Fenikso Limited - Annual results for the year ended 31 December 2022

Strategic Report

 

PRINCIPAL ACTIVITY, FINANCIAL REVIEW, OPERATIONS REPORT AND ASSET SUMMARY

 

PRINCIPAL ACTIVITY

The Company is an exempted limited liability company incorporated and registered in the Cayman Islands on 3 December 2010.

 

Fenikso is the restructured holding company that used to be called Lekoil Limited. The Company holds one main asset which is a US$51.9 million loan made to Lekoil Oil & Gas Investments ("LOGI"), a wholly owned subsidiary of Lekoil Nigeria. The Company is an AQSE listed enterprise company. These accounts are for the Company only on the basis of the principal accounting policy for 'Consolidation' included in Note 1.

 

FINANCIAL REVIEW

 

Financial overview and performance

The Company reported a loss of $15,397,000 for the year ended 31 December 2022. (restated 2021: $326,417,000) The loss was primarily as a consequence of the impairment of the Company's intercompany receivables (Note 12) following a restructure and settlement agreement.

 

Net assets of the Company at the year end were $19,518,000 (restated 2021: $34,187,000). Cash balances as at the year end were $208,000. (2021: $50,000).           

 

OPERATIONS REPORT AND ASSET SUMMARY

 

The Company no longer operates or oversees operations of any Oil & Gas assets in Nigeria. The principal business of the Company is to manage and ensure the full recovery of the LOGI Loan. The Company has received three payments under the LOGI Loan as at the end of May 2023 and the Board will continue to monitor the compliance with the terms and conditions of the LOGI Loan. As at the end of May 2023 LOGI had complied with all conditions of the settlement agreement save for the cancellation of certain shares in the Company owned by Lekoil Nigeria, Lekan Akinyami and Samuel Olutu. The total shares that should have been cancelled are 107,658,847 ordinary shares and the Company is working with such parties to cancel such shares as soon as practicably possible. In the interim, the relevant holders have agreed to not vote such shares in any general meeting.  All other conditions under the loan have been satisfied to date.

 

 

Principal risks and uncertainties

 

The principal risk of the business is the non-payment of the LOGI Loan, which leads to the Company having no income to cover costs and build shareholder value. This is the Company's only current source of income. The possible risks to non payment are:

1.   LOGI fails to pass on the proceeds from the sale of oil at the Otakikpo field

2.   The Otakikpo field has to shut in all production and has no sales of oil

3.   The Oil price falls to such an extent that the value of the oil sales is insufficient to cover the running costs of the Company

4.   The crude oil sales are from oil sales in Nigeria. This means the income of the company is exposed to changes in the political and economic environment in Nigeria that could prevent the repayment of the loan.

 

 

Going concern

 

The assessment of the going concern risk has been detailed in the Directors' Report.

 

Liquidity risk

 

The Company manages its liquidity through the repayment of the LOGI Loan by LOGI. The Company's liquidity position could be at risk should the repayments stop for any reason.

 

 

 

Credit risk

 

The Company's principal financial asset is the LOGI Loan. This is secured against the proceeds from oil sales at the Otakikpo field. There is always a risk with Oil & Gas that production may have to be shut in or that the Oil price could fall substantially both of which would impact the value of the Company's assets.

 

This strategic report was approved by the Board on 6 June 2023 and signed on its behalf.

 

 

 

 

 

Tom Richardson Chairman

6 June 2023

 

 

 

 

 

 

Report of the Directors

 

The Directors present their report and the audited financial statements of the Company for the year ended 31 December 2022.

 

RESULTS FOR THE YEAR

 

The Company has made a loss of $15.4 million (restated 2021: loss of US$326.4 million).

 

DIVIDENDS

 

The Directors are unable to recommend the payment of a dividend (2021: Nil).

 

ACCOUNTING POLICIES

 

The Company's accounting policies and details of the significant judgments and critical accounting estimates are disclosed within the notes to the financial statements.

 

DIRECTORS AND THEIR INTERESTS

 

The Directors who served during the year are listed below.

 

Name	Period as a Director of the Company
Anthony Hawkins	1 January 2022 to 30 June 2022
Tom Richardson	8 January 2022 to 31 December 2022
Marco D'Attanasio	21 April 2022 to 31 December 2022
Al Tindall	1 January 2022 2021 to 30 June 2022
Olapade Durotoye	1 January  2022 to 31 December 2022
Adeoye Adefulu	1 January 2022  to 31 December 2022
Guy Oxnard	9 June 2022 to 31 December 2022
Dipo Sofola	9 June to 31 December 2022

 

As at 31 December 2022, none of the then current Directors of the Company had any legal or beneficial interest in the share capital of the Company other than as follows:

 

Director's Name	Beneficial Interest held via	Number of ordinary shares held by legal or beneficial owner at 31 December 2022	Percentage of Company's issued share capital held by legal or beneficial owner at 31 December 2022
Tom Richardson	TDR Enterprises	21,807,151	3.6%
Marco D'Attanasio	Hadron Master Fund	25,025,000	4.2%

 

 

DIRECTORS' RESPONSIBILITIES STATEMENT

 

The directors are responsible for preparing the Strategic Report, the Directors' Report and the financial statements in accordance with applicable law and regulations.

 

Company law and the Company's Articles of Association require the directors to prepare financial statements for each financial year using International Financial Reporting Standards (as adopted by the European Union (IFRSs)). Under company law the directors must not approve the financial statements unless they are satisfied

that they give a true and fair view of the state of affairs and profit or loss of the Company for that period. In preparing these financial statements, the directors are required to:

 

§  select suitable accounting policies and then apply them consistently;

§  make judgements and accounting estimates that are reasonable and prudent;

§  state whether applicable IFRSs have been followed, subject to any material departures disclosed and explained in the financial statements;

§  prepare the financial statements on the going concern basis unless it is inappropriate to presume that the company will continue in business.

The directors are responsible for keeping adequate accounting records that are sufficient to show and explain the company's transactions and disclose with reasonable accuracy at any time the financial position of the company. They are also responsible for safeguarding the assets of the company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.

 

The directors confirm that:

 

§  in so far as each of the directors is aware, there is no relevant audit information of which the company's auditor is unaware; and

§  the directors individually have taken all steps that they ought to have taken to make themselves aware of any relevant audit information and to establish that the auditor is aware of that information.

GOING CONCERN

 

The Directors have assessed the ability of the Company to continue as a going concern having prepared detailed cash, funding and liquidity forecast through to June 2024. The Directors, having made due and careful enquiry, are of the opinion that the Company will have access to adequate working capital to meet its obligations over the next 12 months from the date of approval of these financial statements. The Directors therefore have made an informed judgement, at the time of approving the financial statements, that there is a reasonable expectation that the Company has adequate resources to continue in operational existence for the foreseeable future. As a result, the Directors have adopted the going concern basis of accounting in the preparation of the annual financial statements.

 

CORPORATE ADVISORS

 

The Company's AQSE corporate adviser during 2022 was First Sentinel Corporate Finance Limited.  Bright Grahame Murray act as auditors to the Company.

 

DIRECTORS' INDEMNITY AND INSURANCE

 

The Company provides indemnity to Directors in respect of liabilities incurred as a result of their office. However, neither the indemnity nor the insurance provides cover if the Director is proven to have acted dishonestly or fraudulently.  The Company provided directors and officers insurance for its directors for the financial year ended 31 December 2022.

 

POST-REPORTING DATE EVENTS

 

All events that have occurred since the year end which require reporting have been disclosed in the financial statements and/or the Chairman's Statement.

 

 

 

 

HEALTH, SAFETY AND ENVIRONMENT

 

The Company is committed to fulfil its health, safety, and environmental responsibility. The Company has limited operational activities outside of office based activities. There have been no known breaches of HSE or environmental laws during the reporting period.

 

FINANCIAL INSTRUMENTS

 

Details of the use of any financial instruments by the Company are contained in the financial statements.

 

INDICATION OF FUTURE DEVELOPMENTS

 

The details of the future developments of the Company are given in the Strategic Report.

 

FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES

 

The details of financial risk management are given in the Strategic Report.

 

BOARD MEMBERS

 

The current Board is constituted by the following members:

 

Mr. Tom Richardson, Chairman

Mr. Richardson has over 20 years of experience across banking and oil & gas. Mr Richardson served as CFO of Nostrum Oil & Gas Plc a UK premium listed company. Prior to joining Nostrum in 2011, Mr Richardson has worked for ING, JP Morgan and NM Rothschild covering investment banking, capital markets and credit.

 

Mr. Olapade Durotoye, Non-Executive Director

Pade Durotoye is the Chief Executive Officer and Founder of West Titan Energy. He has over 32 years of management experience across the value chain of the oil and gas Industry internationally.

 

He began his career with Schlumberger Oilfield Services where he worked in various Management capacities in Field Operations, Operations Management, Line (Country) Management, Human Resources Management and Business Development for close to 20 years in 8 countries in Africa, Europe and Asia.

 

He served as the MD/CEO of Ocean and Oil Holdings Group, a principal investment and advisory services group, where advised on and in some cases led the company's Management and Technical Services advisory contract with Oando. He was a core member of Oando's Group Leadership Council and a key part of the company's Upstream Diversification Strategy & Execution Team that acquired oilfield assets and drilling rigs.

 

Pade served as Managing Director/CEO of Oando Energy Resources (OER), a position he held for over 8 years. In his capacity as MD/CEO, he led the team that delivered on the acquisition of the Nigerian upstream

oil and gas business of ConocoPhillips in 2014, making OER Nigeria's leading Indigenous Independent Oil Company by production with over 40,000boepd of oil and gas and 16 participating Licenses in Nigeria and the Gulf of Guinea. He proceeded to join Nigerdock FZE as Managing Director/CEO, where he served for a year to strategically direct the organization.

 

Pade has a deep knowledge of the oil and gas sector and is passionate about resolving value traps in in the industry. He holds a BSc. Electronics and Engineering from the University of Ife (now Obafemi Awolowo University) and is a member of several professional bodies and associations which include the Society of Petroleum Engineers, the Nigeria Society of Engineers, and the Institute of Directors.

 

Mr. Marco D'Attanasio, Non-Executive Director

Mr D'Attanasio is a senior banker and investment manager with over 23 years of experience in banking, finance, technology and oil & gas. He is the Founder and Portfolio Manager for Hadron Capital LLP and Hadron Capital (Cayman) Limited, each company managing numerous Alternative Investment Funds and being FCA and CIMA regulated, respectively. With Hadron Capital LLP he is the winner of multiple performance-based awards. He is the co-founder of Cricklo Ltd, an online community of professionals active in transforming their enterprises into sustainable businesses and a NED with Argo Blockchain plc. Mr D'Attanasio has a degree in physics ("Laurea") from Pisa University and a PhD in Theoretical Physics from Parma University.

 

 

BOARD COMMITTEES

 

As at 31 December 2022, the Audit& Risk and Remuneration Committees of the Board of Directors have the following directors as members:

 

Audit & Risk Committee

 

Name	Position
Tom Richardson	Member
Marco D'Attanasio	Member

 

Remuneration Committee

 

Name	Position
Tom Richardson	Member
Marco D'Attanasio	Member

 

 

 

 

This report was approved by the board on 6 June 2023 and signed on its behalf.

 

 

 

 

 

T Richardson Chairman

6 June 2023

 

Corporate Governance Statement

 

The Company has formally adopted the Quoted Companies Alliance Corporate Governance Code for Small and Mid-Size Quoted Companies ("QCA Code") and its replacement, the QCA Corporate Governance Code that was published in April 2018. The Company's application of the QCA Code is set out on its website (feniksoplc.com) and is updated from time to time.

 

The Company recognises the importance of sound corporate governance commensurate with the size, corporate structure and nature of the Company, even though there is no applicable regime of corporate governance to which Directors of a Cayman Islands company must adhere to over and above the general fiduciary duties of care, diligence and skill imposed on such Directors under Cayman Islands law.

 

The Company updated its policies in line with the EU Market Abuse Regulation ("MAR") with effect from 3 July 2016 (and as applied in the United Kingdom pursuant to applicable English law).

 

The Company will continue to implement internal policies as necessary to provide guidance on Corporate Governance issues. These policies are the same as those summarised in the Company's Annual Report for the year ended 31 December 2021.  These policies are reviewed periodically to ensure continued relevance:

 

·      Related Party Transactions Policy

·      Disclosure and Insider Trading Policy

·      Share Dealing Code

·      Whistleblowing Policy

·      Anti-Bribery Policy

·      Risk Management Policy

·      Gifts and Hospitality Policy

·      Code of Ethics

·      Safety, Health, Environment and Security Policy

 

The Company implements these policies in a manner commensurate with the size and available resources.  In the course of preparing this Annual Report and Accounts, the Board has noted the need to review the Corporate Governance framework and its practical implementation.

Website publication

The Company's Corporate Governance statement is published on its website.  The Directors are responsible for ensuring the annual report and the financial statements are made available on a website. Financial statements are published on the Company's website in accordance with legislation in the United Kingdom governing the preparation and dissemination of financial statements, which may vary from legislation in other jurisdictions. The maintenance and integrity of the Company's website is the responsibility of the Directors.

 

Auditor

All of the current Directors have taken all the steps that they ought to have taken to make themselves aware of any information needed by the Company's auditor for the purposes of their audit and to establish that the auditor is aware of that information. The Directors are not aware of any relevant audit information of which the auditor is unaware.

 

Business model and strategy

Information on our strategy is included in the Strategic Report set out above.

 

Obligations to our stakeholders

We are committed to communicating openly with our shareholders and stakeholders to ensure that our strategy, our financial position and the effects of those on our stakeholder is clearly understood.

 

Review of risks

The Board is responsible for setting the Company's risk philosophy and appetite and approving the overall risk management policy. It is responsible for maintaining a sound system of internal control that supports the achievement of its goals and objectives. 

 

The Board is also responsible for overseeing the establishment, implementation and review of the Company's risk management systems and, to this end, has delegated certain functions relating to risk to the Audit and Risk Committee and to management.

 

The Company has adopted a Risk Management Policy appropriate for a company of its size and resources.

 

Management framework

 

As at 31 December 2022, the Board comprised of an Executive Chairman and two Non-Executive Directors. The Company believes that its current composition is appropriate for the Company given its current corporate structure and financial resources. Each Board member brings a wealth of business leadership experience to foster the collective strength of the Board in setting the strategic goals of the Company and overseeing the effective performance of management in achieving these goals.

 

Under their appointment letters, the Company may call on the Directors to spend at least 20 days per year on Company business.

 

Directors

 

We believe that our Board has the appropriate balance of skills, experience and capabilities required to direct the management of the Company. These include sector-specific experience in the oil and gas industry, as well as more general finance, accounting and business management skills.

 

The Board is supported by the Audit & Risk and Remuneration Committees, the terms of reference of which can be found on our website.

 

Succession planning is managed through regular reviews and management discussions. The composition of the Board will reflect the size of the Company and the resources available to it.

 

Reward

 

The Company manages its activities via the Board of Directors and one executive director. Of the Company's two non-executive directors, one is rewarded in cash, while the other receives no fee.

 

Further information

 

The Corporate Governance section of our website sets out our approach to corporate governance, and the roles and responsibilities of the Chairman and any other Directors who have specific individual responsibilities or remits (e.g. for engagement with shareholders or other stakeholder groups) are shown.

 

The roles and terms of reference of the Audit & Risk Committee and Remuneration Committee, and a formal written schedule of matters reserved for the Board are also shown on the Company's website https://feniksoplc.com/.

 

Previous annual reports and other corporate documents, including notices of all general meetings held in the last five years, are also available on the Company's website https://feniksoplc.com/.

 

Audit & Risk Committee Report

 

Composition

 

As at 31 December 2022, the Committee was composed of Tom Richardson and Marco D'Attanasio, each of whom  have relevant financial experience.

 

Role and Responsibilities

 

The Audit & Risk Committee's terms of reference designate the role and responsibilities of the audit committee

These are available on the Company's  website https://feniksoplc.com/

 

2022 Financial reporting

 

The following are the main key judgements and new accounting standards that were considered by the Committee in its review of the 2022 full year Financial Statements:

 

·      Going Concern basis of accounting;

·      Assessment of impairment;

·      Assessment of impairment of inter-company receivables; and

·      the impact of new accounting standards.

 

 

Internal Controls

 

The internal control framework is based on the Company's assessment of the risks it faces. The effectiveness of the internal control system is monitored by the Board, and material exceptions are reported to the Committee.  The Company does not consider it appropriate, given its size and complexity, to have an internal audit function.

 

External auditor

 

Bright Grahame Murray were first appointed auditors of the Company in May 2022. The Committee has recommended to the Board that the auditors are reappointed for the year ending 31 December 2023. Bright Grahame Murray has expressed a willingness to continue in office as auditor and a resolution to re-appoint them will be proposed at the next Annual General Meeting of the Company.