28th Sep 2005 07:01
Aminex PLC28 September 2005 Interim Results for the six months ended 30 June 2005 Aminex, the oil and gas company listed on the London and Irish Stock Exchanges,today announces its interim results for the half year ended 30 June 2005 Highlights • Production Sharing Agreement signed with North Korea • Placing and Open Offer of new shares raises net US$8 million • Satisfactory settlement reached with Petrom SA over Nyuni cost dispute • Farm-out agreement over part of Nyuni acreage signed with East Coast Energy Ltd • Net loss for period of US$1.9 million (2004: loss US$1.15 million) OVERVIEW During the period under review Aminex negotiated and finalised a form of modelProduction Sharing Agreement ("PSA") with the authorities in North Korea as partof its work obligation under the 2004 Petroleum Agreement with the government ofthat country and applied for formal exploration licences using the model PSAnegotiated. In Tanzania geological and geophysical work continued on the Nyunilicence in preparation for exploration activity due to be carried out during thethree year second period of the Nyuni-East Songo-Songo PSA which commenced inNovember 2004. A satisfactory conclusion was negotiated with Petrom SA over along-running farm-out dispute in connection with the Nyuni-1 well. Also in theperiod Aminex drilled the first of four development wells on the South WeslacoField and worked over the Sunny Ernst-1 well on the Alta Loma property, both inTexas. Since the end of the period a placing and open offer to shareholders wassuccessfully completed and the proceeds are being used to progress work on theGroup's existing projects as well as to advance other opportunities. In Augustthe Group achieved the unusual step of signing a PSA with the North Koreanauthorities covering virtually the entire country and its offshore waters, eastand west. Aminex took the view from the outset that the country's geologicalpotential outweighed the risk that the nuclear dispute would escalate out ofcontrol. The recent news from Beijing of the preliminary success of the longrunning and controversial six-party negotiations appears to vindicate thisposition. Earlier this month, the Group also announced that it had concluded afarm-out agreement for part of the Nyuni East Songo-Songo PSA in Tanzania withEast Coast Energy of Canada ("East Coast"). A seismic survey is due to commenceover Nyuni in October as part of this farm-out agreement and Aminex will takeadvantage of the seismic vessel's presence in the area to shoot new seismic overthe part of Nyuni which has not been farmed out to East Coast. This willinclude the prospect which was drilled in 2003-4 as the Nyuni-1 well and whichfound evidence of Jurassically sourced crude oil in East Africa for the firsttime. A number of other opportunities are currently under review and some are at anadvanced stage of negotiation. FINANCIAL REVIEW The results for the six-month period ended 30 June 2005 have been prepared inaccordance with International Financial Reporting Standards ("IFRS"). Theresults and cash flow statements for the six-month period ended 30 June 2004 andthe twelve-month period ended 31 December 2004 as well as the balance sheets at1 January 2004, 30 June 2004 and 31 December 2004 have been restated from theoriginally adopted Irish GAAP to conform with IFRS. Detailed movements betweenthe original Irish GAAP figures and the IFRS figures are set out in theaccompanying notes to the financial statements. Gross profit amounted to $0.4 million for the first six months of 2005 ($0.98million for the first six months of 2004). The 2004 figure included theoperating profit of the Vinton Dome property which was sold in December 2004 andwhich accounted for 70% of the Group's oil production in the period. Following asuccessful recompletion, the Alta Loma gas well was brought back on productiontowards the end of June 2005 having been out of commission since September 2004.As a consequence, gas production in the USA during the period has beensignificantly reduced. The Group benefited from higher oil and gas pricesduring the current period achieving $46.03 per barrel of oil, an increase of$10.85 over the comparative period, and $7.03 per mcf of gas, an increase of$0.59 per mcf over the comparative period. After charging administrativeexpenses of $2.23 million (2004: $2.13 million net of an offsetting profit of$143,000 on the sale of a Corsair drilling rig) and financing costs of $87,000(2004: $Nil), the net loss for the period amounted to $1.92 million (2004: loss$1.15 million). Exploration and evaluation expenditures of $0.12 million during the currentperiod related to the Group's assets in North Korea and Tanzania. A provision of$2.3 million relating to the Group's future decommissioning liability in the USAhas been set up at the beginning of the period with the associated cost includedin additions to property, plant and equipment. The high level of current tradeand other receivables at the period end includes the proceeds receivable fromthe Placing and Open Offer made to shareholders during June 2005 and which waspaid in early July. TANZANIA The second period of the Nyuni East Songo-Songo permit commenced in November2004 and involves a two well drilling commitment. This PSA was the first inTanzania ever to have been extended into a second period. The Nyuni prospectitself, drilled in 2003/4, fully justifies further work and there are at leastfour other untested prospects over which seismic will be shot in the fourthquarter of this year. Approximately 25% of the PSA has been farmed out to EastCoast which is the operator of the neighbouring Songo-Songo producing gas fieldand the farm-out area adjoins the Songo-Songo field. Songo-Songo has now beenon successful commercial production for over a year and it is an opportune timeto appraise the possibility of its extension into Aminex's acreage. A newcommercial gas well drilled under the farm-out agreement could be rapidly hookedup to Songo-Songo's existing production facilities and would fulfil one well outof the two well PSA obligation. Nyuni-1, a completely separate structure, wasspudded before Songo-Songo came on stream. The East Coast farm-out remainssubject to formal Tanzanian government approval. Elsewhere in Tanzania, Aminex is now close, it believes, to finalising a PSA forthe southern 12,000 square kilometre Ruvuma area currently held under atechnical evaluation agreement. Tanzania and the East African margin generally are attracting increasingindustry interest. Since our last report to shareholders Mozambique haslaunched a licensing round, Exxon-Mobil has farmed into large tracts offshoreMadagascar, while Tanzania itself has an ongoing deep water licensing round.Aminex believes the timing of its entry into Tanzania was good and looks forwardto making further progress on its large acreage portfolio. NORTH KOREA Since signing a Petroleum Agreement last year Aminex moved quickly to establisha model PSA, applied for acreage and has now signed a comprehensive PSA. Duringthis time an extensive data evaluation exercise has taken place includingnumerous visits by Aminex specialists to Pyongyang where good working relationshave been established with Korean specialists. On 4 August Aminex and itswholly-owned subsidiary Korex Ltd. entered into a PSA with the North Koreanauthorities covering all the prospective basins in the West Sea, onshore NorthKorea and in the East Sea. This represents major progress since the originalPetroleum Agreement was signed in 2004. The PSA is for a nine year perioddivided into three sub-periods, in the first of which Aminex will acquire newseismic and either drill a new well or re-enter an existing West Sea discoverywell. USA Following an extended recompletion, the Alta Loma Sunny Ernst #1 well resumedproduction during June having been shut in since the previous September. Thefirst of a four well development programme at South Weslaco was drilled duringthe period and is currently being tied-in for production. The second well wasspudded on 19 September and is drilling ahead at the date of this report. Twofurther wells are planned during the remainder of 2005. The advantage of highprices has been offset to some extent by the difficulty in sourcing drillingrigs during a period of excessive demand as a result of which the South Weslacoproject has not progressed as quickly as planned and no production from newdrilling is included in the current financial results. During the period, adecision was made to plug and abandon the Sabine Lake well which ceasedproduction at the beginning of this year. Oil production at the Somerset fieldhas been maintained and a start made on a programme for plugging and abandoningredundant wells and facilities. As a consequence of the sale of the Vintonproperties at the end of 2004 and also the delayed commencement of gas from theAlta Loma well, production in the USA declined below that of the prior period.Major efforts are under way to restore the production levels MOCOH JOINT VENTURE Aminex has been co-operating for some time with Mocoh SA, a petroleum tradingcompany with existing operations in a number of African countries, to poolresources in the search for new upstream opportunities where a combination ofMocoh's established presence and Aminex's technical capabilities can be broughtto bear for mutual advantage. This co-operation has now been formalised tocover three countries; Sudan, Madagascar and Congo-Brazzaville. Any licenceaward will be shared on a 50-50- basis by Mocoh and Aminex, each party payingfor its own share of licence expenditures. A joint company known as Amicoh hasnow been formed and co-operation may be extended to include other countries inthe region. LIQUEFIED NATURAL GAS Aminex continues to work with Liquefied Natural Gas Ltd. of Australia ("LNGL")to identify suitable opportunities for co-operation in the development ofstranded gas fields suitable for small scale LNG operations. EGYPT As previously announced to shareholders, Aminex participates in the sharecapital of Red Sea Petroleum Ltd which made an unsuccessful application for newacreage in 2004 in very competitive circumstances. Red Sea is currently activelypursuing other opportunities in Egypt and has recently applied for furtheracreage. PROSPECTS The Aminex Group has now established a strong exploration portfolio at a time ofhigh oil and gas prices and unprecedented international exploration activity bylarge and small oil companies alike. The company is working hard to build onthis position. 28 September 2005 Enquiries:Aminex PLCBrian Hall, Chief Executive +44 (0) 20 7240 1600Simon Butterfield, Finance Director +44 (0) 20 7240 1600 College HillBen Brewerton +44 (0) 20 7457 2020Nick Elwes +44 (0) 20 7457 2020 CONSOLIDATED INCOME STATEMENT for the six months ended 30 June 2005 Unaudited Unaudited Unaudited 6 months ended 6 months ended Year ended 30 June 2005 30 June 2004 31 December 2004 Notes $'000 Restated Restated $'000 $'000 Revenue 2 1,258 3,108 5,384Cost of sales (734) (1,716) (3,182)Depletion (128) (414) (777) Gross profit 396 978 1,425 Administrative expenses (net) 3 (2,230) (2,128) (5,436)Purchaser's share of Vinton Dome profit - - (532) Loss from operations (1,834) (1,150) (4,543) Financing costs (net) 4 (87) - (19) Loss before tax (1,921) (1,150) (4,562) Income tax expense - - - Net loss for the period 2 (1,921) (1,150) (4,562) Basic and diluted loss per share (cent) 5 (1.92) (1.26) (4.90) STATEMENT OF RECOGNISED INCOME AND EXPENSE for the six months ended 30 June 2005 Unaudited Unaudited Unaudited 6 months ended 6 months ended Year ended 30 June 2005 30 June 2004 31 December 2004 Restated Restated $,000 $'000 $'000 Foreign exchange translation differences 7 (46) (57)Group loss after tax for the financial period (1,921) (1,150) (4,562) Total recognised income and expense forthe financial period (1,914) (1,196) (4,619) Attributable to:Equity holders of the Company (1,914) (1,196) (4,619) CONSOLIDATED BALANCE SHEET At 30 June 2005 Unaudited Unaudited Unaudited 30 June 30 June 31 December 2005 2004 2004 Restated Restated Notes $'000 $'000 $'000Assets Exploration and evaluation assets 14,429 13,884 14,310Property, plant and equipment 11,028 13,637 8,313Other investments 381 868 - Total non current assets 25,838 28,389 22,623 Trade and other receivables 10,398 6,570 6,102Cash and cash equivalents 554 377 767 Total current assets 10,952 6,947 6,869 Total assets 36,790 35,336 29,492 EquityIssued capital 6 11,003 6,197 6,777Share premium 6 40,088 35,311 36,222Capital conversion reserve fund 234 234 234Foreign currency reserve fund (50) (46) (57)Retained earnings (20,488) (15,155) (18,567) Total equity 30,787 26,541 24,609 LiabilitiesInterest-bearing loans and borrowings 34 55 51Abandonment and site restoration provision 2,311 - - Total non-current liabilities 2,345 55 51 Bank overdraft 434 197 -Interest-bearing loans and borrowings 28 293 47Trade and other payables 3,196 8,250 4,785 Total current liabilities 3,658 8,740 4,832 Total liabilities 6,003 8,795 4,883 Total equity and liabilities 36,790 35,336 29,492 CONSOLIDATED STATEMENT OF CASHFLOWS for the six months ended 30 June 2005 Unaudited Unaudited Unaudited 6 months 6 months Year ended ended ended 30 June 30 June 31 December 2005 2004 2004 Restated Restated Notes $'000 $'000 $'000Operating activitiesLoss for the period (1,921) (1,150) (4,562)Depreciation and impairment 147 438 827Foreign exchange losses 18 (46) (68)Financing costs (net) 87 - 19Loss/(gain) on sale of property, plant and equipment 8 (106) (121)Loss on sale of listed investment - - 184Equity-settled share-based payment charge 7 78 238Decrease/(increase) in debtors 4,772 (468) -(Decrease)/increase in creditors (3,208) 2,284 707Cash generated from operations (90) 1,030 (2,776)Interest paid (11) (14) (34)Tax paid - - -Net cash (outflows)/inflows from operating activities (101) 1,016 (2,810) Investing activitiesAcquisition of property, plant and equipment (282) (36) (159)Expenditure on exploration and evaluation assets (209) (3,308) (5,522)Proceeds from sale of property, plant and equipment 18 193 5,276Proceeds from sale of investments - 2,003 2,687Interest received 2 14 15 Net cash (outflows)/inflows from investing activities (471) (1,134) 2,297 Financing activitiesProceeds from the issue of share capital - - 1,265Payment of transaction costs (39) - (34)Loans repaid (36) (26) (145)Loans received - 153 23 Net cash (outflows)/inflows from financing activities (75) 127 1,109 Net (decrease)/increase in cash and cash equivalents 7 (647) 9 596Cash and cash equivalents at 1 January 767 171 171Cash and cash equivalents at end of the financial period 7 120 180 767 Provisional Principal Accounting Policies under IFRS in the Restated 2004Financial Statements and Interim Financial Statements for six months ended 30June 2005. Statement of Provisional Accounting Policies Statement of compliance Aminex PLC prepared its financial statements up to and including 31 December2004 in accordance with Irish GAAP. As part of the European Commission's plan to develop a single European capitalmarket, all publicly quoted companies in the EU are required to prepareconsolidated financial statements in accordance with International FinancialReporting Standards (IFRS) as endorsed by the European Commission in respect ofaccounting periods commencing on or after 1 January 2005. The financialinformation presented in this Interim Statement has been prepared in accordancewith the recognition and measurement principles of IFRS and Interpretationsissued by the International Accounting Standards Board (IASB) and itscommittees, including those issued by the predecessor International AccountingStandards Committee that have been subsequently authorised by the IASB, whichare expected to be endorsed by the EU and which are effective for accountingperiods ending on 31 December 2005. Qualifications to be taken into account The majority of the International Financial Reporting Standards have beenendorsed by the European Commission. However, a number of IFRS remain to beendorsed at the date of publication of this document, and failure to endorsethese outstanding standards in time for 2005 financial reporting could lead tochanges in the basis of accounting or in the basis of presentation of certainfinancial information from that adopted for the purposes of this InterimStatement. Furthermore, the restated 2004 financial information attached to this InterimStatement and the Interim Statement itself is subject to the issuance by theInternational Accounting Standards Board of additional interpretations prior tothe end of 2005 which may have retrospective impact and thus require to beapplied in the 2005 financial statements and the related 2004 comparatives. Asa result, it is possible that further changes may be required to the 2004financial information attached to this Interim Statement prior to its inclusionas comparative information in the published 2005 year-end consolidated financialstatements. First time adoption This is the first time that the Group has presented financial information inaccordance with the recognition and measurement principles of IFRS which are setout in these accounting policies. The impact of the application of therecognition and measurement principles of these IFRS accounting policies on thefinancial information presented in respect of the period ended 30 June 2004 andthe year ended 31 December 2004 have been set out in Appendix 1. This Appendixincludes reconciliations of equity and profit or loss for comparative periodsreported under Irish GAAP (previous GAAP) to those reported for those periodsunder these IFRS accounting policies. In accordance with IFRS 1, whichestablishes the framework for transition to IFRS by a first time adopter such asAminex PLC, the Group has elected to avail itself of a number of specifiedexemptions from the general principal of retrospective restatement as follows: First time adoption (continued) • IFRS requires that on disposal of a foreign operation, the cumulative amount of currency translation differences previously recognised directly in reserves for that operation be transferred to the income statement as part of the profit or loss on disposal. Aminex PLC has deemed the cumulative currency translation differences applicable to foreign operations to be zero as at the transition date. The cumulative currency translation differences arising before the transition date have been reclassified as part of retained earnings. • In accordance with the exemption allowed on transition to IFRS, the fair value calculations in respect of share based payments under IFRS-2 Share Based Payment, have only been applied in respect of share options granted after 7 November 2002. Basis of preparation The financial statements are presented in US dollars, rounded to the nearestthousand ($'000) except when otherwise indicated. The financial statements areprepared on a historical cost basis except for the measurement at fair value ofshare options and the present value of the abandonment provisions. Thepreparation of interim financial statements requires management to usejudgements, estimates and assumptions that affect the application of policiesand reported amounts of assets, liabilities, income and expenses. Actualresults may differ from those estimates. Basis of consolidation The consolidated interim statements comprise the financial statements of AminexPLC and its subsidiaries. Subsidiaries are consolidated from the date on whichcontrol is transferred to the Group and cease to be consolidated from the dateon which effective control is transferred out of the Group. Control exists whenthe company has the power, directly or indirectly, to govern the financial andoperating policies of an entity so as to obtain economic benefits from itsactivities. Financial statements of subsidiaries are prepared for the samereporting year as the parent company. The Group will continue to prepare the statutory separate financial statementsof Group companies under the GAAP applicable in their country of incorporationbut adjustments have been made to the results and financial position of suchcompanies to bring their accounting policies into line with those of the Group. All inter-company balances and transactions, including unrealised profitsarising from inter-group transactions, have been eliminated in full. Unrealisedlosses are eliminated in the same manner as unrealised gains except to theextent that there is evidence of impairment. Revenue recognition Revenue is recognised to the extent that it is probable that the economicbenefits will flow to the Group, that it can be reliably measured, thatperformance has occurred under a service contract and that the significant risksand rewards of ownership of the goods have passed to the buyer. Revenuecomprises the invoiced value of goods and services supplied by the Group andexcludes inter-company sales, trade discounts and value added tax. Services areinvoiced as they are performed and goods are invoiced when supplied. Royalties Royalties are charged to the profit and loss account in the period in which therelated production is accounted for. Employee benefits (a) Pensions and Other Post-employment Benefits The group contributes towards the cost of certain individual employee pensionplans. Annual contributions are based upon a percentage of gross annual salary. Pension contributions are recognised as an expense in the income statement onan accruals basis. (b) Share-based payment For equity-settled share-based payment transactions (i.e. the issuance of shareoptions), the Group measures the services received and the correspondingincrease in equity at fair value at the measurement date (which is the grantdate) using a recognised valuation methodology for the pricing of financialinstruments (i.e. the binomial model). Given the share options granted do notvest until the completion of a specified period of service, the fair valueassessed at the grant date is recognised in the income statement over thevesting period as the services are rendered by employees. For options grantedto Directors, there is no vesting period and the fair value is recognised in theincome statement at the date of the grant. The share options issued by the Company are not subject to market-based vestingconditions as defined in the IFRS. Non-market vesting conditions are not takeninto account when estimating the fair value of share options as at the grantdate; such conditions are taken into account through adjusting the number ofequity instruments included in the measurement of the transaction amount sothat, ultimately, the amount recognised equates to the number of equityinstruments that actually vest. The expense in the income statement in relationto share options represents the product of the total number of optionsanticipated to vest and the fair value of these options, this amount isallocated to accounting periods on a straight-line basis over the vestingperiod. Given that the performance conditions underlying the Group's shareoptions are non-market in nature, the cumulative charge to the income statementis reversed only where an employee in receipt of share options leaves thecompany prior to completion of the service period. The proceeds received by theCompany on the exercise of share entitlements are credited to share capital andshare premium. In line with the transitional provisions applicable to a first-timeadopter of International Financial Reporting Standards, as contained in IFRS 2Share-based Payment, the Group has elected to implement the measurementrequirements of the IFRS in respect of share options that were granted after 7November 2002 that had not vested as at the effective date of the standard (1January 2005). In accordance with the standard, the disclosure requirements ofIFRS 2 have been applied in relation to all outstanding share-based paymentsregardless of their grant date. The Group does not operate any cash-settled share-based payment schemes orshare-based payment transactions with cash alternatives as defined in IFRS 2. The fair value of options granted is recognised as an employee expensewith a corresponding increase in equity. Net financing costs Net financing costs comprise interest payable on borrowings calculated using theeffective interest rate method, interest receivable on funds invested, theimputed interest on the fair value of the abandonment and site restorationprovision and applicable foreign exchange gains and losses. Interest income is recognised in the income statement as it accrues, using theeffective interest method. The interest expense component of finance leasepayments is recognised in the income statement using the effective interest ratemethod. Leases Finance leases, which transfer to the Group substantially all the risks andbenefits of ownership of the leased asset, are capitalised at the inception ofthe lease at the fair value of the leased asset or if lower the present value ofthe minimum lease payments. The corresponding liability to the lessor isincluded in the balance sheet as a finance lease obligation. Lease payments areapportioned between the finance charges and reduction of the lease obligation soas to achieve a constant rate of interest on the remaining balance of theliability. Finance charges are charged to the income statement as part offinance costs. Capitalised leased assets are depreciated over the shorter of the estimateduseful life of the asset or the lease term. Leases where the lessor retains substantially all the risks and benefits ofownership of the assets are classified as operating leases. Operating leasepayments are recognised as an expense in the income statement on a straight linebasis over the lease term. Tax The tax expense in the income statement represents the sum of the tax currentlypayable and deferred tax. Tax currently payable is based on taxable profit for the year. Taxable profitdiffers from net profit as reported in the income statement because it excludesitems of income or expense that are taxable or deductible in other years and itfurther excludes items that are not taxable or deductible. The Group's liabilityfor current tax is calculated using rates that have been enacted orsubstantially enacted at the balance sheet date. Tax is recognised in the income statement except to the extent that it relatesto items recognised directly in equity. Deferred income tax is provided, using the liability method, on all differencesbetween the carrying amounts of assets and liabilities for financial reportingpurposes and the amounts used for taxation purposes except those arising fromnon deductible goodwill or on initial recognition of an asset or liability whichaffects neither accounting nor taxable profit. Deferred income tax assets andliabilities are not subject to discounting and are measured at the tax ratesthat are expected to apply in the year when the asset is expected to be realisedor the liability to be settled. Deferred income tax assets are recognised for all deductible differences, carryforward of unused tax credits and unused tax losses, to the extent that it isprobable that taxable profit will be available against which the deductibletemporary differences, and the carry forward of unused tax credits and unusedtax losses can be utilised. The carrying amount of deferred income tax assets is reviewed at each balancesheet date and reduced to the extent that it is no longer probable thatsufficient taxable profit would be available to allow all or part of thedeferred income tax asset to be utilised. Earnings per ordinary share Basic earnings per share is computed by dividing the net profit for thefinancial period attributable to ordinary shareholders by the weighted averagenumber of ordinary shares in issue that ranked for dividend during the financialperiod. Diluted earnings per share is computed by dividing the profit for the financialperiod attributable to ordinary shareholders by the weighted average number ofordinary shares in issue after adjusting for the effects of all potentialdilutive ordinary shares that were outstanding during the financial period. Foreign currency translation The presentation currency of the Group and the functional currency of Aminex PLCis the US dollar (US$). Transactions in foreign currencies are recorded at therate of exchange ruling at the date of the transaction. Monetary assets andliabilities denominated in foreign currencies are retranslated into thefunctional currency at the rate of exchange at the balance sheet date. Alltranslation differences are taken to the consolidated income statement with theexception of differences on foreign currency borrowings that provide a hedgeagainst a net investment in a foreign entity. These are taken directly to equitytogether with the exchange difference on the net investment in the foreignentity until the disposal of the net investment, at which time they arerecognised in the consolidated income statement. Results and cash flows of non-dollar subsidiary undertakings are translated intodollars at average exchange rates for the year, and the related balance sheetshave been translated at the rates of exchange ruling at the balance sheet date.Adjustments arising on translation of the results of non--dollar subsidiaryundertakings at average rates, and on the restatement of the opening net assetsat closing rates, are dealt with in a separate translation reserve withinequity, net of differences on related currency borrowings. All othertranslation differences are taken to the income statement. On disposal of a foreign entity, accumulated currency translation differencesare recognised in the income statement as part of the overall gain or loss ondisposal; the cumulative currency translation differences arising prior to thetransition date have been set to zero for the purposes of ascertaining the gainor loss on disposal of a foreign operation subsequent to 1 January 2004.Goodwill and fair value adjustments arising on acquisition of a foreignoperation are regarded as assets and liabilities of the foreign operation, areexpressed in the functional currency of the foreign operation and are recordedat the exchange rate at the date of the transaction and subsequentlyretranslated at the applicable closing rates. Exploration and evaluation assets Exploration and evaluation assets comprise the pre-licence, licence acquisition,exploration and appraisal costs incurred in respect of undeveloped oil and gasproperties. When a decision is reached with regard to the commercial viabilityof the property, the associated expenditures are transferred to the relevantgeographical cost pools included under developed and producing oil and gasproperties within "Property, plant and equipment". Property, plant and equipment (a) Developed and producing oil and gas properties The Group uses the full cost method of accounting for its developed andproducing oil and gas properties under which all costs associated with propertyacquisition, exploration and development activities, whether or not productive,are capitalised in separate geographical cost pools based upon the incomegenerating operations of the Group and are stated in the balance sheet at costless amortisation. Interest on borrowings is capitalised into development projects up to the timeof revenue generation. Depletion Capitalised costs, together with anticipated future development costs calculatedat price levels ruling at the balance sheet date, are amortised on a unit ofproduction basis. Amortisation is calculated by reference to the proportionthat production for the period bears to the total of the estimated remainingcommercial reserves as at the beginning of the period. Changes in reservesquantities and cost estimates are recognised prospectively. Oil and gasproperty costs in certain instances include gross interest payable on borrowingsto finance development. All proceeds received from the disposal of oil and gasproperties are credited to the relevant geographical cost pool. Impairment The net book value of developed and producing oil and gas properties bygeographical pool is assessed each year and compared with estimated future cashflows of proven and probable oil and gas reserves. To the extent that thecarrying amount of the asset exceeds the recoverable amount, being the estimateddiscounted future cash flows, the asset is written down to its recoverableamount. Any impairment in developed and producing oil and gas properties isreflected as a charge to the income statement. Abandonment costs Provision is made for the abandonment costs of oil and gas wells. The cost ofabandonment is determined through discounting the amounts expected to be payableto their present value at the date the provision is recorded. The unwinding ofthe discount is reflected as an interest charge in the income statement over thelife of the well (transition date to the expected date of abandonment of thewell). (b) Other Property, Plant and Equipment Other property, plant and equipment are stated at cost less accumulateddepreciation and impairment losses. Depreciation is calculated to write off the original cost of property, plant andequipment less their estimated residual value over their expected useful liveson a straight line basis. The estimated useful lives applied in determining the charge to depreciation areas follows: Leasehold property 2% - 4%Plant and equipment 20 - 33.3%Motor vehicles 25% The useful lives and residual values are reassessed annually. On disposal of property, plant and equipment the cost and related accumulateddepreciation and impairments are removed from the financial statements and thenet amount less any proceeds is taken to the income statement. The carrying amounts of the Group's property, plant and equipment are reviewedat each balance sheet date to determine whether there is any indication ofimpairment. An impairment loss is recognised whenever the carrying amount of anasset or its cash generation unit exceeds its recoverable amount. Impairmentlosses are recognised in the income statement unless the asset is recorded at arevalued amount in which case it is firstly dealt with through the revaluationreserve with any residual amount being transferred to the income statement. Subsequent costs are included in an asset's carrying amount or recognised as aseparate asset, as appropriate, only when it is probable that future economicbenefits associated with the item will flow to the Group and the cost of thereplaced item can be measured reliably. All other repair and maintenance costsare charged to the income statement during the financial period in which theyare incurred. Business combinations The purchase method of accounting is employed in accounting for the acquisitionof subsidiaries by the Group. The Group has availed itself of the exemptionunder IFRS 1, "First-time Adoption of International Financial ReportingStandards", whereby business combinations prior to the transition date of 1January 2004 are not restated. IFRS 3, "Business Combinations", has beenapplied with effect from the transition date of 1 January 2004 and goodwillamortisation ceased from that date. The costs of a business combination is measured as the aggregate of the fairvalue at the date of exchange of assets given, liabilities incurred or assumedand equity instruments issued in exchange for control together with any directlyattributable costs. Deferred expenditure arising on business combinations isdetermined through discounting the amounts payable to their present value at thedate of exchange. The discount element is reflected as an interest charge inthe income statement over the life of the deferred payment. In the case of abusiness combination the assets and liabilities are measured at theirprovisional fair values at the date of acquisition. Adjustments to provisionalvalues allocated to assets and liabilities are made within 12 months of theacquisition date and reflected as a restatement of the acquisition balancesheet. Joint Ventures - jointly controlled operations Joint controlled operations are those activities over which the Group exercisesjoint control with other participants, established by contractual agreement.The Group recognises, in respect of its interests in jointly controlledoperations, the assets that it controls, the liabilities that it incurs, theexpenses that it incurs and its share of the income that it earns from the saleof goods or services by the joint venture. Goodwill Goodwill written off to reserves under Irish GAAP prior to 1998 has not beenreinstated and will not be included in determining any subsequent profit or losson disposal. Goodwill on acquisitions is initially measured at cost being the excess of thecost of the business combination over the acquirer's interest in the net fairvalue of the identifiable assets, liabilities and contingent liabilities.Following initial recognition, goodwill is measured at cost less any accumulatedimpairment losses. Goodwill relating to acquisitions from 1 January 2004 and thedeemed cost of goodwill carried in the balance sheet at 1 January 2004 is notamortised. Goodwill is reviewed for impairment annually or more frequently ifevents or changes in circumstances indicate that the carrying value may beimpaired. As at the acquisition date, any goodwill acquired, is allocated to each of thecash-generating units expected to benefit from the combination's synergies.Impairment is determined by assessing the recoverable amount of thecash-generating unit to which the goodwill relates. Where goodwill forms part of a cash-generating unit and part of the operationwithin that unit is disposed of, the goodwill associated with the operationdisposed of is included in the carrying amount of the operation when determiningthe gain or loss on disposal of the operation. Goodwill disposed of in thiscircumstance is measured on the basis of the relative values of the operationdisposed of and the proportion of the cash-generating unit retained. Financial assets Investments in subsidiary undertakings are stated at cost less provision forimpairment in the Company's balance sheet. Investments in companies are stated at cost less any provision required forimpairment in value. Cash and Cash Equivalents Cash and short term deposits in the balance sheet comprise cash at bank and inhand and short term deposits with an original maturity of three months or less.Bank overdrafts that are repayable on demand and form part of the Group's cashmanagement are included as a component of cash and cash equivalents for thepurposes of the statement of cashflows. Trade and other Receivables Trade receivables, which generally have 30 to 90 day terms, are recognised andcarried at original invoice amount less an allowance for any potential shortfallin receipt. An estimate of any shortfall in receipt is made when collection ofthe full amount is no longer probable. Bad debts are written off whenidentified. Provisions A provision is recognised in the balance sheet when the Group has a presentlegal or constructive obligation as a result of a past event, and it is probablethat an outflow of economic benefits would be required to settle the obligation. If the effect of the time value of money is material, provisions aredetermined by discounting the expected future cash flows at a pre-tax rate thatreflects the time value of money and, where appropriate, the risks specific tothe liability. Where discounting is used, the increase in the provision due tothe passage of time is recognised as a borrowing cost. Segment Reporting A segment is a distinguishable component of the Group that is engaged either inproviding products or services (business segment), or in providing products orservices within a particular economic environment (geographical segment), whichis subject to risks and rewards that are different from those other segments.The Group has identified the geographical segments as the primary segments andthe business segments as the secondary segments. Principal New Accounting Pronouncements IFRS 6 and the potential impacts. In 2004, the IASB issued IFRS 6 Exploration for and Evaluation of MineralResources to address the accounting issues in relation to costs incurred inexploration for and evaluation of mineral resources. There are a number ofareas where IFRS 6 will require changes to existing accounting practices andtherefore to reported financial performance and position. Entities typicallyhave one accounting policy for all costs incurred prior to production. Theadoption of IFRS 6 will require entities to reconsider the accounting treatmentfor costs incurred during each of pre-exploration and exploration and evaluationactivities. An entity must develop a separate accounting policy for expenditurerelated to each of: pre-exploration activities, exploration and evaluationactivities and development activities. IFRS 6 permits, in many cases, an entitythat incurs exploration and evaluation (E&E) expenditure to continue itsexisting accounting policies with respect to such expenditure. IFRS6 requiresentities to identify and account for pre-exploration, E&E and developmentexpenditure separately. E&E expenditure may include the cost (and directlyattributable cost of acquisition) of the licence itself. Capitalised E&E costsmust be segregated and classified as either tangible or intangible assets,according to their nature. E&E costs can be expensed as incurred orcapitalised, in accordance with the entity's selected accounting policy. E&Eexpenditure rarely will include costs incurred prior to the acquisition of anexploration licence. The standard provides guidance on the testing forimpairment of amounts recognised as E&E assets and specifies disclosures forthese assets and related expenditure. Previous GAAP impairment policies cannotbe continued automatically; instead the general impairment tests must be appliedin measuring the impairment of exploration and evaluation assets when there areindicators that the carrying amount of an exploration and evaluation asset mayexceed its recoverable amount. The test for recoverability of exploration andevaluation assets can combine several cash generating units, so long as thegroup is not larger than a segment. This standard is effective for annualperiods beginning on or after 1 January 2006. We are currently evaluating theeffect IFRS 6 will have on our financial position or results of operations. NOTES TO THE INTERIM FINANCIAL STATEMENTS (unaudited)for the six months ended 30 June 2005 1. Accounting policies As outlined in the provisional accounting policies, the financial informationhas been prepared in accordance with the recognition and measurement principlesof all International Financial Reporting Standards (IFRS), includingInterpretations issued by the International Accounting Standards Board ("IASB")and it's committees and endorsed or expected to be endorsed by the EuropeanCommission. 2. Segmental disclosure The Group's revenue and profits arise from oil and gas production in theUSA and the provision of oilfield equipment and services in Europe. The Group'snet assets are located in the USA, Tanzania and Europe. Unaudited Unaudited Unaudited 6 months ended 6 months ended 30 year ended June 2004 31 December 2004Revenue 30 June 2005 Restated Restated $'000 $'000 $'000 USA 769 2,185 4,048Europe 489 923 1,336 1,258 3,108 5,384 Segment result -loss after taxUSA (99) 37 (955)Tanzania (407) (25) (480)Europe (55) 5 (85)Central costs (1,360) (1,167) (3,042) Net loss for the (1,921) (1,150) (4,562)period NOTES TO THE INTERIM FINANCIAL STATEMENTS (unaudited)for the six months ended 30 June 2005 2. Segmental disclosure (continued) Unaudited Unaudited Unaudited 6 months ended 6 months ended Year ended 30 June 2005 30 June 2004 31 December 2004 Restated Restated $'000 $'000 $'000 USA 11,575 14,899 9,357Tanzania 14,796 18,183 19,244North Korea 127 - -Europe 10,292 2,254 891 36,790 35,336 29,492Less: liabilities (6,003) (8,795) (4,883)Net assets 30,787 26,541 24,609 Net assets before borrowings have been adjusted to eliminate the impact ofintercompany financing. 3. Administrative expenses (net) Included in administrative expenses are the following gains and losses arisingfrom other income and the disposal of assets: Unaudited Unaudited Unaudited 6 months ended 6 months ended Year 30 June 2005 30 June 2004 ended 31 December 2004 $'000 $'000 $'000 Rental income 30 21 49 Gain/(loss) on the disposal of property, plant and equipment 9 121 (46) Loss on the disposal of listed investment - - (184) NOTES TO THE INTERIM FINANCIAL STATEMENTS (unaudited)for the six months ended 30 June 2005 4. Financing costs (net) Unaudited Unaudited Unaudited 6 months ended 6 months ended year ended 30 June 2005 30 June 2004 31 December 2004 $'000 $'000 $'000 Interest receivable 2 14 15Interest payable (9) (12) (28)Finance cost of abandonment and site restoration provision (78) - -Interest on finance leases (2) (2) (5)Other interest - - (1) (87) - (19) 5. Loss per share Unaudited Unaudited Unaudited 6 months ended 6 months ended Year ended 30 June 2005 30 June 2004 31 December 2004 Restated Restated $'000 $'000 $'000 (a) Numerator for basic and diluted loss per share: Net loss for the financial period ($'000) 1,921 1,150 4,562 (b) Weighted average number of shares: Weighted average number of ordinary shares in issue for calculation of basic earnings per share (million) 100,091,324 90,940,068 93,014,594 The loss attributable to ordinary shareholders and the weighted average numberof ordinary shares for the purpose of calculating the diluted loss per ordinaryshare are identical to those used for basic loss per Ordinary Share. This isbecause the exercise of share options would have the effect of reducing the lossof ordinary share and is therefore anti-dilutive. (c) Basic and diluted loss per share (cents) 1.92 1.26 4.90 NOTES TO THE INTERIM FINANCIAL STATEMENTS (unaudited)for the six months ended 30 June 2005 6. Issued share capital and share premium Issued Share capital premium $'000 $'000 At 1 January 2005 6,777 36,222Issue of shares in return for 10% interest in Kobril Ltd. - first instalment - net of issue costs 67 85Proceeds from placing and open offer net of issue costs 4,159 3,774Equity-settled share-based payment expenses - 7 At 30 June 2005 11,003 40,088 7. Reconciliation of net cash flow to movement in net debt Unaudited Unaudited Unaudited 6 months ended 6 months ended Year ended 30 June 2005 30 June 2004 31 December 2004 Restated Restated $'000 $'000 $'000Net (decrease)/increase in cash and cashequivalents (213) 31 421Decrease/(increase) in debt (434) (22) 175Changes in net cash resulting from cashFlows (647) 9 596Currency translation adjustment - - - Net (decrease)/increase in net cash (647) 9 596 Net cash at start of period 767 171 171 Net cash at end of period 120 180 767 8. Statutory Information The financial information for the six month periods to 30 June and theyear to 31 December is unaudited and does not constitute statutory accountswithin the meaning of Section 19 of The Companies (Amendment) Act 1986. Thisannouncement is being sent to shareholders and will be made available at theCompany's registered office at 6 Northbrook Road, Dublin 6 and at the Company'sUK representative office at 10 Bedford Street, London WC2E 9HE Appendix I Reconciliation from Irish GAAP to IFRS___________________________________________________________________________ Introduction As part of the European Commission's plan to develop a single European capitalmarket, all publicly quoted European companies in the EU are required to prepareconsolidated financial statements in accordance with International FinancialReporting Standards (IFRS) as adopted by the European Commission in respect ofaccounting periods commencing on or after 1 January 2005. Consolidated Balance SheetAt 1 January 2004Reconciliation from Irish GAAP to IFRS Irish Foreign Currency Conversion GAAP Reserve IFRS restated 01-Jan-04 IAS 21 01-Jan-04 Notes $'000 $'000 $'000 AssetsExploration and evaluation assets 11,068 - 11,068Property plant and equipment 12,834 - 12,834Other investments 868 - 868Total non current assets 24,770 - 24,770 Investment held for sale 2,003 - 2,003Trade and other receivables 6,102 - 6,102Cash and cash equivalents 346 - 346Total current assets 8,451 - 8,451 Total Assets 33,221 - 33,221 EquityIssued capital 6,172 - 6,172Share premium 35,258 - 35,258Capital conversion reserve fund 234 - 234Foreign currency reserve fund 2 316 (316) -Retained earnings 2 (14,321) 316 (14,005)Total equity 27,659 - 27,659 LiabilitiesInterest-bearing loans and borrowings 88 - 88Total non current liabilities 88 - 88 Bank overdraft 175 - 175Interest-bearing loans and borrowings 132 - 132Trade and other payables 5,167 - 5,167Total current liabilities 5,474 - 5,474 Total liabilities 5,562 - 5,562 Total equity and liabilities 33,221 - 33,221 Consolidated Income StatementFor the six months ended 30 June 2004Reconciliation from Irish GAAP to IFRS Irish GAAP Restated 6 months Other 6 months ended Income ended 30-Jun-04 30-Jun-04 $'000 $'000 $'000 NotesRevenue - continuing operations 3,108 - 3,108Cost of sales (1,716) - (1,716)Depletion (414) - (414) Gross profit 978 - 978 Administrative expenses 1 (2,271) 143 (2,128) Loss from operations (1,293) 143 (1,150) Financing costs (net) 2 143 (143) - Loss before tax (1,150) - (1,150) Income tax expense - - - Loss after tax (1,150) - (1,150) Basic and dilutedloss per share (cent) (1.26) (1.26) Statement of recognised income and expenseFor the six months ended 30 June 2004Reconciliation from Irish GAAP to IFRS Irish GAAP Restated 6 months 6 months ended Ended 30-Jun-04 30-Jun-04 Notes $'000 $'000 Foreign exchange translation differences (46) (46)Loss after tax for the financial period (1,150) (1,150)Total recognised income and expenses for the (1,196) (1,196)financial periodAttributable to:Equity holders of the Company (1,196) (1,196) Consolidated Balance SheetAt 30 June 2004 Reconciliation from Irish GAAP to IFRS Foreign Irish Currency IFRS GAAP Conversion Restated 30-Jun-04 Reserve 30-Jun-04 $'000 $'000 $'000 Notes Assets Exploration and evaluation 13,884 - 13,884 assets Property plant and equipment 13,637 - 13,637 Other investments 868 - 868 Total non current assets 28,389 - 28,389 Trade and other receivables 6,570 - 6,570 Cash and cash equivalents 377 - 377 Total current assets 6,947 - 6,947 Total Assets 35,336 - 35,336 Equity Issued capital 6,197 - 6,197 Share premium 35,311 - 35,311 Capital conversion reserve 234 - 234 fund Foreign currency reserve fund 2 270 (316) (46) Retained earnings 2 (15,471) 316 (15,155) Total equity 26,541 - 26,541 Liabilities Interest bearing loans and 55 - 55 borrowings Total non current liabilities 55 - 55 Bank overdraft 197 - 197 Interest bearing loans and 293 - 293 borrowings Trade and other payables 8,250 - 8,250 Total current liabilities 8,740 - 8,740 Total liabilities 8,795 - 8,795 Total equity and liabilities 35,336 - 35,336 Consolidated Income StatementFor the twelve months ended 31 December 2004Reconciliation from Irish GAAP to IFRS IFRS Irish GAAP restated 12 months Share based 12 months Ended payment Other Ended 31-Dec-04 IFRS 2 IAS 31-Dec-04 Notes $'000 $'000 $'000 $'000 Revenue - continuing operations 5,384 - 5,384 -Cost of sales (3,182) - - (3,182)Depletion (777) - - (777) Gross profit 1,425 - - 1,425 Administrative expenses 1 (5,094) (161) (181) (5,436)Purchasers' share of Vinton Dome (532) - - (532)profitLoss on disposal of property, 1 (46) - 46 -plant and equipmentLoss on disposal of investment 1 (184) - 184 - Loss from operations (4,431) (161) 49 (4,543) Financing costs (net) 2 30 - (49) (19)Loss before tax (4,401) (161) - (4,562) Income tax expense - - - -Loss after tax (4,401) (161) - (4,562) Basic and dilutedloss per share (cent) (4.73) (4.90) Statement of recognised income and expenseFor the year ended 31 December 2004Reconciliation from Irish GAAP to IFRS Irish GAAP Share based Restated Year payment Year ended IFRS 2 Ended 31-Dec-04 $'000 31-Dec-04 Notes $'000 $'000 $'000 Foreign exchange translation differences (57) - (57)Loss after tax for the financial period (4,401) (161) (4,562)Total recognised income and expenses forthe financial period (4,458) (161) (4,619) Attributable to:Equity holders of the Company (4,458) (161) (4,619) Consolidated Balance SheetAt 31 December 2004 Reconciliation from Irish GAAP to IFRS Irish Foreign currency Share IFRS GAAP Conversion Based restated Reserve Payment 31-Dec-04 IAS 21 IFRS 2 31-Dec-04 Notes $'000 $'000 $'000 $'000AssetsExploration and 14,310 - - 14,310evaluation assetsProperty plant and 8,313 - 8,313equipment Total non current 22,623 - - 22,623assets Trade and other 6,102 - - 6,102receivablesCash and cash 767 - - 767equivalents Total current assets 6,869 - - 6,869 Total Assets 29,492 - - 29,492 EquityIssued capital 6,777 - - 6,777Share premium 36,061 - 161 36,222Capital conversion 234 - - 234reserve fundForeign currency 259 (316) - (57)reserve fund 2Retained earnings 2 (18,722) 316 (161) (18,567) Total equity 24,609 - - 24,609 LiabilitiesInterest bearing loans 51 - - 51and borrowings Total non current 51 - - 51liabilities Interest bearing loans 47 - - 47and borrowingsTrade and other 4,785 - - 4,785payables Total current 4,832 - - 4,832liabilities Total liabilities 4,883 - - 4,883 Total equity and 29,492 - - 29,492liabilities Notes to accompany Group Income Statement and Group Balance SheetSix months ended 30 June 2004 and year ended 31 December 2004Reconciliation from Irish GAAP to IFRS CONSOLIDATED INCOME STATEMENT 1. Administration expenses Notes 30-Jun-04 31-Dec-04 $'000 $'000 Previous GAAP balance 2,271 5,094(IFRS 2) Share based payment (i) - 161 Rental Income (ii) (21) (49) (Gain)/loss on sale of property, plant and equipment (iii) (122) 46 Loss on disposal of investment (iii) - 184 Restated IFRS balance 2,128 5,436 (i) IFRS 2 "Share-based Payment", requires that an expense for share-basedpayments, which in the case of Aminex are share options, be recognised in theincome statement based on their fair value at the date of grant. This expense,which is primarily in relation to the Aminex PLC share option scheme isrecognised over the vesting period of the schemes. Fair value calculations havebeen applied in respect of share options granted after 7 November 2002 aspermitted under the framework for transition to IFRS. The fair value of theshare options to be expensed is determined by using option pricing models andthe Group has used the binomial model in its evaluation. The charge recognisedin the Income Statement over the vesting period of three years has been adjustedto reflect the expected and actual levels of vesting. Where there is no vestingperiod and options are exercisable immediately, the value of the options hasbeen charged to the Income Statement at the date of grant. The following inputswere used in determining the fair value of share entitlements: • The exercise price which is the market price at the date the share entitlements were granted. • Future price volatility was based on historical volatility as a guide and was assessed over the last three to four years • The risk free interest rate used in the model is the rate applicable to Irish Government Bonds with a remaining term equal to the expected term of the share entitlements being valued • Expected share purchase/dividend payments. An expense of $7,000 has been recognised in the Group Income Statement inrespect of six months ended 30 June 2005 and an expense of $161,000 for the yearended 31 December 2004 and this is based on share options granted in July 2004and February 2005. No expense was made to the Income Statement during the sixmonths ended 30 June 2004 as no options were granted in the period nor were anyoptions granted after the exemption date of 7 November 2002 which required to bewritten off over a vesting period. (ii) Under IFRS income received from the sub lease of a rented property is netted against rental payments on that property as opposed to being shown as other income under Irish GAAP. This adjustment has no effect on retained earnings. (iii) This adjustment is to reclassify gain/loss on disposal from a separate line item before operating profit to administration expenses. This adjustment has no effect on retained earnings. 2. Retained earnings Notes 1-Jan-04 30-Jun-04 31-Dec-04 $'000 $'000 $'000 Previous GAAP balance (14,321) (15,471) (18,722)(IAS 12) Foreign currency conversion reserve (i) 316 316 316(IFRS 2) Share based payment (ii) - - (161) Subtotal 316 316 155 Restated IFRS balance (14,005) (15,155) (18,567) (i) Under IAS 32 the Group has deemed the cumulative currency translation difference applicable to foreign operations to be zero as at the transition date. The cumulative amount of currency translation differences previously recognised directly in foreign currency reserves has been transferred to retained earnings. (ii) See note 1 (i). This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
Aminex