Annual Report 2007 in PDF - Cairn Energy PLC

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NOTES TO THE ACCOUNTS CONTINUED 1. Accounting Policies (continued) (u) Prior year adjustments Financial assets Investments, representing the Group’s holding in Videocon Industries Limited, a company listed in India, have been correctly reclassified as available-for-sale financial assets. This investment was previously recorded as an investment measured at cost but as a reliable measure of fair value was readily available this asset should have been reclassified under IAS 39 in prior years. The restated financial asset is now shown in Note 17. Indian deferred tax liabilities Deferred tax liabilities relating to India have been restated to reflect the taxable temporary difference that remains at the end of the seven-year tax holiday period on the Rajasthan tangible development/producing asset in two of the Group’s subsidiaries. Cairn Energy India Pty Limited had recorded deferred tax liabilities to reflect the difference between the net book value of development/producing assets and tax written down values. However, a liability should only have been created to recognise the taxable temporary difference on balances remaining at the end of the tax holiday period since movements in net book values and tax written down values during the tax holiday period will have no tax impact. Cairn Energy Hydrocarbons Limited previously had no deferred tax liability recognised due to the availability of Indian tax losses. As these losses will unwind during the tax holiday period, a taxable temporary difference will remain at the end of the tax holiday period reflecting the forecast excess of net book values over tax written down values. A deferred tax liability should therefore have been recognised. UK deferred tax assets Deferred tax assets representing Uk tax losses available on Indian assets in Cairn Energy Hydrocarbons Limited have been reversed on the basis that they have no economic benefit to the group given the excess of Indian tax rates over Uk rates and the availability of double taxation relief. As there would have been no economic benefit associated with the losses in previous years, a prior year adjustment has been made. The amount of the prior year adjustments and the financial statement line items affected are shown below. Uk India 2006 Financial Deferred Deferred Financial assets taxation taxation Restated statements adjustment adjustment adjustment 2006 $’000 $’000 $’000 $’000 $’000 Balance Sheet Financial assets – 7,868 – – 7,868 Investments 96 (96) – – – Deferred tax asset 18,911 – (18,911) – – Total assets 1,923,911 7,772 (18,911) – 1,912,772 Deferred tax liabilities 138,694 – – (8,729) 129,965 Total liabilities 1,242,741 – – (8,729) 1,234,012 Net assets 681,170 7,772 (18,911) 8,729 678,760 Retained earnings 467,017 7,772 (18,911) 8,729 464,607 Total equity attributable to equity holders 681,170 7,772 (18,911) 8,729 678,760 Income Statement Finance costs (30,609) – (1,266) – (31,875) Taxation credit/(expense) 8,559 – (15,039) 1,200 (5,280) Loss for the year attributable to equity holders (82,017) – (16,305) 1,200 (97,122) Earnings per share – basic (cents) (52.02) – (10.35) 0.77 (61.60) Earnings per share – diluted (cents) (52.02) – (10.35) 0.77 (61.60) Statement of Recognised Income and Expense Surplus on valuation of financial assets – 603 – – 603 Total income/expense recognised directly in equity 10,725 603 – – 11,328 Loss for the year (82,017) – (16,305) 1,200 (97,122) Total recognised income and expense for the year (71,292) 603 (16,305) 1,200 (85,794) 84 CAIRN ENERGY PLC ANNUAL REPORT 2007
NOTES TO THE ACCOUNTS CONTINUED 2. Revenue and Other Income 2007 2006 $’000 $’000 Revenue from sale of oil, gas and condensate 286,871 285,709 Tariff income 785 595 ––––––––––– ––––––––––– Revenue from operating activities 287,656 286,304 Interest receivable (Note 9) 65,176 4,603 Other operating income – Joint Venture operator fee income 6,010 3,340 ––––––––––– ––––––––––– Total income 358,842 294,247 ––––––––––– ––––––––––– 3. Acquisitions and Disposals During the year the Group acquired Plectrum Petroleum Plc (‘Plectrum’) and medOil plc (‘medOil’). As required under IFRS 3 ‘Business Combinations’, fair values have been assigned to the identifiable assets and liabilities of those companies including intangible exploration assets. Given the inherently uncertain nature of oil and gas exploration, these fair value calculations are highly judgemental in nature. The fair value calculations are based on the information available at the date of acquisition and are provisional in nature. These will be reassessed within 12 months from the date of acquisition in accordance with IFRS 3. (a) Acquisition of Plectrum Petroleum Plc On 7 September 2007, the Group announced a recommended cash offer for Plectrum. Plectrum holds a 50% equity interest in the Nabeul permit offshore Tunisia and in addition has interests in Australia, Peru and the Uk. The offer was declared unconditional in all respects and Cairn gained control of Plectrum on 10 October 2007. By 31 December 2007, the Group had acquired 98% of the voting shares of Plectrum. The remaining 2% shareholding was undergoing compulsory acquisition as at 31 December 2007. The fair value of the identifiable assets and liabilities of Plectrum as at the date of acquisition and the corresponding carrying amounts immediately prior to acquisition were: Fair value Previous recognised carrying on acquisition value $’000 $’000 Intangible exploration/appraisal assets 72,598 4,894 Property, plant & equipment – other 8 14 Intangible assets – other – 11,961 Trade and other receivables 4,034 1,326 Cash and cash equivalents 6,107 6,107 Trade and other payables (3,192) (3,192) Deferred tax liabilities (34,165) – Provisions (10,861) – ––––––––––– ––––––––––– Net assets 34,529 21,110 ––––––––––– ––––––––––– Goodwill arising on acquisition (Note 16) 13,511 ––––––––––– Total consideration 48,040 ––––––––––– The total cost of the combination was $48.0m which is made up of: Cash purchase of Plectrum shares at 13p per share 46,545 Costs associated with the acquisition 1,495 ––––––––––– $’000 48,040 ––––––––––– CAIRN ENERGY PLC ANNUAL REPORT 2007 85
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ANNUAL REPORT & ACCOUNTS 2007 CAIRN
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CAIRN is an edinburgh based oil and
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CAIRN INDIA performance First comme
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2000 lakshmi disCovery 2001 sarasWa
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THE RESTRUCTURING OF THE GROUP INTO
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ajasthan midstream the government o
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Cambay Basin, India CAIRN ENERGY PL
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Cairn india assets 30% 30% 49% 40%
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Rajasthan, India the increased reso
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Detail heading here relore min ullu
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uk (West Of shetland) Block 214/19
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nePal the security situation in nep
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angladesh reserves sangu gross 2p r
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activities in all operated blocks.
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2007 marked the beginning of a new
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key financial performance indicator
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CAIRN INDIA CAPITAL EXPENDITURE FOR
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Page 37 and 38: 2007 ACCOUNTS Risk Factors 36 Corpo
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Page 59 and 60: DIRECTORS’ REMUNERATION REPORT Re
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Page 75 and 76: GROUP INCOME STATEMENT For the year
Page 77 and 78: BALANCE SHEETS As at 31 December 20
Page 79 and 80: NOTES TO THE ACCOUNTS For the year
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Page 131 and 132: RESERVES Direct Direct working enti
Page 133 and 134: NOTICE OF ANNUAL GENERAL MEETING No
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GLOSSARY OF TERMS CONTINUED TECHNIC
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