Investments and other financial assets and liabilities
denominated in foreign currencies are translated into United States
dollars at the exchange rates prevailing on each valuation day.
Purchases and sales of investments, income and expenses are
translated into United States dollars at the exchange rate
prevailing on the respective dates of such transactions.
Provisions and contingent liabilities
The Company recognises the need to make provisions for
liabilities that can be measured but where the timing of payment is
uncertain, and to treat as contingent those liabilities whose
existence will be confirmed only by the occurrence of one or more
uncertain future events that are not within the Company's
control.
3. MATERIAL AGREEMENTS
The investment management agreement entered into between the
Company and the Investment Manager was described on pages 35 and 36
of the 2012 Annual Report and Accounts.
4. RELATED-PARTY TRANSACTIONS
The Investment Manager and the directors are regarded as related
parties. The Investment Manager has undertaken that no
co-investments will be made in any other funds that may at any time
be managed by the Investment Manager or any entity controlled by
the principals of the Investment Manager.
Details of investment management fees paid are set out in note 6
and the Performance Fee accrued is set out in note 13.
Directors' fees and expenses are included in administrative
expenses and detailed in note 6.
Strata Energy Services ("Strata"), in which the Company owns 43
per cent of the equity, is deemed a related party under Canadian
GAAP.
5. SEGMENTAL INFORMATION
The directors are of the opinion that the Company is engaged in
a single segment of business, being an investment company investing
capital in companies that provide services and technology to the
upstream oil and gas industry, and therefore no segmental reporting
is required.
6. ADMINISTRATIVE EXPENSES
The administrative expenses of the Company for the six months to
30 June 2013 are set out in the table below:
30 June 30 June
2013 2012
US$ US$
---------- ----------
Administration fees 86,931 86,083
Audit fees 64,243 39,591
Directors' fees and expenses 104,942 114,031
Insurance costs 7,375 7,750
Investor communications costs 12,519 (4,345)
Investment management fees 660,000 660,000
Legal and professional fees 586,298 481,477
Listing and licence fees 9,883 6,978
Marketing expenses - 43,278
Other expenses 6,176 5,046
Registrar and custodian fees 20,853 17,992
Stockbroker's fees 25,152 25,604
Travel and entertainment costs 11,339 3,874
1,595,711 1,487,359
---------- ----------
7. TAX
The Company has been granted exemption from income tax in
Guernsey under the Income Tax (Exempt Bodies) (Bailiwick of
Guernsey) Ordinance, 1989 for which it pays an annual fee of GBP600
(2012: GBP600). With this exemption, the Company will not be liable
to income tax in Guernsey other than on Guernsey source income
(excluding deposit interest on funds deposited with a Guernsey
bank). No withholding tax is applicable to distributions by the
Company to shareholders.
8. DIVIDEND
No dividend was paid during the period.
For the period ending 30 June 2012, a dividend of US$0.10 per
participating redeemable share, totalling US$729,237, was paid on
30 May 2012 to shareholders on the register on 27 April 2012.
9. BASIC AND DILUTED (LOSS) EARNINGS PER SHARE
(Loss) earnings per share is computed by dividing net (loss)
income available to preferred shareholders by the weighted average
number of preferred shares outstanding for the period. Diluted
(loss) earnings per share reflects the potential dilution that
could occur if additional preferred shares are issued under
warrants and stock options that entitle their holders to obtain
common shares in the future, to the extent that such entitlement is
not subject to unresolved contingencies. The number of additional
shares for inclusion in diluted (loss) earnings per share
calculations is determined using the treasury-stock method. Under
this method, warrants and stock options whose exercise price is
less than the average market price of the preferred shares are
assumed to be exercised, with the proceeds used to repurchase
preferred shares at the average market price for the period. The
incremental number of preferred shares issued under warrants and
stock options and repurchased from proceeds is included in the
calculation of diluted (loss) earnings per share.
For each of the periods ended 30 June 2013 and 30 June 2012, the
Company excluded potential share equivalents comprised of stock
options and warrants for the diluted (loss) earnings per share as
these would be considered anti-dilutive.
30 June 30 June
2013 2012
US$ US$
------------ ----------
Basic (loss) earnings per share
Net (expense) income (9,883,525) 1,358,743
Average number of preferred shares 7,292,367 7,293,675
Basic (loss) earnings per share (1.36) 0.19
------------------------------------ ------------ ----------
Diluted earnings per share
Net (expense) income (9,883,525) 1,358,743
Average number of preferred shares
(diluted) 7,292,367 7,293,675
Diluted (loss) earnings per share (1.36) 0.19
------------------------------------ ------------ ----------
10. ACCOUNTS RECEIVABLE AND PREPAID EXPENSES
30 June 31 December
2013 2012
US$ US$
-------- ------------
Accounts receivable and prepaid expenses 215,572 179,515
Due on disposal of investment - 534,296
215,572 713,811
-------- ------------
The amount due on disposal of investment was receivable in two
equal instalments, 12 months and 18 months after the date of the
disposal of the investment.
11. LOAN
In accordance with an agreement dated 1 December 2012, the loan
to SR2020 Inc attracts interest at 7 per cent and is repayable in
36 equal monthly instalments commencing on 1 February 2013.
12. INVESTMENTS
1) Strata
The Company made no further investment in Strata during the
period.
The investment in Strata was valued using a blend of
comparable-company multiples and discounted cash flow,
incorporating actual and budget figures (US$36.9 million at 30 June
2013).
2) Crest Energy Services Limited ("Crest")
During the period, Crest issued promissory notes to the Company
in the principal amount of US$300,000, bringing the total
promissory notes outstanding at 30 June 2013 to US$2,989,858.
The Company's investment in Crest was valued using adjusted cost
(US$4 million at 30 June 2013).
3) SR2020 Inc ("SR2020")
During the period, SR2020 issued promissory notes to the Company
in the principal amounts of US$900,000, bringing the total
promissory notes outstanding at 30 June 2013 to US$7,793,368.
The Company's investment in SR2020 was valued using a multiple
of projected sales (US$14 million at 30 June 2013).
During the period ending 30 June 2013, the reconciliation of
investments measured at fair value using unobservable inputs (Level
III) is presented as follows:
30 June 31 December
2013 2012
------------ ------------
Fair level disclosure by fair value
hierarchy level Level III Level III
US$ US$
------------ ------------
Investments 54,898,561 62,955,458
------------ ------------
30 June 31 December
2013 2012
------------ ------------
Reconciliation of Level III fair values Trading Trading
securities securities
US$ US$
------------ ------------
Opening balance 62,955,458 63,471,383
Total unrealised gains in net income (9,256,897) (4,284,182)
Additions 1,200,000 3,768,257
Closing balance 54,898,561 62,955,458
------------ ------------
13. LIABILITIES
30 June 31 December
2013 2012
US$ US$
-------- ------------
Accounts payable and accrued liabilities 398,157 391,283
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