13th Dec 2007 07:01
Amerisur Resources PLC13 December 2007 13 December 2007 AMERISUR RESOURCES PLC ("Amerisur" or the "Company") Interim results for the six months ended 30 September 2007 Amerisur Resources plc, the oil and gas explorer and developer focussed on SouthAmerica, is pleased to announce its unaudited results for the six months ended30 September 2007. Highlights • The Company raised £15m before expenses through the placing of 250m shares at 6p per share and remains very well capitalised • Re-entry to Alea 1 successful, long term testing continues with current flow rates of 130 barrels of oil per day through a 16/64'' choke • Both Platanillo 1 and 2 drilled on time and within budget, Platanillo 1 has helped define the limits of the field and results from testing two separate intervals in Platanillo 2 will be available shortly • Decision on next phase of Platanillo block expected in January 2008 • Completion of the 3D seismic survey on the Fenix block ahead of schedule, initial analysis very encouraging • Increased our working interest in the Fenix block to 100%, giving greater flexibility to maximise overall value Giles Clarke, Chairman of Amerisur Resources said: "Your Company is in better shape than it has ever been. It is focused ondelivering value to shareholders through its access to superb prospects inColombia. We have a professional team in place, production testing is underwayand some exciting exploration and development assets are being de-risked for thebenefit of shareholders. Our work in Paraguay has also progressed, and we willbe performing an exciting programme of data acquisition there during 2008. "We look to the future with confidence." ENQUIRIES: Billy Clegg/Caroline Stewart, Tel: +44 (0)207 831 3113Financial Dynamics Jerry Keen/Rhod Cruwys, Tel: +44 (0)20 7448 4400Blue Oar Securities Plc Competent person: Technical information in this announcement has been reviewedby John Wardle, Ph.D, the Company's Chief Executive. John Wardle has 23 yearsexperience in the industry, having worked for BP, Britoil, Emerald Energy andPebercan, and is a trained drilling engineer. Chairman's statement Introduction Your Company has seen a period of significant progress. We have raised £15m ofnew money, significantly improved the management and advisory team. YourCompany has secured some exciting new acreage at Fenix, which is now 100% ownedand made significant progress de-risking Platanillo. Operations The new management is now focused on prioritising the Company's most prospectiveregions with the discovery at Platanillo and excellent exploration prospects inthe new Fenix block. The Company has also reviewed a wide selection of newprojects within Colombia, seeking new, near term opportunities. Although severalof those were attractive, when compared to the potential within our currentinterests it was decided to concentrate on our existing acreage for the moment.However, we remain on the look out for exciting new portfolio additions. The Company has made progress with its Platanillo block, in which it holds a 25%working interest under the Platanillo E&P Contract with the Colombian NationalHydrocarbons Agency (ANH). Repsol YPF holds 35% and Ecopetrol S.A. (40%) is theoperator. The Platanillo block comprises an area of 14,204 hectares located inthe Putumayo basin of Colombia. The re-entry of the Alea-1 well has been successful, and the flow rate has beentested with various choke sizes and is currently producing at 130 barrels of oilper day through a 16/64'' choke. Oil produced is being delivered to the Santanaterminal, operated by Gran Tierra Energy Colombia for export. Platanillo-1, the first new well in a 2 well programme, was drilled to a totaldepth of 8,390ft. The reservoir section was encountered 55ft deeper at thePlatanillo-1 location which is located approximately 2,200m from Alea-1 andanalysis of electric logs indicated that the well might be close to thetransition zone between the oil and water columns of the field. Platanillo-1remains a potential candidate for a subsequent re-entry and sidetrack toevaluate reserves up-dip of the current reservoir entry point. Platanillo-2, the second new well in the current phase of the Platanillocontract has also been drilled to a total depth of 8,578ft. The Lower U sand,which is productive in Alea-1 was encountered approximately 20ft higher than inAlea-1 and 75ft higher than in Platanillo-1. Good shows of oil were observed atthat horizon and at several other zones within the reservoir. The condition ofthe wellbore in this directional well prevented full access of electric logs,however the indications during drilling and the fact that the productiveinterval was encountered higher indicated that the well should be tested.Accordingly, the well has been secured with 7" casing, which was run to totaldepth and cemented successfully. The rig Pride-17 was released and has beendemobilised. The work over rig Pride-6 has been moved to Platanillo-2 and iscurrently beginning the testing of this well. The Electric logs acquired throughcasing confirmed the presence of an oil saturation in the Lower U sand, as atAlea-1, and also a potentially productive zone at a deeper point within the Blimestone. The B zone will be tested in the next few days, followed immediatelyby the Lower U Sand. We look forward to updating the market on the test results from Platanillo 2.In addition, we expect to agree the next phase for the Platanillo block with ourpartners in January 2008. The Directors are encouraged with the results of thework programme to date. Following the initial seismic studies in the Fenix block, Amerisur has, throughits subsidiary companies, secured 100% control and benefit of this area. Inaddition, the Company has identified several positive exploration opportunities.The Fenix block is an area of 24,117 hectares located in the Middle MagdalenaBasin of Colombia. At the end of November, we acquired the entire issued share capital of Fenix Oiland Gas S.A. for a total consideration of US$4.3m satisfied in cash fromexisting resources to give us a further 35% working interest in this area,increasing our interest in the block to 83.75%. In addition, we acquired fromPetex Offshore Inc the remaining 16.25% working interest, giving us, via oursubsidiary companies, 100% interest in the block. The total consideration forthe transaction with Petex Offshore Inc was 18,240,000 new ordinary shares of0.1p each in Amerisur. Finally, as part of the transaction, the Company hassuccessfully removed a profit share agreement on the Platanillo block. Thecompletion of the transaction with Petex Offshore Inc has been announced today. We are busy interpreting the 103km2 of 3D seismic data acquired in this blockduring the period. This work will be completed during Q1 2008. However, aninitial study focused on the southern part of the survey, which adjoins theBonanza field operated by Ecopetrol and which contains the La Tigra wells hasindicated some interesting opportunities. As an example among these is the wellLa Tigra-10, drilled by Sinclair-BP in 1969, where 30.1 API degree oil wasproduced from a formation at approximately 4,750ft. Our initial analysisindicates that the structure tested by that well may have a significant closureabove the level at which the original well penetrated the reservoir. Inaddition, the target reservoir within the Lisama sands was not reached by thewell. This analysis indicates that reserves potential within the area studied(approximately 16km2) may be in excess of 8 MMBO. Other exploration leads existwithin the block, which will be matured during the current interpretationprocess. Those leads may carry higher risk than the La Tigra area, but theirreserves potential is also significantly higher. Given the range and quality ofthese opportunities, the Company, now with full control of the block can enterinto advantageous partnering scenarios, which will simultaneously increase andaccelerate the work programme in the block, while minimising cash requirementsfor the Company. Drilling at Primavera was unsuccessful and the block was subsequentlyrelinquished. We are in advanced negotiations in Paraguay to undertake 2D seismic acquisitionon San Pedro & Alto Parana and to acquire aeromagnetometry and aerogravimetrydata in the Curupayty block through our Paraguayan subsidiary, Bohemia S.A. Ouracreage position in Paraguay is strong, and located in areas which we believe tobe very interesting from an exploration viewpoint. The Company has excellentopportunities in Paraguay, where we continue to expand our acreage positionahead of the current surge of international interest. We look forward to makingsome exciting progress during 2008, when shareholders will be updated. Corporate In May, the Company announced a fund raising of £15 million before expenses, byway of the placing with institutional and other investors, arranged by Blue OarSecurities Plc. 250 million new ordinary shares of 0.1 pence each in the capitalof the Company were placed at 6 pence per new ordinary share. In addition, during the period the Company changed its name from Chaco Resourcesplc to Amerisur Resources plc. Financials The headline loss for the period was £1,025,000, which includes operating costsof £644,000 and the (non cash) cost of issuing share options of £1,408,000 andthe write back of a provision against future costs of Primavera of £785,000 andincome from interest of £245,000. At the period end, the Company had cash in the bank of £15m and remains verywell capitalised. Outlook The period ahead will be busy for your Company. We look forward to updating shareholders shortly with the test results fromPlatanillo 2 and determining with our partners how the contract is progressed inJanuary 2008. On the Fenix block, interpretation of the 3D seismic has been encouraging andcompletion is expected during Q1 2008. In addition, having 100% of the blockgives us the flexibility to maximise value. We also look forward to updating shareholders on progress in Paraguay andcontinue to analyse potential new projects for the Company. Condensed consolidated income statement 6 months to 6 months to 12 months to 30 Sept 30 Sept 31 March 2007 2006 2007 Notes £'000 £'000 £'000 Revenue - - -Cost of sales - - - Gross profit - - - Share option charge (1,408) - (23)Impairment charge on jointly controlled assets 785 - (4,295)Other administrative expenses (647) (624) (1,302) Administrative expenses & operating loss (1,270) (624) (5,620) Finance income 245 55 222Finance expense - (7) - Loss before tax (1,025) (576) (5,398)Income tax - - - Loss for the period (1,025) (576) (5,398) Loss per shareBasic & diluted (pence per share) 3 (0.15) (0.11) (1.01) Condensed consolidated balance sheet 30 Sept 30 Sept 31 March 2007 2006 2007 Notes £'000 £'000 £'000 AssetsNon-current assetsGoodwill 537 537 537Intangible assets 4 6,205 7,403 5,798Property, plant and equipment 54 4 13 Total non-current assets 6,796 7,944 6,348 Current assetsTrade and other receivables 213 45 242Cash and cash equivalents 15,037 2,194 2,103 Total current assets 15,250 2,239 2,345 Total assets 22,046 10,183 8,693 Equity and liabilitiesEquityIssued capital 5 808 534 555Shares to be issued 167 167 167Share premium 5 27,572 11,636 13,583Other reserve 1,431 - 23Foreign exchange reserve 10 (2) 7Retained earnings (8,192) (2,345) (7,167) Total equity 21,796 9,990 7,168 Current liabilitiesTrade and other payables 250 193 1,525Corporation tax - - - Total current liabilities 250 193 1,525 Total liabilities 250 193 1,525 Total equity and liabilities 22,046 10,183 8,693 Condensed consolidated statement of changes in equity Share Share Shares to Other Foreign Retained Total capital premium be issued reserve exchange earnings equity reserve £'000 £'000 £'000 £'000 £'000 £'000 £'000 At 1 April 2006 507 7,888 167 - - (1,769) 6,793 Exchange differences on (2) (2)translation of foreign operationsNet income recognised directly in (2) (2)equityLoss for the period (576) (576)Total recognised income and (2) (576) (578)expense Issue of shares 27 3,973 4,000Associated share issue costs (225) (225)At 30 September 2006 534 11,636 167 - (2) (2,345) 9,990 Exchange differences on 9 9translation of foreign operationsNet income recognised directly in 9 9equityLoss for the period (4,822) (4,822)Total recognised income and 9 (4,822) (4,813)expense Issue of shares 21 2,053 2,074Associated share issue costs (106) (106)Equity settled share options 23 23At 31 March 2007 555 13,583 167 23 7 (7,167) 7,168 Loss for the period 3 (1,025) (1,022)Total recognised income and 3 (1,025) (1,022)expense Issue of shares 253 14,811 15,064Associated share issue costs (822) (822)Equity settled share options 1,408 1,408 At 30 September 2007 808 27,572 167 1,431 10 (8,192) 21,796 Condensed consolidated cash flow statement 6 months to 6 months to 12 months to 30 Sept 30 Sept 31 March 2007 2006 2007 £'000 £'000 £'000 Cash flows from operating activities Loss for the period (1,025) (576) (5,398) Adjustments for:Finance income (245) (55) (222)Finance expense - 7 -Income tax (paid) / refunded - - -Depreciation - - 1Share option charge 1,408 - 23Impairment charge (785) - 4,295Decrease / (increase) in trade and other 29 (23) (220)receivables(Decrease) / increase in trade and other payables (490) 53 1,384 Net cash used in operations (1,108) (594) (137) Interest paid - (7) -Income tax paid - - - Net cash used in operating activities (1,108) (601) (137) Cash flows from investing activitiesInterest received 245 55 222Payments for property, plant and equipment (41) (1) (11)Payments for intangible assets (407) (6,597) (9,286) Net cash used in investing activities (203) (6,543) (9,075) Cash flows from financing activitiesProceeds from issue of equity shares 15,064 4,000 6,074Issue costs (822) (225) (331) Net cash generated by financing activities 14,242 3,775 5,743 Net increase / (decrease) in cash and cash 12,931 (3,369) (3,469)equivalentsForeign exchange differences 3 (2) 7Cash and cash equivalents at the start of the 2,103 5,565 5,565period Cash and cash equivalents at the end of the period 15,037 2,194 2,103 AMERISUR RESOURCES PLC (formerly CHACO RESOURCES PLC) 1. Accounting policies Basis of preparation The unaudited consolidated interim financial information is for the six monthperiod ended 30 September 2007. It has been prepared in accordance with theaccounting policies set out below which are based on the recognition andmeasurement principles of IFRS in issue as adopted by the European Union (EU)and are effective at 31 March 2008 or are expected to be adopted and effectiveat 31 March 2008, the first annual reporting date at which the Group is requiredto use IFRS accounting standards adopted by the EU. The interim financialinformation does not include all of the information required for full annualfinancial statements and should be read in conjunction with the consolidatedfinancial statements of the Group for the year ended 31 March 2007. Comparative financial information previously published under UK GenerallyAccepted Accounting Principles has been restated on an IFRS basis for theopening balance sheet as at 1 April 2006, interim accounts as at 30 September2006 and for the year ended 31 March 2007. The change in the Group's reportedperformance and financial position on adopting IFRS is disclosed fully in thisinterim consolidated financial information. The interim financial information has not been audited nor has it been reviewedunder International Standard on Review Engagements (UK and Ireland) 2410 issuedby the Auditing Practices Board. The financial information set out in thisinterim report does not constitute statutory accounts as defined in Section 240of the Companies Act 1985. The Group's statutory financial statements for theyear ended 31 March 2007 prepared under UK GAAP have been filed with theRegistrar of Companies. The auditors' report on those financial statements wasunqualified and did not contain a statement under Section 237(2) of theCompanies Act 1985. First time adoption The following optional exemptions have been adopted (see Note 6 for details ofthe transitional arrangements):- a) Cumulative translation differences which exist at the date oftransition can be transferred into retained earnings and the foreign exchangereserve therefore only shows differences arising after transition. Upondisposal, pre-transition foreign exchange differences will not be recycled (IFRS1 'First time adoption of IFRS'). b) Business combinations that occurred before the opening IFRSbalance sheet date are exempt from the application of the standard (IFRS 3 'Business Combinations'). This means that goodwill shown on the balance sheet attransition under UK GAAP will be maintained and, thereafter, be subject toimpairment but not amortisation. Accounting policies The principal accounting policies adopted by the Group are set out below. Consolidation Subsidiaries are all entities over which the Group has the power to govern thefinancial and operating policies generally accompanying a shareholding of overone half of the voting rights. The existence and effect of potential votingrights that are currently exercisable or convertible are considered whenassessing whether the Group controls another entity. Subsidiaries areconsolidated fully from the date on which control is transferred to the Group.They are deconsolidated on the date control ceases. The Group uses the purchase method of accounting for the acquisition of asubsidiary. The cost of an acquisition is measured by the fair value of theassets given, equity instruments issued and liabilities incurred or assumed atthe date of exchange, plus costs directly attributable to the acquisition.Identifiable assets acquired and liabilities and contingent liabilities assumedin a business combination are measured initially at their fair values at theacquisition date irrespective of the extent of any minority interest. The excessof the cost of acquisition over the fair value of the Group's share of theidentifiable net assets acquired is recorded as goodwill. If the cost of theacquisition is less than the fair value of the net assets of the subsidiaryacquired the difference is recognised directly in the income statement. Inter-company transactions, balances and unrealised gains and losses ontransactions between Group companies are eliminated. Goodwill Goodwill arising from business combinations is the difference between the fairvalue of the consideration paid and the fair value of the assets and liabilitiesand contingent liabilities acquired. It is recognised initially as an intangibleasset at cost and is subject to impairment testing on an annual basis or morefrequently if circumstances indicate that the asset may have been impaired.Details of impairment testing are described in the accounting policies. Joint venture A joint venture is a contractual arrangement whereby the Group and other partiesundertake an economic activity that is subject to joint control, which is whenstrategic financial and operating policy decisions relating to the activitiesrequire the unanimous consent of the parties sharing control. The Group is party to the joint ownership and control of assets but withoutsetting up a separate entity. The Group therefore accounts for its share of theincomes, costs, assets and liabilities resulting from the utilisation of thejointly controlled assets on the basis of the agreed percentage of ownership andincluding any amounts incurred jointly with the other venturers. Jointly held assets relate to agreements where the parties act together tocontrol the activity. Each of the parties sharing control must consent to allessential decisions relating to the well's operating, investing and financialactivities. The percentages in the table (in note 4) relate to profit and assetshare alone and are not linked to rights of control such as voting rights. Segmental reporting A business segment is a group of assets and operations engaged in productionthat is subject to risks and returns that are different from those of otherbusiness segments. A geographical segment is where operations are engaged inproduction within a particular economic environment that is different from thatin segments operating in other economic environments. The Group's one principal activity is the exploration for and production of oiland gas, which is traded as a commodity on a world wide basis. This activity iscarried out in three identifiable areas and therefore the secondary segmentalreporting basis is geographical comprising UK, Colombia and Paraguay. Foreign currency translation a) Functional and presentational currency Items included in the financial statements of each of the Group's entities aremeasured using the currency of the primary economic environment in which theentity operates (the functional currency). The Company's functional currency andthe Group's presentational currency is Sterling. b) Transactions and balances Foreign currency transactions are translated into the functional currency usingthe exchange rates prevailing at the dates of the transactions. Foreign exchangegains and losses resulting from the settlement of such transactions and from thetranslation at reporting period end exchange rates of monetary assets andliabilities denominated in foreign currencies are recognised in the incomestatement. c) Group companies The results and financial position of all Group entities that have a functionalcurrency different from the presentation currency adopted in these Groupfinancial statements are translated into the presentation currency as follows: i. Assets and liabilities for each balance sheet presentedare translated at the closing rate at the date of the balance sheet; ii. Income and expenses for each income statement aretranslated at the actual rate on the date of the transaction and; iii. All resulting exchange differences are recognised as aseparate component of equity. On consolidation, exchange differences arising from the translation of the netinvestment in foreign entities are taken to equity. Differences initiallybrought to equity are recycled to the income statement on disposal of thebusiness. Income and expense recognition Revenues associated with the sale of oil, natural gas, natural gas liquids andliquefied natural gas and all other items are recognised when the title passesto the customer. Generally revenues from the production of oil and natural gasproperties in which the Group has an interest with joint venture partners arerecognised on the basis of the Group's working interest in these properties (theentitlement method). Revenue is measured at the fair value of the considerationreceived or receivable and represents amounts receivable for goods provided inthe normal course of business, net of discounts, customs duties and sales taxes.Operating expenses are recognised in the income statement upon utilisation ofthe service or at the date of their origin. Interest income is accrued on a time basis, by reference to the principaloutstanding and at the effective rate applicable. Borrowing costs All borrowing costs are expensed to the income statement as incurred exceptinterest on borrowings to finance exploration which is capitalised anddepreciated with the rest of the costs associated with viable explorationprojects or written off where the project is not deemed viable. Oil and gas expenditure Intangibles - exploration and evaluation assets Capitalisation Costs incurred prior to acquiring the rights to explore are charged directly tothe income statement. Licence acquisition costs and all costs incurred after the rights to explore anarea have been obtained, such as geological and geophysical costs and otherdirect costs of exploration (drilling, trenching, sampling and technicalfeasibility and commercial viability activities) and appraisals are accumulatedand capitalised as intangible exploration and evaluation (E&E) assets, pendingdetermination. E & E costs are not amortised prior to the conclusion of appraisal activities.At completion of appraisal activities if technical feasibility is demonstratedand commercial reserves are discovered, then, following development sanction,the carrying value of the relevant E&E asset will be reclassified as adevelopment and production asset, but only after the carrying value of the E & Easset has been assessed for impairment and, where appropriate, its carryingvalue adjusted. If, after completion of appraisal activities in an area, it isnot possible to determine technical feasibility and commercial viability or ifthe legal rights to explore expire or if the Group decides not to continueexploration and evaluation activities then the costs of such unsuccessfulexploration and evaluation are written off to the income statement in the periodthe relevant events occur. Impairment On an annual basis, or if and when circumstances indicate that the carryingvalue of an E & E asset may exceed its recoverable amount, an impairment reviewis performed. The recoverable amount is the higher of its fair value less coststo sell and its value in use. If the carrying value exceeds the recoverableamount the carrying value is reduced by writing the difference to the incomestatement in that period. Tangibles - development and production assets Capitalisation Development and production (D&P) assets represent the cost of developing thecommercial reserves and bringing them into production, together with the E&Eexpenditures incurred in finding the commercial reserves previously transferredfrom intangible E&E assets as outlined in the policy above. Development assets are not depreciated until production commences. Depreciationis estimated on a unit of production method based on commercially provablereserves. The calculation takes account of the estimated future costs ofdevelopment of recognised proven and probable reserves, based on current pricelevels. Changes in reserve quantities and cost estimates are recognisedprospectively from the last reporting date. Impairment An impairment review is performed each year for any indication that the value ofthe Group's oil and gas production assets may be impaired. If the carrying valueof the assets is estimated to exceed the value in use of the assets based on thediscounted future cash flows then the excess value is written off to the incomestatement in that period. No allocation has yet been made to development and production assets asappraisal activities are not complete. Non oil and gas exploration assetsProperty, plant and equipment Property, plant and equipment are recorded at cost net of accumulateddepreciation and any provision for impairment. Depreciation is provided usingthe straight line method to write off the cost of the asset less any residualvalue over its useful economic life as follows: Office equipment 10 yearsComputer equipment 4 yearsMotor vehicles 4 years Impairment The Group's goodwill, other intangible assets and property plant & equipment aresubject to impairment testing. For the purposes of assessing impairment, assets are grouped at the lowestlevels for which there are separately identifiable cash flows (cash generatingunits). Goodwill is allocated to those cash generating units that are expectedto benefit from synergies of the related business combination and represent thelowest level within the Group at which management controls the related cashflows. Individual assets or cash generating units that include goodwill and otherintangible assets with an indefinite useful life or those not yet available foruse are tested for impairment at least annually. All other individual assets orcash generating units are tested for impairment whenever events or changes incircumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognised for the amount by which the assets or cashgenerating unit's carrying amount exceeds its recoverable amount. Therecoverable amount is the higher of fair value, reflecting market conditionsless costs to sell and value in use, based on an internal discounted cash flowevaluation. Impairment losses recognised for cash generating units, to whichgoodwill has been allocated, are credited initially to the carrying amount ofgoodwill. Any remaining impairment loss is charged pro rata to the other assetsin the cash generating unit. With the exception of goodwill, all assets aresubsequently reassessed for indications that an impairment loss previouslyrecognised may no longer exist. Financial assets Financial assets consist of cash and trade and other receivables. Financialassets are assigned to their different categories by management on initialrecognition, depending on the contractual arrangements. Trade receivables aremeasured at amortised cost less any impairment. Derecognition of financial instruments occurs when the rights to receive cashflows from the investments expire or are transferred and substantially all ofthe risks and rewards of ownership have been transferred. An assessment forimpairment is undertaken at least at each balance sheet date whether or notthere is objective evidence that a financial asset or a group of financialassets is impaired. Financial liabilities The Group's financial liabilities consist of trade and other payables. Financial liabilities are recognised when the Group becomes a party to thecontractual agreements of the instrument. All interest related charges arerecognised as an expense in 'Finance costs' in the income statement. Trade payables are recognised initially at their fair value and subsequentlymeasured at amortised costs less settlement payments. Income taxes Current income tax assets and liabilities comprise those obligations to fiscalauthorities in the countries in which the Group carries out its operations. Theyare calculated according to the tax rates and tax laws applicable to the fiscalperiod and the country to which they relate. All changes to current taxliabilities are recognised as a component of tax expense in the incomestatement. Deferred income taxes are calculated using the liability method on temporarydifferences. This involves the comparison of the carrying amount of assets andliabilities in the consolidated financial statements with their respective taxbases. IAS 12 'Income taxes' does not require deferred tax to be recognised ontemporary differences relating to the initial recognition of goodwill or theinitial recognition of an asset or liability in a transaction that is not abusiness combination and that affected neither the accounting nor taxableprofit. Provision of deferred tax is required on the unremitted profits of jointventures if either the investor is unable to control the timing of theremittance or it is probable that reversal will not take place in theforeseeable future. Deferred tax liabilities are always provided for in full. Deferred tax assetsare recognised to the extent that it is probable that future taxable profitswill be available against which the temporary differences can be utilised.Deferred tax assets and liabilities are calculated at tax rates that areexpected to apply to their respective period of realisation, provided they areenacted or substantively enacted at the balance sheet date. Changes in deferred tax assets or liabilities are recognised as a component oftax expense in the income statement, except where they relate to items that arecharged or credited directly to equity in which case the related deferred tax isalso charged or credited directly to equity. Cash and cash equivalents Cash and cash equivalents include cash at bank and in hand, and includesdeposits repayable on demand by banks and other short term investments withoriginal maturities of three months or less. Provisions, contingent liabilities and contingent assets Provisions are recognised when the present obligations arising from legal orconstructive commitments resulting from past events will probably lead to anoutflow of economic resources from the Group which can be estimated reliably. Provisions are measured at the present value of the estimated expenditurerequired to settle the present obligation, based on the most reliable evidenceavailable at the balance sheet date. All provisions are reviewed at each balance sheet date and adjusted to reflectthe current best estimates. Exploration and drilling operations are generally subject to decommissioningcosts at the end of their producing lives. Provisions in the accounts are madewhen obligations arise and can be quantified. The directors do not believe thatthere is yet a requirement to provide for decommissioning as no production hasbeen undertaken. Share based employee compensation The Group operates equity settled share based compensation plans for theremuneration of its employees. All employee services received in exchange for the grant of any share basedcompensation are measured at their fair values. These are indirectly determinedby reference to the fair value of the share option awarded. Their value isappraised at the grant date and excludes the impact of any non-market vestingconditions (e.g. profitability or sales growth targets). All share based compensation is ultimately recognised as an expense in theincome statement with a corresponding credit to the other reserve, net ofdeferred tax where applicable. If vesting periods or other vesting conditionsapply, the expense is allocated over the vesting period, based on the bestavailable estimate of the number of shares options expected to vest. Non marketvesting conditions are included in assumptions about the number of options thatare expected to become exercisable. Estimates are subsequently revised if thereis any indication that the number of share options expected to vest differs fromprevious estimates. No adjustment to expense recognised in prior periods is madeif fewer share options ultimately are exercised than originally estimated. Upon exercise of share options, the proceeds received, net of any directlyattributable transaction costs, up to the nominal value of the shares issued areallocated to share capital with any excess being recorded as share premium. Atthis time, the appropriate balance in the other reserve relating to the shareoptions exercised is transferred to retained earnings by way of a transferwithin reserves. Use of accounting estimates and judgements Many of the amounts included in the financial statements involve the use ofjudgement and/or estimation. These judgements and estimates are based onmanagement's best knowledge of the relevant facts and circumstances, havingregard to prior experience, but actual results may differ from the amountsincluded in the financial statements. Information about such judgements andestimation is contained in the accounting policies and/or the notes to thefinancial statements and the key areas are summarised below: Judgements in applying accounting policies a) Capitalisation of exploration costs requires analysis of the technicalfeasibility and commercial viability of the project. b) Assessment of the impairment of assets is a judgement based on analysisof the likely future cash flows from the relevant income generating unit and anestimate of value in use. c) The directors must judge whether future profitability is likely inmaking the decision whether or not to create a deferred tax asset. d) Identification of functional currencies requires analysis of theeconomic environments of the subsidiaries of the Group and the selection of thepresentational currency must reflect the requirements of the users of thosestatements. Sources of estimation uncertainty a) Depreciation rates are based on estimates of the useful lives andresidual values of the assets involved. b) Estimates of future profitability are required for the decision whetheror not to create a deferred tax asset. c) Estimates are required as to asset carrying values and impairmentcharges. 2. Segmental reporting The Group's one principal activity is the exploration for and production of oiland gas, which is traded as a commodity on a worldwide basis. This activity iscarried out in three identifiable areas and therefore the secondary segmentalreporting basis is geographical comprising UK, Colombia and Paraguay. 6 months to 6 months to 12 months to 30 Sept 30 Sept 31 March 2007 2006 2007 £'000 £'000 £'000Loss before taxationUK 846 542 4,977Colombia 141 14 93Paraguay 38 20 328 1,025 576 5,398 Net assetsUK 22,344 10,107 7,674Colombia (97) (3) (85)Paraguay (451) (114) (421) 21,796 9,990 7,168 3. Loss per share 6 months to 6 months to 12 months to 30 Sept 30 Sept 31 March 2007 2006 2007 £'000 £'000 £'000 Loss for the year attributable to equity shareholders (1,025) (576) (5,398) Shares Shares Shares Issued ordinary shares at start of the period 555,434,554 507,467,887 507,467,887Ordinary shares issued in the period 252,300,000 26,666,667 47,966,667Issued ordinary shares at end of the period 807,734,554 534,134,554 555,434,554 Weighted average number of shares in issue for the period. 686,687,748 527,101,587 532,954,006 The diluted loss per share does not differ from the basic loss per share as theexercise of share options would have the effect of reducing the loss per shareand is therefore not dilutive under the terms of IAS 33. 4. Intangible assets The Group has made investments in intangible assets (deferred exploration costs)as follows: Puerto Lopez Oeste Platanillo - 25% Primavera - 55% Fenix - Other Total - 54% 48.75% £'000 £'000 £'000 £'000 £'000 £'000 1 April 2006 604 - - - 202 806Additions - 4,270 2,175 - 152 6,597 30 September 2006 604 4,270 2,175 - 354 7,403Additions - - 1,336 1,298 55 2,689Impairment (604) - (3,511) - (179) (4,294) 31 March 2007 - 4,270 - 1,298 230 5,798Additions - - - 157 250 407 30 September 2007 - 4,270 - 1,455 480 6,205 The carrying value of the intangible assets (deferred exploration costs) hasbeen impaired, as part of the normal testing procedure, during the period 30September 2006 to 31 March 2007 as shown above. This has resulted in thecarrying value being reduced for the following reasons: - The Puerto Lopez Oeste exploration has returned seismic data whichindicates that no structures large enough to be commercially viable are present.The Group has consequently decided to withdraw from the next stage of theexploration. - The wells comprising the Primavera exploration have not encounteredcommercial quantities of hydrocarbons and as a result have been plugged andabandoned. 5. Share capital Shares Nominal Premium Total Value (0.1p) net of costs £'000 £'000 £'000 In issue on 1 April 2006 507,467,887 507 7,888 8,395Issue 18 May 2006 26,666,667 27 3,748 3,775 30 September 2006 534,134,554 534 11,636 12,170Exercise of options 4,800,000 4 145 149Issue 27 February 2007 16,500,000 17 1,802 1,819 31 March 2007 555,434,554 555 13,583 14,138Exercise of options 2,300,000 2 61 63Issue 30 June 2007 250,000,000 251 13,928 14,179 30 September 2007 807,734,554 808 27,572 28,380 6. Transition to IFRS From 1 April 2006 the Group has adopted International Financial ReportingStandards (IFRS) in the preparation of its financial statements. The main items contributing to the change in financial information compared withthat reported under UK GAAP as at the transition date are shown below: IFRS 3 'Business combinations' Under UK GAAP the goodwill resulting from a business combination is amortisedover a relevant period, however, under IFRS 3 goodwill must not be amortised butbecomes subject to regular impairment testing. IAS 21 'The effects of changes in foreign exchange rates' Under UK GAAP the Group reported differences in exchange rates on consolidationin a foreign exchange reserve. Under IFRS the Group has claimed the exemptionfrom retrospective application of IAS 21, including all exchange differencesrecognised up to transition within the income statement. The Group is nowrequired to show all post transition differences on consolidation as a separateitem within equity. Detailed reconciliations between UK GAAP and IFRS of both equity and losses areshown below: Reconciliation of equity as at 1 April 2006 Balance sheet UK GAAP IFRS 3 IAS 21 IFRS £'000 £'000 £'000 £'000AssetsNon-current assetsGoodwill 537 537Intangible assets 806 806Property, plant and equipment 3 3 Total non-current assets 1,346 1,346 Current assetsTrade and other receivables 22 22Cash and bank balances 5,565 5,565 Total current assets 5,587 5,587 Total assets 6,933 6,933 Equity and liabilitiesEquityIssued capital 507 507Shares to be issued 167 167Share premium 7,888 7,888Other reserve - -Foreign exchange reserve 3 (3) -Retained earnings (1,772) 3 (1,769) Total equity 6,793 6,793 Current liabilitiesTrade and other payables 140 140 Total liabilities 140 140 Total equity and liabilities 6,933 6,933 In the last reported financial statements, the Group presented its share of theassets of the joint arrangement within "investments" on the balance sheet. Theassets that Amerisur control all relate to exploration assets. Amerisur hasincurred no liabilities as a result of these arrangements and to date hasneither incurred expenses nor earned income. Accordingly, these assets are nowpresented in intangible assets as exploration assets and there is no amendmentto this presentation on transition to IFRS. Reconciliation of equity as at 30 September 2006 Balance sheet UK GAAP IFRS 3 IAS 21 IFRS £'000 £'000 £'000 £'000AssetsNon-current assetsGoodwill 523 14 537Intangible assets 7,403 7,403Property, plant and equipment 4 4 Total non-current assets 7,930 14 7,944 Current assetsTrade and other receivables 45 45Cash and bank balances 2,194 2,194 Total current assets 2,239 2,239 Total assets 10,169 14 10,183 Equity and liabilitiesCapital and reservesIssued capital 534 534Shares to be issued 167 167Share premium 11,636 11,636Other reserve - -Foreign exchange reserve 1 (3) (2)Retained earnings (2,362) 14 3 (2,345) Total equity 9,976 14 9,990 Current liabilitiesTrade and other payables 193 193 Total liabilities 193 193 Total equity and liabilities 10,169 14 10,183 In the last reported financial statements, the Group presented its share of theassets of the joint arrangement within "investments" on the balance sheet. Theassets that Amerisur control all relate to exploration assets. Amerisur hasincurred no liabilities as a result of these arrangements and to date hasneither incurred expenses nor earned income. Accordingly, these assets are nowpresented in intangible assets as exploration assets and there is no amendmentto this presentation on transition to IFRS. Reconciliation of equity as at 31 March 2007 Balance sheet UK GAAP IFRS 3 IAS 21 IFRS £'000 £'000 £'000 £'000AssetsNon-current assetsGoodwill 508 29 537Intangible assets 5,798 5,798Property, plant and equipment 13 13 Total non-current assets 6,319 29 6,348 Current assetsTrade and other receivables 242 242Cash and bank balances 2,103 2,103 Total current assets 2,345 2,345 Total assets 8,664 29 8,693 Equity and liabilitiesCapital and reservesIssued capital 555 555Shares to be issued 167 167Share premium 13,583 13,583Other reserve 23 23Foreign exchange reserve 10 (3) 7Retained earnings (7,199) 29 3 (7,167) Total equity 7,139 29 7,168 Current liabilitiesTrade and other payables 1,525 1,525 Total liabilities 1,525 1,525 Total equity and liabilities 8,664 29 8,693 In the last reported financial statements, the Group presented its share of theassets of the joint arrangement within "investments" on the balance sheet. Theassets that Amerisur control all relate to exploration assets. Amerisur hasincurred no liabilities as a result of these arrangements and to date hasneither incurred expenses nor earned income. Accordingly, these assets are nowpresented in intangible assets as exploration assets and there is no amendmentto this presentation on transition to IFRS. Reconciliation of loss for the six months ended 30 September 2006 UK GAAP IFRS 3 IFRS £'000 £'000 £'000 Administrative expenses 638 (14) 624Impairment charge -Finance income (48) - (48) Loss before tax 590 (14) 576Taxation - - - Loss for the period 590 (14) 576 Reconciliation of loss for the year ended 31 March 2007 UK GAAP IFRS 3 IFRS £'000 £'000 £'000 Administrative expenses 1,354 (29) 1,325Impairment charge 4,295 - 4,295Finance income (222) - (222) Loss before tax 5,427 (29) 5,398Taxation - - - Loss for the period 5,427 (29) 5,398 Cashflow As a result of the transition to IFRS the following changes have resulted in thecash flow statement. Under UK GAAP payments to acquire property, plant and equipment were classifiedas part of 'Capital expenditure and financial investment' whilst under IFRS suchpayments have been reclassified as part of 'Investing activities'. There are no other material differences between the cash flow statementpresented under IFRS and that presented under UK GAAP. This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
AMER.L