TIDMQOGT
RNS Number : 5056X
Quorum Oil and Gas Tech. Fund Ld
17 August 2009
Not for release, publication or distribution in, or into, the United States,
Canada, Australia or Japan.
+------------------------------------------+-----------------------------------+
| Press Release | 17 August 2009 |
+------------------------------------------+-----------------------------------+
Quorum Oil and Gas Technology Fund Limited
("Q-OGT" or "the Company")
Half-yearly Financial Report
Quorum Oil and Gas Technology Fund Limited (LSE:QOGT), a registered closed-ended
Guernsey investment company traded on the London Stock Exchange, today presents
its 2009 unaudited half yearly report for the six months ended 30 June 2009.
Highlights
+-----+--------------------------------------------------------------------------+
| * | Strata Energy Services Inc. and WellPoint Systems Inc. achieving |
| | significant growth with profitability in a difficult market |
+-----+--------------------------------------------------------------------------+
| * | Maintained dividend payments in highly volatile markets |
+-----+--------------------------------------------------------------------------+
| * | Additional investment of US$1,556,571 million into SQFive Intelligent |
| | Oilfield Solutions Limited and US$327,168 into Quorum MENA Limited |
+-----+--------------------------------------------------------------------------+
Since 30 June 2009, the Company has:
+-----+--------------------------------------------------------------------------+
| * | Signed a letter of Intent with leading Saudi Arabian industrial oil and |
| | gas conglomerate, the Alturki Group |
+-----+--------------------------------------------------------------------------+
| * | Announced a proposed placing to raise up to US$50 million |
+-----+--------------------------------------------------------------------------+
| * | Paid a Q2 dividend of US$0.10 per participating redeemable share |
+-----+--------------------------------------------------------------------------+
| * | Discount to net asset value narrowed to 3.5% |
+-----+--------------------------------------------------------------------------+
Wanda Dorosz, Managing Partner & CEO of Quorum Group, said: "In what have been
extremely challenging market conditions, I am very pleased with the performance
of the fund. Our investee companies continue to progress well and with our entry
into the Middle East I am confident that we remain extremely well positioned to
continue on our growth path."
For further information:
+-----------------------------------------------+--------------------------+
| Investment Manager | |
+-----------------------------------------------+--------------------------+
| Quorum Group | |
+-----------------------------------------------+--------------------------+
| Wanda Dorosz, Managing Partner & CEO | Tel: +1 416 971 6998 |
+-----------------------------------------------+--------------------------+
| wdorosz@quorum.ca | |
+-----------------------------------------------+--------------------------+
| David Sefton, Quorum European Partners LLP | Tel: +44 (0) 7989 333 |
| | 371 |
+-----------------------------------------------+--------------------------+
| david.sefton@quorum-europe.com | www.q-ogtfund.com |
+-----------------------------------------------+--------------------------+
Media enquiries:
+-----------------------------------------------+--------------------------+
| Abchurch | |
+-----------------------------------------------+--------------------------+
| Henry Harrison-Topham / George Parker | Tel: +44 (0) 20 7398 |
| | 7719 |
+-----------------------------------------------+--------------------------+
| george.parker@abchurch-group.com | www.abchurch-group.com |
+-----------------------------------------------+--------------------------+
Chairman's Statement
I am delighted to introduce the 2009 half-yearly report for the Quorum Oil and
Gas Technology Fund Limited. We continue to believe that the strategic space
identified by the Investment Managers - in particular focusing on technologies
which drive mature field recovery and significant cost reduction - is one that
can provide opportunities for significant gains on investments.
The Investee Companies
During the first half of this year the Investment Managers have continued to
work hard with the Investee Companies, where the performance of many of the
companies, and Strata Energy Services in particular, is well ahead of plan. In
respect of the earlier stage companies, we are assured that the Investment
Managers are working hard with them to ensure that they are focused and
disciplined in testing economic times. We remain very pleased with Investment
Managers portfolio selection and note that they have some very interesting
companies that they are monitoring as possible future investments.
Dividends
I also note that the Company has paid dividends amounting to US$0.20 per share
in respect of the first half of 2009. The Board understands the importance of
these dividends to shareholders and does not intend to change the Company's
objective of generating a dividend yield of at least 4 per cent per annum.
The Board and the Investment Managers are grateful to you, as one of our
Shareholders, for the confidence you have shown in your company. Together I am
confident that we can all look forward to the continued growth and success of
the Company and its Investee Companies.
Fund Raising
We are also pleased that the Company has announced its intention to proceed with
an additional placing of new shares to raise gross proceeds of up to US$50
million.
Tom Price
Chairman
14 August 2009
Investment Manager's statement
The Company is pleased to present its 2009 half-yearly results. They reflect
stability in what was a volatile market both for commodities and capital markets
in the period ending 30 June 2009. This stability has been evident in both Net
Asset Value and stock price.
What I would like to highlight is the theme of my letter to shareholders in the
2009 Annual Report, which presaged 2009 as a "breakout" year. Although only
halfway through, as CEO of the Investment Managers I can say that 2009 has
already been a breakout year for Strata Energy Services Inc. and WellPoint
Systems Inc. Achieving growth with profitability in a difficult market is high
performance indeed. In addition, our newest investment, Quorum MENA Limited,
which is designed to accelerate the market penetration of the investee
comapnies' technologies into the greater Middle Eastern region, also
accomplished the formation of its first significant strategic relationship with
the recent announcement of its 50/50 joint venture with the Alturki Group of
Saudi Arabia, a highly respected industrial and oil and gas conglomerate.
The other investee companies stood ground and did not retreat in size or
strategy. LxData is in the process of adding a critical pressure sensor to its
thermal sensor product offering, which is already becoming a global leader.
SR2020 is penetrating a net new market in CO2 sequestration analysis in
reservoirs for the U.S. Department of Energy. Ambercore and Terrapoint are
growing year over year and have added highly prestigious new clients in the
U.S., South Africa and Russia.
So while our financial snapshot is one of overall stability, the story behind
the scenes is largely one of vibrancy and growth.
Finally, I would like to reference the Company's recent announcement of its
intention to raise further equity through a placing of new shares in the
Company. As should be evident, this is an issue based upon funding further
growth and in particular a desire to make certain follow-on and net new
investments which we believe will deliver transformative returns to
shareholders. We very much hope that you will be able to participate in the
placing and look forward to what should prove a very interesting next twelve
months!
Quorum European Partners LLP and QOGT Inc.
14 August 2009
Unaudited condensed income statement
for the period 30 June 2008 to 30 June 2009
+-----------------------+--------+-----------------+-------------------+----------------+
| | | 1 January 2009 | 20 November 2007 | 20 November |
| | | to 30 June 2009 | to 31 December | 2007 to 30 |
| | | | 2008 | June 2008 |
+-----------------------+--------+-----------------+-------------------+----------------+
| | Note | US$ | US$ | US$ |
+-----------------------+--------+-----------------+-------------------+----------------+
| | | | | |
+-----------------------+--------+-----------------+-------------------+----------------+
| Investment Income | | | | |
+-----------------------+--------+-----------------+-------------------+----------------+
| Portfolio interest | 2 | 2,240,984 | 2,695,497 | 871,113 |
| income | | | | |
+-----------------------+--------+-----------------+-------------------+----------------+
| Non-portfolio | | 267 | 316,705 | 240,371 |
| interest income | | | | |
+-----------------------+--------+-----------------+-------------------+----------------+
| Realised gain / | | (18,470) | 19,840 | (12,885) |
| (loss) on foreign | | | | |
| exchange | | | | |
+-----------------------+--------+-----------------+-------------------+----------------+
| | | 2,222,781 | 3,032,042 | 1,098,599 |
+-----------------------+--------+-----------------+-------------------+----------------+
| Expenses | | | | |
+-----------------------+--------+-----------------+-------------------+----------------+
| Management fees | 3,4 | 588,463 | 968,648 | 200,751 |
+-----------------------+--------+-----------------+-------------------+----------------+
| Marketing expenses | | 148,618 | 414,798 | 159,743 |
+-----------------------+--------+-----------------+-------------------+----------------+
| Advisory board fees | | 112,500 | 259,842 | 100,000 |
| and expenses | | | | |
+-----------------------+--------+-----------------+-------------------+----------------+
| Legal and | | 93,547 | 610,767 | 42,993 |
| professional fees | | | | |
+-----------------------+--------+-----------------+-------------------+----------------+
| Administration fees | | 72,171 | 339,645 | 193,558 |
+-----------------------+--------+-----------------+-------------------+----------------+
| Directors fees and | | 51,147 | 118,616 | 50,000 |
| expenses | | | | |
+-----------------------+--------+-----------------+-------------------+----------------+
| Insurance expense | | 43,638 | 94,510 | 50,011 |
+-----------------------+--------+-----------------+-------------------+----------------+
| Registrar and | | 30,590 | 25,151 | 7,500 |
| custodian fees | | | | |
+-----------------------+--------+-----------------+-------------------+----------------+
| Other expenses | | 10,100 | 24,113 | 99,564 |
+-----------------------+--------+-----------------+-------------------+----------------+
| Listing and license | | 6,643 | 99,816 | 57,959 |
| fees | | | | |
+-----------------------+--------+-----------------+-------------------+----------------+
| | | 1,157,417 | 2,955,906 | 962,079 |
+-----------------------+--------+-----------------+-------------------+----------------+
| | | | | |
+-----------------------+--------+-----------------+-------------------+----------------+
| Net Investment Income | | 1,065,364 | 76,136 | 136,520 |
+-----------------------+--------+-----------------+-------------------+----------------+
| | | | | |
+-----------------------+--------+-----------------+-------------------+----------------+
| Unrealised gains | | | | |
| (losses) on | | | | |
| investments | | | | |
+-----------------------+--------+-----------------+-------------------+----------------+
| Net change in | | 45,444 | (116,428) | - |
| unrealised | | | | |
| depreciation of value | | | | |
| of investments | | | | |
+-----------------------+--------+-----------------+-------------------+----------------+
| Change in unrealised | | 45,444 | (116,428) | - |
| gains (losses) on | | | | |
| investments | | | | |
+-----------------------+--------+-----------------+-------------------+----------------+
| Net Income | | 1,110,808 | (40,292) | 136,520 |
+-----------------------+--------+-----------------+-------------------+----------------+
| | | | | |
+-----------------------+--------+-----------------+-------------------+----------------+
| Weighted average | | 6,122,471 | 6,122,471 | 4,258,694 |
| number of preferred | | | | |
| shares outstanding | | | | |
+-----------------------+--------+-----------------+-------------------+----------------+
| Basic earnings (loss) | 8 | 0.18 | (0.01) | 0.03 |
| per share | | | | |
+-----------------------+--------+-----------------+-------------------+----------------+
| Diluted weighted | 8 | 6,122,471 | 6,122,471 | 6,174,717 |
| average number of | | | | |
| preferred shares | | | | |
| outstanding | | | | |
+-----------------------+--------+-----------------+-------------------+----------------+
| Diluted earnings | | 0.18 | (0.01) | 0.02 |
| (loss) per share | | | | |
+-----------------------+--------+-----------------+-------------------+----------------+
| Dividends paid per | 7 | 0.20 | 0.30 | - |
| share | | | | |
+-----------------------+--------+-----------------+-------------------+----------------+
The accompanying notes are integral to these financial statements
Unaudited condensed balance sheet as at 30 June 2009
+--------+--------+--------+--------+--------+------------+------------+------------+
| | | | | | 30 | 31 | 30 |
| | | | | | June | December | June |
| | | | | | 2009 | 2008 | 2008 |
+--------+--------+--------+--------+--------+------------+------------+------------+
| | | | | Note | US$ | US$ | US$ |
+--------+--------+--------+--------+--------+------------+------------+------------+
| ASSETS | | | | | |
+--------------------------+--------+--------+------------+------------+------------+
| Cash and cash | | | 1,188,057 | 5,125,917 | 5,532,644 |
| equivalents | | | | | |
+--------------------------+--------+--------+------------+------------+------------+
| Accounts receivable and | | | 505,163 | 83,755 | 55,240 |
| prepaid expenses | | | | | |
+--------------------------+--------+--------+------------+------------+------------+
| Investments | | 2, 9 | 57,729,771 | 55,727,763 | 38,274,102 |
+--------------------------+--------+--------+------------+------------+------------+
| | | | | | 59,422,991 | 60,937,435 | 43,861,986 |
+--------+--------+--------+--------+--------+------------+------------+------------+
| | | | | | | | |
+--------+--------+--------+--------+--------+------------+------------+------------+
| LIABILITIES | | | | | |
+--------------------------+--------+--------+------------+------------+------------+
| Accounts payable and | | 10 | 283,762 | 471,563 | 61,820 |
| accrued liabilities | | | | | |
+--------------------------+--------+--------+------------+------------+------------+
| Deferred interest income | | 10 | 451,832 | 1,664,789 | 2,214,637 |
+--------------------------+--------+--------+------------+------------+------------+
| | | | | | 735,594 | 2,136,352 | 2,276,457 |
+--------+--------+--------+--------+--------+------------+------------+------------+
| | | | | | | | |
+--------+--------+--------+--------+--------+------------+------------+------------+
| SHAREHOLDERS' EQUITY | | | | | |
+--------------------------+--------+--------+------------+------------+------------+
| Common (founder) shares of US$1 | 11 | 2 | 2 | 2 |
| par. Authorized 2 shares; issued | | | | |
| 2 shares | | | | |
+-----------------------------------+--------+------------+------------+------------+
| Participating redeemable | | 11 | 6,122,469 | 6,122,469 | 4,258,692 |
| preferred shares | | | | | |
| Authorized 50,000,0000 | | | | | |
| shares; issued 6,122,469 | | | | | |
| shares | | | | | |
+--------------------------+--------+--------+------------+------------+------------+
| Warrants | | | 987,822 | 987,822 | - |
+--------------------------+--------+--------+------------+------------+------------+
| Contributed surplus | | | 51,577,104 | 51,731,082 | 37,190,315 |
+--------------------------+--------+--------+------------+------------+------------+
| Retained earnings | | | - | (40,292) | 136,520 |
| (deficit) | | | | | |
+--------------------------+--------+--------+------------+------------+------------+
| | | | | | 58,687,397 | 58,801,083 | 41,585,529 |
+--------+--------+--------+--------+--------+------------+------------+------------+
| | | | | | 59,422,991 | 60,937,435 | 43,861,986 |
+--------+--------+--------+--------+--------+------------+------------+------------+
The accompanying notes are integral to these financial statements
APPROVED BY THE BOARD OF DIRECTORS ON THE 13 AUGUST 2009 AND SIGNED ON ITS
BEHALF ON THE 14 AUGUST 2009 BY:
+----------------------------------------+---------------------------------------+
| Tom Price | Wanda Dorosz |
| Chairman | Director |
+----------------------------------------+---------------------------------------+
Unaudited condensed cash flow statement
for the period to 30 June 2009
+--------+--------+--------+--------+-------------+--------------+
| | | | | | |
+--------+--------+--------+--------+-------------+--------------+
| | | | | 1 | 20 |
| | | | | January | November |
| | | | | 2009 to | 2007 |
| | | | | 30 June | to 30 |
| | | | | 2009 | June |
| | | | | | 2008 |
+--------+--------+--------+--------+-------------+--------------+
| | | | Note | US$ | US$ |
+--------+--------+--------+--------+-------------+--------------+
| NET INFLOW (OUTFLOW) OF | | | |
| CASH RELATED | | | |
+--------------------------+--------+-------------+--------------+
| | TO THE | | | |
| | FOLLOWING | | | |
| | ACTIVITIES | | | |
+--------+-----------------+--------+-------------+--------------+
| | | | | | |
+--------+--------+--------+--------+-------------+--------------+
| OPERATING | | | | |
+-----------------+--------+--------+-------------+--------------+
| | Net income | | 1,110,808 | 136,520 |
+--------+-----------------+--------+-------------+--------------+
| | Net change in | 10 | (1,853,907) | 2,221,217 |
| | non-cash | | | |
| | working capital | | | |
+--------+-----------------+--------+-------------+--------------+
| | | | | (743,099) | 2,357,737 |
+--------+--------+--------+--------+-------------+--------------+
| | | | | | |
+--------+--------+--------+--------+-------------+--------------+
| INVESTING | | | | |
+-----------------+--------+--------+-------------+--------------+
| | Purchase of | 9 | (1,970,267) | (38,274,102) |
| | investments | | | |
+--------+-----------------+--------+-------------+--------------+
| | | | | (1,970,267) | (38,274,102) |
+--------+--------+--------+--------+-------------+--------------+
| | | | | | |
+--------+--------+--------+--------+-------------+--------------+
| FINANCING | | | | |
+-----------------+--------+--------+-------------+--------------+
| | Issuance of | 11 | - | 42,586,902 |
| | share capital | | | |
+--------+-----------------+--------+-------------+--------------+
| | Share issuance | 11 | - | (1,137,893) |
| | costs | | | |
+--------+-----------------+--------+-------------+--------------+
| | Dividends paid | 7 | (1,224,494) | - |
+--------+-----------------+--------+-------------+--------------+
| | | | | (1,224,494) | 41,449,009 |
+--------+--------+--------+--------+-------------+--------------+
| | | | | | |
+--------+--------+--------+--------+-------------+--------------+
| NET (DECREASE) INCREASE | | (3,937,860) | 5,532,644 |
| IN CASH | | | |
| AND CASH EQUIVALENTS | | | |
| DURING THE PERIOD | | | |
+--------------------------+--------+-------------+--------------+
| | | | | | |
+--------+--------+--------+--------+-------------+--------------+
| CASH AND CASH | | 5,125,917 | - |
| EQUIVALENTS, BEGINNING | | | |
| OF PERIOD | | | |
+--------------------------+--------+-------------+--------------+
| CASH AND CASH | | 1,188,057 | 5,532,644 |
| EQUIVALENTS, END OF | | | |
| PERIOD | | | |
+--------+--------+--------+--------+-------------+--------------+
The accompanying notes are integral to these financial statements
Unaudited condensed statement of changes in equity
For the period 30 June 2009
+-----------+--------+-----------+----------+-------------+-------------+--------------+
| | | Share | | Contributed | Retained | |
+-----------+--------+-----------+----------+-------------+-------------+--------------+
| | Note | Capital | Warrants | Surplus | Earnings | Total |
+-----------+--------+-----------+----------+-------------+-------------+--------------+
| As at | | 6,122,471 | 987,822 | 51,731,082 | (40,292) | 58,801,083 |
| 31 | | | | | | |
| December | | | | | | |
| 2008 | | | | | | |
+-----------+--------+-----------+----------+-------------+-------------+--------------+
| Net | | - | - | - | 1,110,808 | 1,110,808 |
| income | | | | | | |
+-----------+--------+-----------+----------+-------------+-------------+--------------+
| Dividends | 7 | - | - | (153,978) | (1,070,516) | (1,224,494) |
| paid | | | | | | |
+-----------+--------+-----------+----------+-------------+-------------+--------------+
| As at | | 6,122,471 | 987,822 | 51,577,104 | - | $58,687,397 |
| 30 June | | | | | | |
| 2009 | | | | | | |
+-----------+--------+-----------+----------+-------------+-------------+--------------+
Statement of Investment Portfolio
+-------------+-------------+--------------+-------------------+-------------+-------------+
| Security | Security | Par | Dividend/Interest | Cost | Estimated |
| Company | Held | Value/Number | Securities | | Fair Value |
| | | of | | | |
| | | Securities | | | |
+-------------+-------------+--------------+-------------------+-------------+-------------+
| Quorum MENA | Convertible | $3,248,168 | 8.5% | 3,248,168 | 3,248,168 |
| Limited | secured | | | | |
| | debentures | | | | |
+-------------+-------------+--------------+-------------------+-------------+-------------+
| Seismic | Convertible | $275,000 | 8.5% | 275,000 | 275,000 |
| Reservoir | secured | | | | |
| 2020 Inc. | debentures | | | | |
+-------------+-------------+--------------+-------------------+-------------+-------------+
| SQFive | Convertible | $12,350,800 | 8%-8.5% | 12,350,800 | 12,350,800 |
| Intelligent | secured | | | | |
| Oilfield | debentures | | | | |
| Solutions | | | | | |
| Limited | | | | | |
+-------------+-------------+--------------+-------------------+-------------+-------------+
| | Redeemable | $3,833,471 | 8%-8.5% | 3,833,471 | 3,833,471 |
| | convertible | | | | |
| | preferred | | | | |
| | shares | | | | |
+-------------+-------------+--------------+-------------------+-------------+-------------+
| Strata | Convertible | $20,000,000 | 8% | 20,000,000 | 20,000,000 |
| Energy | secured | | | | |
| Services | debentures | | | | |
| Inc. | | | | | |
+-------------+-------------+--------------+-------------------+-------------+-------------+
| WellPoint | Convertible | $18,045,491 | 7.75%-8.5% | 18,045,491 | 17,974,973 |
| Systems Inc | secured | | | | |
| | debentures | | | | |
+-------------+-------------+--------------+-------------------+-------------+-------------+
| | Promissory | $47,826 | 8.00% | 47,826 | 47,359 |
| | note | | | | |
+-------------+-------------+--------------+-------------------+-------------+-------------+
| | | | | $57,800,756 | $57,729,771 |
+-------------+-------------+--------------+-------------------+-------------+-------------+
The accompanying notes are integral to these financial statements
Quorum Oil and Gas Technology Fund Limited
Notes to the half-yearly financial statements
for the period from the period 1 January 2009 to 30 June 2009
1. BUSINESS OPERATIONS AND REGISTRATION
Quorum Oil and Gas Technology Fund Ltd (the "Company") is a closed ended
investment company incorporated and registered in Guernsey on 20 November 2007.
The Company's participating redeemable preference shares are traded on the
London Stock Exchange.
The nature of the Company's operations and its principal activities are set out
in the Directors' Report. The address of the Company's registered office is
Ogier House, St Julian's Avenue, St. Peter Port, Guernsey, GY1 1WA.
QOGT Inc. and Quorum European Partners LLP (the "Investment Managers") are the
investment managers of the Company.
These financial statements are presented in United States Dollars as that is the
currency of the primary economic environment in which the Company operates.
The Directors believe it is appropriate to adopt the going concern basis in
preparing the financial statements as, after due consideration, the Directors
consider that the Company has adequate resources to continue in operational
existence for the foreseeable future. In making this assessment, the Directors
note that the investments are income generating, the Company has cash reserves,
no gearing and the Shares are non-redeemable.
The new Guernsey Fund Rules relating to authorised and registered funds (the
Authorised Closed-Ended Investment Scheme Rules 2008 and the Registered
Collective Investment Scheme Rules 2008), together "the new rules", became
effective from 15 December 2008. All funds in existence at that date are
automatically deemed to be authorised funds but have a transition period of up
to 30 April 2009 to write to the Guernsey Financial Services Commission
("GFSC") and convert to a registered fund.
The Company's Directors have confirmed their intention to keep the Company's
designation as authorised.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The Company prepared its 2009 unaudited half yearly report using the same
accounting principles and methods of computation that were applied in the
audited financial statements as of 31 December 2008 and for the period then
ended.
These financial statements have been prepared by the Company in accordance with
Canadian generally accepted accounting principles ("GAAP"). The Company is an
investment company and accounted for in accordance with the Canadian Institute
of Chartered Accountants Accounting Guideline 18 - Investment Companies. All
amounts are in the currency of the United States dollar unless otherwise stated.
Use of Estimates
The preparation of financial statements in accordance with GAAP requires
management to make estimates and assumptions that affect the reported amounts of
assets, liabilities, income and expenses during the reporting period.
Significant estimates and judgments in these financial statements are required
principally in determining the reported estimated fair value of investments
since these determinations include estimates of expected future cash flows,
rates of return and the impact of future events. Actual results could differ
significantly from those estimates.
Accounting Policy
The Company adopted Canadian Institute of Chartered Accountants ("CICA")
Handbook - Accounting Section 3862, "Financial Instruments - Disclosures"
("Section 3862") and Section 3863, "Financial Instruments - Presentation"
("Section 3863"). These sections establish standards for comprehensive
disclosure and presentation requirements for financial instruments. The
standards include new requirements to quantify certain risk exposures and to
provide sensitivity analysis for certain risks. The additional disclosure can be
found in note 13 to these financial statements.
The Company also adopted the CICA Handbook Section 1535, "Capital Disclosures"
which establishes standards for disclosing information about the Company's
capital and how it is managed. The Company has included disclosures recommended
by this new Handbook section below. The adoption of this standard results in
additional disclosures but does not affect the Company's results or financial
position. The additional disclosures can be found in note 14 to these financial
statements.
Valuation of Investments
Investments are presented in the financial statements at fair value. Investments
are initially valued at cost, as this is the best indication of fair value. The
Investment Managers consider adjustments to this assessment of fair value when
circumstances justify a different valuation. The Investment Managers consider a
number of valuation methodologies, including discounted cash flows, the price of
recent investments and net assets in order to arrive at fair value.
Other Financial Assets and Liabilities
Other financial assets and financial liabilities are recorded at cost. Since
these assets and liabilities are short-term in nature, their carrying values
approximate fair values.
Investment Transactions and Income
Investment transactions are accounted for as of the trade date. Interest income
is recorded on an accrued basis. Realised and unrealised gains and losses from
investment transactions are calculated on an average cost basis. Interest income
received in advance (prepaid interest) is recorded as deferred interest income
on the balance sheet.
Translation of Foreign Currencies
Investments and other financial assets and liabilities denominated in foreign
currencies are translated into United States dollars at the exchange rates
prevailing on each valuation day. Purchases and sales of investments, income and
expenses are translated into United States dollars at the exchange rate
prevailing on the respective dates of such transactions.
Issuance Costs
Issuance costs incurred to form the Company are deducted directly from
contributed surplus.
Stock-Based Payments
The Company has granted stock options to the Investment Manager and Investment
Advisory Committee. CICA 3870 requires recognition of an expense of option
awards using the fair value method of accounting. Under this method, the fair
value of an award at the grant date is amortised over the applicable vesting
period and recognised as an expense.
3. MATERIAL AGREEMENTS
Under the terms of the Investment Management Agreement dated 27 December 2007, a
management fee is payable to the Investment Managers for investment management
services. These are paid monthly in arrears and are subject to a maximum of 2
percent per annum of the Net Asset Value.
4. RELATED PARTY TRANSACTIONS
The Investment Managers and the Directors are regarded as related parties. The
related party transactions are described below:
The fees and expenses payable to the Investment Managers are explained in Note 3
and are detailed in the Statement of Operations. As at 30 June 2009, the Company
had an amount payable to the Investment Managers of $0 (30 June 2008 - $34,574,
31 December 2008 - $232,490).
As the Company has a controlling interest (or would have a controlling interest
on conversion of the relevant debentures) in SQFive Intelligent Oilfield
Solutions Ltd., Seismic Reservoir 2020 Inc., WellPoint Systems Inc. and Quorum
MENA Ltd, all transactions with these companies, including interest and dividend
income to the Company and transaction fees with the Investment Managers, are
considered related party transactions. These transactions are summarized below.
+--------------------------------------+--------------+---------------+---------------+
| Company | Interest | Dividend | Transaction |
| | Income | Income | Fees |
+--------------------------------------+--------------+---------------+---------------+
| | $ | $ | $ |
+--------------------------------------+--------------+---------------+---------------+
| SQFive Intelligent Oilfield | 488,613 | 154,682 | 36,000 |
| Solutions Ltd. | | | |
+--------------------------------------+--------------+---------------+---------------+
| WellPoint Systems Inc. | 696,785 | - | - |
+--------------------------------------+--------------+---------------+---------------+
| Quorum MENA Limited | 131,518 | - | 12,765 |
+--------------------------------------+--------------+---------------+---------------+
| Seismic Reservoir 2020 Inc. | 3,128 | - | 8,250 |
+--------------------------------------+--------------+---------------+---------------+
| | $1,320,044 | $154,682 | $57,015 |
+--------------------------------------+--------------+---------------+---------------+
On June 30, 2009, the Company gave notice of its intention to exercise its
rights under the Assignment Agreement with Quorum Investment Pool Ltd
Partnership ("Partnership"), an entity also managed by an affiliate of the
Investment Managers, to assign its debentures of WellPoint in the principal
amount of Cdn$900,000 in addition to a fee of Cdn $150,000 payable in kind in
the form of WellPoint shares. The assignments are to close equally over three
dates: 17 August 2009, 14 September 2009 and 14 October 2009. The put option is
being exercised as part of a pragmatic cash management process by the Investment
Managers to ensure that the Company always has adequate cash reserves. The
Company may or may not exercise the second of third trenches depending on cash
considerations.
5. SEGMENT INFORMATION
The Directors are of the opinion that the Company is engaged in a single segment
of business, being investment management, therefore no segment reporting is
required.
6. TAX
The Company has been granted exemption from income tax in Guernsey under the
Income Tax (Exempt Bodies) (Bailiwick of Guernsey) Ordinance, 1989 for which it
pays an annual fee of GBP600. As such it will not be liable for income tax in
Guernsey other than on Guernsey source income (excluding deposit interest on
funds deposited with a Guernsey bank). No withholding tax is applicable to
distributions to shareholders by the Company.
With effect from 1 January 2008, Guernsey abolished some aspects of the exempt
company regime. As a publicly available fund, it will continue to be eligible to
apply for exempt status however, and liable to the annual fee if it chooses to
do so. The Company has taken advantage of this exemption for the current period
and expects to do so for future periods.
7. DIVIDENDS
Dividends of $0.10 and $0.10 per participating redeemable preference share were
paid on 18 February 2009 and 20 May 2009 respectively. Total dividends paid
during the period ended 30 June 2009 were $1,224,494. Further dividends have
been declared and paid as set out in note 15.
Under Guernsey law, companies can pay dividends in excess of accounting profit
provided they satisfy the solvency test prescribed under the Companies
(Guernsey) Law, 2008. The solvency test considers whether a company is able to
pay its debts when they fall due; and whether the value of a company's assets is
greater than its liabilities. The Company passed the solvency test for each
dividend payment in 2008 and 2009.
8. BASIC AND DILUTED LOSS PER SHARE
Basic earnings per Share is computed by dividing net income available to
preferred shareholders by the weighted average number of preferred shares
outstanding for the period. Diluted earnings per share reflects the potential
dilution that could occur if additional preferred shares are issued under
warrants and stock options that entitle their holders to obtain preferred shares
in the future, to the extent such entitlement is not subject to unresolved
contingencies. The number of additional shares for inclusion in diluted earnings
per share calculations is determined using the treasury stock method. Under this
method, warrants and stock options whose exercise price is less than the average
market price of the preferred shares are assumed to be exercised with the
proceeds used to repurchase preferred shares at the average market price for the
period. The incremental number of preferred shares issued under warrants and
stock options and repurchased from proceeds is included in the calculation of
diluted earnings per share. For the period ended 30 June 2009, the Company
excluded potential Share equivalents comprised of stock options and warrants for
the diluted earnings per Share as these would be considered anti-dilutive.
Basic Earnings Per Share
+----------------------------------------+----------------------------------------+
| Net income | $1,110,808 |
+----------------------------------------+----------------------------------------+
| Weighted average number of shares | 6,122,471 |
| outstanding | |
+----------------------------------------+----------------------------------------+
| Basic earnings per share | $0.18 |
+----------------------------------------+----------------------------------------+
Diluted Earnings Per Share
+----------------------------------------+----------------------------------------+
| Net Income | $1,110,808) |
+----------------------------------------+----------------------------------------+
| Weighted average number of preferred | 6,122,471 |
| shares outstanding | |
+----------------------------------------+----------------------------------------+
| Warrants | - |
+----------------------------------------+----------------------------------------+
| Stock options (See note 12) | - |
+----------------------------------------+----------------------------------------+
| Diluted average number of diluted | 6,122,471 |
| preferred shares outstanding | |
+----------------------------------------+----------------------------------------+
| Diluted earnings per share | $0.18 |
+----------------------------------------+----------------------------------------+
9. INVESTMENTS
(a) Quorum MENA Limited ("QMENA")
The convertible secured debenture in the principal amount of $3,248,168 matures
on 17 December 2013 and bears an annual interest rate of 8.5%. The debenture is
convertible at the Company's option at any time into common shares of QMENA at a
conversion price of $1.00 per share.
(b) SQFive Intelligent Oilfield
Solutions Limited ("SQFive")
The convertible secured debentures in the aggregate principal amount of
$12,350,800 mature on dates ranging from 30 January 2013 to 22 November 2013,
and bear annual interest rates ranging from 8% to 8.5%. The debentures are
convertible at the Company's option at any time into common shares of SQFive at
a conversion price of $1.00 per share.
The convertible preferred shares in the aggregate par value of $3,833,471 bear
annual dividend rates ranging from 8% to 8.5%. The preferred shares are
convertible at the Company's option at any time into common shares of SQFive at
a conversion price of $1.00 per share.
(c) Strata Energy Services Inc. ("Strata")
The convertible secured debenture in the principal amount of $15,000,000 matures
on 25 February 2013 and bears an annual interest rate of 8%. The convertible
secured debenture in the principal amount of $5,000,000 matures on 1 August 2013
and bears an annual interest rate of 8%.
d) WellPoint Systems Inc. ("WellPoint")
The convertible secured debentures in the aggregate principal amounts of
$17,200,000 and Cdn$900,000 mature on dates ranging from 1 October 2010 to 20
January 2014 and bear an annual interest rate of 7.75% to 8.5%. The debentures
are convertible at the Company's option at any time into common shares of
WellPoint. The conversion price for the common shares range from $0.246 to $0.30
per share for the United States dollar denominated debentures and $0.30 per
common share for the Canadian dollar denominated debentures. Under certain
circumstances, WellPoint may prepay the entire principal amount of the
debentures, subject to a right by the Company to exercise its conversion right
into common shares of WellPoint. Additionally, under certain circumstances,
WellPoint may compel a conversion of its debentures into common shares of its
company
As described in note 4, the Company exercised its right to assign its
Cdn$900,000 of WellPoint debentures to Quorum Investment Pool Limited
Partnership, receiving an additional consideration of Cdn$150,000 and with
closing dates on 17 August 2009, 14 September 2009 and 14 October 2009. The
promissory note in the amount of Cdn$55,000 matures on 26 June 2010 and bears an
annual interest rate of 8%. This further investment was made to provide funds to
pay for Wellpoint's audit fee in respect of the June 2008 prospectus.
(e) Seismic Reservoir 2020 Inc. ("SR2020")
The promissory notes in the aggregate principal amount of $275,000 are due on
demand and bear an annual interest rate of 8.5%.
10. LIABILITIES
+----------------------------------------+----------------------------------------+
| | 30 June 2009 |
+----------------------------------------+----------------------------------------+
| Accounts payable and accrued | 283,762 |
| liabilities | |
+----------------------------------------+----------------------------------------+
| Deferred interest income | 451,832 |
+----------------------------------------+----------------------------------------+
| | $735,594 |
+----------------------------------------+----------------------------------------+
The deferred interest income of $451,832 relates to interest payments received
from Investee Companies paid in advance.
11. SHAREHOLDERS' EQUITY
+---------------------------+---------------------------+---------------------------+
| Authorised | Number | Nominal Value (US$) |
+---------------------------+---------------------------+---------------------------+
| Common (founder) shares | 2 | 2 |
+---------------------------+---------------------------+---------------------------+
| Unclassified shares | 50,000,000 | 50,000,000 |
+---------------------------+---------------------------+---------------------------+
| | | |
+---------------------------+---------------------------+---------------------------+
| Issued | | |
+---------------------------+---------------------------+---------------------------+
| Common (founder) shares | 2 | 2 |
+---------------------------+---------------------------+---------------------------+
| Participating redeemable | 6,122,469 | 6,122,469 |
| preference shares | | |
+---------------------------+---------------------------+---------------------------+
| Warrants | 851,571 | - |
+---------------------------+---------------------------+---------------------------+
The shares may be allotted and issued as one of more classes of shares, being
participating redeemable preference shares in the Company. To qualify as
participating redeemable preference shares, the shares are required under
Guernsey Law to have a preference over another class of share capital. The
participating redeemable preference shares may be redeemed at the option of the
Company subject to the discretion of the Directors.
The common or founder shares have been created so that the participating
redeemable preference shares may be issued. The common or founder shares are not
redeemable and do not carry any right to vote or receive dividends and are only
entitled to participate in the assets of the Company on a winding-up.
On 7 January 2008, the Company raised $42,580,652 in relation to a placing of
4,258,065 participating redeemable preference and common (founder) shares. The
Company capped the Investment Managers recovery of issuance costs to 2.5% of the
gross issue proceeds.
On 25 July 2008, the Company issued 851,571 warrants to record holders of the
same date on the basis of one warrant for every five participating redeemable
preference shares held. Upon the issuance of the warrants, a reclassification
was made in the amount of $987,822 from contributed surplus to warrants. The
warrants are exercisable at a price of $10.00 on each of 1 April 2009 and 1
April 2010 following which date rights under the warrants will lapse.
On 28 July 2008, the Company issued an additional 1,864,406 participating
redeemable preference shares at an issuance price of $10.35 per share for total
consideration proceeds of $19,297,253.
12. STOCK-BASED PAYMENTS
The Company has the ability to issue stock options representing 20% of the fully
diluted capital of the Company under its stock option plan. As at 31 December
2008, options had been granted to the Investment Managers in respect of 20 per
cent of the fully diluted share capital of the Company at exercise prices of
$10.00 and $10.35 per share increasing by 8% per annum subject to reductions in
any dividends paid. The options are exercisable in three equal tranches on the
first three anniversaries of the grant date and have a 10 year life.
As at 30 June 2009, none of the options were exercised.
Summary of Stock Option Activity
+---------------------------+----------------------+--------------------------------+
| | Number of Options | Weighted Average Exercise |
| | | Price |
+---------------------------+----------------------+--------------------------------+
| As at 31 December, 2008 | 1,530,618 | 10.22 |
+---------------------------+----------------------+--------------------------------+
| Granted | - | - |
+---------------------------+----------------------+--------------------------------+
| Exercised | - | - |
+---------------------------+----------------------+--------------------------------+
| Cancelled | - | - |
+---------------------------+----------------------+--------------------------------+
| As at 30 June, 2009 | 1,530,618 | $10.22 |
+---------------------------+----------------------+--------------------------------+
The Company recognises the expense for option-based payments using the fair
value method of accounting utilising the binomial options pricing model. The
weighted average fair value of options granted during the period is estimated to
be nil. The following assumptions were used:
Binomial Options pricing model Assumptions
+----------------------------------------+----------------------------------------+
| | 1 January 2009 to 30 June 2009 |
+----------------------------------------+----------------------------------------+
| Weighted average assumptions | |
+----------------------------------------+----------------------------------------+
| Risk-free interest rate | 2.92% |
+----------------------------------------+----------------------------------------+
| Expected dividend yield | 4.00% |
+----------------------------------------+----------------------------------------+
| Expected share price volatility | 26% |
+----------------------------------------+----------------------------------------+
| Expected life of options (years) | 9.5 |
+----------------------------------------+----------------------------------------+
13. FINANCIAL RISK MANAGEMENT
In the normal course of business, the Company is exposed to a variety of
financial risks: credit risk, liquidity risk and market risk (including interest
rate risk, currency risk and other price risk). The value of investments within
the Company's portfolio can fluctuate on a daily basis as a result of changes in
interest rates, economic conditions, the market, and company news related to
specific securities within the Company. The level of risk depends on the
Company's Investment Objective and the type of securities it invests in.
The Investment Objective of the Company is to provide interest income, dividend
income and capital appreciation by investing income in secured convertible
debentures and preferred shares of public and private companies. On a quarterly
basis, the Company performs a formal review of its investments, which includes,
but not limited to, an assessment of the global macro environment, the outlook
for credit, and the amount of active risk being taken in the Company. The
Company's overall risk management program seeks to minimize the potentially
adverse effect of risk on the Company's financial performance in a manner
consistent with the Company's investment objective.
Credit Risk
Credit risk is the risk that the counterparty to a financial instrument will
fail to discharge an obligation or commitment that it has entered into with the
Company.
The Company is exposed to credit risk in respect of the investment portfolio,
with a maximum exposure equal to the value of the loans advanced. Credit risk is
mitigated by the Company's Investment Managers performing satisfactory due
diligence on prospective investments. Under the terms of the convertible secured
debenture, should the principal not be repaid by the maturity date or if there
is a default in the debenture covenants, the debenture is secured by a charge of
the Investee Companies' assets and/or may be converted into ordinary shares of
the borrower. However, the Company may not be able to recover all or some of the
value of the debenture through realisation of the Investee Companies' assets or
shares. Given the current status of the Investee Companies and their respective
financial positions, the recoverability of these investments is, in some cases,
predicated on the performance of the companies. As of 30 June 2009, two of the
investee companies were not current on their interest payments. However,
subsequent to this, both interest payments were received by the Company.
The Company's investments are primarily located in Canada and therefore the
Company is exposed to the macro economic changes in Canada. These investments
are focused solely in the oil and gas technology sectors. The Company attempts
to mitigate their exposure by investing in companies that sell their products
internationally.
The Company is exposed to credit risk in respect to its cash and cash
equivalents, arising from possible default of the relevant counterparty, with a
maximum exposure equal to the carrying value of those assets. The credit risk on
liquid funds is limited because the counterparties are banks with high
credit-ratings assigned by international credit-rating agencies. The Company
monitors the placement of cash balances on an ongoing basis. The Company only
invests its cash and cash equivalents with its banker and custodian, the Royal
Bank of Canada (Channel Islands) Ltd.
Liquidity Risk
Liquidity risk is defined as the risk that the Company may not be able to settle
or meet its obligations on time or at a reasonable price.
The Company's exposure to liquidity risk is concentrated in the investments of
private secured convertible debentures and preferred shares. The Company
primarily invests in securities that are not traded in active markets and cannot
be readily disposed. To compensate for this, the Company retains sufficient cash
and cash equivalent positions to maintain liquidity to meeting operating
expenses and distributions. Furthermore, it is mitigated by the fact that the
participating redeemable preference Shares of the Company are redeemable only at
the Company's discretion.
The Company's current financial liabilities all mature within one year and the
Company has sufficient cash on hand to meet all these obligations.
Interest Rate Risk
Interest rate risk arises from the possibility that changes in interest rates
will affect future cash flows or fair values of financial instruments. Interest
rate risk arises when the Company invests in interest-bearing financial
instruments. The Company is exposed to the risk that the value of such financial
instruments will fluctuate due to changes in the prevailing levels of market
interest rates. The Company seeks to mitigate this risk by monitoring the
placement of cash balance on an ongoing basis in order to maximise the interest
rates obtained.
Sensitivity to movements in interest rates is limited by the fact that the
Company's investments bear interest at a fixed rate.
To gauge the duration of the debt instruments, their maturities on an estimated
fair value basis are as follows:
+----------------------------------------+----------------------------------------+
| Debt Instruments By Maturity Date | Estimated Fair Value (US$ Equivalent) |
+----------------------------------------+----------------------------------------+
| Less than 1 year | 47,342 |
+----------------------------------------+----------------------------------------+
| 1-3 years | 45,531,561 |
+----------------------------------------+----------------------------------------+
| 3-5 years | 10,550,730 |
+----------------------------------------+----------------------------------------+
| Greater than 5 years | 1,600,138 |
+----------------------------------------+----------------------------------------+
| Total | $57,729,771 |
+----------------------------------------+----------------------------------------+
**Excludes cash and cash equivalents and preferred shares, as applicable
Other Price Risk
Other price risk is the risk that the market value or future cash flows of
financial instruments will fluctuate because of changes in market prices other
than those arising from interest rate risk. It represents the potential loss
that the Company might suffer through holding interests in unquoted private
companies whose value may fluctuate and which may be difficult to value and/or
to realise.
All investments represent a risk of loss of capital. The Investment Managers
moderate this risk through a careful selection and diversification of securities
and other financial instruments within the limits of the Company's investment
objective and strategy, as well as by establishing a clear exit strategy for all
potential investments. The Company's overall market positions are monitored on a
quarterly basis by the portfolio manager. Financial instruments held by the
Company are susceptible to market price risk arising from uncertainties about
future prices of the instruments. If the value of the Company's investment
portfolio were to decline by 10%, it would represent a loss of $5.8 million.
This would cause the net asset value of the Company to fall by 9.8%.
Currency Risk
Currency risk is the risk that the value of a financial instrument will
fluctuate due to changes in foreign exchange rates. Currency risk arises from
financial instruments (including cash and cash equivalents) that are denominated
in a currency other than United States dollars, which represents the functional
currency of the Company. The Company has 1.4% of its investments not denominated
in the functional currency. As such, currency risk is not considered to be a
material risk to the Company.
14. CAPITAL MANAGEMENT
The Company considers Shareholders' Equity to be its capital, The Company does
not have any externally imposed capital requirements. The capital is to be used
by the Company to invest in accordance with its investment objective. The
Company though does have specific restrictions on how it can deploy its
shareholders' capital; the Company will not invest more than 35 percent of its
total assets in any one company (this restriction is calculated at the time of
the relevant investments), with the exception of Strata where this will not be
more than 40 percent.
The investment objective of the Company is to seek long-term capital
appreciation with a target return of 20 percent over a five-year time horizon.
The Company aims to deliver its objective by investing available cash and
generating portfolio interest income whilst maintaining sufficient liquidity to
meet ongoing expenses and dividend payments.
15. SUBSEQUENT EVENTS
A dividend of $0.10 per participating redeemable preference share was declared
on 16 July 2009 and will be paid on 19 August 2009.
On the 28 July 2009, a corporate restructuring of SR2020 took place. As a result
of which convertible secured debenture investments in SR2020 made during 2009
and amounting in aggregate to US$2.2 million are now being held by the Company.
During August, the investment Ambercore was assigned from SQ5 to the Company and
is now held directly by the Company.
Attention is drawn to the disclosure in note 4 to the financial statements
relating to part of the Company's investments in WellPoint.
- Ends -
This information is provided by RNS
The company news service from the London Stock Exchange
END
IR BLGDIDBBGGCS
Quorum Oil &Gas (LSE:QOGT)
過去 株価チャート
から 11 2024 まで 12 2024
Quorum Oil &Gas (LSE:QOGT)
過去 株価チャート
から 12 2023 まで 12 2024
