WEN.L Regulatory News (WEN)

PRESS RELEASE 30 June 2023

WENTWORTH RESOURCES PLC("Wentworth" or the "Company")

Final Results for the Year Ended 31 December 2022

Wentworth (AIM: WEN), the independent, Tanzania-focused natural gas producer is pleased to announce its audited financial results for the year ended 31 December 2022. All values are expressed in US dollars unless stated otherwise.

Wentworth confirms, following release of its 2022 Financial Results today that both its 2022 Annual Report and Sustainability Report will be available shortly on the Company's website at www.wentplc.com.

On 5 December 2022, the boards of Wentworth and Établissements Maurel & Prom S.A. ("M&P") announced that they had reached agreement on the terms of a recommended all cash offer by M&P for the entire issued, and to be issued, share capital of Wentworth (the "Acquisition"). The outcome of the Acquisition is still pending and as such details of Wentworth's 2023 Annual General Meeting ("AGM") will be announced in due course. It is anticipated that the AGM will be held no later than 15 December 2023.

HIGHLIGHTS

2023 Outlook

· 2023 production guidance increased to 90 - 100 MMscf/d for Mnazi Bay, up from previous guidance 85 - 95 MMscf/d issued in March 2023 (2022 production 90 MMscf/d)

· The contracted price for gas produced at Mnazi Bay has increased from $3.44/MMbtu to $3.71/MMbtu; effective from 1 January 2023

· Balance sheet strengthened; remaining debt free with current cash (as at 15 June 2023) of $38 million

· The Company anticipates, given the absence of recent investment in the Mnazi Bay field and continued cost recovery, that H2 2023 production will include significant periods where costs have been fully recovered, leading to substantially lower revenues

· The Government's re-examination of the historic cost pool audit for the years 2013 - 2015 is ongoing; any reduction in the current expected cost pool balance as a result is likely to further impact revenue going forward 

· Continued strong track record of safe operations; no LTIs reported in 2023 to date

Financial

· Mnazi Bay gas sales revenue of $30.8 million, an increase of 30% (2021: $23.8 million), underpinned by long-term fixed gas price contracts and strong production

· Adjusted earnings before interest, tax, depreciation and amortisation ("EBITDAX") of $25.7 million, an increase of 89% (2021: $13.6 million) excluding non-recurring expenses of $335k (2021: $502k)

· E&E and PPE assets impairment of $25.0 million (2021: nil) driven by technical accounting revision in light of the pending Acquisition resulting in net loss of $13 million for 2022 (2021: net profit of $6.1 million)

· Debt free with total cash at year-end of $30.9 million (2021: $22.8 million)

· Strong balance sheet, together with the enhanced operational performance of the Mnazi Bay gas field supported the Company's ongoing dividend programme, with an interim dividend declared of $1.45 million, up 10% from H1 2021

· Whilst a final dividend for FY22 would normally be declared, this is currently suspended pending the outcome of the Acquisition; should the Acquisition not proceed, the Board intend to consider reinstating a final dividend for FY22

Operational

· No Lost Time Incidents ("LTI") in 2022, with a total of 6 years and 151 days without an LTI

· 2022 average gross daily gas production increased by 10% to 90.0 MMscf/d from 81.6 MMscf/d in 2021, higher than mid-year guidance

· Gross 2P Reserves of 137 Bscf as at 31 December 2022 (2021: 135.2 Bscf)

Corporate

· In December 2022, the Company announced it had reached agreement on the terms of a recommended acquisition by M&P (Wentworth's JV partner and operator of the Mnazi Bay Gas Production Facility) of the entire issued and to be issued share capital of Wentworth

· The Acquisition was approved by Wentworth Shareholders at the Court Meeting and the General Meeting which were held on 23 February 2023, but remains subject to the satisfaction or (where capable of being waived) waiver of the other conditions to the Acquisition as set out in Part III (Conditions to and certain further terms of the Acquisition and the Scheme) of the Scheme Document

· Representatives of the Company and M&P attended a preliminary hearing before the Fair Competition Commission (the "FCC") (the "Hearing") in Tanzania on 7 June 2023, at which various Tanzanian governmental parties were present. A number of concerns were raised at the Hearing, which may impact the likelihood of the FCC approving the Acquisition in its current form. A ruling is expected within the coming weeks

· On 9 June 2023, the Company received a letter from TPDC in which TPDC notified Wentworth Gas Limited, the Company's main operating subsidiary, of its decision purportedly to exercise its right of first refusal in respect of Wentworth's interest in the Mnazi Bay asset pursuant to section 86 (7) of the Tanzanian Petroleum Act, Cap 392 (the "ROFR")

· M&P and Wentworth intend to consult with relevant Tanzanian government stakeholders about how the above concerns may be satisfactorily addressed and how TPDC intends the ROFR to apply to the Acquisition

· There can be no certainty that the Acquisition conditions will be satisfied or (where capable of being waived) waived by M&P. In the light of these developments the Company now expects that, if the conditions are satisfied or (where capable of being waived) waived by M&P, the Acquisition will complete in H2 2023 

Sustainability

· Commenced ESG reporting alignment with Taskforce on Climate-related Financial Disclosures ("TCFD")

· 4.1 million tonnes saved in CO2 emissions from the use of natural gas from Mnazi Bay compared to diesel over the life of the Mnazi Bay gas production project

· 5.6 billion litres of diesel and heavy fuel oils displaced by natural gas from Mnazi Bay Concession over the life of the Mnazi Bay gas production project

· The Company reduced its Scope 1 emissions by 8% from 2021, to 428t CO2e

· Wentworth's carbon intensity per boe of 0.29 kg CO2e/boe is one of the lowest reported in the London E&P sector

· Continued commitment to our local communities through our corporate social responsibility efforts and dedicated foundation programmes

· Wentworth's domestic natural gas continues to play a critical role in increasing energy access to communities across Tanzania and remains a key partner for the Government of Tanzania to deliver on its ambition to provide universal energy access in Tanzania by 2030 in line with the UN Sustainable Development Goals

Katherine Roe, CEO, commented:

"2022 was a landmark year for Wentworth, representing the culmination of years of hard work. Tanzania's increasing demand for energy, continued good performance from the Mnazi Bay reservoirs and impeccable operational safety record all contributed to 2022's strong performance. H1 2023 continued in the same vein, although we expect 2023's financial outcome to be heavily first half weighted.

"We are incredibly proud of what we achieved throughout the year and we would like to thank our stakeholders for their ongoing support. We continue to work with M&P and our stakeholders towards a successful completion of the Acquisition. We believe this will represent a considerable value realisation for shareholders."

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

The accompanying notes form part of these financial statements.

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

The accompanying notes form part of these financial statements

The financial statements of Wentworth Resources plc, registered number 127571 were approved by the Board of Directors and Authorised for issue on 29 June 2023.

Signed on behalf of the Board of Directors.

Katherine Roe

Chief Executive Officer

29 June 2023

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

The accompanying notes form part of these financial statements.

CONSOLIDATED STATEMENT OF CASH FLOWS

The accompanying notes form part of these financial statements.

1. Incorporation and basis of preparation

Wentworth Resources plc ("Wentworth" or the "Company") is an East Africa-focused upstream natural gas production company. These audited consolidated financial statements include the accounts of the Company and its subsidiaries (collectively referred to as "Wentworth Group of Companies" or the "Group"). The Company is actively involved in oil and gas exploration, development and production operations. Wentworth is incorporated in Jersey and shares of the Company as at 31 December 2022 were held and listed on the AIM Market of the London Stock Exchange (ticker: WEN).

The Company's registered office is located at 4th Floor, St Paul's Gate, 22 - 24 New Street, St Helier, Jersey, JE1 4TR. The Group maintains offices in Jersey and Tanzania.

Basis of presentation and statement of compliance

These consolidated financial statements have been prepared on a historical cost basis and have been prepared using the accrual basis of accounting. The consolidated financial statements are prepared in accordance with UK-adopted International Financial Reporting Standard ("IFRS"), as issued by the International Accounting Standards Board (IASB) in conformity with the requirements of the Companies (Jersey) Law 1991.

The consolidated financial statements were approved by the Board of Directors on 29 June 2023.

The Group continue to apply the judgement that the business will continue as a going concern for the foreseeable future, further discussion on which is noted below.

Functional and presentation currency

These consolidated financial statements are presented in US dollars which is the functional currency of the majority of its subsidiaries.

Basis of consolidation

These consolidated financial statements include the accounts of the Company and its subsidiaries. Subsidiaries are entities that the Company controls. An investor controls an investee when it is exposed, or has rights, to variable returns from its involvement with the investee and can affect those returns through its authority over the investee. The existence and effect of potential voting rights are considered when assessing whether a company controls another entity. Subsidiaries are fully consolidated from the date on which control is transferred to the Company. They are deconsolidated from the date that control ceases. The legal entities within the Wentworth Group of Companies are disclosed within note 14. All intercompany transactions, balances and unrealised gains on transactions between the parent and subsidiary companies are eliminated on consolidation.

The Group holds a 31.94% participation interest in the Mnazi Bay Concession through two subsidiaries. Wentworth Gas Limited ("WGL"), which is a wholly owned subsidiary, owns a 25.40% participation interest and Cyprus Mnazi Bay Limited ("CMBL") owns a 16.38% participation interest of which the Group's proportionate share is 6.54% (i.e. Wentworth's interest of 39.925% in CMBL multiplied by 16.38% participation interest). CMBL is considered a jointly controlled entity and accounted for as a joint operation rather than a joint venture. The Group accounts for its share of CMBL assets and liabilities as CMBL has contractual agreements which establish that the parties to the joint arrangement have rights to the assets and obligations for the liabilities of ownership in proportion to their interest in the arrangement.

Going Concern

Wentworth's business activities, together with the factors likely to affect any future development, performance and position are set out in the Strategic Report. The financial position of the Group, its cash flows and liquidity position are described in the Financial Review contained within that report.

2022 saw Wentworth achieve its best operating and financial results in our history, despite unprecedented upward inflationary pressures on our expenditures. Given the essential nature of services provided and the forecasted impact of recent world events on both international capital markets and production operations in the United Republic of Tanzania, the Group notes that an interruption to production remains remote.

On 5 December 2022, Wentworth received, and the Board of Directors subsequently recommended the acceptance of a cash offer for 100% of the issued and to be issued share capital of the Company for 32.5 pence per share by M&P. M&P is the ultimate parent company of the Operator of the Mnazi Bay licence. On 23 February 2023, shareholders voted in favour of a scheme of arrangement at a court meeting held the same day. Following this meeting, shareholders voted to pass the resolution in connection with the amendment of Wentworth's Articles in order to implement the scheme of arrangement once the Jersey Court sanctions this.

Following the ratification of the proposed acquisition by shareholders there were certain legal and administration consents to be obtained, including the consent of the Tanzanian government to the proposed transaction, the waiver of any right of first refusal or pre-emption right to which TPDC may be entitled in respect of the Mnazi Bay Asset and approval from the Tanzanian Fair Competition Commission (FCC).

At a preliminary hearing held by the FCC on 7 June 2023 a number of concerns were raised which may impact the likelihood of the FCC approving the proposed acquisition in its current form. On 9 June 2023 TPDC informed the Group of its decision to exercise its right of first refusal (ROFR) for Wentworth's interest in the Mnazi Bay asset pursuant to section 86(7) of the Tanzanian Petroleum Act, Cap 392. Discussions with TPDC and the FCC on the way forward and resolution of these issues are ongoing as at the date of this report.

It is acknowledged that the above developments introduce uncertainty as to the timing and manner in which an acquisition (if any) of the Group will be finalised. The Directors expect that the Group would continue to operate in its existing state if none of the proposed arrangements set out above proceed during the going concern period. Should an acquisition proceed, it is uncertain how the acquirer intends to integrate Wentworth's interest in the Mnazi Bay asset with its own operations and whether the legal entities in which the Group operates will remain in their current form or cease to operate, in which case the Group will no longer be a going concern.

Apart from the uncertainty noted above, the Directors view the continued timely settlement of gas-sales invoices by the Government of Tanzania to be the most significant financial risk currently faced by the Group with respect to its ongoing operations.

The Directors have prepared base and sensitised cash flow information for a period of at least 12 months from the date of their approval of these financial statements (the going concern assessment period) on the assumption that the group continues in its current form. Based on the application of severe but plausible down-side scenarios, which include non- settlement of future gas sales, potential changes in demand, capital spend and operating costs, the Directors believe that if the Group were to continue in its present structure it is well placed to manage the Group's financial exposures and has sufficient cash resources for working capital needs, committed capital and operational expenditure programs for the going concern assessment period.

Based on the above factors and with respect to the going concern assessment period, the Directors believe that it remains appropriate to prepare the financial statements on a going concern basis. However, the uncertainty regarding the proposed acquisition and the subsequent integration of the Group's operations into that of the acquirer`s should the acquisition proceed, indicates the existence of a material uncertainty related to events or conditions that may cast significant doubt on the Group's ability to continue as a going concern and, therefore, that the group may be unable to realise its assets and discharge their liabilities in the normal course of business in a plausible situation that the Group is reorganised by the acquiring entity. The Group, in its current form, does have the resources to be able to satisfy its expected obligations as they fall due. The financial statements do not include any adjustments that would result from the basis of preparation being inappropriate.

Changes in accounting policies

A number of new standards are effective from 1 January 2022, but they do not have material effect on the Group's financial statements.

New and amended standards

The following amended standards and interpretation are effective for financial years commencing on or after 1 January 2023. The Group does not intend to adopt the standards below, before their mandatory application date.

Future accounting pronouncements

The Company intends to adopt the above listed standards and interpretations in our financial statements for the annual period beginning 1 January 2023. The Company does not expect the interpretation to have a material impact on the financial statements.

2. Summary of accounting policies

The principal accounting policies applied in the preparation of these Company and Group consolidated financial statements are set out below. These policies have been consistently applied to all the years presented, unless otherwise stated.

Joint arrangements

The analysis of joint arrangements requires management to analyse numerous agreements and the requirements of IFRS 10 and IFRS 11. Judgements made by management include whether joint control exists and the extent of exposure to the underlying assets and liabilities of the joint arrangement. By virtue of the provisions contained within the underlying shareholder agreements, to which Cyprus Mnazi Bay Limited (see below for accounting considerations of this entity) and Wentworth Holdings Gas Limited, a wholly owned subsidiary of Wentworth Resources plc, are parties to, management have assessed that the Company has a joint arrangement through its 31.94% ownership in the licence and accounts for this interest as a joint operation as no single individual shareholder may exercise absolute control over the entity. The agreement is bilateral, with Maurel & Prom Mnazi Bay Holdings SAS (M&P) and whilst the Operator may make day-to-day decisions, the overall strategic direction of the partnership requires unanimous consent between M&P and Wentworth. M&P hold 48.06% share in the licence and 20% is owned by TPDC. As such the Group is entitled to its share of production from the licence and therefore revenue generated from the sale of this output. Wentworth also recognise its share of all expenses incurred by the joint arrangement, its right to the assets, as well as its share of the liabilities and obligations.

Accounting treatment of CMBL

The Group holds a 31.94% participation interest in the Mnazi Bay Concession through two subsidiaries. WGL is a wholly owned subsidiary, which owns a 25.40% participation interest and Wentworth Holdings (Jersey) Limited is a wholly owned subsidiary that holds 39.925% in CMBL, which owns a 16.38% participation interest, of which the Group's proportionate share is therefore 6.54% (i.e. Wentworth's interest of 39.925% interest in CMBL, multiplied by 16.38% participation interest). CMBL is considered a jointly controlled entity and accounted for as a joint operation rather than a JV. The Group recognises its share of the following:

• Assets, including its share of any assets held jointly;

• Liabilities, including its share of any liabilities incurred jointly;

• Revenues arising from the joint operation;

• Other revenues from the joint operation; and

• Expenses, including its share of any expenses incurred jointly.

Financial instruments

The Group recognises financial assets and liabilities on its balance sheet when it becomes a party to the contractual provisions of the instrument.

(i) Financial assets

Classification and initial measurement

Financial assets within the scope of IFRS 9 are classified as financial assets at amortised cost, fair value through profit or loss or fair value through (OCI). The Group determines this classification at initial recognition depending on the business model for managing the financial asset and the contractual terms of the cash flows.

The Group's financial assets include cash and cash equivalents, Trade and other receivables.

When financial assets are initially recognised, they are measured at fair value being the consideration given or received plus directly attributable transaction costs. Any gain or loss at initial recognition is recognised in the income statement.

The Group's financial assets measured at amortised cost are held for the collection of contractual cash flows where those cash flows have specified dates and represent solely payments of principal and interest, such as cash and cash equivalents or trade receivables.

The Group's financial assets are initially measured at fair value where the contractual cash flows do not solely represent payments of principal and interest, such as trade and other receivables.

Subsequent measurement

Financial assets held for the collection of contractual cash flows that are solely payments of principal and interest (and classified as amortised cost) are subsequently measured at amortised cost using the effective interest rate method ("EIR"). Amortised cost is calculated by taking into account any discount or premium on acquisition and fees or costs that are an integral part of the EIR. The EIR amortisation is included in finance income in the income statement. Allowance for impairment is estimated on a case-by-case basis.

A gain or loss on a financial asset measured at fair value through profit or loss is recognised in the income statement in the period in which it arises.

 Derecognition

A financial asset is derecognised when the Group loses control over the contractual rights that comprise that asset. This occurs when the rights are realised, expire or are surrendered.

Impairment of financial assets

The Group assesses on a forward-looking basis the expected credit losses that might arise on financial assets measured at amortised cost. This assessment considers the probability of a default event occurring that could result in the expected cash flows due from a counterparty falling short of those contractually agreed.

Expected credit losses are estimated for default events possible over the lifetime of a financial asset measured at amortised cost. However, where the financial asset is not a trade receivable measured at amortised cost and there have been no significant increases in that financial asset's credit risk since initial recognition, expected credit losses are estimated for default events possible within 12 months of the reporting date.

(ii) Financial liabilities

Classification and initial measurement

Financial liabilities within the scope of IFRS 9 are classified as financial liabilities at amortised cost or fair value through profit or loss. The Group determines the classification of its financial liabilities at initial recognition.

The Group's financial liabilities include trade and other payables, other liabilities and borrowings which are classified as amortised cost. Trade payables may be designated and measured at fair value through profit or loss when doing so eliminates or significantly reduces a measurement or recognition inconsistency that would otherwise arise from measuring assets or liabilities on a different basis.

All financial liabilities are recognised initially at fair value while financial liabilities at amortised cost additionally include directly attributable transaction costs.

Subsequent measurement

Trade and other payables, borrowings and other financial liabilities are subsequently measured at amortised cost using the EIR method after initial recognition. Gains and losses are recognised in the income statement through the EIR amortisation process. Amortised cost is calculated by taking into account any discount or premium on acquisition and fees or costs that are an integral part of the EIR. The EIR amortisation is included in finance costs in the income statement.

A gain or loss on a financial liability measured at fair value through profit or loss is recognised in the income statement in the period in which it arises.

Derecognition

A financial liability is de-recognised when the obligation under the liability is discharged or cancelled or expires. When an existing financial liability is replaced by another on substantially different terms, or the terms of an existing liability are substantially modified, such an exchange or modification is treated as a derecognition of the original liability and the recognition of a new liability, and the difference in the respective carrying amounts is recognised in the income statement.

(iii) Offsetting of financial instruments

Financial assets and financial liabilities are offset and the net amount reported in the balance sheet when there is an enforceable legal right to offset the recognised amounts and there is an intention to settle on a net basis, or to realise the assets and settle the liabilities simultaneously.

(iv) Fair value of financial instruments

At each reporting date, the fair value of financial instruments that are traded in active markets is determined by reference to quoted market prices, without any deduction for transaction costs. For financial instruments not traded in an active market, the fair value is determined using appropriate valuation techniques. Such techniques may include using recent arm's length market transactions, reference to the current fair value of another instrument that is substantially the same, discounted cash flow analysis or other valuation models.

Cash and cash equivalents

Cash and cash equivalents include cash on hand, term deposits and short-term highly liquid investments with the original term to maturity of three months or less, which are convertible to known amounts of cash and which are subject to an insignificant risk of changes in value.

Exploration Assets ("E&E")

E&E costs, including costs of licence acquisition, technical services and studies, exploratory drilling, whether successful or unsuccessful, and testing and directly attributable overhead, are capitalised as E&E assets according to the nature of the assets acquired. These costs are accumulated in cost centres by well, field or exploration area pending determination of technical feasibility and commercial viability.

E&E assets are assessed for impairment if (i) sufficient data exists to determine technical feasibility and commercial viability, and (ii) facts and circumstances suggest that the carrying amount exceeds the recoverable amount.

The technical feasibility and commercial viability of extracting a resource is generally considered to be determinable when proven and/or probable reserves are determined to exist. A review of each exploration licence or field is carried out, at least annually, to ascertain whether it is technically feasible and commercially viable. Upon determination of technical feasibility and commercial viability, intangible E&E assets attributable to those reserves are first tested for impairment with the unimpaired amounts reclassified from E&E assets to a separate category within tangible assets within Property, Plant and Equipment referred to as oil and gas interests.

Once the commercial viability of a resource has been proven and/or probable and reserves have been determined to exist, the intangible E&E asset attributable to those reserves are then transferred to oil and natural gas properties within PP&E and then depleted over its useful life on a unit of production basis.

Costs incurred prior to the legal awarding of petroleum and natural gas licences, concessions and other exploration rights are recognised in profit or loss as incurred.

Property Plant and Equipment ("PP&E") - oil and natural gas properties

Items of PP&E, which include oil and gas development and production assets, are measured at cost less accumulated depletion and depreciation and accumulated impairment losses. PP&E assets include costs incurred in developing commercial reserves and bringing them into production, such as drilling of development wells, tangible costs of facilities and infrastructure construction, together with the E&E expenditures incurred in finding the commercial reserves that have been reclassified from E&E assets as outlined above, the projected cost of retiring the assets and any directly attributable general and administrative expenses. Expenditures on developed oil and natural gas properties are capitalised to PP&E when it is probable that a future economic benefit will flow to the Company as a result of the expenditure and the cost can be reliably measured. The initial cost of an asset is comprised of its purchase price or construction cost, any costs directly attributable to bringing the asset into operation, the initial estimate of any decommissioning obligations associated with the asset and borrowing costs on qualifying assets. When significant parts of an asset with PP&E, including oil and gas interests, have different useful lives, they are accounted for as separate items (major components).

Costs incurred after the determination of technical feasibility and commercial viability and the costs of replacing parts of PP&E are recognised as capitalised oil and gas interests only when they increase the future economic benefits embodied in the specific asset to which they relate. Subsequent changes in estimated decommissioning obligation due to changes in timing, amounts and discount rates are included in the cost of the asset. Such capitalised oil and gas interests generally represent costs incurred in developing proved and/or probable reserves and bringing in or enhancing production from such reserves and are accumulated on a field or geotechnical area basis. The carrying amount of any replaced or sold component is derecognised. The costs of the day-to-day operating of PP&E are recognised in profit or loss as incurred.

Depletion 

The net carrying amount of PP&E is depleted on a field-by-field unit of production method by reference to the ratio of production in the year to the related proven and probable reserves. These reserves represent full field recoverable reserves and not just those recoverable to the end of the current licence period. If the useful life of the asset is less than the reserve life, the asset is depreciated over its estimated useful life using the straight-line method. Future development costs are estimated considering the level of development required to produce the proven and probable reserves. These estimates are reviewed by third party independent reserves engineers. Changes in factors such as estimates of reserves that affect unit-of-production calculations are dealt with on a prospective basis. Capital costs for assets under construction included in development and production assets are excluded from depletion until the asset is available for use, that is, when it is in the location and condition necessary for it to be capable of operating in the manner intended by management.

Disposals

Oil and natural gas properties are derecognised upon disposal or when no future economic benefits are expected to arise from the continued use of the asset. Any gain or loss on derecognition of the asset, including farm out transactions or asset sales or asset swaps, is calculated as the difference between the proceeds on disposal, if any, and the carrying value of the asset, is recognised in profit or loss in the period of derecognition.

PP&E - office and other equipment

Office and other equipment are carried at cost less accumulated depreciation and impairment losses. Depreciation of the cost of these assets less residual value is charged to profit and loss on a straight-line basis over their estimated useful economic lives of between three and five years.

Leases

IFRS 16 Leases applies to all leases, including subleases, except for leases to explore for or use minerals, oil, natural gas and similar non-regenerative resources.

The Company has not elected to recognise right-of-use assets and lease liabilities for lease of low-value assets and short-term leases. The Company recognises the lease payments associated with these leases as an expense on a straight-line basis over the lease term.

Decommissioning obligation

Decommissioning obligations are recognised for legal obligations related to the decommissioning of long-lived tangible assets that arise from the acquisition, construction, development or normal operation of such assets. A liability for decommissioning is recognised in the period in which it is incurred and when a reasonable estimate of the liability can be made with the corresponding decommissioning provision recognised by increasing the carrying amount of the related long-lived asset. The recognised decommissioning provision is subsequently allocated in a rational and systematic method over the underlying asset's useful life. The initial amount of the liability is accreted by charges to the profit or loss to its estimated future value.

Impairment

The carrying values of production assets, E&E expenditures that have been capitalised and property, plant and equipment (PPE) are assessed for impairment when indicators of such impairment exist. In performing impairment reviews, assets are categorised into the smallest identifiable groups, cash generating units (CGU), that generate cash flows independently. If any indication of impairment exists, the estimated recoverable amount of the asset or CGU is calculated. If the carrying amount of the asset or CGU exceeds its recoverable amount, it is impaired with the loss charged to the income statement to reduce the carrying amount to its recoverable amount. Impairment losses are recognised in the income statement in those expense categories consistent with the function of the impaired asset or CGU. An assessment is made at each reporting date as to whether there is any indication that previously recognised impairment losses may no longer exist or may have decreased. If such indication exists, the Group makes an estimate of the recoverable amount.

(i) Calculation of recoverable amount

The recoverable amount of an asset or CGU is the greater of its value in use and fair value less costs to sell. In assessing value in use, the estimated future cash flows of the asset or CGU in its present condition are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. In determining fair value less costs to sell, consideration will be given to whether the value of the asset or CGU can be determined from an active market (e.g. recognised exchange) or a binding sale agreement which are classified as level 1 in the fair value hierarchy under IFRS 13 'Fair Value Measurements'. Where this is not determinable, fair value less costs to sell for a CGU is usually estimated with reference to a discounted cash flow model, similar to the method used for value in use, but may include estimates of future production, revenues, costs and capital expenditure not currently included in the economic model. Additionally, cash flow estimates include the impact of tax and are discounted using a post-tax discount rate. An estimate made on this basis is classified as level 3 in the fair value hierarchy.

(ii) Reversals of impairment

A previously recognised impairment loss is reversed only if there has been a change in the estimates used to determine the asset's recoverable amount since the last impairment loss was recognised. If this is the case, the carrying amount of the asset is increased to its recoverable amount. An impairment loss is reversed only to the extent that the asset's carrying amount does not exceed the carrying amount that would have been determined, net of depreciation or amortisation, if no impairment loss had been recognised for the asset in prior years. Such reversals are recognised in the income statement. Impairment losses recognised in relation to goodwill are not reversed for subsequent increases in the recoverable amount.

Share capital

The proceeds from the exercise or vesting of share options and the issuance of shares from treasury are recorded as share capital in the amount for which the option, warrant, or treasury share enables the holder to purchase a share in the Company.

Proceeds for shares in excess of the nominal value are recorded within share premium.

Share issuance costs

Commissions paid to underwriters, and other related share issue costs, such as legal, auditing and advisory, on the issue of the Company's shares, are charged directly to share capital, net of tax within the share premium account.

Share based payments

The fair value of the options at the date of the grant is determined using the Black-Scholes option pricing model and share based compensation is accrued and charged to profit or loss, with an offsetting credit to equity reserve over the vesting periods. A forfeiture rate is estimated on the grant date and is adjusted to reflect the actual number of options that vest.

Capitalisation of interest

The Company capitalises interest expense incurred during the construction phase of the projects, except E&E assets which were funded by the related financing.

Revenue recognition

Natural gas revenues are recognised upon the transfer of control over its gas to its customers, TPDC and TANESCO, which is when delivery is made to them through the offtake network.

Interest income is accrued on a time basis by reference to the principal outstanding and at the effective interest rate applicable, which is the rate that discounts estimated future cash receipts through the expected life of the financial asset to that asset's net carrying value.

Other revenue relating to the recovery of corporate income tax, in line with the Production Sharing Agreement, are recognised in the period the in which the recovery is made. These recoveries are affected through adjustments to TPDC's gas sales entitlements.

Income taxes

Tax expense comprises current and deferred tax. Tax is recognised in the profit or loss except to the extent it relates to items recognised in other comprehensive income ("OCI") or directly in equity.

Current income tax

Current tax expense is based on the results for the period as adjusted for items that are not taxable or not deductible. Current tax is calculated using tax rates and laws that were enacted or substantively enacted at the end of the reporting period. Management periodically evaluates positions taken in tax returns with respect to situations in which applicable tax regulation is subject to interpretation. Provisions are established where appropriate on the basis of amounts expected to be paid to the tax authorities.

Deferred income tax

Deferred taxes are the taxes expected to be payable or recoverable on differences between the carrying amounts of assets and liabilities in the consolidated statement of financial position and their corresponding tax basis. Deferred tax liabilities are generally recognised for all taxable temporary differences. Deferred tax assets are recognised to the extent that it is probable that future taxable profits are expected to be available against which deductible temporary differences to the tax basis can be utilised. Deferred income tax assets and liabilities are not recognised if the temporary difference arises from the initial recognition of goodwill, if any, or from the initial recognition (other than in a business combination) of other assets in a transaction that affects neither the taxable profit nor the accounting profit.

Deferred tax liabilities are recognised for taxable temporary differences arising on investments in subsidiaries and joint arrangements except where the reversal of the temporary difference can be controlled, and it is probable that the difference will not reverse in the foreseeable future.

Deferred tax assets are reviewed at each reporting period and reduced to the extent that it is no longer probable that sufficient future taxable profits are expected to be available to allow all or part of the asset to be recovered. Deferred tax assets are recognised for taxable temporary differences arising on investments in subsidiaries to the extent that it is probable that the temporary difference will reverse in the foreseeable future and future taxable profits are expected to be available against which the temporary difference can be utilised.

Foreign currency translation

Items included in the financial statements of the Company and its subsidiaries are measured using the currency of the primary economic environment in which the legal entity operates (the "functional currency"). Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the transaction. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation of monetary assets and liabilities not denominated in the functional currency of an entity are recognised in profit or loss.

The functional currency of all Wentworth subsidiaries is US dollars except for Wentworth Resources (UK) Limited which is Pound Sterling. The assets and liabilities of this Company are translated into US dollars at the period-end exchange rate. The income and expenses of the Company are translated to US dollars at the average exchange rate for the period.

Translation gains and losses are included in OCI; however, Wentworth Resources (UK) Limited has limited operations so there is no significant amount of foreign exchange gains and losses to include in OCI. All other foreign exchange gains and losses are recognised in profit or loss.

Earnings or loss per share (EPS)

Basic earnings or loss per share is calculated by dividing profit or loss attributable to owners of the Company (the numerator) by the weighted average number of ordinary shares outstanding (the denominator) during the period. The denominator is calculated by adjusting the shares outstanding at the beginning of the period by the number of shares bought back or issued during the period, multiplied by a time-weighting factor.

Diluted EPS is calculated by adjusting the earnings and number of shares for the effects of all dilutive potential ordinary shares deemed to have been converted at the beginning of the period or if later, the date of issuance. The effects of anti-dilutive potential ordinary shares are ignored in calculating diluted EPS.

3. Accounting judgements and key sources of estimation uncertainty

In applying the Group's accounting policies, the preparation of consolidated financial statements requires management to make estimates, judgments and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual amounts may differ materially from these estimates due to changes in general economic conditions, changes in laws and regulations, changes in future operating plans and the inherent imprecision associated with estimates. Significant estimates and judgments used in the preparation of these consolidated financial statements include the assessment of impairment triggers related to E&E and PP&E assets and recognition of a deferred tax asset.

3.1 Significant accounting judgements and estimates

Recoverable value of Mnazi Bay E&E and Natural Gas Properties costs

Significant accounting Judgements

Oil and gas assets are inherently judgemental to value. The Directors review the carrying value of the Groups assets to determine whether there are any indicators of impairment such that the carrying values of the assets may not be recoverable. The assessment of whether an indicator of impairment or reversal thereof has arisen requires considerable judgement, taking account of factors such as future operational and financial plans, commodity prices and the competitive environment. Indicators of impairment also include but are not limited to; declines in market value; company net assets in excess of market capitalisation; obsolescence or physical damage; economic performance worse than expected; or substantive expenditure in the specific area is neither budgeted nor planned. The outcome of ongoing production and exploration activities and whether their carrying values will ultimately be recovered is inherently uncertain and requires significant judgement.

Management performs impairment testing on the Group's producing and non-producing assets when indicators of impairment are present. The assessment of impairment indicators is subjective and considers the various internal and external factors such as the financial performance of individual CGUs, market capitalisation and industry trends.

The period over which future cash flows are considered for impairment testing is an area of judgment. Impairment testing was conducted over the licence term, which expires in 2031.

Judgement was applied in determining the fair value less cost of disposal for the natural gas properties. The offer price for the shares of the Group by M&P provides the basis for the fair market value of the business. Judgement is involved in deriving the fair value of the natural gas asset from the fair value of the business based on the offer price for the Group's shares.

Key sources of estimation uncertainty

The preparation of discounted cash flows used to assess the recoverable amount of the Groups CGU includes management's estimates of future operating costs, economic and regulatory environments, capital expenditures requirements, cost recovery estimates, long term field plans and other factors including discount rates and the total level of reserves deemed to be commercial.

The valuation underpinning the carrying value of producing and non-producing assets are largely dependent on supply and demand variables.

The gas sales price is fixed, subject to an annual inflation index linked to the US consumer prices index to 2031 and the cost base of production operations is also largely fixed in nature. Whilst the benefits of increased production volumes are clear, the opposite is equally true during operational downtime, prolonged or permanent gas supply outages which may in turn impact upon the commerciality of the field. Mnazi Bay currently has 5 producing wells and formally signed the Commercialisation of Discovery making all terms contained within the Mnazi Bay GSA legally binding and fully in effect from 10 September 2019. Mnazi Bay is committed to supplying a minimum quota of natural gas to TPDC and TANESCO of 90 MMscf/day rising to 130 MMscf/day for the entire remaining term of the GSA and is guaranteed of future revenue streams via a take or pay provision of 85% of these amounts. This greatly strengthens and formally ratifies the long-term commerciality of the Mnazi Bay asset.

Sensitivities were run on the following variables:

· Field production per well, noting that the engineering solutions utilised on Mnazi Bay allow for the production of multiple hydrocarbon bearing horizons from certain wells;

· The operating and development costs of producing gas from Mnazi bay.

· The impact of increased sales invoice delinquency upon future cash flows;

· Currency settlement denomination variables, currently in US dollars, noting that in certain circumstances an election for settlement in Tanzanian Shillings may be made by TPDC; and

The above sensitivities impact the value in use of the cash generating unit, which was found to be lower than the fair market value. Given that the fair value less cost to sell was used as the recoverable amount, the Directors have not indicated the quantitative impact of the above sensitivity analysis.

Summary of PPE &EE impairment

At the year-end, a full impairment test was conducted on the Mnazi Bay cash generating unit, which comprises the production asset and the evaluation and exploration asset, as there was an indication of impairment with respect to the discrepancy between the market capitalisation of the Company as at 31 December 2022 of $66.1 million and the net asset of the group of $90.5million.

Given the existence of impairment indicators, the Group determined the of Value- in -use (VIU) and the Fair value less cost to sell (FVLCS) of the cash generating unit and have selected the higher of the two as the recoverable amount.

The full impairment testing ultimately determined that the recoverable amount was lower than the carrying value at the year-end, which resulted in an impairment of $25 million. Due to there being no formal agreement between Mnazi Bay partners to sanction further expenditure on non-producing assets, $8.1m of the impairment loss has been applied against the carrying value of the E&E assets reducing the carrying value down to $nil. At such time as the Group, alongside its JV partners in Mnazi Bay, undertake future exploration activities, this provision will be reviewed and dependent upon the outcome of these activities may be reversed in part or in full. A total of $16.9 million has been provided against the producing asset in Mnazi Bay, reducing the carrying value down to $41.8 million from $58.7 million. Irrespective of the above accounting treatment, the asset continues to outperform expectations and 2022 remains the strongest performing year in its production history. (See notes 12 and 13).

Reserves estimates

Significant accounting judgements

The Directors use judgement and experience to determine the timing and quantum of volumes expected to be recovered from producing fields to be able to calculate a probabilistic base-case value-in-use for its assets. This valuation may vary in response to changes in field performance over time and the Company expects that there will likely be revisions upward or downward based on updated information such as the results of future drilling, oil and gas production levels and reservoir performance.

Key sources of estimation uncertainty

Oil and natural gas reserves, prepared by an external independent reserve evaluator as at 31 December 2022, are used in the calculation of depletion, impairment and impairment reversal determinations and recognition of deferred tax asset. Reserve estimates are based on engineering data, estimated future prices and costs, expected future rates of production and the timing of future capital expenditures; all of which are subject to many uncertainties and certain input assumptions.

3.2 Other accounting judgements and estimates

Taxes

Other accounting judgements

The Directors make judgements in relation to the recognition of various taxes levied on the Group, which are both payable and recoverable. Judgement applies as the Group operates in countries where the legal and tax systems are less developed, which increases the requirement for management to make assumptions as to whether certain payments will be required related to matters such as income taxes, value added taxes, and other indirect taxes as well as outcomes of any tax disputes which would affect the recognition of tax liabilities and deferred tax assets. A provision is recognized in the financial statements for such matters if it is considered probable that a future outflow of cash resources will be required. The provision, if any, is subject to management estimates and judgements with respect to the outcome of the event, the costs to defend, the quantum of the exposure and past practice in the country.

Key sources of estimation uncertainty

Estimates may be made to determine the amount of taxes recoverable, principally deferred tax assets. Commercial production and gas sales under the Gas Sales Agreement, allows for the recognition of a deferred tax asset within the financial statements. The amount that the company recognizes is subject to the following estimates:

· The timing of future profits for the utilization of tax losses from the current tax pools which are based on management assessments and forecasts of future performance.

· The effective tax rate at which the losses will be utilised throughout the Group which is currently the tax rate of Tanzania as this is where all of the Group's operations are;

· The status of any current tax assessments and disputes and their impact on the deferred tax pool on a probabilistic basis;

· Any material changes in legislation that may impact upon the fiscal regime on which the deferred tax asset is computed.

Changes in these estimates within a reasonably possible range in the next 12 months are not expected to significantly alter the carrying amount of the Groups taxes that are recoverable.

The Group engages early with tax authorities where it has or will enter into a large or complicated transaction that is subject to interpretation and, in Tanzania, completed its most recent Tanzanian Revenue Authority (TRA) audit for the years of 2018 to 2020in January 2021, the result of which was an agreed assessment for taxes totalling $9k. Recently, the TRA issued a determination for disputed 2018 to 2020 CIT assessments totalling $126k and we are awaiting revised assessments to establish the liability which remains.

The tax audit for the fiscal year 2021 was completed in October 2022, with an agreed assessment of $1.1 million for CIT which has been recognised within revenue and also trade and other receivables, the amount will ultimately be recovered from TPDC profit gas. An assessment for VAT of $9k was also made by the TRA. Recently, the TRA issued a determination on disputed assessments for 2021 employment taxes totalling $121k of which assessments for employment taxes totalling $115k have been dropped leaving a tax liability of $6k.

4. Segment information

The Company conducts its business through the Tanzania ("Mnazi Bay Concession") segment. Gas operations include the exploration, development, and production of natural gas and other hydrocarbons. The Corporate segment activities include investment income, interest expense, financing related expenses, share based compensation relating to corporate activities and general corporate expenditures. Inter-segment transfers of products, which are accounted for at market value, are eliminated on consolidation.

Net income/(loss) for the year-ended 31 December 2022

Net income/(loss) for the year-ended 31 December 2021

Selected balances at 31 December 2022

Capital additions for the year-ended 31 December 2022

1 Discontinued operations represent Wentworth Moçambique Petroleos, Limitada which is in the process of liquidation after relinquishment of the Tembo Block Appraisal Licence in April 2019.

Selected balances at 31 December 2021

Capital additions for the year-ended 31 December 2021

1 Discontinued operations represent Wentworth Moçambique Petroleos, Limitada which is in the process of liquidation after relinquishment of the Tembo Block Appraisal Licence.

5. Revenue

Other revenue includes $3.0 million (2021: 163k) of corporate income tax ("CIT") recovery within WGL. It also includes $1.8 million and $2.1 million of CIT recovery within CMBL for the financial years of 2022 and 2021 respectively (see note: 23). CIT is recovered through adjustments to TPDC gas sales entitlements.

6. Administrative costs

During the year the Company incurred regulatory, legal and consultancy costs with respect to proposed acquisition transaction expenditures amounting to $1,256k (2021: nil).

During the year the Company incurred legal and consultancy costs with respect to new venture and pre-licence appraisal expenditures amounting to $335k (2021: $502k).

During the year the Company write-off Value Added Tax recoverable amounting to $607k (2021: nil) which was disallowed for refund by the HM Revenue & Customs.

7. Staff numbers and costs

The average number of persons employed during the year, analysed by category, was as follows:

The aggregate payroll costs were as follows:

8. Directors' costs

The aggregate remuneration of the highest paid Director was $404k (2021: $427k). During 2021, contractual termination payments, relate to amounts paid to Bob McBean who retired as Company Chairman.

For additional segregation by Director, refer to Total Remuneration of Executive Director Table and Total Remuneration of Non-Executive Directors Table contained within the Remuneration Committee Report.

9. Finance income and finance costs

10. Trade and other receivables

At 31 December 2022, $2.5 million is receivable from TPDC (2021: $1.9 million) representing one month of gas sales (2021: one month).

At 31 December 2022, $2.7 million is receivable from Operator - M&P (2021: $1.1 million) representing one month of gas sales of $2.5 million which was paid by TPDC to M&P in December 2022 but payment to Wentworth was made in January 2023. The receivable from Operator - M&P also include $265k (2021: 62k) representing two months gas sales paid by TANESCO to M&P in November 2022 but payment to Wentworth was made in January 2023.

At 31 December 2022, $1 million is receivable from TANESCO (2021: $351k) representing seven months of gas sales (2021: three months).

Other receivables from TPDC represent income tax of $2.9 million (2021: $378k) paid by WGL, a wholly owned subsidiary of the Company and income tax of $675k (2021: nil) paid by CMBL, a 39.925% owned subsidiary of the Company. The income tax is anticipated to be recovered from TPDC's share of profit gas within the next 12-months under the terms of the Mnazi Bay PSA, which provides such a mechanism for the recovery of all corporate taxes.

Other receivables include VAT recoverable of $306k (2021: 886k), corporate tax prepayments of $546k (2021: $483k), various prepaid expenses $425k (2021: $88k). In accordance with IFRS 9 the Company notes no material expected credit losses.

11. Tanzania Government receivables

The Group has an agreement with the Government of the United Republic of Tanzania (TANESCO, TPDC and the Ministry of Energy and Minerals) to be reimbursed for all the project development costs associated with Umoja T&D expenditures at cost. An audit of the Mtwara Energy Project ("MEP") development expenditures was completed in November 2012 and costs of approximately $8.1 million were verified to be reimbursable. After deducting costs associated with the Tariff Equalisation Fund and VAT input credits associated with the MEP totalling $1.6 million, the amount agreed to be reimbursed was $6.5 million.

During 2017, the Government initiated its first review of the costs to verify the balance owing by it. On 8 February 2018 the Government issued the results which differed from the previously audited and approved gross receivable of $6.5 million, which the Group maintains was accurate and correct.

The Government is conducting a second ongoing review and due to the age and uncertainty surrounding the receivable and its recoverability, the Group made a provision in-full during 2018 against the carrying amount without prejudice to the ongoing commercial discussions with the Government, the Group has reviewed this at the year-end and continues to consider the provision is appropriate.

12. Exploration and evaluation assets

At the year-end the carrying value of these assets were assessed for impairment. The impairment test ultimately determined that the recoverable amount was less than the carrying amount and all E&E assets were fully impaired (see note 13).

13. Property, plant and equipment

During the year a full impairment test was conducted on the Mnazi Bay asset as there was an indication of impairment with respect to the difference between the offer made for 100% of the issued and to be issued share capital of the Company and its net assets prior to the recognition of an impairment loss. This implied fair value of the cash generating unit is derived from the agreed offer price adjusted for cash and other monetary assets and liabilities, provided a higher recoverable amount for the year ended 31 December 2022, compared to the value-in-use of the cash generating unit as at that date. An impairment provision of $25.0 million has therefore been recognised, reducing the carrying value of the cash generating unit to the recoverable amount of $41.8 million from $66.8 million.

The impairment loss has been limited to the measurable fair value less costs to disposal of the individual assets within the CGU. The fair value of the asset is categorised as level 2 and was determine with reference to the offer price, adjusted for additional factors considered in agreeing to the offer price. A $8.1m impairment loss has been applied against the carrying value of the E&E assets reducing the carrying value down to $nil. At such time as the Group, alongside its JV partners in Mnazi Bay, undertake future exploration activities, this provision will be reviewed and dependent upon the outcome of these activities may be reversed in part or in full. A total of $16.9 million has been provided against the producing asset in Mnazi bay, reducing the carrying value down to $41.8 million from $58.7 million. Irrespective of the above accounting treatment, the asset continues to outperform expectations and 2022 remains the strongest performing year in its production history.

During the year, the Group made additions to PPE totalling $519k (2021: $62k). Right of use asset addition of $11k (2021: $124k) relate to office space leased in Tanzania. Disposals related to office furniture and other equipment disposed during the year. A change to the assumptions used in calculating the decommissioning and abandonment provisions resulted in further additions of ($250k) (2021: $289k) (see note 16). Assets disposals $211k (2021: $17k) includes disposal of vehicles.

14. Subsidiary and joint undertakings

The subsidiary and joint undertakings at 31 December 2022 are:

1 CMBL is considered a jointly controlled entity and accounted for as a joint operation rather than a joint venture (see note 1 for further details).

2 The Wentworth Moçambique Petroleos, Limitada is in the process of liquidation following the relinquishment of the Tembo Block Appraisal Licence in April 2019.

15. Trade and other payables

Other payables and accrued expenses include income tax liability $994k (2021: nil), bonuses of $682k (2021: $606k), audit and tax advice fees of $350k (2021: $320k), other third-party services of $852k (2021: $59k) and current lease liability $41k (2021: $46k).

16. Decommissioning and abandonment provision

The Company's decommissioning provision results from net ownership interests in petroleum and natural gas assets including well sites, pipeline gathering systems and processing facilities in Tanzania. The operator of the Mnazi Bay Concession has revised the estimate of the Company's share of the undiscounted, inflation-adjusted amount of cash flows required to settle decommissioning obligations for the infrastructure within the Mnazi Bay Concession to $3.7 million (initial estimated costs was $4.2 million). Estimates of the gross cost of abandonment to the JV has decreased from $9.8 million to $7.7 million as per a revised abandonment cost study prepared by TSB Offshore in 2021. The projected costs have decreased due to the expectation that a local contractor will perform the work. Costs have been discounted back to 2031, the current licence expiry date, however a further 10-year extension beyond this to 2041 would likely be awarded, deferring this expenditure until that date. The obligations have been estimated using existing technology at current prices inflated and discounted using discount rates that reflect current market assessments of the time value of money and the risks specific to each liability.

A reconciliation of the decommissioning obligations is provided below:

The change in the accounting estimate of ($250k) during the year comprises:

· Change in inflation rate from 3.16% in 2021 to 4.20% in 2022 (2021: from 1.36 to 3.16%).

· Revised estimated gross abandonment cost which has decreased from $9.8 million to $7.7 million in 2022 (2021: nil).

The same discount rate of 8.3% was used for year 2022 and 2021.

17. Lease liability

During the year, the Company recognised a lease liability of $41k (2021: $82k), the whole amount is current (2021: $46k) and is presented in trade and other payables. The lease liability was initially recognised in year 2021 with the assumption that the office in Dar Es Salaam would have been leased for the next two years up to September 2023, however in case the lease is extended the lease liability will be revised.

18. Repurchase of own shares

During 2022, the Company repurchased 867k ordinary shares totalling $243k, which were cancelled and removed from the share register during the first half of 2022 (see note 20).

During 2021, the Company repurchased 7.5 million ordinary shares totalling $2.0 million which included $1.2 million for 4.5 million ordinary shares repurchased on 17 December 2021, cancelled and removed from the share register on 30 December 2021. The balance of $793k for 3.0 million ordinary shares repurchased on 17 December 2021 was held in treasury and recognised within equity reserves at 31 December 2021 (see note 20) and used to satisfy upcoming obligations in respect of the employee share plan.

19. Share-based payments

Movement in the total number of share options outstanding and their related weighted average exercise prices are summarised as follows:

The following table summarises share options outstanding and exercisable at 31 December 2022:

1 The US Dollar to Norwegian Kroner exchange rate used for determining the exercise price at 31 December 2022 is 0.10135.

The following table summarises share options outstanding and exercisable at 31 December 2021:

1 The US Dollar to Norwegian Kroner exchange rate used for determining the exercise price at 31 December 2021 is 0.11349.

Measurement of fair value

The fair value of share options is assessed on the grant date and the fair value is subsequently recognized as compensation expense over the vesting period which is three years. The fair value of options granted is measured at the date of the grant and is determined using the Black-Scholes option pricing model. The following table indicates weighted average grant date fair value and the assumptions used in the determination of the fair value of options granted during the year:

20. Share capital

Authorised, called up, allotted and fully paid

The holders of ordinary shares are entitled to receive dividends as declared from time to time and are entitled to one vote per share at meetings of the Company.

The 867k ordinary shares repurchased on various dates during the first half of 2022 were cancelled and removed from the share register during the same period.

The 939k ordinary shares repurchased in December 2020 were cancelled and removed from the share register on 3 February 2021. These ordinary shares have been removed from share capital.

The 4.5 million ordinary shares repurchased on 17 December 2021 were cancelled and removed from the share register on 30 December 2021. These ordinary shares have been removed from share capital.

21. Earnings per share

Basic and diluted eps