REG-Cadogan Petroleum: Annual Financial Report <Origin Href="QuoteRef">CADP.L</Origin> - Part 5
26/04/2016 14:10
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(420) (420)
borrowings (Note 13)
Segment results (1,558) 460 1,762 664
Unallocated administrative (5,276)
expenses
Other income, net 2,228
Impairment(1) (5,134)
Share of losses in joint (54,664)
ventures
Net foreign exchange gains 3,036
Loss before tax (59,146)
(1) Impairment loss recognised in 2014 of $5.1 million related to exploration
and production segment.
6. Revenue
2015 2014
$'000 $'000
Sale of hydrocarbons 75,086 31,544
Other revenues 354 1,079
75,440 32,623
Other revenues include revenues from services provided to third parties of $0.4
million (2014: $0.8 million).
Information about major customers
Included in revenues for the year ended 31 December 2015 are revenues of $35.7
million (2014: $25.3 million) which arose from sales to the Group's two largest
customer. None other single customers contributed 10% or more to the Group
revenue for both 2015 and 2014 years.
7. Other operating income, net
2015 2014
$'000 $'000
Transactions with JV partner - 510
Other income, net 31 37
31 547
8. Impairment
2015 2014
$'000 $'000
Impairment of oil and gas assets (note (10,480) (5,134)
16, 17)
Inventories (90) (253)
VAT recoverable 1,390 1,130
Reversal of impairment of other assets 1,300 877
The carrying value of inventory as at 31 December 2015 and 2014 has been
impaired to reduce it to net realisable value (see note 20). During 2015, the
Group gross sales of inventory to third parties comprised $0.1 million (2014:
$0.1 million).
During the year VAT impairment in the amount of $1.3 million (2014: $1.1
million) has been released mainly as a result VAT recovery of historical
balances through offset of VAT liabilities arising on sales.
9. Loss for the year
The loss for the year has been arrived at after (charging)/crediting:
2015 2014
$'000 $'000
Depreciation of property, plant and equipment (434) (938)
Loss on disposal of property, plant and equipment (24) (211)
Reversal of impairment of other assets (note 8) 1,300 877
Impairment of oil and gas assets (note 17) (10,480) (5,134)
Staff costs (2,996) (4,039)
Net foreign exchange gain 2,494 3,036
In addition to the depreciation of PP&E of $nil million (2014: $0.9 million) in
the year ended 31 December 2015, depreciation of $nil million (2014: $0.04
million) was capitalised to E&E assets being depreciation of tangible assets
used in E&E activities.
10. Auditor's remuneration
The analysis of auditor's remuneration is as follows:
2015 2014
$'000 $'000
Audit fees
Fees payable to the Company's auditor and their associates for 180 194
the audit of the Company's annual accounts
Fees payable to the Company's auditor and their associates for
other services to the Group:
* The audit of the Company's subsidiaries 35 30
Total audit fees 215 224
Non-audit fees
* Audit-related assurance services 66 38
* Taxation compliance services 59 25
Non-audit fees 125 63
11. Staff costs
The average monthly number of employees (including Executive Directors) was:
2015 2014
Number Number
Executive Directors 3 2
Other employees 77 98
80 100
Total number of employees at 31 December 80 100
$'000 $'000
Their aggregate remuneration comprised:
Wages and salaries 2,895 4,012
Social security costs 226 455
3,121 4,467
Within wages and salaries $0.9 million (2014: $0.8 million) relates to amounts
accrued and paid to executive Directors for services rendered.
Included within wages and salaries is $0.1 million (2014: $0.4 million)
capitalised to intangible E&E assets and $0.1 million (2014: $nil) capitalised
to development and production assets.
12. Investment income
2015 2014
$'000 $'000
Interest on bank deposits 118 27
Interest on loans issued - 825
118 852
13. Finance costs
2015 2014
$'000 $'000
Interest on short-term borrowings (2,411) (420)
Interest on tax provision (note 26) (201) -
Unwinding of discount on decommissioning provision (note 26) (13) (48)
(2,625) (468)
14. Tax
2015 2014
$'000 $'000
Current tax 11 11
Adjustment in relation to the current tax of prior years 1,317 362
Deferred tax (benefit)/charge (note 23) (288) (207)
1,040 166
The Group's operations are conducted primarily outside the UK. The most
appropriate tax rate for the Group is therefore considered to be 18 per cent
(2014: 18 per cent), the rate of profit tax in Ukraine which is the primary
source of revenue for the Group. Taxation for other jurisdictions is calculated
at the rates prevailing in the respective jurisdictions.
As at 31 December 2015 the Group recognised short-term provision in respect of
possible corporate tax obligation in respect of dispute on classification
taxable income and expenses (note 26).
The taxation charge for the year can be reconciled to the loss per the income
statement as follows:
2015 2015 2014 2014
$'000 % $'000 %
Loss before tax (22,243) 100.0 (59,146) 100.0
Tax credit at Ukraine corporation tax rate of (4,004) 18.0 (10,646) 18.0
18% (2014: 18%)
Tax credit related to the Joint venture losses 2,312 (10.4) 9,292 (15.7)
Permanent differences 1,511 (6.8) 1,543 (2.6)
Unrecognised tax losses utilised in the year (107) 0.5 (839) 1.4
Effect of different tax rates 11 (0.1) 454 (0.8)
(277) 1.3 (196) 0.3
Adjustments recognised in the current year in - -
relation 1,317 362
to the current tax of prior years
Income tax expense recognised in profit or loss 1,040 - 166 -
15. Loss per ordinary share
Basic loss per Ordinary share is calculated by dividing the net loss for the
year attributable to owners of the Company by the weighted average number of
Ordinary shares outstanding during the year. The calculation of the basic loss
per share is based on the following data:
Loss attributable to owners of the Company 2015 2014
$'000 $'000
Loss for the purposes of basic loss per share being net loss (23,261) (59,271)
attributable to owners of the Company
2015 2014
Number Number
Number of shares '000 '000
Weighted average number of Ordinary shares for the purposes 231,092 231,092
of
basic loss per share
2015 2014
Cent cent
Loss per Ordinary share
Basic (10.1) (25.6)
The Group has no potentially dilutive instruments in issue. Therefore no
diluted loss per share is presented above.
16. Intangible exploration and evaluation assets
$'000
Cost
At 1 January 2014 34,895
Additions 468
Change in estimate of decommissioning assets (note 26) 95
Transfer from property, plant and equipment (note 17) 18,467
Disposals (1)
Exchange differences (16,743)
At 1 January 2015 37,181
Additions 281
Change in estimate of decommissioning assets (note 26) 183
Disposals (2)
Exchange differences (12,310)
At 31 December 2015 25,333
Impairment
At 1 January 2014 28,937
Transfer from property, plant and equipment (note 17) 3,826
Exchange differences (13,871)
At 1 January 2015 18,892
Impairment charge 10,105
Exchange differences (6,364)
At 31 December 2015 22,633
Carrying amount
At 31 December 2015 2,700
At 31 December 2014 18,289
During the year additions to the exploration and evaluation assets include $nil
million (2014: $0.1 million) of capitalised depreciation of development and
production assets used in exploration and evaluation activities.
As at 31 December 2015, due to the expiration of the Pirkovska licence and
uncertainty as for the timing for the licence re-awarding due to the change in
the legislative process and respective delays in responses from the government
authorities, the Group decided to impair E&E assets of Pirkovska licence in the
amount of $10.1 million.
The carrying amount of E&E assets as at 31 December 2015 of $2.7 million (2014:
$3.6 million) mainly relates to Bitlyanska licence. As of 31 December 2015
management of the Group carried out the assessment of the Bitlyanska licences
value in use and recognised no impairment as recoverable amount was higher than
the book value of the assets. Key assumptions used in the impairment assessment
were as follows:
* Future gas price was assumed to be flat $210, real per m3;
* The pre-tax discount rate used was 24%, real.
17. Property, plant and equipment
Cost Development Total
and $'000
production Other
assets $'000
$'000
At 1 January 2014 50,942 9,650 60,592
Additions 1,235 376 1,611
Transfer to intangible exploration and (18,467) - (18,467)
evaluation assets
Transfer between property, plant and (54) 54 -
equipment
Change in estimate of decommissioning 201 - 201
assets (note 26)
Disposals (587) (89) (676)
Exchange differences (24,492) (4,801) (29,293)
At 1 January 2015 8,778 5,190 13,968
Additions 172 89 261
Change in estimate of decommissioning 79 - 79
assets (note 26)
Disposals (1) (43) (44)
Exchange differences (2,934) (2,063) (4,997)
At 31 December 2015 6,094 3,173 9,267
Accumulated depreciation and impairment
At 1 January 2014 13,489 3,217 16,706
Impairment 5,134 - 5,134
Charge for the year 614 359 973
Transfer to intangible exploration and (3,826) - (3,826)
evaluation assets
Disposals (188) (76) (264)
Exchange differences (6,787) (1,814) (8,601)
At 1 January 2015 8,436 1,686 10,122
Impairment 375 - 375
Charge for the year 82 352 434
Disposals (1) (16) (17)
Exchange differences (2,798) (510) (3,308)
At 31 December 2015 6,094 1,512 7,606
Carrying amount
At 31 December 2015 - 1,661 1,661
At 31 December 2014 342 3,504 3,846
As of 31 December 2015 management of the Group carried out the assessment of
the Debeslavetska and Cheremkhivska licences value in use and recognised an
impairment of these oil and gas assets of $0.4 million. Recoverable amount was
assessed at $nil million as at 31 December 2015.
Key assumptions used in the impairment assessment were as follows:
* Future gas price was assumed to be flat $210, real per m3;
* The pre-tax discount rate used was 24%, real.
During the year ended 31 December 2015 the depreciation charge of $nil million
(2014: $0.1 million) of development and production assets used in exploration
and evaluation activities has been capitalised and accounted as additions to
the exploration and evaluation assets (note 16).
18. Subsidiaries
The Company had investments in the following subsidiary undertakings as at 31
December 2015, which principally affected the profits and net assets of the
Group:
Country of Proportion
incorporation of voting
Name and operation interest % Activity
Directly held
Cadogan Petroleum Holdings Ltd UK 100 Holding company
Ramet Holdings Ltd Cyprus 100 Holding company
Indirectly held
Rentoul Ltd Isle of Man 100 Holding company
Cadogan Petroleum Holdings BV Netherlands 100 Holding company
Cadogan Bitlyanske BV Netherlands 100 Holding company
Cadogan Delta BV Netherlands 100 Holding company
Cadogan Astro Energy BV Netherlands 100 Holding company
Cadogan Pirkovskoe BV Netherlands 100 Holding company
Cadogan Zagoryanske Production BV Netherlands 100 Holding company
Momentum Enterprise (Europe) Ltd Cyprus 100 Holding company
Cadogan Ukraine Holdings Limited Cyprus 100 Holding company
Cadogan Momentum Holdings Inc Canada 100 Holding company
Radley Investments Ltd UK 100 Holding company
Cadogan Petroleum Trading SAGL Switzerland 100 Trading company
Global Commodities NC France 80 Trading company
LLC AstroInvest-Ukraine Ukraine 100 Exploration
LLC Zagvydobuvannya Ukraine 100 Exploration
LLC Astro Gas Ukraine 100 Exploration
DP USENCO Ukraine Ukraine 100 Exploration
LLC USENCO Nadra Ukraine 95 Exploration
JV Delta Ukraine 100 Exploration
LLC WestGasInvest Ukraine 100 Exploration
LLC Astro-Service Ukraine 100 Service Company
OJSC AgroNaftoGasTechService Ukraine 79.9 Construction
services
LLC Cadogan Ukraine Ukraine 100 Corporate
services
19. Joint ventures
Company name Licences held Country of Ownership Activity
incorporation share %
and operation
LLC Zagoryanska exploration Ukraine 40 Exploration
Astroinvest-Energy licence
LLC Industrial Pokrovska exploration Ukraine 70 Exploration
Company licence
Gazvydobuvannya
LLC Westgasinvest Reklynetska, Ukraine 15 Exploration
Zhuzhelianska,
Cheremkhivsko-Strupkivska,
Baulinska, Filimonivska,
Kurinna, Sandugeyivska,
Yakovlivska, and
Debeslavetska Exploration,
Debeslavetska Production
licence
All of the above joint ventures are accounted for using the equity method in
these consolidated financial statements. According to the shareholders'
agreements, which regulate the activities of the jointly controlled entities,
all key decisions require unanimous approval from the shareholders, therefore
these entities are jointly controlled.
Summarised financial information in respect of each of the Group's material
joint ventures is set out below. The summarised financial information below
represents amounts shown in the joint venture's financial statements prepared
in accordance with IFRSs.
LLC Astroinvest-Energy
2015 2014
$'000 $'000
Non-current assets 4 886
Current assets 735 1,234
Non-current liabilities - (598)
Current liabilities (6,986) (4,742)
Revenue - -
Loss for the period (6,107) (3,058)
Other comprehensive (loss)/income (3) (73)
Total comprehensive loss (6,110) (3,131)
Net deficit of the joint venture (6,247) (3,220)
LLC Industrial Company Gazvydobuvannya
2015 2014
$'000 $'000
Non-current assets 2,113 20,273
Current assets 2,164 2,106
Non-current liabilities - (312)
Current liabilities (2,652) (2,821)
Revenue - -
Loss for the period (13,822) (56,559)
Other comprehensive income/(loss) (3,729) (18,727)
Total comprehensive loss (17,551) (75,286)
Net assets of the joint venture 1,625 19,246
As of 31 December 2015 joint venture LLC Industrial Company Gazvydobuvannya
conducted an impairment assessment of its exploration and evaluation assets.
The impairment charge of $12.6 million recognised as the result of exploration
and evaluation assets value recoverability assessment was included in the loss
for the period.
Key assumptions used in the impairment assessment were as follows:
* Future gas price was assumed to be flat $210, real per m3;
* The pre-tax discount rate used was 24%, real.
LLC Westgasinvest
2015 2014
$'000 $'000
Non-current assets 83 73
Current assets 562 123
Non-current liabilities - -
Current liabilities (313) (2,893)
Revenue - -
Loss for the period (1,854) (3,717)
Other comprehensive income (322) (1,024)
Total comprehensive loss (2,176) (4,741)
Net assets/(deficit) of the joint venture 332 (2,697)
Notes to the Consolidated Financial Statements (continued)
For the year ended 31 December 2015
LLC LLC Industrial LLC Total
Astroinvest-Energy company Westgasinvest
Gazvydo-buvannya
$'000 $'000
$'000
$'000
(Deficit)/ net assets (1,240) 62,283 4,922 65,965
recognised
as at 1 January 2014
Investments during the year 224 2,800 - 3,024
Profit/(loss) for the year (1,253) (52,700) (711) (54,664)
(Deficit)/ net assets (2,269) 12,383 4,211 14,325
recognised
as at 1 January 2015
Investments during the year - 700 - 700
Profit/(loss) for the year (228) (12,286) (330) (12,844)
Carrying amount of Group's (2,497) 797 3,881 2,181
interest
as at 31 December 2015
The carrying amounts of the Group's interest in joint ventures recognized in
the financial statements of the Group using the equity method are set out in
the tables below:
The Group is committed together with ENI to fund LLC Astroinvest-Energy
subsequently to the year end with the necessary amount of $2.5 million in order
to close current liabilities of the joint venture. Most of the funds will be
used to repay the costs charged by the partners.
20. Inventories
2015 2014
$'000 $'000
Natural gas 2,525 8,124
Diesel 38 258
Other inventories 1,148 1,751
Impairment provision for obsolete (208) (193)
inventory
Carrying amount 3,503 9,940
The impairment provision as at 31 December 2015 and 2014 is made so as to
reduce the carrying value of the obsolete inventories to net realisable value.
During 2015 impairment charge $0.1 million (2014: $0.4 million) has been
recognised in respect of other inventories.
21. Trade and other receivables
2015 2014
$'000 $'000
Trading receivables 8,514 5,060
Trading prepayments 3,206 8,584
Receivable from joint venture 1,824 1,938
Prepayments 64 166
VAT recoverable - 1,674
Other receivables 803 469
14,411 17,891
Trading prepayments represent actual payments made by the Group to suppliers
for the January 2016 gas supply.
Trading receivables represent current receivables from customers and are to be
repaid within three months after the year end. As of 31 December 2015 there
were no past due receivables and no related impairment provision. The Group
considers that the carrying amount of receivables approximates their fair
value.
VAT recoverable is presented net of the cumulative provision of $1.1 million
(2014: $4.4 million) against Ukrainian VAT receivable has been recognised as at
31 December 2015.
Receivable from joint ventures comprise $1.0 million from Astroinvest-Energy
LLC (2014: $1.2 million) and $0.8 million from Gazvydobuvannya LLC (2014: $0.7
million).
22. Cash and cash equivalents
Cash and cash equivalents as at 31 December 2015 of $49.4 million (2014: $48.9
million) comprise cash held by the Group. The Directors consider that the
carrying amount of these assets approximates to their fair value.
As of 31 December 2015 part of the cash and cash equivalents in amount of $20
million related to security of borrowings and held at UK bank is considered to
be restricted cash balance (note 24).
23. Deferred Tax
The following are the major deferred tax liabilities and assets recognised by
the Group and movements thereon during the current and prior reporting period:
Temporary differences
$'000
Liability as at 1 January 2014 675
Deferred tax benefit (207)
Exchange differences (180)
Liability as at 1 January 2015 288
Deferred tax benefit (287)
Exchange differences (1)
Liability as at 31 December 2015 -
At 31 December 2015, the Group had the following unused tax losses available
for offset against future taxable profits:
2015 2014
$'000 $'000
UK 9,054 10,274
Ukraine 78,859 69,010
87,913 79,284
Deferred tax assets have not been recognised in respect of these tax losses
owing to the uncertainty that profits will be available in future periods
against which they can be utilised.
The Group's unused tax losses of $9.1 million (2014: $10.3 million) relating to
losses incurred in the UK are available to shelter future non-trading profits
arising within the Company. These losses are not subject to a time restriction
on expiry.
Unused tax losses incurred by Ukraine subsidiaries amount to $78.9 million
(2014: $69.0 million). Under general provisions, these losses may be carried
forward indefinitely to be offset against any type of taxable income arising
from the same company of origination. Tax losses may not be surrendered from
one Ukraine subsidiary to another. However, in the past, Ukrainian legislation
has been imposed which restricted the carry forward of tax losses. During 2011
a new tax legislation in Ukraine was implemented which resulted in the
restriction to recognition of accumulated losses at 1 April 2011. Starting 1
January 2012 only 25% of accumulated losses as at this date are allowed to be
utilised each year for the period from 2012 till 2015 in the calculation of
taxable income of the company. Tax losses accumulated after 1 January 2012 have
no restrictions.
24. Short-term borrowing
In October 2014 the Group started to use short-term borrowings as a financing
facility for its trading activities. Borrowings are represented by credit line
drawn in short-term tranches in UAH at Ukrainian bank, 100% subsidiary of UK
bank. Credit line is secured by $20 million of cash balance placed at the
European bank in the UK.
Outstanding amount as at 31 December 2015 was $12.9 million (2014: $17.3
million) with effective interest rate 20%p.a. (2014: 16%p.a.). Interest is paid
monthly and as at 31 December 2015 accrued interest amounted to $0.2 million
(2014: $0.2 million).
Outstanding amount as at 31 December 2015 was $12.9 million (2014: $17.3
million) with average effective interest rate 20%p.a. (2014: 16%p.a.). Interest
is paid monthly and as at 31 December 2015 accrued interest amounted to $0.2
million (2014: $0.2 million).
25. Trade and other payables
2015 2014
$'000 $'000
Trade creditors 921 723
Trading payables 907 312
VAT payable 899 -
Accruals 635 631
Payables to joint ventures 96 159
Taxes and social security 77 425
Payments received in advance 6 2,470
Other payables 141 348
3,682 5,068
Prepayments received represent payments from the customers for the natural gas
to be supplied in January 2016.
Trading payables represent liability to suppliers for the natural gas supply in
December 2015.
Trade creditors and accruals principally comprise amounts outstanding for
capital work programme purchases and ongoing costs. The average credit period
taken for trade purchases is 24 days (2014: 91 days). The Group has financial
risk management policies to ensure that all payables are paid within the credit
timeframe.
The Directors consider that the carrying amount of trade and other payables
approximates to their fair value. No interest is generally charged on
outstanding balances.
26. Provisions
The provisions at 31 December 2015 comprise of $2.3 million of probable tax
obligation and decommissioning provision.
As at 31 December 2015 the Group recognised short-term provision in respect of
possible corporate tax obligation in respect of dispute on classification
taxable income and expenses. The Group appealed to the Tribunal, however given
the uncertainty around the final position the provision of $1.3 million (£0.9
million) and up to $0.2 million (£0.1 million) of interest was recognised in
the financial statements.
Decommissioning
$'000
At 1 January 2014 708
Change in estimate (note 16 and 17) 296
Unwinding of discount on decommissioning 48
provision (note 13)
Exchange differences (350)
At 1 January 2015 702
Change in estimate (note 16 and 17) 262
Unwinding of discount on decommissioning 13
provision (note 13)
Exchange differences (245)
At 31 December 2015 732
At 1 January 2014 708
Non-current 55
Current 647
At 1 January 2015 702
Non-current 726
Current 6
At 31 December 2015 732
In accordance with the Group's environmental policy and applicable legal
requirements, the Group intends to restore the sites it is working on after
completing exploration or development activities.
A short-term provision of $6 thousand (2014: $0.6 million) has been made for
decommissioning costs, which are expected to be incurred within the next year
as a result of the demobilisation of drilling equipment and respective site
restoration. In addition to that there isa short-term provision for
decommissioning costs at Zagoryanska licence of $3.7 million and at Pokrovska
licence of $1.9 million in the account of joint ventures (note 19).
The long-term provision recognised in respect of decommissioning reflects
management's estimate of the net present value of the Group's share of the
expenditure expected to be incurred in this respect. This amount has been
recognised as a provision at its net present value, using a discount rate that
reflects the market assessment of time value of money at that date, and the
unwinding of the discount on the provision has been charged to the income
statement. These expenditures are expected to be incurred at the end of the
producing life of each field in the removal and decommissioning of the
facilities currently in place (currently estimated to be between 1 and 17
years).
27. Share capital
Authorised and issued equity share capital
2015 2014
Number Number
'000 $'000 '000 $'000
Authorised 1,000,000 57,713 1,000,000 57,713
Ordinary shares of £0.03 each
Issued 231,092 13,337 231,092 13,337
Ordinary shares of £0.03 each
Authorised but unissued share capital of £30 million has been translated into
US dollars at the historic exchange rate of the issued share capital. The
Company has one class of Ordinary shares which carry no right to fixed income.
Issued equity share capital
Ordinary shares
of £0.03
At 31 December 2014 and 2015 231,091,734
28. Financial instruments
Capital risk management
The Group manages its capital to ensure that entities in the Group will be able
to continue as a going concern, while maximising the return to shareholders.
The capital resources of the Group consists of cash and cash equivalents
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