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Victoria Oil & Gas (VOG)

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Friday 27 February, 2015

Victoria Oil & Gas

Interim Results

RNS Number : 1284G
Victoria Oil & Gas PLC
27 February 2015
 



 

 

RNS Number:

Victoria Oil & Gas PLC (AIM:VOG)

27 February 2015

 

Victoria Oil & Gas Plc

("VOG" or "the Company")

 

INTERIM FINANCIAL REPORT FOR THE SIX MONTHS ENDED 30 NOVEMBER 2014

 

Victoria Oil & Gas Plc, the Cameroon energy utility company, today announces its unaudited interim results for the six months ended 30 November 2014.

 

Financial Highlights

 

·     Revenue for the period of $11.6 million (six months to 30 November 2013: $6.0 million; twelve months to 31 May 2014: $14.7 million)

·     EBITDA net of RSM arbitration/impairment adjustments of $1.4 million (six months to 30 November 2013: $0.2 million; twelve months to 31 May 2014: $5.8 million loss)

·     Revenue during the period was derived from the Logbaba gas and condensate field in Cameroon:

-     gas sold was 716mmscf (six months to 30 November 2013: 323mmscf; twelve months to 31 May 2014: 809mmscf)

-     condensate produced was 13,221bbls (six months to 30 November 2013: 5,335bbls; twelve months to 31 May 2014: 14,107bbls)

·      Capital Reorganisation, including 40 to 1 share consolidation

·      West Medvezhye - decision taken to fully impair asset, write down of $49.8 million

 

Operational Highlights for Accounting Period and to Present

 

·     Gas to power proof of concept established - first customer installations June 2014

·     Pipe laying and network infrastructure work outsourced under a cost per metre fixed price agreement from July 2014

·     Completions of first thermal gas connections on the Bonaberi shore in December 2014 after the gas pipeline network was extended under the Wouri River

·     Legally binding term sheet signed with ENEO Cameroon S.A. ("ENEO") to supply two major power stations under a two year minimum 'take-or-pay' contract at a fixed price of $9/mmbtu

·     Successful remediation of Well La-106 and perforation in the upper horizons of Well La-105

·     Gas pipeline to two ENEO power stations completed and successfully tested

·     Total pipeline laid in Douala to date 31.3km

·     $17.0 million of cash received from RSM Production Corporation post period end

 

Corporate

 

·     Appointment of two Independent Non-Executive Directors with significant industry experience

·     Appointment of  Numis Securities as sole broker

 

Kevin Foo, Executive Chairman, said: "The VOG and GDC teams excelled during 2014 and achieved all our stated objectives.  I am proud to confirm that GDC has substantially completed its scope of work for the ENEO project construction phase and safely built and tested gas pipelines to both stations. We have issued a completion certificate for the Bassa power station and expect to complete the Logbaba power station within two weeks. The project is scheduled to be online by the end of Q1 2015 and if this is achieved, as we expect, it will represent a remarkable success for the GDC, ENEO and Altaaqa teams. Progressing from signing legally binding terms sheets in late December 2014 to delivering 50MW to the grid approximately three months later is outstanding.

Concerning our 100% owned Russian property, West Medvezhye, we have continued to pursue ways to derive value for this asset, through farm-out, joint venture or sale. West Medvezhye has significant gas and gas condensate reserves but the current state of relations between Russia and the West, combined with a low oil price, makes near-term development of the asset challenging and we believe divestiture is a more prudent course. With our focus on Cameroon, the Board has taken the decision to fully impair the Russian asset, writing it down by $49.8 million. We shall of course continue to seek partners to derive full value from the asset."

 

 

For further information, please visit www.victoriaoilandgas.com or contact: 

 

Victoria Oil & Gas Plc

Kevin Foo/Laurence Read Tel: +44 (0) 20 7921 8820

 

Numis Securities

John Prior/Ben Stoop Tel: +44 (0) 207 260 1000 

 

Strand Hanson Limited

Angela Hallett / Stuart Faulkner Tel: +44 (0) 20 7409 3494

 

Tavistock

Jos Simson / Nuala Gallagher / Ed Portman Tel: +44 (0) 20 7920 3150

 

 

 

Notes to Editors

 

About Victoria Oil & Gas Plc

Victoria Oil & Gas (VOG.L) is a gas utility company with operations in the industrial port city of Douala in Cameroon, which is the business hub to Central Africa.

 

The Company's subsidiary, Gaz du Cameroun S.A. ("GDC"), supplies cost effective, clean and reliable gas to industries in the Douala region from its onshore Logbaba Gas Project. Industrial customers are primarily supplied with gas through a 31.3km pipeline network built by GDC in Douala. GDC products currently include thermal gas, gas condensate and gas for electricity generation. GDC gas is attractive to customers due to its reliability, price competitiveness, low hydrocarbon emissions (compared to Heavy Fuel Oil) and adaptability to meet varied power requirement needs.

 

The Company generates cash flow from the Logbaba Project which is 60% owned and managed by GDC, with RSM Production Corporation, an affiliate of Grynberg Petroleum Company of Denver, Colorado holding a 40% participating interest.

 

VOG also holds 100% of the West Medvezhye oil and gas exploration project near Nadym, Russia. The field has C1 plus C2 reserves of 14.4mmboe (under the Russian resource classification system, analogous to proven and probable reserves under Western conventions) in addition to best estimate prospective resources of 1.4bboe.

 

Cameroon Energy Market

Cameroon is a stable African country that is host to a developing economy serving most of Central Africa with goods and services. A power deficit remains a major hindrance to Cameroon's economic expansion. The power grid is reliant on hydroelectric dams to supply 75% of power and the shortfall is made up from heavy fuel oil and gas. Hydroelectric dams are highly seasonal, with stream rates significantly varying from 6,000m3 per second in the wet season to 50m3 per second in the dry season. As with many hydro electrical systems transmission loss is also a constant issue when balancing power loads across distances to different consuming regions. The port-city of Douala is the major industrial zone within Cameroon and it requires high levels of consistently delivered grid power all year round. Currently Cameroon's energy demand is growing at 7% annually and gas is seen as a key element to Cameroons national energy strategy.




 

CHAIRMAN'S STATEMENT

 

 

Dear Shareholder,

 

On behalf of the Board I am pleased to report our unaudited results for the six months to 30 November 2014 and to update you on company developments beyond the financial period.

 

During the six months to 30 November 2014, the Group's objectives were to:

 

·      Increase gas production and to make Gaz du Cameroun S.A. ("GDC") operationally cash positive;

·      Strengthen our Board and corporate profile;

·      Stabilise operations and processes and develop our people within the Group;

·      Build strong working relationships with our Logbaba partners RSM Production Corporation ("RSM") and Société Nationale des Hydrocarbures ("SNH");

·      Secure major new supply contracts involving power generation for the National Grid in Cameroon.

 

The management teams of Victoria Oil & Gas Plc ("VOG" or "the Company") and GDC excelled during 2014, meeting all of the above objectives for the reporting period and delivering positive results in the areas of engineering, sales and corporate developments.

 

Logbaba Gas Project, Cameroon

Following extensive planning and negotiations during the reporting period, GDC signed a legally binding term sheet with ENEO Cameroon S.A. ("ENEO"), Cameroon's integrated utility company, in late December 2014, to supply gas to two power stations, located in the city of Douala. Logbaba and Bassa power stations will generate up to 50MW from Gensets, supplied by Altaaqa Alternative Solutions Projects DWC‑LLC ("Altaaqa"). The agreement includes 'take-or-pay' consumption rates and allows GDC to establish a secure level of gas sales at an attractive price of $9/mmbtu. The power stations' minimum gas consumption will be approximately 9mmscf/d in the January-June dry season and 3mmscf/d in the July‑December wet season. The contract is for two years and extendable by mutual agreement. This project could treble GDC's current gas production.  We expect average annual production for the 2015 calendar year to be about 10.4mmscf/d.

 

In the release of our 2014 Annual Report we quoted our 7 day week July 2014 production of 3.9mmscf/d at GDC.  Since then, from August 2014 to January 2015 inclusive, our monthly average daily rate based on a 7 day week has ranged from 3.9 to 4.4mmscf/d.   For the same period our monthly average daily rate based on a 5 day working week has ranged from 4.1 to 4.6mmscf/d and the monthly daily peak production rates have ranged from 4.5 to 5.3mmscf/d.   

 

I am proud to report that GDC has substantially completed its scope of work for the ENEO project construction phase and safely built and tested gas pipelines to both stations. We have issued a completion certificate for the Bassa station and expect to complete the Logbaba station within two weeks. The project is scheduled to be online by the end of Q1 2015 and if this is achieved, as we expect, it will represent a remarkable success for the GDC, ENEO and Altaaqa teams. Progressing from signing legally binding terms sheets in late December 2014 to delivering 50MW to the grid approximately three months later is outstanding. 

 

The period was not without its challenges, such as securing the release of gas-fired electricity generations sets ("Gensets") from the local customs and the delay on the Wouri River crossing.  However GDC now has access to a wide base of thermal gas customers on the Bonaberi side of the river. GDC is also in the process of making final connections to the Dangote cement plant, a business located on the Douala shore and a major thermal supply customer. Total pipe laid to date in Douala is now 31.3km.

 

During the period, VOG maintained a good working relationship with Logbaba Field development partners RSM and SNH. Following a settlement agreement between VOG and RSM in January 2014, a cost review process overseen by Akintola Williams Deloitte, Nigeria was undertaken to look at retrospective development expenditure. The review resulted in RSM paying significant development contributions ($10.1 million) and both companies are now working together to unlock the full potential of the Logbaba Field. An additional $6.9 million was received from RSM in February 2015.

 

One of the most important tasks undertaken during 2014 was the development of our people. At the beginning of the reporting period, we appointed a business-training company, Gallop Solutions International Ltd, to work with us to create an effective workforce with the right skill sets to deliver value for VOG. Our teams within VOG and GDC are now a cohesive, effective team working to build cash flow and a brand synonymous with safe, reliable gas supply.

 

 

Post period, in January 2015, the GDC subsurface team successfully conducted a rigless workover of Well La-106.  The work utilised specialist coiled tubing, high-pressure pumping and wireline equipment to perform cement remediation work on the well. Initial well flow-tests of Well La-106 were at 5 to 6mmscf/d and the well can provide back-up for Well La-105.

 

In February 2015, we took the opportunity to utilise the specialist equipment and personnel used on the Well La-106 workover to add perforations to Well La-105.  We perforated the sands above the Upper Logbaba D Sand, which has been our main producing reservoir in La-105 since start-up. In total, 57 metres of additional perforations were shot. After shooting the perforations, a production log was run in Well La‑105 to determine the contributions of the new zones to flow and a baseline for future logs. The newly perforated zones are performing well and will significantly contribute to production in the future as the lower sands deplete.

 

The Company is also making plans for the drilling of future wells at Logbaba that are aimed at increasing reserves and production to meet the growing gas demand in Cameroon.

 

In operations, VOG will make a number of key decisions over the next six months concerning where best to allocate gas supply. With strong increased demand rates expected in the first half of 2015, through the ENEO deal, the Board is now looking at the most effective ways to increase both margin and consumption within GDC.

 

Corporate Developments

In addition to developing our operational capabilities, we have taken significant steps to enhance our corporate structure and profile.

 

VOG strengthened its Board of Directors with the appointment of James McBurney who joined the Board as an independent Non-Executive Director in June. James has over 25 years' experience advising many of the U.S.'s largest power and gas companies.  John Bryant was also appointed as an independent Non‑Executive Director in December 2014. John has commercial and financial experience in developing and managing new businesses with over 40 years' experience in the oil, gas and energy services, both in the U.S. and the U.K. These appointments give the VOG Board important and valuable independent guidance.

 

During October 2014, Numis Securities Ltd ("Numis") was appointed as sole broker to VOG. Numis is one of the premier broking houses in London and we are working closely with their team to provide the market with guidance on VOG, with the intention of building further investor support as we expand operations. After consulting with Numis and a number of other advisors and institutional investors we took the decision to conduct a 40 to 1 share consolidation in the Company's equity.  Following the fundraisings from 2011 to 2013, which were needed to support the commercialisation of the Logbaba project, VOG had over four billion shares on issue and this was felt to be unattractive to potential investors. We implemented the consolidation and sub-division of the Company's share capital effective 27 November 2014, following shareholder approval granted at the AGM. 

 

Since then, the Company has announced consistent positive news flow and our share price has performed solidly despite very challenging equity markets.

 

West Medvezhye, Russia

The Company has continued to pursue ways to derive value for its 100%-owned West Medvezhye field, Russia, through farm-out, joint venture or sale. West Medvezhye has significant gas and gas condensate reserves but the current state of relations between Russia and the West, combined with a low oil price, makes near-term development of the asset challenging and divestiture is a more prudent course. With our focus on the expanding operations in Cameroon, the Board has taken the decision to fully impair the Russian asset, writing it down by $49.8 million. The Company will continue to seek partners to derive value from the asset.

 

I would like to thank the Board and our teams for their work and also our shareholders who have been supportive, allowing us to drive the Group forward to where it is today. I believe 2015 will be a year when GDC is able to expand its gas sales within a region in great need of reliable sources of energy.

 

 

 

Kevin Foo

Executive Chairman

27 February 2015



 

FINANCIAL REVIEW

 

 

Revenue and Results

The Group's revenue for the period was $11.6 million, compared to $6.0 million for the six months to 30 November 2013 and adjusted EBITDA (shown below) increased by $1.2 million. In all relevant periods, the revenue was derived from the Logbaba gas and condensate field in Cameroon. The primary revenue stream was gas sold to industrial customers for thermal energy production and electricity generation, with revenue also generated from the sale of condensate, a by-product from gas production and processing.

 

The total gas sold during the period was 716mmscf, and 13,221bbls of condensate were produced. While gas prices remained unchanged throughout the period because of the fixed price contracts we have with our customers, the global downturn in oil prices has negatively affected the condensate sales price, as this is linked directly to the price of Brent Crude.

 

The loss on ordinary activities after taxation of the Group for the six months to 30 November 2014 amounted to $53.4 million (six months to 30 November 2013: $2.5 million profit; year ended 31 May 2014: $1.7 million loss). The current period loss includes an impairment charge of $49.8 million against the Group's Russian asset, discussed in more detail below and in Note 5.

 

It should also be noted that the comparative period results included historical adjustments as a consequence of the decision in the arbitration between the Group and RSM Production Corporation ("RSM"). The adjustments reflect RSM's share of prior period operating expenses, as the arbitration decision was that RSM had not forfeited its 40% interest in the Logbaba gas and condensate project. The Directors believe that EBITDA (net of this adjustment and the impairment provision) provides context for the results in the current period and comparative periods.

 


6 months
ended
30 November 2014

6 months
ended
30 November 2013

12 months
ended
31 May
2014

EBITDA net of RSM arbitration and impairment adjustments

$1.4 million

$0.2 million

($5.8 million)

 

 

Impairment of Russian Asset (West Medvezhye)

At the end of the current period, the Directors took the decision to fully impair the Group's exploration and evaluation asset, being the Russian West Medvezhye ("West Med") asset. The impairment increased the loss for the period by $49.8 million, with corresponding balance sheet reductions of the same value. The impairment provision was made as it was considered that the political issues in Russia, combined with the weakness in the world price of oil, make realising the carrying value of the asset through the current marketing process significantly more difficult.

 

 

Balance Sheet

Intangible Assets

The West Med exploration and evaluation asset was fully impaired at the end of the period, as described above and in Note 5.

 

Unlisted investments

The movement in unlisted investments relates to the repayment to the Company of loans that were acquired as part of the original investment.

 

Deferred tax assets

As a result of the taxable profits generated by the Cameroon segment during the period, the deferred tax asset was reduced by $1.6 million and a corresponding debit to income tax expense was recorded on the income statement.

 

Trade and other receivables

Trade and other receivables at 30 November 2014 included $18.2 million due from RSM. This relates to RSM's funding obligation for its 40% participating interest in the Logbaba Concession. It reflects RSM's share of all assets, liabilities and costs relating to the Logbaba concession in the post-exploration period. Following the end of the period, $17.0 million was received from RSM. The period end receivable balance includes a further $1.2 million, which remains outstanding at the date of publication of these results. Further details are provided in the 'Cash Flow' section below and in Note 10.

 

Translation reserve

The devaluation of the Russian Rouble resulted in an $8.3 million movement in the translation reserve. The translation reserve movements arose because the financial accounts of the Group's Russian subsidiary are maintained in Russian Roubles.

 

Cash Flow

Operating activities

The Group's operations in Cameroon are conducted through a joint operation with RSM. During the period under review, RSM did not make any payments for its 40% share of project expenditures, with all such payments from RSM suspended pending the issue of a final report by Akintola Williams Deloitte, Nigeria ("Deloitte Nigeria") (refer Note 10). The Group was required to fund 100% of the operational cash flows, and therefore the cash used in operating activities was substantially more than the Group's share. As reported in Note 10, the claim against RSM was resolved subsequent the end of the period, and RSM settled the amounts owing for the period covered by Deloitte Nigeria's report ($10.1 million). An additional $6.9 million was received from RSM in February 2015 for its share of incurred expenses subsequent to the period covered by Deloitte Nigeria's report. The period end receivable balance includes a further $1.2 million, which remains outstanding at the date of publication of these results.

 

Investing activities

Investing activities related primarily to the expansion of the pipeline network in Cameroon, with payments of $3.7 million for property, plant and equipment (six months to 30 November 2013: $9.5 million).

 

Additionally, the Company received $1.4 million from its unlisted investments, in the form of loan repayments.

 

Financing activities

Financing cash flows in the period related solely to the repayment of debts.

 

 

Going Concern

The Directors are satisfied that the Group has sufficient resources to continue operations for the foreseeable future, being a period of not less than twelve months from the date of this report. Accordingly, they continue to adopt the going concern basis in preparing the condensed financial information.

 

 

 

 

Robert Palmer

Finance Director

27 February 2015

UNAUDITED CONDENSED CONSOLIDATED INCOME STATEMENT

FOR THE SIX MONTHS ENDED 30 NOVEMBER 2014

 

 

 



6 months
ended
30 November 2014

6 months
ended
30 November 2013

12 months
ended
31 May 2014



Unaudited

Unaudited

Audited


Notes

$000

$000

$000






Continuing operations

3




Revenue


11,562

6,014

14,729

Cost of sales





     Production royalties


(2,441)

(1,928)

(3,953)

     Other cost of sales


(5,947)

(2,906)

(6,295)



 

 

 



(8,388)

(4,834)

(10,248)



 

 

 

Gross profit


3,174

1,180

4,481






Other income


103

4

11

Sales and marketing expenses


(872)

(817)

(620)

Administrative expenses


(5,032)

(1,700)

(9,303)

Other gains/(losses)


820

(130)

(3,978)

Impairment of exploration and evaluation assets

5

(49,775)

-

-

Adjustment resulting from arbitration decision


-

5,169

6,543



 

 

 

Operating profit/(loss)


(51,582)

3,706

(2,866)

Finance revenue


19

142

146

Finance costs


(173)

(1,308)

(2,004)



 

 

 

Profit/(loss) before taxation


(51,736)

2,540

(4,724)

Income tax (expense)/credit


(1,652)

-

3,059



 

 

 

Profit/(loss) after taxation for the period


(53,388)

2,540

(1,665)



 

 

 



 

Cents

 

Cents

 

Cents



Earnings/(loss) per share - basic

4

(50.73)

2.47*

(1.58)*

Earnings/(loss) per share - diluted

4

(50.73)

2.47*

(1.58)*

 

*Comparative period earnings/(loss) per share has been restated as a result of the Capital Reorganisation detailed in Note 8.

 

 

 

UNAUDITED CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

FOR THE SIX MONTHS ENDED 30 NOVEMBER 2014

 

 

 


6 months
ended
30 November 2014

6 months
ended
30 November 2013

12 months
ended
31 May 2014


Unaudited

Unaudited

Audited


$000

$000

$000





Profit/(loss) for the financial period

(53,388)

2,540

(1,665)

Exchange differences on translation of foreign operations

(8,331)

(1,702)

1,348


 

 

 

Total comprehensive income/(loss) for the period

(61,719)

838

(317)


 

 

 



 

 

UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEET

AS AT 30 NOVEMBER 2014

 

 

 



30 November 2014

30 November 2013

31 May 2014



Unaudited

Unaudited

Audited


Notes

$000

$000

$000











Assets:





Non-current assets





Intangible assets

6

27

58,035

57,797

Property, plant and equipment

7

122,168

121,680

121,772

Unlisted investments


5,155

6,600

6,600

Deferred tax assets


1,668

-

3,297



 

 

 








129,018

186,315

189,466



 

 

 






Current assets





Inventories


38

13

38

Trade and other receivables


24,080

30,337

14,026

Cash and cash equivalents


5,809

1,372

17,018



 

 

 








29,927

31,722

31,082



 

 

 






Total assets


158,945

218,037

220,548



 

 

 






Liabilities:





Current liabilities





Trade and other payables


10,505

12,458

12,452

Borrowings


12,367

6,964

10,563



 

 

 








22,872

19,422

23,015



 

 

 






Net current assets/(liabilities)


7,055

12,300

8,067



 

 

 






Non-current liabilities





Borrowings


30

247

86

Deferred tax liabilities


6,599

6,599

6,599

Provisions


9,791

9,325

9,551



 

 

 








16,420

16,171

16,236



 

 

 

Net assets


119,653

182,444

181,297



 

 

 






Equity:





Called-up share capital

8

34,240

34,240

34,240

Share premium


229,556

229,556

229,556

ESOP Trust reserve


(1,090)

(1,138)

(1,165)

Translation reserve


(18,394)

(13,113)

(10,063)

Other reserves


4,062

4,162

4,197

Retained earnings - deficit


(128,721)

(71,263)

(75,468)



 

 

 






Total equity


119,653

182,444

181,297



 

 

 






 



 

UNAUDITED CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

FOR THE SIX MONTHS ENDED 30 NOVEMBER 2014

 

 

 










Share capital

Share premium

ESOP Trust reserve

Translation reserve

Other reserve

Retained earnings / (accumulated deficit)

Total


$000

$000

$000

$000

$000

$000

$000


 

 

 

 

 

 

 









At 31 May 2013

34,240

229,556

(1,061)

(11,411)

4,583

(74,504)

181,403

Exchange adjustments

-

-

(77)

-

-

-

(77)

Transfer expired warrants to retained earnings

-

-

-

-

(701)

701

-

Warrants issued

-

-

-

-

280

-

280

Total comprehensive income/(loss) for the period

-

-

-

(1,702)

-

2,540

838


 

 

 

 

 

 

 









At 30 November 2013

34,240

229,556

(1,138)

(13,113)

4,162

(71,263)

182,444

Exchange adjustments

-

-

(27)

-

-

-

(27)

Warrants issued

-

-

-

-

35

-

35

Total comprehensive income/(loss) for the period

-

-

-

3,050

-

(4,205)

(1,155)


 

 

 

 

 

 

 

At 31 May 2014

34,240

229,556

(1,165)

(10,063)

4,197

(75,468)

181,297

Exchange adjustments

-

-

75

-

-

-

75

Transfer expired warrants to retained earnings

-

-

-

-

(135)

135

-

Total comprehensive income/(loss) for the period

-

-

-

(8,331)

-

(53,388)

(61,719)


 

 

 

 

 

 

 









At 30 November 2014

34,240

229,556

(1,090)

(18,394)

4,062

(128,721)

119,653


 

 

 

 

 

 

 

 



 

UNAUDITED CONDENSED CONSOLIDATED CASH FLOW STATEMENT

FOR THE HALF YEAR ENDED 30 NOVEMBER 2014

 

 

 


6 months

Ended

30 November

2014

6 months

Ended

30 November

2013

12 months

Ended

31 May

2014


Unaudited

Unaudited

Audited


$000

$000

$000









Cash flows from operating activities




Profit/(loss) for the period

(53,388)

2,540

(1,665)

Income tax expense/(credit) recognised in the Income Statement

1,629

-

(3,059)

Finance revenue recognised in the Income Statement

(19)

(142)

(146)

Finance costs recognised in the Income Statement

141

1,308

2,004

Depreciation and amortisation of non-current assets

3,517

2,149

4,608

Other (gains)/losses recognised in the Income Statement

(820)

130

3,978

Impairment of exploration and evaluation assets

49,775

-

-

Adjustment relating from arbitration decision

-

(5,169)

-


 

 

 






835

816

5,720

Movements in working capital




(Increase)/decrease in trade and other receivables

(10,688)

(5,434)

4,727

(Increase)/decrease in inventories

-

21

(4)

Increase/(decrease) in trade and other payables

2,312

3,571

3,140


 

 

 





Net cash (used in)/generated from operating activities

(7,541)

(1,026)

13,583





Cash flows from investing activities




Proceeds from disposal of intangible assets

-

-

115

Payments for intangible assets

(207)

-

(752)

Payments for property, plant and equipment

(3,688)

(9,451)

(10,807)

Loan repayments received

1,445

-

-

Interest received

19

11

15


 

 

 





Net cash used in investing activities

(2,431)

(9,440)

(11,429)





Cash flows from financing activities




Proceeds from borrowings

-

438

5,234

Repayment of borrowings

(958)

(1,676)

(3,140)

Finance costs

(376)

(268)

(493)


 

 

 





Net cash generated from financing activities

(1,334)

(1,506)

1,601


 

 

 





Net (decrease)/increase in cash and cash equivalents

(11,306)

(11,972)

3,755





Cash and cash equivalents - beginning of the period

17,018

13,107

13,107

Effects of exchange rate changes on the balance of cash held in foreign currencies

97

237

156


 

 

 





Cash and cash equivalents - end of the period

5,809

1,372

17,018


 

 

 





 



 

 

NOTES TO THE UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS FOR THE SIX MONTHS ENDED 30 NOVEMBER 2014

 

 

1.         GENERAL INFORMATION AND BASIS OF PREPARATION

 

The unaudited interim condensed consolidated financial statements of Victoria Oil & Gas Plc and its subsidiaries ("the Group") for the six months ended 30 November 2014 have been prepared in accordance with International Financial Reporting Standards ("IFRSs") and in accordance with International Accounting Standard ("IAS") 34 Interim Financial Reporting.

 

The interim condensed consolidated financial statements do not include all the information and disclosures required in the annual financial statements and should be read in conjunction with the Group's annual consolidated financial statements as at 31 May 2014.

 

 

2.         ACCOUNTING POLICIES

 

The accounting policies adopted in the preparation of the interim condensed consolidated financial statements are consistent with those followed in the preparation of the Group's annual consolidated financial statements for the year ended 31 May 2014, with the exception of the following:

 

Adoption of new and revised Standards

The following new and revised Standards have been mandatorily adopted by the Group during the period. Their adoption has not had a material impact on the financial statements of the Group.

 

Name of new Standards/Amendments

Effective from

IFRS 10 Consolidated Financial Statements

1 January 2014

IFRS 11 Joint Arrangements

1 January 2014

IFRS 12 Disclosure of Interests in Other Entities

1 January 2014

IAS 27 (revised 2011) Separate Financial Statements

1 January 2014

IAS 28 (revised 2011) Investments in Associates and Joint Ventures

1 January 2014

Amendments to IAS 32 Offsetting Financial Assets and Financial Liabilities

1 January 2014

Amendments to IFRS 10, IFRS 12, and IAS 27 Investment Entities

1 January 2014

Amendments to IAS 36 Recoverable Amount Disclosures for Non-Financial Assets

1 January 2014

Amendments to IAS 39 Novation of Derivatives and Continuation of Hedge Accounting

1 January 2014

 

 

3.         SEGMENTAL ANALYSIS

 

The Group has one class of business: oil and gas exploration, development and production and the sale of hydrocarbons and related activities. This is analysed on a location basis. Only the Cameroon segment is generating revenue, which is from the sale of hydrocarbons. The accounting policies of the reportable segments are the same as the Group's accounting policies.  

 

The following tables present revenue, profit/(loss) and certain asset and liability information regarding the Group's business segments:

 

Six months to 30 November 2014 (Unaudited)

Cameroon
$000

Russia
$000

Kazakhstan
$000

Corporate
$000

Total
$000

Revenue

11,562

-

-

-

11,562

Production royalties

(2,441)

-

-

-

(2,441)

Other cost of sales

(5,947)

-

-

-

(5,947)







Gross profit

3,174

-

-

-

3,174

Other income

103

-

-

-

103

Sales and marketing expenses

(872)

-

-

-

(872)

Administrative expenses

(2,832)

(106)

(143)

(1,951)

(5,032)

Other gains and (losses)

596

-

256

(32)

820

Impairment of exploration and evaluation assets

-

(49,775)

-

-

(49,775)







Operating profit/(loss)

169

(49,881)

113

(1,983)

(51,582)

Finance revenue

-

-

-

19

19

Finance costs

-

(13)

-

(160)

(173)







Profit/(loss) before taxation

169

(49,894)

113

(2,124)

(51,736)

Income tax expense

(1,547)

-

-

(105)

(1,652)







Profit/(loss) after taxation for the financial period

(1,378)

(49,894)

113

(2,229)

(53,388)







Total assets

147,595

29

90

11,231

158,945







Total liabilities

(33,922)

(278)

(11)

(5,081)

(39,292)







 

 

Six months to 30 November 2013 (Unaudited)

Cameroon
$000

Russia
$000

Kazakhstan
$000

Corporate
$000

Total
$000

Revenue

6,014

-

-

-

6,014

Production royalties

(1,928)

-

-

-

(1,928)

Other cost of sales

(2,906)

-

-

-

(2,906)







Gross profit

1,180

-

-

-

1,180

Other income

4

-

-

-

4

Sales and marketing expenses

(817)

-

-

-

(817)

Administrative expenses

(113)

(115)

(135)

(1,337)

(1,700)

Other gains and (losses)

(51)

-

(295)

216

(130)

Adjustment resulting from arbitration decision

5,169

-

-

-

5,169







Operating profit/(loss)

5,372

(115)

(430)

(1,121)

3,706

Finance revenue

-

-

-

142

142

Finance costs

(667)

(14)

-

(627)

(1,308)







Profit/(loss) before taxation

4,705

(129)

(430)

(1,606)

2,540

Income tax expense

-

-

-

-

-







Profit/(loss) after taxation for the financial period

4,705

(129)

(430)

(1,606)

2,540







Total assets

158,831

57,793

103

1,310

218,037







Total liabilities

(26,803)

(412)

(3)

(8,375)

(35,593)







 

Twelve months to 31 May 2014 (Audited)

Cameroon
$000

Russia
$000

Kazakhstan
$000

Corporate
$000

Total
$000

Revenue

14,729

-

-

-

14,729

Production royalties

(3,953)

-

-

-

(3,953)

Other cost of sales

(6,295)

-

-

-

(6,295)







Gross profit

4,481

-

-

-

4,481

Other income

11

-

-

-

11

Sales and marketing expenses

(620)

-

-

-

(620)

Administrative expenses

(4,667)

(251)

(250)

(4,135)

(9,303)

Other losses

(70)

(57)

(3,098)

(753)

(3,978)

Adjustment resulting from arbitration decision

6,543

-

-

-

6,543







Operating profit/(loss)

5,678

(308)

(3,348)

(4,888)

(2,866)

Finance revenue

-

-

-

146

146

Finance costs

(1,105)

(28)

-

(871)

(2,004)







Profit/(loss) before taxation

4,573

(336)

(3,348)

(5,613)

(4,724)

Income tax credit

3,059

-

-

-

3,059







Profit/(loss) after taxation for the financial year

7,632

(336)

(3,348)

(5,613)

(1,665)







Total assets

147,615

57,630

88

15,215

220,548







Total liabilities

(32,831)

(364)

(12)

(6,044)

(39,251)







 

 

4.         EARNINGS/(LOSS) PER SHARE

 

Basic earnings or loss per share is computed by dividing the profit or loss after tax for the year available to ordinary shareholders by the weighted average number of ordinary shares in issue and ranking for dividend during the year, excluding those held by the ESOP Trust. Diluted earnings or loss per share is computed by dividing the profit or loss after taxation for the period by the weighted average number of ordinary shares in issue, each adjusted for the effect of all dilutive potential ordinary shares that were outstanding during the period.

 

The following table sets forth the computation for basic and diluted loss per share.

 


30 November

30 November

31 May


2014

2013

2014


Unaudited

Unaudited

Audited


$000

$000

$000

Numerator:




Numerator for basic and diluted earnings/(loss) per share - earnings/(loss) for the period

(53,388)

2,540

(1,665)


 

 

 

 

 

 

Number

 

Number

Number

Denominator:




Denominator for basic and diluted earnings/(loss) per share

105,232,684

102,707,481*

105,232,532*


 

 

 


 

Cents

 

Cents

Cents

Earnings/(loss) per share - basic and diluted

(50.73)

2.47*

(1.58)*


 

 

 

 

*Comparative period earnings/(loss) per share has been restated as a result of the Capital Reorganisation detailed in Note 8.

 

Basic and diluted loss per share are the same, as the effect of any potential shares is anti-dilutive and is therefore excluded.

 

5.         IMPAIRMENT OF EXPLORATION AND EVALUATION ASSETS

 


30 November

30 November

31 May


2014

2013

2014


Unaudited

Unaudited

Audited


$000

$000

$000

Impairment of carrying value of West Med license interest:




Intangible assets (Note 6)

49,702

-

-

Property, plant and equipment (Note 7)

52

-

-

Current assets

21

-

-






49,775

-

-





 

The Directors tested the Group's Russian exploration and evaluation asset, West Med, for impairment as at 30 November 2014, and took the view that it would be prudent to fully impair the asset. Whilst the Directors continue to seek avenues for deriving value from West Med, through farm-out, joint venture or sale, it was considered that the political issues in Russia, combined with the weakness in the world price of oil, make realising the carrying value of the asset significantly more difficult.

 

Because of this level of uncertainty, it was difficult for the Directors to form a view on the value that the asset should be held at in the accounts. The Directors have taken the decision to completely write down the asset, given the uncertainties regarding its monetisation. There may be an adjustment in future periods, depending on the outcome of current efforts to derive value from the asset.

 

 

6.         INTANGIBLE ASSETS

 

Six months to 30 November 2014 (Unaudited)

Exploration and evaluation assets

Software

Total

Cost

$000

$000

$000

Opening balance

91,597

62

91,659

Exchange adjustments

(8,286)

-

(8,286)

Transfer to property, plant and equipment

(299)

-

(299)

Additions

207

-

207





Closing balance

83,219

62

83,281





 

Accumulated amortisation and impairment




Opening balance

33,834

28

33,862

Exchange adjustments

(290)

-

(290)

Transfer to property, plant and equipment

(27)

-

(27)

Provision for impairment (Note 5)

49,702

-

49,702

Charge for the period

-

7

7





Closing balance

83,219

35

83,254





 





Carrying amount 30 November 2014

-

27

27





 

Six months to 30 November 2013 (Unaudited)

Exploration and evaluation assets

Software

Total

Cost

$000

$000

$000

Opening balance

93,838

104

93,942

Transfer to other receivables

(199)

(42)

(241)

Exchange adjustments

(2,106)

-

(2,106)

Additions

402

-

402





Closing balance

91,935

62

91,997





 

Accumulated amortisation and impairment




Opening balance

33,948

24

33,972

Transfer to other receivables

(12)

(10)

(22)

Charge for the period

5

7

12





Closing balance

33,941

21

33,962





 





Carrying amount 30 November 2013

57,994

41

58,035





 

Twelve months to 31 May 2014 (Audited)

Exploration and evaluation assets

Software

Total

Cost

$000

$000

$000

Opening balance

93,838

104

93,942

Adjustment resulting from arbitration decision

(199)

(42)

(241)

Exchange adjustments

(2,737)

-

(2,737)

Additions

883

-

883

Disposals

(172)

-

(172)





Closing balance

91,613

62

91,675





 

Accumulated amortisation and impairment




Opening balance

33,948

24

33,972

Adjustment resulting from arbitration decision

(11)

(10)

(21)

Exchange adjustments

(97)

-

(97)

Charge for the year

10

14

24





Closing balance

33,850

28

33,878





 





Carrying amount 31 May 2014

57,763

34

57,797





 

 

Segmental Analysis

 

Six months to 30 November 2014 (Unaudited)

Cameroon

Russia

Total


$000

$000

$000

Opening balance

314

57,483

57,797

Exchange

-

(7,996)

(7,996)

Transfer to property, plant and equipment

(272)

-

(272)

Additions

-

207

207

Provision for impairment (Note 5)

-

(49,702)

(49,702)

Charge for the period

(15)

8

(7)





Closing balance

27

-

27





 

Six months to 30 November 2013 (Unaudited)

Cameroon

Russia

Total


$000

$000

$000

Opening balance

558

59,412

59,970

Transfer to other receivables

(219)

-

(219)

Exchange

-

(2,106)

(2,106)

Additions

-

402

402

Charge for the period

(12)

-

(12)





Closing balance

327

57,708

58,035





 

Twelve months to 31 May 2014 (Audited)

Cameroon

Russia

Total


$000

$000

$000

Opening balance

558

59,412

59,970

Adjustment resulting from arbitration decision

(220)

-

(220)

Exchange

-

(2,640)

(2,640)

Additions

-

883

883

Disposals

-

(172)

(172)

Charge for the year

(24)

-

(24)





Closing balance

314

57,483

57,797





 

An impairment provision was made in the year against the West Med asset in Russia. The provision is described in detail in Note 5.

 

7.         PROPERTY PLANT AND EQUIPMENT

 

Six months to 30 November 2014

(Unaudited)


Plant and equipment

Oil and gas interest

Assets under construction at cost

Total

Cost


$000

$000

$000

$000

Opening balance


29,974

98,579

2,865

131,418

Additions


821

778

2,089

3,688

Transfer from intangible assets


-

299

-

299

Disposals


(4)

-

-

(4)

Transfer to plant and equipment


4,769

-

(4,769)

-







Closing balance


35,560

99,656

185

135,401







 

 

Depreciation






Opening balance


1,645

8,001

-

9,646

Transfer from intangible assets


-

27

-

27

Disposals


(2)

-

-

(2)

Provision for impairment (Note 5)


-

52

-

52

Charge for financial period


578

2,932

-

3,510







Closing balance


2,221

11,012

-

13,233







 







Carrying amount 30 November 2014


33,339

88,644

185

122,168







 

 

Six months to 30 November 2013 (Unaudited)


Plant and equipment

Oil and gas interest

Assets under construction at cost

Total

Cost


$000

$000

$000

$000

Opening balance


33,025

102,786

3,093

138,904

Transfer to other receivables


(13,146)

(4,585)

(1,324)

(19,055)

Additions


1,463

1,322

6,247

9,032







Closing balance


21,342

99,523

8,016

128,881







 

 

Depreciation






Opening balance


1,383

4,483

-

5,866

Transfer to other receivables


(254)

(548)

-

(802)

Charge for financial period


257

1,880

-

2,137







Closing balance


1,386

5,815

-

7,201







 







Carrying amount 30 November 2013


19,956

93,708

8,016

121,680







 

Twelve months to 31 May 2014

(Audited)

Plant and equipment

Oil and gas interest

Assets under construction at cost

Total

Cost

$000

$000

$000

$000

Opening balance

33,025

102,786

3,093

138,904

Adjustment resulting from arbitration decision

(12,151)

(4,966)

(1,167)

(18,284)

Additions

283

759

9,765

10,807

Transfer to plant and equipment

-

-

(8,826)

(8,826)

Transfer from assets under construction

8,826

-

-

8,826

Disposals

(9)

-

-

(9)






Closing balance

29,974

98,579

2,865

131,418






 

Depreciation





Opening balance

1,383

4,483

-

5,866

Adjustment resulting from arbitration decision

(249)

(548)

-

(797)

Disposals

(7)

-

-

(7)

Charge for the year

518

4,066

-

4,584






Closing balance

1,645

8,001

-

9,646






 






Carrying amount 31 May 2014

28,329

90,578

2,865

121,772






 

 

Segmental Analysis

 

Six months to 30 November 2014 (Unaudited)

Cameroon

Russia

Corporate

Total


$000

$000

$000

$000

Opening balance

121,703

52

17

121,772

Additions

2,748

-

4

2,752

Transfer from intangible assets

272

-

-

272

Disposals

-

-

(2)

(2)

Provision for impairment (Note 5)

-

(52)

-

(52)

Charge for the period

(2,570)

-

(4)

(2,574)






Closing balance

122,153

-

15

122,168

 

 





 

Six months to 30 November 2013 (Unaudited)

Cameroon

Russia

Corporate

Total


$000

$000

$000

$000

Opening balance

132,974

52

12

133,038

Transfer to other receivables

(18,253)

-

-

(18,253)

Additions

9,032

-

-

9,032

Charge for the period

(2,134)

-

(3)

(2,137)






Closing balance

121,619

52

9

121,680






 

Twelve months to 31 May 2014 (Audited)

Cameroon

Russia

Corporate

Total


$000

$000

$000

$000

Opening balance

132,974

52

12

133,038

Transfer to other receivables

(17,487)

-

-

(17,487)

Additions

10,792

-

15

10,807

Disposals

-

-

(2)

(2)

Charge for the period

(4,576)

-

(8)

(4,584)






Closing balance

121,703

52

17

121,772






 

Oil and gas assets are depreciated on a unit-of-production basis.

 

Assets under construction comprise of expenditure on the uncompleted sections of the pipeline network and surface infrastructure on the Logbaba gas and condensate project in Cameroon.

 

 

 

 

8.         CALLED-UP SHARE CAPITAL

 

At the Annual General Meeting held on 26 November 2014, the Company sought shareholder approval for a consolidation and sub-division of the Company's share capital ("Capital Reorganisation"). The shareholders passed the resolution, and as of 27 November 2014, the new shares were admitted to trading on AIM. As a result of the Capital Reorganisation, shareholders received one consolidated ordinary share of 20 pence for every 40 ordinary shares of 0.5 pence ("Consolidation"). Immediately following the Consolidation, each consolidated ordinary share was subdivided into one new ordinary share of 0.5 pence and one new deferred share of 19.5 pence. Prior to the Capital Reorganisation, the Company's ordinary share capital consisted of 4,348,552,329 ordinary shares of 0.5 pence, and subsequent to the Capital Reorganisation, the Company's ordinary share capital consists of 108,713,809 ordinary shares of 0.5 pence with voting rights listed on AIM and 108,713,809 deferred shares of 19.5 pence with no voting rights.

 

 

9.         RELATED PARTY TRANSACTIONS

 

Payments to Directors and other key management personnel are set out below.

 


30 November

2014

30 November

2013

31 May

2014


Unaudited

Unaudited

Audited


$000

$000

$000

Directors' remuneration - cash payments

1,183

716

1,792

Other key management - short term benefits

135

687

450

Other key management - professional fees

714

242

585

 

Key management personnel includes personnel who act as consultants to the Group, and who are not employees. These accounts include $0.7 million of professional fees for such consultants (six months to 30 November 2013: $0.2 million; twelve months to 31 May 2014: $0.6 million).

 

The following table provides details of other transactions entered into by the Company with its subsidiaries and by the Group with other related parties:

 


Company transactions with subsidiaries

Directors' other interests

Key management personnel


$000

$000

$000

6 months to 30 November 2014 (Unaudited)



Investment in subsidiaries

12,498

-

-

Purchases from/(recharges to) related parties during the period

(245)

-

714

Cash advances to/(from) related parties during the year

(5,175)

(5)

-

Amounts due from/(to) related parties at the end of the period

108,175

-

-




6 months to 30 November 2013 (Unaudited)



Investment in subsidiaries

29,789

-

-

Advances to subsidiaries

42,379

-

-

Purchases from/(recharges to) related parties during the period

(993)

-

242

Cash advances to/(from) related parties during the year

(193)

-

-

Amounts due from/(to) related parties at the end of the period

120,799

-

(429)




12 Months to 31 May 2014 (Audited)



-

Investment in subsidiaries

29,789

-

-

Advances to subsidiaries

42,849

-

-

Purchases from/(recharges to) related parties during the year

(1,342)

5

432

Cash advances to/(from) related parties during the year

(7,983)

13

-

Amounts due from/(to) related parties at the year end

113,009

-

-

 

Amounts due from subsidiaries are non-interest bearing loans repayable on demand.

 

The balance of the amounts due from subsidiaries at 30 November 2014 is stated net of a provision against the amounts due from Victoria Energy Central Asia LLP of $17.6 million and Victoria Oil and Gas Central Asia Limited of $4.5 million (30 November 2013: $17.5 million and $5.2 million; 31 May 2014: $17.6 million and $5.1 million).

Amounts due from the Company's Russian subsidiary, ZAO SeverGas-Invest ("SGI"), are recorded as 'Advances to subsidiaries' and considered part of the Company's net investment in the Russian operations, as settlement is neither planned nor likely in the foreseeable future. As a result of the impairment of West Med (refer Note 5), a provision of $43.2 million was made during the period against the balance due to the Company by SGI, reducing the balance to nil.

 

Additionally, the Company's investment in subsidiaries is stated net of a provision of $17.3 million against the Company's investment in SGI.

 

There was no intergroup trading or transactions between Group subsidiaries.

 

 

10.        POST BALANCE SHEET EVENTS

 

Board Appointments

John Bryant was appointed as an independent non-executive director effective 1 December 2014.

 

Deloitte Nigeria Audit Results and Receipt of RSM Funds

In the Annual Report for the year ended 31 May 2014, the history of the arbitration between the Group and RSM was described in detail. As at the date of publishing the Annual Report, Deloitte Nigeria had not issued its final report on the billing statement issued by the Group to RSM for its share of incurred expenses from inception of the Logbaba gas project to 31 December 2013 and the advance cash call for RSM's share of January 2014 expenses. Deloitte Nigeria had been appointed by RSM and the Group jointly under a settlement agreement announced in January 2014.

 

On 11 December 2014, the Company announced that the final report had been issued by Deloitte Nigeria and that RSM was due to pay $10.1 million to the Group. As at 11 December 2014, RSM had transferred $3.7 million of the amount owing. On 8 January 2015, the Company made a further announcement that the balance payment from RSM had been received. A further $6.9 million was received in February 2015 for RSM's share of incurred expenses subsequent to the period covered by Deloitte Nigeria's report. The period end receivable balance includes a further $1.2 million that remains outstanding at the date of publication of these results

 

 

11.        APPROVAL OF INTERIM FINANCIAL STATEMENTS

 

The unaudited interim condensed consolidated financial statements were approved by the Board of Directors on 27 February 2015.

 

Copies of the Interim report are available by download from the Company's website at: www.victoriaoilandgas.com


This information is provided by RNS
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