Depreciation and depletion costs primarily relate to the
depreciation of proved and probable reserves and other production
and non-production assets. In 2012, these costs totalled US$20.5
million (2011: US$13.8 million). The increase in DD&A costs is
driven by higher production volumes and by bringing into operation
infield facilities once their construction was completed.
Selling expenses for 2012 of US$106.8 million (2011: US$84.1
million) is comprised of export duties of US$83.8 million (2011:
US$65.6 million), transportation services of US$22.0 million (2011:
US$16.9 million) and other selling expenses of US$1.0 million
(2011: US$1.6 million). Transportation services include services
provided by Transneft and transportation services from oil field to
oil filling station. In 2012, the export duty rate fluctuated
within the range from US$336.6 per tonne to US$460.7 per tonne
following the changes in crude oil prices. Export duty is reviewed
by the Russian government on a monthly basis and is based on a
formula that takes into account the average Urals price prevailing
in the market between the 15(th) and 15(th) of the two months prior
to the month of delivering the crude.
Administrative expenses (excluding share-based compensation
expenses, share issuance costs and depreciation and amortisation)
totalled US$20.8 million (2011: US$18.6 million). In 2012, an
increase in headcount led to an ensuing increase in salaries, while
savings were achieved in business trip and office rent
expenses.
In 2012, interest income increased to US$2.9 million (2011:
US$1.3 million) resulting from surplus cash being held on
short-term deposits and VTB credit-linked deposits.
In 2012, income tax expense of US$5.4 million (2011: US$2.9
million) comprised an income tax charge of US$6.9 million (2011:
US$2.5 million) and a deferred tax credit of US$1.5 million (2011:
deferred tax charge of US$0.4 million). The basic corporate income
tax rate in the Russian Federation is 20%. The reduced rate of 17%
was applied to Exillon WS in 2012 in compliance with local tax
legislation (2011: 16%).
It should be noted that - in accordance with IFRS - a foreign
exchange gain of US$3.4 million has been included in our net profit
arising from the revaluation of foreign currency monetary items
(cash and cash equivalents, accounts receivable and payable, other
assets) using the closing rate at the reporting date. A larger
foreign exchange gain of US$24.8 million has been applied directly
to the consolidated statement of financial position as the part of
translation reserve.
As a result of the above, we reported a profit after tax of
US$12.1 million compared to a loss of US$10.4 million for the year
ended 31 December 2011.
Financial Position
In February 2012 we received proceeds of US$14.3 million
comprising the nominal value and accrued interest in relation to
Eurobonds issued by EBRD.
In March 2012 we replaced our existing US$50 million loan
facility with a US$100 million facility with a LIBOR plus 6%
interest rate and a term of 5 years. The previous loan had an
interest rate of LIBOR plus 7% and a term of 3.5 years.
We ended the period in a strong financial position with US$121.0
million of cash and cash equivalents (2011: US$117.6 million) with
outstanding borrowings of US$100.2 million (2011: US$49.0 million),
equivalent to a net cash position of US$20.8 million (2011: US$68.6
million).
The increase in the cost of property, plant and equipment has
been driven by the drilling of wells and further development of
field infrastructure in Exillon WS and the launch of drilling and
extensive field development in Exillon TP.
Cash Flow
Net cash generated from operating activities in 2012 amounted to
US$36.1 million, compared to a US$32.4 million inflow in 2011.
Operating cash flow before working capital changes amounted to the
inflow of US$46.8 million in 2012 compared to the inflow of US$19.4
million in 2011. The increase is driven by higher production and
sales volumes. It was also positively affected by payment terms for
tax payments to the Russian Government, offset by the timing gap
for taxes receivable; a decrease in trade and other receivables due
to the implementation of a prepayment scheme dealing with customers
and an increase in interest income received from holding our cash
surplus on deposits. The negative impact relates to the decrease in
trade and other payables following payments to contractors for
drilling work and the construction of infield infrastructure, an
increase in inventory balances and an increase in income tax paid
due to the further expansion of our operations in 2012.
Capital expenditure during the year was US$86.5 million (2011:
US$97.3 million), including the drilling of wells and the
development of infield infrastructure. During the year, we paid
US$5.9 million of loan interest (2011: US$3.7 million), which was
capitalised in full (2011: US$2.7 million). In September - November
2012 the Group has signed a number of preliminary agreements to
process the acquisition of subsoil licences and certain other
non-current assets of VenlockNeft LLC ("Venlock") for a total
consideration of US$2.7 million.
Cash flow from financing activities was US$47.3 million (2011:
US$145.1 million). The inflow of US$49.8 million relates to the net
proceeds from increasing the loan facility. The outflow of US$2.5
million represents the repayment of the loan principal amount
before we replaced the loan facility.
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME (UNAUDITED)
For the year ended 31 December
--------------------------------
Note 2012 2011
$'000 $'000
Revenue 6 301,928 202,971
Cost of sales 7 (147,631) (93,778)
GROSS PROFIT 154,297 109,193
--------------- --------------
Selling expenses 8 (106,761) (84,124)
Administrative expenses 9 (30,380) (23,388)
Foreign exchange gain/(loss) 3,375 (6,744)
Other income 10 1,209 126
Other expense 10 (2,949) (2,995)
OPERATING PROFIT/(LOSS) 18,791 (7,932)
--------------- --------------
Finance income 13 2,895 1,328
Finance cost 14 (4,161) (953)
PROFIT/(LOSS) BEFORE INCOME TAX 17,525 (7,557)
Income tax expense 15 (5,383) (2,892)
--------------- --------------
NET PROFIT/(LOSS) FOR THE YEAR 12,142 (10,449)
--------------- --------------
OTHER COMPREHENSIVE INCOME/(EXPENSE):
Currency translation differences 24,792 (26,373)
--------------- --------------
TOTAL COMPREHENSIVE PROFIT/(LOSS)
FOR THE YEAR 36,934 (36,822)
=============== ==============
Profit/(loss) per share for profit
attributable to the equity holders
of the Company
* Basic ($) 16 0.08 (0.07)
* Diluted ($) 16 0.08 (0.07)
CONSOLIDATED STATEMENT OF FINANCIAL POSITION (UNAUDITED)
As at 31 December
------------------------------
Note 2012 2011
-------------- --------------
$'000 $'000
ASSETS:
Non-current assets:
Property, plant and equipment 17 627,256 523,423
Intangible assets 131 127
627,387 523,550
-------------- --------------
Current assets:
Inventories 18 4,596 2,823
Trade and other receivables 19 17,008 13,686
Other current assets 20 3,788 16,648
Short-term loans issued 21 2,719 -
Cash and cash equivalents 22 120,965 117,567
149,076 150,724
-------------- --------------
TOTAL ASSETS 776,463 674,274
============== ==============
LIABILITIES and equity:
Equity:
Share capital 26 1 1
Share premium 26 272,116 272,116
Other invested capital 68,536 68,536
Retained earnings 192,068 170,780
Translation reserve 34,813 10,021
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