Interim Results
Aminex PLC
28 September 2005
Interim Results for the six months ended 30 June 2005
Aminex, the oil and gas company listed on the London and Irish Stock Exchanges,
today announces its interim results for the half year ended 30 June 2005
Highlights
• Production Sharing Agreement signed with North Korea
• Placing and Open Offer of new shares raises net US$8 million
• Satisfactory settlement reached with Petrom SA over Nyuni cost dispute
• Farm-out agreement over part of Nyuni acreage signed with East Coast
Energy Ltd
• Net loss for period of US$1.9 million (2004: loss US$1.15 million)
OVERVIEW
During the period under review Aminex negotiated and finalised a form of model
Production Sharing Agreement ("PSA") with the authorities in North Korea as part
of its work obligation under the 2004 Petroleum Agreement with the government of
that country and applied for formal exploration licences using the model PSA
negotiated. In Tanzania geological and geophysical work continued on the Nyuni
licence in preparation for exploration activity due to be carried out during the
three year second period of the Nyuni-East Songo-Songo PSA which commenced in
November 2004. A satisfactory conclusion was negotiated with Petrom SA over a
long-running farm-out dispute in connection with the Nyuni-1 well. Also in the
period Aminex drilled the first of four development wells on the South Weslaco
Field and worked over the Sunny Ernst-1 well on the Alta Loma property, both in
Texas.
Since the end of the period a placing and open offer to shareholders was
successfully completed and the proceeds are being used to progress work on the
Group's existing projects as well as to advance other opportunities. In August
the Group achieved the unusual step of signing a PSA with the North Korean
authorities covering virtually the entire country and its offshore waters, east
and west. Aminex took the view from the outset that the country's geological
potential outweighed the risk that the nuclear dispute would escalate out of
control. The recent news from Beijing of the preliminary success of the long
running and controversial six-party negotiations appears to vindicate this
position. Earlier this month, the Group also announced that it had concluded a
farm-out agreement for part of the Nyuni East Songo-Songo PSA in Tanzania with
East Coast Energy of Canada ("East Coast"). A seismic survey is due to commence
over Nyuni in October as part of this farm-out agreement and Aminex will take
advantage of the seismic vessel's presence in the area to shoot new seismic over
the part of Nyuni which has not been farmed out to East Coast. This will
include the prospect which was drilled in 2003-4 as the Nyuni-1 well and which
found evidence of Jurassically sourced crude oil in East Africa for the first
time.
A number of other opportunities are currently under review and some are at an
advanced stage of negotiation.
FINANCIAL REVIEW
The results for the six-month period ended 30 June 2005 have been prepared in
accordance with International Financial Reporting Standards ("IFRS"). The
results and cash flow statements for the six-month period ended 30 June 2004 and
the twelve-month period ended 31 December 2004 as well as the balance sheets at
1 January 2004, 30 June 2004 and 31 December 2004 have been restated from the
originally adopted Irish GAAP to conform with IFRS. Detailed movements between
the original Irish GAAP figures and the IFRS figures are set out in the
accompanying notes to the financial statements.
Gross profit amounted to $0.4 million for the first six months of 2005 ($0.98
million for the first six months of 2004). The 2004 figure included the
operating profit of the Vinton Dome property which was sold in December 2004 and
which accounted for 70% of the Group's oil production in the period. Following a
successful recompletion, the Alta Loma gas well was brought back on production
towards the end of June 2005 having been out of commission since September 2004.
As a consequence, gas production in the USA during the period has been
significantly reduced. The Group benefited from higher oil and gas prices
during the current period achieving $46.03 per barrel of oil, an increase of
$10.85 over the comparative period, and $7.03 per mcf of gas, an increase of
$0.59 per mcf over the comparative period. After charging administrative
expenses of $2.23 million (2004: $2.13 million net of an offsetting profit of
$143,000 on the sale of a Corsair drilling rig) and financing costs of $87,000
(2004: $Nil), the net loss for the period amounted to $1.92 million (2004: loss
$1.15 million).
Exploration and evaluation expenditures of $0.12 million during the current
period related to the Group's assets in North Korea and Tanzania. A provision of
$2.3 million relating to the Group's future decommissioning liability in the USA
has been set up at the beginning of the period with the associated cost included
in additions to property, plant and equipment. The high level of current trade
and other receivables at the period end includes the proceeds receivable from
the Placing and Open Offer made to shareholders during June 2005 and which was
paid in early July.
TANZANIA
The second period of the Nyuni East Songo-Songo permit commenced in November
2004 and involves a two well drilling commitment. This PSA was the first in
Tanzania ever to have been extended into a second period. The Nyuni prospect
itself, drilled in 2003/4, fully justifies further work and there are at least
four other untested prospects over which seismic will be shot in the fourth
quarter of this year. Approximately 25% of the PSA has been farmed out to East
Coast which is the operator of the neighbouring Songo-Songo producing gas field
and the farm-out area adjoins the Songo-Songo field. Songo-Songo has now been
on successful commercial production for over a year and it is an opportune time
to appraise the possibility of its extension into Aminex's acreage. A new
commercial gas well drilled under the farm-out agreement could be rapidly hooked
up to Songo-Songo's existing production facilities and would fulfil one well out
of the two well PSA obligation. Nyuni-1, a completely separate structure, was
spudded before Songo-Songo came on stream. The East Coast farm-out remains
subject to formal Tanzanian government approval.
Elsewhere in Tanzania, Aminex is now close, it believes, to finalising a PSA for
the southern 12,000 square kilometre Ruvuma area currently held under a
technical evaluation agreement.
Tanzania and the East African margin generally are attracting increasing
industry interest. Since our last report to shareholders Mozambique has
launched a licensing round, Exxon-Mobil has farmed into large tracts offshore
Madagascar, while Tanzania itself has an ongoing deep water licensing round.
Aminex believes the timing of its entry into Tanzania was good and looks forward
to making further progress on its large acreage portfolio.
NORTH KOREA
Since signing a Petroleum Agreement last year Aminex moved quickly to establish
a model PSA, applied for acreage and has now signed a comprehensive PSA. During
this time an extensive data evaluation exercise has taken place including
numerous visits by Aminex specialists to Pyongyang where good working relations
have been established with Korean specialists. On 4 August Aminex and its
wholly-owned subsidiary Korex Ltd. entered into a PSA with the North Korean
authorities covering all the prospective basins in the West Sea, onshore North
Korea and in the East Sea. This represents major progress since the original
Petroleum Agreement was signed in 2004. The PSA is for a nine year period
divided into three sub-periods, in the first of which Aminex will acquire new
seismic and either drill a new well or re-enter an existing West Sea discovery
well.
USA
Following an extended recompletion, the Alta Loma Sunny Ernst #1 well resumed
production during June having been shut in since the previous September. The
first of a four well development programme at South Weslaco was drilled during
the period and is currently being tied-in for production. The second well was
spudded on 19 September and is drilling ahead at the date of this report. Two
further wells are planned during the remainder of 2005. The advantage of high
prices has been offset to some extent by the difficulty in sourcing drilling
rigs during a period of excessive demand as a result of which the South Weslaco
project has not progressed as quickly as planned and no production from new
drilling is included in the current financial results. During the period, a
decision was made to plug and abandon the Sabine Lake well which ceased
production at the beginning of this year. Oil production at the Somerset field
has been maintained and a start made on a programme for plugging and abandoning
redundant wells and facilities. As a consequence of the sale of the Vinton
properties at the end of 2004 and also the delayed commencement of gas from the
Alta Loma well, production in the USA declined below that of the prior period.
Major efforts are under way to restore the production levels
MOCOH JOINT VENTURE
Aminex has been co-operating for some time with Mocoh SA, a petroleum trading
company with existing operations in a number of African countries, to pool
resources in the search for new upstream opportunities where a combination of
Mocoh's established presence and Aminex's technical capabilities can be brought
to bear for mutual advantage. This co-operation has now been formalised to
cover three countries; Sudan, Madagascar and Congo-Brazzaville. Any licence
award will be shared on a 50-50- basis by Mocoh and Aminex, each party paying
for its own share of licence expenditures. A joint company known as Amicoh has
now been formed and co-operation may be extended to include other countries in
the region.
LIQUEFIED NATURAL GAS
Aminex continues to work with Liquefied Natural Gas Ltd. of Australia ("LNGL")
to identify suitable opportunities for co-operation in the development of
stranded gas fields suitable for small scale LNG operations.
EGYPT
As previously announced to shareholders, Aminex participates in the share
capital of Red Sea Petroleum Ltd which made an unsuccessful application for new
acreage in 2004 in very competitive circumstances. Red Sea is currently actively
pursuing other opportunities in Egypt and has recently applied for further
acreage.
PROSPECTS
The Aminex Group has now established a strong exploration portfolio at a time of
high oil and gas prices and unprecedented international exploration activity by
large and small oil companies alike. The company is working hard to build on
this position.
28 September 2005
Enquiries:
Aminex PLC
Brian Hall, Chief Executive +44 (0) 20 7240 1600
Simon Butterfield, Finance Director +44 (0) 20 7240 1600
College Hill
Ben Brewerton +44 (0) 20 7457 2020
Nick Elwes +44 (0) 20 7457 2020
CONSOLIDATED INCOME STATEMENT
for the six months ended 30 June 2005
Unaudited Unaudited Unaudited
6 months ended 6 months ended Year ended
30 June 2005 30 June 2004 31 December 2004
Notes $'000 Restated Restated
$'000 $'000
Revenue 2 1,258 3,108 5,384
Cost of sales (734) (1,716) (3,182)
Depletion (128) (414) (777)
Gross profit 396 978 1,425
Administrative expenses (net) 3 (2,230) (2,128) (5,436)
Purchaser's share of Vinton Dome profit - - (532)
Loss from operations (1,834) (1,150) (4,543)
Financing costs (net) 4 (87) - (19)
Loss before tax (1,921) (1,150) (4,562)
Income tax expense - - -
Net loss for the period 2 (1,921) (1,150) (4,562)
Basic and diluted loss per share (cent) 5 (1.92) (1.26) (4.90)
STATEMENT OF RECOGNISED INCOME AND EXPENSE
for the six months ended 30 June 2005
Unaudited Unaudited Unaudited
6 months ended 6 months ended Year ended
30 June 2005 30 June 2004 31 December 2004
Restated Restated
$,000 $'000 $'000
Foreign exchange translation differences 7 (46) (57)
Group loss after tax for the financial period (1,921) (1,150) (4,562)
Total recognised income and expense for
the financial period (1,914) (1,196) (4,619)
Attributable to:
Equity holders of the Company (1,914) (1,196) (4,619)
CONSOLIDATED BALANCE SHEET
At 30 June 2005
Unaudited Unaudited Unaudited
30 June 30 June 31 December
2005 2004 2004
Restated Restated
Notes $'000 $'000 $'000
Assets
Exploration and evaluation assets 14,429 13,884 14,310
Property, plant and equipment 11,028 13,637 8,313
Other investments 381 868 -
Total non current assets 25,838 28,389 22,623
Trade and other receivables 10,398 6,570 6,102
Cash and cash equivalents 554 377 767
Total current assets 10,952 6,947 6,869
Total assets 36,790 35,336 29,492
Equity
Issued capital 6 11,003 6,197 6,777
Share premium 6 40,088 35,311 36,222
Capital conversion reserve fund 234 234 234
Foreign currency reserve fund (50) (46) (57)
Retained earnings (20,488) (15,155) (18,567)
Total equity 30,787 26,541 24,609
Liabilities
Interest-bearing loans and borrowings 34 55 51
Abandonment and site restoration provision 2,311 - -
Total non-current liabilities 2,345 55 51
Bank overdraft 434 197 -
Interest-bearing loans and borrowings 28 293 47
Trade and other payables 3,196 8,250 4,785
Total current liabilities 3,658 8,740 4,832
Total liabilities 6,003 8,795 4,883
Total equity and liabilities 36,790 35,336 29,492
CONSOLIDATED STATEMENT OF CASHFLOWS
for the six months ended 30 June 2005
Unaudited Unaudited Unaudited
6 months 6 months Year
ended ended ended
30 June 30 June 31 December
2005 2004 2004
Restated Restated
Notes $'000 $'000 $'000
Operating activities
Loss for the period (1,921) (1,150) (4,562)
Depreciation and impairment 147 438 827
Foreign exchange losses 18 (46) (68)
Financing costs (net) 87 - 19
Loss/(gain) on sale of property, plant and equipment 8 (106) (121)
Loss on sale of listed investment - - 184
Equity-settled share-based payment charge 7 78 238
Decrease/(increase) in debtors 4,772 (468) -
(Decrease)/increase in creditors (3,208) 2,284 707
Cash generated from operations (90) 1,030 (2,776)
Interest paid (11) (14) (34)
Tax paid - - -
Net cash (outflows)/inflows from operating activities (101) 1,016 (2,810)
Investing activities
Acquisition of property, plant and equipment (282) (36) (159)
Expenditure on exploration and evaluation assets (209) (3,308) (5,522)
Proceeds from sale of property, plant and equipment 18 193 5,276
Proceeds from sale of investments - 2,003 2,687
Interest received 2 14 15
Net cash (outflows)/inflows from investing activities (471) (1,134) 2,297
Financing activities
Proceeds from the issue of share capital - - 1,265
Payment of transaction costs (39) - (34)
Loans repaid (36) (26) (145)
Loans received - 153 23
Net cash (outflows)/inflows from financing activities (75) 127 1,109
Net (decrease)/increase in cash and cash equivalents 7 (647) 9 596
Cash and cash equivalents at 1 January 767 171 171
Cash and cash equivalents at end of the financial period 7 120 180 767
Provisional Principal Accounting Policies under IFRS in the Restated 2004
Financial Statements and Interim Financial Statements for six months ended 30
June 2005.
Statement of Provisional Accounting Policies
Statement of compliance
Aminex PLC prepared its financial statements up to and including 31 December
2004 in accordance with Irish GAAP.
As part of the European Commission's plan to develop a single European capital
market, all publicly quoted companies in the EU are required to prepare
consolidated financial statements in accordance with International Financial
Reporting Standards (IFRS) as endorsed by the European Commission in respect of
accounting periods commencing on or after 1 January 2005. The financial
information presented in this Interim Statement has been prepared in accordance
with the recognition and measurement principles of IFRS and Interpretations
issued by the International Accounting Standards Board (IASB) and its
committees, including those issued by the predecessor International Accounting
Standards Committee that have been subsequently authorised by the IASB, which
are expected to be endorsed by the EU and which are effective for accounting
periods ending on 31 December 2005.
Qualifications to be taken into account
The majority of the International Financial Reporting Standards have been
endorsed by the European Commission. However, a number of IFRS remain to be
endorsed at the date of publication of this document, and failure to endorse
these outstanding standards in time for 2005 financial reporting could lead to
changes in the basis of accounting or in the basis of presentation of certain
financial information from that adopted for the purposes of this Interim
Statement.
Furthermore, the restated 2004 financial information attached to this Interim
Statement and the Interim Statement itself is subject to the issuance by the
International Accounting Standards Board of additional interpretations prior to
the end of 2005 which may have retrospective impact and thus require to be
applied in the 2005 financial statements and the related 2004 comparatives. As
a result, it is possible that further changes may be required to the 2004
financial information attached to this Interim Statement prior to its inclusion
as comparative information in the published 2005 year-end consolidated financial
statements.
First time adoption
This is the first time that the Group has presented financial information in
accordance with the recognition and measurement principles of IFRS which are set
out in these accounting policies. The impact of the application of the
recognition and measurement principles of these IFRS accounting policies on the
financial information presented in respect of the period ended 30 June 2004 and
the year ended 31 December 2004 have been set out in Appendix 1. This Appendix
includes reconciliations of equity and profit or loss for comparative periods
reported under Irish GAAP (previous GAAP) to those reported for those periods
under these IFRS accounting policies. In accordance with IFRS 1, which
establishes the framework for transition to IFRS by a first time adopter such as
Aminex PLC, the Group has elected to avail itself of a number of specified
exemptions from the general principal of retrospective restatement as follows:
First time adoption (continued)
• IFRS requires that on disposal of a foreign operation, the cumulative
amount of currency translation differences previously recognised directly
in reserves for that operation be transferred to the income statement as
part of the profit or loss on disposal. Aminex PLC has deemed the
cumulative currency translation differences applicable to foreign
operations to be zero as at the transition date. The cumulative currency
translation differences arising before the transition date have been
reclassified as part of retained earnings.
• In accordance with the exemption allowed on transition to IFRS, the fair
value calculations in respect of share based payments under IFRS-2 Share
Based Payment, have only been applied in respect of share options granted
after 7 November 2002.
Basis of preparation
The financial statements are presented in US dollars, rounded to the nearest
thousand ($'000) except when otherwise indicated. The financial statements are
prepared on a historical cost basis except for the measurement at fair value of
share options and the present value of the abandonment provisions. The
preparation of interim financial statements requires management to use
judgements, estimates and assumptions that affect the application of policies
and reported amounts of assets, liabilities, income and expenses. Actual
results may differ from those estimates.
Basis of consolidation
The consolidated interim statements comprise the financial statements of Aminex
PLC and its subsidiaries. Subsidiaries are consolidated from the date on which
control is transferred to the Group and cease to be consolidated from the date
on which effective control is transferred out of the Group. Control exists when
the company has the power, directly or indirectly, to govern the financial and
operating policies of an entity so as to obtain economic benefits from its
activities. Financial statements of subsidiaries are prepared for the same
reporting year as the parent company.
The Group will continue to prepare the statutory separate financial statements
of Group companies under the GAAP applicable in their country of incorporation
but adjustments have been made to the results and financial position of such
companies to bring their accounting policies into line with those of the Group.
All inter-company balances and transactions, including unrealised profits
arising from inter-group transactions, have been eliminated in full. Unrealised
losses are eliminated in the same manner as unrealised gains except to the
extent that there is evidence of impairment.
Revenue recognition
Revenue is recognised to the extent that it is probable that the economic
benefits will flow to the Group, that it can be reliably measured, that
performance has occurred under a service contract and that the significant risks
and rewards of ownership of the goods have passed to the buyer. Revenue
comprises the invoiced value of goods and services supplied by the Group and
excludes inter-company sales, trade discounts and value added tax. Services are
invoiced as they are performed and goods are invoiced when supplied.
Royalties
Royalties are charged to the profit and loss account in the period in which the
related production is accounted for.
Employee benefits
(a) Pensions and Other Post-employment Benefits
The group contributes towards the cost of certain individual employee pension
plans. Annual contributions are based upon a percentage of gross annual salary.
Pension contributions are recognised as an expense in the income statement on
an accruals basis.
(b) Share-based payment
For equity-settled share-based payment transactions (i.e. the issuance of share
options), the Group measures the services received and the corresponding
increase in equity at fair value at the measurement date (which is the grant
date) using a recognised valuation methodology for the pricing of financial
instruments (i.e. the binomial model). Given the share options granted do not
vest until the completion of a specified period of service, the fair value
assessed at the grant date is recognised in the income statement over the
vesting period as the services are rendered by employees. For options granted
to Directors, there is no vesting period and the fair value is recognised in the
income statement at the date of the grant.
The share options issued by the Company are not subject to market-based vesting
conditions as defined in the IFRS. Non-market vesting conditions are not taken
into account when estimating the fair value of share options as at the grant
date; such conditions are taken into account through adjusting the number of
equity instruments included in the measurement of the transaction amount so
that, ultimately, the amount recognised equates to the number of equity
instruments that actually vest. The expense in the income statement in relation
to share options represents the product of the total number of options
anticipated to vest and the fair value of these options, this amount is
allocated to accounting periods on a straight-line basis over the vesting
period. Given that the performance conditions underlying the Group's share
options are non-market in nature, the cumulative charge to the income statement
is reversed only where an employee in receipt of share options leaves the
company prior to completion of the service period. The proceeds received by the
Company on the exercise of share entitlements are credited to share capital and
share premium.
In line with the transitional provisions applicable to a first-time
adopter of International Financial Reporting Standards, as contained in IFRS 2
Share-based Payment, the Group has elected to implement the measurement
requirements of the IFRS in respect of share options that were granted after 7
November 2002 that had not vested as at the effective date of the standard (1
January 2005). In accordance with the standard, the disclosure requirements of
IFRS 2 have been applied in relation to all outstanding share-based payments
regardless of their grant date.
The Group does not operate any cash-settled share-based payment schemes or
share-based payment transactions with cash alternatives as defined in IFRS 2.
The fair value of options granted is recognised as an employee expense
with a corresponding increase in equity.
Net financing costs
Net financing costs comprise interest payable on borrowings calculated using the
effective interest rate method, interest receivable on funds invested, the
imputed interest on the fair value of the abandonment and site restoration
provision and applicable foreign exchange gains and losses.
Interest income is recognised in the income statement as it accrues, using the
effective interest method. The interest expense component of finance lease
payments is recognised in the income statement using the effective interest rate
method.
Leases
Finance leases, which transfer to the Group substantially all the risks and
benefits of ownership of the leased asset, are capitalised at the inception of
the lease at the fair value of the leased asset or if lower the present value of
the minimum lease payments. The corresponding liability to the lessor is
included in the balance sheet as a finance lease obligation. Lease payments are
apportioned between the finance charges and reduction of the lease obligation so
as to achieve a constant rate of interest on the remaining balance of the
liability. Finance charges are charged to the income statement as part of
finance costs.
Capitalised leased assets are depreciated over the shorter of the estimated
useful life of the asset or the lease term.
Leases where the lessor retains substantially all the risks and benefits of
ownership of the assets are classified as operating leases. Operating lease
payments are recognised as an expense in the income statement on a straight line
basis over the lease term.
Tax
The tax expense in the income statement represents the sum of the tax currently
payable and deferred tax.
Tax currently payable is based on taxable profit for the year. Taxable profit
differs from net profit as reported in the income statement because it excludes
items of income or expense that are taxable or deductible in other years and it
further excludes items that are not taxable or deductible. The Group's liability
for current tax is calculated using rates that have been enacted or
substantially enacted at the balance sheet date.
Tax is recognised in the income statement except to the extent that it relates
to items recognised directly in equity.
Deferred income tax is provided, using the liability method, on all differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for taxation purposes except those arising from
non deductible goodwill or on initial recognition of an asset or liability which
affects neither accounting nor taxable profit. Deferred income tax assets and
liabilities are not subject to discounting and are measured at the tax rates
that are expected to apply in the year when the asset is expected to be realised
or the liability to be settled.
Deferred income tax assets are recognised for all deductible differences, carry
forward of unused tax credits and unused tax losses, to the extent that it is
probable that taxable profit will be available against which the deductible
temporary differences, and the carry forward of unused tax credits and unused
tax losses can be utilised.
The carrying amount of deferred income tax assets is reviewed at each balance
sheet date and reduced to the extent that it is no longer probable that
sufficient taxable profit would be available to allow all or part of the
deferred income tax asset to be utilised.
Earnings per ordinary share
Basic earnings per share is computed by dividing the net profit for the
financial period attributable to ordinary shareholders by the weighted average
number of ordinary shares in issue that ranked for dividend during the financial
period.
Diluted earnings per share is computed by dividing the profit for the financial
period attributable to ordinary shareholders by the weighted average number of
ordinary shares in issue after adjusting for the effects of all potential
dilutive ordinary shares that were outstanding during the financial period.
Foreign currency translation
The presentation currency of the Group and the functional currency of Aminex PLC
is the US dollar (US$). Transactions in foreign currencies are recorded at the
rate of exchange ruling at the date of the transaction. Monetary assets and
liabilities denominated in foreign currencies are retranslated into the
functional currency at the rate of exchange at the balance sheet date. All
translation differences are taken to the consolidated income statement with the
exception of differences on foreign currency borrowings that provide a hedge
against a net investment in a foreign entity. These are taken directly to equity
together with the exchange difference on the net investment in the foreign
entity until the disposal of the net investment, at which time they are
recognised in the consolidated income statement.
Results and cash flows of non-dollar subsidiary undertakings are translated into
dollars at average exchange rates for the year, and the related balance sheets
have been translated at the rates of exchange ruling at the balance sheet date.
Adjustments arising on translation of the results of non--dollar subsidiary
undertakings at average rates, and on the restatement of the opening net assets
at closing rates, are dealt with in a separate translation reserve within
equity, net of differences on related currency borrowings. All other
translation differences are taken to the income statement.
On disposal of a foreign entity, accumulated currency translation differences
are recognised in the income statement as part of the overall gain or loss on
disposal; the cumulative currency translation differences arising prior to the
transition date have been set to zero for the purposes of ascertaining the gain
or loss on disposal of a foreign operation subsequent to 1 January 2004.
Goodwill and fair value adjustments arising on acquisition of a foreign
operation are regarded as assets and liabilities of the foreign operation, are
expressed in the functional currency of the foreign operation and are recorded
at the exchange rate at the date of the transaction and subsequently
retranslated at the applicable closing rates.
Exploration and evaluation assets
Exploration and evaluation assets comprise the pre-licence, licence acquisition,
exploration and appraisal costs incurred in respect of undeveloped oil and gas
properties. When a decision is reached with regard to the commercial viability
of the property, the associated expenditures are transferred to the relevant
geographical cost pools included under developed and producing oil and gas
properties within "Property, plant and equipment".
Property, plant and equipment
(a) Developed and producing oil and gas properties
The Group uses the full cost method of accounting for its developed and
producing oil and gas properties under which all costs associated with property
acquisition, exploration and development activities, whether or not productive,
are capitalised in separate geographical cost pools based upon the income
generating operations of the Group and are stated in the balance sheet at cost
less amortisation.
Interest on borrowings is capitalised into development projects up to the time
of revenue generation.
Depletion
Capitalised costs, together with anticipated future development costs calculated
at price levels ruling at the balance sheet date, are amortised on a unit of
production basis. Amortisation is calculated by reference to the proportion
that production for the period bears to the total of the estimated remaining
commercial reserves as at the beginning of the period. Changes in reserves
quantities and cost estimates are recognised prospectively. Oil and gas
property costs in certain instances include gross interest payable on borrowings
to finance development. All proceeds received from the disposal of oil and gas
properties are credited to the relevant geographical cost pool.
Impairment
The net book value of developed and producing oil and gas properties by
geographical pool is assessed each year and compared with estimated future cash
flows of proven and probable oil and gas reserves. To the extent that the
carrying amount of the asset exceeds the recoverable amount, being the estimated
discounted future cash flows, the asset is written down to its recoverable
amount. Any impairment in developed and producing oil and gas properties is
reflected as a charge to the income statement.
Abandonment costs
Provision is made for the abandonment costs of oil and gas wells. The cost of
abandonment is determined through discounting the amounts expected to be payable
to their present value at the date the provision is recorded. The unwinding of
the discount is reflected as an interest charge in the income statement over the
life of the well (transition date to the expected date of abandonment of the
well).
(b) Other Property, Plant and Equipment
Other property, plant and equipment are stated at cost less accumulated
depreciation and impairment losses.
Depreciation is calculated to write off the original cost of property, plant and
equipment less their estimated residual value over their expected useful lives
on a straight line basis.
The estimated useful lives applied in determining the charge to depreciation are
as follows:
Leasehold property 2% - 4%
Plant and equipment 20 - 33.3%
Motor vehicles 25%
The useful lives and residual values are reassessed annually.
On disposal of property, plant and equipment the cost and related accumulated
depreciation and impairments are removed from the financial statements and the
net amount less any proceeds is taken to the income statement.
The carrying amounts of the Group's property, plant and equipment are reviewed
at each balance sheet date to determine whether there is any indication of
impairment. An impairment loss is recognised whenever the carrying amount of an
asset or its cash generation unit exceeds its recoverable amount. Impairment
losses are recognised in the income statement unless the asset is recorded at a
revalued amount in which case it is firstly dealt with through the revaluation
reserve with any residual amount being transferred to the income statement.
Subsequent costs are included in an asset's carrying amount or recognised as a
separate asset, as appropriate, only when it is probable that future economic
benefits associated with the item will flow to the Group and the cost of the
replaced item can be measured reliably. All other repair and maintenance costs
are charged to the income statement during the financial period in which they
are incurred.
Business combinations
The purchase method of accounting is employed in accounting for the acquisition
of subsidiaries by the Group. The Group has availed itself of the exemption
under IFRS 1, "First-time Adoption of International Financial Reporting
Standards", whereby business combinations prior to the transition date of 1
January 2004 are not restated. IFRS 3, "Business Combinations", has been
applied with effect from the transition date of 1 January 2004 and goodwill
amortisation ceased from that date.
The costs of a business combination is measured as the aggregate of the fair
value at the date of exchange of assets given, liabilities incurred or assumed
and equity instruments issued in exchange for control together with any directly
attributable costs. Deferred expenditure arising on business combinations is
determined through discounting the amounts payable to their present value at the
date of exchange. The discount element is reflected as an interest charge in
the income statement over the life of the deferred payment. In the case of a
business combination the assets and liabilities are measured at their
provisional fair values at the date of acquisition. Adjustments to provisional
values allocated to assets and liabilities are made within 12 months of the
acquisition date and reflected as a restatement of the acquisition balance
sheet.
Joint Ventures - jointly controlled operations
Joint controlled operations are those activities over which the Group exercises
joint control with other participants, established by contractual agreement.
The Group recognises, in respect of its interests in jointly controlled
operations, the assets that it controls, the liabilities that it incurs, the
expenses that it incurs and its share of the income that it earns from the sale
of goods or services by the joint venture.
Goodwill
Goodwill written off to reserves under Irish GAAP prior to 1998 has not been
reinstated and will not be included in determining any subsequent profit or loss
on disposal.
Goodwill on acquisitions is initially measured at cost being the excess of the
cost of the business combination over the acquirer's interest in the net fair
value of the identifiable assets, liabilities and contingent liabilities.
Following initial recognition, goodwill is measured at cost less any accumulated
impairment losses. Goodwill relating to acquisitions from 1 January 2004 and the
deemed cost of goodwill carried in the balance sheet at 1 January 2004 is not
amortised. Goodwill is reviewed for impairment annually or more frequently if
events or changes in circumstances indicate that the carrying value may be
impaired.
As at the acquisition date, any goodwill acquired, is allocated to each of the
cash-generating units expected to benefit from the combination's synergies.
Impairment is determined by assessing the recoverable amount of the
cash-generating unit to which the goodwill relates.
Where goodwill forms part of a cash-generating unit and part of the operation
within that unit is disposed of, the goodwill associated with the operation
disposed of is included in the carrying amount of the operation when determining
the gain or loss on disposal of the operation. Goodwill disposed of in this
circumstance is measured on the basis of the relative values of the operation
disposed of and the proportion of the cash-generating unit retained.
Financial assets
Investments in subsidiary undertakings are stated at cost less provision for
impairment in the Company's balance sheet.
Investments in companies are stated at cost less any provision required for
impairment in value.
Cash and Cash Equivalents
Cash and short term deposits in the balance sheet comprise cash at bank and in
hand and short term deposits with an original maturity of three months or less.
Bank overdrafts that are repayable on demand and form part of the Group's cash
management are included as a component of cash and cash equivalents for the
purposes of the statement of cashflows.
Trade and other Receivables
Trade receivables, which generally have 30 to 90 day terms, are recognised and
carried at original invoice amount less an allowance for any potential shortfall
in receipt. An estimate of any shortfall in receipt is made when collection of
the full amount is no longer probable. Bad debts are written off when
identified.
Provisions
A provision is recognised in the balance sheet when the Group has a present
legal or constructive obligation as a result of a past event, and it is probable
that an outflow of economic benefits would be required to settle the obligation.
If the effect of the time value of money is material, provisions are
determined by discounting the expected future cash flows at a pre-tax rate that
reflects the time value of money and, where appropriate, the risks specific to
the liability. Where discounting is used, the increase in the provision due to
the passage of time is recognised as a borrowing cost.
Segment Reporting
A segment is a distinguishable component of the Group that is engaged either in
providing products or services (business segment), or in providing products or
services within a particular economic environment (geographical segment), which
is subject to risks and rewards that are different from those other segments.
The Group has identified the geographical segments as the primary segments and
the business segments as the secondary segments.
Principal New Accounting Pronouncements
IFRS 6 and the potential impacts.
In 2004, the IASB issued IFRS 6 Exploration for and Evaluation of Mineral
Resources to address the accounting issues in relation to costs incurred in
exploration for and evaluation of mineral resources. There are a number of
areas where IFRS 6 will require changes to existing accounting practices and
therefore to reported financial performance and position. Entities typically
have one accounting policy for all costs incurred prior to production. The
adoption of IFRS 6 will require entities to reconsider the accounting treatment
for costs incurred during each of pre-exploration and exploration and evaluation
activities. An entity must develop a separate accounting policy for expenditure
related to each of: pre-exploration activities, exploration and evaluation
activities and development activities. IFRS 6 permits, in many cases, an entity
that incurs exploration and evaluation (E&E) expenditure to continue its
existing accounting policies with respect to such expenditure. IFRS6 requires
entities to identify and account for pre-exploration, E&E and development
expenditure separately. E&E expenditure may include the cost (and directly
attributable cost of acquisition) of the licence itself. Capitalised E&E costs
must be segregated and classified as either tangible or intangible assets,
according to their nature. E&E costs can be expensed as incurred or
capitalised, in accordance with the entity's selected accounting policy. E&E
expenditure rarely will include costs incurred prior to the acquisition of an
exploration licence. The standard provides guidance on the testing for
impairment of amounts recognised as E&E assets and specifies disclosures for
these assets and related expenditure. Previous GAAP impairment policies cannot
be continued automatically; instead the general impairment tests must be applied
in measuring the impairment of exploration and evaluation assets when there are
indicators that the carrying amount of an exploration and evaluation asset may
exceed its recoverable amount. The test for recoverability of exploration and
evaluation assets can combine several cash generating units, so long as the
group is not larger than a segment. This standard is effective for annual
periods beginning on or after 1 January 2006. We are currently evaluating the
effect IFRS 6 will have on our financial position or results of operations.
NOTES TO THE INTERIM FINANCIAL STATEMENTS (unaudited)
for the six months ended 30 June 2005
1. Accounting policies
As outlined in the provisional accounting policies, the financial information
has been prepared in accordance with the recognition and measurement principles
of all International Financial Reporting Standards (IFRS), including
Interpretations issued by the International Accounting Standards Board ("IASB")
and it's committees and endorsed or expected to be endorsed by the European
Commission.
2. Segmental disclosure
The Group's revenue and profits arise from oil and gas production in the
USA and the provision of oilfield equipment and services in Europe. The Group's
net assets are located in the USA, Tanzania and Europe.
Unaudited Unaudited Unaudited
6 months ended 6 months ended 30 year ended
June 2004 31 December 2004
Revenue 30 June 2005 Restated Restated
$'000 $'000 $'000
USA 769 2,185 4,048
Europe 489 923 1,336
1,258 3,108 5,384
Segment result -
loss after tax
USA (99) 37 (955)
Tanzania (407) (25) (480)
Europe (55) 5 (85)
Central costs (1,360) (1,167) (3,042)
Net loss for the (1,921) (1,150) (4,562)
period
NOTES TO THE INTERIM FINANCIAL STATEMENTS (unaudited)
for the six months ended 30 June 2005
2. Segmental disclosure (continued)
Unaudited Unaudited Unaudited
6 months ended 6 months ended Year ended
30 June 2005 30 June 2004 31 December 2004
Restated Restated
$'000 $'000 $'000
USA 11,575 14,899 9,357
Tanzania 14,796 18,183 19,244
North Korea 127 - -
Europe 10,292 2,254 891
36,790 35,336 29,492
Less: liabilities (6,003) (8,795) (4,883)
Net assets 30,787 26,541 24,609
Net assets before borrowings have been adjusted to eliminate the impact of
intercompany financing.
3. Administrative expenses (net)
Included in administrative expenses are the following gains and losses arising
from other income and the disposal of assets:
Unaudited Unaudited Unaudited
6 months ended 6 months ended Year
30 June 2005 30 June 2004 ended
31 December 2004
$'000 $'000 $'000
Rental income 30 21 49
Gain/(loss) on the disposal of property,
plant and equipment 9 121 (46)
Loss on the disposal of listed investment - - (184)
NOTES TO THE INTERIM FINANCIAL STATEMENTS (unaudited)
for the six months ended 30 June 2005
4. Financing costs (net)
Unaudited Unaudited Unaudited
6 months ended 6 months ended year ended
30 June 2005 30 June 2004 31 December 2004
$'000 $'000 $'000
Interest receivable 2 14 15
Interest payable (9) (12) (28)
Finance cost of abandonment
and site restoration provision (78) - -
Interest on finance leases (2) (2) (5)
Other interest - - (1)
(87) - (19)
5. Loss per share
Unaudited Unaudited Unaudited
6 months ended 6 months ended Year ended
30 June 2005 30 June 2004 31 December 2004
Restated Restated
$'000 $'000 $'000
(a) Numerator for basic and diluted loss per share:
Net loss for the financial period ($'000) 1,921 1,150 4,562
(b) Weighted average number of shares:
Weighted average number of ordinary shares in issue
for calculation of basic earnings per share
(million) 100,091,324 90,940,068 93,014,594
The loss attributable to ordinary shareholders and the weighted average number
of ordinary shares for the purpose of calculating the diluted loss per ordinary
share are identical to those used for basic loss per Ordinary Share. This is
because the exercise of share options would have the effect of reducing the loss
of ordinary share and is therefore anti-dilutive.
(c) Basic and diluted loss per share (cents) 1.92 1.26 4.90
NOTES TO THE INTERIM FINANCIAL STATEMENTS (unaudited)
for the six months ended 30 June 2005
6. Issued share capital and share premium
Issued Share
capital premium
$'000 $'000
At 1 January 2005 6,777 36,222
Issue of shares in return for 10% interest in
Kobril Ltd. - first instalment - net of issue costs 67 85
Proceeds from placing and open offer net of issue costs 4,159 3,774
Equity-settled share-based payment expenses - 7
At 30 June 2005 11,003 40,088
7. Reconciliation of net cash flow to
movement in net debt
Unaudited Unaudited Unaudited
6 months ended 6 months ended Year ended
30 June 2005 30 June 2004 31 December 2004
Restated Restated
$'000 $'000 $'000
Net (decrease)/increase in cash and cash
equivalents (213) 31 421
Decrease/(increase) in debt (434) (22) 175
Changes in net cash resulting from cash
Flows (647) 9 596
Currency translation adjustment - - -
Net (decrease)/increase in net cash (647) 9 596
Net cash at start of period 767 171 171
Net cash at end of period 120 180 767
8. Statutory Information
The financial information for the six month periods to 30 June and the
year to 31 December is unaudited and does not constitute statutory accounts
within the meaning of Section 19 of The Companies (Amendment) Act 1986. This
announcement is being sent to shareholders and will be made available at the
Company's registered office at 6 Northbrook Road, Dublin 6 and at the Company's
UK representative office at 10 Bedford Street, London WC2E 9HE
Appendix I
Reconciliation from Irish GAAP to IFRS
___________________________________________________________________________
Introduction
As part of the European Commission's plan to develop a single European capital
market, all publicly quoted European companies in the EU are required to prepare
consolidated financial statements in accordance with International Financial
Reporting Standards (IFRS) as adopted by the European Commission in respect of
accounting periods commencing on or after 1 January 2005.
Consolidated Balance Sheet
At 1 January 2004
Reconciliation from Irish GAAP to IFRS
Irish Foreign
Currency
Conversion
GAAP Reserve IFRS restated
01-Jan-04 IAS 21 01-Jan-04
Notes $'000 $'000 $'000
Assets
Exploration and evaluation assets 11,068 - 11,068
Property plant and equipment 12,834 - 12,834
Other investments 868 - 868
Total non current assets 24,770 - 24,770
Investment held for sale 2,003 - 2,003
Trade and other receivables 6,102 - 6,102
Cash and cash equivalents 346 - 346
Total current assets 8,451 - 8,451
Total Assets 33,221 - 33,221
Equity
Issued capital 6,172 - 6,172
Share premium 35,258 - 35,258
Capital conversion reserve fund 234 - 234
Foreign currency reserve fund 2 316 (316) -
Retained earnings 2 (14,321) 316 (14,005)
Total equity 27,659 - 27,659
Liabilities
Interest-bearing loans and borrowings 88 - 88
Total non current liabilities 88 - 88
Bank overdraft 175 - 175
Interest-bearing loans and borrowings 132 - 132
Trade and other payables 5,167 - 5,167
Total current liabilities 5,474 - 5,474
Total liabilities 5,562 - 5,562
Total equity and liabilities 33,221 - 33,221
Consolidated Income Statement
For the six months ended 30 June 2004
Reconciliation from Irish GAAP to IFRS
Irish GAAP Restated
6 months Other 6 months
ended Income ended
30-Jun-04 30-Jun-04
$'000 $'000 $'000
Notes
Revenue - continuing operations 3,108 - 3,108
Cost of sales (1,716) - (1,716)
Depletion (414) - (414)
Gross profit 978 - 978
Administrative expenses 1 (2,271) 143 (2,128)
Loss from operations (1,293) 143 (1,150)
Financing costs (net) 2 143 (143) -
Loss before tax (1,150) - (1,150)
Income tax expense - - -
Loss after tax (1,150) - (1,150)
Basic and diluted
loss per share (cent) (1.26) (1.26)
Statement of recognised income and expense
For the six months ended 30 June 2004
Reconciliation from Irish GAAP to IFRS
Irish GAAP Restated
6 months 6 months
ended Ended
30-Jun-04 30-Jun-04
Notes $'000 $'000
Foreign exchange translation differences (46) (46)
Loss after tax for the financial period (1,150) (1,150)
Total recognised income and expenses for the (1,196) (1,196)
financial period
Attributable to:
Equity holders of the Company (1,196) (1,196)
Consolidated Balance Sheet
At 30 June 2004
Reconciliation from Irish GAAP to IFRS
Foreign
Irish Currency IFRS
GAAP Conversion Restated
30-Jun-04 Reserve 30-Jun-04
$'000 $'000 $'000
Notes
Assets
Exploration and evaluation 13,884 - 13,884
assets
Property plant and equipment 13,637 - 13,637
Other investments 868 - 868
Total non current assets 28,389 - 28,389
Trade and other receivables 6,570 - 6,570
Cash and cash equivalents 377 - 377
Total current assets 6,947 - 6,947
Total Assets 35,336 - 35,336
Equity
Issued capital 6,197 - 6,197
Share premium 35,311 - 35,311
Capital conversion reserve 234 - 234
fund
Foreign currency reserve fund 2 270 (316) (46)
Retained earnings 2 (15,471) 316 (15,155)
Total equity 26,541 - 26,541
Liabilities
Interest bearing loans and 55 - 55
borrowings
Total non current liabilities 55 - 55
Bank overdraft 197 - 197
Interest bearing loans and 293 - 293
borrowings
Trade and other payables 8,250 - 8,250
Total current liabilities 8,740 - 8,740
Total liabilities 8,795 - 8,795
Total equity and liabilities 35,336 - 35,336
Consolidated Income Statement
For the twelve months ended 31 December 2004
Reconciliation from Irish GAAP to IFRS
IFRS
Irish GAAP restated
12 months Share based 12 months
Ended payment Other Ended
31-Dec-04 IFRS 2 IAS 31-Dec-04
Notes $'000 $'000 $'000
$'000
Revenue - continuing operations 5,384 - 5,384
-
Cost of sales (3,182) - - (3,182)
Depletion (777) - - (777)
Gross profit 1,425 - - 1,425
Administrative expenses 1 (5,094) (161) (181) (5,436)
Purchasers' share of Vinton Dome (532) - - (532)
profit
Loss on disposal of property, 1 (46) - 46 -
plant and equipment
Loss on disposal of investment 1 (184) - 184 -
Loss from operations (4,431) (161) 49 (4,543)
Financing costs (net) 2 30 - (49) (19)
Loss before tax (4,401) (161) - (4,562)
Income tax expense - - - -
Loss after tax (4,401) (161) - (4,562)
Basic and diluted
loss per share (cent) (4.73) (4.90)
Statement of recognised income and expense
For the year ended 31 December 2004
Reconciliation from Irish GAAP to IFRS
Irish GAAP Share based Restated
Year payment Year
ended IFRS 2 Ended
31-Dec-04 $'000 31-Dec-04
Notes $'000 $'000 $'000
Foreign exchange translation differences (57) - (57)
Loss after tax for the financial period (4,401) (161) (4,562)
Total recognised income and expenses for
the
financial period (4,458) (161) (4,619)
Attributable to:
Equity holders of the Company (4,458) (161) (4,619)
Consolidated Balance Sheet
At 31 December 2004
Reconciliation from Irish GAAP to IFRS
Irish Foreign currency Share IFRS
GAAP Conversion Based restated
Reserve Payment
31-Dec-04 IAS 21 IFRS 2 31-Dec-04
Notes $'000 $'000 $'000 $'000
Assets
Exploration and 14,310 - - 14,310
evaluation assets
Property plant and 8,313 - 8,313
equipment
Total non current 22,623 - - 22,623
assets
Trade and other 6,102 - - 6,102
receivables
Cash and cash 767 - - 767
equivalents
Total current assets 6,869 - - 6,869
Total Assets 29,492 - - 29,492
Equity
Issued capital 6,777 - - 6,777
Share premium 36,061 - 161 36,222
Capital conversion 234 - - 234
reserve fund
Foreign currency 259 (316) - (57)
reserve fund 2
Retained earnings 2 (18,722) 316 (161) (18,567)
Total equity 24,609 - - 24,609
Liabilities
Interest bearing loans 51 - - 51
and borrowings
Total non current 51 - - 51
liabilities
Interest bearing loans 47 - - 47
and borrowings
Trade and other 4,785 - - 4,785
payables
Total current 4,832 - - 4,832
liabilities
Total liabilities 4,883 - - 4,883
Total equity and 29,492 - - 29,492
liabilities
Notes to accompany Group Income Statement and Group Balance Sheet
Six months ended 30 June 2004 and year ended 31 December 2004
Reconciliation from Irish GAAP to IFRS
CONSOLIDATED INCOME STATEMENT
1. Administration expenses Notes 30-Jun-04 31-Dec-04
$'000 $'000
Previous GAAP balance 2,271 5,094
(IFRS 2) Share based payment (i) - 161
Rental Income (ii) (21) (49)
(Gain)/loss on sale of property, plant and equipment (iii) (122) 46
Loss on disposal of investment (iii) - 184
Restated IFRS balance 2,128 5,436
(i) IFRS 2 "Share-based Payment", requires that an expense for share-based
payments, which in the case of Aminex are share options, be recognised in the
income statement based on their fair value at the date of grant. This expense,
which is primarily in relation to the Aminex PLC share option scheme is
recognised over the vesting period of the schemes. Fair value calculations have
been applied in respect of share options granted after 7 November 2002 as
permitted under the framework for transition to IFRS. The fair value of the
share options to be expensed is determined by using option pricing models and
the Group has used the binomial model in its evaluation. The charge recognised
in the Income Statement over the vesting period of three years has been adjusted
to reflect the expected and actual levels of vesting. Where there is no vesting
period and options are exercisable immediately, the value of the options has
been charged to the Income Statement at the date of grant. The following inputs
were used in determining the fair value of share entitlements:
• The exercise price which is the market price at the date the share
entitlements were granted.
• Future price volatility was based on historical volatility as a guide
and was assessed over the last three to four years
• The risk free interest rate used in the model is the rate applicable to
Irish Government Bonds with a remaining term equal to the expected term of
the share entitlements being valued
• Expected share purchase/dividend payments.
An expense of $7,000 has been recognised in the Group Income Statement in
respect of six months ended 30 June 2005 and an expense of $161,000 for the year
ended 31 December 2004 and this is based on share options granted in July 2004
and February 2005. No expense was made to the Income Statement during the six
months ended 30 June 2004 as no options were granted in the period nor were any
options granted after the exemption date of 7 November 2002 which required to be
written off over a vesting period.
(ii) Under IFRS income received from the sub lease of a rented property is
netted against rental payments on that property as opposed to being shown
as other income under Irish GAAP. This adjustment has no effect on
retained earnings.
(iii) This adjustment is to reclassify gain/loss on disposal from a separate
line item before operating profit to administration expenses. This
adjustment has no effect on retained earnings.
2. Retained earnings Notes 1-Jan-04 30-Jun-04 31-Dec-04
$'000 $'000 $'000
Previous GAAP balance (14,321) (15,471) (18,722)
(IAS 12) Foreign currency conversion reserve (i) 316 316 316
(IFRS 2) Share based payment (ii) - - (161)
Subtotal 316 316 155
Restated IFRS balance (14,005) (15,155) (18,567)
(i) Under IAS 32 the Group has deemed the cumulative currency translation
difference applicable to foreign operations to be zero as at the
transition date. The cumulative amount of currency translation
differences previously recognised directly in foreign currency reserves
has been transferred to retained earnings.
(ii) See note 1 (i).
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