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| Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
|---|---|---|---|---|---|
| Petro Matad Limited | LSE:MATD | London | Ordinary Share | IM00B292WR19 | ORD USD0.01 |
| Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
|---|---|---|---|---|---|---|---|---|---|---|
| 0.05 | 1.64% | 3.10 | 3.00 | 3.20 | 3.15 | 3.00 | 3.05 | 863,758 | 12:57:37 |
| Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
|---|---|---|---|---|---|
| Oil And Gas Field Expl Svcs | 201k | -2.95M | -0.0026 | -11.92 | 34.53M |
From May 2019 to May 2024
TIDMMATD
RNS Number : 8646C
Petro Matad Limited
30 June 2016
30 June 2016
Petro Matad Limited
("Petro Matad" or the "Company")
Final results for year ended 31 December 2015
Petro Matad Limited ("Petro Matad" or "the Company"), the AIM quoted Mongolian oil explorer, announces its audited final results for the year ended 31 December 2015.
Operational Highlights
-- The net loss after tax for the Group for the 12 months ended 31 December 2015 was $0.19 million (31 December 2014: Loss $3.940 million).
-- During the year the Group focused on exploration activities on its Production Sharing Contracts ("PSCs") with the Petroleum Authority of Mongolia ("PAM") on Blocks IV, V and XX in Mongolia.
-- After year-end, exit notice received from BG Group on Blocks IV and V. Compensation of at least $10 million to be paid to the Company to partially enable the Company to satisfy minimum spend obligations on Blocks IV and V.
About Petro Matad Limited
Petro Matad is the parent Company of a group focused on oil exploration, as well as future development and production in Mongolia. At the current time, Petro Matad holds the sole operatorship of three Production Sharing Contracts with the Government of Mongolia. Block XX has an area of 10,340 km(2) in the far eastern part of the country, and Blocks IV and V have an area of 28,900 km2 and 21,100 km2, respectively, in the southwest part of the country.
Petro Matad Limited is incorporated in the Isle of Man under Company number 1483V. Its registered office is at Victory House, Prospect Hill, Douglas, Isle of Man, IM1 1EQ.
Further Information:
Petro Matad Limited
Ridvan Karpuz, CEO
+976 70141099 / +976 75751099
Nominated Adviser and Broker
Stockdale Securities Limited
Richard Johnson / David Coaten
+44 (0)20 7601 6100
Annual Report and Accounts
The Company's statutory annual report and accounts will be dispatched electronically to shareholders today and will be posted shortly to shareholders who have elected to receive hard copies of the Annual Report. Additional copies of the Annual Report may be requested directly from the Company and an electronic copy is available on the Company's website www.petromatad.com.
Annual General Meeting ("AGM")
A notice of the Company's AGM will be distributed in due course and be made available on the Company's website www.petromatad.com.
Directors' Statement
The 2015 financial year was predominantly focused on the work programme on Blocks IV and V following the Company's farmout agreement with BG Group.
The results of work programme activities carried out in 2015 and recommenced in 2016 after a winter break, have been very encouraging. Based on preliminary processing and interpretation of data acquired, the Company is confident that a number of high quality drillable prospects will emerge from the substantial leads inventory already established. The Company is committed to continuing with the 2015-2017 three-year exploration programme approved by the Petroleum Authority of Mongolia (PAM), which includes the drilling of two wildcat exploration wells. Completion of this programme will furthermore meet the minimum financial and work obligations of the Production Sharing Contracts, as required by PAM, over the initial eight-year term ending July 2017. Additional details on the work programme are set out below.
Exploration Work Programme Summary
The 2015 airborne Full Tensor Gradiometer (FTG) and High Resolution Aeromagnetics (HRAM) surveys were completed on time, as planned and within budget. It is the first time in Mongolia such survey was conducted to optimise exploration work in remote locations. The surveys have provided a continuous high-resolution gravity and magnetic dataset across the expansive basin areas of Block IV and western Block V. The results of the surveys fully met geological and geophysical expectations and continue to provide the Company with a powerful tool for not only optimisation of the seismic acquisition programmes, but also to test, to strengthen the subsurface interpretation and de-risk the leads and prospects.
The 2015/2016 2D seismic program was designed to: 1) improve basin-scale definition over the greater Baatsagaan trend of central Block IV, and 2) elevate data coverage to prospect-scale for drill target definition over two priority areas - the Taatsiin Basin of Block V and the high-graded Baidrag Graben of Block IV.
The first phase of the seismic programme in Block IV was completed in December 2015, with 1085 kms of high quality data being acquired. The results were encouraging and led to the discovery of the attractive Baidrag Graben trend, which was the focus area of the 2016 infill programme in Block IV. After ceasing Phase 1 operations over the winter another 174 kms of infill data was acquired in May 2016 over the Baidrag Graben. The data acquired from the two surveys are being processed and interpreted to evaluate the existing lead portfolio, with a view to defining high-graded drillable prospects for 2017.
Seismic acquisition over Block V commenced in early June 2016 and is expected to be completed in August. 402 kms of priority data acquisition is planned, with potential for additional infill lines being acquired should preliminary results warrant it.
Once the seismic acquisition and processing programs have been completed, the Company will have successfully accumulated prospect-scale seismic coverage over three of its priority basin areas of Blocks IV and V (Baidrag Graben - IV; Taatsiin Basin - V; and Tugrug Basin - V). The Company will integrate all data - FTG, HRAM, new seismic, legacy seismic, geological studies and field surveys - to generate a portfolio of drill ready prospects. The Company plans to drill the two most attractive of these in 2017.
Since mid-2015, the Company has employed a Drilling Manager with relevant oil and gas exploration drilling experience in Mongolia. He and his team have been working on well design specifications assuming various depth ranges. A drilling tender has also been prepared with a number of companies participating in a pre-qualification process. This preparatory work will enable final well design and rig award to proceed quickly after the precise drilling locations are known.
Key Events
In April 2015, the Company announced completion of a farmout of its Block IV and V PSCs to BG Group. In return for earning working interests of 78% in each block.
Unexpectedly and as previously reported, on 28 April 2016, Shell (which had since acquired BG Group), through its affiliate company issued an Exit Notice to withdraw from the Block IV and V Production Sharing Contracts. Consequently, the Company's interest in Blocks IV and V will revert to 100% once all Mongolian Government approvals are in place.
Shell advised that the exit decision came after a careful and thorough evaluation of its portfolio following its combination with BG Group earlier this year. Shell stated that the decision was based on portfolio optimisation and was not related to the technical aspects of the blocks.
As part of the exit obligations, Shell is due to pay an exit fee to the Company, which will enable it to continue to fund ongoing exploration programmes. The exit fee, stipulated in the farmout agreement, will be a minimum of $10 million.
However, as PAM is requiring that the approved work programme be fulfilled, $10 million will be insufficient and the Company is therefore in discussions with Shell on receiving added compensation to meet work programme obligations. As Petro Matad is determined to fulfil the PAM required minimum work obligation, the Company is in continuous discussions with Shell to resolve the issue. The Company is also aware that PAM is in direct communication with Shell on this matter.
At the Company's request, the PAM provided a one-year moratorium on Block XX, which freezes for one-year obligations that would have normally been incurred, while at the same time extending the current license period to July 2018. The moratorium enables the Company to focus on Blocks IV and V work programmes in the immediate term.
HSSE
The Company remains demonstrably committed to best practice in health, safety, security and environmental management for the benefit of all stakeholders. During the past year the HSSE team has been strengthened with an HSSE Manager with relevant international experience with multinational Companies, supported by specialist local staff.
As part of the board's ongoing process of continual improvement the Company's Health, Safety, Security and Environmental Management System (HSSE MS) has been revised and is now structured according to International Association of Oil and Gas Producers (IOGP) guidelines.
All incidents are investigated, recorded and classified according to IOGP guidelines and learnings are shared through the management review process.
The Company is deeply focused on environmental protection. This was evident during Phase 1 and Phase 2 seismic planning and acquisition. To ensure both legal compliance when working near protected areas and to minimise all adverse environmental impacts, detailed environmental and cultural sensitivity field studies by specialist consultants were also commissioned. No environmental complaints were received during any of the Company's field activities.
Community Relations
The Company takes its responsibilities in community engagement and relations very seriously. In advance of any work programme activity being undertaken, the Company obtains approval from the Petroleum Authority of Mongolia and then invites them to join Company representatives on trips to local communities to present the planned activities. In addition to meeting local government officials, the community relations efforts will also normally include town hall meetings where questions by local residents are answered. Company representatives will also meet with herders who may be in proximity to planned operations.
In all the various work programmes the Company has undertaken over the years, community support has always been provided and no disruption to work or serious community issues have arisen. This is a record the Company is proud of and works hard to consistently achieve.
Conclusion
With the completion of FTG and Phase 1 of the seismic acquisition programme in 2015, and the expected completion of the Phase 2 seismic acquisition programme in August 2016, the Company will be well positioned to commence a drilling program in 2017 in locations that will maximise the chances of success. There is a great deal of anticipation and optimism among staff and stakeholders on the potential growth of the Company that a successful drilling program would bring.
Finally, the Board would like to express their appreciation to our staff, both technical and non-technical, who have worked with enthusiasm and diligence throughout the year. We would also like to express our gratitude to shareholders for their continued support of the Company.
Consolidated Statement of Profit or Loss and Other Comprehensive Income
For the year ended 31 December 2015
Hot Features
Premium
Consolidated
31 Dec 31 Dec
2015 2014
Note $'000 $'000
------------- --------
Continuing operations
Revenue
Interest income 4(a) 22 72
Other income 4(a) 11,722 5
------------- --------
11,744 77
Expenditure
Consultancy fees (476) (147)
Depreciation and amortisation (97) (131)
Employee benefits expense 4(b) (2,438) (1,941)
Exploration and evaluation expenditure 4(c) (7,236) (266)
Other expenses 4(d) (1,687) (1,532)
Loss from continuing operations
before income tax (190) (3,940)
Income tax expense 5 - -
------------- --------
Loss from continuing operations
after income tax (190) (3,940)
Net loss for the year (190) (3,940)
------------- --------
Other comprehensive income
Items that may be reclassified
subsequently to profit or loss:
Exchange differences on translating
foreign operations, net of income
tax of $Nil (2013: $Nil) (41) (115)
Other comprehensive loss for
the year, net of income tax (41) (115)
Total comprehensive loss for
the year (231) (4,055)
============= ========
Loss attributable to owners of
the parent (190) (3,940)
============= ========
Total comprehensive loss attributable
to owners of the parent (231) (4,055)
============= ========
Loss per share (cents per share)
Basic and diluted loss per share 6 0.1 1.4
The above Consolidated Statement of Profit or Loss and Other Comprehensive Income should be read in conjunction with the accompanying notes.
Consolidated Statement of Financial Position
As at 31 December 2015
Consolidated
31 Dec 31 Dec
2015 2014
Note $'000 $'000
--------- ---------
ASSETS
Current Assets
Cash and cash equivalents 7 5,339 895
Trade and other receivables 8 822 241
Prepayments and other assets 9 812 364
--------- ---------
Total Current Assets 6,973 1,500
Non-Current Assets
Trade and other receivables 8 536 -
Exploration and evaluation
assets 10 15,275 15,275
Property, plant and equipment 11 502 439
Total Non-Current Assets 16,313 15,714
--------- ---------
TOTAL ASSETS 23,286 17,214
--------- ---------
LIABILITIES
Current Liabilities
Trade and other payables 12 7,436 1,353
Total Current Liabilities 7,436 1,353
TOTAL LIABILITIES 7,436 1,353
--------- ---------
NET ASSETS 15,850 15,861
========= =========
EQUITY
Equity attributable to owners
of the parent
Issued capital 13 106,150 105,278
Reserves 14 4,010 4,896
Accumulated losses (94,310) (94,313)
--------- ---------
TOTAL EQUITY 15,850 15,861
========= =========
The above Consolidated Statement of Financial Position should be read in conjunction with the accompanying notes.
Consolidated Statement of Cash Flows
For the year ended 31 December 2015
Consolidated
31 Dec 31 Dec
2015 2014
Note $'000 $'000
-------- --------
Cash flows from operating activities
Payments to suppliers and employees (9,359) (2,363)
Interest received 22 72
Farm-out proceeds 13,921 -
Net cash flows provided by/ (used
in) operating activities 7 4,584 (2,291)
Cash flows from investing activities
Purchase of property, plant and
equipment (183) (20)
Proceeds from the sale of property,
plant and equipment 3 15
Net cash flows used in investing
activities (180) (5)
Cash flows from financing activities
Proceeds from issue of shares 81 1
Net cash flows from financing
activities 81 1
Net increase/(decrease) in cash
and cash equivalents 4,485 (2,295)
Cash and cash equivalents at beginning
of the year 895 3,308
Net foreign exchange differences (41) (118)
-------- --------
Cash and cash equivalents at the
end of the year 7 5,339 895
======== ========
The above Consolidated Statement of Cash Flows should be read in conjunction with the accompanying notes.
Consolidated Statement of Changes in Equity
For the year ended 31 December 2015
Consolidated
Attributable to equity holders
of the parent
Issued Accumulated Other
Capital Losses Reserves Total
Note 14
Note $'000 $'000 $'000 $'000
--------- ------------ ---------- --------
As at 1 January 2014 105,097 (90,556) 4,736 19,277
Net loss for the year - (3,940) - (3,940)
Other comprehensive income - - (115) (115)
--------- ------------ ---------- --------
Total comprehensive loss
for the year - (3,940) (115) (4,055)
Issue of share capital 13 1 - - 1
Cost of capital raising 13 - - - -
13, 14
Share-based payments & 15 180 183 275 638
As at 31 December 2014 105,278 (94,313) 4,896 15,861
========= ============ ========== ========
Net loss for the year - (190) - (190)
Other comprehensive income - - (41) (41)
--------- ------------ ---------- --------
Total comprehensive loss
for the year - (190) (41) (231)
Issue of share capital 13 81 - - 81
Cost of capital raising 13 - - - -
13, 14
Share-based payments & 15 791 193 (845) 139
As at 31 December 2015 106,150 (94,310) 4,010 15,850
========= ============ ========== ========
The above Consolidated Statement of Changes in Equity should be read in conjunction with the accompanying notes.
Notes to the Consolidated Financial Statements
For the year ended 31 December 2015
1 Corporate information
The financial report of Petro Matad Limited ("Company") for the year ended 31 December 2015 was authorised for issue in accordance with a resolution of the Directors on 27 June 2016.
This financial report presents the consolidated results and financial position of Petro Matad Limited and its subsidiaries (together, the "Group"). The Group's principal activity in the course of the financial year consisted of oil exploration in Mongolia.
Petro Matad Limited ("Company") a company incorporated in the Isle of Man on 30 August 2007 has four wholly owned subsidiaries, including Capcorp Mongolia LLC and Petro Matad LLC (both incorporated in Mongolia), as well as Central Asian Petroleum Corporation Limited ("Capcorp") and Petromatad Invest Limited (both incorporated in the Cayman Islands). The Company and its subsidiaries are collectively referred to as the "Group". Petro Matad Service Limited, a subsidiary of the Company was dissolved on 1 January 2016, as the company was dormant due to no longer being operationally required.
Petrovis Matad Inc. is a major shareholder of the Company, currently holding approximately 32.06% of the shareholding.
2 Summary of significant accounting policies
(a) Basis of preparation
This financial report complies with International Financial Reporting Standards ("IFRS") as adopted by the European Union.
This financial report has been prepared on a historical cost basis, except where otherwise stated. Historical cost is generally based on the fair values of the consideration given in exchange for goods and services. Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date, regardless of whether that price is directly observable or estimated using another valuation technique.
In addition, for financial reporting purposes, fair value measurements are categorised into Level 1, 2 or 3 based on the degree to which the inputs to the fair value measurements are observable and the significance of the inputs to the fair value measurement in its entirety, which are described as follows:
-- Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities that the entity can access at the measurement date;
-- Level 2 inputs are inputs, other than quoted prices included within Level 1, that are observable for the asset or liability, either directly or indirectly; and
-- Level 3 inputs are unobservable inputs for the asset or liability.
For the purpose of preparing the consolidated financial statements, the Company is a for-profit entity.
(b) Statement of compliance
This general purpose financial report has been prepared in accordance with the requirements of all applicable IFRS as adopted by the European Union and related Interpretations and other authoritative pronouncements.
(c) Going concern note
The Consolidated Entity has incurred a net loss after income tax of $0.19 million (2014: $3.94 million) and experienced net cash inflows from operating activities of $4.58 million (2014: net cash outflow of $2.29 million) for the year ended 31 December 2015.
In addition, and as outlined in Note 16(b) the Consolidated Entity is required to meet minimum exploration commitments in the next 12 months on its PSCs of approximately $19.37 million with further commitments of $15.58 million thereafter as disclosed in Note 16(b).
These conditions indicate a material uncertainty that may cast significant doubt over the Company and the Consolidated Entity's ability to continue as going concerns.
The ability of the Company and the Consolidated Entity to continue as going concerns is principally dependent upon the following:
-- Receiving compensation of at least $10 million in respect of the exit notice received from BG Group; and
-- Raising additional equity; and/or -- Further varying and/or deferring PSC commitment expenditures; and/or -- Securing farm-out agreements to fund minimum exploration commitments.
On 20 April 2016, the Petroleum Authority of Mongolia (PAM) granted a one-year moratorium for Block XX, commencing 1 January 2016. As a result of the moratorium, the licence period for the PSC for Block XX has been extended by one year from July 2017 to July 2018. In addition, the moratorium approval allows the cumulative expenditure shortfall as at 31 December 2015 of $4.3 million to be spent after the moratorium has ended. Prior to the moratorium ending the Company will have to arrange for alternative sources of funding to fund the future exploration expenditure commitments of $21.3 million currently due by July 2018.
On 28 April 2016, the Company received an exit notice from BG Group advising they were triggering the exit option under the farm-out agreement. Consequently, the Company's working interests in Blocks IV and V will revert to 100%. As required by the farm-out and other related agreements, compensation of at least $10 million is required to be paid to the Company by a related entity of BG Group, which will partially enable the Company to satisfy minimum spend obligations in relation to Blocks IV and V.
At the date of this report the Company has not received the minimum exit payment as the amount due is in dispute. While BG Group has advised they are prepared to pay the minimum amount of $10 million immediately, the Company believes additional compensation is due under the farm-out and other related agreements. Consequently, BG Group has withheld payment pending agreement on the total amount due. In the absence of other mitigating factors, a delay in the receipt of funds from BG of more than a few months would significantly compromise the ability of the Company and Consolidated Entity to continue as going concerns. The Company is currently in negotiation with BG Group and expects to resolve the dispute and receive at least $10 million over the next few months from the date of this report.
The Company intends to explore opportunities for raising further investment funds later in the 2016 calendar year, once drillable prospects on Blocks IV and V have been defined from the ongoing seismic acquisition program. The opportunities to be considered include equity raise, direct investment and farm-out.
The Directors have prepared a cash flow forecast which indicates that the consolidated entity will be required to raise additional funds to meet their working capital requirements (including minimum exploration commitments) for the twelve month period from the date of signing the financial report.
The Directors are satisfied that they will achieve successful outcomes in relation to the matters set out above and therefore the going concern basis of preparation is appropriate. The financial report has therefore been prepared on the going concern basis, which assumes continuity of normal business activities and the realisation of assets and the settlement of liabilities in the ordinary course of business.
Should the Company and the Consolidated Entity be unable to achieve the matters referred to above, there is a material uncertainty whether the Company and the Consolidated Entity will be able to continue as going concerns and, therefore, whether they will realise their assets and discharge their liabilities in the normal course of business and at amounts stated in the financial report.
The financial report does not include adjustments relating to the recoverability and classification of recorded asset amounts nor to the amounts and classification of liabilities that might be necessary should the Company and the Consolidated Entity not continue as going concerns.
(d) Application of new and revised Accounting Standards
Standards and Interpretations adopted in the current year
The consolidated entity has adopted all of the new and revised Standards and Interpretations issued by the International Accounting Standards Board that are relevant to their operations and are effective for the current financial reporting period beginning 1 January 2015.
The following new and revised Standards and Interpretations have been adopted in the current period:
-- Annual Improvements to IFRSs 2010- 2012 Cycle and 2011-2013 Cycle
The impact of the adoption of the above standards and interpretations did not have a material impact for the Group.
Standards and Interpretations in issue not yet adopted
At the date of authorisation of the financial statements, the following International Financial Reporting Standards and Interpretations have recently been issued or amended but are not yet effective and have not been adopted by the consolidated entity for the year ended 31 December 2015:
Standard/Interpretation Effective for Expected to
annual reporting be initially
periods beginning applied in
on or after the financial
year ending
--------------------------------------- ------------------- ---------------
IFRS 9 'Financial Instruments' 1 January 2018 31 December
2018
--------------------------------------- ------------------- ---------------
IFRS 15 'Revenue from Contracts 1 January 2018 31 December
with Customers' 2018
--------------------------------------- ------------------- ---------------
IFRS 16 'Leases' 1 January 2019 31 December
2019
--------------------------------------- ------------------- ---------------
Amendments to IFRS 11 - 'Accounting 1 January 2016 31 December
for Acquisition of Interest in 2016
Joint Operations'
--------------------------------------- ------------------- ---------------
Amendments to IAS1 - Disclosure 1 January 2016 31 December
initiative 2016
--------------------------------------- ------------------- ---------------
Amendments to IAS 27 'Equity Method 1 January 2016 31 December
in Separate Financial Statements' 2016
--------------------------------------- ------------------- ---------------
Amendments to IAS 36 and IAS 38 1 January 2016 31 December
'Clarification of Acceptable Methods 2016
of Depreciation and Amortisation'
--------------------------------------- ------------------- ---------------
Amendments to IFRS 10 and IAS 28 1 January 2016 31 December
- 'Sale or Contribution of Assets 2016
between an Investor and its Associate
or Joint Venture'
--------------------------------------- ------------------- ---------------
Annual Improvements to IFRSs 2012-2014 1 January 2016 31 December
Cycle 2016
--------------------------------------- ------------------- ---------------
The impact of these recently issued or amended standards and interpretations are currently being assessed by the consolidated entity and impact is not expected to be material.
(e) Basis of consolidation
The consolidated financial statements incorporate the financial statements of the Company and entities controlled by the Company and its subsidiaries. Control is achieved when the Company:
-- has power over the investee; -- is exposed, or has rights, to variable returns from its involvement with the investee; and -- has the ability to use its power to affect its returns.
The Company reassesses whether or not it controls an investee if facts and circumstances indicate that there are changes to one or more of the three elements of control listed above.
The financial statements of the subsidiaries are included in the consolidated financial statements from the date that control commences until the date that control ceases.
The financial statements of subsidiaries are prepared for the same reporting period as the parent company, using consistent accounting policies. Adjustments are made to bring into line any dissimilar accounting policies that may exist.
A change in the ownership interest of a subsidiary that does not result in a loss of control is accounted for as an equity transaction.
All intercompany balances and transactions, including unrealised profits arising from intra-group transactions, have been eliminated in full. Unrealised losses are eliminated unless costs cannot be recovered.
(f) Foreign currency translation
Functional and presentation currency
Both the functional and presentation currency of Petro Matad Limited is United States Dollars ("USD"). The Cayman Island subsidiaries functional currency is USD. The Mongolian subsidiaries' functional currency is Mongolian Tugrugs ("MNT") which is then translated to the presentation currency, USD.
Transactions and balances
Transactions in foreign currencies are initially recorded in the functional currency by applying the exchange rates ruling at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies are retranslated at the rate of exchange ruling at the reporting date.
Non-monetary items that are measured in terms of historical cost in a foreign currency are translated using the exchange rate as at the date of the initial transaction. Non-monetary items measured at fair value in a foreign currency are translated using the exchange rates at the date when the fair value was determined.
Exchange differences are recognised in profit or loss in the period in which they arise except for:
-- Exchange differences on transactions entered into to hedge certain foreign currency risks; and
-- Exchange differences on monetary items receivable from or payable to a foreign operation for which settlement is neither planned nor likely to occur (therefore forming part of the net investment in the foreign operation), which are recognised initially in other comprehensive income and reclassified from equity to profit or loss on disposal or partial disposal on the net investment.
Translation of subsidiaries' functional currency to presentation currency
The results of the Mongolian subsidiaries are translated into USD (presentation currency) as at the date of each transaction. Assets and liabilities are translated at exchange rates prevailing at the reporting date.
Exchange differences resulting from the translation are recognised in other comprehensive income and accumulated in the foreign currency translation reserve in equity.
On consolidation, exchange differences arising from the translation of the net investment in Mongolian subsidiaries are recognised in other comprehensive income and accumulated in the foreign currency translation reserve. If a Mongolian subsidiary was sold, the proportionate share of exchange difference would be transferred out of equity and recognised in profit and loss.
(g) Cash and cash equivalents
Cash and short-term deposits in the statement of financial position comprise cash at bank and in hand and short-term deposits with an original maturity of three months or less.
For the purposes of the statement of cash flows, cash and cash equivalents consist of cash and cash equivalents as defined above, net of outstanding bank overdrafts.
(h) Trade and other receivables
Trade receivables, which generally have 30-60 day terms, are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method, less an allowance for impairment.
Collectability of trade receivables is reviewed on an ongoing basis. An impairment provision is recognised when there is objective evidence that the Group will not be able to collect the receivable. Objective evidence of impairment includes financial difficulties of the debtor, default payments or debts more than 60 days overdue. The amount of the impairment loss is the amount by which the receivable carrying value exceeds the present value of the estimated future cash flows, discounted at the original effective interest rate.
(i) Plant and equipment
Plant and equipment is stated at historical cost less accumulated depreciation and any impairment in value.
Depreciation is calculated on a straight-line basis over the estimated useful life of the asset and is currently estimated to be an average of 6.0 years.
The assets' residual values, useful lives and amortisation methods are reviewed, and adjusted if appropriate, at each financial year end.
Derecognition
An item of property, plant and equipment is derecognised upon disposal or when no further future economic benefits are expected from its use or disposal.
(j) Exploration and evaluation expenditure
Exploration and evaluation expenditure incurred by the Group is expensed separately for each area of interest. The Group's policy is to expense all exploration and evaluation costs funded out of its own resources.
(k) Exploration and evaluation assets
Exploration and evaluation assets arising out of business combinations are capitalised as part of deferred exploration and evaluation assets. Subsequent to acquisition exploration expenditure is expensed in accordance with the Company's accounting policy.
(l) Impairment of tangible and intangible assets other than goodwill
At each reporting date, the Group assesses whether there is any indication that tangible and intangible asset may be impaired. Where an indicator of impairment exists, the Group makes a formal estimate of recoverable amount for each asset or cash generating unit to determine the extent of the impairment loss (if any). Where the carrying amount of an asset (or cash-generating unit) exceeds its recoverable amount the asset is considered impaired and is written down to its recoverable amount.
Recoverable amount is the greater of fair value less costs to sell and value in use. It is determined for an individual asset, unless the asset's value in use cannot be estimated to be close to its fair value less costs to sell and it does not generate cash inflows that are largely independent of those from other assets or groups of assets, in which case, the recoverable amount is determined for the cash-generating unit to which the asset belongs.
In assessing value in use, the estimated future cash flows are discounted to their present value using a pre tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset.
Where an impairment loss subsequently reverses, the carrying amount of the asset (or cash-generating unit) is increased to the revised estimate of its recoverable amount, but so that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognised for the assets (or cash-generating unit) in prior years. A reversal of an impairment loss is recognised immediately in profit or loss, unless the relevant asset is carried at a revalued amount, in which case the reversal of impairment loss is treated as a revaluation increase.
Impairment review for deferred exploration and evaluation assets are carried out on a project-by-project basis, which each project representing a single cash generating unit. An impairment review is undertaken when indicators of impairment arise, typically when one of the following circumstances apply:
-- Unexpected geological occurrences that render the resource uneconomic; -- Title to asset is compromised; -- Variations in prices that render the project uneconomic; or -- Variations in the currency of operation.
(m) Trade and other payables
Trade and other payables are initially recognised at fair value. After initial recognition, trade and other payables are carried at amortised cost and due to their short term nature are not discounted. They represent liabilities for goods and services provided to the Group prior to the end of the financial year that are unpaid and arise when the Group becomes obliged to make future payments in respect of the purchase of these goods and services. The amounts are unsecured and are usually paid within 30 days of recognition.
(n) Interest-bearing loans and borrowings
All loans and borrowings are initially recognised at cost, being the fair value of the consideration received net of issue costs associated with the borrowing.
After initial recognition, interest-bearing loans and borrowings are subsequently measured at amortised cost using the effective interest method. Amortised cost is calculated by taking into account any issue costs, and any discount or premium on settlement.
Gains and losses are recognised in the profit and loss when the liabilities are derecognised.
The component parts of compound financial instruments are classified as financial liabilities and equity in accordance with the substance of the contractual arrangement. The fair value of the liability portion of a convertible note is determined using a market interest rate for an equivalent non-convertible note. The remainder of the proceeds is allocated to the conversion option. If the conversion option meets the definition of an equity instrument, this amount is recognised and included in shareholders' equity and is not subsequently remeasured.
(o) Provisions
Provisions are recognised when the Group has a present obligation (legal or constructive) as a result of a past event, it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation.
The amount recognised as a provision is the best estimate of the consideration required to settle the present obligation at the end of the reporting period, taking into account the risks and uncertainties surrounding the obligation. If the effect of the time-value of money is material, provisions are determined by discounting the expected future cash flows at a pre-tax rate that reflects current market assessments of the time value of money and, where appropriate, the risks specific to the liability.
Where discounting is used, the increase in the provision due to the passage of time is recognised as a finance cost.
(p) Leases
Finance leases, which transfer to the Group substantially all the risks and benefits incidental to ownership of the leased item, are capitalised at the inception of the lease at the fair value of the leased property or, if lower, at the present value of the minimum lease payments.
Lease payments are apportioned between the finance charges and reduction of the lease liability so as to achieve a constant rate of interest on the remaining balance of the liability. Finance charges are charged directly to profit and loss.
Capitalised leased assets are depreciated over the shorter of the estimated useful life of the asset or the lease term.
Leases where the lessor retains substantially all the risks and benefits of ownership of the asset are classified as operating leases. Initial direct costs incurred in negotiating an operating lease are added to the carrying amount of the leased asset and recognised over the lease term on the same bases as the lease income.
Operating lease payments are recognised as an expense in profit or loss on a straight-line basis over the lease term.
(q) Contributed equity
Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of new shares or Options are shown in equity as a deduction, net of tax, from the proceeds.
(r) Revenue
Revenue is recognised to the extent that it is probable that the economic benefits will flow to the Group and the revenue can be reliably measured. The following specific criteria must also be met before revenue is recognised:
Interest revenue
Revenue is recognised on an accrual basis using the effective interest method.
(s) Share-based payment transactions
The Group provides to certain key management personnel share-based payments, whereby they render services in exchange for rights over shares ("equity-settled transactions").
The cost of these equity-settled transactions is measured by reference to the fair value at the date at which they are granted. The fair value is determined by use of the Black Scholes model.
In determining the fair value of the equity-settled transactions, vesting conditions that are not market conditions are not taken into account.
The cost of equity-settled transactions is recognised as an expense on a straight-line basis, together with a corresponding increase in equity, over the period in which they vest.
The cumulative expense recognised for equity-settled transactions at each reporting date until the vesting date reflects:
-- the extent to which the vesting period has expired; and
-- the number of awards that, in the opinion of the Directors of the Group, will ultimately vest.
This opinion is formed based on the best available information at the reporting date. The impact of the revision of original estimates, if any, is recognised in profit or loss such that the cumulative expense reflects the revised estimate, with a corresponding adjustment to equity reserves.
Where the terms of an equity-settled award are modified, as a minimum, an expense is recognised as if the terms had not been modified. In addition, an expense is recognised for any increase in the value of the transaction as a result of the modification, as measured at the date of modification.
Where an equity-settled award is cancelled, it is treated as if it had vested on the date of cancellation, and any expense not yet recognised for the award is recognised immediately. However, if a new award is substituted for the cancelled award, and designated as a replacement award on the date that it is granted, the cancelled and new award are treated as if they were a modification of the original award, as described in the previous paragraph.
(t) Income tax
Current tax
Current tax is calculated by reference to the amount of income taxes payable or recoverable in respect of the taxable profit or tax loss for the year. It is calculated using tax rates and tax laws that have been enacted or substantively enacted by the reporting date. Current tax for current and prior years is recognised as a liability (or asset) to the extent that it is unpaid (or refundable).
Deferred tax
Deferred tax is accounted for using the comprehensive balance sheet liability method in respect of temporary differences arising from differences between the carrying amount of assets and liabilities and the corresponding tax base of those items.
In principle, deferred tax liabilities are recognised for all taxable temporary differences. Deferred tax assets are recognised to the extent that it is probable that sufficient taxable amounts will be available against which deductible temporary differences or unused tax losses and tax offsets can be utilised. However, deferred tax assets and liabilities are not recognised if the temporary differences giving rise to them arise from the initial recognition of assets and liabilities (other than as a result of a business combination) that affects neither taxable income nor accounting profit. Furthermore, a deferred tax liability is not recognised in relation to taxable temporary differences arising from goodwill.
Deferred tax assets and liabilities are measured at the tax rates that are expected to apply to the year(s) when the asset and liability giving rise to them are realised or settled, based on tax rates (and tax laws) that have been enacted or substantively enacted by reporting date. The measurement of deferred tax liabilities and assets reflects the tax consequences that would follow from the manner in which the consolidated Group expects, at the reporting date, to recover or settle the carrying amount of its assets and liabilities.
Deferred tax assets and liabilities are offset when they relate to income taxes levied by the same taxation authority and the Company intends to settle its current tax assets and liabilities on a net basis.
Current and deferred tax for the year
Current and deferred tax is recognised as an expense or income in the profit or loss, except when it relates to items credited or debited directly to equity/other comprehensive income, in which case the deferred tax is also recognised directly in equity/other comprehensive income, or where it arises from the initial accounting for a business combination, in which case it is taken into account in the determination of goodwill.
(u) Earnings per share
Basic earnings per share is calculated as net profit attributable to owners of the parent, adjusted to exclude any costs of servicing equity (other than dividends), divided by the weighted average number of ordinary shares, adjusted for any bonus element.
Diluted earnings per share is calculated as net profit attributable to owners of the parent, adjusted for:
-- Costs of servicing equity (other than dividends);
-- The after tax effect of dividends and interest associated with dilutive potential ordinary shares that have been recognised as expenses; and
-- Other non-discretionary changes in revenues or expenses during the year that would result from the conversion of dilutive potential ordinary shares, divided by the weighted average number of ordinary shares and dilutive potential ordinary shares, adjusted for any bonus element.
(v) Interest in Joint Operations
Joint operation is a joint arrangement whereby the parties that have joint control of the arrangement have rights to the assets, and obligations for the liabilities, relating to the arrangement. Those parties are called joint operators. Joint control is the contractually agreed sharing of control of an arrangement, which exists only when decisions about the relevant activities require the unanimous consent of the parties sharing control.
A joint operator recognises the following in its financial statements in respect to the joint operation:
-- its assets including its share of any jointly held assets; -- its liabilities, including its share of any jointly incurred liabilities; -- its revenue from the sale of its share of the output arising from the joint operation; -- its share of the revenue from the sale of the output by the joint operation; and -- its expenses, including its share of any expenses incurred jointly
The group accounts for the assets, liabilities, revenues and expenses relating to its interest in a Joint operation in accordance with IFRSs applicable to the particular asset, liabilities, revenues and expenses.
(w) Significant accounting judgments, estimates and assumptions
In applying the Group's accounting policies management continually evaluates judgments, estimates and assumptions based on experience and other factors, including expectations of future events that may have an impact on the Group. All judgments, estimates and assumptions made are believed to be reasonable based on the most current set of circumstances available to management. Actual results may differ from the judgments, estimates and assumptions.
Any revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision affects only that period, or in the period of the revision and future periods if the revision affects both the current and future periods.
The following are the most critical estimates and judgments made by management in applying the accounting policies and have the most significant effect on the amounts recognised in the financial statements.
Share-based payments
The Group measures the cost of equity-settled transactions with Directors and employees at the fair value of the equity instruments at the date at which they are granted. The fair value is determined using a Black Scholes model. One of the inputs into the valuation model is volatility of the underlying share price which is estimated on the 4.5 year history of the share price and has been estimated in a range from 10% to 120% depending on the date of the grant.
Recovery of the exploration and evaluation assets
The ultimate recoupment of the exploration and evaluation assets is dependent upon successful development and commercial exploitation or alternatively the sale of the respective areas of interest at an amount at least equal to book value. At the point that it is determined that any capitalised exploration and evaluation expenditure is not recoverable, it is written off.
Going Concern
The Group assesses the going concern of the Group on a regular basis, reviewing their cash flow requirements, commitments and status of PSC requirements and funding arrangements. Refer to Note 2 (c) for further details.
3 Operating segments
Operating segments have been identified on the basis of internal reports of the Group that are regularly reviewed by the chief operating decision maker in order to allocate resources to the segments and to assess their performance.
The chief operating decision maker has been identified as the Board of Directors. On a regular basis, the Board receives financial information on a consolidated basis similar to the financial statements presented in the financial report, to manage and allocate their resources. Based on the information provided to the Board of Directors, the Group has one operating segment and geographical segment, being Mongolia; as such no separate disclosure has been provided.
31 Dec 31 Dec
2015 2014
Note $'000 $'000
--------- ---------
4 Revenues and expenses
(a) Revenue
Interest income 22 72
Other income:
Consideration for the BG Group
farm-out agreement* 4,486 -
Cash calls received from BG
Group* 7,234 -
Other income* 2 5
Foreign exchange gains - -
11,744 77
======= ===
* On 7 April 2015, the Company announced the successful completion of a farm-out agreement with BG International Limited and BG Mongolia Holdings Limited ("BG Group"). On 22 June 2015, all conditions to the farm-out were satisfied and unconditional status was therefore received. Under the terms of the farm-out, BG Group acquired 78% of Blocks IV and V in exchange for funding the Group's share of a mutually agreed $28 million work programme which will fulfil the minimum work obligations for both blocks within the current licence period to July 2017. The Group will also receive additional cash consideration of $4.55 million to fund ongoing operations and obligations. Also refer to Note 21 - Events after the reporting date.
(b) Employee benefits expense
Included in employee benefits expense are the following:
Wages and salaries 1,601 610
Directors' fees (including Directors
of affiliates) 175 104
Consultancy fees 557 589
Share-based payments 105 638
------ ------
2,438 1,941
====== ======
(c) Exploration and evaluation expenditure
Exploration and evaluation expenditure relates to the following PSCs:
Block XX 1 30
Blocks IV and V 7,235 236
7,236 266
====== ====
(d) Other expenses
Included in other expenses are the following:
Administration costs 903 623
PSC administration costs 533 732
Audit fees 114 99
Travel expenses 137 78
1,687 1,532
====== ======
31 Dec 31 Dec
2015 2014
Note $'000 $'000
--------- ---------
5 Income tax
Income tax recognised in the statement of profit or loss:
Tax expense/(benefit) comprises:
Current tax expense/(benefit) - -
Deferred tax expense/(benefit)
relating to the
origination and reversal of temporary
differences - -
----
Total tax expense/(benefit) reported
in the statement of profit or
loss - -
====
The prima facie income tax benefit on pre-tax accounting loss from continuing operations reconciles to the income tax expense/(benefit) in the financial statements as follows:
Net loss for the year (190) (3,940)
Income tax benefit calculated
at 10% (i) 19 394
Effect of different tax rates
on entities in different jurisdictions (ii) 650 (220)
Change in unrecognised deferred
tax assets (669) (174)
------ --------
- -
====== ========
(i) The tax rate used in the above reconciliation is the corporate tax rate of 10% payable by Mongolian corporate entities on taxable profits up to 3 billion MNT under Mongolian tax law.
(ii) Petromatad Invest Limited and Capcorp are exempt of Mongolian corporate tax on profits derived from the sale of oil under their PSCs once production commences and are subject to Cayman Islands income tax at a rate of 0%. As a consequence, no provision for Mongolian corporate tax or Cayman Islands current tax or deferred tax has been made in the Company's accounts in relation to them.
Petro Matad Limited is subject to Isle of Man income tax at a rate of 0%. As a consequence, no provision for Isle of Man current tax or deferred tax has been made in the Company's accounts.
6 Loss per share
The following reflects the loss and share data used in the total operations basic and diluted loss per share computations:
31 Dec 2015 31 Dec 2014
cents per share cents per share
-------------------- ----------------
Basic loss per share 0.1 1.4
==================== ================
Diluted loss per share 0.1 1.4
==================== ================
$'000's $'000's
-------------------- ----------------
The loss and weighted average number of ordinary
shares used in the calculation of basic and
diluted loss per share are as follows:
Net loss attributable to owners of the parent 190 3,940
-------------------- ----------------
Weighted average number of ordinary shares
for the purposes of basic and diluted loss
per share (in thousands) 284,450 279,377
-------------------- ----------------
Share Options and Conditional Share Awards could potentially dilute basic loss per share in the future, however they have been excluded from the calculation of diluted loss per share because they are anti-dilutive for both years presented.
31 Dec 31 Dec
2015 2014
Note $'000 $'000
--------- ---------
7 Cash and cash equivalents
Cash at bank and in hand 5,339 895
5,339 895
====== ====
Cash at bank and in hand earns interest at fixed and floating rates based on prevailing bank rates, and the fair value of the above cash and cash equivalents is $5,339,000 (2014: $895,000) due to the short-term nature of the instruments.
Reconciliation from the net loss after tax to the net cash flows from operations:
Net loss after tax (190) (3,940)
Adjustments for:
Depreciation and amortisation 97 131
Net (profit)/loss on disposal
of property, plant and equipment 9 6
Share based payments 140 638
Unrealised foreign exchange (gains)/
losses 10 50
Changes in assets and liabilities
(Increase)/decrease in trade
and other receivables (1,117) 69
(Increase)/decrease in prepayments
and other assets (448) 120
Increase/(decrease) in trade
and other payables 6,083 635
Net cash flows used in operating
activities 4,584 (2,291)
======== ========
Non-cash investing and financing activities
There were no non-cash investing or financing activities undertaken in the financial year or prior year, other than the exercise of Options and Conditional Share Awards of $0.79 million (2014: $0.180 million).
8 Trade and other receivables
Current
Receivable from BG Group 600 -
Other debtors 222 241
Non-Current
Receivable from BG Group 536 -
1,358 241
====== ====
All amounts are recoverable and are not considered past due or impaired.
9 Prepayments and other assets
Prepayments 505 55
Other assets 307 309
---- ----
812 364
==== ====
Other current assets are mainly comprised of consumables, including casing, mud and drilling materials purchased for Block XX.
31 Dec 31 Dec
2015 2014
Note $'000 $'000
--------- ---------
10 Exploration and evaluation assets
Exploration and evaluation assets 15,275 15,275
------- -------
15,275 15,275
======= =======
The exploration and evaluation asset arose following the initial acquisition in February 2007 of 50% of Petromatad Invest Limited, together with acquisition on 12 November 2007 of the remaining 50% not already held by the Group, for a consideration of 23,340,000 ordinary shares credited as fully paid up and with an estimated fair value of $0.50 per share, taking into account assets and liabilities acquired on acquisition. This relates to the exploration and evaluation of PSC Block XX.
The ultimate recoupment of exploration and evaluation expenditure is dependent upon successful development and commercial exploitation or alternatively the sale of the respective areas of interest at an amount at least equal to book value.
Management have reviewed for impairment indicators on Block XX and no impairment has been noted.
11 Property, plant and equipment
Plant and equipment at cost 1,050 936
Accumulated depreciation and impairment (548) (497)
------ ------
502 439
====== ======
Reconciliation of carrying amounts at the beginning and end of the year:
Plant
and equipment
Total
$'000
---------------
As at 1 January 2014 (net of accumulated
depreciation) 618
Additions 20
Disposals (21)
Foreign exchange (47)
Depreciation charge for the year (131)
As at 31 December 2014 (net of accumulated
depreciation) 439
===============
Additions 183
Disposals (9)
Foreign exchange (14)
Depreciation charge for the year (97)
As at 31 December 2015 (net of accumulated
depreciation) 502
===============
31 Dec 31 Dec
2015 2014
Note $'000 $'000
--------- ---------
12 Trade and other payables (current)
Trade payables 4,097 1,351
Funding received in advance from
BG Group 3,337 -
Other payables 2 2
------ ------
7,436 1,353
====== ======
Trade payables are non-interest bearing and are normally settled within 60 day terms.
13 Issued capital
Ordinary Shares
287,494,775 shares issued and fully
paid
(2014: 279,489,279) 106,150 105,278
-------- --------
106,150 105,278
======== ========
Movements in ordinary shares on issue:
Issue
Number Price
of Shares $ $'000
------------ ------- --------
As at 1 January 2014 279,340,879 105,097
Exercise of Conditional Share Awards on 3 October
2014 (note (a)) 146,400 0.010 1
--------
1
Share based payment - - 180
--------
As at 31 December 2014 279,487,279 105,278
Exercise of Conditional Share Awards on 23 April
2015 (note (b)) 5,750,946 0.010 58
Exercise of Conditional Share Awards on 27 July 2015
(note (c)) 2,256,550 0.010 23
81
Share based payment - - 791
------------ --------
As at 31 December 2015 287,494,775 106,150
============ ========
(a) On 3 October 2014, pursuant to the Group's Plan, 146,400 shares were awarded to former employees exercising Conditional Share Awards with an exercise price per share of $0.01.
(b) On 23 April 2015, pursuant to the Group's Plan, 5,750,946 shares were awarded upon exercise of Conditional Share Awards with an exercise price per share of $0.01.
(c) On 27 July 2015, pursuant to the Group's Plan, 2,256,550 shares were awarded upon exercise of Conditional Share Awards with an exercise price per share of $0.01.
14 Reserves
A detailed breakdown of the reserves of the Group is as follows:
Equity Foreign
Merger benefits currency
reserve reserve translation Total
$'000 $'000 $'000 $'000
---------- ---------- ------------- ------
As at 1 January 2014 831 4,801 (896) 4,736
Currency translation differences - - (115) (115)
Share based payments - 275 - 275
---------- ---------- ------------- ------
As at 31 December 2014 831 5,076 (1,011) 4,896
Currency translation differences - - (41) (41)
Share based payments - (845) - (845)
As at 31 December 2015 831 4,231 (1,052) 4,010
========== ========== ============= ======
Nature and purpose of reserves
Merger reserve
The merger reserve arose from the Company's acquisition of Capcorp on 12 November 2007. This transaction is outside the scope of IFRS 3 'Business Combinations' and as such Directors have elected to use UK Accounting Standards FRS 6 'Acquisitions and Mergers'. The difference, if any, between the nominal value of the shares issued plus the fair value of any other consideration, and the nominal value of the shares received in exchange are recorded as a movement on other reserves in the consolidated financial statements.
Equity benefits reserve
The equity benefits reserve is used to record the value of Options and Conditional Share Awards provided to employees and Directors as part of their remuneration, pursuant to the Group's Long Term Equity Incentive Plan (referred to as "Plan" or "Group's Plan"). Refer to Note 15 for further details of these plans.
Foreign currency translation reserve
The foreign currency translation reserve is used to record exchange differences arising from the translation of the financial statements of foreign subsidiaries.
15 Share based payments
(a) Long Term Equity Incentive Plan ("Plan" or "Group's Plan")
The Group provides long term incentives to employees (including Executive Directors), Non-Executive Directors and consultants through the Group's Plan based on the achievement of certain performance criteria. The Plan provides for share awards in the form of Options and Conditional Share Awards. The incentives are awarded at the discretion of the Board, or in the case of Executive Directors, the Remuneration Committee of the Board, who determine the level of award and appropriate vesting, service and performance conditions taking into account market practice and the need to recruit and retain the best people.
Options may be exercised, subject only to continuing service, during such period as the Board may determine. Options have a term of 10 years.
Conditional Share Awards shall vest subject to continuing service and appropriate and challenging service and performance conditions determined by the Remuneration Committee relating to the overall performance of the Group.
Conditional Share Awards based on performance conditions will vest on achievement of the following performance conditions:
-- 25% vest on the first discovery of oil on a commercial scale, estimated by management as being by 30 September 2017;
-- 25% vest on the first production of oil on a commercial scale, estimated by management as being by 30 September 2019; and
-- 50% vest on the Company achieving the sale of 1 million barrels of oil, estimated by management as being by 30 September 2020.
Other Conditional Share Awards have service conditions tied to employment continuity and are available for vesting in three equal annual instalments on various dates.
(b) Option pricing model
The fair value of Options granted is estimated as at the date of grant using the Black Scholes model, taking into account the terms and conditions upon which the Options were granted.
No options have been issued during 2014 and 2015.
(c) Movement in Share Options
Opening Closing
balance balance Exercisable
at 1 Granted Forfeited Exercised as at as at
January during during during 31 December 31 December
2014 the year the year the year 2014 2014
Grant of Options on
3 June
2008 399,500 - (19,500) - 380,000 380,000
Grant of Options on
8 April
2009 268,750 - (52,500) - 216,250 216,250
Grant of Options on
9 July
2010 899,500 - (154,100) - 745,400 745,400
Grant of Options on
6 April
2011 75,000 - - - 75,000 75,000
Grant of Options on
5 July
2011 150,000 - - - 150,000 150,000
Grant of Options on
22 Nov
2011 120,000 - - - 120,000 120,000
Grant of Options on
5 Dec
2011 79,914 - (36,486) - 43,428 43,428
Grant of Options on
25 Apr
2012 928,300 - (66,360) - 861,940 570,900
Grant of Options on
16 Jul
2012 516,860 - (306,020) - 210,840 200,640
Grant of Options on
5 Oct
2012 98,300 - (23,300) - 75,000 49,500
Grant of Options on
4 Dec
2012 6,000 - - - 6,000 3,960
Grant of options on
9 July
2013 112,000 - (12,000) - 100,000 33,000
3,654,124 - (670,266) - 2,983,858 2,588,078
============ ========== ========== ============ ============= =============
Weighted Average
Exercise
Price (cents per
option) 53.96 - 31.68 - 58.96 63.54
============ ========== ========== ============ ============= =============
Opening Closing
balance balance Exercisable
at 1 Granted Forfeited Exercised as at as at
January during during during 31 December 31 December
2015 the year the year the year 2015 2015
Grant of Options on
3 June
2008 380,000 - - - 380,000 380,000
Grant of Options on
8 April
2009 216,250 - - - 216,250 216,250
Grant of Options on
9 July
2010 745,400 - (125,000) - 620,400 620,400
Grant of Options on
6 April
2011 75,000 - - - 75,000 75,000
Grant of Options on
5 July
2011 150,000 - - - 150,000 150,000
Grant of Options on
22 Nov
2011 120,000 - - - 120,000 120,000
Grant of Options on
5 Dec
2011 43,428 - (3,828) - 39,600 39,600
Grant of Options on
25 Apr
2012 861,940 - (311,940) - 550,000 550,000
Grant of Options on
16 Jul
2012 210,840 - (45,840) - 165,000 165,000
Grant of Options on
5 Oct
2012 75,000 - - - 75,000 75,000
Grant of Options on
4 Dec
2012 6,000 - - - 6,000 6,000
Grant of options on
9 July
2013 100,000 - (50,000) - 50,000 33,000
2,983,858 - (536,608) - 2,447,250 2,430,250
============ ========== ========== ============ ============= =============
Weighted Average
Exercise
Price (cents per
option) 58.96 - 39.40 - 63.25 63.64
============ ========== ========== ============ ============= =============
(d) Share Options Contractual Life
The weighted average remaining contractual life of outstanding share Options is 5.7 years (2014: 6.3 years).
(e) Conditional share awards pricing model
The fair value of Conditional Share Awards granted is estimated as at the date of grant using the Black Scholes model, taking into account the terms and conditions upon which the Awards were granted.
The following Table summarizes Conditional Share Awards granted during 2014 and 2015, along with relevant details in relation to each grant.
(1) (2)
23 Apr 7 Jul
14 15
Conditional Share
Awards granted 5,229,255 1,993,520
Share price at grant
date $0.0923 $0.0621
Expected Volatility
(%) 10 28
Risk-free interest
rates (%) 0.50 0.50
Expected life (years) 10 10
Exercise Price $0.01 $0.01
Estimated fair value
of each Conditional
Share Award at the
grant date $0.0827 $0.0527
Items (1): Conditional Share Awards vested on 1 October 2014.
Items (2): Conditional Share Awards vested immediately.
(f) Movement in Conditional share awards
Opening Closing
balance balance Exercisable
at 1 Granted Awarded Forfeited as at as at
January during during during 31 December 31 December
Consolidated 2014 the year the year the year 2014 2014
---------- ---------- ---------- ---------- ------------- ---------------
Grant of Conditional Share Awards
on 3 Jun 2008 535,000 - - (20,000) 515,000 -
Grant of Conditional Share Awards
on 8 Apr 2009 145,000 - - (50,000) 95,000 -
Grant of Conditional Share Awards
on 9 Jul 2010 1,061,000 - (87,000) (102,000) 872,000 -
Grant of Conditional Share Awards
on 6 Apr 2011 325,000 - (24,000) (157,000) 144,000 -
Grant of Conditional Share Awards
on 5 Jul 2011 230,000 - (12,000) (38,000) 180,000 -
Grant of Conditional Share Awards
on 22 Nov 2011 50,000 - - - 50,000 -
Grant of Conditional Share Awards
on 5 Dec 2011 78,000 - (3,400) (35,000) 39,600 -
Grant of Conditional Share Awards
on 25 Apr 2012 1,440,060 - (20,000) (41,000) 1,379,060 263,030
Grant of Conditional Share Awards
on 5 Oct 2012 165,000 - - (15,000) 150,000 -
Grant of Conditional Share Awards
on 4 Dec 2012 261,661 - - - 261,661 258,661
Grant of Conditional Share Awards
on 9 Jul 2013 176,000 - - (6,000) 170,000 -
Grant of Conditional Share Awards
on 23 Apr 2014 - 5,229,255 - - 5,229,255 5,229,255
4,466,721 5,229,255 (146,400) (464,000) 9,085,576 5,750,946
========== ========== ========== ========== ============= =============
Weighted Average Exercise Price
(cents per award) 1.00 1.00 1.00 1.00 1.00 1.00
========== ========== ========== ========== ============= =============
Opening Closing
balance balance Exercisable
at 1 Granted Awarded Forfeited as at as at
January during during during 31 December 31 December
Consolidated 2015 the year the year the year 2015 2015
---------- ---------- ------------ ---------- ------------- ---------------
Grant of Conditional Share Awards
on 3 Jun 2008 515,000 - - - 515,000 -
Grant of Conditional Share Awards
on 8 Apr 2009 95,000 - - - 95,000 -
Grant of Conditional Share Awards
on 9 Jul 2010 872,000 - - (125,000) 747,000 -
Grant of Conditional Share Awards
on 6 Apr 2011 144,000 - - - 144,000 -
Grant of Conditional Share Awards
on 5 Jul 2011 180,000 - - - 180,000 -
Grant of Conditional Share Awards
on 22 Nov 2011 50,000 - - - 50,000 -
Grant of Conditional Share Awards
on 5 Dec 2011 39,600 - - - 39,600 -
Grant of Conditional Share Awards
on 25 Apr 2012 1,379,060 - (526,060) (3,000) 850,000 -
Grant of Conditional Share Awards
on 5 Oct 2012 150,000 - - - 150,000 -
Grant of Conditional Share Awards
on 4 Dec 2012 261,661 - (258,661) - 3,000 -
Grant of Conditional Share Awards
on 9 Jul 2013 170,000 - - (50,000) 120,000 -
Grant of Conditional Share Awards
on 23 Apr 2014 5,229,255 - (5,229,255) - - -
Grant of Conditional Share Awards
on 7 Jul 2015 - 1,993,520 (1,993,520) - - -
9,085,576 1,993,520 (8,007,496) (178,000) 2,893,600 -
========== ========== ============ ========== ============= =============
Weighted Average Exercise Price
(cents per award) 1.00 1.00 1.00 1.00 1.00 -
========== ========== ============ ========== ============= =============
(g) Conditional Share Awards Contractual Life
The weighted average remaining contractual life of outstanding Conditional awards is 12.5 years (2014: 13.5 years).
16 Commitments and contingencies (a) Operating lease commitments
Operating leases relate to premises used by the Group in its operations, generally with terms between 2 and 5 years. Some of the operating leases contain options to extend for further periods and an adjustment to bring the lease payments into line with market rates prevailing at that time. The leases do not contain an option to purchase the leased property.
The Group has committed to office lease in Mongolia in the amounts of $149,000 as at 31 December 2015.
31 Dec 31 Dec
2015 2014
Note $'000 $'000
------- -------
Operating Leases:
Within one year 45 27
After one year but not more than
five years 104 -
Greater than five years - -
------- -------
149 27
======= =======
(b) Exploration expenditure commitments
Petromatad Invest Limited and Capcorp have minimum spending obligations, under the terms of their PSCs on Blocks IV, V and XX with PAM.
The amounts set out below do not include general and administrative expenses.
31 Dec 31 Dec
2015 2014
Note $'000 $'000
------- -------
Production Sharing Contract Fees:
Within one year 898 1,677
After one year but not more than
five years 40 835
Greater than five years - -
------- -------
938 2,512
======= =======
Minimum Exploration Work Obligations:
Within one year 19,374 7,515
Greater than one year but no more
than two years 15,580 18,815
Greater than two years but no more
than three years - 18,056
Greater than three years but no more
than four years - -
Greater than five years - -
------- -------
34,954 44,386
======= =======
Prior year expenditure over and above minimum exploration work obligations may be used to reduce the following year's obligation.
Due to the prior focus on Block XX and despite substantial work programme activities occurring in 2015, Blocks IV and V are below the minimum PSC commitment at the end of 31 December 2015 by $13.7 million.
On 28 April 2016, the company received an exit notice from BG Group advising they were triggering the exit option under the farm-out agreement. Consequently, the Company's working interests in Blocks IV and V will revert to 100%. As required by the agreements, compensation of a minimum of $10 million will be paid to the Company by BG Group, which will partially enable the Company to satisfy minimum spend obligations in relation to Blocks IV and V.
Petromatad Invest Limited and Capcorp can voluntarily relinquish their rights under the PSCs, if the minimum work obligations are completed.
The Company intends to undertake a fund raising effort later in the 2016 once drillable prospects on Blocks IV and V have been defined from the ongoing seismic acquisition program. This will ensure that the cumulative expenditures shortfall for Blocks IV and V will be met by end of for the remainder exploration term ending on 29 July 2017.
In relation to Block XX, cumulative expenditure shortfall is $4.3 million at the end of 2015. PAM has agreed to a one-year moratorium which will enable the Company to defer expenditures towards the minimum PSC obligation by one-year and extends the exploration term to July 2018. In addition, the moratorium approval allows the cumulative expenditure shortfall as at 31 December 2015 of $4.3 million to be spent after the moratorium has ended. Prior to the moratorium ending, the Company will have to arrange for alternative sources of funding to fund the future exploration expenditure commitments of $21.3 million for Block XX due by July 2018. The Company is actively pursuing farm-out options to raise the necessary funds to assist in meeting the obligation.
(c) Contingencies
There are no contingencies outstanding at the year end.
17 Related party disclosures
The immediate parent and ultimate controlling party of the consolidated entity is Petro Matad Limited.
The consolidated financial statements include the financial statements of Petro Matad Limited and the subsidiaries listed in the following table:
Equity Interest
Country of 2015 2014
Incorporation % %
---------------- -------- --------
Central Asian Petroleum Corporation
Limited Cayman Islands 100 100
Capcorp Mongolia LLC Mongolia 100 100
Petromatad Invest Limited Cayman Islands 100 100
Petro Matad LLC Mongolia 100 100
Petro Matad Services Limited Isle of Man 100 100
Subsidiary Details
Capcorp Mongolia LLC was acquired on the 14 August 2006, on incorporation of the Company. Capcorp holds 1,000,000 ordinary shares of MNT150 each.
Petromatad Invest Limited was acquired on 12 November 2007. Petro Matad Limited and Capcorp each hold 25,000 shares of $1 each.
Central Asian Petroleum Corporation Limited was acquired on 12 November 2007. Petro Matad Limited holds 43,340,000 ordinary shares of $0.01 each.
Petro Matad LLC is 100% owned by Petromatad Invest Limited. Petromatad Invest Limited holds 15,000 ordinary
shares of MNT10,000 each.
Petro Matad Services Limited is 100% owned by Petro Matad Limited. Petro Matad Limited holds 1 ordinary share of $1. Petro Matad Services Limited was dissolved on 1 January 2016.
Balances and transactions between the Company and its subsidiaries, which are related parties of the Company, have been eliminated on consolidation and are not disclosed in this note.
The following table provides the total amount of transactions which have been entered into with related parties for the relevant financial year:
31 Dec 2015 31 Dec 2014
$'000 $'000
------------ ------------
Petrovis' subscription for shares in Petro Matad Limited - -
Petrovis Matad Inc. is a major shareholder of the Company, currently holding approximately 32.06% of the shareholding.
18 Key management personnel (a) Details of Directors
The names of the Company's Directors, having authority and responsibility for planning, directing and controlling the activities of the Group, in office during 2014 and 2015, are as below:
The Directors were in office until the date of this report and for this entire year unless otherwise stated.
Directors
George Edward Watkins Non-Executive Chairperson Resigned 24 November 2014
Oyungerel Janchiv Non-Executive Director Resigned as Chairperson 1 August 2015
Mary Ellen Collins Non-Executive Director Not re-appointed 21 November 2014
Enkhmaa Davaanyam Non-Executive Chairperson Appointed as Chairperson 1 August 2015
David Daniel Skeels Non-Executive Director Not re-appointed 21 November 2014
Philip Arthur Vingoe Non-Executive Director Amarzul Tuul Executive Director John Rene Henriksen Chief Financial Officer
Mehmed Ridvan Karpuz Chief Executive Officer Appointed as CEO 1 October 2015
(b) Compensation of Directors
31 Dec 31 Dec
2015 2014
Note $'000 $'000
------- -------
Short-term employee benefits 864 646
Post-employment benefits - -
Share based payment expense 143 499
1,007 1,145
======= =======
(c) Other key management personnel transactions
There were no other key management personnel transactions during the year (2014: Nil).
19 Financial risk management objectives and policies
The Group's principal financial instruments comprise cash and short-term deposits classified as loans and receivables financial assets.
The main purpose of these financial instruments is to raise capital for the Group's operations.
The Group also has various other financial instruments such as trade debtors and trade creditors, which arise directly from its operations. It is, and has been throughout the year under review, the Group's policy that no trading in financial instruments shall be undertaken.
The main risks arising from the Group's financial instruments are interest rate risk, foreign currency risk, credit risk and liquidity risk.
The Board is responsible for identification and control of financial risks. The Board reviews and agrees policies for managing each of these risks as summarised below.
Risk Exposures and Responses
Interest rate risk
Interest rate risk is the risk that the value of a financial instrument or cash flow associated with the instrument will fluctuate due to changes in market interest rate. Interest rate risk arises from fluctuations in interest bearing financial assets and liabilities that the Group uses. Interest bearing assets comprise cash and cash equivalents which are considered to be short-term liquid assets. It is the Group's policy to settle trade payables within the credit terms allowed and the Group does therefore not incur interest on overdue balances.
The following table sets out the carrying amount of the financial instruments that are exposed to interest rate risk:
31 Dec 2015 31 Dec 2014
Weighted
Average
Int. rate $'000 $'000
------------ ------------
Financial Assets
Cash and cash equivalents 1.10% 5,339 895
Trade and other receivables 0% 1,358 241
6,697 1,136
Financial Liabilities
Trade and other payables 0% 7,436 1,353
------------ ------------
7,436 1,353
Net exposure (739) (217)
============ ============
Sensitivity Analysis
If the interest rate on cash balances at 31 December 2014 and 2015 weakened/strengthened by 1%, there would be no material impact on profit or loss. There would be no effect on the equity reserves other than those directly related to other comprehensive income movements.
Foreign currency risk
As a result of operations overseas, the Group's Statement of Financial Position can be affected by movements in various exchange rates.
The functional currency of Petro Matad Limited and presentational currency of the Group is deemed to be USD because the future revenue from the sale of oil will be denominated in USD and the costs of the Group are likewise predominately in USD. Some transactions are however dominated in currencies other than USD. These transactions comprise operating costs and capital expenditure in the local currencies of the countries where the Group operates. These currencies have a close relationship to the USD and management believes that changes in the exchange rates will not have a significant effect on the Group's financial statements.
The Group does not use forward currency contracts to eliminate the currency exposures on any individual transactions.
The following significant exchange rates applied during the year:
Average rate Spot rate at the balance
date
USD 2015 2014 2015 2014
--------- --------- ------------- ------------
Mongolian Tugrug ("MNT") 1 1,969.88 1,817.27 1,995.98 1,888.44
Australian Dollar ("AUD") 1 1.37978 1.10970 1.37003 1.22600
Great British Pound ("GBP") 1 0.66662 0.60730 0.67553 0.64380
Sensitivity Analysis
A 5% strengthening/weakening of the MNT against USD at 31 December 2014 and 2015 would not have a material effect on profit and loss or on equity.
Price risk
The Group's exposure to price risk is minimal as the Group is currently not revenue producing other than from interest income.
Credit risk
Credit risk is the risk of financial loss to the Group if a customer or counterparty to a financial instrument fails to meet its contractual obligations. The Group is exposed to credit risk on its cash and cash equivalents and other receivables as set out in Notes 7 and 8 which also represent the maximum exposure to credit risk. The Group only deposits surplus cash with well-established financial institutions of high quality credit standing.
In addition, receivable balances are monitored on an ongoing basis with the result that the Group's exposure to bad debts is not significant.
There are no significant concentrations of credit risk within the Group.
Maximum exposure to credit risk at reporting date:
31 Dec 31 Dec
2015 2014
Note $'000 $'000
------- -------
Financial Assets
Trade and other receivables 8 1,358 241
------- -------
Net exposure 1,358 241
======= =======
Impairment Losses:
None of the Group's receivables are past due at 31 December 2015 (2014: Nil)
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'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.
The Group's objective is to ensure that sufficient funds are available to allow it to continue its exploration activities.
The remaining contractual maturities of the Group's and parent entity's financial liabilities are:
31 Dec 31 Dec
2015 2014
Note $'000 $'000
------- -------
6 months or less 6,938 1,318
6-12 months 498 35
1-5 years - -
over 5 years - -
------- -------
7,436 1,353
======= =======
All of the Group's amounts payable and receivable are current.
Further, the Group has exploration expenditure commitments on its PSCs as disclosed in Note 16(b).
Fair Value of Financial Assets and Liabilities
The fair value of cash and cash equivalents and non-interest bearing financial assets and financial liabilities of the consolidated entity approximate their carrying value due to their short term duration.
Fair Value Hierarchy as at
31 December 2015
Level Level
1 Level 2 3 Total
---------- ---------- -------- ------
Financial Assets
Trade and other receivables - 1,358 - 1,358
--------- ---------- -------- ------
Total - 1,358 - 1,358
========= ========== ======== ======
Financial Liabilities
Trade and other payables - 7,436 - 7,436
Total - 7,436 - 7,436
========= ========== ======== ======
Fair Value Hierarchy as at 31 December
2014
Level 1 Level 2 Level 3 Total
------------ ----------- ---------- -------
Financial Assets
Trade and other receivables - 241 - 241
----------- ----------- ---------- -------
Total - 241 - 241
=========== =========== ========== =======
Financial Liabilities
Trade and other payables - 1,353 - 1,353
Total - 1,353 - 1,353
=========== =========== ========== =======
The fair values of the financial assets and financial liabilities included in the level 2 category above have been determined in accordance with generally accepted pricing models based on a discounted cash flow analysis, with the most significant inputs being the discount rate that reflects the credit risk of counterparties.
20 Capital management
The Group's objectives when managing capital are to safeguard the Group's ability to continue as a going concern in order to provide returns for shareholders and benefits for other stakeholders and to maintain an optimal capital structure to reduce the cost of capital. The management of the Group and the Group's capital is regularly reviewed by the Board. The capital structure of the Group consists of cash and bank balances (Note 7) and equity of the Group (comprising issued capital, reserves and retained earnings as detailed in Notes 13 and 14). This is reviewed by the Board of Directors as part of their regular Directors meetings.
The Group monitors its capital requirements based on the funding required for its exploration activities in Mongolia and operations of the company.
The Group is not subject to externally imposed capital requirements.
21 Events after the reporting date
On 1 January 2016, Petro Matad Service Limited was dissolved, as the company was dormant due to no longer being operationally required.
On 20 April 2016, PAM granted a one-year moratorium, effective 1 January 2016, for Block XX. The moratorium will enable the Company to defer expenditures towards the minimum PSC obligation by one year. The PSC term is consequently extended by one-year to July 2018.
On 28 April 2016, the Company received an Exit Notification from BG Group that advised they were triggering their option under the farm-out agreement to exit Blocks IV and V PSCs, effective immediately. Upon Mongolian Government approval, the Company's working interest in both PSCs will therefore revert to 100%.
22 Auditors' remuneration
The auditor of Petro Matad Limited is Deloitte Touche Tohmatsu ("Deloitte").
31 Dec 31 Dec
2015 2014
Note $'000 $'000
------- -------
Amounts received or due and receivable
by Deloitte Touche Tohmatsu for:
- an audit or review of the financial
report of the entity and any other
entity in the consolidated entity 75 57
- other services in relation to
the entity and any other entity
in the consolidated entity - -
------- -------
75 57
Amounts received or due and receivable
by Deloitte Onch Audit LLC for:
- an audit or review of the financial
report of subsidiary entities 39 42
- other services in relation to
the subsidiary entities - -
------- -------
39 42
------- -------
114 99
======= =======
23 Other Information
Registered Office:
Victory House
Douglas
Isle of Man
IM1 1EQ
This information is provided by RNS
The company news service from the London Stock Exchange
END
FR FMMITMBIJBLF
(END) Dow Jones Newswires
June 30, 2016 10:56 ET (14:56 GMT)
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