017, an SPA was signed for the sale of Taoudeni Resources SARL. The consideration receivable was agreed as either:

a) A sum of $40,000; or

b) Shares in the capital of the Buyer with a value of $40,000 (price being 30 day average weighted volume if buyer is listed).

The consideration is payable on the earlier of 30 days from the date of first production or the date falling on the fifth anniversary of the agreement (8 November 2023). Management have taken the view that five years is the most viable time period at which consideration will be received and have discounted this amount to a present value of $36,000.

14. Discontinued operations - Antubia Ltd

The Antubia Ltd sale completed on 26 February 2018 for a total consideration of US $600,000. The assets fair value was considered to be its carrying value. The analysis of total gain on disposal, carrying values of the assets and liabilities disposed, and also the net cash inflow from the disposal were as follows:

15. Intangible assets

The additions in the current period are a result of the West Rustavi PSC increase from 25% to 100%. The transfer to PPE relates to the West Rustavi ($1,887,000) and Satskhenisi PSC ($257,000).

The additions in the prior period are a result of the West Rustavi PSC increase from 5% to 25%. The transfer to PPE relates to the Norioskhevi ($740,000) and Satskhenisi PSC ($16,000).

All the intangible assets are located in Georgia.

16. Property, Plant and Equipment

Carrying amount of property plant and equipment by cash generative unit:

At the end of the current period, the directors concluded there were impairment indicators in the current period that warranted impairment testing to be prepared with respect to the carrying value of the assets of the Group. Results of the impairment testing supported the currently carrying value of the assets of the Group and as such no impairment to the carrying value of the assets was required.

An assessment of impairment took place at the time that the West Rustavi intangible assets were transferred to Property, Plant and Equipment. There were no significant changes from the net present value model that would indicate impairment at that point.

17. Asset Held for Sale

Details of asset held for sale are as follows:

On 8 June 2017, the Antubia Head of Terms was signed, and the asset classed as held for sale. The SPA was signed on 6 September 2017. The asset's fair value was considered to be its carrying value. The sale of Antubia was finalised and completed on 26 February 2018.

Antubia Ltd was a subsidiary of Ensign Resources and was sold for consideration of $600,000 giving rise to a gain on disposal of $168,000.

18. Inventory

19. Provisions

Decommissioning provisions are based on management estimates of work and the judgement of the directors. By its nature, the detailed scope of work required, and timing of such work is uncertain.

20. Trade and other receivables

During the period, the Company registered as an employer in Canada and Canadian income tax and employee's social security were payable. In December 2019, the Company paid these liabilities of $77,000 for Roger McMechan to the tax collector during December 2019 and this effectively formed a loan to the director and included in other receivables - refer Note 33. The Company is currently negotiating a repayment plan with Roger, with the loan expected to be repaid in full by 31 July 2020.

The 2018 balance relates mainly to VAT recoverable, and consideration to be received from the sale of Taoudeni SARL (please refer to note 13).

21. Cash and cash equivalents

Cash and cash equivalents consist of balances in bank accounts used for normal operational activities. The vast majority of the cash was held in an institution with a Standard & Poor's credit rating of A-1.

22. Non - cash transactions

On 1 August 2017, the company issued 70,000,000 ordinary shares at a price of 0.85p per share with a value of $787,522 (£595,000), for the acquisition of Satskhenisi Ltd and a 90% interest in the Satskhenisi PSC.

On 11 June 2018, the following shares were issued in settlement of liabilities:

Also on 11 June 2018, 4,695,717 shares at 4p ($250,000) were issued on behalf of Block Norioskhevi Limited as part of the PSC purchase agreement, and 18,782,870 shares were issued at 4p ($1,000,00) on behalf of Georgia New Ventures Inc as part of the West Rustavi PSC consideration.

The listing also activated the conversion of all outstanding $360,000 convertible loan notes at a discounted price of 3.6p which resulted in the issue of 10,759,132 shares with a value of $516,000 (£387,329).

On 4 March 2019, the Company issued 1,846,791 shares at 3.8p to various consultants and professional advisors in settlement of fees along with the settlement outstanding loan (refer Note 26) for a value of $92,000 as follows:

On 13 March 2019, the Company issued 9,550,870 ordinary shares at 4p with a value of $500,000 to GOG as part of the consideration for a further 46.5% interest in the West Rustavi PSC.

On 5 June 2019, the Company issued 1,091,291 ordinary shares at 15p with a value of $208,000 as full and final settlement of deferred consideration in line with the Taoudeni Resources Limited share purchase agreement (details of which are set out in the Company's Admission Document dated 4 June 2018). 977,383 of these ordinary shares were allotted to Plutus Strategies Limited, a company in which Paul Haywood, Chief Executive, and Niall Tomlinson, former Executive Director, have an interest. The agreement to issue these shares was completed on the 3rd March 2016 at a time when the Company's share price (adjusted for subsequent share consolidations) was 15p.

On 5 June 2019, the Company issued 377,834 ordinary shares to non-executive directors and a consultant in settlement of fees. 163,418 of the ordinary shares were allotted to Philip Dimmock, Chairman, at an average price of 3.67p in settlement of fees amounting to £6,000 ($7,628) due to him, and 69,957 ordinary shares were allotted to Chris Brown, Non-Executive Director, at an average price of 3.81p in settlement of fees of £2,667 ($3,390) due to him. The issue price of these shares has been calculated monthly, based on the 30-day volume weighted average price ("VWAP") for the periods to which these fees relate. The remaining 144,459 ordinary shares were allotted to a consultant to the Company as settlement for services with a value of $10,000 provided on the Georgian operations for the five months from January 2019 to May 2019.

On 15 July 2019, the Company issued 3,326,268 ordinary shares at 11.99p with a value of $500,000 to GOG for the final 10% interest in the West Rustavi PSC and 772,727 ordinary shares at an issue price of 11p per share to settle liabilities amounting to $106,655 (£85,000) for professional services provided to the Company.

23. Trade and Other Payables

Trade and other payables principally comprise amounts outstanding for corporate services and operational expenditure.

24. Share capital

On 3 July 2017, through an equity placing of 10,588,235 ordinary shares at a price of 0.85p per share, $117,000 of funds were raised in conjunction with $272,000 of convertible loan notes.

On 1 August 2017, the company issued 70,000,000 ordinary shares at a price of 0.85p per share with a value of $788,000, for the acquisition of Satskhenisi Ltd and a 90% interest in the Satskhenisi PSC.

On 31 August 2017, the company raised $323,650 funds through the placing of 29,411,765 new shares at 0.85p per share.

On 15 November 2017, each 5 Ordinary shares of 0.05p were consolidated into one Ordinary Share of 0.25p, resulting in a reduction in the number of Ordinary Shares from 489,841,048 to 97,968,209.

The issue of equity on AIM listing on 11 June 2018 comprised of the following:

On 11 June 2018, the Company raised gross proceeds of $6,644,000 through the placing of 125,000,000 ordinary shares at 4p per share.

On 11 June 2018, the Company issued 18,782,870 ordinary shares at 4p with a value of $1,000,000 to Georgian Oil and Gas for a further 20% interest in the West Rustavi PSC.

On 11 June 2018, the Company issued 4,695,717 shares at 4p with a value of $250,000 to GOG as part of the purchase consideration for the Group's 100% interest in the Norioskhevi PSC.

On 11 June 2018, the Company converted all of the existing convertible loan note balance through the issue of 10,759,132 shares at a discounted price of 3.6p with a value of $516,000.

On 11 June 2018, the Company issued 1,841,673 shares at 4p to various consultants and professional advisors in settlement of fees. This issue was apportioned between directors (1,057,500 shares of value $56,00), and consultants (784,173 shares of value $43,000). See note 20 for further information.

On 4 March 2019, the Company issued 1,846,791 shares at an average price of 3.8p to various consultants and professional advisors in settlement of fees along with the settlement of outstanding loan (refer note 26).

On 13 March 2019, the Company issued 9,550,870 ordinary shares at 4p with a value of $500,000 to GOG as part of the consideration for a further 46.5% interest in the West Rustavi PSC.

On 15 April 2019, the Company issued 1,837,500 ordinary shares pursuant to the exercise of a warrant at 4p.

On 1 May 2019, the Company issued 3,624,326 ordinary shares pursuant to the exercise of a warrants at 4p.

On 15 May 2019, the Company issued 225,000 ordinary shares pursuant to the exercise of a warrant at 4p.

On 21 May 2019, the Company raised gross proceeds of $5,958,000 through the placing of 42,820,000 ordinary shares at 11p per share.

On 23 May 2019, the Company issued 1,723,650 ordinary shares pursuant to the exercise of options at 4p.

On 4 June 2019, the Company raised gross proceeds of $9,248,000 through the placing of 66,270,000 ordinary shares at 11p per share.

On 5 June 2019, the Company issued 1,091,291 ordinary shares at 15p as full and final settlement of deferred consideration in line with the Taoudeni Resources Limited share purchase agreement (details of which are set out in the Company's Admission Document dated 4 June 2018). 977,383 of these ordinary shares were allotted to Plutus Strategies Limited, a company in which Paul Haywood, Chief Executive, and Niall Tomlinson, former Executive Director, have an interest. The agreement to issue these shares was completed on the 3rd March 2016 at a time when the Company's share price (adjusted for subsequent share consolidations) was 15p.

On 5 June 2019, the Company issued 377,834 ordinary shares to non-executive directors and a consultant in settlement of fees. 163,418 of the ordinary shares were allotted to Philip Dimmock, Chairman, at an average price of 3.67p in settlement of fees amounting to $7,628 (£6,000) due to him, and 69,957 ordinary shares were allotted to Chris Brown, Non-Executive Director, at an average price of 3.81p in settlement of fees of $3,390 (£2,667) due to him. The issue price of these shares has been calculated monthly, based on the 30-day volume weighted average price ("VWAP") for the periods to which these fees relate. The remaining 144,459 ordinary shares were allotted to a consultant to the Company as settlement for services with a value of $10,000 provided on the Georgian operations for the five months from January 2019 to May 2019.

On 13 June 2019, the Company issued 650,674 ordinary shares pursuant to the exercise of a warrants at 4p.

On 5 July 2019, the Company issued 375,000 ordinary shares pursuant to the exercise of a warrant at 4p.

On 15 July 2019, the Company issued 3,326,268 ordinary shares at 11.99p with a value of $500,000 to GOG for the final 10% interest in the West Rustavi PSC and 772,727 ordinary shares at an issue price of 11p per share to settle liabilities amounting to $106,655 (£85,000) for professional services provided to the Company.

On 13 December 2019, the Company issued 900,000 ordinary shares pursuant to the exercise of a warrant at 4p.

The Ordinary Shares consist of full voting, dividend and capital distribution rights and they do not confer any rights for redemption. The Deferred Shares have no entitlement to receive dividends or to participate in any way in the income or profits of the Company, nor is there entitlement to receive notice of, speak at, or vote at any general meeting or annual general meeting.

25. Share premium account

26. Reserves

The following describes the nature and purpose of each reserve within owners' equity.

27. Warrants

As at 31 December 2019, all warrants were available to exercise and were exercisable at prices between 4p and 12.5p (30 June 2018: 4p and 15p). The weighted average life of the warrants is 3.2 years (30 June 2018: 2.1 years). The additions represent warrants issued with three year terms (30 June 2018: terms ranging from 81 days to 5 years).

28. Share based payments

During the period, the Group operated a Block Energy Plc Share Option Plan (Share Option Scheme).

Under IFRS 2, an expense is recognised in the statement of comprehensive income for share based payments, to recognise their fair value at the date of grant. The application of IFRS 2 gave rise to a charge of $862,000 for the 18 months period ended 31 December 2019. The equivalent charge for the year ended June 2018 was $201,000 which was restated as of 30 June 2018, refer note 4. The warrants charge for the comparative period represents only 22 days' valuation charge, as all warrants became exercisable on AIM admission (11 June 2018).

The Group recognised total expenses (all of which related to equity settled share-based payment transactions) under the current plans of:

Share Option Scheme

The Option Plan provides for an exercise price equal to or higher than the closing market price of the Group shares on the date of the grant. The vesting period varies between 66 days to 3 years. The options expire if they remain unexercised after the exercise period has lapsed and have been valued using the Black Scholes model.

The following table sets out details of all outstanding options granted under the Share Option Scheme.

The weighted average exercise price of the share options exercisable at 31 December 2019 is $0.04 (30 June 2018: $0.03). The weighted average contractual life of the share based payments outstanding at 31 December 2019 is 8.5 years (30 June 2018: 9.8 years).

The estimated fair values of options which fall under IFRS 2, and the inputs used in the Black Scholes Option model to calculate those fair values are as follows: