TIDMRPO
RNS Number : 0452W
RusPetro plc
14 August 2015
Ruspetro plc
14 August 2015
Ruspetro plc (the "Group")
Results for the six months to 30 June 2015
London, 14 August 2015: Ruspetro plc (LSE: RPO) announces its
first half 2015 results and an update on its operations.
HIGHLIGHTS
- Average daily production for the first half of 2015 increased
by 16% to 3,914 bopd (H1 2014: 3,366 bopd)
- Revenues of US$24.0 million in the first half of 2015 (H1
2014: US$27.8 million) with the decline due to lower realised oil
prices
- EBITDA of US$2.7 million in the first half of 2015 (H1 2014: US$4.2 million)(1)
- Two multi-stage fractured horizontal wells and one deviated
well drilled and completed during the first half of 2015 to
complete development well campaign at Pad 23b
- Total production in first half of 2015 exceeded the minimum
covenant requirement of the Group's US$100.0 million Development
Facility provided by Public Joint Stock Company "Bank Otkritie
Financial Corporation" ("Otkritie")
- The Group has achieved major reductions in well costs while
drilling longer horizontal reservoir sections. Well 210, the most
recent multiple fractured horizontal well, was drilled and
completed with 10 fracs for a total cost of approximately US$5.4
million
- The Group concluded a new 18 month prepayment facility with
Glencore Energy UK Limited ("Glencore") in May 2015 for up to
US$30.0 million. The new facility renews the prepayment facility
entered into in March 2014 which was fully repaid to Glencore as
planned
RESULTS SUMMARY
H1 2015 H1 2014
------------------------------------- -------- --------
Revenue (US$ million) 24.0 27.8
------------------------------------- -------- --------
EBITDA (US$ million) 2.7 4.2
------------------------------------- -------- --------
Average daily production (bopd) 3,914 3,366
------------------------------------- -------- --------
Total debt (US$ million) 272.5 420.4
------------------------------------- -------- --------
Cash on hand (US$ million) 11.6 7.7
------------------------------------- -------- --------
Proved reserves, oil and condensate
(mmbbl) 205.3 206.7
------------------------------------- -------- --------
(1) Earnings before interest, taxes, depreciation and
amortisation ("EBITDA") defined as profit before income tax with
finance costs, depletion, depreciation and amortisation, foreign
exchange income and other expenses added back.
Enquiries:
Ruspetro plc
John Conlin, Chief Executive Officer +44 (0)20 7318 1630
Alexander Betsky, Finance Director +44 (0)20 7318 1630
Finlay Thomson, Investor Relations +44 (0)79 7624 8471
FTI Consulting
Ben Brewerton, George Parker +44 (0)20 3727 1000
About Ruspetro
Ruspetro plc is an independent oil and gas development and
production company, with assets in the Western Siberia region of
the Russian Federation. Our mission is to unlock the tight oil
reservoirs in our asset base while building a leading regional
independent E&P company in a safe and environmentally
responsible manner for the long-term benefit of our
shareholders.
OUTLOOK
- Ruspetro will commence an appraisal and development campaign
in October using two newly contracted rigs to build on the
successful development well campaign in the area of Pad 23b on the
Pottymsko-Inginsky ("PI") licence block
- The initial focus will be on appraising the most promising
areas of Group's licences with a combination of deviated and
horizontal appraisal wells, designed to mature a portfolio of
horizontal development wells to be drilled in 2016 and 2017.
- Given the uncertainties inherent in an appraisal campaign, the
Group is about to contract two new drilling rigs that have the
capability to deliver the programme wells, and can be moved more
quickly than is standard in Western Siberia. One is a heavy rig
which can drill and complete development wells (long horizontal
wells with multi-stage fracturing) and the other is a lighter unit
for appraisal wells with a data acquisition focus but which can
also drill 500 metre long horizontal appraisal and production
wells.
- The Group will continue to strive to drive down well capex
through design and technology innovation and capitalising where
possible on softening services pricing due to reductions in
regional activity.
- The Group also plans to construct additional processing and
power facilities to accommodate anticipated production levels of
10,000 bopd in late 2016.
- Acknowledging the possibility of oil prices staying lower for
longer than earlier forecasts, the Group is working to achieve
operating profitability at current oil price levels. In particular,
the Group is targeting the following economic benchmarks:
o Unit Development Cost of less than US$10/bbl (2) ;
o Cash production operating costs per barrel of oil produced of
less than US$8/bbl compared with US$12/bbl in 1H 2015.
(2) Unit Development Cost is defined as well capex divided by
estimated ultimate oil recovery of a well.
OPERATIONAL REVIEW
Horizontal Well Programme
The Group completed its development well campaign in the area of
Pad 23b on the PI licence block in 2Q 2015. The 2015 drilling
campaign comprised two multi-stage fractured horizontal wells 212
and 210, plus one deviated well 218.
The horizontal well programme implemented over the last year has
prepared the Group for the future development of its assets. The
campaign has augmented the Group's technological and operational
capabilities, enhanced its risk-based decision making and extensive
scenario-planning techniques.
As for the Group's completion technology, the standard Western
Siberian well design concept involving a small number of relatively
large hydraulic fractures (as employed in the first horizontal well
on Pad 23b) has evolved into a fit-for-purpose design with a
greater number of smaller fractures tuned to the geological setting
with input from "Real-Time" logging data. The technology
underpinning this design has proved reliable and cost effective (as
demonstrated by the Group's last horizontal well - well 210).
In addition, the Group achieved major reductions in well costs
in drilling longer horizontal reservoir sections. This was
facilitated by advanced mathematical modelling, daily monitoring of
well construction performance, innovative drilling and completion
techniques, intelligent well design, and implementation of
effective services contracting strategies, aided by the beneficial
devaluation of the Ruble exchange rate against the US Dollar. Well
210, Group's most recent multiple fractured horizontal well,
completed with 10 fractures, was drilled and completed for a total
cost of approximately US$5.4 million.
Reservoir Management
During the first half of 2015, the on-going reservoir management
programme has been tuned to match encouraging waterflooding
results. The Group currently has six active injector wells in the
main production area of the field. A comprehensive tracer campaign
has been initiated to assist in further optimisation of the
waterflood. In particular, seven different tracer agents were
deployed in all of the active injector wells, after which water
samples were taken from 23 producing wells in order to clarify
reservoir connectivity and refine the waterflood pattern. As a
result of the tracer campaign, the Group adjusted its water
injection volumes to enhance waterflooding effectiveness.
Palyanovo Licence Block
In February 2014, the Group took the decision to suspend
condensate production from its Palyanovsky licence in order to
preserve gas for future commercialisation. The Group is currently
in negotiations with potential partners about a range of
opportunities to commercialise its hydrocarbon resources.
Meanwhile, the Group is preparing its application to the Russian
Federal Subsurface Resources Agency (Rosnedra) for the extension of
its existing Palyanovo Licence, which is due to expire in December
2015. Upon review of the application, the licence is expected to be
extended for 20 years.
FINANCIAL REVIEW
Revenues
Revenues (gross revenues from oil sales less export duty) were
US$24.0 million in the first half of 2015, compared with US$27.8
million in the first half of 2014. The drop in revenues was driven
by a 46% decline in the average realised blended oil price, offset
by a 30% increase in sales volumes, reflecting a 16% increase in
production and a carry-over of 2014 crude oil inventory sold in
2015.
Cost of sales
The cost of sales, including depreciation and production-related
taxes was US$26.4 million for the first half of 2015, compared with
US$23.0 million for the first half of 2014. The increase was
primarily driven by a US$2.2 million increase in Mineral Extraction
Tax ("MET") as a result of firstly, increase of MET with
simultaneous decrease of export duty (widely known as the tax
manoeuvre), and secondly, the 16% increase in liquids production
for the period. Other reasons for the increase included a US$2.2
million increase in depletion expense as a result of higher
production as well as a reduction in the volume of proved developed
reserves in 2014 and a US$1.7 million increase due to a faster
turnover of own crude oil than in the prior period. Offsetting the
above increases to cost of sales were a US$2.7 million reduction of
production-related operating expenses and direct payroll expenses,
partially achieved due to the devaluation of the Russian Ruble.
Selling, general, and administrative ("SGA") expenses
SGA expenses include oil transportation costs, payroll expenses,
rent, professional services, depreciation, IT and telephony, and
other expenses.
SGA expenses for the first half of 2015 amounted to US$7.6
million, down 37% or US$4.6 million from US$12.2 million in the
first half of 2014. The decrease resulted from savings of US$2.4
million in payroll expense and share-based compensation, as well as
savings of US$0.5 million in oil transportation expenses due to
lower export volumes, with additional savings of US$1.7 million in
professional services, rent, depreciation and other expenses.
Approximately half of the above combined savings have been achieved
due to the 65% devaluation of the Russian Ruble from the previous
period.
EBITDA
EBITDA was US$2.7 million in the first half of 2015, compared
with US$4.2 million in the first half of 2014. The drop in EBITDA
was primarily driven by lower netback (2) due to the 46% decline in
the average realised blended oil price, an increase in MET, offset
by additional gross profit contribution from a 16% increase in
liquids production, lower export duty due to the falling trend of
oil prices, as well as lower SGA expenses and production-related
operating expenses, partially achieved through a devaluation of the
Russian Ruble.
(2) Netback is defined as revenues from oil sales less export
duty less transportation expenses.
Comprehensive loss for the year and foreign exchange
The Group recorded a loss of US$19.0 million for the first half
of 2015, compared with a loss of US$39.8 million for the first half
of 2014. The loss for the first half of 2015 includes a
foreign-exchange gain of US$2.6 million, compared with a foreign
exchange loss of US$9.1 million in the first half of 2014. The
Group's operating companies, whose functional currency is the
Russian Ruble, have borrowings in US dollars. After deducting the
foreign-exchange effects in both years, the Group's loss would have
been US$21.6 million in the first half of 2015, compared with a
loss of US$30.6 million in the first half of 2014.
Balance sheet
Non-current assets have increased by US$12.0 million as a result
of additional capital expenditure accrued during the period.
Current assets are in line with the Group's 31 December 2014
reported balance sheet.
Borrowings have increased from the year end by US$25.4 million
to US$272.5 million, reflecting US$28.2 million drawn down of the
Group's existing bank facilities with Otkritie, partly offset by
repayments of the principal amount of US$1.7 million and US$1.2
million related to the payment and amortisation of the arrangement
fees.
The Group's current liabilities decreased by US$7.8 million as a
result of paying down accrued interest on a shareholder loan in the
amount of US$5.0 million and a decrease in trade payables by US$1.6
million due to payments to contractors. Within current liabilities
between 31 December 2014 and 30 June 2015 there was a US$1.8
million net decrease in prepayments to Glencore as a result of the
Group's new US$22.5 million export facility drawn down in May of
2015, of which US$5.0 million is classified as long-term
liabilities, offset by the full repayment of three prepayment
facilities with Glencore and Energo Resurs LLC, a Russian company
affiliated with Glencore, in the amount of US$19.3 million during
the first half of 2015. A further US$7.5 million will be available
to the Group in November subject to meeting monthly production of
4,100 bopd and certain export sales obligations.
Cash flow
In the first half of 2015, the Group generated a net cash inflow
from operating activities of US$3.4 million, resulting from
positive operating cash flow of US$2.6 million and a positive cash
contribution from changes in working capital of US$0.8 million.
During the first half of 2015, the Group spent US$16.1 million
on investment activities. This consisted of US$12.3 million in the
construction of new wells, US$2.1 million on infrastructure-related
capital expenditures, US$0.7 million on development studies, US$0.5
million on the purchase of intangible and other assets and US$0.5
million in capitalised staff costs.
The Group received loan proceeds of US$28.2 million from
Otkritie, repaid US$1.7 million in principal amount and paid US$6.6
million in interest. Additionally, the Group repaid US$5.0 million
of accrued interest on a shareholders loan.
Cash balances at the end of the period were US$11.6 million
compared to US$12.0 million at the end of 2014.
Financing the Group's current operations and future
development
Following the Group's financial restructuring achieved in
December of 2014, along with the satisfaction of the 30 June 2015
production covenants which was a condition for the Group to draw
down the second US$50.0 million of its US$100.0 million development
facility from Otkritie (subject to continuing to meet the drawdown
conditions), the Group is able to continue the implementation of
its horizontal well programme in the near future.
The terms for its restructured debt finance require the Group to
achieve certain annualised EBITDA and production targets that will
be tested quarterly from January 2016. The current projections
prepared by management for the purposes of preparation of these
financial statements show that the Group would breach its covenants
for the year ending 31 December 2015 and four consecutive quarters
ending 31 March 2016. The principal reason for this is the
substantial decline of the oil price: during preparation and
approval of the Facility Agreements between July and September of
2014, the Brent price exceeded US$100 per barrel, whilst the
current price of Brent is near US$50 per barrel. To mitigate this
risk as disclosed in the 2014 annual report, management is in
negotiations with Otkritie to revise the covenants to a level
within its current macroeconomic and production forecasts. The
Group has also received, in August 2015, a written confirmation
from Otkritie that the bank has no intention to take any actions to
accelerate the repayment of the loans as a result of the possible
breach of covenants for the periods referred to above. The outcome
of such negotiations cannot be certain and, therefore, the
directors recognise that this represents a material uncertainty
which may cast significant doubt over the Group's ability to
continue as a going concern.
Taking into account all considerations relevant to the Group's
financial position, including contingent liabilities referred to in
Note 18 to the interim condensed consolidated financial statements,
management considers it appropriate that the financial statements
should be prepared on a going concern basis.
Outstanding debt obligations (in US$ million)
Debt Principal Accrued Total Maturity Annual
Interest as at Interest
30 June Rate
2015
----------------------- ---------- ---------- --------- --------- ------------
Otkritie 173.1 - 173.1 Nov-19 8% - 10.25%
Shareholder loans
Makayla Investments 1M Libor
Limited 15.0 4.4 19.4 Oct-16 +10%
Limolines Transport 3M Libor
Limited 48.7 31.0 79.7 Feb-20 +10%
Crossmead Holding Past
Limited 0.3 - 0.3 Due 0%
Total debt 237.1 35.4 272.5
----------------------- ---------- ---------- --------- --------- ------------
BUSINESS RISKS
The Group continuously monitors major financial, operational,
strategic, and external risks to identify and properly manage
them.
During the first half of 2015 the Group continued to experience
the impact of high volatility of the oil price and US$ / Russian
Ruble exchange rate, which the management views as key external
risks also in the second half of 2015. Operationally, it will be
crucial for the Group to successfully and cost-effectively
implement its current appraisal campaign to identify sufficient
suitable development well targets and significantly increase the
Group's production in 2016 and beyond. The importance of the above
external and operational uncertainties is more pronounced when
considering the Group's existing debt facility covenants.
The Group continues to face a variety of other internal and
external risks which have not changed significantly since the year
end. A summary of these risks can be seen in the 2014 Annual Report
and Accounts which is available on Group's website
(www.ruspetro.com).
DIRECTORS RESPONSIBILITY STATEMENT
The Directors confirm that to the best of their knowledge:
a) the condensed financial statements have been prepared in
accordance with International Accounting Standards (IAS) 34
"Interim Financial Reporting"; and
b) the Interim Management Report includes a fair review of the
information required by DTR 4.2.7R (indication of important events
during the first six months and description of principal risks and
uncertainties for the remaining six months of the year); and
c) the Interim Management Report includes a fair review of the
information required by DTR 4.2.8R (disclosure of related parties'
transactions and changes therein).
A list of the current Directors is maintained on the Ruspetro
plc website:www.ruspetro.com.
By order of the Board,
John Conlin Alexander Chistyakov
Chief Executive Officer Executive Chairman
13 August 2015 13 August 2015
Disclaimer
This statement contains certain forward-looking statements that
are subject to the usual risk factors and uncertainties associated
with the oil and gas exploration and production business. Whilst
the Group believes the expectations reflected herein to be
reasonable in light of the information available to them at this
time, the actual outcome may be materially different owing to
factors beyond the Group's control or otherwise within the Group's
control where, for example, the Group decides on a change of plan
or strategy. Accordingly no reliance may be placed on the figures
contained in such forward-looking statements.
Independent review report to Ruspetro plc
Report on the unaudited interim condensed consolidated financial
statements
Our conclusion
We have reviewed the unaudited interim condensed consolidated
financial statements, defined below, in the unaudited results of
Ruspetro plc for the six months ended 30 June 2015 (the "half
yearly financial report"). Based on our review, nothing has come to
our attention that causes us to believe that the interim condensed
consolidated financial statements are not prepared, in all material
respects, in accordance with International Accounting Standard 34
as adopted by the European Union and the Disclosure and
Transparency Rules of the United Kingdom's Financial Conduct
Authority.
This conclusion is to be read in the context of what we say in
the remainder of this report.
What we have reviewed
The interim condensed consolidated financial statements, which
are prepared by Ruspetro plc, comprise:
-- the unaudited interim condensed consolidated statement of
financial position as at 30 June 2015;
-- the unaudited interim condensed consolidated statement of
profit and loss and statement of other comprehensive income for the
period then ended;
-- the unaudited interim condensed consolidated statement of
cash flows for the period then ended;
-- the unaudited interim condensed consolidated statement of
changes in equity for the period then ended; and
-- the explanatory notes to the unaudited interim condensed consolidated financial statements.
As disclosed in note 2, the financial reporting framework that
has been applied in the preparation of the full annual financial
statements of the group is applicable law and International
Financial Reporting Standards (IFRSs) as adopted by the European
Union.
The unaudited interim condensed consolidated financial
statements included in the half-yearly financial report have been
prepared in accordance with International Accounting Standard 34,
'Interim Financial Reporting', as adopted by the European Union and
the Disclosure and Transparency Rules of the United Kingdom's
Financial Conduct Authority.
What a review of condensed consolidated financial statements
involves
We conducted our review in accordance with International
Standard on Review Engagements (UK and Ireland) 2410, 'Review of
Interim Financial Information Performed by the Independent Auditor
of the Entity' issued by the Auditing Practices Board for use in
the United Kingdom. A review of interim financial information
consists of making enquiries, primarily of persons responsible for
financial and accounting matters, and applying analytical and other
review procedures.
A review is substantially less in scope than an audit conducted
in accordance with International Standards on Auditing (UK and
Ireland) and, consequently, does not enable us to obtain assurance
that we would become aware of all significant matters that might be
identified in an audit. Accordingly, we do not express an audit
opinion.
We have read the other information contained in the half-yearly
financial report and considered whether it contains any apparent
misstatements or material inconsistencies with the information in
the unaudited interim condensed consolidated financial
statements.
Responsibilities for the unaudited interim condensed
consolidated interim financial statements and the review
Our responsibilities and those of the directors
The half-yearly financial report, including the unaudited
interim condensed consolidated financial statements, is the
responsibility of, and has been approved by, the directors. The
directors are responsible for preparing the half-yearly financial
report in accordance with the Disclosure and Transparency Rules of
the United Kingdom's Financial Conduct Authority.
Our responsibility is to express to the company a conclusion on
the unaudited interim condensed consolidated financial statements
in the half-yearly financial report based on our review. This
report, including the conclusion, has been prepared for and only
for the company for the purpose of complying with the Disclosure
and Transparency Rules of the Financial Conduct Authority and for
no other purpose. We do not, in giving this conclusion, accept or
assume responsibility for any other purpose or to any other person
to whom this report is shown or into whose hands it may come save
where expressly agreed by our prior consent in writing.
Emphasis of matter
In forming our conclusion on the financial statements, which is
not modified, we have considered the adequacy of the disclosures
made in note 2 to the unaudited interim condensed consolidated
financial statements concerning the Group's ability to continue as
a going concern. This ability is dependent on whether the Group can
renegotiate its debt covenants successfully. This condition
indicates the existence of a material uncertainty which may cast
significant doubt about the Group's ability to continue as a going
concern. The financial statements do not include the adjustments
that would result if the Group was unable to continue as a going
concern.
PricewaterhouseCoopers LLP
Chartered Accountants
14 August 2015
Aberdeen
Notes:
(a) The maintenance and integrity of the Ruspetro plc website is
the responsibility of the directors; the work carried out by the
auditors does not involve consideration of these matters and,
accordingly, the auditors accept no responsibility for any changes
that may have occurred to the financial statements since they were
initially presented on the website.
(b) Legislation in the United Kingdom governing the preparation
and dissemination of financial statements may differ from
legislation in other jurisdictions.
Ruspetro plc
Unaudited Interim Condensed Consolidated Statement of Profit or
Loss and Other Comprehensive Income
for the six months ended 30 June 2015
(presented in US$ thousands, except otherwise stated)
Six months ended
30 June
------------------------------
2015 2014
Note (Unaudited) (Unaudited)
-------------- --------------
Revenue 5 24,001 27,814
Cost of sales 6 (26,406) (23,017)
-------------- --------------
Gross (loss)/profit (2,405) 4,797
Selling and administrative expenses 7 (7,608) (12,212)
Other operating expenses (22) (756)
-------------- --------------
Operating loss (10,035) (8,171)
Finance costs (12,081) (18,049)
Foreign exchange gain/(loss) 2,574 (9,110)
Other expenses, net 8 (113) (581)
-------------- --------------
Loss before income tax (19,655) (35,911)
Income tax benefit/(expense) 9 681 (3,841)
Loss for the period (18,974) (39,752)
============== ==============
Other comprehensive loss that may
be reclassified subsequently to loss,
net of income tax
Exchange difference on translation
to presentation currency 2,380 (6,080)
Total comprehensive loss for the
period (16,594) (45,832)
============== ==============
The entire amount of loss and total comprehensive loss for the
period are attributable to equity holders of the Company
Loss per share
Basic and diluted loss per ordinary
share (US$) 21 (0.02) (0.12)
Ruspetro plc
Unaudited Interim Condensed Consolidated Statement of Financial
Position
as at 30 June 2015
(presented in US$ thousands, except otherwise stated)
30 June 2015
31 December
Note (Unaudited) 2014
------------- ------------
Assets
Non-current assets
Property, plant and equipment 10 157,197 148,139
Mineral rights and other intangibles 11 234,588 231,562
391,785 379,701
------------- ------------
Current assets
Inventories 1,419 584
Trade and other receivables 12 7,164 6,565
Income tax prepayment 21 21
Other current assets 13 3,264 5,065
Cash and cash equivalents 14 11,629 12,022
23,497 24,257
------------- ------------
Total assets 415,282 403,958
============= ============
Shareholders' equity
Share capital 15 135,493 135,493
Share premium 389,558 389,558
Retained loss (448,726) (429,752)
Exchange difference on translation
to presentation currency (42,576) (44,956)
Other reserves 25,397 25,397
Total equity 59,146 75,740
------------- ------------
Liabilities
Non-current liabilities
Borrowings 16 268,610 238,801
Provision for dismantlement 5,176 4,238
Other long-term liabilities 17 5,000 -
Deferred tax liabilities 49,380 49,457
328,166 292,496
------------- ------------
Current liabilities
Borrowings 16 3,868 8,303
Trade and other payables 17 22,004 25,447
Taxes payable other than income
tax 2,089 1,550
Other current liabilities 9 422
------------- ------------
27,970 35,722
------------- ------------
Total liabilities 356,136 328,218
------------- ------------
Total equity and liabilities 415,282 403,958
============= ============
Ruspetro plc
Unaudited Interim Condensed Consolidated Statement of Changes in
Equity
for the six months ended 30 June 2015
(presented in US$ thousands, except otherwise noted)
Exchange
difference
on translation
Retained to presentation
Share capital Share premium earnings currency Other reserves Total equity
Balance as at 1
January
2014 51,226 220,506 (153,106) (35,124) 11,759 95,261
============== ============== ========== ================= =============== =============
Loss for the period
(Unaudited) - - (39,752) - - (39,752)
Other comprehensive
income for the
period
(Unaudited) - - - (6,080) - (6,080)
Total comprehensive
loss for the period
(Unaudited) - - (39,752) (6,080) - (45,832)
-------------- -------------- ---------- ----------------- --------------- -------------
Share-based
remuneration
of Board of
directors
(Unaudited) - - - - 991 991
-------------- -------------- ---------- ----------------- --------------- -------------
Balance as at 30
June
2014 (Unaudited) 51,226 220,506 (192,858) (41,204) 12,750 50,420
============== ============== ========== ================= =============== =============
Balance as at 1
January
2015 135,493 389,558 (429,752) (44,956) 25,397 75,740
============== ============== ========== ================= =============== =============
Loss for the period
(Unaudited) - - (18,974) - - (18,974)
Other comprehensive
income for the
period
(Unaudited) - - - 2,380 - 2,380
Total comprehensive
loss for the period
(Unaudited) - - (18,974) 2,380 - (16,594)
-------------- -------------- ---------- ----------------- --------------- -------------
Balance as at 30
June
2015 (Unaudited) 135,493 389,558 (448,726) (42,576) 25,397 59,146
============== ============== ========== ================= =============== =============
Ruspetro plc
Unaudited Interim Condensed Consolidated Statement of Cash
Flows
for the six months ended 30 June 2015
(presented in US$ thousands, except otherwise stated)
Six months ended
Note 30 June
------------------------------
2015 2014
(Unaudited) (Unaudited)
-------------- --------------
Cash flows from operating activities
Loss before income tax (19,655) (35,911)
Adjustments for:
Depreciation, depletion and amortisation 10, 11 12,674 11,628
Foreign exchange (income)/loss (2,574) 9,110
Finance costs 12,081 18,049
Impairment of other current assets 13 1,868 -
Share-based payment compensation - 991
Insurance coverage 8 (1,800) -
-------------- --------------
Operating cash inflows before working
capital adjustments 2,594 3,867
-------------- --------------
Working capital adjustments:
Change in trade and other receivables (127) (87)
Change in inventories (835) (1,036)
Change in trade and other payables 1,490 18,607
Change in other taxes receivable/payable 238 (2,153)
Net cash flows from operating activities 3,360 19,198
-------------- --------------
Cash flows from investing activities
Purchase of property, plant and equipment (16,145) (28,268)
Net cash used in investing activities (16,145) (28,268)
-------------- --------------
Cash flows from financing activities
Proceeds from loans and borrowings 28,242 -
Repayment of loans and borrowings (1,718) -
Interest paid (11,638) -
Other financing charges paid (1,727) -
Net cash from/(used in) financing
activities 13,159 -
-------------- --------------
Net increase/(decrease) in cash and
cash equivalents 374 (9,070)
-------------- --------------
Effect of exchange rate changes on
cash and cash equivalents (767) 893
-------------- --------------
Cash and cash equivalents at the beginning
of the period 12,022 15,832
-------------- --------------
Cash and cash equivalents at the end
of the period 11,629 7,655
============== ==============
Ruspetro plc
Notes to the Interim Condensed Consolidated Financial Statements
for the six months ended 30 June 2015
(all tabular amounts are in US$ thousands unless otherwise
noted)
1. Corporate information
The interim condensed consolidated financial statements of
Ruspetro plc (the 'Company' or 'Ruspetro') and its subsidiaries,
together referred to as 'the Group' for the six months ended 30
June 2015 were approved by its Board of Directors on 13 August
2015.
The Company was incorporated in the United Kingdom on 20 October
2011 as a public company under the provisions of the Companies Act
2006. The Company's registered office is 58 Grosvenor Street,
London, W1K 3JB, United Kingdom.
These unaudited interim condensed consolidated financial
statements do not comprise statutory accounts within the meaning of
section 434 of the Companies Act 2006. Statutory accounts for the
year ended 31 December 2014 were approved by the board of directors
on 30 April 2015 and delivered to the Registrar of Companies. The
report of the auditors on those accounts is unqualified and
contained an emphasis of matter paragraph but did not contain any
statement under section 498 of the Companies Act 2006.
The principal activities of the Group are exploration for and
production of crude oil. The operating subsidiaries of the Group -
OJSC INGA and OJSC Trans-oil (hereinafter referred to as INGA and
Trans--oil respectively) hold three licences for exploration for,
and extraction of, crude oil and natural gas in the Khanty-Mansiysk
region of the Russian Federation.
2. Basis of preparation
The Group's interim condensed consolidated financial statements
for the six months ended 30 June 2015 have been prepared in
accordance with IAS 34, "Interim financial reporting" as adopted by
the European Union. The interim condensed consolidated financial
statements are prepared under the historical cost convention.
The interim condensed consolidated financial statements are
presented in US dollars (US$) and all values are rounded to the
nearest thousand unless otherwise indicated.
The interim condensed consolidated financial statements should
be read in conjunction with the annual consolidated financial
statements of the Company for the year ended 31 December 2014,
which have been prepared in accordance with IFRS.
Adoption of the new or revised standards
The IASB has issued a number of new and revised IFRS. Adoption
of amendments to the standards listed below had no significant
influence on the Group's accounting policy, financial position or
financial result of the Group:
(i) Not endorsed by the European Union
Amendments
-- Annual Improvements to IFRSs 2014 (effective for annual
periods beginning on or after 1 January 2016).
Going concern
These interim condensed consolidated financial statements are
prepared on a going concern basis, which presumes that the Group
will be able to realise its assets and discharge its liabilities in
the normal course of business in the foreseeable future.
At the reporting date the Group had net current liabilities of
US$4,473 thousand, which included cash in hand of US$11,629
thousand.
The Group's continuing operations are dependent upon its ability
to make further investments in field development in order to grow
its hydrocarbon production and sales. In the short term, this field
development is planned to involve, in particular, the drilling of a
number of horizontal wells, the success of which will only be known
with certainty once each well is completed. In the light of these
results, the nature and extent of the Group's drilling programme
may change over time, with a consequent change in investment
requirements.
Accordingly, the ability of the Group to generate sufficient
cash from operations may be materially affected by the results of
the Group's current appraisal activity and the success of future
drilling activities, as well as by a number of economic factors to
which the Group's financial forecasts are particularly sensitive,
such as crude oil prices, the level of inflation in Russia, and
foreign exchange rates.
The Group finances its exploration and development activities
using a combination of cash in hand, operating cash flow generated
mainly from the sale of crude oil production, prepayments from
forward oil sale agreements and additional debt or equity financing
as required.
In particular, the Group attained a level of production in the
six-months period ended 30 June 2015 required as a condition in
order for the Group to be able to unlock a further US$50 million
under the Development Facility from OJSC "Bank Otkritie Financial
Corporation" ("Otkritie").
The credit facilities obtained from Otkritie contain certain
covenants which the Group needs to meet to avoid acceleration of
the debt repayment schedule. The two key covenants relate to EBITDA
and production volume targets.
The current projections prepared by management for the purposes
of preparation of these financial statements show that the Group
would breach its covenants for the year ending 31 December 2015 and
four consecutive quarters ending 31 March 2016. The principal
reason for this is the substantial decline of the oil price: during
preparation and approval of the Facility Agreements between July
and September of 2014, the Brent price exceeded US$100 per barrel,
whilst the current price of Brent is near US$50 per barrel. To
mitigate this risk as disclosed in the 2014 annual report,
management is in negotiations with Otkritie to revise the covenants
to a level within its current macroeconomic and production
forecasts.
The Group has also received, in August 2015, a written
confirmation from Otkritie that the bank has no intention to take
any actions to accelerate the repayment of the loans as a result of
the possible breach of covenants for the periods referred to above.
The outcome of such negotiations cannot be certain and, therefore,
the directors recognise that this represents a material uncertainty
which may cast significant doubt over the Group's ability to
continue as a going concern.
However, on the basis of the assumptions and cash flow forecasts
prepared, and taking into account contingent liabilities referred
to in Note 18, management has assumed that the Group will continue
to operate within both available and prospective facilities.
Accordingly, the Group interim condensed consolidated financial
statements are prepared on the going concern basis and do not
include any adjustments that would be required in the event that
the Group were no longer able to meet its liabilities as they fall
due.
3. Summary of significant accounting policies
The principal accounting policies followed by the Group and the
critical accounting estimates in applying accounting policies are
consistent with those disclosed in the consolidated financial
statements of the Group for the year ended 31 December 2014. There
were no revisions in the accounting policies and estimates in these
interim condensed consolidated financial statements for the period
of at least of twelve months of these interim condensed
consolidated financial statements.
The preparation of interim financial statements requires
management to make judgements, estimates and assumptions that
affect the application of accounting policies and the reported
amounts of assets and liabilities, income and expense. Actual
results may differ from these estimates.
In preparing these interim condensed consolidated financial
statements, the significant judgements made by management in
applying the Group's accounting policies and the key sources of
estimation uncertainty were the same as those that applied to the
consolidated financial statements for the year ended 31 December
2014, with the exception of changes in estimates that are required
in determining the provision for income taxes.
Interim period income tax expense is accrued using the tax rate
that would be applicable to expected total annual earnings, that
is, the estimated average annual effective income tax rate applied
to the pre-tax income of the interim period.
Foreign currency translation
The US$ to RUR exchange rates were RUR55.52 and RUR56.26 as at
30 June 2015 and 31 December 2014, respectively and the average
rates for the six months ended 30 June 2015 and 2014 were RUR58.03
and RUR35.03, respectively. The US$ to GBP exchange rates were
US$0.64 and US$0.64 as at 30 June 2015 and 31 December 2014,
respectively and the average rates for the six months ended 30 June
2015 and 2014 were US$0.66 and US$0.60, respectively. The decrease
in the US$ to RUR exchange rate for the six months ended 30 June
2015 has resulted in a gain of US$2,574 thousand in the interim
condensed consolidated statement of profit or loss and other
comprehensive income and an adjustment of US$2,380 thousand in
other comprehensive income (refer to Notes 10 and 11).
4. Segment reporting
Management views the operations of the Group as one operating
segment. Should the Group diversify its operations the financial
reporting will be adjusted to reflect such change.
For business segments reporting purposes, the Company's Board of
directors evaluates performance of the Group on the basis of
different measures, including, production volumes, related
revenues, capital expenditures, operating expenses per barrel and
others.
5. Revenue
Six months ended
30 June
2015 2014
(Unaudited) (Unaudited)
-------------- --------------
Revenue from crude oil sales 23,667 26,935
Revenue from gas condensate sales - 328
Other revenue 334 551
Total revenue 24,001 27,814
============== ==============
Other revenue includes proceeds from third parties for crude oil
transportation.
For the six months ended 30 June 2015 and 2014, revenue from
export sales of crude oil amounted to US$7,459 thousand and
US$10,913 thousand, respectively.
6. Cost of sales
Six months ended
30 June
2015 2014
(Unaudited) (Unaudited)
-------------- --------------
Depletion, depreciation and amortisation 12,284 10,117
Employee benefit expense 3,237 4,298
Mineral extraction tax 5,167 3,055
Production services 2,061 2,766
Taxes, other than income tax 959 1,285
Repairs and maintenance 903 895
Transportation services 241 349
Reserves evaluation 42 379
Change of inventories 993 (743)
Other 519 616
Total cost of sales 26,406 23,017
============== ==============
7. Selling and administrative expenses
Six months ended
30 June
2015 2014
(Unaudited) (Unaudited)
-------------- --------------
Selling expenses
Oil transportation costs 921 1,431
-------------- --------------
Administrative expenses
Employee benefit expense 4,130 5,491
Professional services 852 1,010
Rent expenses 616 754
Depreciation and amortisation 390 1,511
Travel expenses 253 280
IT, telecom and other information services 215 244
Bank charges 85 39
Share-based payment compensation - 991
Other 146 461
Total selling and administrative expenses 7,608 12,212
============== ==============
Oil transportation costs represent the cost of transferring oil
to export customers through the 'Transneft' pipeline system.
8. Other expenses, net
Other expenses, net, mainly consist of an insurance claim
settlement received and an impairment charge of other assets.
In 2015 the Group received an insurance claim settlement in
total amount of US$1,800 thousand. Impairment of financial
instruments was recognised in total amount of US$1,868 thousand
(see Note 13).
9. Income tax
Income tax expense is recognised based on management's estimate
of the weighted average annual income tax rate expected for the
full financial year. The estimated average annual tax rate used for
the year to 31 December 2015 is -3.5% (the estimated tax rate for
the six months ended 30 June 2014 was 11%). The change is mainly
due to the recognition of deferred tax assets on tax losses.
10. Property, plant and equipment
Other property,
Oil & gas plant and Construction
properties equipment in progress Total
Cost as at 1 January 2015 182,659 7,825 22,670 213,154
Additions - - 18,857 18,857
Transfers to fixed assets 18,996 586 (19,582) -
Change in provision for
dismantlement 612 - - 612
Disposals (54) (945) - (999)
Effect of translation
to presentation currency 2,968 159 273 3,400
Cost as at 30 June 2015
(Unaudited) 205,181 7,625 22,218 235,024
------------ ---------------- ------------- ---------
Accumulated depletion
and impairment as at 1
January 2015 (58,302) (5,761) (952) (65,015)
Charge for the period (12,052) (488) - (12,540)
Disposals 53 942 - 995
Effect of translation
to presentation currency (1,197) (57) (13) (1,267)
Accumulated depletion
and impairment as at 30
June 2015 (Unaudited) (71,498) (5,364) (965) (77,827)
------------ ---------------- ------------- ---------
Net book value as at 30
June 2015 (Unaudited) 133,683 2,261 21,253 157,197
============ ================ ============= =========
Other property,
Oil & gas plant and Construction
properties equipment in progress Total
Cost as at 1 January 2014 223,088 11,425 74,258 308,771
Additions - - 23,831 23,831
Transfers to fixed assets 45,855 213 (46,068) -
Change in provision for
dismantlement (325) - - (325)
Disposals (330) (80) (569) (979)
Effect of translation
to presentation currency (4,039) (267) (2,660) (6,966)
Cost as at 30 June 2014
(Unaudited) 264,249 11,291 48,792 324,332
------------ ---------------- ------------- ---------
Accumulated depletion
and impairment as at 1
January 2014 (68,789) (5,779) - (74,568)
Charge for the period (9,965) (1,489) - (11,454)
Disposals 226 38 - 264
Effect of translation
to presentation currency 1,385 100 - 1,485
Accumulated depletion
and impairment as at 30
June 2014 (Unaudited) (77,143) (7,130) - (84,273)
------------ ---------------- ------------- ---------
Net book value as at 30
June 2014 (Unaudited) 187,106 4,161 48,792 240,059
============ ================ ============= =========
For the six months ended 30 June 2015, additions to construction
in progress are primarily made up of additions to production
facilities as well as additions to infrastructure. As at 30 June
2015, the construction in progress balance mainly represents
production wells and oil production infrastructure not finalised
(e.g. pads, roads, etc.).
The Group's property, plant and equipment in total amount of
US$12,621 was pledged under the Development and Credit Facility
agreements with Otkritie as at 30 June 2015 (31 December 2014:
nil).
11. Mineral rights and other intangibles
Other
Mineral intangible
rights assets Total
Cost as at 1 January 2015 230,253 2,566 232,819
Additions - 100 100
Effect of translation to presentation
currency 3,045 38 3,083
Cost as at 30 June 2015 (Unaudited) 233,298 2,704 236,002
-------- ------------ --------
Accumulated depletion and impairment
as at 1 January 2015 (1,063) (194) (1,257)
Charge for the period (84) (50) (134)
Effect of translation to presentation
currency (18) (5) (23)
Accumulated depletion and impairment
as at 30 June 2015 (Unaudited) (1,165) (249) (1,414)
-------- ------------ --------
Net book value as at 1 January 2015 229,190 2,372 231,562
Net book value as at 30 June 2015 (Unaudited) 232,133 2,455 234,588
======== ============ ========
Other
Mineral intangible
rights assets Total
Cost as at 1 January 2014 395,779 1,495 397,274
Additions - 1,245 1,245
Effect of translation to presentation
currency (10,590) (183) (10,773)
Cost as at 30 June 2014 (Unaudited) 385,189 2,557 387,746
--------- ------------ ---------
Accumulated depletion and impairment
as at 1 January 2014 (1,587) (154) (1,741)
Charge for the period (138) (36) (174)
Effect of translation to presentation
currency 75 (34) 41
Accumulated depletion and impairment
as at 30 June 2014 (Unaudited) (1,650) (224) (1,874)
--------- ------------ ---------
Net book value as at 1 January 2014 394,192 1,341 395,533
Net book value as at 30 June 2014 (Unaudited) 383,539 2,333 385,872
========= ============ =========
Intangible assets of the Group are not pledged as security for
liabilities and their titles are not restricted.
12. Trade and other receivables
30 June 31 December
2015 (Unaudited) 2014
------------------ ------------
Trade receivables 1,432 1,205
Other receivables and prepayments 1,853 1,953
VAT recoverable 3,879 3,407
Total trade and other receivables 7,164 6,565
================== ============
Trade receivables are mainly denominated in US$ and are not
past-due or impaired. Other receivables and prepayments are mostly
RUR denominated and relate to counterparties with no history of
delays in settlements. VAT recoverable is used either to offset
against amounts due for mineral extraction tax or is recovered in
cash. The VAT is recovered within three to six months from its
initiation, following a review by the tax authorities.
As at 30 June 2015 and 31 December 2014, the Group has impaired
prepayments amounting to US$52 thousand and US$129 thousand,
respectively. In determining the recoverability of trade and other
receivables, the Group considers any change in the credit quality
of the receivable from the date credit was initially granted up to
the reporting date.
13. Other current assets
In November 2014 the Group entered into an agreement to purchase
promissory notes denominated in RUR. Due to the change of
management estimation of recoverable amount of these promissory
notes at the reporting date, the Group recognised an impairment
loss in amount of US$1,868 thousand.
14. Cash and cash equivalents
30 June 2015
31 December
(Unaudited) 2014
-------------- ------------
Cash in bank denominated in US$ 11,009 4,248
Cash in bank denominated in RUR 410 45
Cash in bank denominated in GBP 204 7,713
Cash in bank denominated in EUR 6 16
Total cash and cash equivalents 11,629 12,022
============== ============
Cash balances generally carry no interest. The Group holds its
cash with Otkritie (Moody's rating Ba3/ b1/NP (Negative) at 30 June
2015), Sberbank (Moody's rating Ba2/ ba2/NP (Negative) at 30 June
2015), Bank of America (Moody's rating A1/baa2/P-1 (Stable) at 30
June 2015), Citibank (Fitch's rating BBB-/bbb-/F3 (Negative) at 30
June 2015) and Bank of Cyprus (Moody's rating Caa3/caa3/NP (Stable)
at 30 June 2015).
15. Shareholders' equity
Share capital
30 June 2015
31 December
(Unaudited) 2014
-------------- ------------
Ordinary share capital 135,493 135,493
============== ============
Share capital authorised, issued and paid in consisted of
870,112,016 ordinary shares with a par value of GBP 0.10 each at 30
June 2015 and 31 December 2014.
16. Borrowings
30 June
2015
31 December
(Unaudited) 2014
-------------- ------------
Short-term
Otkritie 3,565 3,000
Short-term loans from shareholders of the
Company 303 5,303
Total short-term borrowings 3,868 8,303
============== ============
30 June
2015
31 December
(Unaudited) 2014
-------------- ------------
Long-term
Otkritie 169,508 144,750
Long-term loans from shareholders of the
Company 99,102 94,051
Total long-term borrowings 268,610 238,801
============== ============
Otkritie credit facilities Under the terms of the Group's
Restructuring, completed in December 2014, the Group obtained a
loan from Otkritie in the amount of US$150,000 thousand on 8
December 2014, pursuant to a loan agreement dated 14 November 2014.
The loan is repayable in November 2019, bears interest at 8% per
annum and is subject to certain covenants, including EBITDA and
production targets.
14 November 2014 loan agreements for US$100,000 thousand and
US$44,700 thousand were entered into with Otkritie for the Group's
field development and for general working capital purposes
respectively. As at 30 June 2015, facilities in total amount of
US$20,818 and US$7,206 were drawn down under these agreements,
respectively (31 December 2014: nil).
Loans from shareholders of the Company The Group has a number of
US$ denominated loans obtained from the Shareholders of the
Company. All of these loans are unsecured and the interest rate on
most of these loans is Libor +10% per annum. In May 2015 interest
in total amount of US$5,000 thousand was repaid under the one of
the Shareholders' loan agreements.
17. Trade and other payables
30 June 2015
31 December
(Unaudited) 2014
-------------- ------------
Trade payables 4,494 6,135
Other non-financial liabilities 17,510 19,312
Total trade and other payables 22,004 25,447
============== ============
Trade and other payables are denominated primarily in Russian
roubles, except for the advance received from Glencore Energy UK
Ltd. ("Glencore") in the amount of US$15,000 thousand, which is
denominated in US$. The long-term part of the advance in the amount
of US$5,000 is presented in the statement of financial position as
other long-term liabilities.
On 7 May 2015 the Group signed a prepayment agreement with
Glencore, which renewed prepayment facility with Glencore entered
into in August 2013 and amended in March 2014. The sum of
prepayment received from Glencore in May 2015 amounted to US$22,500
thousand with additional US$7,500 thousand available to the Company
in six months depending on the Group's ability to meet certain
production targets. The facility is for a period of eighteen months
and requires the Group to deliver a minimum of 37,350 barrels per
month of crude oil to Glencore.
18. Capital commitments and other contingencies
Legal contingencies
As at 30 June 2015 the Group had received a claim from
Schlumberger Logelco Inc. in the amount of US$7,000 thousand.
Management disputes this claim and shall take all necessary steps
to protect the position of the Group.
Capital commitments
As at 30 June 2015, the Group had contractual commitments for
capital expenditures of US$3,426 thousand (31 December 2014:
US$2,360 thousand).
License commitments
The Group's exploration and production licences require certain
operational commitments. These include performance criteria certain
of which have not been fully met during 2014. The Directors note
that breach of licence performance conditions has not given rise to
any material fines or penalties in the six-months period ended 30
June 2015. Furthermore, management has been undertaking particular
actions to meet required licence performance criteria. The
Directors also note that the Group's production programme has been
inspected by the Russian licensing authorities subsequent to 31
December 2014 and that no material fines or penalties have
resulted.
Liquidity of subsidiary undertakings
In accordance with the legal framework in the Russian
Federation, creditors and tax authorities may initiate bankruptcy
procedures against an entity with negative net assets. Ruspetro
LLC, the Company's subsidiary holding entity in Russia, as at 30
June 2015 reported net liabilities under Russian GAAP. However, no
such bankruptcy procedures have been initiated either by the
creditors or the tax authorities against them. The Directors
consider its net liability position to be normal given its still
early stage of development.
Operating risks and contingencies
Pledge of shares and promissory notes
On the opening of its credit facilities with Otkritie, the Group
provided to Otkritie as collateral its shares in INGA and
Trans-oil.
Operating Environment of the Group
The Russian Federation displays certain characteristics of an
emerging market. Its economy is particularly sensitive to oil and
gas prices. The legal, tax and regulatory frameworks continue to
develop and are subject to varying interpretations. The political
and economic turmoil witnessed in the region, including the
developments in Ukraine have had and may continue to have a
negative impact on the Russian economy, including weakening of the
Rouble and making it harder to raise international funding. At
present, there is an ongoing threat of sanctions against Russia and
Russian officials the impact of which, if they were to be
implemented, are at this stage difficult to determine. The
financial markets are uncertain and volatile. These and other
events may have an significant impact on the Group's operations and
financial position, the effect of which is difficult to predict.
Management has assessed the ability of the Group to continue as a
going concern as well as possible impairment of the Group's
long-term assets by considering the current economic environment
and outlook. The future economic and regulatory situation may
differ from management's current expectations.
Environmental matters
The enforcement of environmental regulation in the Russian
Federation is evolving and the enforcement posture of government
authorities is continually being reconsidered. The Group
periodically evaluates its obligations under environmental
regulations. As obligations are determined, they are recognised
immediately. Potential liabilities, which might arise as a result
of changes in existing regulations, civil litigation or
legislation, cannot be estimated but could be material. In the
current enforcement climate under existing legislation, management
believes that there are no significant liabilities for
environmental damage.
19. Related party disclosures
Compensation of key management personnel of the Group
Key management includes Executive and Non-executive Directors of
the Group. The compensation paid or payable to key management for
employee services is shown below:
Six months ended
30 June
----------------------------
2015 2014
(Unaudited) (Unaudited)
------------- -------------
Employee remuneration paid in cash 1,478 1,466
Share-based payment compensation - 991
Employee remuneration paid in shares - 31
Non-executive directors fees 300 394
------------- -------------
Total compensation of key management personnel
of the Group 1,778 2,882
============= =============
All related party transactions are on an arm's-length basis and
no financial period end balances have arisen as result of these
transactions.
Loans from related parties
The Group has a number of loans from shareholders of the Company
with the following balances:
2015 2014
-------- -------
As at 1 January 99,354 89,806
Interest paid (5,000) -
Interest accrued 5,051 4,614
As at 30 June (Unaudited) 99,405 94,420
======== =======
The effective interest rates of loans received are disclosed in
Note 16.
Transactions with other related parties
Ruspetro LLC leased an office space in a building from a
company, in which one of its shareholders has an interest, for an
annual rent and service charge of RUR36,401 thousand (US$628
thousand) (excluding VAT). The lease will terminate on 14 September
2015 or earlier, when a long-term lease agreement is entered into
between the parties. Ruspetro Russia leased parking places at the
office building from the same company for an annual rent and
service charge of RUR2,029 thousand (US$35 thousand) (excluding
VAT). This lease will terminate on 1 October 2021.
20. Financial risk management objectives and policies
The Group's principal financial liabilities comprise accounts
payable, bank borrowings and other loans. The main purpose of these
financial instruments and liabilities is to manage short term cash
flow and raise finance for the Group's capital expenditure
programme. The Group has various financial assets such as accounts
receivable and cash, which arise directly from its operations.
It is, and has been throughout the six months ended 30 June 2015
and 2014, the Group's policy that no speculative trading in
derivatives shall be undertaken.
The main risks that could adversely affect the Group's financial
assets, liabilities or future cash flows are commodity price risk,
interest rate risk, foreign currency risk, liquidity risk and
credit risk. Management reviews and agrees policies for managing
each of these risks which are summarised below.
Capital risk management
The Group considers capital to comprise both debt and equity.
Total debt comprises long-term and short-term loans and borrowings,
as shown in the consolidated statement of financial position.
Equity of the Group comprises share capital, share premium, other
reserves and retained earnings. Equity of the Group was equal to
US$59,146 thousand and US$75,740 thousand as at 30 June 2015 and 31
December 2014 respectively.
Total debt of the Group was equal to US$272,478 thousand and
US$247,104 thousand as at 30 June 2015 and 31 December 2014
respectively.
The Group's objectives when managing capital are to safeguard
the Group's ability to continue as a going concern in order to
provide adequate levels of financing for its current development
and production activities. In order to maintain or adjust the
capital structure, the Group may issue new shares, attract new or
repay existing loans and borrowings.
The Group manages its capital structure and makes adjustments to
it, based on the funds available to the Group, in order to support
its construction and production activities. The Group is at the
development stage; as such it is dependent on external financing to
fund its activities. In order to carry out its planned construction
and production activities and pay for administrative costs, the
Group will spend its existing capital and raise additional amounts
as needed.
There were no changes in the Group's approach to capital
management during the period. As at 30 June 2015 the Group is
subject to certain covenants (Note 16).
Fair values
The Group has financial instruments carried at fair value only
in the 'Level 3' category.
The different levels have been defined as follows:
-- Quoted prices (unadjusted) in active markets for identical assets or liabilities (Level 1).
-- Inputs other than quoted prices included within level 1 that
are observable for the asset or liability, either directly (that
is, as prices) or indirectly (that is, derived from prices) (Level
2).
-- Inputs for the asset or liability that are not based on
observable market data (that is, unobservable inputs) (Level
3).
Carrying amount of financial instruments approaches their fair
value.
21. Loss per share
Basic
Basic earnings per share are calculated by dividing the profit
attributable to equity holders of the Company by the weighted
average number of ordinary shares in issue during the period.
Six months ended
30 June
2015 2014
------------ ------------
Loss attributable to equity holders of the Company 18,974 39,752
============ ============
Weighted average number of ordinary shares in
issue 870,112,016 333,381,480
============ ============
Basic Loss per share (US$) 0.02 0.12
============ ============
Diluted
Diluted earnings per share is calculated by adjusting the
weighted average number of ordinary shares to assume conversion of
all dilutive potential ordinary shares.
The Company has incurred a loss from continuing operations for
the six months ended 30 June 2015 and the effect of considering the
exercise of the options on the Company's shares would be
anti-dilutive, that is, it would reduce the loss per share.
22. Events after the statement of financial position date
In July 2015 Ruspetro LLC changed its legal form to joint-stock
company.
There have been no other material events after the end of
reporting period which require disclosure in these consolidated
financial statements.
1. Supplementary information (Unaudited)
Reserve quantity information
The oil, condensate and gas reserves estimate as at 30 June 2015
and 31 December 2014 was made by the Company by adjusting reserves
numbers as at 30 June 2014, prepared by DeGolyer and MacNaughton,
for actual oil production in the second half of 2014 and first half
of 2015. No third party was involved in estimating reserves as at
30 June 2015 and 31 December 2014. The Company plans to engage an
independent third party in 2015 to prepare updated reserve
information based on the results of horizontal wells completed in
2014 and 2015.
In 2014 the Company suspended production in its Palyanovo
licence area, having evaluated it as currently not feasible the
commercialisation of gas production and to reduce unnecessary gas
flaring.
Reserves information has been prepared in accordance with
Petroleum Resources Management System (PRMS) definition and
classification system.
Developed reserves are expected quantities to be recovered from
existing wells and facilities.
Proved reserves are those quantities of petroleum, which, by
analysis of geoscience and engineering data, can be estimated with
reasonable certainty to be commercially recoverable, from a given
date forward, from known reservoirs and under defined economic
conditions, operating methods, and government regulations. If
deterministic methods are used, the term reasonable certainty is
intended to express a high degree of confidence that the quantities
will be recovered. If probabilistic methods are used, there should
be at least a 90% probability that the quantities actually
recovered will equal or exceed the estimate.
Probable reserves are those additional reserves which analysis
of geoscience and engineering data indicate are less likely to be
recovered than proved reserves but more certain to be recovered
than possible reserves. It is equally likely that actual remaining
quantities recovered will be greater than or less than the sum of
the estimated proved plus probable reserves (2P). In this context,
when probabilistic methods are used, there should be at least a 50%
probability that the actual quantities recovered will equal or
exceed the 2P estimate.
Due to the inherent uncertainties and the necessarily limited
nature of reservoir data, estimates of reserves are inherently
imprecise, require the application of judgement and are subject to
change as additional information becomes available.
Management has included within proved reserves significant
quantities which the Group expects to produce after the expiry
dates of certain of its current production licences. The Subsoil
Law of the Russian Federation states that, upon expiration, a
licence is subject to renewal at the initiative of the licence
holder provided that further exploration, appraisal, production or
remediation activities are necessary and provided that the license
holder has not violated the terms of the license. Since the law
applies both to newly issued and old licences, management believes
that licences will be renewed upon their expiration for the
remainder of the economic life of each respective field.
Estimated net proved crude oil and condensate reserves for the
period ended 30 June 2015 and 30 June 2014, are shown in '000
barrels in the table set out below.
2015 2014
-------- --------
As at 1 January 205,979 190,743
Revisions of previous estimates - 16,530
Production (708) (610)
-------- --------
As at 30 June 205,271 206,663
======== ========
Estimated net proved developed crude oil and condensate reserves
as at 31 December 2014 and 30 June 2015 are shown in the table set
out below.
Crude oil and condensate reserves
'000 barrels
----------- ------------- ------------- ---------- ---------------
Proved Proved Total Proved
Developed Undeveloped Total Proved Probable Plus Probable
----------- ------------- ------------- ---------- ---------------
31 December 2014 5,876 200,103 205,979 1,539,452 1,745,431
30 June 2015 5,168 200,103 205,271 1,539,452 1,744,722
=========== ============= ============= ========== ===============
Estimated net proved and probable gas reserves as at 31 December
2014 and 30 June 2015 are shown in the table set out below.
Gas reserves
Millions of cubic
feet
------------ ------------- ------------- ---------------------------
Proved Proved Total Proved
Developed Undeveloped Total Proved Probable Plus Probable
------------ ------------- ------------- ---------- ---------------
31 December 2014 - 307,576 307,576 1,204,356 1,511,932
30 June 2015 - 307,576 307,576 1,204,356 1,511,932
============ ============= ============= ========== ===============
Crude oil and condensate reserves breakdown
The table below reflects the split of crude oil and condensate
as at 30 June 2015 and 31 December 2014.
Crude oil and condensate
'000 barrels
----------- ------------- --------------------------
30 June 2015 31 December 2014
-------------------------- --------------------------
Proved Proved
Developed Total Proved Developed Total Proved
----------- ------------- ----------- -------------
Crude oil 5,168 199,240 5,876 199,948
Condensate - 6,031 - 6,031
----------- ------------- ----------- -------------
Total Crude oil and
Condensate 5,168 205,271 5,876 205,979
=========== ============= =========== =============
This information is provided by RNS
The company news service from the London Stock Exchange
END
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