REG - Roxi Petroleum Plc - Final Results <Origin Href="QuoteRef">RXP.L</Origin> - Part 4
16/07/2015 12:07
- Part 4: For the preceding part double click ID:nRSW8872Qc
(2013 and 2012: 16,500,000). They were
accounted in other reserves in the Parent and Consolidated Statement of Changes in Equity.
27 Financial instrument risk exposure and management
In common with all other businesses, the Group and Company are exposed to risks that arise from its use of financial
instruments. This note describes the Group and Company's objectives, policies and processes for managing those risks and
the methods used to measure them. Further quantitative information in respect of these risks is presented throughout these
financial statements.
The significant accounting policies regarding financial instruments are disclosed in note 1.
There have been no substantive changes in the Group or Company's exposure to financial instrument risks, its objectives,
policies and processes for managing those risks or the methods used to measure them from previous years unless otherwise
stated in this note.
Principal financial instruments
The principle financial instruments used by the Group and Company, from which financial instrument risk arises, are as
follows:
Financial assets Group2014$'000 Group2013$'000(restated) Group2012$'000(restated) Company2014$'000 Company2013$'000
Loans and receivables
Intercompany receivables - - - 114,342 103,327
Amounts due from joint venture 11,239 10,914 10,577 6,881 6,741
Other receivables- current 193 342 119 100 47
Other receivables - non-current 3,026 2,839 6,144 - -
Cash and cash equivalents 605 3,173 252 18 1,093
15,063 17,268 17,092 121,341 111,208
Financial liabilities Group2014$'000 Group2013$'000(restated) Group2012$'000(restated) Company2014$'000 Company2013$'000
Financial liabilities at amortised cost
Trade and other payables 3,266 2,686 3,532 4,535 4,200
Other payables - non-current 6,790 5,248 5,248 52,953 50,084
Borrowings - current 804 1,454 8,523 - 500
Borrowings - non-current 10,503 9,676 8,848 9,075 8,248
21,363 19,064 26,151 66,563 63,032
As at 31 December 2014 the carrying value of financial liabilities measured at fair value through profit and loss for the
Group and Company was US$6,790,000 (2013: Group and Company US$5,248,000).
Fair value of financial assets and liabilities
At 31 December 2014 and 2013, the fair value and the book value of the Group and Company's liabilities were as follows:
Group and CompanyFair value measurements at 31 December 2014
Level 1 $000 Level 2 $000 Level 3$000
Financial Liability - - 6,790
Future profit oil royalty - - 6,790
Group and CompanyFair value measurements at 31 December 2013
Level 1 $000 Level 2 $000 Level 3 $000
Financial Liability - - 5,248
Future profit oil royalty - - 5,240
Warrant liability - - 8
Group and CompanyFair value measurements at 31 December 2012
Level 1 $000 Level 2 $000 Level 3 $000
Financial Liability - - 5,248
Future profit oil royalty - - 5,240
Warrant liability - - 8
The derivative financial asset is measured on initial recognition and subsequently at fair value by reference to the
probability of various outcomes and categorised as level 3 measurement:
· Level 1 fair value measurements are those derived from quoted prices (unadjusted) in active markets for identical
assets or liabilities.
· Level 2 fair value measurements are those derived from inputs other than quoted prices included within Level 1
that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices).
· Level 3 fair value measurements are those derived from valuation techniques that include inputs for the asset or
liability that are not based on observable market data (unobservable inputs).
The fair values of the financial liabilities are included at the amount at which the instrument could be exchanged in a
current transaction between willing parties, other than in a forced or liquidation sale.
The fair value of the warrant liability was initially recognised utilising the Black-Scholes model based on the underlying
contract terms. The fair value is recalculated when warrants are issued, exercised, expired or at year end utilising the
Black-Scholes model. The model takes into account the effect of financial assumptions, including the future share price
volatility, risk-free interest rates and expected life.
The fair value of the future profit oil royalty payable to Canamens as at 31 December 2013 and 2012 was calculated using
discounted cash flows expected from future production at BNG field during 20 years starting 2015. The discount rate used in
calculations of 8% is approximately equal to the current cost of debt for BNG LLP Ltd. The fair value of thefuture profit
oil royalty payable to Canamens as at 31 December 2014 was revised following a review by the Directors.
During 2014 and 2013 the movement in Group and Company's financial liabilities was as follows:
Financial Liability 2014$'000 2013$'000
Balance at the beginning of the year 5,248 5,248
Change in value taken to the Profit or Loss 1,542 -
Balance at 31 December 6,790 5,248
Principal financial instruments
The principal financial instruments used by the Group and Company, from which financial instrument risk arises, are as
follows:
· other receivables
· cash at bank
· trade and other payables
· borrowings
· derivative financial liability
General objectives, policies and processes
The Board has overall responsibility for the determination of the Group and Company's risk management objectives and
policies and, whilst retaining ultimate responsibility for them, it has delegated the authority for designing and operating
processes that ensure the effective implementation of the objectives and policies to the Group and Company's finance
function. The Board receives regular reports from the finance function through which it reviews the effectiveness of the
processes put in place and the appropriateness of the objectives and policies it sets.
The overall objective of the Board is to set policies that seek to reduce risk as far as possible without unduly affecting
the Group and Company's competitiveness and flexibility. Further details regarding these policies are set out below:
Credit risk
Credit risk arises principally from the Group's other receivables. It is the risk that the counterparty fails to discharge
its obligation in respect of the instrument. The maximum exposure to credit risk equals the carrying value of these items
in the financial statements.
When commercial exploitation commences sales will only be made to customers with appropriate credit rating. Sales during
test production are made on prepayment base thereby eliminating credit risk.
Credit risk with cash and cash equivalents is reduced by placing funds with banks with high credit ratings.
Capital
The Company and Group define capital as share capital, share premium, deferred shares, shares to be issued, capital
contribution reserve, other reserves, retained earnings and borrowings. In managing its capital, the Group's primary
objective is to provide a return for its equity shareholders through capital growth. Going forward the Group will seek to
maintain a gearing ratio that balances risks and returns at an acceptable level and also to maintain a sufficient funding
base to enable the Group to meet its working capital and strategic investment needs. In making decisions to adjust its
capital structure to achieve these aims, either through new share issues or the issue of debt, the Group considers not only
its short-term position but also its long-term operational and strategic objectives.
The Group's gearing ratio as at 31 December 2014 was 12% (2013:10%; 2012:18%).
There has been no other significant changes to the Group's Management objectives, policies and processes in the year.
Liquidity risk
Liquidity risk arises from the Group and Company's Management of working capital and the amount of funding committed to its
exploration programme. It is the risk that the Group or Company will encounter difficulty in meeting its financial
obligations as they fall due.
The Group and Company's policy is to ensure that it will always have sufficient cash to allow it to meet its liabilities
when they become due. To achieve this aim, it seeks to raise funding through equity finance, debt finance and farm-outs
sufficient to meet the next phase of exploration and where relevant development expenditure.
The Board receives cash flow projections on a periodic basis as well as information regarding cash balances. The Board will
not commit to material expenditure in respect of its ongoing exploration programmes prior to being satisfied that
sufficient funding is available to the Group to finance the planned programmes.
For maturity dates of financial liabilities as at 31 December 2014, 2013 and 2012 see table below:
On Demand Less than 3 months 3-12 months 1- 5 years Over 5 years Total
Group 2014 $'000 804 3,266 - 11,570 12,232 27,872
Group 2013 $'000 (restated) 1,454 2,686 - 11,570 10,679 26,389
Group 2012 $'000 (restated) 1,711 3,532 6,849 11,570 9,295 32,957
Company 2014 $'000 400 - 10,142 67,419 77,961
Company 2013 $'000 500 345 - 10,142 67,197 78,184
Interest rate risk
The majority of the Group's borrowings are at variable rates of interest linked to LIBOR. As a result the Group is exposed
to interest rate risk. An increase of LIBOR by 1% would have resulted in an increase in finance expense of approximately
US$100,000 (2013: US$155,000).
There is no significant interest rate risk on the cash and cash equivalents as the Group does not have significant surplus
cash balances to hold in interest bearing accounts.
Currency risk
The Group and Company's policy is, where possible, to allow group entities to settle liabilities denominated in their
functional currency (primarily US Dollar and Kazakh Tenge) in that currency. Where the Group or Company entities have
liabilities denominated in a currency other than their functional currency (and have insufficient reserves of that currency
to settle them) cash already denominated in that currency will, where possible, be transferred from elsewhere within the
Group.
In order to monitor the continuing effectiveness of this policy, the Board receives a periodic forecast, analysed by the
major currencies held by the Group and Company.
The Group and Company is primarily exposed to currency risk on purchases made from suppliers in Kazakhstan, as it is not
possible for the Group or Company to transact in Kazakh Tenge outside of Kazakhstan. The finance team carefully monitors
movements in the US Dollar/Kazakh Tenge rate and chooses the most beneficial times for transferring monies to its
subsidiaries, whilst ensuring that they have sufficient funds to continue its operations. The currency risk relating to
Tenge is insignificant.
In case Kazakhstani Tenge will devalue against US Dollar by 20% the Group will have foreign exchange loss in the amount of
US$23 million that will be reflected in the Statement of Comprehensive Income/Loss.
28 Related party transactions
The Company has no ultimate controlling party.
28.1 Loan agreements
a) Loan to Baverstock
In August 2010 Galaz Energy BV has provided Baverstock GmbH (holds 41% interest in Eragon) with a loan facility of up to
US$10,000,000 at LIBOR +7%. The amounts borrowed under this loan agreement should be used exclusively for repayment of Kuat
Oraziman's US$10,000,000 loan received in July 2007. The facility is to be repaid by paying back future dividends
receivable by Baverstock from Eragon. In December 2010 the first tranche of US$5,000,000 under the facility agreement was
transferred to Kuat Oraziman directly by Galaz Energy BV to be repaid by Baverstock.
b) Other loans from Kuat Oraziman
The Company had other loans outstanding as at 31 December, 2014, 2013 and 2012 with Kuat Oraziman, details of which have
been summarised in notes 21 and 23.
c) Vertom
During the year ended 31 December, 2011 the Company entered into two loan facilities with Vertom International NV, details
of which have been summarised in note 23. The loan payable at 31 December 2014 was US$9,075,000 (2013: US$8,248,000; 2012:
US$7,420,000). No cash was called during 2014 under the loan agreement. A director of the Company Kuat Oraziman is a
director of and holds 50% of the issued share capital of both Vertom International N.V. ("Vertom") and Vertom International
BV.
d) Raditie loan
During the year ended 31 December, 2011 the Company entered into a loan facility with one of its shareholder Raditie NV,
details of which have been summarised in note 21. During 2013 the Group issued 22,654,731 new ordinary shares of the
Company of 1p each in order to convert US$2.5 million debt to Raditie NV at a conversion price of 7.412668p per ordinary
share. As at 31 December 2014 Raditie NV held 6.9% share interest at the Company.
28.2 Key management remuneration
Key management comprises the Directors and details of their remuneration are set out in note 6.
28.3 Purchases
During 2014 the Group purchased drilling services from the related party STK Geo LLP, the company registered in Kazakhstan,
which is owned by the member of Kuat Oraziman's family, in the amount of US$4.9 million (2013: US$2.5 million). These
expenses were capitalized to unproven oil and gas assets. As at year end the Group has advances paid in the amount of
US$2.4 million (2013: US$505,000; 2012: US$237,000) and trade receivables in the amount of US$120,500 (2013: US$117,000;
2012: US$220,000) in relation to these drilling services.
29 Restatement
The consolidated statements of financial position for the years ended 31 December 2013 and 31 December 2012 as well as
consolidated income statement and consolidated statements of cash flows for the year ended 31 December 2013 have been
restated to reflect changed accounting policy on joint ventures from 1 January 2014 following the introduction of IFRS 11
Joint arrangements which applies to the current year (note 1.2). The accounting for joint ventures was changed from
proportionate consolidation to equity method.
The consolidated statement of financial position for the years ended 31 December 2013 and 31 December 2012, and the
consolidated income statement and the consolidated statement of cash flows for the year ended 31 December 2013 were
restated to reflect the accounting noted above.
The reconciliation between the previously reported financial position for the years ended 31 December 2013 and 31 December
2012 and the restated financial position are as follows:
Consolidated statement of financial position 31 December 2013$'000 Adjustment$'000 31 December 2013 (restated)$'000
Non-current assets 167,748 (27,730) 140,018
Current assets 6,188 (2,581) 3,607
Non-current liabilities (58,850) 30,209 (28,641)
Current liabilities (9,056) 102 (8,954)
Net assets 106,030 - 106,030
Share capital 13,475 - 13,475
Share premium 128,578 - 128,578
Shares to be issued 5,000 - 5,000
Deferred shares 64,702 - 64,702
Other reserves (583) - (583)
Retained earnings (134,589) - (134,589)
Cumulative translation reserve (6,461) - (6,461)
Total equity 70,122 - 70,122
Non-controlling Interest (NCI) 35,908 - 35,908
Total equity and NCI 106,030 - 106,030
Consolidated statement of financial position 31 December 2012 Adjustment 31 December 2012 (restated)
$'000 $'000 $'000
Non-current assets 167,590 (29,198) 138,392
Current assets 2,515 (1,790) 725
Non-current liabilities (55,805) 29,761 (26,044)
Current liabilities (17,698) 1,227 (16,471)
Net assets 96,602 - 96,602
Share capital 10,777 - 10,777
Share premium 111,276 - 111,276
Deferred shares 64,702 - 64,702
Other reserves (583) - (583)
Retained earnings (124,952) - (124,952)
Cumulative translation reserve (4,388) - (4,388)
Total equity 56,832 - 56,832
Non-controlling Interest (NCI) 39,770 - 39,770
Total equity and NCI 96,602 - 96,602
The reconciliation between the previously reported financial results and cash flows for the year ended 31 December 2013 and
the restated financial results and cash flows are as follows:
Consolidated income statement 31 December 2013 Adjustment 31 December 2013 (restated)
$'000 $'000 $'000
Revenue 3,908 (2,951) 957
Cost of sales (3,617) 2,951 (666)
Gross profit 291 - 291
Other administrative expenses (7,180) 1,812 (5,368)
Operating loss (6,889) 1,812 (5,077)
Finance income and cost (4,333) 371 (3,962)
Loss before taxation (11,222) 2,183 (9,039)
Tax charge (1,975) - (1,975)
Loss after taxation from continuing operations (13,197) 2,183 (11,014)
Loss for the year from discontinued operations - (2,183) (2,183)
Loss for the year (13,197) - (13,197)
Loss attributable to owners of the parent (9,637) - (9,637)
Income attributable to non-controlling interest (3,560) - (3,560)
Basic and diluted earnings/loss per ordinary share (US cents) fromcontinuing operations (1.22) 0.16 (1.06)
Basic and diluted earnings/loss per ordinary share (US cents) fromdiscontinued operations - (0.16) (0.16)
Consolidated cash flows 31 December 2013 Adjustment 31 December 2013 (restated)
$'000 $'000 $'000
Cash flow from operating activities (1,892) (937) (2,829)
Cash flow from investing activities (13,978) 1,548 (12,430)
Cash flow from financing activities 18,180 - 18,180
Net increase in cash and cash equivalents 2,310 611 2,921
Cash and cash equivalents at beginning of year 917 (665) 252
Cash and cash equivalents at end of year 3,227 (54) 3,173
30 Events after the reporting period
30.1 New shares issuance
In January and February 2015 Mr. Kairat Satylganov paid US$3 million to fund work programme commitments of BNG Contract
Area according to the agreement with the Company signed in 2013. At reporting date Mr. Satylganov has provided US29.2
million of agreed US$40 million and the Company issued total 244,670,973 ordinary shares in his favor.
30.2 Galaz SPA
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$29.2 million (net cash for the Group will be equal to US$ 22.7 million).
The sale of 58% of the equity in Galaz and Company LLP was finalized on 19 May 2015.
30.3 Options exercised
From January till May 2015 the Company's former employee exercised 2,100,000 share options at an exercise price of 4p.
30.4 Subscription for new shares
In April 2015 the Company has entered into a Subscription Agreement with BOCO (H.K.) Limited, ("BOCO"), whereby BOCO should
have been subscribed for 75,585,790 new ordinary shares at a price of 18p per share. However, following the completion of
the sale of Galaz, and difficulties in receiving timely payment Roxi has decided not to continue with this subscription.
This information is provided by RNS
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