Interim Financial Report half-year 31 Dec 2014

OILEX LTD

ABN 50078652632

 

CONDENSED CONSOLIDATED INTERIM FINANCIAL REPORT

For the half-year ended 31 December 2014

 

CONTENTS

 

Directors' Report       

Auditor's Independence Declaration       

Condensed Consolidated Statement of Profit or Loss and Other Comprehensive Income       

Condensed Consolidated Statement of Financial Position          

Condensed Consolidated Statement of Changes in Equity        

Condensed Consolidated Statement of Cash Flows  

Notes to the Condensed Consolidated Interim Financial Report              

Directors' Declaration              

Independent Review Report   

 

DIRECTORS REPORT

 

The Directors of Oilex Ltd present their report together with the condensed consolidated interim financial report of the Group comprising of Oilex Ltd (the "Company") and its subsidiaries for the half-year ended 31 December 2014 and the auditor's review report thereon.

Directors

The directors of the Company at any time during the interim period and until the date of this report are detailed below. All directors were in office for this entire period unless otherwise stated.

 

Mr Max Dirk Jan Cozijn                     Non-Executive Chairman

Mr Sundeep Bhandari                       Non-Executive Vice Chairman

Mr Jeffrey Auld                                  Non-Executive Director (Appointed 28 January 2015)

Mr Ronald Miller                                Managing Director

Dr Bruce Henry McCarthy                Non-Executive Director (Resigned 18 November 2014)

 

Review of Operations

Oilex is continuing its transition to an early mover unconventional energy producer, focusing on assets around the Indian Ocean Rim. The Company is evaluating and commercialising the extensive Eocene low permeability ("tight") reservoirs in its onshore Cambay Field project located in the state of Gujarat, India, where energy market fundamentals are attractive. Oilex is applying tight reservoir evaluation, drilling and production techniques which have been developed in recent years in the rapidly expanding shale gas and tight oil ("SGTO") industry in North America. Oilex also has a large acreage position in the onshore Canning Basin, Western Australia, which is anticipated to be prospective for conventional and SGTO resources. The interest in the exploration asset offshore Timor Sea is currently under temporary suspension of the PSC for a further 3 month period to April 2015 to enable the completion of the ANP legal assessment and continued discussion between the parties to address the way forward. Oilex is pursuing enforcement of the Arbitration Award with respect to its interest in the West Kampar PSC, onshore Sumatra, Indonesia.

Cambay Field

Significant progress was achieved during the period on the Cambay Field development. The Company successfully completed the Cambay-77H production test. The test was focused on acquiring long term performance data which is essential for assessment of reservoir properties and will supplement surface data collected during flowback. A 5 day shut-in period preceded the test to allow the well to stabilise after ~ 85 days of flowback production. Cambay-77H produced 3,372 bbls (net to Oilex 1,517 bbls) of light oil which was sold to a local refinery and 43 MMscf of gas which was flared for the safety of personnel and equipment at site.

Delivering the Proof of Concept

Proof of Concept objectives are critical to demonstrating that the Cambay Field can be commercially developed using multi-stage fracture treatments (fracs) in horizontal wells. Key objectives achieved include:

·      Efficient drilling operations demonstrating the repeatability of targeting the Y zone

·      Y zone reservoir properties are laterally consistent, having variability within expectations

·      Successful completion of 8 fracture treatments

·      Successfully demonstrated "Plug and Perf" completion technique in India

·      First horizontal well in the Cambay Basin with multiple fracture treatments to achieve flowback

·      Flowback data used to calibrate horizontal well model for the first time

·      Future well designs may have wider frac spacing, leading to significant cost savings

 

Gas sales agreements

Oilex has concluded two gas sale agreements ("GSA") to date. GSAs are conducted via a bid system, with buyers submitting offers to purchase via a tender process. Given the demand for gas by nearby industrial users, strong pricing is secured, above the floor price recently established by the Indian Government.

During the period Oilex received the endorsement from the relevant Government of India authorities for the Gas Sales Agreement for the sale of Cambay-73 gas, a critical milestone for increasing production from the field and supplying gas to the local market. With Cambay-73, gas production from the Cambay Field will recommence for the first time since the early 1990's.

Bhandut Field

During the period Oilex received endorsement from the Government of India for the sale of gas from the Bhandut-3 well, located within the Bhandut Field. This is a critical milestone for returning the field to production, supplying gas to the local market and generating positive cash flow for the Company from a previously idle asset.

Now that endorsement of the gas sales agreement has been received, the Bhandut Joint Venture will proceed to establish the appropriate production facilities for Bhandut-3. This will include a compressed natural gas ("CNG") loading facility that will enable CNG "bullet" trucks to be loaded at site for transportation of the gas to end users. Bhandut-3 gas is "lean" and therefore no material condensate production is expected.

Sabarmati Field

During the period the Joint Venture finalised cost estimates for the plug and abandonment of the Sabarmati-1 well and commenced the process to obtain Government of India approval to relinquish the Sabarmati Field. Plug and abandonment activities are expected to be completed during the remainder of Q1 2015. As part of the relinquishment of the Sabarmati Field, Oilex plans to transfer equipment from Sabarmati EPS facility for possible future use at Cambay Field.

Canning Basin

During the period the WA Department of Mines and Petroleum (DMP) approved Oilex's application to convert the Special Prospecting Authority (SPA) (SPA 17 AO) to Exploration Permit Application (STP-EPA-0131).

The committed work program for SPA 17 AO was fulfilled by the acquisition, processing and interpretation of a 4,060 line km gravity gradiometry/magnetic survey ("Survey"). Under the terms of the SPA, Oilex had exclusive rights to negotiate a formal exploration permit with the Government of Western Australia. The terms of the SPA state that the area retained as an exploration permit from within the SPA is limited to 30-50% of the total area.

The final report for SPA 17 AO incorporating the newly acquired Survey data with 2D seismic, regional gravity, magnetic, surface geological and well data, confirmed Oilex's structural model of the Wallal Graben and its extension into SPA 17 AO.

The graben is present in Oilex's three, 100%-owned, exploration areas encompassing approximately 11,900 km2 (~3 million acres). The acreage is in a unique position in the Canning Basin as it is adjacent to many world class mining projects in the Pilbara region.  This activity has led to the development of a significant amount of infrastructure in the area with the Great Northern Highway, numerous sealed roads, good quality graded roads and multiple airstrips being present within the Oilex acreage.

Oilex continues to negotiate Native Title agreements with Traditional Owners. Upon finalisation of the agreements the regulatory process of conversion of STP-EPA-0106 and STP-EPA-0107 to formal exploration permits will commence.

Financial

The Group incurred a consolidated loss after income tax of $3,118,088 for the half-year (31 December 2013: loss of $2,776,134). Revenue for the period has increased due to increased production from the Cambay Field. The loss includes $1,040,131 (31 December 2013: $1,058,838) incurred on exploration expenditure and $1,718,780 (31 December 2013: $1,637,860) incurred on employee and administrative expenditure. The Company's focus on reducing costs, which do not impact its technical and commercial capabilities, is continuing. Cash and cash equivalents held by the Group as at 31 December 2014 totalled $5,426,328 (30 June 2014: cash and cash equivalents $7,455,572).

Significant Events After Balance Date

Oilex received approval from the Government of India for the grant of an extension of the Petroleum Mining Lease for the Cambay Field to 22 September 2019.

The receipt of endorsement from the relevant authorities of the Government of India for the sale of gas from Cambay Field, specifically from the Cambay-77H well.

The Autoridade Nacional do Petroleo ("ANP") with prior consent of the Joint Commission for the Joint Petroleum Development Area under the Timor Sea Treaty, advised on 16 January 2015 that it had further extended the expiry date of the PSC from 15 January 2015 to 15 April 2015 for the purpose of completing an assessment and to continue discussions with the Joint Venture partners.

Significant Events After Balance Date (Continued)

On 28 January 2015 Oilex announced the appointment of Mr Jeffrey D Auld as a Non-Executive Director. The appointment of a UK based independent non-executive director, with significant experience in the London Capital markets and upstream oil and gas industry is in line with the Company's decision to appoint additional directors to achieve the right mix of skills, experience and diversity which reflects the Company's strategy and increase the balance of independence on the Board.

There are no other significant subsequent events occurring after balance date.

 

Lead Auditor's Independence Declaration

The lead auditor's independence declaration is set out on page 4 and forms part of the Directors' Report for the half-year ended
31 December 2014.

Signed in accordance with a resolution of the Board of Directors.

Mr Max Cozijn                                                                                                         Mr Ronald Miller

Chairman                                                                                                                 Managing Director                                  

 

Leederville

Western Australia

10 February 2015

 

KPMG

 

Lead Auditor's Independence Declaration under Section 307C of the Corporations Act 2001

To: the directors of Oilex Ltd

I declare that, to the best of my knowledge and belief, in relation to the review for the half-year ended 31 December 2014 there have been:

(i)     no contraventions of the auditor independence requirements as set out in the Corporations Act 2001 in relation to the review; and

(ii)     no contraventions of any applicable code of professional conduct in relation to the review.

 

KPMG

Brent Steedman

Partner

Perth

10 February 2015

 

KPMG, an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative ("KPMG International"), a Swiss entity

 

Liability limited by a scheme approved under Professional Standards Legislation

 

 

CONDENSED CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME

FOR THE HALF-YEAR ENDED 31 DECEMBER 2014

 

	Note	31 December 2014 $	31 December 2013 $
Revenue	6(a)	232,992	121,927
Cost of sales	6(b)	(272,005)	(197,596)
Gross loss		(39,013)	(75,669)
Other income	6(c)	6,573	336,514
Exploration expenditure		(1,040,131)	(1,058,838)
Administration expense	6(d)	(1,718,780)	(1,637,860)
Share-based payments expense		(407,152)	(289,549)
Other expenses	6(e)	(35,625)	(42,920)
Results from operating activities		(3,234,128)	(2,768,322)
Finance income		33,959	21,447
Finance costs		(41)	(5)
Foreign exchange gain/(loss)	6(f)	82,122	(19,254)
Net finance income		116,040	2,188
Loss before income tax		(3,118,088)	(2,766,134)
Tax expense		-	-
Loss for the period		(3,118,088)	(2,766,134)
Other comprehensive income/(loss)
Items that may be reclassified subsequently to profit or loss
Foreign currency translation difference		4,250,375	507,701
Other comprehensive (loss)/income for the period, net of income tax		4,250,375	507,701
Total comprehensive income/(loss) for the period		1,132,287	(2,258,433)
Earnings per share
Basic loss per share (cents per share)		0.48	0.66
Diluted loss per share (cents per share)		0.48	0.66

 

 

The above Condensed Consolidated Statement of Profit or Loss and Other Comprehensive Income is to be read in conjunction with the accompanying notes.

 

 

CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION

AS AT 31 DECEMBER 2014

 

	Note	31 December 2014 $	30 June 2014 $
Assets
Cash and cash equivalents		5,426,328	7,455,572
Trade and other receivables		5,987,480	3,684,488
Prepayments		576,259	733,654
Inventories		1,200,540	1,047,630
Total current assets		13,190,607	12,921,344
Trade and other receivables		92,887	80,585
Exploration and evaluation	7	33,841,997	26,320,952
Property, plant and equipment		265,414	254,741
Total non-current assets		34,200,298	26,656,278
Total assets		47,390,905	39,577,622
Liabilities
Trade and other payables		3,474,923	2,776,075
Employee benefits		442,422	386,198
Provisions		153,263	132,966
Total current liabilities		4,070,608	3,295,239
Provisions		3,375,128	2,928,141
Total non-current liabilities		3,375,128	2,928,141
Total liabilities		7,445,736	6,223,380
Net assets		39,945,169	33,354,242
Equity
Issued capital	9	154,154,028	149,250,072
Reserves		7,624,280	5,179,638
Accumulated losses		(121,833,139)	(121,075,468)
Total equity		39,945,169	33,354,242

 

 

The above Condensed Consolidated Statement of Financial Position is to be read in conjunction with the accompanying notes.

 

 

CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

FOR THE HALF-YEAR ENDED 31 DECEMBER 2014

 

	Attributable to Owners of the Company
	Issued  Capital	Option Reserve	Foreign Currency Translation Reserve	Accumulated Losses	Total Equity
	$	$	$	$	$
Balance at 1 July 2013	135,371,619	3,663,824	2,644,735	(117,416,789)	24,263,389
Total Comprehensive (loss)/income for the period
Loss	-	-	-	(2,766,134)	(2,766,134)
Other comprehensive income
Foreign currency translation differences	-	-	507,701	-	507,701
Total other comprehensive income	-	-	507,701	-	507,701
Total comprehensive (loss)/ income for the period	-	-	507,701	(2,766,134)	(2,258,433)
Transactions with owners of the Company
Contributions and distributions
Shares issued	3,394,957	-	-	-	3,394,957
Capital raising costs	(357,765)	-	-	-	(357,765)
Shares issued on exercise of listed options	120	-	-	-	120
Transfers on forfeited options	-	(93,932)	-	93,932	-
Share-based payment transactions	-	289,549	-	-	289,549
Total transactions with owners of the Company	3,037,312	195,617	-	93,932	3,326,861
Balance at 31 December 2013	138,408,931	3,859,441	3,152,436	(120,088,991)	25,331,817
Balance at 1 July 2014	149,250,072	4,089,004	1,090,634	(121,075,468)	33,354,242
Total Comprehensive (loss)/income for the period
Loss	-	-	-	(3,118,088)	(3,118,088)
Other comprehensive income
Foreign currency translation differences	-	-	4,250,375	-	4,250,375
Total other comprehensive income	-	-	4,250,375	-	4,250,375
Total comprehensive (loss)/ income for the period	-	-	4,250,375	(3,118,088)	1,132,287
Transactions with owners of the Company
Contributions and distributions
Shares issued	4,362,379	-	-	-	4,362,379
Capital raising costs(1)	(552,676)	147,532	-	-	(405,144)
Shares issued on exercise of listed options	1,094,253	-	-	-	1,094,253
Transfers on forfeited options	-	(2,360,417)	-	2,360,417	-
Share-based payment transactions	-	407,152	-	-	407,152
Total transactions with owners of the Company	4,903,956	(1,805,733)	-	2,360,417	5,458,640
Balance at 31 December 2014	154,154,028	2,283,271	5,341,009	(121,833,139)	39,945,169

 

⁽¹⁾      Capital raising costs include unlisted options granted to the underwriter and sub-underwriters.

 

The above Condensed Consolidated Statement of Changes in Equity is to be read in conjunction with the accompanying notes.

 

 

CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS

FOR THE HALF-YEAR ENDED 31 DECEMBER 2014

 

 

	31 December 2014 $	31 December 2013 $
Cash flows from operating activities
Cash receipts from customers	241,668	89,084
Payments to suppliers and employees	(1,995,279)	(1,745,293)
Cash outflows from operations	(1,753,611)	(1,656,209)
Payments for exploration and evaluation expenses	(879,195)	(1,827,686)
Cash receipts from government grants	358,517	198,148
Interest received	33,925	20,855
Interest paid	(41)	(5)
Net cash used in operating activities	(2,240,405)	(3,264,897)
Cash flows from investing activities
Advances (to)/from joint ventures	(25,202)	33,071
Advance from sale of petroleum interests (refer Note 10)	-	4,272,013
Payments for capitalised exploration and evaluation	(5,204,371)	(565,611)
Proceeds from sale of assets	600	-
Acquisition of property, plant and equipment	(30,900)	(44,557)
Net cash (used in)/from investing activities	(5,259,873)	3,694,916
Cash flows from financing activities
Proceeds from issue of share capital	5,725,960	3,395,077
Payment for share issue costs	(323,261)	(357,765)
Net cash from financing activities	5,402,699	3,037,312
Net (decrease)/increase in cash held	(2,097,579)	3,467,331
Cash and cash equivalents at 1 July	7,455,572	3,598,640
Effect of exchange rate fluctuations	68,335	118,776
Cash and cash equivalents at 31 December	5,426,328	7,184,747

 

 

The above Condensed Consolidated Statement of Cash Flows is to be read in conjunction with the accompanying notes.

 

 

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL REPORT

FOR THE HALF-YEAR ENDED 31 DECEMBER 2014

 

1.     REPORTING ENTITY

Oilex Ltd (the "Company") is domiciled in Australia. The condensed consolidated interim financial report of the Group as at and for the half-year ended 31 December 2014 comprise the Company and its subsidiaries (collectively the "Group" and individually "Group Entities"). Oilex Ltd is a company limited by shares incorporated in Australia whose shares are publicly traded on the Australian Securities Exchange ("ASX") and on the Alternative Investment Market ("AIM") of the London Stock Exchange. The Group is a for-profit entity and is primarily involved in the exploration, evaluation, development and production of hydrocarbons.

The consolidated annual financial report of the Group as at and for the year ended 30 June 2014 is available upon request from the Company's registered office at Level One, 660 Newcastle Street, Leederville, Western Australia 6007 or at www.oilex.com.au.

2.     BASIS OF PREPARATION

(a)   Statement of Compliance

The condensed consolidated interim financial report is a general purpose condensed financial report which has been prepared in accordance with Accounting Standard AASB 134 Interim Financial Reporting and the Corporations Act 2001, and IAS 34 Interim Financial Reporting. The condensed consolidated interim financial report does not include all of the notes and information included in an annual financial report and accordingly this report should be read in conjunction with the consolidated annual financial report of the Group as at and for the year ended 30 June 2014.

This condensed consolidated interim financial report was authorised for issue by the Board of Directors on 10 February 2015.

(b)   Going Concern

The Directors believe it is appropriate to prepare the consolidated financial report on a going concern basis, which contemplates realisation of assets and settlement of liabilities in the normal course of business. The Group has incurred a loss of $3,118,088, and had cash outflows from operating and investing activities of $2,240,405 and $5,259,873 respectively. As at 31 December 2014, the Group's current assets exceeded current liabilities by $9,119,999 and the Group had cash and cash equivalents of $5,426,328.

The Company has in place a £7,500,000 three year equity financing facility with a UK company, Darwin Strategic Limited ("Darwin"). Under the terms of the facility, the Company may (at its discretion) issue placement shares to Darwin at any time until December 2016. Any drawdown of the facility and resultant issue of shares on the AIM of the London Stock Exchange is limited to the Company's equity placement capacity under ASX Listing Rules. £6,300,000 is available in financing as at 31 December 2014.

The Group will continue to manage its expenditure to ensure that it has sufficient cash reserves for at least the next twelve months. The Group will require funds within the next twelve months in order to meet planned expenditures for its projects, noting that the timing and amount of discretionary expenditures may be able to be varied if required although some commitments exist in the medium term as per note 14.

The Directors believe it is appropriate to prepare the consolidated financial report on a going concern basis as, and in the opinion of the Directors, the Company has adequate plans in place to meet its minimum administrative, evaluation and development expenditures for at least twelve months from the date of this report. If further funds are not able to be raised or realised, possible funding options available to the Group include the sale of interests in the Group's assets, farm out opportunities or a future capital raising, including but not limited to the Darwin facility.

3.     SIGNIFICANT ACCOUNTING POLICIES

Except as disclosed below, the accounting policies applied by the Group in this condensed consolidated interim financial report are the same as those applied by the Group in its consolidated financial report as at and for the year ended 30 June 2014.

The Group has adopted the following new and revised accounting standards that are mandatory for entities with an annual reporting period beginning on 1 July 2014:

Offsetting Financial Assets and Financial Liabilities (Amendments to AASB 132);

Recoverable Amount Disclosures for Non-Financial Assets (Amendments to AASB 136);

Annual Improvements to Australian Accounting Standards 2010-2012 and 2011-2013 Cycles: and

IFRIC 21 Levies.

The adoption of these newly effective standards have no material effect on the financial position or the consolidated financial statements of the Group.

4.     ESTIMATES AND JUDGEMENTS

The preparation of an interim financial report requires management to make judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets and liabilities, income and expense.  Actual results may differ from these estimates.

In preparing this condensed consolidated interim financial report, the significant judgements made by management in applying the Group's accounting policies and the key sources of estimation uncertainty were the same as those that applied to the consolidated financial report as at and for the year ended 30 June 2014.