PETROLEUM_EQUIPMENT_SUPPL - Accounts

The directors present the strategic report and audited financial statements for the year ended 31 December 2021.

The company's principal activity is the provision of consultant engineering services and sale of oilfield equipment.

The results of the company show a loss before taxation for the year of $967,846 (2020 - $324,392) and turnover of $9,004,220 (2020 - $12,388,690). 2021 was, as expected, a tough year for the company and the results reflect this. However, latterly in 2021 and into 2022, there have been positive signs of recovery and the directors are optimistic about the future.

The key risks and uncertainties affecting the company are considered to relate to the international energy sector in general, where a continuation of a sustained downturn in oil and gas prices, coupled with continued reduction in exploration levels would have a negative impact on future profitability. To meet these challenges, the company continues to strive to develop and deepen both customer and supplier relationships, and to expand the customer base. In addition to this, the company and the IPS Group are actively supplying to, and investing in, the geothermal energy market.

Price Risk:

The company has no significant exposure to price risk which will affect the valuation of its financial assets and liabilities.

Credit Risk:

The company’s exposure to credit risk arises from trade and other receivables, margin deposits and cash and cash equivalents placed with the banks. Banking transactions are limited to the branches of international banks operating in the countries of operation. The company has policies and procedures in place to ensure that the company is not exposed to undue credit risk and for monitoring and follow up of the debtors. The company's exposure to credit risk on trade receivables is influenced mainly by the individual characteristics of each customer and the demographics of customer's customer base, including the default risk of the industry and country in which customers operate.

Liquidity Risk:

Liquidity Risk is managed locally with group support available should the company need it. Cash flow forecasts are maintained and monitored daily in order to effectively manage liquidity.

Given the straightforward nature of the business, the company's directors are of the opinion that analysis using KPIs is not necessary for an understanding of the development, performance or position of the business.

Although incurring a significant loss in the year, the company still boasts a relatively strong balance sheet, with sufficient reserves. The company has started 2022 strongly and the outlook is positive for the foreseeable future. The directors regularly review the cost base and the operational structure of the company to ensure maximum efficiency. The company is part of a diverse and profitable group of companies that complement and support each other well.

On behalf of the board

The directors present their report and audited financial statements for the year ended 31 December 2021.

Financial risk management and future outlook are outlined in the strategic report.

The directors who held office during the year and up to the date of signature of the financial statements were as follows:

The results for the year are set out on page 6. The financial statements are prepared in US dollars.

No ordinary dividends were paid. The directors do not recommend payment of a final dividend.

This has been disclosed in the Strategic Report.

Meston Reid & Co were appointed as auditor to the company and in accordance with section 485 of the Companies Act 2006, a resolution proposing that they be re-appointed will be put at a General Meeting.

So far as the directors are aware , there is no relevant audit information of which the company's auditors are unaware. Additionally, the directors have taken all the necessary steps that they ought to have taken as directors in order to make themselves aware of all relevant audit information and to establish that the company's auditors are aware of that information.

The company meets its day-to-day working capital requirements through its cash reserves and continued trading. The company continues to work closely with Barclays and makes use of the trade loan facility that was secured in the previous year which helps with cash flow managment. The economic conditions are improving and there has been a growing demand for the company's products and services. The company's forecasts and projections, taking account of potential changes in trading performance, show that the company will be able to operate within the level of its current cash reserves. After making enquiries, the Directors have a reasonable expectation that the Company has adequate resources to continue in operational existence for the foreseeable future. The company therefore continues to adopt the going concern basis in preparing financial statements.

The directors are responsible for preparing the annual report and the financial statements in accordance with applicable law and regulations.

Company law requires the directors to prepare financial statements for each financial year. Under that law the directors have elected to prepare the financial statements in accordance with United Kingdom Generally Accepted Accounting Practice (United Kingdom Accounting Standards and applicable law), including Financial Reporting Standard 101 Reduced Disclosure Framework (FRS101).

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 of the company and of the 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 United Kingdom Accounting Standards, including FRS 101 have been followed, subject to any material departures disclosed and explained in the financial statements

•     notify its shareholders in writing about the use of disclosure exemptions, if any, of FRS 101 used in the preparation of financial statements; and

•     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 and enable them to ensure that the financial statements comply with the Companies Act 2006. 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 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.

We have audited the financial statements of Petroleum Equipment Supply Engineering Company Limited (the 'company') for the year ended 31 December 2021 which comprise the statement of comprehensive income, the statement of financial position, the statement of changes in equity and notes to the financial statements, including a summary of significant accounting policies. The financial reporting framework that has been applied in their preparation is applicable law and United Kingdom Accounting Standards, including FRS 101 Reduced Disclosure Framework (United Kingdom Generally Accepted Accounting Practice).

In our opinion the financial statements:

•     give a true and fair view of the state of the company's affairs as at 31 December 2021 and of its loss for the year then ended;

•     have been properly prepared in accordance with United Kingdom Generally Accepted Accounting Practice; and

•     have been prepared in accordance with the requirements of the Companies Act 2006.

Basis for opinion

We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our responsibilities under those standards are further described in the Auditor's responsibilities for the audit of the financial statements section of our report. We are independent of the company in accordance with the ethical requirements that are relevant to our audit of the financial statements in the UK, including the FRC’s Ethical Standard, and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Conclusions relating to going concern

In auditing the financial statements, we have concluded that the directors' use of the going concern basis of accounting in the preparation of the financial statements is appropriate.

Based on the work we have performed, we have not identified any material uncertainties relating to events or conditions that, individually or collectively, may cast significant doubt on the company's ability to continue as a going concern for a period of at least twelve months from when the financial statements are authorised for issue.

Our responsibilities and the responsibilities of the directors with respect to going concern are described in the relevant sections of this report.

Other information

The other information comprises the information included in the annual report other than the financial statements and our auditor's report thereon. The directors are responsible for the other information contained within the annual report. Our opinion on the financial statements does not cover the other information and, except to the extent otherwise explicitly stated in our report, we do not express any form of assurance conclusion thereon. Our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the course of the audit, or otherwise appears to be materially misstated. If we identify such material inconsistencies or apparent material misstatements, we are required to determine whether this gives rise to a material misstatement in the financial statements themselves. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact.

We have nothing to report in this regard.

Opinions on other matters prescribed by the Companies Act 2006

In our opinion, based on the work undertaken in the course of our audit:

• the information given in the strategic report and the directors' report for the financial year for which the financial statements are prepared is consistent with the financial statements; and

• the strategic report and the directors' report have been prepared in accordance with applicable legal requirements.

In the light of the knowledge and understanding of the company and its environment obtained in the course of the audit, we have not identified material misstatements in the strategic report and the directors' report.

We have nothing to report in respect of the following matters where the Companies Act 2006 requires us to report to you if, in our opinion:

•     adequate accounting records have not been kept, or returns adequate for our audit have not been received from branches not visited by us; or

•     the financial statements are not in agreement with the accounting records and returns; or

•     certain disclosures of remuneration specified by law are not made; or

•     we have not received all the information and explanations we require for our audit.

As explained more fully in the directors' responsibilities statement, the directors are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view, and for such internal control as the directors determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. In preparing the financial statements, the directors are responsible for assessing the company's ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the directors either intend to liquidate the company or to cease operations, or have no realistic alternative but to do so.

Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor's report that includes our opinion. Reasonable assurance is a high level of assurance but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.

Irregularities, including fraud, are instances of non-compliance with laws and regulations. We design procedures in line with our responsibilities, outlined above, to detect material misstatements in respect of irregularities, including fraud. The extent to which our procedures are capable of detecting irregularities, including fraud, is detailed below.

The auditor’s explanation of its audit response will depend on the risks identified but may include:

- Enquiry of management, those charged with governance and the entity’s solicitors around actual and potential litigation and claims.

- Reviewing financial statement disclosures and testing to supporting documentation to assess compliance with applicable laws and regulations.

- Auditing the risk of management override of controls, including through testing journal entries and other adjustments for appropriateness, and evaluating the business rationale of significant transactions outside the normal course of business.

A further description of our responsibilities is available on the Financial Reporting Council’s website at: https://www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditor's report.

Use of our report

This report is made solely to the company's members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006. Our audit work has been undertaken so that we might state to the company's members those matters we are required to state to them in an auditor's report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company and the company's members, as a body, for our audit work, for this report, or for the opinions we have formed.

The income statement has been prepared on the basis that all operations are continuing operations.

These financial statements have been prepared in accordance with the provisions applicable to companies subject to the small companies regime.

Petroleum Equipment Supply Engineering Company Limited (the company) is a private limited liability company in the United Kingdom, incorporated and domiciled in Scotland. The company’s principal activities are the provision of consultant engineering services and sale of oilfield equipment.

The company's principal place of business is Badentoy Park, Portlethen, United Kingdom. The company's registered office is c/o Raeburn Christie Clark and Wallace, 12-16 Albyn Place, Aberdeen, AB10 1PS.

The parent company is IPS Group Holding B.V., incorporated and domiciled in the Netherlands.

These financial statements represent the individual company only. Details of the consolidated group accounts can be found at Concertgebouwplein 25, 4711 LM, Amsterdam, The Netherlands.

Summary of Significant Accounting Policies

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

These financial statements have been prepared in accordance with United Kingdom Accounting Standards, in particular, Financial Reporting Standard 101 Reduced Disclosure Framework (FRS 101) and the Companies Act 2006 (the Act) as applicable to companies using FRS 101. FRS 101 sets out a reduced disclosure framework for a 'qualifying entity' as defined in the standard which addresses the financial reporting requirements and disclosure exemptions in the individual financial statements of qualifying entities that otherwise apply the recognition, measurements and disclosure requirements of EU-adopted IFRS.

The company is a qualifying entity for the purposes of FRS 101. Note 18 gives details of the company's ultimate parent and from where its consolidated financial statements prepared in accordance with IFRS may be obtained.

The preparation of the financial statements in conformity with FRS 101 requires the use of certain critical accounting estimates. It also requires management to exercise its judgement in the process of applying the company's accounting policies. The areas involving a higher degree of judgement or complexity, or areas where assumptions and estimates are significant to the financial statements are disclosed in Note 3.

The financial statements have been prepared under the historical cost convention, as modified by the revaluation of land and buildings and derivative financial assets and financial liabilities measured at fair value through profit or loss, and in accordance with the Companies Act 2006.

The financial statements are prepared in US dollars, which is the functional currency of the company. Monetary amounts in these financial statements are rounded to the nearest $.

The principal activities, risks and uncertainties and future outlook are set out in the Strategic and Directors’ Report on pages 1 to 3. The company meets its day-to-day working capital requirements through its cash reserves and continued trading. The current economic conditions continue to create uncertainty, particularly over the level of demand for the company’s products and services. The company’s forecasts and projections, taking account of reasonably possible changes in trading performance, show that the company should be able to operate within the level of its current cash reserves. After making enquiries, the Directors have a reasonable expectation that the Company has adequate resources to continue in operational existence for the foreseeable future. The company therefore continues to adopt the going concern basis in preparing its financial statements. true

Revenue comprises the fair value of the consideration received or receivable for the sale of goods and services in the ordinary course of the company’s activities. Revenue is shown net of value-added tax, returns, rebates and discounts.

The company recognises revenue when the amount of revenue can be measured reliably, it is probable that future economic benefits will flow to the entity and specific criteria have been met for each of the company's activities. The amount of revenue is not considered to be reliably measurable until all contingencies relating to the sale have been resolved. The company bases its estimates on historical results, taking into consideration the type of customer, the type of transaction and the specifics of the arrangement.

Sale of goods is recognised when the company has delivered products to the customer, the customer has accepted the products and collectability of the related receivables is reasonably assured. Revenue from services is recognised in the periods services are provided. Where the products have not been delivered or the services have not been performed, but settlements have been received in advance, revenue recognition is deferred until completion of delivery of the products or performance of the services.

Property, plant and equipment are initially measured at cost and subsequently measured at cost, net of depreciation and any impairment losses.

Depreciation is recognised so as to write off the cost or valuation of assets less their residual values over their useful lives on the following bases:

Inventories are stated at the lower of cost and estimated net realisable value, after making due allowance for obsolete and slow moving items. Cost is determined using the first-in, first-out (FIFO) method. Costs are specifically identified against each item of inventory. Net realisable value is the estimated selling price in the ordinary course of business, less applicable variable selling expenses.

Cash and cash equivalents consist solely of cash in banks and on hand.

Financial instruments are recognised in the company's statement of financial position when the company becomes party to the contractual provisions of the instrument.

Financial assets and liabilities are offset, with the net amounts presented in the financial statements, when there is a legally enforceable right to set off the recognised amounts and there is an intention to settle on a net basis or to realise the asset and settle the liability simultaneously.

Trade receivables are amounts due from customers for goods sold or services performed in the ordinary course of business. If collection is expected in on year or less, they are classified as current assets. If not, they are presented as non-current assets.

Trade receivables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method, less provision for impairment. A provision for impairment of trade receivables is established when there is evidence that the company will not be able to collect all amounts due according to the original terms of the receivable.

1.7.1 Classification

The company classifies its financial assets as loans and receivables. The classification depends on the purpose for which the financial assets were acquired. Management determines the classification of its financial assets at initial recognition.

Loans and Receivables

Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. The company's loans and receivables comprise "debtors" and "cash at bank and in hand" in the balance sheet.

1.7.2 Recognition and Measurement

They are initially measured at fair value and subsequently carried at amortised cost using effective interest method.

Financial assets are derecognised when the rights to receive cash flows have expired or have been transferred and the company has transferred substantially all risks and rewards of ownership.

The company assesses at the end of each reporting period whether there is objective evidence that a financial asset or group of financial assets is impaired. A financial asset or group of financial assets is impaired and impairment losses are incurred only if there is objective evidence of impairment as a result of one or more events that occurred after the initial recognition of the asset (a 'loss event') and that loss event (or events) has an impact on the estimated future cash flows of the financial asset or group of financial assets that can be reliably estimated.

For loans and receivables category, the amount of the loss is measured as the difference between the asset's carrying amount and the present value of estimated future cash flows (excluding future credit losses that have not been incurred) discounted at the financial asset's original effective interest rate. The carrying amount of the asset is reduced and the amount of the loss is recognised in the consolidated income statement.

If in a subsequent period, the amount of the impairment loss decreases and the the decrease can be related objectively to an event occurring after the impairment was recognised (such as an improvement in the debtor's credit rating), the reversal of the previously recognised impairment loss is recognised in the income statement.

Financial assets are derecognised only when the contractual rights to the cash flows from the asset expire or are settled, or when the company transfers the financial asset and substantially all the risks and rewards of ownership to another entity, or if some significant risks and rewards of ownership are retained but control of the asset has transferred to another party that is able to sell the asset in its entirety to an unrelated third party.

Trade payables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method.

Derivatives, including interest rate swaps and forward foreign exchange contracts, are not basic financial instruments. Derivatives are initially recognised at fair value on the date a derivative contract is entered into and are subsequently re-measured at their fair value. Changes in the fair value of derivatives are recognised in profit or loss in finance costs or finance income as appropriate, unless hedge accounting is applied and the hedge is a cash flow hedge.

Debt instruments that do not meet the conditions in FRS 102 paragraph 11.9 are subsequently measured at fair value through profit or loss. Debt instruments may be designated as being measured at fair value through profit or loss to eliminate or reduce an accounting mismatch or if the instruments are measured and their performance evaluated on a fair value basis in accordance with a documented risk management or investment strategy.

Financial liabilities are derecognised when the company’s contractual obligations expire or are discharged or cancelled.

Ordinary shares are classified as equity.

Changes in the fair value of derivatives that are designated and qualify as fair value hedges are recognised in profit or loss immediately, together with any changes in the fair value of the hedged asset or liability that are attributable to the hedged risk.

The tax expense for the period comprises current and deferred tax. Tax is recognised in the income statement, except to the extent that it relates to items recognised directly in equity. In this case, the tax is also recognised in equity.

The current income tax charge is calculated on the basis of the tax laws enacted or substantially enacted at the balance sheet date in the countries where the company operate and generate taxable income. Management periodically evaluates positions taken in tax returns with respect to situations in which applicable tax regulation is subject to interpretation. It establishes provisions where appropriate on the basis of amounts expected to be paid to the tax authorities.

Deferred income tax is recognised, usually the liability method, on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the financial statements. However, the deferred income tax is not accounted for if it arises from initial recognition of an asset or liability in a transaction other than a business combination that at the time of the transaction affects neither accounting nor taxable profit or loss. Deferred income tax is determined using tax rates (and laws) that have been enacted or substantially enacted by the balance sheet date and are expected to apply when the related deferred income tax asset is realised or the deferred income tax liability is settled.

Deferred income tax is provided on temporary differences arising on investments in subsidiaries, except where the timing of the reversal of the temporary difference is controlled by the company and is it probable that the temporary difference will not reverse in the foreseeable future.

Provision for taxation is based on accounting profits adjusted for any potential disallowances under relevant taxation rules or in accordance with the bases agreed with the tax authorities in the various countries in which the company has taxable operations.

The company operates a defined contribution pension scheme. Contributions payable to the company's pension scheme are charged to the profit and loss account in the period to which they relate.

Leases in which a significant portion of the risks and rewards of ownership are retained by the lessor are classified as operating leases. Payments made under operating leases (net of any incentives received from the lessor) are charged to the consolidated income statement on a straight-line basis over the period of the lease.

Foreign Currency Translation

(a) Functional and Presentation Currency:

Items included in the financial statements of the company are measured using the currency of the primary economic environment in which the entity operates ("the functional currency"). This is also the presentation currency of the company. The financial statements are presented in United States Dollars (USD), which is the company's functional currency.

(b) Transactions and Balances:

Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the transactions or valuation where items are re-measured. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at year end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in the profit and loss account. Foreign exchange gains and losses are presented in the profit and loss account within "Administrative Expenses".

Disclosure Exemption

The company has adopted the disclosure exemption as allowed by FRS 101; IPS Group Holding B.V.'s (the parent undertaking of the smallest group of undertakings to consolidate these financial statements) accounts are full disclosure. The exemption covers some (but not all) disclosures in the following standards:

IFRS 7 - Disclosure of financial statements.

IFRS 13 - Disclosure relating to fair value measurement. IAS 1 - Information on management capital.

IAS 1 - From the requirement to present a balance sheet as at the beginning of the preceding period if there is a prior year adjustment.

IAS 7 - A Cash flow statement is not required.

IAS 8 - Disclosure in respect of new standards and interpretations that have been issued but which are not yet effective.

IAS 24 - The requirements in IAS 24, "Related party disclosures" to disclose related party transactions entered into between two or more members of a group.

Others - The requirement to present comparatives in roll-forward reconciliations, including movements in share capital (IAS 1), PP&E (IAS 16) and intangible assets (IAS 38).

Estimates and judgements are continually evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances.

The company makes estimates and assumptions concerning the future. The resulting accounting estimates may, by definition, seldom equal the related actual results. The estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are as follows:

(a) Impairment of trade and other receivables

The impairment charge reflects estimates of losses arising from the failure or inability of the parties concerned to make the required payments. The charge is based on aging of the customers' accounts, the customer' creditworthiness and the historic write-off experience. Changes to the estimated impairment charge may be required if the financial condition of the customers was to improve or deteriorate.

(b) Income tax

The Company is subject to incomes taxes in the UK. Significant judgement is required in determining the worldwide provision for income taxes. There are many transactions and calculations for which the ultimate tax determination is uncertain. The Company recognises liabilities for anticipated tax audit issues based on estimates of whether additional taxes will be due. Where the final tax outcome of these matters is different from the amounts that were initially recorded, such differences will impact the current and deferred income tax assets and liabilities in the period in which such determination is made.

(c) Provision for inventory write-down

The company carries out a review of all items held in inventory each year, focussing on the carrying value of each item. Professional judgement is used to determine whether a provision should be made and, if so, the value of the write-down. When arriving at a decision, consideration is made as to the current market conditions, the age and condition of the material, the storage location and the demand and availability of the product.

The company's activities relate to the sale of oilfield equipment and also the provision of engineering services. the geographical analysis for each of the company's activities are as follows:

The average monthly number of persons (including directors) employed by the company during the year was:

Employment costs:

The actual (credit)/charge for the year can be reconciled to the expected credit for the year based on the profit or loss and the standard rate of tax as follows:

The number of directors for whom retirement benefits are accruing under defined contribution schemes amounted to 0 (2020 - 1).

No provisions for impairment were made in the year (2020 - $nil).

All sums payable to group companies are repayable on demand.

All shares rank pari passu in all respects.

At 31 December the company was committed to making the following payments under non-cancellable operating leases in the year to 31 December:

During the year consultancy fees amounting to $268,137 (2020 - $245,910) were paid to LPB Consultants Limited of which Ilirjana Bradley is a director.

The immediate parent undertaking is IPS Group Holding B.V., a company incorporated in the Netherlands. These financial statements will be consolidated into those of IPS Group Holding B.V. at 31 December 2021.

Copies of the group financial statements can be obtained from Concertgebouwplein 25, 4711 LM, Amsterdam, The Netherlands.

The ultimate controlling party is Bart Duijndam.

The company has entered into a limitation of liability agreement "the agreement" with the auditor Meston Reid & Co. in respect of the year ended 31 December 2021. This agreement was approved by the directors on 21 March 2022.

The principal term of the agreement is that our auditor has a maximum liability, for any claim arising out of the provision of audit services, of the lower of one hundred times the fee value or £1 million. This agreement does not restrict our auditor's liability for fraud or dishonesty or where a restriction is not permitted by law.