TIDMMTA
RNS Number : 2379E
Matra Petroleum PLC
07 April 2014
7 April 2014
Matra Petroleum plc
("Matra" or the "Company")
Full Year Results
Matra Petroleum PLC today announces its results for the 12 month
period ending 31 December 2013.
Highlights
Corporate
-- Disposal of Arkhangelovskoye Licence for a full consideration
of up to US$35 million of which deferred consideration of US$10
million remains outstanding on the date of the report.
-- Phased acquisition of oil and gas leases across the Anadarko
Basin in the Texas Panhandle, with independently estimated 15,086
MBOE of net Proved and Probable Reserves.
-- The Company brought 55 wells back to production on the date of the report.
Financial
-- Cash or cash equivalents of US$20.96 million at year end
-- No debt
Outlook
-- Proposed Delisting from AIM to complete US acquisition
-- Planned to drill 60 new wells and complete 70 workovers in 2014
-- Strategy to build on existing acreage position through the
active evaluation and selective targeting of further prospective
acreage opportunities
Maxim Barskiy, Chief Executive of Matra, commented
"I am very pleased with the significant progress Matra made
during 2013 towards becoming an independent of size and scale. Our
acquisition in the US provides a springboard for future growth
through increased production and targeted acquisitions."
For further information, please contact:
Matra Petroleum plc c/o Pelham Bell Pottinger
Henry Lerwill 020 7861 3169
Canaccord Genuity Limited
Henry Fitzgerald-O'Connor 0207 523 8000
Chairman's Statement
Dear Shareholder,
2013 has been a transformational year for Matra with the
Company's successful disposal of the Arkhangelovskoye Licence in
Russia and the successful entry into a highly prospective upstream
oil and gas opportunity onshore in the United States.
In June, Matra agreed the disposal of its 100% interest in the
Arkhangelovskoye Licence which includes the Sokolovskoe Field. The
full consideration under the agreement (including a US$10 million
contingent payment to which Matra became entitled on 1 April 2014)
amounted to US$35 million see (note 7) in the financial statements,
which the Board considered to be an excellent achievement for this
legacy asset.
This disposal followed a seismic survey being conducted on the
Sokolovskoe Field in early 2013 and an extensive review by the
Board of the conceptual Field Development Plan and associated
economic forecasts. As a result of this review, the Board concluded
that the disposal of the licence at the terms agreed represented
compelling value for shareholders.
Having completed the disposal of the Sokolovskoe Field, the
Board moved forward with the Company's stated strategy to identify
opportunities to invest in low risk, onshore oil and gas properties
underpinned by proven hydrocarbon resources and with material
business growth potential. This strategy came to fruition in
October 2013, with Matra initiating a substantial strategic
acquisition onshore in the United States, having reviewed (and
rejected) a number of opportunities in other parts of the
world.
The acquisition agreement provided Matra with the option of
making a series of phased investments which have resulted in the
acquisition of working interests in oil and gas leases across the
Anadarko Basin located in the Texas Panhandle, encompassing Gray,
Carson and Hutchinson counties, and which have been independently
estimated to contain 15,086 MBOE of net Proved and Probable
Reserves.
The Board has taken the view that the US conventional onshore
oil and gas sector currently represents a compelling investment
environment for a Company of Matra's size and niche capabilities.
It offers access to low risk production and reserves at attractive
valuations, in a benign operating environment, within a stable
fiscal and legal regime. In addition, in provides, in the Board's
view, material opportunities for growth within an active and liquid
asset market, and plays to Matra's particular technical and
operational competitive strengths.
Since Matra's entry into the US, the Company has made
significant operational progress, including establishing an office
in Houston which is now fully operational. An experienced executive
and operating team have been put in place including a chief
operations officer, geoscience and other technical personnel, a
land manager and a financial controller. As at April 2014 Matra's
well workover programme brought back to production 55 wells across
existing leases.
In 2014, the Company aims to make further operational progress
with the development of its Anadarko Basin acreage including
increasing production and further evaluating the potential of their
existing licenses. Subject to completion of the Acquisition, the
Company plans to drill 60 new wells and complete 70 workovers on
the leases in 2014. In addition, the Company will look to build on
its existing acreage position through the active evaluation and
selective targeting of further prospective acreage opportunities
within the area.
The onshore US conventional oil and gas play, and the material
business opportunities that the Board believes are associated with
this play, will represent the primary focus area for the Company in
the near to medium term.
Finally, I would like to acknowledge the understandable concerns
of some shareholders relating to the proposed delisting of the
Company. After careful consideration, the Board has decided the
delisting is in the best interests of the Shareholders' and the
Company as a whole. Crucially, it will allow the Company to
complete the acquisition of the remaining 50% interest in PG-M JV
and therefore take operational control of the US assets to generate
further value for shareholders. The Cancellation will not alter the
Board's strategy for the Company which would be to continue the
acquisition of mature oil and gas assets in proven hydrocarbon
provinces.
I would like to conclude by thanking everyone in the Company for
their enormously hard work in enabling the Company to re-direct
itself into a new and exciting business area and I look forward to
a successful and exciting year ahead for Matra Petroleum.
James William Guest
Chairman
7 April 2014
Strategic Report
1. Business overview and developments
Arkhangelovskoye license disposal
In May 2013, following the 3D seismic programme on the
Arkhangelovskoye licence, the Management revised its estimate of 2P
Recoverable Reserves on the licence to 13.5 mmbbls of oil. The
Board conducted an extensive review of the conceptual Field
Development Plan and associated economic forecasts, as well as
investigating other options for maximising the value of the
Sokolovskoe Field for shareholders, including a possible sale of
the asset.
As a result of this review in July 2013 Matra announced the
disposal of its 100 per cent interest in the Arkhangelovskoye
Licence, which included the Sokolovskoe Field for an initial
consideration of US$25 million with a further deferred contingent
consideration of US$10 million payable within nine months from
completion of the disposal unless a report from expert geophysics
company mutually agree by the parties was provided confirming
negative drilling results. The US$25 million initial consideration
was received by the Company in July 2013. On 1 April 2014 the
Company became entitled to the contingent consideration of US$10
million following the occurrence of the trigger event.
The Board believes that the disposal of the licence for a
consideration of up to $35 million represented compelling value
when compared to the capital costs required to develop the asset
and the technical risks associated with the field.
The proposed monetisation of the Arkhangelovskoye Licence was
consistent with the Company's growth strategy and provided the
Company with increased flexibility to pursue new upstream
investment opportunities, with the potential to create significant
value for Shareholders.
Entering USA
The Company appraised and evaluated a number of opportunities in
Russia and the CIS but concluded that the valuations expected by
vendors were proving unattractive. The Board therefore decided to
focus its efforts on pursuing opportunities in the United States of
America given the favourable tax regime, extensive established
infrastructure and a large number of independent players, all of
which made the USA a very attractive place to pursue the
implementation of its investment policy.
On 31 October 2013 the Company's wholly owned subsidiary, Matra
Petroleum U.S.A., Inc. ("Matra USA"), entered into an agreement
which allowed it to invest into the US onshore oil and gas sector.
The agreement allowed Matra USA, through a series of investments,
to acquire up to 38,746 net acres located in the Texas Panhandle
for an aggregate consideration of up to US$28.2 million.
The first of the series of investments was Matra USA's
acquisition of a 50 per cent interest in PG-M International LLC
(PG-M JV) from PSOFEI, LLC ("PSOFEI") for US$1.5 million. PSOFEI is
a holding Company owned by the entities of the selling Group namely
Amiba Resources LLC, Galaga Resources LLC and Jenkins Oil & Gas
LLC. The PG-M JV was a newly incorporated Company created to hold
various oil and gas working interests in leases.
On 22 January 2014 the Company announced the transfer of
additional oil and gas leases to PG-M JV by affiliates of PSOFEI.
The consideration for this transfer was the payment of cash from
Matra USA to PSOFEI in the amount of US$2.26 million and the
provision of additional secured lending by Matra USA to PSOFEI in
the amount of US$3.76 million.
In the course of conducting extensive due diligence prior to
closing of Phase 2, the Company discovered certain title defects in
six leases being acquired. On the date of the report PG-M JV
purchased a further two cured leases for an amount of
US$354,000.
Pursuing to the completion of the delisting procedures, Matra
USA intends to cancel the debt funding of US$3.88 million provided
by Matra USA to PSOFEI as of 4 April 2014 in consideration for
Matra USA acquiring the remaining 50 per cent of PG-M JV it does
not already own.
D&M appraisal of reserves
DeGolyer & MacNaughton ("D&M") conducted a review of all
of the assets acquired and the results of the independent reserve
audit. The Company has extracted from the D&M report the
Reserves associated with those leases that are currently free and
clear from title defects and the results of this analysis are as
set out below:
Gross Reserves Net Reserves*
------------------------------- ------------------------------
Oil and Wet TOTAL Oil and Wet TOTAL
Condensate Gas Condensate Gas
(Mbbl) (MMcf) (MBOE) (Mbbl) (MMcf) (MBOE)
------------ -------- ------- ------------ ------- -------
Proved
Developed Producing 96 1,236 302 37 502 121
Developed Nonproducing 866 15,901 3,516 614 11,656 2,556
Undeveloped 1,782 49,701 10,066 1,227 34,874 7,040
------------ -------- ------- ------------ ------- -------
Total Proved 2,744 66,838 13,884 1,878 47,031 9,717
Probable 1,800 37,938 8,122 1,194 25,051 5,369
Proved plus Probable 4,543 104,775 22,006 3,072 72,082 15,086
*Net reserves are defined as that portion of the gross reserves
attributable to the interests that PG-MI JV owns after deducting
royalties and interests owned by others.
NB. Sums in the analysis above may not add up due to
rounding.
Operations and outlook
As of 04 April 2014 Matra funded PG-M JV's work programme
through secured lending to the joint venture Company in the amount
of US$3.44 million. Pursuant to a joint operating agreement,
Petrolia Group, LLC, an affiliate of PSOFEI, has to date been
appointed as operator to service the properties owned by PG-M JV,
and Matra USA and PSOFEI jointly agreed a work program.
Since Matra's entry into the US, the Company has made
significant operational progress, including establishing an office
in Houston which is now fully operational. An experienced executive
and operating team has been put in place including a chief
operations officer, geoscience and other technical personnel, a
land manager and a financial controller.
As at 4 April 2014 Matra had 55 producing wells. During March -
April 2014 PG-M JV mobilised 4 workover rigs to start execution of
workover programme of 24-30 wells. Workovers will allow
optimisation of operating cash flows as well as collection of
additional technical information and acquisition of well test
data.
In 2014 the Company aims to make further operational progress
with the development of its assets including an extensive capital
investment program to boost production and further evaluate the
potential of our existing leases, subject to raising additional
finance. Subject to completion of the acquisition, the Company
plans to mobilise two drilling rigs and drill 60 new wells as well
as to perform total of 70 workovers on the leases in 2014 In
addition, the Company will look to build on its existing acreage
position through the active evaluation and selective targeting of
further prospective acreage opportunities within the area. The
Company has commenced negotiations with various US financial
institutions on raising the reserve based financing necessary for
this ambitious development programme and expects to obtain such
funding within next 6 months.
Strategy
Our strategy is to become mid-sized independent US oil and gas
producer. Our goal is to maximize shareholders value through the
acquisition of reserves at a price substantially below their NPV
and grow production. Our financial strategy is to use equity
capital for the acquisition of reserves and use debt for the
development.
We will aim to reach this goal through acquisitions of assets
located in proven oil and gas provinces with existing reserves in
conventional petroleum reservoirs. Our focus is to identify
remaining hydrocarbon potential in already producing and
potentially partially depleted reservoirs assets through further
exploration and appraisal and/or through the increase of the
recovery factor by using different secondary enhancement
techniques.
2. Principal risks and uncertainties
Managing the risks is essential to the long term success and
sustainability of the Company. Following the sale of
Arkhangelovskoye license and subsequently entering the USA oil and
gas market, the strategy of targeting and realising value from
existing production assets and new acquisitions has been
articulated. In delivering this strategy, our business activities
are subject to a variety of risks specific to the oil and gas
business.
Our key risks to manage going forward are:
-- Oil and gas price volatility - The economic viability of the
Group's oil and gas assets is dependent on the underlying oil
price. Management produce financial models of the assets based upon
conservative long term oil prices and regularly revise these
estimates.
-- Availability and cost of rigs/reliability of service
providers in the development area - Management actively monitor,
set up and maintain good links to the local rig and other services
market, supplemented by regular market enquiries.
-- Experienced personnel recruitment and retention in the
development area - The Company has put an experienced core local
management team in place in Houston and Borger. To retain
experienced personnel the Group adopted a long-term incentive award
scheme.
-- Lack of operational success - Operational risks include
geological and reservoir uncertainties, drilling challenges,
equipment failure, well control issues and the impact of hostile
weather conditions. The Group takes responsibility to ensure all
relevant legislation is met and that the Group and contractors have
the relevant insurance in place.
-- Preventing Health and Safety Executive (HSE) incidents -
Management introduced a safety and health programme to identify and
eliminate unsafe working conditions or practices which includes but
not limited by providing mechanical and physical safeguards,
conducting a series of inspections, training of all employees,
providing personal protective equipment, developing and enforcing
safety and health rules.
-- Access to the capital for development of existing assets and
future M&A - The Group may be unable to raise the required debt
or equity to develop a full potential of existing assets and
further growth of the Company via M&A. In order to mitigate
this risk, Management produce financial forecasts and monitor
closely the process of asset development to ensure that finance is
used to develop economically viable assets only. The Company
started negotiations with banks in the United States regarding
reserve base lending for development of the assets, however no
binding agreements were in place at the date of this report.
3. Financial position and performance of the business
The successful completion of disposal of Arkhangelovskoye
license in July 2013 allowed the realization of value of the
business built in Russia since 2007 and made it possible for the
Company to start a new cycle of business development.
In 2013 the Company made a US$12.63 million gain on disposal of
Sokolovskoe oil field.
The Company has used US$11.00 million for acquisition and
financing of the work program of the PG-M JV to date.
The Group's total administrative expenditure from continuing
operations in the year was US$6,241,000 (2012: US$3,437,000). A
loss of US$429,000 is the Group's share of the workover and
administrative expenditures in the PG-M JV in 2013 (2012: nil).
The US$1,587,000 increase in administrative expenditures was
largely due to legal and professional costs and travel costs both
related to the acquisition of the assets (note 5).
On 28 June 2013 the Company granted options to its management
and employees and as a result a charge of US$427,000 (2012:
US$599,000) lead to an increase in the administrative expenditures
which was offset by a reverse of the share-based payment to Maxim
Barskiy accrued in 2012 of US$599,000 (2012: nil) due to vesting
conditions not being satisfied.
The Company maintains a strong liquidity position as of the end
of 2013. At year end the Group had cash and cash equivalents
totalling US$20,957,000 (2012: US$4,000,000). The funding position
going forward will be supported by a combination of existing cash
resources, cash flow generated from operations and external
funding. The Company started negotiations with banks in the United
States regarding reserve base lending for development of the
assets, however no binding agreements were in place at the date of
this report. In order to pursue its planned development strategy
the Group will need to secure additional funding. The Directors are
confident in the Company's ability to secure the funding when it is
required for future capital programme.
5. Key Performance Indicators
With the change of focus Management are still in the process of
setting KPIs however the main financial and non-financial KPI will
be to deliver our operating program for 2014 successfully and
safely, maintain balance sheet strength and enhance the reserves
base to provide the funding for future growth and cash flow.
By order of the Board
Ekaterina Konshina (born Sapozhnikova)
CFO
7 April 2014
CONSOLIDATED STATEMENT OF PROFIT AND LOSS
FOR THE YEAR ENDED 31 DECEMBER 2013
31 December 31 December
2013 2012
Notes US$'000 US$'000
------------------------------------------------- ------ ------------ ------------
Other administrative expenditure (4,425) (2,838)
Unrealised foreign exchange loss arising (1,988) -
on retranslation of monetary items denominated
in non-functional currency
Reversal of share-based payment 599 -
Share-based payment (427) (599)
Total administrative expenditure (6,241) (3,437)
------------------------------------------------- ------ ------------ ------------
Loss from operations 5 (6,241) (3,437)
Finance income 11 29 16
Share of post tax loss of equity accounted
joint ventures 8 (429) -
------------------------------------------------- ------ ------------ ------------
Loss before and after taxation from continuing
operations 9 (6,641) (3,421)
Profit / (loss) on discontinued operations,
net of tax 7 12,630 (1,395)
------------------------------------------------- ------ ------------ ------------
Profit / (loss) before and after taxation
attributable to the equity holders of the
parent 9 5,989 (4,816)
================================================= ====== ============ ============
Basic and diluted earnings per share (cents) 3
Continuing operations (0.34) (0.20)
Discontinued operations 0.65 (0.08)
Total 0.31 (0.28)
------------------------------------------------- ------ ------------ ------------
CONSOLIDATED STATEMENT OF PROFIT AND LOSS AND COMPREHENSIVE
INCOME
FOR THE YEAR ENDED 31 DECEMBER 2013
31 December 31 December
2013 2012
US$'000 US$'000
--------------------------------------------------- ------------ ------------
Profit/(loss) after taxation 5,989 (4,816)
---------------------------------------------------- ------------ ------------
Other comprehensive profit / (loss): - -
Exchange differences on translating foreign
continuing operations* 704 1
Exchange differences on translating discontinued
operations and release of cumulative translation
reserve on disposal (note 7) (1,988) 798
Other comprehensive profit / (loss) for
the year (1,284) 799
---------------------------------------------------- ------------ ------------
Total comprehensive profit / (loss) for
the year attributable to the equity holders
of the parent 4,705 (4,017)
==================================================== ============ ============
*Items that may be reclassified to profit or loss.
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 DECEMBER 2013
Share Share Foreign Retained Total
capital premium currency deficit
translation
reserve
US$'000 US$'000 US$'000 US$'000 US$'000
------------------------------ -------- -------- ------------ --------- --------
Total equity as at
31 December 2011 (restated) 2,178 46,801 3,933 (39,151) 13,761
Loss after taxation - - - (4,816) (4,816)
Exchange differences
on translating to
presentation currency - - 799 - 799
------------------------------ -------- -------- ------------ --------- --------
Total comprehensive
income for the period - - 799 (4,816) (4,017)
Shares issued 934 6,470 - - 7,404
Recognition of share-based
payment - - - 599 599
Total equity as at
31 December 2012 3,112 53,271 4,732 (43,368) 17,747
============================== ======== ======== ============ ========= ========
Share Share Foreign Other Retained Total
capital premium currency reserves deficit
translation
reserve
Consolidated US$'000 US$'000 US$'000 US$'000 US$'000 US$'000
---------------------------- -------- -------- ------------ --------- --------- --------
Total equity as at
1 January 2013 3,112 53,271 4,732 - (43,368) 17,747
Profit after taxation - - - - 5,989 5,989
Reclassification on
disposal of subsidiary - - (1,988) - - (1,988)
Exchange differences
on translating to
presentation currency - - 704 - - 704
---------------------------- -------- -------- ------------ --------- --------- --------
Total comprehensive
income for the period - - (1,284) - 5,989 4,705
Reversal of recognised
share-based payment - - - - (599) (599)
Recognition of share-based
payment - - - 45 427 472
Total equity as at
31 December 2013 3,112 53,271 3,448 45 (37,551) 22,325
============================ ======== ======== ============ ========= ========= ========
COMPANY STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 DECEMBER 2013
Share Share Foreign Retained Total
capital premium currency deficit
translation
reserve
US$'000 US$'000 US$'000 US$'000 US$'000
------------------------------ -------- -------- ------------ --------- ----------
Total equity as at
31 December 2011 (restated) 2,178 46,801 2,106 (37,324) 13,761
Profit after taxation - - - 10,267 10,267
Exchange differences
on translating to
presentational currency - - 1,367 - 1,367
------------------------------ -------- -------- ------------ --------- ----------
Total comprehensive
income for the year - - 1,367 10,267 11,634
Shares issued 934 6,470 - - 7,404
Recognition of share-based
payment - - - 599 599
Total equity as at
31 December 2012 3,112 53,271 3,473 (26,458) 33,398
============================== ======== ======== ============ ========= ==========
Share Share Foreign Other Retained Total
capital premium currency reserves deficit
translation
reserve
US$'000 US$'000 US$'000 US$'000 US$'000 US$'000
----------------------------- -------- -------- ------------ --------- --------- --------
Total equity as at
1 January 2013 3,112 53,271 3,473 - (26,458) 33,398
Loss after taxation - - - - (9,835) (9,835)
Exchange differences
on translating to
presentational currency - - 1 - - 1
----------------------------- -------- -------- ------------ --------- --------- --------
Total comprehensive
income for the year - - 1 - (9,835) (9,834)
Reversal of the share-based
payment - - - (599) (599)
Recognition of share-based
payment - - - 45 427 472
Total equity as at
31 December 2013 3,112 53,271 3,474 45 (36,465) 23,437
============================= ======== ======== ============ ========= ========= ========
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
AS AT 31 DECEMBER 2013
31 December 31 December
2013 2012
Notes US$'000 US$'000
------------------------------- ------ ------------ ------------
Non-current assets
Property, plant and equipment 12 34 19
Intangible assets 13 - 13,691
Investments in equity
accounted joint ventures 8 1,116 -
------------------------------- ------ ------------ ------------
Total non-current assets 1,150 13,710
Current assets
Inventories 15 - 21
Trade and other receivables 16 1,259 420
Cash and cash equivalents 20,957 4,000
------------------------------- ------ ------------ ------------
Total current assets 22,216 4,441
Total assets 23,366 18,151
================================ ====== ============ ============
Capital and reserves attributable to the equity holders
of the parent
Share capital 19 3,112 3,112
Share premium 53,271 53,271
Foreign currency translation
reserve 3,448 4,732
Share options reserve 45 -
Retained deficit (37,551) (43,368)
------------------------------- ------ ------------ ------------
Total equity 22,325 17,747
Current liabilities
Trade and other payables 17 1,041 404
------------------------------- ------ ------------ ------------
Total liabilities 1,041 404
Total equity and liabilities 23,366 18,151
================================ ====== ============ ============
The financial statements were approved and authorised for issue
by the Board on 7 April 2014 and were signed on its behalf by:
Maxim Barskiy
Chief Executive Officer
COMPANY STATEMENT OF FINANCIAL POSITION
AS AT 31 DECEMBER 2013
Company number: 5375141
31 December 31 December
2013 2012
Notes US$'000 US$'000
------------------------------- ------ ------------ ------------
Non-current assets
Property, plant and equipment 12 34 8
Investment in subsidiary 14 1,545 32,761
------------------------------- ------ ------------ ------------
Total non-current assets 1,579 32,769
Current assets
Trade and other receivables 16 2,321 85
Cash and cash equivalents 20,274 811
------------------------------- ------ ------------ ------------
Total current assets 22,595 896
Total assets 24,174 33,665
================================ ====== ============ ============
Capital and reserves attributable to the equity holders of
the parent
Share capital 18 3,112 3,112
Share premium 53,271 53,271
Foreign currency translation
reserve 3,474 3,473
Share options reserve 45 -
Retained deficit (36,465) (26,458)
------------------------------- ------ ------------ ------------
Total equity 23,437 33,398
Current liabilities
Trade and other payables 16 737 267
------------------------------- ------ ------------ ------------
Total liabilities 737 267
Total equity and liabilities 24,174 33,665
================================ ====== ============ ============
The financial statements were approved and authorised for issue
by the Board on 7 April 2014 and were signed on its behalf by:
Maxim Barskiy
Chief Executive Officer
CONSOLIDATED AND COMPANY STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED 31 DECEMBER 2013
Group Company
31 December 31 December 31 December 31 December
2013 2012 2013 2012
US$'000 US$'000 US$'000 US$'000
------------------------------------ ------------ ------------ ------------ ------------
Profit / (Loss) after taxation 5,989 (4,813) (9,835) 10,267
Adjustments for:
Depreciation 5 5 5 1
Finance income (29) (42) (51) (208)
Share of post-tax profits 429 - - -
of equity accounted joint
ventures
Profit on sale of discontinued
operations, net of tax (14,063) - (49) -
Profit on disposal of property, - (24) - -
plant and equipment
Impairment of the inter-company
receivable - - 3,143 (13,695)
Cost related to sales of
test production 282 503 - -
Share-based payment 427 599 427 599
Reversal of share-based
payment (599) - (599) -
Foreign currency differences 1,988 130 1,988 10
------------ ------------ ------------ ------------
Cash generated from operations
before changes in working
capital (5,571) (3,642) (4,971) (3,026)
Decrease in inventories 2 6 - -
Decrease / (increase) in
receivables 68 (295) (50) (4,389)
Increase in payables 750 141 471 154
Interest received 26 42 18 18
Net cash from operating activities (4,725) (3,748) (4,532) (7,243)
Investment in subsidiaries
and joint ventures (1,500) - (1,500) (1,335)
Disposal of subsidiary undertaking
(note 7) 24,928 - 24,928 -
Proceeds from sale of property, - 24 - -
plant and equipment
Purchase of property, plant
and equipment (32) (13) (32) (8)
Expenditure on oil and gas
assets (437) (1,954) - -
Loan to related parties (993) - (2,150) -
Loan returned from Matra - - 2,785 -
Cyprus Petroleum Ltd
Net cash from investing activities 21,966 (1,943) 24,031 (1,343)
Proceeds from issue of shares - 7,404 - 7,404
Net cash from financing activities - 7,404 - 7,404
Net increase / (decrease)
in cash and cash equivalents 17,241 1,713 19,499 (1,182)
Cash and cash equivalents
at beginning of period 4,000 2,333 811 2,024
Effect of foreign exchange
rate differences (284) (46) (36) (31)
Cash and cash equivalents
at end of period 20,957 4,000 20,274 811
===================================== ============ ============ ============ ============
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2013
1. Accounting policies
Basis of preparation
These financial statements have been prepared in accordance with
International Financial Reporting Standards, International
Accounting Standards and Interpretations (collectively IFRSs)
issued by International Accounting Standards Board (IASB) as
adopted by European Union.
These financial statements are presented in US Dollars and
rounded to the nearest thousand (US$'000).
The principal accounting policies adopted in the preparation of
these financial statements are set out below. The policies have
been applied consistently to all the years presented, unless
otherwise stated.
The financial information set out above for the years ended 31
December 2013 and 31 December 2012 does not constitute statutory
accounts as defined in Section 434 of the Companies Act 2006, but
is derived from those accounts. A copy of the statutory accounts
for 2012 has been delivered to the Registrar of Companies and those
for 2013 will be submitted for approval by shareholders at the
Annual General Meeting. The auditor has issued an unqualified
opinion in respect of the financial statements which does not
contain any statements under the Companies Act 2006, Section 498(2)
or Section 498(3).
Going concern
For going concern purposes the Directors have prepared a cash
flow forecast for the period until the end of 2015 that relies on
the available cash resources and does not assume raising additional
equity or debt finance. The Group's operations are forecast to be
cash generative in 2014 and with the current cash position they
consider that there will be sufficient cash resources to cover the
Group's minimum uncommitted drilling and workover programme and
administrative costs for the next 18 months.
To implement the Board's strategy of rapid development and
further acquisition of assets, as described in the Chairman's
statement and the Strategic Report, additional funding will be
required. The Directors are looking to raise the required funding
through reserve based financing and are confident that such funds
will be available to the Group. However, at present there are no
binding agreements in place and therefore should the additional
funding not be secured this could result in delays to the planned
development.
New and revised standards and interpretations applied
A number of new standards and amendments to existing standards
and interpretations were applicable from 1 January 2013. The
adoption of these amendments did not have a material impact on the
Group's financial statements for the year ended 31 December
2013.
The following standards, amendments and interpretations are not
yet effective and have not been earlier adopted:
Effective
* Standard date
-------------------------------------------------------------------- ----------------
IFRS 10 Consolidated financial statements 1 January
2014
-------------------- ---------------------------------------------- ----------------
IFRS 11 Joint arrangements 1 January
2014
-------------------- ---------------------------------------------- ----------------
IFRS 12 Disclosure of interest in other entities 1 January
2014
-------------------- ---------------------------------------------- ----------------
IAS 27 (Amendment Separate financial statements 1 January
2011) 2014
-------------------- ---------------------------------------------- ----------------
IAS 28 (Amendment Investments in associates and joint 1 January
2011) ventures 2014
-------------------- ---------------------------------------------- ----------------
IAS 32 (Amendment) Offsetting Financial Assets and Financial 1 January
Liabilities 2014
-------------------- ---------------------------------------------- ----------------
IAS 36 (Amendment) Recoverable amounts disclosures for 1 January
non-financial assets 2014
-------------------- ---------------------------------------------- ----------------
IAS 39 (Amendment) Novation of Derivatives and Continuation 1 January
of Hedge Accounting 2014
-------------------- ---------------------------------------------- ----------------
IFRS 9 Financial Instruments To be confirmed
-------------------- ---------------------------------------------- ----------------
IAS 19 (Amendment) Defined Benefit Plans: Employee Contributions 1 January
2014*
-------------------- ---------------------------------------------- ----------------
IFRIC 21 Interpretation of IAS 37 Provisions, 1 January
Contingent Liabilities and Contingent 2014*
Assets on the accounting for levies
imposed by governments.
-------------------- ---------------------------------------------- ----------------
Annual Improvements 2010-2012 Cycle 1 January
to IFRSs 2014*
-------------------- ---------------------------------------------- ----------------
Annual Improvements 2011-2013 Cycle 1 January
to IFRSs 2014*
-------------------- ---------------------------------------------- ----------------
* Not yet endorsed by EU.
The Group is evaluating the impact of the above pronouncements
but they are not expected to have a material impact on the Group's
earnings or shareholders' funds.
Basis of consolidation
Where the Company has the power, either directly or indirectly,
to govern the financial and operating policies of another entity or
business so as to obtain benefits from its activities, it is
classified as a subsidiary. The consolidated financial statements
present the results of the Company and its subsidiaries ("the
Group") as if they formed a single entity. Inter-company
transactions and balances between Group companies are therefore
eliminated in full.
Segmental reporting
Operating segments are reported in a manner consistent with the
internal reporting provided to the chief operating decision-maker.
The chief operating decision maker has been identified as the
Board.
Business combinations
The consolidated financial statements incorporate the results of
business combinations using acquisition accounting. In the
consolidated statement of financial position, the acquiree's
identifiable assets, liabilities and contingent liabilities are
initially recognised at their fair values at the acquisition date.
The results of acquired operations are included in the consolidated
statement of profit or loss from the date on which control is
obtained.
Foreign currency translation
Transactions entered into by Group entities in a currency other
than the currency of the primary economic environment in which they
operate (their "functional currency") are recorded at the rates
ruling when the transactions occur. Foreign currency monetary
assets and liabilities are translated at the rates ruling at the
reporting date. Exchange differences arising on the retranslation
of unsettled monetary assets and liabilities are recognised
immediately in the consolidated statement of profit or loss.
The Company's functional currency is Pound sterling. Matra
Petroleum USA and joint ventures' functional currency is US dollar.
Matra Petroleum Cyprus (Alpha) ltd functional currency is Euro.
On consolidation, the results of overseas operations are
translated into US Dollars (the presentational currency) at rates
approximating to those ruling when the transactions took place. All
assets and liabilities of overseas operations are translated at the
rate ruling at the reporting date. Differences arising on
retranslating the opening net assets and the results of operations
are recognised directly in equity (the "foreign currency
translation reserve").
Exchange differences recognised in the statement of profit or
loss of Group entities' separate financial statements on the
translation of long-term monetary items forming part of the Group's
net investment in the overseas operation concerned are reclassified
to the foreign currency translation reserve on consolidation.
On disposal of a foreign operation, the cumulative exchange
differences recognised in the foreign currency translation reserve
relating to that operation up to the date of disposal are
transferred to the consolidated profit or loss statement as part of
the profit or loss on disposal.
The following rates were used to translate these financial
statements:
As at 31.12.2013 Average for As at 31.12.2012 Average for
2013 2012
GBP to
USD 1.6490 1.5646 1.6168 1.5851
USD to
RUB 32.7855 31.8540 30.4858 31.1604
EUR to
USD 1.3767 1.3281 1.3218 1.2861
Property, plant and equipment
Property, plant and equipment are stated at cost less
accumulated depreciation and impairment. Depreciation is provided
at rates calculated to write off the cost of assets, less their
estimated residual value, over their expected useful economic lives
on the following basis:
Property, plant and equipment - 25% per annum straight line.
The useful lives and residual values of Property, plant and
equipment are re-assessed annually and any revisions taken to the
income statement in the current period.
Intangible oil exploration and evaluation assets
The Group applies the successful efforts method of accounting
for exploration and appraisal costs. Under the successful efforts
method of accounting, all licence acquisition, exploration and
appraisal costs are initially capitalised in well, field or
specific exploration well cost centres as appropriate, pending
determination. Costs are capitalised until commercial reserves are
established or the exploration site is deemed to have no commercial
value. Costs incurred on areas of interest where exploration is
completed without success are impaired to the income statement.
Pre-licence costs: costs incurred prior to having obtained the
legal rights to explore an area are expensed directly to the income
statement as they are incurred.
Exploration and appraisal costs are initially capitalised as an
intangible asset. Intangible assets are not amortised prior to the
conclusion of appraisal activities and determination of commercial
reserves.
Impairment of exploration and evaluation assets
All intangible assets are reviewed regularly for indications of
impairment and costs are written off where circumstances indicate
that the carrying value might not be recoverable. Any impairment is
immediately written off to the statement profit or loss. The Group
applies the successful efforts method of accounting where costs are
capitalised in different cost centres for each well and the
impairment review is carried out separately on each cost centre. An
individual well is a cash generating unit.
Investments
In its separate financial statements the Company recognises its
investments in subsidiaries and associates at cost less allowances
for impairments in value.
Joint arrangements accounting policy
The Group is party to a joint arrangement where there is a
contractual agreement that confers a joint control and it involves
the establishment of a separate entity ('Joint Venture') in which
each party has a jointly controlled interest.
The Group accounts for its interest in joint venture using
equity method where the Group's share of post-acquisition profits
and losses and other comprehensive income is recognised in the
consolidated profit or loss and other comprehensive income.
Any premium paid for an investment in a joint venture above the
fair value of the Group's share of the identifiable assets,
liabilities and contingent liabilities acquired is capitalised and
included in the carrying amount of the investment in joint venture.
Where there is objective evidence that the investment in a joint
venture has been impaired the carrying amount of the investment is
tested for impairment in the same way as other non-financial
assets.
Inventories
Inventories are stated at the lower of cost and net realisable
value. Cost comprises all costs of purchase, costs of conversion
and other costs included in bringing the inventories to their
present location and condition.
Financial instruments
Financial assets and financial liabilities are recognised when
the Group and the Company becomes party to the contractual
provisions of the instrument. Financial assets are de-recognised
when the contractual right to the cash flow expires or when
substantially all the risk and rewards of ownership are
transferred. Financial liabilities are de-recognised when the
obligations specified in the contract are either discharged or
cancelled.
Financial assets
The Group classifies its financial assets into one of the
following categories, depending on the purpose for which the asset
was acquired. The Group does not have any held to maturity,
available for sale or fair value through profit and loss
assets.
Loans and receivables
Trade and other receivables are stated initially at fair value
and subsequently at amortised cost (unless the effect of the time
value of money is immaterial) less allowance for impairment in
value.
Fair value through profit or loss
This category comprises the contingent consideration which arose
on disposal of subsidiary (note 7) and is treated as a financial
asset which is carried in the statement of financial position at
fair value with changes in fair value recognised in the profit or
loss.
Cash and cash equivalents
Cash and cash equivalents include cash in hand, deposits held at
call with banks and other short term highly liquid investments with
an original maturity of 90 days or less.
Financial liabilities
The Group's financial liabilities consist of trade and other
payables which are initially stated at fair value and subsequently
at amortised cost. There are no liabilities recognised at fair
value through profit or loss.
Tax
Income tax on the profit or loss from ordinary activities
includes current and deferred tax.
Current tax is based on the profit or loss from ordinary
activities adjusted for items that are non-assessable or disallowed
and is calculated using tax rates that have been enacted or
substantively enacted by the reporting date.
Income tax is charged or credited to profit or loss, except
where the tax relates to items credited or charged to other
comprehensive income in which case the tax is also dealt with in
other comprehensive income, or when the tax relates to items
credited or charged directly to equity, in which case the tax is
also dealt with in equity.
Deferred taxation
Deferred tax is provided on temporary differences between the
carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for taxation purposes. The following
temporary differences are not provided for: the initial recognition
of assets or liabilities that affect neither accounting nor taxable
profit other than in a business combination, and differences
relating to investments in subsidiaries to the extent that they
will probably not reverse in the foreseeable future. The amount of
deferred tax provided is based on the expected manner of
realisation or settlement of the carrying amount of assets and
liabilities, using tax rates enacted or substantively enacted at
the reporting date.
Deferred tax liabilities are generally recognised for all
taxable temporary differences. Deferred tax assets and current tax
losses have not been recognised since it is uncertain that taxable
profits will be available against which deductible temporary
differences can be utilised.
Deferred tax assets and liabilities are offset when the Group
has a legally enforceable right to offset current tax assets and
liabilities and the deferred tax assets and liabilities relate to
taxes levied by the same tax authority on either the same taxable
Group Company or different Group Entities which intend either to
settle current tax assets and liabilities on a net basis or to
realise the assets and settle the liabilities simultaneously, in
each future period in which significant amounts of deferred tax
assets or liabilities are expected to be settled or recovered.
Share capital
Issued and paid up share capital is recognised at the fair value
of the consideration received by the Company. Any transaction costs
arising on the issue of ordinary shares are recognised directly in
equity as a reduction of the share proceeds received.
Share Based Payments
Where equity settled share options are awarded to employees, the
fair value of the options at the date of grant is charged to the
consolidated income statement over the vesting period. Non-market
vesting conditions are taken into account by adjusting the number
of equity instruments expected to vest at each reporting date so
that, ultimately, the cumulative amount recognised over the vesting
period is based on the number of options that eventually vest.
Market vesting conditions are factored into the fair value of the
options granted. As long as all other vesting conditions are
satisfied, a charge is made irrespective of whether the market
vesting conditions are satisfied. The cumulative expense is not
adjusted for failure to achieve a market vesting condition.
Where the terms and conditions of options are modified before
they vest, the increase in the fair value of the options, measured
immediately before and after the modification, is also charged to
the consolidated income statement over the remaining vesting
period.
Where equity instruments are granted to persons other than
employees, the consolidated income statement is charged with the
fair value of goods and services received.
2. Significant accounting judgements and key sources of estimation
uncertainty
The Group makes estimates and assumptions regarding the future.
Estimates and judgements are continually evaluated based on
historical experiences and other factors, including expectations of
future events that are believed to be reasonable under the
circumstances. In the future, actual experience may deviate from
these estimates and assumptions. The estimates and assumptions that
have a significant risk of causing a material adjustment to the
carrying amounts of assets and liabilities within the next
financial year are as follows:
Carrying value of investments in joint ventures
The Group assesses at each reporting period whether there is any
indication that the investments in joint ventures capitalised may
be impaired, If such an indication exists, the Group estimates the
recoverable amount of the asset. The assessment of recoverable
amount judgement as to the likely future commerciality of the asset
and when such commerciality should be determined as well as future
revenues and costs pertaining to the utilisation of the exploration
and production rights to which such capitalised costs relate and
the discount rate to be applied to such future revenues and costs
in order to determine a recoverable value.
Share based payments
The Company makes equity-settled share-based payments to certain
Group employees. Equity-settled share-based payments are measured
at fair value using a Black-Scholes valuation model at the date of
grant based on certain assumptions. Those assumptions are described
in the note 18 to these financial statements and include, among
others, expected volatility, expected life of the options and
number of options expected to vest. More details including carrying
values are disclosed in the note to the accounts.
3. Loss per share
Loss per share from continuing operations of 0.34 cents (2012:
0.20 cents) is calculated by dividing the loss from continuing
operations of US$6,641,000 (2012: US$3,421,000) by the weighted
average number of ordinary shares outstanding during the year of
1,936,117,872 (2012: 1,717,649,244).
Profit per share from discontinued operations of 0.65 cents
(2012: 0.08 cents loss per share) is calculated by dividing the
profit from discontinued operations of US$12,630,000 (2012: loss of
US$1,395,000) by the weighted average number of ordinary shares
outstanding during the year of 1,936,117,872 (2012:
1,717,649,244).
The effect of all potential ordinary shares arising from the
exercise of options going forward is considered to be anti-dilutive
and therefore diluted earnings per share has not been calculated.
At the reporting date there were 338,922,823 (2012: 53,672, 907)
potentially dilutive ordinary shares.
4. Parent Company's income statement
The Company has taken advantage of section 408 of the Companies
Act 2006 and has not included its own income statement in these
financial statements. The Company's (loss)/profit for the year
after taxation was US$(9,835,000) (2012: US$10,267,000).
5. Loss from continuing operations
2013 2012
Notes Audited
US$'000 US$'000
---------------------- ------ -------- --------
Staff costs 6 1,577 1,250
Travel costs 681 388
Office costs 373 326
Corporate costs 368 389
Legal & professional
costs 1,421 463
General costs - 2
Exchange loss 1,988 20
Gain on disposal - -
Depreciation /
amortization 5 -
Share-based payment
reversal (599) -
Share-based payment 427 599
6,241 3,437
---------------------- ------ -------- --------
Loss from operations consist of administrative expenditure of
Matra Petroleum plc and its subsidiaries Matra Petroleum U.S.A.,
Inc. and Matra Cyprus Petroleum (Alpha) Limited. Loss from
operations of the disposed subsidiaries Matra Cyprus Petroleum
Limited and OOO Arkhangelvoskoe is shown separately in the note
7.
Exchange loss
Unrealised foreign exchange loss represents a loss arising on
retranslation of monetary items denominated in non-functional
currency in accordance with IAS 21 "The Effects of Changes in
Foreign Exchange Rates". This loss is an accounting adjustment and
has no impact on cash available to spend.
The loss arose due to the fact that the exchange rate of US
dollar to Pound sterling has fallen by 0.1278 from 1.5212 GBP/USD
on 1 July to 1.649 GBP/USD on 31 December 2013. Whereas this
movement in exchange rate did not affect the actual amount of cash
held by the Company in US dollars, an accounting entry showing loss
of US$1,988,000 was made in order to comply with the IFRS. In the
event of the US dollar appreciation against Pound sterling, the
Company will accrue an accounting gain which also will not have an
impact on the actual cash held by the Company.
The management believes that given Company's extensive
development programme, holding cash in US dollars is most
beneficial for the Company as it protects Company against US dollar
depreciation leaving the Company with the same amount of US dollars
irrespective of movements in the exchange rate.
Auditor's remuneration
2013 2012
US$'000 US$'000
-------------------------------------------- -------- --------
Fees payable by the Group to the Company's
auditor and its associates in respect
of the year:
Audit and assurance services:
- Group and parent Company's accounts 70 74
- Group subsidiaries - 37
70 111
Other services:
- Tax compliance 9 9
- Tax advice 53 30
62 39
Total 132 150
============================================ ======== ========
6. Staff costs
Total staff costs (including Directors) comprise:
2013 2012
US$'000 US$'000
--------------------- -------- --------
Employee salaries
and benefits 1,376 1,081
Employers national
insurance 201 169
Share-based payment 427 599
Share-based payment
reversal (599) -
1,405 1,849
===================== ======== ========
Directors' emoluments
2013 2012
US$'000 US$'000
----------------------- -------- --------
Basic salary and fees 839 519
Consultancy fees 2 -
Bonus 660 250
Compensation for loss
of office - 323
Benefits in kind 11 -
Share-based payment 324 599
Share-based payment -
reversal (599)
1,237 1,691
======================= ======== ========
The following table shows the directors who served during the year
or in the previous year together with an analysis of their remuneration:
Basic Salary Consultancy Bonus Benefits 2013 2012
Fees in kind
US$'000 US$'000 US$'000 US$'000 US$'000 US$'000
------------------------ ------------- ------------ -------- --------- -------- --------
Executive directors
Maxim Barskiy 282 - 260 - 542 177
Vladimir Lenskiy 236 2 218 - 456 147
Ekaterina Sapozhnikova 236 - 182 11 429 149
Peter Hind - - - - - 687
Neil Hodgson - - - - - 129
Non-executive
directors
Sir Michael Jenkins 12 - - - 12 48
Bill Guest 42 - - - 42 32
Matthias Brandl 31 - - - 31 -
839 2 660 11 1,512 1,369
======================== ============= ============ ======== ========= ======== ========
Directors emoluments includes US$325,000 (2012: US$277,000)
related to discontinued operations and which are not included in
the staff costs note above.
Key management personnel:
2013 2012
US$'000 US$'000
-------------------------------- -------- --------
Employee salaries and benefits 1,330 1,092
Employers national insurance 184 161
Share based payment expense 411 599
Share based payment reversal (599) -
1,326 1,852
================================ ======== ========
Key management personnel include all parent Company Directors
and senior management in the UK, Russia and Cyprus. The highest
paid director in 2013 received US$542,000).
Average number of employees in the Group (including
Directors):
2013 2012
Technical 3 6
Corporate & administrative 7 11
10 17
============================================= ======== =====
7. Discontinued operations
On 28 June 2013 the Company disposed of its 100% interest in
Matra Cyprus Petroleum Limited which owns 100% of the share capital
in OOO Arkhangelovskoye for a potential total consideration of
US$35 million of which US$25 million was received on 1 of July 2013
with the remaining US$10 million receivable on or after 4 April
2014 conditional upon the outcome of the drilling works to be
carried out by the buyer by 1 April 2014. Due to high degree of
uncertainty of the outcome of the drilling results the contingent
consideration was valued at US$1 on the date of disposal and the
reporting date.
Subsequently, on 1 April 2014 the Company became entitled to the
deferred consideration of US$10 million as a negative report on the
outcome of the drilling works was not provided to the Company by
the buyer (note 23). This is considered a non-adjusting subsequent
event and the changes in the fair value of the contingent
consideration have not been recognised at the reporting date.
The post-tax gain on discontinued operation has been determined
as follows:
28 June
2013
US$000
---------
Cash consideration received 25,000
Less net assets disposed:
PPE 8
Intangibles 12,849
Inventories 19
Trade and other receivables 88
Cash 72
Trade and other payables (111)
-------
(12,925)
Add release of cumulative translation reserve* 1,988
Gain on disposal of discontinued operations
before and after tax 14,063
=========
Add results of discontinued operations for
the period (1,433)
Net gain on disposal of discontinued operations
before and after tax** 12,630
=========
The cash flow comprises:
Consideration received 25,000
Cash disposed
of (72)
---------
Net cash inflow 24,928
---------
* The US$1.9 million release of cumulative translation reserves
represents the previously capitalised translation gains and losses
attributed to the interest sold.
** Company qualified for the substantial shareholdings exemption
and the gain is exempt from the tax in the UK.
Result of discontinued operations 28 June 31 December
2013 2012
US$'000 US$'000
--------------------------------------- -------- ------------
Revenue 282 503
Cost of sales (282) (503)
Administration expenses (1,454) (1,418)
Finance income 21 26
Taxation - (3)
Loss for the period from discontinued
operations (1,433) (1,395)
======================================= ======== ============
Earnings per share from discontinued 28 June 31 December
operations
2013 2012
cents cents
------------------ ------------
Basic earnings / (loss) per
share 0.65 (0.08)
Diluted earnings / (loss)
per share 0.65 (0.08)
Statement of cash flows
The statement of cash flows includes the following amounts
relating to discontinued operations:
28 June 31 December
2013 2012
US$'000 US$'000
-------------------------------------- ------------------ ------------
Operating activities 127 (1,036)
Investing activities (437) (1,954)
Financing activities - -
Net cash from discontinued
operations (310) (2,990)
====================================== ================== ============
8. Investment in equity accounted joint ventures
On 31 October 2013, the Company announced that its wholly owned
subsidiary, Matra Petroleum U.S.A. ("Matra USA"), has entered into
agreement which allows it to make a series of investments into the
US onshore oil and gas sector. On the same date Matra USA has
acquired a 50% interest in a joint venture vehicle, PG-M
International, LLC ("PG-M-JV"), a Texas limited liability Company
with certain oil and gas leasehold interests in the Texas Panhandle
region of the USA, from PSOFEI, LLC for a consideration of
US$1.5m.
On 29 October 2013, Matra USA has acquired a 50% in another
joint venture vehicle, PG-M International Operating, LLC ("PGMIO"),
a Texas limited liability Company, for a consideration of
US$500.
In addition, the Company has entered into an option agreement
with PSOFEI, LLC pursuant to which the Company has granted to
PSOFEI, LLC options to subscribe for 150,000,000 ordinary shares in
the Company at a price of 2.24 pence per ordinary share (note
18).
US$'000
--------
At 1 January 2013 -
Cash investment in joint ventures 1,500
Share-based payment for acquisition of joint
ventures 45
Share of post tax loss of joint ventures (429)
--------
At 31 December 2013 1,116
Summarised information in relation to the joint ventures is
presented below:
28 September
2013
US$'000
-------------
As at 31 December
Current assets 332
Non-current assets 3,431
Current liabilities (1,472)
Non-current liabilities (149)
Included in the above amounts are:
Cash and cash equivalents 256
Proven oil & gas properties 2,073
Non-current assets prepayment 1,076
Non-current assets (Bond for operator's
licence) 250
Current financial liabilities
(excluding trade payables) (996)
Non-current financial liabilities
(excluding trade payables) (149)
Period ended 31 December
Revenues -
Loss from continuing operations 858
Loss after taxation 858
Other comprehensive income -
Total comprehensive income 858
Included in the above amounts are:
Depreciation and amortisation -
Interest income -
Interest expense 3
The above information relates to both PG-M-JV and PGMIO on a
combined basis. PGMI was incorporated on 28 September 2013 with a
purpose to hold certain oil and gas assets. PGMIO was incorporated
on 30 September 2013 with a purpose of providing operator's
services to the PG-M-JV's properties and will take over this
service from Petrolia Group, LLC which is operator at the
moment.
Name Country of incorporation Proportion Nature of business
of ownership
-------------------- ------------------------- -------------- -------------------
PG-M International, United States Owner of oil and
LLC of America 50% gas assets
PG-M International United States Operator of oil
Operating, LLC of America 50% and gas assets
9. Taxation
Below is a reconciliation of the theoretical income tax rate to
the actual effective tax rate in the Group's income statement:
Note 2013 2012
-----
US$'000 US$'000
------------------------------------------------ ----- -------- --------
Profit /(loss) before taxation attributable
to the equity holders of the parent 7 5,989 (4,613)
------------------------------------------------ ----- -------- --------
Taxation at the UK corporation tax rate
of 23.25% (2012: 24%) 1,392 (1,155)
Effect of different tax rates in overseas
jurisdictions (128) 89
Expenses not deductible for tax purposes 524 144
Profits not subject to tax arising on disposal
of discontinued operations (2,936) -
Unrecognised tax losses carried forward 1,148 925
Tax charge for the year - 3
================================================ ===== ======== ========
Total tax losses of US$4,034,000 (2012: US$3,004,000) are
carried forward to future periods for which no deferred tax asset
has been recognised as the recoverability of such asset is
uncertain at this stage.
10. Segmental reporting
Prior to disposal of OOO Arkhangelovskoye (note 7) the Group's
operations were entirely focused on oil and gas exploration and
development within Russian Federation. Following the subsequent
acquisition of 50% interest in joint venture vehicles in USA (note
8) the Group has changed its operating focus and is now entirely
focused on oil & gas development and production in the US
onshore oil and gas sector with its corporate head office in the
UK.
The operating segment has been identified on the basis of
internal reports about the components of the Group. The Group has
one reportable segment, being operations in the USA. The operating
results of this segment are regularly reviewed by the Group's chief
operating decision makers in order to make decisions about the
allocation of resources and to assess their performance. The
operating results of the segment are disclosed in note 8.
The operating results of the disposed segment are disclosed in
note 7.
11. Finance income
Group
2013 2012
US$'000 US$'000
--------------- -------- --------
Bank interest 29 16
29 16
=============== ======== ========
12. Property, plant and equipment
Property, plant and equipment is comprised of office and
computer equipment.
US$'000
---------------------------------- -------------------------------
Cost at 1 January 2012 153
Additions 13
Disposals (70)
Foreign exchange difference 1
---------------------------------- -------------------------------
Cost at 31 December 2012 97
Additions 32
Disposals (36)
Foreign exchange difference (2)
----------------------------------
Cost at 31 December 2013 91
---------------------------------- -------------------------------
US$'000
Depreciation at 1 January 2012 (142)
Charge for the year (5)
Disposals 70
Foreign exchange difference (1)
---------------------------------- -------------------------------
Depreciation at 31 December 2012 (78)
Charge for the year (5)
Disposals 27
Foreign exchange difference (1)
----------------------------------
Depreciation at 31 December 2013 (57)
---------------------------------- -------------------------------
US$'000
-------------------------------
Net book value at:
1 January 2012 11
31 December 2012 19
31 December 2013 34
13. Intangible assets
COST Group
US$'000
--------------------------------------- ------------------------------------------------------
Cost at 1 January 2012 18,284
Additions 1,954
Sales from test production (503)
Foreign exchange difference 1,105
---------------------------------------
Cost at 31 December 2012 20,840
Additions 437
Sales from test production (282)
Disposals (19,998)
Foreign exchange difference (997)
---------------------------------------
Cost at 31 December 2013 -
--------------------------------------- ------------------------------------------------------
ACCUMULATED IMPAIRMENT Group
US$'000
------------------------------------------------------
Accumulated impairment at 1 January
2012 (6,763)
Impairment in the year -
Foreign exchange difference (386)
---------------------------------------
Accumulated impairment at 31 December
2012 (7,149)
Disposal of subsidiary 7,149
Foreign exchange difference -
---------------------------------------
Accumulated impairment at 31 December
2013 -
--------------------------------------- ------------------------------------------------------
Group
US$'000
------------------------------------------------------
Net book value at 31 December 2011
(restated) 11,521
Net book value at 31 December 2012 13,691
Net book value at 31 December 2013 -
14. Investment in subsidiaries
The principal subsidiaries of Matra Petroleum plc, all of which
have been included in these consolidated financial statements,
are as follows:
Name Country of incorporation Proportion Nature of business
of ownership
----------------------- ------------------------- -------------- -------------------
Matra Cyprus Petroleum
(Alpha) Limited Cyprus 100% Holding Company
Matra Petroleum U.S.A. United States
Inc. of America 100% Holding Company
Investment Inter-Company Total
loans
US$'000 US'000 US'000
----------- -------------- ---------
Cost at 1 January 2012 2 - 2
Additions 1,334 - 1,334
Re-classification (note 15) - 31,425 31,425
-----------------------------
Cost at 31 December 2012 1,336 31,425 32,761
Additions 1,500 - 1,500
Share-based options charge 45 - 45
Loan repayment - (2,785) (2,785)
Disposals (1,256) (23,695) (24,951)
Impairment of intercompany
loan - (3,143) (3,143)
Foreign exchange difference (80) (1,802) (1,882)
----------------------------- ----------- -------------- ---------
Cost at 31 December 2013 1,545 - 1,545
----------------------------- ----------- -------------- ---------
15. Inventories
Group Group Company Company
2013 2012 2013 2012
US$'000 US$'000 US$'000 US$'000
---------------------------- -------- -------- -------- --------
Drilling and other supplies - 21 - -
============================ ======== ======== ======== ========
16. Receivables
Group Group Company Company
2013 2012 2013 2012
US$'000 US$'000 US$'000 US$'000
----------------------------------- -------- -------- -------- ---------
Prepayments and other receivables 263 420 137 85
Loans to related parties 996 - - -
Inter-Company loans - - 2,184 17,730
Reversal of impairment - - - 13,695
Re-classification (note
13) - - - (31,425)
1,259 420 2,321 85
=================================== ======== ======== ======== =========
The fair value of receivables is not significantly different
from the carrying value.
Loans to related parties represent a funding note of up to
US$16,500,000 to PG-M JV repayable in May 2014 with an annual
interest rate of 6%.
Inter-Company loans represent a short-term loan to Matra USA
with an annual interest rate of 5.5% repayable on demand.
17. Trade and other payables
Group Group Company Company
2013 2012 2013 2012
US$'000 US$'000 US$'000 US$'000
----------------------------- -------- -------- -------- --------
Trade payables 293 178 267 119
Accruals and other payables 748 226 470 148
1,041 404 737 267
============================= ======== ======== ======== ========
18. Share based payments
Exercise Grant Outstanding Granted Exercised Lapsed Outstanding Final
price date at start during during during at end exercise
(p) of year the year the year the year of year date
--------- ----------- ------------ -------------- ------------ -------------- -------------- -----------
2012
0.1 11/04/2006 5,000,000 - (5,000,000) - -
5 11/04/2006 10,000,000 - - (10,000,000) -
0.1 23/05/2006 1,200,000 - (1,200,000) - -
5 23/05/2006 6,000,000 - - (6,000,000) -
4.5 23/04/2007 8,000,000 - - (8,000,000) -
7.5 25/09/2007 250,000 - - (250,000) -
3.65 20/10/2009 20,500,000 - - (20,000,000) 500,000 19/10/2014
1.81 01/07/2010 200,000 - - - 200,000 30/06/2015
0.5 11/11/2011 8,500,000 - - - 8,500,000 11/11/2014
1.13 11/05/2012 - 44,472,907 - - 44,472,907 11/05/2014
Total 59,650,000 44,472,907 (6,200,000) (44,250,000) 53,672,907
--------- ----------- ------------ -------------- ------------ -------------- -------------- -----------
WAEP 3.32 1.13 0.10 4.31 1.06
--------- ----------- ------------ -------------- ------------ -------------- -------------- -----------
2013
3.5 20/10/2009 500,000 - - - 500,000 19/10/2014
1.81 01/07/2010 200,000 - - - 200,000 30/06/2015
0.5 11/11/2011 8,500,000 - - - 8,500,000 11/11/2014
1.13 11/05/2012 44,472,907 - (44,472,907)- -
0.85 28/06/2013 - 179,722,823* - - 179,722,823* 28/06/2018
2.24 29/10/2013 - 150,000,000** - - 150,000,000** 30/04/2015
Total 53,672,907 329,722,823 - (44,472,907)- 338,922,823
--------- ----------- ------------ -------------- ------------ -------------- -------------- -----------
WAEP 1.06 1.48 0.00 1.13 1.46
--------- ----------- ------------ -------------- ------------ -------------- -------------- -----------
As at 31 December 2013 9,200,000 share options (2012: 9,200,000)
had vested and were exercisable at a weighted average exercise
price of 1.46p (2012: 0.7p).
The weighted average contractual life of share options
outstanding at the end of the period is 3 years (2012:1.46
years)
Options granted to Directors and employees
On 28 June 2013 the Company granted 179,722,823* options at an
exercise price of 0.85 pence per share to its Directors and
employees in recognition of the sale of Arkhangelovskoye Licence.
The options were granted to executive Directors and employees under
Matra's Enterprise Management Incentive Scheme and non-executive
Directors were granted unapproved options. 50 per cent of the
options for executive Directors and employees vest on the first
anniversary of the date of grant and the remaining 50 per cent vest
on the second anniversary of the date of grant. Options for
non-executive Directors vest in 3 equal tranches on the anniversary
of the date of grant over a three year period.
Where options are exercised the Board may in its absolute
discretion determine to vary the number of options and the exercise
price such that the option holder is in the same position but
dilution is reduced.
Options to PSOFEI
On 29 October 2013, the Company granted to PSOFEI an option to
subscribe to150,000,000** ordinary shares in the Company at a price
of 2.24 pence per ordinary share as part of consideration of the
phased investment described in note 8. The option may be exercised
for a period of one year following the later to occur of: (a)
completion of the Phase 2 Investment; and (b) readmission of the
Company's ordinary shares to trading on AIM following a Reverse
Takeover by the Company of PG-M JV. On the date of issuing of this
report only condition (b) remained in force as the Phase 2
Investment was completed on 22 January 2014.
On 01 April 2014 the Company amended the option as follows. The
option may be exercised during 18 months from the date the
Company's share are admitted for trading on any securities exchange
following the proposed delisting of the Company's shares on AIM.
The option expires on 5 May 2017.
Warrants
On 11 May 2012 warrants were granted to Maxim Barskiy to
subscribe for 44,472,907 of the Company's ordinary shares of 0.1
pence each at an exercise price of 1.3 pence per share. The
warrants were valid for 12 months from the date of grant and
exercise was conditional upon completion of a Material Acquisition
by the Company.
In May 2013 the warrants lapsed as the vesting conditions which
are not market related have not been met and the total charge of
US$599,000 has been reversed.
The fair value of equity-settled share options and warrants
granted is estimated as at the date of grant using the Black
Scholes model, taking into account the terms and conditions upon
which the options were granted. The table below lists the inputs to
the model used for options granted during the reported years:
29 October 28 June
2013 2013 2012
Share price at the date
of grant (pence) 0.9 0.83 2.325
Dividend yield (%) - - -
------------------------- ----------- -------- ------
Volatility 60 75 75
Expected life (years) 1.5 3 2
Risk free interest rate
(%) 0.0479 0.53 1.5
------------------------- ----------- -------- ------
Weighted average option
price (pence) 2.24 0.85 1.13
------------------------- ----------- -------- ------
The total fair value of the options issued is spread over the
vesting period of the options. The share-based payment charge for
the year was US$427,000 (2012: US$599,000).
The expected life of the options is based on academic research
and is not necessarily indicative of exercise patterns that
may occur. Volatility is calculated with reference to
comparative entities share price volatility and reflects the
assumption that the comparator's volatility is indicative of future
trends, which may also not necessarily be the actual outcome. No
other features of options granted were incorporated into the
measurement of fair value.
19. Share capital
2013 2012
US$'000 US$'000
------------------------------------- ----------- -----------
Authorised:
10,000,000,000 ordinary shares
of 0.1p each 13,571,000 13,571,000
===================================== =========== ===========
Allotted, called-up and fully
paid:
1,936,117,872 (2012: 1,936,117,872)
ordinary shares of 0.1p each 3,111,694 3,111,694
===================================== =========== ===========
Allotted, called-up and fully paid: Number of US$
shares
1 January 2012 1,354,917,872 2,177,850
New share placing 575,000,000 924,313
Exercise of options 6,200,000 9,531
31 December 2012 1,936,117,872 3,111,694
31 December 2013 1,936,117,872 3,111,694
There was no share issue or share exercise in 2013.
On 14 May 2012 the Company issued 575,000,000 of new ordinary
shares of 0.1 pence each to Maxim Barskiy at a price of 0.8 pence
per ordinary share for a total consideration of GBP4.6 million
(US$7.4 million).
On 6 June 2012 Mr P Hind and Mr N Hodgson exercised their
6,200,000 options at a price of 0.1 pence per share for a total
consideration of GBP6,000 (US$10,000).
20. Reserve description and purpose
The following describes the nature and purpose of each reserve
within owners' equity:
-- Share capital: Amount subscribed for share capital at nominal value.
-- Share premium: Amount subscribed for share capital in excess of nominal value.
-- Other reserves: Share-based payment charge in relation to the assets acquisition.
-- Foreign currency translation reserve: Exchange gains/losses
arising on retranslating the net assets of operations into the
presentation currency.
-- Retained deficit: Cumulative net gains and losses recognised in the consolidated income
statement.
21. Financial instrument risk exposure and management
In common with all other businesses, the Group and Company are
exposed to risks that arise from its use of financial instruments.
This note describes the Group and Company's objectives, policies
and processes for managing those risks and the methods used to
measure them. Further quantitative information in respect of these
risks is presented throughout these financial statements.
There have been no substantive changes in the Group or Company's
exposure to financial instrument risks, its objectives, policies
and processes for managing those risks or the methods used to
measure them from previous periods unless otherwise stated in this
note.
Principal financial instruments
The principal financial instruments used by the Group and
Company, from which financial instrument risk arises, are as
follows:
other receivables
asset fair valued through profit and loss
cash and cash equivalents
trade and other payables
inter-company loans
loans to JV
Financial assets
Loans and receivables
Group Group Company Company
2013 2012 2013 2012
US$'000 US$'000 US$'000 US$'000
--------------------------- -------- -------- -------- --------
Other receivables 264 369 137 64
Loans to JV 996 - - -
Cash and cash equivalents 20,957 4,000 20,274 811
22,217 4,369 20,411 875
=========================== ======== ======== ======== ========
Financial liabilities
Financial liabilities at amortised cost
Group Group Company Company
2013 2012 2013 2012
US$'000 US$'000 US$'000 US$'000
-------------------------- -------- -------- --------- --------
Trade and other payables 1,043 404 737 267
1,043 404 737 267
========================== ======== ======== ========= ========
General objectives, policies and processes
The Board has overall responsibility for the determination of
the Group and Company's risk management objectives and policies
and, whilst retaining ultimate responsibility for them, it has
delegated the authority for designing and operating processes that
ensure the effective implementation of the objectives and policies
to the Group and Company's finance function. The overall objective
of the Board is to set policies that seek to reduce risk as far as
possible without unduly affecting the Group and Company's
competitiveness and flexibility. Further details regarding these
policies are set out below:
Credit risk
The Group has credit risk related to a significant proportion of
cash being held in one bank. Management reduced this risk placing
funds in a reputable bank with a good credit rating. Such decision
was taken as the Group required funds to complete the acquisition
of the assets and start developing them. In the future a cash
surplus will be invested with the reputable financial
institutions.
Credit risk for the Group also arises principally from credit
sale of oil. To reduce credit the risk sales are made only to
reputable customers with appropriate credit rating. Credit risk
with cash and cash equivalents is reduced by placing funds with
banks with high credit ratings.
Credit risk for the Company also arises from the inter-company
loans. It is the risk that the counterparty fails to discharge its
obligation in respect of the instrument. The maximum exposure to
credit risk equals the carrying value of these items in the
financial statements.
Hedging policy
It is the Company and Group policy not to actively hedge against
foreign currency transactions and balances. However, this policy is
kept under constant review.
Capital
The Company and Group define capital as ordinary shares, share
premium, foreign currency translation reserve and retained
earnings.
The Group considers its capital to comprise entirely of equity.
The Group's primary objective is to ensure its continued ability to
provide a consistent return for its equity shareholders through
capital growth.
In order to achieve this aim, it seeks to maintain cash balances
(or agreed facilities) to meet expected obligations as they fall
due.
Overriding the above is the need for the Group to maintain a
sufficient funding base to enable it to meet its working capital
and strategic investment needs.
In making decisions to adjust its capital structure to achieve
these aims the Group considers not only its short-term position but
also its long-term operational and strategic objectives.
Liquidity risk
Liquidity risk arises from the Group and Company's management of
working capital. It is the risk that the Group or Company will
encounter difficulty in meeting its financial obligations as they
fall due.
The Group and Company's policy is to ensure that it will always
have sufficient cash to allow it to meet its liabilities when they
become due. To achieve this aim, it seeks to maintain appropriate
levels of cash balances (or agreed facilities). The Group and
Company also seeks to reduce liquidity risk by maximising interest
rates (and hence cash flows) on its cash deposits, this is further
discussed in the 'interest rate risk' section below.
The Board receives rolling 12 month cash flow projections on a
periodic basis as well as information regarding cash balances in
order to closely monitor the Group's liquidity position (as noted
above).
Trade and other payables are due within 30 days of invoice
date.
Interest rate risk
The Group has no interest bearing borrowings and so there is no
interest rate risk.
There is no significant interest rate risk in respect of
temporary surplus funds invested in deposits and other interest
bearing accounts with financial institutions as the operations of
the Group are not dependent on the finance income received.
However, it is the Group's policy to manage the interest rate risk
over the cash flows on its invested surplus funds by using only
substantial financial institutions when such funds are
invested.
A 1% change in interest rates would result in a decrease or
increase in profit after tax of the Group or Company by US$ 203,000
(2012: nil).
At the year end, the Group had a cash balance of US$20,957,000
(2012: US$4,000,000) and the Company had a cash balance of
US$20,274,000 (2012: US$811,000) which was made up as follows:
Group Group Company Company
2013 2012 2013 2012
US$'000 US$'000 US$'000 US$'000
---------------- -------- -------- -------- --------
Great British
pound 212 893 212 699
Russian rouble - 64 - -
US dollar 20,745 3,043 20,062 112
20,957 4,000 20,274 811
================ ======== ======== ======== ========
Fair values
The fair values of the Group's cash in banks, prepayments and
accounts payable are considered equal to the book value as they are
all short term.
The financial asset fair valued through profit and loss is
measured on initial recognition and subsequently at fair value by
reference to the probability of various outcomes and categorised as
level 3 measurement:
-- Level 1 fair value measurements are those derived from quoted
prices (unadjusted) in active markets for identical assets or
liabilities.
-- Level 2 fair value measurements are those derived from inputs
other than quoted prices included within Level 1 that are
observable for the asset or liability, either directly (i.e. as
prices) or indirectly (i.e. derived from prices).
-- Level 3 fair value measurements are those derived from
valuation techniques that include inputs for the asset or liability
that are not based on observable market data (unobservable
inputs).
Currency risk
The Group and Company's policy is, where possible, to allow
Group entities to settle liabilities denominated in their
functional currency (primarily US Dollars and Great British Pound)
in that currency. Where Group or Company entities have liabilities
denominated in a currency other than their functional currency (and
have insufficient reserves of that currency to settle them) cash
already denominated in that currency will, where possible, be
transferred from elsewhere within the Group.
In order to monitor the continuing effectiveness of this policy,
the Board receives a periodic forecast, analysed by the major
currencies held by the Group and Company.
The Group and Company is primarily exposed to currency risk on
purchases made from suppliers in the UK. The UK finance team, along
with its advisors, carefully monitors movements in the Sterling /
US dollar rate and chooses the most beneficial times for
transferring monies to the Company, whilst ensuring that it has
sufficient funds to continue its operations.
A movement in the Great British pound of 25% would result in the
expenditure in the year increasing or decreasing by US$1,106,000
(2012: US$ 755,000).
A movement in the Great British pound of 25% would result in the
average cash and cash equivalents increasing or decreasing by US$
53,000 (2012: US$223,000).
22. Related party transactions
Apart from key management remuneration as disclosed in note 6,
the Group and Company had no transactions with related parties
during the year (31 December 2012: nil).
As at 31 December 2013 the Group provided a loan to a joint
venture in amount of US$996,000 including interest of US$3,000.
23. Events after the reporting period.
Deferred consideration
On 1 April 2014 the Company became entitled to a deferred
consideration of US$10 million in relation to the disposal of
Arkhangelovskoye Licence (note 7). The consideration was
conditional upon not providing a report about negative drilling
results to the Company by the buyer by 1 April 2014. On 1 April
2014 such report hasn't been provided to the Company and then the
consideration became payable.
On 3 April 2014 the Company announced that it started the
process of preparing the necessary documents to make a formal
request from the guarantor, JSC joint stock commercial bank "Jugra"
of Megion City, for the US$10 million. As of date of issuing these
financial statements the funds haven't been received by the Company
yet.
PG-M JV
On 22 January 2014 the Company completed Phase II investment
("Phase 2") by acquiring further assets from PSOFEI's affiliates
for a consideration of US$ 6.02 million consisting of US$2.26
million in cash and US$3.76 million in a form of a promissory note
secured by PSOFEI's 50% interest in PG-M JV.
In the course of conducting extensive due diligence prior to
closing of Phase 2, the Company discovered certain title defects in
six leases being acquired. On the date of the report PG-M JV
purchased a further two cured leases for an amount of
US$354,000.
On 1 April 2014 the Company announced that it has entered into
the Amendment Agreement which amends the Omnibus Agreement dated 29
October 2013 between the Company, PSOFEI and its affiliates in
relation to the investments in the USA (note 8) and the Option
agreement between the Company and PSOFEI (note 18) as follows. The
deadline for Matra USA to exercise its option to acquire the Phase
III Properties has been extended to 5 May 2014. The deadline to
acquire the remaining 50 percent of PG-M International LLC (note 8)
has been extended to 2 May 2014 and is no longer conditioned upon
any action by the Company's shareholders.
Delisting proposal
On 1 April 2014 the Company announced a proposal to cancel the
admission of its ordinary shares to trading on AIM in accordance
with Rule 41 of the AIM Rules for Companies. The Company was unable
to meet the requirements of a reverse takeover under the AIM Rules
in order to complete the acquisition of the assets from PSOFEI
(note 8) as its two major shareholders Winpro Ventures Corporation
and Tricon Energy Finance Limited are unwilling to enter into
Lock-In Agreements required by the Rule 7 of the AIM Rules.
The Directors believe that cancellation of shares and becoming a
private company will enable the Company to complete the acquisition
of oil and gas assets from PSOFEI (note 8) and to continue its
strategy of acquiring oil and gas interests.
This information is provided by RNS
The company news service from the London Stock Exchange
END
FR BXGDSXBGBGSR
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