XSTO:IPCO ESEF Annual Report
International Petroleum Corp. (XSTO:IPCO)
ESEF Annual Report
2022-02-08
For: 2021-12-31
View Original
Added on
September 27, 2026
Q4
International Petroleum Corporation
Audited Consolidated Financial
Statements
For the years ended December 31, 2021 and 2020
2
Contents
Report of Management 3
Report of Independent Auditor 4
Consolidated Statement of Operations 9
Consolidated Statement of Comprehensive Income 10
Consolidated Balance Sheet 11
Consolidated Statement of Cash Flow 12
Consolidated Statement of Changes in Equity 13
Notes to the Consolidated Financial Statements 14
Consolidated Financial Statement
For the years ended December 31, 2021 and 2020, AUDITED
3
REPORT OF MANAGEMENT
The accompanying consolidated financial statements of International Petroleum Corporation (“IPC” or the “Corporation” and,
together with its subsidiaries, the “Group”) and other information contained in the management’s discussion and analysis are the
responsibility of management and have been approved by the Board of Directors. The consolidated financial statements have been
prepared by management in accordance with International Financial Reporting Standards (“IFRS”) as issued by the International
Accounting Standards Board (“IASB”) as outlined in Part 1 of the Handbook of the Chartered Professional Accountants of Canada,
and include some amounts that are based on management’s estimates and judgment.
The Board of Directors carries out its responsibility for the consolidated financial statements principally through its Audit
Committee, which is comprised solely of independent directors. The Audit Committee reviews the Group’s annual consolidated
financial statements and recommends its approval to the Board of Directors. The Corporation’s auditors have full access to the
Audit Committee, with and without management being present. These consolidated financial statements have been audited by
PricewaterhouseCoopers SA, Chartered Professional Accountants, Licensed Public Accountants.
(Signed) Mike Nicholson (Signed) Christophe Nerguararian
Director, President and Chief Executive Officer Chief Financial Officer
Vancouver, Canada
February 8, 2022
Consolidated Financial Statement
For the years ended December 31, 2021 and 2020, AUDITED
4
PricewaterhouseCoopers SA, avenue Giuseppe-Motta 50, case postale, CH-1211 Genève 2, Switzerland
Téléphone: +41 58 792 91 00, Téléfax: +41 58 792 91 10, www.pwc.ch
PricewaterhouseCoopers SA is a member of the global PricewaterhouseCoopers network of firms, each of which is a separate and independent legal entity.
Independent auditor’s report
To the Shareholders of International Petroleum Corporation
Our opinion
In our opinion, the accompanying consolidated financial statements present fairly, in all material respects, the financial
position of International Petroleum Corporation and its subsidiaries (together, the Corporation) as at December 31,
2021 and 2020, and its financial performance and its cash flows for the years then ended in accordance with
International Financial Reporting Standards (IFRS).
What we have audited
The Corporation’s consolidated financial statements comprise:
x the consolidated statements of operations for the years ended December 31, 2021 and 2020;
x the consolidated statement of comprehensive income for the years then ended;
x the consolidated balance sheet as at December 31, 2021 and 2020;
x the consolidated statements of cash flows for the years then ended;
x the consolidated statements of changes in equity for the years then ended; and
x the notes to the consolidated financial statements, which include a summary of significant accounting policies.
Basis for opinion
We conducted our audit in accordance with Canadian generally accepted auditing standards. Our responsibilities
under those standards are further described in the Auditor’s responsibilities for the audit of the consolidated financial
statements section of our report.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Independence
We are independent of the Corporation in accordance with the ethical requirements that are relevant to our audit of the
consolidated financial statements in Canada. We have fulfilled our other ethical responsibilities in accordance with
these requirements.
Key audit matters
Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the
consolidated financial statements for the year ended December 31, 2021. These matters were addressed in the
context of our audit of the consolidated financial statements as a whole, and in forming our opinion thereon, and we do
not provide a separate opinion on these matters.
5
Key audit matters
How our audit addressed the key audit
matters
The impact of oil and gas reserves on net property, plant and
equipment (PP&E) for the Canada, Malaysia, and France
segments
Refer to note 1 - Corporate information, note 2 - Critical
accounting estimates and judgements, and note 8 – Oil and Gas
Properties to the consolidated financial statements.
The Corporation has USD 953.5 million of net PP&E assets as at
December 31, 2021. Depletion charges were USD 119.0 million
for the year then ended. PP&E is depleted based on the year’s
production in relation to the estimated total proved and probable
reserves in accordance with the unit of production method.
At each balance sheet date or when there are facts and
circumstances that suggest that the net book value of capitalized
costs within each field area cost centre is higher than anticipated
future net cash flow from oil and gas reserves attributable to the
Corporation’s interest in the related field areas, the Corporation
performs an assessment as to whether there is an indication that
an asset may be impaired. Management determined the
recoverable amounts of PP&E based on the higher of fair value
less costs of disposal and value in use using estimated future
discounted net cash flows of proved and probable oil and gas
reserves. The Corporation’s estimates of proved and probable oil
and gas reserves used in the calculations for impairment tests and
accounting for depletion have been reviewed by Management’s
experts, specifically independent qualified reserves auditor.
Significant assumptions developed by management used to
determine the recoverable amount include the proved and
probable oil and gas reserves, expected production volumes,
future oil and gas prices, future development costs, future
production costs and the discount rate.
We determined that this is a key audit matter due to (i) the
significant judgment made by management, including the use of
management’s experts, when developing the expected future cash
flows to determine the recoverable amount and the proved and
probable oil and gas reserves; and (ii) a high degree of auditor
judgment, subjectivity and effort in performing procedures
and evaluating audit evidence relating to management’s
estimates.
Our approach to addressing the matter included the
following procedures, among others:
භ The work of management’s experts was used in
performing the procedures to evaluate the
reasonableness of the proved and probable oil and
gas reserves used to determine depletion charges
and the recoverable amount of PP&E for the
Canada, France and Malaysia segments. As a
basis for using this work, management’s experts’
competence, capability and objectivity were
evaluated, their work performed was understood
and the appropriateness of their work as audit
evidence was evaluated by considering the
relevance and reasonableness of the
assumptions, methods and findings.
භ Tested how management determined the
recoverable amount and depletion charges for the
Canada, France and Malaysia segments, which
included the following:
o Evaluated the appropriateness of the methods
used by management in making these
estimates.
o Tested the data used in determining these
estimates.
o Evaluated the reasonableness of significant
assumptions used in developing the
underlying estimates:
ඵ Expected production volumes, future
development costs and future production
costs by considering the past
performance of each segment, and
whether these assumptions were
consistent with evidence obtained in
other areas of the audit.
ඵ Future oil and gas prices by comparing
those prices with other reputable third-
party industry forecasts.
ඵ The discount rate, by performing an
independent sensitivity analysis.
o Recalculated the unit of production rates used
to calculate depletion charges for the Canada,
France and Malaysia segments.
6
Other information
Management is responsible for the other information. The other information comprises the Management’s Discussion
and Analysis.
Our opinion on the consolidated financial statements does not cover the other information and we do not express any
form of assurance conclusion thereon.
In connection with our audit of the consolidated financial statements, our responsibility is to read the other information
identified above and, in doing so, consider whether the other information is materially inconsistent with the
consolidated financial statements or our knowledge obtained in the audit, or otherwise appears to be materially
misstated.
If, based on the work we have performed, we conclude that there is a material misstatement of this other information,
we are required to report that fact. We have nothing to report in this regard.
Responsibilities of management and those charged with governance for the consolidated
financial statements
Management is responsible for the preparation and fair presentation of the consolidated financial statements in
accordance with IFRS, and for such internal control as management determines is necessary to enable the preparation
of consolidated financial statements that are free from material misstatement, whether due to fraud or error.
In preparing the consolidated financial statements, management is responsible for assessing the Corporations’s ability
to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going
concern basis of accounting unless management either intends to liquidate the Corporation or to cease operations, or
has no realistic alternative but to do so.
Those charged with governance are responsible for overseeing the Corporation’s financial reporting process.
7
Auditor’s responsibilities for the audit of the consolidated financial statements
Our objectives are to obtain reasonable assurance about whether the consolidated financial statements as a whole are
free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our
opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in
accordance with Canadian generally accepted auditing standards will always detect a material misstatement when it
exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they
could reasonably be expected to influence the economic decisions of users taken on the basis of these consolidated
financial statements.
As part of an audit in accordance with Canadian generally accepted auditing standards, we exercise professional
judgment and maintain professional skepticism throughout the audit. We also:
x Identify and assess the risks of material misstatement of the consolidated financial statements, whether due to
fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is
sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement
resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional
omissions, misrepresentations, or the override of internal control.
x Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are
appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the
Corporation’s internal control.
x Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and
related disclosures made by management.
x Conclude on the appropriateness of management’s use of the going concern basis of accounting and, based on
the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast
significant doubt on the Corporation’s ability to continue as a going concern. If we conclude that a material
uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the
consolidated financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are
based on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions
may cause the Corporation to cease to continue as a going concern.
x Evaluate the overall presentation, structure and content of the consolidated financial statements, including the
disclosures, and whether the consolidated financial statements represent the underlying transactions and events in
a manner that achieves fair presentation.
x Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities
within the Corporation to express an opinion on the consolidated financial statements. We are responsible for the
direction, supervision and performance of the group audit. We remain solely responsible for our audit opinion.
We communicate with those charged with governance regarding, among other matters, the planned scope and timing
of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during
our audit.
8
From the matters communicated with those charged with governance, we determine those matters that were of most
significance in the audit of the consolidated financial statements of the current period and are therefore the key audit
matters. We describe these matters in our auditor’s report unless law or regulation precludes public disclosure about
the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our
report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest
benefits of such communication.
We also provide those charged with governance with a statement that we have complied with relevant ethical
requirements regarding independence, and to communicate with them all relationships and other matters that may
reasonably be thought to bear on our independence, and where applicable, related safeguards.
The engagement partner on the audit resulting in this independent auditor’s report is Luc Schulthess.
PricewaterhouseCoopers SA
Luc Schulthess Tarik Bouchama
February 8, 2022
9
Consolidated Statement of Operations
For the years ended December 31, 2021 and 2020, AUDITED
USD Thousands
Note
2021
2020
Revenue
3
Cost of sales
Production costs
4
(325,007 ) (204,628 )
Depletion and decommissioning costs
8
(1 19,0 1 3 ) (1 1 1,896 )
Depreciation of other tangible fixed assets
10
(1 0,1 08 ) (1 1,681 )
Exploration and business development costs (1,960 ) (6,802 )
Impairment costs of oil and gas properties
8
Gross profit / (loss)
3
General, administration and depreciation expenses
(1 2,364 ) (1 2,788 )
Profit / (loss) before financial items
Finance income
5
Finance costs
6
(30,499 ) (28,090 )
Net financial items
(30,21 4 ) (1 4,987 )
Profit / (loss) before tax
Income tax recovery / (expense)
7
(21,684 ) 33,820
Net result
Net result attributable to:
Shareholders of the Parent Company 1 46,028 (77 ,854 )
Non-controlling interest
Earnings per share – USD
1
17
Earnings per share fully diluted – USD
1
17
1
Based on net result attributable to shareholders of the Parent Company
See accompanying notes to the consolidated financial statements
10
Consolidated Statement of Comprehensive Income
For the years ended December 31, 2021 and 2020, AUDITED
USD Thousands Note
2021
2020
Net result 1 46,059 (77 ,941 )
Other comprehensive income/(loss)
Items that may be reclassified to profit or loss:
Hedging (gains) / losses reclassified to profit or loss
3
Gains / (losses) on cash flow hedges (31,253 ) (3,098 )
Income tax relating to these items (562 ) 279
Currency translation adjustments (5,409 ) 1 0,491
Items that will not be reclassified to profit or loss:
Re-measurements on defined pension plan
21
Total comprehensive income / (loss)
Total comprehensive income/ (loss) attributable to:
Shareholders of the Parent Company 1 42,980 (68,91 4 )
Non-controlling interest
See accompanying notes to the consolidated financial statements
11
Consolidated Balance Sheet
For the years ended December 31, 2021 and 2020, AUDITED
USD Thousands Note
December 31, 2021
December 31, 2020
ASSETS
Non-current assets
Oil and gas properties
8
Other tangible fixed assets
10
Right-of-use assets
11
Deferred tax assets
7
Other assets
12
Total non-current assets
Current assets
Inventories
13
Trade and other receivables
14
Derivative instruments
23
Current tax receivables 99 1,1 57
Cash and cash equivalents
15
Total current assets
TOTAL ASSETS 1,273,67 4 1,333,120
LIABILITIES
Non-current liabilities
Financial liabilities
19
Lease liabilities
11
Provisions
20
Deferred tax liabilities
7
Total non-current liabilities
Current liabilities
Trade and other payables
22
Financial liabilities
19
Current tax liabilities 5,093 18 4
Lease liabilities
11
Provisions
20
Derivative instruments
23
Total current liabilities
EQUITY
Shareholders’ equity 847 ,386 708,321
Non-controlling interest
Net shareholders’ equity
TOTAL EQUITY AND LIABILITIES
Approved by the Board of Directors
(Signed) C. Ashley Heppenstall (Signed) Mike Nicholson
Director Director
See accompanying notes to the consolidated financial statements
12
Consolidated Statement of Cash Flow
For the years ended December 31, 2021 and 2020, AUDITED
USD Thousands Note
2021
2020
Cash flow from operating activities
Net result
Adjustments for non-cash related items:
Depletion, depreciation and amortization
8,10,11
Exploration costs
8
Impairment costs
8
Income tax
7
Capitalized financing fees
6
Foreign currency exchange
5
Interest expense
6
Unwinding of asset retirement obligation discount
6
Change in pension liability
20
Share-based costs
18
Other
Cash flow generated from operations (before
working capital adjustments and income taxes)
Changes in working capital (36,1 15 ) (1 0,41 4 )
Decommissioning costs paid
20
(3,945 ) (4,324 )
Other payments
20
(1,507 ) (4,629 )
Income taxes received / (paid) 425 (2,609 )
Interest paid
(1 1,955 ) (1 3,475 )
Net cash flow from operating activities
Cash flow used in investing activities
Investment in oil and gas properties
8
(43,990 ) (77 ,659 )
Investment in other fixed assets
10
(242 ) (426 )
Acquisition of Granite
9
Net cash (outflow) from investing activities
(44,232 ) (1 05,794 )
Cash flow from financing activities
Borrowings / (Repayments)
19
(21 5,81 9 ) 41,549
Paid financing fees (595 ) (3,1 82 )
Purchase of own shares
16
(7 ,293 ) (1 7 ,602 )
Other payments
(872 ) (854 )
Net cash (outflow) from financing activities
(224,579 ) 1 9,91 1
Change in cash and cash equivalents 12,368 (8,736 )
Cash and cash equivalents at the beginning of the
period
Currency exchange difference in cash and cash
equivalents
(56 ) (337 )
Cash and cash equivalents at the end of the
period
See accompanying notes to the consolidated financial statements
13
Consolidated Statement of Changes in Equity
For the years ended December 31, 2021 and 2020, AUDITED
USD Thousands
Share
capital and
premium
Retained
earnings
CTA
IFRS 2
reserve
MTM
reserve
Pension
reserve
Total
Non-
controlling
interest
Total
equity
Balance at January 1, 2020
Net result – (77 ,854 ) – – – –
(77 ,854 )
(87 )
(77 ,941 )
Re-measurements on defined
pension plan
– – – – – (703 )
(703 )
–
(703 )
Acquisition of Granite
1
– – – – 1,31 1 –
–
Cash flow hedge – – – – (2,1 47 ) –
(2,1 47 )
–
(2,1 47 )
Currency translation difference
– – 1 0,724 2 74 (44 ) (475 )
Total comprehensive income
– (77 ,854 ) 1 0,724 2 74 (880 ) (1,178 ) (68,91 4 ) (75 ) (68,989 )
Purchase of own shares
2
(1 7 ,602 ) – – – – –
(17 ,602 )
–
(17 ,602 )
Share based payments
–
Balance at December 31, 2020
1
See Note 9
2
See Note 16
USD Thousands
Share
capital and
premium
Retained
earnings
CTA
IFRS 2
reserve
MTM
reserve
Pension
reserve
Total
Non-
controlling
interest
Total
equity
Balance at January 1, 2021 532,379 152,184 16,776 1 0,088 (877 ) (2,229 ) 708,321 132 708,453
Net result – 1 46,028 – – – –
Re-measurements on defined
pension plan
– – – – – 578
–
Cash flow hedge – – – – 1,777 –
–
Currency translation difference
– – (5,485 ) (88 ) (26 ) 19 6
(5,403 )
(6 )
(5,409 )
Total comprehensive income
– 1 46,028 (5,485 ) (88 ) 1,751 7 74 1 42,980 25 143,005
Purchase of own shares
1
(7 ,221 ) – – – – –
(7 ,221 )
–
(7 ,221 )
Share based payments
–
Balance at December 31, 2021
1
See Note 16
See accompanying notes to the consolidated financial statements
14
Notes to the Consolidated Financial Statements
For the years ended December 31, 2021 and 2020, AUDITED
1. CORPORATE INFORMATION
A. The Group
The Corporation’s common shares are listed on the Toronto Stock Exchange (“TSX”) in Canada and the Nasdaq Stockholm
Exchange in Sweden. The Corporation is incorporated and domiciled in British Columbia , Canada under the Business Corporations
Act. The address of its registered office is Suite 2600, 595 Burrard Street, P.O. Box 49314, Vancouver, BC V7X 1L3 , Canada and its
business address is Suite 2000, 885 West Georgia Street, Vancouver, BC V6C 3E8, Canada .
On April 10, 2021, IPC increased its working interest in the Bertam field, Malaysia, from 75% to 100% following the completion
of the withdrawal of Petronas Carigali Sdn Bhd from Block PM307 and assignment of its working interest to IPC. An irrevocable
notice of withdrawal was submitted by Petronas Carigali Sdn Bhd to IPC, as the operator of the Bertam field, in December 2020
following a review of its portfolio. The settlement for the transfer of the 25% additional working interest was the assumption by
IPC of an additional USD 1,078 thousand of estimated future decommissioning liability, being the net difference of the estimated
decommissioning liability associated with the working interest and the secured amounts transferred.
B. Basis of preparation
The consolidated financial statements have been prepared in accordance with International Financial Reporting Standards (“IFRS”)
as issued by the International Accounting Standards Board (“IASB”).
These consolidated financial statements are presented in United States Dollars (USD), which is the Group’s presentation and
functional currency. The consolidated financial statements have been prepared on a historical cost basis, except for items that are
required to be accounted for at fair value as detailed in the Group’s accounting policies. Intercompany transactions and balances
have been eliminated. Certain comparative figures have been reclassified to conform with the financial statements presentation in
the current year.
These consolidated financial statements have been approved by the Board of Directors of IPC and authorized for issuance on
February 8, 2022.
C. Going concern
The Group’s consolidated financial statements for the year ended December 31, 2021, have been prepared on a going concern
basis, which assumes that the Group will be able to realize its assets and discharge its liabilities in the normal course of business
as they become due in the foreseeable future.
D. Changes in accounting policies and disclosures
During the year ended December 31, 2021, the Group applied the amended accounting standards, interpretations and annual
improvement points that are effective as of January 1, 2021. The application of the amendments did not have a material impact on
the consolidated financial statements.
There are no plans for the early adoption of published standards, interpretations, or amendments prior to their mandatory effective
date. The Group does not expect that other changes in IFRS will have a material impact on the consolidated financial statements.
E. Basis of Consolidation
Subsidiaries
Subsidiaries are all entities over which the Group has control and are consolidated. The Corporation controls an entity when it is
exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through
its power over the entity.
The non-controlling interest in a subsidiary represents the portion of the subsidiary not owned by Group companies. The equity of
the subsidiary relating to the non-controlling shareholders is shown as a separate item within changes in net equity.
Inter-company transactions, balances, income and expenses on transactions between companies are eliminated. Profits and losses
resulting from intercompany transactions that are recognized in assets are also eliminated.
15
Notes to the Consolidated Financial Statements
For the years ended December 31, 2021 and 2020, AUDITED
F. Joint Arrangements
Oil and gas operations of the Group are conducted as co-licencees in unincorporated joint ventures with other companies and are
classified as joint operations. The consolidated financial statements reflect the relevant proportions of production, capital costs,
operating costs and current assets and liabilities of the joint operation applicable to the Corporation’s interests.
G. Foreign Currency Translation
Transactions and balances
Monetary assets and liabilities denominated in foreign currencies are translated at the rates of exchange prevailing at the balance
sheet date and foreign exchange currency differences are recognized in the consolidated statement of operations. Transactions
in foreign currencies are translated at exchange rates prevailing at the transaction date. Foreign exchange gains and losses are
presented within finance income and costs in the consolidated statement of operations.
Functional and presentation currency
Items included in the financial statements of each of the operational entities are measured using the currency of the primary
economic environment in which the entity operates (the “functional currency”). The functional currency of the Corporation’s
operational entities are the USD, CAD, MYR and EUR. The consolidated financial statements are presented in USD which is the
Corporation’s presentation currency. The balance sheets and income statements of foreign companies are translated using the
current rate method. All assets and liabilities are translated at the balance sheet date rates of exchange, whereas the income
statements are translated at average rates of exchange for the year, except for transactions where it is more relevant to use the
rate of the day of the transaction. The translation differences which arise are recorded directly in net assets.
Exchange rates for the relevant currencies of the Group with respect to the US Dollar are as follows:
December 31, 2021
December 31, 2020
Average Period end
Average Period end
1 EUR equals USD 1.1835 1.1326 1.1413 1.2271
1 USD equals CAD 1.2536 1.2708 1.3412 1.2740
1 USD equals MYR 4.1433 4.1660 4.2026 4.0209
H. Classification of assets and liabilities
Non-current assets, long-term liabilities and provisions consist of amounts that are expected to be recovered or paid more than
twelve months after the balance sheet date. Current assets and current liabilities consist solely of amounts that are expected to be
recovered or paid within twelve months after the balance sheet date.
I. Oil and gas properties
Oil and gas properties are recorded at historical cost less depletion. All costs for acquiring concessions, licences or interests in
production sharing contracts and for the survey, drilling and development of such interests are capitalized on a field area cost
centre basis.
Costs directly associated with an exploration well are capitalized until the determination of reserves is evaluated. If it is determined
that a commercial discovery has not been achieved, these exploration costs are charged to the income statement. During the
exploration and development phases, no depletion is charged. The field will be transferred from the non-producing assets to the
producing assets within oil and gas properties once production commences, and accounted for as a producing asset. Routine
maintenance and repair costs for producing assets are expensed to the income statement when they occur.
Property, plant and equipment are depleted based on the year’s production in relation to estimated total proved and probable
reserves of oil and gas in accordance with the unit of production method. Depletion of a field area is charged to the income
statement through cost of sales once production commences.
Proved reserves are those quantities of petroleum which, by analysis of geological and engineering data, can be estimated
with reasonable certainty to be commercially recoverable, from a given date forward, from known reservoirs and under current
economic conditions, operating methods and governmental regulations. Proved reserves can be categorized as developed or
undeveloped. If deterministic methods are used, the term reasonable certainty is intended to express a high degree of confidence
that the quantities will be recovered. If probabilistic methods are used, there should be at least a 90 percent probability that the
quantities actually recovered will equal or exceed the estimates.
Probable reserves are those unproved reserves which analysis of geological and engineering data suggests are more likely than not
to be recoverable. In this context, when probabilistic methods are used, there should be at least a 50 percent probability that the
quantities actually recovered will equal or exceed the sum of estimated proved plus probable reserves.
16
Notes to the Consolidated Financial Statements
For the years ended December 31, 2021 and 2020, AUDITED
Proceeds from the sale or farm-out of oil and gas concessions in the exploration stage are offset against the related capitalized
costs of each cost centre with any excess of net proceeds over all costs capitalized included in the income statement. In the event
of a sale in the exploration stage, any deficit is included in the income statement.
Impairment tests are performed annually or when there are indicators of impairment that suggest that the net book value of
capitalized costs within each field area cost centre less any provision for asset retirement obligation costs, royalties and deferred
production or revenue related taxes is higher than the anticipated future net cash flow from oil and gas reserves attributable to the
Corporation’s interest in the related field areas. Capitalized costs cannot be carried unless those costs can be supported by future
cash flows from that asset. Provision is made for any impairment, where the net carrying value, according to the above, exceeds
the recoverable amount, which is the higher of value in use and fair value less costs of disposal, determined through estimated
future discounted net cash flows using prices and cost levels used by management in their internal forecasting. If there is a
decision to not continue with a field specific exploration program, the costs will be expensed at the time the decision is made.
J. Other tangible fixed assets
Other tangible fixed assets are stated at cost less accumulated depreciation. The cost includes the original purchase price of the
asset and the costs attributable to bringing the asset to its working condition for its intended use. Depreciation is based on cost
and is calculated on a straight line basis over the estimated economic life of 3 to 5 years for office equipment and other assets.
The Floating Production Storage and Offloading (“FPSO”) located on the Bertam field, Malaysia, is being depreciated on a unit of
production basis based on the Bertam field 2P reserves.
Additional costs to existing assets are included in the assets’ net book value or recognized as a separate asset, as appropriate, only
when it is probable that future economic benefits associated with the item will flow to the Group and the cost of the item can be
measured reliably. The net book value of any replaced parts is written off. Other additional expenses are deemed to be repair and
maintenance costs and are charged to the income statement when they are incurred.
The net book value is written down immediately to its recoverable amount when the net book value is higher. The recoverable
amount is the higher of an asset’s fair value less cost of disposal and value in use. The assets’ residual values and useful lives are
reviewed, and adjusted if appropriate, at the end of each reporting period.
K. Leases
The Group leases various offices, warehouses, equipment and cars. Rental contracts are typically made for fixed periods of 3 to
5 years but may have extension options. Lease terms are negotiated on an individual basis and contain a wide range of different
terms and conditions.
Right-of-use assets and corresponding liabilities are recognized when the leased asset is available for use by the Group. Each
lease payment is allocated between the liability and finance cost. The finance cost is charged to profit or loss over the period so
as to produce a constant periodic rate of interest on the remaining balance of the liability for each period. The right-of-use asset is
depreciated over the shorter of the asset’s useful life and the lease term on a straight-line basis.
Assets and liabilities arising from a lease are initially measured on a present value basis. Lease liabilities include the net present
value of the fixed and variable lease payments and the exercise price of the purchase option. The lease payments are discounted
using the incremental borrowing rate and are classified as finance leases. The right-of-use assets are measured at cost comprising
the amount of the initial measurement of the lease liability, any lease payments made and any initial direct costs.
Payments associated with short-term leases and leases of low-value assets are recognized on a straight-line basis as an expense in
profit or loss.
L. Impairment of Assets
At each balance sheet date or when there are facts and circumstances that suggest that the net book value of capitalized costs
within each field area cost center is higher than anticipated future net cash flow from oil and gas reserves attributable to the
Corporation’s interest in the related field areas, the Corporation performs an assessment as to whether there is an indication
that an asset may be impaired. Management determined the recoverable amounts of property, plant and equipment based on
the higher of fair value less costs of disposal and value in use using estimated future discounted net cash flows of proved and
probable oil and gas reserves. The Corporation’s estimates of proved and probable oil and gas reserves used in the calculations for
impairment tests and accounting for depletion have been reviewed by Management’s experts, specifically independent qualified
reserves auditor.
The recoverable amount is the higher of fair value less costs of disposal and value in use. In determining fair value less costs of
disposal, recent market transactions are considered, if available. In the absence of such transactions, an appropriate valuation
model is used. Value in use is calculated by discounting estimated future cash flows to their present value using a discount rate
that reflects current market assessments of the time value of money and the risks specific to the asset. When the recoverable
amount is less than the carrying value an impairment loss is recognized with the expensed charge to the income statement.
If indications exist that previously recognized impairment losses no longer exist or are decreased, the recoverable amount is
estimated. When a previously recognized impairment loss is reversed the carrying amount of the asset is increased to the
17
Notes to the Consolidated Financial Statements
For the years ended December 31, 2021 and 2020, AUDITED
estimated recoverable amount but the increased carrying amount may not exceed the carrying amount after depreciation that
would have been determined had no impairment loss been recognized for the asset in prior years. If the asset does not generate
cash inflows that are largely independent of those from other assets or groups of assets, the asset is tested as part of a CGU,
which is the smallest identifiable group of assets that generates cash inflows that are largely independent of the cash inflows from
other assets or groups of assets. An impairment loss is the amount by which the carrying amount of the individual asset or CGU
exceeds its recoverable amount.
M. Financial Instruments
Financial assets and financial liabilities are recognized on the consolidated balance sheet on the trade date, the date on which
the Group becomes a party to the contractual provisions of the financial instrument. All financial instruments are required to
be classified and measured at fair value on initial recognition. Measurement in subsequent periods is dependent upon the
classification of the financial instrument. The Group classifies its financial instruments in the following categories:
Financial Assets at Amortized Cost
Assets that are held for collection of contractual cash flows where those cash flows represent solely payments of principal and
interest are measured at amortized cost. The Group’s loans and receivables consist of fixed or determined cash flows related
solely to principal and interest amounts or contractual sales of oil. The Group’s intent is to hold these receivables until cash flows
are collected. Loans and receivables are recognized initially at fair value, net of any transaction costs incurred and subsequently
measured at amortized cost.
Financial Assets at Fair Value through Profit or Loss (“FVTPL”)
Financial assets measured at FVTPL are assets which do not qualify as financial assets at amortized cost or at fair value through
other comprehensive income.
Financial Liabilities at Amortized Cost
Financial liabilities are measured at amortized cost, unless they are required to be measured at FVTPL, or the Group has opted
to measure them at FVTPL. Borrowings and accounts payable are recognized initially at fair value, net of any transaction costs
incurred, and subsequently at amortized cost using the effective interest method.
Financial Liabilities at FVTPL
Financial liabilities measured at FVTPL are liabilities which include embedded derivatives and cannot be classified as amortized
cost.
Impairment of Financial Assets
The measurement of impairment of financial assets is based on the expected credit losses model. For the trade and other
receivables, the Group applies the simplified approach which requires the use of the lifetime expected loss provision for all trade
receivables. In estimating the lifetime expected loss provision, the Group considered historical industry default rates as well as
credit ratings of major customers. Additional disclosure related to the Group’s financial assets is included in Note 23.
N. Derivative Financial Instruments and Hedging Activities
Derivatives are initially recognized at fair value on the date a derivative contract is entered into and are subsequently remeasured
to their fair value. The method of recognizing the resulting gain or loss depends on whether the derivative is designated as a
hedging instrument, and if so, the nature of the item being hedged. The Group designates certain derivatives as either hedges of a
particular risk associated with a recognized asset or liability or a highly probable forecasted transaction, hedges of the fair value of
recognized assets and liabilities or a firm commitment, or hedges of a net investment in a foreign operation.
The Group documents at the inception of the transaction the relationship between hedging instruments and the hedged items, as
well as its risk management objectives and strategy for undertaking various hedging transactions. The Group also documents its
assessment, both at hedge inception and on an ongoing basis, of whether the derivatives that are used in hedging transactions
are highly effective in offsetting changes in fair values or cash flows of the hedged items. The fair values of various derivative
financial instruments used for hedging purposes are disclosed in Note 23. Movements on the hedging reserve is reflected in other
comprehensive income. The full fair value of a hedging derivative is classified as a non-current asset or liability when the remaining
maturity of the hedged item is more than twelve months and as a current asset or liability when the remaining maturity of the
hedged item is less than twelve months.
Cash flow hedge
The effective portion of changes in the fair value of derivatives that are designated and qualify as cash flow hedges is recognized
in other comprehensive income. The gain or loss relating to the ineffective portion, if any, is recognized immediately within finance
income or costs. Amounts accumulated in equity are reclassified to profit or loss in the periods when the hedged item affects
profit or loss. When a hedging instrument expires or is sold, or when a hedge no longer meets the criteria for hedge accounting,
any cumulative gain or loss existing in equity at that time remains in equity and is recognized when the forecast transaction is
ultimately recognized in the profit or loss. When a forecasted transaction is no longer expected to occur, the cumulative gain or
loss that was reported in equity is immediately recognized in profit or loss as finance income or costs.
18
Notes to the Consolidated Financial Statements
For the years ended December 31, 2021 and 2020, AUDITED
O. Inventories
Inventories of consumable well supplies are stated at the lower of cost and net realizable value, cost being determined on a
weighted average cost basis. Net realizable value is the estimated selling price in the ordinary course of business, less applicable
variable selling expenses. Inventories of hydrocarbons are stated at the lower of cost and net realizable value. Under or overlifted
positions of hydrocarbons are valued at market prices prevailing at the balance sheet date. An underlift of production from a field
is included in the current receivables and valued at the reporting date spot price or prevailing contract price and an overlift of
production from a field is included in the current liabilities and valued at the reporting date spot price or prevailing contract price.
A change in the over or underlift position is reflected in the income statement as revenue.
P. Cash and cash equivalents
Cash and cash equivalents include cash at bank and cash in hand.
Q. Provisions
A provision is reported when the Group has a legal or constructive obligation as a consequence of a past event and when it is more
likely than not that an outflow of resources is required to settle the obligation and a reliable estimate can be made of the amount.
Provisions are measured at the present value of the expenditures expected to be required to settle the obligation using a discount
rate that reflects current market assessments of the time value of money and the risks specific to the obligation. The increase in
the provision due to passage of time is recognized as financial expense.
On fields where there is an obligation to contribute to asset retirement obligation costs, a provision is recorded to recognize the
future commitment. An asset is created, as part of the oil and gas property, to represent the discounted value of the anticipated
asset retirement obligation liability and depleted over the life of the field on a unit of production basis. The corresponding
accounting entry to the creation of the asset recognizes the discounted value of the future liability. The discount applied to
the anticipated asset retirement obligation liability is subsequently released over the life of the field and is charged to financial
expenses. Changes in asset retirement obligation costs and reserves are treated prospectively and consistent with the treatment
applied upon initial recognition.
R. Revenue and Other Operating Revenue
Revenue associated with the sale of crude oil and natural gas is measured based on the consideration specified in a contract with
a customer and excludes amounts collected on behalf of third parties. The Group recognizes revenue when it transfers control of
the product or service to a customer, which is generally when title passes from the Group to its customer. The Group satisfies its
performance obligations in contracts with customers upon the delivery of crude oil and natural gas, which is generally at a point in
time and the amounts of revenue recognized relating to performance obligations satisfied over time are not significant.
Royalties payments to governments and other mineral interest owners are recognized as a cost in the revenue section.
Production and sales taxes directly attributable to fields, including export duties, are expensed in the income statement and
classified as direct production taxes included within production costs. Production taxes payable in cash are accrued in the
accounting period in which the liability arises.
Prior to April 2021, the Group recognized revenue from the FPSO in other operating revenue as earned from third party participants
in the Bertam field, Malaysia. Other operating revenue also includes pipeline tariffs earned.
S. Employee Benefits
Short-term employee benefits
Short-term employee benefits such as salaries, social premiums and holiday pay, are expensed when incurred.
Pension obligations
The pension obligations consist of defined contribution plans for all companies within the Group except for one Swiss subsidiary,
International Petroleum SA. A defined contribution plan is a pension plan under which the Group pays fixed contributions. The
Group has no further payment obligations once the contributions have been paid. The contributions are recognized as an expense
when they are due.
International Petroleum SA has a defined benefit pension plan that is managed through a private pension plan. Independent
actuaries determine the cost of the defined benefit plan on an annual basis, and the subsidiary pays the annual insurance premium.
The pension plan provides benefits coverage to the employees of International Petroleum SA in the event of retirement, death or
disability. International Petroleum SA and its employees jointly finance retirement and risk benefits. Employees of International
Petroleum SA pay 40% of the savings contributions, of the risk contributions and of the cost contributions and International
Petroleum SA contributes the difference between the total of all required pension plan contributions and the total of all employees’
contributions.
19
Share-based payments
The Group operates an equity-settled, share-based compensation plan under which the entity receives services from employees,
directors and officers as consideration for equity instruments of the Corporation. Equity-settled share-based payments are
recognized in the income statement as expenses during the vesting period and as equity in the balance sheet. The option is
measured at fair value at the date of the grant using an appropriate options pricing model and is charged to the income statement
over the vesting period without revaluation of the value of the option.
T. Taxation
The components of tax are current and deferred. Tax is recognized in the income statement, except to the extent that it relates
to items recognized in other comprehensive income or directly in equity, in which case it is accounted for consistently with the
related item.
Current tax is tax that is to be paid or received for the year in question and also includes adjustments of current tax attributable to
previous periods.
Deferred income tax is a non-cash charge provided, using the liability method, on temporary differences arising between the
tax bases of assets and liabilities and their carrying values. Temporary differences can occur for example where investment
expenditure is capitalized for accounting purposes but the tax deduction is accelerated or where asset retirement obligation
costs are provided for in the financial statements but not deductible for tax purposes until they are actually incurred. However,
the deferred income tax is not accounted for if it arises from initial recognition of an asset or liability in a transaction other than a
business combination that at the time of the transaction affects neither accounting nor taxable profit nor loss.
Deferred income tax is provided on temporary differences arising on investments in subsidiaries and associates, except where the
timing of the reversal of the temporary difference is controlled by the Corporation and it is probable that the temporary difference
will not reverse in the foreseeable future. Deferred income tax is determined using tax rates (and laws) that have been enacted or
substantively enacted by the balance sheet date and are expected to apply when the related deferred income tax asset is realized
or the deferred income tax liability is settled. Deferred income tax assets are recognized to the extent that it is probable that future
taxable profit will be available against which the temporary differences can be utilized.
Deferred tax assets are offset against deferred tax liabilities in the balance sheet where they relate to the same jurisdiction and
there is a legally enforceable right to offset.
U. Segment Reporting
Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision maker,
which, due to the unique nature of each country’s operations, commercial terms or fiscal environment, is at a country level.
V. Business combinations
Acquisitions of businesses are accounted for using the purchase method of accounting whereby all identifiable assets and liabilities
are recorded at their fair values as at the date of acquisition. Any excess purchase price over the aggregate fair value of net
assets is recorded as goodwill. Goodwill is identified and allocated to cash-generating units (“CGU”), or groups of CGUs, that are
expected to benefit from the synergies of the acquisition. Goodwill is not amortized. Any excess of the aggregate fair value of net
assets over the purchase price is recognized in the consolidated statement of operations.
A CGU to which goodwill has been allocated is tested for impairment at least annually or when events or circumstances indicate
that an assessment for impairment is required. For goodwill arising on an acquisition in a financial year, the CGU to which the
goodwill has been allocated is tested for impairment before the end of that financial year.
When the recoverable amount of the CGU is less than the carrying amount of that CGU, the impairment loss is allocated to
reduce the carrying amount of any goodwill allocated to that CGU first, and then to the other assets of that CGU pro rata on the
basis of the carrying amount of each asset in the CGU. Any impairment loss for goodwill is recognized directly in the consolidated
statement of earnings. An impairment loss for goodwill is not reversed in subsequent periods.
On disposal of a subsidiary, the attributable amount of goodwill is included in the determination of the gain or loss on disposal.
Notes to the Consolidated Financial Statements
For the years ended December 31, 2021 and 2020, AUDITED
20
2. CRITICAL ACCOUNTING ESTIMATES AND JUDGMENTS
In connection with the preparation of the consolidated financial statements, the Group’s management has made assumptions
and estimates about future events and applied judgments that affect the reported values of assets, liabilities, revenues, expenses
and related disclosures. The assumptions, estimates and judgments are based on historical experience, current trends and other
factors that management believes to be relevant at the time the consolidated financial statements are prepared. On a regular basis,
management reviews the accounting policies, assumptions, estimates and judgments to ensure that the consolidated financial
statements are presented fairly in accordance with IFRS. However, because future events and their effects cannot be determined
with certainty, actual results could differ from these assumptions and estimates, and such differences could be material.
Management believes the following critical accounting policies affect the more significant judgments and estimates used in the
preparation of the consolidated financial statements:
Estimates in oil and gas reserves
Estimates of oil and gas reserves are used in the calculations for impairment tests and accounting for depletion and asset
retirement obligation. Standard recognized evaluation techniques are used to estimate the proved and probable reserves. These
techniques take into account the future level of development required to produce the reserves. An independent qualified reserves
auditor reviews these estimates. Changes in estimates in oil and gas reserves, resulting in different future production profiles, will
affect the discounted cash flows used in impairment testing, the anticipated date of site decommissioning and restoration and
the depletion charges in accordance with the unit of production method. Changes in estimates in oil and gas reserves could for
example result from additional drilling, observation of long-term reservoir performance or changes in economic factors such as oil
price and inflation rates.
Impairment of oil and gas properties
Key assumptions in the impairment models relate to prices and costs that are based on forward curves and the long-term
corporate assumptions. Annual impairment tests are performed in conjunction with the annual reserves certification process. The
impairment test requires the use of estimates. For the purpose of determining a potential impairment, the significant assumptions
developed by management used to determine the recoverable amount include the proved and probable oil and gas reserves,
expected production volumes, future oil and gas prices, future development costs, future production costs and the discount rate.
These assumptions and judgements of management that are based on them are subject to change as new information becomes
available. Changes in economic conditions can also affect the rate used to discount future cash flow estimates and the discount
rate applied is reviewed throughout the year.
Provision for asset retirement obligations
Amounts used in recording a provision for asset retirement obligations are estimates based on current legal and constructive
requirements and current technology and price levels for the removal of facilities and decommissioning. Due to changes in relation
to these items, the future actual cash outflows in relation to the site decommissioning and restoration can be different. To reflect
the effects due to changes in legislation, requirements and technology and price levels, the carrying amounts of asset retirement
obligation provisions are reviewed on a regular basis.
Deferred income tax assets
The Group accounts for differences that arise between the carrying amount of assets and liabilities and their tax bases in
accordance with IAS 12, Income Taxes, which requires deferred income tax assets only to be recognized to the extent that
is probable that future taxable profits will be available against which the temporary differences can be utilized. Management
estimates future taxable profits based on the financial models used to value its oil and gas properties. Any change to the estimates
and assumptions used for the key operational and financial variables used within the business models could affect the amount of
deferred income tax assets recognized.
The effects of changes in estimates do not give rise to prior year adjustments and are treated prospectively over the estimated
remaining commercial reserves of each field. While the Group uses its best estimates and judgement, actual results could differ
from these estimates.
Fair value of assets acquired and liabilities assumed in a business combination
The fair value of assets acquired and liabilities assumed in a business combination, including contingent consideration and
any goodwill, is estimated based on information available at the date of acquisition. Various valuation techniques are applied
for measuring fair value including market comparables and discounted cash flows which rely on assumptions such as forward
commodity prices, reserves and resources estimates, production costs and discount rates. Changes in these variables could
significantly impact the carrying value of the net assets.
Notes to the Consolidated Financial Statements
For the years ended December 31, 2021 and 2020, AUDITED
21
3. SEGMENT INFORMATION
The Group operates within several geographical areas. Operating segments are reported at a country level which is consistent with
the internal reporting provided to the CEO, who is the chief operating decision maker.
The following tables present segment information regarding: revenue, production costs, exploration and evaluation costs and gross
profit. The Group derives its revenue from contracts with customers primarily through the transfer of oil and gas at a point in time.
In addition, certain identifiable asset segment information is reported in Note 8.
2021
USD Thousands
Canada Malaysia France Other Total
Crude oil 458,690 100,436 75,949 –
635,075
NGLs 570 – – –
570
Gas 100,019 – – –
100,019
Net sales of oil and gas 559,279 100,436 75,949
–
735,664
Change in under/over lift position – – 5,391 –
5,391
Royalties (46,424) – – –
(46,424)
Hedging settlement (33,592) – – –
(33,592)
Other operating revenue 171 4,208 927 64
5,370
Revenue 479,434 104,644 82,267 64 666,409
Production costs (259,716) (25,243) (40,048) –
(325,007)
Depletion and decommissioning costs (72,764) (30,156) (16,093) –
(119,013)
Depreciation of other tangible fixed assets – (10,108) – –
(10,108)
Exploration and business development costs (8) (259) (7) (1,686)
(1,960)
Gross profit/(loss) 146,946 38,878 26,119 (1,622) 210,321
2020
USD Thousands
Canada Malaysia France Other Total
Crude oil 167,352 60,465 35,700 –
263,517
NGLs 214 – – –
214
Gas 59,950 – – –
59,950
Net sales of oil and gas
227,516 60,465 35,700
–
323,681
Change in under/over lift position – – (630) –
(630)
Royalties (14,064) – – –
(14,064)
Hedging settlement (1,983) – – –
(1,983)
Other operating revenue – 15,555 1,164 441
17,160
Revenue 211,469 76,020 36,234 441 324,164
Production costs (153,382) (24,793) (26,453) –
(204,628)
Depletion and decommissioning costs (66,810) (27,759) (17,327) –
(111,896)
Depreciation of other tangible fixed assets – (11,681) – –
(11,681)
Exploration and business development costs (3,011) (741) (2,389) (661)
(6,802)
Impairment costs of oil and gas properties – – (73,143) –
(73,143)
Gross profit/(loss)
(11,734) 11,046 (83,078) (220) (83,986)
Notes to the Consolidated Financial Statements
For the years ended December 31, 2021 and 2020, AUDITED
22
Notes to the Consolidated Financial Statements
For the years ended December 31, 2021 and 2020, AUDITED
USD Thousands
Assets Liabilities
2021
2020
2021
2020
Malaysia 342,636 308,044 200,519 215,688
France 175,479 167,916 106,346 152,645
Canada 1,135,017 1,197,240 695,051 868,253
Corporate 92,899 164,574 40,550 38,201
Other 128,331 126,227 (15,647) (19,239)
Intercompany balance elimination
(600,688) (630,881) (600,688) (630,881)
Total Assets / Liabilities
1,273,674 1,333,120 426,131 624,667
Shareholders’ equity N/A N/A 847,386 708,321
Non-controlling interest
N/A N/A 157 132
Total equity for the group
N/A N/A
847,543 708,453
Total consolidated
1,273,674 1,333,120 1,273,674 1,333,120
4. PRODUCTION COSTS
USD Thousands
2021
2020
Cost of operations 203,537 154,411
Tariff and transportation expenses 33,879 21,875
Direct production taxes
10,813 7,510
Operating costs
248,229 183,796
Cost of blending
1
78,434 20,691
Change in inventory position
(1,656) 141
Total production costs
325,007 204,628
1
In Canada, oil production is blended with purchased condensate diluent to meet pipeline specifications. Cost of blending represents the contracted
purchase of diluent used for blending net of proceeds from the sale of surplus diluent. A net gain of USD 421 thousand and a cost of USD 1,258
thousand was recognized relating to the difference between the cost and sale proceeds of the surplus diluent for the year ended December 31, 2021
and December 31, 2020 respectively.
5. FINANCE INCOME
USD Thousands
2021
2020
Foreign exchange gain, net – 13,028
Interest income 254 75
Other financial income
31 –
Total finance income
285 13,103
23
Notes to the Consolidated Financial Statements
For the years ended December 31, 2021 and 2020, AUDITED
6. FINANCE COSTS
USD Thousands
2021
2020
Foreign exchange loss, net 1,994 –
Interest expense 12,867 13,401
Unwinding of asset retirement obligation discount 11,488 10,837
Amortization of loan fees 2,068 1,979
Loan commitment fees 1,666 1,204
Other financial costs
416 669
Total finance costs
30,499 28,090
7. INCOME TAX RECOVERY / (EXPENSE)
USD Thousands
2021
2020
Current tax (4,670) (113)
Deferred tax
(17,014) 33,933
Total tax recovery / (expense)
(21,684) 33,820
The deferred tax amount arises primarily where there is a difference in depletion for tax and accounting purposes. The deferred tax
debit in the statement of operations for the current period mainly relates to the tax profit incured and the tax losses used during
the year 2021.
The tax on the Group’s profit before tax differs from the theoretical amount that would arise using the tax rate of Canada as follows:
USD Thousands
2021
2020
Profit before tax 167,743 (111,761)
Tax calculated at the corporate tax rate in Canada 25% (41,936) 27,940
Effect of foreign and domestic tax rates 2,835 8,540
Tax effect of statutory rate change 904 3,939
Tax effect of (recognition) / derecognition of unrecorded tax losses 12,614 (9,230)
Tax effect due to true-up of provision to prior year tax filings 1,324 1,852
Other
2,575 779
Total tax
(21,684) 33,820
Specification of deferred tax assets and tax liabilities
1
USD Thousands
2021
2020
Unused tax loss carry forward 115,560 133,753
Other
3,414 2,841
Deferred tax assets
118,974 136,594
Accelerated allowances 73,641 76,014
Other
287 318
Deferred tax liabilities
73,928 76,332
Deferred taxes, net 45,046 60,262
1
The specification of deferred tax assets and tax liabilities does not agree to the face of the balance sheet due to the netting off of balances in the
balance sheet when they relate to the same jurisdiction.
The deferred tax liabilities consist of accelerated allowances, being the difference between the book and the tax value of oil and
gas properties. The deferred tax liabilities will be released over the life of the oil and gas assets as the book value is depleted for
accounting purposes.
24
Notes to the Consolidated Financial Statements
For the years ended December 31, 2021 and 2020, AUDITED
Deferred tax assets in relation to tax loss carried forwards are only recognized in so far that there is a reasonable certainty as to
the timing and the extent of their realization. The recognized unused tax loss carry forward mainly relates to Canada. The Group
has concluded that the deferred assets will be recoverable using the estimated future taxable income based on the approved
business plans and budgets.
8. OIL AND GAS PROPERTIES
USD Thousands
2021
2020
Exploration and Evaluation Assets 18,037 20,986
Property, plant and Equipment
953,534 1,049,918
Oil and Gas Properties
971,571 1,070,904
Exploration and Evaluation Assets
USD Thousands
Canada Malaysia France Total
Cost
January 1, 2021 15,409 44 5,533 20,986
Additions
1
(2,723) 472 7 (2,244)
Expensed exploration and evaluation costs (8) (259) (7) (274)
Reclassification – (76) – (76)
Currency translation adjustments 73 – (428) (355)
Net book value December 31, 2021 12,751 181 5,105 18,037
1
Net revenues on appraisal projects are being offset against capitalised costs of Exploration and Evaluation assets.
USD Thousands
Canada Malaysia France Total
Cost
January 1, 2020 13,899 6,761 6,954 27,614
Additions 4,264 460 522 5,246
Expensed exploration and evaluation costs (3,011) (741) (2,389) (6,141)
Reclassification
1
(84) (6,436) (51) (6,571)
Currency translation adjustments 341 – 497 838
Net book value December 31, 2020
15,409 44 5,533 20,986
1
The reclassification to the property, plant and equipment producing pool relates to the successful appraisal drilling in Malaysia.
25
Notes to the Consolidated Financial Statements
For the years ended December 31, 2021 and 2020, AUDITED
Property, Plant and Equipment
USD Thousands
Canada Malaysia France Total
Cost
January 1, 2021 1,004,605 523,728 437,660 1,965,993
Additional working interest
1
– 1,078 – 1,078
Additions 33,450 10,333 2,451 46,234
Change in estimates (18,174) (772) 1,594 (17,352)
Reclassification – 76 – 76
Currency translation adjustments
2,063 – (33,494) (31,431)
December 31, 2021
1,021,944 534,443 408,211 1,964,598
Accumulated depletion
January 1, 2021 (195,322) (420,191) (300,562) (916,075)
Depletion charge for the period (72,764) (30,156) (16,093) (119,013)
Currency translation adjustments
501 – 23,523 24,024
December 31, 2021
(267,585) (450,347) (293,132) (1,011,064)
Net book value December 31, 2021
754,359 84,096 115,079 953,534
1
Relates to the increased decommissioning liability relating to the additional 25% working interest in the Bertam field, Malaysia. (Also see Note 1).
USD Thousands
Canada Malaysia France Total
Cost
January 1, 2020 905,394 493,231 385,775 1,784,400
Granite Acquisition (see Note 9) 47,076 – – 47,076
Additions 40,816 20,274 11,323 72,413
Change in estimates (11,395) 3,787 4,423 (3,185)
Reclassification 84 6,436 51 6,571
Currency translation adjustments
22,630 – 36,088 58,718
December 31, 2020
1,004,605 523,728 437,660 1,965,993
Accumulated depletion
January 1, 2020 (122,595) (392,432) (191,492) (706,519)
Depletion charge for the period (66,810) (27,759) (17,327) (111,896)
Impairment costs of oil and gas properties – – (73,143) (73,143)
Currency translation adjustments
(5,917) – (18,600) (24,517)
December 31, 2020
(195,322) (420,191) (300,562) (916,075)
Net book value December 31, 2020
809,283 103,537 137,098 1,049,918
26
Notes to the Consolidated Financial Statements
For the years ended December 31, 2021 and 2020, AUDITED
Impairment test
The Group carried out its impairment testing at December 31, 2021, on a CGU basis in conjunction with the annual reserves
audit process. The Group used appropriate oil or natural gas price curves based on forward forecasts as at December 31, 2021, a
future cost inflation factor of 2% (2020: 2%) per annum, production and cost profiles based on proved and probable reserves (2P
reserves) as at December 31, 2021 and a discount rate of 8.5% (8.5% at December 31, 2020) to calculate the estimated future
post-tax cash flows.
The following prices were used in the impairment testing as at December 31, 2021:
Price Decks 2022 2023 2024 2025 2026
Average
annual
increase
thereafter
Dated Brent (USD/bbl) 75.00 72.00 70.00 71.40 72.83 2%
West Texas Intermediate (USD/bbl) 73.00 70.00 68.00 69.36 70.75 2%
Western Canadian Select (USD/bbl) 60.50 57.25 55.00 56.09 57.22 2%
Empress Gas (CAD/MMbtu) 4.55 3.92 3.59 3.67 3.74 2%
In 2021, as a result of the testing, no impairment of the oil and gas properties was required.
Sensitivities were calculated on the valuation of the estimated future post-tax cash flows. Using a discount rate of 10% instead of
8.5% or a USD 2/bbl decrease in the oil price curve or using a flat gas price curve at CAD 3.00/mcf did not result in an impairment
charge.
9. GRANITE ACQUISITION
On March 5, 2020, IPC completed the acquisition of all of the issued and outstanding shares of Granite Oil Corp. (“Granite”). At
such date, Granite became a wholly-owned subsidiary of IPC.
The Granite Acquisition has been accounted for as a business combination with IPC being the acquirer, and in accordance with
IFRS 3 Business Combinations, the assets acquired and liabilities assumed have been recorded at their fair values.
Total cash consideration provided, after preliminary closing adjustments, amounted to USD 27.7 million (CAD 37.1 million).
The amounts recognized in respect of the identifiable assets acquired and liabilities assumed are as set out in the table below.
USD Thousands
Trade and other receivables 1,620
Prepaid expenses and deposits 599
Fair value of risk management assets
1,748
Deferred tax assets
16,730
Property, plant and equipment 47,076
Other fixed assets 85
Accounts payable and accrued liabilities (6,691)
Decommissioning liabilities
(4,498)
Short-term debt (27,649)
MTM reserve in equity
(1,311)
Total Consideration
27,709
Settled by:
Cash payment for 39,061,575 common shares of Granite 27,709
The Corporation performed a preliminary purchase price allocation for the acquisition. The amounts disclosed above were
determined provisionally pending the finalization of the valuation for those assets and liabilities. Up to twelve months from the
effective date of the Granite Acquisition, further adjustments may be made to the fair values assigned to the identifiable assets
acquired and liabilities assumed. No such further adjustments are expected.
Acquisition-related costs of approximately USD 0.5 million have been recognized in the statement of operations during the year
ended December 31, 2020. No further costs have been incurred during the year ended December 31, 2021.
27
Notes to the Consolidated Financial Statements
For the years ended December 31, 2021 and 2020, AUDITED
Decommissioning liabilities
The fair value of the decommissioning liability at the acquisition date was based on the estimated future cash flows to
decommission the acquired oil and natural gas properties at the end of their useful life. The discount rate used to determine the net
present value of the decommissioning obligation was a credit risk adjusted rate of 8%.
10. OTHER TANGIBLE FIXED ASSETS
USD Thousands
FPSO Other Total
Cost
January 1, 2021 208,063 10,413 218,476
Additions – 242 242
Disposals – (72) (72)
Currency translation adjustments
(1,890) (420) (2,310)
December 31, 2021
206,173 10,163 216,336
Accumulated depreciation
January 1, 2021 (152,416) (6,862) (159,278)
Depreciation charge for the period (10,108) (979) (11,087)
Disposals – 72 72
Currency translation adjustments
– 320 320
December 31, 2021
(162,524) (7,449) (169,973)
Net book value December 31, 2021
43,649 2,714 46,363
USD Thousands
FPSO Other Total
Cost
January 1, 2020 205,989 9,420 215,409
Granite Acquisition (see Note 9) – 85 85
Additions – 426 426
Disposals – (79) (79)
Currency translation adjustments
2,074 561 2,635
December 31, 2020
208,063 10,413 218,476
Accumulated depreciation
January 1, 2020 (140,735) (5,659) (146,394)
Depreciation charge for the period (11,681) (882) (12,563)
Disposals – 79 79
Currency translation adjustments
– (400) (400)
December 31, 2020
(152,416) (6,862) (159,278)
Net book value December 31, 2020
55,647 3,551 59,198
The FPSO located on the Bertam field, Malaysia, is being depreciated on a unit of production basis based on the Bertam field 2P
reserves. The depreciation charge is included in the depreciation of other assets line in the statement of operations.
For office equipment and other assets, the depreciation charge for the year is based on cost and an estimated useful life of 3 to
5 years. The depreciation charge is included within the general, administration and depreciation expenses in the statement of
operations.
28
Notes to the Consolidated Financial Statements
For the years ended December 31, 2021 and 2020, AUDITED
11. RIGHT-OF-USE ASSETS AND LEASE LIABILITIES
USD Thousands
Buildings
January 1, 2021
1,965
Additions 434
Depreciation (737)
Currency translation adjustments
(23)
Right-of-use-assets as at December 31, 2021
1,639
Current 684
Non-Current
980
Lease Liabilities as at December 31, 2021
1,664
USD Thousands
Buildings
January 1, 2020
2,700
Additions 60
Depreciation (821)
Currency translation adjustments
26
Right-of-use assets as at December 31, 2020
1,965
Current 671
Non-Current
1,347
Lease Liabilities as at December 31, 2020
2,018
12. OTHER ASSETS
USD Thousands
December 31, 2021
December 31, 2020
Long-term receivables 28,024 20,210
Financial assets
7,729 29
35,753 20,239
Long-term receivables represent cash payments made to an asset retirement obligation fund and financial assets mainly
represent secured amounts transferred for the future asset retirement obligation, in respect of the Bertam field, Malaysia.
The increase in long-term receivables and financial assets have been transferred to the Group following the assignment of the
additional 25% working interest of the Bertam field. (Also see Notes 1 and 20).
29
Notes to the Consolidated Financial Statements
For the years ended December 31, 2021 and 2020, AUDITED
13. INVENTORIES
USD Thousands
December 31, 2021
December 31, 2020
Hydrocarbon stocks 8,355 6,606
Well supplies and operational spares
11,840 10,464
20,195 17,070
14. TRADE AND OTHER RECEIVABLES
USD Thousands
December 31, 2021
December 31, 2020
Trade receivables 91,062 51,614
Underlift 9,827 5,057
Joint operations debtors 1,930 1,792
Prepaid expenses and accrued income 6,325 5,524
Other
1,753 2,164
110,897 66,151
15. CASH AND CASH EQUIVALENTS
Cash and cash equivalents include only cash at hand or held in bank accounts.
16. SHARE CAPITAL
The Group’s issued common share capital is as follows:
Number of shares
Balance at January 1, 2020 159,790,869
Cancellation of repurchased common shares (4,448,112)
Balance at December 31, 2020
155,342,757
Stock option exercise 25,000
Cancellation of repurchased common shares (169,652)
Balance at December 31, 2021
155,198,105
The common shares of IPC trade on both the Toronto Stock Exchange and the Nasdaq Stockholm.
As at January 1, 2020, the total number of common shares issued and outstanding in IPC was 159,790,869. During Q1 2020,
IPC repurchased an aggregate of 4,448,112 common shares under a share repurchase program and all of these shares were
cancelled. As at December 31, 2020, IPC had a total of 155,342,757 common shares issued and outstanding.
Following the exercise of stock options during February 2021, the number of issued and outstanding common shares of the
Corporation increased by 25,000 to 155,367,757 common shares with voting rights.
On December 1, 2021, IPC announced the commencement of a share repurchase program. During the period up to December 31,
2021, IPC repurchased an aggregate of 1,330,303 common shares of which 169,652 shares were cancelled prior to December 31,
2021. The remaining 1,160,651 shares were cancelled in January 2022. As at December 31, 2021, IPC had a total of 155,198,105
common shares issued and outstanding.
As at February 8, 2022, following the cancellation of a further 726,676 common shares repurchased, IPC has a total of 153,310,778
common shares issued and outstanding with no par value.
30
Notes to the Consolidated Financial Statements
For the years ended December 31, 2021 and 2020, AUDITED
In addition, IPC has 117,485,389 outstanding class A preferred shares, issued as a part of an internal corporate structuring to a
wholly-owned subsidiary of IPC. Such preferred shares are not listed on any stock exchange, do not carry the right to vote on
matters to be decided by the holders of IPC’s common shares and does not impact the earnings per share calculations.
17. EARNINGS PER SHARE
Basic earnings per share are based on net result attributable to the common shareholders and is calculated based upon the
weighted-average number of common shares outstanding during the periods presented.
USD Thousands
2021
2020
Net result attributable to shareholders of the Parent Company, USD 146,028,617 (77,854,090)
Weighted average number of shares for the period
155,363,445 156,439,552
Earnings per share, USD
0.94 (0.50)
Weighted average diluted number of shares for the period
158,432,436 158,427,821
Earnings per share fully diluted, USD
0.92 (0.49)
18. SHARE BASED PAYMENTS
The Group has the following equity-settled share-based compensation plans: (a) a Share Unit Plan and (b) a Stock Option Plan.
IPC Share Unit Plan
The shareholders of IPC at the 2018 Annual General Meeting and at the 2021 Annual General Meeting approved a Share Unit Plan.
Awards under the plan will be accounted from the date of grant.
The IPC Performance Share Plan (“PSP”) 2018 awards vested on June 30, 2021 at a price of CAD 5.77 per award.
The IPC PSP 2019 awards are subject to continued employment and to certain performance conditions being met. The total
outstanding number of awards at December 31, 2021, is 860,349 which vest on June 30, 2022. Each award was fair valued at
the grant date at CAD 4.28 using an adjusted share price calculated with a hybrid valuation model based on the Monte Carlo
simulation. The assumptions used in the calculation of the adjusted share price were a risk free rate of 2.00%, expected volatility
of 46%, dividend yield rate of 0%, and an exercise price of CAD zero.
The IPC PSP 2020 awards are subject to continued employment and to certain performance conditions being met. The total
outstanding number of awards at December 31, 2021, is 1,017,105 which vest on March 1, 2023. Each award was fair valued
at the grant date at CAD 3.65 using an adjusted share price calculated with a hybrid valuation model based on the Monte Carlo
simulation. The assumptions used in the calculation of the adjusted share price were a risk free rate of 2.00%, expected volatility
of 47%, dividend yield rate of 0%, and an exercise price of CAD zero.
The IPC PSP 2021 awards are subject to continued employment and to certain performance conditions being met. The total
outstanding number of awards at December 31, 2021, is 1,716,000 which vest on March 1, 2024. Each award was fair valued
at the grant date at CAD 3.61 using an adjusted share price calculated with a hybrid valuation model based on the Monte Carlo
simulation. The assumptions used in the calculation of the adjusted share price were a risk free rate of 2.00%, expected volatility
of 68%, dividend yield rate of 0%, and an exercise price of CAD zero.
IPC Performance Share Plan 2018 Awards 2019 Awards 2020 Awards 2021 Awards Total
Outstanding at January 1, 2021
501,500 902,933 1,086,000 – 2,490,433
Awarded during the period – – – 1,716,000 1,716,000
Forfeited during the period – (42,584) (68,895) – (111,479)
Vested during the period
(501,500) – – – (501,500)
Outstanding at December 31, 2021
–
860,349 1,017,105 1,716,000 3,593,454
Vesting date
June 30, 2022 – 860,349 – – 860,349
March 1, 2023 – – 1,017,105 – 1,017,105
March 1, 2024
– – – 1,716,000 1,716,000
Outstanding at December 31, 2021
–
860,349 1,017,105 1,716,000 3,593,454
31
Notes to the Consolidated Financial Statements
For the years ended December 31, 2021 and 2020, AUDITED
The last third of the IPC Restricted Share Plan (“RSP”) 2018 awards vested on June 30, 2021, at a price of CAD 5.77 per award.
The second third of the IPC RSP 2019 awards vested on June 30, 2021, at a price of CAD 5.77 per award. The total outstanding
number of 2019 awards under the IPC RSP as at December 31, 2021, is 132,142 which vest on June 30, 2022, subject to
continued employment. Each award was fair valued at the grant date at CAD 5.84.
The first third of the IPC RSP 2020 awards vested on March 1, 2021, at a price of CAD 4.18 per award. The total outstanding
number of 2020 awards under the IPC RSP as at December 31, 2021, is 404,410 which vest over two years on each of March 1,
2022 and March 1, 2023, subject to continued employment. Each award was fair valued at the grant date at CAD 4.35.
The total outstanding number of IPC RSP 2021 awards as at December 31, 2021, is 1,036,773 which vest over three years as to
one-third on each of March 1, 2022, March 1, 2023, and March 1, 2024, subject to continued employment. Each award was fair
valued at the grant date at CAD 4.07.
IPC Restricted Share Plan 2018 Awards 2019 Awards 2020 Awards 2021 Awards Total
Outstanding at January 1, 2021
65,152 287,393 646,446
–
998,991
Awarded during the period
– – –
1,091,129 1,091,129
Forfeited during the period
–
(14,677) (26,554) (54,356) (95,587)
Vested during the period
(65,152) (140,574) (215,482) – (421,208)
Outstanding at December 31, 2021
– 132,142 404,410 1,036,773 1,573,325
Vesting date
June 30, 2022 – 132,142 – – 132,142
March 1, 2022 – – 202,205 345,591 547,796
March 1, 2023 – – 202,205 345,591 547,796
March 1, 2024
– – – 345,591 345,591
Outstanding at December 31, 2021
–
132,142 404,410 1,036,773 1,573,325
In connection with the BlackPearl Acquisition, the Group granted awards under the IPC RSP for certain officers and employees.
The second third vested on December 31, 2020, at a price of CAD 2.85 per award. The last third vested on December 31, 2021 at a
price of CAD 6.94. Each award was fair valued at the grant date at CAD 4.35.
IPC Restricted Share Plan - BlackPearl 2019 RSP
Outstanding at January 1, 2021
91,777
Awarded during the period –
Forfeited during the period (10,769)
Vested during the period
(81,208)
Outstanding at December 31, 2021
–
Under the IPC Share Unit Plan, the Group allows non-employee directors of the Corporation to elect for awards for fees for
services performed as a director and otherwise payable in cash. These awards will vest immediately at the time of grant. However,
these awards may not be redeemed before the end of service as a director of the Corporation. The total outstanding RSP awards
outstanding as at December 31, 2021, is 112,529. In 2019 there were 25,349 awards issued with a fair value at the grant date at
CAD 5.76. In 2020 there were 25,335 awards issued with a fair value at the grant date at CAD 2.56 and 45,781 awards issued
with a fair value at the grant date at CAD 2.85. In 2021 there were 18,167 awards issued with a fair value at the grant date at CAD
5.75 and 12,543 awards issued with a fair value at the grant date at CAD 6.95. In 2021, 14,646 awards issued in 2019 have been
exercised at a price of CAD 6.44.
32
Notes to the Consolidated Financial Statements
For the years ended December 31, 2021 and 2020, AUDITED
Stock Option Plan
The Stock Option Plan provides for the grant of stock option awards to employees, consultants and directors up to a maximum of
1,000,000 common shares of IPC. The Board granted stock options under the Stock Option Plan in February 2017, with a three year
vesting period and a four year term. In February 2021, 25,000 stock options were exercised at CAD 4.77 and all remaining stock
options expired. There are currently no outstanding stock options under the Stock Option Plan.
The number of awards outstanding under the Stock Option Plan at December 31, 2021, are summarized in the table below.
IPC Stock Option Plan 2021
Outstanding at January 1, 2021
1,808,566
Awarded during the period –
Forfeited during the period (1,783,566)
Exercised during the period
(25,000)
Outstanding at December 31, 2021
–
The costs charged to the statement of operations of the Group for the Share-Based payments are summarized in the following table:
USD Thousands
2021
2020
IPC Stock Option Plan – 44
IPC PSP – 2018 Awards 337 682
IPC RSP – 2018 Awards 81 224
IPC PSP – 2019 Awards 397 987
IPC RSP – 2019 Awards 984 983
IPC PSP – 2020 Awards 643 822
IPC RSP – 2020 Awards 984 1,056
IPC PSP – 2021 Awards 1,599 –
IPC RSP – 2021 Awards
1,432 –
6,457 4,798
19. FINANCIAL LIABILITIES
USD Thousands
December 31, 2021
December 31, 2020
Bank loans 113,121 327,691
Capitalized financing fees
(2,096) (3,556)
111,025 324,135
As at January 1, 2020, the Group had a reserve-based lending credit facility of USD 175 million (the “International RBL”) with
a maturity to end of June 2022 in connection with its oil and gas assets in France and Malaysia. In addition, the Group had a
reserve-based lending credit facility of CAD 375 million (the “Canadian RBL”) with a maturity date in May 2021, in connection
with its oil and gas assets in Canada.
In May 2020, IPC entered into a EUR 13 million unsecured credit facility in France (the “France Facility”) under a financial
assistance program instituted by the French government. In April 2021, IPC extended the France Facility until May 2026, with
quarterly repayments commencing in August 2022. The France Facility amount was fully drawn as at December 31, 2021, and as
at February 8, 2022.
In June 2020, the Group amended and extended the International RBL to a facility size of USD 125 million, with a maturity at the
end of December 2024. In July 2020, the facility size was further increased to USD 140 million.
33
Notes to the Consolidated Financial Statements
For the years ended December 31, 2021 and 2020, AUDITED
In March 2020, in connection with the completion of the acquisition of Granite Oil Corp. (“Granite”), the Group assumed the
bank debt of Granite consisting of a revolving credit facility of CAD 42.5 million (the “Granite Facility”). In July 2020, the Group
amended and extended the Canadian RBL to a facility size of CAD 350 million with a maturity extended until the end of May
2022. In December 2020, the Granite Facility was amended to a CAD 30 million revolving credit facility.
In June 2021, the Group consolidated the amounts outstanding under the Granite Facility into the Canadian RBL and the Granite
Facility was terminated. As of June 30, 2021, the Canadian RBL was amended to a facility size of CAD 300 million with a maturity
extended until the end of May 2023. Under the Canadian RBL, the Group had the requirement, to hedge 40% of forecast Canadian
oil production from June 30, 2021, to December 31, 2021.
The borrowing base availability under the International RBL was agreed in November 2021 at approximately USD 100 million of
which USD 4 million was drawn as at December 31, 2021. The borrowing base availability under the Canadian RBL was CAD 300
million of which CAD 120 million was drawn as at December 31, 2021.
In February 2022, IPC completed the issuance of USD 300 million of senior unsecured bonds (the “Bonds”), which mature in
February 2027 and have a fixed coupon rate of 7.25 percent per annum, payable in semi-annual instalments. The Group used a
portion of the proceeds of the Bonds to fully repay the Canadian RBL and the International RBL, which were then cancelled. At the
same time, the Group entered into a revolving credit facility of CAD 75 million (the “Canadian RCF”) in connection with its oil and
gas assets in Canada. The Canadian RCF has a maturity of February 2024.
The amounts drawn under the International RBL and the Canadian RBL as at December 31, 2021, are classified as non-current as
there are no mandatory repayments within the next twelve months.
An amount of USD 1,806 thousand drawn under the France Facility as at December 31, 2021 is classified as current representing
the repayment planned within the next twelve months.
The Group is in compliance with the covenants of the financing facilities as at December 31, 2021 and 2020.
The net debt and the movements in net debt can be summarized as follows:
USD Thousands
Cash
Lease
liabilities
Bank loans due
before 1 year
Bank loans due
after 1 year
Total
Net debt as at January 1, 2021 6,498 (2,018) (22,982) (304,709) (323,211)
Granite Facility – – 22,982 – 22,982
France Facility – – (1,806) 1,806 –
Cash flows 12,368 – – 192,837 205,205
Lease liabilities – 354 – – 354
Currency translation adjustments
(56) – – (1,249) (1,305)
Net debt as at December 31, 2021
18,810 (1,664) (1,806) (111,315) (95,975)
Net debt (excluding lease liabilities) (94,311)
USD Thousands
Cash
Lease
liabilities
Bank loans due
before 1 year
Bank loans due
after 1 year
Total
Net debt as at January 1, 2020
15,571 (2,750) – (247,074) (234,253)
Granite Acquisition (see Note 9) – – (27,649) – (27,649)
Cash flows (8,736) – 7,585 (49,134) (50,285)
Lease liabilities – 732 – – 732
Currency translation adjustments
(337) – (2,918) (8,501) (11,756)
Net debt as at December 31, 2020
6,498 (2,018) (22,982) (304,709) (323,211)
Net debt (excluding lease liabilities)
(321,193)
34
Notes to the Consolidated Financial Statements
For the years ended December 31, 2021 and 2020, AUDITED
20. PROVISIONS
USD Thousands
Asset
retirement
obligation
Farm-in
obligation
Pension
obligation
Other Total
January 1, 2021
192,701 4,350 5,558 1,540 204,149
Additions
1
15,993 – 293 159 16,445
Unwinding of asset retirement obligation discount 11,488 – – – 11,488
Changes in estimates (17,952) 600 (578) – (17,930)
Payments (3,945) (601) (629) (277) (5,452)
Reclassification
2
1,414 – – – 1,414
Currency translation adjustments (3,337) (150) (196) (65) (3,748)
December 31, 2021 196,362 4,199 4,448 1,357 206,366
Non-current 190,607 2,399 4,448 1,357
198,811
Current 5,755 1,800 – –
7,555
Total 196,362 4,199 4,448 1,357 206,366
1
The addition of USD 15,993 thousand relates to the increased decommissioning liability relating to the additional 25% working interest in the
Bertam field, Malaysia. The majority of this additional liability is covered by secured amounts transferred on assignment of the working interest.
(Also see Notes 1 and 12)
2
The reclassification of the asset retirement obligation related to the 2021 payment to the asset retirement obligation fund in respect of the Bertam
asset, Malaysia (see Note 12).
USD Thousands
Asset
retirement
obligation
Farm-in
obligation
Pension
obligation
Other Total
January 1, 2020
176,305 6,720 4,413 2,399 189,837
Granite Acquisition 4,498 – – – 4,498
Additions – – 603 1,269 1,872
Unwinding of asset retirement obligation discount 10,837 – – – 10,837
Changes in estimates (2,563) (622) 703 – (2,482)
Payments (4,324) (1,814) (636) (2,179) (8,953)
Reclassification
1
1,967 – – – 1,967
Currency translation adjustments 5,981 66 475 51 6,573
December 31, 2020
192,701 4,350 5,558 1,540 204,149
Non-current 187,012 3,107 5,558 1,268
196,945
Current 5,689 1,243 – 272
7,204
Total 192,701 4,350 5,558 1,540 204,149
1
The reclassification of the asset retirement obligation related to the 2020 payment to the asset retirement obligation fund in respect of the Bertam
asset, Malaysia (see Note 12).
The farm-in obligation relates to future payments for historic costs on Block PM307 in Malaysia payable on reaching certain Bertam
field production milestones.
In calculating the present value of the asset retirement obligation provision, a blended rate of 6% (2020: 6%) was used, based on a
credit risk adjusted rate.
35
Notes to the Consolidated Financial Statements
For the years ended December 31, 2021 and 2020, AUDITED
21. PENSION LIABILITY
The Group operates a pension plan for employees in Switzerland that is managed through a private pension plan. The amount
recognized in the balance sheet associated with the Swiss pension plan is as follows:
USD Thousands
December 31, 2021 December 31, 2020
Present value of defined benefit obligation 14,714 15,316
Fair value of plan assets
(10,266) (9,758)
Pension obligation, ending balance
4,448 5,558
The movement in the defined benefit obligation over the year is as follows:
USD Thousands
For the year ended
December 31, 2021
For the year ended
December 31, 2020
Opening balance 15,316 10,760
Current service cost 636 786
Additional contributions paid by employees 237 1,920
Ordinary contributions paid by employees 419 424
Interest expense on defined benefit obligation 29 27
Actuarial loss on defined benefit obligation (552) 777
Administration costs 13 12
Benefits paid from plan assets (485) (452)
Past service cost (366) (206)
Foreign exchange loss
(533) 1,268
Defined benefit obligation, ending balance
14,714 15,316
The weighted average duration of the defined benefit obligation is 18.6 years. There is no maturity profile since the average
remaining life before active employees reach final age according to the plan is 10.4 years.
The movement in the fair value of the plan assets over the year is as follows:
USD Thousands
For the year ended
December 31, 2021
For the year ended
December 31, 2020
Opening balance 9,758 6,347
Additional contributions paid by employees 237 1,920
Ordinary contributions paid by employer 629 636
Ordinary contributions paid by employees 419 424
Interest income on plan assets 19 16
Return on plan assets excluding interest income 26 73
Foreign exchange gain (337) 794
Benefits paid from plan assets
(485) (452)
Fair value of plan assets, ending balance
10,266 9,758
The plan assets are under an insurance contract comprised entirely of free funds and reserves, such as fluctuation reserves and
employer contribution reserves, for which there is no quoted price in an active market.
36
Notes to the Consolidated Financial Statements
For the years ended December 31, 2021 and 2020, AUDITED
The amount recognized in the income statement associated with the Group’s pension plan is as follows:
USD Thousands
For the year ended
December 31, 2021
For the year ended
December 31, 2020
Current service cost 636 786
Interest expense on defined benefit obligation 29 27
Administration costs 13 12
Past service cost (366) (206)
Interest income on plan assets
(19) (16)
Total expense recognized
293 603
The expense associated with the Group’s pension plan of USD 293 thousand was included within general and administrative
expenses. The Group also recognized in other comprehensive income a USD 578 thousand net actuarial gain on defined benefit
obligations and pension plan assets.
The principal actuarial assumptions used to estimate the Group’s pension obligation are as follows:
USD Thousands
For the year ended
December 31, 2021
For the year ended
December 31, 2020
Discount rate 0.20% 0.20%
Inflation rate 1.00% 1.00%
Future salary increase 1.00% 1.00%
Future pension increases 0.00% 0.00%
Retirement ages, male (‘M’) and female (‘F’) M65/F64 M65/F64
Assumptions regarding future mortality are set based on actuarial advice in accordance with the BVG 2015 GT generational
published statistics and experience in Switzerland. The discount rate is determined by reference to the yield on high quality
corporate bonds. The rate of inflation is based on the expected value of future annual inflation adjustments in Switzerland. The rate
for future salary increases is based on the average increase in the salaries paid by the Group, and the rate of pension increases is
based on the annual increase in risk, retirement and survivors’ benefits.
The sensitivity of the defined benefit obligation to changes in the weighted principal assumptions is:
Change in
assumption
Increase in
assumption
Decrease in
assumption
Discount rate 0.50% Decrease by 8.6% Increase by 10.0%
Salary growth rate 0.50% Increase by 0.6% Decrease by 0.6%
Life Expectancy One year Increase by 1.4% Decrease by 1.5%
The above sensitivity analyses are based on a change in an assumption while holding all other assumptions constant. In practice,
this is unlikely to occur, and changes in some of the assumptions may be correlated. When calculating the sensitivity of the defined
benefit obligation to significant actuarial assumptions, the same method has been applied as when calculating the pension liability
recognized within the consolidated balance sheet.
22.TRADE AND OTHER PAYABLES
USD Thousands
December 31, 2021
December 31, 2020
Trade payables 9,043 11,635
Joint operations creditors 20,201 14,135
Accrued expenses 45,329 34,453
Other
5,268 3,127
79,841 63,350
37
Notes to the Consolidated Financial Statements
For the years ended December 31, 2021 and 2020, AUDITED
23. FINANCIAL ASSETS AND LIABILITIES
Financial assets and liabilities by category
The accounting policies for financial instruments have been applied to the line items below:
December 31, 2021
USD Thousands
Total
Financial assets
at amortized
cost
Fair value
recognized in
profit or loss
(FVTPL)
Derivatives
used for
hedging
Other assets
1
35,753
35,753 – –
Derivative instruments
1,159
– – 1,159
Joint operation debtors
1,930
1,930 – –
Other current receivables
2
102,741
92,914 9,827 –
Cash and cash equivalents
18,810
18,810 – –
Financial assets
160,393 149,407 9,827 1,159
1
See Note 12
2
Prepayments are not included in other current assets, as prepayments are not deemed to be financial instruments
December 31, 2021
USD Thousands
Total
Financial
liabilities at
amortized cost
Fair value
recognized in
profit or loss
(FVTPL)
Derivatives
used for
hedging
Non-current financial liabilities
109,219
109,219 – –
Current financial liabilities
1,806
1,806 – –
Derivative instruments – – – –
Joint operation creditors
20,201
20,201 – –
Other current liabilities
19,404
19,404 – –
Financial liabilities
150,630 150,630 –
–
December 31, 2020
USD Thousands
Total
Financial assets
at amortized
cost
Fair value
recognized in
profit or loss
(FVTPL)
Derivatives
used for
hedging
Other assets
1
20,239
20,239 – –
Derivative instruments
1,591
– – 1,591
Joint operation debtors
1,792
1,792 – –
Other current receivables
2
59,992
54,935 5,057 –
Cash and cash equivalents
6,498
6,498 – –
Financial assets
90,112 83,464 5,057 1,591
1
See Note 12
2
Prepayments are not included in other current assets, as prepayments are not deemed to be financial instruments
December 31, 2020
USD Thousands
Total
Financial
liabilities at
amortized cost
Fair value
recognized in
profit or loss
(FVTPL)
Derivatives
used for
hedging
Non-current financial liabilities
302,500
302,500 – –
Current financial liabilities
22,982
22,982 – –
Derivative instruments
2,746
– – 2,746
Joint operation creditors
14,135
14,135 – –
Other current liabilities
15,617
15,617 – –
Financial liabilities
357,980 355,234 – 2,746
The carrying amount of the Group’s financial assets approximate their fair values at the balance sheet dates.
38
Notes to the Consolidated Financial Statements
For the years ended December 31, 2021 and 2020, AUDITED
For financial instruments measured at fair value in the balance sheet, the following fair value measurement hierarchy is used:
– Level 1: based on quoted prices in active markets;
– Level 2: based on inputs other than quoted prices as within level 1, that are either directly or indirectly observable;
– Level 3: based on inputs which are not based on observable market data.
Based on this hierarchy, financial instruments measured at fair value can be detailed as follows:
December 31, 2021
USD Thousands
Level 1 Level 2 Level 3
Other current receivables 9,827 – –
Derivative instruments – current
– 1,159 –
Financial assets
9,827 1,159 –
Derivative instruments – current
– – –
Financial liabilities
– – –
December 31, 2020
USD Thousands
Level 1 Level 2 Level 3
Other current receivables 5,057 – –
Derivative instruments – current
– 1,591 –
Financial assets
5,057 1,591
–
Derivative instruments – current
– 2,746 –
Financial liabilities
– 2,746
–
24. MANAGEMENT OF FINANCIAL RISK
The Corporation’s financial instruments are exposed to certain financial risks, including credit risk, liquidity risk, foreign exchange
risk, commodity price risk and interest rate risk.
a) Credit risk
The exposure to credit risk arises through the failure of a customer or another third party to meet its contractual obligations to the
Corporation. The Corporation believes that its maximum exposure to credit risk as at December 31, 2021, is the carrying value of
its trade receivables. The Group’s policy is to limit credit risk by limiting the counterparties to major oil and gas companies. Where
it is determined that there is a credit risk for oil and gas sales, the policy is to require an irrevocable letter of credit for the full value
of the sale. The policy on joint operation parties is to rely on the provisions of the underlying joint operating agreements to take
possession of the licence or the partner’s share of production for non-payment of cash calls or other amounts due.
As at December 31, 2021, the trade receivables amounted to USD 91,062 thousand and there is no recent history of default. The
expected credit loss associated with these receivables is not significant. Cash and cash equivalents are maintained with banks
having strong long-term credit ratings.
b) Liquidity risk
Liquidity risk is defined as the risk that the Group could not be able to settle or meet its obligations on time or at a reasonable
price. Corporation treasury is responsible for liquidity, funding as well as settlement management. The Corporation has in place a
planning and forecasting process to help determine the funds required to support the Corporation’s normal operating requirements
on an ongoing basis. The Corporation ensures that there is sufficient available capital to meet its short-term business requirements,
taking into account its anticipated cash flows from operations and its holdings of cash and cash equivalents, including bond
proceeds. The Corporation has credit facilities in place to assist with meeting its cash flow needs as required (Note 19).
The table below analyses the Group’s financial liabilities into relevant maturity groupings based on the remaining period at the
balance sheet date to the contractual maturity date. Loan repayments are made upon a net present value calculation of the assets’
future cash flows. No loan repayments are currently forecast under this calculation.
39
Notes to the Consolidated Financial Statements
For the years ended December 31, 2021 and 2020, AUDITED
USD Thousands
December 31, 2021
December 31, 2020
Non-current
Repayment within 2 - 5 years:
- Bank loans
111,315 304,709
111,315 304,709
Current
Repayment within 6 to 12 months:
- Bank loans 1,806 22,982
Repayment within 6 months:
- Trade payables 9,043 11,635
- Joint operation creditors 20,201 14,135
- Other current liabilities 5,268 3,127
- Current tax liabilities
5,093 184
41,411 52,063
c) Foreign exchange risk
The Group operates internationally and is exposed to foreign exchange risk arising from various currencies, primarily with respect
to EUR and CAD. The Group’s risk management objective is to manage cash flow risk related to foreign denominated cash flows.
The Corporation is exposed to currency risk related to changes in rates of exchange between foreign denominated balances and
the functional currencies of the Group’s principal operating subsidiaries. The Group’s revenues are denominated in US dollars,
while most of its operating and capital expenditures are denominated in the local currencies. A significant change in the currency
exchange rates between the US dollar and foreign currencies could have a material effect on the Group’s net earnings and on other
comprehensive income.
The following tables summarize the effects that a change in these currencies against the US Dollar would have on operating result
and equity through the conversion of the income statements of the Group’s subsidiaries from functional currency to the presentation
currency US Dollar for the years ended at December 31, 2021 and 2020.
Shift of currency exchange rates
USD Thousands
Average rate
2021
USD weakening
10%
USD strengthening
10%
Operating profit in the financial statements 197,956 197,956
EUR /USD 0.8450 0.7681 0.9294
CAD/USD 1.2536 1.1396 1.3790
Total effect on operating profit
(16,961) 16,961
Shift of currency exchange rates
USD Thousands
Average rate
2020
USD weakening
10%
USD strengthening
10%
Operating profit in the financial statements (96,775) (96,775)
EUR /USD 0.8762 0.7965 0.9638
CAD/USD 1.3412 1.2193 1.4753
Total effect on operating profit
9,714 (9,714)
40
Notes to the Consolidated Financial Statements
For the years ended December 31, 2021 and 2020, AUDITED
d) Commodity price risk
The Group is subject to price risk associated with fluctuations in the market prices for oil and gas. Prices of oil and gas are affected by
the normal economic drivers of supply and demand as well as the financial investors and market uncertainty. Factors that influence
these include operational decisions, natural disasters, economic conditions, political instability or conflicts or actions by major oil
exporting countries. Price fluctuations can affect the Corporation’s financial position.
Commodity price risk is the risk that future cash flows will fluctuate as a result of changes in the price of oil and natural gas.
Commodity prices are impacted by world economic events that affect supply and demand, which are generally beyond the Group’s
control. Changes in crude oil prices may significantly affect the Corporation’s results of operations, cash generated from operating
activities, capital spending and the Corporation’s ability to meet its obligations. The majority of the Corporation’s production is sold
under short-term contracts; consequently the Group is at risk to near term price movements. The Corporation manages this risk by
constantly monitoring commodity prices and factoring them into operational decisions, such as contracting or expanding its capital
expenditures program.
The Corporation enters into certain risk management contracts in order to manage the exposure to market risks from fluctuations
in commodity prices. These risk management contracts are not used for trading or speculative purposes. The Corporation has
designated its risk management contracts as effective accounting hedges, and thus has applied hedge accounting. As a result, all
risk management contracts are recorded at fair value at each reporting period with the change in fair value being recognized on the
statement of comprehensive income.
The outstanding derivative instruments can be specified as follows:
Fair value of outstanding derivative instruments in the balance sheet
USD Thousands
December 31, 2021
December 31, 2020
Assets Liabilities
Assets Liabilities
Oil price hedge – – – 2,743
Gas price hedge
1,159 – 1,591 3
Total
1,159
–
1,591 2,746
Non-current – – – –
Current
1,159 – 1,591 2,746
Total
1,159
–
1,591 2,746
The Group had gas price sale financial hedges outstanding as at December 31, 2021, which are summarized as follows:
Period
Volume (Gigajoules
(GJ) per day)
Type Average Pricing
January 1, 2022 – March 31, 2022 20,000 AECO Swap CAD 4.15/GJ
April 1, 2022 – September 30, 2022 20,000 AECO Swap CAD 3.14/GJ
The Group had no oil price sale financial hedges outstanding as at December 31, 2021.
All of the above hedges are treated as effective and changes to the fair value are reflected in other comprehensive income.
The table below summarizes the effect that a change in the oil and gas price would have had on the net result and equity at
December 31, 2021 and 2020:
2021 Net result (USD Thousands) 146,059 146,059
Possible shift (%) (10%) 10%
Total effect on net income (USD Thousands) (54,368) 54,368
2020 Net result (USD Thousands) (77,941) (77,941)
Possible shift (%) (10%) 10%
Total effect on net income (USD Thousands) (23,081) 23,081
41
Notes to the Consolidated Financial Statements
For the years ended December 31, 2021 and 2020, AUDITED
e) Interest rate risk
The Group’s exposure to interest rate risk arises from both the interest rate impact on its cash and cash equivalents as well as on
its debt facilities. As at December 31, 2021, the Group’s long-term debt is comprised of partially floating rate debt tied to LIBOR. As
such, changes in interest rate will have an impact on interest expense.
The total interest expense for 2021 amounted to USD 12,867 thousand (2020: USD 13,401 thousand). A 100 basis point shift in the
interest rate would have resulted in a change in the total interest expense for the year of USD 2,477 thousand (2020: USD 3,255
thousand).
25. MANAGEMENT OF CAPITAL RISK
The objectives when managing capital are to safeguard the Group’s ability to continue as a going concern and to meet its committed
work program requirements in order to create shareholder value. The Corporation may put in place new credit facilities, repay debt, or
other such restructuring activities as appropriate. Management continuously monitors and manages the capital, liquidity and net debt
position in order to assess the requirement for changes to the capital structure to meet the objectives and to maintain flexibility.
No significant changes were made in the objectives, policies or procedures during the year ended December 31, 2021 or in the
comparative periods.
Through the ongoing management of its capital, the Corporation will modify the structure of its capital based on changing economic
conditions in the jurisdictions in which it operates. In doing so, the Corporation may issue new shares or debt, buy back issued shares,
or pay off any outstanding debt.
26. SALARY AND OTHER COMPENSATION EXPENSES
a) Employee compensation expenses
The following table provides a breakdown of gross salaries, short-term benefits, share-based compensation and other compensation
expenses included in the consolidated statement of comprehensive income (loss):
USD Thousands
2021
2020
Salaries, bonuses and other short-term benefits 44,033 40,914
Security social costs 5,556 6,387
Share-based incentive plans
1
6,457 4,798
56,046 52,099
1
Vested during the period and based on IFRS 2 valuation (see Note 18)
b) Remuneration of Directors and Senior Management
Remuneration of Directors and Senior Management includes all amounts earned and awarded to the Group’s Board of Directors and
Senior Management. Senior Management includes the Group’s President and Chief Executive Officer, Chief Financial Officer, General
Counsel and Corporate Secretary, Chief Operating Officer, Senior Vice President Canada, Vice President of Asset Management and
Corporate Planning Canada and Vice President of Corporate Planning and Investor Relations.
Directors’ fees include Board and Committee fees. Senior Management’s remuneration includes salary, short-term benefits, bonuses
and any other compensation earned in 2020 and in 2021.
USD Thousands
2021
2020
Directors’ fees 650 686
Senior Management’s salaries, bonuses and other short-term benefits 4,818 6,989
Share-based incentive plans paid to Senior Management
641 118
6,109 7,793
42
Notes to the Consolidated Financial Statements
For the years ended December 31, 2021 and 2020, AUDITED
27. CONTRACTUAL OBLIGATIONS AND COMMITMENTS
In Canada, an oil pipeline from the Onion Lake Thermal field to the Husky Alberta Gathering System has been built by Husky
Midstream (“Husky“) for the exclusive use of IPC. Onion Lake Thermal oil production is planned to be blended with condensate
before being transported via the pipeline and is therefore expected to attract improved realised prices as a result of the blended
oil. The pipeline is also expected to improve the reliability and uptime of the transportation and production at Onion Lake Thermal.
The initial investment in the pipeline was met by Husky and is to be recovered through an agreed tariff charged to IPC. IPC has
committed to a firm transportation service for 15 years from commencement of service, with total tariffs committed as shown in
the table below:
2022
1
2023 2024 2025 2026 Thereafter
Transportation service (MCAD)
22.5 27.3 28.0 28.4 29.0 300.9
1
Assuming commissioning of the pipeline and commencement of the service occurs during the first quarter of 2022
In Malaysia, IPC has an obligation to make payments towards historic costs on Block PM307 payable on the Bertam field for every
1 MMboe gross that the field produces above 10 MMboe gross. The estimated liability based on current 2P reserves has been
provided for in the Group’s Balance Sheet (see Note 20).
28. RELATED PARTIES
Lundin Energy has charged the Group USD 636 thousand in respect of office space rental and USD 1,508 thousand in respect of
shared services provided during the year 2021.
All transactions with related parties are in the normal course of business and are made on the same terms and conditions as with
parties at arm’s length.
29. IMPACT OF COVID-19
The current and any future Covid-19 outbreaks may increase IPC’s exposure to, and magnitude of, each of the risks and uncertainties
identified in IPC’s Management’s Discussion and Analysis for the year ended December 31, 2021 (“MD&A“) and previous Annual
Information Form, financial reports and MD&A that result from a reduction in demand for oil and gas consumption and/or lower
commodity prices and/or reliance on third parties. The extent to which Covid-19 impacts IPC’s business, results of operations and
financial condition will depend on future developments, which are highly uncertain and are difficult to predict, including, but not
limited to, the duration and spread of the current and any future Covid-19 outbreaks, their severity, the actions taken to contain such
outbreaks or treat their impact, and how quickly and to what extent normal economic and operating conditions resume and their
impacts to IPC’s business, results of operations and financial condition. Even after the Covid-19 outbreaks have subsided, IPC may
continue to experience materially adverse impacts to IPC’s business as a result of the global economic impact.
The Group will continue to monitor this situation and IPC will work to adapting its business to further developments as determined
necessary or appropriate.
30. SUBSEQUENT EVENTS
In January 2022, the Group entered into oil price sale financial hedges to hedge the WCS/WTI Differential, hedging a volume of 11,900
bbl/day at an average of USD 13.06/bbl for the period March 1 to June 30, 2022 and a volume of 16,000 bbl/day at an average of USD
13.04/bbl for the period July 1 to December 31, 2022.
In January 2022, the Group entered into further gas price sale financial hedges to hedge the AECO Swap, hedging a volume of 15,000
GJ/day at an average of CAD 3.77/GJ for the period April 1 to September 30, 2022.
In February 2022, IPC completed the issuance of USD 300 million of senior unsecured bonds, which mature in February 2027 and
have a fixed coupon rate of 7.25 percent per annum, payable in semi-annual instalments. The Group used a portion of the proceeds
of the Bonds to fully repay the Canadian RBL and the International RBL, which were then cancelled. At the same time, the Group
entered into a revolving credit facility of CAD 75 million (the “Canadian RCF”) in connection with its oil and gas assets in Canada. The
Canadian RCF has a maturity of February 2024.
Corporate Office
International Petroleum Corp
Suite 2000
885 West Georgia Street
Vancouver, BC
V6C 3E8, Canada
Tel: +1 604 689 7842
E-mail: [email protected]
Web: international-petroleum.com