22nd Jun 2007 07:01
Matra Petroleum PLC22 June 2007 Matra Petroleum For immediate release: 22 June 2007 Matra Petroleum plc or the 'Company' Matra Petroleum plc announces final results for the year ended 31 December 2006 and Notice of AGM Matra Petroleum plc, the AIM-listed oil and gas exploration company focused onHungary and European Russia today announces its final results for the year ended31 December 2006. 2006 was a formation year for Matra and a year in which extensive review andstudy work was completed that allowed the following highlights to be achieved in2007: Hungary €2007 exploration programme of 2 wells and 150kms of 3D seismic is underway. •Horvatkut-1 will test an existing gas discovery. •Marcali-1 will test a seismic anomaly - known as a Direct Hydrocarbon Indicator •New 3D seismic will confirm prospects in the new "play fairways". Russia •Acquisition of Limited Liability Company Arkhangelovskoe in Orenburg in return for 55 million ordinary shares in Matra. •Extension of the Arkhangelovskoe Exploration License to incorporate a large potential structure on the southern edge of the block. •Signing of the drilling rig contract for the first well and well-site construction. Peter Hind, Matra's Managing Director commented: "We are continuing to evaluate exploration and production opportunities inHungary and European Russia with a view to expanding our asset portfolio. Apartfrom the usual technical criteria applied to new ventures, any new venture musthave the potential both to add value for shareholders and fall within financialconstraints that maintain shareholders leverage to success. 2007 is both a busy and exciting year for Matra and the current programme hasthe potential to add substantial value for shareholders." Annual Report and AccountsA full copy of the Annual Report and Accounts is being dispatched toshareholders today. A copy will be available for public inspection at thecompany's office at 120 Bridge Road, Chertsey, Surrey, KT16 8LA and on thecompany's website www.matrapetroleum.com. Annual General MeetingThe Annual General Meeting of Matra Petroleum plc will be held at 120 BridgeRoad, Chertsey, Surrey, KT16 8LA, UK at 9.00am on 31 July 2007 andsimultaneously via video link at 16.00WST at Ground floor 8, Colin Street, WestPerth, Australia. Formal notice of this meeting is being dispatched toshareholders today. For further information, please contact: Matra Petroleum www.matrapetroleum.comPeter Hind, Managing Director +44 (0) 7990 807 855 Aquila Financial Limited www.aquila-financial.comPeter Reilly +44 (0) 20 7202 2601Yvonne Fraser +44 (0) 20 7202 2609 Matra's nominated Advisor is RFC Corporate Finance Ltd -Contact: Steve Allen +61894802500 MANAGING DIRECTOR'S LETTER I am pleased to present to you the second Annual Report of Matra Petroleum plcfor the period ending 31 December 2006. In April 2006 the company was re-listed on AIM following the issue of 160million shares and 80 million warrants (exercisable at 6.5p on or before 31January 2009) to raise £8 million. This allowed the company to acquire the InkeConcession in Hungary and the company's first well Blue Topaz - 9 was drilledshortly afterwards. Although the well encountered only minor hydrocarbon shows it providedconsiderable encouragement for the potential of the concession and the resultswere combined with the reprocessing of both the 2D and 3D seismic over the keyareas of the concession. This technical work led to a much fuller understandingof the geological model and confirmed two drillable prospects within theexisting 3D area and highlighted a new "play fairway". The results of this technical review have led to the current programme inHungary for the drilling of Horvatkut- 1 and Marcali-1 and the acquisition of150 sq kms of additional 3-D seismic. 2006 was a year in which we concentrated on applying the latest technology tothe data on the Inke Concession and seeking further opportunities. We havereviewed many opportunities in Hungary and neighbouring countries and arecontinuing to evaluate opportunities in these areas as the fundamentals ofexploring and producing in Hungary remain attractive. A review of the former Soviet Union countries and a preliminary visit to Russiarevealed a number of potential opportunities within European Russia (to the Westof the Urals) and we decided to concentrate our efforts on this region andconsequently evaluated a number of opportunities there in late 2006. From my previous experience in Russia it was clear that there would be a numberof suitable opportunities there but before completing any deal we would need tofully understand the fiscal and legal framework for doing business there, inaddition to understanding the non-technical risks. Since the end of 2006 many of our efforts have come to fruition: Russia •The acquisition of Limited Liability Company Arkhangelovskoe in Orenburg. In return for 55 million ordinary shares in Matra. •The extension of the Arkhangelovskoe Exploration License to incorporate a large potential structure on the southern edge of the block. •Signing of the drilling rig contract for the first well and well-site construction. The Arkhangelovskoe License is valid until August 2009 and we are required todrill 4 exploration wells prior to that time. In the event of a discovery thelicense holder may apply for permission to immediately place the well on testproduction and at the same time apply for the discovery area to be converted toa 25 year production license. Currently we are planning to start drilling on the first location in July. Thiswell has been designated Arkhangelovskoe -12 by the local authorities and willtest the Sokolovskoe prospect. It is our intention to move the rig directly tothe next location on completion of this well. The merits of the Sokolovskoe prospect have been previously reported and SenergyLtd concluded that there is an 80% chance of making a commercial oil discoveryand a 40% chance of finding 32 million barrels or more of recoverable reserveswith the first well. Senergy's evaluation considered only one of severalpotential reservoirs to be tested by this well and the license contains severalother prospects. Arkhangelovskoe fits well with Matra's strategy of accessinglow cost, low risk but high impact exploration and success during the 4 wellprogrammes will clearly have a major impact on Matra. The Arkhangelovskoe license is close to existing production and infrastructureand existing rail terminals that are already used for oil export. Futurediscoveries on the block could therefore be rapidly placed on production,subject to local authority approvals. Orenburg is a highly prospective region for oil and gas and the localauthorities have been both co-operative and welcoming. Now that Matra has aRussian registered subsidiary we will be able to participate in licensing roundsin the region. Hungary •The 2007 exploration programme of 2 wells and 150kms of 3D seismic is underway. •Horvatkut -1 will test an existing gas discovery. •Marcali -1 will test a seismic anomaly - known as a Direct Hydrocarbon Indicator (DHI). •New 3D seismic will confirm prospects in the new "play fairways". •A 2 well rig contract was signed with Rotary drilling in early June. At the time of writing we are expecting to commence drilling on Horvatkut-1 inmid-June with Marcali-1 following on directly. Horvatkut will re-test a gasreservoir discovered in 1983. The seismic indicates a thickening section at thenew location and with the application of current drilling technology we arehopeful of avoiding the reservoir damage indicated in the original well. The result of Marcali-1 will test a specific seismic attribute that may beindicative of the presence of hydrocarbon gas. Refinement of this technique as apredictive tool will help reduce risks on future drilling. The exploration period of the concession will expire in July next year and wethen have a 12 month period in which we are able to apply for mining plots forthe areas of interest surrounding existing discoveries. Once a Mining Plot isawarded, that acreage is secured for a further 5 years. The 2006 review of theConcession gave us a much more complete understanding of the geological modelfor the area and revealed new play fairways containing a number of prospects.Before drilling these we will acquire new 3D seismic data to refine theprospects. This 3D programme is underway such that we will be have time tocomplete further exploration drilling later this year or early next year. The Inke Concession covers a huge area - some 2,297 sq kms (equivalent to 10North Sea blocks) and holds a lot of untested potential. In order that we couldaccelerate and increase our programme in Hungary we sought and secured a partnerfor the Inke Concession. The technical and fiscal attractions of exploring and producing in Hungaryremain self evident. Hungary is an established oil and gas province and taxesand royalties are amongst the lowest of producing countries. There is a readyand easily accessed market for oil and gas with European based prices andapplying the latest technologies is helping to reduce technical risks. Funding The Delek Group is a large Israeli conglomerate that has significant upstreamholdings and has been seeking to acquire upstream assets in Central and EasternEurope. We were very pleased to be able to announce a placement, at a premium tothe market price with a Delek subsidiary raising £6.075 million at the same timeas the Russian acquisition. Whilst this alone is not sufficient to cover thefull extent of the Russian programme it was considered a prudent amount bearingin mind our intentions in Hungary and our objective of providing existingshareholders with the best exposure to the forthcoming programme. Neil Hodgson and I have previously worked closely with Delek and haveestablished an excellent working relationship with them and we are well aligned.Their understanding of the upstream business, their regional contacts and theirfinancial strength will all prove invaluable. In Hungary we are very pleased that Aspect International LLC agreed to join usin the Inke Concession. Regulations in Hungary do not allow more than one entityto hold a concession and so the farm-out was achieved through a sale of sharesin Gemstone Ltd, the subsidiary holding the Inke Concession. Effectively Aspectwill pay the next $5.5 million of expenditures to earn a 60% interest. Thisamount will cover both wells and a large part of the 3D seismic and sosignificantly reduces Matra's 2007 expenditure in Hungary whilst maintaining asubstantial interest. Aspect is a substantial private company with a very large existing acreageposition in Hungary. Their local knowledge will prove valuable as we continue toexplore the block. Aspect requested that Matra continue to operate the blockduring the exploration period. The combination of these two transaction means that we are well funded and havesufficient funds to cover our current plans in both Hungary and Russia. At thesame time, through prudent portfolio management we have maintained a highexposure to success for our shareholders. The Future 2007 is both a busy and exciting year for Matra and the current programme hasthe potential to add substantial value for shareholders. We are continuing to evaluate exploration and production opportunities inHungary and European Russia with a view to expanding our asset portfolio. Apartfrom the usual technical criteria applied to new ventures, any new venture musthave the potential both to add value for shareholders and fall within financialconstraints that maintain shareholders leverage to success. In our last report I noted our intention to appoint a European based IndependentNon-executive Chairman. It is perhaps fair to say that our attentions have beendirected elsewhere over the past year but it is still our intention to do so. Gideon Tadmor of Delek agreed to join the board in June and his extensiveexperience in large scale upstream deals and financing will strengthen theboard. The Company still has a very small core staff and it is only through theircontinued concerted efforts that we have achieved so much in the past year. Mythanks therefore go to them, to our consultants and advisors and to my fellowBoard members. I thank shareholders for your ongoing support and look forward to welcoming youto the Annual General Meeting. On behalf of the Board Peter HindManaging Director CONSOLIDATED INCOME STATEMENTFOR THE PERIOD ENDED 31st DECEMBER 2006 2006 2005 Notes • • -------- ------- Revenue 19,351 - Cost of Sales - - -------- -------Gross Profit 19,351 - Administration expenses (1,491,562) (191,603) Impairment of exploration (4,006,864) -expenditure and goodwill -------- --------Operating loss 4 (5,479,075) (191,603) Finance income 7 267,942 58,419Finance costs 8 (12,157) - Loss on ordinary activities (5,223,290) (133,184)before taxation Taxation - - ======== ========Loss attributable to equity shareholders (5,223,290) (133,184) ======== ======== Loss per ordinary share 2 (0.02560) (0.00311) Diluted loss per ordinary 2 (0.02414) (0.00253)share COMPANY AND GROUP BALANCE SHEETSAS AT 31st DECEMBER 2006 Group Company 2006 2005 2006 2005 Notes • • • • -------- -------- -------- -------- Assets Non-Current assets Property,plant 9 56,230 - 22,786 - and equipment Intangible 10 375,000 - - - exploration assets Other intangible 10 2,534,469 - - - assets Investment in 11 - - 3,861,520 - subsidiary -------- -------- -------- -------- 2,965,699 - 3,884,306 - Current assets Inventories 12 150,048 - - - Trade and other 13 71,945 370,112 2,322,495 370,112 receivables Cash and cash 14 8,250,886 1,105,859 8,116,096 1,105,859 equivalents -------- -------- -------- -------- 8,472,879 1,475,971 10,438,591 1,475,971 -------- -------- --------- -------- Total Assets 11,438,578 1,475,971 14,322,897 1,475,971 ======== ======== ========= ======== Equity and liabilities Capital and reserves attributable to equity holders of the Company Ordinary shares 16 389,122 79,212 389,122 79,212 Share premium 15,877,510 1,424,480 15,877,510 1,424,480 Foreign currency (158,239) - (230,587) - translation reserve Other reserves 532,934 79,286 532,934 79,286 Retained earnings (5,356,474) (133,184) (2,367,297) (133,184) --------- -------- --------- -------- Total Equity 11,284,853 1,449,794 14,201,682 1,449,794 Current Liabilities Trade and 15 149,850 26,177 121,215 26,177 other payables Current income 3,875 - - - tax liabilities --------- -------- --------- -------- Total Liabilities 153,725 26,177 121,215 26,177 --------- -------- --------- -------- Total Equity 11,438,578 1,475,971 14,322,897 1,475,971 and Liabilities ========= ======== ========= ======== The financial statements were approved by the Board on 18th June 2007 Peter HindManaging Director COMPANY AND GROUP CASH FLOW STATEMENTSFOR THE PERIOD ENDED 31st DECEMBER 2006 Group Company 2006 2005 2006 2005 Notes • • • • -------- -------- -------- ---------- Cash flows from operating activities 17 (882,731) (463,733) (4,130,667) (463,733) Cash flows frominvesting activities Acquisition of Inke 18 693,434 - - - Petroleum Pty Ltd net of cash acquired Purchase of (74,634) - (26,638) - property, plant and equipment Expenditure on oil (3,748,247) - - - and gas assets Finance income 255,785 58,419 266,122 58,419 Cash flows fromfinancing activities Net proceeds from 10,901,420 1,511,173 10,901,420 1,511,173 issue of shares 1 --------- -------- --------- -----------Net increase /(decrease) in cash and cashequivalents 7,145,027 1,105,859 7,010,237 1,105,859 Cash and cashequivalents atbeginning ofperiod 1,105,859 - 1,105,859 - --------- -------- --------- -----------Cash and cashequivalents atend of period 8,250,886 1,105,859 8,116,096 1,105,859 ========= ======== ========= =========== 1 Net proceeds from issue of shares includes €3,861,520 in respect of 52,000,000ordinary shares issued to the shareholders of Inke Petroleum Pty Ltd. COMPANY AND GROUP STATEMENT OF CHANGES IN NET EQUITYFOR THE YEAR ENDED 31 DECEMBER 2006 Company Share Share Foreign Share Retained Total capital premium currency based earnings translation payments reserve reserve 2006 2006 2006 2006 2006 2006 • • • • • • -------- -------- -------- -------- -------- --------- Balance at1st 79,212 1,424,480 - 79,286 (133,184) 1,449,794January 2006 New sharesissued 309,910 15,414,964 - - - 15,724,874 Cost ofshare - (961,934) - - - (961,934)issue Equitysettledshare based - - - 453,648 - 453,648payments Foreigncurrencytranslations - - (230,587) - - (230,587) Net loss forperiod - - - - (2,234,113) (2,234,113) -------- --------- -------- -------- -------- ---------Balance at31stDecember 389,122 15,877,510 (230,587) 532,934 (2,367,297) 14,201,6822006 Group Share Share Foreign Share Retained Total capital premium currency based earnings translation payments reserve reserve 2006 2006 2006 2006 2006 2006 • • • • • • -------- -------- -------- -------- -------- --------- Balance at1st 79,212 1,424,480 - 79,286 (133,184) 1,449,794January 2006 New sharesissued 309,910 15,414,964 - - - 15,724,874 Cost ofshare - (961,934) - - - (961,934)issue Equitysettledshare based - - - 453,648 - 453,648payments Foreigncurrencytranslations - - (158,239) - - (158,239) Net loss forperiod - - - - (5,223,290) 5,223,290) -------- --------- -------- -------- -------- ---------Balance at31stDecember 389,122 15,877,510 (158,239) 532,934 (5,356,474) 11,284,8532006 NOTES TO THE FINANCIAL STATEMENTSFOR THE PERIOD ENDED 31st DECEMBER 2006 1. Accounting policies Basis of preparationThe financial statements have been prepared on the historical cost basis inaccordance with International Financial Reporting Standards (IFRS) and theprovisions of the SORP "Accounting for Oil and Gas Exploration, Development,Production and Decommissioning Activities". Basis of consolidationThe consolidated financial statements incorporate the financial statements ofentities controlled by the Group. Control is achieved where the Group has thepower to govern the financial and operating policies of an entity (asubsidiary). Intercompany transactions, balances and unrealised gains ontransactions between group companies are eliminated on consolidation. Unrealisedlosses are also eliminated but considered an impairment indicator of the assettransferred. Accounting policies of subsidiaries are consistent with thoseadopted by the Group. Investments in subsidiaries in the Company's balance sheetare accounted at cost less provision for impairment. Foreign currency translationFunctional currency is the currency of the primary economic environment in whichthe company operates and is normally the currency in which the company primarilygenerates and expends cash. In individual companies, transactions in foreign currencies are initiallyrecorded in the functional currency by applying the rate of exchange ruling atthe date of the transaction. Monetary assets and liabilities denominated inforeign currencies are translated into the functional currency at the rate ofexchange ruling at the balance sheet date. Any resulting exchange differencesare included in the income statement. In the consolidated financial statements, the assets and liabilities of non Eurofunctional currency subsidiaries are translated into Euro at the rate ofexchange ruling at the balance sheet date. The results and cashflow of non Eurofunctional currency subsidiaries are translated into Euro using average rates ofexchange. Exchange adjustments arising when the opening net assets and profitsare translated from the functional currency to Euro is taken to a separatecomponent of equity. Tangible non-current assetsTangible non-current assets are stated at cost less depreciation. Depreciationis provided at rates calculated to write off the cost of assets, less theirestimated residual value, over their expected useful economic lives on thefollowing basis: Property, plant and equipment 25% - 33% per annum straight line Intangible non-current exploration assetsThe Group applies the successful efforts method of accounting for explorationand appraisal costs. Under the successful efforts method of accounting, alllicence acquisition, exploration and appraisal costs are initially capitalisedin well, field or specific exploration well cost centres as appropriate, pendingdetermination. Expenditure incurred during the various exploration and appraisalphases is then written off unless commercial reserves have been established orthe determination process has been completed. Pre-licence costs: costs incurred prior to having obtained the legal rights toexplore an area are expensed directly to the profit and loss account as they areincurred. Licence acquisition costs: costs which have not been allocated are depreciatedover the maximum period of the licence. Exploration and appraisal costs are initially capitalised as an intangibleasset. Intangible assets are not amortised prior to the conclusion of appraisalactivities and determination of commercial reserves. Goodwill and intangible non-current assetsGoodwill arising on the acquisition of subsidiary undertakings, representing anyexcess of the fair value of the consideration given over the fair value of theidentifiable assets and liabilities acquired is capitalised and written off on astraight line basis over its useful life. Provision is made for any impairment.The goodwill in respect of the acquisition of the Matra group is being amortisedover its estimated useful economic life of five years. InvestmentsInvestments are stated at cost less provision for any diminution in value InventoriesInventories are valued at the lower of cost and net realisable value.Trade and other receivablesTrade and other receivables are stated at their cost less impairment losses. Cash and cash equivalentsThe Company considers all highly liquid investments, with a maturity of 90 daysor less, to be cash equivalents. They are stated at the lower of cost or marketvalue. Trade and other payablesLiabilities are recognised for amounts to be paid in the future for goods andservices received, whether or not billed to the Company. TaxationCurrent tax, including UK corporation tax and foreign tax, is provided atamounts expected to be paid (or recovered) using the tax rates and laws thathave been enacted or substantially enacted by the balance sheet date. Contributed equityIssued and paid up share capital is recognised at the fair value of theconsideration received by the Company. Any transaction costs arising on theissue of ordinary shares are recognised directly in equity as a reduction of theshare proceeds received. Share based paymentsWhere the Company engages in equity-settled share based payments the treatmentdepends upon the service provided. In respect of employees, the fair value ismeasured by reference to the fair value of the share options granted on the dateof the grant. The cost of the employee services received in respect of the shareoptions is recognised in the income statement. In respect of other servicesprovided, the share options are measured by reference to the fair value of theservices provided. RevenueRevenue is recognised to the extent that it is probable that the economicbenefits will flow to the entity and the revenue can be reliably measured. 2. Loss per shareBasic loss per share of €0.02560 is calculated by dividing the loss for theperiod by the weighted average number of ordinary shares in issue during theperiod of 204,049,315. Diluted loss per share of €0.02414 is calculated by dividing the loss for theperiod by the diluted weighted average number of ordinary shares of 216,396,847,being the number of ordinary shares in issue and allowing for the exercise ofoptions, warrants and convertible shares outstanding. 3. Segmental information The primary segmental reporting is determined to be geographical segmentaccording to the location of the assets. The Directors do not believe that thereis a secondary segment that could be reported. There are two geographicalsegments. Geographical segment (Group) United Hungary Total Kingdom • • •Revenue 1,753 17,598 19,351Administration expenses (1,426,639) (64,923) (1,491,562)Impairment of explorationexpenditure and goodwill - (4,006,864) (4,006,864)Finance revenue 266,248 1,694 267,942Financing costs (7,159) (4,998) (12,157) -------- -------- -------- (1,165,797) (4,057,493) (5,223,290) Non current assets 22,786 2,942,913 2,965,699Inventories - 150,048 150,048Trade and otherreceivables 17,216 54,729 71,945Cash and cash equivalents 8,116,097 134,789 8,250,886Trade and other payables (121,215) (32,510) (153,725) -------- -------- -------- 8,034,884 3,249,969 11,284,853 4. Loss for the periodThis is stated after charging: Group Company 2006 2005 2006 2005 • • • • -------- ------- -------- ------- Auditors remuneration Audit 39,948 37,496 Taxation 7,426 - 7,426 - Other 9,071 - 9,071 -Impairment of explorationexpenditure 2,748,247 - - -Amortisation of licence costs 625,000 - - -Depreciation of tangible fixedassets 18,404 - 3,852 -Foreign exchange gain / (loss) (138,844) - (99,598) - 5. Directors emoluments Group Company 2006 2005 2006 2005 • • • • -------- ------- -------- -------Directors remuneration 479,724 23,969 479,724 23,969Equity settled sharebased payments 450,267 71,805 450,267 71,805 -------- ------- -------- ------- 929,991 95,774 929,991 95,774 The highest paid Director earned remuneration of • 616,358 which included •363,874 of equity settled share based payments. 6. Staff costs Group Company 2006 2005 2006 2005 • • • • --------- ------ -------- -------Staff costs 112,296 - 14,252 - --------- ------ -------- ------- 112,296 - 14,252 - The average number of staff during the year was 3. 7. Finance income Group Company 2006 2005 2006 2005 • • • • -------- ------- -------- -------Bank interest 267,942 58,419 266,248 58,419 -------- ------- -------- ------- 267,942 58,419 266,248 58,419 8. Finance costs Group Company 2006 2005 2006 2005 • • • • -------- ------- -------- -------Bank charges (12,157) - (7,159) - -------- ------- -------- ------- (12,157) - (7,159) - 9. Tangible non-current assets Group Company 2006 2005 2006 2005 • • • • ------- -------- -------- -------- Property, plant and equipment Cost At 1st January 2006 - - - - Additions 74,634 - 26,638 - Disposals - - - - ------- -------- -------- -------- At 31st December 2006 74,634 - 26,638 - Depreciation At 1st January 2006 - - - - Eliminated on disposal - - - - Charge for year (18,404) - (3,852) - ------- -------- -------- -------- At 31st December 2006 (18,404) - (3,852) - ------- -------- -------- -------- Net Book Value at 31st December 56,230 - 22,786 - 2006 ======= ======== ======== ======== ------- -------- -------- -------- Net Book Value at 31st December - - - - 2005 ======= ======== ======== ======== 10. Intangible non-current assets Group Company 2006 2005 2006 2005 • • • • -------- -------- -------- -------- Intangible exploration assets (exploration expenditure) Cost At 1st January 2006 - - - - Additions 2,748,247 - - - Impairment (2,748,247) - - - -------- -------- -------- -------- At 31st December 2006 - - - - Amortisation At 1st January 2006 - - - - Amortisation - - - - Charge for year - - - - -------- -------- -------- -------- At 31st December 2006 - - - - -------- -------- -------- -------- Net Book Value at - - - - 31st December 2006 ======== ======== ======== ======== -------- -------- -------- -------- Net Book Value at - - - - 31st December 2005 ======== ======== ======== ======== Group Company 2006 2005 2006 2005 • • • • -------- -------- -------- -------- Intangible exploration assets (license acquisition costs) Cost At 1st January 2006 - - - - Additions 1,000,000 - - - Impairment / disposal - - - - -------- -------- -------- -------- At 31st December 2006 1,000,000 - - - Amortisation At 1st January 2006 - - - - Amortisation (625,000) - - - Charge for year - - - - -------- -------- -------- -------- At 31st December 2006 (625,000) - - - -------- -------- -------- -------- Net Book Value at 375,000 - - - 31st December 2006 ======== ======== ======== ======== -------- -------- -------- -------- Net Book Value at - - - - 31st December 2005 ======== ======== ======== ======== Group Company 2006 2005 2006 2005 • • • • -------- -------- -------- -------- Other intangible assets (goodwill) Cost At 1st January 2006 - - - - Additions 3,168,086 - - - Impairment / disposal - - - - -------- -------- -------- -------- At 31st December 2006 3,168,086 - - - Amortisation At 1st January 2006 - - - - Amortisation - - - - Charge for year (633,617) - - - -------- -------- -------- -------- At 31st December 2006 (633,617) - - - -------- -------- -------- -------- Net Book Value at 2,534,469 - - - 31st December 2006 ======== ======== ======== ======== -------- -------- -------- -------- Net Book Value at - - - - 31st December 2005 ======== ======== ======== ======== 11. Investment in subsidiary In April 2006 the Company acquired 100% of the Australian company Inke PetroleumPty Ltd in exchange for 52,000,000 ordinary shares. The directors do not believethere is any significant difference between the book value and fair value of theassets acquired. 12. Inventories 2006 2005 2006 2005 • • • • -------- -------- -------- -------Drilling and other supplies 150,048 - - - -------- -------- -------- ------- 150,048 - - - 13. Trade and other receivables Group Company 2006 2005 2006 2005 • • • • -------- -------- -------- -------Amounts owed fromsubsidiary undertakings - - 2,177,553 -Trade debtors 3,650 - 131,376 -Other debtors 65,334 370,112 11,882 370,112Prepayments 2,961 - 1,684 - -------- -------- -------- ------- 71,945 370,112 2,322,495 370,112 14. Cash and cash equivalents Group Company 2006 2005 2006 2005 • • • • -------- -------- -------- --------Cash at bank andin hand 8,250,886 1,105,859 8,116,096 1,105,859 -------- -------- -------- -------- 8,250,886 1,105,859 8,116,096 1,105,859 15. Trade and other payables Group Company 2006 2005 2006 2005 • • • • -------- -------- -------- -------Trade creditors 49,820 - 32,950 -Other taxation and socialsecurity 125 - 2,860 -Accruals and deferred income 99,905 26,177 85,405 26,177 -------- -------- -------- ------- 149,850 26,177 121,215 26,177 16. Called up share capital 2006 2005 • • --------- --------Authorised:10,000,000,000 ordinary shares of 0.1peach 14,852,000 14,852,000 ========= ======== Allotted: --------- ---------262,000,000 ordinary shares of 0.1p each 389,122 79,212 ========= ========= The following issues of new shares in the Company for shares took place in theperiod: 1. 52,000,000 shares were issued as consideration for the purchase of100% of the ordinary issued share capital of Inke Petroleum Pty Ltd on 6th April2006 The following issues of new convertible shares in the Company took place in theperiod: 1. 32,000,000 convertible shares were issued to the shareholders of InkePetroleum Pty Ltd. Conversion will arise on the achievement of Milestone Eventswithin the Hungarian Inke Concession. The following issues of new shares in the Company for cash took place in theperiod: 1. 160,000,000 shares were issued at 5 pence each on 11th April 2006 onre-admission to AIM. The following issues of warrants in the Company took place in the period: 1.80,000,000 warrants were issued 1 for 2 to the subscribers of the160,000,000 shares issued on re-admission to AIM. The warrants are convertiblefrom grant at 6.5p per share and expire on 31st January 2009. The following issues of new share options took place in the period: 1. 2,900,000 ordinary share options were issued on 11th April 2006 withan exercise price of 0.1 pence. The options are exercisable on or after 11thApril 2007 and expire on 11th April 2011.2. 2,100,000 ordinary share options were issued on 11th April 2006 withan exercise price of 0.1 pence. The options are exercisable on or after 11thApril 2008 and expire on 11th April 2011.3. 5,800,000 ordinary share options were issued on 11th April 2006 withan exercise price of 5 pence. The options are exercisable on or after 11th April2007 and expire on 11th April 2011.4. 4,200,000 ordinary share options were issued on 11th April 2006 withan exercise price of 5 pence. The options are exercisable on or after 11th April2008 and expire on 11th April 2011.5. 2,620,000 ordinary share options were issued on 11th April 2006 withan exercise price of 6.25 pence. The options are exercisable from grant andexpire on 31st March 2009.6. 1,200,000 ordinary share options were issued on 23rd May 2006 with anexercise price of 0.1 pence. The options are exercisable on or after 23rd May2007 and expire on 23rd May 2011.7. 3,600,000 ordinary share options were issued on 23rd May 2006 with anexercise price of 5 pence. The options are exercisable on or after 23rd May 2007and expire on 23rd May 2011.8. 2,400,000 ordinary share options were issued on 23rd May 2006 with anexercise price of 5 pence. The options are exercisable on or after 23rd May 2008and expire on 23rd May 2011. 17. Reconciliation of operating profit / (loss) to net cash inflow / (outflow)from operating activities Group Company 2006 2005 2006 2005 • • • • --------- -------- -------- ------- Operating loss (5,479,075) (191,603) (2,500,235) (191,603)Depreciation 18,404 - 3,852 -Amortisation ofgoodwill 633,617 - - -Amortisation ofconcession licensecosts 625,000 - - -Impairment ofexplorationexpenditure 2,748,247 - - -Share based payments 453,648 71,805 453,648 71,805Foreign currencytranslation reserve (158,239) - (230,587) -Increase ininventories (150,048) - - -Decrease / (increase)in debtors 298,167 (370,112) (1,952,383) (370,112)Increase / (decrease)in creditors 127,548 26,177 95,038 26,177 --------- -------- -------- --------Cash flows fromoperating activities (882,731) (463,733) (4,130,667) (463,733) 18. Acquisition of subsidiary During the period the Group acquired Inke Petroleum Pty Ltd. The fair value ofassets acquired and liabilities assumed were as follows: 2006 • ---------Property, plant and equipment 1,657Intangible exploration assets 814,024Trade and other receivables 731,823Trade and other payables (854,070) --------- 693,434 19. Control The Company is not under the control of any individual or group of connectedparties. 20. Related parties On 6th April 2006, following shareholder approval, the Company completed theacquisition of Inke Petroleum Pty Ltd ("Inke"). Pursuant to AIM Rules, theacquisition constitutes a reverse takeover of the Company. In accordance withthe acquisition agreement the Company issued 52,000,000 ordinary shares and32,000,000 converting shares to Inke shareholders. The converting shares convertto ordinary shares on the achievement of certain milestones, namely: 1. the successful completion of a well and commercial production ofhydrocarbons from the Inke Concession; or2. the sale of a greater than 50% interest in the Inke Concession (or partthereof) by the Company for greater than US$4,000,000. The acquisition was a related party transaction. The related party is Mr Burtonwho is a Director of the Company and was a substantial shareholder of Inke. Theacquisition was on arms length terms. Neither the Company nor Inke generated anymaterial turnover or profit. Under the acquisition, Mr Burton sold his 8,400,000 ordinary shares and8,400,000 converting shares in Inke to the Company for consideration of8,400,000 ordinary shares and 8,400,000 converting shares in the Company. Basedon the price per share of 4.6p on 11th November 2005, being the date after whichtrading in Company shares was suspended, consideration totalled £386,400 priorto conversion of the converting shares, with a total potential consideration of£772,800. 21. Subsequent events 1. On 24th April 2007 the Company completed the acquisition of 100% of theRussian company "OOO" Arkhangelovskoe (Arkhangel). In accordance with theacquisition agreement the Company issued 55,000,000 ordinary shares asconsideration to the owners of Arkhangel. 2. On 16th May 2007, following shareholder approval, the Company completed theplacement for cash of 135,000,000 shares at 4.5 pence to Delek-InternationalEnergy Limited. Under the terms of the Subscription Agreement, Gideon Tamor,President and CEO of Delek Energy Systems Limited, was appointed as a Directorof the Company. 3. On 13th June 2007 the Company completed the sale for cash of 60% of theordinary issued share capital of Gemstone Properties Ltd for a deemedconsideration of US$ 2,200,000 to the US company Aspect International LLC. This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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