TIDMGED
RNS Number : 9459A
Global Energy Development PLC
27 March 2013
Immediate Release 27 March 2013
GLOBAL ENERGY DEVELOPMENT PLC
(the "Company" or "Global")
AUDITED FINAL RESULTS FOR THE YEAR ENDED 31 DECEMBER 2012
Global Energy Development PLC, the Latin America focused
petroleum exploitation, development and production company (AIM:
GED) with operations in Colombia, is pleased to announce its
audited final results for the year ended 31 December 2012.
2012 Highlights
-- Turnover increased to $44.0 million (2011: $43.1
million).
-- Oil prices increased 3% averaging $98 per barrel ("bbl")
(2011: $95 per bbl).
-- Gross oil production decreased 5% to 492,000 bbls (2011:
519,000 bbls) due to certain down time of the Tilodiran 2 well.
-- Sales of oil volumes increased slightly at 454,943 bbls (2011: 444,657).
-- Gross profit decreased to $12.6 million (2011: $15.0 million)
due primarily to the delay in the completion of the Rio Verde 2
water disposal well.
-- Profit from sale of Block 95, net of tax, of $810,000 (2011: Nil).
-- Tax charge of $3.7 million primarily relating to write-down
of the value of the Company's deferred tax assets following
enactment of Colombian Tax Law 1607 in December 2012.
-- Net loss of $2.12 million (2011: net income of $2.00 million) due primarily to higher water transportation costs and other operating expenses during 2012 along with the non-cash tax effect of Colombian Tax Law 1607 passed in December 2012.
Mikel Faulkner, Global's Chairman, indicated "The Company's 2013
focus is on bringing in a strategic partner to accelerate the
development of its Middle Magdalena reserves and on continuing with
the improvement of its strong cash flow from operations from its
oil production in the Llanos Basin. This combination should hasten
the realisation of greater value to the Company and its
shareholders in 2013 and the future."
For further information please contact
Global Energy Development PLC
Anna Williams, Finance Director +001 817 310 0240
awilliams@globalenergyplc.com
www.globalenergyplc.com
Buchanan (Financial PR)
Tim Thompson +44 (0)20 7466 5000
Ben Romney
Northland Capital Partners Limited
+44 (0)20 7796
Louis Castro 8800
Lauren Kettle
Notes to Editors:
The Company's shares have been traded on AIM, a market operated
by the London Stock Exchange, since March 2002 (AIM: GED). The
Company's balanced portfolio includes the country of Colombia and
comprises a base of production, developmental drilling and
recompletion opportunities. The Company currently holds five
operated contracts in Colombia.
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 Ralph E. Davis, Inc., ("RED"), an independent
petroleum engineering firm, conform to the definition approved by
the Society of Petroleum Engineers ("SPE") and the World Petroleum
Council ("WPC"). The probable and possible reserves reported by RED
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 RED. In addition, the information contained within this
announcement has been reviewed by Mr. Stephen Voss, a Director of
the Company, for the purpose of the Guidance Note for Mining, Oil
and Gas Companies issued by the London Stock Exchange in respect of
AIM companies which outlines standards of disclosure for natural
resource projects. Mr. Voss is a Registered Professional Engineer
in Texas and has been a Member of SPE for 28 years.
Forward-looking statements
This release may include statements that are, or may be deemed
to be, "forward-looking statements". These forward-looking
statements can be identified by the use of forward-looking
terminology, including the terms "believes", "estimates", "plans",
"projects", "anticipates", "expects", "intends", "may", "will" or
"should" or, in each case, their negative or other variations or
comparable terminology, or by discussions of strategy, plans,
objectives, goals, future events or intentions. These
forward-looking statements include all matters that are not
historical facts. They appear in a number of places throughout this
release and include, but are not limited to, statements regarding
the Group's intentions, beliefs or current expectations concerning,
among other things, the Group's results of operations, financial
position, liquidity, prospects, growth, strategies and expectations
of the industry. By their nature, forward-looking statements
involve risk and uncertainty because they relate to future events
and circumstances. Forward-looking statements are not guarantees of
future performance and the development of the markets and the
industry in which the Group operates may differ materially from
those described in, or suggested by, any forward-looking statements
contained in this release. In addition, even if the development of
the markets and the industry in which the Group operates are
consistent with the forward-looking statements contained in this
release, those developments may not be indicative of developments
in subsequent periods. A number of factors could cause developments
to differ materially from those expressed or implied by the
forward-looking statements including, without limitation, general
economic and business conditions, industry trends, competition,
commodity prices, changes in law or regulation, currency
fluctuations (including the US dollar), the Group's ability to
recover its reserves or develop new reserves, changes in its
business strategy, political and economic uncertainty. Save as
required by law, the Company is under no obligation to update the
information contained in this release.
Past performance cannot be relied on as a guide to future
performance.
Chairman's Statement
Development of the Company's 2P reserves in its Bolivar and
Bocachico Association Contract areas within the Middle Magdalena
Valley in Colombia, South America remains the Company's top
priority for 2013. During 2012, the Company elected to engage a
financial advisor in connection with a farm-out or other business
transaction involving the Company's Bolivar Association Contract
("Bolivar") in order to accelerate production and to better exploit
Bolivar's large reserve base. This targeted increase in drilling
activity mandates the deployment of additional and substantial
technical expertise and operating man power to effectively
undertake the management of this sizable shale oil development
project. Interest has increased dramatically in shale oil generally
throughout the entire international petroleum industry and
specifically in the northern Middle Magdalena Valley Basin. The
Company hopes to complete the partnering process in the second
quarter of 2013 and is looking forward to working with an eventual
partner selected to develop these significant oil assets.
The Company also demonstrated continued progress towards
developing oil production from its Bocachico Association Contract
through the testing efforts on the Torcaz 5 well. Although
consistent oil production has not yet been achieved, the Company
was able to demonstrate increased permeability of the reservoir
formation through successful sanding with oil shows during the
testing of Torcaz 5. The Company plans to address the challenge of
moderating the sanding and enhancing oil production by modifying
its completion approach in existing Torcaz wells during 2013.
2012 saw record revenue from oil production from the Company's
contract areas located within the Llanos Basin of Colombia. Higher
operating costs incurred were primarily a result of the water
disposal and transportation costs from the Tilodiran field. While
the Company was able to complete the existing Rio Verde 2 well
during 2012 into a secondary recovery water injection well, final
approval from the Colombian authorities to commence long-term water
injection was not received until the fourth quarter of 2012. This
delay led to increased operating costs during the majority of 2012.
Following commencement of water injection at Rio Verde 2 in the
fourth quarter of 2012, cost savings of approximately $400,000 per
month began to be realised in late 2012 and continuing into
2013.
Lastly, 2012 saw the Company narrow its focus solely on its core
assets within the country of Colombia through the sale of its
remaining 40 per cent working interest of the Peruvian Block 95
Licence Contract for cash consideration of $5.4 million with $2
million received at closing and the remaining $3.4 million net
proceeds received in February 2013 following the completion of the
assignment from Perupetro, Peru's national agency for
hydrocarbons.
The Company's 2013 focus is on bringing in a strategic partner
to accelerate the development of its Middle Magdalena reserves and
on continuing with the improvement of its strong cash flow from
operations from its oil production in the Llanos Basin. This
combination should hasten the realisation of greater value to the
Company and its shareholders in 2013 and the future.
Mikel Faulkner
Chairman
26 March 2013
Managing Director's Review of Operations
Operations
Llanos Basin Production:
In 2012, the Company anticipated higher gross production from
its Llanos Basin properties due to strong production rates at the
beginning of 2012 primarily from its Tilodiran wells (Tilodiran 2
and Tilodiran 3) within the Rio Verde Contract Area. Overall, gross
oil production decreased by 5 per cent to 491,786 barrels ("bbl")
in 2012 (2011: 519,653 bbls). The largest contributing factor to
the shortfall in 2012 oil production was the downtime at the
Tilodiran 2 well. Due to high levels of scale precipitation from
Ubaque water previously intermingled with the Gacheta oil
production in the Tilodiran 2 well, the electric submersible pump
on Tilodiran 2 failed early in 2012 and failed twice again during
the year due to Colombian national grid electrical system
malfunctions. These factors required pump changes in the Tilodiran
2 well which resulted in downtime of approximately 140 days (38 per
cent of the year) during 2012. Daily oil production from the
Tilodiran 2 well averages between approximately 250 and 275 barrels
of oil per day ("bopd"). The effect of these pump replacements
during the year played a key role in the Company's understanding of
the effect of produced Ubaque water chemistry on scaling and other
factors that were causing poor pump performance. All Ubaque
formation production has been shut-off in the Tilodiran 2 well, and
this should benefit long term production performance of the Middle
Gacheta reservoir in the Tilodiran field.
The Tilodiran 3 well is currently flowing naturally without
requirement of lifting at rates between 700-800 bopd. In late 2012,
the Company moved ahead to recomplete the existing Tilodiran 1 well
in the Middle Gacheta. The well was previously recompleted in 2005
in the Massive Ubaque with preliminary successful results, but the
water cut from the Ubaque eventually increased to 100%. The
Tilodiran 1 well was completed in early 2013 and has been placed on
production with an initial producing rate of 40 bopd.
In regards to improving the profitability of our Llanos Basin
operations, a key achievement for the Company was the successful
recompletion of the existing Rio Verde 2 well into a secondary
water injection well in the fourth quarter of 2012. The conversion
was completed in July 2012 and short-term test results were
submitted to the Colombian Ministry of Mines and Energy. Final
approval for long-term injection was not received until October
2012. Following commencement of water injection in October 2012,
water disposal and transportation costs have since decreased by
approximately $400,000 per month. Water disposal costs previously
represented the largest component of the Company's operating costs
prior to the conversion of the Rio Verde 2 well. The Company plans
to continue other operational improvements in 2013 such as reducing
fuel costs by converting generators at the Tilodiran field from
diesel to produced natural gas, completing the saltwater transfer
line from the Tilodiran field to the Rio Verde 2 water injection
well, and eliminating high road maintenance costs as a result of
decreased trucking operations.
Middle Magdalena Properties:
Development plans for the Company's Bolivar field were delayed
in 2012 while the Company engaged a financial advisor to pursue a
farm-out of the Bolivar Contract Area. The Company believes that
bringing in a strategic partner with technical expertise and
financial resources will benefit and accelerate the overall pace of
development of this reserve-rich property in the Middle Magdalena
field in Colombia. This process is presently continuing and is
hoped to be completed during the second quarter of 2013.
Bringing on increased production from our Torcaz field within
the Bocachico Contract Area also remains a priority for the Company
in 2013. As part of this strategy, the Company installed several
types of abrasive-tolerant pumps in the existing Torcaz 5 well
within the Bocachico Contract area in 2012 to re-establish oil (and
sand) production and lift from the wellbore. During the testing
phase of the pumps, successful sanding and oil shows were
initiated. However, oil shows were interrupted due to periodic
significant sand movement into the wellbore, which eventually
overwhelmed the capacity of the pumps. As a result it became
evident that a modified approach to partially apply conventional
sanding restraints should be utilised to moderate initial heavy
sand production and enhance oil production. The Company has ordered
a newly-designed pump which should be received in the second
quarter of 2013 and plans to commence recompletion operations on
its straight-hole Torcaz 3 well upon delivery.
Although the Torcaz 5 was considered an initial setback, this
was the first attempt at implementing such abrasives-tolerant
technology at the Torcaz field and it is not surprising to see some
short-term calibration and engineering issues at this early stage.
The initial results are nevertheless encouraging and the Company
believes that this process, in a modified form, can help to
substantially accelerate production of the Company's reserves in
the Torcaz field. The delay in accelerating the development plans
at the Torcaz field had a tangible impact on the Company's year-end
2012 reserves report resulting in a loss of significant 2P reserves
due to end of contract life effects. Therefore, it is critical for
the Company to accelerate production efforts in the Torcaz field or
face continued loss of reserves as the contract term draws
closer.
Financials
During 2012, the Company recorded increased turnover of $44.0
million, 2 per cent higher than the prior year (2011: $43.1
million) due to slightly higher realised average oil pricing of $98
per bbl during the year (2011: $95 per bbl). Net sales volumes
remained steady with 454,943 bbls sold in 2012 (2011: 444,657 bbls)
as the Company was able to liquidate certain crude oil inventory
volumes on hand.
Cost of Sales increased by 12 per cent to $31.5 million during
the year (2011: $28.1 million). The largest component of the
Company's lease operating expenses of $14.3 million during 2012 was
water transportation and disposal costs which totaled $3.9 million.
The delayed final approval for the long-term water injection from
the Colombian authorities until fourth quarter of 2012 led to
overall higher water costs during the year than originally
projected. Also contributing to the increased Cost of Sales were
the derecognised costs of $2.8 million during 2012 (2011: $1.4
million) primarily related to the damaged pumps at the Tilodiran 2
well and the Torcaz 5 well. As a slight benefit, the Company
experienced a 16 per cent decline in oil transportation costs
during 2012 to $5.9 million (2011: $7.0 million) due to the ability
to transport its Palo Blanco oil production (representing
approximately 12 per cent of the Company's net production) via
pipeline in lieu of trucking.
Based on overall increased Cost of Sales, gross profit was $12.6
million, a decrease of $2.4 million over the prior year.
Administrative costs (including share-based expense and exchange
rate costs) increased to $7.9 million during 2012 against $6.6
million in the prior year due primarily to the non-cash increase in
share-based expense, higher foreign exchange expense and additional
personnel costs. In an effort to diminish future costs, the Company
reduced personnel and has provided for non-routine severance costs
in administrative costs in 2012. During 2012, the Company recorded
a discount impairment in Other Expense of $1.1 million against a
long-term receivable from one partner of an association contract in
Colombia.
Profit before taxation was $760,000 (2011: $5.9 million). Due to
the issuance of Colombian Tax Law 1607 approved by Congress in
December 2012, the Company recorded a one-time, non-cash charge of
$3.6 million in tax expense to reduce the valuation of the
Company's deferred tax assets. The Tax Law included a provision
which lowered the income tax from 33 per cent to 25 per cent but
implemented a new income tax called a "CREE" tax of 9 per cent
(decreasing to 8 per cent in 2016) which is not eligible for tax
loss carry forwards. Otherwise, the long-term tax effect of the Tax
Law is not expected to have a future material financial impact to
the Company. The loss from continuing operations, net of tax, was
$2.9 million (2011: $2.0 million profit). Profit from the Company's
discontinued operations in Peru, net of tax, was $810,000,
therefore, net loss for 2012 was $2.12 million (2011: $2.0 million
profit).
The Company generated cash flow from operations of $9.3 million
(2011: $14.2 million) and expended $ 8.7 million on capital
projects primarily related to the conversion of the Rio Verde 2
into a secondary recovery injection well, the implementation of
abrasives tolerant technology in its Torcaz 5 well and the efforts
to eliminate scale precipitation from Ubaque formation production
and improve overall production performance in the Tilodiran 2 well.
The Company repaid and fully extinguished the remaining convertible
notes outstanding of $9.5 million with the securing of new
financing of $12 million. Proceeds of $2.0 million were also
received in 2012 from the sale of the Company's remaining working
interest in the Peruvian Block 95 Contract.
In March 2013, the Group renegotiated its current debt
obligations totaling $17 million with HKN, Inc. to restructure into
one new loan agreement with amortising payments due quarterly
through 15 June 2015 at a slightly increased interest charge of
12.75 per cent per annum, payable quarterly in arrears. This
restructuring permits the Company to repay its debt obligations
through current cash flow from operations while allowing additional
capacity for discretionary capital expenditures to develop its
significant reserve base.
Stephen Voss
Managing Director
26 March 2013
Oil and Gas Reserves Information (unaudited)
As at 31 December 2012
The reserve estimates shown in this report were developed by
Ralph E. Davis Associates, Inc., an independent petroleum
engineering firm, and are based on the joint reserve and resource
definitions of the Society of Petroleum Engineers, the World
Petroleum Council, the American Association of Petroleum Geologists
and the Society of Petroleum Evaluation Engineers consistent with
UK reporting purposes. In 2012, the Company also completed an
additional reserve report reflecting the requirements of Canadian
Form 51-101. Proved and probable reserve estimates are based on a
number of underlying assumptions including oil prices, future
costs, oil in place and reservoir performance, which are inherently
uncertain. Management uses established industry techniques to
generate its estimates and regularly references its estimates
against those of joint venture partners or external consultants.
However, the amount of reserves that will ultimately be recovered
from any field cannot be known with certainty until the end of the
field's life.
All reserves are in the South America production and development
area.
Estimated net proved and probable reserves of crude oil
Proved Probable Total
South America South America All
Barrels ('000s) Barrels ('000s) Barrels ('000s)
------------------------------------- ------------------ -------------------- ------------------
At 1 January 2012
Developed 2,209 - 2,209
Undeveloped 41,919 74,179 116,098
44,128 74,179 118,307
------------------------------------- ------------------ -------------------- ------------------
Changes in year attributable
to:
Revision of previous estimates(1) (3,927) (26,193) (30,120)
Production (492) - (492)
Developed 2,539 - 2,539
Undeveloped 37,170 47,986 85,156
At 31 December 2012 39,709 47,986 87,695
------------------------------------- ------------------ -------------------- ------------------
(1) The overall decrease in reserve volumes is due primarily to
the sale of the Company's interest in Block 95 in Peru, accelerated
reversionary interest, end of contract life effects and minor field
revision. Further delays in the development activities within the
Bolivar and Bocachico Contracts Areas will result in future losses
of 2P reserves due to end of contract life effects.
PRIMARY FINANCIAL STATEMENTS
Consolidated Statement of Comprehensive Income
for the year ended 31 December 2012
2012 2011
$'000 $'000
--------------------------------------------- ----------- ------------
Revenue 44,038 43,070
Cost of sales (31,450) (28,075)
--------------------------------------------- ----------- ------------
Gross profit 12,588 14,995
--------------------------------------------- ----------- ------------
Other income 77 12
Administrative expenses (6,563) (6,082)
Share-based expense (892) (297)
Exchange rate expense (536) (290)
Other expenses (1,421) -
Operating profit from continuing operations 3,253 8,338
--------------------------------------------- ----------- ------------
Finance income 61 34
Finance expense (2,554) (2,438)
Profit before taxation 760 5,934
--------------------------------------------- ----------- ------------
Tax expense (3,693) (3,938)
--------------------------------------------- ----------- ------------
(Loss)/profit from continuing operations,
net of tax (2,933) 1,996
--------------------------------------------- ----------- ------------
Profit from discontinued operations, net 810 -
of tax
--------------------------------------------- ----------- ------------
Total comprehensive (loss)/income for the
year attributable to the equity owners of
the parent (2,123) 1,996
--------------------------------------------- ----------- ------------
(Loss)/earnings per share for continuing
operations
- Basic $ (0.08) $ 0.06
- Diluted $ (0.08) $ 0.05
--------------------------------------------- ----------- ------------
Total (loss)/earnings per share
- Basic $ (0.06) $ 0.06
- Diluted $ (0.06) $ 0.05
--------------------------------------------- ----------- ------------
Consolidated Statement of Changes in Equity
Share Share Capital Other Retained Total
Capital Premium Reserve Reserve Losses Equity
$'000 $'000 $'000 $'000 $'000 $'000
---------------------------- ---------- ------------- ------------- --------- ------------- -----------
At 1 January 2011 540 26,544 210,844 1,826 (159,928) 79,826
Total comprehensive profit
for the year - - - - 1,996 1,996
Share-based payment -
options equity settled - - - - 107 107
Redemption of convertible
notes 6 595 - (899) 874 576
At 1 January 2012 546 27,139 210,844 927 (156,951) 82,505
---------------------------- ---------- ------------- ------------- --------- ------------- -----------
Total comprehensive (loss)
for the year - - - - (2,123) (2,123)
Share-based payment -
options equity settled 62 - - - 24 86
Redemption of convertible
notes - - - (927) 927 -
At 31 December 2012 608 27,139 210,844 - (158,123) 80,468
---------------------------- ---------- ------------- ------------- --------- ------------- -----------
Consolidated Statement of Financial Position
as at 31 December 2012
2012 2011
$'000 $'000
--------------------------------------- -------------- ------------
Assets
Non-current assets
Intangible assets 739 3,427
Property, plant and equipment 108,606 99,845
Trade receivables 1,388 2,500
Total non-current assets 110,733 105,772
--------------------------------------- -------------- ------------
Current assets
Inventories 1,754 1,939
Trade and other receivables 9,346 2,952
Prepaids and other assets 1,628 1,299
Term deposits 1,608 1,718
Cash and cash equivalents 6,209 4,331
Total current assets 20,545 12,239
--------------------------------------- -------------- ------------
Total assets 131,278 118,011
--------------------------------------- -------------- ------------
Liabilities
Non-current liabilities
Deferred tax liabilities (net) (13,353) (10,116)
Equity tax liability (434) (968)
Long-term provisions (5,546) (2,861)
Long-term loans payable (551) (227)
Total non-current liabilities (19,884) (14,172)
--------------------------------------- -------------- ------------
Current liabilities
Convertible loan notes - (9,372)
Trade and other payables (12,126) (5,556)
Corporate and equity tax liability (1,478) (1,184)
Short term loans and finance leases (17,322) (5,222)
Total current liabilities (30,926) (21,334)
--------------------------------------- -------------- ------------
Total liabilities (50,810) (35,506)
Net assets 80,468 82,505
--------------------------------------- -------------- ------------
Capital and reserves attributable to equity holders
of the company
Share capital 608 546
Share premium account 27,139 27,139
Other reserve - 927
Capital reserve 210,844 210,844
Retained deficit (158,123) (156,951)
Total equity 80,468 82,505
--------------------------------------- -------------- ------------
Consolidated Statement of Cash Flows
for the year ended 31 December 2012
2012 2011
$'000 $'000
--------------------------------------------------- --------------- ----------------
Cash flows from operating activities
Operating profit before interest and taxation
from continuing operations 3,253 8,338
Operating profit before interest and taxation 1,157 -
from discontinued operations
Depreciation, depletion and amortisation 8,108 8,424
Gain on disposal of assets from discontinued
operations (1,157) 5
Increase in trade and other receivables (3,103) (930)
Increase in Cajaro receivable provision 1,221 -
Decrease/(increase) in inventories 185 (389)
Increase in trade and other payables (436) 437
(Decrease) / increase in long-term provisions 624 (482)
Shared-based payments and other non-cash
items 24 107
Cash generated from continuing operations 9,876 15,510
--------------------------------------------------- --------------- ----------------
Net movement tax charges (612) (1,344)
--------------------------------------------------- --------------- ----------------
Net cash flows from operating activities 9,264 14,166
--------------------------------------------------- --------------- ----------------
Investing activities
Capital expenditure
- Expenditure on property, plant and equipment (8,702) (5,596)
- Expenditure on intangible assets (1,599) (393)
- Disposal of Peru 2,000 65
Interest received 61 34
Decrease/(increase) in short-term investment 110 (252)
Net cash flows from investing activities (8,130) (6,142)
--------------------------------------------------- --------------- ----------------
Financing activities
Short term loans paid during the period (9,762) (9,219)
Loans subscribed for during the period 12,625 -
Interest paid (2,181) (1,818)
Proceeds from exercise of share options 62 -
Net cash flows from financing activities 744 (11,037)
--------------------------------------------------- --------------- ----------------
Increase /(decrease) in cash and cash equivalents 1,878 (3,013)
Cash and cash equivalents at beginning
of year 4,331 7,344
Cash and cash equivalents at the end of
year 6,209 4,331
--------------------------------------------------- --------------- ----------------
ABRIDGED NOTES TO THE PRIMARY FINANCIAL STATEMENTS
For the twelve months ended 31 December 2012
1. Accounting Policies
Basis of preparation
The financial statements of the Group for the twelve months
ended 31 December 2012 have been prepared in accordance with
International Financial Reporting Standards, International
Accounting Standards and Interpretations (collectively IFRS) issued
by the International Accounting Standards Board (IASB) as adopted
by European Union.
The financial information set out above does not constitute the
Company's statutory accounts for the years ended 31 December 2012
or 2011 as defined by section 435 of the Companies Act 2006 but is
derived from those accounts. Statutory accounts for 2011 have been
delivered to the registrar of companies, and those for 2012 will be
delivered in due course. The auditors have reported on those
accounts; their reports were (i) unqualified, and (ii) did not
include a reference to any matters to which the auditors drew
attention by way of emphasis without qualifying their report and
(iii) did not contain a statement under section 498 (2) or (3) of
the Companies Act 2006 in respect of the accounts.
2. Earnings per share (EPS)
Basic earnings per share amounts are calculated by dividing the
profit/(loss) 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 are calculated by dividing the
profit/ (loss) for the year attributable to ordinary equity holders
of the parent by the weighted average number of ordinary shares
outstanding at the end of 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.
2012 2011
$'000 $'000
------------------------------------------------ ---------------- ------------------
(Loss)/profit from continuing operations
after taxation (2,933) 1,996
Profit from discontinued operations after 810 -
taxation
Net (loss)/profit attributable to equity
holders used in dilutive calculation (2,123) 1,996
------------------------------------------------ ---------------- ------------------
(Loss)/earnings per share for continuing
operations
- Basic $ (0.08) $ 0.06
- Diluted $ (0.08) $ 0.05
Earnings per share for discontinued operations
- Basic and Diluted $ 0.02 $ -
Total (loss)/earnings per share
- Basic $ (0.06) $ 0.06
- Diluted $ (0.06) $ 0.05
Basic weighted average number of shares 35,950,888 35,752,049
Dilutive potential ordinary shares
Employee and Director share option plans 1,247,263 1,536,620
Diluted weighted average number of shares 37,198,151 37,288,669
------------------------------------------------ ---------------- ------------------
The calculation of the diluted EPS assumes all criteria giving
rise to the dilution of the EPS are achieved and all outstanding
share options with exercise prices lower than the average period
share price are exercised. During the period ended 31 December
2012, the Group reported a loss. Therefore, because the effect of
the potentially dilutive shares related to outstanding share
options would be anti-dilutive, a separate diluted loss per share
has not been reported because it is deemed to equal the basic loss
per share.
3. Income tax
The Group is subject to UK and Colombian taxation.
UK taxation
The Group 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, the Group had trading losses carried forward of $31.1
million as at 31 December 2012 and $31.0 million as at 31 December
2011 and these are expected to increase in the future.
Colombian taxation
The Group pays taxes in Colombia through the branch office of
its wholly-owned subsidiary CEDCo. The Colombian corporation tax in
2012 and 2011 was calculated as the higher of net income tax or
presumptive income tax which was determined as follows:
-- Presumptive income tax. An alternative minimum tax calculated
on the prior year gross equity less liabilities at a rate of 3 per
cent to determine the presumptive income. A rate of 33 per cent is
applied to the presumptive income to arrive at the tax obligation;
or
-- Net income tax. Calculated at a rate of 33 per cent taking
into account revenues minus costs, and standard deductions.
In 2012 and 2011, CEDCo paid its Income tax based on Presumptive
Income Tax.
Colombian Tax Law 1607
On 26 December 2012, the Colombian Congress passed a tax law
which reduced the corporate income tax rate applicable to Colombian
entities and branches of non-Colombian companies from 33 per cent
to 25 per cent beginning 1 January 2013. However, this rate
reduction is effectively offset by a new income tax, known as "CREE
Tax", with a tax rate of 9 per cent from 2013 through 2015, and 8
per cent thereafter. The CREE tax works as an income tax except for
certain limitations on the ability to claim costs and expenses. Tax
loss carryforwards are not eligible to offset the CREE taxable
amount. Lastly, the CREE's taxable income amount may not be less
than three per cent of the taxpayer's net equity as of 31 December
of the preceding taxable year. The Company will calculate its
current tax expense beginning 2013 based upon Tax Law 1607.
Additionally, the Group pays an Equity Tax calculated using a
taxable base of the Net Equity as at 1 January 2011 at a rate of 6
per cent. The payment of the tax is over four years with payments
made twice per year.
The major components of income tax expense for the periods ended
31 December 2012 and 2011 are:
Consolidated statement of comprehensive income:
2012 2011
$'000 $'000
--------------------------------------------------- ------------- -------------
Current taxes:
Current income tax charge 333 256
Current equity tax charge - 1,549
Other withholding tax 123 51
Deferred Tax:
Adoption of Colombian Tax Law 1607 3,560 -
Relating to origination and reversal of temporary
differences (323) 2,082
Total income tax expense reported in the income
statement 3,693 3,938
--------------------------------------------------- ------------- -------------
Taxation reconciliation
The charge for the year can be reconciled to the profit per the
income statement:
2012 2011
$'000 $'000
----------------------------------------------- ------------- ------------
Accounting (loss)/profit before income tax 760 5,934
Tax on Group (loss)/profit at UK Corporation
tax rate of 24.5% (2011 26.5%) 186 1,572
Effects of:
Permanent differences 677 (511)
UK tax on losses carried forward 215 798
Non taxable income / Non-deductible expenses
for tax purposes - 709
Adoption of Colombian Tax Law 1607 3,560
Temporary differences (1,032) 2,082
Effect of higher tax rates in the UK 87 (712)
Total corporation tax expense reported in the
income statement 3,693 3,938
----------------------------------------------- ------------- ------------
4. Deferred tax
The gross movement in net deferred tax liabilities are reported
as follows:
2012 2011
$'000 $'000
----------------------------------------------- ------------- ---------------
Opening balance as of 1 January (10,116) (8,034)
Change in deferred tax related to adoption of (3,560) -
Colombian Tax Law 1607
Change in deferred tax related to temporary
differences and other 323 (2,082)
Closing balance as at 31 December (13,353) (10,116)
----------------------------------------------- ------------- ---------------
The Group offsets deferred tax assets and liabilities if, and
only if, it has a legally enforceable right to offset current tax
assets and current tax liabilities and the deferred tax assets and
deferred tax liabilities related to corporation taxes levied by the
same tax authority. Deferred tax assets and liabilities listed
below are related to corporation taxes levied by the Colombian tax
authority with jurisdiction over CEDCo.
Temporary differences between the tax base and carrying values
arise in relation to the effect of inflation adjustments,
differences in exchange rate of non-monetary assets, differences
between tax and accounting depreciation and the adjustment and use
of tax losses generated in 2008 and 2010 that could be compensated
with future profits with no due date.
The movement in deferred income tax assets and liabilities
during the year is as follows:
Tax losses Provisions Total
Deferred tax assets $'000 $'000 $'000
--------------------------------------- ----------- ------------- ----------
As at 1 January 2011 14,979 1,398 16,377
Use of tax loss carry forwards (1,721) (382) (2,103)
As at 1 January 2012 13,258 1,016 14,274
Write down of tax loss carry forwards
- Law 1607 (3,186) - (3,186)
Use of tax loss carry forward (1,126) (4) (1,130)
As at 31 December 2012 8,946 1,012 9,958
--------------------------------------- ----------- ------------- ----------
The reduction in deferred tax assets during 2012 is primarily
due to the new 2012 Colombian Tax Law 1607 which reduced the
corporate income tax rate applicable to Colombian entities and
branches of non-Colombian companies from 33 per cent to 25 per cent
beginning 1 January 2013 and established a new CREE tax with a tax
rate of 9 per cent from 2013 through 2015, and 8 per cent
thereafter. In 2012, the Group had to write-down the value of its
deferred tax assets because tax loss carryforwards are not eligible
to offset the CREE taxable amount. Therefore, accumulated tax
losses of $40 million will now be recoverable at 25 per cent rather
than the prior year amount of 33 per cent.
Fixed
Assets value Inventory Total
Deferred tax liabilities $'000 $'000 $'000
------------------------------------ ------------- ------------ -----------
As at 1 January 2011 (24,371) (40) (24,411)
Charged to income statement (41) 62 21
As at 1 January 2012 (24,412) 22 (24,390)
Adoption of Colombian Tax Law 1607 (373) - (373)
Other charges to income statement 1,430 22 1,452
As at 31 December 2012 (23,355) 44 (23,311)
------------------------------------ ------------- ------------ -----------
5. Borrowings
2012 2011
$'000 $'000
------------------------------ -------------------- ------------------
Non-Current
Finance leases 551 227
Total non-current borrowings 551 227
------------------------------ -------------------- ------------------
Current
Short-term loans 17,000 5,000
Finance leases 322 222
Convertible loan notes - 9,372
Total current borrowings 17,322 14,594
------------------------------ -------------------- ------------------
Total borrowings 17,873 14,821
------------------------------ -------------------- ------------------
The short-term loans payable are represented as follows:
-- Fixed Rate Note Payable with HKN, Inc. - $12 million.
On 31 January 2012, the Group closed a Fixed Rate Note Payable
with HKN, Inc. for the principal amount of $12 million (the "Note
Payable"). The Note Payable is not convertible into shares. The
Note Payable is subject to an interest charge of 12.5 per cent per
annum, payable quarterly in arrears, with the principal amount
being repayable in full on 30 September 2013. The Note Payable is
currently unsecured, but HKN can require the Group to provide
adequate collateral security in the event of a material adverse
effect. The Group also paid to HKN a 1.75 per cent transaction fee
of $210,000. The Group used these proceeds to redeem and extinguish
the remaining convertible notes during 2012.
-- Senior Secured Note Payable in HKN, Inc. - $5 million.
On 30 August 2012, the Group, as borrower, signed an amendment
to the Senior Secured Note Payable entered into with HKN, as
lender, on 14 September 2010. This loan amendment extended the
maturity date of the underlying repayment obligation from September
2012 to April 2013. In exchange for this extension, the Group
agreed to increase the interest rate from 10.5 per cent per annum
to 12.5 per cent per annum and to pay a 1 per cent transaction fee
of $50,000.
2012 2011
$'000 $'000
-------------------------------------- ------------------ ------------------
Analysis of borrowings
Debt can be analysed as falling due:
Within one year or on demand 17,322 14,594
Between one and two years 551 227
17,873 14,821
-------------------------------------- ------------------ ------------------
6. Post reporting date events
In March 2013, the Group completed the restructuring of the
notes payable to HKN of $5 million and $12 million, respectively,
which were both due and payable in 2013 into one new note agreement
(the "Amortizing Note Payable") for the combined principal amount
of $17 million. The Amortising Note Payable is not convertible into
shares and is subject to an interest charge of 12.75 per cent per
annum, payable quarterly in arrears, with the following principal
repayment amounts and dates:
-- $500,000 - due on 31 March 2013
-- $1.5 million - due quarterly beginning 30 June 2013 through 31 March 2015
-- $4.5 million - due on 15 June 2015
The Amortising Note Payable is currently unsecured, but HKN can
require the Group to provide adequate collateral security in the
event of a material adverse effect. The Group also paid to HKN a
2.0 per cent transaction fee of $340,000.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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