REG - Petroneft Resources - 2014 Final Results <Origin Href="QuoteRef">INGR.L</Origin> <Origin Href="QuoteRef">PTR.I</Origin> - Part 2
16/07/2015 12:08
- Part 2: For the preceding part double click ID:nRSW8902Qa
denominated assets and
liabilities held by Stimul-T whose functional currency is Russian Rouble. As
part of the consolidation process in prior periods up to 3 July 2014 those
Russian Rouble carrying amounts were converted to US Dollars, the functional
currency of PetroNeft, at each period end and the unrealised gain or loss was
then recognised through the statement of other comprehensive income and
included in the currency translation reserve rather than the retained loss
reserve. With the completion of the Licence 61 Farmout in July 2014 this
accumulated loss was realised and therefore transferred to the Income
Statement and included in the calculation of loss on disposal arising from the
Licence 61 Farmout.
5. Property, plant and equipment
Plant and machinery
US$
Cost
At 1 January 2013 1,854,724
Additions 14,551
Transferred from oil and gas properties 108,427
Disposals (39,380)
Translation adjustment (129,353)
1,808,969
Transferred to assets held for sale (335,997)
At 1 January 2014 1,472,972
Additions 148,917
Disposals (43,974)
Translation adjustment (581,327)
At 31 December 2014 996,588
Depreciation
At 1 January 2013 1,082,298
Charge for the year 227,083
Transferred from oil and gas properties 52,512
Disposals (27,112)
Translation adjustment (81,280)
1,253,501
Transferred to assets held for sale (247,589)
At 1 January 2014 1,005,912
Charge for the period 126,250
Disposals (43,974)
Translation adjustment (413,402)
At 31 December 2014 674,786
Net book values
At 31 December 2014 321,802
At 31 December 2013 467,060
6. Equity-accounted Investment in Joint Venture - WorldAce Investments
Limited
PetroNeft Resources plc has a 50% interest in WorldAce Investments Limited, a
jointly controlled entity which holds 100% of LLC Stimul-T, an entity involved
in oil and gas exploration and the registered holder of Licence 61. The
interest in this joint venture is accounted for using the equity accounting
method. WorldAce Investments Limited became a joint venture with effect from 3
July 2014. Full details of the transaction and the accounting implications are
discussed in Note 4. WorldAce Investments Limited is incorporated in Cyprus
and carries out its activities, through LLC Stimul-T, in Russia.
Share of net assets
US$
At 1 January 2014 -
Subsidiary becoming a joint venture (Note 4) 35,000,000
Elimination of unrealised profit on intra-Group transactions (22,734)
Retained loss (304,439)
Translation adjustment (23,807,671)
At 31 December 2014 10,865,156
Additional financial information in respect of PetroNeft's 50% interest in the
equity-accounted joint venture entity is disclosed below:
Period from 3 July to 31 December 2014
US$
Continuing operations
Revenue 5,845,646
Cost of sales (5,450,642)
Gross profit 395,004
Administrative expenses (1,027,260)
Operating loss (632,256)
Finance revenue 4,713
Finance costs (876,896)
Loss for the period for continuing operations before taxation (1,504,439)
Income tax credit 1,200,000
Loss for the period (304,439)
Loss for the period (304,439)
Other comprehensive income to be reclassified to profit or loss in subsequent periods:
Currency translation adjustments (23,807,671)
Total comprehensive loss for the period (24,112,110)
The currency translation adjustment results from the devaluation of the
Russian Rouble during the year. All Russian Rouble carrying values in
Stimul-T, the 100% subsidiary of WorldAce are converted to US Dollars at each
period end. The resulting gain or loss is recognised through other
comprehensive income and transferred to the currency translation reserve. The
Russian Rouble depreciated significantly against the US Dollar during the
period moving from RUB34.2:US$1 at 3 July 2014 to RUB56.5:US$1 at 31 December
2014.
6. Equity-accounted Investment in Joint Venture - WorldAce Investments
Limited (continued)
2014
US$
Non-current Assets
Oil and gas properties 27,860,901
Property, plant and equipment 285,775
Exploration and evaluation assets 9,600,431
37,747,107
Current Assets
Inventories 691,950
Trade and other receivables 1,633,624
Cash and cash equivalents 514,206
2,839,780
Total Assets 40,586,887
Non-current Liabilities
Provisions (393,153)
Interest-bearing loans and borrowings (32,593,955)
(32,987,108)
Current Liabilities
Trade and other payables (1,638,815)
(1,638,815)
Total Liabilities (34,625,923)
Net Assets 5,960,964
Capital commitments
2014
US$
Details of capital commitments at the balance sheet date are as follows:
Contracted for but not provided in the financial statements 12,839,994
Including contracted with related parties 3,697,366
6. Equity-accounted Investment in Joint Venture - WorldAce
Investments Limited (continued)
Future minimum rentals payable under non-cancellable operating leases at the balance sheet date are as follows:
2014
US$
Within one year 44,624
After one year but not more than five years 160,711
More than five years 403,104
608,439
The above capital commitments in the joint venture are incurred jointly with
Oil India International B.V. The Group has a 50% share of these commitments.
7. Equity-accounted Investment in Joint Venture - Russian BD Holdings
B.V.
PetroNeft Resources plc has 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 the equity
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 2013 3,819,142
Retained loss (235,060)
Translation adjustment (252,238)
At 1 January 2014 3,331,844
Retained loss (294,103)
Translation adjustment (2,672,563)
At 31 December 2014 365,178
7. Equity-accounted Investment in Joint Venture - Russian BD Holdings
B.V. (continued)
Additional financial information in respect of PetroNeft's 50% interest in the
equity-accounted joint venture entity is disclosed below:
2014 2013
US$ US$
Revenue - -
Cost of sales - -
Gross profit - -
Administrative expenses (143,643) (114,563)
Exchange loss on intra-Group loans - (65,784)
Operating loss (143,643) (180,347)
Finance revenue 1,743 184
Finance costs (152,203) (45,134)
Loss for the year for continuing operations before taxation (294,103) (225,297)
Taxation - (9,763)
Loss for the year (294,103) (235,060)
Loss for the year
Other comprehensive income to be reclassified to profit or loss in subsequent periods: (294,103) (235,060)
Currency translation adjustments (2,672,563) (252,238)
Total comprehensive loss for the year (2,966,666) (487,298)
2014 2013
US$ US$
Non-current assets 4,155,338 4,774,180
Current assets 165,716 164,066
Total assets 4,321,054 4,938,246
Non-current liabilities (22,810) (34,704)
Current liabilities (3,933,066) (1,571,698)
Total liabilities (3,955,876) (1,606,402)
Net Assets 365,178 3,331,844
7. Equity-accounted Investment in Joint Venture - Russian BD Holdings
B.V. (continued)
Capital commitments 2014 2013
US$ US$
Details of capital commitments at the balance sheet date are as follows:
Contracted for but not provided in
the financial statements - 4,935,229
Including contracted with related parties - 204,980
Future minimum rentals payable under non-cancellable operating leases at the balance sheet date are as follows:
2014 2013
US$ US$
Within one year 2,605 4,261
After one year but not more than five years 8,980 15,801
More than five years 29,377 51,251
40,962 71,313
The above capital commitments in the joint venture are incurred jointly with
Arawak Energy. The Group has a 50% share of these commitments.
8. Financial assets - loans and receivables
2014 2013
US$ US$
Loans to WorldAce Investments Limited (Note 15) 46,398,502 -
46,398,502 -
The Company has granted a loan facility to its joint venture undertaking
WorldAce Investments Limited of up to US$45 million. This loan facility is US$
denominated and unsecured. Interest currently accrues on the loan at USD LIBOR
plus 6.0% but the Company has agreed not to seek payment of interest until
2016 at the earliest. The loan is set to mature on 31 December 2017. As at 31
December 2014 the loan is fully drawn down.
9. Inventories
2014 2013
US$ US$
Materials 15,179 30,523
15,179 30,523
10. Trade and other receivables
2014 2013
US$ US$
Other receivables 112,492 14,544
Receivable from jointly controlled entities (Note 15) 4,879,292 717,190
Receivable from related parties (Note 15) 11,858 -
Advances to contractors 1,922 -
Prepayments 64,380 59,130
5,069,944 790,864
11. Cash and Cash Equivalents and Restricted Cash
2014 2013
US$ US$
Cash at bank and in hand 3,392,769 116,831
Restricted cash - 2,054,947
3,392,769 2,171,778
At 31 December 2013 restricted cash amounting to US$2,054,947 was being held
in a Macquarie Debt Service Reserve Account ("DSRA"). This account was part of
the security package held by Macquarie and was offsetable against the loan in
the event of a default on the loan or by agreement between the parties. The
related Macquarie loan was repaid in full following the Licence 61 Farmout in
July 2014, and the DSRA was subsequently released. Bank deposits earn interest
at floating rates based on daily deposit rates. Short-term deposits are made
for varying periods of between one day and one month depending on the
immediate cash requirements of the Group, and earn interest at the respective
short-term deposit rates.
12. Trade and other payables
2014 2013
US$ US$
Trade payables 306,857 740,817
Trade payables to jointly controlled entity (Note 15) 53,450 72,659
Corporation tax 60,797 63,292
Oil taxes, VAT and employee taxes 74,497 87,004
Other payables 137,475 22,745
Accruals 818,547 820,215
1,451,623 1,806,732
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.
13. Interest-bearing loans and borrowings
Effective interest rate Contractual maturity date 2014 2013
% US$ US$
Interest bearing
Current liabilities
Macquarie Bank Limited 9.81% 7 July 2014 - 15,000,000
Belgrave Naftogaz B.V. 7.38% 30 May 2015 - 15,000,000
Total current liabilities - 30,000,000
Total loans and borrowings - 30,000,000
Contractual undiscounted liability - 30,000,000
Macquarie loan facility
The Macquarie loan was repaid in full in July 2014 following the completion of
the Licence 61 Farmout.
Arawak Energy loan facility
In March 2014 Belgrave Naftogas B.V. (an Arawak Group company) extended its
loan facility to the Company by US$1,500,000 to US$16,500,000. The loan was
subsequently repaid in full following the completion of the Licence 61 Farmout
in July 2014.
14. Share capital 2014 2013
E E
Authorised
1,000,000,000 (2013: 800,000,000) Ordinary Shares of E0.01 each 10,000,000 8,000,000
10,000,000 8,000,000
Allotted, called up and fully paid equity Number of Ordinary Shares Called up share capital US$
At 1 January 2013 644,920,275 8,561,499
At 1 January 2014 644,920,275 8,561,499
Issued in the year 62,325,631 867,683
At 31 December 2014 707,245,906 9,429,182
The Company issued 62,325,631 new shares for consideration of US$5.2 million
in March 2014. The net proceeds of this share issue of US$5.0 million, after
transaction costs of US$0.2 million, were used to finance expenditure on oil
and gas properties, exploration and evaluation costs, debt repayment and
corporate overhead.
15. Related party disclosures
Transactions with subsidiaries
Transactions between the Group and its subsidiaries, WorldAce Investments
Limited, Stimul-T, Granite and Dolomite have been eliminated on consolidation.
The Company had the following transactions with its subsidiaries during the
years ended 31 December 2014 and 2013:
Stimul-T Granite Construction WorldAce Investments Limited
US$ US$ US$
Loans
At 1 January 2013 101,924,207 1,581,167 25,133,138
Technical and management services provided 198,750 - 41,627
Interest accrued in the year 6,767,453 105,375 -
Impairment of loans receivable and interest in the year (46,287,424) - -
Repaid during the year (5,230,000) (650,000) -
Translation adjustment (1,481,277) - 8,525
At 1 January 2014 55,891,709 1,036,542 25,183,290
Technical and management services provided - - 16,255
Advanced during the year 600,000 - -
Interest accrued in the year 7,233 66,916 -
Loans repaid during the year (1,075,000) - -
Assigned to WorldAce Investments Limited (54,815,433) - 54,815,433
Transferred on cessation as a subsidiary (607,233) - (80,011,257)
Translation adjustment (1,276) - (3,721)
At 31 December 2014 - 1,103,458 -
Capital contributions
Share-based payment 2014 21,169 7,247 -
Share-based payment 2013 221,744 38,959 -
15. Related party disclosures (continued)
Transactions with joint ventures
PetroNeft Resources plc had the following transactions with its joint ventures
during the years ended 31 December 2014 and 2013:
Russian BD Holdings B.V. Group WorldAce Investments Limited Group
US$ US$
Receivable by PetroNeft Group at 1 January 2013 639,251 -
Advanced during the year 15,000 -
Transactions during the year (7,774) -
Interest accrued in the year 32,222 -
Repaid during the year (37,936) -
Translation adjustment 3,767 -
At 1 January 2014 644,531 -
Transferred on subsidiary becoming a joint venture (note 4) - 81,021,362
Advanced during the year 3,500,000 -
Transactions during the year 330,967 1,574,116
Interest accrued in the year 117,120 1,415,202
Loans repaid during the year (475,000) (35,630,575)
Payments for services made during the year (206,290) (968,140)
Translation adjustment (28,750) (70,199)
At 31 December 2014 3,882,578 47,341,766
Balance at 31 December 2013 comprised of:
Trade and other receivables 717,190 -
Trade and other payables (72,659) -
644,531 -
Balance at 31 December 2014 comprised of:
Loan facility advanced - 46,398,502
Trade and other receivables 3,882,578 996,714
Trade and other payables - (53,450)
3,882,578 47,341,766
15. Related party disclosures (continued)
Remuneration of key management
Key management comprise the Directors of the Company, the Vice President of
Business Development and Operations, the General Director and the Executive
Director of the Russian subsidiary LLC Dolomite, along with both the Chief
Geologist and Chief Engineer of LLC Dolomite. Their remuneration during the
year was as follows:
Remuneration of key management
2014 2013
US$ US$
Compensation of key management 2,068,014 1,799,937
Contributions to defined contribution pension plan 65,923 40,784
Share-based payment expense 39,981 258,258
2,173,918 2,098,979
The total amount of unpaid fees and expenses due to Directors as at 31
December 2014 was US$561,348 (2013: US$400,036).
Details of transactions between the Group and other related parties are
disclosed below.
Transactions with TBNG Group
Vakha Sobraliev, a Director of PetroNeft, is the principal of LLC
Tomskburneftegaz ("TBNG") which has drilled production and exploration wells
for the WorldAce Group (100% subsidiary of PetroNeft Group until 3 July 2014,
and 50% joint venture afterwards). Various contracts for drilling have been
awarded to TBNG in recent years. All drilling contracts with TBNG are
"turnkey" contracts whereby TBNG assumes substantially all liabilities in
relation to the health and safety, environmental and other risks associated
with drilling operation. As part of this relationship PetroNeft Group
companies also occasionally sell sundry goods and services to TBNG. Other
companies related to TBNG also provide some services to the Group such as
transportation, power management and repairs.
The following is a summary of the transactions between the WorldAce Group and
the TBNG Group:
TBNG Group TBNG Group
2014 2013
US$ US$
Maximum value of new contracts awarded during the year 4,494,543 -
Paid during the year for drilling and related services 6,869,038 1,527,850
Paid during the year for other services 24,523 128,416
Amount due to TBNG and related companies at year end 351,172 1,962,935
Received during the year for sundry goods and services 37,271 49,445
Amount due from TBNG and related companies at year end 400,970 10,122
Other PetroNeft Group companies provided various services to TBNG Group during
2014 amounting to US$15,917 (2013: US$Nil). An amount of US$11,858 (2013:
US$Nil) is outstanding from TBNG Group at 31 December 2014.
15. Related party disclosures (continued)
Transactions with TBNG Group (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:
TBNG Group TBNG Group
2014 2013
US$ US$
Maximum value of new contracts awarded during the year - -
Paid during the year for drilling and related services 183,874 -
Paid during the year for other services - -
Amount due to TBNG and related companies at year end - -
Received during the year for sundry goods and services - -
Amount due from TBNG and related companies at year end 4,625 7,968
16. Approval of financial statements
The 2014 consolidated financial statements were approved, and authorised for
issue, by the Board of Directors on 18 June 2015.
17. Board approval
This announcement was approved by the Board of Directors of PetroNeft
Resources plc on 22 June 2015.
Glossary
1P Proved reserves according
to SPE standards.
2P Proved and probable
reserves according to SPE standards.
3P Proved, probable and
possible reserves according to SPE standards.
AGM Annual General Meeting.
AIM Alternative Investment Market
of the London Stock Exchange.
AMI Area of Mutual Interest.
Arawak Arawak Energy Russia B.V.
bbl Barrel.
Belgrave Naftogas Belgrave Naftogas B.V., a member of the
Arawak group of companies
bfpd Barrels of fluid per day.
boe Barrel of oil equivalent.
bopd Barrels of oil per day.
Company PetroNeft Resources plc.
CPF Central Processing
Facility.
CSR Corporate and Social
Responsibility.
Custody Transfer Point Facility/location at which custody of oil
transfers to another operator.
Dolomite LLC Dolomite, a 100% subsidiary
of PetroNeft registered in the Russian Federation
ESM Enterprise Securities Market
of the Irish Stock Exchange.
ESP Electric Submersible Pump
Exploration resources An undrilled prospect in an area of known
hydrocarbons with unequivocal four-way dip closure at the reservoir horizon.
Granite Construction LLC Granite Construction, a 100% subsidiary
of PetroNeft registered in the Russian Federation
Group The Company and its subsidiary
undertakings.
HSE Health, Safety and
Environment.
IAS International Accounting
Standard.
IFRIC IFRS Interpretations
Committee.
IFRS International Financial
Reporting Standard.
km Kilometres.
km2/ sq km Square
kilometres.
KPI Key Performance Indicator.
Licence 61 The Exploration and Production
Licence in the Tomsk Oblast, Russia owned by the joint venture company
WorldAce Investments Limited. It contains seven known oil fields, Lineynoye,
Tungolskoye, West Lineynoye, Arbuzovskoye, Kondrashevskoye, Sibkrayevskoye and
North Varyakhskoye and 27 Prospects and Leads that are currently being
explored.
Licence 61 Farmout An agreement whereby Oil India Limited
subscribed for shares in WorldAce, the holding company for Stimul-T, the
entity which holds Licence 61 and all related assets and liabilities, and
following, PetroNeft and Oil India Limited both hold 50% of the voting shares,
and through the shareholders agreement, both parties have joint control of
WorldAce with PetroNeft as operator
Licence 67 The Exploration and Production
Licence in the Tomsk Oblast, Russia owned by the joint venture company Russian
BD Holdings B.V. It contains two oil fields, Ledovoye and Cheremshanskoye and
several potential prospects.
Lineynoye Limited Liability Company
Lineynoye, a wholly owned subsidiary of Russian BD Holdings B.V., registered
in the Russian Federation.
Macquarie Macquarie Bank Limited.
m Metres.
mmbbls Million barrels.
mmbo Million barrels of oil.
Oil pay A formation containing
producible hydrocarbons.
P1 Proved reserves according
to SPE standards.
P2 Probable reserves according
to SPE standards.
P3 Possible reserves according
to SPE standards.
PetroNeft PetroNeft Resources plc.
Russian BD Holdings B.V. Russian BD Holdings B.V., a company owned 50%
by PetroNeft and registered in the Netherlands.
SPE Society of Petroleum
Engineers.
Spud To commence drilling a well.
Stimul-T Limited Liability Company
Stimul-T, a wholly owned subsidiary of WorldAce, based in the Russian
Federation.
TSR Total Shareholder Return.
VAT Value Added Tax.
WAEP Weighted Average Exercise
Price.
WorldAce WorldAce Investments Limited, a
company owned 50% by PetroNeft, registered in Cyprus.
WorldAce Group WorldAce Investments Limited and its 100%
subsidiary LLC Stimul-T
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