REG-Cadogan Petroleum: Annual Financial Report <Origin Href="QuoteRef">CADP.L</Origin> - Part 6
26/04/2016 14:10
- Part 6: For the preceding part double click ID:nPRrQ1408e
arising from equity attributable to owners of the Company, comprising issued
capital, reserves and retained earnings as disclosed in the Consolidated
Statement of Changes in Equity.
Externally imposed capital requirement
The Group is not subject to externally imposed capital requirements.
Categories of financial instruments
2015 2014
$'000 $'000
Financial assets - loans and receivables (includes cash and
cash equivalents)
Cash and cash equivalents 49,407 48,927
Trading receivable 8,514 5,060
Receivable from joint venture 1,824 1,938
Other receivables 801 469
60,546 56,394
Financial liabilities - measured at amortised cost
Short-term borrowings 12,903 17,327
Trade creditors 921 723
Trading payables 907 312
Accruals 635 631
Other payables 141 348
Payables to joint ventures 96 159
15,603 19,500
Financial risk management objectives
Management provides services to the business, co-ordinates access to domestic
and international financial markets and monitors and manages the financial
risks relating to the operations of the Group in Ukraine through internal risks
reports which analyse exposures by degree and magnitude of risks. These risks
include commodity price risks, foreign currency risk, credit risk, liquidity
risk and cash flow interest rate risk. The Group does not enter into or trade
financial instruments, including derivative financial instruments, for
speculative purposes.
The Audit Committee of the Board reviews and monitors risks faced by the Group
through meetings held throughout the year.
Interest rate risk
Interest rate risk arises from the possibility that changes in interest rates
will affect the value of the financial instruments. The Group is not exposed to
interest rate risk because entities of the Group borrow funds at fixed interest
rates.
Commodity price risk
The commodity price risk related to Ukrainian gas and condensate prices and, to
a lesser extent, prices for crude oil are the Group's most significant market
risk exposures. World prices for gas and crude oil are characterised by
significant fluctuations that are determined by the global balance of supply
and demand and worldwide political developments, including actions taken by the
Organisation of Petroleum Exporting Countries.
These fluctuations may have a significant effect on the Group's revenues and
operating profits going forward. In 2015 the price for Ukrainian gas was mainly
based on the current price of the European gas imports. Management continues to
expect that the Group's principal market for gas will be the Ukrainian domestic
market.
The Group does not hedge market risk resulting from fluctuations in gas,
condensate and oil prices, and holds no financial instruments which are
sensitive to commodity price risk.
Foreign exchange risk and foreign currency risk management
The Group undertakes certain transactions denominated in foreign currencies.
Hence, exposures to exchange rate fluctuations arise. The Group to date has
elected not to hedge its exposure to the risk of changes in foreign currency
exchange rates.
The carrying amounts of the Group's foreign currency denominated monetary
assets and monetary liabilities at the reporting date are as follows:
Liabilities Assets
2015 2014 2015 2014
$'000 $'000 $'000 $'000
Monetary balance denominated in USD where 157 105 48,860 46,484
functional currency is GBP
Foreign currency sensitivity analysis
The Group is exposed primarily to movements in currencies against the US dollar
as this is the presentation currency of the Group. In order to fund
operations, US dollar funds are converted to UAH just before being contributed
to the Ukrainian subsidiaries. Sensitivity analyses have been performed to
indicate how the profit or loss would have been affected by changes in the
exchange rate between the GBP and US dollar. The analysis is based on a
weakening of the US dollar by 10 per cent against GBP, a functional currency in
the entities of the Group which have significant monetary assets and
liabilities at the end of each respective period. A movement of 10 per cent
reflects a reasonably possible sensitivity when compared to historical
movements over a three to five year timeframe. The sensitivity analysis
includes only outstanding foreign currency denominated monetary items and
adjusts their translation at the period end for a 10 per cent change in foreign
currency rates.
A number below indicates a decrease in profit where US dollar strengthens 10
per cent against the other currencies. For a 10 per cent weakening of the US
dollar against the other currencies, there would be an equal and opposite
impact on the profit or loss, and the balances would be negative.
The Group is not exposed to significant foreign currency risk in other
currencies.
The following table details the Group's sensitivity to a 10 per cent decrease
in the US dollar against the GBP.
2015 2014
$'000 $'000
Income statement (4,572) (4,473)
Inflation risk management
Inflation in Ukraine and in the international market for oil and gas may affect
the Group's cost for equipment and supplies. The Directors will proceed with
the Group's practices of keeping deposits in US dollar accounts until funds are
needed and selling its production in the spot market to enable the Group to
manage the risk of inflation.
Credit risk management
Credit risk refers to the risk that counterparty will default on its
contractual obligations resulting in financial loss to the Group. The Group's
credit management process includes the assessment, monitoring and reporting of
counterparty exposure on a regular basis. Credit risk with respect to
receivables and advances is mitigated by active and continuous monitoring the
credit quality of its counterparties through internal reviews and assessment.
Trading receivables as at 31 December 2015 have been paid within four months
after year end.
The Group makes allowances for impairment of receivables where there is an
identified event which, based on previous experience, is evidence of a
reduction in the recoverability of cash flows.
The credit risk on liquid funds (cash) is considered to be limited because the
counterparties are financial institutions with high and good credit ratings,
assigned by international credit-rating agencies in the UK and Ukraine
respectively.
The carrying amount of financial assets recorded in the financial statements
represents the Group's maximum exposure to credit risk.
Liquidity risk management
Ultimate responsibility for liquidity risk management rests with the Board of
Directors, which has built an appropriate liquidity risk management framework
for the management of the Group's short-, medium- and long-term funding and
liquidity management requirements. The Group manages liquidity risk by
maintaining adequate cash reserves and by continuously monitoring forecast and
actual cash flows.
The following tables sets out details of the expected contractual maturity of
financial liabilities.
Within 3 months More
3 months to 1 than 1 Total
year year
$'000 $'000 $'000 $'000
At 31 December 2015
Short-term borrowings 12,903 - - 12,903
Trade and other payables 3,019 657 - 3,676
At 31 December 2014
Short-term borrowings 17,327 - - 17,327
Trade and other payables 1,683 915 - 2,598
29. Commitments and contingencies
Joint activity agreements
The Group has working interests in nine licences to conduct its exploration and
development activities in Ukraine. Each licence is held with the obligation to
fulfil a minimum set of exploration activities within its term and is
summarised on an annual basis, including the agreed minimum amount forecasted
expenditure to fulfil those obligations. The activities and proposed
expenditure levels are agreed with the government licensing authority.
The required future financing of exploration and development work on fields
under the licence obligations are as follow:
2015 2014
$'000 $'000
Within one year 234 580
Between two and five years 1,135 520
1,369 1,100
The Group has revised its minimum working programmes and resubmitted the
required documentation to the government authorities; updated commitments have
slightly increased for all licences from $1.1 million to $1.4 million. Licence
obligations of the joint ventures as at 31 December 2015 amounted to $0.1
million (2014: $0.5 million) of obligations within one year and $nil million
(2014: $0.4 million) of obligations between two and five years.
In addition to licence commitments, the Group is committed together with ENI to
fund LLC Astroinvest-Energy subsequently to year end with the necessary amount
of $2.2 million (2014: $2.3 million) in order to close current liabilities of
the joint venture.
Tax contingent liabilities
The Group assesses its liabilities and contingencies for all tax years open for
audit by UK and Ukraine tax authorities based upon the latest information
available. For those matters where it is probable that an adjustment will be
made, the Group records its best estimate of these tax liabilities, including
related interest charges. Inherent uncertainties exist in estimates of tax
contingencies due to complexities of interpretation and changes in tax laws.
Whilst the Group believes it has adequately provided for the outcome of these
matters, certain periods are under audit by the UK and Ukraine tax authorities,
and therefore future results may include favourable or unfavourable adjustments
to these estimated tax liabilities in the period the assessments are made, or
resolved. The final outcome of tax examinations may result in a materially
different outcome than assumed in the tax liabilities.
30. Related party transactions
All transactions between the Company and its subsidiaries, which are related
parties, have been eliminated on consolidation and are not disclosed in this
note. The application of IFRS 11 has resulted in the existing joint ventures
LLC Astroinvest-Energy, LLC Gazvydobuvannya and LLC Westgasinvest being
accounted for under the equity method and disclosed as related parties.
During the period, Group companies entered into the following transactions with
joint ventures who are considered as related parties of the Group:
2015 2014
$'000 $'000
Revenues from services provided and sales 508 597
of goods
Purchases of goods 9 87
Amounts owed by related parties 1,824 1,938
Amounts owed to related parties 96 159
Directors' remuneration
The remuneration of the Directors, who are the key management personnel of the
Group, is set out below in aggregate for each of the categories specified in
IAS 24 Related Party Disclosures. Further information about the remuneration of
individual Directors is provided in the audited part of the Annual Report on
Remuneration 2015 on pages 39 and 44.
Purchase of services Amounts owing
2015 2014 2015 2014
$'000 $'000 $'000 $'000
Short-term employee benefits 1,282 1,148 169 137
The total remuneration of the highest paid Director was $0.4 million in the
year (2014: $0.4 million).
The amounts outstanding are unsecured and will be settled in cash. No
guarantees have been given or received and no provisions have been made for
doubtful debts in respect of the amounts owed by related parties.
31. Events after balance sheet date
Starting 1 January 2016 the new regulations on the gas trading in Ukraine came
into force implying the additional requirement of the covered bank guarantee
for 20% of trading volumes that will effect cost of supply.
Subsequent to 31 December 2015, in April 2016 the Group has contributed,
together with eni, $1 million to LLC Astroinvest-energy as part of commitment
to fund its current liabilities.
Political and economic situation in Ukraine
We are monitoring the current political situation in Ukraine carefully and
there have been no disruptions to the Company's operations in either of our
operating locations.
We have reassessed the key judgements and critical accounting estimates as at
the date of this report and, based on the current status of operations, no
adjustments have been made.
Company Balance Sheet
As at 31 December 2015
Notes 2015 2014
$'000 $'000
ASSETS
Non-current assets
Investments 34 - -
Receivables from subsidiaries 35 26,905 73,750
26,905 73,750
Current assets
Trade and other receivables 35 778 3,333
Cash and cash equivalents 35 44,882 46,634
45,660 49,967
Total assets 72,565 123,717
LIABILITIES
Current liabilities
Trade and other payables 36 (380) (370)
(380) (370)
Total liabilities (380) (370)
Net assets 72,185 123,347
EQUITY
Share capital 37 13,337 13,337
Retained earnings 167,567 212,902
Cumulative translation reserves 38 (108,719) (102,892)
Total equity 72,185 123,347
The financial statements of Cadogan Petroleum plc, registered in England and
Wales no. 5718406, were approved by the Board of Directors and authorised for
issue on 25 April 2016.
They were signed on its behalf by:
Guido Michelotti
Chief Executive Officer
25 April 2016
The notes on pages 92 to 95 form part of these financial statements.
Company Cash Flow Statement
For the year ended 31 December 2015
Note 2015 2014
$'000 $'000
Net cash inflow from operating activities 39 3,655 (633)
Investing activities
Interest received 79 827
Loans to subsidiary companies (3,633) -
Net cash used in investing activities (3,554) 827
Net (decrease)/increase in cash and cash 101 194
equivalents
Effect of foreign exchange rate changes (1,853) (3,840)
Cash and cash equivalents at beginning of year 46,634 50,280
Cash and cash equivalents at end of year 44,882 46,634
Company Statement of Changes in Equity
For the year ended 31 December 2015
Share Cumulative
capital Retained translation
$'000 earnings reserves Total
$'000 $'000 $'000
As at 1 January 2014 13,337 210,297 (95,296) 128,338
Net income for the year - 2,605 - 2,605
Exchange translation differences - - (7,596) (7,596)
As at 1 January 2015 13,337 212,902 (102,892) 123,347
Net loss for the year - (45,335) - (45,335)
Exchange translation differences - - (5,827) (5,827)
As at 31 December 2015 13,337 167,567 (108,719) 72,185
Notes to the Company Financial Statements
For the year ended 31 December 2015
32. Significant accounting policies
The separate financial statements of the Company are presented as required by
the Companies Act 2006 (the "Act"). As permitted by the Act, the separate
financial statements have been prepared in accordance with International
Financial Reporting Standards.
The financial statements have been prepared on the historical cost basis. The
principal accounting policies adopted are the same as those set out in note 3
to the Consolidated Financial Statements except as noted below.
As permitted by section 408 of the Act, the Company has elected not to present
its profit and loss account for the year. Cadogan Petroleum plc reports a loss
for the financial year ended 31 December 2015 of $45.5 million (2014: $2.6
million) of which $46.5 million relates to the impairment of receivables from
subsidiaries.
Investments
Investments in subsidiaries are stated at cost less, where appropriate,
provisions for impairment.
Critical accounting judgements and key sources of estimation uncertainty
The Company's financial statements, and in particular its investments in and
receivables from subsidiaries, are affected by certain of the critical
accounting judgements and key sources of estimation uncertainty described in
note 4 to the Consolidated Financial Statements.
33. Auditor's remuneration
The auditor's remuneration for audit and other services is disclosed in note 10
to the Consolidated Financial Statements.
34. Investments
The Company's subsidiaries are disclosed in note 18 to the Consolidated
Financial Statements. The investments in subsidiaries are all stated at cost
less any provision for impairment.
35. Financial assets
The Company's principal financial assets are bank balances and cash and cash
equivalents, prepayments and receivables from related parties none of which are
past due. The Directors consider that the carrying amount of receivables from
related parties approximates to their fair value.
Receivables from subsidiaries
At the balance sheet date gross amounts receivable from the fellow Group
companies were $316.7 million (2014: $329.0 million). The Group recognised
impairment of $46.5 million in relation to receivables from subsidiaries in
2015 (2014: $nil). The carrying value of the receivables from the fellow Group
companies as at 31 December 2015 was $26.9 million (2014: $73.8 million). There
are no past due receivables.
Trade and other receivables
2015 2014
$'000 $'000
Prepayments 752 3,272
VAT recoverable - 37
Other receivables 26 24
778 3,333
In December 2015 the Company has made a prepayment for the natural gas on
behalf of its Ukrainian subsidiary due to difficulties of currency purchase in
Ukraine. In 2016 this prepayment has been settled in full to the Company.
Cash and cash equivalents
Cash and cash equivalents comprise cash held by the Company and short-term bank
deposits with an original maturity of three months or less. The carrying value
of these assets approximates to their fair value.
As of 31 December 2015 cash and cash equivalents in the amount of $20 million,
related to security of the loan provided to the Ukrainian subsidiary and held
at UK bank, was restricted (note 24).
36. Financial liabitlities
Trade and other payables
2015 2014
$'000 $'000
Trade creditors 237 179
Accruals 143 191
380 370
Trade payables principally comprise amounts outstanding for trade purchases and
ongoing costs. The average credit period taken for trade purchases is 126 days
(2014: 82 days).
The Directors consider that the carrying amount of trade and other payables
approximates to their fair value. No interest is charged on balances
outstanding.
37. Share capital
The Company's share capital is disclosed in note 27 to the Consolidated
Financial Statements.
38. Cumulative translation reserve
The functional currency of the Company is pounds sterling. The financial
statements of the Company are expressed in US dollars, which is its
presentation currency. Cumulative translation reserve represents the effect of
translating the results and financial position of the Company into US dollars.
39. Notes to cash flow statement
2015 2014
$'000 $'000
(Loss)/profit for the year (45,335) 2,605
Adjustments for:
Interest received (79) (827)
Impairment of receivables from subsidiaries 46,504 -
Operating cash flows before movements in working capital 1,090 1,778
Decrease/(increase) in receivables 2,555 (1,570)
Increase/(decrease) in payables 10 (841)
Cash from operations 3,655 (633)
Income taxes paid - -
Net cash inflow from continuing operations 3,655 (633)
40. Financial instruments
The Company manages its capital to ensure that it is able to continue as a
going concern while maximising the return to shareholders. Refer to note 28 for
the Group's overall strategy and financial risk management objectives.
The capital resources of the Group consist of cash and cash equivalents arising
from equity, comprising issued capital, reserves and retained earnings.
Categories of financial instruments
2015 2014
$'000 $'000
Financial assets - loans and receivables (includes cash
and cash equivalents)
Cash and cash equivalents 44,882 46,634
Amounts due from subsidiaries 26,905 73,750
71,787 120,384
Financial liabilities - measured at amortised cost
Trade creditors (237) (179)
(237) (179)
Interest rate risk
All financial liabilities held by the Company are non-interest bearing. As the
Company has no committed borrowings, the Company is not exposed to any
significant risks associated with fluctuations in interest rates.
Credit risk
Credit risk refers to the risk that counterparty will default on its
contractual obligations resulting in financial loss to the Company. For cash
and cash equivalents, the Company only transacts with entities that are rated
equivalent to investment grade and above. Other financial assets consist of
amounts receivable from related parties.
The Company's credit risk on liquid funds is limited because the counterparties
are banks with high credit-ratings assigned by international credit-rating
agencies.
The carrying amount of financial assets recorded in the Company financial
statements, which is net of any impairment losses, represents the Company's
maximum exposure to credit risk.
Liquidity risk management
Ultimate responsibility for liquidity risk management rests with the Board of
Directors, which has built an appropriate liquidity risk management framework
for the management of the Company's short, medium and long-term funding and
liquidity management requirements. The Company maintains adequate reserves, by
continuously monitoring forecast and actual cash flows.
The Company's financial liabilities are not significant and therefore no
maturity analysis has been presented.
Foreign exchange risk and foreign currency risk management
The Company undertakes certain transactions denominated in foreign currencies.
Hence, exposures to exchange rate fluctuations arise. The Company holds a
large portion of its foreign currency denominated monetary assets and monetary
liabilities in US dollars. More information on the foreign exchange risk and
foreign currency risk management is disclosed in note 28 to the Consolidated
Financial Statements.
41. Related parties
Amounts due from subsidiaries
The Company has entered into a number of unsecured related party transactions
with its subsidiary undertakings. The most significant transactions carried out
between the Company and its subsidiary undertakings are mainly for short and
long-term financing. Amounts owed from these entities are detailed below:
2015 2014
$'000 $'000
Cadogan Petroleum Holdings Limited 26,905 73,750
26,905 73,750
Refer to note 35 for details on the Company's receivables due from
subsidiaries.
The remuneration of the Directors, who are the key management personnel of the
Group, is set out below in aggregate for each of the categories specified in
IAS 24 Related Party Disclosures. Further information about the remuneration of
individual Directors is provided in the audited part of the Annual Report on
Remuneration 2015 on pages 39 to 44.
Remuneration Amounts owing
2015 2014 2015 2014
$'000 $'000 $'000 $'000
Short-term employee benefits 603 334 28 54
The total remuneration of the highest paid Director was $0.4 million in the
year (2014: $0.4 million)
Events after the balance sheet date
Events after the balance sheet date are disclosed in note 31 to the
Consolidated Financial Statements.
GLOSSARY
IPO Initial public offering
IFRSs International Financial Reporting
Standards
JAA Joint activity agreement
UAH Ukrainian hryvnia
GBP Great Britain pounds
$ United States dollars
bbl Barrel
boe Barrel of oil equivalent
mmboe Million barrels of oil equivalent
mboe Thousand barrels of oil equivalent
mboepd Thousand barrels of oil equivalent per
day
boepd Barrels of oil equivalent per day
bcf Billion cubic feet
mmcm Million cubic metres
mcm Thousand cubic metres
Reserves Those quantities of petroleum
anticipated to be commercially recoverable by application of development
projects to known accumulations from a given date forward under defined
conditions. Reserves include proved, probable and possible reserve categories.
Proved Reserves Those additional Reserves which analysis of
geoscience and engineering data can be estimated with reasonable certainty to
be commercially recoverable, from a given date forward, from reservoirs and
under defined economic conditions, operating methods and government
regulations.
Probable Reserves Those additional Reserves which analysis of
geoscience and engineering data indicate are less likely to be recovered than
proved Resources but more certain to be recovered than possible Reserves.
Possible Reserves Those additional Reserves which analysis of
geoscience and engineering data indicate are less likely to be recoverable than
probable Reserves.
Contingent Resources Those quantities of petroleum estimated, as of a
given date, to be potentially recoverable from known accumulations by
application of development projects, but which are not currently considered to
be commercially recoverable due to one or more contingencies.
Prospective Resources Those quantities of petroleum which are estimated
as of a given date to be potentially recoverable from undiscovered
accumulations.
P1 Proved Reserves
P2 Probable Reserves
P3 Possible Reserves
1P Proved Reserves
2P Proved plus probable Reserves
3P Proved plus probable plus possible
Reserves
Carboniferous A geological period 295 million to 354
million years before present
Devonian A geological period between 417 million
and 354 million years before present
Visean Geological period within the early to
middle Carboniferous
Spud To commence drilling, once the cement
cellar and conductor pipe at the well-head have been constructed
TD Target depth
Workover The process of performing major maintenance
or remedial treatment of an existing oil or gas well
LWD Logging while drilling
SHAREHOLDER INFORMATION
Enquiries relating to the following administrative matters should be addressed
to the Company's registrars:
Capita Asset Services, The Registry, 34 Beckenham Road, Beckenham, Kent BR3 4TU
Telephone number:
UK: 0871 664 0300 (calls cost 10p per minute plus network extras).
International: +44 (0) 371 664 0300
Lines are open 9am - 5.30pm, Monday - Friday, excluding public holidays.
* Loss of share certificates.
* Notification of change of address.
* Transfers of shares to another person.
* Amalgamation of accounts: if you receive more than one copy of the Annual
Financial Report, you may wish to amalgamate your accounts on the share
register.
You can access your shareholding details and a range of other services at the
Capita website www.capitashareportal.com.
Information concerning the day-to-day movement of the share price of the
Company can be found on the Group's website www.cadoganpetroleum.com or that of
the London Stock exchange www.prices.londonstockexchange.com.
Unsolicited mail
As the Company's share register is, by law, open to public inspection,
shareholders may receive unsolicited mail from organisations that use it as a
mailing list. To reduce the amount of unsolicited mail you receive, contact:
The Mailing Preference Service, FREEPOST 22, London W1E 7EZ. Telephone: 0845
703 4599. Website: www.mpsonline.org.uk
Financial calendar 2016/2017
Annual General Meeting 22 June 2016
Half Yearly results announced August 2016
Annual results announced April 2017
Investor relations
Enquiries to: info@cadoganpetroleum.com
Registered office
c/o Bridgehouse Company Secretaries Ltd, Unit 205,
Clerkenwell Workshops, 31 Clerkenwell Close, London EC1R 0AT
Registered in England and Wales no. 5718406
Ukraine
48/50A Zhylyanska Street
Business center «Prime», 8th floor
01033 Kyiv
Ukraine
Email: info@cadoganpetroleum.com
Tel: +38 044 594 58 70
Fax: +38 044 594 58 71
www.cadoganpetroleum.com
All references to page numbers in the announcement are to the page numbers in
the full Annual Report and Financial Statements which can be found on the
Company's website www.cadoganpetroleum.com
END
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