THIS PRESS RELEASE IS NOT FOR DISTRIBUTION TO UNITED STATES NEWSWIRE SERVICES OR
FOR DISSEMINATION IN THE UNITED STATES.
Heritage Oil Plc ("Heritage" or the "Company") (TSX:HOC)(LSE:HOIL), an
independent upstream exploration and production company, announces the
publication of its interim results for the six months ended 30 June 2011.
Operational Highlights
-- Miran West-3 well in the Kurdistan Region of Iraq ("Kurdistan")
commenced drilling on 7 August 2011
-- Miran 3D seismic acquisition is nearing completion and 2D seismic
acquisition in the southern portion of the Miran Block has commenced
-- Miran Field conceptual engineering studies have been completed for early
development in 2013, followed by full field development in 2015
-- An initial gas marketing study for the Miran Field has been completed
-- Completed drilling well 363 in Russia which is producing 1,205 bopd
-- Completed acquisition of 2D seismic data in both Mali and offshore Malta
-- Seismic data being processed and interpreted for Tanzania, Mali and
Malta
-- Net average daily production of 420 bopd in the first half of 2011
Corporate Highlights
-- Strong balance sheet with cash of approximately $468 million, excluding
$405 million related to the tax dispute
-- Share buy back programme commenced in April 2011 and to date 28,556,281
Ordinary Shares have been bought back and held in treasury
-- 12.46% of PetroFrontier Corp. acquired for investment purposes
-- Arbitration proceedings have commenced in London against the Government
of the Republic of Uganda (the "Ugandan Government") to resolve the tax
dispute
-- Implemented internal systems for managing requirements of the UK Bribery
Act which became law in July 2011
Outlook
-- Multiple reservoir intervals to be tested and evaluated in the Miran
West-3 well during the second half of 2011 as the well is drilled to a
target depth of c.4,400 metres
-- Exploration drilling on the Miran East structure planned to commence in
December 2011, at which time two rigs will be operational in the field
-- Final processing of 3D seismic data on the Miran Field is scheduled to
be completed in the fourth quarter of 2011
-- Work programmes in Tanzania, Mali and Malta continuing
-- A further development well planned for Russia in the fourth quarter of
2011
-- Production from the Zapadno Chumpasskoye Field, in Russia, expected to
continue to increase
-- Active assessment of new acquisitions and opportunities continues
Tony Buckingham, Chief Executive Officer, commented:
"We have started the second half of the year with a strong balance sheet, an
active multi-well exploration and appraisal drilling programme in Kurdistan and
increased production following the success of our first horizontal well in
Russia. We continue to assess opportunities to acquire and invest in exploration
and early development opportunities throughout the world, with a particular
emphasis on our core areas of Africa and the Middle East where we have a strong
technical understanding and an established network of contacts."
Heritage's 2011 Interim Report and Accounts is available on its website at
www.heritageoilplc.com.
Notes to Editors
-- Heritage is listed on the Main Market of the London Stock Exchange and
is a constituent of the FTSE 250 Index. The trading symbol is HOIL.
Heritage has a further listing on the Toronto Stock Exchange (TSX:HOC).
-- Heritage is an independent upstream exploration and production company
engaged in the exploration for, and the development, production and
acquisition of, oil and gas in its core areas of Africa, the Middle East
and Russia.
-- Heritage has a producing property in Russia and exploration projects in
the Kurdistan Region of Iraq, the Democratic Republic of Congo, Malta,
Pakistan, Tanzania and Mali.
-- All dollars are US$ unless otherwise stated.
-- For further information please refer to our website,
www.heritageoilplc.com.
If you would prefer to receive press releases via email please contact Jeanny So
(jeanny@chfir.com) and specify "Heritage press releases" in the subject line.
CHAIRMAN'S AND CHIEF EXECUTIVE'S REVIEW
Heritage has achieved success through the discovery of significant hydrocarbon
resources and has capitalised on the ability to monetise these at the
appropriate stage. The Miran Field, a major gas discovery with oil and
condensate, is believed by management to be the largest gas field discovered in
Iraq in almost 30 years. With the success of our first two wells, the focus with
Miran is now centred on three initiatives: the appraisal of these large
hydrocarbon bearing reservoirs, the exploration on Miran East and other
potential structures in the south of the Miran Block and development of the
field. Since announcing the Miran gas discovery, we have made significant
progress towards early production which is currently expected to commence in
2013. Full field development would continue with key activities completed by
2015. In Tanzania, Mali and Malta work programmes are progressing with some
high-impact exploration drilling scheduled to commence in 2012.
Operational overview
Kurdistan
The Miran West-2 well reached a total depth of 4,426 metres in November 2010
after which a series of tests were conducted. On conclusion of these tests, in
January 2011, we announced the discovery of a major gas field with oil and
condensate. Management currently estimates in-place volumes for the Miran West
structure to have a P90-P50 range of 6.8-9.1 TCF, with an upside P10 potential
of 12.3 TCF of gas with a P90-P50 range of 42-71 MMbbls of condensate and 53-75
MMbbls of oil. Miran East, on which we are planning to commence drilling in the
fourth quarter of this year, has an additional estimated P90-P50 gas in-place
range of 0.6-0.9 TCF with a P10 upside of 1.3 TCF. Additionally, further
exploration potential exists in the Miran Field within the Jurassic and the
Triassic.
Drilling of the Miran West-3 appraisal well commenced at the beginning of August
2011. The well is targeting reservoir sections encountered in discovery wells
with the primary objective of appraising the Jurassic and Cretaceous reservoirs
in the Miran West structure. The Miran West-3 location and well trajectory
achieves a c.4.3 kilometre appraisal step out from the Miran West-2 Jurassic
reservoir penetration. The planned well path targets the flanks of the
structure. The well bore is being orientated and inclined to optimally intercept
open fracture networks associated with multiple faults identified on recently
acquired 3D seismic data. This well will also appraise the Cretaceous oil and
gas reservoirs discovered in the Miran West-1 and Miran West-2 wells, further
enhancing our knowledge of the Miran structures.
Drilling of the Miran West-3 well is expected to take approximately seven months
with key reservoir intervals being tested as the well is drilled. After drilling
and testing, it is intended that this rig will move to drill the Miran West-4
appraisal well. A second rig is being sourced to drill the planned Miran East-1
exploration well, with drilling expected to commence before year end, at which
time there will be two rigs operating in the Miran Field.
Seismic acquisition
The original Miran 3D seismic programme covering 550 square kilometres was
completed at the beginning of July 2011. After the success of the Miran West-2
well, the 3D programme was extended by 180 square kilometres and the programme
is nearing completion. Seismic data is being processed in tranches in order to
expedite understanding of the structures and to select optimum drilling
locations. It is expected that final processing will be completed in the fourth
quarter, providing a better understanding of the Miran fracture networks and
enabling the drilling programme to target these networks more effectively.
A significant improvement in seismic data quality achieved in our 3D programme
in the Miran Field assists greatly with the selection of well locations. Initial
interpretation of the first tranche of data acquired has highlighted increased
resource potential, in particular in the Miran East structure. This potential
will be targeted by the Miran East-1 exploration well to be spudded before year
end.
In addition to the 3D seismic programme, the acquisition of 180 kilometres of 2D
seismic has commenced and will target leads and additional exploration potential
in the southern portion of the Miran Block. This 2D programme is expected to be
completed in the fourth quarter.
Development of the Miran Field
The Miran Field is a commercial discovery and independent engineering studies
have confirmed the potential for a fast-tracked, phased development of the field
enabling early revenues. Options being considered include deliveries from early
production to existing and planned power plants for local markets in Kurdistan
and exports to Turkey and to the European market under full field development.
The Kurdistan Regional Government (the "KRG") has outlined favoured development
options for gas utilisation and the initial priority will be to satisfy local
gas demand by supplying produced gas on commercial terms to local power stations
and other end-users in the Sulymaniyah region in 2013. Early gas production
would also result in associated condensate and oil production.
Early production activities will be paralleled with full development and the
export of gas to Turkey/Europe with full production of oil and condensate.
Independent gas marketing studies highlight increasing demand in the KRG region,
Turkey and Europe that can provide valuable markets for our gas volumes.
Conceptual engineering design studies have confirmed the potential for early
production of between 80 and 180 MMscfd for local markets commencing in 2013,
followed by full development of between 560 and 750 MMscfd in 2015 for exports.
Exports would require the construction of either a 180 kilometre gas export
pipeline tie-in to a previously planned pipeline or a 320 kilometre pipeline to
the Iraq/Turkey border. Oil and condensate production of between 5,000 and
12,000 bpd would be trucked to Kirkuk for export in the early production scheme.
This would be followed by construction of a 78 kilometre oil/condensate pipeline
to Kirkuk for full development production of between 37,000 and 50,000 bpd.
Other exploration assets
In Malta, Heritage has an extensive data set of approximately 5,000 kilometres
of 2D seismic that indicates the presence of multiple prospects and leads. In
July 2011, the acquisition of 1,400 kilometres of infill and exploration 2D
seismic was completed in Area 7 over the large Caravaggio structure and some
additional leads. Current management estimates for the prospects, based on
existing data, are for 500 MMboe of oil and gas.
In Mali, 1,077 kilometres of 2D seismic was acquired over Blocks 7 and 11
between June and August 2011 and the data is currently being interpreted.
Previous drilling in the region has encountered oil and gas shows indicating the
potential for a working hydrocarbon system. In both Mali and Tanzania, Heritage
is actively looking to advance leads to drillable prospects.
Producing asset
Russia
Production averaged 420 bopd in the first half of 2011, a decrease of 28% from
the six month period ended 30 June 2010. Production declined in the first
quarter of the year due to a temporary problem with power generation which has
since been resolved. In addition, there was some repair work undertaken on one
of three producing wells.
In May 2011, we commenced the drilling of well 363, the first horizontal well in
the licence, which completed in August 2011. Results of this well exceeded
pre-drill expectations and production from the field is currently c.1,600 bopd
which is a significant increase over the level achieved in the first half of the
year. Well 363 is currently producing at a controlled rate of 1,205 bopd. During
the flow test, the well produced at rates of up to 1,405 bopd and the well
potential has been calculated by management to be 2,365 bopd. Currently, we plan
to commence drilling a second horizontal well in the field in the fourth
quarter.
Historical development of this reservoir type throughout the region has been
through conventional drilling on a grid pattern. We recognised an opportunity to
improve the efficiency and economics of field development by utilising
horizontal drilling technology, thus decreasing the number of wells and the
total cost required to develop the field, while potentially improving recovery.
The previous reserves review and development plan undertaken by RPS Energy in
June 2009 will be updated in due course, incorporating the results of well 363,
and management expects these results will increase the valuation of the field.
Corporate
As at 30 June 2011, Heritage held a cash position of approximately $468 million,
excluding $405 million related to the tax dispute. This is more than sufficient
to cover the planned 2011/2012 work programmes.
In April 2011, Heritage announced the commencement of a share buy back
programme. To date 28,556,281 Ordinary Shares have been bought back and are held
in treasury. Consequently Heritage has 261,191,749 Ordinary Shares in issue,
excluding treasury shares, as well as 2,811,408 exchangeable shares of no par
value of Heritage Oil Corporation each carrying one voting right in Heritage.
The total number of voting rights in Heritage, excluding treasury shares, as at
24 August 2011 is 264,003,157.
In May 2011, Heritage Oil & Gas Limited ("HOGL"), a wholly owned subsidiary of
Heritage, commenced arbitration proceedings in London against the Ugandan
Government. HOGL is seeking a decision requiring, among other things, the return
or release of approximately $405 million in aggregate currently on deposit with
the Ugandan Revenue Authority ("URA") or in escrow with Standard Chartered Bank
in London following HOGL's sale of its interests in Blocks 1 and 3A in Uganda
(the "Ugandan Assets") on 26 July 2010.
In July 2011, it was announced that Heritage had acquired common shares
("Shares") of PetroFrontier Corp. ("PetroFrontier") and currently holds 12.46%
of the outstanding Shares of PetroFrontier. All Shares acquired and/or held by
Heritage in PetroFrontier were acquired for investment purposes. PetroFrontier
is listed on the TSX Venture Exchange and has commenced a high-impact drilling
programme in Australia targeting billions of barrels of resources.
Corporate Social Responsibility ("CSR")
CSR policies developed since the Company's formation are considered a
fundamental element supporting our successful business record. Our CSR systems
are reviewed regularly by our CSR Board Committee. The framework of our CSR
policy has been refined through our experiences and we continue to work
diligently with stakeholders affected, or potentially affected, by our
operations. We believe that our active, ongoing involvement in community
projects in areas where we operate is fundamental in developing and maintaining
strong relationships within these regions. During the first half of 2011 we
continued with our programmes in Kurdistan through active recruitment of local
labour.
Corporate strategy
With the benefit of our strong cash position, we aim to generate significant
growth in shareholder value by focusing on high-impact international plays with
the potential to discover significant hydrocarbon reserves. We continue to
assess opportunities to acquire and invest in exploration and early development
opportunities throughout the world, with a particular emphasis on our core areas
of Africa and the Middle East where we have a strong technical understanding.
Heritage looks to enter into regions early either through direct interests or
through investing in corporate initiatives pursuing high-impact opportunities.
Outlook
Activities across our diversified asset portfolio are set to continue to pick up
over the remainder of the year as exploration and appraisal drilling continues
in the Miran Field. Work programmes on the remainder of our portfolio continue
with seismic data being interpreted to establish potential drilling locations
for exploration drilling planned for 2012. A strong balance sheet ensures we can
continue with multiple work programmes across our portfolio whilst also looking
for further opportunities to generate shareholder value.
Michael J. Hibberd
Chairman and Non-Executive Director
Anthony Buckingham
Chief Executive Officer
FINANCIAL REVIEW
Heritage has a strong balance sheet to support execution of current work
programmes and assessment of opportunities to generate shareholder value.
SELECTED OPERATIONAL AND FINANCIAL DATA
Six months Six months
ended ended
30 June 30 June
2011 2010 Change
----------------------------------------------------------------------------
Production bopd 420 583 (28%)
----------------------------------------------------------------------------
Sales volume bopd 411 580 (29%)
----------------------------------------------------------------------------
Average realised price $/bbl 38.3 23.4 64%
----------------------------------------------------------------------------
Petroleum and natural gas
revenue $ million 2.8 2.5 12%
----------------------------------------------------------------------------
Loss from continuing
operations $ million (9.7) (12.3) (21%)
----------------------------------------------------------------------------
Loss from discontinued
operations $ million (1.7) (1.9) (11%)
----------------------------------------------------------------------------
Net loss $ million (11.4) (14.2) (20%)
----------------------------------------------------------------------------
Total cash capital
expenditures - continuing
operations $ million (52.7) (29.3)
----------------------------------------------------------------------------
As at As at
30 June 31 December
2011 2010
----------------------------------------------------------------------------
Period end cash balance(1) $ million 468.3 598.3
----------------------------------------------------------------------------
----------------------------------------------------------------------------
(1) Excluding amounts related to the tax dispute in Uganda of $405 million.
Operating performance
Production
All production and revenue is generated from the Zapadno Chumpasskoye Field in
Russia.
Average daily production decreased by 28% from 583 bopd in the six month period
ended 30 June 2010 to 420 bopd in the six month period ended 30 June 2011. This
decrease resulted primarily from power issues which have since been resolved and
repair work on one of three producing wells. Average daily production was 16%
lower than the six months ended 31 December 2010.
Well 363, the first horizontal well to be drilled in the Zapadno Chumpasskoye
Field, Russia, was completed in August 2011 and commenced production from
mid-August at a rate of 1,205 bopd which is expected to result in a significant
increase in production from the field in the second half of this year.
Revenue
Petroleum and natural gas revenue increased by 12% to $2.8 million, as a result
of higher average realised prices offset by lower volumes of crude oil sales.
The average realised price per barrel in the first half of 2011 of $38.3/bbl was
64% higher than in the first half of 2010 due to increased average commodity
prices in Russia in 2011.
Operating results
Petroleum and natural gas operating costs of $1.3 million in the six month
period ended 30 June 2011 were 30% higher than in the same period last year due
to cost increases in Russia, particularly impacting fuel costs, and weakening of
the US dollar against the Russian rouble. The average operating cost per barrel
increased from $9.8/bbl in the first half of 2010 to $17.8/bbl in the first half
of 2011. The lower level of production and the fixed nature of certain costs
also contributed to this increase.
Production tax increased from $1.3 million in the first half of 2010 to $1.5
million in the first half of 2011 as a result of the 12% increase in revenues.
General and administrative expenses increased from $8.1 million in the first
half of 2010 to $8.8 million in the same period in 2011, principally due to
increased legal fees and travel expenses related to corporate initiatives.
Depletion, depreciation and amortisation expenses were $1 million in the first
half of 2011, which was consistent with the same period in the prior year.
Exploration expenditures, expensed and not capitalised, increased from $0.9
million in the first half of 2010 to $2.8 million in the first half of 2011.
Exploration expenditures in the first half of 2011 related principally to
potential new ventures in Africa.
Interest income of $3.2 million in the first half of 2011 was $2.9 million
higher than in the same period in 2010, primarily as a result of higher average
cash balances in 2011. Cash and cash equivalents are typically held in interest
bearing treasury accounts.
Other finance costs increased from $1.4 million in the first half of 2010 to
$1.7 million in the first half of 2011 due to higher convertible bonds accretion
expense as the maturity of the convertible bonds is approaching.
The Company recognised foreign exchange gains of $1.2 million in the first half
of 2011 (first half of 2010 - losses of $0.9 million) primarily because of an
intercompany US dollar denominated loan provided to the Russian subsidiary used
to develop the Zapadno Chumpasskoye Field. The revaluation of this loan in
Russian roubles, the functional currency of the Russian subsidiary, created the
foreign exchange gains due to the strengthening of the Russian rouble against
the US dollar during the first half of 2011. In accordance with Heritage's
accounting policy, the revaluation gain was recognised in the financial
statements of the Russian subsidiary in Russian roubles and on consolidation the
revaluation gains were translated into US dollars and included in the statement
of comprehensive income.
Heritage recognised an unrealised gain on the fair value of its investment in
Afren plc ("Afren") warrants of $0.3 million in the first half of 2011, compared
to a $0.4 million loss in the first half of 2010. The gain or loss is determined
by the performance of the share price of Afren. Heritage holds 1,500,000
warrants in Afren, received as partial consideration from the sale of Heritage
Congo Limited in 2006, with an exercise price of GBP 0.60 per warrant. The
warrants have a term until 22 December 2011. At 30 June 2011, Afren's share
price was GBP 1.58 per share.
Heritage's net loss from continuing operations after tax in the first half of
2011 was $9.7 million, 21% lower than the loss of $12.3 million in the first
half of 2010.
Disposal
On 18 December 2009, Heritage announced that the Company and HOGL had entered
into a Sale and Purchase Agreement ("SPA"), with ENI International B.V. ("Eni")
for the sale of the Ugandan Assets and on 17 January 2010, Tullow Uganda Limited
("Tullow") exercised its rights of pre-emption. The sale of the Ugandan Assets
completed on 26 July 2010; Tullow paid cash of $1.45 billion, including $100
million from a contractual settlement, of which Heritage received and retained
$1.045 billion.
The URA contends that income tax is due on the capital gain arising on the
disposal and it raised assessments of $404,925,000 prior to completion of the
disposal. Heritage's position, based on comprehensive advice from leading legal
and tax experts in Uganda, the United Kingdom and North America, is that no tax
should be payable in Uganda on the disposal of the Ugandan Assets.
Tullow paid cash consideration of $1.35 billion and an additional contractual
settlement amount of $100 million. On closing, Heritage deposited $121,477,000
with the URA, representing 30% of the disputed tax assessment of $404,925,000.
$121,477,000 has been classified as a deposit in the balance sheet at 30 June
2011 and 31 December 2010. A further $283,447,000 has been retained in escrow
with Standard Chartered Bank in London, pursuant to an agreement between HOGL,
Tullow and Standard Chartered Bank pending resolution between the Ugandan
Government and HOGL of the tax dispute. Including accrued interest, an amount of
$283,841,000 is classified as restricted cash in the balance sheet at 30 June
2011.
In August 2010, the URA issued a further income tax assessment of $30 million
representing 30% of the additional contractual settlement amount of $100
million. HOGL disputed this assessment and no provision has been made for this
amount.
A tax tribunal is ongoing in Uganda and in May 2011 HOGL commenced international
arbitration proceedings in London against the Ugandan Government.
HOGL is seeking a decision requiring, among other things, the return or release
of approximately $405 million in aggregate currently on deposit with the URA or
in escrow with Standard Chartered Bank in London. Accordingly, the arbitration
proceedings concern HOGL's claims that the Ugandan Government wrongfully or
unreasonably withheld consent to the sale by HOGL of the rights under the
Production Sharing Agreements ("PSAs") for the Ugandan Assets, including by
making this consent conditional upon the payment of a sum alleged to be a tax
liability of HOGL. The arbitration proceedings are being held in London in
accordance with the provisions of the PSAs in relation to the Ugandan Assets.
In March 2011, Tullow paid working capital adjustments with respect to the
Ugandan Assets of $13.6 million.
On 15 April 2011, Heritage and its wholly owned subsidiary HOGL received
Particulars of Claim filed in the High Court of Justice in England by Tullow
seeking $313,447,500 for alleged breach of contract as a result of HOGL's and
Heritage's refusal to reimburse Tullow in relation to a payment made by Tullow
of $313,447,500 on 7 April 2011 to the URA. Heritage and HOGL believe that the
claim has no basis and are in the process of vigorously and robustly defending
it. Heritage and HOGL have filed their Defence and Counterclaim against Tullow
seeking instead the release to HOGL of $283,447,000 plus interest currently
being held in escrow with Standard Chartered Bank.
Although disputes of this nature are inherently uncertain, the Directors believe
that the monies on deposit and held in escrow will ultimately be recovered by
Heritage.
The results of the Ugandan operations have been classified as discontinued
operations. Loss on disposal of discontinued operations for the six months ended
30 June 2011 and 2010 are as follows:
Six months Six months
ended ended
30 June 30 June
2011 2010
$'000 $'000
----------------------------------------------------------------------------
Loss on disposal of discontinued operations (1,654) -
Loss of the discontinued operations - (1,852)
----------------------------------------------------------------------------
(1,654) (1,852)
----------------------------------------------------------------------------
In the first half of 2011 the basic and diluted loss per share was $0.04,
compared to the basic and diluted loss per share of $0.05 in the first half of
2010.
Cash flow and capital expenditures
Cash used in operating activities of continuing operations was $9.5 million in
the first half of 2011 compared to $13.0 million in the first half of 2010.
Total cash capital expenditures for continued operations in the first half of
2011 were $52.7 million compared to $29.3 million in the first half of 2010. The
following major work programmes were undertaken in the first half of 2011:
-- testing of the Miran West-2 well completed in January 2011. The well was
drilled to a total depth of 4,426 metres. This resulted in the discovery
of large gas field which management considers to be the largest gas
field to be discovered in Iraq in almost 30 years;
-- the 3D seismic survey across the Miran Field continued during the first
half of 2011 and is nearing completion. The seismic survey covering 730
square kilometres will be processed over the remainder of the year;
-- well 363 in the Zapadno Chumpasskoye Field, Russia, completed at the
beginning of August 2011, leading to a significant increase in
production;
-- in Mali, approximately 1,077 kilometres of 2D seismic was acquired over
Blocks 7 and 11; and
-- the acquisition of 300 square kilometres of 3D seismic offshore Tanzania
completed in January 2011.
On 26 April 2011, the Company announced a buy back programme to acquire Ordinary
Shares. Shareholders approved the resolution at the Annual General Meeting
("AGM") on 20 June 2011 to acquire up to 28,900,000 Ordinary Shares from that
date. Purchased Ordinary Shares are held in treasury. At 30 June 2011, the
Company held 18,347,696 Ordinary Shares in treasury. The total acquisition cost
of these shares was $66.6 million.
As at 30 June 2011, the Company had acquired 6,594,200 Shares, through the
facilities of the TSX Venture Exchange, of PetroFrontier representing 10.39% of
the Shares of PetroFrontier. The investment in share capital of PetroFrontier is
classified as available-for-sale and valued at fair value which is determined
using market price at the end of the period. The valuation at market price at 30
June 2011 of $19.0 million, resulted in a loss of $0.9 million recognised in
equity.
Financial position
Liquidity
Heritage had a net decrease in cash and cash equivalents during the first half
of 2011 of $130 million. At 30 June 2011, Heritage had a working capital surplus
of $703.5 million, including cash and cash equivalents of $468.3 million.
Like most oil and gas exploration companies, Heritage raises finance for its
activities from time to time using a variety of sources. Sources of funding for
future exploration and development programmes will be derived from, inter alia,
disposal proceeds from the sale of assets, such as the sale of the Ugandan
Assets in 2010 (see Disposal section of the Financial Review) using its existing
treasury resources, new credit facilities, reinvesting its funds from
operations, farm-outs and, when considered appropriate, issuing debt and
additional equity. Accordingly, the Group has a number of different sources of
finance.
Capital structure
Heritage's financial strategy has been to fund its capital expenditure
programmes and any potential acquisitions by selling non-core assets,
reinvesting funds from operations, using existing treasury resources, finding
new credit facilities and, when considered appropriate, either issuing unsecured
convertible bonds or equity.
On 26 July 2010, the Company completed the disposal of the Ugandan Assets for
cash consideration of $1.35 billion and an additional contractual settlement
amount of $100 million.
At 30 June 2011, Heritage had net cash of $277.5 million (31 December 2010 -
$409.2 million) (cash and cash equivalents less total liabilities) and nil
gearing (31 December 2010 - nil) (net debt as a percentage of total
shareholders' equity).
As referred to above, as at 30 June 2011, Heritage had acquired 18,347,696
Ordinary Shares, which are held in treasury, at a total cost of $66.6 million.
Primary risks and uncertainties facing the business
Heritage's business, financial standing and reputation may be impacted by
various risks, not all of which are within its control. The Group identifies and
monitors the key risks and uncertainties affecting it and runs its business in a
way that minimises the impact of such risks where possible.
The primary risks to the business include:
-- exploration and development expenditures and success rates - the Group
has experienced management and technical teams with a track record of
finding attractive hydrocarbon discoveries and has a diversified
portfolio of exploration, development and production assets.
Considerable technical work is undertaken to reduce related areas of
risk and maximise opportunities;
-- factors associated with operating in developing countries including
political, fiscal and regulatory instability - the Group maintains close
contact with governments in the areas within which it operates and,
where appropriate, invests in community projects. Considerable work is
undertaken before commencing operations in any new territory. The Group
continually reviews fiscal regimes and enters into robust, transparent
PSCs or licences;
-- title disputes - notwithstanding potential challenges in Kurdistan and
Malta, the Group believes that it has good title to its oil and gas
properties. However, the Group cannot control or completely protect
itself against the risk of title disputes or challenges and there can be
no assurance that claims or challenges by third parties against the
Group's properties will not be asserted at a future date. Naturally, the
Group strives to employ the best internal and advisory knowledge
available to help to minimise this risk associated with its activities;
-- oil and gas sales volumes and prices - whilst not under the direct
control of the Company, a material movement in commodity prices could
impact on the Group. The Group did not hedge oil prices in the first
half of 2011;
-- loss of key employees - remuneration packages are regularly reviewed to
ensure key executives and senior management are properly remunerated.
Long-term incentive programmes have been established; and
-- foreign exchange exposure - generally, it is the Group's policy to
conduct and manage its business in US dollars, which is its reporting
currency. Cash balances in Group subsidiaries are primarily held in US
dollars but small amounts may be held in other currencies in order to
meet immediate operating or administrative expenses or to comply with
local currency regulations.
Further details on risks and how the Company mitigates them are disclosed on
pages 36 to 39 of the Annual Review report within the 2010 Annual Report and
Accounts issued on 18 April 2011.
Paul Atherton
Chief Financial Officer
Responsibility statement of the Directors in respect of the Interim Report and
Accounts
We confirm on behalf of the Board that to the best of our knowledge:
-- the condensed set of financial statements has been prepared in
accordance with International Accounting Standard ("IAS") 34 Interim
Financial Reporting as adopted by the European Union ("EU");
-- the Interim Report and Accounts includes a fair review of the
information required by:
-- DTR 4.2.7R of the Disclosure and Transparency Rules ("DTR"), being
an indication of important events that have occurred during the
first six months of the financial year and their impact on the
condensed set of financial statements; and a description of the
principal risks and uncertainties for the remaining six months of
the year; and
-- DTR 4.2.8R of the Disclosure and Transparency Rules, being related
party transactions that have taken place in the first six months of
the current financial year and that have materially affected the
financial position or performance of the Group during that period;
and any changes in the related party transactions described in the
last Annual Report and Accounts that could do so.
For and on behalf of the Board
Anthony Buckingham
Chief Executive Officer
24 August 2011
Paul Atherton
Chief Financial Officer
24 August 2011
Independent review report to Heritage Oil Plc
Introduction
We have been engaged by the Company to review the condensed set of financial
statements in the Interim Report and Accounts for the six months ended 30 June
2011 which comprises the condensed consolidated income statement, condensed
consolidated statement of comprehensive income, condensed consolidated balance
sheet, condensed consolidated statement of changes in equity, condensed
consolidated cash flow statement and the related explanatory notes. We have read
the other information contained in the Interim Report and Accounts and
considered whether it contains any apparent misstatements or material
inconsistencies with the information in the condensed set of financial
statements.
This report is made solely to the Company in accordance with the terms of our
engagement to assist the Company in meeting the requirements of the Disclosure
and Transparency Rules (the "DTR") of the UK's Financial Services Authority (the
"UK FSA"). Our review has been undertaken so that we might state to the Company
those matters we are required to state to it in this report and for no other
purpose. To the fullest extent permitted by law, we do not accept or assume
responsibility to anyone other than the Company for our review work, for this
report, or for the conclusions we have reached.
Directors' responsibilities
The Interim Report and Accounts is the responsibility of, and has been approved
by, the Directors. The Directors are responsible for preparing the Interim
Report and Accounts in accordance with the DTR of the UK FSA.
As disclosed in note 2, the annual financial statements of the Group are
prepared in accordance with International Financial Reporting Standards ("IFRS")
as adopted by the EU. The condensed set of financial statements included in this
half-yearly financial report has been prepared in accordance with IAS 34 Interim
Financial Reporting as adopted by the EU.
Our responsibility
Our responsibility is to express to the Company a conclusion on the condensed
set of financial statements in the Interim Report and Accounts based on our
review.
Scope of review
We conducted our review in accordance with the International Standard on Review
Engagements (UK and Ireland) 2410 Review of Interim Financial Information
Performed by the Independent Auditor of the Entity issued by the Auditing
Practices Board for use in the UK. A review of interim financial information
consists of making enquiries, primarily of persons responsible for financial and
accounting matters, and applying analytical and other review procedures. A
review is substantially less in scope than an audit conducted in accordance with
International Standards on Auditing (UK and Ireland) and consequently does not
enable us to obtain assurance that we would become aware of all significant
matters that might be identified in an audit. Accordingly, we do not express an
audit opinion.
Conclusion
Based on our review, nothing has come to our attention that causes us to believe
that the condensed set of financial statements in the Interim Report and
Accounts for the six months ended 30 June 2011 is not prepared, in all material
respects, in accordance with IAS 34 as adopted by the EU and the DTR of the UK
FSA.
Emphasis of matter - uncertain outcome of tax dispute
In forming our conclusion on the condensed set of financial statements, which is
not modified, we have considered the adequacy of the disclosures made in note 4
to the condensed set of financial statements concerning the dispute as to
whether or not tax is payable on the disposal of the Group's interest in Uganda.
In this respect, based on advice received, the Directors believe that the
amounts on deposit ($121,477,000) and held in escrow ($283,841,000) shown in the
condensed consolidated balance sheet will be recovered. However, the ultimate
outcome of the matter is uncertain and it may be some considerable time before
the issue is resolved.
Jimmy Daboo
for and on behalf of KPMG Audit Plc
Chartered Accountants
15 Canada Square
London
E14 5GL
24 August 2011
Condensed consolidated income statement
Six months Six months
ended ended
30 June 30 June
2011 2010
$'000 $'000
----------------------------------------------------------------------------
Revenue
Petroleum 2,850 2,458
Expenses
Petroleum operating (1,349) (1,034)
Production tax (1,491) (1,333)
General and administrative (8,761) (8,076)
Depletion, depreciation and amortisation (993) (1,031)
Exploration expenditures (2,765) (863)
----------------------------------------------------------------------------
Operating loss (12,509) (9,879)
----------------------------------------------------------------------------
Finance income/(costs)
Interest income 3,202 276
Other finance costs (1,749) (1,416)
Foreign exchange gains/(losses) 1,202 (926)
Unrealised gain/(loss) on other financial assets 303 (371)
----------------------------------------------------------------------------
2,958 (2,437)
----------------------------------------------------------------------------
Loss from continuing operations before tax (9,551) (12,316)
----------------------------------------------------------------------------
Income tax expense (174) -
----------------------------------------------------------------------------
Loss from continuing operations after tax (9,725) (12,316)
----------------------------------------------------------------------------
Loss on disposal of discontinued operations (note
4) (1,654) (1,852)
----------------------------------------------------------------------------
Net loss for the period attributable to owners of
the Company (11,379) (14,168)
----------------------------------------------------------------------------
----------------------------------------------------------------------------
The notes are an integral part of these condensed set of financial statements.
Condensed consolidated statement of comprehensive income
Six months Six months
ended ended
30 June 30 June
2011 2010
$'000 $'000
----------------------------------------------------------------------------
Loss for the period (11,379) (14,168)
Other comprehensive gain/(loss)
Exchange differences on translation of foreign
operations 998 (383)
Net change in fair value of available-for-sale
financial assets (885) -
Other comprehensive gain/(loss) net of income tax 113 (383)
----------------------------------------------------------------------------
Total comprehensive loss for the period (11,266) (14,551)
----------------------------------------------------------------------------
Attributable to
Owners of the Company (11,266) (14,551)
Net loss per share from continuing operations
(dollars)
Basic and diluted (0.03) (0.04)
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Net loss per share from discontinued operations
(dollars)
Basic and diluted (0.01) (0.01)
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Net loss per share (dollars)
Basic and diluted (0.04) (0.05)
----------------------------------------------------------------------------
----------------------------------------------------------------------------
The notes are an integral part of these condensed set of financial statements.
Condensed consolidated balance sheet
30 June 31 December
2011 2010
$'000 $'000
----------------------------------------------------------------------------
ASSETS
Non-current assets
Intangible exploration assets (note 5) 228,485 183,424
Property, plant and equipment (note 5) 110,124 101,993
Other financial assets (note 6) 18,985 2,050
----------------------------------------------------------------------------
357,594 287,467
----------------------------------------------------------------------------
Current assets
Inventories 141 97
Prepaid expenses 1,503 746
Trade and other receivables 3,496 20,240
Deposit with URA (note 4) 121,477 121,477
Other financial assets (note 6) 2,353 -
Restricted cash (note 4) 283,841 283,603
Cash and cash equivalents 468,271 598,275
----------------------------------------------------------------------------
881,082 1,024,438
----------------------------------------------------------------------------
1,238,676 1,311,905
----------------------------------------------------------------------------
LIABILITIES
Current liabilities
Current tax liabilities 371 197
Trade and other payables 52,857 54,083
Borrowings (note 7) 124,324 896
----------------------------------------------------------------------------
177,552 55,176
----------------------------------------------------------------------------
Non-current liabilities
Borrowings (note 7) 12,824 133,515
Provisions 408 389
----------------------------------------------------------------------------
13,232 133,904
----------------------------------------------------------------------------
190,784 189,080
----------------------------------------------------------------------------
Net assets 1,047,892 1,122,825
----------------------------------------------------------------------------
----------------------------------------------------------------------------
SHAREHOLDERS' EQUITY ATTRIBUTABLE TO OWNERS OF THE
COMPANY
Share capital (note 8) 402,627 460,280
Reserves 82,558 86,678
Retained earnings 562,707 575,867
----------------------------------------------------------------------------
1,047,892 1,122,825
----------------------------------------------------------------------------
----------------------------------------------------------------------------
The notes are an integral part of these condensed set of financial statements.
Condensed consolidated statement of changes in equity
Six months ended 30 June 2011
Available-
Foreign for-sale
currency investments Share-based
translation revaluation payments
Share capital reserve reserve reserve
$'000 $'000 $'000 $'000
Balance at 1
January 2011 460,280 (940) - 62,969
Total
comprehensive
income for the
period
Loss for the
period - - - -
Other
comprehensive
gain/(loss)
Exchange
differences on
translation of
foreign
operations - 998 - -
Net change in
fair value of
available-for-
sale financial
assets - - (885) -
Total other
comprehensive
gain/(loss) - 998 (885) -
Total
comprehensive
gain/(loss) for
the period - 998 (885) -
Transactions with
owners, recorded
directly in
equity
Contributions by
and
distributions to
owners
Share buy back (66,630) - - -
Exercise of share
options net of
attributable
dividends 1,225 - - (1,225)
Share-based
payment
transactions and
exercise of
share options 7,752 - - (3,008)
Total
transactions
with owners (57,653) - - (4,233)
Balance at 30
June 2011 402,627 58 (885) 58,736
Six months ended 30 June 2011
Equity
portion of
Retained convertible
earnings debt Total equity
$'000 $'000 $'000
Balance at 1
January 2011 575,867 24,649 1,122,825
Total
comprehensive
income for the
period
Loss for the
period (11,379) - (11,379)
Other
comprehensive
gain/(loss)
Exchange
differences on
translation of
foreign
operations - - 998
Net change in
fair value of
available-for-
sale financial
assets - - (885)
Total other
comprehensive
gain/(loss) - - 113
Total
comprehensive
gain/(loss) for
the period (11,379) - (11,266)
Transactions with
owners, recorded
directly in
equity
Contributions by
and
distributions to
owners
Share buy back - - (66,630)
Exercise of share
options net of
attributable
dividends (1,781) - (1,781)
Share-based
payment
transactions and
exercise of
share options - - 4,744
Total
transactions
with owners (1,781) - (63,667)
Balance at 30
June 2011 562,707 24,649 1,047,892
The notes are an integral part of these condensed set of financial statements.
Condensed consolidated statement of changes in equity
Six months ended 30 June 2010
Foreign Share- Equity
currency based portion of
Share translation payments Retained convertible Total
capital reserve reserve earnings debt equity
$'000 $'000 $'000 $'000 $'000 $'000
Balance at 1
January 2010 460,280 (816) 58,714 (153,164) 24,649 389,663
Total
comprehensive
income for
the period
Loss for the
period - - - (14,168) - (14,168)
Other
comprehensive
loss
Exchange
differences
on
translation
of foreign
operations - (383) - - - (383)
Total other
comprehensive
loss - (383) - - - (383)
Total
comprehensive
loss for the
period - (383) - (14,168) - (14,551)
Transactions
with owners,
recorded
directly in
equity
Contributions
by and
distributions
to owners
Share-based
payment
transactions
and exercise
of share
options - - 2,070 - - 2,070
Total
transactions
with owners - - 2,070 - - 2,070
Balance at 30
June 2010 460,280 (1,199) 60,784 (167,332) 24,649 377,182
The notes are an integral part of these condensed set of financial statements.
Condensed consolidated cash flow statement
Six months Six months
ended ended
30 June 30 June
2011 2010
$'000 $'000
----------------------------------------------------------------------------
Cash provided by (used in)
Operating activities
Net loss from continuing operations for the period (9,725) (12,316)
Items not affecting cash
Depletion, depreciation and amortisation 993 1,031
Finance costs - accretion expenses 641 474
Foreign exchange (gains)/losses (473) 481
Share-based compensation 1,536 1,562
(Gain)/loss on other financial assets (303) 371
Decrease/(increase) in trade and other receivables 734 (188)
(Increase)/decrease in prepaid expenses (757) 63
Increase in inventory (44) (10)
Decrease in trade and other payables (1,859) (4,453)
Accrued interest on restricted cash (238) -
----------------------------------------------------------------------------
Continuing operations (9,495) (12,985)
Discontinued operations (1,858) (2,195)
----------------------------------------------------------------------------
(11,353) (15,180)
----------------------------------------------------------------------------
Investing activities
Property, plant and equipment expenditures (9,125) (1,413)
Intangible exploration expenditures (43,526) (27,893)
Other financial assets (19,870) -
----------------------------------------------------------------------------
Continuing operations (72,521) (29,306)
----------------------------------------------------------------------------
Discontinued operations
Working capital adjustments 9,901 -
Property, plant and equipment expenditures and
intangible exploration expenditures - (18,842)
----------------------------------------------------------------------------
(62,620) (48,148)
----------------------------------------------------------------------------
Financing activities
Share buy back (note 8) (58,138) -
Shares issued for cash, proceeds from exercise of
share options 2,659 -
Payment on exercise of share options (note 9) (1,781) -
Payment of consent fee to the holders of the
convertible bonds - (2,378)
Repayment of long-term debt (346) (373)
----------------------------------------------------------------------------
(57,606) (2,751)
----------------------------------------------------------------------------
Decrease in cash and cash equivalents (131,579) (66,079)
Cash and cash equivalents - beginning of period 598,275 208,094
Foreign exchange gain/(loss) on cash held in
foreign currency 1,575 (1,218)
----------------------------------------------------------------------------
Cash and cash equivalents - end of period 468,271 140,797
----------------------------------------------------------------------------
Non-cash investing and financing activities
Supplementary information
The following have been included within cash flows
for the period under operating and investing
activities:
Interest received 3,781 272
Interest paid 5,216 5,247
----------------------------------------------------------------------------
----------------------------------------------------------------------------
The notes are an integral part of these condensed set of financial statements.
Notes to condensed set of financial statements
1. Reporting entity
Heritage Oil Plc (the "Company") was incorporated under the Companies (Jersey)
Law 1991 (as amended) (the "Jersey Companies Law") on 6 February 2008 as
Heritage Oil Limited. The Company changed its name to Heritage Oil Plc on 18
June 2009. Its primary business activity is the exploration, development and
production of petroleum and natural gas in Africa, the Middle East and Russia.
The Company was established in order to implement a corporate reorganisation of
Heritage Oil Corporation ("HOC", the "Corporation").
2. Basis of accounting and presentation and significant accounting policies
These interim condensed set of financial statements of the Company as at and for
the six months ended 30 June 2011 include the results of the Company and all
subsidiaries over which the Company exercises control (together referred as the
"Group").
The Group had available cash of $468.3 million at 30 June 2011, excluding
amounts related to the tax dispute with the Ugandan Government.
After making enquiries, the Directors have a reasonable expectation that the
Group has adequate resources to continue in operational existence for the
foreseeable future. Accordingly, they continue to adopt the going concern basis
in preparing the Interim Report and Accounts.
The condensed set of financial statements have been prepared in accordance with
IAS 34 Interim Financial Reporting as adopted by the EU. They do not include all
information required for full annual financial statements and should be read in
conjunction with the consolidated financial statements of the Company and all
its subsidiaries as at the year ended 31 December 2010.
The Company's condensed set of financial statements are presented in thousand US
dollars unless otherwise stated. US dollars are the Company's functional and
presentation currency.
The accounting policies applied in the preparation of these condensed set of
financial statements are consistent with those applied by the Company and all
its subsidiaries in its consolidated financial statements as at and for the year
ended 31 December 2010.
The condensed set of financial statements were approved by the Board and
authorised for issuance on 24 August 2011.
The comparative information at 31 December 2010 is abridged and therefore is not
the Company's statutory accounts for that financial period.
3. Segment information
The Group has a single class of business which is international exploration,
development and production of petroleum oil and natural gas. The geographical
areas are defined by the Company as operating segments in accordance with IFRS 8
Operating Segments. The Group operates in a number of geographical areas based
on location of operations and assets, being Russia, the DRC, Kurdistan,
Pakistan, Tanzania, Malta, Mali and Uganda (discontinued). The Group's reporting
segments comprise each separate geographical area in which it operates.
Six months ended 30 June 2011
------------------------------------------------
External Segment Total
revenue result assets
$'000 $'000 $'000
----------------------------------------------------------------------------
Russia 2,850 169 60,749
Kurdistan - - 163,786
Pakistan - - 5,306
Tanzania - - 24,398
Mali - - 16,515
Malta - - 15,534
Uganda - discontinued
operations - (1,654) -
----------------------------------------------------------------------------
Total for reportable
segments 2,850 (1,485) 286,288
Corporate - (9,894) 952,388
Elimination of discontinued
operations - 1,654 -
----------------------------------------------------------------------------
Total from continuing
operations 2,850 (9,725) 1,238,676
----------------------------------------------------------------------------
Six months ended 30 June 2011
------------------------------------------------
Depreciation,
depletion
Total Capital and
liabilities additions amortisation
$'000 $'000 $'000
----------------------------------------------------------------------------
Russia 2,914 6,398 (501)
Kurdistan 13,741 28,361 -
Pakistan - 564 -
Tanzania 213 4,294 -
Mali 6,236 13,167 -
Malta 63 1,741 -
Uganda - discontinued
operations - - -
----------------------------------------------------------------------------
Total for reportable
segments 23,167 54,525 (501)
Corporate 167,617 268 (492)
Elimination of discontinued
operations - - -
----------------------------------------------------------------------------
Total from continuing
operations 190,784 54,793 (993)
----------------------------------------------------------------------------
Six months ended 30 June 2010
--------------------------------------------------
External Segment Total
revenue result assets
$'000 $'000 $'000
----------------------------------------------------------------------------
Russia 2,458 (1,478) 49,679
DRC - - 1,693
Kurdistan - (12) 95,213
Pakistan - - 4,263
Tanzania - - 21,493
Mali - - 2,452
Malta - - 11,590
Uganda - discontinued
operations - (1,852) 183,082
----------------------------------------------------------------------------
Total for reportable
segments 2,458 (3,342) 369,465
Corporate - (10,826) 164,178
Elimination of
discontinued operations - 1,852 (183,082)
----------------------------------------------------------------------------
Total from continuing
operations 2,458 (12,316) 350,561
----------------------------------------------------------------------------
Six months ended 30 June 2010
-------------------------------------------------
Depreciation,
depletion
Total Capital and
liabilities additions amortisation
$'000 $'000 $'000
----------------------------------------------------------------------------
Russia 788 2,032 (696)
DRC - 31 -
Kurdistan 3,363 21,103 -
Pakistan - 1,585 -
Tanzania 134 1,267 -
Mali - 332 -
Malta 70 437 -
Uganda - discontinued
operations 13,384 19,946 -
----------------------------------------------------------------------------
Total for reportable
segments 17,739 46,733 (696)
Corporate 138,722 14 (335)
Elimination of
discontinued operations (13,384) (19,946) -
----------------------------------------------------------------------------
Total from continuing
operations 143,077 26,801 (1,031)
----------------------------------------------------------------------------
In 2010, capitalised expenditures relating to the DRC were written off and
therefore no amounts are disclosed with respect to the DRC in the 2011 segmental
report.
Corporate activities include the financing activities of the Group and is not an
operating segment. There have been no changes to the basis of segmentation or
the measurement basis for the segment results since 31 December 2010.
4. Discontinued operations
On 18 December 2009, Heritage announced that the Company and HOGL had entered
into a SPA with Eni for the sale of the Ugandan Assets and on 17 January 2010
Tullow exercised its rights of pre-emption. The sale of the Ugandan Assets
completed on 26 July 2010; Tullow paid cash of $1.45 billion, including $100
million from a contractual settlement, of which Heritage received and retained
$1.045 billion.
The URA contends that income tax is due on the capital gain arising on the
disposal and it raised assessments to $404,925,000 prior to completion of the
disposal. Heritage's position, based on comprehensive advice from leading legal
and tax experts in Uganda, the United Kingdom and North America, is that no tax
should be payable in Uganda on the disposal of the Ugandan Assets.
Tullow paid cash consideration of $1.35 billion and an additional contractual
settlement amount of $100 million. On closing, Heritage deposited $121,477,000
with the URA, representing 30% of the disputed tax assessment of $404,925,000.
$121,477,000 has been classified as a deposit in the balance sheet at 30 June
2011 and 31 December 2010. A further $283,447,000 has been retained in escrow
with Standard Chartered Bank in London, pursuant to an agreement between HOGL,
Tullow and Standard Chartered Bank pending resolution between the Ugandan
Government and HOGL of the tax dispute. Including accrued interest, an amount of
$283,841,000 is classified as restricted cash in the balance sheet at 30 June
2011.
In August 2010, the URA issued a further income tax assessment of $30 million
representing 30% of the additional contractual settlement amount of $100
million. HOGL disputed this assessment and no provision has been made for this
amount.
A tax tribunal is ongoing in Uganda and in May 2011 HOGL commenced international
arbitration proceedings in London against the Ugandan Government.
HOGL is seeking a decision requiring, among other things, the return or release
of approximately $405 million in aggregate currently on deposit with the URA or
in escrow with Standard Chartered Bank in London. Accordingly, the arbitration
proceedings concern HOGL's claims that the Ugandan Government wrongfully or
unreasonably withheld consent to the sale by HOGL of the rights under the PSAs
for the Ugandan Assets, including by making this consent conditional upon the
payment of a sum alleged to be a tax liability of HOGL. The arbitration
proceedings are being held in London in accordance with the provisions of the
PSAs in relation to the Ugandan Assets.
In March 2011, Tullow paid working capital adjustments with respect to the
Ugandan Assets of $13.6 million.
On 15 April 2011, Heritage and its wholly owned subsidiary HOGL received
Particulars of Claim filed in the High Court of Justice in England by Tullow
seeking $313,447,500 for alleged breach of contract as a result of HOGL's and
Heritage's refusal to reimburse Tullow in relation to a payment made by Tullow
of $313,447,500 on 7 April 2011 to the URA. Heritage and HOGL believe that the
claim has no basis and are in the process of vigorously and robustly defending
it. Heritage and HOGL have filed their Defence and Counterclaim against Tullow
seeking instead the release to HOGL of $283,447,000 plus interest currently
being held in escrow with Standard Chartered Bank in London.
Although disputes of this nature are inherently uncertain, the Directors believe
that the monies on deposit and held in escrow will ultimately be recovered by
Heritage.
The results of the Ugandan operations have been classified as discontinued
operations. Loss on disposal of discontinued operations as at 30 June 2011 and
2010 is as follows:
Six months Six months
ended ended
30 June 30 June
2011 2010
$'000 $'000
----------------------------------------------------------------------------
Loss on disposal of discontinued operations (1,654) -
Loss of the discontinued operations - (1,852)
----------------------------------------------------------------------------
(1,654) (1,852)
----------------------------------------------------------------------------
----------------------------------------------------------------------------
5. Property, plant and equipment and intangible exploration assets
Capital additions
During the six months ended 30 June 2011, the Group acquired property, plant and
equipment and intangible exploration assets with a cost of $54,793,000 (six
months ended 30 June 2010 - $46,747,000), including nil relating to discontinued
operations (six months ended 30 June 2010 - $19,946,000).
6. Other financial assets
30 June 31 December
2011 2010
$'000 $'000
----------------------------------------------------------------------------
Current other financial assets
Investment in warrants 2,353 -
Non-current other financial assets
Investment in warrants - 2,050
Investment in listed securities 18,985 -
----------------------------------------------------------------------------
The investment in Afren warrants is classified as held for trading. Afren
warrants expire within a period less than one year from 30 June 2011, and
therefore they have been classified as current assets at 30 June 2011.
As at 30 June 2011, the Company had acquired 6,594,200 of the listed Shares of
PetroFrontier representing 10.39% of the Shares of PetroFrontier. The investment
in share capital of PetroFrontier is classified as available-for-sale and valued
at fair value which is determined using market price at the end of the period.
The valuation at market price at 30 June 2011 resulted in a loss of $885,000
recognised in equity.
7. Borrowings
30 June 31 December
2011 2010
$'000 $'000
----------------------------------------------------------------------------
Current borrowings - secured
Convertible bonds - unsecured 123,413 -
Current portion of secured long-term debt 911 896
----------------------------------------------------------------------------
124,324 896
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Non-current borrowings
Convertible bonds - unsecured - 120,468
Non-current portion of secured long-term debt 12,824 13,047
----------------------------------------------------------------------------
12,824 133,515
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Convertible bonds mature within a period less than one year from 30 June 2011
and therefore have been reclassified as current liabilities at 30 June 2011.
8. Share capital
The Company was incorporated under the Jersey Companies Law on 6 February 2008.
The Company's authorised share capital is an unlimited number of Ordinary Shares
without par value.
Ordinary Shares
Six months ended Six months ended
30 June 2011 30 June 2010
------------------------ ----------------------
Amount Amount
Number $'000 Number $'000
----------------------------------------------------------------------------
At 1 January 284,899,830 457,746 284,842,830 457,697
Exchange of exchangeable
shares of HOC for Ordinary
Shares 155,700 132 - -
Issued on exercise of stock
options 4,692,500 8,977 - -
Shares bought back and held
in treasury (18,347,696) (66,630) - -
----------------------------------------------------------------------------
At 30 June, excluding
treasury shares 271,400,334 400,225 284,842,830 457,697
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Special Voting Share
Six months ended Six months ended
30 June 2011 30 June 2010
------------------------ ------------------------
Amount Amount
Number $'000 Number $'000
----------------------------------------------------------------------------
At 1 January 1 - 1 -
Issued during the period - - - -
----------------------------------------------------------------------------
At 30 June 1 - 1 -
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Exchangeable shares of HOC each carrying one voting right in the Company
Six months ended Six months ended
30 June 2011 30 June 2010
------------------------ ------------------------
Amount Amount
Number $'000 Number $'000
----------------------------------------------------------------------------
At 1 January 2,967,108 2,534 3,024,108 2,583
Exchange of exchangeable
shares of HOC for
Ordinary Shares (155,700) (132) - -
----------------------------------------------------------------------------
At 30 June, excluding
treasury shares 2,811,408 2,402 3,024,108 2,583
----------------------------------------------------------------------------
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Balance of Ordinary Shares
of the Company, excluding
treasury shares, and
exchangeable shares of
HOC - at 30 June 274,211,742 402,627 287,866,938 460,280
----------------------------------------------------------------------------
----------------------------------------------------------------------------
On 26 April 2011, the Company announced a buy back programme to acquire Ordinary
Shares. Shareholders approved the resolution at the AGM on 20 June 2011 to
acquire up to 28,900,000 Ordinary Shares from that date. The purchased Ordinary
Shares are held in treasury. At 30 June 2011, the Company held 18,347,696
Ordinary Shares in treasury.
Following the payment of a special dividend of 100 pence per share in August
2010, holders of share options are entitled to receive 100 pence per share when
the option is exercised. The net exercise price for the 2,150,000 options
exercised was less than 100 pence per share, which resulted in net payment of
$1,781,000 to the option holders on exercise of these share options during the
period ended 30 June 2011.
9. Share based payments
Long Term Incentive Plan ("LTIP")
On 20 June 2011, the AGM of the Company approved the 2011 LTIP. Under the terms
of the plan, the LTIP awards will be in the form of full-value shares, subject
to performance and time-vesting conditions. Eligible employees will normally be
considered by the Remuneration Committee for an award once each year.
The award would vest in line with the following schedule:
Percentage of award vesting
----------------------------------------------------------------------------
Upper quartile 100% of the award
Between median and upper quartile 25% - 100% on a straight line basis
Median 25%
Below median 0%
----------------------------------------------------------------------------
Total Shareholder Return ("TSR") will be measured in comparison to a peer group
of 18 oil companies selected based on one of or a combination of size (market
capitalisation, revenue, turnover, cash expenditure or a combination thereof),
area of operations and country of domicile. The TSR measurement will be
conducted by the independent consultants in discussion with the Remuneration
Committee.
Since there are market-related conditions the awards of shares under LTIP were
fair valued using the Monte Carlo model which takes into account the
market-based performance conditions which effectively estimate the number of
shares expected to vest. No subsequent adjustment is made to the fair value
charge for shares that do not vest in the event that these performance
conditions are not met. Adjustments are, however, made for leavers. The fair
value of the awards is recognised as an employee expense with the corresponding
increase in equity. The total amount to be expensed is spread over the vesting
period during which the employees become unconditionally entitled to the shares
and options.
The table below summarises the main assumptions used to fair value the awards
made under the above LTIP and the fair values of the shares granted.
Award date 20 June 2011
----------------------------------------------------------------------------
Vesting period 3 years
Exercise price Nil
Share price at date of grant 212.8 p
Expected volatility 55%
Risk free interest 1.3%
Fair value as at grant date 1.63
Number of shares granted 2,834,367
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The 2008 Long Term Incentive Plan (Performance Share Plan) (the "2008 LTIP") was
approved by shareholders at the AGM on 19 June 2008. The 2008 LTIP compared the
Company's TSR over a three year period ended 19 June 2011 against a comparator
group of 18 other companies. The 2008 LTIP comprised two plans, one for members
of staff and another for the Executive Directors. The plan for the Executive
Directors included an additional performance condition over-and-above the
Company's relative TSR performance.
Independent executive reward consultants, Hay Group, compared the Company's TSR
against the comparator group during this three year period. The additional 2008
LTIP performance conditions for the Executive Directors were not met and so none
of their awards over 3,507,246 shares vest. While performance conditions for the
staff plan were achieved with the result that all of the awards of 1,419,187
shares could have vested in accordance with the plan. Participants have agreed
(due to a range of contributing factors) to forego 25% of their potential awards
in accordance with the 2008 LTIP rules. As a result, awards over a total of only
1,064,372 shares will vest. The Remuneration Committee also approved such a
reduction in accordance with the 2008 LTIP rules.
The Remuneration Committee agreed with Mr. Buckingham, the Company's CEO, to
amend the performance criteria relating to 915,913 shares under the 2008 LTIP to
reflect substantially the same terms and conditions as those under the new 2011
LTIP rules.
The share-based payment recognised in the period ended 30 June 2011 was
$2,030,000 (six months ended 30 June 2010 - $2,071,000) out of which $459,000
(six months ended 30 June 2010 - $509,000) was capitalised.
10. Loss per share
The following table summarises the weighted average Ordinary Shares and
exchangeable shares used in calculating net loss per share:
Six months ended 30 June
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2011 2010
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Weighted average Ordinary and Exchangeable
Shares
Basic 287,573,271 287,866,938
Diluted 302,355,193 305,330,803
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The reconciling item between basic and diluted weighted average number of
Ordinary Shares is the dilutive effect of stock options. A total of 27,042,553
of shares relating to the convertible bonds (30 June 2010 - 27,042,553) were
excluded from the above calculation, as they were antidilutive. However, since
the Company has made a loss in each period for the purposes of calculating
diluted loss per share, all potential Ordinary Shares have been treated as
anti-dilutive.
11. Related party transactions
During the six months ended 30 June 2011, the Company incurred transportation
costs of $75,000 (six months ended 30 June 2010 - $32,000) with respect to the
services provided by a company indirectly owned by Mr. Buckingham, CEO of the
Company.
12. Non-cash investing and financing activities supplementary information
30 June 30 June
2011 2010
$'000 $'000
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Capitalised portion of share-based compensation (459) (509)
Capitalised portion of interest (6,422) (6,404)
Non-cash property, plant and equipment and
intangible exploration assets additions relating
to the capitalised portion of share-based
compensation and interest 6,881 6,913
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FORWARD-LOOKING INFORMATION:
Except for statements of historical fact, all statements in this news release -
including, without limitation, statements regarding production estimates and
future plans and objectives of Heritage - constitute forward-looking information
that involve various risks and uncertainties. There can be no assurance that
such statements will prove to be accurate; actual results and future events
could differ materially from those anticipated in such statements. Factors that
could cause actual results to differ materially from anticipated results include
risks and uncertainties such as: risks relating to estimates of reserves and
recoveries; production and operating cost assumptions; development risks and
costs; the risk of commodity price fluctuations; political and regulatory risks;
and other risks and uncertainties as disclosed under the heading "Risk Factors"
in its Prospectus and elsewhere in Heritage documents filed from time-to-time
with the London Stock Exchange and other regulatory authorities. Further, any
forward-looking information is made only as of a certain date and the Company
undertakes no obligation to update any forward-looking information or statements
to reflect events or circumstances after the date on which such statement is
made or reflect the occurrence of unanticipated events, except as may be
required by applicable securities laws. New factors emerge from time to time,
and it is not possible for management of the Company to predict all of these
factors and to assess in advance the impact of each such factor on the Company's
business or the extent to which any factor, or combination of factors, may cause
actual results to differ materially from those contained in any forward-looking
information.
Anglo-Canadian Mining Corp. (TSXV:URA)
過去 株価チャート
から 5 2024 まで 6 2024
Anglo-Canadian Mining Corp. (TSXV:URA)
過去 株価チャート
から 6 2023 まで 6 2024
