REG - Ascent Resources PLC - Final results for the year ended 31 December 2014 <Origin Href="QuoteRef">ASCR.L</Origin> - Part 2
15/07/2015 17:05
- Part 2: For the preceding part double click ID:nRSL8421Ma
(1,276)
FX differences recycled on discontinued operations - - - - - (1,324) - (1,324) (1,324)
Total comprehensive income - - - - - (2,600) (3,587) (6,187) (5) (6,192)
Transactions with owners - - -
Issue of convertible loan notes - - 518 - - - - 518 - 518
Issue of shares during the year net of costs 425 3,635 - 84 - - - 4,144 4,144
Share-based payments - - - - (5) - 100 95 - 95
Balance at 31 December 2013 1,451 55,833 518 84 1,896 (498) (34,171) 25,113 - 25,113
Balance at 1 January 2014 1,451 55,833 518 84 1,896 (498) (34,171) 25,113 - 25,113
Comprehensive income - -
Loss for the year - - - - - - (5,623) (5,623) - (5,623)
Other comprehensive income
Currency translation differences - - - - - (1,248) - (1,248) - (1,248)
FX differences recycled on discontinued operations - - - - - - - - - -
Total comprehensive income - - - - - (1,248) (5,623) (6,871) - (6,871)
Transactions with owners - -
Issue of convertible loan notes - - 2,058 - - - - 2,058 - 2,058
Conversion of loan notes - 2 2 - 2
Issue of shares during the year net of costs 8 76 - (84) - - - - - -
Share-based payments and expiry of options - - - - (1,035) - 1,181 146 - 146
Balance at 31 December 2014 1,459 55,911 2,576 - 861 (1,746) (38,613) 20,448 - 20,448
Company Statement of Changes in Equity
For the year ended 31 December 2014
Share capital Share premium Equity reserve Shares to be issued Share based payment reserve Retained earnings Total parent equity
£ '000s £ '000s £ '000s £ '000s £ '000s £ '000s £ '000s
Balance at 1 January 2013 1,026 52,198 - - 1,901 (28,599) 26,526
Comprehensive income
Loss and total comprehensive income for the year - - - - - (6,190) (6,190)
Transactions with owners
Issue of convertible loan notes - - 518 - - - 518
Issue of shares during the year net of costs 425 3,635 - 84 - - 4,144
Share-based payments - - - - (5) 100 95
Balance at 31 December 2013 1,451 55,833 518 84 1,896 (34,689) 25,093
Balance at 1 January 2014 1,451 55,833 518 84 1,896 (34,689) 25,093
Comprehensive income
Loss and total comprehensive income for the year - - - - - (6,058) (6,058)
Transactions with owners
Issue of convertible loan notes - - 2,058 - - - 2,058
Conversion of loan notes - 2 - - - - 2
Issue of shares during the year net of costs 8 76 - (84) - - -
Share-based payments - - - - (1,035) 1,181 146
Balance at 31 December 2014 1,459 55,911 2,576 - 861 (39,566) 21,241
Consolidated Statement of Financial Position
As at 31 December 2014
31 December2014 31 December2013
Assets Notes £ '000s £ '000s
Non-current assets
Property, plant and equipment 2 3
Exploration and evaluation costs 8 33,166 33,628
Total non-current assets 33,168 33,631
Current assets
Trade and other receivables 10 98 110
Cash and cash equivalents 456 184
Total current assets 554 294
Total assets 33,722 33,925
Equity and liabilities
Attributable to the equity holders of the Parent Company
Share capital 18 1,459 1,451
Share premium account 55,911 55,833
Equity reserve 2,576 518
Shares to be issued - 84
Share-based payment reserve 861 1,896
Translation reserves (1,746) (498)
Retained earnings (38,613) (34,171)
Total equity attributable to the shareholders 20,448 25,113
Non-Controlling interest - -
Total equity 20,448 25,113
Non-current liabilities
Borrowings 13 - 4,957
Provisions 14 410 437
Total non-current liabilities 410 5,394
Current liabilities
Trade and other payables 16 647 409
Borrowings 13 9,624 754
Other current liabilities 15 2,593 2,255
Total current liabilities 12,864 3,418
Total liabilities 13,274 8,812
Total equity and liabilities 33,722 33,925
The notes on pages 31 to 51are an integral part of these consolidated
financial statements.
These financial statements were approved and authorised for issue by the Board
of Directors on 11 May 2015 and signed on its behalf by:
Clive Carver, Chairman
11 May 2015
Company Statement of Financial Position
As at 31 December 2014
31 December2014 31 December2013
Notes £ '000s £ '000s
Non-current assets
Property, plant and equipment 1 2
Investment in subsidiaries and joint ventures 14,340 14,340
Intercompany receivables 21 19,045 18,815
Total non-current assets 33,386 33,157
Current assets
Trade and other receivables 11 62 71
Cash and cash equivalents 439 175
Total current assets 501 246
Total assets 33,887 33,403
Equity
Share capital 18 1,459 1,451
Share premium 55,911 55,833
Equity reserve 2,576 518
Shares to be issued - 84
Share-based payment reserve 861 1,896
Retained loss (39,566) (34,689)
Total equity 21,241 25,093
Non-Current liabilities
Borrowings 13 - 4,957
Total non-current liabilities - 4,957
Current liabilities
Trade and other payables 17 429 344
Borrowings 13 9,624 754
Other current liabilities 15 2,593 2,255
Total current liabilities 12,646 3,353
Total liabilities 12,646 8,310
Total equity and liabilities 33,887 33,403
The notes on pages 31 to 51 are an integral part of these consolidated
financial statements.
These financial statements were approved and authorised for issue by the Board
of Directors on 11 May 2015 and signed on its behalf by:
Clive Carver
Chairman
11 May 2015
Consolidated Cash Flow Statement
For the year ended 31 December 2014
Year ended31 December 2014 Year ended31 December 2013
£ '000s £ '000s
Cash flows from operations
Loss after tax for the year (5,623) (3,592)
DD&A charge 2 (2)
Decrease in receivables 12 171
Increase / (Decrease) in payables 238 (547)
Increase in share based payments 146 96
Exchange differences (42) (190)
Finance income (3) (1,423)
Finance cost 3,516 1,266
Loss on the sale of discontinued operations (net of tax) - 1,792
Net cash used in operating activities (1,754) (2,429)
Cash flows from investing activities
Interest received 3 5
Payments for investing in exploration (773) (1,346)
Disposal of discontinued operations net of cash disposed of - (228)
Disposal / (Purchase) of property, plant and equipment (1) 101
Net cash used in investing activities (771) (1,468)
Cash flows from financing activities
Interest paid and other finance fees (60) (226)
Proceeds from loans 3,650 2,061
Loans repaid (761) (2,031)
Loan issue costs (32) (20)
Proceeds from issue of shares - 887
Share issue costs - (44)
Net cash generated from financing activities 2,797 627
Net increase in cash and cash equivalents for the year 272 (3,270)
Effect of foreign exchange differences - 2
Cash and cash equivalents at beginning of the year 184 3,452
Cash and cash equivalents at end of the year 456 184
Company Cash Flow Statement
For the year ended 31 December 2014
Year ended31 December 2014 Year ended31 December 2013
£ '000s £ '000s
Cash flows from in operations
Loss for the year (6,058) (6,190)
Depreciation charge 2 2
Increase in receivables (662) (14)
Increase in payables 85 114
Increase in share based payments reserve 146 96
Settlement of warranty claim - 3,300
Write off of investment - 79
Foreign exchange 1,533 (73)
Finance income (3) (5)
Finance cost 3,499 1,183
Net cash generated from / (used in) operating activities (1,458) (1,508)
Cash flows from investing activities
Interest received 3 (47)
Advances to subsidiaries (1,094) (2,449)
Investment in PPE (1) -
Net cash flows used in investing activities (1,092) (2,496)
Cash flows from financing activities
Interest paid (43) (143)
Proceeds from loans 3,650 2,061
Repayment of loan (761) (1,775)
Loan issue costs (32) (20)
Cash proceeds from issue of shares - 887
Share issue costs - (44)
Net cash generated from financing activities 2,814 966
Net increase in cash and cash equivalents 264 (3,038)
Cash and cash equivalents at beginning of the year 175 3,211
Effects of foreign exchange differences - 2
Cash and cash equivalents at end of the year 439 175
Notes to the accounts
1 Accounting policies
Reporting entity
Ascent Resources plc ('the Company' or 'Ascent') is a company domiciled and
incorporated in England. The address of the Company's registered office is 5
New Street Square, London EC4A 3TW. The consolidated financial statements of
the Company for the year ended 31 December 2014 comprise the Company and its
subsidiaries (together referred to as the 'Group') and the Group's interest in
associates and joint ventures. The Parent Company financial statements
present information about the Company as a separate entity and not about its
Group.
The Company is admitted to AIM, a market of the London Stock Exchange.
The consolidated financial statements of the Group for the year ended 31
December 2014 are available from the Company's website at
www.ascentresources.co.uk.
Statement of compliance
The Group's and Company's financial statements for the year ended 31 December
2014 were approved and authorised for issue by the Board of Directors on 11
May 2015 and the Statements of Financial Position were signed on behalf of the
Board by Clive Carver.
Both the Parent Company financial statements and the Group financial
statements give a true and fair view and have been prepared and approved by
the Directors in accordance with International Financial Reporting Standards
as adopted by the EU ('IFRSs').
Basis of preparation
In publishing the Parent Company financial statements here together with the
Group financial statements, the Company is taking advantage of the exemption
in section 408 of the Companies Act 2006 not to present its individual income
statement and related notes that form a part of these approved financial
statements. The Company loss for the year was £6.2 million.
Measurement Convention
The financial statements have been prepared under the historical cost
convention except for available-for-sale financial assets and financial
instruments which are measured at fair value through profit and loss. The
financial statements are presented in sterling and have been rounded to the
nearest thousand (£ '000s) except where otherwise indicated.
The principal accounting policies set out below have been consistently applied
to all periods presented.
Going Concern
The Financial Statements of the Group are prepared on a going concern basis.
The Company has sufficient cash to fund its current trading obligations but
further funding will be required for working capital through the year and to
finance work programmes in Slovenia. In addition, both the 2013 & 2014
Convertible Loan notes become due in November 2015 and the £3m due to EnQuest
becomes payable in December 2015. Consequently the Directors are considering
a range of funding options, including a strategic investor.
However, there can be no guarantee over the outcome of these negotiations and
as a consequence there is a material uncertainty of the Group's ability to
raise additional finance, which may cast significant doubt on the Group's
ability to continue as a going concern. Further, the Group may be unable to
realise its assets and discharge its liabilities in the normal course of
business.
The Directors, however, remain confident of the Group's ability to operate as
a going concern given the funding discussions that have and continue to take
place and in light of the significant recent support from existing
shareholders.
New and amended Standards effective for 31 December 2014 year end adopted by
the Group:
i. The following new standards and amendments to standards are mandatory for
the first time for the Group for the financial year beginning 1 January 2014.
The adoption of these standards and amendments has had no material effect on
the Group's accounting policies.
Standard Effective date Impact on initial application
IAS 32 Amendment - Offsetting Financial Assets and Financial Liabilities 1 January 2014
IFRS 10 Consolidated Financial Statements 1 January 2014
IFRS 11 Joint Arrangements 1 January 2014
IFRS 12 Disclosure of Interests in Other Entities 1 January 2014
IAS 28 Investments in Associates and Joint Ventures 1 January 2014
IAS 36 Recoverable amounts disclosures for non-financial assets 1 January 2014
IFRS 10, IFRS 12, and IAS 27 Investment Entities 1 January 2014
ii. 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
IFRS 11 Accounting for Acquisitions of Interests in Joint Operation 1 January 2016
IAS 16 and IAS 38 Clarification of Acceptable Methods of Depreciation and Amortisation 1 January 2016
IAS 1 Amendments to presentation of financial statements 1 January 2016
IAS 19 Defined Benefit Plans: Employee Contributions 1 February 2015
Annual Improvements to IFRSs 2010-2012 Cycle 1 February 2015
Annual Improvements to IFRSs 2011-2013 Cycle 1 January 2015
Annual Improvements to IFRSs 2012-2014 Cycle 1 January 2016
IFRS 9 Financial instruments 1 January 2018
The Group has not yet assessed the impact of IFRS 9. The adoption of IFRS 9
will eventually replace IAS 39 in its entirety and consequently may have a
material effect on the presentation, classification, measurement and
disclosures of the Group's financial instruments.
Critical accounting estimates and assumptions
The preparation of the consolidated financial statements in conformity with
IFRSs requires management to make estimates and assumptions that affect the
application of policies and reported amounts of assets, liabilities, income,
expenses and related disclosures. The estimates and underlying assumptions
are based on practical experience and various other factors that are believed
to be reasonable under the circumstances, the results of which form the basis
for making the judgments about carrying values of assets and liabilities that
are not readily apparent from other sources. Actual results may differ from
these estimates.
The estimates and underlying assumptions are reviewed on an ongoing basis.
Changes in accounting estimates may be necessary if there are changes in the
circumstances on which the estimate was based or as a result of new
information. Such changes are recorded in the period in which the estimate is
revised.
Critical judgements in applying the Group's accounting policies
The application of the Group's accounting policies may require management to
make judgements, apart from those involving estimates, which can have a
significant effect on the amounts amortised in the financial statements.
Management judgement is particularly required when assessing the substance of
transactions that have a complicated structure or legal form.
The key areas where management judgement will need to be applied will be in
the areas of:
(a) Oil and gas assets - exploration and evaluation costs are initially
classified and held as intangible fixed assets rather than being expensed.
The carrying value of intangible exploration and evaluation assets are then
determined. Management considers these assets for indicators of impairment at
least annually based on an estimation of the recoverability of the cost pool
from future development and production of the related oil and gas reserves
(see Note 8);
(b) Decommissioning provision - the cost of decommissioning is estimated by
reference to operators and internal specialist staff (see Note 14);
(c) Convertible loan notes - management assessed the fair value of the
liability component at issue and the appropriateness of the amortisation
period (see Note 13);
(d) Basis of consolidation - management consider the Company's ability to
exert financial and operational control, as well as the level of voting rights
and representation on the Board as a basis of consolidation;
(e) Share-based payments - management assesses the fair value of each option
using an appropriate pricing model based on option and share prices,
volatility and the life of the option (see Note 23).
(f) Commercial reserves - Commercial reserves are proven and probable oil
and gas reserves, calculated on an entitlement basis. Estimates of commercial
reserves underpin the calculation of depletion and amortisation on a unit of
production basis. Estimates of commercial reserves include estimates of the
amount of oil and gas in place, assumptions about reservoir performance over
the life of the field and assumptions about commercial factors which, in turn,
will be affected by the future oil and gas price.
Basis of consolidation
Where the company has control over an investee, it is classified as a
subsidiary. The company controls an investee if all three of the following
elements are present: power over the investee, exposure to variable returns
from the investee, and the ability of the investor to use its power to affect
those variable returns. Control is reassessed whenever facts and circumstances
indicate that there may be a change in any of these elements of control.
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.
The results of undertakings acquired or disposed of are consolidated from or
to the date when control passes to or from the Group. The results of
subsidiaries acquired or disposed of during the period are included in the
consolidated income statement from the date that control commences until the
date that control ceases.
Where necessary, adjustments are made to the results of subsidiaries to bring
the accounting policies they use into line with those used by the Group.
Business combinations
On acquisition, the assets, liabilities and contingent liabilities of
subsidiaries are measured at their fair values at the date of acquisition.
Any excess of cost of acquisition over net fair values of the identifiable
assets, liabilities and contingent liabilities acquired is recognised as
goodwill. Any deficiency of the cost of acquisition below the net fair values
of the identifiable assets, liabilities and contingent liabilities acquired
(i.e. discount on acquisition) is credited to profit and loss in the period of
acquisition.
Non-current assets held for sale and discontinued operations
Non-current assets are classified as assets held for sale and stated at the
lower of carrying amount and fair value less costs to sell if their carrying
amount is to be recovered principally through a sale transaction rather than
through continuing use.
A discontinued operation is a component of the Group's business that
represents a separate major line of business or geographical area of
operations. Classification as a discontinued operation occurs upon disposal
or when the operation meets the criteria to be classified as held for sale.
Joint arrangements
The group is party to a joint arrangement when there is a contractual
arrangement that confers joint control over the relevant activities of the
arrangement to the group and at least one other party. Joint control is
assessed under the same principles as control over subsidiaries.
The group classifies its interests in joint arrangements as either joint
ventures, where the group has rights to only the net assets of the joint
arrangement, or joint operations where the group has both the rights to assets
and obligations for the liabilities of the joint arrangement.
All of the group's joint arrangements are classified as joint operations. The
Group accounts for its interests in joint operations by recognising its
assets, liabilities, revenues and expenses in accordance with its
contractually conferred rights and obligations.
Oil and Gas Exploration Assets
All licence/project acquisitions, exploration and appraisal costs incurred or
acquired on the acquisition of a subsidiary, are accumulated in respect of
each identifiable project area. These costs, which are classified as
intangible fixed assets are only carried forward to the extent that they are
expected to be recovered through the successful development of the area or
where activities in the area have not yet reached a stage which permits
reasonable assessment of the existence of economically recoverable reserves.
Pre-licence/project costs are written off immediately. Other costs are also
written off unless commercial reserves have been established or the
determination process has not been completed. Thus accumulated cost in
relation to an abandoned area are written off in full to the statement of
comprehensive income in the year in which the decision to abandon the area is
made.
When production commences the accumulated costs for the relevant area of
interest are transferred from intangible fixed assets to Property, Plant and
Equipment as 'Developed oil and gas assets'.
Impairment of oil and gas exploration assets
Exploration/appraisal assets are reviewed regularly for indicators of
impairment following the guidance in IFRS 6 'Exploration for and Evaluation of
Mineral Resources' and tested for impairment where such indicators exist.
In accordance with IFRS 6 the group considers the following facts and
circumstances in their assessment of whether the group's oil and gas
exploration assets may be impaired:
· whether the period for which the group has the right to explore in a
specific area has expired during the period or will expire in the near future,
and is not expected to be renewed;
· whether substantive expenditure on further exploration for and
evaluation of mineral resources in a specific area is neither budgeted nor
planned;
· whether exploration for and evaluation of oil and gas reserves in a
specific area have not led to the discovery of commercially viable quantities
of oil and gas and the group has decided to discontinue such activities in the
specific area; and
· whether sufficient data exists to indicate that although a development
in a specific area is likely to proceed, the carrying amount of the
exploration and evaluation assets is unlikely to be recovered in full from
successful development or by sale.
If any such facts or circumstances are noted, the group, as a next step,
perform an impairment test in accordance with the provisions of IAS 36. In
such circumstances the aggregate carrying value of the oil and gas exploration
and assets is compared against the expected recoverable amount of the cash
generating unit. The recoverable amount is the higher of value in use and the
fair value less costs to sell.
The group has identified one cash generating unit, the Petišovci project in
Slovenia. Any impairment arising is recognised in the Income Statement for the
year.
Where there has been a charge for impairment in an earlier period that charge
will be reversed in a later period where there has been a change in
circumstances to the extent that the discounted future net cash flows are
higher than the net book value at the time. In reversing impairment losses,
the carrying amount of the asset will be increased to the lower of its
original carrying values or the carrying value that would have been determined
(net of depletion) had no impairment loss been recognised in prior periods.
Decommissioning costs
Where a material liability for the removal of wells and production facilities
and site restoration at the end of the field life exists, a provision for
decommissioning is recognised. The amount recognised is the net present value
of estimated future expenditure determined in accordance with local conditions
and requirements. An asset of an amount equivalent to the provision is also
added to oil and gas exploration assets and depreciated on a unit of
production basis once production begins. Changes in estimates are recognised
prospectively, with corresponding adjustments to the provision and the
associated asset.
Property, plant and equipment assets other than oil and gas assets
Property, plant and equipment other than oil and gas assets are stated at
cost, less accumulated depreciation and any provision for impairment.
Depreciation is provided at rates estimated to write off the cost, less
estimated residual value of each asset over its expected useful life as
follows:
Computer and office equipment - 33% straight line.
Foreign currency
The Group's strategy is focussed on developing oil and gas projects across
Europe funded by shareholder equity and other financial assets which are
principally denominated in sterling. The functional currency of the Company
is sterling.
Transactions in foreign currency are translated to the respective functional
currency of the Group entity at the rates of exchange prevailing on the dates
of the transactions. At each reporting date, monetary assets and liabilities
that are denominated in foreign currencies are retranslated to the functional
currency at the rates prevailing on the reporting date. Exchange gains and
losses on short-term foreign currency borrowings and deposits are included
with net interest payable.
The assets and liabilities of foreign operations, including fair value
adjustments arising on consolidation, are translated to sterling at foreign
exchange rates ruling at the balance sheet date. The revenues and expenses of
foreign operations are translated to sterling at the average rate ruling
during the period. Foreign exchange differences arising on retranslation are
recognised directly in a separate component of equity. They are released into
the income statement upon disposal.
On consolidation, the results of overseas operations are translated into
sterling 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 reporting date. Exchange differences arising on translating the
opening net assets at opening rate and the results of overseas operations at
actual rate are recognised in other comprehensive income and accumulated in
the foreign exchange reserve.
On disposal of a foreign operation, the cumulative exchange differences
recognised in the foreign exchange reserve relating to that operation up to
the date of disposal are transferred to the consolidated statement of
comprehensive income as part of the profit or loss on disposal.
Exchange differences on all other transactions, except intercompany foreign
currency loans, are taken to operating loss.
Taxation
The tax expense represents the sum of the tax currently payable and any
deferred tax.
The tax currently payable is based on the estimated taxable profit for the
period. Taxable profit differs from net profit as reported in the income
statement because it excludes items of income or expense that are taxable or
deductible in other years and it further excludes items that are never taxable
or deductible. The Group's liability for current tax is calculated using the
expected tax rate applicable to annual earnings.
Deferred tax is the tax expected to be payable or recoverable on differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the corresponding tax bases used in the computation of taxable
profit. It is accounted for using the balance sheet liability method.
Deferred tax liabilities are recognised for all taxable temporary differences
and deferred tax assets are recognised to the extent that it is probable that
taxable profits will be available against which deductible temporary
differences can be utilised. The carrying amount of deferred tax assets is
reviewed at each reporting date and reduced to the extent that it is no longer
probable that sufficient taxable profits will be available to allow all or
part of the asset to be recovered.
Equity-settled share-based payments
The cost of providing share-based payments to employees is charged to the
income statement over the vesting period of the related share options or share
allocations. The cost is based on the fair values of the options and shares
allocated determined using the binomial method. The value of the charge is
adjusted to reflect expected and actual levels of vesting. Charges are not
adjusted for market related conditions which are not achieved. Where equity
instruments are granted to persons other than directors or employees the
consolidated income statement is charged with the fair value of any goods or
services received.
Grants of options in relation to acquiring further shares in licence areas are
treated as additions to Slovenian exploration costs at Group level and
increases in investments at Company level.
Provisions
A provision is recognised in the statement of financial position when the
Group has a present legal or constructive obligation as a result of a past
event, and it is probable that an outflow of economic benefits will be
required to settle the obligation. If the effect is material, provisions are
determined by discounting the expected future cash flows at a pre-tax rate
that reflects current market assessments of the time value of money and the
risks specific to the liability.
Convertible loan notes
Upon issue of a convertible loan, where the convertible option is at a fixed
rate, the net proceeds received from the issue of convertible loan notes are
split between a liability element and an equity component at the date of
issue. The fair value of the liability component is estimated using the
prevailing market interest rate for similar non-convertible debt. The
difference between the proceeds of issue of the convertible loan notes and the
fair value assigned to the liability component, representing the embedded
option to convert the liability into equity of the Group, is included in
equity and is not re-measured.
Subsequent to the initial requisition the liability component is measured at
amortised cost using the effective interest method.
However, where, at inception, the conversion option is such that the option
will not be settled by the Company exchanging a fixed number of its own equity
instruments for a fixed amount of cash, the convertible loan does not meet the
definition of a compound financial instrument. In such cases, the convertible
loan (the host contract) is a hybrid financial instrument and the option to
convert is an embedded derivative. Attached options (options entered into in
consideration for entering into the host contract) on similar terms are also
embedded derivatives. The embedded derivatives are separated from the host
contract as their risks and characteristics are not closely related to those
of the host contract and the host contract is not carried at fair value. At
each reporting date, the embedded derivatives are measured at fair value with
changes in fair value recognised in the income statement as they arise. The
method used for revaluation is the Black Scholes method. The host contract
carrying value on initial recognition is based on the net proceeds of issuance
of the convertible loan reduced by the fair value of the embedded derivatives
and is subsequently carried at each reporting date at amortised cost.
When there are amendments to the contractual loan note terms these terms are
assessed and the estimate of fair value adjusted as appropriate.
Non-derivative financial instruments
Non-derivative financial instruments comprise of investments in equity and
debt securities, trade and other receivables, cash and cash equivalents, loans
and borrowings and trade and other payables.
Financial instruments
Financial assets and financial liabilities are recognised on the statement of
financial position when the Group becomes a party to the contractual
provisions of the instrument.
Trade and other receivables are measured at initial recognition at fair value
and are subsequently measured at amortised cost using the effective interest
method. A provision is established when there is objective evidence that the
Group will not be able to collect all amounts due. The amount of any
provision is recognised in the income statement.
Cash and cash equivalents comprise cash held by the Group and short-term bank
deposits with an original maturity of three months or less.
Trade and other payables are initially measured at fair value and are
subsequently measured at amortised cost using the effective interest rate
method.
Financial liabilities and equity instruments issued by the Group are
classified in accordance with the substance of the contractual arrangements
entered into and the definitions of a financial liability and an equity
instrument. Equity instruments issued by the Company are recorded at the
proceeds received, net of direct issue costs.
Interest bearing bank loans, overdrafts and other loans are recorded at fair
value less any directly attributable costs, with subsequent measurement at
amortised cost. Finance costs are accounted for on an accruals basis in the
income statement using the effective interest method.
Equity
Equity instruments issued by the Company are recorded at the proceeds
received, net of any direct issue costs.
Investments and loans
Shares and loans in subsidiary undertakings are shown at cost. Provisions are
made for any permanent diminution in value when the fair value of the assets
is assessed as less than the carrying amount of the asset. Intercompany loans
are repayable on demand but are included as non-current as the realisation is
not expected in the short term.
Pension costs
Contributions are made to the individual pension scheme of a director's choice
and are charged to the Income Statement as they become payable.
Segment 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 Chief Executive Officer ('CEO').
2 Segmental Analysis
The Group now has two reportable segments, an operating segment and a head
office segment, as described below. The operations and day to day running of
the business is carried out on a local level and therefore managed separately.
The operating segment reports to the UK head office which evaluates
performance, decide how to allocate resources and make other operating
decisions such as the purchase of material capital assets and services.
Internal reports are generated and submitted to the Group's CEO for review on
a monthly basis.
The operations of the Group as a whole are the exploration for, development
and production of oil and gas reserves.
The two geographic reporting segments are made up as follows:
Slovenia - exploration and
development
UK - head office
The costs of exploration and development works are carried out under shared
licences with joint ventures and subsidiaries which are co-ordinated by the UK
head office. Transfer prices between segments are set on an arm's length
basis in a manner similar to transactions with third parties. Segment
revenue, segment expense and segment results include transfers between
segments. Those transfers are eliminated on consolidation.
Information regarding the current and prior year's results for each reportable
segment is included below. Initial performance is measured by the results
that arise from the exploration and development works carried out. Once
producing, other production performance measures are based on the production
revenues achieved. This is reported to the Group's CEO by the level of
capitalised exploration costs and the results from studies carried out at the
individual locations of the wells. The CEO uses these measures to evaluate
project viability within each operating segment. There is no revenue in the
current year from continuing operations.
2014 UK Slovenia elims Total
£ '000s £ '000s £ '000s £ '000s
Intercompany sales 276 - (276) -
Total revenue 276 - (276) -
Administrative expenses (1,039) (1,116) 276 (1,879)
Aborted transaction costs (228) - - (228)
Other Operating Income 10 15 (25) -
Material non-cash items
Net finance costs (3,501) (15) - (3,516)
Reportable segment (loss)/profit before tax (4,482) (1,116) (25) (5,623)
Taxation - - - -
Reportable segment (loss)/profit after taxation (4,482) (1,116) (25) (5,623)
Reportable segment assets
Carrying value of exploration assets - 33,628 - 33,628
Additions to exploration assets - 773 - 773
Effects of exchange rate movements - (1,235) - (1,235)
Total plant and equipment 1 1 - 2
Total non-current assets 1 33,167 - 33,168
Other assets 33,886 420 (33,752) 554
Consolidated total assets 33,887 33,587 (33,752) 33,722
Reportable segmental liabilities
Trade payables (429) (217) - (646)
External loan balances (9,624) - - (9,624)
Inter-group borrowings - (19,319) 19,319 -
Other liabilities (2,593) (411) - (3,004)
Consolidated total liabilities (12,646) (19,947) 19,319 (13,274)
2013 Discontinued Operations Continuing Operations Total
Italy Netherlands Hungary Eliminations Sub Total UK Slovenia Eliminations Sub Total Eliminations Group
£ '000s £ '000s £ '000s £ '000s £ '000s £ '000s £ '000s £ '000s £ '000s £ '000s £ '000s
Hydrocarbons - - 304 - 304 - - - - (304) -
Intercompany sales - - - - - 213 23 (236) - - -
Total revenue - - 304 - 304 213 23 (236) - (304) -
Cost of sales - - (90) - (90) (263) 102 161 - 90 -
Profit / (Loss) from discontinued operations (1,937) 100 45 - (1,792) - - - - 1,792 -
Administrative expenses (78) (31) (59) - (168) (1,402) (684) 162 (1,924) 168 (1,924)
Material non-cash items - -
Net finance costs (70) - (9) - (79) 282 (125) - 157 79 157
Reportable segment (loss)/profit before tax (2,085) 69 191 - (1,825) (1,170) (684) 87 (1,767) 1,825 (1,767)
Taxation - - - - - - - - - - -
Reportable segment (loss)/profit after taxation (2,085) 69 191 - (1,825) (1,170) (684) 87 (1,767) 1,825 (1,767)
Reportable segment assets
Carrying value of exploration assets - - - - - - 32,285 - 32,285 - 32,285
Additions to exploration assets - - - - - - 1,343 - 1,343 - 1,343
Total plant and equipment - - - - - 1 1 - 2 - 2
Total non-current assets - - - - - 1 33,629 - 33,630 - 33,630
Other assets
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