9th Mar 2006 09:20
OILEX NL ABN 50 078 652 632 AND CONTROLLED ENTITIES INTERIM FINANCIAL REPORT 31 DECEMBER 2005 OILEX NL ABN 50 078 652 632 AND CONTROLLED ENTITIES Incorporated under the Corporations Act 2001 in the State of Victoria on 2 June 1997. INTERIM FINANCIAL REPORT 31 DECEMBER 2005 CORPORATE DETAILS Directors M.D.J. Cozijn B.Com. ASA - Chairman B.H. McCarthy B.Sc. (Hons) PhD (Geology) - Managing Director R.G. Barnes B.Sc. (Hons) - Technical Director G.I. Johnson B.Sc. (Hons) PhD (Geology) - Non-Executive Director Company Secretary M.D.J. Cozijn B.Com. ASA Registered & Principal Offices Perth Level 3 50 Kings Park Road West Perth WA 6005 Australia Ph. +61 8 9226 5577 Fax. +61 8 9226 2108 India No.3, Rajdoot Marg Chanakyapuri New Delhi 110021 India Ph. +91 11 2412 2323 Fax. +91 11 2412 2425 Postal Address PO Box 588 West Perth WA 6872 Australia Share Registry - Australia Security Transfer Registrars Pty Ltd 770 Canning Highway Applecross WA 6153 Australia Share Registry - United Kingdom Computershare Investor Services PLC 2nd Floor Vintners' Place 68 Upper Thames Street London EC4V 3BJ United Kingdom Solicitors Deacons Level 31 108 St George's Terrace Perth WA 6000 Australia Maltman & Associates First Floor 220 St Georges Terrace Perth WA 6000 Australia Auditors Grant Thornton Western Australian Partnership 256 St Georges Terrace Perth WA 6000 Australia CONTENTS DIRECTORS' REPORT 1AUDITOR'S INDEPENDENCE DECLARATION 3CONSOLIDATED INCOME STATEMENT 4CONSOLIDATED BALANCE SHEET 5CONSOLIDATED STATEMENT OF CHANGES IN EQUITY 6CONSOLIDATED CASH FLOW STATEMENT 7NOTES TO THE FINANCIAL STATEMENTS 8DIRECTORS' DECLARATION 22INDEPENDENT REVIEW REPORT 23 DIRECTORS' REPORTYour directors submit the financial report of the economic entity for the halfyear ended 31 December 2005 made in accordance with a resolution of the Board.DIRECTORSThe names of directors who held office during or since the end of the halfyear:Mr Max D.J. Cozijn - ChairmanDr Bruce H. McCarthy - Managing DirectorMr Ray G. Barnes (appointed 19/09/2005) - Technical DirectorDr Geoffrey I. Johnson - Non-Executive DirectorMr Simon L. Robertson (resigned 19/09/2005)REVIEW OF OPERATIONSThe economic entity incurred a loss from ordinary activities after income taxof $3,031,765. The Company adopts the policy of not carrying forwardinvestments or capitalising exploration expenditure until an economiccommercial discovery has been delineated.Oilex is an oil exploration company dedicated to creating shareholder valuethrough the discovery of commercial oil fields and their development.HIGHLIGHTS FOR THE SIX MONTHS * Farmin agreement executed for a 30% earning interest in the Cambay Field, onshore Gujarat State, India which is awaiting approval of the Ministry of Petroleum & Natural Gas with an anticipated grant expected during the first quarter 2006. Drilling is planned to commence during April 2006. * Oilex concluded alliance agreements with three large Indian public sector companies including Gujarat State Petroleum Corporation Ltd (GSPC), Gas Authority of India Ltd (GAIL) and Hindustan Petroleum Corporation Ltd (HPCL) and its affiliate Prize Petroleum Company Ltd to develop exploration and production opportunities in India, Australia and the Indian Ocean rim. * Oilex signed a similar alliance agreement with Videocon International Ltd, a large Indian public listed company. * Farmed in and drilled the Donga-3 discovery well in ATP 805P in the Surat Basin with completion and long term production test scheduled for completion during the first quarter 2006. * 2,667 barrels of oil were produced during the half year from Rookwood South-1 well in ATP 608P Rookwood Block and sold to Inland Oil Refinery. The total cumulative oil production to 31 December 2005 is 7,286 barrels. * Water dump flood operations at ATP 608P Rookwood Block to improve the oil production rate and ultimate recovery at Rookwood South-1 well are planned to commence in the first quarter 2006.CORPORATEAcquisition of Independence Oil & Gas LtdOilex acquired 98.04% of the issued capital of the unlisted companyIndependence Oil & Gas Limited (IOGL) in December 2005. The consideration forthe acquisition was 980,534 Oilex shares plus one free Oilex option exercisableat $0.50 per share and expiring on 7 December 2008. The vesting of the sharesand exercise of the options is conditional upon the acquisition by IOGL of anonshore petroleum permit in Timor L'Este (formerly East Timor) within theoption period. All of these securities are subject to a 12 month voluntaryescrow.Capital StructureAt 31 December 2005, Oilex has a total issued capital of 50,014,319 ordinaryshares after 3,011,446 shares were released from voluntary escrow in Octoberand December 2005. 980,534 shares are in voluntary escrow until 6 December2006.In addition there are a total of 16,430,534 unlisted options exercisable atprices of between $0.20 and $1.50 per share.ADOPTION OF AUSTRALIAN EQUIVALENTS TO IFRSThis interim financial report has been prepared under Australian equivalents toIFRS. A reconciliation of differences between previous GAAP and Australianequivalents to IFRS has been included in Note 2 of this report.AUDITORS' INDEPENDENCE DECLARATIONThe lead auditors' independence declaration under section 307C of theCorporations Act 2001 is set out on page 3 for the half year ended 31 December2005.This report is signed in accordance with a resolution of the Board ofDirectors. M.D.J. Cozijn B.H. McCarthyChairman Managing DirectorDated this 9th day of March 2006Grant Thornton Western Australian PartnershipABN 21 965 022 882Chartered Accountants, Business Advisers and ConsultantsAUDITOR'S INDEPENDENCE DECLARATIONIn accordance with the requirements of section 307C of the Corporations Act2001, as lead auditor for the review of Oilex NL for the half-year ended 31December 2005, I declare that, to the best of my knowledge and belief, therehave been:(a) no contraventions of the auditor independence requirements of the CorporationsAct 2001 in relation to the review; and(b) no contraventions of any applicable code of professional conduct in relation tothe review.GRANT THORNTON WESTERN AUSTRALIAN PARTNERSHIPSEAN MCGURKPartnerDated 9 March 2006Level 6 256 St Georges TerracePerth 6000 AustraliaGPO Box P1213Perth WA 6844T + 61 8 9481 1448F + 61 8 9481 0152E [email protected] www.grantthornton.com.auAn independent Western Australian partnership entitled to trade under theinternational name Grant Thornton.Grant Thornton is a trademark owned by Grant Thornton International and usedunder licence by independent firms and entities throughout the world. CONSOLIDATED INCOME STATEMENT FOR THE HALF YEAR ENDED 31 DECEMBER 2005 ECONOMIC ENTITY 31 Dec 2005 31 Dec $ 2004 $ Revenues from ordinary activities 340,256 156,093 Employee benefits expense (313,791) (382,546) Depreciation expense (31,399) (13,556) Administration costs (455,801) (400,729) Exploration expenditure (2,515,306) (2,913,259) Other expenses from ordinary activities (55,724) (109,316) Loss before income tax expense (3,031,765) (3,663,313) Income tax expense - - Loss from continuing operations after related income (3,031,765) (3,663,313)tax expense attributable to members of the parent entity Overall Operations (7.1) (9.89) Basic loss per share (cents per share) (7.1) (9.89) Diluted loss per share (cents per share) The accompanying notes form part of these financial statements. CONSOLIDATED BALANCE SHEET AS AT 31 DECEMBER 2005 ECONOMIC ENTITY 31 Dec 30 June 2005 2005 $ $ CURRENT ASSETS 5,537,921 8,137,627 Cash and cash equivalents 363,301 29,327 Trade and other receivables 374,324 519,510 Inventories TOTAL CURRENT ASSETS 6,275,546 8,686,464 NON CURRENT ASSETS 343,453 228,852 Property, plant & equipment 81,335 64,535 Other assets TOTAL NON CURRENT ASSETS 424,788 293,387 TOTAL ASSETS 6,700,334 8,979,851 CURRENT LIABILITIES 689,268 432,564 Trade and other payables 144,063 130,480 Short term provisions TOTAL CURRENT LIABILITIES 833,331 563,044 TOTAL LIABILITIES 833,331 563,044 NET ASSETS 5,867,003 8,416,807 EQUITY 17,341,537 17,039,127 Issued capital 179,551 - Reserve (11,654,085) (8,622,320) Accumulated losses TOTAL EQUITY 5,867,003 8,416,807 The accompanying notes form part of these financial statements. CONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR THE HALF YEAR ENDED 31 DECEMBER 2005 ECONOMIC ENTITY Share Accumulated Option Total Losses Reserve Capital $ $ $ Ordinary $ Balance at 1 July 2004 5,295,262 (3,387,456) - 1,907,806 Shares issued during the period 11,743,865 - - 11,743,865 Losses attributable to members - (3,663,313) - (3,663,313)of the parent entity Balance at 31 December 2004 17,039,127 (7,050,769) - 9,988,358 Balance at 1 July 2005 17,039,127 (8,622,320) - 8,416,807 Shares issued during the period 302,410 - - 302,410 Options issued during the - - 179,551 179,551period Losses attributable to members - (3,031,765) - (3,031,765)of the parent entity Balance at 31 December 2005 17,341,537 (11,654,085) 179,551 5,867,003 The accompanying notes form part of these financial statements. CONSOLIDATED CASH FLOW STATEMENT FOR THE HALF YEAR ENDED 31 DECEMBER 2005 ECONOMIC ENTITY 31 Dec 2005 31 Dec 2004 $ $ CASH FLOWS FROM OPERATING ACTIVITIES (692,863) (389,724) Payments to suppliers and employees (2,176,407) (1,790,154) Payments for exploration expenditure 187,704 75,409 Interest received 124,986 - Proceeds from oil sales 139,857 5,249 Other income Net cash (used in) operating activities (2,416,723) (2,099,220) CASH FLOWS FROM INVESTING ACTIVITIES (134,498) (145,171) Payments for property, plant and equipment 25,704 - Proceeds from sale of property, plant & equipment (7,389) (100,000) Purchase of interests in permits (16,800) (26,007) Payments for environmental security bonds Net cash flows (used in) investing activities (132,983) (271,178) CASH FLOWS FROM FINANCING ACTIVITIES - 12,000,000 Proceeds from the issue of shares - (770,033) Capital raising costs - 10,843 Loans from other companies - 33,772 Repayments from (loans to) other persons (50,000) - AIM costs Net cash flows provided by (used in) financing (50,000) 11,274,582activities Net increase (decrease) in cash held (2,599,706) 8,904,184 Cash at 1 July 2005 8,137,627 1,771,661 Cash at 31 December 2005 5,537,921 10,675,845 The accompanying notes form part of these financial statements. NOTES TO THE FINANCIAL STATEMENTS FOR THE HALF YEAR ENDED 31 DECEMBER 2005 NOTE 1 - BASIS OF PREPARATIONThe half year consolidated financial statements are a general purpose financialreport prepared in accordance with the requirements of the Corporations Act2001, Australian Accounting Standard AASB 134: Interim Financial Reporting,Urgent Issues Group Interpretations and other authoritative pronouncements ofthe Australian Accounting Standards Board.It is recommended that this financial report be read in conjunction with theannual financial report for the year ended 30 June 2005 and any publicannouncements made by Oilex NL and its controlled entities during the half yearin accordance with continuous disclosure requirements arising under theCorporations Act 2001.As this is the first interim financial report prepared under Australianequivalents to IFRS, the accounting policies applied are inconsistent withthose applied in the 30 June 2005 annual report as this report was presentedunder previous Australian GAAP. Accordingly, a summary of the significantaccounting policies under Australian equivalents to IFRS has been includedbelow. A reconciliation of equity, profit and loss between previous GAAP andAustralian equivalents to IFRS has been included in Note 2.The half-year financial report does not include full disclosures of the typenormally included in an annual financial report and therefore cannot beexpected to provide as full an understanding of the financial performance,financial position and financing activities of the consolidated entity as thefull financial report.ACCOUNTING POLICIES(a) Principles of ConsolidationA controlled entity is any entity controlled by Oilex NL. Control exists whereOilex has the capacity to dominate the decision-making in relation to thefinancial and operating policies of another entity so that the other entityoperates with Oilex to achieve the objectives of Oilex. All controlled entities have a June financial year end.All inter-company balances and transactions between entities in the economicentity, including any unrealised profits or losses have been eliminated onconsolidation. Accounting policies of subsidiaries have been changed wherenecessary to ensure consistencies with those policies applied by the parententity.Where controlled entities have entered or left the economic entity during theyear, their operating results have been included/excluded from the date controlwas obtained or until the date control ceased.Minority equity interests in the equity and results of the entities that arecontrolled are shown as a separate item in the consolidated financial report.(b) Income TaxThe charge for current income tax expenses is based on the profit for the yearadjusted for any non-assessable or disallowed items. It is calculated usingtax rates that have been enacted or are substantively enacted by the balancesheet date. NOTES TO THE FINANCIAL STATEMENTS FOR THE HALF YEAR ENDED 31 DECEMBER 2005 NOTE 1 - BASIS OF PREPARATION (continued)Income Tax (continued)Deferred tax is accounted for using the balance sheet liability method inrespect of temporary differences arising between the tax bases of assets andliabilities and their carrying amounts in the financial statements. Nodeferred income tax will be recognised from the initial recognition of an assetor liability, excluding a business combination, where there is no effect onaccounting or taxable profit or loss.Deferred tax is calculated at the tax rates that are expected to apply to theperiod when the asset is realised or liability is settled. Deferred tax iscredited in the income statement except where it relates to items that may becredited directly to equity, in which case the deferred tax is adjusteddirectly against equity.Deferred income tax assets are recognised to the extent that it is probablethat future tax profits will be available against which deductible temporarydifferences can be utilised.The amount of benefits brought to account or which may be realised in thefuture is based on the assumption that no adverse change will occur in incometaxation legislation and the anticipation that the economic entity will derivesufficient future assessable income to enable the benefit to be realised andcomply with the conditions of deductibility imposed by the law.(c) Property, Plant and EquipmentEach class of property, plant and equipment is carried at cost less, whereapplicable, any accumulated depreciation.Plant and EquipmentPlant and equipment are measured on the cost basis less depreciation andimpairment losses.The carrying amount of plant and equipment is reviewed annually by directors toensure it is not in excess of the recoverable amount from these assets. Therecoverable amount is assessed on the basis of the expected net cash flowswhich will be received from the assets employment and subsequent disposal. Theexpected net cash flows have been discounted to their present values indetermining recoverable amounts.DepreciationThe depreciable amount of all fixed assets including capitalised lease assets,but excluding computers, is depreciated on a reducing balance commencing fromthe time the asset is held ready for use. Computers are depreciated on astraight line basis over their useful lives to the economic entity commencingfrom the time the asset is held ready for use. NOTES TO THE FINANCIAL STATEMENTS FOR THE HALF YEAR ENDED 31 DECEMBER 2005 NOTE 1 - BASIS OF PREPARATION (continued)(c) Property, Plant and Equipment (continued)The depreciation rates used for each class of depreciable assets are:Class of Fixed Asset Depreciation RateMotor Vehicles 22.5%Plant & Equipment 15-50%Office Equipment 10-40%The assets' residual values and useful lives are reviewed, and adjusted ifappropriate, at each balance sheet date.An asset's carrying amount is written down immediately to its recoverableamount if the asset's carrying amount is greater than its estimated recoverableamount.Gains and losses on disposals are determined by comparing proceeds with thecarrying amount. These gains and losses are included in the income statement. When revalued assets are sold, amounts included in the revaluation reserverelating to that asset are transferred to retained earnings.(d) Deferred Exploration and Evaluation ExpenditureExploration, evaluation and development expenditure incurred is written off asthe group has now elected to adopt the policy of not carrying forwardinvestments or capitalising exploration expenditure until an economiccommercial discovery has been delineated.Accumulated costs in relation to an abandoned area are written off in fullagainst profit in the year in which the decision to abandon the area is made.When production commences, the accumulated costs for the relevant area ofinterest are amortised over the life of the area according to the rate ofdepletion of the economically recoverable reserves.A regular review is undertaken of each area of interest to determine theappropriateness of continuing to carry forward costs in relation to that areaof interest.Restoration, rehabilitation and environmental costs necessitated by explorationand evaluation activities are expensed as incurred and treated as explorationand evaluation expenditure.(e) LeasesLease payments for operating leases, where substantially all the risks andbenefits remain with the lessor, are charged as expenses in the periods inwhich they are incurred. NOTES TO THE FINANCIAL STATEMENTS FOR THE HALF YEAR ENDED 31 DECEMBER 2005 NOTE 1 - BASIS OF PREPARATION (continued)(f) Financial InstrumentsRecognitionFinancial instruments are initially measured at cost on trade date, whichincludes transaction costs, when the related contractual rights or obligationsexist. Subsequent to initial recognition these instruments are measured as setout below.Loans and ReceivablesLoans and receivables are non-derivative financial assets with fixed ordeterminable payments that are not quoted in an active market and are stated atamortised cost using the effective interest rate method.ImpairmentAt each reporting date, the group assesses whether there is objective evidencethat a financial instrument has been impaired. In the case of available forsale financial instruments, a prolonged decline in the value of the instrumentis considered to determine whether impairment has arisen. Impairment losses arerecognised in the income statement. (g) Impairment of AssetsAt each reporting date, the group reviews the carrying values of its tangibleand intangible assets to determine whether there is any indication that thoseassets have been impaired. If such an indication exists, the recoverableamount of the assets, being the higher of the asset'sfair value less costs to sell and value in use, is compared to the asset'scarrying value. Any excess of the asset's carrying value over its recoverableamount is expensed to the income statement.Impairment testing is performed annually for goodwill and tangible assets withindefinite lives.Where it is not possible to estimate the recoverable amount of an individualasset, the group estimates the recoverable amount of the cash generating unitto which the asset belongs.(h) Interest in Joint VenturesThe economic entity's share of the assets, liabilities, revenue and expenses ofjoint venture operations are included in the appropriate items of theconsolidated income statement and balance sheet.(i) Employee BenefitsProvision is made for the entity's liability for employee benefits arising fromservices rendered by employees to the balance date. Employee benefits expectedto be settled within one year together with entitlements arising from wages andsalaries and annual leave which will be settled after one year, have beenmeasured at the amounts expected to be paid when the liability is settled, plusrelated on-costs. Other employee benefits payable later than one year have been measured at thepresent value of the estimated future cash outflows to be made for thosebenefits. NOTES TO THE FINANCIAL STATEMENTS FOR THE HALF YEAR ENDED 31 DECEMBER 2005 NOTE 1 - BASIS OF PREPARATION (continued)(i) Employee Benefits(continued)Contributions are made by the economic entity to employee superannuation fundsand are charged as expenses when incurred.Equity-settled CompensationThe group operates a share option arrangement. The total to be expensed overthe vesting period is determined by reference to the fair value of the sharesof the options granted.(j) ProvisionsProvisions are recognised when the group has a legal or constructiveobligation, as a result of past events, for which it is probable that anoutflow of economic benefits will result and that outflow can be reliablymeasured.(k) Cash and Cash EquivalentsCash and cash equivalents includes cash on hand, deposits held at call withbanks, other short-term highly liquid investments with original maturities ofthree months or less, and bank overdrafts. Bank overdrafts are shown withinshort-term borrowings in current liabilities on the balance sheet.(l) RevenueRevenue from the sale of goods is recognised upon the delivery of goods tocustomers.Interest revenue is recognised on a proportional basis taking into account theinterest rates applicable to the financial assets.Revenue from the rendering of a service is recognised upon the delivery of theservice to the customers.All revenue is stated net of the amount of goods and services tax (GST).(m) Goods and Services Tax (GST)Revenues, expenses and assets are recognised net of the amount of GST, exceptwhere the amount of GST incurred is not recoverable from the Australian TaxOffice. In these circumstances the GST is recognised as part of the cost ofacquisition of the asset or as part of an item of the expense. Receivables andpayables in the balance sheet are shown inclusive of GST.Cash flows are presented in the cash flow statement on a gross basis, exceptfor the GST component of investing and financing activities, which aredisclosed as operating cash flows. NOTES TO THE FINANCIAL STATEMENTS FOR THE HALF YEAR ENDED 31 DECEMBER 2005 NOTE 1 - BASIS OF PREPARATION (continued)(n) Comparative FiguresWhere required by Accounting Standards, comparative figures have been adjustedto conform with changes in presentation for the current financial year.(o) Contributed EquityIssued and paid up capital is recognised at the fair value of the considerationreceived by the company. Any transaction costs arising on the issue of ordinaryshares are recognised directly in equity as a reduction of the share proceedsreceived.(p) InventoriesOil stocks and field consumables are valued at the lower of cost and netrealisable value. Cost includes expenditure incurred in acquiring and bringingthe inventories to their existing condition and location. (q) Foreign Currency Transactions and BalancesFunctional and Presentation CurrencyThe functional currency of each of the group's entities is measured using thecurrency of the primary economic environment in which that entity operates. Theconsolidated financial statements are presented in Australian dollars which isthe parent entity's functional and presentation currency.Transactions and BalancesForeign currency transactions are translated into functional currency using theexchange rates prevailing at the date of the transaction. Foreign currencymonetary items are translated at the year-end exchange rate. Non-monetary itemsmeasured at historical cost continue to be carried at the exchange rate at thedate of the transaction. Non-monetary items measured at fair value are reportedat the exchange rate at the date when fair values were determined.Exchange differences arising on the translation of monetary items arerecognised in the income statement, except where deferred in equity as aqualifying cash flow or net investment hedge.Exchange differences arising on the translation of non-monetary items isrecognised directly in equity to the extent that the gain or loss is directlyrecognised in equity, otherwise the exchange difference is recognised in theincome statement. NOTES TO THE FINANCIAL STATEMENTS FOR THE HALF YEAR ENDED 31 DECEMBER 2005 NOTE 2 - FIRST TIME ADOPTION OF AUSTRALIAN EQUIVALENTS TO INTERNATIONAL FINANCIAL REPORTING STANDARDS ECONOMIC ENTITY Previous Adjustments on Australian Introduction of Equivalents to IFRS GAAP Australian at At Equivalent to 1 July 2004 1 July 2004 IFRS $ $ $ Reconciliation of equity at 1 July 2004 CURRENT ASSETS Cash and cash 1,771,661 - 1,771,661equivalents Trade and other 37,954 - 37,954receivables Other 89,778 - 89,778 TOTAL CURRENT 1,899,393 - 1,899,393ASSETS NON CURRENT ASSETS Receivables 33,772 - 33,772 Property, plant 112,952 - 112,952& equipment TOTAL NON 146,724 - 146,724CURRENT ASSETS TOTAL ASSETS 2,046,117 - 2,046,117 CURRENT LIABILITIES Trade and other 132,944 - 132,944payables Short term 4,942 - 4,942provisions Other 425 - 425 TOTAL CURRENT 138,311 - 138,311LIABILITIES TOTAL 138,311 - 138,311LIABILITIES NET ASSETS 1,907,806 - 1,907,806 EQUITY Contributed 5,295,262 - 5,295,262equity Accumulated (3,387,456) - (3,387,456)losses TOTAL EQUITY 1,907,806 - 1,907,806 NOTES TO THE FINANCIAL STATEMENTS FOR THE HALF YEAR ENDED 31 DECEMBER 2005 NOTE 2 - FIRST TIME ADOPTION OF AUSTRALIAN EQUIVALENTS TO INTERNATIONAL FINANCIAL REPORTING STANDARDS(continued) RECONCILIATION OF EQUITY AT 31 DECEMBER 2004 ECONOMIC ENTITY Previous Adjustments on Australian introduction of equivalents to IFRS GAAP Australian at At equivalent to 31 Dec 2004 31 Dec 2004 IFRS $ $ $ CURRENT ASSETS Cash and cash 10,675,845 - 10,675,845equivalents assets Trade and other 368,166 - 368,166receivables Inventories 190,121 - 190,121 TOTAL CURRENT 11,234,132 - 11,234,132ASSETS NON CURRENT ASSETS Receivables 65,785 - 65,785 Property, plant & 368,437 - 368,437equipment TOTAL NON CURRENT 434,222 - 434,222ASSETS TOTAL ASSETS 11,668,354 - 11,668,354 CURRENT LIABILITIES Trade and other 1,645,698 - 1,645,698payables Short term 34,298 - 34,298provisions TOTAL CURRENT 1,679,996 - 1,679,996LIABILITIES TOTAL LIABILITIES 1,679,996 - 1,679,996 NET ASSETS 9,988,358 - 9,988,358 EQUITY Issued capital 17,039,127 - 17,039,127 Accumulated losses (7,050,769) - (7,050,769) TOTAL EQUITY 9,988,358 - 9,988,358 NOTES TO THE FINANCIAL STATEMENTS FOR THE HALF YEAR ENDED 31 DECEMBER 2005 NOTE 2 - FIRST TIME ADOPTION OF AUSTRALIAN EQUIVALENTS TO INTERNATIONAL FINANCIAL REPORTING STANDARDS(continued) RECONCILIATION OF EQUITY AT 30 JUNE 2005 ECONOMIC ENTITY Previous Adjustments on Australian introduction of Australian equivalents to IFRS GAAP at equivalent to At 30 June 2005 IFRS 30 June $ 2005 $ $ CURRENT ASSETS Cash and cash 8,137,627 - 8,137,627equivalents Trade and other 29,327 - 29,327receivables Inventories 519,510 - 519,510 TOTAL CURRENT 8,686,464 - 8,686,464ASSETS NON CURRENT ASSETS Other assets 64,535 - 64,535 Property, plant & 228,852 - 228,852equipment TOTAL NON CURRENT 293,387 - 293,387ASSETS TOTAL ASSETS 8,979,851 - 8,979,851 CURRENT LIABILITIES Trade and other 432,564 - 432,564payables Short term 130,480 - 130,480provisions TOTAL CURRENT 563,044 - 563,044LIABILITIES TOTAL LIABILITIES 563,044 - 563,044 NET ASSETS 8,416,807 - 8,416,807 EQUITY Issued capital 17,039,127 - 17,039,127 Accumulated (8,622,320) - (8,622,320)losses TOTAL EQUITY 8,416,807 - 8,416,807 NOTES TO THE FINANCIAL STATEMENTS FOR THE HALF YEAR ENDED 31 DECEMBER 2005 NOTE 2 - FIRST TIME ADOPTION OF AUSTRALIAN EQUIVALENTS TO INTERNATIONAL FINANCIAL REPORTING STANDARDS(continued) ECONOMIC ENTITY Previous Effect of transition Australian to Australian equivalents to IFRS GAAP equivalent to $ $ IFRS $ Reconciliation of Profit and Loss for the half year ended 31 December 2004 Revenue from ordinary 156,093 - 156,093activities Employee benefits expense (382,546) - (382,546) Depreciation expense (13,556) - (13,556) Administration costs (400,729) - (400,729) Exploration expenditure (2,913,259) - (2,913,259) Other expenses from (109,316) - (109,316)ordinary activities Loss before income tax (3,663,313) - (3,663,313)expense Income tax expense - - - Net loss attributable to (3,663,313) - (3,663,313)members of the parent entity Reconciliation of Profit & Loss for the year ended 30 June 2005Revenue from ordinary activities 524,698 - 524,698 Employee benefits expense (435,395) - (435,395) Depreciation expense (39,362) - (39,362) Administration costs (530,477) - (530,477) Consultancy costs (460,322) - (460,322) Exploration expenditure (4,161,506) - (4,161,506) Book value of assets sold (7,500) - (7,500) Provision for restoration (125,000) - (125,000) Loss before income tax expense (5,234,864) - (5,234,864) Income tax expense - - - Net loss attributable to members of the (5,234,864) - (5,234,864)parent entity NOTES TO THE FINANCIAL STATEMENTS FOR THE HALF YEAR ENDED 31 DECEMBER 2005 NOTE 2 - FIRST TIME ADOPTION OF AUSTRALIAN EQUIVALENTS TO INTERNATIONAL FINANCIAL REPORTING STANDARDS (continued)(a) Income TaxPreviously, the economic entity adopted the liability method of tax-effectaccounting whereby the income tax expense was based on the accounting profitadjusted for any permanent differences. Timing differences were brought toaccount as either a provision for deferred income tax or future income taxbenefit. Under AASB 112: Income Taxes, the entity is required to adopt a balance sheetapproach under which temporary differences are identified for each asset andliability rather than the effects of the timing and permanent differencesbetween taxable income and accounting profit.The financial effect of this impact is nil due to the Company's unutilisedavailable tax losses and the uncertainty over whether they will be realised inthe future.(b) Non-Current InvestmentsUnder AASB 139: Financial Instruments: Recognition and Measurement, financialassets are required to be classified into four categories, which determines theaccounting treatment of the item. The categories and various treatments are: held to maturity, measured at amortised cost; held for trading, measured at fair value with unrealised gains or losses charged to the profit and loss; loans and receivables, measured at amortised cost; and available for sale instruments, measured at fair value with unrealised gains or losses taken to equity.Under AASB 139: Financial Instruments: Recognition and Measurement, themeasurement of available for sale instruments at fair value differs to previousaccounting policy which measured non-current investments at cost with an annualreview by directors to ensure the carrying amounts were not in excess of therecoverable value of the instrument. AASB 139 has prospective application foryears commencing on or after 1 January 2005.(c) Impairment of AssetsUnder AASB 136: Impairment of Assets, the recoverable amount of an asset isdetermined as the higher of fair value less costs to sell and value in use. Indetermining value in use, projected future cash flows are discounted using arisk adjusted pre-tax discount rate and impairment is assessed for theindividual asset or at the 'cash generating unit' level. A 'cash generatingunit' is determined as the smallest group of assets that generates cash flowsthat are largely independent of the cash inflows from other assets or groups ofassets. The previous policy was to determine the recoverable amount of anasset on the basis of undiscounted net cash flows that would be received fromthe asset's use and subsequent disposal.No material impact has been assessed on prior periods stated under previousaccounting policies as the carrying values are considered to be supported byeither an assets fair value less costs to sell or its value in use. NOTES TO THE FINANCIAL STATEMENTS FOR THE HALF YEAR ENDED 31 DECEMBER 2005 NOTE 3 - CHANGE IN ACCOUNTING POLICYDeferred Exploration and Evaluation ExpenditureThe economic entity changed its accounting policy for the half year ending 31December 2005 relating to deferred exploration and evaluation expenditure.Exploration, evaluation and development expenditure incurred were previouslyeither written off as incurred or accumulated in respect of each identifiablearea of interest. Costs were only carried forward to the extent that they wereexpected to be recouped through the successful development of the area, sale ofthe respective areas of interest or where activities in the area had not yetreached a stage which permits reasonable assessment of the existence ofeconomically recoverable reserves.The group has now elected to adopt the policy of not carrying forwardinvestments or capitalising exploration expenditure until an economiccommercial discovery has been delineated. The aggregate effect of the change inaccounting policy on the half year financial statements to 31 December 2005 isas follows (no taxation effect results from these changes):Economic Entity Previously Adjustment Restated Stated Dec 2005 Dec 2005 Dec 2005 $ $ $ Income Statement Exploration expenditure (2,094,776) (420,530) (2,515,306) Balance Sheet Deferred exploration and evaluation 420,530 (420,530) -expenditure Basic loss per share (cents per share) (6.1) (1.0) (7.1) Diluted loss per share (cents per share) (6.1) (1.0) (7.1) Previously Adjustment Restated Stated Dec 2004 Dec 2004 Dec 2004 $ $ $ Income Statement Exploration expenditure (2,699,361) (213,898) (2,913,259) Balance Sheet Deferred exploration and evaluation 213,898 (213,898) -expenditure Basic loss per share (cents per share) (9.31) (0.58) (9.89) Diluted loss per share (cents per share) (9.31) (0.58) (9.89) Previously Adjustment Restated Stated 1 July 2004 1 July 2004 1 July 2004 $ $ $ Accumulated Losses Adjustment to opening accumulated (1,256,456) (2,131,000) (3,387,456)losses NOTES TO THE FINANCIAL STATEMENTS FOR THE HALF YEAR ENDED 31 DECEMBER 2005 NOTE 4 - ACQUISITION OF SUBSIDIARYAcquisition of Independence Oil & Gas LtdThe parent entity acquired 98.04% of the issued capital of the unlisted companyIndependence Oil & Gas Limited (IOGL) in December 2005. The consideration forthe acquisition was 980,534 Oilex shares at an issue price of $0.30 each, plusone free Oilex option exercisable at $0.50 per share and expiring on 7 December2008. The issue was based on the market price on the date of purchase. Thevesting of the shares and exercise of the options is conditional upon theacquisition by IOGL of an onshore petroleum permit in Timor L'Este (formerlyEast Timor) within the option period. All of these securities are subject to a12 month voluntary escrow.Purchase consideration $404,889Equity issued as consideration $404,889Fair value of assets acquired -Goodwill $404,889NOTE 5 - SEGMENT INFORMATIONPrimary Reporting- Geographic Segments Australia India Economic Entity $ $ $ 2005 Total segment revenue 340,256 - 340,256 Segment result (2,391,490) (640,275) (3,031,765) Income tax expense - - - Loss after income tax (2,391,490) (640,275) (3,031,765) 2004 Total segment revenue 156,093 - 156,093 Segment result (3,663,313) - (3,663,313) Income tax expense - - - Loss after income tax (3,663,313) - (3,663,313) NOTE 6 - CONTINGENT LIABILITIESWith the exception of the Company's amended commitment as set out in Note 7 (a)below, there has been no change in contingent liabilities since the last annualreporting date. NOTES TO THE FINANCIAL STATEMENTS FOR THE HALF YEAR ENDED 31 DECEMBER 2005 NOTE 7 - SUBSEQUENT EVENTS(a) Oilex & India Joint Venture Partners Execute EPP27 Farmin AgreementsOn 28 February 2006 Oilex and two key players in the Indian oil and gas sector,Gujarat State Petroleum Corporation Ltd and Videocon Industries Ltd, finalisedfarmin and joint operating agreements over Great Artesian Oil & Gas Ltd's EPP27permit in the Otway Basin, South Australia. The agreements are aimed atformalising the terms of a letter agreement, originally entered into betweenOilex and Great Artesian Oil & Gas Ltd whereby Oilex could earn a 60%participating interest in EPP27 subject to completing a well commitment. Underarrangements introducing the Indian companies, each of the three parties areentitled to earn a 20% participating interest in EPP27 by funding (in equalportions) a $2 million seismic program followed by the drilling of anexploration well with Great Artesian Oil & Gas Ltd retaining a 40%participating interest in EPP27.(b) Oilex NL Commences Trading on the AIM MarketOn 16 February 2006, ordinary shares of Oilex NL were admitted to trading onthe AIM market of the London Stock Exchange. Oilex shares will also continue tobe listed on the Australian Stock Exchange.(c) LinQ Mezzanine Finance Facility of A$5 MillionOn 20 February 2006 an agreement with LinQ Resources Fund for the provision ofan A$5 million mezzanine finance facility to assist Oilex in funding thedevelopment of its Indian production interests, including the drilling of theCambay Field (with Oilex as operator) was reached. The Cambay developmentprogram is in the final stages of preparation for presentation to the Cambayjoint venture partners for approval in March 2006. As part of this facility, 5million unlisted options exercisable at $0.50 over a four year term are to beissued, with a portion subject to shareholder approval.The financial affect of the above events has not been brought to account atbalance date.DIRECTORS' DECLARATIONThe directors of the company declare that:(a) The financial statements and notes, as set out on pages 4-21: (i) comply with Accounting Standard AASB134: Interim Financial Reporting and the Corporations Regulations 2001; and (ii) give a true and fair view of the economic entity's financial position as at 31 December 2005 and of its performance for the half year ended on that date.(b) In the directors' opinion there are reasonable grounds to believe that the company will be able to repay its debts as and when they become due and payable.This declaration is made in accordance with a resolution of the Board ofDirectors: M.D.J. Cozijn B.H. McCarthyChairman Managing DirectorPerth, Western Australia9th March 2006Grant Thornton Western Australian PartnershipABN 21 965 022 882Chartered Accountants, Business Advisers and Consultants INDEPENDENT REVIEW REPORT TO THE MEMBERS OF OILEX NL Scope The half-year financial report and directors' responsibility The half-year financial report comprises the balance sheet, income statement,statement of changes in equity, cash flow statement, notes to the financialstatements and the directors' declaration for the consolidated entity, for thehalf-year ended 31 December 2005. The consolidated entity comprises both theOilex NL (the company) and the entities it controlled during that half-year.The directors of the company are responsible for the preparation and true andfair presentation of the half-year financial report in accordance with theCorporations Act 2001. This includes responsibility for the maintenance ofadequate accounting records and internal controls that are designed to preventand detect fraud and error, and for the accounting policies and accountingestimates inherent in the half-year financial report.Review approachWe conducted an independent review of the half-year financial report in orderto state whether, on the basis of the procedures described, anything has cometo our attention that would indicate that the half-year financial report is notpresented fairly in accordance with Accounting Standard AASB 134: InterimFinancial Reporting and other mandatory professional reporting requirements inAustralia and statutory requirements so as to present a view which isconsistent with our understanding of the consolidated entity's financialposition and performance as represented by the results of its operations andits cash flows, and in order for the company to lodge the half-year financialreport with the Australian Securities & Investments Commission/Australian StockExchange Limited.Our review has been conducted in accordance with Australian Auditing Standardsapplicable to review engagements. A review is limited primarily to inquiriesof company personnel and analytical procedures applied to the financial data. These procedures do not provide all the evidence that would be required in anaudit, thus the level of assurance provided is less than given in an audit. Wehave not performed an audit and, accordingly, we do not express an auditopinion.IndependenceIn conducting our review, we followed the applicable independence requirementsof Australian professional and ethical pronouncements and the Corporations Act2001.In accordance with ASIC Class Order 05/83, we declare to the best of ourknowledge and belief that the auditor's independence declaration has notchanged as at the date of providing our review opinion.Level 6 256 St Georges TerracePerth 6000 AustraliaGPO Box P1213Perth WA 6844T + 61 8 9481 1448F + 61 8 9481 0152E [email protected] www.grantthornton.com.auAn independent Western Australian partnership entitled to trade under theinternational name Grant Thornton.Grant Thornton is a trademark owned by Grant Thornton International and usedunder licence by independent firms and entities throughout the world. Statement Based on our review, which is not an audit, we have not become aware of anymatter that makes us believe that the half-year financial report of Oilex NLisnot in accordance with:(a) the Corporations Act 2001, including:(i) giving a true and fair view of the consolidated entity's financial position as at 31 December 2005 and of its performance for the half-year ended on that date; and(ii)complying with Accounting Standard AASB 134: Interim Financial Reporting and the Corporations Regulations 2001; and(b) other mandatory professional reporting requirements in Australia.GRANT THORNTON WESTERN AUSTRALIAN PARTNERSHIPSEAN McGURKPartnerDated 9 March 2006Level 6 256 St Georges TerracePerth 6000 AustraliaGPO Box P1213Perth WA 6844T + 61 8 9481 1448F + 61 8 9481 0152E [email protected] www.grantthornton.com.auAn independent Western Australian partnership entitled to trade under theinternational name Grant Thornton.Grant Thornton is a trademark owned by Grant Thornton International and usedunder licence by independent firms and entities throughout the world.ENDOILEX NLRelated Shares:
OEX.L