REG - Roxi Petroleum Plc - Final Results <Origin Href="QuoteRef">RXP.L</Origin> - Part 3
03/06/2016 07:06
- Part 3: For the preceding part double click ID:nRSC1034Ab
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.
1.18 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.
1.19 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.
1.20 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.
1.21 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.
1.22 Interest receivable and payable
Interest income and expense are reported on an accrual basis using the
effective interest rate method.
1.23 Accounts not presented in sterling
For reference the year end exchange rate from sterling to US$ was 1.53 and the
average rate during the year was 1.48.
1.24 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.
1.25 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 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.
95% of Group's revenue was derived from major customer Exditrade LLP.
4 Operating loss
Group operating profit for the year has been arrived after charging:
2015$'000 2014$'000
Depreciation of property, plant and equipment (note 12) (40) (53)
Auditors' remuneration (note 5) (220) (210)
Staff costs (note 6) (2,001) (2,291)
Share based payment remuneration (note 6) (555) (139)
Impairment reversal of unproven oil and gas assets (note 11) - 25,000
Gain/loss from investment in equity accounted joint venture (note 14) (914) (5,626)
5 Group Auditor's remuneration
Fees payable by the Group to the Company's auditor and its associates in
respect of the year:
2015$'000 2014$'000
Fees for the audit of the annual financial statements 104 159
Auditing of accounts of associates of the Company 9 12
Other services - corporation tax compliance 107 39
220 210
6 Employees and Directors
Staff costs during the year Group2015$'000 Group2014$'000
Wages and salaries 1,699 1,922
Social security costs 176 207
Pension costs 126 162
Share-based payments 555 139
2,556 2,430
Average monthly number of people employed(including executive Directors) Group2015 Group2014
Technical 14 8
Field operations 34 31
Finance 9 9
Administrative and support 21 17
78 65
Directors' remuneration Group2015$'000 Group2014$'000
Director's emoluments 549 573
Share-based payments 443 111
992 684
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 (2014: US$240,000).
7 Finance cost
Group2015$'000 Group2014$'000
Loan interest payable 828 828
Unwinding of discount on provisions (note 22) 118 130
946 958
8 Finance income
Group2015$'000 Group2014$'000
Discounting of loan receivable from Baverstock (note 16) 215 200
Other 19 325
234 525
9 Taxation
Analysis of charge for the year Group2015$'000 Group2014$'000
Current tax charge 5,280 3,025
Deferred tax charge - 5,786
5,280 8,811
Group2015$'000 Group2014$'000
Income/(loss) on ordinary activities before tax (1,869) 20,094
Tax on the above at the standard rate of corporate income tax in the UK 21.5% (2014: 21.5%) (402) 4,320
Effects of:
Non deductible expenses (22,230) (3,079)
Effect of income/(loss) from discontinued operations 4,012 (1,210)
Effect of different tax rates overseas 499 305
Withholding tax on interest 1,126 2,463
Unrecognised tax losses carried forward 22,275 6,012
5,280 8,811
10 Earnings/(loss) per share
Basic earnings/(loss) per share is calculated by dividing the income/(loss)
attributable to ordinary shareholders by the weighted average number of
ordinary shares outstanding during the year including shares to be issued.
In order to calculate diluted earnings/(loss) per share, the weighted average
number of ordinary shares in issue is adjusted to assume conversion of all
dilutive potential ordinary shares according to IAS33. Dilutive potential
ordinary shares include share options granted to employees and directors where
the exercise price (adjusted according to IAS33) is less than the average
market price of the Company's ordinary shares during the period.
The calculation of income/(loss) per share is based on:
2015 2014
The basic weighted average number of ordinary shares inissue during the year* 914,698,721 835,797,523
The diluted average number of ordinary shares in issue during the period 924,586,221 850,997,523
The basic weighted average number of ordinary shares inissue as of financials issue date* 949,335,601 877,173,464
The diluted average number of ordinary shares in issue as of financials issue date 957,735,601 894,385,778
The income/(loss) for the year attributable to owners of the parent from continuing operations (US$'000) (2,640) 5,069
The income/(loss) for the year attributable to owners of the parent from discontinued operations (US$'000) 10,469 (3,319)
* Including shares to be issued from the day the funds were received for such
shares.
11 Unproven oil and gas assets
COST Group $'000
Cost at 1 January 2014 177,940
Additions 10,112
Sales from test production (882)
Foreign exchange difference (34,091)
Cost at 31 December 2014 153,079
Additions 11,734
Sales from test production (882)
Foreign exchange difference (91,803)
Cost at 31 December 2015 72,128
ACCUMULATED IMPAIRMENT Group$'000
Accumulated impairment at 1 January 2014 76,676
Reverse of impairment (25,000)
Foreign exchange difference (14,691)
Accumulated impairment at 31 December 2014 36,985
Foreign exchange difference (22,180)
Accumulated impairment at 31 December 2015 14,805
Net book value at 1 January 2014 101,264
Net book value at 31 December 2014 116,094
Net book value at 31 December 2015 57,323
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 2015 were as
follows: Beibars Munai LLP US$ nil (2014: US$ nil), BNG Ltd LLP US$57,323,000
(2014: US$116,094,000).
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 Proved Motor Other Total
oil and gas assets Vehicles
$'000 $'000 $'000 $'000
Cost at 1 January 2014 322 192 289 803
Additions - 24 166 190
Disposals (225) (53) (2) (280)
Reclassification from inventory - 12 86 98
Foreign exchange difference (50) (40) (15) (105)
Cost at 31 December 2014 47 135 524 706
Additions - - 30 30
Foreign exchange difference - (31) (252) (283)
Cost at 31 December 2015 47 104 302 453
Depreciation at 1 January 2014 254 100 234 588
Charge for the year 17 18 18 53
Disposals (209) (35) - (244)
Foreign exchange difference (15) (5) (26) (46)
Depreciation at 31 December 2014 47 78 226 351
Charge for the year - 12 28 40
Foreign exchange difference - (38) (95) (133)
Depreciation at 31 December 2015 47 52 159 258
Net book value at:
31 December 2014 - 57 298 355
31 December 2015 - 52 143 195
13 Investments (Company)
Investments Company$'000
Cost
At 1 January 2014 124,775
Additions -
Disposals -
At 31 December 2014 124,775
Additions -
Disposals -
At 31 December 2015 124,775
ImpairmentAt 1 January 2014 64,253
Impairment -
At 31 December 2014 64,253
Impairment -
At 31 December 2015 64,253
Net book value at:
31 December 2014 60,522
31 December 2015 60,522
Direct investments
Name of undertaking Country of incorporation Effectiveholding andproportionof votingrights heldat 31 December 2015 Effective holding andproportionof votingrights heldat 31 December 2014 Natureof business
Eragon Petroleum Limited United Kingdom 59% 59% Holding Company
Eragon Petroleum FZE Dubai 100% - Management Company
Beibars BV Netherlands 100% 100% Holding Company
Ravninnoe BV Netherlands 100% 100% Holding Company
Roxi Petroleum Kazakhstan LLP Kazakhstan 100% 100% Management Company
Indirect investments held by Eragon Petroleum Limited
Name of undertaking Country of incorporation Effectiveholding andproportionof votingrights heldat 31 December 2015 Effective holding andproportionof votingrights heldat 31 December 2014 Natureof business
Galaz Energy BV Netherlands 100% 100% Holding Company
BNG Energy BV Netherlands 100% 100% Holding Company
Galaz and Company LLP* Kazakhstan 0% 58% Exploration Company
BNG Ltd LLP Kazakhstan 99% 99% Exploration Company
Munaily Kazakhstan LLP Kazakhstan 99% 99% Exploration Company
*Interest at Galaz and Company LLP has been sold during 2015 (note 14).
Indirect investments held by Beibars BV
Name of undertaking Country of incorporation Effectiveholding andproportionof votingrights heldat 31 December 2015 Effective holding andproportionof votingrights heldat 31 December2014 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. Discontinued operation 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 Joint
venture, rather than interests in its underlying assets and obligations.
Accordingly, under IFRS 11, the group's share of joint venture have been
accounted for using the equity method rather than proportionately
consolidated, from the beginning of the earliest period presented.
On 10 February 2015 Galaz Energy BV entered into a SPA with Netherlands Sinian
Investment BV ("SI BV") for the sale of its residual 58% interest in Galaz and
Company LLP, resulting in a profit on disposal of $18.7million as disclosed in
Note 18. The transaction was finalized on 20 May, 2015.
Set out below is the summarised financial information for Galaz and Company
LLP which was accounted for using the equity method up to 20 May, 2015
(amounts stated at 58% that represent Group's interest in Galaz and Company
LLP).
Year ended 31 December 2015 Year ended 31 December 2014
Non-current assets - 46,192
Current assets - 175
Total assets - 46,367
Non-current liabilities - (28,514)
Current liabilities - (9,981)
Total liabilities - (38,495)
Equity attributable to owners of the parent - 4,644
Non-controlling interests - 3,228
Expenses (914) (5,626)
Loss after tax (914) (5,626)
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 2015 Year ended 31 December 2014
Opening net assets 7,872 16,197
Loss for the period (914) (5,626)
Other comprehensive loss 289 (2,699)
Closing net assets (7,247) 7,872
Carrying value - 7,872
Total comprehensive loss for the year attributable to owners of the parent - (4,912)
Total comprehensive loss for the year attributable to NCI (369) (3,413)
Total comprehensive loss for the year (256) (8,325)
15 Inventories
Group Group
2015 2014
$'000 $'000
Materials and supplies 12 1,247
12 1,247
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, 2015 the Group wrote off US$27 thousand
(2014: US$46 thousand) of materials to its Consolidated Statement of Profit
and Loss.
16 Other receivables
Group Group Company Company
2015 2014 2015 2014
$ '000 $ '000 $ '000 $'000
Amounts falling due after one year:
Advances paid 5,479 3,066 - -
VAT receivable 3,040 4,524 50 31
Loan provided to Baverstock 2,919 2,704 - -
Receivable from Baverstock due to royalty settlement 3,202 - 3,202 -
Intercompany receivables - - 114,632 121,223
14,640 10,294 117,884 121,254
Amounts falling due within one year:
Amounts due from joint venture - 11,239 - -
Advances paid 87 222 2 22
Receivable under SPA 1,827 - - -
Other receivables 182 193 - 100
2,096 11,654 2 122
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 (2014: 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%.
On July 24, 2015 the Company entered into an agreement with Canamens Limited
and Sector Spesit IV to cancel future royalty payments due to them from
production from Company's BNG asset in return for the issue of 46,661,654
fully paid Company's ordinary shares. That resulted to the revaluation and the
cancellation of the derivative financial liability in the amount of US$2.2
million and US$4.6 million respectively, and recognition of the receivable
from Baverstock in the amount of $3.2 million related to the Baverstock
portion of the Company's royalty obligation.
Intercompany receivables are shown net of provisions of US$26.6 million (2014:
US$25.1 million), and bear interest rates between LIBOR + 2% and LIBOR + 7%.
At 31 December of 2014 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 Company Company
2015 2014 2015 2014
$'000 $'000 $'000 $'000
Cash at bank and in hand 10,462 605 25 18
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 Company Company
2015 2014 2015 2014
Denomination $'000 $'000 $'000 $'000
US Dollar 10,415 588 22 18
Sterling 3 - 3 -
Kazakh Tenge 44 17 - -
10,462 605 25 18
18 Galaz disposal
On 10 February, 2015 Galaz Energy BV entered into a SPA with 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
the sale of its 58% of the equity in Galaz and Company LLP for US$29.2
million.
This transaction completed on 20 May, 2015. Consequently as a result of the
transaction Roxi lost its share in Galaz and Company LLP.
Up to the date of disposal, Galaz and Company LLP was treated as an investment
in equity accounted joint venture.
The gain on disposal of Galaz and Company LLP was determined as follows:
At date ofdisposal$'000
Total consideration under SPA 29,232
Adjustment for net working capital position at the date of disposal (966)
Total consideration after adjustment for net working capital position 28,266
Net assets disposed (7,247)
Less release of cumulative translation reserve1 (2,361)
Gain on disposal recognised in the income statement 18,658
Net cash inflow2 22,908
1- the US$2.4 million release of cumulative translation reserves arose from
the disposal of the Company's 34.22% net interest in Galaz and Company LLP to
SI BV. This represents the previously capitalised translation losses
attributed to the interest sold, now written off during 2015.
2- of the net US$28,266,000 purchase consideration US$3,531,000 was withheld
by SI BV in order to pay withholding tax on the capital gain that arose in
Galaz Energy BV. Purchase consideration in the amount of US$22,908,000 was
received during 2014 and 2015. The residual part of purchase consideration net
of capital gain tax in the amount of US$1,827,000 is expected to be received
by end of 2016. This amount is presented in other receivables line of
Consolidated Statement of Financial Position.
19 Called up share capital
Group and Company
Numberof ordinaryshares $'000 Numberof deferredshares $'000
Balance at 1 January 2014 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
Share issue in exchange of cash provided by a shareholder 25,137,429 405 - -
Share options exercised 5,712,500 87 - -
Liability converted to equity (note 16) 46,661,654 726 - -
Balance at 31 December 2015 935,945,577 15,979 - -
US$3,000,000 was provided during 2015 by Mr. Kairat Satylganov according to
the US$40million funding agreement (2014: $3,700,000). As at 31 December 2015
the Company issued total 244,670,973 ordinary shares in favour of Mr.
Satylganov in exchange of US$29,200,000 funding.
20 Trade and other payables - current
Group Group Company Company
2015 2014 2015 2014
$'000 $'000 $'000 $'000
Trade payables 372 951 212 218
Taxation and social security 2,225 2,237 34 24
Accruals 212 347 180 173
Other payables 1,995 1,968 15 10
Purchase consideration received in advance (note 18) - 1,000 - 1,000
Intercompany payables - - - 4,134
Advances received 165 5,368 - -
CIT payable 763 562 763 562
5,732 12,433 1,204 6,121
Trade and other payables - non-current
Group Group Company Company
2015 2014 2015 2014
$'000 $'000 $'000 $'000
Intercompany payables - - 39,234 46,163
Taxation and social security 8,297 6,992 - -
8,297 6,992 39,234 46,163
21 Short-term borrowings
Group Group Company Company
2015 2014 2015 2014
$'000 $'000 $'000 $'000
Other borrowings 308 804 - -
308 804 - -
Short-term loans provided by Kazakhstan based individuals and are repayable on
demand. US$308,000 (2014: US$804,000) 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 2015
US$140,000 (2014: US$490,000) was payable to Kuat Oraziman (note 28.1 (c)).
22 Provisions
Group only Employee holiday provision Liabilities under Social Development Program Abandonment fund 2014Total$'000
Balance at 1 January 2014 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
Group only Employee holiday provision Liabilities under Social Development Program Abandonment fund 2015Total$'000
Balance at 1 January 2014 154 3,982 231 4,367
Increase/(decrease) in provision (21) 1,121 9 1,109
Paid in year - (693) - (693)
Unwinding of discount - 112 6 118
Foreign exchange difference (71) (987) (106) (1,164)
Balance at 31 December 2015 62 3,535 140 3,737
Non-current provisions - 640 140 780
Current provisions 62 2,895 - 2,957
Balance at 31 December 2015 62 3,535 140 3,737
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, 2015.
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
2015 and 2014 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. On 22 June 2015 BNG Ltd LLP
signed Addendum No. 9 extending the exploration period for three consecutive
years until June 2018. On 24 December 2015 BNG Ltd LLP signed Addendum No.10
according to which the geological territory was extended by 140.6 sq
kilometres.
In accordance with the terms of the contract and addendums, BNG Ltd LLP
remains committed to the following:
· For the three-year extension period up to 2018 US$700,000 per annum
should be invested in the social development of the region;
· To fund minimum work program during the extended exploration period of
US$16,540,000
· 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 2018.
23 Borrowings
Group Group Company Company
2015 2014 2015 2014
$'000 $'000 $'000 $'000
Loan from Vertom(a) 9,903 9,075 9,903 9,075
Interest free loan from Kuat Oraziman (b) - 1,428 - -
9,903 10,503 9,903 9,075
(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 of the loan facility was extended until 30
April 2016. On 26 June 2015 the term of the loan facility was extended until
30 April 2018. 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 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 (c)). The loan was repaid to Kuat Oraziman during 2015.
24 Deferred tax
Deferred tax liabilities comprise:
Group2015 Group2014
$'000 $'000
Deferred tax on exploration and evaluation assets acquired 7,485 11,164
7,485 11,164
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:
Group2015 Group2014
$'000 $'000
At beginning of the year 11,164 7,415
Deferred tax related to impairment reversal (note 9) - 5,000
Foreign exchange (3,679) (1,251)
7,485 11,164
As at 31 December 2015 the Group has accumulated deductible tax expenditure
related to its Kazakhstan assets of approximately US$106 million (2014: US$150
million) available to carry forward and offset against future profits. This
represents an unrecognised deferred tax asset of approximately US$21 million
(2014: US$30 million).
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
As at 31 December 2014 85,708,226 (30,686,964) (2,700,000) 52,321,262 18
Directors - - - - -
Employees and others - (2,420,670) (5,712,500) (8,133,170) -
As at 31 December 2015 85,708,226 (33,107,634) (8,412,500) 44,188,092 19
Options issued during 2014 will be vested in three years. 31,988,092
outstanding options as at 31 December 2015 are exercisable.
The range of exercise prices of share options outstanding at the year end is
4p - 65p (2014: 4p - 65p). The weighted average remaining contractual life of
share options outstanding at the end of the year is 5.5 years (2014: 6
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 are represented by the
carrying value of royalty payable to Canamens from future oil revenues of
US$6,790,000.
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 2014 comprised US$6.7
million.
On July 24, 2015 the Company entered into an agreement with Canamens Limited
and Sector Spesit IV to cancel future royalty payments due That resulted to
the revaluation and the cancellation of the derivative financial liability in
the amount of US$2.2 million and US$4.6 million respectively, and recognition
of the receivable from Baverstock in the amount of $3.2 million related to the
Baverstock portion of the Company's royalty obligation (note 16).
The Company has 7.5
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