RNS Number:9381T
Global Energy Development PLC
08 May 2008
For Immediate Release 8 May 2008
GLOBAL ENERGY DEVELOPMENT PLC
("Global" or the "Company")
AUDITED FINAL RESULTS FOR THE YEAR ENDED 31 DECEMBER 2007
Global Energy Development PLC, the Latin America focused petroleum exploration
and production company (LSE-AIM: "GED"), announces its audited final results for
the year ended 31 December 2007.
Highlights:
* Turnover up 29.6% to $27.3 million (year ended 31 December 2006: $21.1
million);
* Gross profit up 45.4% to $13.8 million (year ended 31 December 2006: $9.5
million);
* Profit before tax (excluding correction of miscellaneous income) up 62% to
$7.6 million (year ended 31 December 2006: $4.7 million);
* Average operating cash netback per barrel (excluding miscellaneous income
and income relating to a quality adjustment) of $30.44 during 2007 against
an average price for West Texas Intermediate ("WTI") crude oil of $72.48
(2006: average operating cash netback per barrel $23.86, average price for
WTI $66.23);
* Proved plus probable ("2P") reserves totalling 15.2 million barrels of oil
equivalent ("BOE") as at 31 December 2007 giving a net present value at a
10% discount ("NPV10") of $641.2 million (2006: $427.0 million);
* Proved plus probable plus possible ("3P) reserves totalling 64.9 million
BOE as at 31 December 2007 giving a NPV10 of $2.5 billion (2006: $1.7
billion); and
* Potentially high-impact drilling underway at the Colombian Rio Verde
contract to supplement current production.
These final results are the Company's first final results to be reported in
accordance with International Financial Reporting Standards ("IFRS") and the
comparative financial information for the year ended 31 December 2006 has been
restated accordingly. The percentages given within this announcement are
calculated using the restated financial information for the year ended 31
December 2006.
For further information:
Global Energy Development PLC
Catherine Miles, Company Secretary +44 (0) 20 7763 7177
www.globalenergyplc.com +44 (0) 7909918034
Landsbanki Securities (UK) Limited +44 (0) 20 7426 9000
Jeff Keating / Fred Walsh / Sebastian Jones
NOTES TO EDITORS:
The Company's shares have been traded on AIM, a market operated by the London
Stock Exchange, since March 2002 (LSE-AIM: "GED"). The Company's balanced
portfolio covers the countries of Colombia, Peru and Panama and comprises a base
of production, developmental drilling and workover opportunities and several
high-potential exploration projects.
Proven and probable oil and gas reserves are estimated quantities of
commercially producible hydrocarbons which the existing geological, geophysical
and engineering data show to be recoverable in future years from known
reservoirs. The proved reserves reported by Ryder Scott Company, LP ("Ryder
Scott"), independent petroleum consultants, conform to the definition approved
by the Society of Petroleum Engineers ("SPE") and the World Petroleum Congress
("WPC"). The probable and possible reserves reported by Ryder Scott conform to
definitions of probable and possible reserves approved by the SPE/WPC using the
deterministic methodology.
The information contained within this announcement has been reviewed by Ryder
Scott.
In addition, the information contained within this announcement has been
reviewed by Mr. Stephen Voss and Mr. Stephen Newton, both Directors of the
Company. Mr. Voss is a Registered Professional Engineer in Texas and has been a
Member of SPE for 25 years. Mr. Newton holds a Mining/Petroleum Engineering
degree from the University of Queensland, Brisbane and a Master of Science
Petroleum Engineering degree from Imperial College London. He has been a Member
of SPE for 35 years.
CHAIRMAN'S STATEMENT
Towards the end of 2007 the Company announced that it had received several
unsolicited expressions of interest from separate parties who were interested in
potentially acquiring the Company. The Board of the Company ultimately
concluded that these approaches undervalued the Company and terminated all such
discussions. These approaches arose, in the Board's opinion, due to the
disconnect in the value the petroleum industry places on the Company's assets
and the much lesser value that the financial markets place on the Company as a
whole. The Company's financial statements and independently audited reserves
for the year ended 31 December 2007 again show the considerable value inherent
within the Company.
Various initiatives are underway to develop the Company's broad portfolio of
assets, not least the commercial partnering discussions and the potentially
high-impact drilling currently underway at the Colombian Rio Verde contract. In
addition, the Company has added a key appointment in 2008 with Stephen Newton
joining the Company as a member of the Board and Managing Director. He has
extensive experience in Colombia having held, among other roles, the position of
President and General Manager of Colombia for Occidental Petroleum Corporation.
His contribution will be invaluable during 2008.
Mikel Faulkner
Executive Chairman
8 May 2008
VICE CHAIRMAN AND MANAGING DIRECTOR'S REVIEW
Financials
These final results are the Company's first final results to be reported in
accordance with International Financial Reporting Standards ("IFRS") and the
comparative financial information for the year ended 31 December 2006 has been
restated accordingly. The percentages given within this announcement are
calculated using the restated financial information for the year ended 31
December 2006. The impact of adopting IFRS is disclosed within the Notes to the
Financial Information section of this announcement and additional information is
also available on the Company's website at www.globalenergyplc.com.
Turnover for the year ended 31 December 2007 was $27.3 million, an increase of
29.6% against the prior year (year ended 31 December 2006: $21.1 million) due to
higher oil prices, marginally increased oil production volumes and income
relating to a quality adjustment. Total cost of sales was $13.5 million (year
ended 31 December 2006: $11.6 million) and gross profit was $13.8 million (year
ended 31 December 2006: $9.5 million). Operating profit was $9.9 million (year
ended 31 December 2006: $5.2 million) with profit before tax (excluding
correction of miscellaneous income) (see note 2 of Notes to Financial
Statements) at $7.6 million (year ended 31 December 2006: $4.7 million).
Gross production for the year ended 31 December 2007 totalled 478,030 barrels of
oil ("bbls") (year ended 31 December 2006: 466,099 bbls) with production net to
the Company of 413,775 bbls (year ended 31 December 2006: 401,298 bbls). The
average price for West Texas Intermediate ("WTI") crude oil during 2007 was
$72.48 (2006: $66.23) and the Company averaged an operating cash netback per
barrel of oil (excluding miscellaneous income and income relating to a quality
adjustment) of $30.44 (2006: $23.86). The Company's lease and operating expense
("LOE") per barrel of oil equivalent ("BOE") in 2007 was 6.5% lower than in 2006
due to increased operational efficiencies and despite rising industry costs.
Net cash inflow from operating activities for the year ended 31 December 2007
was $12.4 million (year ended 31 December 2006: $8.9 million) and this together
with available cash funded capital expenditure of $13.3 million (year ended 31
December 2006: $15.2 million).
2007 Reserve Report
Ryder Scott, the petroleum consultancy firm, has independently audited the
Company's portfolio of contracts and prepared a reserve report for the Company
annually since the Company's admission to AIM in 2002.
Ryder Scott reported that as at 31 December 2007, proved reserves net to the
Company totalled 4.6 million BOE (as at 31 December 2006: 5.5 million BOE),
proved plus probable ("2P") reserves net to the Company totalled 15.2 million
BOE (as at 31 December 2006: 19.4 million BOE) and proved plus probable plus
possible ("3P") reserves net to the Company totalled 64.9 million BOE (as at 31
December 2006: 81.8 million BOE).
Based upon a Brent Crude Oil Price of $93.85 per barrel, this being the closing
price as at 31 December 2007, the date of the Reserve Report, the Net Present
Value at a 10% discount ("NPV10") of the proved reserves was $214.0 million
(2006: $128.0 million). The NPV10 of the 2P reserves totalled $641.2 million
(2006: $427.0 million) and the NPV10 of the 3P reserves totalled $2.5 billion
(2006: $1.7 billion).
Of the 4.2 million BOE reduction in the 2P reserves in 2007 against 2006, 0.4
million BOE was attributable to the production in 2007, 2.9 million BOE of the
reduction, almost 70%, was a consequence of forecasted substantially higher oil
prices accelerating the Company's cost recovery and therefore allowing Ecopetrol
S.A. ("Ecopetrol"), the state oil company and the partner in the Bolivar and
Bocachico contracts, to back-in to these two Colombian contracts at earlier
dates in the future. In addition, a revised development approach at the Bolivar
contract resulted in lower future development costs further accelerating
Ecopetrol's back-in. Anticipated accelerated Ecopetrol back-in also accounted
for 12.5 million BOE, approximately 74%, of the 16.8 million BOE reduction in
the 3P reserves.
Gross recoverable 3P reserves in 2007 totalled 106.0 million BOE. This was a 2%
increase against 2006 (2006: 103.7 million BOE) and therefore indicated that
engineering remained almost entirely unchanged since the 2006 Reserve Report.
Therefore, while substantially improved oil prices in 2007 have decreased the
Company's contractual share of future oil production, they have also increased
the Company's 2P property value by over 50% against 2006.
Overview of Contracts and Activities
The Company currently holds five contracts in Colombia, one contract in Peru and
one contract in Panama. The Company is currently fully compliant with the terms
of each of these contracts.
During 2007, the Company undertook drilling at the Colombian Luna Llena
contract. The first well, Luna Llena 1, tested fresh formation water with small
traces of hydrocarbons. While the second well, Luna Llena 2, proved the
existence of a productive horizon and possibly significant reserves, an
independent technical study indicated that a major portion of these reserves
were located underneath or in close proximity to the Meta River meaning a very
capital intensive work programme would be needed to potentially realise these
reserves and that commercial development would be very high risk. Although the
Company exceeded the capital investment obligations for the initial phase of the
contract, the complications resulting from the location of the reserves and
potential environmental restrictions, the unexpected additional capital
requirement and very restrictive rainy season resulted in the Company not being
able to meet all of the specific work commitments within the time period
provided for under the contract. As a result, as at 31 March 2008 the Company
no longer held the contract. The Luna Llena contract, however, accounted for no
reserves within the 2007 Reserve Report and only 341,000 BOE of 3P reserves in
the 2006 Reserve Report.
During 2007, the Colombian Los Sauces contract was also relinquished to the
National Hydrocarbons Agency of the Republic of Colombia ("ANH") as the Company
was unable to secure a rig due to industry-wide equipment availability
constraints and therefore unable to complete its work obligations under the
contract. The Los Sauces contract accounted for none of the Company's reserves
in either the 2006 or 2007 Reserve Reports.
In relation to the Peruvian Block 95 contract, the Company is awaiting the
environmental permit required to undertake drilling. Once this is obtained, the
Company will proceed to finalise the details of the drilling programme with the
first obligation well contractually required by late 2009.
The Company signed the Panamanian Garachine contract during June 2007, the first
hydrocarbons contract the Panamanian government had signed since 1990. The
Company is on schedule with the currently required geological and geophysical
work obligations and anticipates completion of all phase 1 requirements on or
before November 2008.
Since the end of 2007, the Company has experienced some field underperformance
at some of its older fields, predominately at the Palo Blanco field within the
Colombian Alcaravan contract. The field underperformance is partially due to an
increasing percentage of well downtime due to surface mechanical conditions and
also delays caused by the lack of rigs to repair down hole problems. This
resulted in average net production for the first quarter of 2008 of 982 barrels
of oil per day ("bopd") versus 1,126 bopd for 2007. The Company is currently
addressing the Palo Blanco field power generation facilities issues which have
been the major source of mechanical downtime. In May 2008, production has been
restored to approximately 1,000 bopd net to the Company.
The management believes that the current two-well drilling programme at the
Colombian Rio Verde contract has the potential to significantly enhance current
production levels. The Rio Verde contract contains the Tilodiran field
containing the Tilodiran 2 well which is currently producing 500 net bopd and
has outperformed original decline rate projections resulting in Ryder Scott
assigning a 30% increase in the Tilodiran field proved reserves for 2007. The
second of the two wells to be drilled back-to-back is the Tilodiran 3 well, a
direct offset to the Tilodiran 2 well and is classified by Ryder Scott as a
proved, undeveloped location. The first well, the exploratory Boral 1 well, has
now been drilled vertically to a total depth of 12,340 feet, production casing
has been set and initial testing is underway to evaluate the Gacheta and Ubaque
formations, with both these formations present in the Tilodiran field. The
Boral 1 well is structurally updip from the Rio Verde 1 well which was drilled
several years ago by a previous operator. Ryder Scott has assigned a total of
eight possible drilling locations to develop the Boral field based upon seismic
and the Rio Verde 1 well log information.
The Company continues to assess commercial partnering opportunities for some of
its projects in order to accelerate the realisation of potential value and two
separate letters of intent ("LOIs") have been signed during April 2008 covering
two of the Company's contracts.
Stephen Voss
Vice Chairman
Stephen Newton
Managing Director
8 May 2008
Consolidated Income Statement
For the period ended 31 December 2007
Note 2007 2006
$'000 $'000
Revenue 27,289 21,053
Cost of sales (13,514) (11,578)
Gross Profit 13,775 9,475
Other income 2 678 200
Other income - correction of miscellaneous income 2 1,240 -
1,918 200
General and Administrative costs (5,841) (4,438)
Operating Profit 9,852 5,237
Finance income 3 164 152
Finance expense 4 (1,141) (683)
Profit before taxation 8,875 4,706
Income tax expense 5 (1,882) (1,225)
Profit after taxation 6,993 3,481
Earnings Per Share 1
- Basic $ 0.20 $ 0.10
- Diluted $ 0.19 $ 0.09
Shares Outstanding 1
- Basic 35,328,428 35,304,403
- Diluted 43,038,651 43,814,626
The results reflected above relate to continuing activities.
The Notes to the Financial Statements below form an integral part of these
financial statements.
Consolidated statement of changes in equity
Called
Up Share Capital Share Other Retained
Capital Reserve Premium Reserve Losses Total
$'000 $'000 $'000 $'000 $'000 $'000
At 1 January 2006 537 210,844 26,288 1,314 (177,809) 61,174
Profit for the period - - - - 3,481 3,481
Total recognised income and expense for the year - - - - 3,481 3,481
Equity proportion of convertible debt - - - 512 - 512
Share based payments - - - - 312 312
Exercise of options 2 - 151 - - 153
At 1 January 2007 539 210,844 26,439 1,826 (174,016) 65,632
Profit for the period - - - - 6,993 6,993
Total recognised income and expense for the year - - - - 6,993 6,993
Share based payments - - - - 480 480
At 31 December 2007 539 210,844 26,439 1,826 (166,543) 73,105
The Notes to the Financial Statements below form an integral part of these
financial statements.
Consolidated Balance Sheet
As at 31 December 2007
Note 2007 2006
$'000 $'000
Assets
Non-current assets
Intangible assets 7 4,419 4,658
Property, plant and equipment 8 82,499 76,578
86,918 81,236
Current assets
Inventories 9 884 999
Deferred tax assets 6 288 728
Trade and other receivables 10 9,367 4,405
Term deposits 11 1,831 893
Cash & cash equivalents 12 4,602 6,955
16,972 13,980
Total assets 103,890 95,216
Liabilities
Current liabilities
Trade and other payables 13 (4,223) (3,456)
(4,223) (3,456)
Non-current liabilities 14
Convertible loan notes 15 (15,810) (15,425)
Deferred tax liabilities 6 (10,010) (10,029)
Long term provisions 16 (674) (624)
Other payables 14 (68) (50)
(26,562) (26,128)
Total liabilities (30,785) (29,584)
Net assets 73,105 65,632
Equity
Called up share capital 17 539 539
Share premium account 17 26,439 26,439
Other reserve 17 1,826 1,826
Capital reserve 17 210,844 210,844
Retained losses 17 (166,543) (174,016)
Total equity 73,105 65,632
The Notes to the Financial Statements below form an integral part of these
financial statements.
Consolidated Cash Flow Statement
For the period ended 31 December 2007
Note 2007 2006
$'000 $'000
Operating Activities
Profit before Taxation 8,875 4,706
Depreciation, depletion and amortisation 8 6,805 4,343
Write-off unsuccessful exploration costs 7 65 -
(Increase)/decrease in trade and other receivables 10 (4,962) 1,016
Decrease / (Increase) in inventories 9 115 (343)
(Decrease) / increase in trade and other payables 13 767 6
Increase in long-term provisions 16 66 50
Accretion expense on convertible notes 15 283 546
Provision against unitisation receivable 1,050 -
Other non-cash items 63 14
Stock options expense 18 480 312
Cash flows from operating activities 13,607 10,650
Income taxes paid (1,202) (1,724)
Net cash flows from operating activities 12,405 8,926
Investing activity
Capital expenditure and financial investment
- Expenditure on tangible fixed assets (12,242) (13,699)
- Expenditure on intangible fixed assets (1,040) (1,466)
Disposal of assets 108 827
Interest received 3 164 152
Increase in short-term deposits 11 (938) (345)
Net cash flows from investing activities (13,948) (14,531)
Financing activities
Interest paid (810) (305)
Convertible loan notes issued 15 - 5,201
Net cash flows from financing activities (810) 4,896
Decrease in cash and cash equivalents (2,353) (709)
Cash at beginning of year 6,955 7,664
Cash at end of year 12 4,602 6,955
The Notes to the Financial Statements below form an integral part of these
financial statements.
NOTES TO THE FINANCIAL INFORMATION
For the twelve months ended 31 December 2007
The financial information set out above does not constitute the Company's
statutory accounts for the period ended 31 December 2007 or 2006. The statutory
accounts for 2007 will be delivered to the Registrar of companies, following the
Company's annual general meeting. The auditors have reported on those accounts;
their report was unqualified and did not contain statements under section 237(2)
or (3) of the Companies Act 1985.
Copies of the annual report and accounts will be posted to all shareholders.
Further copies will be available from the Company's registered office from the
date of posting.
Basis of Preparation
With effect from 1 January 2007 it became mandatory for the Group to comply with
International Financial Reporting Standards (IFRS).
The financial results of the Group for the twelve months ended 31 December 2007
have been prepared on a basis which is consistent with International Financial
Reporting Standards (IFRS) as adopted by the European Union. Comparative
information for 2006 has been restated under IFRS. Reconciliations to IFRS from
the previously published UK GAAP financial statements will be included in the
full annual report and accounts.
1. Earnings per share (EPS)
Basic earnings per share amounts are calculated by dividing profit for the
period attributable to ordinary equity holders of the parent by the weighted
average number of ordinary shares outstanding during the year.
Diluted earnings per share amounts are calculated by dividing profit for the
period attributable to ordinary equity holders of the parent by the weighted
average number of ordinary shares outstanding during the year, plus the weighted
average number of shares that would be issued on the conversion of dilutive
potential ordinary shares into ordinary shares. The calculation of the dilutive
potential ordinary shares related to employee and director share option plans
includes only those options with exercise prices below the average share trading
price for each period.
2007 2006
$'000 $'000
Net profit attributable to equity holders used in basic calculation 6,993 3,481
($'000)
Add back interest and accretion charge in respect of convertible 970 554
loan notes ($'000)
Net profit attributable to equity holders used in dilutive 7,963 4,035
calculation ($'000)
Basic weighted average number of shares 35,328,428 35,304,403
Dilutive potential ordinary shares
Shares related to convertible notes 4,565,027 4,565,027
Employee and Director share option plans 3,145,196 3,945,196
Diluted weighted average number of shares 43,038,651 43,814,626
The dilutive share schemes and options are detailed within Share based payments
(note 18). The calculation of the diluted EPS assumes all criteria giving rise
to the dilution of the EPS are achieved and all outstanding share options are
exercised.
2. Other income
2007 2006
$'000 $'000
Financial gain on settlement of royalties 444 -
Crude transport fees 104 40
Miscellaneous income 22 160
Gain on sale of assets 108 -
Specific adjustment for correction of miscellaneous income 1,240 -
Total other income 1,918 200
The correction of miscellaneous income resulted from a current year end
reconciliation of fees, tariffs and other income and an analysis of deferred
income recorded over a period of years, which identified that other income had
been understated in prior periods. The correction of miscellaneous income was
identified by the Group as an associated result of a reversal of a timing
difference between the local Colombian policy of recording revenue and the Group
policy of revenue recognition. Revenue is recorded in Colombia when the oil is
lifted by the customer however revenue is recorded at Group level at the point
of sale according to the sales contract in place. In addition during the
detailed analysis and correction of the related accounts at the current
financial year end mis-classifications between other income and revenue were
identified. In prior years, although the information that would have been
required to correct the recorded amount of other income would have been
available copies of this information were not retained as this was not, at the
time, considered necessary and in consequence the information that would be
required to allocate the adjustment to prior periods is not available. It has
been found to be impracticable to recreate records retrospectively in order to
determine the period specific effect of the overall adjustment of #1.2m. In
accordance with the provisions of IAS 8 regarding the impracticability of
identifying historic data in order to objectively ascertain the specific effect
on each of the prior periods the adjustment to correct the miscellaneous incomes
has been recognised in the current year. For comparison purposes, this
adjustment has been excluded from the calculation of key performance indicators
for profit before tax and cash netback per barrel.
3. Finance income
2007 2006
$'000 $'000
Income on cash at bank and short-term deposits 164 152
4. Finance expense
2007 2006
$'000 $'000
Bank loans and overdrafts 122 80
Interest on convertible debt 938 685
Accretion of convertible debt expense 386 304
Unwinding of discount on decommissioning provision 49 49
Gross finance expenses 1,495 1,118
Interest capitalised during the year (354) (435)
Net finance expenses 1,141 683
5. Taxation
Global Energy Development PLC is subject to UK and Colombian taxation.
UK taxation
The Company does not expect to be liable for UK corporation tax in the
foreseeable future because, as of the date of the last UK tax return, Global had
trading losses brought forward of $14.5m which are expected to increase in the
future.
Colombian taxation
The Company pays taxes in Colombia through its branch office of the subsidiary
Harken de Colombia, Ltd. The current tax included represents the tax payable
under Colombian legislation called Presumptive Income Tax (PIT). The PIT
calculation is based upon a 34% tax rate (2006: 35%) on presumptive income
representing 3% of the previous year's taxable net assets.
At 31 December 2007, net operating losses carried forward accumulated prior to
the year 2002 and totalling $13.0m expired in accordance with Colombian tax law.
To the extent allowed, net operating losses carried forward were utilised each
year to reduce current taxation charges. See note 6 for information related to
deferred taxation recognized regarding the net operating losses carried forward.
Taxation charge
Analysis of the Group tax charge/(credit):
2007 2006
$'000 $'000
Current tax:
UK Corporation Tax on profits at 30% (2006: 30%) - -
Overseas tax 1,500 1,723
Adjustments in respect of previous periods (40) -
Total current tax 1,460 1,723
Deferred tax:
UK deferred tax (16) (47)
Overseas tax 438 (451)
Total deferred tax 422 (498)
Tax charge on profit on ordinary activities 1,882 1,225
The Overseas current tax charge for 2006 includes a reclassification of $738,000
of tax expense previously reflected as administrative expenses. The weighted
average effective tax rate is 21% (2006: 26%) based on profit before taxation.
Taxation reconciliation
The charge for the year can be reconciled to the profit per the income
statement:
2007 2006
$'000 $'000
Profit before tax 8,875 4,706
Tax on Group profit before tax at UK Corporation tax rate of 30% 2,663 1,412
(2006: 30%)
Effects of:
Expenses not deductible for tax purposes 2,166 2,062
Tax rate differences on profits/(losses) outside ring fence (1,077) 554
activities
Utilisation of Colombia tax losses foregone (2,252) (2,305)
Temporary differences (see note 10) 422 (498)
Adjustments in respect of previous periods (40) 0
Total tax charge 1,882 1,225
6. Deferred taxation
Net operating losses in the Harken de Colombia, Ltd branch generated in the
years 2002 and prior were partially utilised in each year since. In 2006, a
deferred tax asset in the amount of $433,000 was recognised on the basis of
forecasted local profits and anticipated utilisation of losses carried forward,
however actual utilisation of losses was higher for the year. At 31 December
2007, the remaining balance of net operating losses carried forward totalling
$13.0m expired, in accordance with Colombia tax law, therefore no deferred tax
assets related to those net operating losses were recorded in 2007.
Deferred taxation on Colombia tax losses Historical Deferred Deferred Tax
Losses Tax Asset Charges/
Brought $'000 (Credits)
Forward $'000
$'000
As at 1 January 2006 139,718 - -
Tax losses expiring (111,712) - -
Utilisation of tax losses in 2006 (8,363) - -
As at 31 December 2006 19,643 433 (433)
Utilisation of tax losses in 2007 (6,623) (433) 433
Tax losses expiring (13,020) - -
As at 31 December 2007 - - -
Additionally, in accordance with IAS 12, a deferred tax liability was recognised
in non-current liabilities related to temporary differences between net book
values of assets in Colombia and their associated tax basis, as detailed below:
Temporary differences on Colombia assets Temporary Deferred Tax Deferred Tax
Differences Liability Charges/
$'000 $'000 (Credits)
$'000
As at 1 January 2006 (29,450) (10,013) -
Movement in temporary differences (47) (16) 16
As at 31 December 2006 (29,497) (10,029) -
Movement in temporary differences 56 19 (19)
As at 31 December 2007 (29,441) (10,010) -
These temporary differences between the tax basis of Colombia related assets and
their book value are generated due to investments carried outside of the local
branch books and therefore not tax deductible in Colombia.
Other temporary differences Temporary Deferred tax Deferred Tax
Differences asset $'000 Charges/
$'000 (Credits)
$'000
As at 1 January 2006 711 214
Movement in temporary differences 231 81 (81)
As at 31 December 2006 942 295
Movement in temporary differences 103 (7) 7
As at 31 December 2007 1,045 288
Other temporary differences between tax basis and net book carrying values arise
in regards to a decommissioning liability related to Colombia exploration and
producing assets in the amount of $674,000 at 31 December 2007 (2006: $624,000),
and office equipment and miscellaneous assets with timing differences totalling
$371,000 (2006: $318,000).
7. Intangible exploration and evaluation (E&E) assets
2007 2006
$'000 $'000
Costs
Colombia
At 1 January 1,157 2,257
Additions 7,476 -
Exploration expenditure written off (65) -
Transfer to tangible assets (8,568) (1,100)
At 31 December - 1,157
Peru
At 1 January 2,807 1,508
Additions 667 1,299
Exploration expenditure written off (33) -
At 31 December 3,441 2,807
Panama
At 1 January 694 527
Additions 284 167
At 31 December 978 694
Total intangible costs at 31 December 4,419 4,658
The amounts for intangible E&E assets represent costs incurred on active oil and
gas exploration projects. In accordance with the Oil and Gas asset accounting
policies of the Group, E&E assets are evaluated when circumstances exist that
suggest the possibility of impairment, as well as when E&E assets are reclassed
to the Development and Producing phase. The outcome of ongoing exploration, and
therefore whether the carrying value of assets will ultimately be recovered, is
inherently uncertain.
In June 2007, the exploration and producing contract with the Colombian Agencia
Nacional de Hidrocarburos covering the Los Sauces area in Colombia was
terminated. In September 2007, after negotiations to modify terms and conditions
of the contract obligations failed, investment totalling $1,075,000 was
reclassified to depreciable facilities.
Further during the year, Global invested $7.4m in the drilling of two wells on
the Luna Llena contract area which were initially classified as E&E costs in the
balance sheet. In March 2008, that contract was terminated, therefore in light
of the financial impact those assets were reclassed to depreciable assets in
2007, the appropriate depreciation expense was charged to the income statement,
and related reserves were eliminated from commercial reserves estimates..
In accordance with the provisions of IFRS 6 and IAS 36 the Group have
considered, in detail, the definition of CGU for the purposes of assessing the
accounting treatment of the E&E assets referred to above. The considerations
have taken into account the operating structure of the terminated licences
alongside existing D&P assets, the interdependence of future cashflows arising
from the terminated licences alongside existing D&P projects and hence the
extent to which individual assets in each CGU generate cash flows which are
largely independent of those from other assets, the operating segment to which
the assets had belonged under IFRS 8 and an assessment of the recoverable amount
of the CGU in which the assets were held. Accordingly the directors consider
that the carrying value of the D&P assets as disclosed in note 8 are not
impaired based on an assessment of the recoverable amount of each of the group's
CGUs.
8. Property, plant and equipment
Oil and Facilities Office Total
Gas and Equipment $'000
Properties Pipelines & Other
$'000 $'000 $'000
Cost:
At 1 January 2007 81,396 19,158 1,727 102,281
Additions 3,012 1,674 169 4,855
Disposals (293) - (279) (572)
Transfers 9,819 (1,686) - 8,133
At 31 December 2007 93,934 19,146 1,617 114,697
Depreciation:
At 1 January 2007 (20,350) (4,209) (1,144) (25,703)
Disposals 211 - 181 392
/Transfers (118) 38 (2) (82)
Provided during the year (5,368) (1,264) (173) (6,805)
At 31 December 2007 (25,625) (5,435) (1,138) (32,198)
Net book value at 31 December 2007 68,309 13,711 479 82,499
For comparison purposes, balances and activity for the year 2006 is presented
below:
Oil and Facilities Office Total
Gas and Equipment $'000
Properties Pipelines & Other
$'000 $'000 $'000
Cost:
At 1 January 2006 84,162 2,660 1,486 88,308
Additions 11,169 2,289 241 13,699
Disposals - - - -
Reclasses/Transfers (13,935) 14,209 - 274
At 31 December 2006 81,396 19,158 1,727 102,281
Depreciation:
At 1 January 2006 (18,956) (1,436) (968) (21,360)
Disposals - - - -
Reclasses/Transfers 2,016 (2,078) 62 -
Provided during the year (3,410) (695) (238) (4,343)
At 31 December 2006 (20,350) (4,209) (1,144) (25,703)
Net book value at 31 December 2006 61,046 14,949 583 76,578
Net book value at 31 December 2005 65,206 1,224 518 66,948
Included in the cost of tangible fixed assets is $788,000 (2006: $435,000) in
respect of capitalised financing costs. The amount of financing costs
capitalised in the period is $353,000 (2006 $347,000).
E&E costs for the Los Sauces contract in addition to drilling costs related to
Luna Llena, as described in note 7, were transferred from Intangible Assets to
Tangible Assets during the year. Detailed analyses of tangible assets
classifications recorded in prior years for Colombia resulted in
reclassification of asset values ($1,357,000) and related depreciation ($38,000)
from Facilities and Pipelines to other categories of tangible fixed assets. In
addition, excess materials and equipment valued at $329,000 were transferred
into inventory. Overall, profit after tax was not impacted by these
transactions. Other excess materials and equipment totalling $572,000 with
related depreciation of $392,000 were sold to third parties or otherwise
disposed of, resulting in recognition of a gain of $108,000 in Other Income.
Depletion and depreciation for oil assets is calculated on a unit-of-production
basis, using the ratio of oil production in the period to the estimated
quantities of proved and probable reserves at the end of the period plus
production in the period. Oil and gas assets are tested periodically for
impairment to determine whether the net book value of capitalised costs relating
to the cash generating unit exceed the associated estimated future discounted
cash flows of the related commercial oil and gas reserves. If an impairment is
identified, the depletion is charged through the income statement in the period
incurred. The Group has performed an impairment test at 31 December 2007 and no
impairment requirement was identified.
9. Inventories
2007 2006
$'000 $'000
Oil stocks 306 167
Yard Stock 578 832
Total Inventories 884 999
The amount of inventory which has been recognised as an expense during the year
is $1,703,000 (2006: $974,000).
10. Trade and other receivables
2007 2006
$'000 $'000
Trade receivables 10,351 4,399
Less provision for impairment of trade receivables (1,931) (881)
Net trade receivables 8,420 3,518
Other receivables 50 601
Prepayments 437 286
Withholding taxes receivable 460 -
Total trade and other receivables 9,367 4,405
As at 31 December 2007, with the exception of the unitisation issue discussed
below, there were no receivables considered past due (2006: $nil), and the Board
of Directors considers that the carrying values adequately represents the fair
values of all receivables. The maximum exposure to credit risk at the reporting
date is the fair value of each class of receivable set out above.
As at 31 December 2007, trade receivables of $4.0m (2006 $3.1m) related to an
association partner in the Colombian region, whose legal entitlement under a
unitisation issue is subject to ongoing negotiation and arbitration. In light of
the probability of delays anticipated in the resolution of the unitisation
issue, the Board of Directors elected to impair the receivable. The amount of
the provision as at 31 December 2007 was $1.9m (2006 $881,000) based on a 10%
discount factor. The ageing of this receivable is as follows:
2007 2006
$'000 $'000
Up to 3 months 244 97
4 to 6 months 236 317
Over 6 months 3,560 2,717
Total 4,040 3,131
Also included in the above are trade receivables from the Group's sole customer
totalling $6.3m (2006: $1.1m) in crude sales receivables not considered a risk
due to the short term nature of the receivables, the positive credit rating of
the customer, and the historical trading relationship with this customer. The
full balance from this customer as at 31 December 2007 was due within 30 days
(2006: 30 days).
Other classes of financial assets included within trade and other receivables do
not contain impaired assets.
The carrying values of the Groups' trade and other receivables are denominated
in the following currencies:
2007 2006
$'000 $'000
US Dollar 7,323 3,556
Colombian Peso 2,040 845
Peruvian Nuevos Soles 4 4
Total 9,367 4,405
11. Term deposits
2007 2006
$'000 $'000
Dollar denominated investments 1,831 893
The Group has established US Dollar denominated Certificates of Deposit with
restricted access and varying maturity dates as guarantees for Letters of Credit
required for performance assurance on oil and gas fields and office rental
contracts. At 31 December 2007, the Group maintained four Certificates of
Deposit totalling $1,731,000 (2006: $793,000) supporting oil and gas fields and
one Certificate of Deposit in the amount of $100,000 (2006: $100,000) supporting
one office rental contract. There are no material differences between the
carrying amounts of the financial assets and their fair values.
The maturity of the Group's term deposits is as follows:
2007 2006
$'000 $'000
Up to 3 months - 448
3 to 6 months - -
Over 6 months 1,831 445
Total 1,831 893
12. Cash & cash equivalents
2007 2006
$'000 $'000
Cash in bank and on hand 4,602 6,955
All cash balances constitute demand deposits or short term investments available
at call and held in US Dollars, Colombian Pesos, Peruvian Nuevos Soles and
Pounds Sterling.
13. Current liabilities
2007 2006
$'000 $'000
Trade payables 1,109 2,206
Taxation 1,579 308
Other financial liabilities - 309
Accrued liabilities 1,223 325
Short term loans payable 312 308
Total current liabilities 4,223 3,456
Trade payables reflect balances owed on invoices received from vendors and
contractors related to active projects in progress at the end of each period.
The increase in balances related to taxation is primarily due to VAT taxes on
the open crude sales receivables. Other financial liabilities as at 31 December
2006 reflect the value of crude oil royalties due to Ecopetrol, which was
settled in 2007. The increase in accrued liabilities relates to ongoing projects
and represents the value of work completed but not yet invoiced at 31 December
2007.
Short term loans payable represent the financing of insurance premiums at fixed
rates over the coverage period.
It is considered that where trade and other payables are not carried at fair
value in the consolidated balance sheet, book value approximates to fair value
at 31 December 2007 and 2006.
Maturity analysis of the financial liabilities is as follows:
2007 2006
$'000 $'000
Up to 3 months 3,989 3,225
3 to 6 months 78 77
Over 6 months 156 154
Total 4,223 3,456
14. Non-current liabilities
2007 2006
$'000 $'000
Long term leases payable 68 50
Decommissioning provision 674 624
Convertible loan notes 15,810 15,425
Deferred income taxation (see note 6) 10,010 10,029
Total non-current liabilities 26,562 26,128
Long term leases payable represents the difference between actual lease payments
and the recognition of lease costs on a straight-line basis as per IAS 17.
2007 2006
$'000 $'000
Analysis of debt:
Debt can be analysed as falling due:
Within one year or on demand - -
Between one and two years - -
Between two and five years 68 50
In five years or more 15,810 15,425
15,878 15,475
All of the Group's loans and borrowings are denominated in United States
Dollars.
15. Convertible loan notes
2007 2006
$'000 $'000
Balance bought forward 15,425 10,482
Convertible loan notes issued - 5,201
Proportion classed as equity - (512)
Costs of raising finance - (292)
Accreted interest 385 546
Balance carried forward 15,810 15,425
On 8 December 2006, the Group entered into a fixed-rate loan agreement for
$11,903,000 in convertible notes. Unless previously redeemed, converted or
purchased and cancelled, the notes are repayable in full on 8 December 2012. If
the Company redeems the loan notes prior to 8 December 2009, an early redemption
penalty of 8% on the outstanding balance is payable.
A portion of the previous loan notes from the loan agreement entered into on 27
October 2005 ("2005 loan notes") was partly extinguished ($6,702,000) and
re-invested in the new convertible notes. A balance of $5,798,000 in 2005 loan
notes remains outstanding. The Group raised an additional $5,201,000 in cash
from this financing transaction.
All loan notes incur an interest charge of 5% per annum for the three years to 8
December 2009, 6% per annum for the two years to 8 December 2011 and thereafter
an interest rate of 7%. Interest is payable quarterly. The effective interest
rate is therefore 5.85%. Holders of the loan notes issued in 2006 have the right
to convert the outstanding amount (or part thereof) into ordinary shares at a
fixed exchange rate of $1.90:#1 and at a fixed price of 179p at any time.
Holders of the 2005 loan notes have the right to convert the outstanding amount
(or part thereof) into ordinary shares at a fixed exchange rate of $1.78:#1 and
at a fixed price of 305.8p at any time. The loan notes are not secured against
any assets of any Group company. In accordance with the provisions of IAS 32,
the Group has determined the convertible loan note issue to be a compound
financial instrument requiring a proportion of the loan to be classified as
equity. The reclassified element represents the difference between the fair
value of a similar liability with no equity conversion option and the fair value
of the existing loan in current terms. Accordingly, an amount of $512,000 was
been reclassified to equity in 2006. Total costs incurred in raising the loan
amounts in 2006 were $325,000 of which $32,000 was reclassified to equity. The
remainder was debited against the carrying value of the notes. Accreted interest
is charged to the income statement over the life of the notes. The effective
interest rate is 5.96%.
16. Provisions
2007 2006
$'000 $'000
Decommissioning liability on 1 January 625 575
Unwinding of discount on decommissioning liability 49 49
Decommissioning liability on 31 December 674 624
The decommissioning provision represents the present value of decommissioning
costs for existing assets in the Group's oil and gas operations, which are
expected to be incurred between 2010 and 2018. These provisions have been
generated based on the Group's internal estimates, and where available, studies
and analyses from external sources. Assumptions, based on the current economic
environment, have been made which management believes are a reasonable basis
upon which to estimate the future liability. These estimates are reviewed
periodically to take into account any material changes to those assumptions.
However, actual decommissioning costs will ultimately depend upon future market
prices for the necessary decommissioning work required at the time assets are
decommissioned and abandoned. Furthermore, the timing of decommissioning is
likely to depend on when the fields cease to produce at economically viable
rates, which in turn is dependent upon future oil and gas prices that are
inherently uncertain.
17. Share capital
2007 2006
Number of 2007 Number of 2006
Shares $'000 Shares $'000
Authorised
Ordinary shares of 1p each 70,000,000 1,071 70,000,000 1,071
Unclassified shares of #1 each 50,000 92 50,000 92
Allotted, called up and fully paid
Ordinary shares of 1p each 35,328,428 539 35,328,428 539
The ordinary shares confer the right to vote at general meetings of Global
Energy Development PLC, to a repayment of capital in the event of liquidation or
winding up and certain other rights as set out in Global Energy Development
PLC's articles of association.
The ordinary shares also confer the right to receive dividends if declared by
the directors and approved by the Company. The unclassified shares do not carry
any rights.
The following describes the nature and purpose of each reserve within owners'
equity.
Reserve Description and Purpose
Share premium Amount subscribed for share capital in excess of nominal value.
_________________________________________________________________________________________________________
Equity element of the convertible loan notes accounted for in
Other reserve accordance with IAS 32 and IAS 39.
_________________________________________________________________________________________________________
Cumulative net gains and losses recognised in the consolidated income
Retained losses statement.
_________________________________________________________________________________________________________
Reserve created on issue of shares on acquisition of subsidiaries in
Capital reserve prior years.
_________________________________________________________________________________________________________
18. Share based payments
Discretionary share option incentive plan
The Company periodically grants share options to employees and directors, as
approved by the Board of Directors. At 31 December 2007 and 31 December 2006 the
following share options were outstanding in respect of the ordinary shares:
Year ended 31 December 2007
Year of Number Of Issued Lapsed Exercised Number Start Date End Date Price
Grant Shares in Year in Year of Shares per
Share
2002 2,915,196 - - - 2,915,196 31.01.2002 31.01.2012 50.0p
2002 30,000 - - - 30,000 08.08.2002 12.08.2012 54.5p
2004 675,000 - - - 675,000 03.12.2004 03.12.2014 151.1p
2005 240,000 - (60,000) - 180,000 08.12.2005 08.12.2015 265.1p
2006 325,000 - - - 325,000 13.09.2006 13.09.2016 174.5p
2007 - 200,000 - - 200,000 13.06.2007 13.06.2017 85.7p
Total 4,185,196 200,000 (60,000) - 4,325,196
Year ended 31 December 2006
Year of Number Of Issued Lapsed Exercised Number Start Date End Date Price per
grant Shares in Year in Year of Shares Share
2002 2,967,636 - (32,440) (20,000) 2,915,196 31.01.2002 31.01.2012 50.0p
2002 30,000 - - - 30,000 08.08.2002 12.08.2012 54.5p
2004 780,000 - - (105,000) 675,000 03.12.2004 03.12.2014 151.1p
2005 270,000 - - (30,000) 240,000 08.12.2005 08.12.2015 265.1p
2006 - 325,000 - - 325,000 13.09.2006 13.09.2016 174.5p
Total 4,047,636 325,000 (32,440) (155,000) 4,185,196
The Company's share price at 31 December 2007 was 83.5p (31 December 2006:
123.5p). The highest and lowest share prices during the year were 140.0p (2006:
300.0p) and 82.5p (2006: 118.5p) respectively.
The fair values of awards granted under the Group's option plan have been
calculated using a variation of a binomial option pricing model that takes into
account factors specific to share incentive plans such as the vesting periods,
estimated share price volatility, the expected dividend yield on the Company's
shares and expected exercise of share options. The following principal
assumptions were used in the valuation:
Grant date 3 Dec 2004 8 Dec 2005 13 Sep 2006 13 Jun 2007
Share price at date of grant 1.51p 2.651p 1.745p 0.857p
Exercise price 1.51p 2.651p 1.745p 0.857p
Volatility 36.73% 33.02% 40.68% 30.99%
Option Life 3 Dec 2014 8 Dec 2015 13 Sep 2016 13 Jun 2017
Dividend Yield 0% 0% 0% 0%
Risk-Free investment rate 4.645% 4.226% 4.568% 5.416%
Employee Turnover 3.7 years 3.3 years 4.3 years 4.0 years
Volatility has been based on a Volatility Cone calculation model using the
historic share price two years prior to each grant date and assigning a
probability weighting. Volatilities were selected between the median and the
75th percentile calculations.
Based on above assumptions the fair values of the options granted are estimated
to be:
Grant date 3 Dec 2004 8 Dec 2005 13 Sep 2006 13 Jun 2007
Fair value 51p 76p 66p 28p
Expense arising from share-based payments:
Based on the above fair values and the Company's expectations of employee
turnover, the expense arising from equity-settled share options and share awards
made to employees was $480,000 for the period (2006: $312,000). There were no
other share-based payment transactions.
- Ends -
This information is provided by RNS
The company news service from the London Stock Exchange
END
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