11 Dec 2008 07:00
Press Release 11 December 2008
Interim Results
Six months to 30 September 2008
Great Eastern Energy Corporation Ltd. ("Great Eastern" or "the Company"), a company involved in the exploration, development and production of coal bed methane ("CBM") natural gas in India, is pleased to announce its Interim Results for the six months to 30 September 2008.
Highlights
YK Modi, Chairman and CEO of Great Eastern, commented:
"Great Eastern remains well positioned to make further progress in the second half of the financial year. The Company has made significant operational progress in the year to date, the market for CBM gas remains positive and the Company is now well positioned to develop gas production and sales."
For further information
Great Eastern
YK Modi Chairman & Managing Director + 44 (0)20 7743 6363
Prashant Modi President & COO
Pelham Public Relations
Philip Dennis +44 (0)20 7743 6363
Arden Partners plc
Richard Day +44 (0)20 7398 1632
Adrian Trimmings
For more information on the Company please visit www.geecl.com
Chairman's Statement
Introduction
Great Eastern remains in a strong position, with further progress having been made over the last six months in all key areas of the business. As the Company currently stands, it has made significant progress in successfully developing the licence area, has achieved gas production volumes ahead of initial planned rates and sits on the verge of achieving meaningful gas sales.
Sales & Markets
Current gas sales, including internal consumption by Great Eastern, are around 200 mcf/d. In order to decrease the flaring of excess gas, de-watering and production rates are currently running at a reduced level until the two external distribution pipelines are completed.
One of the distribution pipelines will connect the gas gathering station on the license block to the central gas gathering station at Asansol, which is a key local market and will be the central point for distributing natural gas throughout the region. The second pipeline connects the central gas gathering station to SAIL Growth Works in Kulti, which is part of the Steel Authority of India Ltd. Both are expected to be completed on target within December 2008.
The Company also expects gas sales to increase in mid - 2009, with the completion of a third distribution pipeline. This additional pipeline will connect the central gas gathering station in Asansol with Durgapur.
Great Eastern signed a MOU during the first half of the year with SAIL Growth Works, Kedia Group of Industries and also successfully renewed gas sales agreements for another year with those customers whose initial terms of agreement had expired. Delivered prices under these MOUs range from $9 per mmbtu to $17 per mmbtu. This is despite the price of alternative fuel sources, such as LPG and furnace oil having dropped by 25% and 55% respectively in the last few months.
Despite expectations that the Indian economy will slow to around 7% GDP growth in the year ahead, Great Eastern remains well placed with its key market situated in the immediate vicinity and limited competition. Great Eastern was the first producer of CBM gas in India and is the only CBM producer is its market area. The main alternatives sources of fuel include commercial LPG, furnace oil, petrol and diesel, all of which continue to be substantially more expensive for end users than gas produced by Great Eastern.
Great Eastern is currently supplying Compressed Natural Gas ("CNG") to two additional IOCL ("Indian Oil Corporation Ltd") outlets in Asansol and Durgapur, bringing the total number of IOCL outlets supplied with CNG to four. These outlets are located immediately in the area surrounding the Company's license block. Under the original agreement with the IOCL, signed in 2007, Great Eastern would supply CNG to a total of five IOCL outlets and this number may be extended further. The Company also currently supplies CNG directly to customers through four Company owned outlets located at the wells. The Company supplies CNG through outlets owned by both Great Eastern and IOCL, primarily for domestic use, including vehicles and transport. The agreement with the IOCL enables the Company to expand its distribution channels for CNG by overcoming the extensive regulatory obstacles to establishing CNG outlets.
Operations update
Further to the successful commissioning of the gas gathering station on the license block in September this year, the Company has now also successfully laid 29.61km of pipeline, connecting 19 wells to this station. In addition, and as mentioned above, a further 10.55km of 11km of steel pipeline connecting the gas gathering station with the central gas gathering station in Asansol has been laid; and 10.48km of 11.2km of steel pipeline connecting the central gas gathering station and with SAIL Growth Works in Kulti has also been laid. Both pipelines are expected to be completed this month.
The Company has also recently obtained permission from the National Highway Authority of India to lay a 57km pipeline from Asansol to Durgapur. Work on this pipeline started in the first week of this month and it is expected to be completed in mid 2009.
As previously announced, the first phase of drilling and well completion activities was completed in December 2006 and of the 23 production wells drilled, cased, cemented, logged, perforated and fractured, 18 are currently dewatering and producing gas.
Subsequent to the completion of the first phase, the Company has made solid progress with the second 30 well phase of the programme and drilled 13 wells in the current year. Due to natural fractures the drilling of some wells is taking longer than expected, but this could potentially signify higher production levels in those wells.
Financials
As at 30 September 2008 Great Eastern had Rs. 0.01 billion ($1.7m) of cash, as well as undrawn debt facilities of Rs. 1.93 billion ($40.6m), from a total sanctioned facility of Rs. 3.5 billion ($71m) put in place by a consortium of 9 banks, each of which did extensive due diligence on the project.
In August this year, the Company announced its intention to conduct an IPO in India. The aim of the IPO is to raise additional funds for the Company and achieve a listing for the Company's shares on the Indian stock exchanges alongside its existing AIM listing. The additional funds would be used to accelerate the Company's next phase of drilling and well completion, and for general corporate purposes. The exact amount raised will be dependent on the price achieved through the book building process and the intention is to file the Draft Red Herring Prospectus by the end of this December 2008.
Outlook
Great Eastern remains well positioned to make further progress in the next six months of the year. On completion of the pipeline to Asansol, it will be a fully vertically integrated CBM business, capable of exploring for, producing, distributing and selling natural gas to end users, which provides both economic efficiencies and also comprehensive control over all aspects of business development. The Company has made significant operational progress in the year to date, the market for CBM gas remains positive and the Company is now well positioned to develop gas production and sales.
Interim consolidated accounts for the six months ended 30 September 2008 are shown below. A copy of the full interim accounts are available on the Company website: www.geecl.com
Great Eastern Energy Corporation Limited
Interim condensed balance sheet as at 30 September 2008
(In US Dollars unless otherwise stated)
|
| Notes |
| As at 30 September 2008 | As at 31 March 2008 |
| ASSETS | ||||
| Non-current assets | ||||
| Property, plant and equipment | 8 | 21,730,684 | 16,818,701 | |
| Capital work-in-progress | 10 | 44,786,840 | 44,477,852 | |
| Intangible assets | 9 | 316,930 | 370,944 | |
| Prepayments | 5 | 170,911 | 202,637 | |
| Trade and Other receivables | 148,601 | 65,297 | ||
| 67,153,966 | 61,935,431 | |||
| Current assets | ||||
| Prepayments | 5 | 194,790 | 123,848 | |
| Advance income tax | 366,415 | 770,744 | ||
| Trade and other receivables | 3,433,259 | 1,936,281 | ||
| Cash and cash equivalents | 3 | 1,693,422 | 2,102,197 | |
| Restricted deposit with bank | 4 | 440,232 | 927,938 | |
| 6,128,118 | 5,861,008 | |||
| Total Assets |
| 73,282,084 | 67,796,439 | |
| EQUITY | ||||
| Ordinary Shares | 12,246,781 | 12,246,781 | ||
| Share premium | 33,301,944 | 33,301,944 | ||
| Retained earnings | (6,839,932) | (4,815,414) | ||
| Other reserves | (1,669,858) | 4,930,843 | ||
| Total equity | 37,038,935 | 45,664,154 | ||
| LIABILITIES Non current liabilities | ||||
| Borrowings | 30,405,856 | 18,663,070 | ||
| Retirement benefit obligations | 99,052 | 98,304 | ||
| Deferred income tax liability | 6 | - | - | |
| Provisions | 242,650 | 107,588 | ||
| 30,747,558 | 18,868,962 | |||
| Current liabilities | ||||
| Trade and other payables | 5,265,824 | 3,114,656 | ||
| Provisions | - | - | ||
| Borrowings | 229,767 | 148,667 | ||
| 5,495,591 | 3,263,323 | |||
| Total liabilities | 36,243,149 | 22,132,285 | ||
| Total equity and liabilities |
| 73,282,084 | 67,796,439 |
Great Eastern Energy Corporation Limited
Interim condensed income statement for six months ended 30 September 2008
(In US Dollars unless otherwise stated)
| For six months period ended 30 September | ||||
|
| Notes |
| 2008 | 2007 |
| Revenue | 391,378 | 7,272 | ||
| Other income | 65,810 | 2,460 | ||
| Repairs and Stores and Consumables | (155,106) | |||
| Personnel expenses | (510,053) | (232,511) | ||
| Depreciation and amortization | 8&9 | (229,685) | (52,534) | |
| Other operating expenses | (1,496,651) | (670,031) | ||
| Foreign exchange gain/(loss) | (76,484) | 3,145 | ||
| Operating profit/(loss) | (2,010,791) | (942,199) | ||
| Finance income | 59 | 323,210 | ||
| Finance expense |
| (13,786) | (15,083) | |
| Finance income/(expense) net | (13,727) | 308,127 | ||
| Profit/(loss) before income tax | (2,024,518) | (634,072) | ||
| Income tax expense | - | - | ||
| Profit/(loss) for the period | (2,024,518) | (634,072) | ||
| Loss per share | ||||
| - basic and dilutive (in cents) | (0.3717) | (0.1164) | ||
|
| ||||
Great Eastern Energy Corporation Limited
Consolidated statement of changes in equity for the six months ended 30 September 2008
(In US Dollars unless otherwise stated)
|
| Issued capital | Share premium | Retained earnings | Translation reserve | Total equity |
| At 1 April 2008 | 12,246,781 | 33,301,944 | (4,815,414) | 4,930,843 | 45,664,154 |
| Currency translation adjustments | - | - | - | (6,600,701) | - |
| Profit/(Loss) for the period | - | - | (2,024,518) | - | (8,739,146) |
| At 30 September 2008 | 12,246,781 | 33,301,944 | (6,839,932) | (1,669,858) | 36,925,008 |
Consolidated statement of changes in equity for the six months ended 30 September 2007
(In US Dollars unless otherwise stated)
|
| Issued capital | Share premium | Retained earnings | Translation reserve | Total equity |
| At 1 April 2007 | 12,246,781 | 33,301,944 | (2,305,483) | 945,822 | 44,189,064 |
| Currency translation adjustments | - | - | - | 4,263,017 | 4,263,017 |
| Profit/(Loss) for the period | - | - | (634,072) | - | (634,072) |
| At 30 September 2007 | 12,246,781 | 33,301,944 | (2,939,555) | 5,208,839 | 47,818,009 |
Great Eastern Energy Corporation Limited
Interim Condensed Statement of Cash Flows for the six months ended 30 September 2008
(In US Dollars unless otherwise stated)
| Six months ended 30 September | ||
| 2008 | 2007 | |
| A. Cash flows from operating activities | ||
| Profit/(loss) after tax | (2,024,518) | (634,072) |
| Adjustments for: | ||
| Finance cost | 13,786 | 15,083 |
| Interest income | (59) | (323,210) |
| Depreciation and amortization | 229,685 | 52,534 |
| Foreign exchange loss/(gain) | 5962 | (5,716) |
| Provisions | 14,126 | (4,181) |
| Operating profit /(loss) before working capital changes | (1,761,018) | (899,562) |
| (Increase)/decrease in debtors | (1,958,475) | (1,023) |
| (Increase)/decrease in other receivables/prepayments | 118,037 | (2,848,082) |
| Increase / (decrease) in payables and accruals | 3,144,234 | (117,037) |
| Net cash flows from operating activities | (457,222) | (3,865,704) |
| B. Cash flows from investing activities | ||
| Cash paid for purchase of property, plant and equipment | (1,457,284) | (486,918) |
| Cash paid for capital work in progress (including well development cost) | (14,472,509) | (5,175,092) |
| Cash paid for purchase of intangible asset | (18,447) | (3,010) |
| Cash paid for purchase of leasehold land | - | (58,799) |
| Proceeds/(payment) on encashment/(acquisitions) of short term bank deposits (Net) | 384,035 | (629,782) |
| Interest received from investments | 59 | 323,210 |
| Net cash flows from investing activities | (15,564,146) | (6,030,391) |
| C. Cash flows from financing activities | ||
| Proceeds from Borrowings | 15,929,109 | - |
| Interest expense | (13,786) | (15,083) |
| Net Cash flows from financing activities | 15,915,323 | (15,083) |
| Net changes in cash and cash equivalents (A+B+C) | (106,045) | (9,911,178) |
| Cash and Cash equivalents as on 1 April | 2,102,196 | 11,032,180 |
| Foreign currency translation difference on cash balances | (302,729) | 789,466 |
| Cash and Cash equivalents as on 30 September | 1,693,422 | 1,910,468 |
a) Cash and cash equivalents are same as that disclosed under note 3.
Notes to Interim Condensed Financial Information
1. CORPORATE INFORMATION
Great Eastern Energy Corporation Limited ('GEECL' or 'the Company') is a public limited company incorporated in India with its registered office at Fathepur, G. T. Road, Asansol, West Bengal, India.
The Company was incorporated in 1992 to explore, develop, distribute and market Coal Bed Methane or CBM in India. GEECL originally entered into a license agreement in December 1993 with Coal India Limited (CIL) for exploration and development of CBM over an area of approximately 210 Sq. km (approximately 52,000 acres) in the Raniganj coalfields of West Bengal (the Block). Following the transfer of CBM administration in India from the Ministry of Coal to the Ministry of Petroleum and Natural Gas (MoPNG), the Company entered into the existing CBM production sharing contract (PSC) on 31 May 2001 for the Block.
The PSC is effective from 9 November 2001 as a result of the granting by Government of West Bengal of the Petroleum Exploration License on the same date and provides for a five year initial assessment and market development phase, followed by a five year development phase and then a twenty-five year production phase, extendable with the approval of the Government of India (GOI). The PSC also provides that the Company can produce gas during any phase with the prior approval of the GOI. GEECL currently is in the development phase, with dewatering and production underway in 18 producing wells out of 23 production wells. In the second phase of drilling campaign of 30 new wells, company has drilled 10 wells which are under various stage of completion. The Company has laid 29.4 km of the MDPE pipeline which connects wells to the gas gathering station, and 9.7 km of the steel pipeline which will ultimately connect the gas gathering station to the central gathering station in Asansol. The Company has also laid 8.5 km of the steel pipeline which will connect industrial customers from central gathering station.
The Company has its primary listing on Alternative Investment Market.
This condensed interim financial information was approved for issue on 10 December 2008. Condensed interim financial statements for the period ended 30 September 2008 has not been audited.
Basis of preparation
The interim condensed financial information for the six months period ended 30 September 2008 have been prepared in accordance with IAS-34 Interim Financial Reporting.
The interim condensed financial information do not include all the information and disclosures required in the annual financial information, and should be read in conjunction with the Company's annual audited financial information as at 31 March 2008.
The financial information are presented in US Dollar ('$') and all values are rounded to the nearest US dollar except when otherwise indicated.
Significant Accounting Policies and estimates
The accounting polices adopted in preparation of the interim condensed financial information are consistent with those followed in the preparation of the Company's annual audited financial information for the year ended 31 March 2008.
a. Standard effective for period ended 30 Sept 2008
The following standards, amendments and interpretations to published standards are mandatory for accounting periods beginning on or after 1 January 2008 but they are not relevant to the Company's operations:
IFRIC 12, 'Service concession arrangements'
b. Standards, amendments and interpretations effective in the period ended 30 Sept 2008 but not relevant
IFRIC 14, 'IAS 19 - The limit on a defined benefit asset, minimum funding requirements and their interaction', provides guidance on assessing the limit in IAS 19 on the amount of the surplus that can be recognised as an asset. It also explains how the pension asset or liability may be affected by a statutory or contractual minimum funding requirement. This interpretation does not have any impact on the Company's financial statements, as the Company has no statutory or contractual minimum funding requirements
c. Standards, amendments and interpretations to existing standards not yet effective in the period ended 30 September 2008 which have not been early adopted by the Company
The following standards, amendments and interpretations to existing standards have been published and are mandatory for Company's accounting periods beginning on or after 1 April 2008 or later periods, but Company has not early adopted them:
IAS 1 (Revised), 'Presentation of financial statements' (effective from 1 January 2009). The revised standard will prohibit the presentation of items of income and expenses (that is, 'non-owner changes in equity') in the statement of changes in equity, requiring 'non-owner changes in equity' to be presented separately from owner changes in equity. All non-owner changes in equity will be required to be shown in a performance statement, but entities can choose whether to present one performance statement (the statement of comprehensive income) or two statements (the income statement and statement of comprehensive income). Where entities restate or reclassify comparative information, they will be required to present a restated balance sheet as at the beginning comparative period in addition to the current requirement to present balance sheets at the end of the current period and comparative period. The Company will apply IAS 1 (Revised) from 1 January 2009. It is likely that both the income statement and statement of comprehensive income will be presented as performance statements.
IAS 1 (Amendment), 'Presentation of financial statements' (effective from 1 January 2009). The amendment is part of the IASB's annual improvements project published in May 2008. The amendment clarifies that some rather than all financial assets and liabilities classified as held for trading in accordance with IAS 39, 'Financial instruments: Recognition and measurement' are examples of current assets and liabilities respectively. The Company will apply the IAS 39 (Amendment) from 1 July 2009. It is not expected to have an impact on the Company's financial statements.
IAS 19 (Amendment), 'Employee benefits' (effective from 1 January 2009). The amendment is part of the IASB's annual improvements project published in May 2008.
- The amendment clarifies that a plan amendment that results in a change in the extent to which benefit promises are affected by future salary increases is a curtailment, while an amendment that changes benefits attributable to past service gives rise to a negative past service cost if it results in a reduction in the present value of the defined benefit obligation.
- The definition of return on plan assets has been amended to state that plan administration costs are deducted in the calculation of return on plan assets only to the extent that such costs have been excluded from measurement of the defined benefit obligation.
- The distinction between short term and long term employee benefits will be based on whether benefits are due to be settled within or after 12 months of employee service being rendered.
- IAS 37, 'Provisions, contingent liabilities and contingent assets, requires contingent liabilities to be disclosed, not recognised. IAS 19 has been amended to be consistent.
The Company will apply the IAS 19 (Amendment) from 1 January 2009.
IAS 23 (Amendment), 'Borrowing costs' (effective from 1 January 2009). The amendment is part of the IASB's annual improvements project published in May 2008. The definition of borrowing costs has been amended so that interest expense is calculated using the effective interest method defined in IAS 39 'Financial instruments: Recognition and measurement'. This eliminates the inconsistency of terms between IAS 39 and IAS 23. The Company will apply the IAS 23 (Amendment) prospectively to the capitalisation of borrowing costs on qualifying assets from 1 January 2009.
IAS 27 (Revised), 'Consolidated and separate financial statements', (effective from 1 July 2009). The revised standard requires the effects of all transactions with non-controlling interests to be recorded in equity if there is no change in control and these transactions will no longer result in goodwill or gains and losses. The standard also specifies the accounting when control is lost. Any remaining interest in the entity is re-measured to fair value, and a gain or loss is recognised in profit or loss. The Company will apply IAS 27 (Revised) prospectively to transactions with non-controlling interests from 1 January 2010.
IAS 28 (Amendment), 'Investments in associates' (and consequential amendments to IAS 32, 'Financial Instruments: Presentation', and IFRS 7, 'Financial instruments: Disclosures') (effective from 1 January 2009). The amendment is part of the IASB's annual improvements project published in May 2008. An investment in associate is treated as a single asset for the purposes of impairment testing. Any impairment loss is not allocated to specific assets included within the investment, for example, goodwill. Reversals of impairment are recorded as an adjustment to the investment balance to the extent that the recoverable amount of the associate increases. The Company will apply the IAS 28 (Amendment) to impairment tests related to investments in subsidiaries and any related impairment losses from 1 January 2009.
IAS 32 (Amendment), 'Financial instruments: Presentation', and IAS 1 (Amendment), 'Presentation of financial statements' - 'Puttable financial instruments and obligations arising on liquidation' (effective from 1 January 2009). The amended standards require entities to classify puttable financial instruments and instruments, or components of instruments that impose on the entity an obligation to deliver to another party a pro rata share of the net assets of the entity only on liquidation as equity, provided the financial instruments have particular features and meet specific conditions. The Company will apply the IAS 32 and IAS 1(Amendment) from 1 January 2009. The expected impact is still being assessed in detail by the management.
IAS 36 (Amendment), 'Impairment of assets' (effective from 1 January 2009). The amendment is part of the IASB's annual improvements project published in May 2008. Where fair value less costs to sell is calculated on the basis of discounted cash flows, disclosures equivalent to those for value-in-use calculation should be made. The Company will apply the IAS 28 (Amendment) and provide the required disclosure where applicable for impairment tests from 1 January 2009.
IAS 39 (Amendment), 'Financial instruments: Recognition and measurement' (effective from 1 January 2009). The amendment is part of the IASB's annual improvements project published in May 2008.
- This amendment clarifies that it is possible for there to be movements into and out of the fair value through profit or loss category where a derivative commences or ceases to qualify as a hedging instrument in cash flow or net investment hedge.
- The definition of financial asset or financial liability at fair value through profit or loss as it relates to items that are held for trading is also amended. This clarifies that a financial asset or liability that is part of a portfolio of financial instruments managed together with evidence of an actual recent pattern of short-term profit taking is included in such a portfolio on initial recognition.
- The current guidance on designating and documenting hedges states that a hedging instrument needs to involve a party external to the reporting entity and cites a segment as an example of a reporting entity. This means that in order for hedge accounting to be applied at segment level, the requirements for hedge accounting are currently required to be met by the applicable segment. The amendment removes the example of a segment so that the guidance is consistent with IFRS 8, 'Operating segments', which requires disclosure for segments to be based on information reported to the chief operating decision-maker.
- When re-measuring the carrying amount of a debt instrument on cessation of fair value hedge accounting, the amendment clarifies that a revised effective interest rate (calculated at the date fair value hedge accounting ceases) are used.
The Company will apply the IAS 39 (Amendment) from 1 July 2009. It is not expected to have an impact on the Company's income statement.
On 13 October 2008, the IASB agreed to amend IAS 39 "Financial instruments; recognition and measurement", to allow the reclassification of certain financial assets previously classified as held for trading or available for sale to another category under limited circumstances. Various disclosures are required where a reclassification has been made. Derivatives and assets designated as "at fair value through profit or loss" under the fair value option are not eligible for this reclassification. Given the urgency of the issue due process has been suspended and there will be no comment period. The amendment has an effective date of 1 July 2008. It is not expected to have an impact on the Company's financial statement.
IFRS 2 (Amendment), 'Share-based payment' (effective from 1 January 2009). The amended standard deals with vesting conditions and cancellations. It clarifies that vesting conditions are service conditions and performance conditions only. Other features of a share-based payment are not vesting conditions. These features would need to be included in the grant date fair value for transactions with employees and others providing similar services; they would not impact the number of awards expected to vest or valuation thereof subsequent to grant date. All cancellations, whether by the entity or by other parties, should receive the same accounting treatment. The Company will apply IFRS 2 (Amendment) from 1 January 2009. The expected impact is still being assessed in detail by the management.
IFRS 3 (Revised), 'Business combinations' (effective from 1 July 2009). The revised standard continues to apply the acquisition method to business combinations, with some significant changes. For example, all payments to purchase a business are to be recorded at fair value at the acquisition date, with contingent payments classified as debt subsequently re-measured through the income statement. There is a choice on an acquisition-by-acquisition basis to measure the non-controlling interest in the acquiree either at fair vale or at the non-controlling interest's proportionate share of the acquiree's net assets. All acquisition-related costs should be expensed. The Company will apply IFRS 3 (Revised) prospectively to all business combinations from 1 January 2010.
There are a number of minor amendments to IFRS 7, 'Financial instruments: Disclosures', IAS 8, 'Accounting policies, changes in accounting estimates and errors', IAS 10, 'Events after the reporting period', IAS 18, 'Revenue' and IAS 34, 'Interim financial reporting', which are part of the IASB's annual improvements project published in May 2008 (not addressed above). These amendments are unlikely to have an impact on the Company's accounts and have therefore not been analysed in detail.
IFRIC 16, 'Hedges of a net investment in a foreign operation' (effective from 1 October 2008). IFRIC 16 clarifies the accounting treatment in respect of net investment hedging. This includes the fact that net investment hedging relates to differences in functional currency not presentation currency, and hedging instruments may be held anywhere in the Company. The requirements of IAS 21, 'The effects of changes in foreign exchange rates', do apply to the hedged item. The Company will apply IFRIC 16 from 1 January 2009. It is not expected to have a material impact on the Company's financial statements.
d. (d) Standards, amendments and interpretations to existing standards that are not yet effective and not relevant for the Company's operations
The following interpretations to existing standards have been published that are mandatory for the Company's accounting periods beginning on 1 July 2008 or later periods but are not relevant for the Company's operations:
IFRS 1 (Amendment) 'First time adoption of IFRS', and IAS 27 'Consolidated and separate financial statements' (effective from 1 January 2009). The amendments deal with separate financial statements. The amended standard allows first-time adopters to use a deemed cost of either fair value or the carrying amount under previous accounting practice to measure the initial cost of investments in subsidiaries, jointly controlled entities and associates in the separate financial statements. The amendment also removes the definition of the cost method from IAS 27 and replaces it with a requirement to present dividends as income in the separate financial statements of the investor.
IFRS 5 (Amendment), 'Non-current assets held-for-sale and discontinued operations' (and consequential amendment to IFRS 1, 'First-time adoption') (effective from 1 July 2009). The amendments deal with classification of subsidiary's assets and liabilities if a partial disposal or sale plan resulting in loss of control.
IAS 28 (Amendment), 'Investments in associates' (and consequential amendments to IAS 32, 'Financial Instruments: Presentation', and IFRS 7, 'Financial instruments: Disclosures') (effective from 1 January 2009). The amendment will not have any impact on the Company's financial statements as the Company has no investments in associates.
IAS 38 (Amendment), 'Intangible assets' (effective from 1 January 2009). The amendment is part of the IASB's annual improvements project published in May 2008. A prepayment may only be recognised in the event that payment has been made in advance of obtaining right of access to goods or receipt of services. This means that an expense will be recognised for shoe mail order catalogues when the Company has access to the catalogues and not when the catalogues are distributed to customers, as is the Company's current accounting policy. This amendment is not applicable to the Company as the Company has not entered into any such transactions
IFRS 8, 'Operating segments', (effective from 1 January 2009) replaces IAS 14, 'Segment reporting', and aligns segment reporting with the requirements of the US standard SFAS 131, 'Disclosures about segments of an enterprise and related information'. The new standard requires a 'management approach', under which segment information is presented on the same basis as that used for internal reporting purposes. This standard does not have an impact on the Company's financial statements as none of the Company companies' securities are listed and the Company has chosen not to adopt this standard.
IFRIC 12, 'Service concession arrangements' (effective from 1 January 2008). IFRIC 12 applies to contractual arrangements whereby a private sector operator participates in the development, financing, operation and maintenance of infrastructure for public sector services. IFRIC 12 is not relevant to the Company's operations as none of the Company's companies have entered into such arrangements.
IFRIC 13, 'Customer loyalty programmes' (effective from 1 July 2008). IFRIC 13 clarifies that where goods or services are sold together with a customer loyalty incentive (for example, loyalty points or free products), the arrangement is a multiple-element arrangement and the consideration receivable from the customer is allocated between the components of the arrangement by using fair values. IFRIC 13 is not relevant to the Company's operations as none of the Company entities operate any loyalty programmes.
3. Cash and Cash equivalents
| As at | ||
| 30 September 2008 | 31 March 2008 | |
| Cash and bank and in hand | 152,021 | 1,319,978 |
| Short Term Deposits | 1,541,401 | 782,219 |
| 1,693,422 | 2,102,197 | |
Cash and Cash Equivalents exclude $170,430 (31 March 2008: $463,822) which are restricted deposits with less than three months maturity. These constitute margin money deposits against letters of credit issued by banks of behalf of the company. Restrictions on such deposits are released on the expiry of terms of respective arrangements. These are included in restricted deposits.
4. Restricted deposits with bank
Restricted deposits with bank represent margin money deposits against letters of credit issued by banks on behalf of the Company. Restrictions on such deposits including those considered as part of Cash and Cash equivalents (refer note 3 above) are released on the expiry of the terms of the respective arrangements.
5. Prepayments
Prepayments include an amount of $20,937 (31 March 2008: $24,589) on account of advance rent to related party YKM Holdings Pvt. Ltd.
6. Income tax
There is no current tax liability in view of losses for the period. The Company has not carried forward the losses incurred till 31 March 2005, however from the year ended 31 March 2006 the Company has carried forward losses for set-off against future taxable profits. Further as the Company will be enjoying a tax holiday period in accordance with the Income Tax Act in India, no deferred tax assets has been recognized during this period.
7. Segment reporting
The Company operates in a single geographical segment, being India, and in a single business segment, being the production and sale of gas. Hence, no separate segment information has been furnished herewith.
8. Property, plant and equipment
During the six months ended 30 September 2008, the Company has capitalised six wells and acquired cascades, generator sets, dispensers and other machinery. There were no disposals during the period.
| As at September 30 | ||
| 2008 | 2007 | |
| Opening net book balance as on 1 April | 16,818,701 | 1,181,024 |
| Additions [including capitalisation of 6 wells (refer note 11)] | 8,461,876 | 2,508,499 |
| Depreciation | (330,129) | (67,921) |
| Foreign exchange fluctuation on translation | (3,219,764) | 183,201 |
| Closing net book balance as on 30 September | 21,730,684 | 3,804,803 |
9. Intangible assets
Intangible assets comprises of cost of SAP implementation and cost of acquisition of rights for gas exploration. The amortization during six months ended 30 September 2008 charged to statement of income amounts to $17,276 (30 September 2007: $21,440). The Company has acquired computer software during six months ended 30 September 2008 capitalised as intangible of $18,447 (30 September 2007: $3,010).
Cost of SAP implementation is being amortized over a period of five years which is the useful life of such software as assessed by the management. Gas Exploration rights are being amortized over a period of 25 years commencing from the year when commercial production has started.
10. Capital work-in-progress
During the six months period ended 30 September 2008, the Company has drilled five new wells which are under various stages of completion. During the period, the Company has incurred $14,592,025 (30 September 2007: $5,210,897) as additions to capital work-in-progress.
| As at 30 September | ||
| 2008 | 2007 | |
| Opening net book balance as on 1 April | 44,477,852 | 31,913,627 |
| Additions | 14,592,025 | 5,210,897 |
| Capitalisation | (7,004,592) | (2,020,258) |
| Exchange Fluctuation | (7,278,445) | 3,181,705 |
| Closing net book balance as on 30 September | 44,786,840 | 38,285,971 |
11. Well Capitalisation
a) During the six months period ended 30 September 2008 the Company has capitalized six wells amounting to $7,004,592 (2007-08: Nine wells $11,241,220). All exploration cost involved in drilling, cementing, fracturing and drilling of exploratory core holes are initially capitalised as Capital work-in-progress till the time these are ready for commercial use.
b) Depletion: Commercially producing wells are depleted using unit of production method based on related proved reserves. Proved reserves of gas per well are technically re-assessed in house every year at the end of period/year based on technical data available.
12. Retirement benefits
The Company has two post employment unfunded benefit plans, namely gratuity and superannuation and one state administered provident fund, which is a funded defined contribution plan. Gratuity and superannuation are defined benefit schemes. The Company has made provision for gratuity and superannuation benefits on the basis of actuarial valuation.
13. Leases and arrangements containing lease
The Company has entered into Equipment lease and other arrangements with various contractors for development of its wells, whereby the specific assets leased by the contractors are used only at the company's well development site and such arrangements convey the right to use the assets. Some of these arrangements contain lease as per IFRIC 4. The significant terms and arrangements are described below.
a. The company has entered into arrangements with Mitchell Drilling International PTY Limited for logging and wiring of production wells and core holes respectively. The terms of contract include comprehensive payment rates to include both lease and non - lease elements which are not separable. The arrangement is cancellable at the option of either party to the contract.
b. Work Over Rig has been taken on lease from Aakash Exploration Services Pvt. Ltd, for initial period of one year on 12 June 2008, which can be extended for another six months with the mutual consent of both the parties. The arrangements have terms describing the operating rate per hour, the standby rate per hour, stack rate and the repair rate per hour.
c. For Cementing and fracturing services, equipment and personnel from Schlumberger Asia Services limited have been hired. The arrangement is cancellable at the option of either party to contract.
The above mentioned arrangements include non-lease elements also and are being treated as well development costs along with other costs. The segregation of lease and non- lease elements under some of the arrangements is not possible. The details of total expenses during the six months period ended 30 September 2008 are as follows:
| Nature | As at 30 Sep 2008 | As at 30 Sep 2007 |
| Towards Minimum Lease Payments;- | ||
| Cementing and Fracturing Charges | 3,329,049 | 229,100 |
| Logging and Wire Line Charges | 359,462 | - |
| Towards lease payments under arrangements where lease and non - lease payments are combined | ||
| Drilling Charges (including core hole drilling) | 20,093 | |
| Work Over Expenses | 114,016 | - |
d. The Company has taken a building on finance lease, the net carrying amount of which is $250,257 (30 September 2007: $293,894). The entire consideration has been paid during the previous year 2005-06 and there are no future lease rentals payable.
e. The Company has acquired a property under an operating lease for an initial period of three years renewable by mutual consent on mutually agreeable terms. The lease is also cancellable at the option of either party by service of appropriate notice. The lease rental of $56,931 (30 September 2007: $50,511) incurred has been charged to profit and loss account.
f. The company has acquired compressors on operating lease, which is cancellable subject to certain conditions. The lease period is of two years and is further renewable for the same period of time. The lease rental of $18,798 (30 September 2007: $12790) has been paid during the period.
g. The company has taken land on lease on which the wells are being developed. The lease period ranges from 30-99 years. The entire amount of consideration as lease premium has been paid upon acquisition. The premium paid as on 30 September 2008 is $174,261 (30 September 2007: $58,799).
14. Commitments and Contingencies
a) MR associates filed the case against company at local court of Asansol for non payment of his bills along with interest. MR associates did civil work at Company's site. The said contractor did not complete the work and whatever work was done it was not up to mark but kept on raising bills. Company refused to return the security deposit and also refused to pay extra amount demanded by the contractor. Total claim by Contract as on 30 September 2008 is $14,824.
b) D.S. Steel and others filed a money suit against our Company before the Civil Judge, Asansol for recovery for non-payment of bills, along with an application for temporary injunction restraining our Company from alienating or disposing off the properties/sites developed by D.S. Steel for our Company. The disputed bills pertain to a work order awarded by our Company to D.S. Steel for developing wells and enabling drilling to extract methane gas from certain sites. D.S. Steel has alleged that they executed the works as per the work orders but were not paid the requisite amount against the bills raised. Total claim by Contract as on 30 September 2008 is $156,785.
There are no new contingencies existing for the Company, other than those mentioned above arising out of activities and operations during the six months period ended 30 September 2008.
15. Capital Commitments
At 30 September 2008, the Company has following Capital Commitments.
| As at 30 September | ||
| 2008 | 2007 | |
| Capital Assets | 15,435,345 | 8,750,868 |
16. Key business developments
a. During the period the Company signed an agreement with New Tech Engineering L.P. under which they provide advice, assistance and services for the operation, maintenance and technical management of our exploration and drilling activities. This agreement is for a term of three years, and is renewable upon the agreement of both parties. Under this agreement, New Tech oversees drilling and production operations, and works in conjunction with various other third party service providers engaged by the company for other activities.
b. During the period the Company has awarded a contract to Schlumberger Asia Services Limited to provide a crew and equipment to carry out coil tubing services to facilitate fracturing operations.
c. During the period the Company has awarded a contract to Ario Brothers for laying approximately 25km steel pipeline with additional spur lines from Central gathering station to Barakar for delivery of gas to industrial customers.
d. During the period the Company has awarded the contract to Aakash Exploration Services Private Limited to lease a work over rig and provide crew members to operate the rig. This rig is used to maintain the wells.
e. The Company has proposed to enter into Indian capital market with fresh issue of 46,280,501 shares and secondary sale of 45,000,000 shares. The Company is in the process of filing the Draft Red Herring Prospectus (DRHP) with SEBI.
17. Events occurring after Balance sheet date
There is no material events occurred after the interim financial ended 30 September 2008.
18. Foreign Currency Translation
The Company has converted Indian Rupees ('INR') balances to $ equivalent balances on the following basis:
o as at 30 September 2007: $1 = INR 39.74
o as at 30 September 2008: $1 = INR 46.94
o as at 31 March 2008: $1 = INR 39.97
o For the six months period ended 30 September 2008: $1 = INR 42.77
o For the six months period ended 30 September 2007: $1 = INR 40.86