Global Energy Dev. (GED) - Interim Results RNS Number : 1514N Global Energy Development PLC 26 September 2012 Immediate Release 26 September 2012 GLOBAL ENERGY DEVELOPMENT PLC ("Global" or the "Company") INTERIM RESULTS FOR THE SIX MONTHS ENDED 30 JUNE 2012 Global Energy Development PLC, the South American focused petroleum production and development company (AIM: GED), with operations in Colombia, South America, announces its interim results for the six month period ended 30 June 2012 (the "Period"). HIGHLIGHTS: • Revenue increased by 18 per cent. to $20.2 million (H1 2011: $17.1 million); • Average gross production decreased 17 per cent. to 202,247 barrels of oil ("bbls") (H1 2011: 244,040 bbls) due to the temporary downtime of the Tilodiran 2 well (126 days) during the Period; • Gain of $810,000, net of taxes (H1 2011: nil) on sale of remaining interest in Block 95 in Peru ; • Profit before taxation of $1.2 million (H1 2011; $2.6 million); • Net profit of $2.0 million (H1 2011: $3.9 million net profit due to a significant non-cash tax benefit of $1.2 million received); and • Capital expenditures of $6.0 million predominantly related to the workover programmes of the Tilodiran 2 and the Torcaz 5 wells and the conversion of the Rio Verde 2 well into a water injection well. Stephen Voss, Managing Director, commenting on the results, said: "We are in a strong financial position from recent improvements in our on-going Llanos oil production and are focusing on partnering efforts and our development plans in the Magdalena Valley". For further information please contact Global Energy Development PLC +001 817 310 0240 Anna Williams, Finance Director firstname.lastname@example.org www.globalenergyplc.com Buchanan (Financial PR) +44 (0)20 7466 5000 Tim Thompson Ben Romney Northland Capital Partners Limited +44 (0)20 7796 8800 Louis Castro Lauren Kettle Westhouse Securities +44 (0) 20 7601 6100 Petre Norton Andrew Matharu Notes to Editors: The Company's shares have been traded on AIM, a market operated by the London Stock Exchange, since March 2002 (AIM: GED). The Company's balanced portfolio comprises a base of production, developmental drilling and workover opportunities and several exploration projects in Colombia, South America. The information contained within this announcement has been reviewed by Mr. Stephen Voss, a Director of the Company, for the purpose of the Guidance Note for Mining, Oil and Gas Companies issued by the London Stock Exchange in respect of AIM companies which outlines standards of disclosure for natural resource projects. Mr. Voss is a Registered Professional Engineer in Texas and has been a Member of the Society of Petroleum Engineers for 28 years. Proven and probable oil and gas reserves are estimated quantities of commercially producible hydrocarbons which the existing geological, geophysical and engineering data show to be recoverable in future years from known reservoirs. The proved reserves reported by Ralph E. Davis ("RED") independent petroleum engineers, conform to the definition approved by the Society of Petroleum Engineers ("SPE") and the World Petroleum Council ("WPC"). The probable and possible reserves reported by RED conform to definitions of probable and possible reserves approved by the SPE/WPC using the deterministic methodology. Forward-looking statements This release may include statements that are, or may be deemed to be, "forward-looking statements". These forward-looking statements can be identified by the use of forward-looking terminology, including the terms "believes", "estimates", "plans", "projects", "anticipates", "expects", "intends", "may", "will" or "should" or, in each case, their negative or other variations or comparable terminology, or by discussions of strategy, plans, objectives, goals, future events or intentions. These forward-looking statements include all matters that are not historical facts. They appear in a number of places throughout this release and include, but are not limited to, statements regarding the Group's intentions, beliefs or current expectations concerning, among other things, the Group's results of operations, financial position, liquidity, prospects, growth, strategies and expectations of the industry. By their nature, forward-looking statements involve risk and uncertainty because they relate to future events and circumstances. Forward-looking statements are not guarantees of future performance and the development of the markets and the industry in which the Group operates may differ materially from those described in, or suggested by, any forward-looking statements contained in this release. In addition, even if the development of the markets and the industry in which the Group operates are consistent with the forward-looking statements contained in this release, those developments may not be indicative of developments in subsequent periods. A number of factors could cause developments to differ materially from those expressed or implied by the forward-looking statements including, without limitation, general economic and business conditions, industry trends, competition, commodity prices, changes in law or regulation, currency fluctuations (including the US dollar), the Group's ability to recover its reserves or develop new reserves, changes in its business strategy, political and economic uncertainty. Save as required by law, the Company is under no obligation to update the information contained in this release. Past performance cannot be relied on as a guide to future performance. CHAIRMAN AND MANAGING DIRECTOR'S STATEMENT & REVIEW OF OPERATIONS Operations Middle Magdalena Oil Reserves: Several major international companies such as Shell E&P - Colombia and ExxonMobil Exploration Colombia Limited have recently announced partnering efforts in block areas adjacent to the Company's Bolivar Contract area in the Middle Magdalena valley. The Company may also pursue partnering with highly-experienced operators in order to accelerate the development of our substantial undeveloped reserve base and increase shareholder value. Regarding our second largest 2P reserve-based property, the Bolivar Contract area, the Company is continuing its planning with third-party service and equipment providers to hydraulically fracture the La Luna formation in the existing Olivo 2 well during late 2012 or early 2013 depending on the availability of equipment within the country. As part of our strategy to increase production from the large reserve base in our Middle Magdalena properties, work began on the Torcaz 5 well within our Bocachico Contract area in mid-July. A progressive cavity pump was installed at a depth of approximately 7,900 feet which was below the perforations in the formation to re-establish oil (and sand) production and lift from the wellbore. During the testing phase of this pump, successful sanding and oil shows were initiated. However, oil shows were interrupted due to periodic significant sand movement into the wellbore which eventually overwhelmed the capacity of the pump. As a result, it became evident that a modified approach, combining the Cold Heavy Oil Production with Sand (CHOPS) technology process and the partial application of conventional sanding restraints, should be utilised to moderate sand production and enhance oil production. The Company hopes to commence this process in October and planning efforts are currently underway. Llanos Basin Oil Production: The overwhelming majority of the Company's current oil production comes from its contract areas located within the Llanos Basin of Colombia, South America. The Company's focus for the Llanos Basin production is to maximise production volumes, decrease operating costs and utilise cash flow from operations to develop projects within our Middle Magdalena Valley contract areas (Bocachico and Bolivar Association Contracts). Our original targets for the Period for the Llanos Basin properties were the recompletion of the Tilodiran 1 well to re-establish oil production and the conversion of the Rio Verde 2 well to a water injection well in order to significantly reduce water transportation and disposal costs within the Rio Verde Concession Contract area. As previously announced, the original timing of these projects was delayed because, during early 2012, the Company was forced to perform workover operations to replace a failed pump within the wellbore of its Tilodiran 2 well located within the Rio Verde Concession Contract area. Shortly after this work was completed, in May 2012, the electric submersible pump ("ESP") failed again. Upon recovery of the failed pump, the well was stimulated and an ESP from a different vendor was installed at a shallower depth of 8,800 feet. This subsequent workover operation was completed in mid-June. The Tilodiran 2 well is now online and producing stable rates of approximately 350 gross barrels of oil per day ("bopd"). Overall gross production decreased by 17 per cent. from 244,040 bbls to 202,247 in the Period due to the more than 120 days of downtime of the Tilodiran 2 well during the Period. Following completion of the workover, the Company's average gross daily production has been steadily averaging between 1,700 bopd and 1,800 bopd. In July following the completion of the workover of the Tilodiran 2 well, the Company commenced and completed the conversion of the inactive Rio Verde 2 to a water disposal well. The Company successfully concluded short-term water injection tests at Rio Verde 2 and has submitted the test results to the Colombian Ministry of Mines and Energy. Final approval from the Colombian authorities to re-commence water injection at Rio Verde 2 is expected in October 2012. As the Company transports and disposes of more than 120,000 barrels of water each month from its Tilodiran field, we anticipate that this disposal well will save an average of $4.00 per barrel of water on transportation costs per month translating into significant cost savings for the Company. Peru: In June 2012, the Company closed on the sale of its remaining 40 per cent. working interest of the Peruvian Block 95 License Contract for cash consideration of $5.4 million with $2 million received at closing and the remaining $3.4 million payable upon the earlier of either approval of the assignment from Perupetro, Peru's national agency for hydrocarbons, or one year from the closing date. Based on the total proceeds from the sale, the Company was able to record a net gain after tax on this transaction of approximately $810,000. This sale allows the Company to remain focused on our core value assets in Colombia. Financials During the Period, the Company experienced increased revenues due to higher oil prices as compared to the prior year period. Average realised sales prices increased from $93.59 per bbl for the six months ended 30 June 2011 to an average of $101.60 per bbl in the Period, while gross oil production decreased by 17 per cent. from 244,040 bbls to 202,247 bbls due to the temporary downtime of the Tilodiran 2 well during the Period. Cost of sales increased 47% from $9.7 million to $14.3 million during the Period. The major contributing factor of this increase in operating expense was higher water volumes and associated disposal costs from the Tilodiran field. As a reminder, water production increased in mid-2011 along with increased oil production from the Tilodiran field. Commencing water injection into the recently converted Rio Verde 2 well will reduce future water disposal costs. The Company also derecognised the cost of the damaged ESP of $736,000 in the Tilodiran 2 well when it was replaced during the Period. The Company ended the Period with a cash balance of $7.8 million with increased cash flow from operations of $5.9 million compared to $4.1 million in the prior period. Capital expenditures of $6.0 million related primarily to the required workovers on the Tilodiran 2 well, the workover operations on the Torcaz 5 well and the conversion of the Rio Verde 2 well to a water disposal well. We were able to repay and fully extinguish the remaining convertible notes outstanding of $9.5 million which became due and payable in 2012 with the securing of new long-term financing of $12 million. This allows the Company to focus its capital resources on improvements of its on-going oil production and the continuation of its development plans in the Magdalena Valley. Mikel Faulkner Chairman Stephen Voss Managing Director 25 September 2012 INDEPENDENT REVIEW REPORT TO GLOBAL ENERGY DEVELOPMENT PLC Introduction We have been engaged by the Company to review the set of financial information in the half-yearly financial report for the six months ended 30 June 2012 which comprises the Consolidated Statement of Comprehensive Income, the Consolidated Statement of Financial Position, the Consolidated Cash Flow Statement, the Consolidated Statement of Changes in Equity and related explanatory notes 1 to 13. We have read the other information contained in the half-yearly financial report and considered whether itcontains any apparent misstatements or material inconsistencies with the information in the condensed set of financial information. Directors' responsibilities The interim report, including the financial information contained therein, is the responsibility of and has been approved by the Directors. The Directors are responsible for preparing the interim report in accordance with the rules of the London Stock Exchange for companies whose securities are traded on AIM which require that the half-yearly report be presented and prepared in aform consistent with that which will be adopted intheCompany's annual accounts having regard to theaccounting standards applicable to such annualaccounts. Our responsibility Our responsibility is to express to the Company aconclusion on the condensed set of financial information in the half-yearly financial report based onour review. Our report has been prepared in accordance with the terms of our engagement to assist the Company in meeting the requirements of the rules of the London Stock Exchange for companies whose securities are traded on AIM and for no other purpose. No person is entitled to rely on this report unless such a person is aperson entitled to rely upon this report by virtue of andfor the purpose of our terms of engagement or has been expressly authorised to do so by our prior written consent. Save as above, we do not accept responsibility for this report to any other person or for any other purpose and we hereby expressly disclaim any and allsuch liability. Scope of review We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410, ''Review of Interim Financial Information Performed by the Independent Auditor of the Entity'', issued by the Auditing Practices Board for use in the United Kingdom. A review of interim financial information consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK and Ireland) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion. Conclusion Based on our review, nothing has come to our attention that causes us to believe that the condensed set of financial information in the half-yearly financial report for the six months ended 30 June 2012 is not prepared, in all material respects, in accordance with the rules of the London Stock Exchange for companies whose securities are traded on AIM. BDO LLP Chartered Accountants and Registered Auditors 55 Baker Street London W1U 7EU UK 25 September 2012 CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME For the period ended 30 June 2012 Six months ended Six months ended Twelve months 30 June 30 June ended 2012 2011 31 December $'000 $'000 2011 (Unaudited) (Unaudited) $'000 (Audited) Revenue 20,179 17,096 43,070 Cost of sales (14,300) (9,705) (28,075) Gross profit 5,879 7,391 14,995 Other income 39 9 12 Administrative expenses (3,282) (3,629) (6,669) Finance income 15 10 34 Finance expense (1,416) (1,138) (2,438) Profit before taxation 1,235 2,643 5,934 Tax (expense)/credit (41) 1,232 (3,938) Profit from continuing 1,194 3,875 1,996 operations, net of tax Profit from discontinued 810 - - operations, net of tax Total comprehensive income attributable to the equity holders of the parent 2,004 3,875 1,996 Earnings per share for continuing operations - Basic $0.03 $0.11 $0.06 - Diluted $0.03 $0.10 $0.05 Earnings per share for discontinued operations - Basic and diluted $0.02 - - CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION 30 June 30 June 31 December 2012 2011 2011 $'000 $'000 (Unaudited) $'000 (Unaudited) (Audited) Assets Non-current assets Intangible assets 828 5,746 3,427 Property, plant and equipment 101,146 101,780 99,845 Total non-current assets 101,974 107,526 103,272 Current assets Inventories 1,522 2,964 1,939 Trade and other receivables 11,144 8,276 5,452 Prepaids and other assets 2,423 1,718 1,299 Term deposits 1,384 1,728 1,718 Cash and cash equivalents 7,758 5,713 4,331 Total current assets 24,231 20,399 14,739 Total assets 126,205 127,925 118,011 Liabilities Non-current liabilities Convertible loan notes - (16,577) - Deferred tax liabilities (net) (9,936) (5,764) (10,116) Equity tax liability (646) (1,267) (968) Long-term provisions (3,710) (3,278) (2,779) Long-term loans payable (12,164) (5,000) (227) Total non-current liabilities (26,456) (31,886) (14,090) Current liabilities Convertible loan notes - - (9,372) Trade and other payables (8,264) (10,107) (5,556) Corporate and equity tax liability (1,628) (1,456) (1,184) Provision (82) (96) (82) Short-term loan payable and (5,144) - (5,222) financing leases Total current liabilities (15,118) (11,659) (21,416) Total liabilities (41,574) (43,545) (35,506) Net assets 84,631 84,380 82,505 Capital and reserves attributable to equity holders of the company Share capital 549 545 546 Share premium account 27,139 27,139 27,139 Other reserve - 1,767 927 Capital reserve 210,844 210,844 210,844 Retained deficit (153,901) (155,915) (156,951) Total equity 84,631 84,380 82,505 The financial information contained in this announcement was approved and authorised for issue by the Board of Directors on 25 September 2012 and is signed on its behalf by: Mikel Faulkner Stephen Voss Chairman Managing Director CONDENSED CONSOLIDATED CASH FLOW STATEMENT Six months ended Six months Twelve months 30 June ended ended 2012 30 June 31 December $'000 2011 2011 (Unaudited) $'000 $'000 (Unaudited) (Audited) Cash flows from operating activities Operating profit before interest 2,636 3,771 8,338 and taxation from continuing operations Operating profit before interest 1,157 and taxation from discontinued operations Depreciation, depletion and 3,182 3,735 8,424 amortisation Gain on disposal of assets from (1,157) - 5 discontinued operations Write-off of workover costs 736 - - (Increase) in trade and other (2,293) (3,698) (930) receivables Decrease/(increase) in 417 (1,414) (389) inventories Increase in trade and other 2,708 1,828 437 payables (Decrease)/increase in long-term (1) 213 (482) provisions Share-based payments and other 110 103 107 non-cash items Cash generated from continuing 7,495 4,538 15,510 operations Taxes paid (1,571) (430) (1,344) Net cash flows from operating 5,924 4,108 14,166 activities Investing activities Capital expenditure - Expenditure on property, plant (4,744) (2,619) (5,596) and equipment - Expenditure on intangible (1,274) (712) (393) assets Disposal of property, plant and 2,000 - 65 equipment Interest received 15 8 34 Increase/(decrease) in short-term 333 (262) (252) investments Net cash flows from investing (3,670) (3,585) (6,142) activities Financing activities Proceeds from placement of note 11,938 - - payable Short-term loans (paid)/drawn (78) (1,285) (9,124) during the period Convertible loan notes payments (9,561) - (95) Interest paid (1,129) (869) (1,818) Proceeds from exercise of share 3 - - options Net cash flows from financing 1,173 (2,154) (11,037) activities Increase/(decrease) in cash and 3,427 (1,631) (3,013) cash equivalents Cash and cash equivalents at 4,331 7,344 7,344 beginning of period Cash and cash equivalents at end 7,758 5,713 4,331 of period CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY For the six months ended 30 June 2012 Share Share Other Capital Retained Capital Premium Reserves Reserve deficit Total $'000 $'000 $'000 $'000 $'000 $'000 At 1 January 2011 540 26,544 1,826 210,844 (159,928) 79,826 (Audited) Total comprehensive loss - - - - 3,875 3,875 for the period Share-based payments - - - - 103 103 Exercise of convertible 5 595 (59) - 35 576 notes At 30 June 2011 (Unaudited) 545 27,139 1,767 210,844 (155,915) 84,380 Total comprehensive loss - - - - (1,879) (1,879) for the period Share-based payments 1 - - - 3 4 Redemption of convertible - - (840) - 840 - notes At 31 December 2011 546 27,139 927 210,844 (156,951) 82,505 (Audited) Total comprehensive income - - - - 2,004 2,004 for the period Share-based payments 3 - - - 119 122 Redemption of convertible - - (927) - 927 - notes (Note 7) At 30 June 2012 (Unaudited) 549 27,139 - 210,844 (153,901) 84,631 UNAUDITED NOTES FORMING PART OF THE CONDENSED CONSOLIDATED INTERIM FINANCIAL INFORMATION For the six months ended 30 June 2012 1. Accounting Policies Basis of Preparation The condensed interim financial information has been prepared using policies based on International Financial Reporting Standards (IFRS and IFRIC interpretations) issued by the International Accounting Standards Board ("IASB") as adopted for use in the EU. The condensed interim financial information has been prepared using the accounting policies which will be applied in the Group's statutory financial information for the year ended 31December 2012. 2. Financial reporting period The condensed interim financial information for the period 1 January 2012 to 30 June 2012 is unaudited. In the opinion of the Directors the condensed interim financial information for the period presents fairly the financial position, results from operations and cash flows for the period in conformity with the generally accepted accounting principles consistently applied. The condensed interim financial information incorporates comparative figures for the interim period 1 January 2011 to 30 June 2011 and the audited financial year to 31 December 2011. The financial information contained in this interim report does not constitute statutory accounts as defined by section 435 of the Companies Act 2006. The comparatives for the full year ended 31 December 2011 are not the Company's full statutory accounts for that year. A copy of the statutory accounts for that year has been delivered to the Registrar of Companies. The auditors' report on those accounts was unqualified, did not include references to any matters to which the auditors drew attention by way of emphasis without qualifying their report and did not contain a statement under section 498(2)-(3) of the Companies Act 2006. 3. Revenue Revenue is attributable to one continuing activity, which is oil production from Colombia Energy Development Co. ("CEDCo"), a wholly-owned subsidiary of the Group, located in Colombia, South America. 4. Discontinued operations - Peru In June 2012, the Company closed on the sale of its remaining 40 per cent working interest of the Peruvian Block 95 License Contract ("Block 95") through its wholly-owned subsidiary to Gran Tierra Energy, Inc. ("GTE"). Block 95 was the Company's only Peruvian asset, located in the Marañon Basin in the north-east area of the country, with net 2P reserves of 8.4m barrels of oil as reported in the Company's annual report and accounts for the year to 31 December 2011. The contract is in its third exploration phase although it is currently under force majeure, pending approval of certain environmental licensing requirements. Block 95 did not generate any revenues or expenses in the year to 31 December 2011. Under the terms of the purchase and sale agreement, the Company sold its 40 per cent working interest to GTE for cash consideration of $5.4 million with $2 million received upon closing and the remaining $3.4 million payable upon the earlier of either approval of the assignment from Perupetro, Peru's national agency of hydrocarbons, or one (1) year from the closing date. The effective date of the sale was 1 June 2012. The proceeds from the sale will be used for working capital generally. This sale included all intangible assets of the wholly-owned subsidiary. The Company recognised a net gain after taxation on the sale of these assets of approximately $810,000 as of 30 June 2012. Following the completion of this divestiture, the Company holds no further interests in Block 95 in Peru. The following are the totals for the major classes of assets and liabilities relating to our discontinued operations associated with Block 95: Six months ended 30 June 2012 $'000 (Unaudited) Net Assets disposed of: Intangible assets $4,600 Trade and other payables (357) 4,243 Proceeds on disposal of discontinued operations Cash and cash equivalents 2,000 Deferred consideration 3,400 5,400 Profit on disposal of discontinued operations before taxation $1,157 The gain on discontinued operations on the Statement of Comprehensive Income can be analysed as follows: Six months ended 30 June 2012 $'000 (Unaudited) Gain recognised on disposal of net assets less costs to sell $1,157 Income tax payable (347) Profit on disposal of discontinued operations, net of tax 810 The Statement of Cash Flows contains the following elements related to discontinued operations: Twelve months ended Six months ended Six months ended 31 December 30 June 30 June 2011 2012 2011 $'000 $'000 (Unaudited) $'000 (Unaudited) (Audited) Net cash flows attributable to investing activities: Expenditure on intangible $(1,172) $(712) $(393) assets Proceeds on sale of 2,000 _ 2,000 non-current assets Net Cash flow attributable 828 (712) 1,670 to investing activities There were no cash flows from discontinued operations attributable to operating or financing activities. 5. Earnings per share Basic earnings per share amounts are calculated by dividing profit for the period attributable to ordinary equity holders of the parent by the weighted average number of ordinary shares outstanding for the period. Diluted earnings per share amounts are calculated by dividing the profit for the period attributable to ordinary equity holders of the parent by the weighted average number of ordinary shares outstanding during the period plus the weighted average number of ordinary shares that would be issued on the conversion of all the dilutive potential ordinary shares into ordinary shares. The calculation, of the dilutive potential ordinary shares related to employee and Director share option plans, includes only those options with exercise prices below the average share trading price for each period. The following reflects the profit and share data used in the basic and diluted earnings per share calculations: Twelve months Six months ended Six months ended ended 30 June 30 June 31 December 2012 2011 2011 $'000 (Unaudited) $'000 (Unaudited) $'000 (Audited) Profit from continuing 1,194 3,875 1,996 operations after taxation Profit from discontinued 810 - - operations after taxation Net profit attributable to 2,004 3,875 1,996 equity holders used in dilutive calculation Earnings per Share for continuing operations - Basic $0.03 $0.11 $0.06 - Diluted $0.03 $0.10 $0.05 Earnings per Share for discontinuing operations - Basic and Diluted $0.02 $- $- Total Earnings per Share - Basic $0.05 $0.11 $0.06 - Diluted $0.05 $0.10 $0.05 Basic weighted average 35,855,076 35,766,774 35,752,049 number of shares Dilutive potential ordinary shares Employee and Director 1,416,998 1,439,072 1,536,620 share option plans Diluted weighted average 37,272,074 37,205,846 37,288,669 number of shares Figures in thousand except for per share information. The calculation of the diluted EPS assumes all criteria giving rise to the dilution of the EPS are achieved and all outstanding share options with exercise prices lower than the average period share price are exercised. 6. Intangible Assets The remaining balance in intangible assets at 30 June 2012 is primarily related to the costs of the upgrade in the Group's accounting system to SAP-ERP. 7. Convertible loan notes On 3 February 2012, the Group irrevocably exercised its option to redeem all of the outstanding ($9,561,000) principal amount of its remaining Variable Coupon Convertible Notes Due 2012 (the "Convertible Notes") of the Company on 5 March 2012 (the "Redemption Date"). The Notes were redeemed for cash at the principal amount of the Notes together with interest accrued up to (but excluding) the Redemption Date. The Convertible Notes have been fully extinguished and are no longer outstanding. 8. Long-term and short-term loans payable On 31 January 2012, the Group closed a Fixed Rate Note Payable with HKN, Inc. ("HKN") for the principal amount of $12 million (the "Note Payable"). The Note Payable is not convertible into shares and allowed for the full principal amount to be available to the Company from the date of closing. The Note Payable is subject to an interest charge of 10.5 per cent per annum, payable quarterly in arrears, with the principal amount being repayable in full on 30 September 2013. The Note Payable is currently unsecured, but HKN can require Global to provide adequate collateral security in the event of a material adverse effect. The Company also paid to HKN a 1.75 per cent transaction fee of approximately $210,000. The Company used these proceeds to redeem and extinguish the remaining $9.5 million principal amount (and accrued interest) of its Convertible Notes and to accelerate development activities at its existing properties within Colombia. On 30 August 2012, the Group, as borrower, signed an amendment (the "Loan Amendment") to the Senior Secured Note Payable for $5 million entered into with HKN, as lender, on 14 September 2010. The Loan Amendment extended the maturity date of the underlying repayment obligation from September 2012 to April 2013. In exchange for this extension, the Company agreed to increase the interest rate from 10.5 per cent per annum to 12.5 per cent per annum and to pay a one-time 1 per cent transaction fee of $50,000 (see Note 13 - Subsequent events). 9. Tax credit/(expense) The Global Energy Development PLC Group is subject to UK and Colombian taxation. UK taxation The Company does not expect to be liable for UK corporation tax in the foreseeable future due to Global trading losses brought forward of $28.5 million as at 31 December 2011. These trading losses are expected to increase in the future. Colombian taxation The Group pays taxes in Colombia through the branch office of its wholly-owned subsidiary CEDCo. The Colombian corporation tax is calculated as the higher of net income tax or presumptive income tax which are determined as follows: · Presumptive income tax. An alternative minimum tax calculated on the prior year gross equity less liabilities at a rate of 3 per cent to determine the presumptive income. A rate of 33 per cent is applied to the presumptive income to arrive at the tax obligation; or · Net income tax. Calculated at a rate of 33 per cent taking into account revenues minus costs, standard deductions and special deductions. Currently, CEDCo pays its income tax based on Presumptive Income Tax. Additionally, the Group pays an Equity Tax calculated using a taxable base of the Net Equity as at 1 January 2011 at a rate of 6 per cent. The payment of the tax is being made over four years with payments made twice per year. The major components of income tax expense for the periods ended 30 June 2012 and 2011 as disclosed in the Consolidated Statement of Comprehensive Income are: 30 June 30 June 31 December 2012 2011 2011 $'000 $'000 $'000 Current taxes for continuing operations: Current income tax charge for continuing 164 139 256 operations Current equity tax - 859 1,549 Others withholdings 58 40 51 Total current taxes for continuing operations 222 1,038 1,856 Deferred Tax: Change in deferred tax related to temporary (181) (2,270) 2,082 differences and other Tax expense/(credit) for continuing operations 41 (1,232) 3,938 Tax expense for discontinued operations 347 - - 10. Deferred tax liabilities (net) The Group offsets tax assets and liabilities if, and only if, it has a legally enforceable right to offset current tax assets and current tax liabilities and the deferred tax assets and deferred tax liabilities related to corporation taxes levied by the same tax authority. Deferred tax assets and liabilities listed are related to corporation tax levied by the Colombian tax authority with jurisdiction over CEDCo. Temporary differences between the tax bases and net book carrying values arise in relation to the effect of inflation adjustments, the differences in exchange rate of non-monetary assets, differences between tax and accounting depreciation, the balance of presumptive income tax excesses generated and tax losses generated in prior years. The changes in net deferred tax liabilities are reported as follows: Deferred tax liabilities (net) 30 June 30 June 31 December 2012 2011 2011 $'000 $'000 $'000 Opening balance of deferred tax liabilities (net) (10,116) (8,034) (8,034) Change in deferred tax related to temporary 180 2,270 (2,082) differences and other Ending balance of deferred tax liabilities (net) (9,936) (5,764) (10,116) 30 June 30 June 31 December 2012 2011 2011 $'000 $'000 $'000 Deferred tax assets 14,061 17,913 14,274 Deferred tax liabilities (23,997) (23,677) (24,390) Deferred tax liabilities (net) (9,936) (5,764) (10,116) The effect of this net deferred income tax ("DIT") movement on the condensed consolidated statement of comprehensive income was a tax benefit resulting from an overall decrease in the net deferred tax liabilities due to the following: · DIT asset decreased due to the Colombian peso (COP) to US dollar exchange rate effect (Dec 2011: COP$ 1,942 per $1 and June 2012: COP$1,784 per $1) and the estimated use of tax losses carried forward into the 2011 income tax return. · DIT liability decreased due to the peso-dollar exchange rate effect mentioned above causing on overall net decrease in deferred taxes). Even though there was an important increase to the decommissioning accrual (approx $835 thousand) in the first semester, the impact of the exchange rate did not significantly change the basis for DIT liability. At the end of each reporting period, the temporary differences (denominated in COP) must be translated to USdollars. A further fluctuation in the exchange rate (COP vs. USD) as of 31 December 2012 could cause the calculation of the net deferred tax liabilities to change significantly. If the Colombian peso appreciates against the US dollar as of 31 December 2012 compared to 30 June 2012, the Group may be required to recognise a significant tax expense (i.e. net increase in deferred tax liability) that is not reflected as of 30 June 2012. 11. Interim dividend No interim dividend has been declared. 12. Share capital Six months ended Six months ended Twelve months ended 30 June 2012 30 June 2011 31 December 2011 (Unaudited) (Unaudited) (Audited) Number Number Number of shares $'000 of shares $'000 of shares $'000 Allotted, called up and fully paid Ordinary shares of 1p 36,044,657 549 35,766,774 545 35,752,049 546 each The ordinary shares confer the right to vote at general meetings of the Company, to a repayment of capital in the event of liquidation or winding up and certain other rights as set out in the Company's articles of association. The ordinary shares also confer the right to receive dividends if declared by the Directors and approved by theCompany. On 4 January and 14 May 2012, following notices of exercise of option in respect of 22,981 and 254,902 respectively, ordinary shares of 1p each in the Company, the Company issued a total of 277,883 ordinary shares to ex-employees of the Company. 13. Subsequent events On 30 August 2012, the Group agreed to an extension of the maturity date of its Senior Secured Note Payable with HKN for the principal amount of $5 million. The maturity date of the Note Payable has been extended from 14 September 2012 to 14 April 2013. In exchange for this extension, the Company agreed to increase the interest charge by 2 per cent to 12.5 per cent per annum with effect from the date the extension was granted. The Company also paid to HKN a one-time 1 per cent transaction fee of $50,000. Under the terms of the Fixed Rate Note Payable issued on 31 January 2012 for the principal amount of $12 million, the stated interest charge of 10.5per cent per annum, payable quarterly in arrears, is contingent upon certain results reported in this interim report. The interest rate terms of the Note Payable state that in the event of a decrease in the Company's profit from operations or cash flow from operations as of 30 June 2012 compared to the prior period, the interest rate shall immediately be adjusted from 10.5 per cent to 12.5 per cent per annum from the date of publication of this interim report and through the maturity date of the Note Payable. Based on the results of this period, the interest rate shall be increased 2 per cent to 12.5 per cent effective immediately. This information is provided by RNS The company news service from the London Stock Exchange END IR SEEESIFESEEU -0- Sep/26/2012 06:00 GMT
Global Energy Dev. GED Interim Results
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