Last checked at 29 Sep 2008 07:00
Roxi Petroleum Plc
Interim Results for the period ended June 30 2008
Roxi Petroleum plc ("Roxi" or "the Company"), the Kazakhstan based oil exploration and development company is very pleased to announce its Interim Financial Results for the period ended June 30 2008
Chairman's Statement
During this period the Company made good progress in developing the assets acquired at the time of the Company's IPO in May 2007. In addition we successfully completed the acquisition of 59% of Eragon plc for a total consideration of US$250 million and have commenced work developing these new assets.
We have not yet secured the medium term funding we seek to develop our existing assets. However, we are in discussions with potential funders that would provide the required funding. In the interim we have undertaken a number of measures to assist in funding our short term obligations.
Eragon acquisition
Our main achievement in the period under review was the acquisition of a 59 per cent. interest in Eragon plc, the holding company for three oil and gas assets in Kazakhstan. The total consideration for these assets was US$250 million, payable predominantly in Roxi shares issued at a price of 65p per share. At the request of the vendors of Eragon 48,461,538 of the Eragon consideration shares have not yet been issued.
Funding
In May 2008, we announced that we would need to raise additional working capital later in the year and that we were in advanced discussions with a number of potential funders. Regrettably, these discussions did not produce an acceptable offer of the additional funding we sought. We are, however, in advanced discussions with several alternative potential funders to provide short and medium term development funding for our existing assets.
In August 2008, to help address the short term funding needs of the business, we entered into a pre sales contract in respect of production at our Galaz property, which is expected to provide US$3 million, of which we have already received US$800,000. Additionally, in August 2008, Mr Kuat Oraziman, a non-executive director and significant shareholder, made a short term loan of US$1.25 million.
In August 2008, we entered into a heads of agreement with Canamens Energy Asia Limited, a large specialist investor in the oil sector, in respect of our interest in the Ravninnoe Contract Area under which, on completion of the agreement, Roxi would receive an initial payment of US$5 million and up to a further US$17 million in connection with the development costs of the Ravninnoe Contract Area. Canamens have deposited the initial US$5 million into an escrow account pending completion of the Ravninnoe farm out agreement. The release of this US$5 million would fund the group for the next three months. During this period the board will pursue a number of longer term funding options, some of which are at an advanced stage.
We have also looked in detail at our cost base following the Eragon acquisition and taken action, which, over a full year, will result in significant cost savings.
ADA
In October 2007 we announced the purchase of an option, exercisable before 31 March 2008, to acquire 50 per cent. of the assets of ADA and ADA Oil for an aggregate consideration of some US$425 million payable predominantly in Roxi shares at an agreed price of 85p per share. In February 2008, following the delays in completing the Eragon acquisition, we extended the option until 30 September 2008 in return for a refundable deposit of US$3.2 million and reduced the purchase consideration to US$340 million, again predominantly payable by the issue of Roxi shares at a lower agreed price of 65p per share.
It has not been possible to exercise the revised option as planned. The acquisition of ADA and ADA Oil under the terms of the revised option would have been regarded as a reverse takeover under the AIM Rules. Accordingly, we would have needed committed funding for the development work on all our existing assets and the ADA and ADA Oil assets for at least until the end of 2009 before we would have been in a position to exercise the option.
We remain convinced that an involvement in the development of the ADA and ADA Oil assets on the right terms will be in the interest of Roxi. We are therefore in discussions with the ADA and ADA Oil vendors to restructure the proposed acquisition to lessen the financial commitments required of Roxi and will make a further announcement in this regard in due course.
North Karamandybas
At time of the original IPO in May 2007, we deferred the acquisition of an interest in the assets at North Karamandybas pending the result of a legal challenge regarding the ownership of the vendors' interests. We remain interested in a future involvement with the North Karamandybas assets. However, it has become clear to the board that the scale of development work undertaken by the vendors during the course of the legal challenge has increased the value of these assets such that a purchase of a significant interest in these assets on the terms originally agreed is not now possible. Accordingly, steps have been taken to seek the repayment of the initial US$1 million deposit.
Board changes
In August 2008, we announced that, following a review of the Company's management structure, David Barker, our Chief Operating Officer, was to leave the company. David was a key member of the management team that founded Roxi and has made an important contribution in our development so far. I would like to take this opportunity to thank David for his contribution and to wish him well for the future.
Local partners and staff
It is our stated policy of seeking to work with local partners and we are pleased to report that more than 50 per cent of the company's shares are held by our partners and supporters in the region. We thank them for their support and continue to believe such local representation will be a key factor in moving the company forward in the next months and years.
I would also like to express on behalf of the board our thanks to the people both inside and outside the company who have worked tirelessly on the company's behalf over the period under review.
Outlook
Despite the woes of the financial markets we remain upbeat on the prospects for the Company once properly funded. We believe we have an exciting portfolio of assets and the management and infrastructure to develop them to their full potential.
Chief Executive's statement
Strategy
Roxi Petroleum's strategy is to acquire oil and gas assets and enhance their value, either by further development or enhanced production techniques. We are mostly looking for assets that have already been discovered and / or that have promising near-term production characteristics.
Over the medium term we have identified Central Asia as the area of our planned operations but in the short-term have focussed our efforts in Kazakhstan. The oil producing regions of Kazakhstan have already witnessed significant discoveries and have an extensive extraction and distribution infrastructure.
It remains our strategy to work with local partners who are already well established in the territories in which we wish to operate. We believe working with well-respected and experienced partners enhances our operations and manages risk through better understanding of the complicated regulatory processes as well as giving us a deeper knowledge of the local business environment.
We seek to maintain appropriate strategic, operational and financial control and believe this is the most effective way to deliver projects on time and to budget.
Eragon acquisition
As noted in the Chairman's report, our greatest success since our original IPO was the completion of the acquisition of a 59 per cent. interest in Eragon plc. We believe that the principal assets acquired as part of the purchase of Eragon have outstanding development potential. In particular the BNG Contract Area offers tremendous upside in both reserves and significant levels of medium term production and the Galaz Contract Area offers the prospect of near-term production.
Staffing
The Roxi team is now some 93 strong in total comprising 50 in the main Almaty office , 14 in the Aktau regional office 9 in the Atyrau / Munaily office and field operations and 20 in the Kyzlorda / Galaz office and field locations. Of these employees 14 are technical staff, 17 are financial staff, 43 are operational staff and 19 fulfil other activities.
Infrastructure
The Company's activities are run from a modern offices in Almaty. The regional office in the Caspian Sea port of Aktau, which is the centre of operations for BNG, Ravninnoe and Beibars. A small office in Kyzlorda has been established to service the Galaz asset and a small office in Atyrau services the Munaily asset.
Integration of Eragon
The acquisition of Eragon completed on 3 March 2008, since when Roxi has taken operational control at BNG, Galaz and Munaily and has completed an evaluation of the staff joining Roxi and an initial evaluation of the Eragon assets.
Following this evaluation 10 staff previously with Eragon have left the company. Additionally, 13 Roxi employees have also left the Company.
Asset update
BNG Contract Area
Exploration
Roxi holds a 58.41% interest in "BNG Ltd" LLP which operates the Ayrshagyl block in the South Pre-Caspian Basin. An extension was granted by the Ministry for Energy and Mineral Resources in Q2 2008, enlarging the Contract area by 139km2. In Q2 2008 a contract to acquire 366km2 of 3D seismic was signed, to cover the Yelemes structures and surround Ayrshagyl area. Work is planned to start in Q4 2008. A pilot production project has been commissioned in order to apply to produce existing Jurassic C1 reserves on the block.
Ravninnoe Contract Area
Proven oil discovery - appraisal and development
Roxi holds a 50% interest and operational control of the Ravninnoe field, in the south pre-Caspian Basin, discovered in the 1980's. A 168km2 3D seismic programme which was commenced at the end of 2007 was completed in Q1 2008, and initial processing was completed in Q2 2008. The discovered carboniferous reservoirs are currently being evaluated, prior to selecting a well location for drilling later in 2008. Deeper exploration prospectivity is also being evaluated.
The re-entry programme for old wells on Ravninnoe field has been suspended after encountering damaged casing in both wells 8 and 5.
Beibars Contract Area
Exploration
Roxi holds a 50% interest and operational control of Beibars exploration contract Area in the Mangishlak Basin near Aktau. A 121 km2 3D seismic programme (delayed from 2007 due to issuance of a military polygon on the Contract Area) was acquired in Q2 2008. The data is being processed and will be evaluated in the second half of 2008 to identify drillable prospects for 2009.
Galaz Contract Area
Proven oil field - appraisal and development targeting early production
Roxi holds a 50.15% interest in Galaz LLP, based in Kyzylorda. The Contract Area contains the North West Konus Field discovered in 1992. 3D seismic acquisition was completed in Q1 2008 and processed in Q2 2008. Well NK1 was drilled in Q2 2008 to appraise the Arskum "M2" sands, and is currently under evaluation to establish flow from the these and further Jurassic and Cretaceous intervals. The results of the well have confirmed that the Arskum "M2" sands are not the primary reservoir in NW Konus and that Upper Jurassic intervals provide the best potential for development. Further drilling is waiting completion of the seismic interpretation of the Upper Jurassic Sands.
Due to regulatory requirements, Well #27 was shut in after an initial 90 day test period. Remedial work is planned on both wells #26 and #27 in Q4, prior to further testing.
Munaily Contract Area
Proven oil field - rehabilitation targeting early production
Roxi holds a 58.41% interest in "Munaily Kazakhstan" LLP which operates the Munaily Field in the South Pre-Caspian Basin. Well H1 was been shut in after a successful three month test period at average rates of approximately 100bopd under natural flow. C1 category reserves are being calculated for the well for submission to the State Geological Committee for approval.
Environmental
No significant environmental issues have surfaced at any of the properties acquired to date. Compliance with environmental regulatory bodies is being managed from both the Aktau and Almaty offices.
Agreements since the period end
In August 2008, we entered into a US$3 million pre sales agreement for oil produced at our Galaz Contract Area of which we have already received the first US$800,000.
Also in August 2008, we entered into a farm out heads of agreement with Canamens Energy Asia Limited, under which upon completion Roxi will receive an initial payment of US$5 million and up to a further US$17 million to develop the Ravninnoe Contract Area in return for the sale of 40 per cent. of the interest held by Roxi. As part o the agreement Canamens will also acquire a further 25 per cent. of the residual partners interest in Ravninnoe.
Canamens Energy Asia Limited is a subsidiary of Canamens Limited, an independent oil and gas company with offices in England, Norway and Kazakhstan.
We believe this may be the first of a number of such arrangements with the Canamens Group.
Kazakhstan
Kazakhstan has undoubtedly been hit by the impact of the global credit crunch. It is now harder to fund projects from local funders than in recent years and funding from banks is particularly difficult to secure. However, once funded, Kazakhstan remains a favourable operating environment for a company such as Roxi. We have already established good working relations with the various regulatory bodies responsible for our industry and there is a good pool of skilled labour used to working with international management teams.
Outlook
We have made a strong start in our mission to assemble a collection of valuable exploration and development oil and gas assets. Subject to securing the additional funding we are confident that we shall within our stated time horizon assemble a portfolio of oil and gas assets which will greatly increase the value of the company.
Enquiries:
| Roxi Petroleum Plc | Clive Carver | Tel: +44(0) 20 3008 2500 |
| College Hill | Paddy Blewer/ Nick Elwes | Tel: +44(0) 20 7457 2020 |
| W H Ireland Ltd | James Joyce/David Porter | Tel: +44(0) 20 7220 1666 |
Duncan McDougall, Technical Director of Roxi Petroleum and a Fellow in the Geological Society, London, has reviewed and approved the technical disclosure in this announcement. He holds a BSc in Geology and has 25 years international experience of exploration, appraisal, and development of oilfields in a variety of environments.
CONSOLIDATED INCOME STATEMENT
| Six months ended 30 June 2008 Unaudited | Period from13 October 2006 to 30 June 2007 Unaudited | Period from 13 October 2006 to 31 December 2007 Audited | ||
| Note | US$000s | US$000s | US$000s | |
| Revenue | - | - | - | |
| Cost of sales | - | - | - | |
| IPO costs | - | (1,293) | (1,446) | |
| Share based payments | (1,934) | (585) | (2,224) | |
| Impairment of investments | (6,503) | (2,983) | (2,983) | |
| Other administrative expenses | (9,066) | (434) | (5,421) | |
| Administrative expenses | (17,503) | (5,295) | (12,074) | |
| Operating loss | (17,503) | (5,295) | (12,074) | |
| Interest payable and similar charges | (859) | - | (56) | |
| Interest receivable | 110 | 260 | 1,659 | |
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| Loss before taxation | (18,252) | (5,035) | (10,471) | |
| Taxation | - | - | (2) | |
| Loss after taxation | (18,252) | (5,035) | (10,473) | |
| Loss attributable to minority interests | (1,630) | (159) | (988) | |
| Loss attributable to equity shareholders | (16,622) | (4,876) | (9,485) | |
| (18,252) | (5,035) | (10,473) | ||
| Loss per Ordinary share (US cents) Basic and diluted | 5 | 5.5 | 10.7 | 9.9 |
The notes form part of these financial statements.
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
For the six months ended 30 June 2008
| Share capital | Share premium | Shares to be issued | Cumulative translation reserve | Other reserve | Retained earnings | Total | Minority interests | Total equity | |
| US$'000 | US$'000 | US$'000 | US$'000 | US$'000 | US$'000 | US$'000 | US$'000 | US$'000 | |
| At start of period | 33,707 | 52,711 | - | 1,334 | 2,378 | (7,261) | 82,869 | 35,551 | 118,420 |
| Currency translation differences and total income and expense recognised directly in equity | - | - | - | (354) | - | - | (354) | (95) | (449) |
| Loss for the period | - | - | - | - | - | (16,622) | (16,622) | (1,630) | (18,252) |
| Total recognised income and expense for the period | - | - | - | (354) | - | (16,622) | (16,976) | (1,725) | (18,701) |
| Due to acquisitions | 30,145 | 33,100 | 20,175 | - | - | - | 83,420 | 46,022 | 129,442 |
| Due to employee share options | - | - | - | - | - | 1,934 | 1,934 | - | 1,934 |
| At 30 June 2008 | 63,852 | 85,811 | 20,175 | 980 | 2,378 | (21,949) | 151,247 | 79,848 | 231,095 |
For the period ended 30 June 2007
| Share capital | Share premium | Cumulative translation reserve | Other reserve | Retained earnings | Total | Minority interests | Total equity | |
| US$'000 | US$'000 | US$'000 | US$'000 | US$'000 | US$'000 | US$'000 | US$'000 | |
| At start of period | - | - | - | - | - | - | - | - |
| Currency translation differences and total income and expense recognised directly in equity | - | - | 111 | - | - | 111 | 111 | 222 |
| Loss for the period | - | - | - | - | (4,876) | (4,876) | (159) | (5,035) |
| Total recognised income and expense for the period | - | - | 111 | - | (4,876) | (4,765) | (48) | (4,813) |
| Due to acquisitions | - | - | - | - | - | - | 39,126 | 39,126 |
| Arising on share issues | 33,707 | 55,089 | - | - | - | 88,796 | - | 88,796 |
| Due to employee share options | - | - | - | - | 585 | 585 | - | 585 |
| Arising on warrants | - | (2,378) | - | 2,378 | - | - | - | - |
| At 30 June 2007 | 33,707 | 52,711 | 111 | 2,378 | (4,291) | 84,616 | 39,078 | 123,694 |
For the period ended 31 December 2007
| Share capital | Share premium | Cumulative translation reserve | Other reserve | Retained earnings | Total | Minority interests | Total equity | |
| US$'000 | US$'000 | US$'000 | US$'000 | US$'000 | US$'000 | US$'000 | US$'000 | |
| At start of period | - | - | - | - | - | - | - | - |
| Currency translation differences and total income and expense recognised directly in equity | - | - | 1,334 | - | - | 1,334 | 2,092 | 3,426 |
| Loss for the period | - | - | - | - | (9,485) | (9,485) | (988) | (10,473) |
| Total recognised income and expense for the period | - | - | 1,334 | - | (9,485) | (8,151) | 1,104 | (7,047) |
| Due to acquisitions | - | - | - | - | - | - | 34,447 | 34,447 |
| Due to share issues | 33,707 | 55,089 | - | - | - | 88,796 | - | 88,796 |
| Arising on employee share options | - | - | - | - | 2,224 | 2,224 | - | 2,224 |
| Arising on warrants | - | (2,378) | - | 2,378 | - | - | - | - |
| At 31 December 2007 | 33,707 | 52,711 | 1,334 | 2,378 | (7,261) | 82,869 | 35,551 | 118,420 |
| Reserve | Description and purpose |
| Share capital | The nominal value of shares issued |
| Share premium | Amount subscribed for share capital in excess of nominal value |
| Shares to be issued | Outstanding share capital to be issued |
| Cumulative translation reserve | Losses arising on retranslating the net assets of overseas operations into US dollars |
| Other reserves | Fair value of warrants issued during the period |
| Retained earnings | Cumulative losses recognised in the consolidated income statement |
| Minority interests | The interest of the non-controlling interests in the net assets of the subsidiaries |
The notes form part of these financial statements.
CONSOLIDATED BALANCE SHEET
| 30 June 2008 | 30 June 2007 | 31 December 2007 | ||
| Note | US$000s | US$000s | US$000s | |
| Assets | Unaudited | Unaudited | Audited | |
| Non-current assets | ||||
| Unproven oil and gas assets | 6 | 325,326 | 102,967 | 110,142 |
| Available for sale financial assets | 1,025 | 1,025 | 5,525 | |
| Property, plant and equipment | 1,138 | 209 | 615 | |
| Other receivables | 9,863 | - | 4,986 | |
| Total non-current assets | 337,352 | 104,201 | 121,268 | |
| Current assets | ||||
| Inventories | 339 | 65 | 815 | |
| Other receivables | 2,577 | 980 | 4,665 | |
| Cash and cash equivalents | 2,866 | 53,831 | 30,144 | |
| Total current assets | 5,782 | 54,876 | 35,624 | |
| Total assets | 343,134 | 159,077 | 156,892 | |
| Equity and liabilities | ||||
| Equity | ||||
| Share capital |
| 63,852 | 33,707 | 33,707 |
| Share premium |
| 85,811 | 52,711 | 52,711 |
| Shares to be issued |
| 20,175 | - | - |
| Other reserves |
| 2,378 | 2,378 | 2,378 |
| Retained earnings | (21,949) | (4,291) | (7,261) | |
| Cumulative translation reserve | 980 | 111 | 1,334 | |
| Shareholders' equity |
| 151,247 | 84,616 | 82,869 |
| Minority interests | 79,848 | 39,078 | 35,551 | |
| Total equity | 231,095 | 123,694 | 118,420 | |
| Current liabilities | ||||
| Trade and other payables | 6,787 | 703 | 2,059 | |
| Short-term borrowings | 4,038 | - | 61 | |
| Current provisions | 1,928 | 1,908 | 1,908 | |
| Total current liabilities | 12,753 | 2,611 | 4,028 | |
| Non-current liabilities | ||||
| Borrowings | 13,763 | 3,900 | 3,900 | |
| Deferred tax liabilities | 79,940 | 28,203 | 29,809 | |
| Non-current provisions | 5,374 | 669 | 669 | |
| Other payables | 209 | - | 66 | |
| Total non-current liabilities | 99,286 | 32,772 | 34,444 | |
| Total liabilities | 112,039 | 35,383 | 38,472 | |
| Total equity and liabilities | 343,134 | 159,077 | 156,892 |
The notes form part of these financial statements.
These financial statements were approved and authorised for issue by the Board of Directors on 26 September 2008 and were signed on its behalf by:
| Cliver Carver | Rob Schoonbrood |
| Director | Director |
CONSOLIDATED CASH FLOW STATEMENT
| Six months ended 30 June 2008 | Period from13 October 2006 to 30 June 2007 | Period from 13 October 2006 to 31 December 2007 | |
| Unaudited | Unaudited | Audited | |
| US$000s | US$000s | US$000s | |
| Cash flow used in operating activities | |||
| Payments made to suppliers and employees | (11,602) | (1,727) | (8,588) |
| Interest paid | - | - | (11) |
| Interest received | 110 | 260 | 1,198 |
| Net cash used in operating activities | (11,492) | (1,467) | (7,401) |
| Cash flow used in investing activities | |||
| Purchase of property, plant and equipment | (222) | (40) | (474) |
| Additions to unproven oil and gas assets | (11,197) | (704) | (4,603) |
| Acquisition of subsidiaries net of cash acquired | (1,167) | (16,399) | (16,399) |
| Option fees, deposits and prepayment of acquisition costs | (3,200) | - | (7,530) |
| Cash flow used in investing activities | (15,786) | (17,143) | (29,006) |
| Cash flow used in financing activities | |||
| Net proceeds from issue of ordinary share capital, net of expenses relating to issue of shares | - | 72,767 | 72,767 |
| Repayment of financial aid and borrowings | - | - | (3,531) |
| Issue of financial aid and loans | - | - | (2,741) |
| Net cash used in financing activities | - | 72,767 | 66,495 |
| Net increase/ (decrease) in cash and cash equivalents | (27,278) | 54,157 | 30,088 |
| Exchange gains and losses on cash and overdrafts | - | (326) | 56 |
| Cash and cash equivalents at the start of the period | 30,144 | - | - |
| Cash and cash equivalents at period end | 2,866 | 53,831 | 30,144 |
The notes form part of these financial statements.
Notes to the interim financial statements
1. STATUTORY ACCOUNTS
The interim results for the period ended 30 June 2008 are unaudited. The financial information contained within this report does not constitute statutory accounts as defined by Section 240 of the Companies Act 1985.
2. BASIS OF PREPARATION
Roxi Petroleum Plc is registered and domiciled in England and Wales.
These interim financial statements of the Company and its subsidiaries ("the Group") for the six months ended 30 June 2008 have been prepared on a basis consistent with the accounting policies set out in the Group's consolidated annual financial statements for the period ended 31 December 2007. They have not been audited, do not include all of the information required for full annual financial statements, and should be read in conjunction with the Group's consolidated annual financial statements for the period ended 31 December 2007. The 2007 annual report and accounts, which received an unqualified opinion from the auditors but did include an emphasis of matter paragraph regarding going concern and did not contain a statement under section 237 (2) or (3) of the Companies Act 1985, have been filed with the Registrar of Companies. As permitted, the Group has chosen not to adopt IAS 34 'Interim Financial Reporting'.
The financial information is presented in US Dollars and has been prepared under the historical cost convention and on a going concern basis.
3. GOING CONCERN
The directors have prepared cash flow forecasts which indicate that further funds will need to be raised to finance future capital requirements. The Directors expect the $5m held in escrow to be released shortly. These funds would finance corporate overheads and a limited work programme for the next three months. During the period, the Board will continue to pursue a number of longer term funding solutions that will finance the development of the Group's assets. A number of these potential funding transactions are at an advanced stage of negotiation. Whilst the directors are confident that at least one of these transactions will close in the next three months, there can be no certainty, in current markets, that sufficient funds will be forthcoming.
These interim financial statements have been prepared on a going concern basis as the Directors are confident the Group will be able to raise the required funds.
These conditions indicate the existence of a material uncertainty which may cast significant doubt over the Group's ability to continue as a going concern.
The financial statements do not include any adjustments that would result if the Group was unable to continue as a going concern.
4. RESTATEMENT
During the period ended 30 June 2007, the company acquired the entire share capital of RS Munai BV (formerly Sytero BV), Beibars BV (formerly Sytero 2 BV) and Ravninnoe BV (formerly Sytero 3 BV). These companies held 50% interests in RS Munai LLP, Beibars LLP and Ravninnoe LLP.
The company estimated the provisional fair values for inclusion in the interim financial statements for the period ended 30 June 2007. These were reassessed and finalised at the period end and accordingly 30 June 2007 figures have been restated so as to reflect the fair value as disclosed in the annual report for the period ended 31 December 2007.
The effect of this restatement on 30 June 2007 interim financial statements is:
| $000's | |
| Increase in unproven oil and gas assets | 52,356 |
| Increase in deferred tax liability | 14,934 |
| Increase in loss for the period | 682 |
| Increase in minority interests | 39,359 |
| Net movement in other items | 1,255 |
5. EARNINGS PER ORDINARY SHARE
Basic loss per share is calculated by dividing the loss attributable to ordinary shareholders by the weighted average number of ordinary shares outstanding during the period.
In order to calculate diluted loss per share, the weighted average number of ordinary shares in issue is adjusted to assume conversion of all dilutive potential ordinary shares according to IAS33. Dilutive potential ordinary shares include share options granted to employees and Directors where the exercise price (adjusted according to IAS33) is less than the average market price of the Company's ordinary shares during the period. During the period the potential ordinary shares are anti-dilutive and therefore diluted loss per share has not been calculated.
The calculation of earnings per ordinary share is based on: 6. UNPROVEN OIL AND GAS ASSETS
| Six months ended 30 June 2008 US$000s | Period from13 October 2006 to 30 June 2007 US$000s | Period from 13 October 2006 to 31 December 2007 US$000s | ||
| At the start of the period | 110,142 | - | - | |
| Acquisitions of subsidiaries (see note 7) | 204,239 | 99,003 | 99,003 | |
| Additions | 11,197 | 3,646 | 5,155 | |
| Foreign exchange differences | (252) | 318 | 5,984 | |
| At the end of the period | 325,326 | 102,967 | 110,142 |
7. ACQUISITIONS
During the period, the Company completed the acquisition of 59% of the Eragon group which includes Sytero 4 BV and Sytero 5 BV. Sytero 4 BV owns interests in Galaz and Company LLP and Sytero 5 owns interests in BNG LLP and Munaily Kazakhstan LLP. The preliminary assessment of the fair values of the assets and liabilities acquired as at the date of acquisition is as follows:
| Fair value | |||
| Book values | adjustments | Fair values | |
| $000s | $000s | $000s | |
| Unproven oil and gas assets | 72,595 | 131,644 | 204,239 |
| Property, plant and equipment | 301 | - | 301 |
| Inventories | 55 | - | 55 |
| Other receivables | 816 | 31,566 | 32,382 |
| Cash and cash equivalents | 862 | - | 862 |
| Other payables | (19,879) | - | (19,879) |
| Long term borrowings | (29,166) | (2,400) | (31,566) |
| Deferred taxation | (10,708) | (39,493) | (50,201) |
| 14,876 | 121,317 | 136,193 | |
| Minority interests | (46,022) | ||
| Net assets acquired | 90,171 | ||
| Consideration: | |||
| - Ordinary shares | 63,246 | ||
| - Shares to be issued | 20,175 | ||
| - Cash | 1,500 | ||
| - Expenses | 5,250 | ||
| Total consideration | 90,171 |
7. ACQUISITIONS (CONTINUED)
| Related cash flows: | |||
| - Cash consideration | (1,500) | ||
| - Cash acquired | 862 | ||
| - Expenses incurred | (5,250) | ||
| - Prepayments at 31 December 2007 | 4,721 | ||
| (1,167) |
The surplus of the fair value of the consideration over the other separable net assets and liabilities of the acquired entities has been attributed to the value of the negotiated rights in respect of the unproven oil and gas properties and financial assets.
8. SUBSEQUENT EVENTS
On 28 August 2008 the Company entered into a non- binding Heads of Agreement ("HoA") for a farm-out with Canamens Energy Central Asia Limited ("Canamens"), a company incorporated in England, to develop the Company's Ravninnoe Contract Area. This HoA is subject to the signing and completion of definitive contractual documents and satisfaction of the conditions precedent under such documents.
Key terms of the HoA are as follows:
The purchase of up to a 32.5% interest in Ravninnoe Oil LLP ("Ravninnoe") by Canamens with up to 20% of the total interest coming from the Company and up to 12.5% from K Oraziman (together "the sellers").
Canamens will deposit an exclusivity fee of US$5 million into an escrow account which shall be released to the Group if the sale and purchase agreement is signed by 31 October 2008 and if the other conditions precedent have been satisfied by 31 December 2008.
Following signing of the sale and purchase agreement and satisfaction of the other conditions precedent, Canamens will receive a 20% interest in Ravninnoe and will fund the drilling of a first well up to a total amount of US$8.5 million. Should the first well yield acceptable drilling results, Canamens has the option to acquire a further 12.5% interest in Ravninnoe by funding a second well up to a total of US$8.5 million.
The final fee of US$5 million will be payable subject to the two wells producing a combined daily amount in excess of 900 barrels of oil for a period of no less than 45 consecutive days.