TIDMOPHR
RNS Number : 6236R
Ophir Energy Plc
10 March 2016
10 March 2016
OPHIR ENERGY PLC
Full Year Results for the year ended 31 December 2015
Ophir Energy Plc announces its full year results for the year
ended 31 December 2015.
Full Year Results Highlights:
-- Delivered on key strategic objectives:
o added production cash flow to deliver through-cycle
sustainability
o integrated acquired production operations whilst maintaining
operational excellence
o met all key deadlines on Fortuna FLNG project; which is on
track for FID in mid-2016
o high-graded the exploration portfolio; added five new plays
and exited, or in process of exiting, five plays
o delivered G&A savings and acquisition synergies of $60
million
-- Improved strong financial position, all commitment capex funded to 2020:
o net cash at year end 2015 of $355 million (2014: $1.17
billion)
o pre-tax cash generated from operations $122 million ($150
million on a full year pro-forma basis) (2014: cash outflow of
$16.4 million)
o commitment capital expenditure of only $87 million (at the
balance sheet date)
o production break-even at oil price of $15 per bbl
o revenue of $161 million ($211 million on a full year pro-forma
basis) (2014: nil)
o pre-tax operating loss of $376 million, after pre-tax
impairments due to lower commodity price environment of $169
million (post tax impairments of $106 million), and exploration
write offs of $149 million (2014: profit of $288 million)
Nick Cooper, CEO of Ophir Energy plc commented:
"2015 saw Ophir respond swiftly to an exceptionally challenging
operating environment. We radically reduced our cost base, and
delivered synergies ahead of forecast on the Salamander
acquisition. In the period we delivered material progress on the
Fortuna FLNG Project: signing gas fiscal terms with the host
Government, securing Golar as midstream provider, commencing FEED,
shortlisting binding offtake offers and signing a heads of
agreement with Schlumberger to participate in the project. Through
these steps, the forward funding requirements of the project will
be met. In parallel through 2015, we also high-graded our
exploration portfolio at minimal cost and with negligible
commitments; exiting five plays and entering seven new plays, two
of which are post period, that are better suited to the new price
environment.
Our strong balance sheet and net cash position, plus our low
forward committed capex, provide Ophir with greater financial
flexibility than we have ever enjoyed. We can now confidently look
forward four years, to first gas and revenues from the Fortuna FLNG
Project, knowing that we are fully funded. Meanwhile today we have
further reduced our 2016 capex guidance to $150-200mm as we
continue to prioritise capital requirements.
"The upstream model of the past decade is clearly broken. Yet
Ophir's relatively strong financial position and quality asset base
provide considerable optionality at this low point in the cycle.
Exploration costs are approaching 30 year lows and quality
opportunities for future growth are plentiful. Provided we continue
to focus capital at assets that can deliver strong returns in the
'new normal' of lower oil and gas prices then we are confident of
driving superior NAV growth. In future, Ophir will more
transparently report its assessment of movements in our NAV and
will explicitly use this metric to align our organisational
behaviour with shareholder interests. We are confident that our
track record of financial prudence, low finding costs, repeated
ability to monetise discoveries and innovation across our asset
base will increasingly differentiate our performance for
investors."
A presentation for analysts will be held at 9.00am following
this announcement. This will be webcast live through the link on
the Company website: www.ophir-energy.com/investors.
Ends
For Further Enquiries Please Contact:
Ophir Energy plc +44 (0)20 7811 2400
Nick Cooper, CEO
Tony Rouse, CFO
Geoff Callow, Head of Investor Relations and Corporate
Communications
Brunswick Group +44 (0)20 7404 5959
Patrick Handley
Wendel Verbeek
Notes to Editors
Ophir Energy (OPHR.LN) is an upstream oil and gas exploration
company which is listed on the London Stock Exchange (FTSE 250).
Ophir has a large portfolio of assets across Africa and Asia.
For further information on Ophir, please refer to
www.ophir-energy.com
Chief Executive's review
At Ophir we have given considerable thought over the past 18
months as to how we can develop a business that is differentiated
from that of other E&P companies, both in terms of its approach
to doing business, and as a place to work.
The current commodity price environment creates an opportunity
for Ophir to redefine itself, placing net asset value (NAV)
creation at the forefront of everything we do. I would like to take
this opportunity to set out our assessment of the international
upstream sector, and Ophir's place within it.
Let us start with the bad news. Despite fluctuating share and
commodity prices, and some notable discoveries, the international
upstream sector as a whole has had a poor record of value creation
over the past decade.
In particular, the sector has suffered in two ways:
1. Diminishing exploration success rates, which with hindsight have been driven by:
-- financial and risk-taking indiscipline amongst exploration companies;
-- too many commitment wells drilled as host governments
increased their demands of explorers; and
-- an indecent haste, partly motivated by equity market
appetite, to chase new or breaking frontier plays rather than
assimilate and build on collective understanding as a play is
de-risked over time.
2. Increasing finding costs, as the above factors reduced
finding rates, compounded by increased pricing in all three key
exploration cost areas: acreage entry, seismic and drilling.
Even before the collapse in commodity prices, investors were
beginning to question the value equation for upstream, seeing high
finding costs and only rare examples of companies monetising their
discoveries promptly and profitably.
The significant capital inflow into the sector, primarily on the
back of the unprecedented oil price rise in the period 2004 to
2008, had led many upstream players to chase growth at almost any
cost, losing sight of the fact that value is created for investors
by 'finding cheap and monetising high'.
Specifically, when we look back on the recent period, it is
clear that Ophir too made misjudgements and that we can sharpen our
focus on value creation. At times we were drawn into high-risk
commitment wells and chased look-alike plays with more haste than
our geoscientists would have wanted. As a result, much deliberation
has gone into how Ophir can tighten up its model with a real focus
on return on invested capital.
Now that prices have been reset, the weaknesses in the E&P
sector have been laid painfully bare.
A rethink of the upstream model and of how to create value is
essential and overdue.
Despite our mistakes, we feel Ophir's track record is good.
Ophir has demonstrated in Tanzania that it can monetise exploration
success and we expect to provide further evidence of our ability to
monetise our successes when we make a FID on the Fortuna FLNG
project in 2016. Ophir has been one of the more successful
international E&P companies of the past decades with finding
costs of $3.78/boe and commercial success rates of 65%.
We have found c.3,000 mmboe of gross discovered commercial
resource in the past seven years and have divested 560mmboe of this
for cash at $2.31boe. We have also achieved this without overly
leveraging our balance sheet to much higher, mid-cycle oil
prices.
And now the good news. We believe that there is an opportunity
right now to amend our model and build an upstream business which
will more consistently create value for shareholders and other
stakeholders.
Current exploration conditions are arguably the most favourable
for decades:
1. Competition for assets has dramatically decreased and host
governments have generally adjusted their demands in terms of work
commitments to levels more aligned with the technical maturity of
licence blocks.
2. The cost environment is deflating. Exploration service costs
- both seismic and drilling - have dropped significantly.
Development cost reductions are starting to feed through to
operators.
3. The equity markets' scepticism toward exploration and
upstream investment means there is less pressure on upstream
companies to rush the science.
4. Those upstream parties now able to secure acreage from a
position of technical competitive advantage find themselves at the
table for opportunities that were out of reach just two years
ago.
Ophir's response to these conditions will be as follows:
-- Our primary objective must remain that of protecting and growing NAV per share
-- We define NAV as the value of our producing assets, net cash
and a risked value of developments that are beyond FID, minus 12
months of G&A costs.
-- We remain an exploration company at heart and will look to
create NAV through best-in-class exploration and then monetising
our exploration success. We are well-capitalised with a $355
million end-2015 net cash position, a significantly lowered capital
expenditure programme and with much discretion in where we use our
funds.
-- We will remain a 'big E, small p' upstream player. Our focus
is on value creation with the drill bit. Our development and
production activity will be sized to deliver a self-sustaining
company. Each project decision will be made on a risked IRR basis.
We do not have production or reserve growth targets, and so will
not chase these opportunities if they do not create value.
(MORE TO FOLLOW) Dow Jones Newswires
March 10, 2016 02:01 ET (07:01 GMT)
-- We have rebuilt our exploration portfolio in Africa and Asia
with high quality positions where Ophir has competitive advantage,
where drilling commitments are minimised and where the fiscal
regime allows material value creation at current commodity prices.
This approach enables us to properly pace the exploration, high
grade plays (withdrawing from any plays which, over time,
disappoint) and focus our attention, and ultimately our drilling,
solely on those attractive plays.
-- We will not rush to drill; we are carefully and
counter-cyclically building an exploration acreage of low-cost
options that we can decide whether or not to pursue at an
appropriate stage when our play analyses are complete.
To deliver this model we have re-thought the way we manage our
assets, our people and our capital.
Assets are only held and progressed if they can demonstrably
create substantial value for shareholders. If they do not, then
they will be divested or relinquished.
Capital is being directed only at those assets which offer the
highest risk-weighted returns. Assets offering weaker IRRs will
either be improved or managed out of the portfolio.
Ophir's people are its biggest asset. The technical team is
stronger now than at any time in the Company's history. We have
reorganised to maximise the impact of our technical professionals
and to minimise our support activities.
All Ophir's staff are stakeholders and their compensation is
designed to include rewards only when investors benefit through NAV
per share growth. That is why I sincerely hope that shareholders
will support the new remuneration scheme which will more tightly
align the actions of our team with the interests of our
shareholders.
Moreover, we think it is necessary to define the purpose of
upstream companies to include another element of shareholder value
creation. The 2015 Paris Agreement re-emphasises the obligation on
us to focus on a model of 'finding cheap, monetising high whilst
minimising environmental impact in doing so'.
Ophir's purpose is simple: to create value through safely
exploring for and providing sources of energy in the most
sustainable way. Ophir has the experience and the operational track
record that gives the management the belief, and should give
shareholders the reassurance, that we can deliver this.
The E&P industry makes decisions based on a risk-adjusted
outcome and on occasion our endeavours will not succeed, so we will
learn from failure and success in equal measure to improve Ophir's
performance. Our ambition is to become the most valued E&P
company.
As a final note, I thank the Chairman, Nic Smith, who steps down
on 30 April 2016, for all the support, guidance and energy he has
brought to Ophir since 2007. I would also like to welcome Bill
Schrader to the role of Chairman, Bill has been a Board member
since 2013 and his expertise will be invaluable for the next
phase.
Operations Review
The morning of 4 March 2015 signalled a significant change for
Ophir, when our first-ever daily production report was published
relating to the newly-acquired assets in Thailand, the Bualuang oil
field and the Sinphuhorm gas field. The addition of revenue from
production is a key strategic objective to move towards our goal of
becoming a self-sustaining explorer. Becoming a producer created a
number of new challenges for Ophir, in particular making sure our
operating standards and procedures were appropriate for an operator
now involved in activities across the full cycle of exploration and
production.
I am pleased to report that Ophir has adapted well to these
changes and this transition has been achieved in line with our
plans. In some areas, such as in the approach to managing
relationships with local communities, Ophir has been able to
enhance and improve its processes and procedures through learning
from the experience of the teams already working on the Kerendan
development in Indonesia and the production, development and
exploration operations in the Gulf of Thailand.
In other areas, such as drilling, where Ophir has demonstrated
'best in class' performance, we have been able to apply Ophir's
operational practices to improve the processes within the Asian
business units. The net result has been that it has been a good
opportunity to upgrade our processes and procedures in pursuit of
operational excellence. A great example of this in practice was the
work that we completed on the Bualuang field in late 2015/early
2016. A series of drilling and well workover activities to increase
water handling were completed ahead of schedule, with no safety
incidents and under budget. We expect this to be a template for
Ophir as we move forward.
Health and safety
Against the background of integrating the new production assets
into the broader Ophir portfolio, it was a pleasing achievement for
us to complete over 2.4 million man-hours of work in 2015 with only
two minor recordable injuries. We promptly completed investigations
into both incidents and applied the lessons learned.
While we have achieved top quartile performance for our Total
Recordable Incident Rate, unfortunately, both incidents were
employees being hurt while conducting routine operations. As part
of the continuous improvement of our operations, we have introduced
our first leading indicators of safety performance, which are
focused on our highest risk operational activities.
Growing asset value
As Nick Cooper outlines in his Chief Executive's review, in 2015
we have focused on ways to differentiate Ophir, and a relentless
focus on delivering growth in asset value is a key part of this
strategy. From an operational perspective, we have continued the
implementation of our asset-led strategy and have restructured all
our operations to put in place Asset Managers to lead value
creation. In their enhanced role, they are tasked to develop
long-term asset development plans and determine the returns that
can be offered through investment in their asset. As a management
team, we will benchmark opportunities across the portfolio and only
move ahead with those that we believe create the highest
risk-adjusted returns.
The consequences of this approach can already be seen by Ophir
making the decision to exit a number of low-graded exploration
acreage opportunities during 2015 and to high grade the portfolio
by replacing it with new acreage that we believe has the potential
for higher returns. We will maintain this discipline across the
portfolio and will seek to execute our selected operations with
excellence.
Asset overview
Reserves
With the addition of the Asian production base, we report
reserves for the first time. As at 31 December 2015 we booked 54.4
mmboe of proved and probable reserves in line with expectations. In
addition we had 996.0 mmboe of contingent resource. We expect a
significant proportion of the contingent resource to move to
reserves when we make the FID on the Fortuna FLNG project.
Production assets
Production operations outperformed with output from the Bualuang
and Sinphuhorm fields more than 5% ahead of budget at 13,000 boepd
(on a full year proforma basis). The Bualuang field produced its 25
millionth barrel in October 2015, a significant achievement given
the field was originally projected to contain 14 million barrels of
proven and probable reserves. The field is expected to carry on
producing into the next decade. This operational milestone has been
achieved whilst maintaining an excellent track record for health
and safety with no LTIs having been recorded since May 2014.
The focus now is on extracting maximum value from the remaining
reserves over the rest of the field life. With a view to optimising
the next phase of development, we completed an Ocean Bottom Node 3D
seismic survey in mid-2015. For the first time we now have modern
3D seismic data coverage of the field, designed with development in
mind. These data are being integrated into our models and will help
us make better-informed investment decisions as we design the
optimal Asset Development Plan.
During 2016, our focus will be on completing the facilities
de-bottlenecking project on the Bualuang field, which will allow
higher rates of water treatment and disposal, and thus accelerate
oil production and recovery. We expect the project to deliver
additional production and increase recovery from the field. The
first phase of this project was completed successfully in 1Q
2016.
Gross production from the Sinphuhorm gas field was 26% ahead of
budget at 121 mmscfd (11.5 mmscfd net). This was driven by
additional demand for power from the Nam Phong power plant, which
utilises gas from Sinphuhorm, as a result of a dry season in Laos
that reduced the availability of imported hydro-power from the
supply mix.
Development projects
We were pleased to complete the construction and commissioning
of the Kerendan gas plant facilities during 2015, and right at the
end of the year we supplied a small quantity of commissioning gas
to the PLN Power Plant. The project was completed with an excellent
HSE record despite being in a remote, challenging environment. We
forecast that low rate commissioning activities will continue into
the second half of 2016, at which time the plant will start full
production of phase 1.
Agreement has been reached with PLN to amend the Gas Sales
Agreement (GSA) to set the commercial start date as 11 January 2016
with Take or Pay on the initial GSA applicable from this date.
There is little progress to report so far in revising upwards the
price of the gas; the negotiation is taking longer than hoped due
to regulatory processes that have had to be completed prior to the
gas price being finalised. We expect these processes to conclude
during 2016 and to yield an improvement to the current gas price.
In the meantime, as part of the amendment to the GSA, the inflation
mechanism was amended from 3% every three years to 3% per
annum.
(MORE TO FOLLOW) Dow Jones Newswires
March 10, 2016 02:01 ET (07:01 GMT)
The Fortuna FLNG project in Equatorial Guinea was a main focus
of activity for us during 2015. Given the challenging macro
environment, Ophir has made remarkable progress on this asset. The
approach we have taken exemplifies all that is good about the
independent sector as we have had to be innovative and
ground-breaking in our contracting, gas marketing and financing
strategies. During 2015 we achieved all the milestones we set,
reaching agreement with Golar LNG to be the Midstream provider,
agreed Heads of Terms (HoT) on gas sales with seven off-takers and
embarked on Upstream FEED with our two world-class competing
consortia.
In January 2016, we announced that we had agreed HoT with
Schlumberger for them to acquire a 40% economic interest in the
field in return for reimbursing 50% of Ophir's back costs (in the
form of a development carry). This agreement is expected to be
finalised in 2Q 2016, at which point our share in the development
will be fully funded to beyond first gas.
Clearly, the first half of 2016 will be important for the
Fortuna FLNG project as we look to finalise gas off-take
agreements, award EPCIC contracts for the sub-sea production
system, finalise the agreement with Schlumberger, submit and
receive approval of the development plan and sign the Umbrella
Agreement with the Government of Equatorial Guinea. I am pleased to
say all of these items are currently proceeding to schedule and we
anticipate making a FID in mid-2016.
In Tanzania, progress has been relatively disappointing as
momentum on the award of the land was slow prior to the
presidential election in November 2015. Since the election, the new
President has moved quickly to demonstrate the Government's
commitment to the project by commencing the programme for the
acquisition of the land. Pre-FEED studies continued whilst the land
issue was waiting to be resolved. This year we will focus on
ensuring that land acquisition and resettlement plans are robust
and meet international standards. In addition, a focus on
completing terms for HGA will enable the project to complete the
year with a clear plan for first gas.
Exploration
As stated in the Chief Executive's review, we are committed to
taking advantage of softness in the market for exploration acreage
to add high quality exploration licences to our portfolio. We can
mature these licences with low capital expenditure outlay and then
retain the top-ranked opportunities whilst relinquishing those
which we think are least prospective or not commercially viable.
This process will result in Ophir focusing capital and people on
those exploration opportunities that offer shareholders the best
potential risk-adjusted return.
The Rakhine Basin in Myanmar has exploration potential that has
excited the industry. It is a large deepwater province with proven
basins that, for political reasons, has been under-explored. Ophir
moved quickly from signing the PSC at the end of 2014 to completing
the acquisition of over 10,000 sq km of 3D seismic by mid-2015.
This seismic survey was completed safely and under budget. The
processing of this seismic will be completed in 2Q 2016. Work has
already started on interpreting the fast-track data and we are
hoping to mature the prospect inventory during the second half of
2016 to give us the option of drilling a well in Myanmar in
2017.
The two play fairways of Kutai Basin and West Papua in Indonesia
are focal points for exploration activity. Having completed the
acquisition of five licences from Niko Resources Limited, we have
continued to high grade our exploration footprint. We believe the
West Papua and Aru licences have the potential to be liquids prone
and initial work suggests prospects could contain several hundred
million barrels. We will acquire new 3D seismic in 2016 over the
key leads and prospects. Once this has been fully processed and
interpreted, we will determine whether to move ahead and drill -
most likely in 2017.
Having obtained all of the environmental approvals to enable
drilling in the G4/50 licence in the Gulf of Thailand, we were
disappointed not to make a commercial discovery with our 2015
drilling programme, although we did prove a working hydrocarbon
system in a previously undrilled basin.
The Soy Siam well was disappointing in that it did not encounter
hydrocarbons. The Parichat South West well however recovered oil,
albeit not in commercial quantities. We are in the process of
completing the post-well analysis to determine whether a breached
seal or a limited charge is the root cause of the result. If it was
due to the seal, then the basin may warrant another well, most
likely on the Sala North prospect in 2H 2016, before we call a halt
to the exploration of this licence.
In Gabon, we completed the acquisition of the Olumi Rouge 3D
seismic survey and will be interpreting these data during 2016 with
a view to making a drill or drop decision in 1H 2016.
As referred to earlier, we are exiting our low-priority assets
in order to focus our people and capital on maximising value
creation from high-priority acreage. As a result, during 2015 we
exited - or started the process of exiting - from Kenya, Seychelles
and a number of blocks in Indonesia (South Sokang, Kofiau,
Halmahera Kofiau, Kutai) and Tanzania (Block 3, Block 7 and East
Pande).
However we have at the same time continued to take advantage of
the lack of competition for exploration acreage to rebuild the
portfolio with high-class acreage. We have signed our first PSC in
Cote d'Ivoire. The CI-513 Block, located in a relatively
under-explored part of the transform-margin play fairway, contains
exploration opportunities of similar geology and scale to the
discoveries in the Tano Basin to the east. Success in CI-513 would
unlock another segment of this emerging oil play fairway in which
Ophir is seeking to establish a material position, and we are
excited about the potential for this basin, where we expect to be
drilling in 2017. Furthermore, we have continued to build on our
entry to Southeast Asia by adding a new block in Malaysia (Block
2A). Block 2A is pushing an extension of an existing play in the
Sarawak basin into deeper water. We hope to be further expanding
our position in both Malaysia and Myanmar during 2016.
Summary
Conditions for the Upstream E&P sector are difficult at
present, but quality projects are always more resilient to macro
conditions. We believe we have a high-quality asset base with a
production base that is cash-generative at an oil price in the low
$20s per barrel. Our Fortuna FLNG project in Equatorial Guinea is
robust and we are confident that we will be in a position to make a
FID in mid-2016 thereby leading to first production in the second
half of 2019.
Production in 2016 is expected to be between 10,500 and 11,500
boepd and we scope for it to increase to around 30,000 boepd in our
base case for 2020.
We are focused on value creation and the restructuring we have
completed means that assets, and how to extract maximum value from
them, are front and centre of everything we do.
Financial Review
Units 2015 2014 2013
------------------------- ----------- ------- ------- -------
Operating income and cash flow
-----------------------------------------------------------------
Realised prices:
oil/liquids (including
oil hedge realisations) $/bbl 56.32 - -
------------------------- ----------- ------- ------- -------
Realised prices:
gas $/Mscf 4.73 - -
------------------------- ----------- ------- ------- -------
Revenue $'millions 161.1 - -
------------------------- ----------- ------- ------- -------
Field operating
cost $/boe 10.01 - -
------------------------- ----------- ------- ------- -------
Profit/(loss)
before taxation $'millions (376.0) 288.5 (280.5)
------------------------- ----------- ------- ------- -------
Cash generated
from operations: 122.1 (16.4) (15.7)
-------------------------------------- ------- ------- -------
Investing cash flow and capital
expenditure:
-----------------------------------------------------------------
Acquisitions $'millions 1,128 - -
------------------------- ----------- ------- ------- -------
Exploration
and appraisal $'millions 132.0 594.3 389.1
------------------------- ----------- ------- ------- -------
Development
and production $'millions 42.7 - -
------------------------- ----------- ------- ------- -------
Financing cash flow and debt:
-----------------------------------------------------------------
Net cash $'millions 354.9 1,172.8 666.7
------------------------- ----------- ------- ------- -------
Introduction
2015 was a year of significant change for Ophir, both in terms
of our asset mix and the broader market context. The macro
environment saw a further deterioration of the capital markets, a
34% fall in the oil price, from $56/bbl at the beginning of the
year to $37/bbl at the end of the year, and a tightening of the
debt markets.
Ophir has a relatively strong balance sheet after partially
monetising our exploration success in Tanzania in 2014. A key
objective for us is to preserve our financial strength through the
cycle whilst retaining our ability to invest counter-cyclically in
opportunities that provide low-cost options of potential long-term
value creation.
During 2015, we advanced discussion with the various
stakeholders in our Fortuna FLNG project and developed innovative
ways by which to finance the development to first gas in mid-2019.
These measures include the signing of the HoT with Schlumberger in
January 2016. It is expected that this agreement will be finalised
in 2Q 2016, at which time we will be able to confirm that our share
of the development project is fully funded.
(MORE TO FOLLOW) Dow Jones Newswires
March 10, 2016 02:01 ET (07:01 GMT)
Having solved the funding of the Fortuna FLNG project, this will
free up capital for other assets in our portfolio.
Recognising changes to the external environment and our need to
preserve capital, we took steps to lower our operating cost base
during 2015 by reducing our General and Administration (G&A)
costs by $60 million and we expect to further reduce in 2016.
The all-share acquisition of Salamander Energy plc for $326.1
million completed in March 2015, bringing for the first time
production revenues as a source of funds. This transaction followed
the decision to become a self-sustaining explorer and the
acquisition secured a cash-flow stream with a low break-even of
only $15/boe. The assets continued to perform to expectations,
producing on average 13,000 boepd for the full year (on a pro forma
basis), exceeding production guidance.
Overall, as set-out in the Group's viability statements, the
Group is well placed and has sufficient flexibility to fund itself
through to first gas at Fortuna in 2019.
Financial statements
With the acquisition of Salamander Energy completing on 3 March
2015, the financial statements reflect revenues and expenses
incurred for the Salamander assets for the 10-month period from the
date of acquisition. In addition, the Sinphuhorm asset, under IFRS
11, is reflected in the financial statement on an equity accounting
basis through APICO LLC. For completeness, full year pro forma
numbers are also stated in the relevant sections below, which
include both the Sinphuhorm asset, as if accounted on a
proportional consolidated basis.
Overall, the Group reported a loss after taxation for the year
of $322.5 million (2014: profit of $54.8 million), representing a
loss per share of $0.47 (2014: profit per share$0.09). After
removing the non-cash adjustments, the underlying pre-tax cash flow
from the producing assets was $122.1 million ($149.9 million on a
full year pro forma basis) with a net cash outflow reported after
accounting for all activities of $268.6 million (2014: inflow
$382.2 million).
Operating income and cash flow
Revenue
Revenue for 2015 amounted to $161.1 million ($211.1 million on a
full year pro forma basis). The realised price for oil and liquids
is $56.32/bbl including $17.1 million of commodity price hedges
which are accounted for in other financial gains in the
consolidated income statement.
Cost of sales
2015 cost of sales predominantly included field operating costs
of $31.8 million (or $10.01/boe), royalty of $14.5 million (or
$4.50/boe) and depreciation and amortisation of $80.9 million (or
$21.40/boe). On a full year pro forma basis, the equivalent numbers
were: operating costs $40.3 million (or $10.03/boe), and royalty of
$19.5 million.
Equity accounted investments
Reporting of Sinphuhorm's financial contribution under IFRS 11
resulted in a share of profit through APICO LLC of $7.2 million for
2015. Sinphuhorm gas revenues of $16.7 million ($4.73/Mscf) were
offset by operating costs of $4.4 million and taxes of $4.6 million
and other costs of $0.5m.
Impairment of producing and development assets and exploration
expenses
Following the 34% reduction in the commodity price during the
year, the pre-tax fair values of the producing and development
assets were assessed at the balance sheet date based on the lower
commodity price environment. Consequently, the assets were impaired
on a pre-tax basis by $126.7 million and on a post-tax basis by
$63.4 million. In addition impairment of investments amounted to
$42.1 million.
Exploration expenses for 2015 amounted to $183.1 million (2014:
$333.8 million). The 2015 exploration charge partly reflects the
decision to high grade the exploration portfolio and exit from
licences that do not offer sufficient returns. Therefore, the 2015
write off partly results from decisions to exit operations in Kenya
and Indonesia and reduce activity levels in Gabon.
General and administration expenses
With our clear focus on minimising costs in 2015, underlying
gross G&A expenses were reduced by $60 million. Our target in
2016 is to further decrease long-run gross G&A expenses by a
further $15 million, representing a total reduction of 47% over the
two-year period.
After allocating costs to operating activities, our net G&A
expenses for 2015, after eliminating one-off restructuring costs of
$13.5 million, were 14% lower than 2014 at $17.8 million (2014:
$20.7 million). The one-off restructuring costs arose through the
implementation of synergies, the closure of offices and the
reduction in staff numbers following the acquisition of
Salamander.
Operating profit and cash flow generated from operating
activity
Pre-tax operating loss for 2015 is reported as $376.0 million
(2014: profit $288.5 million). After adjustment for non-cash items
totalling $498.1 million (2014: $304.9 million), the pre-tax cash
flow generated from operating activity for 2015 is $122.1 million
or $38.59/boe (2014: outflow $16.4 million). On a full year pro
forma basis, pre-tax cash flow generated from operating activity
for 2015 amounted to $149.9 million.
Taxation
The 2015 taxation credit of $53.6 million comprised an income
tax charge of $5.0 million, Special Remuneratory Benefit (SRB)
charge of $19.6 million and a deferred tax credit of $78.2 million.
The taxation charge predominantly arose on production activities in
Thailand where income tax is charged at a rate of 50% on taxable
profits, and SRB which was incurred at a rate of 28% in 2015. With
the fall in commodity prices, the SRB component is expected to be
negligible in 2016. The deferred tax credit predominantly arose
with the impairment of the Bualuang asset.
This compared to taxation payments made during the year
totalling $83.0 million (2014: $3.2 million).
Investing cash flow and capital expenditure
Investing cash flow as reported in the cash flow statement was
an outflow of $39.4 million (2014: inflow $435.9 million) and
included net payments in respect of oil and gas assets of $374.9
million, partly offset by the withdrawal of long-term cash deposits
of $294.9 million.
Translating this into capital expenditure as reported in the
balance sheet (by adjusting for accrued expenditures and other
non-cash adjustments), capital expenditure for the year totalled
$174.7 million ($209.8 million on a full year pro forma basis).
This predominantly comprised investments on: exploration activities
in Myanmar, Thailand and Indonesia; FEED studies for the Fortuna
FLNG project in Equatorial Guinea; and a seismic and water handling
upgrade for the Bualuang field in the Gulf of Thailand.
Oil and gas assets held on the balance sheet at year end 2015
comprised exploration totalling $879.9 million (2014: $764.9
million) and producing and development totalling $662.2 million
(2014: $nil).
Financing cash flow and debt
Financing cash outflows of $270.3 million (2014: outflow of
$42.3 million) were driven by the deleveraging of the balance sheet
following the acquisition of Salamander with debt repayments
totalling $240.5 million, and interest payments against the
facilities of $22.5 million (at an average all-in interest cost of
5.6%). This reduced the Company's gearing from 30% to 15%.
In addition, we closed out the share buy-back programme
implemented in 2014 with the further acquisitions in 2015 totalling
$56.1 million (2014: $44.2 million).
Liquidity, going concern and longer-term viability
A total of $502.6 million of debt and $48.8 million of cash was
inherited as part the Salamander acquisition. The debt comprised a
convertible bond of $93.9 million, a Norwegian bond of $154.8
million and reserves based lending facility of $253.9 million.
Since the acquisition, total debt has reduced by $242.9 million (to
$259.7 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 $100.9 million.
Total cash available to the Company at year-end 2015 totalled
$614.6 million (2014: $1,172.8 million), comprising cash and cash
equivalent of $614.6 million (2014: $877.9 million) and investments
(short-term deposits) of $nil (2014: $294.9 million). Consequently,
closing net cash at year end 2015 was $354.9 million (2014:
$1,172.8 million).
The Company's business activities, together with the factors
likely to affect its future development, performance and position,
are set out in the strategic review section of the Annual Report
and Accounts. The financial position of the Company, consisting of
cash resources of $614.6 million, its cash flows and its liquidity
position are described in the financial statements of the Annual
Report and Accounts. In addition, note 26 to the financial
statements of the Annual Report include the Company's objectives,
policies and processes for managing its capital; its financial risk
management objectives; details of its financial instruments and
hedging activities; and its exposures to credit risk and liquidity
risk.
In making our going concern assessment, the Directors have
considered Company budgets and cash flow forecasts, which include
the impact of approving the investment decision for its Fortuna
FLNG project during 2016. As a result of this review, the Directors
have a reasonable expectation that the Company has adequate
resources to continue in operational existence for the foreseeable
future. Thus they continue to adopt the going concern basis of
accounting in preparing the annual financial statements.
Financial outlook
The Company has reviewed its plans for the remainder of 2016 and
to position itself against the possibility that the current low
commodity price environment is protracted and will continue beyond
the current year. Accordingly, the Company has reset its guidance
for 2016.
On the basis of production guidance outlined in the review of
operations, at the current forward curve price assumption, revenue
is forecast at $140-160 million for 2016, with cash flow from
producing assets of $75-100 million.
(MORE TO FOLLOW) Dow Jones Newswires
March 10, 2016 02:01 ET (07:01 GMT)
Capital expenditure forecast for 2016 is revised downwards to
$150-200 million.
Our current plans remain to refinance our debt facilities in
2016 subject to market conditions improving. Accordingly, with a
lower oil price forecast for 2016, the Company expects to close the
year with net cash of $200-250 million and cash of $525-575
million.
With a strong net cash position, reduced cost base and high
degree of financial flexibility, Ophir is well positioned to
navigate through the difficult market conditions at present and
emerge on the other side as a stronger entity.
Consolidated income statement and statement of comprehensive
income
For the year ended 31 December
2015 2014
Consolidated income statement Notes $'000 $'000
========================================= ===== ============ =========
Continuing operations
----------------------------------------- ----- ------------ ---------
Revenue 161,090 -
----------------------------------------- ----- ------------ ---------
Cost of sales (128,816) -
========================================= ===== ============ =========
Gross profit 32,274 -
----------------------------------------- ----- ------------ ---------
Gain on farm-out 245 671,677
----------------------------------------- ----- ------------ ---------
Share of profit of investments accounted
for using the equity method 7,219 -
----------------------------------------- ----- ------------ ---------
Other income 6 26
----------------------------------------- ----- ------------ ---------
Impairment of oil and gas properties (126,732) -
----------------------------------------- ----- ------------ ---------
Impairment of investments accounted
for using the equity method (42,117) -
----------------------------------------- ----- ------------ ---------
Exploration expenses (183,137) (333,782)
----------------------------------------- ----- ------------ ---------
General and administration expenses (31,252) (20,746)
----------------------------------------- ----- ------------ ---------
Other operating expenses (25,264) (22,821)
========================================= ===== ============ =========
Operating (loss)/profit (368,758) 294,354
----------------------------------------- ----- ------------ ---------
Net finance expense 4 (10,662) (5,861)
----------------------------------------- ----- ------------ ---------
Other financial gains 5 3,372 -
========================================= ===== ============ =========
(Loss)/profit from continuing operations
before taxation (376,048) 288,493
----------------------------------------- ----- ------------ ---------
Taxation 7 53,596 (233,651)
========================================= ===== ============ =========
(Loss)/profit from continuing operations
for the year (322,452) 54,842
----------------------------------------- ----- ------------ ---------
Attributable to:
----------------------------------------- ----- ------------ ---------
Equity holders of the Company (322,452) 54,846
----------------------------------------- ----- ------------ ---------
Non-controlling interest - (4)
========================================= ===== ============ =========
(322,452) 54,842
========================================= ===== ============ =========
Earnings per ordinary share
----------------------------------------- ----- ------------ ---------
Basic - (Loss)/profit for the period
attributable to equity holders of
the Company (47.1) cents 9.4 cents
========================================= ===== ============ =========
Diluted - (Loss)/profit for the period
attributable to equity holders of
the Company (47.1) cents 9.4 cents
========================================= ===== ============ =========
Consolidated statement of comprehensive
income
========================================= ===== ============ =========
(Loss)/profit from continuing operations
for the year (322,452) 54,842
----------------------------------------- ----- ------------ ---------
Other comprehensive (loss)/income
----------------------------------------- ----- ------------ ---------
Other comprehensive (loss)/ income
to be classified to profit or loss
in subsequent periods:
----------------------------------------- ----- ------------ ---------
Exchange differences on retranslation
of foreign operations net of tax (702) 1,784
========================================= ===== ============ =========
Other comprehensive (loss)/ income
for the year, net of tax (702) 1,784
========================================= ===== ============ =========
Total comprehensive (loss)/income
for the year, net of tax: (323,154) 56,626
========================================= ===== ============ =========
Attributable to:
----------------------------------------- ----- ------------ ---------
Equity holders of the Company (323,154) 56,630
----------------------------------------- ----- ------------ ---------
Non-controlling interest - (4)
========================================= ===== ============ =========
(323,154) 56,626
========================================= ===== ============ =========
Consolidated statement of financial position
As at 31 December
2015 2014
Notes $'000 $'000
=========================================== ===== ========= =========
Non-current assets
------------------------------------------- ----- --------- ---------
Exploration and evaluation assets 8 879,914 764,933
------------------------------------------- ----- --------- ---------
Oil and gas properties 9 662,177 -
------------------------------------------- ----- --------- ---------
Other property, plant and equipment 5,140 6,307
------------------------------------------- ----- --------- ---------
Financial assets 27,253 17,104
------------------------------------------- ----- --------- ---------
Investments accounted for using the
equity method 130,200 -
=========================================== ===== ========= =========
1,704,684 788,344
=========================================== ===== ========= =========
Current assets
------------------------------------------- ----- --------- ---------
Inventory 50,216 23,902
------------------------------------------- ----- --------- ---------
Taxation receivable 22,322 13,424
------------------------------------------- ----- --------- ---------
Trade and other receivables 32,071 12,839
------------------------------------------- ----- --------- ---------
Cash and cash equivalents 10 614,569 877,872
------------------------------------------- ----- --------- ---------
Investments - 294,904
=========================================== ===== ========= =========
719,178 1,222,941
=========================================== ===== ========= =========
Total assets 2,423,862 2,011,285
=========================================== ===== ========= =========
Current liabilities
------------------------------------------- ----- --------- ---------
Trade and other payables (115,971) (242,148)
------------------------------------------- ----- --------- ---------
Interest-bearing bank borrowings
due within one year 11 (37,059) -
------------------------------------------- ----- --------- ---------
Taxation payable (38,056) -
------------------------------------------- ----- --------- ---------
Provisions (47,737) (26,787)
=========================================== ===== ========= =========
(238,823) (268,935)
=========================================== ===== ========= =========
Non-current liabilities
------------------------------------------- ----- --------- ---------
Interest-bearing bank borrowings 11 (115,949) -
------------------------------------------- ----- --------- ---------
Bonds payable 12 (106,651) -
(MORE TO FOLLOW) Dow Jones Newswires
March 10, 2016 02:01 ET (07:01 GMT)
------------------------------------------- ----- --------- ---------
Deferred tax liability (245,745) (44,048)
------------------------------------------- ----- --------- ---------
Provisions (67,190) (263)
=========================================== ===== ========= =========
(535,535) (44,311)
=========================================== ===== ========= =========
Total liabilities (774,358) (313,246)
=========================================== ===== ========= =========
Net assets 1,649,504 1,698,039
=========================================== ===== ========= =========
Capital and reserves
------------------------------------------- ----- --------- ---------
Called up share capital 3,061 2,474
------------------------------------------- ----- --------- ---------
Reserves 1,646,723 1,695,845
=========================================== ===== ========= =========
Equity attributable to equity shareholders
of the Company 1,649,784 1,698,319
=========================================== ===== ========= =========
Non-controlling interest (280) (280)
=========================================== ===== ========= =========
Total equity 1,649,504 1,698,039
=========================================== ===== ========= =========
The consolidated financial statements of Ophir Energy plc
(registered number 05047425) were approved by the Board of
Directors on 9 March 2016. On behalf of the Board:
Nicholas Smith Tony Rouse
Chairman Chief Financial Officer
Consolidated statement of changes in equity
For the year ended 31 December 2015
Non-
Called up Treasury Other controlling
share capital shares reserves interest Total equity
$'000 $'000 $'000 $'000 $'000
=================================== ============== ======== ========== ============ ============
As at 1 January 2014 2,466 - 1,674,719 (276) 1,676,909
----------------------------------- -------------- -------- ---------- ------------ ------------
Profit/(loss) for the
period, net of tax - - 54,846 (4) 54,842
----------------------------------- -------------- -------- ---------- ------------ ------------
Other comprehensive income,
net of tax - - 1,784 - 1,784
=================================== ============== ======== ========== ============ ============
Total comprehensive income/(loss),
net of tax - - 56,630 (4) 56,626
----------------------------------- -------------- -------- ---------- ------------ ------------
Purchase of own shares - (59) (44,168) - (44,227)
----------------------------------- -------------- -------- ---------- ------------ ------------
Exercise of options 8 - 1,847 - 1,855
----------------------------------- -------------- -------- ---------- ------------ ------------
Share-based payment - - 6,876 - 6,876
=================================== ============== ======== ========== ============ ============
As at 31 December 2014 2,474 (59) 1,695,904 (280) 1,698,039
----------------------------------- -------------- -------- ---------- ------------ ------------
Loss for the period, net
of tax - - (322,452) - (322,452)
----------------------------------- -------------- -------- ---------- ------------ ------------
Other comprehensive income,
net of tax - - (702) - (702)
=================================== ============== ======== ========== ============ ============
Total comprehensive (loss),
net of tax - - (323,154) - (323,154)
----------------------------------- -------------- -------- ---------- ------------ ------------
New ordinary shares issued
to third parties 587 - 325,545 - 326,132
----------------------------------- -------------- -------- ---------- ------------ ------------
Purchase of own shares - (99) (56,011) - (56,110)
----------------------------------- -------------- -------- ---------- ------------ ------------
Exercise of options - 3 - - 3
----------------------------------- -------------- -------- ---------- ------------ ------------
Share-based payment - - 4,594 - 4,594
=================================== ============== ======== ========== ============ ============
As at 31 December 2015 3,061 (155) 1,646,878 (280) 1,649,504
=================================== ============== ======== ========== ============ ============
Consolidated statement of cash flows
For the year ended 31 December
2015 2014
Notes $'000 $'000
=========================================== ===== ========= =========
Cash generated from/(utilised) in
operations 122,084 (16,394)
------------------------------------------- ----- --------- ---------
Income taxes paid (83,042) (3,226)
------------------------------------------- ----- --------- ---------
Interest Income 2,051 8,307
=========================================== ===== ========= =========
Net cash flows generated from /(used
in) operating activities 41,093 (11,313)
=========================================== ===== ========= =========
Investing activities
------------------------------------------- ----- --------- ---------
Proceeds from farm-out 2,100 1,329,672
------------------------------------------- ----- --------- ---------
Tax paid on gain on farm-out - (222,411)
------------------------------------------- ----- --------- ---------
Dividend received from investments 5,843 -
------------------------------------------- ----- --------- ---------
Funding provided to investment accounted
for using the equity method (3,941) -
------------------------------------------- ----- --------- ---------
Expenditure on property, plant and
equipment (44,788) (4,770)
------------------------------------------- ----- --------- ---------
Exploration expenditure (311,120) (521,302)
------------------------------------------- ----- --------- ---------
Purchase of subsidiaries, net of
cash acquired (18,965) -
------------------------------------------- ----- --------- ---------
Proceeds on disposals of assets - 2
------------------------------------------- ----- --------- ---------
Disposal/(purchase) of inventory - 1,988
------------------------------------------- ----- --------- ---------
Cash returned/(placed) on deposit 294,904 (134,983)
------------------------------------------- ----- --------- ---------
Financial assets returned/(placed) 36,580 (12,331)
=========================================== ===== ========= =========
Net cash flows (used in)/from investing
activities (39,387) 435,865
=========================================== ===== ========= =========
Financing activities
------------------------------------------- ----- --------- ---------
Interest paid (22,521) -
------------------------------------------- ----- --------- ---------
Repayment of interest-bearing bank
borrowings (100,910) -
------------------------------------------- ----- --------- ---------
Repayment of convertible bonds (93,959) -
------------------------------------------- ----- --------- ---------
Repayment of unsecured bonds (45,652) -
------------------------------------------- ----- --------- ---------
Proceeds from exercise of share options 3 1,914
------------------------------------------- ----- --------- ---------
Purchase of own shares (56,109) (44,230)
------------------------------------------- ----- --------- ---------
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March 10, 2016 02:01 ET (07:01 GMT)
Cash acquired on acquisition of subsidiary 48,827 -
=========================================== ===== ========= =========
Net cash outflows from financing
activities (270,321) (42,316)
=========================================== ===== ========= =========
(Decrease)/increase in cash and cash
equivalents for the year (268,615) 382,236
------------------------------------------- ----- --------- ---------
Effect of exchange rates on cash
and cash equivalents 5,312 (11,126)
------------------------------------------- ----- --------- ---------
Cash and cash equivalents at the
beginning of the year 10 877,872 506,762
=========================================== ===== ========= =========
Cash and cash equivalents at the
end of the year 10 614,569 877,872
=========================================== ===== ========= =========
Notes to the financial statements
1 Corporate information
Ophir Energy plc (the 'Company' and ultimate parent of the
Group) is a public limited company domiciled and incorporated in
England and Wales. The Company's 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 Southeast Asia.
The Group's consolidated financial statements for the year ended
31 December 2015 were authorised for issue by the Board of
Directors on 9th March 2016 and the consolidated statement of
financial position was signed on the Board's behalf by Nicholas
Smith and Tony Rouse.
2 Basis of preparation
The consolidated financial statements of the Group have been
prepared in accordance with IFRS as issued by the International
Accounting Standards Board and adopted by the European Union (EU),
IFRIC Interpretations and the Companies Act 2006 applicable to
companies reporting under IFRS.
The consolidated financial statements are prepared on a going
concern basis.
The consolidated financial statements have been prepared under
the historical cost convention, modified by the revaluation of
certain derivative instruments measured at fair value. The
consolidated financial statements 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 abbreviated 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 2015.
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:
Year ended 31 December
2015
------------------------------------- =========================================
Africa Asia Other Total
$'000 $'000 $'000 $'000
===================================== ========= ========= ======== =========
Revenue sales of crude oil - 161,090 - 161,090
------------------------------------- --------- --------- -------- ---------
Depreciation and amortisation - (80,943) - (80,943)
------------------------------------- --------- --------- -------- ---------
Impairment of exploration costs (134,640) (14,340) - (148,980)
------------------------------------- --------- --------- -------- ---------
Impairment of oil and gas properties - (126,732) - (126,732)
------------------------------------- --------- --------- -------- ---------
Impairment of investments accounted
for using the equity method - (42,117) - (42,117)
------------------------------------- --------- --------- -------- ---------
Share of profit of equity-accounted
joint venture - 7,219 - 7,219
===================================== ========= ========= ======== =========
Operating (loss)/profit (154,270) (169,029) (45,459) (368,758)
------------------------------------- --------- --------- -------- ---------
Finance income 405 9,170 964 10,539
------------------------------------- --------- --------- -------- ---------
Finance expense (383) (18,641) (2,177) (21,201)
------------------------------------- --------- --------- -------- ---------
Other financial gains - 3,372 - 3,372
------------------------------------- --------- --------- -------- ---------
Loss before tax (154,248) (175,128) (46,672) (376,048)
------------------------------------- --------- --------- -------- ---------
Taxation 53,596
===================================== ========= ========= ======== =========
Loss after tax (322,452)
===================================== ========= ========= ======== =========
Non-current assets and total
liabilities As at 31 December 2015
------------------------------------- =========================================
Total assets 705,430 1,164,134 554,298 2,423,862
------------------------------------- --------- --------- -------- ---------
Total liabilities (138,529) (628,340) (7,489) (774,358)
------------------------------------- --------- --------- -------- ---------
Investments accounted for using
the equity method - 130,200 - 130,200
===================================== ========= ========= ======== =========
Year ended 31 December
2015
===================================== =========================================
Additions to non-current assets 37,016 137,666 - 174,682
===================================== ========= ========= ======== =========
Comparatives for the year ending 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.
Non-current operating assets
The non-current operating assets for the UK are $4.0 million.
(2014: $4.1 million). The non-UK, non-current operating assets are
$1,543.1 million (2014: $767.1 million). Included in the non-UK,
non-current operating assets is Thailand which makes up $455.7
million (2014: nil) and Equatorial Guinea which makes up $547.3
million (2014: $529.1 million).
Revenue from major customers
All sales of crude oil are to a single customer PTT Public
Company Limited (PTT). PTT is a Thai state-owned oil and gas
company that is listed on the Stock Exchange of Thailand.
4 Net finance expense
Year ended Year ended
31 Dec 2015 31 Dec 2014
$'000 $'000
============================================ ============ ============
Interest income on short-term bank deposits 1,673 3,630
-------------------------------------------- ------------ ------------
Other interest income - 3,419
-------------------------------------------- ------------ ------------
Interest expense on long term borrowings1 (17,099) -
-------------------------------------------- ------------ ------------
Unwinding of discount (1,250) -
-------------------------------------------- ------------ ------------
Net foreign currency exchange losses 6,014 (12,910)
============================================ ============ ============
(10,662) (5,861)
============================================ ============ ============
1 Includes interest capitalised using a rate of 6.7%.
5 Other financial gains
Year ended Year ended
31 Dec 2015 31 Dec 2014
$'000 $'000
======================================== ============ ============
Realisation settlement gains on hedging 17,091
---------------------------------------- ------------ ------------
Loss relating to oil derivatives (14,001) -
---------------------------------------- ------------ ------------
Gain on bond redemption 282 -
======================================== ============ ============
3,372 -
======================================== ============ ============
6 Business combinations
Acquisition of Salamander Energy plc
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March 10, 2016 02:01 ET (07:01 GMT)
On 3 March 2015 (the acquisition date), the Group acquired 100%
of the share capital of Salamander Energy Plc ('Salamander'), a
Southeast Asian focused independent exploration and production
company quoted on the London Stock Exchange. The enlarged Group
enhances Ophir's operating capabilities in both Africa and
Southeast 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 Southeast 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'.
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 of the identifiable assets and liabilities of
Salamander as at the date of acquisition were:
Fair Value
as at
3 Mar 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 68,680
-------------------------------------------------- -----------
Cash and cash equivalents 48,827
================================================== ===========
1,311,398
================================================== ===========
Fair Value
as at
3 Mar 2015
$'000
================================================ ===========
Liabilities
------------------------------------------------ -----------
Trade and other payables (42,216)
------------------------------------------------ -----------
Current tax liability (97,375)
------------------------------------------------ -----------
Interest-bearing bank borrowings (253,918)
------------------------------------------------ -----------
Convertible bonds2 (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 -
================================================ ===========
Consideration satisfied by the issue of:
------------------------------------------------ -----------
Equity instruments (152,208,612 ordinary shares
of parent company 3) 326,131
================================================ ===========
Total consideration transferred 326,131
================================================ ===========
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 31 December 2015,
Salamander contributed $161.1 million to Group revenue and a loss
of $132.2 million to Group loss after taxation. If the acquisition
of Salamander had taken place at the beginning of the year,
Salamander contribution to Group revenue and loss after taxation
for the year ended 31 December 2015 would be $211.1 million and
$147.7 million respectively.
The corporate costs associated with the transaction amounted to
$8.0 million and have been expenses in general and administration
expenses in the consolidated income statement and statement of
comprehensive income.
7 Taxation
(a) Taxation(credit) / charge
Year ended Year ended
31 Dec 2015 31 Dec 2014
$'000 $'000
================================================== ============ ============
Current income tax:
-------------------------------------------------- ------------ ------------
UK corporation tax - -
-------------------------------------------------- ------------ ------------
UK corporation tax - adjustment in respect
of prior periods - 341
-------------------------------------------------- ------------ ------------
Foreign tax:
-------------------------------------------------- ------------ ------------
Special remuneratory benefit 19,610 -
-------------------------------------------------- ------------ ------------
Other foreign tax 4,719 209,259
-------------------------------------------------- ------------ ------------
Other foreign tax - adjustments in respect
of prior periods 297 809
================================================== ============ ============
Total current income tax charge 24,626 210,409
================================================== ============ ============
Deferred tax:
-------------------------------------------------- ------------ ------------
Origination and reversal of temporary differences
-------------------------------------------------- ------------ ------------
Special remuneratory benefit (43,603) -
-------------------------------------------------- ------------ ------------
Other (34,619) 23,242
================================================== ============ ============
Total deferred income tax (credit)/charge (78,222) 23,242
================================================== ============ ============
Tax (credit)/charge in the consolidated
income statement and statement of comprehensive
income (53,596) 233,651
================================================== ============ ============
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March 10, 2016 02:01 ET (07:01 GMT)
(b) Reconciliation of the total tax (credit) / charge
Year ended Year ended
31 Dec 2015 31 Dec 2014
$'000 $'000
================================================= ============ ============
(Loss)/profit on operations before taxation (376,048) 288,493
================================================= ============ ============
(Loss)/profit on operations before taxation
multiplied by the applicable rate of 36%,
being the average weighted corporate tax
rate for the Group (2014: Based on the
UK Corporation tax rate of 21.5%) (138,125) 62,026
------------------------------------------------- ------------ ------------
Non-deductible expenditure 88,168 6,132
------------------------------------------------- ------------ ------------
Share-based payments 929 634
------------------------------------------------- ------------ ------------
Tax effect of SRB (11,997) -
------------------------------------------------- ------------ ------------
Effect of overseas tax rates - 92,492
------------------------------------------------- ------------ ------------
Tax effect of equity accounted investments (3,610) -
------------------------------------------------- ------------ ------------
Unrecognised deferred tax assets 10,742 71,389
------------------------------------------------- ------------ ------------
Other adjustments - (172)
------------------------------------------------- ------------ ------------
Adjustment in respect of prior year periods 297 1,150
================================================= ============ ============
Total tax (credit)/charge in the consolidated
income statement and statement of comprehensive
income (53,596) 233,651
================================================= ============ ============
(c) Reconciliation of SRB charge to loss from operations before
taxation
The taxation charge for SRB for the year can be reconciled to
the loss from operations before tax per the consolidated income
statement and statement of comprehensive income as follows:
Year ended Year ended
31 Dec 2015 31 Dec 2014
$'000 $'000
================================================ ============ ============
Loss from operations before taxation (376,048) -
------------------------------------------------ ------------ ------------
Add back losses from operations before
taxation for activities outside of Thailand 296,547 -
================================================ ============ ============
Loss from operations before taxation for
activities in Thailand (79,501) -
------------------------------------------------ ------------ ------------
Deduct share of profit of investments accounted
for using the equity method (7,219) -
================================================ ============ ============
Loss before taxation for activities in
Thailand (86,721) -
------------------------------------------------ ------------ ------------
Applicable rate of SRB 28% -
------------------------------------------------ ------------ ------------
Tax at the applicable rate of SRB (24,282) -
------------------------------------------------ ------------ ------------
Change in average SRB deferred tax rate (37,450) -
------------------------------------------------ ------------ ------------
Effect of average SRB deferred tax rate
compared to current SRB tax rate 28,791 -
------------------------------------------------ ------------ ------------
Other non-deductible costs 8,948 -
================================================ ============ ============
Total SRB credit (23,993) -
================================================ ============ ============
(d) Deferred income tax
As at As at
31 Dec 2015 31 Dec 2014
$'000 $'000
================================================ ============ ============
Deferred tax balances relate to the following:
================================================ ============ ============
Corporate tax on fixed asset timing differences (236,247) -
------------------------------------------------ ------------ ------------
SRB on fixed asset timing differences (9,498) -
------------------------------------------------ ------------ ------------
Exploration and evaluation assets - (38,048)
================================================ ============ ============
Fair value in respect of exploration expenses (6,000)
================================================ ============ ============
(245,745) (44,048)
================================================ ============ ============
(e) Unrecognised tax losses
The Group has gross tax losses arising in the UK of $192,101,762
(2014: $135,921,762) and Australia $5,884,000 (2014: $7,331,000)
that are available to carry forward indefinitely to offset against
future taxable profits of the companies in which the losses arose.
Deferred tax assets have not been recognised in respect of these
losses as there is not sufficient certainty that taxable income
will be realised in the future due to the nature of the Group's
international exploration activities and the long lead times in
either developing or otherwise realising exploration assets.
(f) Other unrecognised temporary differences
The Group has other net unrecognised temporary differences in
the various African countries where we are active totalling
$164,441,000 (2014: $164,441,000) in respect of provisions and
exploration expenditure for which deferred tax assets have not been
recognised.
(g) Change in corporation tax rate
Deferred tax has been calculated at the rates substantively
enacted at the consolidated statement of financial position
date.
The standard rate of UK corporation tax in the year changed from
21% to 20% with effect from 1 April 2015. Any UK deferred tax that
is recognised is therefore recognised at the reduced rate of 20%.
Deferred tax in Kenya and Tanzania is provided for at the statutory
rates of 30% 2014: 30%). Deferred tax in Thailand is provided for
at the statutory rate of 50%. Deferred tax in Indonesia is provided
for at the statutory rate of 50%.
8 Exploration and evaluation assets
Year ended Year ended
31 Dec 2015 31 Dec 2014
$'000 $'000
======================================= ============ ============
Cost
--------------------------------------- ------------ ------------
Balance at the beginning of the year 764,933 1,124,423
--------------------------------------- ------------ ------------
Additions1 131,961 594,340
--------------------------------------- ------------ ------------
Acquisition of subsidiary2 132,000 -
--------------------------------------- ------------ ------------
Expenditure written off3 (148,980) (309,835)
--------------------------------------- ------------ ------------
Recovery of costs incurred on farm-out
of exploration interests4 - (643,995)
======================================= ============ ============
Balance at the end of the year 879,914 764,933
======================================= ============ ============
1 Additions in the period include exploration activities in:
Myanmar - Block AD03 ($28.3 million), Thailand - G4/50 ($19.7
million) and Equatorial Guinea - Block R ($18.3 million) and five
Indonesian PSC licences from Niko Resources Limited ($25.3million).
The licences acquired from Niko Resources were accounted for as an
asset purchase as they did not meet the definition of a business
combination in accordance with IFRS 3.
2 Acquisition of subsidiary: Refer to Note 6 of these consolidated financial statements.
3 Expenditure write off for the year ended 31 December 2015 was
$149.0 million. The significant write offs included within the
$149.0 million are listed below:
Expenditure write off in respect of Kenya: loss of $62.6 million
- Block L9, in respect of Gabon: loss of $12.5 million - Ntsina
Block, loss of $17.8 million - Mbeli Block and in respect of three
Blocks in the Seychelles a loss of $24.4 million. The cash
generating unit ('CGU') applied for the purpose of the impairment
assessment is the Blocks. The recoverable amount for each Block was
nil. This was based on management's estimate of value in use.
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Expenditure write off of $309.8 million for the year ended 31
December 2014 comprised of:
Expenditure write off in respect of Tanzania: loss of $107.3
million - East Pande Block, loss of $80.3 million - Block 7, in
respect of Gabon: loss of $62.8 million - Gnondo Block, and in
respect of Kenya: loss of $59.4 million- Block L9. The trigger for
expenditure write off was management's assessment that no further
expenditure on exploration and evaluation of hydrocarbons in the
Blocks was budgeted or planned within the current licences terms.
The cash generating unit ('CGU') applied for the purpose of the
impairment assessment is the Blocks. The recoverable amounts for
each Block was nil, except for Kenya - Block L9 where it was $60.4
million. This was based on management's estimate of value in
use.
4 Recovery of costs incurred on farm-out of exploration interest include:
The Group's disposal in 2014 of a 20% interest in Tanzania
Blocks 1, 3 & 4. The Group received cash consideration of
$1,250 million plus a completion adjustment to reflect interest and
working capital movements 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 recognised for the year ended 31 December
2014 was $671.7 million.
The Group also received $77.8 million relating to the farm-out
of the Gabonese exploration blocks.
The Group generally estimates value in use using a discounted
cash flow model. Future cash flows are discounted to their present
values using a pre-tax discount rate of 15% (2014: post-tax 10%).
Adjustments to cash flows are made to reflect the risks specific to
the CGU.
9 Oil and gas properties
Year ended Year ended
31 Dec 2015 31 Dec 2014
$'000 $'000
===================================== ============ ============
Cost
------------------------------------- ------------ ------------
Balance at the beginning of the year - -
------------------------------------- ------------ ------------
Acquisition of subsidiary (Note 6) 827,131 -
------------------------------------- ------------ ------------
Additions 42,721 -
===================================== ============ ============
Balance at the end of the year 869,852 -
===================================== ============ ============
Depreciation and amortisation - -
------------------------------------- ------------ ------------
Balance at the beginning of the year - -
------------------------------------- ------------ ------------
Charge for the year (80,943) -
------------------------------------- ------------ ------------
Charge for impairment1 (126,732) -
===================================== ============ ============
Balance at the end of the year (207,675) -
===================================== ============ ============
Net book value
------------------------------------- ------------ ------------
Balance at the beginning of the year - -
===================================== ============ ============
Balance at the end of the year 662,177 -
===================================== ============ ============
1 The 2015 impairment charge of $126.7m related to the Bualuang
oil field in Thailand which has a recoverable amount of $387.2m
based on management's estimate of value in use. The discount rate
used was 15%
10 Cash and cash equivalents
As at As at
31 Dec 2015 31 Dec 2014
$'000 $'000
================= ============ ============
Cash 116,060 138,603
----------------- ------------ ------------
Cash equivalents 498,509 739,269
================= ============ ============
614,569 877,872
================= ============ ============
Cash and cash equivalents comprise cash in hand, deposits and
other short-term money market deposit accounts that are readily
convertible into known amounts of cash. The fair value of cash and
cash equivalents is $614.6 million (2014: $877.9 million).
11 Interest bearing bank loans
Year ended Year ended
31 Dec 2015 31 Dec 2014
$'000 $'000
======================================= ============ ============
Balance at the beginning of the year - -
--------------------------------------- ------------ ------------
Acquisition of subsidiary (Note 6) 253,918 -
--------------------------------------- ------------ ------------
Less: amounts repaid during the period (100,910) -
--------------------------------------- ------------ ------------
Less: amounts due within one year (37,059) -
======================================= ============ ============
Balance at the end of the year 115,949 -
======================================= ============ ============
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 31 December 2015 or the borrowing
base amount as determined by the forecast cash flows arising from
the borrowing base assets of $153 million.
-- As at 31 December 2015 the facility available is $153 million
-- 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 by Ophir on 3 March 2015 (refer to
Note 6 of these consolidated financial statements) 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.
12 Bonds payable
Year ended Year ended
31 Dec 2015 31 Dec 2014
$'000 $'000
======================================== ============ ============
Balance at the beginning of the year - -
---------------------------------------- ------------ ------------
Acquisition of subsidiary:
---------------------------------------- ------------ ------------
9.75% Unsecured, callable bonds at $150
million par value (Note 6) 154,835 -
---------------------------------------- ------------ ------------
Redemption - 9.75% Unsecured, callable
bonds at $45.2 million par value (45,652)
---------------------------------------- ------------ ------------
Gain on redemption (282)
---------------------------------------- ------------ ------------
Coupon interest charged 9,510 -
---------------------------------------- ------------ ------------
Interest paid (11,760) -
---------------------------------------- ------------ ------------
Balance at the end of the year 106,651 -
======================================== ============ ============
The unsecured callable bonds were issued by Salamander 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 5 May 2015, bond holders exercised put options at 101% for the
redemption of bonds with a par value of $45.2 million.
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