REG - Petro Matad Ltd - Final Results <Origin Href="QuoteRef">MATD.L</Origin> - Part 2
29/06/2017 08:10
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Other non-discretionary changes in revenues or expenses during the year
that would result from the conversion of dilutive potential ordinary shares,
divided by the weighted average number of ordinary shares and dilutive
potential ordinary shares, adjusted for any bonus element.
(v) Interest in Joint Operations
Joint operation is a joint arrangement whereby the parties that have joint
control of the arrangement have rights to the assets, and obligations for the
liabilities, relating to the arrangement. Those parties are called joint
operators. Joint control is the contractually agreed sharing of control of an
arrangement, which exists only when decisions about the relevant activities
require the unanimous consent of the parties sharing control.
A joint operator recognises the following in its financial statements in
respect to the joint operation:
· its assets including its share of any jointly held assets;
· its liabilities, including its share of any jointly incurred
liabilities;
· its revenue from the sale of its share of the output arising from the
joint operation;
· its share of the revenue from the sale of the output by the joint
operation; and
· its expenses, including its share of any expenses incurred jointly
The group accounts for the assets, liabilities, revenues and expenses relating
to its interest in a Joint operation in accordance with IFRSs applicable to
the particular asset, liabilities, revenues and expenses.
(w) Significant accounting judgments, estimates and assumptions
In applying the Group's accounting policies management continually evaluates
judgments, estimates and assumptions based on experience and other factors,
including expectations of future events that may have an impact on the Group.
All judgments, estimates and assumptions made are believed to be reasonable
based on the most current set of circumstances available to management. Actual
results may differ from the judgments, estimates and assumptions.
Any revisions to accounting estimates are recognised in the period in which
the estimate is revised if the revision affects only that period, or in the
period of the revision and future periods if the revision affects both the
current and future periods.
The following are the most critical estimates and judgments made by management
in applying the accounting policies and have the most significant effect on
the amounts recognised in the financial statements.
Share-based payments
The Group measures the cost of equity-settled transactions with Directors and
employees at the fair value of the equity instruments at the date at which
they are granted. The fair value is determined using a Black Scholes model.
One of the inputs into the valuation model is volatility of the underlying
share price which is estimated on the 4.5 year history of the share price and
has been estimated in a range from 10% to 120% depending on the date of the
grant.
Recovery of theexploration and evaluation assets
The ultimate recoupment of the exploration and evaluation assets is dependent
upon successful development and commercial exploitation or alternatively the
sale of the respective areas of interest at an amount at least equal to book
value. At the point that it is determined that any capitalised exploration
and evaluation expenditure is not recoverable, it is written off.
Going Concern
The Group assesses the going concern of the Group on a regular basis,
reviewing their cash flow requirements, commitments and status of PSC
requirements and funding arrangements. Refer to Note 2 (c) for further
details.
3 Operating segments
Operating segments have been identified on the basis of internal reports of
the Group that are regularly reviewed by the chief operating decision maker in
order to allocate resources to the segments and to assess their performance.
The chief operating decision maker has been identified as the Board of
Directors. On a regular basis, the Board receives financial information on a
consolidated basis similar to the financial statements presented in the
financial report, to manage and allocate their resources. Based on the
information provided to the Board of Directors, the Group has one operating
segment and geographical segment, being Mongolia; as such no separate
disclosure has been provided.
31 Dec 2016 31 Dec 2015
Note $'000 $'000
4 Revenues and expenses
(a) Revenue
Interest income 40 22
Other income:
Consideration for the BG Group farm-out agreement* 14,008 4,486
Cash calls received from BG Group* 4,841 7,234
Other income* - 2
18,889 11,744
* On 28 April 2016, Shell which acquired BG Group, through its affiliate
company issued an Exit Notice to Petro Matad's 100% owned subsidiary, Capcorp,
exercising the exit option under the Farmout Agreement (FOA) dated 7 April
2015, to withdraw from Blocks IV and V Production Sharing Contracts in
West/Central Mongolia. In accordance with provisions of the FOA, Shell's
affiliate company was required to pay an exit payment of $10,005,303, which
was received by the Company on 9 August 2016, which along with Cash calls paid
by Shell's affiliate prior to their exit accounts for the Other Income
amount.
On 1 Feb 2017, following the withdrawal of Shell's Affiliate from Mongolia, $5
million was received from the Affiliate, which was in relation to an agreement
that such amount would be paid upon receipt of Mongolian government approval
for the reassignment of Block IV and V interests back to the Company.
(b) Employee benefits expense
Included in employee benefits expense are the following:
Wages and salaries 2,370 1,601
Non-Executive Directors' fees (including Directors of affiliates) 144 175
Consultancy fees 574 557
Share-based payments 192 105
3,280 2,438
(c) Exploration and evaluation expenditure
Exploration and evaluation expenditure relates to the following PSCs:
Block XX - 1
Blocks IV and V 2,464 7,235
2,464 7,236
(d) Other expenses
Included in other expenses are the following:
Administration costs 977 903
PSC administration costs 773 533
Audit fees 81 114
Travel expenses 137 137
1,968 1,687
31 Dec 2016 31 Dec 2015
Note $'000 $'000
5 Income tax
Income tax recognised in the statement of profit or loss:
Tax expense/(benefit) comprises:
Current tax expense/(benefit) - -
Deferred tax expense/(benefit) relating to the origination and reversal of temporary differences - -
Total tax expense/(benefit) reported in the statement of profit or loss - -
The prima facie income tax benefit on pre-tax accounting loss from continuing
operations reconciles to the income tax expense/(benefit) in the financial
statements as follows:
Net profit/(loss) for the year 10,896 (190)
Income tax benefit calculated at 10% (i) (1,090) 19
Effect of different tax rates on entities in different jurisdictions (ii) 1,639 650
Change in unrecognised deferred tax assets (549) (669)
- -
(i) The tax rate used in the above reconciliation is the corporate
tax rate of 10% payable by Mongolian corporate entities on taxable profits up
to 3 billion MNT under Mongolian tax law.
(ii) Petromatad Invest Limited and Capcorp are exempt of Mongolian
corporate tax on profits derived from the sale of oil under their PSCs once
production commences and are subject to Cayman Islands income tax at a rate of
0%. As a consequence, no provision for Mongolian corporate tax or Cayman
Islands current tax or deferred tax has been made in the Company's accounts in
relation to them.
Petro Matad Limited is subject to Isle of Man income tax at a rate of 0%. As a
consequence, no provision for Isle of Man current tax or deferred tax has been
made in the Company's accounts.
6 Earnings/(Loss) per share
The following reflects the loss and share data used in the total operations
basic and diluted earnings/(loss) per share computations:
31 Dec 2016 31 Dec 2015
cents per share cents per share
Basic earnings/(loss) per share 3.8 (0.1)
Diluted earnings/(loss) per share 3.8 (0.1)
$'000's $'000's
The loss and weighted average number of ordinary shares used in the calculation of basic and diluted earnings/(loss) per share are as follows:
Net profit/(loss) attributable to owners of the parent 10,896 (190)
Weighted average number of ordinary shares for the purposes of diluted earnings/(loss) per share (in thousands) 287,626 -
Weighted average number of ordinary shares for the purposes of basic earnings/(loss) per share (in thousands) 287,495 284,450
31 Dec 2016 31 Dec 2015
Note $'000 $'000
7 Cash and cash equivalents
Cash at bank and in hand 6,479 5,339
6,479 5,339
Cash at bank and in hand earns interest at fixed and floating rates based on
prevailing bank rates, and the fair value of the above cash and cash
equivalents is $6,479,000 (2015: $5,339,000) due to the short-term nature of
the instruments.
Reconciliation from the net gain/(loss) after tax to the net cash flows from
operations:
Net gain/(loss) after tax 10,896 (190)
Adjustments for:
Depreciation and amortisation 226 97
Net (profit)/loss on disposal of property, plant and equipment 24 9
Share based payments 192 140
Unrealised foreign exchange (gains)/ losses 110 10
Dissolvement of PMSL 18 -
Changes in assets and liabilities
(Increase)/decrease in trade and other receivables (3,797) (1,117)
(Increase)/decrease in prepayments and other assets 289 (448)
Increase/(decrease) in trade and other payables (6,167) 6,083
Net cash flows used in operating activities 1,791 4,584
Non-cash investing and financing activities
There were no non-cash investing or financing activities undertaken in the
financial year or prior year (2015: $0.79 million).
8 Trade and other receivables
Current
Receivable from BG Group 5,000 600
Other debtors 155 222
Non-Current
Receivable from BG Group - 536
5,155 1,358
All amounts are recoverable and are not considered past due or impaired.
9 Prepayments and other assets
Prepayments 222 505
Other assets 301 307
523 812
Other current assets are mainly comprised of consumables, including casing,
mud and drilling materials purchased for Block XX.
31 Dec 2016 31 Dec 2015
Note $'000 $'000
10 Exploration and evaluation assets
Exploration and evaluation assets 15,275 15,275
15,275 15,275
The exploration and evaluation asset arose following the initial acquisition
in February 2007 of 50% of Petromatad Invest Limited, together with
acquisition on 12 November 2007 of the remaining 50% not already held by the
Group, for a consideration of 23,340,000 ordinary shares credited as fully
paid up and with an estimated fair value of $0.50 per share, taking into
account assets and liabilities acquired on acquisition. This relates to the
exploration and evaluation of PSC Block XX.
The ultimate recoupment of exploration and evaluation expenditure is dependent
upon successful development and commercial exploitation or alternatively the
sale of the respective areas of interest at an amount at least equal to book
value.
Management have reviewed for impairment indicators on Block XX and no
impairment has been noted.
11 Property, plant and equipment
Plant and equipment at cost 1,300 1,050
Accumulated depreciation and impairment (517) (548)
783 502
Reconciliation of carrying amounts at the beginning and end of the year:
Plant and equipmentTotal
$'000
As at 1 January 2015 (net of accumulated depreciation) 439
Additions 183
Disposals (9)
Foreign exchange (14)
Depreciation charge for the year (97)
As at 31 December 2015 (net of accumulated depreciation) 502
Additions 676
Disposals (59)
Foreign exchange (110)
Depreciation charge for the year (226)
As at 31 December 2016 (net of accumulated depreciation) 783
31 Dec 2016 31 Dec 2015
Note $'000 $'000
12 Trade and other payables (current)
Trade payables 1,352 4,097
Funding received in advance from BG Group - 3,337
Other payables - 2
1,352 7,436
Trade payables are non-interest bearing and are normally settled within 60 day
terms.
13 Issued capital
Ordinary Shares
287,494,775 shares issued and fully paid (2015: 287,494,775) 106,150 106,150
106,150 106,150
Movements in ordinary shares on issue:
Number of Shares Issue Price $ $'000
As at 1 January 2015 279,487,279 105,278
Exercise of Conditional Share Awards on 23 April 2015 (note (a)) 5,750,946 0.010 58
Exercise of Conditional Share Awards on 27 July 2015 (note (b)) 2,256,550 0.010 23
81
Share based payment - - 791
As at 31 December 2015 287,494,775 106,150
No transaction during 2016 - -
As at 31 December 2016 287,494,775 106,150
(a) On 23 April 2015, pursuant to the Group's Plan, 5,750,946 shares were
awarded upon exercise of Conditional Share Awards with an exercise price per
share of $0.01 pursuant to the Cash Preservation Scheme.
(b) On 27 July 2015, pursuant to the Group's Plan, 2,256,550 shares were
awarded upon exercise of Conditional Share Awards with an exercise price per
share of $0.01 pursuant to the Cash Preservation Scheme.
14 Reserves
A detailed breakdown of the reserves of the Group is as follows:
Merger reserve Equity benefits reserve Foreign currency translation Total
$'000 $'000 $'000 $'000
As at 1 January 2015 831 5,076 (1,011) 4,896
Currency translation differences - - (41) (41)
Share based payments - (845) - (845)
As at 31 December 2015 831 4,231 (1,052) 4,010
Currency translation differences - - (93) (93)
Share based payments - 192 - 192
As at 31 December 2016 831 4,423 (1,145) 4,109
Nature and purpose of reserves
Merger reserve
The merger reserve arose from the Company's acquisition of Capcorp on 12
November 2007. This transaction is outside the scope of IFRS 3 'Business
Combinations' and as such Directors have elected to use UK Accounting
Standards FRS 6 'Acquisitions and Mergers'. The difference, if any, between
the nominal value of the shares issued plus the fair value of any other
consideration, and the nominal value of the shares received in exchange are
recorded as a movement on other reserves in the consolidated financial
statements.
Equity benefits reserve
The equity benefits reserve is used to record the value of Options and
Conditional Share Awards provided to employees and Directors as part of their
remuneration, pursuant to the Group's Long Term Equity Incentive Plan
(referred to as "Plan" or "Group's Plan"). Refer to Note 15 for further
details of these plans.
Foreign currency translation reserve
The foreign currency translation reserve is used to record exchange
differences arising from the translation of the financial statements of
foreign subsidiaries.
15 Share based payments
(a) Long Term Equity Incentive Plan ("Plan" or "Group's Plan")
The Group provides long term incentives to employees (including Executive
Directors), Non-Executive Directors and consultants through the Group's Plan
based on the achievement of certain performance criteria. The Plan provides
for share awards in the form of Options and Conditional Share Awards. The
incentives are awarded at the discretion of the Board, or in the case of
Executive Directors, the Remuneration Committee of the Board, who determine
the level of award and appropriate vesting, service and performance conditions
taking into account market practice and the need to recruit and retain the
best people.
Options may be exercised, subject only to continuing service, during such
period as the Board may determine. Options have a term of 10 years.
Conditional Share Awards shall vest subject to continuing service and
appropriate and challenging service and performance conditions determined by
the Remuneration Committee relating to the overall performance of the Group.
Conditional Share Awards based on performance conditions will vest on
achievement of the following performance conditions:
· 25% vest on the first discovery of oil on a commercial scale, estimated
by management as being by 30 September 2017;
· 25% vest on the first production of oil on a commercial scale,
estimated by management as being by 30 September 2019; and
· 50% vest on the Company achieving the sale of 1 million barrels of oil,
estimated by management as being by 30 September 2020.
Other Conditional Share Awards have service conditions tied to employment
continuity and are available for vesting in three equal annual instalments on
various dates.
(b) Option pricing model
The fair value of Options granted is estimated as at the date of grant using
the Black Scholes model, taking into account the terms and conditions upon
which the Options were granted.
No options have been issued during 2015 and 2016.
(c) Movement in Share Options
Opening balance at 1 January 2015 Granted during the year Forfeited during the year Exercised during the year Closing balance as at 31 December 2015 Exercisable as at 31 December 2015
Grant of Options on 3 June 2008 380,000 - - - 380,000 380,000
Grant of Options on 8 April 2009 216,250 - - - 216,250 216,250
Grant of Options on 9 July 2010 745,400 - (125,000) - 620,400 620,400
Grant of Options on 6 April 2011 75,000 - - - 75,000 75,000
Grant of Options on 5 July 2011 150,000 - - - 150,000 150,000
Grant of Options on 22 Nov 2011 120,000 - - - 120,000 120,000
Grant of Options on 5 Dec 2011 43,428 - (3,828) - 39,600 39,600
Grant of Options on 25 Apr 2012 861,940 - (311,940) - 550,000 550,000
Grant of Options on 16 Jul 2012 210,840 - (45,840) - 165,000 165,000
Grant of Options on 5 Oct 2012 75,000 - - - 75,000 75,000
Grant of Options on 4 Dec 2012 6,000 - - - 6,000 6,000
Grant of options on 9 July 2013 100,000 - (50,000) - 50,000 33,000
2,983,858 - (536,608) - 2,447,250 2,430,250
Weighted Average Exercise Price (cents per option) 58.96 - 39.40 - 63.25 63.64
Opening balance at 1 January 2016 Granted during the year Forfeited during the year Exercised during the year Closing balance as at 31 December 2016 Exercisable as at 31 December 2016
Grant of Options on 3 June 2008 380,000 - - - 380,000 380,000
Grant of Options on 8 April 2009 216,250 - - - 216,250 216,250
Grant of Options on 9 July 2010 620,400 - - - 620,400 620,400
Grant of Options on 6 April 2011 75,000 - - - 75,000 75,000
Grant of Options on 5 July 2011 150,000 - - - 150,000 150,000
Grant of Options on 22 Nov 2011 120,000 - - - 120,000 120,000
Grant of Options on 5 Dec 2011 39,600 - - - 39,600 39,600
Grant of Options on 25 Apr 2012 550,000 - - - 550,000 550,000
Grant of Options on 16 Jul 2012 165,000 - - - 165,000 165,000
Grant of Options on 5 Oct 2012 75,000 - - - 75,000 75,000
Grant of Options on 4 Dec 2012 6,000 - - - 6,000 6,000
Grant of options on 9 July 2013 50,000 - - - 50,000 50,000
2,447,250 - - - 2,447,250 2,447,250
Weighted Average Exercise Price (cents per option) 63.25 - - - 63.25 63.25
(d) Share Options Contractual Life
The weighted average remaining contractual life of outstanding share Options
is 3.8 years (2015: 5.7 years).
(e) Conditional share awards pricing model
The fair value of Conditional Share Awards granted is estimated as at the date
of grant using the Black Scholes model, taking into account the terms and
conditions upon which the Awards were granted.
The following Table summarizes Conditional Share Awards granted during 2015,
along with relevant details in relation to each grant.
(1)
7 Jul 15
Conditional Share Awards granted 1,993,520
Share price at grant date $0.0621
Expected Volatility (%) 28
Risk-free interest rates (%) 0.50
Expected life (years) 10
Exercise Price $0.01
Estimated fair value of each Conditional Share Award at the grant date $0.0527
No awards have been issued during 2016.
(f) Movement in Conditional share awards
Consolidated Opening balance at 1 January 2015 Granted during the year Awarded during the year Forfeited during the year Closing balance as at 31 December 2015 Exercisable as at 31 December 2015
Grant of Conditional Share Awards on 3 Jun 2008 515,000 - - - 515,000 -
Grant of Conditional Share Awards on 8 Apr 2009 95,000 - - - 95,000 -
Grant of Conditional Share Awards on 9 Jul 2010 872,000 - - (125,000) 747,000 -
Grant of Conditional Share Awards on 6 Apr 2011 144,000 - - - 144,000 -
Grant of Conditional Share Awards on 5 Jul 2011 180,000 - - - 180,000 -
Grant of Conditional Share Awards on 22 Nov 2011 50,000 - - - 50,000 -
Grant of Conditional Share Awards on 5 Dec 2011 39,600 - - - 39,600 -
Grant of Conditional Share Awards on 25 Apr 2012 1,379,060 - (526,060) (3,000) 850,000 -
Grant of Conditional Share Awards on 5 Oct 2012 150,000 - - - 150,000 -
Grant of Conditional Share Awards on 4 Dec 2012 261,661 - (258,661) - 3,000 -
Grant of Conditional Share Awards on 9 Jul 2013 170,000 - - (50,000) 120,000 -
Grant of Conditional Share Awards on 23 Apr 2014 5,229,255 - (5,229,255) - - -
Grant of Conditional Share Awards on 7 Jul 2015 - 1,993,520 (1,993,520) - - -
9,085,576 1,993,520 (8,007,496) (178,000) 2,893,600 -
Weighted Average Exercise Price (cents per award) 1.00 1.00 1.00 1.00 1.00 -
Consolidated Opening balance at 1 January 2016 Granted during the year Awarded during the year Forfeited during the year Closing balance as at 31 December 2016 Exercisable as at 31 December 2016
Grant of Conditional Share Awards on 3 Jun 2008 515,000 - - - 515,000 -
Grant of Conditional Share Awards on 8 Apr 2009 95,000 - - (15,000) 80,000 -
Grant of Conditional Share Awards on 9 Jul 2010 747,000 - - (100,000) 647,000 -
Grant of Conditional Share Awards on 6 Apr 2011 144,000 - - - 144,000 -
Grant of Conditional Share Awards on 5 Jul 2011 180,000 - - - 180,000 -
Grant of Conditional Share Awards on 22 Nov 2011 50,000 - - - 50,000 -
Grant of Conditional Share Awards on 5 Dec 2011 39,600 - - - 39,600 -
Grant of Conditional Share Awards on 25 Apr 2012 850,000 - - - 850,000 -
Grant of Conditional Share Awards on 5 Oct 2012 150,000 - - - 150,000 -
Grant of Conditional Share Awards on 4 Dec 2012 3,000 - - - 3,000 -
Grant of Conditional Share Awards on 9 Jul 2013 120,000 - - - 120,000 -
Grant of Conditional Share Awards on 23 Apr 2014 - - - - - -
Grant of Conditional Share Awards on 7 Jul 2015 - - - - - -
2,893,600 - - (115,000) 2,778,600 -
Weighted Average Exercise Price (cents per award) 1.00 - - 1.00 1.00 -
(g) Conditional Share Awards Contractual Life
The weighted average remaining contractual life of outstanding Conditional
awards is 11.5 years (2015: 12.5 years).
16 Commitments and contingencies
(a) Operating lease commitments
Operating leases relate to premises used by the Group in its operations,
generally with terms between 2 and 5 years. Some of the operating leases
contain options to extend for further periods and an adjustment to bring the
lease payments into line with market rates prevailing at that time. The leases
do not contain an option to purchase the leased property.
Due to prepayment of rent, the Group has no commitment for office lease in
Mongolia as at 31 December 2016.
31 Dec 2016 31 Dec 2015
Note $'000 $'000
Operating Leases:
Within one year - 45
After one year but not more than five years - 104
Greater than five years - -
- 149
(b) Exploration expenditure commitments
Petromatad Invest Limited and Capcorp have minimum spending obligations, under
the terms of their PSCs on Blocks IV, V and XX with PAM.
The amounts set out below do not include general and administrative expenses.
31 Dec 2016 31 Dec 2015
Note $'000 $'000
Production Sharing Contract Fees:
Within one year 284 898
After one year but not more than five years 75 40
Greater than five years - -
359 938
Minimum Exploration Work Obligations:
Within one year 8,124 19,374
Greater than one year but no more than five years 21,004 15,580
Greater than five years - -
29,128 34,954
(c) Contingencies
On 5 August 2016, Shell through its Affiliate company announced it would be
withdrawing from Blocks IV and V in West/Central Mongolia. As part of the
negotiations leading to formal Mongolian Government approval of the
reassignment of interest from Shell's Affiliate to Petro Matad's Affiliate,
Shell agreed to a payment of US$5 million to be remitted to Petro Matad's
Affiliate upon such government approval being received. A condition to the
payment by Shell is that the proceeds would be repaid to Shell by Petro Matad
in the event a farmout is concluded in future prior to the development of
either Block IV or V. There is no certainty that such farmout will be
concluded in future in which case funds would not be repaid. The US$5 million
payment was received on 1 February 2017.
17 Related party disclosures
The immediate parent and ultimate controlling party of the Group is Petro
Matad Limited.
The consolidated financial statements include the financial statements of
Petro Matad Limited and the subsidiaries listed in the following table:
Equity Interest
Country of 2016 2015
Incorporation % %
Central Asian Petroleum Corporation Limited Cayman Islands 100 100
Capcorp Mongolia LLC Mongolia 100 100
Petromatad Invest Limited Cayman Islands 100 100
Petro Matad LLC Mongolia 100 100
Petro Matad Services Limited Isle of Man - 100
Subsidiary Details
Capcorp Mongolia LLC was acquired on the 14 August 2006, on incorporation of
the Company. Capcorp holds 1,000,000 ordinary shares of MNT150 each.
Petromatad Invest Limited was acquired on 12 November 2007. Petro Matad
Limited and Capcorp each hold 25,000 shares of $1 each.
Central Asian Petroleum Corporation Limited was acquired on 12 November 2007.
Petro Matad Limited holds 43,340,000 ordinary shares of $0.01 each.
Petro Matad LLC is 100% owned by Petromatad Invest Limited. Petromatad Invest
Limited holds 15,000 ordinary shares of MNT10,000 each.
Petro Matad Services Limited is 100% owned by Petro Matad Limited. Petro Matad
Limited holds 1 ordinary share of $1. Petro Matad Services Limited was
dissolved on 1 January 2016.
Balances and transactions between the Company and its subsidiaries, which are
related parties of the Company, have been eliminated on consolidation and are
not disclosed in this note.
Petrovis Matad Inc. is a major shareholder of the Company, currently holding
approximately 32.06% of the shareholding.
18 Key management personnel
(a) Details of Directors
The names of the Company's Directors, having authority and responsibility for
planning, directing and controlling the activities of the Group, in office
during 2015 and 2016, are as below:
The Directors were in office until the date of this report and for this entire
year unless otherwise stated.
Directors
Oyungerel Janchiv Non-Executive Director
Resigned as Chairperson 1 August 2015
Enkhmaa Davaanyam Non-Executive Chairperson
Appointed as Chairperson 1 August 2015
Philip Arthur Vingoe Non-Executive Director
Retired 10 March 2017
Amarzul Tuul Executive Director
John Rene Henriksen Chief Financial Officer
Mehmed Ridvan Karpuz Chief Executive Officer
Appointed as CEO 1 October 2015
Timothy Paul Bushell Non-Executive Director
Appointed 10 March 2017
(b) Compensation of Directors
Consolidated
31 Dec 2016 31 Dec 2015
Note $'000 $'000
Short-term employee benefits 1,402 864
Post-employment benefits - -
Share based payment expense 177 143
1,579 1,007
(c) Other key management personnel transactions
There were no other key management personnel transactions during the year
(2015: Nil).
19 Financial risk management objectives and policies
The Group's principal financial instruments comprise cash and short-term
deposits classified as loans and receivables financial assets.
The main purpose of these financial instruments is to raise capital for the
Group's operations.
The Group also has various other financial instruments such as trade debtors
and trade creditors, which arise directly from its operations. It is, and has
been throughout the year under review, the Group's policy that no trading in
financial instruments shall be undertaken.
The main risks arising from the Group's financial instruments are interest
rate risk, foreign currency risk, credit risk and liquidity risk.
The Board is responsible for identification and control of financial risks.
The Board reviews and agrees policies for managing each of these risks as
summarised below.
Risk Exposures and Responses
Interest rate risk
Interest rate risk is the risk that the value of a financial instrument or
cash flow associated with the instrument will fluctuate due to changes in
market interest rate. Interest rate risk arises from fluctuations in interest
bearing financial assets and liabilities that the Group uses. Interest bearing
assets comprise cash and cash equivalents which are considered to be
short-term liquid assets. It is the Group's policy to settle trade payables
within the credit terms allowed and the Group does therefore not incur
interest on overdue balances.
The following table sets out the carrying amount of the financial instruments
that are exposed to interest rate risk:
31 Dec 2016 31 Dec 2015
Weighted Average Int. rate $'000 $'000
Financial Assets
Cash and cash equivalents 0.94% 6,479 5,339
Trade and other receivables 0% 5,155 1,358
11,634 6,697
Financial Liabilities
Trade and other payables 0% 1,352 7,436
1,352 7,436
Net exposure 10,282 (739)
Sensitivity Analysis
If the interest rate on cash balances at 31 December 2015 and 2016
weakened/strengthened by 1%, there would be no material impact on profit or
loss. There would be no effect on the equity reserves other than those
directly related to other comprehensive income movements.
Foreign currency risk
As a result of operations overseas, the Group's Statement of Financial
Position can be affected by movements in various exchange rates.
The functional currency of Petro Matad Limited and presentational currency of
the Group is deemed to be USD because the future revenue from the sale of oil
will be denominated in USD and the costs of the Group are likewise
predominately in USD. Some transactions are however dominated in currencies
other than USD. These transactions comprise operating costs and capital
expenditure in the local currencies of the countries where the Group operates.
These currencies have a close relationship to the USD and management believes
that changes in the exchange rates will not have a significant effect on the
Group's financial statements.
The Group does not use forward currency contracts to eliminate the currency
exposures on any individual transactions.
The following significant exchange rates applied during the year:
Average rate Spot rate at the balance date
USD 2016 2015 2016 2015
Mongolian Tugrug (MNT) 1 2,145.72 1,969.88 2,489.53 1,995.98
Australian Dollar (AUD) 1 1.34553 1.37978 1.38851 1.37003
Great British Pound (GBP) 1 0.74031 0.66662 0.81029 0.67553
Sensitivity Analysis
A 5% strengthening/weakening of the MNT against USD at 31 December 2015 and
2016 would not have a material effect on profit and loss or on equity.
Price risk
The Group's exposure to price risk is minimal as the Group is currently not
revenue producing other than from interest income.
Credit risk
Credit risk is the risk of financial loss to the Group if a customer or
counterparty to a financial instrument fails to meet its contractual
obligations. The Group is exposed to credit risk on its cash and cash
equivalents and other receivables as set out in Notes 7 and 8 which also
represent the maximum exposure to credit risk. The Group only deposits surplus
cash with well-established financial institutions of high quality credit
standing.
In addition, receivable balances are monitored on an ongoing basis with the
result that the Group's exposure to bad debts is not significant.
There are no significant concentrations of credit risk within the Group.
Maximum exposure to credit risk at reporting date:
31 Dec 2016 31 Dec 2015
Note $'000 $'000
Financial Assets
Trade and other receivables 8 5,155 1,358
Net exposure 5,155 1,358
Impairment Losses:
None of the Group's receivables are past due at 31 December 2016 (2015: Nil)
Liquidity risk
Liquidity risk is the risk that the Group will not be able to meet its
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