TIDMGED
RNS Number : 7435R
Global Energy Development PLC
16 September 2014
lmmediate Release 16 September 2014
GLOBAL ENERGY DEVELOPMENT PLC
(the "Company" or "Global")
INTERIM RESULTS FOR THE SIX MONTHS ENDED 30 JUNE 2014
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
interim results for the six month period ended 30 June 2014 (the
"Period").
Highlights
-- Partnering agreements for the Bolivar and Bocachico Contract
areas closed during the Period;
-- Turnover of $14.9 million (H1 2013: $19.7 million) due to a
fall in oil pricing averaging $86 per bbl (H1 2013: $91 per bbl)
and a decline in production volumes;
-- Cost of sales decreased by 22 per cent. from $12.5 million to
$9.7 million during the Period due to lesser reliance on diesel
fuels and reductions in both rental equipment and operational
personnel costs;
-- Gross profit of $5.2 million (H1 2013: $7.2 million) due to
lower turnover, and profit before taxation of $1.9 million (H1
2013: $4.1 million);
-- Same level of net profit of $1.2 million (H1 2013: $1.2
million) for the Period as in the first half of 2013; and
-- Outstanding debt balance reduced by 25 per cent.
Stephen C. Voss, Global's Managing Director, indicated "The
first six months of 2014 reflected mixed results for the Company.
The closing of the farm-out partnering agreements for the Bolivar
and Bocachico Contract areas were a positive step. Although the
emulsion blockage from the Catalina #1 - Simiti formation test
delayed results of new oil production from the Company's Bolivar
oil reserves, the Company is using the information gathered from
the Simiti project as we plan for our next project in the Bolivar
area. Lower average oil pricing led to decreased turnover for the
Period, but our improved efficiencies in our Llanos operations
helped to partially mitigate the lower turnover. Cash flow from
operations from our Llanos properties remains strong, and the
Company was able to reduce its debt balance by 25 per cent."
For further information please contact
Global Energy Development PLC
+001 817 310
Anna Williams, Finance Director 0240
awilliams@globalenergyplc.com
www.globalenergyplc.com
Northland Capital Partners Limited
+44 (0)20
Matthew Johnston 7382 1100
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
exploration opportunities. The Company currently holds five
operated contracts in Colombia.
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 and Managing Director's Statement & Review of
Operations
Operations
Partnering Arrangements Completed
During the period, the Group took steps forward in its
operations in the Middle Magdalena basin, with farm-out agreements
over the Bolivar and Bocachico Contract areas, after an extensive
marketing process undertaken by Jefferies International. Both
agreements give the partner a 50 per cent. interest in the
respective areas in exchange for payment of certain work
commitments and programmes as set out in the agreements, together
with the cash payment of $5 million in respect of the Bolivar
agreement and $1 million in respect of the Bocachico agreement.
Simiti Project, Bolivar Contract Area - Lessons Learned
During the six months ended 30 June 2014 (the "Period), the
Group hydraulically fractured the Simiti formation in its existing
Catalina #1 well, located in the Bolivar Contract area of the
Northern Middle Magdalena Valley in Colombia, South America.
Several months were required in the first half of 2014 to organize
the fracturing project due to the need to ship a number of
materials to Colombia from the United States, including sand
proppant. During the fracture project, approximately 27,000 barrels
("bbls") of water and 181,000 pounds of sand were injected into the
Simiti formation at nearly constant pressures. Flowback of the well
commenced at low rates after the injection of the fracture fluids
and materials due to the presence of an emulsion substantially
blocking most reservoir fluids from reaching the wellbore. In July
2014, the Company installed a jet pump in hopes of breaking the
emulsion and facilitating the fracture fluid recovery. Oil traces
consistently appeared during lifting operations testing at 27
degrees to 32 degrees API. Surging efforts continued to recover
fracture fluids but at low rates and were ineffective in breaking
down the emulsion flow barrier within the wellbore. As reported
earlier, the Group has temporarily shut in the well with the
expectation that formation oil will naturally move back towards the
wellbore and the emulsion will organically breakdown while
formation and wellbore temperatures and pressures equalise. The
Group continues to monitor the pressure in the well and will
consider optional additional operations on the well in the near
future.
The Simiti formation was able to easily absorb the injected
fracture fluid and sand indicating much higher levels of natural
fracture permeability than originally predicted by geological data.
The Group has learned that, due to the naturally fractured Bolivar
formations, high-pressure and high-volume hydraulic fracturing are
unlikely to be required in the future. As previously reported, the
Group is currently planning for its next project in the Bolivar
Contract area using information gathered from the Simiti
project.
Llanos Basin oil production - Continued Solid Cash Flow
Net cash flow from operations from the Group's Llanos Basin
properties remained strong at $5.2 million during the six months
ended 30 June 2014, despite a fall in oil prices and an 18 per
cent. decline in production volumes during the Period from 234,957
bbls of oil to 192,756 bbls of oil. The majority of this decrease
was related to normal production decline, coupled with certain
downtime from the Tilodiran 2 well. The Group replaced the downhole
pump in the Tilodiran 2 well, and it is currently on production.
The Group continued its success in reducing operating costs during
the Period to $18.97 per bbl from $24.20 per bbl in the first half
of 2013. The majority of the cost savings came from further
reducing equipment rentals, operating personnel costs and generator
costs, with the Tilodiran and Rio Verde fields now fully
electrified through the Colombian national grid. The horizontal
pump system in the Palo Blanco field replaced the less efficient
diesel pumps, and the Group also reduced its oil transportation
costs during the Period by selling higher quantities of oil at the
wellhead.
Financials
During the Period, the Group recorded turnover of $14.9 million,
25 per cent. lower than the first half of the prior year (2013:
$19.7 million). Sales of net oil volumes decreased to 172,597 bbls
compared to 215,804 bbls during the first half of 2013 and average
realised sales prices decreased to $86.13 per bbl during the Period
as compared to $91.16 per bbl from the same prior period last year.
Based on the overall decrease in revenue, gross profit was $5.2
million, a decrease of 28 per cent over the first half of 2013
($7.2 million).
Cost of sales decreased by 22 per cent. from $12.5 million to
$9.7 million during the Period due to a lesser reliance on diesel
fuels and reductions in both rental equipment and operational
personnel costs. The Group experienced higher depreciation expense
due to an increase in the depreciation rates calculated for each
operating segment or cash-generating unit (the Llanos Basin, the
Bolivar Contract area and the Bocachico Contract area).
Administrative costs (including share-based expense and exchange
rate costs) increased slightly to $2.2 million during the Period
against $2.0 million during the first half of 2013.
Profit from continuing operations before taxation decreased to
$1.9 million during the Period compared to $4.1 million in the
first half of 2013, mainly due to the decrease in revenues
discussed above. During the Period, the Group transferred its
Bolivar and Bocachico Contracts from its CEDCO Colombia branch to
new wholly-owned Colombian branches resulting in an increase in its
current income tax expense, due to the taxable profit generated
from the transfer. However in contrast, deferred tax expense was
reduced due to the revaluation of tax balances resulting from this
transfer of assets and liabilities at the Colombian branch level.
In addition, during the first half of 2013, a significant increase
in the exchange rate of the Colombian Peso to the US dollar caused
an overall increase in the Group's net deferred tax liabilities
which required the Group to recognise a non-cash deferred tax
expense of $2.4 million during the prior year period. Overall, the
Group's net tax expense decreased to $656,000 (H1 2013: $2.9
million), resulting in the same level of net profit $1.2 million
reported for the Period as in the first half of 2013.
Cash flows from operations decreased to $5.2 million compared to
$6.7 million in the prior year period, and the Group ended the
Period with a cash balance of $8.6 million. Capital expenditures of
$3.6 million relate primarily to the completion of the Catalina
1-Simiti Test, improvements to surface facilities at the Group's
Tilodiran, Torcaz and Palo Blanco fields and the pump replacement
for the Tilodiran 2 well. During the Period, the Group received
approximately $8.2 million from partner contributions, net of fees,
for the Bolivar and Bocachico Contract area farm-out agreements and
Catalina 1-Simiti Test. Debt and interest payments totalled $4.1
million reducing the outstanding debt balance by approximately 25
per cent.
Conclusion
The Group remains confident in its oil reserves in the Magdalena
Valley and its cash flow from operations in the Llanos Basin.
Technical lessons were learned from the results of the Catalina #1
Simiti project which should serve to benefit future projects in the
Bolivar Contract area. The Group's cash position is strong while
its outstanding debt balance was reduced by 25 per cent during the
Period.
Mikel Faulkner
Chairman
Stephen Voss
Managing Director
Independent Review Report to Global Energy Development PLC
Introduction
We have been engaged by the Company to review the interim
financial information in the half-yearly financial report for the
six months ended 30 June 2014 which comprises the Consolidated
Statement of Comprehensive Income, the Consolidated Statement of
Financial Position, the Consolidated Cash Flow Statement, the
Consolidated Statement of Changes in Equity, and related
explanatory notes 1 to 10. We have read the other information
contained in the half-yearly financial report and considered
whether it contains any apparent misstatements or material
inconsistencies with the interim financial information.
This report is made solely to the Company in accordance with
International Standard on Review Engagements (UK and Ireland) 2410
"Review of Interim Financial Information performed by the
Independent Auditor of the Entity" issued by the Auditing Practices
Board. Our review work has been undertaken so that we might state
to the Company those matters we are required to state to them in an
independent review report and for no other purpose. To the fullest
extent permitted by law, we do not accept or assume responsibility
to anyone other than the Company, for our review work, for this
report, or for the conclusions we have formed.
Directors' Responsibilities
The half-yearly financial report, is the responsibility of, and
has been approved by the directors. The directors are responsible
for the preparation and presentation of interim financial
information that gives a true and fair view of the financial
position of the Group as at 30 June 2014 and of the financial
performance of the Group and the cash flows of the Group for six
months period then ended in accordance with the applicable law and
International Financial Reporting Standards and International
Financial Reporting Interpretations Committee pronouncements as
adopted by the European Union. The directors are also responsible
for preparing and presenting the half-yearly financial report in
accordance with AIM Rules of the London Stock Exchange.
As disclosed in note 1, the annual financial statements of the
Group are prepared in accordance with International Financial
Reporting Standards and International Financial Reporting
Interpretations Committee pronouncements as adopted by the European
Union. The interim financial information included in this
half-yearly financial report has been prepared in accordance with
International Financial Reporting Standards and International
Financial Reporting Interpretations Committee pronouncements as
adopted by the European Union.
Our Responsibility
Our responsibility is to express to the Company a conclusion on
the interim financial information in the half-yearly financial
report based on our review.
Scope of Review
We conducted our review in accordance with International
Standard on Review Engagements (UK and Ireland) 2410, "Review of
Interim Financial Information Performed by the Independent Auditor
of the Entity" issued by the Auditing Practices Board for use in
the United Kingdom. A review of interim financial information
consists of making enquiries, primarily of persons responsible for
financial and accounting matters, and applying analytical and other
review procedures. A review is substantially less in scope than an
audit conducted in accordance with International Standards on
Auditing (UK and Ireland) and consequently does not enable us to
obtain assurance that we would become aware of all significant
matters that might be identified in an audit. Accordingly, we do
not express an audit opinion.
Conclusion
Based on our review, nothing has come to our attention that
causes us to believe that the condensed set of financial statements
in the half yearly financial report for the 6 months ended 30 June
2014 is not prepared in all material respects, in accordance with
International Accounting Standard 34 "Interim Financial Reporting"
as adopted by the European Union, and the AIM Rules of the London
Stock Exchange.
Baker Tilly UK Audit LLP
Chartered Accountants
25 Farringdon Street
London
EC4A 4AB
15 September 2014
Unaudited Condensed Consolidated Statement of Comprehensive
Income
For the period ended 30 June 2014
Six Six Year
months months
ended ended
30 30 ended
Note June June
2014 2013
$'000 $'000 31 December
(Unaudited) (Unaudited) 2013
$'000
(Audited)
------------------ ------------------ ----------------------
Revenue 4 14,865 19,672 33,612
Cost of sales (9,681) (12,502) (22,736)
------------------ ------------------ ----------------------
Gross profit 5,184 7,170 10,876
Other income 6 253 145
Administrative expenses (2,164) (1,964) (4,872)
Other expenses - - (22)
Finance income 15 18 30
Finance expense (1,148) (1,402) (2,746)
------------------ ------------------ ----------------------
Profit before taxation 1,893 4,075 3,411
Tax expense 7 (656) (2,866) (3,401)
------------------ ------------------ ----------------------
Profit from continuing
operations, net of tax 1,237 1,209 10
------------------ ------------------ ----------------------
Profit from discontinued
operations, net of tax - - 368
------------------ ------------------ ----------------------
Profit and total comprehensive
income attributable to
the equity holders of the
parent 1,237 1,209 378
------------------ ------------------ ----------------------
Earnings /(loss) per share
for continuing operations
- Basic 5 $0.03 $0.03 ($0.00)
- Diluted 5 $0.03 $0.03 ($0.00)
------------------ ------------------ ----------------------
Total earning/(loss) per
share
- Basic and diluted 5 $0.03 $0.03 ($0.01)
------------------ ------------------ ----------------------
Figures in thousands except for per share information.
Unaudited Condensed Consolidated Statement of Financial
Position
As at 30 June 2014
30 June 30 June 31 December
2014 2013 2013
$'000 $'000 $'000
Note (Unaudited) (Unaudited) (Audited)
------------------ --------------- -------------------
Assets
Non--current assets
Intangible assets 491 604 486
Property, plant and
equipment 102,255 110,673 110,089
Trade receivables 1,387 1,387 1,388
------------------ --------------- -------------------
Total non--current
assets 104,133 112,664 111,963
Current assets
Inventories 2,444 1,913 1,903
Trade and other receivables 2,406 5,259 3,445
Prepayments and other
assets 2,623 1,335 1,697
Term deposits 1,367 713 896
Cash and cash equivalents 8,664 5,311 3,415
------------------ --------------- -------------------
Total current assets 17,504 14,531 11,356
Total assets 121,637 127,195 123,319
------------------ --------------- -------------------
Liabilities
Non--current liabilities
Deferred tax liabilities
(net) 8 (15,684) (15,772) (16,291)
Equity tax liability (271) (662) -
Long--term provisions (6,258) (5,447) (6,304)
Long--term loans payable 6 (626) (9,926) (6,878)
------------------ --------------- -------------------
Total non--current
liabilities (22,839) (31,807) (29,473)
Current liabilities
Trade and other payables (5,011) (5,596) (4,487)
Corporate and equity
tax liability (2,109) (1,688) (1,974)
Short--term loan payable
and financing leases 6 (9,518) (6,403) (6,495)
------------------ --------------- -------------------
Total current liabilities (16,638) (13,687) (12,956)
------------------ --------------- -------------------
Total liabilities (39,477) (45,494) (42,429)
------------------ --------------- -------------------
Net assets 82,160 81,701 80,890
Capital and reserves attributable
to equity holders of the
company
Share capital 9 608 608 608
Share premium account 27,139 27,139 27,139
Capital reserve 210,844 210,844 210,844
Retained deficit (156,431) (156,890) (157,701)
Total equity 82,160 81,701 80,890
------------------ --------------- -------------------
Unaudited Condensed Consolidated Cash Flow Statement
For the period ended 30 June 2014
Six Six Year
months months
ended ended
30 30 ended
June June
2014 2013
$'000 $'000 31 December
(Unaudited) (Unaudited) 2013
$'000
(Audited)
------------------- --------------- ----------------------
Cash flows from operating
activities
Operating profit before interest
and taxation from continuing
operations 3,026 5,459 6,127
Operating profit before interest
and taxation from discontinued
operations - - 372
Amortisation of intangible
assets - - 253
Depreciation, depletion and
amortisation 5,094 4,121 7,107
Decrease in trade and other
receivables 1,039 1,388 2,696
Increase in inventories (541) (159) (149)
Decrease in trade and other
payables, net (2,912) (3,007) (4,234)
Use in decommisioning liability (22) - -
Decrease in long-term provisions (313) (846) (681)
Share-based payments and other
non-cash items 35 9 44
Cash generated from operating
activities 5,406 6,964 11,535
------------------- --------------- ----------------------
Taxes paid (238) (290) (545)
------------------- --------------- ----------------------
Net cash flows from operating
activities 5,168 6,674 10,990
------------------- --------------- ----------------------
Investing activities
Capital expenditure
- Expenditure on property,
plant and equipment (3,587) (8,150) (10,062)
- Disposal of Property, plant
and equipment - 3,283 3,283
Interest received 14 18 30
Increase (decrease) in term
deposits 471) 895 712
Net cash flows from investing
activities (4,044) (3,954) (6,037)
------------------- --------------- ----------------------
Financing activities
Farm-out partner cash calls 3 4,600 - -
Bolivar contract farm-out
proceeds 3 2,883 - -
Bocachico contract farm-out
proceeds 3 729 - -
Debt principal repayments 6 (3,000) (2,185) (5,000)
Loans subscribed for during
the period - - (329)
Interest paid (781) (1,433) (2,418)
Capital lease payments (306) - -
Net cash flows from financing
activities 4,125 (3,618) (,747)
------------------- --------------- ----------------------
Increase (decrease) in cash
and cash equivalents 5,249 (898) (2,794)
Cash and cash equivalents
at beginning period 3,415 6,209 6,209
------------------- --------------- ----------------------
Cash and cash equivalents
at the end of period 8,664 5,311 3,415
------------------- --------------- ----------------------
Unaudited Condensed Consolidated Statement of Changes in
Equity
For the six months ended 30 June 2014
Share Share Capital Retained
capital premium reserve deficit Total
$'000 $'000 $'000 $'000 $'000
---------------- ----------------- ------------- ------------- ----------
At 1 January
2013 (Audited) 608 27,139 210,844 (158,123) 80,468
Total comprehensive
income - - - 1,209 1,209
Share--based
payments - - - 24 24
---------------- ----------------- ------------- ------------- ----------
At 30 June
2013 (Unaudited) 608 27,139 210,844 (156,890) 81,701
Total comprehensive
loss - - - (831) (831)
Share--based
payments - - - 20 20
---------------- ----------------- ------------- ------------- ----------
At 31 December
2013 (Audited) 608 27,139 210,844 (157,701) 80,890
Total comprehensive
income - - - 1,237 1,237
Share--based
payments - - - 33 33
---------------- ----------------- ------------- ------------- ----------
At 30 June
2014 (Unaudited) 608 27,139 210,844 (156,431) 82,160
---------------- ----------------- ------------- ------------- ----------
Unaudited Notes Forming Part of the Condensed Consolidated
Interim Financial Report
For the six months ended 30 June 2014
1. Accounting Policies
Basis of Preparation
The interim financial information has been prepared using
policies based on International Financial Reporting Standards (IFRS
and IFRIC interpretations) issued by the International Accounting
Standards Board ("IASB") as adopted for use in the EU. The interim
financial information has been prepared using the accounting
policies which will be applied in the Group's statutory financial
information for the year ending 31 December 2014. Of the new
international accounting standards issued with effective date of 1
January 2014, none have an impact on the Group. The interim
financial information has been prepared in accordance with IAS 34 -
Interim Financial Reporting.
2. Financial reporting period
The interim financial information for the period 1 January 2014
to 30 June 2014 is unaudited. In the opinion of the Directors the
interim financial information for the period presents fairly the
financial position, results from operations and cash flows for the
period in conformity with the generally accepted accounting
principles consistently applied. The interim financial information
incorporates unaudited comparative figures for the interim period 1
January 2013 to 30 June 2013 and the audited financial year to 31
December 2013.
The financial information contained in this interim report does
not constitute statutory accounts as defined by section 435 of the
Companies Act 2006. The comparatives for the full year ended 31
December 2013 are not the Company's full statutory accounts for
that year. A copy of the statutory accounts for that year has been
delivered to the Registrar of Companies. The auditors' report on
those accounts was unqualified, did not include references to any
matters to which the auditors drew attention by way of emphasis
without qualifying their report and did not contain a statement
under section 498(2)-(3) of the Companies Act 2006.
3. Interests in joint arrangements
In March and May 2014, the Group entered into two separate
farm-out agreements with Everest Hill Energy Group Ltd ("Everest")
on behalf of its affiliated company, Magdalena Energy Management
Inc. ("Magdalena"), to share costs and risks associated with
exploration activities in the Bolivar and Bocachico Contract Areas
in Colombia. The Group has been appointed as operator under both
farm-out arrangements. Everest is an affiliated company of the
Quasha family trusts which also have an interest in Lyford
Investments, Inc., an existing shareholder of the Group. HKN Inc,
("HKN"), the Group's principal shareholder, Lyford Investments,
Inc. and its parties acting in concert with it are interested in
21,849,016 shares of the Group, representing approximately 60.50
per cent. of the issued share capital of the Company. By virtue of
these holdings, entry into these farm-out agreements constituted
related party transactions.
The Group accounts for its farm-out arrangements as jointly
controlled operations under IFRS 11 "Joint Arrangements". A jointly
controlled operation involves the use of assets and other resources
of the Group and other venturers rather than the establishment of a
separate corporation, partnership or other entity.
Bolivar Farm-Out Arrangement
Under the Bolivar Agreement, Magdalena 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 cash consideration of $5.0
million which was paid, net of fees, in March 2014. Under the
Bolivar Agreement, Magdalena 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, to drill and complete one new
exploitation well in the Contract Area.
The work programme is governed by a joint-venture agreement
between the Group and Magdalena.
During the six months ended 30 June 2014, the Group recorded the
cash consideration of $5.0 million, less fees, as a reduction of
the carrying value of its property, plant and equipment applied as
a recovery of prior costs. During the period, Magdalena funded the
$4.6 million of costs towards the first obligation under the work
program for the re-entry of the Catalina #1 well into the Simiti
formation, and the Group did not recognize any related increase to
property, plant and equipment in its consolidated statement of
financial position for these costs since these costs were fully
funded by its partner. The Group will not recognise the value of
future assets to be received under the remaining work program
obligations due to the uncertainty of future costs but only
recognise future assets when the obligations are completed and will
defer any possible future gain recognition until that point.
Bocachico Farm-Out Arrangement
Under the Bocachico Agreement, Magdalena 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 Bocachico Agreement and cash
consideration of $1.0 million which was paid, net of fees, in May
2014. Under the Bocachico Agreement, Magdalena 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, to drill and complete one new
exploitation well in the Contract Area.
The work programme is governed by a joint-venture agreement
between the Group and Magdalena.
During the six months ended 30 June 2014, the Group recorded the
cash consideration of $1.0 million, less fees, as a reduction of
the carrying value of its property, plant and equipment applied as
a recovery of prior costs. During the period, no other activity
under the Bocachico farm-out agreement occurred. The Group will not
recognise the value of future assets to be received under the work
program obligations due to the uncertainty of future costs but only
recognise future assets when the obligations are completed and will
defer any possible future gain recognition until that point.
4. Revenue
Revenue is attributable to one continuing activity, which is oil
liftings from the Group's wholly-owned subsidiaries of the Group,
located in Colombia, South America.
5. Earnings per share
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 for the period.
Diluted earnings per share amounts are calculated by dividing
the profit for the period attributable to ordinary equity holders
of the parent by the weighted average number of ordinary shares
outstanding during the period plus the weighted average number of
ordinary shares that would be issued on the conversion of all the
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.
The following reflects the profit and share data used in the
basic and diluted earnings per share calculations:
Six Six Year
months months
ended ended
30 30 ended
June June
2014 2013
$'000 $'000 31 December
(Unaudited) (Unaudited) 2013
$'000
(Audited)
------------------ ----------------- -------------------------
Profit from continuing operations
after taxation 1,237 1,209 10
Profit from discontinued operations
after taxation - - 368
Net profit attributable to
equity holders used in dilutive
calculation 1,237 1,209 378
------------------ ----------------- -------------------------
Earnings per share for continuing
operations
- Basic $0.03 $0.03 $ (0.00)
- Diluted $0.03 $0.03 $ (0.00)
Earnings per share for discontinued
operations
- Basic and Diluted - - $0.01
Total Earnings per share
- Basic $0.03 $0.03 $ 0.01
- Diluted $0.03 $0.03 $ 0.01
Basic weighted average number
of shares 36,112,187 36,111,964 36,112,064
Dilutive potential ordinary
shares
Employee and Director share
option plans 1,004,033 1,245,535 1,205,054
Diluted weighted average number
of shares 37,116,220 37,357,500 37,317,118
------------------ ----------------- -------------------------
Figures in thousands except for per share information.
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.
6. Amortising Note Payable
In 2013, the Group completed the restructuring of its notes
payable to 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, 31
December 2013, 31 March 2014 and 30 June 2014
-- $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 30 June 2014, the outstanding principal balance of the
Amortising Note Payable was $9.0 million and is reported as a
short-term loan payable in the consolidated statement of financial
position.
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. Based
upon the 2014 interim results, the Group's interest rate on the
amortising note payable will increase to 13.50 per cent.
7. Tax expense
The Global Energy Development PLC 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.
Colombian taxation
The Group pays taxes in Colombia through the branch offices of
its wholly owned subsidiaries. Beginning in 2013, as determined by
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 2014, the Colombian corporation tax is calculated as 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 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 being made over four years
with payments made twice per year. The last installment payment of
this Equity Tax will be paid in September 2014.
The major components of income tax expense for the periods ended
30 June 2014 and 2013 as disclosed in the consolidated statement of
comprehensive income are:
Six Six Year
months months ended
ended ended 31 December
30 30 2013
June June $'000
2014 2013 (Audited)
$'000 $'000
(Unaudited) (Unaudited)
--------------- ---------------- -------------------------
Current taxes for continuing
operations:
CREE income tax (1) 1,032 292 125
Current income tax charge
for continuing operations 124 132 283
Other withholdings 107 23 55
--------------- ---------------- -------------------------
Total current taxes for
continuing operations 1,263 447 463
--------------- ---------------- -------------------------
Deferred Tax:
Change in deferred tax
related to temporary differences
and other (607) 2,419 2,938
Tax expense for continuing
operations 656 2,866 3,401
--------------- ---------------- -------------------------
(1) The increase in CREE income tax is due to the taxable profit
generated from the transfer the Bolivar and Bocachico Contracts
between branch offices of the Group's wholly-owned Colombian
subsidiaries in 2014. Any transfer of assets located in Colombia
(even between wholly-owned Group subsidiaries) constitutes a
disposition of assets for Colombian tax purposes if such assets
represent more than 20% of the assets of the Group. The transfer of
the Bolivar and Bocachico Contracts to newly-created wholly-owned
Colombian branches during 2014 constituted more than 20% of the
Group's consolidated assets.
8. Deferred tax liabilities (net)
The Group offsets 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 are related
to corporation tax levied by the Colombian tax authority with
jurisdiction over the Group's Colombian branches.
Temporary differences between the tax basis and net book
carrying values arise in relation to the effect of inflation
adjustments, the differences in exchange rate of nonmonetary
assets, differences between tax and accounting depreciation, the
balance of presumptive income tax excesses generated and tax losses
generated in prior years.
The changes in net deferred tax liabilities are reported as
follows:
30 June 30 June 31 December
2014 2013 2013
$'000
$'000 $'000
------------ ------------- ---------------------
Opening balance of deferred
tax liabilities (net) (16,291) (13,353) (13,353)
Change in deferred tax
related to temporary differences
and other 607 (2,419) (2,938)
Ending balance of deferred
tax liabilities (net) (15,684) (15,772) (16,291)
------------ ------------- ---------------------
30 June 30 June 31 December
2014 2013 2013
$'000 $'000
$'000
------------ ------------- ---------------------
Deferred tax assets 7,524 8,306 10,090
Deferred tax liabilities (23,208) (24,078) (26,381)
Deferred tax liabilities
(net) (15,684) (15,772) (16,291)
------------ ------------- ---------------------
The Group changed its depreciation method for fiscal (tax)
balances in 2014 following the transfer of the Bolivar and
Bocachico contracts to new wholly-owned branches in Colombia which
reduced temporary differences. 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.
9. Share capital
Six months Six months Year ended
ended ended
30 June 30 June 31 December
2014 2013 2013
(Unaudited) (Unaudited) (Audited)
------------------------------------- ------------------------------------ -----------------------------------
Number $'000 Number $'000 Number $'000
of shares of shares of shares
------------ ----------------------- ---------------- ------------------ -------------- -------------------
Allotted,
called
up and
fully
paid
Ordinary
shares
of 1p
each 36,112,187 608 36,112,187 608 36,112,187 608
------------ ----------------------- ---------------- ------------------ -------------- -------------------
The ordinary shares confer the right to vote at general meetings
of the Company, to a repayment of capital in the event of
liquidation or winding up and certain other rights as set out in
the Company's articles of association.
The ordinary shares also confer the right to receive dividends
if declared by the Directors and approved by the Company.
10. Related Party Disclosures
HKN, Lyford and its parties in concert are major shareholders of
the Group. The Group holds an Amortising Note Payable with HKN with
a principal balance of $9.0 million, less capitalised arrangement
fees, as at 30 June 2014. Please see note 6 for information on the
Amortising Note Payable.
The Group entered into two separate farm-out agreements with
Everest, an affiliate of Lyford, with respect to the Bolivar and
Bocachico Association Contract areas. Please see note 3 for
information on these farm-out agreements.
This information is provided by RNS
The company news service from the London Stock Exchange
END
IR BRGDCBXBBGSU
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