TIDMOGT
RNS Number : 0516C
International Oil and Gas Tech Ltd
10 April 2013
The following amendment has been made to the 'Final Results'
announcement released on 10 April 2013 at 07.00 under RNS No
9524B.
The date at the top of the announcement was incorrectly stated
as 10 April 2012. This has now been corrected.
All other details remain unchanged.
The full amended text is shown below.
Not for release, publication or distribution in, or into, the
United States, Canada, Australia or Japan.
Press Release 10 April 2013
International Oil and Gas Technology Limited
("IOGT" or the "Company")
Final Results
International Oil and Gas Technology Limited (LSE:OGT), an
authorised closed-ended investment company incorporated in
Guernsey, today announces its final results for the year ended 31
December 2012.
Highlights
-- Net Asset Value per share reduced to US$9.34 (31 December 2011: US$10.30)
-- Further progress in building value across the investment portfolio
-- The revenues and EBITDA of Strata Energy Services were
negatively affected by the slowdown in the Canadian drilling
market; valuation reduced by US$1.73 per share. International
expansion is progressing well and the development of new offshore
equipment remains on schedule
-- Crest Energy Services has increased revenues and invested in
new equipment; valuation increased by US$0.30 per share
-- SR2020 is experiencing increased demand for its range of
specialist seismic services; valuation increased by US$1.36 per
share
-- Regarding the litigation brought by the former co-investment
manager, the trial has been set for March 2014. The board continues
to be advised that the case is entirely without merit.
Christopher Hill, Chairman of International Oil and Gas
Technology Limited, said,
"The past twelve months have seen your Company make good
progress in building long-term value in its portfolio companies. I
am confident that value creation will continue in 2013."
Michael Goffin, Partner at Linton Capital, said,
"This year we have focused time and capital on growing the two
smaller investments, Crest and SR2020, and working with Strata to
return it to its growth trajectory. The current portfolio, while
concentrated, made progress in 2012. Crest and SR2020 moved onto
the next level of operations. Strata is addressing the issues
around its poor performance in the second half of the year and
continues to develop its offshore equipment.
We consider that the prospects are favourable for further growth
in the value of these investments."
In this statement of Final Results, all references to currency
are to lawful currency of the United States of America unless
otherwise stated
For further information:
Investment Manager
Linton Capital
David Sefton Tel: +44 (0) 20 3384
8090
dsefton@linton-capital.com
Corporate Broker
Numis Securities
Nathan Brown Tel: +44 (0) 20 7260
1426
n.brown@numis.com
A copy of the Company's Annual Report will be posted to
shareholders and will then be available on the IOGT website:
www.international-ogt.com
Notes to editors:
International Oil and Gas Technology Limited
International Oil and Gas Technology Limited is an authorised
closed-ended investment company incorporated in Guernsey. IOGT
invests expansion capital into companies that provide services and
technology to the upstream oil and gas industry. These companies
have proprietary and proven technologies, services and/or processes
that can be deployed more rapidly or on a larger scale through the
introduction of growth capital. Such companies are likely to have
recurring annual revenues of between US$5 million and US$25
million, positive EBITDA and/or significant working capital, and
strong management teams.
IOGT was admitted to the Official List of the UK Listing
Authority and to trading on the London Stock Exchange on 7 January
2008. Its stock market EPIC is OGT.L. Further information can be
found at www.international-ogt.com.
CHAIRMAN'S STATEMENT
Dear shareholders
The past twelve months have seen your Company make good progress
in building long-term value in its portfolio companies. I am
confident that value creation will continue in 2013.
The headline figure of net asset value ("NAV") per Preferred
Share has decreased over the twelve months from US$10.30 to
US$9.34, a decline of US$0.96 per share, which we believe is
temporary. The combined valuation of the investee companies, into
which the Company injected US$0.52 per share during the year, has
remained flat overall compared to 31 December 2011. The reduction
in the valuation of Strata Energy Services Inc ("Strata") has
largely been offset by the investment and positive developments in
both SR2020 Inc ("SR2020") and Crest Energy Services Ltd ("Crest").
While valuations of private companies can only be estimates and are
heavily dependent on future performance, the Board and the
Investment Manager believe that the valuations remain reasonable
when compared to the companies' future potential. The remaining
drop in NAV is accounted for by operating costs, share buybacks and
dividends, and the considerable legal fees associated with the
litigation.
Our primary goal remains to increase the NAV of your Company by
buying and building successful portfolio companies. The Investment
Manager reports in detail on the business performance of each
portfolio company later in this Report.
It is in the nature of portfolios of private companies that
individual companies' results vary from year to year. Although each
of our portfolio companies operates in the oil and gas services
sector, their differing technologies, geographical reach and niche
segments mean that they are affected independently by events in the
global energy market. The Board appreciates the time and effort
that the management teams of all the portfolio companies have
dedicated to create value for you, our shareholders.
In 2012, the valuations of each of SR2020 and Crest have
materially improved as they began to achieve traction in their
respective markets. Both started from a low base in FY/11. However,
they have used our capital and their energy effectively to
establish a meaningful presence in their respective markets,
develop technology and intellectual property, and lay the
foundations for much greater scale.
On the other hand, Strata, after a very encouraging start to the
year, found itself the victim of a prolonged thaw in Canada, which
made equipment difficult to move around, following which the
drilling market came to an unforeseen and abrupt downturn,
primarily because of the fall in North American natural gas prices.
We have further reduced the valuation of Strata from its level at
the half year. However, Strata has the technology, equipment,
skills and geographical diversification that should, if its markets
continue to improve, enable it to resume its growth trajectory. It
is also developing a service that we believe will be attractive to
all major drilling companies operating offshore.
It is disappointing that my statement again has to refer to the
litigation that the former co-investment manager of the Company
initiated in January 2012. The advice that we have received from
highly skilled and experienced legal firms and counsel since
inception of this action is that the case is entirely without
merit. The Board believes that both the basis of the claimant's
case and the damages claimed are incapable of being
substantiated.
While I can understand that you, as shareholders, are unhappy at
having to bear the costs of defending this vexatious litigation, I
can assure you that the Company is monitoring the costs closely and
committing considerable energy, experience and expertise to the
defence. As I mentioned last year, the Company will have to pick up
a proportion (generally about 25 per cent) of the total legal costs
incurred even after a successful outcome. As we approach the trial
date of March 2014, I will become increasingly restricted in the
level of detail that I can provide on developments, for reasons
that I am sure you understand.
We will continue to put the needs of our portfolio companies for
capital, expertise and assistance at the top of our list of
priorities. While the Board will consider, at each meeting, future
payment of dividends and return of capital (upon sales of current
or future assets), I should emphasise that such actions are
unlikely in the short term. However, I believe that our
shareholders understand that our current investment strategy should
be focused solely on increasing value by developing our portfolio
companies.
As I noted in last year's statement, the Company's corporate
governance procedures follow the principles of the UK Corporate
Governance Code as they relate to the role and effectiveness of the
Board and the performance and re-election of the directors. The
Board regularly evaluates the performance, skills and commitment of
the directors and reviews the Company's succession plans. The
Directors' Report notes that the Company has a nominations
committee, which I chair. The committee continues to follow best
practice in corporate governance, which requires each director to
stand for re-election at every Annual General Meeting. All the
directors submit themselves for re-election and I strongly
recommend that you support the resolutions for their
reappointment.
The Board looks forward to meeting shareholders at the Annual
General Meeting, to be held at 10.30am on 6 June 2013 at Regency
Court, Glategny Esplanade, St Peter Port, Guernsey, GY1 1WW.
Christopher Hill
Chairman
International Oil and Gas Technology Limited
Guernsey, Channel Islands
9 April 2013
INVESTMENT MANAGER'S REPORT
We are pleased to present our report on the performance of the
Company's portfolio of investments for the year ended 31 December
2012.
This year we have focused time and capital on growing the two
smaller investments, Crest and SR2020, and working with Strata to
return it to its growth trajectory.
The oil and gas technology market
The oil and gas industry needs to develop new technologies in
order to arrest declining production across the industry. Between
1995 and 2004, the industry spent US$2.4 trillion on capital
expenditure, and there was an increase in production of 12.3
million barrels of oil per day. Between 2005 and 2010, the industry
also spent US$2.4 trillion on capital expenditure. However, during
this period, production decreased by 0.2 million barrels per
day.
The reasons for this divergence of outcomes are clear. The
continued growth of the oil and gas industry will be increasingly
reliant on activities such as:
-- Extending the production of mature fields where each marginal
barrel is more difficult to produce
-- Producing oil and gas from the type of reserves, such as
shale, where production was previously thought uneconomic or
impossible
-- Developing fields in challenging environments, such as the
deep-water fields in South America, the Gulf of Mexico and East
Africa.
All these developments are being made possible by expensive
technologies that are paid for through a high price for oil and, in
some parts of the world, gas. The average price for oil (using
Brent Crude as the global benchmark) has remained above US$100 per
barrel in recent years despite the economic downturn in 2009. A
high price is necessary to enable production to be sustained in the
face of increasing global demand.
By investing in businesses that provide innovative and effective
technological solutions to some of the industry's technical
challenges, the Company looks to profit from growing its portfolio
companies and enabling their technologies and services to be
deployed more widely.
The portfolio company summaries, which also outline the
technical aspects of each company's operations, are found later in
this Report. We add the following observations and comments.
Current investments
Strata
Strata had a disappointing year, with revenues down from over
C$29 million(1) in 2011 to C$22.6 million in 2012, and EBITDA
reduced to C$3.1 million. While there were external factors at play
in its core Canadian market, principally sharply reduced gas
drilling due to lower prices and an extended thaw (which made the
movement and operation of equipment difficult), we regard 2012's
performance as a missed opportunity. The US has experienced a boom
in drilling activity, especially in the several shale oil trends.
Strata, with the endorsement of the Investment Manager, has started
to put in place the organisational and logistical structures to
enable it to take advantage of this exciting upturn. Of particular
note is the appointment of an experienced country manager in the
US. This shift in emphasis towards the US market will enable Strata
further to diversify revenue geographically. Although the US
contributed US$6 million to FY/12 revenues, we are hopeful that the
US will in future contribute a more significant part of Strata's
sales.
Strata's execution of its plan to expand into the Middle East
has been exemplary, and that region now makes a significant
contribution to revenues and EBITDA. Strata has carefully expanded
operations and there are now three full under-balanced drilling
("UBD") units operating in Kurdistan under the direction of an
experienced regional manager and with an increasingly local
workforce. Operational performance has been to a high standard and
we believe that the prospects for further growth in this important
region are good.
Of particular importance to the longer-term value of Strata will
be the results of its development of offshore equipment. This is
now well advanced and Strata is working with offshore operators to
refine the design, which we believe to be superior to any
competitive offering. We are working closely with Strata's
management team, especially in areas such as corporate finance and
capital markets where we can add particular value, to help them
achieve their goals.
The demand for and deployment of managed-pressure drilling
("MPD") services is expanding rapidly. This demand has arisen for a
number of reasons: increased drilling rates and thus reduced well
costs, minimising formation damage from drilling fluid influx and,
most important of all, enhanced safety.
The rising level of demand for MPD could have interesting
long-term consequences. Both Linton and Strata believe that MPD
could create a shift in understanding and appreciation of the
techniques of working with pressure. Such a shift could cause a
significant increase in the usage of MPD across the industry.
Looking further ahead, Strata's management believes that, once the
techniques are properly understood, MPD will be seen as a much
safer way to drill and could be highly effective in the early
detection of well kicks, which in turn may prevent blowouts. If, as
we expect, this fundamental shift in the appetite of the industry
for MPD takes place, the effect on valuation will be
significant.
The reduction in the valuation of the Company's stake in Strata
reflects its relative underperformance in 2012, in particular the
reduction in revenues and EBITDA. However, it does not materially
alter the company's longer-term prospects. We continue to see the
potential for significant upside in respect of this investment,
since the US expansion and the introduction of offshore technology,
if accomplished successfully, should enable a highly profitable
exit through either a trade sale or an IPO.
(1) Except where noted, the average value during 2012 of one
Canadian dollar was approximately equal to one US dollar.
Crest
Crest is a company that is still at an early stage in its
development. Nevertheless, during 2012, it grew revenue-generating
operations in the Middle East to over US$1 million. This is no
small achievement. The market that Crest has penetrated, Saudi
Arabia, is considered to be among the most lucrative, yet most
difficult to access, in the world.
During the year, Crest acquired its own operating equipment,
which generates significantly higher gross margins than using
rented equipment. However, it currently has considerable surplus
demand for its services and so has retained some rental equipment
to increase its capacity. Even so, Crest has recently had to turn
down a number of offers of work from across the region. Expanding
capacity is therefore critical for this business.
During 2013, Crest, subject to the availability of further
capital, will seek to expand its nitrogen-purging operations in
Saudi Arabia, broaden its product offerings to include services
such as well intervention and extend its international reach.
Crest, through genuine commercial agreements, also acts as a
regional sales accelerator for one of the other portfolio
companies. The management teams of Crest and SR2020 co-operate
closely, thereby enabling SR2020 to stay abreast of opportunities
to tender for seismic data processing work in the Middle East
(acquisition work in the region would require too high a level of
capital investment at this stage). SR2020 has recently received
several tender requests as a result.
All of the above will require considerable time and effort by
the management team. In conjunction with Crest's management, we are
seeking capital for expansion. This growth plan will enable Crest
to deliver significant returns for the Company.
SR2020
SR2020 is a 3D seismic-survey acquisition and processing company
with differentiated and proprietary technology and services. 3D VSP
seismic surveying has become an increasingly important segment of
the oil and gas service industry. The management teams of both
SR2020 and Linton believe that SR2020's particular expertise and
service packages are potentially of great value to the
industry.
Following a re-analysis of the company's technology and the
state of the market generally, SR2020 reconfigured its services
into product offerings that targeted the specific needs of
potential customers. It was easier for clients to understand the
financial and operational benefits of using SR2020's distinct
proprietary technologies. We worked closely with the management
team who deployed a targeted injection of capital to revamp
SR2020's proprietary tubing-conveyed acquisition system, expand the
acquisition team, order enhanced acquisition equipment and recruit
a professional sales and marketing function.
As a result, 2012 saw revenues increase from US$1.2 million in
2011 to US$3.4 million. SR2020 now regularly works for new clients
in the US (principally mid-size E&P operators), with SR2020's
services applicable both to conventional and unconventional (for
example, shale) geological formations.
It has become clear that the potential market for SR2020's
services is of a greater order of magnitude than we previously
believed. In addition, its technical offering is superior to that
of its competitors. However, many operators remain unaware of
SR2020 and its differentiated technical solutions. This presents an
outstanding opportunity to expand the business by providing survey
services to a much broader client base.
During 2013, SR2020 intends further to expand operations and, in
particular, to increase utilisation of its acquisition equipment.
It maintains a pipeline of potential projects that far exceeds its
current capacity, which is a good indication of medium-term growth
prospects. It is worth noting that SR2020 currently only targets a
few markets within mainland US. There is considerable scope for
geographical expansion.
SR2020 is operationally profitable. However, growing a business
of this size absorbs working capital that, in the absence of a
conventional lender, the Company has to provide. While injections
of working capital could be reduced by restraining SR2020's growth
trajectory, we believe that would be short sighted.
We expect 2013 to be another interesting and productive year for
SR2020. We remain confident that SR2020 will justify further
increases in valuation over the medium term.
Leverage
These three investments are largely unleveraged. Strata has
third-party debt at a level (approximately C$21 million) that is
appropriate for a capital-intensive business of its size. Neither
Crest nor SR2020 has any external debt, other than specific
equipment financing.
Availability of new investments
The oil and gas services and technology sector is growing in
importance as new technologies experience increasing demand from
the wider industry. Yet the sources of capital available to small
growing companies in this sector are few. For this reason, we
regularly receive approaches from companies that are seeking
investment: many have excellent products and services but no access
to capital. We believe that there are numerous opportunities to
make further successful investments. However, the Company currently
has no capital available for such investments. At present, we
consider that the Company should reserve its investment capital for
its existing portfolio companies, which all have positive
prospects.
Conclusion
The current portfolio, while concentrated, made progress in
2012. Crest and SR2020 moved onto the next level of operations and
Strata is addressing the issues around its poor performance in the
second half of the year. We consider that the prospects are
favourable for further growth in the value of these investments. We
look forward to creating value for the Company's investors.
Linton Capital LLP
9 April 2013
David Sefton Michael Goffin Roland Wessel
Investment manager Investment manager Investment manager
BALANCE SHEET
At 31 December 2012
Note 2012 2011
US$ US$
============ ============
ASSETS
Cash and cash equivalents 5,055,889 12,851,711
Accounts receivable and prepaid
expenses 10 713,811 1,101,726
Loan 11 586,600 -
Investments 2,12 62,955,458 63,471,383
------------ ------------
69,311,758 77,424,820
------------ ------------
LIABILITIES
Accounts payable and accrued liabilities 13 391,283 363,227
Performance fee accrual 13 841,550 1,783,214
------------ ------------
1,232,833 2,146,441
------------ ------------
Net assets 68,078,925 75,278,379
SHAREHOLDERS' EQUITY
Common (founder) shares of US$1
par.
Authorised 2 shares: issued 2 shares 14 2 2
Participating redeemable Preferred
Shares
Authorised 50,000,000 shares; issued
7,292,367 (2011: 8,156,348) shares 14 7,292,367 8,156,348
Contributed surplus 2 62,571,971 67,565,301
Treasury shares 14 - (5,749,345)
Retained earnings (deficit) (1,785,415) 5,306,073
------------ ------------
Total equity 68,078,925 75,278,379
------------ ------------
The accompanying notes are integral to these financial
statements.
Net asset value per preferred share 9.34 10.30
Approved by the Board of Directors and signed on its behalf
by:
JEREMY THOMPSON
Director
9 April 2013
STATEMENT OF OPERATIONS
For the year ended 31 December 2012
Note 2012 2011
US$ US$
------------ ------------
Investment Income
Portfolio interest income 2 79,561 2,209,729
Non-portfolio interest income 1,719 2,293
(Loss) on foreign exchange (10,910) (33,158)
------------ ------------
70,370 2,178,864
------------ ------------
Expenses
Administrative expenses 6 3,090,103 3,696,020
3,090,103 3,696,020
------------ ------------
Net investment (expense) (3,019,733) (1,517,156)
------------ ------------
(Losses) gains on investments
Unrealised change in value of
investments (4,284,182) 11,871,679
Contingent investment management
fee 3 941,664 (1,783,214)
------------ ------------
(3,342,518) 10,088,465
------------ ------------
Net (loss) income (6,362,251) 8,571,309
------------ ------------
Average number of Preferred
Shares 7,292,758 7,809,446
Basic (loss) earnings per share 9 (0.87) 1.10
Average number of diluted Preferred
Shares 7,292,758 7,809,446
Diluted (loss) earnings per
share 9 (0.87) 1.10
Dividends paid per preferred
share 8 0.10 -
------------ ------------
The accompanying notes are integral to these financial
statements.
STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
For the year ended 31 December 2012
Treasury Contributed Retained
Share capital shares surplus earnings Total
Notes US$ US$ US$ US$ US$
At 1 January
2012 8,156,350 (5,749,345) 67,565,301 5,306,073 75,278,379
Purchase of
own shares 14 - (107,966) - (107,966)
Cancellation
of treasury
shares (863,981) 5,857,311 (4,993,330) - -
Net loss - - - (6,362,251) (6,362,251)
Dividend paid - - - (729,237) (729,237)
At 31 December
2012 7,292,369 - 62,571,971 (1,785,415) 68,078,925
---------------- ------ -------------- ------------ ------------- ------------ ------------
At 1 January
2011 8,156,350 - 67,565,301 (3,265,236) 72,456,415
Purchase of
own shares 14 - (5,749,345) - - (5,749,345)
Net income - - - 8,571,309 8,571,309
At 31 December
2011 8,156,350 (5,749,345) 67,565,301 5,306,073 75,278,379
---------------- --- ---------- ------------ ----------- ------------ ------------
The accompanying notes are integral to these financial
statements.
STATEMENT OF CASHFLOWS
For the year ended 31 December 2012
2012 2011
Note US$ US$
Net (outflow) of cash related
to the following activities:
Operating
Net investment (deficit) (2,078,069) (3,300,370)
Capitalisation of interest - (403,183)
Net change in non-cash working
capital 10, 13 (1,031,405) 2,911,165
------------ ------------
(3,109,474) (792,388)
------------ ------------
Investing
Purchase of investments (3,768,257) (3,430,265)
Loan advanced (586,600) -
Disposals of investments 505,712 22,059,263
------------ ------------
(3,849,145) 18,628,998
------------ ------------
Financing
Purchase of own shares 14 (107,966) (5,749,345)
Dividends paid 8 (729,237) -
------------ ------------
(837,203) (5,749,345)
------------ ------------
Net (decrease) increase in cash
during the year (7,795,822) 12,087,265
Cash balance at the beginning
of the year 12,851,711 764,446
------------ ------------
Cash balance at the end of the
year 5,055,889 12,851,711
------------ ------------
The accompanying notes are integral to these financial
statements.
STATEMENT OF INVESTMENT PORTFOLIO
At 31 December 2012
2012 2011
----------------- ---------------------- --------------- ------------------------ ------------------------
Par value Estimated Estimated
(US$)/ fair fair
Number Cost value Cost value
Security held of securities US$ US$ US$ US$
----------------- ---------------------- --------------- ----------- ----------- ----------- -----------
CURRENT INVESTMENTS
Crest Energy Convertible
Services Ltd secured debentures 6,996,499 7,399,683 7,399,683
Promissory
notes 2,689,858 2,689,858 4,000,000 1,055,000 1,800,000
=========== ===========
SR2020 Inc Common shares 7,000,000 1 -
Convertible
and non-convertible
secured debentures 5,161,821 5,161,821 5,161,821
Promissory
notes 6,893,368 6,917,224 4,090,456
1474559 Alberta Secured promissory
Ltd (1) note 2,751,074 2,751,074 17,837,436 3,444,443 7,946,193
================= =========== -----------
Strata Energy
Services Inc Common shares 840,890 22,879,668 39,118,022 22,879,668 51,725,190
Promissory
note 2,000,000 2,000,000 2,000,000 2,000,000 2,000,000
=========== -----------
Total 49,799,329 62,955,458 46,031,071 63,471,383
=========== =========== =========== ===========
(1() Following a reorganisation of SR2020 during the year,
1474559 Alberta Ltd is in the process of being wound up and the
Company's interest in it has no value. However, this should not
have any impact on the valuation of the SR2020 investment.
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 31 December 2012
1. BUSINESS REGISTRATION AND OPERATIONS
General
International Oil and Gas Technology Limited (the "Company") is
a closed-ended investment company incorporated and registered in
Guernsey on 20 November 2007. The Company's participating
redeemable preference shares are listed on the London Stock
Exchange as a standard listing. The Company changed its name from
Quorum Oil and Gas Technology Fund Limited on 10 June 2011.
The nature of the Company's operations and its principal
activities are set out in the Directors' Report. The address of the
Company's registered office is set out in the section of this
Report entitled 'Management and Administration'.
The currency used in the Financial Statements is the United
States dollar, which is the currency of the primary economic
environment in which the Company operates.
Authorisation
The Company is designated as authorised pursuant to the
Authorised Closed-Ended Investment Scheme Rules 2008.
Going concern
The directors believe it is appropriate to adopt the
going-concern basis in preparing the Financial Statements as, after
due consideration, the directors consider that the Company has
adequate resources to continue in operational existence for the
foreseeable future. In making this assessment, the directors note
that, although two of the investments are not currently cash
generating, the Company has significant cash reserves and has no
gearing, and the Preferred Shares are only redeemable at the
discretion of the Company.
Litigation
As previously reported, QOGT Inc. ("Quorum") issued proceedings
in the High Court, Queen's Bench (Commercial Court) on 17 January
2012 claiming damages of US$15.7 million for wrongful termination
of the original investment management agreement.
The pleadings stage in the litigation is now substantially
complete. The next stage is disclosure of documentary evidence and
exchange of witness statements, which is scheduled to take place
over the coming months. The Board continues to take advice on the
merits and defence of the case from Norton Rose LLP and Queen's
Counsel. A date for trial has been fixed for March 2014.
The Board and its advisers continue to view the claim by Quorum
as entirely without merit and the damages claimed as inflated,
speculative and far-fetched.
Of Quorum's total claim for US$15.7 million, the first head of
damage claims loss of management and transaction fees during the
three-year notice period and (based on the Company's NAV at the
date of termination) amounts to approximately US$4 million. The
recovery by Quorum of this head of damage can only occur if the
Court rules at trial that (contrary to advice taken by the Board in
2010) dismissal of the co-managers was wrongful and represented a
breach of contract. The second head of damages, which seeks
compensation for lost future transaction fees, performance fees and
options, and other consequential losses, amounts to approximately
US$11.7 million. This part of the claim makes a number of
assumptions, including that the Company would not only have
permitted Quorum to make further and new investments but that the
Company would have also raised more capital and both existing and
new investments would have performed well. The Board has been
advised that, as a matter of English law, Quorum will fail to
recover the second head of damages.
Notwithstanding the rules of the High Court of England and Wales
on the recoverability of costs of litigation, parties generally
incur around 25 per cent costs that are not recoverable even on a
successful outcome. The Company has budgeted to incur at least a
further US$1.2 million in defending the claim. Legal costs incurred
to date have been expensed. No provision or asset has been
recognised for any future costs or recoveries.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of presentation
These Financial Statements have been prepared by the Company in
accordance with Canadian generally accepted accounting principles
("GAAP"). The Company is an investment company and accounted for in
accordance with the Canadian Institute of Chartered Accountants
("CICA") Accounting Guideline 18 - Investment Companies.
Use of estimates
The preparation of financial statements in accordance with GAAP
requires management to make estimates and assumptions that affect
the reported amounts of assets, liabilities, income and expenses
during the reporting period. Significant estimates and judgments in
these Financial Statements are required principally in determining
the reported fair value of investments since these determinations
include estimates of expected future cash flows, rates of return
and the impact of future events. Actual results could differ
significantly from these estimates.
Accounting policy
In 2009, the Company adopted CICA Handbook-Accounting Section
3862, "Financial Instruments-Disclosures" ("Section 3862") and
Section 3863, "Financial Instruments-Presentation" ("Section
3863"). These sections established standards for comprehensive
disclosure and presentation requirements for financial instruments.
The standards included new requirements to quantify certain risk
exposures and to provide sensitivity analysis for certain risks.
The additional disclosure can be found in note 16 to these
Financial Statements.
The Company also adopted the CICA Handbook Section 1535,
"Capital Disclosures" which establishes standards for disclosing
information about the Company's capital and how it is managed. The
Company has included below disclosures recommended by this new
Handbook section. The adoption of this standard resulted in
additional disclosures but does not affect the Company's results or
financial position. The additional disclosures can be found in note
16 to these Financial Statements.
Valuation of investments
Investments measured and reported at fair value are classified
and disclosed in one of the following categories:
Level I Unadjusted quoted prices in an active market for
identical assets or liabilities provides the most reliable evidence
of fair value and is used to measure fair value whenever
available.
Level II Inputs other than unadjusted quoted prices in active
markets, which are either directly or indirectly observable as of
the reporting date, and fair value is determined using models or
other valuation methodologies.
Level III Inputs that are unobservable for the investment and
include situations where there is little, if any, market activity
for the investment. The inputs into the determination of fair value
require significant management judgment or estimation.
All the investments of the Company are classified as Level
III.
Generally, a combination of two methods, including a market
multiple approach that considers one or more financial measures,
such as revenues, EBITDA, adjusted EBITDA, EBIT, net income, net
asset value, discounted cash flow or liquidation analysis, are used
to determine the estimated value of an investment. Consideration
may also be given to such factors as:
-- The Company's historical and projected financial data
-- Valuations given to comparable companies
-- The size and scope of the Company's operations
-- Expectations relating to the market's receptivity to
an offering of the Company's securities
-- Any control associated with interests in the company
that are held by the Company
-- Information with respect to transactions or offers
for the Company's securities (including the transaction
pursuant to which the investment was made and the period
of time that has elapsed from the date of the investment
to the valuation date)
-- Applicable restrictions on transfer
-- Industry information and assumptions
-- General economic and market conditions
-- Other factors deemed relevant.
Because of the inherent uncertainty of the valuation process,
the fair value may differ materially from the actual value that
would be realised if such investments were sold in an orderly
disposal. Further information regarding the Company's investments
can be found in note 12.
The CICA Accounting Standards Board decided to defer the
mandatory IFRS changeover date of 1 January 2011 for a three-year
period for investment companies. For this reason, the Company has
elected to defer the first-time adoption of IFRS until January
2014.
Other financial assets and liabilities
Other financial assets and financial liabilities are recorded at
cost. Since these assets and liabilities are short term in nature,
their carrying values approximate fair values.
Performance fees
Incentive fees are accrued where the valuation of a portfolio
asset is such that, upon a realisation at that value, a fee would
become payable under the terms of the new Investment Management
Agreement (see note 3 for further detail). As disclosed in note 3
(b) below, payment of the contingent performance fee accrued in the
Financial Statements, which currently relates only to the increase
in the unrealised valuation of SR2020, is not payable, either in
part or in full, until an exit event and will only be made from
realisation proceeds. A proportion of the fee due may be held in
escrow pending future realisations.
As reported in note 6, the Investment Management Agreement
provided for a performance fee to be paid following the successful
exit from WellPoint.
Investment transactions and income
Investment transactions are accounted for as of the trade date.
Interest income is recorded on an accrued basis. Realised and
unrealised gains and losses from investment transactions are
calculated on an average cost basis. Interest income received in
advance is recorded as deferred interest income on the balance
sheet as a liability. Where interest received is capitalised, it is
added to the relevant investment's cost of investment and is not
shown as interest receivable in debtors.
Translation of foreign currencies
Investments and other financial assets and liabilities
denominated in foreign currencies are translated into United States
dollars at the exchange rates prevailing on each valuation day.
Purchases and sales of investments, income and expenses are
translated into United States dollars at the exchange rate
prevailing on the respective dates of such transactions. Realised
and unrealised foreign exchange differences are recognised in
profit or loss.
Issuance costs
Issuance costs incurred to form the Company are deducted
directly from contributed surplus.
Share-based payments
In the period between January 2008 and October 2009, the Company
granted share options to the current Investment Manager. The
Investment Manager agreed to surrender these share options when the
new Investment Management Agreement was signed. Members of the now
defunct advisory board were granted share options during the same
period. CICA Handbook Section 3870 - 'Stock-based Compensation and
other Stock-based Payments' requires recognition of an expense of
share option awards using the fair-value method of accounting.
Under this method, the fair value of an award at the grant date is
recognised as an expense. The effect of actual forfeitures of
previously granted share options is recognised as they occur.
Provisions and contingent liabilities
The Company recognises the need to make provisions for
liabilities that can be measured but where the timing of payment is
uncertain, and to treat as contingent those liabilities whose
existence will be confirmed only by the occurrence of one or more
uncertain future events that are not within the Company's
control.
3. MATERIAL AGREEMENTS
The Investment Management Agreement (the "IMA") between the
Company and the Investment Manager took effect from 1 June 2011 and
was executed on 30 August 2011. The IMA provides for:
(a) a monthly investment management fee of US$110,000 payable to
Linton Capital LLP, subject to regular review by the Board and
Investment Manager
(b) a revised incentive arrangement in respect of each portfolio
asset held by the Company on 1 June 2011 under which the Investment
Manager will receive, upon realisation of the asset:
(i) 7.5 per cent of the increase in value of each portfolio
asset between the amount of its valuation at 30 September 2010 and
the lower of the realisation proceeds of the portfolio asset and
the equivalent of the amount of its valuation as at 31 December
2009, and then
(ii) in the event that the realisation proceeds exceed the
amount of its valuation as at 31 December 2009, 20 per cent of the
increase in value of each portfolio asset between the realisation
proceeds of the portfolio asset and the equivalent of the amount of
its valuation on 31 December 2009 as used in (b)(i) above.
(c) an incentive arrangement in respect of any portfolio assets
purchased after 1 June 2011. Under this arrangement, the Investment
Manager will receive 20 per cent of the value of all portfolio
realisations once the Company has received an amount equal to the
aggregate amount invested at cost in the respective portfolio asset
plus an additional amount calculated by reference to a hurdle rate
of eight per cent per annum.
(d) a performance fee in an amount equal to US$143,531 in
respect of the sale of WellPoint Services Inc ("Wellpoint"),
received in 2011.
Any payments due to the Investment Manager under the above
paragraphs (b) i, (b) ii and (c) will be subject to an escrow
arrangement. These arrangements can restrict the Company's
immediate cash payments to the Investment Manager. The restriction
applies to (i) 50 per cent of the calculated amount in respect of
any realisation of either Strata or any future portfolio assets,
and (ii) 80 per cent of the calculated amount in respect of all
other portfolio realisations unless the realisation value of the
portfolio exceeds the cost as at 31 October 2010. The amount noted
in (d) was paid in the year.
The IMA may be terminated by either party giving twelve months'
prior written notice and may additionally be terminated without
notice in certain circumstances, including the departure of key
investment-management executives.
4. RELATED-PARTY TRANSACTIONS
The Investment Manager and the directors are regarded as related
parties. The Investment Manager has undertaken that no
co-investments will be made in any other funds that may at any time
be managed by the Investment Manager or any entity controlled by
the partners of the Investment Manager.
The fees and expenses payable to the Investment Manager are
explained in note 3 and are detailed in the statement of
operations. Details of directors' remuneration are set out in the
Directors' Remuneration Report.
Strata Energy Services ("Strata"), in which the Company owns 43
per cent of the equity, is deemed to be a related party under
Canadian GAAP.
5. SEGMENTAL INFORMATION
The directors are of the opinion that the Company is engaged in
a single segment of business, being an investment company investing
capital in companies that provide services and technology to the
upstream oil and gas industry, and therefore no segmental reporting
is required.
6. ADMINISTRATIVE EXPENSES
Note below 2012 2011
US$ US$
---------- ----------
Administration fees 168,650 170,357
Audit and taxation fees 80,100 138,466
Directors' fees and expenses 235,471 240,079
Insurance costs 15,500 15,500
Investment management fees 1,320,000 1,145,000
Investor communications costs 4,113 88,567
Legal and professional fees a 1,070,518 1,442,358
Listing and licence fees 11,851 15,558
Marketing expenses 64,253 102,562
Other expenses 8,659 5,893
Performance fees b - 143,531
Provision against doubtful debts - 96,686
Registrar and custodian fees 38,992 26,149
Stockbroker's fees 52,004 39,560
Travel and entertainment costs 19,992 25,754
3,090,103 3,696,020
---------- ----------
a) In 2011, there were significant non-recurring legal fees
incurred in connection with the reorganisation and sale of non-core
portfolio companies. In addition, legal fees have been, and will
continue to be, incurred in connection with the legal action
brought against the Company by the former co-investment manager,
details of which are included in note 1. Except where noted, legal
fees have been fully expensed in the statement of operations.
b) A performance fee was paid to the Investment Manager on the
disposal of WellPoint, as described in note 3.
7. TAX
The Company has been granted exemption from income tax in
Guernsey under the Income Tax (Exempt Bodies) (Bailiwick of
Guernsey) Ordinance, 1989 for which it pays an annual fee of GBP600
(2011: GBP600). With this exemption, the Company will not be liable
to income tax in Guernsey other than on Guernsey source income
(excluding deposit interest on funds deposited with a Guernsey
bank). No withholding tax is applicable to distributions by the
Company to shareholders.
8. DIVIDENDS
The directors authorised a dividend of US$0.10 per participating
redeemable preference share on 30 May 2012, which was payable to
shareholders registered on 27 April 2012 (2011: US$ nil).
Under Guernsey Law, companies can pay dividends in excess of
accounting profit provided they satisfy the solvency test
prescribed under the Companies (Guernsey) Law, 2008. The solvency
test considers whether a company is able to pay its debts when they
fall due; and whether the value of a company's assets is greater
than its liabilities.
9. BASIC AND DILUTED (LOSS ) EARNINGS PER SHARE
(Loss) earnings per share is computed by dividing net (loss)
income available to preferred shareholders by the weighted average
number of Preferred Shares outstanding for the year. Diluted (loss)
earnings per share reflects the potential dilution that could occur
if additional Preferred Shares were issued under warrants and share
options that entitled their holders to obtain Preferred Shares in
the future, to the extent such entitlement is not subject to
unresolved contingencies. The number of additional shares for
inclusion in diluted (loss) earnings per share calculations is
determined using the treasury-stock method. Under this method,
warrants and share options whose exercise price is less than the
average market price of the Preferred Shares are assumed to be
exercised, with the proceeds used to repurchase Preferred Shares at
the average market price for the period. The incremental number of
Preferred Shares issued under warrants and share options and
repurchased from proceeds is included in the calculation of diluted
(loss) earnings per share.
For the years ended 31 December 2012 and 31 December 2011, the
Company excluded potential share equivalents comprised of share
options and warrants from the calculation of diluted (loss)
earnings per share as these would be considered anti-dilutive.
2012 2011
Basic earnings per share US$ US$
Net (loss) income (6,362,251) 8,571,309
Average number of Preferred Shares 7,292,758 7,809,446
Basic (loss) earnings per share (0.87) 1.10
------------------------------------- ------------ ----------
Diluted earnings per share
Net (loss) income (6,362,251) 8,571,309
Warrants - -
Share options - -
Average number of diluted Preferred
Shares 7,292,758 7,809,446
Diluted (loss) earnings per share (0.87) 1.10
------------------------------------- ------------ ----------
10. ACCOUNTS RECEIVABLE AND PREPAID EXPENSES
2012 2011
US$ US$
Accounts receivable and prepaid expenses 179,515 61,718
Due on disposal of investment 534,296 1,040,008
------- ---------
713,811 1,101,726
======= =========
11. LOAN
In accordance with an agreement dated 1 December 2012, the loan
to SR2020 Inc attracts interest at 7 per cent and is repayable in
36 equal monthly instalments commencing on 1 February 2013.
12. INVESTMENTS
Current investments
1) Crest Energy Services Limited ("Crest")
The convertible secured debenture in the principal amount of
US$6,996,499 matures on 17 December 2013 and bears an annual
interest rate of 8.5 per cent. The debenture is convertible at the
Company's option at any time into common shares of Crest at a
conversion price of US$1.00 per share.
During the year, a number of promissory notes were issued
totalling the principal amount of US$1,634,858, bringing the total
promissory notes outstanding at 31 December 2012 to US$2,689,858.
The promissory notes issued in prior years bear an annual interest
rate of 8.5 per cent and are notionally repayable on dates during
2013. The promissory notes issued during 2012 are interest free and
repayable on demand.
The investment includes US$403,183 in respect of interest
capitalised in 2011.
The investment in Crest has been valued at US$4 million using
adjusted cost, supported by valuations based on projected revenues
for 2013.
2) SR2020 Inc ("SR2020")
The convertible secured debenture in the principal amount of
US$900,000 matures on 29 May 2013 and bears an annual interest rate
of 8.5 per cent. It is convertible at the Company's option. During
the year, SR2020 issued promissory notes totalling US$2,120,000.
Following a reorganisation of interests between SR2020, the Company
and the related company 1479559 Alberta Limited, promissory notes
outstanding to the Company at 31 December 2012 totalled
US$6,893,368. They are due on demand. The Company directly owns 100
per cent of the common shares of SR2020 subject to an allocation of
up to 30 per cent for an ESOP.
The SR2020 investment was valued using a blend of a
comparable-company-multiples approach and the discounted cash flow
basis of valuation, using budgeted 2013 and 2014 figures. The
Company's investment in SR2020 is supported by a second charge on
the security.
3) Strata
The Company investment in Strata was restructured on 3 August
2011:
-- The Company converted both its US$20 million convertible
secured debentures in Strata and US$2.85 million of its US$4.85
million secured promissory note to the company into common stock of
Strata. When fully diluted by Strata's employee share-option
programme, the Company holds 43 per cent of the common shares of
Strata.
-- The remaining part of the secure promissory note (US$2
million) was converted into a one-year promissory note carrying
interest at four per cent per annum. The term has been extended
beyond 31 December 2012.
The Strata investment was valued using both a blend of
comparable-company multiples approach and the discounted cash flow
basis of valuation, using budgeted 2013 and 2014 figures.
During the year ended 31 December 2012, the reconciliation of
investments measured at fair value using unobservable inputs (Level
III) is presented as follows:
31 December 31 December
2012 2011
Fair level disclosure by Level III Level III
fair value hierarchy level: US$ US$
Investments 62,955,458 63,471,383
Reconciliation of 31 December 31 December
Level III fair values: 2012 2011
Trading securities Trading securities
US$ US$
Opening balance 63,471,383 70,865,527
Total unrealised (losses)
gains in net income(1) (4,284,182) 11,871,679
Additions(2) 3,768,257 3,833,448
Disposals - (23,099,271)
-------------------- --------------------
62,955,458 63,471,383
-------------------- --------------------
1: Total unrealised gains in net income are presented in the
Statement of Operations under unrealised change in valuation of
investments
2:Additions include US$ nil (2011: US$403,183) in respect of
capitalised interest
All of the above valuations are based on 2013 and 2014 budgets,
which predict substantial improvements in performance from 2012. A
key valuation assumption is the EV/EBITDA multiple used. A change
in the EV/EBITDA multiple of plus or minus 1.0 would result in an
aggregate change in the unrealised gains in investments of
approximately +/-US$5.6 million (2011: US$4.04 million), deriving
from the change in the valuations of Strata and SR2020.
13. LIABILITIES
2012 2011
US$ US$
Accounts payable and accrued
liabilities 391,283 363,227
Performance fee accrued (1) 841,550 1,783,214
--------- ---------
1,232,833 2,146,441
========= =========
1: The performance fee is only payable as set out in note 3 to
the Financial Statements
14. SHAREHOLDERS' EQUITY
2012 2011
Nominal Nominal
value value
Authorised Number US$ Number US$
Common (founder) shares 2 2 2 2
Unclassified shares 50,000,000 50,000,000 50,000,000 50,000,000
---------- ---------- ---------- ----------
Issued
Common (founder) shares 2 2 2 2
Participating redeemable
preference shares 7,292,367 7,292,367 7,310,367 7,310,367
Treasury shares of
US$1.00 - - 845,981 845,981
---------- ---------- ---------- ----------
The unclassified shares may be allotted and issued as one or
more classes of shares, including participating redeemable
preference shares ("Preferred Shares" or "Shares"). To qualify as
participating redeemable preference shares, the Preferred Shares
are required under Guernsey Law to have a preference over another
class of share capital. The Preferred Shares may be redeemed at the
option of the Company, subject to the discretion of the
directors.
The common or founder shares have been created so that the
Preferred Shares may be issued. The common or founder shares are
not redeemable and do not carry any right to vote or receive
dividends and are only entitled to participate in the assets of the
Company on a winding-up.
In 2012, the Company repurchased 18,000 Shares for a total cost
of US$107,966 (2011: 845,981 for a total cost of US$5,749,345). It
is the Company's policy to hold repurchased Shares in treasury. All
treasury shares have been cancelled during the year.
Repurchased in year
Number of Preferred Unit cost Total cost
Date Shares US$ US$
================ ==================== ========== ===========
6 January 2012 13,000 6.00 78,156
================ ==================== ========== ===========
13 January
2012 5,000 5.95 29,810
================ ==================== ========== ===========
Total 107,966
================ ==================== ========== ===========
15. SHARE-BASED PAYMENTS
The Company has the ability to issue share options representing
20 per cent of the fully diluted capital of the Company under its
share-option plan. The share options are exercisable in three equal
tranches on the first three anniversaries of the grant date and
have ten-year lives. At 31 December 2012, 1,552,927 share options
(2011 - 1,552,927) were exercisable, with a weighted average
exercise price of US$12.49 (2011 - US$11.66).
Number of Weighted average
Summary of share-option activity share options exercise price
US$
---------------------------------- ---------------- ------------------
At 31 December 2010 1,796,677 10.79
Granted - -
Exercised - -
Cancelled (243,750) 11.62
---------------------------------- ---------------- ------------------
At 31 December 2011 1,552,927 11.66
Granted - -
Exercised - -
Cancelled - -
---------------------------------- ---------------- ------------------
At 31 December 2012 1,552,927 12.49
---------------------------------- ---------------- ------------------
There is no expense in 2012 (2011: US$ nil) as no share options
were issued during the year.
16. FINANCIAL RISK MANAGEMENT
In the normal course of business, the Company is exposed to a
variety of financial risks: credit risk, liquidity risk and market
risks, which include interest-rate risk, currency risk and other
price risks.
The value of investments within the Company's portfolio can
fluctuate on a daily basis as a result of changes in interest
rates, economic conditions, the market and company news related to
specific securities within the portfolio. The level of risk may
depend on, inter alia, the Company's investment objective and the
type of securities in which it invests.
The primary investment objective of the Company is to generate
long-term capital growth by investing expansion capital in
companies that provide services and technology to the upstream oil
and gas industry. On a quarterly basis, the Company performs a
formal review of its investments. This review includes, but is not
limited to, an assessment of the global macro-economic environment,
the outlook for credit and the amount of active risk being taken in
the Company.
The Company's overall risk management programme seeks to
minimise the potentially adverse effect of risk on the Company's
financial performance in a manner consistent with the Company's
investment objective.
Credit risk
Credit risk is the risk that the counterparty to a financial
instrument will fail to discharge an obligation or commitment that
it has entered into with the Company.
The Company is exposed to credit risk in respect of the
investment portfolio, with a maximum exposure equal to the value of
the loans advanced. Credit risk is mitigated by the Company's
Investment Manager performing satisfactory due diligence on
prospective investments. Under the terms of the convertible secured
debenture, should the principal not be repaid by the maturity date
or if there is a default in the debenture covenants, the debenture
is secured by a charge over an Investee Company's assets or may be
converted into ordinary shares of the borrower. However, the
Company may not be able to recover some or all of the value of the
debenture through realisation of the Investee Company's assets or
shares.
Given the status of the Investee Companies and their respective
financial positions, the recoverability of these investments is, in
some cases, predicated on the performance of the companies.
Provisions have been made where appropriate.
The Company's investments are focused solely on the oil and gas
technology sector. The Company attempts to mitigate its exposure by
investing in companies that sell their products
internationally.
The Company is exposed to credit risk in respect of its cash and
cash equivalents, arising from possible default of the relevant
counterparty, with a maximum exposure equal to the carrying value
of those assets. The credit risk on liquid funds is limited because
the company only invests its cash and cash equivalents with its
banker and custodian, the Royal Bank of Canada (Channel Islands)
Limited, a counterparty with a high credit-rating which has been
assigned by international credit-rating agencies. The Company
regularly monitors the placement of its cash balances.
Liquidity risk
Liquidity risk is defined as the risk that the Company may not
be able to settle or meet its obligations on time or at a
reasonable price.
The Company's exposure to liquidity risk is concentrated in the
investments of secured convertible debentures, convertible loans,
promissory notes and equity of private companies. The Company
invests in securities that are not traded in active markets and
cannot be readily disposed. To compensate for this, the Company
retains sufficient cash and cash-equivalent positions to maintain
liquidity in order to meet operating expenses, follow-on
investments and any distributions. The Company seeks to maintain a
sufficient level of cash or other liquid assets to minimise
liquidity risk, which is further mitigated because the Preferred
Shares of the Company are redeemable only at the Company's
discretion.
Market risks
Interest-rate risk
Interest-rate risk arises from the possibility that changes in
interest rates will affect future cash flows or fair values of
financial instruments. Interest-rate risk arises when the Company
invests in interest-bearing financial instruments. The Company is
exposed to the risk that the value of such financial instruments
will fluctuate due to changes in the prevailing levels of market
interest rates. The Company seeks to mitigate this risk by
monitoring the placement of cash balances in order to maximise the
interest rates obtained.
Sensitivity to movements in interest rates is limited by the
fact that the Company's investments bear interest at a fixed rate,
although the fair value of the debt is sensitive to changes in
interest rates.
To gauge the duration of the debt instruments, their maturities
on a cost basis are as follows:
DEBT INSTRUMENTS Cost
2012 2011
BY MATURITY DATE US$ US$
---------------------- ----------- -----------
Less than 1 year 34,386,096 8,525,624
1 - 3 years - 20,500,541
3 - 5 years - -
Greater than 5 years - -
Total 34,386,096 29,026,165
---------------------- ----------- -----------
Other price risks
Other price risk include the risk that the market value or
future cash flows of financial instruments will fluctuate because
of changes in market prices other than those arising from
interest-rate risk. They represent the potential loss that the
Company might suffer through holding interests in unquoted private
companies whose value may fluctuate and that may be difficult to
value or realise.
All investments carry a risk of loss of capital. The Investment
Manager moderates this risk through a careful selection of
securities and other financial instruments within the limits of the
Company's investment objective and strategy, as well as by
establishing a clear exit strategy for all potential investments.
The Investment Manager monitors the Company's overall market
positions on a quarterly basis. Financial instruments held by the
Company are susceptible to market-price risk arising from
uncertainties about future prices of the instruments. If the value
of the Company's investment portfolio were to decline by 10 per
cent, it would represent a loss of US$6.3 million (2011 - US$6.3
million). This would cause the net asset value of the Company to
fall by 9.2 per cent (2011 - 8.2 per cent).
Currency risk
Currency risk is the risk that the value of a financial
instrument will fluctuate due to changes in foreign exchange
rates.
Currency risk arises from financial instruments (including cash
and cash equivalents) that are denominated in a currency other than
United States dollars, which is the functional currency of the
Company. There are no significant assets or liabilities in
currencies other than the United States dollar. As such, currency
risk is not considered a material risk to the Company.
17. CAPITAL MANAGEMENT
The Company considers Shareholders' Equity to be its capital.
The Company does not have any externally imposed capital
requirements. The capital is used by the Company to invest in
ordinary shares, secured convertible debentures, convertible loans
and promissory notes in companies located worldwide. The Company
does have specific restrictions on how it can deploy its
shareholders' capital: it will not invest more than 35 per cent of
its total assets in any one company (this restriction is calculated
at the time of the relevant investments on a cost basis) and it
will invest in assets diversified by a range of factors.
The investment objective of the Company is to seek long-term
capital growth by investing capital in private companies that
provide services and technology to the upstream oil and gas
industry.
18. SUBSEQUENT EVENTS
There have been no events since the balance sheet date that are
required to be noted in these financial statements.
- Ends -
This information is provided by RNS
The company news service from the London Stock Exchange
END
FR ZBLFFXZFLBBF
Intl Oil &Gas (LSE:OGT)
Gráfica de Acción Histórica
De May 2024 a Jun 2024
Intl Oil &Gas (LSE:OGT)
Gráfica de Acción Histórica
De Jun 2023 a Jun 2024
