Final Results -20-
March 17 2009 - 3:00AM
UK Regulatory
+---------------------------------------+---------+---------+---------+---------+
| 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
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