Accountants Reports.
MASIYA Petroleum Limited
We have Prepared the balance sheets of MASIYA Petroleum Limited (the “Company”), as of December
31, 2022 and the related statements of income and cash flows for the year ended December 31, 2022,
from the financial record of Masiya Petroleum. The financial statements include the reports for the
financial year January to December 2022 and the three months ended September to December 2021.
These financial statements are the responsibility of the Company’s management.
We have prepared the financial statement in accordance to international financial reporting
standards(IFRS) and were approved by the directors on;
MASIYA PETROLEUM PRODUCTS LIMITED
STATEMENT OF FINANCIAL POSITION AS AT 31 DEC 2022
December 31, December 31,
(Kwacha in thousands) 2022 2021
Assets
Current assets:
Cash and cash equivalents 24,280 9,497
Accounts receivable, net 48,595 7,983
Accounts receivable from related party 25,691 10,867
Inventory 150,211 70,164
Derivative instruments - —
Short-term investments - -
Prepaids and other 250,393 75,628
Total current assets 499,170 174,139
Property and equipment-at cost, net 11,813,360 4,502,278
Accumulated depletion and depreciation (249,973) (152,908)
Total Property and equipment 11,563,387 4,349,373
Total Assets 12,062,557 4,523,512
Liabilities and stockholders’ equity and capital
Current liabilities:
Accounts payable and accrued liabilities 253,532 123,338
Accounts payable to related party 111,878 51,905
Revenue distribution payable - -
Total current liabilities 365,410 175,243
Long-term derivative instruments - -
Paid-in capital 4,259,580 1,550,166
Retained earnings 2,870,944 732,875
Revaluation Reserve 4,566,623 2,065,228
11,697,147 4,348,269
Total Liabilities and Equity 12,062,557 4,523,512
The accompanying notes are an integral part of these statements.
MASIYA PETROLEUM PRODUCTS LIMITED
Statements of income
3 months
ended
Year ended December 31, December 31,
(Kwacha in thousands) 2022 2021
Revenues:
Oil and gas sales 24,577,429 4,782,130
Cost of sales 14,117,990 2,242,838
Costs and expenses:
General operating Expenses 4,027,174 423,719
Tax and related expenses 554,922 256,266
Depreciation, depletion and amortization 249,973 152,908
Impairment of oil and gas properties — -
General and administrative 2,501,918 311,819
Total costs and expenses 7,333,987 1,414,712
Operating income 3,125,452 1,124,580
Non-operating income (expense):
Interest expense
Non-hedge derivative gains (losses) 4,013 5,426
Net non-operating income (expense) 4,013 5,426
Net income 3,121,439 1,119,154
5
MASIYA PETROLEUM PRODUCTS LIMITED
Statements of cash flows
Three
months
ended
Year Ended December 31, December 31,
(dollars in thousands) 2022 2021
Cash flows from operating activities
Net income 3,121,439 1,119,154
Adjustments to reconcile net income to net
cash provided by operating activities
Depreciation, depletion & amortization 249,973 152,908
Non-cash change in fair value of non-hedge
derivative instruments — -
(Gain) loss on sale of assets - -
Bad debt expense - -
Change in assets & liabilities
Accounts receivable (74,286) 18,850
Inventories 150,211 (70,164)
Prepaid expenses & other assets 250,393 75,628
Short-term investments — -
Accounts payable & accrued liabilities (365,410) (175,243)
Revenue distribution payable
Net cash provided by operating
activities 3,183,748 1,121,133
Cash flows from investing activities
Settlement of non-hedge derivative instruments —
Purchase of property & equipment (3,062,780) (1,104,377)
Net cash used in investing activities (3,062,780) (1,104,377)
Cash flows from financing activities
Return of capital — -
Partner contributions — —
Dividends paid (254,757) (21,539)
Net cash used in financing activities (254,757) (21,539)
Net increase (decrease) in cash and
cash equivalents (254,757) (21,539)
Cash and cash equivalents at beginning of period 9,497 14,280
Cash and cash equivalents at end of period 24,280 9,497
The accompanying notes are an integral part of these statements.
MASIYA PETROLEUM PRODUCTS LIMITED
Notes to combined financial statements
(Kwacha in thousands, unless otherwise noted)
Nature of operations and summary of accounting policies
MASIYA PETROLEUM PRODUCTS LIMITED was incorporated in Zambia in August 2021, as a company
dealing in petroleum and petroleum related products. The accompanying financial statements include the
assets, liabilities and results of operations as though that transfer occurred on December 31, 2021.
A summary of the significant accounting policies applied in the preparation of the accompanying
combined financial statements follows.
Use of estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the
Zambia requires management to make estimates. These estimates and assumptions affect the reported
amounts of assets and liabilities, the disclosure of contingent assets and liabilities and the reported
amounts of revenues and expenses. Actual results could differ from these estimates. Significant
estimates affecting these financial statements include estimates for quantities of proved petroleum
reserves, accounts receivable asset retirement obligations and others, and are subject to change.
Cash and cash equivalents
The Company maintains cash and cash equivalents in bank deposit accounts and money market funds
which may not be federally insured. The Company has not experienced any losses in such accounts and
believes it is not exposed to any significant credit risk on such accounts.
The Company considers all highly liquid investments with an original maturity of three months or less to
be cash equivalents.
Notes to combined financial statements — (continued)
(dollars in thousands, unless otherwise noted)
Accounts receivable
The Company has receivables from petroleum purchasers which are generally uncollateralized. The
Company generally reviews these parties for credit worthiness and general financial condition. Accounts
receivable from joint interest owners are stated at amounts due, net of an allowance for doubtful
accounts. Accounts receivable are generally due within 30 days and accounts outstanding longer than 60
days are considered past due. The Company determines its allowance by considering the length of time
past due, previous loss history.
Inventory
Fuel inventories are carried at the lower of cost or market.
Property and equipment
Property and equipment and betterments of such equipment are capitalized and stated at cost, while
maintenance and repairs are expensed currently.
Depreciation and amortization are provided in amounts sufficient to relate the cost of depreciable assets
to operations over their estimated service lives using the straight-line method. Estimated useful lives are
as follows:
Furniture and fixtures 10 years
Automobiles and trucks 5 years
Machinery and equipment 10 years
Office and computer equipment 5 years
Building and improvements 40 years
Revenue recognition
Oil revenue is recognized when the product is delivered to the purchaser and natural gas revenue when
delivered to the gas purchaser’s sales meter. Well supervision fees and overhead reimbursements from
producing properties are recognized as expense reimbursements from outside interest owners when the
services are performed.
Derivative instruments
The Company uses swaps to reduce the effect of fluctuations in crude oil prices. The Company accounts
for these transactions in accordance with Financial Accounting Standards Accounting for Derivative
Instruments and Hedging Activities, as amended which requires that the Company recognize all
derivatives as either assets or liabilities measured at fair value. The accounting for changes in the fair
value of a derivative depends on the use of the derivative and the resulting designation. Derivatives that
are not hedges must be adjusted to fair value through income.
The results of operations and operating cash flows are impacted by changes in market prices for oil and
gas. To mitigate a portion of this exposure, the Company has entered into derivative instruments. The
Company’s derivative instruments were comprised solely of swaps. For swap instruments, the Company
receives a fixed price for the hedged commodity and pays a floating market price, as defined in each
instrument, to the counterparty. The fixed-price payment and the floating-price payment are netted,
resulting in a net amount to or from the counterparty.
Fair value of financial instruments
The Company’s financial instruments include cash and cash equivalents, trading securities, receivables,
payables and derivative instruments. The carrying values of items comprising current assets and current
liabilities approximate fair value due to the short-term nature of these instruments.
Concentration of credit risk
Financial instruments which potentially subject the Company to concentrations of credit risk consist
principally of derivative instruments and accounts receivable. Derivative instruments are exposed to credit
risk from [Link] Company believes the counterparty risk is not significant. Accounts
receivable are primarily from purchasers of oil and natural gas products. The industry concentration has
the potential to impact the Company’s overall exposure to credit risk, either positively or negatively, in that
customers may be similarly affected by changes in economic, industry or other conditions.
