TIDMMTA
RNS Number : 0176A
Matra Petroleum PLC
26 March 2012
26 March 2012
Matra Petroleum PLC
("Matra" or the "Company")
Full Year Results
Matra Petroleum PLC, the independent oil and gas exploration and
production company with operations in Russia, today announces its
results for the 12 month period ending 31 December 2011.
Highlights
Operational
-- Well A-13 validated following successful extended well test
Financial
-- Successfully raised GBP1.2 million through a placement in
November 2011 -- Cash or cash equivalents of EUR1.8 million at year
end
Outlook
-- Imminent production from Well A-13 -- Well A-14 drilling
approval granted -- Planned acquisition of 3D seismic over the
entire field
Peter Hind, Managing Director, commented:
"We are delighted that Well A-13 is about to commence production
and that approval to drill well A-14 has now been granted. We look
forward to achieving sustained production from Well A-13 and
increasing our understanding of the Sokolovskoe field."
For further information, please contact:
Matra Petroleum plc www.matrapetroleum.com
Peter Hind, Managing Director +44 (0) 7990 807 855
Neil Hodgson, Exploration Director +44 (0) 7973 342 822
Fox-Davies Capital Limited +44 (0) 203 463 5000
Daniel Fox-Davies / Richard Hail
Barry Saint (Nominated Advisor)
Pelham Bell Pottinger +44 (0) 20 7861 3232
Nick Lambert / Henry Lerwill
REPORT AND ACCOUNTS FOR THE YEAR ENDED 31 DECEMBER 2011
CHAIRMAN'S STATEMENT
2011 was a year of progress for the Company, notwithstanding the
previously announced execution difficulties experienced with Well
A-12.
Well A-13 has been validated as a potential producing well for
the Company and the board has been able to advance its strategy for
developing its 100 per cent held 20 year production licence on the
Sokolovskoe oil field. The Company's independently assessed
Contingent Recoverable ("2C") Resources are 15mm bbls.
In particular, 2011 saw the successful extended test on Well
A-13 with production expected to commence shortly, following
completion of surface production facilities, with anticipated
initial oil production of around 40bopd (unpumped), rising to an
expected 100bopd once a down-hole electrical submersible pump is
installed. This will allow us to take advantage of current strong
oil prices and a reduction in Mineral Extraction Tax for small
fields that became applicable in January 2012.
Imminent production from Well A-13 puts the Company back on
track after operations on Well A-12 had to be suspended following
difficulties with the completion of the well over the reservoir
interval.
The board expects to be able to utilise Well A-12 at some point
in the future development of the Sokolovskoe Field and therefore
the well has not been abandoned.
In the absence of a firm programme for this well, however, IFRS
guidelines require us to write-off the full cost of this well at
this time. Apart from this item, the accounts reflect an overall
reduction in overheads compared to last year.
The effects of the global recession on world markets continued
in 2011, however in November the Company successfully raised GBP1.2
million through a placement, leaving the Company in a better cash
position and continuing to operate without any debt.
Further funds will be required to enable the drilling of the
proposed production Well A-14 and the acquisition of the full field
3D seismic survey. These represent the Company's next steps to
evaluate the Sokolovskoe oil field before proceeding with a full
field development decision. Accordingly, the Board is currently
considering a number of financing and strategic options available
to the Company, with the best interests of shareholders in
mind.
The board remains optimistic about the Company's prospects in
2012 and anticipates that the start-up of production and the
prospect of a key appraisal and development programme will have a
significant positive impact on the Company. 2011 was a challenging
year for Matra and the Board would like to thank the company's
management and staff for their efforts and perseverance in
2011.
Sir Michael Jenkins
Chairman
22 March 2012
REPORT AND ACCOUNTS FOR THE YEAR ENDED 31 DECEMBER 2011
MANAGING DIRECTOR'S REVIEW
Well Activity
Well A-12
Activity in 2011 was focussed on trying to establish commercial
production from Well A-12 which was drilled as the discovery well
and tested at rates close to 1,000bopd. The side-track to the well
was completed successfully but cementing operations were hampered
by equipment failure. Poor well performance prior to acidisation
was subsequently found to be caused by fill at the bottom of the
hole from mud particulates.
After cleaning out the well an acid treatment was completed and
subsequently produced at rate of over 1,400bopd with the aid of
Nitrogen lift, with no measurable water cut. At the end of the
clean-up process the well was inadvertently opened to atmospheric
pressure causing unacceptably high levels of pressure differentials
across both downhole equipment and the formation itself. After
shutting the well in and demobilising the treatment equipment the
well was found to hold large volumes of water. This together with
further well data indicates that the water influx was caused by the
"pressure shock" combined with poor cementation and the proximity
of the side-track to the original well (50m).
At this point the board concluded that it would be better to
focus efforts on Well A-14 which is likely to have a more material
impact on the Company.
Well A-12 has not been abandoned and it is most likely that the
well will be revisited in the future and potentially side-tracked
further away from the original hole.
Well A-13
On Well A-13 successful water shut-off was achieved by remedial
cementation. The well subsequently completed an extended test
period without any significant water production.
The well tested, on free flow, at rates of around 40bopd and the
installation of a downhole pump is expected to increase production
to around 100 bopd. The success of the remedial cementation in Well
A-13 further supports the conclusion that water influx may be
avoided during development drilling, by changes in well design.
At the time of writing, production equipment was being installed
at the wellsite and production is expected to commence once the
equipment is commissioned.
Well A-14
Well A-14 is planned to test the top of the Sokolovskoe field
and is predicted to intersect the reservoir some 20m higher than
Well A-12. It is also located at the centre of the "patch" reef as
prognosed by ERC/Equipoise in 2010 as part of their Competent
Person's Report. The well is therefore a key part of the field's
appraisal and will test what the Company believes to be the best
part of the reservoir and is structurally higher and hence further
away from the oil-water-contact encountered in previous wells. The
Company estimates that success at this location could add up to 10
million barrels of oil to the Company's contingent resources.
This well location is also near Well 309 on an adjoining
property which was drilled in the 1991 by TNK/BP and encountered a
thicker and better oil pay section.
Well A-14 is therefore planned to be located between three known
oil wells and up-dip from Well A-12 and in an area covered by
existing 3D seismic. We are confident that the well will encounter
oil pay at which point we can determine the thickness and quality
of the reservoir in that location.
Local authority approval to drill Well A-14 has now been
granted. Actual timing of the well is dependent upon various
factors including the ending of the spring thaw period, the type of
rig to be used and funding.
3D Seismic
The acquisition of a full field 3D survey is required before
drilling in the north eastern part of the field which currently has
little available data. Subject to funding, it is currently
anticipated that the survey will be completed, processed and
interpreted during 2012.
REPORT AND ACCOUNTS FOR THE YEAR ENDED 31 DECEMBER 2011
MANAGING DIRECTOR'S REVIEW
Accounts
Although we have not abandoned Well A-12 and expect to utilise
it within the overall field development, IFRS guidelines require
that the full expenditure is written down until such times as there
is a firm plan to use the well.
Outlook
The board is confident in making significant progress for the
Company during 2012, establishing production and substantially
enhancing the Company's knowledge of the Sokolovskoe oil field.
Well A-14 is a low risk appraisal well which has the prospect of
improving our knowledge of the field and its reserves and
production potential. Data acquired by drilling Well A-14 together
with the additional seismic, will enable us to plan the full
development of the Sokolovskoe field.
We continue to evaluate financial and strategic opportunities to
enable broadening the portfolio but we recognise the importance of
being able to commit to the full development of the Sokolovskoe
field.
Peter Hind
Managing Director
22 March 2012
REPORT AND ACCOUNTS FOR THE YEAR ENDED 31 DECEMBER 2011
REVIEW OF OPERATIONS AND FINANCE
During the year the Company placed 290 million new shares with
subscribers. Details of the Placing are summarised below:
Ordinary Price Funds
shares per share raised
No. GBP GBP
------------------------------ -------------- ---------- ----------
31 December 2010 1,064,917,872 - -
Placement 14 February
2011 50,000,000 0.031 1,550,000
Placement 16 November
2011 170,000,000 0.005 850,000
Placement 22 November
2011 70,000,000 0.005 350,000
Share issue costs (cash) - - (99,311)
Share issue costs (warrants) - - (29,288)
31 December 2011 1,354,917,872 - 2,621,401
============================== ============== ========== ==========
Group administrative expenditure was higher in 2011 by
EUR5,382,889 (2010: EUR486,324). This increase was largely due to
impairment of exploration expenditure and share based payment, but
was offset by a reduction of EUR388,044 in Group overheads.
During the year Russian VAT refunds of EUR280,688 (2010:
EUR566,137) were received.
The Group capitalised costs of EUR1,635,983 (2010: EUR4,520,175)
relating to the work on its A-12 and A-13 appraisal wells. An
impairment charge of EUR5,246,672 (2010: nil) has been recognised
in respect of costs incurred on Well A-12 (note 11).
Inventory includes EUR20,787 (2010: EUR18,421) (note 13) for
well casing and other drilling equipment retained for future use.
Inventory is accounted for at the lower of cost and net realisable
value.
At year end the Group had cash and cash equivalents totalling
EUR1,802,280 (2010: EUR2,222,041) (note 18). Current cash reserves
are sufficient to fund the programmed work on Well A-13 and
associated overheads for 2012. Drilling of Well A-14 and the 3D
seismic survey planned for 2012 require additional funds to be
raised in 2012. The Directors are confident of the Company's
ability to secure further funding.
Risks to the Group
The Group's Oil and Gas activities are subject to various
business and financial risks as described below, which can
significantly impact upon its performance:
-- Funding risk - The Group does not currently have commercial
production but has a significant capital programme to develop its
asset. As a result management carefully monitor the liquidity
position. Cash forecasts are produced regularly and are reviewed by
management.
-- Currency risk - The Group has a presentational currency of
the Euro but a significant proportion of capital expenditure is
denominated in Roubles and Pounds Sterling. At present the Group
has no formal currency hedging policy but management will continue
to monitor the situation and adopt an appropriate hedging policy if
necessary.
-- Commodity risk - The economic viability of the Group's oil
and gas assets is dependent on the underlying oil price. Management
produce financial models of the assets based upon conservative long
term oil prices and regularly revise these estimates.
-- Operational risk - Operational risks include equipment
failure, well control issues and the impact of hostile weather
conditions. The Group takes responsibility to ensure all relevant
legislation is met and that contractors have the relevant insurance
in place.
-- Appraisal and development risk - The Group is planning to
appraise and develop the Sokolovskoe field. Whilst the Group has a
strong technical function and audits this function with independent
expertise there is a risk that the volumes of economically
recoverable oil may vary from current estimates.
REPORT AND ACCOUNTS FOR THE YEAR ENDED 31 DECEMBER 2011
REVIEW OF OPERATIONS AND FINANCE
Key sources of estimation uncertainty
The Group makes estimates and assumptions regarding the future.
Estimates and judgements are continually evaluated based on
historical experiences and other factors, including expectations of
future events that are believed to be reasonable under the
circumstances. In the future, actual experience may deviate from
these estimates and assumptions. The estimates and assumptions that
have a significant risk of causing a material adjustment to the
carrying amounts of assets and liabilities within the next
financial year are as follows:
Exploration and evaluation costs
Exploration and evaluation costs are capitalised as intangible
assets (note 11) and are assessed for impairment when circumstances
suggest that the carrying amount may exceed the recoverable value
thereof. This assessment involves judgement as to the likely future
commerciality of the asset and when such commerciality should be
determined as well as future revenues and costs pertaining to the
utilisation of the exploration and production rights to which such
capitalised costs relate and the discount rate to be applied to
such future revenues and costs in order to determine a recoverable
value.
Impairment review
While conducting an impairment review of its assets, the Group
exercises judgement in making assumptions about future oil &
gas prices and future development and production costs. Changes in
the estimates used can result in significant charges to the income
statement.
Share based payments
Where equity settled share options are awarded to employees, the
fair value of the options at the date of grant is charged to the
consolidated income statement over the vesting period. Non-market
vesting conditions are taken into account by adjusting the number
of equity instruments expected to vest at each balance sheet date
so that, ultimately, the cumulative amount recognised over the
vesting period is based on the number of options that eventually
vest. Market vesting conditions are factored into the fair value of
the options granted. As long as all other vesting conditions are
satisfied, a charge is made irrespective of whether the market
vesting conditions are satisfied. The cumulative expense is not
adjusted for failure to achieve a market vesting condition.
Where the terms and conditions of options are modified before
they vest, the increase in the fair value of the options, measured
immediately before and after the modification, is also charged to
the consolidated income statement over the remaining vesting
period.
Where equity instruments are granted to persons other than
employees, the consolidated income statement is charged with the
fair value of goods and services received.
DIRECTORS' REPORT
FOR THE YEAR ENDED 31 DECEMBER 2011
The Directors present their annual report and the audited
consolidated financial statements of Matra Petroleum plc (the
"Company" and together with its subsidiaries, the "Group"), for the
year ended 31 December 2011.
Principal activity and business review
The principal activity of the Group and Company is that of oil
and gas exploration and production.
A full review of the Group's activities during the year, recent
events and future developments are contained in the Chairman's
Statement, Managing Director's Review and Review of Operations and
Finance incorporated within the Annual Report and Accounts.
Corporate structure
Matra Petroleum plc is a Company limited by shares that is
incorporated and domiciled in England and Wales. The Company has
the following subsidiaries at 31 December 2011:
-- Matra Cyprus Petroleum Limited (100%)
-- Matra Cyprus Petroleum (Alpha) Limited (100%)
-- OOO Arkhangelovskoe (100%)
Results and dividends
The loss of the Group after taxation amounted to EUR7,210,221
(2010: EUR1,769,429) and the Company to EUR8,219,393 (2010:
EUR1,761,165).
The Directors do not propose the payment of a dividend (2010:
nil).
Business review and future developments
Likely developments in the operations of the group have been
included in the Chairman's Statement and Managing Director's Review
which is incorporated into this report.
Directors
The following Directors held office during the year to 31
December 2011:
Sir Michael Jenkins
Peter Hind
Neil Hodgson
Gideon Tadmor
Bill Guest
Re-election of directors
The Articles of Association require one-third of the Directors
who are subject to retirement by rotation to retire and offer
themselves for re-election each year.
Annual general meeting
Details of the Company's forthcoming Annual General Meeting will
be set out in a separate circular and sent to all Shareholders with
the Annual Report and Accounts.
Supplier payment policy
The Group and Company's policy is that payments made to
suppliers are made in accordance with those terms and conditions
agreed between the Company and its suppliers, providing that all
trading terms and conditions have been complied with. The supplier
payment days are 30 days for the Group (2010: 30 days) and 30 days
for the Company (2010: 13 days).
Political and charitable contributions
There were no political or charitable contributions made by the
Group or Company during the year ended 31 December 2011 (2010:
nil).
Events after the reporting period.
The Group has had no events after the reporting period that
require disclosure.
Director's liabilities
The Company has granted an indemnity to all of its Directors and
officers against liability in respect of proceedings brought by
third parties, subject to the conditions set out in the Companies
Act 2006. Such qualifying third party indemnity provision remains
in force as at the date of approving the Directors' report and is
provided by way of insurance policy with a collective limit of
GBP10 million.
DIRECTORS' REPORT
FOR THE YEAR ENDED 31 DECEMBER 2011
Financial instruments
Details of the use of financial instruments by the Company and
its subsidiary undertakings are contained in note 18 of the
financial statements.
Principal risks and uncertainties
Principal risks and uncertainties are described in detail on
page 6 of the financial statements.
Going Concern
After making enquiries, including the disclosures made in note 1
to the financial statements and the managing Director's Review, the
Directors are confident that the Group will have adequate resources
to continue in operational existence for the foreseeable future.
For this reason, they continue to adopt the going concern basis in
preparing the financial statements.
Auditors and disclosure of information to auditors
The Directors confirm the following applies:
-- So far as the Directors are aware, there is no relevant audit
information of which the Company's auditors are unaware, and;
-- The Directors have taken all steps that they ought to have
taken as Directors in order to make themselves aware of any
relevant audit information and to establish that the Company's
auditors are aware of that information.
BDO LLP offer themselves for re-appointment as auditors and an
appropriate resolution will be put to the shareholders at the
AGM.
By order of the Board
Peter Hind
Managing Director
22 March 2012 STATEMENT OF DIRECTORS' RESPONSIBILITIES
FOR THE YEAR ENDED 31 DECEMBER 2011
The directors are responsible for preparing the annual report
and the financial statements in accordance with applicable law and
regulations.
Company law requires the directors to prepare financial
statements for each financial year. Under that law the directors
have elected to prepare the group and company financial statements
in accordance with International Financial Reporting Standards
(IFRSs) as adopted by the European Union. Under company law the
directors must not approve the financial statements unless they are
satisfied that they give a true and fair view of the state of
affairs of the group and company and of the profit or loss of the
group for that period. The directors are also required to prepare
financial statements in accordance with the rules of the London
Stock Exchange for companies trading securities on the Alternative
Investment Market.
In preparing these financial statements, the directors are
required to:
-- select suitable accounting policies and then apply them consistently;
-- make judgements and accounting estimates that are reasonable and prudent;
-- state whether they have been prepared in accordance with
IFRSs as adopted by the European Union, subject to any material
departures disclosed and explained in the financial statements;
-- prepare the financial statements on the going concern basis
unless it is inappropriate to presume that the company will
continue in business.
The directors are responsible for keeping adequate accounting
records that are sufficient to show and explain the company's
transactions and disclose with reasonable accuracy at any time the
financial position of the company and enable them to ensure that
the financial statements comply with the requirements of the
Companies Act 2006. They are also responsible for safeguarding the
assets of the company and hence for taking reasonable steps for the
prevention and detection of fraud and other irregularities.
Website publication
The directors are responsible for ensuring the annual report and
the financial statements are made available on a website. Financial
statements are published on the company's website in accordance
with legislation in the United Kingdom governing the preparation
and dissemination of financial statements, which may vary from
legislation in other jurisdictions. The maintenance and integrity
of the company's website is the responsibility of the directors.
The directors' responsibility also extends to the ongoing integrity
of the financial statements contained therein.
INDEPENDENT AUDITORS' REPORT TO
THE MEMBERS OF MATRA PETROLEUM PLC
We have audited the financial statements of Matra Petroleum plc
for the year ended 31 December 2011 which comprise the consolidated
income statement, the consolidated and company statement of
comprehensive income, the consolidated and company statement in
changes in equity, the consolidated and company balance sheet, the
consolidated and company cash flow statement and the related notes.
The financial reporting framework that has been applied in their
preparation is applicable law and International Financial Reporting
Standards (IFRSs) as adopted by the European Union and, as regards
the parent company financial statements, as applied in accordance
with the provisions of the Companies Act 2006.
This report is made solely to the company's members, as a body,
in accordance with Chapter 3 of Part 16 of the Companies Act 2006.
Our audit work has been undertaken so that we might state to the
company's members those matters we are required to state to them in
an auditor's report and for no other purpose. To the fullest extent
permitted by law, we do not accept or assume responsibility to
anyone other than the company and the company's members as a body,
for our audit work, for this report, or for the opinions we have
formed.
Respective responsibilities of directors and auditors
As explained more fully in the statement of directors'
responsibilities, the directors are responsible for the preparation
of the financial statements and for being satisfied that they give
a true and fair view. Our responsibility is to audit and express an
opinion on the financial statements in accordance with applicable
law and International Standards on Auditing (UK and Ireland). Those
standards require us to comply with the Auditing Practices Board's
(APB's) Ethical Standards for Auditors.
Scope of the audit of the financial statements
A description of the scope of an audit of financial statements
is provided on the APB's website at
www.frc.org.uk/apb/scope/private.cfm.
Opinion on financial statements
In our opinion:
-- the financial statements give a true and fair view of the
state of the group's and the parent company's affairs as at 31
December 2011 and of the group's loss for the year then ended;
-- the group financial statements have been properly prepared in
accordance with IFRSs as adopted by the European Union;
-- the parent company financial statements have been properly
prepared in accordance with IFRSs as adopted by the European Union
and as applied in accordance with the provisions of the Companies
Act 2006; and
-- the financial statements have been prepared in accordance
with the requirements of the Companies Act 2006.
INDEPENDENT AUDITORS' REPORT TO
THE MEMBERS OF MATRA PETROLEUM PLC
Opinion on other matters prescribed by the Companies Act
2006
In our opinion the information given in the directors' report
for the financial year for which the financial statements are
prepared is consistent with the financial statements.
Matters on which we are required to report by exception
We have nothing to report in respect of the following matters
where the Companies Act 2006 requires us to report to you if, in
our opinion:
-- adequate accounting records have not been kept by the parent
company, or returns adequate for our audit have not been received
from branches not visited by us; or
-- the parent company financial statements are not in agreement
with the accounting records and returns; or
-- certain disclosures of directors' remuneration specified by law are not made; or
-- we have not received all the information and explanations we require for our audit.
Scott Knight (senior statutory auditor)
For and on behalf of BDO LLP, statutory auditor
London
United Kingdom
22 March 2012
BDO LLP is a limited liability partnership registered in England
and Wales (with registered number OC305127).
CONSOLIDATED INCOME STATEMENT
FOR THE YEAR ENDED 31 DECEMBER 2011
31 December 31 December
2011 2010
Notes EUR EUR
--------------------------------------- ------ ------------- ------------
Revenue 441,412 -
Cost of sales (441,412) -
--------------------------------------- ------ ------------- ------------
Gross profit - -
--------------------------------------- ------ ------------- ------------
Other administration expenditure (1,440,167) (1,828,211)
Share based payments (525,428) (1,167)
Impairment of exploration expenditure (5,246,672) -
--------------------------------------- ------ ------------- ------------
Total administration expenditure (7,212,267) (1,829,378)
--------------------------------------- ------ ------------- ------------
Loss from operations 4 (7,212,267) (1,829,378)
Finance income 8 7,444 71,538
Finance costs 9 (5,398) (11,589)
--------------------------------------- ------ ------------- ------------
Loss before taxation (7,210,221) (1,769,429)
Loss after taxation attributable
to equity holders of parent company (7,210,221) (1,769,429)
======================================= ====== ============= ============
Loss per share
Basic and diluted 2 (0.00638) (0.00166)
The notes on pages 19 to 38 form part of the financial
statements. STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEAR ENDED 31 DECEMBER 2011
31 December 31 December
2011 2010
Group EUR EUR
---------------------------------------------- ------------ ------------
Loss after taxation (7,210,221) (1,769,429)
---------------------------------------------- ------------ ------------
Other comprehensive income:
Exchange differences on translating foreign
operations (333,902) 988,943
--------------------------------------------- ------------ ------------
Other comprehensive income for the period (333,902) 988,943
Total comprehensive income for the period
attributable to equity shareholders of
parent company (7,544,123) (780,486)
============================================== ============ ============
31 December 31 December
2011 2010
Company EUR EUR
---------------------------------------------- ------------ ------------
Loss after taxation (8,219,393) (1,761,165)
---------------------------------------------- ------------ ------------
Other comprehensive income:
Exchange differences on translating to
presentational currency 675,270 934,738
--------------------------------------------- ------------ ------------
Other comprehensive income for the period 675,270 934,738
Total comprehensive income for the period (7,544,123) (826,427)
============================================== ============ ============
The notes on pages 19 to 38 form part of the financial
statements. CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 DECEMBER 2011
Share Share Foreign Retained Total
capital premium currency deficit
translation
reserve
Group EUR EUR EUR EUR EUR
------------------------------------- ---------- ----------- ------------ ------------- ------------
Total equity as at 1 January
2010 1,355,222 36,284,035 (4,782,613) (17,493,416) 15,363,228
Loss after taxation - - - (1,769,429) (1,769,429)
Exchange differences on translating
foreign operations - - 988,943 - 988,943
------------------------------------- ---------- ----------- ------------ ------------- ------------
Total comprehensive income
for the period - - 988,943 (1,769,429) (780,486)
Recognition of share based
payment - - - 1,167 1,167
Total equity as at 31 December
2010 1,355,222 36,284,035 (3,793,670) (19,261,678) 14,583,909
===================================== ========== =========== ============ ============= ============
Share Share Foreign Retained Total
capital premium currency deficit
translation
reserve
Group EUR EUR EUR EUR EUR
------------------------------------- ---------- ----------- ------------ ------------- ------------
Total equity as at 1 January
2011 1,355,222 36,284,035 (3,793,670) (19,261,678) 14,583,909
Loss after taxation - - - (7,210,221) (7,210,221)
Exchange differences on translating
foreign operations - - (333,902) - (333,902)
------------------------------------- ---------- ----------- ------------ ------------- ------------
Total comprehensive income
for the period - - (333,902) (7,210,221) (7,544,123)
Shares issued 337,377 2,827,983 - - 3,165,360
Share issue costs (cash) - (114,361) - - (114,361)
Share issue costs (warrants) (34,286) - 34,286 -
Recognition of share based
payment - - - 525,428 525,428
Total equity as at 31 December
2011 1,692,599 38,963,371 (4,127,572) (25,912,185) 10,616,213
===================================== ========== =========== ============ ============= ============
The notes on pages 19 to 38 form part of the financial
statements. COMPANY STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 DECEMBER 2011
Share Share Foreign Retained Total
capital premium currency earnings
translation
reserve
Company EUR EUR EUR EUR EUR
------------------------------------- ---------- ----------- ------------ ------------- ------------
Total equity as at 1 January
2010 1,355,222 36,284,035 (3,831,738) (18,398,350) 15,409,169
Loss after taxation - - - (1,761,165) (1,761,165)
Exchange differences on translating
to presentational currency - - 934,738 - 934,738
------------------------------------- ---------- ----------- ------------ ------------- ------------
Total comprehensive income
for the year - - 934,738 (1,761,165) (826,427)
Recognition of share based
payment - - - 1,167 1,167
Total equity as at 31 December
2010 1,355,222 36,284,035 (2,897,000) (20,158,348) 14,583,909
===================================== ========== =========== ============ ============= ============
Share Share Foreign Retained Total
capital premium currency earnings
translation
reserve
Company EUR EUR EUR EUR EUR
------------------------------------- ---------- ----------- ------------ ------------- ------------
Total equity as at 1 January
2011 1,355,222 36,284,035 (2,897,000) (20,158,348) 14,583,909
Loss after taxation - - - (8,219,393) (8,219,393)
Exchange differences on translating
to presentational currency - - 675,270 - 675,270
------------------------------------- ---------- ----------- ------------ ------------- ------------
Total comprehensive income
for the year - - 675,270 (8,219,393) (7,544,123)
Shares issued 337,377 2,827,983 - - 3,165,360
Share issue costs (cash) - (114,361) - - (114,361)
Share issue costs (warrants) - (34,286) - 34,286 -
Recognition of share based
payment - - - 525,428 525,428
Total equity as at 31 December
2011 1,692,599 38,963,371 (2,221,730) (27,818,027) 10,616,213
===================================== ========== =========== ============ ============= ============
The notes on pages 19 to 38 form part of the financial
statements. BALANCE SHEET
AS AT 31 DECEMBER 2011
Company number: 5375141
Group Company
31 December 31 December 31 December 31 December
2011 2010 2011 2010
Notes EUR EUR EUR EUR
------------------------------ ------ ------------- ------------- ------------- -------------
Non-current assets
Property, plant and
equipment 10 8,488 16,162 - 1,989
Intangible assets 11 8,869,075 13,395,353 - -
Investment in subsidiary 12 - - 1,663 1,620
------------------------------ ------ ------------- ------------- ------------- -------------
8,877,563 13,411,515 1,663 3,609
Current assets
Inventories 13 20,787 18,421 - -
Trade and other receivables 14 87,413 180,527 9,133,221 13,093,887
Cash and cash equivalents 1,802,280 2,222,041 1,562,663 1,606,328
------------------------------ ------ ------------- ------------- ------------- -------------
1,910,480 2,420,989 10,695,884 14,700,215
Total assets 10,788,043 15,832,504 10,697,547 14,703,824
=============================== ====== ============= ============= ============= =============
Capital and reserves attributable
to equity holders of the Parent
Ordinary shares 17 1,692,599 1,355,222 1,692,599 1,355,222
Share premium 38,963,371 36,284,035 38,963,371 36,284,035
Foreign currency translation
reserve (4,127,572) (3,793,670) (2,221,730) (2,897,000)
Retained deficit (25,912,185) (19,261,678) (27,818,027) (20,158,348)
------------------------------ ------ ------------- ------------- ------------- -------------
Total equity 10,616,213 14,583,909 10,616,213 14,583,909
Current liabilities
Trade and other payables 15 171,830 1,248,595 81,334 119,915
------------------------------ ------ ------------- ------------- ------------- -------------
Total liabilities 171,830 1,248,595 81,334 119,915
Total equity and liabilities 10,788,043 15,832,504 10,697,547 14,703,824
=============================== ====== ============= ============= ============= =============
The notes on pages 19 to 38 form part of the financial
statements.
The financial statements were approved and authorised for issue
by the Board on 22 March 2012 and signed on their behalf by
Peter Hind
Managing Director CASH FLOW STATEMENT
FOR THE YEAR ENDED 31 DECEMBER 2011
Group Company
31 December 31 December 31 December 31 December
2011 2010 2011 2010
EUR EUR EUR EUR
--------------------------------------- ------------ ------------ ------------ ------------
Loss before taxation (7,210,221) (1,769,429) (8,219,393) (1,761,165)
Adjustments for:
Depreciation 14,225 24,014 1,971 5,732
Finance income - - (445,538) -
Finance costs - - 457 -
Impairment of intercompany - - 7,322,655 -
receivable
Impairment of exploration expenditure 5,246,672 - - -
Sales from test production 441,412 - - -
Share based payments 525,428 1,167 525,428 1,167
Foreign currency differences (61,467) 32,612 106,830 759,875
------------ ------------ ------------ ------------
Cash used in operating activities
before changes in working capital
and provisions (1,043,951) (1,711,636) (707,590) (994,391)
(Increase) / decrease in inventories (2,366) 145,324 - -
(Increase) / decrease in receivables 93,114 44,119 (3,361,989) (1,423,014)
Increase / (decrease) in payables (1,076,765) 1,092,985 (38,581) 10,246
--------------------------------------- ------------ ------------ ------------ ------------
Cash used in operating activities (2,029,968) (429,208) (4,108,160) (2,407,159)
Purchase of property, plant
and equipment (4,095) (549) - (7)
Expenditure on oil and gas
assets (1,635,983) (4,520,175) - -
--------------------------------------- ------------ ------------ ------------ ------------
Cash used in investing activities (1,640,078) (4,520,724) - (7)
Proceeds from issue of shares 3,165,360 - 3,165,360 -
Share issue expenses paid (114,361) - (114,361) -
Cash generated in financing
activities 3,050,999 - 3,050,999 -
Net decrease in cash and cash
equivalents (619,047) (4,949,932) (1,057,161) (2,407,166)
Cash and cash equivalents at
beginning of period 2,222,041 6,727,308 1,606,328 3,839,039
Effect of foreign exchange rate
differences 199,286 444,665 1,013,496 174,455
Cash and cash equivalents at
end of period 1,802,280 2,222,041 1,562,663 1,606,328
======================================== ============ ============ ============ ============
The notes on pages 19 to 38 form part of the financial
statements.
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2011
1. Accounting policies
Basis of preparation
The financial statements have been prepared on going concern
basis in accordance with International Financial Reporting
Standards ("IFRS") as adopted by the European Union and the
provisions of the SORP "Accounting for Oil and Gas Exploration,
Development, Production and Decommissioning Activities in so much
as it complies with IFRS.
These financial statements are presented in Euro, and the
Company's functional currency is Sterling.
The IFRS financial information has been drawn up on the basis of
accounting policies consistent with those applied in the financial
statements for the year to 31 December 2010.
Going concern
The Directors have prepared cash flow projections for the next
12 months and on this basis are confident that the company has
sufficient funds to continue as a going concern. The projections
show that current funds combined with moderate production are
sufficient to cover overheads and current work commitments for
approximately 13 months. These projections include only the
completion of works currently underway at well-13 to allow
production start-up at that well, as there are no outstanding
commitments within the next 12 months under the licence terms.
Additional funding is required to complete the 2012 planned work
programme to drill well-14 and acquire 3D seismic. The Directors
are confident that funds can be raised to complete the full work
programme but these funds are not required to continue as a going
concern.
(i)Standards, amendments and interpretations effective in
2011:
The following new standards and amendments to standards are
mandatory for the first time for the Group for the financial year
beginning 1 January 2011. Except as noted, the implementation of
these standards did not have a material effect on the Group:
Standard Impact on initial application Effective
date
----------------------------- ------------------------------------------- ------------
IFRIC 19 Extinguishing This interpretation addresses transactions 1 July 2010
financial in which an entity issues equity
liability instruments to a creditor in return
with equity for the extinguishment of all or
instruments part of a financial liability.
The group applied this interpretation
from 1 January 2011.
IAS 24 Related party The revised standard responds to 1 January
(Revised) disclosures concerns that the previous disclosure 2011
requirements and the definition
of a related party were too complex
and difficult to apply in practice,
especially in environments where
government control is pervasive.
The group applied the revised standard
from 1 January 2011.
Improvements The improvements in this amendment 1 January
to IFRSs clarify the requirements of IFRSs 2011
(2010) and eliminate inconsistencies within
and between standards.
The group applied the amendments
from 1 January 2011.
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2011
-------------------------------------------------------------------------------------------
(ii)Standards, amendments and interpretations effective in 2011
but not relevant for the Group:
Standard Impact on initial application Effective
date
-------------------------------- --------------------------------------------- ------------
IFRS 1 First-time The amendment permits first-time 1 July 2010
(Amendment) adoption adopters to use the same transitional
of IFRS provisions as are available to
existing preparers of IFRS.
This amendment is not relevant
to the group as it is existing
IFRS preparer.
IFRIC 14 Limit on The amendment applies in the limited 1 January
/ a defined circumstances when an entity is 2011
IAS 19 benefit asset, subject to minimum funding requirements
(Amendment) minimum funding and makes an early payment of contributions
requirements to cover those requirements.
and their
interaction The amendment is not relevant to
the group as it is not subject
to minimum funding requirement.
IAS 32 Classification This Amendment addresses the accounting 1 February
(Amendment) of rights for rights issues (rights, options 2010
issues or warrants) that are denominated
in a currency other than the functional
currency of the issuer. Previously
such rights issues were accounted
for as derivative liabilities.
However, the Amendment requires
that, provided the entity offers
the rights, options or warrants
pro rata to all of its existing
owners of the same class of its
own non-derivative equity instruments,
such rights issues are classified
as equity regardless of the currency
in which the exercise price is
denominated.
The amendment is not relevant to
the group as it has no rights issues
that are denominated in a currency
other than the functional currency
of the issuer.
============= ================= ============================================= ============
(iii)Standards, amendments and interpretations that are not yet
effective and have not been early adopted:
Standard Impact on initial application Effective
date
-------------------------------------------- -------------------------------------------- ------------
IFRS 7 (Amendments) Disclosures The amendment requires the disclosure 1 July 2011
- transfers of information in respect of all
of financial transferred financial assets that
assets are not derecognised and for any
continuing involvement in a transferred
asset, existing at the reporting
date.
The Group will apply the amendments
from 1 January 2012.
IFRS 1 (Amendments) Severe Hyperinflation Management do not expect this amendment, 1 July 2011
and removal which is subject to the endorsement *
of fixed by the EU, to be relevant to the
dates for group.
first-time
adopters
IAS 12 (Amendment) Deferred The amendment introduces the presumption, 1 January
tax: recovery when measuring the deferred tax 2012 *
of underlying relating to an asset, that the
assets entity will normally recover its
carrying amount through sale.
Management do not expect this amendment,
which is subject to the endorsement
by the EU, to be relevant to the
Group.
IAS 1 (Amendment) Presentation The amendment requires companies 1 July 2012
of items to group together items within *
of other other comprehensive income (OCI)
comprehensive that may be reclassified to the
income profit or loss section of the income
statement.
The group will apply the amendment
from 1 January 2013, subject to
the endorsement by the EU.
IFRS 10 Consolidated The new standard replaces the consolidation 1 January
financial requirements in SIC-12 "Consolidation 2013 *
statements - special purpose entities" and
IAS 27 "Consolidated and separate
financial statements".
The group will apply the standard
from 1 January 2013, subject to
the endorsement by the EU.
IFRS 11 Joint arrangements The new standard requires that 1 January
a party to a joint arrangement 2013 *
recognises its rights and obligations
arising from the arrangements rather
than focusing on the legal form.
The group will apply the standard
from 1 January 2013, subject to
the endorsement by the EU.
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2011
--------------------------------------------------------------------------------------------------------
IFRS 12 Disclosure The standard includes the disclosure 1 January
of interest requirements for all forms of interest 2013 *
in other in other entities, including subsidiaries,
entities joint arrangements, associates
and unconsolidated structured entities.
The group will apply the standard
from 1 January 2013, subject to
the endorsement by the EU.
IFRS 13 Fair value The standard defines fair value, 1 January
measurement sets out a framework for measuring 2013 *
fair value and requires disclosures
about fair value measurements.
The group will apply the standard
from 1 January 2013, subject to
the endorsement by the EU.
IAS 27 (Amendment Separate The amendment contains accounting 1 January
2011) financial and disclosure requirements for 2013 *
statements investment in subsidiaries, joint
ventures and associates when an
entity prepares separate financial
statements.
The group will apply the amendment
from 1 January 2013, subject to
the endorsement by the EU.
IAS 28 (Amendment Investments The amendment includes the required 1 January
2011) in associates accounting for joint ventures as 2013 *
and joint well as the definition and required
ventures accounting for associates.
The group will apply the amendment
from 1 January 2013, subject to
the endorsement by the EU.
IAS 19 (Amendment Employee The main changes introduced by 1 January
2011) benefits the amendment revolve around the 2013 *
accounting for defined benefit
pension schemes.
Management do not expect this amendment,
which is subject to the endorsement
by the EU, to be relevant to the
group as it has no defined benefit
pension scheme in place.
IFRIC 20 Stripping This interpretation applies to 1 January
costs in waste removal (stripping) costs 2013 *
the production that are incurred in surface mining
phase of activity, during the production
a surface phase of the mine.
mine
The group will apply the interpretation
from 1 January 2013, subject to
the endorsement by the EU.
IFRS 7 (Amendment Disclosures The amendment introduces disclosures 1 January
2011) - offsetting to enable users of financial statements 2013 *
financial to evaluate the effect or potential
assets and effect of netting arrangements
financial on entity's financial position.
liabilities
The group will apply the amendment
from 1 January 2013, subject to
the endorsement by the EU.
IAS 32 (Amendment Offsetting The amendment seeks to clarify 1 January
2011) financial rather than change the off-setting 2014 *
assets and requirements previously set out
financial in IAS 32.
liabilities
The group will apply the amendment
from 1 January 2014, subject to
the endorsement by the EU.
IFRS 9 Financial The standard will eventually replace 1 January
instruments IAS 39 in its entirety. However, 2015 *
the process has been divided into
three main components: classification
and measurement, impairment and
hedge accounting.
The Group will apply the standard
from 1 January 2013 subject to
the endorsement by the EU.
==================== ====================== ============================================ ============
* Not yet endorsed by the EU.
The Group is evaluating the impact of the above pronouncements
but they are not expected to have a material impact on the Group's
earnings or shareholders' funds.
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2011
Basis of consolidation
Where the company has the power, either directly or indirectly,
to govern the financial and operating policies of another entity or
business so as to obtain benefits from its activities, it is
classified as a subsidiary. The consolidated financial statements
present the results of the company and its subsidiaries ("the
Group") as if they formed a single entity. Intercompany
transactions and balances between Group companies are therefore
eliminated in full.
Segmental reporting
Operating segments are reported in a manner consistent with the
internal reporting provided to the chief operating decision-maker.
The chief operating decision maker has been identified as the
Managing Director and Exploration Director.
Business combinations
The consolidated financial statements incorporate the results of
business combinations using acquisition accounting. In the
consolidated balance sheet, the acquiree's identifiable assets,
liabilities and contingent liabilities are initially recognised at
their fair values at the acquisition date. The results of acquired
operations are included in the consolidated income statement from
the date on which control is obtained.
Foreign currency translation
Transactions entered into by group entities in a currency other
than the currency of the primary economic environment in which they
operate (their "functional currency") are recorded at the rates
ruling when the transactions occur. Foreign currency monetary
assets and liabilities are translated at the rates ruling at the
balance sheet date. Exchange differences arising on the
retranslation of unsettled monetary assets and liabilities are
recognised immediately in the consolidated income statement.
On consolidation, the results of overseas operations are
translated into Euro at rates approximating to those ruling when
the transactions took place. All assets and liabilities of overseas
operations are translated at the rate ruling at the balance sheet
date. Differences arising on retranslating the opening net assets
and the results of operations are recognised directly in equity
(the "foreign currency translation reserve").
The income statement of individual Group companies with
functional currencies other than Euro are translated into Euro at
the rate ruling at the date of the transaction and the balance
sheet translated at the rate of exchange ruling on the balance
sheet date. Exchange differences which arise from translation of
the opening net assets and results of such subsidiary operations
are taken to reserves.
Exchange differences recognised in the income statement of Group
entities' separate financial statements on the translation of
long-term monetary items forming part of the Group's net investment
in the overseas operation concerned are reclassified to the foreign
currency translation reserve on consolidation.
On disposal of a foreign operation, the cumulative exchange
differences recognised in the foreign currency translation reserve
relating to that operation up to the date of disposal are
transferred to the consolidated income statement as part of the
profit or loss on disposal.
Revenue
Revenue is measured at the fair value of the consideration
received or receivable and represents amounts receivable for oil
and gas products provided in the normal course of business, net of
discounts, VAT and other sales related taxes to third party
customers. Revenues are recognised when the risks and rewards of
ownership together with effective control are transferred to the
customer and the amount of the revenue and associated costs
incurred in respect of the relevant transaction can be reliably
measured. Revenue is not recognised unless it is probable that the
economic benefits associated with the sales transaction will flow
to the Group. Revenue recognised in 2011 relates to oil sales from
test production.
Cost of sales
During test production cost of sales cannot be reliably
estimated and therefore a cost of sales equal to revenue is
recognised and credited to the intangible exploration assets.
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2011
Tangible non-current assets
Tangible non-current assets are stated at cost less accumulated
depreciation and impairment. Depreciation is provided at rates
calculated to write off the cost of assets, less their estimated
residual value, over their expected useful economic lives on the
following basis:
Property, plant and equipment - 25% per annum straight line.
The useful lives and residual values of tangible non-current
assets are re-assessed annually and any revisions taken to the
income statement in the current period.
Intangible non-current exploration assets
The Group applies the successful efforts method of accounting
for exploration and appraisal costs. Under the successful efforts
method of accounting, all licence acquisition, exploration and
appraisal costs are initially capitalised in well, field or
specific exploration well cost centres as appropriate, pending
determination. Costs are capitalised until commercial reserves are
established or the exploration site is deemed to have no commercial
value. Costs are then amortised over the production life of the
well or written-off immediately.
Pre-licence costs: costs incurred prior to having obtained the
legal rights to explore an area are expensed directly to the income
statement as they are incurred.
Exploration and appraisal costs are initially capitalised as an
intangible asset. Intangible assets are not amortised prior to the
conclusion of appraisal activities and determination of commercial
reserves.
Impairment
All intangible assets are reviewed regularly for indications of
impairment and costs are written off where circumstances indicate
that the carrying value might not be recoverable. Any impairment is
immediately written off to the income statement. The Group applies
the successful efforts method of accounting where costs are
capitalised in different cost centres for each well and the
impairment review is carried out separately on each cost
centre.
Investments
In its separate financial statements the Company recognises its
investments in subsidiaries and associates at cost less allowances
for impairments in value.
Inventories
Inventories are stated at the lower of cost and net realisable
value. Cost comprises all costs of purchase, costs of conversion
and other costs included in bringing the inventories to their
present location and condition.
Financial instruments
Financial assets and financial liabilities are recognised when
the Group and the Company becomes party to the contractual
provisions of the instrument. Financial assets are de-recognised
when the contractual right to the cash flow expires or when
substantially all the risk and rewards of ownership are
transferred. Financial liabilities are de-recognised when the
obligations specified in the contract are either discharged or
cancelled.
Financial assets
The Group classifies its financial assets into one of the
following categories, depending on the purpose for which the asset
was acquired. The Group does not have any held to maturity,
available for sale or fair value through profit and loss
assets.
Loans and receivables
Trade and other receivables are stated initially at fair value
and subsequently at amortised cost (unless the effect of the time
value of money is immaterial) less allowance for impairment in
value.
Cash and cash equivalents
The Company considers all highly liquid investments, with an
original maturity of 90 days or less, to be cash or cash
equivalents.
Financial liabilities
The Group's financial liabilities consist of trade and other
payables which are initially stated at fair value and subsequently
at amortised cost. There are no fair value through profit and loss
liabilities.
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2011
Tax
Income tax on the profit or loss from ordinary activities
includes current and deferred tax.
Current tax is based on the profit or loss from ordinary
activities adjusted for items that are non-assessable or disallowed
and is calculated using tax rates that have been enacted or
substantively enacted by the balance sheet date.
Income tax is charged or credited to profit or loss, except
where the tax relates to items credited or charged to other
comprehensive income in which case the tax is also dealt with in
other comprehensive income, or when the tax relates to items
credited or charged directly to equity, in which case the tax is
also dealt with in equity.
Deferred taxation
Deferred tax is provided on temporary differences between the
carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for taxation purposes. The following
temporary differences are not provided for: the initial recognition
of assets or liabilities that affect neither accounting nor taxable
profit other than in a business combination, and differences
relating to investments in subsidiaries to the extent that they
will probably not reverse in the foreseeable future. The amount of
deferred tax provided is based on the expected manner of
realisation or settlement of the carrying amount of assets and
liabilities, using tax rates enacted or substantively enacted at
the balance sheet date.
Deferred tax liabilities are generally recognised for all
taxable temporary differences. Deferred tax assets and current tax
losses have not been recognised since it is uncertain that taxable
profits will be available against which deductible temporary
differences can be utilised.
Deferred tax assets and liabilities are offset when the Group
has a legally enforceable right to offset current tax assets and
liabilities and the deferred tax assets and liabilities relate to
taxes levied by the same tax authority on either the same taxable
Group company or different Group Entities which intend either to
settle current tax assets and liabilities on a net basis or to
realise the assets and settle the liabilities simultaneously, in
each future period in which significant amounts of deferred tax
assets or liabilities are expected to be settled or recovered.
Contributed equity
Issued and paid up share capital is recognised at the fair value
of the consideration received by the Company. Any transaction costs
arising on the issue of ordinary shares are recognised directly in
equity as a reduction of the share proceeds received.
Share Based Payments
Where equity settled share options are awarded to employees, the
fair value of the options at the date of grant is charged to the
consolidated income statement over the vesting period. Non-market
vesting conditions are taken into account by adjusting the number
of equity instruments expected to vest at each balance sheet date
so that, ultimately, the cumulative amount recognised over the
vesting period is based on the number of options that eventually
vest. Market vesting conditions are factored into the fair value of
the options granted. As long as all other vesting conditions are
satisfied, a charge is made irrespective of whether the market
vesting conditions are satisfied. The cumulative expense is not
adjusted for failure to achieve a market vesting condition.
Where the terms and conditions of options are modified before
they vest, the increase in the fair value of the options, measured
immediately before and after the modification, is also charged to
the consolidated income statement over the remaining vesting
period.
Where equity instruments are granted to persons other than
employees, the consolidated income statement is charged with the
fair value of goods and services received.
Warrants
Warrants are treated as equity instruments and are valued using
the Black-Scholes option pricing model. The proceeds from issuance
of warrants are credited to retained earnings.
Significant accounting judgements and key sources of estimation
uncertainty
The Group makes estimates and assumptions regarding the future.
Estimates and judgements are continually evaluated based on
historical experiences and other factors, including expectations of
future events that are believed to be reasonable under the
circumstances. In the future, actual experience may deviate from
these estimates and assumptions. The estimates and assumptions that
have a significant risk of causing a material adjustment to the
carrying amounts of assets and liabilities within the next
financial year are as follows:
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2011
Exploration and evaluation costs: are capitalised as intangible
assets (note 11) and are assessed for impairment when circumstances
suggest that the carrying amount may exceed the recoverable value
thereof. This assessment involves judgement as to the likely future
commerciality of the asset and when such commerciality should be
determined as well as future revenues and costs pertaining to the
utilisation of the exploration and production rights to which such
capitalised costs relate and the discount rate to be applied to
such future revenues and costs in order to determine a recoverable
value.
Carrying value of assets: while conducting an impairment review
of its assets, the Group exercises judgement in making assumptions
about future oil & gas prices and future development and
production costs. Changes in the estimates used can result in
significant charges to the income statement.
Share based payments: employee services received, and the
corresponding increase in equity, are measured by reference to the
fair value of the equity instruments at the date of grant,
excluding the impact of any non-market vesting conditions. The fair
value of share options is estimated by using the Black Scholes
valuation model, on the date of grant based on certain assumptions.
Those assumptions are described in note 16 and include, among
others, the dividend growth rate, expected volatility, expected
life of the options and number of options expected to vest. More
details including carrying values are disclosed in note 16.
2. Loss per share
Loss per share of EUR0.00638 (2010: EUR0.00166) is calculated by
dividing the loss attributable to equity shareholders for the year
EUR7,210,221 (2010: EUR1,769,429) by the weighted average number of
ordinary shares outstanding during the year of 1,129,808,508 (2010:
1,064,917,872).
The effect of all potential ordinary shares arising from the
exercise of options going forward is considered to be anti-dilutive
and therefore diluted earnings per share has not been calculated.
At the balance sheet date there were 59,650,000 (2010: 52,400,000)
potentially dilutive ordinary shares.
3. Parent company's income statement
The company has taken advantage of section 408 of the Companies
Act 2006 and has not included its own income statement account in
these financial statements. The company loss for the year after
taxation was EUR 8,219,393 (2010: EUR1,761,165).
4. Loss from operations
EXPENSES
Loss from operations is stated after charging:
Notes 2011 2010
--------
EUR EUR
------------------------------------------ ---- ------------ ----------
Auditors remuneration
- Audit: fees payable to the Company's
auditor for the audit of the parent
company and consolidated financial
statements 36,154 36,594
- Audit: fees payable for the audit
of subsidiaries pursuant to legislation 24,519 23,627
- Fees payable to the company's auditor:
- Tax services 7,127 12,645
- Other services 24,709 26,723
Impairment of exploration expenditure 11 5,246,672 -
Depreciation 10 14,225 24,014
Foreign exchange costs (61,467) 32,612
Share based payment expense (all equity
settled) 16 525,428 1,167
Staff costs 5 848,094 875,244
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2011
5. Staff costs
Total staff costs (including Directors) comprise:
Group Company
2011 2010 2011 2010
EUR EUR EUR EUR
-------------------------------- ---------- -------- ---------- --------
Employee salaries and benefits 848,094 874,077 578,201 577,825
Share based payment expense 525,428 1,167 525,428 1,167
1,373,522 875,244 1,103,629 578,992
================================ ========== ======== ========== ========
The key management personnel consist of the Board of Directors
and the Director in Russia.
Directors remuneration and other interests comprise:
Group Company
2011 2010 2011 2010
EUR EUR EUR EUR
---------------------------------- ---------- -------- ---------- --------
Basic salary 443,289 445,283 443,289 445,283
Fees - - - -
Consultancy fees - - - -
Bonus - - - -
Employers national insurance 53,803 51,891 53,803 51,891
Benefits in kind - - - -
---------------------------------- ---------- -------- ---------- --------
497,092 497,174 497,092 497,174
Share based payment transactions 525,428 1,167 525,428 1,167
1,022,520 498,341 1,022,520 498,341
================================== ========== ======== ========== ========
The following table shows the directors who served
during the year or in the previous year together
with an analysis of their remuneration:
Basic Salary Fees Bonus Benefits 2011 2010
in kind
EUR EUR EUR EUR EUR EUR
------------------------- ------------- ----- ------ --------- -------- --------
Executive directors
Peter Hind 207,252 - - - 207,252 209,772
Neil Hodgson 178,467 - - - 178,467 180,637
Non-executive directors
Sir Michael Jenkins 34,542 - - - 34,542 34,962
Craig Burton - - - - - 5,828
Gideon Tadmor - - - - - -
Bill Guest 23,028 - - - 23,028 14,084
443,289 - - - 443,289 445,283
========================= ============= ===== ====== ========= ======== ========
Key management personnel:
Group Company
2011 2010 2011 2010
EUR EUR EUR EUR
-------------------------------- ---------- -------- ---------- --------
Employee salaries and benefits 668,863 663,587 578,201 577,825
Share based payment expense 525,428 1,167 525,428 1,167
1,194,291 664,754 1,103,629 578,992
================================ ========== ======== ========== ========
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2011
Average number of employees (including directors):
Group Company
2011 2010 2011 2010
EUR EUR EUR EUR
Technical 8 11 1 1
Corporate & administrative 12 9 2 2
20 20 3 3
=============================== ====== ===== ===== =====
Included in the above were pension contributions totalling
EURnil (2010: EURnil).
6. Taxation
Below is a reconciliation of the theoretical income tax rate to
the actual effective tax rate in the Group's income statement:
TAXATION
Group
2011 2010
EUR EUR
--------------------------------------------- ------------ ------------
Loss before taxation (7,210,221) (1,769,429)
--------------------------------------------- ------------ ------------
Taxation at the UK corporation tax rate
of 26.5% (2010: 28%) (1,910,708) (495,440)
Effect of lower tax rate in Russia 388,857 44,773
Expenses disallowed for tax 1,188,573 225,703
Temporary differences on non-current assets
not recognised - -
Utilisation of previously unrecognised tax
losses - -
Tax losses not recognised carried forward 333,278 224,964
Tax charge for the year - -
============================================= ============ ============
Factors that may affect future tax charges
No deferred tax asset has been recognised on accumulated tax
losses as the recoverability of any such assets is not probable in
the foreseeable future (see note 19).
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2011
7. Segmental reporting
The Group has two reportable segments:
-- Arkhangelovskoe: this segment involves the appraisal and
production of oil within the Sokolovskoe Field licence area in
Russia; and
-- Head Office Operations: this segment is the head office of the Group.
The operating results of each of these segments are regularly
reviewed by the Group's chief operating decision makers in order to
make decisions about the allocation of resources and assess their
performance.
The accounting policies of these segments are in line with those
described in note 1.
Reportable segments as at 31 December
2011
Head Arkhangelovskoe Total
Office
EUR EUR EUR
-------------------------------------- ----------- --------------- -----------
Revenue - 441,412 441,412
Cost of sales - (441,412) (441,412)
Administration expenses (709,358) (730,809) (1,440,167)
Share-based payment (525,428) - (525,428)
Impairment of exploration expenditure - (5,246,672) (5,246,672)
Finance income 7,444 - 7,444
Financing costs (457) (4,941) (5,398)
Loss for the year after taxation (1,227,799) (5,982,422) (7,210,221)
====================================== =========== =============== ===========
Other information
Depreciation (1,971) (12,254) (14,225)
Capital additions - 7,066 7,066
Non current assets - 8,877,563 8,877,563
Inventories - 20,787 20,787
Trade and other receivables 19,733 67,680 87,413
Cash and cash equivalents 1,562,663 239,617 1,802,280
Segment assets 1,582,396 9,205,647 10,788,043
====================================== =========== =============== ===========
Trade and other payables (81,334) (90,496) (171,830)
Segment liabilities (81,334) (90,496) (171,830)
-------------------------------------- ----------- --------------- -----------
Segment net assets 1,501,062 9,115,151 10,616,213
====================================== =========== =============== ===========
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2011
Reportable segments as at 31 December 2010
Head Arkhangelovskoe Total
Office
EUR EUR EUR
---------------------------------- ------------ ---------------- ------------
Administration expenses (1,229,792) (598,419) (1,828,211)
Share-based payment (1,167) - (1,167)
Finance income 24,851 46,687 71,538
Financing costs (3,657) (7,932) (11,589)
Loss for the year after taxation (1,209,765) (559,664) (1,769,429)
================================== ============ ================ ============
Other information
Depreciation (5,732) (18,282) (24,014)
Capital additions 7 543 550
Non current assets 1,989 13,409,526 13,411,515
Inventories - 18,421 18,421
Trade and other receivables 15,806 164,721 180,527
Cash and cash equivalents 1,606,328 615,713 2,222,041
Segment assets 1,624,123 14,208,381 15,832,504
================================== ============ ================ ============
Trade and other payables (119,915) (1,128,680) (1,248,595)
Segment liabilities (119,915) (1,128,680) (1,248,595)
---------------------------------- ------------ ---------------- ------------
Segment net assets 1,504,208 13,079,701 14,583,909
================================== ============ ================ ============
The finance income, finance costs and taxation have been
analysed above in line with the way the Group's business is
structured.
All material non-current assets other than financial instruments
are owned by the Russian subsidiary and are located in Russia.
Share based payments of EUR525,428 (2010: EUR1,167) relate
solely to Head Office.
All material capital expenditures in the current and previous
year relate to the Arkhangelovskoe segment. NOTES TO THE FINANCIAL
STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2011
8. Finance income
Group
2011 2010
EUR EUR
------------------- ------ -------
Bank interest 7,444 71,538
7,444 71,538
=================== ====== =======
9. Finance costs
Group
2011 2010
EUR EUR
-------------- ------ -------
Bank charges 5,398 11,589
5,398 11,589
============== ====== =======
10. Property, plant and equipment
Group Company
2011 2010 2011 2010
EUR EUR EUR EUR
---------------------------------- ---------- --------- --------- ---------
Cost
At 1(st) January 108,629 101,984 35,412 33,864
Additions 7,066 550 - 7
Disposals (2,971) - - -
Currency translation adjustments 6,095 6,095 1,541 1,541
---------------------------------- ---------- --------- --------- ---------
At 31(st) December 118,819 108,629 36,953 35,412
Depreciation
At 1st January (92,467) (64,694) (33,423) (26,487)
Charge for year (14,225) (24,014) (1,971) (5,732)
Currency translation adjustments (3,639) (3,759) (1,559) (1,204)
---------------------------------- ---------- --------- --------- ---------
At 31st December (110,331) (92,467) (36,953) (33,423)
Carrying value as at 31st
December 8,488 16,162 - 1,989
================================== ========== ========= ========= =========
Property, plant and equipment is comprised of office and
computer equipment and transport vehicles. NOTES TO THE FINANCIAL
STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2011
11. Intangible assets
Intangible assets as at 31 December 2011 were:
License acquisition Exploration Total
costs and appraisal
costs
EUR EUR EUR
--------------------------------------- -------------------- --------------- -------------
Cost
At 1 January 3,374,972 10,020,381 13,395,353
Additions - 1,635,983 1,635,983
Oil sales from test production - (441,412) (441,412)
Impairment of exploration expenditure - (5,246,672) (5,246,672)
Currency translation adjustments (71,800) (402,377) (474,177)
--------------------------------------- -------------------- --------------- -------------
Carrying value at 31 December 3,303,172 5,565,903 8,869,075
======================================= ==================== =============== =============
Intangible assets as at 31 December 2010 were:
License acquisition Exploration Total
costs and appraisal
costs
EUR EUR EUR
---------------------------------- -------------------- --------------- -----------
Cost
At 1 January 3,175,861 5,189,988 8,365,849
Additions - 4,520,175 4,520,175
Impairment - - -
Currency translation adjustments 199,111 310,218 509,329
---------------------------------- -------------------- --------------- -----------
Carrying value at 31 December 3,374,972 10,020,381 13,395,353
================================== ==================== =============== ===========
During the year various operations were carried out to establish
commercial production at Well A-12. Operational failures caused an
influx of water production and sustained oil production was not
restored. Although the well may be used in the future development
of the field IFRS guidelines require that in the absence of a firm
programme for the well the full cost of the well is written down.
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2011
12. Investment in subsidiaries
The principal subsidiaries of Matra Petroleum plc, all of which have been included in these
consolidated financial statements, are as follows:
Name Country of incorporation Proportion of ownership in Nature of business
2010 and 2011
----------------------------- ------------------------- ----------------------------- -----------------------------
Matra Cyprus Petroleum
Limited Cyprus 100% Holding company
Matra Cyprus Petroleum
(Alpha) Limited Cyprus 100% Holding company
Oil & gas exploration and
OOO Arkhangelovskoe Russian Federation 100% production company
Matra Cyprus Petroleum Limited owns 100% of the shares in OOO Arkhangelovskoe.
13. Inventories
Group Company
2011 2010 2011 2010
EUR EUR EUR EUR
----------------------------- ------- ------- ----- -----
Drilling and other supplies 20,787 18,421 - -
============================= ======= ======= ===== =====
14. Receivables
Group Company
2011 2010 2011 2010
EUR EUR EUR EUR
----------------------------------- ------- -------- ---------- -----------
Prepayments and other receivables 87,413 180,527 19,733 15,806
Intercompany loans - - 9,113,488 13,078,081
87,413 180,527 9,133,221 13,093,887
=================================== ======= ======== ========== ===========
The fair value of receivables is not significantly different
from the carrying value.
The Intercompany loans are shown net of a provision of
EUR14,008,976 (2010: EUR6,686,321).
The Intercompany loans are repayable on demand and bear interest
at the rate of 2% above the Russian Base Rate (2010: 2% above the
Russian Base Rate).
15. Payables
Group Company
2011 2010 2011 2010
EUR EUR EUR EUR
----------------------------- -------- ---------- ------- --------
Trade payables 17,024 105,237 10,894 63,473
Accruals and other payables 154,806 1,143,358 70,440 56,442
171,830 1,248,595 81,334 119,915
============================= ======== ========== ======= ========
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2011
16. Share based payments
Exercise Grant Outstanding Granted Exercised Lapsed Outstanding Final
price date at start during during during at end exercise
(p) of year the year the year the year of year date
--------- ----------- ------------ ---------- ---------- ------------ ------------ ------------
2010
0.1 11/04/2006 5,000,000 - - - 5,000,000 11/04/2011
5 11/04/2006 10,000,000 - - - 10,000,000 11/04/2011
0.1 23/05/2006 1,200,000 - - - 1,200,000 23/05/2011
5 23/05/2006 6,000,000 - - - 6,000,000 23/05/2011
4.5 23/04/2007 8,000,000 - - - 8,000,000 22/04/2012
4.5 31/03/2007 500,000 - - - 500,000 31/03/2012
7.5 25/09/2007 250,000 - - - 250,000 25/09/2012
3.65 20/10/2009 21,250,000 - - - 21,250,000 19/10/2014
1.81 01/07/2010 - 200,000 - - 200,000 19/10/2014
Total 52,200,000 200,000 - - 52,400,000
--------- ----------- ------------ ---------- ---------- ------------ ------------ ------------
2011
0.1 11/04/2006 5,000,000 - - - 5,000,000 11/04/2013*
5 11/04/2006 10,000,000 - - - 10,000,000 11/04/2013*
0.1 23/05/2006 1,200,000 - - - 1,200,000 23/05/2013*
5 23/05/2006 6,000,000 - - - 6,000,000 23/05/2013*
4.5 23/04/2007 8,000,000 - - - 8,000,000 22/04/2012
4.5 31/03/2007 500,000 - - (500,000) - -
7.5 25/09/2007 250,000 - - - 250,000 25/09/2012
3.65 20/10/2009 21,250,000 - - (750,000) 20,500,000 -
1.81 01/07/2010 200,000 - - - 200,000 19/10/2014
Total 52,400,000 - - (1,250,000) 51,150,000
--------- ----------- ------------ ---------- ---------- ------------ ------------ ------------
* The life of these options was extended by two years in
2011.
The fair value of equity-settled share 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. The table below lists the inputs to the model used
for options granted during the year ended 31 December 2011:
2011 2010
Share price at the date
of grant (pence) 3.9 1.64
Dividend yield (%) - -
------------------------- ----- -----
Volatility 75 75
Expected life (years) 2 5
Risk free interest rate
(%) 0.5 3.0
------------------------- ----- -----
Weighted average option
price (pence) 2.00 1.00
------------------------- ----- -----
The total fair value of the options issued is spread over the
vesting period of the options. The share-based payment charge for
the year was EUR525,428 (2010: EUR1,167).
The expected life of the options is based on academic research
and is not necessarily indicative of exercise patterns that may
occur. Volatility is calculated with reference to comparative
entities share price volatility and reflects the assumption that
the comparator's volatility is indicative of future trends, which
may also not necessarily be the actual outcome. No other features
of options granted were incorporated into the measurement of fair
value.
Warrants
On 11 November 2011, warrants to subscribe for 8,500,000 shares
were issued as part-payment to the broker in relation to the
170,000,000 shares issued in November 2011. The fair value of
warrants granted has been calculated using the Black-Scholes option
pricing model. These warrants are exercisable immediately and the
full amount (EUR34,286) was charged against the share premium
reserve. The exercise price of the warrants was 0.5p for a period
of 3 years from the date of grant. NOTES TO THE FINANCIAL
STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2011
17. Share capital
2011 2010
EUR EUR
---------------------------------------------- ----------- -----------
Authorised:
10,000,000,000 ordinary shares of 0.1p
each 13,571,000 13,571,000
============================================== =========== ===========
Allotted, called-up and fully paid:
1,354,917,872 (December 2010: 1,064,917,872)
ordinary shares of 0.1p each 1,692,599 1,355,222
============================================== =========== ===========
Reserve Description and purpose The following describes the
nature and purpose of each reserve within owners' equity:
-- Share capital: Amount subscribed for share capital at nominal value.
-- Share premium: Amount subscribed for share capital in excess of nominal value.
-- Foreign currency translation reserve: Exchange gains/losses
arising on retranslating the net assets of operations into the
presentation currency.
-- Retained deficit: Cumulative net gains and losses recognised in the consolidated income statement.
The Group considers its capital to comprise entirely of equity.
The Group's primary objective is to ensure its continued ability to
provide a consistent return for its equity shareholders through
capital growth.
In order to achieve this objective, the Group seeks to maintain
a gearing ratio that balances risks and returns at an acceptable
level wherever such a choice between the raising of debt, equity or
a combination of the two exists.
Overriding the above is the need for the Group to maintain a
sufficient funding base to enable it to meet its working capital
and strategic investment needs.
In making decisions to adjust its capital structure to achieve
these aims the Group considers not only its short-term position but
also its long-term operational and strategic objectives.
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2011
18. 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.
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 periods unless otherwise stated in this
note.
Principle financial instruments
The principle financial instruments used by the Group, from
which financial instrument risk arises, are as follows:
Financial assets Group Company
2011 2010 2011 2010
Loans and receivables Loans and receivables
EUR EUR EUR EUR
--------------------------- ----------- ----------- ----------- -----------
Other receivables 54,526 - 12,660 -
Cash and cash equivalents 1,802,280 2,222,041 1,562,663 1,606,328
Inter-company loans - - 9,113,488 13,078,081
1,856,806 2,222,041 10,688,811 14,684,409
=========================== =========== =========== =========== ===========
Financial liabilities Group Company
2011 2010 2011 2010
Financial liabilities Financial liabilities
at amortised cost at amortised cost
EUR EUR EUR EUR
--------------------------- ----------- ----------- ----------- -----------
Trade and other payables 171,830 1,248,595 81,334 119,915
171,830 1,248,595 81,334 119,915
=========================== =========== =========== =========== ===========
Fair value of financial assets and liabilities
At 31 December 2011 and 2010, the fair value and the book value
of the Group and Company's financial assets and liabilities were
materially the same.
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 and cash equivalents
trade and other payables
inter-company loans
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 overall objective
of the Board is to set polices 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:
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2011
Credit risk
Credit risk arises principally from the Group's and Company's
intercompany loans. 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.
Credit risk with cash and cash equivalents is reduced by placing
funds with banks with high credit ratings.
Hedging policy
It is the Company and Group policy not to actively hedge against
foreign currency transactions and balances. However, this policy is
kept under constant review.
Capital
The Company and Group define capital as ordinary shares, share
premium, foreign currency translation reserve and retained
earnings.
Liquidity risk
Liquidity risk arises from the Group and Company's management of
working capital. 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 maintain cash balances
(or agreed facilities) to meet expected requirements for a period
of at least 30 days. The Group and Company also seeks to reduce
liquidity risk by maximising interest rates (and hence cash flows)
on its cash deposits, this is further discussed in the 'interest
rate risk' section below.
The Board receives rolling 12 month cash flow projections on a
periodic basis as well as information regarding cash balances and
(as noted above).
Trade and other payables are due on demand.
Interest rate risk
The Group has no interest bearing borrowings and so there is no
interest rate risk.
There is no significant interest rate risk in respect of
temporary surplus funds invested in deposits and other interest
bearing accounts with financial institutions as the operations of
the Group are not dependent on the finance received. However, it is
the Group's policy to manage the interest rate risk over the cash
flows on its invested surplus funds by using only substantial
financial institutions when such funds are invested.
A 1% change in interest rates would have increased or decreased
profit after tax by approximately EUR20,122 (2010: EUR44,747).
At the year end, the Group had a cash balance of EUR1,802,280
(2010: EUR2,222,041) and the Company had a cash balance of
EUR1,562,663 (2010: EUR1,606,328) which was made up as follows:
Group Company
2011 2010 2011 2010
EUR EUR EUR EUR
--------------------- ---------- ---------- ---------- ----------
Great British pound 1,562,663 1,606,328 1,562,663 1,606,328
Euro 4,012 5,413 - -
Russian rouble 235,605 610,300 - -
1,802,280 2,222,041 1,562,663 1,606,328
===================== ========== ========== ========== ==========
Included in the Group and Company totals above are amounts of
EUR1,447,672 (2010: EUR1,517,151) held within deposit accounts.
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2011
Currency risk
The Group and Company's policy is, where possible, to allow
group entities to settle liabilities denominated in their
functional currency (primarily Euro, Russian Roubles or Great
British Pounds) in that currency. Where 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 Orenburg, Southern Russia in
Russian Roubles. As it is not possible for the Group or Company to
transact in Russian Roubles outside of Russia, a Sterling account
is maintained in Orenburg and all funding is transferred to its
Russian subsidiary in this currency. Once the funding has been
received, the local finance team negotiates a favourable spot rate
with its Russian bank for transferring Sterling to Russian Roubles.
The UK finance team, along with its advisors, carefully monitors
movements in the Sterling / Russian Rouble rate and chooses the
most beneficial times for transferring monies to its subsidiary,
whilst ensuring that it has sufficient funds to continue its
operations.
A movement in the Russian Rouble of 15% would result in the
expenditure in the year increasing or decreasing by EUR506,879
(2010: EUR767,789).
A movement in the Great British pound of 25% would result in the
expenditure in the year increasing or decreasing by EUR55,597
(2010: EUR307,740).
A movement in the Great British pound of 25% would result in the
average cash and cash equivalents increasing or decreasing by
EUR386,654 (2010: EUR396,169).
19. Deferred tax
Group Company
2011 2010 2011 2010
EUR EUR EUR EUR
------------------------------------------ ---------- ---------- ---------- ----------
No deferred tax asset has been
recognised in respect of the following:
- Temporary differences in share
based payments 325,190 481,694 325,190 481,694
- Unused tax losses 2,300,246 1,996,968 1,161,968 1,080,807
2,655,436 2,478,662 1,487,158 1,562,501
========================================== ========== ========== ========== ==========
No deferred tax asset has been recognised as the recovery of
such assets is not probable in the foreseeable future.
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2011
20. Commitments
The Company has no operating or finance lease commitments.
On 23 December 2010 the 100% subsidiary, OOO Arkhangelovskoe,
was awarded a production licence (the Licence) for the exploration
and production hydrocarbon resources within the Sokolovskoe field
in Orenburg, Russia.
The Licence is valid to 31 December 2030 and in order to
maintain the current rights of tenure to the licence, the group
currently has the following commitments:
-- To drill a minimum of one well by the end of 2013.
-- To issue for approval a reserve report for the field by the end of 2014.
-- To submit for approval a development plan for the field by the end of 2015.
21. Related party transactions
Apart from key management remuneration as disclosed in note 5,
the Group and Company had no transactions with related parties
during the years ended 31 December 2011 and 31 December 2010.
22. Events after the reporting period.
The Group has had no events after the reporting period that
require disclosure.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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