forte oil annual report 2012

ANNUAL REPORT &

ACCOUNTS

2012

Safety, Health & Environment

Strong Corporate Governance & Business Ethics

We are building Nigeria�s leading energy solutionsprovider, driven by a motivated, talented workforceand propelled by technology-driven world-class

business processes.

...Take the lead

Our Values

Innovative

Customer Focused

Transparent

Responsible

1.

Quality Policy

�Forte Oil consistently provides the best products and services in the downstream and midstream sectors of the petroleum industry based on its in-built stepwise improvement of processes which gives value to all stakeholders�

Contents

3.

Corporate Information

Result at a Glance

Notice of Annual General Meeting

Chairman�s Statement

Performance Indicator

Subsidiary Reviews

Statement of Compliance

Board of Directors

Profile of Directors

Reports of Directors

Report of Audit Committee

Report of Independent Auditors

Consolidated Statement of Financial Position

Consolidated Statement of Comprehensive Income

Consolidated Statement of Changes in Equity

Consolidated Statement of Cash Flows

Notes to the Consolidated Financial Statements

Consolidated Statement of Value Added

Financial Summary

Proxy Form

Admission Card

Postage

E-Dividend Mandate

Authority to Electronically

receive Corporate Information

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Board of Directors

FEMI OTEDOLA, C.O.N. - Chairman

AKIN AKINFEMIWA - Group Chief Executive Officer

JULIUS OMODAYO-OWOTUGA - Group Chief Financial Officer

Ven. LAYIWOLA BOLODEOKU - Director

GRACE C. EKPEYONG (DR. MRS) - Director

CHRISTOPHER ADEYEMI - Director

PHILIP M . AKINOLA - Director

KOREDE OMOLOJA (MRS) - Director

AKINLEYE OLAGBENDE - Company Secretary

Corporate Information

4.

ECOBANK NIGERIA PLC

2012 Financial Result at a Glance

For the year ended 31 December, 2012

RevenueN91bn

Profit Before Income TaxN1.15bn

Profit After TaxN1.01bn

106 %22 % 105 %

Profit & Loss Items

2012

N'000 N'000 % Change

2011

Revenue

Profit before incometaxation

Income tax expense

Profit for the year

90,984,215

1,149,805

(142,298)

1,007,507

116,999,641

(19,949,954)

413,745

(19,536,209)

22%

106%

(134%)

105%

Major balance sheet items

Property, plant and equipment

Current assets

Current liabilities

Shareholders funds

8,967,569

24,719,314

(34,583,242)

7,582,842

9,620,659

29,941,299

(38,214,488)

5,889,294

5.

NOTICE IS HEREBY GIVEN that the Thirty Fourth Annual General Meeting of the Members of FORTE OIL PLC will hold at the Bespoke Event Centre, Lekki-Ajah Expressway, Lagos on July 31, 2013 at 10:00 a.m. to transact the following business:

1. To present the Report of the Directors, the Balance Sheet together with the Profit and Loss Accounts as at 31st December 2012 and the report of the Auditors and Audit Committee thereon.

2. To re-elect Directors under Articles 89 and 93 of the Company's Articles of Association

3. To authorize the Directors to fix the remuneration of the Auditors.

4. To elect/re-elect the members of the Audit Committee.

To fix the remuneration of the Directors

A member entitled to attend and vote at the Annual General Meeting is entitled to appoint a proxy to attend and vote in his stead. A proxy need not be a member of the Company. For the appointment to be valid, a completed and duly stamped proxy form by the Commissioner of Stamp Duties must be deposited at the office of the Registrar, Veritas Registrars Limited, Plot 89A Ajose Adeogun Street, Victoria Island, Lagos not less than 48 hours before the time fixed for the meeting.

A blank proxy form is attached to the Annual Report.

In accordance with Section 359(5) of the Companies and Allied Matters Act of 2004, any member may nominate a shareholder as a member of the Audit Committee by giving in writing of such nomination to the Secretary of the Company at least 21 days before the Annual General Meeting.

Dated this 8th Day of July, 2013. By Order of the Board

Akin Olagbende Esq.Company SecretaryFO House, 13 Walter Carrington CrescentVictoria Island, Lagos.FRC/2013/NBA00000003160

Ordinary Business

Special Business

Proxy

Audit Committee

Closure of Register

Notice is hereby given that the Register of Members and Transfer Books will th

be closed from 19th July, 2013 through 24 July, 2013, both days inclusive, to enable us update the Register of members.

Notice of Annual General Meeting

Akin Olagbende Esq.Company Secretary

6.

i st inguished shareholders; Ladies and

Gentlemen, i t i s with great pleasure that I Dwelcome you to the 34th Annual General

Meeting of our great company. I will be presenting to

you a brief review of the major developments that have

taken place in our operating environment as well as the

summary of the company�s performance for the

financial year ended 31st December, 2012.

Operating Environment

The effects of the global economic downturn continue

to impact negatively on economies worldwide,

including that of Nigeria. The country�s real GDP growth

declined moderately to 6.6% year-on-year (y/y) in 2012

from 7.3% y/y in 2011 largely due to weak performance

from the agricultural sector, which was hit by severe

floods late last year and the continued insecurity in the

northern region. In the same vein, inflation increased to

12.2% from 10.9% in 2011.

Oil growth remained negative due to declining national

production and limited investments in the sector. The

downstream petroleum sector remained a low-margin

and capital-intensive one with dependence on the

Petroleum Support Fund for the sale of regulated

products. However the ongoing privatization of the

power sector by the Federal Government, I believe,

would eventually help unlock Nigeria�s investment

potential, lay a solid foundation to attract Foreign Direct

Investment and further open up the economy. Forte Oil

having identified this opportunity is positioned to play a

major role in this sector.

2012 Financial Results

Forte Oil Plc returned to profitability in the 2012 Financial

Year after three years of consecutive losses even in the

face of a more difficult operating environment. Our

turnover dipped by 22% to N91bn in 2012 financial year

compared with N117bn in 2011. The drop in turnover was

mainly attributable to the suspension of imports under

the subsidy regime due to non-payment of outstanding

Chairman�s Statement

arrears so as not to increase our exposure to the

PSF in the face of uncertainty and also to reduce

our huge interest costs exposure. However, Forte

Oil Plc was cleared and we resumed imports at

the end of the last quarter of 2012. The fall in

turnover due to the sale of regulated products

was compensated for by sales of our fast moving

quality lubricants and income from non-fuel

revenue which helped shore up our gross profits

to 10.2 Billion Naira representing an 11% gross

margin when compared to the 7% gross margin in

2011. Profit after tax increased significantly to

N1.01bn from a loss of N19bn the previous year.

The PAT growth was as a result of improved

operational efficiency due to improved controls

across all business lines, implementation of new

systems, stringent cost curtailment measures,

divestment from non-core business and the

outsourcing of such and other support services

and the adoption of a lean talent-based and

technology-driven business model. From this, we

can see clearly that we are focused on our

business t ransformation plan which we

commenced a few years ago.

7.

Chairman�s Statement (Cont�d)

The Future

Without a doubt, our business transformation plan is

yielding the expected results, have been tested and

we are confident that they are sustainable. Our next

step is to consolidate on the emerging trend, by

maximizing opportunities in our business environment

to extract additional value. Our vision of being the

leading energy solutions provider provides a solid

foundation and focus for our diversification into the

upstream, power and gas sub-sectors of the Nigerian

Energy Sector.

Having successfully emerged as the preferred bidder

and paid the requisite 25% down payment for

Geregu Power Generating Plant in consortium with

Amperion Power , we are now poised to actualize

our power sector aspirations. The sector has been

considered by experts as the next nexus of growth for

the Nigerian economy. We are also close to making

the full payment ahead of the final asset handover to

close the transaction and assume full operation of

the plant with our technical partners.

In the midstream, African Petroleum Oilfield Services

Limited (APOS) our fully-owned subsidiary, continued

to make steady progress in the supply of production

chemicals, drilling fluids and completion fluids to

international oil companies (IOCs) in the upstream

sector. Though the company operated under a

challenging environment during the year under

review, i t was able to record a 393% increase in

operating profit before tax. To sustain its growth and

profitability the company has entered into an

agreement with SNEPCO to execute a completion

fluids contract for one year and has consistently

been awarded the supply of production chemicals

to a key upstream project valued. I t i s currently

executing a 2year multi-million dollar contract with

another leading International Oil Company (IOC) for

the supply of Laboratory Services and Wellbore

clean up fluids. It is expected that that the contract

will be renewed after the initial term as a result of the

satisfactory performance report received from the

IOC. APOS is also working towards actualising the

Nigerian Local Content Policy of the Federal

Government through the establishment of a

production chemicals and drilling fluids facilities by

bringing local technology to the shores of Nigeria.

In the Upstream Petroleum sector, Forte Oil Plc i s

identifying opportunities in the sale of assets by IOCs

through partnerships with established companies

and also participation in any future Federal

Government Oil Bid round.

In our downstream operations, we are rationalizing

our current network of petroleum products retailing

outlets to ensure only those contributing to the

overall growth and performance of the group, are

retained. We are also using our existing retail assets to

grow our Non-fuel revenue income. We have

streamlined the production of our lubricants for

improved operational efficiency to reduce costs

and grow margins. We are currently re-positioning

and repackaging our lubricants as a part of our bid

to increase market share with special focus on the

synthetic and industrial lubricants markets. We

remain committed to building a high-performance

organization with stronger focus on controls across

business lines, strong corporate governance

framework and compliance at all levels.

I look forward to a rewarding 2013 when we hope to

consolidate on our efforts in our bid to become the

market leaders. I thank you for your support and

belief in Forte Oil Plc.

Thank you

Femi Otedola, CON

FRC/2013/IODN/00000002426

8.

10.

Growth of Operating Profit 115% from 2011 to 2012

Operating expenses as a percentage of sales dropped

from 19.23% to 5%

High investments in Marketing & Distribution were

compensated by efficiency increase

frican Petroleum Oilfield Services Limited (APOS) i s a fully owned subsidiary of Forte Oil Plc. The A

Company is engaged in the production, sale of drilling fluids, chemicals and other engineering services to major international oil companies in Nigeria. Some of these companies i nc lude She l l , Addax , ExxonMobil, Total and emerging local oil companies such as Afren, Seplat, Septa, Geo Mud.

APOS 2012 BUSINESS OUTLOOK AND PERFORMANCE REVIEW

In 2012, the Company continued to make steady progress in the supply of production chemicals, drilling fluids and completion fluids. During the period under review, the Company operated under a challenging environment. However, the Company was able to achieve an increase in operating profit before tax of N86,204,000 as against N17,502,000 in the year 2011 (an increase of 393%). This improvement was due to the re-organisation of the business module by management in the 1st quarter of the year. As part of its business strategy for sustained

growth and profitability, the Company signed a completion fluids contract with SNEPCO for one year and has consistently been awarded the supply of production chemicals to a key upstream project.

APOS currently has a 2year multi-million dollar contract with an International Oil Company (IOC) for the supply of Laboratory Services and Wellbore clean up fluids. I t i s expected that the contract will be renewed after the initial term as a result of the satisfactory performance report received from the IOC.

In addition, the Company embarked on an aggressive marketing drive with the submission of tenders/bids to various IOCs, some of which have passed the technical and commercial tender stages. To further aid the expansion of its market share in the production of chemicals, the company revisited the exclusive agreement with her partner MI-Production Technologies, Schlumberger Company to remodel the existing business relationship.

Subsidiary Reviews

African Petroleum Oilfield Services Limited

11.

During the period under review, the Company executed Memorandum of Understanding (MoU) with some International Companies engaged in other oilfield services as agents/distributors for the expansion of its markets in this region in consideration of the Nigerian Content Development Act (NCD). In addition, there are plans in place to form alliances with other petroleum marketing companies for the blending and ultimately, manufacturing, production and drilling of chemicals locally in the not too distant future.

It i s expected that these various business decisions will aid the Company in its aspiration to attain leadership position in the supply of oilfield production, drilling fluids chemicals and other oil field services.

The Company in 2011 converted to the International Financial Reporting Standards (IFRS) in its financial reports in line with the requirements of the Financial Reporting Council of Nigeria Act, No 6, 2011. The audited 2012 IFRS Financial Statements reported a turnover of N2,307,515,000 as against N2,100,398,000 in the year 2011 (an increase of over 9% over the previous year).

African Petroleum Oilfield Services Limited (Cont�d)

KPIS

Turnover

Cost of sales

Gross profit

P r o f i t b e f o r e i n come T a x

Taxation

Profit/(loss) for the year

Total Equity

2012 % 2011

N �000

2,307,515

(1,940,503)

367,012,

8 6 , 2 04

112,754

198,958

578,286

10

(16)

3 9 3

9 7 3

5 2

N �000

2,100,398

(1,660,952)

439,446

17,502

(40,296)

(22,794)

379,328

12.

AP Oil and Gas Ghana Ltd

Performance Review

The production of oil in Ghana sequel to the oil discovery continued to fuel stiff competition in the industry especially in the downstream where we witnessed increased proliferation of OMC and BDC during the year under review. Precisely, as at the close of the year OMCs numbered 88 and BDCs totaled 15.

Despite the stiff competition and ever tightening of the regulations, AP Oil And Gas Ghana Limited (APOG) posted a net profit of One Million Three Hundred And Eighty-Three Thousand Eight Hundred And Sixty-Nine Ghana Cedis (GH¢ 1,383,869.00), an increase of 16.15% against One Million One Hundred And Ninety-One Thousand Four H u n d r e d A n d O n e G h a n a Cedis(GH¢1,191,401.00) posted in 2011.

APOG's significant achievements during the year under review include amongst others:l First ultra-modern station built by

APOG was commissioned.l Retail network expansion included

two (2) LPG stations co-opted and one (1) state of the art Dealer owned outlet also co-opted under our Dealer Developed scheme.

l Secured the custom of f ive (5) new Blue Chip industrial customers namely: J.A.Plantpool, SambaoGh Pharmaceutical Ltd, First Sky Limited, Fruitiland Limited, Devtraco Ltd

l Full automation of our processes on SAP platform.

l Importation of various grades of lubes from Parent Company.

l Extension of our lubes across the borders of Ghana to Cote D'ivoire.

l Our manpower development drive received a boost with training across the board on fire risk and preventive measures, various training programmes to fill the knowledge gap on the part of some staff members.

13.

Internal Control System

The Board is responsible for maintaining a sound system of internal control to safeguards shareholders� investment and the assets of the Company. The system of internal control i s to provide reasonable assurance against material misstatement, prevent and detect fraud and other irregularities.

There is an effective internal control function within the Company which gives reasonable assurance against any material misstatement or loss. The Board and Management will continue to review the effectiveness and the adequacy of the company's internal control systems and update such as may be necessary.

Risk Management

The Directors are responsible for the total process of risk management as well as expressing their opinion on the effectiveness of the process. The risk management framework i s integrated into the day-to-day operations of the business and provides guidelines and standards for administering the acceptance and on-going management of key risks such financial, compliance/legal/regulatory, reputational, strategic and operational risk. The Directors are of the view that effective internal audit function exists in the company and that risk management control and compliance system are operating efficiently and effectively in all respects.

2012 AGM, Lagos

15.

The membership of the Board is a mix of executive and non-executive directors based on integrity, professionalism, career success, recognition and the ability to add value to the organization. In reviewing Board composition, the Board ensures a mix with representatives from different industry sectors.

During the period under review, there was no change to the Board structure with eight (8) members which include the Chairman, five (5) Non-Executive

Directors and two (2) Executive Directors to ensure the stability and accountability of the organization at all times.

The Board of Directors i s responsible for the efficient operation of the Company and to ensure that the Company fully discharges its legal, financial and regulatory responsibilities. The Board is also committed to shareholders to create and deliver sustainable value through the management of the Company's business.

Statement of Compliance with the Corporate Governance Code

The Board of Directors has consistently maintained corporate policies and standards designed to encourage good and transparent corporate governance to avoid potential conflicts of interest whilst promoting ethical business practices. This includes compliance with the code of corporate governance as outlined by the Securities and Exchange Commis s ion ( SEC) i n l i ne w i th international best practices.

A key governance development during the period under review was the e n g a g emen t o f t h e F i r m o f PriceWaterHouseCoopers (PWC) to aid the review the Corporate Governance f ramework of the Company in compliance with the Codes of Corporate Governance of SEC for public companies and to give a defined charter for the previously re-constituted Board Committees on their functions,

composition, structure and duties. The purpose of this was to further ensure an effective Board accountable to its stakeholders.

Outside of these committees, several management committees exist namely t h e E x e c u t i v e M a n a g eme n t Committee, Management Committee, Risk Committee, Credit Risk Committee, Branding Committee and Inventory Management Tenders and Contracts Committee are charged to ensure that the activities of the Company are at all times done with high standards of professionalism, accountability and integrity to the sustainment of an endurable institution that will guarantee profitability and professionalism whilst enhancing shareholders' value.

Company Secretariat�s ReportFor 2012 Annual Report

Board of Directors

16.

1

2

3

4

5

6

7

8

S/N Name

Mr. Femi Otedola (CON)

Mr. Akin Akinfemiwa

Mr. Julius Omodayo-Owotuga

Ven. Canon Layi Bolodeoku

Rev. Dr. (Mrs.) Grace Ekpenyong

Mr. Philip Akinola

Mrs. Korede Omoloja

Mr. Christopher Adeyemi

Position

Chairman

Director

Director

Director

Director

Director

Director

Director

17 Feb

2012

19 Mar

2012

13 Apr

2012

13 Sep

2012

19 Dec

2012

Symbol Meaning

Present

Absent

2012 Board and Board Committees Meeting Attendance

In line with the best practice, the Board is expected to hold a minimum of four (4) meetings annually; this requirement was achieved during the year under review as five (5) meetings were held.

The Director's attendances at the meetings are as follow:

17.

The Corporate Governance and Remuneration Committee's role i s to assist the Board in fulfilling its responsibilities in relation to Corporate Governance and Remuneration matters, to satisfy legal and regulatory requirements so as to protect the Company from liability, improve organizational effectiveness and assist in the attainment of business goals.

The Committee comprises of only non executive directors who oversee the nomination and board appointment process and the board remuneration process. The Committee is also responsible for the review of the company`s organizational structure and ensures compliance with the Code of Corporate governance. I t also oversees the succession planning process of the board.

The Committee held three (3) meetings in the year 2012.

1

2

3

5

S/N Name

Ven. Layi Bolodeoku


Mr. Philip Akinola


Position

Chairman

Member

Member

Member

19 Mar

2012

27 Jun

2012

18 Dec

2012

Risk Management Committee

The Risk Management Committee assists the Board in fulfilling its oversight responsibilities in the identification, assessment, management of risk and adherence to internal risk management policies and procedures. The Committee is further responsible for development of effective risk governance framework and disclosure process, reviewing of changes in the economic and business environment and reviewing of company`s compliance level with regulations that impact on the company.

The Committee held three (3) meetings in the year 2012.

Corporate Governance and Remuneration Committee

18.

1

2

3

4

5

S/N Name

Ven. Layi Bolodeoku


Mr. Julius Omodayo-Owotuga

Mr. Akin Akinfemiwa

Position

Chairman

Member

Member

Member

Member

19 Mar

2012

18 Dec

2012

27 Jun

2012


Statutory Audit CommitteeThe Audit Committee is composed of six (6) members, three shareholders representatives and three Directors. One of the shareholders representative seats as the Chairman of the Committee.

The functions of the committee are set out in section 359(6) of the Company and Allied Matters Act. The Committee reviews the Company's Control Policies, Management accounting and reporting systems, internal control and overall standard of business conduct.

The Audit Committee held four (4) meetings in the year 2012.

1

2

3

4

5

S/N Name

Tokunbo Shofolawe Bakare

Emmanuel Okoro

Suleman Ahmed

Philip Akinola

Mrs. Korede Omoloja

Position

Chairman

Member

Member

Member

Member

7 Feb

2012

13 Apr

2012

27 Sep

2012

17 Dec

2012

6Mr. ChristopherAdeyemi

Member

19.

1. 2. 3.

4. 5. 6.

7. 8.

1. Mr. Femi Otedola, CON Chairman

2. Mr. Akin Akinfemiwa Group Chief Executive Officer

3. Mr. Julius B. Omodayo - Owotuga Group Chief Financial Officer

4. Ven. B. O. Bolodeoku Director

6. Mr. Christopher Adeyemi Director

7. Deacon Philip M. Akinola Director

8. Mrs. Omoloja Korede Director

5. Rev. Dr. (Mrs) Grace C. Ekpenyong Director

Board of Directors

20.

1 . Mr. Femi Otedola, CON Chairman

He was appointed the Chairman of the Board of Directors of Forte Oil Plc (formerly known as African Petroleum Plc) on May 25, 2007.

Mr. Otedola attended the famous London College of Printing from where he bagged a Diploma in Printing Technology in 1985. He then took over as the Managing Director of Impact Press Limited in 1988, growing the company into one of the foremost printing press in Nigeria at that time.

In 1999, he ventured into the Oil and Gas sector by incorporating Zenon Petroleum & Gas Limited, an indigenous company engaged in the procurement, storage, marketing and distribution of petroleum products. In 2001, he incorporated Seaforce Shipping Company Limited which currently owns and manages modern tanker fleet of vessels that transport petroleum products.

Mr. Otedola is today the President and Chief Executive Officer of Zenon Petroleum & Gas Limited; Chairman, Seaforce Shipping Company Limited, Atlas Shipping Agency Company Limited, F. O. Transport Limited, F.O. Properties Limited, Swift Insurance Brokers Limited and Garment Care Limited.

Mr. Otedola, a former President of the Nigerian Chamber of Shipping, and the immediate past Chairman of Transcorp Hilton Hotel, Abuja, was appointed member of the governing council of the Nigerian Investment Promotion Council (NIPC) in January 2004, and in December of the same year, he was appointed a member of the committee saddled with the task of fostering business relationship between the Nigerian and the South African Private sectors.

Mr. Femi Otedola was further recognized for his immense contributions to the growth of the Nigerian economy when in May, 2010 he was awarded the prestigious National Honours of �Commander, Order of the Niger - CON� by President Goodluck Jonathan.

2 . Mr. Akin Akinfemiwa Group Chief Executive Officer

Mr. Akin Akinfemiwa as the Group Chief Executive Officer of the Company is responsible for the overall strategic direction for the business and the subsidiaries. Mr. Akinfemiwa was a former Director, Trading and Business development of Fineshade Energy Limited.

Mr. Akin Akinfemiwa is a seasoned and experienced International Petroleum Products Trader with focus on oil and oil products, swaps and derivatives trading responsibil it ies. He was influential in developing strategic trading and supply relationships for Oando in the West African Sub Region.

Prior to this, Akin had worked with FSB International Bank plc as a Business Process Analyst and a sub-team leader on the Company's Business Transformation project in 2001.

Mr. Akinfemiwa is an alumnus of the Said Business School, University of Oxford, United Kingdom. He also holds a B.sc Honours degree in Mechanical Engineering from the University of Ibadan and a Master of Business Administration (Information Technology) from the University of Lincolnshire and Humberside, United Kingdom.

3 . Mr. Julius Babatunde Omodayo - Owotuga Group Chief Financial Officer

Mr. Julius Babatunde Omodayo-Owotuga is the Chief Financial Officer of Forte Oil Plc. He is a KPMG trained Chartered Accountant (ICAN) and an experienced finance professional.

Until recently, he was at Africa Finance Corporat ion (AFC) where he had responsibilities for the Corporation Assets and Liabilities Management function and also doubled as the Assistant Treasurer. The African Finance Corporation is a US1bn

Profile of Directors

21.

private sector led Development Finance and Investment Bank. Prior to this, he had held the role of Finance Manager in the same Corporation. In this role, Mr. Omodayo Owotuga set up the Financial Control function of the institution. He was also responsible for Human Resources and Administration at the Corporation's start up stage in 2007.

Mr. Omodayo-Owotuga joined the AFC from Standard Chartered Bank Nigeria Limited where he was a Finance Manager with responsibilities for the finance aspect of the Bank's expansion project. Before this, he was at KPMG where he led assurance engagements within the Nigerian Financial Services Industry. He also consulted for a number of Institutions on IFRS and Risk Management while at KPMG Professional Services. Prior to his over 4 year service at KPMG, Mr. Omodayo-Owotuga worked in the Foreign Operations Group of MBC International Bank.

Mr. Omodayo-Owotuga holds a B.Sc in Accounting from the University of Lagos. He is also a Chartered Management Accountant and Certified Treasury and Financial Manager.

Ven. Bankole Olayiwola Bolodeoku is a non Executive Director of Forte Oil Plc. He obtained a Bachelor's Degree in History and Political Science from the University of Ibadan in 1965 and a Masters' Degree in Public Administration from the University of Ife in 1972. He worked with the old Western Region Civil Service in different capacities and was seconded to the newly founded Ibadan Polytechnic as the first Registrar in 1971.

Subsequently, he was appointed Registrar Examinations in the Public Service from where he became Training Officer in charge of the old Civil Service Training School. In 1973, he

4 . Ven. Bankole Olayiwola Bolodeoku Director

joined Evans Brothers Limited as a General Manager and later became the Managing Director/Chief Executive Officer in 1976, and was also Director of Evans Brothers London and Evans East Africa, before he voluntarily retired in May, 2000.

Ven. Bolodeoku is a member of the prestigious society of Young Publishers in Brighton England and the United Kingdom Society of Scientif ic Technical and Mechanical Publishers. Between 1980 and 1981, he served on the executive committee of the publisher's association based in Geneva. In 1979, he was appointed Vice President of the Nigerian Publishers' Association and became the President in 1980, and has remained on the Board of the University Bookshop as Chairman.

Grace Christopher Ekpenyong holds a first Degree in Zoology from the University of Ibadan in 1979 and a Post Graduate Diploma in Education from the University of Lagos. She is vastly experienced in different fields such as manufacturing, social welfare, education, farming, and humanitarian activities - having worked in various capacities within the sectors.

From 1980 to 1985, she was a Senior Lecturer/Vice Principal, Cross River State Schools Board; Lecturer at Vivian Fowler Tutorial College from 1986-1989. From 1989 to date, she has been the Deputy Managing Director, Gestric Group of Companies; Managing Director, Amazing Quality Limited and President, Widows Mite Integrated Development Association. Currently, she also functions as Executive Director, Eemjm Investment.

Mrs. Grace Ekpenyong is a member of many associations, such as the Manufacturers Association of Nigeria, National Association of Women Entrepreneurs (NAWE), Nigeria Institute of Management (NIM), etc.

5 . Rev. Dr. (Mrs) Grace C. Ekpenyong Director

Profile of Directors (Cont�d)

22.

She holds various awards such as Certificate of Honour, Federal UNESCO Club of Nigeria (FUCN); Leadership Award, Afr ican Education and Culture Organisation, Miami, Florida, USA, and Honorary Degree of Doctor of Divinity. She has been on the Board of Forte Oil Plc since 1999.

6 . Mr. Christopher Adeyemi Director

Mr. Adeyemi attended Obafemi Awolowo University I le Ife where he obtained his LL.B (Hons) degree in 1989. He became a Barrister and Solicitor of the Supreme Court of Nigeria in 1991.

Mr. Adeyemi began his legal career as Head of Green Form Advice and Assistance Team in The Legal Aid Board of England and Wales. During his stint at the Legal Aid Board, he was responsible for setting up the Green Form Advice and Assistance phone extensions team and also the Immigration Project Team. After leaving the public sector, Mr. Adeyemi, in partnership with others, set up Agape Consu l t ing , a Lega l P ract ice and Management Consultancy which assists in setting up and advising over 100 Law firms in the United Kingdom.

Christopher Adeyemi i s currently the Head of the Corporate and Media Law Department of the International Law and Management F i rm. He has advised mult inat ional companies on setting up businesses in the African and European markets. Mr. Adeyemi has most recently advised the Nollywood Industry on how to make international profits.

He is a member of the Nigerian Bar Association, member of the Black Solicitors Network (UK), and member of Immigration Law Practitioners Association (UK).

7 . Deacon Philip M. Akinola Director

Deacon Akinola holds a B.Sc. (Honours) in Sociology and Anthropology (1987), M.Sc.

Industrial Sociology (1989), and has Ph.D (Sociology) in view at University of Lagos.

Mr. Akinola has garnered over 22 years experience in Human Resources Operations, Consulting and Management. His working experiences included stints as Management Consultant, Agrovog (1992 - 1994), Principal Consultant, Management Plus (1994 - 1997), and Manager, Personnel /Admin., Golden Gate Ventures and Trusts Limited.

Deacon Akinola also worked as Manager, Human Resources Development at SCG Consulting from 1997 - 1999 and Human Resources Manager, Parker Drilling Nig. Limited (1999 - 2001). He is at present, the Head, Human Capital and Administration of Zenon Petroleum and Gas Limited.

8 . Mrs. Omoloja Korede Director

Mrs. Omoloja is a qualified accountant with extens ive exper ience gained whi le performing senior roles in accounting operations.

She holds a Higher National Diploma in Accountancy (1998) and an MBA (Finance) obtained in 2004. She also has certification by the Association of Chartered Certified Accountants, ACCA, (2007); ACTI (2001) and the Association of Chartered Accountants, ACA. (1999).

Mrs. Omoloja previously worked as Audit Trainee at Confidence Finance; Accountant at Amni International Petroleum Dev. Co. Ltd ( 1 9 9 4 - 2 0 0 2 ) , a n d a s H e a d , Accounts/Financial Controller, Zenon Petroleum & Gas Limited (2002-2005).

Mrs. Omoloja is at present, the Group Chief Financial Officer, Fineshade Energy Services Group Limited.

Profile of Directors (Cont�d)

23.

In accordance with the provisions of the Companies and Allied Matters Act of 2004, the Directors are pleased to present their report on the affairs of Forte Oil plc (�the Company�) and subsidiary companies (�the Group�), together with the group audited financial statements and the auditor's report for the year ended 31 December 2012.

The Company was incorporated in 1964 as British Petroleum (BP) Nigeria Limited with the marketing of BP Petroleum Products as the main focus. The Company changed from a private to public company in 1978, when 40% of the shares were sold to Nigerian Citizens in compliance with the provisions of the Nigerian Enterprises Promotion Decree of 1977. On July 31, 1979, the Federal Government of Nigeria (FGN) acquired 60% share capital held originally by BP, for the Nigerian National Petroleum Corporation (NNPC). This step transformed the company in to an ent i re ly N iger ian concern necessitating the subsequent change of name to African Petroleum in 1979.

In March 1989, FGN sold 20% of its share holding to the Nigerian public, thus making AP the first public company privatized under the Privatization and Commercialization Policy. The Federal Government, under its privatization programme in 2000 divested its remaining 40% shareholding in AP, thus making AP a privately owned Company, with over 153,000 shareholders.

In 2010, the Company was acquired by a majority stakeholder, Zenon Oil plc which saw the change of name and corporate identity of the Company to Forte Oil plc. In addition to this transformation, was the restructuring of the Company's operations and the incorporation of sustainable growth strategies and policies to continuously improve on its operations and deliver prompt quality and effective services to customers and all stakeholders.

Legal Form

Principal Activity

The Company is a major marketer of refined petroleum products with a strong presence in the 36 States of Nigeria and the Federal Capital Territory - Abuja. I t procures and markets Premium Motor Spirit (PMS), Automotive Motor Oil (Diesel), Dual Purpose Kero (DPK), Fuel Oils and JetA-1 fuel amongst others. Forte Oil plc also manufactures and distributes a wide range of lubricants, foremost amongst them is the newly launched SYNTH 10000.

The company sources high quality chemical products, classed under industrial, organic and petro-chemicals, which i t sells to local industries. The chemical Products include: DO P , P o l y o l , A c e t o n e , C a l c i um Hydrochloride, Isopropyl Alcohol etc.

StructureThe Company has three wholly owned subsidiaries: AP OilFields Services Limited (APOS), AP Oil & Gas, Ghana (APOG) and AP Properties Limited.

Operating Results:The following is a summary of the Group's and Company's operating results:

Directors' ReportFor the year ended 31 December 2012

24.

Fixed Assets

Information relating to changes in fixed assets during the year i s given in Note 15 to the financial statements.

Directors

The names of the Directors as at the date of this report and those who held office during the year are as follows:

Femi Otedola, C.O.N. (Chairman) Appointed on May 25, 2007Ven. Layi Bolodeoku Re-appointed on Sept. 14, 2012Grace C. Ekpenyong (Mrs.) Re-appointed on December 29, 2010Christopher Adeyemi Appointed on October 28, 2011Deacon Philip M. Akinola Re-appointed on Sept. 14, 2012Omoloja Korede (Mrs) Re-appointed on Sept. 14, 2012Akin Akinfemiwa Appointed December 28, 2011Julius Omodayo-owotuga Appointed December 28, 2011

In accordance with Article 89 of the Company's Articles of Association, Mrs. Grace Ekpeyong

will retire by rotation from the Board of Directors at this Annual General Meeting and being

eligible has offered herself for re-election at this meeting.

Changes on the BoardSince the conclusion of the last Annual General Meeting, there have been no changes with the Board Members.

Directors InterestsThe Directors of the Company who held office during the year together with their direct and indirect interest in the share capital of the Company are as follows:

Number of Ordinary Shares31/12/12 31/12/11

Mr. Femi Otedola - Chairman 64,059,340 38,556,408372,750,197(indirect) 454,587,249(Indirect)

Mr. Akin Akinfemiwa 20,000 20,000Mr. Julius Omodayo-Owotuga NIL NILRev. Mrs. Grace Ekpeyong 43,496 43,496Ven. Layi Bolodeoku NIL NILDeacon Phillip Akinola NIL NILMr. Christopher Adeyemi 80,485 80,485Mrs. Korede Omojola NIL NIL

Contracts None of the Directors has notified the Company for the purpose of Section 277 of the Company and Allied Matters Act of 2004 of any declarable interest in contracts which the Director i s involved.

Acquisition of Shares

The Company did not purchase any of its own shares during the year.

25.

Major Shareholding

Share Capital History

According to the Register of Members, the shareholder�s under-mentioned held more than 5% of the issued share capital of the Company as at 31 December 2012:

No. of Shares % Holding

ZENON PETROLEUM & GAS LIMITED 78,012,963 7.22%FEMI OTEDOLA 64,059,340 5.87%ZENON PETROLEUM & GAS LTD 172, 209,831 15.94%THAMES INVESTMENT INCORPORATED 142,478,296 13.19% ZSL NOMINEES 127,942,154 11.84%ZSL A/C FOZ 122,527,403 11.34%

Authorised Capital Issued and Fully Paid Capital

Date From To

22/06/7817/07/8028/08/8204/08/8406/08/8612/07/8829/06/9029/07/9328/11/9719/02/9915/11/02

N N

6,000,0007,500,00011,250,00022,500,00030,000,00036,000,00043,200,00072,000,00086,400,000108,000,000144,000,000

7,500,00011,250,00022,500,00030,000,00036,000,00043,200,00072,000,00086,400,000108,000,000144,000,0005,000,000,000

Date From To

N N

6,000,0007,500,00011,250,00022,500,00030,000,00036,000,00043,200,00072,000,00086,400,000108,000,000216,000,000234,263,450.50281,116,141394,393,919443,271,555

28/02/7917/07/8024/08/8210/08/8416/09/8603/08/8824/09/9010/01/9428/11/9913/09/0425/11/0430/09/0528/10/0620/04/0920/04/09

7,500,00011,250,00022,500,00030,000,00036,000,00043,200,00086,400,00086,400,000108,000,000216,000,000234,263,450.50281,116,141394,393,919443,271,555540,140,314.50

Consideration

-Bonus (1:2)Bonus (1:1)Bonus (1:3)Bonus (1:5)Bonus (2:3)Rights IssueBonus (1:4)Rights IssueRights Issue-Bonus (1:5)PlacementRights IssuePublic Offer

Analysis of Shareholding

The analysis of the distribution of the shares of the Company at the end of the 2012 financial year i s as follows:

Directors' Report (Cont�d)

26.

The Company identifies with the aspirations of the community as well as the environment within which i t operates and made charitable donations to the under-listed organizations amounting to N350,000.00 during the year under review as follows:

Name of Beneficiary PurposeS/N Amount (N)

Employment of Disabled PersonsThe Company operates a non-discriminatory policy in the consideration of applications for employment, including those received from disabled persons. The Company's policy i s that the most qualified and experienced persons are recruited for appropriate job levels irrespective of the applicant's state of origin, ethnicity, religion or physical condition. In the event of any employee becoming disabled in the course of employment, the Company is in a position to arrange appropriate training to ensure the continuous employment of such a person without subjecting him/her to any disadvantage in his/her career development. As at 31 December 2012, the Company had no disabled persons in its employment.

Health, Safety and Welfare of EmployeesThe Company maintains business premises designed with a view to guaranteeing the safety and healthy living conditions of its employees and customers alike. Health, safety and fire drills are regularly organized to keep employees alert at all times. Employees are adequately insured against occupational hazards. In addition, the Company provides medical facilities to its employees and their immediate families at its expense.

Employee Involvement and TrainingThe Company encourages participation of employees in arriving at decisions in respect of

Donations and Charitable Gifts

matters affecting their well being. Towards this end, the Company provides opportunities for employees to deliberate on issues affecting the Company and employees' interests, with a view to making inputs to decisions thereon. The Company places a high premium on the development of its manpower. Consequently, the Company sponsored its employees for various training courses both in Nigeria and abroad in the year under review.

Post Balance Sheet EventsThere was no material event subsequent to year end that could impact on the financial statements.

AuditorsMessrs PKF Professional Services have indicated their willingness to continue in office in accordance with section 357(2) of the Companies and Allied Matters Act of Nigeria.

BY ORDER OF THE BOARD

Akin Olagbende ESQCompany Secretary

1

2

3

4

5

6

7

Old People�s Home, Yaba

Down Syndrome Foundation

Everybody Has Something To Give

HYE (Have You Eaten) Foundation

S lum to School Project

Wesley School For The Deaf

So �Said Destitute Home

Charity Donation

Charity Donation

Charity Donation

Charity Donation

Charity Donation

Charity Donation

Charity Donation

N50,000.00

N50,000.00

N50,000.00

N50,000.00

N50,000.00

N50,000.00

N50,000.00

N350,000.00TOTAL

27.

Report of the Audit Committee

To the members of Forte Oil Plc

In accordance with the provision of Section 359(6) of the Companies and Allied Matters Act 2004, we confirm that the accounting and reporting policies of the Company are in accordance with legal requirements and agreed ethical practices.

In our opinion, the scope and planning of the audit for the year ended 31st December, 2012 were adequate and we have reviewed the external auditors' findings on management matters and are satisfied with the departmental response thereto.

Dated this 13th Day of March, 2013

CHRIS ADEYEMI

28.

Report of the Independent Auditorsto the members of Forte Oil Plc

We have audited the accompanying consolidated financial statements of Forte Oil Plc (�the Company�) and its subsidiaries

(together, �the Group�) which comprise the consolidated financial position at 31 December 2012 and the consolidated statement of comprehensive income, consolidated statement of cash flows and statement of changes in equity for the year then ended and a summary of significant accounting policies and other explanatory information.

The Directors are responsible for the preparation and fair presentation of these consolidated financial statements in accordance with International Financial Report ing Standards and with the requirements of the Companies and Allied Matters Act, Cap C20, LFN 2004 and in compliance with the Financial Report Council of Nigeria Act, No 6, 2011, and for such internal controls as the Directors determine are necessary to enable the preparation of consolidated financial statements that are free from material misstatement, whether due to fraud or error.

Our responsibility i s to express an opinion on these consolidated financial statements based on our audit. We conducted our audit in accordance with International Standards on Auditing. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statement are free from material misstatements.

Di rec to r s ' Respons ib i l i t i e s f o r t he

consolidated Financial Statements

Auditors' Responsibility

An audit involves performing procedures to obtain audit evidence about the amount and disclosures in the consolidated financial statements. The procedures selected depend on the auditor's judgment, including the assessment of the risks of material misstatement of the consolidated financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity's preparation and fair presentation of the consolidated financial statements 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 entity's internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by Directors, as well as evaluating the overall presentation of the consolidated financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

In our opinion:

The consolidated financial statements present fairly, in all material respects, the financial position of Forte Oil Plc and its subsidiaries at 31 December 2012 and of their financial performance and its cash flow for the year then ended; in accordance with International Financial Reporting Standard and in the manner required by the Companies and Allied Matters Act, Cap C20, LFN 2004, and in compliance with the Financial Reporting Council of Nigeria Act, No 6, 2011.

Opinion

29.

Report of the Independence Auditors (Cont'd)

The company and its subsidiaries have kept proper books of accounts, which are in agreement with the consolidated financial position and statement of comprehensive income as i t appears from our examination of their records.

Emphasis of Matter

Minimum Share Capital

We draw attention to Note 24(b) regarding the Company's issued shares Company's issued share capital. The issued share capital i s less than twenty five percent of the authorised share capital prescribed by section 99 of the Companies and Allied Matters Act, Cap C20 LFN 2004.

Our opinion is not qualified in respect of this matter.

30.

Date: 13th March, 2013FRC/2013/ICAN/00000000753

Consolidated Financial Statements

31 D e c embe r 2 0 1 2

CONSOLIDATED STATEMENT OF FINANCIAL POSITION AS AT 31 DECEMBER 2012

Consolidated Statement of Financial Position 32

Consolidated Statement of Comprehensive Income 33

Consolidated Statement of Changes in Equity 34

Consolidated Statement of Cash Flows 35

Notes to the Financial Statements 36

As at 31 December 2012

Consolidated Statement of Financial Position

Note 31-Dec-12 31-Dec-11 01-Jan-11 31-Dec-12 31-Dec-11 01-Jan-11

N�000 N�000 N�000 N�000 N�000 N�000

Assets

Property, plant and equipment 15 8,967,569 9,620,659 7,951,857 7,753,349 8,264,126 6,614,278

Intangible assets 16 752,525 30,363 38,034 744,354 29,085 3 8 , 0 3 4

Investment property 17 2,247,129 2,328,457 2,366,485 2,247,129 2,328,457 2 , 3 6 6,485

Investment in subsidiaries 18 - 2,950 2,500 457,415 358,340 357,890

Other investments 19 3,882,798 1,027,763 89,502 3,882,798 1,027,763 89,502

Deferred tax assets 20 1,943,603 1,943,603 1,773,471 1,943,603 1,943,603 1,773,471

Trade and other receivables 22 - 330,281 1,285,284 - 330,281 1 , 2 8 5,284

Total non-current assets 17,793,624 15,284,076 13,507,133 17,028,648 14,281,655 12,524,944

Other assets 21 148,289 155,654 64,384 148,289 155,654 64,384

Inventories 21 7,744,093 5,758,603 7,713,927 6,834,061 5,037,775 7,050,815

Trade and other receivables 22 12,958,547 20,370,686 30,361,312 9,795,564 19,576,313 30,443,283

Cash and cash equivalents 23 3,868,385 3,656,356 17,624,934 3,657,438 3,248,546 17,092,325

Total current assets 24,719,314 29,941,299 55,764,557 20,435,352 28,018,288 54,650,807

Total assets 42,512,938 45,225,375 69,271,690 37,464,000 42,299,943 67,175,751

Equity

Share capital 539,368 489,025 489,025 539,368 489,025 489,025

Share premium 62,292,576 61,588,213 61,588,213 62,292,576 61,588,213 61,588,213

Foreign exchange reserve (61,819) 6,846 - - - -

Retained earnings (55,187,283) (56,194,790) (36,658,581) (55,984,400) (56,638,862) (37,062,637)Total equity at tributable to

equity holders of the

Company 24 7,582,842 5,889,294 25,418,657 6,847,544 5,438,376 25,014,601

Liabilities

Employee benefits 26 142,940 780,596 1,835,967 107,835 667,438 1,083,941

Deferred tax liabilities 20 203,914 340,997 787,184 - - 482,954

Total non-current liabilities 3 4 6 , 8 54 1 , 1 2 1,593 2 , 6 2 3,151 1 0 7 , 8 35 667,438 1,566,895

Loans and borrowings 25 2,314,498 3,075,021 4,000,000 2 , 1 9 4 ,212 3,075,021 3,957,735

Bank Overdraft 23 9,878,337 6 , 3 7 6,654 12,005,485 9,771,432 6 , 3 7 6,654 11,823,169

Current tax liabilities 13 206,799 219,255 801,104 1 6 8 , 4 32 1 7 4 , 3 99 723,189

Trade and other payables 27 22,183,608 28,543,558 24,423,293 1 8 , 3 74,545 26,568,055 24,090,162

Total current liabilities 34,583,242 38,214,488 41,229,882 30,508,621 36,194,129 40,594,255

Total liabilities 34,930,096 39,336,081 43,853,033 30,616,456 36,861,567 42,161,150

Total equity and l iabilities 42,512,938 45,225,375 69,271,690 37,464,000 42,299,943 67,175,751

Chairman

FRC/2013/IODN/00000002426

FRC/2013/IODN/00000001994 D i r e c t o r s

FRC/2013/ICAN/00000001995

The CompanyThe Group

The Consolidated Financial Statements on pages 32 to 86 were approved by the Board of Directors on 13 March 2013 and signed

on its behalf by:

32.

Consolidated Statement of Comprehensive Income

For the year ended 31 December 2012

Notes 2012 2011-Restated 2012 2011-Restated

N'000 N'000 N'000 N'000

Revenue 7 90,984,215 116,999,641 78,921,742 103,825,837

Cost of sales (80,839,083) (108,272,760) (69,752,363) (95,774,521)

Gross profit 10,145,132 8 , 726,881 9 , 169,379 8 , 051,316

Other income 8 6 1 1,105 1,081,627 570,376 737,518

Distribution expenses 9 (2,870,025) (5,838,670) (2,777,787) (5,835,574)

Administrative expenses 9 (5,014,810) (13,807,749) (4,430,093) (12,944,928)

Other expenses 9 - (8,709,598) - (8,709,598)

Results from operating activities 2 , 871,402 (18,547,509) 2 , 531,875 (18,701,266)

Finance income 12 1 2 7 , 062 86,701 1 2 7 , 062 8 6 , 395

Finance expenses 12 (1 ,848,659) (1,489,146) ( 1 ,782,534) (1 ,435,292)

Net finance cost (1,721,597) (1 ,402,445) (1,655,472) (1,348,897)

Profit before income tax 1 , 149,805 (19,949,954) 8 7 6 , 4 0 3 (20,050,163)

Income tax expense 13 ( 142 ,298) 4 1 3 , 745 ( 221 ,942 ) 4 7 3 , 935

Profit for the year 1 , 007,507 (19,536,209) 6 5 4 , 4 6 1 (19,576,228)

Profit attibutable to:

Owners of the Company 1 , 007,507 (19,536,209) 6 5 4 , 4 6 1 (19,576,228)

Profit for the year 1 , 007,507 (19,536,209) 6 5 4 , 4 6 1 (19,576,228)

Other Comprehensive Income:

Foreign currency t ranslation

differences for foreign operations: (68,665) 6,846 - -

Income tax on comprehensive

income

Other comprehensive income net of taxes (68,665) 6,846 - -

Total comprehensive income

for the year : 938,842 (19,529,363) 654,461 (19,576,228)

Earnings per share

Basic earnings per share in (N) 0 . 93 ( 1 9 . 9 6 ) 0 . 61 ( 2 0 . 0 2 )


The notes on pages 36 to 86 are an integral part of these financial statements.

14

33.


Statement of changes in Equity

Attributable to equity holders - the Group

Share

capital

Share

premium

Foreign

exchange

translation

reserve

Retained

earnings Total equity

N�000 N�000 N�000 N�000 N�000

Balance at 1 January 2011 4 8 9 , 025 61,588,213 - (36,751,217) 25,326,021

Impact of correction of error under previous GAAP (Note 33) - - - 9 2 , 6 3 6 9 2 , 6 3 6

Balance at 1 January 2011 as restated 4 8 9 , 025 61,588,213 - (36,658,581) 25,418,657

Changes in equity for 2011

Profit or loss - - - (19,536,209) (19,536,209)

Other comprehensive income - - 6 , 8 4 6 - 6 , 8 4 6

Total comprehensive income for the year - - 6 , 8 4 6 (19,536,209) (19,529,363)

Transactions with owners, recorded directly in equity

Dividend to equity holders - - - - -

Share issues during the year - - - - -

Balance at 31 December 2011 4 8 9 , 025 61,588,213 6 , 8 4 6 (56,194,790) 5 , 889 ,294

Balance at 31 December 2011 4 8 9 , 025 61,588,213 6 , 8 4 6 (56,194,790) 5 , 889 ,294


Profit or loss - - - 1 ,007 ,507 1 , 007 ,507

Other comprehensive income - - ( 68 ,665) ( 6 8 , 6 65 )

Total comprehensive income for the year ( 68 ,665) 1 ,007 ,507 9 3 8 , 8 4 2

Transactions with owners, recorded directly in equity -


Shares issued during the year 50,343 704,363 - - 7 5 4 , 7 0 6

Balance at 31 December 2012 5 3 9 , 368 62,292,576 ( 61 ,819) (55,187,283) 7 , 582 ,842

Attributable to equity holders of the Company

Share

capital

Share

premium

Foreign

exchange

translation

reserve

Retained

earnings Total equity

N�000 N�000 N�000 N�000 N�000

Balance at 1 January 2011 4 8 9 , 025 61,588,213 - (37,155,273) 24,921,965

Impact of correction of error under previous GAAP (Note 33) - - - 9 2 , 6 3 6 9 2 , 6 3 6

Balance at 1 January 2011 as restated 4 8 9 , 025 61,588,213 - (37,062,637) 25,014,601


Profit or loss - - - (19,576,228) (19,576,228)



Unclaimed dividend - - - - -

Share issues during the year - - - - -

Balance at 31 December 2011 4 8 9 , 025 61,588,213 - (56,638,865) 5 , 438 ,373



Profit or loss - - - 6 5 4 , 4 6 1 6 5 4 , 4 6 1



Share issues during the year 50,343 704,363 - - 7 5 4 , 7 0 6


34.

Consolidated Statement of Cash Flows


Notes 2012 2011-Restated 2012 2011-Restated

N'000 N'000 N'000 N'000

Cash flows from operating activities

Profit/ (Loss) for the year 1,007,507 (19,536,209) 654,461 (19,576,228)

Adjustment for:

Depreciation of property, plant & equipment 546,460 465,821 448,835 399,928

Depreciation of investment property 81,328 48,956 81,328 48,956

Amortization of intangible asset 1 0 8 , 1 5 9 8,971 1 0 6 , 8 5 0 8,949

Impairment loss on intangible asset 29,085 - 29,085 -

Impairment o f trade receivables and other receivables 2 , 9 7 8 8 , 7 5 4 , 815 2 , 9 7 8 8 , 7 5 4 , 817

Finance income ( 127 ,062 ) ( 8 6 , 7 0 1 ) ( 1 27 , 062 ) ( 8 6 , 3 9 5 )

(Profit)/loss on disposal of investment (167,826) - (167,826) -

(Profit)/loss on disposal of property, plant and equipment ( 1 3 , 9 54 ) 3 4 , 4 5 1 ( 7 , 5 6 9 ) 3 4 , 4 5 1

Impairment of investment - - 2 2 2 , 5 9 6 -

Finance expense 1 , 8 48 , 659 1 , 4 8 9 , 146 1 , 7 8 2 , 534 1 , 4 3 5 , 292

Income tax expense 1 4 2 , 2 9 8 ( 4 13 ,745 ) 2 2 1 , 9 4 2 ( 4 73 ,935 )

3 , 4 57 , 632 ( 9 , 234 , 495) 3 , 2 4 8 , 152 ( 9 , 454 , 165)

Changes in:

Inventories and consumables ( 1 ,978,125) 1 , 8 6 4 , 054 ( 1 , 788 , 921) 1 , 9 2 1 , 770

Trade receivables and other receivables 7 , 8 78 , 647 2 , 8 5 2 , 894 1 0 ,197 , 232 2 , 4 2 0 , 970

Prepayments ( 1 3 9 , 204) ( 6 6 2 , 077) ( 8 9 , 179) 6 4 6 , 188

Trade payables and accruals ( 3 ,566,522) ( 4 , 831 , 935) ( 4 , 828 , 930) ( 5 , 091 , 783)

Non trade payables & o ther creditors ( 2 ,793,428) 8 , 9 5 2 , 200 ( 3 , 364 , 580) 7 , 5 6 9 , 676

Employee benefit ( 6 3 7 , 656) ( 1 , 055,371) ( 5 59 , 603 ) ( 4 16 ,503 )

Cash generated from operating activities 2 , 2 21 , 344 ( 2 , 114,730) 2 , 8 1 4 , 171 ( 2 , 403 , 847)

Income taxes paid ( 290 ,309 ) ( 7 84 ,353 ) ( 2 27 , 909 ) ( 7 27 ,940 )

Prepaid expenses paid

Net cash from (used i n) operating activities 1 , 931,035 ( 2 , 899,083) 2 , 586,262 ( 3 , 131,787)

Cash flows from investing activities

Proceeds from s ale of property, plant and equipment 2 9 , 7 7 4 1 3 , 4 0 3 2 0 , 3 7 3 1 3 , 4 0 3

Interest received 1 2 7 , 0 6 2 8 6 , 7 0 1 1 2 7 , 0 6 2 86,395

Acquisition of property, plant and equipment ( 856 ,179 ) ( 2 , 176 , 154) ( 7 98 , 510 ) ( 2 , 097 , 630)

Reversal of accruals for work in progress 9 1 , 4 3 0 - 6 1 , 6 9 4 -

Disposal of investment in subsidiaries 1 7 0 , 3 2 6 - 1 7 0 , 3 2 6 -

Acquisition of investment - - ( 3 2 4 , 6 21) -

Acquisition of investment property - ( 1 0 , 9 2 8 ) - ( 1 0 , 9 2 8 )

Acquisition of intangibles ( 7 3 , 6 50 ) ( 1 , 3 0 0 ) ( 6 5 , 2 5 0 ) -

Acquisition of other investments. ( 2 ,855,035) ( 9 38 ,261 ) ( 2 , 854 , 585) ( 9 3 8 , 7 11)

Net cash used in investing activities ( 3 ,366,272) ( 3 , 026 , 539) ( 3 , 663 , 511) ( 2 , 947 , 471)

Cash flows from financing activities

Shares issued and fully paid for 7 5 4 , 7 0 6 - 7 5 4 , 7 0 6 -

Loans and Borrowings ( 760 ,523 ) 3 , 0 7 5 , 021 ( 8 80 , 809 ) 3,075,021

Interest Paid ( 1 ,848,659) ( 1 , 489 , 146) ( 1 , 782 , 534) ( 1 , 435 , 292)

Net cash (used in)/from financing activities ( 1 ,854,476) 1 , 5 8 5 , 875 ( 1 , 908 , 637) 1 , 6 3 9 , 729

Net decrease in cash and cash equivalents ( 3 ,289,714) ( 4 , 339 , 747) ( 2 , 985 , 886) ( 4 , 439 , 529)

Cash and cash equivalents beginning of the year ( 2 ,720,298) 1 , 6 1 9 , 449 ( 3 , 128 , 108) 1,311,421Effect of exchange rate fluctuations on cash and cash

equivalents 6 0 - - -

Cash and cash equivalents at the end of the year 23 ( 6 , 009,952) ( 2 , 720,298) ( 6 , 113,994) ( 3 , 128,108)

The Group The Company

35.



1. The Group

1.1 Reporting Entity

Forte Oil Plc (the Company) was incorporated on 11 December 1964 as British Petroleum. I t became African

Petroleum through the nationalisation policy of the Federal Government of Nigeria in 1979. The Company

changed its name to Forte Oil Plc in December 2010 upon restructuring and rebranding . The major shareholders

are Zenon Petroleum and Gas Company Limited and Thames Investment Incorporated. The Company and its

subsidiaries, African Petroleum Oilfield Services Limited (APOS) and AP Oil and Gas Ghana Limited are

collectively, the Group.

1.2 Principal activities

The Company and its subsidiaries is primarily engaged in the marketing of petroleum products which is

divided into fuels, production chemicals, lubricants and greases.

2. Basis of preparation

2.1 Statement of compliance

These financial statements have been prepared in accordance with the International Financial Reporting

Standards (IFRSs) as issued by the International Accounting Standard Board (IASB) and in compliance with the

Financial Reporting Council of Nigeria Act, No 6, 2011. These are the Group's first financial statements prepared

in accordance with IFRSs and IFRS 1 - First-time Adoption of International Financial Reporting Standards has

been adopted.

An explanation of how the transition to IFRSs has affected the reported financial position, financial performance

and cash flows of the Company is provided in note 33.

2.2 Functional/presentation currency

These financial statements are presented in Naira, which is the Group's functional currency (except for AP Oi l

Ghana Ltd which operates in the Ghanian Cedis). Except as indicated in these financial statements, financial

information presented in Naira has been rounded to the nearest thousand.

2.3 New standards and interpretations not yet adopted

The accounting policies adopted are consistent with those of the previous financial year. There are no IFRSs or

IFRIC interpretations that are effective for the first time for the financial year beginning on or after 1 January 2012

that would be expected to have a material impact on the group. Standards and interpretations issued but not yet

effective.

A number of new standards and amendments to standards and interpretations are effective for annual periods

beginning after 1 January 2012, and have not been applied in preparing these consolidated financial statements.

None of these is expected to have a significant effect on the consolidated financial statements of the Group,

except the following set out below:

2.3.1 Amendment to IAS 1, 'Financial statement presentation' regarding other comprehensive income. The main

change resulting from these amendments is a requirement for entities to group items presented in 'other

comprehensive income' (OCI) on the basis of whether they are potentially reclassifiable to profit or loss

subsequently (reclassification adjustments).The amendments do not address which items are presented in OCI.

2.3.2 IFRS 13, 'Fair value measurement', aims to improve consistency and reduce complexity by providing a precise

definition of fair value and a single source of fair value measurement and disclosure requirements for use across

IFRSs. The requirements, which are largely aligned between IFRSs and US GAAP, do not extend the use of fair

value accounting but provide guidance on how i t should be applied where its use is already required or permitted

by other standards within IFRSs.

36.

2.3.3 IFRS 9, 'Financial instruments', addresses the classification, measurement and recognition of financial assets and financial liabilities. IFRS 9 was issued in November 2009 and October 2010. I t replaces the parts of IAS 39 that relate to the classification and measurement of financial instruments. IFRS 9 requires financial assets to be classified into two measurement categories: those measured as at fair value and those measured at amortised cost. The determination is made at initial recognition. The classification depends on the entity's business model for managing its financial instruments and the contractual cash flow characteristics of the instrument. For financial liabilities, the standard retains most of the IAS 39 requirements. The main change is that, in cases where the fair value option is taken for financial liabilities, the part of a fair value change due to an entity's own credit risk is recorded in other comprehensive income rather than the income statement, unless this creates an accounting mismatch. The group is yet to assess IFRS 9's full impact and intends to adopt IFRS 9 no later than the accounting period beginning on or after 1 January 2015. The group will also consider the impact of the remaining phases of IFRS 9 when completed by the Board.

2.3.4 IFRS 10, Consolidated financial statements', builds on existing principles by identifying the concept of control

as the determining factor in whether an entity should be included within the consolidated financial statements of

the parent company. The standard provides additional guidance to assist in the determination of control where this

is difficult to assess. The group is yet to assess IFRS 10's full impact and intends to adopt IFRS 10 no later than the

accounting period beginning on or after 1 January 2013 which is the effective date of the standard.

2.3.5 IFRS 12, 'Disclosures of interests in other entities', includes the disclosure requirements for all forms of

interests in other entities, including joint arrangements, associates, special purpose vehicles and other off balance

sheet vehicles. The group is yet to assess IFRS 12's full impact and intends to adopt IFRS 12 no later than the

accounting period beginning on or after 1 January 2013 which is the effective date of the standard.

There are no other IFRSs or IFRIC interpretations that are not yet effective that would be expected to have a

material impact on the group.

2.4 Basis of measurement

These financial statements are prepared on the historical cost basis except as modified by actuarial valuation of

staff gratuity and fair valuation of financial assets and liabilities where applicable.

2.5 Use of estimates and judgements

The preparation of the financial statements in conformity with IFRSs requires management to make judgements,

estimates and assumptions that affect the application of accounting policies and the reported amounts of assets,

liabilities, income and expenses. Actual results may differ from these estimates.

The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates

are recognised in the period in which the estimates are revised, if the revision affects only that period, or in the

period of the revision and future periods, i f the revision affects boths current and future periods.

In particular, the Group has identified the following areas where significant judgements, estimates and

assumptions are required. Changes in these assumptions may materially affect the financial position or financial

results reported in future periods. Further information on each of these areas and how they impact the various

accounting policies are described below and also in the relevant notes to the financial statements.

a. Recovery of deferred tax

Jugement is required to determine which types of arrangements are considered to be tax on income in contrast to

an operating cost. Jugement is also required in determining whether deferred tax assets are recognised in the

statement of financial position. Deferred tax assets, including those arising from un-utilised tax losses require

management assessment of the likelihood that the Group will generate sufficient taxable earnings in future

periods in order to utilise recognised deferred tax assets. Assumptions about the generation of future taxable

profits depend on management's estimates of future cash flows. These estimates of future taxable income are

based on forecast cash flows from operations ( which are impacted by sales volume and production, global oil

prices, operating costs and capital expenditure ) and judgement about the application of existing tax laws. To the

extent that future cash flows and taxable income differ significantly from estimates, the ability of the Group to

realise the net deferred tax assets recorded at the reporting date could be impacted.

Future changes in tax laws could also limit the ability of the Group to obtain tax deductions in future periods.

37.




Notes to the Consolidated Financial Statements (Cont�d)

The Group may incur decommissioning cost at the end of the operating life of some of the Group's facilities and properties. The Group assesses its decommissioning provision at each reporting date. The ultimate decommissioning costs are uncertain and cost estimates can vary for various factors including changes to relevant legal requirements, emergence of new restoration techniques or experience on similar decommissioning exercise. The expected timing, extent and amount of expenditure can also change, for example in response to changes in laws and regulations or their interpretations. Therefore, significant estimates and assumptions are made in determining the provision for decommissioning. As a result, there could be significant adjustments to the provisions established which could affect future financial results.

b. Contigencies

By their nature, contigencies will only be resolved when one or more uncertain future events occur or fail to occur. The assessment of the existence, and potential quantum, of contingencies inherently involves the exercise of significant judgement and the use of estimates regarding the outcome of future events.

3 Basis of consolidation

The consolidated financial statements include the financial statements of Forte Oil Plc and its subsidiaries;

African Petroleum Oilfield Services Limited (APOS), AP Oi l and Gas Ghana Limited (APOG) all made up to 31

December 2012. AP Marginal Oil Field Investment Limited, AP Investment in AP Tchad and AP Drilling &

Completion Limited are not consolidated because there are no significant balances relating to these entities, the

carrying amount of their investment have been fully provided for and the process for their winding up has

commenced.

All subsidiaries are wholly owned by Forte Oil Plc. All intra Group transactions, balances, income and expenses are eliminated on consolidation.

4 Significant accounting policies

The accounting policies set out below have been applied consistently to all periods presented in these financial statements and in preparing the opening IFRS statement of financial position at 1 Janaury 2011 for the purpose of the trasition to IFRSs, unless otherwise indicated.

4.1.1 Foreign currency transactions

Transactions in foreign currencies are translated to the respective functional currencies of the entities within the group.

Monetary items denominated in foreign currencies are re-translated at the exchange rates applying at the

reporting date. Non-monetary items carried at fair value that are denominated in foreign currencies are

retranslated at the rates prevailing at the date when the fair value was determined. Non-monetary items that are

measured in terms of historical cost in a foreign currency are not re-translated. Exchange differences are recognised in profit or loss in the period in which they arise except for:

- exchange differences on foreign currency borrowings which are regarded as adjustments to interest costs ,

where those interest costs qualify for capitalisation to assets under construction ;

- exchange differences on transactions entered into to hedge foreign currency risks; and - exchange differences on loans to or form a foreign operation for which settlement is neither planned nor likely

to occur and therefore forms part of the net investment in the foreign operation, which are recognised initially in other comprehensive income and reclassified from equity to profit or loss on disposal or partial disposal of the net investment.

4.1.2 Foreign operations

The functional currency of the parent company and the presentation currency of the consolidated financial

statements is Naira. The assets and liabilities of the Group's foreign operations are translated to Naira using

exchange rates at period end. Income and expense items are translated at the average exchange rates for the

period, unless exchange rates fluctuated significantly during that period, in which case the exchange rate on

transaction date is used. Goodwill acquired in business combinations of a foreign operation are treated as assets

and liabilities of that operation and translated at the closing rate.

38.

Exchange differences are recognised in other comprehensive income and accumulated in a separate category of equity.

On the disposal of a foreign operation, the accumulated exchange differences of that operation, which is attributable to the Group are recognised in profit or loss.

4.2 Financial instruments

The Group classifies financial instruments, or their component parts, on initial recognition as a financial asset, a

financial liability or an equity instrument in accordance with the substance of the contractual arrangement.

Financial instruments are recognised when the Group becomes a party to the contractual provisions of the

instrument.

Financial instruments are recognised initially at fair value plus transactions costs that are directly attributable to the acquisition or issue of the financial instrument, except for financial assets at fair value through profit or loss, which are initially measured at fair value, excluding transaction costs.

Financial instruments are derecognised on trade date when the Group is no longer a party to the contractual provisions of the instrument.

4.2.1 Available-for-sale financial assets

Available-for-sale financial assets comprise equity investments. Subsequent to initial recognition available-for-

sale financial assets are stated at fair value. Movements in fair values are taken directly to equity, with the

exception of impairment losses which are recognised in profit or loss. Fair values are based on prices quoted in an

active market i f such a market is available. I f an active market is not available, the Group establishes the fair value

of financial instruments by using a valuation technique.

Usually discounted cash flow analysis. When an investment is disposed, any cumulative gains and losses previously recognised in equity are recognised in profit or loss. Dividends are recognised in profit or loss when the right to receive payments is established.

4.2.2 Trade receivables

Trade receivables are stated at their original invoiced value, as the interest that would be recognised from

discounting future cash receipts over the short credit period is not considered to be material. Trade receivables

are reduced by appropriate allowances for estimated irrecoverable amounts. Interest on overdue trade

receivables is recognised as i t accrues.

4.2.3 Cash and cash equivalents

Cash equivalents comprise short-term, highly liquid investments that are readily convertible into known amounts of cash and which are subject to an insignificant risk of changes in value. An investment with a maturity of three months or less is normally classified as being short-term.

4.2.4 Trade payables

Trade payables are stated at their original invoiced value, as the interest that would be recognised from discounting future cash payments over the short payment period is not considered to be material.

4.2.5 Interest-bearing borrowings

Interest-bearing borrowings are stated at amortised cost using the effective interest method. The effective interest

method is a method of calculating the amortised cost of a financial liability and of allocating interest expense over

the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash payments

through the expected life of the financial liability.

4.2.6 Compound instruments

At the issue date the fair value of the liability component of a compound instrument is estimated using the market interest rate for a similar non-convertible instrument. This amount is recorded as a liability at amortised cost using the effective interest method until extinguished upon conversion or at the instrument's redemption date.

39.





The equity component is determined as the difference of the amount of the liability component from the fair value of the instrument. This is recognised in equity, net of income tax effects, and is not subsequently remeasured.

4.2.7 Impairment of financial assets

All financial assets, except for those at fair value through profit or loss, are assessed for indicators of impairment at each reporting date.

4.3 Share capital

Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of ordinary shares and share options are recognised as a deduction from equity, net of any tax effects and costs directly attributable to the issue of the instrument.

4.4 Property, Plant and Equipment

4.4.1 Recognition and measurement

Items of property, plant and equipment are measured at cost less accumulated depreciation and accumulated impairment losses, i f any. The cost of certain items of property, plant and equipment was determined by reference to a previous GAAP revaluation (carried out on March 08, 2004). The Group elected to apply the optional exemption to use this previous revaluation as deemed cost at 1 January 2011, the date of transition.

Cost includes expenditure that is directly attributable to the acquisition of the asset. Items of property, plant

and equipment under construction are disclosed as capital work-in-progress. The cost of construction

recognised includes the cost of material sand direct labour, any other costs directly attributable to bringing the

assets to a working condition for the intended use, the costs of dismantling and removing the items and

restoring the site on which they are located, and borrowing costs on qualifying assets.

When parts of an item of property, plant and equipment have different useful lives, they are accounted for as separate items (major components) of property, plant and equipment.

Gains and losses on disposal of an item of property, plant and equipment are determined by comparing the proceeds from disposal with the carrying amount of property, plant and equipment, and are recognised net within other income in profit or loss.

4.4.2 Reclassification of investment property

When the use of a property changes from owner-occupied to investment property, the property is transferred to investment properties at its carrying amount.

4.4.3 Subsequent costs

The cost of replacing part of an item of property or equipment is recognised in the carrying amount of the item

i f i t is probable that future economic benefits embodied within the part will flow to the Group and its cost can be

measured reliably. The costs of the day-to-day servicing of property and equipment are recognised in profit or

loss as incurred.

4.4.4 Depreciation

Depreciation is calculated over the depreciable amount, which is the cost of an asset, or other amount substituted for cost, less its residual value.

Depreciation is recognized in profit or loss on a straight-line basis over the estimated useful lives of each part

of an item of property, plant and equipment which reflects the expected pattern of consumption of the future

economic benefits embodied in the asset. Leased assets are depreciated over the shorter of the lease term

and their useful lives unless it is reason ably certain that the Group will obtain ownership by the end of the

lease term in which case the assets are depreciated over the useful life.

40.

The estimated useful lives for the current and comparative period are as follows:

Land Over lease periodBuildings 25 years

Plants, Equipment and tanks 5 - 20 years

Furniture and fitttings 5 years

Computer Equipment 4 years

Motor vehicles 4 years

Depreciation methods, useful lives and residual values are reviewed at each financial year end and adjusted, i f appropriate. Capital work- in-progress is not depreciated. The attributable cost of each asset is transferred to the relevant asset category immediately the asset is available for use and depreciated accordingly.

4.4.5 De-recognition

An item of property and equipment is derecognised on disposal or when no future economic benefits are

expected from its use or disposal. Any gain or loss arising on de-recognition of the asset (calculated as the

difference between the net disposal proceeds and the carrying amount of the asset) is included in profit or loss

in the year the asset is derecognised

Non-current asset held for sale

Non-current assets or a disposal groups comprising assets and liabilities, that are expected to be recovered primarily through sale rather than through continuing use, are classified as held for sale. Immediately before classification as held for sale, the assets, or components of a disposal group are remeasured in accordance with the Group's accounting policies. Thereafter generally the assets, or disposal group are measured at the lower of their carrying amount and fair value less cost to sell. Impairment losses on initial classification as held for sale and subsequent gains or losses on remeasurement are recognised in profit and loss. Gains are not recognised in excess of any cumulative impairment loss.

4.5 Investment property

Investment properties are measured at cost less accumulated depreciation and accumulated impairment

losses, i f any. Cost includes expenditure that is directly attributable to the acquisition of the property.

Investment properties under construction are disclosed as capital work-in-progress. The cost of construction

recognised includes the cost of material sand direct labour, any other costs directly attributable to bringing the

property to a condition of commercial lease to third parties.

Depreciation is calculated over the depreciable amount, which is the cost of an property, or other amount substituted for cost, less its residual value. Depreciation is recognised on a straight - line basis over the useful life of the investment property.

The estimated useful lives for the current and comparative period are as follows:

Land Over lease period

Buildings 25 years

The criteria used by the Group to distinguish investment property from owner occupied property are as follows:

- The property must not be actively used for the running of the core business activity of the group i.e

production and marketing of petroleum products.

- The property generates cashflows which have no direct connection with core business activity of the

group.

41.





4.6 Intangible assets

4.6.1 Intangible assets acquired separately

Intangible assets acquired separately are shown at historical cost less accumulated amortisation and impairment losses

Amortisation is charged to profit or loss on a straight-line basis over the estimated useful lives of the intangible assets unless such lives are indefinite. These charges are included in other expenses in profit or loss

Intangible assets with an indefinite useful life are tested for impairment annualy. Other intangible assets are amortised from the date they are available for use. The useful lives are as follows:

- Software costs - 5 years

Amortisation periods and methods are reviewed annually and adjusted if appropriate.

4.6.2 Intangible assets generated internally

Expenditures on research or on the research phase of an internal project are recognised as an expense when incurred. The intangible assets arising from the development phase of an internal project are recognised if, and only if, the following conditions apply:

- it is technically feasible to complete the asset for use by the Company - the company has the intention of completing the asset for either use or resale - the company has the ability to either use or sell the asset - it is possible to estimate how the asset will generate income - the company has adequate financial, technical and other resources to develop and use the asset; and- the expenditure incurred to develop the asset is measurable.

I f no intangible asset can be recognised based on the above, then development costs are recognised in profit and loss in the period in which they are incurred.

4.6.3 Intangible assets recognised in a business combination

Intangible assets acquired in a business combination and recognised separately from goodwill are initially

recognised at their fair value at the acquisition date.

4.6.4 Subsequent expenditure

Subsequent expenditure on software assets is capitalised only when i t increases the future economic benefits embodied in the specific asset to which i t relates. All other expenditure is expensed as incurred.

4.6.5 Amortisation

Amortisation is calculated over the cost of the asset, or other amount substituted for cost, less its residual value

Amortisation is recognised in profit or loss on a straight - line basis over the estimated useful lives of intangible assets from the date that they are available for use, since this must closely reflect the expected pattern of consumption of the future economic benefits embodied in the asset. The estimated useful life for the current and comparative period is:

Computer software: 5 years

Amortisation methods, useful lives and residual values are reviewed at each financial year-end and adjusted i f appropriate.

42.

4.7 Leases

Leases are classified as finance leases whenever the terms of the lease transfer substantially all the risks and rewards of ownership to the Company/Group. All other leases are classified as operating leases.

Finance leases

Assets held under finance leases are recognised as assets of the Group at the fair value at the inception of the lease or i f lower, at the present value of the minimum lease payments. The related liability to the lessor is included in the statement of financial position as a finance lease obligation.

Lease payments are apportioned between interest expenses and capital redemption of the liability, Interest is recognised immediately in profit or loss, unless attributable to qualifying assets, in which case they are capitalised to the cost of those assets.

Contingent rentals are recognised as expenses in the periods in which they are incurred.

4.7.1 Operating leases

Operating lease payments are recognised as an expense on a straight-line basis over the lease term, except i f another systematic basis is more representative of the time pattern in which economic benefits will flow to the Group. Contingent rentals arising under operating leases are recognised in the period in which they are incurred.

Lease incentives and similar arrangements of incentives are taken into account when calculating the straight-lined expense.

4.8 Borrowing costs

Borrowing costs that are directly attributable to the acquisition, construction or production o f a qualifying asset are capitalised as part of the cost of that asset. Other borrowing costs are expensed in the period in which they are incurred.

4.9 Taxation

Income tax for the period is based on the taxable income for the year. Taxable income differs from profit as reported in the statement of comprehensive income for the period as there are some items which may never be taxable or deductible for tax and other items which may be deductible or taxable in other periods.

Deferred tax is the future tax consequences of temporary differences between the carrying amounts and tax

bases of assets and liabilities shown on the statement of financial position. Deferred tax assets and liabilities are

not recognised i f they arise in the following situations: the initial recognition of goodwill; or the initial recognition of

assets and liabilities that affect neither accounting nor taxable profit. The amount of deferred tax provided is

based on the expected manner of recovery or settlement of the carrying amount of assets and liabilities, using tax

rates enacted or substantially enacted at the statement of financial position date.

The Group does not recognise deferred tax liabilities, or deferred tax assets, on temporary differences

associated with investments in subsidiaries, joint ventures and associates where the parent company is able to

control of the timing of the reversal of the temporary differences and i t is not considered probable that the

temporary differences will reverse in the foreseeable future. I t is the Group's policy to reinvest undistributed

profits arising in group companies

A deferred tax asset is recognised only to the extent that i t is probable that future taxable profits will be available against which the asset can be utilised.

The carrying amount of deferred tax assets are reviews at each statement of financial position date and reduced to the extent that i t is no longer probable that sufficient taxable profit will be available to allow all or part of the asset to be recovered.

43.





4.10 Inventory

Inventories are measured at the lower of cost and net realisable value. The cost of deregulated inventories -

AGO, ATK, LPFO, is based on the weighted average cost principle, and includes expenditure incurred in

acquiring the inventories, production or conversion costs and other costs incurred in bringing them to their

existing location and condition. The cost of regulated inventories - PMS and DPK is based on the standard cost

principle. In the case of manufactured inventories and work in progress, cost includes an appropriate share of

production overheads based on normal operating capacity.

Net realisable value is the estimated selling price in the ordinary course of business, less the estimated costs

of completion and selling expenses.

The production costs comprise direct materials, direct labour and an appropriate proportion of manufacturing

fixed and variable overheads.Allowance is made for obsolete, slow moving or defective items where appropriate.

4.11 Impairment

4.11.1 Financial assets (including loans and receivables)

A financial asset not carried at fair value through profit or loss is assessed at each reporting date to determine

whether there is objective evidence that i t is impaired. A financial asset is impaired i f objective evidence indicates

that a loss event has occurred after the initial recognition of the asset, and that the loss event had a negative

effect on the estimated future cash flows of that asset that can be reliably estimated.

Objective evidence that financial assets (including equity securities) are impaired can include default or delinquency by a debtor, restructuring of an amount due to the Group on terms that the Group would not consider otherwise, indications that a debtor or issuer will enter bankruptcy, or the disappearance of an active market for a security. In addition, for an investment in an equity security, a significant or prolonged decline in its fair value below its cost is objective evidence of impairment.

In assessing collective impairment the Group uses historical trends of the probability of default, timing of

recoveries and the amount of loss incurred, adjusted for management's judgment as to whether current

economic and credit conditions are such that the actual losses are likely to be greater or less than suggested by

historical trends.

An impairment loss in respect of a financial asset measured at amortised cost is calculated as the difference

between its carrying amount and the present value of the estimated future cash flows discounted at the asset's

original effective interest rate. Losses are recognized in profit or loss and reflected in an allowance account

against receivables. Interest on the impaired asset where applicable continues to be recognized through the

unwinding of the discount. When a subsequent event causes the amount of impairment loss to decrease, the

decrease in impairment loss is reversed through profit or loss.

4.11.2 Non-financial assets

The carrying amounts of the Group's non-financial assets, other than i nventories and deferred tax assets are

reviewed at each reporting date to determine whether there is any indication of impairment. I f any such indication

exists, then the asset's recoverable amount is estimated. For intangible assets that have indefinite useful lives or

that are not yet available for use, the recoverable amount is estimated each year at the same time.

The recoverable amount of an asset is the greater of its value in use and its fair value less costs to sell. In

assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax

discount rate that reflects current market assessments of the time value of money and the risks specific to the

asset.

An impairment loss is recognised i f the carrying amount of an asset exceeds its recoverable amount.

An impairment loss in respect of goodwill is not reversed. In respect of other assets, impairment losses

recognized in prior periods are assessed at each reporting date for any indications that the loss has decreased or

no longer exists. An impairment loss is reversed i f there has been a change in the estimates used to determine

the recoverable amount. An impairment loss is reversed only to the extent that the asset's carrying amount does

not exceed the carrying amount that would have been determined, net of depreciation or amortization, i f no

impairment loss had been recognised.

44.

4.12 Employee benefits

The Group operates both defined contribution plans and defined benefit plans.

4.12.1 Defined benefit plan

A defined benefit plan is a post-employment benefit plan other than a defined contribution plan. The Group's net obligation in respect of defined benefit post-retirement plans is calculated separately for each plan by estimatingthe amount of future benefit that employees have earned in return for their service in the current and prior periods; that benefit is discounted to determine its present value and any unrecognised past service costs and the fair value of any plan assets are deducted. The discount rate is the yield at the reporting date on government bonds that have maturity dates approximating the terms of the Group's obligations and that are denominated in the same currency in which the benefits are expected to be paid. The calculation is performed annually by a qualified actuary using the projected unit credit method. When the calculation results in a benefit to the Group, the recognised asset is limited to the total of any unrecognised past service costs and the present value of economic benefits available in the form of any future refunds from the plan or reductions in future contributions to the plan. In order to calculate the present value of economic benefits, consideration is given to any minimum funding requirements that apply to any plan in the Group. An economic benefit is available to the Group if i t is realisable during the life of the plan, or on settlement of the plan liabilities. When the benefits of a plan are improved, the portion of the increased benefit related to past service by employees is recognised in profit or loss on a straight-line basis over the average period until the benefits become vested. To the extent that the benefits vest immediately, the expense is recognised immediately in profit or loss.

4.12.2 Defined contribution plan

A defined contribution plan is a post-employment benefit plan under which an entity pays fixed contributions into a separate entity and will have no legal or constructive obligation to pay further amounts. Obligations for contributions to defined contribution pension plans are recognised as an employee benefit expense in profit or loss in the periods during which services are rendered by employees. Contributions to a defined contribution plan that is due more than 12 months after the end of the period in which the employees render the service are discounted to their present value. In relation to the defined contribution plan, the Group has in place the Pension fund scheme.

4.12.3 Pension fund scheme

In accordance with the provisions of the Pension Reform Act, 2004 the Group has instituted a Contributory

Pension Scheme for its employees, where both the employees and the Group contribute 7.5% of the employee

emoluments (basic salary, housing and transport allowances). The Group's contribution under the scheme is

charged to the profit and loss account while employee contributions are funded through payroll deductions.

4.12.4 Terminal benefit

Termination benefits are recognised as an expense when the Group is committed demonstrably, without realistic possibility of withdrawal, to a formal detailed plan to either terminate employment before the normal retirement date, or to provide termination benefits as a result of an offer made to encourage voluntary redundancy. Termination benefits for voluntary redundancies are recognised as an expense i f the Group has made an offer of voluntary redundancy, i t is probable that the offer will be accepted, and the number of acceptances can be estimated reliably. I f benefits are payable more than 12 months after the reporting period, then they are discounted to their present value.

4.13 Provision, contingencies and decommissioning

4.13.1 Provisions

A provision is recognised if, as a result of a past event, the Group has a present legal or constructive obligation that can be estimated reliably, and i t is probable that an outflow of economic benefits will be required to settle the obligation.

45.





4.13.2 Contingent liabilities

Contingent liabilities are possible obligations whose existence will only be confirmed by future events not wholly

within the control of the Group. Contingent liabilities are not recognised in the financial statements but are

disclosed. However if the possibility of an outflow of economic resources is considered remote, such contigent

liabilities are recognised in the financial statements

4.13.3 Contingent assets

Contingent assets are possible assets that arise from past events whose existence will be confirmed only by the

occurrence or non-occurrence of one or more uncertain future events not wholly within the control of the entity.

Contingent assets are only disclosed when an inflow of economic benefit is probable. Asset is recognised when

the realisation of income is virtually certain, in which case the related asset is no more contingent.

4.13.4 Decommissioning

Liabilities for decommissioning costs are recognised when the Group has an obligation to dismantle and remove a facility or an item of property, plant or equipment and to restore the site on which i t is located, and when a reliable estimate of the liability can be made. Where an obligation exists for a new facility such as a retail outlet, this will be on construction. An obligation for decommissioning may also crystalize during the period of operation of a facility through a change in legislation or through a decision to terminate operations. The amount recognised is the present value of the estimated future expenditure determined in accordance with local conditions and requirements. A corresponding item of property, plant and equipment of a amount equivalent to the provision is also recognised. This is subsequently depreciated as part of the asset.

Other than the unwinding discount on the provision, any change in the present value of the estimated expenditure is reflected as an adjustment to the provision and the corresponding item of property, plant and equipment.

4.14 Models used for impairment test, valuations, actuarial results and policy holders liabilities

A financial asset not carried at fair value through profit or loss is assessed at each reporting date to determine

whether there is objective evidence that i t is impaired. A financial asset is impaired i f objective evidence indicates

that a loss event has occurred after the initial recognition of the asset, and that the loss event had a negative effect

on the estimated future cash flows of that asset that can be reliably estimated.

Objective evidence that financial assets (including equity securities) are impaired can include default or

delinquency by a debtor, restructuring of an amount due to the Group on terms that the Group would not consider

otherwise, indications that a debtor or issuer will enter bankruptcy, or the disappearance of an active market for a

security. In addition, for an investment in an equity security, a significant or prolonged decline in its fair value below

its cost is objective evidence of impairment.

The Group considers evidence of impairment for receivables at both a specific asset and collective level. All

individually significant receivables are assessed for specific impairment. All individually significant receivables

found not to be specifically impaired are then collectively assessed for any impairment that has been incurred but

not yet identified. Receivables that are not individually significant are collectively assessed for impairment by

grouping together receivables with similar risk characteristics.

In assessing collective impairment the Group uses historical trends of the probability of default, timing of

recoveries and the amount of loss incurred, adjusted for management's judgment as to whether current economic

and credit conditions are such that the actual losses are likely to be greater or less than suggested by historical

trends.

An impairment loss in respect of a financial asset measured at amortised cost is calculated as the difference

between its carrying amount and the present value of the estimated future cash flows discounted at the asset's

original effective interest rate. Losses are recognized in profit or loss and reflected in an allowance account

against receivables. Interest on the impaired asset continues to be recognized through the unwinding of the

discount. When a subsequent event causes the amount of impairment loss to decrease, the decrease in

impairment loss is reversed through profit or loss.

46.

Non-financial assets

The carrying amounts of the Group's non-financial assets, other than inventories and deferred tax assets are

reviewed at each reporting date to determine whether there is any indication of impairment. I f any such indication

exists, then the asset's recoverable amount is estimated. For intangible assets that have indefinite useful lives or

that are not yet available for use, the recoverable amount is estimated each year at the same time.

The recoverable amount of an asset is the greater of its value in use and its fair value less costs to sell. In

assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax

discount rate that reflects current market assessments of the time value of money and the risks specific to the

asset.

4.15 Revenue

4.15.1 Sale of goods

Revenue from sale of goods in the course of ordinary activities is measured at fair value of the consideration received or receivable, net of returns, trade discounts and volume rebates.

Revenue is recognised when significant risks and rewards of ownership have been transferred to the customer,

recovery of the consideration is possible, the associated costs and possible return of goods can be estimated

reliably , there is no continuing management involvement with the goods, and the amount of revenue can be

measured reliably. I f i t is probable that discounts will be granted and the amount can be measured reliably, then

the discount is recognised as a reduction of revenue as the sales are recognised.

The timing of the transfer of risks and rewards varies depending on the individual terms of the sales agreement.

4.15.2 Rental income

Rental income from investment property is recognised as revenue on a straight-line basis over the term of the lease. Lease incentives granted are recognised as an integral part of the total rental income, over the term of the lease. Rental income from other property is recognised as other income.

4.15.3 Throughput income

Throughput income represents fees earned from the use of the Group's storage facilities by third parties on one hand and the Nigerian National Petroleum Corporation product discharge into these storage facilities. These are recognised as other income.

4.16 Finance income and finance costs

Finance income comprises interest income on funds invested and dividend income. Interest income is recognised as i t accrues in profit or loss, using the effective interest method. Dividend income is recognised in profit or loss on the date that the Company's right to receive payment is established.

Finance costs comprises interest expense on borrowings and impairment losses recognised on financial assets.

Borrowing costs that are not directly attributable to the acquisition, construction or production of a qualifying asset are recognised in profit or loss using the effective interest method.

Foreign currency gains and losses on financial assets and financial liabilities are reported on a net basis as either finance income or finance cost depending on whether foreign currency movements are in a net gain or net loss position.

4.17 Earnings per share

The Company presents basic earnings per share data for its ordinary shares.

Basic earnings per share is calculated by dividing the profit or loss attributable to ordinary shareholders of the Company by the weighted average number of ordinary shares outstanding during the year, adjusted for own shares held.

47.





4.18 Segment reporting

An operating segment is a component of the Group that engages in business activities from which i t may earn

revenues and incur expenses. Segment results that are reported to the Company's CEO (the chief operating

decision maker) include items directly attributable to a segment as well as those that can be allocated on a

reasonable basis. Unallocated items comprise mainly of head office expenses, and tax assets and liabilities.

5 Determination of fair valuesA number of the Company's accounting policies and disclosures require the determination of fair value, both for financial and non-financial assets and liabilities. Fair values have been determined for measurement and / or disclosure purposes based on the following methods.

When applicable, further information about the assumptions made in determining fair values is disclosed in the notes specific to that asset or liability.

Trade and other receivables

The fair value of trade and other receivables is estimated as the present value of the future cash flows, discounted at market rates of interest at the reporting date. For trade and other receivables with a remaining life of less than one year, the notional amount is deemed to reflect the fair value.

Fair value which is determined for disclosure purposes, is calculated based on the present value of future principal and interest cash flows, discounted at market rates of interest at the reporting date. For trade and other creditors with a remaining life of less than one year, the notional amount is deemed to reflect the fair value.

6 Financial risk management

Overview

The Company's Business Assurance and Risk Management (BARM) oversees risk management function for

the Company using Enterprise Risk Management framework that focuses on business risk and internal

controls taking an entity level portfolio view of risk with the objective to protect and enhance each entity's

value and by extension the Company's value. Risks are an inevitable consequence of being in business. The

Company through BARM designs policies; processes and procedures that will enable i t achieve an

appropriate balance between risk and return. Risk management activities are applied across the enterprise at

every level from strategy settings to all sources of value. I t is a continuous process and includes an element of

corporate governance; it promotes efficient and effective assessment of risk, increase risk awareness and

improves the management of risk throughout the company. This includes anticipating and avoiding threats

and losses as well as identifying and realizing opportunities.

Risk management framework

i The Board of Directors at the apex exercise and assumed ultimate authority and responsibility for the corporate risk management.

ii The Risk Management Board Committee responsible for oversight and approval of risk policies and credit approvals above management�s authority levels.

iii Executive Management Committee (EXCO) responsible for review of investments and projects proposaland exercise of management�s delegated authority for investment and project approvals.

iv Management Risk committee headed by BARM and are responsible for the risk policy review and implementation.

v Risk Management unit of BARM responsible for risk development, management and monitoring.

vi Business units, responsible for the creation and management of risk assets

The Board of Directors has overall responsibility for the establishment and oversight of the Company�s r isk management framework. The Board has established the Risk Management Committee, which is responsible for developing and monitoring the Company�s risk management policies. The committee reports quarterly to the Board of Directors on its activities.

48.

The Company's risk management policies are established to identify and analyze the risks faced by the

Company, to set appropriate risk limits and controls, and to monitor risks and adherence to limits. Risk

management policies and systems are reviewed regularly to reflect changes in market conditions and the

Company's activities. The Company, through its training and management standards and procedures, aims

to develop a disciplined and constructive control environment in which all employees understand their roles

and obligations.

The Company's Audit Committee oversees how management monitors compliance with the Company's risk management policies and procedures, and reviews the adequacy of the risk management framework in relation to the risks faced by the Company. The Audit Committee is assisted in its oversight role by Business Assurance and Risk Management (BARM). BARM undertakes both regular and ad hoc reviews of risk management controls and procedures, the outcomes of which are reported to the Audit Committee regularly.

The Company has exposure to the following risks from its use of financial instruments:

Ï Credit risk

Ï Liquidity risk

Ï Market risk Ï Operational risk

Credit risk

Credit risk is the risk of financial loss to the Company i f a customer or counterparty to a financial instrument fails to meet its contractual obligations, and arises principally from the Company's receivables from customers and investment securities.

The credit risks are managed within a framework of credit policies, guidelines and processes which are described in more detail below.


The Company has developed a comprehensive Credit Policy that details its risk philosophy and metrics. The

Credit Risk Policy defines the level and type of credit exposures that the Company is prepared to accept in

order to achieve its business goals and objectives. The Framework creates a quantifiable link between the

risks assumed and the amount of risk capital required to support those risks. The capital adequacy

framework ensures that the Company holds adequate levels of capital to support its investment operations.

The Company's exposure to credit risk is influenced mainly by the individual characteristics of each customer.

However, management also considers the demographics of the Company's customer base, including the default risk of the industry and country in which customers operate, as these factors may have an influence on credit risk.

The Company through its Credit Control Committee has established a credit policy under which each new proposed credit customer is analyzed individually for creditworthiness before the Company's standard payment and delivery terms and conditions are offered. The review includes external ratings, financial performance, and in some cases bank references. Credit limits are established for each customer, which represents the maximum open amount. These limits are approved by the Chief Executive Officer (CEO) or the Board. These limits are reviewed quarterly. Customers that fail to meet the Company's benchmark credit worthiness may transact with the Company only on a prepayment basis.

In monitoring customer credit risk, customers are grouped according to their credit characteristics, including

whether they are an individual or legal entity, whether they are a wholesale, retail or end-user customer,

geographic location, industry, aging profile, maturity and existence of previous financial difficulties. Trade and

other receivables relates to all customers. Customers that are graded as �high risk� are placed on a restricted

customer list and monitored by the Credit Control Committee, and future sales are made on a prepayment

basis.

49.





Trade and other receivables are highlighted in note 22.

Allowance for impairment losses

The Company establishes an allowance for impairment that represents its estimate of incurred losses in

respect of trade and other receivables and investments. The main components of this allowance are a

specific loss component that relates to individually significant exposures, and a collective loss

component established for groups of similar assets in respect of losses that have been incurred but not

yet identified. The collective loss allowance is determined based on historical data of payment statistics

for similar financial assets.

The carrying amount of financial assets represents the maximum credit exposure.

Investments

The Company limits its exposure to credit risk by investing only in liquid securities and only with

counterparties that have a credit rating. Management actively monitors credit ratings and given that the

Company only has invested in securities with high credit ratings, management does not expect any

counterparty to fail to meet its obligations.

Guarantees

The Company's policy is to provide financial guarantees only to wholly-owned subsidiaries after a careful review of the unveiling transaction. Where the unveiling transaction does not meet the Company's risk appetite, such transactions are exited.

There are no financial guarantees for any of the wholly owned subsidiaries for the year ended 2012.

Liquidity risk

Liquidity risk is the risk that the Company will encounter difficulty in meeting the obligations associated

with its financial liabilities that are settled by delivering cash or another financial asset. The Company's

approach to managing liquidity is to ensure, as far as possible, that i t will always have adequate liquidity

to meet its liabilities when due, under both normal and stressed conditions, without incurring

unacceptable losses or risk damage to the Company's reputation.

The Company manages its liquidity process by:

Ï Day to day funding, managed by monitoring future cash flows to ensure that requirements can

be met. Ï Monitoring balance sheet liquidity ratios against internal requirements

Ï Managing the concentration and debt profile

Ï Daily matching of funds by assets and liabilities manager's.

The Company ensures that i t has sufficient cash on demand to meet expected operational expenses for a period of 60 days, including the servicing of financial obligations; this excludes the potential impact of extreme circumstances that cannot reasonably be predicted, such as natural disasters.

The company exposure to Liquidity risk are highlighted on note 28.

Market risk

Market risk is the risk that changes in market prices, such as foreign exchange rates, interest rates and equity prices will affect the Company's income or the value of its holdings of financial instruments. The objective of market risk management is to manage and control market risk exposures within acceptable parameters, while optimizing the return. The Company is not currently buying and selling derivatives, however, the Company incurs financial liabilities, in order to manage market risks. The Company may in future be involved in buying and selling derivatives. All such transactions are carried out within the guidelines set by the Risk Management Committee. Generally the Company seeks to apply hedge accounting in order to manage volatility in profit or loss.

The company manages market risks by keeping cost low to keep prices within profitable range, foreign exchange risks are managed by maintaining foreign denominated bank accounts and maintaining letters of credit facility lines with the Company's bankers. Also interest rates are benchmarked to NIBOR (for local loans and LIBOR (for foreign loans). The company is exposed to equity risk.

50.

Currency risk

The currency risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate due to the changes in foreign exchange rates

The Company is exposed to currency risk on sales, purchases and borrowings that are denominated in a currency other than its functional currency. The Company is exposed primarily to US Dollars (USD), Euro (E), Pound Sterling (GBP) and Cedes (GHC).

The Company monitors the movement in currency rates on an ongoing basis to mitigate the risk that the movements in the exchange rates may adversely affect the Company's income or value of their financial instruments.

The Company is allowed to hedge currency exposure within the tolerable limit by bank and must be approved by BARM. The Company does not hedge for speculative reasons.

Interest on borrowings is denominated in the currency of the borrowing. Generally, borrowings are

denominated in currencies that match the cash flows generated by the underlying operations of the

Company, primarily Naira, also GHC and USD. This provides an economic hedge without derivatives

being entered into and therefore hedge accounting is not applied in these circumstances.

In respect of other monetary assets and liabilities denominated in foreign currencies, the Company ensures that its net exposure is kept to an acceptable level by buying or selling foreign currencies at spot rates when necessary to address short-term imbalances.

The investment in APOG subsidiary is hedged by a GHC-denominated secured bank loan, which mitigates the currency risk arising from the subsidiary's net assets. The investments in other subsidiaries are not hedged as those currency positions are considered to be long-term in nature.

Sensitivity analysis

A change in the exchange rate either positively or negatively by 200 basis points would have

increased/(decreased) equity and profit or loss by the amount stated below. This analysis is based on

foreign currency exchange rate variances that the Group considered to be reasonable possible at the

end of the reporting period. The analysis assumes that all other variables, in particular interest rates,

remain constant.

A weakening of the Naira against the currencies at 31 December would have increased/(decreased) equity and profit or loss by the amount shown below.

Increase/decreasein Foreign N'000 Exchange rate

31-Dec-12 +/- 2% 1,69631-Dec-11 +/- 2% 4,467

Interest rate risk

The Company�s Interest rate on borrowing is floating and is driven by market forces. The company is exposed to multiple interest rates. The risk is managed by the Company by constantly negotiating with the banks to ensure that interest rates are consistent with the monetary policy rates as defined by the Central bank of Nigeria.

At the reporting date the interest rate profile of the Group's interest -bearing financial interest was:

2012 2011Finance lease liabilities 18% 18%Unsecured bank loans 23% 21%Bank overdraft 17% 15%

Notes 23 and 25 highlighted the borrowings for the reporting period.

51.





Sensitivity analysis

Assuming that all other variables remain constant, a 200 basis points increase in interest rates at the reporting period would lead to an additional N42.03 million charge to the income statement (2011 - N33.39 miilion). A 200 basis points decrease in interest rate at the reporting date would have an equal but opposite effect.

Other market price risk

Management of the Company monitors the mix of debt and equity securities in its investment portfolio based on market indices. Material investments within the portfolio are managed on an individual basis and all buy and sell decisions are recommended by Risk Management Committee and approved by the Executive Committee.

Management is assisted by external advisors in this regard. In accordance with this strategy, certain

investments are designated at fair value through profit or loss because their performance is actively

monitored and they are managed on a fair value basis. The Company does not enter into commodity

contracts other than to meet the Company's expected usage and sale requirements; such contracts are

not settled net.

Operational risk

Operational risk is the risk of direct or indirect loss arising from a wide variety of causes associated with the

Company's processes, personnel, technology and infrastructure, and from external factors other than credit, market and liquidity risks such as those arising from legal and regulatory requirements and generally accepted standards of corporate behaviour. Operational risks arise from all of the Company's operations.

The Company's objective is to manage operational risk so as to balance the avoidance of financial

losses and damage to the Company's reputation with overall cost effectiveness and to avoid control

procedures that restrict initiative and creativity. The primary responsibility for the development and

implementation of controls to address operational risk is assigned to senior management within each

business unit. This responsibility is supported by the development of overall Company standards for the

management of operational risk in the following areas:

i Requirements for appropriate segregation of duties, including the independent authorization of transactions/processes.

ii Requirements for the reconciliation and monitoring of transactions. iii Compliance with regulatory and other legal requirements. iv Documentation of controls and procedures. v Requirements for the periodic assessment of operational risks faced, and the adequacy of

controls and procedures to address the risks identified. vi Requirements for the reporting of operational losses and proposed remedial action vii Development of contingency plans viii Training and professional development ix Ethical and business standards x Risk mitigation, including insurance when this is effective.

Compliance with Company standards is supported by a programme of periodic reviews undertaken by Business Assurance and Risk Management. The results of BARM reviews are discussed with the management of the business unit to which they relate, with summaries submitted to the Audit Committee and Executive Management of the Company.

52.

Capital Management

The Board's policy is to maintain a strong capital base so as to maintain investor, creditor and market

confidence and to sustain future development of the business. The Board of Directors monitors capital on

the basis of the gearing ratio, which the Company defines as total liabilities (non- current liabilities and

current liabilities) over total assets (non- current assets and current assets). Board of Directors also

monitors the level of dividends to ordinary shareholders.

The Board seeks to maintain a balance between the higher returns that might be possible with higherlevels of borrowings and the advantages and security afforded by a sound capital position. The Company does not have a defined share buy-back plan.

The company's debt to capital ratio at the end of the reporting period was as follows:

2 0 12 2 0 11Total Liabilities 34,930,097 39,336,081Total Assets 42,512,938 45,225,375Gearing Ratio as at 31st December 8 2 % 8 7 %

There were no changes in the company�s approach to capital management during the year.

7. Operating Segment The Group has three reportable segments, as described below, which are the Group's strategic business units. The strategic business units offer different products, and are managed separately. For each of the strategic business units, the Group CEO reviews internal management reports on at least monthly basis. The following summary describes the operations in each of the Group's reportable segments.

Segment Description

Fuels This segment is responsible for the sale and distribution of petroleum products (white products) and Aviation Turbine Kerosene (ATK) in retail outlets and to industrial customers.

Production Chemicals This segment manufactures and sells production chemicals

Lubricants and Greases This segment manufactures and sells lubricants and greases.

Information regarding the results of each reportable segment is included below.

53.





Information regarding the results of each reportable segment is included below.

7.1 Business segment

7.1.1 Revenue

2012 2011 2012 2011

N'000 N'000 N'000 N'000

Fuels 84,899,003 98,190,647 74,873,997 96,750,185

Production chemicals 2,037,666 3,528,255 4,978 528,162

Lubricants 4,047,546 15,280,739 4,042,767 6,547,490

90,984,215 116,999,641 78,921,742 103,825,837

7.1.2 Cost of sales

Fuels 76,707,514 101,263,325 67,294,756 92,180,810

Production chemicals 1,695,946 3,515,131 25,825 103,967

Lubricants 2,435,623 3,494,304 2,431,782 3,489,744

80,839,083 108,272,760 69,752,363 95,774,521

Gross profit 10,145,132 8,726,881 9,169,379 8,051,316

Gross profit margin 11% 7% 12% 8%

7.2 Geographic segment

Nigeria Ghana Nigeria Ghana

N'000 N'000 N'000 N'000

Revenue 81,264,822 9,719,393 105,926,235 11,073,406

Cost of s ales (71,692,865) (9,146,217) (97,435,473) (10,840,191)

Gross Profit 9,571,957 573,176 8,490,762 233,215

Finance income 127,062 - 86,701 -Finance expense (1,790,524) (58,134) (1,454,574) (34,572)

Depreciation and amortisation (627,938) (32,526) (474,620) (15,341)

Reportable segment profit

before income tax 7,280,557 482,516 6,648,269 183,302

Reportable segment total

assets 40,394,953 3,143,246 45,324,662 1,938,154

Reportable segment total

liabilities 32,968,602 2,529,340 36,431,935 1,550,978

The Group operates in two geographic regions namely Nigeria and Ghana.


2012 2011

54.

8. Other income

2012 2011 2012 2011

N'000 N'000 N'000 N'000

Investment property rental income 26,984 215,801 26,984 214,866

Gain on disposal of investment (Note 8.1) 167,826 - 167,826 -

Throughput fees 324,877 465,401 324,877 456,178

Gain on disposal of f ixed assets 7,569 1,179 7,569 -

Foreign exchange gain 39,795 342,027 - -

Sundry income 44,054 57,219 43,120 66,474

611,105 1,081,627 570,376 737,518

8.1

9 Other expenses

2012 2011 2012 2011

N'000 N'000 N'000 N'000

Provision for diminution for investment (Note 9.1) - 1,530,841 - 1,530,841

Severance benefit (Note 9.2) - 2,940,744 - 2,940,744

Provision for transporters' scheme (Note 9.3) - 2,227,658 - 2,227,658

Provision for interest receivable (Note 9.4) - 2,010,355 - 2,010,355

- 8,709,598 - 8,709,598

9.1

9.2

9.3

9.4

10. Personnel expenses

2012 2011 2012 2011

N'000 N'000 N'000 N'000

Salaries, wages and allowances 633,221 1,545,213 493,080 1,439,453

Contributions to pension fund scheme 63,339 195,867 30,203 195,867

Expenses related to defined benefit plans 127,470 1,766,945 105,006 1,762,800

Training, recruitment and canteen expenses 21,614 397,465 21,614 37,440

Medical expenses 8,797 14,647 7,665 13,351

Other personnel expenses 538,478 489,547 537,894 389,547

1,392,919 4,409,684 1,195,462 3,838,458

11. Profit/Loss before taxation is stated after

charging/(crediting):

Directors fees 19,070 18,420 18,420 18,420

Auditors' remuneration 48,841 41,273 42,500 35,000

Depreciation & amortisation 735,947 523,748 637,013 457,833(Profit)/loss on sale of fixed assets (13,954) 34,279 (7,569) 34,451

This relates to money paid as a result of restructuring exercise carried out in 2011 financial year which resulted in

payment of severance benefit t o staff.

This represents net gain realised from liquidation of AP Properties Limited. The carrying value of the investment

was N2,500,000. The net realised amount from the liquidation was N170,224,000.




This relates to impairment of receiveables from transporters in respect of a transportation scheme financed by

Zenith Bank Plc. The liability with Zenith Bank Plc upon crystalization is now being serviced by Forte Oil Plc while

the transporters make payments to Forte Oil Plc.

This relates to impairment in respect of disputed balance of interest receivable from Afribank now Mainstreet Bank.

This relates to provision made in respect of investment in upstream assets (SPDC Oilwell) and advances to

suppliers -Neptune Ogara Tank farm.

55.





12 Finance income and finance cost

2012 2011 2012 2011

N'000 N'000 N'000 N'000

Interest income on bank deposits 321 86,701 321 -

Interest income on loans and receivables 126,741 - 126,741 86,395

Finance income 127,062 86,701 127,062 86,395

Net foreign exchange loss (24,497) (7,516) (24,497) (7,516)

Interest expense on bank loans and overdrafts (1,824,162) (1,481,630) (1,758,037) (1,427,776)

Impairment l oss on other receivables - - - -

Finance costs (1,848,659) (1,489,146) (1,782,534) (1,435,292)

Net Finance costs (1,721,597) (1,402,445) (1,655,472) (1,348,897)

13. Taxation

(a) I ncome tax expense

2012 2011 2012 2011

Current tax expense N'000 N'000 N'000 N'000

Current period income tax 226,695 191,251 144,498 170,038

Current period education tax 51,159 2,211 47,382 -

Adjustment for prior periods - 9,112 30,062 9,112

277,854 202,574 221,942 179,150

Deferred tax expense

Origination and reversal of temporary differences (135,556) (616,319) - (653,085)

(135,556) (616,319) - (653,085)

Total income tax expense 142,298 (413,745) 221,942 (473,935)

(b) Reconciliation of e ffective tax rate

2012 2011 2012 2011

N'000 N'000 N'000 N'000

Profit/ (loss) for the period 1,007,507 (19,536,209) 654,461 (19,576,228)

Total income tax expense 142,298 (413,745) 221,942 (473,935)

Profit/ ( loss) excluding income tax 1,149,805 (19,949,954) 876,403 (20,050,163)

Income tax using the Company�s domestic tax rate 12% 2% 25% 2%

The Company


Interest income represents income earned on bank deposits while interest expense represents charges paid on

loans and overdraft facilities utilised during the year.

The tax charge for the year has been computed after adjusting for certain items of expenditure and income, which

are not deductible or chargeable for tax purposes, and comprises:


The Group

56.

2012 2011

N'000 N'000

The minimum tax provisions is computed as the highest of:

1 . 0 .5% of gross profit 4 5 , 847 4 0 , 257

2 . 0 .5% of net assets 3 4 , 238 2 7 , 192

3 . 0 .25% of paid up share capital 1 , 348 1 , 223

4 . 0 .25% of N500,000 turnover 1 1

Highest of the above plus 4 5 , 847 4 0 , 257

0.125% of excess turnover above N500,000 9 8 , 652 1 2 9 , 7 8 2

Total m inimum tax 1 4 4 , 4 98 1 7 0 , 0 3 8

(c ) Movement in current tax liability

2012 2011

N'000 N'000

Balance at 1 January 219,255 801,104

Provisions for the year 277,853 202,504

Payments during the year (290,309) (784,353)

Balance at 31 December 206,799 219,255

14 Basic earnings per share

(a) Bas ic earnings per share

Profit attributable to ordinary shareholders

2012 2011 2012 2011

N'000 N'000 N'000 N'000

Profit f or the period (1,007,509) 19,536,209 (654,462) 19,576,227

Profit attributable to ordinary shareholders (1,007,509) 19,536,209 (654,462) 19,576,227

Weighted average number of ordinary shares

Issued ordinary shares at 1 January 978,049 978,049 978,049 978,049

Shares issued during the year 100,687 - 100,687 -Weighted average number of ordinary shares at

31 December 1,078,736 978,049 1,078,736 978,049

Education tax was computed at t he rate of 2% of assessable profit i n accordance with the provisions of the Act.

The company income tax was based on the minimum tax provisions of the Company Income Tax Act Cap C21 LFN

2004 for 2012 and 2011 as the Company had no taxable profit for these years due to prior years losses relieved.


The Company

The Group

Basic earnings per share of N0.93 kobo (2011: (N19.96) kobo) is based on the profit attributable to ordinary

shareholders of N1,007,507 [2011: (N19,536,209)], and on the 1,078,735,540 (2011:978,949,492) ordinary shares

of 50 kobo each, being the weighted average number of ordinary shares in issue during the current and preceding

year. There were no dilutive instrument as at t he year end 31st December, 2012 and 2011.

2012 2011

N'000 N'000

174,399 723,189

221,942 179,150

(227,909) (727,940)

168,432 174,399

The Company

57.



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Balance at 1 January 2012

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2,220,826

7,211,367

58,506

461,363

1,209,007

13,927,910

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(8595

7

,4)

(785,954)

WIP reversed

-

-

-

-

-

94

(

1,30)

(1,30)

94

classfi

d oother

Re

ie

t

PPE

-

-

14,831

3

2,254

-

(17,085

3)

-

sosa

Dip

l(6,670)

1,558

()

(29,746)

4,672)

(

2514

)(

,8

-

(7,94)

67

ranslationdifference

T

14,055

(35,281)

(37,525)

(1,486)

17,391

(6,079)

(48,25)

9

lceat

mer2

Baan

31 D

ece

b 012

,746

277

,1

20

3,2

0,46

7,1

16

1,56

6708

,1

600,952

3299

5,

0

,9,86

1378

9-

pr

ition nd impar

eDe

eca

aim

nt

-

loss

es

alnc

an

21

Ba

e at1J

uary 01

0833

2,

4

53

23,20

24

7,8

7,44

39

0,96

330,083

-

9

3,50,377

Depr eciation for the year

40,451

41,624

288,087

5,119

90,540

-

465,821

sosas

Dip

l-

46

(8)

-

-

1095

)(

,00

-

(1

9,68)

0

9

rsat

fe

Tan

lion diferenc

259

198

455

59

50

-

1,021

ne

1Bala

ce at 31 D

ecemb

r 201

0249,44

574,574

3,136,286

36,174

311,173

-

4,307,251

lnce at1Ja

ry2

2Baa

nua

01

249,044

574,573

3,136,286

,

36174

1 311,74

-

4,307,251

pcat

o

hy

De

rei

ionfr te ear

22,286

,

2 9166

,1

34079

,

6 513

6

8 8

,55

-

5

46,460

Reclassified

-

-

-

-

-

-

-

mparm

ntloss

Ii

e

-

-

-

-

-

-

-

os

Disp

als

794

(

) 74

(

3)

2592

(

,7)

308

(,

6)

2

4)

(1,25

-

(1,75

5

9)

Translation difference

11

(

0,22)

37, 519

(6,779)

4

(61)

524

-

20,681

lnce at3

De

mer20

Baa

1

ce

b

12

0,414

26

03,01

71

3,44,371

4

37,763

37685

,8

-

,82,17

42

4

mCarrying a

ounts

t 1 Jan

ar 2

11

Au

y0

,6,253

255

1,37,416

5

3,40,491

4

16,729

16055

,3

40,415

2

,91,57

75

8

t 31 D

ec

mer20

1A

eb

1

,7,797

251

1,46,253

6

4,75,081

0

22,331

15019

,0

1,09,007

2

,60,59

92

6

t31De

0

A

cember2

12

,704

251

,7

19

3,4

7,35

4,6678

1,

5

2931

,8

224,094

3299

5,

0

,7,69

896

5

For the Year Ended 31 December 2012

Notes to the Conso

lidated Financial Sta

tements (Cont�d)

15

et

pa

q

m

yPro

pry, lnt ande

uipment- co

pan

(b)

Plant,

Funiture

rMotor

Con

tu

tn

srcio

aL

nd

Building

eq

mnt & t

nk

uip

ea

s& fitti

gs

nvehicles

wokin

po

rss

r

r

ge

Total

N0

�00

N�00

0N�000

N00

�0N�000

N�000

N�000

so

dt

Co

t rdeeme

cos

laa

11

Ba

nce t

January 20

1,6

727

4,58

1,966,10100

.4,95

,287

9260

2,7

457,302

234,733

10,408,082

di

Ad

itons

-

1

8

11,07

70

,637

86,134

123,432

,483

9

11

,4

,9

020

7,63

Transfers

-

32,004

17

,691

79

15

-

(20

90

9,8

)

-

pa

Dis

os

l-

--

- (

54)

1

7,35

-

(15

54

7,3

)

ln

1

er

1Baa

ceat3

Dec

mbe 20

1,6

727

4,58

,0

321

9,18

5,84

,615

532401

,423,380

1,173,192

12,348,358

ln

Ja

2Baa

ceat1 anu

ry 201

,6

727

4,58

2

9,18

,10

35,84

,615

532401

,423,380

1,173,192

12,348,358

di

Ad

itons

32

5

,3

13,827

1

3,48

2

77

38

32

13,05

45

52

,31

79

,10

85

csf

tnt

ina

lRe

las

iicaio

o

tngi bes

--

--

-

(78

54

5,9

)(785,954)

es

WIP R

ev

red

--

--

-

64

(1,69

),9

(616

4)

csf

t

PRe

las

ii edto

oher

PE

--

3

4,83

1

1,5

22

4-

(31

85

7,0

)-

pa

Dis

os

l (

,670

6)

(1,558)

(

9,74

)

2

6-

1

8 (5,34

)-

5

2 (

3,32

)ln

1

er

1Baa

ceat3

Dec

mbe 20

2,6

227

1,15

,2

221

1,45

6,25

,187

435033

,541,084

532,990

12,245,898

pe

n

eDe

rciationa

d impairment loss

s

l aa

11

Ba

nce t

January 20

1

,

208334

5

,6

243

0

2,72

,989

8221

5,4

309,976

-,9

437

3,80

pe

f

rDe

rciation or theyea

27925

,

79,617

213,429

2

,050

69

7

,07

-9

83

9,92

pas

Dis

os

l-

--

- (

00)

1

9,50

-

(10

00

9,5

)l a

a3

cb

Ba

nce t

1 D

eem

er 2011

39

26,25

07

63,97

2,94

,418

2241

5,9

277,383

-,8

240

4,23

l aa

11

Ba

nce t

January 20

223

59

6,2

07

63,97

2,94

,418

2241

5,9

277,383

-,8

240

4,23

pe

f

rDe

rciation or theyea

20501

,

87,962

2

6,1

2

6

1,7

11

7

30

7

,83

-4

54

8,83

am

sIm

pi r

ent l os

--

--

--

-

pas

Di s

os

l

(94

7)

(43)

7

(

5,92

)

2

7-

(13,054)

-

48

(

0,51

)ln

1

er

1Baa

ceat3

Dec

mbe 20

25

62

5,96

96

61,19

3,18

,603

2253

2,7

337,412

-,9

944

2,54

r mo

Caryinga

unts

aay

01

At 1 J

nu

r2

1,5

325

6,25

,4

114

1,74

2,23

,298

02

3,9

7147,326

234,733

,1

866

4,27

De

mr

01

At 31

ce

be 2

1,2

825

8,32

,0

615

5,20

2,90

,197

38,206

145,997

1,173,192

,6

682

4,12

tD

mb

2A 31

ece

er 201

,0

625

5,18

,3

614

0,25

3,07

,584

16

9,6

1203,672

532,990

,5

977

3,34

The m

oement on thi saccount during he year was as f

l lws:

v

too

(c)

Capital commitments

The G

roup had no capital commitment as at 31 D

ecember 2012 (2011: Nil).

59.


Notes to the Conso


tements (Cont�d)



16 Intangible assets

(a) The movement on this account during t he year was as f ollows:


N'000 N'000

Cost

Balance at 1 January 2011 41,017 4 1,017

Acquisitions 1,300 -

- -

Balance at 31 December 2011 42,317 41,017

Balance at 1 January 2012 42,317 41,017

Acquisitions 73,650 65,250

Disposals - -

Transfer from CWIP 785,954 785,954

Translation difference (202) -


Amortisation and impairment losses


Amortisation for the year 8,971 8,949

Impairment loss - -

Disposals - -

Balance at 31 December 2011 11,954.00 11,932



Impairment loss 29,085 29,085

Disposals - -

Translation difference (4) -


Carrying amounts

At 1 January 2011 38,034 38,034

At 31 December 2011 30,363 29,085

At 31 December 2012 7 5 2 , 5 25 7 4 4 , 3 5 4

(b)

(c)

Software

Oracle ERP for Forte Oil Plc was fully impaired in the year 2012 due to the implementation of

another ERP software - SAP

The amortisation of our intangible asset is recognised in administrative expenses of the statement

of comprehensive income.

60.

17


N'000 N'000

Balance at 1 January 2011 2,779,976 2,779,976

Acquisitions 10,928 10,928

Disposals - -

Transfers - -

Balance at 31 December 2011 2,790,904 2,790,904

Balance at 1 January 2012 2,790,904 2,790,904

Acquisitions - -

Disposals - -

Transfers - -

Balance at 31 December 2012 2,790,904 2,790,904

Amortisation and impairment losses

Balance a t 1 January 2011 413,491 413,491


Impairment loss - -

Disposals - -

Transfers - -




Impairment loss - -

Disposals - -


Carrying amounts

At 1 January 2011 2,366,485 2,366,485

At 31 December 2011 2,328,457 2,328,457

At 31 December 2012 2,247,129 2,247,129

Investment property

The movement on this account during the year was as follows:

The total fair value ofthe investment properties as

at 31 December 2012 is N2,836,202,420

I nvestment

Investment property comprises a number of commercial properties that a released to third parties. The

lease period ranges between 1-2 years. Investment properties are carried at cost/deemed cost. The

carrying a mount of investment property is separated between lease hold land and buildings. Lease hold

land is amortised over the lease period while building is depreciated on a straight line basis over the

estimated useful l i fe at 4% per annum.

61.





18

Investment in subsidiaries comprise:

% of Non-current % of Non-current

ownership asset ownership asset

N'000 N'000 N'000 N'000

I January 2011

AP Oilfield Services Limited - - 100% 10,000

AP Marginal Oil Field Investment 100% 10,000 100% 10,000

AP Investment in AP Tchad 100% 7,677 100% 7,677

AP Properties Limited 100% 75,000 100% 75,000

AP Drilling & Completion Fluids 100% 10,000 100% 10,000

AP O i l and Gas Ghana Limited - - 100% 3 4 5 , 390

Impairment losses (100,177) - (100,177)

100% 2,500 100% 357,890

2011

AP Oilfield Services Limited - - 100% 10,000

AP Marginal Oil Field Investment 100% 10,000 100% 10,000

AP Investment in AP Tchad 100% 7,677 100% 7,677

AP Properties Limited 100% 75,000 100% 75,000

AP Drilling & Completion Fluids 100% 10,000 100% 10,000

AP Oi l and Gas Ghana Limited - - 100% 345,390

Forte Oil Energy 100% 450 100% 450

Impairment losses - (100,177) - (100,177)

100% 2,950.00 100% 358,340

2012

AP Oilfield Services Limited (consolidated) 100% - 100% 10,000 100

AP Marginal Oil Field Investment 100% 10,000 100% 10,000 100

AP Investment in AP Tchad 100% 7,677 100% 7,677 100

AP Drilling & Completion Fluids 100% 10,000 100% 10,000 100

AP Oi l and Gas Ghana Limited (consolidated) 100% - 100% 670,011 100

Impairment losses ( 27 ,677 ) (250,273)

100% - 100% 457,415 100

19 Other investments

Other investment comprise:

2012 2011 01-Jan-11 2012 2011 2012 01-Jan-11

N'000 N'000 ' N'000 N'000 N'000 N'000

Bid expenses for SPDC Oi l well 1,030,841 1,120,343 1,120,343 1,030,841 1,120,343 1 ,120,343 1,120,343

Investment in Power Sector 3,882,798 1,027,763 - 3,882,798 1,027,763 1 ,027,763 -

Impairment losses (1,030,841) (1,120,343) (1,030,841) (1,030,841) (1,120,343) (1,120,343) (1,030,841)

3,882,798 1,027,763 89,502 3,882,798 1,027,763 1,027,763 89,502

The total fair value of the investment properties as at 31 December 2012 is N2,836,202,420


Investment in subsidiaries


During the year ended 31 December 2012 N26,983,000 was recognised as rental income in statement of comprehensive ncome

(2011: N214,866,000).

Depreciation on investment properties recognised in administration expenses was N81,328,000 ( 2011: N48,956,000)

An Independent valuer - Kunle Oyewale & Associates (FRC No: FRC/2012/NIESV/00000000320) carried out the professional

valuation of these investment properties. The valuation was based on comparative market value of these properties

The valuation was carried out in Apri l 2012. Management is of the opinion that there is no significant difference in the market

value as at the year end 2012.

The consolidated financial statements include the financial statements of Forte Oil Plc and its subsidiaries; African Petroleum

Oilfield Services Limited (APOS), AP Oil and Gas Ghana Limited (APOG) all made up to 31 December 2012. AP Marginal Oil

Field Investment Limited, AP Investment in AP Tchad and AP Drilling & Completion Limited are not consolidated because there

are no significant balances relating to these entities, the carrying amount of their investments have been fully provided for and

the process for their winding up has commenced.

62.


Notes to the Conso


tements (Cont�d)

20

Derr

tax asset and liabiliies -

rp

ef

ed

st

Gou

(a)

ns

e t

ad

iabli

sRecog

ied defrred

ax assets

n l

itie

Deer

s

t nd liablitisa

tr

tble t

th

low

:f

redtax as

esa

ie

re

atibua

o

e fol

ing

Assest

Liabilities

Net

02

12

120

1J

01-an-11

2201

02

11

J01-an-11

2012

2011

a1

01-J

n-1

N0

0�0

N�0

00

N�000

N�00

0N�000

N�000

N�000

N�000

N�000

Propet, plant ande

ipm

nt

ry

qu

e,7

5479

0

47,970

5

-

--

(

82,516)

6

47,97

5

0

547,97

0 (682,516

)

ibea

es

Intang

l ss

t-

--

--

(1141

)

,0

-

-

(

,40)

11

1

ee

r

ry

Inv

stm

ntpopet

--

--

-

(709,946)

-

-

(

) 709,946

Employee benefits

--

2,545

1

--

- -

-

2,545

1

Unabsorbed Capital A

lowance

l-

--

--

,19

9209

-

-

0,919

92

rit

mOthe e

s-

- 1,10939

,2

(203,914)

(340,997)

(304,231)

(

3,14

20

9)

(40,997

3

)

05,161

8

Ta

lsc

rry-orw

ar

x os

a

fds

1,39563

,

3

1,39563

,

3

1,533

65

-

--

1,39

6

5,33

1,39

6

5,33

51,533

6

1,94360

,3

1,94360

,3

17

3,70

,7

4 (

,4)

20391

)

(340,997

7

(87,184)

,39,689

17

1,60

,66

20

98

,86

62

(b)

Rec

gnized

oRe

ognized

c

differences during the year

in other

in other

lnc

Baa

eR

cog

izd i

en

en

ompreh

nsive

Ce

Balan

ec

Rec

gnized in

oReco

izd

gn

em

sCo

prehen

ive

Balan

ec

1-

n-

0Ja

11

oo

s prfit

r los

oinc

me

-31-D

ec11

pit

s

rof orlo

sdir

tecly in equity

ic

nome

--

31Dec12

rPropety, plant and equipment

68

5 (

2,16)

,8

(1,2304

6)

- 54

7,970

--

- 5

47,970

ible

as

ets

Intang

s

(11,410)

(11,410)

- -

--

- -

Ivest

en prpery

nm

to

t (709,946)

(709,946)

- -

--

- -

po

eEm

lyee ben

fits

1

2,545

1

2,545

-

-

--

-

-

na

or

d a

lowanc

Ubs

be

Cpital A

le

9

,19

209

9

0,919

2

-

-

--

-

-

Other items

805,161

1,146,158

- (340,997)

355

1,55

--

(205,442)

o a

fd

Tax l

ssc

rry-orw

ars

6

3

51,53

(7

)

44,100

-13

,95,633

--

- 13

,95,633

986,286

(6

,0)

1632

-1,602,606

31

5,555

--

1,738,161

Me

ein te

pora

ov

mnt

mry

63.


Notes to the Conso


tements (Cont�d)

Dfer

d ta

aets

nd

ties

Co

an

ere

xss

aliabi li

-

mp

y()

aRecog

ed

ferr

d ta

as

ets

nd lia

i li ties

nis

de

ex

s a

bDe

red t

x as

es nd li abi it

s a

eat rbutabl ot hefo

long:

f er

as

ta

li e

r ti

et

lwi

As

ts

es

abilti

Li

ies

Net

2012

2011

01-Jan-11

2012

2011

01-Jan-11

2012

2011

01-J

n-11

a

N�0

00

N0

0�0

N0�00

N0

� 00

N�0

00

N0

0�0

N�000

N� 000

N0

�00

rp

r,

n n

q

im

nP

oety pla

ta

de

up

et

57,9

04

7 5

79

4,70

--

-

2

(68

, 516)

,7

5479

0

0 547, 97

(8

,1

) 6

25

6

I ntn

ile ass

ta

gb

es

--

--

-

(114

0

,1

)

-

-

, 41

) (11

0

ne

Ivestm

nt property

--

--

- (709,946)

-

-

(709, 946)

mp

ye

e

eit

El o

eb

nfs

--

1

,4

25

5-

--

-

- 1

,4

25

5

nbsob

dCa

i tl

on

eU

are

p

a Al l

wa

c-

--

--

2,19

9

09

-

-

2,1

9

09

9

Other i tems

--

11

92

,0

, 39

-

--

-

-

11

92

,0

, 39

ac

sT

x loss arry-forw

ard

1,95,3

3

63

1,395,633

651,53

3-

--

1, 395,6

3

3 ,95,63

13

3 651, 533

01,943,6

36

1,943,03

17

40

,73,7

-

-

482

53)

(

,9,

1, 943603

01,943,6

31

0,29

,517

(b)

eo

nz

dR

cg

ie

c

gie

Re

onz

d

di fferences during theyear

i n other

i n other

ac

Baln

ec

gie

Re

onz

di n

Cp

eom

rehensi v

lBaance

Rn

ecognized i

Recogni zed

Co

pre

esve

mh

ni

ala

cB

ne

0-

n-11

1Ja

f i r o

s pro

to

ls

co

ein

m1D

c11

3-

e-

po

rlo

s rf ito

sdi r

cy i

q

i te

t lne

uy

ic

mn

oe

-D-1

31

ec

2

pry,p

n n

qm

Pro

et l a

ta

d e

ui p

ent

(682,516)

(1,230,486)

- 547,970

--

- 547,970

Intngile assets

ab

(1

0

1

, 41

)

1

1 (

1, 4

0)

-

-

--

-

-

nt

eIvesm

nt property

0

4)

(7

9,9

6

04

) (7

9, 9

6-

-

--

-

-

mp

ye

e

efi

Elo

eb

nt s

125

5

,4

1

, 54

2

5-

-

--

- -

Un

bsobedCapital

l owance

ar

Al

920,919

920, 919

-

-

--

-

-

rOthe items

,0

,9

11

93

2 11

93

2

,0

,9

-

-

--

-

-

alo

scarr

-r

rs

Tx

s

yfo

wad

651533

, (744,1

0)

0-

1,395,633

--

- 1,395,633

12

0, 5

7,9

1

5)

(6

3,086

-19

3,6

3,4

0-

--

1, 94

,603

3

ove

n i

eorary

Mme

tn t

mp



21 Inventories

2012 2011 01-Jan-11 2012 2011 01-Jan-11

N'000 N'000 N'000 N'000 N'000 N'000

Raw and packaging materials 3 , 0 1 4 ,751 1 , 5 7 2,624 3 , 0 9 1,190 2 , 4 2 6,632 1 , 0 3 3,866 2 , 5 0 9,539

White products 3 , 2 1 2 ,502 3 , 0 1 2,11 2 3 , 4 66,149 3 , 2 2 6,713 2 , 9 5 9,670 3 , 3 9 4,956

Lubricants 1 , 1 0 4 ,976 9 9 3 , 3 8 6 1 , 0 59,419 1 , 1 0 2,144 9 9 3 , 3 86 1 , 0 4 9,151

Chemicals 4 1 1,864 1 8 0 , 4 8 1 9 7 , 1 69 7 8 , 5 7 2 5 0 , 8 5 3 9 7 , 1 6 9

7,744,093 5,758,603 7,713,927 6,834,061 5,037,775 7,050,815

Other assets

Consumables 1 4 8 , 2 89 1 5 5 , 6 5 4 6 4 , 3 84 1 4 8 , 2 89 1 5 5 , 6 54 6 4 , 3 8 4

22 Trade and other receivables

2012 2011 01-Jan-11 2012 2011 01-Jan-11

N'000 N'000 N'000 N'000 N'000 N'000

Trade receivables 7,200,717 9,661,990 11,835,412 4,149,658 7,899,199 10,781,715

Receivable from related companies 1,121,552 336,172 116,992 1,689,396 1,869,376 1 , 6 7 6,930

Prepayments 1,490,164 1,350,960 2,013,037 1,438,928 1,349,749 1 , 9 9 5,937

Prepaid staff expenses 43,294 65,897 164,718 43,180 64,877 164,718

- - 2,069,865 - - 2,069,865

3,911,733 10,829,689 7,013,295 3,911,733 10,829,689 7,013,295

Advance payment to suppliers 5,209,340 4,238,365 9,517,349 5,209,340 4,238,365 9,517,349

Interest Receivable 2,055,811 2,010,355 2,010,355 2,055,811 2,010,355 2,010,355

Transporters' scheme 3,321,617 3,605,277 - 3,321,617 3,605,277 -

Sundry debtors 932,798 927,763 476,259 304,380 365,208 69,089

Impairment allowance (12,328,479) (12,325,501) (3,570,686) (12,328,479) (12,325,501) (3,570,686)

12,958,547 20,700,967 31,646,596 9,795,564 19,906,594 31,728,567

Non-current - 330,281 1,285,284 - 330,281 1,285,284

Current 12,958,547 20,370,686 30,361,312 9,795,564 19,576,313 30,443,283

12,958,547 20,700,967 31,646,596 9,795,564 19,906,594 31,728,567

23 Cash and cash equivalents

2012 2011 01-Jan-11 2012 2011 01-Jan-11

N'000 N'000 N'000 N'000 N'000 N'000

593 1 , 1 3 9 3 ,049 - 4 5 6 2 , 7 4 0

1 , 854 ,745 2 ,898 ,397 3 ,834 ,884 1 ,644 ,391 2 ,491 ,270 3 ,302 ,584

2 , 013 ,047 7 5 6 , 8 2 0 13,787,001 2 ,013 ,047 7 5 6 , 8 2 0 13,787,001

3,868,385 3,656,356 17,624,934 3,657,438 3,248,546 1 7 , 092,325

(9,878,337) (6,376,654) (12,005,485) (9,771,432) (6,376,654) (11,823,169)

- - ( 4 , 0 00,000) - - (3,957,735)

(6,009,952) (2,720,298) 1,619,449 (6,113,994) (3,128,108) 1,311,421

There is no portion of the cash and cash equivalents that is not available for use by the Group.

Bank balances

Short-term deposits



Petroleum Equalisation Fund (PEF)

receivable

*The was no write down on the value of inventory during the year apart from normal production losses.

*The security forthe import finance facilities used in the purchase of these inventories is an all asset debenture executed in

favour of the financial institutions.

Petroleum Support Fund (PSF)

receivable

Cash and cash equivalents

Bank overdrafts used for cash

management purposes

Commercial Paper

Cash and cash equivalents in the

statement of cash flows

The Company�s exposure to credit and currency risks, and impairment losses related to trade and other receivables is disclosed in

note 28


Cash balances

65.

24 Capital and reserves

Ordinary shares

(a) Authorised ordinary shares:

10,000,000,000 ordinary shares of 50k eack

2012 2011 2012 2011

N'000 N'000 N'000 N'000

At 1 January 5,000,000 5,000,000 5,000,000 5,000,000

At 31 December 5,000,000 5,000,000 5,000,000 5,000,000

(b) Issued and fully paid ordinary shares of 50k each

At 1 January 489,025 489,025 489,025 489,025

Issued for cash 50,343 - 50,343 -

Exercise of share options - - - -

At 31 December - 489,025 539,368 489,025

539,368 489,025 539,368 489,025

(c) Share premium

At 1 January 61,588,213 61,588,213 61,588,213 61,588,213

Issued for cash 704,363 - 704,363 -

At 31 December 62,292,576 61,588,213 62,292,576 61,588,213

(d) Retained earnings

(e)

(f)

N'000

6,846

Translation loss on property, plant and equipment ( 6 9 , 606 )

Translation gain on deferred tax asset and liabilities 1 , 0 7 8

Translation loss on intangibles ( 1 9 8 )

Effect of exchange rate fluctuations on cash and cash equivalents 6 0

( 6 1 , 820 )

25 Loans and borrowings

2012 2011 01-Jan-11 2012 2011 01-Jan-11

N'000 N'000 N'000 N'000 N'000 N'000

Loans and borrowings

Secured bank loans - - - - - -

Finance lease liabilities 2,194,212 3,075,021 - 2,194,212 3,075,021 -

Unsecured bank loans 120,286 - 4,000,000 - - 3,957,735

2,314,498 3,075,021 4,000,000 2,194,212 3,075,021 3,957,735


Retained earnings represent the carried forward recognised income net of expenses plus current period comprehensive

income attributable to shareholders.


Forte Oil Plc and its subsidiaries had no dilutive instruments as at years end 2012 and 2011.

Foreign exchange reserve represents translation gain or loss from consolidation of a foreign subsidiary.

Reconciliation of foreign exchange reserve

Bal as at 31st December 2011

Bal as at 31st December 2012

This note provides information about the contractual terms of the Company�s interest-bearing loans and borrowings, which are

Measured at amortised cost. For more information about the Company�s exposure to interest rate, foreign currency and

liquidity r isks, see note 28



66.


Notes to the Conso


tements (Cont�d)

The G

roup

Term

nd debt

ea

me

t sc

du

s a

rp

yn

he

le

ms

nd

i o

ns

e fo

wTer

ad con

itons of

utstandig loan

wre as

llos:

Nominal

Year of

Curr

nc

ey

Inter est

ae

rt

Maturity

Fc

ae value

yCarr

ing

namou

te

ale

Fac

vu

arig

Cryn

uamo

nt

Fac

vau

e

le

ar yig

Cr

n

un

amo

t

N'000

N'000

N'000

N'000

N'000

N'000

Secured bank lo

ns

a

nc

la

li

ilti

sFian

ee

se

abie

aNair

%18

01

24

,,

2262884

2

921

,14,

2

89

13,

9,94

375

2,0

,01

-

-

Us

cred bank loa

ne

un

%23

01

25

,6

22383

228

10,

6

-

-0

4,00,000

,4,000000

2,852,678

82,314,49

3,899,194

3,075,021

4,000,000

4,000,000

Th

bank loans are secured by a negative pledge on the Comp

ny�s assets.

ea

Finance lease liabiities

l

na

c lease libilties ar pa

abe

sfo

ow

:Fi

ne

ai

ey

l a

ll

s

Future

Presen vaue

tl

Future

Pesent value

rFuture

Pre

ent value

s

iu

minm

m

ofminim

um

minmium

fi

uo m

inm

min

mim

um

inof m

imum

as

pnt

lee

ayme

nt

es

Ier

tle

e ayme

as

pnt

lea

y

en

sepa

mt

ntre

Ie

st

as

pa

tle

e

ymen

lea

e aymen

sp

tI

erst

nt

elea

e

ymen

spa

t

2012

2012

2012

2011

2011

2011

01-Jan-11

01-Jan- 11

01- Jan-11

N0

'00

N'000

0N'00

'N000

0N'0

0N

0'00

N'000

0N'00

N'000

es

ae

ar

Ls th

n on

ye

1,20

,832

4

295779

,09,053

9

1,1

0,821

6

35549

,7

80

,32

54

-

-

-

e on

nve y

ar

Betw

en

e a

d fi

es

1,42

,010

4

138852

,1,85,158

22,7

8,373

3

468676

,

2269,69

,7

-

--

ae

More th

n fiv

years

2,628,842

34631

4,

2,194,1

21

,899,194

3824,1

37

3,075,021

--

-

2012

2011

01-Ja

11

n-

otl

tre

rin

T

a ine

st bea

g

liabilities

67.


Notes to the Conso


tements (Cont�d)

y

TheCompan

Trm

s and debt

epa

mntsc

dul

er

ye

he

e

r

nf

r

ol

:Tems andco

ditions o

outstandingloans w

ee as f

lows

mna

No

il

arof

Ye

Curenc

ry

es

Intre

t

a rt e

Mat

ity

ur

u

Ca

nrryig

mn

aou

tce value

Fa

iCarryng

amount

Fac

vu

e ale

Ca

nrryig

nt

amou

N'00

00

0N'0

0N'00

N'000

N'000

N'00

0

Secured ank loans

b

ncelas

libit

Fian

e

e a

liies

Naira

18%

24

01

2,2884

6,

2

2,19421

,2

,9,194

389

3,7502

0,

1-

-

Unsecured bank loan

-

-

-

-

3,95773

,5

,97,735

35

,8,842

262

2,9421

1,

2,

9,94

389

10

,1

3,7502

,7,735

395

95

3,57,73

an

loa

es

r

gaie ldg

ote

mpa

s

sTheb

k

ns ar ecuedbyane

tv

pe

e n h

Co

ny�sas

et.

Finance lease iabilities

l

nce l

as

libit

re

pa

able as f

ows

Fian

ee a

liiesa

y

oll

:

Fue

utr

rent

le

Pes

vau

Fue

utr

ent

lPrse

vaue

utr

Fue

ent

le

Prse

vau

minmum

io m

nmum

fii

mnmum

ii

o m

nim

um

fi

minim

um

o m

nim

um

fi

ea

leas

pyment

tIn

erestlease payment

lease payment

tIn

erest

e

ylasepa

ment

lease payment

nr

Ite

est

e

ylasepa

ment

012

2012

212

20

011

22011

11

20

1-

n-1

0Ja

1-

n-1

01Ja

101Ja

1-

n-1

N'000

N'000

N'00

0N'000

00

N'

0N'00

0N'

000

0N'00

00

N'

0

stano

rLe

s h

ne yea

1,04,832

2

29577

,9

09,053

9

1,60,821

1

35549

,7

5,324

80

-

-

-

ean

f

aBetweenon

d iveye

rs1,24,010

4

13885

,2

1,85,158

22,38,373

7

46867

,6

,9,697

226

-

--

et

n v

yr

Mor ha

fie eas

2, 628,842

36

44,31

,4

1219

,21

13,899,94

824,173

3, 075,021

--

-

2012

1201

-n-

01Ja

11

ta nerstbe

ring

To

lit

e

a

blia

ilities



26 Other long term employee benefits

The Company

2012 2011 2012 2011

N'000 N'000 N'000 N'000

Balance at 1 January 780,596 1,835,967 667,438 1,083,941

Charged to profit and loss 120,292 2,027,004 112,136 1,923,376

Payments during the year (757,948) (3,082,375) (671,739) (2,339,879)

Balance at 31 December 142,940 780,596 107,835 667,438

Expense recognised in profit or loss

Current service costs 110,370 2,027,004 102,478 1,923,376

Interest costs on obligation 9,922 - 9,658 -

Actuarial (Gains) or Losses - - - -

2,027,004 112,136 1,923,376

The expense is recognised in administrative expenses in the statement of comprehensive income.

27 Trade and other payables

2012 2011 01-Jan-11 2012 2011 01-Jan-11

N'000 N'000 N'000 N'000 N'000 N'000

Trade payables and accruals

NNPC accounts payable 2,602,883 4,168,879 3,560,033 2,602,883 4,168,879 3,560,033

Other trade creditors 5,395,806 4,853,110 9,966,314 2,577,784 3,297,496 8,670,548

Inventory acruals (Note 27.1) 4,044,166 6,587,388 6,914,965 4,044,166 6,587,388 6,914,965

12,042,855 15,609,377 20,441,312 9,224,833 14,053,763 19,145,546

Non-trade payables

and other creditors

Underwriter's commitment payable 114,174 50,000 6,470 114,174 50,000 6,470

Staff pension payable 22,746 10,979 12,325 22,746 10,979 12,325

Licencees deposits 575,188 619,392 629,758 575,188 619,392 629,758

Unclaimed dividends 885,466 752,922 - 885,463 752,921 -

Withholding tax payable 383,399 393723 379,126 345,345 361,479 379,126

1,517,937 1,018,554 - 1,517,937 1,018,554 -

Other creditors 6,641,843 10,088,611 2,954,302 5,688,859 9,700,967 3,916,937

10,140,753 12,934,181 3,981,981 9,149,712 12,514,292 4,944,616

22,183,608 28,543,558 24,423,293 18,374,545 26,568,055 24,090,162

27.1. This account hold accruals for value of goods received pending receipt of suppliers' invoices

The Company�s exposure to currency and liquidity r isk related to trade and other payables is disclosed in note 28.

Petroleum Equalisation Fund (PEF)

payable

The movement in the present value of the other long term employee benefits was as follows:


The actuary valuation was carried out by Miller Kingsley (FRC/2013/NAS/00000002392) of KMC Actuarial Services a Fellow of

the Society o f Actuaries, USA

69.



28 Financial instruments

Credit risk

Exposure to credit risk

2012 2011 01-Jan-11 2012 2011 01-Jan-11

N'000 N'000 N'000 N'000 N'000 N'000

Loans and receivables (Note 22) 12,958,547 20,700,967 31,646,596 9,795,564 19,906,594 31,728,567

Cash and cash equivalents (Note 23) (6,009,952) (2,720,298) 1,619,449 (6,113,994) (3,128,108) 1,311,421

6,948,595 17,980,669 33,266,045 3,681,570 16,778,486 33,039,988

Forex exposure

2012 2011 01-Jan-11 2012 2011 01-Jan-11

N'000 N'000 N'000 N'000 N'000 N'000

257,624 879,819 380,384 99,585 588,386 1,594

3,074,007 1,388,891 765,115 244,713 - -

3,331,631 2,268,710 1,145,499 344,298 588,386 1,594

Trade and other receivable

denominated in other currencies

The carrying amount of financial assets represents the maximum credit exposure. The maximum exposure to credit

risk at the reporting date was:



Bank balances denominated in other

currencies

70.


Notes to the Conso


tements (Cont�d)

Impairment losses

hG

up

Te

ro

he agin

of lans n

re

ev

bes a

th re

oin

dat w

a:

Tg

oa

dc

ia

lt

ep

rtg

es

sGro

sI

im

nmapar

et

roG

ss

ae

Imap

i rm

nt

sGro

sm

pr

tI

aaimen

012

22012

21

01

20

11

-J01

an- 11

11

0-Jan-1

N0

0'0

N0

'00

N'0

00

N'000

N0

0'0

N'000

0on

s-3 m

th1

,8905

20

,0

,35

25

7,9

6142

4,5

,9

66

7,9

,36

82

22

,51

24

3,1

030

2,3

,8

70

4-6

onths

m,4

881

12

,5

-9263,968

,-

9,0

9,3

02

2487,956

s7-9 m

onth

73,925,66

1,735,439

85,58

,114

1,455,035

--

Mr th

9 m

nth

oe

an

os

,33

712

,94

,27

51

,114

89

33,7

,71

27

,11

,98

4,6

63

17

,90

-

5,

2,287025

24

912,3

8,7

33, 026,469

12,325,502

12

35,2

7,28

,3570,686

21

02

2011

N'000

N'0

00

ne

t

aBala

c a

1Janu

r y1

35

02,2

,51

37

,66

,50

8

maimento

srecognie

Ip

r l

s

zd

2,78

98,54,8

57

1

ne

t1

cm

eBala

c a

3 De

eb

r1

38

72,2

,49

22

,51

1,3

50

hCom

aT

e

pny

he agin

of lans n

re

ev

bes a

th

re

oin

dat w

a:

Tg

oa

dc

ia

lt

ep

rtg

es Gro

ss

Imapairment

Gro

ss

Imapairment

Gro

ss

mapair

ent

Im

2012

2201

2011

2011

-J01

an- 11

10

-Jan-11

N0

0'0

N0

0'0

N'000

N'

000

N0

0'0

N0

'00

0-3

onths

m10,9

2,41

12

5,375,26

913500,282

,7,892,326

24,613,91

03082,730

,

s4-6 m

onth

81,428,15

-3

9,26

,968

-9,009,232

748

,956

7on

s-9 m

th,

57

392

,66

,75

31

3,4

95

81

5,8

,14

15

,05

,45

3-

-

Mor than 9 m

nths

eo

,8705

55

,0

5,2

7,1

11

43879,731

,2,78,1

09

41,6

6,3

79

0-

22

,03

2,1

44

1,2

49

23

8,7

3,2

29

23

,05

22

,1

1,3

550

,9

23

352

9,5

,50

83

7,6

6

212

020

11

N'000

N'000

ln

e t

Jn

aBaa

ca

1a

ury

12325,01

,5

3,70,6

65

8

mIm

pair

ent loss recognized

2,978

8,754,815

ne

t1

cm

Bala

c a

3 De

eber

13

87

2,2

,49

22

,51

1,3

50

et

e

fl

Themovement in the allowance forim

pairment in resp

c of loans and receivablsduring the year was as ol ows:

Asat31st

eDecemb

r2

1,

02

ree

bc

iva

leof

ga

e-6

4o

hm

ntsre

tla

esto

rea

mn

pp

ye

tswhcihare

ei

crtan

otbeu

ltiizedwheil

sa

at

1t

3s

De

eb

rc

me

2,

011

cie

be f a

e4-6

mn

sa

i re

pc o

Pe

lu

Supp

rtun

ose e

ity o

cllcio

i uaaneed s

he

re

ak

dy l

w.

reev

al

og

oth

re

ns

et

f troe

mo

Fdwh

crtan

f oe

tn

sg

rt

a t

ya

bc

e b

a

he m

vmen in th

al lwance fo impairment i re

pect o loan

nd re

ev

bls durin

te e

r was sfollo

:T

oe

te

or

ns

fsa

cia

eg

hy

aa

ws

71.


Notes to the Conso


tements (Cont�d)

Lii

kiqudty ris

Th

Group

e

ay

C

rring

onta

tual

Crc

nth

6 m

os

ehan

Mor t

aun

mo

ts

lca

h fows

ls

ore

s1

nts

6-2 m

oh

-2 y

as

1e

r-5

ye

s2

ar

a5 ye

rs

N�0

00

N�0

00

N�0

00

N0

0�0

N�000

N�000

N�000

Nrv

tv

inan

iaon-deiaief

cl

liabilities

ea

Securd b

nk loans

Finance leaseliabilities

2,194,12

22,6

8,84

22

6571

1,8

65

,81

71

1,314,480

--

Tde

ndoter

aya

ls

ra a

h

pbe

22,18

,608

32,183,08

26

2,183,08

26

--

--

nBa

k overdraft

9,878,337

11

0,413,55

11

0,413,55

--

--

34,256,157

36

5,225,05

39

3,253,44

61

57,81

14

8,31

,40

--

arryin

C

gContractual

months

6Moe than

ra

un

mo

ts

ls

ca

h fow

ls

ore

s1

mnts

6-2

oh

- y

as

12

er

-5y

s2

ear

5 years

N�000

N�000

N�000

N�000

N�000

N�000

N0

0�0

Non-dervatve financial

ii

lia

iles

biti e

Securd bank loans

--

--

--

-Fin

ne leaseliabilities

ac

30

5,02

,7

13,899194

,616,394

653,957

2,628,26

7-

-T

de

nd

er

aya

ls

ra a

oth

pbe

85

3,5

2,4

58

85

35

2,4

,58

85

35

2,4

,58

--

--

ve

aBanko

rdrft

,7

,4

63

665

,6,738742

,6,738742

--

--

3,9

23

79

5,3

3,8

,44

91

19

3,9

,64

58

89

639

75

,5

287

,62

,26

--

el o

n ar t

e c

nrctu

l atriis

fia

a libliies i

cdin

sim

ae

ne

s a

me

t a

d e

cu

ig

hmp

ct

fn

ttig a

re

ns.

Th

folwig

eh

ota

am

ute

o fn

ncila

it

,n

luge

ttd i

tre

tp

yns

nxldn

te i

ao e

nge

me

t

31-D

ec-12

1e

-3

-Dc11

tisn

tp

c

th

los

ld

int

au

tls

u

c

ia

lr,

ga

tn

sI o ex

etedtha the cas

fw

incu

ed

hem

triy anayisco

ld oc

ursignfic

ntly earie

or at sinific

nly differe

tamount.

TheCompany

Cn

arryig

otra

uC

nctal

6

ns

mo

thMo

an

reth

m

ut

ao

ncash low

fs

or le

ss

12mo

ths

6-

n

- e

r12y

as

25

ar

-ye

s5 y

as

er

N�000

N�000

N�0

00

N0

�00

N�000

N�000

N�0

00

Non-dervatve fina

cial

ii

n

ab

liilities

crd a

k lo

nSe

ue

bn

as

--

--

--

-Fin

ne e

sa

lis

ac

la

e libitie

,9

121

4,2

2,2

426

8,8

25

,11

67

85

11

67,8

11

,40

,34

8-

-Trade and other payables

18,374,545

18,374,545

18,374,545

--

--

an

vrra

Bk o

ed

ft,7

13

97

,42

1,3

52

01

,58

1,3

528

01

,5-

--

-4

30,3

0,189

131,3

8,915

,5

29347,2

45

11

67,8

1,4

0,314

8-

-

Car

n

ryig

ontra

al

Cctu

6 m

oth

n

sMo

thn

re

a

amount

cash flws

oor less

6-12 m

onths

12 y

ars

-e

2-5 years

5years

N�000

N0

�00

N�0

00

N�0

00

N0

�00

N�000

N�000

Non-derivativefi

ancial

n

iabilities

l

erdb

na

sS

cue

a

k lo

n-

--

--

--

Finance lea

e libilities

sa

3,075,021

3,899,194

616,394

653,957

2628,726

,-

-rd

no

ep

yb

sTa

e a

d th

r a

ale

66

,02

,58

55

66

,02

,58

55

,6

5265

8,0

5-

--

-Ba

k

ed

ftn

ov

rra

366

46,7

,5

767

26,1

,4

61

,72

,76

4-

--

-0

36,019,73

137,183,99

3,

3,901191

653,957

82,62

,726

--

31-D

ec-12

-1

31Dec-1

s o

ee

ea h

cs

lc

di

thr

aa

o

lo

crs

na

t e

e,

t

igiic

lyif

rn m

tsItin

t xp

ctd th

tte a

h fows in

lude

n

e m

atu

ity n

lysisc

ud c

u ig

ific

nly

arlir ora s

nf

ant d

fee

ta

oun

.

e

llowngae

e c

na

tual

ar

eso

acal liabiltie

, cludin

st

aed in

rs p

ym

n nde

cudingth

p

ct

f nettin

agre

ents.

Th

foi

r

tho

trc

mtu

iti

ffin

ni

is

inge

imt

tee

ta

ets

a xl

eim

ao

g

em

73.


Notes to the Conso


tements (Cont�d)



29

Contingencies

(a) Guarantees

(b) Pending litigation and claims

(c) Financial commitments

30 Transactions with key management personnel

Loan to directors

Key management personnel compensation

Group

1. Group Chief Executive Officer

2. Group Chief Financial Officer

3. Group Head Human Resources and Admin

4. General Manager - AP Oil Ghana Ltd

5. Managing Director - AP Oil Services Ltd

Key management personnel compensation comprised:

2012 2011 2012 2011

N'000 N'000 N'000 N'000

Short-term employee benefits 124,316 148,397 100,471 128,580

Contribution to compulsory pension fund scheme 5,579 7,290 4,949 6,375

Defined benefit gratuity scheme 14,187 17,196 12,559 16,073

Termination benefits - 338,680 - 299,626

144,082 511,563 117,979 450,654

In addition to their salaries, the Company also provides non-cash benefits to directors and executive officers. Also, lump-sum

benefits payable upon retirement or resignation of employment are fully accrued over the service lives of the directors of the

Company.

Julius Omodayo- Owotuga

Oludare Arinde

Nikita Oluade

Kennet Olisa

Mike Ameh

Mrs. Lola Segun-Idahor

Nikita Oluade

Pedro Adigwe

The Group has 108 Number of employees in 2012 and 263 in 2011. T he total number of employees for the company were

70 in 2012 and 215 in 2011.


No loan to directors was issued during the period ended 31 December 2012.

During the year, the Company did not issue any guarantee to or on behalf of some other persons in relation to a loan.

The Company is engaged in lawsuits that have arisen in the normal course of business. The contingent liabilities in

Respect of litigation and claims amounted to N504M as at 31 December 2012 (2011:N417M). In the opinion of

the directors, and based on independent legal advice, the Company is not expected to suffer any material loss arising

from these claims. Thus no provision has been made in these f inancial statements.

The Directors are of the opinion that all known liabilities and commitments, which are relevant in assessing the state of

affairs of the Company, have been taken into consideration in the preparation of these financial statements.

2012 2011

Akin Akinfemiwa

74.


Notes to the Conso


tements (Cont�d)

31

rla

ea

ton

Other

etd party trnsaci

s

Relatedp

ty ar

2012

2011

2012

2011

-Ja

01

n-11

N00

'0

N'000

00

N'

0N'000

N00

'0

eno

eu

Ltd

Zn Petrol

m&Gas

Purchases &

Rent

vor

Core in

est

2,716,376

45,7

,605

33

21

5,222

41,5

7,893

,35

54

3,12

Fin

had

ergy td

es

eEn

LPurch

es

as

ate

r ore

ies

Rel

d paty toc

nv

tor

82,6

7,376

785

94

,8222

6,69

126

,965

-Plati

um

Fleet Ltd

n

Purch

ses

aR

late

arty

core

ives

re

dp

to

n

to-

25,6

2,233

1,426,246

1,42

46

6,2

4,60

,013

2td

Pertinex L

Purchases

Relate

party to core investor

d-

126

,965

--

-ne

td

Neptu

Energy ServicesL

hs

Purc

ase

ed

oRelatd to a form

er

irectr

--

050

,000

500000

,0

50

,000

-5,40

52

3,7

,47

52

03,69

67

2,

0,164

3,736,104

59,4

5,138

32

Events a

te th

en

of re

on

at

fr

ed

prtigd

e

There are no significantpost reporting date events w

hichcould have had a

aterial effect on the state of affairs of the Company a sat 31s December 2012 that

mt

v d

eb

r

ri

li

n

ate

tsha

e nota

equatly eenprovided fo

o d

scosed n thefi

ancil sta

men

.

Balanc

utstandin

s at 31Dece

ber

eo

ga

m

rnsa

a

ear

Ta

ctionv

lueY

nd

Dcm

eed 31

eber

ao

Nture f

taction

rans

Thea

gregate alu

f tr

nsa

tion

ando

stan

ngb

ance

relat

g toth

e en

ties

r sfol ows;

g

veo

ac

s ut

di

al

sin

es

tiweea

l

on

ba

th

rla

arti

r

pri

atam

l.Non

sa

e

.All

utsta

ding

lanceswith

ese

etedp

esae

ced

r

�s ength

e of the

e balnces iss

cured

ela

on

Rti

ship

75.


Notes to the Conso


tements (Cont�d)

33

at

tan

nSs

Explan

ion of r

sitio

to IFR

TheGru

o

p

Correction

Adjsted

u

Effect of

Previous

oe

tiC

rrc

on

de

Ajustd

Eec of

fft

Nte

osGA

PPreviou

A

fr

o Erro

GAAP

transtion to IFRSs

iSs

IFR

AGA

PofEror

r

G AAP

tans

ion to FRSs

rit

ISs

IFR

N�000

N�000

N�000

N�000

N0�00

N�000

N�000

N�000

N00

�0

N0�00

Assets

Property, plant and equipment

b,

, e, f

c3,3

9,31

98

392,6

66,

9,40

034

1,8

7,95

57

194,1

0,7

21

92

36

,610,886,757

(1,266

98)

,00,6

9,62

59

gl

Intan

ibeassets

b-

--

38,034

38

34

,0-

--

30,363

30

63

,3

Ine

tment prpery

vs

ot

c-

--

2,366,485

2,366,485

--

-8

2,32

,457

2,328,457

Investm

ent in e

uiyaccouned in

ete

sq

t

tv

se

2,500

-2,5

00

-2,500

2,950

-0

2,95

-2,950

e

Otherinv

stm

ents

02

89,5

-02

89,5

-8

02

9,5

17,76

,02

3-

1,027,763

-1

7,76

,02

3

efe

set

Drred tax as

s1

3,47

,77

1-

13,47

,77

1-

13,47

,77

14

8,38

,20

21

3(18,59)

4,090,023

(

146,4

0)

2,

21,

3,603

94

Tad

d other eceivables

rean

rg

1,285,284

-1,2

5,284

8-

1,285,284

,330281

-3

,281

30

-,2

330

81

Total non-current assets

64

12,4

,155

92,636

56

12,5

,791

950,342

07

13,5

,133

63

16,3

,497

(25,723)

16

37,77

,34

(1,05

98)

3,6

84,

15,2

076

ass

tsOther

e

64,38

4

-6

84

4,3

-64

84

,3155,654

-,65

155

4-

155,654

Ine

ries

vnto

7,71

,927

3

-7,713,927

-7,713,927

5,758,603

-8,6

5,75

03

-5,758,603


d,e

62

31,1

,103

-62

31,1

,103

(800,79

)1

361,

0,3

312

42,

22,9

659

-22,942,659

(2,571

72)

,92

70,6

0,3

87

ash

ncasheq

vl

tsC

ad

uiaen

17

24,9

,634

-1

24,9

7,6

34

-17

24,9

,634

6,3

3,65

55

-3,6

6,355

5-

6,3

3,65

55

Totl

ure

t set

ac

rn

as

s56,565,348

-56,565,348

(800,

)791

655,7

4,557

132,5

3,271

-

3

13,2

2,5

71

2,5

72

(71,9

)41

29,9

,299

Total assets

29

69,0

,503

92,636

22

69,1

,139

14

,551

971

69,2

,690

76

48,8

,768

(25,723)

48

51,04

,85

(3,62

70)

5,6

25,

45,2

375

tEquiy

Sh

ecapital

ar

,0489

25

-489,025

-,0

489

25

,0489

25

-4

,025

89

-,0

489

25

Shae premium

r88

61,5

,213

-8

61,5

8,213

-88

61,5

,213

88

61,5

,213

-61

88,21

,53

-88

61,5

,213

i x

ng

sFore

gne

cha

e re

erve

--

--

--

--

6,

684

66,84

evalati

n r

ves

Ru

oeser

a2,4

3,441

9-

2,

3,441

49

2,

4(

493,4

1)

-2,4

3,441

9-

3,

2,49

441

24

(,493,4

1)

-

Retained eanings

rh

38

(9,191,99)

92,636

32

(9,099,63)

20,68

,44

236

58

(,658,

1)

54

56

(,716,

8)

436

2,6

(54,67

932)

3,

1,5

58)

(20,8

56

79

(,194,

0)

tTotal equity attributable o equity holders

oh

o

py

f teC

man

25

78,78

,30

36

92,6

271,4

5,4

16

(52,759)

25

18,65

,47

94,11

,85

142,636

9,896,747

(4,007,53)

45

9,29

,88

4

Correction

Adjusted

Effect of

Core

tirc

on

de

Ajustd

Effect of

oN

tes

Pre

us G

AP

vio

AfEr

ro

roG AAP

sio

t

Rtran

itn oIF

Ss

IFSs

RPre

s G

AP

viou

Aof Error

GAAP

transtion to IFRSs

iIF

Ss

R

N00

�0

N0�00

N0�00

N�000

N00

�0

N00

�0

N�000

N�000

N�000

N00

�0

sLiabilitie

ply

e en

tsEm

oe

befi

i1,9

5,991

3-

1,

5,99

93

110

)(

0,024

1,8

5,967

3517,170

-

51

170

7,

63,4

2

26

80

7,596

Deferedta

liiiti

r

x ables

g,8

484

50

-,8

484

50

30

,334

2,18

787

4,9

340

97

3 (118,59)

2,638

22

18

59

1

,3

40,9

3

97

Total non-current liabilities

02,42

,841

-0

2,42

,841

202,310

3,

2,62

151

,16

858

7

,3 (118

59)

8 739,08

381,785

1,

1,593

12

ns

d bor

igs

Loa

an

rown

d4,0

0,000

0-

4,

0,00

00

0-

40,00

,00

0

,0

1 3

75,02

-

,075

1

3,02

-

5,0

3,07

21

Ba

Overra

nk

dft

012,0

5,485

-0

12,0

5,485

-12

05,48

,05

6,3

6,654

7-

,376,

4

665

-6,3

6,654

7

Current tax liabilities

,104

801

-,10

801

4-

,1801

04

2,255

19

-

25

219,

5

-,255

219

doth

a

abes

Tradean

erp

yl

24

23,29

,43

-2

23,2

4,4

93

-23

24,4

,293

293,5

8,4

60

50,000

28,543,560

2)

(28

43,55

,58

Totl

ur

iaiiti

a c

rent l

bl

es

41,229,882

-41,29,882

2-

241,2

9,882

38,164,490

050,0

0

3214,4

8,

90

38,214,488

Total liabilitis

e50

43,6

,723

-50

43,6

,723

20

,310

253

43,8

,033

22

39,0

,657

(68,359)

38

54,29

,98

3,783

81

36

39,3

,081

oi

n

i

iT

tal equty

adlabilties

69

29,50

,03

36

92,6

69

22,1

,139

,5149

51

69

71,69

,20

48

76,76

,88

(25,723)

548,8

1,045

(3,625,70)

645

25,37

,25

As stated in note 2(1), the

e are the G

roup�s first financial statements prepared i

accordan

e wit

IRSs.

sn

ch

F

0J

-1-an11

3D

c-1

1-

e1

he

ouni

i

soutn

4een

d n

parng

fi

al s

e

3e

em

the

oai

im

on

es

tedn

ni

ntsfor

e ea

end

ber

T acc

tngpolcies et

i note

have b

applie

ipre

i the

nanci

tatem

nts forthe year ended

1 D

cber2012,

cmpartve nfor

ati

pr

en

i these fi

ancal stateme

th

yr

ed 31Decem

t

ea

ono

ai

S

tem

t f

cp

i

u

ytheGr

p�

da

t2011 andin he prparti

f

n openngIFR

sta

en

ofinan

ial

ositonat1Jan

ar 2011 (

ou

s ate of tr

nsion.

i)

In prepa

n its op

ig

FS s

atm

nt of finan

ial po

ition t

eGrup as adu

te amo

ntsrep

red prev

sy in

i acc

rance

iancil s

at

nt

pared n

od

ith Nieri

nGAA

. An explanaino h

the tran

ition from rvo

AA

o

rig

enn

IR

te

ec

s,h

o

hjs

du

ot

iou

lfn

at

eme

s rep

wg

a

Pto

f

ow

spe

iusG

Pt

fIFRSs has affectedthe G

roup�s financial position, financial perform

ance and cash flows i

set out in the ollowing tables and the notes that accompan

the ta

le.

sy

bs

01-Jan-11

c31-D

e-11

(1,454,177)

The Company

Correction

dAdjuste

Effect of

ePrvious

Correction

sd

Adju

tef

Effect o

ot

Ne

reio

sA

PP

vu

GA

f E

roo

rr

A

PG

Ara

sio

tIF

St

nit

no

Rs

IR

sF

SG

AA

Pf

rrr

o E

o

AP

GA

rs

io t

IF

Stan

itn

oR

sR

sIF

S

N0

�00

N�000

N00

�0

N0

�00

N�000

N�000

N�000

N0�00

N00

�0

N�0

00

Assets

Property, pla

t and equipment

nc, e, f

7,948,207

92,636

8,040,843

6,614,278

9,436,3

11

92,636

9,528,947

(1,264,821)

8,264,126

Inn

b a

tagile

ssets

b-

--

83

3,0

43

08,34

--

-9

82

,05

,05

29

8

Inv

stm

ent property

ec

--

-

26

,3

6,485

2,366,485

--

-2,328,457

2,328,457

Inv

stm

ent in equity accounted investees

e357,890

-357,890

-357,890

358,3

04

-358,340

-358,340

Other investm

ents

89,502

-89,502

-89,502

1,027,7

36

-1,027,763

-1,027,763

Deferred ax assets

t1,773,471

-1,773,471

-1,773,471

4,208,3

28

(118,359)

4,090,023

,

62

) (214

,40

1,943,603

Td

a

h r

ea

era

e ndoterec

ivbls

g2

,4

1,8528

-,

58

128

,24

-1

82

,25,84

30

3,281

-0

833

,21

-,2

1330

8

Total non-current assets

11,454,354

92,636

11,546,990

977,954

12,524,944

15,361,0

77

(25,723)

15,335,354

(1,053,699)

4,281,655

1

Inv

ntories

e

,

59

711

,19

-7,115,199

-7,115,99

15,193,4

92

-5,193,429

-5,193,429

Td

a

h r

ea

era

e ndoterec

ivbls

d,e

39

,1

0,9883

-,

83

3099

,81

(5

455

,58)

04

23

,43,83

2,1

82

4,283

-,

88

2214

,23

,1

7)

(257

,90

,33

19,576

1

Cash and ca

h equivaents

sl

17,092,325

-17,092,325

-17,092,325

3,248,5

64

-3,248,546

-3,248,546

Total curent assets

r55,206,355

-55,206,355

(555,548)

54,650,807

30,590,2

85

-30,590,258

(2,571,970)

8,018,288

2

Ta

se

otl a

sts

66

,9

6,6070

,6

9263

,3

46675

,35

20

42

,46

77

76

,15,51

4,9

15

5,335

(,

32572

),

51

4592

,62

,5

6)

(362

,69

,93

42,299

4

Eq

itu

y

Sr

ci

hae aptal

4,

58902

-9

248

,05

-8

04

9,25

49

8,025

-9

248

,05

-,

548902

Sr

pm

mhae re

iu6

5,

31,8821

-,

81

6158

,23

-1

82

6,5

8,13

6,5

81

8,213

-,

81

6158

,23

-,

361,58821

Ra

er

sevalu

tion r

seve

a4

,1

2,9344

-,

34

249

,41

,3

4(2

49

,41)

-,4

32

9,441

-,

34

249

,41

34

)(2,49

,41

-

Ra

ee

netin

d arings

h3

5,

2(9,4814

),

69263

(,

50

3945

,56)

,2

6239

,89

76

6)

(3,0

2,37

(5,1

85

6,004)

,6

4263

(,

56

5512

,38)

39

)(1,51

,44

,2

(56,63886

)

Toal

qityatrib

tale

toeq

it h

ldrs

t e

u

tu

b

u

yo

e

oth

Cm

ay

f e

op

n2502

,57

,2

39

,66

23

2,1

5,73

51

1(1

0,72

05

)5,1460

20

,1

,402,6

59

74

,66

23

,45,11

94

3,0

635)

(40

,95

3,3

6,4

87

Corecion

rt

Aju

ted

ds

Efect o

ff

ore

tion

Cr

cA

justed

dE

fet of

fc

Nte

os

rio

sA

PP

ev

u G

Af E

ro

ror

A

PG

Ara

sio

tIF

St

nit

no

Rs

IR

sF

Sr

isG

AP

evou

A

Pf

rr

o E

roA

P G

Ar

sio

t I

Stan

itn

oFR

sR

sIF

S

N�000

N�000

N00

�0

N0

�00

N�000

N�000

N�000

N0�00

N00

�0

N�0

00

Lb

tia

iliies

Employee benefits

i821,032

-821,032

262,909

1,083,941

404,5

92

-

05

4

4,29

69

2

2,09

6,

8

6743

De

ea

lii

efrr

d t

x ablities

g1

,0

8062

-0

218

,60

23

30

,34

89

42,54

-

11

,39)

(

85

(8

511

,39)

1835

1,

9 -

Total non-current liabilities

1,001,652

-1,001,652

565,243

1,566,895

404,5

92

1,3

9 (18

5)

8

1

2

6,70

82

3

1,68

6,

8

6743

Ln

a

rw

goa

s ndboro

ins

d0

,0

4,0000

-,

00

400

,00

26

(4,2

5)

35

,735

,97

- -

-

- -

Bank O

verdraft

1182

,19

,3

6-

1,8

369

12

,1-

1,823,169

1,3

65

67

,64

-

6,376,654

-

6

37

,64

,6

5

Cr

tx

ait

uren ta

libilies

7,

92318

-3

872

,19

-2

,189

73

49

17

,39

-

17439

,9

-

17

,39

4

9

Trade and other pa

ables

y24,090,162

-24,090,162

-9

,12

24,0

06

29,593,078

0

5

,000

29,643,078

(2)

2

6,

6

9,4307

Ta

ue

t b

its

otl c

rrn

lia

ilie

46

,0

0,3652

-,

62

4063

,50

26

(4,2

5)

09

,255

4,5

43

,14

64

,131

,0

5000

6,19413

3

,1

)(2

3619

,19

,4

2

Ta

iail

eotl l

bitis

46

,2

1,3817

-,

87

4163

,12

27

52

,98

26

14

,11,50

3

,58,60

64

6

(6

,39)

85

6,48030

3

,1

8126

3,

6 3686

,57

,1

6

Total equity and libiities

al

66,660,709

92,6

63

66,753,345

422,06

467,175,751

45,951,335

(25,723)

45,925,612

(3,625,669)

42299,943

,

01-Jan-11

31-D

ec-11

01-Jan-11

31-D

ec-11

1,2656

)

(4

,5

77.


Notes to the Conso


tements (Cont�d)



Reconciliation of comprehensive income for the year ended 31 December 2011- the Group

Note Previous GAAP Correction of

Error

Adjusted

GAAP

Effect o f

Transition to IFRS IFRSs

N�000 N�000 N�000 N�000 N�000

Revenue 116,999,641 - 1 16,999,641 - 116,999,641

Cost of sales (108,281,526) - (108,281,526) 8,766 (108,272,760)

Gross profit 8,718,115 - 8 , 7 1 8 ,115 8,766 8,726,881

Other income j, 1,044,081 ( 5 0 , 0 00) 994,081 87,546 1,081,627

Distribution expenses (5,838,670) - (5,838,670) - (5,838,670)

Administrative expenses b,c,d,e,f (11,820,011) - (11,820,011) (1,987,738) (13,807,749)

Other expenses (8,709,598) - (8,709,598) - (8,709,598)

Results from operating activities (16,606,083) (50,000) (16,656,083) (1,891,426) (18,547,509)

Finance income d 84,730 - 84,730 1,971 86,701

Finance expenses d (1,439,366) - (1,439,366) (49,780) (1,489,146)

Net finance cost (1,354,636) - (1,354,636) (47,809) (1,402,445)

Loss before income tax (17,960,719) - (18,010,719) (1,939,235) (19,949,954)

Income tax expense g 2,376,260 - 2,376,260 (1,962,515) 413,745

Loss for the year (15,584,459) - (15,634,459) (3,901,750) (19,536,209)

Reconciliation of comprehensive income for the year ended 31 December 2011- the Company

Correction of Adjusted Effect o f

Note Previous GAAP Error GAAP transition to IFRSs IFRSs

N�000 N�000 N�000 N�000 N�000

Revenue 103,825,837 - 103 ,825,837 - 103,825,837

Cost of sales (95,774,521) - ( 9 5 , 774,521) - (95,774,521)

Gross profit 8,051,316 - 8 , 0 5 1 ,316 - 8,051,316

Other income j, 787,518 ( 5 0 , 0 00) 737,518 - 737,518

Distribution expenses (5,835,574) - (5,835,574) - (5,835,574)

Administrative expenses b,c,d,e,f (11,049,124) - (11,049,124) (1,895,804) (12,944,928)

Other expenses (8,709,598) - (8,709,598) - (8,709,598)

Results from operating activities 16,755, (50,000) (16,805,462) (1,895,804) (18,701,266)

Finance income d 84,730 - 84,730 1,665 86,395

Finance expenses d (1,385,511) - (1,385,511) (49,781) (1,435,292)

Net finance cost (1,300,781) - (1,300,781) (48,116) (1,348,897)

Loss before income tax (18,056,243) - (18,106,243) (1,943,920) (20,050,163)

Income tax expense g 2,436,381 - 2,436,381 (1,962,446) 473,935

Loss for the year (15,619,862) - (15,669,862) (3,906,366) (19,576,228)

78.

Reconciliation of cash flows for the year ended 31 December 2011

2011

Previous

GAAP

Effect of

IFRS 2011-IFRS

2011

Previous

GAAP

Effect of

IFRS 2011-IFRS

N'000 N'000 N'000 N'000 N'000 N'000

Notes

Net cash used in operating

activities a (2,899,083) - (2,899,083) (3,131,787) - (3,131,787)

Net cash used in investing

activities b (3,026,539) - (3,026,539) (2,947,471) - (2,947,471)

Net cash (used in)/provided

by financing activities c 1,439, (3,025,241) 1,585,875 (1,385,511) (3,025,240) 1,639,729

(7,364,988) 3,025,241 (4,339,747) (7,464,769) 3,025,240 (4,439,529)

Material adjustments to the statement of cash flows for 2011


Net (decrease)/increase in cash

and cash equivalents

Bank overdrafts of N3,025,240 that are repayable on demand and form an integral part of the Company�s cash

management were classified as financing cash flows under previous GAAP. These overdrafts were reclassified as

cash and cash equivalents under IFRSs. There are no other material differences between the statement of cash flows

presented under IFRSs and the statement of cash flows presented under previous GAAP.

79.





Index to the notes to the reconciliations

Note

Deemed cost exemption a

Intangible assets reclassification b

Investment property reclassification c

Financial instrument remeasurement d

Impairment remeasurement e

Depreciation of land and building f

Deferred tax g

Retained earnings h

Employee Severance Benefit i

80.

(a) Deemed cost exemption

The impact arising from the change is summarized as follows:

01-Jan-11 31-Dec-11

Group N�000 N�000

Statement of comprehensive income - -

Adjustment before income tax - -

Statement of financial position

Decrease in revaluation reserve 2,493,441 2,493,441

Adjustment to retained earnings 2,493,441 2,493,441

Company 01-Jan-11 31-Dec-11

N�000 N�000

Statement of comprehensive income - -

Adjustment before income tax - -


Decrease in revaluation reserve 2,493,441 2,493,441

Adjustment to retained earnings 2,493,441 2,493,441

(b) Intangible assets reclassification

The impact arising from the change is summarized as follows:

01-Jan-11 31-Dec-11

Group N�000 N�000

Statement of comprehensive income

Administrative expenses:

Amortization charge on intangible asset - 8 , 949

Adjustment before income tax - 8 , 949


Increase in intangible asset 3 8 , 034 3 0 , 363

Reclassification from PPE - ( 1 , 278)

Increase in revaluation reserve ( 41,017) ( 4 1 , 017)

Adjustment to retained earnings ( 2,983) ( 1 1,932)

On 8 March 2004, Forte Oil Plc revalued its property, plant and equipment and investment peroperty under previous

GAAP. On transition to IFRS, the Company elected to apply the optional exemption to use that previous revaluation as

deemed cost under IFRSs. The Group has opted to subsequently measure all items of PPE at cost/deemed cost less

accumulated depreciation and impairment losses. The revaluation reserve of N2.49 billion at 1 January 2011 and 31

December 2011 was reclassified to retained earnings. Except for the reclassification had no impact on the financial

statements.

The carrying cost of Oracle software of N 41.02million which qualifies for recognition as an intangible asset under IFRS

was incorrectly written off against there valuation reserve under the previous GAAP. This amount is recognised under IFRS

and the adjustments relating to the amortization of the software which was not recognised subsequent to the write

off has been recognised under IFRS.

81.






N�000 N�000



Amortization charge on intangible asset - 8 , 949

Adjustment before income tax - 8 , 949


Increase in intangible asset 3 8 , 034 2 9 , 085

Increase in revaluation reserve ( 41,017) ( 4 1 , 017)

Adjustment to retained earnings ( 2,983) ( 1 1,932)

(c) Investment property reclassification

The impact arising from the change is summarised as follows:

Group 01-Jan-11 31-Dec-11

N�000 N�000



Depreciation - ( 62,389)

Adjustment before income tax - ( 6 2 , 389)


Increase in investment property 2 , 3 6 6 , 485 2 , 328,457

Decrease in property, plant and equipment ( 1 , 765 ,488) ( 1 , 6 6 5 ,071)

Adjustment to retained earnings 6 0 0 , 9 9 7 6 6 3 , 386


N�000 N�000



Depreciation - ( 6 2 , 389)

Adjustment before income tax - ( 6 2 , 389)


Increase in investment property 2 , 3 6 6 , 485 2 , 328,457

Decrease in property, plant and equipment ( 1 , 765 ,488) ( 1 , 6 6 5 ,071)

Adjustment to retained earnings 6 0 0 , 9 9 7 6 6 3 , 386

Prior-year error

The effect on these financial statements is as follows:

01-Jan-11 31-Dec-11

N�000 N�000


Increase in property, plant and equipment 92,636 92,636

Increase in retained earnings (92,636) (92,636)

- -

As part of accounting policies applied under previous GAAP, the carrying amount of investment properties was included as

Property, Plant & Equipment (PPE). Assets meant for investment purposes are recognised separately as Investment

property under IFRS. Accordingly, the deemed cost of these assets at the date of transition has been reclassified to

Investment property. Except for the reclassification, this had no impact on the financial statements.

Accumulated depreciation on some motor vehicles disposed in prior years were erroneosly excluded in determing the

gain/loss on disposal of these motor vehicles. This amount to N92,636,000. This has however been corrected in these

financial statements.

82.

(d) Financial Instrument remeasurement



N�000 N�000



Employee expenses - 32,164

Finance expenses:

Interest expenses on loans and borrowing - 42,265

Finance income:

Interest income on loans and receivable measured at amortized cost - ( 1 , 6 6 5)

Adjustment before income tax - 7 2 , 7 6 4


Trade and other receivables 10,229 (20,271)

Loans and borrowings 42,265 -

Adjustment to retained earnings 52,494 (20,271)


N�000 N�000



Employee expenses - 32,164

Finance expenses:

Interest expenses on loans and borrowing - 42,265

Finance income:

Interest income on loans and receivable measured at amortized cost - ( 1 , 6 6 5)



Trade and other receivables 10,229 (20,271)

Loans and borrowings 42,265 -


(e) Impairment remeasurement



N�000 N�000



Expensed Assets - 36,345

Depreciation - ( 1 5 , 0 14)



Trade and Other Receivables ( 8 11,020) ( 2 , 5 5 1,698)

Property, plant and equipment ( 2 7 7 , 746) ( 2 9 9 , 077)

Adjustment to retained earnings ( 1 , 0 8 8,766) ( 2 , 8 5 0,775)

In accordance with IFRSs, financial instruments have been subsequently recognised at either fair value or amortised cost.

These assets and liabilities were previously carried at cost.

As described in notes 3, based on the transition to IFRS, the Company carried out a physical verification of i ts property, plant

and equipment and recognised an impairment loss on items that could not be physically verified. The Company also

recognised an impairment loss on receivables that could not be recovered.

83.






N�000 N�000



Expensed Assets - 36,345




Trade and Other Receivables ( 5 6 5 , 777) ( 2 , 5 5 1,698)

Property, plant and equipment ( 2 7 7 , 246) ( 2 9 9 , 077)

Adjustment to retained earnings ( 8 4 3 , 023) ( 2 , 8 5 0,775)

(f) Depreciation of land and building


Group 01-Jan-11 31-Dec-11N�000 N�000



Adjustment before income tax - ( 8 2 , 4 23)


Property, plant and equipment 589,057 699,327

Adjustment to retained earnings 589,057 699,327

Company 01-Jan-11 31-Dec-11N�000 N�000



Adjustment before income tax - ( 8 2 , 4 23)


Property, plant and equipment 616,669 699,327

Adjustment to retained earnings 616,669 699,327

(g) Deferred tax

Group

Unrelieved losses b/f - (1,919,638)

Property, plant and equipment 1,167,055 1 , 110,154

Investment property (709,946) (698,537)

Intangible asset (11,410) (8,726)

Revaluation reserve (748,032) (748,032)

Adjustment to deferred tax asset & liability (302,333) (2,264,779)

Under the previous GAAP, land and building were capitalised together and depreciated over 25years. Due to the transition

to IFRS, the cost of land and building were separated and based on the change in accounting policy, land was depreciated

over 99 years while building was depreciated over 25 years.

The changes in deferred tax liability at 30% tax rate is attributable to:

84.


N�000 N�000

Unrelieved losses b/f - (1,919,638)

Property, plant and equipment 1,167,055 1 , 1 10,154

Investment property (709,946) (698,537)

Intangible asset (11,410) (8,726)

Revaluation reserve (748,032) (748,032)

Adjustment to deferred tax asset & liability (302,333) (2,264,779)

(h) Retained earnings

Group Note 01-Jan-11 31-Dec-11

N�000 N�000

Reclassification of revaluation reserve a,b ( 2 , 5 3 4,458) ( 2 , 5 3 4,458)

Intangible asset reclassification b 2 , 9 8 3 1 1,932

Financial instrument remeasurement d ( 1 0 , 2 29) 2 0 , 2 7 1

Impairment of property, plant and equipment e 2 7 7 , 7 46 2 9 9 , 0 77

Impairment of trade and other receivables e 8 1 1,020 2 , 5 5 1 ,698

Depreciation of land and building f ( 5 8 9 , 057) ( 6 9 9 , 327)

Deferred tax g 3 0 2 , 3 33 2 , 2 6 4 ,779

Employee Severance Benefits i ( 1 0 0 , 024) 2 6 3 , 4 26

Investment Property c ( 6 0 0 , 997) ( 6 6 3 , 386)

Reclassification to foreign excahange reserve - 6 , 8 4 6

Increase in retained earnings ( 2 , 4 4 0,683) 1 , 5 2 0 ,858

Company Note 01-Jan-11 31-Dec-11

N�000 N�000

Reclassification of revaluation reserve a,b ( 2 , 5 3 4,458) ( 2 , 5 3 4,458)

Intangible asset reclassification b 2 , 9 8 3 1 1,932

Financial instrument remeasurement d ( 5 2 , 4 94) 2 0 , 2 7 1

Impairment of property, plant and equipment e 2 7 7 , 7 46 2 9 9 , 0 77

Impairment of trade and other receivables e 2 , 5 5 1 ,698

Depreciation of land and building f ( 6 1 6 , 669) ( 6 9 9 , 327)

Deferred tax g 3 0 2 , 3 33 2 , 2 6 4 ,779

Employee Severance Benefits i 2 6 2 , 9 09 2 6 2 , 9 09

Investment Property c ( 6 0 0 , 997) ( 6 6 3 , 386)

Increase in retained earnings ( 2 , 3 9 2,870) 1 , 5 1 3 ,495

(i) Employee Severance Benefits



N�000 N�000

Statement of comprehensive income - - - -


Employee benefits 100,024 (263,426)


The above changes decreased (increased) retained earnings (each net of related tax) as follows:

In accordance with IFRSs, additional provision has been made for defined benefit obligation (severance benefits) determined

using the Projected Unit Credit Method.

85.






N�000 N�000

Statement of comprehensive income - - - -


Employee benefits (262,909) (262,909)

Adjustment to retained earnings (262,909) (262,909)

(j) Other Income

(k) Foreign exchange reserve

Retained earnings - (6,846)

An underwriter commitment fee of N50M was earlier recognised as income. This has been reclassified as a liability

apprpriately

86.

2012 2011 2012 2011

N'000 % N'000 % N'000 % N'000 %

Turnover 90,984,215

116,999,641

78,921,742

103,825,837

Other income 611,105

1,081,627

570,376

737,518

Finance income 127,062

86,701

127,062

86,395

91,722,382

118,167,969

79,619,180

104,649,750

Bought in materials and services:

- L o c a l (63,255,271)

(75,788,362)

(50,626,890)

(70,103,590)

- I m ported (33,594,441)

(54,521,073)

(33,483,701)

(53,174,936)

VALUE ADDED/(ERODED) 5,127,330

100

(12,141,466)

100 4,491,412

100

(18,628,776)

100

APPLIED AS FOLLOWS:

To pay employees:

Salaries, wages and other staff

costs 1,392,919

27

4,409,684

(34)

1,195,462

26

3,838,458

(28)

To pay government:

Taxation 277,854

5

202,574

(1)

221,942

4

179,150

(1)

To pay providers of capital:

Interest on borrowings 1,848,659

36

1,489,146

(11)

1,782,534

40

1,435,292

(10)

Retained in the business

Depreciation and amortisation 735,947

14

523,748

(4)

637,013

14

457,833

(3)

Deferred taxation (135,556)

(3)

(616,319)

5

-

-

(653,085)

5

Profit/(loss) transferred/(charged)

to reserves 1,007,507

21

(19,536,209)

145

654,461

16

(19,576,228)

137

5,127,330

100

(13,527,376)

100 4,491,412

100

(14,318,579)

100


Value added represents the additional wealth which the Group has been able to create/erode by its own and its employees' efforts.

This statement shows the allocation of that wealth among the employees, government, providers of capital and that retained for the

future creation of more wealth.


Other Information

Consolidated Statement of Value Added

87.

Financial Summary

20122 2011 2010 2012 2011 2010

N� 000 N�000 N�000 N�000 N�000 N�000

Funds Employed

Share capital 539,368

489,025

489,025

539,368

489,025

489,025

Share premium 62,292,576

61,588,213

61,588,213

62,292,576

61,588,213

61,588,213

Foreign exchange reserve (61,819)

6,846

-

-

-

-

Retained earnings (55,187,283)

(56,194,790)

(36,658,581)

(55,984,400)

(56,638,862)

(37,062,637)

Shareholder's fund 7,582,842

5,889,294

25,418,657

6,847,544

5,438,376

25,014,601

Current liabilities 34,583,243

38,214,488

41,229,882

30,508,621 36,194,129 40,594,255

Non-current liabilities

346,854

1 ,121,593

2 ,623,151

107,835

667,438

1,566,895

42,512,938

45,225,375

69,271,690

37,464,000

42,299,943

67,175,751

Asset Employed

Non-current assets 17,793,625 15,284,076

13,507,133

17,028,648

14,281,655

12,524,944

Current assets 24,719,313 29,941,299

55,764,557

20,435,352

28,018,288 54,650,807

42,512,938

45,225,375

69,271,690

37,464,000

42,299,943

67,175,751

2012 2011-Restated 2012 2011-Restated

N' 000 N' 000 N' 000 N' 000

Revenue 90,984,215

116,999,641

78,921,742

103,825,837

Operating profit (Loss) 2,871,402

(18,547,509)

2,531,875

(18,701,266)

Profit (Loss) before income tax 1,149,805

(19,949,954)

876,403

(20,050,163)

Profit (Loss) after tax 1,007,507

(19,536,209)

654,461

(19,576,228)

Basic earnings (Loss) per share in (N) 0.93

(19.96)

0.61

(20.02)

The Company


The Group

Other Information (Cont�d)

88.

34TH ANNUAL GENERAL MEETING to be held at the Bespoke Event Centre, Lekki-Ajah Expressway, Lagos on July 31, 2013 a t 10:00 a.m

I/We&&&&&&&&&&&&&&.&&&........................................................... Being a

Member/members of Forte Oil Plc hereby appoint* &&&&&&&&.&...............&&& o r failing him/ her, the Chairman of the meeting, Mr. Femi Otedola, or failing him, Mr. Akin Akinfemiwa, as my/our proxy to attend and vote for me/us and on my/our behalf at the Annual General Meeting of the Company to be held on July 31, 2013 and at any adjournment thereof.

Dated this &.................&.day of &..&&................&&&.2013.

Signature of Shareholder&&..........................&&&........................&&&&&&&&...

Name of Shareholder&&&&&&&&&&..............................................................&&&

Number of shares held:

Resolutions For Against

To receive reports & Accounts

To re-elect Directors.

To authorize the Directors to fix the Auditors' remuneration.

To elect/re-elect members of the Audit Committee.

Please indicate with an �X� in the appropriate box how you wish your votes to be cast on the resolutions set above. Unless otherwise instructed, the proxy will vote or abstain from voting at his discretion.

To be valid, this proxy form should be duly stamped by the Commissioner of Stamp Duties and signed before posting i t to reach the address overleaf not later than 48 hours before the time for holding this meeting.

Please note that no action should be taken on the proxy form if the member is attending the meeting.

Proxy Form

89.

Please admit ........................................................................................... to the 34th Annual General Meeting of the members of Forte Oil plc holding at the Bespoke Event Center, Lekki-Ajah Expressway, Lagos on July 31, 2013 by 10.00am.

I f you are unable attend the meetingA member (Shareholder) who is unable to attend an Annual General Meeting is allowed by law to vote by proxy and the above proxy form has been prepared to vote in case you cannot personally attend the meeting. Following the normal practice, the names of two Directors of the Company have been entered on the form to ensure that someone will at the meeting act as your proxy; but i f you wish, you may insert in the blank space marked (* * ) the name of any person, whether a member (Shareholder) of this Company or not, who will attend the meeting and vote on your behalf instead of one of the Directors.

Number of Shares held

IMPORTANT

a) The name of the shareholder must be written in BLOCK LETTERS on the form marked (*). Please stamp and sign the proxy form if you are not attending the meeting and post i t so as to reach the address shown overleaf not later than July 29, 2013. I f executed by a corporation, the proxy form should be sealed with a common seal.

b) The shareholder or his proxy must produce the admission card in order to gain entrance to the Annual General Meeting

c) Shareholders or their proxies are requested to sign the admission card before attending the meeting.

______________________________Signature of person attending

AKIN OLAGBENDE Esq.Company Secretary

Admission Card

90.

VERITAS REGISTRARS

91.

Veritas Registrars

E-Dividend Mandate

92.

Authority to Electronically receive Corporate Information

In line with the developments in electronic communications to circumvent

the usual issue of late receipt of corporate information, we would like to

introduce to our shareholders the electronic delivery of corporate

information such as annual reports and financial statements, proxy form

etc.

With this service, as an alternative to receiving paper copies of corporate

information and materials, you can elect to receive an electronic copy

thereof via an email that will provide an electronic link to the corporate

information and/or receive a compact disk of the corporate information by

post.

I f you so elect, kindly complete the authority to electronically receive

information attached below and return to The Company Secretary at the

Head office at No 13, Walter Carrington Crescent, Victoria Island, Lagos.

Regards,

Akin Olagbende Esq.Company SecretaryFO House, 13 Walter Carrington CrescentVictoria Island, Lagos.FRC/2013/NBA00000003160

I/We&&&&&&&&&&&&&&&.....................................&&&&

being a member/members of Forte Oil Plc hereby authorise the

Company and agree to receive all future corporate information of the

Company electronically.

Signature

Email(s)

CSCS Clearing House Number (CHN)

Postal Address

Telephone Number

Date

94.

13 Walter Carrington Crescent, Victoria Island, Lagos, NigeriaT: +234 1 2776100 - 29, F: +234 1 2776129P.O. Box 512 Lagos. P.M.B. 12690, Marina, LagosE: [email protected]

w w w . f o r t e o i l p l c . c o m

forte oil annual report 2012

Investor Relations