Q3 2014 Financial Statements FINAL - Ithaca · PDF fileNo separate statement of comprehensive...
-
Upload
hoangquynh -
Category
Documents
-
view
217 -
download
3
Transcript of Q3 2014 Financial Statements FINAL - Ithaca · PDF fileNo separate statement of comprehensive...
Ithaca Energy Inc. Q3 2014 Financial Statements
Consolidated Statement of IncomeFor the three and nine months ended 30 September 2014 and 2013
(unaudited)
Restated* Restated*
Three months ended 30 Sept Nine months ended 30 Sept
Note
Revenue 5
- Operating costs 6
- Oil purchases
- Movement in oil and gas inventory 6
- Depletion, depreciation and amortisation EXP04
Cost of sales
Gross (Loss)/Profit
Exploration and evaluation expenses 12
Impairment of assets
- Administrative expenses
- Non-recurring Valiant acquisition costs
Total Administrative expenses 7
Operating (Loss)/Profit
Foreign exchange
Gain/(Loss) on financial instruments 29
Release of exploration obligation 19
Negative goodwill
Profit Before Interest and Tax
Finance costs 8
Interest income
Profit Before Tax
Taxation 27
Profit After Tax
Earnings per share
Basic 26
Diluted 26
* Refer to Note 2, Basis of Preparation for further details on the nature of the restatement.
The accompanying notes on pages 6 to 24 are an integral part of the financial statements.
-
27,038
114,112
30,866
2,212
(1,518)
(81,219)
(4,956)
(15,814)
32,893
(509)
(1,518)
-
8,183
-
24,98243,143
46
31,989
5,978
(10,866)
(21,865)
-
3
34,960
39,913
12,092
5,219
19,763
0.34
0.08
0.08 0.13
0.14
45
107,937
100,445
55,333
No separate statement of comprehensive income has been prepared as all such gains and losses have been incorporated in the
consolidated statement of income above.
39,229
22,649
120,125
(7,492)
0.34
(12,233)
(277,573)
(5,472)
(612)
US$'000
0.02
0.02
289,665
US$'000
2014
US$'000
2013
US$'000
2013 2014
(10,235)
-
137
22,649 2,190
47,478
(3,067)
302,241
(235,979)
(7,971)
(3,734)
66,262
(11,278)
(13,119)
(953)
(17,831)
(7,596)(11,278)
-
90,094
(25,809)
4,147
(3,734)
(103,586)
-
(13,492)
(270)
(68,819)
17,567
7,727
227
7,954
4
(9,844)
-
-
(111,925)
(981)
(108,275)
(121,580)
(161,979)
(46,207)
6,915
(34)
(41,893)
7,047
(1,061)
(37,809)
3,312 (14,798)
2
Ithaca Energy Inc. Q3 2014 Financial Statements
(unaudited)
Note
Current assets
Cash and cash equivalents CAS01
Restricted cash 9 CAS03
Accounts receivable 10 CAS02
Deposits, prepaid expenses and other CAS04
Inventory 11 CAS06
Derivative financial instruments 30 CAS10
Non current assets
Long-term receivable 32
Long-term inventory 11
Investment in associate 16
Exploration and evaluation assets 12
Property, plant & equipment 13
Goodwill 15
Total assets
LIABILITIES AND EQUITY
Current Liabilities
Trade and other payables 18 CLB01
Exploration obligations 19
Non current liabilities
Borrowings 17
Decommissioning liabilities 20 CLB04
Other long term liabilities 21 CLB03
Contingent consideration 23 CLB06
Derivative financial instruments 30 CLB07
Deferred tax liability 27
Net Assets
Equity attributable to equity holders
Share capital 24 SEQ01
Share based payment reserve 25 SEQ02
Retained earnings SEQ03
Shareholders' Equity
The accompanying notes on pages 6 to 24 are an integral part of the financial statements.
The financial statements were approved by the Board of Directors on 12 November 2014 and signed on its behalf by:
49,938
57,405
80,729
18,337
1,821,513
(491,938)
31,655
18,337
8,126
(486,345)
137,114
(199)
1,423,712
1,540,443
2,618,904
(17,820)
(323,658)
(893,110)
57,628
495,680
(5,593)
2,123,224
2014
Consolidated Statement of Financial Position
30 September
21,150
21,632
63,435
355,185
6,311
-
(1,233,856)
(143,964)
(551,632)
(4,000)
25,198
US$'000
59,048
(222,890)
US$'000
985
(12,859)
(485,255)
(472,396)
8,126
12,198
314,727
5,102
(6,037)
1,978,687
853,646
31 December
2013
(19,254)
"Jay Zammit"
Director
Director
"Les Thomas"
ASSETS
(830,681)
893,110
(32,122)
(535,716)
(853,646)
(298,676)
(432,243)
(15,550)
(4,000)
(9,909)
(639,786)
(172,047)
438,244
3
Ithaca Energy Inc. Q3 2014 Financial Statements
Consolidated Statement of Changes in Equity(unaudited)
Balance, 1 Jan 2013
Net income for the period
Total comprehensive income
Shares issued
Share based payment
Options exercised
Balance, 30 September 2013
Balance, 1 Jan 2014
Share based payment
Options exercised
Net income for the period
Balance, 30 September 2014
The accompanying notes on pages 6 to 24 are an integral part of the financial statements.
19,254
551,632 17,820
9,672-
323,658
(6,244)
-- 4,810
20,340
Retained
Earnings
US$'000
524,908
-
15,916
23,000
2,917
535,716
-
-
Share Based
Payment Reserve
100,445
153,990
93,005
298,676 853,646
Share Capital Total
605,648
US$'000US$'000
431,318
US$'000
20,340 - 100,445-
-585
254,435
93,005
431,318
-
(257)
-
802,343
328
254,435
-893,110
4,810
706,093
24,982 24,982
2,917
4
Ithaca Energy Inc. Q3 2014 Financial Statements
Consolidated Statement of Cash FlowFor the three and nine months ended 30 September 2014 and 2013
(unaudited)Restated* Restated*
Three months ended 30 Sept Nine months ended 30 Sept
Operating activities
Profit Before Tax
Adjustments for:
Depletion, depreciation and amortisation
Exploration and evaluation expenses
Impairment
Share based payment
Loan fee amortisation
Revaluation of financial instruments
Movement in goodwill
Gain on disposal
Gain on exploration obligation release
Accretion
Bank interest & charges
Valiant acquisition fees
Cashflow from operations
Net cash from operating activities
Investing activitiesAcquisition of Valiant
Cash acquired on acquisition of Valiant
Valiant acquisition fees
Acquisition of Cook
Acquisition of Summit
Capital expenditureLoan to associate
Proceeds on disposal
Net cash used in investing activities
Financing activitiesProceeds from issuance of shares
(Increase) / decrease in restricted cash
Derivatives
Loan (repayment)/draw down
Senior notes
Bank interest & charges
Net cash from financing activities
Currency translation differences relating to cash
Increase / (decrease) in cash & cash equiv.
Cash and cash equivalents, beginning of period
Cash and cash equivalents, end of period
The accompanying notes on pages 6 to 24 are an integral part of the financial statements.
* Refer to Note 2, Basis of Preparation for further details on the nature of the restatement.
-
-
161,549
-
33,390
-
69,860
- -
(7,925)
2014
- -
612
7,727
(22,321)
203
(25,931)
(569,678) (446,503)
2,190
9,673
(1,050) (3,249)
-
(22,133)
98,726
400,087
73,770
3,655
(73,139)
(200,636)
198,229
19,950
-
1,777
(22,321)
121,580
865
-
(33,495)
(55,333)
-
(2,190)
7,405
5,032
4,162
(196,943)
11,611
178,279
(305,638)
2013
107,937
- 12,60812,608 -
2,106
(2,365)
52,058
31,374
(18,555)
50,753
(865)
63,435
-
(139,304)
-
CASH PROVIDED BY (USED IN):
(163,541)
(16,787)
128,159
3,052
US$'000
34,960
63,136
US$'000
2014 2013
- -
13,312
550
37,809
(38,189)
26,325
11,242
77,785
7,0991,3751,543
-
46,206
(5,077)
37,567
(163,541)
-
-
-
-
1,316
5921,203
17,074
509 953
111,925 3,067
US$'000
5,219
US$'000
27,091
8,295
-
- (76,758)
(76,168)(260,562)
294,946
42,396
(4,275)
319,041
(3,226)
(12,876)
(8,321)
328
-
2,965
73,770
-
(8,370)
(75,157)
-
Changes in inventory, receivables and
payables relating to operating activities
Changes in receivables and payables relating
to investing activities
59,048
(2,816)232,155
46,679
929
-
-
2,949
-
(4,387)
59,048
58,123
-
(5,032)
(33,370)
-
7,971
300,000 300,000-
14,582
-
- 10,866
5
Ithaca Energy Inc. Q3 2014 Financial Statements
1. NATURE OF OPERATIONS
2. BASIS OF PREPARATION
3. SIGNIFICANT ACCOUNTING POLICIES, JUDGEMENTS AND ESTIMATION UNCERTAINTY
Basis of measurement
Basis of consolidation
A subsidiary is an entity which the Corporation controls by having the power to govern the financial and operating policies. The
existence and effect of potential voting rights that are currently exercisable or convertible are considered when assessing whether
Ithaca controls another entity. A subsidiary is fully consolidated from the date on which control is obtained by Ithaca and is de-
consolidated from the date that control ceases.
The consolidated financial statements have been prepared under the historical cost convention, except for the revaluation of
certain financial assets and financial liabilities (under IFRS) to fair value, including derivative instruments.
Ithaca Energy Inc. (the “Corporation” or “Ithaca”), incorporated and domiciled in Alberta, Canada on 27 April 2004, is a publicly
traded company involved in the exploration, development and production of oil and gas in the North Sea. The Corporation's
registered office is 1600, 333 - 7th Avenue S.W., Calgary, Alberta, Canada, T2P 2Z1. The Corporation's shares trade on the
Toronto Stock Exchange in Canada and the London Stock Exchange’s Alternative Investment Market in the United Kingdom under
the symbol “IAE”.
Business combinations are accounted for using the acquisition method. The cost of an acquisition is measured as the fair value of
the assets acquired, equity instruments issued and liabilities incurred or assumed at the date of completion of the acquisition.
Acquisition costs incurred are expensed and included in administrative expenses. Identifiable assets acquired and liabilities and
contingent liabilities assumed in a business combination are measured initially at their fair values at the acquisition date. The
excess of the cost of acquisition over the fair value of the Corporation's share of the identifiable net assets acquired is recorded as
goodwill. If the cost of the acquisition is less than the Corporation's share of the net assets acquired, the difference is recognised
directly in the statement of income as negative goodwill.
These interim consolidated financial statements have been prepared in accordance with International Financial Reporting
Standards (IFRS) applicable to the preparation of interim financial statements, including IAS 34 Interim Financial Reporting. These
interim consolidated financial statements do not include all the necessary annual disclosures in accordance with IFRS.
The consolidated financial statements of the Corporation include the accounts of Ithaca Energy Inc. and all wholly-owned
subsidiaries as listed per note 32. Ithaca has twenty-one wholly-owned subsidiaries, thirteen of which were acquired on 19 April
2013 as part of the acquisition of Valiant Petroleum PLC ("Valiant"), and four of which were acquired on 31 July 2014 as part of the
acquisition of Summit Petroleum Limited ("Summit"). The consolidated financial statements include the Valiant group of companies
from 19 April 2013 only and the Summit group of companies from 31 July 2014 only (being the respective acquisition dates.). All
inter-company transactions and balances have been eliminated on consolidation.
The condensed interim consolidated financial statements should be read in conjunction with the Corporation’s annual financial
statements for the year ended 31 December 2013.
The policies applied in these condensed interim consolidated financial statements are based on IFRS issued and outstanding as
of 12 November 2014, the date the Board of Directors approved the statements. Any subsequent changes to IFRS that are given
effect in the Corporation’s annual consolidated financial statements for the year ending 31 December 2014 could result in
restatement of these interim consolidated financial statements.
The financial statements for the period ended 30 September 2013 have been restated to reflect adjustments to the provisional fair
values attributed to the business combination accounting for the acquisition of Valiant Petroleum PLC in 2Q 2013. Subsequent
revisions disclosed within the 3Q 2013 and 31 December 2013 year end accounts are now reflected through 2Q 2013 (the time of
acquisition). Restatements have been reflected through negative goodwill and cost of sales.
Business Combinations
6
Ithaca Energy Inc. Q3 2014 Financial Statements
Goodwill
Capitalisation
Impairment
Interest in joint operations
Revenue
Foreign currency translation
Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the
transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at
year end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in the statement of
income.
Goodwill acquired through business combinations is initially measured at cost, being the excess of the aggregate of the
consideration transferred and the amount recognised as the fair value of the Corporation's share of the identifiable net assets
acquired and liabilities assumed. If this consideration is lower than the fair value of the identifiable assets acquired, the difference
is recognised in the statement of income.
Goodwill is tested annually for impairment and also when circumstances indicate that the carrying value may be at risk of being
impaired. Impairment is determined for goodwill by assessing the recoverable amount of each cash generating unit ("CGU") to
which the goodwill relates. Where the recoverable amount of the CGU is less than its carrying amount, an impairment loss is
recognised in the statement of income. Impairment losses relating to goodwill cannot be reversed in future periods.
Items included in the financial statements are measured using the currency of the primary economic environment in which the
Corporation and its subsidiaries operate (the ‘functional currency’). The consolidated financial statements are presented in United
States Dollars, which is the Corporation’s functional and presentation currency.
The Corporation's interests in joint operations (eg exploration and production arrangements) are accounted for by recognising its
assets (including its share of assets held jointly), its liabilities (including its share of liabilities incurred jointly), its revenue from the
sale of its share of the output arising from the joint operation, its share of revenue from the sale of output by the joint operation and
its expenses (including its share of any expenses incurred jointly).
Interest income is recognised on an accruals basis and is separately recorded on the face of the statement of income.
Oil, gas and condensate revenues associated with the sale of the Corporation’s crude oil and natural gas are recognised when title
passes to the customer. This generally occurs when the product is physically transferred into a vessel, pipe or other delivery
mechanism. Revenues from the production of oil and natural gas properties in which the Corporation has an interest with joint
venture partners are recognised on the basis of the Corporation’s working interest in those properties (the entitlement method).
Differences between the production sold and the Corporation’s share of production are recognised within cost of sales at market
value.
Under the equity method, investments are carried at cost plus post-acquisition changes in the Corporation's share of net assets,
less any impairment in value in individual investments. The consolidated statement of income reflects the Corporation's share of
the results and operations after tax and interest.
Under IFRS 11, joint arrangements are those that convey joint control which exists only when decisions about the relevant
activities require the unanimous consent of the parties sharing control. Investments in joint arrangements are classified as either
joint operations or joint ventures depending on the contractual rights and obligations of each investor. Associates are investments
over which the Corporation has significant influence but not control or joint control, and generally holds between 20% and 50% of
the voting rights.
7
Ithaca Energy Inc. Q3 2014 Financial Statements
Share based payments
Cash and cash equivalents
Restricted cash
Financial instruments
Senior notes
Inventory
Trade receivables
Trade payables
Senior notes are measured at amortised cost.
Inventories of materials and product inventory supplies, other than oil and gas inventories, are stated at the lower of cost and net
realisable value. Cost is determined on the first-in, first-out method. Oil and gas inventories are stated at fair value less cost to sell.
Cash that is held for security for bank guarantees is reported in the balance sheet and cash flow statements separately. If the
expected duration of the restriction is less than twelve months then it is shown in current assets.
The Corporation has a share based payment plan as described in note 24 (c). The expense is recorded in the statement of income
or capitalised for all options granted in the year, with the gross increase recorded in the share based payment reserve.
Compensation costs are based on the estimated fair values at the time of the grant and the expense or capitalised amount is
recognised over the vesting period of the options. Upon the exercise of the stock options, consideration paid together with the
amount previously recognised in share based payment reserve is recorded as an increase in share capital. In the event that vested
options expire unexercised, previously recognised compensation expense associated with such stock options is not reversed. In
the event that unvested options are forfeited or expired, previously recognised compensation expense associated with the
unvested portion of such stock options is reversed.
Analysis of the fair values of financial instruments and further details as to how they are measured are provided in notes 29 to 31.
For the purpose of the statement of cash flow, cash and cash equivalents include investments with an original maturity of three
months or less.
Trade receivables are recognised and carried at the original invoiced amount, less any provision for estimated irrecoverable
Trade payables are measured at cost.
Transaction costs that are directly attributable to the acquisition or issue of a financial asset or liability and original issue discounts
on long-term debt have been included in the carrying value of the related financial asset or liability and are amortised to
consolidated net earnings over the life of the financial instrument using the effective interest method.
Held-for-trading financial instruments are subsequently measured at fair value with changes in fair value recognised in net
earnings. All other categories of financial instruments are measured at amortised cost using the effective interest method. Cash
and cash equivalents are classified as held-for-trading and are measured at fair value. Accounts receivable are classified as loans
and receivables. Accounts payable, accrued liabilities, certain other long-term liabilities, and long-term debt are classified as other
financial liabilities. Although the Corporation does not intend to trade its derivative financial instruments, they are classified as held-
for-trading for accounting purposes.
All financial instruments, other than those designated as effective hedging instruments, are initially recognised at fair value in the
statement of financial position. The Corporation’s financial instruments consist of cash, restricted cash, accounts receivable,
deposits, derivatives, accounts payable, accrued liabilities, contingent consideration and the current liability on the Beatrice
acquisition. The Corporation classifies its financial instruments into one of the following categories: held-for-trading financial assets
and financial liabilities; held-to-maturity investments; loans and receivables; and other financial liabilities. All financial instruments
are required to be measured at fair value on initial recognition. Measurement in subsequent periods is dependent on the
classification of the respective financial instrument.
8
Ithaca Energy Inc. Q3 2014 Financial Statements
Property, plant and equipment
Oil and gas expenditure – exploration and evaluation assets
Capitalisation
Impairment
Oil and gas expenditure – development and production assets
Capitalisation
Depreciation
Impairment
Costs of bringing a field into production, including the cost of facilities, wells and sub-sea equipment, direct costs including staff
costs and share based payment expense together with E&E assets reclassified in accordance with the above policy, are
capitalised as a D&P asset. Normally each individual field development will form an individual D&P asset but there may be cases,
such as phased developments, or multiple fields around a single production facility when fields are grouped together to form a
single D&P asset.
The Corporation’s oil and gas assets are analysed into CGUs for impairment review purposes, with E&E asset impairment testing
being performed at a grouped CGU level. The current E&E CGU consists of the Corporation’s whole E&E portfolio. E&E assets
are reviewed for impairment when circumstances arise which indicate that the carrying value of an E&E asset exceeds the
recoverable amount. When reviewing E&E assets for impairment, the combined carrying value of the grouped CGU is compared
with the grouped CGU's recoverable amount. The recoverable amount of a grouped CGU is determined as the higher of its fair
value less costs to sell and value in use. Impairment losses resulting from an impairment review are written off to the statement of
income.
E&E costs are not amortised prior to the conclusion of evaluation activities. At completion of evaluation activities, if technical
feasibility is demonstrated and commercial reserves are discovered then, following development sanction, the carrying value of the
E&E asset is reclassified as a development and production (“D&P”) asset, but only after the carrying value is assessed for
impairment and where appropriate its carrying value adjusted. If after completion of evaluation activities in an area, it is not
possible to determine technical feasibility and commercial viability or if the legal right to explore expires or if the Corporation
decides not to continue exploration and evaluation activity, then the costs of such unsuccessful exploration and evaluation is
written off to the statement of income in the period the relevant events occur.
A review is carried out each reporting date for any indication that the carrying value of the Corporation’s D&P assets may be
impaired. For D&P assets where there are such indications, an impairment test is carried out on the CGU. Each CGU is identified
in accordance with IAS 36. The Corporation’s CGUs are those assets which generate largely independent cash flows and are
normally, but not always, single developments or production areas. The impairment test involves comparing the carrying value
with the recoverable value of an asset. The recoverable amount of an asset is determined as the higher of its fair value less costs
to sell and value in use, where the value in use is determined from estimated future net cash flows. Any additional depreciation
resulting from the impairment testing is charged to the statement of income.
Pre-acquisition costs on oil and gas assets are recognised in the statement of income when incurred. Costs incurred after rights to
explore have been obtained, such as geological and geophysical surveys, drilling and commercial appraisal costs and other
directly attributable costs of exploration and evaluation including technical, administrative and share based payment expenses
are capitalised as intangible exploration and evaluation (“E&E”) assets.
All costs relating to a development are accumulated and not depreciated until the commencement of production. Depreciation is
calculated on a unit of production basis based on the proved and probable reserves of the asset. Any re-assessment of reserves
affects the depreciation rate prospectively. Significant items of plant and equipment will normally be fully depreciated over the life
of the field. However, these items are assessed to consider if their useful lives differ from the expected life of the D&P asset and
should this occur a different depreciation rate would be charged.
9
Ithaca Energy Inc. Q3 2014 Financial Statements
Non oil and natural gas operations
Decommissioning liabilities
Contingent consideration
Taxation
Operating leases
Finance leases
Maintenance expenditure
Recent accounting pronouncements
Finance leases that transfer substantially all the risks and benefits incidental to ownership of the leased item to the Corporation,
are capitalised at the commencement of the lease at the fair value of the leased property or, if lower, at the present value of the
minimum lease payments. Lease payments are apportioned between finance charges and reduction of the lease liability so as to
achieve a constant rate of interest on the remaining balance of the liability. Finance charges are recognised in finance costs in the
income statement. A leased asset is depreciated over the useful life of the asset. A486However, if there is no reasonable certainty
that the Corporation will obtain ownership by the end of the lease term, the asset is depreciated over the shorter of the estimated
useful life of the asset and the lease term.
Current income tax
Rentals under operating leases are charged to the statement of income on a straight line basis over the period of the lease.
Expenditure on major maintenance refits or repairs is capitalised where it enhances the life or performance of an asset above its
originally assessed standard of performance; replaces an asset or part of an asset which was separately depreciated and which is
then written off, or restores the economic benefits of an asset which has been fully depreciated. All other maintenance expenditure
is charged to the statement of income as incurred.
Deferred income tax
Current income tax assets and liabilities are measured at the amount expected to be recovered from or paid to the taxation
authorities. The tax rates and tax laws used to compute the amounts are those that are enacted or substantively enacted by the
reporting date.
The Corporation records the present value of legal obligations associated with the retirement of long term tangible assets, such as
producing well sites and processing plants, in the period in which they are incurred with a corresponding increase in the carrying
amount of the related long term asset. The obligation generally arises when the asset is installed or the ground/environment is
disturbed at the field location. In subsequent periods, the asset is adjusted for any changes in the estimated amount or timing of
the settlement of the obligations. The carrying amounts of the associated assets are depleted using the unit of production method,
in accordance with the depreciation policy for development and production assets. Actual costs to retire tangible assets are
deducted from the liability as incurred.
Contingent consideration is accounted for as a financial liability and measured at fair value at the date of acquisition with any
subsequent remeasurements recognised either in the statement of income or in other comprehensive income in accordance with
IAS 39.
Deferred tax is recognised for all deductible temporary differences and the carry-forward of unused tax losses. Deferred tax assets
and liabilities are measured using enacted or substantively enacted income tax rates expected to apply to taxable income in the
years in which temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a
change in rates is included in earnings in the period of the enactment date. Deferred tax assets are recorded in the consolidated
financial statements if realisation is considered more likely than not.
Computer and office equipment is recorded at cost and depreciated over its estimated useful life on a straight-line basis over three
years. Furniture and fixtures are recorded at cost and depreciated over their estimated useful lives on a straight-line basis over five
years.
New and amended standards and interpretations need to be adopted in the first interim financial statements issued after their
effective date (or date of early adoption). There are no new IFRSs or IFRICs that are effective for the first time for this interim
period that would be expected to have a material impact on the Corporation.
10
Ithaca Energy Inc. Q3 2014 Financial Statements
Significant accounting judgements and estimation uncertainties
4. SEGMENTAL REPORTING
5. REVENUE
Three months ended 30 Sept Nine months ended 30 Sept
Oil sales REV01
Gas sales REV02
Condensate sales REV03
Other income REV04
6. COST OF SALES
7. ADMINISTRATIVE EXPENSES
Three months ended 30 Sept Nine months ended 30 Sept
General & administrative EXP01
Non-recurring Valiant acquisition related costsShare based payment EXP16
8. FINANCE COSTS
Three months ended 30 Sept Nine months ended 30 Sept
Accretion
Bank charges
Senior notes interest
Finance lease interest
Non-operated asset finance fees
Prepayment interestLoan fee amortisation
The 3Q 2014 movement in inventory figure represents a positive movement in volumes of $8.9 million partially offset by a negative
movement due to revaluation of oil inventory at the period end of $5.6 million due to the low Brent price at 30 September 2014.
The preparation of financial statements in conformity with IFRS requires management to make estimates and assumptions
regarding certain assets, liabilities, revenues and expenses. Such estimates must often be made based on unsettled transactions
and other events and a precise determination of many assets and liabilities is dependent upon future events. Actual results may
differ from estimated amounts.
374
US$'000
289,665
(592)
56
(3,052)
(17,831)
(10,235)
1,060
US$'000
4,579
2014
(82)
(12,233)
2,533
(3,184)
114,112
2013
(6,731)
US$'00020142013
US$'000
(9,962)
(865)
88,347 292,506
(1,777)-
-
(7,409)
US$'0002013
(21,865)(4,956)
-
2014
(2,965)
(1,316)
282,179
2013
The amounts recorded for depletion, depreciation of property and equipment, long-term liability, stock-based compensation,
contingent consideration, decommissioning liabilities, derivatives and deferred taxes are based on estimates. The depreciation
charge and any impairment tests are based on estimates of proved and probable reserves, production rates, prices, future costs
and other relevant assumptions. By their nature, these estimates are subject to measurement uncertainty and the effect on the
financial statements of changes in such estimates in future periods could be material. Further information on each of these
estimates is included within the notes to the financial statements.
2014US$'000
2013
(11,278)
US$'000
(4,162)
2014
2014US$'000
(9,883)(2,949)
(1,518)
US$'000
7,231
(550) (203)
(1,315)
90,094
US$'000
238 328
111,289
2,176
302,241
2,007
(1,375)
2013US$'000
- -
(3,734)
(1,543)
449 760
US$'000
(2,743)
(1,203)
(9,844)
(22)
The Company operates a single class of business being oil and gas exploration, development and production and related activities
in a single geographical area presently being the North Sea.
-
(3,862)
-
- (3,862)
(174)(174)
Included within 3Q operating costs is $12 million associated with the Sullom Voe Terminal 2013 reconciliation charge previously
reported as a contingent liability in Q2 2014 as a result of the late notification from the operator. Following a full audit this non-
recurring exceptional item has been recognised as a cost and settled in Q3 2014.
(608)
(124)
(297)(40)
-
11
Ithaca Energy Inc. Q3 2014 Financial Statements
9. RESTRICTED CASH
Letters of credit
10. ACCOUNTS RECEIVABLE
Trade debtors
Norwegian tax receivableAccrued income
11. INVENTORY
Crude oil inventory - current
Crude oil inventory - non-current
Materials inventory
The non-current portion of inventory relates to long term stocks at the Sullom Voe Terminal
12. EXPLORATION AND EVALUATION ASSETS
At 1 January 2013
Additions
Write offs/relinquishmentsDisposals
At 31 December 2013
Additions
Transfer from E&E to D&P
Release of exploration obligationsWrite offs/relinquishments
At 30 September 2014
30 Sept
12,198
US$'000
2,247
(7,266)
31 Dec
US$'000
12,198
2013
2013
34,800
The cash letters of credit collateralised in place as at 30 June 2014 were issued under the Reserved Based Lending Facility in Q3
and therefore the restricted cash was released.
2014
31 Dec
Following completion of geotechnical evaluation activity, certain licences were declared unsuccessful and certain prospects were
declared non-commercial and therefore the related expenditure of $3 million was expensed in the nine months to 30 September
2014.
(1,366)
US$'000
58,064
2014
-
-
30 Sept
47,691
US$'000
47,390
60,145
(31,170)(18,737)
80,729
The above also includes the release of the exploration obligation provision against expenditure incurred (see note 19).
77,589
US$'000 US$'0002014 2013
8,126
29,758
215
21,417
355,185
31,371
8,126
31 Dec
US$'000
30 Sept
194,442
57,628
(3,067)
246,225
314,727
58,88861,397
12
Ithaca Energy Inc. Q3 2014 Financial Statements
13. PROPERTY, PLANT AND EQUIPMENT
Development & Production Other fixed
Cost
At 1 January 2013
Acquisitions
Additions
At 31 December 2013
Acquisitions
Additions
Transfer from E&E to D&P
At 30 September 2014
DD&A
At 1 January 2013
DD&A charge for the period
Impairment charge for the period
At 31 December 2013
DD&A charge for the period
Impairment charge for the period
At 30 September 2014
NBV at 1 January 2013
NBV at 1 January 2014
NBV at 30 September 2014
1,366
1,423,712
1,820,533
1,422,848
(459,584)
615,262
(2,579)
-
(462,163)
332,796
-
(320,501)
(52,864)
333,534
-
685,533 685,533
(158,279)
725,020
1,743,349
-
The impairment predominately relates to the Corporation's Southern North Sea (“SNS”) gas operated field Anglia ($14.9 million)
which contributes under 1% to revenue. As a result of a notification during 3Q 2014 of increased future costs it is therefore
currently expected that 2015 will be the last year of production from Anglia hence the Corporation has fully written down the
carrying value of the asset in the quarter. The remaining $2.9 million impairment reflects further costs of a capital nature
recognised in Q1 2014 on Beatrice and Jacky, both of which were fully written down at 31 December 2013 in anticipation of their
handback to Talisman.
289,629
2,283,676
(280)
US$'000
615,788
(2,299)
US$'000
3,163 1,746,512
727,445 2,425
738
526
Oil and Gas assets assets
1,821,513980
864
(322,800)
289,233
(121,288)
(1,899)
1,366 -
3,559
Total
396
(109,758)
246,169 246,169
US$'000
(17,795)
The net book amount of property, plant and equipment includes $32.1m (Q4 2013: Nil) in respect of the Pierce FPSO lease held
under finance lease.
(157,879)
(111,657)
(400)
2,280,117
(17,795)
(121,568)
(52,864)
This has been partially offset by a $6.9m credit in the Income Statement on the previously fully written down Jacky field as a result
of a downwards revision to the latest Jacky decommissioning estimate.
13
Ithaca Energy Inc. Q3 2014 Financial Statements
14. BUSINESS COMBINATION
ProvisionalFair value
US$'000
PP&EPierce lease asset
InventoryTrade and other receivables
Trade and other payablesPierce lease liabilityDeferred tax liabilities
Provisions
Total identifiable net assets at fair value
Positive goodwill arising on acquisition
Total consideration
The cash outflow on acquisition is as follows:Net cash acquiredCash paid
Net consolidated cash flow
15. GOODWILL
At 1 January 2014Addition in the period
At 30 September 2014
(178,402)
(43,772)
214,000
178,402
The fair values of the acquired identifiable assets are provisional due to the proximity of the acquisition to the quarter end and to
allow for any further information received to be taken into account.
16,563
(136,903)
On 31 July 2014 the Corporation completed the acquisition of 100% of the issued shares of Summit Petroleum Limited and its
subsidiaries ("Summit"), The acquisition further broadens the Corporation's producing asset base with high quality, long-life oil
assets with clear upsides and enables acceleration in the monetisation of existing UK tax allowance. The assets that were
acquired were: a further 20% interest in the Cook field in which the Company already had a 41.346% interest; a 7.48% interest in
the Pierce field; and, a 7.43% interest in the Wytch Farm field. The transaction was completed on 31 July 2014 for a net
consideration of $163 million. The total acquisition consideration was $178.4 million, paid in cash. These interim condensed
consolidated financial statements include the results of Summit from the acquisition date.
The provisional fair values of the identifiable assets and liabilities of Summit as at the acquisition date were:
(25,245)
17,630
32,169
(32,169)
$136.1 million represents a goodwill asset recognised on the acquisition of Summit Petroleum limited as a result of recognising a
$136.9million deferred tax liability as required under IFRS 3 fair value accounting for business combinations. Absent the deferred
tax liability the price paid for the Summit assets equates to the fair value of the assets. $0.9 million represents goodwill recognised
on the acquisition of gas assets from GDF in December 2010. As at 30 September 2014, the recoverable amount of oil and gas
assets was sufficiently high to support the carrying value of this goodwill.
136,129
42,273
From the date of acquisition, Summit has contributed $9 million of revenue and approximately $2.5 million to the net profit before
tax. If the combination had taken place at the beginning of the year, the profit before tax from continuing operations for the period
would have been approximately $39.4 million and revenue contribution of the Summit assets to the continuing operations would
have been approximately $57 million.
14,861
(163,541)
US$'000
985136,129
137,114
14
Ithaca Energy Inc. Q3 2014 Financial Statements
16. INVESTMENT IN ASSOCIATES
Investment in FPF-1 and FPU Services
17. BORROWINGS30 Sept
RBL facility
Corporate facility
Senior notes
Norwegian facility
Long term bank feesLong term senior notes fees
The key covenants in the RBL are:
- A corporate cashflow projection showing total sources of funds must exceed total forecast uses of funds for the following 12
months.
- The ratio of the net present value of cashflows secured under the RBL for the economic life of the fields to the amount drawn
under the facility must not fall below 1.15:1
- The ratio of the net present value of cashflows secured under the RBL for the life of the debt facility to the amount drawn under
the facility must not fall below 1.05:1.
The Corporation is in compliance with all its financial and operating covenants.
Investment in associates comprises shares, acquired by Ithaca Energy (Holdings) Limited, in FPF-1 Limited and FPU Services
Limited as part of the completion of the Greater Stella Area transactions in 2012. There has been no change in value during the
period with the above investment reflecting the Company's share of the associates' results.
8,948
US$'000
18,337
The Corporation is subject to financial and operating covenants related to the facilities. Failure to meet the terms of one or more of
these covenants may constitute an event of default as defined in the facility agreements, potentially resulting in accelerated
repayment of the debt obligations.
On 1 July 2013, the Corporation signed a NOK 450 million Norwegian Tax Rebate Facility (the "Norwegian Facility"). Under the
Norwegian tax regime, 78% of exploration, appraisal and supporting expenditure resulting from operations on the Norwegian
Continental Shelf is refunded by the Government in the December of the year following the year the costs were incurred. This is a
conventional tax refund facility on industry standard terms. On 30 September 2014, this facility was increased to NOK 600 million
(~$100 million) and tenure to 31 December 2016. Any drawings under this facility will be fully offset by a receivable tax refund from
the Norwegian government within a maximum of 24 months.
20132014
30 Sept 31 Dec
US$'000
18,337
In October 2013, the Corporation increased its existing RBL (Reserved Based Lending) Facility to $610 million with enhanced
terms including reduced margin costs (LIBOR plus 2.75%-3%) and greater flexibility over future unallocated capital with a loan
term until June 2017.
The Corporation also established a new five year $100 million corporate facility in October 2013 with a term of up to 5 years which
attracts interest at LIBOR plus 4.15%.
- 5,538
(432,243)
-
US$'000 US$'000
(33,985)
11,660
-
(409,918)
(69,044)
(300,000)
-
(476,123)
2014 2013
31 Dec
(830,681)
On 3 July 2014, the Company completed an offering of $300 million 8.125% senior unsecured notes due July 2019, with interest
payable semi-annually. The net proceeds of the notes were used to partially repay (without cancelling) the Company’s senior
secured RBL Facility, with a portion of it subsequently redrawn to finance the acquisition of the Summit assets on 31 July 2014.
15
Ithaca Energy Inc. Q3 2014 Financial Statements
18. TRADE AND OTHER PAYABLES30 Sept
Trade payablesAccruals and deferred income
19. EXPLORATION OBLIGATIONS
Exploration obligations
The RBL and Corporate facilities are secured by the assets of the guarantor member of the Ithaca Group, such security including
share pledges, floating charges and/or debentures.
The Norwegian Facility is secured by the assets of Ithaca Petroleum Norge AS, such security including a share pledge,
assignment of insurance and tax refund proceeds and pledges of participation interests in licences.
The Senior notes are unsecured senior debt of Ithaca Energy Inc, guaranteed by certain members of the Ithaca Group and
subordinated to existing and future secured obligations.
There are no financial maintenance covenants tests under the senior notes.
The principle covenants under the undrawn Corporate Facility are:
- The ratio of total debt to earnings before interest, tax, DD&A, impairment, exceptional or extraordinary expenditure and E&E
writeoffs ("EBITDAX"), calculated quarterly on a trailing 12-month basis as of the last day of each quarter, must not exceed 3.0:1 or
3.5:1 if any one of the two previously tested ratios have been at or below 3.0:1
- The ratio of EBITDAX to total debt costs, calculated quarterly on a trailing 12-month basis as of the last day of each quarter,
must not be less than 4.0:1
The key covenant in the Norwegian Tax Rebate Facility is Norwegian subsidiaries must have available funds to execute planned
activities for the year to December in each calendar year.
Note no funds have or are forecast to be drawn under the Corporate facility.
Security provided against the loan
US$'000
As at 30 September 2014, $476 million (31 December 2013: $410 million) was drawn down under the RBL Facility and
approximately $70 million (31 December 2013: $34million) was drawn under the Norwegian Tax Rebate Facility. $8 million (31
December 2013: $12 million) of loan fees relating to the RBL and $5.4 million relating to the Senior Notes have been capitalised
and remain to be amortised.
31 Dec
2014
30 Sept
2013
(5,593) (12,859)
(206,194)
31 Dec
US$'000
The above reflects the fair value of E&E commitments assumed as part of the Valiant transaction. During the period to 30
September 2014, $7.3 million was released reflecting expenditure incurred in the period.
(280,151)
(472,396)(486,345)
US$'000
(299,344)
2013US$'000
(173,052)
2014
16
Ithaca Energy Inc. Q3 2014 Financial Statements
20. DECOMMISSIONING LIABILITIES
30 Sept 31 Dec
US$'000 US$'000
Balance, beginning of period
Acquisitions
Additions
AccretionRevision to estimates
Balance, end of period
21. OTHER LONG TERM LIABILITIES 30 Sept 31 Dec
US$'000 US$'000
Balance, beginning of period
Revaluation in the period
Reclassed to trade payables
Finance lease
Balance, end of period
22. FINANCE LEASE LIABILITIES
30 Sept 31 Dec
US$'000 US$'000
Total minimum lease payments
Less than 1 year
Between 1 and 5 years
5 years and later
Interest
Less than 1 year
Between 1 and 5 years
5 years and later
Present value of minimum lease payments
Less than 1 year
Between 1 and 5 years5 years and later
The finance lease relates to the Pierce FPSO asset acquired as part of the Summit acquisition in the period. (Note 21)
2014
(43,772)
2013
(32,123)
(4,162)
-
The total future decommissioning liability was calculated by management based on its net ownership interest in all wells and
facilities, estimated costs to reclaim and abandon wells and facilities and the estimated timing of the costs to be incurred in future
periods. The Corporation uses a risk free rate of 3.0 percent (31 December 2013: 3.0 percent) and an inflation rate of 2.0 percent
(31 December 2013: 2.0 percent) over the varying lives of the assets to calculate the present value of the decommissioning
liabilities. These costs are expected to be incurred at various intervals over the next 13 years.
The economic life and the timing of the obligations are dependent on Government legislation, commodity price and the future
production profiles of the respective production and development facilities. Note that upon the acquisition of the Beatrice Field in
November 2008, the Corporation did not assume the decommissioning liabilities.
(6,037)
5,691
(172,047)
2014
The opening balance relates to volumes of oil at the Nigg terminal which must be settled on re-transfer to Talisman, expected to
take place in early 2015. This has been transferred to current liabilities and is now included within trade and other payables (Note
18). The finance lease relates to the Pierce FPSO asset acquired as part of the Summit acquisition in the period (Note 22).
347
(966)
(1,943)
(32,122)
(3,018)
(4,509)
(6,037)
- (3,019)
-
-
-
-
(4,541)
(172,047)
(52,834)
(18,891)
(9,475)
2013
(222,890)
2014 2013
(2,595) -
-
(21,967)
-
-
(12,958)
(26,370)
(1,061)
-
(1,534)
(8,417)
-
(86,338)
(4,403)
17
Ithaca Energy Inc. Q3 2014 Financial Statements
23. CONTINGENT CONSIDERATION
30 Sept 31 Dec
US$'000 US$'000
Balance 31 December 2013 & 30 September 2014
24. SHARE CAPITAL
Amount
Authorised share capital 000 US$'000
At 31 December 2013 and 30 September 2014 Unlimited -
(a) Issued
The issued share capital is as follows:
Issued Number of common shares Amount US$'000
Balance 1 January 2013
Share issue
Issued for cash - options exercised 6,574 Transfer from Share based payment reserve on options exercised
Balance 1 January 2014
Issued for cash - options exercisedTransfer from Share based payment reserve on options exercised
Balance 30 September 2014
(b) Stock options
Balance, beginning of period
Granted $2.43
Forfeited / expiredExercised
$2.01
2014 2013
11,090
$2.31
(5,885,000)
329,518,620
4,819
Changes to the Corporation’s stock options are summarised as follows:
No. of Options
30 September 2014
$2.37$1.79
The contingent consideration at the end of the period relates to the acquisition of the Stella field and is payable subsequent to first
oil.
$2.47
* The weighted average exercise price has been converted into U.S. dollars based on the foreign exchange rate in effect at the
date of issuance.
$2.18
15,682,164
No. of Options
7,260,000
Options
Wt. Avg Exercise
Price *
14,593,567
(286,403)
56,952,321 93,005
31 December 2013
Wt. Avg Exercise
Price *
No. of ordinary
20,347,964
In the nine months ended 30 September 2014, the Corporation's Board of Directors granted 95,000 options at a weighted average
exercise price of $2.51 (C$2.68) and 7,165,000 options at a weighted average exercise price of $2.47 (C$2.71)
(4,000)(4,000)
431,318 259,920,003
323,633,620
6,761,296 -
535,716
5,885,000
$2.01
(813,333)(6,761,296)
1,820,232
$0.95
14,593,567
551,632
4,826
The Corporation’s stock options and exercise prices are denominated in Canadian Dollars when granted. As at 30 September
2014, 15,682,164 stock options to purchase common shares were outstanding, having an exercise price range of $2.00 to $2.51
(C$1.97 to C$2.71) per share and a vesting period of up to 3 years in the future.
$1.63
-
18
Ithaca Energy Inc. Q3 2014 Financial Statements
The following is a summary of stock options as at 30 September 2014
Options Outstanding Options Exercisable
Wt. Avg. Wt. Avg. Wt. Avg. Wt. Avg.
Life Exercise Life Exercise
(Years) Price * (Years) Price *
2.5 $2.41 0.9 $2.28
2.0 $2.03 2.0 $2.03
2.4 $2.31 1.2 $2.21
The following is a summary of stock options as at 31 December 2013
Options Exercisable
Wt. Avg. Wt. Avg. Wt. Avg. Wt. Avg.
Life Exercise Life Exercise
(Years) Price * (Years) Price *
1.8 $2.29 1.0 $2.22
2.1 $1.90 1.4 $1.77
0.1 $0.17 0.1 $0.20
1.9 $2.01 1.1 $1.95
(c) Share based payment
Risk free interest rate
Expected stock volatility
Expected life of options
Weighted Average Fair Value
25. SHARE BASED PAYMENT RESERVE
30 Sept 31 Dec
Balance, beginning of period
Share based payment cost
Transfer to share capital on exercise of options (6,244)
Balance, end of period
4,810
2014
$2.00-$2.03
(C$1.97-C$1.99)
Range of
Exercise Price
2013
2 years
1.37%
56%
3,733
US$’000
1,144,999
11,560,496
$2.22-$2.51
(C$2.25-C$2.71)
Options granted are accounted for using the fair value method. The compensation cost during the three months and nine months
ended 30 September 2014 for total stock options granted was $1.5 million and $4.8 million respectively (Q3 2013: $1.0 million, Q3
YTD: $3.0 million). $0.6 million and $1.3 million were charged through the income statement for share based payment for the three
and nine months ended 30 September 2014 respectively, being the Corporation’s share of share based payment chargeable
through the income statement. The remainder of the Corporation’s share of share based payment has been capitalised. The fair
value of each stock option granted was estimated at the date of grant, using the Black-Scholes option pricing model with the
following assumptions:
51%
19,254
No. of Options
4,673,333
$2.22-$2.46
(C$2.25-$2.53)
$1.08
US$’000
3,367,163
15,682,164
For the year ended 31
December 2013
14,593,567
$2.22-$2.51
(C$2.25-C$2.71)
Range of
Exercise PriceNo. of Options
4,121,668
$2.00-$2.03
(C$1.97-C$1.99)
Options Outstanding
For the nine months ended 30
September 2014
$0.82
4,512,162
8,989,999
17,820
1.27%
3 years
471,668
19,254
471,668$0.20 (C$0.25)
7,451,667
$1.49-$2.03
(C$1.54-C$1.99)
Range of
Exercise Price
$0.20 (C$0.25)
$1.49-$2.03
(C$1.54-C$1.99) 3,844,998
No. of Options
Range of
Exercise Price
$2.22-$2.46
(C$2.25-$2.53)
20,340
6,670,232
No. of Options
(4,819)
19
Ithaca Energy Inc. Q3 2014 Financial Statements
26. EARNINGS PER SHARE
Three months ended 30 Sept Nine months ended 30 Sept
Wtd av. number of common shares (basic)
Wtd av. number of common shares (diluted)
27. TAXATION
Three months ended 30 Sept Nine months ended 30 Sept
UK Corporation Tax
Norwegian Corporation TaxUK Petroleum Revenue Tax
Total Taxation Credit/(Charge)
The movement in deferred taxation primarily results from business combination as per note 14.
28. COMMITMENTS
30 Sept 31 Dec
Operating lease commitments
Within one year
Two to five years
Capital commitments 30 Sept 31 Dec
Capital commitments incurred jointly with other venturers (Ithaca's share)
29. FINANCIAL INSTRUMENTS
1
272 4,253-
16,959
299,807,995
(1,449)
2014
• Level 1 – inputs represent quoted prices in active markets for identical assets or liabilities (for example, exchange-traded
commodity derivatives). Active markets are those in which transactions occur in sufficient frequency and volume to provide pricing
information on an ongoing basis.
7,911
19,763
2014 2013
2014
324,563,406
294,617,969
1,675
12,528
14,389
The calculation of basic earnings per share is based on the profit after tax and the weighted average number of common shares in
issue during the period. The calculation of diluted earnings per share is based on the profit after tax and the weighted average
number of potential common shares in issue during the period.
- 1,214
(8,706)
(1,449)
To estimate fair value of financial instruments, the Corporation uses quoted market prices when available, or industry accepted
third-party models and valuation methodologies that utilise observable market data. In addition to market information, the
Corporation incorporates transaction specific details that market participants would utilise in a fair value measurement, including
the impact of non-performance risk. The Corporation characterises inputs used in determining fair value using a hierarchy that
prioritises inputs depending on the degree to which they are observable. However, these fair value estimates may not necessarily
be indicative of the amounts that could be realised or settled in a current market transaction. The three levels of the fair value
hierarchy are as follows:
66,841
(7,492)
US$'000
317,365,658329,954,910
327,997,027
330,098,302
2014
329,409,055
2013 2013
2013
111,747
2014US$000 US$000
8,183 227
US$'000
2014 2013US$'000 US$'000
US$000
• Level 2 – inputs other than quoted prices included within Level 1 that are observable, either directly or indirectly, as of the
reporting date. Level 2 valuations are based on inputs, including quoted forward prices for commodities, market interest rates, and
volatility factors, which can be observed or corroborated in the marketplace. The Corporation obtains information from sources
such as the New York Mercantile Exchange and independent price publications.
2013US$000
• Level 3 – inputs that are less observable, unavailable or where the observable data does not support the majority of the
instrument’s fair value.
8,149
13,262
20
Ithaca Energy Inc. Q3 2014 Financial Statements
Derivative financial instrument assets
Long term liability on Beatrice acquisition
Contingent considerationDerivative financial instrument liability
Three months ended 30 Sept Nine months ended 30 Sept
Revaluation of forex forward contracts
Revaluation of other long term liability
Revaluation of commodity hedges
Revaluation of interest rate swaps
Realised gain/(loss) on commodity hedges
Realised gain/(loss) on forex contracts
Realised (loss)/gain on interest rate swaps
Total (loss)/gain on financial instruments
The Corporation has identified that it is exposed principally to these areas of market risk.
i) Commodity Risk
Three months ended 30 Sept
Revaluation of commodity hedgesRealised gain/(loss) on commodity hedges
(4,171)
(82)
US$'000
2014
In forming estimates, the Corporation utilises the most observable inputs available for valuation purposes. If a fair value
measurement reflects inputs of different levels within the hierarchy, the measurement is categorised based upon the lowest level
of input that is significant to the fair value measurement. The valuation of over-the-counter financial swaps and collars is based on
similar transactions observable in active markets or industry standard models that primarily rely on market observable inputs.
Substantially all of the assumptions for industry standard models are observable in active markets throughout the full term of the
instrument. These are categorised as Level 2.
US$'000
-
US$'000
US$'000
(199)
The table below presents the total gain / (loss) on commodity hedges that has been disclosed through the statement of
comprehensive income:
(199)
- -
Level 3
(5,691)
25,198
-
-
Level 1
-
2013
(5,691)
US$'000
25,198
US$'000Total Fair ValueLevel 2
The following table presents the Corporation’s material financial instruments measured at fair value for each hierarchy level as of
30 September 2014:
(4,000)
US$'000
US$'000
2014 2013
US$'000
Total gain/(loss) on commodity hedges
37,373
2013
38,189 33,486
11,602
(15,814)
1,185 -
Commodity price risk related to crude oil prices is the Corporation’s most significant market risk exposure. Crude oil prices and
quality differentials are influenced by worldwide factors such as OPEC actions, political events and supply and demand
fundamentals. The Corporation is also exposed to natural gas price movements on uncontracted gas sales. Natural gas prices, in
addition to the worldwide factors noted above, can also be influenced by local market conditions. The Corporation’s expenditures
are subject to the effects of inflation, and prices received for the product sold are not readily adjustable to cover any increase in
expenses from inflation. The Corporation may periodically use different types of derivative instruments to manage its exposure to
price volatility, thus mitigating fluctuations in commodity-related cash flows.
- -
1,729 4,028
(306)
9,873 1,122 (3,687) (5,219)
39,229
(25,389)37,373
100
1,040
716 3468,251- 9,723
64
-
(13,312)
37,445
38,495
1,122 (3,687)(22,945)
(26,632)
(5,472)
The table below presents the total gain / (loss) on financial instruments that has been disclosed through the statement of
comprehensive income:
-
(90)
US$'000
31,989
(1,497)
(17,074)
(2,502)
(134)(22,945)
(4,000)
2014
- -
21
Ithaca Energy Inc. Q3 2014 Financial Statements
Derivative Term Volume Average price
bbls
bbls
therms
therms
ii) Interest Risk
Derivative Value Rate
0.44%
Three months ended 30 September
Revaluation of foreign exchange forward contractsRealised gain on foreign exchange forward contracts
Oct 15 - Jun 17 187,300,000 63p/therm
Oil swaps Oct 14 - Jun 16
Oct 14 - Dec 14 404,800
$103/bbl
2,774,205 $102/bbl
1,225,835
9,723
10,908
The Corporation’s accounts receivable with customers in the oil and gas industry are subject to normal industry credit risks and are
unsecured. All of its oil production from the Beatrice, Jacky and Athena fields is sold to BP Oil International Limited. Oil production
from Cook, Broom, Dons, Causeway and Fionn is sold to Shell Trading International Ltd. Anglia and Topaz gas production is
currently sold through three contracts to RWE NPower PLC and Hess Energy Gas Power (UK) Ltd. Cook gas is sold to Shell UK
Ltd and Esso Exploration & Production UK Ltd.
1,185
Gas puts
Oil puts Oct 14 - Jun 16
67p/thermGas swaps
-
US$'000
The below represents commodity hedges in place:
The Corporation also has credit risk arising from cash and cash equivalents held with banks and financial institutions. The
maximum credit exposure associated with financial assets is the carrying values.
The Corporation assesses partners’ credit worthiness before entering into farm-in or joint venture agreements. In the past, the
Corporation has not experienced credit loss in the collection of accounts receivable. As the Corporation’s exploration, drilling and
development activities expand with existing and new joint venture partners, the Corporation will assess and continuously update its
management of associated credit risk and related procedures.
The Corporation may be exposed to certain losses in the event that counterparties to derivative financial instruments are unable to
meet the terms of the contracts. The Corporation’s exposure is limited to those counterparties holding derivative contracts with
positive fair values at the reporting date. As at 30 September 2014, exposure is $25.2 million (31 December 2013: $5.1 million).
The Corporation is exposed to foreign exchange risks to the extent it transacts in various currencies, while measuring and
reporting its results in US Dollars. Since time passes between the recording of a receivable or payable transaction and its
collection or payment, the Corporation is exposed to gains or losses on non USD amounts and on balance sheet translation of
monetary accounts denominated in non USD amounts upon spot rate fluctuations from quarter to quarter. The Corporation
evaluates its foreign exchange instrument requirements on a rolling monthly basis.
US$'000
-
2014 2013
Total gain/(loss) on forex forward contracts
The Corporation regularly monitors all customer receivable balances outstanding in excess of 90 days. As at 30 September 2014
substantially all accounts receivables are current, being defined as less than 90 days. The Corporation has no allowance for
doubtful accounts as at 30 September 2014 (31 December 2013: $Nil).
-
Interest rate swap
Calculation of interest payments for the RBL agreement incorporates LIBOR. The Corporation is therefore exposed to interest rate
risk to the extent that LIBOR may fluctuate. The Corporation evaluates its annual forward cash flow requirements on a rolling
monthly basis.
iv) Credit Risk
$200 million
The table below presents the total gain on foreign exchange financial instruments that has been disclosed through the statement
of comprehensive income:
iii) Foreign Exchange Rate Risk
Term
Oct 14 - Dec 15
22
Ithaca Energy Inc. Q3 2014 Financial Statements
Accounts payable and accrued liabilitiesBorrowings
30. DERIVATIVE FINANCIAL INSTRUMENTS
30 Sept 31 December
US$'000 US$'000
Oil swaps
Oil puts
Gas swaps
Gas puts
Interest rate swapsForeign exchange forward contract
31. FAIR VALUES OF FINANCIAL ASSETS AND LIABILITIES
Classification
Cash and cash equivalents (Held for trading)
Restricted cash
Derivative financial instruments (Held for trading)
Accounts receivable (Loans and Receivables)
Deposits
Long-term receivable (Loans and Receivables)
Borrowings (Loans and Receivables)
Contingent consideration
Derivative financial instruments (Held for trading)
Other long term liabilities
Accounts payable (Other financial liabilities)
Liquidity risk includes the risk that as a result of its operational liquidity requirements the Corporation will not have sufficient funds
to settle a transaction on the due date. The Corporation manages liquidity risk by maintaining adequate cash reserves, banking
facilities, and by considering medium and future requirements by continuously monitoring forecast and actual cash flows. The
Corporation considers the maturity profiles of its financial assets and liabilities. As at 30 September 2014, substantially all accounts
payable are current.
US$'000
63,435
-
13,042
5,179
3
24,999
-
31 December 2013
Fair Value
314,727
5,102
31,655
-
12,198
314,727355,185
57,405
(6,037)
31,655
5,102
(830,681)
25,198
21,150 21,150
(15,550)
(4,000)(432,243)
(4,000)
(472,396)(472,396)
(830,681)
(32,122)
(4,000)
(6,037)
(15,550)
(830,681)
59,048
25,198
6,311
355,185
US$'0001 to 5 yearsWithin 1 year
2014 2013
-
(486,345)
(486,345) -
597
-
(15,349)
4,304
The following table shows the timing of cash outflows relating to trade and other payables.
59,048
(830,681)
(486,345) (486,345)
79
63,435
US$'000
US$'000
v) Liquidity Risk
6,696
(199)
30 September 2014
Carrying
Amount Carrying Amount
Financial instruments of the Corporation consist mainly of cash and cash equivalents, receivables, payables, loans and financial
derivative contracts, all of which are included in these financial statements. At 30 September 2014, the classification of financial
instruments and the carrying amounts reported on the balance sheet and their estimated fair values are as follows:
(432,243)
12,198
(32,122)
(199)
- -
Fair Value
(10,448)
(4,000)
57,405
6,311
23
Ithaca Energy Inc. Q3 2014 Financial Statements
32. RELATED PARTY TRANSACTIONS
Country of incorporation % equity interest at 30 Sep
Ithaca Energy (UK) Limited Scotland 100% 100%
Ithaca Minerals (North Sea) Limited Scotland 100% 100%
Ithaca Energy (Holdings) Limited Bermuda 100% 100%
Ithaca Energy Holdings (UK) Limited Scotland 100% 100%
Ithaca petroleum PLC England and Wales 100% 100%
Ithaca North Sea Limited England and Wales 100% 100%
Ithaca Exploration Limited England and Wales 100% 100%
Ithaca Causeway Limited England and Wales 100% 100%
Ithaca Gamma Limited England and Wales 100% 100%
Ithaca Alpha Limited Northern Ireland 100% 100%
Ithaca Epsilon Limited England and Wales 100% 100%
Ithaca Delta Limited England and Wales 100% 100%
Ithaca Petroleum Holdings AS Norway 100% 100%
Ithaca Petroleum Norge AS Norway 100% 100%
Ithaca Technology AS Norway 100% 100%
Ithaca AS Norway 100% 100%
Ithaca Petroleum EHF Iceland 100% 100%
Ithaca SPL Limited England and Wales 100% Nil
Ithaca Dorset Limited England and Wales 100% Nil
Ithaca SP UK Limited England and Wales 100% Nil
Ithaca Pipeline Limited England and Wales 100% Nil
Burstall Winger Zammit LLP 2014 - 111 -
2013 - 323 -
Loans to related parties Amounts owed from related parties
FPF-1 Limited
33. SEASONALITY
(127)
(18)
31,655
20132014
The effect of seasonality on the Corporation's financial results for any individual quarter is not material.
31 Dec
The consolidated financial statements include the financial statements of Ithaca Energy Inc and the subsidiaries listed in the
following table:
20132014
30 Sept
US$'000US$'000
57,405
Purchases
Accounts
Receivable
Accounts
Payable
US$'000
Sales
US$'000 US$'000 US$'000
The following table provides the total amount of transactions that have been entered into with related parties during the nine month
period ending 30 September 2014 and 30 September 2013, as well as balances with related parties as of 30 September 2014 and
31 December 2013:
Transactions between subsidiaries are eliminated on consolidation.
24