TIDMOPHR
RNS Number : 8929V
Ophir Energy Plc
13 August 2015
13 August 2015
OPHIR ENERGY PLC
Half Year Results for the six months ended 30 June 2015
OPERATIONAL
-- Completed Salamander Energy acquisition and successfully
integrated Asian assets, operations and team
-- Average daily production 14,600 boepd (pro forma); full year
guidance increased to 11,000-12,500 boepd
-- Significant progress on Fortuna FLNG with Golar LNG signed on
as Midstream partner to provide a 2.2 MTPA vessel and Upstream FEED
phase underway. FID expected mid-2016
-- Increased exploration portfolio with low commitments:
completed acquisition of four deepwater PSCs in Indonesia
-- Completed four seismic acquisition programmes: Bualuang oil
field, Myanmar Block AD-03, Gabon and Seychelles
-- Preparations finalised for two exploration wells in 2H 2015:
Soy Siam and Parichat in G4/50, Thailand
FINANCIAL (reflects acquisition of Salamander Energy, completed
3(rd) March 2015)
-- Revenue of $86.5 million (1H 2014: nil)
-- Pre-tax loss of $123.3 million (1H 2014: profit of $589.4
million) before extraordinary items
-- Cash generated from Operations of $69.4 million (1H 2014: utilised $12.7 million)
-- Total cash available as at 30 June of $708.2 million (FY
2014: $1,172.8 million); gross debt of $316.2 million resulting in
a net cash position of $392.0 million (FY 2014: $1,172.8 million)
Cost rationalisation programme delivering $60 million per annum of
pre-tax G&A savings
-- Completed $100 million share buyback programme
Nick Cooper, CEO, Ophir Energy, commented
"In a tough operating environment for E&P companies Ophir
continues to differentiate itself through the robustness of its
financial position, the progression of its field development plans
and a commitment to acquire quality exploration acreage with
minimal financial commitments that offer attractive returns at
current commodity prices. The second half of the year will see the
drilling of two low cost wells in the Gulf of Thailand in an
unexplored basin adjacent to the Bualuang oil field.
"Overall, Ophir sees numerous opportunities offering significant
upside and value creation, both from within our existing asset base
and beyond."
Ends
A call with management will be held at 0900 BST following this
announcement. Participants can dial in using the following
details:
Dial-in number: +44 (0) 1452 555 566
Conference ID: 86615575
For Further Enquiries please contact:
Ophir Energy plc +44 (0)20 7811 2400
Nick Cooper, Chief Executive Officer
Bill Higgs, Chief Operating Officer
Geoff Callow, Head of Investor Relations
Brunswick Group +44 (0)20 7404 5959
Patrick Handley
Carolina Desmeules
Strategic Context
Ophir has reacted quickly and decisively to the commodity price
declines since 3Q 2014 with five key changes to our plan that
prioritise preservation of cash and liquidity, and maximise
potential returns to investors in a $50/bbl environment:
- Reduced capital expenditure - in the first half of 2015 we
reduced our annual capex by over 50% to a forecast $250-300
million(1) in 2015. We are planning further reductions for
2016.
- Improved efficiencies and overhead cost reductions - headcount
reductions, office closures and improved organisational
efficiencies will deliver $60 million of ongoing annual cost
savings.
- Reconfigured Salamander debt package - Ophir inherited $503
million of debt on closing of the Salamander transaction and, as
planned, reduced this by $186 million in the first half of 2015. We
will now move to refinance the production base in 2H 2015 with a
conservative debt package that is more appropriate to the broader
Company's requirements.
- Benchmarking against a $50/bbl environment - investments that
offer shareholders strong returns are the only ones being
progressed. A combination of our low commitment expenditure and
strong net cash position provides Ophir with great flexibility with
respect to investments over the next three years.
- Self-funding developments - we will use our high equity
interests in development projects as source of capital to fund our
capital commitments beyond FID. Minimal incremental capital is
planned to be deployed to development activity.
(1) excluding the consideration for the Salamander
acquisition
Strategic Delivery
Ophir made encouraging progress during the first half of 2015 in
delivering the Company's key objectives. Ophir is an exploration
company and it is through excellence in exploration that we aim to
create value for shareholders. However, our business model is
evolving and, through the acquisition of Salamander Energy plc
("Salamander"), which completed in March 2015, Ophir has taken the
first steps towards becoming an explorer sustained, throughout the
cycle, by its production base. Consequently Ophir is reporting
production revenue and operating cash flow for the first time.
Our production base is reliably cash generative throughout the
cycle, with a mean breakeven oil price in 2015 of $15/bbl before
debt service.
In the first half of 2015 Ophir has significantly advanced the
Fortuna FLNG project in Equatorial Guinea. The project remains on
schedule for Final Investment Decision ("FID") in mid-2016 and
first gas in mid-2019, with Golar LNG appointed as the Midstream
provider and the Upstream component of the project already in Front
End Engineering Design ("FEED") stage. Formal processes have
commenced to secure both gas buyers and equity partners and we are
encouraged by the levels of interest at this early stage.
We continue to believe that the limited competition for
exploration acreage presents a compelling opportunity. The risk
profile of the geology has not changed but the cost of assessing
the sub-surface risk has fallen dramatically. It is well documented
that rates for both seismic vessels and drilling rigs have fallen,
but perhaps the most important change is that licences for prime
acreage can now be acquired without having to undertake firm
drilling commitments. We believe this is a fundamental change that
will lead to improved returns from exploration drilling as our
geoscientists will be able to high-grade across our portfolio,
without the encumbrance of drilling commitments on specific
licences. As a well-capitalised company, the discipline to allocate
capital to drilling only those exploration prospects that offer the
best potential returns, even in difficult times for the sector,
will be the hallmark of Ophir in the future.
Ophir has been actively reloading its exploration portfolio over
the past twelve months and has continued this during the first half
of the year with the completion of the acquisition of four
deepwater exploration PSCs in Eastern Indonesia. Our team is
analysing potential additional exploration acreage that fits
Ophir's criteria of minimal well commitments, together with the
potential to deliver good returns on the invested capital in a low
oil price environment.
The integration of Salamander is progressing well. The
production and development operations have performed as forecast
and systems integration will be completed, as planned, by year end.
The cost rationalisation programme is delivering $60 million per
annum of ongoing pre-tax G&A savings and synergies (excepting
one off restructuring costs) across the combined business. These
cost savings are being driven by removal of overlapping activity,
streamlining of operations, reducing headcount and closing of five
of the eleven offices owned by the Group post the Salamander
acquisition.
Ophir continues to be well financed with $708.2 million of cash
on the balance sheet at end June 2015. $186 million of the debt
acquired with Salamander, principally the convertible bond and $45
million of unsecured bonds, has been repaid since the acquisition,
resulting in a net cash position of $392.0 million as at 30 June
2015. The Group will review the debt portfolio in the second half
of 2015 to capture the improved credit profile of combining the
Salamander assets into the broader portfolio. Cash at year end is
expected to remain in line with previous forecasts, at $700-750
million with a net cash position of $350-400 million.
There is significant financial flexibility in the forward plan
with only c. $95 million of committed exploration and appraisal
spending between now and end 2017. The carrying costs of the
Tanzania and Equatorial Guinea LNG projects to end 2016 are also
low and add only $40 million to this figure.
Ophir's current portfolio of assets has the medium term
potential, subject to financing, to deliver the requisite cash
flows to fund our exploration activity from 2020 onwards..
In summary, Ophir is managing its business on the basis that the
current industry downturn will persist and to ensure financial
strength during this period. The strength of our balance sheet is
now presenting opportunities with significant upside both from our
existing asset base and from elsewhere in the industry.
We are positioning Ophir to not only create value during the
down-cycle, but also to be optimally positioned to benefit from any
recovery in the sector.
Operations Review
Following the acquisition of Salamander, and a number of assets
from Niko Resources Ltd, a key area of focus during the first half
was the successful integration of the Asian assets, operations and
employees into the wider Group. This process has been delivered
smoothly to date.
Production during the first half averaged 14,600 boepd (on a
pro-forma basis) and is on track to meet expectations for the full
year. Health and Safety is a priority for Ophir. With the
integration of the Salamander assets 1,203,218 man hours were
worked during the first half and we were delighted that there were
no recordable incidents. Indeed the Bualuang oil field passed the
milestone of 12 months incident free during the period which is a
notable achievement.
The Group has delivered other key milestones around the Kerendan
gas field development and the Fortuna FLNG project. In addition, we
have captured significant volumes of seismic data as we mature
prospects in our replenished exploration portfolio.
Equatorial Guinea
Block R (80%, operated)
Building on the progress at the end of 2014 when a successful
Drill Stem Test was completed on the Fortuna reservoir and fiscal
terms were agreed with the Equatorial Guinean government, the first
half of 2015 saw Ophir reach agreement with Golar LNG as the
midstream FLNG vessel provider. Golar's solution, which enables the
project to be cost competitive with brownfield LNG expansions, is
to provide a 2.2 MTPA vessel in return for a liquefaction tariff.
The selected midstream concept will utilise a retrofitted LNG
carrier vessel, with the associated processing facilities for
handling the near pure methane produced from the reservoir. The
current plan envisages a production plateau of around 330 MMscfd
for over 30 years. Ophir is also evaluating the feasibility of
commissioning a second vessel to be on stream in the middle of the
next decade. Initial screening suggests that this would not
materially increase project capital or operating costs but would
significantly advance project cash flows, making it value
accretive.
An independent audit confirmed gross contingent (2C) resources
and low risk prospective resource to be 3.4 Tcf.
In July, Ophir announced that the Fortuna FLNG project had
entered into FEED, a competitive process involving two consortia.
The FEED is expected to take nine months and the two consortia will
then enter bids for an Engineering, Procurement, Construction,
Installation and Commissioning (EPCIC) contract that will deliver
the installed subsea systems. The FID is expected in mid-2016,
ahead of first gas in mid-2019. The FEED process will provide
better definition of the costs to first gas, with current estimates
at around $800 million (gross).
The next milestones will be securing gas buyers and equity
partners. Processes for both of these have commenced with the aim
of signing agreements ahead of FID. Ophir's plan is to utilise our
high equity position in the Fortuna FLNG project to enable
farm-downs such that, the project funds itself to first gas.
Tanzania
Blocks 1 and 4 (20% non-operated interest)
The Blocks 1 and 4 partners (BG, Pavilion Energy and Ophir)
continue to make progress with pre-FEED and concept selection
activities. An independent audit confirmed gross contingent (2C)
resources to be in excess of 15 Tcf. A joint project team, in
collaboration with the Block 2 partners ( Statoil (Operator) and
Exxon), is conducting pre-FEED studies for the Tanzania onshore LNG
project. The formal award of the land for the site of the proposed
LNG plant is the next milestone that will enable the project to
gather momentum.
During the first half of 2015 Ophir gave notice of its intention
to relinquish the Block 3, East Pande and Block 7 licences.
Thailand
B8/38 Production Licence (100%, Operator)
Production from the Bualuang oil field averaged 12,600 bopd
during the first half of the year. An Ocean Bottom Seismic survey
was completed under budget and without incident in July 2015 with
the purpose of filling a gap in the existing 3D seismic image of
the field. The results of this survey, along with data from the
2014 development drilling programme, will be used to update the
static and dynamic field models. These seismic data will also be
evaluated for their 4D potential - assessing if we can observe the
movement of oil and water in the reservoir. A commercial evaluation
of the options for the next phase of development will then be
completed ahead of FID in 2H 2016.
An additional water disposal well will be drilled at the end of
the G4/50 exploration campaign starting later this year to increase
the water disposal capacity and therefore the ultimate production
capacity, of the infrastructure.
Block G4/50 (100%, Operator)
The G4/50 exploration block surrounds the B8/38 production
licence. In the first quarter of the year EIA approvals were
granted for 18 drilling locations on the G4/50 block. The Vantage
Emerald Driller jack-up rig has now been contracted for a drilling
programme commencing in October 2015 that will see two firm
explorations wells drilled on the Soy Siam and Parichat prospects.
Soy Siam has prospective recoverable resource of 25.3 MMbo on a
Pmean basis with a 21% chance of success. The Parichat cluster also
has prospective recoverable resource of 24.9 MMbo on a Pmean basis
with a 32% chance of success. The exploration strategy is to test
two different hydrocarbon systems, neither of which have been
previously evaluated in the South Western Basin to the south of the
Bualuang oil field in the Gulf of Thailand. In the success case,
these wells would de-risk numerous other analogue prospects in the
same basin. These are relatively low cost exploration targets with
wells costing c. $10 million each. Due to the shallow water
environment, they have the potential to rapidly be brought into
production in a two to three year time horizon and would be
strongly cash generative at current oil prices.
Sinphuhorm (9.5% non-operated)
Production from the Sinphuhorm field averaged 2,025 boepd net
(on a pro-forma basis) during the first half of the year. This was
ahead of budget due to higher demand for gas to meet the power
generation demands of the region. An additional production well
(PH-11) was successfully drilled and completed and will be tied in
to provide additional deliverability as needed.
Indonesia
Bangkanai PSC (70%, Operator)
The Kerendan gas field is on schedule for first gas in 2H 2016.
Mechanical completion of Ophir's gas processing facilities is
forecast to complete in August 2015, at which point the facilities
will be ready to deliver gas. The offtaker, PLN, is making good
progress and as at end June the transmission lines were 73%
complete and the power plant 81% complete. Achieving mechanical
completion now puts the Group in a strong position to push for a
conclusion to the gas price amendment to the initial gas sales
agreement. During the second half of 2015 SKKMigas, the Indonesian
regulator, is expected to complete its reserves audit on the West
Kerendan discovery. The results of this report will enable Ophir to
start marketing the next phase of the project and to mature some of
the 470 Bcf of gross contingent resource to the 123 Bcf of gross 2P
reserves.
West Papua IV (50%, Operator) & Aru (60 %, Operator)
During the first half of the year Ophir completed the
acquisition of the West Papua IV, Aru, Kofiau and Halmahera-Kofiau
offshore PSCs, Eastern Indonesia. Multiple leads and prospects have
been identified that are a mixture of clastic and carbonate play
types in both proven and frontier basins.
The West Papua area (West Papua IV and Aru PSCs) is frontier
with high impact potential. It is primarily prospective for oil
within a carbonate play where reservoir quality has been partially
de-risked by drilling to date. Ophir will be commencing a 3D
seismic survey in this area in 4Q 2015.
Other Assets
Myanmar
Block AD-03 (95%, operator)
Ophir completed a 10,200 km(2) 3D seismic survey over Block
AD-03 in June 2015. The fast track data will be available during
the second half of 2015 and detailed interpretation will start
thereafter. The Block is located in the Rakhine basin and is
on-trend with the 9 TCF Shwe gas field that exports gas to China.
However, Block AD-03 is still in the seismic processing stage and
first interpretation of these data will only be available later
this year, at which point we will be able to provide an update on
the prospectivity.
Gabon
Mbeli/Ntisna (40%, operator), Manga/Gnondo (70% operator),
Nkawa/Nkouere (100%, Operator)
Ophir completed a 10,200 km(2) seismic survey during 1Q 2015.
The data is now being interpreted and a prospect inventory is being
developed for ranking against Ophir's broader exploration
portfolio.
Seychelles
Blocks PEC 5B/1, PEC 5B/2 and PEC 5B/3 (75% operated
interest)
The 3D seismic data from the survey completed in 2014 is being
interpreted and a prospect inventory being built ahead of a
drill/drop decision deadline later in 2015.
Malaysia
PM-322 (85%, operator)
Preparations are ongoing for a 3D seismic survey which is
expected to commence in 2016.
Financial Review
Units 1H 2015 1H 2014 FY 2014
------------------------------------------------ -------- -------- --------
Income statement:
------------------------------------------------- -------- -------- --------
Realised prices: oil and 60.48 - -
liquids $/bbl
----------------------------------- ------------ -------- -------- --------
Revenue $'millions 86.5 - -
----------------------------------- ------------ -------- -------- --------
Field operating cost $/boe 7.36 - -
----------------------------------- ------------ -------- -------- --------
Profit/(loss) before taxation $'millions (123.3) 589.4 288.5
----------------------------------- ------------ -------- -------- --------
Balance sheet:
------------------------------------------------- -------- -------- --------
Capital expenditures/investments:
------------------------------------------------- -------- -------- --------
Acquisitions $'millions 1,128.0 - -
----------------------------------- ------------ -------- -------- --------
Exploration and appraisal $'millions 50.9 230.4 594.3
----------------------------------- ------------ -------- -------- --------
Development and production $'millions 11.7 - -
----------------------------------- ------------ -------- -------- --------
Net cash $'millions 392.0 1,490.8 1,172.8
----------------------------------- ------------ -------- -------- --------
Cash flow statement:
------------------------------------------------- -------- -------- --------
Cash generated from operations $'millions 69.4 (12.7) (16.4)
----------------------------------- ------------ -------- -------- --------
Introduction
The financial results include the acquisition of Salamander from
3 March 2015, when the transaction completed. Salamander was
acquired for a consideration of $326.1 with net debt of $453.8
million and other assets and liabilities, as set out in more detail
in note 8 to the interim financial statements. The Group issued
152,208,612 new ordinary shares as consideration, with a prior day
closing price GBP1.38 ($2.14) per share deriving an enterprise
value for the acquisition of $780 million. The Salamander assets
were booked at fair value without any charge to goodwill.
Looking through the equity accounting of Sinphuhorm (equity
accounted in line with IFRS 11), production from the acquired
Salamander assets averaged 14,600 boepd for the full six month
period.
Following the acquisition of Salamander, and the Niko Indonesia
assets, the Group is significantly lowering its operating cost base
with synergies and cost savings identified. The closure of five out
of a total of eleven offices following the acquisitions, and the
introduction of other efficiencies delivers year on year cost
savings of $60 million.
During the period since acquisition of Salamander, the Group has
reduced the acquired debt portfolio by $186.4 million. The Group is
currently in discussion with lenders to refinance its debt
portfolio by early-2016, taking advantage of its increased balance
sheet strength and lower credit rating following the combining of
the Ophir and Salamander balance sheets.
In September 2014, the Company commenced a share buy-back
programme. The programme allowed for up to $100 million of the
Company's shares to be acquired by the Company's brokers in line
with certain specified criteria. The programme concluded in May
2015. During 2015, $56.1 million of shares were purchased at an
average cost of GBP1.55 per share. The Board retains the right to
initiate further share buy-back programmes and will weigh up the
potential returns against other investment opportunities.
The Group's commitment exploration programme over the next three
years totals c. $95 million providing significant flexibility to
manage expenditure plans going forward. With the current downturn
in the cycle, the Group remains focused on preserving balance sheet
strength by maximising returns from its operating base, optimising
its debt portfolio and effective budget and cost management.
Statement of Comprehensive Income
Revenue, realisations and production
Working interest production averaged 12,100 boepd for the period
since 2 March 2015 with the Bualuang field accounting for 100% of
revenues. A further 2,025 boepd was produced from the Sinphuhorm
field, which is equity accounted for under IFRS 11. Bualuang
production, which is priced at a $0.40/bbl discount to Dubai,
generated revenues of $80.9 million with the balance of $5.6
million generated from profit on hedging arrangements.
Cost of Sales
Cost of sales for the period totalled $64.5 million (30 June
2014: nil) comprising of $18.2 million of operating costs and
royalty payments, and $45.7 million of depreciation and
amortisation costs.
Exploration expense
Exploration costs expensed totalled $94.9 million (30 June 2014:
$67.7 million) comprising principally the impairment of Kenya Block
L9 of $62.0 million, Gabon Ntsina of $12.1 million and other asset
write downs and new business activity of $20.8 million.
Equity accounted investments
Reporting of Sinphuhorm's financial contribution under IFRS 11
resulted in a share of profit of $4.1 million for the period to 30
June 2015 being recognised. Sinphuhorm gas revenues realised
$5.13/Mscf for the period. The equity value of the investments
totalled $173.9 million.
General and Administrative Expenses
General and administration expenses were 29% lower than the same
period last year at $19.4 million (30 June 2014: $27.2 million).
The charge for the period also included one off restructuring
charges following the acquisition of Salamander of approximately
$8.0 million.
Finance income and expense
Net finance expenses of $6.9 million (30 June 2014: income of
$12.1 million) predominantly included interest paid on borrowings,
partly offset by income earned on short-term deposits of $1.1
million (30 June 2014: $1.8 million income).
Taxation
The taxation charge of $7.7 million (30 June 2014: $250.4
million) related predominantly to production from Thailand. The
charge comprises income tax of $30.6 million and a deferred tax
credit of $22.9 million.
Balance Sheet
Capital expenditure
Capital expenditures (excluding the acquisition cost of
Salamander) totalled $89.6 million (30 June 2014: $230.4 million)
with the lower expenditure reflecting no drilling activity during
1H 2015 compared to 1H 2014. Activity during the period included
seismic activity in Myanmar and the acquisition of Niko assets in
Indonesia. In addition, the acquisition of Salamander's assets were
booked at a cost of $132.0 million for exploration and appraisal
assets (intangibles) and $827.1 million for development and
production assets (property, plant and equipment).
Cash and net debt
A total of $502.6 million of debt and $48.8 million of cash were
purchased along with the Salamander acquisition. The debt comprised
a convertible bond of $93.9 million, a Norwegian bond of $154.8
million and a reserves based lending facility of $253.9 million.
Since acquisition, total debt has been reduced by $186.4 million
(to $316.2 million) with the full repayment of the convertible
bond, the Norwegian bond lenders' put option being exercised at
change of control totalling $45.6 million and scheduled repayment
of the reserves based lending facility of $44.1 million.
Total cash available to the Group totalled $708.2 million (30
June 2014: $1,490.8 million) at period end, comprising cash and
cash equivalent of $608.2 million (30 June 2014: $1,040.8 million)
and investments (short-term deposits) of $100.0 million (30 June
2014: $450.0 million). Consequently, closing net cash at 30 June
2015 was $392.0 million (30 June 2014: $1,490.8 million).
The Group is currently in discussion with lenders to refinance
its debt portfolio by early-2016, taking advantage of its increased
balance sheet strength and low credit rating following the
combining of the Ophir and Salamander balance sheets.
Cash flow statement
Operating cash flow
Net cash flow used in operating activity is reported at $7.1
million (30 June 2014: outflow $9.5 million). This reflects a
number of factors, namely: the short-term timing of receipts and
payments in respect of operating activity, particularly in relation
to oil inventories, trade debtors and tax; and the equity
accounting for the Sinphuhorm gas field. Furthermore, since the
date of acquisition, the reported numbers only include four months'
activity for the Salamander producing assets. Adjusting for these
factors, the underlying accrued cash flow from the producing for
the six months was $56.8 million. Against that amount, general and
administration costs totalled $19.4 (which also includes one-off
restructuring charges of $8.0 million following the acquisition of
Salamander).
Investing cash flow
Investing cash flow of $57.2 million (30 June 2014; inflow
$535.1 million) included net payments in respect of oil and gas
assets of $253.8 million, partly offset by the withdrawal of long
term cash deposits of $196.6 million. Investments in oil and gas
assets included payments of $161.0 million for activity undertaken
in 2014.
These costs were related to the drilling of wells in Block 7 and
East Pande in Tanzania, Block R in Equatorial Guinea, and seismic
costs in Gabon.
Financing cash flow
Financing cash outflows of $202.2 million (30 June 2014 $1.5
million inflow) resulted from the repayment of Salamander debt
facilities of $186.4 million, interest payments of $12.6 million
and purchase of share under the share buy-back arrangement of $56.1
million.
Financial outlook
The average daily production forecast for the full year has
increased to 11,000-12,500 boepd. With the recent decline in oil
prices, forecast underlying operating cash flow from the producing
assets is revised to $110-130 million for the full year.
Full year capital expenditure forecast for 2015 is $250-300
million. Following refinancing of the debt portfolio by year-end
2015, net cash for end-2015 remains forecast at $350-400 million,
with total cash available on the balance sheet forecast at $700-750
million.
Risk management
The Group's Executive Directors constantly monitor the Group's
risk exposures and report to the Audit , Corporate Responsibility
and Technical Advisory Committees on a six monthly basis. Risks
that have the potential to have a high impact on the Company are
each reviewed, together with the controls the Company has put in
place, with the Board on at least an annual cycle. The Audit
Committee provides oversight on risk whilst ultimate authority for
risk management remains with the Group's Board. The Corporate
Responsibility Committee provides oversight on surface risk,
particularly in the areas of Health, Safety and the Environment.
The Technical Advisory Committee provides oversight on subsurface
risk and uncertainty for exploration and development
activities.
The principal risks for the Group remain as previously detailed
on pages 18 to 21 of the 2014 Annual Report and Accounts these have
been re-evaluated following the Salamander acquisition. The
principal risks can be summarised as follows:
-- External Risks: Low commodity price and adverse market
sentiment towards the E&P sector, global economic volatility,
capital constraints, legal compliance regulatory or litigation
risk, stakeholder sentiment, political risk.
-- Strategic Risks: Investment decisions, inadequate resource and reliance on key personnel.
-- Operational Risks: HSE and security incident, drilling
operations risk, discovery risk and success rate, IT risk.
-- Financial Risks: Inability to fund exploration work
programmes, counterparty credit risk, cost and capital spending,
interest rate and foreign exchange risk.
Responsibility Statement
The Directors confirm that to the best of their knowledge:
a the condensed set of financial statements has been prepared in
accordance with IAS 34 "Interim Financial Reporting";
b the half year report includes a fair review of the information
required by DTR 4.2.7R (indication of important events during the
first six months and description of principal risks and
uncertainties for the remaining six months of the year);
c the half year report includes a fair review of the information
required by DTR 4.2.8R (disclosure of related parties' transactions
and changes therein);
The Directors of Ophir Energy plc are as listed in the Company
Information section at the back of this report.
By order of the Board
Nicholas Smith
Chairman
12 August 2015
Independent Review Report to Ophir Energy plc
Introduction
We have been engaged by the Company to review the condensed set
of financial statements in the half-yearly financial report for the
six months ended 30 June 2015 which comprises the condensed
consolidated income statement and statement of comprehensive
income, the condensed consolidated statement of financial position,
the condensed consolidated statement of changes in equity, the
condensed consolidated statement of cash flows and related notes 1
to 25. We have read the other information contained in the half
yearly financial report and considered whether it contains any
apparent misstatements or material inconsistencies with the
information in the condensed set of financial statements.
This report is made solely to the company in accordance with
guidance contained in International Standard on Review Engagements
2410 (UK and Ireland) "Review of Interim Financial Information
Performed by the Independent Auditor of the Entity" issued by the
Auditing Practices Board. To the fullest extent permitted by law,
we do not accept or assume responsibility to anyone other than the
company, for our work, for this report, or for the conclusions we
have formed.
Directors' Responsibilities
The half-yearly financial report is the responsibility of, and
has been approved by, the directors. The directors are responsible
for preparing the half-yearly financial report in accordance with
the Disclosure and Transparency Rules of the United Kingdom's
Financial Conduct Authority.
As disclosed in note 2, the annual financial statements of the
group are prepared in accordance with IFRSs as adopted by the
European Union. The condensed set of financial statements included
in this half-yearly financial report has been prepared in
accordance with International Accounting Standard 34, "Interim
Financial Reporting", as adopted by the European Union.
Our Responsibility
Our responsibility is to express to the Company a conclusion on
the condensed set of financial statements in the half-yearly
financial report based on our review.
Scope of Review
We conducted our review in accordance with International
Standard on Review Engagements (UK and Ireland) 2410, "Review of
Interim Financial Information Performed by the Independent Auditor
of the Entity" issued by the Auditing Practices Board for use in
the United Kingdom. A review of interim financial information
consists of making enquiries, primarily of persons responsible for
financial and accounting matters, and applying analytical and other
review procedures. A review is substantially less in scope than an
audit conducted in accordance with International Standards on
Auditing (UK and Ireland) and consequently does not enable us to
obtain assurance that we would become aware of all significant
matters that might be identified in an audit. Accordingly, we do
not express an audit opinion.
Conclusion
Based on our review, nothing has come to our attention that
causes us to believe that the condensed set of financial statements
in the half-yearly financial report for the six months ended 30
June 2015 is not prepared, in all material respects, in accordance
with International Accounting Standard 34 as adopted by the
European Union and the Disclosure and Transparency Rules of the
United Kingdom's Financial Conduct Authority.
Ernst & Young LLP
London
12 August 2015
The maintenance and integrity of the Ophir Energy plc web site
is the responsibility of the Directors; the work carried out by the
auditors does not involve consideration of these matters and,
accordingly, the auditors accept no responsibility for any changes
that may have occurred to the financial information since it was
initially presented on the web site. Legislation in the United
Kingdom governing the preparation and dissemination of financial
statements may differ from legislation in other jurisdictions.
Condensed consolidated income statement and statement of
comprehensive income
Six months ended 30 June 2015
6 Months 6 Months Year ended
Ended ended
30 June 30 June 31 December
2015 2014 2014
(Unaudited) (Unaudited) $'000
Notes $'000 $'000
Consolidated income statement
Continuing operations
Revenue 4 86,495 - -
Cost of sales 5a (64,499) - -
------------- ------------- -------------
Gross profit 21,996 - -
Gain on farm-out 5b 245 673,020 671,677
Share of profit of investments
accounted for using the equity
method 20 4,066 - -
Other income - - 26
Exploration expenses 5c (94,867) (67,706) (333,782)
General & administration expenses 5d (19,440) (27,217) (20,746)
Other operating expenses 5e (23,039) (774) (22,821)
------------- ------------- -------------
Operating (loss)/profit (111,039) 577,323 294,354
Net finance (expense)/income 6 (6,889) 12,113 (5,861)
Other financial losses 7 (5,367) - -
------------- ------------- -------------
(Loss)/profit from continuing
operations before taxation (123,295) 589,436 288,493
Taxation 9 (7,717) (250,383) (233,651)
------------- ------------- -------------
(Loss)/profit from continuing
operations for the period
attributable to: (131,012) 339,053 54,842
------------- ------------- -------------
Equity holders of the Company (131,012) 339,053 54,846
Non-controlling interest - - (4)
------------- ------------- -------------
(131,012) 339,053 54,842
------------- ------------- -------------
Earnings per share (pence)
Basic - (Loss)/profit for
the period attributable to (12.7) pence 33.7 pence 6.0 pence
equity holders of the Company (1) (3) (5)
Diluted - (Loss)/profit for
the period attributable to (12.6) 33.3 pence 6.0 pence
equity holders of the Company pence (2) (4) (6)
============= ============= =============
(1) (20.0) cents per share
2 (19.8) cents per share
(3) 57.3 cents per share
4 56.6 cents per share
(5) 9.4 cents per share
(6) 9.4 cents per share
Condensed consolidated income statement and statement of
comprehensive income
Six months ended 30 June 2015 (continued)
Consolidated statement of comprehensive
income
(Loss)/profit from continuing operations
for the period (131,012) 339,053 54,842
Other comprehensive (loss)/income
Other comprehensive (loss)/income
to be reclassified to profit or
loss in subsequent periods:
Exchange differences on retranslation
of foreign operations net of tax (1,049) 151 1,784
---------- -------- -------
Other comprehensive (loss)/income
for the period, net of tax (1,049) 151 1,784
========== ======== =======
Total comprehensive (loss)/income
for the period, net of tax attributable
to:
Equity holders of the Company (132,061) 339,204 56,630
Non-controlling interest - - (4)
---------- -------- -------
(132,061) 339,204 56,626
========== ======== =======
Condensed consolidated statement of financial position
As at 30 June 2015
As at As at As at
30 June
30 June 2015 2014 31 December
(unaudited) (unaudited) 2014
Notes $'000 $'000 $'000
Non-current assets
Exploration and evaluation
assets 10 895,904 722,528 764,933
Oil and gas properties 11 793,074 - -
Other property, plant
and equipment 6,131 6,821 6,307
Goodwill - 20,868 -
Financial assets 59,910 16,460 17,104
Investments accounted
for using the equity
method 20 173,920 - -
-------------- ------------- -------------
1,928,939 766,677 788,344
-------------- ------------- -------------
Current assets
Inventory 12 45,896 23,316 23,902
Trade and other receivables 53,830 36,269 12,839
Taxation receivable 13,202 - 13,424
Cash and cash equivalents 13 608,207 1,040,823 877,872
Investments 14 100,000 450,000 294,904
-------------- ------------- -------------
821,135 1,550,408 1,222,941
-------------- ------------- -------------
Total assets 2,750,074 2,317,085 2,011,285
-------------- ------------- -------------
Current liabilities
Trade and other payables 15 (131,879) (211,367) (242,148)
Interest-bearing bank
borrowings due within
one year 16 (53,332) - -
Taxation payable (49,769) (21,157) -
Provisions 18 (49,142) (35,398) (26,787)
-------------- ------------- -------------
(284,122) (267,922) (268,935)
-------------- ------------- -------------
Non-current liabilities
Interest-bearing bank
borrowings 16 (156,498) - -
Bonds payable 17 (106,371) - -
Deferred tax liability (301,058) (26,968) (44,048)
Provisions 18 (64,597) (354) (263)
-------------- ------------- -------------
(628,524) (27,322) (44,311)
-------------- ------------- -------------
Total liabilities (912,646) (295,244) (313,246)
-------------- ------------- -------------
Net assets 1,837,428 2,021,841 1,698.039
============== ============= =============
Condensed consolidated statement of financial position
As at 30 June 2015 (continued)
As at As at As at
30 June
30 June 2015 2014 31 December
(unaudited) (unaudited) 2014
Notes $'000 $'000 $'000
Capital and reserves
Called up share capital 19 3,061 2,471 2,474
Reserves 21 1,834,647 2,019,646 1,695,845
---------- ---------- ----------
Equity attributable
to equity shareholders
of the Company 1,837,708 2,022,117 1,698,319
Non-controlling interest (280) (276) (280)
---------- ---------- ----------
Total equity 1,837,428 2,021,841 1,698,039
========== ========== ==========
Approved by the Board on 12(th) August 2015
Nicholas Smith Nick Cooper
Chairman Chief Executive Officer
Condensed consolidated statement of changes in equity
Six months ended 30 June 2015
Called Non-controlling
up share Treasury Other reserves interest
capital shares (1) Total equity
$'000 $'000 $'000 $'000 $'000
=============================
As at 1 January 2014 2,466 - 1,674,719 (276) 1,676,909
Profit for the period,
net of tax - - 339,053 - 339,053
Other comprehensive income,
net of tax - - 151 - 151
========== ========= =============== ================= =============
Total comprehensive income,
net of tax - - 339,204 - 339,204
Exercise of options 5 - 1,481 - 1,486
Share-based payment - - 4,242 - 4,242
---------- --------- --------------- ----------------- -------------
As at 30 June 2014
(Unaudited) 2,471 - 2,019,646 (276) 2,021,841
Loss for the period,
net of tax - - (284,207) (4) (284,211)
Other comprehensive income,
net of tax - - 1,633 - 1,633
---------- --------- --------------- ----------------- -------------
Total comprehensive loss,
net of tax - - (282,574) (4) (282,578)
Purchase of own shares - (59) (44,168) - (44,227)
Exercise of options 3 - 366 - 369
Share-based payment - - 2,634 - 2,634
---------- --------- --------------- ----------------- -------------
As at 1 January 2015 2,474 (59) 1,695,904 (280) 1,698,039
Loss for the period,
net of tax - - (131,012) - (131,012)
Other comprehensive income,
net of tax - - (1,049) - (1,049)
---------- --------- --------------- ----------------- -------------
Total comprehensive loss,
net of tax - - (132,061) - (132,061)
New ordinary shares issued
to third parties 587 - 325,545 - 326,132
Purchase of own shares - (99) (56,011) - (56,110)
Exercise of options - 1 - - 1
Share-based payment - - 1,427 - 1,427
As at 30 June 2015
(Unaudited) 3,061 (157) 1,834,804 (280) 1,837,428
========== ========= =============== ================= =============
(1) Refer to note 22
- Other reserves
Condensed consolidated statement of cash flows
Six months ended 30 June 2015
6 Months 6 Months Year ended
Ended ended
30 June 31 December
30 June 2015 2014 2014
(unaudited) (unaudited) $'000
Notes $'000 $'000
Operating activities
(Loss)/profit before taxation (123,295) 589,436 288,493
Adjustments to reconcile loss
before tax to net cash flows
Gain on farm-out 5b (245) (673,020) (671,677)
Interest income 6 (1,118) (5,232) (7,049)
Interest expense 6 7,521 - -
Share of profit of investments
accounted for using the equity
method 20 (4,066) - -
Net foreign currency losses/(gains) 6 486 (6,881) 12,910
Other financial losses 7 5,367 - -
Depreciation and amortisation 5 48,559 775 1,955
Impairment of goodwill 5e - - 20,868
Loss/(profit) on disposal of
assets 5e 145 (1) (2)
Provision for employee entitlements (700) 146 (207)
Provision for redundancy costs 2,792 - -
Provision for exiting contract 5e 20,000 - -
Share-based payment expense 5d 1,427 4,242 6,876
Exploration expenditure - pre
license costs 5c 17,671 1,560 23,947
Exploration expenditure - written
off 5c 3,082 205 -
Exploration expenditure - provision
for impairment 5c 74,114 65,941 309,835
Working capital adjustments
(Increase)/decrease in inventories (1,770) - -
(Decrease)/increase in trade
and other payables (3,353) 7,522 (4,409)
Decrease/(increase) in trade
and other receivables 22,783 2,630 2,066
-------------- ------------- -------------
Cash generated from/(utilised
in) operations 69,400 (12,677) (16,394)
Income taxes paid (78,012) (2,099)(1) (3,226)
Interest income 1,496 5,232 8,307
-------------- ------------- -------------
Net cash flows used in operating
activities (7,116) (9,544) (11,313)
-------------- ------------- -------------
Condensed consolidated statement of cash flows (continued)
Six months ended 30 June 2015
6 MONTHS 6 MONTHS year ended
ENDED ENDED
30 June 31 December
30 June 2015 2014
(Unaudited) (Unaudited) 2014
Notes $'000 $'000 $'000
Investing activities
Proceeds from farm-out 2,100 1,251,840 1,329,672
Tax paid on gain on farm-out - (222,411)(1) (222,411)
Dividend received from investments 1,087 - -
Increase in investments (3,941) - -
Expenditure on property, plant
& equipment (14,411) (4,358) (4,770)
Exploration expenditure (238,617) (183,911) (521,302)
Proceeds on disposal of assets - 1 2
Disposal/(purchase) of inventory - (4,307) 1,988
Cash returned/(placed on deposit) 194,904 (290,079) (134,983)
Security refunds/(deposits) 1,726 (11,687) (12,331)
-------------- ------------- --------------
Net cash flows (used in)/from
investing activities (57,152) 535,088 435,865
-------------- ------------- --------------
Financing activities
Interest paid (12,571) - -
Other financial receipts and -
payments 1,381 -
Repayment of interest-bearing
bank borrowings 16 (44,088) - -
Repayment of convertible bonds 8 (94,000) - -
Repayment of unsecured bonds 17 (45,652) - -
Proceeds from exercise of share
options 1 1,486 1,914
Purchase of own shares (56,108) - (44,230)
Cash acquired on acquisition -
of subsidiary 48,827 -
-------------- ------------- --------------
Net cash (outflows)/inflows from
financing activities (202,210) 1,486 (42,316)
-------------- ------------- --------------
(Decrease)/increase in cash
and cash equivalents for the
period (266,478) 527,030 382,236
Effect of exchange rates on cash
and cash equivalents (3,187) 7,031 (11,126)
Cash and cash equivalents at
the beginning of the period 877,872 506,762 506,762
-------------- ------------- --------------
Cash and cash equivalents at the
end of the period 608,207 1,040,823 877,872
============== ============= ==============
(1) Prior period comparatives have been restated. Tax paid on
gain on farm-out relates to the farm-out of Tanzania Blocks 1, 3
& 4, the proceeds from which are classified as investing
activities. As a result, it was deemed more appropriate to classify
the tax paid as an investing activity, along with the proceeds.
This treatment is consistent with the presentation at 31 December
2014.
Notes to the condensed interim financial statements
1 Corporate information
Ophir Energy plc (the 'Company' and ultimate parent of the
Group) is a public limited company incorporated, domiciled and
listed in England. Its registered offices are located at 123
Victoria Street, London SW1E 6DE.
The principal activity of the Group is the development of
offshore and deepwater oil and gas exploration assets. The Company
has an extensive and diverse portfolio of exploration interests
across Africa and South East Asia.
The Income Statement and Statement of Comprehensive Income,
Statement of Changes in Equity, Statement of Financial Position,
Statement of Cash Flows and associated Notes to the Financial
Statements for the financial year ended 31 December 2014 included
in the 30 June 2015 half yearly financial report do not constitute
the Group's statutory accounts, as defined under section 435 of the
Companies Act 2006. The Group's statutory financial statements for
the financial year ended 31 December 2014 have been audited by the
Group's external auditor and lodged with the United Kingdom
Companies House. The auditor's opinion on these accounts was
unqualified and did not contain a statement under either Section
498(2) or 498(3) of the Companies Act 2006.
The Group's condensed consolidated interim financial statements
are unaudited but have been reviewed by the auditors and their
report to the Company is included on page 16. These condensed
consolidated interim financial statements of the Group for the six
months ended 30 June 2015 were approved and authorised for issue by
the Board of the Directors on 12 August 2015.
2 Basis of preparation and significant accounting policies
2.1 Basis of preparation
The unaudited condensed consolidated interim financial
statements for the six months ended 30 June 2015 included in this
interim report has been prepared in accordance with International
Accounting Standard 34 'Interim Financial Reporting', as adopted by
the European Union.
The unaudited condensed consolidated interim financial
statements are prepared on a going concern basis.
The consolidated financial statements have been prepared on a
historical cost basis and are presented in US Dollars rounded to
the nearest thousand dollars ($'000) except as otherwise
indicated.
Comparative figures for the period to 31 December 2014 are for
the year ended on that date.
The interim financial statements do not include all the
information and disclosures required in the annual financial
statements, and should be read in conjunction with the consolidated
financial statements in the Ophir Energy plc Annual Report and
Accounts for the year ended 31 December 2014. The accounting
policies adopted in the preparation of the interim financial
statements, the significant judgements made by management in
applying these policies, and key sources of estimation uncertainty
are consistent with those followed in the preparation of the
Group's financial statements for the year ended 31 December 2014,
except for the adoption of the following standards and
amendments:
Adoption of new accounting policies
The Group has adopted the following relevant new accounting
policies as a result of the acquisition of Salamander Energy plc on
3 March 2015 (the acquisition date and effective date of
adoption):
Commercial reserves - 2.3(a) & 2.4
Oil and gas properties - 2.3(e) & 2.4
Derivative financial instruments - 2.3(f)
Inventories of oil - 2.3(g)
Provision for decommissioning - 2.3(h) & 2.4
Revenue recognition: sale of oil and petroleum products -
2.3(n)
Cost of sales: underlift and overlift - 2.3(o)
Royalties, resource rent tax and revenue-based taxes -
2.3(u)
New and amended accounting standards and interpretations
The Group has adopted the following relevant new and amended
IFRS and IFRIC interpretations as of 1 January 2015:
IAS 19 'Employee Benefits' (Amendments) - Defined Benefit Plans:
Employee Contributions
Improvements to IFRSs 2010-2012 cycle
Improvements to IFRSs 2011-2013 cycle
These new and amended standards and interpretations have not
materially affected amounts reported or disclosed in the Group's
financial statements for the six months ended 30 June 2015.
Standards and interpretations issued, but not yet effective
The following standards and interpretations, relevant to the
Group, have been issued by the IASB, but have not yet been endorsed
by the EU for their application to become mandatory. The Group
expects to adopt this interpretation in accordance with the
effective date:
Disclosure Initiative (Amendments to IAS 1). The narrow-focus
amendments to IAS 1 Presentation of Financial Statements clarify,
rather than significantly change, existing IAS 1 requirements. In
most cases the proposed amendments respond to overly prescriptive
interpretations of the wording in IAS 1;
IFRS 9 'Financial Instruments', amends the classification and
measurement of financial instruments;
IFRS 14 'Regulatory Deferral Accounts', allows an entity, whose
activities are subject to rate-regulation, to continue applying
most of its existing accounting policies for regulatory deferral
account balances upon its first-time adoption of IFRS;
IFRS 15 'Revenue from Contracts with Customers', replaces all
existing revenue requirements (IAS 11 Construction Contracts, IAS
18 Revenue, IFRIC 13 Customer Loyalty Programmes, IFRIC 15
Agreements for the Construction of Real Estate, IFRIC 18 Transfers
of Assets from Customers and SIC 31 Revenue - Barter Transactions
Involving Advertising Services) in IFRS and applies to all revenue
arising from contracts with customers;
Amendments to IFRS 10 and IAS 28: Sale or Contribution of Assets
between an Investor and its Associate or Joint Venture, Amendments
to IAS 27: Equity Method in Separate Financial Statements,
Amendments to IAS 16 and IAS 41: Bearer Plants, Amendments to IAS
16 and IAS 38: Clarification of Acceptable Methods of Depreciation
and Amortisation, Amendments to IFRS 11: Accounting for
Acquisitions of Interests in Joint Operations, and Annual
Improvements to IFRSs 2012-2014 Cycle.
The Group has reviewed the impact to financial reporting for the
changes arising from these standards and interpretations and they
are not expected to materially affect amounts reported or disclosed
in the Group's financial statements. The impact of the adoption of
other standards noted above has not been assessed by the Group.
2.2 Basis of consolidation
The consolidated financial statements comprise the financial
statements of the Company and its subsidiaries, drawn up to 31
December each year.
Subsidiaries
Control is achieved when the Group is exposed, or has rights, to
variable returns from its involvement with the investee and has the
ability to affect those returns through its power over the
investee. Specifically, the Group controls an investee if, and only
if, the Group has all of the following:
-- Power over the investee (i.e. existing voting rights that
give it the current ability to direct the relevant activities of
the investee);
-- Exposure, or rights, to variable returns from its involvement with the investee; and
-- The ability to use its power over the investee to affect its returns.
The Group reassesses whether or not it controls an investee if
facts and circumstances indicate that there are changes to one or
more of the three elements of control. Subsidiaries are
consolidated from the date of their acquisition, being the date on
which the Group obtains control, and continue to be consolidated
until the date that such control ceases.
The financial statements of subsidiaries are prepared for the
same reporting year as the parent company, using consistent
accounting policies. All intercompany balances and transactions,
including unrealised profits arising therefrom, are eliminated.
A change in the ownership interest of a subsidiary, without loss
of control, is accounted for as an equity transaction. If the Group
loses control over a subsidiary, it (i) derecognises the assets
(including goodwill) and liabilities of the subsidiary; (ii)
derecognises the carrying amount of any non-controlling interest;
(iii) derecognises the cumulative translation differences, recorded
in equity; (iv) recognises the fair value of the consideration
received; (v) recognises the fair value of any investment retained;
and (vi) recognises any surplus or deficit in profit and loss;
(vii) reclassifies the parent's share of components previously
recognised in other comprehensive income to profit and loss or
retained earnings, as appropriate.
Non-controlling interests
Non-controlling interests represent the equity in a subsidiary
not attributable, directly and indirectly, to the parent company
and is presented separately within the Consolidated statement of
financial position, separately from equity attributable to owners
of the parent. Losses within a subsidiary are attributed to the
non-controlling interest even if that results in a deficit
balance.
2.3 Summary of significant accounting policies
(a) Commercial reserves
Commercial reserves are proved and probable oil and gas
reserves, which are defined as the estimated quantities of crude
oil, natural gas and natural gas liquids which geological,
geophysical and engineering data demonstrate with a specified
degree of certainty to be recoverable in future years from known
reservoirs and which are considered commercially viable. Proved and
probable reserve estimates are based on a number of underlying
assumptions including oil and gas prices, future costs, oil and gas
in place and reservoir performance, which are inherently uncertain.
There should be a 50% statistical probability that the actual
quantity of recoverable reserves will be more than the amount
estimated as proven and probable reserves and a 50% statistical
probability that it will be less. However, the amount of reserves
that will ultimately be recovered from any field cannot be known
with certainty until the end of the field's life.
(b) Intangible exploration and evaluation expenditure
Exploration and evaluation ('E&E') expenditure relates to
costs incurred on the exploration for and evaluation of potential
mineral reserves and resources. The Group applies the successful
efforts method of accounting for E&E costs as permitted by IFRS
6 'Exploration for and Evaluation of Mineral Resources'.
Under the successful efforts method of accounting, all licence
acquisition, exploration and appraisal costs (such as geological,
geochemical and geophysical costs, exploratory drilling and other
direct costs associated with finding mineral resources) are
initially capitalised in well, field or specific exploration cost
centres as appropriate, pending determination. Costs (other than
payments for the acquisition of rights to explore) incurred prior
to acquiring legal rights to explore an area and general
exploration costs not specific to any particular licence or
prospect are charged directly to the Consolidated income statement
and statement of comprehensive income.
E&E assets are not amortised prior to the determination of
the results of exploration activity.
Treatment of E&E assets at conclusion of appraisal
activities
Intangible E&E assets related to each exploration
licence/block are carried forward, until the existence (or
otherwise) of commercial reserves has been determined, subject to
certain limitations including review for indicators of impairment.
If, at completion of evaluation activities, technical and
commercial feasibility is demonstrated, then, following recognition
of commercial reserves, the carrying value of the relevant E&E
asset is then reclassified as a development and production asset
(subject to an impairment assessment before reclassification).
If, on completion of evaluation activities, it is not possible
to determine technical feasibility and commercial viability or if
the legal right to explore expires or if the Group decides not to
continue E&E activity, then the costs of such unsuccessful
E&E are written off to the Consolidated income statement and
statement of comprehensive income in the period of that
determination.
Impairment
E&E assets are assessed for impairment when facts and
circumstances suggest that the carrying amount of an E&E asset
may exceed its recoverable amount. The cash generating unit ('CGU')
applied for impairment test purposes is generally the block, except
that a number of block interests may be grouped as a single cash
generating unit where the cash flows of each block are
interdependent.
Where an indicator of impairment exists, management will assess
the recoverability of the carrying value of the asset or CGU. This
review includes a status report confirming that E&E drilling is
still under way or firmly planned, or that it has been determined,
or work is under way to determine that the discovery is
economically viable. This assessment is based on a range of
technical and commercial considerations and confirming that
sufficient progress is being made to establish development plans
and timing. If no future activity is planned, or the value of the
asset cannot be recovered via successful development or sale, the
balance of the E&E costs are written off in the Consolidated
income statement and statement of comprehensive income.
Farm-in / farm-out arrangements
The Group may enter into farm-in or farm-out arrangements, where
it may introduce partners to share in the development of an asset.
For transactions involving assets at the exploration and evaluation
phase, the Group adopts an accounting policy as permitted by IFRS 6
such that the Group does not record any expenditure made on its
behalf under a 'carried interest' by a farm-in partner (the
'farmee'). Where applicable past costs are reimbursed, any cash
consideration received directly from the farmee is credited against
costs previously capitalised in relation to the whole interest with
any excess accounted for by the farmor as a gain on disposal.
Farmed-out oil and gas properties are accounted for in accordance
with IAS 16 'Property, Plant and Equipment'.
(c) Business combinations
A business combination is a transaction in which an acquirer
obtains control of a business. A business is defined as an
integrated set of activities and assets that is capable of being
conducted and managed for the purpose of providing a return in the
form of dividends or lower costs or other economic benefits
directly to investors or other owners or participants. A business
consists of inputs and processes applied to those inputs that have
the ability to create outputs.
Business combinations are accounted for using the acquisition
method. The cost of an acquisition is measured as the aggregate of
the consideration transferred, measured at acquisition date fair
value and the amount of any non-controlling interest ('NCI') in the
acquiree. For each business combination, the Group elects whether
to measure NCI in the acquiree at fair value or at the
proportionate share of the acquiree's identifiable net assets.
Acquisition-related costs are expensed as incurred and included in
general & administrative expenses.
When the Group acquires a business, it assesses the assets and
liabilities assumed for appropriate classification and designation
in accordance with the contractual terms, economic circumstances
and pertinent conditions as at the acquisition date. This includes
the separation of embedded derivatives in host contracts by the
acquiree. Those oil and gas reserves that are able to be reliably
measured are recognised in the assessment of fair values on
acquisition. Other potential reserves, resources and rights, for
which fair values cannot be reliably measured, are not recognised
separately, but instead are subsumed in goodwill.
If the business combination is achieved in stages, the
acquisition date fair value of the acquirer's previously held
equity interest in the acquiree is remeasured to fair value as at
the acquisition date (being the date the acquirer gains control) in
profit or loss.
Any contingent consideration to be transferred by the acquirer
will be recognised at fair value at the acquisition date.
Subsequent changes to the fair value of the contingent
consideration which is deemed to be an asset or liability, will be
recognised in accordance with IAS 39 either in profit or loss or as
a change to other comprehensive income. If the contingent
consideration is not within the scope of IAS 39, it is measured in
accordance with the appropriate IFRS. If the contingent
consideration is classified as equity, it is not remeasured and
subsequent settlement is accounted for within equity.
(d) Goodwill
Goodwill is initially measured at cost, being the excess of the
aggregate of the consideration transferred and the amount
recognised for NCI over the fair value of the identifiable net
assets acquired and liabilities assumed. If the fair value of the
identifiable net assets acquired is in excess of the aggregate
consideration transferred (otherwise known as a 'bargain
purchase'), before recognising a gain, the Group reassesses whether
it has correctly identified all of the assets acquired and all of
the liabilities assumed and reviews the procedures used to measure
the amounts to be recognised at the acquisition date. If the
assessment still results in an excess of the fair value of net
assets acquired over the aggregate consideration transferred, then
the gain is recognised in the Consolidated income statement and
statement of comprehensive income.
After initial recognition, goodwill is measured at cost less any
accumulated impairment losses. For the purpose of impairment
testing, goodwill acquired in a business combination is, from the
acquisition date, allocated to each of the Group's cash generating
units ('CGUs') that are expected to benefit from the synergies of
the combination, irrespective of whether other assets or
liabilities of the acquiree are assigned to those units.
Where goodwill forms part of a CGU and part of the operation
within that unit is disposed of, the goodwill associated with the
operation disposed of is included in the carrying amount of the
operation when determining the gain or loss on disposal of the
operation. Goodwill disposed of in this circumstance is measured
based on the relative values of the operation disposed of and the
portion of the cash-generating unit retained.
Goodwill is tested for impairment annually (as at 31 December)
and when circumstances indicate that the carrying value may be
impaired.
In assessing whether goodwill has been impaired, the carrying
amount of the CGU or reportable segment is compared with its
recoverable amount. In determining whether goodwill is impaired,
the Group reviews the status of projects including recent farm-out
transactions and whether the Group's intention is to further
develop the Group's various assets.
(e) Property, plant and equipment
Oil and gas properties and other property, plant and equipment
are stated at cost, less accumulated depreciation and accumulated
impairment losses.
Development and production assets are generally accumulated on a
field-by-field basis and represent the cost of developing the
commercial reserves discovered and bringing them into production.
The initial cost of a development and production asset comprises
its purchase price or construction cost, any costs directly
attributable to bringing the asset into operation, the initial
estimate of the decommissioning obligation and, for qualifying
assets (where relevant), borrowing costs. When a development
project moves into the production stage, the capitalisation of
certain construction/development costs ceases, and costs are either
regarded as part of the cost of inventory or expensed, except for
costs which qualify for capitalisation relating to oil and gas
property asset additions, improvements or new developments. The
purchase price or construction cost is the aggregate amount paid
and the fair value of any other consideration given to acquire the
asset. The capitalised value of a finance lease is also included
within property, plant and equipment.
Oil and gas properties
Oil and gas properties are depreciated / amortised from the
commencement of production, on a unit-of-production basis, which is
the ratio of oil and gas production in the period to the estimated
quantities of commercial reserves at the end of the period plus the
production in the period, on a field-by-field basis. Costs used in
the unit of production calculation comprise the net carrying amount
of capitalised costs plus the estimated future field development
costs. The production and reserve estimates used in the calculation
are on an entitlements basis. Changes in the estimates of
commercial reserves or future field development costs are dealt
with prospectively.
Producing assets are generally grouped with other assets that
are dedicated to serving the same reserves for depreciation
purposes, but are depreciated separately from producing assets that
serve other reserves.
Other fixed assets
Property, plant and equipment other than oil and gas properties,
is depreciated at rates calculated to write-off the cost less
estimated residual value of each asset on a straight-line basis
over its expected useful economic life of between three and 10
years.
Impairment
The Group assesses at each reporting date whether there is an
indication that an asset (or CGU) may be impaired. Management has
assessed its CGUs as being an individual field, which is the lowest
level for which cash flows are largely independent of those of
other assets. If any indication exists, or when annual impairment
testing for an asset is required, the Group estimates the asset's
(or CGU's) recoverable amount. The recoverable amount is the higher
of an asset's (or CGU's) fair value less costs of disposal (FVLCD)
and value in use (VIU). The recoverable amount is then determined
for an individual asset, unless the asset does not generate cash
flows that are largely independent of those from other assets or
groups of assets, in which case the asset is tested as part of a
larger CGU to which it belongs. Where the carrying amount of an
asset or CGU exceeds its recoverable amount, the asset (or CGU) is
considered impaired and written down to its recoverable amount.
Impairment losses of continuing operations are recognised in the
Consolidated income statement and statement of comprehensive
income.
Where conditions giving rise to impairment subsequently reverse,
the effect of the impairment charge is also reversed as a credit to
the Statement of Comprehensive Income, net of any depreciation that
would have been charged since the impairment.
(f) Financial instruments
Financial assets and financial liabilities are recognised in the
group's Balance Sheet when the group becomes a party to the
contractual provisions of the instrument.
i. Financial assets
Financial assets and financial liabilities are initially
measured at fair value. Transaction costs that are directly
attributable to the acquisition or issue of financial assets and
liabilities (other than financial assets and financial liabilities
through profit or loss) are added to or deducted from the fair
value of the financial assets or financial liabilities, as
appropriate, on initial recognition. Transaction costs directly
attributable to the acquisition of financial assets or financial
liabilities at fair value through profit or loss are recognised
immediately in profit or loss.
All financial assets are recognised and derecognised on a trade
date where the purchase or sale of an investment is under a
contract whose terms require delivery of the investment within the
timeframe established by the market concerned, and are initially
measured at fair value, plus transaction costs, except for those
financial assets classified as at fair value through profit and
loss, which are initially measured at fair value.
Financial assets are classified into the following specified
categories: financial assets 'at fair value through profit and
loss' (FVTPL), 'held-to-maturity' investments, 'available-for-sale'
(AFS) financial assets and 'loans and receivables'. The
classification depends on the nature and purpose of the financial
assets and is determined at the time of initial recognition.
Loans and receivables
Trade receivables, loans, and other receivables that have fixed
or determinable payments that are not quoted in an active market
are classified as loans and receivables. Loans and receivables are
measured at amortised cost using the effective interest method,
less any impairment. Interest income is recognised by applying the
effective interest rate, except for short-term receivables when the
recognition of interest would be immaterial.
Effective interest method
The effective interest method is a method of calculating the
amortised cost of a financial asset and of allocating interest
income over the relevant period. The effective interest rate is the
rate that exactly discounts estimated future cash receipts
(including all fees paid or received that form an integral part of
the effective interest rate, transaction costs and other premiums
or discounts) through the expected life of the financial asset.
Income is recognised on an effective interest basis for debt
instruments other than those financial assets classified as at
FVTPL.
Financial assets at fair value through profit and loss
("FVTPL")
Financial assets are classified as financial assets at fair
value through profit or loss where the Group acquires the financial
asset principally for the purpose of selling in the near term, is a
part of an identified portfolio of financial instruments that the
Group manages together and has a recent actual pattern of short
term profit taking as well as all derivatives that are not
designated and effective as hedging instruments. Financial assets
at fair value through profit or loss are stated at fair value, with
any resultant gain or loss recognised in profit or loss. The net
gain or loss recognised in profit or loss incorporates any dividend
or interest earned on the financial asset and is included in the
'other financial gains and losses' line item in the Consolidated
income statement and statement of comprehensive income.
Impairment of financial assets
Financial assets, other than those at FVTPL, are assessed for
indicators of impairment at each balance sheet date. Financial
assets are impaired where there is objective evidence that, as a
result of one or more events that occurred after the initial
recognition of the financial asset, the estimated future cash flows
of the investment have been impacted. All impairment losses are
taken to the Consolidated income statement and statement of
comprehensive income.
Trade receivables are assessed for impairment based on the
number of days outstanding on individual invoices. Any trade
receivable that is deemed uncollectible is immediately written off
to the Consolidated income statement and statement of comprehensive
income, any subsequent recoveries are also taken directly to the
Consolidated income statement and statement of comprehensive income
upon receipt of cash collected.
Derecognition of financial assets
The Group derecognises a financial asset only when the
contractual rights to the cash flows from the asset expire; or it
transfers the financial asset and substantially all the risks and
rewards of ownership of the asset to another entity.
ii. Financial liabilities
Financial liabilities are classified as either financial
liabilities 'at FVTPL' or 'other financial liabilities'.
Financial liabilities at fair value through profit and loss
("FVTPL")
Financial liabilities are classified as at FVTPL where the
financial liability is either held for trading or it is designated
as at FVTPL.
Financial liabilities at FVTPL are stated at fair value, with
any resultant gain or loss recognised in profit or loss. The net
gain or loss recognised in profit or loss incorporates any interest
paid on the financial liability and is included in the 'other
financial gains and losses' line item in the Consolidated income
statement and statement of comprehensive income.
Other financial liabilities
Other financial liabilities, including borrowings, are initially
measured at fair value, net of transaction costs. Other financial
liabilities are subsequently measured at amortised cost using the
effective interest method, with interest expense recognised on an
effective yield basis. The effective interest method is a method of
calculating the amortised cost of a financial liability and of
allocating interest expense over the relevant period. The effective
interest rate is the rate that exactly discounts estimated future
cash payments through the expected life of the financial liability,
or, where appropriate, a shorter period.
Derecognition of financial liabilities
The Group derecognises financial liabilities when, and only
when, the Group's obligations are discharged, cancelled or they
expire.
iii. Cash and short-term deposits
Cash and cash equivalents in the statement of financial position
comprise cash at banks and in hand and short-term deposits with a
maturity of three months or less, but exclude any restricted cash.
Restricted cash is not available for use by the Group and therefore
is not considered highly liquid - for example cash set aside to
cover rehabilitation obligations.
For the purpose of the consolidated statement of cash flows,
cash and cash equivalents consist of cash and cash equivalents as
defined above, net of outstanding bank overdrafts.
iv. Short-term investments
Short-term investments in the statement of financial position
comprise cash deposits that are made for varying periods of between
three months and twelve months depending on the immediate cash
requirements of the Group and earn interest at the respective
short-term investment rate.
v. Derivative financial instruments
The Group uses derivative financial instruments to manage its
exposure to movements in oil and gas prices, interest rates and
foreign exchange. The Group does not use derivatives for
speculative purposes.
Derivative financial instruments are stated at fair value
Gains or losses on derivatives are taken directly to the
Consolidated income statement and statement of comprehensive income
in the period.
The fair values of derivative instruments are calculated using
quoted prices. Where such prices are not available, a discounted
cash flow analysis is performed using the applicable yield curve
for the duration of the instruments for non-optional derivatives,
and option pricing models for optional derivatives. Foreign
currency forward contracts are measured using quoted forward
exchange rates and yield curves derived from quoted interest rates
matching maturities of the contracts. Interest rate swaps are
measured at the present value of future cash flows estimated and
discounted based on the applicable yield curves derived from quoted
interest rates.
The estimated fair value of these derivatives is disclosed in
trade and other receivables or trade and other payables in the
Consolidated statement of financial position and the related
changes in the fair value are included in other financial gains and
losses in the Consolidated income statement and statement of
comprehensive income. Upon settlement, the cumulative amount of
previously recognised gains or losses is reversed out of other
financial gains and losses and, together with any final realised
gains or losses, recorded within revenue.
(g) Inventories
Inventories of oil, materials and drilling consumables are
stated at the lower of cost and net realisable value. Cost is
determined by using weighted average cost method and comprises
direct purchase costs, cost of transportation and other related
expenses.
(h) Provisions
General
A provision is recognised when the Group has a legal or
constructive obligation as a result of a past event and it is
probable that an outflow of economic benefits will be required to
settle the obligation and a reliable estimate can be made of the
obligation. If the effect of the time value of money is material,
expected future cash flows are discounted using a current pre-tax
rate that reflects, where appropriate, the risks specific to the
liability. Where discounting is used, the increase in the provision
due to unwinding the discount is recognised as a finance cost.
Decommissioning liability
The Group recognises a decommissioning liability where it has a
present legal or constructive obligation as a result of past
events, and it is probable than an outflow of economic benefits
will be required to settle the obligation and a reliable estimate
can be made of the obligation.
The obligation generally arises when the asset is installed or
the ground/environment is disturbed at the field location. When the
liability is initially recognised, the present value of the
estimated costs is capitalised by increasing the carrying amount of
the related oil and gas assets to the extent that it was incurred
by the development/construction of the field.
Changes in the estimated timing or cost of decommissioning are
dealt with prospectively by recording an adjustment to the
provision and a corresponding adjustment to oil and gas assets. Any
reduction in the decommissioning liability and, therefore, any
deduction from the asset to which it relates, may not exceed the
carrying amount of that asset. If it does, any excess over the
carrying value is taken immediately to the Consolidated income
statement and statement of comprehensive income.
If the change in estimate results in an increase in the
decommissioning liability and, therefore, an addition to the
carrying value of the asset, the Group considers whether this is an
indication of impairment of the asset as a whole, and if so, tests
for impairment. If, for mature fields, the estimate for the revised
value of oil and gas assets net of decommissioning provisions
exceeds the recoverable value, that portion of the increase is
charged directly to expense. Over time, the discounted liability is
increased for the change in present value based on the discount
rate that reflects current market assessments and risks specific to
the liability. The periodic unwinding of the discount is recognised
in the Consolidated income statement and statement of comprehensive
income as a finance cost. The company recognises neither the
deferred tax asset in respect of the temporary difference on the
decommissioning liability nor the corresponding deferred tax
liability in respect of the temporary difference on a
decommissioning asset.
(i) Pensions and other post-retirement benefits
The Group does not operate its own pension plan but makes
pension or superannuation contributions to private funds of its
employees which are defined contribution plans. The cost of
providing such benefits are expensed in the income statement as
incurred.
(j) Employee benefits
Salaries, wages, annual leave and sick leave
Liabilities for salaries and wages, including non-monetary
benefits, annual leave and accumulating sick leave expected to be
settled within 12 months of the reporting date are recognised in
respect of employees' services up to the reporting date. They are
measured at the amounts expected to be paid when the liabilities
are settled. Liabilities for non-accumulating sick leave are
recognised when the leave is taken and are measured at the rates
paid or payable.
Long service leave
The liability for long service leave is recognised and measured
at the present value of expected future payments to be made in
respect of services provided by employees up to the reporting date
using the projected unit credit method.
Consideration is given to the expected future wage and salary
levels, experience of employee departures and periods of service.
Expected future payments are discounted using market yields at the
reporting date on national government bonds with terms to maturity
and currencies that match, as closely as possible, the estimated
future cash outflows.
(k) Equity instruments
Equity instruments issued by the Group are recorded at the
proceeds received, net of direct issue costs.
(l) Leases
The determination of whether an arrangement is, or contains, a
lease is based on the substance of the arrangement and requires an
assessment of whether the fulfilment of the arrangement is
dependent on the use of a specific asset or assets and the
arrangement conveys a right to use the asset, even if that right is
not explicitly specified in an arrangement.
The Group has leases where the Lessor retains substantially all
the risks and benefits of ownership of the asset. Such leases are
classified as operating leases and rentals payable are charged to
the income statement on a straight line basis over the lease
term.
(m) Interests in joint arrangements
A joint arrangement is an arrangement over which two or more
parties have joint control. Joint control is the contractually
agreed sharing of control of an arrangement, which exists only when
decisions about the relevant activities (being those that
significantly affect the returns of the arrangement) require
unanimous consent of the parties sharing control.
i. Joint operations
A joint operation is a type of joint arrangement whereby the
parties that have joint control of the arrangement have rights to
the assets and obligations for the liabilities, relating to the
arrangement. In relation to its interests in joint operations, the
Group recognises its:
-- Assets, including its share of any assets held jointly
-- Liabilities, including its share of any liabilities incurred jointly
-- Revenue from the sale of its share of the output arising from the joint operation
-- Share of the revenue from the sale of the output by the joint operation
-- Expenses, including its share of any expenses incurred jointly
ii. Joint ventures
A joint venture is a type of joint arrangement whereby the
parties that have joint control of the arrangement have rights to
the net assets of the joint arrangement. The Group's investment in
its joint venture is accounted for using the equity method.
Under the equity method, the investment in the joint venture is
initially recognised at cost. The carrying amount of the investment
is adjusted to recognise changes in the Group's share of net assets
of the joint venture since the acquisition date. Goodwill relating
to the joint venture is included in the carrying amount of the
investment and is not individually tested for impairment.
The statement of profit or loss reflects the Group's share of
the results of operations of the joint venture. Unrealised gains
and losses resulting from transactions between the Group and the
joint venture are eliminated to the extent of the interest in the
joint venture.
The aggregate of the Group's share of profit or loss of the
joint venture is shown on the face of the Consolidated income
statement and statement of comprehensive income as part of
operating profit and represents profit or loss after tax and NCI in
the subsidiaries of joint venture. The financial statements of the
joint venture are prepared for the same reporting period as the
Group. When necessary, adjustments are made to bring the accounting
policies in line with those of the Group.
At each reporting date, the Group determines whether there is
objective evidence that the investment in the joint venture is
impaired. If there is such evidence, the Group calculates the
amount of impairment as the difference between the recoverable
amount of the joint venture and its carrying value, and then
recognises the loss as 'Share of profit of a joint venture' in the
Consolidated income statement and statement of comprehensive
income.
On loss of joint control over the joint venture, the Group
measures and recognises any retained investment at its fair value.
Any difference between the carrying amount of the joint venture
upon loss of joint control and the fair value of the retained
investment and proceeds from disposal is recognised in the
Consolidated income statement and statement of comprehensive
income.
(n) Revenue recognition
Revenue is recognised to the extent that it is probable that the
economic benefits will flow to the Group and the revenue can be
reliably measured. Revenue is measured at the fair value of the
consideration received and receivable, excluding discounts, sales
taxes, excise duties and similar levies.
Revenue from the sale of oil and petroleum products is
recognised on an entitlement basis when the significant risks and
rewards of ownership have been transferred, which is considered to
occur when title passes to the customer. This generally occurs when
the product is physically transferred into a vessel, pipe or other
delivery mechanism.
Revenue from the production of oil, in which the Group has an
interest with other producers, is recognised based on the Group's
working interest and the terms of the relevant production sharing
contracts.
(o) Cost of sales
Underlift and overlift
Lifting or offtake arrangements for oil and gas produced in
certain of the Group's jointly owned operations are such that each
participant may not receive and sell its precise share of the
overall production in each period. The resulting imbalance between
cumulative entitlement and cumulative production is 'underlift' or
'overlift'. Underlift and overlift are valued at market value and
included within receivables and payables respectively. Movements
during an accounting period are adjusted through cost of sales such
that gross profit is recognised on an entitlements basis.
(p) Interest income
Interest income is recognised as it accrues using the effective
interest rate method, that is, the rate that exactly discounts
estimated future cash receipts through the expected life of the
financial instrument to the net carrying amount of the financial
asset. Interest income is included in net finance costs in the
Consolidated income statement and statement of comprehensive
income.
(q) Finance costs and borrowings
Finance costs of borrowings are allocated to periods over the
term of the related debt at a constant rate on the carrying amount.
Debt is shown on the Consolidated statement of financial position
net of arrangement fees and issue costs, and amortised through to
the Consolidated income statement and statement of comprehensive
income as finance costs over the term of the debt.
Borrowing costs directly attributable to the acquisition,
construction or production of qualifying assets, which are assets
that necessarily take a substantial period of time to prepare for
their intended use or sale, are added to the cost of those assets,
until such time as the assets are substantially ready for their
intended use or sale.
All other borrowing costs are recognised in profit and loss in
the period in which they are incurred.
(r) Share-based payments
The cost of equity-settled transactions with employees is
measured by reference to the fair value at the date at which they
are granted and is recognised as an expense over the vesting
period, which ends on the date on which the relevant employees
become fully entitled to the award. Fair value is determined with
reference to the market value of the underlying shares using a
pricing model appropriate to the circumstances which requires
judgements as to the selection of both the valuation model and
inputs. In valuing equity-settled transactions, no account is taken
of any vesting conditions, other than conditions linked to the
price of the shares of the Company (market conditions).
No expense is recognised for awards that do not ultimately vest,
except for awards where vesting is conditional upon a market
condition or a non-vesting condition, which are treated as vesting
irrespective of whether or not the market condition or non-vesting
condition is satisfied, provided that all other vesting conditions
are satisfied.
At each statement of financial position date before vesting, the
cumulative expense is calculated on the basis of the extent to
which the vesting period has expired and management's best estimate
of the number of equity instruments that will ultimately vest. The
movement in cumulative expense since the previous statement of
financial position date is recognised in the income statement, with
a corresponding entry in equity.
Where the terms of an equity-settled award are modified or a new
award is designated as replacing a cancelled or settled award, the
cost based on the original award terms continues to be recognised
over the original vesting period. In addition, an expense is
recognised over the remainder of the new vesting period for the
incremental fair value of any modification, based on the difference
between the fair value of the original award and the fair value of
the modified award, both as measured on the date of the
modification. No reduction is recognised if this difference is
negative.
Where an equity-settled award is cancelled, it is treated as if
it had vested on the date of cancellation and any cost not yet
recognised in the income statement for the award is expensed
immediately. Any compensation paid up to the fair value of the
award at the cancellation or settlement date is deducted from
equity, with any excess over fair value being treated as an expense
in the income statement.
For equity-settled share-based payment transactions with third
parties, the goods or services received are measured at the date of
receipt by reference to their fair value with a corresponding entry
in equity. If the Group cannot reliably estimate the fair value of
the goods or services received, their value is measured by
reference to the fair value of the equity instruments granted.
(s) Foreign currency translation
The Group's consolidated financial statements are presented in
US Dollars, which is also the parent company's functional currency.
The functional currency for each entity in the Group is determined
on an individual basis according to the primary economic
environment in which it operates.
Transactions in foreign currencies are initially recorded in the
functional currency by applying the spot exchange rate ruling at
the date of the transaction. Monetary assets and liabilities
denominated in foreign currencies are translated at the rate of
exchange ruling at the statement of financial position date. All
exchange differences are taken to the income statement.
Non-monetary items that are measured at historical cost in a
foreign currency are translated using the spot exchange rate ruling
as at the date of the initial transaction. Non-monetary items
measured at a revalued amount in a foreign currency are translated
using the spot exchange rate ruling at the date when the fair value
was determined.
The assets and liabilities of foreign operations whose
functional currency is other than that of the presentation currency
of the Group are translated into the presentation currency, at the
rate of exchange ruling at the statement of financial position
date. Income and expenses are translated at the weighted average
exchange rates for the period. The resulting exchange differences
are taken directly to a separate component of equity. On disposal
of a foreign entity, the deferred cumulative amount recognised in
equity relating to that particular foreign operation is recognised
in the income statement.
(t) Income taxes
Current tax
Current tax assets and liabilities are measured at the amount
expected to be recovered from or paid to the taxation authorities,
based on tax rates and laws that are enacted or substantively
enacted by the statement of financial position date.
Current income tax is charged or credited directly to equity if
it relates to items that are credited or charged to equity.
Otherwise income tax is recognised in the income statement.
Deferred tax
Deferred income tax is recognised on all temporary differences
arising between the tax bases of assets and liabilities and their
carrying amounts in the financial statements, with the following
exceptions:
-- where the temporary difference arises from the initial
recognition of goodwill or of an asset or liability in a
transaction that is not a business combination and, at the time of
the transaction affects neither accounting nor taxable profit or
loss;
-- in respect of taxable temporary differences associated with
investments in subsidiaries, associates and joint ventures, where
the timing of the reversal of the temporary differences can be
controlled and it is probable that the temporary differences will
not reverse in the foreseeable future; and
-- deferred income tax assets are recognised only to the extent
that it is probable that taxable profit will be available against
which the deductible temporary differences, carried forward tax
credits or tax losses can be utilised.
Deferred tax is provided on temporary differences arising on
acquisitions that are categorised as Business combinations.
Deferred tax is recognised at acquisition as part of the assessment
of the fair value of assets and liabilities acquired. Any deferred
tax is charged and credited in the income statement as the
underlying temporary difference is reversed.
The carrying amount of deferred income tax assets is reviewed at
the end of each reporting period and reduced to the extent that it
is no longer probable that sufficient taxable profit will be
available to allow all or part of the deferred income tax asset to
be utilised. Unrecognised deferred tax assets are reassessed at the
end of each reporting period and are recognised to the extent that
it has become probable that future taxable profit will be available
to allow the deferred tax asset to be recovered.
Deferred income tax assets and liabilities are measured on an
undiscounted basis at the tax rates that are expected to apply when
the related asset is realised or liability is settled, based on tax
rates and laws enacted or substantively enacted at the statement of
financial position date.
Deferred income tax is charged or credited directly to equity if
it relates to items that are credited or charged to equity.
Otherwise deferred income tax is recognised in the income
statement.
In order to account for uncertain tax positions, management has
formed an accounting policy, in accordance with IAS 8, whereby the
ultimate outcome of legal proceedings is viewed as a single unit of
account. The results of separate hearings in relation to the same
matter, such as local tribunals and international arbitration, are
not viewed separately and only the final outcome is assessed by
management to determine the best estimate of any potential outcome.
If management viewed the results of individual hearings separately
an income statement charge could arise due to the differing
recognition criteria of assets and liabilities.
(u) Royalties, resource rent tax and revenue-based taxes
In addition to corporate taxes, the Group's condensed
consolidated interim financial statements also include and
recognise as taxes on income, other types of taxes on net income
such as certain royalties, resource rent taxes and revenue-based
taxes.
Royalties, resource rent taxes and revenue-based taxes are
accounted for under IAS 12 when they have the characteristics of an
income tax. This is considered to be the case when they are imposed
under government tax authority and the amount payable is based on
taxable income - rather than physical quantities produced or as a
percentage of revenue - after adjustment for temporary differences.
For such arrangements, current and deferred tax is provided on the
same basis as described above for other forms of taxation.
Obligations arising from royalty arrangements and other types of
taxes that do not satisfy these criteria are accrued and included
in cost of sales.
(v) Impairment
The accounting policies for the impairment of intangible
exploration and evaluation assets and oil and gas properties is
described in more detail in 2.3(b), 2.3(f) and 2.4.
The Group assesses at each reporting date whether there is an
indication that an intangible asset or item of property, plant
& equipment may be impaired. If any indication exists, the
Group estimates the asset's recoverable amount. The recoverable
amount is the higher of an asset or cash-generating unit's ('CGU')
fair value less costs of disposal and its value in use. The
recoverable amount is determined for an individual asset, unless
the asset does not generate cash inflows that are largely
independent of those from other assets or groups of assets. When
the carrying amount of an asset or CGU exceeds its recoverable
amount, the asset is considered impaired and is written down to its
recoverable amount. In assessing value in use, the estimated future
cash flows are discounted to their present value using a pre-tax
discount rate that reflects current market assessments of the time
value of money and the risks specific to the asset. In determining
fair value less costs of disposal, recent market transactions are
taken into account, if available. If no such transactions can be
identified, an appropriate valuation model is used.
These calculations are corroborated by valuation multiples,
quoted share prices for publicly traded subsidiaries or other
available fair value indicators.
The Group bases its impairment calculation on detailed budgets
and forecast calculations, which are prepared separately for each
of the Group's CGU's to which the individual assets are allocated.
These budgets and forecast calculations generally cover a period of
five years. For longer periods, a long-term growth rate is
calculated and applied to project future cash flows after the fifth
year.
Impairment losses of continuing operations (including impairment
on inventories), are recognised in the income statement in expense
categories consistent with the function of the impaired asset,
except for a property previously revalued where the revaluation was
taken to other comprehensive income. In this case, the impairment
is also recognised in other comprehensive income up to the amount
of any previous revaluation. Where conditions giving rise to the
impairment subsequently reverse, the effect of the impairment
charge is also reversed, net of any depreciation that would have
been charged since the impairment.
2.4 Significant accounting judgements, estimates and assumptions
The preparation of the Group's consolidated financial statements
requires management to make judgements, estimates and assumptions
that affect the reported amounts of revenues, expenses, assets and
liabilities, and the accompanying disclosures, and the disclosure
of contingent liabilities at the date of the consolidated financial
statements. Estimates and assumptions are continuously evaluated
and are based on management's experience and other factors,
including expectations of future events that are believed to be
reasonable under the circumstances. Uncertainty about these
assumptions and estimates could result in outcomes that require a
material adjustment to the carrying amount of assets or liabilities
affected in future periods.
The Group has identified the following areas where significant
judgements, estimates and assumptions are required. Further
information on each of these areas and how they impact the various
accounting policies are described below and also in the relevant
notes to the financial statements.
Commercial reserves 2.3(a)
Management is required to assess the level of the Group's
commercial reserves together with the future expenditures to access
those reserves, which are utilised in determining the amortisation
and depreciation charge for the period and assessing whether any
impairment charge is required. The Group employs independent
reserves specialists who periodically report on the Group's level
of commercial reserves by evaluating the estimates of the Group's
in house reserves specialists and where necessary referencing
geological, geophysical and engineering data together with reports,
presentation and financial information pertaining to the
contractual and fiscal terms applicable to the Group's assets. In
addition the Group undertakes its own assessment of commercial
reserves, using standard evaluation techniques and related future
capital expenditure by reference to the same datasets using its own
internal expertise. The estimates adopted by the Group may differ
from the independent reserves specialists' estimates where
management considers that adjustments are appropriate in the
circumstances. The last assessment by its independent reserves
specialist was as at 1 January 2015.
Intangible exploration and valuation assets 2.3(b)
The application of the Group's accounting policy for exploration
and evaluation expenditure requires judgement to determine whether
future economic benefits are likely, from either future
exploration, development or asset sale, or whether activities have
not reached a stage which permits a reasonable assessment of the
existence of reserves.
Management is also required to assess impairment in respect of
exploration and evaluation assets. The intangible exploration and
evaluation assets note discloses the carrying value of such assets.
The triggering events for impairment are defined in IFRS 6. In
making the assessment, management is required to make judgements on
the status of each project and assumptions about future events and
circumstances, in particular, whether an economically viable
extraction operation can be established. Any such estimates and
assumptions may change as new information becomes available.
Where an indicator of impairment exists, a formal estimate of
the recoverable amount is made. The assessments require the use of
estimates and assumptions such as long-term oil prices, discount
rates, operating costs, future capital requirements,
decommissioning costs, exploration potential, and reserves. These
estimates and assumptions are subject to risk and uncertainty.
Therefore, there is a possibility that changes in circumstances
will impact these projections, which may impact the recoverable
amount of assets and/or CGUs.
Oil and gas properties 2.3(e)
Management is required to assess impairment in respect of oil
and gas property assets at least annually with reference to
indicators in IAS 36 'Impairment of Assets'. The property, plant
and equipment note discloses the carrying value of such assets. In
making the assessment, management is required to estimate the
recoverable amount for each asset held and compare that value to
the net carrying amount of the asset at the balance sheet date.
Such a review is done at least annually. This requires estimates to
be made of in particular: future commodity prices, production
volumes, capital/operating expenditure and appropriate pre-tax
discount rates. Details of the Group's property plant and equipment
are provided in note 11 to the consolidated Financial Statements.
No impairment arose during 2015.
Where an indicator of impairment exists, a formal estimate of
the recoverable amount is made. The assessments require the use of
estimates and assumptions such as long-term oil prices, discount
rates, operating costs, future capital requirements,
decommissioning costs, exploration potential, and commercial
reserves. These estimates and assumptions are subject to risk and
uncertainty. Therefore, there is a possibility that changes in
circumstances will impact these projections, which may impact the
recoverable amount of assets and/or CGUs.
Provision for decommissioning 2.3(h)
Decommissioning costs are uncertain and cost estimates can vary
in response to many factors, including changes to relevant legal
requirements, the emergence of new technology or experience at
other production sites. The expected timing, extent and amount of
expenditure may also change. Therefore significant estimates and
assumptions are made in determining the provision for
decommissioning. As a result, there could be significant
adjustments to the provisions established which would affect future
financial results.
The estimated decommissioning costs are reviewed annually by an
external expert and the results of this review are then used for
the purposes of the financial statements.
Provision for environmental clean-up and remediation costs is
based on current legal and contractual requirements, technology and
price levels.
Share-based payments 2.3(r)
Management is required to make assumptions and use their
judgement when determining the inputs used to value share-based
payment arrangements made during the year. Details of the inputs
adopted when valuing share-based payment arrangements can be found
in the share-based compensation note. Management bases these
assumptions on observable market data such as the Group's share
price history and risk free interest rates offered on Government
bonds.
Recovery of deferred tax assets 2.3(t)
Judgement is required to determine whether deferred tax assets
are recognised in the statement of financial position. Deferred tax
assets, including those arising from unutilised tax losses, require
management to assess the likelihood that the Group will generate
sufficient taxable profits in future periods, in order to utilise
recognised deferred tax assets. Assumptions about the generation of
future taxable profits depend on management's estimates of future
cash flows. These estimates are based on forecast cash flows from
operations and judgement about the application of existing tax laws
in each jurisdiction. To the extent that future cash flows and
taxable income differ significantly from estimates, the ability of
the Group to realise deferred tax assets could be impacted.
The Group establishes tax provisions, based on reasonable
estimates, for possible consequences of audits by the tax
authorities of the respective countries in which it operates. The
amount of such provisions is based on various factors, such as
experience with previous tax audits and differing interpretations
of tax regulations by the taxable entity and the responsible tax
authority.
3 Segmental analysis
The Group's reportable and geographical segments are Africa,
Asia and Other. The Other segment includes the corporate centres
in the UK, Australia and Singapore.
Segment revenues and
results
The following is an analysis of the Group's revenue and assets
by reportable segment:
Six months ended 30 June 2015
Africa Asia Other Total
$'000 $'000 $'000 $'000
Revenue (external) - 80,881 5,614 86,495
Operating profit/(loss) (91,755) 16,216 (35,500) (111,039)
--------- ---------- --------- ----------
Net finance (expense)
/ income 68 19 (6,976) (6,889)
Other financial profits/(losses) - - (5,367) (5,367)
--------- ---------- --------- ----------
Profit/(loss) before
tax (91,687) 16,235 (47,843) (123,295)
Taxation 6,399 - (14,116) (7,717)
--------- ---------- --------- ----------
Profit/(loss) after
tax (85,288) 16,235 (61,959) (131,012)
Total assets 778,290 1,376,756 614,018 2,750,074
--------- ---------- --------- ----------
Comparatives for the periods ending 30 June 2014 and 31 December
2014 have not been presented because the Group's only reportable
segment under IFRS 8 was the exploration and evaluation of oil and
gas related projects in Africa.
6 Months Year ended
6 Months ended ended
30 June 31 December
30 June 2015 2014
(Unaudited) (Unaudited) 2014
$'000 $'000 $'000
4 Revenue
Sales of crude oil 80,881 - -
Realised settlement gains 5,614 - -
on hedging
--------------- ------------- --------------
86,495 - -
=============== ============= ==============
5 Operating profit/(loss) before
taxation
The Group operating profit / (loss) from continuing operations
before taxation is stated after charging/(crediting):
(a) Cost of sales
- Operating costs 10,519 - -
- Royalty payable 7,712 - -
* Depreciation and amortisation of oil and gas
properties 45,665 - -
* Movement in inventories of oil 603 - -
--------------- ------------- --------------
64,499 - -
=============== ============= ==============
(b) Gain on farm-out
- Gain on farm-out (note 10) (245) (673,020) (671,677)
=============== ============= ==============
(c) Exploration expenses
* Pre licence exploration costs 17,671 1,560 23,947
* Exploration expenditure written off 3,082 205 -
--------------- ------------- --------------
20,753 1,765 23,947
* Provision for impairment (note 10) 74,114 65,941 309,835
--------------- ------------- --------------
94,867 67,706 333,782
=============== ============= ==============
(d) General & administration
expenses include:
* Operating lease payments - minimum lease payments 2,555 2,414 4,865
* Share-based compensation charge 1,428 4,242 6,876
--------------- ------------- --------------
3,983 6,656 11,741
=============== ============= ==============
(e) Other expenses
* (Profit)/loss on disposal of assets 145 (1) (2)
* Depreciation of other property plant and
equipment 2,894 775 1,955
- Impairment of goodwill - - 20,868
- Provision for exiting contract 20,000 - -
--------------- ------------- --------------
23,039 774 22,821
=============== ============= ==============
6 Months Year ended
6 Months ended ended
30 June 31 December
30 June 2015 2014
(Unaudited) (Unaudited) 2014
$'000 $'000 $'000
6 Net finance (expense)/income
Interest income on short-term
bank deposits 1,118 1,813 3,630
Other interest income (note
10) - 3,419 3,419
Interest expense on long-term (8,057) - -
borrowings
Amortisation of capitalised (403) - -
arrangement fees
Unwinding of discount (note (613) - -
18)
Interest capitalised 1,552 - -
Net foreign currency exchange
gains/(losses) (486) 6,881 (12,910)
---------------- ---------------- ----------------
(6,889) 12,113 (5,861)
================ ================ ================
7 Other financial losses
Loss relating to oil derivatives (5,649) - -
Gain on bond redemption (note 282 - -
17)
------------------ ------------ ------------
(5,367) - -
================== ============ ============
8 Business combinations
Acquisition in 2015
On 3 March 2015 (the acquisition date), the Group acquired 100%
of the share capital of Salamander Energy Plc ('Salamander'),
a South East Asian focused independent exploration and production
company quoted on the LSE. The enlarged Group enhances Ophir's
operating capabilities in both Africa and South East Asia and
deepwater expertise across key technical and commercial functions.
The combined Group provides shareholders with a diversified exposure
to 21 production, development and exploration blocks in Africa
and South East Asia.
The Group announced that the scheme of arrangement was approved
by Salamander's shareholders on 6 February 2015 and was sanctioned
by the Supreme Court in London effective on 2 March 2015. The
consideration of $326.1 million was satisfied in full by equity
by which Salamander shareholders received 0.5719 Ophir ordinary
shares for each Salamander ordinary share held.
The acquisition will be accounted for as a single business combination.
The fair value assessment of the Salamander identifiable assets
and liabilities acquired as at the date of acquisition have been
reviewed in accordance with the provisions of IFRS 3 - Business
Combinations. Details of the Group accounting policies in relation
to business combinations are contained in note 2.
The fair values of the assets acquired have been calculated using
valuation techniques based on discounted cash flows using forward
curve commodity prices, a discount rate based on market observable
data and cost and production profiles.
The fair values disclosed are provisional as at 30 June 2015
due to the complexity of the acquisition and the fact that the
assessment of the underlying reserves and resources acquired,
and allocation of value to intangible exploration and evaluation
assets is still being finalised. As a result, the final fair
values may differ. The review of the fair value of the assets
and liabilities acquired will be completed within 12 months of
the acquisition at the latest.
The provisional fair values of the identifiable assets and
liabilities of Salamander as at the date of acquisition were:
Provisional
Fair value
recognised
3 March 2015
$'000
Assets
Exploration & evaluation assets 132,000
Oil & gas properties 827,131
Other property, plant & equipment 1,869
Financial assets 46,749
Investments accounted for using
the equity method 167,000
Inventory 19,142
Trade and other receivables (1) 68,680
Cash and cash equivalents 48,827
--------------
1,311,398
Liabilities
Trade and other payables (42,216)
Current tax liability (97,375)
Interest-bearing bank borrowings (253,918)
Convertible bonds (2) (93,959)
Bonds payable (154,835)
Provisions (64,127)
Deferred tax liability (278,837)
--------------
(985,267)
--------------
Total identifiable net assets
at fair value 326,131
--------------
Goodwill arising on acquisition -
--------------
326,131
--------------
Consideration:
Equity instruments (152,208,612
ordinary shares of parent company
(3) ) 326,131
--------------
Total consideration transferred 326,131
--------------
(1) The fair value of the trade and other receivables amounts to
$68.7 million. None of the trade receivables have been impaired and
it is expected that the full contractual amount can be
collected.
(2) The convertible bonds were redeemed at par value ($94.0
million) on 30 March 2015. Accrued interest up to the date of
redemption ($2.35 million) was also paid on this date.
(3) The Group issued 152,208,612 new shares in consideration for
the entire share capital of Salamander. The fair value of the
shares is the published price of the shares of the Group at the
acquisition date. Therefore, the fair value of the share
consideration given is $326.1 million.
From the date of acquisition, 3 March 2015 to 30 June 2015,
Salamander contributed $86.5 million to Group revenue and a loss of
$26.4 million to Group loss after taxation. If the acquisition of
Salamander had taken place at the beginning of the year, Group
revenue and loss after taxation for the 6 months ended 30 June 2015
would be $139.9 million and $76.0 million respectively.
As at As at Year ended
30 June 31 December
30 June 2015 2014
(Unaudited) (Unaudited) 2014
$'000 $'000 $'000
9 Taxation
(a) Taxation charge
Current income tax:
UK Corporation tax - - -
UK Corporation tax - adjustment
in respect of prior periods (413) (58) 341
Special remuneratory benefit 16,700 - -
Foreign tax 14,341 244,280 209,259
Foreign tax - adjustment
in respect of prior periods - - 809
-------------- ------------- -------------
Total current income tax
charge 30,628 244,222 210,409
-------------- ------------- -------------
Deferred tax:
Special remuneratory benefit (5,911) - -
Origination and reversal
of temporary differences (17,000) 6,161 23,242
-------------- ------------- -------------
Total deferred tax (credit)/charge (22,911) 6,161 23,242
-------------- ------------- -------------
Total tax charge in the income
statement 7,717 250,383 233,651
============== ============= =============
(b) Reconciliation of the
total tax charge
The tax benefit not recognised in the income statement is reconciled
to the Group's weighted average tax rate of 23%(1) (30 June /
31 December 2014: standard rate of corporation tax in the UK
of 21.50%). The differences are reconciled below:
Loss/(profit) from operations
before taxation (123,295) 589,436 288,493
============== ============= =============
Loss/(profit) from operations
before taxation multiplied
by the Group's applicable
weighted average tax rate
of 23% (30 June / 31 December
2014: 21.50%) (28,358) 126,729 62,026
Special remuneratory benefit 8,350 - -
Tax effect of share of profit
of investments accounted
for using the equity method (2,033) - -
Non-deductible expenditure 22,720 2 6,132
Share-based payments - - 634
Unrecognised deferred tax
assets 8,337 18,333 71,389
Effect of overseas tax rates - 105,382 92,492
Other adjustments (886) (5) (172)
Prior year adjustments (413) (58) 1,150
-------------- ------------- -------------
Total tax charge in the income
statement 7,717 250,383 233,651
============== ============= =============
(1) Following the acquisition of Salamander Energy plc, the
Group has moved from preparing the income tax reconciliation at the
UK statutory tax rate to preparing it at the weighted average tax
rate as this provides a more appropriate representation of the tax
profile in the Group.
Special remuneratory benefit is a tax that arises on one of the
Group's assets, Bualuang in Thailand at rates that vary from zero
to 75% of annual petroleum profit depending on the level of annual
revenue per cumulative metre drilled. The current rate for special
remuneratory benefit for 2014 was 35%. Petroleum profit for the
purpose of special remuneratory benefit is calculated as revenue
less a number of deductions including operating costs, royalty,
capital expenditures, special reduction (an uplift of certain
capital expenditures) and losses brought forward.
As at As at Year ended
30 June 31 December
30 June 2015 2014
(Unaudited) (Unaudited) 2014
$'000 $'000 $'000
(c) Reconciliation of special remuneratory benefit charge to
loss from operations before taxation
The taxation charge for special remuneratory benefit for the
year can be reconciled to the loss from operations before tax
per the Statement of Comprehensive Income as follows:
Loss from operations before (123,295) - -
taxation
Add back losses from operations
before taxation for activities
outside of Thailand 143,456 - -
-------------- ------------- -------------
Profit from operations before
taxation for activities in
Thailand 20,161 - -
Deduct share of profit of
investments accounted for
using the equity method (4,066) - -
-------------- ------------- -------------
Profit before taxation for 16,095 - -
activities in Thailand
Applicable rate of special 35% - -
remuneratory benefit
Tax at the applicable rate
of special remuneratory benefit 5,633 - -
Special reduction 176 - -
Other 10,891 - -
-------------- ------------- -------------
Total current special remuneratory 16,700 - -
benefit charge
-------------- ------------- -------------
Income tax impact (after
deduction at the applicable
rate of income tax) 8,350 - -
As at As at Year ended
30 June 31 December
30 June 2015 2014
(Unaudited) (Unaudited) 2014
$'000 $'000 $'000
10 Exploration and evaluation
assets
Cost
Balance at the beginning
of the period 1,247,128 1,296,783 1,296,783
Additions (1) 78,022 230,413 594,340
Acquisition of subsidiary
(2) (note 8) 132,000 - -
Expenditure written-off (3,082) (205) -
Transfers to oil and gas
properties - - -
Recovery of costs incurred
on farm-out of exploration
interests (3) (1,855) (566,162) (643,995)
-------------- ------------- -------------
Balance at the end of the
period 1,452,213) 960,829 1,247,128
-------------- ------------- -------------
Provision for impairment
Balance at the beginning
of the period (482,195) (172,360) (172,360)
Additional allowance (4) (74,114) (65,941) (309,835)
-------------- ------------- -------------
Balance at the end of the
period (556,309) (238,301) (482,195)
-------------- ------------- -------------
Net book value
Balance at the beginning
of the period 764,933 1,124,423 1,124,423
-------------- ------------- -------------
Balance at the end of the
period 895,904 722,528 764,933
============== ============= =============
(1) Additions in the period include exploration activities in:
Myanmar - Block AD03 ($24.9 million), Gabon - Nkawa ($6.5 million)
and Equatorial Guinea - Block R ($4.8 million).
(2) Acquisition of subsidiary: Refer to note 8
(3) Recovery of costs incurred on farm-out of exploration interest
include:
* The Group's disposal of a 20% interest ($566.2
million) in Tanzania Blocks 1, 3 & 4 to Pavilion
Energy PTE LTD. The transaction completed on 22 March
2014. The Group received cash consideration of $1,250
million plus a completion adjustment of $5.3 million
to reflect interest ($3.4 million - refer to note 6)
and working capital movements ($1.9 million) from the
effective date of the transaction of 1 January 2014.
A further $38.0 million is payable following the
final investment decision in respect of the
development of Blocks 1, 3 & 4, currently expected in
2016. The total gain on disposal, after taking into
account working capital adjustments and direct costs
of the transaction ($13.9 million), recognised for
the year ended 31 December 2014 was $671.7 million.
* The Group also received $77.8 million relating to
back costs ($13.3 million) and interim costs ($64.5
million) relating to the farm-out of the Gabonese
exploration blocks.
(4) Allowance for impairment of $74.1 million for the period
ended 30 June 2015 comprise:
* Impairment loss of $62.0 million in respect of Kenya
- Block L9. The trigger for impairment was
management's assessment that no further expenditure
on exploration and evaluation of hydrocarbons in the
Block was budgeted or planned within the current
licence term. The cash generating unit ('CGU')
applied for the purpose of the impairment assessment
is the block and the recoverable amount was based on
management's estimate of value in use.
* Impairment loss of $12.1 million in respect of Gabon
- Ntsina Block. The trigger for impairment was
management's assessment that no further expenditure
on exploration and evaluation of hydrocarbons in the
Block was budgeted or planned within the current
licence term. The cash generating unit ('CGU')
applied for the purpose of the impairment assessment
is the block and the recoverable amount was based on
management's estimate of value in use.
(4) Allowance for impairment of $309.8 million for the year ended
31 December 2014 comprise:
* Impairment loss of $107.3 million in respect of
Tanzania - East Pande Block. The trigger for the
impairment test was the conclusion of the Tende-1
drilling operations which did not encounter live
hydrocarbons and indicated that the carrying value of
the block was not recoverable. The cash generating
unit ('CGU') applied for the purpose of the
impairment assessment is the block and the
recoverable amount of $nil was based on management's
estimate of value in use;
* Impairment loss of $62.8 million in respect of Gabon
- Gnondo Block. The trigger for the impairment test
was the conclusion of the Affanga Deep-1 drilling
operations which did not encounter live hydrocarbons
and indicated that the carrying value of the block
was not recoverable. The cash generating unit ('CGU')
applied for the purpose of the impairment assessment
is the block and the recoverable amount of $nil was
based on management's estimate of value in use;
* Impairment loss of $80.3 million in respect of
Tanzania - Block 7. The trigger for the impairment
test was the conclusion of the Mkuki-1 drilling
operations which did not encounter live hydrocarbons
and indicated that the carrying value of the block
was not recoverable. The cash generating unit ('CGU')
applied for the purpose of the impairment assessment
is the block and the recoverable amount of $nil was
based on management's estimate of value in use; and
* Impairment loss of $59.4 million in respect of Kenya
- Block L9. The trigger for impairment was
management's assessment that no further expenditure
on exploration and evaluation of hydrocarbons in the
Block was budgeted or planned within the current
licence term. The cash generating unit ('CGU')
applied for the purpose of the impairment assessment
is the block and the recoverable amount was based on
management's estimate of value in use.
The Group generally estimates value in use using a discounted
cash flow model. Future cash flows are discounted to their present
values using a post-tax discount rate of 10%. Adjustments to
cash flows are made to reflect the risks specific to the CGU.
As at As at Year ended
30 June 31 December
30 June 2015 2014
(Unaudited) (Unaudited) 2014
$'000 $'000 $'000
11 Oil and gas properties
Cost
Balance at the beginning
of the period - - -
Acquisition of subsidiary
(note 8) 827,131 - -
Additions 11,607 - -
Disposals - - -
Transfers from exploration
and evaluation assets - - -
-------------- ------------- -------------
Balance at the end of the
period 838,738 - -
-------------- ------------- -------------
Depreciation and amortisation
Balance at the beginning
of the period - - -
Charge for the period (45,664) - -
-------------- ------------- -------------
Balance at the end of the
period (45,664) - -
-------------- ------------- -------------
Net book value
Balance at the beginning
of the period - - -
-------------- ------------- -------------
Balance at the end of the
period 793,074 - -
============== ============= =============
As at As at Year ended
30 June 31 December
30 June 2015 2014
(Unaudited) (Unaudited) 2014
$'000 $'000 $'000
12 Inventory
Oil 2,452 - -
Materials and consumables 43,444 23,316 23,902
-------------- ------------- -------------
45,896 23,316 23,902
============== ============= =============
As at As at Year ended
30 June 31 December
30 June 2015 2014
(Unaudited) (Unaudited) 2014
$'000 $'000 $'000
13 Cash and cash equivalents
Cash 126,539 940,823 138,603
Short-term deposits 481,668 100,000 739,269
-------------- ------------- -------------
608,207 1,040,823 877,872
============== ============= =============
Cash at banks earn interest at floating rates based on daily
bank deposit rates. Short-term deposits are made for varying
periods of between one day and three months depending on the
immediate cash requirements of the Group and earn interest at
the respective short term deposit rates. The fair value of cash
and cash equivalents is $608.2 million (30 June 2014: $1,040.8
million and 31 December 2014: $877.9 million).
As at As at Year ended
30 June 31 December
30 June 2015 2014
(Unaudited) (Unaudited) 2014
$'000 $'000 $'000
14 Investments
Short-term investments 100,000 450,000 294,904
-------------- ------------- -------------
100,000 450,000 294,904
============== ============= =============
Short-term investments consists of cash deposits that are made
for varying periods of between three months and twelve months
depending on the immediate cash requirements of the Group and
earn interest at the respective short term investment rates. The
fair value of short term investments is $100.0 million (30 June
2014: $450.0 million and 31 December 2014: $294.9 million).
As at As at Year ended
30 June 31 December
30 June 2015 2014
(Unaudited) (Unaudited) 2014
$'000 $'000 $'000
15 Trade and other payables
Trade payables 13,804 5,615 3,004
Accruals 112,364 157,405 221,681
Other payables 5,123 - -
Payables in relation to joint
operation partners 588 48,347 17,463
-------------- ------------- -------------
131,879 211,367 242,148
============== ============= =============
Trade payables are unsecured and are usually paid within 30 days of
recognition.
As at As at Year ended
30 June 31 December
30 June 2015 2014
(Unaudited) (Unaudited) 2014
$'000 $'000 $'000
16 Interest-bearing bank borrowings
Acquisition of subsidiary
(note 8) 253,918 - -
Less: amounts repaid during
the period (44,088) - -
Less: amounts due within one
year (53,332) - -
-------------- ------------- -------------
156,498 - -
============== ============= =============
Interest-bearing bank borrowings comprise a $350 million senior reserves
based lending facility. The facility has been arranged for a period
of seven years commencing in December 2012.
The senior reserves based lending facility is secured against certain
of the Group's Thailand and Indonesia development and producing assets.
There has been no breach of terms on the borrowing facility. The
key terms of the facility are:
-- Initial facility amount of up to $350 million.
* Financial covenants relating to the ratio of the loan
balance outstanding to the net present value of cash
flows of the secured assets and relating to the ratio
of the loan balance outstanding to the net present
value of cash flows during the life of the loan of
the secured assets.
-- Financial covenants relating to the maximum amount of borrowings
of the Group.
* The Group may draw an amount up to the lower of the
facility amount being $350 million as at 30 June 2015
or the borrowing base amount as determined by the
forecast cash flows arising from the borrowing base
assets.
* Interest accrues at a rate of between 3.70% and 4.20%
plus LIBOR depending on the maturity of the assets.
The borrowing base amount is re-determined on a
semi-annual basis; with the Group further having the
option to undertake two mid-period redeterminations
in each year should it elect to do so.
-- No early repayment penalties.
-- Change of control provisions.
The acquisition of Salamander Energy plc by Ophir Energy plc on 3
March 2015 (note 8) constituted a change of control under the terms
of the facility. Prior to this transaction completing, a waiver was
obtained from the lending banks such that the terms of the borrowing
facility were not impacted at the date of completion.
As at As at Year ended
30 June 31 December
30 June 2015 2014
(Unaudited) (Unaudited) 2014
$'000 $'000 $'000
17 Bonds payable
Acquisition of subsidiary:
9.75% Unsecured, callable
bonds at $150 million par
value (note 8) 154,835 - -
Redemption - 9.75% Unsecured,
callable bonds at $45.2 million
par value (45,652) - -
Gain on redemption (note 7) (282) - -
Coupon interest charged 2,580 - -
Interest paid (5,110) - -
---------------- ----------------- -----------------
106,371 - -
================ ================= =================
The unsecured callable bonds were issued by Salamander Energy plc
in December 2013 at an issue price of $150 million. The bonds have
a term of six years and one month and will be repaid in full at maturity.
The bonds carry a coupon of 9.75% and were issued at par. On 05 May
2015, bond holders exercised put options at 101% for the redemption
of bonds with a par value of $45.2 million.
Decommissioning
and restoration Litigation
of oil and and other Total
gas assets claims Other provisions $'000
$'000 $'000 $'000
18 Provisions
As at 30 June 2014
(Unaudited) - 24,700 11,052 35,752
------------------- ------------ ----------------- --------------
Arising during the
period - 1,650 (68) 1,582
Utilised/paid - - (10,000) (10,000)
Foreign exchange revaluation - - (57) (57)
Amounts released - - (227) (227)
As at 1 January 2015 - 26,350 700 27,050
------------------- ------------ ----------------- --------------
Acquisition of subsidiary
(note 8) 64,127 - - 64,127
Arising during the
period - - 22,792 22,792
Utilised/paid - - - -
Unwinding of discount
(note 6) 613 - - 613
Amounts released (143) - (700) (843)
As at 30 June 2015
(Unaudited) 64,597 26,350 22,792 113,739
------------------- ------------ ----------------- --------------
As at 30 June 2015
(Unaudited)
Current - 26,350 22,792 49,142
Non-current 64,597 - - 64,597
------------------- ------------ ----------------- --------------
64,597 26,350 22,792 113,739
------------------- ------------ ----------------- --------------
As at 1 January 2015
Current - 26,350 437 26,787
Non-current - - 263 263
------------------- ------------ ----------------- --------------
- 26,350 700 27,050
------------------- ------------ ----------------- --------------
As at 30 June 2014
(Unaudited)
Current - 24,700 10,698 35,398
Non-current - - 354 354
------------------- ------------ ----------------- --------------
- 24,700 11,052 35,752
------------------- ------------ ----------------- --------------
Decommissioning and restoration of oil and gas assets
The provision outstanding at 30 June 2015 is expected to fall due
from 2035 onwards.
Litigation and Other Claims
Litigation and other claims consist of separate legal matters, including
claims arising from trading activities, in various Group companies
and at various stages of negotiation. The majority of any cash outflow
from these matters is expected to occur within the next 12 months,
although this is dependent on the development of the various legal
claims. In the Directors' opinion, after taking appropriate legal
advice, the amounts provided at 30 June 2015 represent the best
estimate of the expected loss.
Other provisions
Amounts provided at 30 June 2015 comprise:
* $20.0 million provision representing the unavoidable,
least net cost of exiting a contract. The cost is
expected to be incurred within the next 12 months;
and
* $2.8 million provision in respect of redundency costs,
expected to be incurred within the next 12 months.
Year
As at As at ended
30 June 30 June 31 December
2015 2014
(Unaudited) (Unaudited) 2014
$'000 $'000 $'000
19 Share capital
(a) Authorised
2,000,000,000 ordinary shares of
0.25p each 7,963 7,963 7,963
(b) Called up, allotted and fully
paid
593,810,795 ordinary shares of
0.25p in issue at the beginning
of the period (30 June / 31 December
2014: 591,961,422) 2,474 2,466 2,466
Nil ordinary shares of 0.25p each
issued on exercise of share options
during the period (30 June 2014:
1,085,172 / 31 December 2014: 1,849,373) - 5 8
152,208,612 (1) ordinary shares
issued 0.25p each during the period
(30 June / 31 December 2014: N) 587 - -
------------- ------------- -------------
746,019,407 ordinary shares of
0.25p each
(30 June 2014: 593,046,594 / 31
December 2014: 593,810,795) 3,061 2,471 2,474
============= ============= =============
(1) 152,208,612 ordinary shares issued in consideration for the
Salamander acquisition on 3 March 2015. The market value of the
Company's shares on this date was: GBP1.39 ($2.14).
The balances classified as called up; allotted and fully
paid share capital represent the nominal value of the total
number of issued shares of the company of 0.25p each.
Fully paid shares carry one vote per share and carry the
right to dividends.
As at
30 June 2015
(Unaudited)
Percentage
Holding
20 Investments accounted for
using the equity method
Company
APICO LLC 27.18%
APICO (Khorat) Holdings LLC 27.18%
APICO (Khorat) Limited 27.18%
---------------------
The investments in the jointly controlled entities have been classified
as joint ventures under IFRS 11 and therefore the equity method of
accounting has been used in the consolidated financial statements.
The table below shows the movement in investments in the jointly controlled
entities:
As at As at Year ended
30 June 31 December
30 June 2015 2014
(Unaudited) (Unaudited) 2014
$'000 $'000 $'000
Acquisition of subsidiary
(note 8) 167,000 - -
Share of profit of investments 4,066 - -
Dividends received (1,087) - -
Additions 3,941 - -
-------------- ------------- -------------
173,920 -
============== ============= =============
As at As at Year ended
30 June 31 December
30 June 2015 2014
(Unaudited) (Unaudited) 2014
$'000 $'000 $'000
21 Reserves
Treasury shares (157) - (59)
Other reserves (note 22) 1,834,804 2,019,646 1,695,904
-------------- ------------- -------------
1,834,647 2,019,646 1,695,845
Non-controlling interest (1) (280) (276) (280)
-------------- ------------- -------------
1,834,367 2,019,370 1,695,565
============== ============= =============
(1) The non-controlling interest relates to Dominion Uganda
Limited, where the Group acquired a 95% shareholding during
2012.
Foreign (7) currency translation reserve
$'000 Accumulated Total
Share premium (1) Capital redemption (2) reserve Options premium (3) reserve Consolidation (4) reserve Merger (5) reserve Equity (6) component on convertible bond profits / (losses) other reserves
$'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000
=============== ================== =============================== ============================ ========================== ==================== ========================================= ========================================== ==================== =================
22 Other
reserves
As at 1
January 2014 805,580 - 43,338 (500) 1,218,239 669 4,456 (397,063) 1,674,719
Profit for the
period, net
of tax - - - - - - - 339,053 339,053
Other
comprehensive
income net of
tax - - - - - - 151 - 151
------------------ ------------------------------- ---------------------------- -------------------------- -------------------- ----------------------------------------- ------------------------------------------ -------------------- -----------------
Total
comprehensive
income net of
tax - - - - - - 151 339,053 339,204
Exercise of
options 1,481 - - - - - - - 1,481
Share-based
payments - - 4,242 - - - - - 4,242
Transfers
within
reserves (5) - - - - (876,447) - - 876,447 -
------------------ ------------------------------- ---------------------------- -------------------------- -------------------- ----------------------------------------- ------------------------------------------ -------------------- -----------------
As at 30 June
2014
(Unaudited) 807,061 - 47,580 (500) 341,792 669 4,607 818,437 2,019,646
Loss for the
period, net
of tax - - - - - - - (284,207) (284,207)
Other
comprehensive
income net of
tax - - - - - - 1,633 - 1,633
------------------ ------------------------------- ---------------------------- -------------------------- -------------------- ----------------------------------------- ------------------------------------------ -------------------- -----------------
Total
comprehensive
loss, net of
tax - - - - - - 1,633 (284,207) (282,574)
Purchase of
own shares
(8) - 62 - - - - - (44,230) (44,168)
Exercise of
options 366 - - - - - - - 366
Share-based
payments - - 2,634 - - - - - 2,634
------------------ ------------------------------- ---------------------------- -------------------------- -------------------- ----------------------------------------- ------------------------------------------ -------------------- -----------------
As at 1
January 2015 807,427 62 50,214 (500) 341,792 669 6,240 490,000 1,695,904
------------------ ------------------------------- ---------------------------- -------------------------- -------------------- ----------------------------------------- ------------------------------------------ -------------------- -----------------
Loss for the
period, net
of tax - - - - - - - (131,012) (131,012)
Other
comprehensive
loss, net of
tax - - - - - - (1,049) - (1,049)
------------------ ------------------------------- ---------------------------- -------------------------- -------------------- ----------------------------------------- ------------------------------------------ -------------------- -----------------
Total
comprehensive
loss, net of
tax - - - - - - (1,049) (131,012) (132,061)
New ordinary
shares issued
to third
parties - - - - 325,545 - - - 325,545
Purchase of
own shares
(8) - 98 - - - - - (56,109) (56,011)
Share-based
payments - - 1,427 - - - - - 1,427
------------------ ------------------------------- ---------------------------- -------------------------- -------------------- ----------------------------------------- ------------------------------------------ -------------------- -----------------
As at 30 June
2015
(Unaudited) 807,427 160 51,641 (500) 667,337 669 5,191 302,879 1,834,804
================== =============================== ============================ ========================== ==================== ========================================= ========================================== ==================== =================
(1) The share premium account represents the total net proceeds on issue of the Company's
shares in excess of their nominal value of 0.25p per share less amounts transferred to any
other reserves.
(2) The capital redemption reserve represents the nominal value of shares transferred following
the Company's purchase of them.
(3) The option premium reserve represents the cost of share-based payments to Directors, employees
and third parties.
(4) The consolidation reserve represents a premium on acquisition of a minority interest in
a controlled entity.
(5) In the current year the provisions of the Companies Act 2006 relating to Merger Relief
(s612 and s613) were applied to the Salamander Energy plc acquisition (refer to note 8). The
non-statutory premium arising on shares issued by Ophir as consideration has been recognised
in the Merger reserve, by virtue of Ophir acquiring in excess of 90% of all classes of the
acquiree's issued share capital.
In the prior year the provisions of the Companies Act 2006 relating to Merger Relief (s612
and s613) were applied to the March 2013 share placement and rights issue raising performed
through a cash box structure. The 'cash box' method of affecting an issue of shares for cash
is commonplace and enabled the Company to issue shares without giving rise to a share premium.
The premium on shares issued, net of applicable transaction costs of $34.5 million, as part
of the 'cash box' arrangement is instead recognised in the Merger Reserve. Following on from
the completion of the Group's farm out of 20% of its interest in Tanzania Blocks 1, 3 & 4
in March 2014 Ophir Ventures (Jersey) Limited and Ophir Ventures (Jersey) No.2 Limited, which
are wholly owned subsidiaries of the Company, redeemed the preference shares that had been
acquired by the Company as part of the 'cash box' arrangement. This has allowed the Company
to realise $876.4 million of the Merger Reserve to accumulated profits / (losses) as the redemption
of the preference shares was considered to be performed with qualifying consideration in the
form of free cash and a readily recoverable receivable from Ophir Holdings Limited, a 100%
owned subsidiary of the Company and beneficial holder of the Group's interest in Tanzania
Blocks 1, 3 & 4.
(6) This balance represents the equity component of the convertible bond, net of costs and
tax as a result of the separation of the instrument into its debt and equity components. The
bond was converted into 21,661,476 ordinary shares of 0.25p each on 21 May 2008.
(7) The foreign currency translation reserve is used to record unrealised exchange differences
arising from the translation of the financial statements of entities within the Group that
have a functional currency other than US Dollars.
(8) On 14 August 2014, the Company announced that the Board had approved a share buyback programme
of up to $100 million of ordinary shares (the 'Programme'). During the period, the Group repurchased
26,114,403 shares (31 December 2014: 15,522,066) under the Programme for a total consideration
of $56.1 million (31 December 2014: $44.2 million), including costs of $0.3 million (31 December
2014: $0.3 million). The remaining facility as at 30 June 2015 was $nil (31 December 2014:
$56.1 million).
As at Year ended
30 June 2015 As at 31 December
30 June 2014
(Unaudited) 2014 (Unaudited)
$'000 $'000 $'000
23 Capital commitments - Exploration
In acquiring its oil and gas interests, the Group has pledged
that various work programmes will be undertaken on each permit/interest.
The exploration commitments are an estimate of the cost of performing
these work programmes and includes any commitments under rig
share agreements.
Due within one (1) year 32,997 402,594 63,328
Due later than one (1) year
but within two (2) years 50,986 20,000 28,600
Due later than two (2) years
but within five (5) years 12,145 26,200 6,630
-------------- ------------------- -------------
96,127 448,794 98,558
-------------- ------------------- -------------
24 Contingent liabilities
An individual has commenced claims against the Group relating to
the evaluation and subsequent disposal of an interest that was held
in exploration blocks within the portfolio. Preliminary court
hearings for applications relating to the claims have been held,
and, to date, no material rulings have been made. The Group is
awaiting the schedule for the full trials and it is not practicable
to state whether any payment obligation may arise. The Group has
taken the view that the actions are without merit and accordingly
has estimated that no liability will arise as a result of
proceedings and therefore no provision for any liability has been
made in these financial statements.
25 Events after the reporting period
There are no events after the reporting period.
Company Information
Directors
---------------------------------- ------------------------------------
Chairman (Non-Executive) Independent Non-Executive Directors
Nicholas Smith Ron Blakely
Dr Carol Bell
Executive Directors Alan Booth
Vivien Gibney
Dr Nick Cooper - Chief Executive William (Bill) Schrader
Officer
Dr William (Bill) Higgs - Chief
operating Officer
Company Secretary
Chandrika Kher
---------------------------------- ------------------------------------
Registered Office and Head Office
Fourth Floor
123 Victoria Street
London SW1E 6DE
Telephone: +44 (0)20 7811 2400
Website: www.ophir-energy.com
Registrars
The Company has appointed Equiniti Limited to maintain its
register of members. Shareholders should contact Equiniti using the
details below in relation to all general enquiries concerning their
shareholding:
Equiniti Limited*
Aspect House
Spencer Road
Lancing, West Sussex BN99 6DA
Telephone: 0871 384 2030**
International dialling: +44 121 415 7047
* Equiniti Limited and Equiniti Financial Services Limited are
part of the Equiniti group of companies. Company share
registration, employee scheme and pension administration services
are provided through Equiniti Limited, which is registered in
England & Wales with No. 6226088. Investment and general
insurance services are provided through Equiniti Financial Services
Limited, which is registered in England & Wales with No.
6208699 and is authorised and regulated by the UK Financial Conduct
Authority.
** Lines are open Monday - Friday from 9.00am - 5.30pm (UK
time), excluding UK bank holidays. Calls to 0871 numbers are
charged at 8p per minute plus network extras.
Auditors: Solicitors:
Ernst & Young LLP Linklaters
One More London Place One Silk Street
London SE1 2AF London EC2Y 8HQ
United Kingdom United Kingdom
Bankers: Corporate Brokers:
HSBC Bank plc Jefferies Hoare Govett
70 Pall Mall Vintners Place
London SW1 5EY 68 Upper Thames Street
United Kingdom London EC4V 3BJ
United Kingdom
Financial PR Advisors:
Brunswick Group LLP Morgan Stanley
16 Lincoln's Inn Fields 20 Bank Street
London WC2A 3ED Canary Wharf
United Kingdom London E14 4AD
United Kingdom
RBC Capital Markets
Thames Court, One Queenhithe
London EC4V 3DQ
United Kingdom
------------------------- ------------------------------
This information is provided by RNS
The company news service from the London Stock Exchange
END
IR SFDFIEFISEFA
Ophir Energy (LSE:OPHR)
Historical Stock Chart
Von Jun 2024 bis Jul 2024
Ophir Energy (LSE:OPHR)
Historical Stock Chart
Von Jul 2023 bis Jul 2024
