
16
Notes to the Consolidated Financial Statements
For the years ended December 31, 2024 and 2023, AUDITED
Oil and gas properties are depleted based on the year’s production in relation to estimated total proved and probable reserves of
oil and gas in accordance with the unit of production method. Depletion of a field area is charged to the statement of operations
through cost of sales once production commences.
Proved reserves are those quantities of petroleum which, by analysis of geological and engineering data, can be estimated
with reasonable certainty to be commercially recoverable, from a given date forward, from known reservoirs and under current
economic conditions, operating methods and governmental regulations. Proved reserves can be categorized as developed or
undeveloped. If deterministic methods are used, the term reasonable certainty is intended to express a high degree of confidence
that the quantities will be recovered. If probabilistic methods are used, there should be at least a 90 percent probability that the
quantities actually recovered will equal or exceed the estimates.
Probable reserves are those unproved reserves which analysis of geological and engineering data suggests are more likely than
not to be recoverable. In this context, when probabilistic methods are used, there should be at least a 50 percent probability that
the quantities actually recovered will equal or exceed the sum of estimated proved plus probable reserves.
Proceeds from the sale or farm-out of oil and gas concessions in the exploration stage are offset against the related capitalized
costs of each cost center with any excess of net proceeds over the costs capitalized included in the statement of operations. In
the event of a sale in the exploration stage, any deficit is included in the statement of operations.
When there are facts and circumstances that suggest that the net book value of capitalized costs within each field area cost
center is higher than anticipated future net cash flow from oil and gas reserves attributable to the Corporation’s interest in the
related field areas, the Corporation performs an assessment as to whether an asset may be impaired. Management determines
the recoverable amounts of property, plant and equipment based on the higher of fair value less costs of disposal and value in use
using estimated future discounted net cash flows of proved and probable oil and gas reserves. The Corporation’s estimates of
proved and probable oil and gas reserves used in the calculations for impairment tests and accounting for depletion are reviewed
annually by Management’s experts, specifically independent qualified reserves auditor (“IQRE”).
The recoverable amount of the asset or cash-generating unit (“CGU”) is estimated as the the higher of fair value less costs of
disposal (“FVLCOD”) and value in use (“VIU”). In determining FVLCOD, recent market transactions are considered, if available.
In the absence of such transactions, FVLCOD is estimated based on the dicounted after-tax cash flows of reserves using forward
prices, costs to develop and operating costs, consistent with IPC’s IQREs. Value in use is estimated by discounting future cash
flows expected to arise from the continuing use of a CGU or asset, to their present value, using a discount rate that reflects
current market assessments of the time value of money and the risks specific to the asset. When the recoverable amount is less
than the carrying value an impairment loss is recognized with the expensed charge to the statement of operations. If indications
exist that previously recognized impairment losses no longer exist or are decreased, the recoverable amount is reversed. When
a previously recognized impairment loss is reversed the carrying amount of the asset is increased to the estimated recoverable
amount but the increased carrying amount may not exceed the carrying amount after depreciation that would have been
determined had no impairment loss been recognized for the asset in prior years. If the asset does not generate cash inflows that
are largely independent of those from other assets or groups of assets, the asset is tested as part of a CGU, which is the smallest
identifiable group of assets that generates cash inflows that are largely independent of the cash inflows from other assets or
groups of assets.
Other tangible fixed assets
Other tangible fixed assets are stated at cost less accumulated depreciation. The cost includes the original purchase price of the
asset and the costs attributable to bringing the asset to its working condition for its intended use. Depreciation is based on cost
and is calculated on a straight line basis over the estimated economic life of 3 to 5 years for office equipment and other assets.
The Floating Production Storage and Offloading (“FPSO”) located on the Bertam field, Malaysia, is being depreciated to its residual
value on a unit of production basis to August 2025.
Additional costs to existing assets are included in the assets’ net book value or recognized as a separate asset, as appropriate, only
when it is probable that future economic benefits associated with the item will flow to the Group and the cost of the item can be
measured reliably. The net book value of any replaced parts is written off. Other additional expenses are deemed to be repair and
maintenance costs and are charged to the statement of operations when they are incurred.
The net book value is written down immediately to its recoverable amount when the net book value is higher. The recoverable
amount is the higher of an asset’s fair value less cost of disposal and value in use. The assets’ residual values and useful lives are
reviewed, and adjusted if appropriate, at the end of each reporting period.
M. Leases
The Group leases various offices, warehouses, equipment and cars. Rental contracts are typically made for fixed periods of 3 to
5 years but may have extension options. Lease terms are negotiated on an individual basis and contain a wide range of different
terms and conditions.
Right-of-use assets and corresponding liabilities are recognized when the leased asset is available for use by the Group. Each
lease payment is allocated between the liability and finance cost. The finance cost is charged to profit or loss over the period so
as to produce a constant periodic rate of interest on the remaining balance of the liability for each period. The right-of-use asset is
depreciated over the shorter of the asset’s useful life and the lease term on a straight-line basis.