TIDMUEN
RNS Number : 3932S
Urals Energy Public Company Limited
09 September 2010
9 September 2010
Urals Energy Public Company Limited
("Urals Energy" or the "Company")
2010 Interim Results
Urals Energy (LSE: UEN), an independent exploration and production company with
operations in Russia, today announces its interim results for the six months
ended 30 June 2010.
Financial
· Operating profit of US$1.6 million (for the six months ended 30 June
2009: loss of US$126.9 million) as result of implementation of substantial cost
reduction program and increase in oil prices
· Net profit of US$1.6 million as compared with net loss of US$440 million
for the six months ended 30 June 2009
· Net cash position of US$2.4 million at 30 June 2010 (US$4.5 million as at
31 December 2009)
· Selling, general and admin expenses in 2010 reduced by 55% from the same
period last financial year
· Interest expense of US$1.0 million as compared with US$58.6 million for
the six months ended 30 June 2009
· Debt to largest creditor Petraco was restructured to a long-term debt
with only US$7.0 million remaining short-term
Operational
· Average daily production for the six months ended 30 June 2010 decreased
to 2,084 BOPD (4,251 BOPD for the six months ended 30 June 2009) following the
divestiture of Dulisma in 2009
· Total production from Arcticneft increased to 121,605 barrels from
115,114 barrels in for the six months ended 30 June 2009
· Total production from Petrosakh decreased to 255,655 barrels from 332,173
barrels in for the six months ended 30 June 2009
· Current daily levels of production at Arcticneft increased to 715 BOPD
from an average of 672 BOPD for the six months ended 30 June 2010
· Current daily levels of production at Petrosakh increased to 1,596 BOPD
from an average of 1,412 BOPD for the six months ended 30 June 2010
· In June 2010 the first of three sidetrack wells was spudded at Petrosakh
- completion expected in September 2010
· Installed four rod pumps on wells 7, 28, 34 and 47 at Petrosakh
· Commenced production of high octane gasoline at Petrosakh
· First export loadings of 211,500 barrels at Arcticneft was shipped in
August 2010
Corporate
· As part of the restructuring agreement, Petraco converted US$2.0 million
of the capital outstanding into 8,693,006 ordinary shares in Urals Energy and
received an option to acquire 12,576,688 additional new ordinary shares for
US$5.0 million.
Outlook
· Focused on early production increase from existing wells
· Complete geological studies in 2010 to develop a drilling program at
Arcticneft in 2011
· Assess potential growth opportunities to maximise synergies with current
asset portfolio
Enquiries:
+-----------------------------------+---------------------------------+
| Allenby Capital Limited | |
| Nominated adviser and broker | +44 (0)20 3328 5656 |
+-----------------------------------+---------------------------------+
| Nick Naylor | |
+-----------------------------------+---------------------------------+
| Alex Price | |
+-----------------------------------+---------------------------------+
| | |
+-----------------------------------+---------------------------------+
| Pelham Bell Pottinger | +44 (0)20 7861 3894 |
+-----------------------------------+---------------------------------+
| Mark Antelme | |
+-----------------------------------+---------------------------------+
| Evgeniy Chuikov | |
| Jenny Renton | |
+-----------------------------------+---------------------------------+
CEO STATEMENT
When we entered 2010 our focus moved to restarting operations and renegotiating
our remaining commitments with Petraco and I am pleased to report that both of
these objectives were delivered in the first half of 2010. With Petraco, we were
able to reach an agreement which significantly extended the repayment of the
financing facility through to the end of 2013 and which we are confident of
meeting from cash flows from our existing production.
At the same time as completing the Petraco refinancing, we also recommenced
operations at both Arcticneft and Petrosakh which were put on hold in 2008 as a
result of our constrained financial situation. Both licenses have a long history
of production and have combined proved and probable reserves of 58 mmbbls.
At Petrosakh, we completed the workover on well 47, reperforated well 34 and
optimised water injection on well 42. This work programme produced immediate
results, reversing production decline and increasing daily production to 1,596
bopd. As reported on 4th June 2010 we also spudded the first sidetrack well 35b.
Unfortunately as result of poor performance of a contractor, completion of the
well has been delayed. The Company has since changed contractors and drilling
recommenced in late August with production scheduled for late September.
In May 2010 we also began first deliveries of Gasoline 92 which increases our
netbacks and allows for uninterrupted year round gasoline sales by the Company.
Urals, along side Rosneft, is the only supplier of this type of fuel to Sakhalin
where demand outstrips supply.
Current trading and outlook
Following delays with the drilling of the side track well 35b at Petrosak, the
Directors are hopeful that this will be completed in September 2010 and will
provide a further update once completed.
The Company intends to load a second tanker at Arcticneft during the autumn and
the proceeds from the sale of this oil will provide the Company with sufficient
capital in order to continue to operate the business until the next tanker
collection in July 2011.
It is the board's strategy to continue to investigate ways to maximise
production from the Company's existing assets at Petrosak and Arcticneft and the
Directors look forward to reporting further developments as they occur.
Following the significant capital restructure undertaken in 2010 and 2009, the
Directors view the future of the Company with increasing confidence.
Financial Results
Operating Environment
The six months ended 30 June 2010 were characterised by stable crude oil market
price at an average level of US$75 per barrel. Domestic prices for light oil
products ranged from US$70 to US$75 per barrel thus securing the Company's
operating cash flows at a level sufficient to maintain its operations and comply
with license requirements at both fields.
There were no deliveries of crude oil exported from Arcticneft during the
reporting period, resulting in 47.2 thousand tons of crude oil that remained in
stock until August 2010, when 26.8 thousand tons of crude oil were shipped.
Arcticneft is highly dependent on weather conditions as it can only ship crude
oil during the period from July to December.
The first tanker from Arcticneft was shipped in the second half of August 2010
and the next tanker is expected at the end of October 2010.
At the same time, at Petrosakh, the Company accelerated production and sales of
refined products thus securing the Company's liquidity during the period of non
deliveries from Arcticneft.
Operating Results
+---------------------------------------------+----------+-----------+
| $ '000 | Period ended 30 |
| | June: |
+---------------------------------------------+----------------------+
| | 2010 | 2009 |
+---------------------------------------------+----------+-----------+
| | | |
+---------------------------------------------+----------+-----------+
| Gross revenues before excise, export duties | 11,690 | 15,140 |
| | | |
+---------------------------------------------+----------+-----------+
| Net revenues after excise, export duties | 11,078 | 15,086 |
| and VAT | | |
+---------------------------------------------+----------+-----------+
| Gross profit/(loss) | 2,561 | (116,539) |
+---------------------------------------------+----------+-----------+
| Operating profit/(loss) | 1,554 | (126,926) |
+---------------------------------------------+----------+-----------+
| Management EBITDA | 79 | (2,621) |
+---------------------------------------------+----------+-----------+
| Total net finance costs | (585) | (339,598) |
+---------------------------------------------+----------+-----------+
| Profit/(loss) for the period | 1,558 | (439,987) |
+---------------------------------------------+----------+-----------+
Gross Revenues ($'000)
+--------------------------------------------+----------+--------+
| | Period ended 30 |
| | June: |
+ +-------------------+
| | 2010 | 2009 |
+--------------------------------------------+--------------------------------------------+----------+
| Crude oil | 1,523 | 5,927 |
+--------------------------------------------+----------+--------+
| Export sales | - | - |
+--------------------------------------------+----------+--------+
| Domestic sales (Russian Federation) | 1,523 | 5,927 |
+--------------------------------------------+----------+--------+
| Petroleum (refined) products - domestic | 9,779 | 8,425 |
| sales | | |
+--------------------------------------------+----------+--------+
| Other sales | 388 | 787 |
+--------------------------------------------+----------+--------+
| | 11,690 | 15,140 |
| Total gross revenues | | |
+--------------------------------------------+----------+--------+
For the six months ended 30 June 2010, total gross revenues declined by US$3.5
million as a result of decreased sales volumes totaling 210,385 barrels for the
six months ended 30 June 2010 (compared with 552,865 barrels for the six months
ended 30 June 2009) following the divestment of Dulisma. The decline was
partially off-set by a higher crude oil net back price of US$40.33 per barrel
for the six months ended 30 June 2010 (US$15.34 per barrel for the six months
ended 30 June 2009) and higher average net back prices for petroleum (refined)
products of US$49.84 per barrel for the six months ended 30 June 2010 (US$41.39
for the six months ended 30 June 2009). Netback, in the case of domestic crude
oil sales, is the gross sales net of VAT. Netback for domestic product sales is
defined as gross product sales minus VAT, transportation, excise tax and
refining costs.
A sharp decrease in domestic sales of crude oil was due to divestiture of
Dulisma in 2009 and acceleration of refining and sales of refined products at
Petrosakh.
For the six months ended 30 June 2010 all domestic sales of crude oil and almost
all petroleum (refined) products related to Petrosakh. During the six months
ended 30 June 2010 Arcticneft sold petroleum (refined) products to FGUP
"ArcticMorNefteGazRazvedka" ("AMNGR") for US$307,000 (US$366,000 for the six
months ended 30 June 2009).
Summary table: Net backs ($/bbl)
+----------------------------------------------+--------+--------+
| |Period ended 30 |
| | June: |
+ +-----------------+
| | 2010 | 2009 |
+----------------------------------------------+----------------------------------------------+--------+
| Crude oil | 40.33 | 15.34 |
+----------------------------------------------+--------+--------+
| Export sales | - | - |
+----------------------------------------------+--------+--------+
| Domestic sales (Russian Federation) | 40.33 | 15.34 |
+----------------------------------------------+--------+--------+
| Petroleum (refined) products - domestic | 49.84 | 41.39 |
| sales | | |
+----------------------------------------------+--------+--------+
Gross profit (net revenues less cost of sales) for the first half of 2010
increased to US$2.6 million from a loss of US$116.5 million for the six months
ended 30 June 2009. The main driver of the loss in 2009 was an impairment charge
recognised by the Company in the amount of US$122 million associated with the
impairment of Dulisma and Taas. According to IFRS, these expenses were included
in the cost of sales. Without this write-off, the Gross Profit in 2009 would
have been US$5.6 million.
Selling, General and Administrative expenses decreased for the six months ended
30 June 2010 by US$5.7 million to US$4.6 million from US$10.4 million for the
six months ended 30 June 2009. This was primarily caused by the initiation of
cost reduction programme in the holding company and management company and as
result of the divestment of the Dulisma during 2009. More than 70% of the head
count in the management company in Moscow was reduced.
As a result of cost reduction programme the Company had an Operating Profit of
US$1.6 million during the first half of 2010 as compared with an Operating Loss
of US$126.9 million for the six months ended 30 June 2009.
The net finance costs during the first half of 2010 were US$585,000 and net
interest benefit was US$969,000 (for the six months ended 30 June 2009: net
finance cost of US$340 million and net interest expense of US$56.6 million).
These costs decreased substantially as result of the settlement of all
liabilities to Sberbank during 2009 through a sale of Dulisma and Taas.
Decrease of Production expenses, Selling, General and Administrative expenses
and Finance costs in 2010 resulted in a Net Profit of US$1.6 million compared
with a Net Loss of US$440 million for the six months ended 30 June 2009 and
Consolidated Management EBITDA in the six months ended 30 June 2010 was
US$79,000 as compared with a loss of US$2.6 million during the six months ended
30 June 2009.
Management EBITDA ($'000) - Unaudited
+-------------------------------------+------------+------------+
| | Period ended 30 June: |
+-------------------------------------+-------------------------+
| | 2010 | 2009 |
+-------------------------------------+------------+------------+
| | | |
+-------------------------------------+------------+------------+
| Profit/(loss) for the period | 1,558 | (439,987) |
+-------------------------------------+------------+------------+
| | | |
+-------------------------------------+------------+------------+
| Net interest cost | 585 | 339,598 |
+-------------------------------------+------------+------------+
| Income tax | (589) | (26,538) |
+-------------------------------------+------------+------------+
| Depreciation, depletion and | 1,238 | 355 |
| amortization | | |
+-------------------------------------+------------+------------+
| Total non-cash expenses | 1,234 | 313,415 |
+-------------------------------------+------------+------------+
| | | |
+-------------------------------------+------------+------------+
| Share-based payments | 383 | 1,823 |
+-------------------------------------+------------+------------+
| Impairment of property, plant and | - | 122,127 |
| equipment | | |
+-------------------------------------+------------+------------+
| Gain from disposal of property, | (1,227) | - |
| plant and equipment | | |
+-------------------------------------+------------+------------+
| Release of provision for inventory | (1,869) | - |
+-------------------------------------+------------+------------+
| Total non-recurrent and non-cash | (2,713) | 100,329 |
| items | | |
+-------------------------------------+------------+------------+
| | 79 | (2,621) |
| Normalised EBITDA | | |
+-------------------------------------+------------+------------+
Cash Flow
The Company's cash position for the six months ended 30 June 2010 didn't change
significantly as compared with the six months ended 30 June 2009. The Group used
US$3.3 million on operating activities, primarily financing production at
Arcticneft and working capital associated with that production (the Company pays
operating expenses and production taxes at the time crude is produced, whilst
the sales of crude at Arcticneft take place only twice a year due to seasonality
of shipments).
This deficit was financed by operating cash flows and partially financed by cash
inflows from investing activity. During the first half of 2010 Arcticneft sold
its office building for US$2.0 million gross with VAT and now it is renting back
a smaller office space in the same building from the purchaser. This operation
was profitable for the Company, since the costs of maintaining the building are
high compared with the renting expenses and immediate cash from the sale of the
building allowed to its finance current operations of the Company.
Net debt Position
As at 30 June 2010 the Company had net cash of US$2.4 million (calculated as
Long-term and Short-term debt plus payables to Finfund and to shareholders less
cash in bank, less loan receivable from Taas and less Loans issued to related
parties). As at 31 December 2009 net cash was US$4.5 million.
Accounts payable and accrued expenses of US$14.7 million at the period end
mainly represented outstanding accounts payable to Finfund with the maximum
liability of US$4.4 million at 30 June 2010 for the pledge fee, accounts payable
to the Shareholders in the amount of US$2.2 million and a liability to AMNGR in
the amount of US$1.6 million for the crude oil, which the Company acquired at
the end of 2009 and couldn't load because of adverse weather conditions in
December 2009. At period end, the Company had 23,599 metric tons of crude oil
purchased from AMNGR which were loaded from Arcticneft in August 2010.
On 2 June 2010 the Company was notified that Finfund Limited had exercised its
rights to acquire 13,000,000 existing Urals Energy shares with a nominal value
of US$0.0063 per share from entities beneficially owned by two directors (being
Leonid Y. Dyachenko and Aleksey V. Ogarev) and another significant shareholder
(being Vyacheslav V. Rovneiko) (together the "Pledge Shareholders") pursuant to
a share pledge agreement dated 26 November 2007 (the "Share Pledge Agreement").
The Share Pledge Agreement was entered into by entities beneficially owned by
the Pledge Shareholders and secured various obligations of the Company under the
terms of a sale and purchase agreement dated 26 November 2007 (the "SPA")
relating to the acquisition by Urals of Taas-YuriakhNeftegazodobycha (the
"Acquisition"). Such obligations included certain pledge fees which Finfund
Limited are now claiming are owed by the Company. Based on Company's alleged
defaults in respect of the payment of such fees, Finfund Limited has chosen to
exercise its rights under the Share Pledge Agreement to acquire 13,000,000
shares in the Company from entities beneficially owned by the Pledge
Shareholders (the "Pledged Shares").
In consequence of the exercise of Finfund Limited's rights as described above,
any liability owed by the Company to Finfund Limited has been reduced by US$2.2
million. This liability, whilst reducing any obligations of the Company to
Finfund Limited, has transferred to the Pledge Shareholders in proportion to the
number of shares transferred by them under the Share Pledge Agreement. The
Company disputes that it owes any pledge fees to Finfund Limited and is in the
process of formulating a response to Finfund Limited.
In April 2010 the Company and its largest creditor Petraco Oil Company
("Petraco") reached an agreement to restructure the debt owed to Petraco with
the repayment schedule allowing for a more gradual repayment of the outstanding
liability and providing additional security to Petraco. Additionally, Petraco
converted US$2.0 million of the liability to 8,693,006 new ordinary shares in
the capital of the Company and received an option to acquire 12,576,688 new
ordinary shares in the capital of the Company for US$5.0 million. The Company
classified US$7.0 million of the US$33.9 million as current portion of a
long-term debt in its financial statements and the remaining part as long-term
debt. As at 30 June 2010 the long-term part amounted to US$25.8 million. As part
of this restructuring agreement, Petraco have the right to appoint one
non-executive to the board of the Company.
Sincerely,
Alexei Maximov
Chief Executive Officer
Urals Energy Public Company Limited
Interim Condensed Consolidated Financial Information (unaudited)
As of
and for the Six Months Ended 30 June 2010
+------------------------------------+------+------------+------------+
| Urals Energy Public Company | | 30 June | 31 |
| Limited | | 2010 | December |
| Interim Condensed Consolidated | | | 2009 |
| Statement of Financial Position | | | |
| (unaudited) | | | |
| (presented in US$ thousands) | | | |
| | | | |
+------------------------------------+------+ + +
| |Note | | |
+------------------------------------+------+------------+------------+
| Assets | | | |
+------------------------------------+------+------------+------------+
| Current assets | | | |
+------------------------------------+------+------------+------------+
| Cash and cash equivalents | | 237 | 2,361 |
+------------------------------------+------+------------+------------+
| Accounts receivable and | | 10,214 | 11,264 |
| prepayments | | | |
+------------------------------------+------+------------+------------+
| Inventories | 7 | 25,293 | 16,867 |
+------------------------------------+------+------------+------------+
| Total current assets | | 35,744 | 30,492 |
+------------------------------------+------+------------+------------+
| | | | |
+------------------------------------+------+------------+------------+
| Non-current assets | | | |
+------------------------------------+------+------------+------------+
| Property, plant and equipment | 5 | 57,888 | 62,524 |
+------------------------------------+------+------------+------------+
| Supplies and materials for capital | | 2,207 | 2,289 |
| construction | | | |
+------------------------------------+------+------------+------------+
| Other non-current assets | 6 | 37,116 | 35,330 |
+------------------------------------+------+------------+------------+
| Total non-current assets | | 97,211 | 100,143 |
+------------------------------------+------+------------+------------+
| | | 132,955 | 130,635 |
| Total assets | | | |
+------------------------------------+------+------------+------------+
| | | | |
+------------------------------------+------+------------+------------+
| Liabilities and equity | | | |
+------------------------------------+------+------------+------------+
| Current liabilities | | | |
+------------------------------------+------+------------+------------+
| Accounts payable and accrued | 8 | 14,688 | 20,697 |
| expenses | | | |
+------------------------------------+------+------------+------------+
| Income tax provision | | 3,759 | 3,759 |
+------------------------------------+------+------------+------------+
| Other taxes payable | | 2,253 | 2,360 |
+------------------------------------+------+------------+------------+
| Short-term borrowings and current | 10 | 7,629 | 33,978 |
| portion of long-term borrowings | | | |
+------------------------------------+------+------------+------------+
| Advances from customers | 9 | 8,500 | 2,090 |
+------------------------------------+------+------------+------------+
| Derivative financial instruments | | 170 | 56 |
+------------------------------------+------+------------+------------+
| Total current liabilities | | 36,999 | 62,940 |
+------------------------------------+------+------------+------------+
| | | | |
+------------------------------------+------+------------+------------+
| Long-term liabilities | | | |
+------------------------------------+------+------------+------------+
| Long-term borrowings | 10 | 25,775 | - |
+------------------------------------+------+------------+------------+
| Long-term finance lease | | 434 | 610 |
| obligations | | | |
+------------------------------------+------+------------+------------+
| Dismantlement provision | | 1,262 | 1,223 |
+------------------------------------+------+------------+------------+
| Deferred income tax liabilities | | 3,370 | 3,921 |
+------------------------------------+------+------------+------------+
| Total long-term liabilities | | 30,841 | 5,754 |
+------------------------------------+------+------------+------------+
| | | 67,840 | 68,694 |
| Total liabilities | | | |
+------------------------------------+------+------------+------------+
| | | | |
+------------------------------------+------+------------+------------+
| Equity | | | |
+------------------------------------+------+------------+------------+
| Share capital | | 1,188 | 1,131 |
+------------------------------------+------+------------+------------+
| Share premium | | 646,462 | 644,135 |
+------------------------------------+------+------------+------------+
| Currency translation | | (29,141) | (28,373) |
+------------------------------------+------+------------+------------+
| Accumulated deficit | | (553,394) | (554,976) |
+------------------------------------+------+------------+------------+
| Equity attributable to | | 65,115 | 61,917 |
| shareholders | | | |
| of Urals Energy Public Company | | | |
| Limited | | | |
+------------------------------------+------+------------+------------+
| Non-controlling interest | | - | 24 |
+------------------------------------+------+------------+------------+
| Total equity | 11 | 65,115 | 61,941 |
+------------------------------------+------+------------+------------+
| | | 132,955 | 130,635 |
| Total liabilities and equity | | | |
+------------------------------------+------+------------+------------+
Approved on behalf of the Board of Directors on 8 September 2010
+---------------------------------+----------+-------------------------------+
| | | |
+---------------------------------+----------+-------------------------------+
| | | |
+---------------------------------+----------+-------------------------------+
| A.D. Maximov | | G.B. Kazakov |
| Chief Executive Officer | | Chief Financial Officer |
+---------------------------------+----------+-------------------------------+
+--------------------------------------+------+--------------+-------------+
| | | Six months ended 30 |
| Urals Energy Public Company Limited | | June: |
| Interim Condensed Consolidated | | |
| Statement of Comprehensive Income | | |
| (unaudited) | | |
| (presented in US$ thousands) | | |
| | | |
+--------------------------------------+------+----------------------------+
| |Note | 2010 | 2009 |
+--------------------------------------+------+--------------+-------------+
| | | | |
+--------------------------------------+------+--------------+-------------+
| | | | |
+--------------------------------------+------+--------------+-------------+
| Gross revenues | 12 | 11,690 | 15,140 |
+--------------------------------------+------+--------------+-------------+
| Less: excise taxes | | (612) | (54) |
+--------------------------------------+------+--------------+-------------+
| | | 11,078 | 15,086 |
| Net revenues after excise taxes and | | | |
| VAT | | | |
+--------------------------------------+------+--------------+-------------+
| | | | |
+--------------------------------------+------+--------------+-------------+
| | | | |
+--------------------------------------+------+--------------+-------------+
| Cost of sales | 13 | (8,517) | (9,499) |
+--------------------------------------+------+--------------+-------------+
| Impairment charges | | - | (122,127) |
+--------------------------------------+------+--------------+-------------+
| Gross profit/(loss) | | 2,561 | (116,540) |
+--------------------------------------+------+--------------+-------------+
| | | | |
+--------------------------------------+------+--------------+-------------+
| Selling, general and administrative | 14 | (4,647) | (10,386) |
| expenses | | | |
+--------------------------------------+------+--------------+-------------+
| Other income | 15 | 3,640 | - |
+--------------------------------------+------+--------------+-------------+
| | | (1,007) | (10,386) |
| Total operating costs | | | |
+--------------------------------------+------+--------------+-------------+
| | | | |
+--------------------------------------+------+--------------+-------------+
| Operating profit/(loss) | | 1,554 | (126,926) |
+--------------------------------------+------+--------------+-------------+
| | | | |
+--------------------------------------+------+--------------+-------------+
| Interest income | 10 | 2,012 | 2,056 |
+--------------------------------------+------+--------------+-------------+
| Interest expense | 10 | (1,043) | (58,619) |
+--------------------------------------+------+--------------+-------------+
| Foreign currency losses | | (1,554) | (3,881) |
+--------------------------------------+------+--------------+-------------+
| Loss from disposal of assets held | | - | (1,090) |
| for sale | | | |
+--------------------------------------+------+--------------+-------------+
| Loss from joint venture operations | | - | (237,585) |
+--------------------------------------+------+--------------+-------------+
| Change in fair value of financial | | - | (40,480) |
| derivatives | | | |
+--------------------------------------+------+--------------+-------------+
| | | 969 | (466,525) |
| Profit/(loss) before income tax | | | |
+--------------------------------------+------+--------------+-------------+
| Income tax (expense) / benefit | | 589 | 26,538 |
+--------------------------------------+------+--------------+-------------+
| | | 1,558 | (439,987) |
| Profit/(loss) for the period | | | |
+--------------------------------------+------+--------------+-------------+
| | | | |
+--------------------------------------+------+--------------+-------------+
| Attributable to: | | (24) | (62) |
| - Non-controlling interest | | | |
+--------------------------------------+------+--------------+-------------+
| - Shareholders of Urals Energy | | 1,582 | (439,925) |
| Public Company Limited | | | |
+--------------------------------------+------+--------------+-------------+
| | | | |
+--------------------------------------+------+--------------+-------------+
| | | | |
+--------------------------------------+------+--------------+-------------+
| Energy Public Company Limited Energy | | 0.0086 | (2.4561) |
| Public Company Limited basic and | | | |
| diluted profit/(loss) per share (in | | | |
| US dollar per share) | | | |
+--------------------------------------+------+--------------+-------------+
| | | | |
+--------------------------------------+------+--------------+-------------+
| | | | |
+--------------------------------------+------+--------------+-------------+
| Weighted average shares outstanding | | 184,098,227 | 179,117,156 |
| attributable to basic and diluted | | | |
| shares | | | |
+--------------------------------------+------+--------------+-------------+
| | | | |
+--------------------------------------+------+--------------+-------------+
| | | | |
+--------------------------------------+------+--------------+-------------+
| Profit/(loss) for the period | | 1,558 | (439,987) |
+--------------------------------------+------+--------------+-------------+
| | | | |
+--------------------------------------+------+--------------+-------------+
| Other comprehensive income/(loss): | | | |
+--------------------------------------+------+--------------+-------------+
| - Effect of currency translation | | (768) | (20,911) |
+--------------------------------------+------+--------------+-------------+
| - Cumulative translation adjustment | | - | 2,080 |
| relating to disposed subsidiaries | | | |
+--------------------------------------+------+--------------+-------------+
| Total comprehensive loss for the | | 790 | (458,818) |
| period | | | |
+--------------------------------------+------+--------------+-------------+
| | | (24) | (72) |
| Attributable to: | | | |
| - Non-controlling interest | | | |
+--------------------------------------+------+--------------+-------------+
| - Shareholders of Urals Energy | | 815 | (458,746) |
| Public Company Limited | | | |
+--------------------------------------+------+--------------+-------------+
+------------------------------------------+------+--------------+-----------+
| Urals Energy Public Company Limited | | Six months ended 30 |
| Interim Condensed Consolidated Statement | | June: |
| of Cash Flows (unaudited) | | |
| (presented in US$ thousands) | | |
| | | |
| | | |
| | | |
+------------------------------------------+------+--------------------------+
| |Note | 2010 | 2009 |
+------------------------------------------+------+--------------+-----------+
| Cash flows from operating activities | | | |
+------------------------------------------+------+--------------+-----------+
| Loss before income tax | | 970 | (466,525) |
+------------------------------------------+------+--------------+-----------+
| Adjustments for: | | | |
+------------------------------------------+------+--------------+-----------+
| Depreciation, depletion and amortisation | 5 | 2,317 | 355 |
+------------------------------------------+------+--------------+-----------+
| Decrease of fair value of warrants | | 114 | - |
+------------------------------------------+------+--------------+-----------+
| Decrease of fair value of financial | | - | 40,480 |
| derivatives | | | |
+------------------------------------------+------+--------------+-----------+
| Loss from joint venture operations | | - | 237,585 |
+------------------------------------------+------+--------------+-----------+
| Share-based payments | 11 | 383 | 1,823 |
+------------------------------------------+------+--------------+-----------+
| Interest income | 10 | (2,012) | (2,056) |
+------------------------------------------+------+--------------+-----------+
| Interest expense | 10 | 1,043 | 58,619 |
+------------------------------------------+------+--------------+-----------+
| Loss from disposal of assets held for | | - | 1,090 |
| sale | | | |
+------------------------------------------+------+--------------+-----------+
| Release of provision for inventory | 15 | (1,869) | (642) |
+------------------------------------------+------+--------------+-----------+
| Impairment charges | | - | 122,127 |
+------------------------------------------+------+--------------+-----------+
| Foreign currency losses | | 1,554 | 3,881 |
+------------------------------------------+------+--------------+-----------+
| Gain from disposal of property, plant | 15 | (1,223) | - |
| and equipment | | | |
+------------------------------------------+------+--------------+-----------+
| Other | | (155) | 55 |
+------------------------------------------+------+--------------+-----------+
| Operating cash flows before changes in | | 1,122 | (3,208) |
| working capital | | | |
+------------------------------------------+------+--------------+-----------+
| | | (7,071) | (4,379) |
| Increase in inventories | | | |
+------------------------------------------+------+--------------+-----------+
| Decrease in accounts receivables and | | 2,089 | 2,873 |
| prepayments | | | |
+------------------------------------------+------+--------------+-----------+
| (Decrease)/increase in accounts payable | | (5,788) | 208 |
| and accrued expenses | | | |
+------------------------------------------+------+--------------+-----------+
| Increase/(decrease) in advances from | | 6,474 | (4,357) |
| customers | | | |
+------------------------------------------+------+--------------+-----------+
| (Decrease)/Increase in other taxes | | (107) | 10,898 |
| payable | | | |
+------------------------------------------+------+--------------+-----------+
| Cash (used in) / generated from | | (3,283) | 2,035 |
| operations | | | |
+------------------------------------------+------+--------------+-----------+
| | | | |
+------------------------------------------+------+--------------+-----------+
| Interest received | | - | 72 |
+------------------------------------------+------+--------------+-----------+
| Income tax received | | - | 380 |
+------------------------------------------+------+--------------+-----------+
| | | (3,283) | 2,487 |
| Net cash (used in) / generated from | | | |
| operating activities | | | |
+------------------------------------------+------+--------------+-----------+
| | | | |
+------------------------------------------+------+--------------+-----------+
| Cash flows from investing activities | | | |
+------------------------------------------+------+--------------+-----------+
| Purchase of property, plant and | | (789) | (1,840) |
| equipment | | | |
+------------------------------------------+------+--------------+-----------+
| Proceeds from sale of property, plant | | 1,771 | - |
| and equipment | | | |
+------------------------------------------+------+--------------+-----------+
| Proceeds from sale of subsidiaries, net | | - | (52) |
| of cash disposed | | | |
+------------------------------------------+------+--------------+-----------+
| Change in loans issued | | - | 25 |
+------------------------------------------+------+--------------+-----------+
| | | 982 | |
| Net cash generated from/(used in) | | | (1,867) |
| investing activities | | | |
+------------------------------------------+------+--------------+-----------+
| | | | |
+------------------------------------------+------+--------------+-----------+
| Cash flows from financing activities | | | |
+------------------------------------------+------+--------------+-----------+
| Proceeds from borrowings, net of | | 565 | - |
| borrowing costs | | | |
+------------------------------------------+------+--------------+-----------+
| Finance lease principal payments | | (396) | (180) |
+------------------------------------------+------+--------------+-----------+
| Net cash generated from/(used in) | | 169 | (180) |
| financing activities | | | |
+------------------------------------------+------+--------------+-----------+
| Effect of exchange rate changes on cash | | 7 | (24) |
| and cash equivalents | | | |
+------------------------------------------+------+--------------+-----------+
| Net (decrease) / increase in cash and | | (2,124) | 416 |
| cash equivalents | | | |
+------------------------------------------+------+--------------+-----------+
| Cash and cash equivalents at the | | 2,361 | 1,272 |
| beginning of the period | | | |
+------------------------------------------+------+--------------+-----------+
| Ñash and cash equivalents at the end of | | 237 | 1,688 |
| the period | | | |
+------------------------------------------+------+--------------+-----------+
| Cash and cash equivalents at the end of | | 237 | 1,190 |
| the period of the Group, excluding those | | | |
| classified as held for sale | | | |
+------------------------------------------+------+--------------+-----------+
| Cash and cash equivalents at the end of | | - | 498 |
| the period of the assets classified as | | | |
| held for sale | | | |
+------------------------------------------+------+--------------+-----------+
+---------------+--------+---------+-----------+-------------+-------------+--------------+-----------------+-----------+
| Urals Energy Public Company Limited | | |
| Interim Condensed Consolidated Statement of Changes | | |
| in Shareholders' Equity (unaudited) | | |
| (presented in US$ thousands) | | |
+--------------------------------------------------------------------------+--------------+-----------------+
| | | Share | Share | Currency | Accumulated | Equity | Non-controlling | Total |
| | | capital | premium | translation | deficit | attributable | interest | equity |
| | | | | | | to | | |
| | | | | | | Shareholders | | |
| | | | | | | of Urals | | |
| | | | | | | Energy | | |
| | | | | | | Public | | |
| | | | | | | Company | | |
| | | | | | | Limited | | |
+---------------+--------+---------+-----------+-------------+-------------+--------------+-----------------+-----------+
| | | | | | | | | |
+---------------+--------+---------+-----------+-------------+-------------+--------------+-----------------+-----------+
| Balance | | 1,122 | 640,080 | (40,321) | (251,045) | 349,723 | 105 | 349,828 |
| at 1 | | | | | | | | |
| January | | | | | | | | |
| 2009 | | | | | | | | |
+---------------+--------+---------+-----------+-------------+-------------+--------------+-----------------+-----------+
| | | | | | | | | |
+---------------+--------+---------+-----------+-------------+-------------+--------------+-----------------+-----------+
| Effect | | - | - | (20,901) | - | (20,901) | (10) | (20,911) |
| of | | | | | | | | |
| currency | | | | | | | | |
| translation | | | | | | | | |
+---------------+--------+---------+-----------+-------------+-------------+--------------+-----------------+-----------+
| Cumulative | | - | - | 2,080 | (2,080) | - | - | - |
| translation | | | | | | | | |
| adjustment | | | | | | | | |
| relating to | | | | | | | | |
| disposed | | | | | | | | |
| subsidiaries | | | | | | | | |
+---------------+--------+---------+-----------+-------------+-------------+--------------+-----------------+-----------+
| Loss | | - | - | - | (437,845) | (437,845) | (62) | (437,907) |
| for | | | | | | | | |
| the | | | | | | | | |
| period | | | | | | | | |
+---------------+--------+---------+-----------+-------------+-------------+--------------+-----------------+-----------+
| Total | | - | - | (18,821) | (439,925) | (458,746) | (72) | (458,818) |
| comprehensive | | | | | | | | |
| loss | | | | | | | | |
+---------------+--------+---------+-----------+-------------+-------------+--------------+-----------------+-----------+
| | | | | | | | | |
+---------------+--------+---------+-----------+-------------+-------------+--------------+-----------------+-----------+
| Share | | 9 | (9) | - | - | - | - | - |
| issue | | | | | | | | |
+---------------+--------+---------+-----------+-------------+-------------+--------------+-----------------+-----------+
| Share-based | | - | 1,823 | - | - | 1,823 | - | 1,823 |
| payment | | | | | | | | |
+---------------+--------+---------+-----------+-------------+-------------+--------------+-----------------+-----------+
| | | | | | | | | |
+---------------+--------+---------+-----------+-------------+-------------+--------------+-----------------+-----------+
| | | | | | | | | |
+---------------+--------+---------+-----------+-------------+-------------+--------------+-----------------+-----------+
| Balance | | 1,131 | 641,781 | (59,142) | (690,970) | (107,200) | 33 | (107,167) |
| at 30 | | | | | | | | |
| June | | | | | | | | |
| 2009 | | | | | | | | |
+---------------+--------+---------+-----------+-------------+-------------+--------------+-----------------+-----------+
| | | | | | | | | |
+---------------+--------+---------+-----------+-------------+-------------+--------------+-----------------+-----------+
| Balance | | 1,131 | 644,135 | (28,373) | (554,976) | 61,917 | 24 | 61,941 |
| at 1 | | | | | | | | |
| January | | | | | | | | |
| 2010 | | | | | | | | |
+---------------+--------+---------+-----------+-------------+-------------+--------------+-----------------+-----------+
| | | | | | | | | |
+---------------+--------+---------+-----------+-------------+-------------+--------------+-----------------+-----------+
| Effect | | - | - | (768) | - | (768) | 0 | (768) |
| of | | | | | | | | |
| currency | | | | | | | | |
| translation | | | | | | | | |
+---------------+--------+---------+-----------+-------------+-------------+--------------+-----------------+-----------+
| Profit | | - | - | - | 1,582 | 1,582 | (24) | 1,558 |
| for | | | | | | | | |
| the | | | | | | | | |
| period | | | | | | | | |
+---------------+--------+---------+-----------+-------------+-------------+--------------+-----------------+-----------+
| Total | | - | - | (768) | 1,582 | 814 | (24) | 790 |
| comprehensive | | | | | | | | |
| income/(loss) | | | | | | | | |
+---------------+--------+---------+-----------+-------------+-------------+--------------+-----------------+-----------+
| | | | | | | | | |
+---------------+--------+---------+-----------+-------------+-------------+--------------+-----------------+-----------+
| Share | | 57 | 1,944 | - | - | 2,001 | - | 2,001 |
| issue | | | | | | | | |
| (Note | | | | | | | | |
| 10) | | | | | | | | |
+---------------+--------+---------+-----------+-------------+-------------+--------------+-----------------+-----------+
| Share-based | | - | 383 | - | - | 383 | - | 383 |
| payment | | | | | | | | |
| (Note 11) | | | | | | | | |
+---------------+--------+---------+-----------+-------------+-------------+--------------+-----------------+-----------+
| | | | | | | | | |
+---------------+--------+---------+-----------+-------------+-------------+--------------+-----------------+-----------+
| | | | | | | | | |
+---------------+--------+---------+-----------+-------------+-------------+--------------+-----------------+-----------+
| Balance | | 1,188 | 646,462 | (29,141) | (553,394) | 65,115 | 0 | 65,115 |
| at 30 | | | | | | | | |
| June | | | | | | | | |
| 2010 | | | | | | | | |
+---------------+--------+---------+-----------+-------------+-------------+--------------+-----------------+-----------+
| | | | | | | | | |
+---------------+--------+---------+-----------+-------------+-------------+--------------+-----------------+-----------+
Urals Energy Public Company Limited
Selected Notes to the Interim Condensed Consolidated Financial
Information(unaudited)
(presented in US$ thousands)
1 Activities
Urals Energy Public Company Limited ("Urals Energy" or the "Company" or "UEPCL")
was incorporated as a limited liability company in Cyprus on 10 November 2003.
Urals Energy and its subsidiaries (the "Group") are primarily engaged in oil and
gas exploration and production in the Russian Federation and processing of crude
oil for distribution on both the Russian and international markets.
The registered office of Urals Energy is at 31 Evagorou Avenue, Suite 34,
CY-1066, Nicosia, Cyprus. UEPCL's shares are traded on the AIM Market operated
by the London Stock Exchange.
The Group comprises UEPCL and the following subsidiaries:
+----------------+--------------+--------+----------+
| Entity | Jurisdiction | 30 | 31 |
| | | June | December |
| | | 2010 | 2009 |
+----------------+--------------+--------+----------+
| Exploration | | | |
| and | | | |
| production | | | |
+----------------+--------------+--------+----------+
| ZAO | Sakhalin, | 97.2% | 97.2% |
| Petrosakh | Russian | | |
| ("Petrosakh") | Federation | | |
+----------------+--------------+--------+----------+
| ZAO | Nenetsky | | |
| Arcticneft | Okrug, | 100.0% | 100.0% |
| ("Arcticneft") | Russian | | |
| | Federation | | |
+----------------+--------------+--------+----------+
| OOO | Irkutsk, | | |
| Lenskaya | Russian | 100.0% | 100.0% |
| Transportnaya | Federation | | |
| Kompaniya | | | |
| ("LTK") | | | |
| (dormant - | | | |
| under | | | |
| liquidation) | | | |
+----------------+--------------+--------+----------+
| | | | |
+----------------+--------------+--------+----------+
| Management | | | |
| company | | | |
+----------------+--------------+--------+----------+
| OOO Urals | Moscow, | | |
| Energy | Russian | 100.0% | 100.0% |
| | Federation | | |
+----------------+--------------+--------+----------+
| Urals | United | | |
| Energy | Kingdom | 100.0% | 100.0% |
| (UK) | | | |
| Limited | | | |
| (dormant | | | |
| - under | | | |
| liquidation) | | | |
+----------------+--------------+--------+----------+
| | | | |
+----------------+--------------+--------+----------+
| Exploration | | | |
+----------------+--------------+--------+----------+
| OOO Urals-Nord | Nenetsky | 100.0% | 100.0% |
| ("Urals-Nord") | Okrug, | | |
| (dormant - | Russian | | |
| under | Federation | | |
| liquidation) | | | |
+----------------+--------------+--------+----------+
| | | | |
+----------------+--------------+--------+----------+
2 Summary of significant accounting policies
Basis of preparation. This consolidated interim condensed financial information
has been prepared in accordance with and comply with IAS 34 Interim Financial
Reporting and should be read in conjunction with the annual financial statements
for the year ended 31 December 2009, which have been prepared in accordance with
International Financial Reporting Standards ("IFRS").
The same accounting policies and methods of computation were followed in the
preparation of this interim condensed consolidated financial information as
compared with the annual consolidated financial statements for the year ended 31
December 2009.
The financial information set out in this interim report does not constitute
statutory accounts. The Group's statutory financial statements for the year
ended 31 December 2009 have been filed with the Registrar of Companies. The
auditor's report on those financial statements was unqualified and did not
contain a statement under s498(2) or s498(3) of the Companies Act 2006. This
interim condensed consolidated financial information has not been audited.
Use of estimates. The preparation of interim condensed consolidated financial
information in conformity with IFRS requires management to make estimates and
assumptions that affect the reported amounts of assets, liabilities, revenues
and expenses, and the disclosure of contingent assets and liabilities as of the
reporting date and during the reporting period. Estimates have principally been
made in respect to fair values of financial assets and financial liabilities,
impairment provisions, asset retirement obligation and deferred income taxes.
Actual results may differ from such estimates.
Functional and presentation currency. The United States dollar ("US dollar or
US$ or $") is the presentation currency for the Group's operations as management
have used the US dollar accounts to manage the Group's financial risks and
exposures, and to measure its performance. Financial statements of the Russian
subsidiaries are measured in Russian Roubles, their functional currency.
Translation to functional currency. Monetary balance sheet items denominated in
foreign currencies have been remeasured using the exchange rate at the
respective balance sheet date. Exchange gains and losses resulting from foreign
currency translation are included in the determination of profit or loss. The US
dollar to Russian Rouble exchange rates were 31.1954 and 30.2442 as of 30 June
2010 and 31 December 2009, respectively.
Translation to presentation currency. The Group's condensed consolidated
financial information are presented in US dollars in accordance with IAS 21, The
Effects of Changes in Foreign Exchange Rates. The results and financial position
of each Group entity having a functional currency different from the
presentation currency (the functional currency of none of which is a currency of
a hyperinflationary economy) are translated into the presentation currency as
follows:
(i) Assets and liabilities for each reporting date presented are translated at
the closing rate. Goodwill and fair value adjustments arising on the
acquisitions are treated as assets and liabilities of the acquired entity.
(ii) Income and expenses for each statement of comprehensive income are
translated at average exchange rates (unless this average is not a reasonable
approximation of the cumulative effect of the rates prevailing on the
transaction dates, in which case income and expenses are translated at the dates
of the transactions).
(iii) All resulting exchange differences are recognised as a separate
component of equity.
When a subsidiary is disposed of through sale, liquidation, repayment of share
capital or abandonment of all, or part of, that entity, the exchange differences
deferred in equity are reclassified to statement of comprehensive income.
Income tax. Taxes on income in the interim periods are accrued using the tax
rate that would be applicable to expected total annual earnings.
Accounting standards adopted during the period. In the current period, the Group
has adopted all of the new and revised Standards and Interpretations issued by
the International Accounting Standards Board (the IASB) and the International
Financial Reporting Interpretations Committee (the IFRIC) of the IASB that are
relevant to its operations and effective for reporting periods beginning on 1
January 2010.
3 Going concern
A significant portion of the Group's consolidated net assets of $65,115 thousand
comprises undeveloped mineral deposits requiring significant additional
investment. The Group is dependent upon external debt to fully develop the
deposits and realise the value attributed to such assets.
The Group had net current liabilities of $1,255 thousand as of 30 June 2010. The
most significant creditor as of 30 June 2010 was an advance for future oil sales
from Petraco Oil Company Ltd. ("Petraco") in the amount of $32,775 thousand of
principal and interest owed as of 30 June 2010 (Note 10).
On 29 April 2010 the Extraordinary General Meeting authorised the restructuring
of the advance from Petraco. As a consequence of the restructuring the debt was
restructured so that $7,000 thousand in repayable by 31 December 2010 and $8,000
thousand is repayable by 31 December 2011. The other terms and conditions of the
restructuring are discussed further in Note 10.
The management of the Group have prepared monthly cash flow projections for
periods throughout 2010, 2011 and 2012. Judgements with regard to future oil
prices and planned production were required for the preparation of the cash flow
projections and model. Positive overall cash flows are crucially dependant on
future oil prices. A price of $75 per barrel has been used for 2010 and for
2011.
Despite the above matters, the Group still has funding and liquidity
constraints. The management of the Group considers that there is a material
uncertainty, which may cast significant doubt about the Group's ability to
continue as a going concern.
Despite these uncertainties and based on cash flow projections performed, the
management considers that the application of the going concern assumption for
the preparation of this interim condensed consolidated financial information is
appropriate.
4 Critical Accounting Estimates and Judgements in Applying Accounting
Policies
The Group makes estimates and assumptions that affect the reported amounts of
assets and liabilities. Estimates and judgements are continually evaluated and
are based on management's experience and other factors, including expectations
of future events that are believed to be reasonable under the circumstances.
Management also makes certain judgements, apart from those involving
estimations, in the process of applying the accounting policies. Judgements
that have the most significant effect on the amounts recognised in the condensed
consolidated financial information and estimates that can cause a significant
adjustment to the carrying amount of assets and liabilities are outlined below.
Tax legislation. Russian tax and customs legislation is subject to varying
interpretations, and changes, which can occur frequently.
Management's interpretation of such legislation as applied to the transactions
and activity of the Group may be challenged by the relevant authorities.
Estimation of oil and gas reserves. Engineering estimates of hydrocarbon
reserves are inherently uncertain and are subject to future revisions.
Accounting measures such as depreciation, depletion and amortization charges,
impairment assessments and asset retirement obligations that are based on the
estimates of proved reserves are subject to change based on future changes to
estimates of oil and gas reserves.
Proved reserves are defined as the estimated quantities of hydrocarbons which
geological and engineering data demonstrate with reasonable certainty to be
recoverable in future years from known reservoirs under existing economic
conditions. Proved reserves are estimated by reference to available reservoir
and well information, including production and pressure trends for producing
reservoirs. Furthermore, estimates of proved reserves only include volumes for
which access to market is assured with reasonable certainty. All proved reserves
estimates are subject to revision, either upward or downward, based on new
information, such as from development drilling and production activities or from
changes in economic factors, including product prices, contract terms or
development plans. In some cases, substantial new investment in additional
wells and related support facilities and equipment will be required to recover
such proved reserves. Due to the inherent uncertainties and the limited nature
of reservoir data, estimates of underground reserves are subject to change over
time as additional information becomes available.
In general, estimates of reserves for undeveloped or partially developed fields
are subject to greater uncertainty over their future life than estimates of
reserves for fields that are substantially developed and depleted. As those
fields are further developed, new information may lead to further revisions in
reserve estimates. Reserves have a direct impact on certain amounts reported in
the interim condensed consolidated financial information, most notably
depreciation, depletion and amortization as well as impairment expenses.
Depreciation rates on production assets using the units-of-production method for
each field are based on proved developed reserves for development costs, and
total proved reserves for costs associated with the acquisition of proved
properties. Assuming all variables are held constant, an increase in proved
developed reserves for each field decreases depreciation, depletion and
amortization expenses. Conversely, a decrease in the estimated proved developed
reserves increases depreciation, depletion and amortization expenses. Moreover,
estimated proved reserves are used to calculate future cash flows from oil and
gas properties, which serve as an indicator in determining whether or not
property impairment is present.
The possibility exists for changes or revisions in estimated reserves to have a
significant effect on depreciation, depletion and amortization charges and,
therefore, reported net profit for the year.
Impairment provision for receivables. The impairment provision for receivables
is based on management's assessment of the probability of collection of
individual receivables. Significant financial difficulties of the debtor,
probability that the debtor will enter bankruptcy or financial reorganization,
and default or delinquency in payments are considered indicators that the
receivable is potentially impaired. Actual results could differ from these
estimates if there is deterioration in a debtor's creditworthiness or actual
defaults are higher than the estimates.
When there is no expectation of recovering additional cash for an amount
receivable, the expected amount receivable is written off against the associated
provision.
Future cash flows of receivables that are evaluated for impairment are estimated
on the basis of the contractual cash flows of the assets and the experience of
management in respect of the extent to which amounts will become overdue as a
result of past loss events and the success of recovery of overdue amounts. Past
experience is adjusted on the basis of current observable data to reflect the
effects of current conditions that did not affect past periods and to remove the
effects of past conditions that do not exist currently.
Asset retirement obligations. Management makes provision for the future costs of
decommissioning hydrocarbon production facilities, pipelines and related support
equipment based on the best estimates of future cost and economic lives of those
assets. Estimating future asset retirement obligations is complex and requires
management to make estimates and judgments with respect to removal obligations
that will occur many years in the future. Changes in the measurement of existing
obligations can result from changes in estimated timing, future costs or
discount rates used in valuation.
Useful lives of non-oil and gas properties. Items of non-oil and gas properties
are stated at cost less accumulated depreciation. The estimation of the useful
life of an asset is a matter of management judgement based upon experience with
similar assets. In determining the useful life of an asset, management
considers the expected usage, estimated technical obsolescence, physical wear
and tear and the physical environment in which the asset is operated. Changes in
any of these conditions or estimates may result in adjustments to future
depreciation rates. Useful lives applied to oil and gas properties may exceed
the licence term where management considers that licences will be renewed.
Assumptions related to renewal of licences can involve significant judgment of
management.
Impairment. Management have estimated the recoverable amount of cash generating
units. Changes in the assumptions used can have a significant impact on the
amount of any impairment charge.
Fair values of acquired assets and liabilities. Since its inception, the Group
has completed several significant acquisitions. IFRS 3 requires that, at the
date of acquisition, all identifiable assets (including intangible assets),
liabilities and contingent liabilities of an acquired entity be recorded at
their respective fair values. The estimation of fair values requires management
judgement. For significant acquisitions, management engages independent experts
to advise as to the fair values of acquired assets and liabilities. Changes in
any of the estimates subsequent to the finalisation of acquisition accounting
may result in losses in future periods.
Going Concern. This interim condensed consolidated financial information have
been prepared on the basis that the Group will continue as a going concern.
Preparation of the interim condensed consolidated financial information on a
basis other than going concern can have a significant impact on the balances
recorded in respect of assets and liabilities.
5 Property, Plant and Equipment
+-------------------------------------+----------+---------------+----------+--------------------+-----------+----------+---------+----------+----------------+----------+-----------+
| | Oil and gas properties | Refinery and related | Buildings | Other Assets | Assets under construction | Total |
| | | equipment | | | | |
+-------------------------------------+--------------------------+-------------------------------+----------------------+--------------------+---------------------------+-----------+
| Cost at | | | | | | |
+-------------------------------------+--------------------------+-------------------------------+----------------------+--------------------+---------------------------+-----------+
| 1 January 2009 | 331,038 | 5,550 | 3,689 | 12,131 | 106,627 | 459,035 |
+-------------------------------------+--------------------------+-------------------------------+----------------------+--------------------+---------------------------+-----------+
| Property, plant and equipment, | 229,044 | - | 2,446 | 8,843 | 103,145 | 343,478 |
| excluding assets held for sale | | | | | | |
+-------------------------------------+--------------------------+-------------------------------+----------------------+--------------------+---------------------------+-----------+
| Property, plant and equipment held | 101,994 | 5,550 | 1,243 | 3,288 | 3,482 | 115,557 |
| for sale | | | | | | |
+-------------------------------------+--------------------------+-------------------------------+----------------------+--------------------+---------------------------+-----------+
| Translation difference | (20,698) | (340) | (225) | (763) | (6,096) | (28,122) |
+-------------------------------------+--------------------------+-------------------------------+----------------------+--------------------+---------------------------+-----------+
| Additions | - | - | - | - | 10,349 | 10,349 |
+-------------------------------------+--------------------------+-------------------------------+----------------------+--------------------+---------------------------+-----------+
| Capitalised borrowing | - | - | - | - | 4,705 | 4,705 |
| costs | | | | | | |
+-------------------------------------+--------------------------+-------------------------------+----------------------+--------------------+---------------------------+-----------+
| Transfers | 7,504 | 3 | - | 4 | (7,511) | - |
+-------------------------------------+--------------------------+-------------------------------+----------------------+--------------------+---------------------------+-----------+
| Impairment | (122,127) | - | - | - | - | (122,127) |
+-------------------------------------+--------------------------+-------------------------------+----------------------+--------------------+---------------------------+-----------+
| Disposals | - | - | - | (386) | (202) | (588) |
+-------------------------------------+--------------------------+-------------------------------+----------------------+--------------------+---------------------------+-----------+
| Disposals of assets held for sale | (6,079) | - | - | - | (51) | (6,130) |
+-------------------------------------+--------------------------+-------------------------------+----------------------+--------------------+---------------------------+-----------+
| | 189,638 | 5,213 | 3,464 | 10,986 | 107,821 | 317,122 |
| 30 June 2009 | | | | | | |
+-------------------------------------+--------------------------+-------------------------------+----------------------+--------------------+---------------------------+-----------+
| Property, plant and equipment, | - | - | - | 4,562 | 1,687 | 6,249 |
| excluding assets held for sale | | | | | | |
+-------------------------------------+--------------------------+-------------------------------+----------------------+--------------------+---------------------------+-----------+
| Property, plant and equipment held | 189,638 | 5,213 | 3,464 | 6,424 | 106,134 | 310,873 |
| for sale | | | | | | |
+-------------------------------------+--------------------------+-------------------------------+----------------------+--------------------+---------------------------+-----------+
| | | | | | | |
+------------------------------------------------+--------------------------+--------------------+-----------+--------------------+---------------------------+----------------------+
| | Oil and gas properties | Refinery and | Buildings | Other Assets | Assets under construction | Total |
| | | related equipment | | | | |
+------------------------------------------------+--------------------------+--------------------+-----------+--------------------+---------------------------+----------------------+
| Accumulated Depreciation, Amortization and | | | | | | |
| Depletion at | | | | | | |
+------------------------------------------------+--------------------------+--------------------+-----------+--------------------+---------------------------+----------------------+
| | (44,218) | (1,920) | (1,008) | (4,211) | - | (51,357) |
| 1 January 2009 | | | | | | |
+------------------------------------------------+--------------------------+--------------------+-----------+--------------------+---------------------------+----------------------+
| Property, plant and equipment, excluding | (3,361) | - | (424) | (2,725) | - | (6,510) |
| assets held for sale | | | | | | |
+------------------------------------------------+--------------------------+--------------------+-----------+--------------------+---------------------------+----------------------+
| Property, plant and equipment held for sale | (40,857) | (1,920) | (584) | (1,486) | - | (44,847) |
+------------------------------------------------+--------------------------+--------------------+-----------+--------------------+---------------------------+----------------------+
| Translation difference | 3,343 | 118 | 61 | 252 | - | 3,774 |
+------------------------------------------------+--------------------------+--------------------+-----------+--------------------+---------------------------+----------------------+
| Depreciation, depletion and amortization | - | - | - | (229) | - | (229) |
+------------------------------------------------+--------------------------+--------------------+-----------+--------------------+---------------------------+----------------------+
| Disposals | - | - | - | 131 | - | 131 |
+------------------------------------------------+--------------------------+--------------------+-----------+--------------------+---------------------------+----------------------+
| Disposals of assets held for sale | 4,267 | - | - | - | - | 4,267 |
+------------------------------------------------+--------------------------+--------------------+-----------+--------------------+---------------------------+----------------------+
| 30 June 2009 | (36,608) | (1,802) | (947) | (4,057) | - | (43,414) |
+------------------------------------------------+--------------------------+--------------------+-----------+--------------------+---------------------------+----------------------+
| Property, plant and equipment, excluding | - | - | - | (1,755) | - | (1,755) |
| assets held for sale | | | | | | |
+------------------------------------------------+--------------------------+--------------------+-----------+--------------------+---------------------------+----------------------+
| Property, plant and equipment held for sale | (36,608) | (1,802) | (947) | (2,302) | - | (41,659) |
+------------------------------------------------+--------------------------+--------------------+-----------+--------------------+---------------------------+----------------------+
| | | | | | | |
| Net Book Value at | | | | | | |
+------------------------------------------------+--------------------------+--------------------+-----------+--------------------+---------------------------+----------------------+
| 30 June 2009 | 153,030 | 3,411 | 2,517 | 6,929 | 107,821 | 273,708 |
+------------------------------------------------+--------------------------+--------------------+-----------+--------------------+---------------------------+----------------------+
| Property, plant and equipment, excluding | - | - | - | 2,807 | 1,687 | 4,494 |
| assets held for sale | | | | | | |
+------------------------------------------------+--------------------------+--------------------+-----------+--------------------+---------------------------+----------------------+
| Property, plant and equipment held for sale | 153,030 | 3,411 | 2,517 | 4,122 | 106,134 | 269,214 |
+------------------------------------------------+--------------------------+--------------------+-----------+--------------------+---------------------------+----------------------+
| | | | | | | | | | | | |
+-------------------------------------+----------+---------------+----------+--------------------+-----------+----------+---------+----------+----------------+----------+-----------+
+----------+--------------------+----------+---------+----------+----------+----------+-------+----------+-------+----------+---------+----------+---------+----------+
| | Oil and gas | Refinery and | Buildings | Other Assets | Assets under | Total | |
| | properties | related equipment | | | construction | | |
+-------------------------------+--------------------+---------------------+------------------+------------------+--------------------+--------------------+----------+
| Cost at | | | | | | | |
+-------------------------------+--------------------+---------------------+------------------+------------------+--------------------+--------------------+----------+
| | | 91,991 | 5,394 | 1,207 | 5,096 | 3,443 | 107,131 |
| | 1 January 2010 | | | | | | |
+----------+-------------------------------+--------------------+---------------------+------------------+------------------+--------------------+--------------------+
| | Translation difference | (2,813) | (166) | (19) | (141) | (93) | (3,232) |
+----------+-------------------------------+--------------------+---------------------+------------------+------------------+--------------------+--------------------+
| | Reclassificated as intangible | - | - | - | - | (283) | (283) |
| | assets | | | | | | |
+----------+-------------------------------+--------------------+---------------------+------------------+------------------+--------------------+--------------------+
| | Additions | - | - | - | 2 | 180 | 182 |
+----------+-------------------------------+--------------------+---------------------+------------------+------------------+--------------------+--------------------+
| | Transfers | 235 | 40 | - | 2 | (277) | - |
+----------+-------------------------------+--------------------+---------------------+------------------+------------------+--------------------+--------------------+
| | Disposals | (4) | - | (490) | (413) | - | (906)* |
+----------+-------------------------------+--------------------+---------------------+------------------+------------------+--------------------+--------------------+
| | | | | | | | | | | | | | | |
+----------+--------------------+----------+---------+----------+----------+----------+-------+----------+-------+----------+---------+----------+---------+----------+
+--------+----------+---------+--------+---------+---------+-----------+
| | 89,409 | 5,268 | 698 | 4,546 | 2,970 | 102,891 |
| 30 | | | | | | |
| June | | | | | | |
| 2010 | | | | | | |
+--------+----------+---------+--------+---------+---------+-----------+
+---------------+------------+-----------+-----------+----------+--------------+-----------+
| | Oil | Refinery | Buildings | Other | Assets | Total |
| | and | and | | Assets | under | |
| | gas | related | | | construction | |
| | properties | equipment | | | | |
+---------------+------------+-----------+-----------+----------+--------------+-----------+
| Accumulated | | | | | | |
| Depreciation, | | | | | | |
| Amortization | | | | | | |
| and Depletion | | | | | | |
| at | | | | | | |
+---------------+------------+-----------+-----------+----------+--------------+-----------+
| | (38,783) | (2,171) | (648) | (3,005) | - | (44,607) |
| 1 | | | | | | |
| January | | | | | | |
| 2010 | | | | | | |
+---------------+------------+-----------+-----------+----------+--------------+-----------+
| Translation | 1,250 | 70 | 16 | 90 | - | 1,426 |
| difference | | | | | | |
+---------------+------------+-----------+-----------+----------+--------------+-----------+
| Depreciation, | (1,871) | (99) | (8) | (203) | - | (2,181) |
| depletion | | | | | | |
| and | | | | | | |
| amortization | | | | | | |
+---------------+------------+-----------+-----------+----------+--------------+-----------+
| Disposals | - | - | 121 | 238 | - | 359 |
+---------------+------------+-----------+-----------+----------+--------------+-----------+
| | (39,404) | (2,200) | (519) | (2,880) | - | (45,003) |
| 30 | | | | | | |
| June | | | | | | |
| 2010 | | | | | | |
+---------------+------------+-----------+-----------+----------+--------------+-----------+
| | | | | | | |
| | | | | | | |
| Net | | | | | | |
| Book | | | | | | |
| Value | | | | | | |
| at | | | | | | |
+---------------+------------+-----------+-----------+----------+--------------+-----------+
| 1 | 53,208 | 3,223 | 559 | 2,091 | 3,443 | 62,524 |
| January | | | | | | |
| 2010 | | | | | | |
+---------------+------------+-----------+-----------+----------+--------------+-----------+
| | | | | | | |
+---------------+------------+-----------+-----------+----------+--------------+-----------+
| 30 | 50,005 | 3,068 | 179 | 1,666 | 2,970 | 57,888 |
| June | | | | | | |
| 2010 | | | | | | |
+---------------+------------+-----------+-----------+----------+--------------+-----------+
*During the six months period ended 30 June 2010 the Group sold property, plant
and equipment for the total consideration of $1,771 thousand. The net book value
on the date of disposal was $547 thousand.
Included within oil and gas properties at 30 June 2010 and 31 December 2009 were
exploration and evaluation assets:
+----------------------------+----------------+-----------+------------+------------+-------------+-+--------+
| | Cost at | Additions | Transfers | | Translation | Cost at |
| | 31 December | | to | Disposals: | difference | 30 June |
| | 2009 | | tangible | Impairment | | 2010 |
| | | | part of | loss | | |
| | | | Oil and | | | |
| | | | Gas | | | |
| | | | properties | | | |
+----------------------------+----------------+-----------+------------+------------+-------------+----------+
| | | |
+-----------------------------------------------------------------------------------+---------------+--------+
| Exploration and evaluation | | |
| assets | | |
+-----------------------------------------------------------------------------------+---------------+--------+
| | | | | | | |
+----------------------------+----------------+-----------+------------+------------+-------------+----------+
| Arcticneft | 7,414 | - | - | - | (226) | 7,188 |
+----------------------------+----------------+-----------+------------+------------+-------------+----------+
| Petrosakh | 17,688 | - | - | - | (539) | 17,149 |
+----------------------------+----------------+-----------+------------+------------+-------------+----------+
| Total cost of exploration | 25,102 | - | - | - | (765) | 24,337 |
| and evaluation assets | | | | | | |
+----------------------------+----------------+-----------+------------+------------+-------------+----------+
| | | | | | | | |
+----------------------------+----------------+-----------+------------+------------+-------------+-+--------+
The Group's oil fields are situated in the Russian Federation on land owned by
the Russian government. The Group holds licenses and associated mining plots and
pays production taxes to extract oil and gas from the fields. The licenses
expire between 2012 and 2067, but may be extended. The Group's management
intends to renew the licences as the properties are expected to remain
productive subsequent to the license expiration date.
The estimated costs of dismantling oil and gas production facilities, including
abandonment and site restoration costs, amounting to $163 thousand and $168
thousand as of 30 June 2010 and 31 December 2009, respectively, are included in
the cost of oil and gas properties. The Group has estimated its liability based
on current environmental legislation using estimated costs when the expenses are
expected to be incurred.
6 Other Non-Current Assets
+-------------------------------------------+---------+------------+
| | 30 June | 31 |
| | 2010 | December |
| | | 2009 |
+-------------------------------------------+---------+------------+
| | | |
+-------------------------------------------+---------+------------+
| Loans receivable | 36,110 | 34,438 |
+-------------------------------------------+---------+------------+
| Intangible assets | 578 | 431 |
+-------------------------------------------+---------+------------+
| Advances to contractors and suppliers for | 428 | 461 |
| construction in process | | |
+-------------------------------------------+---------+------------+
| Total other non-current assets | 37,116 | 35,330 |
+-------------------------------------------+---------+------------+
Loans receivable represent US dollar denominated long-term loans (interest
inclusive) of $36.1 million and $34.4 million at 30 June 2010 and 31 December
2009, respectively, issued by UEPCL to OOO Taas-Yuryakh Neftegazdobycha
("Taas"), as part of the Taas acquisition agreement. The loans were used to pay
organisation fees for a $600.0 million project finance loan facility provided by
Savings Bank of Russian Federation ("Sberbank") for the development of the SRB
field, financing of interest payments and repayment of third party loans at
Taas. The loans bear interest of 12% and mature in February 2015. The fair value
of the loans approximates the carrying value at the reporting date. These loans
are considered to be fully performing as of 30 June 2010 and as of 31 December
2009. The loans are unsecured.
7 Inventories
+-------------------------------------------+--------+----------+-------------+
| | 30 June 2010 | 31 December |
| | | 2009 |
+-------------------------------------------+-------------------+-------------+
| | | |
+-------------------------------------------+-------------------+-------------+
| Crude oil | 16,752 | 8,747 |
+-------------------------------------------+-------------------+-------------+
| Oil products | 1,838 | 1,586 |
+-------------------------------------------+-------------------+-------------+
| Materials and supplies | 6,703 | 6,534 |
+-------------------------------------------+-------------------+-------------+
| Total inventories | 25,293 | 16,867 |
+----------------------------------------------------+----------+-------------+
| | | | |
+-------------------------------------------+--------+----------+-------------+
8 Accounts Payable and Accrued Expenses
+-----------------------------------------+------------+------------+
| | |
+ +-------------------------+
| | 30 June 2010 | 31 |
| | | December |
| | | 2009 |
+-----------------------------------------+-----------------------------------------+------------+
| | | |
+-----------------------------------------+------------+------------+
| Payable to Finfund Ltd. | 6,591 | 6,572 |
+-----------------------------------------+------------+------------+
| Payable to shareholders | 2,199 | - |
+-----------------------------------------+------------+------------+
| Trade payables | 1,883 | 9,430 |
+-----------------------------------------+------------+------------+
| Wages and salaries | 1,021 | 1,634 |
+-----------------------------------------+------------+------------+
| Accounts payable for construction in | 939 | 710 |
| process | | |
+-----------------------------------------+------------+------------+
| Advances from and payables to related | 13 | 13 |
| parties (Note 16) | | |
+-----------------------------------------+------------+------------+
| Other payable and accrued expenses | 4,241 | 2,338 |
+-----------------------------------------+------------+------------+
| Total accounts payable and accrued | 14,688 | 20,697 |
| expenses | | |
+-----------------------------------------+------------+------------+
9 Advances from customers
+------------------------------------------+--------+-------------+--------------+
| | 30 June 2010 | 31 December |
| | | 2009 |
+------------------------------------------+----------------------+--------------+
| | | |
+------------------------------------------+----------------------+--------------+
| Petraco | 6,666 6,670 | - |
+------------------------------------------+----------------------+--------------+
| Kresov V.G. (private entrepreneur) | 1,319 | 1,171 |
+------------------------------------------+----------------------+--------------+
| Other | 515 | 919 |
+------------------------------------------+----------------------+--------------+
| Total advances from customers | 8,500 | 2,090 |
+---------------------------------------------------+-------------+--------------+
| | | | |
+------------------------------------------+--------+-------------+--------------+
10 Borrowings
Short-term borrowings. Short-term borrowings were as follows at 30 June 2010
and 31 December 2009:
+--------------------------------------+--------------+--------------+----------+
| | 30 June 2010 | 31 December 2009 |
+--------------------------------------+--------------+-------------------------+
| Petraco | | | |
+--------------------------------------+--------------+--------------+----------+
| - Principal | 7,000 | 30,722 | |
+--------------------------------------+--------------+--------------+----------+
| - Interest | - | 3,195 | |
+--------------------------------------+--------------+--------------+----------+
| Other | 629 | 61 | |
+--------------------------------------+--------------+--------------+----------+
| Total short-term borrowings | 7,629 | 33,978 | |
+--------------------------------------+--------------+--------------+----------+
| | | | |
+--------------------------------------+--------------+--------------+----------+
| Long-term borrowings. Long-term borrowings were as follows at 30 | |
| June 2010 and 31 December 2009: | |
+--------------------------------------------------------------------+----------+
| | | | |
+--------------------------------------+--------------+--------------+----------+
| | 30 June 2010 | 31 December | |
| | | 2009 | |
+--------------------------------------+--------------+--------------+----------+
| Petraco | | | |
+--------------------------------------+--------------+--------------+----------+
| - Principal | 25,316 | - | |
+--------------------------------------+--------------+--------------+----------+
| - Interest | 459 | - | |
+--------------------------------------+--------------+--------------+----------+
| Total long-term borrowings | 25,775 | - | |
+--------------------------------------+--------------+--------------+----------+
Petraco. In April 2010 the Company has reached agreement with Petraco relating
to the restructuring of the Petraco facility (the "Restructuring Agreement").
The principal terms of the Restructuring Agreement are as follows:
Total indebtedness owed by the Company to Petraco, as at 31 March 2010, was
$34.3 million, made up as follows:
- capital amount outstanding (the "Capital Outstanding") of $30.7 million;
- accrued interest outstanding (the "Accrued Interest") of $3.6 million.
As at 1 April 2010, the Capital Outstanding and Accrued Interest were added
together and carried forward as principal ("Principal"). After 1 April 2010
interest will be accrued on the Principal and will not be compounded. All
accrued interest from 1 April 2010 will be paid once the Principal has been
repaid and all payments made by the Company according to the payment schedule
set out below will be applied against the Principal outstanding. Interest will
be charged on the Principal at a rate of 6 month LIBOR plus 5% per annum,
non-compounding.
As part of the restructuring agreement Petraco converted $2 million of the
Capital Outstanding into 8,693,006 ordinary shares of the Company (recorded in
the interim condensed consolidated statement of changes in shareholders' equity)
and received an option to acquire additional new ordinary shares in the amount
of 12,576,688 for $5 million. The fair value of the option in the amount of
$170 thousand as of 30 June 2010 is recorded as liabilities.
The repayment schedule of the balance for the Capital Outstanding and the
Accrued Interest is:
+---------------------------------+---------------------------------+
| Payment date | Amount to be paid by UEPCL to |
| | Petraco |
+---------------------------------+---------------------------------+
| 30 September 2010 | $3 million |
+---------------------------------+---------------------------------+
| 31 December 2010** | $3 million* |
+---------------------------------+---------------------------------+
| 31 December 2011 | $8 million |
+---------------------------------+---------------------------------+
| 31 December 2012 | $11.7 million |
+---------------------------------+---------------------------------+
| 31 December 2013 | Outstanding balance |
+---------------------------------+---------------------------------+
Notes
*In the event that the Company does not export any oil from Petrosakh (the
Group's operations on Sakhalin Island), the amount of this tranche is to be
increased to $4 million.
**Urals Energy and Petraco as part of the Restructuring Agreement have also
agreed a distribution schedule of the Taas-Yuryakh Neftegazodobycha loan (the
"Taas loan") proceeds based on the amount of any early repayment received by the
Company. In the event of early repayment of the Taas Loan in 2010, the maximum
payment by the Company to Petraco is to be not more than $10 million. If the
Taas Loan is repaid earlier than maturity, but later than 31 December 2010, the
Company and Petraco have agreed to modified a schedule of settlement.
In June 2010 Company pledged 100% of the shares it currently holds in Arcticneft
and 97.2% of shares it currently holds in Petrosakh to Petraco as security
against the restructured Petraco facility.
Weighted average interest rate. The Group's weighted average interest rates on
short-term borrowings were 5.75% and 5.43% at 30 June 2010 and at 31 December
2009, respectively.
Interest expense and income. Interest expense and income for the six months
ended 30 June 2010 and 30 June 2009 comprised the following:
+-----------------------------------------------+----------+---------+
| | Six months ended |
| | 30 June: |
+-----------------------------------------------+--------------------+
| | 2010 | 2009 |
+-----------------------------------------------+----------+---------+
| | | |
+-----------------------------------------------+----------+---------+
| Short-term borrowings | | |
+-----------------------------------------------+----------+---------+
| Interest at penalty rate on the loan from | - | 59,786 |
| OJSC Sberbank | | |
+-----------------------------------------------+----------+---------+
| Total interest expense associated with | - | 59,786 |
| short-term borrowings | | |
+-----------------------------------------------+----------+---------+
| | | |
+-----------------------------------------------+----------+---------+
| Interest on advance from Petraco | 882 | 1,854 |
+-----------------------------------------------+----------+---------+
| Finance leases | 81 | 90 |
+-----------------------------------------------+----------+---------+
| Change in dismantlement provision due to | 80 | - |
| passage of time | | |
+-----------------------------------------------+----------+---------+
| Less capitalised borrowing costs | - | (4,705) |
+-----------------------------------------------+----------+---------+
| Pledge interest to Finfund Limited | - | 1,492 |
+-----------------------------------------------+----------+---------+
| Other interest | - | 102 |
+-----------------------------------------------+----------+---------+
| Total interest expense | 1,043 | 58,619 |
+-----------------------------------------------+----------+---------+
| | | |
+-----------------------------------------------+----------+---------+
| Interest income | | |
+-----------------------------------------------+----------+---------+
| Interest on loan issued to Taas | (1,672) | - |
+-----------------------------------------------+----------+---------+
| Loans issued to the related party (Note 16) | (340) | (2,013) |
+-----------------------------------------------+----------+---------+
| Other | - | (43) |
+-----------------------------------------------+----------+---------+
| Total interest income | (2,012) | (2,056) |
+-----------------------------------------------+----------+---------+
| Net interest expense | (969) | 56,563 |
+-----------------------------------------------+----------+---------+
11 Equity
At 30 June 2010 authorised share capital was $1,890 thousand divided into 300
million shares of $0.0063 each and issued share capital was $1,188 thousand
divided into 188.5 million shares of $0.0063 each.
At 31 December 2009 authorised share capital was $1,890 thousand divided into
300 million shares of $0.0063 each and issued share capital was $1,131 thousand
divided into 179.6 million shares of $0.0063 each.
+--------------------------+------------+------------+------------+
| Date of Grant | Number of | Share | Share |
| | shares | capital | premium |
| | (thousand | | |
| | of shares) | | |
+--------------------------+------------+------------+------------+
| | | | |
+--------------------------+------------+------------+------------+
+--------------------------+------------+------------+------------+
| Balance at 1 January | 179,648 | 1,131 | 644,135 |
| 2010 | | | |
+--------------------------+------------+------------+------------+
| | | | |
+--------------------------+------------+------------+------------+
| Shares issued under | 178 | 1 | (1) |
| restricted stock plans | | | |
+--------------------------+------------+------------+------------+
| Shares issued to Petraco | 8,693 | 56 | 1,945 |
| as per restricted | | | |
| agreement (Note 10) | | | |
+--------------------------+------------+------------+------------+
| Share-based payment | - | - | 383 |
| under restricted stock | | | |
+--------------------------+------------+------------+------------+
| | | | |
+--------------------------+------------+------------+------------+
| Balance at 30 June 2010 | 188,519 | 1,188 | 646,462 |
+--------------------------+------------+------------+------------+
| | | | |
+--------------------------+------------+------------+------------+
Restricted stock plan. During the six months ended 30 June 2010 and 30 June
2009, $383 thousand and $1,823 thousand, respectively, of expense related to
share-based payments were recognized in the interim condensed consolidated
statement of comprehensive income.
At 30 June 2010 and 30 June 2009, restricted stock grants for 177,812 shares and
1,432,062 shares were fully issued. Additional restricted stock grants for
72,500 shares were vested during the six months ended 30 June 2009 and issued in
July 2009.
As of 30 June 2010, the number of unvested restricted stock grants and their
respective vesting dates are presented in the table below.
+------------------------+----------+------------+----------+-------------+
| Date of grant | | January | January | Total |
| | | 2010 | 2011 | |
+------------------------+----------+------------+----------+-------------+
| | | | | |
+------------------------+----------+------------+----------+-------------+
| Total restricted stock | | 1,489,141 | 665,120 | 2,154,261 |
| granted as of 31 | | | | |
| December 2009 | | | | |
+------------------------+----------+------------+----------+-------------+
| | | | | |
+------------------------+----------+------------+----------+-------------+
| Vested in the six | | (177,812) | - | (177,812) |
| months ended 30 June | | | | |
| 2010 | | | | |
+------------------------+----------+------------+----------+-------------+
| Total restricted stock | | 1,311,329 | 665,120 | 1,976,449 |
| granted as of 30 June | | | | |
| 2010 | | | | |
+------------------------+----------+------------+----------+-------------+
Profit per share. Profit / (loss) per share is calculated by dividing the
profit/(loss) attributable to equity holders of the Company by the weighted
average number of ordinary shares in issue during the reporting period.
The profit / (loss) per share was calculated as following:
+--------------------------------------------+----+--------+------------+----------------+
| | |
| | Period ended: |
+-------------------------------------------------+--------------------------------------+
| | 30 June | 30 |
| | 2010 | June |
| | | 2009 |
+--------------------------------------------+-------------+------------+
| | | |
+--------------------------------------------+-------------+------------+
| Profit / (loss) attributable to equity | 1,582 | (439,925) |
| holders of the Company | | |
+--------------------------------------------+-------------+------------+
| Weighted average number of ordinary shares | 184,098 | 179,117 |
| in issue (thousands) | | |
+--------------------------------------------+-------------+------------+
| | | |
+--------------------------------------------+-------------+------------+
| Basic and diluted profit / (loss) per | 0.009 | (2.456) |
| share (in US dollar per share) | | |
+--------------------------------------------+-------------+------------+
| | | | |
+--------------------------------------------+----+--------+------------+----------------+
12 Revenues
+----------------------------------------------+----------------------------------------------+--------+
| | Six months |
| | ended 30 June: |
+ +-------------------------------------------------------+
| | 2010 | 2009 |
+----------------------------------------------+----------------------------------------------+--------+
| Petroleum (refined) products - domestic | 9,779 | 8,425 |
| sales | | |
+----------------------------------------------+----------------------------------------------+--------+
| Crude oil - domestic sales | 1,523 | 5,927 |
+----------------------------------------------+----------------------------------------------+--------+
| Other sales | 388 | 788 |
+----------------------------------------------+----------------------------------------------+--------+
| | 11,690 | 15,140 |
| Total gross revenues | | |
+----------------------------------------------+----------------------------------------------+--------+
13 Cost of Sales
+------------------------------------------+----+----------+---------+
| | | Six months |
| | | ended 30 June: |
+------------------------------------------+----+--------------------+
| | | 2010 | 2009 |
+------------------------------------------+----+----------+---------+
| Wages and salaries including payroll | | - 5,186 | 6,992 |
| taxes | | | |
+------------------------------------------+----+----------+---------+
| Unified production tax | | 4,823 | 3,385 |
+------------------------------------------+----+----------+---------+
| Depreciation, depletion and amortisation | | 2,317 | 355 |
+------------------------------------------+----+----------+---------+
| Materials | | 1,199 | 1,680 |
+------------------------------------------+----+----------+---------+
| Rent, utilities and repair services | | 604 | 181 |
+------------------------------------------+----+----------+---------+
| Other taxes | | 507 | 1,063 |
+------------------------------------------+----+----------+---------+
| Oil treating, storage, transportation | | 227 | 198 |
| and other services | | | |
+------------------------------------------+----+----------+---------+
| Other | | 478 | 136 |
+------------------------------------------+----+----------+---------+
| Change in finished goods | | (6,824) | (4,491) |
+------------------------------------------+----+----------+---------+
| | | | |
+------------------------------------------+----+----------+---------+
| Total cost of sales | | 8,517 | 9,499 |
+------------------------------------------+----+----------+---------+
14 Selling, General and Administrative Expenses
+------------------------------------------+----+---------+--------+
| | | Six months |
| | | ended 30 June: |
+------------------------------------------+----+------------------+
| | | 2010 | 2009 |
+------------------------------------------+----+---------+--------+
| Wages and salaries | | 1,503 | 4,692 |
+------------------------------------------+----+---------+--------+
| Audit, legal and professional | | 998 | 1,012 |
| consultancy fees | | | |
+------------------------------------------+----+---------+--------+
| Transport, loading and storage services | | 579 | 743 |
+------------------------------------------+----+---------+--------+
| Office rent and other expenses | | 540 | 714 |
+------------------------------------------+----+---------+--------+
| Share-based payments (Note 11) | | 383 | 1,823 |
+------------------------------------------+----+---------+--------+
| Trip expenses and communication services | | 203 | 327 |
+------------------------------------------+----+---------+--------+
| Other | | 441 | 1,075 |
+------------------------------------------+----+---------+--------+
| | | | |
+------------------------------------------+----+---------+--------+
| Total selling, general and | | 4,647 | 10,386 |
| administrative expenses | | | |
+------------------------------------------+----+---------+--------+
15 Other income
+------------------------------------------+----+---------+--------+
| | | Six months |
| | | ended 30 June: |
+------------------------------------------+----+------------------+
| | | 2010 | 2009 |
+------------------------------------------+----+---------+--------+
| Release of provision for inventory | | 1,869 | - |
+------------------------------------------+----+---------+--------+
| Gain from disposal of property, plant | | 1,227 | - |
| and equipment (Note 5) | | | |
+------------------------------------------+----+---------+--------+
| Other income | | 545 | - |
+------------------------------------------+----+---------+--------+
| | | | |
+------------------------------------------+----+---------+--------+
| Total other income | | 3,641 | - |
+------------------------------------------+----+---------+--------+
As of 30 June 2010 the Group has released the provision for inventory in the
amount of $1,869 thousand as a result excess of net realisable value of crude
oil in stock over its market value.
16 Balances and Transactions with Related Parties
Parties are generally considered to be related if one party has the ability to
control the other party, is under common control, or can exercise significant
influence over the other party in making financial or operational decisions as
defined by IAS 24 Related Party Disclosures. Key management personnel are
considered to be related parties. In considering each possible related party
relationship, attention is directed to the substance of the relationship, not
merely the legal form.
Balances and transactions with related parties
+--------------------------------------+--------------------------------------+------------------+
| | Six months ended 30 June: |
+ +---------------------------------------------------------+
| | 2010 | 2009 |
+--------------------------------------+--------------------------------------+------------------+
| Interest income from Taas, net | - | 1,672 |
+--------------------------------------+--------------------------------------+------------------+
| Interest income from other related | 340 | 341 |
| parties, net | | |
+--------------------------------------+--------------------------------------+------------------+
| Other expenses | - | (6) |
+--------------------------------------+--------------------------------------+------------------+
| | | |
| | | |
+--------------------------------------+--------------------------------------+------------------+
| | |
+--------------------------------------+---------------------------------------------------------+
| | 30 June 2010 | 31 |
| | | December |
| | | 2009 |
+--------------------------------------+--------------------------------------+------------------+
| | | |
+--------------------------------------+--------------------------------------+------------------+
| Current loan issued to related | 6,008 | 5,781 |
| parties | | |
+--------------------------------------+--------------------------------------+------------------+
| Interest receivable from related | 627 | 515 |
| parties | | |
+--------------------------------------+--------------------------------------+------------------+
| Accounts and notes receivable | 78 | 78 |
+--------------------------------------+--------------------------------------+------------------+
| Receivables from related parties | 6,713 | 6,374 |
+--------------------------------------+--------------------------------------+------------------+
| | | |
+--------------------------------------+--------------------------------------+------------------+
| | | |
+--------------------------------------+--------------------------------------+------------------+
| Advances from and accounts payable | (13) | (13) |
| to related parties | | |
+--------------------------------------+--------------------------------------+------------------+
Compensation to senior management. The Group's senior management team
compensation totaled $953 thousand and $4,506 thousand for the six months ended
30 June 2010 and 30 June 2009, respectively, including salary, bonuses and
severance payments of nil and $2,683 thousand respectively. Stock compensation
of $191 thousand and $1,823 thousand, respectively, were included in the senior
management team compensation. Additionally, included in loans receivable at 30
June 2010 and 31 December 2009 were loans receivable of $4,567 thousand and
$4,289 thousand, respectively from the Group's senior management team.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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