15. Other intangible assets
PLN ’000 | Dec 31 2013 | Dec 31 2012 (restated) |
---|---|---|
Licences, patents and trademarks | 93,607 | 91,286 |
Exploration and production licences (1) | 357,559 | 431,073 |
Intangible exploration and evaluation assets (2) | 198,439 | 15,356 |
Other | 36,617 (3) | 10,944 |
Total | 686,222 | 548,659 |
(1) AB LOTOS Geonafta Group’s exploration and production licences related to oil fields in Lithuania.
(2) Including PLN 180,401 thousand under LOTOS E&P Norge AS North Sea exploration licences (December 31st 2012: PLN 13,896 thousand).
(3) Including Grupa LOTOS's purchased carbon dioxide (CO2) emission allowances of PLN 23,911 thousand.
Exploration and evaluation assets
The Group incurs expenditures on intangible assets in connection with exploration for and evaluation of mineral resources. In 2013, the incurred expenditure of PLN 204,518 thousand mainly related to the acquisition of assets connected with the YME field and Heimdal fields (for more information on the transaction, see Note 13). In 2013, the value of cash flows related to expenditure on intangible exploration and evaluation assets was PLN 181,632 thousand (2012: PLN 73,714 thousand). As at December 31st 2013, the value of investment commitments connected with the expenditure was PLN 21,233 thousand.
Exploration and evaluation assets are carried until the technical feasibility and commercial viability of extracting the mineral resources is demonstrated. As at December 31st 2013, the intangible assets related to mineral resources with demonstrable technical feasibility and commercial viability of extraction stood at PLN 362,438 thousand (December 31st 2012: PLN 434,949 thousand), and their 2013 amortisation amounted to PLN 55,126 thousand (2012: PLN 49,744 thousand). These assets are recognised under: Exploration and production licences and Other intangible assets.
Impairment losses on intangible assets
Upstream segment
In 2013, the Group recognised impairment losses on intangible assets of PLN 31,164 thousand (2012: PLN 88,986 thousand). The impairment losses were related to exploration licences in Norway and exploration and production licences in Lithuania, as described in more detail below.
In 2013, as the drillings performed within the PL 498 and PL 497 licence areas yielded no positive results, the Group recognised an impairment loss on related capitalised exploration expenses of PLN 4,744 thousand (NOK 8,856 thousand). The respective impairment loss recognised in 2012 was PLN 74,481 thousand (NOK 133,145 thousand).
As at December 31st 2013 Latvian production licences held by companies of the AB LOTOS Geonafta Group (AB LOTOS Geonafta (Girkaliai, Kretinga and Nausodis fields), UAB Genciu Nafta (Genciu field)) were tested for impairment. The Group determined the recoverable amount of the tested assets at their value in use measured using the discounted future cash flows method.
The assets of UAB Manifoldas (Klaipėda, Troba fields) were not tested for impairment, as the key assumptions relating to the allocation of cost for AB LOTOS Geonafta's acquisition of controlling interest in UAB Manifoldas were not materially different from the estimates made in connection with the final accounting for the transaction (see Note 6).
Key assumptions underlying computation of the recoverable amount of the tested intangible assets in Lithuania as at December 31st 2013:
- the cash flow projection period was assumed to equal the asset's planned life,
- the discount rate was assumed to equal the weighted average cost, at 11%,
- production volumes were assumed to be in line with a competent person report prepared by Miller & Lents based on available current geological information,
- capital expenditure was assumed to match the projected production volumes.
The following crude oil price assumptions in USD/bbl were adopted for the purposes of the estimates:
- The following crude oil price assumptions in USD/bbl were adopted for the purposes of the estimates:
- 2017 and beyond – crude prices reflect the assumptions made for the purposes of acquisition of an interest in Heimdal assets by LOTOS E&P Norge AS (for more information on the acquisition of Heimdal assets see Note 13).
Due to significant market volatility, in particular with respect to crude oil prices, the adopted assumptions might be subject to justifiable changes, and such changes may in the future cause a change on the carrying amounts of assets held by the AB LOTOS Geonafta Group. To determine the effect of key factors on the test results, the Group carried out an analysis of sensitivity to a -15%/+15% change of crude oil price, -15%/+15% change in production volumes, and a -15%/+15% change in the USD/LTL exchange rate. As at December 31st 2013, as a result of impairment tests a PLN 26,420 thousand (LTL 21,663 thousand) impairment loss on assets was recognised, including PLN 7,943 thousand (LTL 6,513 thousand) on assets associated with the Girkaliai field and PLN 18,477 thousand (LTL 15,150 thousand) on assets associated with the UAB Minijos Nafta's fields.
As at December 31st 2012, remeasurement of the intangible assets related to the Lithuanian licences was necessitated mainly by the determination of new geological information which revised the reserve estimates down. Following impairment tests performed separately for each individual asset generating cash flows, i.e. for the Girkaliai, Kretinga and Nausodis fields, an impairment loss of PLN 14,504 thousand (LTL 12,000 thousand) was recognised on assets related to the Kretinga field
In connection with the tests carried out as at December 31st 2012, production profiles based on the current field reports prepared by an independent expert were used to calculate future cash flows (the assets tested for impairment generate cash flows from production of crude oil; production profiles determine the period of detailed cash flow projections for each field). The analysed cash flows in the production periods included revenue from sale of crude oil, operating expenses and capital expenditure necessary to conduct production activities, and the calculated cash flows were discounted to arrive at the present value of future payments. The applied discount rate was based on the weighted average cost of capital after tax, estimated at 11%. With financial effects of production from a given oil field showing high sensitivity to changes in the prices of crude oil, and the prices being highly volatile, the Group applied a range approach to testing the value of its fields, in order to avoid remeasurement of assets after any price movements, by allowing for the following volatilities: crude oil price: +/- 15%, production volumes: +/- 15%, USD/LTL exchange rate: +/- 15%. The tests revealed that, as at December 31st 2012, the carrying amounts of the Girkaliai and Nausodis fields fell within the ranges determined by the range test. In the case of the Kretinga field, the carrying amount of the tested assets was higher than the field’s range measurement values, which resulted in recognition of the impairment loss on the assets.
The table below presents items under which amortisation of other intangible assets was recognised:
PLN ’000 | Year ended Dec 31 2013 |
Year ended Dec 31 2012 (restated) |
---|---|---|
Cost of sales | 56,679 | 51,267 |
Distribution costs | 472 | 1,380 |
Administrative expenses | 11,197 | 9,590 |
Change in products and adjustments to cost of sales | 108 | 108 |
Total | 68,456 | 62,345 |
As at December 31st 2013, other intangible assets serving as collateral for the Group's liabilities was PLN 150,364 thousand. The collateral was created over the acquired Heimdal assets; for more information see Note 13. As at December 31st 2012, no intangible assets served as collateral.
As at December 31st 2013, the Group’s future contractual liabilities related to expenditure on intangible assets undisclosed in the statement of financial position were PLN 9,263 thousand (December 31st 2012: PLN 8,039 thousand).
Changes in other intangible assets
PLN ’000 | Note | Licences, patents and trademarks |
Exploration and production licences |
Intangible exploration and evaluation assets |
Other | Total |
---|---|---|---|---|---|---|
Gross carrying amount Jan 1 2013 (restated) |
163,626 | 527,054 | 159,305 | 32,978 | 882,963 | |
Purchase | - | - | 41,890 | 25,573 (1) | 67,463 | |
Acquisition of Heimdal assets |
13 | - | - | 162,628 | - | 162,628 |
Transfer from property, plant and equipment under construction |
12,562 | - | - | 2,912 | 15,474 | |
Exchange differences on translating foreign operations |
- | 7,612 | (30,788) | (473) | (23,649) | |
Contribution of assets for development of B-4 and B-6 fields to Baltic Gas Sp. z o.o i wspónicy sp. k. (2) |
- | - | (1,430) | (327) | (1,757) | |
Liquidation | (179) | - | - | (14) | (193) | |
Other | (265) | - | - | 308 | 43 | |
Gross carrying amount Dec 31 2013 |
175,744 | 534,666 | 331,605 | 60,957 | 1,102,972 | |
Accumulated amortisation Jan 1 2013 (restated) |
72,337 | 81,773 | 7,121 | 22,008 | 183,239 | |
Amortisation | 10,249 | 54,548 | 1,411 | 2,248 | 68,456 | |
Exchange differences on translating foreign operations |
- | 354 | - | (293) | 61 | |
Contribution of assets for development of B-4 and B-6 fields to Baltic Gas Sp. z o.o i wspónicy sp. k. (2) |
- | - | (1,317) | (87) | (1,404) | |
Liquidation | (172) | - | - | (10) | (182) | |
Other | (252) | - | - | 420 | 168 | |
Accumulated amortisation Dec 31 2013 |
82,162 | 136,675 | 7,215 | 24,286 | 250,338 | |
Impairment losses Jan 1 2013 |
3 | 14,208 | 136,828 | 26 | 151,065 | |
Recognised | - | 26,420 | 4,744 | - | 31,164 | |
Exchange differences on translating foreign operations |
- | (196) | (15,079) | - | (15,275) | |
Used / Reversed | - | - | (542) | - | (542) | |
Other | (28) | - | - | 28 | - | |
Impairment losses Dec 31 2013 |
(25) | 40,432 | 125,951 | 54 | 166,412 | |
Net carrying amount Dec 31 2013 |
93,607 | 357,559 | 198,439 | 36,617 | 686,222 |
(1) Including Grupa LOTOS S.A.'s purchased carbon dioxide (CO2) emission allowances of PLN 23,430 thousand.
(2) For more information see Note 2.
PLN ’000 | Licences, patents and trademarks |
Exploration and production licences |
Intangible exploration assets plant and equipment |
Other | Total |
---|---|---|---|---|---|
Gross carrying amount Jan 1 2012 |
150,007 | 403,716 | 87,880 | 29,834 | 671,437 |
Purchase | 180 | - | 73,714 | 805 | 74,699 |
Transfer from property, plant and equipment under construction | 15,518 | - | - | 2,419 | 17,937 |
Exchange differences on translating foreign operations | - | (33,245) | (2,289) | (80) | (35,614) |
Acquisition of control (AB LOTOS Geonafta Group) (1) | - | 184,625 | - | - | 184,625 |
Liquidation | (584) | - | - | (270) | (854) |
Deconsolidation (AB LOTOS Geonafta Group) (1) | - | (28,042) | - | - | (28,042) |
Other | (1,495) | - | - | 270 | (1,225) |
Gross carrying amount Dec 31 2012 (restated) |
163,626 | 527,054 | 159,305 | 32,978 | 882,963 |
Accumulated amortisation Jan 1 2012 |
63,340 | 41,741 | 6,156 | 20,280 | 131,517 |
Amortisation | 10,309 | 49,017 | 965 | 2,054 | 62,345 |
Exchange differences on translating foreign operations | - | (4,007) | - | (56) | (4,063) |
Liquidation | (584) | - | - | (270) | (854) |
Deconsolidation (AB LOTOS Geonafta Group) (1) | - | (4,978) | - | - | (4,978) |
Other | (728) | - | - | - | (728) |
Accumulated amortisation Dec 31 2012 (restated) |
72,337 | 81,773 | 7,121 | 22,008 | 183,239 |
Impairment |
3 | - | 64,311 | 26 | 64,340 |
Recognised | - | 14,504 | 74,481 | - | 88,985 |
Exchange differences on translating foreign operations | - | (296) | (1,964) | - | (2,260) |
Impairment losses Dec 31 2012 |
3 | 14,208 | 136,828 | 26 | 151,065 |
Net carrying amount Dec 31 2012 (restated) |
91,286 | 431,073 | 15,356 | 10,944 | 548,659 |
(1) Effect of the acquisition of control over UAB Manifoldas by AB LOTOS Geonafta. For more information on the transaction, see Note 2 to the consolidated financial statements for 2012.