TIDMAEN
RNS Number : 8779H
Andes Energia PLC
23 May 2014
23 May 2014
Andes Energia plc
("Andes" or the "Company")
Final Results for the year ended 31 December 2013
The Board of Andes Energia is pleased to report final results
for the year ended 31 December 2013.
HIGHLIGHTS
-- Production rate of 1,400 bpd at the end of 2013 (2012: 200 bpd)
-- 2P reserves increased to 20 million bbls at the end of 2013
-- Non-cash equity settled acquisition of MGM International
S.R.L. ("MGM") with 1,100 bpd production from the Chañares and
Puesto Pozo Cercado fields
-- Non-cash equity settled acquisition of Kilwer S.A. ("Kilwer")
and Ketsal S.A. ("Ketsal") incorporating exploration and
development assets
-- Drilling of 29 development and appraisal wells in the
Chachahuen block, which is now producing 380 bpd net to Andes (20%
working interest)
-- Mirador del Valle x-1 discovery well in El Manzano West
block, 15 million boe light oil discovery in the Neuquen Group,
which flowed at 535bpd (40% carried interest)
-- Workovers campaign in Puesto Pozo Cercado and Chañares Herrados
-- Progress with regulator authorities in Colombia to start physical activities on the blocks.
-- JV agreement with Imetame Energia with interests in Brazil
-- Award of a new exploration licence in Paraguay
-- Revenue of $22.5million (2012: $4.8million)
-- Pre-exceptional operating loss $0.2million (2012: $2.9million)
-- Pre-exceptional EBITDA $1.3million (2012: ($2.5million loss)
Post year end highlights:
-- Varillas x-1 drilled into the Vaca Muerta encountered 410
feet (125 metres) of pay; the well, the most northerly in the Vaca
Muerta, is to be fracked and tested in Q3 2014
Alejandro Jotayan, CEO said:
"2013 was a significant year for Andes as we began to develop
our main conventional field (Chachahuen), made a conventional
discovery in El Manzano Block, executed a number of transactions to
increase our production and reserves levels and initiated work on
the Las Varillas x-1 well which resulted in a shale discovery in
February 2014. We finalised the year with a solid production base
of 1,400 bpd, with a conventional 2P reserve base of 20 million
bbls and certified resources of 600 million boe, mainly in the Vaca
Muerta formation. For the first time the group has achieved
positive cash flow. During 2013 and 2014 we have seen the Vaca
Muerta de-risked as more and more wells have been fracked and
tested and the extent of the shale deposit has increased by new
discoveries to the North. Vaca Muerta, where Andes has 213,000 net
acres in the oil window, is considered to be the second largest
shale oil deposit in the world and is the only producing shale oil
deposit outside of the USA. Andes is in an exciting position as the
only AIM listed Company in London with exposure to Vaca Muerta and
we remain focussed on creating significant shareholder value by
developing and enhancing our portfolio with the drilling of 25
conventional wells over the next 12 months with our partner YPF and
the further development of our large unconventional and
conventional resources. The Board looks to the future with
confidence."
For further information please contact:
Andes Energia plc Nicolas MalloHuergo, Chairman T: +541141105150
Alejandro Jotayan, CEO
Billy Clegg, Head of Communications T: +442079691828
Westhouse Securities Antonio Bossi T: +442076016100
David Coaten
GMP Europe LLP Rob Collins T: +442076472800
Liz Williamson
Camarco Georgia Mann T: +442037574986
Buchanan Ben Romney T: +442074665000
Note to Editors:
Andes Energia is an oil and gas company focussed on onshore
South America with a market capitalisation of circa GBP250m. The
Company has operations in Argentina, Colombia, Brazil and Paraguay,
representing three of the largest economies and three of the four
largest oil producing nations in South America.
Andes is the only AIM company on the London Stock Exchange with
exposure to Vaca Muerta.
Annual Report
The Company will in due course be posting to shareholders a copy
of the audited annual report for the year ended 31 December 2013
together with the notice for the Annual General Meeting, to be held
at the offices of Nabarro LLP at Lacon House, 84 Theobald's Road,
London WC1X 8RW at 10.00a.m. on 30 June 2014. The annual report
will be made available on the Group's website at
www.andesenergiaplc.com.ar after it has been posted to
shareholders
STRATEGIC REPORT
OVERVIEW
Andes Energia plc ("Andes" or the "Company" and with its
subsidiaries the "Group") is a Latin American oil and gas group,
with interests in Argentina, Colombia, Brazil and Paraguay.
Year ended 31 December 2013 2012*
------------------------ ------ ------
US$m US$m
------------------------ ------ ------
Revenue 22.5 4.8
------------------------ ------ ------
**Operating loss (0.2) (2.9)
------------------------ ------ ------
**EBITDA 1.3 (2.5)
------------------------ ------ ------
*Continuing operations
** Before exceptional items
Our financial results incorporating the results of Andes
together with its subsidiaries for the year ended 31 December 2013
are set out below.
The Group recorded an operating loss before exceptional items of
US$0.2 million for the year compared to an operating loss on
continuing operations of US$2.9 million in 2012.
BUSINESS REVIEW
Andes is an oil and gas company focused on South America with
interests in Argentina, Colombia, Brazil and Paraguay. The Company
has interests in exploration, development and producing assets. The
Company has 20 million bbls of conventional 2P reserves in
Argentina and certified resources of 600 million boe. The Company's
licences cover 7.5 million acres across South America with 2
million net acres in unconventional plays including 213,000 net
acres in the Vaca Muerta formation, which is the second largest
shale oil deposit in the world and the only producing shale oil
deposit outside of the USA. Over 250 wells have already been
drilled and fracked in the Vaca Muerta formation. The Company
currently produces 1,400 bpd in Argentina from 7 conventional
fields, with positive cash flow generated. Andes, with its partner
YPF, has 25 wells planned over the next 12 months, which will be
funded primarily by field production cash flow.
OPERATIONAL REVIEW
The 2013 highlights were the:
-- Production rate of 1,400 bpd at the end of 2013 (2012: 200 bpd)
-- 2P reserves increased to 20million bbls at the end of 2013
-- Non-cash equity settled acquisition of Kilwer S.A. ("Kilwer")
and Ketsal S.A. ("Ketsal") incorporating exploration and
development assets
-- Non-cash equity settled acquisition of MGM International
S.R.L. ("MGM") with 1,100 bpd production
-- Mirador del Valle x-1 well, 15 million boe light oil
discovery in the Neuquen Group, which flowed at 535bpd
-- 29 development and appraisal wells drilled in the Chachahuen
block, which is now producing 380 bpd net to Andes
-- Workovers campaign in Puesto Pozo Cercado and Chañares Herrados
-- JV agreement with Imetame Energia with interests in Brazil
-- Award of a new exploration licence in Paraguay
Post year end highlights:
-- Varillas x-1 drilled into the Vaca Muerta encountered 410
feet (125 metres) of pay; the well, the most northerly in the Vaca
Muerta is to be fracked and tested mid year
Andes continued with its stated strategy to expand and diversify
its oil and gas portfolio during 2013 and has been able to increase
its production from 200 bpd to 1,400 bpd primarily through the
acquisition of MGM.
On April 2013 the Group through the acquisitions of 100% of
Kilwer S.A and Ketsal S.A. acquired the following oil and gas
interest:
-- a 6.75% working interest in 2 development blocks in Neuquen
-- a 10% carried interest in 3 exploration blocks and a 5%
carried interest in 4 exploration blocks in Mendoza
-- a 40% working interest in 1 exploration block and a 15%
working interest in 2 exploration blocks in Salta
-- a 2% carried interest in 6 exploration blocks and a 20%
working interest in 1 exploration block in Chubut
-- a 2% working interest in 1 exploration block in Rio Negro
The Group through these acquisitions increased its net 2P
reserves by 1.2 million bbls; its net contingent resources by 57
million bbls; and its net recoverable shale oil resources by 60
million bbls with a resultant increase of 2 million net acres in
the area.
In June 2013 the Group acquired from Mercuria Energy Asset
Management B.V. a 49.92% JV interest in two producing oilfields;
Chañares Herrados and Puesto Pozo Cercado. These two oilfields are
located in the Cuyana basin in the province of Mendoza, Argentina
and have proved reserves (P1) of 7.1 million bbls (as at 30
November 2012) and gross production of 2,181 bpd with initial net
production of 1,089 bpd with net proved reserves of 3.3 millions
bbls attributable to Andes. The concession to exploit the oilfields
runs until 2027.
Andes has significantly increased and improved its portfolio
through the year, which now includes;
-- 46 licenses
-- 7.5 million of net acres
-- 20 million bbls of 2P net reserves
-- 600 million boe of net contingent and prospective resources (management estimate)
-- Production approximately 1400 bpd
Argentina
Chachahuen block
License status
The Argentine Province of Mendoza granted a 25 year right to
develop the "Chachahuen Sur" ("ChuS") oil field located in the
Chachahuen block, to a joint venture between Andes, the state-run
energy company YPF and the local firm Energia Mendocina. This
development block covers an area of 72 km(2) in the south of the
Chachahuen block that borders the energy-rich Neuquén Province. The
remaining area (approximately 3,063 km(2)) is still in the
exploration phase.
Development and delineation drilling (ChuS)
The 2013 drilling program focused on developing and delineating
the ChuS field discovery by the well Chus x.-2. The well program
targeted the clastic member, cycle 2 and 3 of the Rayoso formation.
This unit was deposited during the early Cretaceous in a
predominantly continental environment and is composed of a
succession of fine sandstones, red mudstones, and minor evaporates.
Two drilling rigs and two completion rigs were assigned to speed up
the delineation and development plan and as a result a total of 26
development wells and 3 appraisal wells were drilled and completed
successfully during the year.
Exploratory drilling
The exploration well Chus.xp-44, located 1.4 km south of the
discovery well Chus x-1, encountered a significant net oil pay in
the sands of the cycle 5 of the Rayoso formation presenting a new
play to be appraised. The well came on stream in December 2013
producing at a rate of 70 bpd. A delineation well is planned to be
drilled during 2014.
The JV is now planning to carry out a 3D seismic acquisition
survey covering an area of 310 km(2) and 100 km of 2D seismic. Four
new exploratory wells are also planned with two targeting the
Rayoso formation and two targeting the Centenario formation.
Oil production (ChuS)
At the end of 2013 a total of 40 wells were on stream producing
approximately 1,900 bpd (Andes has a 20% working interest or
equivalent to 380 bpd). A progression cavity pump artificial
lifting system has been installed in the wells, which in
neighbouring oil fields has proven to be efficient and best suited
to the conditions of the wells.
El Manzano West
In June 2013 the well EM x-4 was worked over successfully,
increasing production 100% over the pre-intervention level.
Encouraged by the results, a new 3D seismic reinterpretation and
petro physical study in existing wells was carried out and as a
result two new well placements were defined with the aim to develop
the Agrio formation in which Andes holds a 100% working
interest.
YPF as operator of the JV in "El Manzano West" (Andes 40%
carried interest) drilled, cased and tested successfully the
exploratory well "Mirador del Valle x-1" which discovered 15
million boe of light oil from the Neuquén Group formation. The well
reached a depth of 1,789 meters and was drilled into a geological
structure of approximately 6 km(2). Initial testing produced an
average rate of 535 bpd of light oil by natural flow (214 bopd net
to Andes). A delineation and development program is being planned.
These reserves are not included in the Company's year end 20
million bbls 2P reserve figure.
After the year end, Andes announced the results of the
multi-target unconventional and conventional exploration well, Las
Varillas x-1. The well, the most northerly well to be drilled into
the Vaca Muerta, was vertically drilled reaching a total depth of
7,851 feet (2,393 metres) and encountered 410 feet (125 metres) of
gross pay in the unconventional Vaca Muerta formation, the primary
target. The drilling was characterised by the persistent presence
of oil and gas shows through most of the Vaca Muerta interval.
Geochemical data were sampled at two metre intervals through the
entire Vaca Muerta column. Oil was also found in the mud pits. Two
18 metres core samples from the Vaca Muerta formation have been
recovered and a comprehensive suite of logs has been run. The
analysis of this data is being used to design the completion,
fracking and production testing of this well, which will commence
mid year. The Las Varillas x-1 well was drilled by YPF with the
assistance of the service company Schlumberger. Andes was fully
carried during the drilling of this well, as part of the farm-in
agreement with YPF under which Andes has a 100% working interest in
all production from the Agrio formation, which overlays the Vaca
Muerta formation and a 40% carried interest in the Vaca Muerta and
other formations.
Puesto Pozo Cercado and Chañares Herrados blocks
In June 2013, following the acquisition of MGM, a well
intervention program was undertaken with the main aim to stimulate
producing layers and perforate new horizons. As a result five well
interventions were completed successfully and after 1 month
production increased by an average of 32 bpd.
Colombia
In six out of the eight areas where Andes holds interests in
Colombia (VMM-8, LLA-79, LLA-12, LLA-2, LLA-49 and LLA-28), the
country's regulatory authority, ANH, has approved the start of
operational phase 1. This means that Andes can commence operations
needed to realise the potential of these areas. These activities
will include the recording of new seismic data, the reprocessing of
existing data using new technologies and the evaluation of existing
wells in the area. Data from recent discoveries in nearby areas
will be incorporated into Andes's regional database to evaluate
similar features within Andes's acreage.
Brazil
In May 2013, the company signed a JV agreement with Imetame
Energia, a Brazilian E&P company with a proven track record as
operator in different basins in the country. Imetame participated
in the 2013 Brazil bidding round and was awarded 7 blocks in the
Potiguar, the Sergipe-Alagoas and the Reconcavo basins. Our partner
has recently formalised the seven blocks contracts with the ANP
(the local authority that regulates the industry) and will request
the assignment of 50% of the working interest to Andes. Andes has
recently established a branch office in Brazil.
Paraguay
A new exploratory block "Capitan Mesa" was awarded to Andes by
the government of Paraguay. This block is located in the Itapua
Department in the southeast region of Paraguay covering 825,000
acres in which is present the "San Alberto" formation, a source
rock of the Parana basin. Andes hold a 50% working interest.
TRADING PERFORMANCE
During the year, the acquisitions of Kilwer S.A., Ketsal S.A.
and MGM International S.R.L. have significantly increased the
Group's portfolio of assets, strengthened the balance sheet and
underpinned the increase in revenue. Revenue from continuing
operations increased from US$4.8 million in 2012 to US$22.5 million
in 2013. Production has increased from 200 bpd at the end of 2012
to 1,400 bpd at the end of 2013. Exploration and development
activity continues and we expect to see the benefit of these
programs in future years.
FINANCIAL PERFORMANCE
Revenue has significantly increased to US$22.5 million compared
to US$4.8 million in 2012, an increase of 369% primarily as a
result of the acquisition of MGM. Loss before tax and before
exceptional gains was US$6.3 million but after deducting one off
fees of US$2.5 million associated with the acquisitions and an
investment impairment charge of US$1.6 million on the Group's
minority interest in the demerged utility operations, which was
acquired as part of the Ketsal acquisition, the adjusted loss of
US$2.2 million compares favourably with the US$4.4 million loss
before tax in 2012. The Group's total assets have increased from
US$180 million in 2012 to US$319 million at the end of the year
mainly as a result of equity settled acquisitions. However, the
devaluation of the Argentine Peso has resulted in US$68 million of
exchange losses being recognised in the comprehensive loss of the
year. Borrowings have increased from US$7 million in 2012 to US$56
million at the end of the year with net current liabilities falling
from US$7.9 million at the end of 2012 to US$0.8 million at the end
of 2013. At the year end, the Group had cash resources of US$8.2
million compared to US$0.2 million at the end of 2012, which
management believes together with the free cash flow generated from
existing activities will be sufficient to meet its ongoing working
capital requirements. The directors will not be recommending the
payment of a dividend.
EARNINGS PER SHARE
Basic and diluted loss per share fell from 2.34 cents in 2012 to
0.1 cents in 2013 (1.58 cents after adjusting for exceptional
gains). During the year the number of shares in issue increased by
316 million to 515 million.
KEY PERFORMANCE INDICATORS
The directors use a range of performance indicators to monitor
progress in the delivery of the Group's strategic objectives, to
assess actual performance against targets and to aid management of
the business and consider the following to be relevant in assessing
performance.
Sales:
Sales provide a measure of Group activity that is influenced by
production levels and oil prices. Revenue increased by US$17.7
million to US$22.5 million in 2013.
Price:
The average price of oil sales in 2013 was US$74 per barrel
compared to US$59 per barrel in 2012.
Production:
Production is measured in barrels of oil per day and increased
from 200 bpd at the end of 2012 to 1,400 bpd at the end of
2013.
Resources and Reserves
As the end of 2013 the Group had 20 million bbls of net 2P
reserves and certified resources of 600 million boe. The Group's
licences cover 2 million of net acres.
Work programs:
During the year 31 wells were drilled and 6 workovers
completed.
FUTURE DEVELOPMENT
Andes has made significant progress during the year
strengthening our portfolio and increasing production. The focus in
2014 is to continue to expand our work programs, to move forward
with the Chachahen development with YPF, and move forward our work
programmes in our Vaca Muerta acreage, which will start with the
fracking and testing of the Varillas x-1 well. The management team
is focussed on developing and enhancing the value of our portfolio
and on increasing production.
PRINCIPAL RISKS AND UNCERTAINTIES
The principal risks and uncertainties facing the Group are set
out below:
Exploration and drilling - the Group's exploration and drilling
programs may be unsuccessful. The Group seeks to mitigate these
risks by undertaking extensive geological analysis prior to
significant expenditure being incurred.
Capital expenditure - the business relies on substantial
investment in exploration programs and restrictions on the
availability of funding would curtail the growth of the Group. A
failure to fund licence commitments could result in the loss of
upstream properties. The Group seeks to mitigate this risk through
entering into joint operations in which the Group has a carried
interest.
Exchange controls and access to capital - Current foreign
currency legislation in Argentina restricts the flow of capital out
of Argentina, which could cause delays in the Group meeting its
financial obligations outside Argentina. To mitigate this risk the
Group holds funds outside Argentina.
Production - the Group's production may be adversely affected by
technical problems and production performance may not be in line
with expectations. The Group seeks to mitigate these risks by
managing its responsibilities as an operator and by working closely
with our partners in the field.
Environment - the Group's activities could be affected by
environmental issues. The Group ensures it understands and
effectively manages the actual and potential environmental impact
of its current and future activities.
Health and safety - the Group has rigorous health and safety
processes and procedures but regulatory bodies could impose
sanctions which could disrupt operations and ultimately levy
penalties.
Oil price fluctuations - the Group's financial performance is
related to oil and gas prices. The Group takes a conservative view
when undertaking capital appraisal.
Other general industry and country risks - Legislation and
business practices regarding local governmental regulation, foreign
currency transactions and taxation are constantly evolving in some
of the countries in which the Group operates. The risks inherent in
conducting business in these economies include, but are not limited
to, volatility in the financial markets and the general economy. As
a result the Group's operations and financial position may be
affected by these uncertainties. The Group monitors local and
worldwide changes in government regulation and takes appropriate
action where necessary.
SIGNIFICANT EVENTS AFTER THE BALANCE SHEET DATE
There were no significant events after the balance sheet
date.
Alejandro Jotayan
Chief Executive Office
CONSOLIDATED INCOME STATEMENT
FOR THE YEAR ENDED 31 DECEMBER 2013
31-Dec-13 31-Dec-12
Continuing Operations US$'000 US$'000
Revenue 22,456 4,829
Cost of sales (14,224) (3,047)
Gross profit 8,232 1,782
Other operating (expense)/income before
exceptional items (1,066) 1,226
Exceptional items 6,211 -
----------------------------------------- ---------- ----------
Total Other operating income 5,145 1,226
----------------------------------------- ---------- ----------
Distribution costs (1,711) (255)
Administrative expenses (5,656) (5,620)
---------- ----------
Operating profit/(loss) 6,010 (2,867)
Finance income 2,369 222
Finance costs (8,473) (1,769)
Loss before taxation (94) (4,414)
Taxation (334) (253)
----------
Loss for the year from continuing
operations (428) (4,667)
Loss for the year from discontinued
operations - (22,350)
Loss for the year (428) (27,017)
---------- ----------
Loss attributable to:
Owners of the parent
- Continuing operations (428) (4,667)
- Discontinued operations - (22,933)
---------- ----------
(428) (27,600)
Non-controlling interests - 583
(428) (27,017)
---------- ----------
Basic and diluted loss per ordinary
share Cents Cents
From continuing operations (0.10) (2.34)
From discontinued operations - (11.48)
(0.10) (13.82)
---------- ----------
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEAR ENDED 31 DECEMBER 2013
31-Dec-13 31-Dec-12
US$'000 US$'000
Loss for the year (428) (27,017)
Recycled foreign exchange on demerger - 26,530
Translation differences (68,058) (15,479)
Total comprehensive loss for the year (68,486) (15,966)
---------- ----------
Total comprehensive loss attributable
to:
Owners of the parent (68,486) (13,463)
Non-controlling interests - (2,503)
Total comprehensive loss for the year (68,486) (15,966)
---------- ----------
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
31 DECEMBER 2013
31-Dec-13 31-Dec-12
US$'000 US$'000
Non-current assets
Intangible assets 279,617 166,315
Property, plant and equipment 1,025 1,154
Available for sale financial assets 1,634 -
Trade and other receivables 10,725 5,165
Deferred income tax assets 1,490 155
Total non-current assets 294,491 172,789
---------- ----------
Current assets
Inventories 540 349
Available for sale financial assets 3,680 585
Trade and other receivables 12,151 6,347
Restricted cash 3,561 -
Cash and cash equivalents (excluding
bank overdrafts) 4,617 179
Total current assets 24,549 7,460
---------- ----------
Current liabilities
Trade and other payables 17,436 8,584
Financial liabilities 7,957 6,775
Current tax liabilities - 49
Total current liabilities 25,393 15,408
---------- ----------
Non-current liabilities
Trade and other payables 8,854 9,027
Financial liabilities 48,018 166
Deferred income tax liabilities 66,405 33,724
Provisions 454 145
Total non-current liabilities 123,731 43,062
---------- ----------
Net assets 169,916 121,779
---------- ----------
Capital and reserves
Called up share capital 84,216 34,814
Share premium account 58,281 1,111
Retained earnings 45,172 45,192
Other reserves (17,753) 40,662
Total equity 169,916 121,779
---------- ----------
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 DECEMBER 2013
Capital and reserves Share Share Retained Other Owners Non Total
capital premium earnings reserves of the controlling
parent interests
US$'000 US$'000 US$'000 US$'000 US$'000 US$'000 US$'000
At 1 January 2012 32,771 43,910 (40,933) 77,462 113,210 63,400 176,610
--------- --------- --------- ------------ ------------ -------------- ----------
(Loss)/profit for the year - - (27,600) - (27,600) 583 (27,017)
Recycled foreign exchange
on demerger - - - 26,530 26,530 - 26,530
Translation differences - - - (12,393) (12,393) (3,086) (15,479)
Total comprehensive
(loss)/income
for the year - - (27,600) 14,137 (13,463) (2,503) (15,966)
--------- --------- --------- ------------ ------------ -------------- ----------
Issue of ordinary shares 18,869 1,111 - 55,487 75,467 - 75,467
Fair value of share based
payments - - 373 - 373 - 373
Dividends - - - - - (58) (58)
Issue of warrants - - - 1,817 1,817 - 1,817
Reduction of capital and
demerger (16,826) (43,910) 113,352 (108,241) (55,625) (60,839) (116,464)
At 31 December 2012 34,814 1,111 45,192 40,662 121,779 - 121,779
--------- --------- --------- ------------ ------------ -------------- ----------
Loss for the year - - (428) - (428) - (428)
Translation differences - - - (68,058) (68,058) - (68,058)
Total comprehensive loss
for the year - - (428) (68,058) (68,486) - (68,486)
--------- --------- --------- ------------ ------------ -------------- ----------
Issue of ordinary shares 49,402 57,170 - - 106,572 - 106,572
Deferred contingent
consideration
shares - - - 9,355 9,355 - 9,355
Fair value of share based
payments - - 408 - 408 - 408
Issue of warrants - - - 288 288 - 288
At 31 December 2013 84,216 58,281 45,172 (17,753) 169,916 - 169,916
--------- --------- --------- ------------ ------------ -------------- ----------
Other reserves Merger Warrant Reverse Translation Deferred Total
reserve reserve acquisition reserve Consideration other
reserve reserves
US$'000 US$'000 US$'000 US$'000 US$'000 US$'000
At 1 January 2012 66,196 - 42,045 (30,779) - 77,462
--------- --------- ------------ ------------ -------------- ----------
Recycled foreign exchange
on demerger - - - 26,530 - 26,530
Translation differences - - - (12,393) - (12,393)
Total comprehensive income
for the year - - - 14,137 - 14,137
--------- --------- ------------ ------------ -------------- ----------
Issue of ordinary shares 55,487 - - - - 55,487
Issue of warrants - 1,817 - - 1,817
Reduction of capital and
demerger (66,196) - (42,045) - - (108,241)
At 31 December 2012 55,487 1,817 - (16,642) - 40,662
--------- --------- ------------ ------------ -------------- ----------
Translation differences - - - (68,058) - (68,058)
Total comprehensive loss
for the year - - - (68,058) - (68,058)
--------- --------- ------------ ------------ -------------- ----------
Deferred contingent
consideration
shares - - - 204 9,151 9,355
Issue of warrants - 288 - - - 288
At 31 December 2013 55,487 2,105 - (84,496) 9,151 (17,753)
--------- --------- ------------ ------------ -------------- ----------
CONSOLIDATED CASH FLOW STATEMENT
FOR THE YEAR ENDED 31 DECEMBER 2013
31-Dec-13 31-Dec-12
US$'000 US$'000
Cash flow from continuing operations
Cash generated from operations 3,431 612
Tax paid (59) (925)
Cash flows generated from/(used in) operating
activities 3,372 (313)
---------- ----------
Cash flows from investing activities
Purchase of property, plant and equipment (547) (195)
Purchase of exploration assets (2,906) (398)
Purchase of financial assets (2,525) (19)
Acquisition of subsidiaries 23 9
Net cash used in investing activities (5,955) (603)
---------- ----------
Cash flows from financing activities
Funds from borrowing 10,386 110
Interest paid - (737)
Interest received 11 -
Proceeds from issue of shares 359 1,485
Net cash generated from/(used in) financing
activities 10,756 858
---------- ----------
Exchange (losses)/gains on cash and cash
equivalents (174) 72
Net increase in cash and cash equivalents
from continuing operations 7,999 14
---------- ----------
Cash generated from discontinued operations
Operating activities - 12,349
Investing activities - (3,131)
Financing activities - (13,599)
Cash and cash equivalents transferred on
demerger - (4,291)
Effect of foreign exchange rate changes - (444)
Net decrease in cash and cash equivalents
from discontinued operations - (9,116)
---------- ----------
Net increase/(decrease) in cash and cash
equivalents 7,999 (9,102)
Cash and cash equivalents at the beginning
of the year 179 9,281
Cash and cash equivalents at the end of the
year 8,178 179
---------- ----------
1. GENERAL INFORMATION
1.1 Introduction
The financial information set out in this announcement does not
comprise the Group's statutory accounts for the years ended 31
December 2013 or 31 December 2012.
The financial information has been extracted from the statutory
accounts of the Company for the years ended 31 December 2013 and 31
December 2012. The auditors reported on those accounts; their
reports were unqualified and did not contain a statement under
Section 498(2) or Section 498(3) of the Companies Act 2006.
The Company has produced its statutory accounts for the year
ended 31 December 2013 in accordance with International Financial
Reporting Standards as adopted by the European Union and in
accordance with the Group's accounting policies that are unchanged
from those set out in the 2012 statutory accounts.
The statutory accounts for the year ended 31 December 2012 have
been delivered to the Registrar of Companies, whereas those for the
year ended 31 December 2013 will be delivered to the Registrar of
Companies following the Company's Annual General Meeting.
1.2 Exceptional items
In 2013, as a result of the acquisition of MGM International
S.R.L. the Group recognised an exceptional gain of US$6.2 million
arising from the difference between the consideration paid and the
fair value of the net assets acquired.
1.3 Taxation
Continuing operations 31-Dec-13 31-Dec-12
US$'000 US$'000
Current tax (1,172) (255)
Deferred taxation 838 2
Tax charge (334) (253)
---------- ----------
Loss on ordinary activities before
tax (94) (4,414)
Tax credit on loss at standard rate
of 35% 33 1,545
Effects of:
Expenses not deductible for tax purposes
Impairment - (450)
Item not deductible for tax purposes (1,132) -
Effect of items not taxable 2,278 -
Recovery of deferred tax position 179 -
Tax losses for which no deferred tax
asset is recognised (1,692) (1,348)
Current tax charge (334) (253)
---------- ----------
The tax rate used for the 2013 and 2012 reconciliations above is
the corporate tax rate of 35% payable by corporate entities in
Argentina on taxable profits under tax law in that jurisdiction.
There is no tax arising on any items within the consolidated
statement of comprehensive income.
The Group is liable to pay a minimum notional income tax at the
applicable tax rate (1%), calculated on the amount of computable
assets at the closing of the financial year. This tax is
supplementary to income tax and the Group's tax liability in each
fiscal year will be the higher of the minimum notional income tax
and the income tax for the year. If the minimum notional income tax
for a given financial year exceeds the amount of income tax, such
excess may be carried forward as a partial payment of income tax
for any of the ten following fiscal years.
1.4 Loss per share
Basic loss per share is calculated by dividing the net loss for
the year attributable to ordinary shareholders of the Group by the
weighted average number of ordinary shares outstanding during the
year. The basic and diluted loss per share are the same as there
are no instruments that have a dilutive effect on earnings.
Adjusted basic and diluted loss per share are presented after
adjustment of exceptional items.
31-Dec-13 31-Dec-12
Cents Cents
Continuing operations:
Basic and diluted loss per share (0.10) (2.34)
Adjusted basic and diluted loss per share (1.58) (2.34)
Discontinued operations:
Basic and diluted loss per share - (11.48)
Adjusted basic and diluted loss per share - (11.48)
Continuing and discontinued operations:
Basic and diluted loss per share (0.10) (13.82)
Adjusted basic and diluted loss per share (1.58) (13.82)
Continuing operations: US$'000 US$'000
Loss for the financial year attributable
to equity holders (428) (4,667)
Exceptional items (6,211) -
Adjusted loss for the financial year
attributable to equity holders (6,639) (4,667)
---------- ----------
Discontinued operations: US$'000 US$'000
Loss for the financial year attributable
to equity holders - (22,933)
Exceptional items - -
Adjusted loss for the financial year
attributable to equity holders - (22,933)
---------- ----------
Continued and discontinued operations: US$'000 US$'000
Loss for the financial year attributable
to equity holders (428) (27,600)
Exceptional items (6,211) -
Adjusted loss for the financial year
attributable to equity holders (6,639) (27,600)
---------- ----------
No.'000 No.'000
Weighted average number of shares 419,224 199,810
Effect of dilutive warrants - -
Diluted weighted average number of shares 419,224 199,810
---------- ----------
No.'000 No.'000
Potential number of dilutive warrants 34,728 30,428
---------- ----------
The warrants are deemed to be non-dilutive for the purposes of
this calculation.
Subsequent to the reporting date 37,000 ordinary shares of 10
pence each were issued.
1.5 Acquisitions
Kilwer S.A. ("Kilwer")
On 11 March 2013 the Group acquired 100% of Kilwer. Kilwer is a
private oil and gas company with exploration and development assets
in Argentina. The combination of Kilwer's and Andes's assets is
strategically very valuable; providing a participation in 10 new
licences; increasing the Group's participation interest in an
additional 10 licences; giving Andes operator status in other
licences; and bringing additional production.
The consideration for the acquisition of Kilwer was satisfied by
the issue of 60,676,666 ordinary shares (the "Issued Shares"), the
issue of a US$10,000,000 convertible bonds (the "Convertible Bond")
with a five year term and 11% coupon (principal and coupon bullet)
and a US$25,000,000 bond with a ten year term and 11% coupon
(principal and coupon bullet).
If the Company sells its interest in the Kilwer's shares the
bond should has priority over other debt.
Acquisition costs for the acquisitions of both Kilwer and Ketsal
totalled US$2.5 million and this has been recognised as an expense
in the income statement.
A loss of US$0.04 million in relation to the acquired activities
has been recognised in the income statement for the year. Revenue
for the Group for the year does not include any revenue from
Kilwer's operations. Had Kilwer been acquired on 1 January 2013 a
loss for the year of US$0.05 million would have been recognized in
the income statement.
Kilwer S.A. Book Fair value Fair value
Value adjustments
US$'000 US$'000 US$'000
Net assets acquired
Intangible assets 765 70,435 71,200
Property plant and equipment 5 - 5
Trade and other receivables 7,748 - 7,748
Trade and other payables (178) - (178)
Borrowings (7,236) - (7,236)
Social security and other taxes (390) - (390)
Deferred tax 28 (24,652) (24,624)
742 45,783 46,525
-------- ------------
Positive goodwill arising on acquisition 6,674
Total purchase consideration 53,199
-----------
Net cash inflow on acquisition
Total purchase consideration 53,199
Less: Shares issued for non cash consideration (21,472)
31,727
Less: Convertible bonds issued for non
cash consideration and bond (31,727)
-
Less: Cash and cash equivalents -
-
-----------
The assets and liabilities acquired have been measured at fair
value at the date of acquisition. The Board expects the trade
receivables acquired of US$7.8 million to be collectable.
The goodwill arose after the application of IAS 12 "Income
taxes" and is attributable principally to expanding growth
opportunities in Argentina.
Ketsal S.A. ("Ketsal")
On 11 April 2013 the Group acquired 100% of Ketsal. Ketsal is a
private oil and gas company with exploration and development assets
in Argentina. The combination of Ketsal's and Andes's assets is
strategically very valuable further strengthening and increasing
our position in 12 licences and bringing additional production.
Acquisition costs for the acquisitions of both Kilwer and Ketsal
totalled US$2.5 million and this has been recognised as an expense
in the income statement.
The consideration for the acquisition of Ketsal was satisfied by
the issue of 82,781,457 ordinary shares (the "Issued Shares") and
the issue of a US$56,000,000 convertible bond (the "Convertible
Bond") with a ten year term and 8% coupon (principal and coupon
bullet).
A loss of US$2.1 million in relation to the acquired activities
has been recognised in the income statement for the year. Revenue
for the Group for the year does not include any revenue from
Ketsal's operations. Had Ketsal been acquired on 1 January 2013 a
loss of US$3.9 million would have been recognized in the income
statement.
Ketsal S.A. Book Fair value Fair value
Value adjustments
US$'000 US$'000 US$'000
Net assets acquired
Intangible assets 3,054 63,446 66,500
Property plant and equipment 44 - 44
Investments 5,269 - 5,269
Cash and cash equivalents 26 - 26
Trade and other receivables 7,169 - 7,169
Trade and other payables (644) - (644)
Borrowings (10,961) - (10,961)
Social security and other taxes (2,196) - (2,196)
Deferred tax 860 (22,207) (21,347)
2,621 41,239 43,860
--------- ------------
Positive goodwill arising on acquisition 19,746
Total purchase consideration 63,606
-----------
Net cash inflow on acquisition
Total purchase consideration 63,606
Less: Shares issued for non cash consideration (26,598)
37,008
Less: Convertible bonds issued for
non cash consideration (37,008)
-
Add: Cash and cash equivalents 26
26
-----------
The assets and liabilities acquired have been measured at fair
value at the date of acquisition. The Board expects the trade
receivables acquired of US$7.2 million to be collectable.
The goodwill arose after the application of IAS 12 "Income
taxes" and is attributable principally to expanding growth
opportunities in Argentina.
MGM International S.R.L ("MGM")
On 4 June 2013 the Group acquired 100% of MGM. MGM has an
interest in two producing fields in the province of Mendoza. MGM
was acquired from Mecuria Energy Asset Management B.V.. The
acquisition of MGM increased the Group's reserves and significantly
increased production.
The consideration for the acquisition was satisfied by the issue
of 29,533,333 ordinary shares (the "Issued Shares") and contingent
deferred consideration totalled of a further 29.5 million shares,
subject to certain production targets being met.
There were no material acquisition costs.
A profit of US$2.4 million in relation to the acquired
activities has been recognised in the income statement for the
year. Revenue for the Group for the year includes US$15 million of
revenue from MGM's operations. Had MGM been acquired on 1 January
2013 a profit of US$2.4 million would have been recognized in the
income statement.
MGM international SRL Book Fair value Fair value
Value adjustments
US$'000 US$'000 US$'000
Net assets acquired
Intangible assets 29,304 (104) 29,200
Trade and other receivables 390 - 390
Deferred tax 50 (5,128) (5,078)
29,744 (5,232) 24,512
-------- ------------
Excess of interest in the net fair
value of identifiable assets and liabilities
over cost (6,211)
Total purchase consideration 18,301
-----------
Net cash inflow on acquisition
Total purchase consideration 18,301
Less: Shares issued for non cash consideration (9,150)
Shares issued as contingent 9,151
Less: Deferred contingent consideration
shares* (9,151)
-
Add: Cash and cash equivalents -
-
-----------
* At rates of exchange prevailing at the date of acquisition but
recognised as a movement on equity at the average rate for the
year.
The assets and liabilities acquired have been measured at fair
value at the date of acquisition. The Board expects the trade
receivables acquired of US$0.4 million to be collectable.
The acquisition resulted in an excess in Andes's interest in the
net fair value of MGM's identifiable assets and liabilities over
cost of US$6,211,108, which has been recognised as a separately
identifiable item in other operating income in the income
statement.
This information is provided by RNS
The company news service from the London Stock Exchange
END
FR ATMBTMBITTLI
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