REG - Roxi Petroleum Plc - Final Results <Origin Href="QuoteRef">RXP.L</Origin> - Part 2
16/07/2015 12:07
- Part 2: For the preceding part double click ID:nRSW8872Qa
Earnings per share 10
Basic earnings/(loss) per ordinary share (US cents)
From continuing operations 0.61 (1.06)
From discontinued operations (0.4) (0.16)
Total 0.21 (1.22)
Diluted earnings/(loss) per ordinary share (US cents)
From continuing operations 0.6 (1.06)
From discontinued operations (0.39) (0.16)
Total 0.21 (1.22)
The notes on pages 26 to 51 are essential part of these financial statements
ConsolidatedStatement of Comprehensive income
Year ended31 December2014 Year ended31 December2013
$000 $000(restated)
Income / (Loss) after taxation 5,657 (13,197)
Other comprehensive income:
Exchange differences on translating foreign operations from continuing operations* (18,119) (1,861)
Exchange differences on translating foreign operations from discontinued operations* (2,699) (514)
Total comprehensive loss for the year (15,161) (15,572)
Total comprehensive income / loss attributable to:
Owners of parent (10,790) (11,710)
Non-controlling interest (4,371) (3,862)
*Items which may be reclassified to the statement of profit or loss
Consolidated Statement of Changes in Equity
Share capital$'000 Share premium$'000 Deferred shares $'000 Shares to be issued $'000 Cumulative translation reserve$'000 Other reserves$'000 Retained earnings$'000 Total attributable to the owner of Parent$'000 Non-controlling interests$'000 Totalequity$'000
Total equity as at 1 January 2014 13,475 128,578 64,702 5,000 (6,461) (583) (134,589) 70,122 35,908 106,030
Income after taxation - - - - - - 1,750 1,750 3,907 5,657
Exchange differences on translating foreign operations - - - - (12,540) - - (12,540) (8,278) (20,818)
Total comprehensive income for the year - - - - (12,540) - 1,750 (10,790) (4,371) (15,161)
Arising on share issues 500 3,200 - - - - 3,700 - 3,700
Cancellation of shares to be issued 674 4,326 - (5,000) - - - - - -
Transactions with owners 1,174 7,526 - (5,000) - - - 3,700 - 3,700
Arising on employee share options - - - - - - 139 139 - 139
Conversion of debts to equity 67 433 - - - - - 500 - 500
Stock options exercised 45 137 - - - - - 182 - 182
Total equity as at 31 December 2014 14,761 136,674 64,702 - (19,001) (583) (132,700) 63,853 31,537 95,390
Share capital$'000 Share premium$'000 Deferred shares $'000 Shares to be issued $'000 Cumulative translation reserve$'000 Other reserves$'000 Retained earnings$'000 Total attributable to the owner of the Parent$'000 Non-controlling interests$'000 Totalequity$'000
Total equity as at 1 January 2013 10,777 111,276 64,702 - (4,388) (583) (124,952) 56,832 39,770 96,602
Loss after taxation - - - - - - (9,637) (9,637) (3,560) (13,197)
Exchange differences on translating foreign operations - - - - (2,073) - - (2,073) (302) (2,375)
Total comprehensive loss for the year - - - - (2,073) - (9,637) (11,710) (3,862) (15,572)
Arising on share issues 2,361 15,139 - - - - - 17,500 - 17,500
Conversion of debts to equity 337 2,163 - - - - - 2,500 - 2,500
Transactions with owners 2,698 17,302 - - - - - 20,000 - 20,000
Funds received for shares to be issued - - - 5,000 - - - 5,000 - 5,000
Total equity as at 31 December 2013 13,475 128,578 64,702 5,000 (6,461) (583) (134,589) 70,122 35,908 106,030
Reserve Description and purpose
Share capital The nominal value of shares issued
Share premium Amount subscribed for share capital in excess of nominal value
Deferred shares The nominal value of deferred shares issued
Shares to be issued Amount received in respect of shares which are yet to be issued
Cumulative translation reserve Gains/losses arising on retranslating the net assets of overseas operations into
US Dollars
Other reserves Fair value of warrants issued and capital contribution arising on
discounted loans
Retained earnings Cumulative losses recognised in the consolidated statement of profit or
loss
Non-controlling interest The interest of non-controlling parties in the net assets of the
subsidiaries
Parent Company Statement of Changes in Equity
Share capital$'000 Share premium$'000 Shares to be issued$'000 Deferred shares$'000 Other reserves$'000 Retained earnings$'000 Total attributable to the owner of the Parent$'000
Total equity as at 1 January 2014 13,475 128,578 5,000 64,702 16,715 (118,988) 109,482
Total comprehensive loss for the year - - - - - (236) (236)
Arising on share issues 500 3,200 - - - - 3,700
Cancellation of shares to be issued 674 4,326 (5,000) - - - -
Transactions with owners 1,274 (7,526) (5,000) - - - 3,700
Conversion of debts to equity 67 433 - - - - 500
Arising on employee share options - - - - - 139 139
Employee share options exercised 45 137 - - - - 182
Total equity as at 31 December 2014 14,761 136,674 - 64,702 16,715 (119,085) 113,767
Share capital$'000 Share premium$'000 Shares to be issued$'000 Deferred shares$'000 Other reserves$'000 Retained earnings$'000 Total attributable to the owner of the Parent$'000
Total equity as at 1 January 2013 10,777 111,276 - 64,702 16,715 (94,112) 109,358
Total comprehensive loss for the year - - - - - (24,876) (24,876)
Arising on share issues 2,361 15,139 - - - - 17,500
Conversion of debts to equity 337 2,163 - - - - 2,500
Transactions with owners 2,698 17,302 - - - - 20,000
Funds received for shares to be issued - - 5,000 - - - 5,000
Total equity as at 31 December 2013 13,475 128,578 5,000 64,702 16,715 (118,988) 109,482
Reserve Description and purpose
Share capital The nominal value of shares issued
Share premium Amount subscribed for share capital in excess of nominal value
Shares to be issued Amount received in respect of shares which are yet to be issued
Deferred shares The nominal value of deferred shares issued
Other reserves Fair value of warrants issued and capital contribution arising on
discounted loans
Retained earnings Cumulative losses recognised in the profit or loss
Consolidated and Parent Company Statements of Financial Position
Company number 5966431 Notes Group2014$'000 Group2013$'000(restated) Group2012$'000(restated) Company2014$'000 Company2013$'000
Assets
Non-current assets
Unproven oil and gas assets 11 116,094 101,264 93,971 - -
Property, plant and equipment 12 355 215 1,924 - -
Investments in subsidiaries 13 - - - 60,522 60,522
Investments in equity accounted joint venture 14 - 16,197 18,894 - -
Inventories 15 1,247 2,383 1,069 - -
Deferred tax asset 22 - 786 2,121 - 786
Other receivables 16 10,294 18,838 20,076 121,254 110,078
Restricted use cash 322 335 337 - -
Total non-current assets 128,312 140,018 138,392 181,776 171,386
Current assets
Other receivables 16 11,654 434 473 122 58
Cash and cash equivalents 17 605 3,173 252 18 1,093
Total current assets 12,259 3,607 725 140 1,151
Investments in equity accounted joint venture classified as held for sale 18 7,872 - - - -
Total assets 148,443 143,625 139,117 181,916 172,537
Equity and liabilities
Capital and reserves attributableto equity holders of the parent
Share capital 19 14,761 13,475 10,777 14,761 13,475
Share premium 136,674 128,578 111,276 136,674 128,578
Shares to be issued - 5,000 - - 5,000
Deferred shares 19 64,702 64,702 64,702 64,702 64,702
Other reserves (583) (583) (583) 16,715 16,715
Retained earnings (132,700) (134,589) (124,952) (119,085) (118,988)
Cumulative translation reserve (19,001) (6,461) (4,388) - -
Equity attributable to the owners of the Parent 63,853 70,122 56,832 113,767 109,482
Non-controlling interests 31,537 35,908 39,770 - -
Total equity 95,390 106,030 96,602 113,767 109,482
Current liabilities
Trade and other payables 20 12,433 3,581 3,998 6,121 4,223
Short - term borrowings 21 804 1,454 8,523 - 500
Current provisions 22 3,554 3,919 3,950 - -
Total current liabilities 16,791 8,954 16,471 6,121 4,723
Non-current liabilities
Borrowings 23 10,503 9,676 8,848 9,075 8,248
Deferred tax liabilities 24 11,164 7,415 7,563 - -
Non-current provisions 22 813 871 338 - -
Derivative financial liability 26 6,790 5,248 5,248 6,790 5,248
Other payables 20 6,992 5,431 4,047 46,163 44,836
Total non-current liabilities 36,262 28,641 26,044 62,028 58,332
Total liabilities 53,053 37,595 42,515 68,149 63,055
Total equity and liabilities 148,443 143,625 139,117 181,916 172,537
By Order of the Board
Clive Carver, Chairman, 22 June 2015
Company number: 5966431
Consolidated and Parent Company Statements of Cash Flows
Notes Group2014$'000 Group2013$'000(restated) Company2014$'000 Company2013$'000
Cash flows from operating activities
Cash received from customers 6,548 1,040 - -
Payments made to suppliers for goods and services (4,588) (3,869) (817) (1,137)
Net cash flow from operating activities 1,960 (2,829) (817) (1,137)
Cash flows from investing activities
Purchase of property, plant and equipment 12 (190) (120) - -
Additions to unproven oil and gas assets 11 (9,233) (12,312) - -
Transfers to/from restricted use cash 13 2 - -
Loans repaid by subsidiaries - - 130 -
Disposal of joint venture(net of cash disposed) 18 1,000 - - -
Loans given to subsidiaries - - (5,270) (20,300)
Exclusivity payment received in advance 18 - - 1,000 -
Net cash flow from investing activities (8,410) (12,430) (4,140) (20,300)
Cash flows from financing activities
Net proceeds from issue of ordinary share capital 3,882 22,500 3,882 22,500
Repayment of borrowings - (4,320) - -
Net cash from financing activities 3,882 18,180 3,882 22,500
Net increase in cash and cash equivalents (2,568) 2,921 (1,075) 1,063
Cash and cash equivalents at beginning of year 3,173 252 1,093 30
Cash and cash equivalents at end of year 17 605 3,173 18 1,093
Notes to the Financial Statements
General information
Roxi Petroleum Plc ("the Company") is a public limited company incorporated and domiciled in England and Wales. The address
of its registered office is 5 New Street Square, London, EC4A 3TW. These consolidated financial statements were authorised
for issue by the Board of Directors on 22 June 2015.
The principal activities of the Group are exploration and production of crude oil.
1 Principal accounting policies
The principal accounting policies applied in the preparation of these consolidated financial statements are set out below.
1.1 Basis of preparation
The Group's and Parent's financial statements have been prepared in accordance with International Financial Reporting
Standards as adopted by the European Union ("IFRSs"), and with those parts of the Companies Act 2006 applicable to
companies reporting under IFRSs.
The financial statements have been prepared on a going concern basis based upon projected future cash flows and planned
work programmes.
The financial statements have been prepared on a going concern basis.
The Directors have produced detailed models of the Group's financial results under various scenarios and sensitivity
analysis has been performed on the various scenarios. The principal scenario is that a further three Deep Wells and a
further 2 shallow wells are drilled at BNG as part of the 2015 drilling campaign.
The expected receipts from the proceeds of the sale of Galaz plus the expected contribution from our partner Baverstock is
in the opinion of the Directors sufficient to cover these costs and the costs associated with the day to day operation of
the Company.
Additional funding would in the opinion of the directors be available if required from the sale of oil produced during
testing, further draw downs under the $40 million equity facility and if required by rescheduling various loans.
The Directors are confident, on the above basis, that the Group will have sufficient resources for its operational needs
over the relevant period, being until June 2016. Accordingly, the Directors continue to adopt the going concern basis.
The Company has taken advantage of section 408 of the Companies Act 2006 and has not included its own profit or loss in
these financial statements. The Group loss for the year included a loss on ordinary activities after tax of US$236,000 in
respect of the Company.
The preparation of financial statements in conformity with IFRSs requires the Management to make judgements, estimates and
assumptions that affect the application of policies and reported amounts in the financial statements. The areas involving a
higher degree of judgement or complexity, or areas where assumptions or estimates are significant to the financial
statements are disclosed in note 2.
1.2 Restatement
The consolidated statements of financial position for the years ended 31 December 2013 and 1 January 2013 as well as
consolidated income statement and consolidated statements of cash flows for the year ended 31 December 2013 have been
restated to reflect changed accounting policy on joint ventures from 1 January 2014 following the introduction of IFRS 11
Joint arrangements which applies to the current year.
For the reconciliation between the previously reported financial position for the years ended 31 December 2013 and 31
December 2012 and the restated financial position refer to note 29.
1.3 New and revised standards and interpretations applied
A number of new standards and amendments to existing standards and interpretations were applicable from 1 January 2014.
Other than IFRS 11 the adoption of these amendments did not have a material impact on the Group's financial statements for
the year ended 31 December 2014.
The Group has adopted, where applicable, the following new and revised standards and interpretations issued by
International Accounting Standards Board and the International Financial Reporting Interpretations Committee (the IFRIC)
which became effective for the Company's financial statements for the year ended 31 December 2014:
· Amendments to IAS 36 - Recoverable Amount Disclosures for Non-Financial Assets;
· Amendments to IAS 32 - Offsetting Financial Assets and Financial Liabilities;
The amendments to IFRS 10, IFRS 12 and IAS 27 do not have material effect on the Group's financial statements.
Amendments to IAS 32 - Offsetting Financial Assets and Financial Liabilities
The amendments to IAS 32 clarify the requirements relating to the offset of financial assets and financial liabilities.
Specifically, the amendments clarify the meaning of 'currently has a legally enforceable right of set-off' and
'simultaneous realisation and settlement'.
1 Principal accounting policies (continued)
Amendments to IAS 36 - Recoverable Amount Disclosures for Non-Financial Assets
The amendments to IAS 36 restrict the requirement to disclose the recoverable amount of an asset or a cash-generating unit
to periods in which an impairment loss has been recognised or reversed. In addition, they expand and clarify the disclosure
requirements applicable to when recoverable amount of an asset or a cash-generating unit has been determined on the basis
of fair value less costs of disposal. The new disclosures include the fair value hierarchy, key assumptions and valuation
techniques used which are in line with the disclosure required by IFRS 13 Fair Value Measurements.
Application of new and revised standards, except for IFRS 11, did not affect the Group's financial position and financial
results. New and revised standards were applied retrospectively in accordance with IAS 8 "Accounting Policies, Changes in
Accounting Estimates and Errors," unless otherwise noted below.
New and revised IFRS - issued, but not yet effective
The following new standards and interpretations had been issued but not yet effective at the approval date of these
financial statements. The Group has not yet applied them:
· Amendments to IAS 19 - Defined Benefit Plans: Employee contributions1;
· Annual Improvements to IFRSs 2010-2012 Cycle1;
· Annual Improvements to IFRSs 2011-2013 Cycle1;
· Annual Improvements to IFRSs 2012-2014 Cycle2;
· IFRS 14 Regulatory Deferral Accounts2;
· Amendments to IAS 16 and IAS 38 - Clarification of Acceptable Methods of Depreciation and Amortisation2;
· Amendments to IAS 27 - Equity Method in Separate Financial Statements2;
· Amendments to IAS 16 and IAS 41 - Agriculture: Bearer Plants2;
· Amendments to IFRS 11 - Accounting for Acquisition of Interests in Joint Operations2;
· Amendments to IFRS 10 and IAS 28 - Sale or Contribution of Assets between an Investor and its Associate or
Joint Venture2;
· IFRS 15 Revenue from Contracts with Customers3;
· IFRS 9 Financial Instruments4;
· IFRIC 21-Levies.
1 Effective for annual periods beginning on or after 1 July 2014, with earlier application permitted.
2 Effective for annual periods beginning on or after 1 January 2016, with earlier application permitted.
3 Effective for annual periods beginning on or after 1 January 2017, with earlier application permitted.
4 Effective for annual periods beginning on or after 1 January 2018, with earlier application permitted.
The Group will apply new and revised standards and new interpretations from the date they enter into force. Retrospective
application is required in accordance with IAS 8 "Accounting Policies, Changes in Accounting Estimates and Errors," unless
otherwise noted.
The Company's management assumes that application of these Standards and Interpretations will not have a material effect on
its financial position or results of operations of the Group.
1.4 Basis of consolidation
Subsidiary undertakings are entities that are directly or indirectly controlled by the Group. Control is achieved when the
Group is exposed, or has rights, to variable returns from its involvement with the investee and has the ability to affect
those returns through its power over the investee. Generally, there is a presumption that a majority of voting rights
result in control. To support this presumption and when the Group has less than a majority of the voting or similar rights
of an investee, the Group considers all relevant facts and circumstances in assessing whether it has power over an
investee. 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 purchase method of accounting is used to account for the acquisition of subsidiary undertakings by the Group. The cost
of an acquisition is measured at the fair value of the assets given, equity instruments issued and liabilities incurred or
assumed at the date of exchange. Identifiable assets acquired and liabilities and contingent liabilities assumed in a
business combination are measured initially at their fair values at the acquisition date, irrespective of the extent of any
non-controlling interest. The excess of the cost of acquisition over the fair value of the Group's share of the
identifiable net assets acquired is recorded as goodwill.
Where the Group holds interests in jointly ventures, it accounts for its interests using the equity method.
1.5 Operating Loss
Operating loss is stated after crediting all operating income and charging all operating expenses, but before crediting or
charging the financial income or expenses.
1.6 Foreign currency translation
1.6.1 Functional and presentational currencies
Items included in the financial statements of each of the Group's entities are measured using the currency of the primary
economic environment in which the entity operates ("the functional currency"). The consolidated financial statements are
presented in US Dollars ("USD"), which is the Group's presentational currency. Beibars Munai LLP, Munaily Kazakhstan LLP,
BNG Ltd LLP and Roxi Petroleum Kazakhstan LLP, subsidiary undertakings of the Group and Galaz and Company LLP being joint
venture, undertake their activities in Kazakhstan and the Kazakh Tenge is the functional currency of these entities. The
functional currency for the Company, RS Munai BV, Beibars BV, Ravninnoe BV, Galaz Energy BV and BNG Energy BV is USD as USD
reflects the underlying transactions, conducts and events relevant to these companies.
1.6.2 Transactions and balances in foreign currencies
In preparing the financial statements of the individual entities, transactions in currencies other than the entity's
functional currency ("foreign currencies") are recorded at the rates of exchange prevailing at the dates of the
transactions. At each reporting date, monetary items denominated in foreign currencies are retranslated at the rates
prevailing at the reporting date. Non-monetary items carried at fair value that are denominated in foreign currencies are
retranslated at the rates prevailing at the date when the fair value was determined. Non-monetary items, including the
parent's share capital, that are measured in terms of historical cost in a foreign currency are not retranslated. Exchange
differences are recognised in profit or loss in the period in which they arise.
1.6.3 Consolidation
For the purpose of consolidation all assets and liabilities of Group entities with a functional currency that is not USD
are translated at the rate prevailing at the reporting date. The profit or loss is translated at the exchange rates
approximating to those ruling when the transaction took place. Exchange difference arising on retranslating the opening net
assets from the opening rate and results of operations from the average rate are recognised directly in other comprehensive
income (the "cumulative translation reserve"). On disposal of a foreign operator related cumulative foreign exchange gains
and losses are reclassified to profit and loss and are recognized as part of the gain or loss on disposal.
1.7 Current tax
Current tax is based on taxable profit for the year. Taxable profit differs from profit as reported in the profit or loss
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 tax rates that have been
enacted or substantively enacted by the reporting date.
1.8 Deferred tax
Deferred tax is provided on temporary differences between the carrying amounts of assets and liabilities for financial
reporting purposes and the amounts used for taxation purposes. The following temporary differences are not provided for:
the initial recognition of assets or liabilities that affect neither accounting nor taxable profit other than in a business
combination, and differences relating to investments in subsidiaries to the extent that they will probably not reverse in
the foreseeable future.
The amount of deferred tax provided is based on the expected manner of realisation or settlement of the carrying amount of
assets and liabilities, using tax rates enacted or substantively enacted at the reporting date.
Deferred tax liabilities are generally recognised for all taxable temporary differences. A deferred tax asset is recorded
only to the extent that it is probable that taxable profit will be available against which the deductible temporary
differences can be utilised.
1.9 Unproven oil and gas assets
The Group applies the full cost method of accounting for exploration and unproven oil and gas asset costs, having regard to
the requirements of IFRS 6 'Exploration for and Evaluation of Mineral Resources'. Under the full cost method of accounting,
costs of exploring for and evaluating oil and gas properties are accumulated and capitalised by reference to appropriate
cost pools. Such cost pools are based on license areas. The Group currently has four operating assets.
Exploration and evaluation costs include costs of license acquisition, technical services and studies, seismic
acquisition, exploration drilling and testing, but do not include costs incurred prior to having obtained the legal rights
to explore an area, which are expensed directly to the profit or loss as they are incurred.
Assets acquired for use in exploration and evaluation activities are classified as property, plant and equipment. However,
to the extent that such asset is consumed in developing an intangible exploration and evaluation asset, the amount
reflecting that consumption is recorded as part of the cost of the intangible asset.
The amounts included within unproven oil and gas assets include the fair value that was paid for the acquisition of
partnerships holding subsoil use in Kazakhstan. These licenses have been capitalised to the Group's full cost pool in
respect of each license area.
Exploration and unproven oil and gas assets related to each exploration license/prospect are not amortised but are carried
forward until the technical feasibility and commercial usability of extracting a mineral resource are demonstrated.
Commercial reserves are defined as proved oil and gas reserves.
Proven oil and gas properties
Once a project reaches the stage of commercial production and production permits are received, the carrying values of the
relevant exploration and evaluation asset are assessed for impairment and transferred as proven oil and gas properties and
included within property plant and equipment.
Proven oil and gas properties are accounted for in accordance with provisions of the cost model under IAS 16 "Property
Plant and Equipment" and are depleted on unit of production basis based on commercial reserves of the pool to which they
relate.
Impairment
Exploration and unproven intangible assets are reviewed for impairments if events or changes in circumstances indicate that
the carrying amount may not be recoverable as at the reporting date. Intangible exploration and evaluation assets that
relate to exploration and evaluation activities that are not yet determined to have resulted in the discovery of the
commercial reserve remain capitalised as intangible exploration and evaluation assets subject to meeting a pool-wide
impairment test as set out below.
Such indicators include the point at which a determination is made as to whether or not commercial reserves exist. Where
the exploration and evaluation assets concerned fall within the scope of an established full cost pool, the exploration and
evaluation assets are tested for impairment together with all development and production assets associated with that cost
pool, as a single cash generating unit. The aggregate carrying value is compared against the expected recoverable amount of
the pool, generally by reference to the present value of the future net cash flows expected to be derived from production
of the commercial reserves. Where the exploration and evaluation assets to be tested fall outside the scope of any
established cost pool, there will generally be no commercial reserves and the exploration and evaluation assets concerned
will be written off in full. Any impairment loss is recognised in the profit or loss as impairment and separately
disclosed.
An impairment loss is reversed if the asset's or cash-generating unit's recoverable amount exceeds its carrying amount.
Workovers/Overhauls and maintenance
From time to time a workover or overhaul or maintenance of existing proven oil and gas properties is required, which
normally fall into one of two distinct categories. The type of workover dictates the accounting policy and recognition of
the related costs:
Capitalisable costs - cost will be capitalised where the performance of an asset is improved, where an asset being
overhauled is being changed from its initial use, the assets' useful life is being extended, or the asset is being modified
to assist the production of new reserves.
Non-capitalisable costs - expense type workover costs are costs incurred as maintenance type expenditure, which would be
considered day-to-day servicing of the asset. These types of expenditures are recognised within cost of sales in the
statement of comprehensive income as incurred. Expense workovers generally include work that is maintenance in nature and
generally will not increase production capability through accessing new reserves, production from a new zone or
significantly extend the life or change the nature of the well from its original production profile.
1.10 Abandonment
Provision is made for the present value of the future cost of the decommissioning of oil wells and related facilities. This
provision is recognised when the asset is installed. The estimated costs, based on engineering cost levels prevailing at
the reporting date, are computed on the basis of the latest assumptions as to the scope and method of decommissioning. The
corresponding amount is capitalised as a part of property, plant and equipment and is amortised on a unit-of-production
basis as part of the depreciation, depletion and amortisation charge. Any adjustment arising from the reassessment of
estimated cost of decommissioning is capitalised, while the charge arising from the unwinding of the discount applied to
the decommissioning provision is treated as a component of the interest charge.
1.11 Restricted use cash
Restricted use cash is the amount set aside by the Group for the purpose of creating an abandonment fund to cover the
future cost of the decommissioning of oil and gas wells and related facilities and in accordance with local legal rulings.
Under the Subsoil Use Contracts the Group must place 1% of the value of exploration costs in an escrow deposit account. At
the end of the contract this cash will be used to return the field to the condition that it was in before exploration
started.
1.12 Property, plant and equipment
All property, plant and equipment assets are stated at cost or fair value on acquisition less accumulated depreciation.
Depreciation is provided on a straight-line basis, at rates calculated to write off the cost less the estimated residual
value of each asset over its expected useful economic life. The residual value is the estimated amount that would currently
be obtained from disposal of the asset if the asset were already of the age and in the condition expected at the end of its
useful life. Expected useful economic life and residual values are reviewed annually.
The annual rates of depreciation for class of property, plant and equipment are as follows:
- motor vehicles over 7 years
- other over 2-4 years
The Group assesses at each reporting date whether there is any indication that any of its property, plant and equipment has
been impaired. If such an indication exists, the asset's recoverable amount is estimated and compared to its carrying
value.
1.13 Investments (Company)
Non-current asset investments in subsidiary undertakings are shown at cost less allowance for impairment.
1.14 Financial instruments
The Group classifies financial instruments, or their component parts on initial recognition, as a financial asset, a
financial liability or an equity instrument in accordance with the substance of the contractual agreement.
Financial assets and financial liabilities are recognised when the Group becomes a party to the contractual provisions of
the financial instrument and are measured initially at fair value adjusted for transaction costs, except for those carried
at fair value through profit or loss which are measured initially at fair value. Subsequent measurement of financial assets
and financial liabilities is described below.
Financial assets are derecognised when the contractual rights to the cash flows from the financial asset expire, or when
the financial asset and substantially all the risks and rewards are transferred. A financial liability is derecognised when
it is extinguished, discharged, cancelled or expires.
The Group's financial assets consist of cash and other receivables. Cash and cash equivalents are defined as short term
cash deposits which comprise cash on deposit with an original maturity of less than 3 months. Other receivables are
initially measured at fair value and subsequently at amortised cost.
The Group's financial liabilities are non-interest bearing trade and other payables, other interest bearing borrowings,
profit oil royalty, and warrants. Non-interest bearing trade and other payables and other interest bearing borrowings are
stated initially at fair value and subsequently at amortised cost. Profit oil royalty and warrants are recognised and
measured at fair values through profit or loss.
There are long-term loans between Group entities and from related parties which bear interest at a rate lower than that
which the Directors consider the Group would bear if the facility had been granted by a third party. Such borrowings are
recognised initially at fair value, net of transaction costs incurred, and are subsequently stated at amortised cost. Any
difference between the proceeds (net of transaction costs) and the redemption value is recognised in the profit or loss
over the period of the borrowings using the effective interest method. Fair value is calculated by discounting the
non-current borrowings and receivables using a market rate of interest.
Where a loan is renegotiated on substantially different terms, this is treated as an extinguishment of the original
financial liability and the recognition of a new financial liability. The terms are considered to be 'substantially
different' if the discounted present value of the cash flows under the new terms, including any fees paid net of any fees
received and discounted using the original effective interest rate, is at least 10 per cent different from the discounted
present value of the remaining cash flows of the original financial liability. In addition to this quantitative test, a
qualitative test also needs to be applied.
Share capital issued to extinguish financial liabilities is fair valued with any difference to the carrying value of the
financial liability taken to the profit or loss.
1.15 Inventories
Inventories are initially recognised at cost, and subsequently at the lower of cost and net realisable value. Cost
comprises all costs of purchase and other costs incurred in bringing the inventories to their present location and
condition.
1.16 Other provisions
A provision is recognised 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, where appropriate, the risks specific to the liability.
1.17 Share capital
Ordinary and deferred shares are classified as equity. Incremental costs directly attributable to the issue of new shares
or options are shown in equity as a deduction from the proceeds.
1.18 Share-based payments
The Group has used shares and share options as consideration for services received from employees.
Equity-settled share-based payments to employees and others providing similar services are measured at fair value at the
date of grant. The fair value determined at the grant date of such an equity-settled share-based instrument is expensed on
a straight-line basis over the vesting period, based on the Group's estimate of the shares that will eventually vest.
Equity-settled share-based payment transactions with other parties are measured at the fair value of the goods or services
received, except where the fair value cannot be estimated reliably, in which case they are measured at the fair value of
the equity instruments granted, measured at the date the entity obtains the goods or the counterparty renders the service.
The fair value determined at the grant date of such an equity-settled share-based instrument is expensed since the shares
vest immediately. Where the services are related to the issue of shares, the fair values of these services are offset
against share premium where permitted.
Fair value is measured using the Black-Scholes model. The expected life used in the model has been adjusted based on the
Management's best estimate, for the effects of non-transferability, exercise restrictions and behavioural considerations.
1.19 Warrants
The warrants are separated from the host contract as their risks and characteristics are not closely related to those of
the host contracts. Due to the exercise price of the warrants being in a different currency to the functional currency of
the Company, at each reporting date the warrants are valued at fair value with changes in fair values recognised through
profit or loss as they arise. The fair values of the warrants are calculated using the Black-Scholes model.
1.20 Revenue
Revenue is measured at the fair value of the consideration received or receivable and represents amounts receivable for oil
and gas products provided in the normal course of business, net of discounts, VAT and other sales related taxes to third
party customers. Revenues are recognised when the risks and rewards of ownership together with effective control are
transferred to the customer and the amount of the revenue and associated costs incurred in respect of the relevant
transaction can be reliably measured. Revenue is not recognised unless it is probable that the economic benefits associated
with the sales transaction will flow to the Group.
1.21 Cost of sales
During test production cost of sales cannot be reliably estimated and therefore a cost of sales equal to revenue is
recognised and credited to the unproven oil and gas assets.
1.22 Segmental reporting
Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision
maker. The chief operating decision maker, who is responsible for allocating resources and assessing performance of the
operating segments and making strategic decisions, has been identified as the Board of Directors. The Group has one
operating segment being oil exploration and production in Kazakhstan.
1.23 Interest receivable and payable
Interest income and expense are reported on an accrual basis using the effective interest rate method.
1.24 Accounts not presented in sterling
For reference the year end exchange rate from sterling to US$ was 1.56 and the average rate during the year was 1.65.
1.25 Joint venture agreements
The Group's investments in joint arrangements are characterised as a joint venture in which the Group has rights to a share
of the arrangement's net assets rather than direct rights to underlying assets and obligations for underlying liabilities.
Investments in joint ventures are accounted for using the equity method. The carrying amount of the investment in joint
ventures is increased or decreased to recognise the Group's share of the profit or loss and other comprehensive income of
the joint venture, adjusted where necessary to ensure consistency with the accounting policies of the Group. Unrealised
gains and losses on transactions between the Group and its joint ventures are eliminated to the extent of the Group's
interest in those entities. Where unrealised losses are eliminated, the underlying asset is also tested for impairment.
1.26 Discontinued operations
A discontinued operation is a component of the Group that either has been disposed of, or is classified as held for sale.
Profit or loss from discontinued operations comprises the post-tax profit or loss of discontinued operations and the
post-tax gain or loss resulting from the measurement and disposal of assets classified as held for sale
Non-current assets classified as held for sale are presented separately and measured at the lower of their carrying amounts
immediately prior to their classification as held for sale and their fair value less costs to sell. However, some held for
sale assets such as financial assets or deferred tax assets, continue to be measured in accordance with the Group's
relevant accounting policy for those assets. Once classified as held for sale, the assets are not subject to depreciation
or amortisation. Any profit or loss arising from the sale or remeasurement of discontinued operations is presented as part
of a single line item, profit or loss from discontinued operations.
2 Critical accounting estimates and judgements
In the process of applying the Group's accounting policies, which are described in note 1, the Management has made the
following judgements and key assumptions that have the most significant effect on the amounts recognised in the financial
statements.
2.1 Recoverability of exploration and evaluation costs
Under the full cost method of accounting for exploration and evaluation costs, such costs are capitalised as intangible
assets by reference to appropriate cost pools, and are assessed for impairment on a concession basis when circumstances
suggest that the carrying amount may exceed its recoverable value and, therefore, there is a potential risk of an
impairment adjustment. This assessment involves judgment as to: (i) the likely future commerciality of the asset and when
such commerciality should be determined; (ii) future revenues and costs
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