Brooge Energy (US:BROG)2021-04-05 12:51Financial Performance and Costs - BPGIC's fixed costs for Phase I, Phase II, and the BIA Refinery are expected to be covered by fixed storage fees from BIA and other customers[235]. - The Company anticipates that future expenses related to the BPGIC Terminal will remain relatively fixed, impacting profit margins if costs increase[235]. - Wage increases in the oil storage industry may necessitate faster employee compensation adjustments, potentially reducing profit margins if not offset by customer utilization[236]. - BPGIC may only increase storage and ancillary service fees every two years, which could lead to lower margins if costs rise before a fee review[237]. - BPGIC III's fixed costs will also be covered by storage fees, with profit margins subject to change based on wage costs[240]. - The Company may need to utilize a combination of internally generated cash and external borrowings for future capital investments, which could be affected by market conditions[249]. - The Company has not committed to paying cash dividends, and future dividend payments will depend on financial conditions and distributions from BPGIC and BPGIC III[257]. - The issuance of additional Ordinary Shares may dilute existing shareholders' ownership and potentially depress the market price of the Company's shares[258]. - The Company is subject to higher costs due to public company compliance requirements, which may impact financial performance[255]. Corporate Governance and Structure - BPGIC Holdings holds approximately 85.6% of the Company's voting equity, giving it substantial influence over significant corporate actions[288]. - The Company is incorporated in the Cayman Islands, which may provide less protection to investors compared to U.S. law[263]. - The Company is classified as an "emerging growth company," allowing it to take advantage of reduced disclosure requirements[285]. - The Company's financial statements are prepared in accordance with IFRS and it is not required to file reconciliations to U.S. GAAP[275]. - The Company may temporarily lower the exercise price of its Warrants, which could lead to substantial dilution for investors[262]. - The Company's directors have discretion over the inspection of corporate records, potentially limiting shareholders' access to information[270]. - The Company is not required to comply with certain NASDAQ rules due to its status as a foreign private issuer[276]. - The Cayman Islands law may limit shareholders' ability to bring actions against the Company or its directors[268]. - The Company's Amended and Restated Memorandum and Articles of Association contain provisions that may inhibit takeovers, affecting the price investors might be willing to pay for its securities[272]. Economic and Market Conditions - The UAE has experienced slower economic growth in recent years, influenced by the global financial crisis and volatile oil prices, which remain below historic highs[290]. - The Company's operations are entirely located in the UAE, making it susceptible to political and economic conditions in the region, which could adversely affect its business and financial performance[290][292]. - The Company is subject to risks from geopolitical developments in the MENA region, which could escalate and materially impact its operations[297]. - The UAE's wealth is largely based on oil and gas, and fluctuations in energy prices significantly affect economic growth, which in turn impacts the Company's performance[290]. Risk Management and Compliance - The Company has insurance in place for certain catastrophic events, but there is no assurance that it will cover all costs associated with operational disruptions[301]. - Compliance with environmental regulations may require significant capital expenditures, which could adversely affect the Company's financial condition[307][309]. - Changes to indirect tax regulations in Fujairah could increase costs for the Company, potentially impacting its financial performance[311][313]. - The Company is subject to anti-corruption laws and economic sanctions, with potential violations leading to substantial penalties and reputational damage[310]. - The Company’s business could be adversely affected by climate change regulations, which may increase operating costs and reduce demand for its services[302][306]. - The Company’s operations could be disrupted by natural disasters or terrorist attacks, impacting logistics and overall business volumes[300][299]. - The Company faces risks from arbitrary governmental actions, which could adversely affect its business and financial condition[318]. - Legal and regulatory uncertainties in the UAE may impact the Company's ability to enforce contracts and defend against claims[319]. Financial Position and Liabilities - As of December 31, 2020, the Company had total liabilities of approximately USD 1.19 billion, including term loans and lease liabilities[1032]. - The Company had a low credit risk exposure with only five customers as of December 31, 2020, indicating a concentrated customer base[1034]. - The Company does not have significant currency risk as most contracts and financing are denominated in US dollars or AED, which is pegged to the US dollar[1035]. - The Company monitors liquidity risk using a planning tool that considers projected financing requirements and cash projections from operations[1036]. - The Company’s capital structure includes shareholders' equity and debt, with a focus on maintaining an optimal capital structure to reduce the cost of capital[1023]. - The Company’s exposure to interest rate risk is primarily related to variable rate loans, but current bonds are not linked to fluctuating rates[1026]. - Total liabilities increased to $377,082,706 from $336,793,530, reflecting a growth of approximately 12%[1038]. - Accounts payable, accruals, and other payables (excluding accrued interest) rose to $57,819,739, up from $8,093,107, indicating a significant increase[1038]. - The company maintains comprehensive insurance coverage, including property damage and business interruption, administered by Lockton Insurance Brokers[1040]. - The insurance program covers major risks such as terrorism, political violence, and environmental liability, ensuring robust protection for operations[1040]. - Premiums for the insurance program are allocated based on insured values and claims history, ensuring appropriate coverage for the company's business type[1041].