NAUT.L Regulatory News (NAUT)

GLOBAL ENERGY DEVELOPMENT PLC

(the "Company" or "Global")

AUDITED FINAL RESULTS FOR THE YEAR ENDED 31 DECEMBER 2014

Global Energy Development PLC, the Latin America focused petroleum exploration, development and production company (AIM: GED) with operations in Colombia, announces its audited final results for the year ended 31 December 2014.

2014 Highlights:

· Completed the sale of the rights and obligations of the Company's Llanos Basin properties in Colombia, South America, through the sale of the entire issued share capital of the Company's wholly-owned subsidiary, Colombia Energy Development Company, ("CEDCO") for gross cash consideration of $50 million, net of purchase price adjustments

· Eliminated all outstanding debt obligations

· As at 31 December 2014:

• Cash and cash equivalents: $41.2 million

• Working capital: $38.0 million

• Debt balance: nil

• Current ratio: 8.7 to 1

· Dramatically lower oil prices as at 31 December 2014 led to the full impairment of $11.2 million of the carrying value of the Company's Bocachico Contract oil assets at year-end 2014

· Preserving remaining contract acreage in Colombia (Bolivar and Bocachico Contract areas) with no mandatory contract obligations during low oil pricing environment

Stephen C. Voss, Global's Managing Director, commented, "In the current low oil price environment and capital-tight economy, the Company has a robust cash position, a streamlined overhead structure and no mandatory contract or debt obligations. While preserving our remaining oil reserves and acreage in Colombia until prices rebound, we are in a strong position to watch for and pursue strategic opportunities in this precarious sector."

For further information please contact:

Notes to Editors:

The Company's shares have been traded on AIM, a market operated by the London Stock Exchange, since March 2002 (AIM: GED). The Company's portfolio includes exploration and developmental drilling opportunities in Colombia, South America. The Company currently holds two operated contracts in Colombia.

Proven and probable oil and gas reserves are estimated quantities of commercially producible hydrocarbons which the existing geological, geophysical and engineering data show to be recoverable in future years from known reservoirs. The proved reserves reported by Ralph E. David, Inc., ("RED"), an independent petroleum engineering firm, conform to the definition approved by the Society of Petroleum Engineers ("SPE") and the World Petroleum Council ("WPC"). The probable and possible reserves reported by RED conform to definitions of probable and possible reserves approved by the SPE/WPC using the deterministic methodology. The information contained within this announcement has been reviewed by RED. The information contained within this announcement has been reviewed by Mr. Stephen Voss, a Director of the Company, for the purpose of the Guidance Note for Mining, Oil and Gas Companies issued by the London Stock Exchange in respect of AIM companies which outlines standards of disclosure for natural resource projects. Mr. Voss is a Registered Professional Engineer in Texas and has been a Member of SPE for 45 years.

Forward-looking statements

This release may include statements that are, or may be deemed to be, "forward-looking statements". These forward-looking statements can be identified by the use of forward-looking terminology, including the terms "believes", "estimates", "plans", "projects", "anticipates", "expects", "intends", "may", "will" or "should" or, in each case, their negative or other variations or comparable terminology, or by discussions of strategy, plans, objectives, goals, future events or intentions. These forward-looking statements include all matters that are not historical facts. They appear in a number of places throughout this release and include, but are not limited to, statements regarding the Group's intentions, beliefs or current expectations concerning, among other things, the Group's results of operations, financial position, liquidity, prospects, growth, strategies and expectations of the industry. By their nature, forward-looking statements involve risk and uncertainty because they relate to future events and circumstances. Forward-looking statements are not guarantees of future performance and the development of the markets and the industry in which the Group operates may differ materially from those described in, or suggested by, any forward-looking statements contained in this release. In addition, even if the development of the markets and the industry in which the Group operates are consistent with the forward-looking statements contained in this release, those developments may not be indicative of developments in subsequent periods. A number of factors could cause developments to differ materially from those expressed or implied by the forward-looking statements including, without limitation, general economic and business conditions, industry trends, competition, commodity prices, changes in law or regulation, currency fluctuations (including the US dollar), the Group's ability to recover its reserves or develop new reserves, changes in its business strategy, political and economic uncertainty. Save as required by law or the AIM Rules for Companies, the Company is under no obligation to update the information contained in this release.

Past performance cannot be relied on as a guide to future performance.

Chairman's Statement

In December 2014, the Group disposed of its rights and obligations of its Llanos Basin Contract areas (Rio Verde, Alcaravan and Los Hatos) through the sale of the entire issued share capital of its wholly-owned subsidiary, Colombia Exploration and Development Company ("CEDCO") for gross cash consideration of $50 million, net of approximately $1.0 million adjusted for CEDCO's operating income received and capital expenditures spent by the Group during the period between the transaction's effective date (1 August 2014) and the closing date in December 2014. Per the share purchase agreement, the purchaser of CEDCO may send their final proposed adjustments to the purchase price following 90 days after the closing date. In February 2015, the Group received the purchaser's adjustment statement with proposed additional purchase price adjustments totalling $1.5 million. The Group is reviewing the proposed adjustments, and in accordance with the share purchase agreement, will pay allowable adjustments as agreed upon by the parties. The Llanos properties had historically provided consistent cash flow for the Group, but the downtime of certain of its producing wells was continuing to increase as the producing properties declined in production. The Group had already taken numerous steps over the past few years to reduce operational costs. Consequently the Directors believe their decision to monetise the Llanos properties and relinquish the related plugging and abandonment liabilities of these properties was in the best interests of shareholders.

During 2014, the Group's actions for the development of its Middle Magdalena contract areas (Bolivar and Bocachico) included the hydraulic-fracturing of the Simiti formation in its existing Catalina #1 well, located in the Bolivar contract area of the Northern Middle Magdalena Valley in Colombia. Flowback of the well commenced at low rates after the injection of significant volumes of fracture fluids. After efforts to facilitate fracture fluid recovery were unsuccessful, the Group temporarily shut in the well in July 2014. Also during 2014, the Group closed two separate farm-out agreements covering the Bolivar and Bocachico contract areas which provided the Group's farm-out partner a 50 per cent. interest in the respective areas in exchange for the payment of certain work commitments and programmes as set out in the agreements, together with gross cash payments of $5.0 million in respect of the Bolivar agreement and $1.0 million in respect of the Bocachico agreement. The re-entry of the Catalina #1 well was financed entirely by the Group's farm-out partner.

Subsequent to the re-entry of the Catalina #1 and with the beginning of the decline in oil prices during the second half of 2014, the Group turned its focus and efforts to completing a sale of its Llanos properties. Following months of due diligence and negotiation, the Group entered into the conditional share purchase agreement for the disposal of CEDCO in October 2014 with the closing of the transaction occurring in December 2014. As a result of the Group's focus and efforts on the sale of CEDCO coupled with the decline of oil prices, the Group chose not to pursue exploration or development projects on its Bolivar and Bocachico contract areas during the second half of 2014.

Given the significant decrease in oil prices, in December 2014, the Group's farm-out partner elected to exercise its option under the farm-out agreements to terminate and release their rights and obligations with respect to the Group's Bolivar and Bocachico Contracts. All future obligations by the Group's farm-out partner to undertake the future funding of work programmes for either contract area, including an obligation to pay all future costs and expenses incurred with respect to the proposed operations, were released with effect from 12 December 2014 in exchange for the return of the 50 per cent interest in these contract areas.

The decrease in oil prices also affected the Group's oil reserves included in its reserve report at 31 December 2014, which was produced by an independent petroleum engineering firm. Lower oil benchmark pricing at 31 December 2014 of $57.33 per barrel ("bbl") was used to price the Group's year-end oil reserves (2013: $109.95 per bbl). The lower oil prices resulted in a reduction in the estimated quantity of proved and probable reserves and in the estimated future net cash flows expected to be generated from the Group's Bolivar and Bocachico contract areas. In addition, the low oil prices caused the heavy oil reserves within the Bocachico contract area to be uneconomic at 31 December 2014 which required the Group to fully impair the carrying value of its Bocachico contract oil assets within the Group's financial statements.

Whilst 2014 did not bring about production success at Bolivar from the re-entry of the Catalina #1 well, the monetisation of the Llanos properties proved to be a timely and strategic divestiture in the face of declining oil prices. Immediately following the sale of the Llanos properties, the Group extinguished all remaining debt obligations. The Company has a strong cash balance, no outstanding debt obligations and proven oil reserves in Colombia, South America. In addition, the Company has no mandatory contractual obligations with its Middle Magdalena contract areas. At this time, the Company is poised and financially liquid while other companies, with much higher market-caps in comparison to ours, may be struggling in this low oil price environment. With the outlook for oil pricing uncertain for 2015, the Company continues to streamline its overhead structure, preserve its acreage in Colombia and review alternatives to create value for our shareholders.

Mikel Faulkner

Chairman

9 March 2015

Managing Director's Review of Operations

Financial overview

On 5 December 2014, the Group completed the disposal of the Llanos properties through the sale of CEDCO, and consequently the Llanos properties have been treated as a discontinued operation for reporting purposes. The results for the period to the effective date of disposal (1 August 2014) together with the loss on disposal, have been shown as loss from discontinued operations, net of tax, in the statement of comprehensive income. As required by accounting standards, the comparative figures for the year ended 31 December 2013 have also been restated to show the discontinued operations separately from continuing operations.

Revenue from continuing operations during 2014 related solely to production from the Company's Torcaz #2 well located in the Bocachico contract area. During 2013, continuing operations included production from the Torcaz #2 well as well the Olivo #1 well located in the Bolivar contract area. Turnover from continuing operations declined to $689,000 in 2014 (2013: $1.5 million) due to lower realised average oil pricing of $64 per barrel ("bbl") (2013: $90 per bbl) as well as lower production volumes resulting from the shut-in of the Olivo #1 well during late 2013. Net production volumes from continuing operations declined by 19 per cent with 10,772 bbls sold in 2014 (2013: 13,262 bbls).

Cost of sales decreased by 13 per cent to $1.7 million during the year (2013: $1.9 million) due to lower production volumes. Based on lower turnover, the gross loss increased to $990,000 from continuing operations in 2014 (2013: $405,000). Administrative expenses from continuing operations increased to $3.6 million during 2014 (2013: $2.7 million) due primarily to higher allocations of operations and technical personnel salaries to administrative expense during the second half of 2014. Salary costs for technical and operational personnel can only be capitalised when their related time is clearly allocated to the development of a qualifying asset. During the second half of the year, there were fewer ongoing operational and development projects while the focus of the Group was to close the sale of the Llanos properties. In December 2014, the Group's employee count declined dramatically subsequent to the sale of CEDCO, and the Group anticipates lower salary expense and administrative costs in 2015.

The Group performed its annual impairment test as at 31 December 2014. The Group considers the relationship between its market capitalisation and its book value, among other factors, when reviewing for indicators of impairment. As at 31 December 2014, the market capitalisation of the Group was below the book value of its equity, indicating a potential impairment of the assets of the Company's two continuing operating segments (the Bolivar contract area and the Bocachico contract area). Low oil prices caused the heavy oil reserves within the Bocachico area to be uneconomic at 31 December 2014. The significant decline in oil prices at 31 December 2014 and the resulting uneconomic nature of the proved and probable reserves within the Bocachico area required the Group to fully impair the $11.2 million of carrying value of its Bocachico area oil assets within its consolidated financial statements at 31 December 2014. Under current accounting standards, the Group may reverse such impairment in the future if there is an indication that the previously recognised impairment loss no longer exists or has decreased. Management did not identify an impairment for the Bolivar contract area as at 31 December 2014. Consequently, the operating loss from continuing operations before tax and interest expense increased to $15.5 million during 2014 from $2.4 million in the prior year.

During 2014, the Group transferred its Bolivar and Bocachico contracts from its wholly-owned subsidiary, CEDCO, to new wholly-owned Colombian branches resulting in a decrease in deferred tax expense due to the revaluation of tax balances resulting from this transfer of assets and liabilities at the Colombian branch level. Overall, the Group's net tax benefit related to continuing operations was $2.3 million (2013: $1.1 million expense), resulting in a net loss from continuing operations of $15.0 million (2013: $5.8 million).

The Group generated $6.3 million of cash from operations before tax in 2014 (2013: $11.6 million). Capital expenditures of $7.5 million relate primarily to the completion of the Catalina #1 well test and improvements to surface facilities at the Group's Torcaz field. During 2014, the Group received a non-refundable payment of $6.2 million from its farm-out partner for reimbursement of the costs for the Catalina #1 well test, as this well test was to be fully funded by the farm-out partner under the previously existing farm-out agreement. The Group also received gross non-refundable payments totalling $6.0 million (net proceeds of $3.6 million after fees) from the establishment of the Bolivar and Bocachico farm-out agreements. In December 2014, the Group's farm-out partner elected to exercise its option to terminate both farm-out agreements.

Upon closing of the sale of CEDCO, the Group received net cash proceeds of $49 million. The Group extinguished all of its previously-outstanding debt obligations during 2014 with debt and interest payments totalling $13.9 million. As of 31 December 2014, the Group no longer holds any outstanding debt obligations. The Group ended 2014 with cash in bank of $41.2 million (2013: $3.4 million).

Operational overview

Following the conclusion of the Catalina #1 well test on the Simiti Formation, the well was temporarily shut-in during July 2014. The Group continues to monitor the pressure in the well. Although this well test is considered an economical failure, the Group did gain various technical insights, in particular that high-pressure and high-volume hydraulic fracturing are unlikely to be required in future Bolivar projects due to the naturally-fractured formations within the area.

In the Bocachico contract area, the Group took measures during 2014 to reduce the operational costs for its one producing well, Torcaz #2, by intermittently producing the well in cycles of 18 hours on and 6 hours off to lower diesel fuel costs for the pump. In addition, the Group implemented additional cost-saving measures to reduce operational expenses related to engineering services, boiler fuel, maintenance, and field personnel. The Group has identified other cost-saving measures to implement in 2015 to minimise operating expenses for Torcaz #2. Certain operational costs are fixed and cannot be suspended, such as environmental and social compliance along with security and maintenance of the surface facilities.

During this environment of low oil prices, the Group has currently paused its discretionary capital spending on exploration and developmental drilling on its Bolivar and Bocachico contract areas in Colombia. The Group has no mandatory drilling obligations. Whilst the oil pricing environment remains depressed and uncertain, the Group will maintain its acreage position in Colombia while seeking to implement further cost reduction initiatives to reduce operational and overhead costs.

Conclusion

2015 could prove to be an interesting year for the Company and its shareholders. Other oil companies with much higher production, turnover and market capitalisation tend to also hold high levels of outstanding debt. In the previous high oil pricing environment, cash flows from operations could easily satisfy any ongoing debt requirements for these types of companies. Low oil pricing and the resulting decrease in cash flow from operations coupled with lower oil reserve values can be difficult circumstances to survive during a prolonged amount of time. Our Company is currently structured to allow us to seek alternatives and opportunities to create value for our shareholders during this precarious time in our industry.

Stephen Voss

Managing Director

9 March 2015

Oil Reserves Information (unaudited)

As at 31 December 2014

The reserve estimates shown in this report were developed by Ralph E. Davis Associates, Inc., an independent petroleum engineering firm, and are based on the PRMS joint reserve and resource definitions of the Society of Petroleum Engineers, the World Petroleum Council, the American Association of Petroleum Geologists and the Society of Petroleum Evaluation Engineers consistent with UK reporting purposes. Proved and probable reserve estimates are based on a number of underlying assumptions including oil prices, future costs, oil in place and reservoir performance, which are inherently uncertain. Management uses established industry techniques to generate its estimates and regularly references its estimates against those of joint venture partners or external consultants. However, the amount of reserves that will ultimately be recovered from any field cannot be known with certainty until the end of the field's life.

All reserves are located in Colombia, South America.

Estimated net proved and probable reserves of crude oil

1 The revisions in previous estimates are due primarily to lower oil benchmark prices as at 31 December 2014 as well as the elimination of anticipated improved recoveries through fracture stimulation within the Simiti Formation in the Bolivar Contract area. The lower oil prices at year-end 2014 caused the heavy oil reserves within the Bocachico Contract area to be uneconomic as at 31 December 2014.

2 All proved and probable reserves associated with the Company's Llanos Basin properties were disposed of in December 2014 through the sale of the entire issued share capital of the Company's wholly-owned subsidiary, CEDCO.

PRIMARY FINANCIAL STATEMENTS

Consolidated Statement of Comprehensive Incomefor the year ended 31 December 2014

Consolidated Statement of Changes in Equity

for the year ended 31 December 2014

Consolidated Statement of Financial Positionas at 31 December 2014

Consolidated Statement of Cash Flowsfor the year ended 31 December 2014

ABRIDGED NOTES TO THE PRIMARY FINANCIAL STATEMENTS

For the twelve months ended 31 December 2014

1. Accounting Policies

Basis of preparation

The financial statements of the Group for the twelve months ended 31 December 2014 have been prepared in accordance with International Financial Reporting Standards, International Accounting Standards and Interpretations (collectively IFRS) issued by the International Accounting Standards Board (IASB) as adopted by European Union.

The financial information set out above does not constitute the Company's statutory accounts for the years ended 31 December 2014 or 2013 as defined by section 435 of the Companies Act 2006 but is derived from those accounts. Statutory accounts for 2013 have been delivered to the registrar of companies, and those for 2014 will be delivered in due course. The auditors have reported on those accounts; their reports were (i) unqualified, and (ii) did not include a reference to any matters to which the auditors drew attention by way of emphasis without qualifying their report and (iii) did not contain a statement under section 498 (2) or (3) of the Companies Act 2006 in respect of the accounts.

2. Discontinued operations - CEDCO

On 6 December 2014, the Group closed on the sale of its wholly-owned subsidiary, CEDCO, with an effective date of 1 August 2014. CEDCO held the Company's contract areas (Rio Verde, Alcaravan and Los Hatos contracts) within the Llanos Basin of Colombia, South America. These contracts previously comprised the majority of the Company's oil producing properties. As a result of this disposal, the operations of CEDCO have been treated as discontinued operations for the year ended 31 December 2014. A single amount is shown on the face of the statement of operations comprising the post-tax result of discontinued operations and the post-tax loss recognised on the disposal of CEDCO. The table below provides further details of the amount shown in the statement of operations for CEDCO as of the effective date of 1 August 2014. The statement of operations for the prior year has been restated to show the discontinued operations separately from continuing operations.

1In December 2013, CEDCO received a special requirement letter from DIAN (Colombian tax authority) related to the review of CEDCO's 2010 Colombian income tax return. A special requirement letter is not a tax assessment but a basis for seeking additional information regarding certain tax deductions taken by CEDCO. Under the special requirement letter, the original possible tax effect of losing the deductions under review could have been $6 million with additional penalties upwards of $10 million (if the deductions were challenged by the Group through the courts) for a possible contingency amount of $16 million. During 2014, after filing the Company's statutory response to DIAN, CEDCO received a final assessment from DIAN in September 2014 which accepted certain of the previously questioned deductions and assessed a reduced penalty for the disallowed deductions in 2010. In November 2014, as a condition prior to the closing of the sale of CEDCO, the Group filed CEDCO's amended 2010 tax return and paid $5.0 million to fully settle the matter.

2Other income recognised in 2013 related to the Company's previous ownership in Peruvian Block 95 Licence Contract and was related to a decrease in accrued taxes payable for the gain on disposal from the prior year and recovery of legal fees provision incurred during 2012.

The net assets at the effective date of disposal (1 August 2014) were as follows:

1Per the share purchase agreement, the purchaser of CEDCO may send proposed adjustments to the purchase price following 90 days after the closing date. In February 2015, the Group received the purchaser's adjustment statement with proposed additional purchase price adjustments totalling $1.5 million. The Group is reviewing the proposed adjustments, and in accordance with the share purchase agreement, will pay allowable adjustments as agreed upon by the parties.

Reconciliation of profit / (loss) before taxation to net cash flow from operations

The Statement of Cash Flows contains the following elements related to discontinued operations:

3. Farm-out agreements (Bolivar & Bocachico)

In March and May 2014, the Group entered into two separate farm-out agreements with Everest Hill Energy Group Ltd ("Everest") on behalf of its affiliated company, Magdalena Energy Management Inc. ("Magdalena"), to share costs and risks associated with development and production activities in the Bolivar and Bocachico contract areas in Colombia. The Group was appointed as operator under both farm-out arrangements. Everest is an affiliated company of the Quasha family trusts which also have an interest in Lyford Investments, Inc., an existing shareholder of the Group. HKN Inc, ("HKN"), the Group's principal shareholder, Lyford Investments, Inc. and its parties acting in concert with it are interested in 21,849,016 shares of the Group, representing 60.50 per cent. of the issued share capital of the Company. By virtue of these holdings, entry into these farm-out agreements constituted related party transactions.

The Group accounted for its farm-out arrangements as jointly controlled operations under IFRS 11 "Joint Arrangements". A jointly controlled operation involves the use of assets and other resources of the Group and other venturers rather than the establishment of a separate corporation, partnership or other entity.

Bolivar Farm-Out Arrangement

Under the Bolivar Agreement, Magdalena would have acquired, subject to Ecopetrol approvals, a 50 per cent. interest in the Contract Area, including any and all rights, obligations and duties in respect of the Contract Area, in exchange for payment of the work commitments stipulated in the Bolivar Agreement and cash consideration of $5.0 million, net of fees, which was paid in March 2014. The work programme was governed by a joint-venture agreement between the Group and Magdalena.

During 2014, the Group recorded the gross cash consideration of $5.0 million as a reduction of the carrying value of its property, plant and equipment (applied as a recovery of prior costs), and the fees for the farm-out of $2.1 million were capitalised reducing the overall increase to property, plant and equipment to net cash received (after fees). Also during 2014, Magdalena funded the $6.2 million of costs for the obligation under the work program for the re-entry of the Catalina #1 well, and the Group did not recognize any related increase to property, plant and equipment in its consolidated statement of financial position for these costs since these costs were fully funded by its partner.

Bocachico Farm-Out Arrangement

Under the Bocachico Agreement, Magdalena would have acquired, subject to Ecopetrol approvals, a 50 per cent. interest in the Contract Area, including any and all rights, obligations and duties in respect of the Contract Area, in exchange for payment of the work commitments stipulated in the Bocachico Agreement and cash consideration of $1.0 million, net of fees, which was paid in May 2014. The work programme was governed by a joint-venture agreement between the Group and Magdalena. During 2014, the Group recorded the gross cash consideration of $1.0 million as a reduction of the carrying value of its property, plant and equipment (applied as a recovery of prior costs), and the fees for the farm-out of $255,000 were capitalised reducing the overall increase to property, plant and equipment to net cash received (after fees). During 2014, no other activity under the Bocachico farm-out agreement occurred.

Termination of Farm-Out Arrangements

In December 2014, Everest elected to exercise its option under the farm-out and joint operating agreements to terminate and release its rights and obligations with respect to the Group's Bolivar and Bocachico Contract areas due to the significant fall of the price of oil. All obligations by Everest to undertake the future funding of work programs for the Bolivar and Bocachico Contract areas, including an obligation to pay all future costs and expenses incurred with response to the proposed operations, were released with effect from 12 December 2014 in exchange for the return of the rights for the 50 per cent. interest in the Group's interest in each of the Bolivar and Bocachico Contract areas.

4. Earnings per share (EPS)

Basic earnings per share amounts are calculated by dividing the profit/(loss) for the period attributable to ordinary equity holders of the parent by the weighted average number of ordinary shares outstanding during the year. Diluted earnings per share are calculated by dividing the profit/(loss) for the year attributable to ordinary equity holders of the parent by the weighted average number of ordinary shares outstanding at the end of the year, plus the weighted average number of shares that would be issued on the conversion of dilutive potential ordinary shares into ordinary shares. The calculation of the dilutive potential ordinary shares related to employee and Director Share option plans includes only those options with exercise prices below the average share trading price for each period.

The calculation of the diluted EPS assumes all criteria giving rise to the dilution of the EPS are achieved and all outstanding share options with exercise prices lower than the average period share price are exercised.

5. Property, plant and equipment

As at 31 December 2014, there are no amounts included in the cost of property, plant and equipment in respect of capitalised financing costs (2013: $797,600). The amount of the financing costs capitalised during the year was $nil (2013: $nil). There are no amounts included in PP&E relating to capitalised finance leases (2013: $1,595,575) as at 31 December 2014.

Expenditures in 2014 on oil assets primarily related to the Catalina #1 well. Magdalena fully funded the $6.2 million of costs for their obligation under the farm-out agreement for the re-entry of the Catalina #1 well into the Simiti formation, and the Group did not recognize any related increase to property, plant and equipment in its consolidated statement of financial position for these costs since these costs were fully funded by its partner.

Depletion and depreciation for oil assets is calculated on a unit-of-production basis, using the ratio of oil production in the period to the estimated quantities of proved and probable reserves at the end of the period plus production in the period. Oil assets are tested periodically for impairment to determine whether the net book value of capitalised costs relating to the cash generating unit, as defined, exceed the associated estimated future discounted cash flows of the related commercial oil reserves. If an impairment is identified, the depletion is charged through the statement of comprehensive income in the period incurred.

The Group performed its annual impairment test as at 31 December 2014. The Group considers the relationship between its market capitalisation and its book value, among other factors, when reviewing for indicators of impairment. As at 31 December 2014, the market capitalisation of the Group was below the book value of its equity, indicating a potential impairment of the assets of the Company's two operating segments. The recoverable amounts of the two CGUs, the Bolivar area and the Bocachico area, were determined based upon value in use calculations using risked cash flow projections. The value in use calculations include estimates about the future financial performance of each CGU. All estimates and assumptions included in the value in use calculations are derived from the reserve report developed by Ralph E. Davis Associates, Inc., an independent petroleum engineering firm, and are based on the PRMS joint reserve and resource definitions of the Society of Petroleum Engineers, the World Petroleum Council, the American Association of Petroleum Geologists and the Society of Petroleum Evaluation Engineers consistent with UK reporting purposes. The projected risked discounted cash flows are calculated using the Brent oil pricing as at December 2014 of $57.33 per bbl (2013: $109.95 per bbl), with an escalation of 3% each following year, with historical pricing discounts and historical operating costs. The pre-tax discount rate applied to the cash flow projections is 10 per cent (2013: 10 per cent).

Low oil prices caused the heavy oil reserves within the Bocachico area to be uneconomic at 31 December 2014. The significant decline in oil prices at 31 December 2014 and the resulting uneconomic nature of the proved and probable reserves within the Bocachico area required the Group to fully impair the $11.2 million of carrying value of its Bocachico area oil assets within its consolidated financial statements at 31 December 2014. Under current accounting standards, the Group may reverse such impairment in the future if there is an indication that the previously recognised impairment loss no longer exists or has decreased. Bolivar's proved and probable reserves continued to be economic at the lower oil prices based upon many factors, such as estimated oil recovery rates, quality of the oil and lower estimated future operating costs. Management did not identify an impairment for the Bolivar area as at 31 December 2014.

6. Borrowings

During 2013 and 2014, the Group previously had outstanding an Amortising Note Payable (the "Amortising Note Payable") with HKN. The Amortising Note Payable was not convertible into shares, and was subject to an interest charge of 12.75 per cent. per annum (which was increased to 13.50 per cent. per annum in September 2014 following the publication of the 2014 interim results), payable quarterly in arrears. The Amortising Note Payable was subject to quarterly principal repayment amounts with the final repayment amount due on 15 June 2015.

The Amortising Note Payable was unsecured, but HKN could have required the Company to provide adequate collateral security in the event of a material adverse effect. In December 2014, following the disposal of CEDCO, the Group extinguished the remaining principal balance of $7.5 million (along with accrued interest payable of $200,000 and a required prepayment penalty of $225,000). As of 31 December 2014, the outstanding principal balance of the Amortising Note Payable is $nil (2013: $12 million).

7. Finance leases

Prior to the sale of CEDCO in 2014, the Group's wholly-owned subsidiary, CEDCO, leased operating equipment, and the Group classified these costs as finance leases in accordance with IAS 17. As part of the terms of the sale of CEDCO, the Group paid the outstanding balance of the finance leases in full ($1 million) in November 2014 as a condition prior to the closing of the sale.

8. Related party disclosures

HKN and its parties in concert are major shareholders of the Group. During 2014 and 2013, the Group held an Amortising Note Payable with HKN. The Amortising Note Payable was fully repaid in December 2014 and is no longer outstanding (2013: $12 million).

The Group entered into two separate farm-out agreements with Everest, an affiliate of Lyford Investments Inc., with respect to the Bolivar and Bocachico Association Contract areas. These farm-out agreements were terminated during December 2014.