RPT.L Regulatory News (RPT)

19 Sep 2007 12:21

Regal Petroleum PLC19 September 2007 Immediate Release 19 September 2007 REGAL PETROLEUM PLC ("Regal" or "the Company") First Time Adoption of International Financial Reporting Standards ("IFRS") - Preliminary Restatement of 2006 Financial Information Regal Petroleum plc, the AIM listed London based oil and gas exploration andproduction group, is pleased to announce the restatement of its 2006 financialinformation under IFRS. Regal prepared its financial statements under UK Generally Accepted Accountingprinciples ("UK GAAP") until 31 December 2006. From 1 January 2007, in line withAIM listing requirements, the Company will prepare its consolidated financialstatements in accordance with International Accounting Standards and IFRS, asadopted by the European Union. The Company's anticipated accounting policies under IFRS, together withreconciliations from the 2006 financial information previously released under UKGAAP to IFRS, are provided below. The Company's first published results to be prepared on an IFRS basis will bethose for the six months ending 30 June 2007 which will include comparative IFRSfinancial results for the six months ended 30 June 2006 and for the year ended31 December 2006. For further information, please contact: Regal Tel: 020 7408 9500Neil Ritson, Chief Executive OfficerFrank Scolaro, Chairman Evolution Securities Tel: 020 7071 4300Robert Collins Buchanan Communications Tel: 020 7466 5000Bobby MorseBen Willey First Time Adoption and Restatement of 2006 results under International Financial Reporting Standards Introduction Regal Petroleum plc (Regal or the Group) prepared its consolidated financialstatements under UK Generally Accepted Accounting Practices (UK GAAP) for allreporting periods to 31 December 2006. With effect from 1 January 2007 allcompanies listed on the Alternative Investment Market (AIM) are required toreport in accordance with International Financial Reporting Standards (IFRS).The Group's first published results to be prepared under IFRS will be those forthe six months ended 30 June 2007, which will include comparative IFRS financialstatements for the six months ended 30 June 2006. The Group will present itsfirst annual report and accounts under IFRS for the year ended 31 December 2007,which will include comparative IFRS financial information for the year ended 31December 2006. Therefore the Group's date of transition to IFRS is 1 January2006, being the first day of the comparative period (transition date). Set out in this document are extracts from Regal's consolidated financialstatements for the year ended 31 December 2006 and the six months ended 30 June2006, restated under IFRS, including reconciliations of the income statements,balance sheets and cash flow statements between UK GAAP and IFRS. The documentadditionally sets out the Group's balance sheet under IFRS at the transitiondate, including reconciliation to the UK GAAP balance sheet at that date. TheGroup's accounting policies have been revised to reflect IFRS and are alsoincluded herein. The financial information relating to the year ended 31 December 2006 and thetransition date balance sheet have been audited by UHY Hacker Young LLP. Thefinancial information relating to the six months ended 30 June 2006 has beenreviewed by UHY Hacker Young LLP. The audit and review reports, addressed to theDirectors of Regal, are included on pages 21 and 23. Summary Impact of IFRS on Group Results The principal changes to the Group's reported consolidated 2006 financialinformation from the adoption of IFRS are as follows: UK GAAP Change under IFRS IFRS $'000 $'000 $'000 Income Statement Revenue 10,845 (34) 10,811 Operating loss (66,166) (6,105) (72,271) Loss after tax (109,176) (6,104) (115,280) Basic loss per share (cents) (85.0) (4.8) (89.8) Balance Sheet Net Assets 69,960 (6,336) 63,624 These changes arise from the following principal factors: (a) Changes in accounting policies •IFRS 6 "Exploration for and Evaluation of Mineral Resources": In accordance with IFRS 6, Regal has written off pre-licence acquisition costs which were previously capitalised under the Group's full cost UK GAAP accounting policy. In addition, the Directors have chosen to adopt the successful efforts method of accounting for its oil and gas assets. This represents a change in accounting policy from the full cost method used in the preparation of the accounts prepared under UK GAAP and has been undertaken as it brings the Group more into line with the majority of its peer group who report under IFRS. Adoption of the successful efforts method has had no impact on the results presented. •IAS 21 "Effect of Changes in Foreign Exchange Rates": Under UK GAAP the profit and loss account of a foreign entity could be translated at the closing rate for consolidation purposes. IAS 21 requires revenues and expenses to be translated at actual rates or appropriate averages. •IAS 38: "Intangible Assets": Computer software costs have been reallocated from Tangible assets to Intangible assets (b) Changes in Presentation of Financial Information •IAS 1 "Presentation of Financial Statements": The form and presentation of the UK GAAP financial statements has been changed to be in compliance with IAS 1. •IAS 16 "Property, plant and equipment": "Tangible fixed assets" has been renamed "Property, plant and equipment". •IAS 7 "Cash Flow Statements": In the Cash Flow Statement under IFRS cash flows have been grouped under three main headings: cash flows from operating activities, from investing activities and from financing activities. This has led to some presentational changes compared with UK GAAP. There is no change to the net movement in cash and cash equivalents. A detailed analysis of the effect of these changes can be found on pages 19 and20 of this report. First Time Adoption of IFRS IFRS 1 "First-time Adoption of International Financial Reporting Standards"establishes the transitional requirements for the preparation of financialstatements upon first time adoption of IFRS. IFRS 1 generally requires an entityto comply with IFRS effective at the reporting date and to apply theseretrospectively to the opening balance sheet, the comparative period and thereporting period. The standard allows certain optional exemptions from fullretrospective application and other elections on transition. Elections made pursuant to IFRS 1 "First Time Adoption" are as follows: • IFRS 3 "Business Combinations" has not been applied retrospectively to business combinations before 1 January 2006. Thus both the classification of the business combination and the measurement of fair values determined at the time of the business combination have been maintained. • Cumulative foreign exchange translation differences for all subsidiaries which do not use US dollars as a functional currency have been set to zero. • IFRS 2 "Share-based Payment Transactions" has not been applied to awards granted before 7 November 2002. The remaining available elections were reviewed by the Directors and consideredto be either not applicable or not appropriate. Accounting policies The accounting policies which the Group has adopted in relation to thepreliminary comparative financial information, and which it currently intends toadopt for the purposes of its 2007 IFRS interim and annual financial statements,are set out below. Basis of preparation The preliminary comparative financial information (the "financial information")has been prepared in accordance with International Financial Reporting Standardsand IFRIC interpretations and with those parts of the Companies Act 1985applicable to companies reporting under IFRS. The financial information isprepared under the historical cost basis except for valuation of certainshare-based payments and other financial assets. The financial information isthe first financial information to be prepared in accordance with IFRS and thedate of the transition to IFRS is 1 January 2006. This document and the financial statements contained within do not constitutestatutory accounts within the meaning of section 240 of the Companies Act 1985.The comparatives for the year ended 31 December 2006 and the period ended 30June 2006 are not the Group's statutory accounts for that financial year/period.A copy of the statutory accounts for the year ended 31 December 2006 has beendelivered to the Registrar of Companies. The auditors' report on those accountswas qualified arising from a limitation in scope in respect of theircomparatives. Basis of consolidation The consolidated financial information incorporates the financial information ofthe Company and entities controlled by the Company (its subsidiaries) made up to31 December each year. Control is achieved where the Company has the power togovern the financial and operating policies of an investee entity so as toobtain benefits from its activities. SubsidiariesThe acquisition of subsidiaries is accounted for using the purchase method. Onacquisition, the assets, liabilities and contingent liabilities of a subsidiaryare measured at their fair values at the date of acquisition. Any excess of costof acquisition over the fair values of the identifiable net assets acquired isrecognised as goodwill, any deficiency of the cost of acquisition below the fairvalues of the identifiable net assets acquired (i.e. discount on acquisition) iscredited to the income statement in the period of acquisition. The results ofsubsidiaries acquired or disposed of during the year are included in theconsolidated income statement from the effective date of acquisition or up tothe effective date of disposal, as appropriate. Subsidiaries that are not controlled by the Company are accounted for asavailable-for-sale financial assets (see financial instruments accountingpolicies). Joint venturesThe Group's companies participate in joint ventures which involve joint controlof assets used in the Group's oil and gas exploration, development and producingactivities. The Group accounts for its share of the assets and liabilities ofjoint ventures, classified in the appropriate Balance Sheet heading within eachcompany and at Group level upon consolidation. Corporate restructuringDuring 2002 the Group carried out a corporate restructuring including theintroduction of a new holding company. As this represented a combination ofentities under common control, and because this was before 1 January 2006, thisbusiness combination was outside the scope of IFRS 3 "Business Combinations" andwas therefore accounted for using principles of merger accounting as specifiedunder UK GAAP. Commercial reservesProven and probable oil and gas reserves are estimated quantities ofcommercially producible hydrocarbons which the existing geological, geophysicaland engineering data show to be recoverable in future years from knownreservoirs. The proven and probable reserves included herein conform to thedefinition approved by the Society of Petroleum Engineers (SPE) and WorldPetroleum Congress (WPC). Oil and gas exploration assets and development/producing assets The Group applies the successful efforts method of accounting for oil and gasassets, having regard to the requirements of IFRS 6 "Exploration for andEvaluation of Mineral Resources". All licence acquisition, exploration and evaluation costs are initiallycapitalised as intangible fixed assets in cost centres by field or byexploration area, as appropriate, pending determination of commerciality of therelevant property. Directly attributable administration costs are capitalisedinsofar as they relate to specific exploration activities, as are finance coststo the extent they are directly attributable to financing development projects.Pre-licence costs and general exploration costs not specific to any particularlicence or prospect are expensed as incurred. If prospects are deemed to be impaired ('unsuccessful') on completion of theevaluation, the associated costs are charged to the income statement. If thefield is determined to be commercially viable, the attributable costs aretransferred to development/production assets within property, plant andequipment in single field cost centres. Subsequent expenditure is capitalised only where it either enhances the economicbenefits of the development/producing asset or replaces part of the existingdevelopment/producing asset. Net proceeds from any disposal of an exploration asset are initially creditedagainst the previously capitalised costs. Any surplus proceeds are credited tothe Income Statement. Net proceeds from any disposal of development/producingassets are credited against the previously capitalised cost. A gain or loss ondisposal of a development/producing asset is recognised in the Income Statementto the extent that the net proceeds exceed or are less than the appropriateportion of the net capitalised costs of the asset. Depletion and amortisationAll expenditure carried within each field is amortised from the commencement ofproduction on a unit of production basis, which is the ratio of oil and gasproduction in the period to the estimated quantities of commercial reserves atthe end of the period plus the production in the period, generally on a field byfield basis. In certain circumstances, fields within a single development areamay be combined for depletion purposes. Costs used in the unit of productioncalculation comprise the net book value of capitalised costs plus the estimatedfuture field development costs necessary to bring the reserves into production.Changes in the estimates of commercial reserves or future field developmentcosts are dealt with prospectively. ImpairmentAt each balance sheet date, the Group reviews the carrying amount of explorationassets and development/producing assets to determine whether there is anyindication that those assets have suffered an impairment loss. This includesexploration and appraisal costs capitalised which are assessed for impairment inaccordance with IFRS 6. If any such indication exists, the recoverable amount ofthe asset is estimated in order to determine the extent of the impairment loss(if any). Recoverable amount is the greater of net selling price and value in use. Inassessing value in use, the estimated future cash flows are discounted to theirpresent value using a pre-tax discount rate that reflects current marketassessments of the time value of money and the risks specific to the asset. If the recoverable amount of an asset is estimated to be less than its carryingamount, the carrying amount of the asset is reduced to its recoverable amount.Impairment losses are recognised as an expense immediately. When an impairment loss subsequently reverses, the carrying amount of the assetis increased to the revised estimate of its recoverable amount, but so that theincreased carrying amount does not exceed the carrying amount that would havebeen determined had no impairment loss been recognised for the asset in prioryears. A reversal of an impairment loss is recognised as income immediately. Decommissioning Where a material liability for the removal of production facilities and siterestoration at the end of the productive life of a field exists, a provision fordecommissioning is recognised. The amount recognised is the present value ofestimated future expenditure determined in accordance with local conditions andrequirements. The cost of the relevant tangible fixed asset is increased with anamount equivalent to the provision and depreciated on a unit of productionbasis. Changes in estimates are recognised prospectively, with correspondingadjustments to the provision and the associated fixed asset. There were nomaterial decommissioning liabilities at 1 January and 31 December 2006. Property, plant and equipment other than oil and gas assets and depreciation Property, plant and equipment other than oil and gas assets are stated at costless accumulated depreciation and any provision for impairment. Depreciation ischarged so as to write off the cost, less estimated residual value, of assets ona straight-line basis over their useful lives as follows: Fixtures, fittings and equipment : 20-25% per annum straight lineMotor vehicles : 20-25% per annum straight linePlant and machinery : 8-25% per annum straight line Inventories Inventories are stated at the lower of weighted average cost and net realisablevalue. Net realisable value represents the estimated selling price less allestimated costs of completion and costs to be incurred in marketing, selling anddistribution. Revenue recognition Turnover represents amounts invoiced in respect of sales of oil and gasexclusive of indirect taxes and excise duties and is recognised on delivery ofproduct. Interest income is accrued on a time basis, by reference to theprincipal outstanding and at the effective rate applicable, which is the ratethat exactly discounts estimated future cash receipts through the expected lifeof the financial asset to that asset's net carrying amount. Foreign currencies The Group's consolidated accounts are presented in US Dollars. The functionaland presentational currencies of some subsidiary companies may be in currenciesother than US Dollars. The functional currency of individual companies is normally determined by theprimary economic environment in which the entity operates (the functionalcurrency), normally the one in which it primarily generates and expends cash.Transactions in currencies other than US dollars ("foreign currencies") arerecorded in US dollars at the rates of exchange prevailing on the dates of thetransactions. At each balance sheet date, monetary assets and liabilities thatare denominated in foreign currencies are retranslated into US dollars at therates prevailing on the balance sheet date. Non-monetary assets and liabilitiescarried at fair value that are denominated in foreign currencies are translatedat the rates prevailing at the date when the fair value was determined. Gainsand losses arising on retranslation are included in net profit or loss for theperiod, except for exchange differences arising on non-monetary assets andliabilities where the changes in fair value are recognised directly in equity. On consolidation, the assets and liabilities of the group's subsidiaries whichdo not use US dollars as their functional currency are translated into USdollars at exchange rates prevailing on the balance sheet date. Income andexpense items are translated at the average exchange rates for the period unlessexchange rates fluctuate significantly. Exchange differences arising, if any,are classified as equity and are recognised in the group's translation reserve.Such translation differences are recognised as income or as expenses in theperiod in which the operation is disposed of. In accordance with the transitional provisions of IFRS 1 cumulative foreignexchange translation differences at 1 January 2006 for all subsidiaries which donot use US dollars as a functional currency have been set to zero. Pensions The Group operates a defined contribution pension scheme. The assets of thescheme are held separately from those of the Group in an independentlyadministered fund. The amount charged to the profit and loss account representsthe contributions payable to the scheme in respect of the accounting period. Leases Leases are classified as finance leases whenever the terms of the lease transfersubstantially all the risks and rewards of ownership to the lessee. All otherleases are classified as operating leases. Assets held under finance leases are recognised as assets of the Group at theirfair value or, if lower, at the present value of the minimum lease payments,each determined at the inception of the lease. The corresponding liability isincluded on the balance sheet as a finance lease obligation. Lease payments areapportioned between finance charges and reduction of the lease obligation so asto achieve a constant rate of interest on the remaining balance of theliability. Finance charges are charged directly against income, unless they aredirectly attributable to qualifying assets, in which case they are capitalisedin accordance with the Group's policy on borrowing costs (see below). Rentals payable under operating leases are charged to income on a straight-linebasis over the term of the relevant lease. Taxation The tax expense represents the sum of the tax currently payable and deferredtax. Current tax, including UK corporation and overseas tax, is provided at amountsexpected to be paid (or recovered) using the tax rates and laws that have beenenacted or substantially enacted by the balance sheet date. Deferred tax is the tax expected to be payable or recoverable on differencesbetween the carrying amounts of assets and liabilities in the financialinformation and the corresponding tax bases used in the computation of taxableprofit, and is accounted for using the balance sheet liability method. Deferredtax liabilities are generally recognised for all taxable temporary differencesand deferred tax assets are recognised to the extent that it is probable thattaxable profits will be available against which deductible temporary differencescan be utilised. Such assets and liabilities are not recognised if the temporarydifference arises from goodwill or from the initial recognition (other than in abusiness combination) of other assets and liabilities in a transaction thataffects neither the tax profit nor the accounting profit. Deferred tax liabilities are recognised for taxable temporary differencesarising on investments in subsidiaries and associates, and interests in jointventures, except where the group is able to control the reversal of thetemporary difference and it is probable that the temporary difference will notreverse in the foreseeable future. The carrying amount of deferred tax assets is reviewed at each balance sheetdate and adjusted to the extent that it is probable that sufficient taxableprofits will be available to allow all or part of the asset to be recovered. Deferred tax is calculated at the tax rates that are expected to apply in theperiod when the liability is settled or the asset is realised. Deferred tax ischarged or credited in the income statement, except when it relates to itemscharged or credited directly to equity, in which case the deferred tax is alsodealt with in equity. Dividends payable Accounting for dividends payable is in accordance with IAS 10 "Events after theBalance Sheet Date". Accordingly, dividends proposed or declared on equityinstruments after the Balance Sheet date are not recognised as a liability atthe Balance Sheet date. Financial instruments Financial assets and financial liabilities are recognised on the Group's balancesheet when the Group becomes a party to the contractual provisions of theinstrument. The Group does not currently utilise derivative financialinstruments. Trade receivablesTrade receivables do not carry any interest and are stated at their nominalvalue as reduced by appropriate allowances for estimated irrecoverable amounts. InvestmentsInvestments are recognised and derecognised on a trade date where a purchase orsale of investment is under a contract whose terms require delivery of theinvestment within the timeframe established by the market concerned, and areinitially measured at cost, including transaction costs. Investments are classified as either held-for-trading or available-for-sale, andare measured at subsequent reporting dates at fair value. Where securities areheld for trading purposes, gains and losses arising from changes in fair valueare included in net profit or loss for the period. For available-for-saleinvestments, gains and losses arising from changes in fair value are recogniseddirectly in equity, until the security is disposed of or is determined to beimpaired, at which time the cumulative gain or loss previously recognised inequity is included in the net profit or loss for the period. Impairment lossesrecognised in profit and loss for equity instruments classified asavailable-for-sale are not subsequently reversed through profit and loss. Trade payablesTrade payables are not interest-bearing and are stated at their nominal value. Bank borrowings and loan notesInterest-bearing bank borrowings and loan notes are recorded at the proceedsreceived, net of direct transaction costs. Direct transaction costs areaccounted for on an amortised cost basis in profit and loss using the effectiveinterest method and are added/deducted to/from the carrying amount of theinstrument to the extent that they are not settled in the period in which theyarise. Equity instrumentsEquity instruments issued by the Company and the Group are recorded at theproceeds received, net of direct issue costs. Finance costs and debt Borrowing costs directly attributable to the acquisition, construction orproduction of qualifying assets, which are assets that necessarily take asubstantial period of time to get ready for their intended use or sale, areadded to the cost of those assets, until such time as the assets aresubstantially ready for their intended use or sale. Finance costs of debt are allocated to periods over the term of the related debtat the effective interest rate on the carrying amount. Directly attributabletransaction costs are deducted from the debt proceeds on initial recognition ofthe liability and are amortised and charged to the Income Statement as financecosts over the term of the debt. All other borrowing costs are expensed as incurred. Cash and cash equivalents Cash and cash equivalents comprise cash on hand and demand deposits and othershort term highly liquid investments that are readily convertible to a knownamount of cash and are subject to an insignificant risk of changes in value. Included in cash and cash equivalents are amounts relating to financialguarantees entered into by the Group to collaterise future commitments as perstandard industry practice. Share-based transactions The Group has applied the requirements of IFRS 2 "Share-based payments". Inaccordance with the transitional provisions of that standard, this standard hasnot been applied to those awards that were granted on or before 7 November 2002.In addition, the standard has not been applied to awards that were granted after7 November 2002 that vested before 1 January 2005. However, in contrast to thetransitional provision of IFRS 2, the standard has been applied for those awardsthat were granted after 7 November 2002, and that vested between 1 January 2005and 1 January 2006 in order to be consistent with the transitional rules adoptedunder UK GAAP in the 2006 annual report in respect of FRS 20 Share-basedPayments. All share based awards of the group to date have been equity settled as definedby IFRS 2. The fair value of these awards has been determined at the date ofgrant of the award allowing for the effect of any market-based performanceconditions. The fair value, adjusted by the Group's estimate of the number ofawards that will eventually vest as a result of non-market conditions, isexpensed uniformly over the vesting period. The fair values were calculated using a binomial option pricing model withsuitable modifications to allow for employee turnover after vesting and earlyexercise. Where necessary this model was supplemented with a Monte Carlo model.The inputs to the model include: the share price at date of grant; exerciseprice; expected volatility; expected dividends; risk free rate of interest; andpatterns of exercise of the plan participants. Share options In accordance with IAS 37 "Provisions, Contingent Liabilities and ContingentAssets", the Company provides in full for the employer's national insuranceliability estimated to arise on the future exercise of share options granted. 1. Reconciliation of UK GAAP to IFRS Consolidated Income Statement for the year ended 31 December 2006 UK GAAP IFRS 6 IAS 21 IFRS $'000 $'000 $'000 $'000 Notes a b c Revenue 10,845 - (34) 10,811Cost of sales (8,306) - 21 (8,285)----------------------- -------- ------- ------ --------Gross profit 2,539 - (13) 2,526 Ukraine settlement costs (54,801) - - (54,801)Share based charge (387) - - (387)Other administrative expenses (14,378) (6,150) 61 (20,467)----------------------- -------- ------- ------ --------Total administrative expenses (69,566) (6,150) 61 (75,655)Other operating income 861 - (3) 858----------------------- -------- ------- ------ --------Operating loss (66,166) (6,150) 45 (72,271) Impairment of financial asset (43,700) - - (43,700)Finance revenue 1,183 - (1) 1,182Finance costs (2) - - (2)----------------------- -------- ------- ------ --------Loss on ordinary activities beforetaxation (108,685) (6,150) 44 (114,791)Tax on loss on ordinary activities (491) - 2 (489)----------------------- -------- ------- ------ -------- Loss for the financial period (109,176) (6,150) 46 (115,280)----------------------- -------- ------- ------ -------- Loss per ordinary share (cents)Basic and diluted (85.0) (4.8) - (89.8)----------------------- -------- ------- ------ -------- Consolidated Balance Sheet as at 31 December 2006 UK GAAP IFRS 6 IAS 21 IAS 38 IAS 16 IFRS $'000 $'000 $'000 $'000 $'000 $'000 Notes a b c d e Non-current assetsIntangible assets 26,867 (6,336) - 141 - 20,672Property, plant andequipment - - - - 29,620 29,620Tangible assets 29,761 - - (141) (29,620) ------------------ -------- ------- ------ ------ ------- ------- 56,628 (6,336) - - - 50,292 Current assetsInventories 37 - - - - 37Trade and otherreceivables 3,368 - - - - 3,368Cash and cash 13,048 - - - - 13,048equivalents ----------------- -------- ------- ------ ------ ------- ------- 16,453 - - - - 16,453----------------- -------- ------- ------ ------ ------- -------Current liabilitiesTrade and other (2,171) - - - - (2,171)payables -------- ------- ------ ------ ------- ------------------------ Net current assets 14,282 - - - - 14,282----------------- -------- ------- ------ ------ ------- ------- Non-currentliabilitiesProvisions (950) - - - - (950)----------------- -------- ------- ------ ------ ------- ------------------------ -------- ------- ------ ------ ------- -------Net assets 69,960 (6,336) - - - 63,624----------------- -------- ------- ------ ------ ------- ------- EquityCalled up share 10,934 - - - - 10,934capitalShare premium account 217,640 - - - - 217,640Other reserves 10,644 - (46) - - 10,598Equity reserves 49,049 - - - - 49,049Profit and loss (218,307) (6,336) 46 - - (224,597)account -------- ------- ------ ------ ------- ------------------------Total equity 69,960 (6,336) - - - 63,624----------------- -------- ------- ------ ------ ------- -------- Consolidated Cash Flow Statement for the year to 31 December 2006 UK GAAP IFRS 6 IAS 38 IAS 16 IFRS $'000 $'000 $'000 $'000 $'000 Notes a b d e Operating activitiesCash generated from operations (11,840) (6,184) - - (18,024)Interest received 1,183 - - - 1,183Interest paid (2) - - - (2)Taxation paid (491) - - - (491)---------------------- -------- ------- ------- ------- -------Net cash from operating (11,150) (6,184) - - (17,334)activities -------- ------- ------- ------- ----------------------------- Investing activitiesProceeds from sale of intangiblefixed assets 4,245 - - - 4,245Purchase of intangible assets (14,100) 6,184 (50) - (7,966)Purchase of property, plant andequipment - - - (1,926) (1,926)Purchase of tangible assets (1,976) - 50 1,926 ----------------------- -------- ------- ------- ------- -------Net cash from investing (11,831) 6,184 - - (5,647)activities -------- ------- ------- ------- ----------------------------- Financing activitiesFunds received in connection withshare options 80 - - - 80---------------------- -------- ------- ------- ------- -------Net cash from financing 80 - - - 80activities -------- ------- ------- ------- ----------------------------- Net decrease in cash and cashequivalents (22,901) - - - (22,901)Cash and cash equivalents atbeginning of year 34,916 - - - 34,916Effect of foreign exchange ratechanges 1,149 - - - 1,149Other non-cash movements (116) - - - (116)---------------------- -------- ------- ------- ------- -------Cash and cash equivalents at endof year 13,048 - - - 13,048---------------------- -------- ------- ------- ------- ------- Consolidated Income Statement for the six months ended 30 June 2006 UK GAAP IAS 21 IFRS $'000 $'000 $'000 Notes a c Revenue 4,967 (106) 4,861Cost of sales (4,175) 89 (4,086)----------------------- -------- ------ ------Gross profit 792 (17) 775 Share based credit 91 - 91Administrative expenses (5,193) 11 (5,182)----------------------- -------- ------ ------Total administrative expenses (5,102) 11 (5,091)----------------------- -------- ------ ------Operating loss (4,310) (6) (4,316) Finance revenue 679 - 679Finance costs (1) - (1)----------------------- -------- ------ ------Loss on ordinary activities before taxation (3,632) (6) (3,638)Tax on loss on ordinary activities (33) 1 (32)----------------------- -------- ------ ------ Loss for the financial period (3,665) (5) (3,670)----------------------- -------- ------ ------ Loss per ordinary share (cents)Basic and diluted (2.9) - (2.9)----------------------- -------- ------ ------ Consolidated Balance Sheet as at 30 June 2006 UK GAAP IFRS 6 IAS 21 IAS 38 IAS 16 IFRS $'000 $'000 $'000 $'000 $'000 $'000 Notes a b c d e Non-current assetsIntangible assets 20,735 (475) - 227 - 20,487Property, plant andequipment - - - - 33,321 33,321Tangible assets 33,548 - - (227) (33,321) -Financial asset 43,700 - - - - 43,700----------------- -------- ------ ------ ------ ------- ------- 97,983 (475) - - - 97,508 Current assetsInventories 40 - - - - 40Trade and otherreceivables 3,515 - - - - 3,515Investments 117 - - - - 117Cash and cash 25,478 - - - - 25,478equivalents ----------------- -------- ------ ------ ------ ------- ------- 29,150 - - - 29,150----------------- -------- ------ ------ ------ ------- -------Current liabilitiesTrade and other (3,086) - - - - (3,086)payables ----------------- -------- ------ ------ ------ ------- ------- Net current assets 26,064 - - - - 26,064----------------- -------- ------ ------ ------ ------- ------- Non-currentliabilitiesProvisions (207) - - - - (207)----------------- -------- ------ ------ ------ ------- ------------------------ -------- ------ ------ ------ ------- -------Net assets 123,840 (475) - - - 123,365----------------- -------- ------ ------ ------ ------- ------- EquityCalled up share 10,934 - - - - 10,934capitalShare premium account 217,640 - - - - 217,640Other reserves 8,289 - 5 - - 8,294Profit and loss (113,023) (475) (5) - - (113,503)account ----------------- -------- ------ ------ ------ ------- -------Total equity 123,840 (475) - - - 123,365----------------- -------- ------ ------ ------ ------- -------- Consolidated Cash flow Statement for the six months to 30 June 2006 UK GAAP IFRS 6 IAS 38 IAS 16 IFRS $'000 $'000 $'000 $'000 $'000 Notes a b d e Operating activitiesCash generated from operations (2,872) (2) - - (2,874)Interest received 678 - - - 678Interest paid (1) - - - (1)Taxation paid (34) - - - (34)----------------------- -------- ------- ------ ------ -------Net cash from operating activities (2,229) (2) - - (2,231)----------------------- -------- ------- ------ ------ ------- Investing activitiesPurchase of intangible assets (4,078) 2 (48) - (4,124)Purchase of property, plant andequipment - - - (3,168) (3,168)Purchase of tangible assets (3,216) - 48 3,168 ------------------------ -------- ------- ------ ------- -------Net cash from investing activities (7,294) 2 - - (7,292)----------------------- -------- ------- ------ ------- ------- Net decrease in cash and cashequivalents (9,523) - - - (9,523)Cash and cash equivalents atbeginning of period 34,916 - - - 34,916Effect of foreign exchange ratechanges 202 - - - 202----------------------- -------- ------- ------ ------- -------Cash and cash equivalents at endof period 25,595 - - - 25,595----------------------- -------- ------- ------ ------- ------- Consolidated Balance Sheet as at 1 January 2006 UK GAAP IFRS 6 IAS 38 IAS 16 IFRS $'000 $'000 $'000 $'000 $'000 Notes a b d e Non-current assetsIntangible assets 14,731 (473) 221 - 14,479Property, plant and equipment - - - 29,135 29,135Tangible assets 29,356 - (221) (29,135) -Financial asset 43,700 - - - 43,700----------------- -------- ------ ------ ------- ------- 87,787 (473) - - 87,314 Current assetsInventories 38 - - - 38Trade and other receivables 4,995 - - - 4,995Investments 136 - - - 136Cash and cash equivalents 34,796 - - - 34,796----------------- -------- ------ ------ ------- ------- 39,965 - - - 39,965----------------- -------- ------ ------ ------- -------Current liabilitiesTrade and other payables (2,267) - - - (2,267)----------------- -------- ------ ------ ------- ------- Net current assets 37,698 - - - 37,698----------------- -------- ------ ------ ------- ------- Non-current liabilitiesProvisions (196) - - - (196)----------------- -------- ------ ------ ------- ------------------------ -------- ------ ------ ------- -------Net assets 125,289 (473) - - 124,816----------------- -------- ------ ------ ------- ------- EquityCalled up share capital 10,934 - - - 10,934Share premium account 217,640 - - - 217,640Other reserves 6,073 - - - 6,073Profit and loss account (109,358) (473) - - (109,831)----------------- -------- ------ ------ ------- -------Total equity 125,289 (473) - - 124,816----------------- -------- ------ ------ ------- -------- Notes to reconciliations The following notes explain the reconciliations between the UK GAAP financialstatements and the IFRS comparative financial information. a Amounts described as "UK GAAP" have been reclassified to conform with IFRSformat. b IFRS 6: "Exploration for and Evaluation of Mineral Resources" Under UK GAAP all costs incurred prior to having obtained the licence rightswere included within intangible assets. Under IFRS such expenditure has to bewritten off in full in the year in which it occurs. This has resulted in anadjustment of $473k to retained earnings for the opening balance sheet, anadditional adjustment of $2k to 30 June 2006 and an adjustment of $6.15m toother administrative expenses for the year ended 31 December 2006. The totaladjustment for the year ended 31 December 2006 is $6.658m, however $322k(included in the opening balance sheet adjustment and subsequent expenditureduring 2006) was impaired during 2006 which now reverses resulting in a netadjustment of $6.336m. On the cash flow statement for the year ended 31 December 2006, the pre-licencecosts were shown within "Capital expenditure and financial investment". Sincesuch costs are being expensed under IFRS, they have been classified withinoperating cash flows. The adoption of the successful efforts method of accounting for oil and gasassets has resulted in no adjustment to Intangible Assets or to the IncomeStatement/Retained Earnings. c IAS 21: "Effect of Changes in Foreign Exchange Rates" Under UK GAAP the profit and loss account of a foreign entity could betranslated at the closing rate for consolidation purposes. IAS 21 requiresrevenues and expenses to be translated at actual rates or appropriate averages.Cumulative exchange differences are then recognised as a separate componentwithin equity. At transition date, the Group has taken advantage of the exemptions offeredunder IFRS 1 and deemed cumulative translation differences to be zero. For later periods, this change has resulted in a restatement of the incomestatement with the corresponding adjustment recognised within equity. d IAS 38: "Intangible Assets" In accordance with IAS 38, the Group has reclassified computer software fromproperty, plant and equipment to intangible assets as the software component isnot an integral part of the related hardware of a computer. This adjustment is also reflected within the cashflow statement as areclassification from fixed assets to intangible assets. e IAS 16: "Property, Plant and Equipment"Under UK GAAP, tangible fixed assets comprised oil and gas properties for whichthe existence or otherwise of commercial reserves had been established and otherfixed assets including non oil and gas specific fixtures and fittings, officeequipment and motor vehicles. Under IFRS, all amounts previously classified as tangible assets have beenrecorded as Property, Plant and Equipment. Independent Auditors' Report INDEPENDENT AUDITORS' REPORT TO REGAL PETROLEUM PLCON THE PRELIMINARY COMPARATIVE IFRS FINANCIAL INFORMATION We have audited the preliminary comparative IFRS financial information of RegalPetroleum plc for the year ended 31 December 2006 which comprises the groupincome statement, group balance sheet, group changes in net equity, group cashflow statement and the transition date (1 January 2006) group balance sheet, allof which are set out in section 5 and which have been prepared on the basis setout in sections 3 and 4. This report is made solely to the company in accordance with our relatedengagement letter and solely for the purpose of assisting with the transition toIFRS. Our audit work has been undertaken so that we might state to the company,those matters we are required to state to it in an auditors' report and for noother purpose. To the fullest extent permitted by law, we will not accept orassume responsibility to anyone other than the company for our audit work, forour report, or for the opinions we have formed. Respective responsibilities of Directors and auditors The company's Directors are responsible for ensuring that the Group maintainsproper accounting records and for the preparation of the preliminary comparativeIFRS financial information on the basis set out in sections 3 and 4, whichdescribe how IFRS will be applied under IFRS 1 and the policies expected to beadopted, when they prepare its first complete set of IFRS financial statementsas at 31 December 2007. Our responsibility is to audit the preliminary comparative IFRS financialinformation in accordance with relevant legal and regulatory requirements andInternational Standards on Auditing (UK and Ireland) and report to you ouropinion as to whether the preliminary comparative IFRS financial information isprepared, in all material respects, on the basis set out in sections 3 and 4. We read the other information contained in the preliminary comparative IFRSfinancial information for the above year as described on the contents page andconsider the implications for our report if we become aware of any apparentmisstatements or material inconsistencies with the preliminary comparative IFRSfinancial information. Basis of audit opinion We conducted our audit in accordance with International Standards on Auditing(UK and Ireland) issued by the Auditing Practices Board. An audit includesexamination, on a test basis, of evidence relevant to the amounts anddisclosures in the preliminary comparative IFRS financial information. It alsoincludes an assessment of the significant estimates and judgements made by theDirectors in the preparation of the preliminary comparative IFRS financialinformation and of whether the accounting policies are appropriate to thecircumstances of the Group, consistently applied and adequately disclosed. We planned and performed our audit so as to obtain all the information andexplanations which we consider necessary in order to provide us with sufficientevidence to give reasonable assurance that the preliminary comparative IFRSfinancial information is free from material misstatement, whether caused byfraud or other irregularity or error. In forming our opinion, we also evaluatedthe overall adequacy of the presentation of information in the preliminarycomparative IFRS financial information. We draw attention to the fact that, under IFRS, only a complete set of financialstatements comprising an income statement, balance sheet, cash flow statement,statement of recognised income and expense and statement of changes inshareholders' equity, together with comparative financial information andexplanatory notes, provide a fair presentation of the Group's financialposition, results of operations and cash flow in accordance with IFRS. Opinion In our opinion the preliminary comparative IFRS financial information isprepared, in all material respects, on the basis set out in sections 3 and 4which describes how IFRS will be applied under IFRS 1, and the policies expectedto be adopted, when management prepares its first complete set of IFRS financialstatements at 31 December 2007. UHY Hacker Young LLPRegistered AuditorsChartered AccountantsLondon 18 September 2007 Independent Review Report INDEPENDENT REVIEW REPORT TO REGAL PETROLEUM PLCON THE PRELIMINARY IFRS FINANCIAL INFORMATION FOR THE SIX MONTHS ENDED 30 JUNE2006 Introduction We have reviewed the preliminary IFRS consolidated financial information ofRegal Petroleum Plc for the six months ended 30 June 2006 which comprises thegroupincome statement, the group consolidated cash flow statement, the group balancesheet and the group statement of changes in equity as at 30 June 2006. This report is made solely to the company in accordance with guidance containedin Bulletin 1999/4 'Review of interim financial information' issued by theAuditing Practices Board. To the fullest extent permitted by the law, we do notaccept or assume responsibility to anyone other than the company for our work,for this report, or for the conclusions we have formed. Directors' responsibilities The preliminary IFRS financial information is the responsibility of thecompany's Directors and has been prepared as part of the company's conversion toIFRS. It has been prepared in accordance with the basis of preparation set outin sections 3 and 4 which describe how IFRS has been applied under IFRS 1,including the policies expected to be adopted, when management prepares itsfirst complete set of IFRS financial statements as at 31 December 2007. Review work performed We conducted our review in accordance with guidance contained in Bulletin 1999/4'Review of interim financial information' issued by the Auditing Practices Boardfor use in the United Kingdom. A review consists principally of making enquiriesof group management and applying analytical procedures to the financialinformation and underlying financial data, and based thereon, assessing whetherthe accounting policies and presentation have been consistently applied, unlessotherwise disclosed. A review excludes audit procedures such as tests ofcontrols and verification of assets of assets, liabilities and transactions. Itis substantially less in scope than an audit performed in accordance withInternational Standards on Auditing and therefore provides a lower level ofassurance than an audit. Accordingly we do not express an opinion on thepreliminary IFRS financial information. We draw attention to the fact that, under IFRS only a complete set of financialstatements with comparative financial information and explanatory notes canprovide a fair presentation of the company's financial position, results ofoperations and cash flows in accordance with IFRS. Review conclusion On the basis of our review we are not aware of any material modifications thatshould be made to the preliminary IFRS financial information as presented forthe six months ended 30 June 2006. UHY Hacker Young LLPChartered AccountantsLondon 18 September 2007 This information is provided by RNS The company news service from the London Stock Exchange