TIDMOHM
RNS Number : 6662A
Offshore Hydrocarbon Mapping PLC
04 February 2011
PRESS RELEASE
4th February 2011
Offshore Hydrocarbon Mapping plc ("OHM" or "the Company")
Preliminary Results for the year ended 31 August 2010
Offshore Hydrocarbon Mapping plc (AIM: OHM) presents its
Preliminary Results for the 12 months ended 31 August 2010.
-- Disposal of loss making marine CSEM survey business completed
after period end
-- Remaining business focused on geophysical data processing and
interpretation
-- Proposal to change name to Rock Solid Images plc
After fighting for its very existence in 2010, the Company is
now moving forward again and looking to grow its CSEM, seismic and
well data interpretation services.
After an optimistic start the financial year to 31 August 2010
turned out to be our toughest on record as shown by a pre tax loss
of GBP17.3 million including impairment charges totalling GBP6.7
million. This was caused principally by a shortage of new marine
CSEM survey contracts leading to underutilised charter vessels with
attendant fixed costs. The Company's Board were also increasingly
focused on ensuring that the Company survived through this very
difficult period which meant that other areas of the business
suffered too.
In a transaction which completed on 2 November 2010, the marine
CSEM acquisition business was divested to new owners. In turn this,
together with a GBP2.0 million share placing and GBP1.9 million
prepayment for CSEM processing and interpretation services, has
allowed the Board to focus on re-building and growing the remaining
data processing and interpretation business which now sits in the
Company's wholly owned subsidiary, Rock Solid Images Inc.
As a result of the disposal, your Company is now a pioneer of
data integration, the first of a new breed of companies that
recognises that the value of existing seismic data can be
significantly increased via the careful integration of additional
data sets such as well logs, CSEM and MT data. Our specialists,
largely based in Houston, are able to take some or all of these
separate types of data, work with them and then produce new
insights into geologic structure and reservoir properties that are
of value and relevant to our clients' needs.
Peter Reilly, Offshore Hydrocarbon Mapping's Non Executive
Chairman, said:
"A new and exciting chapter has opened for your Company and the
challenge now lies in growing revenues, providing excellent levels
of service to clients, continued investment in R&D focused on
integration of data types, and very importantly, achieving
profitability as rapidly as possible."
Offshore Hydrocarbon Mapping plc www.ohmrsi.com
Richard Cooper - Chief Executive Officer +44 (0)870 429 6581
Bob Auckland - Finance Director +44 (0)870 429 6581
Peter Reilly - Non Exec Chairman +44 (0)7881 920542
Peel Hunt LLP (NOMAD and Broker)
Julian Blunt/Simon Brown +44 (0)20 7418 8900
Chairman's statement
After fighting for its very existence in 2010, your Company is
now moving forward again and looking to grow its CSEM, seismic and
well data interpretation services.
After an optimistic start, the financial year to 31 August 2010
turned out to be our toughest on record as shown by a pre tax loss
of GBP17.3 million including impairment charges totalling GBP6.7
million. This was caused principally by a shortage of new marine
CSEM survey contracts leading to underutilised charter vessels with
attendant fixed costs. Your Company's Board were also increasingly
focused on ensuring that the Company survived through this very
difficult period which meant that other areas of the business
suffered too. The financials for the year under review are
discussed further in the Chief Executive Officer's Report.
The year to 31 August 2011 is fortunately looking more hopeful
than the previous year. This improvement in outlook can be
attributed directly to the transaction completed on 2 November
2010, which saw the marine CSEM acquisition business divested to
new owners who not only really understand the shipping business,
but also see the inherent value in CSEM surveying and are prepared
to provide the significant capital that the business requires. In
turn this, together with a GBP2.0 million share placing and GBP1.9
million prepayment for CSEM processing and interpretation services,
has allowed your Company's Board to focus on re-building and
growing the remaining data processing and interpretation business
which now sits in the Company's wholly owned subsidiary, Rock Solid
Images Inc.
The disposal of the marine CSEM survey business should not be
taken as a departure from CSEM as a valuable geophysical technique;
rather it is a sensible division of skill sets and capital
allocation. Our in-house interpretation and Research and
Development skills need continued investment to maintain and
further develop our industry leadership; however the heavy
financial burden and management attention focussed on the marine
survey business meant that investment in R&D and the sales team
was not happening. It is now.
As a result of the disposal, your Company is now a specialist
interpreter and integrator of geophysical data, specifically
seismic, well, CSEM and magnetotelluric data. Our specialists,
largely based in Houston, are able to take some or all of these
separate types of data, work with them and then produce new
insights into geologic structure and reservoir properties that are
of value and relevant to our clients' needs.
The added value of this integration is most easily explained by
the example of a client's appraisal of an undeveloped oil field in
the North Sea. Following a surprise "dry" appraisal well located
using conventional seismic interpretation, your Company was asked
to integrate well, seismic and CSEM data to identify where the
reservoir actually lay. Using the information provided from the
interpretation, the client subsequently drilled a well and
sidetrack in line with our suggestions of location. The wells were
successful.
CSEM has a very valuable role to play in the offshore oil and
gas industry, and having CSEM interpretation and data integration
capabilities places your Company in a strong position to win
business from Exploration and Production companies and National Oil
Companies across the globe. In fact, we also see both OHM Ltd and
other CSEM survey acquisition companies as potentially very
important clients for our CSEM processing and interpretation
services.
Aside from CSEM interpretation skills, the Company's remaining
trading subsidiary, Rock Solid Images Inc. has a strong industry
reputation for making sense of seismic and well data both onshore
and offshore, and this line of business is also expected to
increase now that the additional finance has been secured and the
Board's attention is once again focused on growth. The benefit of
an increased sales force will take time to feed through to the
revenue line; however the Board sees the potential to substantially
increase our market share in all our lines of business over the
coming years.
Since my appointment in November, I have visited the Company's
offices in Aberdeen and Houston to meet the staff and am pleased to
report that our CEO, Richard Cooper, has fostered a team approach
that has shown resilience in recent times and will stand us in good
stead for the future.
I have also met our three largest shareholders, East Hill
Management, Sector Asset Management and Seatrans, who between them
have provided significant financial backing through some very
difficult times for which we are very grateful. Sector Asset
Management and Seatrans together have a 61% shareholding in the
Company and are considered by the Takeover Panel to be a "Concert
Party". Shareholders should be aware that although it has been very
supportive to the Company, the Concert Party's majority stake in
the voting rights of the Company means that it is able, if it so
wishes, to propose and exert significant influence over resolutions
proposed at future general meetings of the Company including, if it
so wishes, resolutions to de-list the Company.
On behalf of the Board, I would like to thank the staff and
management team for their sterling efforts during a difficult year
and also to my predecessor Dave Pratt, who as CEO led the Company
from its formation in 2002 and subsequently as Chairman. Following
the disposal of CGGVeritas' significant shareholding in the
Company, Thierry Le Roux stepped down from the Board as a
non-executive director and we thank him also for his wise
counsel.
A resolution will be put to shareholders at the Annual General
Meeting to change the name of the Company to Rock Solid Images plc
to align it with that of our wholly owned trading subsidiary Rock
Solid Images, Inc. which is a long established industry name with a
strong reputation in well and seismic data processing and
interpretation.
A new and exciting chapter has opened for your Company and the
challenge now lies in growing revenues, providing excellent levels
of service to clients, continued investment in R&D focused on
integration of data types, and very importantly, achieving
profitability as rapidly as possible. I believe that, with the
continued support of our shareholders and our clients, your Company
has the management, staff and the technological capability to
achieve these aims.
In note 2 to the accounts, the directors explain the reasons why
it continues to be appropriate to prepare the financial statements
on a going concern basis.
Peter Reilly
Chairman
CEO Report
Introduction
2010 has been a watershed year for your Company. We began the
year with some level of optimism: we had recently successfully
completed the conversion of our fixed cost vessel charters to
equity in September of 2009, which substantially lowered our
monthly costs and allowed greater flexibility in bidding for new
work. In addition, we raised GBP2.6 million of new capital from a
private placement with our vessel supplier Seatrans. Thus we
entered September 2009 with a growing backlog of marine CSEM
surveys which we believed would provide support for our business
and allow us to direct our capital towards accelerating much needed
investments in processing and interpretation technology.
Unfortunately geopolitical unrest in Asia caused two out of our
three early survey opportunities to be cancelled. Though we
completed the first survey successfully in West Africa, and went on
to acquire further surveys in India and Australia in the second
half of the year, the loss of these two projects early in our
financial year proved a near fatal blow for the Company.
It became obvious by October 2009 that further funds would need
to be raised to allow the Company to continue to trade through the
revenue gap left by the loss of the two CSEM surveys in Asia. We
entered into a loan agreement with our two largest shareholders in
December 2009 who together provided a further $2 million of working
capital. Subsequently, in April 2010, we closed an additional
private placement of funds with Sector Asset Management who
subscribed for approximately GBP3.4 million of new shares.
Notwithstanding these investments, the Company still struggled
with the high capital costs associated with operating a marine
acquisition business in remote areas. Though the CSEM market has
improved somewhat, the business environment remains competitive
leading to aggressive bidding and the award of jobs with limited or
no margin. Operational overruns with several of the later surveys
resulted in further erosion of our cash position. Clearly a change
in strategy was required.
Business review
The use of marine electromagnetic methods for hydrocarbon
exploration and exploitation remains a relatively new technology.
The upstream oil and gas industry is notoriously conservative and
slow to adopt new methods compared to other hi-tech industries such
as biotech or telecommunications. In consideration of this, during
the course of calendar year 2009 and into 2010, management
undertook a thorough review of CSEM technology and its current use
in the oil and gas industry in order to determine how to accelerate
market adoption and best position the Company for growth.
In order to acquire and deliver a valuable CSEM dataset to our
customers we must execute three key steps:
1. Survey design
2. Data acquisition
3. Data processing, interpretation and integration
In our view, the industry has disproportionately invested in
data acquisition technology and under-invested in the key areas of
survey design and processing and interpretation. The CSEM
acquisition business has grown rapidly, in a fashion analogous to
development of the marine seismic business. However, the CSEM
business is quite different from seismic in a number of important
ways, including:
-- Survey design is very important for CSEM; improper placing of
receivers and/or use of inappropriate source parameters, for
example may result in a survey with little or no target sensitivity
and therefore little or no value to our clients.
-- The CSEM industry is relatively immature compared to the
seismic industry, particularly with respect to the development of
commercial grade processing and interpretation software and the
associated growth of independent consultants with the technology
and experience required to deliver high value data sets. The raw
data from the CSEM vessel itself is of little value without the
attendant ability to process and interpret these data. Few oil and
gas companies have the expertise to undertake this processing and
interpretation themselves, and the major CSEM contractors have been
investing disproportionately in acquisition capabilities.
It became obvious that OHM was very much following this path;
investment funds were being used to support the acquisition
business, to the detriment of the development of our processing and
interpretation capabilities. However,
unless we were able to strengthen our processing and
interpretation technology, we were in danger of fettering our
ability to deliver robust and reliable high-value data sets to our
clients.
The management decided therefore to seek to divest the loss
making CSEM acquisition business, which would then be free to raise
capital independently of the Company and develop a strategy for
growth within the commodity CSEM marine acquisition business. Our
Company retained the high value CSEM processing and integration
technology and personnel, which are a perfect match for the seismic
and well processing and interpretation capabilities of our wholly
owned Rock Solid Images subsidiary.
We began working on this project in June of 2010 and
successfully concluded the resulting transaction ("Project Alloy")
on 2 November 2010 after the close of our 2010 financial year.
Hence the Group results for the year ended 31 August 2010 (and the
first two months of the 2011 financial year), represent a full
period of operating both the acquisition and processing businesses.
While the full consequences of the divestment and subsequent
re-focus on processing and interpretation did not crystalise until
November 2010, an impairment provision has been made in the
reported numbers.
A new OHM is formed
So we begin our new financial year with renewed optimism.
Project Alloy has resulted in the conversion of our Company into a
pioneer of data integration, the first of a new breed of companies
that recognises that the value of existing seismic data can be
significantly increased via the careful integration of additional
data sets such as well logs, CSEM and MT data. No longer distracted
by the need to continuously support the CSEM marine acquisition
business, we can focus all our resources on the development and
delivery of high value data and technology. The resulting business
going forward will focus on value creation for our shareholders
through the development of industry leading tools and workflows for
the integration of any combination of seismic, well, CSEM and MT
data.
We are passionate believers in the power of integration. Seismic
will always be the tool of choice for exploration and exploitation,
but the careful addition of non-seismic data can add value to
existing or new seismic and can still further reduce interpretation
risk.
Our core technologies include:
-- Pre and post-stack seismic inversion
-- Seismic attribute calculation and calibration
-- Seismic facies modelling
-- Well-driven rock-physics analysis and modelling
-- CSEM and MT processing, interpretation and modelling
-- WISE integrated seismic and EM projects
-- CSEM and MT survey planning and modelling
We routinely employ our tools and expertise to solve our
customer problems over a broad range of areas including:
-- Transform margin plays
-- Carbonate reservoirs
-- Non-conventional reservoirs
-- Appraisal and monitoring studies
-- Fractured reservoirs
Intellectual property
Following the restructuring of the Company completed in November
2010, OHM's patent portfolio consists of 68 granted or pending
applications in 14 jurisdictions. OHM's intellectual property
strategy is to seek patent protection for key aspects of seismic,
CSEM and well log interpretation and integration technology that
support the Company's on-going development of these
technologies.
Financial review
Group revenues increased from GBP9.2 million in 2009 to GBP9.9
million in the year to 31 August 2010. This 8% increase, although
encouraging, came about from mixed performances in the Group's
underlying businesses.
CSEM marine acquisition revenues rose from GBP4.5 million in
2009 to GBP6.5 million in the year to 31 August 2010. This
represented an increase in our share of this market which is
estimated to be around GBP60 to GBP70 million in total for 2010.
However these additional revenues were achieved at poor operating
margins and absorbed too high a proportion of the Group's cash
resources during the year.
WISE revenues were held back to GBP0.6 million in the year to 31
August 2010 compared to GBP0.9 million in 2009. This was a
disappointing outcome caused largely by a reduction in the number
of integrated projects associated with a lack of investment in
sales and marketing activities in this area.
Revenues from our Well and Surface Seismic ("WSS") division
declined from GBP3.8 million in 2009 to GBP2.8 million in the year
to 31 August 2010. This was also a disappointing performance and
was due similarly to under investment in our sales force. This
represents a small fraction of the total annual market estimated to
be upwards of approximately GBP125 million.
Cost of sales rose from GBP12.2 million in 2009 to GBP13.1
million in the year to 31 August 2010. The resulting gross loss
from operations in 2010 was GBP3.1 million compared to a gross loss
of GBP3.0 million in 2009.
Following changes made to the Group's cost base in 2009,
overheads have continued to fall from GBP7.2 million in 2008, to
GBP5.8 million in 2009 down to GBP5.2 million in the year to 31
August 2010. However, overheads began to rise again towards the end
of 2010 as the Group increased its sales force.
On 9 September 2009 the Company issued 14,030,171 new ordinary
shares to Euro Trans Skips AS in exchange for removing most of the
future year's charter liabilities. In accordance with International
Accounting Standards the Group has accounted for a charge which is
equivalent to the fair value of the 14,030,171 ordinary shares. The
fair value charge of GBP2,140,000 was based on the closing bid
price of 15.25p on the date that the transaction was completed
which was when those shares were admitted to trading on AIM (14
September 2009).
The Group has also accounted for two sets of impairment
provisions. The first provisions totalling GBP4.5 million are
attributable to the disposal of OHM Limited and OHM Surveys Sdn Bhd
which were sold on 2 November 2010. The second relate to impairment
provisions of GBP2.2 million against the goodwill carried on the
balance sheet for the acquisition of Rock Solid Images, Inc. in
2007. These impairment provisions totalled GBP6.7 million and have
been recognised in the Consolidated Group Statement of
Comprehensive Income in arriving at the Group operating loss of
GBP17.2 million for the year to 31 August 2010. The Group reported
an operating loss of GBP8.8 million in 2009.
In addition, at the balance sheet date the Company has accounted
for impairment provisions totalling GBP24.7 million on its
investment in, and loans and other amounts due from, OHM Limited
and OHM Surveys Sdn Bhd.
The Group's cash balance at 31 August 2010 stood at GBP3.4
million up from GBP1.0 million at the end of August 2009. The Group
successfully completed a further round of fundraising in October
and early November 2010, which contributed a gross cash amount of
GBP2.0 million less GBP118,000 of expenses. The Group also received
GBP1.2 million from OHM Limited when it prepaid its first tranche
for WISE services. On 2 November 2010 when Project Alloy completed
and OHM Ltd and OHM Surveys Sdn Bhd left the Group, the remaining
Group had cash balances of GBP2.9 million to take forward. This
cash was supplemented by a further GBP0.6 million received from OHM
Limited when it prepaid its second tranche for WISE services on 30
November 2010.
Trading outlook
The management team looks forward to developing the Company's
integration strategy over the coming years. Our initial focus is in
expanding our Houston centre, though we will continue to maintain
an office presence in Aberdeen and Kuala Lumpur in cooperation with
our former subsidiary, OHM Limited.
We are making immediate investments in software designed to
improve our processing and interpretation capabilities particularly
for seismic and CSEM data, but also for key enabling technologies
such as rock-physics. We are in the process of expanding our
computer facilities in Houston by adding a second high-performance
cluster.
We have added staff, and continue to add staff, at all levels of
our organisation. We are paying particular attention to building a
substantially larger and more sophisticated business development
organisation and have added sales personnel into both geographical
niches.
We are seeing increased interest in CSEM technology and your
Company is uniquely positioned to take advantage of this market
increase as the only independent supplier of integrated processing
and interpretation products and services for seismic and
electromagnetics. Our traditional Rock Solid Images business
remains strong in West Africa and we continue to work on developing
new markets such as unconventional shale plays in North America and
fractured reservoirs.
I'd like to thank all of our shareholders, employees, board
members and of course our clients for the support they've given to
the Company over the previous years and we look forward to an
exciting future as we take the Company along its new path.
Richard Cooper
Chief Executive Officer
Offshore Hydrocarbon Mapping plc
Consolidated Group Statement of Comprehensive Income
For the year ended 31 August 2010
2010 2009
GBP'000 GBP'000
Revenue 9,925 9,227
Cost of sales 13,067 12,238
----------- -----------
Gross loss (3,142) (3,011)
Administrative expenses 5,151 5,770
Charge on conversion of vessel charter
commitments into shares 2,140 -
Impairment provisions 6,749 -
Group operating loss (17,182) (8,781)
Finance income 3 81
Finance costs (76) (11)
----------- -----------
Loss before taxation (17,255) (8,711)
Income tax credit/(expense) 137 (121)
----------- -----------
Loss for the year attributable to equity
holders of the parent company (17,118) (8,832)
Other comprehensive income:
Exchange differences on translating foreign
operations 875 1,555
----------- -----------
Other comprehensive income and expense
for the year, net of tax 875 1,555
Total comprehensive loss for the year
attributable to equity holders of the
parent company (16,243) (7,277)
----------- -----------
Loss per ordinary share (22.41)p (20.41)p
Basic (22.41)p (20.41)p
Diluted
----------- -----------
Offshore Hydrocarbon Mapping plc
Consolidated Group Balance Sheet at 31 August 2010
2010 2009
GBP'000 GBP'000
Assets
Non-current assets
Goodwill 11,124 12,636
----------- -----------
Intangible assets - multi client data
library - 2,679
- software 2,430 2,575
- patent costs 852 1,101
- consortium fees 143 153
----------- -----------
3,425 6,508
Plant and machinery 667 4,283
----------- -----------
15,216 23,427
Current assets
Inventories
Trade and other receivables 487 607
Cash and cash equivalents 2,365 749
Total assets 3,443 1,043
----------- -----------
6,295 2,399
----------- -----------
21,511 25,826
----------- -----------
Liabilities
Current liabilities
Borrowings 973 -
Trade and other payables 5,466 2,941
Current tax liabilities 63 48
Finance leases 34 9
----------- -----------
6,536 2,998
Non current liabilities
Borrowings 324 -
Deferred tax liabilities 710 736
Finance leases 63 -
----------- -----------
1,097 736
----------- -----------
Total liabilities 7,633 3,734
----------- -----------
Net assets 13,878 22,092
----------- -----------
Shareholders' equity
Share capital
Share premium 905 434
Share based payments reserve 44,103 36,668
Merger reserve 1,443 1,322
Retained earnings 5,355 5,355
Cumulative translation reserve (41,649) (24,531)
Total shareholders' equity 3,721 2,844
----------- -----------
13,878 22,092
----------- -----------
The financial statements were approved by the board of directors
and authorised for issue on 3 February 2011 and are signed on its
behalf by:
R C Cooper R I Auckland
Director Director
Offshore Hydrocarbon Mapping plc
Consolidated Group Cashflow Statement
For the year ended 31 August 2010 2010 2009
GBP'000 GBP'000
Cash flow from operating activities Loss before (17,255) (8,711)
taxation Adjustments for: Depreciation of 1,840 947
tangible fixed assets Amortisation of intangible 1,066 1,345
fixed assets Share based payments charge 121 215
Intangible asset transfer from balance sheet Loss - 53
on disposal of plant and equipment Impairment 172 35
provisions Charge on conversion of vessel charter 6,749 -
commitments Finance income Operating cash flows 2,140 -
before changes in working capital (3) (81)
(5,170) (6,197)
Decrease in inventories
(Increase)/decrease in trade and other receivables 120 138
Increase/(decrease) in trade and other payables (1,616) 3,170
Cash absorbed by operations 2,325 (3,577)
---------- ----------
(4,341) (6,466)
Foreign taxes paid 137 -
---------- ----------
Net cash used in operating activities (4,204) (6,466)
Cash flow from investing activities
Payments to acquire multi client data library
Payments to acquire software - (59)
Payments to acquire patents (115) (294)
Purchase of plant and equipment (56) (124)
Proceeds from sale of plant and equipment (232) (200)
Interest received 25 11
Net cash used in investing activities 3 81
---------- ----------
(375) (585)
Cash flow from financing activities
Proceeds from issue of ordinary share capital
Share issue costs 5,947 2
Borrowings received (181) -
Finance lease obligations 1,297 -
Net cash from financing activities (26) (41)
---------- ----------
7,037 (39)
---------- ----------
Net increase/(decrease) in cash and cash
equivalents 2,458 (7,090)
---------- ----------
Opening cash and cash equivalents 1,043 8,222
Effect of foreign exchange rate changes (58) (89)
---------- ----------
Closing cash and cash equivalents 3,443 1,043
---------- ----------
Offshore Hydrocarbon Mapping plc
Consolidated Group Statement of Changes in Equity
For the year ended 31 August 2010
Attributable to equity holders of the parent company
Share
based
Share Share payments Merger Retained Translation Total
capital Premium reserve reserve earnings reserve equity
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Balance at 1
September
2008 432 36,668 1,107 5,355 (15,699) 1,289 29,152
Loss for the
year - - - - (8,832) - (8,832)
Other
comprehensive
income -
comprising
foreign
currency
translation
difference
arising on
consolidation
of
subsidiaries - - - - - 1,555 1,555
Share based
payments - - 215 - - - 215
Share issue 2 - - - - - 2
Balance at 31
August 2009 434 36,668 1,322 5,355 (24,531) 2,844 22,092
Loss for the
year - - - - (17,118) - (17,118)
Other
comprehensive
income -
comprising
foreign
currency
translation
difference
arising on
consolidation
of
subsidiaries - - - - - 875 875
Share based
payments - - 121 - - - 121
Other
adjustments - - - - - 2 2
Share placings 471 7,435 - - - - 7,906
--------- --------- ---------- --------- ---------- ------------- ----------
Balance at 31
August 2010 905 44,103 1,443 5,355 (41,649) 3,721 13,878
--------- --------- ---------- --------- ---------- ------------- ----------
The charge to the share based payments reserve represents the
fair value of the shares to be awarded under the Group's Share
Option Plans and Share Award and Annual Bonus Plans calculated in
accordance with IFRS 2. Corresponding amounts are included in the
loss for the relevant periods with the consequence that the Group's
accounting for share based payments has no net impact on total
equity.
The merger reserve represents the excess of the fair value of
the shares issued over their nominal value which is recorded when
shares are issued in exchange for shares to effect an investment in
an undertaking.
Other reserves represent the credit entry relating to share
based payment charges on the implementation of IFRIC 11. This
impacts the Company only.
Retained earnings represent gains and losses recognised in the
Consolidated Group Statement of Comprehensive Income that are not
required to be presented in any of the other components of equity
as presented. No dividends were declared in any period
disclosed.
The translation reserve comprises gains and losses arising on
the translation of the net assets of overseas operations.
Notes to the Preliminary Results
1 General information
The financial information set out above does not constitute the
Company's statutory accounts for the years ended 31 August 2010 or
2009, but is derived from those accounts. Statutory accounts for
the years ended 31 August 2010 and 31 August 2009 have been
reported on by the Independent Auditors. The Independent Auditors'
Report on the Annual Report and Financial Statements for 2009 was
unqualified and did not contain a statement under 237(2) or 237(3)
of the Companies Act 1985. The Independent Auditors' Report on the
Annual Report and Financial Statements for 2010 was unqualified,
did not draw attention to any matters by way of emphasis, and did
not contain a statement under 498(2) or 498(3) of the Companies Act
2006. Statutory accounts for the year ended 31 August 2009 have
been filed with the Registrar of Companies. The statutory accounts
for the year ended 31 August 2010 will be delivered to the
Registrar following the Company's annual general meeting.
Accounts for the year ending 31 August 2010 will be dispatched
to shareholders during February 2011 and will shortly be available
on the Company's website, www.ohmrsi.com. The AGM will take place
at 11.00am on 28 February 2011 at the offices of Peel Hunt LLP, 111
Old Broad Street, London, EC2N 1PH.
Offshore Hydrocarbon Mapping plc is a company registered in
England and Wales.
2 Significant accounting policies
Basis of preparation
The financial statements have been prepared under the historical
cost convention, in accordance with IFRS (International Financial
Reporting Standards) as endorsed for use in the European Union and
also in accordance with those parts of the Companies Act 2006 that
remain applicable to companies who report under IFRS.
Going concern assumption
In the 2009 Annual Report, the directors reported that should
the Company not receive a flow of profitable orders, additional
funding may be required by the Group and the directors were
therefore continuing to consider a number of funding options,
should such a course of action become necessary.
Since that time, such a course did become necessary, and the
Directors decided to seek to divest the loss making CSEM
acquisition business and focus the remaining business on CSEM, well
and seismic data processing and interpretation services.
The divestment of the marine CSEM acquisition business was
initiated in June 2010 and together with a related fundraising,
completed on 2 November 2010, after the balance sheet date of 31
August 2010.
In summary, the actions taken were:
-- Disposal of the marine CSEM acquisition business which
removed charter liabilities and high fixed costs.
-- Raised GBP2.0 million before expenses through a Placing of
New Ordinary Shares with certain shareholders at 10 pence per
share.
-- Received a prepayment of $3.0 million (GBP1.95 million) from
OHM Limited (the disposed of business) for CSEM data processing and
interpretation services.
Sales within the data processing and interpretation services
business suffered in 2010 principally through uncertainty caused by
the marine CSEM acquisition business and a lack of investment in
processing and interpretation technology and sales personnel. The
Directors consider that following the disposal the financial health
of the Company is more robust and the renewed investment in
processing and interpretation technology and in an increased sales
force will flow through to increased backlog.
The timing of the anticipated increase in orders is difficult to
predict and additional funding may yet be required by the Group.
The directors are therefore continuing to consider a number of
funding options, should such a course of action become
necessary.
The closing middle market price of Offshore Hydrocarbon Mapping
plc's shares at 31st August 2010 was 6.0 pence (market
capitalisation of approximately GBP5.4 million) compared to 11.5
pence (market capitalisation of approximately GBP5.0 million) at
31st August 2009. The directors believe that the current share
price of 6.6 pence per share is some way below the underlying value
of the Group and its future prospects following the disposal of the
marine CSEM acquisition business on 2 November 2010.
Although further sales will take time to build up, after making
enquiries, the directors believe that there are reasonable
prospects that order backlog for the data processing and
interpretation business and the resulting revenues will increase
significantly in 2011 compared to 2010, leading to stronger
operational cash flows, providing a satisfactory level of
confidence to the Board in respect of trading in the year ahead.
The directors have a reasonable expectation that both the Company
and the Group have adequate resources to continue in operational
existence for the foreseeable future. Accordingly, they continue to
adopt the going concern basis in preparing the Annual Report and
financial statements.
Basis of consolidation
The consolidated financial statements incorporate the financial
statements of the Company and entities controlled by the Company
(its subsidiaries) made up to 31 August 2010 each year. Control is
achieved where the Company has the power to govern the financial
and operating policies of an investee entity so as to obtain
benefits from its activities. The results of subsidiaries acquired
in the year are included in the Consolidated Group Statement of
Comprehensive Income from the effective date of acquisition. Where
necessary, adjustments are made to the financial statements of
subsidiaries to bring the accounting policies used into line with
those used by the Group. All intra-group transactions, balances,
income and expenses are eliminated on consolidation.
Business combinations and goodwill
Goodwill represents the excess of the cost of a business
combination over, in the case of business combinations completed
prior to 1 September 2009, the Group's interest in the fair value
of identifiable assets, liabilities and contingent liabilities
acquired and, in the case of business combinations completed on or
after 1 September 2009, the total acquisition date fair value of
the identifiable assets, liabilities and contingent liabilities
acquired.
For business combinations completed prior to 1 September 2009,
cost comprises the fair value of assets given, liabilities assumed
and equity instruments issued, plus any direct costs of
acquisition. Changes in the estimated value of contingent
consideration arising on business combinations completed by this
date are treated as an adjustment to cost and, in consequence,
result in a change in the carrying value of goodwill.
For business combinations completed on or after 1 September
2009, cost would comprise the fair value of assets given,
liabilities assumed and equity instruments issued, plus the amount
of any non-controlling interests in the acquiree plus, if the
business combination is achieved in stages, the fair value of the
existing equity interest in the acquiree. Contingent consideration
is included in cost at its acquisition date fair value and, in the
case of contingent consideration classified as a financial
liability, remeasured subsequently through profit or loss. For
business combinations completed on or after 1 September 2009,
direct costs of acquisition are recognised immediately as an
expense.
Goodwill is capitalised as an intangible asset with any
impairment in carrying value being charged to the Consolidated
Group Statement of Comprehensive Income. Where the fair value of
identifiable assets, liabilities and contingent liabilities exceed
the fair value of consideration paid, the excess is credited in
full to the Consolidated Group Statement of Comprehensive Income on
the acquisition date.
For the purpose of impairment testing, goodwill is allocated to
each of the Group's cash-generating units expected to benefit from
the synergies of the combination. Cash generating units to which
goodwill has been allocated are tested for impairment annually, or
more frequently when there is an indication that the unit may be
impaired. If the recoverable amount of the cash generating unit is
less than the carrying amount of the unit, the impairment loss is
allocated first to reduce the carrying amount of any goodwill
allocated to the unit and then to the other assets of the unit
pro-rata on the basis of the carrying amount of each asset in the
unit.
An impairment loss recognised for goodwill is not reversed in a
subsequent period.
On disposal of a subsidiary the attributable amount of goodwill
is included in the determination of the profit or loss on
disposal.
Revenue recognition
Revenue represents sales in respect of the provision of oil
exploration and production services to external customers at
invoiced amounts less value added tax or local taxes on sales.
Revenue is recognised in line with the performance of these
services, to the extent that the performance entitles the Group to
receive consideration in line with the terms of the service
contracts under which the Group operates. Included within revenue
are amounts in respect of data acquisition offshore, data modelling
and data interpretation services provided to external customers.
Reimbursable expenses billed to customers are included in
revenue.
Interest receivable
Interest income is recognised on an accruals basis under the
effective interest method and is recognised within finance income
in the Consolidated Group Statement of Comprehensive Income.
Research and development
Expenditure on pure and applied research is charged as an
expense in the year in which it is incurred. Development costs
which are expected to generate probable future economic benefits
are capitalised in accordance with IAS 38 "Intangible Assets" and
amortised on a straight line basis over their useful economic
lives. All other development expenditure is charged to the
Consolidated Group Statement of Comprehensive Income.
Under IAS 38, an internally-generated intangible asset arising
from the Groups' product development is recognised only if all of
the following conditions are met:
-- the technical feasibility of completing the intangible asset
so that it will be available for sale,
-- its intention to complete the intangible asset,
-- its ability to use or sell the intangible asset,
-- it is probable that the asset created will generate future
economic benefits,
-- the availability of adequate technical, financial and other
resources to complete the development and to use or sell the
intangible asset, and
-- the development cost of the asset can be measured
reliably.
Financial instruments
Financial assets and financial liabilities are recognised in the
Group or Company Balance Sheet when the Group or Company becomes a
party to the contractual provisions of the instrument.
Trade receivables
Trade receivables are measured at fair value with appropriate
allowances for estimated irrecoverable amounts recognised in the
Consolidated Group Statement of Comprehensive Income. All amounts
are subsequently valued at amortised cost using the effective
interest method.
Cash and cash equivalents
Cash and cash equivalents have original maturity of three months
or less from acquisition and comprise cash in hand and demand
deposits and other short-term highly liquid investments that are
readily convertible to a known amount of cash and are subject to an
insignificant risk of change in value.
Bank borrowings
Interest-bearing loans and overdrafts are initially recognised
at fair value and subsequently at amortised cost. Finance charges,
including premiums payable on settlement or redemption and direct
issue costs, are accounted for on an accruals basis in the
Consolidated Group Statement of Comprehensive Income using the
effective interest method and are added to the carrying amount of
the instrument to the extent that they are not settled in the
period in which they arise. The Group does not capitalise any
interest with respect to borrowings.
Loans and receivables
These assets are non-derivative financial assets with fixed or
determinable payments that are not quoted in an active market. They
arise principally through the provision of goods and services to
customers (e.g. trade receivables), but also incorporate other
types of contractual monetary asset. They are initially recognised
at fair value plus transaction costs that are directly attributable
to their acquisition or issue, and are subsequently carried at
amortised cost using the effective interest rate method, less
provision for impairment.
Impairment provisions are recognised when there is objective
evidence (such as significant financial difficulties on the part of
the counterparty or default or significant delay in payment) that
the Group will be unable to collect all of the amounts due under
the terms receivable, the amount of such a provision being the
difference between the net carrying amount and the present value of
the future expected cash flows associated with the impaired
receivable. For trade receivables, which are reported net, such
provisions are recorded in a separate allowance account with the
loss being recognised within administrative expenses in the
Consolidated Group Statement of Comprehensive Income. On
confirmation that the trade receivable will not be collectable, the
gross carrying value of the asset is written off against the
associated provision.
From time to time, the Group elects to renegotiate the terms of
trade receivables due from customers with which it has previously
had a good trading history. Such renegotiations will lead to
changes in the timing of payments rather than changes to the
amounts owed and, in consequence, the new expected cash flows are
discounted at the original effective interest rate and any
resulting difference to the carrying value is recognised in the
Consolidated Group Statement of Comprehensive Income (operating
profit).
The Group's loans and receivables comprise trade and other
receivables and cash and cash equivalents in the Consolidated Group
Balance Sheet.
Loans made from the parent company to its subsidiaries are
initially recognised at fair value and are subsequently stated at
amortised cost using the effective interest method. Where the fair
value of such loans is less than the loan amount the difference is
treated as an increase in the investment in that subsidiary.
Trade payables
Trade payables are initially measured at fair value. All amounts
are subsequently valued at amortised cost using the effective
interest method.
Equity instruments
Equity instruments issued by the Group are recorded at the
proceeds received, net of direct issue costs.
Leasing
Leases are classified as finance leases whenever the terms of
the lease transfer substantially all the risk and rewards of
ownership to the lessee. All the other leases are classified as
operating leases.
Assets held under finance leases are recognised as assets of the
Group at their fair value or, if lower, at the present value of the
minimum lease payments, each determined at the inception of the
lease. The corresponding liability to the lessor is included in the
Balance Sheet as a finance lease obligation. Lease payments are
apportioned between finance charges and reduction of the lease
obligation so as to achieve a constant rate of interest on the
remaining balance of the liability. Finance charges are charged
directly against income.
Rentals payable under operating leases are charged to income on
a straight-line basis over the term of the relevant lease.
Foreign currencies
In preparing the financial statements of the individual
companies that comprise the Group, transactions in currencies other
than the entity's functional currency are recorded at the rates of
exchange prevailing on the date of the transactions. At each
balance sheet date, monetary assets and liabilities that are
denominated in foreign currencies are retranslated at the rates
prevailing on the balance sheet date. Non-monetary items carried at
fair value that are denominated in foreign currencies are
translated at the rates prevailing at the date when the fair value
is determined. Non-monetary items that are measured in terms of
historical cost in a foreign currency are not retranslated.
On consolidation, income statements of foreign operations are
translated into sterling at monthly average rates which approximate
to the actual rate for the relevant accounting periods. Assets and
liabilities are translated at exchange rates ruling at the balance
sheet date. Exchange differences on all balances, except foreign
currency loans accounted for as net investment hedges, are taken to
other comprehensive income in the Consolidated Group Statement of
Comprehensive Income. Exchange differences arising on consolidation
of the net investments in overseas subsidiaries, together with
those on foreign currency loans accounted for as net investment
hedges, are taken to equity. An intra-group monetary item for which
settlement is neither planned nor likely in the foreseeable future
is, in substance, a part of the Group's net investment in the
foreign operation. Exchange differences arising on a monetary item
that forms part of the Group's net investment in a foreign
operation are recognised in a separate component of equity.
Investments
The parent company's investments in subsidiary undertakings are
stated at cost less any impairment provisions.
Depreciation
Depreciation is provided to write off the cost, less estimated
residual values, of all tangible fixed assets, except for assets in
the course of construction, over their expected useful lives. It is
calculated at the following rates:
Plant and equipment - 12.5% to 66.7% straight line
Computer equipment - 20% to 50% straight line
Office equipment - 14.3% to 66.7% straight line
Impairment of fixed assets
Impairment reviews of fixed assets are carried out on each
cash-generating unit identified in accordance with IAS 36
"Impairment of Assets". The need for any fixed asset impairment
write-down is assessed by comparison of the carrying value of the
asset against the higher of realisable value and value in use. Any
such impairment arising is recognised in the Consolidated Group
Statement of Comprehensive Income as impairment.
Where there has been a charge for impairment in an earlier
period that charge will be reversed in a later period where there
has been a change in circumstances to the extent that the
discounted future net cash flows are higher than the net book value
at the time. In reversing impairment losses, the carrying amount of
the asset will be increased to the lower of its original carrying
value or the carrying value that would have been determined (net of
depreciation or amortisation) had no impairment loss been
recognised in prior periods.
Intangible assets
Patent costs
Costs of obtaining patents are capitalised and amortised on a
straight line basis over their useful life from the date they are
awarded which ranges from ten to seventeen years.
Software developed internally
Software developed internally is capitalised and amortised on a
straight line basis over its useful life which ranges from two to
ten years.
Consortium fees
Recurring fees from research consortia are fair valued on
acquisition, capitalised and amortised on a straight line basis
over their useful lives which ranges from five to ten years.
Multi client data library
The cost of collecting and processing electromagnetic and
seismic data for onward licensing to clients on a non-exclusive
basis is capitalised and held in the Balance Sheet as an intangible
asset. The carrying cost of the electromagnetic data is held on an
identified prospect basis with the costs being reduced as sales
occur or, if insufficient sales are realised, amortised on a
straight line basis over a period of three years starting in the
first month of the next half year following completion of the data
library product. The carrying cost of well data is amortised on a
straight line basis over a period of five years. All sales of
information from the library attract a cost based on regular review
of operating margins.
Stocks and long term contracts
Stocks of spare parts and consumables are carried at the lower
of cost or net realisable value.
Long-term contracts are assessed on a contract by contract basis
and are reflected in the Consolidated Group Statement of
Comprehensive Income by recording revenue and related costs as
contract activity progresses. Where the outcome of each long-term
contract can be assessed with reasonable certainty before its
conclusion, the attributable profit is recognised in the
Consolidated Group Statement of Comprehensive Income as the
difference between the reported revenue and related costs for that
contract. As soon as a contract is expected to be loss making
overall, all future contract losses are provided for in the
period.
Taxation
The tax expense represents the sum of the tax currently payable
and deferred tax.
The tax currently payable is based on taxable profit for the
year. The Group's liability for current tax is calculated using
rates that have been enacted or substantively enacted by the
balance sheet date.
Deferred tax is the tax expected to be payable or recoverable on
differences between the carrying amounts of assets and liabilities
in the financial statements and the corresponding tax bases used in
the computation of taxable profits, and is accounted for using the
balance sheet liability method.
Deferred tax liabilities are generally recognised for all
taxable temporary differences and deferred tax assets are
recognised to the extent that it is probable that taxable profits
will be available against which deductible temporary differences
can be utilised. Such assets and liabilities are not recognised if
the temporary difference arises from the initial recognition of
goodwill or from the initial recognition (other than in a business
combination) of other assets and liabilities in a transaction that
affects neither the tax profit nor the accounting profit.
Deferred tax liabilities are recognised for taxable temporary
differences arising on investment in subsidiaries except where the
Group is able to control the reversal of the temporary difference
and it is probable that the temporary difference will not reverse
in the foreseeable future.
The carrying amount of deferred tax assets is reviewed at each
balance sheet date and reduced to the extent that it is no longer
probable that sufficient taxable profits will be available to allow
all or part of the asset to be recovered.
Deferred tax is calculated at the tax rates that have been
enacted or substantively enacted by the end of the reporting period
which are expected to apply in the period when the liability is
settled or the asset is realised. Deferred tax is charged or
credited in the Consolidated Group Statement of Comprehensive
Income, except when it relates to items charged or credited
directly to equity, in which case the deferred tax is also dealt
with in equity. Deferred tax assets and liabilities are offset when
there is a legally enforceable right to set off current tax assets
against current tax liabilities and when they relate to income
taxes levied by the same taxation authority and the Group intends
to settle its current tax assets and liabilities on a net
basis.
Retirement benefit costs
Payments to defined contribution retirement benefit schemes are
charged as an expense as they fall due. The Group has no defined
benefit retirement schemes.
Share-based payments
The Group operates a number of equity settled share-based
payment schemes under which shares are issued to certain employees.
The fair value determined at the grant date of the equity-settled
share-based payment is expensed on a straight-line basis over the
vesting period. For schemes with only market based performance
conditions, those conditions are taken into account in arriving at
the fair value at grant date. Accordingly, no subsequent adjustment
to the amortised fair value is made for achievement or otherwise of
those conditions. For schemes that include non-market based
conditions or no conditions, a "true-up" model is applied to the
expense at each reporting date based on the expected number of
shares that will eventually vest.
Group and treasury share transactions
Through its share award and share option schemes the Company
allows its subsidiary undertakings to remunerate their employees
with shares that the Company has issued. The Company accounts for
these share based payments as a capital contribution to the
subsidiary undertaking including the fair value of this capital
contribution as an addition to its investment in the subsidiary
undertaking
3 Critical accounting judgements and key sources of estimation
uncertainty
The preparation of the financial statements requires the use of
estimates and assumptions that affect the reported amounts of
assets and liabilities at the date of the financial statements and
the reported amounts of revenue and expenses during the year.
Although these estimates are based on management's best knowledge
of the amount, event or actions, actual results ultimately may
differ from those estimates. Significant judgements and estimates
in these financial statements have been made in a number of areas
and an explanation of key uncertainties or assumptions used by
management in accounting for these items is explained, where
material, in the following paragraphs and in the relevant
notes.
Assets held for sale and discontinued operations
At the General Meeting held on 1 November 2010 the members of
the Company approved a number of resolutions which included the
sale of the entire issued share capital of OHM Limited and OHM
Surveys Sdn Bhd for a total consideration of $150,000 (GBP97,000).
These disposals were completed on 2 November 2010. As a consequence
of these disposals the Group has recognised impairment provisions
totalling approximately GBP4.4 million in its consolidated accounts
to 31 August 2010 and the Company has recognised impairment
provisions totalling approximately GBP24.7 million in its own
accounts to 31 August 2010.
The Group has determined that while management was committed to
the sale of OHM Limited and OHM Surveys Sdn Bhd, before the year
end, the disposals were not considered highly probable at the
balance sheet date. The Company had not entered into legally
binding contracts at the balance sheet date and at that time the
disposals still required a number of shareholder approvals.
Consequently, the Group has not classified these two companies as a
disposal group at 31 August 2010 and thus its results are not
disclosed as discontinued operations. However, following completion
of these transactions after the year end, the trading results of
OHM Limited and OHM Surveys Sdn Bhd between the balance sheet date
and 2 November 2010 will be reflected as a discontinued operation
in the accounts to 31 August 2011.
Impairment of goodwill, tangible and intangible assets
The Group is required to test, on an annual basis, whether
goodwill and other intangible assets and intangible assets with
indefinite lives have suffered any impairment. At each reporting
date where there are indicators of impairment tangible assets are
also tested for impairment. In this test the net book value of the
cash-generating unit is compared with the associated expected
discounted future cash flows over a five year period. If the net
book value is higher, then the difference is written off to the
Consolidated Group Statement of Comprehensive Income as impairment.
The recoverable amount is determined based on "value in use"
calculations.
Following the year end, but before the financial statements were
signed, the Group disposed of its CSEM cash-generating unit as
represented by the trading activities of OHM Limited and OHM
Surveys Sdn Bhd. The directors have made impairment provisions
against the intangible and tangible assets of the Group and the
Company based on the known recoverable amounts.
Impairment of goodwill, tangible and intangible assets
(continued)
The use of this "value in use" method requires the estimation of
future cash flows and the choice of a discount rate in order to
calculate the present value of the net cash flows. Discounted
future net cash flows for IAS 36 purposes are calculated using a
pre tax discount rate of 22.0% (2009:17.5%). A higher discount rate
was used at 31 August 2010 in order to reflect an increased level
of uncertainty in forecasts. The Group determines forecasted
revenues and costs for each cash-generating unit over a five year
period based on a combination of historical experience and
projected growth rates for the WISE and WSS segments which are
corroborated by external sources, wherever possible.
The Group has determined that, going forward, it has two largely
independent cash-generating units, the Well-driven Integration of
Seismic and Electromagnetics business (WISE), and the Well and
Surface Seismic interpretation business (WSS). These
cash-generating units correspond broadly to the Group's business
segments.
The WISE market is forecast to grow by between 25% and 30% pa.
over the next five years with the Group's share of this market
should grow from approximately 15% to approximately 50%. In 2009
the WISE business was not classified as a separate cash-generating
unit. The Group's WISE revenues are forecast to increase by between
50% and 60% pa over this period. Assumptions relating to the growth
of the WISE market are based on projections made by the Board of
Directors.
The WSS market is forecast to grow by between 5% and 10% pa
(2009: between 10% and 15% pa) over the next five years with the
Group's share of this market increasing from approximately 5%
(2009: 10%) to between 10% and 15% (2009: between 10% and 25%). The
Group's WSS revenues are therefore forecast to increase by
approximately 40% pa (2009: between 30% and 40% pa) over this
period. The forecasts for the WSS market and the Group's relative
share of this market have changed during the year as a result of
carrying out further research.
The calculation of the value in use for each cash-generating
unit is most sensitive to assumptions for:
(a) the forecast rate of growth of the Group's revenues in the
WISE and WSS markets over the next five years; and
(b) the discount rate used.
The Board considers the value attributable to net cash flows
generated from the WISE and WSS businesses to be lower than the
current carrying value of goodwill, tangible and intangible assets
and consequently an impairment adjustment totalling GBP2,200,000 is
required. This impairment provision has been made against the
carrying value of goodwill.
Useful lives of intangible assets and property, plant and
equipment
Intangible assets and property, plant and equipment are
amortised or depreciated over their useful lives. Useful lives are
based on the management's estimates of the period over which the
assets will generate revenue, which are periodically reviewed for
continued appropriateness. Changes to estimates can result in
significant variations in the carrying value and amounts charged to
the Consolidated Income Statement in specific periods.
Share based payments
The Group has two types of equity-settled share-based
remuneration schemes for employees. Employee services received, and
corresponding credit to reserves, are measured by reference to the
fair value of the equity instruments at the date of grant,
excluding the impact of any non-market vesting conditions. The fair
value of share options and awards is estimated by using valuation
models, such as Monte Carlo and Cox, Ross & Rubinstein
binomial, on the date of grant based on certain assumptions. Those
assumptions include, among others, the dividend growth rate,
expected volatility, estimated number of employees leaving,
expected life of the options and number expected to vest.
4 Business and geographical segments
IFRS 8 defines operating segments as components of an entity
about which separate financial information is evaluated by the
chief operating decision maker in deciding how to allocate
resources and in assessing performance. The chief operating
decision maker has been identified as the Chief Executive Officer
("CEO").
At 31 August 2010 and 31 August 2009 the Group is organised into
three reportable business segments - Controlled Source
ElectroMagnetic (CSEM) business, Well-driven Integration of Seismic
and Electromagnetics (WISE) business and the Well and Surface
Seismic (WSS) business.
The CEO considers the performance of the operating segments
based on revenue, gross profit contribution, overheads and a
measure of Earnings before Interest, Taxation, Depreciation and
Amortisation (EBITDA). He also reviews performance, investment and
asset allocations by segments and in geographical regions.
Controlled Source ElectroMagnetic (CSEM)
OHM provides offshore CSEM acquisition and data processing
services. CSEM surveying can detect the presence of resistive
features in the earth which when carefully interpreted can provide
evidence for and information on hydrocarbon accumulations prior to
drilling. The Group has not divided financial information for its
CSEM activities into further different segments as it offers only
one CSEM surveying product range to its clients, who are
international and state owned oil and gas companies.
The risk and profitability of the Group's operations is similar
in different geographical regions of the world. Most of the Group's
plant and machinery is deployed on survey vessels and, as the CSEM
surveys are executed worldwide with equipment often being relocated
to meet capacity requirements, the Group is not able to allocate
these assets specifically to any geographical region.
Following the balance sheet date the Company disposed of the
CSEM business segment.
Well-driven Integration of Seismic and Electromagnetics
(WISE)
The value of geophysical data and interpretations derived from
them is significantly increased when different data types are
integrated to utilise the strengths of each. The Group's WISE
interpretation approaches use available seismic, CSEM and well log
data to add value to interpretations at all stages of the oil field
life cycle, by providing quantitative measurements of rock and
fluid properties.
The directors view the WISE product range and focus as being
critical to the future success of the Group and are allocating
resources to this business segment and monitoring performance
accordingly.
Well and Surface Seismic (WSS)
The Group's subsidiary Rock Solid Images (RSI), is the industry
leader in the integration of fundamental rock physics with well
data and surface seismic in order to interpret geophysical
signatures in terms of reservoir properties. Careful integration of
these data can lead to quantitative measurements of rock and fluid
properties such as porosity and hydrocarbon saturation.
The following tables present revenue, profit and loss, and
certain asset and liability information regarding the Group's three
business segments for the years ended 31 August 2010 and 2009. The
comparatives are restated for consistency of presentation.
Business segments
2010 CSEM WISE WSS Total
2010 2010 2010 2010
GBP'000 GBP'000 GBP'000 GBP'000
Continuing operations
revenue
External revenue 6,474 667 2,784 9,925
(10,
Cost of sales 930) (348) (1,789) (13,067)
---------- --------- --------- ----------
Segment gross (loss)/
profit (4,456) 319 995 (3,142)
Administrative expenses (2,292) (515) (2,344) (5,151)
Charge on conversion of
vessel charter commitments
into shares (2,140) - - (2,140)
Impairment provisions (4,359) (500) (1,890) (6,749)
Segment operating loss (13,247) (696) (3,239) (17,182)
Add back depreciation
and amortisation 2,176 16 714 2,906
Add back charge on conversion
of vessel charter commitments
into shares 2,140 - - 2,140
Add back impairment provisions 4,359 500 1,890 6,749
---------- --------- --------- ----------
Segment EBITDA (4,572) (180) (635) (5,387)
2009 CSEM WISE WSS Total
2009 2009 2009 2009
GBP'000 GBP'000 GBP'000 GBP'000
Continuing operations
revenue
External revenue 4,486 972 3,769 9,227
Cost of sales (9,702) (399) (2,137) (12,238)
Segment gross (loss)/
profit (5,216) 573 1,632 (3,011)
Administrative expenses (2,654) (429) (2,687) (5,770)
Segment operating loss/(profit) (7,870) 144 (1,055) (8,781)
Add back depreciation
and amortisation 1,098 39 1,155 2,292
Segment EBITDA (6,772) 183 100 (6,489)
--------- --------- --------- ----------
CSEM WISE WSS Total
2010 2010 2010 2010
GBP'000 GBP'000 GBP'000 GBP'000
Net capital investment
during 2010 Capital
additions - multi client
data library - software - - - - -
patent costs - tangible - 31 84 115
fixed assets Depreciation - 56 - 56
and amortisation charges 96 14 236 346
---------- --------- --------- ----------
96 101 320 517
(2,176) (16) (714) (2,906)
---------- --------- --------- ----------
(2,080) 85 (394) (2,389)
---------- --------- --------- ----------
CSEM WISE WSS Total
2010 2010 2010 2010
GBP'000 GBP'000 GBP'000 GBP'000
Balance sheet at 31 August
2010
Segment assets
Segment liabilities 6,163 3,373 11,975 21,511
Total net assets (5,728) (295) (1,610) (7,633)
---------- --------- ---------- ----------
435 3,078 10,365 13,878
---------- --------- ---------- ----------
CSEM WISE WSS Total
2009 2009 2009 2009
GBP'000 GBP'000 GBP'000 GBP'000
Net capital investment
during 2009 Capital
additions - multi client
data library - software - 59 - - 59
patent costs - tangible 138 5 151 294
fixed assets Depreciation 119 - 5 124
and amortisation charges 82 24 94 200
---------- --------- ---------- ----------
398 29 250 677
(1,098) (39) (1,155) (2,292)
---------- --------- ---------- ----------
(700) (10) (905) (1,615)
---------- --------- ---------- ----------
CSEM WISE WSS Total
2009 2009 2009 2009
GBP'000 GBP'000 GBP'000 GBP'000
Balance sheet at 31 August
2009
Segment assets
Segment liabilities 8,754 3,316 13,756 25,826
Total net assets (2,181) (342) (1,211) (3,734)
---------- --------- ---------- ----------
6,573 2,974 12,545 22,092
---------- --------- ---------- ----------
Geographical segments
The Group's operations are analysed between Europe, Africa, the
Americas and Asia Pacific. The following table provides analysis of
the Group's revenue by location of the contracted activity:
Revenue
2009
2010 restated
GBP'000 GBP'000
Europe (particularly in the North Sea)
Africa (particularly Equatorial Guinea
and Cote d'Voire) 910 3,860
Americas (particularly the USA) 3,554 2,835
Asia Pacific (particularly India and 496 1,966
Australia) 4,965 566
--------- -----------
9,925 9,227
--------- -----------
The following table is an analysis of the carrying amount of
total assets, and additions to the property, plant and machinery
and intangible assets, analysed by the location in which the assets
are located:
Total assets Capital expenditure
2010 2009 2010 2009
GBP'000 GBP'000 GBP'000 GBP'000
5,160 6,961 113 412
Europe Africa Americas Asia - - - -
Pacific Unallocated - 14,798 16,298 323 243
including plant and machinery 66 152 - 9
on vessels 1,487 2,415 81 13
--------- --------- ----------- ----------
21,511 25,826 517 677
--------- --------- ----------- ----------
The total assets located in Europe include GBP3,213,000 of cash
and cash equivalents (2009: GBP488,000).
Major clients
The Group had four different clients (2009: two) who accounted
for more than 10% of the Group's external revenue during the year
as shown below:
Major clients
2010 2009
GBP'000 GBP'000
Client A 2,048 -
Client B 1,675 -
Client C 1,464 -
Client D 1,278 -
Client E - 1,243
Client F - 1,063
Other clients accounting for less than 10%
of the Group's external revenues 3,460 6,921
--------- ---------
Total revenue 9,925 9,227
--------- ---------
The revenue from Clients A-F is attributable to the CSEM and
WISE business segments. The names of these clients are confidential
to the business.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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