RNS Number : 9594Y
Petrolatina Energy PLC
14 July 2008
14 July 2008
PetroLatina Energy Plc
("PetroLatina", "PELE" or the "Company")
Final Results for the year ended 31 December 2007
PetroLatina, the oil and gas exploration and production company focused on Colombia, with additional interests in Guatemala, announces
its audited final results for the year ended 31 December 2007. As trading in the Company's shares was suspended on 30 June 2008 pending the
publication of these accounts, such suspension has now been lifted with immediate effect.
Operational Highlights
* Average production of 350 bopd.
* Extension of the Tisquirama licence for the economic life of the fields.
* Guatemalan assets sold for $4 million cash consideration - 20% interest retained in first three wells and a 20% working interest
in future wells.
* Rio Zulia - Ayacucho ("RZA") pipeline average throughput of 2,958 bopd, 31.76% up on 2006.
* New operationally focused management structure in place.
Financial Highlights
* Revenues of $7.09 million (2006: $4.17 million).
* Gross profit of $0.21 million (2006: $3.03 million).
* Loss on continuing activities before tax $8.38 million (2006: $4.74 million).
* Total Loss from all activities after tax $7.96 million (2006: $38.96 million).
* Total Loss per share of $0.069 (2006: $0.45).
* Continuing Loss per share of $0.069 (2006: $0.054).
* Cash at year end of $3.54 million (2006: $5.65 million).
Post Balance Sheet Events
* Ryder Scott reports $164.9 million NPV10 on 3P reserves of 7.34 million boe as at 31 December 2007.
* $25 million equity investment secured from Tribeca Oil and Gas, Inc. ("TOGI") at 83 pence per share on an issued share capital
basis.
Outlook
* Commercial gas sales from Serafin gas field expected to commence in Q4 2008.
* Expected increase in the RZA pipeline throughput due to ongoing field developments by Ecopetrol S.A. and Petrobras.
* Drilling of a minimum of four wells expected to have commenced by the year end.
Greg Smith, Executive Chairman of PetroLatina, commented:
"The past eighteen months may ultimately prove to have been one of the Company's most significant periods of development. With the
future of the Company secured and a strong management team in place, the outlook for the remainder of 2008 is good as we pursue our strategy
of growing PetroLatina into one of the major oil and gas players in Colombia.
We now have the funding in place to commence the drilling of four wells before the year end. Our plan is to convert our Probable and
Possible Reserves into Proved Producing Reserves and considerably increase production and cash flow through the drill programme."
Enquiries:
PetroLatina Energy Plc Tel: +44 (0)20 7808 4851
Greg Smith, Executive Chairman
Pawan Sharma, Executive Vice President -
Corporate Affairs
Strand Partners Limited Tel: +44 (0)20 7409 3494
Simon Raggett / Matthew Chandler
Financial Dynamics Tel: +44 (0)20 7831 3113
Ben Brewerton / Susan Quigley
Availability of Report & Accounts
Copies of the full Report & Accounts are being posted to all shareholders of the Company today and are available to download from the
Company's website at www.petrolatinaenergy.com.
The annual report will also be made available for inspection at the Company's registered office during normal business hours on any
weekday. Petrolatina Energy Plc is registered in England and Wales with registered number 05173588. The registered office is at 34 Grosvenor
Gardens, London SW1W 0DH.
Annual General Meeting
The Company's next Annual General Meeting ("AGM") will be held at the offices of Strand Partners Limited, 26 Mount Row, London W1K 3SQ
at 11.00 a.m. on 5 August 2008. The formal Notice of AGM and related notes is included within the Company's annual report and accounts.
Executive Chairman's Statement
PetroLatina Energy Plc ("PELE" or the "Company") is a petroleum exploration and production Company focused on Latin America, an area in
which the management team has decades of operating experience and in which they have pursued a long-term strategy of finding and developing
reserves.
The Company held as at 30 June 2008, interests in 7 contracts in Colombia and a 20% carried interest in 3 wells and a 20% working
interest 2 licence areas in Guatemala.
The Company's balanced portfolio of contracts comprises a base of production, development drilling and workover opportunities and
several high-potential exploration projects.
The Company intends to continue increasing the asset value of its portfolio focused in Latin America by utilising the cash flow from
current production to advance certain projects whilst looking for partners for other projects which should allow their value to be realised
more quickly.
Ryder Scott Company, LP ("Ryder Scott"), the petroleum consultancy firm, independently audit the Company's portfolio of contracts and
reserves yearly. Ryder Scott reported that as at 31 December 2007 within the Company's portfolio proved plus probable reserves ("2P
reserves") net to the Company totalled 5.6 million barrels of oil equivalent ("boe") and that proved plus probable plus possible reserves
("3P reserves") net to the Company totalled 7.34 million boe.
The Company's ordinary shares have been traded on AIM, a market operated by the London Stock Exchange, since 2005 (LSE-AIM: "PELE").
Achievements to date
14.01.2005 Company listed on London Stock Exchange
26.07.2005 Confirmed producible oil on the Las Casas structure
19.09.2005 Awarded Guatemalan Licence A7-2005
20.02.2006 Obtained interests in La Paloma and Midas licences in Colombia
16.06.2006 Completed acquisition of Petroleos Del Norte ("PDN")
10.01.2007 Confirmed producible oil on Guatemalan Licence A7-2005
15.07.2007 Serafin well �1 tests at 14 mmcf/day
23.07.2007 Disposal of 100% interest in its Guatemalan subsidiary
29.11.2007 Extension to Tisquarama announced
25.06.2008 Updated Reserves reported
11.07.2008 Completed a US$25m investment by Tribeca Oil & Gas Inc
2007 and the months since the year end may ultimately prove, in the long-term, to have been one of the most significant periods in the
Company's development to date.
During the period, PELE has restructured its organisation and reduced its central overhead costs. The loss from continuing operations
for the Group for the year was US$7,951,000 (2006 - US$4,669,000). The increase in the loss relates to an increase in corporate activity
with refinancing and interest charges totaling US$2,587,000 (2006 - US$523,000). In addition the Group incurred share based payment charges
in respect of current and outgoing directors of US$971,000 (2006 * US$8,000). The Group expects that the fact that the above costs are
largely one-off in nature and allowing for the full year effects of the restructuring, the underlying profitability of the Company should
improve.
During 2006 we classified our Guatemalan business (Petrolatina Corporation, formerly Mexpetrol) as discontinued operations. Associated
results of operations, financial position and cash flows are separately reported for all periods presented.
Petrolatina Corporation
In July 2007, we completed the sale of our Guatemalan business for US$4,000,000 in cash. We retained a 20% carried interest in the first
three workovers, and a 20% working interest in any future wells. We sold this business to focus on operations in Colombia. As a result,
PELE's losses from its Guatemalan discontinued operations, net of taxes, was US$4,000 in 2007, compared with losses of US$34,289,000 in
2006.
The Company successfully secured an extension to the key Tisquirama licence in Colombia during the year, for the economic life of the
fields.
Following these developments, the Board was restructured to achieve a greater operational focus and I believe that PELE now has a very
strong team in place to take it into the second phase of its development programme in Colombia.
Since the year end we have also been successful in refinancing the Company. The US$25 million equity investment from a portfolio
investment Company of Tribecapital Partners S.A. ("Tribeca") will secure the future of the Company and enable us to fund our planned
programme of exploration and appraisal wells. We currently expect to commence drilling a minimum of four wells across our three licence
areas in Colombia by the end of this year. Our plan is to increase cash flow dramatically, and further develop and commercialise the
Company's reserves through the drill programme.
The drilling programme should deliver a steady increase in production rates which averaged 350 barrels of oil per day ("bopd") in 2007.
In addition, commercial gas sales are expected to commence from the Serafin gas field in the fourth quarter of 2008.
Since the year end, we have also announced the results of Ryder Scott's review of the Company's reserves as at 31 December 2007. Ryder
Scott reported that Proved Reserves net to the Company in respect of its interests in Colombia totalled approximately 2.75 million barrels
of oil equivalent, 2P reserves net to the Company totalled approximately 5.06 million boe and 3P reserves net to the Company totalled
approximately 7.34 million boe. Based upon NYMEX crude oil futures prices as of 10 April 2008 used in Ryder Scott's Report, the Net Present
Value at a 10 per cent. discount ("NPV10") of the Proved Reserves was US$47.7 million. The NPV10 of the 2P reserves totalled US$108.8
million and the NPV10 of the 3P reserves totalled US$164.9 million.
These NPV10 valuations did not take account of the exploration potential in respect of the Company's interests in Colombia, which the
Directors of PELE believe could be substantial alongside its retained interest in Guatemala. Furthermore, Ryder Scott's assessment did not
include the Company's pipeline asset, which was valued at up to US$30 million (this is carried in the financial statements at US$12.2
million cost) on a PV12 basis by Gaffney Cline & Associates in 2006.
With the future of the Company secured and a strong management team in place, I have decided that now is the right time for me to step
down as Executive Chairman and leave the Board. I welcome Luc Gerard and Ciro Mdez to the Board and look forward to Luc, as Chairman,
steering the Company into its next growth phase. I remain a significant and supportive shareholder in the Company.
Outlook
The outlook for 2008 is good. Significant changes have been undertaken in 2007 which will show benefit this year and in future years. We
now have the funding in place to commence the drilling of four wells before the year end. The Board believes that PELE has significant
potential to create value for its shareholders. Our plan is to convert our Probable and Possible Reserves into Proved Producing Reserves and
considerably increase production and cash flow through the drill programme.
Gregory Smith
Executive Chairman
Interim Chief Executive's Review
Overview
2007 has proven to be an important period in the development of PELE. The progress made by the Company has demonstrated that we are now
on the right track and has resulted in a consolidation of our operations. The Company is now focusing its resources and efforts in
developing its Colombian assets.
Net oil production for the Company in 2007 was approximately 350 bopd, but is expected to increase steadily in future years through the
development of producing fields and exploration drilling.
Review of Operations
Colombian Exploration Activities
Exploration activities on the Midas and La Paloma licence areas started in 2006, and a new exploration block, the La Gaita licence, was
granted by the Agencia Nacional de Hidrocarburos (The National Hydrocarbons Agency of Colombia "ANH") on 12 September 2007.
During 2007, PELE successfully renegotiated the conditions of the two exploration blocks that it acquired in April 2006, increasing its
participation in the Midas block from 70% to 85% and in the La Paloma block from 65% to 80%.
Following the 2006 acquisition of PDN, the Company reached agreement in November 2007 with ECOPETROL S.A., the Colombian State Oil
Company, on a development program for the Tisquirama Exploration and Production licence. Both ECOPETROL and the ANH have now officially
approved the terms of the contract extension for the economic life of the fields.
A plan has been formulated to initiate development of the Tisquirama licence based on the recent licence extension. Important reservoir
studies in the Los Angeles field, including seismic reprocessing, core analysis, and simulation study will be performed during the second
half of 2008. In the case of the Santa Lucia field, the acquisition of a minimum of 54 sq. km. of 3D seismic will be carried out in the same
period. The information obtained to date has been processed and interpreted and we expect that at least 7 wells will be drilled between late
2008 and early 2009. Most of these will be infill wells, which the Company believes have a high probability of success at reasonable cost.
RZA Pipeline
The Company also sees important upside potential in its Rio Zulia - Ayacucho ("RZA") pipeline which in 2007 achieved a daily average
throughput of 2,958 bopd from the Tibd R Zulia fields. ECOPETROL and PETROBRAS are currently investing US$175 million to develop the Tibeld.
Additionally, ECOPETROL has increased its production in the Tibeld with the drilling of two new wells. ECOPETROL also plans to drill 10
workovers and new wells in the Rio Zulia and predicts an increase in its production of 1,000 bopd by the end of 2008.
Eventually, future production from the R Zulia field is expected to rise from the current level of 1,800 bopd to 15,000 bopd with
reserves estimated to potentially increase to 100 million barrels. Such development could lead to a significant increase in the flow of oil
throughput and in consequence an increase in the Company's RZA pipeline revenues. ECOPETROL, has also commenced an extended exploratory
drilling programme near the Rio Zulia field and in close proximity to the pipeline. Due to the favourable location of our RZA pipeline, PELE
believes that both pipeline revenues and the strategic and commercial value of the pipeline will increase considerably in future years as
production from Tibu and R Zulia increases.
Guatemalan Assets
Despite having sold its assets (Licence A7-2005 and A-6-93), in Guatemala to Quetzal Energy Inc. on 23 July 2007, PELE retained a 20%
carried interest in the first three wells to be worked over in 2008, and a 20% working interest in future wells.
Serafin Gas Development
During 2007, PELE also completed the first stage of its Serafin Gas development which highlighted the gas potential in the area. Well �1
was worked over in January 2007 and tested at flow rates of 14 million cubic feet of gas per day ("mmcfd"). Gross reserves are estimated at
between 5 and 6 billion cubic feet of gas in place. Construction of a 3.5km trunk pipeline was completed which ties the well to the now
established gas pipeline network.
During the second half of 2008, the Group should satisfy the necessary conditions to bring the Serafin gas well into production.
Commercial gas sales are expected to commence in the fourth quarter of 2008 which will provide valuable cash revenues to the Company to
support the development of its producing fields.
Recent increases in the domestic price of gas in Colombia (from US$3.50 to US$5.00 per thousand cubic feet) mean that the project offers
strong short term cash flow and economic returns, with a projected pay back of less than three months. There is also believed to be a high
probability of further gas deposits on the licence and PELE is currently conducting studies using its existing 3D seismic coverage to
identify further drillable prospects. PELE has a 25% interest in the project.
Financial Review
During 2007 revenues totalled US$7.1million (2006 - US$4.2 million) an increase on the previous year as a result of the full year impact
of its subsidiary PDN. On an annualised basis the revenues from the 2006 acquisition, PDN, were slightly lower reducing to US$7.1 million
from US$7.6 million in 2006. The principle reason for the reduction in reserves was due to Ecopetrol's interest in well ANG10, located in
the Los Angeles field, increased from 0% to 50% during the year as a result of PELE's recovering 200% of its initial capital spend on the
well, as per the terms of the licence agreement.
A booked depletion, depreciation and amortization charge ("DD&A") of US$4,786,000 (2006 - US$1,561,000) led to a loss after tax of
US$7.96 million (2006 - loss of US$38,958,000). This DD&A relates to the terms of the original contract which prior to the renewal was due
to expire at the end of 2008. Well depletion and other petroleum asset depreciation was therefore accelerated.
Debt service payments to Macquarie Bank Limited ("Macquarie") reached US$2,587,000 (2006 - US$523,000) and income tax credit was
US$433,000 (2006 - US$71,000) resulting in a continuing loss before interest, tax, depreciation and amortization of US$1.01 million (2006 -
US$2.65 million).
Guatemalan operations accounted for a loss of US$4,000 (2006 - US$34,289,000) in the consolidated income statement.
During 2008, we will continue to pursue our strategy of growing PELE into one of the major players in the oil and gas industry in
Colombia and capitalising on the clear opportunities to increase both production and shareholder returns.
Juan Carlos Rodruez
Interim Chief Executive Officer
PetroLatina Energy Plc
Consolidated Income Statement
31 December 2007
Note 2007 2006
US$'000 US$'000
Revenue 5 7,092 4,174
Cost of sales 6,873 1,140
________ ________
Gross profit 219 3,034
General and administration costs 6,040 7,639
________ ________
Loss from operations 6 (5,821) (4,605)
Finance income 7 24 388
Finance expense 7 (2,587) (523)
________ ________
Loss before tax (8,384) (4,740)
Income tax credit 8 (433) (71)
________ ________
Loss from continuing operations (7,951) (4,669)
Loss on discontinued operation, net of tax 10 (4) (34,289)
________ ________
Loss for the period attributable to equity 9 (7,955) (38,958)
shareholders of the parent
________ ________
2007 2006
US$ US$
Loss per share attributable to the equity holders of 9 0.069 0.448
the parent during the year (basic and diluted)
________ ________
Loss per share - Continuing operations (basic and 9 0.069 0.054
diluted)
________ ________
PetroLatina Energy Plc
Consolidated balance sheet
31 December 2007
Note 2007 2006
ASSETS US$'000 US$'000
Non-Current Assets
Property, plant and equipment 11 32,407 23,287
Intangible assets 12 4,328 2,906
________ ________
36,735 26,193
Current Assets
Inventories 14 52 54
Trade and other receivables 15 307 1,220
Prepayments 15 118 65
Cash and cash equivalents 23 3,542 5,652
________ ________
4,019 6,991
________ ________
Total Assets 40,754 33,184
________ ________
LIABILITIES
Non-current liabilities
Provisions 19 556 857
Deferred tax liability 18 6,576 3,893
________ ________
7,132 4,750
Current liabilities
Trade and other payables 16 10,380 2,246
Short term loans 17 6,388 7,658
________ ________
16,768 9,904
Total Liabilities 23,900 14,654
________ ________
Total Net assets 16,854 18,530
________ ________
EQUITY
Share capital 20 11,735 11,077
Share premium 55,718 55,357
Shares to be issued 4,560 -
Warrant reserve 1,624 1,051
Share option reserve - 314
Retained earnings (56,783) (49,269)
________ ________
Total equity 16,854 18,530
________ ________
The financial statements were approved by the Board of Directors and authorised for issue on 11 July 2008
PetroLatina Energy Plc
Consolidated cash flow statement
31 December 2007
Note 2007 2006
US$'000 US$'000
Operating activities
Loss for the year (7,955) (38,957)
Share-based payments 1,094 846
Depreciation of property, plant and equipment 5,503 1,312
Loss on disposal of property, plant and equipment 122 -
Loss on sale of discontinuing operations 10 4 34,289
Interest income (24) (388)
Finance expense 778 523
Income tax expense (433) (71)
Exchange loss - 38
________ ________
Cash flows from operating activities before changes (911) (2,408)
in working capital and provisions
Decrease/(increase) in inventories (1) (5)
Decrease/(increase) in trade and other receivables 788 (134)
(Decrease)/increase in trade and other payables (36) (1,621)
Increase in provisions - 1,646
________ ________
Cash generated from operations
(160) (2,522)
Income taxes paid (284) (353)
________ ________
Net cash from operating activities (444) (2,875)
Investing activities
Interest received 24 388
Purchase of property, plant and equipment (298) (1,696)
Payments for exploration and exploration (3,760) (13,554)
Acquisition of subsidiary (net of cash acquired) - (19,359)
Proceeds from sale of subsidiaries and other assets 10 3,992 -
(net of cash disposed)
Proceeds from sale of fixed assets 49 -
________ ________
Net cash flows from investing activities 7 (34,221)
________ ________
Note 2007 2006
US$'000 US$'000
Financing activities
Issue of ordinary share capital - 35,429
Exercise of share warrants 375 125
Proceeds from short term loan - 7,000
Repayment of short term loan (1,270) (632)
Interest paid (778) (468)
________ ________
Net cash flows from Financing activities (1,673) 41,454
________ ________
Decrease in cash and cash equivalents (2,110) 4,358
Cash and cash equivalents at the start of the period 5,652 1,294
________ ________
Cash and cash equivalents at the end of the period 23 3,542 5,652
________ ________
PetroLatina Energy Plc
Consolidated statement of changes in equity
For the year ended 31 December 2007
Called up
share Shares to Share Warrant
capital be issued premium reserve
US$'000 US$'000 US$'000 US$'000
Opening balance - 1 January 2006 5,496 25,164 140
Loss for the period - - - -
______ ______ ______ ______
Total recognised income and
expense for the year - - - -
Issue of share capital 5,581 - 31,944 -
Issue of warrants - - - 911
Share based payment - - - -
Issue costs - - (1,751) -
______ ______ ______ ______
Balance as at 31 December 2006 11,077 - 55,357 1,051
Loss for the period - - - -
______ ______ ______ ______
Total recognised income and
expense for the year - - - -
Issue of share capital 658 - 361 -
Transfer on lapse of warrants and - - - (127)
options
Issue of warrants - - - 700
Deferred consideration payable - 3,000 - -
Share-based payment - 1,560 - -
______ ______ ______ ______
Balance as at 31 December 2007 11,735 4,560 55,718 1,624
________ _________ _________ _________
(continued from table above)
Share
option Retained Total
reserve earnings equity
US$'000 US$'000 US$'000
Opening balance - 1 January 2006 299 (10,312) 20,787
Loss for the period - (38,957) (38,957)
______ ______ ______
Total recognised income and expense for the
year - (38,957) (38,957)
Issue of share capital - - 37,525
Issue of warrants - - 911
Share based payment 15 - 15
Issue costs - - (1,751)
______ ______ ______
Balance as at 31 December 2006 314 (49,269) 18,530
Loss for the period - (7,955) (7,955)
______ ______ ______
Total recognised income and expense for the
year - (7,955) (7,955)
Issue of share capital - - 1,019
Transfer on lapse of warrants and options (314) 441 -
Issue of warrants - - 700
Deferred consideration payable - - 3,000
Share-based payment - - 1,560
______ ______ ______
Balance as at 31 December 2007 - (56,783) 16,854
________ _________ _________
The following describes the nature and purpose of each reserve within owners' equity:
Reserve Descriptions and purpose
Share capital Amount subscribed for share capital at nominal value.
Share premium Amount subscribed for share capital in excess of nominal
value.
Warrant reserve Amounts resulting from the issue of warrants.
Share option reserve Amounts resulting from incentive stock options vesting.
Retained earnings Cumulative net gains and losses recognised in the
consolidated income statement.
Shares to be issued The fair value of shares to be issued in respect of
consideration for services or liabilities delivered in
the
period (see notes 17 and 20).
PetroLatina Energy Plc
Notes forming part of the financial statements for the year ended 31 December 2007
1. Authorisation of financial statements
The consolidated financial statements of PetroLatina Energy Plc (the "Company" or "PELE") and its subsidiaries (together the "Group")
for the year ended 31 December 2007 were authorised by the Board of Directors on 11 July 2008 and the balance sheet was signed on the
Board's behalf by Gregory Smith.
2. Accounting policies
Basis of Preparation
With effect from 1 January 2007 it became mandatory for the Group to comply with International Financial Reporting Standards (IFRS).
The financial results of the Group have been prepared on a basis which is consistent with International Financial Reporting Standards
(IFRS) as adopted by the European Union, for the first time, for the twelve months ended 31 December 2007. Comparative information for 2006
has been restated under IFRS. Reconciliations to IFRS from the previously published UK GAAP financial statements are summarised in the notes
to the financial statements.
First-time adoption of IFRS
In preparing these financial statements, the Group has elected to apply the following transitional arrangements permitted by IFRS 1
'First-time Adoption of International Financial Reporting Standards':
* Business combinations effected before 1 January 2006 have not been restated.
* Only those exchange differences arising on the retranslation of foreign operations since 1 January 2006 have been recognised as a
separate component of equity, with the related reserve being reset to zero at that date.
* IFRS 2 'Share-based payments' has been applied to employee options granted after 7 November 2002 that had not vested by 1 January
2006.
The Group has made estimates under IFRS at the date of transition, which are consistent with those estimates made for the same date
under UK GAAP unless there is objective evidence that those estimates were in error, i.e. the Group has not reflected any new information in
its opening IFRS balance sheet but reflected that new information in its income statement for subsequent periods.
Standards, amendments and interpretations to published standards not yet effective for the year ended 31 December 2007
Certain new standards, amendments and interpretations to existing standards have been published that are mandatory for accounting
periods beginning after 1 January 2007 or later periods and which the Group has decided not to adopt early. These are:
- IFRS 8, Operating Segments (effective for accounting periods beginning on or after 1 January 2009). This standard sets out
requirements for the disclosure of information about an entity's operating segments and also about the entity's products and services, the
geographical areas in which it operates, and its major customers. It replaces IAS 14, 'Segmental Reporting'. The Group expects to apply this
standard in the accounting period beginning on 1 January 2009. As this is a disclosure standard it will not have any impact on the results
or net assets of the Group.
- IAS 23, Borrowing Costs (revised) (effective for accounting periods beginning on or after 1 January 2009). The revised IAS 23 is still
to be endorsed by the EU. The main change from the previous version is the removal of the option of immediately recognising as an expense
borrowing costs that relate to qualifying assets, broadly being assets that take a substantial period of time to get ready for use or sale.
The Group is currently assessing its impact on the financial statements.
- IFRIC 11, IFRS 2 - Group and Treasury Share Transactions (effective for accounting periods
beginning on or after 1 March 2007). IFRIC 11 requires share-based payment transactions in which an entity receives services as
consideration for its own equity instruments to be accounted for as equity settled. This applies regardless of whether the entity chooses or
is required to buy those equity instruments from another party to satisfy its obligations to its employees under the share-based payment
arrangement. It also applies regardless of whether: (a) the employee's rights to the entity's equity instruments were granted by the entity
itself or by its shareholder(s); or (b) the share-based payment arrangement was settled by the entity itself or by its shareholder(s).
Management is currently assessing the impact of IFRIC 11 on the accounts.
- IFRIC 12, Service Concession Arrangements (effective for accounting periods beginning on or after 1 January 2008). IFRIC 12 is still
to be endorsed by the EU. IFRIC 12 gives guidance on the accounting by operators for public-to-private service concession arrangements.
IFRIC 12 is not relevant to the Group's operations due to absence of such arrangements.
- IFRIC 13, Customer Loyalty Programmes (effective for accounting periods beginning on or after 1 July 2008). IFRIC 13 is still to be
endorsed by the EU. IFRIC 13 addresses sales transactions in which the entities grant their customers award credits that, subject to meeting
any further qualifying conditions, the customers can redeem in future for free or discounted goods or services. IFRIC 13 is not relevant to
the Group's operations due to absence of such arrangements.
- IFRIC 14, IAS 9 - The Limit on a Defined Benefit Asset, Minimum Funding Requirements and their Interaction (effective for accounting
periods beginning on or after 1 January 2008). IFRIC 14 is still to be endorsed by the EU. IFRIC 14 clarifies when refunds or reductions in
future contributions should be regarded as available in accordance with paragraph 58 of IAS 19, how a minimum funding requirement might
affect the availability of reductions in future contributions and when a minimum funding requirement might give rise to a liability. IFRIC
14 is not relevant to the Group's operations due to absence of such arrangements.
- IFRIC 15, Agreements for the construction of real estate. IFRIC 15 is not relevant to the Group's operations as it does not have any
real estate construction activity.
- IFRIC 16 Hedges of net investment in foreign option. IFRIC 16 applies only to hedges of net investments in foreign operations. The
Group does not hedge any investments at the current time.
- Revised IFRS 3, Business Combinations and complementary Amendments to IAS 27, Consolidated and separate financial statements (both
effective for accounting periods beginning on or after 1 July 2009). This revised standard and amendments is still to be endorsed by the EU.
The revised IFRS 3 and amendments to IAS 27 arise from a joint project with the Financial Accounting Standards Board (FASB), the US
standards setter, and result in IFRS being largely converged with the related, recently issued, US requirements. There are certain very
significant changes to the requirements of IFRS, and options available, if accounting for business combinations. The revision to IFRS 3 is
not considered relevant to the Group's operations at present due to absence of such arrangements.
- Amendment to IFRS 2, Share-based payments: vesting conditions and cancellations (effective for accounting periods beginning on or
after 1 January 2009). This amendment is still to be endorsed by the EU. The Amendment to IFRS 2 is of particular relevance to companies
that operate employee share save schemes. This is because it results in an immediate acceleration of the IFRS 2 expense that would otherwise
have been recognised in future periods should an employee decide to stop contributing to the savings plan, as well as a potential revision
to the fair value of the awards granted to factor in the probability of employees withdrawing from such a plan. This amendment is currently
not applicable as the Group does not operate employee share save schemes. Management will continue to assess the impact of the amendment
prior to adoption.
- Amendment to International Accounting Standard 1 Presentation of Financial Statements (IAS 1) (effective for accounting periods
beginning or after 1 January 2009, yet to be endorsed by the EU) replaces IAS 1 Presentation of Financial Statements (revised in 2003) as
amended in 2005.
IAS 1 amends some of the terminology used in regard to the primary statements. Furthermore it introduces a requirement to include within
a complete set of financial statements a statement of financial position as at the beginning of the earliest comparative period whenever the
entity retrospectively applies an accounting policy or makes a retrospective restatement of items in its financial statements, or when it
reclassifies items in its financial statements. In addition the requirements in regard to the presentation of changes in equity and income
and expenses are altered. Management is currently assessing the impact of the amendments on the accounts.
- Amendments to IAS 32, "Financial Instruments: Presentation" and IAS 1, "Presentation of Financial Statements" - Puttable Financial
Instruments and Obligations Arising on Liquidation (effective for accounting periods beginning or after 1 January 2009, yet to be endorsed
by the EU) IAS 32 is amended by requiring some financial instruments that meet the definition of a financial liability to be classified as
equity. The amendment addresses the classification of some puttable financial instruments, and instruments, or components of instruments,
that impose on the entity an obligation to deliver to another party a pro rata share of the net assets of the entity only on liquidation.
These amendments are currently not applicable as the Group does not utilize the described financial instruments. Management will continue to
assess the impact of the amendments prior to adoption.
- Amendments to IFRS 1 and IAS 27 Cost of an Investment in a Subsidiary, Jointly-Controlled Entity or Associate (effective for
accounting periods beginning on or after 1 January 2009). ). These amendments are still to be endorsed by the EU. The amendments permits the
entity at its date of transition to IFRSs in its separate financial statements to use a deemed cost to account for its investment in
subsidiary, jointly controlled entity or associate. The deemed cost of such investment could be either the fair value of the investment at
the date of transition, which would be determined in accordance with IAS 39 Financial instruments: Recognition and Measurement or; the
carrying amount of the investment under previous GAAP at the date of transition. Management is currently assessing the impact of the
Amendment on the accounts.
- Improvements to IFRS (effective for accounting periods beginning on or after 1 July 2009). This improvements project is still to be
endorsed by the EU. The amendments take various forms, including the clarification of the requirements of IFRS and the elimination of
inconsistencies between Standards. Management is currently assessing the impact of the Amendment on the accounts.
Basis of Consolidation
The consolidated financial statements incorporate the financial statements of PELE and entities controlled by the Company up to 31
December each year. Control is achieved where the Company has the power to govern the financial and operating policies of an entity so as to
obtain benefits from its activities.
On acquisition, the assets, liabilities and contingent liabilities of a subsidiary are measured at their fair values at the date of
acquisition. Any interest of minority shareholders is stated at the minority's proportion of the fair values of the assets and liabilities
recognised. Any excess of the cost of acquisition over the fair values of identifiable net assets is recognised as goodwill. The results of
subsidiaries acquired or disposed of during the year are included in the consolidated income statement from the effective date of
acquisition or up to the effective date of disposal, as appropriate.
Where necessary, adjustments are made to the financial statements of subsidiaries to bring the accounting policies used into line with
those used by other members of the Group. All significant interCompany transactions and balances between Group entities are eliminated on
consolidation.
Segment reporting
The Group's primary form of segmental reporting will be by business segment.
A business segment is a Group of assets or operations that are subject to risks and returns that are different to those of other
business segments.
Revenues
Sales revenues relating to the sale of crude oil are recognised when the oil is received by the customer, and are net of taxes and
royalty interests. Pipeline income is recognised as incurred and consists of pipeline throughput tariffs.
Oil and gas assets
The following policy definitions provide the guidelines for accounting treatment of Oil and Gas assets including properties, wells,
facilities, pipelines and other related oil and gas producing assets during all stages of exploration and production activities:
Intangible Assets - Evaluation and Exploration Assets
In accordance with the provisions of IFRS 6, the Company has adopted an accounting policy for Evaluation and Exploration activity at the
Company's transition date of 1 January 2006. The Company will continue to monitor the application of its policy with respect to any future
guidance on accounting for oil and gas activities which may be issued.
Oil and gas assets
The Group applies the successful efforts based method of accounting for oil and gas operations.
Under the successful efforts based method of accounting, costs are capitalised if they lead to or represent the development of the oil
and gas assets that either have to be appraised or have been appraised as successful. If evaluation of the oil and gas asset leads to the
conclusion that the asset is not economic, the costs incurred acquiring this asset are expensed through the income statement. If evaluation
of the oil and gas asset leads to the conclusion that the asset has economic value but the costs incurred acquiring and developing this
asset exceed this value, the excess costs are expensed through the income statement. The costs incurred to evaluate potential assets prior
to grant of exploration and production ("E&P") licences are expensed.
Proven oil and gas assets
For evaluated properties with economic values exceeding the exploration and development costs incurred after the grant of the licence,
these costs, which may include geological and geophysical costs, costs of drilling exploration and development wells, costs of field
(defined as an exploration area) production facilities, including commissioning and infrastructure costs, are capitalised. These
expenditures are combined into asset Groups reflecting the anticipated useful lives of individual assets and subsequently are depreciated
over the expected economic lives of those asset Groups. The expenditure within the asset Group with a useful life equal to the producing
life of the field is depleted on a unit-of-production basis. The assets formed by capitalisation of these costs are referred to as oil and
gas assets.
Impairment review
Impairment reviews of development and/or producing assets are carried on a field-by-field basis. At each reporting date an impairment
review is carried out comparing the carrying value of the development and/or producing assets to either the value in use or the net present
values of expected future cash flows from the relevant fields. If the net book value is higher than the underlying economic value of the
asset, as defined by value in use or realisable value less costs to sell, then the difference is written off to the income statement as
impairment. Expected future cash flows are calculated using production profiles and costs determined on a field-by-field basis by in-house
engineers, using appropriate petroleum engineering techniques, and using oil price forecasts which are developed by the Group for business
planning purposes.
Exploration and evaluation assets are regarded as intangible fixed assets until it has been established whether they are associated with
commercially producible reserves of hydrocarbons or not. If the efforts associated with the costs of these assets are successful, these
assets are reclassified into development and/or producing assets, which are subject to regular impairment reviews on a field-by-field basis.
If the efforts associated with the costs of these assets are unsuccessful, the carrying cost of these assets is written off to the income
statement in accordance with the successful efforts based accounting method.
Intangible oil and gas assets
Intangible oil and gas assets represent costs that have been incurred after the grant of the licence where the properties still have to
be evaluated and where production of hydrocarbons has yet to commence. Costs related to such unevaluated properties are not amortised until
such time as the related property has been appraised and put on production.
Asset disposals
Proceeds from the disposal of an asset, or part thereof, are taken to the income statement together with the requisite net book value of
the asset, or part thereof, being sold.
Decommissioning
Where a material liability for the removal of production facilities and site restoration at the end of the productive life of a field
exists, a provision for decommissioning is recognised. The amount recognised is the present value of estimated future expenditure determined
in accordance with local conditions and requirements. The unwinding discount arising on the recognition of the provision is released to the
income statement and included within finance expense.
A property, plant and equipment asset of an amount equivalent to the provision is also created and depreciated on a unit of production
basis. Changes in estimates are recognised prospectively, with corresponding adjustments to the provision and the associated fixed asset.
Property, plant, equipment and pipeline
Property, plant, equipment and pipeline assets, currently comprising furniture and fittings, communications equipment and computer
equipment and the oil pipeline, are depreciated on a straight-line basis over 3 to 20 years (or the life of the asset, if shorter).
Inventories
Inventories are stated at the lower of cost and net realisable value.
Taxation
The tax expense represents the sum of the tax currently payable and deferred tax.
Current tax, including UK Corporation and any overseas tax, is provided at amounts expected to be paid (or recovered) using the tax
rates and laws that have been enacted or substantively enacted by the balance sheet date.
Deferred tax is the tax expected to be payable or recoverable on differences between the carrying amounts of assets and liabilities in
the financial information and the corresponding tax bases used in the computation of taxable profit, and is accounted for using the balance
sheet liability method. Deferred tax liabilities are generally recognised for all taxable temporary differences and deferred tax assets are
recognised to the extent that it is probable that taxable profits will be available against which deductible temporary differences can be
utilised. Such assets and liabilities are not recognised if the temporary difference arises from goodwill or from the initial recognition
(other than in a business combination) of other assets and liabilities in a transaction that affects neither the tax profit nor the
accounting profit.
Deferred tax assets and liabilities are recognised for taxable temporary differences arising on investments in subsidiaries and
associates, and interests in joint ventures, except where the Group is able to control the reversal of the temporary difference and it is
probable that the temporary difference will not reverse in the foreseeable future.
The carrying amount of deferred tax assets is reviewed at each balance sheet date and reduced to the extent that it is no longer
probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered.
Deferred tax is calculated at the tax rates that are expected to apply in the period when the liability is settled or the asset is
realised. Deferred tax is charged or credited in the income statement, except when it relates to items charged or credited directly to
equity, in which case the deferred tax is also dealt with in equity.
Financial Instruments
Financial assets
The Group classifies its financial assets into the following category discussed below. The Group has not classified any of its financial
assets as held to maturity or available for sale.
The Group's accounting policy for its loans and receivables is as follows:
Loans and receivables: These assets are non-derivative financial assets with fixed or determinable payments that are not quoted in an
active market. They arise principally through the provision of goods and services to customers (i.e. trade receivables) but also incorporate
other types of contractual monetary assets. They are initially recognised at fair value plus transaction costs that are directly
attributable to their acquisition or issue and are subsequently carried at amortised cost, using the effective interest rate method less
provision for impairment.
Impairment provisions are recognised when there is objective evidence (such as significant financial difficulties on the part of the
counterparty or default or significant delay in payment) that the Group will be unable to collect all of the amounts due under the terms of
the receivable, the amount of such a provision being the difference between the net carrying amount and the present value of the future
expected cash flows associated with the impaired receivable.
From time to time the Group may elect to renegotiate the terms of trade receivables due from customers with which it has previously had
a good trading history. Such renegotiations may lead to changes in the timing of payments rather than changes to the amounts owed and, in
consequence, the new expected cashflows would be discounted at the original effective interest rate.
Cash and cash equivalents comprise cash on hand, deposits with a maturity of three months or less and other short-term highly liquid
investments that are readily convertible into known amounts of cash and overdrafts repayable on demand. Bank overdrafts are shown within
borrowings in current liabilities on the balance sheet.
Financial liabilities
The Group classifies its financial liabilities into categories depending on the purpose for which the liability was acquired. The Group
has not classified any of its liabilities at fair value through profit and loss.
The Group's accounting policy for each category is as follows:
Held at amortised cost: Trade payables, bridging loans, other loans and other short-term monetary liabilities are initially recognised
at fair value and subsequently carried at amortised cost using the effective interest method.
Share capital
Financial instruments issued by the Group are treated as equity only to the extent that they do not meet the definition of a financial
liability. The Group's ordinary shares are classed as equity instruments.
Provisions
From time to time it is necessary for the Group to defend itself against legal claims that may or may not result in the Group having to
make a financial settlement. Provisions for anticipated settlement costs and associated expenses arising from any legal and other disputes
are made where a reliable estimate can be made of the probable outcome of the dispute. Where it is not possible to make such an estimate, no
provision is made. See accounting policy for decommissioning provisions above.
Share-based payments and warrants
In accordance with IFRS 2 'Share-based payments', the Group reflects the economic cost of awarding shares and share options to employees
and directors by recording an expense in the income statement equal to the fair value of the benefit awarded. The expense is recognised in
the income statement over the vesting period of the award.
Fair value is measured by use of a Black-Scholes model which takes into account conditions attached to the vesting and exercise of the
equity instruments. The expected life used in the model is adjusted, based on management's best estimate, for the effects of
non-transferability, exercise restrictions and behavioral considerations.
Where an option or a warrant is issued to a 3rd party the directors value the service received at fair value, where this is not
ascertainable the directors will value the service based on the fair value of the instruments issued as described above.
Post retirement benefits
The Group contributes to a defined contribution scheme. Contributions are charged to the income statement as they become payable.
Foreign currencies
Transactions in foreign currencies are recorded using the rate of exchange ruling at the date of the transaction. Monetary assets and
liabilities denominated in foreign currencies are translated using the rate of exchange ruling at the balance sheet date. Exchange gains or
losses on translation are included in the income statement. Where subsidiary companies functional currency is not that of the Company being
the US dollar differences which arise on the translation of the assets, liabilities and the income statements of the subsidiaries at year
end exchange rates are included within the cumulative translation reserve account included in equity.
The functional and presentational currency of the Company has been determined to be the US dollar and accordingly the financial
statements have been prepared in US dollars.
Leases
Operating leases and the corresponding rental charges are charged to the income statement on a straight-line basis over the life of the
lease.
Maintenance expenditure
Expenditure on major maintenance, refits or repairs is capitalised where it fulfils one of the following:
- enhances the life or performance of an asset above its originally assessed standard of performance;
- replaces an asset, or part thereof, which was separately depreciated and which is then written off;
- restores the economic benefits of an asset which has been fully depreciated.
All other maintenance expenditures are charged to the income statement as incurred.
Critical accounting judgments and key sources of estimation uncertainty
Details of the Group's significant accounting judgments and critical accounting estimates are set out in these financial statements and
include:
- Carrying value of intangible exploration and evaluation fixed assets (note 12);
- Commercial reserves estimates; (see note 11)
- Share based payments (see note 21);
- Contingent liabilities and litigation (see note 25).
3. Financial instruments - Risk Management
Financial instruments - Risk Management
The Group is exposed through its operations to the following risks:
- Credit risk
- Cash flow interest rate risk
- Foreign exchange risk
- Liquidity risk
In common with all other businesses, the Group is exposed to risks that arise from its use of financial instruments. This note describes
the Group's objectives, policies and processes for managing those risks and the methods used to measure them. Further quantitative
information in respect of these risks is presented throughout these financial statements.
There have been no substantive changes in the Group's exposure to financial instrument risks, its objectives, policies and processes for
managing those risks or the methods used to measure them from previous periods unless otherwise stated in this note.
Principal financial instruments
The principal financial instruments used by the Group, from which financial instrument risk arises are as follows:
* Trade receivables
* Cash at bank
* Trade and other payables
* Short term loans
General objectives, policies and processes
The Board has overall responsibility for the determination of the Group's risk management objectives and policies and, whilst retaining
responsibility for them it has delegated the authority for designing and operating processes that ensure the effective implementation of the
objectives and policies to the Group's finance function. The overall objective of the Board is to set policies that seek to reduce risk
exposure as far as possible without unduly affecting the Group's competitiveness and flexibility. Further details regarding these policies
are set out below:
Credit risk
Credit risk is the risk of financial loss to the Group if a customer or a counterpart to a financial instrument fails to meet its
contractual obligations. The Group is mainly exposed to credit risk from credit sales. It is Group policy, implemented locally, to assess
the credit risk of new customers before entering contracts. Such credit ratings are taken into account by local business practices. The
Group's review includes external credit ratings, when available. Potential customers that fail to meet the Group's benchmark credit
worthiness may transact with the business on a prepayment basis only.
Credit risk also arises from cash and cash equivalents and deposits with banks and financial institutions. The Group reviews the banks
and financial institutions it deals with to ensure that standards of credit worthiness are maintained.
The Group does not enter into derivatives to manage credit risk, although in certain isolated cases may take steps to mitigate such
risks if it is sufficiently concentrated.
The Group monitors the utilisation of credit ratings and available credit evaluation information as appropriate and at the reporting
date does not envisage any losses from non-performance of counterparties.
Cashflow interest rate risk
The Group is exposed to cashflow interest rate risk from its deposits of cash and cash equivalents with banks. The cash balances
maintained by the Group are proactively managed in order to ensure that the maximum level of interest is received for the available funds
but without affecting the working capital flexibility the Group requires.
The Group does not consider itself exposed to cashflow interest rate risk from its borrowings in the form of short term loans which
carry fixed interest rates within the terms of the agreements. Through the fixing of interest rates within the agreements the Company
considers it has minimised the exposure of the Group to cashflow interest rate risk. No subsidiary Company of the Group is permitted to
enter into any borrowing facility or lease agreement without the prior consent of the Board of Directors.
Interest rates on financial assets and liabilities
The interest rate profile of the Group's financial assets and liabilities at 31 December 2007 was as follows:
ASSETS Financial assets Financial assets Total
on which on which no 2007
floating rate interest is earned
interest
is earned
Currency US$'000 US$'000 US$'000
US Dollars 3,199 - 3,199
Colombian Pesos 635 - 635
British Pounds 11 - 11
________ ________ ________
Total 3,845 - 3,845
________ ________ ________
LIABILITIES Financial Financial liabilities Total
liabiliti on which no 2007
es on interest is paid
which
interest
is paid
Currency US$'000 US$'000 US$'000
US Dollars 14,053 - 14,053
________ ________ ________
Total 14,053 - 14,053
________ ________ ________
The profile at 31 December 2006 for comparison purposes was as follows:
ASSETS Financial assets Financial assets Total
on which on which no 2006
floating rate interest is earned
interest
is earned
Currency US$'000 US$'000 US$'000
US Dollars 3,700 - 3,700
Colombian Pesos 2,714 - 2,714
British Pounds 387 - 387
________ ________ ________
Total 6,801 - 6,801
________ ________ ________
Total
LIABILITIES Financia Financial liabilities 2006
l on which no
liabilit interest is paid
ies on
which
interest
is paid
Currency US$'000 US$'000 US$'000
US Dollars 8,299 - 8,299
Colombian Pesos 658 - 658
________ ________ ________
Total 8,957 - 8,957
________ ________ ________
Cash at bank at floating rates consisted of demand deposits subject to floating rates which earn interest at an average rate of 7.17%.
The Group has no floating rate debt. Fixed rate debt consists of obligations under short term loan agreements of less than one year with
rates fixed in advance for periods longer than three months. The average interest rate on these contracts for the year is 14.85% (2006 -
11.89%).
Interest rate sensitivity analysis
The Group reviewed the interest rate sensitivity on year-end balances and determined that a one percent increase or decrease in the
interest rate earned on floating rate deposits would not have resulted in a significant increase or decrease in net income receivable.
Foreign exchange risk
Foreign exchange risk arises because the Group has operations located in various parts of the world whose local operational currency is
not the same as the functional currency of the Group. Although its wider market penetration reduces the Group's operational risk, the
Group's net assets arising from such overseas operations are exposed to currency risk resulting in gains and losses on retranslation into US
Dollars. Only in exceptional circumstances will the Group consider hedging its net investments in overseas operations as generally it does
not consider that the reduction in foreign currency exposure warrants the cash flow risk created from such hedging techniques.
Wherever possible in order to monitor the continuing effectiveness of this policy, the Board, through their approval of capital
expenditure budgets and review of the monthly management accounts, considers the effectiveness of the policy on an ongoing basis.
The following table discloses the exchange rates of those currencies utilised by the Group:
Colombian British Pound Sterling
Peso
Foreign currency units to US$1.00
At 31 December 2007 2,015 0.5007
________ ________
At 31 December 2006 2,239 0.5104
________ ________
Currency exposures
The monetary assets and liabilities of the Group that are not denominated in US dollars and are therefore exposed to currency
fluctuations are shown below. The amounts shown represent the US dollar equivalent of local currency balances.
US dollar equivalent of Colombian Peso British Pound Total
exposed net monetary assets US$'000 Sterling US$'000
and liabilities US$'000
At 31 December 89
2007 (1,725) (1,636)
________ ________ ________
At 31 December 41
2006 1,337 1,378
________ ________ ________
Foreign currency sensitivity analysis
The Group is mainly exposed to currency rate fluctuations of the Colombian Peso versus the USUS$, and measures its foreign currency risk
through a sensitivity analysis considering 10% favourable and adverse changes in market rates on exposed monetary assets and liabilities
denominated in Colombian Pesos. At 31 December 2007, a 10% devaluation of the Peso against the Dollar would not have resulted in a material
difference in the result of the Group (2006 - no significant difference).
Liquidity risk
Liquidity risk arises from the Group's management of working capital and the finance charges and principal repayments on its debt
instruments. It is the risk that the Group will encounter difficulty in meeting its financial obligations as they fall due. The most
significant component of liquidity risk affecting the Group is a potential adverse movement in the market price of the crude oil.
In addition see note 24 for the term of the Group's Colombia exploration, whereby 12 months' expenditure is held in trust to ensure
commitments are met.
Crude oil price sensitivity analysis
A sensitivity analysis based on a 10% price volatility assumption is used internally by management to estimate the potential impact of
variations in crude oil market prices. As at 31 December 2007, a 10% increase in the average sales price obtained during the year would have
increased revenues by US$542,000 (2006 - US$328,000) and a 10% decrease in the average sales price would have reduced revenues by US$492,000
(2006 - US$298,000).
The Group's policy is to ensure that it will always have sufficient cash to allow it to meet its liabilities when they become due. To
achieve this aim, it seeks to maintain cash balances (or agreed facilities) to meet expected requirements for a period of at least 90 days.
The Group seeks to reduce liquidity risk by fixing interest rates (and hence cash flows) on its long term borrowings.
The Directors received rolling 12 month cashflow projections on a monthly basis as well as information regarding cash balances. At the
balance sheet date, these projections indicated that the Group expected to have sufficient liquid resources to meet its obligations under
all reasonable expected circumstances.
Capital management policies
The Group considers its capital to be its ordinary share capital, share premium, other reserves and retained earnings. The Board of
Directors has established guidelines and policies for the management of the Group's capital resources based on a long-term strategy that
continually evaluates and monitors the achievement of corporate objectives and the development of the Group's portfolio in core areas.
Specific capital management policies set forth include the following:
* The reinvestment of all profits into new and existing assets that fit the corporate objectives
* Consolidation of positions in developing regions and disposition of assets of low materiality or where meaningful operational
influence cannot be achieved;
* To identify the appropriate mix of debt, equity and partner sharing opportunities in order to balance the highest returns to
shareholders overall with the most advantageous timing of investment flows;
* Retain maximum flexibility to allocate capital resources between exploration and appraisal, and production and development
projects based on available funds and quality of opportunities.
On a regular basis, management receives financial and operational performance reports that enable continuous management of assets,
liabilities and liquidity. In addition, management communicates frequently with the Board of Directors to provide consistent information and
data flow to ensure the opportunities to evaluate and measure the achievement of objectives.
The above policies and practices are consistent with strategies and objectives employed in prior years and are expected to remain
consistent in the extension of future resource allocation objectives
4. Staff costs (including directors' and key management remuneration)
2007 2006
US$'000 US$'000
Directors' fees and emoluments 1,327 1,148
Share based payments 1,094 -
Wages and salaries 1,490 2,162
Redundancy 60 -
Social security costs 100 179
Pensions 114 88
________ ________
4,185 3,577
________ ________
The Company does not administer its own pension, instead it makes payments on behalf of its directors and employees into their own
personal pension.
The directors believe that directors fees and emoluments represents the charge paid to key management.
The average number of employees of the Group during the period, including executive directors, was as follows:
2007 2006
Number Number
Administration 21 22
Technical 67 62
________ ________
88 84
________ ________
None of the directors are members of a Company pension fund. Pension contributions are paid to the directors to pay into their own
personal pension schemes.
Compensation of directors consists of:
2007 2006
US$'000 US$'000
Wages and salaries 1,279 1,077
Share based payment expense 971 8
Pension costs 176 63
________ ________
The highest paid director received emoluments of US$611,000 (2006 - (US$445,000). They also received share based payments of US$701,000
(2006 - US$8,000) and pension contributions of US$172,000 (2006 - US$39,100). Total pension costs paid on behalf of directors for the year
was US$176,000 (2006 - US$63,100).
Gregory Smith, a director, was a beneficiary of the exercise of 3,750,000 warrants in the period by TVL. The warrants were exercised at
US$0.53 per share with an exercise price of US$0.10 a gain of US$1,612,500 was made on the exercise.
In addition Gregory Smith was granted 4,000,000 options as described in note 21, the share based payments charge is shown above.
5. Segment reporting
In the opinion of the directors, the operations of the Group companies comprise the exploration and production of oil and gas reserves
and the provision of oil pipeline services. The ongoing Group operations in one geographic area being, Latin America. Details of the
operational segment disposed of in the period are disclosed in note 10.
2007
Exploration and Pipeline services Corporate Total
production of oil
and gas
US$'000 US$'000 US$'000 US$'000
Revenue 5,420 1,672 - 7,092
Profit/(loss) before taxation (2,298) 1,173 (7,259) (8,384)
(excluding loss on
discontinued operations)
Total assets 25,203 9,229 6,322 40,754
Total liabilities (14,459) - (9,441) (23,900)
Capital expenditure 298 - 3,758 4,056
Depreciation, depletion and 4,286 500 - 4,786
amortisation
2006
Exploration and Pipeline services Corporate Total
production of oil
and gas
US$'000 US$'000 US$'000 US$'000
Revenue 3,277 897 - 4,174
Profit/(loss) before taxation (2,175) 626 (3,191) (4,740)
(excluding loss on
discontinued operations)
Total assets 21,335 9,729 2,120 33,184
Total liabilities (14,242) - (412) (14,654)
Capital expenditure 15,227 - 541 15,768
Depreciation, depletion and 1,549 271 91 1,911
amortisation
6. Operating loss
2007 2006
Losses from operations is stated after charging: US$'000 US$'000
Depreciation, depletion and amortisation:
Oil and gas assets 4,393 1,125
Other fixed assets 393 436
Operating lease rentals
- land and buildings 226 388
Share based payments expense 1,094 846
Fees payable to the auditor for the audit of the Company's 200 173
annual financial statements
Fees payable to the Company's auditor and its associates for
other services:
The audit of the Company's subsidiaries, pursuant to 50 53
legislation
Corporate finance - 10
7. Finance income and expenses
2007 2006
US$'000 US$'000
Finance income
Interest received on bank deposits 24 388
________ ________
Total interest income calculated using effective interest 24 388
method
________ ________
Finance expense
Interest expense on financial liabilities measured at 777 467
amortised cost
________ ________
Total interest expense calculated using effective interest 777 467
method
Net foreign exchange loss - 56
Refinancing charges 1,810 -
________ ________
2,587 523
________ ________
Net finance expense recognised in the income statement 2,563 134
________ ________
8. Taxation
2007 2006
US$'000 US$'000
Total tax credit (433) (71)
________ ________
The Group has incurred tax losses for the period and a corporation tax charge is not anticipated. The potential benefit of these
taxation losses calculated at the rates of tax prevailing in the countries in which the losses were incurred amount to approximately
US$4,399,000 (2006 - US$1,956,000).
The tax assessed for the period is different than the standard rate of corporation tax in the UK. The differences are explained below:
Reconciliation of the total tax expense 2007 2006
US$'000 US$'000
(8,384) (4,740)
Loss for the period
Expected tax charge based on the standard rate of (2,515) (1,422)
corporation tax in UK of 30%
Effect of:
Expenses not deductible for tax purposes 1,659 (1,351)
Depreciation less capital allowances (3) -
Losses carried forward for utilization in future periods 1,143 3,126
Overseas tax differential (717) (424)
Deferred Tax ________ ________
Total tax credit for the period (433) (71)
________ ________
Deferred tax assets related to these losses have not been recognised in the financial statements as the recovery of this benefit is
dependent on the future profitability of certain subsidiaries, the timing of which cannot be reasonably foreseen.
The deferred tax release relates to the unwinding of the deferred tax liability provision that was established on the acquisition of the
Group subsidiary Company PDN as required by IFRS (see note 18 for further details).
The Group had capital losses on the disposal of Petrolatina Corporation (Bahamas) of US$352,000 (2006 * US$Nil).
9. Loss per share
Loss per ordinary share is calculated by dividing the loss attributable to ordinary shareholders by the weighted number of shares in
issue during the relevant financial periods. The weighted average number of equity shares in issue for the period is 114,796,231 (2006 -
86,976,013).
Losses for the Group attributable to the equity holders of the Company for the year are US$7,955,000 (2006 * US$38,958,000). The effect
of the warrants in issue is anti-dilutive, therefore a diluted loss per share is not presented.
Losses for the Group attributable to continuing operations of the Group for the year are US$7,951,000 (2006 * US$4,669,000).
Potentially dilutive shares are disclosed in the share capital and share options notes.
10. Gain/(loss) on discontinued operations
On 23 July 2007, the Group sold 100% of its interest in PetroLatina Corporation (Bahamas), to Quetzal Energy Inc.
The post-tax gain on discontinued operations was determined as follows:
US$'000 US$'000
Consideration received:
Cash 4,000
Net assets disposed:
Property, plant and equipment 1,420
Exploration expenditure 1,832
Other receivables 109
Cash at bank 8
Trade and other payables (20)
Provision for decommissioning (301)
________
3,048
________
Pre-tax gain on disposal of discontinued operation 952
________
The net cash inflow comprises:
Cash received 4,000
Cash at bank disposed of (8)
________
3,992
________
2007 2006
Result of discontinued operations US$'000 US$'000
Revenue - -
Cost of sales 152 792
Depreciation, depletion and amortisation 176 81
Expenses other than finance costs 628 44
Impairment of assets - 32,741
Finance costs - 629
Tax expense - 2
________ ________
(956) (34,289)
Gain from selling discontinued operations after tax 952 -
________ ________
Loss for the period (4) (34,289)
________ ________
Basic loss per share 0 (0.38c)
________ ________
The cash flow statement includes the following amounts
relating to discontinued operations:
Operating activities (805) (3,829)
Investing activities 75 (2,317)
________ ________
Net cash used in discontinued operations (730) (6,146)
________ ________
Capital expenditure during the year was US$Nil (2006 - US$11,978,000).
On 10 May 2007 the Group made the decision to dispose of its interest in PetroLatina Corporation, its Guatemalan operations. PELE signed
an agreement granting Quetzal Energy Inc the exclusive negotiation rights, for a period of four months, to acquire all the interests for
total consideration of US$4 million.
Quetzal Energy Inc is a Canadian based International Oil and Gas Company operating in Guatemala, CA. The Company was incorporated on 9
May 2007 and started operations on 1 August 2007. The president and one of the founder shareholders of Quetzal Energy, is Michael Realini,
former President of PetroLatina Corporation. On 23 July 2007 the parties completed the sale of PetroLatina Corporation of US$4 million.
Under this agreement the Group retains a 20% carried interest in the first three wells drilled. In addition the Group retains the option
to participate, for a 20% cost contribution, in 20% of future exploration on any of the licence areas disposed of in the agreement.
During 2006 the Directors had reviewed the carrying value of all PELE's Guatemalan assets in the financial statements. As a result of
this review, an impairment was made to historical exploration expenditure of US$30 million and fixed assets and drilling materials inventory
was written down by US$0.35 million and US$1.1 million respectively. Additionally, due to some uncertainty as to the recoverability of
purchase VAT on materials and equipment, a further charge of US$1.3 million was charged against 2006 income.
The net assets at 31 December 2006 after these provisions was US$3.1 million excluding inter-Company balances, therefore the directors
expected that the loss on disposal in 2007 would be minimal, after proceeds received of US$4 million and the loss incurred on the disposal
operations between 1 January 2007 and 23 July 2007, which is consistent with the loss in 2007 on disposal of discontinued operations of
US$4,000.
11. Property, plant and equipment
Fixtures, fittings and Field, plant and machinery Motor vehicles
equipment
US$'000 US$'000 US$'000
Cost
At 1 January 2006 313 1,206 164
Acquisition of subsidiary 169 1,734 10
Additions 21 951 105
________ ________ ________
At 31 December 2006 503 3,891 279
Acquisition of subsidiary - - -
Additions 36 30 3
Transfer from exploration - - -
assets
Disposals (162) (48) (7)
Disposals of subsidiary (223) (1,758) (223)
________ ________ ________
At 31 December 2007 154 2,115 52
________ ________ ________
Depreciation and impairment
At 1 January 2006 84 156 31
Charge for period 128 285 23
Charge to deferred exploration 7 184 25
Impairment provision (note 9) - 350 -
________ ________ ________
At 31 December 2006 219 975 79
Charge for period 32 331 30
Disposals (91) - -
Disposal of subsidiary (130) (560) (94)
________ ________ ________
At 31 December 2007 30 746 15
________ ________ ________
Net book value 124 1,369 37
At 31 December 2007
_________ _________ _________
At 31 December 2006 284 2,916 200
_________ _________ _________
(continued from table above)
Pipelines Proven oil and gas assets Total
US$'000 US$'000 US$'000
Cost
At 1 January 2006 - - 1,683
Acquisition of subsidiary 13,189 7,204 22,306
Additions - 619 1,696
________ ________ ________
At 31 December 2006 13,189 7,823 25,685
Acquisition of subsidiary - 14,650 14,650
Additions - 229 298
Transfer from exploration - 504 504
assets
Disposals - - (217)
Disposals of subsidiary - - (2,204)
________ ________ ________
At 31 December 2007 13,189 23,206 38,716
________ ________ ________
Depreciation and impairment
At 1 January 2006 - - 271
Charge for period 353 772 1,561
Charge to deferred exploration - - 216
Impairment provision (note 9) - - 350
________ ________ ________
At 31 December 2006 353 772 2,398
Charge for period 660 3,733 4,786
Disposals - - (91)
Disposal of subsidiary - - (784)
________ ________ ________
At 31 December 2007 1,013 4,505 6,309
________ ________ ________
Net book value 12,176 18,701 32,407
At 31 December 2007
_________ _________ _________
At 31 December 2006 12,836 7,051 23,287
_________ _________ _________
Where there is depreciation on assets that relate to exploration activity the depreciation is transferred to Exploration Expenditure in
Intangibles see note 12.
Reserve estimates
There are numerous uncertainties inherent in estimating reserves and assumptions that whilst valid at the time of estimation may change
significantly when new information becomes available. Changes in the forecast prices of commodities, exchange rates, production costs or
recovery rates may change the economic status of reserves and may, ultimately, result in the reserves being restated. Such changes in
reserves could impact on depreciation and amortisation rates, asset carrying values, deferred stripping calculations and provisions for
close down, restoration and environmental clean up costs. The Group utilise the expertise of third party consultants to report on the
reserves estimates to increase the reliability of their estimations.
12. Intangible exploration and evaluation (E & E) assets
2007 2006
US$'000 US$'000
At 1 January 2,906 19,871
Additions 3,758 14,072
Acquisitions - 1,276
Transfer to oil and gas assets (see note 11) (504) -
Impairment provision (see note 9) - (32,313)
Disposals (see note 10) (1,832) -
_______ _______
At 31 December 4,328 2,906
_______ _______
Comprising:
Guatemala - 1,829
Colombia 4,328 1,077
_______ _______
4,328 2,906
_______ _______
The amounts for intangible E & E assets represent costs incurred on active oil and gas exploration projects.
In accordance with oil and gas asset accounting policy set out in note 2, E & E assets are evaluated when circumstances exist that
suggest the possibility of impairment as well as when E & E assets are reclassified to the development and producing phase. The outcome of
ongoing exploration, and therefore whether the carrying value of assets will be recovered, is inherently uncertain.
13. Investments in subsidiaries
As at 31 December 2007, the Group comprised the Company and the following directly held subsidiaries:
Proportion of ownership interest at: Country of Principal activity
incorporation
2007 2006
PetroLatina (CA) Limited * 100% 100% United Kingdom Intermediate holding
Company
Taghmen Argentina Limited * 100% 100% United Kingdom Dormant
Taghmen Colombia S.L. 100% 100% Spain Intermediate holding
Company
Petroleos Del Norte SA 100% 100% Columbia Operating Company
(see note 25)
Petrolatina Corporation - 100% Bahamas Operating Company
The subsidiaries marked with an * were held directly by PetroLatina Energy plc, the Group's parent Company.
14. Inventories
2007 2006
US$'000 US$'000
Crude oil inventory 52 54
_______ _______
15. Trade and other receivables
2007 2006
US$'000 US$'000
Trade receivables 307 813
Prepayments 118 65
Other receivables - 407
_______ _______
425 1,285
_______ _______
At 31 December 2007 there were no receivables considered past due (2006 - US$Nil) and the Board of Directors considers that the carrying
values adequately represent the fair value of all receivables. The maximum exposure to credit risk at the reporting date is the fair value
of each class of receivable set as above.
16. Trade and other payables
2007 2006
US$'000 US$'000
Trade payables 411 418
Taxes and social security costs 172 881
Deferred consideration 7,000 -
Accruals 2,203 947
Other payables 594 -
________ ________
10,380 2,246
________ ________
Trade payables are classified as financial liabilities, carried at amortised costs and are expected to be paid within the next three
months.
Included within accruals is the sum of US$1.25m (2006 - US$Nil) as a finders fee due to a third party who originally identified the
potential acquisition of PDN. The liability crystallised on the extension of the licence as described above.
The other payables represent amounts payable to Apex, the third party partner in one of the Group's Colombian licences, and also
includes the amount payable to Gregory Smith, a director of US$512,000 (2006 - US$Nil) in respect of salaries and pensions due to him under
his service contract, this has been settled since the year end.
The deferred consideration relates to amounts payable to the vendors of PDN. During 2006 the Group agreed to pay US$32 million for PDN,
payable in two installments. The first installment of US$19 million was paid on 16 June 2006. The second installment was for US$13 million
and was payable when the Tisquirama licence (containing the Los Angeles and Santa Lucia fields) was extended. The Tisquirama licence was
agreed in principle in November 2007 on less beneficial terms beyond those specified in the sale and purchase agreement. Accordingly the
parties agreed to reduce the second installment by US$3 million to US$10 million. The parties further agreed that this payment would be
satisfied by the payment of US$ 7 million in cash and the satisfaction of the US$3 million by the issuance of 3,045,299 shares in the
capital of the Company.
See share capital note 20 in respect of shares to be issued. See post balance sheet event note 27 where disclosure of the settlement of
the contingent consideration is further explained.
17. Borrowings
2007 2006
US$'000 US$'000
Short-term briding loan 6,388 7,000
Other loans - 658
________ _______
6,388 7,658
________ _______
The Group entered into a short term bridging loan with Macquarie. The loan carries interest at 10.5%. The loan was originally due for
repayment on 28 February 2007 but various extensions were granted during the year. On 1 June 2007, the facility was extended and increased
by US$1.7 million. In consideration for increasing the facility, the Company: (1) paid Macquarie an extension and commitment fee of
US$250,000 satisfied by the issuance of 830,000 ordinary shares of US$0.10 each in the capital of the Company, and (2) granted Macquarie a
5% overriding interest in the Group's working interest in hydrocarbons produced from La Paloma. The 5% working interest has been exchanged
into 800,000 shares of US$0.50 each (4,000,000 shares of US$0.10 each pre consolidation of the Company's share capital) in the Company post
year end. The liability was booked at the year end as it had crystallised on the refinancing. The corresponding entry was to create a
US$1,560,000 entry in shares to be issued with the charge included in finance costs. At the balance sheet date, it was repayable on demand.
18. Deferred tax
Deferred tax is calculated in full on the fair value uplift on business combinations at the prevailing tax rate that relates to the
acquired businesses assets of 34% (2006 - 34%) (the Colombian tax rate).
The movement on the deferred tax account is as shown below:
2007 2006
US$'000 US$'000
At 1 January 3,893 -
Arising on business combination 3,400 4,317
Income statement credit (717) (424)
________
At 31 December 6,576 3,893
________ ________
Deferred tax liabilities were recognised in respect of business combinations entered into by the Group subsequent to its transition date
to IFRS of 1 January 2006 giving rise to deferred tax liabilities.
No deferred tax has been recognised on the Group losses as there can be no certainty that these losses will be recovered against future
operating profits of the Group.
19. Provision for liabilities and charges
Plug and
abandonment
provision
US$'000
At 1 January 2006 301
Provided during the period 556
_______
At 31 December 2006 and 1 January 2007 857
Disposal of subsidiary (301)
_______
Balance at 31 December 2007 556
_______
In common with other oil companies with operations in Colombia, the Group acknowledges its environmental obligations. Therefore where a
material liability for site restoration exists after a well has been drilled, the Group recognises a provision for plugging and abandonment.
The amount recognised is the present value of estimated future expenditure determined in accordance with local conditions and requirements.
During the year the Group disposed of its interest in PetroLatina Corporation, which had a provision of US$301,000 (2006 - US$301,000)
for plugging and abandonment see gain/(loss) on discontinued operations note.
20. Share capital
2007 2006
No. of No. of
shares US$'000 shares US$'000
Authorised Ordinary shares of US$0.10 each 200,000 20,000 200,000 20,000
Deferred shares of �0.0011 (US$0.0021) each 50,000 105 50,000 105
_______ _______ _______ _______
Allotted, called up and fully paid:
Ordinary shares
At 1 January 2007 109,757 10,976 53,951 5,395
Issued during the year 6,580 658 55,806 5,581
_______ _______ _______ _______
116,337 11,634 109,757 10,976
Deferred shares 47,773 101 47,773 101
_______ _______ _______ _______
At 31 December 2007 11,735 11,077
_______ _______
Details of US$0.10 ordinary shares issued during the year are given in the table below:
Issue No. of
Date Description Price shares
US$
5 January 2007 Pursuant to an employment contract 0.25 500,000
13 January 2007 Pursuant to an employment contract 0.18 1,500,000
20 February 2007 Exercise of warrants 0.10 3,750,000
30 May 2007 In consideration for Macquarie loan 0.30 830,000
extension
________
6,580,000
________
The valuation of the Macquarie loan extension was based upon the fair value of the services received, which resulted in 830,000 ordinary
shares being issued for services with a fair value of US$250,000.
The Ordinary Shares carry one vote per share. They entitle the holder to share equally in a distribution of the profits or assets of the
Company by dividend with all other holders of Ordinary Shares, in proportion to the holders' aggregate holding of all Ordinary Shares.
The Deferred Shares are fully paid deferred ordinary shares of �0.0011 (US$0.0021) each. The Deferred Shares were issued prior to
reincorporation as a public limited Company in 2004 and have no rights, including no rights to receive notices, vote at general meetings,
participate in dividends and return of capital on the liquidation of the Company.
Subsequent to the year end the Company consolidated its share capital (see post balance sheet events note 27). In addition significant
post balance sheet share movements are detailed in the post balance sheet events note.
As at the year end the Group was committed to issue US$3,000,000 of US$0.10 ordinary shares, as payment of part of the consideration due
to the vendors of PDN, at fair value governed by the share price at the date of settlement. Subsequent to the year end the shares were
issued see post balance sheet events note 27.
In addition after the year end the Company is due to issue 4,000,000 shares of US$0.10 each at a fair value of US$0.39, the share price
at the date the service was performed, 1 June 2007, to Macquarie in consideration of extending and increasing the short term facility (see
note 17).
21 Share based payments
Share options
At 31 December 2007, the following share options have been granted and are outstanding in respect of the ordinary shares:
Number of options
Granted Forfeited Outstanding Final exercise date
Exercise price
At 1 January 2006 - US$1.30 1,755,000 - 1,755,000 12 January 2010
Lapsed during 2006 - (433,000) (433,000)
________ ________ ________
At 31 December 2006 - US$1.30 1,755,000 (433,000) 1,322,000 12 January 2010
________ ________ ________
Lapsed during 2007 - (1,322,000) (1,322,000)
________ ________ ________
At 31 December 2007 1,755,000 (1,755,000) -
________ ________ ________
On 12 January 2005 the Group granted 1,755,000 US$1.30 options to certain Directors, employees and consultants of the Group under an
unapproved share option scheme.
The options are exercisable as to one-third immediately (on 12 January 2005), the second third on the first anniversary date from grant
and the remaining on the second anniversary date from grant.
During the year the remaining 1,322,000 share options were forfeited because one of the conditions of the options remaining in issue was
the continuation of the option holders employment with the Company. As the option holders ceased to continue to work for the Company, the
options were forfeited.
Fair Value of options
Inputs to the valuation model
The fair value of awards granted under the Share Option Plan have been calculated using the Black Scholes pricing model that takes into
account factors specific to share incentive plans such as the vesting periods of the Plan, the expected dividend yield on the Company's
shares and expected early exercise of share options.
Grant date 12 January 2005
Share price at date of grant US$1.00
Exercise price US$1.30
Volatility 40%
Option life 5 years
Dividend yield 0%
Risk-free investment rate 4.42%
Employee turnover 0
Volatility has been based on the following:
(i) the annualised volatility of the Company's shares since flotation on the AIM market.
(ii) the volatility of comparable listed companies in the mining, oil and gas sector.
Based on the above assumptions, the fair value of each option granted is as follows:
Grant date 12 January 2005
Fair value per option US$0.33
Warrants
At 31 December 2007 the following share warrants have been granted and are outstanding in respect of the ordinary shares:
Number of warrants
Granted Exercised Outstanding 31 December 2006 Granted
18 July 2004 - US$0.10 5,000,000 (1,250,000) 3,750,000 -
30 July 2004 - US$0.90 248,222 - 248,222 -
July - November 2004 - US$0.90 26,462,008 - 26,462,008 -
20 September 2004 - US$0.90 250,000 - 250,000 -
17 November 2004 - US$0.90 1,146,125 - 1,146,125 -
15 February 2006 - US$0.9625 213,123 - 213,123 -
15 June 2006 - US$1.01 7,000,000 - 7,000,000 -
At 31 December 2006 40,319,478 (1,250,000) 39,069,478 -
______ ______ ______
7 February 2007 - US$0.42 - 4,000,000
1 June 2007 - US$0.10 - 2,900,001
US$0.20
31 December 2007 39,069,478 6,900,001
_________ _________
(continued from table above)
Exercised Lapsed Outstanding 31 Final exercise
December 2007
18 July 2004 - US$0.10 (3,750,000) - - 30 April 2007
30 July 2004 - US$0.90 - (248,222) - 30 April 2007
July - November 2004 - US$0.90 - (26,462,008) - 30 April 2007 (see below)
20 September 2004 - US$0.90 - (250,000) - 30 April 2007
17 November 2004 - US$0.90 - (1,146,125) - 30 April 2007
15 February 2006 - US$0.9625 - - 213,123 15 February 2009
15 June 2006 - US$1.01 - - 7,000,000 15 June 2010
At 31 December 2006 - - -
7 February 2007 - US$0.42 - - 4,000,000 7 February 2010
1 June 2007 - US$0.10 - 2,900,001 30 April 2011
US$0.20
31 December 2007 (3,750,000) (28,106,355) 14,113,124
_________ _________ _________
Each warrant entitles the holder to purchase one Ordinary Share at a price of between US$0.10 or US$1.01 per share on or before the
expiry date, after which time the warrants will be void and of no value. Each Warrant is governed by the provisions of warrant instruments
representing the warrants which have been adopted by the Company. The rights conferred by the warrants are transferable in whole or in part
subject to and in accordance with the transfer provisions set out in the Articles. The holders of warrants have no voting right, pre-emptive
right or other right attaching to Ordinary Shares.
The following warrants were issued on consideration for services or assets acquired.
On 18 July 2004 the Company entered into an agreement with TVL, for consideration for services provided, whereby TVL was granted
warrants which entitle the holder to subscribe for 5,000,000 shares at an exercise price of US$0.10 per share. 1,250,000 of these warrants
were exercised during 2006. The final 3,750,000 warrants were exercised on 20 February 2007.
On 30 July 2004 the Company entered into an agreement with Williams De Broe Plc ("WDB"), as consideration for services provided, whereby
WDB was granted warrants which entitle the holder to subscribe for 248,222 shares at an exercise price of US$0.90 per share. The warrants
are exercisable in whole or part at any time before 30 April 2007. None of these warrants have been exercised to date and have now lapsed.
On 20 September 2004 the Company entered into an agreement with TVL whereby TVL was granted warrants, as consideration for services
provided, which entitle the holder to subscribe for 250,000 shares at an exercise price of US$0.90 per share. The warrants are exercisable
in whole or part at any time before 30 April 2007. None of these warrants have been exercised to date and have now lapsed.
On 17 November 2004 the Company entered into separate agreements, for consideration for services provided by Gregory Smith, Nicholas Gay
and Jay Scott and separately with Middleforks Investment Ltd, Rhodes Ventures SA and Steven Wyatt whereby the holders were granted 250,000,
250,000, 250,000, 55,000, 282,792 and 58,333 warrants respectively which entitle the holder to subscribe for shares at an exercise price of
US$0.90 per share. The warrants are exercisable in whole or part at any time before 30 April 2007. None of these warrants were exercised and
have now lapsed.
Between July and November 2004 26,462,008 warrants were issued to various subscribers in connection with private placement of shares.
All of these warrants have now expired.
All of the above warrants do not fall within the scope of IFRS 2 (share based payments) as they vested before the effective date of the
standard.
The Company entered into an agreement with Natexis Bleichroeder Inc. for consideration for services provided ("Natexis") on 15 February
2006 pursuant to which Natexis was granted 213,123 warrants which entitle the holder to subscribe for new ordinary shares at an exercise
price of US$0.9625. The warrants are exercisable in whole or part at any time within 3 years of the date of issue. None of these warrants
have been exercised to date.
On 15 June 2006 the Company entered into an agreement with Macquarie for consideration for services provided whereby Macquarie was
granted warrants which entitle the holder to subscribe for 7,000,000 shares at an exercise price of US$1.01 per share. The warrants are
exercisable in whole or part at any time within 4 years of the date of issue. None of these warrants have been exercised to date.
On 7 February 2007 the Company extended an existing employment agreement with Gregory Smith, a director of the Company. In consideration
for reducing the amount of basic salary payable to Gregory Smith by the Company was granted warrants entitling him to subscribe for
4,000,000 shares at an exercise price of US$0.42 per share. The warrants are exercisable at any time within 3 years of the date of issue.
None of the warrants have been exercised to date.
Fair Value of warrants
Inputs to the valuation model
The fair value of warrants granted has been calculated using the Black Scholes pricing model that takes into account factors specific to
equity share issued payments, the expected dividend yield on the Company's shares and expected early exercise of warrants. The fair value of
warrants issued during 2004 have not been calculated and included in the restated financial statements as their issue precedes the effective
date of IFRS 2.
Grant date 15 February 15 June 7 February
2006 2006 2007
Share price at date of grant US$1.07 US$0.59 US$0.48
Exercise price US$0.9625 US$1.01 US$0.42
Volatility 40% 40% 40%
Option life 3 years 4 years 3 years
Dividend yield 0% 0% 0%
Risk-free investment rate 4.22% 4.71% 5.37%
Employee turnover 0 0 0
Volatility has been based on the following:
(i) the annualised volatility of the Company's shares since flotation on the AIM market.
(ii) the volatility of comparable listed companies in the mining, oil and gas sector.
Based on the above assumptions, the fair value of each warrant granted is as follows:
Grant date 15 February 15 June 7 February
2006 2006 2007
Fair value US$0.38 US$0.12 US$0.188
Expense arising from warrants issued
Based on the fair values shown above, the expense arising from warrants in the year is estimated to be US$700,562 (2006 - US$1,050,939)
and was recorded in the income statement for the year. The warrants issued pre 1 January 2006 have not been restated as all the warrants
were issued during 2004 and had vested before the transition date to IFRS 2.
22 Warrants
The following warrants, as described in the warrant table in note 21, were in issue to new or existing shareholders of the Company.
Between July and November 2004 26,462,008 warrants were issued to various subscribers in connection with private placements of shares.
All of these warrants have now expired.
During the year the Group renegotiated the terms of some of the warrants granted July - November 2004 of US$0.90. A total of 2,900,001
warrants were renegotiated and reissued under new terms, the warrants had no vesting conditions and had a new exercise price of US$0.10,
with extension to the period to 30 April 2011. The warrants were issued to shareholders and no service was received.
23. Cash and Cash equivalents
2007 2006
US$' US$'
000 000
Cash 1,787 3,751
Restricted Cash 1,755 1,901
_____ _____
__ __
Total 3,542 5,652
_____ _____
__ __
The Group has interests in the Midas and La Paloma exploration areas in Colombia. Under the terms of the licence the Group must hold in
a separately administered trust account the US$ equivalent of the subsequent 12 month capital spend. The cash is designated to pay for
seismic, geological and geographical surveys, and exploration drilling etc as stipulated within the licence agreement. This money is held
with Bancolombia Panama S.A., a financial institution with a rating of not less than Baa3/BB by Moody's and Fitels respectively.
Major non cash transactions
Deferred consideration of $10m was recognised on the extension of the Tisquirama licence, a corresponding increase of US$7m in
liabilities and US$3m in shares to be issued has been recognised.
24 Commitments under operating leases
As at 31 December 2007, the Group had total commitments under non-cancellable operating leases as set out below:
Land and Buildings
2007 2006
US$'000 US$'000
Operating leases which expire:
Less than one year 171 203
Within two to five years 180 408
_______ _______
351 611
_______ _______
25. Contingent liabilities and litigation
PDN
On 16 June 2006, the Group acquired a controlling interest of 77.76% of the issued and outstanding share capital of PDN. The remaining
22.24% of the issued and outstanding shares of PDN are held in a trust in Colombia and their release from such trust is subject to the
resolution of pending litigation. Based on the advice of counsel in Colombia, PELE believes that the litigation will ultimately result in
the shares held in trust being returned to PDN for cancellation, which would result in PELE holding 100% of the issued and outstanding
shares of PDN. However, should the litigation not go in the Group's favour then the Group's ownership would remain at 77.76%.
Proceedings were brought in May 1991 by PDN against Inergesa. Banco Santander refused to transfer shares of PDN owned by a trust fund
administered by Banco Santander. First and second instance rulings before the 4th Civil Circuit Court of Bogotwere awarded in favour of PDN.
An appeal filed also found in favour of PDN.
Additional prceedings were brought in June 1992 by Fiduciaria Santander against PDN and Inergesa. PDN is in the process of replying to
an appeal.
Damages Claim, Garibald Ciodaro Mantilla and Aserpec Ltd
Proceedings brought by Garibald Ciodaro Mantilla and Aserpec Ltd. against PDN and Ecopetrol in August 2004. This proceeding is before
the 2nd Civil Court of Oca The Plaintiffs seek indemnification for damages suffered during events in May 2003 at the pumping station
�Bellavista� where a storm destructed the plaintiff's equipment and injured plaintiff's employees. The action has been challenged on grounds
of lack of jurisdiction. PDN�s counsel believes that this case is likely to be decided in favour of PDN and Ecopetrol.
PDN damages claim: "Bellavista" case"
Administrative Proceedings seeking direct reparation. PDN brought an action against the Ministry of Defense in December 2004. PDN seeks
indemnification for damages suffered as a result of a terrorist attack perpetrated by the FARC guerillas in December 2002, which totally
destroyed the �Bellavista� pumping station. PDN argues that the attack was supposed to be directed to the government in place, but affected
PDN's private property. PDN argues that the Army was not protecting the station at the time of the attack having ceased to do so in 1999,
despite the difficult public order situation in the area. PDN demands payment of actual damages and loss in excess of US$ 7million. Current
status: Administrative Court ordered the independent valuation of damaged equipment.
PetroLatina Corporation (Bahamas)
On 23 July 2007, the Company disposed of its holding in PetroLatina Corporation (Bahamas) to Quetzal Energy Inc. The Company made
certain representations and warranties which survive for a period of 2 years from the date of completion. The following claims were
disclosed in 2006 and the position remains as disclosed in 2006:
a) On 12 August 2002, Cadex Peroleo Guatemala Inc. ("Cadex") promoted a lawsuit against PetroLatina Corporation. The claim is quantified
at US$150,000. The claim relates to a deed pursuant to which PetroLatina Corporation sold to Petdegua S.A. certain machinery which was part
of the drilling tower. According to Petdegua S.A., this machinery was never delivered.
b) On 12 August 2002, Cadex issued another lawsuit in the Third Civil Court of First Instance against PetroLatina Corporation. This claim
is based on an agreement for the purchase of shares and other assets owned by PetroLatina Corporation. executed on 31 May 1997. Cadex is
demanding the return of US$325,000 that it had paid as part of consideration under the agreement.
c) Petdegua also issued another claim in the Civil Court of First Instance and Execution Court of the Municipality of Ixcan in Guatemala
on 18 October 2002 requiring the fulfilment of the acquisition contract and the seizure of the machinery naming Cadex as its depository.
d) A legal opinion obtained from A.D. Sosa & Soto of Guatemala, the Company's Guatemalan counsel, states that a motion to declare the
claim process abandoned was presented, and if Cadex does not respond to the lawsuit it will be dismissed. The directors have considered the
legal opinion and do not consider that a provision is required as the likehood of a successful claim is remote.
26 Related party transactions
Joseph Strubel and James Guiang, both non-executive directors during the period, are portfolio managers for Millennium Global Natural
Resources which through a fund owns 5,283,400 (2006 - 5,283,400) ordinary shares in the Company as at 31 December 2007. James Guiang, a
non-executive director during the period, was beneficially interested in Argentiere holdings limited, which held 750,000 (2006 - Nil) in the
Company as at 31 December 2007.
On 20 February 2007 TVL, a company in which Gregory Smith has a beneficial interest, exercised 3,750,000 (2006 - 1,250,000) warrants at
an exercise price of US$0.10 per share.
The Group sold its Guatemalan operations on 23 July 2007 to Quetzal Energy Inc, which is a Canadian based International Oil and Gas
Company operating in Guatemala, CA. The Company was incorporated on 9 May 2007 and started operations on 1 August 2007. The president and
one of the founder shareholders of Quetzal Energy, is Michael Realini, former President of PetroLatina Corporation.
27 Post balance sheet events
On 18 February 2008 the maturity date of an existing loan from Macquarie was extended for a further 90 days in consideration of a fee of
US$100,000, and the repayment of US$2.8 million of the outstanding facility. On 16 May 2008, the remainder of the loan was fully repaid.
On 18 February 2008, the Group took out a US$2.9 million bridge loan from TVL and Athos Enterprises Limited, companies in which Gregory
Smith and Juan Carlos Rodriguez, both directors of the Group, have beneficial interests in respectively. The loan carried an interest rate
of 12.5% per annum. In addition, 2,900,000 warrants with an exercise price of �0.0525 (US$0.10) were issued. On 16 May 2008 the loan was
fully repaid.
On 14 March 2008, the Company appointed Strand Partners Limited as its new Nominated Adviser and Broker.
On 14 March 2008, the Company issued an aggregate of 400,000 warrants with an exercise price of US$0.26 (�0.13) per share to
non-executive directors and employees.
On 28 April 2008, the Company obtained shareholder approval to a 1 for 5 share consolidation, an increase in the Company's authorised
share capital, and an increase in the directors' authority to allot equity securities, without offering those equity securities pro rata to
existing shareholders, up to an aggregate nominal amount equivalent to the increased authorised share capital.
On 16 May 2008, the Company completed the initial US$10 million tranche of proposed US$25 million investment by Tribeca Oil and Gas,
Inc. ("TOGI"), a portfolio investment Company of Tribeca, a Colombian Private Equity Firm. TOGI invested US$10 million in the Company by way
of convertible secured loan notes (the "Notes"). The Notes are convertible at TOGI's option into 5,890,080 new ordinary shares of US$0.50
each ("Ordinary Shares"), at a conversion price of US$1.72 (�0.86) per Ordinary Share. In the event the Notes are not converted into
Ordinary Shares, the Notes carry an interest rate of 15% per annum.
Under the original terms of the PDN acquisition, a second cash payment of US$13 million was due to be paid to the vendors of PDN upon
the extension of the Tisquirama licence. As announced on 29 November 2007, PELE reached agreement with the vendors of PDN to make a cash
payment of US$7 million and to issue to the vendors PELE shares to the value of US$3 million at a price of �0.50 per share (equivalent to
�0.10 per share prior to the Company's share consolidation). On 16 May 2008, of the aforementioned cash payment of US$7 million, US$2.5
million was paid, and 3,045,299 Ordinary Shares were allotted to the vendors of PDN, (Lyan Financial Corp: 2,049,299 shares, and Rorick
Ventures Group Inc 1,005,000 shares) companies in which Juan Carlos Rodriguez's family and Juan Carlos Rodriguez, a director of the Company,
have beneficial interests respectively.
On 25 June 2008, the Company announced that Ryder Scott completed an updated assessment of the reserves, future production and income
attributable to the Company's four concessions in Colombia as at 31 December 2007. Ryder Scott reported that Proved Reserves net to the
Company in respect of its interests in Colombia totalled approximately 2.75 boe (corresponding figure as at 31 December 2006 - approximately
0.45 million boe), 2P reserves net to the Company totalled approximately 5.06 million boe (as at 31 December 2006 - 0.66 million boe) and 3P
reserves net to the Company totalled approximately 7.34 million boe (as at 31 December 2006 - approximately 2.5 million boe). Based upon
NYMEX crude oil futures prices as of 10 April 2008, the Net Present Value at a 10 per cent. discount ("NPV10") of the Proved Reserves was
$47.7 million. The NPV10 of the 2P reserves totalled US$108.8 million and the NPV10 of the 3P reserves totalled US$164.9 million.
On 10 July 2008, the Company issued 800,000 ordinary shares of US$0.50 each in the capital of the Company to Macquarie, as detailed in
note 17.
On 11 July 2008, the Company completed the second tranche of the proposed investment of US$25 million in the Company by TOGI. The Notes
were converted by TOGI into 5,890,080 new Ordinary Shares, at a conversion price of US$1.72 (�0.83) per Ordinary Share. TOGI has invested a
further US$15 million in the Company by way of a subscription for 9,470,919 Ordinary Shares ("the Subscription"). TOGI holds in aggregate,
15,360,999 Ordinary Shares, representing a 35 per cent interest in the Company. All related security held by TOGI relating to the Company
and members of its Group since 16 May 2008 was released. As part of the consideration for the Subscription, TOGI has also been granted
1,875,260 warrants which are automatically exercisable, for no additional consideration, into 1,875,260 Ordinary Shares if, and to the
extent that, any exercise of the Company's existing outstanding 3,482,625 warrants occurs. Luc Gerard and Ciro Mdez, representatives of
Tribeca, will join the Company's board as Executive Chairman and Non-executive Directors respectively, and Gregory Smith, Executive Chairman has agreed to step down from the board following
publication of these results.
On 11 July 2008, the final balancing cash payment of US$4.5 million due to the vendors of PDN was made. In addition, 294,504 Ordinary
Shares were allotted to Dignam Holdings Corporation in respect of finders fees due on the successful introduction of Tribeca to the Company,
and a further 739,573 Ordinary Shares to the vendors of PDN in lieu of interest due to them on the aforementioned outstanding US$4.5 million
payment.
28 Capital commitments
There were no capital commitments at the end of the financial year for which no provision has been made.
29 Transition to IFRS
For all periods through and including the year ended 31 December 2006, PELE prepared its financial statements in accordance with United
Kingdom Generally Accepted Accounting Practice (UK GAAP). These financial statements, for the year ended 31 December 2007, are the first the
Group is required to prepare in accordance with International Financial Reporting Standards (IFRS) as adopted by the European Union and the
International Accounting Standards Board.
Accordingly, the Group has prepared financial statements, for the first time, for the year ended 31 December 2007, which comply with
IFRS. In preparing these financial statements, the Group started from an opening balance sheet as at 1 January 2006, the Group's date of
transition to IFRS, and made those changes in accounting policies and other restatements required by IFRS 1 for the first time adoption of
IFRS. This note explains the principal adjustments made by the Group in restating its UK GAAP Balance Sheet as at 1 January 2006 and its
previously published UK GAAP financial statements for the year ended 31 December 2006.
Consolidated Income Statement
Note UK GAAP Adjustments IFRS
For the period ended 31 December US$'000 US$'000 US$'000
2006
Revenue 4,174 - 4,174
Cost of sales a, b, c 2,187 (1,047) 1,140
________ ________ ________
Gross profit 1,987 1,047 3,034
Administrative expenses b, d 43,922 (36,283) 7,639
________ ________ ________
Operating loss (41,935) 37,330 (4,605)
Finance income 388 - 388
Finance expense (523) - (523)
________ ________ ________
Loss before taxation (42,070) 37,330 (4,740)
Income tax expense/(credit) a 353 (424) (71)
________ ________ ________
Loss from continuing operations (42,423) (37,754) (4,669)
________ ________ ________
Loss on discontinued operations, b - (34,289) (34,289)
net of tax
________ ________ ________
Loss for the period attributable to (42,423) 3,465 (38,958)
the equity shareholders of the
parent
________ ________ ________
Consolidated Balance Sheet
As at 31 December 2006
Note UK GAAP Adjustments IFRS
US$'000 US$'000 US$'000
Assets
Non-current assets
Intangible assets 2,906 - 2,906
Property, plant and equipment a 19,394 3,893 23,287
______ ______ ______
Current assets 22,300 3,893 26,193
Inventories 54 - 54
Trade and other receivables 1,285 - 1,285
Cash & cash equivalents 5,652 - 5,652
______ ______ ______
6,992 - 6,991
______ ______ ______
Total assets 29,291 3,893 33,184
______ ______ ______
Liabilities
Non-current liabilities
Long term provisions 857 - 857
Deferred tax liabilities - 3,893 3,893
______ ______ ______
857 3,893 4,750
______ ______ ______
Current liabilities
Trade and other payables 2,246 - 2,246
Short term loans 7,658 - 7,658
______ ______ ______
9,904 - 9,904
______ ______ ______
Total liabilities a 10,761 3,893 14,654
______ ______ ______
Net assets 18,530 - 18,530
______ ______ ______
Equity
Called up share capital 11,077 - 11,077
Share premium account 55,357 - 55,357
Share option reserve 314 - 314
Warrant reserve 1,051 - 1,051
Retained losses (49,269) - (49,269)
Total equity 18,530 - 18,530
Cash Flow Statement
For the period ended 31 December 2006
Note UK GAAP Adjustments IFRS
US$'000 US$'000 US$'000
Cash flows from operating activities
Loss for the year e (42,423) 3,466 (38,957)
Share based payments b 4,062 (3,216) 846
Exceptional items d 35,305 (35,305) -
Depreciation, depletion and a,b,c 1,137 175 1,312
amortisation
Loss on operations d - 34,289 34,289
Finance income (388) - (388)
Finance expense 523 - 523
Income tax expense a 353 (424) (71)
Foreign exchange losses 38 - 38
Cash flows from operating activities (1,393) (1,015) (2,408)
Increase in inventories (5) - (5)
Decrease in trade and other (134) - (134)
receivables
Increase/(decrease) in trade and (1,621) - (1,621)
other payables
Increase in long-term provisions 631 1,015 1,646
Cash generated from operations (2,522) - (2,522)
Income tax paid (353) - (353)
Net cash from operating activities (2,875) - (2,875)
Investing activity
Interest received 388 - 388
Acquisition of subsidiary, net of (19,359) - (19,359)
cash acquired
Expenditure on tangible fixed assets (1,696) - (1,696)
Expenditure on intangible fixed (13,554) - (13,554)
assets
Net cash flows from investing (34,221) - (34,221)
activities
Financing activities
Issue of ordinary share capital 35,429 - 35,429
Exercise of warrants 125 - 125
New loan finance 7,000 - 7,000
Repayment of loan (632) - (632)
Interest paid (468) - (468)
Net cash flows from financing 41,454 - 41,454
activities
Increase in cash and cash equivalents 4,358 - 4,358
Cash at beginning of year 1,294 - 1,294
Cash at end of year 5,652 - 5,652
Consolidated Balance Sheet
As at 1 January 2006
Note UK GAAP Adjustments IFRS
US$'000 US$'000 US$'000
Assets
Non-current assets
Intangible assets 1,412 - 1,412
Property, plant and equipment c 19,870 (249) 19,621
21,282 (249) 21,033
Current assets
Inventories 1,363 - 1,363
Trade and other receivables 1,056 - 1,056
Deferred share costs b 3,216 (3,216) -
Cash and cash equivalents 1,294 - 1,294
6,929 (3,216) 3,713
Total assets 28,211 (3,465) 24,746
Liabilities
Non-current liabilities
Long term provisions 301 - 301
Current liabilities
Trade and other payables 3,657 - 3,657
Total liabilities 3,958 - 3,958
Net assets 24,253 (3,465) 20,788
Equity
Called up share capital 5,496 - 5,496
Share premium account 25,164 - 25,164
Share option reserve 299 - 299
Warrant reserve 140 - 140
Retained losses (6,846) (3,465) (10,311)
Total equity 24,253 (3,465) 20,788
Notes to IFRS Adjustments Reconciliation Statements:
a) Deferred taxation and fair value Oil and Gas assets: Under IAS 12
'Income Taxes': Deferred tax is recognised on temporary differences as
opposed to timing differences as under UK GAAP. For fair value
adjustments to mineral reserves, mineral resources and other property,
plant and equipment acquired in a business combination, the tax base is
normally nil since generally no tax deduction for amortisation is
obtained in the jurisdictions in which the Group operates. Under UK GAAP
no deferred tax liability arose as the non-deductible amortisation was a
permanent difference, however under IFRS the difference between the
carrying amounts and the asset's tax base is treated as a temporary
difference and gives rise to the recognition of a deferred tax
liability. In 2006, the increase in the fair value of oil and gas assets
and the associated deferred tax liability recognised in relation to the
fair value adjustment is approximately US$4.217m, with an associated
increase in the oil and gas depletion charge and defer
b) Discontinued operation - Guatemala: The wholly owned Guatemalan
operation was sold on 23 July 2007 (refer to note 10). The 2006 results
of this operation have been reclassified to discontinued under IFRS 5.
c) Under IFRS 6 'Exploration and Evaluation of Mineral Resources',
pre-licence costs are no longer carried within intangible exploration
costs, but instead are written off to the income statement as incurred.
As a result, the UK GAAP intangible exploration costs of US$0.249m has
been written off to retained earnings at 1 January 2006 with a
corresponding credit to the income statement in the year ended 31
December 2006 where the pre-licence costs were written off under UK
GAAP.
d) Share-based payment charge: Under IFRS 2 'Share-based payments', the
deferred share costs carried in the balance sheet at the transition date
1 January 2006 relate to shares issued on floatation of the Company to
Directors and under service agreements. At 1 January 2006 and in
accordance with IFRS 2 it was necessary to write them off fully during
the year as the services provided therein had been completed. The charge
against the opening reserves totalled US$3.216m.
e) Cash Flow Statement
The presentation of certain items in the cash flow statement prepared
under IAS 7 'Cash Flow Statements' differs to the previous presentation
under UK GAAP.
Under IFRS, cash flows are segregated into three categories: operating,
investing and financing. This differs from UK GAAP which requires
additional sub categories. Foreign currency exchange differences are
also recorded on the face of the cash flow statement under IFRS.
PetroLatina Energy Plc
Company Balance Sheet
For the year ended 31 December 2007
2007 2006
Note US$'000 US$'000
Fixed assets
Tangible assets 4 193 66
Intangible oil and gas assets 5 4,329 1,319
Investments 6 - 21,788
________ ________
4,522 23,173
Current assets
Debtors 7 21,102 735
Cash at bank and in hand 1,791 3,402
_______ _______
22,893 4,137
_______ _______
Current liabilities
Creditors falling due within one year 8 10,560 7,101
_______ _______
Net current assets 12,333 (2,964)
_______ _______
Total net assets 16,855 20,209
_______ _______
Capital and reserves
Called up share capital 9 11,735 11,077
Share premium 10 55,718 55,357
Warrant reserve 10 1,624 1,051
Share option reserve 10 - 314
Shares to be issued 10 4,560 -
Profit and loss account 10 (56,782) (47,590)
_______ _______
Shareholders' funds 16,855 20,209
_______ _______
The financial statements were approved by the Board of Directors and authorised for issue on 11 July 2008
This information is provided by RNS
The company news service from the London Stock Exchange
END
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