TIDMVOG
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 6,000m(3) per second in the wet
season to 50m(3) 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 6 months 12 months
ended ended ended
30 November 30 November 31 May
2014 2013 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 6 months 12 months
ended ended ended
30 November 30 November 31 May
2014 2013 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 6 months 12 months
ended ended ended
30 November 30 November 31 May
2014 2013 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 30 November
2014 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
Retained
ESOP earnings
Share Share Trust Translation Other / (accumulated
capital premium reserve reserve reserve 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 6 months 12 months
Ended Ended Ended
30 November 30 November 31 May
2014 2013 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.
Effective
Name of new Standards/Amendments from
1 January
IFRS 10 Consolidated Financial Statements 2014
1 January
IFRS 11 Joint Arrangements 2014
1 January
IFRS 12 Disclosure of Interests in Other Entities 2014
1 January
IAS 27 (revised 2011) Separate Financial Statements 2014
IAS 28 (revised 2011) Investments in Associates and 1 January
Joint Ventures 2014
Amendments to IAS 32 Offsetting Financial Assets and 1 January
Financial Liabilities 2014
Amendments to IFRS 10, IFRS 12, and IAS 27 Investment 1 January
Entities 2014
Amendments to IAS 36 Recoverable Amount Disclosures 1 January
for Non-Financial Assets 2014
Amendments to IAS 39 Novation of Derivatives and Continuation 1 January
of Hedge Accounting 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 Cameroon Russia Kazakhstan Corporate Total
2014 (Unaudited) $000 $000 $000 $000 $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 Cameroon Russia Kazakhstan Corporate Total
2013 (Unaudited) $000 $000 $000 $000 $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 Cameroon Russia Kazakhstan Corporate Total
(Audited) $000 $000 $000 $000 $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) Assets under
Plant and Oil and construction
equipment gas interest 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 Assets under
2013 (Unaudited) Plant and Oil and construction
equipment gas interest 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) Assets under
Plant and Oil and construction
equipment gas interest 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 30 November 31 May
2014 2013 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 Directors' Key management
with subsidiaries other interests 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
The company news service from the London Stock Exchange
END
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