Interim Results

RNS Number : 0040L

Roxi Petroleum Plc

28 September 2016

 

Roxi Petroleum plc

("Roxi" or the "Company")

Interim Results for the period ended 30 June 2016

Roxi Petroleum plc, the Central Asian oil and gas company with a focus on Kazakhstan, announces its unaudited results for the six-month period ended 30 June 2016.

Highlights

Financial

·    Operating costs significantly reduced despite increased operational activity

·    Drilling costs in Kazakhstan remain low

·    Work continues towards the proposed merger with Baverstock

Operational

·    Aggregate shallow well production from BNG for the period totalled 62,000 bopd

·    Remains in line with work programme commitments, targeting renewal of BNG licences to production licences from June 2018

Enquiries:

Roxi Petroleum PLC                                                                  [phone]

Clive Carver, Chairman

WH Ireland Limited                                                                   [phone]

James Joyce / James Bavister

Abchurch                                                                                          [phone]

Tim Thompson / George Robinson / Rebecca Clube

Qualified Person

Mr. Nurlybek Ospanov, Roxi's senior geologist who is a member of the Society of Petroleum Engineers ("SPE"), has reviewed and approved the technical disclosures in this announcement.

Letter from the Executive Chairman

Introduction

I am pleased to present this interim statement covering the six-month period ended 30 June 2016.

Overview

For some time now we have been on the cusp of reporting real value adding progress from our drilling activities at BNG. I am therefore delighted this report follows the recent independent confirmation of outstanding reserves on just those shallow areas of BNG drilled to date.

The Board's view is that these shallow reserves would on their own constitute a successful outcome at BNG, with fast and cheap drilling, certain oil and close proximity to efficient distribution routes.

The much larger objective is to similarly prove outstanding reserves from our deep drilling. Such an achievement would constitute a very significant value enhancement for the Company.  We are just 40 kilometers from the world class Tengiz field, which we believe shares certain important geological features with BNG

As with many things with a potentially large reward, success is not always easy or quick and we have found this to be the case with our deep drilling campaign at BNG. We have three deep wells vying to be the first to produce consistently to allow an independent assessment of the reserve base. All three have operational challenges caused by the very high pressure and temperatures encountered as detailed below.

There has probably never been a better time to drill in Kazakhstan. Rig rates remain at an all time low, with flexible payment terms on offer. Following periodic devaluations of the Kazakh Tenge against the US$ the majority of our local operating costs are also at an all time low.

With the confirmed existence of our shallow reserves covering much of the current valuation, shareholders may choose to consider our deep drilling as entirely upside.

Approach to developing BNG

Our approach to the development of BNG, the Group's principal asset, has been to seek to maximise reserves with the minimum dilution before the renewal of the current licence in June 2018.

Our task has been aided greatly by the deep and sustained fall in the costs of drilling. Shallow wells to a depth of 2,500 meters, once costing $5 million can now be drilled on a turnkey basis for as little as $1.25 million, whilst deep wells to a depth of 5,000 meters once costing $15 million can be drilled on a turnkey basis for as little as $6 million.

Despite the recovery in world oil prices we do not expect the rates for drilling to change in the foreseeable future.

We are seeking to avoid dilutive equity issues by funding development work from the pre sales of oil from our shallow wells. Under the current licence all oil produced at BNG must be sold at domestic prices, which are currently approximately $10 per barrel. Even at these reduced prices the pay back periods from shallow wells are, if successful, less than 12 months.

Our assets

Roxi has interests in three Kazakh Contract Areas, BNG (58.41%), Munaily (58.41%) and Beibars (50.00%).

BNG

The BNG Contract Area is located in the west of Kazakhstan, 40 kilometers southeast of Tengiz on the edge of the Mangistau Oblast, covering an area of 1,561 square kilometers of which 1,376 square kilometers has 3D seismic coverage acquired in 2009 and 2010.

In January 2016, Roxi announced that the area of the Contract Area was extended with the addition of 140.6 square kilometres to the north-east of the current block. The extended BNG Contract Area now covers 1,702 square kilometers.

BNG Shallow Reserves

In January 2011, BNG engaged Gaffney Cline & Associates ("GCA") to undertake a technical audit of the BNG Contract Area and subsequently Petroleum Geology Services ("PGS") to undertake depth migration work, based on the 3D seismic work carried out in 2009 and 2010.

The work of GCA in 2011 resulted in confirming total un-risked resources of 900 million barrels from 37 prospects and leads mapped from the 3D seismic work undertaken in 2009 and 2010. The report of GCA also confirmed risked resources of 202 million barrels as well as Most- Likely Contingent Resources of 13 million barrels on South Yelemes.

On 2 September 2016 we published a reserves update from Gaffney Cline & Associates, derived solely from our shallow fields, which based on an 100% economic interest is:

  (P90)  Proved reserves of 18.3 million barrels

  (P50)  Proved and Probable of 29.3 million barrels

  (P10)  Proved, Probable & Possible reserves 45.0 million barrels

These take no account of any reserves from our deep drilling of the Ayrshagyl field.

Licences

BNG's current licence runs to June 2018 when we plan to seek a full production licence to run for either 25 or 49 years depending on the reserve position at that time.  Under a full production licence we will be able to sell oil produced at world prices.  However, under our current licence, we are required to sell oil produced during testing at domestic prices.

The licence at Munaily is a full production licence running until 2025.

Drilling activity

To date we have drilled two deep wells at BNG and are close to completing a third.  Additionally we have drilled 4 shallow wells, plus a further well currently drilling.

We plan to spud one further deep well A7 as the rig working at A6 becomes available and a further two shallow wells, in Q4 2016.

Based on our experience over the past two winters we plan to restrict drilling activities during the main winter months and avoid unnecessary expenditure during periods when work is not possible.

BNG Shallow fields

Roxi has two principal areas of interest to depths of 2,500 meters and above which are located over an area of some 800 square kilometers.  The first is the South Yelemes portion of the BNG block where 4 wells have been drilled to date, including the producing wells 54, 805, 806 & 807.  The second is the MJF structure located to the north of the South Yelemes wells. In aggregate the shallow fields produced approximately 62,000 barrels of crude oil in the six months to 30 June 2016. The production does not include well 54 due to its extended workover and recompletion.

South Yelemes field

Wells 54 and 805 are producing 100 bopd, while 806 & 807 are shut-in temporarily to replace wellhead parts. These wells have been drilled to depths of 2,500 meters.

MJF structure

Well 143

Well 143, which was drilled in 2013 has been by far the best performing of Roxi's shallow wells.  Recently production from this well increased to some 630 bopd following the switch from a 5mm choke to a 7mm choke. Our plan is to flow the well at 500 bopd to ensure optimum production.

Well 141

At Well 141, which is located some 1,200 meters to the southwest of Well 143. The well is to be drilled to a Total Depth of 2,500 meters on a turnkey basis at a total cost of $1.25 million.

Drilling commenced in August 2016 and earlier this week reached the planned 2,500 meter Total Depth.  The well was planned initially to target Jurassic Callovian sands at a depth of 2,200 meters with a secondary objective in the Cretaceous Valanginian limestone at a depth of 1,900 meters.

Based on mudlogging we believe there are intervals with potential. Following the completion of a full open hole log interpretation we will be able to decide which intervals shall be tested.

Well 142

Preparatory work is underway for Well 142, which is also to be drilled on the MJF structure but this time some 1,600 meters to the north-east of Well 143. Drilling Well 142 is expected to commence in October 2016 using the rig currently drilling Well 141.

This well is also to be drilled on a turnkey basis for $1.25 million to a Total Depth of 2,500 meters.

The principal reason for drilling Wells 141 and 142 is to seek to prove the extent of the MJF structure.

Payback from our shallow wells

Even with oil sales at domestic rather than international prices, should either Shallow Well 141 or 142 perform to the levels of Well 143, according to our expected production profile, we would expect the drilling costs to be recovered well within 12 months by the sale of oil produced.

Deep Wells

Our deep wells, typically with a Total Depth of 5,000 meters, are located in the Ayrshagyl region of the Contract Area, which extends over an area of some 120 square kilometers.

A5

Background

Deep Well A5 was spudded in July 2013 and drilled to a total depth of 4,442 meters with casing set to a depth of 4,077 meters. The well targeted structures in the Middle and Lower Carboniferous.

Core sampling revealed the existence of a gross oil--bearing interval of at least 105 meters from 4,332 meters to at least 4,437 meters.

As announced at the time, drilling difficulties resulted in the well being completed on an open-hole basis. Attempts to test the well over an extended period have to date been thwarted by the well becoming blocked after a few hours. However, during brief periods under testing A5 flowed at the rate of some 2,000 bopd.

Our strategy to clear the blockage has been to use a mixture of physical intervention together with opening and closing the well as natural pressure builds.  We initially intervened using coil tubing followed by a series of pipe openings for varying periods ending when the pressure at the wellhead fell back to 300 bar.

Current position

Recently, we conducted a series of trials using a pump unit to make sure a proper level of communication exists between the oil pipe, through which the drilling fluids used to control the high pressure are introduced to the well, and the space between the drill pipe and the well casing by which the drilling fluids is recovered.

By monitoring indicator fluid introduced at surface level we were able to demonstrate that the proper communications are in place, with indicator fluid returning to the surface.

Our plans are, at an appropriate time, to close the well for a period sufficient to attempt a side-track from 4,320 meters so that the well is no longer open-hole at Total Depth and therefore maintaining high well pressures to avoid a collapse in the well becomes less important.

Once flowing freely we continue to believe the production rate at A5 will be the best of the three deep wells spudded to date.

A6

Deep Well A6 was spudded in November 2015, targeting the same structure as Deep Well A5 in the Middle and Lower Carboniferous

Drilling at Deep Well A6 paused for several weeks over the summer to allow casing to be set at a depth of some 4,036 meters.  The cementing proved more difficult than we and our drilling contractors anticipated and delayed our original timetable.

Drilling paused again in August to allow the installation of a higher specification blow-out preventer. Drilling has now resumed and the well is currently progressed to a depth 4,370 meters, well below the salt layer.

Based on seismic information we anticipated encountering oil-bearing intervals at depths of 4,100 meters, 4,242 meters and most importantly at 4,386 meters, some 16 meters deeper than we have drilled to date.

The Total Depth of the well was planned at 5,000.  However, drilling may be stopped earlier dependent on an analysis of the mudlogging.  Once the well has reached a Total Depth a decision on which intervals to test will be taken.

Pressure in the well remains high as with at Deep Well A5 and accordingly our hopes for A6 are similarly strong.

801

Deep Well 801 was spudded on 15 December 2014 and reached a Total Depth of 5,050 meters on August 2015. The well is located approximately 8 kilometers from Deep Well A5.

As previously reported extended flow testing at Deep Well 801 has been frustrated by the presence of excess drilling fluids used to control the high pressure encountered while drilling the well.

Our plan with this well is to use chemical washes to clear the well to allow a continuous flow test. To date we have been through a full cycle of chemical washes. Similarly to Deep Well A5, the periods during which the well has flowed in between clean-ups, while short, are increasing in duration exhibiting strong oil flows.

While we do not have a view on the timing that will be required to complete the clean-up, we are comforted that our best producing well, shallow Well 143, also went through a similar extended period of clean-up before becoming a consistent and valuable producer.

Munaily

The Munaily field is located in the Atyrau Oblast approximately 70 kilometres southeast of the town of Kulsary. The field was discovered in the 1940s and produced from 12 reservoirs in the Cretaceous through to the Triassic. Roxi acquired 58.41 per cent interest of the 0.67 square kilometers rehabilitation block in 2008 and funded two wells and one well re--entry.

The only well is currently producing at that is at the rate of 70 bopd (41 bopd net to Roxi). Sales of oil from Munaily are at export prices as the field has a full production licence, which does not expire until 2025.

As previously announced we entered a joint venture agreement with a Chinese contractor for it to re-enter up to 20 wells drilled in the Soviet era, at the expense of the Chinese contractor, with sales of any oil produced split on a 50:50 basis.

To date, EOR Petroleum Technology Aktobe LLP, the Chinese contractor concerned, has re-entered one well.  However, it is too early to judge how successful this or other re-entries will prove.

Beibars

In 2007, Roxi acquired a 50 per cent interest in Beibars Munai LLP, which operates the 167 square kilometer Beibars Contract Area on the Caspian shoreline south of the city of Aktau.

While acquiring 3D seismic in 2008, the licence was put under Force Majeure when the acreage was allocated as a military exercise area (Polygon), by the Ministry of Defence. Since then no operations have been carried out, and Roxi operates a care and maintenance administrative budget on the project.

We understand a court hearing to consider an end to the force is in progress.

Financial performance

Comparisons to the corresponding period in 2015 are difficult as in H1 2015 we reported a $20.8 million contribution to operating profit from the disposal of Galaz.  Despite increased operational activity in H1 2016 we are pleased to report reduced operating costs.

Funding

In recent months the newly spudded and soon-to-be spudded wells, plus on-going work on existing wells have been funded by pre-sales of BNG oil to local traders.

We have no external debt, aside from $10.4 million debt due to Vertom, a company controlled by our CEO, and other amounts due to local oil traders. As income from any further successful wells increases Roxi could continue to fund developing the BNG asset with only limited recourse to shareholders.

Baverstock merger

The Company continues to progress the planned merger with Baverstock GmbH, the entity controlling the 41% of BNG & Munaily not owned by Roxi, which was announced in June 2016. and we expect to announce the detailed terms in the coming weeks. Completion of the proposed merger requires certain regulatory consents in the UK and Kazakhstan, together with the approval of independent Roxi shareholders and the Baverstock Quota-holders.

Outlook

Roxi is in compliance with its work programme commitments and is working towards the renewal of its BNG licence as a full production licence from June 2018.

The Group's focus remains to prove the greatest level of reserves, without unnecessarily diluting shareholders.

The very strong potential of the shallow fields at BNG has been independently confirmed in the recent Gaffney Cline & Associates reserve report and in the Board's opinion the BNG shallow fields assessed have great value on their own.

The much greater potential of our Ayrshagyl deep field and possibly of further shallow fields remain to be independently quantified. The Company continues to work through its drilling plan to achieve this at an early stage and success here could be viewed as entirely upside.

The group has limited external debt and will, should the proposed merger with Baverstock be completed as expected in the next couple of months, own up to 99% of what the board considers to be one of the most exciting prospects in Kazakhstan.

Clive Carver

Chairman

CONSOLIDATED INCOME STATEMENT

		Six months ended 30 June 2016 Unaudited		Six months ended 30 June 2015 Unaudited
		US$000s		US$000s
Revenue		896			970
Cost of sales		(907)			(994)
Gross Profit/(Loss)		(11)			(24)
Profit on disposal of equity accounted joint venture		-			18,658
Profit from revaluation of financial liability		-			2,182
Share-based payments		(277)			(278)
Administrative expenses		(1,099)			(1,545)
Operating Profit/ (Loss)		(1,387)			18,993
Finance cost		(405)			(398)
Finance income		110			100
Profit/(Loss) before taxation		(1,682)			18,695
Taxation		(818)			(4,592)
Profit/(Loss) after taxation from continuing operations		(2,500)			14,103
Loss for the year from discontinued operations		-			(914)
Profit/(Loss) after taxation		(2,500)			13,189
Profit attributable to owners of the parent		(1,241)			9,450
Profit attributable to non-controlling interest		(1,259)			3,739
Profit/(Loss) for the year		(2,500)			13,189
Earnings per share	3
Basic earnings/(loss) per ordinary share (US cents)
From continuing operations		(0.13)			1.13
From discontinued operations		-			(0.06)
Total		(0.13)			1.07
Diluted earnings/(loss) per ordinary share (US cents)
From continuing operations		(0.13)			1.11
From discontinued operations		-			(0.06)
Total		(0.13)			1.05

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

			Six months ended 30 June 2016 Unaudited	Six months ended 30 June 2015 Unaudited
			US$000s	US$000s
Profit after taxation			(2,500)	13,189
Other comprehensive loss:
	Exchange differences on translating foreign operations from continuing operations		1,791	(2,320)
	Exchange differences on translating foreign operations from discontinued operations		-	289
Total comprehensive income/(loss) for the period			(709)	11,158
Total comprehensive income/(loss) attributable to:
Owners of the parent			(184)	8,573
Non-controlling interest			(525)	2,585

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

For the six months ended 30 June 2016

	Share capital	Share premium	Deferred shares	Cumulative translation reserve	Other reserve	Retained  deficit	Total	Non-controlling interests	Total equity
Unaudited	US$'000	US$'000	US$'000	US$'000	US$'000	US$'000	US$'000	US$'000	US$'000
At 1 January 2016	15,979	146,664	64,702	(56,534)	(583)	(124,315)	45,913	3,624	49,537
Loss after taxation	-	-	-	-	-	(1,241)	(1,241)	(1,259)	(2,500)
Exchange differences on translating foreign operations	-	-	-	1,057	-	-	1,057	734	1,791
Total comprehensive income for the period	-	-	-	1,057	-	(1,241)	(184)	(525)	(709)
Arising on share issue	-	-	-	-	-	-	-	-	-
Transactions with owners	-	-	-	-	-	-	-	-	-
Arising on employee share options	-	-	-	-	-	277	277	-	277
Employee share options exercised	21	64	-	-	-	-	85	-	85
At 30 June 2016	16,000	146,728	64,702	(55,477)	(583)	(125,279)	46,091	3,099	49,190

For the six months ended 30 June 2015

	Share capital	Share premium	Deferred shares	Cumulative translation reserve	Other reserve	Retained  deficit	Total		Non-controlling interests		Total equity
Unaudited	US$'000	US$'000	US$'000	US$'000	US$'000	US$'000	US$'000		US$'000		US$'000
At 1 January 2015	14,761	136,674	64,702	(19,001)	(583)	(132,700)	63,853		31,537		95,390
Income after taxation	-	-	-	-	-	9,450	9,450		3,739		13,189
Exchange differences on translating foreign operations	-	-	-	(877)	-	-	(877)		(1,154)		(2,031)
Total comprehensive income for the period	-	-	-	(877)	-	9,450	8,573		2,585		11,158
Arising on share issue	405	2,595	-	-	-	-	3,000		-		3,000
Transactions with owners	405	2,595	-	-	-	-	3,000		-		3,000
Arising on employee share options	-	-	-	-	-	278	278		-		278
Employee share options exercised	38	164	-	-	-	-	202		-		202
Disposal of subsidiary	-	-	-	2,361	-	-	2,361		-		2,361
At 30 June 2015	15,204	139,433	64,702	(17,517)	(583)	(122,972)	78,267		34,122		112,389

Reserve		Description and purpose
Share capital		The nominal value of shares issued
Share premium		Amount subscribed for share capital in excess of nominal value
Shares to be issued		Amount received in respect of shares which are yet to be issued
Deferred shares		The nominal value of deferred shares issued
Cumulative translation reserve		Losses arising on retranslating the net assets of overseas operations into US Dollars
Other reserves		Fair value of warrants issued and capital contribution arising on discounted loans
Retained deficit		Cumulative losses recognised in the profit or loss
Non-controlling interest		The interest of non-controlling parties in the net assets of the subsidiaries

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

		As at 30 June 2016	As at 31 December 2015
	Note	US$000s	US$000s
Assets		Unaudited	Audited
Non-current assets
Unproven oil and gas assets	4	60,472	57,323
Property, plant and equipment		656	195
Inventories		308	12
Other receivables		17,641	14,640
Restricted use cash		431	271
Total non-current assets		79,508	72,441
Current assets
Other receivables		2,115	2,096
Cash and cash equivalents		2,068	10,462
Total current assets		4,183	12,558
Total assets		83,691	84,999
Equity and liabilities
Equity
Share capital	5	16,000	15,979
Share premium		146,728	146,664
Deferred shares	5	64,702	64,702
Other reserves		(583)	(583)
Retained earnings		(125,279)	(124,315)
Cumulative translation reserve		(55,477)	(56,534)
Shareholders' equity		46,091	45,913
Non-controlling interests		3,099	3,624
Total equity		49,190	49,537
Current liabilities
Trade and other payables		4,104	5,732
Short-term borrowings	6	125	308
Current provisions		2,900	2,957
Total current liabilities		7,129	8,997
Non-current liabilities
Borrowings	6	10,316	9,903
Deferred tax liabilities		7,514	7,485
Non-current provisions		782	780
Other payables		8,760	8,297
Total non-current liabilities		27,372	26,465
Total liabilities		34,501	35,462
Total equity and liabilities		83,691	84,999

This financial information was approved and authorised for issue by the Board of Directors on 27 September 2016 and was signed on its behalf by:

Clive Carver Chairman

CONSOLIDATED STATEMENT OF CASH FLOWS

		Six months ended 30 June 2016		Six months ended 30 June 2015
		Unaudited		Unaudited
		US$000s		US$000s
Cash flow used in operating activities
Cash received from customers		729		-
Payments made to suppliers and employees		(1,310)		(2,469)
Net cash used in operating activities		(581)		(2,469)
Cash flow used in investing activities
Additions to unproven oil and gas assets		(7,555)		(4,260)
Disposal of investments in equity accounted joint venture		-		620
Transfer to restricted use cash		(160)		37
Cash flow used in investing activities		(7,715)		(3,603)
Cash flow provided from financing activities
Issue of share capital		85		3,202
Repayment of borrowings		(183)		4,738
New loans received		-		3,816
Net cash received from financing activities		(98)		11,756
Net increase/(decrease) in cash and cash equivalents		(8,394)		5,684
Cash and cash equivalents at the start of the period		10,462		605
Cash and cash equivalents at the end of the period		2,068		6,289

NOTES TO THE CONSOLIDATED FINANCIAL INFORMATION

1.      STATUTORY ACCOUNTS

The interim financial results for the period ended 30 June 2016 are unaudited. The financial information contained within this report does not constitute statutory accounts as defined by Section 434(3) of the Companies Act 2006.

2.      BASIS OF PREPARATION

Roxi Petroleum plc is registered and domiciled in England and Wales.

This interim financial information of the Company and its subsidiaries ("the Group") for the six months ended 30 June 2016 has been prepared on a basis consistent with the accounting policies set out in the Group's consolidated annual financial statements for the year ended 31 December 2015. It has not been audited, does not include all of the information required for full annual financial statements, and should be read in conjunction with the Group's consolidated annual financial statements for the year ended 31 December 2015. The 2015 annual report and accounts, which received an unqualified opinion from the auditors, did not draw attention to any matters by way of emphasis, and did not contain a statement under section 498 (2) or 498 (3) of the Companies Act 2006, have been filed with the Registrar of Companies. As permitted, the Group has chosen not to adopt IAS 34 'Interim Financial Reporting'.

The financial information is presented in US Dollars and has been prepared under the historical cost convention.

The same accounting policies, presentation and method of computation are followed in this consolidated financial information as were applied in the Group's latest annual financial statements.

In addition, the IASB has issued a number of IFRS and IFRIC amendments or interpretations since the last annual report was published. It is not expected that any of these will have a material impact on the Group.

Going Concern

The financial information has been prepared on a going concern basis based upon projected future cash flows and planned work programmes.

Additional funding would in the opinion of the Directors be available if required from the sale of oil produced during testing, further draw downs under the $40 million equity facility and if required by rescheduling various loans.

The Directors are confident, on the above basis, that the Group will have sufficient resources for its operational needs over the relevant period, being until September 2017. Accordingly, the Directors continue to adopt the going concern basis.

3.         EARNINGS/(LOSS) PER SHARE

Basic earnings/(loss) per share is calculated by dividing the income/(loss) attributable to ordinary shareholders by the weighted average number of ordinary shares outstanding during the year including shares to be issued.

In order to calculate diluted earnings/(loss) per share, the weighted average number of ordinary shares in issue is adjusted to assume conversion of all dilutive potential ordinary shares according to IAS33. Dilutive potential ordinary shares include share options granted to employees and directors where the exercise price (adjusted according to IAS33) is less than the average market price of the Company's ordinary shares during the period.

The calculation of income/(loss) per share is based on:

	Six months ended 30 June 2016 Unaudited	Six months ended 30 June 2015 Unaudited
The basic weighted average number of ordinary shares in issue during the period	936,944,196	879,552,502
The diluted average number of ordinary shares in issue during the period	945,344,196	896,564,816
The basic weighted average number of ordinary shares in issue as of financials issue date*	936,944,196	881,892,142
The diluted average number of ordinary shares in issue as of financials issue date	945,344,196	898,904,456
The income/(loss) for the year attributable to owners of the parent from continuing operations (US$'000)	(1,241)	9,989
The loss for the year attributable to owners of the parent from discontinued operations (US$'000)	-	(539)

* Including shares to be issued from the day the funds were received for such shares.

4.         UNPROVEN  OIL AND GAS ASSETS

During six months period ended June 30 2015 Company's oil and gas assets increased by US$3.1 million due to additions (2015: US$1.1 million).

5.         CALLED UP SHARE CAPITAL

		Number of ordinary shares		$'000	Number of deferred shares	$'000
Balance at 31 December 2015			935,945,577	15,979	-	64,702
Share options exercised			1,487,500	21	-	-
Balance at  30 June 2016			937,433,077	16,000		64,702

6.         BORROWINGS

	Six months ended 30 June 2016	Year ended 31 December 2015
	US$'000 Unaudited	US$'000 Audited
Amounts payable within one year
Other payables(a)	125	308
	125	308

	Six months ended 30 June 2016	Year ended 31 December 2015
	US$'000 Unaudited	US$'000 Audited
Amounts payable after one year
Loan from Vertom N.V.(b)	10,316	9,903
	10,316	9,903

(a)  Short-term loans provided by Kazakhstan based borrowers and are repayable on demand. The Company agreed with the borrowers the loans are repayable in future once the Group companies reach free cash flows from oil sales.

(b)  On 29 September 2011 the Company entered into the loan facility with Vertom International NV ("Vertom") whereby Vertom agreed to lend up to US$5 million to the Company with an associated interest of 12% per annum. The Company has offered Vertom security over its investments in its operating assets in respect to this loan facility. On 30 April 2012 the Group extended the term of the loan facility arrangement with Vertom for further two years to 30 April 2014 and at the same time increased the facility amount to US$7 million. On 28 June 2013 the term of the loan facility was extended until 30 April 2016. On 26 June 2015 the term of the loan facility was extended until 30 April 2018. The loan extension represents a substantial modification of the terms of the existing financial liability and has been accounted for as an extinguishment of the original financial liability and recognition of a new financial liability.

 

END

 

 

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