TIDMSMDR
RNS Number : 1833Q
Salamander Energy PLC
28 August 2014
28 August 2014
Salamander Energy plc
("Salamander" or the "Group")
Half Year Financial Results
Salamander Energy announces its half year results for the six
months ended 30 June 2014.
HIGHLIGHTS
OPERATIONAL
-- Average daily production 11,800 boepd (1H 2013: 14,900
boepd), reflecting production downtime at start of year which
reduced output by 2,800 boepd during the period
-- Drilled 10 development wells in Bualuang field, East Terrace
wells outperforming expectations
-- Four additional slots added to the Bravo platform well bay
-- Bualuang power and processing modules hooked up and
commissioned, FSO now operational and receiving all crude
production
-- WK-1 discovery takes Kerendan field to over 1 TCF gas-in-place
-- Kerendan Gas Processing Facilities construction now more than 70% complete
FINANCIAL
-- Revenue of $177.8 million (1H 2013: $ 197.0 million)
-- Pre-tax operating cash flow of $115.2 million (1H 2013: $147.0 million)
-- Post-tax operating cash flow of $3.8 million (1H 2013: $96.0 million)
-- Pre-tax profit of $66.4 million (1H 2013: $10.3 million)
-- Post-tax loss of $27.9 million (1H 2013: $86.1 million loss)
-- Calculated impact of the production outage on financials
during the period: $53 million reduction in revenue and $39 million
reduction in post-tax operating cash flow
-- Net debt as at 30 June of $401.0 million (FY 2013: $259.9
million) with cash and funds of $154.1 million (FY 2013: $265
million)
-- Gearing is expected to fall to c. 30% post completion of the
SONA transaction (30 June 2014: 52%)
PORTFOLIO
-- Reached agreement to sell 40% interests in B8/38 & G4/50
to Sona Petroleum Berhad ("SONA") for $280 million
-- Price reflects over $19 per proved & probable barrel of reserves
-- Reduces single asset exposure
OUTLOOK
-- Full year 2014 average daily production forecast 13,000 -
15,000 boepd, with production in the second half to date averaging
15,300 boepd
-- Current development drilling programme in Greater Bualuang to complete during 2H 2014
-- Bualuang Charlie Platform to be sanctioned by Board in 2H 2014
-- East Terrace Southern Culmination exploration well proposed to be drilled in Q4 2014
-- EIA application for G4/50 submitted to Thai authorities, awaiting hearing
-- Tutung Plan of Development (PoD) to be submitted to Indonesian regulator for approval
Chief Executive, James Menzies, commented:
"The first half saw significant resource additions at West
Kerendan in Indonesia and an intense period of development activity
in Indonesia and Thailand which is now coming to fruition. The FSP
process resulted in a deal to crystallise value through the
disposal of a minority stake in the Greater Bualuang area, which
will allow us to return capital to shareholders, retire debt and
free up resources to help further diversify the portfolio.
Looking forward our priorities continue to be to commercialise
our resource base, generate step out exploration prospects near our
principal assets and to complete the strengthening of our balance
sheet while pursuing business development opportunities in our
region."
Management will be holding a conference call for analysts at 9am
this morning, a replay facility will be available on the company
website later today.
Enquiries:
Salamander Energy + 44 (0)20 7432 2680
James Menzies, Chief Executive Officer
Geoff Callow, Head of Corporate Affairs
Brunswick Group +44 (0)20 7404 5959
Patrick Handley
Elizabeth Adams
Chief Executive's Review
At a corporate level, the first half of 2014 was dominated by
the process to divest of a stake in our key operated Bualuang
field, which ultimately led to the transaction announced in June
with SONA. Meanwhile, in Thailand the Group continued to make major
steps in the development of the Bualuang field against a backdrop
of political change in the country. In Indonesia, exploration
success at West Kerendan materially increased the Group's certified
resources and highlighted the potential of the area.
Operations
Production was impacted at the start of the period by the
Bualuang field offshore Thailand, being shut in for six weeks as
repairs were undertaken to the damaged facilities. Development
drilling was able to continue during this time and the field
resumed production in February. With new wells completed in the T4
and T2 reservoirs, Group production recovered to average 11,800
barrels of oil equivalent per day in the first half, resulting in
operating cash flow, pre working capital, of $122.7 million (1H
2013: $169.0 million).
A major part of our initiative to upgrade the field
infrastructure in order to reduce operating costs and reduce the
risk of future down-time, is to replace the Floating Production,
Storage & Offloading vessel ("FPSO") with a Floating, Storage
& Offloading vessel ("FSO"). Conversion of the Suksan
Salamander FSO was completed during the period and it is now on
location and receiving 100% of Bualuang production. Use of this new
FSO, together with the new power and processing modules is expected
to yield operating cost savings of up to $25 million per annum.
Meanwhile planning and design work for a third platform continues
and will be presented to the Board for sanction later this year.
This third platform, Charlie, will lead to the development, and
commercialisation, of additional resources identified during this
current development drilling campaign.
In Indonesia, the highlight of the period was the West Kerendan
discovery which has increased certified recoverable resources to
over 650 Bcf in the Kerendan field. Work is ongoing to increase the
permitted sales volumes from Kerendan as a result of both the
successful development and exploration drilling in and around the
field. Gas price negotiations continue between the field partners,
the gas buyer( PLN) and the Indonesian regulator. The construction
of the power plant and transmission lines has continued during the
period and PLN expects to be ready to receive gas around year
end.
SONA Transaction & Formal Sales Process
The decision to partially divest of a stake in the Group's 100%
interest in the Bualuang field was taken having made good progress
in proving up further resources in the field and with planning for
the next wave of investment underway. This is consistent with the
Group's strategy of holding high equity interests in its assets and
realising value from them as they mature.
The proposed transaction we have agreed with SONA is for the
sale of a 40% interest in our acreage containing the Bualuang oil
field, B8/38, and the adjacent exploration concession, G4/50. We
have agreed to sell these interests for $280 million, a price which
reflects the value created in the field since Salamander acquired
an additional 40% interest in the asset in 2010 for $105 million.
The transaction is expected to complete during 4Q 2014. In the four
years since we acquired the additional interest we have increased
ultimately recoverable reserves and resources from 43 to 75 million
barrels of oil, produced over 10 million barrels of oil, and
ultimately realised a $145 million increase in the value of a 40%
interest in the field.
On completion of the transaction, we will look to reduce gross
debt by $200-250 million, which will transform the balance sheet of
the Company, as well as return $50 million to shareholders.
During the process to divest of a stake in the Bualuang oil
field, the Group received a number of preliminary and conditional
approaches to acquire the entire share capital of the Company.
These approaches were taken seriously by the Board, which
considered each in turn alongside proposals to acquire a stake in
the Bualuang asset. The Board concluded that the SONA transaction
was the most compelling and offered the best value for shareholders
as well as achieving the objectives of the original process.
Outlook
Our priorities continue to be to commercialise our resource
base, generate step out exploration prospects near our principal
assets and to complete the strengthening of our balance sheet while
pursuing further business development opportunities in our region.
We have not only demonstrated the ability to make value added
acquisitions but have also, importantly, shown our willingness to
generate shareholder value through disposals at the appropriate
time.
With a stronger balance sheet, we believe that Salamander will
be well positioned to deliver this strategy to the benefit of
shareholders in 2014 and beyond.
Operational Review
The operational focus during the first half of 2014 was on the
conversion of resources to reserves in keeping with our stated
strategy. We made significant strides forward at both our key
development assets, Bualuang and Kerendan, moving us closer to
booking additional reserves.
Production
Production averaged 11,800 boepd during the first half. This
number was impacted by the fact that production from the Bualuang
field was shut-in for the first six weeks of the year due to damage
to the facilities. With development drilling at the field on-going
throughout the period full year production is expected to be
between 13,000 and 15,000 boepd. In the second half to date
production has averaged 15,300 boepd.
Health, Safety and Environment
A total of 1.7 million man hours were completed during the first
half of 2014. In the year to date there have been six reportable
incidents including three lost time incidents (LTIs) in
Salamander's operated activities. All three LTIs were minor but
avoidable, two having occurred on the Mako rig operating at
Bualuang and one at the Kerendan river base. Whilst the Group's
safety performance remains good by industry standards, steps have
been taken to increase safety awareness in order to prevent these
avoidable occurrences.
Thailand
Greater Bualuang
Operations in the Greater Bualuang area were centred on
development drilling in the B8/38 block, the preparation for the
installation of the FSO and replacement of the FPSO. Production
from the Bualuang field averaged 9,900 bopd during the first half,
due to a six week shut in whilst the facilities underwent repairs
after being damaged in early January by an excursion of the Rubicon
operated FPSO into the no-go area of its mooring spread. Average
production for the days the field was on-stream was 13,400 bopd
providing an indication of the strong underlying reservoir
performance. Exploration activity was focused on obtaining the
environmental permits required to drill wells in the G4/50 licence
and the latest application is with the Thai authorities awaiting
formal consideration.
B8/38 (100%, Operator)
10 wells were completed in the first half of 2014 as part of the
Bravo platform development drilling programme, building on the 11
wells drilled during 2013. With the 16 slots on the Bravo platform
having all been utilised, four additional slots have been added to
the well bay on Bravo, and three have already been used to increase
the number of producing wells. The wells drilled during 2014 to
date have been conventional horizontal wells in the T4 and T2
reservoirs in both the main field and the East Terrace. The new
wells have performed in line with expectations and driven further
production growth relative to 2013. In particular, the production
in the East Terrace has been strong with lower water cuts and
higher well deliverability than forecast. We now plan to drill a
number of dual lateral production wells with a view to increasing
the number of production drain points per slot. The first of these
wells has just been completed and is being brought on to
production. The results are eagerly anticipated as success could
generate significant efficiency gains in the future exploitation of
the field.
Aside from development drilling, the first half was also a busy
period in terms of upgrading the field infrastructure to both
enable future growth and deliver a significant reduction in
operating costs.
With all of the slots on the Bravo platform now utilised and
significant resource upside having been identified a new platform
is required. The Charlie platform will lead to both production
growth and the conversion of contingent resource to reserves. A
study examining the design options for the Charlie platform was
completed during the period and an investment proposal is expected
to be submitted for Board approval during 4Q 2014. Board approval
should result in the first tranche of contingent resources being
converted to 2P reserves at year end 2014.
The new infrastructure that will drive operating cost reductions
at Bualuang of up to $25 million per annum is now on location and
operational. The new power and processing modules on the Bravo
platform were commissioned in May and have been running smoothly
since. The Suksan Salamander FSO arrived on location in July, hook
up and commissioning is now complete and the FSO is fully
operational. The FPSO is expected to leave the field very soon.
Outside of the production and development work programme in
B8/38, an exploration prospect, the "Southern Culmination", has
been identified to the south of the East Terrace. This prospect has
an EIA in place and is proposed to be drilled during 4Q 2014.
G4/50 (100%, Operator)
High graded drilling locations in G4/50 are all drill-ready
pending approval of the Environmental Impact Assessment ("EIA"). An
EIA application is with the Thai authorities and we are waiting to
be notified of a date for the hearing before the Technical Review
Committee which is responsible for approval of EIAs. The resource
potential remains in the 25-100 MMbo range with chance of success
of around one in four.
Other
Production from the Sinphuhorm field (9.5% interest) has been
ahead of expectations during the first half with net daily
production averaging 2,000 boepd. High demand due to a dearth of
hydro-electric power has led to the higher than budgeted
requirements of the Nam Phong power plant. PTT assumed the
operatorship of the field during 1H following the acquisition of
Hess' Thai portfolio. PTT has been extremely active since assuming
the operatorship and is planning to start drilling on the field
before year end. Plans include an extra producer in the South of
the field and a well in the North. These will be the first wells to
be drilled in the Sinphuhorm Production Licence area for six years,
and the first well in the north of the field since the original
discovery wells. If successful the northern well could result in a
material upwards revision of recoverable resources.
To the east of Sinphuhorm, in L27/43 the operator APICO is
planning to drill a pre-development well on the Dong Mun gas field
to prove up more reserves and to provide additional production
capacity on field start up. This work is going on in parallel to
gas sales negotiations ahead of an investment decision on the
development. The well is expected to spud during the first half of
2015.
Indonesia
Greater Kerendan
Greater Kerendan consists of the Bangkanai PSC where the Group
now has over 650 Bcf of certified recoverable resource in the
Kerendan gas field development and the West Kerendan gas discovery
with first gas expected around the end of 2014. The Group's
Northeast and West Bangkanai PSCs capture the upside exploration
potential in the basin.
Kerendan/West Kerendan, Bangkanai PSC (70%, Operator)
The Group is now focused on commercialising the material gas
resource discovered to date in the Kerendan area following the
success of the development drilling on the Kerendan field in 2013
and the West Kerendan well in 1Q 2014. We are making progress on
multiple fronts and construction of the Salamander gas processing
facility is well advanced. Meanwhile, gas buyer PLN is moving
towards completion of the power plant and transmission lines that
will enable production to commence. Negotiations regarding the gas
price of the current GSA are at an advanced stage. Furthermore
Indonesian reserves certifiers are finalising their report on the
Kerendan/West Kerendan area, which will lead to an increase in the
gas we are permitted to sell by the Indonesian regulator.
The power plant will initially be a 155 MW facility and PLN has
plans to expand this in 2016. This expansion in capacity will take
demand above the daily contract quantity in the current GSA and it
is expected that a second GSA will be negotiated for the supply of
incremental volumes, potentially in excess of an additional 50
MMscfd.
Negotiations between Salamander, SKKMigas and PLN with regards
to a higher gas price have progressed to an advanced stage and the
re-negotiation is expected to conclude before first gas production
which should result in a material uplift to the current $5.03 per
Mscf.
The West Kerendan-1 exploration well was completed in the first
half and found over 400 metres of gas saturation in two separate
gas columns within the Upper Berai Carbonates, which tested at over
50 MMscfd. Salamander's independent reserves auditors have
certified that there is over 300 Bcf of recoverable resource at the
West Kerendan location. The upper zone is in communication with the
main field c. 10 kilometres to the East suggesting a total gas
bearing structure with an area in excess of 100 sq km.
The success of the West Kerendan-1 well has seen the Group's
certified recoverable resource in the broader Kerendan area
increase to over 650 Bcf. Whilst only 120 Bcf has currently been
commercialised under the first GSA, the rest of the gas should not
be deemed stranded. In Indonesia, to convert resources to reserves
the regulator needs a reserves report from a domestic reserves
certification agency and it will then use this report to determine
what volume of gas may be offered for sale. An Indonesian resource
certification agency is in the final stages of completing such a
report which is an important step in the process of signing a
second GSA to fill the expanded power plant.
North Kutei
The North Kendang-2 ("NK-2") exploration well was spudded
towards the end of the period. The NK-2 well was a follow up to the
North Kendang-1 well that was drilled in 2013 and encountered a
high pressure wet gas kick in the Upper Miocene, which led to the
well being plugged and abandoned.
In August, the NK-2 well reached a total depth of 2,569 metres
true vertical depth sub-sea and encountered two hydrocarbon bearing
intervals, one of which was the primary objective zone of high
pressure encountered in the North Kendang-1 ("NK-1") well. This was
successfully penetrated in NK-2 and comprised a 2.5m gas condensate
bearing sand. In addition, a 10.5m gas bearing sand with oil shows
was encountered at a shallower depth. This sand is at the same
stratigraphic level that flowed 6,000 bopd on test in the South
Kecapi-1 DIR/ST well in the Bontang PSC.
The volume of hydrocarbons encountered by NK-2 were considered
to be sub-commercial and the well was plugged and abandoned, with
substantially all of the well costs covered under the Group's
insurance policies. The NK-2 well concludes the North Kutei
drilling programme and we will now review our strategic options in
this area.
Elsewhere on the Bontang PSC, a plan of development for the
Tutung discovery has been submitted to the authorities.
Malaysia
Malaysia is a region that Salamander is targeting for future
growth. Having entered the country through the award of the PM-322
PSC at the end of 2013 the focus during this period has been on
building a team in country ahead of a logistically challenging 3D
seismic survey that is planned for 4Q 2014/1Q 2015 with a view to
drilling a well before the end of 2016. We continue to evaluate
other opportunities to build our business in Malaysia.
Summary
The Group has made significant steps towards converting
contingent resources through to reserves in the first half of 2014
at both our Bualuang and Kerendan fields. The Kerendan position in
particular was transformed during the first half with the West
Kerendan discovery.
In Greater Bualuang we are already fully operational with the
new FSO enabling us to realise a material reduction in operating
costs. We also expect to finalise the conceptual design for the
Charlie platform and obtain Board sanction for the project.
Finally, we are cautiously optimistic that we will be in position
to drill exploration wells on G4/50 before the end of the year. In
Kerendan, PLN should be ready to receive first gas around year end.
We also expect to conclude negotiations over the higher gas price
and hope to be informed by the regulator as to the volume of gas we
will be permitted to sell in our second gas sales agreement.
Financial Review
Units 1H'14 1H'13 2013
-------------------------------- ------------ ------------ ------------ ------------
Income statement:
Realised prices:
Oil and liquids $/bbl 105.13 102.10 100.83
Gas $/Mscf - 5.39 5.62
Revenue $'millions 177.8 197.0 456.2
Operating costs per boe $/boe 18.98 14.44 16.63
Profit before taxation $'millions 66.4 10.3 39.6
Taxation $'millions 94.3 96.4 159.4
Balance sheet:
Capital expenditures:
Acquisitions $'millions 0.1 - -
Exploration and appraisal $'millions 35.8 119.9 181.0
Development and production $'millions 117.8 95.6 191.6
Net disposal proceeds $'millions - 27.0 27.0
Net debt(1) $'millions 401.0 255.9 259.9
Gearing(2) % 52 37 39
Cash flow statement:
Cash generated from operations $'millions 115.2 147.0 344.4
Taxation payment $'millions 111.3 51.0 56.7
Cash from operations per boe $/boe 56.50 60.13 70.88
-------------------------------- ------------ ------------ ------------ ------------
1 - See note 16 for further details
2 - Gearing is defined as net debt divided by net debt plus book
equity
Introduction
Salamander's financial performance in the first half of 2014 was
coloured by the impact of an unplanned six week shutdown on the
Bualuang field. Looking through this event, the Group's
development-focused investment programme continued to drive robust
revenue generation, which combined with successful exploration
drilling to deliver a pre-tax profit of $66.4 million (1H 2013:
$10.3 million). Translated to cash flow, finances displayed the
normal first-half weighting of taxation payments, but in 1H 2014
these payments were magnified by strong levels of cash generation
in 2013. As is normal, Salamander will generate the majority of its
net cash flow during the second half of the year.
To accommodate the various financial impacts of Bualuang's
shutdown, the Group drew a cushion of additional debt and extended
the Mako rig contract by a further two months. With the production
back online, the additional debt is now being repaid (post 30 June
2014) and production continues to benefit from the new wells
drilled. Reflective of these steps, full year capital expenditure
guidance is revised to circa $300 million (from $275 million).
On completion of the proposed SONA transaction, the Group
intends to repay between $200 and $250 million of debt (inclusive
of the Convertible Bonds) and to return $50 million to
shareholders. Net of these steps, Salamander's gearing is
anticipated to fall to circa 30% (1H 2014 52%).
Statement of Comprehensive Income
Revenue, realisations and production
Group first half working interest production averaged 11,800 boe
per day (1H 2013: 14,900 boepd), with the Bualuang field accounting
for 83% of output. Underlying the decline in Group output is the
impact of the unplanned shutdown on the Bualuang oil field. This
outage lowered production in the period by circa. 0.5 million
barrels (or c. 2,800 bopd), and masked the underlying positive
impact of the continued programme of Bualuang development drilling,
which was uninterrupted by the outage. Adding these volumes back
would have resulted in growth of 6% in production relative to 2H
2013.
Group average realisations improved year-on-year by 8% (1H 2014:
$105.13/boe; 1H 2013: $97.55/boe) as a result of marginally higher
oil prices and an improved contract price for Bualuang crude,
priced at $0.4/bbl discount to Dubai v $1.10/bbl discount to Dubai
in 1H 2013. Figures for both periods are rebased in absolute terms
by the adoption of IFRS 11 - Joint Arrangements ("IFRS 11") under
which the financial contribution of Sinphuhorm volumes is now
equity accounted.
Group revenue totalled $177.8 million (1H 2013: $197.0 million).
Adjusted for the impact of the shutdown, revenue would have
totalled circa $231 million.
Cost of Sales
Cost of sales totalled $89.4 million (1H 2013: $78.5 million).
Within this figure, direct operating costs of $39.7 million (1H
2013: $37.7 million) include additional fixed FPSO-related costs
associated with the Bualuang outage. Adjusting for the outage
underlying Group operating expenditure averaged c$16 per
barrel.
Salamander remains on track to deliver operating cost savings at
the Bualuang field of up to $25 million per annum. During the
period the Group began powering the field facilities with its own
crude and in July the Teekay Suksan Salamander FSO arrived on
location. Crude production switched to the FSO in mid-August, and
the Rubicon Vantage FPSO is scheduled to leave the field at the
month's end.
Royalty declined to $15.5 million (1H 2013: $16.8 million);
amortisation fell to $40.8 million (1H 2013: $53.0 million); and a
$6.6 million positive offset adjusts for the value of crude that
remained unsold in Bualuang's tanks at 30 June 2014 (1H 2013: $29.0
million positive inventory adjustment).
Exploration expense
Exploration costs expensed through the income statement fell
significantly to $6.7 million (1H 2013: $111.2 million). Of this
figure $2.7 million relates to the write-off of unsuccessful
exploration costs (1H 2013: $108.7 million), the balance in both
periods being pre-licence costs.
Equity accounted investments and Administrative Expense
Having adopted IFRS 11 for the reporting of Sinphuhorm's
financial contribution to the Group, the share of profit from
equity accounted investments totalled $7.9 million (1H 2013: $7.5
million).
Administrative costs rose year-on-year to $5.0 million (1H 2013:
$2.3 million), but were flat on 2H 2013. Salamander remains focused
on managing administrative expense toward 2013's lower FY
levels.
Finance revenue and expense
1H 2014 accounts capture a transitional step in the Group's
balance sheet (see discussion below). This led to temporarily
higher levels of gross debt, and net finance costs rose to $16.9
million (1H 2013: $10.4 million). Alongside this, an 'other
financial' loss of $1.3 million in 1H 2014 contrasts to a gain of
$9.1 million in 1H 2013. 2013's gain reflected a positive
mark-to-market movement on the Group's oil hedge book (which in
2013 was subsequently offset by an 2H 2013 currency loss).
Year-to-year the Group undertakes a limited oil price hedging
programme, the aim of which is to protect the cash flows that fund
the Group's future capital expenditure programme. For 2014
Salamander has hedged 2,600 bopd of production at an average swap
price of $104.0 per bbl, with a further call option over these
volumes at $120/bbl. In 2015, 1,200 bopd of production is hedged at
an average swap price of $103.3/bbl, also with a call option at
$120/bbl. The Group is no longer subject to material mark-to-market
movements in the income statement in relation to these programmes
as it adopted hedge accounting principles from mid-way through
2013.
Profit before taxation totalled $66.4 million (1H 2013: $10.3
million).
Taxation
Income statement taxation charges totalled $94.3 million (1H
2013: $96.4 million). Current taxation charges equalled $49.2
million (1H 2013: $48.4 million) and deferred taxation charges
totalled $45.1 million (1H 2013: $48.0 million). As in previous
periods, the income statement taxation charge is distorted by a
number of items that cannot be taken as allowances against tax. In
addition the deferred tax charge does not yet reflect the improved
profile of future payments that will be triggered by board sanction
of the 'Charlie' development. A reconciliation of the Group's
taxation charge is set out in note 9 to the financial
statements.
After tax, Salamander reported a net loss of $27.9 million (1H
2013: $86.2 million).
Balance Sheet
Capital expenditure
Accrued capital expenditures totalled $153.7 million (1H 2013:
$214.7 million). 77% ($117.8 million) of this spend related to
production and development activity (1H 2013: $96.0 million), 84%
of which was spent on drilling and facilities upgrades within
Thailand where the Group is able to capture significant fiscal
efficiencies. The balance of Group production and development spend
lay within Indonesia, where the development of the Kerendan gas
field is now at an advanced stage. Expenditure associated with
exploration and appraisal activity totalled $35.8 million, 86% of
which lay in Indonesia where the Group made a significant discovery
at West Kerendan. Exploration and appraisal, and production and
development expenditures capitalised and carried forward on the
Balance Sheet at 30 June 2014 totalled $1,051.1 million (1H 2013:
$896.2 million).
Cash and net debt
Post the impact of the Bualuang outage and reflective of the
normal 1H-weighting of the Group's cash taxation payments, at 30
June 2014 Group net debt had risen to $401.0 million (30 June 2013:
$255.9 million). Breaking this into its component parts, total
gross debt equalled $555.0 million (1H 2013: $425.0 million), and
cash and funds totalled $154.1 million (1H 2013: $169.1 million).
This net position reflects a transitional step in Salamander's
balance sheet.
Alongside total gross bank borrowings at 30 June 2014 of $311.0
million (1H 2013: $325.0 million), Salamander continued to hold $94
million of Convertible Bond debt (due March 2015) as well as $150
million of high-yield bond debt. These high yield bonds were issued
in November 2013, and $50 million of the proceeds were used in 4Q
2013 to retire a short-term debt facility. The security behind this
facility (Kerendan) was then rolled into the lower-cost RBL, which
subsequently expanded in size to $350 million (from $300 million).
Cash relating to the $100 million balance of proceeds is earmarked
to refinance the Group's $94 million of convertibles, however these
have remained on the balance sheet since the Group has from a
regulatory point of view been restricted from tendering for the
bonds due to the Bualuang sale process.
Post completion of the SONA transaction the Group intends to
repay between $200 and 250 million of debt and to return $50
million to shareholders. Net of these steps, Salamander's gearing
is anticipated to fall to circa 30% (1H 2014 52%).
Cash flow statement
Operating cash flow
Post the impact of Bualuang's unplanned shutdown, pre-tax
operating cash flow declined to $115.2 million (1H 2013: $147.0
million). Adding back the barrels that were not produced due to the
incident, operating cash flow would rise to $154.2 million,
approximately flat on 1H 2013.
In any particular year, Salamander's cash taxation payments are
heavily first half weighted and levied against the levels of
prior-year activity (in May the full SRB charge liable on the
previous year's production is paid, as well as a balancing payment
for the prior year's Petroleum Income Tax). As a result, the
Group's post-tax cash flow is always heavily
second-half-loaded.
For the full year 2013, a 71% year-on-year step-up in Bualuang
production led to a high level of pre-tax operating cash flow
($344.4 million) versus a relatively low cash taxation payment
($56.7 million). The resulting post-tax margin was further enhanced
through the shelter that the Group received from its expanded
programme of facilities-based Bualuang investment.
The cash taxation payment of $111.3 million for the current
period (1H 2013: $51.0 million) was calculated with reference to FY
2013 levels of cash generation, and reflects a shift in investment
focus from facilities (where each dollar spent receives a 25%
uplift for SRB) to production drilling (where there is no uplift
for SRB but each dollar spent receives circa 70% relief against SRB
and petroleum income tax). $70.3 million of cash taxation relates
to SRB payments (1H 2013: $26.0 million) and $41.0 million to
income tax (1H 2013: $25.0 million). Combining the timing
characteristics of the Group's Thai taxation payments, and the
impact of the Bualuang outage, operating cash flow net of taxation
fell to $3.8 million (1H 2013: $96.0 million).
Looking to the future, as Salamander begins the construction of
a third Bualuang platform, the focus of activity will return to
facilities based investment.
Investing cash flow
Having rescaled and refocused the Group's capital spending
programme, total capital expenditures declined by 28% to $130.1
million (1H 2013: $181.1 million) whilst the weight of spend on
production and development activities expanded to 74% (1H 2013:
37%).
Within these figures, Bualuang activity accounted for 81% of
production and development capital expenditures. The balance was
spent on the Kerendan gas development in Indonesia. Exploration and
appraisal capital expenditures were almost exclusively spent within
Indonesia, where the Group announced the 350 bcf West Kerendan
discovery and spudded the re-drill of the North Kendang exploration
prospect. Costs at North Kendang are largely covered under the
Group's insurance policies.
Across the balance of the year, activity will be
development-based and focused at Bualuang and Kerendan. This will
include costs associated with a two month extension to the Atwood
Mako rig contract, which is being used to regain ground lost
following Bualuang's unplanned outage. The contract extension lifts
2014 capital expenditures guidance to $300 million (from $275
million).
Alongside its budgeted programmes of capital investment, in 1H
2013 Salamander sold a 30% interest in the Bangkanai PSC to Saka
Energy for net $27 million. Although no similar cash inflows
occurred in 2014, on 21(st) July 2014 Salamander announced the sale
of 40% of the B8/38 and G4/50 licences to SONA for a cash
consideration of $280 million. This transaction is expected to
close during 4Q 2014 assuming receipt of various regulatory and
shareholder approvals.
Financing cash flow
Having repaid $50 million of higher-cost short-term debt at the
end of 2013, the Group considered it prudent to redraw net $30
million against its banking facilities whilst it managed the
financial impact of Bualuang's unplanned shutdown. As a
consequence, total gross debt at 30 June 2014 rose to $555 million,
which in turn lifted interest payments to $16.8 million (1H 2013:
$11.3 million). Post 30 June 2014, Salamander has made significant
inroads to repaying this additional drawn debt.
Net of these movements, financing activities in 1H 2014
generated a net cash inflow of $12.2 million (1H 2013: $10.8
million net inflow).
The net impact of the Group's operational, investing and
financial activity led to an $112.9 million cash outflow during the
period (1H 2013: $46.0 million cash outflow).
Financial outlook
Completion of the sale of 40% of B8/38 and G4/50 to SONA will
fundamentally rescale the Group's balance sheet and leave
Salamander in a strong position to advance to cash flow its highly
tangible portfolio of development opportunities (Bualuang Charlie
and continued development of the Kerendan field) and to begin the
process of broadening its base of development opportunities.
Ahead of this, remedial action taken at the time of Bualuang's
unplanned outage ensures that Group average production for the year
remains on target for the narrowed 2014 guidance range of 13,000 to
15,000 boepd. In parallel, the recently announced delivery of first
oil into the Suksan Salamander FSO leaves Salamander on track from
September 2014 to lower Bualuang's operating costs by up to $25
million per year.
Elsewhere, progress on the Kerendan gas development continues at
pace and Salamander is on course to begin diversifying its output
away from Bualuang. Kerendan gas price negotiations are at an
advanced stage; the aim being to reset pricing within the base Gas
Sales Agreement ahead of the commercialisation of Kerendan's
significant and growing contingent resource base.
Risk management
The Group's Executive Directors constantly monitor the Group's
risk exposures and report to the Audit Committee on a six monthly
basis, with more frequent updates on particular risks as required.
The Audit Committee provides oversight on risks whilst ultimate
authority remains with the Group's Board.
The principal risks for the Group remain as previously detailed
on pages 14 to 15 of the 2013 Annual Report and Accounts and can be
summarised as:
-- Strategic risks: Bualuang's importance to production and cash
flow, the intensified political and fiscal risks that could result
through the Group's focus on a single geographic region
-- Operational risks: the need for effective management of
relations with host governments, regulators and NOCs, the potential
for un-budgeted cost over-runs, the risk of value erosion due to
project delays
-- HSE risks: the potential for catastrophic loss following an
operational incident, the potential consequences of mismanagement
of community stakeholder relations, the risk of loss through poor
third party HSE standards
-- Financial risks: the risk that a restriction of available
capital could constrain the business, the potential for commodity
price volatility to disrupt planning and/or project execution
-- Governance and compliance: an exposure to business risks that
are governed by the Corruption & Bribery Act, an exposure to
risks that might result from employee misconduct, the risk of loss
due to the occurrence of fraud
Related Party Transactions
There have been no material related party transactions during
the period.
Dr Jonathan Copus
Chief Financial Officer
27 August 2014
Responsibility statement
We confirm that to the best of our knowledge:
a. the condensed set of financial statements has been prepared
in accordance with IAS 34 "Interim Financial Reporting";
b. the interim management report includes a fair review of the
information required by Disclosure and Transparency Rules ("DTR")
4.2.7R (indication of important events during the first six months
and description of principal risks and uncertainties for the
remaining six months of the year); and
c. the interim management report includes a fair review of the
information required by DTR 4.2.8R (disclosure of related party
transactions and changes therein).
By order of the Board
27 August 2014
Independent review report to Salamander Energy PLC
Six months ended 30 June 2014
We have been engaged by the Company to review the condensed set
of financial statements in the half-yearly financial report for the
six months ended 30 June 2014 which comprises the condensed
consolidated statement of comprehensive income, the condensed
consolidated balance sheet, the condensed consolidated statement of
changes in equity, the condensed consolidated cash flow statement
and related notes 1 to 20. We have read the other information
contained in the half-yearly financial report and considered
whether it contains any apparent misstatements or material
inconsistencies with the information in the condensed set of
financial statements.
This report is made solely to the Company in accordance with
International Standard on Review Engagements (UK and Ireland) 2410
"Review of Interim Financial Information Performed by the
Independent Auditor of the Entity" issued by the Auditing Practices
Board. Our work has been undertaken so that we might state to the
Company those matters we are required to state to it in an
independent review report and for no other purpose. To the fullest
extent permitted by law, we do not accept or assume responsibility
to anyone other than the Company, for our review work, for this
report, or for the conclusions we have formed.
Directors' responsibilities
The half-yearly financial report is the responsibility of, and
has been approved by, the directors. The directors are responsible
for preparing the half-yearly financial report in accordance with
the Disclosure and Transparency Rules of the United Kingdom's
Financial Conduct Authority.
As disclosed in note 3, the annual financial statements of the
Group are prepared in accordance with IFRSs as adopted by the
European Union. The condensed set of financial statements included
in this half-yearly financial report has been prepared in
accordance with International Accounting Standard 34, "Interim
Financial Reporting," as adopted by the European Union.
Our responsibility
Our responsibility is to express to the Company a conclusion on
the condensed set of financial statements in the half-yearly
financial report based on our review.
Scope of review
We conducted our review in accordance with International
Standard on Review Engagements (UK and Ireland) 2410 "Review of
Interim Financial Information Performed by the Independent Auditor
of the Entity" issued by the Auditing Practices Board for use in
the United Kingdom. A review of interim financial information
consists of making inquiries, primarily of persons responsible for
financial and accounting matters, and applying analytical and other
review procedures. A review is substantially less in scope than an
audit conducted in accordance with International Standards on
Auditing (UK and Ireland) and consequently does not enable us to
obtain assurance that we would become aware of all significant
matters that might be identified in an audit. Accordingly, we do
not express an audit opinion.
Conclusion
Based on our review, nothing has come to our attention that
causes us to believe that the condensed set of financial statements
in the half-yearly financial report for the six months ended 30
June 2014 is not prepared, in all material respects, in accordance
with International Accounting Standard 34 as adopted by the
European Union and the Disclosure and Transparency Rules of the
United Kingdom's Financial Conduct Authority.
Deloitte LLP
Chartered Accountants and Statutory Auditor
London, United Kingdom
27 August 2014
Condensed consolidated statement of comprehensive income
Six months ended 30 June 2014
Six months Six months Year ended
ended 30 ended 30 31 December
June June 2013
2014 2013 Restated(1)
Unaudited Unaudited
Restated(1)
Notes $'000s $'000s $'000s
---------------------------------- ------ ----------- ------------- -------------
CONTINUING OPERATIONS
Revenue 6 177,781 196,989 456,196
---------------------------------- ------ ----------- ------------- -------------
Cost of sales:
Operating costs (39,689) (37,701) (83,904)
Royalty payable (15,460) (16,797) (41,141)
Amortisation of oil and gas
properties (40,813) (52,972) (111,987)
Movement in inventories of
oil 6,602 28,949 13,007
================================== ====== =========== ============= =============
Total cost of sales (89,360) (78,521) (224,025)
---------------------------------- ------ ----------- ------------- -------------
Gross profit 88,421 118,468 232,171
Exploration expenses:
Pre-licence exploration expenses (3,973) (2,569) (7,041)
Exploration costs written off 11 (2,729) (108,650) (162,253)
================================== ====== =========== ============= =============
Total exploration expenses (6,702) (111,219) (169,294)
Share of profit of investments
accounted for using the equity
method 19 7,856 7,494 11,522
Loss on disposal of assets - (871) (871)
Administration expenses (4,996) (2,327) (7,290)
---------------------------------- ------ ----------- ------------- -------------
Operating profit 84,579 11,545 66,238
Interest revenue 81 58 103
Finance costs 7 (16,917) (10,383) (22,780)
Other financial (losses)/gains 8 (1,332) 9,077 (3,981)
---------------------------------- ------ ----------- ------------- -------------
Profit before tax 66,411 10,297 39,580
Taxation:
Current tax (49,189) (48,370) (138,868)
Deferred tax (45,107) (48,046) (20,487)
================================== ====== =========== ============= =============
Total Taxation 9 (94,296) (96,416) (159,355)
---------------------------------- ------ ----------- ------------- -------------
Loss after taxation (27,885) (86,119) (119,775)
Loss on cash flow hedges(2) (2,135) (1,357) (4,346)
---------------------------------- ------ ----------- ------------- -------------
Total comprehensive loss for
the period (30,020) (87,476) (124,121)
---------------------------------- ------ ----------- ------------- -------------
Notes $'s $'s $'s
---------------------------------- ------ ----------- ------------- -------------
Loss per ordinary share
Basic and diluted 10 (0.11) (0.33) (0.46)
---------------------------------- ------ ----------- ------------- -------------
1 Prior period comparatives have been restated following the
adoption of IFRS 11 (see note 19)
2 This loss may be subsequently recycled to the income
statement.
Condensed consolidated statement of change in equity
Six months ended 30 June 2014
Retained
Share Capital Share Premium Other Reserves Loss Total
$'000s $'000s $'000s $'000s $'000s
---------------------- -------------- -------------- --------------- ---------- ---------
1 January 2013 46,632 563,703 271,719 (361,746) 520,308
Ordinary shares
issued 194 - - - 194
Share-based payments - - 3,374 - 3,374
Comprehensive
loss for the
period - - (1,357) (86,119) (87,476)
30 June 2013
(unaudited) 46,826 563,703 273,736 (447,865) 436,400
Ordinary shares
issued 16 - - - 16
Share-based payments - - 2,642 - 2,642
Comprehensive
loss for the
period - - (2,989) (33,656) (36,645)
31 December 2013 46,842 563,703 273,389 (481,521) 402,413
Ordinary shares
issued 87 - - - 87
Share-based payments - - 2,538 - 2,538
Comprehensive
loss for the
period - - (2,135) (27,885) (30,020)
30 June 2014
(unaudited) 46,929 563,703 273,792 (509,406) 375,018
---------------------- -------------- -------------- --------------- ---------- ---------
Other reserves
Other reserves comprise:
Six months Six months Year ended
ended ended 31 December
30 June 30 June 2013
2014 2013
Unaudited Unaudited
$'000s $'000s $'000s
--------------------------------- ------------- ------------- -------------
Share-based payment reserve 27,271 22,091 24,733
Convertible bonds (see Note 14) 11,271 11,271 11,271
Hedge reserve (6,481) (1,357) (4,346)
Merger reserve 241,731 241,731 241,731
Total other reserves 273,792 273,736 273,389
--------------------------------- ------------- ------------- -------------
Condensed consolidated balance sheet
At 30 June 2014
30 June
30 June 2013 31 December
2014 Unaudited 2013
Unaudited Restated(1) Restated(1)
Notes $'000s $'000s $'000s
--------------------------------------- ------ ------------ ------------- -------------
Assets
Non-current assets
Intangible exploration and evaluation
assets 11 325,979 293,204 293,147
Property, plant and equipment 12 725,104 602,951 648,012
Other receivables: -
Restricted bank deposits 19,439 2,331 18,000
Other 37,772 32,700 30,493
Investments accounted for using
the equity method 19 36,664 27,797 29,922
Total non-current assets 1,144,958 958,983 1,019,574
--------------------------------------- ------ ------------ ------------- -------------
Current assets
Inventories 51,228 62,473 42,370
Trade and other receivables 25,033 53,938 46,738
Restricted bank deposits 843 3,768 2,279
Cash and cash equivalents 133,773 162,992 244,769
Assets classified as held for - 18,000 -
sale
--------------------------------------- ------ ------------ ------------- -------------
Total current assets 210,877 301,171 336,156
--------------------------------------- ------ ------------ ------------- -------------
Total assets 1,355,835 1,260,154 1,355,730
--------------------------------------- ------ ------------ ------------- -------------
Liabilities
Non-current liabilities
Bank borrowings 13 223,632 254,017 259,593
Convertible bonds 14 - 95,093 96,495
Bonds payable 15 145,596 - 145,970
Provisions 52,614 26,885 47,698
Deferred tax liability 9 215,559 198,011 170,452
--------------------------------------- ------ ------------ ------------- -------------
Total non-current liabilities 637,401 574,006 720,208
--------------------------------------- ------ ------------ ------------- -------------
Current liabilities
Liabilities associated with assets - 3,034 -
held for sale
Trade and other payables 95,857 126,011 87,727
Bank borrowings due within one
year 13 80,226 61,995 7,834
Convertible bonds 14 91,897 - -
Current tax liability 75,436 54,708 137,548
Provisions - 4,000 -
--------------------------------------- ------ ------------ ------------- -------------
Total current liabilities 343,416 249,748 233,109
--------------------------------------- ------ ------------ ------------- -------------
Total liabilities 980,817 823,754 953,317
--------------------------------------- ------ ------------ ------------- -------------
Net assets 375,018 436,400 402,413
--------------------------------------- ------ ------------ ------------- -------------
Equity
Share capital 18 46,929 46,826 46,842
Share premium 563,703 563,703 563,703
Other reserves 273,792 273,736 273,389
Retained loss (509,406) (447,865) (481,521)
--------------------------------------- ------ ------------ ------------- -------------
Total equity 375,018 436,400 402,413
--------------------------------------- ------ ------------ ------------- -------------
1 Prior period comparatives have been restated following the
adoption of IFRS 11 (see note 19)
The interim financial information was approved by the Board of
Directors on 27 August 2014.
Condensed consolidated cash flow statement
Six months ended 30 June 2014
Six months
Six months ended
ended 30 June Year ended
30 June 2013 31 December
2014 Unaudited 2013
Unaudited Restated(1) Restated(1)
$'000s $'000s $'000s
------------------------------------------- ----------- ------------- -------------
Cash flow from operating activities
Profit before tax 66,411 10,297 39,580
Adjustments for:
Amortisation, depreciation and impairment
of PPE 41,053 53,238 112,764
Exploration write-offs 2,729 108,650 162,253
Loss on disposal of assets - 871 871
Interest revenue (81) (58) (103)
Finance costs 16,917 10,383 22,780
Other financial losses/(gains) 1,332 (9,077) 3,981
Share of profit of investments accounted
for using the equity method (7,856) (7,494) (11,522)
Share-based payment 2,179 2,175 4,463
------------------------------------------- ----------- ------------- -------------
Operating cash flow prior to movement
in working capital 122,684 168,985 335,067
Increase in oil inventories (6,496) (28,949) (13,007)
Decrease in trade and other receivables 5,845 20,366 4,171
(Decrease)/increase in trade and
other payables (6,847) (13,380) 18,127
------------------------------------------- ----------- ------------- -------------
Cash generated from operations 115,186 147,022 344,358
Payment of tax (111,338) (50,974) (56,718)
------------------------------------------- ----------- ------------- -------------
Net cash from operating activities 3,848 96,048 287,640
------------------------------------------- ----------- ------------- -------------
Investing activities
Expenditure on intangible assets (33,946) (113,665) (170,178)
Purchase of property, plant and equipment (96,124) (67,469) (179,726)
Dividend received from investments 1,359 3,533 6,115
Increase in investments (272) - (679)
Proceeds from disposal of assets - 27,000 27,000
Movement in other receivables (3) (2,301) (18,650)
Interest received 81 59 103
------------------------------------------- ----------- ------------- -------------
Net cash used in investing activities (128,905) (152,843) (336,015)
------------------------------------------- ----------- ------------- -------------
Financing activities
Interest paid (16,787) (11,282) (19,283)
Other financial receipts and payments (7,652) 736 739
Cash flows in respect of long-term
bank borrowings:
Repayment of borrowings facilities (6,242) - (50,000)
Drawdown of borrowings facilities 42,758 21,134 20,557
Cash flow in respect of shares issued:
Gross proceeds 87 194 209
Cash flow in respect of bonds issued:
Proceeds from issue of bonds payable - - 150,000
Fees from issue of bonds payable - - (4,952)
------------------------------------------- ----------- ------------- -------------
Net cash from financing activities 12,164 10,782 97,270
------------------------------------------- ----------- ------------- -------------
Net (decrease)/ increase in cash
and cash equivalents (112,893) (46,013) 48,895
Cash and cash equivalents at the
beginning of the year 244,769 207,342 207,342
Effect of foreign exchange rate changes 1,897 1,663 (11,468)
------------------------------------------- ----------- ------------- -------------
Cash and cash equivalents at the
end of the year 133,773 162,992 244,769
------------------------------------------- ----------- ------------- -------------
1 Prior period comparatives have been restated following the
adoption of IFRS 11 (see note 19)
Notes to consolidated financial information
Six months ended 30 June 2014
1. General Information
The information for the year ended 31 December 2013 does not
constitute statutory accounts as defined in section 434 of the
Companies Act 2006. A copy of the statutory accounts for that year
has been delivered to the Registrar of Companies. The auditor's
report on those accounts was not qualified, did not draw attention
to any matters by way of emphasis and did not contain statements
under section 498(2) or (3) of the Companies Act 2006.
2. Going Concern
The Group has significant expenditure commitments on its
exploration and development portfolio within the next 12 months. As
highlighted in notes 13, 14 and 15, the Group intends to meet these
investment requirements through a mixture of an up to $350 million
reserves based lending facility, bond financing and free cash
flow.
After making enquiries, the Directors have a reasonable
expectation that the Company and the Group have adequate resources
to continue in operational existence for a period of at least 12
months from the date of this report. Accordingly, the Company
continues to adopt the going concern basis in the preparation of
the condensed consolidated interim financial statements.
3. Accounting Policies
The annual financial statements of Salamander Energy PLC are
prepared in accordance with International Financial Reporting
Standards (IFRSs) as adopted by the European Union.
4. Basis of Preparation
The condensed set of financial statements included in this
interim report has been prepared in accordance with International
Accounting Standard 34 "Interim Financial Reporting" as adopted by
the European Union.
Except for the adoption of IFRS 11 on 1 January 2014 (see
below), the same accounting policies, presentation and methods of
computation are followed in the condensed set of financial
statements as applied in the Group's latest annual audited
financial statements. A number of other new standards, amendments
to existing standards and interpretations were applicable from 1
January 2014. The adoption of these amendments did not have a
material impact on the Group's condensed financial statements for
the period ended 30 June 2014.
Under IFRS 11 investments in joint arrangements are classified
as either joint operations or joint ventures depending on the
contractual rights and obligations of each investor. The Group has
assessed the nature of its joint arrangement and determined it to
be a joint venture. Joint ventures are accounted for using the
equity method. Under the equity method of accounting, interests in
joint ventures are initially recognised at cost and adjusted
thereafter to recognise the Group's share of the post-acquisition
profits or losses and movements in other comprehensive income. When
the Group's share of losses in a joint venture equals or exceeds
its interests in the joint venture, the group does not recognise
further losses, unless it has incurred obligations or made payments
on
behalf of the joint ventures. See note 19 for further
details.
5. Segmental Analysis
The Group's reportable and geographical segments are Thailand,
Indonesia and Other. Other includes Malaysia and corporate centre
in the UK and Singapore.
Segment Revenues and Results
The following is an analysis of the Group's revenue and assets
by reportable segment:
Six months ended 30 June 2014
Thailand Indonesia Other Total
$'000s $'000s $'000s $'000s
Revenue (external) 181,046 - (3,265) 177,781
Operating profit/(loss) 97,835 (2,308) (10,948) 84,579
------------------------------ ------------- ------------- --------------- ------------
Interest revenue - - 81 81
Finance cost - - (16,917) (16,917)
Other financial losses - - (1,332) (1,332)
Profit/(loss) before tax 97,835 (2,308) (29,116) 66,411
Tax - - (94,296) (94,296)
Profit/(loss) for the period 97,835 (2,308) (123,412) (27,885)
Total assets 779,264 458,407 118,164 1,355,835
------------------------------ ------------- ------------- --------------- ------------
Six months ended 30 June 2013 (Restated
- note 19)
Thailand Indonesia Other Total
$'000s $'000s $'000s $'000s
Revenue (external) 192,310 7,046 (2,367) 196,989
Operating profit/(loss) 130,006 (97,134) (21,327) 11,545
-------------------------- ---------- ---------- ---------- ------------
Interest revenue - - 58 58
Finance cost - - (10,383) (10,383)
Other financial gains - - 9,077 9,077
Profit/(loss) before tax 130,006 (97,134) (22,575) 10,297
Tax (96,416) (96,416)
Profit/(loss) for the
period 130,006 (97,134) (118,991) (86,119)
Total assets 718,444 419,878 121,832 1,260,154
-------------------------- ---------- ---------- ---------- ------------
Year ended 31 December 2013 (Restated
- note 19)
Thailand Indonesia Other Total
$'000s $'000s $'000s $'000s
Revenue (external) 453,578 8,063 (5,445) 456,196
Operating profit/(loss) 201,450 (110,415) (24,797) 66,238
-------------------------- ------------ ----------- ------------- -----------
Interest revenue - - 103 103
Finance cost - - (22,780) (22,780)
Other financial losses - - (3,981) (3,981)
Profit/(loss) before tax 201,450 (110,415) (51,455) 39,580
Tax - - (159,355) (159,355)
Profit/(loss) for the
period 201,450 (110,415) (210,810) (119,775)
Total assets 698,546 425,641 231,543 1,355,730
-------------------------- ------------ ----------- ------------- -----------
Substantially all the tax charge in all periods presented arises
in Thailand.
6. Revenue
Revenue, excluding interest revenue of $81,000 (1H 2013:
$58,000, FY 2013: $103,000), comprises:
Six Months Six Months Year ended
ended 30 ended 30 31 December
June 2014 June 2013 2013
(Restated (Restated
- note 19) - note 19)
$'000s $'000s $'000s
Sales of Oil 181,046 196,198 458,336
Sales of Gas - 3,157 3,305
Realised settlement losses
on hedging (3,265) (2,366) (5,445)
Total revenue (excluding interest
revenue) 177,781 196,989 456,196
----------------------------------- ------------- ------------- -------------
7. Finance Costs
Six Months Six Months Year ended
ended 30 ended 30 31 December
June 2014 June 2013 2013
(Restated (Restated
- note 19) - note 19)
$'000s $'000s $'000s
------------------------------- ------------- ------------- -------------
Long term borrowings:
Amortisation of capitalised
arrangement fees 2,098 1,590 3,826
Interest expense 15,740 9,101 18,966
Unwinding of discount: - -
Convertible bonds 1,159 1,147 2,317
Provision for decommissioning 501 286 624
Less interest capitalised (2,581) (1,741) (2,953)
Total finance costs 16,917 10,383 22,780
------------------------------- ------------- ------------- -------------
8. Other Financial Gains and Losses
Six Months Six Months Year ended
ended 30 ended 30 31 December
June 2014 June 2013 2013
(Restated (Restated
- note 19) - note 19)
$'000s $'000s $'000s
Gain relating to oil derivatives - 7,130 7,130
(Loss)/profit on investments (99) 68 (162)
Currency exchange gain/(loss) 1,604 1,879 (10,949)
Bad debt written off (2,837) - -
Total other financial (losses)/gain (1,332) 9,077 (3,981)
------------------------------------- ----------- ------------- --------------
Profit relating to hedges is a result of hedges contracted by
the Group. Refer to note 17 for further details.
9. Taxation
Taxation charge comprises:
Six Months Six Months Year ended
ended 30 ended 30 31 December
June 2014 June 2013 2013
(Restated (Restated
- note 19) - note 19)
$'000s $'000s $'000s
------------------------------ ------------ ------------- -------------
Current taxation
Special remuneratory benefit 32,193 28,550 91,128
Income tax 16,996 19,820 47,740
Total current tax 49,189 48,370 138,868
Deferred taxation
Special remuneratory benefit 28,648 27,796 (1,883)
Income tax 16,459 20,250 22,370
Total deferred tax 45,107 48,046 20,487
Total tax charge 94,296 96,416 159,355
------------------------------ ------------ ------------- -------------
Special remuneratory benefit (SRB) is a tax that arises on one
of the Group's assets, Bualuang in Thailand, at rates that vary
from zero to 75% of annual petroleum profit depending on the level
of annual revenue per cumulative metre drilled. The current rate
for special remuneratory benefit for 1H 2014 was 52% (1H 2013: 47%,
FY 2013: 52%). Petroleum profit for the purpose of special
remuneratory benefit is calculated as revenue less a number of
deductions including operating costs, royalty, capital
expenditures, special reduction (an uplift of certain capital
expenditures) and losses brought forward.
Reconciliation of SRB charge to profit before taxation
The taxation charge for SRB for the year can be reconciled to
the profit before tax per the Statement of Comprehensive Income as
follows:
Six Months Six Months Year ended
ended 30 ended 30 31 December
June 2014 June 2013 2013
(Restated (Restated
- note 19) - note 19)
$'000s $'000s $'000s
Profit before taxation 66,411 10,297 39,580
Less losses before taxation
for activities outside of
Thailand 31,424 119,709 161,870
Profit before taxation for
activities in Thailand 97,835 130,006 201,450
Applicable rate of SRB 52% 47% 52%
Tax at the applicable rate
of SRB 50,874 61,103 104,754
Special reduction (4,116) (2,191) (6,141)
Change in SRB average deferred
tax rate - 4,446 (29,386)
Other 14,083 (7,012) 21,901
Total SRB charge 60,841 56,346 91,128
Income tax impact (after deduction
at the applicable rate of
income tax) 30,421 28,173 45,564
------------------------------------ ----------- ------------- -------------
The applicable rate for SRB is the rate applied for the
financial period.
There were no unrelieved losses in respect of SRB for period
ended 30 June 2014 (1H 2013: $nil, FY 2013: $nil).
SRB is fully deductible for corporate tax purposes in Thailand
and accordingly the figure of $30,421,000 in the income tax
effective rate reconciliation below represents the incremental
impact of SRB, current and deferred, on the overall tax charge,
after taking account of the tax relief thereon.
Reconciliation of total tax charge to profit before taxation
The tax charge for the year can be reconciled to the profit
before tax per the Statement of Comprehensive Income as
follows:
Six Months Six Months Year ended
ended 30 ended 30 31 December
June 2014 June 2013 2013
(Restated (Restated
- note 19) - note 19)
$'000s $'000s $'000s
-------------------------------- ------------- ------------- -------------
Profit before taxation 66,411 10,297 39,580
Applicable rate 50% 50% 50%
-------------------------------- ------------- ------------- -------------
Tax at the applicable rate of
tax 33,206 5,149 19,790
Tax effect of:
UK losses not recognised 14,021 7,770 12,660
Utilisation of brought forward
exploration expenses / losses
on which a deferred tax asset
has not been recognised - - (6,971)
SRB 30,421 28,173 45,564
Tax effect of investment in
jointly controlled entities (3,928) (3,747) (5,761)
Other 18,752 3,721 39,437
Items which are not deductible
for tax:
Exploration expenses 1,824 55,610 51,608
Disposal of assets - - 3,593
Different foreign tax rates - (260) (565)
Total tax charge 94,296 96,416 159,355
-------------------------------- ------------- ------------- -------------
The Group's operations are conducted primarily outside the
United Kingdom and Thailand predominantly. Accordingly the
applicable tax rate used above is the Thailand statutory rate of
tax (excluding SRB).
Deferred tax
Deferred tax liabilities included in the Balance Sheet were as
follows:
31 December
30 June 2013 2013
30 June (Restated (Restated
2014 - note 19) - note 19)
$'000s $'000s $'000s
------------------------------ -------- ------------- -------------
Income tax 114,557 94,095 98,098
SRB 101,002 103,916 72,354
Net deferred tax liabilities 215,559 198,011 170,452
------------------------------ -------- ------------- -------------
There are no significant unrecognised temporary differences
associated with undistributed profits of subsidiaries and joint
ventures.
The net deferred tax liability of $215,559,000 materially arose
as a result of accelerated tax depreciation.
10. Earnings/(loss)Per Ordinary Share
The calculation of the basic and diluted profit/(loss) per share
is based on the following data:
Units Six months Six months Year ended
to 30 June to 30 June 31 December
2014 2013 2013
Loss for the purpose of basic
earnings per share being the
net profit/(loss) attributable
to equity holders of the parent $'000s (27,885) (86,119) (119,775)
Basis weighted average number
of shares $'000s 258,410 257,360 257,805
Earnings/(loss) per ordinary
share: basic and diluted $'s (0.11) (0.33) (0.46)
---------------------------------- -------- -------------- -------------- -------------
As there is a loss for the period ended 30 June 2014, 30 June
2013 and 31 December 2013, there is no difference between the basic
and diluted earnings per share.
11. Intangible Exploration and Evaluation Assets
31 December
30 June 2013 2013
30 June (Restated (Restated
2014 - note 19) - note 19)
$'000s $'000s $'000s
---------------------------------- ------------- ------------- -------------
At 1 January 293,147 287,348 287,348
Additions for the period 35,761 119,123 180,975
Transfers to property, plant
and equipment (200) - (8,306)
Disposals for the period - (4,617) (4,617)
Costs written off for the period (2,729) (108,650) (162,253)
Net book amount at end of period 325,979 293,204 293,147
---------------------------------- ------------- ------------- -------------
The amounts shown above for intangible exploration and
evaluation assets principally represent the Group's current
exploration projects in Indonesia ($281,028,000) and Thailand
($39,262,000).
12. Property, Plant and Equipment
Oil and gas properties Other fixed assets Total
net
book
amount
Cost Amort'n Total Cost Dep'n Total
$'000s $'000s $'000s $'000s $'000s $'000s
1 January 2013 1,137,025 (556,126) 580,899 5,103 (2,356) 2,747 583,646
Additions for the
period 95,627 - 95,627 167 - 167 95,794
Disposals for the
period (23,254) - (23,254) - - - (23,254)
Charge for the period - (52,969) (52,969) - (266) (266) (53,235)
--------------------------- ---------- ---------- --------- ------- -------- ------- ---------
30 June 2013 (restated
- note 19) 1,209,398 (609,095) 600,303 5,270 (2,622) 2,648 602,951
Additions for the
period 96,002 - 96,002 282 - 282 96,284
Transfers from intangible
exploration and
evaluation assets 8,306 - 8,306 - - - 8,306
Amortisation and
depreciation - (59,018) (59,018) - (511) (511) (59,529)
31 December 2013
(restated - note
19) 1,313,706 (668,113) 645,593 5,552 (3,133) 2,419 648,012
Additions for the
period 117,805 - 117,805 140 - 140 117,945
Transfers from intangible
exploration and
evaluation assets 200 - 200 - - - 200
Charge for the period - (40,812) (40,812) - (241) (241) (41,053)
30 June 2014 1,431,711 (708,925) 722,786 5,692 (3,374) 2,318 725,104
--------------------------- ---------- ---------- --------- ------- -------- ------- ---------
13. Bank Borrowings
30 June 30 June 31 December
2014 2013 2013
$'000s $'000s $'000s
---------------------------------- -------------- --------- ------------
Principal repayable on maturity 311,013 324,993 274,993
Less deferred fees (7,155) (8,981) (7,566)
---------------------------------- -------------- --------- ------------
Total unamortised borrowings 303,858 316,012 267,427
Less amounts due within one year (80,226) (61,995) (7,834)
---------------------------------- -------------- --------- ------------
Total long term borrowings 223,632 254,017 259,593
---------------------------------- -------------- --------- ------------
The Group's borrowings comprised a $350 million senior reserves
based lending facility secured against certain of the Group's
development and producing assets in Thailand and Indonesia for a
tenure of seven years commencing in December 2012.
14. Convertible Bonds
The net proceeds received from the issue of the convertible
bonds have been split between the financial liability element
(estimated at the time of issue using the prevailing market
interest rate for similar non-convertible debt) and an equity
component, representing the fair value of the embedded option to
convert the financial liability into equity of the Company. The
movement in the liability component during the period was as
follows:
30 June 30 June 31 December
2014 2013 2013
$'000s $'000s $'000s
Liability component at start of period 97,745 94,941 94,941
Coupon interest charged 2,500 2,500 5,000
Unwinding of discount 1,159 1,159 2,317
Interest paid (2,500) (2,500) (5,000)
Amortisation of deferred fees 243 243 487
Redemption (6,000) - -
Liability component at end of period 93,147 96,343 97,745
Reported in:
Non-current liabilities - 95,093 96,495
Current liabilities - principal 91,897 - -
Current liabilities - interest 1,250 1,250 1,250
---------------------------------------- ------------- ------------- ------------
Total liability component 93,147 96,343 97,745
---------------------------------------- ------------- ------------- ------------
If the bonds have not been converted, they will be redeemed on
30 March 2015 at par. Interest of 5% will be paid annually up until
settlement date.
The total convertible bond interest expense for the period is
calculated by applying an effective interest rate of 8% to the
liability component for the period since the bonds were issued. The
liability component is measured at amortised cost. The difference
between the carrying amount of the liability component at the date
of issue and the amount reported in the Balance Sheet at 30 June
2014 represents the effective interest rate less interest paid to
that date.
The fair value of the convertible bond at the Balance Sheet date
is not materially different from the book value.
15. Bonds Payable
The unsecured callable bonds were issued in December 2013 at an
issue price of $150 million. The bonds have a term of 6 years and 1
month and will be repaid in full at maturity. The bonds carry a
coupon of 9.75% and were issued at par.
30 June 30 June 31 December
2014 2013 2013
$'000s $'000s $'000s
---------------------------------------- --------- -------- ------------
Liability component at start of period 145,970 - -
Proceeds of issue of bonds payable - - 150,000
Coupon interest charged 7,366 - 922
Interest paid (8,288) - -
Less fees relating to bond issue - - (4,952)
Amortisation of deferred fees 548 - -
Total liability component at end
of period 145,596 - 145,970
---------------------------------------- --------- -------- ------------
16. Net Debt
30 June 30 June 31 December
2014 2013 2013
$'000s $'000s $'000s
Amounts due on maturity:
Bank borrowings (see note 13) 311,013 324,993 274,993
Convertible bonds (see note 14) 94,000 100,000 100,000
Bonds payable (see note 15) 150,000 - 150,000
Total gross debt 555,013 424,993 524,993
Less restricted bank deposits (20,282) (6,099) (20,279)
Less cash and cash equivalents (133,773) (162,992) (244,769)
Total net debt 400,958 255,902 259,945
-------------------------------------- ---------- ---------- ------------
The average maturity of gross debt at 30 June 2014 was 3.9 years
(30 June 2013: 3.3 years).
17. Fair Value of Financial Instruments
Fair value of financial instruments carried at amortised
cost
The directors consider that the carrying amounts of financial
assets and liabilities recorded at amortised cost in the interim
condensed consolidated financial statements approximate their fair
values.
The fair values of financial assets and liabilities are
determined as follows:
-- The fair values of financial assets and financial liabilities
with standard terms and conditions and traded on active liquid
markets are determined with reference to quoted market prices
(includes listed redeemable notes, bills of exchange, debentures
and perpetual notes).
-- The fair values of other financial assets and financial
liabilities (excluding derivative instruments) are determined in
accordance with generally accepted pricing models based on
discounted cash flow analysis using prices from observable current
market transactions and dealer quotes for similar instruments.
-- The fair values of derivative instruments are calculated
using quoted prices. Where such prices are not available, a
discounted cash flow analysis is performed using the applicable
yield curve for the duration of the instruments for non-optional
derivatives, and option pricing models for optional derivatives.
Foreign currency forward contracts are measured using quoted
forward exchange rates and yield curves derived from quoted
interest rates matching maturities of the contracts. Interest rate
swaps are measured at the present value of future cash flows
estimated and discounted based on the applicable yield curves
derived from quoted interest rates.
The following table provides an analysis of financial
instruments that are measured subsequent to initial recognition at
fair value, grouped into Levels 1 to 3 based on the degree to which
the fair value is observable:
-- Level 1: quoted prices (unadjusted) in active markets for identical assets and liabilities:
-- Level 2: inputs other than quoted prices included within
Level 1 that are observable for the asset or liability, either
directly or indirectly; and
-- Level 3: unobservable inputs for the asset or liability.
30 June 30 June 31 December
2014 2013 2013
Level 2 Level 2 Level 2
-------------------------------------------- ------------- ----------- ------------
Derivative financial liabilities held
to hedge the Group's exposure on expected
future sales and interest rate movements:
Derivative financial assets 1,378 1,138 2,730
Derivative financial liabilities (5,363) - (4,581)
Total (3,985) 1,138 (1,851)
-------------------------------------------- ------------- ----------- ------------
All of the Groups' fair value financial assets and liabilities
are deemed to be Level 2. There were no transfers between Level 1
and 2 during the six months ended 30 June 2014.
18. Share Capital
Share capital as at 30 June 2014 amounted to $46,929,000 (1H
2013: $46,826,000, FY 2013: $46,842,000).
Allotted and fully paid equity share capital
30 June
2014
Ordinary
Shares
10p
Number
------------------- -------------
At 1 January 2014 258,317,599
Other share issue 521,378
At 30 June 2014 258,838,977
------------------- -------------
The Company has one class of ordinary shares, which carry no
right to fixed income.
19. Investments Accounted for Using the Equity Method
The investments represent the Group's interest in the following
jointly controlled entities, accounted for using the equity method
in compliance with IFRS 11.
Percentage
Company Holding
----------------------------- -----------
APICO LLC 27.18%
APICO (Khorat) Holdings LLC 27.18%
APICO (Khorat) Limited 27.18%
----------------------------- -----------
The investments in the jointly controlled entities have been
classified as joint ventures under IFRS 11 and therefore the equity
method of accounting has been used in the consolidated financial
statements. Prior to the adoption of IFRS 11 on 1 January 2014, the
Group's interest was proportionately consolidated.
The Group recognised its investment in the joint venture at the
beginning of the earliest period presented (1 January 2013), as the
total of the carrying amounts of the assets and liabilities
previously proportionately consolidated by the Group. This is the
deemed cost of the Group's investment in the joint venture for
applying equity accounting.
The tables below show the effect on the statement of
comprehensive income, balance sheet and the statement of cash
flows.
Impact on statement of comprehensive income:
Six Months Six Months Year ended
ended ended 31 December
30 June 30 June 2013
2014 2013
Credit/ (charge) $'000s $'000s $'000s
------------------------------------------ ----------- ----------- -------------
Revenue (17,245) (17,353) (26,024)
Operating expenses 3,917 4,001 6,663
Share of profit of investments accounted
for using the equity method 7,856 7,494 11,522
Administration expenses - - -
Interest revenue (4) (6) (8)
Finance costs 16 12 24
Other financial losses 47 231 112
Taxation 5,413 5,621 7,711
Total - - -
------------------------------------------ ----------- ----------- -------------
Impact on balance sheet:
30 June 30 June 31 December
2014 2013 2013
Increase/ (decrease) $'000s $'000s $'000s
------------------------------------------ --------- --------- ------------
Assets:
- Intangible exploration and evaluation
assets (18,602) (11,681) (18,272)
- Property, plant and equipment (14,465) (14,898) (14,765)
- Investments accounted for using
the equity method 36,664 27,797 29,922
- Deferred tax asset (1,937) (1,503) (1,718)
- Inventories (1,424) (1,521) (1,186)
- Trade and other receivables (10,236) (6,839) (4,950)
Total (10,000) (8,645) (10,969)
------------------------------------------ --------- --------- ------------
Liabilities:
- Provisions (1,308) (509) (742)
- Deferred tax liability (884) (670) (982)
- Trade and other payables (2,069) (1,902) (2,069)
- Current tax liability (5,739) (5,564) (7,176)
Total (10,000) (8,645) (10,969)
------------------------------------------ --------- --------- ------------
Impact on statement of cash flows:
Six months Six months Year ended
ended ended 31 December
30 June 30 June 2013
2014 2013
Increase/ (decrease) $'000s $'000s $'000s
------------------------------------- ----------- ----------- -------------
Net cash from operating activities 1,529 (4,308) (12,616)
Net cash from investing activities (1,545) 4,296 12,592
Net cash from financing activities 16 12 24
Net increase/(decrease) in cash and
cash equivalents - - -
------------------------------------- ----------- ----------- -------------
The table below shows the movement in investments in the jointly
controlled entities:
30 June 30 June 31 December
2014 2013 2013
$'000s $'000s $'000s
------------------------------------- -------- -------- ------------
Opening balance as start of period 29,922 23,836 23,836
Share of profit of investments 7,856 7,494 11,522
Dividends received (1,359) (3,533) (6,115)
Additions 245 - 679
Total at end of period 36,664 27,797 29,922
------------------------------------- -------- -------- ------------
20. Post Balance Sheet Events
In August this year, the Group concluded operations on the North
Kendang-2 exploration well ("NK-2") in its operated South East
Sangatta PSC. The volume of hydrocarbons was considered to be
sub-commercial and the NK-2 well was plugged and abandoned pending
a review of the Group's strategic options in this area.
On 18 July, The Group announced it had signed a Sale and
Purchase Agreement with SONA Petroleum Berhard ("SONA") to dispose
of an effective 40% working interest in the B8/38 concession
containing the Bualuang oil field and the surrounding G4/50
concession. The transaction is expected to complete in 4Q 2014
subject to shareholder and regulatory approvals.
This information is provided by RNS
The company news service from the London Stock Exchange
END
IR GMGZRZNDGDZZ
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