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Venture Production (VPC)

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Tuesday 18 March, 2008

Venture Production

Final Results - Part 2

Venture Production PLC
18 March 2008


Part 2

20. Trade and other payables
                                             Group              Company
                                         2007      2006      2007      2006
                                        £'000     £'000     £'000     £'000
--------------------                 --------  --------  --------  --------
Amounts falling due within one year:
Trade payables                         16,779     7,015       693       265
Accruals and deferred income           69,497    42,981    10,441    11,831
Other payables                         28,651    25,491     4,692     9,571
Social security and other taxes           797       384         2       276
Deferred acquisition liability          3,100     5,718         -         -
--------------------                 --------  --------  --------  --------
                                      118,824    81,589    15,828    21,943
--------------------                 --------  --------  --------  --------


21. Financial liabilities - borrowings

                                           Group                    Company
                                    2007           2006       2007       2006
                                   £'000          £'000      £'000      £'000
--------------------            --------       --------   --------   --------
Bank loan (secured)                    -        216,120          -    216,120
Convertible bond                 167,612         29,801    167,612     29,801
USD and GBP loan notes           230,710              -    230,710          -
--------------------            --------       --------   --------   --------
                                 398,322        245,921    398,322    245,921
--------------------            --------       --------   --------   --------


Bank Loan

During the year, the Group entered into new debt financing arrangements and the
existing bank loan was repaid and replaced with a £365,000,000 corporate debt
facility. There was no cash drawn down on this facility at 31 December 2007.


Borrowing facilities

The Group has the following undrawn borrowing facilities available at the
balance sheet date in respect of which all conditions precedent had been met at
that date:

                                                           2007           2006
                                                          £'000          £'000
---------------------------------                     ---------        -------
Expiring in more than two years                         350,000        128,880
---------------------------------                     ---------        -------


This is stated after the issue of a letter of credit guarantee of $30,000,000
issued in the ordinary course of business.

The main purpose of the facilities is to finance the acquisition of new assets
and the development of new and existing assets.

Convertible bonds

The Company issued £29,000,000 4.25% convertible bonds at a nominal value of
£29,000,000 on 19 July 2005. The bonds mature on 26 October 2010 at 110% of par
or can be converted into shares at the holder's option at the rate of 1 share
per 446 pence.

A further £151,000,000 3.25% convertible bonds were issued at a nominal value of
£151,000,000 on 16 August 2007. The bonds mature on 16 August 2010 at par and
can be converted into shares at the rate of 1 share per 915 pence. The equity
component of the bond of £14,463,000 has been reclassified to equity.

The convertible bond recognised in the balance sheet is calculated as follows:

                                              Group               Company
                                           2007      2006       2007      2006
                                          £'000     £'000      £'000     £'000
-------------------------               -------   -------    -------    ------
At 1 January                             29,801    29,122     29,801    29,122
Net proceeds from convertible bond      
issue                                   151,000         -    151,000         -
Accrued redemption premium                  581       148        581       148
Unwinding of discount on liability
component (Note 7)                        2,138         -      2,138         -
Reclassified as equity (Note 29)        (14,463)        -    (14,463)        -
Convertible loan expenses                (1,445)        -     (1,445)        -
Interest expense                              -       531          -       531
-------------------------               -------   -------    -------    ------
Liability component at 31 December      
2007                                    167,612    29,801    167,612    29,801 
-------------------------               -------   -------    -------    ------

USD and GBP loan notes

On 29 August 2007, Venture issued $414,000,000 of 6.41%, $10,000,000 of 6.64%
and £25,000,000 of 6.71% secured loan notes through a private placing with UK
and US institutional investors. These notes have maturities of between 10 and 15
years and are at fixed rates.
                                                Group              Company
                                             2007     2006       2007     2006
                                            £'000    £'000      £'000    £'000
-------------------------                 -------  -------    -------   ------
USD $414 million 6.41% notes with a       205,022        -    205,022        -
    final maturity of 29 August 2017      

USD $10 million 6.64% notes with a final    4,952        -      4,952        -
    maturity of 29 August 2022

GBP £25 million 6.71% notes with a final   25,000        -     25,000        -
    maturity of 29 August 2017

Loan notes expenses                        (4,264)       -     (4,264)       -
-------------------------                 -------  -------    -------   ------
Total USD loan notes                      230,710        -    230,710        -
-------------------------                 -------  -------    -------   ------

Breakdown by currency                    Group                    Company
                                     2007           2006       2007       2006
                                    £'000          £'000      £'000      £'000
-------------------------         -------        -------    -------     ------
GBP                               188,348        245,921    188,348    245,921
USD                               209,974              -    209,974          -
-------------------------         -------        -------    -------     ------
                                  398,322        245,921    398,322    245,921
-------------------------         -------        -------    -------     ------

21. Financial liabilities - borrowings (continued)

Breakdown by maturity                    Group                    Company
                                     2007           2006       2007       2006
                                    £'000          £'000      £'000      £'000
----------------------           --------        -------   --------    -------
       2007                             -              -          -          -
       2008                             -              -          -          -
       2009                             -              -          -          -
       2010                       169,057        245,921    169,057    245,921
       2011                             -              -          -          -
       2012                             -              -          -          -
Thereafter                        234,974              -    234,974          -
Loan expenses                      (5,709)             -     (5,709)         -
----------------------           --------        -------   --------    -------
                                  398,322        245,921    398,322    245,921
----------------------           --------        -------   --------    -------


22.        Deferred tax liability/(asset)

                                              Group               Company
                                                 Restated
                                           2007      2006       2007      2006
                                          £'000     £'000      £'000     £'000
--------------------                   --------  --------   --------  --------
At 1 January                            193,435    46,953    (13,365)   (6,520)
Profit and loss charge (Note 8)          39,919    78,472      1,510       308
Taken to equity:
    - Employee share benefits            10,836    (8,398)    10,836    (8,398)
    - Derivative financial liabilities  (45,800)   26,160          -         -
Deferred tax liability arising on
licence acquisitions                          -     1,516          -         -
Deferred tax on business combination      4,400    48,016          -         -
Deferred PRT                                530         -          -         -
Other                                    (2,875)    1,311          -     1,245
Liability classified as held for sale         -      (615)         -         -
--------------------                   --------  --------   --------  --------
At 31 December                          200,445   193,415     (1,019)  (13,365)
--------------------                   --------  --------   --------  --------


The total deferred tax liability at 31 December 2007 comprised accelerated
capital allowances of £323,418,000 (2006: £211,715,000), other deferred tax
liability of £71,355,000 (2006: £62,039,000), partially offset by tax losses of
£121,270,000 (2006: £63,451,000) and other deferred tax assets of £73,058,000
(2006: £18,029,000). The deferred tax assets have been recognised as the Group
is expected to have sufficient taxable profits in future years against which the
assets can be relieved.

Deferred tax arising on the acquisition of CH4 has been revisited during 2007,
resulting in an additional liability recognised of £3,589,000 and deferred PRT
of £1,141,000.

Deferred tax assets of £5,267,000 (2006: £1,164,000) have not been recognised.

Deferred tax assets and liabilities are only offset where there is a legally
enforceable right of offset and there is an intention to settle the balances
net.

23. Other non-current liabilities

                                             Group                 Company
                                         2007         2006      2007      2006
                                        £'000        £'000     £'000     £'000
---------------------                --------     --------  --------  --------
Deferred acquisition liability          9,392        5,158         -         -
---------------------                --------     --------  --------  --------

Deferred consideration relates to amounts payable in respect of the purchase of
various interests in oil and gas assets, the timing of which is dependent upon
the attainment of certain field development and production milestones. These
amounts are expected to be settled over the next 6 years.


24. Provisions

Provisions for decommissioning                  Group              Company
                                            2007      2006      2007      2006
                                           £'000     £'000     £'000     £'000
----------------------                  --------  --------  --------  --------
At 1 January                              61,831    52,505         -         -
Liability on acquisition of subsidiary         -     4,860         -         -
Increased provision on existing assets     3,958       614         -         -
Liability classified as held for sale
(Note 14)                                      -      (139)        -         -
Unwinding charge for the year (Note 7)     4,636     3,991         -         -
----------------------                  --------  --------  --------  --------
At 31 December                            70,425    61,831         -         -
----------------------                  --------  --------  --------  --------


These decommissioning costs are expected to be incurred in the period from 2008
to 2023. The provision has been based upon existing technology, current
legislation requirements and discounted using a rate of 7.5% (2006: 7.5%). The
estimated decommissioning costs and the pre-tax discount rate applied take into
account the effects of inflation and risks and uncertainties concerning amounts
to be settled in the future.

25. Financial instruments

The main risks arising from the Group's financial instruments are market risk,
liquidity risk and credit risk. The Board reviews and agrees policies for
managing each of these risks and they are summarised below.

Market risk

Venture is exposed to market risk, primarily related to foreign exchange and
commodity prices. The Group actively monitors these exposures. To manage the
volatility relating to these exposures, the Group enters into a variety of
derivative financial instruments.

The Group's objective is to reduce, where it deems appropriate to do so,
fluctuations in earnings and cash flows associated with changes in interest
rates, foreign currency rates and commodity prices. It is the Group's policy and
practice to use derivative financial instruments to manage exposures. The Group
expects that any loss in value for these instruments generally would be offset
by increases in the value of the underlying transactions.

Foreign exchange rate risk

The Group uses the pound Sterling as its reporting currency. As a result the
Group is exposed to foreign exchange movements, primarily in the US Dollar and
Euro. Consequently, it enters into various contracts that reflect the changes in
the value of foreign exchange rates to preserve the value of assets and
commitments. In general, the Group's revenues in crude oil sales are denominated
in US Dollars while its gas sales revenues are denominated in pounds Sterling.
Where possible, the Group's policy is to reduce significant exposures to
movements in foreign currency exchange rates through hedging foreign currency
exposure for up to 50% of forecast net US Dollar revenues. Venture also uses
forward contracts to hedge certain anticipated net revenues in foreign
currencies. The Group marks to market these forward contracts and thus changes
in the forward contract fair values are booked to the income statement and
reverse in the income statement over the term of the contracts.

Net investments in foreign countries are long-term investments. Their fair value
changes through movements of currency exchange rates. In the very long term,
however, the difference in the inflation rate should match the currency exchange
rate movement, so that the market value of the foreign non-monetary assets will
compensate for the change due to currency movements. For this reason, the Group
does not hedge the net investments in foreign subsidiaries.

If the average sterling/US dollar rate had been 10% higher during 2007, post-tax
profit and equity for the year would have been £9,450,000 higher (2006:
£6,954,000 higher). If the average sterling/US dollar rate had been 10% lower
during 2007, post-tax profit for the year and equity would have been £7,732,000
lower (2006: £5,690,000 lower).

If the closing sterling/US dollar rate was 10% higher at 31 December 2007, the
post-tax profit for the year end equity would have been £6,296,000 higher (2006:
£8,530,000). If the closing sterling/US dollar rate was 10% lower at 31 December
2007, the post-tax profit for the year end equity would have been £5,151,000
lower (2006: £6,979,000).

Commodity price risk

The Group has exposure to price risk related to anticipated revenues from crude
oil and natural gas. A change in those prices may alter the gross margin of the
Group. Accordingly, it enters into commodity futures, forward and option
contracts to manage fluctuations in prices of anticipated revenues.

To manage commodity price risk and deliver stability to the investment
programme, the Group's policy is to allow hedging of commodity price exposure up
to 50% of its oil and gas production. In exceptional circumstances and only with
the prior approval of the Board, up to 75% of such production may be hedged.
Hedges have been put in place with a variety of providers.

If the average gas price had been 10% higher or lower during 2007, post-tax
profit for the year and equity would have been £4,365,000 higher or lower (2006:
£5,670,000 higher or lower).

If the average oil price had been 10% higher or lower during 2007, post-tax
profit for the year and equity would have been £4,253,000 higher or lower (2006:
£3,130,000 higher or lower).

Interest rate risk

The Group manages its net exposure to interest rate risk through negotiating
fixed rate financial debt in its financial debt portfolio. The Group has no
exposure to variability in its cash flows due to interest rate risk as it
borrows at rates of interest which are fixed in advance. At 31 December 2007,
all of the Group's borrowings were at fixed rates (2006: 12%).

Credit risk

Credit risks arise from the possibility that customers may not be able to settle
their obligations as agreed. To manage this risk the Group periodically assesses
the financial reliability of customers. The Group's major customers are
typically large companies which have strong credit ratings assigned by
international credit rating agencies. The nominal value less impairment
provision of trade accounts receivables and payables are assumed to approximate
their fair value. The Group's policy is to deal with customers with an 'A'
rating or better where possible. At 31 December 2007, 100% (2006: 100%) of trade
receivables were such customers.

The Group also has credit risk relating to cash held on deposit. The Group's
policy is to deposit cash at institutions with an 'A' rating or better where
possible. 100% of cash held on deposit at 31 December 2007 (2006: 100%) was held
with such institutions.

Liquidity risk

Liquidity risk is defined as the risk that the Group will not be able to settle
or meet its obligations on time or at a reasonable price. Liquidity, funding
risks and related processes and policies are overseen by management. Venture
manages it liquidity risk on a consolidated basis based on business needs and
through numerous sources of finance in order to maintain flexibility.

Capital risk

The Group seeks to maintain an optimal capital structure with a diversified
range of funding including equity, convertible bonds, bank debt and privately
placed loan notes. The Group continually monitors its capital structure, to
ensure this is in line with business needs, ongoing asset development and to
fund potential future acquisitions. During the year its borrowing base banking
facility was replaced with a medium term committed corporate debt facility of
£365,000,000, £151,000,000 was raised through the issue of 3.25% unsecure
convertible bonds and a further $424,000,000 and £25,000,000 in a private
placement of notes was secured with US and UK institutional investors. As a
result, there are externally imposed covenant requirements with which the Group
is fully compliant. These covenants include the ratio of borrowings to EBITDA
and interest cover.

The following tables show the fair values of derivative financial instruments
analysed by type of contract at 31 December 2007 and 2006. The fair values are
determined by reference to market prices at 31 December 2007 and 2006.

Group                              Positive fair values   Negative fair values
                                       2007       2006         2007       2006
                                      £'000      £'000        £'000      £'000
----------------------             --------    -------     --------    -------
Currency related instruments
Forward foreign exchange rate
contracts                               498        772            -          -
Interest rate related instruments
Interest rate swaps                       -      1,629            -          -
Oil price related instruments
Collars                                   -          -       (1,813)         -
Commodity swaps                           -      9,676      (40,685)         -
----------------------             --------    -------     --------    -------
Total of oil price related
instruments                               -      9,676      (42,498)         -
Gas price related instruments
Commodity swaps                           -     13,932      (25,493)         -
----------------------             --------    -------     --------    -------
Total derivative financial
instruments                             498     26,009      (67,991)         -
----------------------             --------    -------     --------    -------

Company                            Positive fair values   Negative fair values
                                       2007       2006        2007       2006
                                      £'000      £'000       £'000      £'000
----------------------             --------    -------     --------    -------

Currency related instruments
Forward foreign exchange rate
contracts                               498        772           -          -
Interest rate related instruments
Interest rate swaps                       -      1,629           -          -
----------------------             --------    -------    --------    -------
Total derivative financial
instruments                             498      2,401           -          -
----------------------             --------    -------    --------    -------


Derivative financial instruments include amounts denominated in the following
major currencies:

Currency                                        Group              Company
                                             2007      2006      2007     2006
                                            £'000     £'000     £'000    £'000
----------------------                   --------   -------  --------  -------
USD                                       (42,498)    9,676         -        -
GBP                                       (24,995)   16,333       498    2,401
----------------------                   --------   -------  --------  -------
Total derivative financial instruments    (67,493)   26,009       498    2,401
----------------------                   --------   -------  --------  -------
Included in current assets                    498    19,916       498    1,676
Included in current liabilities           (36,992)        -         -        -
Included in non-current assets                  -     6,093         -      725
Included in non-current liabilities       (30,999)        -         -        -
----------------------                   --------   -------  --------  -------
Total                                     (67,493)   26,009       498    2,401
----------------------                   --------   -------  --------  -------

All of the derivative instruments used for the purposes of hedging the oil and
gas prices are effective for hedge accounting purposes.

All of the hedging instruments used for anticipated transactions mature during
2008 and 2009, and were contracted with the intention of hedging anticipated
transactions which are expected to occur in 2008 and 2009. The instruments are
intended to hedge the commodity price risk arising from the highly probable
forecast transactions with commodity price risk.

The gain or loss relating to the effective portion of the derivative
instruments, previously deferred in equity, is recognised in the income
statement within revenue when the hedged item affects profit or loss.

There has been no charge recognised in the year relating to the ineffectiveness
of derivatives that are hedge accounted (2006: nil).

The maximum exposure to credit risk at the reporting date is the fair value of
derivative financial instruments.

Forward oil price contracts

At 31 December 2007 the Group had a number of forward oil price contracts in
place to hedge cash flows from oil production in accordance with the Group's
hedging strategy. These contracts comprised forward swaps, put and call options
and forward sales.

The fair value liabilities of £42,498,000 relating to the forward oil price
contracts which are deferred in the cash flow reserve at 31 December 2007 will
reverse in the income statement over the term of the contracts. At 31 December
2007 the forward oil price contracts covered the period January 2008 to December
2009.

Forward gas price contracts

At 31 December 2007 the Group had a number of forward gas price contracts in
place. These contracts comprised forward swaps and forward sales.

The fair value liabilities of £25,493,000 relating to the forward gas price
contracts, which are deferred in the cash flow reserve at 31 December 2007, will
reverse in the income statement over the term of the contracts. At 31 December
2007 the forward gas price contracts covered the period January 2008 to December
2009.

Market values have been used to determine the fair value of derivative financial
instruments based on estimated amounts the Group would receive or pay to
terminate the agreements, taking into account the forward commodity prices and
forward foreign exchange rates at 31 December 2007.

Forward foreign currency contracts

The notional principal amount of the Group's outstanding forward foreign
currency contracts at 31 December 2007 was $228,000,000 (2006: $108,000,000).
These contracts hedge foreign exchange exposure of forecast net US Dollar income
by fixing the forward exchange rate on a monthly basis.

At 31 December 2007 the forward contracts covered the period January 2008 to
December 2008 at an exchange rate varying between $1.9475 and $2.0025 to £1.

The fair value assets of £498,000 relating to the forward foreign currency
contracts and which are marked to market in the income statement at 31 December
2007, will reverse in the income statement over the term of the forward currency
contracts.

Changes in the fair value of derivative financial instruments that do not
qualify for or are not designated in hedging relationships are recognised
immediately in the current period income statement when they occur as shown
below:

                                                            2007          2006
                                                           £'000         £'000
----------------------------------                      --------       -------
(Loss)/Gain in the income statement                       (1,903)        2,401
----------------------------------                      --------       -------

Fair value of non-derivative financial assets and financial liabilities


The following table provides a comparison by category of the book values and the
fair values of the Group's financial assets and financial liabilities at the
balance sheet date.

Group                           Book value  Fair value        Book   Fair value
                                                             value
                                      2007        2007        2006        2006
                                     £'000       £'000       £'000       £'000
----------------------            --------     -------    --------     -------
Fair value of non-current
financial assets and financial
liabilities held or issued to
finance the Group's operations:
Bank loan (Note 21)                      -           -    (216,120)   (216,120)
Convertible bonds (Note 21)       (167,612)   (170,150)    (29,801)    (29,801)
USD and GBP loan notes (Note 21)  (230,710)   (254,046)          -           -
Loan notes receivable (Note 18)      5,383       5,383       5,376       5,376
Deferred acquisition liability
(Note 23)                           (9,392)     (9,392)     (5,158)     (5,158)
Fair value of other financial
assets and financial liabilities
held or issued to finance the
Group's operations:
Trade and other payables (Note
20)                               (115,724)   (115,724)    (75,871)    (75,871)
Deferred consideration (Note 20)    (3,100)     (3,100)     (5,718)     (5,718)
Trade and other receivables
(Note 18)                          107,324     107,324      90,427      90,427
Cash at bank and in hand (Note
19)                                  3,825       3,825      19,342      19,342
Cash on short term deposit (Note
19)                                154,620     154,620      39,825      39,825
----------------------            --------     -------    --------     -------



Company                         Book value  Fair value        Book  Fair value
                                                             value
                                      2007        2007        2006        2006
                                     £'000       £'000       £'000       £'000
----------------------            --------     -------    --------     -------
Fair value of non-current
financial assets and financial
liabilities held or issued to
finance the Company's
operations:
Bank loan (Note 21)                      -           -    (216,120)   (216,120)
Convertible bonds (Note 21)       (167,612)   (170,150)    (29,801)    (29,801)
USD and GBP loan notes (Note 21)  (230,710)   (254,046)          -           -
Trade and other receivables
(Note                              153,247     153,247     227,995     227,995
18)
Loan notes receivable (Note 18)          -           -       5,376       5,376
Fair value of other financial
assets and financial liabilities
held or issued to finance the
Company's operations:
Trade and other payables (Note     (15,828)    (15,828)    (21,943)    (21,943)
20)
Trade and other receivables
(Note                                  346         346       2,773       2,773
18)
Cash at bank and in hand (Note     (50,486)    (50,486)      7,608       7,608
19)
Cash on short term deposit (Note
19)                                154,620     154,620      36,492      36,492
----------------------            --------     -------    --------     -------


Maturity of financial liabilities

The following table sets forth details of the financial liabilities which will
be settled on a net basis into relevant maturity groupings as at 31 December
2007 and 2006. The amounts disclosed in the table are the contractual
undiscounted cash flows including interest payments at the applicable fixed
rate. Non-GBP denominated balances have been translated at the year end closing
rates. The amounts payable in respect of derivative financial instruments have
been calculated based on price differentials at 31 December 2007.

As at 31 December    Due in less   Due in 1  Due in 2 to Due after 5     Total
2007:                than 1 year  to 2 years   5 years      years
Group                     £'000      £'000       £'000       £'000       £'000
------------------      -------    -------     -------     -------  ----------
Current liabilities
Trade and
other payables         (115,724)         -           -           -    (115,724)
Deferred
acquisition
liability                (3,100)         -           -           -      (3,100)
Derivative
financial
instruments             (36,992)         -           -           -     (36,992)
------------------      -------    -------     -------     -------  ----------
Total current 
liabilities            (155,816)         -           -           -    (155,816)
------------------      -------    -------     -------     -------  ----------
Non-current liabilities
Bank loan                     -          -           -           -           -
Convertible bond         (4,908)    (4,908)   (184,908)          -    (194,724)
USD and GBP
loan notes              (14,966)   (14,966)    (44,899)   (306,547)   (381,378)
Derivative
financial
instruments                   -    (30,999)          -           -     (30,999)
Deferred
acquisition
liability                     -       (500)     (8,892)          -      (9,392)
------------------      -------    -------     -------     -------  ----------
Total non-current
liabilities             (19,874)   (51,373)   (238,699)   (306,547)   (616,493)
------------------      -------    -------     -------     -------  ----------
Total financial
liabilities            (175,690)   (51,373)   (238,699)   (306,547)   (772,309)
------------------      -------    -------     -------     -------  ----------

25. Financial instruments (continued)

As at 31 December    Due in less  Due in 1 to Due in 2 to Due after      Total
2007:                than 1 year    2 years     5 years    5 years
Company                   £'000       £'000       £'000      £'000       £'000
------------------      -------     -------     -------    -------  ----------
Current liabilities
Trade and
other payables          (15,828)          -           -          -     (15,828)
------------------      -------     -------     -------    -------  ----------
Total current
liabilities             (15,828)          -           -          -     (15,828)
------------------      -------     -------     -------    -------  ----------
Non-current liabilities
Convertible
bond                     (4,908)     (4,908)   (184,908)         -    (194,724)
USD and GBP
loan notes              (14,966)    (14,966)    (44,899)  (306,547)   (381,378)
------------------      -------     -------     -------    -------  ----------
Total non-current
liabilities             (19,874)    (19,874)   (229,807)  (306,547)   (576,102)
------------------      -------     -------     -------    -------  ----------
Total financial
liabilities             (35,702)    (19,874)   (229,807)  (306,547)   (591,930)
------------------      -------     -------     -------    -------  ----------

As at 31 December    Due in less  Due in 1 to Due in 2 to Due after      Total
2006:                than 1 year    2 years     5 years    5 years
Group                     £'000       £'000       £'000      £'000       £'000
------------------      -------     -------     -------    -------  ----------
Current liabilities
Trade and
other payables          (75,871)          -           -          -     (75,871)
Deferred
acquisition
liability                (5,718)          -           -          -      (5,718)
Derivative                    -           -           -          -           -
financial      
instruments
------------------      -------     -------     -------    -------  ----------
Total current
liabilities             (81,589)          -           -          -     (81,589)
------------------      -------     -------     -------    -------  ----------
Non-current
liabilities
Deferred
acquisition
liability                     -      (1,750)     (3,408)         -      (5,158)
Bank loan               (12,961)    (12,961)   (235,562)         -    (261,484)
Convertible
bond                     (1,233)     (1,233)    (30,233)         -     (32,699)
------------------      -------     -------     -------    -------  ----------
Total non-current
liabilities             (14,194)    (15,944)   (269,203)         -    (299,341)
------------------      -------     -------     -------    -------  ----------
Total financial
liabilities             (95,783)    (15,944)   (269,203)         -    (380,930)
------------------      -------     -------     -------    -------  ----------
As at 31 December    Due in less  Due in 1 to Due in 2 to Due after      Total
2006:                than 1 year    2 years     5 years    5 years
Company                   £'000       £'000       £'000      £'000       £'000
------------------      -------     -------     -------    -------  ----------
Current liabilities
Trade and
other payables          (21,943)          -           -          -     (21,943)
Deferred                      -           -           -          -           -
acquisition
liability
Derivative                    -           -           -          -           -
financial                 
instruments
------------------      -------     -------     -------    -------  ----------
Total current
liabilities             (21,943)          -           -          -     (21,943)
------------------      -------     -------     -------    -------  ----------
Non-current liabilities
Bank loan               (12,961)    (12,961)   (235,562)         -    (261,484)
Convertible
bond                     (1,233)     (1,233)    (30,233)         -     (32,699)
------------------      -------     -------     -------    -------  ----------
Total non-current
liabilities             (14,194)    (14,194)   (265,795)         -    (294,183)
------------------      -------     -------     -------    -------  ----------
Total financial
liabilities             (36,137)    (14,194)   (265,795)         -    (316,126)
------------------      -------     -------     -------    -------  ----------


The table below analyses the Group's derivative financial instruments which will
be settled on a gross basis into relevant maturity groupings based on the
remaining period at the balance sheet date to the contractual maturity date. The
amounts disclosed in the table are the contractual undiscounted cash flows.

As at 31 December 2007:         Less than  Between 1 and Between 2 and  Over 5
                                  1 year      2 years       5 years      years
                                   £'000         £'000         £'000     £'000
---------------------          ---------     ---------     ---------  --------
Forward foreign exchange
contracts - marked to market
Outflow                          115,524             -             -         -
Inflow                           116,022             -             -         -
---------------------          ---------     ---------     ---------  --------
As at 31 December 2006:
---------------------          ---------     ---------     ---------  --------
Forward foreign exchange
contracts - marked to market
Outflow                           57,959             -             -         -
Inflow                            58,732             -             -         -
---------------------          ---------     ---------     ---------  --------

26. Called up share capital

---------------------------------                    ---------         -------
Number                                                    2007            2006
                                                           000             000
---------------------------------                    ---------         -------
Authorised:
Ordinary shares of 0.4p each                           165,000         165,000
Allotted, called up and fully paid:
Ordinary shares of 0.4p each                           143,216         133,496
---------------------------------                    ---------         -------
                                                          2007            2006
Value                                                    £'000           £'000
---------------------------------                    ---------         -------
Authorised:
Ordinary shares of 0.4p each                               660             660
Allotted, called up and fully paid:
Ordinary shares of 0.4p each                               573             534
---------------------------------                    ---------         -------

During the year the Company issued 1,065,464 shares as part consideration for
the acquisition of WHAM, 6,033,906 shares as consideration for the remaining
66.7% of NSGP and 2,620,120 shares to honour share options exercised by
employees.

27.        Share premium account

                                                        Group          Company
                                                        £'000            £'000
---------------------------                     -------------        ---------
At 1 January 2006                                     104,906          104,906
On exercise of share options                              178              178
---------------------------                     -------------        ---------
At 1 January 2007                                     105,084          105,084
On exercise of share options                            2,123            2,123
---------------------------                     -------------        ---------
At 31 December 2007                                   107,207          107,207
---------------------------                     -------------        ---------


28. Retained earnings

                                                             Group    Company
                                                             £'000      £'000
---------------------------                          -------------  ---------
At 1 January 2006                                           43,170      9,816
Disposal of treasury shares                                    405        405
Purchase of treasury shares                                (12,033)   (12,033)
Profit for the year                                         81,593     15,149
---------------------------                          -------------  ---------
At 1 January 2007                                          113,135     13,337
Transfer of treasury shares to EBT                          25,106     25,106
Purchase of treasury shares                                (15,817)   (15,817)
Loss on disposal of shares to satisfy share schemes        (34,693)   (34,693)
Profit for the year                                         48,175    105,527
Dividends paid                                             (67,566)   (67,566)
---------------------------                          -------------  ---------
At 31 December 2007                                         68,340     25,894
---------------------------                          -------------  ---------


The Company acquired 2,173,250 of its own shares during the year for a
consideration of £15,817,000. As the shares were held as treasury shares, the
amount shown has been deducted from retained earnings.

The Company transferred 3,501,096 shares to the EBT and reissued 64,000 treasury
shares in respect of share options exercised for total consideration of
£25,106,000. There were no treasury shares held at 31 December 2007.

The Company issued 5,303,771 in respect of the LTIP 2003 share scheme from the
Employee Benefit Trust at a loss of £33,389,000.

29. Other Reserves

Group            Convertible    Merger  Cash flow  Employee        EBT      Total
                        Loan   reserve    reserve   benefit    reserve
                      Equity                        reserve
                       £'000     £'000      £'000     £'000      £'000      £'000
----------------   ---------   -------     ------   -------     ------     ------
At 1 January 2007          -    69,905     11,804    20,141    (15,228)    86,622
Cash flow hedges:          -
- Fair value gains
net of tax                 -         -    (42,453)        -          -    (42,453)
- Reclassified and
reported in net            
profit                     -         -     (3,427)        -          -     (3,427)
Credit relating to
share based charges        -         -          -    (6,700)         -     (6,700)
Shares issued to
satisfy share schemes      -         -          -    (5,647)    39,036     33,389
Shares disposed
of by EBTs                 -         -          -         -      1,673      1,673
Shares acquired
by EBTs                    -         -          -         -    (32,678)   (32,678)
Convertible loan
classified as         14,463         -          -         -          -     14,463
equity
Shares issued on
acquisition                -    54,181          -         -          -     54,181
----------------   ---------   -------     ------   -------     ------     ------
At 31 December        
2007                  14,463   124,086    (34,076)    7,794     (7,197)   105,070
----------------   ---------   -------     ------   -------     ------     ------

The cash flow reserve relates to the accounting for derivative financial
instruments under IAS 39. Fair value gains and losses in respect of effective
cash flow hedges are recognised in the cash flow reserve.

The employee benefit reserve comprises the credit entry relating to share based
charges included in the income statement and calculated in accordance with IFRS
2.

The Company funds its Employee Share Ownership Trust and its Offshore Employee
Benefit Trust (together 'the EBTs') with funds being used to acquire shares
which will be granted to certain employees under the share option scheme. The
cost of shares acquired by the EBTs is recorded in the EBT reserve. Gains from
the disposal of such shares on exercising of the options are credited to the
share premium account when such options are exercised.

Shares acquired by the EBTs can either be allocated to the EBTs by the Company
or purchased in the open market by the EBTs. The costs of administering the
schemes are charged to the income statement in the period to which they relate.
The EBTs have waived their rights to the receipt of dividends.

During the year 5,538,587 (2006: 157,003) ordinary shares were disposed of by
the EBTs to satisfy the exercise of share options. During the year the Company
transferred £7,920,000 to the EBTs (2006: £14,100,000), which was used to
purchase 1,108,557 (2006: 1,844,739) ordinary shares in the market. Additionally
a further 3,501,096 ordinary shares were transferred from treasury for
£24,758,000.

At 31 December 2007, the EBTs held 1,125,119 ordinary shares (2006: 2,054,053),
which represented a market value of £8,911,000 (2006: £18,137,000) based on the
closing share price of £7.92 (2006: £8.83).

The merger reserve comprises the premium on shares issued as part of a business
combination. In 2006, this balance wholly related to the acquisition of CH4,
where 9,050,000 shares were issued at £7.78 a share, as part consideration for
the acquisition. During the year, the Company issued a further 6,033,906 shares
as consideration for the acquisition of NSGP at £7.72 a share (Note 3) and
1,065,464 shares as part consideration for the acquisition of WHAM at £7.16 a
share (Note 3).

The convertible loan balance of £14,463,000 represents the value placed on the
conversion option of the convertible bonds issued for £151,000,000 during the
year (Note 21).

Company                   Convertible   Merger  Employee        EBT      Total
                                 Loan  Reserve   benefit    reserve
                               Equity            reserve
                                         £'000     £'000      £'000      £'000
----------------------       -------- --------  --------   --------   --------
At 1 January 2007                   -   69,905    20,141    (15,228)    74,818
Credit relating to share 
based charges                       -        -    (6,700)         -     (6,700)
Shares disposed of by
EBTs                                -        -         -      1,673      1,673
Shares acquired by EBTs             -        -         -    (32,678)   (32,678)
Shares issued to satisfy
share schemes                       -        -    (5,647)    39,036     33,389
Convertible loan classified 
as equity                      14,463        -         -          -     14,463
Shares issued
on acquisition                      -   54,181         -          -     54,181
----------------------       -------- --------  --------   --------   --------
At 31 December 2007            14,463  124,086     7,794     (7,197)   139,146
----------------------       -------- --------  --------   --------   --------


30. Cash flow from operating activities

Reconciliation of operating profit to net cash inflow from operating activities:

-------------------------------                      ---------        ---------
Group                                                    2007             2006
                                                        £'000            £'000
-------------------------------                      ---------        ---------
Operating profit                                      116,639          181,920
Depreciation charge                                    82,463           88,242
Share-based transactions                                4,981           10,072
Exploration costs written off                          18,144                -
Development costs written off                          11,207                -
Impairment of assets                                   33,463                -
Gain on disposal of subsidiary                           (251)               -
Changes in working capital:
- Inventories                                           1,462           (1,063)
- Trade and other receivables                         (20,820)           3,778
- Trade and other payables                             16,322            1,461
-------------------------------                      ---------        ---------
Operating cash flow                                   263,610          284,410
-------------------------------                      ---------        ---------


Company                                                  2007             2006
                                                        £'000            £'000
-------------------------------                      ---------        ---------
Operating loss                                         (8,663)            (598)
Depreciation charge                                       339              514
Fair value losses on other financial assets                 -              698
Share-based transactions                                4,981           10,072
Changes in working capital:
- Trade and other receivables                           6,499            1,970
- Trade and other payables                            (15,952)           4,863
-------------------------------                       ---------       ---------
Operating cash (outflow)/inflow                       (12,796)          17,519
-------------------------------                       ---------       ---------


31. Employees and directors

Employee benefit expenses for the Group during the year:

                                                         2007             2006
                                                        £'000            £'000
-------------------------------                      ---------        ---------
Wages and salaries                                     11,767            6,402
Social security costs                                   1,539            1,263
Retirement benefit liabilities (Note 32)                  969              617
--------------------------                           ---------        ---------
                                                       14,275            8,282
--------------------------                           ---------        ---------

The average number of employees during the year was:

                                                                      Restated
                                                         2007             2006
--------------------------                           ---------        ---------
UK                                                        108               76
Netherlands                                                35               14
--------------------------                           ---------        ---------
                                                          143               90
--------------------------                           ---------        ---------


2006 employee numbers for the Netherlands have been restated to show the average
for the year. Post acquisition of CH4, the average number of employees in the
Netherlands in 2006 was 33.


Key Management Compensation:

Group                                                    2007             2006
                                                        £'000            £'000
--------------------------                           ---------        ---------
Salaries and short-term employee benefits               2,667            1,761
Share based payments                                       36               13
--------------------------                           ---------        ---------
                                                        2,703            1,774
--------------------------                           ---------        ---------

The LTIP 2003 matured at the end of the period 1 January 2003 to 31 December
2006 and resulted in an award of shares with a value of £32,730,000 to key
management. In addition, key management exercised share options of £16,771,000
(2006: £825,000).

In addition £2,452,000 (2006: £1,718,000) relating to the ADSBP (Note 16) has
been charged to the income statement.

The key management compensation figures above include Executive Directors.

Directors' Emoluments:

Group                                                    2007             2006
                                                        £'000            £'000
--------------------------                           ---------        ---------
Aggregate emoluments                                    2,484            1,996
Company contributions to defined contribution 
pension schemes                                           138               81
--------------------------                           ---------        ---------
                                                        2,622            2,077
--------------------------                           ---------        ---------

Included in aggregate emoluments is £1,022,000 (2006: £1,046,000) relating to
the ADSBP, which is being charged to the income statement over the vesting
period.

Further details of Directors' emoluments are provided in the Directors'
Remuneration Report.

32. Retirement benefit liabilities

The Group contributes to personal pension schemes on behalf of certain
employees. These schemes are administered independently of the Group. The total
pension cost which is charged against profit represents contributions payable by
the Group and amounted to £969,000 (2006: £617,000).

33. Operating lease commitments - minimum lease payments

The Group has commitments under operating leases to make payments as set out
below:
                                                         2007             2006
                                                        £'000            £'000
Plant and machinery and motor vehicles
--------------------------                           ---------        ---------
within 1 year                                              145            137
Land and buildings
within 1 year                                              733            729
within 2-5 years                                         2,227          1,864
in more than 5 years                                     3,603              -
--------------------------                           ---------        ---------

34.        Capital commitments

At 31 December 2007 the Group has commitments of £173,000,000 (2006:
£355,900,000) relating to capital expenditure. 2006 has been restated to be
consistent with the commitments reported in 2007.

35.        Guarantees

The Company has provided credit guarantees totalling £31,200,000 and €5,200,000
(2006: £21,400,000) for decommissioning security for assets in the North Sea.

36.        Related party transactions

Group

Intra-group related party transactions, which are eliminated on consolidation,
are not required to be disclosed in accordance with IAS 24.

The financial statements include the financial statements of Venture Production
plc and the subsidiaries listed in Note 15.

The following table provides the total amount of transactions, which have been
entered into with related parties for the relevant financial year.

Sales/purchases from                  Sales to   Purchases from  Amounts owed by  Amounts owed to
related party                          related          related          related          related 
                                       parties          parties          parties          parties
                                         £'000            £'000            £'000            £'000
-------------------------------        -------         --------          -------          -------
Joint Venture:
North Sea Gas Partners Limited   2007        -                -                -                -
                                 2006   17,701                -            3,843             (945)
Associates:
North Sea Infrastructure
Partners Limited                2007    68,130                -            3,498                -
                                2006     4,602                -            1,876                -
-------------------------------        -------         --------          -------          -------
Sevan Production General
Partnership                     2007         -                -                -                -
                                2006     4,282                -            4,282                -
-------------------------------        -------         --------          -------          -------



Loans from/to related party                      Interest        Amounts owed by
                                                 received        related parties
                                                    £'000                  £'000
-------------------------------              -------------         -------------
Associate:
Ten Degrees North
Energy Limited                  2007                  281                    281
                                2006                  269                    269
-------------------------------              -------------         -------------


Joint Venture

North Sea Gas Partners Limited

As shown in Note 3, the Company acquired the remaining 66.7% of NSGP during
2007. In 2007 this investment has been classified as a subsidiary and therefore
no disclosure of related party transactions in respect of 2007 is required.

Associate

North Sea Infrastructure Partners Limited

Venture Infrastructure Ltd has a 49.9% interest in North Sea Infrastructure
Partners Limited (2006: 49.9%)

Sevan Production General Partnership

Hummingbird Oil PTE Limited owns 20% of the ordinary shares of Sevan Production
General Partnership (2006: 20%).

Ten Degrees North Energy Limited

Venture Production plc owns 40% of the ordinary shares of Ten Degrees North
Energy Limited (2006: 40%)

Company

During the year the Company received income of £19,735,000 (2006: £18,597,000)
from wholly owned subsidiary undertakings in respect of interest receivable.
Amounts due to the Company by subsidiary undertakings are shown in Note 18.



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