08:00 Mon 26 Sep 2016
Zoltav Resources Inc - Half-year Report
Embargoed: 0700hrs,
("Zoltav" or the "Company")
Half Year Report for the Six Months Ended
Zoltav (AIM:ZOL), the
Financial Highlights
· Maiden profit before tax of
· RUB denominated revenue rose 21% to
· EBITDA increased by 130% to
· Zoltav generated
· Strong operating cash flow of
· Reduced borrowings by 8% (RUB denominated) through repayment of
· Total cash at period end of
Operational Highlights - Bortovoy Licence
· Western Gas Plant operated at full increased capacity throughout H1 2016 - producing an increased rate of 9,019 (H1 2015: 8,845) barrels of oil equivalent per day
· Overall production in H1 2016 was 1,596 million (H1 2015: 1,529 million) barrels of oil equivalent - a 4.4% increase
· New Well 117 on the Karpenskoye field was completed and put online in
· Zhdanovskoye infill Well 107 was successfully acid treated, producing additional 1.13 mmcf/d (0.032 mmcm/d) of gas
· Pre-existing Wells 19 and 103 on the Zhdanovskoye field are scheduled to be hooked-up in
· Two new Wells 108 and 109 on the Zhdanovskoye field are planned to be drilled later 2016/early 2017 with estimated production rates of 5.3 mmcf/d (0.150 mmcm/d) each
· 3D seismic survey over North Mokrousovskoe field's Devonian structure commenced this month - preliminary results expected by
Operational Highlights - Koltogor Licences
· Rosnedra confirmed the discovery of the West Koltogor oil field on Koltogor Exploration Licence 10 and, in
"Zoltav's significant efforts on driving performance at Bortovoy's Western Gas Plant and on cost efficiencies have enabled the Company to deliver a maiden profit before tax for the half year of
The Company has high quality assets and experienced management that is intent on driving more profitable growth from the Western Gas Plant, on operating a lean and efficient business and on the development of our organic opportunities - particularly the considerable resource in the Eastern Fields of Bortovoy, where we are working to better understand the feasibility and economic viability of the development options.
The Board believes this strategy will not only result in our transition into an attractive and profitable junior oil company - a path on which we are already well advanced - but also position the Company very well should the rouble regain strength and as the oil and gas sector continues to improve."
Contacts:
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Tel. +44 (0)20 7830 9704 |
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(via |
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Shore Capital (Nomad and Joint Broker) |
Tel. +44 (0)20 7408 4090 |
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Panmure Gordon (Joint Broker) |
Tel. +44 (0)20 7886 2500 |
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Tel. +44 (0)20 7830 9704 |
Patrick d'Ancona or |
Chairman's statement
I am pleased to present Zoltav's report for the six month period ended
Zoltav's significant efforts on driving performance at Bortovoy's Western Gas Plant have enabled the Company to deliver a maiden profit before tax for the half year of
This performance was complemented by the achievement of a further increase from
At Bortovoy, the Western Gas Plant was maintained at full capacity - the limit of which has been further increased - throughout the period under review, producing 9,019 boe/d (1,280 toe/d). Total production in the first half reached 1,596 mboe (226 mtoe), representing an increase of 4.4% compared with the first half of 2015.
Zoltav's excellent operational performance has served to offset the continued weakness of RUB against our reporting currency of USD. Although RUB fell by approximately a further 22% against USD compared with H1 2015 (conversion rates: 70.2583 USD\RUB in H1 2016 versus 57.3968 in H1 2015), Zoltav's RUB denominated revenue rose by an impressive 21% to
The Company's ongoing programme of cost optimisation at Bortovoy, together with our focus on reducing administrative costs, enabled Zoltav to achieve an operating profit of
The Company's assets underpin potential long-term revenue streams. As the Company has previously stated, Zoltav estimates there are sufficient reserves in the Western Fields of the Bortovoy Licence to keep the Western Gas Plant at full capacity for at least a further decade. Accordingly, the Company commissioned a 3D seismic programme, which commenced this month over the Devonian structure in the North Mokrousovskoye field, in order to identify optimal locations for the drilling of future production wells to tie into the Western Gas Plant.
Zoltav has also continued to assess the development potential of the Eastern Fields of the Bortovoy Licence, which could be commercialised through the construction of a second gas plant in this area of the licence.
At Koltogor, as a result of opening up the West Koltogor oil field on Koltogor Exploration Licence 10, the Company was granted in
The search for value accretive acquisitions in
Non-executive Chairman
Review of operations
Bortovoy Licence
Zoltav continued to operate the Western Gas Plant at its full capacity throughout the first half of 2016, with an increased rate of 9,019 boe/d (1,280 toe/d). A number of factors contributed to this strong operational performance including efficient compressors operation which facilitated an increase in sustainable daily production; optimisation of the well stock production regime; and a higher than expected production ratio from Well 107 of the Zhdanovskoye field.
A preliminary assessment of the Devonian structure within the North Mokrousovskoye field has enabled the Company to commission a 3D seismic programme over this area, which commenced this month, in order to identify optimal locations for the drilling of future production wells to tie into the Western Gas Plant. This activity is in line with the Company's strategic objective to maintain full production capacity from the Western Gas Plant for at least a further decade.
The Company continues to evaluate development scenarios for the highly prospective Eastern Fields of the Bortovoy Licence.
Production
Average daily production from the Western Gas Plant during the first six months of 2016 was 9,019 boe/d (1,280 toe/d) compared to 8,845 boe/d (1,255 toe/d) in 2015. This comprised 47.6 mmcf/d (1.35 mmcm/d) of gas (H1 2015: 46.6 mmcf/d / 1.32 mmcm/d) and 520 bbls/d (66 t/d) of oil and condensate (2015: 544 bbls/d / 69 t/d).
Overall production throughout the period was 1,596 mboe, which reflects an increase of 4.4% compared with H1 2015, mostly due to an increase in daily volume going through the plant and a reduction in maintenance shut-down time.
In
This water cut in the Karpenskoye Well 117, and also in the Zhdanovskoye Well 30, resulted in a 4.2% reduction in the production of liquids in the first half of 2016 compared with H1 2015. This was, however, more than offset by the 4.9% increase in the production of gas.
The hooking-up of the pre-existing Well 19 in the western area of the Zhdanovskoye field is progressing to plan and is expected to be put into production in
The suspended Well 103 in the Zhdanovskoye field is also expected to be put into production in
Development drilling and other well activity
Two new wells are planned for later in 2016 and early 2017. The Zhdanovskoye Well 108 is expected to spud in
The 3D seismic survey over the Devonian structure in North Mokrousovskoye commenced this month, with preliminary interpretation to be completed by
Koltogor Licences
As the sole owner of the Koltogor Licences, management continues to evaluate farm-out options to assist in the future appraisal and development of the substantial resource from a position of strength. It remains Zoltav's intention to commission an update of its reserves and resources under PRMS, however, as previously stated, the Company has deferred this expenditure until such time as it is strategically necessary to commission an updated report.
As a result of opening up the West Koltogor oil field on Koltogor Exploration Licence 10, the Company's application to Rosnedra for an Exploration and Production Licence was approved in
Group Reserves under PRMS as at
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Proved |
Probable |
Proved and probable |
Possible |
Bortovoy Licence |
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Gas |
bcf |
352.9 |
396.8 |
749.7 |
640.0 |
Oil & liquids |
mmbbls |
2.0 |
1.8 |
3.8 |
2.4 |
Gas, oil and liquids |
mmboe |
62.0 |
69.2 |
131.2 |
111.2 |
Koltogor Licences |
|
|
|
|
|
Gas |
bcf |
0.5 |
23.5 |
24.0 |
55.7 |
Oil |
mmbbls |
1.6 |
73.5 |
75.1 |
174.0 |
Total |
mmboe |
1.7 |
77.5 |
79.2 |
183.5 |
Total |
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|
|
|
|
Gas |
bcf |
353.4 |
420.3 |
773.7 |
695.7 |
Oil & liquids |
mmbbls |
3.6 |
75.3 |
78.9 |
176.4 |
Gas, oil and liquids |
mmboe |
63.7 |
146.7 |
210.4 |
294.7 |
Source:
Financial review
Management's focus on profit generation from the Western Gas Plant at Bortovoy, coupled with an intense programme of Group cost optimisation, enabled Zoltav to generate
Revenue
The Group's RUB revenues in H1 2016 increased by 21% to
Gas realisations were
Oil and condensate realisations were
Cost of sales and G&A costs
Total cost of sales decreased by 22% to
Other cost of sales also decreased by 41% to
The Group's G&A costs decreased by 47% to
Operating profit
Zoltav turned the operating loss incurred in H1 2015 of
Finance costs of
Profit before tax
Zoltav generated
Taxation
The production based tax for the period was
The income tax charge for the year was
Net profit
Zoltav generated
Currency translation differences
The significant RUB/USD exchange rate volatility had a material effect on the value of our assets and liabilities presented in USD, which is disclosed in note 11.2 of the interim consolidated financial statements.
Cash
Cash generated from operating activities increased by 63% to
Zoltav has a sustainable financial position. Total cash at the end of the period was
Director of Finance
Interim condensed consolidated statement of comprehensive income for the six months ended
(in '000s US dollars, unless otherwise stated)
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Six months ended 30 June |
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Note |
2016 |
2015 |
Revenue |
3 |
14,281 |
14,434 |
Cost of sales |
|
|
|
Mineral extraction tax |
|
(2,934) |
(3,341) |
Depreciation and depletion |
|
(2,861) |
(3,109) |
Other cost of sales |
|
(2,434) |
(4,156) |
Total cost of sales |
|
(8,229) |
(10,606) |
Gross profit |
|
6,052 |
3,828 |
Operating, administrative and selling expenses |
|
(2,138) |
(4,054) |
Other income and expense, net |
|
(537) |
(139) |
Operating profit/(loss) |
|
3,377 |
(365) |
Finance income |
|
234 |
523 |
Finance cost |
|
(1,974) |
(2,690) |
Profit/(loss) before tax |
|
1,637 |
(2,532) |
Income tax expense |
|
(817) |
(272) |
Profit/(loss) for the year attributable to owners of the parent |
|
820 |
(2,804) |
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|
|
|
Other comprehensive income not to be reclassified to profit or loss in subsequent periods: |
|
|
|
Currency translation differences |
11.2 |
11,758 |
1,560 |
Other comprehensive income for the period |
|
11,758 |
1,560 |
Total comprehensive income/(loss) for the period |
|
12,578 |
(1,244) |
|
|
|
|
|
|
$ cents |
$ cents |
Earnings/(loss) per share attributable to owners of the parent during the period: |
7 |
|
|
Basic |
|
0.58 |
(1.98) |
Diluted |
|
0.57 |
(1.95) |
The accompanying notes are an integral part of these consolidated financial statements.
Interim condensed consolidated statement of financial position as at
(in '000s US dollars, unless otherwise stated)
|
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As at 30 June |
As at 31 December |
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Note |
2016 |
2015 |
Assets |
|
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|
Non-current assets |
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Exploration and evaluation assets |
4 |
74,628 |
64,355 |
Property, plant and equipment |
5 |
68,079 |
59,524 |
Total non-current assets |
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142,707 |
123,879 |
Current assets |
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Inventories |
|
376 |
134 |
Trade and other receivables |
|
2,361 |
2,584 |
Financial assets at fair value through profit or loss |
|
40 |
65 |
Cash and cash equivalents |
|
5,541 |
5,880 |
Total current assets |
|
8,318 |
8,663 |
Total assets |
|
151,025 |
132,542 |
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|
|
|
Equity and liabilities |
|
|
|
Share capital |
6 |
28,391 |
28,391 |
Share premium |
|
159,899 |
159,899 |
Other reserves |
|
43,026 |
43,026 |
Accumulated losses |
|
(42,188) |
(43,008) |
Translation reserve |
11.2 |
(88,130) |
(99,888) |
Total equity |
|
100,998 |
88,420 |
|
|
|
|
Non-current liabilities |
|
|
|
Borrowings |
9 |
26,399 |
25,317 |
Provisions |
10 |
7,083 |
4,912 |
Other payables |
|
850 |
- |
Deferred tax liabilities |
|
6,085 |
4,578 |
Total non-current liabilities |
|
40,417 |
34,807 |
|
|
|
|
Current liabilities |
|
|
|
Borrowings |
9 |
5,335 |
5,123 |
Other taxes payable |
|
1,554 |
1,244 |
Trade and other payables |
|
2,721 |
2,948 |
Total current liabilities |
|
9,610 |
9,315 |
Total liabilities |
|
50,027 |
44,122 |
Total equity and liabilities |
|
151,025 |
132,542 |
The accompanying notes are an integral part of these consolidated financial statements.
Interim condensed consolidated statement of cash flows for the six months ended
(in '000s US dollars, unless otherwise stated)
|
|
Six months ended 30 June |
|
|
Note |
2016 |
2015 |
Cash flows from operating activities |
|
|
|
Profit/(loss) before tax |
|
1,637 |
(2,532) |
|
|
|
|
Adjustments for: |
|
|
|
Depreciation and depletion |
|
2,861 |
3,182 |
Net finance costs |
|
1,740 |
2,167 |
Other losses, net of gains |
|
670 |
90 |
Operating cash inflows before working capital changes |
|
6,908 |
2,907 |
(Increase)/decrease in inventory |
|
(242) |
98 |
Decrease in trade and other receivables |
|
228 |
465 |
(Decrease)/Increase in trade and other payables |
|
(670) |
1,217 |
Net cash from operating activities before tax paid and interests |
|
6,224 |
4,687 |
Interest received |
|
234 |
523 |
Interest paid |
9 |
(1,681) |
(2,280) |
Net cash from operating activities |
|
4,777 |
2,930 |
|
|
|
|
Cash flows from investing activities |
|
|
|
Capital expenditure in relation to exploration and evaluation activities |
|
(406) |
(506) |
Purchase of property, plant and equipment |
|
(2,856) |
(2,318) |
Disposal of financial assets at fair value through profit or loss |
|
- |
105 |
Net cash used in investing activities |
|
(3,262) |
(2,719) |
|
|
|
|
Cash flows from financing activities |
|
|
|
Repayment of borrowings |
9 |
(2,495) |
(1,045) |
Net cash used in from financing activities |
|
(2,495) |
(1,045) |
Net decrease in cash and cash equivalents |
|
(980) |
(834) |
Translation differences |
|
641 |
106 |
Cash and cash equivalents at the beginning of the year |
|
5,880 |
10,694 |
Cash and cash equivalents at the end of the year |
|
5,541 |
9,966 |
The accompanying notes are an integral part of these consolidated financial statements.
Interim condensed consolidated statement of changes in equity for the six months ended
(in '000s US dollars, unless otherwise stated)
|
Share capital |
Share premium |
Capital reserve |
Employee share-based compen-sation reserve |
Accumula-ted losses |
Translation reserve |
Total |
At |
28,391 |
159,899 |
40,444 |
3,148 |
(39,542) |
(74,434) |
117,906 |
Exchange differences on translation to presentation currency |
- |
- |
- |
- |
- |
1,560 |
1,560 |
Loss for the year |
- |
- |
- |
- |
(2,804) |
- |
(2,804) |
Total comprehensive loss |
- |
- |
- |
- |
(2,804) |
1,560 |
(1,244) |
At |
28,391 |
159,899 |
40,444 |
3,148 |
(42,346) |
(72,874) |
116,662 |
|
|
|
|
|
|
|
|
At |
28,391 |
159,899 |
40,444 |
2,582 |
(43,008) |
(99,888) |
88,420 |
Exchange differences on translation to presentation currency |
- |
- |
- |
- |
- |
11,758 |
11,758 |
Profit for the year |
- |
- |
- |
- |
820 |
- |
820 |
Total comprehensive income |
- |
- |
- |
- |
820 |
11,758 |
12,578 |
At |
28,391 |
159,899 |
40,444 |
2,582 |
(42,188) |
(88,130) |
100,998 |
The accompanying notes are an integral part of these consolidated financial statements.
Notes to the interim condensed consolidated financial statements (unaudited)
1. Background
1.1 The Company and its operations
|
Place of incorporation |
Function |
Share of the Group in a subsidiary |
|
Jersey |
Holding company |
100% |
ZRI Services ( |
|
Service company |
100% |
|
|
Holding company |
100% |
CJSC SibGeCo (hereinafter "SibGeCo") |
|
Operating company |
100% |
|
|
Holding company |
100% |
|
|
Operating company |
100% |
|
|
Management company |
100% |
* see note 14
The Company was incorporated in the
The principal activities of the Company and its subsidiaries are the acquisition, exploration, development and production of hydrocarbons in the
1.2 Russian business environment
The Group's operations are located in the
1.3 Russian Federation
The recent political and economic turmoil and falling crude oil prices have had and may continue to have a negative impact on the Russian economy, including further weakening of RUB, higher interest rates, reduced liquidity and making it harder to raise international funding. These events, including current and future international sanctions against Russian companies and individuals and the related uncertainty and volatility of the financial markets, may have a significant impact on the Group's operations and financial position, the effect of which is difficult to predict. The future economic and regulatory situation may differ from management's expectations.
Whilst not currently affecting the Group's operations, the sanctions being imposed by the
2. Significant accounting policies
2.1 Basis of preparation
The interim condensed consolidated financial statements of the Group have been prepared in accordance with International Accounting Standard 34 Interim Financial Reporting (IAS 34), as adopted by the
The preparation of interim condensed consolidated financial statements in conformity with IAS 34 requires the use of certain critical accounting estimates. It also requires management to exercise its judgement in the process of applying the Group's accounting policies.
2.2 Going concern
The consolidated financial statements have been prepared on the going concern basis that contemplates the realisation of assets and satisfaction of liabilities and commitments in the ordinary course of business.
The Group's current liabilities exceeded current assets at
From 2016 to 2018 the Group forecasts an increase in sales and a decrease in operating expenses as it renegotiates the payment terms with contractors which, it forecasts, will lead to an improvement of the cash position and mitigate the liquidity risk. The sales increase is to be reached by sales price growth under the long-term sales contract with
These actions have already significantly improved operating cash flows during the six months ended
Considering the above actions and plans of the Group, management believes that a going concern basis for preparing these financial statements is appropriate.
2.3 Disclosure of impact of new and future accounting standards
The accounting policies and methods of computation are consistent with those used in the Group's Annual Report and Financial Statements for the year ended
a) Adoption of amended Standards
The Group applied for the first time certain standards and amendments, which are effective for periods beginning on or after
Although the new standards and amendments are applied for the first time in 2016, they did not have an impact on the interim condensed consolidated financial statements of the Group.
b) Standards issued but not yet effective
IFRS 9 Financial Instruments
In
IFRS 15 Revenue from Contracts with Customers
IFRS 15 was issued in
Management of the Group does not expect these new standards have a material impact on the consolidated financial statements of the Group.
2.4 Segment reporting
Segmental reporting follows the Group's internal reporting structure.
Operating segments are defined as components of the Group where separate financial information is available and reported regularly to the chief operating decision maker ("CODM"), which is determined to be the Board of Directors of the Company. The Board of Directors decides how to allocate resources and assesses operational and financial performance using the information provided.
The CODM receives reports of monthly operating profit reported in IFRS financial statements for the Group and its development and production entities. The Group has other entities that engage as either head office or in a corporate capacity or as holding companies. Management has concluded that due to application of the aggregation criteria that separate financial information for segments is not required. No geographic segmental information is presented as all of the companies' operating activities are based in the
Management has determined therefore that the operations of the Group comprise one operating segment and the Group operates in only one geographic area − the
2.5 Assets and liabilities not measured at fair value but for which fair value is disclosed
Fair values analysed by level in the fair value hierarchy of assets and liabilities of the Group not measured at fair value are as follows:
|
30 June 2016 |
30 June 2015 |
||
|
Fair value |
Carrying value |
Fair value |
Carrying value |
Financial assets |
|
|
|
|
Trade and other receivables |
2,361 |
2,361 |
2,702 |
2,702 |
Total assets |
2,361 |
2,361 |
2,702 |
2,702 |
Financial liabilities |
|
|
|
|
Borrowings |
32,187 |
31,734 |
42,981 |
41,802 |
Trade and other payables |
3,571 |
3,571 |
3,234 |
3,234 |
Total liabilities |
35,758 |
35,305 |
46,215 |
45,036 |
The fair value of borrowings is based on cash flows discounted using a rate based on the borrowing rate of 13.65% (2015: 11.48%) and is within level 2 of the fair value hierarchy.
3. Revenue
The Group's operations comprise one class of business being oil and gas exploration, development and production and all revenues are from one geographic region, the Saratov Region in the Russian Federation . Companies incorporated outside of Russia provide support to the operations in Russia .
Revenue is primarily from the sale of three products:
|
Six months ended 30 June |
|
|
2016 |
2015 |
Gas sales |
12,201 |
11,706 |
Oil sales |
1,123 |
1,473 |
Condensate sales |
957 |
1,255 |
Total sales |
14,281 |
14,434 |
All gas sales are made to one customer, Gazprom Mezhregiongaz Saratov LLC, under a long-term contract effective until 31 December 2020 with terms reviewed annually. Condensate and oil are sold to regional buyers. The sales of all three products are denominated in RUB.
4. Exploration and evaluation assets
|
Sub-soil licences |
Drilling, |
Decommi-ssioning |
Construction work in progress |
Total |
Balance at 1 January 2015 |
36,460 |
45,084 |
2,269 |
109 |
83,922 |
Additions |
378 |
117 |
- |
11 |
506 |
Reclassification |
107 |
- |
- |
(107) |
- |
Transfer to property, plant and equipment |
- |
- |
- |
- |
- |
Change in the estimates of decommissioning provision (note 10) |
- |
- |
- |
- |
- |
Exchange difference |
495 |
588 |
30 |
(1) |
1,112 |
Balance at 30 June 2015 |
37,440 |
45,789 |
2,299 |
12 |
85,540 |
|
|
|
|
|
|
Balance at 1 January 2016 |
28,828 |
35,073 |
451 |
3 |
64,355 |
Additions |
1,154 |
23 |
- |
7 |
1,184 |
Reclassification |
2 |
- |
- |
(2) |
- |
Transfer to property, plant and equipment |
- |
- |
- |
- |
- |
Change in the estimates of decommissioning provision (note 10) |
- |
- |
307 |
- |
307 |
Exchange difference |
3,992 |
4,697 |
92 |
1 |
8,782 |
Balance at 30 June 2016 |
33,976 |
39,793 |
850 |
9 |
74,628 |
In management's opinion, as at 30 June 2016 there were no non-compliance issues in respect of the licences that would have an adverse effect on the financial position or the operating results of the Group.
5. Property, plant and equipment
|
Oil and gas assets |
Motor |
Other equipment and furniture |
Construction work in progress |
Total |
Cost at 1 January 2015 |
78,921 |
265 |
138 |
5,027 |
84,351 |
Additions |
72 |
25 |
1 |
1,734 |
1,832 |
Reclassification |
2,220 |
16 |
- |
(2,236) |
- |
Transfer from exploration and evaluation assets |
- |
- |
- |
- |
- |
Change in the estimates of decommissioning provision (note 10) |
- |
- |
- |
- |
- |
Disposals |
(40) |
- |
- |
(122) |
(162) |
Exchange difference |
1,394 |
8 |
2 |
38 |
1,442 |
Cost at 30 June 2015 |
82,567 |
314 |
141 |
4,441 |
87,463 |
|
|
|
|
|
|
Cost at 1 January 2016 |
62,353 |
217 |
106 |
3,536 |
66,212 |
Additions |
1 |
- |
- |
2,803 |
2,804 |
Reclassification |
3,306 |
- |
- |
(3,306) |
- |
Transfer from exploration and evaluation assets |
- |
- |
- |
- |
- |
Change in the estimates of decommissioning provision (note 10) |
650 |
- |
- |
- |
650 |
Disposals |
(107) |
- |
- |
(23) |
(130) |
Exchange difference |
8,747 |
29 |
14 |
426 |
9,216 |
Cost at 30 June 2016 |
74,950 |
246 |
120 |
3,436 |
78,752 |
|
|
|
|
|
|
Accumulated depreciation and impairment |
|
|
|
|
|
Balance at 1 January 2015 |
(2,102) |
(21) |
(65) |
- |
(2,188) |
Depreciation and depletion |
(3,122) |
(50) |
(9) |
- |
(3,181) |
Disposals |
16 |
- |
- |
- |
16 |
Exchange difference |
(367) |
(6) |
(1) |
- |
(374) |
Balance at 30 June 2015 |
(5,575) |
(77) |
(75) |
- |
(5,727) |
|
|
|
|
|
|
Balance at 1 January 2016 |
(6,535) |
(96) |
(57) |
- |
(6,688) |
Depreciation and depletion |
(2,844) |
(36) |
(4) |
- |
(2,884) |
Disposals |
60 |
- |
- |
- |
60 |
Exchange difference |
(1,137) |
(16) |
(8) |
- |
(1,161) |
Balance at 30 June 2016 |
(10,456) |
(148) |
(69) |
- |
(10,673) |
|
|
|
|
|
|
Net book value at 1 January 2015 |
76,819 |
244 |
73 |
5,027 |
82,163 |
Net book value at 30 June 2015 |
76,992 |
237 |
66 |
4,441 |
81,736 |
Net book value at 1 January 2016 |
55,818 |
121 |
49 |
3,536 |
59,524 |
Net book value at 30 June 2016 |
64,494 |
98 |
51 |
3,436 |
68,079 |
6. Share capital
At 30 June 2016 and 31 December 2015 |
Number of ordinary shares |
Nominal value |
Authorised (par value of USD 0.20 each) |
250,000,000 |
50,000 |
Issued and fully paid (par value of USD 0.20 each) |
141,955,386 |
28,391 |
7. Earnings/(loss) per share
Basic earnings/(loss) per share is calculated by dividing the loss attributable to owners of the Company by the weighted average number of ordinary shares in issue during the year.
Diluted earnings/(loss) 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 share options and warrants as dilutive potential ordinary shares.
|
Six months ended 30 June |
|
|
2016 |
2015 |
Earnings/(loss)/ attributable to owners of the Company − |
820 |
(2,804) |
|
Number of shares |
Number of shares |
Weighted average number of shares for calculating basic earnings/(loss) per share |
141,955,386 |
141,955,386 |
Effect of dilutive potential ordinary shares − share options |
1,952,500 |
2,117,500 |
Weighted average number of shares for calculating diluted earnings/(loss) per share |
143,907,886 |
144,072,886 |
|
US cents |
US cents |
Basic earnings/(loss) per share |
0.58 |
(1.98) |
Diluted earnings/(loss) per share |
0.57 |
(1.95) |
8. Share-based payments
At 30 June 2016, the Company had a total of 1,952,500 outstanding share options (31 December 2015: 1,952,500).
9. Borrowings
|
2016 |
2015 |
Non-revolving credit facility − current liability, as at 1 January |
5,123 |
3,200 |
Interest accrued |
1,699 |
2,289 |
Interest paid |
(1,681) |
(2,280) |
Reclassified from non-current liability |
2,135 |
3,136 |
Repayment |
(2,495) |
(1,045) |
Exchange difference |
554 |
103 |
Non-revolving credit facility − current liability, as at 30 June |
5,335 |
5,403 |
|
|
|
Non-revolving credit facility - non-current liability, as at 1 January |
25,317 |
39,076 |
Reclassified to current liability |
(2,135) |
(3,136) |
Exchange difference |
3,217 |
459 |
Non-revolving credit facility - non-current liability, as at 30 June |
26,399 |
36,399 |
On 4 April 2014, Diall Alliance entered into a non-revolving credit facility agreement (no. 5878) with Sberbank of Russia OJSC with the maximum amount of the facility of RUB 2,400,000 thousand (USD 37,350 thousand at exchange rate at 30 June 2016). The full amount of the facility was drawn down in 2014. The maturity date is 30 April 2021, being the 7-year anniversary of the facility being entered into. Diall Alliance is obliged to repay the principal amount of the loan in 24 tranches commencing on 11 May 2015 and on a quarterly basis from then on with a final repayment tranche being payable on the maturity date. During the first six months of 2016, Diall Alliance repaid RUB 180,000 thousand (2015: RUB 180,000 thousand). The interest rate is 10.98% per annum. Sberbank may unilaterally amend the interest rate in the event of increase in refinancing rates of the Central Bank of
The outstanding amount of the facility as of 30 June 2016 was RUB 2,040,000 thousand (USD 31,734 thousand) and as of 31 December 2015 was RUB 2,220,000 thousand (USD 30,440 thousand). The credit facility is measured at amortised cost, using the effective interest method.
10. Decommissioning and environmental restoration provision
The decommissioning and environmental restoration provision represents the net present value of the estimated future obligations for abandonment and site restoration costs which are expected to be incurred at the end of the production lives of the gas and oil fields which is estimated to be within 20 years.
|
2016 |
2015 |
Provision as at 1 January |
4,912 |
10,649 |
Additions |
32 |
- |
Unwinding of discount |
260 |
382 |
Change in estimate of decommissioning and environmental restoration provision |
1,090 |
- |
Exchange difference |
789 |
152 |
Provision as at 30 June |
7,083 |
11,183 |
This provision has been created based on the Group's internal estimates. Assumptions, based on the current economic environment, have been made which the directors believe are a reasonable basis upon which to estimate the future liability. These estimates are reviewed regularly to take into account any material changes to the assumptions. However, actual decommissioning costs will ultimately depend upon future market prices for the necessary dismantlement works required which will reflect market conditions at the relevant time. Furthermore, the timing is likely to depend on when the fields cease to produce at economically viable rates. This in turn will depend upon future oil prices and future operating costs, which are inherently uncertain.
The provision reflects two liabilities: one is to dismantle the property, plant and equipment assets and the other is to restore the environment. The decommissioning part of the provision is reversed when an oil well is abandoned and corresponding capitalised costs are expensed. The environmental part of the provision is reversed when the expenses on restoration are actually incurred.
11. Financial risk management
11.1 Liquidity risk
Liquidity risk is the risk that the Group will not be able to meet its financial obligations as they fall due. The Group monitors the risk of cash shortfalls by means of current liquidity planning. The Group's approach to managing liquidity is to ensure, as far as possible, that it will always have sufficient liquidity to meet its liabilities when due, under both normal and stressed conditions, without incurring unacceptable losses or risking damage to the Group's reputation. This approach is used to analyse payment dates associated with financial assets, and also to forecast cash flows from operating activities. The contractual maturities of financial liabilities are presented including estimated interest payments.
|
Contractual amount |
Less than 1 year |
1-3 years |
Over |
Financial liabilities as at 30 June 2016 |
|
|
|
|
Borrowings |
41,335 |
8,346 |
16,208 |
16,781 |
Trade and other payables |
3,571 |
2,721 |
- |
850 |
Total |
44,906 |
11,067 |
16,208 |
17,631 |
|
|
|
|
|
|
Contractual amount |
Less than 1 year |
1-3 years |
Over 3 years |
Financial liabilities as at 31 December 2015 |
|
|
|
|
Borrowings |
40,346 |
8,006 |
12,921 |
19,419 |
Trade and other payables |
2,948 |
2,948 |
- |
- |
Total |
43,294 |
10,954 |
12,921 |
19,419 |
11.2 Foreign exchange risk and the effect of translation to presentational currency
The Company does not have any significant exposure to foreign currency risk as no significant sales, purchases and borrowings are denominated in a currency other than the functional currency of Diall Alliance and SibGeCo, which is the RUB.
The Group's operations are within the Russian Federation where all of its revenue, costs and financing from both Sberbank and intra-group lending are denominated in RUB. As a result there is no exposure at the operating subsidiary level to foreign exchange movements.
The Group does not currently enter into forward exchange contracts or otherwise hedge its potential foreign exchange exposure.
As noted above, the Company's operations are in the
12. Commitments and contingencies
12.1 Capital commitments
Capital expenditure contracted for at the end of the reporting period but not yet incurred at 30 June 2016 was USD 362 thousand (31 December 2015: USD 226 thousand).
12.2 Insurance
The insurance industry in the
12.3 Litigation
The Company was involved in a number of court procedures (both as a plaintiff and as a defendant) arising in the normal course of business. In the opinion of management, there are no current legal proceedings or other claims outstanding, which could have a material adverse effect on the results of operation financial position or cash flows of the Company and which have not been accrued or disclosed in these financial statements.
12.4 Taxation contingencies
Russian tax legislation which was enacted or substantively enacted at the end of the reporting period is subject to varying interpretations when being applied to the transactions and activities of the Group. Consequently, tax positions taken by management and the formal documentation supporting the tax positions may be successfully challenged by relevant authorities. Russian tax administration is gradually strengthening, including the fact that there is a higher risk of review of tax transactions without a clear business purpose or with tax incompliant counterparties. Fiscal periods remain open to review by the authorities in respect of taxes for three calendar years preceding the year of review. Under certain circumstances, reviews may cover longer periods. As Russian tax legislation does not provide definitive guidance in certain areas, the Group adopts, from time to time, interpretations of such uncertain areas that reduce the overall tax rate of the Group. While management currently estimates that the tax positions and interpretations that it has taken can probably be sustained, there is a possible risk that outflow of resources will be required should such tax positions and interpretations be challenged by the relevant authorities. The impact of any such challenge cannot be reliably estimated; however, it may be material to the financial position and/or the overall operations of the Group.
The taxation system in the
These circumstances may create tax risks in the
12.5 Environmental matters
The Group's operations are in the upstream oil industry in the
Under the current levels of enforcement of existing legislation, management believes there are no significant liabilities in addition to amounts which are already accrued as a part of decommissioning provision and which would have a material adverse effect on the financial position of the Group.
13. Related party transactions
During the period there were no operations with related parties, except for key management remunerations.
14. Events after the reporting date
Zoltav Resources Holdings (Jersey) Limited and ZRI Services (
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