25th Aug 2005 07:03
Premier Oil PLC25 August 2005 PREMIER OIL PLC ("Premier" or "the Group") Impact of International Financial Reporting Standards including Adoption of Successful Efforts Based Accounting Policy Premier is today publishing its restated 2004 financial information, reflectingthe change from UK Generally Accepted Accounting Principles (UK GAAP) to the newInternational Financial Reporting Standards (IFRS). Premier's interim resultsfor the six months ended 30 June 2005, which will be the first set of resultspublished in accordance with the new IFRS accounting guidelines, will beannounced on September 15th. In making the transition to IFRS, Premier is proactively adopting a successfulefforts based accounting policy ensuring that future performance istransparently reflected within financial statements. Successful efforts iswidely adopted by the major oil companies and taking this step demonstratesPremier's confidence in delivering its financial performance targets. Theseimportant accounting changes do not impact the fundamentals of the business.There is: • No change to strategy or targets • No impact on economic value • No change in cashflow or cash available for reinvestment The overall impact on the 2004 reported results arising from the move to IFRSis: Income Statement for the year to 31st December 2004 UK GAAP IFRS US$ million US$ millionOperating profit 81.4 59.3Profit after tax 43.8 22.1Earnings per share (basic) (cents) 53.0 26.8 Balance Sheet at 31st December 2004 UK GAAP IFRS US$ million US$ millionFixed assets (net) 569.3 607.7Deferred tax liabilities 90.2 203.6Shareholders funds 430.3 354.1 The main areas in which accounting policy changes have been made are: • The adoption of the successful efforts method of accountingfor exploration activities whereby all exploration and evaluation expenditurewill be expensed in the period it is incurred unless the exploration andevaluation process remains ongoing, or there is a reasonable prospect of acommercial development. • The use of transitional rules available under IFRS wherebythe fair value of existing field interests in the UK and Indonesia on the dateof transition to IFRS (1 January 2004) are adopted as deemed cost. • Recognition of additional deferred tax balances relating toboth UK corporate tax and PRT. • The proportional consolidation of Premier's interest inPremier Kufpec Pakistan BV (PKP), previously accounted for under the grossequity method. • Accounting for employee benefits, principally pensions andshare-based payments. Tony Durrant, Premier's Finance Director, said "By making all of these policy changes now, Premier has taken a proactivedecision in anticipation of likely future changes in accounting standards forour industry. These changes will make the financial performance of ourproducing assets and the impact of our exploration activities more transparentto investors. They have no impact on our cash flows, our strong financial position, or ourability and desire to continue our extensive exploration programme." 25th August 2005 This press release includes the full restated 2004 results and the Group's newaccounting policies. A comprehensive explanation of the reconciling itemstogether with a presentation has been posted on the Company's website. http://www.premier-oil.com/Asp/uploadedFiles/File/conv_to_IFRS.pdf http://www.premier-oil.com/Asp/uploadedFiles/File/IFRS_Reconciliations.PDF Copies of all these documents can also be obtained by contacting Premier Oil at020 7730 1111. A conference call for research analysts will be hosted by the Company's FinanceDirector, Tony Durrant and Group Financial Controller, Nigel Wilson, on Thursday25th August at 11.00am UK time to provide further details of the changes.Please call 020 8901 6905. A replay facility will be available from 90 minutes after the conference call.Please call 020 8515 2499, pin-code 673 740#. ENQUIRIES: Premier Oil plc Tel: 020 7730 1111Tony Durrant Pelham PR Tel: 020 7743 6673James HendersonGavin Davis 1. INTRODUCTION Premier Oil prepared its financial statements under UK Generally AcceptedAccounting Practice (UK GAAP) until 31 December 2004. From 1 January 2005, theGroup will prepare its consolidated financial statements in accordance withInternational Accounting Standards (IAS) and International Financial ReportingStandards (IFRS), as adopted by the European Union (EU). Premier's results for the six months to 30 June 2005 will be the first resultsto be reported under IFRS and the results to 31 December 2005 will be the firstfull year to be reported under IFRS. When these results are announced, Premier will also provide comparativeinformation for the year ending 31 December 2004, together with thereconciliations required by IFRS 1. Premier's date of transition to IFRS willtherefore be 1 January 2004, i.e. the beginning of the comparative year ending31 December 2004. This summary provides an analysis of the effects of the change from UK GAAP toIFRS on Premier's accounts, including: - • Summary of the basis of preparation of the disclosed information • Significant Accounting Policies Premier will adopt under IFRS • Consolidated opening balance sheet at 1 January 2004 • Income Statement, Balance Sheet and Cash Flow Statement for the year ended 31 December 2004 • Income Statement, Balance Sheet and Cash Flow Statement for the half year to 30 June 2004 2. BASIS OF PREPARATION OF IFRS INFORMATION The financial information has been prepared in accordance with InternationalFinancial Reporting Standards published by 31 December 2004 and applying toaccounting periods beginning on or after 1 January 2005 except as noted below. The standards used are those endorsed by the EU together with those standardsand interpretations issued by the International Accounting Standards Board(IASB), some of which had not been endorsed by the EU by January 2005. The IFRSinformation presented in this document has been prepared on the basis of currentinterpretation of the standards. There is a possibility that the accompanyingpreliminary opening IFRS balance sheet may require adjustment beforeconstituting the final opening IFRS balance sheet because the standards andinterpretations that will actually apply when the company prepares its firstcomplete set of IFRS financial statements for the year ending December 31, 2005could differ from those currently expected to be effective. In preparing these reconciliations in accordance with IFRS 1, the Group hasapplied the mandatory exceptions and certain of the optional exemptions fromfull retrospective application of IFRS. Exemptions from full retrospective application elected by the Group The Group has made the following choices in respect of the optional exemptionsfrom full retrospective application, as set out in IFRS1. (a) Business combinations exemption The Group has applied the business combinations exemption in IFRS 1. It has notrestated business combinations that took place prior to the 1 January 2004transition date. (b) Fair value as deemed cost exemption The Group has elected to measure certain items of property, plant and equipment(PPE) at fair value as at 1 January 2004 and use the fair value as deemed cost. (c) Employee benefits exemption The Group has elected to recognise all cumulative actuarial gains and losses asat 1 January 2004. (d) Cumulative translation differences exemption The Group has elected to set the previously accumulated cumulative translationdifferences to zero at 1 January 2004. This exemption has been applied to allsubsidiaries in accordance with IFRS 1. (e) Compound financial instruments exemption The Group has not issued any compound instruments; this exemption is notapplicable. (f) Assets and liabilities of subsidiaries, associates and joint venturesexemption This exemption is not applicable, as the use of the exemption is made at thelevel of the subsidiary, associate or joint venture that adopts IFRS later thanits parent company. (g) Exemption from restatement of comparatives for IAS 32 and IAS 39. The Group elected to apply this exemption. The Group therefore applies itsformer UK GAAP accounting policies to derivatives, financial assets andfinancial liabilities and to hedging relationships for the 2004 comparativeinformation. The adjustments required for differences between UK GAAP and IAS 32and IAS 39 are determined and recognised from 1 January 2005. (h) Share-based payment transaction exemption The Group has elected to apply the share-based payment exemption. It appliedIFRS 2 from 1 January 2004 only to those options that were issued after 7November 2002 but that have not vested by 1 January 2005. (i) Insurance contracts exemption The Group does not issue insurance contracts; this exemption is not applicable. (j) Decommissioning liabilities included in the cost of property, plant andequipment exemption The Group recognises a provision in accordance with IAS37 in respect ofdecommissioning liabilities relating to its share in operated and non operatedproduction facilities. The exemption provided in IFRS 1 from the full retrospective application ofIFRIC 1 has been applied to determine the adjustment required to PPE in respectof the obligation to decommission existing production facilities. (k) Fair value measurement of financial assets or liabilities at initialrecognition The Group has not applied the exemption offered by the revision of IAS 39 on theinitial recognition of the financial instruments measured at fair value throughprofit and loss where there is no active market. This exemption is notapplicable to the 2004 financial information since the Group has applied theexemption in (g) above. Exceptions from full retrospective application followed by the Group Premier Oil has applied the following mandatory exceptions from retrospectiveapplication. (a) Derecognition of financial assets and liabilities exception Any non-derivative financial assets and liabilities derecognised before 1January 2004 are not re-recognised under IFRS in the 2004 financial information. (b) Hedge accounting exception Management has claimed hedge accounting from 1 January 2005 only if the hedgerelationship meets the entire hedge accounting criteria under IAS 39. Becausethe Group will apply IAS 39 prospectively from 1 January 2005, hedges areincluded in the 2004 financial information according to the Group's former, UKGAAP accounting policies. (c) Estimates exception Estimates under IFRS at 1 January 2004 are consistent with estimates made forthe same date under previous GAAP, unless there is evidence that those estimateswere in error. (d) Assets held for sale and discontinued operations exception Management applies IFRS 5 prospectively from 1 January 2005. Any assets held forsale or discontinued operations are recognised in accordance with IFRS 5 onlyfrom 1 January 2005. The Group had no assets that met the held-for-sale criteria during 2004, andconsequently this exception had no effect on the 2004 financial information. 3. SIGNIFICANT ACCOUNTING POLICIES General Premier Oil plc is a limited company incorporated in Scotland and listed on theLondon Stock Exchange. The principal activities of the Company and itssubsidiaries (the Group) are Oil & Gas exploration and production in South andSouth East Asia, the UK and Africa. These financial statements are presented in the US$ since that is the currencyin which majority of the Group's transactions are denominated. Accounting convention The financial statements have been prepared in accordance with InternationalFinancial Reporting Standards (IFRS) as endorsed by the Council of EuropeanUnion. The accounts are prepared under the historical cost convention except for therevaluation of financial instruments and certain properties at transition dateto IFRS. Basis of Consolidation The consolidated financial statements incorporate the financial statements ofthe Company and entities controlled by the Company (its subsidiaries) made up to31 December each year. Control is achieved where the Company has the power togovern the financial and operating policies of an investee entity so as toobtain benefits from its activities. On acquisition, the assets, liabilities and contingent liabilities of asubsidiary are measured at their fair values at the date of acquisition. Anyexcess (deficiency) of the cost of acquisition over (below) the fair values ofthe identifiable net assets acquired is recognised as goodwill (negativegoodwill). The interest of minority shareholders is stated at the minority'sproportion of the fair values of the assets and liabilities recognised. The results of subsidiaries acquired or disposed of during the year are includedin the consolidated income statement from the effective date of acquisition orup to the effective date of disposal, as appropriate. Where necessary, adjustments are made to the financial statements ofsubsidiaries to bring the accounting policies used into line with those used byother members of the Group. All significant intercompany transactions and balances between group entitiesare eliminated on consolidation. Interest in Associates An associate is an entity in which the group has a long-term equity interest andover which it has significant influence, but not control, through participationin the financial and operating policy decisions of the investee. The results and assets and liabilities of associates are incorporated in thesefinancial statements using the equity method of accounting. Interests inassociates are carried in the balance sheet at cost as adjusted bypost-acquisition changes in the Group's share of the net assets of theassociate, less any impairment in the value of individual investments. Anyexcess (deficiency) of the cost of acquisition over (below) the Group's share ofthe net fair values of the identifiable assets, liabilities and contingentliabilities of the associate at the date of acquisition is recognised asgoodwill (negative goodwill). Where a group entity transacts with an associate of the Group, unrealisedprofits and losses are eliminated to the extent of the Group's interest in therelevant associate. Interest in Joint ventures A joint venture is a contractual arrangement whereby the Group and other partiesundertake an economic activity that is subject to joint control. Where a group company undertakes its activities under joint venture arrangementsdirectly, the Group's share of jointly controlled assets and any liabilitiesincurred jointly with other venturers are recognised in the financial statementsof the relevant company and classified according to their nature. Liabilities and expenses incurred directly in respect of interests in jointlycontrolled assets are accounted for on an accrual basis. Income from the sale oruse of the Group's share of the output of jointly controlled assets, and itsshare of joint venture expenses, are recognised when it is probable that theeconomic benefits associated with the transactions will flow to/from the Groupand their amount can be measured reliably. Joint venture arrangements which involve the establishment of a separate entityin which each venturer has an interest are referred to as jointly controlledentities. The Group reports its interests in jointly controlled entities usingproportionate consolidation - the Group's share of the assets, liabilities,income and expenses of jointly controlled entities are combined with theequivalent items in the consolidated financial statements on a line-by-linebasis. Where the Group transacts with its jointly controlled entities, unrealisedprofits and losses are eliminated to the extent of the Group's interest in thejoint venture. Sales revenue & other income Sales of petroleum production are recognised when goods are delivered or thetitle has passed to the customer. Interest income is accrued on a time basis, by reference to the principaloutstanding and at the effective interest rate applicable. Dividend income from investments is recognised when the shareholders' rights toreceive payment have been established. Oil and gas assets The company applies the successful efforts method of accounting for Explorationand Evaluation ("E&E") costs, having regard to the requirements of IFRS 6 "Exploration for and Evaluation of Mineral Resources". (a) Exploration and evaluation assets Under the successful efforts method of accounting, all licence acquisition,exploration and appraisal costs are initially capitalised in well, field orspecific exploration cost centres as appropriate, pending determination.Expenditure incurred during the various exploration and appraisal phases is thenwritten off unless commercial reserves have been established or thedetermination process has not been completed. Pre-licence costs Costs incurred prior to having obtained the legal rights to explore an area areexpensed directly to the income statement as they are incurred. Exploration and evaluation costs Costs of E&E are initially capitalised as E&E assets. Payments to acquire thelegal right to explore, costs of technical services and studies, seismicacquisition, exploratory drilling and testing are capitalised as intangible E&Eassets. Tangible assets used in E&E activities (such as the company's vehicles, drillingrigs, seismic equipment and other property plant and equipment used by thecompany's exploration function) are classified as property plant and equipment.However, to the extent that such a tangible asset is consumed in developing anintangible E&E asset, the amount reflecting that consumption is recorded as partof the cost of the intangible asset. Such intangible costs include directlyattributable overhead, including the depreciation of property plant andequipment utilised in E&E activities, together with the cost of other materialsconsumed during the exploration and evaluation phases. E&E costs are not amortised prior to the conclusion of appraisal activities. Treatment of E&E assets at conclusion of appraisal activities Intangible E&E assets related to each exploration licence/prospect are carriedforward, until the existence (or otherwise) of commercial reserves has beendetermined subject to certain limitations including review for indications ofimpairment. If commercial reserves have been discovered, the carrying value,after any impairment loss, of the relevant E&E assets is then reclassified asdevelopment and production assets. If, however, the commercial reserves have notbeen found, the capitalised costs are charged to expense after conclusion ofappraisal activities. (b) Development and production assets Development and production assets are accumulated generally on a field by fieldbasis and represent the cost of developing the commercial reserves discoveredand bringing them into production, together with the E&E expenditures incurredin finding commercial reserves transferred from intangible E&E assets asoutlined in accounting policy (a) above. The cost of development and production assets also includes the cost ofacquisitions and purchases of such assets, directly attributable overheads,finance costs capitalised, and the cost of recognising provisions for futurerestoration and decommissioning. Depreciation of producing assets The net book values of producing assets are depreciated generally on field byfield basis using the unit-of-production (UOP) method by reference to the ratioof production in the period and the related commercial reserves of the field,taking into account future development expenditures necessary to bring thosereserves into production. Producing assets are generally grouped with other assets that are dedicated toserving the same reserves for depreciation purposes, but are depreciatedseparately from producing assets that serve other reserves. Pipelines are depreciated on a unit of throughput basis. (c) Impairment of development and production assets An impairment test is performed whenever events and circumstances arising duringthe development or production phase indicate that the carrying value of adevelopment or production asset may exceed its recoverable amount. The carrying value is compared against the expected recoverable amount of theasset, generally by reference to the present value of the future net cash flowsexpected to be derived from production of commercial reserves. The cashgenerating unit applied for impairment test purposes is generally the field,except that a number of field interests may be grouped as a single cashgenerating unit where the cash flows of each field are interdependent. (d) Acquisitions, asset purchases and disposals Acquisitions of oil and gas properties are accounted for under the purchasemethod where the transaction meets the definition of a business combination. Transactions involving the purchases of an individual field interest, or a groupof field interests, that do not qualify as a business combination are treated asasset purchases, irrespective of whether the specific transactions involved thetransfer of the field interests directly or the transfer of an incorporatedentity. Accordingly, no goodwill and no deferred tax gross up arises, and theconsideration is allocated to the assets and liabilities purchased on anappropriate basis. Proceeds on disposal are applied to the carrying amount of the specificintangible asset or development and production assets disposed of and anysurplus is recorded as a gain on disposal in the income statement. Inventories Inventories except for petroleum products are valued at the lower of cost andnet realisable value. Petroleum products and under and over lifts of crude oilare recorded at net realisable value. Taxation Income tax expense represents the sum of the tax currently payable and deferredtax. The tax currently payable is based on taxable profit for the year. Taxableprofit differs from net profit as reported in the income statement because itexcludes items of income or expense that are taxable or deductible in otheryears and it further excludes items that are never taxable or deductible. TheGroup's liability for current tax is calculated using tax rates that have beenenacted or substantively enacted by the balance sheet date. Deferred tax is the tax expected to be payable or recoverable on differencesbetween the carrying amounts of assets and liabilities in the financialstatements and the corresponding tax bases used in the computation of taxableprofit, and is accounted for using the balance sheet liability method. Deferredtax liabilities are generally recognised for all taxable temporary differencesand deferred tax assets are recognised to the extent that it is probable thattaxable profits will be available against which deductible temporary differencescan be utilised. Such assets and liabilities are not recognised if the temporarydifference arises from goodwill (or negative goodwill) or from the initialrecognition (other than in a business combination) of other assets andliabilities in a transaction that affects neither the taxable profit nor theaccounting profit. Deferred tax liabilities are recognised for taxable temporary differencesarising on investments in subsidiaries and associates, and interests in jointventures, except where the Group is able to control the reversal of thetemporary difference and it is probable that the temporary difference will notreverse in the foreseeable future. The carrying amount of deferred tax assets is reviewed at each balance sheetdate and reduced to the extent that it is no longer probable that sufficienttaxable profits will be available to allow all or part of the asset to berecovered. Deferred tax is calculated at the tax rates that are expected to apply in theperiod when the liability is settled or the asset realised. Deferred tax ischarged or credited in the income statement, except when it relates to itemscharged or credited directly to equity, in which case the deferred tax is alsodealt with in equity. Deferred tax assets and liabilities are offset when thereis a legally enforceable right to set off corporation tax assets againstcorporation tax liabilities and when they relate to income taxes levied by thesame taxation authority and the Group intends to settle its current tax assetsand liabilities on a net basis. Translation of foreign currencies In the accounts of individual companies, transactions denominated in foreigncurrencies, being currencies other than US $, are recorded in the local currencyat actual exchange rates as of the date of the transaction. Monetary assets andliabilities denominated in foreign currencies at the period end are reported atthe rates of exchange prevailing at the period end. Non-monetary assets andliabilities carried at fair value that are denominated in foreign currencies aretranslated at the rates prevailing at the date when the fair value wasdetermined. Non-monetary assets held at historic cost are translated at thedate of purchase and are not retranslated. Any gain or loss arising from achange in exchange rate subsequent to the date of the transaction is included asan exchange gain or loss in the income statement. On consolidation, the assets and liabilities of the Group's overseas operationsare translated at exchange rates prevailing on the balance sheet date. Incomeand expense items are generally translated at the average exchange rates for theperiod. Exchange differences arising, if any, are classified as equity andtransferred to the Group's translation reserve. Such translation differences arerecognised as income or as expenses in the period in which the operation isdisposed of. Group Retirement Benefits Payments to defined contribution retirement benefit plans are charged as anexpense as they fall due. Payments made to state-managed retirement benefitschemes are dealt with as payments to defined contribution plans where theGroup's obligations under the schemes are equivalent to those arising in adefined contribution retirement benefit plan. The group operates a defined benefit pension scheme, which requirescontributions to be made to a separately administered fund. The cost ofproviding benefits is determined using the Projected Unit Credit Method, withactuarial valuations being carried out at each balance sheet date. Actuarialgains and losses are recognised immediately in the income statement. Pastservice cost is also recognised immediately to the extent that the benefits arealready vested, and otherwise is amortised on a straight-line basis over theaverage period until the benefits become vested. The retirement benefit obligation recognised in the balance sheet represents thepresent value of the defined benefit obligation as adjusted for unrecognisedpast service cost, and as reduced by the fair value of plan assets. Any assetresulting from this calculation is limited to unrecognised past service cost,plus the present value of available refunds and reductions in futurecontributions to the plan. Royalties Royalties are charged as production costs to the income statement in the periodin which the related production is recognised as income. Leasing Rentals payable for assets under operating leases are charged to the incomestatement on a straight line basis over the lease term. Financial Instruments Financial assets and financial liabilities are recognised on the Group's balancesheet when the Group becomes a party to the contractual provisions of theinstrument. Trade receivables Trade receivables are stated at their nominal value as reduced by appropriateallowances for estimated irrecoverable amounts. Bank borrowings Interest-bearing bank loans and overdrafts are recorded at the proceedsreceived, net of direct issue costs. Finance charges, including premiums payableon settlement or redemption and direct issue costs, are accounted for on anaccrual basis to the income statement using effective interest method and areadded to the carrying amount of the instrument to the extent that they are notsettled in the period in which they arise. Trade payables Trade payables are stated at their nominal value. Derivative financial instruments (applied prospectively from 1 January 2005) The Group uses derivative financial instruments ('derivatives') to manage itsexposure to changes in foreign currency exchange rates, interest rates and oilprice fluctuations. All derivative financial instruments are initially recorded at cost, includingtransaction costs. Derivatives are subsequently carried at fair value. Apartfrom those derivatives designated as qualifying cash flow hedging instruments,all changes in fair value are recorded as financial income or expense in theperiod in which they arise. For the purposes of hedge accounting, hedging relationships may be of threetypes. Fair value hedges are hedges of particular risks that may change the fairvalue of a recognised asset or liability. Cash flow hedges are hedges ofparticular risks that may change the amount or timing of future cash flows.Hedges of net investment in a foreign entity are hedges of particular risks thatmay change the carrying value of the net assets of a foreign entity. To qualify for hedge accounting the hedging relationship must meet severalstrict conditions on documentation, probability of occurrence, hedgeeffectiveness and reliability of measurement. If these conditions are not met,then the relationship does not qualify for hedge accounting. In this case thehedging instrument and the hedged item are reported independently as if therewere no hedging relationship. In particular any derivatives are reported at fairvalue, with changes in fair value included in financial income. For qualifying fair value hedges, the hedging instrument is recorded at fairvalue and the hedged item is recorded at its previous carrying value, adjustedfor any changes in fair value that are attributable to the hedged risk. Anychanges in the fair values are reported in financial income or expense. For qualifying cash flow hedges, the hedging instrument is recorded at fairvalue. The portion of any change in fair value that is an effective hedge isincluded in equity, and any remaining ineffective portion is reported infinancial income. If the hedging relationship is the hedge of a firm commitmentor highly probable forecasted transaction, the cumulative changes of fair valueof the hedging instrument that have been recorded in equity are included in theinitial carrying value of the asset or liability at the time it is recognised.For all other qualifying cash flow hedges, the cumulative changes of fair valueof the hedging instrument that have been recorded in equity are included infinancial income at the time when the forecasted transaction affects net income. For qualifying hedges of net investment in a foreign entity, the hedginginstrument is recorded at fair value. The portion of any change in fair valuethat is an effective hedge is included in equity. Any remaining ineffective portion is recorded in financial income or expensewhere the hedging instrument is a derivative and in equity in other cases. Ifthe entity is disposed of, then the cumulative changes of fair value of thehedging instrument that have been recorded in equity are included in financialincome at the time of the disposal. Derivatives embedded in other financial instruments or non-derivative hostcontracts are treated as separate derivatives when their risks andcharacteristics are not closely related to those of host contracts and the hostcontracts are not carried at fair value with unrealised gains or losses reportedin the income statement. Fair value is the amount for which a financial asset, liability or instrumentcould be exchanged between knowledgeable and willing parties in an arm's lengthtransaction. It is determined by reference to quoted market prices adjusted forestimated transaction costs that would be incurred in an actual transaction, orby the use of established estimation techniques such as option pricing modelsand estimated discounted values of cash flows. Prior to adopting IAS 39 from 1 January 2005, the Group continued to account forhedges by deferring recognition of gains and losses on hedging instruments untilthe hedged transaction occurs. Cash and cash equivalents Cash comprises cash in hand and deposits repayable on demand, less overdraftspayable on demand. Cash equivalents comprise funds held in term deposit accounts with a maturitynot exceeding three months. Consolidated Income Statement For the year ended 31 December 2004 UK GAAP IFRS numbers in IFRS format $ million $ millionSales and other operating revenues 196.0 251.8Gain on sale of investments/fixed assets - -Sales revenues and other income 196.0 251.8Cost of sales (108.4) (134.6)Exploration expense (14.3) (40.9)General and administration costs (15.5) (17.0)Share of net income from joint ventures 23.6 -Operating profit 81.4 59.3Interest income 1.9 2.0Interest, exchange and other finance expense (7.6) (7.8)Profit before taxation 75.7 53.5Taxation (31.9) (31.4)Profit after taxation 43.8 22.1Earnings per share Basic: 53.0 26.8 Diluted 52.1 26.3 Movements in shareholders' equity For the year ended 31 December 2004 IFRS $ millionAt 31 December 2003 388.8Adoption of IFRS (please refer opening balance sheet) (51.3)As restated at 1 January 2004 337.5Profit for the period 22.1Currency translation differences (0.4)Restructuring adjustment (1.2)Purchase of shares for ESOP trust (3.2)Issue of ordinary shares 5.2Repurchase of ordinary share capital (5.9)Shareholders' equity at the year end 354.1Cash flow hedges IAS 39 adoption (unaudited) (5.4)Shareholders' equity 1 January 2005 (unaudited) 348.7 Consolidated Balance Sheet At 31 December 2004 UK GAAP IFRS numbers in IFRS format $ million $ millionNon current assetsExploration and evaluation assets 72.0 41.4Property, plant and equipment 403.3 565.2Investments in associates and joint ventures 94.0 1.1 569.3 607.7Current assetsInventories 10.8 12.3Trade and other receivables 103.5 117.5Cash and cash equivalent 56.8 59.6 171.1 189.4Total assets 740.4 797.1Current liabilitiesTrade and other payables (101.7) (107.9)Current tax payable (40.6) (40.6) (142.3) (148.5)Non-current liabilitiesLong term debt (38.8) (38.8)Deferred tax liabilities (90.2) (203.6)Long term provisions (38.8) (41.6) Long term employee benefit plans deficits - (10.5) (167.8) (294.5)Total liabilities (310.1) (443.0)Net assets 430.3 354.1EquityShare capital 74.6 74.6Share premium account 7.0 7.0Retained earnings 348.7 272.5 430.3 354.1 Consolidated Cash Flow Statement For the year ended 31 December 2004 UK GAAP IFRS numbers in IFRS format $ million $ millionOperating activitiesProfit before taxation 75.7 53.5Depreciation, depletion and amortisation 57.4 72.2Exploration expense 14.3 40.9Decrease in inventories 0.1 0.4Increase in trade and other receivables (7.7) (10.0)Increase in trade and other payables 2.5Interest received 2.1 2.2Interest receivable (1.9) (2.0)Interest paid (2.3) (2.5)Interest payable 2.1 2.3Other finance income 5.8 5.8Net operating charge for long term employee benefit plans less - 1.5contributionsIncome taxes paid (53.7) (54.9)Impairment and gain or loss on sale of investment/fixed assets - 0.2Net cash provided by operating activities 94.4 109.6 Investing activitiesCapital expenditure (95.6) (104.5)Inflow of funds from joint venture 32.2 -Net cash used in investing activities (63.4) (104.5) Financing activitiesIssue of ordinary shares 5.2 5.2Repurchase of ordinary shares (3.3) (3.3)Repayment of long term financing (61.2) (61.2)Management of liquid resources 50.7 -Net cash used in financing activities (8.6) (59.3)Currency translation differences relating to cash and cash equivalents - (0.1)(Decrease)/increase in cash and cash equivalents 22.4 (54.3)Cash and cash equivalents at the beginning of period 5.8 113.9Cash and cash equivalents at the end of period 28.2 59.6 Consolidated Income Statement For the six months ended 30 June 2004 UK GAAP IFRS numbers in IFRS format $ million $ millionSales and other operating revenues 110.5 137.3Gain on sale of investments/fixed assets - -Sales revenues and other income 110.5 137.3Cost of sales (56.6) (67.8)Exploration expense (5.1) (22.7)General and administration costs (6.6) (6.6)Share of net income from joint ventures 10.8 -Operating profit 53.0 40.2Interest income 1.5 1.5Interest, exchange and other finance expense (1.7) (1.7)Profit before taxation 52.8 40.0Taxation (26.4) (27.2)Profit after taxation 26.4 12.8Earnings per share Basic 32.0 15.5 Diluted 31.3 15.2 Movements in shareholders' equity For the six months ended 30 June 2004 IFRS (restated) $ millionAt 31 December 2003 388.8Adoption of IFRS (please refer opening balance sheet) (51.3)As restated at 1 January 2004 337.5Profit for the period 12.8Currency translation differences (5.4)Purchase of shares for ESOP trust 0.2Issue of ordinary shares 3.8Shareholders' equity for the period end 348.9 Consolidated Balance Sheet At 30 June 2004 UK GAAP IFRS numbers in IFRS format $ million $ millionNon current assetsExploration and evaluation assets 69.9 33.2Property, plant and equipment 367.1 545.9Investments in associates and joint ventures 99.4 1.1 536.4 580.2Current assetsInventories 11.9 13.9Trade and other receivables 112.9 120.5Cash and cash equivalents 60.1 68.1 184.9 202.5Total assets 721.3 782.7Current liabilitiesTrade and other payables (126.4) (125.1)Current tax payable (23.3) (23.3) (149.7) (148.4)Non-current liabilitiesLong term debt (38.6) (38.6)Deferred tax liabilities (98.5) (215.8)Long term provisions (21.1) (22.8) Long term employee benefit plans - (8.2) (158.2) (285.4)Total liabilities (307.9) (433.8)Net assets 413.4 348.9EquityShare capital 74.0 74.0Share premium account 6.1 6.1Retained earnings 333.3 268.8 413.4 348.9 Consolidated Cash Flow Statement For the six months ended 30 June 2004 UK GAAP IFRS numbers in IFRS format $ million $ millionOperating activitiesProfit before taxation 52.8 40.0Depreciation, depletion and amortisation 28.2 34.6Exploration expense 5.1 22.7Increase in inventories (1.1) (1.3)Increase in trade and other receivables (3.8) (3.8)Increase in trade and other payables 5.8 4.1Interest received 1.6 1.6Interest receivable (1.5) (1.5)Interest paid (1.3) (1.3)Interest payable 2.5 2.5Other finance income (2.1) (2.1)Income taxes paid (24.8) (24.8)Net cash provided by operating activities 61.4 70.7 Investing activitiesCapital expenditure (57.7) (60.4)Inflow of funds from joint venture 14.2Net cash used in investing activities (43.5) (60.4) Financing activitiesIssue of ordinary shares 3.8 3.8Repayment of long term financing (61.2) (61.2)Management of liquid resources 47.5Net cash used in financing activities (9.9) (57.4)Currency translation differences relating to cash and cash equivalents 1.2(Decrease)/increase in cash and cash equivalents 8.0 (45.9)Cash and cash equivalents at the beginning of period 5.8 113.9Cash and cash equivalents at the end of period 13.8 68.0 Consolidated Opening Balance Sheet At 1 January 2004 UK GAAP IFRS Numbers in IFRS format $ million $ millionNon current assets Exploration and evaluation assets 35.8 14.5Property, plant and equipment 368.2 554.1Investments in associates and joint ventures 113.1 11.5 517.1 580.1Current assetsInventories 10.9 12.7Trade and other receivables 112.9 118.9Cash and cash equivalent 109.0 113.8 232.8 245.4Total assets 749.9 825.5Current liabilitiesTrade and other payables (95.1) (93.8)Current tax payable (46.6) (46.6) (141.7) (140.4)Non-current liabilitiesLong term debt (99.5) (99.5)Deferred tax liabilities (102.7) (219.9)Long term provisions (17.2) (20.1) Long term employee benefit plans deficits (8.1) (219.4) (347.6)Total liabilities (361.1) (488.0)Net assets 388.8 337.5EquityShare capital 73.0 73.0Share premium account 3.4 3.4Retained earnings 312.4 261.1 388.8 337.5 INDEPENDENT AUDITORS' REPORT TO THE BOARD OF DIRECTORS OF PREMIER OIL PLC ON THEPRELIMINARY COMPARATIVE IFRS FINANCIAL INFORMATION We have audited the preliminary comparative IFRS financial information ofPremier Oil plc for the year ended 31 December 2004 which comprises theconsolidated balance sheet, income statement, movements in shareholders' equityand cash flow statement and the Basis of Preparation statement in Section 2, theAccounting Policies in Section 3 and the related notes except in relation toIAS39. This report is made solely to the Board of Directors, in accordance with ourengagement letter engagement dated 17 August 2005 and solely for the purpose ofassisting with the transition to IFRS. Our audit work will be undertaken sothat we might state to the Company's board of directors those matters we arerequired to state to them in an auditors' report and for no other purpose. Tothe fullest extent permitted by law, we will not accept or assume responsibilityto anyone other than the Company for our audit work, for our report, or for theopinions we have formed. Respective responsibilities of directors and auditors The Company's directors are responsible for ensuring that the Company and theGroup maintain proper accounting records and for the preparation of thepreliminary comparative IFRS financial information on the basis set out in theBasis of Preparation statement in Section 2, which describes how IFRS will beapplied under IFRS 1, including the assumptions the directors have made aboutthe standards and interpretations expected to be effective, and the policiesexpected to be adopted, when the Company prepares its first complete set of IFRSfinancial statements as at 31December 2005. Our responsibility is to audit thepreliminary comparative financial information in accordance with relevant UnitedKingdom legal and regulatory requirements and auditing standards and report toyou our opinion as to whether the preliminary comparative IFRS financialinformation is prepared, in all material respects, on the basis set out inSection 2. We read the other information contained in the preliminary comparative IFRSfinancial information for the above year and consider the implications for ourreport if we become aware of any apparent misstatements or materialinconsistencies with the preliminary comparative IFRS financial information. Basis of audit opinion We conducted our audit in accordance with United Kingdom auditing standardsissued by the Auditing Practices Board. An audit includes examination, on a testbasis, of evidence relevant to the amounts and disclosures in the preliminarycomparative IFRS financial information. It also includes an assessment of thesignificant estimates and judgements made by the directors in the preparation ofthe preliminary comparative IFRS financial information and of whether theaccounting policies are appropriate to the circumstances of the group,consistently applied and adequately disclosed. We planned and performed our audit so as to obtain all the information andexplanations which we considered necessary in order to provide us withsufficient evidence to give reasonable assurance that the preliminarycomparative IFRS financial information is free from material misstatement,whether caused by fraud or other irregularity or error. In forming our opinion,we also evaluated the overall adequacy of the presentation of information in thepreliminary comparative IFRS financial information. Without qualifying our opinion, we draw attention to the fact that to Section 2explains why there is a possibility that the accompanying preliminarycomparative IFRS comparative financial information may require adjustment beforeconstituting the final comparative IFRS financial information. Moreover, weRelated Shares:
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