ZOL.L Regulatory News (ZOL)

Embargoed: 0700hrs 29 September 2015

Zoltav Resources Inc.

("Zoltav" or the "Company")

Half Yearly Report for the Six Months Ended 30 June 2015

Zoltav (AIM:ZOL), the Russia and CIS-focused oil and gas exploration and production company, announces results for the six months ended 30 June 2015. The full report is available to download from the Investor Relations section of the Company's website at www.zoltav.com.

Operational Highlights - Bortovoy

· Produced 46.6 million cubic feet (1.32 million cubic metres) of gas per day and 544 barrels (69 tonnes) of oil per day throughout the period

· Near-term objectives include the completion of a new well on the Zhdanovskoye field

· Company continues to assess scenarios to commercialise the Eastern fields of the Licence

Operational Highlights - Koltogor

· Registered an additional 546 million barrels (72 million tonnes) of Russian standard C1 plus C2 oil reserves for the Koltogor E&P Licence taking the total Russian standard C1 plus C2 oil reserves for both Koltogor licences to in excess of 1 billion barrels (137 million tonnes)

· Commenced the next phase of the appraisal programme for Koltogor, including drilling project preparation and land allocation activities

· Rosnedra confirmed the discovery of the West Koltogor oil field on Koltogor Exploration Licence 10 (Zoltav intends to submit an application for exploration and production status on this licence later this year)

Summary financials

· Revenues of US$14.4 million from production at Bortovoy (H1 2014: US$1.6 million)

· EBITDA of US$2.7 million (H1 2014: US$(6.8 million))

· First positive operating cash flow of US$4.7 million (H1 2014: US$(7.1 million))

· Operating loss for the period was US$0.4 million (H1 2014: US$7.2 million)

· Cash and cash equivalents at 30 June 2015 of US$9.9 million (30 June 2014: US$15.9 million)

Corporate Highlights

· Changes to board composition implemented in order to simplify the management structure and improve efficiency and effectiveness of decision making

· Denis Golubovskiy was appointed as Director Finance in July 2015 to strengthen the corporate finance function

Alastair Ferguson, Executive Chairman, commented

"I am pleased to report that Zoltav has continued to operate the Bortovoy Western Gas Plant at or near full capacity and maintained a positive operating cash flow throughout the period. Following its successful transformation in 2014 into a producing Russian/CIS-focused oil and gas company, Zoltav produced over 8,000 barrels of oil equivalent per day (1,100 toepd) in the first half of 2015.

"Our focus at Bortovoy continues to be on efficiency and maintaining full plant capacity; while also developing an appraisal strategy to capitalise on the undeveloped Eastern fields of the licence. At Koltogor, we are continuing to develop our planned appraisal programme.

"In line with the Company's objective to grow the business through acquisition as well as organically, we continue to review a number of interesting opportunities in the CIS. We have strict acquisition criteria to ensure that future acquisitions will maximise shareholder value."

Chairman's statement

I am pleased to present Zoltav's report for the six month period ended 30 June 2015.

Notwithstanding the challenges posed by declining oil and gas prices and the application of economic sanctions in Russia, I am pleased to report that Zoltav has continued to operate the Bortovoy Western Gas Plant at or near full capacity and maintained a positive operating cash flow throughout the period.

The Bortovoy Licence

Following its successful transformation in 2014 into a producing Russian/CIS-focused oil and gas company, Zoltav generated over 8,000 boepd (1,100 toepd) in the first half of 2015. The average daily production from the Western Gas Plant increased by over 15% compared with the same period last year (prior to Zoltav's ownership) to 8,845 boepd (1,255 toepd). The improved output is a direct result of Zoltav's significant efforts in the latter half of 2014 to improve plant efficiency and boost production through a series of workover operations and the hook-up of the Zhdanovskoye field to the Western Gas Plant. These activities are part of an integrated value-enhancement programme that has taken place under Zoltav's ownership.

As a consequence, Rouble ("RUB") revenues of the Company's Bortovoy operating subsidiary increased in the first six months of 2015 by approximately 20% to RUB828.5 million. USD-denominated revenues declined to USD 14.4 million (37%) - purely as a result of the significant RUB depreciation in late 2014.

The Company continues to assess opportunities for further development of its Western fields with the objective of maximising capacity at the Western Gas Plant. At the current assessment of remaining reserves in the Western fields, the Company estimates that the Western Gas Plant could be kept at full capacity for at least a further decade.

Zoltav has also continued to assess various development scenarios to commercialise the highly prospective Eastern fields of the Bortovoy Licence including with the construction of a second gas plant in this area of the licence.

On 1 July 2015, the gas sales price with Mezhregiongaz increased by 7.5% in RUB.

The Koltogor Licences

In the first half of 2015, the Russian Federal Agency for Subsoil Use ("Rosnedra") registered an additional 546 mmbbls (72 mmT) of Russian standard C1 plus C2 oil reserves for the Koltogor E&P Licence. The additional reserves take the total C1 plus C2 oil reserves for the Koltogor E&P Licence, and the neighbouring Koltogor 10 Licence, to in excess of 1 billion barrels (137 mmT).

With over a billion barrels of Russian standard reserves, the Koltogor licences now contain the largest undeveloped oil discovery in the Western Siberian oil province of Khantiy-Mansisk.

During the first six months of 2015, the Company commenced the next phase of the appraisal programme for Koltogor, including drilling project preparation and land allocation activities. The appraisal programme will in due course include appraisal drilling and testing in order to further define and prove the optimum method of extracting the hydrocarbons.

A more detailed review of operations during the first half of 2015 accompanies this report.

Corporate and managerial developments

Following a review of the effectiveness of the board, and in consultation with its major shareholders, Zoltav announced at the Annual General Meeting (held after the reporting date) a number of changes intended to simplify the Company's management structure. Accordingly, Symon Drake-Brockman, Michael Lombardi and Julia Lebedina left the board. I should like to reiterate our gratitude for their contributions to Zoltav.

The changes to the board were intended to improve the efficiency and effectiveness of decision making, allowing the Company to make faster operational decisions and to more quickly assess new opportunities for growth. It remains the board's intention to make further appointments in the future of directors with highly relevant Russian and CIS experience who can add value to the Company's strategy to grow organically and through acquisition.

As the centre of Zoltav's day-to-day finance management moves towards Moscow, Denis Golubovskiy was appointed as Director Finance in July 2015. Mr Golubovskiy replaces Alistair Stobie, who left the Company at the end of August. Mr Golubovskiy has extensive financial experience in Russian oil and gas, including having worked in one of Russia's largest hydrocarbon joint ventures with foreign involvement. The board is grateful to Mr Stobie for his contribution towards establishing Zoltav as an operational E&P company.

Outlook

At Bortovoy, the Company's main operational focus is on efficiency and keeping the Western Gas Plant at or near its full capacity; while continuing to develop an appraisal strategy to capitalise on the undeveloped Eastern fields of the licence.

At Koltogor, Zoltav will continue to develop its planned appraisal programme.

Zoltav's strategic goal is that of building a leading, mid-sized Russian/CIS-focused oil and gas business with a scale appropriate to a Main Market listing on the London Stock Exchange within the next two years.

Consequently, we continue to review a number of interesting acquisition opportunities in addition to our organic growth prospects. The Board operates very strict criteria to ensure any proposed future acquisitions will maximise shareholder value.

Alastair Ferguson

Executive Chairman

Review of operations

Bortovoy Licence

Zoltav's main priority since the acquisition of the Bortovoy Licence has been to restore the Western Gas Plant to its full average daily production capacity of approximately 48.4 mmcf/d (1.4 mmcm/d); and thereafter to optimise plant efficiency and maintain capacity production. Production capacity was achieved in the latter part of 2014 through the boosting of production on the Karpenskoye field (the main producer) via a series of workover operations and through the drilling of an infill well; as well as through hooking-up the Zhdanovskoye field to the Western Gas Plant. Flow rates, both from the worked-over Karpenskoye well (11.4 mmcf/d or 0.322 mmcm/d) and the three Zhdanovskoye wells (9.8 mmcf/d or 0.278 mmcm/d), all exceeded the Company's initial expectations.

While Zoltav's main operational objective at Bortovoy has been to achieve and maintain full capacity production, the Company has concurrently been undertaking scenario planning for the development of the highly prospective Eastern fields of the licence. The construction of a second gas plant in this area of the licence, close to the Pavlovskoye field - with its Proved plus Probable plus Possible gas reserves of 183.7 bcf (5.2 bcm) - is currently perceived by management as the most likely scenario to further commercialise the field. Zoltav will continue to assess the optimum timing and strategy to exploit the very substantial upside potential which exists in the east of the licence.

Production

Average daily production from the Western Gas Plant during the first half of 2015 was 8,845 boe/d (1,255 Toe/d) (H1 2014: 7,656 boe/d / 1,086 Toe/d). This comprised 46.6 mmcf/d (1.32 mmcm/d) of gas (H1 2014: 40.2 mmcf/d / 1.14 mmcm/d) and 544 bbls/d (69 T/d) of oil and condensate (H1 2014: 478 bbls/d / 60 T/d). Overall this was a 15.5% increase in production compared with H1 2014. Gas production increased by 15.9%, whilst liquids production increased by 13.8%. Well stock has been operating above our initial estimates of the base decline rate.

The objectives for the next twelve months include the completion of a new well on the Zhdanovskoye field (Well 107) and to either hook up pre-existing Wells 103 and 19 in the western area of the Zhdanovskoye field to the Western Gas Plant or alternatively to side-track Wells 17 and 19 on the Karpenskoye field. Both options are currently being assessed.

Development drilling and other well activity

Our current plan assumes the drilling of two new wells on the Zhdanovskoye field in the next three years. Rig mobilisation for Well 107 is now underway with spud expected in early October and first production in December 2015.

Wells 103 and 19 on the Zhdanovskoye field will, should the Company pursue this route, be hooked up in mid-2016; it is expected that Well 108 will be drilled in early 2017.

If the option of side-tracking wells 17 and 19 on the Karpenskoye field is chosen, all Zhdanovskoye field activities, with the exception of drilling Well 107, will be deferred to 2018 as we believe that the side-tracks will allow for the loading of the Western Gas Plant to its full capacity through to the end of 2017.

Western Gas Plant

Operations at the Western Gas Plant have continued smoothly with the plant operating more reliably compared to 2014.

The dew point project was successfully completed in June 2015 on time and within budget. This allowed Zoltav to continue delivering treated gas even during the hot summer season in volumes specified in the sales agreement with Mezhregiongaz.

Koltogor Licences

The work programme across both the Koltogor E&P Licence and Koltogor 10 resulted in Rosnedra registering, in March 2015, an additional 546 mmbbls (72 mmT) of Russian standard C1 plus C2 oil reserves, bringing the current registered reserves of the combined Koltogor fields to over 1 billion barrels (137 mmT).

As the sole owner of the licences, management is evaluating farm-out options.

Koltogor Exploration and Production Licence

Following the extensive 3D and 2D seismic programme carried out from 2013 to 2015, the Company completed a re-estimation of its reserves and registered new volumes with Rosnedra in March 2015. This included booking new JV2 (Jurassic) oil formation volumes. As a result, the additional reserves across the JV0 (Bazhenov), JV1, JV2 and JV3 (Jurassic) formations now total 949.4 mmbbls (125 mmT) of C1 plus C2 reserves under the Russian classification system.

Throughout the first half of 2015 Zoltav has been engaged in project preparation and land allocation activities associated with the future drilling programme.

Koltogor Exploration Licence 10

On 7 May 2015 Rosnedra granted the Company a certificate confirming the discovery of the West Koltogor oil field. As a result the Company intends, later this year, to submit an application for exploration and production status on this licence.

Group Reserves under PRMS as at 30 June 2015

Source: DeGolyer and & MacNaughton

Financial review

Our focus at Bortovoy - having restored the Western Gas Plant to capacity production - has been on maintaining full capacity, improving operating efficiency, and reducing costs throughout the first half of 2015. The benefits of our efforts are reflected in the reported period.

Revenue

Group revenues were US$14.4 million (H1 2014: US$1.6 million). The comparative numbers in this financial review for the first half of 2014 include only 13 days of trading of the Group's licence holding entity, Diall Alliance. Gas sales are priced in Roubles ("RUB") and are not tied to either the United States dollar ("US$") or the Euro. Accordingly, revenues in US$, the Group's reporting currency, will naturally be affected by fluctuations in the rate of US$ to RUB.

Gas realisations were US$1.46/mcf or RUB2,952.5/mcm (H1 2014: US$2.43/mcf or RUB2,928.9/mcm). Gas produced was sold to Mezhregiongaz, a Gazprom subsidiary, at the transfer point on entry to the Central Asia - Centre gas pipeline system.

I am pleased to note that the gas sales price with Mezhregiongaz increased on 1 July 2015 by 7.5% in RUB.

Oil and condensate realisations were US$28.54/bbl or RUB1,637.9/bbl (US$224.01/T or RUB12,857.4/T)) (H1 2014: US$52.74/bbl or RUB1,801.2/bbl (US$413.98/T or RUB14,139.2/T)). Oil and condensate are sold directly at the Western Gas Plant through a tender process to a small number of different purchasers.

Cost of sales

Total cost of sales were US$10.6 million (H1 2014: US$1.2 million). This comprised US$3.3 million of production based taxes (H1 2014: US$0.25 million), US$3.1 million of depreciation, depletion and amortisation of assets (H1 2014: US$0.4 million) and US$4.2 million of other cost of sales (H1 2014: US$0.5 million). Other cost of sales included approximately US$0.63 million of one-off maintenance and repair costs (including costs of associated materials) on the Western Gas Plant at Bortovoy which are expected to provide economic benefits to the Company in the future.

Operating loss

The operating loss for the period was US$0.4 million (H1 2014: operating loss of US$7.2 million).

Finance costs of US$2.7 million are represented by interest on the RUB2,400 million (US$69.6 million) Sberbank facility which was entered into by Diall Alliance on 4 April 2014.

Taxation

The production based tax for the period was US$3.3 million (H1 2014: US$0.25 million) which is recognised in the cost of sales. The gas mineral extraction tax ("MET") rate applicable in the period was US$0.30/mcf or RUB17.5/mcf (US$10.73/mcm of RUB616/mcm) (H1 2014: US$0.39/mcf or RUB13.3/mcf (US$13.79/mcm or RUB471/mcm)).

In addition to production taxes the Group was subject to a 2.2 per cent property tax which is based on the net book value of Russian assets calculated for property tax purposes. Property tax on major part of Diall Alliance's assets, including the Western Gas Plant, is paid at a reduced tax rate of 0.1 per cent. This figure is included in the cost of sales in the consolidated income statement.

The income tax charge for the half year was US$0.3 million (H1 2014: US$1 million). Despite the Group being predominantly in a development phase it is not able to use losses incurred in one part of the Group against profits in another as the Group companies are located in different tax jurisdictions.

Liquidity

Net cash provided from operating activities was US$4.7 million (H1 2014: cash used in operating activities US$7.1 million). This is reflecting that in H1 2014 the Group was producing only minimal revenues but bore the costs of US$3.2 million associated both with the acquisition of Royal Atlantic Energy and its management company; as well as the costs of the work programme at the Koltogor Licences.

The Group has sufficient liquidity to fund its improvements on the Western fields at Bortovoy and its investment plans for Koltogor at least through to the end of 2016. It is expected that the longer-term plans to appraise - and ultimately develop - the Eastern fields on the highly prospective Bortovoy Licence will require additional funding.

Denis Golubovskiy

Director Finance

Condensed consolidated statement of comprehensive income

(in '000s US dollars, unless otherwise stated)

Condensed consolidated statement of financial position

(in '000s US dollars, unless otherwise stated)

Condensed consolidated statement of cash flows

(in '000s US dollars, unless otherwise stated)

Condensed consolidated statement of changes in equity

(in '000s US dollars, unless otherwise stated)

The accompanying notes form an integral part of these consolidated financial statements.

Notes to the condensed consolidated interim financial information

(in '000s US dollars, unless otherwise stated)

1 Background

1.1 The Company and its operations

The Zoltav Group (Group) comprises Zoltav Resources Inc. (Company), together with its subsidiaries:

The Company was incorporated in the Cayman Islands on 18 November 2003, which does not prescribe the adoption of any particular accounting framework. The Board has therefore adopted International Financial Reporting Standards (IFRS) issued by the International Accounting Standards Board and as adopted by the European Union.

The principal activities of the Company and its subsidiaries (the "Group") are the acquisition, exploration and development of hydrocarbon assets and production of hydrocarbons in the Russian Federation and the CIS. The Company's shares are listed on the AIM of London Stock Exchange. The financial statements are prepared in United States Dollars.

CenGeo Holdings, incorporated in Cyprus, was acquired by Zoltav Resources Holdings (Jersey) Limited on 4 July 2013. CenGeo Holdings has a 100 per cent. interest in SibGeCo, a company incorporated in Russia, which holds the Koltogorsky production licence and the legacy Koltogorsky exploration licences.

Royal Atlantic Energy (Cyprus) Limited, incorporated in Cyprus, has a 100 per cent. interest in Diall Alliance LLC, incorporated in Russia, which holds the Bortovoy exploration and production licence. ZR Energy LLC, incorporated in Russia, is a management company for Diall Alliance LLC. Together, Royal Atlantic Energy (Cyprus) Limited, its wholly owned subsidiary Diall Alliance LLC and ZR Energy LLC are referred to as "Royal Atlantic Energy". Royal Atlantic Energy was acquired by Zoltav Resources Holdings (Jersey) Limited on 18 June 2014.

Zoltav Resources Holdings (Jersey) Limited was incorporated in Jersey as a private limited company on 9 January 2013.

ZRI Services (UK) Ltd was incorporated in the United Kingdom as a private limited company on 29 January 2013.

1.2 Russian business environment

The Russian Federation displays certain characteristics of an emerging market. Its economy is particularly sensitive to oil and gas prices. The legal, tax and regulatory frameworks continue to develop and are subject to varying interpretations.

The recent political and economic turmoil witnessed in the region, in particular the developments in Ukraine, and falling crude oil prices, have had and may continue to have a negative impact on the Russian economy, including further weakening of the Russian Ruble, higher interest rates, reduced liquidity and making it harder to raise international funding. These events, including current and future international sanctions against Russian companies and individuals and the related uncertainty and volatility of the financial markets, may have a significant impact on the Group's operations and financial position, the effect of which is difficult to predict. The future economic and regulatory situation may differ from management's expectations.

Whilst not currently affecting the Company's operations, the sanctions being imposed by the European Union and the United States of America continue to evolve. The Company cannot confirm that the sanctions will not have an effect on the Company's operations or its ability to access international capital markets in the future.

2 Significant accounting policies

2.1 Basis of preparation

These condensed interim financial statements for the six months ended 30 June 2015 have been prepared in accordance with IAS 34, 'Interim financial reporting', as adopted by the European Union. The condensed interim financial statements should be read in conjunction with the annual financial statements for the year ended 31 December 2014, which have been prepared in accordance with IFRSs as adopted by the European Union.

The preparation of financial statements in conformity with IFRSs requires the use of certain critical accounting estimates. It also requires management to exercise its judgment in the process of applying the Group's accounting policies. The areas involving a higher degree of judgment or complexity, or areas where assumptions and estimates are significant to the consolidated financial statements are disclosed in this Note.

2.2 Going concern

The consolidated financial statements have been prepared on the going concern basis as the directors have concluded that the Group will continue to have access to sufficient funds in order to meet its obligations as they fall due for the foreseeable future regarded as at least 12 months after the date of signing of the financial statements as explained further in the Directors Report.

On 30 June 2015 Sberbank formally agreed to waive a debt to EBITDA ratio covenant stipulated in the credit facility agreement with Sberbank and of which the Company had been in breach since the first quarter of 2015. The waiver will be valid through 30 June 2016 by which time the Company expects to be fully compliant based on current projections, as considered and approved by the board.

2.3 Accounting policies

The accounting policies and methods of computation used are consistent with those used in the Group's Annual Report and Financial Statements for the year ended 31 December 2014 with the exception of the following new or revised standards and interpretations.

Annual improvements 2011-2013 cycle (effective 1 July 2014 - endorsed in EU for 1 Jan 2015) include changes to:

· IFRS 1,'First time adoptions of IFRSs', basis of conclusions is amended to clarify that where a new standard is not mandatory but is available for early adoption a first-time adopter can use either the old or the new version, provided the same standard is applied in all periods presented.

· IFRS 3,'Business combinations' is amended to clarify that IFRS 3 does not apply to the accounting for the formation of any joint venture under IFRS 11.

· IFRS 13,'Fair value measurement' clarifies that the portfolio exception in IFRS 13 applies to all contracts (including nonfinancial contracts) within the scope of IAS 39 or IFRS 9.

· IAS 40,'Investment property' is amended to clarify that IAS 40 and IFRS 3 are not mutually exclusive. IAS 40 assists users to distinguish between investment property and owner-occupied property. Preparers also need to consider the guidance in IFRS 3 to determine whether the acquisition of an investment property is a business combination.

These amendments to IFRSs effective for the financial year ending 31 December 2015 are not expected to have a material impact on the Group.

Taxes on income in the interim periods are accrued using the tax rate that would be applicable to expected total annual profit or loss.

3 Acquisition of Royal Atlantic Energy

On 13 December 2013, the Company signed a Sale and Purchase Agreement with Bandbear Limited to acquire 100 per cent. of the share capital of Royal Atlantic Energy (and with it the Bortovoy Licence described above). The acquisition was completed on 18 June 2014 through the issue of 38,263,095 new Ordinary Shares at an effective price of US$1.60 (100 pence) per share (equivalent to US$61.22 million) and the payment of US$58.94 million in cash. In addition, following the transaction the Group assumed US$59.9 million of bank debt held by Royal Atlantic Energy. 

The acquisition-date fair value of the total purchase consideration and its components are as follows:

The fair value of the new issued shares of the acquirer was determined on the basis of the closing market price of the ordinary shares on the date which Zoltav signed an Acquisition Agreement with Bandbear.

Acquisition related transaction costs of US$ 3.2 million were expensed as operating, administrative, selling expenses.

In accordance with IFRS 3 "Business Combinations", the Group is required to account for acquisitions based on the fair values of the identifiable assets acquired and liabilities and contingent liabilities assumed.

Details of the assets and liabilities acquired and goodwill arising are as follows:

The fair values of assets and liabilities acquired are based on a combined valuation approach that considered both discounted cash flows expected to be generated from the acquired business and a multiple based approach looking to similar recent observable market transactions. The valuation of identifiable tangible and intangible assets was performed by an independent professional appraiser. Based on the appraisal report the following items were included in the purchase price allocation:

- Mineral rights valued at US$90.0 million;

- Property, plant and equipment valued at US$128.9 million.

The fair value of the assets acquired and liabilities assumed is greater than the purchase consideration given. The resultant negative goodwill of $35.0 million is as a result the initial acquisition of the assets by Bandbear following the administration of the former owner and the related party nature of the transaction. The negative goodwill on acquisition has been immediately recognised in the income statement as a gain on acquisition.

The revenue included in the consolidated income statement from 18 June 2014 to 30 June 2014 and contributed by Diall Alliance LLC was US$1.6 million. Had Diall Alliance been consolidated into the Group from 1 January 2014, the consolidated income statement for the six months ended 30 June 2014 would show pro-forma revenue of US$19.8 million (year ended 31 December 2014: US$38.14 million).

4 Revenue

The Group's operations comprise one class of business being oil and gas exploration, development and production and all revenues are from one geographical region, Saratov Region in the Russian Federation. Companies incorporated outside of Russia provide support to the operations in Russia.

Revenue is primarily from the sale of three products:

All gas sales are to one customer, Gazprom Mezhreiongaz Saratov LLC under a long term contract effective till 31 December 2015 with terms reviewed annually. Condensate and oil are sold to regional buyers. The sales of all three products are denominated in RUB.

5 Exploration and evaluation assets

Additions for the six months ended 30 June 2014 include additions on acquisition of Royal Atlantic Energy of US$25.8 million, US$63.7 million and US$0.5 million in respect of 'licences and other intangibles', 'drilling, seismic and other costs' and 'decommissioning asset' respectively.

In management's opinion, as at 30 June 2015 there were no non-compliance issues in respect of the licences that would have an adverse effect on the financial position or the operating results of the Group.

Management performed an assessment, as at 30 June 2015, of external and internal indicators of potential impairment and concluded that no such impairment indicators existed.

6 Property, plant and equipment

Additions in for the six months ended 30 June 2014 include additions on acquisition of Royal Atlantic Energy of US$128.4 million, US$0.4 million and US$0.1 million in respect of 'oil and gas assets', 'motor vehicles' and 'other equipment and furniture' respectively.

Management performed an assessment, as at 30 June 2015, of external and internal indicators of potential impairment and concluded that no such impairment indicators existed.

7 Share capital

8 Earnings/(loss) per share

Basic earnings/(loss) per share is calculated by dividing the profit/(loss) attributable to owners of the Company by the weighted average number of ordinary shares in issue during the period.

Diluted earnings/(loss) per share is calculated by adjusting the weighted average number of ordinary shares outstanding to assume conversion of all dilutive potential ordinary shares. The Company has one category of dilutive potential ordinary shares: share options/warrants.

The diluted loss per share for the six months ended 30 June 2015 is US Cents 1.95 (six month period ended 30 June 2014: earnings per share US Cents 37.63; year ended 31 December 2014: earnings per share US cents 20.25) taking into account the existing warrants and share options.

9 Share-based payments

At 30 June 2015, the Company had a total of 2,117,500 outstanding share options (31 December 2014: 2,117,500). There were no movements during the six months ended 30 June 2015.

10 Borrowings

10.1 Non-current borrowings

The fair value of the borrowings as of 30 June 2015 was US$37.1 million (31 December 2014: US$ 40.6 million). The fair value of the borrowings is based on cash flows discounted at the rate based on the borrowing rate of 14.37% (31 December 2014: 12.02%) and is within level two of the fair value hierarchy.

Non-revolving credit facility

On 4 April 2014, Diall Alliance entered into a non-revolving credit facility agreement with Sberbank of Russia OJSC. The maximum amount capable of being drawn down under the facility is RUB 2,400,000,000. The facility was fully drawn down in two tranches on 28 April 2014 and 8 December 2014. The maturity date is 3 April 2021, being the 7 year anniversary of the facility being entered into. Diall Alliance is obliged to repay the principal amount of the loan in 24 tranches on a quarterly basis with a final repayment tranche being payable on the maturity date. The first repayment of RUB 60,000,000 was made on 11 May 2015 in accordance with the terms of the agreement. The interest rate is 10.98 per cent. per annum. Sberbank may unilaterally amend the interest rate in the event of increases in refinancing rates of the Central Bank of Russia. Diall Alliance paid an upfront commission on the facility of 1 per cent. of the facility amount (RUB24,000,000) at time of entering into the facility and paid a drawdown charge of 0.25 per cent. per annum (RUB410,101) on the undrawn balance of the facility until 8 December 2014, when the facility was fully drawn down. Diall Alliance has the option to prepay the loan in whole or in part at any time, subject to the payment of a fee. Diall Alliance provided certain warranties and representations to Sberbank in the agreement. The agreement contains certain loan covenants and events of default which are customary for a facility of this type. The loan is secured on the fixed assets of Diall Alliance, such security being granted pursuant to various pledge and mortgage deeds entered into by Diall Alliance on or about the date of the Sberbank Facility.

Starting from the first quarter of 2015, the Company has been in breach of a debt to EBITDA ratio covenant stipulated by the Sberbank credit facility agreement. On 30 June 2015, Sberbank formally agreed to waive the covenant. The waiver will be valid through 30 June 2016.

10.2 Liquidity risk

Liquidity risk is the risk that the Company will not be able to meet its financial obligations as they fall due. The Company monitors the risk of cash shortfalls by means of current liquidity planning. The Company's approach to managing liquidity is to ensure, as far as possible, that it will always have sufficient liquidity to meet its liabilities when due, under both normal and stressed conditions, without incurring unacceptable losses or risking damage to the Company's reputation. This approach is used to analyse payment dates associated with financial assets, and also to forecast cash flows from operating activities. The contractual maturities of financial liabilities presented include interest payments.

There is no material difference between the carrying value and fair value of financial liabilities.

11 Commitments and contingencies

11.1 Insurance

The insurance industry in the Russian Federation is in a developing state and many forms of insurance protection common in other parts of the world are not generally available. The Company's insurance currently includes cover for damage to or loss of assets, including business interruption insurance should an insurable incident result in a shut-down of the Western Plant for an extended period of time, insurance for out-of-control wells and environmental damage caused thereby, third party liability coverage (including employer's liability insurance) and directors and officers liability insurance, in each case subject to excesses, exclusions and limitations. However, there can be no assurance that such insurance will be adequate to cover losses or exposure for liability or that the Company will continue to be able to obtain insurance to cover such risks. Until the Company obtains adequate insurance coverage there is a risk that the loss or destruction of certain assets could have a material adverse effect on the Company's operations and financial position.

11.2 Litigation

The Company was involved in the number of court procedures (both as a plaintiff and as a defendant) arising in the course of business. In the opinion of management there are no current legal proceedings or other claims outstanding which could have a material adverse effect on the results of operation financial position or cash flows of the Company and which have not been accrued or disclosed in this historical financial information.

11.3 Taxation contingencies

Russian tax legislation which was enacted or substantively enacted at the end of the reporting period is subject to varying interpretations when being applied to the transactions and activities of the Group. Consequently, tax positions taken by management and the formal documentation supporting the tax positions may be successfully challenged by relevant authorities. Russian tax administration is gradually strengthening, including the fact that there is a higher risk of review of tax transactions without a clear business purpose or with tax incompliant counterparties. Fiscal periods remain open to review by the authorities in respect of taxes for three calendar years preceding the year of review. Under certain circumstances reviews may cover longer periods. As Russian tax legislation does not provide definitive guidance in certain areas, the Group adopts, from time to time, interpretations of such uncertain areas that reduce the overall tax rate of the Group. While management currently estimates that the tax positions and interpretations that it has taken can probably be sustained, there is a possible risk that outflow of resources will be required should such tax positions and interpretations be challenged by the relevant authorities. The impact of any such challenge cannot be reliably estimated; however, it may be material to the financial position and/or the overall operations of the Group.

The taxation system in the Russian Federation continues to evolve and is characterised by frequent changes in legislation official pronouncements and court decisions which are sometimes contradictory and subject to varying interpretation by different tax authorities. Taxes are subject to review and investigation by a number of authorities which have the authority to impose severe fines penalties and interest charges. Recent events within the Russian Federation suggest that the tax authorities are taking a more assertive and substance-based position in their interpretation and enforcement of tax legislation.

These circumstances may create tax risks in the Russian Federation that are substantially more significant than in other countries. Management believes that it has provided adequately for tax liabilities based on its interpretations of applicable Russian tax legislation, official pronouncements and court decisions. However the interpretations of the relevant authorities could differ and the effect on this historical financial information if the authorities were successful in enforcing their interpretations could be significant.

11.4 Environmental matters

The Group's operations are in the upstream oil industry in the Russian Federation and its activities may have an impact on the environment. The enforcement of environmental regulations in the Russian Federation is evolving and the enforcement posture of government authorities is continually being reconsidered. The Group periodically evaluates its obligation related thereto. The outcome of environmental liabilities under proposed or future legislation, or as a result of stricter interpretation and enforcement of existing legislation, cannot reasonably be estimated at present, but could be material.

Under the current levels of enforcement of existing legislation, management believes there are no significant liabilities in addition to amounts which are already accrued as a part of decommissioning provision and which would have a material adverse effect on the financial position of the Group.

12 Capital commitments

Capital expenditure contracted for at the end of the reporting period but not yet incurred at 30 June 2015 was US$1.1 million (31 December 2014 - US$1.7 million).

13 Related party transactions

13.1 Control relationships

Related parties include shareholders, affiliates and entities under common ownership and control with the Company and key management personnel.

13.2 Management remuneration

There are no transactions or balances with key management and their close family members, except for remuneration in the form of salary and bonuses.

13.3 Other related parties

On 19 March 2013, the Company entered into the First ARA Subscription Agreement with ARA Capital, pursuant to which ARA committed to provide up to US$20,000,000 of funds principally to support the working capital requirements of the Company, such funding to be made at a price per Ordinary Share of £0.70. ARA Capital completed this subscription in full on 31 March 2014.

On 13 December 2013, the Company entered into the Second ARA Subscription Agreement with ARA Capital, pursuant to which ARA Capital committed to subscribe for US$45,615,000, such funding to be made at a price per Ordinary Share of £1.00.

On 13 December 2013, the Company entered into the Acquisition Agreement (as subsequently amended pursuant to the SPA Amendment) for the acquisition of 100% of the shares of Royal Atlantic Energy and 100% participatory interest in Vostok Energy Limited Liability Company. The following is a summary of certain terms and conditions of the Acquisition Agreement:

a) Zoltav Resources conditionally agreed to acquire 100% of the shares of Royal Atlantic Energy and 100% participatory interest in Vostok Energy Limited Liability Company and have the Diall Receivable and Royal Atlantic Energy Receivable (to the extent the same remain outstanding at completion of the Acquisition Agreement) novated to it. Bandbear agreed to sell such interest as is held by it in the shares of Royal Atlantic Energy and participatory interest in Vostok Energy Limited Liability Company to Zoltav Resources and to enter into novations of the Diall Receivable and the Royal Atlantic Energy Receivable.

b) The aggregate consideration for the purchase of 100% of the shares of Royal Atlantic Energy and 100% participatory interest in Vostok Energy Limited Liability Company and the novation of the Diall Receivable and the Royal Atlantic Energy Receivable was US$77,505,100, RUB10,000 and €5,100 in cash and US$102,500,000 to be satisfied by the allotment and issue to Bandbear of Ordinary Shares as set out in the Acquisition Agreement, credited as fully paid.

c) The parties to the Acquisition Agreement agreed therein that Diall Alliance should be able to enter into a new debt facility after the Acquisition Agreement had been entered into and before its completion and that all or part of such new facility be used to reduce amounts outstanding under the Diall Receivable to Bandbear. Accordingly, on 20 December 2013 RUB82,000,000 and on 29 April 2014 a further RUB2,186,273,565 was repaid to Bandbear by Diall Alliance.

d) Bandbear provided the Company and Zoltav Resources with warranties as to capacity and certain other limited warranties including as to title. The Company and Zoltav Resources also gave certain warranties and undertakings to Bandbear as to capacity and authority and certain other limited warranties.

e) Pursuant to the SPA Amendment, the Acquisition Agreement was amended by the parties to reflect, inter alia, an assignment to Zoltav Resources of a loan note issued by Royal Atlantic Energy in favour of Bandbear on 31 January 2014 and changes to the Subscription which have been agreed subsequent to the Acquisition Agreement having been entered into, together with consequential changes resulting therefrom.

There were no other related party transactions during the period.

14 Effects of movements in foreign exchange

As noted above, the Company's operations are in the Russian Federation and its prime currency of operation in the region is the RUB. The US$:RUB moved from US$1:RUB56.2584 at 31 December 2014 to US$1:RUB55.524 as at 30 June 2015 and continues to fluctuate. Under IFRS these movements are reflected at each asset and liability level with the net adjusting amount being reflected within Shareholders equity. A summary of these movements in reporting periods are set-out below:

15 Events after reporting date

There we no events after reporting date.

16 Date of approval of financial statements

The financial statements were approved by the Board of Directors on 28 September 2015.

About Zoltav

Zoltav is an oil and gas exploration and production company focused on acquiring and developing assets in the CIS.

Zoltav holds the Bortovoy Licence in the Saratov region of South Western Russia, a 3,215 square kilometre area along the northern margin of the Pre-Caspian basin, one of the largest hydrocarbon basins in the CIS.

The Bortovoy Licence contains a number of productive gas fields, a processing plant and significant exploration prospectivity. It holds Proved plus Probable reserves of 750 bcf (21.2 bcm) of gas and 3.9 mmbbls (488 mT) of oil and condensate. In 2014 the Bortovoy Licence produced 2.8 mmboe (396 mToe).

Zoltav also holds the Koltogor E&P Licence, a 528 square kilometre area in the Khantiy-Mansisk Autonomous Okrug of Western Siberia, one of Russian's most prolific oil producing regions.

The Koltogor E&P Licence contains the Koltogor oil field with Proved plus Probable reserves of 79.2 mmboe (10.3 mToe). Zoltav is engaged in an appraisal programme with a view to developing the field for commercial production.

Additionally, Zoltav holds Koltogor 10, a 167 square kilometre area due west of the Koltogor E&P Licence on which Zoltav is engaged in an exploration and appraisal programme. 

For further information on Zoltav or to sign up for our news alert service visit: www.zoltav.com.