Interim Results

RNS Number : 8006Q

Maple Energy plc

10 August 2010

 

Immediate Release

 

10 August 2010

 

MAPLE ENERGY PLC

("MAPLE" OR THE "COMPANY")

Preliminary results

for the six months ended 30 June 2010

 

Maple Energy plc (AIM: MPLE, LIMA: MPLE), an integrated independent energy company with assets and operations in Peru, today announces its preliminary financial results for the six months ended 30 June 2010.

 

Key Financial Highlights

 

·; Adjusted EBITDA (defined below) for the six months ended 30 June 2010 was US$5.3 million compared to US$2.4 million in 2009

 

·; Gross profit for the six months ended 30 June 2010 was US$10.8 million compared with US$8.0 million in 2009

 

·; Revenues increased to US$35.0 million for the six months ended 30 June 2010 compared with US$28.3 million in 2009, primarily due to increases in international hydrocarbon prices

 

·; Depreciation and amortisation expense was US$4.5 million for the six months ended 30 June 2010 compared to US$2.2 million in 2009

 

·; Net profit after taxes of US$0.1 million for the six months ended 30 June 2010 (US$0.03 cents per share) compared to a net loss after taxes of US$15.5 million in 2009 (US$16.29 cents per share)

 

 

Other Financial Highlights

 

·; Closed placing of new ordinary shares in the capital markets in January 2010 for gross proceeds of approximately US$11.8 million

 

·; Drew down US$0.7 million from the US$30 million standby equity distribution agreement (the "SEDA") with YA Global Master SPV Ltd ("Yorkville")

 

·; Fondo de Inversion en Infraestructura, Servicios Publicos y Recursos Naturales ("AC Capitales") acquired 40,018 new shares of The Maple Companies, Limited ("MCL"), one of the Company's subsidiaries, for US$0.9 million pursuant to certain pre-emption rights held by AC Capitales

 

·; Placed new ordinary shares in the capital markets in June 2010 for gross proceeds of approximately US$27.9 million

 

·; Entered into an agreement to issue and sell convertible preferred shares of MCL to AC Capitales for gross proceeds of US$12.5 million, which closed in July 2010

 

·; Sold the 2,000 horsepower, heli-transportable drilling rig ("Rig 1") for US$19.1 million plus certain costs to a third party generating a profit of US$1.8 million

 

·; Made additional investments in the Ethanol Project during the six months ended 30 June 2010 totalling US$20.0 million

 

 

Ethanol Project Highlights

 

·; Achieved significant progress towards completing the financing of the Ethanol Project's estimated US$254.0 million budget through a combination of equity and project debt including placing of new ordinary shares of Maple in the capital markets and a firm debt financing commitment

 

·; Completed the civil construction works for the Macacara pump station, the first of two planned Ethanol Project pump stations on the Chira River

 

·; Substantially completed the civil works on six drip pump stations and all works on two additional drip pump stations

 

·; Installed a 750-metre water canal and approximately 19 kilometres of water pipelines to date

 

·; Installed over 900 hectares of drip irrigation systems to date

 

·; Sugar cane reception, handling and preparation equipment; sugar juice extraction equipment; and sugar juice treatment equipment are under construction

 

·; Boiler and complementary steam generation equipment are under construction

 

·; Fermentation, distillation and dehydration equipment has been delivered or is currently being shipped to Peru

 

·; 37 megawatt turbogeneration unit has been prepared for shipment to Peru

 

·; Completed substantially all of the engineering work for the integration of the major equipment packages for the industrial plant

 

·; Executed a port facilities agreement with Penta Tanks Terminals ("Penta") for the design, engineering, construction and operation of the storage, handling and port facilities in Paita, Peru

 

 

Hydrocarbon Production, Refining and Marketing Highlights

 

·; Obtained a retention period from Perupetro S.A. allowing for additional time to evaluate and develop the Devonian shale gas opportunity in Block 31-E

 

·; Refinery feedstock averaged approximately 2,187 barrels per day ("bpd") for the six months ended 30 June 2010 compared to 2,164 bpd in 2009 in the same period, consisting of natural gasolines supplied by Aguaytia Energy del Peru ("Aguaytia Energy") and crude oil from Maple´s oilfields

 

·; Average daily sales of refined products were 1,993 bpd for the six months ended 30 June 2010 compared to 2,106 bpd for the first six months of 2009

 

·; Average daily crude oil production for the six months ended 30 June 2010 was approximately 498 bpd compared to approximately 499 bpd for the first six months of 2009

 

 

Board Changes

 

·; As announced on 4 August 2010, Mr. Nigel Christie has been appointed Non-executive Chairman of Maple. Mr. Alberto Camet and Mr. Antonio Villa Mardon have also joined the Board as Non-executive Directors.

 

 

Nigel Christie, Non-executive Chairman of Maple Energy, commented today:

"I am very pleased with the results that Maple has announced today which show significant and welcome improvements in revenue and profits compared to the same period in 2009. Maple continues to deliver cash flow from its oil production, refinery and marketing operations which contribute to our strategy of building a leading integrated energy company in Peru. As part of that strategy, much of our attention is now focused on our significant Ethanol Project where the Company continues to make excellent progress towards the completion of the agricultural development and the industrial facilities. Maple remains on target to produce ethanol commercially in 2011."

 

 

For further information, please contact

Maple Energy plc (+ 51 1 611 4000)

Nigel Christie, Chairman of the Board and Non-executive Director

Rex W. Canon, Chief Executive Officer, President and Executive Director

 

Jefferies International Limited (+44 20 7029 8000)

Oliver Griffiths

 

Mirabaud Securities Ltd (+44 20 7321 2508)

Peter Krens

Rory Scott

 

Citigate Dewe Rogerson (+44 20 7638 9571)

Martin Jackson

George Cazenove

 

Earnings Call

Rex W. Canon, Chief Executive Officer, and Raymond Cochard, Chief Financial Officer, will host a conference call to present and discuss the Company's results for the six months ended 30 June 2010 on Thursday, 12 August 2010 at 4:00 pm BST (10:00 a.m. Peruvian time). The call can be accessed by dialling 0800 634 5205 (Freephone UK), 1 866 629 2704 (Freephone US) or +44 (0)208 817 9301 (International including Peru). Call participants will be asked for their full name, company details, and pass code. The pass code for this call is "Maple Energy". A recording of the conference call will be available shortly thereafter on Maple's website at www.maple-energy.com

 

2010 Half Year Operating Results

 

For the six months ended 30 June 2010, revenues increased by 23.6% to US$35.0 million compared with US$28.3 million in 2009 primarily due to higher crude oil prices during the first half of 2010 compared to the previous year. The Company's gross profit for the six months ended 30 June 2010 increased by 35.4% to US$10.8 million compared with US$8.0 million for the six months ended 30 June 2009.

 

Maple generated net profit after taxes of US$0.1 million for the six months ended 30 June 2010 (US$0.03 cents per share) compared to a net loss after taxes of US$15.5 million for the six months ended 30 June 2009 (US$16.29 cents per share). Adjusted EBITDA, a key performance indicator for measuring Maple's underlying financial operating efficiency, was US$5.3 million for the six months ended 30 June 2010 compared to US$2.4 million in the same period in 2009.

 

The table below shows Maple's (i) summary consolidated financial data for the six months ended 30 June 2010, (ii) summary consolidated financial data for the six months ended 30 June 2009, and (iii) other summary financial and operating data.

 

Key Performance Indicators
	For the six months ended 30 June 2010	For the six months ended 30 June 2009
Refinery sales volume, barrels	360,798	381,098
Gross profit per barrel sold	US$29.90	US$20.92
	US$'000	US$'000
	Consolidated Unaudited	Consolidated Unaudited
Revenue from operations	35,015	28,336
Gross profit	10,789	7,971
Operating profit/(loss)	1,238	(2,607)
Share of profit of an associate	-	1,898
Net profit/(loss) after taxes	65	(15,496)
Adjusted EBITDA (1)	5,336	2,363

 

(1) Adjusted Earnings Before Interest Taxation Depreciation and Amortisation ("Adjusted EBITDA") is calculated as operating profit/(loss) before exploration expenses plus depreciation, amortisation, goodwill impairment, and workers' profit sharing, but including share of profit of an associate.

 

Shown below is a reconciliation of operating profit/(loss) to Adjusted EBITDA:

 

	For the six months		For the six months
	ended 30 June 2010		ended 30 June  2009
	US$'000		US$'000
	Consolidated Unaudited		Consolidated Unaudited
Operating income/(loss)	1,238		(2,607)
Depreciation and Amortisation	4,514		2,232
Workers' profit sharing	(416)		840
Share of profit of an associate	-		1,898
	_______		_______
Adjusted EBITDA	5,336		2,363
	========		========

 

 

Cash and cash equivalents were US$7.7 million at 30 June 2010 compared to US$22.5 million at 30 June 2009. The lower cash and cash equivalents balance was primarily due to capital expenditures relating to the Ethanol Project.

 

Cost of sales for the six months ended 30 June 2010 was US$24.2 million compared to US$20.4 million for the same period in 2009. Cost of sales was higher in 2010 primarily due to the increased costs for natural gasoline purchased from Aguaytia Energy and increased royalty payments paid to the Peruvian government. The most significant factor increasing Maple's cost of sales was the cost of natural gasoline purchased from Aguaytia Energy, which increased primarily due to higher crude oil prices during the first half of 2010 compared to the previous year. During the first half of 2010, the cost per barrel of natural gasoline was US$51.38 compared to a cost per barrel of US$34.85 during the same period in 2009. Another significant factor affecting Maple's cost of sales was the increased royalty paid by Maple to the Peruvian government for its production from its producing fields. During the first half of 2010, Maple's total royalty payments increased to US$2.5 million compared to US$1.4 million in the previous year.

 

In September 2009, the Company concluded an internal review to identify opportunities to reduce costs without significantly impacting ongoing operations in each of its existing business units. As a result of this review, Maple identified and implemented a significant cost reduction programme which decreased field operation and administrative expenses during the first half of 2010 compared to the same period in 2009. As a result, increases in cost of sales were partially offset by decreases in cost of sales related to a reduction in field operating personnel pursuant to this programme. Administrative expenses decreased to US$6.5 million during the first half of 2010 compared to US$7.1 million in the same period last year. The Company had 366 employees as of 30 June 2010 compared to 423 on 31 December 2009 and 548 as of 30 June 2009. The reduction in employees was primarily related to cost reduction programmes implemented by the Company.

 

Outlook for the remainder of 2010

 

Maple expects 2010 to be another important year for the Company as it pursues its strategy of building a leading integrated energy company in Peru. The Company will primarily focus on accelerating the development of its Ethanol Project, including the agricultural, industrial and financing components. The Company expects to strengthen its cash flow from operations through optimising its hydrocarbon production, refining and marketing activities and implementing cost reduction programmes. In addition, Maple plans to continue evaluating the shale gas opportunity in Block 31-E and, seek to develop this asset with an industry partner.

 

The timing and completion of the Company's 2010 operating and investing activities are subject to a number of factors, including availability of services and equipment as well as governmental approvals. As a result of these and other factors, Maple may increase or decrease planned activities or priortise certain projects over others during 2010. The Company's capital programme is expected to be funded through the Company's available cash from operations and debt financing commitments related to the Ethanol Project.

 

Ethanol Project

 

The Ethanol Project is expected to advance significantly during 2010, and the Company anticipates the commencement of commercial operations in the middle of 2011. In preparation for the start of commercial operations, the Company will be focused on the following activities in 2010: (i) achieving first disbursement of the senior debt financing for the Ethanol Project, (ii) commencement of commercial planting of sugar cane using seed cane from the Company's 345-hectare seed cane farm, (iii) completion and commencement of operation of additional portions of the hydraulic infrastructure, including the water conveyance system, reservoirs and pump stations, (iv) delivery of major equipment for the industrial facilities including the ethanol production facility and the power generation plant (collectively the "Ethanol Plant") to the plant site on the plantation, (v) beginning and advancing on-site construction of the Ethanol Plant, (vi) beginning construction of the electric transmission line to connect the Ethanol Project to the national power grid, and (vii) commencement of construction of the ethanol storage and loading facilities by Penta contracted by Maple to build and operate these facilities.

 

Hydrocarbon Production, Refining and Marketing Operations

 

At this time, the Company's primary source of cash flow is from its hydrocarbon production, refining and marketing operations. In order to achieve further efficiencies and increases in cash flow from this business, Maple has recently prepared a cost reduction plan, which is in addition to the cost reduction programme announced in 2009 and which will be substantially implemented during the second half of 2010. The objective of this additional plan is to reduce expenditures by an aggregate amount of approximately US$2.0 million on an annual basis. These expense reductions are not expected to have a material impact on current crude oil production or refinery throughput volumes.

 

Development Drilling Programme

 

Maple's oilfield development programme for 2010 includes fracture stimulation for certain of the wells drilled in 2009 to further improve production. The Company does not plan to drill any additional wells in the Maquia and Agua Caliente fields during 2010.

 

Devonian Shale Gas Opportunity in Block 31-E

 

The Company has obtained a retention period from Perupetro allowing for additional time to evaluate and develop the Devonian shale gas opportunity in Block 31-E. In the second half of 2010, Maple intends to finalise with Perupetro the work programme required under the terms of the retention period, including both the scope and timing of the works. Maple plans to identify a potential joint venture partner with relevant industry experience in the development of unconventional hydrocarbon resources such as shale gas. By eventually joint venturing with an industry partner, the Company expects to utilise such a partner's expertise in further evaluating the opportunity while also reducing the Company's capital requirements by having the joint venture partner fund a substantial portion of the costs.

 

The execution of all of these activities by Maple's dedicated team of employees is expected to add significant value to the Company. By making substantial progress on the Ethanol Project, optimising the hydrocarbon production and refining activities, and advancing the shale gas opportunity, Maple will further its mission of being a leading integrated energy company in Peru.

 

Forward-Looking Statements

 

Except for the historical information contained in this interim report, statements contained in this document, particularly those regarding possible, projected or assumed future performance and results, including growth outlook, forecasted economics, operations, production, contracting, costs, prices, earnings, returns and potential growth, are or may include forward-looking statements. Such statements relate to future events and expectations and as such involve known and unknown risks and uncertainties. These risks and uncertainties include, among other things, market conditions, the price of hydrocarbons and ethanol, weather risks, economic and political risks and other factors discussed in Maple Energy plc's Admission Document available on the Company's website (www.maple-energy.com). Forward-looking statements are not guarantees of future performance or an assurance that Maple's current assumptions and projections are valid. Actual results, actions and developments may differ materially from those expressed or implied by those forward-looking statements depending on a variety of factors. Furthermore, any forward-looking statements presented are expressed in good faith and are believed to have a reasonable basis as of the date of this information for the six months ended 30 June 2010. These forward-looking statements speak only as at the date of this information, and Maple Energy plc does not assume any obligation to update any forward-looking statements contained herein, whether as a result of new information, future events or otherwise.

 

In this interim report, "we," "us," "our," "the Group," "the Company," and "Maple" refer to Maple Energy plc and its subsidiaries, unless otherwise indicated or the context otherwise requires.

 

 

CONSOLIDATED INCOME STATEMENT

for the six months ended 30 June 2010

Continuing operations			For the six months ended 30 June 2010 Unaudited US$'000	For the six months ended 30 June 2009 Unaudited US$'000
Revenue			35,015	28,336
Cost of sales			(24,226)	(20,365)
			___________	___________
Gross profit			10,789	7,971
			___________	___________
Administrative expenses			(6,508)	(7,120)
Selling and distribution costs			(2,297)	(1,957)
Depreciation and amortisation			(2,506)	(1,501)
Gain on sale of Rig 1			1,760	-
			___________	___________
Total operating expenses			(9,551)	(10,578)
			___________	___________
Operating profit/(loss)			1,238	(2,607)
Finance revenue			4	38
Finance costs			(1,499)	(1,996)
			___________	___________
Loss before tax from continuing operations			(257)	(4,565)
Income tax expense			322	(2,532)
			___________	___________
Profit/(loss) for the year from continuing operations			65	(7,097)
			==========	==========
Discontinued operations
Share of profit of an associate			-	1,898
Loss on sale of investment in an associate			-	(10,297)
			___________	___________
Loss for the year from discontinued operations			-	(8,399)
			==========	==========
Profit/(loss) for the year			65	(15,496)
			==========	==========
Profit/(loss) attributable to:
Equity holders of the parent			(29)	(14,535)
Minority interests			94	(961)
			____________	____________
			65	(15,496)
			==========	==========
Basic and Diluted loss per share attributable to ordinary equity holders of the parent		US$ (cent)	(0.03)	(16.29)
			=======	=======
Basic and Diluted loss per share from continuing operations attributable to ordinary equity holders of the parent		US$ (cent)	(0.03)	(7.53)
			=======	=======

 

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

for the six months ended 30 June 2010

 

		For the six months ended 30 June 2010 Unaudited US$'000	For the six months ended 30 June 2009 Unaudited US$'000
Profit/(loss) for the year		65	(15,496)
		___________	___________
Cash flow hedges: (Loss)/Gain arising during the six months ended 30 June Cross-currency swap Amounts recycled to the consolidated income statement to offset foreign exchange on hedged loan     Net gain on cash flow hedge		(36)   (93) ________   (129)	823   (249) ________   574
Income tax effect		48	(212)
		____________	____________
		(81) ________	362 ________
Other comprehensive (loss)/income for the year, net of tax		(81) ________	362 ________
Total comprehensive loss for the year, net of tax		(16)	(15,134)
		==========	==========
Loss attributable to:
Equity holders of the parent		(106)	(14,173)
Minority interests		90	(961)
		____________	________
		(16)	(15,134)
		==========	==========

 

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

as at 30 June 2010

ASSETS Non current assets		30 June 2010 Unaudited US$'000	31 Dec 2009 Audited US$'000	30 June 2009 Unaudited US$'000
Property, plant and equipment		84,628	75,276	66,118
Other intangible assets		58,374	52,930	53,941
Exploration and evaluation assets		30,300	30,376	15,057
Other non-current financial assets		2,607	2,672	441
		_________________	_________________	_________________
		175,909	161,254	135,557
		______________	______________	______________
Current assets
Biological asset		774	501	-
Other current financial assets		510	481	381
Income tax recoverable		966	1,733	1,969
Prepayments and other assets		9,842	7,120	7,209
Inventories		10,465	9,074	12,174
Trade and other receivables		4,516	4,904	3,165
Cash and cash equivalents		7,669	5,382	22,454
Restricted cash		957	1,790	2,587
		_________________	_________________	_________________
		35,699	30,985	49,939
Assets classified as held for sale		-	17,355	-
		_________________	_________________	_________________
		35,699	48,340	49,939
		__________	__________	__________
TOTAL ASSETS		211,608	209,594	185,496
		=========	=========	=========
EQUITY AND LIABILITIES
Equity attributable to equity holders of the parent
Issued capital		1,492	895	892
Share premium		129,657	91,377	91,075
Other reserves		3,926	3,920	3,963
Merger reserve		42,647	42,647	42,647
Retained loss		(38,036)	(38,007)	(29,282)
		_________________	_________________	_________________
		139,686	100,832	109,273
Minority interests		9,212	8,225	8,797
		_________________	_________________	_________________
Total equity		148,898	109,057	118,070
		_________________	_________________	_________________
Non-current liabilities
Long-term debt		6,177	143	18,023
Other non-current liabilities		89	130	354
Provisions		1,222	1,095	1,088
Deferred income tax liability		15,169	16,345	14,308
Deferred workers' profit sharing liability		5,643	6,054	3,830
		_________________	_________________	_________________
		28,300	23,767	37,603
		__________	__________	__________
Current liabilities
Current portion of long-term debt		3,317	19,004	6,078
Trade and other payables		9,382	17,291	5,681
Bank loans		10,161	12,303	4,524
Other current liabilities		11,550	28,172	13,540
		_________________	_________________	_________________
		34,410	76,770	29,823
		_________________	_________________	_________________
TOTAL LIABILITIES		62,710	100,537	67,426
		_________________	_________________	_________________
TOTAL EQUITY AND LIABILITIES		211,608	209,594	185,496
		=========	=========	=========

 

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

for the six months ended 30 June 2010

	Attributable to equity holders of the parent
	______________________________________________________________________________________________________________
	Number of Ordinary Shares	Issued capital US$'000	Share premium US$'000	Other reserves US$'000	Merger reserve US$'000	Retained loss US$'000	Total US$'000	Minority interests US$'000	Total equity US$'000
At 1 January 2010	89,494,987	895	91,377	3,920	42,647	(38,007)	100,832	8,225	109,057
Loss for the six months period Other comprehensive income	- -	- -	- -	- (77)	- -	(29) -	(29) (77)	94 (4)	65 (81)
	_____________	___________	___________	___________	___________	___________	___________	___________	___________
Total comprehensive loss	-	-	-	(77)	-	(29)	(106)	90	(16)
Issue of share capital Issue of share capital to minority interest	59,075,000 -	591 -	39,141 -	- -	- -	- -	39,732 -	- 897	39,732 897
Transaction costs on issue of share capital	-	-	(1,515)	-	-	-	(1,515)	-	(1,515)
Share-based payment - employees Share-based payment exercised - non employees	-   645,969	-   6	-   654	83   -	-   -	-   -	83   660	-   -	83   660
	_____________	___________	___________	___________	___________	___________	___________	___________	___________
At 30 June 2010 (unaudited)	149,215,956	1,492	129,657	3,926	42,647	(38,036)	139,686	9,212	148,898
	============	==========	==========	==========	==========	==========	==========	==========	==========
At 1 January 2009	89,217,054	892	91,036	3,113	42,647	(14,747)	122,941	9,736	132,677
Loss for the six months period Other comprehensive income	- -	- -	- -	- 340	- -	(14,535) -	(14,535) 340	(961) 22	(15,496) 362
	_____________	___________	___________	___________	___________	___________	___________	___________	___________
Total comprehensive loss Share-based payment - employees	- -	- -	- -	340 488	- -	(14,535) -	(14,195) 488	(939) -	(15,134) 488
Share options exercised	20,000	-	39	-	-	-	39	-	39
	_____________	___________	___________	___________	___________	___________	___________	___________	___________
At 30 June 2009 (unaudited)	89,237,054	892	91,075	3,941	42,647	(29,282)	109,273	8,797	118,070
	============	==========	==========	==========	==========	==========	==========	==========	==========

CONSOLIDATED STATEMENT OF CASH FLOWS

for the six months ended 30 June 2010

		For the six months ended 30 June 2010 Unaudited US$'000	For the six months ended 30 June 2009 Unaudited US$'000
Operating activities
Collection from customers		52,201	45,118
Payments to suppliers and third parties		(73,342)	(36,235)
Payments to employees		(5,213)	(10,351)
Interest paid		(1,536)	(1,842)
Income tax paid		(33)	(110)
		_______	_______
Net cash used in operating activities		(27,923)	(3,420)
		_______	_______
Investing activities
Proceeds from sale of Rig 1		20,230	-
Decrease in restricted cash		833	2,404
Purchase of property, plant and equipment		(11,158)	(17,991)
Additions of exploration and other intangibles		(7,838)	(11,893)
Interest received		4	38
Proceeds from sale of investment in an associate		-	28,001
Increase in restricted cash		-	(1,588)
		_______	_______
Net cash provided/(used) in investing activities		2,071	(1,029)
		_______	_______
Financing activities
Proceeds from issue of share capital		40,629	-
Proceeds from share options exercised		660	33
Payments of long-term debt		(11,148)	(89)
Proceeds from long-term debt		1,400	17,130
Payments of bank loans		(10,092)	(10,369)
Proceeds from bank loans		7,950	11,493
Transaction costs		(1,515)	-
		_______	_______
Net cash provided by financing activities		27,884	18,198
		_______	_______
Net decrease in cash and cash equivalents during the year		2,032	13,749
Net foreign exchange difference		255	162
Cash and cash equivalents at beginning of year		5,382	8,543
		_______	_______
Cash and cash equivalents at end of year		7,669	22,454
		=========	=========

 

1. BASIS OF PREPARATION

 

The interim condensed consolidated financial statements for the six months ended 30 June 2010 have been prepared in accordance with IAS 34 Interim Financial Reporting ("IAS 34"). The interim condensed consolidated financial information is presented in US dollars, and all values are rounded to the nearest thousand (US$'000), except where otherwise indicated.

 

The interim condensed consolidated financial statements do not include all the information and disclosures required in the annual financial statements, and should be read in conjunction with the Group's annual consolidated financial statements as at 31 December 2009.

 

2. CORPORATE INFORMATION

 

The interim condensed consolidated financial statements for the six months ended 30 June 2010 were authorised for issue in accordance with a resolution of the directors on 9 August 2010.

 

Maple Energy plc ("Maple" or the "Company") was incorporated in the Republic of Ireland on 18 October 2006. On 12 February 2007, the Company re-registered as a public limited company. The Company is domiciled in the Republic of Ireland.

 

On 5 January 2010, the Company completed a Placing Agreement in relation to the sale of 16,000,000 new ordinary shares at US$0.74 per ordinary share in a private placement to institutional investors for aggregate gross proceeds of US$11,840,000. Transaction costs incurred in connection with the placing amounted to US$423,000, and will be applied against share premium. Maple used the proceeds from the offering to fund capital expenditures for the Ethanol Project and for general corporate purposes.

 

On 22 January 2010, Maple completed its first drawdown from the SEDA for a total of US$10,000 at a price per share of US$1.15. The initial drawdown was limited to US$10,000 for administrative and logistical purposes. This first drawdown was supplemented with a second drawdown completed on 3 March 2010 for US$650,000 at a price per share of US$1.02. Yorkville received 8,676 and 637,293 ordinary shares, respectively, in the two drawdowns.

 

On 17 February 2010, AC Capitales, a significant shareholder in MCL, exercised certain pre-emption rights to allow AC Capitales to maintain its pro rata equity interest in MCL. AC Capitales acquired 40,018 MCL shares for approximately US$0.9 million (US$22.42 per share). Each share of MCL held by AC Capitales may be converted, at AC Capitales' option, into 30 ordinary shares of the Company.

 

On 9 June 2010, the Company executed a Placing Agreement in connection with the issuance of 43,075,000 ordinary shares at approximately US$0.65 per ordinary share in a private placement to investors for aggregate gross proceeds of approximately US$27,891,000. Transaction costs incurred in connection with the placing amounted to US$1,092,000 and will be applied against share premium. Maple used the proceeds from the offering to fund capital expenditures for the Ethanol Project.

 

3. GOING CONCERN

The Group is currently in the process of fulfilling certain conditions required prior to the first disbursement of the debt for the Ethanol Project.

 

Maple has executed agreements with three multi-lateral development banks and a Peruvian financial institution (the "Senior Lenders") to provide senior secured debt financing of US$140.0 million for the Ethanol Project. Prior to receiving any funds under this senior debt financing, the Group is required to satisfy certain conditions. The remaining conditions to be met include, among others, (i) negotiation and execution of security documents, including the accounts "waterfall" agreement and an intercreditor agreement among the Senior Lenders, and perfection of security interests in favour of the Senior Lenders in all secured property, (ii) establishment of a US$12.5 million standby letter of credit for cost overruns, delays or other necessary expenditures (the "Sponsor Support Credit Enhancement"), (iii) execution of an off-take agreement for the ethanol production with a reputable counterparty, (iv) continuing execution of the Ethanol Project, according to the Ethanol Project's proposed budget and schedule, and (v) other conditions customary for a transaction of this type. Maple has received a commitment, subject to certain terms and conditions, from a Peruvian financial institution for the Sponsor Support Credit Enhancement. The Directors are of the opinion that the remaining conditions will be met on a timely basis. However, to the extent that the remaining conditions are outside of the control of Maple, they create uncertainty related to the first disbursement of the senior debt financing.

The Group has prepared forecasts and cash flow projections which take into account reasonably possible changes in the timing of cash inflows and funding, but which assume receipt of funds under the senior debt for the Ethanol Project. These cash flow projections have been prepared in detail through to 31 December 2011 and support the conclusion of the Directors that the Group will be able to operate as a going concern within the level of its current resources and those anticipated in the future.

 

The cash flow projections are dependent on the Group substantially achieving its forecast EBITDA as set out in the Group's profit forecast. These cash flow projections are dependent, among other things, on the currently envisaged timing of first production from the Ethanol Project, the price of ethanol, the capital expenditures in respect of the Ethanol Project being in line with budget, and sugar cane yields. The profit assumptions are also in part dependent on the price of oil over the period of the projections in addition to the Group's continued management of costs. The Directors believe that the Group's profit forecasts represent the Group's best estimate of the actual results over the forecast period at the date of approval of these interim condensed consolidated unaudited financial statements.

 

As discussed in the Annual Report and Financial Statements for the year ended 31 December 2009, the Directors have concluded that the funding requirements for the Ethanol Project represent a material uncertainty that may cast significant doubt about the Group and the Company's ability to continue as a going concern if it were to fail to meet the conditions for disbursement of the senior debt financing. Nevertheless, after making enquiries and considering the uncertainties described above, the Directors currently believe that the Group and the Company have and will continue to have adequate financial resources to continue in operation for the foreseeable future. For these reasons, the financial information of the Group and the Company has been prepared on a going concern basis.

 

Accordingly, this financial information does not include any adjustments to the carrying amount or classification of assets and liabilities that would result if the Group or Company was unable to continue as a going concern.

 

4. ACCOUNTING POLICIES

 

The accounting policies adopted in the preparation of the interim condensed consolidated financial statements are consistent with those followed in the preparation of the Group's annual consolidated financial statements for the year ended 31 December 2009, except for the adoption of the new standards and interpretations introduced on 1 January 2010, noted below:

 

IFRS 2 Share-based payment - Group Cash-settled Share-based Payment Transactions

The standard has been amended to clarify the accounting for group cash-settled share-based payment transactions. This amendment also supersedes IFRIC 8 and IFRIC 11. The adoption of this amendment did not have any impact on the financial position or performance of the Group.

 

IAS 39 Financial Instruments: Recognition and Measurement - Eligible Hedged Items

The amendment addresses the designation of a one-sided risk in a hedged item, and the designation of inflation as a hedged risk or portion thereof in particular situations. The amendment had no effect on the financial position or performance of the Group.

 

IFRIC 17 Distribution of Non-cash Assets to Owners

This interpretation provides guidance on accounting for arrangements whereby an entity distributes non-cash assets to shareholders either as a distribution of reserves or as dividends. The interpretation had no effect on the financial position or performance of the Group.

 

5. SEASONALITY

 

The Group operates continuously without fluctuations due to seasonality.

 

6. SEGMENT INFORMATION

 

Operating segments

For management purposes, the Group is organised into business units for which it may earn revenues and incur expenses and has three operating segments as follows:

 

- Exploration, production and marketing

 

- Ethanol

 

- Other and corporate

 

The Chief Operating Decision Maker (hereinafter "CODM") of Maple reviews the information of these segments on an individual basis. Ethanol is mainly referred to Maple Etanol S.R.L. which is a separate entity that manages the Ethanol Project. Exploration, production and marketing are managed through Maple Gas Corporation del Peru S.R.L. and Acer Comercial S.R.L., both separate entities, information for which is reviewed by the CODM together. The other segment includes investment holding companies.

 

Reportable segments

The Company considers that the operating segments and the reportable segments in the financial statements are the same. For the operating segments mentioned above, Maple will present the following information in accordance with IFRS 8:

 

·; Segment Revenue: the Company only includes revenues that are directly attributed to a specific segment together with the relevant portion of revenue that can be allocated to it on a reasonable basis.

 

·; Segment Result: The Company includes operating income/(loss) resulting from the operating activities of the specific segments. Finance revenue, finance costs and income tax expenses are also included in the specific operating segment.

 

·; Segment Assets: Management includes all assets used in the operating activities of the specific segment, comprising property, plant & equipment, assets held for sale, and intangible assets. Goodwill is presented in a separate line of the corresponding segment.

 

·; Segment Liabilities: Management includes all liabilities incurred in the operating activities of the specific segment.

 

	Exploration, production and marketing	Ethanol	Other and corporate	Adjustments and eliminations	Total Group
	US$'000	US$'000	US$'000	US$'000	US$'000
Six months ended 30 June 2010 (unaudited)
Revenue
Sales to external customers	35,015	-	-	-	35,015
Inter-segment sales	388	-	-	(388)	-
	____________	____________	____________	____________	____________
	35,403	-	-	(388)	35,015
Results
Operating income/(loss)	2,739	(104)	(1,397)	-	1,238
Finance revenue	4	-	-	-	4
Finance costs	(1,485)	(4)	(10)	-	(1,499)
	____________	____________	____________	____________	____________
				-
Profit/(loss) before tax from continuing operations	1,258	(108)	(1,407)	-	(257)
	____________	____________	____________	____________	____________
				-
Income tax expense	322	-	-	-	322
	____________	____________	____________	____________	____________
Profit/(loss) from continuing operations	1,580	(108)	(1,407)	-	65
	____________	____________	____________	____________	____________
Assets
Segment assets	113,540	49,316	60,540	(50,930)	172,466
Segment assets Goodwill	94,097 12,653	107,308 -	79,097 -	(81,547) -	198,955 12,653
	____________	____________	____________	____________	____________
At 30 June 2010	106,750	107,308	79,097	(81,547)	211,608
	____________	____________	____________	____________	____________

1. Inter-segment revenues are eliminated on consolidation.

2. Inter-segment loans are eliminated on consolidation.

 

	Exploration, production and marketing	Ethanol	Other and corporate	Adjustments and eliminations	Total Group
	US$'000	US$'000	US$'000	US$'000	US$'000
Six months ended 30 June 2009 (unaudited)
Revenue
Sales to external customers	28,336	-	-	-	28,336
Inter-segment sales	378	-	-	(378)	-
	____________	____________	____________	____________	____________
	28,714	-	-	(378)	28,336
Results
Operating loss	(457)	(1,163)	(987)	-	(2,607)
Finance revenue	6	32	-	-	38
Finance costs	(1,587)	-	(409)	-	(1,996)
	____________	____________	____________	____________	____________
Loss before tax from continuing operations	(2,038)	(1,131)	(1,396)	-	(4,565)
	____________	____________	____________	____________	____________
Income tax expense	(2,532)	-	-	-	(2,532)
	____________	____________	____________	____________	____________
Loss from continuing operations	(4,570)	(1,131)	(1,396)	-	(7,097)
	____________	____________	____________	____________	____________
Assets
Segment assets	113,917	49,316	60,540	(50,930)	172,843
Goodwill	12,653	-	-	-	12,653
	____________	____________	____________	____________	____________
At 30 June 2009	126,570	49,316	60,540	(50,930)	185,496
	____________	____________	____________	____________	____________

 

1. Inter-segment revenues are eliminated on consolidation.

2. Inter-segment interest is eliminated on consolidation.

3. Inter-segment loans are eliminated on consolidation.

 

Non-current assets

Non-current assets are allocated based on where the assets are located:

	30 June 2010	30 June 2009
	US$'000	US$'000
Peru	171,261	134,516
British Virgin Islands	2,041	600
	_________	_________
	173,302	135,116
	_________	_________

 

 

Non-current assets for this purpose consist of property, plant and equipment, other intangible assets and exploration and evaluation assets.

 

7. IMPAIRMENT

 

Goodwill

As of 30 June 2010, goodwill arising on business combinations of US$12,653,000 has been allocated to the production and marketing cash generating unit. Goodwill is tested for impairment annually (as at 31 December) and when circumstances indicate the carrying value may be impaired. The Group's impairment test for goodwill and intangible assets with indefinite lives is based on value in use calculations that use a discounted cash flow model. The recoverable amount of the cash generating unit has been determined based on a value in use calculation using cash flow projections covering the period 2010 to 2024.

 

The key assumptions used to determine the recoverable amount for the different cash generating units were discussed in annual financial statements for the year ended 31 December 2009.

 

With regard to the assessment of value in use of the production and marketing cash generating unit, there are not significant changes to the sensitivity information disclosed at 31 December 2009, except for the oil prices. The Group's oil price assumption is an average of US$82 per barrel in 2010, US$86 per barrel in 2011, US$88 per barrel in 2012, US$89 per barrel in 2013, US$91 per barrel in 2014, US$90 per barrel in 2015 and beyond. For the six months through 30 June 2010, the oil prices averaged $78 per barrel.

 

The oil price is a key assumption in the Company's cash flow projections; therefore, management performed an impairment calculation as at 30 June 2010 updating only the oil price assumption. As a result of the updated analysis, management did not identify an impairment for this cash generating unit to which a goodwill of US$12,653,000 is allocated.

 

8. INCOME TAX AND WORKERS' PROFIT SHARING

 

(a) Income tax and workers' profit sharing regulations

The Company is subject to Irish tax regulations. Subsidiaries incorporated in the British Virgin Islands are not subject to income tax and workers' profit sharing. Peruvian subsidiaries of the Company are subject to the Peruvian tax system and Peruvian labour regulations. According to Peruvian regulations, companies operating in the refining sector that have more than 20 employees must pay profit sharing to their employees equivalent to 10 percent of taxable income.

 

Corporation tax in Ireland is 12.5% on trading activities and 25% on non-trading activities. Exploitation activities of hydrocarbons in Blocks 31-B and 31-D are subject to the common Peruvian tax regulations in force as of 30 March 1994 (30%). Exploration activities in Block 31-E are subject to the common Peruvian tax regulations in force as at 6 March 2001 (22%). Refining and commercial activities of hydrocarbons are subject to the current Peruvian tax regime (30%).

 

(b) Income tax and workers' profit sharing expense

	30 June 2010	30 June 2009
	US$'000	US$'000
Income tax
- Current	800	263
- Deferred	(1,122)	2,269
	___________	___________
	(322)	2,532
	==========	==========
Workers' profit sharing (presented as part of administrative expenses)
- Current	-	-
- Deferred	(416)	840
	___________	___________
	(416)	840
	==========	==========

 

 

The tax effect of the temporary differences associated with exploration costs and tax loss carry forward for which deferred tax assets have not been recognised aggregate to US$1,442,000 and US$9,722,000, respectively, and expire four years from the first period in which taxable profits arise. The deferred tax asset is not recognised due to uncertainty surrounding the existence of sufficient deductible profits when the temporary differences reverse.

 

9. LOSS PER SHARE

 

Basic loss per share amounts are calculated by dividing the net loss for the first half of 2010 attributable to ordinary equity holders of the parent by the weighted average number of ordinary shares outstanding during that period. Diluted loss per share amounts are calculated by dividing the net loss for the first half of 2010 attributable to ordinary equity holders of the parent by the weighted average number of ordinary shares outstanding during that period plus the weighted average number of ordinary shares that would be issued on the conversion of all the dilutive potential ordinary shares into ordinary shares.

 

The following reflects the loss and share data used in the basic and diluted earnings/(loss) per share computations:

 

	30 June 2010	30 June 2009
Numerator	US$'000	US$'000
Net loss attributable to equity holders of the parent for continuing operations	(29)	(6,714)
Net loss attributable to equity holders of the parent for discontinued operations	-	(7,821)
	__________	____________
Net loss attributable to equity holders of the parent for basic and diluted earnings	(29)	(14,535)
	============	============
	30 June 2010	30 June 2009
Denominator	Number	Number
Weighted average number of ordinary shares for basic and diluted loss per share	110,593,833	89,218,221
	_______________	____________
	US$	US$
	(cent)	(cent)
Basic and Diluted loss per share attributable to ordinary equity holders of the parent	(0.03)	(16.29)
	____________	____________

 

 

	US$	US$
	(cent)	(cent)
Basic and Diluted loss per share for continuing operations attributable to ordinary equity holders of the parent	(0.03)	(7.53)
	____________	____________

 

 

The Company has instruments in issue that could potentially dilute basic earnings per share in the future, but are not included in the calculation for the reasons outlined below:

 

·; Stock Option Agreement with AC Capitales - the Company granted AC Capitales an option to receive 7,786,560 (2009: 6,586,020) ordinary shares of US$0.01 each in exchange for the 259,552 (2009: 219,534) shares AC Capitales holds in the equity of MCL, a subsidiary of the Company. These potential ordinary shares are anti-dilutive at 30 June 2010;

 

·; Investment Agreement with AC Capitales - if a subsidiary of the Company has to make tax payments in connection with certain potential tax claims for the tax years 2001, 2002 and 2003, the Company shall compensate AC Capitales by one of the following, as selected by the Company, after consultation with AC Capitales: (i) make a payment equal to 10.989% of the amount of the payment ("Pro Rata Tax Claim Amount"); or (ii) an amount in shares of MCL that is equivalent to the number of shares of the Company having a then market value equal to the Pro Rata Tax Claim Amount. As the status of the contingency remained unsatisfied at 31 December 2009 and 2008, the contingently issuable ordinary shares are not included in the calculation of diluted loss per share at 30 June 2010; and

·; Employee Stock Options - these potential ordinary shares are anti-dilutive at 30 June 2010.

 

9. PROPERTY, PLANT AND EQUIPMENT

 

Acquisitions and disposals

During the six months ended 30 June 2010, the Group acquired assets with a cost of US$11,342,000 (2009:US$19,354,000). All the additions are related to the Ethanol Project.

 

10. ASSETS CLASSIFIED AS HELD FOR SALE

 

The Company entered into a letter agreement effective 15 March 2010 with Tuscany and Estrella Management Group Limited in which the Company agreed to exercise its option to purchase Rig 1 from Interbank and subsequently sell it to Tuscany for approximately US$19,120,000. Following the exercise of its purchase option to acquire Rig 1 under its existing sale-leaseback financing facility ("Lease Financing Facility") with Interbank, Maple transported and delivered the rig to Tuscany from its location in Block 31-E to two sites on the Ucayali river.

 

Tuscany paid US$19,120,000 for Rig 1, plus all costs associated with transportation of the rig to the Ucayali river delivery sites. The cost of Rig 1 was US$17,355,000. Approximately US$11,658,000 of the purchase price was paid to Interbank to extinguish Maple's outstanding debt obligations under the Lease Financing Facility and to pay value added taxes and certain fees associated with the transaction.

 

11. OTHER FINANCIAL ASSETS (INCLUDING DERIVATIVES)

 

	30 June 2010	30 June 2009
	US$'000	US$'000
Other financial asset
Available for sale investment - contingent consideration	2,041	-
	___________	___________
Total other financial asset	2,041	-
	==========	==========
Current	-	-
Non Current	2,041	-
	==========	==========
Derivative financial instruments
Cash flow hedge - cross-currency swap	1,076	822
	___________	___________
Total derivative financial instruments	1,076	822
	==========	==========
Current	510	381
Non Current	566	441
	==========	==========
Total other financial assets (including derivatives)	3,117	822
	==========	==========
Current	510	381
Non Current	2,607	441
	==========	==========

 

a) Cross-currency swap

In January 2009, the Group entered into a cross-currency swap to hedge its exposure to foreign exchange risk from a loan denominated in Peruvian currency (Nuevos Soles). The swap is highly effective, although any ineffectiveness will be recorded in the consolidated income statement. The loan amounted to S/31,560,000, equivalent to US$10,000,000 at the date of the credit facility agreement, with a fixed interest rate of 11.75%. The swap has the same contractual terms of the loan (interest and maturities, among others) and the Group must pay US$10,000,000 plus fixed interest at 8.56% and receive S/31,560,000 plus fixed interest at 11.75%. At 30 June 2010, the Group recognised an unrealised loss related to the fair value of the swap of US$36,000 in other comprehensive income of which an amount of US$93,000 was recycled to the income statement to offset the foreign exchange difference on the loan.

 

b) Contingent consideration

As part of the disposal of its associate interest in Aguaytia Energy, LLC, Maple retained certain rights to a contingent consideration of up to an additional US$7.0 million, related to the negotiation with Perupetro to obtain royalty rate amendments for Aguaytia Energy.

 

The contingent payment was based on the difference between (a) the net cash flows assuming that the royalty payment did not change from 100% of its 2008 baseline and (b) net cash flows assuming that the royalty rate was reduced to 63% of the 2008 baseline. As a financial instrument, the contingent consideration should be measured at fair value. As of the date of disposal, Maple's pro-rata share of the fair value of the financial instrument, based on probability weighted contingent consideration, amounts to US$2,041,000. There have been no movements in the fair value in the six months to 30 June 2010.

 

12. CASH AND CASH EQUIVALENTS AND RESTRICTED CASH

 

(a) Cash and cash equivalents

	30 June 2010	30 June 2009
	US$'000	US$'000
Cash at bank and in hand	5,225	20,902
Trust fund account	657	687
Time deposits	1,787	865
	___________	____________
	7,669	22,454
	===========	===========

 

At 30 June 2010 and 31 December 2009, the Company maintains time deposits which earn interest at an annual average rate between 3.00% and 4.00%, and mature in periods not exceeding 30 days.

 

 

(b) Restricted cash

	30 June 2010			30 June 2009
	US$'000			US$'000
Guarantee deposits	757			2,387
Restricted cash	200			200
	___________			____________
	957			2,587
	===========			===========

In March 2009, the Group granted security to Interbank of US$1,588,000 in connection with the lease finance facility. In March 2010, as a result of the Rig 1 sale and payment of the Interbank debt, this security was released.

 

13. SHARED BASED PAYMENT

 

The expense recognised for employee services during the first half of 2010 is US$83,000 (US$488,000 during the first half of 2009). As of 30 June 2010, 3,110,937 options are exercisable.

 

 

14. COMMITMENTS AND CONTINGENCIES

 

Refer to Note 27 to the annual consolidated financial statements as at 31 December 2009 for details of the Group's commitments and contingencies. The following significant events impact the results for the period:

 

 

(a) Capital commitments

 

At 30 June 2010, the Group had capital commitments of US$29,908,000 (31 December 2009: US$33,054,000) related to the Ethanol Project.

 

15. STATUTORY ACCOUNTS

 

This half year report does not constitute statutory accounts, copies of which are required to be annexed to the annual return. A copy of the statutory accounts for the year ended 31 December 2009 has been delivered to the Registrar of Companies. The auditors' report on those accounts was unqualified.

 

16. BOARD APPROVAL

 

The Board of Directors approved and authorised for issue the unaudited interim condensed consolidated financial statements in respect of the six months ended 30 June 2010 on 9 August 2010.

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