TIDMVPC
RNS Number : 9245O
Venture Production plc
17 March 2009
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17 March 2009
Venture Production plc
('Venture', 'the Company' or 'the Group')
Preliminary Results for the year ended 31 December 2008
Venture is an Aberdeen based UK independent oil and gas company focused on the
UK and Dutch sectors of the North Sea. Venture's strategy is to acquire, develop
and bring into production discovered but undeveloped oil and gas fields,
collectively known as 'stranded' reserves.
Financial Highlights
Record financial performance and cash flow generation:
· Revenue up 38% to GBP494.9 million (2007: GBP358.3 million) - higher
production volumes and commodity prices
· Operating profit up 98% to GBP231.1 million (2007: GBP116.6 million)
· Cash flow from operating activities up 27% to GBP305.0 million (2007: GBP240.2
million)
· Profit after tax for the financial year up 59% to GBP76.7 million (2007:
GBP48.2 million)
· 8% increase in proposed Ordinary Final Dividend to 13p for the year
Operational Highlights
Strong underlying progress across all areas of the business:
· Average production increased 9% to 45,006 boepd (2007: 41,228 boepd):
· Large and complex development programme successfully completed:
+---------+----------------------------------------------------------------------------------------------------+
| - | Three new fields on stream |
+---------+----------------------------------------------------------------------------------------------------+
| - | Six new wells drilled (all successful) setting up 2009/10 development programme |
+---------+----------------------------------------------------------------------------------------------------+
· Year-end proven and probable ('2P') reserves of 214.0 MMboe (2007: 203.0
MMboe) - three year average reserves replacement ratio of 200%
Corporate Development and Outlook
Positioned for the next phase of growth:
· Strong financial position and liquidity
· 13 acquisitions and farm-ins during 2008:
+---------+----------------------------------------------------------------------------------------------------------------------+
| - | Addition of over 43 MMboe of P50 resources in discoveries with almost half already booked as 2P |
+---------+----------------------------------------------------------------------------------------------------------------------+
| - | Rapid progress in developing recently acquired assets |
+---------+----------------------------------------------------------------------------------------------------------------------+
· Active drilling programme for 2009:
+---------+----------------------------------------------------------------------------------------------------------------------+
| - | Two successful southern North Sea ('SNS') gas wells drilled already in 2009 (Cygnus and Carna) |
+---------+----------------------------------------------------------------------------------------------------------------------+
| - | 13 additional wells planned over next 18 months |
+---------+----------------------------------------------------------------------------------------------------------------------+
· Active development programme for 2009:
+---------+----------------------------------------------------------------------------------------------------------+
| - | Chiswick Phase 2 and F3-FA development sanctioned |
+---------+----------------------------------------------------------------------------------------------------------+
Commenting on the results, Mike Wagstaff, Chief Executive of Venture said:
'After a challenging start to 2008, Venture delivered increased production
levels which combined with high oil and gas prices resulted in record financial
performance. 2008 was a very good year across all key areas of our business;
production, development, drilling and acquisitions.
In the second half of the year we brought three new field developments on
stream. This positions us well for 2009 and our active drilling and development
programme will continue to drive growth and the current year has got off to an
excellent start with two successful southern North Sea gas wells already
drilled. Record levels of acquisition activity in 2008 have significantly
strengthened our asset base for the longer term and we are rapidly moving these
newly acquired assets towards development.
In addition to the cash flow generation from our existing production, we have a
strong balance sheet with significant capital resources available both to
finance our drilling and development programme as well as take advantage of
acquisition opportunities thrown up by current market conditions. As a result we
are well placed in the current challenging economic conditions and uncertain
commodity price outlook.'
Enquiries:
+-------------------------------------------+---------------------------+
| VENTURE PRODUCTION plc | 01224 619 000 |
+-------------------------------------------+---------------------------+
| Mike Wagstaff, Chief Executive | |
+-------------------------------------------+---------------------------+
| Peter Turner, Finance Director | |
+-------------------------------------------+---------------------------+
| BRUNSWICK GROUP LLP | 020 7404 5959 |
+-------------------------------------------+---------------------------+
| Patrick Handley | |
+-------------------------------------------+---------------------------+
| Nina Soon | |
+-------------------------------------------+---------------------------+
| WEBER SHANDWICK | 07770 886912 |
+-------------------------------------------+---------------------------+
| John MacDonald | |
+-------------------------------------------+---------------------------+
Chairman and Chief Executive's Review
After a challenging start to 2008, Venture delivered strong progress across all
key areas of its business; production, development, drilling and acquisitions.
We continued the development of our North Sea asset base, participating in the
drilling of six new wells, bringing three new fields on stream and successfully
completing some of the largest and most complex projects in the Company's
history. We also announced 13 new acquisitions and farm-ins which, in aggregate,
more than replaced 2008 production.
Average net daily production for 2008 was 45,006 barrels of oil equivalent per
day ('boepd'). This represented an increase of 9% over 2007 and set a new record
for annual average production. This growth was driven by a combination of strong
underlying reservoir and well performance from our core producing fields, a full
year's contribution from the Chiswick gas field which came on stream in 2007 and
production from three new field developments. Partially offsetting this was
higher than anticipated downtime on the Greater Kittiwake Area ('GKA') and
natural decline in our producing fields. Elsewhere in the portfolio Annabel,
Saturn and Goosander all continued to outperform expectations. Our SNS gas
fields contributed 66% of total 2008 Group production with the balance coming
from Venture's central North Sea ('CNS') oil fields.
During 2008, Venture has continued to build its business through continued
execution of our chosen strategy, summarised as follows:
* The acquisition, development and production of proved but under-exploited oil
and gas fields, known
as 'stranded' reserves;
* Geographic focus as a North Sea acquisition, development and production company;
* Continuing development of our portfolio which includes interests in over 50
North Sea proven oil and
gas fields, less than half of which are currently
in production;
* Leveraging Venture's substantial operational and development expertise to
continue to give us a real
and sustainable competitive advantage as an
efficient and focused low cost operator;
* Utilising our very valuable long term strategic relationships with our key
contractors which helps to
ensure access to critical equipment and services;
and
* Maintaining a strong balance sheet and financial flexibility to continue to
invest through the cycle and
capitalise on opportunities delivering both
organic and acquisitive growth.
At 31 December 2008, net proven and probable reserves were estimated to total
214 million barrels of oil equivalent ('MMboe') which represents a 5% increase
over 2007. This growth is the result of both organic reserves additions from
positive drilling results and strong production performance together with the
acquisition of additional reserves during 2008. In aggregate, these two factors
enabled us to more than offset production during 2008. As a result, Venture's
reserve replacement including acquisitions amounted to 166% of production for
2008 and for the last three years averaged 200%
Financial Results
The average realised sales price of GBP33.58/boe represented a 30% increase over
the prior year (2007: GBP25.91/boe). This higher overall average realised price
was the result of substantially higher oil prices especially in the first half
of the year and strong UK gas markets during the year. Higher production and
sales volumes combined with higher realised prices to generate record turnover
for the year at GBP494.9 million (2007: GBP358.3 million).
As a result, pre-tax profit increased by 82% to GBP184.2 million (2007: GBP101.2
million). Venture recorded a net profit after tax of GBP76.7 million (2007:
GBP48.2 million).
During 2008 Venture's cash flow from operating activities increased by 27% to
GBP305.0 million (2007: GBP240.2 million). As in the previous two years,
Venture's operating cash flow exceeded cash used in investing activities
(excluding acquisitions).
As a result of the major refinancing completed during 2007, Venture has a strong
balance sheet with a year end cash balance of approximately GBP200 million and a
substantially unutilised GBP365 million credit facility. This financial strength
positions the Company well both to continue to invest in its own business and
take advantage of corporate and asset acquisition opportunities.
Operational Overview
During 2008, Venture continued the development of its North Sea asset base,
participating in the drilling of six new wells and bringing three new fields on
stream, Chestnut, Stamford and Grouse.
Average net daily production for 2008 was 45,006 boepd, an increase of 9% over
2007. During 2008 we saw strong performance across all of Venture's production
hubs.
'A' Fields and UK SNS
Venture's 'A' Fields gas production hub in the SNS continued to be our largest
production contributor with annual average production of 16,413 boepd or 36.5%
of total Group production (2007: 20,367 boepd or 49.4%). During the year, we
again saw strong performance from both Annabel (Venture - 100%) and Saturn Unit
(Venture - 22%) although average production volumes fell due to natural field
decline.
The Noble Julie Robertson ('NJR') jack-up drilling rig continued to operate for
Venture in the SNS under a long term contract which will run until late 2010.
2008 operated SNS drilling activity focused largely on appraisal activity. The
Ensign appraisal well (Venture - 100%) was successfully completed and tested
early in the year and since then we have been pushing forward development of the
field. Unfortunately, commercial discussions with neighbouring infrastructure
owners are progressing more slowly than anticipated.
An extensive seismic re-interpretation of the entire 'A' Fields area has
identified a number of attractive low risk step-out appraisal and exploration
opportunities which Venture is planning to test over the next 18 months. During
the first half of 2009, we are planning to drill an exploration well on the
Andrea exploration prospect in Block 48/15b and an appraisal well on the Annabel
East field extension. We are also planning to drill an exploration well in the
Greater Adele area during 2010. In aggregate these wells could add several
hundred billion cubic feet ('Bcf') of gas reserves lying close to Venture's
existing production infrastructure, thereby enabling them to be rapidly
developed.
Also during 2008, Venture successfully drilled, tested and completed the
Barbarossa (now renamed Ceres) appraisal well (Venture - 90%) at a flow rate of
approximately 40 million cubic feet per day ("MMcfpd"), towards the top end of
expectations. Ceres will be developed jointly with the adjacent Channon (now
renamed Eris) gas discovery (Venture - 55.8%) made during 2007 as a sub-sea
tieback to nearby infrastructure. We have now completed most of the subsea
construction work for the fields and first gas is anticipated during late 2009.
In 2008, Venture made two separate acquisitions of interests in a number of
discoveries around the Caister Murdoch gathering system ('CMS') in Quad 44. The
most significant of these discoveries is undoubtedly the large Cygnus discovery
located in Blocks 44/11 and 44/12 (Venture - 48.75%). A two well appraisal
programme commenced in late 2008 and is designed to firm up the long term
development of the field, which is one of the largest undeveloped discoveries in
the UK SNS. The first of these two wells was completed in February 2009 and
delivered results in excess of expectations. The second Cygnus appraisal well is
currently drilling.
In late 2008, Venture commenced exploration drilling on the acreage acquired
with WHAM Energy in 2007 with the drilling of the Carna exploration well in
Block 42/21b. The well encountered a gas bearing carboniferous reservoir which
is currently being production tested. Over the next 18 months we anticipate a
more active exploration programme on this acreage with the drilling of up to
three wells across the Alcyone, Andromeda and Morpheus prospects.
Greater Markham Area ('GMA')
The GMA production hub, which straddles the median line between the UK and Dutch
sectors of the North Sea, contributed 12,711 boepd or 28.2% of Group total
production (2007 - 4,506 boepd and 10.9%). This increase was the result of a
full year's contribution from the Chiswick gas field (Venture - 100%) which came
on stream during the fourth quarter of 2007.
During the first half of 2008, Venture completed the first phase of the
development of the Chiswick field with the drilling of the Chiswick Gamma
production well. The well was drilled as a high angle hydraulically fractured
well and was brought on stream during February. Since then the well's
productivity and overall field performance has been better than anticipated,
which, combined with a major subsurface study of the field has led to a
significant increase in estimated recoverable reserves.
In early 2009, Venture sanctioned the second phase of the Chiswick field
development which will involve the drilling of up to five incremental production
wells. The first two of these are scheduled to be drilled during late 2009 and
the first half of 2010.
During 2008, the development of the Stamford field (Venture - 100%) as a sub-sea
satellite to the Venture operated Markham facilities was sanctioned. The
Stamford production well was drilled during the third quarter and came on stream
during December. While small, the Stamford project demonstrates Venture's
ability to rapidly develop these types of opportunities.
In late 2008, Venture commenced drilling an appraisal well on the Kew discovery
located close to the Markham production facilities. Results from this well are
expected in the next few weeks.
In late 2008, Venture acquired operated interests in three undeveloped gas
discoveries in Quadrants A, B and F in the northern part of the Dutch sector,
thereby expanding Venture's footprint in the Netherlands offshore sector. The
first of these discoveries, F3-FA (Venture - 58% estimated subject to
unitisation), has moved rapidly towards development. The field development plan
involves construction and installation of a self installed production platform
('SIP') tied into the regional transportation facilities with first gas
production expected during winter 2010/11.
Greater Kittiwake Area ('GKA')
The GKA production hub (Venture operated - 50%) contributed 7,902 boepd or 17.5%
of Group total production during the period (2007 - 9,115 boepd and 22.1%).
During 2008, overall production was in line with expectations and benefited from
higher uptime performance as a result of the 2007 installation of the pipeline
linking Kittiwake to the Forties Pipeline System. Continued strong performance
from Goosander was offset by scaling issues on the Mallard production well which
was shut-in for a significant part of the year pending a rig-based workover. The
workover was successfully completed and production was restored during December.
GKA development activity during the period has focused on the development of the
Grouse field, on which a successful appraisal well was drilled during late 2007.
Field development as a sub-sea tieback to Kittiwake was sanctioned during 2008
and the field was brought on stream in late December.
Longer term, with the acquisition of an additional interest and operatorship in
the Bligh gas/condensate discovery (Venture - 31%), Venture is looking towards
the appraisal and subsequent development of the Bligh and Christian fields
located to the south east of the Kittiwake field.
'Trees'
During 2008, the 'Trees' production hub (Venture - 100%) produced at an average
rate of 4,618 boepd or 10.3% of Group total production (2007 - 6,674 boepd and
16.2%). 'Trees' production was steady and in line with expectations during the
period and lower production volumes were the result of natural field decline.
Activity on 'Trees' has focused on ongoing sub-surface work to refine our
understanding of the Birch, Larch and Sycamore reservoirs and to identify
additional investment opportunities.
Other Central North Sea ('CNS')
Development activity elsewhere in our CNS portfolio has focused on the hook-up
and commissioning of the Chestnut field (Venture - 69.875%) and the field was
successfully brought on stream in late September. Since start-up we have seen
good reservoir and facilities performance with gross production rates in excess
of 10,000 boepd. The field contributed 2,452 boepd of annualised average
production or 5.4% of Group total production.
As a result of ongoing sub-surface work on the Chestnut field, Venture
identified the opportunity to drill an additional production well on the field
to boost field recovery. This incremental project, known as Chestnut P2, was
sanctioned during the first half of 2008 and the well was successfully drilled
utilising the Noble Ton van Langeveld ('NTvL') semi-submersible drilling rig
during the third quarter of 2008. Sub-sea tie in of the P2 development well was
completed in February 2009 and the well is expected to be brought on stream
shortly. As a result of good field performance and the results of the second
production well, estimates of the field's recoverable reserves have increased
materially.
In August 2008, the previously shut-in Halley oil field (Venture - 40%) was
restored to production on an extended well test basis. This field, which was
originally developed using a well drilled from the Fulmar platform and shut-in
during 2004, was returned to production with minimal investment. The initial
production performance has been encouraging at about 800 boepd net to Venture,
with the field contributing 382 boepd toward our 2008 annualised production or
0.9% of Group total production. The well performance will be evaluated to
determine redevelopment options which include the potential drilling of a
further appraisal well on the field. A subsea well to appraise the Halley 'Delta
West' area of the field is planned to be drilled during the second half of 2009.
In addition, Venture plans to drill an appraisal well on the Acorn oil discovery
(Venture - 100% post withdrawal by other partners), during 2010.
East Irish Sea ('EIS')
During 2008, Venture established a larger position in the EIS and has moved the
Marram appraisal (Venture - 60%) and Whitbeck exploration projects (Venture -
70%) forward. We are scheduled to drill wells on both opportunities during 2009.
Trinidad
Venture retains a 40% shareholding in Ten Degrees North Energy Limited (TDN), an
oil and gas production company based and registered in Trinidad. TDN produced an
average of 1,320 boepd (528 boepd net) during 2008 (2007: 566 boepd)
which represents 1.2% of total Group production.
Corporate and Business Development
2008 proved to be a very busy year for new business development. In total we
completed 13 acquisitions and farm-ins which both increased our position in a
number of existing assets and expanded Venture's business into several new areas
including the CMS area, the EIS and the northern Dutch Sector. Importantly, we
have been able to move forward rapidly the appraisal and development of a number
of these assets post?acquisition. As a result of 2008 acquisition and farm-in
activity we now have interests in 11 additional discoveries and three
exploration prospects, the majority of which have wells scheduled in 2009 and
2010. In addition, through the acquisition of the remaining 5% interest in Block
49/4a that it did not own, Venture increased its interest in the producing
Chiswick field to 100%.
Discoveries
During the year, we added interests in a wide range of already discovered oil
and gas fields.
In January 2008, Venture increased its working interest in the Bligh gas
condensate discovery from 20.7% to 30.5% and took over operatorship. Recent
detailed technical work has increased the expected recoverable volumes from the
field and Venture is planning an appraisal well on the field.
Also in January 2008, Venture reached agreement to farm-in to 60% of the Marram
gas discovery in the EIS. Venture's equity will be earned when an appraisal well
is drilled, expected to be in 2009. In October we subsequently increased our
farmed-in interest to 70%.
In March 2008, Venture acquired an estimated 58% operated interest in the F3-FA
gas discovery for a royalty based consideration. The F3-FA acquisition marked
our first expansion deal in the Dutch sector which was followed by the
acquisition of interests in two additional discoveries in the northern part of
the Dutch sector later in the year.
April saw the announcement of the most significant acquisition of 2008 when we
acquired a package of SNS interests containing six gas discoveries. The most
important of these is the Cygnus field in blocks 44/11a and 44/12a which was
discovered in 1998. The first of two initial appraisal wells was highly
successful in establishing the reserves potential of a second fault block. A
follow-on appraisal well is currently drilling into a third fault block with
results expected during the second quarter of 2009.
In addition to the Cygnus field, the April acquisition added five other gas
discoveries to Venture's SNS portfolio and in October a further acquisition
increased the working interest in four of these. This second transaction took
our non-operated interest in Cygnus to 48.75%.
The final new discoveries to be added came with the October acquisition of two
fields in the northern part of the Dutch offshore sector. These two discoveries,
A15a and B17a, are both potential tie-backs to nearby infrastructure where
either new production has recently commenced or a change in operator has been
announced. As such, they represent potential follow-on development projects for
our Dutch team once the new F3-FA field has been brought into production.
Exploration
Throughout the year, we sought to expand our portfolio of low to medium risk
exploration targets through a series of low cost farm-in deals and acquisitions,
several from existing field partners whose investment priorities had changed.
In January 2008, the Group completed a farm-in and equity swap in the Carna
exploration prospect. Venture increased its equity interest in Carna from 40% to
56% upon drilling of the exploration well.
In March 2008, Venture acquired an interest in the low risk Whitbeck exploration
prospect which lies close to the producing Bains field. Venture is planning to
drill a well on this new EIS prospect during 2009.
As a result of several transactions completed in March and December, Venture
increased its interest in the Morpheus prospect and surrounding acreage to 100%
ahead of drilling in late 2009 or 2010.
25th Licensing Round
Venture was very active in the 25th UK Seaward Licensing Round and the award of
15 licence interests made it the most successful single applicant. In 12 of the
licences awarded Venture will become the operator and it has already made firm
commitments on two wells to be drilled by 2012, both of which will be targeting
oil prospects. Four of the licences awarded already contain existing discoveries
lying close to export infrastructure and across the new portfolio the Venture
team see a mixture of oil and gas, different play types and extensive seismic
re-processing opportunities. In addition, Venture is waiting to hear the result
of its application for a further seven potential additional SNS licences that
have been delayed pending further consideration of environmental issues.
This highly successful participation in the latest licensing round is entirely
in keeping with Venture's position as a leading North Sea development operator
and the additional licence awards serve to deepen its already rich appraisal and
exploration inventory.
Board and Management
In March 2008, we announced the appointment of Andrew Carr-Locke as a new
independent Non-Executive Director. Andrew was formerly Group Finance Director
of George Wimpey plc for six years until June 2007 when the Company merged with
Taylor Woodrow. A Fellow of the Chartered Institute of Cost and Management
Accountants, Andrew has extensive experience of working at a senior level in a
number of high profile roles including Group Finance Director of Courtaulds
Textiles plc, prior to which he was European Finance Director at United
Distillers and Vintners. Andrew also serves on the Audit Committee.
The Board also recently announced that Jon Murphy, Chief Operating Officer
("COO"), has given notice of his resignation in order to develop his career
outside the Group. It is planned that Jon will step down from the Board at the
Annual General Meeting in May and will remain in employment with the Company
until the end of the year. The Board is also very pleased to announce that, in a
planned succession move, Jonathan Roger, currently General Manager Producing
Assets, will replace Jon as COO and be appointed to the Board of Venture
Production plc in May 2009.
Since he joined Venture in March 1999, Jon has been a very important part of the
Venture team that has built the Company from a virtual start-up operating
onshore in Trinidad to one of the largest and most successful independent E&P
companies in the North Sea. The Board would like to thank Jon for his huge
contribution to our success over the last 10 years and wish him good luck in the
future.
Jonathan has 17 years experience in the oil and gas industry and a broad
commercial and technical background. He joined Venture in 2003 and led the
Company's SNS gas business, including expansion into the Dutch sector, following
the acquisition of CH4. In late 2007, Jonathan's role was expanded to cover all
of Venture's producing business units in the North Sea.
Staff and Contractors
2008 was another challenging year due to the scale and complexity of our
development programme and the unanticipated challenges thrown up during the
year. Once again, our people have excelled in delivering an extremely ambitious
drilling and development programme while at the same time maintaining very high
levels of operational, health, safety and environmental performance. The Board
would like to thank all of our staff and contractors for rising to the
challenges we faced and their critical contribution to our continued success.
Capital Return Policy
As an oil and gas production company, Venture is required to maintain high and
sustained levels of capital reinvestment into its business. 2006 represented a
turning point as Venture generated operating cash flow in excess of its
development capital expenditures. As a result of its cash flow generation
momentum and its long-term hedging policy, this situation continued in both 2007
and 2008, despite the continuation of an active drilling and field development
programme and fluctuating commodity prices.
In utilising free cash flow generated by the business, the Board has determined
the following priorities: firstly, re-investment back into its business through
acquisitions or other internally generated investment opportunities; second,
management of the Company's outstanding debt to sustainable long term levels and
third, the return of capital to shareholders that is surplus to anticipated near
term investment requirements. This will be achieved through dividends or other
capital return mechanisms.
In keeping with these priorities and in view of the business' performance during
2008, the Directors have recommended paying an ordinary final dividend of 13
pence per share, an 8% increase over last year.
If approved at the forthcoming Annual General Meeting the final dividend will be
paid on 28 May 2009 to shareholders on the register at the close of business on
24 April 2009, with an ex-dividend date of 22 April 2009.
Going forward, Venture's capital return policy will continue to reflect the
principal uncertainties in its business namely commodity price volatility,
variable capital expenditure requirements and the unpredictable timing of
acquisition opportunities.
Annual General Meeting
The Company will be holding its Annual General Meeting at The Marcliffe Hotel
and Spa, North Deeside Road, Aberdeen on Thursday 14 May 2009 at 2.00pm and the
2008 Annual Report & Accounts, Notice of Meeting and Form of Proxy will be
issued in early April 2009.
Current Trading and Outlook
Overall, during 2008 Venture made excellent progress in a challenging operating
environment and difficult global economic conditions with the Company benefiting
from record cash flow from production operations and a strong balance sheet.
While global oil prices fell significantly during the second half of 2008, the
majority of Venture's production was gas, thereby lessening the impact of oil
price on Venture's financial performance. While UK gas prices have weakened
recently and we anticipate short term volatility, the longer term fundamentals
and overall outlook for gas pricing remains favourable. In addition, we already
have commodity price hedging in place which will protect a significant
proportion of our production during 2009 and 2010.
Venture's balance sheet remains strong, with cash and cash equivalents of
approximately GBP200 million at year end and a fully committed GBP365 million
syndicated corporate bank facility which is as yet undrawn apart from letters of
credit.
Our 2009 capital expenditure programme, excluding acquisitions, is expected to
total approximately GBP300 million and, based on the current commodity price
outlook, is anticipated to be predominately funded out of operating cash flow.
2009 has started well and we are seeing the impact of our 2008 development
projects and the continuing strong underlying performance of our core fields.
During 2009 we also anticipate additional production contributions from the
second Chestnut production well and the Eris and Ceres gas fields. As a result,
in aggregate we expect modest production growth in 2009 over 2008 levels.
The Board is mindful of the very challenging and volatile external economic
conditions and remains focused on preserving flexibility to respond as external
circumstances change. However, as a result of the strong operating performance
of our business combined with our financial position, the Board remains
confident of the outlook for Venture's business in 2009 and beyond.
17 March 2009
John Morgan
Mike Wagstaff
Chairman
Chief Executive
Group Income Statement
For the year ended 31 December 2008
+--------------------------------------+-------+-----------+-----------+
| | | | |
+--------------------------------------+-------+-----------+-----------+
| | | 2008 | 2007 |
+--------------------------------------+-------+-----------+-----------+
| |Notes | GBP'000 | GBP'000 |
+--------------------------------------+-------+-----------+-----------+
| | | | |
+--------------------------------------+-------+-----------+-----------+
| Revenue | 2 | 494,878 | 358,295 |
+--------------------------------------+-------+-----------+-----------+
| Cost of sales | | (248,085) | (171,703) |
+--------------------------------------+-------+-----------+-----------+
| Development costs written off | 3 | - | (11,207) |
+--------------------------------------+-------+-----------+-----------+
| Impairment of assets | 3 | (6,200) | (33,463) |
+--------------------------------------+-------+-----------+-----------+
| | | | |
+--------------------------------------+-------+-----------+-----------+
| Gross profit | | 240,593 | 141,922 |
+--------------------------------------+-------+-----------+-----------+
| | | | |
+--------------------------------------+-------+-----------+-----------+
| Exploration costs written off | 3 | - | (18,144) |
+--------------------------------------+-------+-----------+-----------+
| Administrative expenses | | (9,047) | (8,815) |
+--------------------------------------+-------+-----------+-----------+
| (Loss)/gain on foreign exchange | 3 | (491) | 496 |
+--------------------------------------+-------+-----------+-----------+
| Gain on disposal of subsidiary | 4 | - | 251 |
+--------------------------------------+-------+-----------+-----------+
| Other operating income | | 19 | 929 |
+--------------------------------------+-------+-----------+-----------+
| | | | |
+--------------------------------------+-------+-----------+-----------+
| Operating profit | 3 | 231,074 | 116,639 |
+--------------------------------------+-------+-----------+-----------+
| | | | |
+--------------------------------------+-------+-----------+-----------+
| Finance income | 5 | 4,998 | 4,442 |
+--------------------------------------+-------+-----------+-----------+
| Finance expense | 5 | (39,499) | (19,122) |
+--------------------------------------+-------+-----------+-----------+
| Change in fair value of derivative | 22 | (6,253) | (1,903) |
| financial instruments | | | |
+--------------------------------------+-------+-----------+-----------+
| Share of (loss)/profit of associates | 12 | (6,131) | 1,151 |
+--------------------------------------+-------+-----------+-----------+
| | | | |
+--------------------------------------+-------+-----------+-----------+
| Profit before tax | | 184,189 | 101,207 |
+--------------------------------------+-------+-----------+-----------+
| | | | |
+--------------------------------------+-------+-----------+-----------+
| Income tax expense | 6 | (107,533) | (53,032) |
+--------------------------------------+-------+-----------+-----------+
| | | | |
+--------------------------------------+-------+-----------+-----------+
| Profit for the financial year | | 76,656 | 48,175 |
+--------------------------------------+-------+-----------+-----------+
| | | | |
+--------------------------------------+-------+-----------+-----------+
| Earnings per ordinary share | | | |
+--------------------------------------+-------+-----------+-----------+
| Basic earnings per share | 7 | 52.7p | 35.6p |
+--------------------------------------+-------+-----------+-----------+
| Diluted earnings per share | 7 | 50.5p | 33.9p |
+--------------------------------------+-------+-----------+-----------+
| Dividends paid per ordinary share | | | |
+--------------------------------------+-------+-----------+-----------+
| Special dividend paid per share | 8 | - | 40.0p |
+--------------------------------------+-------+-----------+-----------+
| Ordinary dividend paid per share | 8 | 12.0p | 10.0p |
+--------------------------------------+-------+-----------+-----------+
All items dealt with in arriving at the profit for the year relate to continuing
activities.
Statement of Recognised Income and Expense
For the year ended 31 December 2008
+-------------------------------+----------+----------+----------+----------+
| | Group | Company |
+-------------------------------+---------------------+---------------------+
| | 2008 | 2007 | 2008 | 2007 |
+-------------------------------+----------+----------+----------+----------+
| | GBP'000 | GBP'000 | GBP'000 | GBP'000 |
+-------------------------------+----------+----------+----------+----------+
| Profit for the financial year | 76,656 | 48,175 | 33,060 | 105,527 |
+-------------------------------+----------+----------+----------+----------+
| | | | | |
+-------------------------------+----------+----------+----------+----------+
| Cash flow hedges: | | | | |
+-------------------------------+----------+----------+----------+----------+
| - Fair value | 30,078 | (42,453) | - | - |
| gains/(losses) net | | | | |
| of tax (Note 26) | | | | |
+-------------------------------+----------+----------+----------+----------+
| -Reclassified and | 24,637 | (3,427) | - | - |
| reported in net | | | | |
| profit (Note 26) | | | | |
+-------------------------------+----------+----------+----------+----------+
| | | | | |
+-------------------------------+----------+----------+----------+----------+
| Total recognised income for | 131,371 | 2,295 | 33,060 | 105,527 |
| the year | | | | |
+-------------------------------+----------+----------+----------+----------+
Group Balance Sheet
As at 31 December 2008
+--------------------------------------+-------+-------------+-------------+
| | | | |
+--------------------------------------+-------+-------------+-------------+
| | | 2008 | 2007 |
+--------------------------------------+-------+-------------+-------------+
| |Notes | GBP'000 | GBP'000 |
+--------------------------------------+-------+-------------+-------------+
| Assets | | | |
+--------------------------------------+-------+-------------+-------------+
| Non-current assets | | | |
+--------------------------------------+-------+-------------+-------------+
| Property, plant and equipment | 10 | 1,024,261 | 818,648 |
+--------------------------------------+-------+-------------+-------------+
| Intangible assets | 11 | 53,291 | 53,291 |
+--------------------------------------+-------+-------------+-------------+
| Investments accounted for using the | 12 | 33,409 | 16,341 |
| equity method | | | |
+--------------------------------------+-------+-------------+-------------+
| Convertible loan notes receivable | 15 | 7,528 | 5,383 |
+--------------------------------------+-------+-------------+-------------+
| Derivative financial instruments | 22 | 27,358 | - |
+--------------------------------------+-------+-------------+-------------+
| | | 1,145,847 | 893,663 |
+--------------------------------------+-------+-------------+-------------+
| Current assets | | | |
+--------------------------------------+-------+-------------+-------------+
| Inventories | 14 | 4,552 | 1,721 |
+--------------------------------------+-------+-------------+-------------+
| Trade and other receivables | 15 | 118,916 | 107,324 |
+--------------------------------------+-------+-------------+-------------+
| Derivative financial instruments | 22 | 21,712 | 498 |
+--------------------------------------+-------+-------------+-------------+
| Cash and cash equivalents | 16 | 207,969 | 158,445 |
+--------------------------------------+-------+-------------+-------------+
| | | 353,149 | 267,988 |
+--------------------------------------+-------+-------------+-------------+
| | | | |
+--------------------------------------+-------+-------------+-------------+
| Total assets | | 1,498,996 | 1,161,651 |
+--------------------------------------+-------+-------------+-------------+
| | | | |
+--------------------------------------+-------+-------------+-------------+
| Liabilities | | | |
+--------------------------------------+-------+-------------+-------------+
| Current liabilities | | | |
+--------------------------------------+-------+-------------+-------------+
| Trade and other payables | 17 | (152,950) | (118,824) |
+--------------------------------------+-------+-------------+-------------+
| Derivative financial instruments | 22 | (13,386) | (36,992) |
+--------------------------------------+-------+-------------+-------------+
| Income taxes payable | | (974) | (15,062) |
+--------------------------------------+-------+-------------+-------------+
| Financial liabilities - bank | 18 | (9,017) | - |
| overdraft | | | |
+--------------------------------------+-------+-------------+-------------+
| | | (176,327) | (170,878) |
+--------------------------------------+-------+-------------+-------------+
| Net current assets | | 176,822 | 97,110 |
+--------------------------------------+-------+-------------+-------------+
| | | | |
+--------------------------------------+-------+-------------+-------------+
| Non-current liabilities | | | |
+--------------------------------------+-------+-------------+-------------+
| Financial liabilities - borrowings | 18 | (456,445) | (398,322) |
+--------------------------------------+-------+-------------+-------------+
| Derivative financial instruments | 22 | - | (30,999) |
+--------------------------------------+-------+-------------+-------------+
| Deferred income tax liabilities | 19 | (343,924) | (200,445) |
+--------------------------------------+-------+-------------+-------------+
| Other non-current liabilities | 20 | (14,113) | (9,392) |
+--------------------------------------+-------+-------------+-------------+
| Provisions | 21 | (83,669) | (70,425) |
+--------------------------------------+-------+-------------+-------------+
| | | (898,151) | (709,583) |
+--------------------------------------+-------+-------------+-------------+
| | | | |
+--------------------------------------+-------+-------------+-------------+
| Total liabilities | | (1,074,478) | (880,461) |
+--------------------------------------+-------+-------------+-------------+
| | | | |
+--------------------------------------+-------+-------------+-------------+
| Net assets | | 424,518 | 281,190 |
+--------------------------------------+-------+-------------+-------------+
| | | | |
+--------------------------------------+-------+-------------+-------------+
| Shareholders' equity | | | |
+--------------------------------------+-------+-------------+-------------+
| Called up share capital | 23 | 599 | 573 |
+--------------------------------------+-------+-------------+-------------+
| Share premium | 24 | 136,242 | 107,207 |
+--------------------------------------+-------+-------------+-------------+
| Other reserves | 26 | 161,206 | 105,070 |
+--------------------------------------+-------+-------------+-------------+
| Retained earnings | 25 | 126,471 | 68,340 |
+--------------------------------------+-------+-------------+-------------+
| | | | |
+--------------------------------------+-------+-------------+-------------+
| Total shareholders' equity | | 424,518 | 281,190 |
+--------------------------------------+-------+-------------+-------------+
The financial statements on pages 11 to 52 were approved by the Board of
Directors on 16 March 2009 and were signed on its behalf by:
Mike Wagstaff
Peter Turner
Chief Executive
Finance Director
Company Balance Sheet
As at 31 December 2008
+-------------------------------------+-------+---------------------+---------------------+
| | | 2008 | 2007 |
+-------------------------------------+-------+---------------------+---------------------+
| |Notes | GBP'000 | GBP'000 |
+-------------------------------------+-------+---------------------+---------------------+
| Assets | | | |
+-------------------------------------+-------+---------------------+---------------------+
| Non-current assets | | | |
+-------------------------------------+-------+---------------------+---------------------+
| Property, plant and equipment | 10 | 372 | 457 |
+-------------------------------------+-------+---------------------+---------------------+
| Investments in subsidiaries | 12 | 530,717 | 427,269 |
+-------------------------------------+-------+---------------------+---------------------+
| Deferred tax assets | 19 | 6,941 | 1,019 |
+-------------------------------------+-------+---------------------+---------------------+
| Amounts due from subsidiary | 15 | 42,634 | 153,247 |
| undertakings | | | |
+-------------------------------------+-------+---------------------+---------------------+
| | | 580,664 | 581,992 |
+-------------------------------------+-------+---------------------+---------------------+
| Current assets | | | |
+-------------------------------------+-------+---------------------+---------------------+
| Trade and other receivables | 15 | 10,801 | 346 |
+-------------------------------------+-------+---------------------+---------------------+
| Cash and cash equivalents | 16 | 207,969 | 154,620 |
+-------------------------------------+-------+---------------------+---------------------+
| Derivative financial instruments | 22 | - | 498 |
+-------------------------------------+-------+---------------------+---------------------+
| | | 218,770 | 155,464 |
+-------------------------------------+-------+---------------------+---------------------+
| | | | |
+-------------------------------------+-------+---------------------+---------------------+
| Total assets | | 799,434 | 737,456 |
+-------------------------------------+-------+---------------------+---------------------+
| | | | |
+-------------------------------------+-------+---------------------+---------------------+
| Liabilities | | | |
+-------------------------------------+-------+---------------------+---------------------+
| Current liabilities | | | |
+-------------------------------------+-------+---------------------+---------------------+
| Trade and other payables | 17 | (9,273) | (15,828) |
+-------------------------------------+-------+---------------------+---------------------+
| Derivative financial instruments | 22 | (5,753) | - |
+-------------------------------------+-------+---------------------+---------------------+
| Financial liabilities - bank | 18 | (21,276) | (50,486) |
| overdraft | | | |
+-------------------------------------+-------+---------------------+---------------------+
| | | (36,302) | (66,314) |
+-------------------------------------+-------+---------------------+---------------------+
| Net current assets | | 182,468 | 89,150 |
+-------------------------------------+-------+---------------------+---------------------+
| | | | |
+-------------------------------------+-------+---------------------+---------------------+
| Non-current liabilities | | | |
+-------------------------------------+-------+---------------------+---------------------+
| Financial liabilities - borrowings | 18 | (456,445) | (398,322) |
+-------------------------------------+-------+---------------------+---------------------+
| | | (456,445) | (398,322) |
+-------------------------------------+-------+---------------------+---------------------+
| | | | |
+-------------------------------------+-------+---------------------+---------------------+
| Total liabilities | | (492,747) | (464,636) |
+-------------------------------------+-------+---------------------+---------------------+
| | | | |
+-------------------------------------+-------+---------------------+---------------------+
| Net assets | | 306,687 | 272,820 |
+-------------------------------------+-------+---------------------+---------------------+
| | | | |
+-------------------------------------+-------+---------------------+---------------------+
| Shareholders' equity | | | |
+-------------------------------------+-------+---------------------+---------------------+
| Called up share capital | 23 | 599 | 573 |
+-------------------------------------+-------+---------------------+---------------------+
| Share premium | 24 | 136,242 | 107,207 |
+-------------------------------------+-------+---------------------+---------------------+
| Other reserves | 26 | 128,093 | 139,146 |
+-------------------------------------+-------+---------------------+---------------------+
| Retained earnings | 25 | 41,753 | 25,894 |
+-------------------------------------+-------+---------------------+---------------------+
| | | | |
+-------------------------------------+-------+---------------------+---------------------+
| Total shareholders' equity | | 306,687 | 272,820 |
+-------------------------------------+-------+---------------------+---------------------+
The financial statements on pages 11 to 52 were approved by the Board of
Directors on 16 March 2009 and were signed on its behalf by:
Mike Wagstaff
Peter Turner
Chief Executive
Finance Director
Group Cash Flow Statement
For the year ended 31 December 2008
+---------------------------------------+-----------+-------------+------------+
| | | 2008 | 2007 |
+---------------------------------------+-----------+-------------+------------+
| | Notes | GBP'000 | GBP'000 |
+---------------------------------------+-----------+-------------+------------+
| | | | |
+---------------------------------------+-----------+-------------+------------+
| Cash flows from operating | | | |
| activities | | | |
+---------------------------------------+-----------+-------------+------------+
| Operating cash flow | 27 | 350,778 | 263,610 |
+---------------------------------------+-----------+-------------+------------+
| Interest received | | 4,920 | 4,174 |
+---------------------------------------+-----------+-------------+------------+
| Interest paid | | (20,813) | (11,534) |
+---------------------------------------+-----------+-------------+------------+
| Income tax paid | | (29,932) | (16,006) |
+---------------------------------------+-----------+-------------+------------+
| Net cash generated from operating | | 304,953 | 240,244 |
| activities | | | |
+---------------------------------------+-----------+-------------+------------+
| | | | |
+---------------------------------------+-----------+-------------+------------+
| Cash flows from investing | | | |
| activities | | | |
+---------------------------------------+-----------+-------------+------------+
| Purchase of property, plant and | | (279,657) | (242,033) |
| equipment | | | |
+---------------------------------------+-----------+-------------+------------+
| Acquisition of subsidiaries (net | | (1,074) | 14,166 |
| of cash acquired) | | | |
+---------------------------------------+-----------+-------------+------------+
| Sale of subsidiary (net of cash | 4 | - | 1,800 |
| disposed) | | | |
+---------------------------------------+-----------+-------------+------------+
| Proceeds from disposal of | 10 | 3,010 | 2,494 |
| property, plant and equipment | | | |
+---------------------------------------+-----------+-------------+------------+
| Investments in joint ventures and | 12 | (23,199) | - |
| associates | | | |
+---------------------------------------+-----------+-------------+------------+
| Payments made for decommissioning | | (3,006) | - |
| liabilities | | | |
+---------------------------------------+-----------+-------------+------------+
| Net cash used in investing | | (303,926) | (223,573) |
| activities | | | |
+---------------------------------------+-----------+-------------+------------+
| | | | |
+---------------------------------------+-----------+-------------+------------+
| Cash flows from financing | | | |
| activities | | | |
+---------------------------------------+-----------+-------------+------------+
| Shares acquired by Employee | 26 | (6,000) | (7,920) |
| Benefit Trust | | | |
+---------------------------------------+-----------+-------------+------------+
| Purchase of treasury shares | | - | (15,817) |
+---------------------------------------+-----------+-------------+------------+
| Disposal of treasury shares | | - | 348 |
+---------------------------------------+-----------+-------------+------------+
| Proceeds from borrowings | | - | 386,161 |
+---------------------------------------+-----------+-------------+------------+
| Repayments of borrowings | | - | (216,120) |
+---------------------------------------+-----------+-------------+------------+
| Dividends paid to shareholders | 8 | (17,201) | (67,566) |
+---------------------------------------+-----------+-------------+------------+
| Proceeds from issuance of | | - | 2,132 |
| ordinary shares | | | |
+---------------------------------------+-----------+-------------+------------+
| Proceeds from exercise of share | | 61 | 386 |
| options | | | |
+---------------------------------------+-----------+-------------+------------+
| Net cash (used in)/generated from | | (23,140) | 81,604 |
| financing activities | | | |
+---------------------------------------+-----------+-------------+------------+
| | | | |
+---------------------------------------+-----------+-------------+------------+
| Net (decrease)/increase in cash | | (22,113) | 98,275 |
| and cash equivalents | | | |
+---------------------------------------+-----------+-------------+------------+
| Opening cash and cash equivalents | | 158,445 | 60,170 |
+---------------------------------------+-----------+-------------+------------+
| Effect of foreign exchange rate | 27 | 62,620 | - |
| changes | | | |
+---------------------------------------+-----------+-------------+------------+
| Closing cash and cash equivalents | 16 | 198,952 | 158,445 |
+---------------------------------------+-----------+-------------+------------+
Company Cash Flow Statement
For the year ended 31 December 2008
+----------------------------------------+-----------+------------+------------+
| | | 2008 | 2007 |
+----------------------------------------+-----------+------------+------------+
| | Notes | GBP'000 | GBP'000 |
+----------------------------------------+-----------+------------+------------+
| | | | |
+----------------------------------------+-----------+------------+------------+
| Cash flows from operating | | | |
| activities | | | |
+----------------------------------------+-----------+------------+------------+
| Operating cash outflow | 27 | (17,160) | (12,796) |
+----------------------------------------+-----------+------------+------------+
| Interest received | | 1,980 | 4,147 |
+----------------------------------------+-----------+------------+------------+
| Interest paid | | (20,813) | (10,437) |
+----------------------------------------+-----------+------------+------------+
| Net cash used in operating | | (35,993) | (19,086) |
| activities | | | |
+----------------------------------------+-----------+------------+------------+
| | | | |
+----------------------------------------+-----------+------------+------------+
| Cash flows from investing | | | |
| activities | | | |
+----------------------------------------+-----------+------------+------------+
| Purchase of property, plant and | | - | (60) |
| equipment | | | |
+----------------------------------------+-----------+------------+------------+
| Disposal of investment in | | - | 11,496 |
| associate | | | |
+----------------------------------------+-----------+------------+------------+
| Investments in subsidiaries | 12 | (150,000) | (226,019) |
+----------------------------------------+-----------+------------+------------+
| Repayments of loans by | | 228,391 | 212,099 |
| subsidiaries | | | |
+----------------------------------------+-----------+------------+------------+
| Net cash generated from/(used in) | | 78,391 | (2,484) |
| investing activities | | | |
+----------------------------------------+-----------+------------+------------+
| | | | |
+----------------------------------------+-----------+------------+------------+
| Cash flows from financing | | | |
| activities | | | |
+----------------------------------------+-----------+------------+------------+
| Shares acquired by Employee | 26 | (6,000) | (7,920) |
| Benefit Trust | | | |
+----------------------------------------+-----------+------------+------------+
| Purchase of treasury shares | | - | (15,817) |
+----------------------------------------+-----------+------------+------------+
| Disposal of treasury shares | | - | 348 |
+----------------------------------------+-----------+------------+------------+
| Proceeds from borrowings | | - | 386,161 |
+----------------------------------------+-----------+------------+------------+
| Repayments of borrowings | | - | (216,120) |
+----------------------------------------+-----------+------------+------------+
| Dividends paid to shareholders | 8 | (17,201) | (67,566) |
+----------------------------------------+-----------+------------+------------+
| Proceeds from issuance of ordinary | | - | 2,132 |
| shares | | | |
+----------------------------------------+-----------+------------+------------+
| Proceeds from exercise of share | | 61 | 386 |
| options | | | |
+----------------------------------------+-----------+------------+------------+
| Net cash (used in)/generated from | | (23,140) | 81,604 |
| financing activities | | | |
+----------------------------------------+-----------+------------+------------+
| | | | |
+----------------------------------------+-----------+------------+------------+
| Net increase in cash and cash | | 19,258 | 60,034 |
| equivalents | | | |
+----------------------------------------+-----------+------------+------------+
| Opening cash and cash equivalents | | 104,134 | 44,100 |
+----------------------------------------+-----------+------------+------------+
| Effect of foreign exchange rate | 27 | 63,301 | - |
| changes | | | |
+----------------------------------------+-----------+------------+------------+
| Closing cash and cash equivalents | 16 | 186,693 | 104,134 |
+----------------------------------------+-----------+------------+------------+
Notes to the Financial Statements
1. Accounting Policies for the year ended 31 December 2008
Basis of Preparation
These financial statements have been prepared in accordance with IFRS and IFRIC
interpretations endorsed by the European Union (EU) and with those parts of the
Companies Act 1985, applicable to companies reporting under IFRS. The financial
statements have been prepared under the historical cost convention as modified
by the revaluation of certain financial assets and liabilities (including
derivative instruments). A summary of the more important Group accounting
policies is set out below, together with an explanation of where changes have
been made to previous policies on the adoption of new accounting standards in
the year.
Critical Estimates and Judgements
The preparation of financial statements requires the use of estimates and
assumptions that affect the reported amount of assets and liabilities at the
date of the financial statements and the reporting amount of income and expenses
during the year. Although these estimates are based on management's best
knowledge of the amount, event or actions, actual results ultimately may differ
from those estimates.
The main estimates made by the Group included decommissioning estimates,
estimates of future capital expenditures used in the calculation of
depreciation, depletion and amortisation (DD&A) and hydrocarbon reserve
estimates. These are described in more detail in the relevant accounting policy.
The main judgements made by the Group included the forecasts and assumptions
used in the impairment review of non-financial assets, tax provisioning,
deferred tax asset recognition and future plans for the assets under
construction. These are described in more detail in the relevant accounting
policy.
Consolidation
Subsidiaries
Subsidiaries are entities over which the Group has the power to govern the
financial and operating policies, generally accompanying a shareholding of more
than one half of the voting rights. The existence and effect of potential voting
rights that are currently exercisable or convertible are considered when
assessing whether the Group controls another entity. Subsidiaries are fully
consolidated from the date on which control is transferred to the Group. They
are de-consolidated from the date on which control ceases.
The purchase method of accounting is used to account for the acquisition of
subsidiaries by the Group. The cost of an acquisition is measured as the fair
value of the assets given, equity instruments issued and liabilities incurred or
assumed at the date of exchange, plus costs directly attributable to the
acquisition. Identifiable assets acquired, liabilities and contingent
liabilities assumed in a business combination are measured initially at their
fair values at the acquisition date. The excess of the cost of acquisition over
the fair value of the Group's share of the identifiable net assets acquired is
recorded as goodwill. If the cost of acquisition is less than the fair value of
the net assets of the subsidiary acquired, the difference is recognised directly
in the income statement.
Inter-company transactions, balances and unrealised gains on transactions
between Group companies are eliminated as part of the consolidation process.
Unrealised losses are also eliminated unless the transaction provides evidence
of an impairment of the asset transferred. Accounting policies of subsidiaries
have been changed where necessary to ensure consistency with the policies
adopted by the Group.
Investments in Associates
The Group's investments in its associates are accounted for under the equity
method of accounting. These are entities in which the Group has significant
influence and which are neither a subsidiary nor a joint venture. The financial
statements of the associates are used by the Group to apply the equity
accounting method. The reporting dates of the associates and the Group are
consistent.
The investments in associates are carried in the balance sheet at cost plus
post-acquisition changes in the Group's share of net assets of the associates,
less any impairment in value. Where accounting policies of associates are
inconsistent with those of the Group, an adjustment is made to the Group's share
of net assets of the associate in order to reflect these differences.
Joint Ventures
The Group is engaged in oil and gas development and production through
incorporated and unincorporated joint ventures. The income, expenses, assets and
liabilities of those jointly controlled assets are included in the consolidated
financial statements in proportion to the Group's interest
Revenue Recognition
Revenue from sales of oil and natural gas is recognised when the significant
risks and rewards of ownership have been transferred, which is when title passes
to the customer. For oil and natural gas, this generally occurs when the product
is physically transferred into a vessel, pipe or other delivery mechanism.
Revenue resulting from the production of oil and natural gas properties in which
Venture has an interest with other producers is recognised on the basis of
Venture's working interest (entitlement method). Consequently, for sales in
respect of oil liftings sold, adjustments for overlift (liftings greater than
production entitlement) and underlift (production entitlement greater than
liftings) are recorded against cost of sales at market value.
Tariff revenue from the use of the Group's platform and pipeline facilities is
recognised when products are physically transferred into a vessel, pipe or other
delivery mechanism.
Segmental Reporting
Segmental reporting follows the Group's internal reporting structure, and
accordingly, its primary segment reporting is by business segment. A business
segment is engaged in providing products within a particular economic
environment that is subject to risks and returns that are different from those
segments operating in other economic environments. In the opinion of the
Directors, the operations of the Group comprise two classes of business, oil
production and gas production.
Foreign Currency Translation
(a) Functional and Presentation Currency
Items included in the financial statements of each of the Group's entities are
measured using the currency of the primary economic environment in which the
entity operates (the functional currency). The consolidated financial statements
are presented in pounds sterling, the Company's functional and presentation
currency.
(b) Transactions and Balances
Foreign currency transactions are translated into the functional currency using
the exchange rates prevailing at the dates of the transactions. Foreign currency
gains and losses resulting from the settlement of such transactions, and from
the translation at year end exchange rates of monetary assets and liabilities
denominated in foreign currencies, are recognised in the income statement.
Foreign currency gains and losses resulting from the translation of monetary
balances that relate to trading are included within the operating profit.
Foreign currency gains and losses resulting from the translation of monetary
balances that relate to the Group's financing are included within finance
expense.
Goodwill
Goodwill represents the excess of the cost of an acquisition over the fair value
of the Group's share of the net identifiable assets of the acquired subsidiary
at the date of acquisition. Goodwill on acquisition of subsidiaries is included
in intangible assets. Separately recognised goodwill is tested annually for
impairment and carried at cost less accumulated impairment losses. Impairment
losses on goodwill are not reversed. Gains and losses on the disposal of an
entity include the carrying amount of goodwill relating to the entity sold.
Goodwill is allocated to cash-generating units (CGUs) for the purpose of
impairment testing. The allocation is made to those CGUs or groups of CGUs that
are expected to benefit from the business combination in which the goodwill
arose.
Property, Plant and Equipment
All property, plant and equipment is shown at cost less subsequent depreciation
and impairment.
The initial cost of an asset comprises its purchase price or construction cost,
any costs directly attributable to bringing the asset into operation, the
initial estimate of the present value of any decommissioning obligation, if any,
and for qualifying assets, borrowing costs. The purchase price or construction
cost is the aggregate amount paid and the fair value of any other consideration
given to acquire the asset.
Subsequent costs are included in the asset's carrying amount or recognised as a
separate asset, as appropriate, only when it is probable that future economic
benefits associated with the item will flow to the Group, and the cost of the
item can be measured reliably. All other repairs and maintenance are charged to
the income statement during the financial period in which they are incurred.
Property, Plant and Equipment - Oil and Gas Exploration, Appraisal and
Development Expenditure
Oil and gas exploration, appraisal and development expenditure is accounted for
using the successful efforts method of accounting.
Expenditure incurred prior to obtaining the legal rights to explore an area is
expensed immediately to the income statement.
Expenditure directly associated with an exploration well is capitalised on a
licence by licence basis. Costs are held, un-depleted, on the balance sheet
under exploration assets, until the success or otherwise of the well has been
established. Costs will continue to be held as an asset if the results indicate
that hydrocarbon reserves exist and there is a reasonable prospect that these
reserves are commercial. All such carried costs are subject to technical,
commercial and management review at least once a year to confirm the intent to
develop or otherwise extract value from the discovery. When this is no longer
the case, the costs are written off. When proved reserves are determined and
development is sanctioned, the relevant costs are transferred to development and
producing assets.
Expenditure on the construction, installation or completion of infrastructure
facilities such as platforms, pipelines and the drilling of development wells,
is capitalised within development and producing assets on a field by field
basis.
Upon commencement of production, these costs are amortised on a unit of
production basis that is calculated on historical expenditure and budgeted
capital expenditure and proven and probable reserves.
Property, Plant and Equipment - Other
Depreciation on other assets is calculated using the straight-line method to
allocate their cost less their residual values over their estimated useful
lives, as follows:
+---------------------------+-----------+
| Plant and machinery | 10-33% |
+---------------------------+-----------+
| Office equipment | 25% |
+---------------------------+-----------+
| Motor vehicles | 25% |
+---------------------------+-----------+
| Buildings | 5% |
+---------------------------+-----------+
The assets' residual values and useful lives are reviewed, and adjusted if
appropriate, at each balance sheet date. An asset's carrying amount is written
down immediately to its recoverable amount if the asset's carrying amount is
greater than its estimated recoverable amount.
Impairment of Non-Financial Assets
Assets that have an indefinite useful life are not subject to amortisation and
are tested annually for impairment. Assets that are subject to amortisation are
reviewed for impairment whenever events or changes in circumstances indicate
that the carrying amount may not be recoverable. An impairment loss is
recognised for the amount by which the asset's carrying amount exceeds its
recoverable amount. The recoverable amount is the higher of an asset's net
realisable value less costs to sell and value in use. For the purposes of
assessing impairment, assets are grouped at the lowest levels for which there
are separately identifiable cash flows. These CGUs are aligned to the business
unit and sub-business unit structure that the Group uses to manage its business.
Cash flows are discounted in determining the value in use.
Exploration/appraisal assets are reviewed regularly for indicators of impairment
and costs are written off where circumstances indicate that the carrying value
might not be recoverable. In such circumstances the exploration asset is
allocated to development/producing assets within the same field and tested for
impairment. Any such impairment arising is recognised in the income statement
for the period. Where there are no development/producing assets within a
business unit, the exploration/appraisal costs are charged immediately to the
income statement.
Impairment reviews on development/producing assets are carried out on each CGU
identified in accordance with IAS 36 'Impairment of Assets'. Venture's CGUs are
those assets which generate largely independent cash flows and are normally, but
not always, single development areas.
At each reporting date, where there are indicators of impairment, the net book
value of the CGU is compared with the associated expected discounted future net
cash flows. If the net book value is higher, then the difference is written off
to the income statement as impairment. Discounted future net cash flows for IAS
36 purposes are calculated using forward curve pricing for the first five years
and management's view of the long term price thereafter. Cash flows are
discounted to present value using an appropriate discount rate. Forecasted
production profiles are determined on an asset by asset basis, using appropriate
petroleum engineering techniques.
Where there has been an impairment charge in an earlier period, that charge will
be reversed in a later period where there has been a change in circumstances to
the extent that the discounted future net cash flows are higher than the net
book value at the time. In reversing impairment losses, the carrying amount of
the asset will be increased to the lower of its original carrying value or the
carrying value that would have been determined (net of depletion) had no
impairment loss been recognised in prior periods.
Deferred Consideration
Deferred consideration relates to the future cash consideration payable in
respect of acquisitions which is contingent on the outcome of future events.
When an acquisition agreement provides for an adjustment to the consideration
contingent on future events, provision is made for that amount if the adjustment
is probable and can be measured reliably. The amount provided is included in the
cost of the acquisition. When the final amount payable is determined, or when
revised estimates are made, the acquisition cost and provision are adjusted
accordingly. Deferred consideration is recorded at its fair value.
Inventories
Inventories are stated at the lower of cost and net realisable value and
comprise oil in tanks and pipelines and materials. Cost values for stocks of oil
are calculated using a weighted average cost for the year.
Under/Overlift
Lifting or offtake arrangements for oil and gas produced in certain of the
Group's jointly owned operations are such that each participant may not receive
and sell its precise share of the overall production in each period. The
resulting imbalance between cumulative production entitlement and cumulative
sales less stock is 'underlift' or 'overlift'. Underlift and overlift are valued
at market value and included within debtors and creditors respectively.
Movements during an accounting period are adjusted through cost of sales such
that gross profit is recognised on an entitlement basis. The Group's share of
any physical stock is accounted for at the lower of cost and net realisable
value.
Assets Held for Sale
Assets held for sale are stated at fair value on the basis that they are
available for immediate sale in their present condition, subject only to terms
that are usual and customary for sales of such assets and that the sale is
highly probable at the balance sheet date.
Trade Receivables
Trade receivables are recognised and carried at original invoice amount less any
provision for impairment. A provision for impairment of trade receivables is
established when there is objective evidence that the Group will not be able to
collect all amounts due according to the original terms of the receivables.
Cash and Cash Equivalents
Cash and cash equivalents includes cash in hand, bank overdrafts, short term
deposits held at call with banks with maturity dates of less than three months,
and other short term liquid investments, which can be withdrawn at any time.
Share Capital
Ordinary shares are classified as equity. Incremental costs directly
attributable to the issue of new shares or options are shown in equity as a
deduction, net of tax, from the proceeds. Incremental costs directly
attributable to the issue of new shares or options, for the acquisition of a
business, are included in the cost of acquisition as part of the purchase
consideration.
Dividends on ordinary shares are not recognised as a liability or charged to
equity until they have been declared.
Where any Group company purchases the Company's equity share capital (treasury
shares), the consideration paid, including any directly attributable incremental
costs (net of income taxes), is deducted from equity attributable to the
Company's equity holders until the shares are cancelled, reissued or disposed
of. Where such shares are subsequently sold or reissued, any consideration
received, net of any directly attributable incremental transaction costs and the
related income tax effects, is included in equity attributable to the Company's
equity holders.
The Group is deemed to have control of the assets, liabilities, income and costs
of its Employee Benefit Trust (EBT). They have therefore, been consolidated in
the financial statements of the Group. Shares acquired by and disposed of by the
EBT are recorded at cost. The cost of shares held by the EBT is deducted from
shareholders' equity.
Borrowings
Borrowings are recognised initially at fair value, net of transaction costs
incurred. Borrowings are subsequently stated at amortised cost; any difference
between the proceeds (net of transaction costs) and the redemption value is
recognised in the income statement over the period of the borrowings using the
effective interest method.
Borrowings are classified as current liabilities unless the Group has an
unconditional right to defer settlement of the liability for at least 12 months
after the balance sheet date.
Convertible Bonds
The fair value of the liability component of a convertible bond is determined
using a market interest rate for an equivalent non-convertible bond. This amount
is recorded as a liability on an amortised cost basis until extinguished on
conversion or maturity. The remainder of the proceeds of the convertible bond
represents the value of the equity conversion option and this component of the
bond is recognised in shareholders' equity.
Capitalised Interest
Interest is capitalised gross of related tax relief during the period of
construction, where it relates either to the financing of major projects with
long periods of development, or to dedicated financing of other projects. All
other interest is charged against income.
Derivative Financial Instruments and Hedging
Derivatives are initially recognised at fair value on the date a derivative
contract is entered into, and are subsequently re-measured at their fair value.
The method of recognising the resulting gain or loss depends on whether the
derivative is designated as a hedging instrument and, if so, the nature of the
item being hedged. The Group designates derivatives as hedges of highly probable
forecast transactions (cash flow hedge).
The Group documents at the inception of the transaction, the relationship
between hedging instruments and hedged items, as well as its risk management
objective and strategy for undertaking various hedge transactions. The Group
also documents its assessment, both at hedge inception and on an ongoing basis,
of whether the derivatives that are used in hedging transactions are highly
effective in offsetting changes in cash flows of hedged items. At the point of
settlement, any payments or receipts relating to hedge transactions are included
in revenue.
Cash Flow Hedge
The effective portion of changes in the fair value of derivatives that are
designated and qualify as cash flow hedges, are recognised in equity net of
deferred income tax. The gain or loss relating to the ineffective portion is
recognised immediately in the income statement.
Amounts accumulated in equity, including the associated deferred income taxes,
are recycled in the income statement in the periods when the hedged item will
affect profit or loss (for example, when the hedged forecast sale takes place).
When a hedging instrument expires or is sold, or when a hedge no longer meets
the criteria for hedge accounting, any cumulative gain or loss existing in
equity at that time remains in equity, and is recognised when the forecast
transaction is ultimately recognised in the income statement. When a forecast
transaction is no longer expected to occur, the cumulative gain or loss that was
reported in equity is immediately transferred to the income statement.
Derivatives that Do Not Qualify for Hedge Accounting
Certain derivative instruments do not qualify for hedge accounting. Such
derivatives are measured at fair value in the balance sheet and changes in the
fair value of any derivative instruments that do not qualify for hedge
accounting are recognised immediately in the income statement.
Fair Value Estimation
Fair value is the amount at which a financial instrument could be exchanged in
an arm's length transaction between informed and willing parties, other than a
forced or liquidation sale and excludes accrued interest. Where available,
market values are used to determine fair values. Where market values are not
available, fair values are calculated by discounting expected cash flows at
prevailing interest and exchange rates.
Taxation
The tax charge, including UK corporation tax and overseas corporate tax,
represents the sum of tax currently payable and deferred tax. Tax currently
payable is based on the taxable profit for the year. Taxable profit differs from
the profit reported in the income statement due to items that are not taxable or
deductible in any period and also due to items that are taxable or deductible in
a different period. The Group's liability for current tax is calculated using
tax rates enacted or substantively enacted at the balance sheet date.
Current UK Petroleum Revenue Tax (PRT) is charged as a tax expense on chargeable
field profits included in the income statement and is deductible for UK
corporation tax. Deferred PRT is provided for in full, using the effective PRT
rate method.
Deferred income tax is provided in full, using the liability method, on
temporary differences arising between the tax bases of assets and liabilities
and their carrying amounts in the consolidated financial statements. However, if
the deferred income tax arises from initial recognition of an asset or liability
in a transaction other than a business combination, that at the time of the
transaction affects neither accounting nor taxable profit or loss, it is not
accounted for. Deferred income tax is determined using tax rates (and laws) that
have been enacted, or substantively enacted, at the balance sheet date and are
expected to apply when the related deferred income tax asset is realised or the
deferred income tax liability is settled.
Deferred income tax assets are recognised to the extent that it is probable that
future taxable profit will be available against which the temporary differences
can be utilised.
Deferred income tax is provided on temporary differences arising on investments
in subsidiaries and associates, except where the timing of the reversal of the
temporary difference is controlled by the Group, and it is probable that the
temporary difference will not reverse in the foreseeable future.
Operating Leases
Rentals payable under operating leases are charged to the income statement on a
straight-line basis.
Pension Costs
The Group pays contributions to personal pension schemes of employees, which are
administered independently of the Group. The Group has no further payment
obligations once the contributions have been paid. The contributions are
recognised as an employee benefit expense when they are due.
Share-Based Payments
The Group currently has various share-based payment schemes for its employees
and Directors, details of which are given in the Directors' Remuneration Report.
The fair value of share-based awards is determined at the date of grant of the
award allowing for the effect of any market-based performance conditions. This
fair value, adjusted by the Group's estimate of the number of awards that will
eventually vest as a result of key performance measures, is expensed uniformly
over the vesting period. The corresponding credit is taken to the employee
benefit reserve. The proceeds on exercise of share options are credited to share
capital and share premium.
The fair values are calculated using a binomial option pricing model with
suitable modifications to allow for employee turnover after vesting and early
exercise. The inputs to the model include the share price at date of grant,
exercise price, expected volatility, expected dividends, risk free rate of
interest and patterns of early exercise of the plan participants.
Decommissioning
Provision for decommissioning is recognised in full at the commencement of oil
and natural gas production. The amount recognised is the present value of the
estimated future expenditure determined in accordance with local conditions and
requirements. A corresponding tangible fixed asset of an amount equivalent to
the provision is also created. This is subsequently depreciated as part of the
capital costs of the production and transportation facilities. Any change in the
present value of the estimated expenditure is reflected as an adjustment to the
provision and the fixed asset. Unwinding of discount is treated as a finance
cost.
Disclosure of Impact of New and Future Accounting Standards
The following standards, amendments and interpretations to published standards
were mandatory for the year ended 31 December 2008:
* IFRIC 11 Group and Treasury Share TransactionsThis interpretation addresses how
to apply IFRS 2 to share-based payment arrangements involving
an entity's
own equity instruments or instruments of another entity in the same group. IFRS
2
charges are correctly accounted for in a fellow subsidiary of the Group.
There has been no impact to
the Group from the introduction of IFRIC 11.
The Group has not yet adopted the following standards, amendments and
interpretations which are only effective for periods commencing on or after 1
January 2009:
* IFRS 8 Operating Segments This standard replaces IAS 14 'Segment Reporting' and
proposes that entities adopt a 'management
approach' to reporting financial
performance.
* IFRS 3 (Revised) Business Combinations This standard includes some significant
changes to IFRS 3 in respect of business combinations with
all payments made
to purchase a business recorded at fair value at acquisition date. The standard
also requires the recognition of subsequent changes in the fair value of
the contingent consideration
in the income statement rather than goodwill.
Transaction costs should be recognised immediately in
the income statement.
This standard is effective from 1 July 2009, but the Group will adopt this on
any acquisitions made from 1 January 2009.
* IAS 27 (Revised) Consolidated and Separate Financial Statements The revised
standard requires the effects of all transactions with non-controlling interests
to be
recorded in equity if there is no change in control and these
transactions will no longer result in
goodwill or gains and losses. When
control is lost, any remaining interest in the entity is re-
measured to
fair value and a gain or loss is recognised in profit or loss.
* IAS 1 Presentation of Financial Statements This standard prescribes the basis
for presentation of financial statements and aims to ensure comparability
both with the entity's financial statements of previous periods and with the
financial statements of other entities.
* IFRS 2 Share-Based Payment - Vesting Conditions and Cancellations The revised
standard clarifies the definition of a vesting condition and prescribes the
treatment of an
award that is effectively cancelled because a non-vesting
condition is not satisfied.
* IAS 23 (Revised) Borrowing Costs The revised standard removes the option of
immediately recognising an expense on borrowing costs
that relate to assets
that take a substantial period of time to get ready for use.
Other standards, amendments and interpretations were considered but specifically
excluded as they were not expected to impact the Group.
2. Segmental Reporting
Primary Segment - Business Segments
Oil Business Segment
The oil segment consists of all activities connected with the Group's oil
assets, currently the Trees, Other oil and GKA hubs.
Gas Business Segment
The gas segment consists of all activities connected with the Group's gas
assets, currently the Gas UK and GMA hubs.
Segment Results
+--------------------------+------------+------------+--------------+------------+
| | Oil | Gas | Unallocated | Total |
| | GBP'000 | GBP'000 | Corporate | GBP'000 |
| | | | GBP'000 | |
+--------------------------+------------+------------+--------------+------------+
| For the year ended | | | | |
| 31 December 2008 | | | | |
+--------------------------+------------+------------+--------------+------------+
| Revenues | 192,921 | 301,957 | - | 494,878 |
+--------------------------+------------+------------+--------------+------------+
| Impairment of assets | (6,200) | - | - | (6,200) |
+--------------------------+------------+------------+--------------+------------+
| Other expenses | (123,576) | (125,948) | (8,080) | (257,604) |
+--------------------------+------------+------------+--------------+------------+
| Operating profit/(loss) | 63,145 | 176,009 | (8,080) | 231,074 |
+--------------------------+------------+------------+--------------+------------+
| | | | | |
+--------------------------+------------+------------+--------------+------------+
| For the year ended | | | | |
| 31 December 2007 | | | | |
+--------------------------+------------+------------+--------------+------------+
| Revenues | 172,760 | 185,535 | - | 358,295 |
+--------------------------+------------+------------+--------------+------------+
| Exploration costs | (18,144) | - | - | (18,144) |
| written off | | | | |
+--------------------------+------------+------------+--------------+------------+
| Development costs | - | (11,207) | - | (11,207) |
| written off | | | | |
+--------------------------+------------+------------+--------------+------------+
| Impairment of assets | (33,463) | - | - | (33,463) |
+--------------------------+------------+------------+--------------+------------+
| Other expenses | (69,832) | (100,728) | (8,282) | (178,842) |
+--------------------------+------------+------------+--------------+------------+
| Operating profit/(loss) | 51,321 | 73,600 | (8,282) | 116,639 |
+--------------------------+------------+------------+--------------+------------+
Segment Assets and Liabilities
+--------------------------+------------+------------+--------------+-------------+
| | Oil | Gas | Unallocated | Total |
| | GBP'000 | GBP'000 | Corporate | GBP'000 |
| | | | GBP'000 | |
+--------------------------+------------+------------+--------------+-------------+
| At 31 December 2008 | | | | |
+--------------------------+------------+------------+--------------+-------------+
| Segment assets | 399,247 | 845,303 | 254,446 | 1,498,996 |
+--------------------------+------------+------------+--------------+-------------+
| Segment liabilities | (74,066) | (173,322) | (827,090) | (1,074,478) |
+--------------------------+------------+------------+--------------+-------------+
| Net assets/(liabilities) | 325,181 | 671,981 | (572,644) | 424,518 |
+--------------------------+------------+------------+--------------+-------------+
| At 31 December 2007 | | | | |
+--------------------------+------------+------------+--------------+-------------+
| Segment assets | 249,138 | 731,016 | 181,497 | 1,161,651 |
+--------------------------+------------+------------+--------------+-------------+
| Segment liabilities | (106,596) | (131,272) | (642,593) | (880,461) |
+--------------------------+------------+------------+--------------+-------------+
| Net assets/(liabilities) | 142,542 | 599,744 | (461,096) | 281,190 |
+--------------------------+------------+------------+--------------+-------------+
Segment assets and liabilities are presented before the elimination of
inter-segment trading balances.
Segment assets and liabilities are reconciled to Group assets and liabilities as
follows:
+--------------------------------------------------+-----------+---------------+
| | Assets | Liabilities |
| | GBP'000 | GBP'000 |
+--------------------------------------------------+-----------+---------------+
| Segment assets/(liabilities) | 1,244,550 | (247,388) |
+--------------------------------------------------+-----------+---------------+
| Unallocated: | | |
+--------------------------------------------------+-----------+---------------+
| Fixed assets | 2,668 | |
+--------------------------------------------------+-----------+---------------+
| Cash at bank and in hand | 207,969 | |
+--------------------------------------------------+-----------+---------------+
| Investments | 33,409 | |
+--------------------------------------------------+-----------+---------------+
| Convertible loan notes | 7,528 | |
+--------------------------------------------------+-----------+---------------+
| Current assets | 2,872 | |
+--------------------------------------------------+-----------+---------------+
| Deferred income tax | | (343,924) |
+--------------------------------------------------+-----------+---------------+
| Current liabilities | | (20,968) |
+--------------------------------------------------+-----------+---------------+
| Non-current borrowings | | (456,445) |
+--------------------------------------------------+-----------+---------------+
| Derivative financial instruments | | (5,753) |
+--------------------------------------------------+-----------+---------------+
| Total | 1,498,996 | (1,074,478) |
+--------------------------------------------------+-----------+---------------+
Other Segment Items
+--------------------------+------------+------------+--------------+------------+
| 2008 | Oil | Gas | Unallocated | Total |
| | GBP'000 | GBP'000 | Corporate | GBP'000 |
| | | | GBP'000 | |
+--------------------------+------------+------------+--------------+------------+
| Movement in property | | | | |
| plant and equipment | | | | |
+--------------------------+------------+------------+--------------+------------+
| - Additions | 73,714 | 243,885 | 2,115 | 319,714 |
+--------------------------+------------+------------+--------------+------------+
| - Acquisitions | - | 1,074 | - | 1,074 |
+--------------------------+------------+------------+--------------+------------+
| - Disposals | - | (3,010) | - | (3,010) |
+--------------------------+------------+------------+--------------+------------+
| - Depreciation | (41,785) | (63,907) | (273) | (105,965) |
+--------------------------+------------+------------+--------------+------------+
| - Impairment of assets | (6,200) | - | - | (6,200) |
+--------------------------+------------+------------+--------------+------------+
| | 25,729 | 178,042 | 1,842 | 205,613 |
+--------------------------+------------+------------+--------------+------------+
| | | | | |
+--------------------------+------------+------------+--------------+------------+
| 2007 | | | | |
+--------------------------+------------+------------+--------------+------------+
| Movement in property, | | | | |
| plant and equipment | | | | |
+--------------------------+------------+------------+--------------+------------+
| - Additions | 86,938 | 168,240 | 433 | 255,611 |
+--------------------------+------------+------------+--------------+------------+
| - Acquisitions | - | 47,944 | - | 47,944 |
+--------------------------+------------+------------+--------------+------------+
| - Disposals | (1,247) | (3,017) | - | (4,264) |
+--------------------------+------------+------------+--------------+------------+
| - Depreciation | (25,439) | (56,685) | (339) | (82,463) |
+--------------------------+------------+------------+--------------+------------+
| - Impairment of assets | (33,463) | - | - | (33,463) |
+--------------------------+------------+------------+--------------+------------+
| - Development costs | - | (11,207) | - | (11,207) |
| written off | | | | |
+--------------------------+------------+------------+--------------+------------+
| - Exploration costs | (18,144) | - | - | (18,144) |
| written off | | | | |
+--------------------------+------------+------------+--------------+------------+
| | 8,645 | 145,275 | 94 | 154,014 |
+--------------------------+------------+------------+--------------+------------+
Secondary Segment - Geographic Segments
All of the Group's activities are in the UK and Dutch sector of the North Sea,
which is considered to be one geographic segment.
3. Operating Profit
The following items have been charged/(credited) in arriving at operating
profit:
+----------------------------------------+-------+-------------+------------+
| | | 2008 | 2007 |
+----------------------------------------+-------+-------------+------------+
| | | GBP'000 | GBP'000 |
+----------------------------------------+-------+-------------+------------+
| Overlift | | 13,187 | 2,848 |
+----------------------------------------+-------+-------------+------------+
| Exploration costs written off | | - | 18,144 |
+----------------------------------------+-------+-------------+------------+
| Development costs written off | | - | 11,207 |
+----------------------------------------+-------+-------------+------------+
| Impairment of assets | | 6,200 | 33,463 |
+----------------------------------------+-------+-------------+------------+
| Depreciation, depletion and | | 105,965 | 82,463 |
| amortisation (Note 10) | | | |
+----------------------------------------+-------+-------------+------------+
| Employee expenses (Note 28) | | 16,219 | 14,275 |
+----------------------------------------+-------+-------------+------------+
| Share-based payments (Note 13) | | 3,928 | 4,981 |
+----------------------------------------+-------+-------------+------------+
| Operating lease rentals: | | | |
+----------------------------------------+-------+-------------+------------+
| - Land and buildings | | 997 | 629 |
+----------------------------------------+-------+-------------+------------+
| - Plant and machinery | | 3,976 | - |
+----------------------------------------+-------+-------------+------------+
| Foreign currency loss/(gain) | | 491 | (496) |
+----------------------------------------+-------+-------------+------------+
The foreign currency loss within operating profit relates to the translation, at
the closing rate, of monetary balances that relate to trading.
A further impairment charge of GBP6,200,000 (2007: GBP24,500,000) has been made
to Sycamore during 2008 in order to reduce the carrying value of the Sycamore
field to its value in use, following the completion of technical work on the
development during 2008. The pre-tax discount rate used for the calculation was
16% (2007: 8% post tax).
Included within overlift is a GBP16,300,000 non-cash charge relating to an
adjustment to the historic overlift position on the Trees hub.
Services Provided by the Group's Auditor and Network Firms
During the year the Group obtained the following services from the Group's
auditor at costs as detailed below:
+--------------------------------------------+---+-------------+------------+
| | | 2008 | 2007 |
+--------------------------------------------+---+-------------+------------+
| | | GBP'000 | GBP'000 |
+--------------------------------------------+---+-------------+------------+
| Audit services: | | | |
+--------------------------------------------+---+-------------+------------+
| - fees payable to the Company auditor for | | | |
| the audit of | | | |
+--------------------------------------------+---+-------------+------------+
| parent company and consolidated accounts | | 205 | 196 |
+--------------------------------------------+---+-------------+------------+
| Non-audit services: | | | |
+--------------------------------------------+---+-------------+------------+
| - fees payable to the Company auditor for | | 91 | 82 |
| the audit of | | | |
| Company subsidiaries pursuant to | | | |
| legislation | | | |
+--------------------------------------------+---+-------------+------------+
| - other services pursuant to legislation | | 35 | 25 |
+--------------------------------------------+---+-------------+------------+
| - tax services | | - | 18 |
+--------------------------------------------+---+-------------+------------+
| - other services | | 23 | - |
+--------------------------------------------+---+-------------+------------+
| | | 354 | 321 |
+--------------------------------------------+---+-------------+------------+
4. Gain on Disposal of Subsidiary
There were no disposals of subsidiaries during 2008. In 2007, the sale of NSIP
(ETS) Limited was completed on 22 January 2007. Details of the book values of
the major classes of assets and liabilities of the Company measured at the date
of disposal and of the consideration were as follows:
+----------------------------------------+-------+-------------+------------+
| | | 2008 | 2007 |
+----------------------------------------+-------+-------------+------------+
| | | GBP'000 | GBP'000 |
+----------------------------------------+-------+-------------+------------+
| Property, plant and equipment | | - | 1,891 |
+----------------------------------------+-------+-------------+------------+
| Trade and other receivables | | - | 440 |
+----------------------------------------+-------+-------------+------------+
| Cash and cash equivalents | | - | 582 |
+----------------------------------------+-------+-------------+------------+
| Provisions | | - | (782) |
+----------------------------------------+-------+-------------+------------+
| Net assets disposed of | | - | 2,131 |
+----------------------------------------+-------+-------------+------------+
| Consideration | | | |
+----------------------------------------+-------+-------------+------------+
| Cash | | - | 2,382 |
+----------------------------------------+-------+-------------+------------+
| Total consideration | | - | 2,382 |
+----------------------------------------+-------+-------------+------------+
| Gain on disposal of NSIP (ETS) Limited | | - | 251 |
+----------------------------------------+-------+-------------+------------+
The total consideration of GBP2,382,000 was satisfied by North Sea
Infrastructure Partners Limited (NSIP) by way of cash.
Reconciliation of Net Proceeds to Cash Inflow from Disposal of Subsidiary
+----------------------------------------+-------+-------------+------------+
| | | 2008 | 2007 |
+----------------------------------------+-------+-------------+------------+
| | | GBP'000 | GBP'000 |
+----------------------------------------+-------+-------------+------------+
| Net cash consideration | | - | 2,382 |
+----------------------------------------+-------+-------------+------------+
| Cash disposed of | | - | (582) |
+----------------------------------------+-------+-------------+------------+
| Cash inflow from disposal of | | - | 1,800 |
| subsidiary | | | |
+----------------------------------------+-------+-------------+------------+
5. Finance Income and Expense
+----------------------------------------------+--+-------------+------------+
| | | 2008 | 2007 |
+----------------------------------------------+--+-------------+------------+
| Finance income | | GBP'000 | GBP'000 |
+----------------------------------------------+--+-------------+------------+
| Bank interest | | 4,032 | 4,174 |
+----------------------------------------------+--+-------------+------------+
| Interest receivable on convertible loan | | 138 | 268 |
| notes | | | |
+----------------------------------------------+--+-------------+------------+
| Other interest | | 828 | - |
+----------------------------------------------+--+-------------+------------+
| | | 4,998 | 4,442 |
+----------------------------------------------+--+-------------+------------+
+----------------------------------------------+--+-------------+------------+
| | | 2008 | 2007 |
+----------------------------------------------+--+-------------+------------+
| Finance expense | | GBP'000 | GBP'000 |
+----------------------------------------------+--+-------------+------------+
| Capitalised interest | | (16,540) | (9,955) |
+----------------------------------------------+--+-------------+------------+
| Interest payable on loans | | 18,530 | 12,593 |
+----------------------------------------------+--+-------------+------------+
| Interest payable and unwinding of discount | | 9,352 | 5,690 |
| on convertible bonds | | | |
+----------------------------------------------+--+-------------+------------+
| Unwinding charge for decommissioning | | 5,099 | 4,636 |
| provision (Note 21) | | | |
+----------------------------------------------+--+-------------+------------+
| Amortisation of loan facility expenses | | 1,743 | 4,521 |
+----------------------------------------------+--+-------------+------------+
| Other interest | | 1,085 | 1,637 |
+----------------------------------------------+--+-------------+------------+
| Foreign exchange loss on net foreign | | 20,230 | - |
| currency liabilities/assets | | | |
+----------------------------------------------+--+-------------+------------+
| | | 39,499 | 19,122 |
+----------------------------------------------+--+-------------+------------+
6. Income Tax Expense
+----------------------------------------+-------+-------------+------------+
| | | 2008 | 2007 |
+----------------------------------------+-------+-------------+------------+
| Analysis of charge for the year | | GBP'000 | GBP'000 |
+----------------------------------------+-------+-------------+------------+
| Current tax - current tax charge - UK | | 12,884 | 10,520 |
+----------------------------------------+-------+-------------+------------+
| Current tax - adjustments in respect | | 709 | 151 |
| of prior years | | | |
+----------------------------------------+-------+-------------+------------+
| Current tax - current tax charge - | | 1,561 | 2,442 |
| overseas | | | |
+----------------------------------------+-------+-------------+------------+
| | | 15,154 | 13,113 |
+----------------------------------------+-------+-------------+------------+
| Deferred tax - relating to origination | | 97,772 | 39,961 |
| and reversal of timing differences | | | |
+----------------------------------------+-------+-------------+------------+
| Deferred tax - adjustments in respect | | (5,393) | (42) |
| of prior years | | | |
+----------------------------------------+-------+-------------+------------+
| | | 92,379 | 39,919 |
+----------------------------------------+-------+-------------+------------+
| Tax charge for the year | | 107,533 | 53,032 |
+----------------------------------------+-------+-------------+------------+
The tax rate for the period is higher (2007: higher) than the standard rate of
corporation tax in the UK (28% - effective from 1 April 2008 (2007: 30%)). The
differences are explained below:
+----------------------------------------+--------+-------------+------------+
| | | 2008 | 2007 |
+----------------------------------------+--------+-------------+------------+
| | | GBP'000 | GBP'000 |
+----------------------------------------+--------+-------------+------------+
| Profit on ordinary activities before | | 184,189 | 101,207 |
| tax | | | |
+----------------------------------------+--------+-------------+------------+
| Tax @ 28.5% (2007: 30%) | | 52,494 | 30,362 |
+----------------------------------------+--------+-------------+------------+
| Effects of: | | | |
+----------------------------------------+--------+-------------+------------+
| Supplementary tax charge | | 48,355 | 24,058 |
+----------------------------------------+--------+-------------+------------+
| Adjustments to tax in respect of prior | | (4,684) | 109 |
| periods | | | |
+----------------------------------------+--------+-------------+------------+
| Unrecognised deferred tax asset | | 52 | 982 |
+----------------------------------------+--------+-------------+------------+
| Expenses not deductible for tax | | 4,897 | 545 |
| purposes | | | |
+----------------------------------------+--------+-------------+------------+
| Share options exercised | | (198) | (5,098) |
+----------------------------------------+--------+-------------+------------+
| Difference in corporation tax rate | | 5,684 | 1,377 |
| between ring fence and non ring fence | | | |
| trades | | | |
+----------------------------------------+--------+-------------+------------+
| Other | | 933 | 697 |
+----------------------------------------+--------+-------------+------------+
| Total taxation | | 107,533 | 53,032 |
+----------------------------------------+--------+-------------+------------+
Disallowable items mainly represent capital acquisition costs that are
depreciated but are not eligible for capital allowances.
7. Earnings Per Ordinary Share
Basic earnings per share is calculated by dividing the profit attributable to
equity holders of the Company by the weighted average number of ordinary shares
in issue during the year, excluding ordinary shares purchased by the EBT and
treasury shares.
+-----------------------------------------------+------------+------------+
| | 2008 | 2007 |
+-----------------------------------------------+------------+------------+
| Profit attributable to equity holders of the | 76,656 | 48,175 |
| Company (GBP'000) | | |
+-----------------------------------------------+------------+------------+
| Weighted average number of ordinary shares in | 145,568 | 135,479 |
| issue (thousands) | | |
+-----------------------------------------------+------------+------------+
| Basic earnings per share (pence per share) | 52.7 | 35.6 |
+-----------------------------------------------+------------+------------+
Diluted earnings per share is calculated by adjusting the weighted average
number of ordinary shares outstanding to assume conversion of all dilutive
potential ordinary shares. The Company has two categories of dilutive potential
ordinary shares: convertible debt and share options.
The convertible debt is assumed to have been converted into ordinary shares and
the net profit is adjusted to eliminate the interest expense and the unwinding
of discount on convertible debt less the tax effect. For the share options, a
calculation is performed to determine the number of shares that could have been
acquired at fair value (determined as the average annual market share price of
the Company's shares) based on the monetary value of the subscription rights
attached to outstanding share options.
The number of shares calculated as above is deducted from the number of
outstanding share options to give the number of share options with dilutive
effect.
+---------------------------------------------+--+------------+------------+
| | | 2008 | 2007 |
+---------------------------------------------+--+------------+------------+
| Profit attributable to equity holders of | | 76,656 | 48,175 |
| the Company (GBP'000) | | | |
+---------------------------------------------+--+------------+------------+
| Interest expense and unwinding of discount | | 6,694 | 2,616 |
| on convertible debt (net of tax) (GBP'000) | | | |
+---------------------------------------------+--+------------+------------+
| Profit used to determine diluted earnings | | 83,350 | 50,791 |
| per share (GBP'000) | | | |
+---------------------------------------------+--+------------+------------+
| Weighted average number of ordinary shares | | 145,568 | 135,479 |
| in issue (thousands) | | | |
+---------------------------------------------+--+------------+------------+
| Adjustments for: | | 19,399 | 12,994 |
| -assumed conversion | | 76 | 1,181 |
| of convertible debt | | | |
| (thousands) | | | |
| -share options | | | |
| (thousands) | | | |
+---------------------------------------------+--+------------+------------+
| Weighted average number of ordinary shares | | 165,043 | 149,654 |
| for diluted earnings per share (thousands) | | | |
+---------------------------------------------+--+------------+------------+
| -Diluted earnings per share (pence per | | 50.5 | 33.9 |
| share) | | | |
+---------------------------------------------+--+------------+------------+
8. Dividends
During the year, the Company paid an ordinary dividend of GBP0.12 per share,
amounting to GBP17,201,000. This was approved at the Company's AGM on 14 May
2008.
In 2007, dividends paid relate to an ordinary dividend of GBP0.10 per share and
a special dividend of GBP0.40 per share that were approved at the Company's AGM
on 6 June 2007. A total dividend of GBP67,566,000 was paid on 24 July 2007.
A dividend of GBP0.13 per share has been proposed for approval at the Company's
AGM on 14 May 2009.
9. Profit for the Financial Year
As permitted by section 230 of the Companies Act 1985, the Company's income
statement has not been included in these financial statements. The Company's
profit after tax for the financial year was GBP33,060,000 (2007: profit -
GBP105,527,000), and included GBP67,112,000 of dividends received from
subsidiary undertakings (2007: GBP110,000,000).
10. Property, Plant and Equipment
+-----------------+-------------+-------------+-----------+-----------+-----------+
| Group | Exploration | | Buildings | Office | Total |
| | assets | Development | | equipment | |
| | | & producing | | | |
| | | assets | | | |
+-----------------+-------------+-------------+-----------+-----------+-----------+
| | GBP'000 | GBP'000 | GBP'000 | GBP'000 | GBP'000 |
+-----------------+-------------+-------------+-----------+-----------+-----------+
| | | | | | |
+-----------------+-------------+-------------+-----------+-----------+-----------+
| Cost | | | | | |
+-----------------+-------------+-------------+-----------+-----------+-----------+
| At 1 January | 27,005 | 1,079,429 | 373 | 2,738 | 1,109,545 |
| 2008 | | | | | |
+-----------------+-------------+-------------+-----------+-----------+-----------+
| Additions | 28,177 | 289,422 | 176 | 1,939 | 319,714 |
+-----------------+-------------+-------------+-----------+-----------+-----------+
| Acquisitions | - | 1,074 | - | - | 1,074 |
+-----------------+-------------+-------------+-----------+-----------+-----------+
| Transfers to | (13,354) | 13,354 | - | - | - |
| development & | | | | | |
| producing | | | | | |
| assets | | | | | |
+-----------------+-------------+-------------+-----------+-----------+-----------+
| Costs written | - | - | - | - | - |
| off | | | | | |
+-----------------+-------------+-------------+-----------+-----------+-----------+
| Disposals | - | (3,010) | - | - | (3,010) |
+-----------------+-------------+-------------+-----------+-----------+-----------+
| At 31 December | 41,828 | 1,380,269 | 549 | 4,677 | 1,427,323 |
| 2008 | | | | | |
+-----------------+-------------+-------------+-----------+-----------+-----------+
| Depreciation | | | | | |
+-----------------+-------------+-------------+-----------+-----------+-----------+
| At 1 January | - | 288,612 | 99 | 2,186 | 290,897 |
| 2008 | | | | | |
+-----------------+-------------+-------------+-----------+-----------+-----------+
| Impairment of | - | 6,200 | - | - | 6,200 |
| assets | | | | | |
+-----------------+-------------+-------------+-----------+-----------+-----------+
| Charge for the | - | 105,692 | 21 | 252 | 105,965 |
| year | | | | | |
+-----------------+-------------+-------------+-----------+-----------+-----------+
| Disposals | - | - | - | - | - |
+-----------------+-------------+-------------+-----------+-----------+-----------+
| At 31 December | - | 400,504 | 120 | 2,438 | 403,062 |
| 2008 | | | | | |
+-----------------+-------------+-------------+-----------+-----------+-----------+
| Net book amount | | | | | |
+-----------------+-------------+-------------+-----------+-----------+-----------+
| at 31 December | 41,828 | 979,765 | 429 | 2,239 | 1,024,261 |
| 2008 | | | | | |
+-----------------+-------------+-------------+-----------+-----------+-----------+
+-----------------+-------------+-------------+-----------+-----------+-----------+
| Group | Exploration | Development | Buildings | Office | Total |
| | assets | & producing | | equipment | |
| | | assets | | | |
+-----------------+-------------+-------------+-----------+-----------+-----------+
| | GBP'000 | GBP'000 | GBP'000 | GBP'000 | GBP'000 |
+-----------------+-------------+-------------+-----------+-----------+-----------+
| | | | | | |
+-----------------+-------------+-------------+-----------+-----------+-----------+
| Cost | | | | | |
+-----------------+-------------+-------------+-----------+-----------+-----------+
| At 1 January | 7,998 | 830,769 | 373 | 2,250 | 841,390 |
| 2007 | | | | | |
+-----------------+-------------+-------------+-----------+-----------+-----------+
| Additions | 38,829 | 216,294 | - | 488 | 255,611 |
+-----------------+-------------+-------------+-----------+-----------+-----------+
| Acquisitions | 10,420 | 37,524 | - | - | 47,944 |
+-----------------+-------------+-------------+-----------+-----------+-----------+
| Transfers to | (12,098) | 12,098 | - | - | - |
| development & | | | | | |
| producing | | | | | |
| assets | | | | | |
+-----------------+-------------+-------------+-----------+-----------+-----------+
| Costs written | (18,144) | (11,207) | - | - | (29,351) |
| off | | | | | |
+-----------------+-------------+-------------+-----------+-----------+-----------+
| Disposals | - | (6,049) | - | - | (6,049) |
+-----------------+-------------+-------------+-----------+-----------+-----------+
| At 31 December | 27,005 | 1,079,429 | 373 | 2,738 | 1,109,545 |
| 2007 | | | | | |
+-----------------+-------------+-------------+-----------+-----------+-----------+
| Depreciation | | | | | |
+-----------------+-------------+-------------+-----------+-----------+-----------+
| At 1 January | - | 174,869 | 80 | 1,807 | 176,756 |
| 2007 | | | | | |
+-----------------+-------------+-------------+-----------+-----------+-----------+
| Impairment of | - | 33,463 | - | - | 33,463 |
| assets | | | | | |
+-----------------+-------------+-------------+-----------+-----------+-----------+
| Charge for the | - | 82,065 | 19 | 379 | 82,463 |
| year | | | | | |
+-----------------+-------------+-------------+-----------+-----------+-----------+
| Disposals | - | (1,785) | - | - | (1,785) |
+-----------------+-------------+-------------+-----------+-----------+-----------+
| At 31 December | - | 288,612 | 99 | 2,186 | 290,897 |
| 2007 | | | | | |
+-----------------+-------------+-------------+-----------+-----------+-----------+
| Net book amount | | | | | |
+-----------------+-------------+-------------+-----------+-----------+-----------+
| at 31 December | 27,005 | 790,817 | 274 | 552 | 818,648 |
| 2007 | | | | | |
+-----------------+-------------+-------------+-----------+-----------+-----------+
Included in property, plant and equipment at 31 December 2008 is an amount of
GBP385,059,000 (2007: GBP257,723,000) relating to expenditure for assets under
construction.
The key assets under construction at the end of the period were Ensign, Cygnus,
Amanda-Agatha, Eris and Ceres.
Additions within producing assets include capitalised interest of GBP16,540,000
(2007: GBP9,955,000). Interest for the year has been charged at a weighted
average of 5.13% (2007: 6.16%) on that proportion of Group loan balances drawn
down to finance assets during their development phase.
+-------------------------------+----------+-----------+-----------+---------+
| Company | | Buildings | Office | Total |
| | | | equipment | |
+-------------------------------+----------+-----------+-----------+---------+
| | | GBP'000 | GBP'000 | GBP'000 |
+-------------------------------+----------+-----------+-----------+---------+
| Cost | | | | |
+-------------------------------+----------+-----------+-----------+---------+
| At 1 January 2008 | | 373 | 2,310 | 2,683 |
+-------------------------------+----------+-----------+-----------+---------+
| Additions | | - | - | - |
+-------------------------------+----------+-----------+-----------+---------+
| At 31 December 2008 | | 373 | 2,310 | 2,683 |
+-------------------------------+----------+-----------+-----------+---------+
| Depreciation | | | | |
+-------------------------------+----------+-----------+-----------+---------+
| At 1 January 2008 | | 99 | 2,127 | 2,226 |
+-------------------------------+----------+-----------+-----------+---------+
| Charge for the year | | 18 | 67 | 85 |
+-------------------------------+----------+-----------+-----------+---------+
| At 31 December 2008 | | 117 | 2,194 | 2,311 |
+-------------------------------+----------+-----------+-----------+---------+
| Net book amount | | | | |
+-------------------------------+----------+-----------+-----------+---------+
| at 31 December 2008 | | 256 | 116 | 372 |
+-------------------------------+----------+-----------+-----------+---------+
+-------------------------------+----------+-----------+-----------+---------+
| Company | | Buildings | Office | Total |
| | | | equipment | |
+-------------------------------+----------+-----------+-----------+---------+
| | | GBP'000 | GBP'000 | GBP'000 |
+-------------------------------+----------+-----------+-----------+---------+
| Cost | | | | |
+-------------------------------+----------+-----------+-----------+---------+
| At 1 January 2007 | | 373 | 2,250 | 2,623 |
+-------------------------------+----------+-----------+-----------+---------+
| Additions | | - | 60 | 60 |
+-------------------------------+----------+-----------+-----------+---------+
| At 31 December 2007 | | 373 | 2,310 | 2,683 |
+-------------------------------+----------+-----------+-----------+---------+
| Depreciation | | | | |
+-------------------------------+----------+-----------+-----------+---------+
| At 1 January 2007 | | 80 | 1,807 | 1,887 |
+-------------------------------+----------+-----------+-----------+---------+
| Charge for the year | | 19 | 320 | 339 |
+-------------------------------+----------+-----------+-----------+---------+
| At 31 December 2007 | | 99 | 2,127 | 2,226 |
+-------------------------------+----------+-----------+-----------+---------+
| Net book amount | | | | |
+-------------------------------+----------+-----------+-----------+---------+
| at 31 December 2007 | | 274 | 183 | 457 |
+-------------------------------+----------+-----------+-----------+---------+
| | | | | |
+-------------------------------+----------+-----------+-----------+---------+
11. Intangible Assets
+--------------------------------+----------+----------+----------+----------+
| | Group | Company |
+--------------------------------+---------------------+---------------------+
| | 2008 | 2007 | 2008 | 2007 |
+--------------------------------+----------+----------+----------+----------+
| Goodwill | GBP'000 | GBP'000 | GBP'000 | GBP'000 |
+--------------------------------+----------+----------+----------+----------+
| Cost | | | | |
+--------------------------------+----------+----------+----------+----------+
| At 1 January | 53,291 | 47,945 | - | - |
+--------------------------------+----------+----------+----------+----------+
| Additions | - | 5,346 | - | - |
+--------------------------------+----------+----------+----------+----------+
| At 31 December | 53,291 | 53,291 | - | - |
+--------------------------------+----------+----------+----------+----------+
+--------------------------------+----------+----------+----------+----------+
| Aggregate impairment | | | | |
+--------------------------------+----------+----------+----------+----------+
| At 1 January | - | - | - | - |
+--------------------------------+----------+----------+----------+----------+
| Impairment for the year | - | - | - | - |
+--------------------------------+----------+----------+----------+----------+
| At 31 December | - | - | - | - |
+--------------------------------+----------+----------+----------+----------+
+--------------------------------+----------+----------+----------+----------+
| Net carrying amount | | | | |
+--------------------------------+----------+----------+----------+----------+
| at 31 December | 53,291 | 53,291 | - | - |
+--------------------------------+----------+----------+----------+----------+
The Group tests goodwill annually for impairment, or more frequently, if there
are any indications that goodwill may be impaired. Goodwill acquired through
business combinations is allocated, at acquisition, to CGUs that are expected to
benefit from that business combination.
Goodwill mainly relates to the acquisition of CH4 in 2006 (GBP46,637,000).
Impairment tests for CH4 are carried out based on future cash flows of the GMA
CGU.
The recoverable amounts of the CGUs are determined from value in use
calculations. These calculations are based on the life of field models for the
CGU. The key assumptions for the value in use calculations are those regarding
future production, oil and gas prices, capital expenditure and operating costs.
The pre-tax discount rate used for the calculation was 16% (2007: 8% post tax).
12. Investments
Associates
+--------------------------------+----------+----------+----------+----------+
| | Group | Company |
+--------------------------------+---------------------+---------------------+
| | 2008 | 2007 | 2008 | 2007 |
+--------------------------------+----------+----------+----------+----------+
| | GBP'000 | GBP'000 | GBP'000 | GBP'000 |
+--------------------------------+----------+----------+----------+----------+
| At 1 January | 16,341 | 11,098 | - | 6,120 |
+--------------------------------+----------+----------+----------+----------+
| Inter-company loan | - | 4,092 | - | - |
| reclassified as investment | | | | |
+--------------------------------+----------+----------+----------+----------+
| Transfer of investment in | - | - | - | (6,120) |
| associated undertaking | | | | |
+--------------------------------+----------+----------+----------+----------+
| Additional investment in | 23,199 | - | - | - |
| associate | | | | |
+--------------------------------+----------+----------+----------+----------+
| Share of (loss)/profit of | (6,131) | 1,151 | - | - |
| associates | | | | |
+--------------------------------+----------+----------+----------+----------+
| At 31 December | 33,409 | 16,341 | - | - |
+--------------------------------+----------+----------+----------+----------+
During the year, Hummingbird Oil Pte Limited, a subsidiary undertaking of the
Group, invested an additional GBP23,199,000 in Sevan Production General
Partnership. Hummingbird Oil Pte Limited owns 20% of the capital of Sevan
Production General Partnership (2007: 20%).
The gross results of the Group's associates, all of which are unlisted, and
their gross assets (including liabilities) are as follows:
+-----------------+---------------+---------+-------------+----------+---------------+----------+
| Name | Country of | Assets | Liabilities | Revenues | Adjusted | Interest |
| | incorporation | GBP'000 | GBP'000 | GBP'000 | Profit/(loss) | |
| | | | | | GBP'000 | |
+-----------------+---------------+---------+-------------+----------+---------------+----------+
| 2008 | | | | | | |
+-----------------+---------------+---------+-------------+----------+---------------+----------+
| Ten Degrees | Trinidad | 40,325 | (23,719) | 22,504 | (3,160) | 40.0% |
| North Energy | | | | | | |
| Limited | | | | | | |
+-----------------+---------------+---------+-------------+----------+---------------+----------+
| North Sea | Scotland | 86,917 | (65,655) | 27,329 | 7,854 | 49.9% |
| Infrastructure | | | | | | |
| Partners | | | | | | |
| Limited | | | | | | |
+-----------------+---------------+---------+-------------+----------+---------------+----------+
| Sevan | Singapore | 253,424 | (123,080) | 18,930 | (43,930) | 20.0% |
| Production | | | | | | |
| General | | | | | | |
| Partnership | | | | | | |
+-----------------+---------------+---------+-------------+----------+---------------+----------+
| | | | | | | |
+-----------------+---------------+---------+-------------+----------+---------------+----------+
| 2007 | | | | | | |
+-----------------+---------------+---------+-------------+----------+---------------+----------+
| Ten Degrees | Trinidad | 32,762 | (18,734) | 15,653 | 2,021 | 40.0% |
| North Energy | | | | | | |
| Limited | | | | | | |
+-----------------+---------------+---------+-------------+----------+---------------+----------+
| North Sea | Scotland | 89,791 | (78,273) | 4,114 | 1,138 | 49.9% |
| Infrastructure | | | | | | |
| Partners | | | | | | |
| Limited | | | | | | |
+-----------------+---------------+---------+-------------+----------+---------------+----------+
| Sevan | Singapore | 176,341 | (157,947) | - | (1,127) | 20.0% |
| Production | | | | | | |
| General | | | | | | |
| Partnership | | | | | | |
+-----------------+---------------+---------+-------------+----------+---------------+----------+
The accounting policies applied to investments in associates are disclosed under
Note 1. The Group's share of the results of its associates have been
consolidated after adjustments have been made to harmonise the DD&A accounting
policies of the associates with that of the Group.
Subsidiaries
+--------------------------------+----------+----------+----------+----------+
| | Group | Company |
+--------------------------------+---------------------+---------------------+
| | 2008 | 2007 | 2008 | 2007 |
+--------------------------------+----------+----------+----------+----------+
| | GBP'000 | GBP'000 | GBP'000 | GBP'000 |
+--------------------------------+----------+----------+----------+----------+
| At 1 January | - | - | 427,269 | 158,771 |
+--------------------------------+----------+----------+----------+----------+
| Investment reclassified as | - | - | - | (4,069) |
| inter-company loan | | | | |
+--------------------------------+----------+----------+----------+----------+
| Dissolution of subsidiary | - | - | (46,552) | - |
+--------------------------------+----------+----------+----------+----------+
| Additional investment in | - | - | 150,000 | 272,567 |
| subsidiaries | | | | |
+--------------------------------+----------+----------+----------+----------+
| At 31 December | - | - | 530,717 | 427,269 |
+--------------------------------+----------+----------+----------+----------+
During the year, the Company made an additional investment in Venture North Sea
Gas Limited of GBP150,000,000 and North Sea Gas Partners Limited was dissolved
GBP(46,552,000).
The Company's principal subsidiaries and joint venture undertakings at 31
December 2008 were as follows:
+------------------------------+--------------------+---------------+--------------+
| Name | Nature of business | Country of | Percentage |
| | | registration/ | of |
| | | incorporation | nominal |
| | | | share |
| | | | capital & |
| | | | voting |
| | | | rights |
+------------------------------+--------------------+---------------+--------------+
| Venture North Sea Oil | Oil and natural | Scotland | 100% |
| Limited | gas production | | |
+------------------------------+--------------------+---------------+--------------+
| Venture North Sea Gas | Oil and natural | Scotland | 100% |
| Limited | gas production | | |
+------------------------------+--------------------+---------------+--------------+
| Venture Production | Employee services | Scotland | 100% |
| (Services) Limited | | | |
+------------------------------+--------------------+---------------+--------------+
| Venture North Sea Gas | Oil and natural | England | 100% |
| Exploration Limited | gas exploration | | |
+------------------------------+--------------------+---------------+--------------+
| NSGP (Ensign) Limited | Oil and natural | Jersey | 100% |
| | gas development | | |
+------------------------------+--------------------+---------------+--------------+
All subsidiary undertakings are consolidated in the Group financial statements.
In the financial statements of the Company, shares in subsidiary undertakings
are stated at cost.
13. Share-Based Payments
The Group currently has various share-based payment schemes for its employees,
details of which are given in the Directors' Remuneration Report.
The charge in the Group income statement for these schemes are as follows:
+------------------------------------------------+-------------+------------+
| | 2008 | 2007 |
+------------------------------------------------+-------------+------------+
| | GBP'000 | GBP'000 |
+------------------------------------------------+-------------+------------+
| Long Term Share Incentive Plans | 1,667 | 1,338 |
+------------------------------------------------+-------------+------------+
| Bonus Plans and Share Incentive Plans | 2,261 | 3,643 |
+------------------------------------------------+-------------+------------+
| | 3,928 | 4,981 |
+------------------------------------------------+-------------+------------+
2006 Long Term Share Incentive Plan
2006 Provisional Award
The performance conditions set for the 2006 provisional award, covering the
performance period 1 January 2006 to 31 December 2008, have not been met
therefore no awards will vest under this scheme. Under IFRS 2, fair values set
at the start of the scheme include consideration for market related performance
conditions. This element of the fair value is not revisited regardless of
changes in non market performance conditions.
There were 12 employees participating in this scheme at 31 December 2008. These
awards were due to vest on 31 December 2010. In 2006, 828,323 shares were
awarded under the 2006 provisional award with an average fair value of GBP5.03.
At 31 December 2008, the average fair value was GBP2.93.
2007 Provisional Award
It is currently considered that the award made in 2007, covering the performance
period 1 January 2007 to 31 December 2009, is unlikely to meet its performance
conditions. This will be formally determined in early 2010. As with the 2006
award, market related performance conditions set at the start of the scheme have
not been revisited.
There are currently 15 employees participating in this scheme. Awards are
provisional because they are dependent on the performance targets being met and
also on continuing employment of the participants. All outstanding awards under
the LTIP will vest after 31 December 2011, subject to all performance targets
being met and the individuals remaining in employment.
In 2007, 627,624 shares were awarded under the 2007 provisional award with an
average fair value of GBP5.06. At 31 December 2008, the average fair value was
GBP2.79.
2008 Long Term Share Incentive Plan
There are currently 27 employees participating in this scheme. For the purposes
of calculating the fair value of the awards, subject to market-based performance
conditions, a binomial pricing model has been used. The share price volatility
of 47% is based on the historical data of the Group. All outstanding awards
under the LTIP will vest after 31 December 2012, subject to all performance
targets being met and the individuals remaining in employment.
The risk free rate of return of 5.5% is based on the implied yield available on
zero coupon gilts, with a term remaining equal to the expected lifetime of the
awards. A dividend yield of 1.3% is used in the calculation.
In 2008, 8,321,250 shares were awarded under the 2008 LTIP with an average fair
value of GBP4.47.
Employee Annual Bonus Plan
From 1 January 2008, all staff including Executive Directors and senior managers
have been eligible to participate in the EABP and there will no longer be a
separate ADSBP. Previously, staff excluded from participation in the ADSBP were
eligible to participate in the EABP. The scheme comprises both share and cash
awards, as individuals awarded bonuses under the EABP can elect to take a
proportion of the bonus in cash and the remaining bonus as deferred shares.
Shares in respect of the 2008 award will be released on 1 January 2011 (2007: 1
January 2010). The estimated proportion of awards to be taken as shares and cash
are 65% and 35% respectively (2007: 50% shares and 50% cash).
For the purposes of calculating the fair value of the share-based awards, a
binomial pricing model has been used. The share price volatility used of 47%
(2007: 34%), the risk free rate of return of 4.5% (2007: 5.6%) and the dividend
yield of 1.3% (2007: 0%) are derived in a consistent manner to those used for
the 2007 LTIP. The charge for awards to be taken in shares is calculated using a
fair value of GBP102 per GBP100 of bonus to be taken as shares (2007: GBP103 per
GBP100 of bonus).
Annual Deferred Share Bonus Plan
Within the ADSBP 2007, there were 16 Executive Directors and senior manager. The
ADSBP was first introduced in 2005. The scheme comprised both share and cash
awards as individuals awarded bonuses under the ADSBP could elect to take a
proportion of the bonus in cash and the remaining bonus as deferred shares. From
1 January 2008, all staff including Executive Directors and senior managers have
been eligible to participate in the EABP and there will no longer be a separate
ADSBP.
Other Schemes
Details of the Group's other share-based plans are included in the Directors'
Remuneration Report.
In respect of these plans, 71,458 (2007: 61,110) shares were granted during the
year with a weighted average fair value of GBP6.21.
51,805 options were exercised during the year (2007: 2,696,220) and 6,250
options lapsed during the year (2007: 4,250). The weighted average price of
options exercised during the year was GBP1.18 (2007: GBP0.74). The number of
options to subscribe for shares outstanding at 31 December was 144,075 (2007:
202,130). The range of exercise prices for options outstanding at 31 December
was GBP0.84 to GBP7.75 (2007: GBP0.44 to GBP5.88). The weighted average
remaining contractual life of outstanding share options is 4.7 years (2007: 4.5
years).
The charge in the Group income statement for these schemes is GBP115,000 (2007:
GBP280,000).
National Insurance credits relating to these schemes totalled GBP196,000 (2007:
GBP9,000 credits).
14. Inventories
+-----------------------------------+---------+---------+---------+----------+
| | Group | Company |
+-----------------------------------+-------------------+--------------------+
| | 2008 | 2007 | 2008 | 2007 |
+-----------------------------------+---------+---------+---------+----------+
| | GBP'000 | GBP'000 | GBP'000 | GBP'000 |
+-----------------------------------+---------+---------+---------+----------+
| Crude oil | 3,043 | - | - | - |
+-----------------------------------+---------+---------+---------+----------+
| Materials and supplies | 1,509 | 1,721 | - | - |
+-----------------------------------+---------+---------+---------+----------+
| | 4,552 | 1,721 | - | - |
+-----------------------------------+---------+---------+---------+----------+
15. Trade and Other Receivables
The fair value of trade and other receivables are as follows:
+-----------------------------------+---------+---------+---------+----------+
| | Group | Company |
+-----------------------------------+-------------------+--------------------+
| | 2008 | 2007 | 2008 | 2007 |
| | GBP'000 | GBP'000 | GBP'000 | GBP'000 |
+-----------------------------------+---------+---------+---------+----------+
| | | | | |
+-----------------------------------+---------+---------+---------+----------+
| Amounts falling due within one | | | | |
| year: | | | | |
+-----------------------------------+---------+---------+---------+----------+
| Trade receivables - net | 50,651 | 49,690 | - | - |
+-----------------------------------+---------+---------+---------+----------+
| Other debtors and accrued income | 66,582 | 48,636 | 5,038 | 346 |
+-----------------------------------+---------+---------+---------+----------+
| Prepayments | 1,683 | 8,998 | - | - |
+-----------------------------------+---------+---------+---------+----------+
| Group relief - due from | - | - | 5,763 | - |
| subsidiary undertakings | | | | |
+-----------------------------------+---------+---------+---------+----------+
| | 118,916 | 107,324 | 10,801 | 346 |
+-----------------------------------+---------+---------+---------+----------+
| | | | | |
+-----------------------------------+---------+---------+---------+----------+
| Falling due after one year: | | | | |
+-----------------------------------+---------+---------+---------+----------+
| Amounts due from subsidiary | - | - | 42,634 | 153,247 |
| undertakings | | | | |
+-----------------------------------+---------+---------+---------+----------+
| Convertible loan notes receivable | 7,528 | 5,383 | - | - |
+-----------------------------------+---------+---------+---------+----------+
| | 7,528 | 5,383 | 42,634 | 153,247 |
+-----------------------------------+---------+---------+---------+----------+
The Company has confirmed that amounts due from subsidiary undertakings will not
be repayable within one year.
The convertible loan notes receivable of $10,000,000 were issued by Ten Degrees
North Energy Limited (TDNEL) on 19 December 2005 as part consideration in
respect of the disposal of Venture Production Trinidad Limited (VPTL). The notes
are denominated in US dollars and are redeemable by TDNEL in $500,000 tranches
in each year from 2010 to the final redemption date in 2014. TDNEL may redeem
$5,000,000 of the notes at par value at any time in the first 24 months after
issue. The notes accrue interest at rates of 2% in the period to 31 December
2006, 3% from 1 January 2007 to 31 December 2009 and 9% from 1 January 2010 to
the final redemption date.
A conversion event is a sale or qualifying Initial Public Offering or private
placement of TDNEL. Upon a conversion event and subject to the valuation of
TDNEL meeting certain criteria at that time, the Company can convert up to
$5,000,000 of the notes into ordinary share capital of TDNEL at a conversion
price of $1,500 per share. The loan notes are carried at the year end at
GBP7,528,000 using year end exchange rates.
Trade and other receivables are made up of 99% (2007: 99%) of balances that are
not overdue as the payment terms established with the Group's customers have not
been exceeded. The remaining overdue balance is not considered to be impaired.
Included within trade and other receivables are balances due from the following
related parties, none of which were overdue:
+----------------------------------+----------+---------+----------+---------+
| | Group | Company |
+----------------------------------+--------------------+--------------------+
| | 2008 | 2007 | 2008 | 2007 |
| | GBP'000 | GBP'000 | GBP'000 | GBP'000 |
+----------------------------------+----------+---------+----------+---------+
| NSIP (Holdings) Limited | 55 | - | - | - |
+----------------------------------+----------+---------+----------+---------+
| NSIP (GKA) Limited | - | 3,498 | - | - |
+----------------------------------+----------+---------+----------+---------+
| | 55 | 3,498 | - | - |
+----------------------------------+----------+---------+----------+---------+
Trade receivables and other receivables include amounts denominated in the
following major currencies:
+----------------------------------+----------+---------+----------+---------+
| | Group | Company |
+----------------------------------+--------------------+--------------------+
| | 2008 | 2007 | 2008 | 2007 |
| | GBP'000 | GBP'000 | GBP'000 | GBP'000 |
+----------------------------------+----------+---------+----------+---------+
| USD | 10,127 | 31,844 | 2,052 | - |
+----------------------------------+----------+---------+----------+---------+
| GBP | 77,687 | 59,896 | 8,749 | 346 |
+----------------------------------+----------+---------+----------+---------+
| Euro | 31,102 | 15,584 | - | - |
+----------------------------------+----------+---------+----------+---------+
| Total trade and other | 118,916 | 107,324 | 10,801 | 346 |
| receivables | | | | |
+----------------------------------+----------+---------+----------+---------+
The maximum exposure to credit risk at the reporting date is the fair value of
each class of receivable mentioned above. The Group does not hold any collateral
as security.
16. Cash and Cash Equivalents
+----------------------------------+----------+---------+----------+---------+
| | Group | Company |
+----------------------------------+--------------------+--------------------+
| | 2008 | 2007 | 2008 | 2007 |
+----------------------------------+----------+---------+----------+---------+
| | GBP'000 | GBP'000 | GBP'000 | GBP'000 |
+----------------------------------+----------+---------+----------+---------+
| Cash in hand and at bank | - | 3,825 | - | - |
+----------------------------------+----------+---------+----------+---------+
| Short term deposits | 24,704 | 154,620 | 24,704 | 154,620 |
+----------------------------------+----------+---------+----------+---------+
| Liquidity funds | 183,265 | - | 183,265 | - |
+----------------------------------+----------+---------+----------+---------+
| | 207,969 | 158,445 | 207,969 | 154,620 |
+----------------------------------+----------+---------+----------+---------+
16. Cash and Cash Equivalents (continued)
For the purposes of the cash flow statements, cash and cash equivalents comprise
the following at 31 December:
+----------------------------------+----------+---------+----------+----------+
| | Group | Company |
+----------------------------------+--------------------+---------------------+
| | 2008 | 2007 | 2008 | 2007 |
+----------------------------------+----------+---------+----------+----------+
| | GBP'000 | GBP'000 | GBP'000 | GBP'000 |
+----------------------------------+----------+---------+----------+----------+
| (Bank overdraft)/Cash in hand | (9,017) | 3,825 | (21,276) | (50,486) |
| and at bank | | | | |
+----------------------------------+----------+---------+----------+----------+
| Short term deposits | 24,704 | 154,620 | 24,704 | 154,620 |
+----------------------------------+----------+---------+----------+----------+
| Liquidity funds | 183,265 | - | 183,265 | - |
+----------------------------------+----------+---------+----------+----------+
| | 198,952 | 158,445 | 186,693 | 104,134 |
+----------------------------------+----------+---------+----------+----------+
17. Trade and Other Payables
+----------------------------------+----------+---------+----------+---------+
| | Group | Company |
+----------------------------------+--------------------+--------------------+
| | 2008 | 2007 | 2008 | 2007 |
+----------------------------------+----------+---------+----------+---------+
| | GBP'000 | GBP'000 | GBP'000 | GBP'000 |
+----------------------------------+----------+---------+----------+---------+
| Amounts falling due within one | | | | |
| year: | | | | |
+----------------------------------+----------+---------+----------+---------+
| Trade payables | 48,623 | 16,779 | - | 693 |
+----------------------------------+----------+---------+----------+---------+
| Accruals and deferred income | 91,747 | 69,497 | 174 | 10,441 |
+----------------------------------+----------+---------+----------+---------+
| Other payables | 10,766 | 28,651 | 9,099 | 4,692 |
+----------------------------------+----------+---------+----------+---------+
| Social security and other taxes | 464 | 797 | - | 2 |
+----------------------------------+----------+---------+----------+---------+
| Deferred acquisition liability | 1,350 | 3,100 | - | - |
+----------------------------------+----------+---------+----------+---------+
| | 152,950 | 118,824 | 9,273 | 15,828 |
+----------------------------------+----------+---------+----------+---------+
18. Financial Liabilities - Borrowings
+----------------------------------+----------+---------+----------+---------+
| | Group | Company |
+----------------------------------+--------------------+--------------------+
| | 2008 | 2007 | 2008 | 2007 |
+----------------------------------+----------+---------+----------+---------+
| | GBP'000 | GBP'000 | GBP'000 | GBP'000 |
+----------------------------------+----------+---------+----------+---------+
| Non-Current | | | | |
+----------------------------------+----------+---------+----------+---------+
| Convertible bond | 142,511 | 167,612 | 142,511 | 167,612 |
+----------------------------------+----------+---------+----------+---------+
| USD and GBP loan notes | 313,934 | 230,710 | 313,934 | 230,710 |
+----------------------------------+----------+---------+----------+---------+
| | 456,445 | 398,322 | 456,445 | 398,322 |
+----------------------------------+----------+---------+----------+---------+
| Current | | | | |
+----------------------------------+----------+---------+----------+---------+
| Bank overdrafts | 9,017 | - | 21,276 | 50,486 |
+----------------------------------+----------+---------+----------+---------+
| | 9,017 | - | 21,276 | 50,486 |
+----------------------------------+----------+---------+----------+---------+
| Total borrowings | 465,462 | 398,322 | 477,721 | 448,808 |
+----------------------------------+----------+---------+----------+---------+
Bank Loan
During 2007, the Group entered into new debt financing arrangements and the
existing bank loan was repaid and replaced with a GBP365,000,000 corporate debt
facility. There was no cash drawn down on this facility at 31 December 2008.
Borrowing Facilities
The Group has the following undrawn borrowing facilities available at the
balance sheet date in respect of which all conditions precedent had been met at
that date:
+---------------------------------------------------+------------+---------+
| | 2008 | 2007 |
+---------------------------------------------------+------------+---------+
| | GBP'000 | GBP'000 |
+---------------------------------------------------+------------+---------+
| | | |
+---------------------------------------------------+------------+---------+
| Expiring in more than two years | 346,215 | 350,000 |
+---------------------------------------------------+------------+---------+
This is stated after the issue of a letter of credit guarantee of GBP18,785,000
(2007: $30,000,000) in the ordinary course of business.
The main purpose of the facilities is to finance the acquisition of new assets
and the development of new and existing assets.
Convertible Bonds
The Company issued GBP151,000,000 3.25% convertible bonds at a nominal value of
GBP151,000,000 on 16 August 2007. The bonds mature on 16 August 2010 at par and
can be converted into shares at the rate of one share per 915 pence. The equity
component of the bond of GBP14,463,000 has been reclassified to equity.
During the year, GBP29,000,000 4.25% convertible bonds matured and were fully
converted into shares.
The convertible bond recognised in the balance sheet is calculated as follows:
+--------------------------------------+----------+----------+----------+----------+
| | Group | Company |
+--------------------------------------+---------------------+---------------------+
| | 2008 | 2007 | 2008 | 2007 |
| | GBP'000 | GBP'000 | GBP'000 | GBP'000 |
+--------------------------------------+----------+----------+----------+----------+
| At 1 January | 167,612 | 29,801 | 167,612 | 29,801 |
+--------------------------------------+----------+----------+----------+----------+
| Net proceeds from convertible bond | - | 151,000 | - | 151,000 |
| issue | | | | |
+--------------------------------------+----------+----------+----------+----------+
| Accrued redemption premium | (1,334) | 581 | (1,334) | 581 |
+--------------------------------------+----------+----------+----------+----------+
| Unwinding of discount on liability | 4,486 | 2,138 | 4,486 | 2,138 |
| component | | | | |
+--------------------------------------+----------+----------+----------+----------+
| Reclassified as equity (Note 26) | - | (14,463) | - | (14,463) |
+--------------------------------------+----------+----------+----------+----------+
| Convertible loan expenses | 747 | (1,445) | 747 | (1,445) |
+--------------------------------------+----------+----------+----------+----------+
| Conversion of convertible loan | (29,000) | - | (29,000) | - |
+--------------------------------------+----------+----------+----------+----------+
| Liability component at 31 December | 142,511 | 167,612 | 142,511 | 167,612 |
+--------------------------------------+----------+----------+----------+----------+
+--------+--------------------------------+---------+---------+---------+---------+
| USD and GBP Loan Notes |
| On 29 August 2007, Venture issued $414,000,000 of 6.41%, $10,000,000 of 6.64% |
| and GBP25,000,000 of 6.71% secured loan notes through a private placing with UK |
| and US institutional investors. These notes have maturities of between 10 and |
| 15 years and are at fixed rates. |
| |
+---------------------------------------------------------------------------------+
| | Group | Company |
+-----------------------------------------+-------------------+-------------------+
| | 2008 | 2007 | 2008 | 2007 |
| | GBP'000 | GBP'000 | GBP'000 | GBP'000 |
+-----------------------------------------+---------+---------+---------+---------+
| USD | $414,000,000 6.41% notes with | 286,307 | 205,022 | 286,307 | 205,022 |
| | a final maturity of 29 August | | | | |
| | 2017 | | | | |
+--------+--------------------------------+---------+---------+---------+---------+
| | | | | | |
+--------+--------------------------------+---------+---------+---------+---------+
| USD | $10,000,000 6.64% notes with a | 6,916 | 4,952 | 6,916 | 4,952 |
| | final maturity of 29 August | | | | |
| | 2022 | | | | |
+--------+--------------------------------+---------+---------+---------+---------+
| | | | | | |
+--------+--------------------------------+---------+---------+---------+---------+
| GBP | GBP25,000,000 6.71% notes with | 25,000 | 25,000 | 25,000 | 25,000 |
| | a final maturity of 29 August | | | | |
| | 2017 | | | | |
+--------+--------------------------------+---------+---------+---------+---------+
| | | | | |
+-----------------------------------------+---------+---------+---------+---------+
| Loan notes expenses | (4,289) | (4,264) | (4,289) | (4,264) |
+-----------------------------------------+---------+---------+---------+---------+
| Total USD and GBP loan notes | 313,934 | 230,710 | 313,934 | 230,710 |
+--------+--------------------------------+---------+---------+---------+---------+
+---------------------------------------+---------+---------+---------+---------+
| Breakdown of total borrowings by | Group | Company |
| currency | | |
+---------------------------------------+-------------------+-------------------+
| | 2008 | 2007 | 2008 | 2007 |
| | GBP'000 | GBP'000 | GBP'000 | GBP'000 |
+---------------------------------------+---------+---------+---------+---------+
| GBP | 172,239 | 188,348 | 184,498 | 238,834 |
+---------------------------------------+---------+---------+---------+---------+
| USD | 293,223 | 209,974 | 293,223 | 209,974 |
+---------------------------------------+---------+---------+---------+---------+
| | 465,462 | 398,322 | 477,721 | 448,808 |
+---------------------------------------+---------+---------+---------+---------+
+---------------------------------------+---------+---------+---------+---------+
| Breakdown by maturity | Group | Company |
+---------------------------------------+-------------------+-------------------+
| | 2008 | 2007 | 2008 | 2007 |
| | GBP'000 | GBP'000 | GBP'000 | GBP'000 |
+---------------------------------------+---------+---------+---------+---------+
| 2008 - | - | - | - | 50,486 |
| bank | | | | |
| overdraft | | | | |
+---------------------------------------+---------+---------+---------+---------+
| 2009 - | 9,017 | - | 21,276 | - |
| bank | | | | |
| overdraft | | | | |
+---------------------------------------+---------+---------+---------+---------+
| 2010 | 143,067 | 169,057 | 143,067 | 169,057 |
+---------------------------------------+---------+---------+---------+---------+
| 2011 | - | - | - | - |
+---------------------------------------+---------+---------+---------+---------+
| 2012 | - | - | - | - |
+---------------------------------------+---------+---------+---------+---------+
| Thereafter | 318,223 | 234,974 | 318,223 | 234,974 |
+---------------------------------------+---------+---------+---------+---------+
| Loan expenses | (4,845) | (5,709) | (4,845) | (5,709) |
+---------------------------------------+---------+---------+---------+---------+
| | 465,462 | 398,322 | 477,721 | 448,808 |
+---------------------------------------+---------+---------+---------+---------+
19. Deferred Tax Liability/(Asset)
+---------------------------------------+---------+----------+---------+----------+
| | Group | Company |
+---------------------------------------+--------------------+--------------------+
| | 2008 | 2007 | 2008 | 2007 |
+---------------------------------------+---------+----------+---------+----------+
| | GBP'000 | GBP'000 | GBP'000 | GBP'000 |
+---------------------------------------+---------+----------+---------+----------+
| At 1 January | 200,445 | 193,435 | (1,019) | (13,365) |
+---------------------------------------+---------+----------+---------+----------+
| Profit and loss charge/(credit) (Note | 92,379 | 39,919 | (9,000) | 1,510 |
| 6) | | | | |
+---------------------------------------+---------+----------+---------+----------+
| Taken to equity: | | | | |
+---------------------------------------+---------+----------+---------+----------+
| - Employee share benefits | (1,406) | 10,836 | 3,078 | 10,836 |
+---------------------------------------+---------+----------+---------+----------+
| - Derivative financial liabilities | 54,714 | (45,800) | - | - |
+---------------------------------------+---------+----------+---------+----------+
| Deferred tax on business combination | - | 4,400 | - | - |
+---------------------------------------+---------+----------+---------+----------+
| Deferred PRT | 543 | 530 | - | - |
+---------------------------------------+---------+----------+---------+----------+
| Other | (2,751) | (2,875) | - | - |
+---------------------------------------+---------+----------+---------+----------+
| At 31 December | 343,924 | 200,445 | (6,941) | (1,019) |
+---------------------------------------+---------+----------+---------+----------+
The total deferred tax liability at 31 December 2008 comprised accelerated
capital allowances of GBP372,021,000 (2007: GBP323,418,000), other deferred tax
liability of GBP51,557,000 (2007: GBP71,355,000), partially offset by tax losses
of GBP26,346,000 (2007: GBP121,270,000) and other deferred tax assets of
GBP53,308,000 (2007: GBP73,058,000). The deferred tax assets have been
recognised as the Group is expected to have sufficient taxable profits in future
years against which the assets can be relieved.
Deferred tax assets of GBP3,372,000 (2007: GBP5,267,000) have not been
recognised.
Deferred tax assets and liabilities are only offset where there is a legally
enforceable right of offset and there is an intention to settle the balances
net.
20. Other Non-Current Liabilities
+---------------------------------+----------+---------+----------+---------+
| | Group | Company |
+---------------------------------+--------------------+--------------------+
| | 2008 | 2007 | 2008 | 2007 |
+---------------------------------+----------+---------+----------+---------+
| | GBP'000 | GBP'000 | GBP'000 | GBP'000 |
+---------------------------------+----------+---------+----------+---------+
| | | | | |
+---------------------------------+----------+---------+----------+---------+
| Deferred acquisition liability | 14,113 | 9,392 | - | - |
+---------------------------------+----------+---------+----------+---------+
| | 14,113 | 9,392 | - | - |
+---------------------------------+----------+---------+----------+---------+
Deferred consideration relates to amounts payable in respect of the purchase of
various interests in oil and gas assets, the timing of which is dependent upon
the attainment of certain field development and production milestones. These
amounts are expected to be settled over the next six years.
21. Provisions
+---------------------------------+----------+----------+----------+----------+
| | Group | Company |
+---------------------------------+---------------------+---------------------+
| | 2008 | 2007 | 2008 | 2007 |
+---------------------------------+----------+----------+----------+----------+
| Provisions for decommissioning | GBP'000 | GBP'000 | GBP'000 | GBP'000 |
+---------------------------------+----------+----------+----------+----------+
| At 1 January | 70,425 | 61,831 | - | - |
+---------------------------------+----------+----------+----------+----------+
| Increased provision on existing | 11,771 | 3,958 | - | - |
| assets | | | | |
+---------------------------------+----------+----------+----------+----------+
| Utilisation of decommissioning | (3,626) | - | - | |
| provision | | | | |
+---------------------------------+----------+----------+----------+----------+
| Unwinding charge for the year | 5,099 | 4,636 | - | - |
| (Note 5) | | | | |
+---------------------------------+----------+----------+----------+----------+
| At 31 December | 83,669 | 70,425 | - | - |
+---------------------------------+----------+----------+----------+----------+
These decommissioning costs are expected to be incurred in the period from 2009
to 2023. The provision has been based upon existing technology, current
legislation requirements and discounted using a rate of 7.5% (2007: 7.5%). The
estimated decommissioning costs and the pre-tax discount rate applied take into
account the effects of inflation and risks and uncertainties concerning amounts
to be settled in the future.
Decommissioning of the Kittiwake Loading Buoy commenced during the year,
resulting in the utilisation of some of the provision.
22. Financial Instruments
The main risks arising from the Group's financial instruments are market risk,
liquidity risk and credit risk. The Board reviews and agrees policies for
managing each of these risks and they are summarised below.
Market Risk
Venture is exposed to market risk, primarily related to foreign exchange and
commodity prices. The Group actively monitors these exposures. To manage the
volatility relating to these exposures, the Group enters into a variety of
derivative financial instruments.
The Group's objective is to reduce, where it deems appropriate to do so,
fluctuations in earnings and cash flows associated with changes, foreign
currency rates and commodity prices. It is the Group's policy and practice to
use derivative financial instruments to manage exposures. The Group expects that
any loss in value for these instruments generally would be offset by increases
in the value of the underlying transactions.
Foreign Exchange Rate Risk
The Group uses the pound sterling as its reporting currency. As a result, the
Group is exposed to foreign exchange movements, primarily in the US dollar and
euro. Consequently, it enters into various contracts that reflect the changes in
the value of foreign exchange rates to preserve the value of assets and
commitments. In general, the Group's revenues from crude oil sales are
denominated in US dollars, while its gas sales revenues are denominated in
pounds sterling and euros. Where possible, the Group's policy is to reduce
significant exposures to movements in foreign currency exchange rates through
hedging foreign currency exposure for up to 50% of forecast net US dollar
revenues. Venture also uses forward contracts to hedge certain anticipated net
revenues in foreign currencies. The Group marks to market these forward
contracts and thus changes in the forward contract fair values are booked to the
income statement and reverse in the income statement over the term of the
contracts.
The Group has certain of its assets and liabilities denominated in foreign
currencies, notably liabilities associated with the privately placed notes of
US$424,000,000, substantially offset by cash and cash equivalents of
US$281,713,000. The retranslation of these foreign currency assets and
liabilities at the year end closing exchange rate has resulted in a net charge
to the income statement in 2008 of GBP20,230,000.
Net investments in foreign countries are long term investments. Their fair value
changes through movements of currency exchange rates. In the very long term,
however, the difference in the inflation rate should match the currency exchange
rate movement, so that the market value of the foreign non-monetary assets will
compensate for the change due to currency movements. For this reason, the Group
does not hedge the net investments in foreign subsidiaries.
If the average sterling/US dollar rate had been 10% higher during 2008, post-tax
profit for the year and equity would have been GBP10,573,000 higher (2007:
GBP9,450,000 higher). If the average sterling/US dollar rate had been 10% lower
during 2008, post-tax profit for the year and equity would have been
GBP8,651,000 lower (2007: GBP7,732,000 lower).
If the closing sterling/US dollar rate was 10% higher at 31 December 2008, the
post-tax profit for the year and equity would have been GBP3,256,000 higher
(2007: GBP6,296,000 higher). If the closing sterling/US dollar rate was 10%
lower at 31 December 2008, the post-tax profit for the year and equity would
have been GBP2,664,000 lower (2007: GBP5,151,000 lower).
Commodity Price Risk
The Group has exposure to price risk related to anticipated revenues from crude
oil and natural gas. A change in those prices may alter the gross margin of the
Group. Accordingly, it enters into commodity futures, forward and option
contracts to manage fluctuations in prices of anticipated revenues.
To manage commodity price risk and deliver stability to the investment
programme, the Group's policy is to allow hedging of commodity price exposure up
to 50% of its oil and gas production. In exceptional circumstances and only with
the prior approval of the Board, up to 75% of such production may be hedged.
Hedges have been put in place with a variety of providers.
If the average gas price had been 10% higher or lower during 2008, post-tax
profit for the year and equity would have been GBP6,944,000 higher or lower
(2007: GBP4,365,000 higher or lower).
If the average oil price had been 10% higher or lower during 2008, post-tax
profit for the year and equity would have been GBP4,758,000 higher or lower
(2007: GBP4,253,000 higher or lower).
Interest Rate Risk
The Group manages its net exposure to interest rate risk through negotiating
fixed rate financial debt in its financial debt portfolio. The Group has no
exposure to variability in its cash flows due to interest rate risk as it
borrows at rates of interest which are fixed in advance. At 31 December 2008,
all of the Group's drawn borrowings were at fixed rates.
Credit Risk
Credit risks arise from the possibility that customers may not be able to settle
their obligations as agreed. To manage this risk, the Group periodically
assesses the financial reliability of customers. The Group's major customers are
typically large companies which have strong credit ratings assigned by
international credit rating agencies. The nominal value less impairment
provision of trade accounts receivables and payables are assumed to approximate
their fair value.
The Group's policy is to deal with customers with an 'A' rating or better where
possible. At 31 December 2008, 100% (2007: 100%) of trade receivables were such
customers.
The Group also has credit risk relating to cash held on deposit. The Group's
policy is to deposit cash at institutions with an 'A' rating or better where
possible. 100% of the cash held on deposit at 31 December 2008 (2007: 100%) was
held with such institutions.
The Group monitors other counterparties such as joint venture partners to ensure
they are able to meet their obligations, and only enters into derivative
financial instruments with parties with an 'A' rating or better.
Liquidity Risk
Liquidity risk is defined as the risk that the Group will not be able to settle
or meet its obligations on time or at a reasonable price. Liquidity, funding
risks and related processes and policies are overseen by management. Venture
manages its liquidity risk on a consolidated basis based on business needs and
through numerous sources of finance in order to maintain flexibility.
At the year end the Group is in a strong financial position due to the amount of
capital available to the business. It has both cash balances of GBP207,969,000
and an undrawn committed five year debt facility of which GBP346,215,000 is
available.
Capital Risk
The Group seeks to maintain an optimal capital structure with a diversified
range of funding including equity, convertible bonds, bank debt and privately
placed loan notes. The Group continually monitors its capital structure, to
ensure this is in line with business needs, ongoing asset development and to
fund potential future acquisitions. In 2007, its borrowing base banking facility
was replaced with a medium term committed corporate debt facility of
GBP365,000,000, GBP151,000,000 was raised through the issue of 3.25% unsecured
convertible bonds and a further $424,000,000 and GBP25,000,000 in a private
placement of notes was secured with US and UK institutional investors. As a
result, there are externally imposed covenant requirements with which the Group
is fully compliant.
There are three key financial covenants the Group must comply with. These are:
leverage, net borrowings should not exceed three times the EBITDA; interest
cover, the ratio of EBITDA to net finance cost is less than 5:1; and net
borrowings should not exceed one times the hydrocarbon covenant dollar
equivalent, which is calculated as $7.5 multiplied by the proved and probable
reserves.
Derivative Financial Instruments
The following tables show the fair values of derivative financial instruments
analysed by type of contract at 31 December 2008 and 2007. The fair values are
determined by reference to market prices at 31 December 2008 and 2007.
+----------------------------------+----------+---------+----------+----------+
| Group | Positive fair | Negative fair |
| | values | values |
+----------------------------------+--------------------+---------------------+
| | 2008 | 2007 | 2008 | 2007 |
| | GBP'000 | GBP'000 | GBP'000 | GBP'000 |
+----------------------------------+----------+---------+----------+----------+
| | | | | |
+----------------------------------+----------+---------+----------+----------+
| Currency related instruments | | | | |
+----------------------------------+----------+---------+----------+----------+
| Forward foreign exchange rate | - | 498 | (5,753) | - |
| contracts | | | | |
| | | | | |
+----------------------------------+----------+---------+----------+----------+
| Oil price related instruments | | | | |
+----------------------------------+----------+---------+----------+----------+
| Collars | - | - | - | (1,813) |
+----------------------------------+----------+---------+----------+----------+
| Commodity swaps | 42,842 | - | - | (40,685) |
+----------------------------------+----------+---------+----------+----------+
| Total of oil price related | 42,842 | - | - | (42,498) |
| instruments | | | | |
| | | | | |
+----------------------------------+----------+---------+----------+----------+
| Gas price related instruments | | | | |
+----------------------------------+----------+---------+----------+----------+
| Collars | 4,024 | - | - | - |
+----------------------------------+----------+---------+----------+----------+
| Commodity swaps | 2,204 | - | (7,633) | (25,493) |
+----------------------------------+----------+---------+----------+----------+
| Total of gas price related | 6,228 | - | (7,633) | (25,493) |
| instruments | | | | |
| | | | | |
+----------------------------------+----------+---------+----------+----------+
| Total derivative financial | 49,070 | 498 | (13,386) | (67,991) |
| instruments | | | | |
+----------------------------------+----------+---------+----------+----------+
+----------------------------------+----------+---------+----------+---------+
| Company | Positive fair | Negative fair |
| | values | values |
+----------------------------------+--------------------+--------------------+
| | 2008 | 2007 | 2008 | 2007 |
| | GBP'000 | GBP'000 | GBP'000 | GBP'000 |
+----------------------------------+----------+---------+----------+---------+
| | | | | |
+----------------------------------+----------+---------+----------+---------+
| Currency related instruments | | | | |
+----------------------------------+----------+---------+----------+---------+
| Forward foreign exchange rate | - | 498 | (5,753) | - |
| contracts | | | | |
+----------------------------------+----------+---------+----------+---------+
| Total derivative financial | - | 498 | (5,753) | - |
| instruments | | | | |
+----------------------------------+----------+---------+----------+---------+
Derivative financial instruments include amounts denominated in the following
major currencies:
+----------------------------------+----------+----------+----------+---------+
| Currency | Group | Company |
+----------------------------------+---------------------+--------------------+
| | 2008 | 2007 | 2008 | 2007 |
| | GBP'000 | GBP'000 | GBP'000 | GBP'000 |
+----------------------------------+----------+----------+----------+---------+
| | | | | |
+----------------------------------+----------+----------+----------+---------+
| USD | 42,842 | (42,498) | - | - |
+----------------------------------+----------+----------+----------+---------+
| GBP | (7,158) | (24,995) | (5,753) | 498 |
+----------------------------------+----------+----------+----------+---------+
| Total derivative financial | 35,684 | (67,493) | (5,753) | 498 |
| instruments | | | | |
+----------------------------------+----------+----------+----------+---------+
+----------------------------------+----------+----------+----------+---------+
| Included in current assets | 21,712 | 498 | - | 498 |
+----------------------------------+----------+----------+----------+---------+
| Included in current liabilities | (13,386) | (36,992) | (5,753) | - |
+----------------------------------+----------+----------+----------+---------+
| Included in non-current assets | 27,358 | - | - | - |
+----------------------------------+----------+----------+----------+---------+
| Included in non-current | - | (30,999) | - | - |
| liabilities | | | | |
+----------------------------------+----------+----------+----------+---------+
| Total | 35,684 | (67,493) | (5,753) | 498 |
+----------------------------------+----------+----------+----------+---------+
All of the derivative instruments used for the purposes of hedging the oil and
gas prices are effective for hedge accounting purposes.
Derivatives for foreign exchange are not hedge accounted and are marked to
market through the income statement.
All of the hedging instruments used for anticipated transactions mature during
2009 and 2010, and were contracted with the intention of hedging anticipated
transactions which are expected to occur in 2009 and 2010. The instruments are
intended to hedge the commodity price risk arising from the highly probable
forecast transactions.
The gain or loss relating to the effective portion of the derivative
instruments, previously deferred in equity, is recognised in the income
statement within revenue when the hedged item affects profit or loss.
There has been no charge recognised in the year relating to the ineffectiveness
of derivatives that are hedge accounted (2007: nil).
The maximum exposure to credit risk at the reporting date is the fair value of
derivative financial instruments.
Market values have been used to determine the fair value of derivative financial
instruments based on estimated amounts the Group would receive or pay to
terminate the agreements, taking into account the forward commodity prices and
forward foreign exchange rates at 31 December 2008.
Forward Oil Price Contracts
At 31 December 2008, the Group had a number of forward oil price contracts in
place to hedge cash flows from oil production in accordance with the Group's
hedging strategy. These contracts were all forward swaps.
The fair value assets of GBP42,842,000 relating to the forward oil price
contracts, which are deferred in the cash flow reserve at 31 December 2008, will
reverse in the income statement over the term of the contracts. At 31 December
2008, the forward oil price contracts covered the period January 2009 to
December 2010.
Forward Gas Price Contracts
At 31 December 2008, the Group had a number of forward gas price contracts in
place. These contracts comprised forward swaps, put and call options and forward
sales.
The fair value liabilities of GBP1,405,000 relating to the forward gas price
contracts, which are deferred in the cash flow reserve at 31 December 2008, will
reverse in the income statement over the term of the contracts. At 31 December
2008, the forward gas price contracts covered the period January 2009 to
December 2010.
Forward Foreign Currency Contracts
The notional principal amount of the Group's outstanding forward foreign
currency contracts at 31 December 2008 was $30,000,000 (2007: $228,000,000).
These contracts hedge foreign exchange exposure of forecast net US dollar income
by fixing the forward exchange rate on a monthly basis.
At 31 December 2008, the forward contracts covered the period January 2009 to
March 2009 at an exchange rate varying between $1.9575 and $2.0025 to GBP1.
The fair value liability for forward foreign currency contracts at 31 December
2008 is GBP5,753,000.
Changes in the fair value of derivative financial instruments that do not
qualify for, or are not designated in hedging relationships, are recognised
immediately in the current period income statement when they occur as shown
below:
+-----------------------------------------------------------------------+--------------+------------+
| | 2008 | 2007 |
+-----------------------------------------------------------------------+--------------+------------+
| | GBP'000 | GBP'000 |
+-----------------------------------------------------------------------+--------------+------------+
| Loss in the income statement | (6,253) | (1,903) |
+-----------------------------------------------------------------------+--------------+------------+
Fair Value of Non-Derivative Financial Assets and Financial Liabilities
The following table provides a comparison by category of the book values and the
fair values of the Group's financial assets and financial liabilities at the
balance sheet date.
+----------------------------------+-----------+-----------+-----------+-----------+
| Group | Book | Fair | Book | Fair |
| | value | value | value | value |
+----------------------------------+-----------+-----------+-----------+-----------+
| | 2008 | 2008 | 2007 | 2007 |
| | GBP'000 | GBP'000 | GBP'000 | GBP'000 |
+----------------------------------+-----------+-----------+-----------+-----------+
| Fair value of non-current | | | | |
| financial assets and financial | | | | |
| liabilities held or issued to | | | | |
| finance the Group's operations: | | | | |
+----------------------------------+-----------+-----------+-----------+-----------+
| Convertible bonds (Note 18) | (142,511) | (134,222) | (167,612) | (170,150) |
+----------------------------------+-----------+-----------+-----------+-----------+
| USD and GBP loan notes (Note 18) | (313,934) | (287,941) | (230,710) | (254,046) |
+----------------------------------+-----------+-----------+-----------+-----------+
| Loan notes receivable (Note 15) | 7,528 | 7,528 | 5,383 | 5,383 |
+----------------------------------+-----------+-----------+-----------+-----------+
| Deferred acquisition liability | (14,113) | (14,113) | (9,392) | (9,392) |
| (Note 20) | | | | |
+----------------------------------+-----------+-----------+-----------+-----------+
| Fair value of other financial | | | | |
| assets and financial liabilities | | | | |
| held or issued to finance the | | | | |
| Group's operations: | | | | |
+----------------------------------+-----------+-----------+-----------+-----------+
| Trade and other payables (Note | (151,600) | (151,600) | (115,724) | (115,724) |
| 17) | | | | |
+----------------------------------+-----------+-----------+-----------+-----------+
| Deferred acquisition liability | (1,350) | (1,350) | (3,100) | (3,100) |
| (Note 17) | | | | |
+----------------------------------+-----------+-----------+-----------+-----------+
| Trade and other receivables | 118,916 | 118,916 | 107,324 | 107,324 |
| (Note 15) | | | | |
+----------------------------------+-----------+-----------+-----------+-----------+
| (Bank overdraft)/Cash at bank | (9,017) | (9,017) | 3,825 | 3,825 |
| and in hand (Note 16) | | | | |
+----------------------------------+-----------+-----------+-----------+-----------+
| Cash on short term deposit (Note | 24,704 | 24,704 | 154,620 | 154,620 |
| 16) | | | | |
+----------------------------------+-----------+-----------+-----------+-----------+
| Liquidity funds (Note 16) | 183,265 | 183,265 | - | - |
+----------------------------------+-----------+-----------+-----------+-----------+
+----------------------------------+-----------+-----------+-----------+-----------+
| Company | Book | Fair | Book | Fair |
| | value | value | value | value |
+----------------------------------+-----------+-----------+-----------+-----------+
| | 2008 | 2008 | 2007 | 2007 |
| | GBP'000 | GBP'000 | GBP'000 | GBP'000 |
+----------------------------------+-----------+-----------+-----------+-----------+
| Fair value of non-current | | | | |
| financial assets and financial | | | | |
| liabilities held or issued to | | | | |
| finance the Company's | | | | |
| operations: | | | | |
+----------------------------------+-----------+-----------+-----------+-----------+
| Convertible bonds (Note 18) | (142,511) | (134,222) | (167,612) | (170,150) |
+----------------------------------+-----------+-----------+-----------+-----------+
| USD and GBP loan notes (Note 18) | (313,934) | (287,941) | (230,710) | (254,046) |
+----------------------------------+-----------+-----------+-----------+-----------+
| Trade and other receivables | 42,634 | 42,634 | 153,247 | 153,247 |
| (Note 15) | | | | |
+----------------------------------+-----------+-----------+-----------+-----------+
| Fair value of other financial | | | | |
| assets and financial liabilities | | | | |
| held or issued to finance the | | | | |
| Company's operations: | | | | |
+----------------------------------+-----------+-----------+-----------+-----------+
| Trade and other payables (Note | (9,273) | (9,273) | (15,828) | (15,828) |
| 17) | | | | |
+----------------------------------+-----------+-----------+-----------+-----------+
| Trade and other receivables | 10,801 | 10,801 | 346 | 346 |
| (Note 15) | | | | |
+----------------------------------+-----------+-----------+-----------+-----------+
| Bank overdraft (Note 16) | (21,276) | (21,276) | (50,486) | (50,486) |
+----------------------------------+-----------+-----------+-----------+-----------+
| Cash on short term deposit (Note | 24,704 | 24,704 | 154,620 | 154,620 |
| 16) | | | | |
+----------------------------------+-----------+-----------+-----------+-----------+
| Liquidity funds (Note 16) | 183,265 | 183,265 | - | - |
+----------------------------------+-----------+-----------+-----------+-----------+
Maturity of Financial Liabilities
The following table sets forth details of the financial liabilities which will
be settled on a net basis into relevant maturity groupings as at 31 December
2008 and 2007. The amounts disclosed in the table are the contractual
undiscounted cash flows including interest payments at the applicable fixed
rate. Non-GBP denominated balances have been translated at the year end closing
rates. The amounts payable in respect of derivative financial instruments have
been calculated based on price differentials at 31 December 2008.
+--------------------------+-----------+-----------+----------+-----------+-----------+
| As at 31 December 2008: | Due in | Due in | Due in | Due | Total |
| | less | 1 to 2 | 2 to 5 | after 5 | |
| | than 1 | years | years | years | |
| | year | | | | |
+--------------------------+-----------+-----------+----------+-----------+-----------+
| Group | GBP'000 | GBP'000 | GBP'000 | GBP'000 | GBP'000 |
+--------------------------+-----------+-----------+----------+-----------+-----------+
| | | | | | |
+--------------------------+-----------+-----------+----------+-----------+-----------+
| Current liabilities | | | | | |
+--------------------------+-----------+-----------+----------+-----------+-----------+
| Trade and other payables | (151,600) | - | - | - | (151,600) |
+--------------------------+-----------+-----------+----------+-----------+-----------+
| Bank overdraft | (9,017) | - | - | - | (9,017) |
+--------------------------+-----------+-----------+----------+-----------+-----------+
| Deferred acquisition | (1,350) | - | - | - | (1,350) |
| liability | | | | | |
+--------------------------+-----------+-----------+----------+-----------+-----------+
| Derivative financial | (13,386) | - | - | - | (13,386) |
| instruments | | | | | |
+--------------------------+-----------+-----------+----------+-----------+-----------+
| Total current | (175,353) | - | - | - | (175,353) |
| liabilities | | | | | |
+--------------------------+-----------+-----------+----------+-----------+-----------+
| | | | | | |
+--------------------------+-----------+-----------+----------+-----------+-----------+
| Non-current liabilities | | | | | |
+--------------------------+-----------+-----------+----------+-----------+-----------+
| Convertible bond | (4,908) | (155,908) | - | - | (160,816) |
+--------------------------+-----------+-----------+----------+-----------+-----------+
| USD and GBP loan notes | (20,489) | (20,489) | (61,467) | (381,526) | (483,971) |
+--------------------------+-----------+-----------+----------+-----------+-----------+
| Deferred acquisition | - | (6,089) | (8,024) | - | (14,113) |
| liability | | | | | |
+--------------------------+-----------+-----------+----------+-----------+-----------+
| Total non-current | (25,397) | (182,486) | (69,491) | (381,526) | (658,900) |
| liabilities | | | | | |
+--------------------------+-----------+-----------+----------+-----------+-----------+
| Total financial | (200,750) | (182,486) | (69,491) | (381,526) | (834,253) |
| liabilities | | | | | |
+--------------------------+-----------+-----------+----------+-----------+-----------+
+--------------------------+-----------+-----------+-----------+-----------+-----------+
| As at 31 December 2008: | Due in | Due in | Due in | Due | Total |
| | less | 1 to 2 | 2 to 5 | after 5 | |
| | than 1 | years | years | years | |
| | year | | | | |
+--------------------------+-----------+-----------+-----------+-----------+-----------+
| Company | GBP'000 | GBP'000 | GBP'000 | GBP'000 | GBP'000 |
+--------------------------+-----------+-----------+-----------+-----------+-----------+
| | | | | | |
+--------------------------+-----------+-----------+-----------+-----------+-----------+
| Current liabilities | | | | | |
+--------------------------+-----------+-----------+-----------+-----------+-----------+
| Trade and other payables | (9,273) | - | - | - | (9,273) |
+--------------------------+-----------+-----------+-----------+-----------+-----------+
| Bank overdraft | (21,276) | - | - | - | (21,276) |
+--------------------------+-----------+-----------+-----------+-----------+-----------+
| Derivative financial | (5,753) | - | - | - | (5,753) |
| instrument | | | | | |
+--------------------------+-----------+-----------+-----------+-----------+-----------+
| Total current | (36,302) | - | - | - | (36,302) |
| liabilities | | | | | |
+--------------------------+-----------+-----------+-----------+-----------+-----------+
| | | | | | |
+--------------------------+-----------+-----------+-----------+-----------+-----------+
| Non-current liabilities | | | | | |
+--------------------------+-----------+-----------+-----------+-----------+-----------+
| Convertible bond | (4,908) | (155,908) | - | - | (160,816) |
+--------------------------+-----------+-----------+-----------+-----------+-----------+
| USD and GBP loan notes | (20,489) | (20,489) | (61,467) | (381,526) | (483,971) |
+--------------------------+-----------+-----------+-----------+-----------+-----------+
| Total non-current | (25,397) | (176,397) | (61,467) | (381,526) | (644,787) |
| liabilities | | | | | |
+--------------------------+-----------+-----------+-----------+-----------+-----------+
| Total financial | (61,699) | (176,397) | (61,467) | (381,526) | (681,089) |
| liabilities | | | | | |
+--------------------------+-----------+-----------+-----------+-----------+-----------+
| | | | | | |
+--------------------------+-----------+-----------+-----------+-----------+-----------+
| As at 31 December 2007: | Due in | Due in | Due in | Due | Total |
| | less | 1 to 2 | 2 to 5 | after 5 | |
| | than 1 | years | years | years | |
| | year | | | | |
+--------------------------+-----------+-----------+-----------+-----------+-----------+
| Group | GBP'000 | GBP'000 | GBP'000 | GBP'000 | GBP'000 |
+--------------------------+-----------+-----------+-----------+-----------+-----------+
| | | | | | |
+--------------------------+-----------+-----------+-----------+-----------+-----------+
| Current liabilities | | | | | |
+--------------------------+-----------+-----------+-----------+-----------+-----------+
| Trade and other payables | (115,724) | - | - | - | (115,724) |
+--------------------------+-----------+-----------+-----------+-----------+-----------+
| Deferred acquisition | (3,100) | - | - | - | (3,100) |
| liability | | | | | |
+--------------------------+-----------+-----------+-----------+-----------+-----------+
| Derivative financial | (36,992) | - | - | - | (36,992) |
| instruments | | | | | |
+--------------------------+-----------+-----------+-----------+-----------+-----------+
| Total current | (155,816) | - | - | - | (155,816) |
| liabilities | | | | | |
+--------------------------+-----------+-----------+-----------+-----------+-----------+
| | | | | | |
+--------------------------+-----------+-----------+-----------+-----------+-----------+
| Non-current liabilities | | | | | |
+--------------------------+-----------+-----------+-----------+-----------+-----------+
| Convertible bond | (4,908) | (4,908) | (184,908) | - | (194,724) |
+--------------------------+-----------+-----------+-----------+-----------+-----------+
| USD and GBP loan notes | (14,966) | (14,966) | (44,899) | (306,547) | (381,378) |
+--------------------------+-----------+-----------+-----------+-----------+-----------+
| Derivative financial | - | (30,999) | - | - | (30,999) |
| instruments | | | | | |
+--------------------------+-----------+-----------+-----------+-----------+-----------+
| Deferred acquisition | - | (500) | (8,892) | - | (9,392) |
| liability | | | | | |
+--------------------------+-----------+-----------+-----------+-----------+-----------+
| Total non-current | (19,874) | (51,373) | (238,699) | (306,547) | (616,493) |
| liabilities | | | | | |
+--------------------------+-----------+-----------+-----------+-----------+-----------+
| Total financial | (175,690) | (51,373) | (238,699) | (306,547) | (772,309) |
| liabilities | | | | | |
+--------------------------+-----------+-----------+-----------+-----------+-----------+
+--------------------------+----------+----------+-----------+-----------+-----------+
| As at 31 December 2007: | Due in | Due in | Due in | Due | Total |
| | less | 1 to 2 | 2 to 5 | after 5 | |
| | than 1 | years | years | years | |
| | year | | | | |
+--------------------------+----------+----------+-----------+-----------+-----------+
| Company | GBP'000 | GBP'000 | GBP'000 | GBP'000 | GBP'000 |
+--------------------------+----------+----------+-----------+-----------+-----------+
| | | | | | |
+--------------------------+----------+----------+-----------+-----------+-----------+
| Current liabilities | | | | | |
+--------------------------+----------+----------+-----------+-----------+-----------+
| Trade and other payables | (15,828) | - | - | - | (15,828) |
+--------------------------+----------+----------+-----------+-----------+-----------+
| Bank overdraft | (50,486) | - | - | - | (50,486) |
+--------------------------+----------+----------+-----------+-----------+-----------+
| Total current | (66,314) | - | - | - | (66,314) |
| liabilities | | | | | |
+--------------------------+----------+----------+-----------+-----------+-----------+
| | | | | | |
+--------------------------+----------+----------+-----------+-----------+-----------+
| Non-current liabilities | | | | | |
+--------------------------+----------+----------+-----------+-----------+-----------+
| Convertible bond | (4,908) | (4,908) | (184,908) | - | (194,724) |
+--------------------------+----------+----------+-----------+-----------+-----------+
| USD and GBP loan notes | (14,966) | (14,966) | (44,899) | (306,547) | (381,378) |
+--------------------------+----------+----------+-----------+-----------+-----------+
| Total non-current | (19,874) | (19,874) | (229,807) | (306,547) | (576,102) |
| liabilities | | | | | |
+--------------------------+----------+----------+-----------+-----------+-----------+
| Total financial | (86,188) | (19,874) | (229,807) | (306,547) | (642,416) |
| liabilities | | | | | |
+--------------------------+----------+----------+-----------+-----------+-----------+
The table below analyses the Group's derivative financial instruments which will
be settled on a gross basis into relevant maturity groupings, based on the
remaining period at the balance sheet date to the contractual maturity date. The
amounts disclosed in the table are the contractual undiscounted cash flows.
+--------------------------------+-----------+-----------+----------+---------+
| As at 31 December 2008: |Less than |Between 1 | Between | Over 5 |
| | 1 year | and 2 | 2 and 5 | years |
| | | years | years | |
+--------------------------------+-----------+-----------+----------+---------+
| | GBP'000 | GBP'000 | GBP'000 |GBP'000 |
+--------------------------------+-----------+-----------+----------+---------+
| Forward foreign exchange | | | | |
| contracts - marked to market | | | | |
+--------------------------------+-----------+-----------+----------+---------+
| Outflow | (22,613) | - | - | - |
+--------------------------------+-----------+-----------+----------+---------+
| Inflow | 16,860 | - | - | - |
+--------------------------------+-----------+-----------+----------+---------+
| | | | | |
+--------------------------------+-----------+-----------+----------+---------+
| As at 31 December 2007: | | | | |
+--------------------------------+-----------+-----------+----------+---------+
| | | | | |
+--------------------------------+-----------+-----------+----------+---------+
| Forward foreign exchange | | | | |
| contracts - marked to market | | | | |
+--------------------------------+-----------+-----------+----------+---------+
| Outflow | (115,524) | - | - | - |
+--------------------------------+-----------+-----------+----------+---------+
| Inflow | 116,022 | - | - | - |
+--------------------------------+-----------+-----------+----------+---------+
23. Called Up Share Capital
+----------------------------------------------------+------------+---------+
| Number | 2008 | 2007 |
| | '000 | '000 |
+----------------------------------------------------+------------+---------+
| Authorised: | | |
+----------------------------------------------------+------------+---------+
| Ordinary shares of 0.4p each | 225,000 | 225,000 |
+----------------------------------------------------+------------+---------+
| Allotted, called up and fully paid: | | |
+----------------------------------------------------+------------+---------+
| Ordinary shares of 0.4p each | 149,770 | 143,216 |
+----------------------------------------------------+------------+---------+
| | | |
+----------------------------------------------------+------------+---------+
| | 2008 | 2007 |
+----------------------------------------------------+------------+---------+
| Value | GBP'000 | GBP'000 |
+----------------------------------------------------+------------+---------+
| Authorised: | | |
+----------------------------------------------------+------------+---------+
| Ordinary shares of 0.4p each | 900 | 900 |
+----------------------------------------------------+------------+---------+
| Allotted, called up and fully paid: | | |
+----------------------------------------------------+------------+---------+
| Ordinary shares of 0.4p each | 599 | 573 |
+----------------------------------------------------+------------+---------+
During the year, the Company issued 6,502,240 shares for the conversion of the
GBP29,000,000 4.25% convertible bonds and 51,805 shares to honour share options
exercised by employees.
24. Share Premium Account
+----------------------------------------------------+------------+---------+
| | Group | Company |
+----------------------------------------------------+------------+---------+
| | GBP'000 | GBP'000 |
+----------------------------------------------------+------------+---------+
| At 1 January 2007 | 105,084 | 105,084 |
+----------------------------------------------------+------------+---------+
| On exercise of share options | 2,123 | 2,123 |
+----------------------------------------------------+------------+---------+
| At 1 January 2008 | 107,207 | 107,207 |
+----------------------------------------------------+------------+---------+
| On exercise of share options | 61 | 61 |
+----------------------------------------------------+------------+---------+
| On conversion of convertible bonds | 28,974 | 28,974 |
+----------------------------------------------------+------------+---------+
| At 31 December 2008 | 136,242 | 136,242 |
+----------------------------------------------------+------------+---------+
25. Retained Earnings
+----------------------------------------------------+------------+----------+
| | Group | Company |
+----------------------------------------------------+------------+----------+
| | GBP'000 | GBP'000 |
+----------------------------------------------------+------------+----------+
| At 1 January 2007 | 113,135 | 13,337 |
+----------------------------------------------------+------------+----------+
| Transfer of treasury shares to EBT | 25,106 | 25,106 |
+----------------------------------------------------+------------+----------+
| Purchase of treasury shares | (15,817) | (15,817) |
+----------------------------------------------------+------------+----------+
| Loss on disposal of shares to satisfy share | (34,693) | (34,693) |
| schemes | | |
+----------------------------------------------------+------------+----------+
| Profit for the year | 48,175 | 105,527 |
+----------------------------------------------------+------------+----------+
| Dividends paid | (67,566) | (67,566) |
+----------------------------------------------------+------------+----------+
| At 1 January 2008 | 68,340 | 25,894 |
+----------------------------------------------------+------------+----------+
| Loss on disposal of shares to satisfy share | (1,324) | - |
| schemes | | |
+----------------------------------------------------+------------+----------+
| Profit for the year | 76,656 | 33,060 |
+----------------------------------------------------+------------+----------+
| Dividends paid | (17,201) | (17,201) |
+----------------------------------------------------+------------+----------+
| At 31 December 2008 | 126,471 | 41,753 |
+----------------------------------------------------+------------+----------+
The Group issued 414,519 shares in respect of the ADSBP share scheme from the
EBT at a loss of GBP1,324,000.
26. Other Reserves
+----------------------------+-------------+---------+---------------------+----------+----------+---------+
| Group | Convertible | Merger | Cash | Employee | EBT | Total |
| | loan | | flow | benefit | reserve | |
| | equity | reserve | reserve | reserve | | |
+----------------------------+-------------+---------+---------------------+----------+----------+---------+
| | GBP'000 | GBP'000 | GBP'000 | GBP'000 | GBP'000 | GBP'000 |
+----------------------------+-------------+---------+---------------------+----------+----------+---------+
| At 1 January 2008 | 14,463 | 124,086 | (34,076) | 7,794 | (7,197) | 105,070 |
+----------------------------+-------------+---------+---------------------+----------+----------+---------+
| Cash flow hedges: | | | | | | |
+----------------------------+-------------+---------+---------------------+----------+----------+---------+
| -Fair | - | - | 30,078 | - | - | 30,078 |
| value | | | | | | |
| gains | | | | | | |
| net of | | | | | | |
| tax | | | | | | |
+----------------------------+-------------+---------+---------------------+----------+----------+---------+
| -Reclassified | - | - | 24,637 | - | - | 24,637 |
| and reported | | | | | | |
| in net profit | | | | | | |
+----------------------------+-------------+---------+---------------------+----------+----------+---------+
| Shares issued to | - | - | - | (1,417) | 2,741 | 1,324 |
| satisfy share | | | | | | |
| schemes | | | | | | |
+----------------------------+-------------+---------+---------------------+----------+----------+---------+
| Credit relating to | - | - | - | 6,097 | - | 6,097 |
| share-based charges | | | | | | |
+----------------------------+-------------+---------+---------------------+----------+----------+---------+
| Shares acquired by | - | - | - | - | (6,000) | (6,000) |
| EBT | | | | | | |
+----------------------------+-------------+---------+---------------------+----------+----------+---------+
| At 31 December 2008 | 14,463 | 124,086 | 20,639 | 12,474 | (10,456) | 161,206 |
+----------------------------+-------------+---------+---------------------+----------+----------+---------+
The cash flow reserve relates to the accounting for derivative financial
instruments under IAS 39. Fair value gains and losses in respect of effective
cash flow hedges are recognised in the cash flow reserve.
The employee benefit reserve comprises the credit entry relating to share-based
charges included in the income statement and calculated in accordance with IFRS
2.
The Company funds its offshore Employee Benefit Trust (EBT) with funds being
used to acquire shares which will be granted to certain employees under the
share option scheme. The cost of shares acquired by the EBT is recorded in the
EBT reserve. The excess of the exercise price and the nominal value of shares
issued under options is credited to the share premium account when such options
are exercised. Shares acquired by the EBT can either be allocated to the EBT by
the Company or purchased in the open market by the EBT. The costs of
administering the schemes are charged to the income statement in the period to
which they relate. The EBT has waived its rights to the receipt of dividends.
During the year, 414,519 (2007: 5,538,587) ordinary shares were disposed of by
the EBT to satisfy the award of shares under share schemes. During the year, the
Company transferred GBP6,000,000 to the EBT (2007: GBP7,920,000), which was used
to purchase 988,166 (2007: 1,108,557) ordinary shares in the market.
At 31 December 2008, the EBT held 1,698,766 ordinary shares (2007: 1,125,119),
which represented a market value of GBP7,220,000 (2007: GBP8,911,000) based on
the closing share price of GBP4.25 (2007: GBP7.92).
The merger reserve comprises the premium on shares issued as part of a business
combination.
The convertible loan equity balance of GBP14,463,000 represents the equity value
placed on the conversion option of the convertible bonds issued for
GBP151,000,000 on 16 August 2007 (Note 18).
+-------------------------------+-------------+---------+----------+----------+---------+
| Company | Convertible | Merger | Employee | EBT | Total |
| | loan | | benefit | reserve | |
| | equity | reserve | reserve | | |
+-------------------------------+-------------+---------+----------+----------+---------+
| | GBP'000 | GBP'000 | GBP'000 | GBP'000 | GBP'000 |
+-------------------------------+-------------+---------+----------+----------+---------+
| At 1 January 2008 | 14,463 | 124,086 | 7,794 | (7,197) | 139,146 |
+-------------------------------+-------------+---------+----------+----------+---------+
| Shares acquired by EBT | - | - | - | (6,000) | (6,000) |
+-------------------------------+-------------+---------+----------+----------+---------+
| Shares issued to satisfy | - | - | - | 2,741 | 2,741 |
| share schemes | | | | | |
+-------------------------------+-------------+---------+----------+----------+---------+
| Transferred to subsidiary | - | - | (7,794) | - | (7,794) |
| entity | | | | | |
+-------------------------------+-------------+---------+----------+----------+---------+
| At 31 December 2008 | 14,463 | 124,086 | - | (10,456) | 128,093 |
+-------------------------------+-------------+---------+----------+----------+---------+
During the year, the employee benefit reserve has been transferred to Venture
Production (Services) Limited, a subsidiary company.
27. Cash Flow from Operating Activities
Reconciliation of operating profit to net cash inflow from operating activities:
+------------------------------------------------+-----------+------------+
| Group | 2008 | 2007 |
| | GBP'000 | GBP'000 |
+------------------------------------------------+-----------+------------+
| Operating profit | 231,074 | 116,639 |
+------------------------------------------------+-----------+------------+
| Depreciation charge | 105,965 | 82,463 |
+------------------------------------------------+-----------+------------+
| Share-based transactions | 3,928 | 4,981 |
+------------------------------------------------+-----------+------------+
| Exploration costs written off | - | 18,144 |
+------------------------------------------------+-----------+------------+
| Development costs written off | - | 11,207 |
+------------------------------------------------+-----------+------------+
| Impairment of assets | 6,200 | 33,463 |
+------------------------------------------------+-----------+------------+
| Gain on disposal of subsidiary | - | (251) |
+------------------------------------------------+-----------+------------+
| Changes in working capital: | | |
+------------------------------------------------+-----------+------------+
| - Inventories | (2,831) | 1,462 |
+------------------------------------------------+-----------+------------+
| - Trade and other receivables | (22,521) | (20,820) |
+------------------------------------------------+-----------+------------+
| - Trade and other payables | 28,963 | 16,322 |
+------------------------------------------------+-----------+------------+
| Operating cash flow | 350,778 | 263,610 |
+------------------------------------------------+-----------+------------+
+---------------------+-----------+----------+---------+-----------+-----------+
| Analysis of net | At 1 | Cash | Other | Exchange | At 31 |
| debt | January | flow | non | movements | December |
| | 2008 | GBP'000 | cash | GBP'000 | 2008 |
| | GBP'000 | | changes | | GBP'000 |
| | | | GBP'000 | | |
+---------------------+-----------+----------+---------+-----------+-----------+
| | | | | | |
+---------------------+-----------+----------+---------+-----------+-----------+
| Cash and cash | 158,445 | (22,113) | - | 62,620 | 198,952 |
| equivalents | | | | | |
+---------------------+-----------+----------+---------+-----------+-----------+
| Long term | (398,322) | - | 24,727 | (82,850) | (456,445) |
| borrowings | | | | | |
+---------------------+-----------+----------+---------+-----------+-----------+
| Net debt | (239,877) | (22,113) | 24,727 | (20,230) | (257,493) |
+---------------------+-----------+----------+---------+-----------+-----------+
+------------------------------------------------+-----------+------------+
| Company | 2008 | 2007 |
| | GBP'000 | GBP'000 |
+------------------------------------------------+-----------+------------+
| Operating loss | (3,996) | (8,663) |
+------------------------------------------------+-----------+------------+
| Depreciation charge | 85 | 339 |
+------------------------------------------------+-----------+------------+
| Share-based transactions | - | 4,981 |
+------------------------------------------------+-----------+------------+
| Changes in working capital: | | |
+------------------------------------------------+-----------+------------+
| - Trade and other receivables | (2,640) | 6,499 |
+------------------------------------------------+-----------+------------+
| - Trade and other payables | (10,609) | (15,952) |
+------------------------------------------------+-----------+------------+
| Operating cash outflow | (17,160) | (12,796) |
+------------------------------------------------+-----------+------------+
+---------------------+-----------+----------+---------+-----------+-----------+
| Analysis of net | At 1 | Cash | Other | Exchange | At 31 |
| debt | January | flow | non | movements | December |
| | 2008 | GBP'000 | cash | GBP'000 | 2008 |
| | GBP'000 | | changes | | GBP'000 |
| | | | GBP'000 | | |
+---------------------+-----------+----------+---------+-----------+-----------+
| | | | | | |
+---------------------+-----------+----------+---------+-----------+-----------+
| Cash and cash | 104,134 | 19,258 | - | 63,301 | 186,693 |
| equivalents | | | | | |
+---------------------+-----------+----------+---------+-----------+-----------+
| Long term | (398,322) | - | 24,727 | (82,850) | (456,445) |
| borrowings | | | | | |
+---------------------+-----------+----------+---------+-----------+-----------+
| Net debt | (294,188) | 19,258 | 24,727 | (19,549) | (269,752) |
+---------------------+-----------+----------+---------+-----------+-----------+
28. Employees and Directors
Employee benefit expenses during the year:
+----------------------------------------+-------+------------+------------+
| Group | | 2008 | 2007 |
| | | GBP'000 | GBP'000 |
+----------------------------------------+-------+------------+------------+
| Wages and salaries | | 13,233 | 11,767 |
+----------------------------------------+-------+------------+------------+
| Social security costs | | 1,809 | 1,539 |
+----------------------------------------+-------+------------+------------+
| Retirement benefit liabilities (Note | | 1,177 | 969 |
| 29) | | | |
+----------------------------------------+-------+------------+------------+
| | | 16,219 | 14,275 |
+----------------------------------------+-------+------------+------------+
The average number of employees during the year was:
+----------------------------------------+-------+------------+------------+
| Group | | 2008 | 2007 |
+----------------------------------------+-------+------------+------------+
| UK | | 118 | 108 |
+----------------------------------------+-------+------------+------------+
| Netherlands | | 38 | 35 |
+----------------------------------------+-------+------------+------------+
| | | 156 | 143 |
+----------------------------------------+-------+------------+------------+
Key Management Compensation:
+----------------------------------------+-------+------------+------------+
| Group | | 2008 | 2007 |
| | | GBP'000 | GBP'000 |
+----------------------------------------+-------+------------+------------+
| Salaries and short term employee | | 2,826 | 2,667 |
| benefits | | | |
+----------------------------------------+-------+------------+------------+
| Share-based payments | | 48 | 36 |
+----------------------------------------+-------+------------+------------+
| | | 2,874 | 2,703 |
+----------------------------------------+-------+------------+------------+
During the year, key management exercised share options of GBP21,000 (2007:
GBP16,771,000).
In 2008, GBP1,702,000 (2007: GBP2,452,000) relating to the bonus schemes (Note
13) was charged to the income statement.
The key management compensation figures above include Executive Directors.
Directors' Emoluments:
+----------------------------------------+-------+------------+------------+
| Group | | 2008 | 2007 |
| | | GBP'000 | GBP'000 |
+----------------------------------------+-------+------------+------------+
| Aggregate emoluments | | 2,608 | 2,484 |
+----------------------------------------+-------+------------+------------+
| Company contributions to defined | | 131 | 138 |
| contribution pension schemes | | | |
+----------------------------------------+-------+------------+------------+
| | | 2,739 | 2,622 |
+----------------------------------------+-------+------------+------------+
Further details of Directors' emoluments are provided in the Directors'
Remuneration Report.
29. Retirement Benefit Liabilities
The Group contributes to personal pension schemes on behalf of certain
employees. These schemes are administered independently of the Group. The total
pension cost which is charged against profit represents contributions payable by
the Group and amounted to GBP1,177,000 (2007: GBP969,000).
30. Operating Lease Commitments - Minimum Lease Payments
The Group has commitments under operating leases to make payments as set out
below:
+------------------------------------------------+------------+------------+
| | 2008 | 2007 |
| | GBP'000 | GBP'000 |
+------------------------------------------------+------------+------------+
| Plant and machinery and motor vehicles | | |
+------------------------------------------------+------------+------------+
| Within 1 year | 17,828 | 145 |
+------------------------------------------------+------------+------------+
| Within 2-5 years | 19,854 | - |
+------------------------------------------------+------------+------------+
| Land and buildings | | |
+------------------------------------------------+------------+------------+
| Within 1 year | 747 | 733 |
+------------------------------------------------+------------+------------+
| Within 2-5 years | 2,257 | 2,227 |
+------------------------------------------------+------------+------------+
| In more than 5 years | 3,603 | 3,603 |
+------------------------------------------------+------------+------------+
31. Capital Commitments
At 31 December 2008, the Group has commitments of GBP313,990,000 (2007:
GBP173,000,000) relating primarily to capital expenditure commitments on
drilling rigs.
32. Guarantees
The Group has provided credit guarantees totalling GBP31,319,000 and EUR5,200,000
(2007: GBP31,200,000 and EUR5,200,000) for decommissioning security for assets in
the North Sea.
33. Related Party Transactions
Group
Intra-group related party transactions, which are eliminated on consolidation,
are not required to be disclosed in accordance with IAS 24.
The financial statements include the financial statements of Venture Production
plc and the subsidiaries listed in Note 12.
The following table provides the total amount of transactions, which have been
entered into with related parties for the relevant financial year.
+-----------------------------+--------+-----------+-------------+---------+---------+
| Sales/purchases from | | Sales | Purchases | Amounts | Amounts |
| related | | to | from | owed by | owed to |
| | | related | related | related | related |
| | | parties | parties | parties | parties |
+-----------------------------+--------+-----------+-------------+---------+---------+
| party | | GBP'000 | GBP'000 | GBP'000 | GBP'000 |
+-----------------------------+--------+-----------+-------------+---------+---------+
| Associates: | | | | | |
+-----------------------------+--------+-----------+-------------+---------+---------+
| North Sea Infrastructure | 2008 | 11,351 | 25,705 | 55 | 2,379 |
| Partners Limited | 2007 | 68,130 | - | 3,498 | - |
+-----------------------------+--------+-----------+-------------+---------+---------+
+-----------------------------+--------+-------------------+------------------+
| Loans from/to related party | | Interest received | Amounts owed by |
| | | GBP'000 | related parties |
| | | | GBP'000 |
+-----------------------------+--------+-------------------+------------------+
| Associate: | | | |
+-----------------------------+--------+-------------------+------------------+
| Ten Degrees North Energy | 2008 | 292 | 292 |
| Limited | | | |
+-----------------------------+--------+-------------------+------------------+
| | 2007 | 281 | 281 |
+-----------------------------+--------+-------------------+------------------+
Associate
North Sea Infrastructure Partners Limited
Venture Infrastructure Limited has a 49.9% interest in North Sea Infrastructure
Partners Limited (2007: 49.9%).
Ten Degrees North Energy Limited
Venture Production plc owns 40% of the ordinary shares of Ten Degrees North
Energy Limited (2007: 40%).
This information is provided by RNS
The company news service from the London Stock Exchange
END
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