Preliminary Results Replacement
The following replaces the earlier announcement today under RNS number 1491P. The only change is the inclusion of the reference to the review by a qualified person.
For Immediate Release 29 September 2011
Indus Gas Limited
("Indus" or "the Company")
Preliminary Results
Indus Gas Limited (AIM:INDI.L), an oil & gas exploration and development company with assets in India, is pleased to report its full year results for the 12 months to 31 March 2011.
Highlights
· SGL Field Development:
- Satisfactory gas production, sales and contract performance of Phase I of SGL following commencement of first production of gas from the Block ("RJ-ON-6") on 9 July 2010.
- Phase II production ramp up estimated to complete by Q1, 2012 after incorporation of required changes in plant sizing and specifications. Likely to coincide with commissioning of existing 110 MW power plant expansion to 270 MW for Rajasthan Rajya Viduit Utpadan Nigam Limited ("RRUVNL"), the State Electricity Company and the end user of the gas from SGL.
- Drilling of additional production wells to deliver required sales gas for Phase II in progress. Majority of key equipment for Phase II being delivered to site.
- Potential for increase of SGL gas sales beyond Phase II as RRUVNL plan to expand 270 MW power plant to 430 MW.
· New drilling and testing program continues to confirm additional hydrocarbon potential within the Block;
- Updated CPR confirmed increase in reserves/resources.
- Additional gas potential from new appraisal wells since the last CPR - new extension in the Southwest of the Block with gas shows in Southern Comfort well.
- Sourced majority of required equipment for planned hydro-fracturing. Extensive Hydro-fracturing campaign being planned in consultation with technical experts considering results of previous hydro-fracturing tests.
- Extensive well testing programme planned ahead of the next CPR.
- Appraisal period extended to January 2013 by the Management Committee. Will help Company to drill a number of appraisal wells to cover undrilled area of the Block.
· Adequate funding position ahead of cash flow ramp up
- Sufficient headroom available under the existing debt facility of $110million ($52.51 million undrawn amount available as at 31 March 2011) to complete Phase II of SGL Field Development.
- Appraisal activities being funded by additional debt financing from banks and related parties on commercial terms.
· Summary of financial performance during Financial Year ending 31 March 2011
- Gas/condensate sales revenues of $2.19 million. Additional invoicing of $2.11 million to GAIL towards its "Take or Pay" commitment under gas sale purchase agreement.
- Operating profits at $0.09 million. Net loss of $2.42 million for the year after considering foreign currency loss of $1.35 million and net interest cost of $1.16 million.
- Total investments in exploration, evaluation and development assets of $ 60.33 million during the FY ending 31 March 2011 with total cumulative investment of $180.19 million ($180.03 million net of depreciation) as of 31 March 2011.
Commenting, Marc Holtzman, Chairman of Indus, said:
"Indus has continued to see progress on its block, with a track record of gas sales, additional wells drilled and an updated competent persons report. The Company has plans in place for additional drilling and testing ahead of commissioning an updated Competent Persons Report in 2012 and will continue to make progress towards increasing production from the SGL Field to around 34 mmscf/d as planned under Phase II of the project. The uplift in production is aimed at coinciding with the completion of the extension to the Ramgarh Power Plant from 110MW to 270MW".
"In accordance with AIM rules, Paul Fink, Technical Consultant, a Geophysicist who holds an engineering degree from the Mining University of Leoben, Austria and has 20 years of industry experience is the qualified person that has reviewed the technical information contained in this release."
For further information please contact:
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Indus Gas Limited |
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John Scott |
CFO |
+44 (0)20 7877 0022 |
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Arden Partners plc |
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Richard Day |
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+44 (0)20 7614 5917 |
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Adrian Trimmings |
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Pelham Bell Pottinger PR |
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Philip Dennis |
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+44 (0)20 7861 3919 |
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Elena Dobson |
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+44 (0) 20 78613147 |
RESULTS STATEMENT
Introduction
Indus gas is pleased to report another year of active operations on the Block. The Company will continue to operate in line with its stated business plan while maintaining compliance with the terms of the Production Sharing Contract, applicable laws and sound standards of health and safety. A summary of the activities in the Block since April 2010 is described below:
Production - SGL Field
Production from SGL began on 9 July 2010 under Phase 1 of gas sale purchase contract. Having completed over a year of gas sales (including post year end period), Indus has seen all contract payments from GAIL on a timely basis towards gas delivered as well as quarterly and annual take or pay commitments.
Indus has produced gas from SGL-1 and SGL-2 wells during the period. Three additional production wells have been spudded since then, which are in various stages of drilling/completion & production testing.
Activities are in their advance stages to increase gas sales to around 34 mmscf/d, as part of Phase II which is expected to be commissioned by Q1, 2012. Phase II production was initially planned to commence from Q2, 2011. However, the experience gained during implementation of phase I and required change in specification, size and source of supply of the gas gathering station and CO2 removal equipment for phase II, to greater than originally planned, has caused some delays in this implementation. Now all the key equipment has been contracted, which is under construction in USA. A significant part of this equipment is en route to India, while the remaining equipment will be shipped shortly. Once this equipment is commissioned, the Company will have gas processing capacity totalling 80 mmscf/d (15 mmscf/d of Phase I and 65 mmscf/d of Phase II), which will enable the ramp up of production beyond Phase II in a quick manner.
Indus understand that the Ramgarh power plant is also nearing completion of its capacity upgrade from 110 MW to 270 MW in order to receive the extra gas sales and the commissioning of the respective facilities is likely to coincide.
RRVUNL, the State Electricity Company in Rajasthan has approved and committed capital for another 160 MW power plant to further expand the Ramgarh power plant and has requested additional gas supplies for the same. The Company is evaluating the possibility of expanding SGL production as this expansion can be commissioned quickly and bring additional cash flows ahead of a larger integrated gas development that will be finalized sometime in 2013-14 after completion of appraisal activities.
Drilling, Seismic and Completion Operations
Indus Gas continues to develop the Block in order to achieve the maximum long term hydrocarbon production and within the scope of the Production Sharing Contract (PSC). We aim to retain the maximum production acreage as the Development Area/Mining Lease after the appraisal period completes. Recently, approval has been granted to extend the appraisal period to January 2013 with a possibility of further extension to October 2013.
Drilling activities since April 2010 has followed multiple objectives being a) the drilling and completion of additional production wells for SGL as planned, b) further appraisal drilling in the Pariwar formation and c) additional clarification of the B&B potential. In order to establish a larger area as development area, the focus has been largely on drilling new wells across the Block at the expense of testing to accommodate rig and other resources availability.
As the understanding of regional gas plays has grown and the Company now has a large inventory of potential well testing candidates, the Company will be planning to undertake an extensive testing campaign over next few quarters to enable a meaningful update to the last CPR.
Currently, five drilling rigs are available for the drilling/testing operation in the Block on a dedicated basis. These rigs are expected to allow the Company to undertake testing of existing wells and drilling/testing of a significant numbers of new appraisal wells before the appraisal period ends.
Between April 2010 and August 2011, seven new wells were spudded with additional activities on two other wells. This amounted to a total drilling of 31,430m during the period.
Between April 2010 and August 2011, the Group acquired a further 361.26km² of 3D seismic with 259km² processed and interpreted.
Following is a brief summary of wells, which were either drilled or where additional operations were conducted between April 2010 and August 2011:
1. Indian Shingli - 1
The Indian Shingli well is located in the south-western part of Block RJ-ON/6 some 26 km to the south-southwest of the currently producing SGL - 1 location. The well was spudded on 10 November 2008 and reached a depth of 5,351m.
The primary aim of the well was to evaluate the distribution of gas within the Lower B&B Formation over pressured tight gas/basin centred gas (BCGA) sands, with a secondary objectives within the conventional sands of the upper B&B and Pariwar Formations. The well successfully encountered significant gas shows at all of the targeted reservoir levels and terminated within the Jaisalmer Limestone section at a depth of 5,351m. The well has been subject to initial fracture injectivity testing in the lowermost parts of the B&B tight gas section which resulted in a successful fracture completion. During testing, combustible gas was recovered to surface from a very tight sandstone section, albeit with low flow rates at this location. Further testing of the B&B tight and conventional targets and key Pariwar conventional reservoir zones is proposed.
2. Eastern Promise - 1
The Eastern Promise well was located to test a structural closure target in the western part of the RJ-ON/6 Block, approximately 16.5km to the south-southwest of the proven productive SGL field. The well was spudded on the 2 June 2009 and has been drilled to a depth of 4,355m.
The primary objective of the well was to assess the potential of the Pariwar Formation, including the same key reservoir zones as those proven in the SGL Field to the north. The secondary objectives of the well were to target conventional gas bearing sands of the Upper B&B Formation and over pressured tight gas/basin centred gas (BCGA) sands of the Lower B&B Formation. The well successfully flowed 8 mmscf/d of gas from sands in the upper parts of the Pariwar Formation. Significant gas shows were also encountered within the Upper B&B target sands, although these were not tested and lower B&B sands were not reached due to technical difficulties encountered within the B&B section. Based on the initial testing, the CPR had assigned 2P reserves of 61 BCF for Eastern Promise area.
Pariwar and B&B Formation zones have been selected for further testing in this well.
3. Southern Comfort - 1
The Southern Comfort well was drilled in the extreme south-western part of the RJ-ON/6 Block. The well spudded on the 3 July 2010 and has been drilled to 4,478m.
The primary aim of this well was to assess the distribution of the Lower B&B Formation over pressured tight gas/BCGA system in this new part of the Block, which was successfully encountered by the Indian Shingli - 1 well located some 12.5km to the northeast. The secondary objective of the well was to assess the Pariwar and Upper B&B reservoir targets. Significant gas shows were encountered in all Pariwar and B&B Target zones and further testing is planned.
This well was not considered in the CPR evaluation. The updated CPR can potentially assign additional reserves/resources for this well.
4. SSG - 2
The SSG - 2 well is located 1.7 km to the south-southwest of the SSG - 1 well, which encountered gas within the upper Pariwar reservoir sands but failed to fully penetrate and test the key lower Pariwar reservoir zone due to technical problems. The well was spudded on the 29 July 2010 and has been drilled to 4,710m.
SSG - 2 successfully encountered gas shows within the key Pariwar Formation target zones and within both Upper and Lower B&B Formation Target sand zones. Further assessment and testing of this well is ongoing at this time.
5. Sandwich - 2
The Sandwich - 2 well was located to the southeast of the SGL field development area with the aim of appraising/delineating the eastern extent of the Lower Cretaceous (Pariwar and B&B Formation) Petroleum Systems. The well was spudded on the 3 February 2011 and has been drilled to 3,965m.
The well was located on structural closure target within a complex highly structured area of the Block. Despite good gas shows in the Pariwar Formation in the nearby Sandwich - 1 well (which unfortunately could not be tested due to sand production problems), only minor shows were encountered at that level in Sandwich - 2. The well drilled into the B&B Formation which contained sands with moderate to good gas shows in its lower parts and terminated within the Jaisalmer limestone. The well is currently suspended pending further assessment.
6. SGL -P1
The SGL - P1 well (formerly called SGL -P3) was spudded on the 8 November 2010 and drilled in an optimal position on the crest of the SGL field structure and was the first location selected for the ongoing development of the SGL Field. The well has been drilled to 3505 meters and has been completed for production. Deliverability testing has been highly successful with a stable flow rate of 9.22 mmscf/d from a depth of 3,117m - 3,229m within the main Pariwar Formation reservoir sands.
7. SGL - 3
The SGL - 3 well was spudded on the 20 March 2011 and was located on a structural high to the north of the main SGL Field area with the aim of extending the field area to the north by proving gas within the Pariwar Formation reservoir zones at this location. The well, drilled to 3,236m, encountered gas shows in the main Pariwar reservoir interval but subsequent technical problems have led to suspension prior to further testing being carried out.
8. SGL - D2
The SGL D2 well was spudded on the 20 April 2011 and is an SGL Field development well drilled on the western flank of the field areas as currently defined, potentially within a separate fault-compartment to the other SGL wells. The Pariwar Formation target sands came in at 3,156m - 3,168m at this location and strong gas shows were encountered. The well has been drilled to 3,211m and is in the final stages of completion and deliverability testing with production due in the near term.
9. SGL 5
The SGL - 5 well was spudded on the 30 June 2011 and is in the northern most development well currently designated within the main SGL Field area as presently defined. The well, drilled to 3,335m recently reached the main Pariwar target reservoir zone and initial completion works and testing are underway at this time.
Competent Persons Report
In December 2010, the Company released the highlights of its first Competent Persons Report (CPR) since listing. The CPR has provided independent verification of increases in reserves and resources since the CPR in 2008. The CPR has made use of the significant amount of seismic and drilling results completed since then. The CPR was provided by Senergy Group Limited and a copy of the same is available our Registered Office for review.
The Company intends to update the CPR sometime in 2012 when sufficient additional seismic, drilling and testing data will be available, for the CPR to reach meaningful conclusions.
Financials
During 12 months ended 31 March 2011, total revenues amounted to $2.19 million including revenues from gas sales of $2.05 million and from sale of condensate of $0.14 million. In addition, Indus invoiced an amount of $2.11million to GAIL towards its "take or pay" commitment under gas sale agreement. This "Take or Pay" commitment allows the Company to invoice GAIL for 90% of the contracted quantity, which has not been delivered for no fault of the sellers. Since GAIL has the right to claim delivery of the gas in the future, subject to certain restrictions, the amount invoiced is not considered as gas sale revenues and instead the same has been reflected as "Deferred Revenues" in the Consolidated Statement of Financial Position.
The Company achieved a modest operating profit of $0.09 million during the period. Net loss for the year was $2.42 million considering foreign currency loss of $1.35 million and net interest cost of $1.16 million.
The Company made total capital investments of $60.33 million during the FY ending 31 March 2011 towards exploration, evaluation and development assets. This included an investment of $39.77 million on appraisal activities and $20.56 million on SGL field development. During the year, a sum of $94.19 million was transferred from Intangible Assets - Exploration and Evaluation assets to Development/Production Assets consequent to the commercial viability and technical feasibility of the reserves in respect of the Eastern Promise field.
As at 31 March 2011, total cumulative investment on exploration, evaluation and development assets was $180.19 million, including $14.11 million of Intangible Assets - Exploration and Evaluation assets and $166.07 million of Development/Production Assets. A depreciation of $0.16 million was provided during the year and net exploration, evaluation and development assets as at 31 March 2011 were $180.03 million.
As at 31 March 2011, the Company has invested a sum of $10.43 million ($7.44 million net of depreciation) in other non current assets including land, equipment, bunk houses, vehicles, capital work in progress etc.
As at 31 March 2011, the Company had current assets of $10.65 million including cash balance of $2.25 million, inventories of $6.44 million and trade receivables of $1.17 million.
To part finance the above capital investment, the Company has drawn a sum of $42.49 million during the year out of its $110 million bank debt facility. As at 31 March 2011, the outstanding balance under the debt facility was $57.49 million and a sum of $52.51 million remains undrawn under the facility.
As detailed last year, as at 31 March 2010, the Company had an outstanding loan of $42.60 million from Focus Energy Ltd., a related party at an interest of 6.5% per annum compounded annually. As at 31 March 2011, the outstanding amount under this loan was $45.37 million after accruing interest of $2.77 million for the year. This loan including accrued interest is subordinated to $110 million bank debt facility and is repayable after the bank debt facility has been repaid in full. Further, as at 31 March 2011, the Company also owe an amount of $19.93 million to Focus Energy Ltd. as short term liability towards unpaid reimbursement of Company's share of exploration, appraisal and development costs. This short term borrowing is repayable on demand and subject to Company reimbursing actual interest cost incurred by Focus on loans taken from third parties subject to a minimum interest rate of 6.5 per cent per annum and maximum interest rate of 10 per cent per annum.
During the year, Gynia Holdings Ltd., a related party, provided a short term financing of $15 million to part finance capital assets of the Company. This loan is repayable on demand and carries an interest of 6.5% per annum. As at 31 March 2011, the outstanding amount under this loan was $15.09 million after accruing interest of $0.09 million for the year.
The Company has sufficient cash and debt capacity available to fund the closing payments on the SGL expansion. While existing cash flows are sufficient to cover overheads and interest payments under the existing debt facility, appraisal costs and debt repayments are being financed by Gynia/Focus Group. Gynia/Focus Group has committed to continue to provide necessary financial support to the Company to cover the ongoing capital investment. Additionally, the Company is in discussions with existing lenders to expand the existing debt facilities of $110 million up to approximately $160 million.
Outlook
As Indus concludes its activities for the upgrade in SGL production, the Company will switch additional resources to appraisal drilling and testing of existing and new wells in order to gather sufficient data for an updated CPR expected in 2012 and to begin planning for additional monetisation of the gas reserves within the Block. Some of these wells may be taken up for hydro fracturing to increase gas flow rates and also to gain a better understanding of the B&B reserve potential.
With an aggressive drilling and testing programme in place, complemented by growing production and revenues, underpinned by established funding, the Company looks forward to the year ahead confident of making further solid progress.
29 September 2011
Consolidated Statement of Financial Position
(All amounts in United States Dollars, unless otherwise stated)
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31 March 2011 |
31 March 2010 |
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ASSETS |
|
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|
|
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Non-current assets |
|
|
|
|
|
|
Intangible assets: exploration and evaluation assets |
7 |
14,110,885 |
|
68,534,029 |
|
|
Property, plant and equipment |
8 |
173,356,791 |
|
57,202,020 |
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|
Deferred tax assets (net) |
9 |
618 |
|
- |
|
|
Other assets |
|
11,149 |
|
9,643 |
|
|
Total non-current assets |
|
187,479,443 |
|
125,745,692 |
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|
|
|
|
|
|
|
|
Current assets |
|
|
|
|
|
|
Inventories |
11 |
6,439,619 |
|
5,337,532 |
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|
Recoverable from related party |
|
- |
|
56,543 |
|
|
Trade receivables |
|
1,172,052 |
|
- |
|
|
Current tax assets |
|
35,639 |
|
- |
|
|
Other current assets |
12 |
746,501 |
|
1,216,007 |
|
|
Short term investments |
13 |
- |
|
8,538,802 |
|
|
Cash and cash equivalents |
14 |
2,252,815 |
|
220,724 |
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|
Total current assets |
|
10,646,626 |
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15,369,608 |
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|
|
|
|
|
|
|
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Total assets |
|
198,126,069 |
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141,115,300 |
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LIABILITIES AND EQUITY |
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STOCKHOLDERS' EQUITY |
|
|
|
|
|
|
Share capital |
15 |
3,618,472 |
|
3,618,472 |
|
|
Additional paid-in capital |
15 |
46,501,666 |
|
46,501,666 |
|
|
Currency translation reserve |
|
(9,313,781) |
|
(10,554,972) |
|
|
Merger reserve |
|
19,570,288 |
|
19,570,288 |
|
|
Share option reserve |
23 |
386,381 |
|
341,303 |
|
|
Accumulated losses |
|
(3,541,234) |
|
(1,124,725) |
|
|
Total stockholders' equity |
|
57,221,792 |
|
58,352,032 |
|
|
|
|
|
|
|
|
|
LIABILITIES |
|
|
|
|
|
|
Non-Current liabilities |
|
|
|
|
|
|
Long term debt from banks, excluding current portion |
16 |
45,089,825 |
|
14,815,524 |
|
|
Provision for decommissioning |
17 |
501,392 |
|
369,809 |
|
|
Finance lease obligations, excluding current portion |
18 |
31,222 |
|
99,289 |
|
|
Payable to related parties, excluding current portion |
19 |
45,369,000 |
|
42,600,000 |
|
|
Total non-current liabilities |
|
90,991,439 |
|
57,884,622 |
|
|
|
|
31 March 2011 |
|
31 March 2010 |
|
|
|
|
|
|
|
|
|
Current liabilities |
|
|
|
|
|
|
Current portion of long term debt from banks |
16 |
11,835,959 |
|
- |
|
|
Current portion of finance lease obligations |
18 |
68,126 |
|
75,270 |
|
|
Current portion payable to related parties |
19 |
35,801,031 |
|
24,753,666 |
|
|
Accrued expenses and other liabilities |
|
93,050 |
|
49,710 |
|
|
Deferred revenue |
|
2,114,672 |
|
- |
|
|
|
|
|
|
|
|
|
Total current liabilities |
|
49,912,838 |
|
24,878,646 |
|
|
|
|
|
|
|
|
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Total liabilities |
|
140,904,277 |
|
82,763,268 |
|
|
|
|
|
|
|
|
|
Total equity and liabilities |
|
198,126,069 |
|
141,115,300 |
|
(The accompanying notes are an integral part of these consolidated financial statements)
These consolidated financial statements were approved and authorised for issue by the board on 27th September 2011 and was signed on its behalf by:
John Scott
Director
Consolidated Statement of Comprehensive Income
(All amounts in United States Dollars, unless otherwise stated)
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Year ended 31 March 2011 |
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Year ended 31 March 2010 |
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|
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Revenues |
|
2,187,649 |
|
- |
|
|
Cost of sales |
|
(518,515) |
|
- |
|
|
Gross profit |
|
1,669,134 |
|
- |
|
|
|
|
|
|
|
|
|
Cost and expenses |
|
|
|
|
|
|
Administrative expenses |
|
1,578,364 |
|
1,754,580 |
|
|
|
|
|
|
|
|
|
Gain/ (loss) from operations |
|
90,770 |
|
(1,754,580) |
|
|
|
|
|
|
|
|
|
Foreign currency exchange loss |
21 |
(1,346,582) |
|
(353,424) |
|
|
Interest expense |
|
(1,183,161) |
|
- |
|
|
Interest income |
|
21,846 |
|
381,476 |
|
|
|
|
|
|
|
|
|
Loss before tax |
|
(2,417,127) |
|
(1,726,528) |
|
|
|
|
|
|
|
|
|
Income tax credit |
10 |
618 |
|
- |
|
|
|
|
|
|
|
|
|
Loss for the year (attributable to the owners of the parent) |
|
(2,416,509) |
|
(1,726,528) |
|
|
|
|
|
|
|
|
|
Other comprehensive income |
|
|
|
|
|
|
Currency translation adjustment |
|
1,241,191 |
|
2,171,365 |
|
|
Total comprehensive (loss)/ income for the year (attributable to the owners of the parent) |
|
(1,175,318) |
|
444,837 |
|
|
|
|
|
|
|
|
|
Loss per share |
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
24 |
(0.01) |
|
(0.01) |
|
|
Diluted |
|
(0.01) |
|
(0.01) |
|
|
Par value of each share |
GBP |
0.01 |
|
0.01 |
|
(The accompanying notes are an integral part of these consolidated financial statements)
Consolidated Statement of Changes in Equity
(All amounts in United States Dollars, unless otherwise stated)
|
|
Common stock |
Additional paid in capital |
Currency translation reserve |
Merger reserve |
Share option reserve |
Accumulated earnings/ (losses) |
Total stockholders' equity
|
|
|
|
No. of shares |
Amount |
||||||
|
Balance as at 1 April 2009 |
182,913,924 |
3,618,472 |
46,501,666 |
(12,726,337) |
19,570,288 |
- |
601,803 |
57,565,892 |
|
Share based payment transactions |
- |
- |
- |
- |
- |
341,303 |
- |
341,303 |
|
Transactions with owners |
- |
- |
- |
- |
- |
341,303 |
- |
341,303 |
|
Loss for the year |
- |
- |
- |
- |
- |
- |
(1,726,528) |
(1,726,528) |
|
Other comprehensive income: |
|
|
|
|
|
|
|
|
|
Currency translation adjustment |
- |
- |
- |
2,171,365
|
- |
- |
- |
2,171,365 |
|
Total comprehensive income/ (loss) for the year |
- |
- |
- |
2,171,365 |
- |
- |
(1,726,528) |
444,837 |
|
Balance as at 1 April 2010 |
182,913,924 |
3,618,472 |
46,501,666 |
(10,554,972) |
19,570,288 |
341,303 |
(1,124,725) |
58,352,032 |
|
Share based payment transactions |
- |
- |
- |
- |
- |
45,078 |
- |
45,078 |
|
Transaction with owners |
- |
- |
- |
- |
- |
45,078 |
- |
45,078 |
|
Loss for the year |
- |
- |
- |
- |
- |
- |
(2,416,509) |
(2,416,509) |
|
Other comprehensive income : |
|
|
|
|
|
|
|
|
|
Currency translation adjustment |
- |
- |
- |
1,241,191 |
- |
- |
- |
1,241,191 |
|
Total comprehensive income/(loss) for the year |
- |
- |
- |
1,241,191 |
- |
- |
(2,416,509) |
(1,175,318) |
|
Balance as at 31 March 2011 |
182,913,924 |
3,618,472 |
46,501,666 |
(9,313,781) |
19,570,288 |
386,381 |
(3,541,234) |
57,221,792 |
(The accompanying notes are an integral part of these consolidated financial statements)
Consolidated Statement of Cash Flow
(All amounts in United States Dollars, unless otherwise stated)
|
|
Year ended 31 March 2011 |
|
Year ended 31 March 2010 |
|
|
||
|
Cash flow from operating activities |
|
|
|
|
|
||
|
Loss before tax |
(2,417,127) |
|
(1,726,528) |
|
|||
|
Adjustments |
|
|
|
|
|||
|
Unrealised exchange loss/(gain) |
1,283,713 |
|
(1,996,001) |
|
|||
|
Interest income |
(21,846) |
|
(381,476) |
|
|||
|
Interest expense |
1,183,161 |
|
- |
|
|||
|
Share based payment |
45,078 |
|
341,303 |
|
|||
|
Depreciation |
156,168 |
|
- |
|
|||
|
Changes in operating assets and liabilities |
|
|
|
|
|||
|
Inventories |
(1,102,087) |
|
(2,246,633) |
|
|||
|
Payable to related party- Operating activities |
1,735,628 |
|
2,948,901 |
|
|||
|
Trade receivables |
(1,172,052) |
|
- |
|
|||
|
Deferred revenue |
2,114,672 |
|
- |
|
|||
|
Other current and non current assets |
516,663 |
|
(1,312,674) |
|
|||
|
Accrued expenses and other liabilities |
41,898 |
|
1,058 |
|
|||
|
Cash generated from /(used in) operations |
2,363,869 |
|
(4,372,050) |
|
|||
|
Income taxes paid |
- |
|
- |
|
|||
|
Net cash used in operating activities |
2,363,869 |
|
(4,372,050) |
|
|||
|
Cash flow from investing activities |
|
|
|
|
|||
|
Investment in exploration and evaluation assets (Refer note A below) |
51,423,352 |
|
(18,105,302) |
|
|||
|
Purchase of property, plant and equipment (Refer note A below) |
(116,386,152) |
|
(8,332,214) |
|
|||
|
Investment in short term investments |
- |
|
(8,906,497) |
|
|||
|
Maturity of short term investments |
8,831,712 |
|
- |
|
|||
|
Interest received |
21,846 |
|
258,445 |
|
|||
|
Net cash used in investing activities |
(56,109,242) |
|
(35,085,568) |
|
|||
|
Cash flow from financing activities |
|
|
|
|
|||
|
Proceeds from loans by related parties |
15,196,962 |
|
- |
|
|||
|
Repayment of loans to related parties |
- |
|
(170,000) |
|
|||
|
Proceeds from long term debt from banks |
42,823,156 |
|
17,662,975 |
|
|||
|
Payment of interest |
(1,183,161) |
|
- |
|
|||
|
Net cash generated from financing activities |
56,836,957 |
|
17,492,975 |
|
|||
|
Net increase/ (decrease) in cash and cash equivalents |
3,091,584 |
|
(21,964,643) |
|
|||
|
Cash and cash equivalents at the beginning of the year |
220,724 |
|
20,308,583 |
|
|||
|
Effects of exchange differences on cash and cash equivalents |
(1,059,493) |
|
1,876,784 |
|
|||
|
Cash and cash equivalents at the end of the year |
2,252,815 |
|
220,724 |
|
|||
(The accompanying notes are an integral part of these consolidated financial statements)
Note A: The movement of property, plant and equipment above, includes the non cash transfer from exploration and evaluation assets during the year, as explained in Note 7 .
Notes to Consolidated Financial Statements
(All amounts in United States Dollars, unless otherwise stated)
1. INTRODUCTION
Indus Gas Limited ("Indus Gas" or "the Company") was incorporated in the Island of Guernsey on 4 March 2008 pursuant to an Act of the Royal Court of the Island of Guernsey. The Company was set up to act as the holding company of iServices Investments Ltd. ("iServices") and Newbury Oil Co. Limited ("Newbury"). iServices and Newbury are companies incorporated in Mauritius and Cyprus respectively. iServices was incorporated on 18 June 2003 and Newbury was incorporated on 17 February 2005. The Company was listed on the Alternative Investment Market (AIM) of the London Stock Exchange on 6 June 2008. Indus Gas through its subsidiaries iServices and Newbury (hereinafter collectively referred to as "the Group") is engaged in the business of oil and gas exploration, development and production.
Focus Energy Limited ("Focus") entered into a Production Sharing Contract ("PSC") with the Government of India ("GOI") and Oil and Natural Gas Corporation Limited ("ONGC") on 30 June 1998 for petroleum exploration and development concession in India known as RJ-ON/06 ("the Block"). The Group acquired an aggregate of 90 per cent participating interest in the Block on 13 January 2006. The balance of 10 per cent participating interest is owned by Focus. The participating interest explained above is subject to any option exercised by ONGC in respect of individual wells (already exercised for SGL field as further explained in Note 3).
2. GENERAL INFORMATION
The consolidated financial statements of the Group have been prepared in accordance with International Financial Reporting Standards ('IFRS') as issued and developed by the International Accounting Standards Board ('IASB'). The consolidated financial statements have been prepared on a going concern basis, and are presented in United States Dollar (US$). US$ was the Company's functional currency up to its listing on the AIM as well as that of its subsidiaries. Upon listing the functional currency of the Company was re-assessed as Pound Sterling (GBP) and that of its subsidiaries continues to be US$. During the current year, the functional currency of the Company has again been reassessed to be US$.
3. JOINTLY CONTROLLED ASSETS
The Group is jointly engaged in oil and gas exploration, development and production activities along with Focus. This venture is a jointly controlled asset as defined under IAS 31: Interest in Joint Ventures. All rights and obligations in respect of exploration, development and production of oil and gas resources under the 'Interest sharing agreement' are shared between Focus, iServices and Newbury in the ratio of 10 per cent, 65 per cent and 25 per cent respectively.
Under the PSC, the GOI, through ONGC had an option to acquire a 30 per cent participating interest in any discovered field, upon such successful discovery of oil or gas reserves, which has been declared as commercially feasible to develop.
Subsequent to the declaration of commercial discovery in SGL field on 21 January 2008, ONGC on 6 June 2008 had exercised the option to acquire a 30 per cent participating interest in the discovered fields.
On exercise of this option, ONGC is liable to pay its share of 30 per cent of the SGL field development costs and production costs incurred after 21 January 2008 and are entitled to a 30 per cent share in the production of gas subject to recovery of Contract costs as explained below.
The allocation of the production from the field to each participant in any year is determined on the basis of the respective proportion of each such participant's cumulative unrecovered Contract Costs as at the end of the previous year or where there are no unrecovered contract cost at the end of previous year on the basis of participating interest of each such participant in the field.
Basis above, gas production of the year ended 31 March 2011 is shared between Focus, iServices and Newbury in the ratio of 10 percent, 65 percent and 25 percent, respectively.
The aggregate amounts relating to jointly controlled assets, liabilities, expenses and commitments related thereto that have been included in the consolidated financial statements are as follows:
|
|
31 March 2011 |
31 March 2010 |
|
|
|
|
|
Non-current assets |
185,481,659 |
125,720,640 |
|
Current assets |
6,439,619 |
5,337,532 |
|
|
|
|
|
Non-current liabilities |
45,901,614 |
43,069,098 |
|
Current liabilities |
19,998,780 |
24,375,352 |
|
|
|
|
|
Expenses (net of finance income) |
429,383 |
442,965 |
|
|
|
|
|
Commitments |
20,923,564 |
377,778 |
|
|
|
|
The GOI, through ONGC, has option to acquire similar participating interest in any future successful discovery of oil or gas reserves in the Block.
4. STANDARDS AND INTERPRETATIONS ISSUED BY IASB BUT NOT YET APPLIED BY THE GROUP
Summarised in the paragraphs below are standards, interpretations or amendments that have been issued until the date of approval of these consolidated financial statements and will be applicable for transactions in the Group but are not yet effective. These have not been adopted early by the Group and accordingly have not been considered in the preparation of the consolidated financial statements of the Group.
Management anticipates that all of these pronouncements will be adopted by the Group in the first accounting period beginning after the effective date of each of the pronouncements. Based on the Group's current business model and accounting policies, management does not expect material changes to the recognition and measurement principles on the Group's consolidated financial statements when these Standards/Interpretations become effective. Information on the new standards, amendments and interpretations that are expected to be relevant to the Group's consolidated financial statements is provided below.
IFRS 9 Financial Instruments (Issued November 2009) (Effective from 1 January 2015 (but under exposure draft))
The IASB aims to replace IAS 39 Financial Instruments: Recognition and Measurement in its entirety by the end of 2010, with the replacement standard to be effective for annual periods beginning 1 January 2013. IFRS 9 is the first part of Phase 1 of this project.
The main phases are:
Phase 1: Classification and Measurement
Phase 2: Impairment methodology
Phase 3: Hedge accounting
In addition, a separate project is dealing with de-recognition. Management has yet to assess the impact that this amendment is likely to have on the financial statements of the Group. However, they do not expect to implement the amendments until all chapters of the IAS 39 replacement have been published and they can comprehensively assess the impact of all changes.
Amendment (issued 28 October 2010) (Effective from 1 January 2015 (but under exposure draft))
In October 2010, the IASB amended IFRS 9 to incorporate requirements for classifying and measuring financial liabilities and derecognising financial assets and financial liabilities. Most of IAS 39's requirements have been carried forward unchanged to IFRS 9. Changes have however been made to address issues related to own credit risk where an entity takes the option to measure financial liabilities at fair value.
IAS 24 Related party disclosure (Issued November 2009) (Effective from 1 January 2011)
The amended standard is effective for annual periods beginning on or after 1 January 2011. It clarified the definition of a related party to simplify the identification of such relationships and to eliminate inconsistencies in its application. The revised standard introduced a partial exemption of disclosure requirements for government related entities.
Though the standard is applicable to the Group, the amendments from the previous version would not have any impact on the consolidated financial statements.
IFRS 10 Consolidated financial statements (Issued May 2011) (Effective from 1 January 2013)
IFRS 10 introduces a revised definition of control together with accompanying guidance on how to apply it. In contrast to IAS 27 and SIC-12, which resulted in different criteria for determining control being applied to special purpose vehicles, IFRS 10's requirements will apply to all types of potential subsidiaries.
Though the standard is applicable to the Group the changes in the new standard from the last version are not likely to have an effect on the Group.
IFRS 11 Joint Agreements (Issued May 2011) (Effective from 1 January 2013)
IFRS 11 supersedes IAS 31 Interests in Joint Ventures. It replaces IAS 31's three categories of 'jointly controlled entities', 'jointly controlled operations' and 'jointly controlled assets' with two new categories - 'joint operations' and 'joint ventures'. The option of using proportionate consolidation for jointly controlled entities that was previously included in IAS 31 has been eliminated (equity accounting is now required for all joint ventures). Though the standard is applicable to the Group the changes in the new standard from the last version are not likely to have an effect on the Group.
IFRS 12 Disclosure of Interests in Other Entities (Issued May 2011) (Effective from 1 January 2013)
The new standard integrates and makes consistent the disclosure requirements for subsidiaries, joint arrangements, associates and unconsolidated structured entities. The new standard is intended to provide transparency about the risks to which a reporting entity is exposed from its involvement with structured entities. The Group will be required to make additional disclosures as suggested by this amended standard.
IFRS 13 Fair Value Measurement (Issued May 2011) (Effective from 1 January 2013)
The new IFRS does not affect which items are required to be 'fair-valued', but specifies how an entity should measure fair value and disclose fair value information. IFRS 13 has been developed to remedy this problem, by establishing a single source of guidance for all fair value measurements, clarifying the definition of fair value and related guidance and enhancing disclosures about fair value measurements (new disclosures increase transparency about fair value measurements, including the valuation techniques and inputs used to measure fair value).The guidance in the standard would impact how the Group would fair value its financial instruments and give disclosures that are required by this standard, however considering the transactions in the Group, this standard is not likely to have an impact on the Group
5. SUMMARY OF ACCOUNTING POLICIES
A summary of the significant accounting policies applied in the preparation of the accompanying consolidated financial statements are as follows:
5.1. OVERALL CONSIDERATIONS
The consolidated financial statements have been prepared on the historical cost basis.
5.2. BASIS OF CONSOLIDATION
The consolidated financial statements include the financial statements of the parent company and all of its subsidiary undertakings drawn up to 31 March 2011. Subsidiaries are all entities over which the Group has the power to control the financial and operating policies. Indus Gas obtains and exercises control through more than half of the voting rights. All subsidiaries have a reporting date of 31 March.
Unrealised gains and losses on transactions between Group companies are eliminated. Where unrealised losses on intra-group asset sales are reversed on consolidation, the underlying asset is also tested for impairment from a group perspective. Amounts reported in the financial statements of subsidiaries have been adjusted where necessary to ensure consistency with the accounting policies adopted by the Group.
Profit or losses of subsidiaries acquired or disposed of during the year are recognised from the effective date of acquisition, or up to the effective date of disposal, as applicable.
5.3. SIGNIFICANT ACCOUNTING JUDGEMENTS AND ESTIMATES
In preparing consolidated financial statements, Group's management is required to make judgements, estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statement and the reported amounts of revenues and expenses during the reporting period. Although these estimates are based on management's best knowledge of current events and actions, actual results may ultimately differ from those estimates. The management's estimates for the useful life and residual value of tangible assets, impairment of tangible and intangible assets, fair value of share based payments and recognition of restoration cost represent certain particularly sensitive estimates. The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision affects only that period or in the period of the revision and future periods if the revision affects both current and future periods. Information about significant judgements, estimates and assumptions that have the most significant effect on recognition and measurement of assets, liabilities, income and expenses is provided in note 28 below.
5.4. FOREIGN CURRENCIES
The consolidated financial statements have been presented in US$.
Foreign currency transactions are translated into the functional currency of the respective Group entities, using the exchange rates prevailing at the dates of the transactions (spot exchange rate). Foreign exchange gains and losses resulting from the settlement of such transactions and from the re-measurement of monetary items at year-end exchange rates are recognised in the profit or loss for the year.
Non-monetary items measured at historical cost are recorded in the functional currency of the entity using the exchange rates at the date of the transaction.
The Company has changed its functional currency from GBP to US$ during the year. Such changes are accounted for prospectively, accordingly relevant assets and liabilities in the Company have been translated into US$, which is also the Group's presentation currency at the date of change in the functional currency. Income and expenses have been translated into US$ at the average rate over the related period. Exchange differences on such change are charged/ credited to the currency translation reserve in equity. Refer note 6 for impact on the change in functional currency.
5.5. REVENUE RECOGNITION
Revenue from sale of natural gas and condensate production (a by- product) is recognised when the significant risks and rewards of ownership have been transferred, which is when title passes to the customer. This generally occurs when product is physically transferred into a vessel, pipe or other delivery mechanism.
Revenue is stated after deducting sales taxes, excise duties and similar levies.
Per the 'Take-or-Pay' agreement, GAIL (India) Limited ('GAIL' or the 'customer') is committed towards taking a certain minimum quantity of gas and paying for any related shortfall. The Group's entitlement to receive revenue for any shortfall is recorded as trade receivables with a corresponding credit to deferred revenue. Until the expiry of the contracted period, the Group continues to have an obligation to deliver the deficit to GAIL. Revenue for the deficit quantity would be recognised at the earlier of delivery of physical quantity towards the deficit to GAIL or at the expiry of the contract period.
5.6. PROPERTY, PLANT ANDEQUIPMENT
Property, plant and equipment comprises of Development assets and other properties, plant and equipment used in the gas fields and for administrative purposes. These assets are stated at cost less accumulated depreciation and any accumulated impairment losses.
Development assets are accumulated on a field by field basis and comprise of costs of developing the commercially feasible reserve, expenditure on the construction, installation or completion of infrastructure facilities such as platforms, pipelines and other costs of bringing such reserves into production. It also includes the exploration and evaluation costs incurred in discovering the commercially feasible reserve, which have been transferred from the exploration and evaluation assets as per the policy mentioned in note 5.7 below. As consistent with the full cost method, all exploration and evaluation expenditure incurred till the date of the commercial discovery have been classified under development assets of that field.
The carrying values of property, plant and equipment are reviewed for impairment when events or changes in circumstances indicate that the carrying values may not be recoverable.
An item of property, plant and equipment is derecognised upon disposal or when no future economic benefits are expected from its use or disposal. Any gain or loss arising on de-recognition of the asset (calculated as the difference between the net disposal proceeds and the carrying amount of the asset) is included in the profit or loss of the year in which the asset is derecognised. However, where the asset is being consumed in developing exploration and evaluation intangible assets, such gain or loss is recognised as part of the cost of the intangible asset.
The asset's residual values, useful lives and depreciation methods are reviewed, and adjusted if appropriate, at each period end. No depreciation is charged on development assets until production commences.
Depreciation on property, plant and equipment is provided at rates estimated by the management. Depreciation is computed using the straight line method of depreciation, whereby each asset is written down to its estimated residual value evenly over its expected useful life. The useful lives estimated by the management are as follows:
|
Extended well test equipment |
20 years |
|
Bunk houses |
5 years |
|
Vehicles |
5 years |
|
Other assets |
|
|
Furniture and fixture |
5 years |
|
Buildings |
10 years |
|
Computer equipment |
3 years |
|
Other equipment |
5 years |
Land acquired is recognised at cost and no depreciation is charged as it has an unlimited useful life.
Production assets will be depreciated from the date of commencement of production, on a field by field basis with reference to the unit of production method for the commercially probable and proven reserves in the particular field and also taking into account the future development costs to be incurred on these respectively for the probable and proven reserves, (taken at the current price). Changes in the prices and quantities are applied prospectively to future periods.
Advances paid for the acquisition/ construction of property, plant and equipment which are outstanding at the consolidated Statement of Financial Position date and the cost of property, plant and equipment under construction before such date are disclosed as 'Capital work-in-progress'.
5.7. EXPLORATION AND EVALUATION ASSETS
The Group adopts the full cost method of accounting for its oil and gas interests, having regard to the requirements of IFRS 6: Exploration for and Evaluation of Mineral Resources. Under the full cost method of accounting, all costs of exploring for and evaluating oil and gas properties, whether productive or not are accumulated and capitalised by reference to appropriate cost pools. Such cost pools are based on geographic areas and are not larger than a segment. The Group currently has one cost pool being an area of land located in Rajasthan, India.
Exploration and evaluation costs may include costs of licence acquisition, directly attributable exploration costs such as technical services and studies, seismic data acquisition and processing, exploration drilling and testing, technical feasibility, commercial viability costs, finance costs to the extent they are directly attributable to financing these activities and an allocation of administrative and salary costs as determined by management. All costs incurred prior to the award of an exploration licence are written off as loss of the year as incurred.
Exploration and evaluation costs are classified as tangible or intangible according to the nature of the assets acquired and the classification is applied consistently. Tangible exploration and evaluation assets are recognised and measured in accordance with the accounting policy on property, plant and equipment. To the extent that such a tangible asset is consumed in developing an intangible exploration and evaluation asset, the amount reflecting that consumption is recorded as part of the cost of the intangible asset.
Exploration and evaluation assets are not amortised prior to the conclusion of appraisal activities. Where technical feasibility and commercial viability is demonstrated, the carrying value of the relevant exploration and evaluation asset is reclassified as a development and production assets and any impairment loss recognised.
5.8. IMPAIRMENT TESTING FOR EXPLORATION AND EVALUATION ASSETS AND PROPERTY, PLANT AND EQUIPMENT
An impairment loss is recognised for the amount by which the asset's or cash-generating unit's carrying amount exceeds its recoverable amount. The recoverable amount is the higher of fair value, reflecting market conditions less costs to sell, and value in use based on an internal discounted cash flow evaluation.
Where there are indicators that an exploration asset may be impaired, the exploration and evaluation assets are grouped with all development/producing assets belonging to the same geographic segment to form the Cash Generating Unit (CGU) for impairment testing. Where there are indicators that an item of property, plant and equipment asset is impaired, assets are grouped at the lowest levels for which there are separately identifiable cash flows to form the CGU. The combined cost of the CGU is compared against the CGU's recoverable amount and any resulting impairment loss is written off in profit or loss of the year. No impairment has been recognised during the year.
An assessment is made at each reporting date as to whether there is any indication that previously recognised impairment losses may no longer exist or may have decreased. If such indication exists, the Group estimates the asset's or CGU's recoverable amount. A previously recognised impairment loss is reversed only if there has been a change in the assumptions used to determine the asset's recoverable amount since the last impairment loss was recognised. The reversal is limited so that the carrying amount of the asset does not exceed its recoverable amount, nor exceed the carrying amount that would have been determined, net of depreciation, had no impairment loss been recognised for the asset in prior years. Such reversal is recognised in profit or loss unless the asset is carried at a revalued amount, in which case the reversal is treated as a revaluation increase.
5.9. FINANCIALASSETS
Financial assets and financial liabilities are recognised on the Group's Statement of Financial Position when the Group has become a party to the contractual provisions of the related instruments.
Financial assets of the Group, under the scope of IAS 39 'Financial Instruments: Recognition and Measurement' fall into the category of loans and receivables. When financial assets are recognised initially, they are measured at fair value plus transaction costs. The Group determines the classification of its financial assets at initial recognition.
Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. Such assets are subsequently carried at amortised cost using the effective interest method, less provision for impairment. Gains and losses are recognised in profit or loss when the loans and receivables are derecognised or impaired, as well as through the amortisation process.
Loans and receivables are assessed for indicators of impairment at the end of each reporting period. Loans and receivables are considered to be impaired when there is objective evidence that, as a result of one or more events that occurred after the initial recognition, the estimated future cash flows have been affected.
De-recognition of loans and receivables occurs when the rights to receive cash flows from the instrument expires or are transferred and substantially all of the risks and rewards of ownership have been transferred.
5.10. FINANCIAL LIABILITIES
The Group's financial liabilities include debts, bank overdrafts, trade and other payables and loans from related parties.
Financial liabilities are recognised when the Group becomes a party to the contractual agreements of the related instrument.
Financial liabilities are recognised at their fair value less transaction costs and subsequently measured at amortised cost less settlement payments. Amortised cost is computed using the effective interest method.
Trade and other payables and loans from related parties are interest free financial liabilities with maturity period of less than twelve months and are carried at transaction value which is not materially different from their fair value.
A financial liability is derecognised when the obligation under the liability is discharged or cancelled or expires.
5.11. INVENTORIES
Inventories are measured at the lower of cost and net realisable value. Inventories of drilling stores and spares are accounted at cost including taxes, duties and freight. The cost of all inventories other than drilling bits is computed on the basis of the first in first out method. The cost for drilling bits is computed based on specific identification method.
5.12. SHARE BASED PAYMENTS
The Group operates equity-settled share-based plans for its employees, directors, consultants and advisors. Where persons are rewarded using share-based payments, the fair values of services rendered by employees and others are determined indirectly by reference to the fair value of the equity instruments granted. This fair value is appraised using the Black Scholes model at the respective measurement date. In the case of employees and others providing services, the fair value is measured at the grant date. The fair value excludes the impact of non-market vesting conditions. All share-based remuneration is recognised as an expense in profit or loss with a corresponding credit to 'Share Option Reserve'.
If vesting periods or other vesting conditions apply, the expense is allocated over the vesting period, based on the best available estimate of the number of share options expected to vest. Non-market vesting conditions are included in assumptions about the number of options that are expected to become exercisable. Estimates are subsequently revised, if there is any indication that the number of share options expected to vest differs from previous estimates and any impact of the change is recorded in the year in which that change occurs.
Upon exercise of share options, the proceeds received up to the nominal value of the shares issued are allocated to share capital with any excess being recorded as additional paid-in capital.
5.13. ACCOUNTING FOR INCOME TAXES
Current income tax assets and/or liabilities comprise those obligations to, or claims from, fiscal authorities relating to the current or prior reporting period that are unpaid / un-recovered at the date of the Statement of Financial Position. They are calculated according to the tax rates and tax laws applicable to the fiscal periods to which they relate, based on the taxable profit for the year. All changes to current tax assets or liabilities are recognised as a component of tax expense in profit or loss.
Deferred income taxes are calculated using the balance sheet method on temporary differences. This involves the comparison of the carrying amounts of assets and liabilities in the financial statement with their tax base. Deferred tax is, however, neither provided on the initial recognition of goodwill, nor on the initial recognition of an asset or liability unless the related transaction is a business combination or affects tax or accounting profit. Tax losses available to be carried forward as well as other income tax credits to the Group are assessed for recognition as deferred tax assets.
Deferred tax liabilities are always provided for in full. Deferred tax assets are recognised to the extent that it is probable that they will be offset against future taxable income. Deferred tax assets and liabilities are calculated, without discounting, at tax rates that are expected to apply to their respective period of realization, provided they are enacted or substantively enacted at the date of the Statement of Financial Position.
Changes in deferred tax assets or liabilities are recognised as a component of tax expense in profit or loss of the year, except where they relate to items that are charged or credited directly to equity in which case the related deferred tax is also charged or credited directly to equity.
5.14. BORROWING COSTS
Any interest payable on funds borrowed for the purpose of obtaining qualifying assets, which are assets that necessarily take a substantial period of time to get ready for their intended use or sale, is capitalised as a cost of that asset until such time as the assets are substantially ready for their intended use or sale.
Investment income earned on the temporary investment of specific borrowings pending their expenditure on qualifying assets is deducted from the borrowing costs eligible for capitalisation.
Any associated interest charge from funds borrowed principally to address a short term cash flow shortfall during the suspension of development activities is expensed in the period.
Transaction costs incurred towards un-utilised debt facility is treated as prepayments to be adjusted against the carrying value of debt as and when drawn.
5.15. CASH AND CASH EQUIVALENTS
Cash and cash equivalents include cash in hand and at bank in demand and other short-term deposits, which are readily convertible to known amounts of cash. These assets are subject to an insignificant risk of change in value. Cash and cash equivalents are classified as loans and receivables under the financial instruments category.
5.16. LEASING ACTIVITIES
Finance leases which transfer substantially all the risks and benefits incidental to ownership of the leased item, are capitalised at the inception of the lease, at the fair value of the leased property or the present value of the minimum lease payments, whichever is lower. Lease payments are apportioned between the finance charges and reduction of the lease liability so as to achieve a constant rate of interest on the remaining balance of the liability. Finance charges are charged directly in profit or loss of the year.
All leases other than finance leases are treated as operating leases. Operating lease payments are recognised as an expense in profit or loss on the straight line basis over the lease term.
5.17. OTHER PROVISIONS AND CONTINGENT LIABILITIES
Provisions are recognised when the Group has a present obligation (legal or constructive) as a result of a past event, it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation. Where the Group expects some or all of a provision to be reimbursed, for example under an insurance contract, the reimbursement is recognised as a separate asset but only when the reimbursement is virtually certain. The expense relating to any provision net of any reimbursement is recognized in profit or loss of the year. To the extent such expense is incurred for construction or development of any asset, it is included in the cost of that asset. 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 current market assessments of 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 other finance expenses.
Provisions include decommissioning provisions representing management's best estimate of the Group's liability for restoring the sites of drilled wells to their original status.
Commitments and contingent liabilities are not recognised in the financial statements. They are disclosed unless the possibility of an outflow of resources embodying economic benefits is remote. A contingent asset is not recognised in the financial statements but disclosed when an inflow of economic benefits is probable.
In those cases where the possible outflow of economic resource as a result of present obligations is considered improbable or remote, or the amount to be provided for cannot be measured reliably, no liability is recognised in the statement of financial position and no disclosure is made.
5.18. OPERATING EXPENSES
Operating expenses are recognised in the profit or loss upon utilisation of the service or at the date of their origin.
5.19. SEGMENT REPORTING
Operating segments are identified on the basis of internal reports about components of the Group that are regularly reviewed by the chief operating decision maker in order to allocate resources to the segments and to assess their performance. The Company considers that it operates in a single operating segment being the production and sale of gas.
6. CHANGE IN FUNCTIONAL CURRENCY
During the year, the Company has changed its functional currency from Pound Sterling (GBP) to United States Dollar (US$) with effect from 1 December 2010.
Up to year ended 31 March 2010, the management had assessed the functional currency of the Company to be GBP. Based on factors including inter alia, incremental drawdown of US$ loans and further US$ loans disbursed to subsidiaries, which have led to a change in significance of the currency in which the underlying transactions entered into by the Company, the management has re-assessed the functional currency of the Company to be US$ with effect from 1 December 2010.
7. INTANGIBLE ASSETS : EXPLORATION AND EVALUATION ASSETS
Intangible assets comprise of exploration and evaluation assets. Movement in intangible assets is as under:
|
|
Intangible assets: exploration and evaluation assets |
|
|
|
|
Balance as at 1 April 2009 |
32,464,788 |
|
Additions |
36,069,241 |
|
Transfer to development assets |
- |
|
Balance as at 31 March 2010 |
68,534,029 |
|
Additions |
39,770,041 |
|
Transfer to development assets (Refer note B below) |
(94,193,185) |
|
Balance as at 31 March 2011 |
14,110,885 |
|
|
|
The above includes borrowing costs capitalised of US$ 1,474,526 (previous year: US$ 2,533,141) during the year. The weighted average capitalisation rate on funds borrowed generally is 4.4 per cent per annum (previous year 8.61 per cent).
Note B: Based on a study conducted by an independent expert and their report of 26 November 2010, the Group believes that gas reserves discovered in the Eastern Promise field in the Block are technically feasible and commercially viable. Accordingly, the Group has reclassified the balance of exploration and evaluation costs as at 30 November 2010 into development assets. The aforementioned discovery shall be assessed for technical feasibility and commercial viability by the Management Committee (comprising of representatives of, inter alia, Newbury, iServices, Focus, ONGC and DGH) as required the Production Sharing Contract and development shall commence thereafter. In accordance with IFRS 6, prior to such transfer, the exploration and evaluation assets have been tested for impairment and no impairment was noted.
8. PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment comprise of the following:
|
Cost
|
Land
|
Extended well test equipment
|
Development /Production assets
|
Bunk Houses
|
Vehicles**
|
Other assets
|
Capital work-in-progress
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance as at 1 April 2009
|
34,204
|
373,244
|
46,221,326
|
1,282,337
|
534,460
|
461,990
|
1,222,420
|
50,129,981
|
|
|
Additions/ transfers
|
-
|
1,053,544
|
5,104,759*
|
1,791,699
|
526,041
|
338,574
|
3,268,625
|
12,083,242
|
|
|
Disposals/ transfers
|
-
|
-
|
-
|
-
|
-
|
-
|
3,158,591
|
3,158,591
|
|
|
Balance as at 31 March 2010
|
34,204
|
1,426,788
|
51,326,085
|
3,074,036
|
1,060,501
|
800,564
|
1,332,454
|
59,054,632
|
|
|
Additions/
transfers
|
2,233
|
493,550
|
114,746,292*
|
1,023,520
|
801,707
|
287,227
|
2,241,540
|
119,596,069
|
|
|
Disposals/transfers
|
-
|
-
|
237,173
|
-
|
25,998
|
1,900,988
|
2,164,159
|
||
|
Balance as at 31 March 2011
|
36,437
|
1,920,338
|
166,072,377
|
3,860,383
|
1,862,208
|
1,061,793
|
1,673,006
|
176,486,542
|
|
|
Accumulated Depreciation
|
|
|
|
|
|
|
|
||
|
Balance as at 1 April 2009
|
-
|
63,794
|
-
|
690,026
|
141,804
|
292,014
|
-
|
1,187,638
|
|
|
Depreciation for the year
|
-
|
67,229
|
-
|
291,558
|
198,778
|
107,409
|
-
|
664,974
|
|
|
Balance as at 31 March 2010
|
-
|
131,023
|
-
|
981,584
|
340,582
|
399,423
|
-
|
1,852,612
|
|
|
Depreciation for the year
|
-
|
131,419
|
156,168
|
546,771
|
270,300
|
179,857
|
-
|
1,284,515
|
|
|
Disposals/ transfers
|
-
|
-
|
-
|
6,163
|
-
|
1,213
|
-
|
7,376
|
|
|
Balance as at 31
March 2011-
|
262,442
|
156,168
|
1,522,192
|
610,882
|
578,067
|
-
|
3,129,751
|
||
|
|
|
|
|
|
|
|
|
||
|
Carrying values
|
|
|
|
|
|
|
|
||
|
|
|
|
|
|
|
|
|
|
|
|
At 31 March 2010
|
34,204
|
1,295,765
|
51,326,085
|
2,092,452
|
719,919
|
401,141
|
1,332,454
|
57,202,020
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At 31 March 2011
|
36,437
|
1,657,896
|
165,916,209
|
2,338,191
|
1,251,326
|
483,726
|
1,673,006
|
173,356,791
|
|
|
|
|
|
|
|
|
|
|
|
|
The balances above represent the Group's share in property, plant and equipment as per Note 3.
* Tangible assets comprising of development/ production assets represent the amount of exploration and evaluation expenditure incurred and accumulated up to the date of the first commercial discovery declared by the Group on 21 January 2008 in respect of SGL field. Since ONGC has exercised the option to acquire a 30 per cent participating interest in the discovered field, accordingly the additions to development and production assets represents 63 per cent of the total cost incurred by the participating parties. Further, the additions during the year include the expenditure incurred for drilling of further wells in the SGL field to enhance the production activity. Also included under development and production assets are completed production facilities (gas gathering station) in respect of the SGL field. The Group commenced production facility from July 2011, and accordingly such production assets have been depreciated since this date.
As mentioned in note 7, during the year ended 31 March 2011, development assets also include a transfer from exploration and evaluation assets, in respect of the Eastern Promise field, consequent to the commercial viability and technical feasibility of the reserves in the field basis a report by an independent expert and the evaluation made by Group's management in respect of these reserves. Pending the assessment of these reserves by the Management Committee and further development of assets for production, no depreciation has been charged on the same.
Development/Production assets also includes borrowing costs capitalised of US$ 3,635,743 (previous year: US$ 2,387,717). The weighted average capitalisation rate on funds borrowed generally is 4.4 per cent per annum (previous year 8.61 per cent).
**These vehicles have been secured against the finance leases as disclosed in Note 18.
The depreciation amounting to US$ 156,168 charged on the development assets during the year has been included in cost of sales in the consolidated statement of comprehensive income.
9. DEFERRED TAX ASSETS (NET)
Deferred taxes arising from temporary differences are summarized as follows:
|
|
|
|
31 March 2011 |
31 March 2010 |
|
|
Deferred tax assets |
|
|
|||
|
|
Brought forward losses (Refer note 10 below) |
7,481,719 |
- |
||
|
|
Other tax credits |
1,820 |
- |
||
|
|
Total |
7,483,539 |
- |
||
|
Deferred tax liabilities |
|
|
|||
|
|
|
Depreciation of development/production assets |
6,848,022 |
- |
|
|
|
|
Amortization of exploration and evaluation assets |
595,903 |
- |
|
|
|
|
Depreciation of property, plant and equipment |
38,996 |
- |
|
|
|
Total |
7,482,921 |
- |
||
|
Net deferred tax asset |
618 |
- |
|||
10. INCOME TAX CREDIT
Income tax is based on tax rate applicable on profit or loss in various jurisdictions in which the Group operates. The effective tax at the domestic rates applicable to profits in the country concerned as shown in the reconciliation below have been computed by multiplying the accounting profit by the effective tax rate in each jurisdiction in which the Group operates. The individual entity amounts have been then aggregated for the consolidated financial statements. The effective tax rate applied in each individual entity has not been disclosed in the tax reconciliation below as the amounts aggregated for individual Group entities would not be a meaningful number.
Income tax credit is arising on account of the following:
|
|
31 March 2011
|
31 March 2010
|
||
|
Current tax
|
-
|
-
|
||
|
Deferred tax credit
|
618
|
-
|
||
|
Total
|
618
|
-
|
||
The relationship between the expected tax expense based on the domestic tax rates for each of the legal entities within the Group and the reported tax expense in profit or loss is reconciled as follows:
|
|
31 March 2011
|
31 March 2010
|
||
|
Accounting loss for the year before tax
|
(2,417,127)
|
-
|
||
|
Non taxable loss
|
(2,419,973)
|
-
|
||
|
Taxable income
|
2,847
|
-
|
||
|
Effective tax at the domestic rates applicable to profits in the country concerned
|
(1,202)
|
-
|
||
|
Other tax credits
|
1,820
|
-
|
||
|
Tax credit
|
618
|
-
|
||
Indus Gas profits are taxable as per the tax laws applicable in Guernsey where nil percent tax rate has been prescribed for corporates. Accordingly, there is no tax liability for the Group in Guernsey. iServices and Newbury being participants in the PSC are covered under the Indian Income tax laws as well as tax laws for their respective countries. However, considering the existence of double tax avoidance arrangement between Cyprus and India and Mauritius and India, profits in Newbury and iServices are not likely to attract any additional tax in their local jurisdiction. Under Indian tax laws, Newbury and iServices are allowed to claim the entire expenditure in respect of the Oil Block incurred till the start of commercial production (whether included in the exploration and evaluation assets or development assets) as deductible expense in the first year of commercial production or over a period of 10 years. iServices and Newbury are also in a tax holiday period for a period of 7 years from year of commercial production. This expense to the extent not adjusted in the profit of the year of commercial production within or after the tax holiday period is allowed to be carried forward and adjusted against the profits of subsequent years for an unlimited period as unabsorbed depreciation. During the year ended 31 March 2011, as the Group has commenced commercial production and has generated profits in Newbury and iServices, the management believes there is reasonable certainty of utilisation of such losses in the future years and thus a deferred tax asset has been created in respect of these.
11. INVENTORIES
Inventories comprise of the following:
|
|
31 March 2011 |
31 March 2010 |
|
Drilling and production stores and spares |
6,348,371 |
4,336,264 |
|
Fuel |
79,076 |
32,539 |
|
Goods in transit |
12,172 |
968,729 |
|
Total |
6,439,619 |
5,337,532 |
The above inventories are held for use in the exploration, development and production activities, these are valued at cost determined based on policy explained in paragraph 5.11.
Inventories of US$ 122,634 (previous year: US$ NIL) were recorded as an expense under the heading 'cost of sales' in the statement of comprehensive income during the year ended 31 March 2011.
12. OTHER CURRENT ASSETS
|
|
31 March 2011
|
31 March 2010
|
|
Prepayments for
|
|
|
|
- procurement of debt
|
656,373
|
1,168,407
|
|
- others
|
90,128
|
47,600
|
|
Total
|
746,501
|
1,216,007
|
Prepayments for procurement of debts represent the proportionate fee paid for the un-utilised facility (refer Note 16).
13. SHORT TERM INVESTMENTS
Short term investments constitute various investments in bank deposits, which have a maturity of more than three months and less than twelve months from the date of deposit, considered to be held till the date of their maturity.
|
|
31 March 2011 |
31 March 2010 |
|
Short term investments in bank deposits |
- |
8,538,802 |
|
Total |
|
8,538,802 |
Fair value of the deposits closely approximates their carrying value on the statement of financial position date.
There are no short term investments outstanding as at 31 March 2011 as all investments have been matured during the year.
14. CASH AND CASH EQUIVALENTS
|
|
31 March 2011 |
31 March 2010 |
|
Cash at banks in current accounts |
2,252,815 |
220,724 |
|
Total |
2,252,815 |
220,724 |
Cash at banks earns interest at floating rates based on daily bank deposit rates. Short-term deposits are made for varying periods between one day and three months, depending on the immediate cash requirements of the Group and earn interest at the respective short-term deposit rates. Fair values of the short deposits closely approximate their carrying value on respective statement of financial position dates.
The Group only deposits cash surpluses with major banks of high quality credit standing.
15. EQUITY
Authorised share capital
The total authorised share capital of the Company is GBP 5,000,000 divided into 500,000,000 shares of GBP 0.01 each. The total number of shares issued by the Company as at 31 March 2011 is 182,913,924 (previous year: 182,913,924).
--For all matters submitted to vote in the shareholders meeting of the Company, every holder of ordinary shares, as reflected in the records of the Company on the date of the shareholders' meeting has one vote in respect of each share held.
All shareholders are equally eligible to receive dividends and the repayment of capital in the event of liquidation of the individual entities of the Group.
Additional paid in capital
Additional paid-in capital represents excess over the par value of share capital paid in by shareholders in return for the shares issued to them, recorded net of expenses incurred on issue of shares.
Merger reserve
The balance on the merger reserve represents the fair value of the consideration given in excess of the nominal value of the ordinary shares issued in an acquisition made by the issue of shares.
16. LONG TERM DEBT FROM BANKS
|
|
Maturity
|
31 March 2011
|
31 March 2010
|
|
US$ 57,490,173 (previous year US$ 15,000,000)
bank loan, secured
|
|
|
|
|
Non current portion of long term debt
|
2018
|
45,089,825
|
14,815,524
|
|
Current portion of long term debt from banks
|
|
11,835,959
|
-
|
|
Total
|
|
56,925,784
|
14,815,524
|
In March 2010, Indus Gas signed an agreement with a consortium of banks for a term loan of US$ 110,000,000 repayable in quarterly instalments commencing on 31 August 2011. The loan bears interest of LIBOR plus 500 basis points. Indus Gas has drawn US$ 57,490,173 (previous year US$ 15,000,000) against this loan during the current financial year.
Interest capitalised on loans above have been disclosed in note 7 and 8.
The term loan is secured by all the assets of subsidiaries of Indus i.e. iServices and Newbury in addition to the Group's participating interest in the Block RJ-ON/6 to the extent of SGL field and all future receivables from gas sales.
Financing facilities
|
|
31 March 2011
|
31 March 2010
|
|
Bank loan facilities with various maturity dates through to 2018
|
|
|
|
- amount used
|
57,490,173
|
15,000,000
|
|
- amount unused
|
52,509,827
|
95,000,000
|
|
|
110,000,000
|
110,000,000
|
17. PROVISION FOR DECOMMISSIONING
|
|
Amount |
|
Balance at 1 April 2009 |
273,264 |
|
Additions |
96,545 |
|
Balance as at 31 March 2010 |
369,809 |
|
Additions |
131,583 |
|
Balance as at 31 March 2011 |
501,392 |
As per the PSC, the Group is required to carry out certain decommissioning activities on gas wells. Provision for decommissioning relates to the estimation of future disbursements related to the abandonment and decommissioning of gas wells. The provision has been estimated by the Group's engineers, based on individual well filling and coverage. This provision will be utilised when the related wells are fully depleted.
18. FINANCE LEASE OBLIGATIONS
Finance lease obligations represent leases entered into for vehicles which are used and operated by the Group for the exploration and evaluation activities.
The table below summarises the total liability on account of these finance lease payments:
|
|
|
31 March 2011 |
31 March 2010 |
|
Secured |
|
|
|
|
Finance lease |
|
99,348 |
174,559 |
|
Less: current portion |
|
68,126 |
75,270 |
|
Non-current portion |
|
31,222 |
99,289 |
The finance lease obligations that are payable within the next 5 years from each reported period are as follows
|
Amount due as at 31 March 2011 |
Minimum lease payments |
Interest |
Principal |
|
|
|
|
|
|
Within 1 year |
78,918 |
10,792 |
68,126 |
|
1- 5 years |
36,254 |
5,032 |
31,222 |
|
Total |
115,172 |
15,824 |
99,348 |
|
Amount due as at 31 March 2010 |
Minimum lease payments |
Interest |
Principal |
|
|
|
|
|
|
Within 1 year |
97,450 |
22,180 |
75,270 |
|
1- 5 years |
111,968 |
12,679 |
99,289 |
|
Total |
209,418 |
34,859 |
174,559 |
19. PAYABLE TO RELATED PARTIES
Related parties payable comprise of the following:
|
|
Maturity |
31 March 2011 |
31 March 2010 |
|
Current |
|
|
|
|
Liability payable to Focus |
On demand |
19,930,655 |
24,326,766 |
|
Borrowings from Gynia Holdings Ltd. |
On demand |
15,085,376 |
- |
|
Payable to directors |
|
785,000 |
426,900 |
|
|
|
35,801,031 |
24,753,666 |
|
Other than current |
|
|
|
|
Liability payable to Focus |
After payment of bank loan per Note 16 |
45,369,000 |
42,600,000 |
|
|
|
45,369,000 |
42,600,000 |
|
Total |
|
81,170,031 |
67,353,666 |
Liability payable to Focus
Liability payable to Focus represents amounts due to them in respect of the Group's share of contract costs, for its participating interest in Block RJ-ON/6 pursuant to the terms of Agreement for Assignment dated 13 January 2006 and its subsequent amendments from time to time (hereinafter referred to as "Assignment Agreement").
The Group had earlier provided a guarantee of Indian Rupee 820 million (equivalent to US$ 16,162,413) to the bankers of Focus in respect of the above liability and created a charge on certain of its future receivables in favour of Punjab National Bank. During the financial year ending 31 March 2010, the Group repaid US$ 15 million directly to the banker of Focus, thus releasing the Group from the above guarantee obligations and the consequently the charge on its future receivables in favour of Punjab National Bank was also released.
As per the Amendment to Assignment Agreement signed with Focus on 26 March 2010, effective 1 April 2009, (hereinafter referred to as the Amendment No. 4), Focus has agreed to convert US$40 million (along with interest thereon) being part of the outstanding balance due as subordinated unsecured long term loan repayable along with interest calculated at 6.5 per cent per annum after payment and full settlement of US$110 million loan taken from a consortium of banks as described in note 16 above, i.e. after August 2018. The Group agreed to pay the entire outstanding balance to Focus, as reduced by US$ 40 million (along with interest thereon), not later than 31 March 2012 on demand by Focus and accordingly classified as short term borrowings. The Group has agreed to reimburse interest cost incurred by Focus on loans taken from third parties to finance the short term borrowing subject to a minimum interest rate of 6.5 per cent per annum and maximum interest rate of 10 per cent per annum. The actualised interest rate for the entire balance is 6.5 per cent for the current year (previous year 8.61 per cent).
Borrowings from Gynia Holding Ltd. carried interest rate of 6.5 per cent per annum compounded annually and repayable on demand. The management estimates these to be repaid within twelve months from the statement of financial position date and these have been classified as current borrowings.
Interest capitalised on loans above have been disclosed in note 7 and 8.
Other payables to related parties comprise of outstanding balances to associate entities and directors, all the amounts are short term. The carrying value of the borrowings and other payables are considered to be a reasonable approximation of fair value.
20. EMPLOYEE COST
The Group does not have employees. However, cost pertaining to the employees of Focus have been included in the cost of sales in the consolidated statement of comprehensive income amounting to US$ 229,150 (previous year Nil).
21. FOREIGN CURRENCY EXCHANGE (LOSS)/ GAIN, NET
The Group has recognised the following in the profit or loss on account of foreign currency fluctuations:
|
|
31 March 2011 |
31 March 2010 |
|
Loss on restatement of foreign currency monetary receivables and payables |
(2,520,139) |
(2,184,783) |
|
Gain on restatement of foreign currency borrowings |
1,227,204 |
1,996,001 |
|
Loss arising on settlement of foreign currency transactions and restatement of foreign currency balances arising out of Oil block operations |
(53,647) |
(164,642) |
|
|
(1,346,582) |
(353,424) |
22. OPERATING LEASES
Lease payments capitalised under exploration and evaluation assets and development/ production assets during the year ended 31 March 2011 amount to US$ 29,525,204 (previous year: US$ 21,434,436). No sublease payments or contingent rent payments were made or received. No sublease income is expected as all assets held under lease agreements are used exclusively by the Group. All the operating leases of the Group are cancellable at a short notice of not more than 90 days and there are no future minimum payments for the existing operating leases. The terms and conditions of these operating leases do not impose any significant financial restrictions on the Group.
23. SHARE BASED PAYMENT
The Group maintains an equity settled share-based payment scheme adopted and approved by the directors on 29 May 2008. Presently, the Company has approved three schemes for the Directors, Consultant and Nominated Advisor known as the "Directors' option agreements", "Advisers Option agreement" and "Arden option deed" respectively. The Group has no legal or constructive obligation to repurchase or settle the options. In accordance with the Plan, upon vesting, the stock options will be settled by the issuance of new shares on payment of the exercise price.
The total amount to be expensed over the vesting period is determined by reference to the fair value of the options granted. The total expense recognised in the profit or loss under the heading 'administrative expenses' of the year ended 31 March 2011 is US$ 45,078 (previous year: US$ 341,303).The forfeiture rate for the year has been considered as Nil (previous year: Nil).
The fair values of options granted were determined using the Black Scholes option pricing model that takes into account factors specific to the share incentive plans along with other external inputs.
The following principal assumptions were used in the valuation: Expected volatility was determined by comparison with implied volatility of Oil and Gas sector stocks and trading volatility of the Company available till the grant date. Dividend yield is taken as nil as the Group has not paid any dividend. The risk-free rate is the rate associated with a risk-free security with the same maturity as the option. At each reporting date, the Group reviews its estimates of the number of options that are expected to vest. The Group recognizes the impact of the revision to original estimates, if any, in the profit or loss, with a corresponding adjustment to 'stock option reserve' in equity.
The inputs to the Black Scholes model for options that have been granted are summarised as follows:
|
|
Employees and Others |
Advisor |
|
Grant date |
29 May 2008 |
29 May 2008 |
|
Fair value of option using the Black Scholes model at grant date (GBP) |
0.84 |
0.62 |
|
Exercise price (GBP) |
1.64 |
1.64 |
|
Expected volatility |
35 per cent |
35 per cent |
|
Option life (in years) |
5 |
3 |
|
Dividend yield |
- |
- |
|
Risk-free interest rate |
4.99 per cent |
5.06 per cent |
The total outstanding and exercisable share options and weighted average exercise prices for the various categories of option holders during the reporting periods are as follows:
Share options granted to Employees and others providing similar services (i.e. Directors and Consultants)
|
|
|
31 March 2011 |
31 March 2010 |
|
|
|
Number of options |
Weighted average exercise price |
Number of options |
Weighted average exercise price |
|
|
|
GBP |
|
GBP |
|
Balance at beginning of year |
240,000 |
1.64 |
240,000 |
1.64 |
|
Granted during the year |
- |
- |
- |
- |
|
Forfeited during the year |
- |
- |
- |
- |
|
Exercised during the year |
- |
- |
- |
- |
|
Expired during the year |
- |
- |
- |
- |
|
Balance at end of year |
240,000 |
1.64 |
240,000 |
1.64 |
|
|
|
|
|
|
|
Exercisable at year end |
160,000 |
|
80,000 |
|
The share options outstanding at the end of the year had a weighted average remaining contractual life of 2.16 years (previous year: 3.16 years).
Share options granted to Advisors
|
|
|
31 March 2011 |
31 March 2010 |
|
||
|
|
Number of options |
Weighted average exercise price |
Number of options |
Weighted average exercise price |
|
|
|
|
|
GBP |
|
GBP |
|
|
|
Balance at beginning of year |
76,220 |
1.64 |
76,220 |
1.64 |
|
|
|
Granted during the year |
- |
- |
- |
- |
|
|
|
Forfeited during the year |
- |
- |
- |
- |
|
|
|
Exercised during the year |
- |
- |
- |
- |
|
|
|
Expired during the year |
- |
- |
- |
- |
|
|
|
|
|
|
|
|
|
|
|
Balance at end of year |
76,220 |
1.64 |
76,220 |
1.64 |
|
|
|
|
|
|
|
|
|
|
|
Exercisable at year end |
76,220 |
|
76,220 |
|
|
|
The share options outstanding at the end of the year had a weighted average remaining contractual life of 0.16 years (previous year: 1.16 years).
The value of the share options granted to the advisor has been measured as and when services are received from them. As the management believes that the fair value of the services received from the advisor cannot be ascertained reliably, the value of the services received from the advisor has been determined indirectly with reference to the fair value of the options granted to them.
24. LOSS PER SHARE
The calculation of the basic loss per share is based on the losses attributable to ordinary shareholders divided by the weighted average number of shares in issue during the year.
Calculation of basic and diluted loss per share for the year ending 31 March 2011 and 31 March 2010 are as follows:
|
|
31 March 2011 |
31 March 2010 |
|
Loss attributable to shareholders of Indus Gas Limited, for basic and dilutive |
(2,416,509) |
(1,726,528) |
|
Weighted average number of shares (used for basic loss per share) |
182,913,924 |
182,913,924 |
|
Diluted weighted average number of shares (used for diluted loss per share) (Refer note C below) |
182,913,924 |
182,913,924 |
|
|
|
|
|
Basic loss per share |
(0.01) |
(0.01) |
|
Dilutive loss per share |
(0.01) |
(0.01) |
Note C:The Group has outstanding share options, however, those are considered anti-dilutive as the Group has incurred loss during the current and previous year.
25. RELATED PARTY TRANSACTIONS
The related parties for each of the entities in the Group have been summarised in the table below:
|
Nature of the relationship |
Related Party's Name |
|
|
|
|
I. Holding Company |
Gynia Holdings Ltd. |
|
|
|
|
II. Ultimate Holding Company |
Multi Asset Holdings Ltd. (Holding Company of Gynia Holdings Ltd.)
|
|
|
|
|
III. Key management personnel ("KMP"): |
Ajay Kalsi |
|
|
John Scott |
|
|
|
|
IV. Enterprises over which KMP exercise control (with whom there are transactions) |
Focus Energy Limited |
|
|
|
Disclosure of transactions between the Group and related parties and the outstanding balances as on 31 March 2011 and 31 March 2010 is as under:
Transactions with parent and subsidiary companies
|
Particulars |
31 March 2011 |
31 March 2010 |
|
Transactions during the year with the holding company |
|
|
|
Loan taken |
15,085,376 |
- |
|
Loan given |
- |
56,543 |
|
Loan repaid |
- |
170,000 |
|
|
|
|
|
Balances at the end of the year |
|
|
|
Total receivables |
- |
56,543 |
|
Total payables |
15,085,376 |
- |
Transactions with KMP and entities over which KMP exercise control
|
Particulars
|
31 March 2011
|
31 March 2010
|
|
Transactions during the year
|
|
|
|
Remuneration to KMP
|
|
|
|
393,357
|
376,676
|
|
18,783
|
104,809
|
|
|
|
|
|
Entities over which KMP exercise control
|
|
|
|
|
|
|
|
Remittances
|
64,463,427
|
26,421,188
|
|
Net assets and costs allocated transferred during the year
|
62,403,871
|
46,979,096
|
|
Loans given
|
-
|
-
|
|
Expenses to be reimbursed
|
90,334
|
26,685
|
|
|
|
|
|
Balances at the end of the year
|
|
|
|
Total payables
|
66,084,655
|
67,353,666
|
Directors' remuneration
Directors' remuneration, by director, is separately disclosed in the directors' report on page [ ].
26. SEGMENT REPORTING
The Chief Operating Decision Maker reviews the business as one operating segment being the extraction and production of oil and gas. Hence, no separate segment information has been furnished herewith.
All of the non-current assets other than financial instruments (there are no employment benefit assets, and rights arising under insurance contracts) are located in India and amounted US$ 187,468,633 (previous year: US$ 125,736,049).
The Group has a single product, i.e. the sale of natural gas, which is supplied to a single customer, GAIL in a single geographical segment, being India.
27. COMMITMENTS AND CONTINGENCIES
The group has no contingencies as at 31 March 2011 (previous year Nil).
A summary of the commitments existing as at 31 March 2011 and 31 March 2010 are as follows:
|
|
Nature of the commitments |
31 March 2011 |
31 March 2010 |
|
i. (ii) |
Group's share in the commitment for Engineering Studies and Design for surface facility, pipeline and Control System including utilities and purchase of equipment
|
- |
377,778 |
|
ii. |
Group's share in commitment for purchase of equipment and storage tanks |
20,923,564 |
- |
|
|
Total |
20,923,564 |
377,778 |
28. ACCOUNTING ESTIMATES AND JUDGEMENTS
In preparing consolidated financial statements, Group's management is required to make judgments and estimates that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statement and the reported amounts of revenues and expenses during the reporting period. The judgments and estimates are based on management's best knowledge of current events and actions and actual results from those estimates may ultimately differ.
Significant judgments applied in the preparation of the consolidated financial statements are as under:
Determination of functional currency of individual entities
Following the guidance in IAS 21 "The effects of changes in foreign exchange rates" the functional currency of each individual entity is determined to be the currency of the primary economic environment in which the entity operates. The management reckons that each of the individual entity's functional currency reflects the transactions, events and conditions under which the entity conducts its business.
Full cost accounting for exploration and evaluation expenditure
The Group has followed 'full cost' approach for accounting exploration and evaluation expenditure against the 'successful efforts' method. As further explained in Note 5.7 and 7 above, exploration and evaluation assets recorded using 'full cost' approach is tested for impairment prior to reclassification into development assets on successful discovery of gas reserves.
Impairment of tangible and intangible assets
The Group follows the guidance of IAS 36 and IFRS 6 to determine when a tangible or an intangible asset is impaired. This determination requires significant judgement to evaluate indicators triggering an impairment. The Group monitors internal and external indicators of impairment relating to its tangible and intangible assets. The management has assessed that no such indicators have occurred or exists as at 31 March 2011 to require impairment testing of property, plant and equipments and intangible assets.
Estimates used in the preparation of the consolidated financial statements
Useful life and residual value of tangible assets
The Group reviews the estimated useful lives of property, plant and equipment at the end of each annual reporting period. During the financial year, the directors determined that no change to the useful lives of any of the property, plant and equipment is required. The carrying amounts of property, plant and equipment have been summarised in note 8.
Fair value for share-based payments
The Group measures the cost of equity-settled transactions with employees, advisors and others by reference to the fair value of the equity instruments at the date at which they are granted. Estimating fair value for share-based payment transactions requires determining the most appropriate valuation model, which is dependent on the terms and conditions of the grant. This estimate also requires determining the most appropriate inputs to the valuation model including the expected life of the share option, volatility and dividend yield and making assumptions about them. The assumptions and models used for estimating fair value for share-based payment transactions are disclosed in Note 23.
Recognition of restoration cost
As per the PSC, the Group is required to carry out certain decommissioning activities on gas wells. The ultimate decommissioning costs are uncertain and cost estimates can vary in response to many factors including changes to relevant legal requirements, the emergence of new restoration techniques or experience at other production sites. The expected timing and amount of expenditure can also change, for example, in response to changes in reserves or changes in laws and regulations or their interpretation. As a result, there could be adjustments to the provisions established which would affect future financial results. The liabilities estimated in respect of decommissioning provisions have been summarised in note 17.
29. CAPITAL MANAGEMENT POLICIES
The Group's objectives when managing capital are to safeguard the Group's ability to continue as a going concern in order to provide returns for shareholders and benefits for other stakeholders and to maintain an optimal capital structure to reduce the cost of capital.
The Group manages the capital structure and makes adjustments to it in the light of changes in economic conditions and the risk characteristics of the underlying assets. The Group monitors capital on the basis of the gearing ratio. This ratio is calculated as net debt divided by total capital.
Net debt is calculated as total liabilities (including 'current and non-current liabilities' as shown in the consolidated Statement of Financial Position). Total capital is calculated as 'equity' as shown in the consolidated Statement of Financial Position plus net debt.
|
|
31 March 2011 |
31 March 2010 |
|
Net debt |
140,904,278 |
82,763,268 |
|
Total equity |
57,221,791 |
58,352,032 |
|
Total capital employed |
198,126,069 |
141,115,300 |
|
Gearing ratio |
71 per cent |
59 per cent |
The Group is not subject to any externally imposed capital requirements. There were no changes in the Group's approach to capital management during the year.
30. FINANCIAL INSTRUMENTS AND RISK MANAGEMENT
A summary of the Group's financial assets and liabilities by category are mentioned in the table below:
The carrying amounts of the Group's financial assets and liabilities as recognised at the date of the statement of financial position of the reporting periods under review may also be categorised as follows:
|
|
31 March 2011 |
31 March 2010 |
|
Non-current assets |
|
|
|
Loans and receivables |
|
|
|
- Security deposits |
11,149 |
9,643 |
|
|
|
|
|
Current assets |
|
|
|
Loans and receivables |
|
|
|
- Recoverable from related party |
- |
56,543 |
|
- Trade receivables |
1,172,052 |
- |
|
- Cash and cash equivalents |
2,252,815 |
220,724 |
|
- Short term investments |
- |
8,538,802 |
|
Total financial assets under loans and receivables |
3,436,016 |
8,825,712 |
|
|
|
|
|
Non current liabilities |
|
|
|
Financial liabilities measured at amortised cost: |
|
|
|
- Long term debt from banks |
45,089,825 |
14,815,524 |
|
- Payable to related parties |
45,369,000 |
42,600,000 |
|
|
|
|
|
Current liabilities |
|
|
|
Financial liabilities measured at amortised cost: |
|
|
|
- Current portion of payable to related parties |
35,801,031 |
24,753,666 |
|
- Current portion of long term debt from banks |
11,835,959 |
- |
|
- Accrued expenses and other liabilities |
93,050 |
49,710 |
|
Total financial liabilities measured at amortised cost |
138,188,865 |
82,218,900 |
The fair value of the financial assets and liabilities described above closely approximates their carrying value on the statement of financial position date.
Risk management objectives and policies
The Group finances its operations through a mixture of retained earnings, loans from banks and related parties and equity. Finance requirements such as equity, debt and project finance are reviewed by the Board when funds are required for acquisition, exploration and development of projects.
The Group treasury functions are responsible for managing fund requirements and investments which includes banking and cash flow management. Interest and foreign exchange exposure are key functions of treasury management to ensure adequate liquidity at all times to meet cash requirements.
The Group's principal financial instruments are cash held with banks and financial liabilities to banks and related parties and these instruments are for the purpose of meeting its requirements for operations. The Group's main risks arising from financial instruments are foreign currency risk, liquidity risk, commodity price risk and credit risks. Set out below are policies that are used to manage such risks:
Foreign currency risk
The functional currency of each entity within the Group is US$ and the majority of its business is conducted in US$. All revenues from gas sales will be received in US$ and substantial costs are incurred in US$. No forward exchange contracts were entered into during the year.
Entities within the Group conduct the majority of their transactions in their functional currency, other than a finance lease obligation balance which is maintained in Indian Rupees. All other monetary assets and liabilities are denominated in functional currencies of the respective entities. The currency exposure on account of liabilities which are denominated in a currency other than the functional currency of the entities of the Group as at 31 March 2011 and 31 March 2010 is as follows:
|
|
Functional currency |
Foreign currency |
31 March 2011 |
31 March 2010 |
|
Total exposure |
|
|
99,348 |
174,559 |
|
Short term exposure |
US$ |
Indian rupee |
68,126 |
75,270 |
|
Long term exposure |
US$ |
Indian rupee |
31,222 |
99,289 |
The Group's currency exposure risk towards Indian Rupee is negligible due to the insignificant currency balance exposed to such risk.
Liquidity risk
Ultimate responsibility for liquidity risk management rests with the Board of Directors, which has established an appropriate liquidity risk management framework for the management of the Group's short-, medium- and long-term funding and liquidity management requirements. The Group manages liquidity risk by maintaining adequate reserves, banking facilities and reserve borrowing facilities, by continuously monitoring forecast and actual cash flows, and by matching the maturity profiles of financial assets and liabilities. The Group also has 'Financing Facilities' additional undrawn facilities that the Group has at its disposal to further reduce liquidity risk, which have been summarised in note 16.
The table below summarises the maturity profile of the Group's financial liabilities based on contractual undiscounted payments.
|
|
On demand |
1-3 months |
3 months to |
1-5 years |
5+ years |
Total |
|
31 March 2011 |
|
|
|
|
|
|
|
Non-interest bearing |
90,334 |
93,050 |
681,308 |
- |
- |
878,051 |
|
Variable interest rate liabilities |
19,930,654 |
45,959 |
14,600,034 |
49,291,254 |
- |
83,867,901 |
|
Fixed interest rate liabilities |
15,085,376 |
- |
- |
- |
70,502,816 |
85,588,192 |
|
|
|
|
|
|
|
|
|
|
35,106,364 |
139,009 |
15,281,342 |
49,291,254 |
70,502,816 |
170,334,144 |
|
|
On demand |
1-3 months |
3 months to |
1-5 years |
5+ years |
Total |
|
31 March 2010 |
|
|
|
|
|
|
|
Non-interest bearing |
59,102 |
14,439 |
414,344 |
- |
- |
487,885 |
|
Variable interest rate liabilities |
24,300,082 |
- |
- |
11,237,579 |
7,573,896 |
43,111,557 |
|
Fixed interest rate liabilities |
- |
- |
- |
- |
70,502,816 |
70,502,816 |
|
|
|
|
|
|
|
|
|
|
24,359,184 |
14,439 |
414,344 |
11,237,579 |
78,076,712 |
114,102,258 |
Interest rate risk
The Group's policy is to minimise interest rate risk exposures on long-term financing. Borrowing from Focus is divided between short term and long term. While long term is fixed at 6.5 percent, the interest rate on short term portion is linked to actual interest incurred by Focus capped between 6.5 percent and 10 percent. Therefore, borrowing from Focus doesn't expose the Group to any significant risk from changes in interest rate. Short term investments of the Group are also at fixed interest rate and therefore, don't expose the Group to risk from changes in interest rate. The Group is also exposed to changes in market interest rates through bank borrowings at variable interest rates. Interest rate on bank borrowing is 5 percent plus LIBOR.
The Group's interest rate exposures are concentrated in US$.
The analysis below illustrates the sensitivity of profit and equity to a reasonably possible change in interest rates. Based on volatility in interest rates in the previous 12 months, the management estimates a range of 50 basis points to be approximate basis for the reasonably possible change in interest rates. All other variables are held constant.
|
|
|
Interest rate |
|
|
|
|
+ 0.50 per cent |
- 0.50 per cent |
|
31 March 2011 |
|
167,308 |
(167,308) |
|
31 March 2010 |
|
1,458 |
(1,458) |
Since the loans are taken specifically for the purpose of exploration and evaluation, development and production activities and according to the Group's policy the borrowing costs are capitalised to the cost of the asset and hence changes in the interest rates do not have any immediate adverse impact on the profit or loss.
Commodity price risks
The Group's share of production of gas from the Block is sold to GAIL. The price has been agreed for the current agreement and the same would be reviewed periodically and reassessed mutually by the parties. No commodity price hedging contracts have been entered into.
Credit risk
The Group has made short term deposits of surplus funds available with banks and financial institutions of good credit repute and therefore, doesn't consider the credit risk to be significant. Other receivables such as security deposits and advances with related parties, do not comprise of a significant cumulative balance and thus do not expose the Group to a significant credit risk. Further, the Group's trade receivables are held with GAIL, which has a reputable credit standing and hence the Group does not consider credit risk in respect of these to be significant. None of the financial assets held by the Group are past due.
This information is provided by RNS
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