23rd Apr 2008 07:10
Maple Energy plc23 April 2008 Immediate Release 23 April 2008 MAPLE ENERGY PLC ("MAPLE" OR THE "COMPANY") Preliminary Results for the year ended 31 December 2007 Maple Energy plc (AIM: MPLE, LIMA: MPLE), an integrated independent energycompany with assets and operations in Peru, today announces its preliminaryfinancial results for the year ended 31 December 2007. 2007 Highlights • Listed on the AIM market of the London Stock Exchange in July 2007 • Listed on the Bolsa de Valores de Lima (Lima Stock Exchange) in December 2007 • Continued to produce oil from Maquia and Agua Caliente fields with annual average production of 467 barrels per day ("bpd") • Operated the Pucallpa Refinery, currently Maple's main revenue producing asset, with approximately 2,523 bpd of feedstock while sales of refined products averaged 2,455 bpd • Revenue from operations of US$80.7 million produced gross profit of US$21.5 million for the year ending 31 December 2007 • Adjusted EBITDA (as defined herein) of US$8.8 million for the year ending 31 December 2007 • Acquired in December an additional 3.1% interest in Aguaytia Energy, LLC ("Aguaytia Energy"), an integrated natural gas and electric power generation and transmission business in Peru • Purchased 10,676 hectares of land near the North coast of Peru for the Company's ethanol project ("Ethanol Project") in June Jack W. Hanks, Chairman of Maple, commented today: "This has been a transformational year for Maple and we are excited about theopportunities and potential for growth of Maple. We have a diversified set ofoperating assets which continue to perform well and contribute to our overallperformance. We expect to make significant progress on our work programme in2008 as we continue to implement our strategic vision for the Company." For further information, please contact Maple Energy plc (+ 51 1 611 4000) Jack W. Hanks, Chairman of the Board and Executive Director Rex W. Canon, Chief Executive Officer, President and Executive Director Canaccord Adams Limited (+44 20 7050 6500) Neil Johnson Jeffrey Auld Bhavesh Patel Citigate Dewe Rogerson (+44 20 7638 9571) Media enquiries: Martin Jackson/George Cazenove Analyst enquiries: Scott Fulton Earnings Call Maple will hold a conference call on 23 April 2008 at 4.00 pm BST (10.00 a.m.Peruvian time) for analysts, shareholders and other investors. The call can beaccessed by dialing 0800 694 8018 (within the UK), 1 866 966 1393 (within theUSA), or +44 (0) 1452 552 018 (International including Peru). Call participantswill be asked for their full name, company details and pass code. The pass codefor this call is 44708991. This call will include statements from Rex W. Canon, Chief Executive Officer,and Ray Cochard, Chief Financial Officer. Upon completion of the remarks by Mr.Canon and Mr. Cochard, a question and answer session will be held wherebyconference-call participants will be permitted to interact with management. 2007 Operating Results The financial information set forth below reflects Maple's (i) consolidatedfinancial data for the year ended 31 December 2007; (ii) historical unauditedcombined financial data for the year ended 31 December 2006, and (iii)historical consolidated financial data for the year ended 31 December 2006.The financial information included herein is based on International FinancialReporting Standards ("IFRS") as adopted for use in the European Union. Prior to 30 November 2006, Maple was organised as two separate groups ofcompanies under common control: The Maple Companies, Limited ("TMC") group andThe Maple Gas Corporation del Peru Ltd. ("Maple BVI") group. Effective 30November 2006, a series of transactions were undertaken whereby these entitieswere re-organised such that TMC acquired Maple BVI and its related entities. TMCalso acquired various minority interests. This business combination wasaccounted for using the purchase method of accounting. This involved recognisingthe identifiable assets and liabilities of Maple BVI at fair value. Thecomparative consolidated information for the year ended 31 December 2006represents 12 months of operations of TMC and one month of operations of MapleBVI. In order to provide a more useful year-to-year comparison of theperformance of Maple by taking into consideration the revenues and expenses ofMaple BVI for a full year, the first set of 2006 figures presented below arebased on the 2006 combined unaudited income statement which was prepared as ifthe two groups had been combined starting 1 January 2006. As such, thecomparison of any financial figures between 2007 and 2006 herein reflect acomparison of 2007 results of operations prepared on a consolidated basis versus2006 results of operations prepared on a combined basis, unless specifiedotherwise. 2007 2006 2006 Refinery Sales Volume, barrels (1) 896,075 953,061 248,780 Gross Profit per barrel sold (1) US$23.98 US$23.98 US$19.26 US$'000 US$'000 US$'000 Consolidated Combined Consolidated Unaudited (3) Revenue from Operations 80,717 78,493 56,712 Gross Profit 21,487 22,850 4,792 Operating (loss)/profit (970) 2,409 1,107 Share of Profit in the associate 1,171 2,102 343 (Loss)/profit for the year (1,990) 399 406 Adjusted EBITDA (2) 8,832 9,450 2,225 __________ (1) Unaudited. (2) Adjusted Earnings before Interest Taxation Depreciation and Amortisation("Adjusted EBITDA") is calculated as operating (loss)/profit before exceptionalitems (AIM listing costs and expensing of brand costs) and exploration expensesplus depreciation, amortisation, workers' profit sharing, and share of profit inAguaytia Energy. (3) The 2006 unaudited combined figures included in the Admission Documentdated 6 July, 2007 ("Admission Document") have been restated to reflectadjustments related to full year amortisation of the fair market value ofintangibles recognised on the business acquisition referred to in Note 3 to the2006 IFRS audited consolidated financial information, and to defer the expensingof AIM listing costs until 2007. For further information on this businessacquisition and information related thereto, please see Note 3 to the auditedconsolidated financial statements included in the Admission Document which maybe found on the Company's website. Revenues for Maple increased to US$80.7 million in 2007 compared to US$78.5million in 2006. Higher prices for hydrocarbon products sold in Peru offset adecline in sales volumes. Even though feedstock costs increased in step withworld oil prices, gross profit on a per barrel sold basis remained stable atUS$23.98. Results for the year 2007 were a net loss after taxes of US$2.0million compared to 2006 net profit after taxes of US$0.4 million. The majorityof this difference was due to exceptional costs of US$3.5 million relating tothe AIM listing that have been expensed in the 2007 Income Statement incompliance with IAS 32 Financial Instruments; presentation. Oil production from Maple's Maquia and Agua Caliente fields decreased slightlyfrom an average of 477 bpd in 2006 to an average of 467 bpd in 2007. Totalrefinery feedstock volumes delivered to the Pucallpa Refinery decreased from anaverage of 2,760 bpd in 2006 to an average of 2,523 bpd in 2007 primarily as theresult of a reduction in the purchase of natural gasoline feedstock from anaverage of 2,211 bpd to 2,014 bpd from 2006 to 2007. Reflecting the relative stability of Maple's operations, Adjusted EBITDA ofUS$8.8 million in 2007 was somewhat less than the Adjusted EBITDA of US$9.5million in 2006. Adjusted EBITDA is a key performance indicator for measuringMaple's underlying operating efficiency. Non-Operating Results Finance revenue increased from US$0.2 million in 2006 to US$0.9 million for 2007as a result of increased cash balances. Maple's share in profit of Aguaytia Energy for 2007 was US$1.2 million. Foraccounting purposes, Maple acquired its ownership interest in Aguaytia Energywith the acquisition of Maple BVI in November 2006. If Maple had held theinterest in Aguaytia Energy for the full year 2006, Maple's share in profit fromAguaytia Energy would have been US$2.1 million. Outlook for 2008 2007 set the stage for Maple's planned growth and included a number ofmilestones in the Company's development. In 2008, Maple will continue togenerate cash flow from its existing operations which include its production,refining, and marketing activities as well as a 17.5% economic interest inAguaytia Energy. Maple intends to increase the cash flow from its production,refining, and marketing business primarily through the development drillingprogram which is expected to increase oil production as the Company commencesthe drilling and completion of wells in the Maquia and Agua Caliente oil fieldsfollowing receipt of certain approvals from the Peruvian government. A total of22 development wells (proven and probable reserves) are planned to be drilled todepths of up to approximately 2,000 feet in the Maquia and Agua Caliente oilfields in 2008 and 2009. An additional nine development wells (possiblereserves) may be drilled thereafter. Anticipated additional oil production fromthe initial 22 development wells is estimated to be in excess of 385 bpd. The approval of the environmental and social impact assessment ("EIA") for thereactivation of the Pacaya oil field was obtained in February 2008, and Maplehas commenced the reactivation of the field. In the second half of 2008, Mapleplans to complete the reactivation of the Pacaya oil field which is expected toincrease oil production by 150 bpd. The Company anticipates supplying all new oil production to its PucallpaRefinery for processing, and the resulting products will be sold to itscustomers. As the majority of Maple's refining costs are fixed, the incrementalcash flow generated from the additional refined product sales may besignificant. Maple's oil exploration business is also expected to be very active this year.The newest addition to its fleet of rigs, the 2,000 horsepowerheli-transportable rig, is expected to be completed and ready for transportationand mobilisation to the Santa Rosa 1X wellsite by the middle of 2008. Mapleplans to finance a substantial portion of the cost of the rig in 2008 withlong-term financing. The environmental approval for the seismic program and thedrilling of the Santa Rosa Prospect and the Cashiboya Deep Prospect in Block31-E was obtained from the Peruvian government in April of 2008. The Companywill begin the acquisition of approximately 225 km of 2-D seismic data and thepreparation of the drilling site for the Santa Rosa 1X well on Block 31-E in thesecond quarter of 2008. Maple expects to drill the Santa Rosa 1X in late 2008to a depth of 14,750 feet. This moderate risk prospect has Unrisked GrossProspective Resources (best estimate) of 220 million barrels of oil and has afavourable royalty regime for potential future production which is capped at20%. As Maple is executing its plans for its oil and gas business, Maple's projectdevelopment team for the Ethanol Project will continue to execute the Company'sinitiative to establish Maple as one of Peru's leading ethanol producers. Inearly 2008, Maple finalised its agricultural development plan for the sugar caneplantation and executed a five-year technical services agreement with BookerTate Limited ("Booker Tate"), a global leader in the provision of services tothe world of sugar, ethanol, bio-energy, and other agribusiness projects. BookerTate will provide the Company with technical services for the development andmanagement of its 8,000 hectare sugar cane plantation. By the middle of 2008,the Company expects to receive approval from the Peruvian government of the EIAfor the Ethanol Project and finalise engineering, procurement, and constructioncontracts for various key components of the project including the main waterdelivery system, the drip irrigation systems, and the ethanol plant. Fabricationand construction of significant portions of these key items are expected tobegin in 2008. A 10% interest in the Ethanol Project may be acquired by theFondo de Inversion en Infraestructura, Servicios Publicos y Recursos Naturales,a reputable Peruvian investment fund, pursuant to an agreement signed in 2007,and a substantial portion of the estimated capital expenditures for the projectare expected to be financed with project finance debt pursuant to agreementswhich are expected to be executed in the middle of 2008. Throughout 2008, Maplewill continue developing its seed cane program to produce the seed cane requiredfor the initial commercial sugar cane planting on the Company's main estate.Agricultural development activities and construction activities will continuethrough 2009, and the Company expects the Ethanol Project to be in commercialoperation by the middle of 2010. The execution of all these activities by Maple's dedicated team of employeescombined with continued strong commodity prices for oil, refined products, andethanol should make 2008 a successful year for the Company. Forward-Looking Statements Except for the historical information contained in this release, statementscontained in this document, particularly those regarding possible, projected orassumed future performance and results, including growth outlook, forecastedeconomics, operations, production, contracting, costs, prices, earnings, returnsand potential growth, are or may include forward looking statements. Suchstatements relate to future events and expectations and as such involve knownand unknown risks and uncertainties. These risks and uncertainties include,among other things, market conditions, weather risks, economic and politicalrisks and other factors discussed in Maple's Admission Document available on theCompany's website (www.maple-energy.com). Forward-looking statements are notguarantees of future performance or an assurance that Maple's currentassumptions and projections are valid. Actual results, actions and developmentsmay differ materially from those expressed or implied by those forward lookingstatements depending on a variety of factors. Furthermore, any forward-lookingstatements presented are expressed in good faith and are believed to have areasonable basis as of the date of this release. These forward lookingstatements speak only as at the date of this release, and Maple does not assumeany obligation to update any forward looking statements, whether as a result ofnew information, future events or otherwise. CONSOLIDATED INCOME STATEMENT for the year ended 31 December 2007 2007 2006 US$'000 US$'000 Revenue 80,717 56,712Cost of sales (59,230) (51,920) ___________ __________ Gross profit 21,487 4,792 ___________ __________ Administrative expenses (13,935) (2,718)Selling and distribution costs (4,528) (579)Exceptional listing costs (3,515) -Exploration expense (479) (388) ___________ ___________ Total operating expenses (22,457) (3,685) ___________ ___________ Operating (loss)/profit (970) 1,107 Finance revenue 930 213Finance costs (2,125) (560)Share of profit of an associate 1,171 343 ___________ ___________ (Loss)/profit before tax (994) 1,103 Income tax expense (996) (697) ___________ ___________ (Loss)/profit for the year (1,990) 406 ========== ========== (Loss)/profit attributable to:Equity holders of the parent (2,152) 40Minority interests 162 366 ____________ ___________ (1,990) 406 ========== ========= Basic (loss)/earnings per share attributable to ordinary US$ (3.38) 0.91equity holders of the parent (cent) ======= =======Diluted (loss)/earnings per share attributable to ordinary US$ (3.38) 0.91equity holders of the parent (cent) ======= ======= CONSOLIDATED BALANCE SHEET as at 31 December 2007 ASSETS 2007 2006 US$'000 US$'000 Non-current assetsProperty, plant and equipment 8,647 6,931Intangible assets 47,837 49,269Investment in an associate 30,243 25,614 _________________ _________________ 86,727 81,814 _________________ _________________Current assetsOther financial assets - 1,118Income tax recoverable 451 629Prepayments and other assets 5,415 3,682Inventories 10,805 8,360Trade and other receivables 7,055 1,983Cash and cash equivalents 34,342 1,663Restricted cash 3,403 638 _________________ _________________ 61,471 18,073 _________________ _________________ TOTAL ASSETS 148,198 99,887 ============== =========EQUITY AND LIABILITIESEquity attributable to equity holders of the parentIssued capital 812 486Share premium 67,417 17,882Other reserves 2,801 2,952Merger reserve 42,647 42,647Retained loss (7,948) (5,796) _________________ _________________ 105,729 58,171Minority interests 8,168 - _________________ _________________ Total equity 113,897 58,171 _________________ _________________Non-current liabilitiesLong-term debt 2,854 5,633Other non-current liabilities 944 1,107Provisions 1,020 998Deferred income tax liability 9,445 11,160Deferred workers' profit sharing liability 3,503 3,773 _________________ _________________ 17,766 22,671 _________________ _________________Current liabilitiesCurrent portion of long-term debt 1,953 2,905Trade and other payables 7,416 9,375Overdrafts and bank loans 1,100 3,829Other current liabilities 6,066 2,936 _________________ _________________ 16,535 19,045 _________________ _________________ Total liabilities 34,301 41,716 TOTAL EQUITY AND LIABILITIES 148,198 99,887 ========= ========= CONSOLIDATED STATEMENT OF CHANGES IN EQUITY for the year ended 31 December 2007 Attributable to equity holders of the parent ______________________________________________________________________________________________________________ Number of Issued Share Retained Other Merger Total Minority Total Ordinary capital Premium Loss Reserves reserve interests equity Shares US$'000 US$'000 US$'000 US$'000 US$'000 US$'000 US$'000 US$'000 US$'000 At 1 January 2006 285,000 3 (42,614) (4,870) - 42,647 (4,834) 2,586 (2,248) Profit for the year - - - 40 - - 40 366 406 _____________ ___________ _________ ___________ _________ ________ ________ _________ _________Total income - - - 40 - - 40 366 406and expensefor the year Issue of share 48,296,120 483 60,496 - 2,952 - 63,931 (2,952) 60,979 capital onacquisition of Maple BVI andminorityinterests Issue of share 10 - - - - - - - -capital Equity - - - (966) - - (966) - (966)dividends _____________ ___________ __________ __________ __________ ________ ________ _________ __________ At 31 December 48,581,130 486 17,882 (5,796) 2,952 42,647 58,171 - 58,1712006 Loss for the - - - (2,152) - - (2,152) 162 (1,990) _____________ ___________ __________ ___________ _________ ________ ________ _________ ___________ Total income - - - (2,152) - - (2,152) 162 (1,990)and expensefor the year Issue of share 32,632,477 326 55,190 - (6,100) - 49,416 6,100 55,516capital Transaction - - (5,655) - - - (5,655) - (5,655)costs on issueof sharecapital Issue of share - - - - 2,711 - 2,711 7,200 9,911capital tominorityinterests Transaction - - - - - - - (434) (434)costs on issueof share capital tominorityinterests Deemed - - - - 4,642 - 4,642 (4,642) - disposal byminority interest ofits minorityinterests Share-based - - - - 369 - 369 - 369payment Payments made by asubsidiary to shareholdersof the Company - - - - (1,773) - (1,773) (218) (1,991) _____________ ___________ ___________ ___________ _________ ________ ________ ________ __________ At 31 December 2007 81,213,607 812 67,417 (7,948) 2,801 42,647 105,729 8,168 113,897 ============ ============ ========== =========== ========= ======== ======== ======== ========= CONSOLIDATED CASH FLOW STATEMENT for the year ended 31 December 2007 2007 2006 US$'000 US$'000 Operating activitiesCollection from customers 74,861 56,715Payments to suppliers and third parties (70,572) (52,049)Payments to employees (11,691) (1,471)Income tax paid (3,196) (1,210)Interest paid (2,104) (540) _______ _______ Net cash (used in)/provided by operating activities (12,702) 1,445 _______ _______Investing activitiesInvestment in associate (2,607) -Increase in restricted cash (3,203) (637)Decrease in restricted cash 438 -Purchase of property, plant and equipment (2,391) (89)Additions of intangible assets (1,545) (23)Cash provided by Maple BVI acquisition - 1,584Increase of due from shareholders (873) (20)Dividends received 1,520 444Interest received 930 213 _______ _______ Net cash (used in)/provided by investing activities (7,731) 1,472 _______ _______Financing activitiesProceeds from issue of share capital 65,427 -Transaction costs (5,655) -Proceeds from bank loans - 2,526Dividends paid to equity holders of the parent - (966)Payments of long-term debt (4,061) (671)Payments of bank loans (2,729) (2,446) _______ _______ Net cash provided by/(used in) financing activities 52,982 (1,557) _______ _______ Net increase in cash and cash equivalents during the year 32,549 1,360Net foreign exchange difference 130 173Cash and cash equivalents at beginning of year 1,663 130 _______ _______ Cash and cash equivalents at end of year 34,342 1,663 ========= ========= 1. CORPORATE INFORMATION Maple Energy plc ("the Company") was incorporated in the Republic of Ireland on18 October 2006. On 12 February 2007, the Company re-registered as a publiclimited company. The Company is domiciled in the Republic of Ireland. Prior to 30 November 2006, the group of companies ("the Maple Group") which nowform the consolidated financial statements of Maple Energy plc and subsidiaries(collectively, "Maple" or "the Group") was organised as two separate groups ofcompanies under common control: The Maple Companies, Limited ("TMC") and TheMaple Gas Corporation del Peru Ltd ("Maple BVI"), both companies registered inthe British Virgin Islands. Effective 30 November 2006, a series of transactionswas undertaken whereby these entities were re-organised such that TMC acquiredMaple BVI and its related entities. TMC also acquired various minorityinterests. This business combination has been accounted for using the purchasemethod of accounting. This involves recognising the identifiable assets andliabilities of the acquired business at fair value. The comparative informationfor the year ended 31 December 2006 in the consolidated financial statementsincludes the results of Maple BVI and its related entities for the one-monthperiod from the date of acquisition. The Group is an integrated independent energy business with assets andoperations in Peru. It engages in numerous aspects of the energy industry,including: (i) exploration and production of crude oil, natural gas and naturalgas liquids; (ii) refining, marketing and the distribution of hydrocarbonproducts; (iii) gas-fired power generation and power transmission; and (iv) thedevelopment of an ethanol project. By utilising its strategic asset base,technical expertise, project management skills, and strong customer andgovernment relationships, the Group has established itself as one of Peru'sleading integrated energy businesses. On 7 February 2007, the Company entered into a share exchange agreement with theshareholders of TMC, whereby in return for the issuance of 48,581,113 OrdinaryShares of US$0.01 each, the Company acquired 1,619,371 shares of US$0.01 each ofTMC, representing its entire issued shared capital at that time, and became theultimate holding company of the Maple Group. This group re-organisation has beenaccounted for using the pooling of interests method. The purpose of the re-organisations carried out on 30 November 2006 and 7February 2007 was to implement a more efficient group structure to facilitatethe raising of capital on the Alternative Investment Market ("AIM") of theLondon Stock Exchange. On 13 July 2007, the Company completed the placing of 26,700,000 Ordinary Sharesof US$0.01 each at a price of STG£0.84 each, and its then entire issued sharecapital, consisting of 75,281,130 Ordinary Shares of US$0.01 each, was admittedto trading on AIM. The transaction costs associated with listing the Company's existing shares onAIM, in the aggregate amount of US$3,515,000, were, in accordance with IAS 32Financial Instruments: presentation ("IAS 32") expensed to the income statementfor the year ended 31 December 2007. Transaction costs incurred in connectionwith the issuance of new shares amounting to US$5,655,000 was applied againstshare premium. Effective 20 December 2007, the Ordinary Shares of the Company were admitted totrading on the Lima Stock Exchange. 2. BUSINESS COMBINATIONS (a) Acquisition of Maple BVI On 30 November 2006, TMC acquired 100% of the issued share capitalof Maple BVI, an unlisted company registered in the British Virgin Islands. The fair values of the identifiable assets, liabilities and contingentliabilities of Maple BVI at the date of acquisition and the correspondingcarrying amounts before the acquisition were: Carrying Fair value value US$'000 US$'000 Property, plant and equipment 6,879 3,848Intangible assets 33,445 691Investment in an associate 25,715 24,780Other financial assets 1,075 1,075Prepayments and other assets 2,753 2,753Inventories 7,212 6,530Receivables from related parties 7,155 7,155Trade and other receivables 4,516 4,516Cash and cash equivalents 1,584 1,584 ____________ ____________ 90,334 52,932 ========== ============ Long-term debt 9,446 9,446Deferred income tax and workers' profit sharing liability 15,273 601Trade and other payables 9,605 9,605Overdrafts and bank loans 4,862 4,862Payables due to related parties 1,465 1,465Other current liabilities 4,801 3,991 ____________ ____________ 45,452 29,970 =========== ============Net assets 44,882 22,962 ============Goodwill arising on acquisition 16,097 ____________ Total Consideration 60,979 ========== The total cost of the business combination was US$60,979,000 and comprised anissue of equity instruments. TMC issued 1,609,871 shares of US$0.01 each with afair value of US$37.878 each. Since there was no published price for the sharesissued, TMC considered the interest in the fair value of the acquiree obtainedas the fair value of the shares issued. There were no significant costs directlyattributable to the acquisition of Maple BVI. In December 2006, Maple BVI contributed a loss of US$190,000 to the Group. Ifthe acquisition of Maple BVI had occurred on the first day of the financial yearended 31 December 2006 (1 January 2006), the profit of the Group would have beenUS$399,000 and revenue from continuing operations would have been US$78,493,000. The fair value adjustments at 31 December 2006 were provisional as the Group hadsought an independent valuation. The results of this valuation had not beenreceived at the date the 2006 accounts were approved for issue by management. Onpreparing these consolidated financial statements the Group recognisedadjustments to the provisional fair values and the total cost of the businesscombination following receipt of an independent valuation report in March 2008.In accordance with IAS 8 Accounting Policies, Changes in Accounting Estimatesand Errors ("IAS 8") the Group has accounted for the error correctionretrospectively, and present these financial statements as if the error hadnever occurred by restating the comparative information for the prior period inwhich the error occurred. (b)Share Exchange Agreement On 7 February 2007, the Company entered into a share exchange agreement with theshareholders of TMC, whereby in return for the issuance of 48,581,113 OrdinaryShares of US$0.01 each, the Company acquired 1,619,371 shares of US$0.01 each ofTMC, representing its entire issued share capital, and became the ultimateholding company of the Maple Group. This share exchange has been accounted forusing the pooling of interests method. The shares issued by the Company werevalued at US$18,368,000. The difference between the share capital of the Companyand the share capital of TMC on entering into the share exchange agreement inthe amount of US$42,647,000 has been reflected as a merger reserve, and has beenaccounted for retrospectively at 1 January 2006. 3. SEGMENT INFORMATION The Group's primary format for segment reporting is business segments and thesecondary format is geographical segments. The risks and returns of the Group'soperations are primarily determined by the nature of the different activitiesthat the Group engages in, rather than the geographical location of theseoperations. This is reflected by the Group's organisational structure and theGroup's internal financial reporting systems. The Group has three reportable operating segments: Exploration; Production andMarketing; and the Ethanol Project. Exploration activities include oilexploration. Production and Marketing include field development and production,as well as refining of crude oil and natural gasoline and hydrocarbonsmanufacturing and marketing. The Ethanol Project relates to the development ofan agricultural industrial project for the future production and sale of ethanoland related products. Sales between segments are realised on normal commercialterms and conditions, which are determined based on the international marketprice of crude oil. Segment revenue, segment expense and segment results includetransfers between business segments. These transactions and any unrealisedprofits and losses are eliminated on consolidation. The Group's geographical segments are based in Peru. Sales to external customersdisclosed in geographical segments are based on the geographical location of itscustomers. Primary reporting format - Business segments Exploration Production Ethanol Other and Adjustments Total and marketing corporate and Group eliminations US$'000 US$'000 US$'000 US$'000 US$'000 US$'000 Year ended 31 December 2007 Revenue Sales to external customers - 80,957 - - (240) 80,717 ____________ ___________ __________ ___________ ___________ ___________ Results Operating loss (645) 5,853 (391) (5,787) - (970)Finance revenue 15 177 28 725 (15) 930Finance costs (19) (2,006) - (115) 15 (2,125)Share of profit in associate - - - 1,171 - 1,171 ____________ ____________ ____________ ____________ ____________ ____________ Loss before tax (649) 4,024 (363) (4,006) - (994) ____________ ____________ ____________ ____________ ____________ Income tax expense (996) ____________ (1,990) ==========Assets and liabilitiesSegment assets 1,680 71,265 6,236 31,359 (8,682) 101,858Goodwill - 16,097 - - - 16,097Investment in associate - - - 30,243 - 30,243 ____________ ____________ ____________ ____________ ____________ ____________ 1,680 87,362 6,236 61,602 (8,682) 148,198 ____________ ____________ ____________ ____________ ____________ ____________ Segment liabilities 915 38,270 314 3,572 (8,770) 34,301 ____________ ____________ ____________ ____________ ____________ ____________Other informationCapital expenditure Intangible assets - 28 1,517 - - 1,545 Property, plant and 142 1,845 734 - - 2,721 equipment ____________ ____________ ____________ ____________ ____________ ____________ 142 1,873 2,251 - - 4,266 ____________ ____________ ____________ ____________ ____________ ____________ Depreciation 7 967 5 - - 979Amortisation - 2,977 - - - 2,977 ____________ ____________ ____________ ____________ ____________ ____________ Other non-cash expenses Share-based payments - - - 369 - 369 ____________ ____________ ____________ ____________ ____________ ____________ Primary reporting format - Business segments Exploration Production Ethanol Other and Adjustments Total and marketing corporate and Group eliminations US$'000 US$'000 US$'000 US$'000 US$'000 US$'000 Year ended 31 December 2006 Revenue Sales to external customers - 56,712 - - - 56,712 ____________ ____________ ____________ ____________ ____________ ____________ Results Operating profit (516) 2,241 (429) (189) - 1,107Finance revenue - 213 - 1 (1) 213Finance costs (62) (423) (2) (74) 1 (560)Share of profit in an associate - - - 343 - 343 ____________ ____________ ____________ ____________ ____________ ____________ Profit before tax (578) 2,031 (431) 81 - 1,103 ____________ ____________ ____________ ____________ ____________ Income tax expense (697) ____________Profit for the year 406 ____________Assets and liabilities Segment assets 3,364 69,688 69 4,884 (19,829) 58,176Goodwill - 16,097 - - - 16,097Investment in associate - - - 25,614 - 25,614 ____________ ____________ ____________ ____________ ____________ ____________ 3,364 85,785 69 30,498 (19,829) 99,887 ____________ ____________ ____________ ____________ ____________ ____________ Segment liabilities 5,885 39,899 368 15,393 (19,829) 41,716 ____________ ____________ ____________ ____________ ____________ ____________ Other informationCapital expenditureIntangible assets - 23 - - - 23Property, plant and equipment - 119 1 - - 120 ____________ ____________ ____________ ____________ ____________ ____________ - 142 1 - - 143 ____________ ____________ ____________ ____________ ____________ ____________ Depreciation 7 105 - - - 112Amortisation - 296 - - - 296 ____________ ____________ ____________ ____________ ____________ ____________ Secondary reporting format - Geographical segments All the Group's sales and capital expenditures are in Peru. Total assets Total assets are allocated based on where the assets are located: 2007 2006 US$'000 US$'000 Peru 147,712 99,188British Virgin Islands 483 699Ireland 3 - _________ _________ 148,198 99,887 _________ _________ 4. INCOME TAX AND WORKERS' PROFIT SHARING (a) Income tax and workers' profit sharing regulations The Company is subject to Irish tax regulations. Subsidiaries incorporated inthe British Virgin Islands are not subject to income tax and workers' profitsharing. Peruvian subsidiaries of the Company are subject to the Peruvian TaxSystem and Peruvian labour regulations. According to Peruvian regulations,companies operating in the refining sector that have more than 20 employees mustpay to their employees profit sharing equivalent to 10 percent of taxableincome. Corporation tax in Ireland is 12.5% on trading activities and 25% on non-tradingactivities. Exploitation activities of hydrocarbons in Blocks 31-B and 31-D aresubject to the common Peruvian tax regulations in force as of 30 March 1994(30%). Exploration activities in Block 31-E are subject to the common Peruviantax regulations in force as at 6 March 2001 (22%). Refining andcommercialisation activities of hydrocarbons are subject the current Peruviantax regime (30%). (b)Income tax and workers' profit sharing expense 2007 2006 US$'000 US$'000Income tax- Current 2,711 920- Deferred (1,715) (223) ___________ ___________ 996 697 ========== ========== Workers' profit sharing (presented as part of administrative expenses)- Current 541 56- Deferred (270) (77) ___________ ___________ 271 (21) ========== ========== (c)Movement of the deferred income tax and workers' profit sharing At 1 January Arising Workers' Income At 31 Workers' Income At 31 2006 on profit tax December profit tax December acquisition sharing 2006 sharing 2007 US$'000 US$'000 US$'000 US$'000 US$'000 US$'000 US$'000 US$'000Deferred asset Other 40 59 2 (3) 98 (9) (43) 46 _______ _______ _______ _______ _______ _______ _______ _______ Deferred asset 40 59 2 (3) 98 (9) (43) 46 _______ _______ _______ _______ _______ _______ _______ _______ Deferred liability Exploration and - (356) (1) (1) (358) (5) 9 (354)development costs Contractual rights and - (13,202) 28 84 (13,090) 294 1,668 (11,128)customer relationships Oil wells - (1,504) 6 20 (1,478) 32 184 (1,262) Inventories - (270) 42 123 (105) 26 79 - Work-overs - - - - - (68) (182) (250) _______ _______ _______ _______ _______ _______ _______ _______ Deferred liability - (15,332) 75 226 (15,031) 279 1,758 (12,994) _______ _______ _______ _______ _______ _______ _______ _______ Deferred liability, net 40 (15,273) 77 223 (14,933) 270 1,715 (12,948) ======== ======== ======== ======== ======== ========= ========= ======== (c) Movement of the deferred income tax and workers' profit sharing (continued) At 31 December 2007, there was no recognised deferred tax liability (2006:US$Nil) for taxes that would be payable on the unremitted earnings of certain ofthe Group's subsidiaries as: • the Group is able to control the timing of the reversal of thetemporary difference; and • the Group has determined that undistributed profits of itssubsidiaries will not be distributed in the foreseeable future. The temporary differences associated with investments in subsidiaries for whichdeferred tax liability has not been recognised aggregate to US$8,678,000 (2006:US$5,015,000). (d)Reconciliation between income tax expenses, and the product of accountingprofit multiplied by the tax rate 2007 2006 US$'000 US$'000 Income (loss) before income tax (994) 1,103Legal consolidated rate 30% 30% _______ _______At consolidated rate (298) 331Losses of entities not subject to tax 1,771 122Effect of change in tax rate due to change of legal status of Group entities (996) -Taxes assumed by the Group 186 80Other permanent items 333 164 _______ _______ Effective income tax expense 996 697 ======== ======== 5. (LOSS)/EARNINGS PER SHARE Basic (loss)/earnings per share amounts are calculated by dividing net (loss)/earnings for the year attributable to equity holders of the parent by theweighted average number of Ordinary Shares outstanding during the year. Diluted(loss)/earnings per share amounts are calculated by dividing the net (loss)/earnings for the year attributable to ordinary equity holders of the parent bythe weighted average number of Ordinary Shares outstanding during the year plusthe weighted average number of Ordinary Shares that would be issued on theconversion of all the dilutive potential Ordinary Shares into Ordinary Shares. The following reflects the income and share data used in the basic and diluted(loss)/earnings per share computations: 2007 2006Numerator US$'000 US$'000Net (loss)/profit attributable to equity (2,152) 40 holders of the parent for basic and diluted earnings ____________ ____________ 2007 2006Denominator Number NumberWeighted average number of Ordinary Shares for basic and diluted earnings per share 63,657,928 4,386,863 ____________ ____________ 2007 2006 US dollar US dollar (cent) (cent) Basic and Diluted (Loss)/Earnings per Share (3.38) 0.91 =========== ============ The calculation of basic and diluted (loss)/earnings per share for all periodspresented has been adjusted retrospectively to reflect the application of thepooling of interests method to account for the share exchange agreement wherebythe Company acquired the entire issued share capital of the former group parent,The Maple Companies, Limited. For all periods until 7 February 2007, the numberof shares in issue is deemed to be the shares of The Maple Companies, Limitedadjusted by a multiple of 30, the multiple applied by the Company to acquire TheMaple Companies, Limited. After 7 February 2007, the actual number of shares inissue is taken into account. During 2007, the Company issued instruments that could potentially dilute basicearnings per share in the future, but were not included in the calculation forthe reasons outlined below: • Stock Option Agreement with ACC - The Company granted Fondo deInversion en Infraestructura, Servicios Publicos y Recursos Naturales ("ACC") anoption to receive 5,997,660 Ordinary Shares of US$0.01 each in exchange for the199,922 shares ACC holds in the equity of TMC, a subsidiary of the Company.These potential Ordinary Shares are anti-dilutive at 31 December 2007; • Investment Agreement with ACC - If a subsidiary of the Company has tomake tax payments in connection with certain potential tax claims for the taxyears 2001, 2002 and 2003, the Company shall compensate ACC by one of thefollowing, as selected by the Company, after consultation with ACC: (i) make apayment equal to 10.989% of the amount of the payment ("Pro Rata Tax ClaimAmount"); or (ii) an amount in shares of TMC that is equivalent to the number ofshares of the Company having a then market value equal to the Pro Rata Tax ClaimAmount. As the status of the contingency remains unsatisfied at 31 December2007, the contingently issuable Ordinary Shares are not included in thecalculation of diluted loss per share at 31 December 2007; and • Employee Stock Options - Refer to the Annual Report for the totalnumber of shares related to the outstanding options that could potentiallydilute basic earnings per share in the future. These potential Ordinary Sharesare anti-dilutive at 31 December 2007. There were no instruments that could potentially dilute basic earnings per sharefor the year ended 31 December 2006. No ordinary share transactions or potential ordinary share transactions occurredafter the balance sheet date but before the financial statements were authorisedfor issue that would have changed significantly the number of ordinary shares orpotential ordinary shares outstanding at the end of the period if thosetransactions had occurred before the end of the reporting period. 6. INVESTMENT IN ASSOCIATE Aguaytia Energy, LLC ("Aguaytia") was incorporated as a Delaware limitedliability company on 30 October 1995 with a share capital divided into cash andnon-cash units. Aguaytia has an issued and outstanding share capital of 181,838units, comprised of 161,838 cash units and 20,000 non-cash units. Whilst boththe cash and the non-cash units are entitled to voting rights, an adjustment ismade to distributions paid by Aguaytia such that the distributions allotted toshareholders of cash units is greater than the distributions allotted toshareholders of non-cash units. Through its wholly owned subsidiaries, Aguaytia carries out the followingactivities within Peru: • Exploitation of natural gas deposit, located in the central jungle ofPeru; • Processing of natural gas to obtain natural gas liquids ("NGLs"); • Fractionation of NGLs into liquefied petroleum gas ("LPG") and naturalgasoline. This latter product is sold to the Group; • LPG transportation and distribution; and • Electric power generation and transmission. Movement in the investment for the years ended 31 December 2007 and 31 December2006 2007 2006 US$'000 US$'000 1 January 25,614 -Arising on acquisition - 25,715Acquisition of additional interest 4,978 -Share of profit for the year:Negative goodwill arising on acquisition of additional interest 203 -Share of profit of associate 999 432Elimination of Group's share of unrealised profit on transactions with associate (31) (89)Dividends received (1,520) (444) ___________ ___________ 31 December 30,243 25,614 ========== ========== At 31 December 2006, the Group held 17,419.5 cash units and 20,000 non-cashunits thereby entitling the Company to a 20.6% voting interest in Aguaytia. TheGroup had granted to a third party the rights on the economic interest, but notthe voting rights, associated with 7,971 cash units and 1,360 non-cash units. Inaccordance with IAS 39, the Company has treated this as a transfer of that partof the investment in the associate, and has de-recognised such investment to theextent the Company has transferred substantially all the risks and rewards ofownership of that part of the investment and is committed to transfer thedividends received from Aguaytia associated with these units. On 18 December 2007, the Company exercised its right of first refusal to acquirefrom a third party investor in Aguaytia an additional 5,684.5 cash units. Theconsideration of US$4,978,000 was satisfied by the payment of US$2,607,000, anda promissory note in the amount of US$2,371,000 due in June 2008. Negativegoodwill of US$203,000, representing the difference between the considerationand the fair value of the associate's assets and liabilities multiplied by theadditional interest acquired has been credited to the income statement for theyear. As of 31 December 2007, the Company held 23,104 cash units and 20,000 non-cashunits, which represented a voting interest of 23.7% and an economic interest of17.5%. The following table illustrates summarised financial information of the Group'sinvestment in Aguaytia at 31 December 2007 and 31 December 2006, and for theyears then ended: 2007 2006 US$'000 US$'000Share of the associate's balance sheetCurrent assets 8,428 6,448Non-current assets 34,415 30,283Current liabilities (3,251) (2,242)Non-current liabilities (9,349) (8,875) ________ ________ Net assets 30,243 25,614 ========== ========== Share of the associate's revenue and profitRevenue 16,397 17,381Profit for the year 999 432 7. COMMITMENTS AND CONTINGENCIES (a)Income tax The tax authorities are legally entitled to review and, if necessary, adjust theincome tax calculated by Peruvian subsidiaries of the Group during the fouryears subsequent to the year of the related tax return filing. The income taxand value added tax returns of the following years are pending review by the taxauthorities: Entity Open years Maple Production del Peru S.R.L. 2003 - 2007The Maple Gas Corporation del Peru S.R.L. 2003 - 2007Acer Comercial S.R.L. 2003 - 2007Maple Etanol S.R.L. 2003 - 2007 Due to various possible interpretations of current legislation, it is notpossible to determine whether or not future reviews will result in taxliabilities for the Group. In the event that additional taxes payable, interestand surcharges result from tax authority reviews, they will be charged toexpense in the period assessed and paid. However, other than as discussed below,in management's opinion, any additional tax assessment would not be significantto the consolidated financial information as at 31 December 2007. The 2001 income tax return of Maple Gas was reviewed by the Tax Administration,and on 9 December 2003, Maple Gas received assessments related to a supposedomission on an income tax payment of US$2,222,729, including interest as at 27November 2003. On 7 January 2004, Maple Gas filed a tax claim against thoseassessments. Resolution of the matter is pending at 31 December 2007. Despitemanagement considering this contingency to be not probable, arising on theacquisition of Maple BVI, the Group recognised an amount of US$809,000 inconnection with the fair value of this contingency. (b)Ethanol Project On 5 January 2007, the Group signed a contract with the Peruvian government toacquire untilled lands for the cultivation of sugar cane and to develop anindustrial project for producing automotive ethanol. The Group acquired 10,676hectares of land for a total amount of US$641,000 and made the followingcommitments: • To invest US$32,029,391 over a five-year term from the date ofdelivery of the lands to the Group. This investment will be subject to an auditcarried out by the Peruvian government; • To pay in favour of the Piura region, for a 20 year period, an annualdonation of US$500,000. The initial payment will be made at the end of the firstyear of commercial production. The Group intends to expense US$500,000 to theincome statement each year on payment of the annual donation, unless thecontract becomes onerous to the Group, in which case the pattern of expensing tothe income statement would be accelerated; and • To grant a bank security in favour of the Peruvian state in the amountof US$3,202,939, equivalent to 10% of total investment commitment. This banksecurity guarantees the compliance of the investment commitment and the annualdonation above mentioned, and will be proportionally reduced as the Groupcarries out the committed investment. The bank security will be reduced toUS$500,000 once the Group finishes with the committed investment ofUS$32,029,391, and shall be kept at such amount until the Group complies withthe committed donations. (c)Environmental matters The Group is subject to the Code for the Environment and Natural Resources. Suchcode requires companies to prepare an Environmental Impact Assessment ("EIA")approved by a competent authority. In connection with such Code and its rulings,the Group filed the corresponding EIAs, which were duly approved in 1996 and2003, respectively. In addition, according to the relevant license contracts and to the refinery andsales plant lease contract mentioned below, the Group is not responsible forenvironmental damages caused before the beginning of its operations. As at 31December 2007 and 31 December 2006, management believes that the Group is incompliance with the current environmental regulations and therefore, noprovisions are required with respect to environmental matters. (d)Operating lease of refinery and sales plant and administrative facilities The Group entered into an operating lease agreement for the refinery and salesplant in Pucallpa and the associated buildings and equipment. The Refinery andSales Plant leases expire in 2014, although such term may be extendable by theparties on similar terms and conditions provided that Maple Gas is not in breachof any terms of the lease, and the License for the Exploitation of Hydrocarbonsin Blocks 31-B and 31-D and the License for the Exploitation of Hydrocarbons inBlock 31-C remain in force. In addition, the Group has entered into operatingleases for its administrative facilities in Lima and in Northern Peru; theseleases expire in various periods until 2014. The minimum future lease payments are as follows: 2007 2006Minimum future lease payments Offices Refinery Total Office Refinery Totalpayable within: lease and lease and sales plant sales plant US$'000 US$'000 US$'000 US$'000 US$'000 US$'000 1 year 481 584 1,065 362 584 9462 to 5 years 1,731 2,335 4,066 1,541 2,335 3,876Thereafter 883 6,616 7,499 1,204 7,188 8,392 ________ ________ ________ ________ ________ ________ Total 3,095 9,535 12,630 3,107 10,107 13,214 ======== ======== ======== ======== ======== ======== (e)Decommissioning of oil production facilities At the end of the term of the license contracts, the Group is required todeliver to the Peruvian State, without any cost and charge, and in goodcondition, all the wells, camps, pipelines, constructions and other facilitieslocated in the area of the license contracts. Accordingly, no obligation existsfor the decommissioning of production facilities at the end of the licenseperiod, except for the plugging of wells with no reserves at that date. (f)Legal claims Payment claimed by Energy Services S.A. In 2000, the Group was defendant in an action initiated by Energy Services S.A.for US$248,832 (principal of US$170,148 plus accrued interest of US$78,684 until15 May 2000), related to the acquisition and installation of a pipeline amongothers. In the same year, the Group filed a counter-claim against EnergyServices S.A. requesting the payment of approximately US$265,000, plus legalinterest, which has been reduced to US$223,000, plus legal interest, as of 31December 2007. On 11 April 2006, the Seventh Civil Court of Lima ruled in favour of EnergyServices S.A. and ordered the Group to pay US$170,148 plus interest calculatedat an annual rate of 18%. On 23 May 2006, the Court accepted the appeal of theGroup to the above decision. However, due to the favourable sentence obtained byEnergy Services S.A., on 23 June 2006, the Court ordered the restriction of theGroup to its funds deposited in Banco de Credito de Peru by US$200,000. Thesefunds are presented as restricted funds. On 6 November 2006, the Fourth Civil Room of the Superior Court of Lima declarednull the sentence of the Seventh Civil Court dated 11 April 2006, on the basisthat there had been a violation of the Group's right to due process, and orderedthe judge to issue a new sentence, taking into consideration the arguments ofthe Group. On 27 October 2007, the Court ruled in favour of Energy Services S.A. andconfirmed the sentence of 11 April 2006. On 29 November 2007, the Group lodgedan Appeal against the sentence of the Seventh Civil Court of Lima before theFourth Civil Room of the Superior Court of Lima. Based on the opinion of the Group's legal advisors, management consider that thefinal outcome will be favourable to the Group, considering that there are legalgrounds that support the counterclaim. Consequently, no provision for anyliability has been recorded in the consolidated financial statements. Other contingencies The Group is involved in other claims of a diverse nature. Management believesthat any possible loss which may result from these claims will not have amaterially adverse effect on the Company's financial position or reportedresults. (g)Commitments to purchase natural gasoline from Aguaytia The Group has a commitment to acquire at a price derived from market prices thenatural gasoline produced by Aguaytia over the life of Aguaytia's Block 31-Clicense contract. (h)Commitment to construct a drilling rig On 17 December 2007, the Group concluded a contract for the construction of a2,000 horse power heli-transportable diesel-electric drilling rig. Pursuant tothe terms of the contract, the Group will pay a total of approximately US$16million for the engineering, procurement, and construction of the rig. The Groupplans to finance a substantial portion of the cost of the rig in 2008 withlong-term financing from one or more financial institutions in Peru. The rigwill be used to drill exploration prospects in Block 31-E, located in thePeruvian jungle. As at 31 December 2007, the Group has paid advances in theamount of US$3,677,000. (i)Capital commitment in Block 31-E In May 2007, the Group signed a contract for a new 2-D seismic program covering225 kilometres to define the most advantageous drilling site for the CashiboyaDeep Prospect, while also providing better geological information on the SantaRosa Prospect. This seismic program is expected to start in the first half of2008 following approval of the environmental and social impact assessment ("EIA") by the Peruvian government. 8. FIRST-TIME ADOPTION OF IFRS For all periods up to and including the year ended 31 December 2006, the Groupprepared its financial statements in accordance with generally acceptedaccounting practice in Peru ("Peruvian GAAP"). These financial statements, forthe year ended 31 December 2007, are the first the Group has prepared inaccordance with IFRS as adopted for use in the EU. Accordingly, the Group has prepared financial statements which comply with IFRSas adopted for use in the EU applicable for periods beginning on or after 1January 2007 as described in the accounting policies. In preparing thesefinancial statements, the Group opening balance sheet was prepared as at 1January 2006, the Group's date of transition to IFRS. This note explains theprincipal adjustments made by the Group in restating its Peruvian GAAP balancesheet as at 1 January 2006 and its previously published Peruvian GAAP financialstatements for the year ended 31 December 2006. IFRS 1 First-Time Adoption of International Financial Reporting Standards ("IFRS1") allows first-time adopters certain exemptions from the general requirementto apply IFRS as effective for December 2007 year ends retrospectively. TheGroup has availed of no exemptions in preparing its financial statements. (a)Reconciliation of equity at 1 January 2006 Peruvian Peruvian GAAP IFRS GAAP Other (restated) GAAP adjustments differencesASSETS US$'000 US$'000 US$'000 US$'000 US$'000 Non-current assetsProperty, plant and equipment 45 - 45 - 45Intangible assets 7,394 - 7,394 (7,394) -Deferred income tax asset 40 - 40 - 40Other financial assets 1,649 - 1,649 - 1,649 __________ ___________ ___________ ___________ ___________ 9,128 - 9,128 (7,394) 1,734 ________ _________ _________ _________ _________Current assetsPrepayments and other assets 340 - 340 - 340Inventories 162 - 162 - 162Trade and other receivables 5,893 (457) 5,436 - 5,436Cash and cash equivalents 130 - 130 - 130 __________ ___________ ___________ ___________ ___________ 6,525 (457) 6,068 - 6,068 ________ _________ _________ _________ _________ TOTAL ASSETS 15,653 (457) 15,196 (7,394) 7,802 ========== ========== ========== ========== ==========EQUITY AND LIABILITIES Equity attributable to equity holders of the parentIssued capital 3 - 3 - 3Share premium (42,614) - (42,614) - (42,614)Retained earnings/(loss) 2,531 (7) 2,524 (7,394) (4,870)Merger reserve 42,647 - 42,647 - 42,647 __________ ___________ ___________ ___________ ___________ 2,567 (7) 2,560 (7,394) (4,834)Minority interests 3,036 (450) 2,586 - 2,586 __________ ___________ ___________ ___________ ___________ Total equity 5,603 (457) 5,146 (7,394) (2,248) __________ ___________ ___________ ___________ ___________Non-current liabilitiesLong-term debt 9 - 9 - 9 __________ ___________ ___________ ___________ ___________ 9 - 9 - 9 __________ ___________ ___________ ___________ ___________Current liabilitiesCurrent portion of long-term debt 10 - 10 - 10Trade and other payables 5,871 - 5,871 - 5,871Payables due to related parties 3,601 - 3,601 - 3,601Other current liabilities 559 - 559 - 559 __________ ___________ ___________ ___________ ___________ 10,041 - 10,041 - 10,041 __________ ___________ ___________ ___________ ___________ Total liabilities 10,050 - 10,050 - 10,050 __________ ___________ ___________ ___________ ___________ TOTAL EQUITY AND LIABILITIES 15,653 (457) 15,196 (7,394) 7,802 ========== ========== ========== ========== ========== (b)Reconciliation of balance sheet and equity as at 31 December 2006 Peruvian GAAP Finalisation Peruvian IFRS (reported) of Other GAAP GAAP fair values adjustments (restated) differencesASSETS US$'000 US$'000 US$'000 US$'000 US$'000 US$'000 Non-current assetsProperty, plant and 6,931 equipment 7,808 (1,965) 1,088 6,931 -Intangible assets 71,766 (13,812) (903) 57,051 (7,782) 49,269Investment in an 25,614 associate 24,124 1,579 (89) 25,614 - ___________ ___________ ___________ ___________ ___________ ___________ 103,698 (14,198) 96 89,596 (7,782) 81,814 ___________ ___________ ___________ ___________ ___________ ___________Current assetsOther financial assets 1,118 - - 1,118 - 1,118Income tax recoverable 629 - - 629 - 629Prepayments and other assets 1,503 2,179 - 3,682 - 3,682Inventories 8,360 - - 8,360 - 8,360Trade and other receivables 2,702 (719) - 1,983 - 1,983 Cash and cash equivalents 1,663 - - 1,663 - 1,663 Restricted cash 638 - - 638 - 638 ___________ ___________ ___________ ___________ ___________ ___________ 16,613 1,460 - 18,073 - 18,073 ___________ ___________ ___________ ___________ ___________ ___________ TOTAL ASSETS 120,311 (12,738) 96 107,669 (7,782) 99,887 ========== ========== ========== ========== ========== ========== EQUITY AND LIABILITIES Equity attributable to equity holders of the parent Issued capital 486 - - 486 - 486Share premium 23,434 (5,552) - 17,882 - 17,882Other reserves 2,952 - - 2,952 - 2,952Merger reserve 42,647 - - 42,647 - 42,647Retained earnings/(loss) 1,986 (7,782) (5,796) 1,890 198 (102) ___________ ___________ ___________ ___________ ___________ ___________ Total Equity 71,409 (5,354) (102) 65,953 (7,782) 58,171 ___________ ___________ ___________ ___________ ___________ ___________ (b) Reconciliation of balance sheet and equity as at 31 December 2006(continued) Peruvian GAAP Finalisation Peruvian IFRS (reported) of Other GAAP GAAP fair values adjustments (restated) differences US$'000 US$'000 US$'000 US$'000 US$'000 US$'000Non-current liabilitiesLong-term debt 5,633 - - 5,633 - 5,633Other non-current liabilities 1,107 - - 1,107 - 1,107Provisions 3,060 (2,253) 191 998 - 998Deferred income tax liability 14,995 (3,835) - 11,160 - 11,160Deferred workers' profit sharing liability 5,069 (1,296) - 3,773 - 3,773 ___________ ___________ ___________ ___________ ___________ ___________ - - 29,864 (7,384) 191 22,671 - 22,671 ___________ ___________ ___________ ___________ ___________ ___________ Current liabilitiesCurrent portion of long-term debt 2,905 - - 2,905 - 2,905 Trade and other payables 9,375 - - 9,375 - 9,375Overdrafts and bank loans 3,829 - 3,829 - 3,829Other current liabilities 2,929 - 7 2,936 - 2,936 ___________ ___________ ___________ ___________ ___________ ___________ 19,038 - 7 19,045 - 19,045 ___________ ___________ ___________ ___________ ___________ ___________ Total liabilities 48,902 (7,384) 198 41,716 - 41,716 ___________ ___________ ___________ ___________ ___________ ___________ TOTAL EQUITY AND LIABILITIES 120,311 (12,738) 96 107,669 (7,782) 99,887 ========== ========== ========== ========== ========== ========== (c)Reconciliation of consolidated statement of income for the year ended 31December 2006 Peruvian Finalisation Peruvian IFRS GAAP of Other GAAP GAAP adjustments (as reported) fair values (restated) differences US$'000 US$'000 US$'000 US$'000 US$'000 US$'000 Revenue 56,712 - - 56,712 - 56,712Cost of sales (50,370) 21 (1,571) (51,920) - (51,920) ___________ ___________ ___________ ___________ ___________ ___________ Gross profit 6,342 21 (1,571) 4,792 - 4,792 ___________ ___________ ___________ ___________ ___________ ___________ Administrative (2,733) 174 (159) (2,718) - (2,718) expensesSelling and (2,146) - 1,567 (579) - (579) distribution costs Exploration expense - - - - (388) (388) ___________ ___________ ___________ ___________ ___________ ___________ Total operating (4,879) 174 1,408 (3,297) (388) (3,685) expenses ___________ ___________ ___________ ___________ ___________ ___________ Operating profit 1,463 195 (163) 1,495 (388) 1,107 Finance revenue 213 - - 213 - 213Finance costs (704) - 144 (560) - (560)Share of profit in an associate 365 67 (89) 343 - 343Other (56) - 56 - - - ___________ ___________ ___________ ___________ ___________ ___________ Profit before tax 1,281 262 (52) 1,491 (388) 1,103Workers' profit sharing 45 - (45) - - -Income tax benefit/ (expense) (634) (64) 1 (697) - (697) ___________ ___________ ___________ ___________ ___________ ___________ Profit for the year 692 198 (96) 794 (388) 406 ___________ ___________ ___________ ___________ ___________ ___________ Profit attributable to: Equity holders of the 326 198 (96) 428 (388) 40 parentMinority interests 366 - - 366 - 366 ___________ ___________ ___________ ___________ ___________ ___________ 692 198 (96) 794 (388) 406 ========== ========== ========== ========== ========== ========== (d)Notes to the reconciliation between Peruvian GAAP and IFRS Finalisation of fair values The main adjustments shown in the above reconciliations refer to thefinalisation in March 2008 of the fair value of the assets, liabilities andcontingent liabilities of Maple BVI at the date of acquisition, as follows: • The fair value of property, plant and equipment was US$6,879,000 atthe date of acquisition, a decrease of US$1,986,000. • Intangible assets that can be separately identified in accordance withIAS 38 include license contracts for the exploration and exploitation ofhydrocarbons and customer relationships, and represented a fair value at thedate of acquisition of US$33,445,000, a decrease of US$11,791,000 compared tothe provisional fair value. • Goodwill of US$16,097,000, included in the intangible assets captionresulted in a decrease of US$2,217,000 compared to the initial accounting. • Investment in associate and share of profit in associate increased byUS$1,579,000 and US$67,000, respectively, as a result of the review of theeconomic interest percentage in Aguaytia from 14.0622% to 14.393% and the changein the fair value of Aguaytia's net assets at 30 November 2006 due to therecognition of the impact of IAS 21. • Prepayments and other assets include a reclassification from Trade andOther Receivables of US$719,000, corresponding to listing costs incurred by theGroup at 30 November 2006. In addition, it includes listing costs ofUS$1,460,000 that were incorrectly expensed at 30 November 2006. • As a result of the fair value adjustments, the Group recognised anadjustment to deferred workers' profit sharing and income tax liability of inthe amount of US$14,672,000, a decrease of US$5,217,000 compared to theprovisional value. • Although the contingencies liabilities were considered possible orremote, as required by IFRS 3, and only for the purposes of allocating the costsof this business combination, the Group recognised a fair value at the date ofacquisition of US$809,000 in respect of contingent liabilities, a decrease ofUS$2,253,000 compared to the provisional value. • The correction of an error in the determination of the cost of thecombination resulted in a decrease of the share premium caption of US$5,552,000. • The Group reduced the cost of sales and administrative expensescaptions by US$21,000 and US$196,000, respectively, due to reduced depreciationand amortisation originated by the reduced fair value of property, plant andequipment and intangible assets. • The impact on deferred workers' profit sharing and income tax due tothe reduced depreciation and amortisation resulted in a reduced administrativeexpense of US$22,000 and reduced income tax expense of US$64,000. Other adjustments The Group made other adjustments and reclassifications: 31 December 2006 • The property, plant and equipment and provisions captions wereincreased by US$187,000 due to decommissioning costs (plugging of wells), net ofaccumulated depreciation of US$2,000. • The cost of drilling development wells by US$903,000 was reclassifiedfrom intangible assets to property, plant and equipment. • The freight expenses amounting to US$1,567,000 were reclassified fromselling and distribution costs to cost of sales. • The tax on financial transactions and the exchange differenceamounting to US$120,000 and US$25,000, respectively, were reclassified fromfinance costs to administrative expenses. • The share of profit in an associate was reduced due to an eliminationof inter-company gains by US$89,000. • Other expenses by US$56,000 were reclassified from Other toadministrative expenses • Workers' profit sharing benefit by US$45,000 was reclassified toadministrative expenses. 1 January 2006 • The trade and other receivables and minority interest were reduced byUS$450,000 in connection with an intercompany transaction not properlyeliminated. GAAP differences • Under Peruvian GAAP, oil exploration and development expenditure isaccounted for using the full cost method of accounting, whereby exploration anddevelopment costs are capitalised. Under IFRS, oil exploration and developmentexpenditure is accounted for using the successful efforts method of accounting.Geological and geophysical exploration costs are charged against income asincurred. Costs directly associated with an exploration well or wells in anExploration Drilling programme for an Area of Interest, are capitalised as anintangible asset until the drilling of the well or wells is complete and theresults have been evaluated. If hydrocarbons are not found, the explorationexpenditure is written off as a dry hole. If hydrocarbons are found and, subjectto further appraisal activity, which may include the drilling of further wells(exploration or exploratory-type stratigraphic test wells), are likely to becapable of commercial development, the costs continue to be carried as an asset. This GAAP difference resulted in a decrease of US$7,782,000 intangible assetsat 31 December 2006 and a decrease of US$388,000 in the consolidated incomestatement. (e)Reconciliation of consolidated cash flow statement for year ended 31 December2006 There are no material differences other than changes in classification betweenthe consolidated cash flow statement prepared under IFRS and that prepared underPeruvian GAAP. 9. STATUTORY ACCOUNTS The financial information presented in this report does not represent fullstatutory accounts. Full statutory accounts for the year ended 31 December 2007prepared in accordance with IFRS upon which the Auditors have given anunqualified audit report, have not yet been filed with the Registrar ofCompanies. 10. APPROVAL OF PRELIMINARY ANNOUNCEMENT The board approved the preliminary announcement on 22 April 2008. This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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