CADOGAN PETROLEUM PLC
Half Yearly Report
for the Six Months ended 30 June
2015
(Unaudited and
unreviewed)
Highlights
Cadogan Petroleum
plc (“Cadogan” or the “Company”), an independent oil and gas
exploration, development and production company with onshore gas,
condensate and oil assets in Ukraine, announces its unaudited results for
the six months ended 30 June
2015.
- The continued efforts to preserve cash have been successful,
moving the Company closer to cash neutrality, notwithstanding an
unfavorable scenario
- Production has continued from Debeslavetska, Cheremkivska and
Monastyretska licences and was 118 boepd (net) at the end of June.
Average net production for the reporting period was 88 boepd
(versus 93 boepd in H1 2014), the reduction being the result of a
temporary halt to Monastyretska operations while waiting for the
renewal of the licence
- Monastyretska and Bytlyanska licences have been renewed until
November 2019 and December 2019, respectively, and the renewal of
the expired Zagoryanska licence follows its normal due process
- The Ukrainian Hryvnia has further devalued against the USD,
which is the Group's reporting currency, resulting in a significant
decrease in the reported USD value of the assets in the
country
- Guido Michelotti, a former eni
executive with more than 30 years of Exploration and Production
(“E&P”) experience, has been appointed CEO to replace Bertrand
des Pallieres who has moved to lead the Cadogan’s growing gas
trading business
Enquiries:
Cadogan Petroleum
Plc |
|
+380 (44) 594
5870 |
Guido
Michelotti
Marta Halabala |
Chief
Executive Officer
Company Secretary |
|
Cantor Fitzgerald
Europe |
|
+44 (0) 20 7894
7000 |
David
Porter
Richard Redmayne |
|
|
Board
Statement
Introduction
The reporting period has not been
easy for the oil and gas industry, in general, and for companies
operating in Ukraine in
particular. The negative impact of persistent low prices has been
compounded in Ukraine by the
devaluation of the currency and the extension into 2015 of the
harsh fiscal regime introduced in 2014 as a temporary measure.
After the end of our reporting period, the government announced
that the harsher regime will be abolished and the relevant draft
legislation submitted to parliament for vote. It, unfortunately,
may not apply to Joint Ventures and Debeslavetske and Cheremkhivske
gas production falls under this category.
In this challenging context the
Group has continued to focus on controlling its costs in order to
preserve cash. A right-sizing program to further reduce the number
of staff has been started and at the same time a broader review of
the administrative expenses undertaken; as part of this exercise
the Company has moved its Ukrainian headquarters to a smaller
office.
On the technical side the activity
has focused on maintaining the licences and efficiently producing
from the existing fields within the Debeslavetska, Cheremkhivska
and Monastyretska licences. Revenues from production have been
negatively affected not only by the lower realised prices, but also
by the delays in securing the renewal of the Monastyretska licence
and by the very harsh fiscal regime imposed in 2014 and maintained
throughout the reporting period.
Operations
The E&P activity has focused on
maintaining the licences’ validity and on safely and efficiently
producing from the existing fields within the Debeslavetska,
Cheremkhivska and Monastyretska licences. At the end of the
reporting period production rate was increased to 118 boepd, but
this has not been enough to offset the negative impact of the delay
of Monastyretska licence approval. The average production in the
reported period was 88 boepd slightly below the 93 boepd of H1
2014.
In the Pirkovskoe licence, the
work-over and testing activity on well PIRK-1 confirmed the
presence of a hydrocarbon, but so far no commercial production has
been achieved.
Results of well Deb-15 have been
integrated into the subsurface model to enhance the calibration of
both seismic attributes and electric logs and thus de-risk the
remaining exploration potential of the licence.
Trading
The trading activity has grown in
the first half of the year, bringing the volumes traded to around
125 million cubic meters of gas which is almost twice the volumes
traded in 2014. Cadogan has
managed to capture the benefits of the volatile environment of the
Ukrainian gas market at the beginning of the year within a
disciplined risk management framework.
Financial
position
At the date of this report, the
Group had cash and cash equivalents of approximately $47.5 million excluding $0.3 million of Cadogan’s share of cash and cash
equivalents in the joint ventures, including $20 million of restricted cash. The Directors
believe that the capital available at the date of this report is
sufficient for the Company and the Group to continue operations for
the foreseeable future.
Outlook
The cost reduction efforts combined
with the net margins generated by trading will help the Company to
preserve the cash at this difficult juncture for the country and
for the oil industry, so as to be ready to capture opportunities in
and outside of Ukraine as they
materialise.
The Board remains confident that the
democratic process in Ukraine will
deliver increased transparency and that the current economic
difficulties will be overcome with the support of international
financial institutions. The harsher, temporary fiscal terms
introduced last year are expected to be withdrawn and this will
contribute to restoring the conditions for investing in the
exploitation of the marginal and technically challenging fields of
Ukraine. At the same time the
crisis of the oil and gas industry triggered by the persistent low
oil prices is creating opportunities for companies like
Cadogan which have the cash, the
experience and the know-how to operate in an efficient manner.
The Board is of the opinion that the
recent executive appointments, new CEO and new Head of Trading,
have strengthened the Company: their competencies in upstream,
M&A, financing and trading complement each other and will
prepare Cadogan to capture and
manage the opportunities which will materialise in and outside of
Ukraine.
Operations
Review
In 2015 the Group held working
interests in eight (2014: nine) gas, condensate and oil exploration
and production licences in the East and West of Ukraine; Zagoryanska licence expired in April
and was not renewed due to an absence of interest in the field
development from eni. Subsequent to eni’s withdrawal Cadogan has taken all necessary actions to
re-obtain the licence via one of its wholly owned subsidiaries. All
these assets are operated by the Group and are located in either
the Carpathian basin or the Dnieper-Donets basin, in close
proximity to the Ukrainian gas distribution infrastructure. The
Group’s primary focus during the period continued to be on the
re-evaluation of the existing assets to define the best drillable
prospects and enhancement of current production results.
Summary of the Group’s licences (as of 30 June
2015) |
Working
interest (%) |
Licence |
Expiry |
Licence type(1) |
Major licences |
|
|
|
70.0 |
Pokrovskoe |
August
2016 |
E&D |
100.0 |
Pirkovskoe |
October
2015 |
E&D |
99.8 |
Bitlyanska |
December 2019 |
E&D |
Minor licences |
|
|
|
99.2
99.2 |
Debeslavetska(2)
Debeslavetska(2) |
November 2026
September 2016 |
Production
E&D |
53.4 |
Cheremkhivska(2) |
May 2018 |
Production |
100.0 |
Slobodo-Rungerska |
April 2016 |
E&D |
99.2 |
Monastyretska |
November 2019 |
E&D |
|
|
|
|
(1) E&D = Exploration and Development.
(2) Debeslavetska and Cheremkhivska licences are held by WGI, in
which the Group has a 15% interest. The Group has 99.2% and 53.4%
of economic benefit in conventional activities in Debeslavetska and
Cheremkhivska licences respectively through Joint Activity
Agreements (“JAA”).
In addition to the above licences,
the Group has a 15 percent interest in WGI, which holds the
Reklynetska, Zhuzhelianska, Cheremkhivsko-Strupkivska,
Debeslavetska Exploration, Debeslavetska Production, Baulinska,
Filimonivska, Kurinna, Sandugeyivska and Yakovlivska licences for
unconventional activities.
Below we provide an update to the
full Operations Review contained in the Annual Financial Report for
2014 published on 30 April 2015.
Pokrovskoe
licence
The Group holds a 70 per cent
working interest in the Pokrovskoe licence area, the remainder
owned by Eni pursuant to a joint venture formed in July 2011 (the “JV”). The exploration and
development licence covers 49.5 square kilometres and will expire
in August 2016. The Group has already
started the process of the licence extension. Pokrovskoe
wells’ re-entering interest was confirmed by a local operator and
is planned after the licence extension is obtained.
The Pokrovskoe licence covers seven
promising hydrocarbon bearing zones, two already defined as
drillable prospects, 2,200m deep. The qualification and volumetric
definition of five other identified leads are planned.
Pirkovskoe
licence
The Group has a 100 per cent working
interest in the Pirkovskoe exploration and appraisal licence that
covers 71.6 square kilometres and will expire in October 2015. The licence application for
20-years production period is in progress; documents were already
transferred to the State Commission of Reserves of Ukraine for approval.
One promising hydrocarbon bearing
zone has been identified and qualified as a drillable prospect at a
depth of circa 2,200m. In Pirk-1 the well re-entry activity
continues and presently the work-over for testing the intervals of
Lower Visean and Tournaisian (around 5,100m deep) is ongoing.
Regardless of the evident gas and oil shows, a commercial inflow
has not been obtained so far. Operations are expected to continue
until October 2015. Re-evaluation of
existing wells for re-entry potential is ongoing.
Bitlyanska
licence area
The Bitlyanska exploration and
development licence covers an area of 390 square kilometres, and
the Group’s interest approximates to 99.8 per cent, varying with
production. The licence extension has been granted until
December 2019.
In this licence area there are three
hydrocarbon discoveries; namely Bitlyanska, Borynya and Vovchenska.
The Borynya 3 well re-entry confirmed the presence of several
promising gas bearing zones though no commercial production was
obtained. The well monitoring and scheduled pressure bleed-off is
being routinely performed.
Zagoryanska
licence (licence renewal is in progress)
The Group had a 40 per cent working
interest in the Zagoryanska licence area, the remainder held by Eni
pursuant to the JV. The exploration and development licence covered
49.6 square kilometres and expired in April
2014.
Following disappointing results in
2012, an extensive revision and reinterpretation of the 3D seismic
and Geology and Geophysics (“G&G”) studies are still on-going
to assess the potential of all the possible reserves, as well as
the re-entry in the existing wells. Cadogan is taking all the necessary actions to
obtain a 100 percent working interest in the renewed 20 years
production licence via one of its wholly owned subsidiaries.
Zagoryanska wells’ re-entering interest was confirmed by a local
operator and is planned after the licence extension is obtained.
The gas production facility is under
conservation condition as per Ukrainian legislation and HSE best
practices.
Minor fields
The Group has a number of minor
licence areas located in western Ukraine. These include the following:
- Debeslavetska Production licence area
The field is regularly producing
around 11,000 scm of gas per day (68 boepd). The new compressor
unit and dehydration facilities confirmed the reduction in fuel
consumption and air emissions.
Existing wells production regimes
and production optimisation study were conducted, resulting in a
plan for re-entering six wells. Activity start-up is scheduled for
August 2015.
- Debeslavetska Exploration licence area
The exploration licence surrounding
the Debeslavetska Production licence area, despite the
disappointing results of the well Deb-15, is considered promising
in the shallow horizons for gas production potential, and two other
prospects have been confirmed.
- Cheremkhivska Production licence area
The production licence is currently
producing 2,500 scm of gas per day (15 boepd). This licence is
considered promising with the same target opportunities as
Debeslavetska and its shallow gas exploration potential is under
further evaluation.
- Slobodo-Rungerska licence area
This licence includes several old
shallow oil wells, now abandoned or temporarily shut-in. The
Delta-1 well was re-entered and treated with a chemical formation
washing that marginally improved the well performance. However, the
significant water content (around 50 percent) and low formation
productivity quickly made production uneconomical. The well was
shut down, and a review of the field development strategy
(including deeper exploration targets) is ongoing.
- Monastyretska licence area
In April
2015 the exploration and development licence was extended
until November 2019. The Blazh 1 well
production was resumed at the end of April and is currently
producing at a rate of circa 50 boepd, among the highest rates
since inception. Negotiations with a local operator for the
acquisition of two further existing wells, with the aim to bring
them back to production, are ongoing.
A re-evaluation of the reserves and
resources for all licences based on the work-over results and on
ongoing studies has started and is expected to be
completed by year-end.
Service Company
activities
Cadogan’s 100 percent owned
subsidiary, Astro Service LLC, is proactively looking for service
opportunities to be delivered to the local E&P market. In
particular, Astro Service has
participated in a tender for a contract for the abandonment and
restoration of wells, the result of which is expected in the second
part of the year.
Financial
Review
Overview
In 2015 in addition to E&P
activities the Group continued to focus on managing the cost base
by implementing a number of cost optimisation initiatives as well
as operating a relatively new energy trading business.
Trading operations included the
importing of gas from the European Union countries and local
purchasing and sales activities with physical delivery of natural
gas and diesel. Furthermore, the Group continued to operate its
service business that includes drilling, construction and other
services provided to E&P companies.
Revenue has increased to
$40.6 million in the first half of
2015 (30 June 2014: $1.6 million, 31 December
2014: $32.6 million) due to
gas and diesel trading operations, which represent $39.6 million of total revenues; revenues from
production have slightly declined to $0.8
million (30 June 2014:
$1.1 million, 31 December 2014: $2.4
million) mainly due to the price decrease and the Blazhiv 1
well being temporary shut in due to the delay in the Monastyretska
licence extension.
Revenue from the service business,
which includes drilling and construction services, decreased to
$0.2 million (30 June 2014: $0.4
million, 31 December 2014:
$0.8 million) mainly due to the
postponement of service contracts by clients as a result of the
situation in Ukraine.
The cash position of $55.1 million at 30 June
2015, including restricted cash of $20 million, has increased from $48.9 million at 31
December 2014, mainly due to to the advances paid by the gas
customers. The net working capital has slightly decreased to
$51.8 million at 30 June 2015 from $53.7
million at 31 December
2014.
Income
statement
- Loss before tax was $4.5 million
(30 June 2014: $3.7 million, 31 December
2014: $59.1 million), of which
$4.2 million (30 June 2014: $0.8
million, 31 December 2014:
$54.7 million) is a share of losses
of joint ventures. The share of losses in Joint Ventures mainly
arises on translation of Balance Sheet items from UAH to USD, being
the presentation currency of the Group.
- Revenues of $40.6 million
(30 June 2014: $1.6 million, 31 December
2014: $32.6 million) are
comprised of $39.6 million in gas and
diesel sales of trading reportable segment, $0.8 million of E&P reportable segment and
$0.2 million sales of service
reportable segment. Cost of sales represents $35.7 million of purchases of gas for trading
operating segment, $0.9 million of
production royalties and taxes, depreciation and depletion of
producing wells and direct staff costs for exploration and
development and $0.1 million relates
to the service segment. Gross profit has increased to $3.8 million (30 June
2014: $0.4 million,
31 December 2014: $2.8 million).
- Other administrative expenses of $3.6
million (30 June 2014:
$3.6 million, 31 December 2014: $7.0
million) comprise other staff costs, professional fees,
Directors’ remuneration and depreciation charges on non-producing
property, plant and equipment and provision for the performance
payments in relation to trading.
- Reversal of impairment of other assets of $1.5 million (30 June
2014: $0.6 million,
31 December 2014: $0.9 million) represent a release in relation to
an impairment of Ukrainian VAT.
- Share of losses in joint ventures of $4.2 million (30 June
2014: $0.8 million,
31 December 2014: $54.7 million) mainly represent translation loss
which arose primarily on translation of non-current assets of
Gazvydobuvannya LLC (Pokrovskoe licence) from UAH to USD, being the
presentation currency of the Group.
- Net foreign exchange loss of $0.9
million (30 June 2014: loss
$1.5 million, 31 December 2014: gain of $3.0 million) mainly relates to the revaluation
of the USD-denominated monetary assets of the Group’s UK entities
which have GBP as a functional currency.
Cash flow
statement
The Consolidated Cash Flow Statement
shows operating cash inflow before movements in working capital of
$0.5 million (30 June 2014: $4.1
million, 31 December 2014:
$3.9 million). Cash inflows from
movements in working capital in 2015 of $15.9 million mostly represent a decrease in
trading receivables and prepayments of $5.1
million, decrease in trading inventories of $4.7 million, and an increase in prepayments
received and trading payables of $4.1
million in relation to trading reportable segment and
$2.0 million of change in working
capital for other reportable segments. In addition, the Group has
incurred capital expenditure of $0.1
million (30 June 2014:
$0.3 million, 31 December 2014: $0.5
million) on intangible Exploration and Evaluation
(“E&E”) assets and $0.4 million
(30 June 2014: $0.7 million, 31 December
2014: $1.6 million) on
Property, Plant and Equipment (“PP&E”).
In 2015 the Group financed its
trading operations with short-term borrowings and as at
30 June 2015 the outstanding amount
was $5.7 million (30 June 2014: $nil, 31
December 2014: $17.3 million).
Borrowings are represented by a credit line drawn in UAH at a
Ukrainian bank, a 100 percent subsidiary of a UK bank. The credit
line is secured by $20 million of
cash balance placed at a UK bank.
Balance sheet
The cash position of $55.1 million at 30 June
2015, including restricted cash of $20 million, has increased from $48.9 million at 31
December 2014 due to the prepayments received from clients
for gas supplies.
Intangible E&E assets of
$14.0 million (30 June 2014: $4.6
million, 31 December 2014:
$18.3 million) represent the carrying
value of the Group’s investment in E&E assets as at
30 June 2015. The PP&E balance of
$2.8 million at 30 June 2015 (30 June
2014: $31.2 million,
31 December 2014: $3.8 million) reflects the cost of developing
fields with commercial reserves and bringing them into
production.
Investments in joint ventures of
$10.1 million (30 June 2014: $52.5
million, 31 December 2014:
$14.3 million) mainly represent the
carrying value of the Group’s investments in Pokrovska licences and
Westgasinvest LLC (costs related to Zagoryanska licence have been
fully impaired).
Trade and other receivables of
$8.9 million (30 June 2014: $5.3
million, 31 December 2014:
$17.9 million) include $5.1 million trading prepayments and receivables,
$1.6 million receivable from joint
ventures in respect of management charges (30 June 2014: $1.8
million, 31 December 2014:
$1.9 million) and VAT recoverable of
$1.4 million (30 June 2014: $0.3
million, 31 December 2014:
$1.7 million) to be recovered through
gas trading operations.
In October
2014 the Group started to use the short-term facility in
Ukraine for its trading
operations. The $5.7 million
outstanding as of 30 June 2015
represents UAH 121.5 million borrowed in UAH to purchase natural
gas and diesel.
The $8.4
million of trade and other payables as of 30 June 2015 (30 June
2014: $2.5 million,
31 December 2014: $5.1 million) represent $6.2 million (30 June
2014: $nil, 31 December 2014:
$2.5 million) worth of advances
received from clients for future supplies of natural gas and
$2.2 million (30 June 2014: $2.5
million, 31 December 2014:
$2.3 million) of other creditors and
accruals.
Commitments
There has not been any significant
change in the commitments and contingencies reported as at
31 December 2014 (refer to pages 78
and 79 of the Annual Report).
Key performance
indicators
The Group monitors its performance
in implementing its strategy with reference to clear targets set
out for four key financial and one key non-financial performance
indicators (‘KPIs’):
- to increase oil, gas and condensate production measured on
number of barrels of oil equivalent produced per day
(‘boepd’);
- to increase the Group’s oil and gas reserves by de-risking
possible resources and contingent reserves into 2P reserves. This
is measured in million barrels of oil equivalent (‘mmboe’);
- to decrease administrative expenses;
- to increase the Group’s basic earnings per share; and
- to maintain no lost time incidents.
The Group’s performance during the
first six months of 2015 against these targets is set out in the
table below, together with the prior year performance data. No
changes have been made to the sources of data or calculations used
in the period/year.
|
Unit |
30
June 2015 |
30
June 2014 |
31
December 2014 |
Financial
KPIs |
|
|
|
|
Average production
(working interest basis) (1) |
boepd |
88 |
93 |
99 |
2P reserves
(2) |
mmboe |
0.6 |
2.6 |
0.6 |
Administrative
expenses (3) |
$ |
3.6 |
3.6 |
7.0 |
Basic loss per share
(4) |
cent |
(1.9) |
(1.6) |
(25.6) |
Non-financial
KPIs |
|
|
|
|
Lost time incidents
(5) |
incidents |
- |
- |
- |
(1) Average production is calculated as the average daily
production during the period.
(2) Quantities of 2P reserves as at 30
June 2014, 31 December 2014
and 30 June 2015 are based on
Gaffney, Cline & Associates’ (“GCA”) independent reserves
report on 2P reserves as at 31 December
2009, dated 16 March 2010, as
adjusted for the actual production during 2015 and actual
production and reclassification to contingent resources.
(3) Administrative expenses for the six months ended
30 June 2015 of $3.6 million includes $0.9
million of provision for trading costs.
(4) Basic loss per Ordinary share is calculated by dividing the
net loss for the year attributable to equity holders of the parent
company by the weighted average number of Ordinary shares during
the period.
(5) Lost time incidents relate to injuries where an
employee/contractor is injured and has time off work.
Treasury
The Group continually monitors its
exposure to currency risk. It maintains a portfolio of cash and
cash equivalent balances mainly in US dollars (‘USD’) held
primarily in the UK and holds these mostly in call deposits.
Production revenues from the sale of hydrocarbons are received in
the local currency in Ukraine
(‘UAH’) and to date funds from such revenues have been held in
Ukraine for further use in
operations rather than being remitted to the UK. Funds are
transferred to the Company’s subsidiaries in USD to fund
operations, at which time the funds are converted to UAH. Some
payments are made on behalf of the affiliates from the UK.
Going concern
After making enquiries, the
Directors have a reasonable expectation that the Company and the
Group have adequate resources to continue in operational existence
for the foreseeable future. Accordingly, they continue to adopt the
going concern basis in preparing the Condensed Consolidated and
Company Financial Statements. For further detail refer to the
detailed discussion of the assumptions outlined in note 2(b) to the
Condensed Consolidated Financial Statements.
Risks and
uncertainties
There are a number of potential
risks and uncertainties, which could have a material impact on the
Group’s long-term performance and could cause the actual results to
differ materially from expected and historical results. Executive
management review the potential risks and then classify them as
having a high impact, above $5
million, medium impact, above $1
million but below $5 million,
and low impact, below $1 million.
They also assess the likelihood of these risks occurring. Risk
mitigation factors are reviewed and documented based on the level
and likelihood of occurrence. The Audit Committee reviews the risk
register and monitors the implementation of improved risk
mitigation procedures via Executive management.
The Group has analysed the following
categories as key risks:
Risk |
Mitigation |
Operational risks |
|
Health, Safety and Environment
(“HSE”) |
|
The oil and gas industry by its
nature conducts activities that can be seriously impacted by
health, safety and environmental incidents. Serious incidents can
have not only financial implications but can also damage the
Group’s reputation and the opportunity to undertake further
projects. |
The Group maintains a HSE system in
place and demands that management, staff and contractors adhere to
it. The system ensures that the Group meets Ukrainian legislative
standards in full and achieves international standards to the
maximum extent possible. |
Drilling
operations |
|
The technical difficulty of drilling
wells in the Group’s locations and equipment limitations can result
in the unsuccessful completion of the well. |
The incorporation of detailed
sub-surface analysis into a robustly engineered well design and
work programme, with appropriate procurement procedures and
competent on site management, aims to minimise risk. |
Production and
maintenance |
|
Some of the Group’s
facilities have been inherited and, although fully checked, were
not installed under our supervision and there is a risk of plant
failure.
There is a risk that production or transportation facilities can
fail due to the poor performance of the Group’s suppliers and
control of some facilities being with other governmental or
commercial organisations. |
All plants are operated
at standards above the Ukrainian minimum legal requirements.
Operative staff are experienced and receive supplemental training
to ensure that facilities are operated and maintained at a high
standard.
Service providers are rigorously reviewed at the tender stage and
are monitored during the contract period. |
Work over and
abandonment |
|
Certain
wells owned by the Group were drilled by the State and other
private companies and will be worked over. There is a risk that
Cadogan’s activities fail because of problems inherited with these
sites.
Any well stock that is not considered satisfactory for purpose or
poses an environmental hazard will need to be abandoned. |
Work
programmes are designed to assess the status of the wells and any
work that is not safe or is not technically feasible will be
abandoned. Qualified professionals will be used to design a
step-by-step approach to re-entering old wells.
All sites that are abandoned will be restored and re-cultivated to
meet or exceed standards required by the relevant environmental
control authorities and in compliance with recognised international
standards. |
Sub-surface
risks |
|
The success of the
business relies on accurate and detailed analysis of the
sub-surface. This can be impacted by poor quality data, either
historical or recently gathered, and limited coverage. Certain
information provided by external sources may not be accurate. |
All externally provided and
historical data is rigorously examined and discarded when
appropriate. New data acquisition is considered and adequate
programmes implemented, but historical data can be reviewed and
reprocessed to improve the overall knowledge base. |
Risk |
Mitigation |
Sub-surface risks
(continued) |
|
Some local contractors may not
acquire data accurately, and there is frequently the limited choice
of locally available equipment or contractors of a desirable
standard. |
Detailed supervision of local
contractors by Cadogan management is followed. Plans are discussed
well in advance with both local and international contractors in an
effort to ensure that appropriate equipment is available. |
Data can be misinterpreted leading
to the construction of inaccurate models and subsequent plans. |
All analytical outcomes are
challenged internally and peer reviewed. Interpretations are
carried out on modern geological software. A staff training
programme has been put in place. |
Area available for drilling
operations is limited by logistics, infrastructures and moratorium.
This increases the risk for setting optimum well coordinates. |
If not covered by 3D seismic or
fitting over 2D seismic lines, the eventual well’s dislocation will
not be accepted. |
Financial risks |
|
The Group may not be
successful in achieving commercial production from an asset and
consequently the carrying values of the Group’s oil and gas assets
may not be recovered through future revenues. |
The
Group performs a review of its oil and gas assets for impairment on
an annual basis. The Group considers on an annual basis whether to
commission a Competent Person’s Report (“CPR”) from an independent
reservoir engineer. The CPR provides an estimate of the Group’s
reserves and resources by field/licence area. As no new production
has been achieved during 2014, management has decided not to
commission a new CPR during 2014.
As part of the annual budget approval process, the Board considers
and evaluates projects for the forthcoming year and considers the
appropriate level of risk. The Board has approved a work programme
for 2015. Further attempts to bring in partners and mitigate the
Group’s risk exposure are underway. |
There is a risk that
insufficient funds are available to meet development obligations to
commercialise the Group’s major licences. |
The
Group manages the risk by maintaining adequate cash reserves and by
closely monitoring forecasted and actual cash flow, as well as
short and longer funding requirements. Management reviews these
forecasts regularly and updates are made where applicable and
submitted to the Board for consideration.
The farm-out campaign to maintain current cash balances and
mitigate risk will continue through 2015. |
The Group could be impacted by
failing to meet regulatory reporting requirements in the UK, and
statutory tax and filing requirements in both Ukraine and the
UK. |
These risks are
mitigated by employing suitably qualified professionals who,
working with advisers when needed, are monitoring regulatory
reporting requirements and ensuring that timely submissions are
made. |
The Group operates primarily in
Ukraine, an emerging market, where certain inappropriate business
practices may from time to time occur. This includes bribery, theft
of Group property and fraud, all of which can lead to financial
loss. |
Clear authority levels and robust
approval processes are in place, with stringent controls over cash
management and the tendering and procurement processes. Adequate
office and site protection are in place to protect assets.
Anti-bribery policies are also in place. |
Risk |
Mitigation |
Financial risks
(continued) |
|
The Group is at risk from changes in
the economic environment both in Ukraine and globally, which can
cause foreign exchange movements, changes in the rate of inflation
and interest rates and can lead to credit risk in relation to the
Group’s key counterparties. |
Revenues in Ukraine are
received in UAH and expenditure is made in UAH, however, the prices
for hydrocarbons are implicitly linked to USD prices.
The Group continues to hold most of its cash reserves in the UK
mostly in USD. Cash reserves are placed with leading financial
institutions that are approved by the Audit Committee. The Group is
predominantly a USD denominated business. Foreign exchange risk is
considered a normal and acceptable business exposure and the Group
does not hedge against this risk for its E&P operations.
For trading operations, the Group matches the revenues and the
source of financing. |
The Group is at risk that the
counterparty will default on its contractual obligations resulting
in a financial loss to the Group. |
We monitor the credit quality of our
counterparties and seek to reduce the risk of customer
non-performance by limiting the title transfer to product until the
payment is received, prepaying only to known credible
suppliers |
The Group is at risk that
fluctuations in gas prices will have a negative result for the
trading operations resulting in a financial loss to the Group. |
The Group mostly enters into
back-to-back transactions where the price is known at the time of
committing to purchase and sell the product. Sometimes the Group
takes exposure to open inventory positions when justified by the
market conditions in Ukraine. |
Corporate risks |
|
Should the Group fail to comply with
licence obligations, there is a risk that its entitlement to the
licence will be lost. |
The Group designs a work programme
and budget to ensure that all licence obligations are met. The
Group engages proactively with the government to re-negotiate terms
and ensure that they are not onerous. |
Ukraine is an emerging
market and as such the Group is exposed to greater regulatory,
economic and political risks, more than other jurisdictions.
Emerging economies are generally subject to a volatile political
environment that could adversely impact Cadogan’s ability to
operate in the market. |
The Group minimises this risk by
maintaining the funds in international banks outside Ukraine and by
continuously maintaining a working dialogue with the regulatory
authorities. |
The Group's success depends upon
skilled management as well as technical and administrative staff.
The loss of service of critical members of the Group's team could
have an adverse effect on the business. |
The Group periodically reviews the
compensation and contract terms of its staff. |
We confirm that to the best of our
knowledge:
(a) the Condensed set of Financial
Statements has been prepared in accordance with IAS 34 ‘Interim
Financial Reporting’;
(b) the interim management report
includes a fair review of the information required by DTR 4.2.7R
(indication of important events during the first six months and
description of principal risks and uncertainties for the remaining
six months of the year);
(c) the interim management report
includes a fair review of the information required by DTR
4.2.8R (disclosure of related parties’ transactions and
changes therein); and
(d) the condensed set of financial
statements, which has been prepared in accordance with the
applicable set of accounting standards, gives a true and fair view
of the assets, liabilities, financial position and profit or loss
of the issuer, or the undertakings included in the consolidation as
a whole as required by DTR 4.2.4R.
This Half Yearly Report consisting
of pages 1 to 24 has been approved by the Board and signed on its
behalf by:
Marta Halabala
Company Secretary
27 August 2015
_______________________________________________________________________________________
Cautionary Statement
The business review and certain
other sections of this Half Yearly Report contain forward looking
statements that have been made by the directors in good faith based
on the information available to them up to the time of their
approval of this report. However they should be treated with
caution due to inherent uncertainties, including both economic and
business risk factors, underlying any such forward-looking
information and no statement should be construed as a profit
forecast.
Condensed
Consolidated Income Statement
Six months ended
30 June 2015
|
|
Six
months ended 30 June |
Year ended
31 December |
|
|
2015
$’000 |
2014
$’000 |
2014
$’000 |
|
Notes |
(Unaudited) |
(Unaudited) |
(Audited) |
CONTINUING OPERATIONS |
|
|
|
|
Revenue |
3 |
40,603 |
1,573 |
32,623 |
Cost of sales |
3 |
(36,758) |
(1,215) |
(29,813) |
Gross profit |
|
3,845 |
358 |
2,810 |
|
|
|
|
|
Administrative expenses: |
|
|
|
|
Other administrative expenses |
|
(3,604) |
(3,585) |
(7,002) |
Impairment of oil and gas
assets |
|
- |
- |
(5,134) |
Reversal of other assets
impairment |
|
1,486 |
609 |
877 |
|
|
(2,118) |
(2,976) |
(11,259) |
|
|
|
|
|
Share of losses in joint
ventures |
6 |
(4,243) |
(834) |
(54,664) |
Net foreign exchange
(losses)/gains |
|
(953) |
(1,457) |
3,036 |
Other operating income |
|
43 |
321 |
547 |
Operating loss |
|
(3,426) |
(4,588) |
(59,530) |
|
|
|
|
|
Investment revenue |
|
81 |
179 |
852 |
Finance (costs)/income |
|
(1,128) |
667 |
(468) |
Loss before tax |
|
(4,473) |
(3,742) |
(59,146) |
|
|
|
|
|
Tax |
|
(28) |
112 |
(166) |
Loss for the period/year |
|
(4,501) |
(3,630) |
(59,312) |
|
|
|
|
|
Attributable to: |
|
|
|
|
Owners of the Company |
4 |
(4,495) |
(3,609) |
(59,271) |
Non-controlling interest |
|
(6) |
(21) |
(41) |
|
|
|
|
|
|
|
|
|
|
Loss per Ordinary share |
|
cent |
cent |
cent |
Basic |
4 |
(1.9) |
(1.6) |
(25.6) |
Condensed Consolidated Statement
of Comprehensive Income
Six months ended 30 June
2015
|
|
Six
months ended 30 June |
Year ended
31 December |
|
|
2015
$’000 |
2014
$’000 |
2014
$’000 |
|
|
(Unaudited) |
(Unaudited) |
(Audited) |
Loss for the period/year |
|
(4,501) |
(3,630) |
(59,312) |
Other comprehensive loss |
|
|
|
|
Items that may be reclassified
subsequently to profit or loss |
|
|
|
|
Unrealised currency translation
differences |
|
(6,647) |
(29,590) |
(28,153) |
Other comprehensive loss |
|
(6,647) |
(29,590) |
(28,153) |
Total comprehensive loss for the
period/year |
|
(11,148) |
(33,220) |
(87,465) |
|
|
|
|
|
Attributable to: |
|
|
|
|
Owners of the Company |
|
(11,142) |
(33,199) |
(87,424) |
Non-controlling interest |
|
(6) |
(21) |
(41) |
|
|
(11,148) |
(33,220) |
(87,465) |
Condensed
Consolidated Statement of Financial Position
Six months ended
30 June 2015
|
|
Six
months ended 30 June |
Year ended
31 December |
|
|
2015
$’000 |
2014
$’000 |
2014
$’000 |
|
Notes |
(Unaudited) |
(Unaudited) |
(Audited) |
|
ASSETS |
|
|
|
|
|
Non-current assets |
|
|
|
|
|
Intangible exploration and
evaluation assets |
5 |
14,049 |
4,637 |
18,289 |
|
Property, plant and equipment |
|
2,791 |
31,169 |
3,846 |
|
Investments in joint ventures |
6 |
10,082 |
52,522 |
14,325 |
|
Other financial assets ventures |
|
- |
3,763 |
- |
|
|
|
26,922 |
92,091 |
36,460 |
|
Current assets |
|
|
|
|
|
Inventories |
7 |
2,687 |
2,196 |
9,940 |
|
Trade and other receivables |
8 |
8,895 |
5,329 |
17,891 |
|
Cash and cash equivalents |
|
55,105 |
47,908 |
48,927 |
|
|
|
66,687 |
55,433 |
76,758 |
|
Total assets |
|
93,609 |
147,524 |
113,218 |
|
|
|
|
|
|
|
LIABILITIES |
|
|
|
|
|
Non-current liabilities |
|
|
|
|
|
Deferred tax liabilities |
|
(307) |
(447) |
(288) |
|
Long-term provisions |
|
(37) |
(512) |
(55) |
|
|
|
(344) |
(959) |
(343) |
|
Current liabilities |
|
|
|
|
|
Short-term borrowings |
9 |
(5,664) |
- |
(17,327) |
|
Trade and other payables |
10 |
(8,437) |
(2,475) |
(5,068) |
|
Current provisions |
|
(479) |
(12) |
(647) |
|
|
|
(14,580) |
(2,487) |
(23,042) |
|
Total liabilities |
|
(14,924) |
(3,446) |
(23,385) |
|
|
|
|
|
|
|
Net assets |
|
78,685 |
144,078 |
89,833 |
|
|
|
|
|
|
|
EQUITY |
|
|
|
|
|
Share capital |
|
13,337 |
13,337 |
13,337 |
|
Retained earnings |
|
219,105 |
279,262 |
223,600 |
|
Cumulative translation reserves |
|
(155,638) |
(150,428) |
(148,991) |
|
Other reserves |
|
1,589 |
1,589 |
1,589 |
|
Equity attributable to equity
holders of the parent |
|
78,393 |
143,760 |
89,535 |
|
Non-controlling interest |
|
292 |
318 |
298 |
|
Total equity |
|
78,685 |
144,078 |
89,833 |
Condensed
Consolidated Cash Flow Statement
Six months ended
30 June 2015
|
Six
months ended 30 June |
Year ended
31 December |
|
2015
$’000 |
2014
$’000 |
2014
$’000 |
|
(Unaudited) |
(Unaudited) |
(Audited) |
|
Operating loss |
(3,426) |
(4,588) |
(59,530) |
|
Adjustments for: |
|
|
|
|
Depreciation of property, plant and
equipment |
267 |
394 |
938 |
|
Impairment of oil and gas
assets |
- |
- |
5,134 |
|
Share of losses in joint
ventures |
4,243 |
834 |
54,664 |
|
Impairment of inventories |
- |
32 |
253 |
|
Reversal of impairment of VAT
recoverable |
(1,486) |
(641) |
(727) |
|
Loss on disposal of property, plant
and equipment |
18 |
157 |
211 |
|
Effect of foreign exchange rate
changes |
861 |
(243) |
(4,892) |
|
Operating cash flows before
movements in working capital |
477 |
(4,055) |
(3,949) |
|
Decrease/(Increase) in
inventories |
4,758 |
882 |
(7,242) |
|
Decrease/(Increase) in
receivables |
8,231 |
2,803 |
(10,285) |
|
Increase/(Decrease) in payables and
provisions |
2,880 |
(967) |
1,424 |
|
Cash from/(used in)
operations |
16,346 |
(1,337) |
(20,052) |
|
Interest paid |
(1,168) |
- |
(218) |
|
Income taxes paid |
(7) |
(2) |
(373) |
|
Net cash inflow/(outflow) from
operating activities |
15,170 |
(1,339) |
(20,643) |
|
|
|
|
|
|
Investing
activities |
|
|
|
|
Investments in joint
ventures |
- |
(2,800) |
(3,024) |
|
Purchases of property,
plant and equipment |
(362) |
(670) |
(1,611) |
|
Purchases of intangible
exploration and evaluation assets |
(174) |
(310) |
(468) |
|
Proceeds from sale of
property, plant and equipment |
- |
108 |
84 |
|
Acquisition of
financial assets |
- |
(5,000) |
- |
|
Proceeds from financial
assets |
- |
1,295 |
- |
|
Interest received |
81 |
179 |
852 |
|
Net cash used in
investing activities |
(455) |
(7,198) |
(4,167) |
|
|
|
|
|
|
Financing
activities |
|
|
|
|
Proceeds from
short-term borrowings |
1,569 |
- |
17,327 |
|
Repayment of short-term
borrowings |
(9,245) |
- |
- |
|
Net cash used in
financing activities |
(7,676) |
- |
17,327 |
|
|
|
|
|
|
Net
increase/(decrease) in cash and cash equivalents |
7,039 |
(8,537) |
(7,483) |
|
Effect of foreign
exchange rate changes |
(861) |
(39) |
(74) |
|
Cash and cash
equivalents at beginning of period/year |
48,927 |
56,484 |
56,484 |
|
Cash and cash
equivalents at end of period/year |
55,105 |
47,908 |
48,927 |
Condensed
Consolidated Statement of Changes in Equity
Six months ended
30 June 2015
|
Share
capital
$’000 |
Retained earnings
$’000 |
Cumulative
translation
reserves
$’000 |
Other reserves
Reorganisation
$’000 |
Non-controlling
interest
$’000 |
Total
$’000 |
As at 1 January 2014 |
13,337 |
282,871 |
(120,838) |
1,589 |
339 |
177,298 |
Net loss for the period |
- |
(3,609) |
- |
- |
(21) |
(3,630) |
Exchange translation differences on
foreign operations |
- |
- |
(29,590) |
- |
- |
(29,590) |
As at 30 June 2014 |
13,337 |
279,262 |
(150,428) |
1,589 |
318 |
144,078 |
Net loss for the period |
- |
(55,662) |
- |
- |
(20) |
(55,682) |
Exchange translation differences on
foreign operations |
- |
- |
1,437 |
- |
- |
1,437 |
As at 1 January 2015 |
13,337 |
223,600 |
(148,991) |
1,589 |
298 |
89,833 |
Net loss for the period |
- |
(4,495) |
- |
- |
(6) |
(4,501) |
Exchange translation differences on
foreign operations |
- |
- |
(6,647) |
- |
- |
(6,647) |
As at 30 June 2015 |
13,337 |
219,105 |
(155,638) |
1,589 |
292 |
78,685 |
Notes to the
Condensed Financial Statements
Six months ended
30 June 2015
1. General
information
Cadogan Petroleum plc (the
‘Company’, together with its subsidiaries the ‘Group’), is
incorporated in England and
Wales under the Companies Act. The
address of the registered office is 1st Floor, 40 Dukes Place,
London, EC3A 7NH. The nature of
the Group’s operations and its principal activities are set out in
the Operations Review on pages 4 to 6 and the Financial Review on
pages 7 to 9.
The financial information for the
year ended 31 December 2014 does not
constitute statutory accounts as defined in section 434 of the
Companies Act 2006, but is derived from those accounts. Statutory
accounts for the year ended 31 December
2014 have been delivered to the Registrar of
Companies. The auditor's report on those accounts was not
qualified. The auditor’s report did not contain a statement under
section 498(2) (unable to determine whether adequate accounting
records had been kept) or 498(3) (failure to obtain necessary
information and explanations) of the Companies Act 2006.
This Half Yearly Report has not been
audited or reviewed in accordance with the Auditing Practices Board
guidance on ‘Review of Interim Financial
Information’.
A copy of this Half Yearly Report
has been published and may be found on the Company’s website at
www.cadoganpetroleum.com.
2. Basis of
preparation
The annual financial statements of
the Group are prepared in accordance with International Financial
Reporting Standards (‘IFRS’) as issued by the International
Accounting Standards Board (‘IASB’) and as adopted by the European
Union (‘EU’). These Condensed Financial Statements have been
prepared in accordance with IAS 34 Interim Financial
Reporting, as issued by the IASB.
The same accounting policies and
methods of computation are followed in the condensed financial
statements as were followed in the most recent annual financial
statements of the Group, which were included in the Annual Report
issued on 30 April 2015.
The Group has not early adopted any
amendment, standard or interpretation that has been issued but is
not yet effective. It is expected that where applicable, these
standards and amendments will be adopted on each respective
effective date.
The Group has adopted the standards,
amendments and interpretations effective for annual periods
beginning on or after 1 January 2015.
The adoption of these standards and amendments did not have a
material effect on the financial statements of the Group.
(a)
Assessment of the political situation in Ukraine
Since 2014, Ukraine has been in a political and economic
turmoil. Crimea, an autonomous republic of Ukraine, was effectively annexed by the
Russian Federation. Political
unrest and separatist movements in Eastern Ukraine evolved into armed conflict
and full-scale military activities in certain parts of the Luhansk
and Donetsk regions, effectively resulting in a loss of control
over these territories by the Government of Ukraine. These events led to a significant
deterioration of the relationship between Ukraine and the Russian Federation.
Active military conflict and
inability to implement substantial and effective economic reforms
have led to a significant fall in a gross domestic product, decline
of international trade, deterioration of the state’s finances and
significant devaluation of the Ukrainian Hryvnia against major
foreign currencies. The ratings of Ukrainian sovereign debt have
been downgraded by all international rating agencies with a
negative outlook for the future. All these factors have had a
negative effect on the Ukrainian companies and banks, hampering
their ability to obtain funding from domestic and international
financial markets. In addition, Ukraine has a large external debt refinancing
requirement in the next few years, while its foreign reserves
reached a critically low level.
The National Bank of Ukraine (“NBU”) introduced a range of measures
aimed at limiting the outflow of foreign currencies from the
country, inter alia, a mandatory sale of 75 percent of foreign
currency earnings, certain restrictions on purchases of foreign
currencies on the interbank market and on usage of foreign
currencies for settlement purposes, limitations on remittances
abroad, as well as limitations for individuals for foreign currency
purchases and bank withdrawals. In addition, the Government of
Ukraine has been making efforts in
attracting significant external financing, primarily from the
International Monetary Fund, as well as negotiating terms and
conditions with external creditors as to the curtailing and
restructuring the terms of repayment of the principal amount of
external debt.
Stabilisation of the economic and
political situation depends, to a large extent, upon the success of
the Ukrainian Government’s and NBU’s efforts, and further economic
and political developments, as well as the impact of these factors
on the Group, its customers and contractors are therefore currently
difficult to predict.
(b)
Going concern
The Directors have continued to use
the going concern basis in preparing these condensed financial
statements. The Group's business activities, together with the
factors likely to affect future development, performance and
position are set out in the Operations Review. The financial
position of the Group, its cash flow and liquidity position are
described in the Financial Review.
The Group’s cash balance at
30 June 2015 of $55.1 million (31 December
2014: $48.9 million) excluding
$0.4 million (31 December 2014: $0.5
million) of Cadogan’s share of cash and cash equivalents in
joint ventures. It includes $20
million of restricted cash held in a UK bank which
represents security of borrowings. The Directors believe that the
funds available at the date of the issue of these financial
statements are sufficient for the Group to manage its business
risks successfully.
The Group’s forecasts and
projections, taking into account reasonably possible changes in
operational performance, start dates and flow rates for commercial
production and the price of hydrocarbons sold to Ukrainian
customers, show that there are reasonable expectations that the
Group will be able to operate on funds currently held and those
generated internally, for the foreseeable future.
As the Group engages in oil and gas
exploration and development activities, the most significant
financial risk faced by the Group is delays encountered in
achieving commercial production from the Group’s major fields. The
Group also continues to pursue its farm-out campaign, which, if
successful, will enable it to farm-out a portion of its interests
in its oil and gas licences to spread the risks associated with
further exploration and development.
After making enquiries and
considering the uncertainties described above, the Directors have a
reasonable expectation that the Company and the Group have adequate
resources to continue in operational existence for the foreseeable
future and consider the going concern basis of accounting to be
appropriate and, thus, they continue to adopt the going concern
basis of accounting in preparing the financial statements. In
making its statement the Directors have considered the recent
political and economic uncertainty in Ukraine.
(c)
Foreign currencies
The individual financial statements
of each Group company are presented in the currency of the primary
economic environment in which it operates (its functional
currency). The functional currency of the Company is pounds
sterling. For the purpose of the consolidated financial statements,
the results and financial position of each Group company are
expressed in US dollars, which is the presentation currency for the
consolidated financial statements.
The relevant exchange rates used
were as follows:
1 US$ =
£ |
Six
months ended 30 June |
Year
ended
31 Dec 2014 |
|
2015 |
2014 |
|
Closing rate |
1.5720 |
1.7048 |
1.5534 |
|
Average rate |
1.5239 |
1.6692 |
1.6481 |
|
|
|
|
|
1 US$ = UAH |
Six
months ended 30 June |
Year
ended
31 Dec 2014 |
|
2015 |
2014 |
|
Closing rate |
21.4515 |
11.8333 |
16.0960 |
|
Average rate |
21.5125 |
10.6536 |
12.1705 |
The effect of foreign currency
sensitivity on shareholders’ equity is equal to that reported in
the statement of comprehensive income. During the six months ended
30 June 2015, the Ukrainian Hryvnia
further depreciated against the USD and EUR by 25.0% and 17.8%,
respectively. As a result, during the six months ended 30 June 2015 the Group recognised net foreign
exchange loss in the amount of $0.9
million in the consolidated income statement and loss of
$6.6 million in the consolidated
statement of comprehensive income
(d)
Dividend
The Directors do not recommend the
payment of a dividend for the period (30
June 2014: $nil; 31 December
2014: $nil).
3. Segment
information
Segment information is presented on
the basis of management’s perspective and relates to the parts of
the Group that are defined as operating segments. Operating
segments are identified on the basis of internal reports provided
to the Group’s chief operating decision maker (“CODM”). The Group
has identified its top management team as its CODM and the internal
reports used by the top management team to oversee operations and
make decisions on allocating resources serve as the basis of
information presented. These internal reports are prepared on the
same basis as these consolidated financial statements.
Segment information is analysed on
the basis of the type of activity, products sold or services
provided.
The majority of the Group’s
operations are located within Ukraine.
Segment information is analysed on
the basis of the types of goods supplied by the Group’s operating
divisions. The Group’s reportable segments under IFRS 8 are
therefore as follows:
Exploration and
Production
- E&P activities on the production licences for natural gas,
oil and condensate
Service
- Drilling services to exploration and production companies
- Construction services to exploration and production
companies
Trading
- Import of natural gas and diesel from European countries
- Local purchase and sales of natural gas operations with
physical delivery of natural gas
The accounting policies of the
reportable segments are the same as the Group’s accounting
policies. Sales between segments are carried out at market prices.
The segment result represents operating profit under IFRS before
unallocated corporate expenses. Unallocated corporate expenses
include management remuneration, representative expenses, and
expenses incurred in respect of the maintenance of office premises.
This is the measure reported to the CODM for the purposes of
resource allocation and assessment of segment performance.
The Group does not present
information on segment assets and liabilities as the CODM does not
review such information for decision-making purposes.
As of 30 June
2015 and for the six months then ended the Group’s segmental
information was as follows:
|
Exploration and
Production |
Service |
Trading |
Consolidated |
|
$’000 |
$’000 |
$’000 |
$’000 |
Sales of hydrocarbons |
141(1) |
- |
40,270 |
40,411 |
Other revenue |
- |
192 |
- |
192 |
Sales between segments |
688 |
- |
(688) |
- |
Total revenue |
829 |
192 |
39,582 |
40,603 |
Other cost of sales |
(713) |
(86) |
(35,731) |
(36,530) |
Depreciation |
(181) |
(47) |
- |
(228) |
Other administrative expenses |
(470)(2) |
- |
(1,153)(3) |
(1,623) |
Interest on short-term
borrowings |
- |
- |
(1,114) |
(1,114) |
Segment results |
(535) |
59 |
1,584 |
1,108 |
Unallocated other administrative
expenses(4) |
|
|
|
(1,981) |
Share of losses in joint
ventures |
|
|
|
(4,243) |
Net foreign exchange losses |
|
|
|
(953) |
Other income, net |
|
|
|
1,595 |
Loss before
tax |
|
|
|
(4,473) |
(1) Sales of hydrocarbons of Exploration and Production
(“E&P”) segment represent sales of oil from Monastyretska
licence only in May and June 2015, as
Monastyretska licence production was shut-in until May 2015
(2) Other administrative expenses of E&P segment also
includes part of costs of personnel of Ukrainian head office
(3) Other administrative expenses of trading segment includes
$0.9 million of provision for trading
costs
(4) Unallocated other administrative expenses includes
depreciation of $39 thousands
As of 31
December 2014 and for the year then ended the Group’s
segmental information was as follows:
|
Exploration and
Production |
Service |
Trading |
Consolidated |
|
$’000 |
$’000 |
$’000 |
$’000 |
Sales of hydrocarbons |
1,291 |
- |
30,253 |
31,544 |
Other revenue |
- |
846 |
233 |
1,079 |
Sales between segments |
1,077 |
- |
(1,077) |
- |
Total revenue |
2,368 |
846 |
29,409 |
32,623 |
Other cost of sales |
(2,000) |
(226) |
(26,848) |
(29,074) |
Depreciation |
(579) |
(160) |
- |
(739) |
Other administrative expenses |
(1,347) |
- |
(379) |
(1,726) |
Interest on short-term
borrowings |
- |
- |
(420) |
(420) |
Segment results |
(1,558) |
460 |
1,762 |
664 |
Unallocated other administrative
expenses(1) |
|
|
|
(5,276) |
Other income, net |
|
|
|
2,228 |
Impairment |
|
|
|
(5,134) |
Share of losses in joint
ventures |
|
|
|
(54,664) |
Net foreign exchange gains |
|
|
|
3,036 |
Loss before tax |
|
|
|
(59,146) |
(1) Unallocated other administrative expenses includes
depreciation of $199 thousands
Trading operations commenced in
September 2014 hence the Group
considered exploration, production and services as a single segment
and did not prepare a separate disclosure as of 30 June 2014.
4. Loss per
ordinary share
Loss per ordinary share is
calculated by dividing the net loss for the period/year
attributable to Ordinary equity holders of the parent by the
weighted average number of Ordinary shares outstanding during the
period/year. The calculation of the basic loss per share is based
on the following data:
|
Six
months ended 30 June |
Year ended
31 December |
Loss attributable to
owners of the Company |
2015
$’000 |
2014
$’000 |
2014
$’000 |
Loss for the purposes
of basic profit per share being net loss attributable to
owners of the Company |
(4,495) |
(3,609) |
(59,271) |
|
|
|
|
|
Number |
Number |
Number |
Number of shares |
‘000 |
‘000 |
‘000 |
Weighted average number of Ordinary
shares for the purposes of basic loss per share |
231,092 |
231,092 |
231,092 |
|
|
|
|
|
Cent |
Cent |
Cent |
Loss per Ordinary share |
|
|
|
Basic |
(1.9) |
(1.6) |
(25.6) |
5. Intangible exploration
and evaluation assets
As of 30 June
2015 the intangible assets balance has decreased in
comparison to 31 December 2014 due to
depreciation of the UAH against the USD, being the presentation
currency of the Group.
6. Investments in
joint ventures
Share of losses in joint ventures
mostly represents translation losses which arose mainly on the
translation of non-current assets from UAH to USD being the
presentation currency of the Group.
The Group is committed together with
Eni to fund LLC Astroinvest-Energy subsequently to the period end
with the necessary amount of $0.8
million in order to close current liabilities of the joint
venture. Most of the funds will be used to repay the costs charged
by the partners.
7.
Inventories
The Group had significant volumes of
natural gas as at 31 December 2014
which have been sold during the six months ended 30 June 2015 that resulted in a decrease of the
natural gas balance from $8.1 million to
$1.5 million.
8. Trade and
other receivables
|
|
Six
months ended 30 June |
Year ended31
December |
|
|
2015
$’000 |
2014
$’000 |
2014
$’000 |
|
Trading
receivables |
|
4,238 |
- |
5,060 |
|
VAT recoverable |
|
1,358 |
342 |
1,674 |
|
Receivable from joint
ventures |
|
1,558 |
1,798 |
1,938 |
|
Trading
prepayments |
|
893 |
- |
8,584 |
|
Prepayments |
|
96 |
322 |
166 |
|
Loans issued |
|
- |
2,185 |
- |
|
Other receivables |
|
752 |
682 |
469 |
|
|
|
8,895 |
5,329 |
17,891 |
The Directors consider that the
carrying amount of the remaining other receivables approximates
their fair value and none of which are past due.
Management plans to realise VAT
recoverable through increased gas trading activity.
9. Short-term
borrowings
In October
2014 the Group started to use short-term borrowings as a
financing facility for its trading activities. Borrowings are
represented by a credit line drawn in UAH at a Ukrainian bank, a
100 percent subsidiary of a UK bank. The credit line is secured by
$20 million of cash balance placed at
a UK bank.
During the six months ended
30 June 2015 the Group repaid a
significant amount of the credit line and the outstanding amount as
at 30 June 2015 was $5.7 million with an average effective interest
rate of 24 percent p.a. Interest is paid monthly and as at
30 June 2015 the accrued interest
amounted to $0.1 million.
10. Trade and
other payables
The $8.4
million of trade and other payables as of 30 June 2015 (30 June
2014: $2.5 million,
31 December 2014: $5.1 million) represent $6.2 million (30 June
2014: $nil, 31 December 2014:
$2.5 million) of advances received
from clients for future supplies of natural gas and $2.2 million (30 June
2014: $2.5 million,
31 December 2014: $2.3 million) of other creditors and
accruals.
11. Related party
transactions
Transactions between the Group and
its subsidiaries, which are related parties, have been eliminated
on consolidation and are not disclosed in this note. The
application of IFRS 11 has resulted in the existing joint ventures
LLC Astroinvest-energy, LLC Gazvydobuvannya and LLC Westgasinvest,
being accounted for under the equity method and disclosed as
related parties. During the period, Group companies entered into
the following transactions with related parties who are not members
of the Group:
|
|
Six
months ended 30 June |
Year ended 31
December |
|
|
2015
$’000 |
2014
$’000 |
2014
$’000 |
|
Revenues from services
provided and sales of goods |
|
350 |
460 |
597 |
|
Purchases of
goods |
|
28 |
16 |
87 |
|
Amounts owed by
related parties |
|
1,558 |
1,798 |
1,938 |
|
Amounts owed to
related parties |
|
148 |
130 |
159 |
The amounts outstanding are
unsecured and will be settled in cash. No provisions have been made
for doubtful debts on the amounts owed by related parties.
12. Post balance
sheet events
No post balance sheet events have
taken place after 30 June 2015.
13. Commitments
and contingencies
There have been no significant
changes to the commitments and contingencies reported on pages 78
and 79 of the Annual Report.