TIDMMTA
RNS Number : 1816G
Matra Petroleum PLC
04 June 2013
4 June 2013
Matra Petroleum plc
("Matra" or the "Company")
Full Year Results and Notice of AGM
Highlights
Operational
-- 2D & 3D Seismic survey conducted on the Sokolovskoe field
-- Management Prove and Probable (2P) estimate of 13.5 mmbbl
-- Production commenced from the A-13 well on the Sokolovskoe
field, current average daily rate of 70bopd
Financial
-- Cash or cash equivalents of $4 million at year end
-- No debt
-- Loss per share 0.28 cents (2011: 0.90 cents)
Outlook
-- Management reviewing options to maximise the value of the Sokolovskoye field
-- Focused on identifying prospects to achieve objective of
creating a mid-sized E&P of size and scale
Maxim Barskiy, Chief Executive of Matra, commented
"I am very positive about Matra's outlook as we have
significantly advanced our evaluation of the best options to
maximise the value of the Sokolovskoye field following the
successful seismic programme, and begin to execute our strategy of
creating growth through value accretive acquisitions.
We have made significant progress this year in evaluating
potential acquisition opportunities, undertaking due-diligence on
more than a dozen E&P businesses."
Notice of Annual General Meeting
The Company's Annual General Meeting will be held at the offices
of BDO LLP at 55 Baker Street, London, W1U 7EU on 28 June 2013 at
11 a.m. The Notice of Annual General Meeting circular has been
posted to shareholders and can be found at the Company's website,
www.matrapetroleum.com
For further information, please contact:
Matra Petroleum plc c/o Pelham Bell Pottinger
Henry Lerwill 020 7861 3169
Canaccord Genuity Limited
Henry Fitzgerald-O'Connor 0207 523 8000
ANNUAL REPORT AND FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2012
CHAIRMAN'S STATEMENT
Dear Shareholder,
2012 has been a year of renewal for Matra Petroleum. In May we
welcomed Maxim Barskiy as a cornerstone investor and CEO of the
Company. Maxim is vastly experienced in the industry through his
roles at TNK-BP and perhaps more relevantly to Matra, his time with
West Siberian Resources when this company saw exceptional growth
culminating in a merger with Alliance Oil.
Further to Maxim's appointment, we have broadened the
operational and corporate team to support our portfolio management
and business development strategy with Vladimir Lenski joining as
Managing Director and Ekaterina Sapozhnikova as Chief Financial
Officer, both with significant experience in the sector. In
addition, we were delighted to welcome Matthias Brandl onto the
board as a Non-executive Director. Matthias brings extensive
corporate finance and business development experience within the
natural resources sector.
The change of management provided a catalyst for a major review
of the Company's strategy. The revised two-pronged strategy, which
the Company has since articulated, was focussed firstly on reducing
the technical uncertainties associated with the Company's
Sokolovskoye Field interest, optimising near term cash flow from
the field and assessing options for further risk reduction and for
securing the maximum financial return from the asset.
The second element of Matra's revised strategy is to expand the
Company's upstream portfolio, reducing the inherent exposure
associated with a single asset company and developing the necessary
"critical mass" to enable the Company to utilise fully the specific
expertise and competitive edge of its management team. This
strategy will see Matra expanding its Emerging Market focus to
include Latin America, Central Asia, and Special Tax Regime Regions
of Russia where the Company has already recognised a number of
asset, portfolio and corporate opportunities. In many cases these
opportunities are a reflection of, and have arisen as a direct
result of, the tough financial market conditions within which the
junior upstream oil and gas sector is presently operating.
The Company has focussed primarily on onshore properties
underpinned by proven hydrocarbon Reserves and/or Contingent
Resources. The Company has restricted its search to properties
where there is clearly defined upside exploration or appraisal
potential and where the Company believes it can bring to bear its
particular technical and operational expertise to rationalise
costs, achieve early incremental cash flow and deliver long term
value accretion.
Over the last year we have carried out a detailed assessment of
a wide variety of assets in several regions. We are encouraged by
the quality of the assets potentially available within our target
market; although macro-economic factors and the value being
attributed by industry to certain assets, particularly in Russia,
has held us back from concluding any acquisitions. We continue to
look for suitable opportunities which reflect the aims of our
clearly stated strategy, and which we are well placed to capitalise
on fully.
With regard to our strategy for the Sokolovskoe Field, we have
carried out a number of production enhancement activities and have
acquired an important 2D and 3D seismic survey to better understand
the geological structure of, and potential reservoir distribution
within, the field. Integrating the seismic data with all other
available geologic data has enabled the Company to carry out,
internally, a full probabilistic re-evaluation of the Resources of
the field and prepare a conceptual field development plan. This
has, in turn, enabled the Company to consider a variety of
strategic options for this asset going forward.
Another important event for the Company was the successful
equity placing in April 2012, which raised GBP4.6 million, and
ensured that the Company's cash position remains strong and Matra
continues to operate without any debt.
We were deeply saddened to have to report in April of this year
that Sir Michael Jenkins, Matra's Chairman from 2007, had passed
away. Sir Michael's diplomatic and City career was one of great
distinction, and we were extremely fortunate to receive the benefit
of his wisdom, experience and leadership while he served as our
Chairman. He will be sorely missed.
In summary, I am pleased to report that we have strengthened
considerably the Matra Management team, and are now furnished with
the expertise to drive the Company in an exciting new direction. We
have established an acquisition led strategy with the stated aim of
building Matra into a significant mid-cap oil and gas company,
whilst continuing to asses and develop options for our current
asset. I would like to conclude by thanking everyone in the Company
for their continued hard work, and look forward to a successful
year ahead for Matra Petroleum.
James William Guest
Chairman
04 June 2013
DIRECTORS' REVIEW
Production
Operational activity in 2012 was focussed on increasing
production and proving the economic viability of the Sokolovskoe
field.
In April 2012, having completed the purchase and implementation
of the necessary equipment, production started at the well A-13 on
Sokolovskoe field, with an average daily rate of 26 bopd. This
production rate was further increased in May 2012, when an electric
submersible pump ("ESP") was installed, increasing the rate to 70
bopd.
Total production in 2012 was 11,925 bbl of oil (2011: 15,753 bbl
of oil).
3D Seismic
In the second half of 2012 a seismic survey was conducted on
Sokolovskoe oil field. The survey included 100 kilometers of 2D
seismic and 60 square kilometers of 3D seismic.
The seismic results determined the complexity of the field
configuration compared to what was previously mapped as one
structure. The seismic data interpretation identified that the
Aphoninsky reservoir splits into four separate domes within the
boundaries of the license area from south-west to north-east.
Domes one and two (wells A-12 and A-13), are controlled by
regional faults in the west. Dome two is limited by a downfold and
local faults system in the east. Domes three and four, that may be
classified as prospective resources and are controlled by downfolds
and the wells from the nearby Olshanskoye field, encountered the
Aphonensky reservoir below anticipated oil water contact. We
believe that further exploration potential exists in these two
structures in the northeast segment of the license area.
Processing and interpretation of seismic data was executed to
the highest technical and professional standard. The quality of the
completed works on Sokolovskoye field has fully met the objectives
set by the Company and further proved the value of the field.
Below is a link to a map of the Sokolovskoye field:
http://www.rns-pdf.londonstockexchange.com/rns/1816G_-2013-6-3.pdf
Internal Reserves Estimate
In light of the new seismic data and the results from wells A-12
and A-13 the Company completed a Field Development Plan and
associated economic forecast for Sokolovskoe field and prepared an
internal Reserves estimate for Sokolovskoe oil field.
The table below outlines Management's Reserves estimate for the
sections of the Aphoninsky reservoir drilled by wells A-12 and
A-13:
Category OOIP Recovery Recoverable Reserves
Factor
(10(3) bbl) (%) (10(3) bbl)
1P 28,255 20.0 5,651
2P 50,152 27.0 13,541
3P 90,856 34.0 30,982
The Company is satisfied that these estimated Reserves subject
to the Company receiving the necessary regulatory approvals, would
result in an independent Competent Person's Report confirming these
as Recoverable Reserves.
The identification of the potential reserves was an important
milestone for Matra and demonstrated the significant potential of
the Sokolovskoe oil field.
The Company is actively reviewing its options for maximising the
value of the Sokolovskoe oil field. These include progressing with
early development of the field, proceeding with further appraisal
activities targeting the upside potential of the field, which the
Company estimates includes further P50 Prospective Resources of 5
mmbbls of recoverable oil, or considering existing options for
monetising part or all of the asset. Depending on the next course
of action the Company may commission an independent Competent
Persons Report over the Sokolovskoe field.
M&A activity and outlook
As the Company reviews its options to maximise the value of the
Sokolovskoe oil field, we continue to access new opportunities as
part of our acquisition led strategy. We have made significant
progress over the past year in identifying prospects: the Company
has reviewed over 20 potential acquisition opportunities in most
oil prolific provinces in Russia including Volga-Urals,
Timano-Pechora, West Siberia, East Siberia, Sakhalin as well as in
CIS, Latin America, USA and other regions. We remain focused on
achieving our objective of creating an E&P Company of size and
scale.
I am confident of further success in 2013 as we look to maximize
the value for shareholders.
Maxim Barskiy
Chief Executive Officer
04 June 2013
REVIEW OF OPERATIONS AND FINANCE
During the year the Company placed 575 million new ordinary
shares with Mr Maxim Barskiy and issued 6.2 million new ordinary
shares following the exercise of the options held by the
Directors.
Ordinary Price Funds Funds
shares per share Raised raised
No. GBP GBP US$
----------------------- -------------- ---------- ---------- ----------
31 December 2011 1,354,917,872 - - -
Placement 14 May 2012 575,000,000 0.008 4,600,000 7,394,500
Share issue (options
exercised) 6,200,000 0.001 6,200 9,531
31 December 2012 1,936,117,872 - 4,606,200 7,404,031
======================= ============== ========== ========== ==========
Test production of oil at the well A-13 commenced in the second
half of 2011 and continued throughout 2012 reaching total
production for the year of 11,925 bbl (2011: 15,753 bbl). In 2012
revenue from test production reduced by US$108,000 to US$ 503,000
(2011: US$611,000) due to the fact that only Well A-13 was
producing oil.
The Group's total administrative expenditure in the year was US$
4,855,000 (2011: US$10,128,000). The US$ 5,273,000 decrease was
largely due to an impairment of US$ 7,400,000 recognised in 2011 in
respect of Well A-12 and a decrease in share based payment charge
from US$ 725,000 in 2011 to US$ 599,000 in 2012. The Group's
general overheads increased by US$2,056,000 largely due to costs
related to analysis of potential acquisition targets and
termination payment of US$ 322,717 made to Mr P Hind who left the
Company in May 2012 (note 6).
During the year Russian VAT refunds of US$53,000 (2011:
US$389,000 and 2010: US$748,000) were received.
The Group capitalised exploration and evaluation expenditure in
the year was US$1,954,000 (2011: US$ 2,266,000) relating primarily
to the 2D and 3D seismic survey and the appraisal of well A-13.
At year end the Group had cash and cash equivalents totalling
US$4,000,000 (2011: US$2,333,000 and 2010: US$2,959,000) (note 20).
The Directors are confident in the Company's ability to secure the
funding when it is required for future capital programme.
CONSOLIDATED INCOME STATEMENT
FOR THE YEAR ENDED 31 DECEMBER 2012
31 December 31 December
2012 2011
Restated
Notes US$'000 US$'000
--------------------------------------------- ------ ------------ ------------
Revenue 503 611
Cost of sales (503) (611)
--------------------------------------------- ------ ------------ ------------
Gross profit - -
--------------------------------------------- ------ ------------ ------------
Other administrative expenditure (4,256) (2,003)
Share-based payments (599) (725)
Impairment of exploration expenditure - (7,400)
--------------------------------------------- ------ ------------ ------------
Total administrative expenditure (4,855) (10,128)
--------------------------------------------- ------ ------------ ------------
Loss from operations 5 (4,855) (10,128)
Finance income 9 42 12
Finance expense 10 - (14)
--------------------------------------------- ------ ------------ ------------
Loss before taxation (4,813) (10,130)
Taxation 7 (3) (2)
--------------------------------------------- ------ ------------ ------------
Loss before and after taxation attributable
to the equity holders of the parent (4,816) (10,132)
============================================= ====== ============ ============
Loss per share
Basic and diluted (cents) 3 (0.28) (0.90)
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEAR ENDED 31 DECEMBER 2012
31 December 31 December
2012 2011
Restated
US$'000 US$'000
---------------------------------------------------- ------------ ------------
Loss after taxation (4,816) (10,132)
---------------------------------------------------- ------------ ------------
Other comprehensive profit / (loss):
Exchange differences
on translating foreign
operations 799 (643)
----------------------------------------------------
Other comprehensive
profit / (loss) for
the year 799 (643)
------------ ------------
Total comprehensive loss for the year attributable
to the equity holders of the parent (4,017) (10,775)
==================================================== ============ ============
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 DECEMBER 2012
Share Share Foreign Retained Total
capital premium currency deficit
translation
reserve
US$'000 US$'000 US$'000 US$'000 US$'000
--------------------------------- -------- -------- ------------ --------- ---------
Total equity as at 31 December
2010 (restated) 1,718 43,085 4,576 (29,789) 19,590
Loss after taxation - - - (10,132) (10,132)
Exchange differences on
translating foreign operations - - (643) - (643)
--------------------------------- -------- -------- ------------ --------- ---------
Total comprehensive income
for the period - - (643) (10,132) (10,775)
Shares issued 460 3,920 - - 4,380
Share issue costs (cash) - (159) - - (159)
Share issue costs (warrants) - (45) - 45 -
Recognition of share based
payment - - - 725 725
Total equity as at 31 December
2011 (restated) 2,178 46,801 3,933 (39,151) 13,761
================================= ======== ======== ============ ========= =========
Share Share Foreign Retained Total
capital premium currency deficit
translation
reserve
US$'000 US$'000 US$'000 US$'000 US$'000
--------------------------------- -------- -------- ------------ --------- ---------
Total equity as at 1 January
2012 (restated) 2,178 46,801 3,933 (39,151) 13,761
Loss after taxation - - - (4,816) (4,816)
Exchange differences on
translating foreign operations - - 799 - 799
--------------------------------- -------- -------- ------------ --------- ---------
Total comprehensive income
for the period - - 799 (4,816) (4,017)
Shares issued 934 6,470 - - 7,404
Recognition of share based
payment - - - 599 599
Total equity as at 31 December
2012 3,112 53,271 4,732 (43,368) 17,747
================================= ======== ======== ============ ========= =========
COMPANY STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 DECEMBER 2012
Share Share Foreign Retained Total
capital premium currency deficit
translation
reserve
US$'000 US$'000 US$'000 US$'000 US$'000
-------------------------------- -------- -------- ------------ --------- ---------
Total equity as at 31 December
2010 (restated) 1,718 43,085 2,239 (27,452) 19,590
Loss after taxation - - - (10,642) (10,642)
Exchange differences on
translating to presentational
currency - - (133) - (133)
-------------------------------- -------- -------- ------------ --------- ---------
Total comprehensive income
for the year - - (133) (10,642) (10,775)
Shares issued 460 3,920 - - 4,380
Share issue costs (cash) - (159) - - (159)
Share issue costs (warrants) - (45) - 45 -
Recognition of share based
payment - - - 725 725
Total equity as at 31 December
2011 (restated) 2,178 46,801 2,106 (37,324) 13,761
================================ ======== ======== ============ ========= =========
Share Share Foreign Retained Total
capital premium currency deficit
translation
reserve
US$'000 US$'000 US$'000 US$'000 US$'000
-------------------------------- -------- -------- ------------ --------- ---------
Total equity as at 1 January
2012 (restated) 2,178 46,801 2,106 (37,324) 13,761
Profit after taxation - - - 10,267 10,267
Exchange differences on
translating to presentational
currency - - 1,367 - 1,367
-------------------------------- -------- -------- ------------ --------- ---------
Total comprehensive income
for the year - - 1,367 10,267 11,634
Shares issued 934 6,470 - - 7,404
Recognition of share based
payment - - - 599 599
Total equity as at 31 December
2012 3,112 53,271 3,473 (26,458) 33,398
================================ ======== ======== ============ ========= =========
.
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
AS AT 31 DECEMBER 2012
Company number: 5375141
31 December 31 December 31 December
2012 2011 2010
Restated Restated
Notes US$'000 US$'000 US$'000
------------------------------- ------ ------------ ------------ ------------
Non-current assets
Property, plant and equipment 11 19 11 22
Intangible assets 12 13,691 11,521 18,021
13,710 11,532 18,043
Current assets
Inventories 14 21 27 25
Trade and other receivables 15 420 113 240
Cash and cash equivalents 4,000 2,333 2,959
------------------------------- ------ ------------ ------------ ------------
4,441 2,473 3,224
Total assets 18,151 14,005 21,267
================================ ====== ============ ============ ============
Capital and reserves attributable to the equity
holders of the parent
Share capital 18 3,112 2,178 1,718
Share premium 19 53,271 46,801 43,085
Foreign currency translation
reserve 19 4,732 3,933 4,576
Retained deficit 19 (43,368) (39,151) (29,789)
------------------------------- ------ ------------ ------------ ------------
Total equity 17,747 13,761 19,590
Current liabilities
Trade and other payables 16 404 244 1,677
------------------------------- ------ ------------ ------------ ------------
Total liabilities 404 244 1,677
Total equity and liabilities 18,151 14,005 21,267
================================ ====== ============ ============ ============
The financial statements were approved and authorised for issue
by the Board on 4 June 2013 and were signed on its behalf by:
Maxim Barskiy
Chief Executive Officer
COMPANY STATEMENT OF FINANCIAL POSITION
AS AT 31 DECEMBER 2012
Company number: 5375141
31 December 31 December 31 December
2012 2011 2010
Restated Restated
Notes US$'000 US$'000 US$'000
------------------------------- ------ ------------ ------------ ------------
Non-current assets
Property, plant and equipment 8 - 3
Investment in subsidiary 13 32,761 2 2
------------------------------- ------ ------------ ------------ ------------
32,769 2 5
Current assets
Trade and other receivables 15 85 11,840 17,605
Cash and cash equivalents 811 2,024 2,139
------------------------------- ------ ------------ ------------ ------------
896 13,864 19,744
Total assets 33,665 13,866 19,749
================================ ====== ============ ============ ============
Capital and reserves attributable to the equity holders of
the parent
Share capital 18 3,112 2,178 1,718
Share premium 19 53,271 46,801 43,085
Foreign currency translation
reserve 19 3,473 2,106 2,239
Retained deficit 19 (26,458) (37,324) (27,452)
------------------------------- ------ ------------ ------------ ------------
Total equity 33,398 13,761 19,590
Current liabilities
Trade and other payables 16 267 105 159
------------------------------- ------ ------------ ------------ ------------
Total liabilities 267 105 159
Total equity and liabilities 33,665 13,866 19,749
================================ ====== ============ ============ ============
The financial statements were approved and authorised for issue
by the Board on 4 June 2013 and were signed on its behalf by:
Maxim Barskiy
Chief Executive Officer
CONSOLIDATED AND COMPANY STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED 31 DECEMBER 2012
Group Company
31 December 31 December 31 December 31 December
2012 2011 2012 2011
Restated Restated
US$'000 US$'000 US$'000 US$'000
-------------------------------- ------------ ------------ ------------ ------------
Loss before taxation (4,813) (10,130) 10,267 (10,642)
Adjustments for:
Depreciation 5 20 1 3
Finance income (42) (12) (208) (621)
Finance expense - 14 - 1
Profit on disposal of (24) - - -
property, plant and equipment
Reversal of impairment - - (13,695) -
(note 15)
Impairment of the Intercompany
receivable - - - 9,399
Impairment of exploration - 7,400 - -
expenditure
Cost related to sales
of test production 503 611 - -
Share based payments 599 725 599 725
Foreign currency differences 130 (84) 10 149
------------ ------------ ------------ ------------
Cash generated from operations
before changes in working
capital (3,642) (1,456) (3,026) (986)
(Increase )/ decrease
in inventories 6 (2) - -
(Increase) / decrease
in receivables (295) 132 (4,389) (3,339)
Increase / (decrease)
in payables 141 (1,487) 154 (56)
- - - -
Interest received 42 12 18 -
Interest paid - (14) - (1)
------------ ------------
Net cash from operating
activities (3,748) (2,815) (7,243) (4,382)
Increase in investment - - (1,335) -
Proceeds from sale of 24 - - -
property, plant and equipment
Purchase of property,
plant and equipment (13) (9) (8) -
Expenditure on oil and
gas assets (1,954) (2,266) - -
-------------------------------- ------------ ------------ ------------ ------------
Net cash from investing
activities (1,943) (2,275) (1,343) -
Proceeds from issue of
shares 7,404 4,380 7,404 4,380
Share issue expenses paid - (159) (159)
-------------------------------- ------------ ------------ ------------ ------------
Net cash from financing
activities 7,404 4,221 7,404 4,221
Net increase / (decrease)
in cash and cash equivalents 1,713 (869) (1,182) (161)
Cash and cash equivalents
at beginning of period 2,333 2,959 2,024 2,139
Effect of foreign exchange
rate differences (46) 243 (31) 46
Cash and cash equivalents
at end of period 4,000 2,333 811 2,024
================================= ============ ============ ============ ============
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2012
1. Accounting policies
Basis of preparation
These financial statements have been prepared in accordance with
International Financial Reporting Standards, International
Accounting Standards and Interpretations (collectively IFRSs)
issued by International Accounting Standards Board (IASB) as
adopted by European Union.
These financial statements are presented in US Dollars and
rounded to the nearest thousand (US $'000) .
The principal accounting policies adopted in the preparation of
these financial statements are set out below. The policies have
been applied consistently to all the years presented, unless
otherwise stated.
Restatement - Change in presentation currency
The Directors have elected to present for the first time the
Group's and Company's financial statements in US Dollars in order
to make them comparable with the financial statements of its peers.
This is a change from prior years when the financial statements
were presented in Euros. The change represents a change in
accounting policy and has been applied retrospectively.
Going concern
The Group's operations are cash generative and the current cash
position is sufficient to cover the Group's administrative costs
for the next 12 months.
As part of the licence commitments the Group is required to
complete construction of no less than 1 exploration well before the
end of 2013. In light of the technical re-interpretation arising
from the 3D seismic survey, the technical team are in the process
of considering the location of the commitment well. Following this
a detailed plan will need to be agreed with the licensing
authorities. For this reason it is not expected that the commitment
well will be drilled within next 12 months. The relevant licensing
authorities are aware of this and it is common practice to obtain
extensions. The estimated cost of the well is approximately US$5
million. In the event of funding being required for the well costs
the Directors have received assurance from the major shareholder
that the funds will be available in the form of debt should the
Company be obliged to start drilling within next 12 months.
(i) New standards, amendments and interpretations effective in
2012:
The following new standards and amendments to standards are
mandatory for the first time for the Group for financial year
beginning 1 January 2012. Except as noted, the implementation of
these standards is not expected to have a material effect on the
Group.
Standard Effective Impact on initial application
date
IFRS 7 - Amendment 1 July No impact
- Transfer of Financial 2011
Assets
IFRS 1 - Amendment 1 July No impact
- Severe hyperinflation 2011
and removal of fixed
dates
IAS 12 - Amendment 1 January No impact
- Recovery of Underlying 2012
Assets
(ii) Standards, amendments and interpretations that are not yet
effective and have not been adopted early:
Standard Description Effective
date
IAS 1 Presentation of Items of Other Comprehensive 1 July 2012
Income
IFRS 10 Consolidated Financial Statements 1 January
2013
IFRS 11 Joint Arrangements 1 January
2013
IFRS 12 Disclosure of Interests in Other 1 January
Entities 2013
IFRS 13 Fair Value Measurement 1 January
2013
IAS 27 Separate Financial Statements 1 January
2014
IAS 28 Investments in Associates and Joint 1 January
Ventures 2014
IAS 19 Employee Benefits 1 January
2013
IFRS 7 Offsetting Financial Assets and 1 January
Financial Liabilities 2013
IFRS improvements (2009-2011 Cycle) 1 January
2013
IFRS 10, 11 Transition Guidance 1 January
and 12 2014
IAS 32 Offsetting Financial Assets and 1 January
Financial Liabilities 2014
IFRS 9* Financial Instruments 1 January
2015
* Not yet endorsed by the European Union
The Group is evaluating the impact of the above pronouncements
but they are not expected to have a material impact on the Group's
earnings or shareholders' funds.
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
Board.
Business combinations
The consolidated financial statements incorporate the results of
business combinations using acquisition accounting. In the
consolidated statement of financial position, the acquiree's
identifiable assets, liabilities and contingent liabilities are
initially recognised at their fair values at the acquisition date.
The 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
reporting 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 US Dollars (the presentational currency) at rates
approximating to those ruling when the transactions took place. All
assets and liabilities of overseas operations are translated at the
rate ruling at the reporting date. Differences arising on
retranslating the opening net assets and the results of operations
are recognised directly in equity (the "foreign currency
translation reserve").
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.
The following rates were used to translate these financial
statements:
As at 31.12.2012 Average As at 31.12.2011 Average As at 31.12.2010 Average
for 2012 for 2011 for 2010
GBP to USD 1.6168 1.5851 1.5456 1.6044 1.5471 1.5463
USD to RUB 30.4858 31.1604 32.2238 29.4484 30.5384 30.4338
EUR to USD 1.3218 1.2861 1.2950 1.3928 1.3253 1.3279
Revenue
Revenue is measured at the fair value of the consideration
received or receivable and represents amounts receivable for oil
and gas products provided in the normal course of business, net of
discounts, VAT and other sales related taxes to third party
customers. Revenues are recognised when the risks and rewards of
ownership together with effective control are transferred to the
customer and the amount of the revenue and associated costs
incurred in respect of the relevant transaction can be reliably
measured. Revenue is not recognised unless it is probable that the
economic benefits associated with the sales transaction will flow
to the Group. Revenue recognised in 2012 relates to oil sales from
test production.
Cost of sales
During test production cost of sales cannot be reliably
estimated and therefore a cost of sales equal to revenue is
recognised and credited to the intangible exploration assets.
Property, plant and equipment
Property, plant and equipment are stated at cost less
accumulated depreciation and impairment. 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 Property, plant and
equipment 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 incurred on areas of interest where exploration is
completed without success are impaired to the income statement.
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.
Impairment
All intangible assets are reviewed regularly for indications of
impairment and costs are written off where circumstances indicate
that the carrying value might not be recoverable. Any impairment is
immediately written off to the income statement. The Group applies
the successful efforts method of accounting where costs are
capitalised in different cost centres for each well and the
impairment review is carried out separately on each cost centre.
There is one cash generating unit which is the licence area.
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.
Financial instruments
Financial assets and financial liabilities are recognised when
the Group and the Company becomes party to the contractual
provisions of the instrument. Financial assets are de-recognised
when the contractual right to the cash flow expires or when
substantially all the risk and rewards of ownership are
transferred. Financial liabilities are de-recognised when the
obligations specified in the contract are either discharged or
cancelled.
Financial assets
The Group classifies its financial assets into one of the
following categories, depending on the purpose for which the asset
was acquired. The Group does not have any held to maturity,
available for sale or fair value through profit and loss
assets.
Loans and 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
Cash and cash equivalents include cash in hand, deposits held at
call with banks and other short term highly liquid investments with
an original maturity of 90 days or less.
Financial liabilities
The Group's financial liabilities consist of trade and other
payables which are initially stated at fair value and subsequently
at amortised cost. There are no liabilities recognised at fair
value through profit or loss.
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 reporting 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 reporting 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.
Share capital
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 reporting 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.
2. 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
The exploration and evaluation costs are capitalised as
intangible assets 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.
Share based payments
The Company makes equity-settled share-based payments to certain
Group employees and advisers. Equity-settled share-based payments
are measured at fair value using a Black-Scholes valuation model at
the date of grant based on certain assumptions. Those assumptions
are described in the note 17 to these financial statements and
include, among others, expected volatility, expected life of the
options and number of options expected to vest. More details
including carrying values are disclosed in the note to the
accounts.
3. Loss per share
Loss per share of 0.28 cents (2011: 0.9 cents) is calculated by
dividing the loss attributable to equity shareholders for the year
US$4,816,000 (2011: US$10,132,000) by the weighted average number
of ordinary shares outstanding during the year of 1,717,649,244
(2011: 1,129,808,508).
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 reporting date there were 53,672,907 (2011: 59,650,000)
potentially dilutive ordinary shares.
4. 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 in these
financial statements. The Company loss for the year after taxation
was US$10,267,000 (2011: US$10,642,000).
5. Loss from operations
2012 2011
Notes Restated
US$'000 US$'000
---------------------- ------ -------- ---------
Staff costs 6 2,703 1,972
Travel costs 425 107
Office costs 545 242
Corporate costs 319 103
Legal & professional
costs 548 153
General costs 204 215
Exchange loss 130 (84)
Gain / loss on
disposal (24) -
Depreciation /
amortization 5 20
Impairment - 7,400
4,855 10,128
====================== ====== ======== =========
Staff costs do not include salaries and salary related taxes of
technical personnel 2012: US$45,000 (2011: US$29,000) which have
been capitalised to intangible assets.
Auditors' remuneration
2012 2011
Restated
US$'000 US$'000
--------------------------------------------- -------- ---------
Fees payable by the Group to the Company's
auditor and its associates in respect of
the year:
-audit of Group and Parent's accounts 74 82
-audit of Group's subsidiaries 37 20
- Other services -Tax compliance services 39 10
6. Staff costs
Total staff costs (including Directors) comprise:
Group
2012 2011
Restated
US$ US$
--------------------- ---------- ----------
Employee salaries
and benefits 1,906,773 1,096,560
Employers national
insurance 239,390 149,452
Vacation provision 2,733 29,543
Share based payment
expense 598,772 724,955
2,747,668 2,000,510
===================== ========== ==========
Directors' emoluments
Group
2012 2011
Restated
US$ US$
----------------------- ---------- ---------
Basic salary and fees 637,879 617,679
Consultancy fees 158,036 -
Bonus 250,055 -
Compensation for loss 322,717 -
of office
1,368,687 617,679
======================= ========== =========
The following table shows the Directors who served during the
year or in the previous year together with an analysis of their
remuneration:
Basic Consultancy Bonus Compensation 2012 2011
Salary Fees for loss
of office
US$ US$ US$ US$ US$ US$
------------------------ -------- ------------ -------- ------------- ---------- --------
Executive directors
Maxim Barskiy 177,413 - - - 177,413 -
Vladimir Lenskiy 78,250 69,045 - - 147,295 -
Ekaterina Sapozhnikova 59,839 88,991 - - 148,830 -
Peter Hind 126,566 - 237,770 322,717 687,053 288,785
Neil Hodgson 116,548 - 12,285 - 128,833 248,676
Non-executive
directors
Sir Michael
Jenkins 47,554 - - - 47,554 48,131
Gideon Tadmor - - - - - -
Bill Guest 31,709 - - - 31,709 32,087
Matthias Brandl - - - - - -
637,879 158,036 250,055 322,717 1,368,687 617,679
======================== ======== ============ ======== ============= ========== ========
Key management personnel:
Group
2012 2011
Restated
US$ US$
------------------------------ ---------- ----------
Employee salaries and
benefits 1,636,222 785,880
Employers national insurance 183,953 81,443
Share based payment
expense (note 17) 598,772 724,955
2,418,947 1,592,278
============================== ========== ==========
Key management personnel include all parent company Directors
and senior management in the UK, Russia and Cyprus. The highest
paid director in 2012 was Maxim Barskiy who received $177,413.
Average number of employees
(including Directors):
Group Company
2012 2011 2012 2011
Technical 6 8 1 1
Corporate & administrative 11 12 3 2
17 20 4 3
============================ ===== ===== ===== =====
The compensation for loss of office payment to Mr P Hind, who
resigned on 18 May 2012, consists of a cash payment. The
discretionary elements of this compensation were approved by the
remuneration committee and were paid in respect of his past service
to the Company.
7. Taxation
Below is a reconciliation of the theoretical income tax rate to
the actual effective tax rate in the Group's income statement:
Group
2012 2011
Restated
US$'000 US$'000
------------------------------------------- -------- ---------
Loss before taxation (4,813) (10,130)
------------------------------------------- -------- ---------
Taxation at the UK corporation tax rate
of 24% (2011: 26%) (1,155) (2,634)
Effect of different tax rates in overseas
jurisdictions 89 506
Expenses not deductible for tax purposes 144 1,668
Unrecognised tax losses carried forward 925 462
Tax charge for the year 3 2
=========================================== ======== =========
No deferred tax asset has been recognised on accumulated tax
losses as the recoverability of such asset is uncertain at this
stage.
8. Segmental reporting
The Group has two reportable segments:
-- Arkhangelovskoe: this segment is involved in the exploration
of oil within the Arkhangelovskoe licence area in Russia; and
-- Head Office Operations: this segment is the head office of the Group.
The operating results of each of these segments are regularly
reviewed by the Group's chief operating decision makers in order to
make decisions about the allocation of resources and assess their
performance.
The accounting policies of these segments are in line with those
described in note 1.
Reportable segments as at 31 December
2012
Head Arkhangelovskoe Total
Office
US$'000 US$'000 US$'000
---------------------------------- -------- ---------------- --------
Revenue - 503 503
Cost of sales - (503) (503)
Administration expenses (3,020) (1,236) (4,256)
Share -based payment (599) - (599)
Finance income 16 26 42
Finance expense - - -
Taxation - (3) (3)
Loss for the year after taxation (3,603) (1,213) (4,816)
================================== ======== ================ ========
Other information
Depreciation (1) (4) (5)
Capital additions 8 5 13
Non-current assets 7 13,703 13,710
Inventories - 21 21
Trade and other receivables 85 335 420
Cash and cash equivalents 811 3,189 4,000
Segment assets 903 17,248 18,151
================================== ======== ================ ========
Trade and other payables (267) (137) (404)
Segment liabilities (267) (137) (404)
---------------------------------- -------- ---------------- --------
Segment net assets 636 17,111 17,747
================================== ======== ================ ========
Reportable segments as at 31 December
2011
Head Arkhangelovskoe Total
Office
Restated Restated Restated
US$'000 US$'000 US$'000
--------------------------------------- --------- ---------------- ---------
Revenue - 611 611
Cost of sales - (611) (611)
Administration expenses (988) (1,015) (2,003)
Share -based payment (725) - (725)
Impairment of exploration expenditure - (7,400) (7,400)
Finance income 12 - 12
Finance expense (3) (11) (14)
Taxation - (2) (2)
Loss for the year after taxation (1,704) (8,428) (10,132)
======================================= ========= ================ =========
Other information
Depreciation (3) (17) (20)
Capital additions - 9 9
Non-current assets - 11,532 11,532
Inventories - 27 27
Trade and other receivables 26 87 113
Cash and cash equivalents 2,024 309 2,333
Segment assets 2,050 11,955 14,005
======================================= ========= ================ =========
Trade and other payables (105) (139) (244)
---------
Segment liabilities (105) (139) (244)
--------------------------------------- --------- ---------------- ---------
Segment net assets 1,945 11,816 13,761
======================================= ========= ================ =========
Reportable segments as at 31 December
2010
Head Arkhangelovskoe Total
Office
Restated Restated Restated
US$'000 US$'000 US$'000
---------------------------------- --------- ---------------- ---------
Administration expenses (1,634) (783) (2,417)
Finance income 33 62 95
Finance expense (5) (11) (16)
Taxation - (2) (2)
Loss for the year after taxation (1,606) (734) (2,340)
================================== ========= ================ =========
Other information
Depreciation (8) (25) (33)
Capital additions - 1 1
Non-current assets 3 18,040 18,043
Inventories - 25 25
Trade and other receivables 21 219 240
Cash and cash equivalents 2,139 820 2,959
Segment assets 2,163 19,104 21,267
================================== ========= ================ =========
Trade and other payables (159) (1,518) (1,677)
Segment liabilities (159) (1,518) (1,677)
---------------------------------- --------- ---------------- ---------
Segment net assets 2,004 17,586 19,590
================================== ========= ================ =========
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 US$599,000 (2011: US$725,000) relate
solely to the Head Office.
All material capital expenditure in the current and previous
years relate to the Arkhangelovskoe segment.
9. Finance income
Group
2012 2011
Restated
US$'000 US$'000
--------------- -------- ---------
Bank interest 42 12
42 12
=============== ======== =========
10. Finance expense
Group
2012 2011
Restated
US$'000 US$'000
-------------- --------- ---------
Bank charges - 14
- 14
======================== =========
11. Property, plant and equipment
Property, plant and equipment is comprised of office and
computer equipment and transport vehicles.
Group
US$'000
------------------------------------- --------
Cost at 1 January 2011 (restated) 148
Additions 9
Disposals (4)
Cost at 31 December 2011 (restated) 153
Additions 13
Disposals (70)
Foreign exchange difference 1
-------------------------------------
Cost at 31 December 2012 97
------------------------------------- --------
US$'000
Depreciation at 1 January 2011
(restated) (126)
Charge for the year (20)
Disposals 4
Depreciation at 31 December 2011
(restated) (142)
Charge for the year (5)
Disposals 70
Foreign exchange difference (1)
------------------------------------- --------
Depreciation at 31 December 2012 (78)
------------------------------------- --------
US$'000
--------
Net book value at:
1 January 2011 (restated) 22
31 December 2011 (restated) 11
31 December 2012 19
12. Intangible assets
COST Group
US$'000
--------------------------------------- --------
Cost at 1 January 2011 (restated) 18,021
Additions 2,266
Sales from test production (611)
Foreign exchange difference (1,392)
---------------------------------------
Cost at 31 December 2011 (restated) 18,284
Additions 1,954
Sales from test production (503)
Foreign exchange difference 1,105
---------------------------------------
Cost at 31 December 2012 20,840
--------------------------------------- --------
ACCUMULATED IMPAIRMENT Group
US$'000
--------
Accumulated impairment at 1 January
2011 (restated) -
Impairment in the year (7,400)
Foreign exchange difference 637
---------------------------------------
Accumulated impairment at 31 December
2011 (restated) (6,763)
Foreign exchange difference (386)
---------------------------------------
Accumulated impairment at 31 December
2012 (7,149)
--------------------------------------- --------
Group
US$'000
--------
Net book value at 31 December 2010
(restated) 18,021
Net book value at 31 December 2011
(restated) 11,521
Net book value at 31 December 2012 13,691
13. Investment in subsidiaries
The principal subsidiaries of Matra Petroleum plc, all of which have been included in these
consolidated financial statements, are as follows:
Name Country of incorporation Proportion of ownership in Nature of business
2011 and 2012
----------------------------- ------------------------- ----------------------------- -----------------------------
Matra Cyprus Petroleum
Limited Cyprus 100% Holding company
Matra Cyprus Petroleum
(Alpha) Limited Cyprus 100% Holding company
Oil & gas exploration and
OOO Arkhangelovskoe Russian Federation 100% production company
COST Investment Inter-company loans Total
US$'000 US$'000 US$'000
----------- -------------------- --------
Cost at 1 January 2011 (restated) 2 - 2
------------------------------------- -----------
Cost at 31 December 2011 (restated) 2 - 2
Additions 1,334 - 1,334
Re-classification (note 15) - 31,425 31,425
Cost at 31 December 2012 1,336 31,425 32,761
------------------------------------- ----------- -------------------- --------
14. Inventories
Group
2012 2011 2010
Restated Restated
US$'000 US$'000 US$'000
-------------------- -------- --------- ---------
Drilling and other
supplies 21 27 25
==================== ======== ========= =========
15. Receivables
Group Company
2012 2011 2010 2012 2011 2010
Restated Restated Restated Restated
US$'000 US$'000 US$'000 US$'000 US$'000 US$'000
------------------------ -------- --------- --------- --------- --------- ---------
Prepayments and other
receivables 420 113 240 85 26 21
Intercompany loans - - - 17,730 11,814 17,584
Reversal of impairment - - - 13,695 - -
Re-classification
(note 13) - - - (31,425) - -
420 113 240 85 11,840 17,605
======================== ======== ========= ========= ========= ========= =========
The fair value of receivables is not significantly different
from the carrying value.
During the year the terms of the inter-company loans have been
revised with the repayment period extended to 2020 and annual
interest reduced to 0.65% (2011 and 2010: 2% above the Russian
Central Bank interest rate). Consequently the inter-company loans
have been re-classified as a non-current investment.
Additionally, the previously recognised impairment of
intercompany loans of US$13,695,000 has been reversed following the
Directors' reassessment of the loan's recoverability and the
Directors are confident that the full amount of the inter-company
loans together with accrued interest will be repaid by 31 December
2020.
16. Trade and other payables
Group Company
2012 2011 2010 2012 2011 2010
Restated Restated Restated Restated
US$'000 US$'000 US$'000 US$'000 US$'000 US$'000
-------------------- -------- --------- --------- -------- --------- ---------
Trade payables 178 36 149 119 14 85
Accruals and other
payables 226 208 1,528 148 91 74
404 244 1,677 267 105 159
==================== ======== ========= ========= ======== ========= =========
17. Share based payments
Exercise Grant Outstanding Granted Exercised Lapsed Outstanding Weighted Final
price date at start during during during at end average exercise
(p) of year the year the year the year of year exercise date
price
--------- ----------- ------------ ----------- ------------ ------------- ------------- --------- ------------
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
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
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 3.79
--------- ----------- ------------ ----------- ------------ ------------- ------------- --------- ------------
2011
0.1 11/04/2006 5,000,000 - - - 5,000,000 - 11/04/2013
5 11/04/2006 10,000,000 - - - 10,000,000 - 11/04/2013
0.1 23/05/2006 1,200,000 - - - 1,200,000 - 23/05/2013
5 23/05/2006 6,000,000 - - - 6,000,000 - 23/05/2013
4.5 23/04/2007 8,000,000 - - - 8,000,000 - 22/04/2012
4.5 31/03/2007 500,000 - - (500,000) - - -
7.5 25/09/2007 250,000 - - - 250,000 - 25/09/2012
3.65 20/10/2009 21,250,000 - - (750,000) 20,500,000 - 19/10/2014-
1.81 01/07/2010 200,000 - - - 200,000 - 30/06/2015
0.5 11/11/2011 - 8,500,000 - - 8,500,000 - 11/11/2014
Total 52,400,000 8,500,000 - (1,250,000) 59,650,000 3.32
--------- ----------- ------------ ----------- ------------ ------------- ------------- --------- ------------
2012
0.1 11/04/2006 5,000,000 - (5,000,000) - - - -
5 11/04/2006 10,000,000 - - (10,000,000) - - -
0.1 23/05/2006 1,200,000 - (1,200,000) - - - -
5 23/05/2006 6,000,000 - - (6,000,000)* - - -
4.5 23/04/2007 8,000,000 - - (8,000,000)* - - -
7.5 25/09/2007 250,000 - - (250,000) - - -
3.65 20/10/2009 20,500,000 - - (20,000,000) 500,000 - 19/10/2014
1.81 01/07/2010 200,000 - - - 200,000 - 30/06/2015
0.5 11/11/2011 8,500,000 - - - 8,500,000 - 11/11/2014
1.30 11/05/2012 - 44,472,907 - - 44,472,907** - 11/05/2014
Total 59,650,000 44,472,907 (6,200,000) (44,250,000) 53,672,907 1.06
--------- ----------- ------------ ----------- ------------ ------------- ------------- --------- ------------
* The exercise period of these options was modified and their
exercise date amended to 31 December 2012 on 18 May 2012. The
modification did not result in a change in the fair value of these
options.
** These options relate to warrants granted in 2012 and were not
exercisable at 31 December 2012.
Peter Hind and Neil Hodgson exercised 5 million and 1.2 million
of options respectively at an exercise price of 0.1 pence per share
on 06 June 2012.
Of the total number of options outstanding at 31 December 2012,
9,200,000 (2011: 59,650,000) had vested and were exercisable at a
weighted average exercise price of 0.7p (2011: 3.32p).
Warrants
On 11 May 2012 warrants were granted to Maxim Barskiy to
subscribe for 44,472,907 of the Company's ordinary shares of 0.1
pence each at an exercise price of 1.3 pence per share. The
warrants are valid for 12 months from the date of grant and
exercise is conditional upon completion of a Material Acquisition
by the Company.
In May 2013 the warrants lapsed as the vesting conditions have
not been met and the charge has been reversed subsequently to the
year end (note 23).
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 reported years:
2012 2011 2010
Share price at the date
of grant (pence) 2.325 3.9 1.64
Dividend yield (%) - - -
------------------------- ------ ----- -----
Volatility 75 75 75
Expected life (years) 2 2 5
Risk free interest rate
(%) 1.5 0.5 3.0
------------------------- ------ ----- -----
Weighted average option
price (pence) 1.36 2.00 1.00
------------------------- ------ ----- -----
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 US$599,000 (2011: US$725,000 and 2010: US$2,000).
The expected life of the options is based on academic research
and is not necessarily indicative of exercise patterns that
may occur. Volatility is calculated with reference to
comparative entities share price volatility and reflects the
assumption that the comparator's volatility is indicative of future
trends, which may also not necessarily be the actual outcome. No
other features of options granted were incorporated into the
measurement of fair value.
18. Share capital 2012 2011 2010
Restated Restated
US$ US$ US$
----------------------------------- ----------- ----------- -----------
Authorised:
10,000,000,000 ordinary shares of
0.1p each 13,571,000 13,571,000 13,571,000
=================================== =========== =========== ===========
Allotted, called-up and fully paid: Number of US$
shares
1 January 2011 1,064,917,872 1,717,606
Additions 290,000,000 460,244
31 December 2011 1,354,917,872 2,177,850
New share placing 575,000,000 924,313
Exercise of options 6,200,000 9,531
31 December 2012 1,936,117,872 3,111,694
On 14 May 2012 the Company issued 575,000,000 of new ordinary
shares of 0.1 pence each to Maxim Barskiy at a price of 0.8 pence
per ordinary share for a total consideration of GBP4.6 million
(US$7.4 million).
On 6 June 2012 Mr P Hind and Mr N Hodgson exercised their
6,200,000 options at a price of 0.1 pence per share for a total
consideration of GBP6,000 (US$10,000).
19. Reserve Description and purpose
The following describes the nature and purpose of each reserve
within owners' equity:
-- Share capital: Amount subscribed for share capital at nominal value.
-- Share premium: Amount subscribed for share capital in excess of nominal value.
-- Foreign currency translation reserve: Exchange gains/losses
arising on retranslating the net assets of operations into the
presentation currency.
-- Retained deficit: Cumulative net gains and losses recognised in the consolidated income
statement.
20. Financial instrument risk exposure and management
In common with all other businesses, the Group and Company are
exposed to risks that arise from its use of financial instruments.
This note describes the Group and Company's objectives, policies
and processes for managing those risks and the methods used to
measure them. Further quantitative information in respect of these
risks is presented throughout these financial statements.
There have been no substantive changes in the Group or Company's
exposure to financial instrument risks, its objectives, policies
and processes for managing those risks or the methods used to
measure them from previous periods unless otherwise stated in this
note.
Principal financial instruments
The principal financial instruments used by the Group and
Company, from which financial instrument risk arises, are as
follows:
other receivables
cash and cash equivalents
trade and other payables
inter-company loans
Loans and receivables
Group Company
2012 2011 2010 2012 2011 2010
Restated Restated Restated Restated
US$'000 US$'000 US$'000 US$'000 US$'000 US$'000
----------------------- -------- --------- --------- -------- --------- ---------
Other receivables 369 70 206 64 16 16
Cash and cash
equivalents 4,000 2,333 2,959 811 2,024 2,139
4, 369 2,403 3,165 875 2,040 2,155
======================= ======== ========= ========= ======== ========= =========
Financial liabilities
Financial liabilities at amortised cost
Group Company
2012 2011 2010 2012 2011 2010
Restated Restated Restated Restated
US$'000 US$'000 US$'000 US$'000 US$'000 US$'000
----------------------- -------- --------- --------- -------- --------- ---------
Trade and other
payables 404 244 1,677 267 105 159
404 244 1,677 267 105 159
======================= ======== ========= ========= ======== ========= =========
Fair value of financial assets and liabilities
At 31 December 2012, 2011 and 2010 the fair value and the book
value of the Group and Company's financial assets and liabilities
were materially the same.
General objectives, policies and processes
The Board has overall responsibility for the determination of
the Group and Company's risk management objectives and policies
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 policies 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 for the Company arises principally from the
intercompany loans. 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.
To reduce credit risk sales of oil from test production are made
only to customers with appropriate credit rating. When commercial
exploitation commences sales will only be made to customers with
appropriate credit rating.
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, foreign currency translation reserve and retained
earnings.
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 debt free or a low gearing ratio position 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.
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 in
order to closely monitor the Group's liquidity position (as noted
above).
Trade and other payables are due within 30 days of invoice
date.
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 income 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 not have material impact on
profit after tax of the Group or Company.
At the year end, the Group had a cash balance of US$4,000,000
(2011: US$2,333,000 and 2010: US$2,959,000) and the Company had a
cash balance of US$811,000 (2011: US$2,024,000 and 2010:
US$2,139,000) which was made up as follows:
Group Company
2012 2011 2010 2012 2011 2010
Restated Restated Restated Restated
US$'000 US$'000 US$'000 US$'000 US$'000 US$'000
---------------- -------- --------- --------- -------- --------- ---------
Great British
pound 893 1,894 2,146 699 1,889 2,139
Russian rouble 64 304 813 - - -
US dollar 3,043 135 - 112 135 -
4,000 2,333 2,959 811 2,024 2,139
================ ======== ========= ========= ======== ========= =========
Currency risk
The Group and Company's policy is, where possible, to allow
Group entities to settle liabilities denominated in their
functional currency (primarily Euro, Russian Roubles or Great
British Pounds) in that currency. Where Group or Company entities
have liabilities denominated in a currency other than their
functional currency (and have insufficient reserves of that
currency to settle them) cash already denominated in that currency
will, where possible, be transferred from elsewhere within the
Group.
In order to monitor the continuing effectiveness of this policy,
the Board receives a periodic forecast, analysed by the major
currencies held by the Group and Company.
The Group and Company is primarily exposed to currency risk on
purchases made from suppliers in Orenburg, Southern Russia in
Russian Roubles. As it is not possible for the Group or Company to
transact in Russian Roubles outside of Russia, a Sterling account
is maintained in Orenburg and all funding is transferred to its
Russian subsidiary in this currency. Once the funding has been
received, the local finance team negotiates a favourable spot rate
with its Russian bank for transferring Sterling to Russian Roubles.
The UK finance team, along with its advisors, carefully monitors
movements in the Sterling / Russian Rouble rate and chooses the
most beneficial times for transferring monies to its subsidiary,
whilst ensuring that it has sufficient funds to continue its
operations.
A movement in the Russian Rouble of 15% would result in the
expenditure in the year increasing or decreasing by
US$ 156,000 (2011: US$ 153,000).
A movement in the Great British pound of 25% would result in the
expenditure in the year increasing or decreasing by US$755,000
(2011: US$ 247,000).
A movement in the Great British pound of 25% would result in the
average cash and cash equivalents increasing or decreasing by US$
223,000 (2011: US$474,000).
21. 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 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 approval a development plan for the field by the end of 2015.
22. Related party transactions
Apart from key management remuneration as disclosed in note 6,
the Group and Company had no transactions with related parties
during the year (31 December 2011: nil).
23. Events after the reporting period.
In May 2013 the warrants granted to Maxim Barskiy (note 17)
lapsed as the qualifying vesting conditions have not been met. The
previously recognised share-based payment charge of US$599,000 has
subsequently been reversed.
This information is provided by RNS
The company news service from the London Stock Exchange
END
FR LLFVERAIVIIV
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