TIDMMTA
RNS Number : 6471D
Matra Petroleum PLC
28 March 2011
28th March 2011
Matra Petroleum PLC
("Matra" or the "Company")
Preliminary Results
Matra Petroleum PLC, an independent oil and gas exploration and
production company with operations in Russia, today announces its
results for the 12 month period ending 31 December 2010.
Highlights
Operational
-- Granting of a 20 year Production Licence for the Sokolovskoe
Field
-- Completed drilling of well A-13, the first appraisal well on
the Sokolovskoe Field
-- Well A-12 successfully side-tracked and now being prepared
for production
-- Independent field assessment showed unrisked upside potential
of the Sokolovskoe field to be in excess of 50 mmbbls
Financial
-- Year-end cash and cash equivalents totalling EUR2.2
million
-- Additional EUR1.80million (GBP1.55 million) raised through
placement since year-end
Outlook
-- 3D seismic survey to be carried out across the entire
field
-- Further wells planned to appraise the field and increase
production
Peter Hind, Managing Director commented:
"Significant progress was made in 2010 with the issue of the
20-year Production Licence and a Competent Person's Report on the
field. We expect to move onto the next stage of development and
further drilling later this year once production testing of
existing wells is complete."
Enquiries:
Matra Petroleum plc www.matrapetroleum.com
Peter Hind, Managing Director +44 (0) 7990 807855
Pelham Bell Pottinger
Nick Lambert +44 20 7861 3936
Henry Lerwill +44 20 7861 3169
Matrix Corporate Capital
LLP
Louis Castro/Tim Graham +44 20 3206 7000
REPORT AND ACCOUNTS FOR THE YEAR ENDED 31 DECEMBER 2010
CHAIRMAN'S STATEMENT
Dear Shareholder
Matra made good progress in 2010 with the drilling of well A-13,
the first appraisal well on the Sokolovskoe Field. This well is now
being brought on stream. 2010 ended with the grant, by the Russian
Authorities, of a 20 year Production Licence for the Sokolovskoe
Field. This was a significant event that followed on from the
Competent Person's Report ("CPR") issued in October last year.
The CPR confirmed the existence of a commercial field having
substantial value. The report also highlighted the potential upside
that will be defined as the field is further developed.
Since the CPR was issued showing the indicative value of the
field, world oil prices have increased considerably from the
$75/bbl market price assumed at the time. We are also aware that
the Russian Authorities are proposing changes in taxation that will
further benefit the economics of the Sokolovskoe Field if, as
expected, they become law.
It is fortuitous that these changes are happening as the field
begins production.
In the early part of 2011 well A-12 was successfully
side-tracked and the well is being prepared for production.
The focus for Matra in 2011 is to begin full development of the
Sokolovskoe Field, alongside further field appraisal, and to
broaden the company's portfolio by acquiring new assets in the
region.
There were also changes to the Matra board in the past year with
Craig Burton, who was a founding Director of the Company, stepping
down in 2010. Craig made a major contribution to the company during
his time on the board, for which we thank him. We wish him well in
his various ongoing and new business ventures in Australia.
I was very pleased to welcome Bill Guest as a non-executive
Director in June 2010. Bill has a wealth of both technical and
commercial experience in the upstream oil business.
The Board is grateful to Matra's management and staff in both
London and Orenburg for their continued hard work and efforts
during 2010 and into 2011.
Sir Michael Jenkins
Chairman
23 March 2011
MANAGING DIRECTOR'S REVIEW
Overview of 2010 and 2011 Operations
During the second half of 2010 we had three main objectives; to
obtain a long term Production Licence, to independently assess the
field and to bring the two existing wells onto production. The
first two objectives were achieved before year end. Subsequently
well A-13 has commenced production and the well A-12 side-track has
been completed and is about to commence production.
Matra has been granted a 20 year Production Licence to develop
the Sokolovskoe field. Under the terms of the licence we are
required to drill at least one well, to run additional seismic and
then to submit a full development plan for approval by the
authorities.
The independent field assessment confirmed the presence of a
field with 15 mmbbls of Contingent Recoverable Resource. With the
subsequent issue of the Production Licence and with board approval
of an outline development we are confident that these resource
estimates will move into the Proven plus Probable Reserve category,
according to SPE guidelines. This assessment also showed that the
unrisked upside potential of the field to be in excess of 50
mmbbls.
It is our intention, subject to funding, to run a 3D seismic
survey over the entire field and to drill or commence drilling two
development wells this year. The 3D seismic is required to provide
further confidence over the eastern flank of the field. Until that
is acquired and processed we will not drill in that area. In the
interim we plan to begin drilling a development well in the western
area not far from existing wells.
This well will provide additional production and test an area
that may contain a patch reef. The existence of patch reefs is
postulated as part of the geological model and if encountered would
be likely to increase reserves and have greater productivity.
A second well on the eastern flank of the field would help
clarify the overall size of the field and, if successful, increase
reserves.
Wells
Our first two wells in the field (12 & 13) were classified
as exploration wells requiring us to drill to a certain depth and
to test specific formations. This entailed drilling into water
bearing formations below the oil reservoir. Due to the higher
permeability of this water zone a good cement bond was not achieved
in either well and subsequently water flowed behind the casing and
into the well. Although this water zone caused difficulties in
these wells it should be understood that development wells will
incur no such obligations and will be terminated in the oil
reservoir, thus avoiding such water influx. In well A-13 the water
was isolated by squeeze cementing and in well A-12 a side-track
hole was drilled to a new location some 50m from the original well
and terminated in the oil zone.
As is usual in carbonate (limestone) reservoirs, the reservoir
quality varies across the field. Well A-13 encountered a poorer
reservoir section and a lower flow rate than well A-12. It should
be pointed out however that well A-13 is typical of production
rates in the area from commercial fields.
The productivity of wells encountering a lower permeability
reservoir can be improved by acid stimulation, installation of a
down-hole pump, and perhaps even more effectively by drilling a
short horizontal section through the reservoir. The drilling of
horizontal sections through the reservoir has the potential to
significantly improve well productivity and is used extensively
within the Orenburg region, and throughout the world. The success
of the well A-12 side-track indicates that such operations may be
carried out in the Sokolovskoe Field and reservoir studies are
underway to estimate the likely improvement in well rates.
Strategy
We are fortunate to begin producing at a time of improving oil
prices. Our focus for 2011 is therefore to advance the development
and production of the Sokolovskoe Field. This is the key to the
future growth of the company.
Our longer term strategy is to build a bigger portfolio of
similar projects, ideally within the same region of Russia. We are
continuously reviewing new opportunities but it was clear that we
should demonstrate success in Sokolovskoe to investors before
moving on to new territory. More emphasis will therefore be placed
on selectively broadening the company's portfolio during the coming
year.
Peter Hind
Managing Director
23 March 2011
REVIEW OF OPERATIONS AND FINANCE
No new funds were raised in 2010. Subsequently on 14 February
2011 the Company placed 50 million new shares with subscribers at
3.1p per share. Details of the Placing are summarised below:
Ordinary Funds
shares raised
No. GBP
----------------------- -------------- ----------
31 December 2010 1,064,917,872 -
Placement 14 February
2011 50,000,000 1,550,000
Share issue costs - (53,512)
14 February 2011 1,114,917,872 1,496,488
======================= ============== ==========
Group administrative expenditure was lower in 2010 by EUR486,324
(note 7). This reduction was largely due to currency variances and
share based payment charges, but also reflects a reduction of
EUR128,618 in Group overhead.
During the year Russian VAT refunds of EUR566,137 (2009:
EUR967,603) were received.
The Group capitalised costs of EUR4,520,175 relating to the
drilling of the A-13 appraisal well, the workover / sidetrack of
well A-12 and all costs associated with the granting of the
Production Licence (note 10).
Inventory includes EUR18,421 (2009: EUR163,745) (note 12) for
well casing and other drilling equipment retained for future use.
Inventory is accounted for at the lower of cost and net realisable
value.
At year end the Group had cash and cash equivalents totalling
EUR2,222,041 (2009: EUR6,727,308) (note 17). Current cash reserves
are sufficient to fund the budgeted work programme and associated
overhead for 2011. Further development of the Sokolovskoe Field
will require additional funds to be raised in 2011 or 2012 through
debt, equity or other arrangement. The Directors are confident of
the Company's ability to secure further funding as appropriate.
Risks to the Group
The Group's Oil and Gas activities are subject to various risks
as described below, which can significantly impact upon its
performance:
-- Liquidity risk and interest rates - The Group has a
significant capital programme to develop its asset. As a result
management carefully monitor the liquidity position. Cash forecasts
are produced regularly and are reviewed by management
-- Currency risk - The Group has a presentational currency of
the Euro but a significant proportion of capital expenditure is
denominated in Roubles and US Dollars. At present the Group has no
formal currency hedging policy but management will continue to
monitor the situation and adopt an appropriate hedging policy if
necessary
-- Commodity risk - The economic viability of the Group's oil
and gas assets is dependent on the underlying oil price. Management
produce financial models of the assets based upon conservative long
term oil prices and regularly revise these estimates
-- Operational risk - Operational risks include equipment
failure, well control issues and the impact of hostile weather
conditions. The Group takes responsibility to ensure all relevant
legislation is met and that contractors have the relevant insurance
in place
REVIEW OF OPERATIONS AND FINANCE
Key sources of estimation uncertainty
The Group makes estimates and assumptions regarding the future.
Estimates and judgements are continually evaluated based on
historical experiences and other factors, including expectations of
future events that are believed to be reasonable under the
circumstances. In the future, actual experience may deviate from
these estimates and assumptions. The 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:
Exploration and evaluation costs
Exploration and evaluation costs are capitalised as intangible
assets (note 10) and are assessed for impairment when circumstances
suggest that the carrying amount may exceed the recoverable value
thereof. This assessment involves judgement as to the likely future
commerciality of the asset and when such commerciality should be
determined as well as future revenues and costs pertaining to the
utilisation of the exploration and production rights to which such
capitalised costs relate and the discount rate to be applied to
such future revenues and costs in order to determine a recoverable
value.
Impairment review
While conducting an impairment review of its assets, the Group
exercises judgement in making assumptions about future oil &
gas prices and future development and production costs. Changes in
the estimates used can result in significant charges to the income
statement.
Share based payments
Where equity settled share options are awarded to employees, the
fair value of the options at the date of grant is charged to the
consolidated income statement over the vesting period. Non-market
vesting conditions are taken into account by adjusting the number
of equity instruments expected to vest at each balance sheet date
so that, ultimately, the cumulative amount recognised over the
vesting period is based on the number of options that eventually
vest. Market vesting conditions are factored into the fair value of
the options granted. As long as all other vesting conditions are
satisfied, a charge is made irrespective of whether the market
vesting conditions are satisfied. The cumulative expense is not
adjusted for failure to achieve a market vesting condition.
Where the terms and conditions of options are modified before
they vest, the increase in the fair value of the options, measured
immediately before and after the modification, is also charged to
the consolidated income statement over the remaining vesting
period.
Where equity instruments are granted to persons other than
employees, the consolidated income statement is charged with the
fair value of goods and services received.
DIRECTORS' REPORT
FOR THE YEAR ENDED 31 DECEMBER 2010
The Directors present their annual report and the audited
consolidated financial statements of Matra Petroleum plc (the
"Company" and together with its subsidiaries and associates, the
"Group"), for the year ended 31 December 2010.
Principal activity and business review
The principal activity of the Group is that of oil and gas
exploration and production.
A full review of the Group's activities during the year, recent
events and future developments are contained in the Chairman's
Statement, Managing Director's Review and Operational Review
incorporated within the Annual Report and Accounts.
Corporate structure
Matra Petroleum plc is a Company limited by shares that is
incorporated and domiciled in England and Wales. The Company has
the following subsidiaries at 31 December 2010:
-- Matra Cyprus Petroleum Limited (100%)
-- Matra Cyprus Petroleum (Alpha) Limited (100%)
-- OOO Arkhangelovskoe (100%)
Results and dividends
The loss of the Group after taxation amounted to EUR1,769,429
(2009: EUR2,325,053).
The Directors do not propose the payment of a dividend (2009:
nil).
Business review and future developments
Likely developments in the operations of the group have been
included in the Chairman's Statement and Managing Director's Review
which is incorporated into this report and details of events after
the reporting period can be found in note 21.
Directors
The following Directors held office during the year to 31
December 2010:
Sir Michael Jenkins
Peter Hind
Neil Hodgson
Craig Burton (resigned 9 April 2010)
Gideon Tadmor
Bill Guest (appointed 2 June 2010)
Re-election of directors
The Articles of Association require one-third of the Directors
who are subject to retirement by rotation to retire and offer
themselves for re-election each year.
Annual general meeting
Details of the Company's forthcoming Annual General Meeting will
be set out in a separate circular and sent to all Shareholders with
the Annual Report and Accounts.
Supplier payment policy
The Group and Company's policy is that payments made to
suppliers are made in accordance with those terms and conditions
agreed between the Company and its suppliers, providing that all
trading terms and conditions have been complied with. The supplier
payment days are 30 days for the Group (2009: 23 days) and 13 days
for the Company (2009: 31 days).
Political and charitable contributions
There were no political or charitable contributions made by the
Company during the year ended 31 December 2010.
Director's liabilities
The Company has granted an indemnity to all of its Directors and
officers against liability in respect of proceedings brought by
third parties, subject to the conditions set out in the Companies
Act 2006. Such qualifying third party indemnity provision remains
in force as at the date of approving the Directors' report and is
provided by way of insurance policy with a collective limit of
GBP10 million.
Financial instruments
Details of the use of financial instruments by the Company and
its subsidiary undertakings are contained in note 17 of the
financial statements.
Going Concern
After making enquiries, including the disclosures made in note
22 to the financial statements and the managing Director's Review,
the Directors have a reasonable expectation that the Group will
have adequate resources to continue in operational existence for
the foreseeable future. For this reason, they continue to adopt the
going concern basis in preparing the financial statements.
Auditors and disclosure of information to auditors
The Directors confirm the following applies:
-- So far as the Directors are aware, there is no relevant audit
information of which the Company's auditors are unaware, and;
-- The Directors have taken all steps that they ought to have
taken as Directors in order to make themselves aware of any
relevant audit information and to establish that the Company's
auditors are aware of that information.
BDO LLP offer themselves for re-appointment as auditors and an
appropriate resolution will be put to the shareholders at the
AGM.
By order of the Board
Peter Hind
Managing Director
23 March 2011
STATEMENT OF DIRECTORS' RESPONSIBILITIES
FOR THE YEAR ENDED 31 DECEMBER 2010
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 group and company financial statements
in accordance with International Financial Reporting Standards
(IFRSs) as adopted by the European Union. 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 group and company and of the profit or loss of the
group for that period. The directors are also required to prepare
financial statements in accordance with the rules of the London
Stock Exchange for companies trading securities on the Alternative
Investment Market.
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 they have been prepared in accordance with
IFRSs as adopted by the European Union, 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 and enable them to ensure that
the financial statements comply with the requirements of 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.
Website publication
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.
The directors' responsibility also extends to the ongoing integrity
of the financial statements contained therein.
INDEPENDENT AUDITORS' REPORT
FOR THE YEAR ENDED 31 DECEMBER 2010
We have audited the financial statements of Matra Petroleum Plc
for the year ended 31 December 2010 which comprise the consolidated
income statement, the consolidated and company statement of
comprehensive income, the consolidated and company statement in
changes in equity, the consolidated and company balance sheet, the
consolidated and company cash flow statement and the related notes.
The financial reporting framework that has been applied in their
preparation is applicable law and International Financial Reporting
Standards (IFRSs) as adopted by the European Union and, as regards
the parent company financial statements, as applied in accordance
with the provisions of the Companies Act 2006.
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.
Respective responsibilities of directors and auditors
As explained more fully in the statement of directors'
responsibilities, the directors are responsible for the preparation
of the financial statements and for being satisfied that they give
a true and fair view. Our responsibility is to audit and express an
opinion on the financial statements in accordance with applicable
law and International Standards on Auditing (UK and Ireland). Those
standards require us to comply with the Auditing Practices Board's
(APB's) Ethical Standards for Auditors.
Scope of the audit of the financial statements
A description of the scope of an audit of financial statements
is provided on the APB's website at
www.frc.org.uk/apb/scope/private.cfm.
Opinion on financial statements
In our opinion:
-- the financial statements give a true and fair view of the
state of the group's and the parent company's affairs as at 31
December 2010 and of the group's loss for the year then ended;
-- the group financial statements have been properly prepared in
accordance with IFRSs as adopted by the European Union;
-- the parent company financial statements have been properly
prepared in accordance with IFRSs as adopted by the European Union
and as applied in accordance with the provisions of the Companies
Act 2006; and
-- the financial statements have been prepared in accordance
with the requirements of the Companies Act 2006.
Opinion on other matters prescribed by the Companies Act
2006
In our opinion the information given in the directors' report
for the financial year for which the financial statements are
prepared is consistent with the financial statements.
Matters on which we are required to report by exception
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 by the parent
company, or returns adequate for our audit have not been received
from branches not visited by us; or
-- the parent company financial statements are not in agreement
with the accounting records and returns; or
-- certain disclosures of directors' remuneration specified by
law are not made; or
-- we have not received all the information and explanations we
require for our audit.
Scott Knight (senior statutory auditor)
For and on behalf of BDO LLP, statutory auditor
London
United Kingdom
23 March 2011
BDO LLP is a limited liability partnership registered in England
and Wales (with registered number OC305127).
CONSOLIDATED INCOME STATEMENT
FOR THE YEAR ENDED 31 DECEMBER 2010
31 December 31 December
2010 2009
Notes EUR EUR
------------------------------------------ ------ ------------ ------------
Administration expenditure (1,829,378) (2,315,702)
------------------------------------------ ------ ------------ ------------
Total administration expenditure (1,829,378) (2,315,702)
------------------------------------------ ------ ------------ ------------
Loss from operations 4 (1,829,378) (2,315,702)
Finance income 71,538 17,956
Finance costs 8 (11,589) (27,307)
Loss before taxation 6 (1,769,429) (2,325,053)
Loss after taxation attributable to
equity holders of parent company (1,769,429) (2,325,053)
========================================== ====== ============ ============
Loss per share
Basic and diluted 2 (0.00166) (0.00328)
The notes on pages 19 to 37 form part of the financial
statements.
STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEAR ENDED 31 DECEMBER 2010
31 December 31 December
2010 2009
Consolidated EUR EUR
------------------------------------------------ ------------ ------------
Loss after taxation (1,769,429) (2,325,053)
------------------------------------------------ ------------ ------------
Other comprehensive income:
Exchange differences on translating foreign
operations 988,943 (456,840)
----------------------------------------------- ------------ ------------
Other comprehensive income for the period 988,943 (456,840)
Total comprehensive income for the period (780,486) (2,781,893)
================================================ ============ ============
31 December 31 December
2010 2009
Company EUR EUR
------------------------------------------------ ------------ ------------
Loss after taxation (1,761,165) (3,504,300)
------------------------------------------------ ------------ ------------
Other comprehensive income:
Exchange differences on translating foreign
operations 934,738 768,348
----------------------------------------------- ------------ ------------
Other comprehensive income for the period 934,738 768,348
Total comprehensive income for the period (826,427) (2,735,952)
================================================ ============ ============
The notes on pages 19 to 37 form part of the financial
statements.
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 DECEMBER 2010
Share Share Foreign Retained Total
capital premium currency earnings
translation
reserve
Consolidated EUR EUR EUR EUR EUR
--------------- ---------- ----------- ------------ ------------- ------------
Total equity
as at 1
January 2009 661,127 28,813,816 (4,325,773) (15,545,880) 9,603,290
Loss after
taxation - - - (2,325,053) (2,325,053)
Exchange
differences
on
translating
foreign
operations - - (456,840) - (456,840)
--------------- ---------- ----------- ------------ ------------- ------------
Total
comprehensive
income for
the period - - (456,840) (2,325,053) (2,781,893)
Shares issued 694,095 7,715,123 - - 8,409,218
Share issue
costs - (244,904) - - (244,904)
Recognition of
share based
payment - - - 377,517 377,517
Total equity
as at 31
December
2009 1,355,222 36,284,035 (4,782,613) (17,493,416) 15,363,228
=============== ========== =========== ============ ============= ============
Share Share Foreign Retained Total
capital premium currency earnings
translation
reserve
Consolidated EUR EUR EUR EUR EUR
--------------- ---------- ----------- ------------ ------------- ------------
Total equity
as at 1
January 2010 1,355,222 36,284,035 (4,782,613) (17,493,416) 15,363,228
Loss after
taxation - - - (1,769,429) (1,769,429)
Exchange
differences
on
translating
foreign
operations - - 988,943 - 988,943
--------------- ---------- ----------- ------------ ------------- ------------
Total
comprehensive
income for
the period - - 988,943 (1,769,429) (780,486)
Recognition of
share based
payment - - - 1,167 1,167
Total equity
as at 31
December
2010 1,355,222 36,284,035 (3,793,670) (19,261,678) 14,583,909
=============== ========== =========== ============ ============= ============
The notes on pages 19 to 37 form part of the financial
statements.
COMPANY STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 DECEMBER 2010
Share Share Foreign Retained Total
capital premium currency earnings
translation
reserve
Company EUR EUR EUR EUR EUR
--------------- ---------- ----------- ------------ ------------- ------------
Total equity
as at 1
January 2009 661,127 28,813,816 (4,600,086) (15,271,567) 9,603,290
Loss after
taxation - - - (3,504,300) (3,504,300)
Exchange
differences
on
translating
foreign
operations - - 768,348 - 768,348
--------------- ---------- ----------- ------------ ------------- ------------
Total
comprehensive
income for
the year - - 768,348 (3,504,300) (2,735,952)
Shares issued 694,095 7,715,123 - - 8,409,218
Share issue
costs - (244,904) - - (244,904)
Recognition of
share based
payment - - - 377,517 377,517
Total equity
as at 31
December
2009 1,355,222 36,284,035 (3,831,738) (18,398,350) 15,409,169
=============== ========== =========== ============ ============= ============
Share Share Foreign Retained Total
capital premium currency earnings
translation
reserve
Company EUR EUR EUR EUR EUR
--------------- ---------- ----------- ------------ ------------- ------------
Total equity
as at 1
January 2010 1,355,222 36,284,035 (3,831,738) (18,398,350) 15,409,169
Loss after
taxation - - - (1,761,165) (1,761,165)
Exchange
differences
on
translating
foreign
operations - - 934,738 - 934,738
--------------- ---------- ----------- ------------ ------------- ------------
Total
comprehensive
income for
the year - - 934,738 (1,761,165) (826,427)
Recognition of
share based
payment - - - 1,167 1,167
Total equity
as at 31
December
2010 1,355,222 36,284,035 (2,897,000) (20,158,348) 14,583,909
=============== ========== =========== ============ ============= ============
The notes on pages 19 to 37 form part of the financial
statements.
BALANCE SHEET
AS AT 31 DECEMBER 2010
Group Company
31 December 31 December 31 December 31 December
2010 2009 2010 2009
Notes EUR EUR EUR EUR
------------- ------ ------------- ------------- ------------- -------------
Non-current
assets
Property,
plant and
equipment 9 16,162 37,290 1,989 7,377
Intangible
assets 10 13,395,353 8,365,849 - -
Investment
in
subsidiary 11 - - 1,620 1,549
------------- ------ ------------- ------------- ------------- -------------
13,411,515 8,403,139 3,609 8,926
Current
assets
Inventories 12 18,421 163,745 - -
Trade and
other
receivables 13 180,527 224,646 13,093,887 11,670,873
Cash and
cash
equivalents 2,222,041 6,727,308 1,606,328 3,839,039
------------- ------ ------------- ------------- ------------- -------------
2,420,989 7,115,699 14,700,215 15,509,912
Total assets 15,832,504 15,518,838 14,703,824 15,518,838
============== ====== ============= ============= ============= =============
Capital and reserves attributable
to equity holders of the Parent
Ordinary
shares 16 1,355,222 1,355,222 1,355,222 1,355,222
Share
premium 36,284,035 36,284,035 36,284,035 36,284,035
Foreign
currency
translation
reserve (3,793,670) (4,782,613) (2,897,000) (3,831,738)
Retained
earnings (19,261,678) (17,493,416) (20,158,348) (18,398,350)
------------- ------ ------------- ------------- ------------- -------------
Total equity 14,583,909 15,363,228 14,583,909 15,409,169
Current
liabilities
Trade and
other
payables 14 1,248,595 155,610 119,915 109,669
------------- ------ ------------- ------------- ------------- -------------
Total
liabilities 1,248,595 155,610 119,915 109,669
Total equity
and
liabilities 15,832,504 15,518,838 14,703,824 15,518,838
============== ====== ============= ============= ============= =============
The notes on pages 19 to 37 form part of the financial
statements.
The financial statements were authorised and approved by the
Board on 23 March 2011 and signed on their behalf by
Peter Hind
Managing Director
CASH FLOW STATEMENT
FOR THE YEAR ENDED 31 DECEMBER 2010
Group Company
31 December 31 December 31 December 31 December
2010 2009 2010 2009
audited audited audited audited
EUR EUR EUR EUR
------------------- ------------ ------------ ------------ ------------
Loss before
taxation (1,769,429) (2,325,053) (1,761,165) (3,504,300)
Adjustments for:
Depreciation 24,014 25,220 5,732 9,174
Share based
payments 1,167 377,517 1,167 377,517
Foreign currency
differences 32,612 105,061 759,875 725,346
------------ ------------ ------------ ------------
Cash used in
operating
activities before
changes in working
capital and
provisions (1,711,636) (1,817,255) (994,391) (2,392,263)
Decrease in
inventories 145,324 3,295 - -
(Increase) /
decrease in
receivables 44,119 1,041,055 (1,423,014) (2,449,563)
Increase /
(decrease) in
payables 1,092,985 (21,857) 10,246 (33,582)
------------------- ------------ ------------ ------------ ------------
Cash used in
operating
activities (429,208) (794,762) (2,407,159) (4,875,408)
Purchase of
property, plant
and equipment (549) (2,842) (7) (1,529)
Expenditure on oil
and gas assets (4,520,175) (1,135,293) - -
------------------- ------------ ------------ ------------ ------------
Cash used in
investing
activities (4,520,724) (1,138,135) (7) (1,529)
Proceeds from
issue of shares - 8,409,218 - 8,409,218
Share issue
expenses paid - (244,904) - (244,904)
------------------- ------------ ------------ ------------ ------------
Cash used in
financing
activities - 8,164,314 - 8,164,314
Net (decrease) /
increase in cash
and cash
equivalents (4,949,932) 6,231,417 (2,407,166) 3,287,377
Cash and cash
equivalents at
beginning of
period 6,727,308 530,265 3,839,039 509,914
Effect of foreign
exchange rate
differences 444,665 (34,374) 174,455 41,748
Cash and cash
equivalents at end
of period 2,222,041 6,727,308 1,606,328 3,839,039
==================== ============ ============ ============ ============
The notes on pages 19 to 37 form part of the financial
statements.
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2010
1. Accounting policies
Basis of preparation
The financial statements have been prepared on the going concern
basis in accordance with International Financial Reporting
Standards ("IFRS") as adopted by the European Union and the
provisions of the SORP "Accounting for Oil and Gas Exploration,
Development, Production and Decommissioning Activities in so much
as it complies with IFRS.
These financial statements are presented in Euro, and the
Company's functional currency is Sterling.
Standard Effective date Impact on initial
application
IAS 27 - Amendment - 1 Jul 2009 The amendment affects the
Consolidated and Separate acquisition of subsidiaries
Financial Statements achieved in stages and
disposals of interests.
Amendment does not require
the restatement of previous
transactions. During the
year, there have been no
transactions whereby an
interest in an entity is
retained after the loss of
control of that entity;
there have been no
transactions with
non-controlling interests.
IFRS 3 - Revised - Business 1 Jul 2009 The revision to IFRS 3
Combinations introduced a number of
changes in accounting for
acquisition costs and
recognition of intangible
assets in business
combinations. The revised
standard does not require
the restatement of previous
business combinations.
During the year, there have
been no transactions whereby
an interest in an entity is
retained after the loss of
control of that entity;
there have been no
transactions with
non-controlling interests.
IAS 39 - Amendment - 1 Jul 2009 The amendment clarifies the
Financial Instruments: principles for determining
Recognition and Measurement: eligibility of hedged items.
Eligible Hedged Items The amendment did not have
any impact on the current or
prior years' financial
statements. Future
transactions will be
accounted for consistently
with this amendment.
IFRS 2 - Amendment - Group 1 Jan 2010 The amendments clarifies
Cash-settled Share-based that where a parent (or
Payment Transactions another group entity) has an
obligation to make a
cash-settled share-based
payment to another group
entity's employees or
suppliers, the entity
receiving the goods or
services should account for
the transaction as equity
-settled. The amendment did
not have any impact on the
current or prior years'
financial statements. Future
transactions will be
accounted for consistently
with this amendment.
The IFRS financial information has been drawn up on the basis of
accounting policies consistent with those applied in the financial
statements for the year to 31 December 2009. The following
standards, interpretations and amendments to existing standards
have been adopted for the first time in 2010:
Standard Effective date Impact on initial
application
'Additional exemptions 1 Jan 2010 This is not relevant to
for first-time adopters' the Group as it is an
(Amendment to IFRS 1) existing IFRS
preparer.
Improvements to IFRSs Generally 1 January 2010 The improvements in
(2009) this Amendment clarify
the requirements of
IFRSs and eliminate
inconsistencies within
and between Standards.
The improvements did
not have any impact on
the current or prior
years' financial
statements.
IFRIC 17 - Distributions 1 Jan 2010 The interpretation
of Non-cash Assets to provides guidance on
Owners how to measure
distribution of assets
other than cash. The
application of this
interpretation did not
have any impact on the
current or prior year's
financial statements.
Future transactions
will be accounted for
consistently with this
interpretation.
IFRIC 18 - Transfer of 1 Jan 2010 The interpretation
Assets from Customers clarifies the treatment
of agreements in which
an entity receives from
a customer an item of
property that it must
use to provide the
customer with an
on-going access to
goods or services. The
application of this
interpretation did not
have any impact on the
current or prior year's
financial statements.
Future transactions
will be accounted for
consistently with this
interpretation.
IFRIC 9/ IAS 39 - 1 Jan 2010 The amendment clarifies
Amendment - Embedded the treatment of
Derivative embedded derivatives in
host contracts that are
classified out of fair
value through profit or
loss. The application
of this interpretation
did not have any impact
on the current or prior
year's financial
statements. Future
transactions will be
accounted for
consistently with this
interpretation.
IFRIC 16 - Hedges of a 1 Jan 2010 The interpretation
Net Investment in a provides guidance for
Foreign Operation application of hedge
accounting in foreign
operations. The
application of this
interpretation did not
have any impact on the
current or prior year's
financial statements.
Future transactions
will be accounted for
consistently with this
interpretation.
Standards, amendments and interpretations, which are effective
for reporting periods beginning after the date of these financial
statements which have not been adopted early:
Standard Description Effective date
IAS 32 Amendment - Classification of Right Issues 1 Feb 2010
IFRIC 19 Extinguishing Financial Liabilities with Equity 1 Jul 2010
Instruments
IFRS 1 Amendment - First Time Adoption of IFRS 1 Jul 2010
IAS 24 Revised - Related Party Disclosures 1 Jan 2011
IFRIC 14 Amendment - IAS 19 Limit on a defined benefit 1 Jan 2011
asset
IFRS 7 * Amendment - Transfer of financial assets 1 Jul 2011
IFRS 1 * Severe Hyperinflation and Removal of Fixed Dates 1 Jul 2011
for First-time Adopters
Improvements to IFRSs (2010) * 1 Jan 2011
IAS 12 * Deferred Tax: Recovery of Underlying Assets 1 Jan 2012
IFRS 9 * Financial instruments 1 Jan 2013
The Group has not yet assessed the impact of IFRS 9. Except for
the amended disclosure requirements of IAS 24 (the above revised
standards), amendments and interpretations are not expected to
materially affect the Group's reporting or reported numbers.
* Not yet endorsed by European Union.
Basis of consolidation
Where the company has the power, either directly or indirectly,
to govern the financial and operating policies of another entity or
business so as to obtain benefits from its activities, it is
classified as a subsidiary. The consolidated financial statements
present the results of the company and its subsidiaries ("the
Group") as if they formed a single entity. Intercompany
transactions and balances between Group companies are therefore
eliminated in full.
Segmental reporting
Operating segments are reported in a manner consistent with the
internal reporting provided to the chief operating decision-maker.
The chief operating decision maker has been identified as the
Managing Director, Finance Manager and the other executive and
non-executive Board Members.
Business combinations
The consolidated financial statements incorporate the results of
business combinations using acquisition accounting. In the
consolidated balance sheet, the acquiree's identifiable assets,
liabilities and contingent liabilities are initially recognised at
their fair values at the acquisition date. The results of acquired
operations are included in the consolidated income statement from
the date on which control is obtained.
Foreign currency translation
Transactions entered into by group entities in a currency other
than the currency of the primary economic environment in which they
operate (their "functional currency") are recorded at the rates
ruling when the transactions occur. Foreign currency monetary
assets and liabilities are translated at the rates ruling at the
balance sheet date. Exchange differences arising on the
retranslation of unsettled monetary assets and liabilities are
recognised immediately in the consolidated income statement.
On consolidation, the results of overseas operations are
translated into Euro at rates approximating to those ruling when
the transactions took place. All assets and liabilities of overseas
operations, including goodwill arising on the acquisition of those
operations, are translated at the rate ruling at the balance sheet
date. Differences arising on retranslating the opening net assets
and the results of operations are recognised directly in equity
(the "foreign currency translation reserve").
The income statement of individual Group companies with
functional currencies other than Euro are translated into Euro at
the rate ruling at the date of the transaction and the balance
sheet translated at the rate of exchange ruling on the balance
sheet date. Exchange differences which arise from translation of
the opening net assets and results of such subsidiary operations
are taken to reserves.
Exchange differences recognised in the income statement of Group
entities' separate financial statements on the translation of
long-term monetary items forming part of the Group's net investment
in the overseas operation concerned are reclassified to the foreign
currency translation reserve on consolidation.
On disposal of a foreign operation, the cumulative exchange
differences recognised in the foreign currency translation reserve
relating to that operation up to the date of disposal are
transferred to the consolidated income statement as part of the
profit or loss on disposal.
Profit from operations
Profit from operations is defined as the profit on all
continuing activities before Finance income, Finance costs and
Taxation.
Tangible non-current assets
Tangible non-current assets are stated at cost less
depreciation. Depreciation is provided at rates calculated to write
off the cost of assets, less their estimated residual value, over
their expected useful economic lives on the following basis:
Property, plant and equipment 25% per annum straight line.
The useful lives and residual values of tangible non-current
assets are re-assessed annually and any revisions taken to the
income statement in the current period.
Intangible non-current exploration assets
The Group applies the successful efforts method of accounting
for exploration and appraisal costs. Under the successful efforts
method of accounting, all licence acquisition, exploration and
appraisal costs are initially capitalised in well, field or
specific exploration well cost centres as appropriate, pending
determination. Costs are capitalised until commercial reserves are
established or the exploration site is deemed to have no commercial
value. Costs are then amortised over the production life of the
well or written-off immediately.
Pre-licence costs: costs incurred prior to having obtained the
legal rights to explore an area are expensed directly to the income
statement as they are incurred.
Exploration and appraisal costs are initially capitalised as an
intangible asset. Intangible assets are not amortised prior to the
conclusion of appraisal activities and determination of commercial
reserves.
All intangible assets are reviewed for impairment on an annual
basis. Any impairment is immediately written off to the Income
Statement.
Investments
In its separate financial statements the Company recognises its
investments in subsidiaries and associates at cost less allowances
for impairments in value.
Inventories
Inventories are stated at the lower of cost and net realisable
value. Cost comprises all costs of purchase, costs of conversion
and other costs included in bringing the inventories to their
present location and condition.
Trade and other receivables
Trade and other receivables are stated initially at fair value
and subsequently at amortised cost (unless the effect of the time
value of money is immaterial) less allowance for impairment in
value.
Cash and cash equivalents
The Company considers all highly liquid investments, with an
original maturity of 90 days or less, to be cash or cash
equivalents.
Trade and other payables
Trade and other payables are stated initially at fair value and
subsequently at amortised cost.
Tax
Income tax on the profit or loss from ordinary activities
includes current and deferred tax.
Current tax is based on the profit or loss from ordinary
activities adjusted for items that are non-assessable or disallowed
and is calculated using tax rates that have been enacted or
substantively enacted by the balance sheet date.
Income tax is charged or credited to profit or loss, except
where the tax relates to items credited or charged to other
comprehensive income in which case the tax is also dealt with in
other comprehensive income, or when the tax relates to items
credited or charged directly to equity, in which case the tax is
also dealt with in equity.
Deferred taxation
Deferred tax is provided on temporary differences between the
carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for taxation purposes. The following
temporary differences are not provided for: the initial recognition
of assets or liabilities that affect neither accounting nor taxable
profit other than in a business combination, and differences
relating to investments in subsidiaries to the extent that they
will probably not reverse in the foreseeable future. The amount of
deferred tax provided is based on the expected manner of
realisation or settlement of the carrying amount of assets and
liabilities, using tax rates enacted or substantively enacted at
the balance sheet date.
Deferred tax liabilities are generally recognised for all
taxable temporary differences. Deferred tax assets and current tax
losses have not been recognised since it is uncertain that taxable
profits will be available against which deductible temporary
differences can be utilised.
Deferred tax assets and liabilities are offset when the Group
has a legally enforceable right to offset current tax assets and
liabilities and the deferred tax assets and liabilities relate to
taxes levied by the same tax authority on either the same taxable
Group company or different Group Entities which intend either to
settle current tax assets and liabilities on a net basis or to
realise the assets and settle the liabilities simultaneously, in
each future period in which significant amounts of deferred tax
assets or liabilities are expected to be settled or recovered.
Contributed equity
Issued and paid up share capital is recognised at the fair value
of the consideration received by the Company. Any transaction costs
arising on the issue of ordinary shares are recognised directly in
equity as a reduction of the share proceeds received.
Share Based Payments
Where equity settled share options are awarded to employees, the
fair value of the options at the date of grant is charged to the
consolidated income statement over the vesting period. Non-market
vesting conditions are taken into account by adjusting the number
of equity instruments expected to vest at each balance sheet date
so that, ultimately, the cumulative amount recognised over the
vesting period is based on the number of options that eventually
vest. Market vesting conditions are factored into the fair value of
the options granted. As long as all other vesting conditions are
satisfied, a charge is made irrespective of whether the market
vesting conditions are satisfied. The cumulative expense is not
adjusted for failure to achieve a market vesting condition.
Where the terms and conditions of options are modified before
they vest, the increase in the fair value of the options, measured
immediately before and after the modification, is also charged to
the consolidated income statement over the remaining vesting
period.
Where equity instruments are granted to persons other than
employees, the consolidated income statement is charged with the
fair value of goods and services received.
Significant accounting judgements and key sources of estimation
uncertainty
The Group makes estimates and assumptions regarding the future.
Estimates and judgements are continually evaluated based on
historical experiences and other factors, including expectations of
future events that are believed to be reasonable under the
circumstances. In the future, actual experience may deviate from
these estimates and assumptions. The 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:
Exploration and evaluation costs: are capitalised as intangible
assets (note 10) and are assessed for impairment when circumstances
suggest that the carrying amount may exceed the recoverable value
thereof. This assessment involves judgement as to the likely future
commerciality of the asset and when such commerciality should be
determined as well as future revenues and costs pertaining to the
utilisation of the exploration and production rights to which such
capitalised costs relate and the discount rate to be applied to
such future revenues and costs in order to determine a recoverable
value.
Carrying value of assets: while conducting an impairment review
of its assets, the Group exercises judgement in making assumptions
about future oil & gas prices and future development and
production costs. Changes in the estimates used can result in
significant charges to the income statement.
Share based payments: employee services received, and the
corresponding increase in equity, are measured by reference to the
fair value of the equity instruments at the date of grant,
excluding the impact of any non-market vesting conditions. The fair
value of share options is estimated by using the Black Scholes
valuation model, on the date of grant based on certain assumptions.
Those assumptions are described in note 15 and include, among
others, the dividend growth rate, expected volatility, expected
life of the options and number of options expected to vest. More
details including carrying values are disclosed in note 15.
2. Loss per share
Loss per share of EUR0.00166 (2009: EUR0.00328) is calculated by
dividing the loss attributable to equity shareholders for the year
by the weighted average number of ordinary shares outstanding
during the year of 1,064,917,872 (2009: 708,399,007).
The effect of all potential ordinary shares arising from the
exercise of options going forward is considered to be anti-dilutive
and therefore diluted earnings per share has not been calculated.
At the balance sheet date there were 52,400,000 (2009: 52,200,000)
potentially dilutive ordinary shares.
3. Parent company's income statement
The company has taken advantage of section 408 of the Companies
Act 2006 and has not included its own income statement account in
these financial statements. The company loss for the year after
taxation was EUR1,761,165 (2009: EUR3,504,300).
4. Expenses by nature
Loss from operations is stated after charging:
2010 2009
EUR EUR
----------------------------------------------------------- ------- --------
Auditors remuneration
- Audit: fees payable to the Company's auditor for the
audit of the parent company and consolidated financial
statements 36,594 34,083
- Audit: fees payable for the audit of subsidiaries
pursuant to legislation 23,627 14,695
- Fees payable to the company's auditor:
- Tax services 12,645 11,903
- Other services 26,723 38,225
Depreciation 24,014 25,220
Foreign exchange costs 32,612 105,061
Share based payment expense (all equity settled) 1,167 377,517
5. Salaries
Total staff costs (including Directors and key management
personnel) comprise:
Group Company
2010 2009 2010 2009
EUR EUR EUR EUR
-------------------------------- -------- ---------- -------- --------
Employee salaries and benefits 874,077 825,745 577,825 597,049
Share based payment expense 1,167 377,517 1,167 377,517
875,244 1,203,262 578,992 974,566
================================ ======== ========== ======== ========
Directors remuneration and other interests comprise:
Group Company
2010 2009 2010 2009
EUR EUR EUR EUR
---------------------------------- -------- -------- -------- --------
Basic salary 445,283 468,407 445,283 468,407
Fees - - - -
Consultancy fees - - - -
Bonus - - - -
Employers national insurance 51,891 50,917 51,891 50,917
Benefits in kind - - - -
---------------------------------- -------- -------- -------- --------
497,174 519,324 497,174 519,324
Share based payment transactions - - - -
497,174 519,324 497,174 519,324
================================== ======== ======== ======== ========
The following table shows the directors who served
during the year or in the previous year together with
an analysis of their remuneration:
Basic Benefits in
Salary Fees Bonus kind 2010 2009
EUR EUR EUR EUR EUR EUR
--------------- ---------- ----- ------ -------------- -------- --------
Executive
directors
Peter Hind 209,772 - - - 209,772 202,135
Neil Hodgson 180,637 - - - 180,637 174,060
Non-executive
directors
Sir Michael
Jenkins 34,962 - - - 34,962 42,111
Craig Burton 5,828 - - - 5,828 28,074
Gideon Tadmor - - - - - -
P Gunzburg - - - - - 22,027
Bill Guest 14,084 - - - 14,084 -
445,283 - - - 445,283 468,407
=============== ========== ===== ====== ============== ======== ========
Key management personnel:
Group Company
2010 2009 2010 2009
EUR EUR EUR EUR
-------------------------------- -------- ---------- -------- --------
Employee salaries and benefits 663,587 675,007 577,825 597,049
Share based payment expense 1,167 377,517 1,167 377,517
664,754 1,052,524 578,992 974,566
================================ ======== ========== ======== ========
Key management personnel include all parent company
directors and senior management in the UK, Russia
and Cyprus.
Average number of employees (including directors):
Group Company
2010 2009 2010 2009
EUR EUR EUR EUR
Technical 11 6 1 1
Corporate & administrative 9 13 2 2
20 19 3 3
=============================== ====== ===== ===== =====
Included in the above were pension contributions totalling
EURnil (2009: EURnil).
6. Taxation
Below is a reconciliation of the theoretical income tax rate to
the actual effective tax rate in the Group's income statement:
Group
2010 2009
EUR EUR
-------------------------------------------------- ------------ ------------
Loss before taxation (1,769,429) (2,325,053)
-------------------------------------------------- ------------ ------------
Taxation at the UK corporation tax rate of 28%
(2009: 28.5%) (495,440) (662,640)
Effect of lower tax rate in Russia 44,773 56,518
Expenses disallowed for tax 225,703 289,985
Temporary differences on non-current assets not
recognised - (538,736)
Tax losses not recognised carried forward 224,964 854,873
Tax charge for the year - -
================================================== ============ ============
Factors that may affect future tax charges
No deferred tax asset has been recognised on accumulated tax
losses as the recoverability of any such assets is not probable in
the foreseeable future (see note 18).
7. Segmental reporting
The Group has two reportable segments:
-- Arkhangelovskoe: this segment is involved in the exploration
of oil within the Arkhangelovskoe licence area in Russia; and
-- Head Office Operations: this segment is the head office of
the Group.
The operating results of each of these segments are regularly
reviewed by the Group's chief operating decision makers in order to
make decisions about the allocation of resources and assess their
performance.
The accounting policies of these segments are in line with those
described in note 1.
Reportable segments as at 31 December 2010
Head Arkhangelovskoe Total
Office
EUR EUR EUR
-------------------------------- ------------ ---------------- ------------
Administration expenses (1,230,959) (598,419) (1,829,378)
Finance income 24,851 46,687 71,538
Financing costs (3,657) (7,932) (11,589)
Loss for the year after
taxation (1,209,765) (559,664) (1,769,429)
================================ ============ ================ ============
Non current assets 1,989 13,409,526 13,411,515
Inventories - 18,421 18,421
Trade and other receivables 15,806 164,721 180,527
Cash and cash equivalents 1,606,328 615,713 2,222,041
Segment assets 1,624,123 14,208,381 15,832,504
================================ ============ ================ ============
Trade and other payables (119,915) (1,128,680) (1,248,595)
Segment liabilities (119,915) (1,128,680) (1,248,595)
-------------------------------- ------------ ---------------- ------------
Segment net assets 1,504,208 13,079,701 14,583,909
================================ ============ ================ ============
Reportable segments as at 31 December 2009
Head Arkhangelovskoe Total
Office
EUR EUR EUR
-------------------------------- ------------ ---------------- ------------
Administration expenses (1,673,631) (642,071) (2,315,702)
Finance income 16,785 1,171 17,956
Financing costs (3,285) (24,022) (27,307)
Loss for the year after
taxation (1,660,131) (664,922) (2,325,053)
================================ ============ ================ ============
Non current assets 7,377 8,395,762 8,403,139
Inventories - 163,745 163,745
Trade and other receivables 14,342 210,304 224,646
Cash and cash equivalents 3,839,039 2,888,269 6,727,308
Segment assets 3,860,758 11,658,080 15,518,838
================================ ============ ================ ============
Trade and other payables (115,653) (39,957) (155,610)
Segment liabilities (115,653) (39,957) (155,610)
-------------------------------- ------------ ---------------- ------------
Segment net assets 3,745,105 11,618,123 15,363,228
================================ ============ ================ ============
The finance income, finance costs and taxation have been
analysed above in line with the way the Group\'s business is
structured.
All material non-current assets other than financial instruments
are owned by the Russian subsidiary and are located in Russia.
Share based payments of EUR1,167 (2009: EUR377,517) relate
solely to Head Office.
All material capital expenditure in the current and previous
year relate to the Arkhangelovskoe segment.
8. Finance costs
Group
2010 2009
EUR EUR
-------------- ------- -------
Bank charges 11,589 27,307
11,589 27,307
============== ======= =======
9. Property, plant and equipment
Group Company
2010 2009 2010 2009
EUR EUR EUR EUR
---------------------------------- --------- --------- --------- ---------
Cost
At 1(st) January 101,984 99,645 33,864 29,888
Additions 550 2,842 7 1,529
Currency translation adjustments 6,095 (503) 1,541 2,447
---------------------------------- --------- --------- --------- ---------
At 31(st) December 108,629 101,984 35,412 33,864
Depreciation
At 1st January (64,694) (39,143) (26,487) (16,002)
Charge for year (24,014) (25,220) (5,732) (9,174)
Currency translation adjustments (3,759) (331) (1,204) (1,311)
---------------------------------- --------- --------- --------- ---------
At 31st December (92,467) (64,694) (33,423) (26,487)
Carrying value as at 31st
December 16,162 37,290 1,989 7,377
================================== ========= ========= ========= =========
Property, plant and equipment is comprised of office and
computer equipment.
10. Intangible assets
Intangible assets as at 31 December 2010 were:
Licence acquisition Exploration and
costs appraisal costs Total
EUR EUR EUR
--------------------- -------------------- -------------------- -----------
Cost
At 1 January 3,175,861 5,189,988 8,365,849
Additions - 4,520,175 4,520,175
Currency translation
adjustments 199,111 310,218 509,329
--------------------- -------------------- -------------------- -----------
Carrying value at 31
December 3,374,972 10,020,381 13,395,353
===================== ==================== ==================== ===========
Intangible assets as at 31 December 2009 were:
Licence acquisition Exploration and
costs appraisal costs Total
EUR EUR EUR
--------------------- --------------------- -------------------- ----------
Cost
At 1 January 3,322,575 4,434,674 7,757,249
Additions - 1,135,293 1,135,293
Currency translation
adjustments (146,714) (379,979) (526,693)
--------------------- --------------------- -------------------- ----------
Carrying value at 31
December 3,175,861 5,189,988 8,365,849
===================== ===================== ==================== ==========
11. Investment in subsidiaries
The principal subsidiaries of Matra Petroleum plc,
all of which have been included in these consolidated
financial statements, are as follows:
Name Country of Proportion of Nature of
incorporation ownership business
------------------ ------------------ ------------------ ------------------
Matra Cyprus Cyprus 100% Holding company
Petroleum
Limited
Matra Cyprus Cyprus 100% Holding company
Petroleum (Alpha)
Limited
OOO Russian 100% Oil & gas
Arkhangelovskoe Federation exploration and
production
company
Matra Cyprus Petroleum Limited owns 100% of the shares
in OOO Arkhangelovskoe.
12. Inventories
Group Company
2010 2009 2010 2009
EUR EUR EUR EUR
----------------------------- ------- -------- ----- -----
Drilling and other supplies 18,421 163,745 - -
============================= ======= ======== ===== =====
13. Receivables
Group Company
2010 2009 2010 2009
EUR EUR EUR EUR
-------------------------------- -------- -------- ----------- -----------
Trade receivables - - - -
Prepayments and other
receivables 180,527 224,646 15,806 14,342
Intercompany loans - - 13,078,081 11,656,531
180,527 224,646 13,093,887 11,670,873
================================ ======== ======== =========== ===========
The fair value of receivables is not significantly different
from the carrying value.
The Intercompany loans are shown net of a provision of
EUR6,686,321 , (2009: EUR5,157,533).
The Intercompany loans are repayable on demand and bear interest
at the rate of 2% above the Russian Base Rate (2009: 2% above the
Russian Base Rate).
14. Payables
Group Company
2010 2009 2010 2009
EUR EUR EUR EUR
----------------------------- ---------- -------- -------- --------
Trade payables 105,237 63,258 63,473 43,211
Accruals and other payables 1,143,358 92,352 56,442 66,458
1,248,595 155,610 119,915 109,669
============================= ========== ======== ======== ========
15. Share based payments
Exercise Outstanding Granted Exercised Lapsed Outstanding Final
price at start of during the during during the at end of exercise
(p) Grant date year year the year year year date
--------- ----------- ------------ ----------- ---------- ------------- ------------ -----------
2009
0.1 11/04/2006 5,000,000 - - - 5,000,000 11/04/2011
5 11/04/2006 10,000,000 - - - 10,000,000 11/04/2011
6.3 11/04/2006 2,620,000 - - (2,620,000) - 11/03/2009
0.1 23/05/2006 1,200,000 - - - 1,200,000 23/05/2011
5 23/05/2006 6,000,000 - - - 6,000,000 23/05/2011
8 20/04/2007 24,000,000 - - (24,000,000) - 15/02/2009
4.5 23/04/2007 8,000,000 - - - 8,000,000 22/04/2012
4.5 31/03/2007 500,000 - - - 500,000 31/03/2012
7.5 25/09/2007 250,000 - - - 250,000 25/09/2012
3.65 20/10/2009 - 21,250,000 - - 21,250,000 19/10/2014
Total 57,570,000 21,250,000 - (26,620,000) 52,200,000
--------- ----------- ------------ ----------- ---------- ------------- ------------ -----------
2010
0.1 11/04/2006 5,000,000 - - - 5,000,000 11/04/2011
5 11/04/2006 10,000,000 - - - 10,000,000 11/04/2011
6.3 11/04/2006 - - - - - 11/03/2009
0.1 23/05/2006 1,200,000 - - - 1,200,000 23/05/2011
5 23/05/2006 6,000,000 - - - 6,000,000 23/05/2011
8 20/04/2007 - - - - - 15/02/2009
4.5 23/04/2007 8,000,000 - - - 8,000,000 22/04/2012
4.5 31/03/2007 500,000 - - - 500,000 31/03/2012
7.5 25/09/2007 250,000 - - - 250,000 25/09/2012
3.65 20/10/2009 21,250,000 - - - 21,250,000 19/10/2014
1.81 01/07/2010 - 200,000 - - 200,000 19/10/2014
Total 52,200,000 200,000 - - 52,400,000
--------- ----------- ------------ ----------- ---------- ------------- ------------ -----------
The fair value of equity-settled share options granted is
estimated as at the date of grant using the Black Scholes model,
taking into account the terms and conditions upon which the options
were granted. The table below lists the inputs to the model used
for options granted during the year ended 31 December 2010:
2010 2009
Share price at the date of grant (pence) 1.64 3.65
Dividend yield (%) - -
------------------------------------------ ----- -----
Volatility 75 55
Expected life (years) 5 5
Risk free interest rate (%) 1.8 0.5
------------------------------------------ ----- -----
Weighted average option price (pence) 1.00 1.58
------------------------------------------ ----- -----
The total fair value of the options issued is spread over the
vesting period of the options. The share-based payment charge for
the year was EUR1,167 (2009: EUR377,517).
The expected life of the options is based on academic research
and is not necessarily indicative of exercise patterns that may
occur. Volatility is calculated with reference to comparative
entities share price volatility and reflects the assumption that
the comparator's volatility is indicative of future trends, which
may also not necessarily be the actual outcome. No other features
of options granted were incorporated into the measurement of fair
value.
16. Share capital
2010 2009
EUR EUR
---------------------------------------------- ----------- -----------
Authorised:
10,000,000,000 ordinary shares of 0.1p
each 13,571,000 13,571,000
============================================== =========== ===========
Allotted, called-up and fully paid:
1,064,917,872 (December 2009: 1,064,917,872)
ordinary shares of 0.1p each 1,355,222 1,355,222
============================================== =========== ===========
Reserve Description and purpose The following describes the
nature and purpose of each reserve within owners' equity:
-- Share capital: Amount subscribed for share capital at nominal
value
-- Share premium: Amount subscribed for share capital in excess
of nominal value
-- Foreign currency translation reserve: Exchange gains/losses
arising on retranslating the net assets of operations into the
presentation currency
-- Retained earnings: Cumulative net gains and losses recognised
in the consolidated income statement
No new issues of shares in the Company took place in the
period.
The Group considers its capital to comprise entirely of equity.
The Group's primary objective is to ensure its continued ability to
provide a consistent return for its equity shareholders through
capital growth.
In order to achieve this objective, the Group seeks to maintain
a gearing ratio that balances risks and returns at an acceptable
level wherever such a choice between the raising of debt, equity or
a combination of the two exists.
Overriding the above is the need for the Group to maintain a
sufficient funding base to enable it to meet its working capital
and strategic investment needs.
In making decisions to adjust its capital structure to achieve
these aims the Group considers not only its short-term position but
also its long-term operational and strategic objectives.
17. Financial instrument risk exposure and management
In common with all other businesses, the Group and Company are
exposed to risks that arise from its use of financial instruments.
This note describes the Group and Company's objectives, policies
and processes for managing those risks and the methods used to
measure them. Further quantitative information in respect of these
risks is presented throughout these financial statements.
There have been no substantive changes in the Group or Company's
exposure to financial instrument risks, its objectives, policies
and processes for managing those risks or the methods used to
measure them from previous periods unless otherwise stated in this
note.
Principle financial instruments
The principle financial instruments used by the Group, from
which financial instrument risk arises, are as follows:
Financial
assets Group Company
2010 2009 2010 2009
Loans and receivables Loans and receivables
EUR EUR EUR EUR
--------------- ------------- -------------- -------------- --------------
Trade
receivables - - - -
Cash and cash
equivalents 2,222,041 6,727,308 1,606,328 3,839,039
Inter-company
loans - - 13,078,081 11,656,531
2,222,041 6,727,308 14,684,409 15,495,570
=============== ============= ============== ============== ==============
Financial
liabilities Group Company
2010 2009 2010 2009
Financial liabilities at Financial liabilities at
amortised cost amortised cost
EUR EUR EUR EUR
--------------- ------------- -------------- -------------- --------------
Trade and
other
payables 1,248,595 155,610 119,915 109,669
1,248,595 155,610 119,915 109,669
=============== ============= ============== ============== ==============
Fair value of financial assets and liabilities
At 31 December 2010 and 2009, the fair value and the book value
of the Group and Company's financial assets and liabilities were
materially the same.
Principal financial instruments
The principal financial instruments used by the Group and
Company, from which financial instrument risk arises, are as
follows:
cash at bank
trade and other payables
General objectives, policies and processes
The Board has overall responsibility for the determination of
the Group and Company's risk management objectives and polices and,
whilst retaining ultimate responsibility for them, it has delegated
the authority for designing and operating processes that ensure the
effective implementation of the objectives and policies to the
Group and Company's finance function. The overall objective of the
Board is to set polices that seek to reduce risk as far as possible
without unduly affecting the Group and Company's competitiveness
and flexibility. Further details regarding these policies are set
out below:
Credit risk
Credit risk arises principally from the Group's other
receivables. It is the risk that the counterparty fails to
discharge its obligation in respect of the instrument. The maximum
exposure to credit risk equals the carrying value of these items in
the financial statements. When commercial exploitation commences
sales will only be made to customers with appropriate credit
rating. Existing trade receivables relate to sales of oil from test
drilling, and these are not considered to be material. Credit risk
with cash and cash equivalents is reduced by placing funds with
banks with high credit ratings.
Hedging policy
It is the Company and Group policy not to actively hedge against
foreign currency transactions and balances. However, this policy is
kept under constant review.
Capital
The Company and Group define capital as ordinary shares, share
premium and retained earnings. To date the company has not included
long-term borrowings in its definition of capital, because it does
not have any
Liquidity risk
Liquidity risk arises from the Group and Company's management of
working capital. It is the risk that the Group or Company will
encounter difficulty in meeting its financial obligations as they
fall due.
The Group and Company's policy is to ensure that it will always
have sufficient cash to allow it to meet its liabilities when they
become due. To achieve this aim, it seeks to maintain cash balances
(or agreed facilities) to meet expected requirements for a period
of at least 30 days. The Group and Company also seeks to reduce
liquidity risk by maximising interest rates (and hence cash flows)
on its cash deposits, this is further discussed in the 'interest
rate risk' section below. The Board receives rolling 12 month cash
flow projections on a periodic basis as well as information
regarding cash balances and (as noted above).
Trade and other payables are due on demand.
Interest rate risk
The Group has no interest bearing borrowings and so there is no
interest rate risk.
There is no significant interest rate risk in respect of
temporary surplus funds invested in deposits and other interest
bearing accounts with financial institutions as the operations of
the Group are not dependent on the finance received. However, it is
the Group's policy to manage the interest rate risk over the cash
flows on its invested surplus funds by using only substantial
financial institutions when such funds are invested.
A 1% change in interest rates would have increased or decreased
profit after tax by approximately EUR44,747 (2009: EUR36,287).
At the year end, the Group had a cash balance of EUR2,222,041
(2009: EUR6,727,308) and the Company had a cash balance of
EUR1,606,328 (2009: EUR3,839,039) which was made up as follows:
Group Company
2010 2009 2010 2009
EUR EUR EUR EUR
--------------------- ---------- ---------- ---------- ----------
Great British pound 1,606,328 3,845,715 1,606,328 3,839,039
Euro 5,413 - - -
Russian rouble 610,300 2,881,593 - -
2,222,041 6,727,308 1,606,328 3,839,039
===================== ========== ========== ========== ==========
Included in the Group and Company totals above are amounts of
EUR1,517,151 (2009: EUR5,451,694) held within deposit accounts.
Currency risk
The Group and Company's policy is, where possible, to allow
group entities to settle liabilities denominated in their
functional currency (primarily Euro, Russian Roubles or Great
British Pounds) in that currency. Where Group or Company entities
have liabilities denominated in a currency other than their
functional currency (and have insufficient reserves of that
currency to settle them) cash already denominated in that currency
will, where possible, be transferred from elsewhere within the
Group.
In order to monitor the continuing effectiveness of this policy,
the Board receives a periodic forecast, analysed by the major
currencies held by the Group and Company.
The Group and Company is primarily exposed to currency risk on
purchases made from suppliers in Orenburg, Southern Russia in
Russian Roubles. As it is not possible for the Group or Company to
transact in Russian Roubles outside of Russia, a Sterling account
is maintained in Orenburg and all funding is transferred to its
Russian subsidiary in this currency. Once the funding has been
received, the local finance team negotiates a favourable spot rate
with its Russian bank for transferring Sterling to Russian Roubles.
The UK finance team, along with its advisors, carefully monitors
movements in the Sterling / Russian Rouble rate and chooses the
most beneficial times for transferring monies to its subsidiary,
whilst ensuring that it has sufficient funds to continue its
operations.
A movement in the Russian Rouble of 15% would result in the
expenditure in the year increasing or decreasing by EUR767,789
(2009: EUR96,311).
A movement in the Great British pound of 25% would result in the
expenditure in the year increasing or decreasing by EUR307,740
(2009: EUR418,408).
A movement in the Great British pound of 25% would result in the
average cash and cash equivalents increasing or decreasing by
EUR396,169 (2009: EUR961,429).
18. Deferred tax
Group Company
2010 2009 2010 2009
EUR EUR EUR EUR
------------------------------ ---------- ---------- ---------- ----------
A deferred tax assets has not
been recognised on the
following:
- Temporary differences in
share based payments 481,694 463,841 481,694 463,841
- Unused tax losses 1,996,968 1,760,348 1,080,807 975,840
2,478,662 2,224,189 1,562,501 1,439,681
============================== ========== ========== ========== ==========
No deferred tax asset has been recognised as the recovery of
such assets is not probable in the foreseeable future.
19. Commitments
The Company has no operating or finance lease commitments.
On 23 December 2010 the 100% subsidiary, OOO Arkhangelovskoe,
was awarded a production licence (the Licence) for the exploration
and production hydrocarbon resources within the Sokolovskoe field
in Orenburg, Russia.
The Licence is valid to 31 December 2030 and in order to
maintain the current rights of tenure to the licence, the group
currently has the following commitments:
-- To submit for approval an Appraisal Programme for the
Sokolovskoe field by the end of 2011
-- To drill a minimum of one well by the end of 2013
-- To issue for approval a reserve report for the field by the
end of 2014
-- To submit for a approval a development plan for the field buy
the end of 2015
20. Related party transactions
The Group had no transactions with related parties during the
year ended 31 December 2010.
Key management remuneration is disclosed in note 5.
21. Events after the reporting period
On 14 February 2011, the Group raised cash funds of GBP1,550,000
by way of an equity Placing of 50 million shares at an issue price
of 3.1p per share.
22. Going concern
The Group currently has sufficient cash resources to fund the
committed work programme and overheads for the next twelve months.
Upon completion of the committed work programme the Group will seek
to raise funds to finance the full development of the Sokolovskoe
field. The Directors are confident, based upon preliminary
discussions with potential investors and lenders that sufficient
funds either in equity or debt could be raised when required.
This information is provided by RNS
The company news service from the London Stock Exchange
END
FR EAFDSALAFEFF
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