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PTR Petroneft Resources Plc

0.085
0.00 (0.00%)
28 Mar 2024 - Closed
Delayed by 15 minutes
Share Name Share Symbol Market Type Share ISIN Share Description
Petroneft Resources Plc LSE:PTR London Ordinary Share IE00B0Q82B24 ORD EUR0.01 (CDI)
  Price Change % Change Share Price Bid Price Offer Price High Price Low Price Open Price Shares Traded Last Trade
  0.00 0.00% 0.085 0.00 00:00:00
Industry Sector Turnover Profit EPS - Basic PE Ratio Market Cap
0 0 N/A 0

Petroneft Resources PLC 2016 Interim Results (0036L)

28/09/2016 7:00am

UK Regulatory


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TIDMPTR

RNS Number : 0036L

Petroneft Resources PLC

28 September 2016

28 September 2016

2016 Interim Results

PetroNeft (AIM: PTR) an oil & gas exploration and production company operating in the Tomsk Oblast, Russian Federation, and 50% owner and operator of Licences 61 and 67 is pleased to report its results for the 6 months ended 30 June 2016.

Highlights

   --      Current gross production from Licence 61 is about 3,200 bopd. 
   --      Represents a 39% increase in production in 2016. 
   --      New wells drilled at South Arbuzovskoye during period drove production growth. 

David Golder, Chairman of PetroNeft Resources plc, commented:

"We have had a busy year so far, with good success in growing production by almost 40% and in enhancing our understanding of Licence 61.

Given that market conditions remain challenging with little sign of improvement in oil prices in the near term, our focus continues to be on growing production, managing costs and positioning the Company for any improvement in market conditions, while we are also investigating opportunities to benefit from current conditions by growing the company through acquisitions or business combinations focussed on producing assets in Russia. We look forward to updating shareholders of our results over the coming year."

For further information, contact:

 
 Dennis Francis, CEO, PetroNeft Resources plc                            +1 713 988 2500 
---------------------------------------------------------------------  ----------------- 
 Paul Dowling, CFO, PetroNeft Resources plc                              +353 1 647 0280 
---------------------------------------------------------------------  ----------------- 
 John Frain/Brian Garrahy, Davy (NOMAD and Joint Broker)                 +353 1 679 6363 
---------------------------------------------------------------------  ----------------- 
 Henry Fitzgerald-O'Connor, Canaccord Genuity Limited (Joint Broker)    +44 207 523 8000 
---------------------------------------------------------------------  ----------------- 
 Martin Jackson/Shabnam Bashir, Citigate Dewe Rogerson                  +44 207 638 9571 
---------------------------------------------------------------------  ----------------- 
 Joe Heron / Douglas Keatinge, Murray Consultants                        +353 1 498 0300 
---------------------------------------------------------------------  ----------------- 
 

The information contained in this announcement has been reviewed and verified by Mr. Dennis Francis, Director and Chief Executive Officer of PetroNeft, for the purposes of the Guidance Note for Mining and Oil & Gas Companies issued by the London Stock Exchange in June 2009. Mr. Francis holds a B.S. Degree in Geophysical Engineering and a M.S. Degree in Geology from the Colorado School of Mines. He has also graduated from the Harvard University Program for Management Development. He is a member of the American Association of Petroleum Geologists and the Society of Exploration Geophysicists. He has over 40 years' experience in oil and gas exploration and development.

Chairman's Statement

Dear Shareholder,

I am pleased to report on the activities of the Group for the six months to 30 June 2016 and provide an update on recent progress. 2016 has been a busy year with a significant work programme undertaken at Licence 61, together with our 50% partner Oil India. The 2016 campaign delivered considerable production growth from new wells at South Arbuzovskoye but some disappointment with the result of a delineation well at the Sibkrayevskoye oil field.

Production and Sales

Gross production at Licence 61 in the six months to 30 June 2016 averaged 2,366 bopd, a 36% increase compared to the same period in 2015 (1,744 bopd). We sold 421,714 (gross) barrels of oil in the six months to 30 June 2016 (H1 2015: 329,733 bbls) and achieved an average Russian Domestic oil price of $20.56 (H1 2015: $29.87). The fall in price is reflective of the continuing challenges being faced across the oil and gas industry.

 
 Licence 61 Gross    H1 2016   Q2-2016   Q1-2016   H1 2015 
  Production 
------------------  --------  --------  --------  -------- 
 Total gross 
  production         430,693   223,877   206,816   315,664 
------------------  --------  --------  --------  -------- 
 Gross bopd            2,366     2,460     2,272     1,744 
------------------  --------  --------  --------  -------- 
 PetroNeft 50% 
  share bopd           1,183     1,230     1,136       872 
------------------  --------  --------  --------  -------- 
 

Gross production at Licence 61 has grown by 39% in the year to date and is currently approximately 3,200 bopd. This growth came from the new wells at South Arbuzovskoye which came online in June and July 2016. Production is shown quarterly above and we intend to publish quarterly production statements from October 2016 onwards. The actual production for Q3-2016 will be announced in October 2016.

South Arbuzovskoye

The main drilling programme in 2016 was focussed on the southern lobe of Arbuzovskoye. In 2015 we had drilled the A-103 well from Pad 1 in the northern end and acquired some additional 2D seismic on the southern end. Both the well and the seismic gave us confidence in the potential of the southern lobe. The lessons learned from the horizontal drilling at Tungolskoye in 2015 also proved valuable in setting out the drilling programme in South Arbuzovskoye.

We drilled two vertical and two horizontal wells. Our pre-drill estimates were to achieve initial production of 125 bopd from the vertical wells and 600 bopd from the horizontal wells. The results far exceeded these estimates with the vertical wells (A213 & A-216) coming in at over 350 bopd and 175 bopd respectively and the horizontal wells (A-214 & A-215) coming in at over 800 bopd and 650 bopd respectively. With the exception of the A-216 well, the new wells at South Arbuzovskoye continue to perform ahead of expectations. The water cut at A-216 has risen higher than expected and we are examining ways to solve this issue.

Sibkrayevskoye

In 2015 we drilled the S-373 delineation well and carried out a major 2D seismic programme across the northern portion of Licence 61 including Sibkrayevskoye. Between late January and April 2016 the S-373 well was put on production and averaged 200 bopd during the period. This well, along with the previous wells, S-372 and S-370, forms the basis for the initial development of Sibkrayevskoye at Pad 1which is planned for 2017. We are currently arranging the necessary studies, permits and approvals to sanction Pad 1 development of Sibkrayevskoye later this year.

In 2016 we sought to ascertain the full potential of Sibkrayevskoye through the drilling of a 10 km step out well, S-374. The well was drilled in July and August 2016 but unfortunately did not encounter commercial oil and was plugged and abandoned. The result, while disappointing, should not affect the current 2P reserve significantly or impact our decision regarding the development of Pad 1 at Sibkrayevskoye which is 10 km to the north.

Review of PetroNeft loss for the period

The loss for the period was US$2.3m (2014: US$1.4m). The loss includes PetroNeft's share of the losses on the joint ventures relating to Licences 61 and 67 of US$2.4m and US$0.2m respectively (H1 2015: US$1.8m and US$0.2m). The loss relating to the Licence 61 joint venture is discussed in more detail below. Finance revenue of US$1.6m (H1 2015: US$1.5m) relates primarily to interest receivable on loans to the joint ventures.

 
  PetroNeft Key 
   Financial Metrics                Unaudited            Audited 
                            ========================  ------------- 
                               6 months     6 months     Year ended 
                               ended 30     ended 30    31 December 
                              June 2016    June 2015           2015 
                                    US$          US$            US$ 
 Continuing operations 
 Revenue                          1,362        1,220         19,165 
 Cost of sales                  (1,235)      (1,206)       (15,233) 
                            ===========  =========== 
 Gross profit                       127           14          3,932 
 Administrative 
  expenses                      (1,073)        (572)        (3,678) 
 Exchange gain/(loss) 
  on intra-Group 
  loans                            (23)           17        (2,402) 
 Operating loss                   (923)        (541)        (2,148) 
 Share of joint 
  venture's net loss 
  - WorldAce Investments 
  Limited                       (2,408)      (1,829)          (304) 
 Share of joint 
  venture's net loss 
  - Russian BD Holdings 
  B.V.                            (173)        (157)          (294) 
 Finance revenue                  1,596        1,504          1,551 
 Loss for the period 
  for continuing 
  operations before 
  taxation                      (1,908)      (1,023)        (8,376) 
 Income tax expense               (410)        (393)          (408) 
                                         =========== 
 Loss for the period 
  for continuing 
  operations before 
  taxation                      (2,318)      (1,416)        (8,784) 
                            ===========  ===========  ============= 
 

Licence 61 joint venture - WorldAce Group

The metrics below are an extraction from the financial statements of the WorldAce Group which demonstrate the performance of Licence 61:

 
                                PetroNeft's   PetroNeft's    PetroNeft's 
                                  50% share     50% share      50% share 
                                   6 months      6 months     year ended 
                                   ended 30      ended 30    31 December 
                                  June 2016     June 2015           2015 
                                    US$'000       US$'000        US$'000 
 Continuing operations 
 Revenue                              4,339         4,925         10,300 
 Cost of sales                      (4,259)       (4,767)       (10,436) 
                               ============  ============ 
 Gross profit                            80           158          (136) 
 Administrative expenses              (917)         (831)        (1,519) 
 Impairment of oil 
  and gas properties                      -             -        (4,550) 
                               ============  ============ 
 Operating loss                       (837)         (673)        (6,205) 
 Finance revenue                          4             6             12 
 Finance costs                      (1,575)       (1,162)        (2,572) 
                               ============  ============ 
 Loss for the period 
  for continuing operations 
  before taxation                   (2,408)       (1,829)        (8,765) 
 Income tax credit                        -             -              - 
                               ============  ============ 
 Loss for the period 
  for continuing operations 
  before taxation                   (2,408)       (1,829)        (8,765) 
                               ============  ============  ============= 
 
 
 WorldAce Analysis                 50% of WorldAce 
                           6 months     6 months   12 months 
                           ended 30     ended 30    ended 31 
                          June 2016    June 2015    December 
                                                        2015 
                            US$'000      US$'000 
 
 Revenue 
 Oil sales                    4,335        4,908      10,276 
 Other sales                      4           16          24 
                        ===========  =========== 
 Total revenue                4,339        4,924      10,300 
 
 Cost of Sales 
 Mineral Extraction 
  Tax                         2,047        2,495       4,922 
 Pipeline tariff                820          635       1,493 
 Staff costs                    402          458         840 
 Depreciation and 
  amortisation                  600          517       1,472 
 Other cost of sales            390          662       1,708 
                        ===========  =========== 
 Total cost of sales          4,259        4,767      10,435 
                        ===========  ===========  ========== 
 

The detailed Income Statement and Balance Sheet of WorldAce Investments Limited is disclosed at note 7 to these condensed financial statements. Very low oil prices in late 2015 and the first quarter of 2016 have significantly reduced the margin. With the higher production and improved pricing being achieved in the second half of 2016 we should be able to improve the margin as many of our production costs are fixed.

In March 2016 Oil India agreed to provide 100% of the funding required to carry out the agreed work programmes at Licence 61 in 2016 and 2017. This work programme is expected to require gross funding of at least US$35 million, US$10m in 2016 and US$25m in 2017. The funding is to be provided by way of unsecured loans to the joint venture company WorldAce Investments Limited. The loan agreement for the 2016 requirement of US$10m was executed in March 2016 and the funding fully drawn by July 2016. It is expected that the loan agreement for the 2017 requirement will be executed on substantially similar terms in late 2016.

Licence 67

During 2015, we agreed an exploration programme for Licence 67 for the five years to 2020 with the Russian authorities; based on this, the first significant expenditure required will be in 2017 but we expect to be able to defer this expenditure to at least 2018. We view Licence 67 as having considerable long term potential and we are discussing forward plans with our joint venture partner Belgrave Naftogas (Arawak Energy).

Board Changes

As discussed in the Annual Report, in April 2016 Maxim Korobov, Anthony Sacca and David Sturt joined the Board as non-executive Directors. David Sanders, Gerry Fagan and Paul Dowling left the Board, however Mr. Dowling remains as CFO of the Company and is Company Secretary.

Business development

In May 2016 Pavel Tetyakov joined the Company as Vice President of Business Development to help bring a renewed focus on Business Development and we are actively pursuing a number of exciting options in this regard.

Outlook

We have had a busy year so far, with good success in growing production and our longer term development and exploration plans for our portfolio, however market conditions remain challenging and there are few signs of sustained improvement in oil prices in the near term. We are now focussed on commencing the development of our largest field, Sibkrayevskoye in 2017 which, with the expected Oil India loan agreement to be signed, the Company is fully financed for. Our focus continues to be on growing production, managing costs and positioning the Company for any improvement in market conditions, while we are also investigating opportunities to benefit from current conditions by growing the company through acquisitions or business combinations focussed on producing assets in Russia. We look forward to updating shareholders of our results over the remainder of 2016.

David Golder

Non-Executive Chairman

Interim Condensed Consolidated Income Statement

For the 6 months ended 30 June 2016

 
                                                Unaudited             Audited 
                                       ==========================  ------------- 
                                                         6 months 
                                           6 months         ended     Year ended 
                                           ended 30       30 June    31 December 
                                          June 2016          2015           2015 
                                 Note           US$           US$            US$ 
 Continuing operations 
 Revenue                                  1,362,158     1,220,323      2,398,314 
 Cost of sales                          (1,234,712)   (1,205,656)    (2,370,949) 
                                       ============  ============ 
 Gross profit                               127,446        14,667         27,365 
 
 Administrative expenses                (1,073,237)     (572,017)    (1,379,506) 
 Exchange loss on intra-Group 
  loans                                      22,522        16,401      (284,449) 
 Operating loss                           (923,268)     (540,949)    (1,636,590) 
 
 Share of joint venture's 
  net loss - WorldAce 
  Investments Limited             7     (2,407,781)   (1,828,719)    (8,765,055) 
 Share of joint venture's 
  net loss - Russian 
  BD Holdings B.V.                8       (172,677)     (157,470)      (314,859) 
 Finance revenue                  4       1,595,944     1,504,174      3,041,587 
 Loss for the period 
  for continuing operations 
  before taxation                       (1,907,782)   (1,022,964)    (7,674,917) 
 
 Income tax expense               5       (409,925)     (392,701)      (799,466) 
 
 Loss for the period 
  attributable to equity 
  holders of the Parent                 (2,317,707)   (1,415,665)    (8,474,383) 
                                       ============  ============  ============= 
 
 Loss per share attributable 
  to ordinary equity 
  holders of the Parent 
 Basic and diluted 
  - US dollar cent                           (0.33)        (0.20)         (1.20) 
 

Interim Condensed Consolidated Statement of Comprehensive Income

For the 6 months ended 30 June 2016

 
                                          Unaudited             Audited 
                                 ==========================  ------------- 
                                     6 months      6 months     Year ended 
                                     ended 30      ended 30    31 December 
                                    June 2016     June 2015           2015 
                                          US$           US$            US$ 
 Loss for the period 
  attributable to 
  equity holders of 
  the Parent                      (2,246,207)   (1,415,665)    (8,474,383) 
 Other comprehensive 
  income to be reclassified 
  to profit or loss 
  in subsequent periods: 
 Currency translation 
  adjustments - subsidiaries           61,935        19,683        265,640 
 Share of joint ventures' 
  other comprehensive 
  income - foreign 
  exchange translation 
  differences                       5,467,539       909,754   (12,474,502) 
 Total comprehensive 
  profit/(loss) for 
  the period attributable 
  to equity holders 
  of the Parent                     3,211,767     (486,228)   (20,683,245) 
                                 ============  ============  ============= 
 

Interim Condensed Consolidated Balance Sheet

As at 30 June 2016

 
                                            Unaudited     Audited 
                                        =============  ------------- 
                                              30 June    31 December 
                                                 2016           2015 
                                  Note            US$            US$ 
 Assets 
 Non-current Assets 
 Property, plant and equipment     6          167,922        181,703 
 Equity-accounted investment 
  in joint ventures - WorldAce 
  Investments Limited              7                -              - 
 Equity-accounted investment 
  in joint ventures - Russian 
  BD Holdings B.V.                 8                -              - 
 Financial assets - loans 
  and receivables                  9       47,214,376     42,883,861 
                                           47,382,298     43,065,564 
                                        =============  ============= 
 Current Assets 
 Inventories                       10          29,676         54,302 
 Trade and other receivables       11       2,314,336      1,842,128 
 Cash and cash equivalents         12         382,546      1,284,212 
                                            2,726,558      3,180,642 
                                        =============  ============= 
 Total Assets                              50,108,856     46,246,206 
                                        =============  ============= 
 
 Equity and Liabilities 
 Capital and Reserves 
 Called up share capital                    9,429,182      9,429,182 
 Share premium account                    140,912,898    140,912,898 
 Share-based payments reserve               6,796,540      6,796,540 
 Retained loss                           (77,092,497)   (74,774,790) 
 Currency translation reserve            (33,355,674)   (38,885,148) 
 Other reserves                               336,000        336,000 
 Equity attributable to equity 
  holders of the Parent                    47,026,449     43,814,682 
                                        =============  ============= 
 
 Non-current Liabilities 
 Deferred tax liability                     1,693,335      1,286,378 
                                            1,693,335      1,286,378 
                                        =============  ============= 
 Current Liabilities 
 Trade and other payables          13       1,389,072      1,145,146 
                                            1,389,072      1,145,146 
                                        =============  ============= 
 Total Liabilities                          3,082,407      2,431,524 
 Total Equity and Liabilities              50,108,856     46,246,206 
                                        =============  ============= 
 

Interim Condensed Consolidated Statement of Changes in Equity

For the 6 months ended 30 June 2016

 
                                                    Share-based 
                                                        payment 
                             Called         Share           and       Currency 
                           up share       premium         other    translation       Retained 
                            capital       account      reserves        reserve           loss          Total 
                                US$           US$           US$            US$            US$            US$ 
 
 At 1 January 2015        9,429,182   140,912,898     7,099,745   (26,676,286)   (66,300,407)     64,465,132 
                         ----------  ------------  ------------  -------------  -------------  ------------- 
 Loss for the year                -             -             -              -    (8,474,383)    (8,474,383) 
 Currency translation 
  adjustments 
  - subsidiaries                  -             -             -        265,640              -        265,640 
 Share of joint 
  ventures' other 
  comprehensive income 
  - foreign 
  exchange translation 
  differences                     -             -             -   (12,474,502)              -   (12,474,502) 
                         ----------  ------------  ------------  -------------  -------------  ------------- 
 Total comprehensive 
  loss for the 
  year                            -             -             -   (12,208,862)    (8,474,383)   (20,683,245) 
 Share-based payment 
  expense                         -             -        32,795              -              -         32,795 
                                                                                               ------------- 
 At 31 December 2015      9,429,182   140,912,898     7,132,540   (38,885,148)   (74,774,790)     43,814,682 
                         ==========  ============  ============  =============  =============  ============= 
 
 At 1 January 2016        9,429,182   140,912,898     7,132,540   (38,885,148)   (74,774,790)     43,814,682 
                         ==========  ============  ============  =============  =============  ============= 
 Loss for the period              -             -             -              -    (2,317,707)    (2,317,707) 
 Currency translation 
  adjustments 
  - subsidiaries                  -             -             -       (61,935)              -       (61,935) 
 Share of joint 
  ventures' other 
  comprehensive income 
  - foreign 
  exchange translation 
  differences                     -             -             -      5,467,539              -      5,467,539 
                         ==========  ============  ============  =============  =============  ============= 
 Total comprehensive 
  profit for 
  the period                      -             -             -      5,529,474    (2,317,707)      3,211,767 
 At 30 June 2016          9,429,182   140,912,898     7,132,540   (33,355,674)   (77,092,497)     47,026,449 
                         ==========  ============  ============  =============  =============  ============= 
 

Interim Condensed Consolidated Cash Flow Statement

For the 6 months ended 30 June 2016

 
                                               Unaudited             Audited 
                                      ==========================  ------------- 
                                                        6 months 
                                          6 months         ended     Year ended 
                                          ended 30       30 June    31 December 
                                         June 2016          2015           2015 
                                               US$           US$            US$ 
 Operating activities 
 Loss before taxation                  (1,907,782)   (1,022,964)    (7,674,917) 
 Adjustment to reconcile 
  loss before tax to net 
  cash flows 
 Non-cash 
   Depreciation                             36,970        54,575         97,673 
   Share of loss in joint 
    ventures                             2,580,458     1,986,189      9,079,914 
   Share-based payment 
    expense                                      -        16,246         32,795 
 Finance revenue                  4    (1,595,944)   (1,504,174)    (3,041,587) 
 Working capital adjustments 
 (Increase)/decrease in trade 
  and other receivables                  (322,891)       156,081      (548,351) 
 Decrease/(increase) 
  in inventories                            24,626      (36,465)       (39,122) 
 Increase/(decrease) in trade 
  and other payables                       292,234     (458,992)         31,428 
 Income tax paid                          (12,771)       (9,861)       (25,832) 
  Net cash flows used 
   in operating activities               (905,100)     (819,365)    (2,087,999) 
                                                    ============  ------------- 
 Investing activities 
 Purchase of property, plant 
  and equipment                                  -      (13,312)       (19,059) 
 Interest received                           1,480         5,984         10,095 
  Net cash received from/(used 
   in) investing activities                  1,480       (7,328)        (8,964) 
                                      ============  ============  ------------- 
  Net decrease in cash 
   and cash equivalents                  (903,620)     (826,693)    (2,096,963) 
  Translation adjustment                     1,954       (8,481)       (11,594) 
  Cash and cash equivalents 
   at the beginning of 
   the period                            1,284,212     3,392,769      3,392,769 
  Cash and cash equivalents 
   at the end of the period       12       382,546     2,557,595      1,284,212 
                                      ============  ============  ============= 
 

Notes to the Interim Condensed Consolidated Financial Statements

For the 6 months ended 30 June 2016

   1.         Corporate Information 

The interim condensed consolidated financial statements of the Group for the six months ended 30 June 2016 were authorised for issue in accordance with a resolution of the Directors on 27 September 2016.

PetroNeft Resources plc ('the Company', or together with its subsidiaries, 'the Group') is a Company incorporated in Ireland. The Company is listed on the Alternative Investment Market ('AIM') of the London Stock Exchange and the Enterprise Securities Market ('ESM') of the Irish Stock Exchange. The address of the registered office and the business address in Ireland is 20 Holles Street, Dublin 2. The Company is domiciled in the Republic of Ireland.

The principal activities of the Group are oil and gas exploration, development and production.

    2.        Accounting Policies 
   2.1       Basis of Preparation 

The interim condensed consolidated financial statements for the six months ended 30 June 2016 have been prepared in accordance with IAS 34 Interim Financial Reporting.

The interim condensed consolidated financial statements do not include all the information and disclosures required in the annual financial statements, and should be read in conjunction with the Group's annual financial statements as at 31 December 2015 which are available on the Group's website - www.petroneft.com.

The interim condensed consolidated financial statements are presented in US dollars ("US$").

   2.2       Significant Accounting Policies 

The accounting policies adopted in the preparation of the interim condensed consolidated financial statements are consistent with those followed in the preparation of the Group's annual financial statements for the year ended 31 December 2015.

   3.         Segment information 

At present the Group has one reportable operating segment, which is oil exploration and production through its joint venture undertakings. As a result, there are no further disclosures required in respect of the Group's reporting segment.

The risk and returns of the Group's operations are primarily determined by the nature of the activities that the Group engages in, rather than the geographical location of these operations. This is reflected by the Group's organisational structure and the Group's internal financial reporting systems.

Management monitors and evaluates the operating results for the purpose of making decisions consistently with how it determines operating profit or loss in the consolidated financial statements.

Geographical segments

Although the joint venture undertakings WorldAce Investments Limited and Russian BD Holdings B.V. are domiciled in Cyprus and the Netherlands, the underlying businesses and assets are in Russia. Substantially all of the Group's sales and capital expenditures are in Russia.

Assets are allocated based on where the assets are located:

 
                                     Unaudited                      Audited 
                          ============================== 
                                                 30 June                 31 December 
                                                    2016                        2015 
  Non-current assets                                 US$                         US$ 
  Russia                                      47,379,517                  43,062,084 
  Ireland                                          2,781                       3,480 
                                              47,382,298                  43,065,564 
                          ==============================  ========================== 
 
 
 4.    Finance revenue                        Unaudited            Audited 
                                      ======================== 
                                         6 months     6 months     Year ended 
                                         ended 30     ended 30    31 December 
                                        June 2016    June 2015           2015 
                                              US$          US$            US$ 
  Bank interest receivable                  1,480        5,984         10,095 
  Interest receivable 
   on loans to Joint Ventures           1,594,464    1,498,190      3,031,492 
                                        1,595,944    1,504,174      3,041,587 
                                      ===========  ===========  ============= 
 
 
 5.    Income tax 
                                               Unaudited            Audited 
                                       ======================== 
                                          6 months     6 months     Year ended 
                                          ended 30     ended 30    31 December 
                                         June 2016    June 2015           2015 
                                               US$          US$            US$ 
       Current income tax 
  Current income tax 
   charge                                    2,968        9,047         24,863 
  Total current income 
   tax                                       2,968        9,047         24,863 
                                                                 ------------- 
 
       Deferred tax 
  Relating to origination 
   and reversal of temporary 
   differences                             406,957      383,654        774,603 
  Total deferred tax                       406,957      383,654        774,603 
                                       ===========  ===========  ------------- 
  Income tax expense reported 
   in the Interim Consolidated 
   Income Statement                        409,925      392,701        799,466 
                                       ===========  ===========  ============= 
 
 
       Property, Plant 
 6.     and Equipment 
 
                                   Plant and 
                                   machinery 
                                         US$ 
       Cost 
  At 1 January 2015                  996,588 
  Additions                           19,059 
  Translation adjustment           (215,247) 
                                  ---------- 
  At 1 January 2016                  800,400 
  Translation adjustment             104,224 
  At 30 June 2016                    904,624 
 
       Depreciation 
  At 1 January 2015                  674,786 
  Charge for the year                 97,673 
  Translation adjustment           (153,762) 
                                  ========== 
  At 1 January 2016                  618,697 
  Charge for the period               36,970 
  Translation adjustment              81,035 
  At 30 June 2016                    736,702 
 
       Net book values 
  At 30 June 2016                    167,922 
                                  ========== 
  At 31 December 2015                181,703 
                                  ========== 
 
   7.          Equity-accounted Investment in Joint Venture - WorldAce Investments Limited 

PetroNeft Resources plc has a 50% interest in WorldAce Investments Limited, a jointly controlled entity which holds 100% of LLC Stimul-T, an entity involved in oil and gas exploration and the registered holder of Licence 61. The interest in this joint venture is accounted for using the equity accounting method. WorldAce Investments Limited is incorporated in Cyprus and carries out its activities, through LLC Stimul-T, in Russia.

 
                                                           Share 
                                                          of net 
                                                          assets 
                                                             US$ 
 
  At 1 January 2015                                   10,865,156 
  Elimination of unrealised profit 
   on intra-Group transactions                          (29,326) 
  Retained loss                                      (8,765,055) 
  Translation adjustment                            (11,587,393) 
  Credited against loans receivable 
   from WorldAce Investments Limited 
   (Note 9)                                            9,516,618 
                                                   ============= 
  At 1 January 2016                                            - 
  Elimination of unrealised loss on 
   intra-Group transactions                            (151,029) 
  Retained loss                                      (2,407,781) 
  Translation adjustment                               5,042,837 
  Reversal of credit to loans receivable 
   from WorldAce Investments Limited (Note 
   9)                                                (2,484,027) 
  At 30 June 2016                                              - 
                                                   ============= 
 
 

The balance sheet position of WorldAce Investments Limited shows net liabilities of US$23,500,706 following a loss in the period of US$4,815,562 together with a positive currency translation adjustment of US$10,085,675. PetroNeft's 50% share is included above and results in a negative carrying value of US$7,032,591. Therefore, the share of net assets is reduced to Nil and, in accordance with IAS 28 Investments in Associates and Joint Ventures, the amount of US$7,032,591 is deducted from other assets associated with the joint venture on the Balance Sheet which are the loans receivable from WorldAce Investments (see Note 9).

   7.          Equity-accounted Investment in Joint Venture - WorldAce Investments Limited (continued) 

Additional financial information in respect of PetroNeft's 50% interest in the equity-accounted joint venture entity is disclosed below:

 
                                               Unaudited             Audited 
                                      ==========================  ------------- 
                                          6 months      6 months     Year ended 
                                          ended 30      ended 30    31 December 
                                         June 2016     June 2015           2015 
                                               US$           US$            US$ 
 
  Continuing operations 
  Revenue                                4,339,111     4,924,336     10,300,094 
  Cost of sales                        (4,259,206)   (4,766,524)   (10,435,521) 
                                      ============  ============  ------------- 
  Gross profit                              79,905       157,812      (135,427) 
  Administrative expenses                (916,886)     (830,570)    (1,519,005) 
  Impairment of oil and 
   gas properties                                -             -    (4,550,000) 
                                      ============  ============  ------------- 
  Operating loss                         (836,981)     (672,758)    (6,204,432) 
  Finance revenue                            3,475         5,834         11,694 
  Finance costs                        (1,574,275)   (1,161,795)    (2,572,317) 
                                      ============  ============  ------------- 
  Loss for the period for 
   continuing operations 
   before taxation                     (2,407,781)   (1,828,719)    (8,765,055) 
  Income tax expense                             -             -              - 
                                      ============  ============ 
  Loss for the period                  (2,407,781)   (1,828,719)    (8,765,055) 
                                      ============  ============  ============= 
 
  Loss for the period                  (2,407,781)   (1,828,719)    (8,765,055) 
  Other comprehensive income 
   to be reclassified to 
   profit or loss in subsequent 
   periods: 
  Currency translation 
   adjustments                           5,042,837       837,749   (11,587,393) 
                                      ============  ============ 
  Total comprehensive profit/(loss) 
   for the period                        2,635,056     (990,970)   (20,352,448) 
                                      ============  ============  ============= 
 

The currency translation adjustment results from the revaluation of the Russian Rouble during the period. All Russian Rouble carrying values in Stimul-T, the 100% subsidiary of WorldAce are converted to US Dollars at each period end. The resulting gain or loss is recognised through other comprehensive income and transferred to the currency translation reserve. The Russian Rouble appreciated significantly against the US Dollar during the period from RUB73.30:US$1 at 31 December 2015 to RUB64.05:US$1 at 30 June 2016.

   7.          Equity-accounted Investment in Joint Venture - WorldAce Investments Limited (continued) 
 
                                      Unaudited       Audited 
                                    =============  ------------- 
                                          30 June    31 December 
                                             2016           2015 
                                              US$            US$ 
  Non-current Assets 
  Oil and gas properties               35,421,820     27,646,307 
  Property, plant and equipment           206,001        197,826 
  Exploration and evaluation 
   assets                               7,048,832      6,044,036 
  Assets under construction             2,665,129      2,345,358 
                                       45,341,782     36,233,527 
                                    =============  ------------- 
 
  Current Assets 
  Inventories                             479,906        257,857 
  Trade and other receivables             308,786        259,142 
  Cash and cash equivalents                38,018        153,198 
                                          826,710        670,197 
                                    =============  ------------- 
 
  Total Assets                         46,168,492     36,903,724 
                                    =============  ============= 
 
 
  Non-current Liabilities 
  Provisions                            (353,646)      (273,278) 
  Interest-bearing loans and 
   borrowings                        (52,416,272)   (48,366,752) 
                                     (52,769,918)   (48,640,030) 
                                    =============  ------------- 
  Current Liabilities 
  Trade and other payables            (5,148,927)    (2,649,103) 
                                      (5,148,927)    (2,649,103) 
                                    =============  ------------- 
  Total Liabilities                  (57,918,845)   (51,289,133) 
                                    =============  ============= 
 
  Net Liabilities                    (11,750,353)   (14,385,409) 
                                    =============  ============= 
 
   8.         Equity-accounted Investment in Joint Venture - Russian BD Holdings B.V. 

PetroNeft Resources plc has a 50% interest in Russian BD Holdings B.V., a jointly controlled entity which holds 100% of LLC Lineynoye, an entity involved in oil and gas exploration and the registered holder of Licence 67. The interest in this joint venture is accounted for using the equity accounting method. Russian BD Holdings B.V. is incorporated in the Netherlands and carries out its activities in Russia.

 
                                                  Share 
                                                 of net 
                                                 assets 
                                                    US$ 
 
  At 1 January 2015                             365,178 
  Retained loss                               (314,859) 
  Translation adjustment                      (887,109) 
  Credited against loans receivable 
   from Russian BD Holdings BV (Note 
   9)                                           836,790 
                                             ========== 
  At 1 January 2016                                   - 
  Retained loss                               (172,677) 
  Translation adjustment                        424,702 
  Reversal of credit to loans receivable 
   from Russian BD Holdings BV (Note 
   9)                                         (252,025) 
  At 30 June 2016                                     - 
                                             ========== 
 

The balance sheet position of Russian BD Holdings B.V. shows net liabilities of US$1,169,530 following a loss in the year of US$345,354 together with a currency translation adjustment (gain) of US$849,404. PetroNeft's 50% share is included above and results in a negative carrying value of US$584,765. Therefore, the share of net assets is reduced to Nil and, in accordance with IAS 28 Investments in Associates and Joint Ventures, the amount of US$584,765 is deducted from other assets associated with the joint venture on the Balance Sheet which are the loans receivable from Russian BD Holdings B.V. (Note 9).

   8.         Equity-accounted Investment in Joint Venture - Russian BD Holdings B.V. (continued) 

Additional financial information in respect of PetroNeft's 50% interest in the equity-accounted joint venture entity is disclosed below:

 
                                              Unaudited            Audited 
                                      ========================  ------------- 
                                         6 months     6 months     Year ended 
                                         ended 30     ended 30    31 December 
                                        June 2016    June 2015           2015 
                                              US$          US$            US$ 
 
  Revenue                                       -            -              - 
  Cost of sales                                 -            -              - 
  Gross profit                                  -            -              - 
  Administrative expenses                (56,435)     (58,858)      (106,224) 
  Operating loss                         (56,435)     (58,858)      (106,224) 
  Finance revenue                             204          274            434 
  Finance costs                         (116,446)     (98,886)      (209,069) 
  Loss for the period for 
   continuing operations 
   before taxation                      (172,677)    (157,470)      (314,859) 
 
  Taxation                                      -            -              - 
 
  Loss for the period                   (172,677)    (157,470)      (314,859) 
                                      ===========  ===========  ============= 
 
  Loss for the period                   (172,677)    (157,470)      (314,859) 
  Other comprehensive income 
   to be reclassified to 
   profit or loss in subsequent 
   periods: 
  Currency translation 
   adjustments                            424,702       72,005      (887,109) 
  Total comprehensive profit/(loss) 
   for the period                         252,025     (85,465)    (1,201,968) 
                                      ===========  ===========  ============= 
 
 
                              Unaudited      Audited 
                            ============  ------------ 
                                 30 June   31 December 
                                    2016          2015 
                                     US$           US$ 
  Non-current assets           3,787,327     3,327,327 
  Current assets                  45,227        71,104 
  Total assets                 3,832,554     3,398,431 
                            ============  ------------ 
 
  Non-current liabilities    (4,214,659)   (4,034,780) 
  Current liabilities          (202,660)     (200,441) 
  Total liabilities          (4,417,319)   (4,235,221) 
                            ============  ------------ 
 
  Net Liabilities              (584,765)     (836,790) 
                            ============  ============ 
 
 
       Financial assets - loans 
 9.     and receivables 
                                                 Unaudited             Audited 
                                               ============  --------------------------- 
                                                    30 June                  31 December 
                                                       2016                         2015 
                                                        US$                          US$ 
 
  Loans to WorldAce Investments 
   Limited (Note 14)                             50,704,823                   49,224,805 
  Less: share of WorldAce Investments 
   Limited loss                                 (7,032,591)                  (9,516,618) 
                                                 43,672,232                   39,708,187 
                                               ------------  --------------------------- 
  Loans to Russian BD Holdings 
   B.V. (Note 14)                                 4,126,909                    4,012,464 
  Less: share of Russian BD Holdings 
   B.V. loss                                      (584,765)                    (836,790) 
                                                  3,542,144                    3,175,674 
                                               ------------  --------------------------- 
                                                 47,214,376                   42,883,861 
                                               ============  =========================== 
 

The Company has granted a loan facility to its joint venture undertaking WorldAce Investments Limited of up to US$45 million. This loan facility is US$ denominated and unsecured. Interest currently accrues on the loan at USD LIBOR plus 6.0% but the Company has agreed not to seek payment of interest until H2 2017 at the earliest. The loan is set to mature on 31 December 2022. The loan from the Company to Russian BD Holdings is repayable on demand. Interest currently accrues on the loan at LIBOR plus 6.0% per annum.

 
 10.    Inventories               Unaudited                     Audited 
                        ============================  --------------------------- 
                                             30 June                  31 December 
                                                2016                         2015 
                                                 US$                          US$ 
 
  Materials                                   29,676                       54,302 
                                              29,676                       54,302 
                        ============================  =========================== 
 
 
 11.    Trade and other receivables                        Unaudited                         Audited 
                                               =================================  ---------------------------- 
                                                                         30 June                   31 December 
                                                                            2016                          2015 
                                                                             US$                           US$ 
 
  Other receivables                                                      224,724                       147,641 
  Receivable from jointly controlled 
   entity (Note 14)                                                    1,852,613                     1,628,667 
  Advances to contractors                                                  1,992                         3,708 
  Prepayments                                                            235,007                        62,112 
                                                                       2,314,336                     5,069,944 
                                               =================================  ============================ 
 

Other receivables are non-interest-bearing and are normally settled on 60-day terms.

 
 12.    Cash and Cash Equivalents 
                                                 Unaudited                      Audited 
                                      ===============================  ------------------------ 
                                                              30 June               31 December 
        Group                                                    2016                      2015 
                                                                  US$                       US$ 
 
  Cash at bank and in hand                                    382,546                 1,284,212 
                                                              382,546                 1,284,212 
                                      ===============================  ======================== 
 

Bank deposits earn interest at floating rates based on daily deposit rates. Short-term deposits are made for varying periods of between one day and one month depending on the immediate cash requirements of the Group, and earn interest at the respective short-term deposit rates.

 
 13.    Trade and other payables 
                                                    Unaudited                         Audited 
                                        =================================  ---------------------------- 
                                                                  30 June                   31 December 
                                                                     2016                          2015 
                                                                      US$                           US$ 
 
  Trade payables                                                  334,135                       238,570 
  Trade payables to jointly 
   controlled entity (Note 
   14)                                                            388,254                       239,228 
  Corporation tax                                                  59,439                        59,087 
  Oil taxes, VAT and employee 
   taxes                                                           44,874                        78,293 
  Other payables                                                  348,544                       212,141 
  Accruals                                                        213,826                       317,827 
                                                                1,389,072                     1,145,146 
                                        =================================  ============================ 
 

The Directors consider that the carrying amount of trade and other payables approximates their fair value.

Trade and other payables are non-interest-bearing and are normally settled on 60-day terms.

Trade payables and accruals principally comprise amounts outstanding for trade purchases and ongoing costs.

   14.        Related party disclosures 

Transactions with subsidiaries

Transactions between the Group and its subsidiaries, Granite and Dolomite, have been eliminated on consolidation.

Transactions with joint ventures

PetroNeft Resources plc had the following transactions with its joint ventures during the six months ended 30 June 2016 and year ended 31 December 2015:

 
                                                                                        WorldAce 
                                                              Russian                Investments 
                                                          BD Holdings                    Limited 
  Group                                                      BV Group                      Group 
                                                                  US$                        US$ 
 
  Receivable by PetroNeft Group 
   at 1 January 2015                                        3,882,578                 47,341,766 
  Transactions during the year                                183,333                  2,670,250 
  Interest accrued in the year                                205,189                  2,826,303 
  Payments for services made 
   during the year                                           (29,781)                (2,483,727) 
  Share of joint venture's translation 
   adjustment                                               (836,790)                (9,516,618) 
  Translation adjustment                                     (14,821)                     45,618 
                                          ---------------------------  ------------------------- 
  At 1 January 2016                                         3,389,708                 40,883,592 
  Transactions during the period                               78,222                  1,686,332 
  Interest accrued in the period                              114,445                  1,480,019 
  Payment for services made 
   during the period                                          (2,743)                (1,771,387) 
  Share of joint venture's translation 
   adjustment                                                 252,025                  2,484,027 
  Translation adjustment                                        7,941                     76,554 
  At 30 June 2016                                           3,839,598                 44,839,137 
                                          ===========================  ========================= 
 
  Balance at 31 December 2015 
   comprised of: 
  Loan facility advanced                                    3,175,674                 39,708,187 
  Trade and other receivables                                 214,034                  1,414,633 
  Trade Payables                                                    -                  (239,228) 
                                                            3,389,708                 40,883,592 
                                          ===========================  ========================= 
  Balance at 30 June 2016 comprised 
   of: 
  Loans receivable                                          3,542,144                 43,672,232 
  Trade and other receivables                                 297,454                  1,555,159 
  Trade and other payables                                          -                  (388,254) 
                                                            3,839,598                 44,839,137 
                                          ===========================  ========================= 
 

This information is provided by RNS

The company news service from the London Stock Exchange

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