REG-Cadogan Petroleum: Half-yearly Report <Origin Href="QuoteRef">CADP.L</Origin> - Part 2
28/08/2015 13:30
- Part 2: For the preceding part double click ID:nPRrSC9A7a
Short-term borrowings 9 (5,664) - (17,327)
Trade and other payables 10 (8,437) (2,475) (5,068)
Current provisions (479) (12) (647)
(14,580) (2,487) (23,042)
Total liabilities (14,924) (3,446) (23,385)
Net assets 78,685 144,078 89,833
EQUITY
Share capital 13,337 13,337 13,337
Retained earnings 219,105 279,262 223,600
Cumulative translation reserves (155,638) (150,428) (148,991)
Other reserves 1,589 1,589 1,589
Equity attributable to equity 78,393 143,760 89,535
holders of the parent
Non-controlling interest 292 318 298
Total equity 78,685 144,078 89,833
Condensed Consolidated Cash Flow Statement
Six months ended 30 June 2015
Six months ended 30 June Year ended
31 December
2015 2014 2014
$'000 $'000 $'000
(Unaudited) (Unaudited) (Audited)
Operating loss (3,426) (4,588) (59,530)
Adjustments for:
Depreciation of property, plant and equipment 267 394 938
Impairment of oil and gas assets - - 5,134
Share of losses in joint ventures 4,243 834 54,664
Impairment of inventories - 32 253
Reversal of impairment of VAT recoverable (1,486) (641) (727)
Loss on disposal of property, plant and 18 157 211
equipment
Effect of foreign exchange rate changes 861 (243) (4,892)
Operating cash flows before movements in 477 (4,055) (3,949)
working capital
Decrease/(Increase) in inventories 4,758 882 (7,242)
Decrease/(Increase) in receivables 8,231 2,803 (10,285)
Increase/(Decrease) in payables and provisions 2,880 (967) 1,424
Cash from/(used in) operations 16,346 (1,337) (20,052)
Interest paid (1,168) - (218)
Income taxes paid (7) (2) (373)
Net cash inflow/(outflow) from operating 15,170 (1,339) (20,643)
activities
Investing activities
Investments in joint ventures - (2,800) (3,024)
Purchases of property, plant and equipment (362) (670) (1,611)
Purchases of intangible exploration and (174) (310) (468)
evaluation assets
Proceeds from sale of property, plant and - 108 84
equipment
Acquisition of financial assets - (5,000) -
Proceeds from financial assets - 1,295 -
Interest received 81 179 852
Net cash used in investing activities (455) (7,198) (4,167)
Financing activities
Proceeds from short-term borrowings 1,569 - 17,327
Repayment of short-term borrowings (9,245) - -
Net cash used in financing activities (7,676) - 17,327
Net increase/(decrease) in cash and cash 7,039 (8,537) (7,483)
equivalents
Effect of foreign exchange rate changes (861) (39) (74)
Cash and cash equivalents at beginning of 48,927 56,484 56,484
period/year
Cash and cash equivalents at end of period/year 55,105 47,908 48,927
Condensed Consolidated Statement of Changes in Equity
Six months ended 30 June 2015
Cumulative
Share Retained translation Other reserves Non-controlling
capital earnings reserves Reorganisation interest Total
$'000 $'000 $'000 $'000 $'000 $'000
As at 1 January 2014 13,337 282,871 (120,838) 1,589 339 177,298
Net loss for the period - (3,609) - - (21) (3,630)
Exchange translation - - (29,590) - - (29,590)
differences on foreign
operations
As at 30 June 2014 13,337 279,262 (150,428) 1,589 318 144,078
Net loss for the period - (55,662) - - (20) (55,682)
Exchange translation - - 1,437 - - 1,437
differences on foreign
operations
As at 1 January 2015 13,337 223,600 (148,991) 1,589 298 89,833
Net loss for the period - (4,495) - - (6) (4,501)
Exchange translation - - (6,647) - - (6,647)
differences on foreign
operations
As at 30 June 2015 13,337 219,105 (155,638) 1,589 292 78,685
Notes to the Condensed Financial Statements
Six months ended 30 June 2015
1. General information
Cadogan Petroleum plc (the 'Company', together with its subsidiaries the
'Group'), is incorporated in England and Wales under the Companies Act. The
address of the registered office is 1st Floor, 40 Dukes Place, London, EC3A
7NH. The nature of the Group's operations and its principal activities are set
out in the Operations Review on pages 4 to 6 and the Financial Review on pages
7 to 9.
The financial information for the year ended 31 December 2014 does not
constitute statutory accounts as defined in section 434 of the Companies Act
2006, but is derived from those accounts. Statutory accounts for the year ended
31 December 2014 have been delivered to the Registrar of Companies. The
auditor's report on those accounts was not qualified. The auditor's report did
not contain a statement under section 498(2) (unable to determine whether
adequate accounting records had been kept) or 498(3) (failure to obtain
necessary information and explanations) of the Companies Act 2006.
This Half Yearly Report has not been audited or reviewed in accordance with the
Auditing Practices Board guidance on 'Review of Interim Financial
Information'.
A copy of this Half Yearly Report has been published and may be found on the
Company's website at www.cadoganpetroleum.com.
2. Basis of preparation
The annual financial statements of the Group are prepared in accordance with
International Financial Reporting Standards ('IFRS') as issued by the
International Accounting Standards Board ('IASB') and as adopted by the
European Union ('EU'). These Condensed Financial Statements have been prepared
in accordance with IAS 34 Interim Financial Reporting, as issued by the IASB.
The same accounting policies and methods of computation are followed in the
condensed financial statements as were followed in the most recent annual
financial statements of the Group, which were included in the Annual Report
issued on 30 April 2015.
The Group has not early adopted any amendment, standard or interpretation that
has been issued but is not yet effective. It is expected that where applicable,
these standards and amendments will be adopted on each respective effective
date.
The Group has adopted the standards, amendments and interpretations effective
for annual periods beginning on or after 1 January 2015. The adoption of these
standards and amendments did not have a material effect on the financial
statements of the Group.
(a) Assessment of the political situation in Ukraine
Since 2014, Ukraine has been in a political and economic turmoil. Crimea, an
autonomous republic of Ukraine, was effectively annexed by the Russian
Federation. Political unrest and separatist movements in Eastern Ukraine
evolved into armed conflict and full-scale military activities in certain parts
of the Luhansk and Donetsk regions, effectively resulting in a loss of control
over these territories by the Government of Ukraine. These events led to a
significant deterioration of the relationship between Ukraine and the Russian
Federation.
Active military conflict and inability to implement substantial and effective
economic reforms have led to a significant fall in a gross domestic product,
decline of international trade, deterioration of the state's finances and
significant devaluation of the Ukrainian Hryvnia against major foreign
currencies. The ratings of Ukrainian sovereign debt have been downgraded by all
international rating agencies with a negative outlook for the future. All these
factors have had a negative effect on the Ukrainian companies and banks,
hampering their ability to obtain funding from domestic and international
financial markets. In addition, Ukraine has a large external debt refinancing
requirement in the next few years, while its foreign reserves reached a
critically low level.
The National Bank of Ukraine ("NBU") introduced a range of measures aimed at
limiting the outflow of foreign currencies from the country, inter alia, a
mandatory sale of 75 percent of foreign currency earnings, certain restrictions
on purchases of foreign currencies on the interbank market and on usage of
foreign currencies for settlement purposes, limitations on remittances abroad,
as well as limitations for individuals for foreign currency purchases and bank
withdrawals. In addition, the Government of Ukraine has been making efforts in
attracting significant external financing, primarily from the International
Monetary Fund, as well as negotiating terms and conditions with external
creditors as to the curtailing and restructuring the terms of repayment of the
principal amount of external debt.
Stabilisation of the economic and political situation depends, to a large
extent, upon the success of the Ukrainian Government's and NBU's efforts, and
further economic and political developments, as well as the impact of these
factors on the Group, its customers and contractors are therefore currently
difficult to predict.
(b) Going concern
The Directors have continued to use the going concern basis in preparing these
condensed financial statements. The Group's business activities, together with
the factors likely to affect future development, performance and position are
set out in the Operations Review. The financial position of the Group, its cash
flow and liquidity position are described in the Financial Review.
The Group's cash balance at 30 June 2015 of $55.1 million (31 December 2014:
$48.9 million) excluding $0.4 million (31 December 2014: $0.5 million) of
Cadogan's share of cash and cash equivalents in joint ventures. It includes $20
million of restricted cash held in a UK bank which represents security of
borrowings. The Directors believe that the funds available at the date of the
issue of these financial statements are sufficient for the Group to manage its
business risks successfully.
The Group's forecasts and projections, taking into account reasonably possible
changes in operational performance, start dates and flow rates for commercial
production and the price of hydrocarbons sold to Ukrainian customers, show that
there are reasonable expectations that the Group will be able to operate on
funds currently held and those generated internally, for the foreseeable
future.
As the Group engages in oil and gas exploration and development activities, the
most significant financial risk faced by the Group is delays encountered in
achieving commercial production from the Group's major fields. The Group also
continues to pursue its farm-out campaign, which, if successful, will enable it
to farm-out a portion of its interests in its oil and gas licences to spread
the risks associated with further exploration and development.
After making enquiries and considering the uncertainties described above, the
Directors have a reasonable expectation that the Company and the Group have
adequate resources to continue in operational existence for the foreseeable
future and consider the going concern basis of accounting to be appropriate
and, thus, they continue to adopt the going concern basis of accounting in
preparing the financial statements. In making its statement the Directors have
considered the recent political and economic uncertainty in Ukraine.
(c) Foreign currencies
The individual financial statements of each Group company are presented in the
currency of the primary economic environment in which it operates (its
functional currency). The functional currency of the Company is pounds
sterling. For the purpose of the consolidated financial statements, the results
and financial position of each Group company are expressed in US dollars, which
is the presentation currency for the consolidated financial statements.
The relevant exchange rates used were as follows:
1 US$ = £ Six months ended 30 Year ended
June 31 Dec 2014
2015 2014
Closing rate 1.5720 1.7048 1.5534
Average rate 1.5239 1.6692 1.6481
1 US$ = UAH Six months ended 30 Year ended
June 31 Dec 2014
2015 2014
Closing rate 21.4515 11.8333 16.0960
Average rate 21.5125 10.6536 12.1705
The effect of foreign currency sensitivity on shareholders' equity is equal to
that reported in the statement of comprehensive income. During the six months
ended 30 June 2015, the Ukrainian Hryvnia further depreciated against the USD
and EUR by 25.0% and 17.8%, respectively. As a result, during the six months
ended 30 June 2015 the Group recognised net foreign exchange loss in the amount
of $0.9 million in the consolidated income statement and loss of $6.6 million
in the consolidated statement of comprehensive income
(d) Dividend
The Directors do not recommend the payment of a dividend for the period (30
June 2014: $nil; 31 December 2014: $nil).
3. Segment information
Segment information is presented on the basis of management's perspective and
relates to the parts of the Group that are defined as operating segments.
Operating segments are identified on the basis of internal reports provided to
the Group's chief operating decision maker ("CODM"). The Group has identified
its top management team as its CODM and the internal reports used by the top
management team to oversee operations and make decisions on allocating
resources serve as the basis of information presented. These internal reports
are prepared on the same basis as these consolidated financial statements.
Segment information is analysed on the basis of the type of activity, products
sold or services provided.
The majority of the Group's operations are located within Ukraine.
Segment information is analysed on the basis of the types of goods supplied by
the Group's operating divisions. The Group's reportable segments under IFRS 8
are therefore as follows:
Exploration and Production
* E&P activities on the production licences for natural gas, oil and
condensate
Service
* Drilling services to exploration and production companies
* Construction services to exploration and production companies
Trading
* Import of natural gas and diesel from European countries
* Local purchase and sales of natural gas operations with physical delivery
of natural gas
The accounting policies of the reportable segments are the same as the Group's
accounting policies. Sales between segments are carried out at market prices.
The segment result represents operating profit under IFRS before unallocated
corporate expenses. Unallocated corporate expenses include management
remuneration, representative expenses, and expenses incurred in respect of the
maintenance of office premises. This is the measure reported to the CODM for
the purposes of resource allocation and assessment of segment performance.
The Group does not present information on segment assets and liabilities as the
CODM does not review such information for decision-making purposes.
As of 30 June 2015 and for the six months then ended the Group's segmental
information was as follows:
Exploration Service Trading Consolidated
and
Production
$'000 $'000 $'000 $'000
Sales of hydrocarbons 141(1) - 40,270 40,411
Other revenue - 192 - 192
Sales between segments 688 - (688) -
Total revenue 829 192 39,582 40,603
Other cost of sales (713) (86) (35,731) (36,530)
Depreciation (181) (47) - (228)
Other administrative expenses (470)(2) - (1,153)(3) (1,623)
Interest on short-term - - (1,114) (1,114)
borrowings
Segment results (535) 59 1,584 1,108
Unallocated other administrative (1,981)
expenses(4)
Share of losses in joint (4,243)
ventures
Net foreign exchange losses (953)
Other income, net 1,595
Loss before tax (4,473)
(1) Sales of hydrocarbons of Exploration and Production ("E&P") segment
represent sales of oil from Monastyretska licence only in May and June 2015, as
Monastyretska licence production was shut-in until May 2015
(2) Other administrative expenses of E&P segment also includes part of costs of
personnel of Ukrainian head office
(3) Other administrative expenses of trading segment includes $0.9 million of
provision for trading costs
(4) Unallocated other administrative expenses includes depreciation of $39
thousands
As of 31 December 2014 and for the year then ended the Group's segmental
information was as follows:
Exploration Service Trading Consolidated
and
Production
$'000 $'000 $'000 $'000
Sales of hydrocarbons 1,291 - 30,253 31,544
Other revenue - 846 233 1,079
Sales between segments 1,077 - (1,077) -
Total revenue 2,368 846 29,409 32,623
Other cost of sales (2,000) (226) (26,848) (29,074)
Depreciation (579) (160) - (739)
Other administrative expenses (1,347) - (379) (1,726)
Interest on short-term - - (420) (420)
borrowings
Segment results (1,558) 460 1,762 664
Unallocated other administrative (5,276)
expenses(1)
Other income, net 2,228
Impairment (5,134)
Share of losses in joint (54,664)
ventures
Net foreign exchange gains 3,036
Loss before tax (59,146)
(1) Unallocated other administrative expenses includes depreciation of $199
thousands
Trading operations commenced in September 2014 hence the Group considered
exploration, production and services as a single segment and did not prepare a
separate disclosure as of 30 June 2014.
4. Loss per ordinary share
Loss per ordinary share is calculated by dividing the net loss for the period/
year attributable to Ordinary equity holders of the parent by the weighted
average number of Ordinary shares outstanding during the period/year. The
calculation of the basic loss per share is based on the following data:
Six months ended 30 June Year ended
31 December
Loss attributable to owners of the Company 2015 2014 2014
$'000 $'000 $'000
Loss for the purposes of basic profit per share (4,495) (3,609) (59,271)
being net loss attributable to owners of the
Company
Number Number Number
Number of shares '000 '000 '000
Weighted average number of Ordinary shares for the 231,092 231,092 231,092
purposes of basic loss per share
Cent Cent Cent
Loss per Ordinary share
Basic (1.9) (1.6) (25.6)
5. Intangible exploration and evaluation assets
As of 30 June 2015 the intangible assets balance has decreased in comparison to
31 December 2014 due to depreciation of the UAH against the USD, being the
presentation currency of the Group.
6. Investments in joint ventures
Share of losses in joint ventures mostly represents translation losses which
arose mainly on the translation of non-current assets from UAH to USD being the
presentation currency of the Group.
The Group is committed together with Eni to fund LLC Astroinvest-Energy
subsequently to the period end with the necessary amount of $0.8 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.
7. Inventories
The Group had significant volumes of natural gas as at 31 December 2014 which
have been sold during the six months ended 30 June 2015 that resulted in a
decrease of the natural gas balance from $8.1 million to $1.5 million.
8. Trade and other receivables
Six months ended 30 Year ended31 December
June
2015 2014 2014
$'000 $'000 $'000
Trading receivables 4,238 - 5,060
VAT recoverable 1,358 342 1,674
Receivable from joint ventures 1,558 1,798 1,938
Trading prepayments 893 - 8,584
Prepayments 96 322 166
Loans issued - 2,185 -
Other receivables 752 682 469
8,895 5,329 17,891
The Directors consider that the carrying amount of the remaining other
receivables approximates their fair value and none of which are past due.
Management plans to realise VAT recoverable through increased gas trading
activity.
9. Short-term borrowings
In October 2014 the Group started to use short-term borrowings as a financing
facility for its trading activities. Borrowings are represented by a credit
line drawn in UAH at a Ukrainian bank, a 100 percent subsidiary of a UK bank.
The credit line is secured by $20 million of cash balance placed at a UK bank.
During the six months ended 30 June 2015 the Group repaid a significant amount
of the credit line and the outstanding amount as at 30 June 2015 was $5.7
million with an average effective interest rate of 24 percent p.a. Interest is
paid monthly and as at 30 June 2015 the accrued interest amounted to $0.1
million.
10. Trade and other payables
The $8.4 million of trade and other payables as of 30 June 2015 (30 June 2014:
$2.5 million, 31 December 2014: $5.1 million) represent $6.2 million (30 June
2014: $nil, 31 December 2014: $2.5 million) of advances received from clients
for future supplies of natural gas and $2.2 million (30 June 2014: $2.5
million, 31 December 2014: $2.3 million) of other creditors and accruals.
11. Related party transactions
Transactions between the Group 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 related
parties who are not members of the Group:
Six months ended 30 Year ended 31 December
June
2015 2014 2014
$'000 $'000 $'000
Revenues from services provided and 350 460 597
sales of goods
Purchases of goods 28 16 87
Amounts owed by related parties 1,558 1,798 1,938
Amounts owed to related parties 148 130 159
The amounts outstanding are unsecured and will be settled in cash. No
provisions have been made for doubtful debts on the amounts owed by related
parties.
12. Post balance sheet events
No post balance sheet events have taken place after 30 June 2015.
13. Commitments and contingencies
There have been no significant changes to the commitments and contingencies
reported on pages 78 and 79 of the Annual Report.
END
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