28th Sep 2007 09:05
AND ITS CONTROLLED ENTITIES ANNUAL REPORT 30 JUNE 2007 ANNUAL REPORT AND FINANCIAL STATEMENTS 30 JUNE 2007 Incorporated under the Corporations Law in the State of Victoria on 2 June 1997 CORPORATE INFORMATIONRegistered and PrincipalOffice Level 3 50 Kings Park Road West Perth WA 6005 Australia Ph. +61 8 9485 3200 Fax +61 8 9485 3290 Postal Address PO Box 588 West Perth WA 6872 Australia Stock Exchange Listings Oilex's shares are listedunder the code OEX on theAustralian Securities Exchangeand the AIM Market of theLondon Stock Exchange. Nominated Adviser to AIMMarket RFC Corporate Finance Ltd Level 15 QV1 Building 250 St Georges Terrace Perth WA 6000 Australia Share Registries Security Transfer RegistrarsPty Ltd (for ASX) 770 Canning Highway Applecross WA 6153 Australia Computershare InvestorServices PLC (for AIM) PO Box 82, The Pavilions Bridgwater Road Bristol BS99 7NH United Kingdom Annual General Meeting The annual general meeting ofOilex Ltd will be held at theCeltic Club, 48 Ord Street,West Perth on 22 November 2007Directors M D J Cozijn BCom ASA MAICD Non-Executive Chairman B H McCarthy BSc (Hons) PhD(Geology) Managing Director R G Barnes BSc (Hons)(Geology) Technical Director L L Bhandari BSc (Geology) andMSc (Geology) Independent Non-ExecutiveDirector Company Secretary M D J Cozijn BCom ASA MAICD Auditors KPMG Level 31 152 - 158 St Georges Terrace Perth WA 6000 Australia Solicitors Deacons Level 39 BankWest Tower 108 St Georges Terrace Perth WA 6000 Australia Public Relations Read Corporate 510A Hay Street Subiaco WA 6014 Australia Pelham Public Relations Ltd No. 1 Cornhill London EC3V 3ND United Kingdom Website www.oilex.com.au Email Address [email protected] . CONTENTSChairman's
Review....................................................... 1
Operations
Review....................................................... 2
Permit
Schedule..................................................... 9
Corporate GovernanceStatement.................................................... 10
Directors'
Report....................................................... 14
- RemunerationReport....................................................... 22
Auditor's Independence Declaration........................... 30
Income
Statements................................................... 31
Balance
Sheets....................................................... 32
Statement of Changes inEquity....................................................... 33Statement of CashFlows........................................................ 35Notes to the FinancialStatements................................................... 36
Directors'
Declaration.................................................. 68
Independent AuditReport....................................................... 69
Shareholder
Information.................................................. 71
Business Directory........................................... 73
CHAIRMAN'S REVIEWDear Shareholder,The oil and gas exploration sector is, by many standards ofmeasurement, at an historically high level of competitiveness. A tight globalmarket for rigs and services and personnel, combined with strong competitionfor exploration and production assets has created a very different commercialenvironment compared to 2 years ago. In this competitive environment, Oilex'sachievements over the past year are notable. The company has expanded thegeographic spread of its projects, built the technical and management capacityto handle the additional work and developed the operational capacity to bringdrilling programs in three countries to reality.India, Indonesia and Oman will all see the start of explorationprograms that have the potential to grow the company exponentially. Oilex hasachieved significant success in recruiting outstanding personnel and expandingthe portfolio of assets since we reported last year. Our focus on assetsremains the countries located around the rim of the Indian Ocean.The emphasis has been on commencing the 2007 drilling programs inthe Cambay and Bhandut fields in Gujarat, India. The first well in thecombined program is anticipated to spud in September, after year-end.Exploration activities onshore Oman, India and Indonesia and offshore NorthWest Shelf of Western Australia, Otway Basin of South Australia and the TimorSea have proceeded well with either seismic reprocessing, seismic acquisition,geotechnical studies and drilling programs at different stages of completion.We continue to seek out new venture opportunities that have thepotential of providing cash flow in the near term to assist in funding furtherexploration activities in the countries of the Indian Ocean rim. We havecompleted the acquisition of additional equity in the fields in India and amaterial interest in a promising exploration block with near-term productionpotential in Indonesia.Oilex has continued to build its exceptionally talented technicaland executive team to design and manage the substantial work programs that lieahead in the coming year, when we expect to be drilling at least 18 wells andacquiring more than 3,000km2 of 3D seismic onshore and offshore in variousbasins. This year, in addition to offices in Perth and India, we haveestablished an office in Muscat, Oman to manage the field operations in Block56.
At 30 June 2007, Oilex held interests in eight permits in prospective basins. Oilex has continued to compile a significant portfolio of oil and gas acreage that has a well-balanced mix of risk and reward.
Under the stewardship of Bruce McCarthy, Ray Barnes and the team,Oilex has continued to increase its market capitalization from $84 million to$200 million at the date of this report, an impressive increase ofapproximately 140% for the past year. The Company retains cash resources ofapproximately $67 million that will be applied to a wide range of explorationand development activities over the coming year, aimed at adding significantvalue for the benefit of all stakeholders.You will note in the attached reports, that Oilex is reinforcingthe strong alignment of shareholders and executive management and staff of thecompany towards improving the value of the company, by granting performanceshares and unlisted options as part of their remuneration package. Your Boardbelieves that this a critical factor behind Oilex's success in attracting andretaining experienced and motivated people in this highly competitive globalindustry.On behalf of the Board, I extend thanks to all of our stakeholders,employees, contractors, suppliers, joint venture partners and the governmentagencies associated with our projects. We also greatly appreciate the supportthat our corporate advisors, Hartleys Limited, continue to provide to thecompany.
We look forward to a very exciting year ahead and aim to achieve outstanding results within the framework of "industry best practice" in all of our endeavours, particularly with regard to our safety, health, social and environmental responsibilities as good corporate citizens.
Mr M D J CozijnChairman28 September 2007 OPERATIONS REVIEWThe company has continued to grow its asset base in the past yearand at the same time, a large part of the work carried out has been to ensurethat the drilling programs in India, Oman and Indonesia all commence in atimely manner. The Indian and Indonesian programs have commenced sinceyear-end and the drilling program in Oman is expected to start in November2007. As well as drilling at Cambay last year, the 3D seismic surveys atCambay and Bhandut have been acquired and processed in second half of the yearand interpretation is ongoing; the 2D seismic acquisition program onshore Omanstarted in July and is anticipated to be completed in November along withreprocessing of an extensive seismic data base; an extensive 3D seismic surveyhas been purchased and a contract has been awarded for new 3D seismicacquisition in JPDA 06-103 in the Timor Sea; and in WA-388-P 3D seismicreprocessing has been completed and interpretation is in progress. Whilemanaging the existing assets we continue to evaluate new opportunitiesfocussed on the countries of the Indian Ocean rim where we already havematerial interests.
INDIA
The work program in the Cambay contract area that began last yearwith the drilling of 2 wells and acquisition of 3D seismic over the entireblock is the most comprehensive in nearly 20 years. The wells provided newdata, the most important of which were the first velocity survey in Cambay totie the seismic data to wells and confirmation of the presence of oil columnsat two stratigraphic levels on the western high feature. Oil flowed to surfacefrom both levels under natural pressure with no formation water and furtherstudies to determine the reservoir properties to assist in designing futureproduction wells are in progress.
Our understanding of the distribution of hydrocarbons and reservoir has improved dramatically since the 3D data have been interpreted. Research of the old wells, combined with the new interpretation has revealed the likely presence of a vertical gas column in excess of 240m at the main, younger reservoir interval and strong seismic amplitude anomalies at the deeper over-pressured interval indicate the presence of gas.
The distribution of hydrocarbons has been mapped with a high levelof confidence from well intersections and 3D seismic character in Cambay fieldand consequently is now much better understood than at any time in the past.The resource estimates (see below) are based on reservoir characteristicsdetermined from the well data.The data that are required to obtain an accurate assessment of therange of reserves in Cambay will be acquired from the wells in the drillingcampaign that is planned to commence in September 2007. The main objective isto acquire the data from cores, testing and logging to meet the requirementsof an independent expert for certification of reserves, enabling the JointVenture to move towards project approval in early 2008.
ACQUISITION OF INTERESTS IN CAMBAY FIELD, GUJARAT, INDIA [45% Interest]
In July 2005, Oilex acquired a 30% participating interest in the Production Sharing Contract ("PSC") covering the Cambay Field located onshore Gujarat, India.
In 2006, Oilex acquired an additional net 15% equity interest from Niko Resources Ltd ("Niko") and now holds a 45% participating interest in the Cambay PSC, 20% of which is being earned by farmin and 25% by purchase from Niko. The Government of India approved the assignment of the balance of the equity in the PSC in May 2007.
PHASE 1 DRILLING PROGRAM 2006
On the basis of data analysed from existing wells and prior toacquisition of the 3D seismic survey, two wells were drilled to acquire modernwireline and formation fluid and pressure information to aid in normalisingthe existing data base and to intersect the possible oil leg on the WesternHigh Trend. Oil is being produced on the Western High at low rates on anintermittent basis from these units in wells that have suffered formation andwell bore damage in the past. These reservoir units are also proven producersin fields nearby to the north and south of Cambay Field.
The first well, Cambay-72, spudded on 11 September 2006 and reached total depth ("TD") of 1767 metres on 25 September 2006. It intersected hydrocarbon-bearing sandstones at the level of the primary Oligocene and secondary Miocene and Eocene objectives. Oil and gas were recovered at surface from the uppermost part of the over-pressured Eocene section during drilling.
The Cambay-71 well spudded on 29 September 2006 and reached theplanned TD of 1600m on 08 October. The well is located on the flank of thenorthern culmination of the Western High structure about 800 metres to thenortheast of Cambay-72 and intersected a geological section in the Oligoceneand Miocene similar to Cambay-72. The Eocene section was not drilled inCambay-71 due to the clear evidence of a high degree of over-pressure inCambay-72 and the consequent need for a different casing design to adequatelytest this section. The Eocene remains highly prospective. Wireline logging andother formation evaluation programs were carried out in Cambay-71. Attempts toacquire good quality pressure and fluid data met with limited success, partlydue to mechanical failure of tools and partly because of very friablesandstone plugging the tools.
PHASE 1 DRILLING PROGRAM - WELL TESTS
The Cambay-72 well was tested successfully in January 2007 at thelevel of the Eocene EP IV and the Oligocene OS II, both zones flowing oil tosurface at unstabilised rates. The first test was conducted on the Eocene EPIV interval, a secondary objective in the well. Significantly, although theflow rate was modest and did not stabilise during the flow period, noformation water was produced and the formation characteristics are such thatclose study of various engineering options to produce the oil at commercialrates will be undertaken. Further testing of the EP IV in areas where seismicdata indicate better quality reservoir are planned for the next drillingcampaign.The second test in Cambay-72 was conducted at the OS II intervalwhere it was expected the well would produce oil at rates that would berestricted by the tendency to also produce sand from the friable reservoirunit. On opening the well slowly to limit the inflow of sand during normalcleanup operations, oil, water and natural gas flowed to surface at variable,unstabilised rates until the test was prematurely terminated. An average flowrate calculated from a period of actual flow and volume produced was about 120barrels per day of oil and 80 barrels per day of completion water.
3D SEISMIC SURVEY
Oilex acquired a 3D seismic survey over the entire Cambay contractarea of 160 km2 at the end of 2006, the first in the history of the field. Thedata were processed and interpreted early in 2007 and provided the basis fordetailed mapping at more than 10 horizons. The quality of the data isexcellent with fault patterns and deep seismic events clearly defined andindicate some significant new plays that were not identifiable on the olddata. Amplitude anomalies that appear to be direct indicators of hydrocarbonshave been mapped in detail at various levels and have been used to locate keywells in the second phase of drilling that is expected to start in September2007.RESOURCE ESTIMATE UPGRADEDThe estimate of resources in the Cambay Field was revised upwardsfrom that completed the previous year and submitted to the Directorate Generalof Hydrocarbons (DGH) the representative of the Government of India. Thisestimate incorporated the interpretation of the Cambay 3D seismic survey andnew well data and is confined to the depth structure mapping of the OligoceneOS II and Eocene EP IV sandstones only. Other potential hydrocarbon bearingreservoirs have not been included in the estimate. The presence anddistribution of in-place hydrocarbons in each of several major
hydrocarbon-bearing structural compartments is demonstrated by test and production data combined with wireline log responses from approximately 65 wells drilled in the Contract Area.
RESOURCES ORIGINAL VOLUME-IN-PLACE (100% BASIS) Low Estimate Best Estimate High Estimate OIL (million stock tank 26 48 91barrels) (16) (43) (108)(May 2006 estimate) GAS (billion cubic feet) # 186 356 702 (May 2006 estimate) (105) (173) (432) CONDENSATE (million stock 7 14 28tank barrels) (1.6) (3.7) (9.8)(May 2006 estimate)
# Includes approximately 52 BCF of gas produced to date.
Oilex holds a 45% interest in the Cambay Production Sharing Contract
Table 1 - Total discovered hydrocarbon-resource-in-place estimation, March 2007.
The hydrocarbon distribution is now much better defined by moreaccurate fault mapping and seismic amplitude extraction from 3D data and issupported by well data in the field area. The remaining uncertainty incalculating hydrocarbon volumes rests with the definition of hydrocarbon fluidboundaries and reservoir net pay. These uncertainties were accommodated in theresource estimate by applying probability analysis to generate a range of oiland gas volumes which will be addressed during the Phase 2 drilling campaign.
As illustrated in Table 1, the evaluation has resulted in redistribution of some of the oil resources compared to the May 2006 estimate. The recognition of additional gas resources based on seismic attribute analysis is reflected by a substantial increase in gas and condensate volumes.
An estimate of undiscovered (exploration) resources of 60 million barrels of oil and 120 billion cubic feet of gas was also provided to the DGH to account for potential resources mainly in deeper stratigraphic units.
PHASE 2 DRILLING PROGRAM
A selective drilling program designed to prove a reserves base bythe end of 2007 is the centrepiece of the 2007-2008 Cambay Field Work Program.The main element is a 9 month continuous drilling program with the first 6firm wells anticipated to start in September 2007. A combination of re-entry,sidetrack and new wells has been sanctioned with the primary objective ofacquiring new reservoir and fluid data for the Oligocene and Eocenehydrocarbon zones that have been identified from the field's production andwell testing history. Each reservoir compartment at the main objective levelswill be tested by at least one well. Along with data from existing wells, thisinformation will be used to determine oil and gas reserves in the majorcompartments of the field and will form the basis for planning there-development of the Cambay field.A contract for a rig for the 9 month program has been signed anddelays in the construction and shipping of that rig from USA have beenmitigated with the award of a second contract for a rig to drill 2-3 wells inBhandut and Cambay starting in September. Six wells to test Oligocene, Eoceneand deeper potential reservoir horizons will be drilled from existing welllocations in Cambay Field with the objective to prove an independentlycertified reserve as the basis for a re-development project to start in 2008.The remaining uncertainty in calculating hydrocarbon volumes are expected tobe resolved with the benefit of the information that will be gathered in thePhase 2 drilling campaign this quarter.
More than 40 potential locations have been selected for future wells that will constitute the core of the phase 2 drilling program in Cambay Field. A number of wells are also planned to be extended to target deeper exploration objectives in settings analogous to nearby oil discoveries.
BHANDUT AND SABARMATI FIELDS: GUJARAT
Oilex acquired 40% in each of Bhandut and Sabarmati Fields onshoreGujarat from Niko early in 2006 and the acquisitions were subsequentlyapproved by the Government of India. Each of these fields is producing oil atlow rates and they are anticipated to be good candidates for re-development.Oilex is the Operator of the fields.
The fields were discovered and developed initially by ONGC of India. Hydrocarbons were found in Miocene sandstones at Bhandut and Eocene sandstones at Sabarmati and continued to be produced on an intermittent basis after the fields were acquired by the GSPC and Niko Joint Venture in 1995. Production from the fields has suffered because of sand and water influx, formation damage and malfunction of downhole equipment.
SABARMATI FIELD [40% INTEREST]
The field is located on the southern culmination of a trend of producing oil fields operated by ONGC, on the outskirts of Ahmedabad, the largest city in Gujarat. Oil had been produced from the one well in the Sabarmati Field Contract Area at very low rates on an intermittent basis since 2001 when the Niko-GSPC Joint Venture intervened in the well. Since installation of the pump in April 2007 the well has produced over 7,000 barrels of oil.
The well has produced, in total, about 17,000 barrels of oil sinceit started producing in 2001 and was producing at 5-10 barrels of fluid (2-5barrels of oil) per day under natural flow from an Eocene reservoir which isabout 5m thick, through 2m of perforations. The results of the studiessuggested that the flow rate could be increased to an average rate of about75-90 barrels of oil per day with the installation of a hydraulic sucker rodpump. Existing production facilities at Sabarmati Field are capable ofhandling more than 600 barrels of fluid (oil plus water) per day.The pumping unit was installed at Sabarmati-1 and the well broughtonstream at an initial average rate of 97 bopd plus water. The flow rate hasgradually declined and the well is currently producing about 30 bopd while onproduction since the installation of the pump.
Although difficult to acquire in this built up area, Oilex is planning to conduct a 2D or 3D survey using an innovative low impact seismic technology to cover the contract area. A single vintage seismic line is the only existing coverage.
BHANDUT FIELD [40% INTEREST]
The field is located near to the Lakshmi, Gauri and Hazira Fieldsthat are producing gas and oil from reservoir intervals similar to thoseintersected in the Bhandut wells. The Bhandut Field has produced about 172,000barrels of oil since 1988. Individual wells have produced at rates of 200-400barrels of oil per day in the past.The first 3D seismic survey over Bhandut field was acquired inFebruary 2007 and has greatly assisted in understanding the distribution ofreservoir facies in the contract area. The data have delineated the structureand distribution of shallower discontinuous sandstone units that have provento be oil-bearing in the older wells and shown seismic amplitude anomalies atdeeper stratigraphic levels that have not been drilled and are likely to bedirect indicators of the presence of gas. The 3D indicates that the old wellswere drilled on the southeastern flank of the main structure and it ispossible that a significant volume of hydrocarbons remains to be found updipof the old wells.The first well on Bhandut is located to replicate the Bhandut-2production well that produced at rates of up to 200 bopd in the past beforerapid water breakthrough, thought to be caused by casing that has parted andthe well was shut-in. Modern core, velocity, wireline log and pressure datathat will be acquired from the well will be used to locate future wells on thefield. Bhandut-2Z is the first well to be drilled in the Phase 2 drillingprogram.
OMAN
BLOCK 56: ONSHORE SOUTHERN OMAN [25% INTEREST]
The Government of the Sultanate of Oman awarded Block 56 to aconsortium of Indian companies led by Oilex (Operator). The Exploration andProduction Sharing Agreement ("EPSA") was signed on 28 June 2006. The block islocated onshore, adjacent to producing fields operated by PDO, the Omannational oil company, in the South Oman Salt Basin, which is one of the mainproducing basins in Oman.
Oilex now has a Branch Office in Muscat that is home to a team of 10 Omani and international staff, and growing in anticipation of the start of the initial drilling campaign in November 2007.
The recognition of 20 structural leads and the possibility of anextension of the proven Ara salt play across Block 56 justified acomprehensive work program 2D and 3D seismic acquisition and drilling duringthe initial 3 year term of the EPSA. The work program commenced in August 2006with reprocessing of existing seismic data. Acquisition of a 2D seismic surveycommenced in August 2007 and the 3D survey will be acquired in 2008. Drillingis expected to start late in 2007.Hydrocarbon potential has been recognized for targets ranging fromthe Cambrian Buah formation to the Cretaceous Wasia group in areas where depthof burial is sufficient to mitigate the biodegradation of oil at the shallowerlevels. The possible presence of a thicker sedimentary section in the blockimplying a more extensive distribution of the Ara Salt unit into Block 56raises the possibility of salt related structures similar to those producingto the west in the main salt basin.Drilling locations in the western part of the block, on the flankof the South Oman Salt Basin, and on the northern salt wall trend have beenapproved and drilling is anticipated in Q4 2007. There is a significant areacovered by 3D and dense 2D seismic surveys and, after mapping of those data,these locations and a number of others have been selected on the existing database.INDONESIAWEST KAMPAR [45% INTEREST]In May 2007 Oilex entered into an agreement to acquire a 45%interest in the West Kampar Production Sharing Contract (PSC), onshoreSumatra, Indonesia from PT Sumatera Persada Energi (SPE) and the acquisitionhas been approved by the Government. The block has existing oil discoveries,one of which (Pendalian) could be brought into production quickly, ifjustified by appraisal drilling and it covers some highly prospectivestructural trends adjacent to major producing fields that will be the subjectof an intensive exploration program.The contract area of 4471 km2 is located in central Sumatraadjacent to the most prolific oil producing province in Indonesia, the CentralSumatra Basin, from which over 10 billion barrels of oil have been produced todate. Awarded in October 2005, the PSC work program commitment provides forthe acquisition of 250 kms of 2D seismic and 50 km2 of 3D seismic along withdrilling of the Pendalian-3 well and an additional 4 exploration wells byOctober 2008.The Pendalian-3 well planned for September 2007 will appraise theoil field discovered in 1993 by the Pendalian-1 well, a cored slim hole whichencountered a number of oil zones at depths ranging from 250 metres to 500metres. Two of the zones flowed oil from drillstem tests in Pendalian-1 withmaximum rates achieved of up to 530 barrels of oil per day. Independenttechnical work carried out for Oilex indicates that the best estimate of the"in place resource" for the field is 12 million barrels of oil.If commercial productivity is confirmed by the Pendalian-3 well,the West Kampar Joint Venture plans to acquire a 3D seismic survey over thePendalian Field and a number of satellite structures and to acceleratedevelopment. Shallow, low cost wells and the proximity to infrastructure areattractive incentives for the rapid development of the field. Early cash flowgenerated by Pendalian production will assist in funding the exploration ofhighly prospective trends that have been recognized on the block. Asconsideration for the acquisition of the interest, Oilex is paying certainpast and future costs including the drilling of the Pendalian-3exploration/appraisal well and the acquisition of 2D and 3D seismic workcommitment programs.
JOINT PETROLEUM DEVELOPMENT AREA - TIMOR-LESTE & AUSTRALIA
JPDA 06-103: FLAMINGO TROUGH, JOINT PETROLEUM DEVELOPMENT AREA (JPDA) BETWEEN TIMOR-LESTE AND AUSTRALIA [25% INTEREST]
In November 2006, Oilex (Operator) and the Joint Venture partiesentered into a Production Sharing Contract ("PSC") with the Timor SeaDesignated Authority for block JPDA 06-103. The block is located to the eastof the Laminaria, Corallina, Kakatua, Kuda Tasi and Elang discoveries/oil andgas fields and to the north of the Bayu-Undan gas condensate field.
Oilex has established an office in Dili, Timor-Leste, the first company awarded a PSC or operating in the Joint Petroleum Development Area to do so. The office employs nationals of Timor-Leste who are being trained as part of our obligation under the PSC.
A contract has been awarded for the acquisition of the Maura 3D seismic survey that will cover an area of 1,657 km2 and is expected to commence late 2007 or early 2008, dependent on current work commitments. With the purchase of modern 3D data acquired in recent years by third party contractors and the addition of the new 3D survey to the existing data set, the JV will have a comprehensive 3D seismic data base over the entire prospective area of the block by mid 2008. Drilling is anticipated in late 2008 dependent on the availability of rig and services.
AUSTRALIA
EPP 27: OTWAY BASIN, OFFSHORE SOUTH AUSTRALIA [20% INTEREST]
Oilex, VIL and GSPC each acquired a 20% participating interest in the Exploration Permit for block EPP 27, offshore South Australia pursuant to a farmin agreement with Great Artesian Oil & Gas Limited in February 2006.
The `Christine' 2D seismic survey commenced on 28 June 2006 and wascompleted on 20 July 2006. The survey was conducted by M.V. Pacific Titan.During the survey, approximately 1300 line kilometres of data were acquired,extending an existing seismic grid and covering eight leads identified in thesouth-eastern part of the permit.The processing and interpretation of the data was completed byOctober 2006, in readiness for drilling of a well at the earliest opportunitythereafter, depending on the availability of a suitable drilling rig. Oilex(Operator), Videocon and GSPC funded the seismic program 33.3% each as part oftheir commitment to earn 20% each in the permit.
The term of the final permit year 6 now ends on 24 February 2008 and will require approval of an extension to the term to enable the commitment well to be drilled.
WA-388-P: CARNARVON BASIN OFFSHORE WESTERN AUSTRALIA [20% INTEREST]
As part of a developing gas strategy, Oilex, (Operator) and the Joint Venture parties bid for and were awarded exploration permit WA-388-P. The block lies to the west of the North Rankin, Goodwyn and Perseus gas and condensate fields currently being produced for the domestic and LNG gas markets by Northwest Shelf Ventures and to the north of the large gas resources discovered in the Janz/lo area.
Reprocessing of existing seismic data has been completed and interpretation is in progress. It is anticipated that a 3D seismic survey will be acquired in 2008.
ONSHORE AUSTRALIA: COOPER-EROMANGA & SURAT-BOWEN BASINS, QUEENSLAND The information in this report has been compiled by the Managing Director of Oilex Ltd, Bruce McCarthy B.Sc. (Hons), PhD (Geology) who has over 29 years
experience in the oil and gas exploration and production industry. The estimates ofhydrocarbons in place were prepared by Paul Robinson B.Sc. (Hons), PhD (Geology), an independent consultant to Oilex Ltd who has over 25 years experience in petroleum geology and resources estimation and is a member of the AAPG. The estimates were reviewed by Ray Barnes, the Technical Director of Oilex Ltd who has over 35 years experience in the oil and gas exploration and production industry and is a member of the AAPG. The oil-in-place estimates are reported in accordance with the standard definitions set out by the Society of Petroleum Engineers, further information on which is available at www.spe.org.In October 2006, Oilex concluded an agreement with Bow Energy Ltd("Bow") to sell its permit interests in the Surat-Bowen and Cooper-Eromangabasins. As consideration for the sale of the assets, Oilex was issued with13.3 million fully paid ordinary Bow shares and 13.3 million options topurchase Bow shares at 50 cents per share on or before 5 years from the issuedate. Oilex is now the largest shareholder in Bow. One permit interest wasexcluded from the sale to Bow as it is subject to a pre-emptive right which isbeing exercised by a Joint Venture party.
CORPORATE REVIEW
CAPITAL RAISING
Shareholders of Oilex Ltd, at a general meeting held on 6 June 2007approved a resolution to raise $67.5 million through the issue of 50 millionordinary shares at an issue price of $1.35 per share. This issue was managedby our Corporate Advisers and stock brokers Hartleys Limited, with the sharesbeing issued predominantly to international and domestic institutionalinvestors and clients of Hartleys.
The monies raised will allow Oilex to expedite its global exploration and development program that may include:
- undertaking drilling of up to 8 wells in Cambay Field and allowing for completion costs plus additional wells in the event of success as part of the 9 month drilling contract;
- drilling and completion of one well and one work over well on Bhandut Field;
- acquiring 3D seismic on Sabarmati Field;
- drilling and completion of one well on Sabarmati Field;
- drilling and appraisal of one well on Otway Basin Block EPP27;
- acquiring 2D and 3D seismic on Oman Block 56;
- drilling and completion of up to 3 wells on Oman Block 56;
- acquiring 2D and 3D seismic on JPDA 06-103 Block; and
- participation in any new activities around the Indian Ocean rim.
In addition to progressing the Company's exploration activities, the Company may also use some of the funds raised to retire some of its existing debt facilities and to provide additional working capital.
SAFETY, HEALTH AND ENVIRONMENT POLICY
Oilex Ltd is committed to protecting the health and safety ofeverybody who plays a part in our operations or lives in the communities inwhich we operate. Wherever we operate, we will conduct our business withrespect and care for both the local and global, natural and social environmentand systematically manage risks to drive sustainable business growth. We willstrive to eliminate all injuries, occupational illness, unsafe practise andincidents of environmental harm from our activities. The safety and health ofour workforce and our environment stewardship are just as important to oursuccess as operational and financial performance and the reputation of thecompany.As Oilex expands its presence in different parts of the world, weshall endeavour to understand the diversity of cultures and customs that weencounter, to incorporate that understanding into the business practice forthat country and to have a beneficial impact through our working involvementwith local communities. We shall strive to make our facilities safer andbetter places in which to work and our attention to detail and focus onsafety, environmental, health and security issues will help to ensure highstandards of performance. We are committed to a process of continuousimprovement in all we do and to the adoption of international industrystandards and codes wherever practicable. Through implementation of theseprinciples, Oilex Ltd seeks to earn the public's trust and to be recognised asa responsible corporate citizen.
SOCIAL RESPONSIBILITY AND COMMUNITY DEVELOPMENT
INDEPENDENCE OIL & GAS SCHOLARSHIP
Oilex has committed to continue a community support program in Timor-Leste aimed at providing fundamental assistance in educating young people. The "Independence Oil and Gas Scholarship Fund" was established by Oilex last year and is continuing to support Delio Teixeira, a student of Timor-Leste studying at Murdoch University in the final year of his degree.
The purpose of the scholarship is to provide young men and women of Timor-Leste with the opportunity of an education that will be the basis of a fundamental contribution to the development of the country.
COMMUNITY DEVELOPMENT - TIMOR-LESTE RURAL HEALTH PROJECT
Oilex's business objective is to produce exceptional results forthe Company and all stakeholders. A fundamental component of our strategy isto develop and maintain excellent working relationships with the communitieswhere we work and to maintain a high level of corporate responsibility. Withthat in mind, Oilex has established a working alliance with Australian AidInternational ("AAI") for the provision of health care and training of healthcare workers that is needed in rural communities of the young sovereign state.That arrangement has been operating since March 2007 with outstanding success.
Objective: Implement health care training and support operations in pre-determined areas of need in cooperation with the Ministry of Health, local health authorities and communities.
AAI is an Australian-based, independent humanitarian aidorganisation that is non-profit and non-sectarian. AAI has made measurable andsustainable improvements to the lives of displaced people around the world,providing emergency medical assistance and implementing rural health programsthat focus on building local capacity.
RATIONALE FOR THE PROJECT
Timor-Leste has one of the highest maternal mortality rates in theSoutheast Asian region, with up to 860 pregnant women dying for every 100,000births. The infant mortality rate is also unacceptably high, with highprevalence of low infant birth weight, peri-natal infection and an acute lackof skilled assistance at delivery. There also exists in the populationgenerally a high level of mortality and morbidity caused by easily preventableand treatable diseases.A nation in its infancy, Timor-Leste has limited fiscal resources,despite a large amount of aid funding, that are being applied to health careand has no capacity to immediately improve low levels of staff training. Themain priority of the AAI/Oilex venture is to create a sustainable healthproject that will increase the capacity of local healthcare workers to providecurative and preventative healthcare within rural communities of certaindistricts of Timor-Leste. AAI/Oilex are supporting the District Office ofHealth (DOH) to achieve their current program objectives and with thesupervision and quality assurance of healthcare projects and staff within theremote areas.Project Objectives
- Improve Health Information Systems
- Provide maternal and child healthcare
- Provide basic emergency care
- Provide support in the form of outreach clinics
This program will have both immediate and long term impacts on thehealth system and its intended beneficiaries. It will be fully co-ordinated bythe Ministry of Health and World Health Organization and support theirrespective objectives. It has also been fully funded by Oilex Ltd pursuant totheir community development program and will employ and benefit Timoresenationals by providing them with long term employment and skills developmentprospects. PERMIT SCHEDULERMIT SCHEDULE
PERMIT BASIN / STATE / JOINT VENTURE PARTIES EQUITY % OPERATOR
COUNTRYCambay Field Cambay / Oilex Ltd 30.00 Oilex Ltd Gujarat / India Oilex NL Holdings 15.00 (India) Limited Gujarat State Petroleum 55.00 Corp. LtdBhandut Field Cambay / Oilex NL Holdings 40.00 Oilex NL
Gujarat / India (India) Limited Holdings (India) Limited Gujarat State Petroleum 60.00 Corp. LtdSabarmati Cambay / Oilex NL Holdings 40.00 Oilex NLField Gujarat / India (India) Limited Holdings (India) Limited Gujarat State Petroleum 60.00 Corp. LtdBlock 56 South Oman / Oilex Oman Limited 25.00 Oilex Oman Oman Limited GAIL (India) Limited 25.00 Videocon Industries Ltd 25.00 Bharat Petroleum 12.50 Corporation Ltd Hindustan Petroleum Corp 12.50 LtdWest Kampar Central Sumatra Oilex (West Kampar) 45.00 PT SumateraBlock / Sumatra/ Limited Persada Energi Indonesia PT Sumatera Persada 55.00 EnergiEPP27 Otway / SA / Oilex Ltd 20.00 Oilex Ltd Australia Videocon Industries Ltd 20.00 Gujarat State Petroleum 20.00 Corp. Ltd Great Artesian Oil & Gas 40.00 LimitedJPDA 06-103 Flamingo / Oilex (JPDA 06-103) Ltd 25.00 Oilex (JPDA Joint Petroleum 06-103) Ltd Development Area/ Timor-Leste & Australia GSPC (JPDA) Limited 25.00 Global Energy Inc. 25.00 Bharat Petroresources 25.00 JPDA LtdWA-388-P Carnarvon / WA Oilex Ltd 20.00 Oilex Ltd / Australia Gujarat State Petroleum 20.00 Corp Ltd Videocon Industries Ltd 20.00 Bharat Petroleum 20.00 Corporation Ltd Hindustan Petroleum Corp 20.00 LtdATP548P Cooper-Eromanga Oilex Ltd 11.35 IOR Exploration Basin / QLD / Pty Ltd Australia Netscald Pty Ltd 20.00 Moroil Pty Ltd 16.94 IOR Exploration Pty Ltd 51.71. CORPORATE GOVERNANCE STATEMENTIn accordance with the ASX Corporate Governance Council'sPrinciples of Good Corporate Governance and Best Practice Recommendations("ASX Principles and Recommendations")[1], Oilex Ltd (the "Company") has madeit a priority to adopt systems of control and accountability as the basis forthe administration of corporate governance. Some of these policies andprocedures are summarised in this statement. Commensurate with the spirit ofthe ASX Principles and Recommendations, the Company has followed eachrecommendation where the Board of Directors ("Board") has considered therecommendation to be an appropriate benchmark for corporate governancepractices, taking into account factors such as the size of the Company and theBoard, resources available and activities of the Company. Where, after dueconsideration, the Company's corporate governance practices depart from theASX Principles and Recommendations, the Board has offered full disclosure ofthe nature of, and reason for, the adoption of its own practice.Further information about the Company's corporate governancepractices is set out on the Company's website at www.oilex.com.au. Inaccordance with the ASX Principles and Recommendations, information publishedon the Company's website includes charters (for the Board and its committees),the Company's code of conduct and other policies and procedures relating tothe Board and its responsibilities.
EXPLANATIONS FOR DEPARTURES FROM BEST PRACTICE RECOMMENDATIONS
During the Company's 2006/2007 financial year (the "Reporting Period") the Company has complied with each of the ASX Principles and Recommendations, other than in relation to the matters specified below.
Principle 2
Recommendation 2.1: A majority of the Board should be independent directors.
Notification of Departure: The Board does not have a majority of independent directors. Only one of the four directors is independent.
Explanation for Departure: The Board considers that its current composition is the most appropriate blend of skills and expertise, relevant to the Company's business. The Board is aware of the importance of independent judgement and considers independence, amongst other things, when new appointments to the Board are made.
Principle 2
Recommendation 2.2: The chairperson should be an independent director.
Notification of Departure: The chair does not satisfy the test of independence as set out in Box 2.1 of the ASX Principles and Recommendations ("Independence Criteria").
Explanation for Departure: The Board considers that Mr Cozijn isthe most appropriate person for the position as chair because of his industryexperience. The Board is of the view that it is only Mr Cozijn's services asCompany Secretary that precludes him being considered independent and that hisrole as Company Secretary is unlikely to cause a conflict of interest orimpede his ability to exercise independent judgement. Therefore, the Boardconsiders Mr Cozijn to be a suitable Chairman.
Principle 2
Recommendation 2.4: The Board should establish a nomination committee.
Notification of Departure: There is no separate nomination committee.
Explanation for Departure: The full Board considers those matters and issues that would usually fall to a nomination committee. The Board considers that no efficiencies or other benefits would be gained by establishing a separate committee. When considering matters of nomination, the Board functions in accordance with its Nomination Committee Charter.
CORPORATE GOVERNANCE STATEMENT
Principle 4
Recommendation 4.2, 4.3: The Board should establish an audit committee and structure it in accordance with Recommendation 4.3.
Notification of Departure: A separate audit committee has not been formed and therefore is not structured in accordance with the compositional recommendation. Further, Mr Cozijn maintains the chair during audit related discussions.
Explanation for Departure: The role of the audit committee iscarried out by the full Board. The Board considers that given its size andcomposition, no efficiencies or other benefits would be gained by establishinga separate committee. When considering audit related matters, the Boardfunctions in accordance with its Audit Committee Charter. The Audit CommitteeCharter also provides that the Board may meet with the external auditor,without management present, as required.
Principle 9
Recommendation 9.2: The Board should establish a remuneration committee.
Notification of Departure: There is no separate remuneration committee.
Explanation for Departure: The full Board considers those matters and issues that would usually fall to a remuneration committee. The Board considers that no efficiencies or other benefits would be gained by establishing a separate committee. When considering matters of remuneration, the Board functions in accordance with its Remuneration Committee Charter.
NOMINATION COMMITTEE
The full Board, in its capacity as the nomination committee, held one meeting during the Reporting Period. All directors appointed at the time of the meeting were in attendance.
AUDIT COMMITTEE
The full Board, in its capacity as the audit committee held two meetings during the Reporting Period. The following table shows the directors attendance at those meetings:
Name No. of Meetings AttendedM D J Cozijn (Chair) 2B H McCarthy 2G I Johnson (Independent) 1R G Barnes 1
L L Bhandari (Independent) 0
For each of Messrs Bhandari and Johnson, one of the meetings occurred outside the time of their appointment to the Board.
A profile of each Director containing their qualifications is setout in the Directors' Report. Mr Cozijn has a Bachelor of Commerce Degree andis an Associate of the Australian Society of Certified Practising Accountants.He has over 30 years experience in the administration of listed miningcompanies. Mr Cozijn's qualifications and experience enable him to meet thetest of financial expertise.
REMUNERATION COMMITTEE
Details of remuneration, including the Company's policy on remuneration, are contained in the Remuneration Report which forms part of the Directors' Report.
The full Board, in its capacity as the Remuneration Committee, held three meetings during the Reporting Period. All directors who were appointed to the Board at the time the meetings were held attended.
CORPORATE GOVERNANCE STATEMENT
OTHER
Skills, Experience, Expertise and Term of Office of Each Director
A profile of each Director containing the skills, experience, expertise and term of office of each Director is set out in the Directors' Report.
Identification of Independent Directors
In considering the independence of directors, the Board refers tothe Independence Criteria. To the extent that it is necessary for the Board toconsider issues of materiality, the Board refers to the thresholds forqualitative and quantitative materiality as adopted by the Board and containedin the Board Charter, which is disclosed in full on the Company's website.
Applying the Independence Criteria, the independent director of the Company currently is Mr Bhandari.
Statement Concerning Availability of Independent Professional Advice
If a Director considers it necessary to obtain independent professional advice to properly discharge the responsibility of his/her office as a director, then, provided the Director first obtains approval for incurring such expense from the Chairperson, the Company will pay the reasonable expenses associated with obtaining such advice.
Confirmation Whether Performance Evaluation of the Board and its Members Has Taken Place and How it was Conducted
During the Reporting Period informal discussions were held particularly in relation to the overall structure of the Board. There were also ongoing discussions between Mr Cozijn and Dr McCarthy in relation to Dr McCarthy's performance and the Board's progress in achieving its objectives.
Existence and Terms of any Schemes for Retirement Benefits for Non-Executive Directors
There are no termination or retirement benefits for non-executivedirectors. FINANCIAL REPORT CONTENTSDirectors'
Report..........................................................14
- RemunerationReport..........................................................22
Auditor's Independence Declaration..............................30
Income
Statements......................................................31
Balance
Sheets..........................................................32
Statement of Changes inEquity..........................................................33Statement of CashFlows...........................................................35Notes to the FinancialStatements......................................................36
Directors'
Declaration.....................................................68
Independent AuditReport..........................................................69
Shareholder
Information.....................................................71
The Directors present their report together with the financialreport of Oilex Ltd (the "Company") and of the consolidated entity, being theCompany and its controlled entities ("Oilex") for the financial year ended 30June 2007 and the Auditors' report thereon.
DIRECTORS
The names and details of the directors of the Company in office during the financial year and until the date of this report are detailed below. Directors were in office for this entire period unless otherwise stated.
Mr Max Dirk Jan Cozijn
(Non-Executive Chairman and Company Secretary)
BCom, ASA MAICD
Age: 57
Chairman since the Company listed on the Australian Securities Exchange ("ASX") in 2003. Mr Cozijn has over 30 years experience in the administration of listed mining and industrial companies. He is the Finance Director of Metex Resources Ltd, Finance Director and Company Secretary of Magma Metals Limited and Non-Executive Director and Company Secretary of Elkedra Diamonds NL and is a Director of various private companies, having also previously been a Non-Executive Director of Kagara Zinc Ltd for 20 years.
During the last three years Mr Cozijn has been a director of the following listed companies:
- Elkedra Diamonds NL (from April 2000 to current)
- Magma Metals Limited (from June 2005 to current)
- Metex Resources Ltd (from September 1992 to current)
Dr Bruce Henry McCarthy(Managing Director)BSc (Hons) PhD (Geology)Age: 57Appointed Managing Director in February 2005. Dr McCarthy has over29 years experience in the oil and gas exploration and production industry ingeotechnical and management positions. Further details of Dr McCarthy'squalifications and experience can be found in the Executive Management sectionof the Directors' Report.During the last three years Dr McCarthy has not been a director of any listedcompanies.Mr Raymond George Barnes(Technical Director)BSc (Hons) (Geology)Age: 56
Appointed as a Director in September 2005. Mr Barnes has over 35 years experience in the oil and gas exploration and production industry. Further details of Mr Barnes' qualifications and experience can be found in the Executive Management section of the Directors' Report.
During the last three years Mr Barnes has been a director of the following listed company:
- Voyager Energy Limited (from September 2001 to September 2005)
Dr Geoffrey Ian Johnson
(Independent Non-Executive Director)
BSc (Hons) PhD (Geology), Grad. Dip. Env. Sc
(Resigned 23 November 2006)
Age: 47
Director since the Company listed on the ASX in 2003 until his resignation on 23 November 2006. Dr Johnson has over 20 years experience in multi-commodity mineral exploration throughout Australia and Africa. He is currently Exploration Director of Zambezi Resources Limited and a Non-Executive Director of Zambezi Nickel Ltd. Dr Johnson is a member of the Geological Society of Australia, the Australian Institute of Geoscientists, the Society of Geology Applied to Mineral Deposits and is a fellow of the Society of Economic Geologists.
During the last three years Dr Johnson has been a Director of the following listed companies:
- Zambezi Resources Limited (from April 2004 to current)
- Zambezi Nickel Ltd (from July 2005 to current)
DIRECTORS (continued)
Mr Laxmi Lal Bhandari
(Independent Non-Executive Director)
BSc (Geology) and MSc (Geology)
(Appointed 23 November 2006)
Age: 72
Mr Bhandari was appointed as a director in November 2006 and is based in NewDelhi, India. He trained as a geologist and worked with Oil and Natural GasCorporation Ltd ("ONGC"), the largest public sector corporation in the oil andgas sector in India, on many significant projects over 36 years including thediscovery and development of the Bombay High offshore fields. Mr Bhandari heldhigh level positions including Chairman and Managing Director of ONGC Videsh,the international exploration arm of ONGC, and Chairman of ONGC.On leaving ONGC, Mr Bhandari became President of Tata Petrodyne, the oil andgas subsidiary of Tata Industries, a very large Indian industrial corporation.In 2003 he took up the position of Managing Director of India Hydrocarbons
Ltduntil June 2006.DIRECTORS' MEETINGS
All members of the Board are members of the Audit, Remuneration and Nomination Committees. The number of meetings of Directors (including meetings of committees of Directors) and the number of meetings attended by each Director of the Company during the financial year are:
Board Meetings Audit Committee Remuneration Committee Nomination Committee Meetings Meetings Meetings A B A B A B A BM D J Cozijn 14 14 2 2 3 3 1 1B H McCarthy 14 14 2 2 3 3 1 1R G Barnes 14 14 2 1 3 3 1 1G I Johnson 9 9 2 1 2 2 1 1L L Bhandari 6 6 1 - 1 1 - -
A - Number of meetings held during the time the Director held office during the year
B - Number of meetings attended
EXECUTIVE MANAGEMENTDr Bruce Henry McCarthy(Managing Director)BSc (Hons) PhD (Geology)Age: 57
Dr McCarthy has onshore and offshore experience gained in Australia and overseas working for a small independent and a large multinational company. Most recently he worked as an independent consultant and as President-India for Cairn Energy PLC (UK) leading their highly successful operating subsidiary in India until 2002 when he returned to Australia.
From 1996 to 2000, Dr McCarthy was based in India as ExecutiveDirector with Command Petroleum India Ltd ("Command") and with Cairn EnergyIndia Pty Ltd ("Cairn") after Command merged with Cairn in 1997. Until 1995,he spent 14 years with Marathon Oil Corporation working in the North Sea andbased in the United Kingdom, working on the North West Shelf of WesternAustralia and in the Timor Sea based out of Perth, Western Australia.
EXECUTIVE MANAGEMENT (continued)
Mr Raymond George Barnes(Technical Director)BSc (Hons) (Geology)Age: 56
Mr Barnes has worked in Europe, North and South America, South East Asia, the Middle East and Australia with an outstanding record of finding and developing commercial oil and gas discoveries in Australia and internationally. Recent appointments include Technical Director of Voyager Energy Limited from 2001 until September 2005 and Exploration Manager of Apache Energy based in Perth during a very aggressive exploration and development phase in the offshore Carnarvon Basin when over 40 discoveries were made. Prior to 1997, Mr Barnes held senior management positions for Ampolex based in Denver, Colorado where he was responsible for the United States and South American operations following a period in Perth, Western Australia where he was responsible for North West Shelf and Timor Sea operations.
Mr Richard Steven Paces(Chief Operating Officer)BSc (Chemical Engineering)Age: 50Mr Paces was appointed as Chief Operating Officer in May 2006 andhas over 25 years of experience in the oil and gas exploration and productionindustry. His background includes broad petroleum and reservoir engineeringexperience as well as extensive operations and management experience. He hasworked onshore and offshore with both large and small multinational companiesand has a variety of international experience. Prior to joining Oilex he wasVice President and Country Manager in Equatorial Guinea, Central Africa wherehe worked on a major LNG expansion project for Marathon Oil Corporation.
From 1998 to 2002, Mr Paces was based in India with Cairn as General Manager - Technical and subsequently as Country Manager in India. After leaving Cairn, he spent one year working for Reliance Industries in India as Chief Operating Officer of their oil and gas division.
Mr Graham John McCauley(Chief Financial Officer)FCA, ACISAge: 57
Mr McCauley has been Chief Financial Officer since October 2005. He is a Chartered Accountant and Chartered Secretary with over 30 years managerial, business development and financial accounting experience with international geophysical and oil companies. Mr McCauley has worked in Australia, Indonesia and the United Kingdom for companies such as Robertson Group, Horizon Exploration and Voyager Energy Limited.
PRINCIPAL ACTIVITIES
The principal activities of Oilex during the course of the financial year included:
- Exploration for oil and gas;
- Appraisal and development of oil and gas properties; and
- Production and sale of oil.
There were no significant changes in the nature of the principal activities of Oilex during the year.
OPERATING RESULTS
The consolidated loss of Oilex for the year ended 30 June 2007 after income tax amounted to $14,721,271 (2006: $10,680,105).
DIVIDENDS
No dividend was paid or declared during the year and the Directors do not recommend the payment of a dividend.
REVIEW OF OPERATIONS
A review of the operations of Oilex during the financial year and the results of those operations are set out on pages 2 to 8 of this report.
SIGNIFICANT CHANGES IN THE STATE OF AFFAIRS
On 20 July 2006 LinQ Capital Limited exercised 500,000 unlisted options at $0.50 per share raising $250,000.
On 11 October 2006, 250,000 unlisted employee options were exercised at $0.40 per share raising $100,000.
Shareholder approval was granted at the General Meeting ofShareholders held on 28 July 2006 for the issue of shares to IndiaHydrocarbons Limited in two tranches. On 1 August 2006 2,500,000 fully paidordinary shares were allotted at $0.20 per share raising $500,000. On 30 April2007 2,500,000 fully paid shares were allotted to India Hydrocarbons Limitedat $0.20 per share raising a further $500,000. The financial effect of theshares allotted on 1 August 2006 was brought to account in the financial yearended 30 June 2006.
Shareholders of the Company, at a general meeting held on 6 June 2007, approved a resolution to raise $67.5 million through the issue of 50 million ordinary shares at an issue price of $1.35 per share. The shares were issued predominantly to international and domestic institutional investors.
SIGNIFICANT EVENTS AFTER BALANCE DATE
Exercise of Options
On 9 August 2007, 250,000 unlisted employee options were exercised at $0.45 per share raising $112,500.
Issue of Options and Performance Rights
On 14 September 2007, options and performance rights were issued as detailed below:
- 344,000 unlisted performance rights were issued pursuant to the Employee Performance Rights Plan;
- 500,000 unlisted options were issued pursuant to consultancy agreement terms; and
- 1,050,000 unlisted options were issued to employees in accordance with the terms of employment.
Other than the matters described above, there has not arisen in the interval between the end of the financial year and the date of this report any item, transaction or event of a material and unusual nature likely, in the opinion of the Board, to affect significantly the operations of Oilex, the results of those operations, or the state of affairs of Oilex, in future financial years.
LIKELY DEVELOPMENTS
Other than the matters referred to elsewhere in this report, further disclosure as to likely developments in the operations of Oilex and expected results of those operations would, in the opinion of the Board, be speculative and not in the best interests of Oilex.
FINANCIAL POSITION
Capital Structure and Treasury Policy
At the date of this report, the Company had a total issued capital of 129,633,885 ordinary shares, 31,875,100 unlisted options exercisable at prices between $0.20 and $2.75 per share and 1,226,000 performance rights.
Cash management is reviewed on a regular basis by Oilex's ChiefFinancial Officer and reported to the Board on a monthly basis to ensure Oilexis able to meet its obligations as and when they fall due. Until sufficientoperating cash flows are generated from its operations, Oilex remains relianton equity or debt funding to fund its exploration commitments andadministration.
FINANCIAL POSITION (continued)
Liquidity and Funding
In order to fund exploration commitments, Oilex has arranged a $10 million loan facility with LinQ Capital Limited and undertaken an equity placement of 50 million shares, raising $67.5 million gross. The equity placement received shareholder approval on 6 June 2007.
ENVIRONMENTAL ISSUES
Oilex's oil and gas exploration and production activities aresubject to environmental regulation under the legislation of the respectivestates and countries in which it operates. The majority of Oilex's activitiesinvolve low level disturbance associated with its exploration drillingprograms. The Board actively monitors compliance with these regulations and asat the date of this report is not aware of any material breaches in respect
ofthese regulations.DIRECTORS' INTERESTSThe relevant interest of each director in shares and options issuedby the Company, as notified by the Directors to the ASX in accordance withS205G(1) of the Corporations Act 2001, at the date of this report is asfollows: Number of Ordinary Shares Number of Options Over Ordinary Shares Direct Indirect Direct IndirectM D J Cozijn - 500,000 1,500,000 -L L Bhandari - - - -B H McCarthy - 800,000 6,000,000 -R G Barnes 23,871 600,000 3,023,871 -
SHARE OPTIONS AND PERFORMANCE RIGHTS
Options Granted to Directors and Officers of the Company
During or since the end of the financial year, the Company granted options for no consideration over unissued ordinary shares in the Company, to the following Executives of the Company as part of their remuneration:
Executives Number of Options Granted Exercise Price Expiry DateP G Senycia 400,000 $1.40 31 January 2010P G Senycia 400,000 $2.00 31 January 2010P G Senycia 400,000 $2.50 31 January 2011R S Paces 775,000 $0.50 31 July 2009R S Paces 775,000 $0.65 31 July 2009R S Paces 775,000 $0.90 31 July 2010A D Beckett 250,000 $0.45 31 July 2009A D Beckett 250,000 $0.55 31 July 2009#
All options above were granted during the financial year. No options were granted to Executive or Non-Executive Directors during or since the end of the financial year.
# Options cancelled subsequent to the end of the financial year.
SHARE OPTIONS AND PERFORMANCE RIGHTS (continued)
Performance Rights Issued to Directors and Officers of the Company
During or since the end of the financial year, the Company granted performance rights for no consideration over ordinary shares in the Company to the following Executives of the Company as part of their remuneration:
Executives Number of Rights Granted Measurement Date Expiry DateG J McCauley 25,000 1 July 2007 1 July 2011G J McCauley 25,000 1 July 2008 1 July 2011G J McCauley 25,000 1 July 2009 1 July 2011P G Senycia 25,000 1 July 2007 1 July 2011P G Senycia 35,000 1 July 2008 1 July 2011P G Senycia 35,000 1 July 2009 1 July 2011R S Paces 50,000 1 July 2007 1 July 2011R S Paces 50,000 1 July 2008 1 July 2011R S Paces 50,000 1 July 2009 1 July 2011A D Beckett 40,000 1 July 2007 1 July 2011A D Beckett 40,000 1 July 2008 1 July 2011##A D Beckett 40,000 1 July 2009 1 July 2011##
All performance rights above were granted during the financial year. No performance rights were granted to Executive or Non-Executive Directors during or since the end of the financial year.
## Performance rights cancelled subsequent to the end of the financial year.
Un-issued Shares and Rights Under Options
At the date of this report unissued ordinary shares of the Company under option are:
Expiry Date Exercise Price Number of Shares28 February 2008 $0.20 2,200,00031 December 2009 $1.00 500,00031 December 2009 $1.50 3,000,0007 December 2008 $0.50 1,000,10014 December 2008 $0.40 2,000,00014 December 2008 $0.50 3,250,00014 December 2009 $0.80 4,250,00016 February 2009 $0.50 1,000,00031 March 2010 $0.50 4,500,00031 July 2009 $0.50 775,00031 July 2009 $0.65 775,00031 July 2010 $0.90 775,00031 October 2009 $1.50 500,00031 October 2009 $1.75 500,00031 October 2010 $2.00 500,00031 January 2010 $1.40 500,00031 January 2010 $2.00 450,00031 January 2011 $2.50 450,00031 March 2011 $2.00 2,500,00031 March 2010 $1.75 300,00031 March 2011 $2.25 300,00031 March 2012 $2.75 300,00030 April 2010 $1.60 350,00030 April 2010 $2.10 350,00030 April 2011 $2.70 350,00030 September 2011 $1.57 500,000 31,875,100
SHARE OPTIONS AND PERFORMANCE RIGHTS (continued)
Un-issued Shares and Rights Under Options (continued)
These options do not entitle the holder to participate in any share issue of the Company or any other body corporate.
At the date of this report unissued ordinary shares of the Company which are subject to performance rights are:
Expiry Date Exercise Price Number of Rights
1 July 2011 - 2006 - 882,000 rights 1 July 2012 - 2007 - 344,000 rights 1,226,000
Vesting of the performance rights is subject to the Company meeting performance conditions based on the share price growth of the Company compared to the growth in the Standard & Poors (S&P) / ASX 200 Energy Sector Index (code XEJ).
Shares Issued on Exercise of Options
During or since the end of the financial year, the Company issued ordinary shares as a result of the exercise of options as follows (there were no amounts unpaid on the shares issued):
Number of Shares Amount Paid on Each Share
500,000 $0.50 250,000 $0.40 250,000 $0.45 1,000,000
INDEMNIFICATION AND INSURANCE OF DIRECTORS AND OFFICERS
Oilex paid insurance premiums in respect of legal costs insurancecover for the directors and officers of Oilex. Oilex has not included detailsof the nature of the liabilities covered or the amount of the premium paid inrespect of the directors' liability and legal expense insurance contracts, assuch disclosure is prohibited under the terms of the insurance contract.
PROCEEDINGS ON BEHALF OF COMPANY
No person has applied for leave of Court to bring proceedings onbehalf of the Company or intervene in any proceedings to which the Company isa party for the purpose of taking responsibility on behalf of the Company forall or any part of those proceedings.
The Company was not a party to any such proceedings during the year.
NON-AUDIT SERVICES
The Company may decide to employ the Auditor on assignments additional to their statutory audit duties where the Auditor's expertise and experience with Oilex is important.
The Board has considered their position and, in accordance with theadvice received from the Audit Committee, is satisfied that the provision ofthe non-audit services is compatible with the general standard of independencefor auditors imposed by the Corporations Act 2001. The Directors are satisfiedthat the provision of non-audit services by the auditor, as set out below, didnot compromise the auditor independence requirements of the Corporations Act2001 for the following reasons:
- all non-audit services have been reviewed by the Audit Committee to ensure they do not impact the impartiality and objectivity of the auditor; and
NON-AUDIT SERVICES (continued)
- none of the services undermine the general principles relating to auditor independence as set out in APES 110 Code of Ethics for Professional Accountants, including reviewing or auditing the Auditor's own work, acting in a management or decision-making capacity for the Company, acting as an advocate for the Company or jointly sharing risks and rewards.
Details of the amounts paid to the auditor of the Company, KPMGAustralia, and its related practices for audit and non-audit services providedduring the year are set out below. In addition, amounts paid to other Auditorsfor the statutory audit have been disclosed: Consolidated 2007 2006 $ $Audit ServicesAuditors of the Company:Audit and review of financial reports (KPMGAustralia) 38,040 -Audit and review of financial reports (Overseas KPMGfirms) 68,448 - Other Auditors:Audit and review of financial reports (GrantThornton) - 29,225 106,488 29,225 Services Other Than Statutory AuditAssurance and Other ServicesKPMG Australia 2,020 -KPMG related practices 43,023 -Grant Thornton - 550 Taxation Services
Taxation compliance services (KPMG Australia) 128,474 -Taxation compliance services (KPMG relatedpractices) 10,941 - 184,458 550REMUNERATION REPORT
1. PRINCIPLES OF COMPENSATION - AUDITED
Remuneration of directors and executives is referred to as compensation as defined in AASB 124.
Compensation levels for key management personnel of Oilex arecompetitively set to attract and retain appropriately qualified andexperienced directors and executives. The Remuneration Committee obtainsindependent advice on the appropriateness of compensation packages of both theCompany and the consolidated group given trends in comparative companies bothlocally and internationally and the objectives of the Company's compensationstrategy.
The compensation structures explained below are designed to attract suitably qualified candidates, reward the achievement of strategic objectives and achieve the broader outcome of creation of value for shareholders. The compensation structures take into account:
- the capability and experience of the key management personnel;
- the ability of key management personnel to control the performance of the relevant segments;
- the Company's performance including:
‚ Oilex's earnings
‚ the growth in share price and delivering constant returns on shareholder wealth; and
- the structure of each compensation package for key management personnel.
Compensation packages include a mix of fixed compensation and long term performance-based incentives.
1.1. Fixed Compensation
Fixed compensation consists of base compensation as well asemployer contributions to superannuation funds. Compensation levels arereviewed annually by the Remuneration Committee through a process thatconsiders individual, segment and overall performance of Oilex. In addition,external independent consultants with specific oil and gas industry experienceprovide analysis and advice to ensure the directors' and senior executives'compensation is competitive in the market. Compensation for senior executivesis also reviewed on promotion.
1.2. Performance-Linked Compensation
Compensation of employees linked to performance of the Companyincludes long-term incentives designed to reward key management personnel forgrowth in shareholder wealth. The long term incentive plan ("LTI") is used toreward performance by granting options over ordinary shares of the Company.The exercise price of the options is set at a premium to the share price atthe time they are granted. The change in share price is the key performancecriteria for achieving a benefit under the plan as the value that may begenerated on exercise of options is dependent upon an increase in the shareprice above the exercise price of the options.The Company has established an Employee Performance Rights Planthat entitles employees to zero exercise price options. The performance rightsare subject to a performance benchmark, based on Oilex's percentage shareprice growth compared to the growth in the S&P/ASX 200 Energy Sector Index,which must be satisfied before any performance rights can be exercised. To theextent that the performance benchmark is achieved, the performance rights vestand may be exercised to acquire shares in the Company.
Given Oilex is an exploration company that is not yet generating profits or net operating cash flows, it is the ability to improve the share price that largely determines the success of Oilex's management team. The Remuneration Committee therefore considers that fixed compensation combined with an LTI component is achieving the Company's objectives to the benefit of employees and shareholders alike.
1.3. Non-Executive Directors
Total compensation for all Non-Executive Directors is set based on advice from external advisers with reference to fees paid to non-executive directors of comparable companies. Non-Executive Directors' base fees are presently $40,000 per annum. The compensation package for the Chairman and Company Secretary is currently $109,000 split evenly for each of company secretarial services and director's fees. Director's fees cover all main board activities.
2. EMPLOYMENT CONTRACTS - UNAUDITED
The following table summarises the key terms and conditions of contracts between key executives and Oilex:
Executive Position Contract Contract Resignation Unvested Termination Termination payment on
Start Date Termination Notice Options and notice notice from Oilex Date Required Performance required Rights on from Oilex ResignationB H McCarthy Managing 23 February 23 February 3 months Forfeited 3 months # 12 months fixed Director 2005 2008
remuneration and any (apart from LTI options and rights options and that have vested or rights that that will vest during have vested) the notice period
R G Barnes Technical 16 September 16 September 3 months Forfeited 3 months # None
Director 2005 2008 (apart from options and rights that have vested)
G J McCauley Chief 3 October 3 October 3 months Forfeited 3 months # None
Financial 2005 2008 Officer (apart from options and rights that have vested)P G Senycia Exploration 30 October n/a 3 months
Forfeited 3 months # None Manager 2006 (apart from options and rights that have vested) R S Paces Chief 5 May 2006 5 May 2009 6 months Forfeited 6 months # 12 months fixed Operating remuneration and any Officer (apart from LTI options and rights options and that have vested or rights that that will vest during have vested) the notice period
A D Beckett General 24 January 24 January 1 month Forfeited 1 month # None
Manager 2006 2008(employment Operations (apart fromceased 19 options andAugust 2007) rights that have vested)
# The Company may terminate the contract without notice if serious misconduct has occurred. In this case the termination payment is only the fixed remuneration earned until the date of termination. On termination with cause, any unvested options and performance rights will immediately be forfeited.
3. DIRECTORS' AND EXECUTIVE OFFICERS' REMUNERATION (COMPANY AND CONSOLIDATED) - AUDITED
Details of the nature and amount of each major element ofremuneration of each Director of the Company and each of the named CompanyExecutives and relevant Oilex Executives who received the highest remunerationare: Year Short - Term Post Other Termination Employment Long-Term Benefits Superannuation Benefits Benefits Salary & STI Non Total Fees Cash Monetary Bonus Benefits $ $ $ $ $ $ $Non-ExecutiveDirectorsM D J Cozijn 2007 16,667 - - 16,667 92,333 - -(Chairperson) 2006 50,000 - - 50,000 59,000 - -G I Johnson 2007 - - - - 47,500 - -(Resigned November 2006 - - - -2006) 2,700 2,700 30,000L L Bhandari 2007 24,111 - - 24,111 - - -(Appointed November 2006 - - - - - - -2006)Executive DirectorsB H McCarthy 2007 275,000 - 19,350 294,350 51,319 - -(Managing Director) 2006 213,006 - - 213,006 19,171 - -R G Barnes 2007 301,000 - - 301,000 - - -(Technical Director) 2006 208,500 - - 208,500 - - -S L Robertson 2007 - - - - - - -(Chief Financial 2006 - - - -Officer) 36,391 36,391 3,308(Resigned September2005) Other ExecutivesR S Paces 2007 505,692 - 139,383 645,075 15,461 - -(Chief Operating 2006 - - - -Officer) 89,165 89,165 2,462G J McCauley 2007 137,615 - - 137,615 12,385 - -(Chief Financial 2006 - - - -Officer) 19,113 19,113 78,803A D Beckett 2007 419,961 - - 419,961 - - -(General Manager 2006 208,731 - - 208,731 - - -Operations)(Ceased August 2007)P G Senycia 2007 144,137 - - 144,137 41,312 - -(Exploration Manager) 2006 - - - - - - -(Appointed October2006)Total Compensation:key managementpersonnel 2007 - - - (consolidated andcompany) 1,824,183 158,733 1,982,916 260,310 2006 827,606 - - 827,606 192,744 - - Year Share Based Payments Total Value of Value of Options as Performance Proportion of Rights as Remuneration Proportion of Remuneration Options Performance Rights $ $ $ % %Non-ExecutiveDirectorsM D J Cozijn 2007 - - 109,000 - -(Chairperson) 2006 - - 109,000 - -G I Johnson 2007 - - 47,500 - -(Resigned November2006) 2006 - - 32,700 - -L L Bhandari 2007 - - 24,111 - -(Appointed November2006) 2006 - - - - -Executive DirectorsB H McCarthy 2007 269,100 - 614,769 44% -(Managing Director) 2006 334,232 - 566,409 59% -R G Barnes 2007 148,999 - 449,999 33% -(Technical Director) 2006 164,532 - 373,032 44% -S L Robertson 2007 - - - - -(Chief FinancialOfficer) 2006 - - 39,699 - -(Resigned September2005) Other ExecutivesR S Paces 2007 # 988,437 98,796 1,747,769 57% 6%(Chief OperatingOfficer) 2006 - - 91,627 - -G J McCauley 2007 38,175 49,398 237,573 16% 21%(Chief FinancialOfficer) 2006 39,254 - 137,170 29% -A D Beckett 2007 # 288,677 79,037 787,675 37% 10%(General ManagerOperations) 2006 - - 208,731 - -(Ceased August 2007)P G Senycia 2007 280,091 55,239 520,779 54% 11%(ExplorationManager) 2006 - - - - -(Appointed October2006)Total Compensation:key managementpersonnel(consolidated andcompany) 2007 2,013,479 282,470 4,539,175 44% 6% 2006 538,018 - 1,558,368 35% -
The Directors of the Company may be Directors of the Company's subsidiaries. No remuneration is received for directorships of subsidiaries.
All key management personnel are employed by the parent entity.
# Options valued on grant date of 31 July 2006 following shareholder approvalon 28 July 2006 in accordance with Australian Accounting Standard AASB 2Share-based Payments. Option values based on the dates of acceptance of offersof employment are: R S Paces - $327,016 and A D Beckett - $32,551
3. DIRECTORS' AND EXECUTIVE OFFICERS' REMUNERATION (COMPANY AND CONSOLIDATED) - AUDITED (continued)
Notes in Relation to the Table of Directors' and Executive Officers' Remuneration
The fair value of the options is calculated at the date of grantusing the Black-Scholes Model. Because of the performance condition attachingto the performance rights, a Monte Carlo Simulation is used to value therights. The fair value of the options and rights is allocated to eachreporting period evenly over the period from grant date to vesting date. Thevalue disclosed is the portion of the fair value of the options andperformance rights allocated to this financial year. In valuing the optionsand performance rights, market conditions have been taken into account.
The following factors and assumptions were used in determining the fair value of 2007 options and performance rights on grant date:
Grant Date Expiry Date Fair Value Exercise Price of Expected Risk Free Dividend Yield Per Option/ Price Shares on Volatility Interest Right Grant Date RateOptions31 July 2006 31 July 2009 $0.71 $0.50 $0.97 90.9% 5.75% -31 July 2006 31 July 2009 $0.66 $0.65 $0.97 90.9% 5.75% -31 July 2006 31 July 2010 $0.67 $0.90 $0.97 90.9% 5.75% -31 July 2006 31 July 2009 $0.73 $0.45 $0.97 90.9% 5.75% -31 July 2006 31 July 2009 $0.69 $0.55 $0.97 90.9% 5.75% -18 January 2007 31 January 2010 $0.75 $1.40 $1.31 85.8% 6.25% -18 January 2007 31 January 2010 $0.64 $2.00 $1.31 85.8% 6.25% -18 January 2007 31 January 2011 $0.70 $2.50 $1.31 85.8% 6.25% - Performance Rights11 January 2007 1 July 2011 $1.40 - $1.40 70% to 90% 6.25% -11 January 2007 1 July 2011 $1.22 - $1.40 70% to 90% 6.25% -11 January 2007 1 July 2011 $1.05 - $1.40 70% to 90% 6.25% -
4. EQUITY INSTRUMENTS
All options refer to options and rights over ordinary shares of the Company, which are exercisable on a one-for-one basis.
4.1 Options and Rights Over Equity Instruments Granted as Compensation - Audited
Details on options and rights over ordinary shares in the Company that were granted as compensation to key management personnel during the financial year and details on options that were vested during the financial year are as follows:
Options
2007 Number of Grant Date Number of Fair Value Exercise Price Expiry Date of
Options Granted Options of
Options of Options Options Granted
During 2007 Vested Granted Granted During During 2007 During 2007 During 2007 2007 $ $Executive DirectorsB H McCarthy - - 2,000,000 - - -R G Barnes - - 1,000,000 - - - ExecutivesG J McCauley - - 250,000 - - -R S Paces 775,000 31 July 2006 775,000 $0.71 $0.50 31 July 2009R S Paces 775,000 31 July 2006 - $0.66 $0.65 31 July 2009R S Paces 775,000 31 July 2006 - $0.67 $0.90 31 July 2010A D Beckett 250,000 31 July 2006 250,000 $0.73 $0.45 31 July 2009A D Beckett 250,000 31 July 2006 - $0.69 $0.55 31 July 2009P G Senycia 400,000 18 January 2007 - $0.75 $1.40 31 January 2010P G Senycia 400,000 18 January 2007 - $0.64 $2.00 31 January 2010P G Senycia 400,000 18 January 2007 - $0.70 $2.50 31 January 2011
4. EQUITY INSTRUMENTS (continued)
4.1 Options and Rights Over Equity Instruments Granted as Compensation-Audited (continued)
Performance Rights
2007 Number of Rights Grant Date Number of Fair Value of Exercise Expiry Date of
Granted During Rights Rights
Price of Rights Granted
2007 Vested Granted Rights During 2007 During 2007 During 2007 Granted During 2007 $ $ExecutivesR S Paces 50,000 11 January 2007 - $1.40 - 1 July 2011R S Paces 50,000 11 January 2007 - $1.22 - 1 July 2011R S Paces 50,000 11 January 2007 - $1.05 - 1 July 2011G J McCauley 25,000 11 January 2007 - $1.40 - 1 July 2011G J McCauley 25,000 11 January 2007 - $1.22 - 1 July 2011G J McCauley 25,000 11 January 2007 - $1.05 - 1 July 2011A D Beckett 40,000 11 January 2007 - $1.40 - 1 July 2011A D Beckett 40,000 11 January 2007 - $1.22 - 1 July 2011A D Beckett 40,000 11 January 2007 - $1.05 - 1 July 2011P G Senycia 25,000 11 January 2007 - $1.40 - 1 July 2011P G Senycia 35,000 11 January 2007 - $1.22 - 1 July 2011P G Senycia 35,000 11 January 2007 - $1.05 - 1 July 2011Options 2006 Number of Grant Date Number of Fair Value of Exercise Expiry Date of Options Granted Options Options Price of Options Granted During 2006 Vested Granted Options During 2006 During During 2006 Granted 2006 During 2006 $ $Executive DirectorsB H McCarthy 1,000,000 14 December 2005 1,000,000 $0.15 $0.40 14 December 2008B H McCarthy 2,000,000 14 December 2005 - $0.13 $0.50 14 December 2008B H McCarthy 3,000,000 14 December 2005 - $0.09 $0.80 14 December 2009R G Barnes 1,000,000 14 December 2005 - $0.15 $0.40 14 December 2008R G Barnes 1,000,000 14 December 2005 - $0.13 $0.50 14 December 2008R G Barnes 1,000,000 14 December 2005 - $0.09 $0.80 14 December 2009 ExecutivesG J McCauley 250,000 14 December 2005 - $0.15 $0.40 14 December 2008G J McCauley 250,000 14 December 2005 - $0.13 $0.50 14 December 2008G J McCauley 250,000 14 December 2005 - $0.09 $0.80 14 December 2009With the exception of options that have vested, which can beretained by the employee irrespective of termination or resignation, alloptions expire on the earlier of their expiry date or termination of theindividual's employment. The options vest over periods of one to three yearsof continuous service and are exercisable at any time between the vesting dateand the expiry date. Further details, including grant dates and exercise datesregarding options granted to key management personnel are in Note 22 to thefinancial statements.
No options or rights were issued to the Directors during the financial year.
No options or rights have been granted to the Directors or to Key Management Personnel since the end of the financial year.
4.2 Modification of Terms of Equity-Settled Share-Based Payment Transactions - Audited
No terms of equity-settled share-based payment transactions (including options granted as compensation to key management personnel) have been altered or modified by the issuing entity during the financial year.
4. EQUITY INSTRUMENTS (continued)
4.3 Exercise of Options Granted as Compensation - Audited
During the financial year, the following shares were issued on the exercise of options previously granted as compensation:
2007 Number of shares Amount paid $/shareExecutiveG J McCauley 250,000 $0.40
4.4 Analysis of Options and Performance Rights Granted as Compensation - Unaudited
Details of vesting profiles of the options granted as remunerationto each Director of the Company, and each of the Key Management Personnel aredetailed below: Options and Performance Rights Granted Financial Value Yet to Vest $ Number Date % Vested in Forfeited in Years in Which Min Max (A) Year Year Grant Vests Executive Directors
B H McCarthy 6,000,000 14 December 2005 33% - (B) - 280,361R G Barnes 3,000,000 14 December 2005 33% - (B) - 222,921 ExecutivesG J McCauley 750,000 14 December 2005 33% - (B) - 55,730G J McCauley 75,000 11 January 2007 - - (D) - 91,750R S Paces 2,325,000 31 July 2006 33% - (B) - 1,032,301R S Paces 150,000 11 January 2007 - - (D) - 183,500A D Beckett 500,000 31 July 2006 50% - (C) - 173,419A D Beckett 120,000 11 January 2007 - - (D) - 146,800P G Senycia 1,200,000 18 January 2007 0% - (B) - 836,407P G Senycia 95,000 11 January 2007 - - (D) - 114,450A. The maximum value of options yet to vest is not determinable asit depends on the market price of shares of the Company on the ASX at the datethe option is exercised. These share prices represent a maximum price includedin the volatility assumptions within the valuation of the options.B. The options issued may vest and can be exercised as; one thirdone year from grant date, two thirds two years after grant date and in fullthree years from grant date. All options that have vested can be retained bythe employee upon resignation or termination of employment. Options granted toDr McCarthy are exercisable as: one sixth one year from the grant date; onehalf two years from grant date; and in full three years from grant date.
C. The options issued may vest and can be exercised as; one half one year from grant date and in full two years from grant date. All options that have vested can be retained by the employee upon resignation or termination of employment.
D. The performance rights are available; one third one year from grant date, two thirds two years after grant date and in full three years from grant date, subject to satisfying performance conditions.
4. EQUITY INSTRUMENTS (continued)
4.5 Analysis of Movements in Options - Unaudited
The movement during the financial year, by value, of options over ordinary shares in the Company held by each Director and each of the named Company Executives and relevant Oilex Executives is detailed below:
Executives Value of Options Granted in Year Exercised in Forfeited in Total Option Year Year Value in Year (A) (B) $ $ $ $G J McCauley - 245,000 - 245,000R S Paces 1,582,505 - - 1,582,505A D Beckett 355,229 - - 355,229P G Senycia 836,407 - - 836,407
(A) The value of options granted in the year is the fair value of the options calculated at grant date using the Black-Scholes Model. The total value of the options granted is included in the table above. This amount is allocated to remuneration over the vesting period.
(B) The value of options exercised during the year is calculated asthe market price of shares of the Company on the ASX as at close of trading onthe date the options were exercised after deducting the price paid to exercisethe option.
There were no movements in options during the financial year for any other Director or Executive other than those disclosed above.
4.6 Analysis of Movements in Performance Rights - Unaudited
The movement during the financial year, by value, of performance rights over ordinary shares in the Company held by each Director and Key Management Personnel of the Company is detailed below:
Value of Performance Rights Executives Total performance Granted in Exercised in Forfeited in rights value in year year year year $ $ $ $ G J McCauley 91,750 - - 91,750R S Paces 183,500 - - 183,500A D Beckett 146,800 - - 146,800P G Senycia 114,450 - - 114,450
The value of rights granted in the year is the fair value of the rights calculated at grant date using a Monte Carlo Simulation. The total value of the performance rights granted is included in the table above. This amount is allocated to remuneration over the vesting period.
There were no movements in rights during the financial year for any other Director or Executive other than those disclosed above.
AUDITOR'S INDEPENDENCE DECLARATION
The lead Auditor's Independence Declaration for the year ended 30 June 2007 has been received and can be found on page 30.
Signed in accordance with a resolution of the Directors.
NOTE CONSOLIDATED THE COMPANY 2007 2006 2007 2006 $ $ $ $ Continuing operations Revenue 7(a) 325,252 38,030 56,231 38,030 Employees benefits expense 7(b) (3,818,304) (1,074,492) (3,818,304) (1,074,492)Depreciation expense (204,771) (72,826) (183,873) (69,419)Exploration expenditure (4,772,748) (4,746,565) (3,172,015) (4,740,058)Production costs (640,212) - (192,138) -Well abandonment provision (1,851,126) - (1,030,524) -Impairment of loans tosubsidiaries - - (2,566,770) (1,326,002)Administration expense (2,847,021) (1,820,648) (2,733,771) (1,817,872))Share based payments 7(c) (2,727,258) (1,851,159) (2,727,258) (1,851,159)Results from operatingactivities (16,536,188) (9,527,660) (16,368,422) (10,840,972) Financial income 1,461,661 269,368 1,345,389 269,368Financial expenses (2,465,939) (253,729) (2,455,656) (253,729)Net financing costs 7(d) (1,004,278) 15,639 (1,110,267) 15,639 LOSS BEFORE INCOME TAX (17,540,466) (9,512,021) (17,478,689) (10,825,333)Income tax expense 8 - - - -NET LOSS FROM CONTINUINGOPERATIONS (17,540,466) (9,512,021) (17,478,689) (10,825,333) Discontinued operationProfit/(Loss) ofdiscontinued operation (netof income tax) 6 2,819,195 (1,168,084) 2,819,195 (1,514)LOSS FOR THE PERIOD (14,721,271) (10,680,105) (14,659,494) (10,826,847) Earnings per shareBasic loss per share (centsper share) 9 (18.3) (21.5)Diluted loss per share(cents per share) 9 (18.3) (21.5) Continuing operationsBasic loss per share (cents 9per share) (21.8) (19.1)Diluted loss per share 9(cents per share) (21.8) (19.1)
The income statements are to be read in conjunction with the notes to the financial statements.
CONSOLIDATED THE COMPANY NOTE 2007 2006 2007 2006 $ $ $ $ Current AssetsCash and cash equivalents 10 66,993,383 21,262,211 66,264,305 21,144,106Trade and other receivables 11 4,285,065
1,457,402 2,801,945 1,419,759Prepayments 12 82,315 - 82,315 -Inventories 13 376,704 1,066,701 217,288 1,040,286
TOTAL CURRENT ASSETS 71,737,467
23,786,314 69,365,853 23,604,151
Non Current AssetsTrade and other receivables 11 - 2,411,552 9,507,614 2,336,974Exploration and evaluation 14 13,498,334 - 4,396,926 -Property, plant and equipment 15 747,609 485,498 620,974 376,332Investments 16 3,717,631 - 3,728,835 2,780TOTAL NON CURRENT ASSETS 17,963,574
2,897,050 18,254,349 2,716,086 TOTAL ASSETS 89,701,041 26,683,364 87,620,202 26,320,237 Current LiabilitiesTrade and other payables 17 2,364,815
1,757,537 1,364,668 1,708,561Employee benefits 18 155,362 39,353 155,362 39,353Provisions 19 - 125,000 - -
Loans and borrowings 20 5,000,000 5,000,000 5,000,000 5,000,000TOTAL CURRENT LIABILITIES 7,520,177
6,921,890 6,520,030 6,747,914
Non Current LiabilitiesProvisions 19 1,714,387 - 954,401 -Loans and borrowings 20 5,000,000 - 5,000,000 -TOTAL NON CURRENT LIABILITIES 6,714,387 - 5,954,401 - TOTAL LIABILITIES 14,234,564
6,921,890 12,474,431 6,747,914 NET ASSETS 75,466,477 19,761,474 75,145,771 19,572,323 EquityIssued capital 21 100,893,697 36,563,991 100,893,697 36,563,991Reserves 21 8,596,476 2,499,908 8,403,144 2,499,908
Accumulated losses (34,023,696)
(19,302,425) (34,151,070) (19,491,576) TOTAL EQUITY 75,466,477 19,761,474 75,145,771 19,572,323 The balance sheets are to be read in conjunction with the notes tothe financial statements. CONSOLIDATED Foreign Asset Currency Issued Option Revaluation Translation Accumulated Capital Reserve Reserve Reserve Losses Total Equity $ $ $ $ $ $Balance at 1 July 2005 17,039,127 - - - (8,622,320) 8,416,807Total recognised income and - -expense for the period - (10,680,105) (10,680,105) Transactions with equity holdersin their capacity as equityholders:Shares issued 20,560,000 - - - - 20,560,000Capital raising costs (1,337,546) - - - - (1,337,546)Equity-settled share-based - -payment transactions 302,410 2,499,908 - 2,802,318Balance as at 30 June 2006 36,563,991 2,499,908 - - (19,302,425) 19,761,474 Balance at 1 July 2006 36,563,991 2,499,908 - - (19,302,425) 19,761,474Total recognised income andexpense for the period - - 330,053 513,379 (14,721,271) (13,877,839) Transactions with equity holdersin their capacity as equityholders:Shares issued 68,000,000 - - - - 68,000,000Capital raising costs (4,248,921) - - - - (4,248,921)Shares issued on exercise of -options 350,000 - - - 350,000
Transfer on exercise of options 202,801 (202,801) -
- - -Equity-settled share-basedpayment transactions 25,826 5,455,937 - - - 5,481,763Balance as at 30 June 2007 100,893,697 7,753,044 330,053
513,379 (34,023,696) 75,466,477 The statements of changes in equity are to be read in conjunction with the notes to the financial statements.
THE COMPANY Foreign Asset Currency Issued Option Revaluation Translation Accumulated Capital Reserve Reserve Reserve Losses Total Equity $ $ $ $ $ $Balance at 1 July 2005 17,039,127 - - - (8,664,729) 8,374,398Total recognised income and - - -expense for the year - (10,826,847) (10,826,847) Transactions with equity holdersin their capacity as equityholders:Shares issued 20,560,000 - - - - 20,560,000Capital raising costs (1,337,546) - - - - (1,337,546)Equity-settled share-based - -payment transactions 302,410 2,499,908 - 2,802,318Balance as at 30 June 2006 36,563,991 2,499,908 - - (19,491,576) 19,572,323 Balance at 1 July 2006 36,563,991 2,499,908 - - (19,491,576) 19,572,323Total recognised income andexpense for the year 330,053 320,047 (14,659,494) (14,009,394) Transactions with equity holdersin their capacity as equityholders:Shares issued 68,000,000 - - - - 68,000,000Capital raising costs (4,248,921) - - - - (4,248,921)Shares issued on exercise of -options 350,000 - - - 350,000
Transfer on exercise of options 202,801 (202,801) -
- - -Equity-settled share-basedpayment transactions 25,826 5,455,937 - - - 5,481,763Balance as at 30 June 2007 100,893,697 7,753,044 330,053 320,047 (34,151,070) 75,145,771
The statements of changes in equity are to be read in conjunction with the notes to the financial statements.
CONSOLIDATED THE COMPANY NOTE 2007 2006 2007 2006 $ $ $ $ Cash Flows From Operating ActivitiesInflows:Cash receipts from customers 34,618 509,587 34,618 241,080Interest received 1,257,796 278,767 1,141,524 269,368Management fees - 22,200 - 22,200 Outflows:Payments to suppliers and employees
(4,656,663) (1,912,426) (4,019,521) (1,905,269) Interest paid
(655,352) (136,655) (655,352) (136,655) Net Cash Flows Used In Operating Activities
23
(4,019,601) (1,238,527) (3,498,731) (1,509,276)
Cash Flows From Investing ActivitiesInflows:Proceeds from sale of property, plant andequipment - 25,704 - 25,704
Outflows:
Acquisition of petroleum interests (4,406,739) (2,337,607) - (2,337,607)Payments for exploration and evaluationexpenditure
(14,058,818) (6,836,010) (6,698,501) (5,363,268) Acquisition of property, plant and equipment
(601,834) (386,057) (468,516) (374,147) Payment for permit bonds
(12,000) (16,800) - -Net Cash Used In Investing Activities
(19,079,391) (9,550,770) (7,167,017) (8,049,318)
Cash Flows From Financing ActivitiesInflows:Proceeds from the issue of share capital
68,000,000 20,560,000 68,000,000 20,560,000 Proceeds from the exercise of options
350,000 - 350,000 -Proceeds from borrowings 5,000,000 5,000,000 5,000,000 5,000,000 Outflows:Payment of transaction costs
(4,225,920) (1,337,546) (4,225,920) (1,337,546) Borrowing costs
(100,000) (308,573) (100,000) (308,573) Advances to subsidiaries
- - (13,044,217) (1,328,859)Net Cash Flows From Financing Activities
69,024,080 23,913,881 55,979,863 22,585,022
NET INCREASE IN CASH AND CASH EQUIVALENTS
45,925,088 13,124,584 45,314,115 13,026,428
CASH AND CASH EQUIVALENTS AT 1 JULY 2006
21,262,211 8,137,627 21,144,106 8,117,678 Effect of exchange rate fluctuations on cash held
(193,916) - (193,916) -CASH AND CASH EQUIVALENTS AT 30 JUNE 2007 10
66,993,383 21,262,211 66,264,305 21,144,106
The statements of cash flows are to be read in conjunction with the notes to the financial statements.
NOTE 1 - REPORTING ENTITY
Oilex Ltd (the "Company") is a company domiciled in Australia. Theconsolidated financial statements of the Company as at and for the year ended30 June 2007 comprise the Company and its subsidiaries (together referred toas "Oilex"). Oilex Ltd is a limited liability company incorporated inAustralia whose shares are publicly traded on the Australian SecuritiesExchange ("ASX") and on the AIM Market of the London Stock Exchange. Oilex isprimarily involved in the exploration, evaluation, development and productionof hydrocarbons.NOTE 2 - BASIS OF PREPARATIONa) Statement of Compliance
The financial report is a general purpose financial report which has been prepared in accordance with Australian Accounting Standards ("AASBs") (including Australian Interpretations) adopted by the Australian Accounting Standards Board ("AASB") and the Corporations Act 2001. The consolidated financial report of Oilex also complies with the IFRSs and interpretations adopted by the International Accounting Standards Board. The Company's financial report does not comply with IFRSs as the Company has elected to apply the relief provided to parent entities by AASB 132 Financial Instruments: Presentation and Disclosure in respect of certain disclosure requirements.
The financial statements were approved by the Board of Directors on 28 September 2007.
b) Basis of Measurement
The consolidated financial statements have been prepared on the historical cost basis except for the following:
(i) financial instruments at fair value through profit or loss are measured at fair value;
(ii) available-for-sale financial assets are measured at fair value; and
(iii) liabilities for cash-settled share-based payment arrangements are measured at fair value.
c) Functional and Presentation Currency
These consolidated financial statements are presented in Australian dollars, which is the Company's functional currency. The functional currency of the majority of the Company's subsidiaries is United States dollars.
d) Use of Estimates and Judgements
The preparation of financial statements 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.
Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised and in any future periods affected.
In the process of applying Oilex's accounting policies, management has made the following judgements, apart from those involving estimations, which have the most significant effect on the amounts recognised in the financial statements.
(i) Exploration and Evaluation Assets
Oilex`s accounting policy for exploration and evaluationexpenditure is set out in Note 3(e). The application of this policynecessarily requires management to make certain estimates and assumptions asto future events and circumstances, including, in particular, the assessmentof whether economic quantities of reserves have been found. Any such estimatesand assumptions may change as new information becomes available. If, afterhaving capitalised expenditure under this policy, it is determined that theexpenditure is unlikely to be recovered by future exploitation or sale, thenthe relevant capitalised amount will be written off to the income statements.
NOTE 2 - BASIS OF PREPARATION (continued)
d) Use of Estimates and Judgements (continued)
(ii) Rehabilitation Obligations
Oilex estimates the future removal costs of onshore oil and gasproduction facilities, wells and pipeline at the time of installation of theassets. In most instances, removal of assets occurs many years into thefuture. This requires judgemental assumptions regarding removal date, futureenvironmental legislation, the extent of reclamation activities required, theengineering methodology for estimating cost, future removal technologies indetermining the removal cost, and asset specific discount rates to determinethe present value of these cash flows. For more detail regarding the policy inrespect of provision for rehabilitation refer to Note 3(k).
(iii) Share-based Payment Transactions
Oilex measures the cost of equity-settled transactions by reference to the fair value of the equity instruments at the date at which they are granted. The fair value of share options granted is determined using the Black-Scholes Model, using the assumptions detailed in Note 22. The fair value of the Performance Rights granted to employees is determined using a Monte Carlo Simulation taking into account the terms of the performance condition under which the rights are granted.
NOTE 3 - SIGNIFICANT ACCOUNTING POLICIES
The accounting policies set out below have been applied consistently to all periods presented in these consolidated financial statements, and have been applied consistently by Oilex entities.
The comparative income statement has been re-presented as if an operation discontinued during the current period had been discontinued from the start of the comparative period [see Note 6].
a) Basis of Consolidation
(i) Subsidiaries
Subsidiaries are entities controlled by the Company. Control exists when the Company has the power, directly or indirectly, to govern the financial and operating policies of an entity so as to obtain benefits from its activities. In assessing control, potential voting rights that presently are exercisable or convertible are taken into account. The financial statements of subsidiaries are included in the consolidated financial statements from the date that control commences until the date that control ceases. All subsidiaries have a June financial year end.
Investments in subsidiaries are carried at their cost of acquisition in the Company's financial statements, subject to impairment testing.
(ii) Joint Ventures
Joint ventures are those entities over whose activities Oilex has joint control, established by contractual agreement.
(iii) Jointly Controlled Operations and Assets
The interests of the Company and Oilex in unincorporated jointventures and jointly controlled assets are brought to account by recognising,in its financial statements, the assets it controls, the liabilities that itincurs, the expenses it incurs and the share of income that it earns from thesale of goods or services by the joint venture.
(iv) Transactions Eliminated on Consolidation
Intragroup balances and any unrealised gains and losses or income and expenses arising from intragroup transactions, are eliminated in preparing the consolidated financial statements.
NOTE 3 - SIGNIFICANT ACCOUNTING POLICIES (continued)
b) Foreign Currency
(i) Foreign Currency Transactions
Transactions in foreign currencies are translated to the respectivefunctional currencies of Oilex entities at exchange rates at the dates of thetransactions. Monetary assets and liabilities denominated in foreigncurrencies at the reporting date are retranslated to the functional currencyat the foreign exchange rate at that date. The foreign currency gain or losson monetary items is the difference between amortised cost in the functionalcurrency at the beginning of the period, adjusted for effective interest andpayments during the period, and the amortised cost in foreign currencytranslated at the exchange rate at the end of the period. Non-monetary assetsand liabilities denominated in foreign currencies that are measured at fairvalue are retranslated to the functional currency at the exchange rate at thedate that the fair value was determined. Foreign currency differences arisingon retranslation are recognised in profit or loss.
(ii) Foreign Operations
The assets and liabilities of foreign operations are translated to Australian dollars at exchange rates at the reporting date. The income and expenses of foreign operations are translated to Australian dollars at exchange rates at the dates of the transactions.
c) Non-Derivative Financial Instruments
Non-derivative financial instruments comprise investments in equity and debt securities, trade and other receivables, cash and cash equivalents, loans and borrowings and trade and other payables.
Non-derivative financial instruments are recognised initially atfair value plus, for instruments not at fair value through profit or loss, anydirectly attributable transaction costs, except as described below. Subsequentto initial recognition non-derivative financial instruments are measured asdescribed below.A financial instrument is recognised if Oilex becomes a party tothe contractual provisions of the instrument. Financial assets arederecognised if Oilex's contractual rights to the cash flows from thefinancial assets expire or if Oilex transfers the financial asset to anotherparty without retaining control or substantially all risks and rewards of theasset. Regular way purchases and sales of financial assets are accounted forat trade date, i.e. the date that Oilex commits itself to purchase or sell theasset. Financial liabilities are derecognised if Oilex's obligations specifiedin the contract expire or are discharged or cancelled.
(i) Available-for-Sale Financial Assets
Oilex's investments in equity securities and certain debtsecurities are classified as available-for-sale financial assets. Subsequentto initial recognition, they are measured at fair value and changes therein,other than impairment losses [see Note 3(i)(i)], and foreign exchange gainsand losses on available-for-sale monetary items [see Note 3(b)(i)], arerecognised as a separate component of equity. When an investment isderecognised, the cumulative gain or loss in equity is transferred to profitor loss.
(ii) Investments at Fair Value through Profit and Loss
An instrument is classified as at fair value through profit andloss if it is held for trading or is designated as such upon initialrecognition. Financial instruments are designated at fair value through profitor loss if Oilex manages such investments and makes purchase and saledecisions based on their fair value in accordance with Oilex's documented riskmanagement or investment strategy. Upon initial recognition, attributabletransaction costs are recognised in profit or loss when incurred. Financialinstruments at fair value through profit or loss are measured at fair value,and changes therein are recognised in profit or loss.
(iii) Other
Other non-derivative financial instruments are measured at amortised cost using the effective interest method, less any impairment losses.
NOTE 3 - SIGNIFICANT ACCOUNTING POLICIES (continued)
c) Non-Derivative Financial Instruments (continued)
(iv)Impairment
At each reporting date, Oilex assesses whether there is objective evidence that a financial instrument has been impaired. In the case of available-for-sale financial instruments, a prolonged decline in the value of the instrument is considered to determine whether impairment has arisen. Impairment losses are recognised in the income statement.
d) Cash and Cash Equivalents
Cash and cash equivalents comprise cash balances, call deposits and short-term deposits with an original maturity of three months or less.
e) Exploration and Evaluation Expenditure
Exploration and evaluation expenditure in respect of each area of interest is accounted for under the successful efforts method.
Exploration licence acquisition costs relating to established oil and gas exploration areas are capitalised.
The costs of drilling exploration wells are initially capitalised pending the results of the well. Costs are expensed where the well does not result in the successful discovery of potentially economically recoverable reserves.
All other exploration and evaluation expenditure, including general administration costs, geological and geophysical costs and new venture expenditure is expensed as incurred, except where:
(i) The expenditure relates to an exploration discovery for which, at balance date, an assessment of the existence or otherwise of economically recoverable reserves is not yet complete; or
(ii) The expenditure relates to an area of interest under which it is expected that the expenditure will be recouped through successful development and exploitation or by sale.
When an oil or gas field has been approved for commercial development, the accumulated exploration and evaluation costs are transferred to development expenditure.
f) Development Expenditure
Development expenditure includes past exploration and evaluation costs, pre-production development costs, development drilling, development studies and other subsurface expenditure pertaining to that area of interest. Costs related to surface plant and equipment and any associated land and buildings are accounted for as property, plant and equipment.
The definition of an area of interest for development expenditureis narrowed from the exploration permit for exploration and evaluationexpenditure to the individual geological area where the presence of an oil ornatural gas field exists, and in most cases will comprise an individual oil orgas field.
Development expenditure is reviewed for impairment at each reporting date where there is an indication that the individual geological area may be impaired [refer Note 3(i)].
(i) Amortisation
Amortisation is not charged on costs carried forward in respect of areas of interest in the development phase until production commences. When production commences, carried forward development costs are amortised on a units of production basis over the life of economically recoverable reserves.
g) Property, Plant and Equipment
(i) Owned Assets
Plant and equipment is stated at cost less accumulated depreciation and any accumulated impairment losses. The cost of self-constructed assets includes the cost of materials, direct labour, the initial estimate, where relevant, of the costs of dismantling and removing the items and restoring the site on which they are located and an appropriate proportion of overheads.
NOTE 3 - SIGNIFICANT ACCOUNTING POLICIES (continued)
g) Property, Plant and Equipment (continued)
(ii) Subsequent Costs
Oilex recognises in the carrying amount of an item of property,plant and equipment the cost of replacing part of such an item when that costis incurred if it is probable that the future economic benefits embodiedwithin the item will flow to Oilex and the cost of the item can be measuredreliably. All other costs are recognised in the income statement as an expenseas incurred.(iii) Depreciation
Depreciation is charged to the income statement using the reducing balance method over the estimated useful life of the assets. The estimated useful lives in the current and comparative periods are as follows:
- Motor vehicles - over 4 to 7 years
- Plant and equipment - over 2 to 7 years
- Office furniture - over 2 to 10 years
The assets' residual values, useful lives and amortisation methods are reviewed and adjusted if appropriate, at each financial year end.
(iv) Derecognition and Disposal
An item of property, plant and equipment is derecognised upon disposal or when no further future economic benefits are expected from its use or disposal.
Any gain or loss arising on derecognition 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.
h) Inventories
Inventories are stated at the lower of cost and net realisable value. Net realisable value is the estimated selling price in the ordinary course of business, less the estimated costs of completion and selling expenses.
i) Impairment(i) Financial AssetsA financial asset is considered to be impaired if objectiveevidence indicates that one or more events have had a negative effect on theestimated future cash flows of that asset. An impairment loss in respect of afinancial asset measured at amortised cost is calculated as the differencebetween its carrying amount, and the present value of the estimated futurecash flows discounted at the original effective interest rate. An impairmentloss in respect of an available-for-sale financial asset is calculated byreference to its current fair value. Individually significant financial assetsare tested for impairment on an individual basis. The remaining financialassets are assessed collectively in groups that share similar credit riskcharacteristics.
All impairment losses are recognised in profit or loss. Any cumulative loss in respect of an available-for-sale financial asset recognised previously in equity is transferred to profit or loss.
An impairment loss is reversed if the reversal can be related objectively to an event occurring after the impairment loss was recognised. For financial assets measured at amortised cost and available-for-sale financial assets that are debt securities, the reversal is recognised in profit or loss. For available-for-sale financial assets that are equity securities, the reversal is recognised directly in equity.
(ii) Non-Financial Assets
The carrying amounts of Oilex'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. If any such indication exists then the asset's recoverable amount is estimated. An impairment loss is recognised if the carrying amount of an asset or its cash-generating unit exceeds its recoverable amount. A cash-generating unit is the smallest identifiable asset group that generates cash flows that are largely independent from other assets and groups. Impairment losses are recognised in profit or loss.
NOTE 3 - SIGNIFICANT ACCOUNTING POLICIES (continued)
i) Impairment (continued)
(iii) Non-Financial Assets (continued)
The recoverable amount of an asset or cash-generating unit 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.
Impairment losses recognised 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 if there has been a change in the estimate 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 amortisation, if no impairment loss had been recognised.
j) Employee Benefits
(i) Wages, Salaries, Annual Leave and Sick Leave
Liabilities for employee benefits for wages, salaries, annual leaveand sick leave that are expected to be settled within 12 months of thereporting date represent present obligations resulting from employee servicesprovided to reporting date. The liabilities are calculated at undiscountedamounts based on remuneration wage and salary rates that Oilex expects to payas at the reporting date.
(ii) Long-term Service Benefits
Oilex's net obligation in respect of long-term service benefits isthe amount of future benefit that employees have earned in return for theirservice in the current and prior periods. The obligation is calculated usingexpected future increases in wage and salary rates including related on-costsand expected settlement dates, and is discounted using the rates attached tothe Commonwealth Government Bonds at the balance sheet date which havematurity dates approximating to the terms of Oilex's obligations.
(iii) Share-Based Payment Transactions
Employee options allow Oilex employees to acquire shares of theCompany. The fair value of options granted is recognised as an employeeexpense with a corresponding increase in equity. The fair value is measured atgrant date and spread over the period during which the employees becomeunconditionally entitled to the options. Options are also provided as part ofconsideration for services by financiers and advisers. The fair value of theoptions granted is measured using the Black-Scholes Model, taking into accountthe terms and conditions upon which the options were granted. The amountrecognised as an expense is adjusted to reflect the actual number of shareoptions that vest except where forfeiture is only due to share prices notachieving the threshold for vesting.Performance rights are also granted to employees. The fair value ofperformance rights granted is recognised as an employee expense with acorresponding increase in equity. The fair value is measured at grant date andallocated over the period during which the employees become unconditionallyentitled to the performance rights. The fair value of the performance rightsis determined using a Monte Carlo Simulation taking into account the terms ofthe performance condition under which the rights are granted.
k) Provisions
Provisions are recognised when Oilex has a present obligation(legal or constructive) as a result of a past event, when it is probable thatan outflow of resources embodying economic benefits will be required to settlethe obligation and when a reliable estimate can be made of the amount of theobligation. Provisions are determined by discounting the expected future cashflows at a pre-tax rate that reflects current market assessments of the timevalue of money and where appropriate, the risks specific to the liability.
NOTE 3 - SIGNIFICANT ACCOUNTING POLICIES (continued)
k) Provisions (continued)
(i) Site Rehabilitation
Provisions are made for site rehabilitation of an oil and gas fieldon an incremental basis during the life of the field (which includes the fieldplant closure phase). Provisions include reclamation, plant closure, wastesite closure and monitoring activities. These costs have been determined onthe basis of current costs, current legal requirements and current technology.Changes in estimates are dealt with on a prospective basis.
l) Interest-bearing Borrowings
All loans and borrowings are initially recognised at the fair valueof the consideration received less directly attributable transaction costs.After initial recognition, interest-bearing loans and borrowings aresubsequently measured at amortised cost with any difference between cost andredemption value being recognised in the income statement over the period ofthe borrowings on an effective interest basis.
m) Revenue
(i) Product Revenue
Revenue is recognised when the significant risks and rewards of ownership have transferred to the buyer. Risks and rewards of ownership are considered passed to the buyer at the time of delivery of the product to the customer.
(ii) Services Revenue
Revenue from the rendering of a service is recognised upon the delivery of the service to the customers.
All revenue is stated net of the amount of Goods and Services Tax ("GST").
n) Leases
The determination of whether an arrangement is or contains a lease is based on the substance of the arrangement and requires an assessment of whether the fulfilment of the arrangement is dependent on the use of a specific asset or assets and the arrangement conveys a right to use the asset.
Leases in which Oilex retains substantially all the risks andbenefits of ownership of the leased asset are classified as operating leases.Initial direct costs incurred in negotiating an operating lease are added tothe carrying amount of the leased asset and recognised as an expense over thelease term on the same basis as rental income.
Payments made under operating leases are recognised in the income statements on a straight line basis over the term of the lease. Lease incentives received are recognised in the income statements as an integral part of the total lease expense and are allocated over the lease term.
o) Income Tax
Income tax expense comprises current and deferred tax. Income tax is recognised in the income statement except to the extent that it relates to items recognised directly in equity, in which case it is recognised in equity.
Current tax is the expected tax payable on the taxable income for the year, using tax rates enacted or substantively enacted at the balance sheet date and any adjustment to tax payable in respect of previous years.
Deferred tax is recognised using the balance sheet method,providing for temporary differences between the carrying amounts of assets andliabilities for financial reporting purposes and the amounts used for taxationpurposes. Deferred tax is not recognised for differences relating toinvestments in subsidiaries to the extent that they probably will not reversein the foreseeable future. Deferred tax is measured at the tax rates that areexpected to be applied to the temporary differences when they reverse, basedon the laws that have been enacted or substantively enacted by the reportingdate.
NOTE 3 - SIGNIFICANT ACCOUNTING POLICIES (continued)
o) Income Tax (continued)
A deferred tax asset is recognised to the extent that it is probable that future taxable profits will be available against which the temporary difference can be utilised. Deferred tax assets are reviewed at each reporting date and reduced to the extent that it is no longer probable that the related tax benefit will be realised.
(i) Tax Consolidation
The Company and its wholly-owned Australian resident entities have formed a tax-consolidated group with effect from 1 July 2004 and are therefore taxed as a single entity from that date. The head entity within the tax-consolidated group is Oilex Ltd.
Current tax expense/income, deferred tax liabilities and deferredtax assets arising from temporary differences of the members of thetax-consolidated group are recognised in the separate financial statements ofthe members of the tax-consolidated group using the `separate taxpayer withingroup' approach by reference to the carrying amounts of assets and liabilitiesin the separate financial statements of each entity and the tax valuesapplying under tax consolidation.
p) Goods and Services Tax
Revenues, expenses and assets are recognised net of the amount of GST except:
- When the GST incurred on a purchase of goods and services is notrecoverable from the taxation authority, in which case the GST is recognisedas part of the cost of acquisition of the asset or as part of the expense itemas applicable; and
- Receivables and payables, which are stated with the amount of GST included.
The net amount of GST recoverable from, or payable to, the taxation authority is included as part of receivables or payables in the balance sheet.
Cash flows are included in the Statement of Cash Flows on a grossbasis and the GST component of cash flows arising from investing and financingactivities, which is recoverable from, or payable to, the taxation authority,is classified as operating cash flows.
Commitments and contingencies are disclosed net of the amount of GST recoverable from, or payable to, the taxation authority.
q) Discontinued Operations
A discontinued operation is a component of Oilex's business thatrepresents a separate major line of business or geographical area ofoperations that has been disposed of or is held for sale, or is a subsidiaryacquired exclusively with a view to resale. Classification as a discontinuedoperation occurs upon disposal or when the operation meets the criteria to beclassified as held for sale, if earlier. When an operation is classified as adiscontinued operation, the comparative income statement is restated as if theoperation had been discontinued from the start of the comparative period.
r) Earnings Per Share
Basic earnings per share is calculated as net profit attributable to members of the Company, adjusted to exclude any costs of servicing equity (other than dividends), divided by the weighted average number of ordinary shares, adjusted for any bonus element.
Diluted earnings per share is calculated as net profit attributable to members of the Company, adjusted for:
- Costs of servicing equity (other than dividends);
- The after tax effect of dividends and interest associated with dilutive potential ordinary shares that have not been recognised as expenses; and
- Other non-discretionary changes in revenues or expenses during the period that would result from the dilution of potential ordinary shares
divided by the weighted average number of ordinary shares and dilutive potential ordinary shares, which comprise share options and performance rights granted, adjusted for any bonus element.
NOTE 3 - SIGNIFICANT ACCOUNTING POLICIES (continued)
s) Segment Reporting
A segment is a distinguishable component of Oilex that is engagedeither in providing products or services (business segment), or in providingproducts or services within a particular economic environment (geographicalsegment), which is subject to risks and rewards that are different from thoseof other segments.t) Joint Ventures
Oilex's interest in joint venture entities is accounted for by recognising its proportionate share of assets and liabilities from joint ventures.
Joint venture expenses and Oilex's entitlement to production are recognised on a pro-rata basis according to Oilex's joint venture interest.
u) New Standards and Interpretations Not Yet Adopted
The following standards, amendments to standards andinterpretations have been identified as those which may impact the entity inthe period of initial application. They are available for early adoption at 30June 2007, but have not been applied in preparing this financial report:(i) AASB 7 Financial Instruments: Disclosures (August 2005)replaces the presentation requirements of financial instruments in AASB 132.AASB 7 is applicable for annual reporting periods beginning on or after 1January 2007, and will require extensive additional disclosures with respectto Oilex's financial instruments and share capital;(ii) AASB 2005-10 Amendments to Australian Accounting Standards(September 2005) makes consequential amendments to AASB 132 FinancialInstruments: Disclosure and Presentation, AASB 101 Presentation of FinancialStatements, AASB 114 Segment Reporting, AASB 117 Leases, AASB 133 Earnings PerShare, AASB 139 Financial Instruments: Recognition and Measurement, AASB 1First-time Adoption of Australian Equivalents to International FinancialReporting Standards, AASB 4 Insurance Contracts, AASB 1023 General InsuranceContracts and AASB 1038 Life Insurance Contracts arising from the release ofAASB 7. AASB 2005-10 is applicable for annual reporting periods beginning onor after 1 January 2007 and is expected to only impact disclosures containedwithin the consolidated financial report;(iii) AASB 8 Operating Segments replaces the presentationrequirements of segment reporting in AASB 114 Segment Reporting. AASB 8 isapplicable for annual reporting periods beginning on or after 1 January 2009and is not expected to have an impact on the financial results of the Companyand Oilex as the standard is only concerned with disclosures;(iv) AASB 2007-3 Amendments to Australian Accounting Standardsarising from AASB 8 makes amendments to AASB 5 Non-current Assets Held forSale and Discontinued Operations, AASB 6 Exploration for and Evaluation ofMineral Resources, AASB 102 Inventories, AASB 107 Cash Flow Statements, AASB119 Employee Benefits, AASB 127 Consolidated and Separate FinancialStatements, AASB 134 Interim Financial Reporting, AASB 136 Impairment Assets,AASB 1023 General Insurance Contracts and AASB 1038 Life Insurance Contracts.AASB 2007-3 is applicable for annual reporting periods beginning on or after 1January 2009 and must be adopted in conjunction with AASB 8 OperatingSegments. This standard is only expected to impact disclosures containedwithin the financial report;
NOTE 3 - SIGNIFICANT ACCOUNTING POLICIES (continued)
u) New Standards and Interpretations Not Yet Adopted (continued)
(v) Interpretation 10 Interim Financial Reporting and Impairmentprohibits the reversal of an impairment loss recognised in a previous interimperiod in respect of goodwill, an investment in an equity instrument or afinancial asset carried at cost. Interpretation 10 will become mandatory forOilex's 2008 financial statements, and will apply to goodwill, investments inequity instruments, and financial assets carried at cost prospectively fromthe date that Oilex first applied the measurement criteria of AASB 136 andAASB 139 respectively (i.e., 1 July 2004 and 1 July 2005, respectively).Interpretation 10 is not expected to have any impact on the financial report;(vi) Interpretation 11 AASB 2 Share-based Payment - Group andTreasury Share Transactions addresses the classification of a share-basedpayment transaction (as equity or cash settled), in which equity instrumentsof the parent or another group entity are transferred, in the financialstatements of the entity receiving the services. Interpretation 11 will becomemandatory for Oilex's 2008 financial report and is not expected to have anyimpact on the financial report;(vii) AASB 2007-1 Amendments to Australian Accounting Standardsarising from AASB Interpretation II amends AASB 2 Share-based Payments toinsert the transitional provisions of IFRS 2, previously contained in AASB 1First-time Adoption of Australian Equivalents to International FinancialReporting Standards. AASB 2007-1 is applicable for annual reporting periodsbeginning on or after 1 March 2007 and is not expected to have any impact onthe consolidated financial report;
(viii) AASB 2007-2 Amendments to Australian Accounting Standards also amends references to "UIG Interpretation" to interpretations. This amending standard is applicable to annual reporting periods ending on or after 28 February 2007;
(ix) AASB 2007-4 Amendments to Australian Accounting Standardsarising from ED 151 Australian Additions to, and Deletions from, IFRSs. Theseamendments result in options that currently exist under IFRSs being includedin the Australian equivalents to IFRSs and the elimination of additionalAustralian disclosures;
(x) AASB 2007-6 Amendments to Australian Accounting Standards arising from a revised AASB 123 Borrowing Costs. This amending standard is applicable to annual reporting periods ending on or after 1 January 2009 and is not expected to have any impact on the consolidated financial report;
(xi) AASB 2007-7 Amendments to Australian Accounting Standards arising from AASB 2007-4. This amending standard is applicable to annual reporting periods ending on or after 1 July 2007 and is not expected to have any impact on the consolidated financial report; and
(xii) AASB 101 Presentation of Financial Statements removes Australian specific disclosure requirements. This amending standard is applicable to annual reporting periods ending on or after 1 January 2007 and is not expected to have any impact on the consolidated financial report.
NOTE 4 - DETERMINATION OF FAIR VALUES
A number of Oilex's accounting policies and disclosures require thedetermination of fair value, for both financial and non-financial assets andliabilities. Fair values have been determined for measurement and / ordisclosure purposes based on the following methods. Where applicable, furtherinformation about the assumptions made in determining fair values is disclosedin the notes specific to that asset or liability.
(a) Investments In Equity and Debt Securities
The fair value of available-for-sale financial assets is determined by reference to their quoted bid price at the reporting date.
(b) Trade and other receivables
The fair value of trade and other receivables, excluding construction work in progress, is estimated as the present value of future cash flows, discounted at the market rate of interest at the reporting date.
NOTE 4 - DETERMINATION OF FAIR VALUES (continued)
(c) Non-derivative Financial Liabilities
Fair value, which is determined for disclosure purposes, is calculated based on the present value of future principal and interest cash flows, discounted at the market rate of interest at the reporting date.
(d) Share-based Payment Transactions
The fair value of options is measured using the Black-ScholesModel. The fair value of performance rights is measured using the Monte CarloSimulation. Measurement inputs include share price on measurement date,exercise price of the instrument, expected volatility (based on weightedaverage historic volatility adjusted for changes expected due to publiclyavailable information), weighted average expected life of the instruments(based on historical experience and general option holder behaviour), expecteddividends, and the risk-free interest rate (based on government bonds).Service and non-market performance conditions attached to the transactions arenot taken into account in determining fair value.
NOTE 5 - SEGMENT REPORTING
Segment information is presented in respect of Oilex's business and geographical segments. The primary format, geographical segments, is based on Oilex's management and internal reporting structure.
(a) Geographical Segments
The petroleum exploration and production segment is managed on a worldwide basis, but as at 30 June 2007 operated in five principal geographical areas; India, Australia, Oman, Timor-Leste and Indonesia.
Segment results, assets and liabilities include items directlyattributable to a segment as well as those that can be allocated on areasonable basis. Unallocated items comprise mainly income-earning assets andrevenue, interest-bearing loans, borrowings and expenses, and corporate assetsand expenses.
Segment capital expenditure is the total cost incurred during the period to acquire segment assets that are expected to be used for more than one period.
(b) Business Segments
Oilex operates in one business segment, being the development, exploration and production of hydrocarbons.
NOTE 5 - SEGMENT REPORTING (continued)
(c) Geographical Segments
INDIA AUSTRALIA OMAN 2007 2006 2007 2006 2007 2006 $ $ $ $ $ $ RevenueTotal segmentrevenue 325,252 - - - - -Unallocatedrevenue Segment Result (3,822,884) (2,731,090) (1,602,961) (1,940,264) (856,730) -UnallocatedexpensesLoss beforefinance costsNet finance(costs)/incomeIncome taxLoss for theperiod Segment Assets 15,322,404 1,131,167 284,955 1,581,248 185,571 -Unallocated assetsTotal assets SegmentLiabilities 2,907,556 861,399 49,235 273,595 148,747 -UnallocatedliabilitiesTotal liabilities OtherAcquisition ofnon-currentsegment assets 11,037,803 120,495 - - 69,107 -UnallocatedacquisitionsTotal acquisitionsDepreciation ofsegment assets 33,048 9,217 - - 14,161 -UnallocateddepreciationTotal depreciationOther non-cashsegment expenses - - - - - - TIMOR-LESTE INDONESIA DISCONTINUED CONSOLIDATED OPERATION 2007 2006 2007 2006 2007 2006 2007 2006 $ $ $ $ $ $ $ $ RevenueTotal segmentrevenue - - - - - - 325,252 -Unallocatedrevenue - 38,030 325,252 38,030Segment Result (423,595) - (19,239) - 2,819,195 - (3,906,214) (4,671,354)Unallocatedexpenses (9,810,779) (6,024,390)Loss beforefinance costs (13,716,993) (10,695,744)Net finance(costs)/income (1,004,278) 15,639Income tax - -Loss for theperiod (14,721,271) (10,680,105) Segment Assets 64,748 - 2,939,209 - - - 18,796,887 2,712,415Unallocated assets 70,904,154 23,970,949Total assets 89,701,041 26,683,364 SegmentLiabilities 9,089 - 353,109 - - - 3,467,736 1,134,994Unallocatedliabilities 10,766,828 5,786,896Total liabilities 14,234,564 6,921,890 OtherAcquisition ofnon-currentsegment assets 13,440 - 2,524,983 - - - 13,645,333 120,495Unallocatedacquisitions 454,835 265,566Total acquisitions 14,100,168 386,061Depreciation ofsegment assets 1,263 - - - (2,341) - 46,131 9,217Unallocateddepreciation 158,640 63,609Total depreciation 204,771 72,826Other non-cashsegment expenses - - - - - - 5,455,937 2,499,908
NOTE 6 - DISCONTINUED OPERATION
In August 2006 Oilex signed a Share Sale and Purchase Agreement forthe sale to Bow Energy Ltd ("Bow") of its onshore Queensland oil and gaspermit interests in the Bowen-Surat and Cooper-Eromanga Basins. Asconsideration for the sale of the assets, Oilex was issued 13.3 million fullypaid ordinary shares and 13.3 million options to purchase Bow shares at $0.50per share on or before five years from the issue date. The effective date ofsale is 24 August 2006 with settlement effected on 8 November 2006. The sharesare subject to voluntary escrow for a period of two years from the date ofissue.
This disposal involved the sale of 100% of Oilex's interest in Seqoil Pty Ltd and other Queensland assets held in the parent entity.
The segment was not a discontinued operation or classified as held for sale as at 30 June 2006 and the comparative income statement has been restated to show the discontinued operation separately from continuing operations.
The effect of the disposal was an increase in the net assets of Oilex of $2,819,195.
During the year ended 30 June 2007, Seqoil Pty Ltd had net cash outflows from operating activities of $9,152 (year ended 30 June 2006: $1,213,242), net cash outflows from investing activities of nil (year ended 30 June 2006: $16,800) and net cash outflows from financing activities of $101,812 (year ended 30 June 2006: net cash inflow of $1,324,850).
Losses attributable to the discontinued operation for the year ended 30 June 2007 were as follows:
CONSOLIDATED THE COMPANY Note 2007 2006 2007 2006 $ $ $ $Results of discontinued operationRevenue 21,110 283,254 21,110 -Expenses (60,507) (1,451,338) (60,507) (1,514)Results from operating activities (39,397) (1,168,084) (39,397) (1,514)Income tax expense - - - -Results from operating activities, net (39,397) (1,168,084) (39,397) (1,514)of income taxGain on sale of discontinued operation 2,858,592 - 2,858,592 -Income tax on gain on sale of - - - -discontinued operationProfit (loss) for the period 2,819,195 (1,168,084) 2,819,195 (1,514)
Basic earnings (loss) per share (cents 9 3.5 (2.4) - -per share)Diluted earnings (loss) per share 9 2.6 (2.4) - -(cents per share) Cash flows from discontinued operationNet cash used in operating activities (9,152) (1,213,242) (9,152) (1,514)Net cash used in investing activities - (16,800) - -Net cash from/(used in) financing (101,812) 1,324,850 (101,812) -activitiesNet cash from/(used in) discontinued (110,964) 94,808 (110,964) (1,514)operation
NOTE 7 - REVENUE AND EXPENSES
CONSOLIDATED THE COMPANY 2007 2006 2007 2006 $ $ $ $ Loss from ordinary activities before income tax has been determined after the following revenues and expenses(a) RevenueOil sales 325,252 - 56,231 -Management fees - 38,030 - 38,030 325,252 38,030 56,231 38,030(b) Employee Benefits
Wages and salaries including superannuation 847,187 502,601 847,187 502,601Other associated personnel expenses 126,429 - 126,429 -Increase in liability for annual leave 116,009 33,873 116,009 33,873Share-based payment transactions 2,728,679
538,018 2,728,679 538,018
3,818,304
1,074,492 3,818,304 1,074,492
(c) Share based payments to financiers and advisers 2,727,258
1,851,159 2,727,258 1,851,159 (d) Net Financing CostsUnrealised gain on investment 204,127 - 204,127 -Interest income 1,257,534 269,368 1,141,262 269,368Interest expense (655,352) (253,729) (655,352) (253,729)
Unrealised foreign exchange loss (1,810,587)
- (1,800,304) - (1,004,278) 15,639 (1,110,267) 15,639 (e) Operating Lease Rentals 304,039 190,093 210,320 190,093 NOTE 8 - INCOME TAX EXPENSE
The prima facie income tax, using rates applicable in the country of operation, on loss from ordinary activities differs from the income tax provided in the financial report as follows:
CONSOLIDATED THE COMPANY 2007 2006 2007 2006 $ $ $ $ Loss before tax (14,721,271)
(10,680,105) (14,659,494) (10,826,847) Income tax using the domestic corporation tax rate of 30% (2006: 30%)
(4,416,381) (3,204,032) (4,397,848) (3,248,054)Non-deductible expensesShare-based payments 1,636,781 749,972 1,636,781 749,972Other non-deductible expenses 224,537
32,235 958,316 32,235
(2,555,063)
(2,421,825) (1,802,751) (2,465,847)
Deferred tax asset on temporary differences and tax losses not brought to account at balance date as realisation is not regarded probable
2,555,063
2,421,825 1,802,751 2,465,847
Income Tax Expense for the Year - - - -
Unrecognised Deferred Tax Assets Not Brought to Account Temporary differences Other
2,117,445 277,650 1,799,619 240,150Losses available for offset against future taxable income 7,445,063
4,449,864 6,755,330 2,703,542
Deferred Tax Asset Not Brought to Account 9,562,508
4,727,514 8,554,949 2,943,692
The deductible temporary differences and tax losses do not expire under current tax legislation.
NOTE 8 - INCOME TAX EXPENSE (continued)
The deferred tax asset not brought to account for the 2007 financial year will only be obtained if:
(i) Future assessable income is derived of a nature and of an amount sufficient to enable the benefit to be realised;
(ii) The conditions for deductibility imposed by the tax legislation continue to be complied with; and
(iii) The companies are able to meet the continuity of ownership and/or continuity of business tests.
(a) Tax Consolidation
In accordance with tax consolidation legislation the Company, as the head entity of the Australia tax-consolidated group, has assured the deferred tax assets initially recognised by members of the tax consolidated group.
NOTE 9 - LOSS PER SHARE(a) Basic Loss Per ShareThe calculation of basic loss per share at 30 June 2007 was basedon the loss attributable to ordinary shareholders of $14,721,271 (2006: lossof $10,680,105) and a weighted average number of ordinary shares outstandingduring the financial year ended 30 June 2007 of 80,632,902 (2006: 49,574,148),calculated as follows:
(i) Loss Attributable to Ordinary Shareholders
CONSOLIDATED 2007 2006 Loss for the Period 14,721,271 10,680,105(ii) Weighted Average Number of Ordinary SharesIssued ordinary shares at 1 July 76,114,319 49,006,285Effect of shares issued 4,518,583 567,863Weighted average number of ordinary shares at 30 June 80,632,902 49,574,148(b) Diluted Loss Per Share
The Company's potential ordinary shares, being its options and performance rights granted, are not considered dilutive as the conversion of these options and rights would result in a decrease in the net loss per share.
NOTE 10 - CASH AND CASH EQUIVALENTS
CONSOLIDATED THE COMPANY 2007 2006 2007 2006 $ $ $ $ Cash at bank and on hand 2,490,660 526,680 1,761,581 408,575Short-term bank deposits # 64,502,723 20,735,531 64,502,724 20,735,531Total cash and cash equivalents 66,993,383
21,262,211 66,264,305 21,144,106 # The effective interest rate on short-term bank deposits was 5.9% (2006: 5.4%).
NOTE 11 - TRADE AND OTHER RECEIVABLES
CONSOLIDATED THE COMPANY 2007 2006 2007 2006 $ $ $ $CURRENTJoint venture receivables 662,588 1,214,416 662,588 1,214,416Other receivables 3,622,477 242,986 2,139,357 205,343 4,285,065 1,457,402 2,801,945 1,419,759 NON-CURRENTPermit bonds - 81,334 - 6,756Advance on acquisition of petroleum interests - 2,330,218 - 2,330,218Loans to subsidiaries - - 12,074,384 1,326,002Impairment of loans to subsidiaries -
- (2,566,770) (1,326,002)
- 2,411,552 9,507,614 2,336,974Unsecured loans to subsidiaries are non-interest bearing with theexception of loans to subsidiaries registered in Cyprus amounting to$11,638,327 (2006: nil) which bear interest at 5% per annum (2006: 5%). Allloans are repayable on demand but will not be recalled for repayment until thesubsidiaries are in a position to repay the loans.
NOTE 12 - PREPAYMENTS
CONSOLIDATED THE COMPANY 2007 2006 2007 2006 $ $ $ $ Prepayments 82,315 - 82,315 -NOTE 13 - INVENTORIES CONSOLIDATED THE COMPANY 2007 2006 2007 2006 $ $ $ $
Oil on hand - net realisable value 85,434
26,415 23,107 -Field consumables - cost 291,270 1,040,286 194,181 1,040,286 376,704 1,066,701 217,288 1,040,286
NOTE 14 - EXPLORATION AND EVALUATION
CONSOLIDATED THE COMPANY 2007 2006 2007 2006 $ $ $ $ Balance at 1 July - - - -Expenditure 9,093,655 5,758,363 4,623,526 4,320,934
Acquisition of exploration assets 5,299,147 420,529 - 420,529Write-off of exploration assets - (6,178,892) - (4,741,463)Effect of movements in exchange rates (894,468) (226,600) -Balance at 30 June 13,498,334 - 4,396,926 -
NOTE 15 - PROPERTY, PLANT AND EQUIPMENT
CONSOLIDATED THE COMPANY Plant and Office Capital Motor Plant and Office Capital Motor Vehicles Equipment Furniture WIP Total
Vehicles Equipment Furniture WIP Total
$ $ $ $ $ $ $ $ $ $CostBalance as at 1 July 45,377 199,246 32,455 - 277,078
45,377 61,988 32,455 - 139,8202005Other acquisitions 45,257 310,328 33,404 - 388,989 45,257 294,859 33,404 - 373,520Disposals (45,377) (250) - - (45,627) (45,377) (250) - - (45,627)Balance as at 30 45,257 509,324 65,859 - 620,440 45,257 356,597 65,859 - 467,713June 2006
Balance as at 1 July 45,257 509,324 65,859 - 620,440
45,257 356,597 65,859 - 467,7132006Other acquisitions 40,442 439,387 48,002 74,003 601,834 27,993 400,675 17,996 21,852 468,516Disposals - (134,952) - - (134,952) - (40,001) - - (40,001)Balance as at 30 85,699 813,759 113,861 74,003 1,087,322 73,250 717,271 83,855 21,852 896,228June 2007 Depreciation andImpairment LossesBalance as at 1 July 10,248 33,389 4,589 - 48,226 10,248 21,951 4,589 - 36,7882005Depreciation charge 9,039 82,919 8,956 - 100,914 9,667 50,796 8,956 - 69,419for the yearDisposals (14,198) - - - (14,198) (14,826) - - - (14,826)Balance as at 30 5,089 116,308 13,545 - 134,942 5,089 72,747 13,545 - 91,381June 2006 Balance as at 1 July 5,089 116,308 13,545 - 134,942 5,089 72,747 13,545 - 91,3812006Depreciation charge 18,511 169,637 16,623 - 204,771
17,399 151,523 14,951 - 183,873for the yearDisposals - - - - - - - - - -Balance as at 30 23,600 285,945 30,168 - 339,713 22,488 224,270 28,496 - 275,254June 2007 Carrying AmountsAt 1 July 2005 35,129 165,857 27,866 - 228,852 35,129 40,037 27,866 - 103,032At 30 June 2006 40,168 393,016 52,314 - 485,498 40,168 283,850 52,314 - 376,332 At 1 July 2006 40,168 393,016 52,314 - 485,498 40,168 283,850 52,314 - 376,332At 30 June 2007 62,099 527,814 83,693 74,003 747,609 50,762 493,001 55,359 21,852 620,974
NOTE 16 - INVESTMENTS
CONSOLIDATED THE COMPANY 2007 2006 2007 2006 $ $ $ $
Listed equity securities available for sale 2,327,872 - 2,327,872 -Unlisted equity securities 1,389,759 - 1,389,759 -Investments in controlled entities - at cost - - 11,204 2,780 3,717,631
- 3,728,835 2,780
The available-for-sale financial assets consist of investments inthe ordinary shares of Bow Energy Ltd . Unlisted equity securitiesrepresent options to purchase Bow Energy Ltd shares. The fair value of thelisted shares has been based on the closing share price at the financial yearend and the fair value of the unlisted options has been calculated using theBlack-Scholes Model.
NOTE 17 - TRADE AND OTHER PAYABLES
CONSOLIDATED THE COMPANY 2007 2006 2007 2006 $ $ $ $ Trade creditors and accruals 2,364,815 1,757,537 1,364,668 1,708,561NOTE 18 - EMPLOYEE BENEFITS CONSOLIDATED THE COMPANY 2007 2006 2007 2006 $ $ $ $ Employee entitlements - annual leave 155,362 39,353 155,362 39,353NOTE 19 - PROVISIONS CONSOLIDATED THE COMPANY 2007 2006 2007 2006 $ $ $ $CURRENTRestorationBalance at 1 July 125,000 125,000 - -Provision reversed due to sale of ATP608P permit to BowEnergy Ltd (125,000) - - -Balance at 30 June - 125,000 - - NON-CURRENTRestorationBalance at 1 July - - - -
Provisions made during the year 1,714,387 - 954,401 -Balance at 30 June 1,714,387 - 954,401 -
A provision for restoration has been recognised during the financial year to cover anticipated well abandonment costs in the Cambay, Bhandut and Sabarmati Fields, onshore India. The provision is based on current estimates of costs to abandon wells and rehabilitate surrounding areas.
NOTE 20 - LOANS AND BORROWINGS
CONSOLIDATED THE COMPANY 2007 2006 2007 2006 $ $ $ $CURRENTSecured loan facility 5,000,000 5,000,000 5,000,000 5,000,000 NON-CURRENTSecured loan facility 5,000,000 - 5,000,000 -(a) Secured Loan Facility
Oilex has a $10 million loan facility secured by way of a fixed and floating charge over the Company and its main operating subsidiaries.
The facility comprises Tranche A ($5,000,000) and Tranche B($5,000,000) and the key financial terms and conditions of the facilityinclude interest at 10% per annum with a 12 month term from drawdown forTranche A and 24 month term from drawdown for Tranche B. The Lender was issuedwith 2,500,000 unlisted options with an exercise price of $2.00 per option,expiring in March 2011 [Refer Note 22]. Such options were recognised as sharebased payment expense of $1,513,862. The facility was fully drawn down at 30June 2007.
NOTE 21 - CAPITAL AND RESERVES
(a) Issued Capital
A reconciliation of the movement in capital and reserves for the Company and the consolidated entity can be found in the Statement of Changes in Equity.
Number of Ordinary Shares 2007 2006
On issue at 1 July 2006 - fully paid 76,114,319 49,006,285 Shares issued for cash
52,500,000 26,100,000Shares issued on exercise of options 750,000 -Equity-settled transactions 19,566 1,008,034
On issue at 30 June 2007- fully paid 129,383,885 76,114,319
The Company has issued share options and performance rights to employees [see Note 22] and issued share options to financiers and advisers.
Effective 1 July 1998, the Company Law Review Act abolished the concept of par value shares and the concept of authorised capital. Accordingly, the Company does not have authorised capital or par value in respect of its issued shares.
The holders of ordinary shares are entitled to receive dividends as declared from time to time and are entitled to one vote per share at meetings of the Company.
(b) Option Reserve
The option reserve recognises the fair value of options and performance rights issued but not exercised. Upon the exercise of options, the balance of the option reserve relating to those options is transferred to share capital.
(c) Asset Revaluation Reserve
Changes in the fair value of investments classified as available-for-sale financial assets are taken to the asset revaluation reserve.
(d) Foreign Currency Translation Reserve
The foreign currency translation reserve comprises exchange differences arising from the translation of the financial statements of foreign operations.
NOTE 22 - SHARE BASED PAYMENTS
The terms and conditions of options and performance rights granted by the Company to employees are as follows, whereby all options and performance rights are settled by physical delivery of shares:
Grant Date Number of Vesting Conditions Contractual Instruments Life of OptionsOPTIONS Key Management Personnel4 March 2003 1,000,000 Vest immediately 5 years16 November 2004 200,000 Vest immediately 3 years14 December 2005 5,250,000 Yearly over three years of 3 years service14 December 2005 4,250,000 Yearly over three years of 4 years service18 January 2007 800,000 Yearly over two years of 3 years service18 January 2007 400,000 Three years of service 4 years3 December 2004 800,000 Vest immediately 5 years31 July 2006 1,550,000 Yearly over two years of 3 years service31 July 2006 775,000 Three years of service 4 years31 July 2006 500,000 Yearly over two years of 3 years service Employees3 December 2004 200,000 Vest immediately 5 years18 January 2007 50,000 Vest immediately 3 years18 January 2007 50,000 In the first year of 3 years service18 January 2007 50,000 Two years of service 3 years18 January 2007 50,000 Three years of service 4 years3 April 2007 300,000 Two years of service 4 years3 April 2007 300,000 Three years of service 5 years3 April 2007 300,000 In the first year of 3 years service Former Managing Director3 December 2004 2,500,000 Vest immediately 5 years16 November 2004 1,000,000 Vest immediately 3 years Financiers andAdvisers10 October 2006 1,000,000 Vest immediately 3 years10 October 2006 500,000 Vest immediately 4 years17 February 2006 1,000,000 Vest immediately 3 years22 March 2006 3,100,000 Vest immediately 4 years22 March 2007 2,500,000 Vest immediately 4 years31 July 2006 1,400,000 Vest immediately 4 years7 December 2005 1,000,100 Vest immediately 3 years
NOTE 22 - SHARE BASED PAYMENTS (continued)
Grant Date Number of Vesting Conditions Contractual Life Instruments of Performance RightsPerformance Rights Key Management Personnel11 January 2007 140,000 One year of service 5 years11 January 2007 150,000 Two years of 5 years service11 January 2007 150,000 Three years of 5 years service Other Employees11 January 2007 141,000 One year of service 5 years11 January 2007 154,000 Two years of 5 years service11 January 2007 147,000 Three years of 5 years service
Total Performance Rights 882,000 The number and weighted average exercise prices of share options are as follows:
Weighted Average Number of
Options Weighted Average Number of Options
Exercise Price Exercise Price 2007 2007 2006 2006 Outstanding at the beginning of the period $0.67 21,050,100 $0.95 5,700,000Forfeited during the period - -Exercised during the period $0.47 (750,000) - -Granted during the period $1.42 10,525,000 $0.57 15,350,100Outstanding at the end of the period $0.93 30,825,100 $0.67 21,050,100 Exercisable at the end of the period $0.88 21,275,100 $0.72 11,300,000
The options outstanding at 30 June 2007 have an exercise price in the range of $0.20 to $2.75 and a contractual life of up to five years. During the financial year 750,000 share options were exercised (2006: nil).
NOTE 22 - SHARE BASED PAYMENTS (continued)
The following factors and assumptions were used in determining the fair value of options and performance rights on grant date that were expensed in the current financial year:
Grant Date Vesting Date Expiry Date Fair Value Exercise Price of Expected Risk Free Dividend
Per Option Price
Shares on Volatility Interest Yield
Grant Date Rate
Options
7 December 2005 7 December 2005 7 December 2008 $0.11 $0.50
$0.29 75.5% 5.50% -14 December 2005 15 September 2006 14 December 2008 $0.15 $0.40 $0.31 75.9% 5.50% -14 December 2005 15 September 2007 14 December 2008 $0.13 $0.50 $0.31 75.9% 5.50% -14 December 2005 15 September 2008 14 December 2009 $0.09 $0.80 $0.31 75.9% 5.50% -17 February 2006 17 February 2006 16 February 2009 $0.19 $0.50 $0.40 76.4% 6.00% -22 March 2006 22 March 2006 31 March 2010 $0.33 $0.50 $0.53 78.7% 5.75% -31 July 2006 5 May 2007 31 July 2009 $0.71 $0.50 $0.97 90.9% 5.75% -31 July 2006 5 May 2008 31 July 2009 $0.66 $0.65 $0.97 90.9% 5.75% -31 July 2006 5 May 2009 31 July 2010 $0.67 $0.90 $0.97 90.9% 5.75% -31 July 2006 24 January 2007 31 July 2009 $0.73 $0.45 $0.97 90.9% 5.75% -31 July 2006 24 January 2008 31 July 2009 $0.69 $0.55 $0.97 90.9% 5.75% -4 October 2006 4 October 2006 7 December 2008 $0.99 $0.50 $1.32 92.7% 6.00% -10 October 2006 10 October 2006 31 October 2009 $0.80 $1.50 $1.34 92.8% 6.00% -10 October 2006 10 October 2006 31 October 2009 $0.76 $1.75 $1.34 92.8% 6.00% -10 October 2006 10 October 2006 31 October 2010 $0.83 $2.00 $1.34 92.8% 6.00% -18 January 2007 31 October 2007 31 January 2010 $0.75 $1.40 $1.31 85.8% 6.25% -18 January 2007 31 October 2008 31 January 2010 $0.64 $2.00 $1.31 85.8% 6.25% -18 January 2007 31 October 2009 31 January 2011 $0.70 $2.50 $1.31 85.8% 6.25% -18 January 2007 31 January 2007 31 January 2010 $0.75 $1.40
$1.31 85.8% 6.25% -22 March 2007 22 March 2007 31 March 2011 $0.61 $2.00 $1.31 68.3% 6.25% -3 April 2007 31 March 2008 31 March 2010 $0.55 $1.75 $1.35 66.0% 6.25% -3 April 2007 31 March 2009 31 March 2011 $0.57 $2.25 $1.35 66.0% 6.25% -3 April 2007 31 March 2010 31 March 2012 $0.60 $2.75 $1.35 66.0% 6.25% - Performance Rights11 January 2007 1 July 2007 1 July 2011 $1.40 Nil $1.40 70% - 90% 6.20% -11 January 2007 1 July 2008 1 July 2011 $1.22 Nil $1.40 70% - 90% 6.20% -11 January 2007 1 July 2009 1 July 2011 $1.05 Nil
$1.40 70% - 90% 6.20% -
The following share-based payments have been recognised in the IncomeStatements: CONSOLIDATED THE COMPANY 2007 2006 2007 2006 $ $ $ $Directors and employees
Share options granted in 2006 - equity settled 456,275 538,018 456,275 538,018Share options granted in 2007 - equity settled 1,707,508 - 1,707,508 -Performance rights granted in 2007 - equity settled 564,896 - 564,896 -Total recognised as employee benefits expense 2,728,679
538,018 2,728,679 538,018
Financiers and advisersShare options granted in 2006 - equity settled - 1,851,159 - 1,851,159Share options granted in 2007 - equity settled 2,727,258 - 2,727,258 -Total recognised as financial expenses 2,727,258
1,851,159 2,727,258 1,851,159
Total share-based payments expense 5,455,937
2,389,177 5,455,937 2,389,177
NOTE 23 - RECONCILIATION OF CASH FLOWS FROM OPERATING ACTIVITIES
(a) Reconciliation of Cash Flow with Operations after Loss for Income Tax
CONSOLIDATED THE COMPANY 2007 2006 2007 2006 $ $ $ $ Net loss for the period (14,721,271)
(10,680,105) (14,659,494) (10,826,847)
Depreciation 204,771 100,914 183,873 69,419Profit from discontinued operation (2,819,195)
- (2,819,195) -Loss on sale of fixed assets - 5,723 - 5,723 Exploration expenditure 4,772,748 6,178,892 3,172,015 4,741,463Equity-settled share-based payments 5,455,937 2,389,178 5,455,937 2,389,178Borrowing costs 100,000 308,573 100,000 308,573Unrealised foreign exchange losses 1,811,929 - 1,706,696 -Impairment of loans to subsidiaries -
- 2,566,770 1,326,002
Operating Profit Before Changes in Working Capital and Provisions
(5,195,081)
(1,696,825) (4,293,398) (1,986,489)
Increase in trade and other payables (58,473) 284,793 (58,473) 288,961Increase in trade and other receivables (611,291) (100,281) (342,270) (86,701)Increase in provisions 1,845,244 33,873 1,195,410 33,873Decrease/(increase) in inventories - 239,913 - 241,080 Net Cash Used In Operating Activities (4,019,601)
(1,238,527) (3,498,731) (1,509,276)
(b) Non-Cash Investing and Financing Activities
During the year the Company acquired the remaining 1.96% of theissued capital of the unlisted company Independence Oil and Gas Limited by theissue of 19,566 Oilex Ltd shares valued at $1.32 each plus one free Oilex Ltdoption exercisable at $0.50 per share expiring on 7 December 2008.
NOTE 24 - CONSOLIDATED ENTITIES
Country Ownership Interest of 2007 2006 Incorporation % % Parent EntityOilex Ltd Australia Subsidiaries
Independence Oil and Gas Limited Australia
100.00% 98.04%Seqoil Pty Ltd Australia - 100.00%Admiral Oil NL Australia 100.00% 100.00%
Oilex NL Holdings (India) Limited Cyprus
100.00% 100.00%Oilex India Pvt Ltd India 90.00% 90.00%Oilex Oman Limited Cyprus 100.00% -Oilex (JPDA 06-103) Ltd Australia 100.00% -Oilex (West Kampar) Limited Cyprus 100.00% -
Although Oilex holds less than 100% of the voting power of Oilex India Pvt Ltd, the value attributable to outside equity interests is not material and therefore is not disclosed separately in the accounts.
NOTE 25 - ACQUISITIONS OF SUBSIDIARIES
(i) On 13 July 2006 Oilex Ltd acquired 1,000 ordinary shares inWidescreen Holdings Limited for the consideration of CYP‚£1,000 (AUD$2,937) atCYP‚£1 each. On 31 August 2006 Widescreen Holdings Limited changed its name toOilex Oman Limited.
(ii) On 5 October 2006 Oilex Ltd subscribed AUD$1,000 for 1,000 ordinary shares at AUD$1 each in Oilex (JPDA 06-103) Ltd on incorporation.
(iii) On 11 May 2007 Oilex Ltd acquired 1,000 ordinary shares in Corisendo Limited for the consideration of EUR¢â€š¬1,000 (A$1,629) at EUR¢â€š¬1 each. On 5 June 2007 Corisendo Limited changed its name to Oilex (West Kampar) Limited.
NOTE 26 - FINANCIAL INSTRUMENTS
Exposure to credit, interest rate and currency risk arises in the normal course of Oilex's business.
(a) Credit Risk
At the balance sheet date there were no significant concentrationsof credit risk. Oilex does not have any material credit risk exposure to anysingular debtor or group of debtors under financial instruments entered intoby Oilex. The maximum exposure to credit risk is represented by the carryingamount of each financial asset in the balance sheet.
(b)Interest Rate Risk
(i) Effective Interest Rates and Repricing Analysis
In respect of income-earning financial assets and interest-bearing financial liabilities, the following table indicates their effective interest rates at the balance sheet date and the periods in which they reprice.
WEIGHTED FLOATING INTEREST FIXED INTEREST RATE AVERAGE RATE MATURING WITHIN ONE EFFECTIVE YEAR INTEREST RATE 2007 2006 2007 2006 2007 2006 % % $ $ $ $FinancialAssetsCash and 5.9 5.4 2,357,076 21,197,390 64,502,723 -cashequivalentsTrade and - - - -otherreceivablesTotal 2,357,076 21,197,390 64,502,723 -FinancialAssets FinancialLiabilitiesTrade and - - - -otherpayablesLoans and 10 10 - - 5,000,000 5,000,000borrowingsTotal - - 5,000,000 5,000,000FinancialLiabilities FIXED NON-INTEREST TOTAL INTEREST RATE BEARING MATURING WITHIN TWO YEARS 2007 2006 2007 2006 2007 2006 $ $ $ $ $ $FinancialAssetsCash and - - 133,584 64,821 66,993,383 21,262,211cashequivalentsTrade and - - 4,285,065 3,868,954 4,285,065 3,868,954otherreceivablesTotal - - 4,418,649 3,933,775 71,278,448 25,131,165FinancialAssets FinancialLiabilitiesTrade and - - 2,364,815 1,757,537 2,364,815 1,757,537otherpayablesLoans and 5,000,000 - - - 10,000,000 5,000,000borrowingsTotal 5,000,000 - 2,364,815 1,757,537 12,364,815 6,757,537FinancialLiabilities(c) Foreign Currency Risk
Oilex is exposed to foreign currency risk on sales and purchases that are denominated in a currency other than the Australian dollar. The currency giving rise to this risk is primarily United States dollars. Oilex has not entered into any forward foreign exchange contracts as at 30 June 2007 and is currently fully exposed to foreign exchange risk.
(d) Net Fair Value of Financial Assets and Liabilities
The net fair values of assets and liabilities of Oilex approximate their carrying amounts. The net fair value of other monetary financial assets and liabilities are based on market prices. Oilex has no off-balance sheet financial instruments.
NOTE 26 - FINANCIAL INSTRUMENTS (continued)
(e) Liquidity Risk
The Company manages liquidity by monitoring present cash flows and ensuring that adequate cash reserves, financing facilities and equity raisings are undertaken to ensure that Oilex can meet its obligations.
NOTE 27 - AUDITORS' REMUNERATION
CONSOLIDATED THE COMPANY 2007 2006 2007 2006 $ $ $ $ Audit ServicesAuditors of the Company:
Audit and review of financial reports (KPMG Australia) 38,040 - 24,040 -Audit and review of financial reports (Overseas KPMG firms) 68,448 - - - Other Auditors:Audit and review of financial reports (Grant Thornton) -
29,225 - 29,225 106,488 29,225 24,040 29,225 Other ServicesAssurance and Other ServicesKPMG Australia 2,020 - 2,020 -KPMG related practices 43,023 - - -Grant Thornton - 550 - 550 Taxation Services
Taxation compliance services (KPMG Australia) 128,474 - 128,474 -Taxation compliance services (KPMG related practices) 10,941 - - - 184,458
550 130,494 550
NOTE 28 - INTEREST IN JOINT VENTURE OPERATIONS
(i) Oilex has an interest in the following joint venture operationswhose principal activities are oil and gas exploration, development andproduction: Permit Country Percentage Percentage Interest Held % Interest Held % 2007 2006 OFFSHOREEPP27 Australia (Otway Basin) 20.00 20.00JPDA 06-103 Timor-Leste (JPDA) 25.00 25.00WA-388-P Australia (Carnarvon Basin) 20.00 20.00 ONSHORECambay Field India (Cambay Basin) 45.00 45.00Bhandut Field India (Cambay Basin) 40.00 40.00Sabarmati Field India (Cambay Basin) 40.00 40.00Block 56 Oman (South Oman Salt Basin) 25.00 25.00West Kampar Block Indonesia (Central Sumatra) 45.00 -ATP 548P Australia (Cooper - Eromanga Basin) 11.35 11.35 (ii) Included in the assets and liabilities of Oilex, are thefollowing items which represent Oilex's interest in the assets and liabilitiesemployed in the joint ventures, recorded in accordance with Oilex's accountingpolicies: CONSOLIDATED THE COMPANY 2007 2006 2007 2006 $ $ $ $ Current AssetsCash and cash equivalents 901,791 116,265 363,415 4,292Trade and other receivables 2,682,214 38,681 1,257,522 -Inventories 376,704 26,415 217,288 -Total current assets 3,960,709 181,361 1,838,225 4,292 Non-Current AssetsProperty, plant and equipment 115,644 100,659 - -Trade and other receivables - 6,757 - 6,756Exploration & evaluation 6,834,018 - 4,396,926 -Total non-current assets 6,949,662 107,416 4,396,926 6,756Total Assets 10,910,371 288,777 6,235,151 11,048 Current LiabilitiesTrade and other payables 1,668,272 25,473 758,322 -Provisions 14,764 - 7,593 -Total current liabilities 1,683,036 25,473 765,915 - Non-Current LiabilitiesProvisions 1,714,387 - 954,401 -
Total non-current liabilities 1,714,387
- 954,401 -Total Liabilities 3,397,423 25,473 1,720,316 - Net Assets 7,512,948 263,304 4,514,835 11,048 NOTE 29 - OPERATING LEASES(a) Leases as Lessee
Non-cancellable operating lease rentals are payable as follows:
CONSOLIDATED THE COMPANY 2007 2006 2007 2006 $ $ $ $Less than one year 488,420 292,720 464,607 292,720Between one and five years 274,846 301,791 274,846 301,791 763,266 594,511 739,453 594,511
Oilex leases its head office premises at Levels 2 and 3, 50 Kings Park Road, West Perth under operating leases. The leases expire on dates between 31 December 2008 and 10 September 2009 with an option to renew the leases for a further term after that date. Lease payments are increased every 18 months to reflect market rentals. The leases do not include contingent rentals.
Oilex leases office premises in Muscat, Dili, Vadodara and New Delhi under operating leases. The leases run for periods of between 1 and 2 years, with an option to renew the lease for a further term after that date. The leases do not include contingent rentals.
During the financial year ended 30 June 2007, $304,039 was recognised as an expense in the income statement in respect of operating leases (2006: $190,093).
NOTE 30 - EXPENDITURE COMMITMENTS
(a) Exploration Expenditure Commitments
In order to maintain current rights of tenure to explorationpermits, Oilex is required to perform minimum exploration work to meet theminimum expenditure requirements specified by various state and nationalgovernments. These obligations are subject to renegotiation when applicationfor an exploration permit is made and at other times. These obligations arenot provided for in the financial report and are estimated to be payable asfollows: CONSOLIDATED THE COMPANY 2007 2006 2007 2006 $ $ $ $ Within one year 23,395,626 9,316,000 9,729,086 9,316,000One year or later and no later than five years 23,587,683 8,600,000 355,682 8,600,000 46,983,309
17,916,000 10,084,768 17,916,000 Financial commitments for subsequent periods are contingent upon future exploration results and can not be estimated. These obligations are subject to renegotiation upon expiry of the exploration leases.
(b) Employee Compensation Commitments
Key Management PersonnelCommitments under non-cancellable employment contracts not provided for in the financial statements and payable:Within one year 888,751 814,881 888,751 422,038 Other EmployeesCommitments under non-cancellable employment contracts not provided for in the financial statements and payable:Within one year 221,732 181,103 221,732 181,103
NOTE 31 - KEY MANAGEMENT PERSONNEL DISCLOSURES
The following were Key Management Personnel of Oilex at any time during the financial year and unless otherwise indicated were key management personnel for the entire period:
Non-Executive Directors PositionMr Max Cozijn Chairperson and Company SecretaryDr Geoffrey Johnson Non-Executive Director (resigned 23 November 2006)Mr Laxmi Bhandari Non-Executive Director (appointed 23 November 2006) Executive Directors PositionDr Bruce McCarthy Managing DirectorMr Raymond Barnes Technical Director Executives PositionMr Richard Paces Chief Operating OfficerMr Graham McCauley Chief Financial OfficerMr Anthony Beckett General Manager OperationsMr Paul Senycia Exploration Manager (appointed 30 October 2006)
(a) Key Management Personnel Compensation
The key management personnel compensation is as follows:
CONSOLIDATED THE COMPANY 2007 2006 2007 2006 $ $ $ $ Short-term employee benefits 1,824,183 827,606 1,824,183 827,606Non monetary benefits 158,733 - 158,733 -Post-employment benefits 260,310 192,744 260,310 192,744Equity compensation benefits 2,295,949 538,018 2,295,949 538,018 4,539,175 1,558,368 4,539,175 1,558,368
The Company has taken advantage of the relief provided by ASIC Class Order 06/05 and has transferred the detailed remuneration disclosures to the Directors' Report. The relevant information can be found in the Remuneration Report.
(b) Individual Directors and Executives Compensation Disclosures
Information regarding individual Directors and Executives compensation is provided in the Remuneration Report section of the Directors' Report.
Apart from the details disclosed in this note, no Director has entered into a material contract with the Company since the end of the previous financial year and there were no material contracts involving Directors' interests existing at year end.
(c) Key Management Personnel Transactions with the Company or its Controlled Entities
Key Management Personnel, or their related parties, can hold positions in other entities that result in them having control or significant influence over the financial or operating policies of those entities.
One of these entities transacted with the Company or itssubsidiaries in the financial year. The terms and conditions of thetransactions with Key Management Personnel and their related parties were nomore favourable than those available, or which might reasonably be expected tobe available, on similar transactions to non-director related entities on anarm's length basis.
NOTE 31 - KEY MANAGEMENT PERSONNEL DISCLOSURES (continued)
(c) Key Management Personnel Transactions with the Company or its Controlled Entities (continued)
The aggregate amounts recognised during the year relating to Key Management Personnel and their related parties were as follows:
Note CONSOLIDATED THE COMPANYKey Management Personnel Transaction 2007 2006 2007 2006 $ $ $ $Mr R G Barnes Technical, management and 1. 301,000 208,500 301,000 208,500 administrative services
1. Oilex used the services of Ad Valorem Resource Consultants Pty Ltd of which Mr Barnes is a Director. Rates charged were at normal market rates and have been included in the remuneration of key management personnel disclosure.
(d) Options and Performance Rights over Equity Instruments Granted as Compensation
The movement during the financial year in the number of options and performance rights over ordinary shares in the Company held, directly, indirectly or beneficially, by each key management person, including their related parties, is as follows:
2007 Held at 1 July Granted as Exercised Other
changes# Held at 30 Vested Vested and
2006 compensation June 2007 during the exercisable at year 30 June 2007OPTIONSDirectorsM D J Cozijn 1,500,000 - - - 1,500,000 - 1,500,000G I Johnson 500,000 - - - 500,000 - 500,000L L Bhandari - - - - - - -B H McCarthy 6,000,000 - - - 6,000,000 2,000,000 3,000,000R G Barnes 3,000,000 - - - 3,000,000 1,000,000 1,000,000 Other Key Management PersonnelR S Paces - 2,325,000 - - 2,325,000 775,000 775,000G J McCauley 750,000 - 250,000 - 500,000 250,000 -A D Beckett - 500,000 - - 500,000 250,000 250,000P G Senycia - 1,200,000 - - 1,200,000 - - PERFORMANCE RIGHTSDirectorsNo performance rights were issued to Directors during the financial year. Other Key Management PersonnelR S Paces - 150,000 - - 150,000 - -G J McCauley - 75,000 - - 75,000 - -A D Beckett - 120,000 - - 120,000 - -P G Senycia - 95,000 - - 95,000 - -
NOTE 31 - KEY MANAGEMENT PERSONNEL DISCLOSURES (continued)
(d) Options and Performance Rights Over Equity Instruments Granted as Compensation (continued)
2006 Held at 1 July Granted as Exercised Other
changes# Held at 30 Vested Vested and
2005 compensation June 2006 during the exercisable at year 30 June 2006OPTIONSDirectorsM D J Cozijn 1,500,000 - - - 1,500,000 - 1,500,000G I Johnson 500,000 - - - 500,000 - 500,000B H McCarthy - 6,000,000 - - 6,000,000 1,000,000 1,000,000R G Barnes - 3,000,000 - - 3,000,000 - -S L Robertson - - - - - - - Other Key Management PersonnelR S Paces - - - - - - -G J McCauley - 750,000 - - 750,000 - -A D Beckett - - - - - - -
# Other changes represent options that expired or were forfeited during the year.
No options held by Key Management Personnel are vested but not exercisable.
(e) Movements in Shares
The movement during the financial year in the number of ordinary shares in the Company held, directly, indirectly or beneficially, by each Key Management Personnel, including their related parties, is as follows:
2007 Held at 1 July 2006 Purchases Received on exercise Sales Held at 30 June 2007 of optionsDirectorsM D J Cozijn 500,000 - - - 500,000G I Johnson - - - - -L L Bhandari - - - - -B H McCarthy 850,000 - - (50,000) 800,000R G Barnes 623,871 - - - 623,871 Other Key Management PersonnelR S Paces 365,000 - - - 365,000G J McCauley - - 250,000 (250,000) -A D Beckett - - - - -P G Senycia - - - - - 2006 Held at 1 July 2005 Purchases Received on exercise Sales Held at 30 June 2006 of optionsDirectorsM D J Cozijn 500,000 - - - 500,000G I Johnson - - - - -B H McCarthy 600,000 395,000 - (145,000) 850,000R G Barnes - 623,871 - - 623,871S L Robertson 30,000 5,000 - - 35,000 Other Key Management PersonnelR S Paces - 365,000 - - 365,000G J McCauley - - - - -A D Beckett - - - - -
No shares were granted to key management personnel during the financial year as compensation.
NOTE 32 - RELATED PARTY TRANSACTIONS
(a) Identity of Related Parties
Oilex has a related party relationship with its subsidiaries [see Note 24], joint ventures [see Note 28] and with its Key Management Personnel [see Note 31].
(b) Other Related Party Transactions
(i) Subsidiaries
Loans are made by the Company to wholly owned subsidiaries forcapital, exploration and production expenditure. Loans outstanding between theCompany and its controlled entities have no fixed date of repayment and arenon-interest bearing except for loans to subsidiary companies registered inCyprus which bear interest at a rate of 5%. During the financial year, suchloans to subsidiaries totalled $12,074,384. (2006: $1,326,002). These loanshave been recognised as non-current receivables and are subject to impairmenttesting [refer Note 11].(ii) Director Related Parties CONSOLIDATED THE COMPANY 2007 2006 2007 2006 $ $ $ $
Administration service fee paid to Metex Resources Ltd (M D J Cozijn is a Director of Metex Resources Ltd)
10,000 29,425 10,000 29,425
NOTE 33 - SUBSEQUENT EVENTS
On 9 August 2007 250,000 unlisted employee options were exercised at $0.45 per share raising $112,500.
On 14 September 2007, options and performance rights were issued as detailed below:
- 344,000 unlisted performance rights were issued pursuant to the Employee Performance Rights Plan;
- 500,000 unlisted options were issued pursuant to consultancy agreement terms; and
- 1,050,000 unlisted options were issued to employees in accordance with the terms of employment.
The financial effect of the above events has not been brought to account at balance date.
1. In the opinion of the Directors of Oilex Ltd (the "Company"):
(a) the financial statements and notes, and the remuneration disclosures that are contained in Sections 1, 3, 4.1, 4.2 and 4.3 of the Remuneration Report in the Directors' Report are in accordance with the Corporations Act 2001, including:
(i) giving a true and fair view of the financial position of the Company and the consolidated entity as at 30 June 2007 and of their performance, as represented by the results of their operations and their cash flows, for the financial year ended on that date; and
(ii) complying with Australian Accounting Standards (including the Australian Accounting Interpretations) and the Corporations Regulations 2001;
(b) the financial report also complies with International Financial Reporting Standards as disclosed in Note 2(a);
(c) the remuneration disclosures that are contained in Sections 1, 3, 4.1, 4.2 and 4.3 of the Remuneration Report in the Directors' Report comply with Australian Accounting Standard AASB 124 Related Party Disclosures; and
(d) there are reasonable grounds to believe that the Company will be able to pay its debts as and when they become due and payable.
2. The Directors have been given the declarations required by Section 295A of the Corporations Act 2001 from the Managing Director and Chief Financial Officer for the financial year ended 30 June 2007.
Dated at West Perth this 28th day of September 2007.
Signed in accordance with a resolution of the Directors.
1. Shareholding
The shareholder information set out below was applicable as at 14 September 2007.
(a) Distribution of share and option holdings as at 14 September 2007.
Number of Number of Number of Unlisted PerformanceSize of Holding Shareholders Option Holders Right Holders1 - 1,000 214 1 -1,001 - 5,000 650 5 -5,001 - 10,000 427 11 -10,001 - 100,000 606 21 19100,001 and over 123 20 2 Total 2,020 58 21
(b) Of the above total, 39 ordinary shareholders hold less than a marketable parcel.
(c) Voting Rights
The voting rights attached to the ordinary shares are governed by the Constitution.
On a show of hands every person present who is a Member orrepresentative of a Member shall have one vote and on a poll, every Memberpresent in person or by proxy or by attorney or duly authorised representativeshall have one vote for each share held. None of the options have any votingrights.
2. The name of the Company Secretary is Mr M D J Cozijn.
3. The address of the principal registered office is Level 3, 50 Kings Park Road, West Perth WA 6005, Australia, Telephone +61 8 9485 3200.
4. Register of Securities
The register of securities listed on the Australian Securities Exchange is held by Security Transfer Registrars Pty Ltd, 770 Canning Highway, Applecross WA 6153, Australia, Telephone +61 8 9315 2333.
The register of securities listed on the AIM Market is held by Computershare Investor Services PLC, PO Box 82, The Pavilions, Bridgwater Road, Bristol BS99 7NH, United Kingdom, Telephone +44 870 703 0300.
5. Stock Exchange Listing
Quotation has been granted for all the ordinary shares of the Company on all Member Exchanges of the Australian Securities Exchange and the AIM Market of the London Stock Exchange and trades under the symbol OEX.
6. Detailed schedules of exploration and production permits held are included in the Operations Review.
7. Directors' interest in share capital is disclosed in the Directors' Report.
8. Unquoted Securities - Options & Performance Rights
Total unlisted options on issue are 31,875,100. Total performance rights on issue are 1,226,000.
9. There is currently no on-market buy-back in place.
TWENTY LARGEST SHAREHOLDERS AS AT 14 SEPTEMBER 2007 SHAREHOLDERS NUMBER OF SHARES % (Fully Paid Ordinary)
1. HSBC Custody Nominees Australia Limited 19,277,234 14.872. Citicorp Nominees Pty Limited 12,558,514 9.693. JP Morgan Nominees Australia Limited 10,880,000 8.394. ANZ Nominees Limited 9,299,303 7.175. India Hydrocarbons Limited 5,500,000 4.246. RBC Dexia Investor Services Australia Nominees Pty Limited 5,058,000 3.907. National Nominees Limited 3,013,435 2.328. UBS Wealth Management Australia Nominees Pty Ltd 1,580,634 1.229. Barclay Share Nominees Limited 1,459,206 (#) 1.1310. J Nicolis Pty Ltd 1,421,503 1.1011. Alchemy Securities Pty Ltd 1,240,000 0.9612. Cogent Nominees Pty Ltd 1,239,908 0.9613. Miramar Superannuation Fund Pty Ltd
1,190,000 0.9214. LR Nominees Limited 1,080,477 (#) 0.8315. Forest Nominees Limited 1,009,900 (#) 0.7816. Orion Equities Limited 990,000 0.7617. UBS Nominees Pty Ltd 895,455 0.6918. Bank Julius Baer & Co Ltd 815,000 0.6319. Mr Bruce McCarthy 800,000 0.62
20. Invia Custodian Pty Limited
750,000 0.58 TOP 20 SHAREHOLDERS 80,058,569 61.76 TOTAL ISSUED SHARES as at 14 September 2007 129,633,885 100.00
Substantial shareholders as disclosed in substantial shareholder notices given to the Company are as follows:
JP Morgan Nominees Australia Limited 10,880,000 8.39%
Note: (#) Included within the total issued capital are 10,620,415 shares held on the AIM register. Included within the top 20 shareholders are certain AIM registered holders as marked.
AUSTRALIA SULTANATE OF OMAN Registered and Principal Muscat Branch Office Office Oilex Oman Limited Oilex Ltd 24-26, 2nd Floor Level 3 Building No 117 50 Kings Park Road Al Ma'aridh Street West Perth WA 6005 Ghala / Bousher Australia Muscat Ph. +61 8 9485 3200 Sultanate of Oman Fax +61 8 9485 3290 Postal Address TIMOR-LESTE Oilex Ltd Dili Branch Office PO Box 588 Oilex (JPDA 06-103) Ltd West Perth WA 6872 Avenida de Portugal Australia Kampo Alor Dili Timor-Lest INDIA New Delhi Office Oilex NL Holdings (India) Limited 202, Pragati House 47-48 Nehru Place New Delhi 110019 India Vadodara Project Office Oilex Ltd 101 - 102 Rubillite Hub 32, Ajit Nagar Society Dinesh Mill Road Vadodara 390007 Gujarat India
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[1] A copy of the ASX Principles and Recommendations is set out on the Company's website under the Section entitled "Corporate Governance".
OILEX LTDRelated Shares:
OEX.L