RNS Number : 1933P
Petroneft Resources PLC
30 September 2013
PetroNeft Resources plc
("PetroNeft" or the "Company")
2013 Interim Results
PetroNeft Resources plc (AIM: PTR) owner and operator of Licences 61 and 67, Tomsk Oblast, Russian Federation, is pleased to report its results for the 6 months ended 30 June 2013.
Highlights:
· H1 production of 445,949 barrels of oil for the period - average of 2,464 bopd
· Encouraging further progress on financing
· Current group production 2,500 bopd
David Golder, Chairman of PetroNeft Resources plc, commented:
"The first half of 2013 was a busy period for the Company. Some production issues were resolved leading to more stable production in recent months.
Since the Annual General Meeting on 11 September we have continued to make good progress on re-financing the Company and I hope to be able to update shareholders in detail on this point in the coming weeks."
For further information, contact:
Dennis Francis, CEO, PetroNeft Resources plc
+1 713 988 2500
Paul Dowling, CFO, PetroNeft Resources plc
+353 1 443 3720
John Frain/Brian Garrahy, Davy (NOMAD and Joint Broker)
+353 1 679 6363
Henry Fitzgerald-O'Connor, Canaccord Genuity Limited (Joint Broker)
+44 207 523 8000
Martin Jackson, Citigate Dewe Rogerson
+44 207 638 9571
Joe Murray/Ed Micheau, Murray Consultants
+353 1 498 0300
Dear Shareholder,
I am pleased to report on the activities of the Company for the six months to 30 June 2013 and provide an update on recent activities.
Production and Sales
Production in the six months to 30 June 2013 was 445,949 barrels of oil or an average of 2,464 bopda 13% increase compared to the same period in 2012 where production was 394,652 barrels of oil or an average of 2,168 bopd. We sold 438,350 barrels of oil in the six months to 30 June 2013 (H1 2012:403,674 bbls) and achieved an average oil price of $42.48 (H1 2012: $43.12). The domestic pricing in the second quarter was lower than expected leading to a reduced gross margin in the period but the price has since recovered with record prices achieved in the third quarter.
Two new oil production wells were drilled at Arbuzovskoye in the first quarter in addition to a water source well to provide water for the water injection system at Arbuzovskoye. While we encountered a number of production difficulties in the early months of 2013, we successfully resolved these issues through a programme of re-perforation of wells at Arbuzovskoye.
We are very encouraged by the stability of production in recent months, which is currently steady at 2,500 bopd. The pressure maintenance programme that commenced at Arbuzovskoye in April 2013 is continuing and is working well. In recent weeks, we have seen some positive impact in the production well nearest to the injection well - similar to the response seen earlier at Lineynoye. This should expand to other nearby production wells in the coming months. Production at Lineynoye also remains very stable with little decline evident. We have also benefitted from strong realised oil prices in recent months.
Development drilling programme - Arbuzovskoye oil field
Two new production wells were drilled at Arbuzovskoye in the first half of 2013 achieving initial rates of 140 bopd and 160 bopd. In March 2013, drilling activities were paused at Arbuzovskoye to allow the commencement of the water injection programme the results of which will help guide future well locations.It is likely that at least three additional wells will ultimately be drilled from Arbuzovskoye Pad 1 to fully exploit the area.The drilling rig remains on site at Arbuzovskoye together with supplies to drill three wells.
Financing
In March 2013, we commenced repayments of US$650,000 per month to Macquarie Bank Limited and we continue to make these payments from our own resources. The current balance on this facility, net of cash held by Macquarie in the Debt Service Reserve Account, is US$13.6 million.
To support the Company's developmentaspirations we appointed financial advisors, Evercore Partners LLP, to assist with negotiations in relation to a potential farmout of up to 50% of Licence 61 and are currently in discussions with a number of parties. We are also in active negotiation with a number of Russian and International banks to refinance the Macquarie debt facility with a longer term arrangement which more appropriately reflects the long term production profile and growth potential of our asset base.
Discussions continue on both the re-financing and planned farmout of Licence 61.We have made good progress on concluding a re-financing of the existing Macquarie Bank facility in recent weeks.
Future drilling programme
Subject to the successful completion of re-financing of the bank debt, or a farmout, plans are in place for re-commencement of drilling operations later this year. This plan includes a delineation well at West Lineynoye, commencement of drilling additional production wells at Arbuzovskoye and, in 2014, delineation wells at Tungolskoye and Sibkrayevskoye, where significant upside potential and near-term developments are possible.
Financial results for the period
The net loss after tax for the period was US$10,593,368 (H1 2012: US$6,990,186). The loss includes a foreign exchange loss of US$6,376,921 (H1 2012: US$2,760,623) on loans denominated in US Dollars and Russian Roubles from PetroNeft to its Russian subsidiaries Stimul-T and Granite Construction whose functional currency is the Russian Rouble. Net cash flows from operating activities in the period were US$3,143,193 (H1 2012: US$4,685,880).
Financial Highlights
Unaudited
Audited
6 months ended 30 June 2013
6 months ended 30 June 2012
Year ended 31 December 2012
US$
US$
US$
Revenue
18,624,293
17,646,024
34,581,257
Cost of sales
(16,683,461)
(15,115,280)
(30,134,453)
Gross profit
1,940,832
2,530,744
4,446,804
Gross margin
10%
14%
13%
Administrative expenses
Overheads
(3,386,091)
(3,548,720)
(6,313,028)
Share-based payment expense
(247,549)
(500,044)
(977,030)
Other foreign exchange gain/(loss)
217,634
83,607
(90,533)
(3,416,006)
(3,965,157)
(7,380,591)
Foreign exchange (loss)/gain on intra-Group loans
(6,376,921)
(2,760,623)
4,538,236
Finance costs
(1,751,751)
(1,750,892)
(4,216,548)
Loss for the period attributable to equity holders of the Parent
(10,593,368)
(6,990,186)
(4,566,143)
Capital expenditure in the period
3,137,110
8,972,891
14,270,220
Net proceeds of equity share issues
-
-
16,256,115
Bank and cash balance at period end (including restricted cash)
4,130,720
5,715,486
7,939,422
Total debt at period end (undiscounted)
33,900,000
45,000,000
36,500,000
Conclusion
The first half of 2013 was a busy period for the Company. Some production issues were resolved leading to more stable production in recent months.
Since the Annual General Meeting on 11 September we have continued to make good progress on re-financing the Company and I hope to be able to update shareholders in detail on this point in the coming weeks.
David Golder
Non-Executive Chairman
Interim Consolidated Income Statement
For the 6 months ended 30 June 2013
Unaudited
Audited
6 months ended 30 June 2013
6 months ended 30 June 2012
Year ended 31 December 2012
Note
US$
US$
US$
Continuing operations
Revenue
18,624,293
17,646,024
34,581,257
Cost of sales
(16,683,461)
(15,115,280)
(30,134,453)
Gross profit
1,940,832
2,530,744
4,446,804
Administrative expenses
(3,416,006)
(3,965,157)
(7,380,591)
Exchange gain/(loss) on intra-Group loans
(6,376,921)
(2,760,623)
4,538,236
Operating profit /(loss)
(7,852,095)
(4,195,036)
1,604,449
Loss on disposal of oil and gas properties
-
-
(19,231)
Share of joint venture's net loss
(127,267)
(178,264)
(223,472)
Finance revenue
9,291
10,518
77,233
Finance costs
5
(1,751,751)
(1,750,892)
(4,216,548)
Loss for the period for continuing operations before taxation
(9,721,822)
(6,113,674)
(2,777,569)
Income tax expense
6
(871,546)
(876,512)
(1,788,574)
Loss for the period attributable to equity holders of the Parent
(10,593,368)
(6,990,186)
(4,566,143)
Loss per share attributable to ordinary equity holders of the Parent
Basic and diluted - US dollar cent
(1.64)
(1.68)
(1.03)
Interim Consolidated Statement of Comprehensive Income
For the 6 months ended 30 June 2013
Unaudited
Audited
6 months ended 30 June 2013
6 months ended 30 June 2012
Year ended 31 December 2012
US$
US$
US$
Loss for the period attributable to equity holders of the Parent
(10,593,368)
(6,990,186)
(4,566,143)
Currency translation adjustments
(3,395,214)
(1,056,282)
2,406,068
Total comprehensive loss for the period attributable to equity holders of the Parent
(13,988,852)
(8,046,468)
(2,160,075)
Interim Consolidated Balance Sheet
As at 30 June 2013
Unaudited
Audited
30 June 2013
30 June 2012
31 December 2012
Note
US$
US$
US$
Assets
Non-current Assets
Oil and gas properties
7
97,483,831
93,862,706
105,097,756
Property, plant and equipment
8
1,464,430
1,710,360
1,696,626
Exploration and evaluation assets
9
26,282,372
25,962,359
28,294,677
Equity-accounted investment in joint venture
10
3,438,283
3,573,728
3,819,142
128,668,916
125,109,153
138,908,201
Current Assets
Inventories
11
1,811,156
1,612,014
1,711,417
Trade and other receivables
12
978,403
1,512,656
1,320,032
Cash and cash equivalents
13
130,720
1,715,486
3,939,422
Restricted cash
13
4,000,000
4,000,000
4,000,000
6,920,279
8,840,156
10,970,871
Total Assets
135,589,195
133,949,309
149,879,072
Equity and Liabilities
Capital and Reserves
Called up share capital
8,561,499
5,636,142
8,561,499
Share premium account
136,762,387
122,431,629
136,762,387
Share-based payments reserve
6,513,594
5,591,829
6,266,045
Retained loss
(58,950,664)
(50,781,339)
(48,357,296)
Currency translation reserve
(8,619,657)
(8,686,793)
(5,224,443)
Other reserves
336,000
336,000
336,000
Equity attributable to equity holders of the Parent
84,603,159
74,527,468
98,344,192
Non-current Liabilities
Provisions
1,644,170
1,655,442
1,843,790
Interest-bearing loans and borrowings
15
14,682,383
14,474,828
14,559,722
Deferred tax liability
6
5,740,566
3,961,350
4,871,227
22,067,119
20,091,620
21,274,739
Current Liabilities
Trade and other payables
14
10,102,313
9,635,150
8,909,830
Interest-bearing loans and borrowings
15
18,816,604
29,695,071
21,350,311
28,918,917
39,330,221
30,260,141
Total Liabilities
50,986,036
59,421,841
51,534,880
Total Equity and Liabilities
135,589,195
133,949,309
149,879,072
Interim Consolidated Statement of Changes in Equity
For the 6 months ended 30 June 2013
Share capital
Share premium
Share-based payment and other reserves
Currency translation reserve
Retained loss
Total
US$
US$
US$
US$
US$
US$
At 1 January 2012
5,636,142
122,431,629
5,230,985
(7,630,511)
(43,791,153)
81,877,092
Loss for the year
-
-
-
-
(4,566,143)
(4,566,143)
Currency translation adjustments
-
-
-
2,406,068
-
2,406,068
Total comprehensive loss for the year
-
-
-
2,406,068
(4,566,143)
(2,160,075)
New share capital subscribed
2,762,969
14,447,506
-
-
-
17,210,475
Transaction costs on issue of share capital
-
(954,360)
-
-
-
(954,360)
Conversion of debt for new shares issued
162,388
837,612
-
-
-
1,000,000
Share-based payment expense
-
-
977,030
-
-
977,030
Share-based payment expense - Macquarie warrants
-
-
197,230
-
-
197,230
Arawak warrants
-
-
196,800
-
-
196,800
At 31 December 2012
8,561,499
136,762,387
6,602,045
(5,224,443)
(48,357,296)
98,344,192
At 1 January 2013
8,561,499
136,762,387
6,602,045
(5,224,443)
(48,357,296)
98,344,192
Loss for the period
-
-
-
-
(10,593,368)
(10,593,368)
Currency translation adjustments
-
-
-
(3,395,214)
-
(3,395,214)
Total comprehensive loss for the period
-
-
-
(3,395,214)
(10,593,368)
(13,988,582)
Share-based payment expense
-
-
247,549
-
-
247,549
At 30 June 2013
8,561,499
136,762,387
6,849,594
(8,619,657)
(58,950,664)
84,603,159
Interim Consolidated Cash Flow Statement
For the 6 months ended 30 June 2013
Unaudited
Audited
6 months ended 30 June 2013
6 months ended 30 June 2012
Year ended 31 December 2012
US$
US$
US$
Operating activities
Loss before taxation
(9,721,822)
(6,113,674)
(2,777,569)
Adjustment to reconcile loss before tax to net cash flows
Non-cash
Depreciation
2,730,042
1,933,985
4,637,596
Loss on disposal of oil and gas properties
-
-
19,231
Share loss in joint venture
127,267
178,264
223,472
Share-based payment expense
247,549
500,044
977,030
Finance revenue
(9,291)
(10,518)
(77,233)
Finance costs
5
1,751,751
1,750,892
4,216,548
Working capital adjustments
Decrease in trade and other receivables
241,470
1,204,750
1,603,422
Decrease in inventories
186,463
447,077
383,541
Increase/(decrease) in trade and other payables
7,589,764
4,805,860
(1,837,731)
Income tax paid
-
(10,800)
(186,675)
Net cash flows received from operating activities
3,143,193
4,685,880
7,181,632
Investing activities
Purchase of oil and gas properties
(2,670,631)
(11,748,966)
(18,479,654)
Advance payments to contractors
(19,000)
(92,963)
(119,159)
Purchase of property, plant and equipment
(90,317)
(6,219)
(15,529)
Proceeds from disposal of property, plant and equipment
Net cash (paid)/received (to)/from financing activities
(4,036,185)
8,086,976
15,064,800
Net (decrease)/increase in cash and cash equivalents
(3,803,282)
674,810
2,901,093
Translation adjustment
(5,420)
10,671
8,324
Cash and cash equivalents at the beginning of the period
3,939,422
1,030,005
1,030,005
Cash and cash equivalents at the end of the period
13
130,720
1,715,486
3,939,422
1. Corporate information
The interim condensed consolidated financial statements of the Group for the six months ended 30 June 2013 were authorised for issue in accordance with a resolution of the Directors on 27 September 2013.
PetroNeft Resources plc ('the Company', or together with its subsidiaries, 'the Group') is a Company incorporated in Ireland. The Company is listed on the Alternative Investment Market ('AIM') of the London Stock Exchange and the Enterprise Securities Market ('ESM') of the Irish Stock Exchange. The address of the registered office and the business address in Ireland is 20 Holles Street, Dublin 2. The Company is domiciled in the Republic of Ireland.
The principal activities of the Group are oil and gas exploration, development and production.
2. Going concern
As noted in the 2012 Annual Report in October 2012 a revised borrowing base was agreed with Macquarie Bank Limited ("Macquarie")which amongst other things led to the commencement of monthly repayments of US$650,000 on 31 March 2013. The Macquarie loan matures in May 2014 at which time a final payment of US$8.4 million (in addition to the US$4 million restricted cash held by Macquarie) will be required.
The Company has entered into discussions with a number of parties and is currently pursuing two independent funding strategies. In consultation with major shareholders and finance providers we have concluded that a farmout of up to 50% of Licence 61, while remaining as operator, represents the best way to provide the necessary finance to strengthen the Group's financial position and allow it to realise the full potential of its substantial asset base. In that regard we have contracted Evercore Partners to run a formal process to seek an industry partner to join in the development and exploration of the licence. We have set up an extensive electronic data room and are in discussions with a number of potential partners. Secondly, we are also in discussions with certain Russian and international banks with a view to re-financing the existing debt facilities,however, the farmout option remains the preference of the Board of Directors. The aim of these discussions is to deliver a long term solution to the Group's finances to enable it to fully exploit its portfolio of reserves and prospects.
While, as at the date of approval of these financial statements, no commitment has been received in respect of either a farmout or re-financing, and there can be no certainty that additional funding will ultimately be received, significant progress has been made and the Directors remain confident about the outcome of these discussions and the resilience of the Group despite the pressures outlined above.
The Group has analysed its cash flow requirements through to 31 December 2014 in detail. The monthly repayments from operating cash flows of US$650,000 to Macquarie commenced in March 2013, however, based on our current cash flow forecasts the Group will need to obtain additional funding in order to repay in full the final amount of US$8.4 million due in May 2014. The cash flow includes estimates for a number of key variables including timing of cash flows of development expenditure, oil price, production rates, and management of working capital. The Directors believe that the Group's cash flow forecasts represent the Group's best estimate of the results over the forecast period as at the date of approval of the financial statements. As part of the Directors' overall consideration of the appropriateness of going concern, the cash flow is stress tested to assess the potential adverse effect arising from reasonable changes in circumstance. It is recognised that the cash flow impact of these changes could result in further funding being required. In addition, under the revised borrowing base the Group has to remain in compliance with certain financial covenants and lender approvals.
These circumstances represent a material uncertainty that may cast significant doubt upon the Group and the Company's ability to continue as a going concern. Nevertheless, after making enquiries, and considering the uncertainties described above, the Directors are confident that the Group and the Company will have adequate resources to continue in operational existence for the foreseeable future. For these reasons, the Directors continue to adopt the going concern basis in preparing the annual report and accounts.
Accordingly, these financial statements do not include any adjustments to the carrying amount or classification of assets and liabilities that would result if the Group or Company was unable to continue as a going concern.
3. Accounting policies
3.1 Basis of Preparation
The interim condensed consolidated financial statements for the six months ended 30 June 2013 have been prepared in accordance with IAS 34 Interim Financial Reporting.
The interim condensed consolidated financial statements do not include all the information and disclosures required in the annual financial statements, and should be read in conjunction with the Group's annual financial statements as at 31 December 2012 which are available on the Group's website - www.petroneft.com.
The interim condensed consolidated financial statements are presented in US dollars ("US$").
3.2 Significant Accounting Policies
The accounting policies adopted in the preparation of the interim condensed consolidated financial statements are consistent with those followed in the preparation of the Group's annual financial statements for the year ended 31 December 2012.
4. Segment information
At present the Group has one reportable operating segment, which is oil exploration and production. As a result, there are no further disclosures required in respect of the Group's reporting segment.
The risk and returns of the Group's operations are primarily determined by the nature of the activities that the Group engages in, rather than the geographical location of these operations. This is reflected by the Group's organisational structure and the Group's internal financial reporting systems.
Management monitors and evaluates the operating results for the purpose of making decisions consistently with how it determines operating profit or loss in the consolidated financial statements.
Geographical segments
All of the Group's sales are in Russia. Substantially all of the Group's capital expenditures are in Russia.
Non-current assets
Assets are allocated based on where the assets are located:
Unaudited
Audited
30 June 2013
30 June 2012
31 December 2012
US$
US$
US$
Russia
128,662,026
125,101,637
138,899,550
Ireland
6,890
7,516
8,651
128,668,916
125,109,153
138,908,201
5.
Finance costs
Unaudited
Audited
6 months ended 30 June 2013
6 months ended 30 June 2012
Year ended 31 December 2012
US$
US$
US$
Interest on loans
1,625,139
1,673,265
3,890,820
Unwinding of discount on decommissioning provision
126,612
77,627
65,167
Other
-
-
260,561
1,751,751
1,750,892
4,216,548
6.
Income tax
Unaudited
Audited
6 months ended 30 June 2013
6 months ended 30 June 2012
Year ended 31 December 2012
US$
US$
US$
Current income tax
Current income tax charge
2,206
61,920
64,105
Income tax on dividends (paid in Russia)
-
10,797
10,799
Total current income tax
2,206
72,717
74,904
Deferred tax
Relating to origination and reversal of temporary differences
869,340
803,795
1,713,670
Total deferred tax
869,340
803,795
1,713,670
Income tax expense reported in the Consolidated Income Statement
871,546
876,512
1,788,574
7.
Oil and gas properties
Wells
Equipment and facilities
Pipeline
Total
US$
US$
US$
US$
Cost
At 1 January 2012
63,611,460
25,557,989
13,315,422
102,484,871
Additions
8,281,792
1,227,254
2,333,384
11,842,430
Disposals
(19,231)
-
-
(19,231)
Translation adjustment
3,485,238
1,383,657
754,214
5,623,109
At 1 January 2013
75,359,259
28,168,900
16,403,020
119,931,179
Additions
1,725,175
1,302,167
24,650
3,051,992
Disposals
-
-
-
-
Translation adjustment
(5,394,916)
(2,076,186)
(1,171,594)
(8,642,696)
At 30 June 2013
71,689,518
27,394,881
15,256,076
114,340,475
Depreciation
At 1 January 2012
8,711,882
958,420
116,593
9,786,895
Charge for the year
3,706,710
893,632
108,953
4,709,295
Translation adjustment
261,360
61,149
14,724
337,233
At 1 January 2013
12,679,952
1,913,201
240,270
14,833,423
Charge for the period
2,263,383
552,758
60,486
2,876,627
Translation adjustment
(666,470)
(166,498)
(20,438)
(853,406)
At 30 June 2013
14,276,865
2,299,461
280,318
16,856,644
Net book values
At 30 June 2013
57,412,653
25,095,420
14,975,758
97,483,831
At 31 December 2012
62,679,307
26,255,699
16,162,750
105,097,756
The net book value at 30 June 2013 includes US$5,952,907(YE2012: US$8,369,828) in respect of assets under construction, which are not yet being depreciated.
Expenditure of US$3,051,992was incurred mainly in connection with the Arbuzovskoye oil field, primarily relating to production wells and oilfield infrastructure.
8.
Property, Plant and Equipment
Buildings &
leasehold
Plant and
Motor
improvements
machinery
vehicles
Total
US$
US$
US$
US$
Cost
At 1 January 2012
1,046,723
1,748,682
117,670
2,913,075
Additions
-
15,529
-
15,529
Disposals
-
(3,549)
-
(3,549)
Translation adjustment
55,961
94,062
6,325
156,348
At 1 January 2013
1,102,684
1,854,724
123,995
3,081,403
Additions
-
14,943
70,175
85,118
Disposals
-
(32,275)
-
(32,275)
Translation adjustment
(79,421)
(130,548)
(12,786)
(222,755)
At 30 June 2013
1,023,263
1,706,844
181,384
2,911,491
Depreciation
At 1 January 2012
146,251
785,981
54,905
987,137
Charge for the year
63,217
250,421
25,698
339,336
Translation adjustment
8,996
45,896
3,412
58,304
At 1 January 2013
218,464
1,082,298
84,015
1,384,777
Charge for the period
31,610
141,172
16,643
189,425
Disposals
-
(19,676)
-
(19,676)
Translation adjustment
(17,444)
(83,064)
(6,957)
(107,465)
At 30 June 2013
232,630
1,120,730
93,701
1,447,061
Net book values
At 30 June 2013
790,633
586,114
87,683
1,464,430
At 31 December 2012
884,220
772,426
39,980
1,696,626
9.
Exploration and evaluation assets
Exploration & Evaluation Expenditure
US$
Cost
At 1 January 2012
24,552,717
Additions
2,412,261
Translation adjustment
1,329,699
At 1 January 2013
28,294,677
Disposals
(25,587)
Translation adjustment
(1,986,718)
At 30 June 2013
26,282,372
Net book values
At 30 June 2013
26,282,372
At 31 December 2012
28,294,677
Exploration and evaluation expenditure represents active exploration projects. These amounts will be written-off to the Consolidated Income Statement as exploration costs unless commercial reserves are established, or the determination process is not completed and there are no indications of impairment. The outcome of ongoing exploration, and therefore whether the carrying value of these assets will ultimately be recovered, is inherently uncertain.
In accordance with IFRS 6, once commercial viability is demonstrated the capitalised exploration and evaluation costs are transferred to oil and gas properties or intangibles, as appropriate after being assessed for impairment.
10.
Equity-accounted investment in Joint Venture
PetroNeft Resources plchas a 50% interest in Russian BD Holdings B.V., a jointly controlled entity which holds 100% of LLC Lineynoye, an entity involved in oil and gas exploration and the registered holder of Licence 67. The interest in this joint venture is accounted for using theequity accounting method.Russian BD Holdings B.V. is incorporated in the Netherlands and carries out its activities in Russia.
Share of net assets
US$
At 1 January 2012
3,851,880
Retained loss
(223,472)
Translation adjustment
190,734
At 1 January 2013
3,819,142
Retained loss
(127,268)
Translation adjustment
(253,591)
At 30 June 2013
3,438,283
Summarised financial statement information prepared in accordance with IFRS of the equity-accounted joint venture entity is disclosed below:
Summarised Interim Financial statements of equity-accounted joint venture (50% share)
Unaudited
Audited
6 months ended 30 June 2013
6 months ended 30 June 2012
Year ended 31 December 2012
US$
US$
US$
Sales and other operating revenues
-
-
-
Operating expenses
(35,545)
(105,815)
(196,468)
Exchange loss
(65,450)
(63,427)
8,890
Finance revenue
86
1,380
1,719
Finance costs
(21,377)
(8,338)
(30,437)
Loss before taxation
(122,286)
(176,200)
(216,296)
Taxation
(4,982)
(2,064)
(7,176)
Loss for the period
(127,268)
(178,264)
(223,472)
Unaudited
Audited
30 June 2013
30 June 2012
31 December 2012
US$
US$
US$
Current assets
108,627
189,733
61,672
Non-current assets
4,273,484
4,243,349
4,647,923
Total assets
4,382,111
4,433,082
4,709,595
Current liabilities
(51,643)
(33,450)
(29,413)
Non-current liabilities
(892,185)
(825,904)
(861,040)
Total liabilities
(943,828)
(859,354)
(890,453)
11.
Inventories
Unaudited
Audited
30 June 2013
30 June 2012
31 December 2012
US$
US$
US$
Oil stock
1,662,932
1,417,696
1,572,957
Materials
148,224
194,318
138,460
1,811,156
1,612,014
1,711,417
12.
Trade and other receivables
Unaudited
Audited
30 June 2013
30 June 2012
31 December 2012
US$
US$
US$
Russian VAT
16,729
335,395
55,519
Russian profit tax receivable
6,610
-
168,885
Other receivables
156,180
359,750
165,054
Receivable from jointly controlled entity (Note 16)
721,092
647,868
657,492
Advances to and receivables from related parties (Note 16)
7,035
50,702
69,762
Advances to contractors
11,965
42,261
49,397
Prepayments
58,792
76,680
153,923
978,403
1,512,656
1,320,032
The Directors consider that the carrying amount of trade and other receivables approximates their fair value.
Other receivables are non-interest-bearing and are normally settled on 60-day terms.
Amounts owed by subsidiary undertakings are interest-bearing. Interest is charged at rates ranging from 0% to 10%.
13.
Cash and Cash Equivalents and Restricted Cash
Unaudited
Audited
30 June 2013
30 June 2012
31 December 2012
US$
US$
US$
Cash at bank and in hand
130,720
1,715,486
3,939,422
Restricted cash
4,000,000
4,000,000
4,000,000
4,130,720
5,715,486
7,939,422
At 30 June 2013 restricted cash amounting to US$4 million is being held in a Macquarie Debt Service Reserve Account ("DSRA").This account is part of the security package held by Macquarie and may be offset against the loan in the event of a default on the loan or by agreement between the parties.
Bank deposits earn interest at floating rates based on daily deposit rates.Short-term deposits are made for varying periods of between one day and one month depending on the immediate cash requirements of the Group, and earn interest at the respective short-term deposit rates.
14.
Trade and other payables
Unaudited
Audited
30 June 2013
30 June 2012
31 December 2012
US$
US$
US$
Trade payables
1,545,374
3,063,278
945,955
Trade payables to jointly controlled entity (Note 16)
182,945
16,768
18,241
Trade payables to related parties (Note 16)
2,011,715
3,113,786
1,947,539
Corporation tax
66,878
69,746
64,105
Oil taxes, VAT and employee taxes
4,936,089
2,318,789
3,221,291
Other payables
186,958
187,785
169,540
Payments received in advance
387,595
-
1,531,204
Accruals
784,759
864,998
1,011,955
10,102,313
9,635,150
8,909,830
The Directors consider that the carrying amount of trade and other payables approximates their fair value.
Trade and other payables are non-interest-bearing and are normally settled on 60-day terms.
Trade payables and accruals principally comprise amounts outstanding for trade purchases and ongoing costs.
15.
Loans and borrowings
Unaudited
Audited
Group and Company
Effective interest rate
Maturity
30 June 2013
30 June 2012
31 December 2012
%
US$
US$
US$
Interest bearing
Current liabilities
Macquarie Bank - US$75,000,000 loan facility
9.79%
31-May-14
18,816,604
29,695,071
21,350,311
Total current liabilites
18,816,604
29,695,071
21,350,311
Non-current liabilities
Arawak - US$15,000,000 loan
7.16%
30-May-15
14,682,383
14,474,828
14,559,722
Total non-current liabilites
14,682,383
14,474,828
14,559,722
Total loans and borrowings
33,498,987
44,366,699
35,910,033
Contractual undiscounted liability
33,900,000
45,000,000
36,500,000
Macquarie loan facility
On 28 May 2010 the Group agreeda loan facility agreement for up to US$30 million with Macquarieto re-finance an existing facility of US$5 million. In April 2011, PetroNeft signed a revised borrowing base loan facility agreement with Macquarie for up to US$75 million. The initial borrowing base was set at US$30 million.
During 2012, pursuant to a borrowing base review, the Group repaid an amount of US$7.5 million on its outstanding loan balance and in addition an amount of US$1 million was converted into equity by way of issuing new shares. In addition to this monthly repayments of US$650,000 commenced on 31 March 2013.
Under the various loan agreements Macquarie was granted 10.1 million warrants at various strike prices and with various expiry dates. There was also a 1% cash arrangement fee associated with the new loan facility in 2011.
Total transaction costs, including share-based payment expense connected with the warrants granted, incurred in the 6 months to June 2013 amounted to US$Nil (2012: US$0.2 million) and are applied against the proceeds. The effective interest rate will be applied to the liability to accrete the transaction costs over the period of the loan.
Certain oil and gas properties (wells, central processing facility, pipeline) together with shares in WorldAce Investments Ltd, shares in Stimul-T, certain bank accounts and inventories are pledged as a security for the Macquarie loan facility agreement.
During the period the Group was in breach of certain financial covenants and conditions subject to the loan agreement, relating primarily certain financial ratios. These conditions were waived by Macquarie such that the Group was not in breach as at the period-end. However as the waiver did not extend to more than 12 months after the period-end, all of the Macquarie debt is classified as repayable within one year.
15. Loans and borrowings (continued)
Arawak Energy Russia B.V. loan facility
On 30 May 2012, the Group signed a three-year loan agreement with Arawak for US$15 million. The loan carries an interest rate of LIBOR plus 6%. In addition, 4,000,000 warrants were granted to Arawak aspart of the loan agreement. Total transaction costs incurred in 2012 amounted to US$0.35 million and are applied against the proceeds. The effective interest rate will be applied to the liability to accrete the transaction costs over the period of the loan.Interest is payable monthly and the principal is repayable in one instalment on 30 May 2015. The loan is secured on PetroNeft's 50% interest in Russian BD Holdings B.V.
The loan arrangement constitutes a compound financial instrument under IAS 32 Financial Instruments: Presentationcomprising loans and borrowing and an equity component (warrants). These warrants granted to Arawak should be accounted for separately. Using the split accounting method, a value of US$0.2 million was allocated to the equity component which has been credited to reserves.
16. Related party disclosures
Transactions between PetroNeft Resources plc and its subsidiaries, Stimul-T, Granite, Pervomayka, Dolomite, WorldAce Investments have been eliminated on consolidation. Details of transactions between the Group and other related parties are disclosed below.
Vakha Sobraliev, a Director of PetroNeft, is the principal of LLC Tomskburneftegaz ("TBNG") which has drilled production and exploration wells for the Group. Various contracts for drilling have been awarded to TBNG in recent years. All drilling contracts with TBNG are "turnkey" contracts whereby TBNG assumes substantially all liabilities in relation to the health and safety, environmental and other risks associated with drilling operation. As part of this relationship PetroNeft Group companies also occasionally sell sundry goods and services to TBNG. Other companies related to TBNG also provide some services to the Group such as transportation, power management and repairs.
The following is a summary of the transactions:
30 June 2013
31 December 2012
TBNG
Other companies
TBNG
Other companies
US$
US$
US$
US$
Period ended
Maximum value of new contracts awarded during the period
-
-
441,264
-
Paid during the period for drilling and other services
1,568,998
78,803
9,834,779
491,339
Amount due to TBNG and related companies at period end
1,961,139
50,576
1,922,796
24,743
Received during the period for sundry goods and services
58,686
-
15,501
-
Amount due from TBNG and related companies at period end
3,755
3,280
66,228
3,534
16. Related party disclosures(continued)
The Group has an indirect 50% interest in Lineynoye which in turn is 100% owned by the jointly controlled entity Russian BD Holdings B.V. Lineynoye also entered into some transactions with TBNG and related companies as follows:
30 June 2013
31 December 2012
TBNG
Other companies
TBNG
Other companies
US$
US$
US$
US$
Period ended
Paid during the period for drilling and related services
-
-
1,375,582
-
The Group provided various goods and services to the jointly controlled entity Russian BD Holdings B.V. and its wholly-owned subsidiary LLC Lineynoye during six months ended 30 June 2013 amounting to US$88,958 (FY2012: US$332,424). An amount of US$721,092 (YE2012: US$657,492) is outstanding from these entities at 30 June 2013 while an amount of US$182,945 (YE2012: US$18,241) is payable.
This information is provided by RNS
The company news service from the London Stock Exchange
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