REG - Roxi Petroleum Plc - Final Results <Origin Href="QuoteRef">RXP.L</Origin> - Part 3
16/07/2015 12:07
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pertaining to any concession based on proved plus
probable, prospective and contingent resources; and (iii) the discount rate to be applied to such revenues and costs for
the purpose of deriving a recoverable value.
2.2 Income taxes
The Group has significant carried forward tax losses in several jurisdictions. Significant judgement is required in
determining deferred tax assets based on an assessment of the probability that taxable profits will be available against
which carried forward losses can be utilised.
Where the final tax outcome of these matters is different from the amounts that were initially recorded, such differences
will impact the profit or loss in the period in which such a determination is made.
2.3 Decommissioning
Provision has been made in the accounts for future decommissioning costs to plug and abandon wells. The costs of provisions
have been added to the value of the unproven oil and gas asset and will be depreciated on the unit of production basis. The
decommissioning liability is stated in the accounts at discounted present value and accreted up to the final expected
liability by way of an annual finance charge.
The Group has potential decommissioning obligations in respect of its interests in Kazakhstan. The extent to which a
provision is required in respect of these potential obligations depends, inter alia, on the legal requirements at the time
of decommissioning, the cost and timing of any necessary decommissioning works, and the discount rate to be applied to such
costs. Actual costs incurred in future periods may substantially differ from the amounts of provisions. In addition, future
changes in environmental laws and regulations, estimates of deposit useful lives and discount rates may affect the carrying
value of this provision
2.4 Share-based compensation
In order to calculate the charge for share-based compensation as required by IFRS 2, the Group makes estimates principally
relating to the assumptions used in its option-pricing model as set out in note 25.
2.5 Profit oil royalty liability
The profit oil royalty liability is initially recognised at the fair value based on the independent valuation and is
accounted as a derivative financial liability at fair value through profit or loss on the basis that future amount of
royalty payable will change depending on the oil field production levels and the future oil prices. The Group revalues its
royalty position annually with changes in fair values recognised in the profit or loss.
3 Segment reporting
Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision
maker. The chief operating decision maker, who is responsible for allocating resources and assessing the performance of the
operating segments and making strategic decisions, has been identified as the Board of Directors.
The Group operates in one operating segment (exploration for and production of oil in Kazakhstan). All revenues from test
production are generated domestically in Kazakhstan.
100% of Group's revenue was derived from major customer Universal Petroltrade LLP.
4 Operating loss
Group operating profit for the year has been arrived after charging:
2014$'000 2013$'000(restated)
Depreciation of property, plant and equipment (note 12) (53) (319)
Auditors' remuneration (note 5) (210) (166)
Staff costs (note 6) (2,291) (2,269)
Share based payment remuneration (note 6) (139) -
Impairment reversal of unproven oil and gas assets (note 11) 25,000 -
Gain/loss from investment in equity accounted joint venture (note 14) (5,626) (2,183)
5 Group Auditor's remuneration
Fees payable by the Group to the Company's auditor and its associates in respect of the year:
2014$'000 2013$'000(restated)
Fees for the audit of the annual financial statements 159 150
Auditing of accounts of associates of the Company 12 11
Other services - corporation tax compliance 39 5
210 166
6 Employees and Directors
Staff costs during the year Group2014$'000 Group2013$'000(restated)
Wages and salaries 1,922 1,846
Social security costs 207 255
Pension costs 162 168
Share-based payments 139 -
2,430 2,269
Average monthly number of people employed(including executive Directors) Group2014 Group2013
Technical 8 8
Field operations 31 18
Finance 9 9
Administrative and support 17 19
65 54
Directors' remuneration Group2014$'000 Group2013$'000
Director's emoluments 573 872
Share-based payments 111 -
684 872
The Directors are the key management personnel of the Company and the Group. Details of Directors' emoluments and interests
in shares are shown in the Remuneration Committee Report. The highest paid director had emoluments totalling US$240,000
(2013: US$240,000).
7 Finance cost
Group2014$'000 Group2013$'000(restated)
Loan interest payable 828 1,244
Discounting of loan receivable from Baverstock (note 16) - 2,902
Unwinding of discount on provisions (note 22) 130 155
958 4,301
8 Finance income
Group2014$'000 Group2013$'000(restated)
Discounting of loan receivable from Baverstock (note 16) 200 -
Other 325 339
525 339
9 Taxation
Analysis of charge for the year Group2014$'000 Group2013$'000(restated)
Current tax charge 3,025 640
Deferred tax charge (note 24) 5,786 1,335
8,811 1,975
Group2014$'000 Group2013$'000(restated)
Income (Loss) on ordinary activities before tax 20,094 (9,039)
Tax on the above at the standard rate of corporate income tax in the UK 21.5% (2013: 23.25%) 4,320 (2,102)
Effects of:
Non deductible expenses (3,079) 981
Return of capital gain tax * - (1,030)
Effect of income/(loss) from discontinued operations (1,210) (507)
Effect of different tax rates overseas 305 673
Withholding tax on interest 2,463 1,649
Unrecognised tax losses carried forward 6,012 2,311
8,811 1,975
*The amount was repaid by Tax Committee of Kazakhstan to BNG Ltd LLP during 2013 as partly repayment of capital gain
withholding tax paid in 2009-2010 (total tax withheld: US$4,169,214) related to the SPA with Canamens that was terminated
in May 2011.
10 Earnings/(loss) per share
Basic earnings/(loss) per share is calculated by dividing the income/(loss) attributable to ordinary shareholders by the
weighted average number of ordinary shares outstanding during the year including shares to be issued.
In order to calculate diluted earnings/(loss) per share, the weighted average number of ordinary shares in issue is
adjusted to assume conversion of all dilutive potential ordinary shares according to IAS33. Dilutive potential ordinary
shares include share options granted to employees and directors where the exercise price (adjusted according to IAS33) is
less than the average market price of the Company's ordinary shares during the period.
The calculation of income/(loss) per share is based on:
2014 2013(restated)
The basic weighted average number of ordinary shares inissue during the year* 835,797,523 789,612, 894
The diluted average number of ordinary shares in issue during the period 850,997,523 789,612,894
The basic weighted average number of ordinary shares inissue as of financials issue date* 877,173,464 829,154,870
The diluted average number of ordinary shares in issue as of financials issue date 894,385,778 829,154,870
The income/(loss) for the year attributable to owners of the parent from continuing operations (US$'000) 6,619 (8,349)
The loss for the year attributable to owners of the parent from discontinued operations (US$'000) (3,319) (1,288)
* Including shares to be issued from the day the funds were received for such shares.
11 Unproven oil and gas assets
COST Group $'000(restated)
Cost at 1 January 2013 172,228
Additions 8,818
Sales from test production (451)
Foreign exchange difference (2,655)
Cost at 31 December 2013 177,940
Additions 10,112
Sales from test production (882)
Foreign exchange difference (34,091)
Cost at 31 December 2014 153,079
ACCUMULATED IMPAIRMENT Group$'000
Accumulated impairment at1 January 2013 78,257
Foreign exchange difference (1,581)
Accumulated impairment at 31 December 2013 76,676
Reverse of impairment (25,000)
Foreign exchange difference (14,691)
Accumulated impairment at 31 December 2014 36,985
Net book value at 1 January 2013 93,971
Net book value at 31 December 2013 101,264
Net book value at 31 December 2014 116,094
See note 22 for Group's capital commitments.
11 Unproven oil and gas assets (continued)
Unproven oil and gas assets represent license acquisition cost and subsequent exploration expenditure in respect of two
licenses held by Kazakh group entities. The carrying values of those assets at 31 December 2014 were as follows: Beibars
Munai LLP US$ nil (2013: US$ nil), BNG Ltd LLP US$116,094,000 (2013: US$101,264,000).
The Directors have carried out an impairment review of these assets on a field by field basis. In carrying out this review
the Directors have taken into account the potential net present values of expected future cash flows and values implied by
farm-in agreements/sale and purchase agreements ("SPA") entered into in the previous years. The Directors consider the
values implied by the third party transactions related to BNG Ltd LLP disposals to be the best indicator of value currently
available. Accordingly where the value implied by these SPAs is below the net book value, a provision has been made to
reduce the carrying value of that asset to the value implied by the relevant SPA.
As a result of military training activities the Group currently cannot access the Beibars license area which resulted in a
force-majeure situation. Due to this ongoing force-majeure situation and the uncertainties surrounding the Beibars asset
the Directors made a full provision against this asset in the prior year.
During 2014 due to the positive test results from the recent BNG wells the board considered the carrying value of its BNG
oil and gas assets and as a result decided to partially reverse some of the previously recognized impairment. An amount of
US$25 million ($20 million net of deferred tax) was reversed in the period.
The Group measures its unproven oil and gas assets using Level 2 of the fair value hierarchy. The Group uses per barrel in
ground data for its fair value calculation, there are no other key assumptions on which management has based its
determination of fair value.
The methods and valuation techniques used for the purpose of measuring fair value of unproven oil and gas assets are
unchanged compared to the previous reporting periods.
12 Property, plant and equipment
Following the commencement of commercial production in December 2012 the Group reclassified its Munaily assets from
unproved oil and gas assets to proved oil and gas assets.
Group Provedoil and gas assets MotorVehicles Other Total
$'000 $'000 $'000 $'000
Cost at 1 January 2013 (restated) 1,525 195 730 2,450
Additions 26 10 84 120
Disposals - (8) (548) (556)
Reclassification from inventory - - 23 23
Impairment (1,200) - - (1,200)
Foreign exchange difference (29) (5) - (34)
Cost at 31 December 2013 (restated) 322 192 289 803
Additions - 24 166 190
Disposals (225) (53) (2) (280)
Reclassification from inventory - 12 86 98
Impairment - - - -
Foreign exchange difference (50) (40) (15) (105)
Cost at 31 December 2014 47 135 524 706
Depreciation at 1 January 2013 (restated) 1 74 451 526
Charge for the year 253 34 32 319
Disposals - (6) (249) (255)
Foreign exchange difference - (2) - (2)
Depreciation at 31 December 2013 (restated) 254 100 234 588
Charge for the year 17 18 18 53
Disposals (209) (35) - (244)
Foreign exchange difference (15) (5) (26) (46)
Depreciation at 31 December 2014 47 78 226 351
Net book value at:
1 January 2013 (restated) 1,524 121 279 1,924
31 December 2013 (restated) 68 92 55 215
31 December 2014 - 57 298 355
13 Investments (Company)
Investments Company$'000
Cost
At 1 January 2013 124,775
Additions -
Disposals -
At 31 December 2013 124,775
Additions -
Disposals -
At 31 December 2014 124,775
ImpairmentAt 1 January 2013 39,253
Impairment 25,000
At 31 December 2013 64,253
Impairment -
At 31 December 2014 64,253
Net book value at:
31 December 2013 60,522
31 December 2014 60,522
Direct investments
Name of undertaking Country of incorporation Effectiveholding andproportionof votingrights heldat 31 December 2014 Effective holding andproportionof votingrights heldat 31 December 2013 Natureof business
Eragon Petroleum Limited United Kingdom 59% 59% Holding Company
RS Munai BV Netherlands 0% 100% Holding Company
Beibars BV Netherlands 100% 100% Holding Company
Ravninnoe BV Netherlands 100% 100% Holding Company
Roxi Petroleum Kazakhstan LLP Kazakhstan 100% 100% Management Company
Ada BV Netherlands 0% 100% Dormant
Ada Oil BV Netherlands 0% 100% Dormant
Indirect investments held by Eragon Petroleum Limited
Name of undertaking Country of incorporation Effectiveholding andproportionof votingrights heldat 31 December 2014 Effective holding andproportionof votingrights heldat 31 December 2013 Natureof business
Galaz Energy BV Netherlands 100% 100% Holding Company
BNG Energy BV Netherlands 100% 100% Holding Company
Galaz and Company LLP* Kazakhstan 58% 58% Exploration Company
BNG Ltd LLP Kazakhstan 99% 99% Exploration Company
Munaily Kazakhstan LLP Kazakhstan 99% 99% Exploration Company
*Galaz and Company LLP is a joint venture and it has been accounted as equity investment within the Group (note 14).
Indirect investments held by Beibars BV
Name of undertaking Country of incorporation Effectiveholding andproportionof votingrights heldat 31 December 2014 Effective holding andproportionof votingrights heldat 31 December2013 Natureof business
Beibars Munai LLP Kazakhstan 50% 50% Exploration Company
Beibars Munai LLP is a subsidiary as the Group is considered to have control over the financial and operating policies of
this entity. Its results have been consolidated within the Group.
14. Investment in equity accounted joint venture
The Company changed its accounting policy on joint ventures from 1 January 2014 following the introduction of IFRS 11 Joint
arrangements which applies to the current year. The joint venture agreements and structures for Galaz and Company LLP
provide the Company with interests in the net assets of the Joint venture, rather than interests in its underlying assets
and obligations. Accordingly, under IFRS 11, the group's share of joint venture has been accounted for using the equity
method rather than proportionately consolidated, from the beginning of the earliest period presented.
Set out below is the summarised financial information for Galaz and Company LLP which is accounted for using the equity
method (amounts stated at 58% that represent Group's interest in Galaz and Company LLP).
Year ended 31 December 2014 Year ended 31 December 2013
Non-current assets 46,192 52,921
Current assets 175 201
Total assets 46,367 53,122
Non-current liabilities (28,514) (29,660)
Current liabilities (9,981) (7,265)
Total liabilities (38,495) (36,925)
Equity attributable to owners of the parent 4,644 9,556
Non-controlling interests 3,228 6,641
Expenses (5,626) (2,183)
Loss after tax (5,626) (2,183)
Reconciliation of the summarized financial information presented to the carrying amount of the group's interest in the
Galaz and Company LLP joint venture:
Year ended 31 December 2014 Year ended 31 December 2013
Opening net assets 16,197 18,894
Loss for the period (5,626) (2,183)
Other comprehensive loss (2,699) (514)
Closing net assets 7,872 16,197
Carrying value 7,872* 16,197
Total comprehensive loss for the year attributable to owners of the parent (4,912) (1,591)
Total comprehensive loss for the year attributable to NCI (3,413) (1,106)
Total comprehensive loss for the year (8,325) (2,697)
* In October 2014 the Group decided to sell its share in Galaz and Company LLP therefore the carrying value of Galaz assets
was reclassified to investments in equity accounted joint venture held for sale (note 18).
15 Inventories
Group Group Group Company Company
2014 2013 2012 2013 2012
$'000 $'000(restated) $'000(restated) $'000 $'000
Materials and supplies 1,247 2,383 1,069 - -
1,247 2,383 1,069 - -
Materials and supplies are principally comprised of concrete slabs, goods and some tubing to be used in the exploration and
development of the Group's oil and gas properties in Kazakhstan. All amounts are held at the lower of cost and net
realisable value.
During the year ended December 31, 2014 the Group wrote off US$46 thousand (2013: US$56 thousand) of materials to its
Consolidated Statement of Profit and Loss.
16 Other receivables
Group Group Group Company Company
2014 2013 2012 2014 2013
$ '000 $ '000(restated) $ '000(restated) $ '000 $'000
Amounts falling due after one year:
Advances paid 3,066 882 - - -
VAT receivable 4,524 4,538 3,692 31 10
Loan provided to Baverstock 2,704 2,504 5,807 - -
Intercompany receivables - - - 121,223 110,068
Amounts due from joint venture - 10,914 10,577 - -
10,294 18,838 20,076 121,254 110,078
Amounts falling due within one year:
Amounts due from joint venture 11,239 - - - -
Advances paid 222 92 354 22 11
Other receivables 193 342 119 100 47
11,654 434 473 122 58
VAT receivable relates to purchases made by operating companies in Kazakhstan and will be recovered after the commencement
of oil production and its export from Kazakhstan.
Loan provided to Baverstock relates to the US$10,000,000 facility provided by Galaz Energy BV to Baverstock exclusively for
the repayment of Kuat Oraziman's loan received in July 2007 (note 28.1 (a)). The total amount outstanding at the reporting
date was US$5,406,000 (2013: 5,406,000) which represent US$5,000,000 of principal and accrued interest. The loan is
interest free and is repayable from future dividends receivable by Baverstock. The carrying value of the receivable has
been adjusted to reflect the present value of the estimated cash flows discounted at 8%.
16 Other receivables (continued)
Intercompany receivables are shown net of provisions of US$25.1 million (2013: US$23.6 million), and bear interest rates
between LIBOR + 2% and LIBOR + 7%.
At 31 December of 2014 and 2013 amounts due from the joint venture relate to Galaz and Company LLP and bear interest rate
LIBOR+2%.
17 Cash and cash equivalents
Group Group Group Company Company
2014 2013 2012 2014 2013
$'000 $'000(restated) $'000(restated) $'000 $'000
Cash at bank and in hand 605 3,173 252 18 1,093
Funds are held in US Dollars, Sterling, Euros, Kazakh Tenge and other foreign currency accounts to enable the Group to trade and settle its debts in the currency in which they occur and in order to mitigate the Group's exposure to short-term foreign exchange fluctuations. All cash is held in floating rate accounts.
Group Group Group Company Company
2014 2013 2012 2014 2013
Denomination $'000 $'000(restated) $'000(restated) $'000 $'000
US Dollar 588 1,143 22 18 1,094
Sterling - (2) 5 - (1)
Kazakh Tenge 17 2,032 243 - -
Euro - - (18) - -
605 3173 252 18 1,093
18 Investment in equity accounted joint venture classified as held for sale
In October 2014 the Group decided to sell its entire 58% interest in Galaz and Company LLP to Netherlands Sinian Investment
BV (part of consortium led by Xinjiang Zhundong Petroleum Technology Co., a Company listed on the Shenzhen Stock Exchange
in China)for US$ 29.2 million, net cash to the Group will be equal to US$22.7 milllion (In October 2014 the Group received
an advance for exclusivity in relation to the proposed sale of Galaz and Company LLP in the amount of US$ 1 million from
Netherlands Sinian Investment BV). The sales and purchase agreement was signed in February 2015 and is subject to the
receipt of certain waivers from regulatory authorities. After all necessary waivers are received, the Group will transfer
its title to the Galaz interest that is expected to occur in the nearest future. Following the completion of the sale the
Group will have no further interest in Galaz and Company LLP.
The details of Galaz and Company LLP carrying value are presented in the note 14.
19 Called up share capital
Group and Company
Numberof ordinaryshares $'000 Numberof deferredshares $'000
Balance at 1 January 2013 609,590,281 10,777 373,317,105 64,702
Share issue in exchange of cash provided by a shareholder 146,635,001 2,361 - -
Borrowings converted to equity (note 21) 22,654,731 337 - -
Balance at 31 December 2013 778,880,013 13,475 373,317,105 64,702
Share issue in exchange of cash provided by a shareholder 72,898,543 1,174 - -
Share options exercised 2,700,000 45 - -
Borrowings converted to equity (note 21) 3,955,438 67 - -
Balance at 31 December 2014 858,433,994 14,761 373,317,105 64,702
US$3,700,000 was provided during 2014 by Mr. Kairat Satylganov according to the US$40million funding agreement (2013:
$22,500,000). As at 31 December 2014 the Company issued total 219,533,544 ordinary shares in favour of Mr. Satylganov in
exchange of US$26,200,000 funding.
20 Trade and other payables - current
Group Group Group Company Company
2014 2013 2012 2014 2013
$'000 $'000(restated) $'000(restated) $'000 $'000
Trade payables 951 324 779 218 143
Taxation and social security 2,237 102 331 24 23
Accruals 347 302 220 173 191
Other payables 1,968 2,060 2,533 10 11
Purchase consideration received in advance (note 18) 1,000 - - 1,000 -
Intercompany payables - - - 4,134 3,855
Advances received 5,368 793 135 - -
CIT payable 562 - - 562 -
12,433 3,581 3,998 6,121 4,223
Trade and other payables - non-current
Group Group Group Company Company
2014 2013 2012 2014 2013
$'000 $'000(restated) $'000(restated) $'000 $'000
Intercompany payables - - - 46,163 44,836
Taxation and social security 6,992 5,431 4,047 - -
6,992 5,431 4,047 46,163 44,836
21 Short-term borrowings
Group Group Group Company Company
2014 2013 2012 2014 2013
$'000 $'000 $'000 $'000 $'000
Loan from Bakmura/KNOC (a) - - 4,312 - -
Loan from Raditie (b) - - 2,500 - -
Other borrowings (c) 804 1,454 1,711 - 500
804 1,454 8,523 - 500
(a) On 19 March 2012, BNG Energy BV entered into an SPA with Bakmura LLP, a wholly owned subsidiary of KNOC Kaz B.V.,
which in turn is wholly owned by KNOC, for the sale of 35% of the interest in the BNG Contract Area for an initial cash
consideration of US$5 million plus an obligation to fund a further US$25 million of the BNG work programme. Under the terms
of SPA Bakmura provided a US$6 million loan to the Group at an interest rate of LIBOR+2% to finance the BNG Contract Area
operations until the completion of the SPA. In November 2012 the transaction was terminated. Consequently the Group repaid
the loan in 2013.
(b) On 10 November 2011 the Group entered into a short term interest free loan arrangement with Raditie NV whereby Raditie
NV lent US$2.5 million to the Group. Raditie NV had the right to convert this loan to 30% share in Munaily Kazakhstan LLP.
On 12 March 2013, Raditie NV agreed to convert the full amount of the loan into the ordinary shares of the Company (note
19). Subsequently, 22,654,731 new ordinary shares of the Company of 1p nominal value each were issued in favor of Raditie
NV at a conversion price of 7.412668p. (note 19).
(c) Short-term loans provided by Kazakhstan based individuals and are repayable on demand. US$804,000 (2013: US$954,000)
was provided by local individuals during 2007-2012 in the form of financial aid to Kazakhstan based entities for their work
programs execution. The Company agreed with the individuals the loans are repayable in future once the Group companies
reach free cash flows from oil sales. Of the total amount borrowed by the Group at 31 December 2014 US$490,000 (2013:
US$582,000) was payable to Kuat Oraziman (note 28.1 (b)). During 2014 the loan in the amount of US$ 500,000 out of 31
December 2013 balance was converted to 3,955,438 shares of the Company at a conversion price of 7.412668p. (note 19).
22 Provisions
Group only Employee holiday provision Liabilities under Social Development Program Abandonment fund 2013Total$'000
Balance at 1 January 2013 (restated) 117 3,723 448 4,288
Increase in provision 16 1,400 (155) 1,261
Paid in year - (802) - (802)
Unwinding of discount - 124 31 155
Foreign exchange difference (3) (102) (7) (112)
Balance at 31 December 2013 (restated) 130 4,343 317 4,790
Non-current provisions - 554 317 871
Current provisions 130 3,789 - 3,919
Balance at 31 December 2013 (restated) 130 4,343 317 4,790
Group only Employee holiday provision Liabilities under Social Development Program Abandonment fund 2014Total$'000
Balance at 1 January 2014 (restated) 130 4,343 317 4,790
Increase in provision 45 582 (47) 580
Paid in year - (376) - (376)
Unwinding of discount - 118 12 130
Foreign exchange difference (21) (685) (51) (757)
Balance at 31 December 2014 154 3,982 231 4,367
Non-current provisions - 709 104 813
Current provisions 154 3,273 127 3,554
Balance at 31 December 2014 154 3,982 231 4,367
Liabilities and commitments in relation to Subsoil Use Contracts are disclosed below:
a) Beibars Munai LLP
During 2007 Beibars Munai LLP, a subsidiary undertaking, and the Ministry of Energy and Mineral Resources of the Republic
of Kazakhstan signed a Contract for oil exploration within the block XXXVII-10 in Mangistauskaya oblast (Contract #2287).
The contract term expired in January 2012 and the Group has applied to the Ministry of Oil and Gas for the extension of the
Beibars exploration license, given the force majeure situation. The situation did not change as of December 31, 2014.
In accordance with the terms of the contract Beibars Munai LLP committed to the following:
· Investing not less that 5% of annual capital expenditures on exploration during the exploration period in
professional training of Kazakhstani personnel engaged in work under the contract;
· Investing US$1,000,000* to the development of Astana City during the second year of the contact term;
· Investing US$1,000,000* in equal tranches over the exploration period in the social development in the region; and
· Transferring, on an annual basis, 1% of exploration expenditures to a liquidation fund through a special deposit
account in a bank located within the Republic of Kazakhstan.
Beibars Munai LLP did not fulfil its obligations under the social program in 2014 and 2013 due to force-majeure
circumstances (see note 11).
* Unpaid amounts in respect of the above social obligations are included within liabilities of social programs above.
b) Munaily Kazakhstan LLP
MunailyKazakhstan LLP, a subsidiary, signed a contract # 1646 dated 31 January 2005 with the Ministry of Energy and Mineral
Resources of RK (now the Ministry of Oil and Gas (MOG) for the exploration and extraction of hydrocarbons on Munaily
deposit located in the Atyrau region.
The contract is valid for 25 years. On 13 July 2011 Munaily Kazakhstan LLP and a competent authority signed Addendum No. 5
to the Subsoil Use Contract (SSUC), which stipulates the oil production period to be 15 years to 2025 and approves the
minimum work program for the production period.
In accordance with the terms of the contract and addendums Munaily Kazakhstan LLP remains committed to the following:
· Social development of Atyrau region - US$600,000* over the period of the contract;
· To allocate US$400,000* to the Astana city development program;
· Professional education of engaged Kazakhstan personnel - not less than 1% of total investments;
· Transferring, on an annual basis, 1% of production expenditures to a liquidation fund through a special deposit
account in a bank located within the Republic of Kazakhstan; and
· To fund the minimum work program during the 15 year production period of US$29,271,756;
· Once the production stage begins, to pay the remaining part of historical costs of US$1,579,770 within 10 years in
equal quarterly instalments.
*Unpaid amounts in respect of the above social obligations are included within liabilities for social programs above.
c) BNG Ltd LLP
BNG Ltd LLP a subsidiary, signed a contract #2392 dated 7 June, 2007 with the Ministry of Energy and Mineral Resources of
RK for exploration at Airshagyl deposit, located in Mangistau region. Under addendum No.1 dated 17 April 2008, the Contract
Area was increased. The contract was valid for 4 years and expired on 7 June, 2011. Addendum No. 6 to the Subsoil Use
Contract for extension of exploration period up to June 2013 was obtained on 13 July 2011. On 16 July 2013 BNG Ltd LLP
signed Addendum No. 7 extending the exploration period for two consecutive years until June 2015.
In accordance with the terms of the contract and addendums, BNG Ltd LLP remains committed to the following:
· For the two-year extension period up to 2015 US$625,000 per annum should be invested in the social development of the
region;
· To fund minimum work program during the extended exploration period of US$26,332,000;
· Investing not less than 1% of total investments in professional training of Kazakhstani personnel engaged in work
under the contract; and
· Transferring, on an annual basis, 1% of exploration expenditures to a liquidation fund through a special deposit
account in a bank located within the Republic of Kazakhstan.
BNG Ltd LLP is in full compliance with licence terms and expects to fulfil 100% its minimum work program until June 2015.
23 Borrowings
Group Group Group Company Company
2014 2013 2012 2014 2013
$'000 $'000(restated) $'000(restated) $'000 $'000
Loan from Vertom(a) 9,075 8,248 7,420 9,075 8,248
Interest free loan from Kuat Oraziman (b) 1,428 1,428 1,428 - -
10,503 9,676 8,848 9,075 8,248
(a) On 29 September 2011 the Company entered into the loan facility with Vertom International NV ("Vertom") whereby
Vertom agreed to lend up to US$5 million to the Company with an associated interest of 12% per annum. The Company has
offered Vertom security over its investments in its operating assets in respect to this loan facility. On 30 April 2012 the
Group extended the term of the loan facility arrangement with Vertom for further two years to 30 April 2014 and at the same
time increased the facility amount to US$7 million. On 28 June 2013 the term ofthe loan facility was extended until 30
April 2016 (note 28.1 (c)). The loan extension represents a substantial modification of the terms of the existing financial
liability and has been accounted for as an extinguishment of the original financial liability and recognition of a new
financial liability.
(b) At 31 December 2014, 2013 and 2012 the principal amount of US$1,428,000 represents an interest free loan from Mr
Kuat Oraziman that is repayable on 27 June 2017(note 28.1 (b)). The carrying amount and fair value of the loan at 31
December 2014 were not materially different.
24 Deferred tax
Deferred tax liabilities comprise:
Group2014 Group2013 Group2012
$'000 $'000(restated) $'000(restated)
Deferred tax on exploration and evaluation assets acquired 11,164 7,415 7,563
11,164 7,415 7,563
The Group recognises deferred taxation on fair value uplifts to its oil and gas projects arising on acquisition. These
liabilities reverse as the fair value uplifts are depleted or impaired.
The movement on deferred tax liabilities was as follows:
Group2014 Group2013
$'000 $'000(restated)
At beginning of the year 7,415 7,563
Deferred tax related to impairment reversal (note 9) 5,000 -
Foreign exchange (1,251) (148)
11,164 7,415
As at 31 December 2014 the Group has accumulated deductible tax expenditure related to its Kazakhstan assets of
approximately US$150 million (2013: US$115 million; 2012: US$110 million) available to carry forward and offset against
future profits. This represents an unrecognised deferred tax asset of approximately US$30 million (2013: US$24 million;
2012: US$22 million). Tax losses carried forward related to Group's UK part have been recognized due to expected net
taxable profit in UK.
The movement on deferred tax asset was as follows:
' Group2014 Group2013 Group2012
$'000 $'000 $'000
At beginning of the year 786 2,121 3,442
Offset with taxable profit (Note 9) (786) (1,335) (1,321)
At end of the year - 786 2,121
25 Share option scheme
During the year the Company had in issue equity-settled share-based instruments to its Directors and certain employees.
Equity-settled share-based instruments have been measured at fair value at the date of grant and are expensed on a
straight-line basis over the vesting period, based on an estimate of the shares that will eventually vest. Options
generally vest in four equal tranches over the two years following the grant.
The options were issued to Directors and employees as follows:
Number of options granted Number of options expired Options exercised Total options outstanding Weighted average exercise price in pence (p) per share Expiry
As at 31 December 2013 73,508,226 (23,717,298) - 49,790,928 24
Directors 9,750,000 - - 9,750,000 20 21 August 2024
Employees and others 2,450,000 (6,969,666) (2,700,000) (7,219,666) - 21 August 2024
As at 31 December 2014 85,708,226 (30,686,964) (2,700,000) 52,321,262 18
Options issued during 2014 will be vested in three years. 40,121,262 outstanding options as at 31 December 2014 are
exercisable.
The range of exercise prices of share options outstanding at the year end is 4p - 65p (2013: 4p - 65p). The weighted
average remaining contractual life of share options outstanding at the end of the year is 6 years (2013: 6.20 years).
26 Derivative financial liability
The derivative financial liabilities at the Group's and the Company's Statements of Financial Position as at 31 December
2014, 2013 and 2012 are represented by the carrying value of royalty payable to Canamens from future oil revenues of
US$6,790,000 (2013 and 2012: US$5,240,000) and warrant liability payable of US$8,000 as at 31 December 2013 and 2012.
Future revenue oil royalty
During 2009 the Company entered into a sale and purchase agreement to dispose of 35% of its interest in BNG Ltd LLP to
Canamens BNG BV ("Canamens"). The deal subsequently was terminated and on 10 May 2011, the Group received back its 35%
interest in BNG Ltd LLP from Canamens. In return for the reassignment of the loans Roxi Petroleum Plc agreed to pay
Canamens a royalty equivalent to 1.5% of the future gross revenues generated from the BNG operating asset. The fair value
of the royalty payable at 31 December 2013 and 2012 comprised US$5,240,000. As at 31 December 2014 the Directors revised
their estimate of the liability to US$ 6.7 million.
Warrants issued
The following table summarises warrants outstanding at 31 December 2014:
1
Description Grant Number $'000 Expiry date
Exercised Expired Year End Grant Exercised Profit or Loss effect Year End
GEM Global Yield Fund Limited (1) - - 9,000,000 - - - (8) - 26 May 2014
TOTAL - - 9,000,000 - - - - -
The following table summarises warrants outstanding at 31 December 2013 and 2012:
1
Description Grant Number $'000 Expiry date
Exercised Expired Year End Grant Exercised Profit or Loss effect Year End
GEM Global Yield Fund Limited (1) 9,000,000 - - - - - 8 26 May 2014
TOTAL 9,000,000 - - - - - 8
The Company entered into a £15,000,000 equity line of credit with GEM Global Fund Limited in return for 9,000,000 warrants.
The warrants were initially recognised at a fair value of US$1,106,000 and have been re-valued and expired during 2014
(2013: US$8,000).
Additionally the Company has 7.5 million warrants valid until 21 May 2017 that are recognized in Consolidated and Parent
Company Statements of Changes in Equity.
Total number of warrants that remained outstanding at the yearend was 7,500,000
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