REG - Roxi Petroleum Plc - Final Results <Origin Href="QuoteRef">RXP.L</Origin> - Part 4

Caspian SunriseAnnouncement

03/06/2016 07:05

- Part 4: For the preceding part double click  ID:nRSC1034Ac 

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 (2014: 7,500,000). 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                 Group2015$'000  Group2014$'000  Company2015$'000  Company2014$'000    
                                                  
 Intercompany receivables         -               -               114,632           114,342             
 Amounts due from joint venture   -               11,239          -                 6,881               
 Other receivables- current       2,009           193             -                 100                 
 Other receivables - non-current  6,392           3,026           3,202             -                   
 Cash and cash equivalents        10,462          605             25                18                  
                                  18,863          15,063          117,859           121,341             
                                  
 Financial liabilities            Group2015$'000  Group2014$'000  Company2015$'000  Company2014$'000    
                                                                                                        
 Trade and other payables         2,579           3,266           407               4,535               
 Other payables - non-current     -               6,790           39,234            52,953              
 Borrowings - current             308             804             -                 -                   
 Borrowings - non-current         9,903           10,503          9,903             9,075               
                                  12,790          21,363          49,544            66,563              
                                                                                                              
 
 
As at 31 December 2015 the carrying value of financial liabilities measured at
fair value through profit and loss for the Group and Company was US$ nil
(2014: Group and Company US$6,790,000). 
 
Fair value of financial assets and liabilities 
 
At 31 December 2015 and 2014, 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 2015  
 Level 1 $000               Level 2 $000                                                  Level 3$000  
                                                                                                          
 Financial Liability        -                                                             -            -  
 Future profit oil royalty  -                                                             -            -  
 
 
                            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         
                                                                                                                            
 
 
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 future profit oil royalty payable to Canamens as at 31
December 2014 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% was approximately equal to the cost of debt for BNG LLP
Ltd. 
 
During 2015 and 2014 the movement in Group and Company's financial liabilities
was as follows: 
 
 Financial Liability                          2015$'000  2014$'000  
                                                                    
 Balance at the beginning of the year         6,790      5,248      
 Change in value taken to the Profit or Loss  (2,183)    1,542      
 Settled during the year                      (4,607)    -          
 Balance at 31 December                       -          6,790      
 
 
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 2015 was 21% (2014:12%). 
 
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 2015 and 2014
see table below: 
 
                     On Demand  Less than 3 months  3-12 months  1- 5 years  Over 5 years  Total   
 Group 2015 $'000    308        2,579               -            14,103      -             16,990  
 Group 2014 $'000    804        3,266               -            11,570      12,232        27,872  
 Company 2015 $'000  -          392                 -            14,103      58,066        72,561  
 Company 2014 $'000  -          400                 -            10,142      67,419        77,961  
 
 
Interest rate risk 
 
The majority of the Group's borrowings are at fixed rate. As a result the
Group is not exposed to the significant interest rate risk. 
 
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 60% the Group will
have foreign exchange loss in the amount of US$45 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)   Receivable from Baverstock due to royalty 
 
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 cancellation of the
derivative financial liability in the amount of US$6.8 million 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). 
 
c)   Other loans from Kuat Oraziman 
 
The Company had other loans outstanding as at 31 December, 2015 and 2014 with
Kuat Oraziman, details of which have been summarised in notes 21 and 23. 
 
d)   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 2015 was US$9,903,000 (2014:
US$9,075,000). No cash was called during 2015 under the loan agreement. A
director of the Company Kuat Oraziman is a director of and holds  100%  of the
issued share capital of both Vertom International N.V. ("Vertom") and Vertom
International BV. 
 
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 2015 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$4.8 million (2014: US$4.9
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$4.9 million (2014:
US$2.4 million) and trade receivables in the amount of US$67,900 (2014:
US$120,500) in relation to these drilling services. 
 
29  Events after the reporting period 
 
29.1 Options exercised 
 
From January till May 2016 the Company's former employee exercised 1,487,500
share options at an exercise price of 4p. 
 
This information is provided by RNS
The company news service from the London Stock Exchange