TIDMGED
RNS Number : 4202D
Global Energy Development PLC
28 March 2014
Immediate Release 28 March 2014
GLOBAL ENERGY DEVELOPMENT PLC
(the "Company" or "Global")
AUDITED FINAL RESULTS FOR THE YEAR ENDED 31 DECEMBER 2013
Global Energy Development PLC, the Latin America focused
petroleum exploration, development and production company (AIM:
GED) with operations in Colombia, is pleased to announce its
audited final results for the year ended 31 December 2013.
2013 Highlights
-- Increased operating profit from continuing operations of $6.1
million (2012: $3.2 million).
-- Increased cash flow from operations of $11 million (2012:
$9.3 million).
-- Net profit of $0.4 million (2012: net loss of $2.1
million).
-- Overall reduction in aggregate debt balance of 25 per cent
during 2013.
-- Turnover decreased to $33.6 million (2012: $44.0 million) due
to overall lower oil pricing and decreased production volumes.
-- Oil prices decreased 8 per cent averaging $90 per barrel
("bbl") (2012: $98 per bbl).
-- Gross oil production decreased 17 per cent to 407,000 bbls
(2012: 492,000 bbls) due primarily to normal declining production
of the Llanos Basin properties along with certain down time from
the Tilodiran 2 well for pump replacement interventions.
-- General and administrative costs decreased to $4.9 million
(2012: $7.9 million) based upon the reduction in non-cash
share-based expense, decrease in foreign currency exchange costs,
decreased personnel costs and other streamlining efforts.
Stephen Voss, Global's Managing Director, indicated "2014 is
beginning with an exciting new phase for the Company. While we
ended 2013 with increased cash flow from operations and increased
operating profits from our Llanos Basin properties, the recently
announced Bolivar farm-out agreement allows the Company to move
ahead in the second quarter of 2014 with the first Bolivar project
in a two-year work program, the re-entry of the Catalina 1 well,
with costs fully funded by our partner. Developing and producing
the oil reserves in the Bolivar Contract, located in the Middle
Magdalena Valley of Colombia, South America, through our strategic
farm-out partnership, remains the Company's principal goal in
2014."
For further information please contact
Global Energy Development PLC
Anna Williams, Finance Director +001 817 310 0240
awilliams@globalenergyplc.com
www.globalenergyplc.com
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 44 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
The Company is entering a new phase in 2014 with the recent
Bolivar farm-out agreement. 2014 brings in a year of change for the
Company. During March 2014, the Company signed a farm-out agreement
(the "Agreement") with Everest Hill Energy Group Ltd. ("Everest")
with respect to its Bolivar contract in the Middle Magdalena Basin.
During 2013, the Company, with its financial adviser, undertook a
process of identifying and meeting with potential farmout partners
for the Company's Bolivar contract. The Agreement marks the
successful conclusion of this extensive marketing process. Under
the terms of the Agreement, Everest will acquire, subject to
Ecopetrol approvals, a 50 per cent interest in the Bolivar contract
area in exchange for a cash payment of $5 million (upon signing)
and payment of the work commitments stipulated in the Agreement.
Under the Agreement, Everest commits to fund the work program which
consists of all future costs and expenses incurred with respect to
the proposed operations:
-- Within one year of completion of the Bolivar Agreement, to
re-enter two existing wells in the Bolivar contract area; and
-- Within two years of completion of the Bolivar Agreement, to
drill and complete one new exploitation well in the Bolivar
contract area.
As previously announced, Global will re-enter the Catalina 1
well to test the Simiti conventional oil formation in the second
quarter of 2014. The Simiti formation is located between the Salada
and Rosa Blanca formations, from which the Company has previously
produced approximately 1,250,000 cumulative barrels of oil from its
Catalina 1 and nearby Olivo 1 wells. The Company is now in the
final stages of planning a Simiti test behind the existing casing
in the Catalina 1 well. Existing data indicates the Simiti
formation contains suitable natural fracture frequency and oil
content to justify testing. Global intends to perforate and then
employ conventional hydraulic fracture stimulation techniques which
are expected to enhance the existing natural fracture network and
to result in oil production.
Entering into the Bolivar Agreement in early 2014 is a
significant step forward towards the Company's goal to realise
value for its shareholders by developing its highest proved and
probable reserve asset, the Bolivar Contract area. The Company's
highest priority is bringing on production from Bolivar and
enhancing future strategic alternatives for the Company and its
shareholders.
Mikel Faulkner
Chairman
27 March 2014
Managing Director's Review of Operations
Operations
Llanos Basin Production:
The Llanos properties historically provide consistent cash flow
from operations for the Company. However, certain of the Company's
larger producing wells in the Llanos Basin demonstrated downtime
and required well intervention work in 2013. Production from the
Company's Llanos Basin properties was stable through the first half
of 2013, but a reduction in oil volumes was experienced in both of
the largest producing wells, the Tilodiran 2 and Tilodiran 3,
during the latter half of the year. Specifically, the Tilodiran 2
well required two pump replacements during the year, and the costs
associated with unsuccessful intervention work totalled
approximately $1.8 million in 2013. The most significant well
intervention work on Tilodiran 2 occurred in late 2013 when the
well was off production for approximately 45 days for an additional
pump replacement. The work was successfully completed and the well
was placed back online in December 2013. Overall, gross oil
production decreased by 17 per cent to 407,298 barrels ("bbl") in
2013 (2012:
491,786bbls).
While cost of sales decreased 28 per cent to $22.7 million
(2012: $31.5 million) during 2013 due to lower diesel fuel costs,
equipment rentals and water transportation expenses, lower
production volumes and lower oil pricing led to a decrease in
overall gross profit compared to the prior year. During the past
two years, the Company completed key operational cost-saving
projects such as the recompletion of the Rio Verde 2 well into a
water injection well to reduce water disposal costs. Other projects
included the electrification of surface facilities to reduce diesel
fuel costs and the purchase of certain equipment to save monthly
rental costs. Even with these cost-saving projects, gross profit
from the Llanos properties declined in 2013 primarily due to
declining production volumes and mechanical problems with the
Tilodiran 2 well. The first quarter of 2014 has, however, featured
stable production rates.
Middle Magdalena Properties:
During 2013, the Company was able to incorporate information on
the Simiti formation from a proven production test in a nearby
field. Previously, the Simiti formation was an unevaluated horizon
within the Bolivar Contract area. The Company was able to
incorporate this data and subsequently revised its plan for reserve
development within the area to incorporate vertical wells in lieu
of horizontal wells based upon the multi-zone findings of the
formations within the area. These formations include the La Luna,
Salada, Rosa Blanca, Tablazo and the Simiti formations. All five
zones are located in a continuous vertical section of over 2,000
feet in the Company's Bolivar Contract area. Utilising vertical
wells will allow the Company to complete, hydraulically fracture
and produce from all five within the same wellbore instead of
drilling horizontal wells into each of the formations. The
Company's independent reserve engineers were able to also
incorporate and utilise this information, along with additional
findings on the Tablazo formation, to further define the oil
reserves in the Bolivar Contract area.
The Company is now planning to test the Simiti formation within
the area through the re-entry of the existing Catalina 1 well. The
Company previously completed the analysis of openhole well logs
including formation imaging measurements and whole core data taken
from the Simiti oil shale located within the existing Catalina 1
well, originally drilled in 1998. The data indicates the Simiti
formation contains suitable natural fracture frequency and oil
content to justify testing. Rig mobilisation is expected to
commence in second quarter 2014 once all necessary service
equipment has been received at the well location.
With regard to the Company's Bocachico Contract area, the
Company performed a successful well intervention during 2013 of its
existing Torcaz 2 well. The Company plans to proceed with the
implementation of the modified-sand-control completion technique,
known as "CHOPs", on its existing Torcaz 3 vertical well in the
second half of 2014.
Financials
During 2013, the Company recorded decreased turnover of $33.6
million, 24 per cent lower than the prior year (2012: $44.0
million) due to lower Llanos production volumes and lower realised
average oil pricing of $90 per bbl during the year (2012: $98 per
bbl). Net sales volumes declined with 373,466 bbls sold in 2013
(2012: 454,943 bbls) due to periodic downtime from the Tilodiran 2
and 3 wells during the year.
Cost of sales decreased by 28 per cent to $22.7 million during
the year (2012: $31.5 million) due to lower water transportation
and disposal costs. Significant efforts were undertaken during the
year on operational cost saving projects targeting high diesel fuel
and equipment rental costs for the Llanos Basin properties. The
Company recognised unsuccessful well intervention costs of $1.8
million during the year primarily related to the Tilodiran 2 well
(2012: $2.9 million).
Based on the decrease in turnover, gross profit was $10.9
million, a decrease of $1.7 million over the prior year.
Administrative and other costs (including share-based expense and
exchange rate costs) decreased to $4.9 million during 2013 against
$7.9 million in the prior year due primarily to a reduction in
personnel costs, the non-cash decrease in share-based expense, and
lower foreign exchange expense. Consequently, the operating profit
margin from continuing operations increased in 2013 to 18.2 per
cent from 7.4 per cent in 2012.
The Company generated increased cash flow from operations of
$11. million (2012: $9.3 million) and expended $10.1 million on
capital projects primarily related to the completion of the
Tilodrian 1 well, the successful intervention on the Torcaz 2 well
and improvements to surface facilities at the Company's Tilodiran,
Torcaz and Paloblanco fields during the year. Final net proceeds of
$3.3 million, from the 2012 sale of the Company's remaining working
interest in the Peruvian Block 95 Contract, were received during
the year following the completion of the assignment from Perupetro,
Peru's national agency for hydrocarbons. The Company also repaid $5
million in principal payments of its Notes Payable during the year,
reducing the overall principal balance by 30 per cent. Continued
strong cash flow from operations, reduced overall debt and new
partnering financing of the two-year Bolivar work program
establishes a strong financial foundation for the company for
2014.
Stephen Voss
Managing Director
27 March 2014
Oil Reserves Information (unaudited)
As at 31 December 2013
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. 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 Colombia, 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 2013
Developed 2,539 - 2,539
Undeveloped 37,170 47,986 85,156
39,709 47,986 87,695
------------------------------ -------------------------- --------------------------- --------------------------
Changes in year attributable
to:
Revision of previous
estimates(1) (1,815) (7,918) (9,733)
Reserve additions(2) 9,144 14,344 23,488
Production (386) - (386)
Developed 1,815 - 1,815
Undeveloped 44,837 54,412 99,249
At 31 December 2013 46,652 54,412 101,064
------------------------------ -------------------------- --------------------------- --------------------------
1 The revisions in previous estimates are due primarily to the
end of contract life effects. 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.
2 The reserve additions are from the inclusion of two previously
unevaluated proved horizons within the Bolivar Contract area,
namely the Simiti and Tablazo formations, through incorporating
information from recent Simiti production tests in a nearby field
and from Tablazo production tests.
PRIMARY FINANCIAL STATEMENTS
Consolidated Statement of Comprehensive Income
for the year ended 31 December 2013
2013 2012
$'000 $'000
------------------------------------------------- ----------------- -----------------
Revenue 33,612 44,038
Cost of sales (22,736) (31,450)
------------------------------------------------- ----------------- -----------------
Gross profit 10,876 12,588
------------------------------------------------- ----------------- -----------------
Other income 145 77
Administrative expenses (5,220) (6,563)
Share-based expense 635 (892)
Exchange rate expense (287) (536)
Other expenses (22) (1,421)
Operating profit from continuing operations 6,127 3,253
------------------------------------------------- ----------------- -----------------
Finance income 30 61
Finance expense (2,746) (2,554)
Profit before taxation 3,411 760
------------------------------------------------- ----------------- -----------------
Tax expense (3,401) (3,693)
------------------------------------------------- ----------------- -----------------
Profit (loss) from continuing operations,
net of tax 10 (2,933)
------------------------------------------------- ----------------- -----------------
Profit from discontinued operations, net of
tax 368 810
------------------------------------------------- ----------------- -----------------
Total comprehensive income /(loss) for the
year attributable to the equity owners of
the parent 378 (2,123)
------------------------------------------------- ----------------- -----------------
Income/(loss) earnings per share for continuing
operations
- Basic $0.00 (0.08)
- Diluted $0.00 (0.08)
------------------------------------------------- ----------------- -----------------
Total income/(loss) earnings per share
- Basic $0.01 (0.06)
- Diluted $0.01 (0.06)
------------------------------------------------- ----------------- -----------------
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
2012 546 27,139 210,844 927 (156,951) 82,505
Total
comprehensive
profit for the
year - - - - (2,123) (2,123)
Share-based
payment
- options
equity
settled 62 - - - 24 86
Redemption of
convertible
notes - - - (927) 927 -
At 1 January
2013 608 27,139 210,844 - (158,123) 80,468
----------------- --------------- --------------- --------------- --------------- -------------- ---------------
Total
comprehensive
profit for the
year - - - - 378 378
Share-based
payment
- options
equity
settled - - - - 44 44
At 31 December
2013 608 27,139 210,844 - (157,701) 80,890
----------------- --------------- --------------- --------------- --------------- -------------- ---------------
Consolidated Statement of Financial Position
as at 31 December 2013
2013 2012
$'000 $'000
--------------------------------------------- -------------------- -------------------
Assets
Non-current assets
Intangible assets 486 739
Property, plant and equipment 110,089 108,606
Trade receivables 1,388 1,388
Total non-current assets 111,963 110,733
--------------------------------------------- -------------------- -------------------
Current assets
Inventories 1,903 1,754
Trade and other receivables 3,445 9,346
Prepaids and other assets 1,697 1,628
Term deposits 896 1,608
Cash and cash equivalents 3,415 6,209
Total current assets 11,356 20,545
--------------------------------------------- -------------------- -------------------
Total assets 123,319 131,278
--------------------------------------------- -------------------- -------------------
Liabilities
Non-current liabilities
Deferred tax liabilities (net) (16,291) (13,353)
Equity tax liability - (434)
Long-term provisions (6,304) (5,546)
Long-term loans payable (6,878) (551)
Total non-current liabilities (29,473) (19,884)
--------------------------------------------- -------------------- -------------------
Current liabilities
Trade and other payables (4,487) (12,126)
Corporate and equity tax liability (1,974) (1,478)
Short term loans payables and financing
leases (6,495) (17,322)
Total current liabilities (12,956) (30,926)
--------------------------------------------- -------------------- -------------------
Total liabilities (42,429) (50,810)
Net assets 80,890 80,468
--------------------------------------------- -------------------- -------------------
Capital and reserves attributable to equity
holders of the company
Share capital 608 608
Share premium account 27,139 27,139
Capital reserve 210,844 210,844
Retained deficit (157,701) (158,123)
Total equity 80,890 80,468
--------------------------------------------- -------------------- -------------------
Consolidated Statement of Cash Flows
for the year ended 31 December 2013
2013 2012
$'000 $'000
---------------------------------------------- ---------------------- ----------------------
Cash flows from operating activities
Operating profit before interest and
taxation from continuing operations 6,127 3,253
Operating profit before interest and
taxation from discontinued operations 372 1,157
Amortisation of intangible assets 253 -
Depreciation, depletion and amortisation 7,107 8,108
Gain on disposal of assets from discontinued
operations - (1,157)
Decrease/(increase) in trade and other
receivables 2,696 (3,103)
Increase in Cajaro receivable provision - 1,221
(Increase)/decrease in inventories (149) 185
(Decrease) in trade and other payables (4,234) (436)
(Decrease)/increase in long-term provisions (681) 624
Shared-based payments and other non-cash
items 44 24
Cash generated from continuing operations 11,535 9,876
---------------------------------------------- ---------------------- ----------------------
Net movement tax charges (545) (612)
---------------------------------------------- ---------------------- ----------------------
Net cash flows from operating activities 10,990 9,264
---------------------------------------------- ---------------------- ----------------------
Investing activities
Capital expenditure
- Expenditure on property, plant and
equipment (10,062) (8,702)
- Expenditure on intangible assets - (1,599)
- Disposal of Peru 3,283 2,000
Interest received 30 61
Decrease/(increase) in short-term
investment 712 110
Net cash flows from investing activities (6,037) (8,130)
---------------------------------------------- ---------------------- ----------------------
Financing activities
Short-term loans paid during the period (5,000) (9,762)
Loans subscribed for during the period - 12,850
Capital lease payments (329) (225)
Interest paid (2,418) (2,181)
Proceeds from exercise of share options - 62
Net cash flows from financing activities (7,747) 744
---------------------------------------------- ---------------------- ----------------------
(Decrease)/increase in cash and cash
equivalents (2,794) 1,878
Cash and cash equivalents at beginning
of year 6,209 4,331
Cash and cash equivalents at the end
of year 3,415 6,209
---------------------------------------------- ---------------------- ----------------------
ABRIDGED NOTES TO THE PRIMARY FINANCIAL STATEMENTS
For the twelve months ended 31 December 2013
1. Accounting Policies
Basis of preparation
The financial statements of the Group for the twelve months
ended 31 December 2013 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 2013
or 2012 as defined by section 435 of the Companies Act 2006 but is
derived from those accounts. Statutory accounts for 2012 have been
delivered to the registrar of companies, and those for 2013 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.
2013 2012
$'000 $'000
----------------------------------------------- ----------- -----------
Profit (loss) from continuing operations
after taxation 10 (2,933)
Profit from discontinued operations after
taxation 368 810
----------------------------------------------- ----------- -----------
Net (loss)/profit attributable to equity
holders used in dilutive calculation 378 (2,123)
----------------------------------------------- ----------- -----------
(Loss)/earnings per share for continuing
operations
* Basic 0.00 (0.08)
* Diluted 0.00 (0.08)
Earnings per share for discontinued operations
* Basic and Diluted 0.01 0.02
Total (loss)/earnings per share
* Basic 0.01 (0.06)
* Diluted 0.01 (0.06)
----------------------------------------------- ----------- -----------
Basic weighted average number of shares 36,112,064 35,950,888
Dilutive potential ordinary shares
Employee and Director share option plans 1,205,054 1,247,263
----------------------------------------------- ----------- -----------
Diluted weighted average number of shares 37,317,118 37,198,151
----------------------------------------------- ----------- -----------
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 $32.5
million as at 31 December 2013 and $31.1 million as at 31 December
2012 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
was calculated in 2012 and in prior periods as the higher of net
income tax or presumptive income tax.
Beginning in 2013, as determined by the new Colombian Tax Law
1607, the corporate income tax rate applicable to Colombian
entities and branches of non-Colombian companies was reduced from
34 per cent to 25 per cent. However this rate reduction was
effectively offset by a new income tax, known as "CREE tax".
During 2013, the Colombian corporation tax was calculated as the
CREE tax and the higher of net income tax or presumptive income tax
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 25 per cent is
applied to the presumptive income to arrive at the tax obligation;
or
-- Net income tax. Calculated at a rate of 25 per cent taking
into account revenues minus costs, standard and special
deductions.
-- CREE tax. Calculated at a rate of 9 per cent from 2013
through 2015, and 8 per cent thereafter, 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 tax may not be less than three per cent of
the taxpayer's net equity as of 31 December of the preceding
taxable year.
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 2013 and 2012 are:
Consolidated statement of comprehensive income:
2013 2012
$'000 $'000
-------------------------------------------------------------- ------ ------
Current taxes:
Current income tax charge 283 333
CREE income tax 125 -
Other withholding tax 55 123
Deferred Tax:
Adoption of Colombian Tax Law 1607 _ 3,560
Relating to origination and reversal of temporary differences 2,938 (323)
-------------------------------------------------------------- ------ ------
Total income tax expense reported in the income statement 3,401 3,693
-------------------------------------------------------------- ------ ------
Taxation reconciliation
The charge for the year can be reconciled to the profit per the
income statement:
2013 2012
$'000 $'000
------------------------------------------------------ ------ --------
Accounting (loss)/profit before income tax 3,411 760
Tax on Group (loss)/profit at UK Corporation tax rate
of 23.25% (2012: 24.5%) 793 186
Effects of:
Permanent differences 64 677
CREE Income Tax 125 -
UK tax on losses carried forward (147) 215
Adoption of Colombian Tax Law 1607 - 3,560
Temporary differences 2,536 (1,032)
Effect of higher tax rates in the UK 30 87
------------------------------------------------------ ------ --------
Total corporation tax expense reported in the income
statement 3,401 3,693
------------------------------------------------------ ------ --------
4. Trade and other receivables - current
2013 2012
$'000 $'000
--------------------------------------------------- ------ ------
Trade receivables 3,117 5,585
Less provision for impairment of trade receivables (112) (77)
Net trade receivables 3,005 5,508
Receivable from sale of Peruvian Block 95 _ 3,400
Other receivables 440 438
--------------------------------------------------- ------ ------
Total trade and other receivables - current 3,445 9,346
--------------------------------------------------- ------ ------
Included in the above are trade receivables from customers
totalling $3. million (2012: $5.5 million) in crude sales
receivables which are not considered at risk due to the short-term
nature of the receivables, the positive credit rating of the
customers and the historical trading relationship with the
customers. All customer balances as at 31 December 2013 were due
within 30 days (2012: 30 days). The Board of Directors considers
that there is no significant difference between the carrying values
and the fair values of all receivables. The maximum exposure of the
gross carrying amount net of provisions for impairment to credit
risk at the reporting date is the fair value of each class of
receivable set out above.
The receivable from the sale of Peruvian Block 95 for $3.4
million was received in February 2013.
Other classes of financial assets included within trade and
other receivables do not contain impaired assets.
The carrying values of the Group's trade and other receivables
are denominated in the following currencies:
2013 2012
$'000 $'000
------------------- ------ ------
US Dollar 3,047 8,928
Peruvian Nuevo Sol 398 418
------------------- ------ ------
Total 3,445 9,346
------------------- ------ ------
5. Borrowings
2013 2012
$'000 $'000
----------------------------- ------- -------
Non-current
Amortising note payable 5,966 -
Finance leases 912 551
----------------------------- ------- -------
Total non-current borrowings 6,878 551
----------------------------- ------- -------
Current
Amortising note payable 5,865 17,000
Finance leases 630 322
Total current borrowings 6,495 17,322
----------------------------- ------- -------
Total borrowings 13,373 17,873
----------------------------- ------- -------
In 2013, the Group completed the restructuring of its previous
notes payable to HKN, Inc. ("HKN") of $5 million and $12 million,
respectively, which were both due and payable in 2013 into one new
Amortising Note Payable (the "Amortising 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 amount amounts and
dates:
-- $500,000 - paid on 31 March 2013
-- $1.5 million - paid on 30 June 2013, 30 September 2013 and 31 December 2013
-- $1.5 million - due quarterly through 31 March 2015
-- $4.5 million - due on 15 June 2015
The Amortising Note Payable is currently unsecured, but HKN can
require the Company to provide adequate collateral security in the
event of a material adverse effect. The Company also paid to HKN a
2 per cent transaction fee of approximately $340,000 during 2013.
As of 31 December 2013, the outstanding principal balance of the
Amortising Note Payable is $12 million.
Under the terms of the Amortising Note Payable, in the possible
event of a decrease in the Company's profit from operations or cash
flow from operations at each interim or annual period as compared
to the prior period, the interest rate shall immediately be
adjusted from 12.75 per cent per annum to 13.50 per cent per annum
from the date of publication of the applicable period report and
through the maturity date of the Amortising Note Payable.
In the Cash Flow Statement the financing activities reflect the
non-cash movement of the renegotiation of the loan with HKN
described above.
2013 2012
$'000 $'000
------------------------------------- ------- -------
Analysis of borrowings
Debt can be analysed as falling due:
Within one year or on demand 6,495 17,322
Between one and two years 6,878 551
------------------------------------- ------- -------
13,373 17,873
------------------------------------- ------- -------
6. Trade and other payables
2013 2012
$'000 $'000
-------------------------- ------ -------
Trade payables(1) 2,759 6,830
Accrued liabilities 1,728 5,287
Advance payment _ 9
-------------------------- ------ -------
Total current liabilities 4,487 12,126
-------------------------- ------ -------
1 Trade payables reflect balances owed on invoices received from
vendors and contractors related to active projects in progress at
the end of each period. It is considered that values of trade and
other payables approximate to fair value at 31 December 2013 and
2012.
7. Post reporting date events
In March 2014, the Group entered into a farm-out agreement (the
"Bolivar Agreement") with Everest Hill Energy Group Ltd.
("Everest") with respect to its Bolivar Association Contract area.
Under the Bolivar Agreement, Everest will acquire, subject to
Ecopetrol approvals, a 50 per cent. interest in the Contract area,
including any and all rights, obligations and duties in respect of
the Contract area, in exchange for payment of the work commitments
stipulated in the Bolivar Agreement and a cash payment of $5
million. Under the Bolivar Agreement, Everest commits to undertake
the funding of a work program with respect to the proposed
operations:
1. Within one year of completion of the agreement, to re-enter
two existing wells within the Contract area; and
2. Within two years of completion of the agreement, to drill and
complete one new exploitation well in the Contract area.
The work program shall be governed by a joint-venture agreement
to be agreed between the Company and Everest. Everest is an
affiliated company of the Quasha family trusts which also have an
interest in Lyford Investments, Inc. Lyford Investments, Inc., HKN
and its parties in concert are major shareholders of the Group.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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