TIDMDPL
RNS Number : 0513J
Dominion Petroleum Limited
24 June 2011
24 JUNE 2011
Dominion Petroleum Limited
("Dominion" or "the Company")
AUDITED Results for year ended 31 December 2010
Dominion Petroleum is an independent oil and gas exploration
company focusing primarily in East Africa, with a portfolio of
assets in Tanzania, Uganda, the Democratic Republic of Congo and
Kenya. Dominion is seeking new funding which will enable the
company to focus on opportunities within its existing acreage in
deepwater East Africa, whilst also exploring prospects in newly
acquired areas. The new ventures in Kenya and Malta offer
additional opportunities for growth.
KEY POINTS
* New Funding
- In March 2010, Dominion raised GBP32.7m (US$ 46.8m) through a
placing of new ordinary shares.
- The Group's cash position at 31 December 2010 was US$ 15.8
million (31 December 2009: US$ 4.7 million).
- On 24 June, 2011, Dominion announced its intention to raise
US$ 55 million (approximately GBP 34.4 million) by way of a placing
undertaken by Merrill Lynch and RBC, subject to Shareholder
approval which will be sought at a Special General Meeting of the
Company which will be held in July 2011.
* Acquisition of 3D seismic offshore Tanzania
- Operational activity during 2010 was focused on preparing for
and executing the programme to acquire 3D seismic.
- A 1 year extension to the initial exploration period has been
granted by the United Republic of Tanzania's Ministry of Energy and
Minerals, providing more time to fully evaluate the acreage.
* PSC in Kenya
- In May 2011, Dominion announced that it had entered into a PSC
for offshore Block L9 in Kenya.
- The Directors believe that L9 represents an ideal opportunity
for organic expansion in this increasingly attractive area.
- The initial exploration period of the PSC lasts for two years
and will require the reprocessing of 2,500 line km of 2D seismic,
block wide geological and geophysical studies and the acquisition
of 500 km2 of 3D seismic data.
* Progress in Uganda
- The Ngaji-1 well in EA4B was drilled in July 2010, on time and
under budget.
- Dominion has now met all of its contractual obligations for
the current period of its PSA with the Government of Uganda.
- In April 2011, Dominion submitted an application to the
Government of Uganda seeking an extension of the EA4B licence into
the Third Exploration Period.
* PSC for Block V, DRC
- In June 2010, the PSC for Block V was ratified by Presidential
Decree, although certain environmental matters are awaiting
resolution.
- During the initial five-year exploration period, the Block V
partnership has committed to acquiring at least 300 km of 2D
seismic data and the drilling of two exploration wells.
* Malta
- In June 2011, Dominion entered into an execution agreement to
acquire a 75% operated working interest in the PSC for blocks 4, 5,
6 & 7 of Area 4 Offshore Malta.
- This area contains a number of prospects including the Tarxien
prospect, estimated by a Competent Persons Report to have a gross
recoverable un-risked P50 prospective oil resource of 115mmbbl with
an 18% chance of success.
Andrew Cochran, Chief Executive of Dominion Petroleum,
commented:
"The proposed fundraising announced today is a huge
accomplishment in the corporate restructuring we embarked upon over
the past year. The Company will have a greatly improved capital
structure going forward and sufficient working capital to meet the
needs of the expanding portfolio.
Offshore Tanzania and Kenya are coming along nicely. Our
internal work on Block 7 3D and existing 2D in L9 will support a
new CPR over the summer. The new prospects mean that we can now
establish our partnering strategy for deepwater East Africa.
The expansion into offshore Malta represents a material operated
position in another emerging deepwater basin under reasonable terms
and commitments. The Mediterranean basin represents a potentially
new 'core' area for Dominion; we'll kick-off 3D in Malta as soon as
we can."
ENQUIRIES:
Dominion Petroleum Limited
Andrew Cochran, Chief Executive Officer +44 (0) 20 7349 5900
Rob Shepherd, Finance Director
Pelham Bell Pottinger Limited +44 (0)20 7861 3112 /
Archie Berens +44 (0)7802 442 486
RBC Capital Markets, NOMAD and Joint Broker +44 (0)20 7653 4000
Jeremy Low
Martin Eales
Paul Stricker
Bank of America Merrill Lynch International,
Joint Broker +44 (0)20 7996 1000
Andrew Osborne
Paul Frankfurt
Dominion Petroleum Limited
CHAiRMAN'S AND CHIEF EXECUTIVE's STATEMENT
for the year ended 31 december 2010
Introduction
Dominion was extremely active during 2010, raising new equity
funds to progress the next phase of exploration activity,
specifically the drilling of the first exploration well in the Lake
Edward basin, Uganda as well as the acquisition of 3D seismic
offshore Tanzania.
Results
As a pure exploration Group, Dominion did not receive any
revenues in the year ended 31 December 2010 (2009: US$ nil),
although US$ 0.06 million ("mln") was earned in interest from cash
on deposit (2009: US$ 0.04 mln). The loss before tax was US$ 38.5
mln (2009: US$ 10.5 mln). The loss per share was US Cents 2.68
(2009: US Cents 1.77).
The Group's cash position at 31 December 2010 was US$ 15.8 mln
(31 December 2009: US$ 4.7 mln).
Review of operations
Tanzania Deep Water Block 7 (Dominion Tanzania Ltd 100%,
Operator)
On 28 June 2010, Dominion announced the results of a competent
person's report ("CPR") concluded by Energy Resource Consultants
Ltd ("ERC") on the first prospect in Block 7, offshore deep-water
Tanzania.
Based on the CPR, the "Alpha" prospect has a mean prospective
resource of 1.104Bbbl of oil or 7.069Tcf of gas. ERC have risked
the prospect with a Chance of Success ("CoS") ranging from 9%-15%
for the different objectives within Alpha; net risked mean
resource: 134 MMbbl of oil or 865 Bcf of gas. Alpha is in water
depths of approximately 1,500 metres and represents multiple
drilling objectives.
The Alpha prospect was identified by the existing 4,350 square
kilometres ("sq km") of 2D seismic coverage and is supported by
amplitude variations with offset ("AVO") studies performed this
year.
This is only the first prospect in the block and the CPR work
undertaken on Alpha was intended to assist in planning the 3D
seismic survey.
Operational activity during 2010 was focused on preparing for
and executing the programme to acquire 3D seismic covering a number
of prospects previously identified following an earlier 2D seismic
programme. The survey was completed by the Fugro Geoteam seismic
vessel, the GeoBarents in November 2010 over a total area of 1,235
sq km, covering the Alpha, Beta and three other prospects.
The data, which is currently being processed by CGG Veritas, is
anticipated to be completed in June 2011. The long offset, 7km
streamer data acquisition was designed to support AVO studies.
These studies on the existing 2D data have already helped de-risk
Alpha and Beta prospects. The final results of the 3D data and
subsequent analyses will help the Company re-assess volumes and
improve chances of success not only for the Alpha prospect but for
all prospects mapped within, and immediately adjacent to, the
survey area.
Uganda Exploration Area 4B (Dominion Uganda Limited 100%,
Operator)
Exploration Area 4B ("EA4B") in Uganda, which is held 100% under
a Production Sharing Agreement ("PSA") by Dominion Uganda Limited
(Dominion interest 95%), is located in south-western Uganda in the
Lake Edward and Lake George segment of the Albertine Graben. To the
north, the Lake Albert basins, (Southern, Northern Lake Albert, and
Pakwach), have been the sites of several major oil discoveries in
the last three years, including those in the Kingfisher, Warthog
and Buffalo-Giraffe prospects.
Operational focus during 2010 was on drilling the Ngaji
(Silverback Gorilla) prospect in EA4B, Dominion's first exploration
well in Uganda.
Ngaji is a tilted-fault block structural closure chosen as the
best location to test the geology of the Ugandan side of the Lake
Edward Basin.
The well was spudded on 21 June 2010, targeting a depth of 2,000
metres.
On 21 July 2010, Dominion announced that the Ngaji-1 well was
drilled to total depth ("TD") at 1765m; the results were
inconclusive as it did not identify any significant hydrocarbons.
The well was plugged and abandoned as a dry hole with gas
shows.
Democratic Republic of Congo ("DRC"), Block V (Dominion
Petroleum Congo 46.75%)
On 28 June 2010, Dominion announced that the Production Sharing
Contract ("PSC") for Block V had been ratified by Presidential
Decree. Certain environmental matters remain to be resolved.
The block, operated by SOCO International plc, is located at the
southern end of the Albertine Rift system and includes the DRC's
portion of Lake Edward. During the initial five-year exploration
period, the Block V partnership has committed to acquiring at least
300 km of 2D seismic data and the drilling of two exploration
wells.
Tanzania Onshore
On 15 February 2010, Dominion announced that agreement had been
signed with Les Etablissements Maurel & Prom ("M & P") to
farm in to the Mandawa and Kisangire PSAs subject to the execution
of final agreements, which were signed at the start of July
2010.
Under the final agreements, M & P acquired:
-- A 40% interest in the Mandawa PSA onshore Tanzania, resulting
in M & P owning 90% of the Mandawa licence and Dominion's
interest being reduced to 10%; and
-- An option over a 35% interest in the Kisangire PSA onshore
Tanzania (operated by Heritage Oil Tanzania Ltd., ("Heritage") who
have a 55% interest), reducing Dominion's interest to 10%.
In return, Dominion's funding requirement in respect of the
Kianika-1 well on the Mandawa licence reduced from 100% to 20% of
the drilling costs and to 10% of associated expenses.
The Kianika-1 well spudded on 27 June 2010, targeting a 77 MMbbl
oil or 264Bcf gas prospect at a depth of approximately 2,700
metres.
On 3 December, 2010, Dominion announced that it was advised by
Maurel & Prom, operator of the Mandawa PSA in Tanzania
(Dominion 10% working interest) that the Kianika-1 well had reached
the planned depth of 3,040 metres. The targeted carbonates of Mid
Jurassic Mtumbei formation were found with good reservoir
characteristics, which confirmed the rationale for investigating
this play.
No hydrocarbon shows being encountered (possibly due to lack of
effective lateral seal), the well was
plugged and abandoned.
The Kianika-1 well was the second and last commitment well of
the Initial Exploration Phase.
On 17 December, 2010, Heritage advised the Tanzania Petroleum
Development Corporation ("TPDC") that the partners wished to allow
the Kisangire / Lukuliro licences to expire on 31 December 2010
upon completion of the first exploration period.
Other
On 1 March 2010, Dominion announced that it had raised GBP32.7
mln (US$ 46.8 mln) through a placing of new ordinary shares, which
was approved at a Special General Meeting on 25 March 2010, with a
broad range of established institutional investors (the
"Placing").
As a result of the Placing, 654,880,000 new ordinary shares were
issued to new and existing shareholders at a price of 5p per
share.
Current trading and outlook
Tanzania Deep Water Block 7 (Dominion Tanzania Ltd 100%,
Operator)
Dominion was granted a one year extension to the initial
exploration period for Block 7 (100% Dominion) by the United
Republic of Tanzania's Ministry of Energy and Minerals, by a notice
dated 28 March 2011. The extension to the current period removes
any obligation for the Company to relinquish any portion of Block 7
until May 2012, providing Dominion with more time to more fully
evaluate the acreage before the mandatory 50% relinquishment.
As previously indicated, the 3D seismic survey acquired at the
end of 2010 is presently being processed in full whilst a Fast
Track volume is being interpreted.
The final results of the 3D seismic survey and subsequent
analyses will help the Company re-assess volumes and potentially
improve chances of success, not only for the Alpha prospect but for
all prospects mapped within, and immediately adjacent to, the
survey area.
The Fast Track 3D has highlighted the presence of new
opportunities not apparent on the original 2D dataset. Examples of
the new Tertiary prospects and leads include:
1. a Paleocene fan prospect (Bravo);
2. an Eocene fan prospect (E1); and
3. a Miocene/Pliocene channel prospect (M1).
Management estimate that these three currently mapped prospects
alone add cumulatively between 1.3 Tcf and 6.5 Tcf (P90 to P10
range) of prospective resources to Block 7. Further work on other
potential prospects and leads is continuing.
Work on the Alpha prospect also continues with the Final 3D
Volume required to analyse the deeper Cretaceous targets. The
Directors anticipate that the geological chance of success will
improve on the Alpha prospect as a consequence of the improved 3D
data quality. Successful drilling offshore Tanzania and Mozambique
by other operators in the region may also de-risk the prospect
further.
Additionally, interpretation of the Fast Track 3D has led to a
better understanding of the whole of Block 7. This understanding
has provided the Directors with increased confidence that the
deepwater Lambda and Mu leads may offer substantial additional
prospectivity. To this end, additional 2D is intended to be
acquired as "in fill" to the deeper water portion of Block 7, to
improve the Company's understanding of both the Lambda and Mu
prospects, as well as the larger Cretaceous structural features
beneath.
The Final 3D Volume will be completed in June 2011 and the
Company will initiate a full CPR in summer 2011. This CPR will
focus on all the prospects so far identified from the Pliocene to
the Lower Cretaceous targets. Dominion's intention is to seek
farm-in partners for Block 7, prior to commencing drilling
operations in the first half of 2012.
Uganda Exploration Area 4B (Dominion Uganda Limited 100%,
Operator), Democratic Republic of Congo, Block V (Dominion DRC
46.75%)
EA4B and Block V are contiguous across the Lake Edward basin,
which straddles the borders of both countries. Both blocks are part
of the Albertine Rift system of sedimentary basins where numerous
commercial oil discoveries have been made since 2006. Although the
Ngaji-1 well on EA4B, drilled in June/July 2010, did not identify
any significant hydrocarbons, the well results did confirm the
presence of good quality reservoir sands, seals and possible
Pliocene source.
Dominion's current exploration efforts in this area are focused
on two prospects: Prospect "B", with 49.4 mmboe net prospective P50
resources; and the "Izzy" Prospect, with 83.7 mmboe net prospective
P50 resources (management estimates). In 2011, Dominion intends to
acquire 300-500 km of new 2D seismic in the Lake Edward Basin as
well as carry out a surface geochemistry survey.
On 27 April, 2011, Dominion submitted an application to the
Government of Uganda seeking an extension of the EA4B licence into
the Third Exploration Period, commencing in July 2011 and ending in
July 2013.
Given the Company has exceeded the minimum commitments for the
second period and is committing to the minimum programme required
for the third period, the Company fully anticipates the extension
to be granted.
Tanzania Onshore
Following further evaluation of the results of the Kianika-1
well, on 23 March, 2011, Maurel et Prom advised the relevant
authorities in Tanzania that the partners would be surrendering the
Mandawa contract area.
New Ventures
Kenya
On 17 May 2011, Dominion entered into a PSC with the Kenyan
Ministry of Energy for a 100% working interest and operatorship of
the Block L9 PSC in the Lamu Basin, offshore Kenya, although it
will retain a net operated working interest of 60% following
transfers of interests to Flow Energy Limited and Avana Petroleum
Limited with whom Dominion applied for the award of the PSC. The
process by which Dominion was awarded Block L9 was highly
competitive. The Board also notes that other companies that have
been awarded acreage offshore Kenya include significantly larger
operators such as BG Group PLC, Anadarko Petroleum Corp and Premier
Oil PLC.
Block L9 was one of the last remaining opportunities for
unlicensed acreage along the whole of the deepwater East African
margin and the Directors believe it represents an ideal opportunity
for organic expansion in this increasingly attractive area. In 1978
Total drilled a single well in Block L9 in the Lamu Basin and
encountered gas shows in the tertiary and upper Cretaceous. The
well may therefore have penetrated a working hydrocarbon system,
making the Block highly attractive. Synthetic aperture radar has
also identified possible oil seeps in offshore Kenya Blocks L6 and
Block L8, which are adjacent to Dominion's Block L9. Due to the
geological similarities between Block L9 and offshore Tanzania,
where Dominion also operates, the Company intends to use its
knowledge of the regional geology to maximise the Block's potential
and to coordinate exploration activities within its expanded
offshore East Africa portfolio.
The initial exploration period of the PSC lasts for two years
and will require the reprocessing of 2,500 line km of 2D seismic,
block wide geological and geophysical studies and the acquisition
of 500 sq km of 3D seismic data. Minimum expenditure will total
US$6.15 mln gross. Dominion will then either relinquish the PSC or
enter into the next two year PSC period carrying a commitment to
drill one exploration well.
Malta
On 24 June 2011 Dominion entered into an Execution Agreement to
acquire a 75% operated working interest in the production sharing
contract for Blocks 4, 5, 6 and 7 of Area 4 Offshore Malta from
Phoenicia Energy Company Limited ("PEL"), a wholly owned subsidiary
of Mediterranean Oil & Gas plc ("MOG"), pursuant to a draft
farm-in agreement (the "Maltese Acquisition"). Closing of the
Maltese Acquisition is conditional upon (i) Maltese government
approvals and (ii) completion of the Placing of the Subscription
Shares. Under the Execution Agreement, Dominion will pay a deposit
of US$225,000, which is non-refundable in the event that the
Resolutions (other than the Remuneration Resolution) are not passed
at the SGM, or Dominion is otherwise unable to enter into the
farm-in agreement. The deposit is refundable in the event that
Maltese government approvals are not received.
The Maltese PSC covers an area of 5,715 sq km in Maltese waters
to the North of Libya and provides Dominion with a material working
interest in the proven Eocene carbonate play of North Africa, as
well as the Cretaceous rift potential of the Melita-Median Graben.
RPS Energy completed a competent person's report on Area 4 in March
2006 identifying a number of prospects in the area including the
Tarxien prospect, a lower Eocene carbonate build-up which RPS,
using Libyan oil field analogues, estimated to have a gross
recoverable un-risked P50 prospective oil resource of 115mmbbl with
an 18% chance of success.
MOG, through PEL, currently holds an operated working interest
of 90% under the Maltese PSC, with the remaining 10% working
interest held by Leni Gas & Oil Investments Limited. Following
successful completion of the Maltese Acquisition and entry into the
farm-in agreement, Dominion will have a 75% operated working
interest in the Maltese PSC. Under the terms of the farm-in
agreement Dominion will carry MOG for certain costs relating to its
remaining 15% working interest up to a cap of US$1,260,000.
Dominion will also reimburse MOG for certain historic costs,
through the US$225,000 deposit referred to above plus a closing sum
under the farm-in agreement of US$675,000, for a total of
US$900,000.
The work obligations under the current period of the Maltese PSC
comprise the acquisition of 1,000 sq km long-offset 3D seismic data
and the drilling of one exploration well. Prior to any drilling
decision, Dominion will process and evaluate the results of the
seismic survey, so as to allow the Company to better define the
Tarxien prospect and to mature other leads and prospects already
identified in Area 4. Furthermore, the long-offset 3D will better
image the pre-tertiary rift-fill below the Eocene carbonates and
potentially support seismic attribute analyses for new Cretaceous
targets.
The first exploration period runs until January 2013 and there
is a minimum spend requirement of US$5 mln. The Company anticipates
that the 3D seismic survey will cost between approximately US$8 mln
and US$10 mln gross to undertake, which will satisfy the minimum
spend requirement.
Other
On 24 June, 2011, Dominion announced its intention to raise
approximately US$ 55 mln (approximately GBP 34.4 mln) by way of the
issue and sale of new and existing Consolidated Shares (the
"Placing Shares") in the Company (the "Placing"), with both new and
existing institutional investors.
Immediately prior to the issue and sale of the Placing Shares,
it is proposed that the issued and unissued US$0.00004 common
shares of the Company be consolidated on a 20 for 1 basis into
common shares of a nominal value of US$0.0008. The shares to be
issued and sold pursuant to the Placing will therefore be
Consolidated Shares.
The Placing is being conducted, subject to the satisfaction of
certain conditions, including shareholder approval through an
accelerated book-building process to be carried out by RBC Capital
Markets ("RBC") and Merrill Lynch International ("Merrill Lynch"),
who are acting as joint bookrunners.
Approximately US$ 18 of the proceeds of the Placing will be used
to repurchase at a discount and then cancel approximately US$ 24
mln in face value of senior secured convertible notes (the "Notes")
held by certain noteholders and to repay any additional amounts
owed to them under the note purchase agreement that constitutes the
Notes.
Whilst the relinquishment of certain assets onshore Tanzania has
led to a material impairment charge for 2010, the initiatives
recently announced in respect of offshore Block 7; the new ventures
in Kenya and Malta; the Company's position in the Lake Edward
Basin; and, completion of the pending placing and associated notes
repurchase should give investors confidence in a bright future for
Dominion.
Roger Cagle Andrew Cochran
Chairman Chief Executive
24 June 2011 24 June 2011
Dominion Petroleum Limited
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEAR ENDED 31 DECEMBER 2010
Notes 2010 2009
$'000 $'000
Administrative expenses
------------------------------------------------ ------ --------- ---------
Share-based payments (597) (2,122)
Impairment charge (33,526) -
Other administrative expenses (5,488) (8,180)
------------------------------------------------ ------ --------- ---------
Total administrative expenses (39,611) (10,302)
--------- ---------
LOSS FROM OPERATIONS (39,611) (10,302)
--------- ---------
Finance costs (63) (193)
Finance income 1,204 40
--------- ---------
LOSS BEFORE TAXATION (38,470) (10,455)
Income tax expense (53) (51)
--------- ---------
LOSS FOR THE YEAR (38,523) (10,506)
--------- ---------
OTHER COMPREHENSIVE INCOME:
Foreign exchange gain / (loss) on retranslation
of foreign operations 68 (41)
--------- ---------
TOTAL COMPREHENSIVE INCOME FOR THE YEAR (38,455) (10,547)
--------- ---------
LOSS FOR THE YEAR ATTRIBUTABLE TO:
(38,506) (10,446)
Owners of the parent (17) (60)
--------- ---------
Non-controlling interest
--------- ---------
TOTAL COMPREHENSIVE INCOME ATTRIBUTABLE
TO:
(38,438) (10,487)
Owners of the parent (17) (60)
--------- ---------
Non-controlling interest
--------- ---------
LOSS PER SHARE
Basic and diluted (US Cent) 3 (2.68) (1.77)
All amounts relate to continuing activities.
Dominion Petroleum Limited
Consolidated STATEMENT of financial position
At 31 December 2010
ASSETS Notes $'000 $'000
NON-CURRENT ASSETS
Property, plant and equipment 402 474
Oil and gas exploration expenditure 4 69,429 65,839
--------- ---------
69,831 66,313
--------- ---------
CURRENT ASSETS
Trade and other receivables 1,753 971
Inventory 385 255
Cash and cash equivalents 15,847 4,706
--------- ---------
17,985 5,932
--------- ---------
TOTAL ASSETS 87,816 72,245
--------- ---------
EQUITY AND LIABILITIES
Equity attributable to equity holders
of the parent
Share capital 63 37
Convertible debt option reserve 9,495 8,909
Share premium 110,004 63,203
Share-based payments reserve 23,178 22,613
Currency translation reserve (112) (180)
Retained earnings (91,461) (52,955)
--------- ---------
Equity attributable to the equity holders
of the parent 51,167 41,627
Non-controlling interests (137) (120)
--------- ---------
Total equity 51,030 41,507
--------- ---------
NON-CURRENT LIABILITIES
Convertible loan notes 31,202 27,110
--------- ---------
31,202 27,110
--------- ---------
CURRENT LIABILITIES
Trade and other payables 5,526 3,564
Current tax payable 58 64
--------- ---------
5,584 3,628
--------- ---------
TOTAL LIABLITIES 36,786 30,738
--------- ---------
TOTAL EQUITY AND LIABILITIES 87,816 72,245
--------- ---------
The financial statements were approved by the Board of Directors
and authorised for issue on 24 June 2011 and are signed on its
behalf by:
Roland Wessel Rob Shepherd
Director Director
Dominion Petroleum Limited
consolidated statement of cash flows
for the year ended 31 december 2010
2010 2009
$'000 $'000
CASH FLOWS FROM OPERATING ACTIVITIES
Loss for the year (38,523) (10,506)
Increase in inventory (130) (255)
(Increase)/decrease in other receivables (782) 1,457
(Decrease)/increase in other payables (1,217) 815
Income tax expense 53 51
Unrealised foreign exchange movement (750) 29
Depreciation 230 175
Loss on disposal of property, plant and
equipment 11 8
Impairment of oil and gas assets 33,526 -
Share-based payment expense 597 2,122
Finance income (59) (40)
CASH USED IN OPERATIONS (7,044) (6,144)
Income taxes paid (59) (50)
--------- ---------
NET CASH FROM OPERATING ACTIVITIES (7,103) (6,194)
INVESTING ACTIVITIES
Interest received 59 40
Oil and gas exploration expenditure (29,140) (3,581)
Reimbursement of past exploration costs - 1,219
Proceeds from disposal of plant and equipment 2 35
Acquisition of property, plant and equipment (172) (27)
--------- ---------
CASH USED IN INVESTING ACTIVITIES (29,251) (2,314)
--------- ---------
FINANCING ACTIVITIES
Costs of re-financed convertible loan notes - (830)
Issue of ordinary share capital (net of
issue costs) 46,827 9,617
Payment made for forfeit of options (32) -
--------- ---------
CASH FLOW FROM FINANCING ACTIVITIES 46,795 8,787
--------- ---------
Increase/(decrease) in cash and cash equivalents 10,441 279
Cash and cash equivalents at beginning of
period 4,706 4,497
Exchange gains/losses on cash and cash equivalents 700 (70)
--------- ---------
CASH AND CASH EQUIVALENTS AT END OF PERIOD 15,847 4,706
--------- ---------
DOMINION PETROLEUM LIMITED
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
for the year ended 31 december 2010
Equity
Share- attributable
Convertible based Currency to owners Non-
Share Debt option Share payments translation Retained of the controlling Total
Capital reserve premium reserve reserve earnings parent Interests equity
$'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000
At 1 January
2010 37 8,909 63,203 22,613 (180) (52,955) 41,627 (120) 41,507
-------- ------------ -------- --------- ------------ --------- ------------- ------------ ---------
Total
comprehensive
income for
the year - - - - 68 (38,506) (38,438) (17) (38,455)
Issue of share
capital (net
of issue
costs) 26 - 46,801 - - - 46,827 - 46,827
Share-based
payments - - - 597 - - 597 - 597
Cash settled
options - - - (32) - - (32) - (32)
Equity portion
of
convertible
loan note - 586 - - - - 586 - 586
At 31 December
2010 63 9,495 110,004 23,178 (112) (91,461) 51,167 (137) 51,030
-------- ------------ -------- --------- ------------ --------- ------------- ------------ ---------
At 1 January
2009 17 16,884 22,590 20,514 (139) (50,951) 8,915 (60) 8,855
-------- ------------ -------- --------- ------------ --------- ------------- ------------ ---------
Total
comprehensive
income for
the year - - - - (41) (10,446) (10,487) (60) (10,547)
Issue of share
capital (net
of issue
costs) 20 - 40,613 505 - - 41,138 - 41,138
Share-based
payments - - - 1,594 - - 1,594 - 1,594
Equity portion
of
convertible
loan note - (7,975) - - - 8,442 467 - 467
-------- ------------ -------- --------- ------------ --------- ------------- ------------ ---------
At 31 December
2009 37 8,909 63,203 22,613 (180) (52,955) 41,627 (120) 41,507
-------- ------------ -------- --------- ------------ --------- ------------- ------------ ---------
Dominion Petroleum Limited
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
for the year ended 31 december 2010 (CONTINUED)
The following describes the nature and purpose of each reserve
within owners' equity:
Reserve Description and purpose
Share capital Amount subscribed for share capital at nominal
value.
Convertible debt Amount of proceeds on issue of convertible debt
option relating to the equity component (i.e. option
to convert the debt into share capital).
Share premium Amount subscribed for share capital in excess
of nominal value.
Share-based payment Cumulative fair value of amounts charged in respect of
share based payment and warrant arrangements.
Currency translation Gains/losses arising on translating the net
assets of overseas operations into US Dollars.
Retained earnings Cumulative net gains and losses recognised in
the consolidated statement of comprehensive
income
Dominion Petroleum Limited
abridged notes
for the year ended 31 december 2010
1 Accounting policies
Basis of preparation
The principal accounting policies adopted in the preparation of
the financial statements are set out below. The policies have been
consistently applied to all the years presented, unless otherwise
stated.
These financial statements have been prepared in accordance with
International Financial Reporting Standards, International
Accounting Standards and Interpretations (collectively IFRS) issued
by the International Accounting Standards Board (IASB) as adopted
by the European Union ("adopted IFRSs"), and are in accordance with
IFRS as issued by the IASB.
The consolidated financial statements have been prepared on the
historical cost basis, as modified by the revaluation of property,
plant and equipment, available for sale financial assets, and
financial assets and liabilities, including derivative financial
instruments, at fair value through profit or loss.
The preparation of financial statements in compliance with IFRS
requires the use of certain critical accounting estimates. It also
requires Group management to exercise judgment in the most
appropriate application in applying the Group's accounting
policies.
Going concern
The Directors have prepared cash projections showing the need to
raise additional funds to finance the minimum exploration work
programme and working capital requirements for the next twelve
months.
The Directors have engaged Merrill Lynch and RBC to raise cash
by an equity placement sufficient to cover the funding requirements
for the next twelve months. The Directors are confident that an
equity placement will be agreed and that the required shareholder
approval will be obtained to conclude the placing. However there
can be no guarantee that an equity placement will complete. Failure
to raise the required funds may result in the Group failing to meet
its minimum exploration work programme and working capital
requirements.
The financial statements have been prepared on a going concern
basis as the Directors expect the Group will be able to raise the
required funds. These conditions indicate the existence of a
material uncertainty which may cast significant doubt about the
Group's ability to continue as a going concern. The financial
statements do not include the adjustments that would result if the
Group was unable to continue as a going concern.
Changes in accounting policies
(a) New and amended standards adopted by the Group
The following new standards and amendments to standards are
mandatory for the first time for the Group for financial year
beginning 1 January 2010.
Standard Effective Impact on initial application
date
IAS 39 - Amendment 1 Jul 2009 The amendment clarifies the
- Financial Instruments: principles for determining
Recognition and eligibility of hedged items. The
Measurement: amendment did not have any impact on
Eligible Hedged the current or prior years'
Items financial statements. Future
transactions will be accounted for
consistently with this amendment.
IFRS 2 - Amendment 1 Jan 2010 The amendments clarifies that where
- Group Cash-settled a parent (or another group entity)
Share-based Payment has an obligation to make a
Transactions cash-settled share-based payment to
another group entity's employees or
suppliers, the entity receiving the
goods or services should account for
the transaction as equity -settled.
The amendment did not have any
impact on the current or prior
years' financial statements. Future
transactions will be accounted for
consistently with this amendment.
'Additional exemptions 1 Jan 2010 This is not relevant to the Group as
for first-time it is an existing IFRS preparer.
adopters' (Amendment
to IFRS 1)
Improvements Generally The improvements in this Amendment
to IFRSs (2009) 1 January clarify the requirements of IFRSs
2010 and eliminate inconsistencies within
and between Standards. The
improvements did not have any impact
on the current or prior years'
financial statements
IFRIC 17 - Distributions 1 Jan 2010 The interpretation provides guidance
of Non-cash Assets on how to measure distribution of
to Owners assets other than cash. The
application of this interpretation
did not have any impact on the
current or prior year's financial
statements. Future transactions will
be accounted for consistently with
this interpretation.
IFRIC 18 - Transfer 1 Jan 2010 The interpretation clarifies the
of Assets from treatment of agreements in which an
Customers entity receives from a customer an
item of property that it must use to
provide the customer with an
on-going access to goods or
services. The application of this
interpretation did not have any
impact on the current or prior
year's financial statements. Future
transactions will be accounted for
consistently with this
interpretation.
IFRIC 9/ IAS 1 Jan 2010 The amendment clarifies the
39 - Amendment treatment of embedded derivatives in
- Embedded Derivative host contracts that are classified
out of fair value through profit or
loss. The application of this
interpretation did not have any
impact on the current or prior
year's financial statements. Future
transactions will be accounted for
consistently with this
interpretation.
IFRIC 16 - Hedges 1 Jan 2010 The interpretation provides guidance
of a Net Investment for application of hedge accounting
in a Foreign in foreign operations. The
Operation application of this interpretation
did not have any impact on the
current or prior year's financial
statements. Future transactions will
be accounted for consistently with
this interpretation.
-------------------------- ----------- -------------------------------------
No other IFRS issued and adopted but not yet effective are
expected to have an impact on the Group's financial statements.
(b) Standards, amendments and interpretations, which are
effective for reporting periods beginning after the date of these
financial statements which have not been adopted early:
Standard Description Effective
date
IAS 32 Amendment - Classification of Rights Issues 1 Feb 2010
IFRIC Extinguishing Financial Liabilities with 1 Jul 2010
19 Equity Instruments
IFRS Amendment - First Time Adoption of IFRS 1 Jul 2010
1
IAS 24 Revised - Related Party Disclosures 1 Jan 2011
IFRIC Amendment - IAS 19 Limit on a defined 1 Jan 2011
14 benefit asset
IFRS Amendment - Transfer of financial assets 1 Jul 2011
7 *
IFRS Severe Hyperinflation and Removal of Fixed 1 Jul 2011
1 * Dates for First-time Adopters
Improvements to IFRSs (2010) * 1 Jan 2011
IAS 12 Deferred Tax: Recovery of Underlying Assets 1 Jan 2012
*
IFRS Financial instruments 1 Jan 2013
9 *
The Group has not yet assessed the impact of IFRS 9. Except for
the amended disclosure requirements of IAS 24, the above revised
standards, amendments and interpretations are not expected to
materially affect the Group's reporting or reported numbers.
* Not yet endorsed by European Union.
Basis of consolidation
The consolidated financial information incorporates the results
of the Group as at 31 December 2010.
Where the Company has the power, either directly or indirectly,
to govern the financial and operating policies of another entity or
business so as to obtain benefits from its activities, it is
classified as a subsidiary. The consolidated financial statements
present the results of the Company and its subsidiaries ("the
Group") as if they formed a single entity. Intercompany
transactions and balances between Group companies are therefore
eliminated in full.
Business combinations
The consolidated financial statements incorporate the results of
business combinations using the purchase method of accounting. In
the consolidated statement of financial position, the acquiree's
identifiable assets, liabilities and contingent liabilities are
initially recognised at their fair values at the acquisition date.
The results of acquired operations are included in the consolidated
statement of comprehensive income from the date on which control is
obtained.
Jointly controlled assets
Jointly controlled assets are arrangements in which the Group
holds an interest on a long term basis which are jointly controlled
by the Group and one or more venturers under a contractual
arrangement. Some of the Group's exploration activities are
conducted jointly with other companies in this way. The Group
accounts for its share of assets, liabilities, income and
expenditure of the joint ventures in which
the Group holds an interest, classified in the appropriate
balance sheet and income statement headings.
Foreign currency
The functional and presentational currency of Group companies is
US dollars, except for Dominion Petroleum Administrative Services
Limited, whose functional currency is UK Sterling. Transactions
entered into by Group entities in a currency other than the
currency of the primary economic environment in which they operate
(their "functional currency") are recorded at the rates ruling when
the transactions occur. Foreign currency monetary assets and
liabilities are translated at the rates ruling at the statement of
financial position date. Exchange differences arising on the
retranslation of unsettled monetary assets and liabilities are
recognised immediately in the consolidated statement of
comprehensive income.
On consolidation, the results of overseas operations are
translated into US dollars at rates approximating to those ruling
when the transactions took place. All assets and liabilities of
overseas operations, including goodwill arising on the acquisition
of those operations, are translated at the rate ruling at the
statement of financial position date. Exchange differences arising
on translating the opening net assets at opening rate and the
results of overseas operations at actual rate are recognised
directly in equity (the "currency translation reserve").
Segment reporting
For management purposes the Group is organised into operating
segments. Management review the Group's performance by reviewing
the results of the exploration activities by geographic location in
each African licence area, and reviewing the corporate
administrative and finance activity of the head office function in
London.
Segment results and total assets include items directly
attributable to a segment as well as those that can be allocated on
a reasonable basis. Unallocated items comprise mainly head office
assets and expenses and capitalised borrowing costs.
Financial assets
The Group's loans and receivables comprise other receivables and
cash and cash equivalents in the statement of financial position.
Cash and cash equivalents include cash in hand and deposits held on
call with banks. Any interest earned is accrued monthly and
classified as interest. Other receivables are stated at amortised
cost less impairment.
Financial liabilities
The Group classifies its financial liabilities into one of two
categories, depending on the purpose for which the liability
arose.
-- Trade and other payables and other short-term monetary
liabilities, which are initially recognised at fair value and
subsequently recognised at amortised cost using the effective
interest rate method.
-- Convertible loan notes are regarded as compound instruments,
consisting of a liability component and an equity component. At the
date of issue, the fair value of the liability component is
estimated using the prevailing market interest rate for similar
non-convertible debt. The difference between the proceeds from
issue of the convertible loan notes and the fair value attributed
to the liability component, representing the embedded option to
convert the liability into equity of the Group, is included in
equity (Convertible debt option reserve). The financial liability
component is subsequently carried at amortised cost using the
effective interest rate method and is accreted up to the redemption
amount each year.
Share capital
Financial instruments issued by the Group are treated as equity
only to the extent that they do not meet the definition of a
financial liability. The Company's Common Shares are classified as
equity instruments. These are recorded at the proceeds received net
of direct issue costs.
Borrowing costs
Interest incurred on the convertible loan notes used to fund the
Group's exploration expenditure is capitalised as part of its oil
and gas exploration assets. The Group does not incur any other
interest costs that qualify for capitalisation under IAS 23
'Borrowing costs'.
The renegotiation of terms of the Series A & B Loan Notes,
following the re-financing on 13 August 2009, required adjustment
of the financial liability to take account of the change in the
present value of future cash flows. The change of terms did not
result in a substantial modification of terms of an existing
financial liability (as defined by IAS 39 para 40). The carrying
value of the remaining liability is being amortised over the
revised remaining term of the Loan Notes, the charge being included
in borrowing costs capitalised.
Share-based payments
Where equity settled share options are awarded to employees, the
fair value of the options at the date of grant is charged to the
consolidated statement of comprehensive income over the vesting
period. Non-market vesting conditions are taken into account by
adjusting the number of equity instruments expected to vest at each
statement of financial position date so that, ultimately, the
cumulative amount recognised over the vesting period is based on
the number of options that eventually vest. Market vesting
conditions are factored into the fair value of the options granted.
As long as all other vesting conditions are satisfied, a charge is
made irrespective of whether the market vesting conditions are
satisfied. The cumulative expense is not adjusted for failure to
achieve a market vesting condition.
Where the terms and conditions of options are modified before
they vest, the increase in the fair value of the options, measured
immediately before and after the modification, is also charged to
the consolidated statement of comprehensive income over the
remaining vesting period.
Warrants
Warrants issued as part of share subscriptions are treated as
equity instruments and are valued using the Black-Scholes option
pricing model. The initial proceeds from the share subscriptions
(units consisting of share and warrants) are allocated to share
capital, share premium and convertible debt reserve in accordance
to their relative fair values.
Oil and gas assets - exploration and evaluation
In respect of all exploration expenditure the Group has adopted
the full cost method of accounting. Pending determination of
commercial reserves all expenditure relating to the acquisition,
exploration and appraisal of oil and gas interests is capitalised
as an intangible asset. On determination of commercial reserves the
expenditure will be transferred to appropriate cost pools and
amortised over the estimated life of the commercial reserves on a
unit of production basis. Where costs associated with a licence
have been capitalised and the licence is subsequently relinquished,
the project is abandoned or is considered to be of no further
commercial value to the Group, the relevant costs will be written
off.
Impairment of oil and gas assets
Impairment tests on oil and gas assets with indefinite useful
economic lives are undertaken annually at the financial year end.
Other non-financial assets are subject to impairment tests whenever
events or changes in circumstances indicate that their carrying
amount may not be recoverable. Where the carrying value of an asset
exceeds its recoverable amount (i.e. the higher of value in use and
fair value less costs to sell), the asset is written down
accordingly.
Where it is not possible to estimate the recoverable amount of
an individual asset, the impairment test is carried out on the
asset's cash-generating unit (i.e. the lowest Group of assets in
which the asset belongs for which there are separately identifiable
cash flows).
Impairment charges are included in the administrative expenses
line item in the consolidated statement of comprehensive income,
except to the extent they reverse gains previously recognised
directly in equity. An impairment loss recognised for goodwill is
not reversed.
Property, plant and equipment
Items of property, plant and equipment are initially recognised
at cost. As well as the purchase price, cost includes directly
attributable costs and the estimated present value of any future
unavoidable costs of dismantling and removing items. The
corresponding liability is recognised within provisions. All items
of property, plant and equipment are carried at depreciated
cost.
Freehold land is not depreciated. Depreciation is provided on
all other items of property, plant and equipment to write off the
carrying value of items over their expected useful economic lives.
It is applied at the following rates:
Buildings 2% per annum straight line
Computer/telecoms 25% per annum straight line
Motor vehicles 25% per annum straight line
Office equipment 25% per annum straight line
Inventories
Inventories are initially recognised at cost, and subsequently
at the lower of cost and net realisable value. Cost comprises all
costs of purchase, costs of conversion and other costs incurred in
bringing the inventories to their present location and
condition.
Provisions
Provisions are recognised for liabilities of uncertain timing or
amount that have arisen as a result of past transactions and are
discounted at a pre-tax rate reflecting current market assessments
of the time value of money and the risks specific to the
liability.
Deferred taxation
Deferred tax assets and liabilities are recognised where the
carrying amount of an asset or liability in the statement of
financial position differs from its tax base, except for
differences arising on:
-- the initial recognition of goodwill;
-- the initial recognition of an asset or liability in a
transaction which is not a business combination and at the time of
the transaction affects neither accounting or taxable profit;
and
-- investments in subsidiaries and jointly controlled entities
where the Group is able to control the timing of the reversal of
the difference and it is probable that the difference will not
reverse in the foreseeable future.
Recognition of deferred tax assets is restricted to those
instances where it is probable that taxable profit will be
available against which the difference can be utilised.
The amount of the asset or liability is determined using tax
rates that have been enacted or substantively enacted by the
statement of financial position date and are expected to apply when
the deferred tax liabilities/(assets) are settled/(recovered).
Deferred tax assets and liabilities are offset when the Group
has a legally enforceable right to offset current tax assets and
liabilities and the deferred tax assets and liabilities relate to
taxes levied by the same tax authority on either:
-- the same taxable group company; or
-- different Group entities which intend either to settle
current tax assets and liabilities on a net basis, or to realise
the assets and settle the liabilities simultaneously, in each
future period in which significant amounts of deferred tax assets
or liabilities are expected to be settled or recovered.
2 SEGMENTAL REPORTING
For management purposes, the Group is organised into three
operating segments: Tanzania, Uganda and Democratic Republic of
Congo. Corporate assets, liabilities and expenses relate to the
general management, financing and administration of the Group
conducted from a head office in the United Kingdom.
2010 Tanzania Uganda DRC Unallocated Total
$'000 $'000 $'000 $'000 $'000
Share-based payments - - - (597) (597)
Impairment costs (33,526) - - - (33,526)
Other administrative
expenses (826) (416) (189) (4,057) (5,488)
Finance costs (25) (12) (3) (23) (63)
Finance income 36 78 - 1,090 1,204
--------- ------- ------ ------------ ---------
Profit/(loss) before
taxation (34,341) (350) (192) (3,586) (38,470)
--------- ------- ------ ------------ ---------
Segment assets -
non-current 33,844 30,162 5,742 83 69,831
Segment assets - current 406 1,486 430 15,663 17,985
Segment liabilities
- non-current - - - 31,202 31,202
Segment liabilities
- current 930 715 3,665 274 5,584
Capital additions
- oil and gas assets 22,623 10,223 4,270 - 37,116
Unallocated impairment costs relate to the impairment of
centrally-controlled capitalised finance costs which are
attributable to the relinquished Mandawa and Kisangire licences in
Tanzania.
2009 Tanzania Uganda DRC Unallocated Total
$'000 $'000 $'000 $'000 $'000
Share-based payments - - - (2,122) (2,122)
Impairment costs - - - - -
Other administrative
expenses (1,355) (1,050) (427) (5,348) (8,180)
Finance costs (36) (180) (5) 28 (193)
Finance income - 38 - 2 40
--------- -------- ------ ------------ ---------
Profit/(loss) before
taxation (1,391) (1,192) (432) (7,440) (10,455)
--------- -------- ------ ------------ ---------
Segment assets -
non-current 44,805 19,902 1,508 97 66,313
Segment assets -
current 609 915 109 4,299 5,932
Segment liabilities
- non-current - - - 27,110 27,110
Segment liabilities
- current 864 1,533 - 1,231 3,628
Capital additions
- oil and gas assets 6,962 3,372 3 - 10,336
During 2010 and 2009 the Group operated in one business segment
being the exploration of oil and gas in East and Central
Africa.
3 EARNINGS PER SHARE 2010 2009
$'000 $'000
Numerator
Loss for the year attributable to the equity
holders of the parent (38,506) (10,446)
-------------- ------------
Denominator
Number of shares 1,438,804,267 591,504,120
-------------- ------------
Weighted average number of shares used in basic
EPS
The potential Common Shares are not dilutive. The number of
potential shares excluded on the grounds that they are non-dilutive
is 402,283,512 (2009: 402,631,172).
4 OIL AND GAS EXPLORATION EXPENDITURE
Oil and
gas
exploration
expenditure
Cost $'000
At 1 January 2009 55,503
Additions 10,336
Disposals -
-------------------------
At 1 January 2010 65,839
Additions 37,116
Impairments (33,526)
-------------------------
At 31 December 2010 69,429
-------------------------
Net book value
At 31 December 2010 69,429
-------------------------
At 31 December 2009 65,839
-------------------------
Additions for the year include capitalised borrowing costs totalling
$4.7 mln (2009: $9.3 mln). An impairment charge of $33.5 mln
has been recognised in respect of the onshore Tanzanian licences,
Mandawa ($24.6 mln) and Kisangire ($8.9 mln). The amount of
impairment recognised represents the total exploration expenditure
incurred on the licences of which US$ 13.6 mln relates to finance
costs. The Directors have made the decision to impair the assets
due to the unsuccessful exploration results to date and the
lack of future prospects in these licences. As such, both licences
are in the process of being relinquished. Other than the amounts
due to the joint venture partners and the contingent liability
disclosed, the Company has no further liabilities in respect
of these licences. The remaining carrying value recognised in
Tanzania relates to the Selous and Offshore Block 7 licences.
An analysis of the carrying value of oil and gas exploration
expenditure by main area of operation is set out below.
2010 2009
$'000 $'000
Tanzania 33,610 41,527
Uganda 30,077 19,840
Democratic Republic of Congo 5,742 1,472
69,429 65,839
------- -------
5 Post balance sheet events
Tanzania Deep Water Block 7 (Dominion Tanzania Ltd 100%,
Operator)
On 5 April, 2011, Dominion announced that a 1 year extension to
the Initial Exploration Period had been granted by the United
Republic of Tanzania's Ministry of Energy and Minerals.
Uganda Exploration Area 4B (Dominion Uganda Limited 100%,
Operator), Democratic Republic of Congo, Block V (Dominion DRC
46.75%)
On 27 April, 2011, Dominion submitted an application to the
Government of Uganda seeking an extension of the EA4B licence into
the Third Exploration Period, commencing in July 2011 and ending in
July 2013.
Tanzania Onshore
On 23 March, 2011, Maurel et Prom advised the relevant
authorities in Tanzania that the partners would be surrendering the
Mandawa contract area.
New Ventures
Kenya
On 18 May, 2011, Dominion announced that it had entered into a
PSC for offshore Block L9 in Kenya (Dominion interest 60%,
operator).
Malta
On 24 June, 2011, Dominion announced that it had entered into an
execution agreement to acquire a 75% operated working interest in
the PSC for Blocks 4, 5, 6 and 7 of Area 4 Offshore Malta from
Mediterranean Oil & Gas plc., conditional upon (i) Maltese
government approvals and (ii) completion of the placing detailed
herein.
Other
On 24 June, 2011, Dominion announced its intention to raise
approximately US$ 55 mln (approximately GBP 34.4 mln) by way of a
placing undertaken by Merrill Lynch and RBC. The Placing is
conditional upon, amongst other things, shareholder approval.
Aside from funding the near-term exploration program for the
existing assets and new ventures, part of the proceeds from the
Placing are being used to retire at a discount approximately US$ 24
mln of the Company's existing secured senior convertible notes.
In addition, the Company also announced its intention,
immediately prior to the issue of the Placing Shares, to
consolidate the existing US$0.00004 common shares of the Company on
a 20 for 1 basis into common shares of a nominal value of
US$0.0008.
This information is provided by RNS
The company news service from the London Stock Exchange
END
FR EZLBLFQFZBBV
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