Global Energy Development PLC Interim Report 2011
Global Energy Development PLC is a petroleum exploration and production company focused on Latin America, an area in which the management team has decades of operating experience and in which they have pursued a long-term strategy of finding and developing reserves.
ContractsThe Company’s balanced portfolio covers the countries of Colombia and Peru, and comprises a base of production, workover opportunities and developmental drilling.
The Company held as at September 2011 six contracts: five in Colombia and one in Peru.
ReservesThe independent petroleum engineers Ralph E. Davis Associates, Inc (“RED”) reported that as at 31 December 2010: proved plus probable (“2P”) reserves net to the Company totalled 124.6 million barrels of oil equivalent (“BOE”); and proved plus probable plus possible (“3P”) reserves net to the Company totalled 218.1 million BOE.
AIMThe Company’s shares have been traded on AIM, a market operated by the London Stock Exchange, since March 2002 (LSE-AIM: “GED”).
01Global Energy Development PLCInterim Report 2011
• NetProfitof$3.9million(firsthalfof2010:$1.3millionNetLoss);
• Revenueincreasedby52%to$17.1milliononcomparablepriorperiod(firsthalfof2010:$11.3million);
• Grossprofitincreasedby138%to$7.4milliononcomparablepriorperiod(firsthalfof2010:$3.1million);
• Averagegrossproductionincreased15%at244,040barrelsofoil(“bbls”)oncomparablepriorperiod(firsthalfof2010:212,692bbls);
• AsaresultofthesuccessfulworkoverprogrammeoftheTilodiran2and3wellswithintheColombianRioVerdecontract,grossproductionforthemonthofJune2011increased86%to68,317bbls(monthofJune2010:36,642bbls);
• Averagecashnetbackperbarrelsoldof$61(firsthalfof2010:$43);
• Taxcreditof$1.2millionreflectedintheincomestatementasaresultofrealisedtaxlossesreportedtotheColombiantaxauthoritiesandalsoduetofavourablefluctuationsinthepeso-dollarexchangerate;
• Capitalexpendituresof$3.3million,predominantlyrelatedtothesuccessfulworkoverprogrammeoftheTilodiran2and3wellsandimprovedsurfacehandlingfacilities;
• Debtrepaymentsof$1.3million,fundedoutofcashflowfromoperationsandcashavailable;and
• Purchaseandcancellationof$0.6millioninvariablecouponconvertiblenotesdue2012plusallaccruedinterestinconsiderationfortheissueof317,000ordinarysharesof1peach.
Highlights
01 Highlights02 ChairmanandManagingDirector’sStatement&ReviewofOperations04 UnauditedFinancialHighlights04 ReserveInformation–UKGAAP05 IndependentReviewReporttoGlobalEnergyDevelopmentPLC06 CondensedConsolidatedStatementofComprehensiveIncome07 CondensedConsolidatedStatementofFinancialPosition08 CondensedConsolidatedCashFlowStatement09 CondensedConsolidatedStatementofChangesinEquity10 UnauditedNotesFormingPartoftheCondensedConsolidatedInterimFinancialInformation16 CorporateDirectory
Contents
02Global Energy Development PLC Interim Report 2011
FinancialsFavourableoilpricingalongwithanincreaseintheCompany’sdailyproductionvolumesgeneratedthesignificantlyimprovedresultsreportedbytheCompanyforthefirsthalfof2011(the“Period”).Revenuesforthesixmonthsended30June2011increased52%to$17.1million(sixmonthsended30June2010:$11.3million).CrudeoilcommoditypricesincreasedduringthePeriodwiththeCompanyaveraging$93.59perbarrel(“bbl”),a36%increaseagainst$68.97perbblinthefirsthalfof2010.
AsaresultofthesuccessfulworkoverprogrammecompletedinJune2011ontheCompany’sTilodiran2andTilodiran3wellswithintheColombianRioVerdeConcessionContract,netproduction(afterallroyaltypayments)duringthePeriodrose16%to212,934bbls(firsthalfof2010:183,658bbls).ThecountryofColombia,wheretheCompanymaintainsitsoperationsandcrudeoilproduction,hassustainedanincreaseinoveralldrillingactivitiesandhydrocarbonproductionwhichhasledtocompetitivepressuresforoperatorsintransportingandmarketingcrudeoilproduction.Duringthefirsthalfof2011,theCompany’snetsalesvolumeswere182,750bbls(firsthalfof2010:163,343bbls),andtheCompanyheldinunsoldcrudeoilinventoryapproximately41,000netbarrelsasat30June2011.ThroughtheCompany’smarketingefforts,theCompany’snetcrudeoilinventoryat30June2011wassubsequentlysoldinthemonthofJuly2011.
ThelimitedavailablecapacityofColombia’scurrentpipelineinfrastructurehasalsocontinuedtoleadtorisingtransportationcostsfortruckingthemajorityoftheCompany’soilsales.Costofsalesincreased18%duringthePeriodto$9.7million(firsthalfof2010:$8.2million).Despitethisincrease,theCompanyaveragedacashnetbackperbblof$61.05forthePeriod(firsthalfof2010:$43.18),andGrossProfitincreasedto$7.4millionduringthePeriodagainst$3.1millioninthesameperiodintheprioryear.
Intermsofcashposition,theCompanyendedthePeriodwithcashandcashequivalentsof$5.7million.CapitalexpendituresforthePeriodwere$3.3millionprimarilyrelatedtotheRioVerdeworkoverprogrammehighlightingtheCompany’semphasisonenhancingcashflowfromoperations,improvingshareholdervalueandincreasingproductionratesbydevelopingitsreservebase.
OperationsInApril2011,theCompanycommencedworkoveroperationsatitsTilodiran2andTilodiran3wellslocatedwithintheRioVerdeConcessionContract.Theworkoveroperationswerecompletedinmid-Maywithtestingandtheinstallationoftemporaryfacilitiescompletedbymid-June2011.TheresultsofthoseworkoverstooktheCompanyfromaveragegrossdailyproductionofapproximately1,100barrelsofoilperday(“bopd”)priortothecompletionoftheseworkoverstoanaveragegrossdailyproductionof2,200bopdfollowingtheworkoversandthrough30June2011.Followingthecompletionoftesting,theCompanyundertookaninternalreviewofitsdevelopmentprogrammefortheTilodiranfieldanddeterminedfurtherevaluationsandstudieswererequired.TheCompanypresentedtheANH(theNationalHydrocarbonsAgencyinColombia)withtheconclusionsofitsinitialinternalstudiesinJuly2011andsubmittedamodifieddevelopmentprogrammetotheagencyrequestingthesuspensionofthepreviouslyplanneddevelopmentdrillingoftwowells,theTilodiran4andTilodiran5respectively,untilsuchtimeasathirdpartyevaluationreportiscompletedwithregardtothebestdevelopmentprogrammeforthatfield.TheCompanybelievesitsinternalanalysisandthethirdpartystudywillsupportthefollowing:
Thesubstantialradialflowdrainageareascombined•inbothTilodiran2andTilodiran3representcurrentProvedDevelopedProducingreservesinexcessoftherisked3PreservesestimatedforallofTilodiranFieldbytheindependentreserveengineers,RalphE.Davisasof31December2010.
Noadditionaldevelopmentdrillingwillberequiredto•drainanyTilodiranfieldreservesbeyondthoseunderproductionintheTilodiran2andTilodiran3wells.
ChairmanandManagingDirector’sStatement&ReviewofOperations
03Global Energy Development PLCInterim Report 2011
InAugust2011,theANHformallyapprovedthesuspensionofthedrillingofTilodiran4andTilodiran5wellsbasedontheCompanycompletingthethirdpartyreservoirstudyandreportandprovidingtheresultsofsuchreporttotheANH.TheCompanyanticipateshavingthethirdpartystudycompletedwithinthenextfourtofivemonthsandpresentedtotheANHinthefirstquarterof2012.
ThepositiveresultsofincreasedcrudeoilproductionfromtheTilodiranworkoverprogrammebroughtwithitchallengessuchastheneedforupgradedtreatmentfacilities,increasedwaterproduction,logistics,transportationandmarketing.Alongwiththeincreasedcrudeoilproduction,waterhandlingincreasedsubstantially,primarilyfromtheTilodiran2well.TheCompanyiscurrentlyoperatingwithtemporaryfacilitiesatitsTilodiranfieldpendingthedesignandconstructionofpermanentfacilities.PermanentupgradedfacilitiesareintendedtoincludeawaterinjectionconversionoftheCompany’sexistingRioVerde2welloncetherequisiteenvironmentalandotherregulatorypermitsareobtained.Also,inAugust2011,theCompanyelectedtotemporarilysuspendproductionfromtheTilodiran2wellwhiletheCompanyfinalisesfieldwaterdisposalpreparations.TheoilratefromtheTilodiran2wellwasstablepriortotemporaryshut-in.TheCompanyplanstorecommenceproductionfromtheTilodiran2wellimmediatelyfollowingtheconversionandstartupofwaterdisposaloperationsutilisingRioVerde2.
Fortheremainderof2011,withacashbalanceofapproximately$11millionasat31August2011,theCompanyisabletofocusonreducingitsoutstandingdebtobligationsandtoalsofocusondevelopmentopportunitieswithinitsotherfields,includingtheBolivarandBocachicofieldsinparticular.TheCompanyiscurrentlycompletingtheevaluationofarecompletionprojectatitsBolivarfieldwiththeintentofexecutingthatprojectbeforetheendofthisyear.
RecenteventshavedemonstratedthatvolatilityinthepublicmarketsmayhaveanimpactontheCompany’soperations,principallytherecentdeclinesinoilprices.Nonetheless,theCompanybelievesinthestrengthoflong-termoilprices.Withaportfolioofdevelopmentopportunities,astreamlinedorganisationandthepositivefinancialperformanceexperiencedduringthefirstsixmonthsof2011,theCompanyiswellpositionedandoptimisticwithregardtoimprovingitsproductionprofilethroughouttheremainderofthisyearandintothenextyear.
Mikel FaulknerChairman
Stephen VossManagingDirector
04Global Energy Development PLC Interim Report 2011
Six months ending
30 June 2011 $000
Sixmonthsending30June2010$000
Twelvemonthsending
31December2010$000
Revenue $17,096 $11,265 $23,763Profit/(Loss)beforetaxation 2,643 (575) (3,185)Cashnetbackperbbl1 61.05 43.18 48.81Expendituresoncapitalassets 3,331 8,712 10,816Totalcurrentassets 20,399 11,104 15,241Capitalandreserves 84,380 80,420 79,826
Basicearningspershare $0.11 ($0.04) ($0.06)Dilutedearningspershare $0.11 ($0.04) ($0.06)
Weighted average ordinary shares outstandingBasic 35,766,774 35,439,009 35,439,009Diluted 43,777,244 42,949,232 43,655,898
Figuresinthousandexceptforperbarrelandpershareinformation.
UnauditedFinancialHighlightsForthesixmonthsended30June2011
Quantity (bbls)
thousands
Future net revenue
$000
NPV at 10%
$000
Proved 47,023 $4,497,464 $1,560,818Probable 77,560 7,827,934 2,378,509
Total 124,583 $12,325,398 $3,939,327
1. Cashnetbackiscalculatedasrevenuelessnetoperatingexpenseandtransportationcostsdividedbynetbarrelssold.2. ThereserveinformationforGlobalEnergyDevelopmentPLChasbeencertifiedbyathird-partyfirm,RalphE.DavisAssociates,Inc.as
at31December2010.
ReserveInformation–UKGAAPasof31December20102
05Global Energy Development PLCInterim Report 2011
IntroductionWehavebeenengagedbytheCompanytoreviewthesetoffinancialinformationinthehalf-yearlyfinancialreportforthesixmonthsended30June2011whichcomprisestheConsolidatedStatementofComprehensiveIncome,theConsolidatedStatementofFinancialPosition,theConsolidatedCashFlowStatement,theConsolidatedStatementofChangesinEquityandrelatedexplanatorynotes1to12.
Wehavereadtheotherinformationcontainedinthehalf-yearlyfinancialreportandconsideredwhetheritcontainsanyapparentmisstatementsormaterialinconsistencieswiththeinformationinthecondensedsetoffinancialinformation.
Directors’ responsibilitiesTheinterimreport,includingthefinancialinformationcontainedtherein,istheresponsibilityofandhasbeenapprovedbytheDirectors.TheDirectorsareresponsibleforpreparingtheinterimreportinaccordancewiththerulesoftheLondonStockExchangeforcompanieswhosesecuritiesaretradedonAIMwhichrequirethatthehalf-yearlyreportbepresentedandpreparedinaformconsistentwiththatwhichwillbeadoptedintheCompany’sannualaccountshavingregardtotheaccountingstandardsapplicabletosuchannualaccounts.
Our responsibilityOurresponsibilityistoexpresstotheCompanyaconclusiononthecondensedsetoffinancialinformationinthehalf-yearlyfinancialreportbasedonourreview.
OurreporthasbeenpreparedinaccordancewiththetermsofourengagementtoassisttheCompanyinmeetingtherequirementsoftherulesoftheLondonStockExchangeforcompanieswhosesecuritiesaretradedonAIMandfornootherpurpose.Nopersonisentitledtorelyonthisreportunlesssuchapersonisapersonentitledtorelyuponthisreportbyvirtueofandforthepurposeofourtermsofengagementorhasbeenexpresslyauthorisedtodosobyourpriorwrittenconsent.Saveasabove,wedonotacceptresponsibilityforthisreporttoanyotherpersonorforanyotherpurposeandweherebyexpresslydisclaimanyandallsuchliability.
Scope of reviewWeconductedourreviewinaccordancewithInternationalStandardonReviewEngagements(UKandIreland)2410,‘‘ReviewofInterimFinancialInformationPerformedbytheIndependentAuditoroftheEntity’’,issuedbytheAuditingPracticesBoardforuseintheUnitedKingdom.Areviewofinterimfinancialinformationconsistsofmakingenquiries,primarilyofpersonsresponsibleforfinancialandaccountingmatters,andapplyinganalyticalandotherreviewprocedures.AreviewissubstantiallylessinscopethananauditconductedinaccordancewithInternationalStandardsonAuditing(UKandIreland)andconsequentlydoesnotenableustoobtainassurancethatwewouldbecomeawareofallsignificantmattersthatmightbeidentifiedinanaudit.Accordingly,wedonotexpressanauditopinion.ConclusionBasedonourreview,nothinghascometoourattentionthatcausesustobelievethatthecondensedsetoffinancialinformationinthehalf-yearlyfinancialreportforthesixmonthsended30June2011isnotprepared,inallmaterialrespects,inaccordancewiththerulesoftheLondonStockExchangeforcompanieswhosesecuritiesaretradedonAIM.
BDO LLPCharteredAccountantsandRegisteredAuditors55BakerStreetLondonW1U7EUUK
5September2011
IndependentReviewReporttoGlobalEnergyDevelopmentPLC
06Global Energy Development PLC Interim Report 2011
Note
Six Months ended
30 June 2011
$ ’000 (Unaudited)
SixMonthsended30June2010$’000
(Unaudited)
TwelveMonthsended
31December2010$’000
(Audited)
Revenue 17,096 11,265 23,763ImpairmentofOil&Gasassets – (1,204) (1,185)OthercostofsalesincludingDD&A (9,705) (6,957) (17,419)
Costofsales (9,705) (8,161) (18,604)
Gross profit 7,391 3,104 5,159
Otherincome 9 5 26Administrativeexpenses (3,629) (2,914) (6,558)
Profit/(loss) from operations 3,771 195 (1,373)
Financeincome 10 6 28Financeexpense (1,138) (776) (1,840)
Profit/(loss) before taxation 2,643 (575) (3,185)
Taxcredit/(expense) 6 1,232 (759) 1,125
Profit/(loss) from continuing operations 3,875 (1,334) (2,060)
Total Comprehensive income/(loss) attributable to the equity holders of the parent 3,875 (1,334) (2,060)
Earnings/(loss) Per Share–Basic 4 $0.11 ($0.04) ($0.06)–Diluted 4 $0.11 ($0.04) ($0.06)
CondensedConsolidatedStatementofComprehensiveIncomeFortheperiodended30June2011
07Global Energy Development PLCInterim Report 2011
Note
30 June 2011
$ ’000 (Unaudited)
30June2010$’000
(Unaudited)
31December2010$’000
(Audited)
AssetsNon-currentassetsIntangibleassets 5,746 4,758 5,034Property,plantandequipment 101,780 104,428 102,896
Totalnon-currentassets 107,526 109,186 107,930
CurrentassetsInventories 2,964 1,948 1,550Tradeandotherreceivables 9,994 6,595 4,881Termdeposits 1,728 1,518 1,466Cashandcashequivalents 5,713 1,043 7,344
Totalcurrentassets 20,399 11,104 15,241
Total assets 127,925 120,290 123,171
LiabilitiesNon-currentliabilitiesConvertibleloannotes (16,577) (16,773) (16,967)Deferredtaxliabilities(net) 7 (5,764) (10,834) (8,034)Equitytaxliability (1,267) – –Long-termprovisions (3,278) (923) (2,982)Long-termloanspayable 8 (5,000) – –
Totalnon-currentliabilities (31,886) (28,530) (27,983)
CurrentliabilitiesTradeandotherpayables (10,107) (9,150) (14,566)Corporateandequitytaxliability (1,456) (2,190) (700)Provision (96) – (96)
Totalcurrentliabilities (11,659) (11,340) (15,362)
Totalliabilities (43,545) (39,870) (43,345)
Net assets 84,380 80,420 79,826
Capital and reserves attributable to equity holders of the companySharecapital 545 540 540Sharepremiumaccount 27,139 26,544 26,544Otherreserve 1,767 1,826 1,826Capitalreserve 210,844 210,844 210,844Retaineddeficit (155,915) (159,334) (159,928)
Total equity 84,380 80,420 79,826
Thefinancialinformationonpages6to15wasapprovedandauthorisedforissuebytheBoardofDirectorson5September2011andissignedonitsbehalfby:
Mikel Faulkner Stephen VossChairman–5September2011 ManagingDirector–5September2011
CondensedConsolidatedStatementofFinancialPositionAsat30June2011
08Global Energy Development PLC Interim Report 2011
Six months ended
30 June 2011
$ ’000 (Unaudited)
Sixmonthsended30June2010$’000
(Unaudited)
Twelvemonthsended
31December2010$’000
(Audited)
Cash flows from operating activitiesOperatingprofitbeforeinterestandtaxation 3,771 195 (1,373)Depreciation,depletionandamortisation 3,735 3,697 6,031(Increase)intradeandotherreceivables (3,698) (1,790) (26)(Increase)ininventories (1,414) (801) (402)Increaseintradeandotherpayables 1,828 6,866 1,670Increase/(decrease)inlong-termprovisions 213 (108) 1,959Lossondisposalofassets – – 692Othernon-cashitems – (40) (11)Share-basedpayments 103 120 252
Cash generated from operations 4,538 8,139 8,792Taxespaid (430) (804) (1,766)
Net cash flows from operating activities 4,108 7,335 7,026
Investing activitiesCapitalexpenditure–Expenditureonproperty,plantandequipment (2,619) (8,508) (10,354)–Expenditureonintangibleassets (712) (204) (462)Disposalofproperty,plantandequipment – – 687Interestreceived 8 6 28Increaseinshort-terminvestments (262) (113) (61)
Net cash flows from investing activities (3,585) (8,819) (10,162)
Financing activitiesShort-termloans(paid)/drawnduringtheperiod (1,285) – 8,768Interestpaid (869) (541) (1,356)
Net cash flows from financing activities (2,154) (541) 7,412
(Decrease)/increase in cash and cash equivalents (1,631) (2,025) 4,276
Cash and cash equivalents at beginning of period 7,344 3,068 3,068
Cash and cash equivalents at end of period 5,713 1,043 7,344
CondensedConsolidatedCashFlowStatementFortheperiodended30June2011
09Global Energy Development PLCInterim Report 2011
ShareCapital$ ’000
SharePremium$’000
OtherReserves$’000
CapitalReserve$’000
Retaineddeficit$ ’000
Total$’000
At 1 January 2010 (Audited) 540 26,544 1,826 210,844 (158,120) 81,634Totalcomprehensivelossfortheperiod – – – – (1,334) (1,334)Share-basedpayments – – – – 120 120
At 30 June 2010 (Unaudited) 540 26,544 1,826 210,844 (159,334) 80,420Totalcomprehensivelossfortheperiod – – – – (726) (726)Share-basedpayments – – – – 132 132
At 31 December 2010 (Audited) 540 26,544 1,826 210,844 (159,928) 79,826Totalcomprehensiveincomefortheperiod – – – – 3,875 3,875Share-basedpayments – – – – 103 103Exerciseofconvertiblenotes(Note11) 5 595 (59) – 35 576
At 30 June 2011 (Unaudited) 545 27,139 1,767 210,844 (155,915) 84,380
CondensedConsolidatedStatementofChangesinEquityForthesixmonthsended30June2011
10Global Energy Development PLC Interim Report 2011
1. Accounting PoliciesBasis of PreparationThecondensedinterimfinancialinformationhasbeenpreparedusingpoliciesbasedonInternationalFinancialReportingStandards(IFRSandIFRICinterpretations)issuedbytheInternationalAccountingStandardsBoard(“IASB”)asadoptedforuseintheEU.ThecondensedinterimfinancialinformationhasbeenpreparedusingtheaccountingpolicieswhichwillbeappliedintheGroup’sstatutoryfinancialinformationfortheyearended31December2011.
2. Financial reporting periodThecondensedinterimfinancialinformationfortheperiod1January2011to30June2011isunaudited.IntheopinionoftheDirectorsthecondensedinterimfinancialinformationfortheperiodpresentsfairlythefinancialposition,resultsfromoperationsandcashflowsfortheperiodinconformitywiththegenerallyacceptedaccountingprinciplesconsistentlyapplied.Thecondensedinterimfinancialinformationincorporatescomparativefiguresfortheinterimperiod1January2010to30June2010andtheauditedfinancialyearto31December2010.
Thefinancialinformationcontainedinthisinterimreportdoesnotconstitutestatutoryaccountsasdefinedbysection435oftheCompaniesAct2006.Thecomparativesforthefullyearended31December2010arenottheCompany’sfullstatutoryaccountsforthatyear.AcopyofthestatutoryaccountsforthatyearhasbeendeliveredtotheRegistrarofCompanies.Theauditors’reportonthoseaccountswasunqualified,didnotincludereferencestoanymatterstowhichtheauditorsdrewattentionbywayofemphasiswithoutqualifyingtheirreportanddidnotcontainastatementundersection498(2)-(3)oftheCompaniesAct2006.
3. RevenueRevenueisattributabletoonecontinuingactivity,whichisoilproductionfromColombiaEnergyDevelopmentCo.(“CEDCo”),awholly-ownedsubsidiaryoftheGroup,locatedinColombia,SouthAmerica.
4. Earnings per shareBasicearningspershareamountsarecalculatedbydividingprofit/(loss)fortheperiodattributabletoordinaryequityholdersoftheparentbytheweightedaveragenumberofordinarysharesoutstandingfortheperiod.
Dilutedearningspershareamountsarecalculatedbydividingtheprofit/(loss)fortheperiodattributabletoordinaryequityholdersoftheparentbytheweightedaveragenumberofordinarysharesoutstandingduringtheperiodplustheweightedaveragenumberofordinarysharesthatwouldbeissuedontheconversionofallthedilutivepotentialordinarysharesintoordinaryshares.Thecalculation,ofthedilutivepotentialordinarysharesrelatedtoemployeeandDirectorshareoptionplans,includesonlythoseoptionswithexercisepricesbelowtheaveragesharetradingpriceforeachperiod.
UnauditedNotesFormingPartoftheCondensedConsolidatedInterimFinancialInformationForthesixmonthsended30June2011
11Global Energy Development PLCInterim Report 2011
4. Earnings per share continuedThefollowingreflectstheprofit/(loss)andsharedatausedinthebasicanddilutedearningspersharecalculations:
Six months ended
30 June 2011
$ ’000 (Unaudited)
Sixmonthsended30June2010$’000
(Unaudited)
Twelvemonthsended
31December2010$’000Audited
Net profit/(loss) attributable to equity holders used in basic calculation 3,875 (1,334) (2,060)Addbackinterestandaccretionchargeinrespectofconvertibleloannotes 727 722 1,457
Net profit/(loss) attributable to equity holders used in dilutive calculation 4,602 (612) (603)
Basic weighted average number of shares 35,766,774 35,439,009 35,439,009Dilutivepotentialordinaryshares Sharesrelatedtoconvertiblenotes 4,388,608 4,565,027 4,565,027 EmployeeandDirectorshareoptionplans 3,621,862 2,945,196 3,651,862
Diluted weighted average number of shares 43,777,244 42,949,232 43,655,898
ThecalculationofthedilutedEPSassumesallcriteriagivingrisetothedilutionoftheEPSareachievedandalloutstandingshareoptionsareexercised.
Duringtheperiodended30Juneand31December2010,theGroupreportedaloss.Therefore,becausetheeffectofthepotentiallydilutivesharesrelatedtoconvertibleloannotesandoutstandingshareoptionswouldbeanti-dilutive,aseparatedilutedlosspersharehasnotbeenreportedbecauseitisdeemedtoequalthebasiclosspershare.
5. Convertible loan notesAbalanceof$5,798,000in2005convertiblenotesand$11,303,000in2006convertiblenotesremainsoutstandingandunlesspreviouslyredeemed,convertedorpurchasedandcancelled,thenotesarerepayableinfullon30October2012andon8December2012,respectively.
6. Tax credit/(expense)TheGlobalEnergyDevelopmentPLCGroupissubjecttoUKandColombiantaxation.
UK taxationTheCompanydoesnotexpecttobeliableforUKcorporationtaxintheforeseeablefuturebecauseGlobalhadtradinglossesbroughtforwardof$25.6millionasat31December2010and$23.6millionasat31December2009andtheseareexpectedtoincreaseinthefuture.
12Global Energy Development PLC Interim Report 2011
6. Tax credit/(expense) continuedColombian taxation
TheGrouppaystaxesinColombiathoughthebranchofficeofitswholly-ownedsubsidiaryCEDCo.TheColombiancorporationtaxiscalculatedasthehigherofnetincometaxorpresumptiveincometaxwhicharedeterminedasfollows:
Presumptiveincometax.Analternativeminimumtaxcalculatedontheprioryeargrossequitylessliabilitiesat•arateof3%todeterminethepresumptiveincome.Arateof33%isappliedtothepresumptiveincometoarriveatthetaxobligation;or
Netincometax.Calculatedatarateof33%takingintoaccountrevenuesminuscosts,standarddeductions•andspecialdeductions.
Currently,CEDCopaysitsIncomeTaxbasedonPresumptiveIncomeTax.
Additionally,theGrouppaysanEquityTaxcalculatedusingataxablebaseoftheNetEquityasat1January2011andarateof6%.Thepaymentofthetaxisoverfouryearswithpaymentsmadetwiceperyear.
Themajorcomponentsofincometaxexpensefortheperiodsended30June2011and2010asdisclosedintheconsolidatedincomestatementare:
Consolidatedincomestatement30 June
2011 $000
30June2010$000
31December2010$000
Current taxes:Currentincometaxcharge 139 382 789Currentequitytaxcharge 859 400 820Otherswithholdings 40 17 107
Total current taxes 1,038 799 1,716
Deferred Tax:Relatingtooriginationandreversaloftemporarydifferences (2,270) (40) (2,841)Taxcreditreportedintheincomestatement (1,232) 759 (1,125)
7. Deferred tax liabilities (net)TheGroupoffsetstaxassetsandliabilitiesif,andonlyif,ithasalegallyenforceablerighttooffsetcurrenttaxassetsandcurrenttaxliabilitiesandthedeferredtaxassetsanddeferredtaxliabilitiesrelatedtocorporationtaxesleviedbythesametaxauthority.DeferredtaxassetsandliabilitieslistedarerelatedtocorporationtaxleviedbytheColombiantaxauthoritywithjurisdictionoverCEDCo.
Temporarydifferencesbetweenthetaxbasesandnetbookcarryingvaluesariseinrelationtotheeffectofinflationadjustments,thedifferencesinexchangerateofnon-monetaryassets,differencesbetweentaxandaccountingdepreciation,thebalanceofpresumptiveincometaxexcessesgeneratedandtaxlossesgeneratedin2010.
UnauditedNotesFormingPartoftheCondensedConsolidatedInterimFinancialStatementscontinuedForthesixmonthsended30June2011
13Global Energy Development PLCInterim Report 2011
7. Deferred tax liabilities (net) continuedTheamountsthatareoff-setinthestatementoffinancialpositionareanalysedbelow:
Deferred tax assets 30 June
2011 $000
30June2010$000
31December2010$000
Deferredtaxassetstoberecoveredaftermorethan12months 14,135 1,239 12,837Deferredtaxassetstoberecoveredwithin12months 3,778 – 3,540
Total 17,913 1,239 16,377
Deferred tax liabilities 30 June
2011 $000
30June2010$000
31December2010$000
Deferredtaxliabilitytoberecoveredaftermorethan12months (23,649) (12,073) (24,244)Deferredtaxliabilitytoberecoveredwithin12months (28) – (167)
Total (23,677) (12,073) (24,411)
Deferred tax liabilities (net) (5,764) (10,834) (8,034)
Theeffectofthisnetdeferredincometax(“DIT”)movementonthecondensedconsolidatedstatementofcomprehensiveincomeisabenefitof$2.3millionresultingfromahigherDITassetof$1.5millionandlowerDITliabilityof$0.8million.
DITassetincreasedbecauseofhigherfiscallossesrecognitionby$5millionafterfinal2010incometaxfiling.•
DITliabilitydecreased$0.5millionduetothepeso-dollarexchangerateeffectand$0.3milliondueto•provisionsmovement.
8. Long-term loans payableOn3February2011,theCompany,asborrower,signedanamendment(The“LoanAmendment”)totheloanagreemententeredintowithHKNInc.,aslender,on14September2010.TheLoanAmendmentextendedthematuritydateoftheunderlyingrepaymentobligationforoneyeartoSeptember2012.Inexchangeforthisextension,theCompanyagreedtoincreasetheinterestratefrom10%perannumto10.5%perannum.
9. Interim dividendNointerimdividendhasbeendeclared.
10. Cash generating unitsCashGeneratingUnits(“CGU”)aredefinedastheassetsrepresentingthesmallestidentifiablesegmentsgeneratingcashflowsthatarelargelyindependentofcashflowsfromotherassetsorgroupsofassets.CGUsareidentifiedinaccordancewithIAS36“ImpairmentofAssets”,significantassetgroupsarenormallybutnotalways,singledevelopmentorproductionareas.
PipelinecapacityissuesinColombiaexperiencedin2010andcontinuingin2011haverequiredtheGrouptoreviewthewayinwhichitscrudeissoldtothirdparties.AllstrategiesadoptedtocommercialisetheCompany’scrude,reinforcetheGroup’srecognitionofasingleCGUfortheGroupatacountrylevel.ThosestrategiesrequirethattheCompanyretainflexibilitytosellitsproductioninvariouscombinationstovariousclientsdependingontherespectiveclient´sshippingandmarketingcapacities.
14Global Energy Development PLC Interim Report 2011
11. Share capital Six months ended
30 June 2011 (Unaudited)
Sixmonthsended30June2010(Unaudited)
Twelvemonthsended31December2010
Audited
Number of shares $’000
Numberofshares $’000
Numberofshares $’000
Allotted, called up and fully paid
Ordinary shares of 1p each 35,766,774 545 35,439,009 540 35,439,009 540
TheconceptofauthorisedcapitalwasremovedbytheCompaniesAct2006andthenewArticlesofAssociationadoptedbytheCompanyatthe2010AnnualGeneralMeetingdonotcontainanyreferencestoauthorisedsharecapitalandunissuedshares.
TheordinarysharesconfertherighttovoteatgeneralmeetingsoftheCompany,toarepaymentofcapitalintheeventofliquidationorwindingupandcertainotherrightsassetoutintheCompany’sarticlesofassociation.
TheordinarysharesalsoconfertherighttoreceivedividendsifdeclaredbytheDirectorsandapprovedbytheCompany.
On14January2011,theCompanyissued317,000ordinarysharesof1peachinconsiderationforthepurchaseandcancellationof$600,000variablecouponconvertiblenotesdue2012(the“Notes”)plusallaccruedinterestdueundertheNotes.Also,on12April2011,followinganoticeofexerciseofoptionsinrespectof10,765ordinarysharesof1peachintheCompany,theCompanyissuedtoAlanHenderson,adirectoroftheCompany,10,765ordinaryshares.
12. Subsequent eventsOn16June2011,HKNannouncedthetermsofamandatorycashoffertobemadebyHKNforalltheissuedandtobeissuedordinarysharesinGlobal(“GlobalShares”)notalreadyheldbyHKNandpersonsdeemedtobeactinginconcertwithit.Asstatedintheannouncementon16June2011,theobligationtomakethemandatoryofferaroseasaresultofLyford,aconcertpartyofHKN,enteringintoaconditionalagreementtoacquire3,565,936GlobalShares,representinganinterestofapproximately9.97%inGlobal,fromtheUnitedStatesMarshalsService(“Acquisition”).
On15July2011,theDirectorsofHKNandtheIndependentDirectorsofGlobalannouncedthattheyhadagreed,withtheconsentoftheTakeoverPanel,topostponethepostingoftheOfferDocumentuntiltheconditionstotheAcquisitionaresatisfiedandLyfordhascompletedtheAcquisition.ItwasfurtherannouncedthatcompletionoftheAcquisitionwassubjecttothesatisfactionofanumberofconditionsandwasanticipatedtotakeplaceonorbefore13September2011,subjecttoagreementbetweentheparties.
UnauditedNotesFormingPartoftheCondensedConsolidatedInterimFinancialStatementscontinuedForthesixmonthsended30June2011
15Global Energy Development PLCInterim Report 2011
On30August2011,GlobalwasnotifiedbyLyfordthatcertainoftheconditionstotheagreementinrelationtotheAcquisitionhadbeensatisfiedand3,565,936GlobalShares,representing9.97%oftheissuedsharecapitalofGlobalhadbeentransferredtoLyfordon29August2011atapriceofapproximately96centsperGlobalShare(equivalenttoapproximately59pperGlobalSharebasedonaclosingmidexchangerateof$1.64:£1on29August2011).Inaddition,theUnitedStatesMarshalsServicewishedtosellandLyfordpurchasedafurther223,000GlobalSharesatapriceof96centsperGlobalShare(equivalenttoapproximately59pperGlobalSharebasedonaclosingmidexchangerateof$1.64:£1on29August2011).Accordingly,HKNanditsconcertpartiesnowownorcontrolsharesrepresenting21,425,560GlobalShares,equivalentto59.90%oftheissuedsharecapitalofGlobalandLyfordnowholds9,120,236GlobalShares,equivalentto25.50%oftheissuedsharecapitalofGlobal.Lyfordhasalsoconditionallyagreedtoacquireafurther55,400GlobalSharesfromtheUnitedStatesMarshalsServiceatapriceof$1.05perGlobalShare(equivalenttoapproximately64pperGlobalSharebasedonaclosingmidexchangerateof$1.64:£1on29August2011).
AstheConcertPartynowholdsinexcessof50%ofthevotingrightsexercisableatageneralmeetingofGlobal,theOffer,whenmade,willbeunconditionalinallrespects.TheOfferDocumentwillbepostedtoGlobalShareholdersassoonaspracticableandinanyeventbynolaterthan9September2011.
Therewerenoothermaterialsubsequenteventsbetween30June2011andthedateofthisdocument.
16Global Energy Development PLC Interim Report 2011
CorporateDirectory
DirectorsMikelFaulkner(Chairman)StephenVoss(ManagingDirector)AlanHenderson(Non-executiveDirector)DavidQuint(Non-executiveDirector)
Executive ManagementElmerJohnston(OperationDirector)RocioCalderon(FinanceDirector)AnnaWilliams(DirectorofBusinessDevelopment)
SecretaryAnaMariaRevollo
Registered office3MoreLondonRiversideLondonSE12AQUK
RegisteredinEnglandNo.4330608
Websitewww.globalenergyplc.com
Company AdvisersNominated Adviser and BrokerMatrixCorporateCapitalLLPOneVineStreetLondonW1J0AHUK
AuditorsBDOLLP55BakerStreetLondonW1U7EUUK
RegistrarsCapitaRegistrarsNorthernHouseWoodsomePark,FenayBridgeHuddersfieldHD80GAUK
Independent Petroleum EngineersRalphE.DavisAssociates,Inc.1717St.JamesPlace,Suite460HoustonTexas77056USA
SolicitorsNortonRoseLLP3MoreLondonRiversideLondonSE12AQUK