22nd Sep 2008 10:06
ANNUAL REPORT AND FINANCIAL STATEMENTS 30 JUNE 2008 Incorporated under the Corporations Law in the State of Victoria on 2 June 1997 CORPORATE INFORMATIONDirectors Registered and Principal Office M D J Cozijn BCom ASA MAICD Level 2 Non-Executive Chairman 50 Kings Park Road West Perth WA 6005
B H McCarthy BSc (Hons) PhD (Geology) Australia
Managing Director Ph. +61 8 9485 3200 Fax +61 8 9485 3290
R G Barnes BSc (Hons) (Geology)
Technical Director Postal Address PO Box 588
L L Bhandari BSc (Geology) and MSc West Perth WA 6872 (Geology)
Australia
Independent Non-Executive Director
Stock Exchange ListingsCompany Secretary Oilex's shares are listed under the codeM D J Cozijn BCom ASA MAICD OEX on the Australian Securities Exchange and the AIM Market of the London Stock Exchange. Auditors KPMG Nominated Adviser to AIM Market Level 31 RFC Corporate Finance Ltd 152 - 158 St Georges Terrace Level 15 QV1 Building Perth WA 6000 250 St Georges Terrace Australia Perth WA 6000 Australia Solicitors Deacons Share Registries Level 39 BankWest Tower Security Transfer Registrars Pty Ltd (for ASX)108 St Georges Terrace 770 Canning HighwayPerth WA 6000 Applecross WA 6153Australia Australia Public Relations Computershare Investor Services PLC (forRead Corporate AIM) 3/100 Hay Street PO Box 82, The Pavilions Subiaco WA 6008 Bridgwater Road Australia Bristol BS99 7NH United Kingdom Pelham Public Relations Ltd No. 1 Cornhill Annual General Meeting London EC3V 3ND The annual general meeting of Oilex Ltd will be held at the Celtic Club, 48 OrdUnited Kingdom Street, West Perth at 5:00 pm on 20 November 2008. Website www.oilex.com.au Email [email protected] CONTENTSChairman's
Review........................................................................4
Operations
Review........................................................................5
Permit
Schedule.....................................................................13
Corporate GovernanceStatement....................................................................14
Directors'
Report.......................................................................18
Remuneration
Report.......................................................................25
Auditor's Independence Declaration.............................................................................32
Income
Statements...................................................................33
Balance
Sheets.......................................................................34
Statements of Changes inEquity.......................................................................35Statements of CashFlows........................................................................36Notes to the FinancialStatements...................................................................37
Directors'
Declaration..................................................................71
Independent AuditReport.......................................................................72
Shareholder
Information..................................................................74
Business Directory.............................................................................76
CHAIRMAN'S REVIEW
Dear Shareholder,
The international oil and gas exploration and production industry hasmaintained a rapid rate of change over the past year with competition forassets and experienced people remaining very strong. The effect of the globalcredit crisis has had a powerful impact on the performance of all listedcompanies on stock exchanges around the world with few exceptions and the endof this phase of the cycle is difficult to predict. In the meantime, Oilex hascontinued to develop its asset base in prospective permits and inconsolidating a highly experienced group of talented people to evaluate,develop and manage these assets.Initial oil discoveries in each of Oman, Indonesia and India have resultedfrom the work programs undertaken in the past 12 months. Of those discoveries,Pendalian Field- Indonesia is anticipated to be brought into production laterthis year in the first of 2 phases at a rate of about 1,200 barrels of oil perday (bopd) from the suspended discovery well Pendalian-3. Sarha-1 explorationwell in Block 56 Oman flowed oil to surface from one of 4 heavy oil bearingzones and will be appraised by a horizontal well in the next phase ofdrilling, which commenced in early September 2008. India appears verypromising with a discovery in a new oil zone to complement the oil flows fromearlier wells.
There have obviously been some disappointments, with Indian drilling operations being delayed by 5 months and slow progress on the wells at Cambay. The results of the 3 wells that remain in the program will be important in determining the development program for Cambay at different stratigraphic levels and whether they are for oil or gas. The emphasis has been on operations in existing permits while the company has continued to grow its asset base in the past year and at the same time has investigated many new venture opportunities in the search for high quality projects that fit with the Oilex strategy.
The past year has been a very active year in operations with drilling of 3wells in Oman, 3 wells in Cambay, 1 well at Bhandut in India and 1 well inWest Kampar Indonesia, in addition to completion of the 2D seismic acquisitionand processing program onshore Oman along with reprocessing of the twoexisting Petroleum Development Oman ("PDO") 3D seismic surveys. In JPDA 06-103Timor-Leste, the reprocessed Thornton 3D seismic survey of approximately 1,000km2 was purchased and the Maura 3D seismic survey of over 2,000 km2 wasacquired in the Timor Sea. At the time of reporting, the Rose 3D seismicsurvey of over 1,000 km2 was being acquired in WA-388-P after seismicreprocessing and initial interpretation of the older data had been completed.Oilex increased its equity in the West Kampar PSC in Indonesia to 60% afteracquiring its initial interest of 45% in August 2007, and we have farmed outpart of our interest in WA-388-P to Sasol during August 2008.
From an operational safety perspective the Company performed exceptionally well with a Lost Time Incident Frequency Rate ("LTIFR") of 1.47 per million manhours worked which is about 20% lower than the average LTIFR for onshore Australia and Asia. We look forward to improving on this safety record and moving into production in the forthcoming year. Our aim to is 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.
Regrettably, in the context of the current global stock markets and the delaysexperienced in progressing our development plans in India, our marketcapitalisation has suffered significantly. Oilex and its management group arededicated to concentrating on our core objectives of building our asset baseto develop sustainable medium to longer term returns for all stakeholders. Inthis regard we rely heavily on the continued efforts of our employees,contractors, suppliers and joint venture partners, coupled with the support ofour shareholders and all stakeholders. On behalf of the Board, I wish torecord our appreciation for the ongoing support of these contributors, and welook forward to establishing and developing our commercial operations duringthe 2009 Financial Year.Mr M.D.J. CozijnChairman18 September 2008OPERATIONS REVIEWHighlights for 2007-08:
- Seven wells drilled in 3 countries - four oil discoveries, one gas discovery, two dry holes
- Over 2,000 km2 3D seismic acquired offshore, 1,000 line km acquired onshore
- Plan of Development for Pendalian Field, Indonesia submitted with first production planned for Q4 2008
- Appraisal/development drilling under way on Sarha discovery, Oman
- New zone oil production proven from Cambay Field, India
Activity planned for 2008-09:
- Full field production at Pendalian Field, Indonesia in Q1 2009
- Prove reserve base for Cambay Field, India with project development in 2009
- Drill 15 wells onshore Oman, India and Indonesia
- Acquire 2D and 3D seismic onshore Oman and Indonesia, offshore Western Australia
INDIA
Cambay Field, Gujarat [Oilex - 45% interest]
The drilling program comprising 6 appraisal wells in the Cambay FieldProduction Sharing Contract area began on 7 March 2008 after extended delaysassociated with importing and commissioning the new drilling rig. Two wells,Cambay-23Z and Cambay-19Z, have been drilled and evaluated in part and thethird well, Cambay-73, spudded in July 2008. Hydrocarbons were intersected inall of the main objective horizons. The most important result to date has beenthe successful flow test of oil from a level deeper than had been proven inCambay Field previously. Oil flowed to surface from this unit under naturalpressure with no formation water at an initial rate of 800 (bopd), laterstabilising at 120 bopd. The results to date are very encouraging for thebroader potential of the deeper zones.New prospects at OS II and EP IV particularly in the northern part of theblock and at stratigraphic horizons other than OS II and EP IV including BasalEP IV, are now being developed with the benefit of the newly acquired welldata. The information from the new wells will provide a comprehensive basisfor certification of oil and gas reserves at the level of the Oligocene andthe Eocene main potential reservoir units and any of the exploration targetsthat may prove to contain hydrocarbons.On completion of the appraisal drilling program later in 2008, a modern suiteof data (including reservoir fluid, pressure, core and wireline data) willhave been acquired to normalise the existing data set and to provide accuratecorrelations to the 3D seismic survey that had been concluded in 2007. Theexisting database comprises data of variable quality from over 60 wellsdrilled on the block. These data have been digitised and integrated with the3D seismic survey. The wells in the current appraisal program are located toprovide at least one modern data point in each geological compartmentrecognised from the 3D seismic data and the existing well data to confirm theties to seismic and the correlations with old wells. All 6 appraisal wellswill test the Oligocene and Eocene primary targets and any of those wells thatindicate production potential from these zones may be suspended for futureproduction of oil or gas. Four of the wells will also test deeper explorationtargets at the base of the Eocene section and fractured Deccan basalts thathave proven to be oil reservoirs in the Tarapur block to the north of theCambay Field.
The first two wells in the program have been concluded and the third well is drilling ahead.
Cambay-23Z Gas Appraisal WellCambay-23Z, the first in the sequence spudded on 7 March 2008 and wassuspended as an intended future gas well. Cambay-23, the initial well drilledin 1963 was reported to have tested gas from the EP IV zone at rates of 14,500cubic metres per day through a 5mm choke. The appraisal well Cambay-23Z wasdesigned to intersect the primary target about 200 metres from the same zonein the initial well in the area of a strong amplitude anomaly. Good gas showswere recorded while drilling the Miocene and Oligocene secondary objectives inthis well. The evaluation of the wireline logs over the Basal Miocene andOligocene OS II intersected at 1,505 metres and 1,545 metres respectivelyindicates the presence of about 9 metres of gas-bearing pay in thesesandstones that are of good reservoir quality, each with about 25% averageporosity.
Cores were cut in the EP IV and wireline logs were run over the Eocene section. Indications from logs are that the EP IV is gas-bearing and a cased-hole DST will be conducted over the interval 1,961m - 2,005m when core results become available and a fracture stimulation program is formalised. Cambay-23Z well has been completed as a potential gas production well
Cambay-19Z Oil Appraisal Well
The second well, Cambay-19Z successfully tested oil at the level of the BasalEP IV sandstone. This is the first test of the Basal Eocene reservoir unit inthe Field. The well spudded on 25 May and the rig was released aftercompleting the first of a series of planned tests on 9 July 2008.The well has proven the productive potential of deeper zones on the WesternHigh Block. These zones are now considered to be prospective developmenttargets and by comparison with a number of older wells that were drilled inthe period 1960-1990 and penetrated the same section, there are probable oilzones that were missed in the initial evaluation. By analogy with the olderwells that penetrated the Basal EP IV unit, the Basal EP IV oil bearingsandstone may be present over a significant area of the Western High Block.The volume of oil for the deeper Eocene (including Basal EP IV) and fracturedDeccan basement objectives was previously estimated at about 60 millionbarrels oil in place.A series of up to 3 additional DST's at the deeper stratigraphic levels willcontinue in Cambay-19Z with a workover rig at the earliest opportunity. Stronggas shows were recorded also at the OS II level while drilling. The workoverrig has been contracted to continue the testing program at Cambay-19Z and thefirst test will be of a zone of about 25 metres with similar log response asthe zone that flowed oil from the Basal EP IV higher in the section.CAMBAY-23ZObjectives Primary: Eocene EP IV - gas Secondary: Oligocene OS II - gasStatus Spud date: 7 March 2008 Rig Release Date: 26 April 2008 Total Depth: 2,100 metres in Cambay Shale Formation Well Status: Suspended gas well with gas shows in OS II and EP IV.CAMBAY-19ZObjectives Primary: Oligocene OS II - gas Eocene EP III and EP IV - oil Secondary: Basal EP IV - oil Miocene Basal Sandstone - gas Deccan Fractured Basement - oilStatus Spud date: 14 May 2008 Rig Release Date: 9 July 2008 Total Depth: 2,350 metres in Deccan Trap basement Well Status: Suspended oil and gas discovery awaiting further testing of Basal EP IV oil zone and EP III and EP IV zones that were drilled with good gas shows.Results DST #1 successfully flowed oil to surface at a rate of over 800 bopd for the first hour of the test and later stabilised at a rate of 120 bopd on 1" choke during the final phase of the 32 hour flow period. No formation water has been produced with the oil which is 410 - 430 API gravity.
Shot hole drilling Cambay 3D seismic survey
RESOURCE ESTIMATE
The estimate of resources in the Cambay Field was last revised in May 2007.This estimate incorporated the interpretation of the Cambay 3D seismic surveyand new well data and is confined to the depth structure mapping of theOligocene OS II and Eocene EP IV sandstones only. Other potential hydrocarbonbearing reservoirs have not been included in the estimate. The presence anddistribution of in-place hydrocarbons in each of several majorhydrocarbon-bearing structural compartments is demonstrated by test andproduction data combined with wireline log responses from approximately 65wells drilled in the Contract Area. The resources for the two main intervalsOligocene OS II and Eocene EP IV have been estimated from the existing database of wells and 3D seismic and presented in the table below. These estimatesdo not include oil or gas that may be found in both shallower and deeperpotential reservoirs that will be intersected during the drilling program.
Total discovered hydrocarbon-resource-in-place estimation, March 2007:
Resources ORIGINAL VOLUME-IN-PLACE(100% BASIS) Low Estimate Best Estimate High EstimateOil (million stock tank barrels) 26 48 91Gas (billion cubic feet) # 186 356 702Condensate (million stock tank 7 14 28
barrels)
# Includes approximately 52 BCF of gas produced to date. Oilex holds a 45% interest in the Cambay Production Sharing Contract.
An estimate of undiscovered (exploration) resources of 60 million barrels ofoil and 120 billion cubic feet of gas was also provided to the DirectorateGeneral of Hydrocarbons ("DGH") to account for potential resources mainly indeeper stratigraphic units.
Approval Received for Additional Well Locations
The Ministry of Environment and Forests (MOEF), Government of India, gave itsformal approval in May to the proposal by the Cambay Joint Venture to drill upto 60 additional development wells within the Cambay block in the event thatre-development of the Cambay Field is warranted by the current 6 wellappraisal drilling program.
With the flexibility to construct new drilling sites, the opportunity now exists to test other prospects at different stratigraphic levels in other areas of the block that have high potential for gas and oil discoveries.
Background
The field was discovered in 1957 by Oil and Natural Gas Corporation Ltd("ONGC"), the first oil discovery in western India, onshore or offshore andwas developed as a gas field mainly from OS II reservoirs in the southern partof the Cambay block. Since inception the field has produced about 52 bcf ofgas until it was shut-in and we are of the view that a substantial resourceremains to be exploited. The field continues to produce small volumes of oilintermittently from wells on the Western High Block.
BHANDUT AND SABARMATI FIELDS: GUJARAT
The fields were discovered and developed initially by ONGC of India.Hydrocarbons were found in Miocene sandstones at Bhandut and Eocene sandstonesat Sabarmati and continue to be produced on an intermittent basis. The fieldswere acquired by the GSPC and Niko Joint Venture in 1995 and Oilexsubsequently acquired Niko's interest in 2006.
Sabarmati Field [Oilex - 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 has been produced from the one well in the Sabarmati Field Contract Area at very low rates on an intermittent basis since inception of the PSC in 1994. The well produces at a daily average rate 16 bopd from an Eocene reservoir which is about 5m thick, through 2m of perforations.
The contract area is on the outskirts of a major city and the Joint Venture has been unsuccessful to date in procuring a contract to conduct a 2D or 3D seismic survey using an innovative low impact seismic technology over the block. A single vintage seismic line is the only existing coverage.
Bhandut Field [Oilex - 40% interest]
The first 3D seismic survey over Bhandut field was acquired in February 2007.The main reservoir units in the shallower section are discontinuous sandstonesand at deeper stratigraphic levels, exploration targets that are likely to begas-bearing will be considered for drilling when environmental approvals arereceived for new well locations. The 3D seismic interpretation indicates thatthe crest of the main structure is to the northwest of the existing wells.The Bhandut-2Z well was drilled in October 2007 on the field margin near theoil-water contact and intersected the objective horizon at a depth 6 metreslower than prognosed in the water leg. Modern core, velocity, wireline log andpressure data have been acquired from the well to confirm the seismiccorrelation to locate future wells on the field. Deeper reservoir objectivesidentified at Bhandut may be drilled from newly built locations after JointVenture and Government environmental approvals for new well locations arereceived later in the development program.
OMAN
Block 56: Onshore Southern Oman [Oilex - 25% INTEREST]
Drilling operations commenced in Oman at the end of 2007 and 3 wells weredrilled in the first phase, 2 of which were oil discoveries. The rig wasreleased for a period after the third well to enable results to be evaluatedbefore the second phase of drilling comprising 4 wells, which commenced on 5September 2008.
The Michelle 2D seismic survey comprising 1,080 line km in the southwestern part of Block 56 was acquired by 2 October 2007 and processing was completed in May 2008. Reprocessing of existing 2D and 3D seismic data has also been completed and results have been incorporated into the existing data set.
The results of the Phase 1 drilling program in Block 56, Oman have been veryencouraging with the Sarha-1 well flowing oil to surface from one of fourinterpreted oil zones. Prospects selected for the 3 well program were based onthe interpretation of existing seismic data and provided a balance ofexploration targets ranging from moderate (Sarha-1, Ghadaq-1) to high risk(Alyanbou-1).The Sarha-1 discovery well confirmed that the productive trend in the adjacentblock continues into Block 56. New seismic acquisition and reprocessing ofexisting data indicates that there are a number of structures similar toSarha-1 present in the western flank area of Block 56 and the most prospectiveof these are the locations for three of the wells in the Phase 2 drillingcampaign. An appraisal well, Sarha-2, on the Sarha discovery, the first of thewells in the second phase of drilling, will have a dual purpose: 1) toevaluate the potential of oil zones not able to be tested in Sarha-1; and 2)to provide production information from a 500 metre horizontal well into the AlKhlata Formation that will be critical in designing wells for full fielddevelopment of the Al Khlata oil pool at the Sarha discovery.Well Status Total Depth ResultSarha-1 Oil discovery, 1,890 m Huqf Fm Flowed oil at ~200 bopd in Al suspended Khlata FmGhadaq-1 Oil discovery, 1,442 m Huqf Fm Recovered heavy oil on test suspended from Al Khlata FmAlyanbou-1 Dry hole 1,199 m Huqf Fm Basement highPhase 1 Well ResultsIn addition to the Sarha-1 well results, heavy oil (preliminary oil gravity of13.30 API) was recovered during testing of the Al Khlata zone in the Ghadaq-1well and these results will also be the subject of further study given thatoil with these characteristics is produced in Oman and in other heavy oilareas using various means of thermally enhanced recovery techniques.The results from Alyanbou-1 which was a higher risk test of a large anticlinalstructure in a remote area of the block will be incorporated into the overallprospectivity assessment.
Phase 2 Drilling Program - Resource estimates
Preliminary estimates of the undiscovered petroleum initially in place basedon the current data range from 37 to 94 million barrels (on a 100% basis) foreach of the four prospects that will be drilled by wells approved for thePhase 2 program which commenced in September 2008. Given the characteristicsof the oil recovered at Sarha-1 there will also be a focus on establishing therecoverable reserves volume and specialists in this type of development arestudying the data from Sarha-1 to estimate the recoverable volumes and toprovide input to a development plan.Prospect/Field Range of Estimates of Oil-Initially-in-Place (100% basis)Sarha Field 10 - 77 (37 mean) mmstboProspect-D 12 - 196 (78 mean) mmstboProspect-J 13 - 105 (48 mean) mmstboProspect-A 19 - 213 (94 mean) mmstboBackgroundThe Government of the Sultanate of Oman awarded the Exploration and ProductionSharing Agreement ("EPSA") for Block 56 to a consortium of Indian companiesand Oilex (Operator) on 28 June 2006. The block is located onshore, adjacentto producing fields operated by PDO, the Oman national oil company, in theSouth Oman Salt Basin, which is one of the main producing basins in Oman.The South Oman Salt Basin is a prolific oil producing province with extensivepipeline infrastructure linking the producing fields to the refining andexport facilities in the north of the country. The oil produced from thesefields is characteristically heavier with density in the range 150 - 280 APIgravity. All of the 7 reservoir objectives drilled in the first 2 wells appearto be oil-bearing and preliminary studies on the feasibility of producing theheavy oil are now in progress.Hydrocarbon potential has been recognized for targets ranging from theCambrian Buah formation to the Cretaceous Wasia group in areas where depth ofburial 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.Several of the fields in this area hold over 1 billion barrels of oil inplace. Most of these fields were discovered by PDO during the last 20 years.The most recent large field development to take place in the region is Oxy'sMukhaizna Field which is reported to be over 2 billion barrels of oil in placeand which will be produced by steam flood to improve the flow characteristicsof the 150 API gravity oil.
The Sarha and Ghadaq prospects, like many others in the western part of the block, are similar in structural form and reservoir objectives to the nearby producing fields operated by PDO. The pipeline network from those producing fields in the main part of the South Oman Salt Basin is only about 30 km to the west from Sarha-1.
A drilling contract was awarded to Abraj-Energy Holdings, an Omani company, for an initial term of 1 year with 2 optional extensions for 6 months each.
Oilex has a Branch Office in Muscat that is home to a team of 14 Omani and international staff.
indonesia
west kampar production sharing contract [oilex - 45% increasing to 60% INTEREST]
In August 2008, Oilex signed an agreement with PT Sumatera Persada Energi("SPE"), the Operator of West Kampar PSC, to acquire 15% additional equityinterest in the PSC thereby increasing its interest from 45% to 60% subject tomeeting certain conditions precedent. The West Kampar PSC contains thePendalian Oil Field and prospective exploration areas that will be the subjectof active work programs later in 2008. Shallow, low cost wells and theproximity to infrastructure are attractive incentives for the rapiddevelopment of the field. Early cash flow generated by Pendalian productionwill assist in funding the exploration of highly prospective trends that havebeen recognized on the block.Pendalian FieldThe Pendalian-3 well spudded on 28 September 2007 to appraise the oil fielddiscovered 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 bopd. Independent technical work carriedout for Oilex indicated a Best Estimate of the "in place resource" for thefield to be 12 million barrels of oil.The well successfully tested oil from two intervals. The Operator's estimateof the Productivity Index for the zone that was swab-tested by DST #3following a brief period of natural flow of 330 API crude oil, is 2.32 barrelsper day per psi which, given an estimated reservoir pressure of 569 psi,indicates that the maximum flow potential from this zone is 1,285 barrels perday. Production rates in the range 700-900 bopd from this zone are likely onceartificial lift is installed. Initial flow rates confirm the excellent SihapasSandstone reservoir quality interpreted from wireline logs for this 9 metreperforated interval. The Operator's estimate of the Productivity Index for thezone tested by DST #4, is 2.23 barrels per day per psi measured from the testwith an estimated reservoir pressure of 424 psi, inferring a maximum flowpotential from this zone of 916 barrels per day and suggests that productionrates in the range 400-650 bopd are likely once artificial lift is installed.This zone offers substantial incremental production potential to the deepersand tested by DST #3. The preliminary evaluation by SPE of the data from DST#5 indicated that flow rates of up to 1,200 barrels of oil per day (bopd) arelikely when the well is brought into production with artificial lift, theconventional method of completion for these shallow wells. The test wasconducted as a commingled flow over both of the zones tested previously in DST#3 and DST #4. This range of potential production flow rates is in generalagreement with the rates achieved for each of those individual tests.
Due to the shallow depth of the reservoir and low volume of associated gas, production from the Sihapas Sandstone oilfields in adjacent areas is carried out by installing beam pumps from inception to provide artificial lift.
Commercial productivity has been confirmed by the Pendalian-3 well and a Planof Development for that well is in the final stages of approval by theGovernment of Indonesia. The West Kampar Joint Venture plans to acquire a 3Dseismic survey over the Pendalian Field and a number of satellite structuresand to accelerate development.The resource estimate for the broader Pendalian Field has been upgraded to13.7 million barrels oil in place (Best Estimate Contingent Resource), with1,800-2,000 bopd production anticipated in Q4 2008. Based on this estimate, aPlan of Development ("POD") for the Field is being submitted to the IndonesianGovernment for approval.
The objective of the POD is to bring Pendalian Field into production in 2 phases comprising 1 or 2 wells in phase 1 and full field development of 3-4 wells in phase 2. The first phase of production is expected to commence at a rate of 900 - 1,200 bopd from a single well, Pendalian-3. A second well, Pendalian-4 will be drilled at the earliest opportunity in Q4 2008 with a corresponding increase in the likely production rate to 1,800 - 2,000 bopd.
Contingent Resource Oil in Place (100% basis) - Pendalian Field:
Contingent Resource - Development Low Estimate Best Estimate High Estimate Pending
mmstboip mmstboip mmstboip
Sihapas Sandstone Units D-6, C-5 5.8 13.7 29.1
To date, significant conclusions arising from an independent evaluation carried out by an independent third party appointed by the regulator (BPMigas) are:
- Inversion studies of the seismic data indicate that the Sihapas sands are continuous reservoirs, supporting the volumetric assumptions for the Pendalian Field.
- The Best Estimate Contingent Resource of oil-in-place determined by the independent third party for the two Sihapas zones is 13.7 mmstboip (gross), with a High Estimate volume of 29 mmstboip (gross). These volumes are similar to those determined by both SPE and Oilex.
- A staged approach to the development, with initial production from the Pendalian-3 well followed by Pendalian-4 production well, 3D seismic and full field development was recommended, subject to approval by the Indonesian Ministry of Petroleum.
Remaining POD requirements are being finalised by the third party adviser to BPMigas prior to submission to the Indonesian authorities. The recommended development schedule, subject to regulatory approval, calls for both Pendalian-3 and Pendalian-4 to be onstream in Q4 2008.
Plans are in place for the early drilling of the Pendalian-4 well and tendershave been received for conducting both 2D and 3D seismic programs in the WestKampar block in 2008. Ongoing mapping has confirmed the exploration potentialof the West Kampar PSC which will be delineated by additional seismic coverageand investigated with the drilling of 3 exploration wells in a campaignscheduled to commence later this year.
Background
The West Kampar Production Sharing Contract area of 4471 km2 is located incentral Sumatra adjacent to the most prolific oil producing province inIndonesia, the Central Sumatra Basin, from which over 10 billion barrels ofoil have been produced to date. Awarded in October 2005, the PSC work programcommitment provides for the acquisition of 250 kms of 2D seismic and 50 km2 of3D seismic along with drilling of the Pendalian-3 well and an additional 4exploration wells by October 2008.In May 2007 Oilex entered into an agreement to acquire a 45% interest in theWest Kampar Production Sharing Contract (PSC), from PT Sumatera Persada Energi(SPE) and the acquisition has been approved by the Government. The block hasexisting oil discoveries, one of which is the Pendalian Oil Field which shouldbe brought into production in Q4 2008, and it covers some highly prospectivestructural trends adjacent to major producing fields that will be the subjectof an intensive exploration program.
Joint petroleum development area - TIMOR-LESTE & Australia
JPDA 06-103: Flamingo Trough [OILEX - 25% INTEREST]
The Maura 3D seismic survey, the first phase of offshore operations in BlockJPDA 06-103, was completed successfully by the Geowave Champion seismic vesselin August 2008. The survey covered an area of 2,082 km2. Data from this surveywill be combined with existing 3D seismic surveys to provide 3D seismiccoverage over more than 90% of the area of the Block. Processing of the datais expected to be concluded about the end of 2008 and the interpretation ofthe data over the entire block is anticipated to be completed by about end ofMarch 2009. Locations for exploration wells will then be selected for drillingstarting about mid-year 2009.
To that end, on 13 June 2008 Oilex issued a conditional Notice of Award jointly with Nexus to Sedco Forex International for the supply of the Transocean Legend semi submersible drilling rig. Oilex has accordingly made application, on behalf of the JPDA Block 06-103 Joint Venture, seeking an extension of time under the PSC to enable its 2 wells to be drilled by January 2010 rather than by January 2009. The application is under review by the relevant government authorities.
In April of this year, a significant oil discovery at Kitan-1 and -2 was madeby ENI, the operator of block JPDA 06-105 (adjacent to the west of JPDA06-103). The Kitan-1 discovery well is reported to have flowed oil at a rateof 6,300 bopd from a drillstem test in the Plover Formation. The discovery wasfollowed by an appraisal well at Kitan-2 that confirmed the commercialviability and ENI subsequently made a Declaration of Commercial Discovery andthe Timor Sea Designated Authority based in Dili, Timor-Leste declared Kitan aDevelopment Area in May. These wells lie close to the JPDA 06-103 blockboundary and confirm the oil potential of the basin.
Background
In November 2006, Oilex (Operator) and the Joint Venture parties entered intoa Production Sharing Contract ("PSC") with the Timor Sea Designated Authorityfor block JPDA 06-103 and the PSC was signed in January 2007. The block islocated to the east of the Laminaria, Corallina, Kakatua, Kuda Tasi and Elangdiscoveries/oil and gas fields and to the north of the Bayu-Undan gascondensate 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.
AUSTRALIA
EPP27: OTWAY BASIN, OFFSHORE SOUTH AUSTRALIA [OILEX - 20% INTEREST]
Oilex, Videocon Industries and Gujarat State Petroleum Corporation eachacquired a 20% participating interest in the Exploration Permit for block EPP27, offshore South Australia pursuant to a farmin agreement with GreatArtesian Oil & Gas Limited in February 2006. The Christine 2D seismic surveyof approximately 1,300 line kilometres was completed on 20 July 2006 andintegrated into the interpretation. The Joint Venture agreed that a well wasnot justified on the block.
The term of the final permit year 6 ended on 24 August 2008 and discussions with the Government authorities are in progress to determine future activity on the permit.
WA-388-P: Carnarvon Basin Offshore Western Australia [OILEX - 14% interest after sasol farmin]
The Rose 3D seismic survey of 1,180 km2 began in August 2008 over thesoutheastern part of the permit using the vessel "Geowave Champion" and isexpected to be completed in September 2008. Interpretation of the reprocessed2D and existing third party seismic data was completed and provided the basisfor Sasol to farmin for 30% equity interest in the permit by funding 60% ofcertain costs of the Rose 3D seismic survey for 2008. Reprocessing of existingseismic data has been completed and interpretation is in progress.As part of its offshore gas strategy, Oilex, (Operator) and the Joint Ventureparties acquired exploration permit WA-388-P by competitive tender in 2007.The block lies to the northwest of the North Rankin, Goodwyn and Perseus gasand condensate fields currently being produced for the domestic and LNG gasmarkets by the North West Shelf Venture and to the north of the large gasresources discovered in the Jansz/lo area.
Onshore Australia: Cooper-Eromanga & Surat-Bowen Basins, Queensland
In November 2006, Oilex concluded an agreement with Bow Energy Limited ("Bow")to sell its permit interests in the Surat-Bowen and Cooper-Eromanga basins. Asconsideration for the sale of the assets, Oilex was issued with 13.3 millionfully paid ordinary Bow shares and 13.3 million options to purchase Bow sharesat 50 cents per share on or before 5 years from the issue date. Oilex is thelargest shareholder in Bow and indirectly through this shareholding maybenefit from success that Bow may have in any of its activities.
CORPORATE REVIEW
issued Capital
The total issued capital at 30 June 2008 was 132,083,885 fully paid shares inaddition to 39,925,100 unlisted options at prices between $0.40 and $2.75 pershare and 1,351,000 performance rights.
At the end of last year, the Company raised $67.5 million and at 30 June 2008 retained $43 million in cash, receivables and realisable investments after having retired $10 million in loans during the financial year.
listed investments
Oilex holds 13.3 million fully paid shares in Bow Energy Limited, representing8.79% of the issued capital. At 30 June 2008 these shares had a market valueof $5.7 million. In addition the Company holds 13.3 million optionsexercisable at $0.50 per share by 7 November 2011.
Safety, Health and environment
Oilex has achieved an excellent operating record in its operations in Oman,India and JPDA during the past 12 months. A single lost time incident occurredin India during a period in Oman and India when 680,172 manhours were workedincluding all contractors and Oilex personnel. This equates to a Lost TimeIncident Frequency Rate of 1.47 / million manhours worked. By comparison theLTIFR for onshore Australia and Asia is 1.76 and for USA is 6.17 (IADC ASPProgram 2007 Final Report issued June 2007).Oilex is committed to protecting the health and safety of everybody who playsa part in our operations or lives in the communities in which we operate.Wherever we operate, we will conduct our business with respect and care forboth the local and global, natural and social environment and systematicallymanage risks to drive sustainable business growth. We will strive to eliminateall injuries, occupational illness, unsafe practise and incidents ofenvironmental harm from our activities. The safety and health of our workforceand our environment stewardship are just as important to our success asoperational and financial performance and the reputation of the company.As Oilex expands its presence in different parts of the world, we shallendeavour 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 seeks to earn the public's trust and to be recognised as aresponsible corporate citizen.
social responsibility and community development
Independence Oil & Gas Scholarship
The "Independence Oil and Gas Scholarship Fund" was established by Oilex in 2006 and provided support for Mr Delio Teixeira, a student of Timor-Leste who completed his degree at Murdoch University in 2008. Delio has returned to Timor-Leste and is working in the Ministry of Foreign Affairs and Cooperation.
Community development - Timor-Leste Rural Health project
Oilex is actively contributing to the needs of various rural communities inTimor-Leste, one of the parties, with Australia, to the agreements governingthe Joint Petroleum Development Area where Oilex has a significant workprogram. One of the fundamental long-term issues affecting the communities ofTimor-Leste is poor health and Oilex has established a working alliance withAustralian Aid International ("AAI") for the provision of health care andtraining of health care workers that is needed in remote communities ofTimor-Leste. This year the work is focussed on the island of Atauro to thenorth of Dili where the project team is providing health care facilities toremote villages. This program has had a very beneficial impact on the healthsystem and its intended beneficiaries on Atauro. It is fully coordinated withthe objectives of the Timor-Leste Ministry of Health and World HealthOrganization.
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 aid organisation that isnon-profit and non-sectarian. AAI has made measurable and sustainableimprovements to the lives of displaced people around the world, providingemergency medical assistance and implementing rural health programs that focuson building local capacity.
Oilex's business objective is to produce exceptional results for the Company and all stakeholders. A fundamental component of our strategy is to develop and maintain excellent working relationships with the communities where we work and to maintain a high level of corporate responsibility.
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 has both immediate and long term impacts on the health system andits intended beneficiaries on Artauro. It is fully co-ordinated with theMinistry of Health and World Health Organization and supports their respectiveobjectives. It has also been fully funded by Oilex under its communitydevelopment program budget. It employs and benefits citizens of Timor-Leste byproviding them with long term employment and skills development prospects inmedical support for local communities.
PERMIT SCHEDULE
As at 30 June 2008
PERMIT BASIN / STATE / JOINT VENTURE PARTIES EQUITY % OPERATOR
COUNTRYCambay Field Cambay / Oilex Ltd 30.0 Oilex Ltd Gujarat / India Oilex NL Holdings 15.0 (India) Limited Gujarat State Petroleum 55.0 Corp. LtdBhandut Field Cambay / Oilex NL Holdings 40.0 Oilex NL
Gujarat / India (India) Limited Holdings (India) Limited Gujarat State Petroleum 60.0 Corp. LtdSabarmati Cambay / Oilex NL Holdings 40.0 Oilex NLField Gujarat / India (India) Limited Holdings (India) Limited Gujarat State Petroleum 60.0 Corp. LtdBlock 56 South Oman / Oilex Oman Limited 25.0 Oilex Oman Oman Limited GAIL (India) Limited 25.0 Videocon Industries Ltd 25.0 Bharat Petroresources 12.5 Limited Hindustan Petroleum 12.5 Corp. LtdWest Kampar Central Sumatra Oilex (West Kampar) 45.0 PT SumateraBlock / Sumatra/ Limited Persada Energi Indonesia PT Sumatera Persada 55.0 EnergiEPP27 Otway / SA / Oilex Ltd 20.0 Oilex Ltd Australia Videocon Industries Ltd 20.0 Gujarat State Petroleum 20.0 Corp. Ltd Great Artesian Oil & Gas 40.0 LimitedJPDA 06-103 Flamingo / Oilex (JPDA 06-103) Ltd 25.0 Oilex (JPDA Joint Petroleum 06-103) Ltd Development Area/ Timor-Leste & Australia GSPC (JPDA) Limited 25.0 Global Energy Inc. 25.0 Bharat Petroresources 25.0 JPDA LtdWA-388-P Carnarvon / WA Oilex Ltd 20.0 Oilex Ltd / Australia Gujarat State Petroleum 20.0 Corp Ltd Videocon Industries Ltd 20.0 Bharat Petroleum 20.0 Corporation Ltd Hindustan Petroleum 20.0 Corp. Ltd CORPORATE GOVERNANCE STATEMENTIn accordance with the ASX Corporate Governance Council's Principles of GoodCorporate Governance and Best Practice Recommendations ("ASX Principles andRecommendations")[1], Oilex Ltd (the "Company") has made it a priority toadopt systems of control and accountability as the basis for theadministration of corporate governance. Some of these policies and proceduresare summarised in this statement. Commensurate with the spirit of the ASXPrinciples and Recommendations, the Company has followed each recommendationwhere the Board of Directors (the "Board") has considered the recommendationto be an appropriate benchmark for corporate governance practices, taking intoaccount factors such as the size of the Company and the Board, resourcesavailable and activities of the Company. Where, after due consideration, theCompany's corporate governance practices depart from the ASX Principles andRecommendations, the Board has offered full disclosure of the nature of, andreason for, the departure.The Company has undertaken a review of its corporate governance practices as aconsequence of the revision to the ASX Principles and Recommendations made bythe ASX Corporate Governance Council. The Company will be reporting againstthe revised ASX Principles and Recommendations in its next annual report.Further information about the Company's corporate governance practices is setout on the Company's website at www.oilex.com.au. In accordance with the ASXPrinciples and Recommendations, information published on the Company's websiteincludes charters (for the Board and its committees), the Company's code ofconduct and other policies and procedures relating to the Board and itsresponsibilities.
EXPLANATIONS FOR DEPARTURES FROM ASX'S RECOMMENDATIONS
During the Company's 2007/2008 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 A majority of the Board should be independent directors.Recommendation 2.1:Notification of The Board does not have a majority of independentDeparture: directors. Only one of the four directors is independent.Explanation for The Board considers that its current composition is anDeparture: 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 The Chairman should be an independent director.Recommendation 2.2:Notification of The chair is not independent in accordance with theDeparture: criteria set out in Box 2.1 of the ASX Principles and Recommendations ("Independence Criteria").Explanation for The Board considers that Mr Cozijn is the most appropriateDeparture: person for the position as chair because of his industry experience. The Board is of the view that it is only Mr Cozijn's services as Company Secretary that precludes him from being considered independent and that his role as Company Secretary is unlikely to cause a conflict of interest or impede his ability to exercise independent judgement. Therefore, the Board considers Mr Cozijn to be a suitable Chairman.Principle 2 The Board should establish a nomination committee.Recommendation 2.4:Notification of There is no separate nomination committee.Departure:Explanation for The full Board considers those matters and issues thatDeparture: would usually fall to a nomination committee. Given the size and composition of the Board, the Board does not consider that any efficiencies or other benefits would be gained by establishing a separate committee. However, to assist it with its nomination function, the Board has adopted and disclosed its Nomination Committee Charter.Principle 4 The Board should establish an audit committee and structureRecommendationS 4.2, it in accordance with Recommendation 4.3.4.3:Notification of A separate audit committee has not been formed andDeparture: therefore is not structured in accordance with the compositional recommendation. Further, Mr Cozijn maintains the chair during audit related discussions.Explanation for The role of the audit committee is carried out by the fullDeparture: Board. Given the Board's size and composition, an audit committee in accordance with the recommended structure is not possible. Therefore, the Board considers no efficiencies or other benefits would be gained by establishing a separate committee. During audit discussions Mr Cozijn maintains the chair due to his financial qualifications and expertise. To assist it with its audit function, the Board has adopted and disclosed its Audit Committee Charter. The Audit Committee Charter also provides that the Board may meet with the external auditor, without management present, as required.Principle 9 The Board should establish a remuneration committee.Recommendation 9.2:Notification of There is no separate remuneration committee.Departure:Explanation for The full Board considers those matters and issues thatDeparture: would usually fall to a remuneration committee. Given the size and composition of the Board, the Board does not consider that any 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. Further, in accordance with the Corporations Act requirements, no directors participate in any deliberations regarding their own remuneration or related issues.NOMINATION COMMITTEE
The Board did not hold any nomination committee meetings during the Reporting Period.
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 Number of Meetings AttendedM D J Cozijn (Chair) 2B H McCarthy 2R G Barnes 2L L Bhandari (Independent) 2
Details of each of the director's qualifications are set out in the Directors' Report.
Mr Cozijn has a Bachelor of Commerce Degree and is an Associate of CPA Australia. He has over 30 years experience in the administration of listed mining companies. Mr Cozijn's qualifications and experience enable him to meet the test 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 four meetings during the Reporting Period. The following table shows the directors attendance at those meetings:
Name Number of Meetings AttendedM D J Cozijn (Chair) 4B H McCarthy 4R G Barnes 4L L Bhandari (Independent) 2OTHER
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 to the criteriafor independence as set out in Box 2.1 of the ASX Principles andRecommendations ("Independence Criteria"). To the extent that it is necessaryfor the Board to consider issues of materiality, the Board refers to thethresholds for qualitative and quantitative materiality as adopted by theBoard and contained in the Board Charter, which is disclosed in full on theCompany'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 adviceto properly discharge the responsibility of his/her office as a director,then, provided the Director first obtains approval for incurring such expensefrom the Chairman, the Company will pay the reasonable expenses associatedwith 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 regarding the overall board performance. All directors participated in the discussions. 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-executive directors. OILEX LTD ABN 50 078 652 632 FINANCIAL REPORT CONTENTSDirectors'
Report.......................................................................18
Remuneration
Report.......................................................................25
Auditor's Independence Declaration.............................................................................32
Income
Statements...................................................................33
Balance
Sheets.......................................................................34
Statements of Changes inEquity.......................................................................35Statements of CashFlows........................................................................36Notes to the FinancialStatements...................................................................37
Directors'
Declaration..................................................................71
Independent AuditReport.......................................................................72
Shareholder
Information..................................................................
74 DIRECTORS' REPORTThe Directors present their report together with the financial report of OilexLtd (the "Company") and of the consolidated entity, being the Company and itscontrolled entities (the "Group") for the financial year ended 30 June 2008and 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: 58
Chairman since the Company listed on the Australian Securities Exchange("ASX") in 2003. Mr Cozijn has over 30 years experience in the administrationof listed mining and industrial companies. He is the Finance Director ofCarbon Energy Limited, Finance Director and Company Secretary of Magma MetalsLimited and Chairman of Malagasy Minerals Limited and is a Director of variousprivate companies, having also previously been a Non-Executive Director ofKagara Zinc Ltd for 20 years.
During the last three years Mr Cozijn has been a director of the following listed companies:
- Carbon Energy Limited (from September 1992 to current)
- Magma Metals Limited (from June 2005 to current)
- Malagasy Minerals Limited (from September 2006 to current)
- Elkedra Diamonds NL (from April 2000 to November 2007)
Dr Bruce Henry McCarthy(Managing Director)BSc (Hons) PhD (Geology)Age: 58
Appointed Managing Director in February 2005, Dr McCarthy has over 30 years experience in the oil and gas exploration and production industry in geotechnical and management positions. Further details of Dr McCarthy's qualifications and experience can be found in the Executive Management section of the Directors' Report.
During the last three years Dr McCarthy has not been a director of any otherlisted companies.Mr Raymond George Barnes(Technical Director)BSc (Hons) (Geology)Age: 57
Appointed as a Director in September 2005, Mr Barnes has over 36 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)
Mr Laxmi Lal Bhandari
(Independent Non-Executive Director)
BSc (Geology) and MSc (Geology)
Age: 73
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 37 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 leavingONGC, Mr Bhandari became President of Tata Petrodyne, the oil and gassubsidiary of Tata Industries, a very large Indian industrial corporation. In2003 he took up the position of Managing Director of India Hydrocarbons Ltdand continued until June 2006.
During the last three years Mr Bhandari has not been a director of any other listed companies.
DIRECTORS' MEETINGSAll members of the Board are members of the Audit, Remuneration and NominationCommittees. The number of meetings of Directors (including meetings ofcommittees of Directors) and the number of meetings attended by each Directorof 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 6 6 2 2 4 4 - -B H McCarthy 6 6 2 2 4 4 - -R G Barnes 6 6 2 2 4 4 - -L L Bhandari 6 4 2 2 4 2 - -
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: 58Dr McCarthy has onshore and offshore experience gained in Australia andoverseas working for a small independent and a large multinational company.Most recently he worked as an independent consultant and as President-Indiafor Cairn Energy PLC (UK) leading their highly successful operating subsidiaryin India until 2002 when he returned to Australia. From 1996 to 2000, DrMcCarthy was based in India as Executive Director with Command Petroleum IndiaLtd ("Command") and with Cairn Energy India Pty Ltd ("Cairn") after Commandmerged with Cairn in 1997. Until 1995, he spent 14 years with Marathon OilCorporation working in the North Sea and based in the United Kingdom, workingon the North West Shelf of Western Australia and in the Timor Sea based out ofPerth, Western Australia.Mr Raymond George Barnes(Technical Director)BSc (Hons) (Geology)Age: 57Mr Barnes has worked in Europe, North and South America, South East Asia, theMiddle East and Australia with an outstanding record of finding and developingcommercial oil and gas discoveries in Australia and internationally. Recentappointments include Technical Director of Voyager Energy Limited from 2001until 2005 and Exploration Manager of Apache Energy based in Perth during avery aggressive exploration and development phase in the offshore CarnarvonBasin when over 40 discoveries were made. Prior to 1997, Mr Barnes held seniormanagement positions for Ampolex based in Denver, Colorado where he wasresponsible for the United States and South American operations following aperiod in Perth, Western Australia where he was responsible for North WestShelf and Timor Sea operations.Mr Richard Steven Paces(Chief Operating Officer)BSc (Chemical Engineering)Age: 51Mr Paces was appointed as Chief Operating Officer in May 2006 and has over 26years of experience in the oil and gas exploration and production industry.His background includes broad petroleum and reservoir engineering experienceas well as extensive operations and management experience. He has workedonshore and offshore with both large and small multinational companies and hasa variety of international experience. Prior to joining Oilex he was VicePresident and Country Manager in Equatorial Guinea, Central Africa where heworked 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 OperatingOfficer of their oil and gas division.
EXECUTIVE MANAGEMENT (CONTINUED)
Mr Ben Clube
(Chief Finance and Commercial Officer)
BSc (Hons) Geology
Age: 42
Mr Clube joined Oilex in May 2008 and brings a depth of commercialinternational oil and gas expertise to the Oilex group, having spent the past15 years at BHP Billiton Petroleum in a variety of senior management roles,including Vice President of Finance and Planning in Houston, London and Perth.A Chartered Accountant, he holds a Bachelor of Science with Honours in Geologyfrom the University of Edinburgh and previously worked as Audit Manager atPricewaterhouseCoopers in London.Mr Paul Senycia(Exploration Manager)MAppSc (Geophysics)Age: 51Mr Senycia was formerly Head of Evaluation at Woodside Energy Ltd responsiblefor worldwide exploration and new ventures, and was seconded from Woodside toPDO in Oman from 1997 to 2000. Mr Senycia has more than 25 years ofexploration experience in Australasia, North & West Africa, North America andEurope.Mr Kim Morrison
(Business Development Manager)
BSc (Hons) Geology and Geophysics
Age: 46
Mr Morrison joined Oilex in May 2008 as Business Development Manager withresponsibility for growing Oilex's portfolio of assets in the countries aroundthe Indian Ocean rim. He has more than 23 years of wide ranging experience inSoutheast and South Asia, North Africa, North America and Australasia invarious senior explorationist roles with Woodside Energy Ltd, ShellInternational and Marathon Oil Company.Mr Jay Laurie(General Counsel)BA LLB (Hons)Age: 37Mr Laurie has over 15 years experience in private practice and in-house legalroles. Following a number of years with a large commercial law firm, he hasheld in-house counsel roles in the Australian and international resourcessector over the last 9 years. Mr Laurie was Senior Counsel at Woodside EnergyLtd before joining Oilex in 2007 as General Counsel.
PRINCIPAL ACTIVITIES
The principal activities of the consolidated entity 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 these activities during the year.
OPERATING RESULTS
The loss after income tax of the consolidated entity for the year ended 30 June 2008 amounted to $7,976,691 (2007: loss of $14,721,271).
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 the Group during the financial year and the results of those operations are set out on pages 5 to 12 of this report.
SIGNIFICANT CHANGES IN THE STATE OF AFFAIRS
There have been no significant changes in the state of affairs of the Group that occurred during the financial period not otherwise disclosed in this report or the financial statements.
SIGNIFICANT EVENTS AFTER BALANCE DATE
(a) On 12 August 2008 the WA-388-P Joint Venture, operated by Oilex Ltd,entered into a Farmout Agreement under which each of the 5 existing jointventure parties (including Oilex Ltd) will assign a 6% participating interestin Exploration Permit WA-388-P in offshore Western Australia to SasolPetroleum Australia Ltd. In return for its 30% participating interest, Sasolhas agreed to bear 60% of certain costs associated with the acquisition ofseismic data in the Permit. The assignment is subject to obtaining thenecessary Government approval and registration.(b) On 14 August 2008 Oilex (West Kampar) Limited entered into an agreement toacquire an additional 15% in the West Kampar PSC, onshore Sumatra Indonesiafrom the operator, PT Sumatera Persada Energi, and thereby increasing Oilex(West Kampar) Limited's working interest from 45% to 60%. The considerationfor the additional 15% interest includes Oilex (West Kampar) Limited carryingcertain operational costs and a phased cash payment.(c) Subsequent to the year ended 30 June 2008, the carrying value of theinvestment in Bow Energy Limited was reviewed and as at 11 September 2008 theinvestment had decreased by $4,757,237 in value. The reduction in value of theinvestment would have reduced the Asset Revaluation Reserve by $2,528,663(before tax effect) and Other Income by $2,228,574. The financial effect ofthe reduction in the value of the investment has not been brought to accountat balance date.LIKELY DEVELOPMENTS
Other than the matters referred to elsewhere in this report, further disclosure as to likely developments in the operations of the Group and expected results of those operations would, in the opinion of the Board, be speculative and not in the best interests of the Group.
FINANCIAL POSITION
Capital Structure and Treasury Policy
At the date of this report, the Company had a total issued capital of 132,083,885 ordinary shares, 39,925,100 unlisted options exercisable at prices between $0.40 and $2.75 per share and 1,351,000 performance rights.
Cash management is reviewed on a regular basis by the Group's Chief Financeand Commercial Officer and reported to the Board on a monthly basis to ensurethe Group is able to meet its financial obligations as and when they fall due.Until sufficient operating cash flows are generated from its operations, theGroup remains reliant on equity or debt funding to fund its explorationcommitments and administration.
Liquidity and Funding
As at 30 June 2008 the Group had no borrowings or undrawn financing facilities. The Company is currently actively developing funding options in order that it can meet its expenditure commitments (see Note 29) and its planned future discretionary expenditure.
ENVIRONMENTAL ISSUES
The Group's oil and gas exploration and production activities are subject toenvironmental regulation under the legislation of the respective states andcountries in which it operates. The majority of the Group's activities involvelow level disturbance associated with its exploration drilling programs. TheBoard actively monitors compliance with these regulations and as at the dateof this report is not aware of any material breaches in respect of theseregulations.
DIRECTORS' INTERESTS
The relevant interest of each director in shares and options issued by the Company, as notified by the Directors to the ASX in accordance with S205G(1) of the Corporations Act 2001, at the date of this report is as follows:
Number of Ordinary Shares Number of Options Over Ordinary Shares Direct Indirect Direct IndirectM D J Cozijn 800,000 500,000 500,000 500,000L L Bhandari - - - 300,000B H McCarthy - 800,000 6,000,000 4,000,000R G Barnes 23,871 600,000 6,023,871 -
SHARE OPTIONS AND PERFORMANCE RIGHTS
Options and Performance Rights Granted to Directors and Officers of the Company
During or since the end of the financial year, the Company granted options andperformance rights for no consideration over unissued ordinary shares in theCompany, to the following Directors and Executives of the Company as part oftheir remuneration:OPTIONS Number of Options Granted Exercise Price Expiry DateDirectorsM D J Cozijn 250,000 $2.00 1 July 2011M D J Cozijn 250,000 $2.50 1 July 2011L L Bhandari 150,000 $2.00 1 July 2011L L Bhandari 150,000 $2.50 1 July 2011B H McCarthy 2,000,000 $2.00 1 July 2011B H McCarthy 2,000,000 $2.50 1 July 2011R G Barnes 1,500,000 $2.00 1 July 2011R G Barnes 1,500,000 $2.50 1 July 2011 ExecutivesB J M Clube 500,000 $1.75 30 June 2011B J M Clube 500,000 $2.25 30 June 2011B J M Clube 500,000 $2.75 30 June 2012W K Morrison 400,000 $1.75 30 June 2011W K Morrison 400,000 $2.25 30 June 2011W K Morrison 400,000 $2.75 30 June 2012PERFORMANCE RIGHTS Number of Rights Granted Exercise Price Expiry DateExecutivesP G Senycia 50,000 - 1 July 2013J W R Laurie 80,000 - 1 July 2012
Un-issued Shares Under Options and Rights
At the date of this report unissued ordinary shares of the Company under option (with an exercise price) are:
Expiry Date Exercise Number of Expiry Date Exercise Number of Price Shares Price Shares7 December $0.50 1,000,100 30 April 2010 $1.60 350,000200814 December $0.40 2,000,000 30 April 2010 $2.10 350,000200814 December $0.50 3,000,000 31 July 2010 $0.90 775,000200816 February $0.50 1,000,000 31 October $2.00 500,0002009 201031 July 2009 $0.50 775,000 31 January $2.50 450,000 201131 July 2009 $0.65 775,000 31 March 2011 $2.00 2,500,00031 October $1.50 500,000 31 March 2011 $2.25 300,000200931 October $1.75 500,000 30 April 2011 $2.70 350,000200914 December $0.80 4,250,000 30 June 2011 $1.75 900,000200931 December $1.00 500,000 30 June 2011 $2.25 900,000200931 December $1.50 3,000,000 1 July 2011 $2.00 3,900,000200931 January $1.40 500,000 1 July 2011 $2.50 3,900,000201031 January $2.00 450,000 30 September $1.57 500,0002010 201131 March 2010 $0.50 4,500,000 31 March 2012 $2.75 300,00031 March 2010 $1.75 300,000 30 June 2012 $2.75 900,000 TOTAL 39,925,100
These options do not entitle the holder to participate in any share issue of the Company or any other body corporate.
SHARE OPTIONS AND PERFORMANCE RIGHTS (CONTINUED)
Un-issued Shares Under Options and Rights (continued)
At the date of this report unissued ordinary shares of the Company under option which are subject to performance rights are:
Expiry Date Exercise Price Number of Rights1 July 2011 - 2006 - 782,000rights1 July 2012 - 2007 - 399,000rights1 July 2013 - 2008 - 170,000rights 1,351,000
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) and to the discretion of the Board of Oilex Ltd.
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 2,200,000 $0.20 250,000 $0.45 250,000 $0.50 2,700,000
INDEMNIFICATION AND INSURANCE OF DIRECTORS AND OFFICERS
The Group paid a premium in respect of insurance cover for the directors andofficers of the Group. The Group has not included details of the nature of theliabilities covered or the amount of the premium paid in respect of thedirectors' liability and legal expense insurance contracts, as such disclosureis prohibited under the terms of the insurance contract.
PROCEEDINGS ON BEHALF OF THE COMPANY
No person has applied for leave of Court to bring proceedings on behalf of theCompany or intervene in any proceedings to which the Company is a party forthe purpose of taking responsibility on behalf of the Company for all or anypart 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 the Group is important.
The Board has considered their position and, in accordance with the advicereceived from the Audit Committee, is satisfied that the provision of thenon-audit services is compatible with the general standard of independence forauditors 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
- 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, KPMG Australia, andits related practices for audit and non-audit services provided during theyear are set out below. Consolidated 2008 2007 $ $Audit ServicesAuditors of the CompanyAudit and review of financial reports (KPMGAustralia) 49,743 38,040Audit and review of financial reports (KPMGrelated practices) 63,543 68,448 113,286 106,488Other ServicesAssurance and Other ServicesKPMG Australia 12,350 2,020KPMG related practices 16,746 43,023 Taxation ServicesTaxation compliance services (KPMG Australia) 104,591 128,474Taxation compliance services (KPMG relatedpractices) 32,426 10,941 166,113 184,458
REMUNERATION REPORT - AUDITED
1. PRINCIPLES OF COMPENSATION
Remuneration of directors and executives is referred to as compensation as defined in AASB 124.
Compensation levels for key management personnel of the Group 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:
- the Group'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 as employercontributions to superannuation funds. Compensation levels are reviewedannually by the Remuneration Committee through a process that considersindividual, segment and overall performance of the Group. 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 Company includes long-term incentives designed to reward key management personnel for growth in shareholder wealth. The long term incentive plan ("LTI") is used to reward 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 at the time they are granted. The change in share price is the key performance criteria for achieving a benefit under the plan as the value that may be generated on exercise of options is dependent upon an increase in the share price above the exercise price of the options.
The Company has established an Employee Performance Rights Plan that entitlesemployees to zero exercise price options. The performance rights are subjectto a performance benchmark, based on Oilex's percentage share price growthcompared to the growth in the S&P/ASX 200 Energy Sector Index, which, subjectto the discretion of the Board of Oilex Ltd, must be satisfied before anyperformance rights can be exercised enabling the relevant employee to receiveshares 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 fromexternal advisers with reference to fees paid to non-executive directors ofcomparable companies. Non-Executive Directors' base fees are currently $40,000per annum. The compensation package for the Chairman and Company Secretary iscurrently $109,000 split evenly for each of company secretarial services anddirector's fees. Director's fees cover all main board activities.
2. EMPLOYMENT CONTRACTS
The following table summarises the key terms and conditions of contracts between key executives and the Company:
Executive Position Contract Contract Resignation Unvested Termination Termination payment Start Date Termination Notice Options and notice Date Required Performance required Rights on from the Resignation Company(3)B H McCarthy Managing 1 May 2008 30 April 6 months
Forfeited 6 months 12 months fixed(1) Director 2011 remuneration if the Company terminates without notice or if the executive terminates the contract following a material change event (including a material diminution in role or change of work location).R G Barnes(2) Technical 16 September 16 3 months
Forfeited 3 months None
Director 2005 September 2008B J M Clube Chief Finance 5 May 2008 n/a 3 months Forfeited 3 months None and Commercial OfficerR S Paces Chief Operating 5 May 2006 5 May 2009 6 months Forfeited 3 months 12 months fixed Officer remuneration to be paid on notice from the Company and any options and rights that will vest during the notice period will be retained.
P G Senycia Exploration 30 October n/a 3 months Forfeited 3 months None
Manager 2006W K Morrison Business 1 May 2008 n/a 1 month
Forfeited 1 month None
Development ManagerJ W R Laurie General Counsel 12 March 2007 n/a 1 month
Forfeited 1 month None
1 On 1 May 2008 the Company entered into an agreement with Macuale Consulting Pty Ltd for the provision of Dr McCarthy's services in the position of Managing Director of Oilex Ltd.
2 On 1 July 2008 the Company entered into an agreement with Ad Valorem Resource Consultants Pty Ltd for the provision of Mr Barnes' services in the position of Technical Director of Oilex Ltd for a period of three years.
3 The Company may terminate the contract immediately if serious misconduct hasoccurred. In this case the termination payment is only the fixed remunerationearned until the date of termination. On termination with cause, any unvestedoptions and performance rights will immediately be forfeited.
3. DIRECTORS' AND EXECUTIVE OFFICERS' REMUNERATION (COMPANY AND CONSOLIDATED)
Details of the nature and amount of each major element of remuneration of eachDirector of the Company and each of the named Company Executives and relevantGroup Executives who received the highest remuneration are: Year Short - Term Post Other Termin- Share-Based Total Value Value Employ- Long- ation/ Payments of of ment Term Sign-on Options Perform- Benefits Benefits as ance Pro- Rights portion as of Pro- Remun- portion eration of Remun- eration Salary STI Non Total Super- Options Perform- & Cash Monetary annuation ance Fees Bonus Benefits Benefits Rights $ $ $ $ $ $ $ $ $ $ % %Non-ExecutiveDirectorsM D J 2008 100,000 - - 100,000 9,000 - - 192,478 - 301,478 64% -Cozijn Chairman 2007 16,667 - - 16,667 92,333 - - - - 109,000 - -L L 2008 40,000 - - 40,000 - - - 115,487 - 155,487 74% -Bhandari Non-ExecutiveDirector 2007 24,111 - - 24,111 - - - - - 24,111 - -ExecutiveDirectorsB H 2008 387,368 - 10,795 398,163 86,082 - - 1,702,762 - 2,187,007 78% -McCarthy ManagingDirector 2007 275,000 - 19,350 294,350 51,319 - - 269,100 - 614,769 - -R G 2008 299,600 - - 299,600 - - - 1,228,957 - 1,528,557 80% -Barnes TechnicalDirector 2007 301,000 - - 301,000 - - - 148,999 - 449,999 - -ExecutivesB J M 2008 21,538 - - 21,538 1,938 - - 52,842 - 76,318 # -Clube ChiefFinanceandCom-mercialOfficer 2007 - - - - - - - - - - - -(Appointed5 May2008)R S 2008 424,525 - 90,210 514,735 14,606 - - 435,483 63,287 1,028,111 42% 6%Paces ChiefOperatingOfficer 2007 505,692 - 139,383 645,075 15,461 - - 988,437 98,796 1,747,769 - - P G 2008 227,980 - - 227,980 69,024 - - 373,944 44,219 715,167 52% 6%Senycia ExplorationManager 2007 144,137 - - 144,137 41,312 - - 280,091 55,239 520,779 - -(Appointed30 October2006)W K 2008 47,500 - - 47,500 4,275 - 40,000 2 84,584 - 176,359 # -Morrison BusinessDevelopmentManager 2007 - - - - - - - - - - - -(Appointed1 May 2008)J W R 2008 226,251 - - 226,251 20,363 - - 135,703 65,830 448,147 30% 15%Laurie GeneralCounsel 2007 56,989 - - 56,989 5,129 - - 38,890 - 101,008 - -(Appointed12 March2007)G J 2008 190,000 190,000 17,100 - - 19,016 31,644 257,760 7% 12%McCauley ChiefFinancialOfficer 2007 137,615 - - 137,615 12,385 - - 38,175 49,398 237,573 - -(To 5 May2008) 1A D 2008 64,797 - - 64,797 - - - - - 64,797 - -Beckett GeneralManagerOperations 2007 419,961 - - 419,961 - - - 288,677 79,037 787,675 - -(Ceased19 August2007)
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.
1 Mr McCauley was appointed to a newly created senior finance role on the appointment of Mr Clube to the position of Chief Finance and Commercial Officer.
2 Relocation benefits paid on appointment
# Not calculated as the inclusion would distort for the period given recent commencement.
3. DIRECTORS' AND EXECUTIVE OFFICERS' REMUNERATION (COMPANY AND CONSOLIDATED) (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 grant using theBlack-Scholes Model. Because of the performance condition attaching to theperformance rights, a Monte Carlo Simulation is used to value the rights. Thefair value of the options and rights is allocated to each reporting periodevenly over the period from grant date to vesting date. The value disclosed isthe portion of the fair value of the options and performance rights allocatedto this financial year. In valuing the options and performance rights, marketconditions have been taken into account.
The following factors and assumptions were used in determining the fair value of 2008 options and performance rights on grant date:
Grant Date Expiry Date Fair Value Per Exercise Price of
Shares Expected Risk Free Dividend
Option/Right Price on Grant Date Volatility Interest Rate YieldOPTIONS22 November 2007 1 July 2011 $0.45 $2.00 $1.62 57.9% 6.75% -22 November 2007 1 July 2011 $0.32 $2.50 $1.62 57.9% 6.75% -17 March 2008 30 April 2011 $0.47 $1.75 $1.20 64.0% 6.25% -17 March 2008 30 April 2011 $0.39 $2.25 $1.20 64.0% 6.25% -17 March 2008 30 April 2012 $0.42 $2.75 $1.20 64.0% 6.25% -1 May 2008 30 April 2011 $0.37 $1.75 $1.04 65.9% 7.25% -1 May 2008 30 April 2011 $0.31 $2.25 $1.04 65.9% 7.25% -1 May 2008 30 April 2012 $0.34 $2.75 $1.04 65.9% 7.25% - PERFORMANCE RIGHTS3 August 2007 1 July 2012 $1.50 - $1.53 60-90% 6.30% -3 August 2007 1 July 2012 $1.28 - $1.53 60-90% 6.30% -3 August 2007 1 July 2012 $1.11 - $1.53 60-90% 6.30% -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
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:
Number of Options Grant Date Number of
Fair Value of Exercise Price Expiry Date of
Granted Options Vested Options Granted of Options Options Granted GrantedOPTIONSExecutive DirectorsB H McCarthy - - 3,000,000 - - -B H McCarthy 2,000,000 22 November 2007 2,000,000 $0.45 $2.00 1 July 2011B H McCarthy 2,000,000 22 November 2007 - $0.32 $2.50 1 July 2011R G Barnes - - 1,000,000R G Barnes 1,500,000 22 November 2007 1,500,000 $0.45 $2.00 1 July 2011R G Barnes 1,500,000 22 November 2007 - $0.32 $2.50 1 July 2011 Non-Executive DirectorsM D J Cozijn 250,000 22 November 2007 250,000 $0.45 $2.00 1 July 2011M D J Cozijn 250,000 22 November 2007 - $0.32 $2.50 1 July 2011L L Bhandari 150,000 22 November 2007 150,000 $0.45 $2.00 1 July 2011L L Bhandari 150,000 22 November 2007 - $0.32 $2.50 1 July 2011
4. EQUITY INSTRUMENTS (CONTINUED)
4.1 Options and Rights Over Equity Instruments Granted as Compensation(continued) Number of Options Grant Date Number of Fair Value of Exercise Price Expiry Date of Granted Options Vested
Options Granted of Options Options
Granted GrantedOPTIONS (CONTINUED)ExecutivesB J M Clube 500,000 1 May 2008 - $0.37 $1.75 30 April 2011B J M Clube 500,000 1 May 2008 - $0.31 $2.25 30 April 2011B J M Clube 500,000 1 May 2008 - $0.34 $2.75 30 April 2012R S Paces - - 775,000 - - -P G Senycia - - 400,000 - - -W K Morrison 400,000 17 March 2008 - $0.47 $1.75 30 April 2011W K Morrison 400,000 17 March 2008 - $0.39 $2.25 30 April 2011W K Morrison 400,000 17 March 2008 - $0.42 $2.75 30 April 2012J W R Laurie - - 150,000 - - -G J McCauley - - 250,000 - - - Number of Grant Date Number of Rights Fair Value Exercise Price of Expiry Date of Rights Vested of
Rights Rights Granted Rights Granted
GrantedPERFORMANCE RIGHTSExecutivesR S Paces - - 50,000 - - -P G Senycia - - 25,000 - - -J W R Laurie 27,000 3 August 2007 - $1.50 - 1 July 2012J W R Laurie 27,000 3 August 2007 - $1.28 - 1 July 2012J W R Laurie 26,000 3 August 2007 - $1.11 - 1 July 2012G J McCauley - - 25,000 - - -With the exception of options that have vested, which can be retained by theemployee irrespective of termination or resignation, all options expire on theearlier of their expiry date or termination of the individual's employment.The options vest over periods of one to three years of continuous service andare exercisable at any time between the vesting date and the expiry date.Further details, including grant dates and exercise dates regarding optionsgranted to key management personnel are in Note 22 to the financialstatements.
No performance rights were issued to Directors during the financial year.
Since the end of the financial year, 50,000 performance rights were granted to Mr P G Senycia.
4.2 Modification of Terms of Equity-Settled Share-Based Payment Transactions
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.
4.3 Exercise of Options Granted as Compensation
During the financial year, the following shares were issued on the exercise of options previously granted as compensation:
Number of Amount paid shares per shareNon-ExecutiveDirectorsM D J Cozijn 1,000,000 $0.20 ExecutivesG J McCauley 250,000 $0.50
4. EQUITY INSTRUMENTS (CONTINUED)
4.4 Analysis of Options and Performance Rights Granted as Compensation
Details of vesting profiles of the options and performance rights granted asremuneration to each key management person and each of the five named Companyexecutives and relevant Group executives is detailed 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 VestsNon-Executive DirectorsM D J Cozijn 500,000 22 November 2007 50% - (B) - 80,695L L Bhandari 300,000 22 November 2007 50% - (B) - 48,417 Executive Directors
B H McCarthy 4,000,000 22 November 2007 50% - (B) - 645,558R G Barnes 3,000,000 22 November 2007 50% - (B) - 484,169 ExecutivesB J M Clube 1,500,000 1 May 2008 0% - (C) - 511,972W K Morrison 1,200,000 17 March 2008 0% - (C) - 510,448(A) The maximum value of options yet to vest is not determinable as it dependson the market price of shares of the Company on the ASX at the date the optionis exercised. The values represent the fair value of the options not vested.(B) The options issued may vest and can be exercised as; one half immediatelyand in full during the year after grant date. All options that have vested canbe retained by the Director upon resignation or termination of employment.(C) The options issued may vest and can be exercised as; one third one yearfrom grant date, two thirds two years after grant date and in full three yearsfrom grant date. All options that have vested can be retained by the employeeupon resignation or termination of employment.
4.5 Analysis of Movements in Options
The movement during the financial year, by value, of options over ordinary shares in the Company held by each key management person and each of the five named Company executives and relevant Group executives is detailed below:
Value of Options Granted Exercised Forfeited in Year in Year in Year (A) (B) (C) $ $ $Non-Executive DirectorsM D J Cozijn 192,841 - -L L Bhandari 115,705 - - Executive DirectorsB H McCarthy 1,542,729 - -R G Barnes 1,157,047 - - ExecutivesB J M Clube 511,972 - -W K Morrison 510,448 - -G J McCauley - 263,750 -A D Beckett - 275,000 173,419
4. EQUITY INSTRUMENTS (CONTINUED)
4.5 Analysis of Movements in Options (continued)
(a) The value of options granted in the year is the fair value of the optionscalculated at grant date using the Black-Scholes Model. The total value of theoptions granted is included in the table above. This amount is allocated toremuneration over the vesting period.(b) The value of options exercised during the year is calculated as the marketprice of shares of the Company on the ASX as at close of trading on the datethe options were exercised after deducting the price paid to exercise theoption.
(c) The value of options forfeited during the year represents the benefit foregone and is calculated at the date the options were forfeited using the Black-Scholes Model.
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
The movement during the financial year, by value, of performance rights overordinary shares in the Company held by each key management person and each ofthe five named Company executives and relevant Group executives is detailedbelow: Value of Performance Rights Granted Exercised Forfeited in Year in Year in Year (A) (B) (C) $ $ $ExecutivesJ W R Laurie 103,920 - -A D Beckett - - 90,800
(a) 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 rights granted is included in the table above. This amount is allocated to remuneration over the vesting period.
(b) The value of rights exercised during the year is calculated as the marketprice of shares of the Company on the ASX as at close of trading on the datethe rights were exercised after deducting the price paid to exercise theoption.(c) The value of performance rights forfeited during the year represents thebenefit foregone and is calculated at the date the rights were forfeited usinga Monte Carlo simulation.
AUDITOR'S INDEPENDENCE DECLARATION
The lead Auditor's Independence Declaration for the year ended 30 June 2008 has been received and can be found on page 32.
Signed in accordance with a resolution of the Directors.
.........................................
............................................
Mr M.D.J. Cozijn Dr B.H. McCarthy Chairman Managing DirectorWest PerthWestern Australia18 September 2008
Lead Auditor's Independence Declaration under Section 307C of the Corporations Act 2001
To: the directors of Oilex Ltd
I declare that, to the best of my knowledge and belief, in relation to the audit for the financial year ended 30 June 2008 there have been:
(i) no contraventions of the auditor independence requirements as set out in the Corporations Act 2001 in relation to the audit; and
(ii) no contraventions of any applicable code of professional conduct inrelation to the audit.KPMGB C FullartonPartnerPerth, WA18 September 2008 INCOME STATEMENTS For the year ended 30 June 2008 Consolidated Company 2008 2007 2008 2007 Note $ $ $ $ Continuing operations Revenue 7(a) 572,281 325,252 49,552 56,231Other income 7(b) 2,868,260 204,127 2,868,260 204,127Employee benefits expense 7(c) (1,236,430) (1,089,625) (1,192,631) (1,089,625)Depreciation expense (421,726) (204,771) (346,795) (183,873)Exploration expenditure (3,943,942) (4,772,748) (1,247,263) (3,172,015)Production costs (568,603) (640,212) (191,744) (192,138)Well abandonment provision 19 (223,017) (1,851,126) (133,810) (1,030,524)Impairment of loans tosubsidiaries - - (3,474,187) (2,566,770)Administration expense (2,758,438) (2,847,021) (2,645,161) (2,733,771)Share based payments 22 (5,562,488) (5,455,937) (5,441,320) (5,455,937) Results from operatingactivities (11,274,103) (16,332,061) (11,755,099) (16,164,295) Finance income 3,275,136 1,257,534 4,580,732 1,141,262Finance costs (695,485) (655,352) (695,485) (655,352)Foreign exchange loss (394,603) (1,810,587) (4,543,767) (1,800,304) Net finance income/(expense) 7(d) 2,185,048 (1,208,405) (658,520) (1,314,394) Loss before income tax (9,089,055) (17,540,466) (12,413,619) (17,478,689) Deferred tax income 8 1,112,364 - 1,112,364 - Loss from continuingoperations (7,976,691) (17,540,466) (11,301,255) (17,478,689) Discontinued operation Profit from discontinuedoperation (net of tax) 6 - 2,819,195 - 2,819,195 Loss for the period (7,976,691) (14,721,271) (11,301,255) (14,659,494) Earnings per share Basic loss per share (centsper share) 9 (6.1) (18.3)Diluted loss per share (centsper share) 9 (6.1) (18.3) Continuing operations Basic loss per share (cents 9per share) (6.1) (21.8)Diluted loss per share (cents 9per share) (6.1) (21.8)The income statements are to be read in conjunction with the notes to thefinancial statements. BALANCE SHEETS As at 30 June 2008 Consolidated Company 2008 2007 2008 2007 Note $ $ $ $ Current assetsCash and cash equivalents 10 33,487,053 66,993,383 30,409,656 66,264,305Trade and other receivables 11 4,202,996 4,285,065 4,711,711 2,801,945Prepayments 12 202,161 82,315 148,721 82,315Inventories 13 2,887,528 376,704 1,322,869 217,288Total current assets 40,779,738
71,737,467 36,592,957 69,365,853
Non-current assetsTrade and other receivables 11 - - 21,025,380 9,507,614Exploration and evaluation 14 31,464,923 13,498,334 8,265,450 4,396,926Property, plant and equipment 15 1,249,171 747,609 1,006,974 620,974Investments 16 9,850,219 3,717,631 9,858,761 3,728,835Total non-current assets 42,564,313 17,963,574 40,156,565 18,254,349 Total assets 83,344,051 89,701,041 76,749,522 87,620,202 Current liabilitiesTrade and other payables 17 8,608,338 2,364,815 2,811,011 1,364,668Employee benefits 18 193,011 155,362 149,212 155,362Loans and borrowings 20 - 5,000,000 - 5,000,000Total current liabilities 8,801,349
7,520,177 2,960,223 6,520,030
Non-current liabilitiesProvisions 19 1,719,838 1,714,387 966,435 954,401Loans and borrowings 20 - 5,000,000 - 5,000,000Total non-current liabilities 1,719,838
6,714,387 966,435 5,954,401
Total liabilities 10,521,187 14,234,564 3,926,658 12,474,431 Net assets 72,822,864 75,466,477 72,822,864 75,145,771 EquityIssued capital 21 101,368,396 100,690,896 101,368,396 100,690,896Reserves 21 13,037,876 8,596,476 16,489,814 8,403,144Accumulated losses (41,583,408) (33,820,895) (45,035,346) (33,948,269) Total equity 72,822,864 75,466,477 72,822,864 75,145,771 The balance sheets are to be read in conjunction with the notes to thefinancial statements. STATEMENTS OF CHANGES IN EQUITY For the year ended 30 June 2008 Foreign Asset Currency Option
Revaluation Translation Accumulated
Issued Capital Reserve Reserve Reserve Losses Total EquityConsolidated $ $ $ $ $ $ Balance at 1 July 2006 36,563,991 2,499,908 - - (19,302,425) 19,761,474Total recognised income and expense - - 330,053 513,379 (14,721,271) (13,877,839)Shares issued 68,000,000 - - - - 68,000,000Capital raising costs (4,248,921) - - - - (4,248,921)Shares issued on exercise of options 350,000 - - - - 350,000Transfer on exercise of options - (202,801) - - 202,801 -Equity-settled share-based paymenttransactions 25,826 5,455,937 - - - 5,481,763Balance at 30 June 2007 100,690,896 7,753,044
330,053 513,379 (33,820,895) 75,466,477
Balance at 1 July 2007 100,690,896 7,753,044 330,053 513,379 (33,820,895) 75,466,477Total recognised income and expense - - 2,265,463 (3,172,373) (7,976,691) (8,883,601)Shares issued - - - - - -Capital raising costs - - - - - -Shares issued on exercise of options 677,500 - - - - 677,500Transfer on exercise of options - (214,178) - - 214,178 -Equity-settled share-based paymenttransactions - 5,562,488 - - - 5,562,488Balance at 30 June 2008 101,368,396 13,101,354
2,595,516 (2,658,994) (41,583,408) 72,822,864
Foreign Asset Currency Option Revaluation Translation Accumulated Issued Capital Reserve Reserve Reserve Losses Total EquityCompany $ $ $ $ $ $ Balance at 1 July 2006 36,563,991 2,499,908 - - (19,491,576) 19,572,323Total recognised income and expense - - 330,053 320,047 (14,659,494) (14,009,394)Shares issued 68,000,000 - - - - 68,000,000Capital raising costs (4,248,921) - - - - (4,248,921)Shares issued on exercise of options 350,000 - - - - 350,000Transfer on exercise of options - (202,801) - - 202,801 -Equity-settled share-based paymenttransactions 25,826 5,455,937 - - - 5,481,763Balance at 30 June 2007 100,690,896 7,753,044
330,053 320,047 (33,948,269) 75,145,771
Balance at 1 July 2007 100,690,896 7,753,044 330,053 320,047 (33,948,269) 75,145,771Total recognised income and expense - - 2,265,463 472,897 (11,301,255) (8,562,895)Shares issued - - - - - -Capital raising costs - - - - - -Shares issued on exercise of options 677,500 - - - - 677,500Transfer on exercise of options - (214,178) - - 214,178 -Equity-settled share-based paymenttransactions - 5,562,488 - - - 5,562,488Balance at 30 June 2008 101,368,396 13,101,354
2,595,516 792,944 (45,035,346) 72,822,864
The statements of changes in equity are to be read in conjunction with the notes to the financial statements.
STATEMENTS OF CASH FLOWS For the year ended 30 June 2008 Consolidated Company 2008 2007 2008 2007 Note $ $ $ $ Cash flows from operating activitiesCash receipts from customers - 34,618 - 34,618Payments to suppliers and employees (4,251,366) (4,656,663) (3,775,728) (4,019,521)Interest received 3,044,667 1,257,796 4,350,264 1,141,524Interest paid (695,485) (655,352) (695,485) (655,352)Net cash used in operating activities 23 (1,902,184)
(4,019,601) (120,949) (3,498,731)
Cash flows from investing activitiesAdvances to joint ventures (1,859,211) - (1,040,719) -Proceeds from sale of assets 184,344 - 184,344 -Acquisition of petroleum interests - (4,406,739) - -Payments for exploration and evaluation (19,678,692) (14,058,818) (9,587,188) (6,698,501)Acquisition of property, plant and equipment (1,067,948) (601,834) (852,973) (468,516)Payment for permit bonds - (12,000) - -Net cash used in investing activities (22,421,507)
(19,079,391) (11,296,536) (7,167,017)
Cash flows from financing activitiesProceeds from issue of share capital - 68,000,000 - 68,000,000Proceeds from exercise of options 677,500 350,000 677,500 350,000Proceeds from borrowings - 5,000,000 - 5,000,000Repayment of borrowings (10,000,000) - (10,000,000) -Payment of transaction costs - (4,225,920) - (4,225,920)Borrowing costs - (100,000) - (100,000)Advances to subsidiaries - - (14,843,660) (13,044,217)Net cash from/(used in) financing activities (9,322,500)
69,024,080 (24,166,160) 55,979,863
Net increase/(decrease) in cash held (33,646,191) 45,925,088 (35,583,645) 45,314,115Cash and cash equivalents at 1 July 66,993,383 21,262,211 66,264,305 21,144,106Effect of exchange rate fluctuations on cash held 139,861
(193,916) (271,004) (193,916)
Cash and cash equivalents at 30 June 10 33,487,053
66,993,383 30,409,656 66,264,305
The statements of cash flows are to be read in conjunction with the notes tothe financial statements. NOTES TO THE FINANCIAL STATEMENTS For the year ended 30 June 2008NOTE 1 - REPORTING ENTITYOilex Ltd (the "Company") is a company domiciled in Australia. Theconsolidated financial statements of the Company as at and for the year ended30 June 2008 comprise the Company and its subsidiaries (together referred toas the "Group"). 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. The Groupis primarily involved in the exploration, evaluation, development andproduction of hydrocarbons.NOTE 2 - BASIS OF PREPARATION(a) 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 the Group also complies with International Financial Reporting Standards (IFRSs) and interpretations adopted by the International Accounting Standards Board (IASB).
The financial statements were approved by the Board of Directors on 18 September 2008.
(b) Basis of Measurement
The consolidated financial statements have been prepared on the historical cost basis except for the following:
- financial instruments at fair value through profit or loss are measured at fair value;
- available-for-sale financial assets are measured at fair value; and
- liabilities for cash-settled share-based payment arrangements are measured at fair value.
(c) Functional and Presentation Currency
The 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 the Group's accounting policies, management has made the following judgements, apart from those involving estimates, which have the most significant effect on the amount recognised in the financial statements.
i) Exploration and Evaluation Assets
The Group`s accounting policy for exploration and evaluation expenditure isset out in Note 3(e). The application of this policy necessarily requiresmanagement to make certain estimates and assumptions as to future events andcircumstances, including, in particular, the assessment of whether economicquantities of reserves have been found. Any such estimates and assumptions maychange as new information becomes available. If, after having capitalisedexpenditure under this policy, it is determined that the expenditure isunlikely to be recovered by future exploitation or sale, then the relevantcapitalised amount will be written off to the income statements.
ii) Rehabilitation Obligations
The Group estimates the future removal costs of onshore oil and gas productionfacilities, wells and pipeline at the time of installation of the assets. Inmost instances, removal of assets occurs many years into the future. Thisrequires judgemental assumptions regarding removal date, future environmentallegislation, the extent of reclamation activities required, the engineeringmethodology for estimating cost, future removal technologies in determiningthe removal cost, and asset specific discount rates to determine the presentvalue of these cash flows. For more detail regarding the policy in respect ofprovision for rehabilitation refer to Note 3(k).
NOTE 2 - BASIS OF PREPARATION (CONTINUED)
(e) Going Concern
The Directors believe that it is appropriate to prepare the financialstatements on a going concern basis. As at 30 June 2008, the Group's currentassets exceeded current liabilities by $31,978,389 and the Group has cash andcash equivalents of $33,487,053. The Directors are satisfied that the value ofthe Group's assets can be realised through further evaluation, development andproduction or alternatively through asset sale. The Directors are alsosatisfied that the Company has adequate plans in place in order that itsfunding requirements in the foreseeable future can be met and that the Companyis progressing with these plans accordingly. The Group's cash flow forecastindicates that the financing plans will ensure the Group will have sufficientcash resources to fulfil all of its operational activities in the future,including the Group's commitments set out in Note 29. The Directors regularlymonitor funding requirements along with the Group's asset portfolio,operational activities and in light of altering market conditions to ensurethey are appropriately balanced by either revising the Company's financingplans, making changes to its operational activities, realising assets orraising capital as required. Such changes may possibly include the realisationof assets or settling of liabilities other than in the normal course ofbusiness at amounts that may be different to those stated in the financialreport.
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 Group entities.
(a) Basis of Consolidation
i) Subsidiaries
Subsidiaries are entities controlled by the Company. Control exists when theCompany has the power, directly or indirectly, to govern the financial andoperating policies of an entity so as to obtain benefits from its activities.In assessing control, potential voting rights that presently are exercisableor convertible are taken into account. The financial statements ofsubsidiaries are included in the consolidated financial statements from thedate that control commences until the date that control ceases. The accountingpolicies of subsidiaries have been changed when necessary to align them withthe policies adopted by the Company. All subsidiaries have a June financialyear end.
Investments in subsidiaries are carried at their cost of acquisition in the Group's financial statements, subject to impairment testing.
ii) Joint Ventures
Joint ventures are those entities over whose activities the Group has joint control, established by contractual agreement.
iii) Jointly Controlled Operations and Assets
The interest of the Group in unincorporated joint ventures and jointly controlled assets are brought to account by recognising, in its financial statements, the assets it controls, the liabilities that it incurs, the expenses it incurs and the share of income that it earns from the sale 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.
(b) Foreign Currency
i) Foreign Currency Transactions
Transactions in foreign currencies are translated to the respective functionalcurrencies of Group 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.
NOTE 3 - SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(b) Foreign Currency (continued)
ii) Foreign Operations
The assets and liabilities of foreign operations are translated to Australiandollars at exchange rates at the reporting date. The income and expenses offoreign operations are translated to Australian dollars at exchange rates atthe dates of the transactions.Foreign currency differences are recognised in the foreign currencytranslation reserve (FCTR). Foreign exchange gains and losses arising from amonetary item receivable from a foreign operation, the settlement of which isneither planned nor likely in the foreseeable future, are considered to formpart of a net investment in a foreign operation and are recognised directly inequity in the FCTR in the financial statements of the Group.
(c) Non-Derivative Financial Instruments
Non-derivative financial instruments comprise investments in equity and debtsecurities, trade and other receivables, cash and cash equivalents, loans andborrowings and trade and other payables.
Non-derivative financial instruments are recognised initially at fair value plus, for instruments not at fair value through profit or loss, any directly attributable transaction costs, except as described below. Subsequent to initial recognition non-derivative financial instruments are measured as described below.
A financial instrument is recognised if the Group becomes a party to thecontractual provisions of the instrument. Financial assets are derecognised ifthe Group's contractual rights to the cash flows from the financial assetsexpire or if the Group transfers the financial asset to another party withoutretaining control or substantially all risks and rewards of the asset. Regularway purchases and sales of financial assets are accounted for at trade date,i.e. the date that the Group commits itself to purchase or sell the asset.Financial liabilities are derecognised if the Group's obligations specified inthe contract expire or are discharged or cancelled.
i) Available-for-Sale Financial Assets
The Group's investments in equity securities and certain debt securities areclassified as available-for-sale financial assets. Subsequent to initialrecognition, they are measured at fair value and changes therein, other thanimpairment losses (see Note 3(i)(i)), and foreign exchange gains and losses onavailable-for-sale monetary items (see Note 3(b)(i)), are recognised as aseparate component of equity. When an investment is derecognised, thecumulative gain or loss in equity is transferred to profit or loss.
ii) Investments at Fair Value through Profit and Loss
An instrument is classified as at fair value through profit and loss if it isheld for trading or is designated as such upon initial recognition. Financialinstruments are designated at fair value through profit or loss if the Groupmanages such investments and makes purchase and sale decisions based on theirfair value in accordance with the Group's documented risk management orinvestment strategy. Upon initial recognition, attributable transaction costsare recognised in profit or loss when incurred. Financial instruments at fairvalue through profit or loss are measured at fair value, and changes thereinare 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.
iv) Impairment
At each reporting date, the Group assesses whether there is objective evidencethat a financial instrument has been impaired. In the case ofavailable-for-sale financial instruments, a prolonged decline in the value ofthe instrument is considered to determine whether impairment has arisen.Impairment losses are recognised in the income statement.
NOTE 3 - SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(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 theresults of the well. Costs are expensed where the well does not result in thesuccessful 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:
- 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
- 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 expenditure is narrowedfrom the exploration permit for exploration and evaluation expenditure to theindividual geological area where the presence of an oil or natural gas fieldexists, and in most cases will comprise an individual oil or gas 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)).
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) Recognition and Measurement
Items of property, plant and equipment are measured at cost less accumulateddepreciation and accumulated impairment losses. The cost of self-constructedassets includes the cost of materials, direct labour, the initial estimate,where relevant, of the costs of dismantling and removing the items andrestoring the site on which they are located and an appropriate proportion ofoverheads.Gains and losses on disposal of an item of property, plant and equipment aredetermined by comparing the proceeds from disposal with the carrying amount ofproperty, plant and equipment and are recognised net within `other income' inprofit or loss.ii) Subsequent Costs
The cost of replacing part of an item of property, plant and equipment is recognised in the carrying amount of the item if it is probable that the future economic benefits embodied within the part will flow to the Group and its cost can be measured reliably. All other costs are recognised in the income statement as an expense as incurred.
NOTE 3 - SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(g) Property, Plant and Equipment (continued)
iii) Depreciation
Depreciation is recognised in profit or loss using the reducing balance methodover the estimated useful life of the assets, with the exception of softwarewhich is depreciated at 40% prime cost. The estimated useful lives in thecurrent and comparative periods are as follows:
- Motor vehicles 4 to 7 years
- Plant and equipment 2 to 7 years
- Office furniture 2 to 10 years
Depreciation methods, useful lives and residual values are reviewed and adjusted if appropriate, at each financial year end.
(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 Assets
A financial asset is assessed at each reporting date to determine whetherthere is any objective evidence that it is impaired. A financial asset isconsidered to be impaired if objective evidence indicates that one or moreevents have had a negative effect on the estimated future cash flows of thatasset. An impairment loss in respect of a financial asset measured atamortised cost is calculated as the difference between its carrying amount,and the present value of the estimated future cash flows discounted at theoriginal effective interest rate. An impairment loss in respect of anavailable-for-sale financial asset is calculated by reference to its currentfair value. Individually significant financial assets are tested forimpairment on an individual basis. The remaining financial assets are assessedcollectively in groups that share similar credit risk characteristics.
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 toan event occurring after the impairment loss was recognised. For financialassets measured at amortised cost and available-for-sale financial assets thatare debt securities, the reversal is recognised in profit or loss. Foravailable-for-sale financial assets that are equity securities, the reversalis recognised directly in equity.
ii) Non-Financial Assets
The carrying amounts of the Group's non-financial assets, other thaninventories, are reviewed at each reporting date to determine whether there isany indication of impairment. If any such indication exists then the asset'srecoverable amount is estimated. An impairment loss is recognised if thecarrying amount of an asset or its cash-generating unit exceeds itsrecoverable amount. A cash-generating unit is the smallest identifiable assetgroup that generates cash flows that are largely independent from other assetsand groups. Impairment losses are recognised in profit or loss.The recoverable amount of an asset or cash-generating unit is the greater ofits value in use and its fair value less costs to sell. In assessing value inuse, the estimated future cash flows are discounted to their present valueusing a pre-tax discount rate that reflects current market assessments of thetime value of money and the risks specific to the asset.Impairment losses recognised in prior periods are assessed at each reportingdate for any indications that the loss has decreased or no longer exists. Animpairment loss is reversed if there has been a change in the estimate used todetermine the recoverable amount. An impairment loss is reversed only to theextent that the asset's carrying amount does not exceed the carrying amountthat would have been determined, net of depreciation or amortisation, if noimpairment loss had been recognised.
NOTE 3 - SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(j) Employee Benefits
i) Wages, Salaries, Annual Leave and Sick Leave
Liabilities for employee benefits for wages, salaries, annual leave and sickleave that are expected to be settled within 12 months of the reporting daterepresent present obligations resulting from employee services provided toreporting date. The liabilities are calculated at undiscounted amounts basedon remuneration wage and salary rates that the Group expects to pay as at thereporting date.
ii) Long-term Service Benefits
The Group's net obligation in respect of long-term service benefits is theamount 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 the Group's obligations.
iii) Share-Based Payment Transactions
Employee options allow Oilex employees to acquire shares of the Company. Thefair value of options granted is recognised as an employee expense with acorresponding increase in equity. The fair value is measured at grant date andspread over the period during which the employees become unconditionallyentitled to the options. Options are also provided as part of considerationfor services by financiers and advisers. The fair value of the options grantedis measured using the Black-Scholes Model, taking into account the terms andconditions upon which the options were granted. The amount recognised as anexpense is adjusted to reflect the actual number of share options that vestexcept where forfeiture is only due to share prices not achieving thethreshold 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.
When the Group grants options and performance rights over its shares to employees of subsidiaries, the fair value at grant date is recognised as an increase in the investments in subsidiaries, with a corresponding increase in equity over the vesting period of the grant.
(k) Provisions
Provisions are recognised when the Group has a present obligation (legal orconstructive) as a result of a past event, when it is probable that an outflowof resources embodying economic benefits will be required to settle theobligation 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.
Provisions are made for site rehabilitation of an oil and gas field on an incremental basis during the life of the field (which includes the field plant closure phase). Provisions include reclamation, plant closure, waste site closure and monitoring activities. These costs have been determined on the 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 value of the consideration received less directly attributable transaction costs. After initial recognition, interest-bearing loans and borrowings are subsequently measured at amortised cost with any difference between cost and redemption value being recognised in the income statement over the period of the borrowings on an effective interest basis.
NOTE 3 - SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(m) Revenue
i) Product Revenue
Revenue is recognised when the significant risks and rewards of ownership havetransferred to the buyer. Risks and rewards of ownership are considered passedto 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 onthe substance of the arrangement and requires an assessment of whether thefulfilment of the arrangement is dependent on the use of a specific asset orassets and the arrangement conveys a right to use the asset.
Leases in which the Group retains substantially all the risks and benefits of ownership of the leased asset are classified as operating leases. Initial direct costs incurred in negotiating an operating lease are added to the carrying amount of the leased asset and recognised as an expense over the lease term on the same basis as rental income.
Payments made under operating leases are recognised in the income statementson a straight line basis over the term of the lease. Lease incentives receivedare recognised in the income statements as an integral part of the total leaseexpense and are allocated over the lease term.
(o) Finance Income and Expenses
Finance income comprises interest income on funds invested. Interest income is recognised as it accrues in profit or loss, using the effective interest method. Finance expenses comprise interest expense on borrowings and unrealised foreign exchange losses. Foreign currency gains and losses are reported on a net basis.
(p) 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 fortemporary differences between the carrying amounts of assets and liabilitiesfor financial reporting purposes and the amounts used for taxation purposes.Deferred tax is not recognised for differences relating to investments insubsidiaries to the extent that they probably will not reverse in theforeseeable 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.A deferred tax asset is recognised to the extent that it is probable thatfuture taxable profits will be available against which the temporarydifference can be utilised. Deferred tax assets are reviewed at each reportingdate and reduced to the extent that it is no longer probable that the relatedtax benefit will be realised.
The Company and its wholly-owned Australian resident entities 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 deferred tax assetsarising from temporary differences of the members of the tax-consolidatedgroup are recognised in the separate financial statements of the members ofthe tax-consolidated group using the `separate taxpayer within group' approachby reference to the carrying amounts of assets and liabilities in the separatefinancial statements of each entity and the tax values applying under taxconsolidation.
NOTE 3 - SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(q) 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 not recoverable from the taxation authority, in which case the GST is recognised as part of the cost of acquisition of the asset or as part of the expense item as 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 Statements of Cash Flows on a gross basis andthe 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.
(r) Discontinued Operations
A discontinued operation is a component of the Group'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.
(s) Earnings Per Share
Basic earnings per share is calculated as net profit attributable to members of the Group, 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 Group, 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.
(t) Segment Reporting
A segment is a distinguishable component of the Group that is engaged eitherin providing products or services (business segment), or in providing productsor services within a particular economic environment (geographical segment),which is subject to risks and rewards that are different from those of othersegments.(u) Joint Ventures
The Group'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 the Group's entitlement to production are recognised on a pro-rata basis according to the Group's joint venture interest.
(v) Comparatives
Certain comparatives have been reclassified to conform with the presentation and classification in the current year.
NOTE 3 - SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(w) New Standards and Interpretations Not Yet Adopted
The following standards, amendments to standards and interpretations have beenidentified as those which may impact the entity in the period of initialapplication. They are available for early adoption at 30 June 2008, but havenot been applied in preparing this financial report:i) AASB 8 Operating Segments introduces the "management approach" to segmentreporting. AASB 8, which becomes mandatory for the Group's 30 June 2010financial statements, will require the disclosure of segment information basedon the internal reports regularly reviewed by the Group's Chief OperatingDecision Maker in order to assess each segment's performance and to allocateresources to them. The Group has not yet determined the potential effect ofthe revised standard on the Group's disclosures.ii) Revised AASB 101 Presentation of Financial Statements introduces as afinancial statement (formerly "primary" statement) the "statement ofcomprehensive income". The revised standard does not change the recognition,measurement or disclosure of transactions and events that are required byother AASBs. The revised AASB 101 will become mandatory for the Group's 30June 2010 financial statements. The Group has not yet determined the potentialeffect of the revised standard on the Group's disclosures.iii) Revised AASB 123 Borrowing Costs removes the option to expense borrowingcosts and requires that an entity capitalise borrowing costs directlyattributable to the acquisition, construction or production of a qualifyingasset as part of the cost of that asset. The revised AASB 123 will becomemandatory for the Group's 30 June 2010 financial statements and willconstitute a change in accounting policy for the Group. In accordance with thetransitional provisions the Group will apply the revised AASB 123 toqualifying assets for which capitalisation of borrowing costs commences on orafter the effective date. The Group has not yet determined the potentialeffect of the revised standard on future earnings.iv) Revised AASB 3 Business Combinations changes the application ofacquisition accounting for business combinations and the accounting fornon-controlling (minority) interests. Key changes include: the immediateexpensing of all transaction costs; measurement of contingent consideration atacquisition date with subsequent changes through the income statement;measurement of non-controlling (minority) interests at full fair value or theproportionate share of the fair value of the underlying net assets; guidanceon issues such as reacquired rights and vendor indemnities; and the inclusionof combinations by contract alone and those involving mutuals. The revisedstandard becomes mandatory for the Group's 30 June 2010 financial statements.The Group has not yet determined the potential effect of the revised standardon the Group's financial report.v) Revised AASB 127 Consolidated and Separate Financial Statements changes theaccounting for investments in subsidiaries. Key changes include: there-measurement to fair value of any previous/retained investment when controlis obtained/lost, with any resulting gain or loss being recognised in profitor loss; and the treatment of increases in ownership interest after control isobtained as transactions with equity holders in their capacity as equityholders. The revised standard will become mandatory for the Group's 30 June2010 financial statements. The Group has not yet determined the potentialeffect of the revised standard on the Group's financial report.vi) AASB 2008-1 Amendments to Australian Accounting Standard - Share-basedpayment: Vesting Conditions and Cancellations changes the measurement ofshare-based payments that contain non-vesting conditions. AASB 2008-1 becomesmandatory for the Group's 30 June 2010 financial statements. The Group has notyet determined the potential effect of the amending standard on the Group'sfinancial report.
NOTE 4 - DETERMINATION OF FAIR VALUES
A number of the Group'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.
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.
Trade and Other Receivables
The fair value of trade and other receivables, excluding construction work inprogress, is estimated as the present value of future cash flows, discountedat the market rate of interest at the reporting date.
Non-derivative Financial Liabilities
Fair value, which is determined for disclosure purposes, is calculated basedon the present value of future principal and interest cash flows, discountedat the market rate of interest at the reporting date.
Share-based Payment Transactions
The fair value of options is measured using the Black-Scholes Model. The fairvalue of performance rights is measured using a Monte Carlo Simulation.Measurement inputs include share price on measurement date, exercise price ofthe instrument, expected volatility (based on weighted average historicvolatility adjusted for changes expected due to publicly availableinformation), weighted average expected life of the instruments (based onhistorical 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 the Group's business and geographical segments. The primary format, geographical segments, is based on the Group's management and internal reporting structure.
Geographical Segments
The petroleum exploration and production segment is managed on a worldwide basis, but as at 30 June 2008 operated in five principal geographical areas; India, Australia, Oman, Timor-Leste and Indonesia.
Segment results, assets and liabilities include items directly attributable to a segment as well as those that can be allocated on a reasonable basis. Unallocated items comprise mainly income-earning assets and revenue, interest-bearing loans, borrowings and expenses, and corporate assets and 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.
Business Segments
The Group operates in one business segment, being the development, exploration and production of hydrocarbons.
NOTE 5 - SEGMENT REPORTING (continued)
Geographical Segments
India Australia Oman Timor-Leste 2008 2007 2008 2007 2008 2007 2008 2007 $ $ $ $ $ $ $ $RevenueTotalsegmentrevenue 572,281 325,252 - - - - - - SegmentResult (2,477,626) (3,822,884) 477,883 (1,602,961) (1,854,903) (856,730) (256,637) (423,595)UnallocatedexpensesLoss beforefinance costsNet finance(costs)/incomeDeferred taxincomeLoss Segment Assets 23,899,307 15,322,404 84,016 284,955 6,771,142 185,571 4,649,621 64,748UnallocatedassetsTotalassets SegmentLiabilities 5,282,472 2,907,556 31,028 49,235 1,129,363 148,747 3,260,693 9,089UnallocatedliabilitiesTotalliabilities OtherAcquisitionof non-currentsegmentassets # 6,559,836 11,037,803 - - 4,609,243
69,107 3,444,581 13,440UnallocatedacquisitionsTotalacquisitionsDepreciationof segmentassets 64,548 33,048 - - 35,446 14,161 27,651 1,263UnallocateddepreciationTotaldepreciationOthernon-cashsegmentexpenses - - - - - - - -
# The acquisition of non-current segment assets includes capitalised exploration and evaluation expenditure.
Indonesia Discontinued Consolidated Operation 2008 2007 2008 2007 2008 2007 $ $ $ $ $ $RevenueTotalsegmentrevenue - - - - 572,281 325,252 SegmentResult (617,392) (19,239) - 2,819,195 (4,728,675) (3,906,214)Unallocatedexpenses (6,545,428) (9,810,779)Loss beforefinancecosts (11,274,103) (13,716,993)Net finance(costs)/income 2,185,048 (1,004,278)Deferredtax income 1,112,364 -Loss (7,976,691) (14,721,271) SegmentAssets 6,132,097 2,939,209 - - 41,536,183 18,796,887Unallocatedassets 41,807,868 70,904,154Totalassets 83,344,051 89,701,041 SegmentLiabilities 185,160 353,109 - - 9,888,716 3,467,736Unallocatedliabilities 632,471 10,766,828Totalliabilities 10,521,187 14,234,564 OtherAcquisitionof non-currentsegmentassets # 3,586,826 2,524,983 - - 18,200,486 13,645,333Unallocatedacquisitions 769,605 454,835Totalacquisitions 18,970,091 14,100,168Depreciationof segmentassets - - - (2,341) 127,645 46,131Unallocateddepreciation 294,081 158,640Totaldepreciation 421,726 204,771Othernon-cashsegmentexpenses - - - - 5,562,488 5,455,937
# The acquisition of non-current segment assets includes capitalised exploration and evaluation expenditure.
NOTE 6 - DISCONTINUED OPERATION
In August 2006 Oilex signed a Share Sale and Purchase Agreement for the saleto Bow Energy Limited ("Bow") of its onshore Queensland oil and gas permitinterests in the Bowen-Surat and Cooper-Eromanga Basins. As consideration forthe sale of the assets, Oilex was issued 13.3 million fully paid ordinaryshares and 13.3 million options to purchase Bow shares at $0.50 per share onor before five years from the issue date. The effective date of sale is 24August 2006 with settlement effected on 8 November 2006. The shares aresubject to voluntary escrow for a period of two years from the date of issue.
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 effect of the disposal was an increase in the net assets of Oilex of$2,819,195. Consolidated Company 2008 2007 2008 2007 Note $ $ $ $Results of discontinued operationRevenue - 21,110 -
21,110
Expenses - (60,507) -
(60,507)
Results from operating activities - (39,397) -
(39,397)
Income tax expense - - -
-
Results from operating activities, - (39,397) - (39,397)net of income taxGain on sale of discontinued - 2,858,592 - 2,858,592operationIncome tax on gain on sale of - - - -discontinued operationProfit for the period - 2,819,195 - 2,819,195 Basic earnings per share (cents per 9 - 3.5 -
-
share)
Diluted earnings per share (cents 9 - 2.6 -
-
per share)
Cash flows from discontinuedoperationNet cash used in operating - (9,152) - (9,152)activitiesNet cash used in investing - - - -activitiesNet cash used in financing - (101,812) - (101,812)activitiesNet cash used in discontinued - (110,964) -
(110,964)
operation
NOTE 7 - REVENUE AND EXPENSES
Loss from ordinary activities before income tax has been determined after the following revenues and expenses: (a) Revenue Oil Sales
572,281 325,252 49,552 56,231 (b) Other IncomeProfit on sale of exploration assets 113,500 - 113,500
-
Fair value movement on investment 2,754,760 204,127 2,754,760 204,127 2,868,260 204,127 2,868,260 204,127 (c) Employee Benefits ExpenseWages and salaries including superannuation (1,000,359) (847,187)(1,000,359) (847,187)Other associated personnel expenses (198,422) (126,429) (198,422) (126,429)Increase/(decrease) in liability for employee benefits (37,649) (116,009) 6,150
(116,009)
(1,236,430)
(1,089,625)(1,192,631)(1,089,625)
(d) Net Finance Income/(Expenses)Interest income 3,275,136 1,257,534 4,580,732
1,141,262
Interest expense (695,485) (655,352) (695,485)
(655,352)
Unrealised foreign exchange loss (394,603) (1,810,587)(4,543,767)(1,800,304) 2,185,048 (1,208,405) (658,520) (1,314,394) (e) Operating Lease Rentals (624,182) (304,039) (574,360) (210,320)NOTE 8 - INCOME TAX EXPENSE
Numerical reconciliation between tax expense and pre-tax accounting loss:
Consolidated Company 2008 2007 2008 2007 $ $ $ $ Loss before tax (9,089,055) (14,721,271) (12,413,619) (14,659,494)Income tax using the domestic corporation tax rate of 30%(2007: 30%) (2,726,717) (4,416,381) (3,724,086) (4,397,848)Non-deductible expensesShare-based payments 1,668,747 1,636,781 1,632,396 1,636,781Other non-deductible expenses 7,145
224,537 1,224,034 958,316
(1,050,825)
(2,555,063) (867,656) (1,802,751) Unrecognised deferred tax assets not brought to account at balance date as realisation is not regarded as probable
- 2,555,063 - 1,802,751 Recognition of current year tax losses 1,050,825 - 867,656 -Recognition of prior year tax losses 61,539 - 244,708 -Deferred tax income 1,112,364 - 1,112,364 -
Unrecognised deferred tax assets not brought to account at balance date as realisation is not regarded as probable - temporary differences Other
519,031 2,117,445 197,432 1,799,619Losses available for offset against future taxable income 7,673,009 7,445,063 6,173,333 6,755,330Deferred tax asset not brought to account 8,192,040
9,562,508 6,370,765 8,554,949
The deductible temporary differences and tax losses do not expire under current tax legislation.
The deferred tax asset not brought to account for the 2008 financial year will only be obtained if:
- Future assessable income is derived of a nature and of an amount sufficient to enable the benefit to be realised;
- The conditions for deductibility imposed by the tax legislation continue to be complied with; and
- The companies are able to meet the continuity of ownership and/or continuity of business tests.
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 8 - INCOME TAX EXPENSE (continued)
Tax Assets and Liabilities
During the year ended 30 June 2008 $1,112,364 of tax losses were recognisedand were offset against the deferred tax liability resulting in nil tax assetsand liabilities. Consolidated Company 2008 2007 2008 2007 $ $ $ $Opening balance - - - -LiabilitiesAvailable-for-sale financial assets 1,112,364 - 1,112,364 -Tax liabilities recognised in equity 1,112,364 - 1,112,364 - AssetsTax losses carried forward (1,112,364) - (1,112,364) -Tax assets recognised in loss for the period (1,112,364) - (1,112,364) - Closing balanceNet tax (assets)/liabilities after set off of tax - - - -NOTE 9 - LOSS PER SHARE(a) Basic Loss Per Share
The calculation of basic loss per share at 30 June 2008 was based on the loss attributable to ordinary shareholders of $7,976,691 (2007: loss of $14,721,271) and a weighted average number of ordinary shares outstanding during the financial year ended 30 June 2008 of 130,632,789 (2007: 80,632,902), calculated as follows:
Consolidated 2008 2007 $ $i) Loss Attributable to Ordinary ShareholdersLoss for the Period 7,976,691 14,721,271ii) Weighted Average Number of Ordinary SharesIssued ordinary shares at 1 July 129,383,885 76,114,319Effect of shares issued 1,248,904 4,518,583Weighted average number of ordinary shares at 30 June 130,632,789 80,632,902
(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 Company 2008 2007 2008 2007 $ $ $ $Cash at bank and on hand 4,138,319 2,490,660 1,060,922 1,761,581Short-term bank deposits 29,348,734 64,502,723 29,348,734 64,502,724 33,487,053
66,993,383 30,409,656 66,264,305 The Group's exposure to interest rate risk and a sensitivity analysis for financial assets and liabilities are disclosed in Note 25.
NOTE 11 - TRADE AND OTHER RECEIVABLES
Consolidated Company 2008 2007 2008 2007 $ $ $ $CURRENTJoint venture receivables 2,529,373 662,588 3,066,007 662,588Working advances to subsidiaries (a) - - 859,896 -Other receivables 1,673,623 3,622,477 785,808 2,139,357 4,202,996 4,285,065 4,711,711 2,801,945 NON-CURRENTLoans to subsidiaries (b) - - 27,066,337 12,074,384Impairment of loans to subsidiaries -
- (6,040,957) (2,566,770)
-
- 21,025,380 9,507,614
(a) Working advances to subsidiaries are short term and non-interest bearing.
(b) Unsecured loans to subsidiaries are non-interest bearing with the exception of loans to subsidiaries registered in Cyprus amounting to $25,286,488 (2007: $11,638,327) which bear interest at 5% per annum (2007: 5%). All loans are repayable on demand but will not be recalled for repayment until the subsidiaries are in a position to repay the loans.
NOTE 12 - PREPAYMENTS
Consolidated Company 2008 2007 2008 2007 $ $ $ $Prepayments 202,161 82,315 148,721 82,315
NOTE 13 - INVENTORIES
Consolidated Company 2008 2007 2008 2007 $ $ $ $Oil on hand - net realisable value 215,185 85,434 26,770 23,107Drilling inventory - at cost 2,672,343 291,270 1,296,099 194,181 2,887,528 376,704 1,322,869 217,288
NOTE 14 - EXPLORATION AND EVALUATION
Consolidated Company 2008 2007 2008 2007 $ $ $ $Balance at 1 July 13,498,334 - 4,396,926 -Expenditure 19,560,074 9,093,655 4,387,583 4,623,526Acquisition of exploration assets - 5,299,147 - -Effect of movements in exchange rates (1,593,485) (894,468) (519,059) (226,600)Balance at 30 June 31,464,923
13,498,334 8,265,450 4,396,926
NOTE 15 - PROPERTY, PLANT AND EQUIPMENT
Motor Plant and Office Vehicles Equipment Furniture TotalConsolidated $ $ $ $CostBalance at 1 July 2006 45,257 509,324 65,859 620,440Other acquisitions 40,442 513,390 48,002 601,834Disposals - (146,615) - (146,615)Currency translation - - - -differencesBalance at 30 June 2007 85,699 876,099 113,861 1,075,659 Balance at 1 July 2007 85,699 876,099 113,861 1,075,659Other acquisitions 3,842 814,975 184,685 1,003,502Disposals (65,877) (74,603) - (140,480)Currency translation (4,774) (16,304) (5,300) (26,378)differencesBalance at 30 June 2008 18,890 1,600,167 293,246 1,912,303 Depreciation andImpairment LossesBalance at 1 July 2006 5,089 116,308 13,545 134,942Depreciation charge for 18,511 157,974 16,623 193,108the yearDisposals - - - -Currency translation - - - -differencesBalance at 30 June 2007 23,600 274,282 30,168 328,050 Balance at 1 July 2007 23,600 274,282 30,168 328,050Depreciation charge for 8,575 356,107 57,044 421,726the yearDisposals (23,703) (45,933) - (69,636)Currency translation (1,594) (11,717) (3,697) (17,008)differencesBalance at 30 June 2008 6,878 572,739 83,515 663,132 Carrying AmountsAt 1 July 2006 40,168 393,016 52,314 485,498At 30 June 2007 62,099 601,817 83,693 747,609 At 1 July 2007 62,099 601,817 83,693 747,609At 30 June 2008 12,012 1,027,428 209,731 1,249,171CompanyCostBalance at 1 July 2006 45,257 356,597 65,859 467,713Other acquisitions 27,993 422,527 17,996 468,516Disposals - (40,001) - (40,001)Currency translation - - - -differencesBalance at 30 June 2007 73,250 739,123 83,855 896,228 Balance at 1 July 2007 73,250 739,123 83,855 896,228Other acquisitions - 663,535 142,985 806,520Disposals (65,877) (34,448) - (100,325)Currency translation (3,305) (8,242) (1,759) (13,306)differencesBalance at 30 June 2008 4,068 1,359,968 225,081 1,589,117 Depreciation andImpairment LossesBalance at 1 July 2006 5,089 72,747 13,545 91,381Depreciation charge for 17,399 151,523 14,951 183,873the yearDisposals - - - -Currency translation - - - -differencesBalance at 30 June 2007 22,488 224,270 28,496 275,254 Balance at 1 July 2007 22,488 224,270 28,496 275,254Depreciation charge for 5,451 306,066 35,278 346,795the yearDisposals (23,703) (5,778) - (29,481)Currency translation (1,252) (7,154) (2,019) (10,425)differencesBalance as at 30 June 2,984 517,404 61,755 582,1432008 Carrying AmountsAt 1 July 2006 40,168 283,850 52,314 376,332At 30 June 2007 50,762 514,853 55,359 620,974 At 1 July 2007 50,762 514,853 55,359 620,974At 30 June 2008 1,084 842,564 163,326 1,006,974NOTE 16 - INVESTMENTS Consolidated Company 2008 2007 2008 2007 $ $ $ $Listed equity securities available for sale 5,705,700 2,327,872 5,705,700 2,327,872Unlisted equity securities 4,144,519 1,389,759 4,144,519 1,389,759Investments in controlled entities - at cost - - 8,542 11,204 9,850,219
3,717,631 9,858,761 3,728,835
The available-for-sale financial assets consist of investments in the ordinaryshares of Bow Energy Limited . Unlisted equity securities representoptions to purchase Bow Energy Limited shares. The fair value of the listedshares has been based on the closing share price at the financial year end andthe fair value of the unlisted options has been calculated using theBlack-Scholes Model. The movement in the fair value of the unlisted options isrecorded in the Income Statement.
NOTE 17 - TRADE AND OTHER PAYABLES
Consolidated Company 2008 2007 2008 2007 $ $ $ $Trade creditors and accruals 8,608,338 2,364,815 2,811,011 1,364,668NOTE 18 - EMPLOYEE BENEFITS Consolidated Company 2008 2007 2008 2007 $ $ $ $Employee entitlements - annual leave 193,011 155,362 149,212 155,362NOTE 19 - PROVISIONS Consolidated Company 2008 2007 2008 2007 $ $ $ $CURRENTSite RestorationBalance at 1 July - 125,000 - -Provision reversed due to sale of ATP608P permit to BowEnergy Limited - (125,000) - -Balance at 30 June - - - - NON-CURRENTSite RestorationBalance at 1 July 1,714,387 - 954,401 -Provisions made during the year 223,017 1,714,387 133,810 954,401Effect of movements in exchange rates (217,566) - (121,776) -Balance at 30 June 1,719,838 1,714,387 966,435 954,401
NOTE 20 - LOANS AND BORROWINGS
Consolidated Company 2008 2007 2008 2007 $ $ $ $CURRENTSecured loan facility - 5,000,000 - 5,000,000 NON-CURRENTSecured loan facility - 5,000,000 - 5,000,000
NOTE 21 - ISSUED 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 Statements of Changes in Equity.
Number of Ordinary Shares 2008 2007
On issue at 1 July- fully paid 129,383,885 76,114,319 Shares issued for cash
- 52,500,000
Shares issued on exercise of options 2,700,000 750,000 Equity-settled transactions
- 19,566
On issue at 30 June - fully paid 132,083,885 129,383,885
The Company has issued share options and performance rights to employees (see Note 22) and issued share options to financiers and advisers.
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 recognised in profit or loss.
(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 theCompany to employees are as follows, whereby all options and performance rights are settled by physical delivery of shares:
Number of Contractual LifeGrant Date Instruments Vesting Conditions of OptionsOPTIONSKey Management Personnel3 December 2004 800,000 Vest immediately 5 years14 December 2005 5,000,000 Yearly over three years of 3 years service14 December 2005 4,250,000 Yearly over three years of 4 years service31 July 2006 1,550,000 Yearly over two years of 3 years service31 July 2006 775,000 Three years of service 4 years18 January 2007 800,000 Yearly over two years of 3 years service18 January 2007 400,000 Three years of service 4 years3 April 2007 150,000 In the first year of 3 years service3 April 2007 150,000 Two years of service 4 years3 April 2007 150,000 Three years of service 5 years22 November 2007 3,900,000 Vest immediately 3 years22 November 2007 3,900,000 One year of service 3 years17 March 2008 400,000 One year of service 3 years17 March 2008 400,000 Two years of service 3 years17 March 2008 400,000 Three years of service 4 years1 May 2008 500,000 One year of service 3 years1 May 2008 500,000 Two years of service 3 years1 May 2008 500,000 Three years of service 4 yearsOther 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 150,000 In the first year of 3 years service3 April 2007 150,000 Two years of service 4 years3 April 2007 150,000 Three years of service 5 years31 August 2007 350,000 One year of service 3 years31 August 2007 350,000 Two years of service 3 years31 August 2007 350,000 Three years of service 4 years
Former Managing Director
3 December 2004 2,500,000 Vest immediately 5 years Financiers andAdvisers7 December 2005 1,000,100 Vest immediately 3 years17 February 2006 1,000,000 Vest immediately 3 years22 March 2006 3,100,000 Vest immediately 4 years31 July 2006 1,400,000 Vest immediately 4 years10 October 2006 1,000,000 Vest immediately 3 years10 October 2006 500,000 Vest immediately 4 years22 March 2007 2,500,000 Vest immediately 4 years25 July 2007 500,000 One year of service 4 years
NOTE 22 - SHARE BASED PAYMENTS (continued)
Contractual Life Number of of Performance
Grant Date Instruments Vesting Conditions Rights
PERFORMANCE RIGHTSKey Management Personnel11 January 2007 140,000 One year of service 5 years11 January 2007 110,000 Two years of service 5 years11 January 2007 110,000 Three years of service 5 years3 August 2007 27,000 One year of service 5 years3 August 2007 27,000 Two years of service 5 years3 August 2007 26,000 Three years of service 5 years Other Employees11 January 2007 139,000 One year of service 5 years11 January 2007 144,000 Two years of service 5 years11 January 2007 139,000 Three years of service 5 years3 August 2007 83,000 One year of service 5 years3 August 2007 68,000 Two years of service 5 years3 August 2007 68,000 Three years of service 5 years14 October 2007 33,000 One year of service 5 years14 October 2007 33,000 Two years of service 5 years14 October 2007 34,000 Three years of service 5 yearsThe number and weighted average exercise prices of share options are asfollows: Weighted Average Number of Options Weighted Average Number of Options Exercise Price Exercise Price 2008 2008 2007 2007 Outstanding at the beginning of the period $0.93 30,825,100 $0.67 21,050,100Forfeited during the period $0.55 (250,000) - -Exercised during the period $0.25 (2,700,000) $0.47 (750,000)Granted during the period $2.21 12,050,000 $1.42 10,525,000Outstanding at the end of the period $1.37 39,925,100 $0.93 30,825,100 Exercisable at the end of the period $1.09 28,600,100 $0.88 21,275,100
The options outstanding at 30 June 2008 have an exercise price in the range of $0.40 to $2.75 and a weighted average contractual life of 1.9 years.
The weighted average share price at the date of exercise for share options exercised during the year ended 30 June 2008 was $1.44 (2007: $1.18).
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 RateOPTIONS
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% -25 July 2007 30 September 2008 30 September 2011 $0.56 $1.57 $1.58 50.7% 6.25% -31 August 2007 30 April 2008 30 April 2010 $0.52 $1.60 $1.22 61.5% 6.25% -31 August 2007 30 April 2009 30 April 2010 $0.36 $2.10 $1.22 61.5% 6.25% -31 August 2007 30 April 2010 30 April 2011 $0.33 $2.70 $1.22 61.5% 6.25% -22 November 2007 30 November 2007 1 July 2011 $0.45 $2.00 $1.62 57.9% 6.75% -22 November 2007 1 July 2008 1 July 2011 $0.32 $2.50 $1.62 57.9% 6.75% -17 March 2008 30 April 2009 30 April 2011 $0.47 $1.75 $1.20 64.0% 6.25% -17 March 2008 30 April 2010 30 April 2011 $0.39 $2.25 $1.20 64.0% 6.25% -17 March 2008 30 April 2011 30 April 2012 $0.42 $2.75 $1.20 64.0% 6.25% -1 May 2008 30 April 2009 30 April 2011 $0.37 $1.75 $1.04 65.9% 7.25% -1 May 2008 30 April 2010 30 April 2011 $0.31 $2.25 $1.04 65.9% 7.25% -1 May 2008 30 April 2011 30 April 2012 $0.34 $2.75 $1.04 65.9% 7.25% -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% -3 August 2007 1 July 2008 1 July 2012 $1.50 Nil $1.53 60% - 90% 6.30% -3 August 2007 1 July 2009 1 July 2012 $1.28 Nil $1.53 60% - 90% 6.30% -3 August 2007 1 July 2010 1 July 2012 $1.11 Nil $1.53 60% - 90% 6.30% -14 October 2007 1 July 2008 1 July 2012 $1.50 Nil $1.72 60% - 90% 6.60% -14 October 2007 1 July 2009 1 July 2012 $1.45 Nil $1.72 60% - 90% 6.60% -14 October 2007 1 July 2010 1 July 2012 $1.26 Nil
$1.72 60% - 90% 6.60% -
NOTE 22 - SHARE BASED PAYMENTS (CONTINUED)
The following share-based payments have been recognised in the IncomeStatements: Consolidated Company 2008 2007 2008 2007 $ $ $ $Directors and employeesShare options - equity settled 4,715,161 2,163,783 4,715,161 2,163,783Performance rights - equity settled 624,809 564,896 503,641 564,896 5,339,970 2,728,679 5,218,802 2,728,679Financiers and advisersShare options - equity settled 222,518 2,727,258 222,518 2,727,258 Total share-based payments expense 5,562,488
5,455,937 5,441,320 5,455,937
NOTE 23 - RECONCILIATION OF CASH FLOWS FROM OPERATING ACTIVITIES
Consolidated Company 2008 2007 2008 2007 $ $ $ $Net loss for the period (7,976,691)
(14,721,271) (11,301,255) (14,659,494)
Depreciation 421,726 193,108 346,795 183,873Profit from discontinued operation - (2,819,195) - (2,819,195)Unrealised gain on investment (2,754,760) (204,127) (2,754,760) (204,127)Exploration expenditure 3,943,942 4,784,411 1,247,263 3,172,015Equity-settled share-based payments 5,562,488 5,455,937 5,441,320 5,455,937Borrowing costs - 100,000 - 100,000Unrealised foreign exchange losses 394,603 2,016,056 4,543,767 1,910,823Deferred tax income (1,112,364) - (1,112,364) -Profit on sale of exploration assets (113,500) - (113,500) -Impairment of loans to subsidiaries - - 3,474,187 2,566,770
Operating Loss Before Changes in Working Capital and Provisions
(1,634,556) (5,195,081) (228,547) (4,293,398) Increase in trade and other payables 251,750 23,842 291,340 23,842Increase in prepayments (66,406) (82,315) (66,406) (82,315)Increase in trade and other receivables (496,072) (611,291) (123,220) (342,270)Increase in provisions 5,451 1,729,235 12,034 1,079,401Increase/(decrease) in employee benefits 37,649 116,009 (6,150) 116,009 Net Cash Used In Operating Activities (1,902,184) (4,019,601) (120,949) (3,498,731)
NOTE 24 - CONSOLIDATED ENTITIES
Country of Ownership Interest % Incorporation 2008 2007Parent EntityOilex Ltd Australia SubsidiariesIndependence Oil and Gas Limited Australia 100 100Admiral Oil NL Australia 100 100Oilex NL Holdings (India) Limited Cyprus 100 100Oilex India Pvt Ltd India 90 90Oilex Oman Limited Cyprus 100 100Oilex (JPDA 06-103) Ltd Australia 100 100Oilex (West Kampar) Limited Cyprus 100 100
Although the Group 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 - FINANCIAL INSTRUMENTS
(a) Financial risk management
The Company and Group have exposure to the following risks from their use of financial instruments:
i) Credit riskii) Liquidity riskiii) Market riskThis note presents qualitative and quantitative information in relation to theCompany's and Group's exposure to each of the above risks and the managementof capital.The Board of Directors has overall responsibility for the establishment andoversight of the risk management framework and the development and monitoringof risk management policies. Risk management policies are established toidentify and analyse the risks faced by the Company and Group, to setappropriate risk limits and controls, and to monitor risks and adherence tolimits. Risk management policies and systems are reviewed regularly to reflectchanges in market conditions and the Company's and Group's activities.
NOTE 25 - FINANCIAL INSTRUMENTS (CONTINUED)
(b) Credit risk
Credit risk is the risk of financial loss to the Group if a customer or counterparty to a financial instrument fails to meet its contractual obligations, and arises principally from the Group's receivables from customers and joint ventures. For the Company it arises primarily from receivables from subsidiaries and joint ventures along with an investment.
Trade and other receivables
The Company's and Group's exposure to credit risk is influenced mainly by theindividual characteristics of each customer. The demographics of the Group'scustomer base, including the default risk of the industry and country in whichcustomers operate, has less of an influence on credit risk.The maximum exposure to credit risk is represented by the carrying amount ofeach financial asset. The maximum exposure to credit risk at the reportingdate was: Consolidated Company 2008 2007 2008 2007 $ $ $ $Cash and cash equivalents 33,487,053 66,993,383 30,409,656 66,264,305Trade and other receivables - current 4,202,996 4,285,065 4,711,711 2,801,945Trade and other receivables - non current - - 21,025,380 9,507,614Investments 9,850,219 3,717,631 9,858,761 3,728,835 47,540,268 74,996,079 66,005,508 82,302,699
The Group's most significant customer, an Indian public sector petroleum company, accounts for $583,667 of the trade and other receivables carrying amount as 30 June 2008 (2007: $215,636).
Impairment losses
The aging of the trade receivables at the reporting date was:
2008 2007 Gross Impairment Gross Impairment $ $ $ $ConsolidatedNot past due 3,738,564 - 4,202,993 -Past due 0-30 days 62,064 - 60,125 -Past due 31-120 days 36,282 - 7,442 -Past due 121 days to one year 328,613 - 9,223 -More than one year 37,473 - 5,282 - 4,202,996 - 4,285,065 - CompanyNot past due 31,718,872 6,040,957 14,853,089 2,566,770Past due 0-30 days 12,867 - 8,609 -Past due 31-120 days 12,179 - 4,961 -Past due 121 days to one year 12,022 - 6,149 -More than one year 22,108 - 3,521 - 31,778,048 6,040,957 14,876,329 2,566,770
The Company and Group have established an allowance for impairment that represents their estimate of incurred losses in respect of trade and other receivables and investments. The main components of this allowance are a specific loss component that relates to individually significant exposures.
NOTE 25 - FINANCIAL INSTRUMENTS (CONTINUED)
(b) Credit risk (continued)
The movement in the allowance for impairment in respect of trade receivables during the year was as follows:
Company 2008 2007 $ $Balance at 1 July 2,566,770 -Impairment loss recognised 3,474,187 2,566,770Balance at 30 June
6,040,957 2,566,770
The impairment loss relates to loans provided by the Company to subsidiaries, which are not supported by underlying assets of subsidiaries.
Based on the credit status of the counterparties, the Group and the Company believe that no impairment allowance is necessary in respect of trade and other receivables that are past due.
(c) Liquidity risk
Liquidity risk is the risk that the Group will not be able to meet its financial obligations as they fall due. The Group's approach to managing liquidity is to ensure, as far as possible, that it will always have sufficient liquidity to meet its liabilities when due without incurring unacceptable losses or risking damage to the Group's reputation.
The Group manages liquidity by monitoring present cash flows and ensuring that adequate cash reserves, financing facilities and equity raisings are undertaken to ensure that the Group can meet its obligations.
The table below analyses the Group's financial liabilities by relevant maturity groupings based on the remaining period at the balance date to the contractual maturity date. The amounts disclosed in the table are the contractual undiscounted cash flows.
Carrying Amount Contractual Cash 6
months or less 6 - 12 months 1 - 2
Flows years $ $ $ $ $Consolidated2008Trade and other payables 8,608,338 8,608,338 8,608,338 - -Loans and borrowings - - - - -Total financial liabilities 8,608,338 8,608,338 8,608,338 - -
2007
Trade and other payables 2,364,815 2,364,815 2,364,815 - -Loans and borrowings 10,000,000 11,236,429 509,053 5,363,368 5,364,008Total financial liabilities 12,364,815 13,601,244 2,873,868 5,363,368 5,364,008Company2008Trade and other payables 2,811,011 2,811,011 2,811,011 - -Loans and borrowings - - - - -Total financial liabilities 2,811,011 2,811,011 2,811,011 - -
2007
Trade and other payables 1,364,668 1,364,668 1,364,668 - -Loans and borrowings 10,000,000 11,236,429 509,053 5,363,368 5,364,008Total financial liabilities 11,364,668 12,601,097 1,873,721 5,363,368 5,364,008(d) Market riskMarket risk is the risk that changes in market prices, such as foreignexchange rates, interest rates and equity prices will affect the Group'sincome or the value of its holdings of financial instruments. The objective ofmarket risk management is to manage and control market risk exposures withinacceptable parameters, while optimising the return.
NOTE 25 - FINANCIAL INSTRUMENTS (CONTINUED)
(d) Market risk (continued)
i) Currency risk
An entity is exposed to currency risk on sales and purchases that are denominated in a currency other than the functional currency of the entity. The currencies giving rise to this risk are the US dollar and Indian rupee.
The exposure to currency risk at balance date was as follows:
Consolidated CompanyIn equivalents of 2008 2007 2008 2007Australian dollar USD INR USD INR USD INR USD INR $ $ $ $ $ $ $ $Cash and cash equivalents 6,054,958 - 2,089,315 - 6,054,958 - 2,089,315 -Trade and other receivables - 1,643,371 - 445,166 27,422,497 4,660,563 7,001,554 1,748,287Trade and other payables - (426,931) - (412,801) -
(170,798) - (229,719) Gross balance sheet exposure 6,054,958 1,216,440 2,089,315 32,365 33,477,455 4,489,765 9,090,869 1,518,568
The following significant exchange rates applied during the year:
Average rate Reporting date spot rateAUD 1 2008 2007 2008 2007USD 0.8968 0.7857 0.9623 0.8487INR 36.0683 35.0302 40.8000 34.6140
Foreign currency sensitivity
A 10% strengthening/weakening of the Australian dollar against the followingcurrencies at 30 June would have (increased)/ decreased loss by the amountsshown below. This analysis assumes that all other variables, in particularinterest rates, remain constant. The analysis is performed on the same basisfor 2007. Consolidated Company 2008 2007 2008 2007 $ $ $ $10% StrengtheningUnited States dollars (USD) (464,776) (169,183) (2,980,037) (826,443)Indian rupees (INR) (110,585) (2,942) (215,768) (131,955) 10% WeakeningUnited States dollars (USD) 568,060 206,779 3,642,268 1,010,097Indian rupees (INR) 135,160 3,596 263,717 161,279ii) Interest rate riskAt the reporting date the interest rate profile of the interest-bearingfinancial instruments was: Consolidated Company Carrying Amount Carrying Amount 2008 2007 2008 2007 $ $ $ $Fixed Rate InstrumentsFinancial assets 29,348,732 64,502,723 29,348,732 64,502,723Financial liabilities - 10,000,000 - 10,000,000 29,348,732 74,502,723 29,348,732 74,502,723Variable Rate InstrumentsFinancial assets 4,028,538 2,357,076 951,143 1,627,999
NOTE 25 - FINANCIAL INSTRUMENTS (CONTINUED)
(d) Market risk (continued)
ii) Interest rate risk (continued)
Fair value sensitivity analysis for fixed rate instruments
The Group does not account for any fixed rate financial instruments at fair value through profit or loss so a change in interest rates at the reporting date would not affect profit or loss or equity.
Cash flow sensitivity analysis for variable rate instruments
An increase of 100 basis points in interest rates at the reporting date wouldhave decreased loss by the amounts shown below. A decrease of 100 basis pointsin interest rates at the reporting date would have had the opposite impact bythe same amount. This analysis assumes that all other variables, in particularforeign currency rates, remain constant. The analysis is performed on the samebasis for 2007. Consolidated Company 2008 2007 2008 2007 $ $ $ $Impact on profit or loss 40,285 23,571 40,285 23,571iii) Other Price Risks
The Group is exposed to equity price risks arising from equity investments. Equity investments are held for strategic rather than trading purposes. The Group does not actively trade these investments.
Equity Price Sensitivity
The sensitivity analysis below has been determined based on the exposure to equity price risks at the reporting date:
Consolidated Company 2008 2007 2008 2007 $ $ $ $If equity prices had been 10% higher:Impact on profit or loss 505,436 187,239 505,436 187,239Impact on asset revaluation reserve 570,570 232,787 570,570 232,787 If equity prices had been 10% lower:Impact on profit or loss (498,948) (182,977) (498,948) (182,977)Impact on asset revaluation reserve (570,570) (232,787) (570,570) (232,787)(e) Capital risk managementThe Board's policy is to maintain a strong capital base so as to maintaininvestor, creditor and market confidence and to sustain future development ofthe business. The capital structure of the Group consists of equityattributable to equity holders of the Company, comprising issued capital,reserves and accumulated losses as disclosed in the statements of changes inequity.
(f) Fair values of financial assets and liabilities
The net fair values of assets and liabilities of the Group approximate theircarrying values. The net fair value of other monetary financial assets andliabilities are based on market prices. The Group has no off-balance sheetfinancial instruments.NOTE 26 - AUDITORS' REMUNERATION Consolidated Company 2008 2007 2008 2007 $ $ $ $Audit ServicesAuditors of the CompanyAudit and review of financial reports (KPMG Australia) 49,743 38,040 42,082 24,040Audit and review of financial reports (KPMG related practices) 63,543 68,448 16,962 - 113,286 106,488 59,044 24,040 Other ServicesAssurance and Other ServicesKPMG Australia 12,350 2,020 12,350 2,020KPMG related practices 16,746 43,023 - - Taxation ServicesTaxation compliance services (KPMG Australia) 104,591 128,474 91,296 128,474Taxation compliance services (KPMG related practices) 32,426 10,941 10,531 -
166,113 184,458 114,177 130,494
NOTE 27 - INTEREST IN JOINT VENTURE OPERATIONS
The Group has the following interests in joint ventures as at 30 June 2008.Principal activities are oil and gas exploration, development and production: Country Interest %Permit 2008 2007 OFFSHORE EPP27 Australia (Otway Basin) 20.00 20.00 JPDA 06-103 Timor-Leste / Australia (JPDA) 25.00 25.00 WA-388-P Australia (Carnarvon Basin) 20.00 20.00 ONSHORE Cambay Field India (Cambay Basin) 45.00 45.00 Bhandut Field India (Cambay Basin) 40.00 40.00 Sabarmati Field India (Cambay Basin) 40.00 40.00 Block 56 Oman (South Oman Salt Basin) 25.00 25.00 West Kampar Block Indonesia (Central Sumatra) 45.00 45.00 ATP 548P Australia (Cooper - Eromanga Basin) - 11.35 NOTE 28 - OPERATING LEASESLeases as Lessee
Non-cancellable operating lease rentals are payable as follows:
Consolidated Company 2008 2007 2008 2007 $ $ $ $Less than one year 448,258 488,420 441,705 464,607Between one and five years 127,918 274,846 127,918 274,846 576,176 763,266 569,623 739,453The Group leases its head office premises at Levels 2 and 3, 50 Kings ParkRoad, West Perth under operating leases. The leases expire on dates between 31December 2008 and 10 September 2009 with an option to renew the leases for afurther term after that date. Lease payments are increased every 18 months toreflect market rentals. The leases do not include contingent rentals.
The Group leases office premises in Muscat (Oman), Dili (Timor-Leste), Vadodara and New Delhi (India) 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.
NOTE 29 - EXPENDITURE COMMITMENTS
Exploration Expenditure Commitments
In order to maintain current rights of tenure to exploration permits, theGroup is required to perform minimum exploration work to meet the minimumexpenditure requirements specified by various state and national governments.These obligations are subject to renegotiation when application for anexploration permit is made and at other times. These obligations are notprovided for in the financial report and are estimated to be payable asfollows: Consolidated Company 2008 2007 2008 2007 $ $ $ $Within one year 25,234,658 23,395,626 3,368,364 9,729,086One year or later and no later than five years 17,470,634 23,587,683 - 355,682 42,705,292 46,983,309 3,368,364 10,084,768Financial commitments for subsequent periods are contingent upon futureexploration results and can not be estimated. These obligations are subject torenegotiation upon expiry of the exploration leases.
Employee Compensation Commitments
Consolidated Company 2008 2007 2008 2007 $ $ $ $
Key Management Personnel Commitments under non-cancellable employment contracts not provided for in the financial statements and payable: Within one year
663,729
888,751 663,729 888,751
Other Employees Commitments under non-cancellable employment contracts not provided for in the financial statements and payable: Within one year
268,311
221,732 268,311 221,732
NOTE 30 - KEY MANAGEMENT PERSONNEL DISCLOSURES
The following were Key Management Personnel of the Group 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 Chairman and Company SecretaryMr Laxmi Bhandari Non-Executive Director Executive Directors PositionDr Bruce McCarthy Managing DirectorMr Raymond Barnes Technical Director Executives Position
Mr Ben Clube (appointed 5 May 2008) Chief Finance and Commercial Officer Mr Richard Paces
Chief Operating OfficerMr Paul Senycia Exploration Manager
Mr Kim Morrison (appointed 1 May 2008) Business Development Manager Mr Jay Laurie
General CounselMr Graham McCauley (to 5 May 2008) Chief Financial Officer
Mr Anthony Beckett (ceased 19 August 2007) General Manager Operations
Key Management Personnel Compensation
The compensation of non-executive Directors and Key Management Personnel wasas follows: Consolidated Company 2008 2007 2008 2007 $ $ $ $ Short-term employee benefits 2,029,559 1,824,183 2,029,559 1,824,183Non monetary benefits 101,005 158,733 101,005 158,733Post-employment benefits 222,388 260,310 222,388 260,310Sign on benefits 40,000 - 40,000 -Equity compensation benefits 4,546,236 2,295,949
4,546,236 2,295,949
6,939,188 4,539,175
6,939,188 4,539,175
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.
Key Management Personnel Transactions with the Company or its Controlled Entities
The terms and conditions of the transactions with Key Management Personnel andtheir related parties were no more favourable than those available, or whichmight reasonably be expected to be available, on similar transactions tonon-key management personnel related entities on an arm's length basis.
The aggregate amounts recognised during the year relating to Key Management Personnel and their related parties were as follows:
Note Consolidated CompanyKey Management Personnel Transaction 2008 2007 2008 2007 $ $ $ $Dr B H McCarthy Management services 1 83,333 - 83,333 -Mr R G Barnes Technical, management and 2 299,600 301,000 299,600 301,000 administrative services
1 From 1 May 2008, the Group used the services of Macuale Consultancy Pty Ltd of which Dr McCarthy is a director. Rates charged were at market rates and have been included in the remuneration of key management personnel disclosure.
2 Oilex used the services of Ad Valorem Resource Consultants Pty Ltd of which Mr Barnes is a director. Rates charged were at market rates and have been included in the remuneration of key management personnel disclosure.
NOTE 30 - KEY MANAGEMENT PERSONNEL DISCLOSURES (continued)
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:
2008 Held at 1 Granted as Exercised Other changes # Held at 30 Vested Vested and July 2007 compensation June 2008 during the exercisable at 30 year June 2008OPTIONSDirectorsM D J Cozijn 1,500,000 500,000 1,000,000 - 1,000,000 250,000 750,000L L Bhandari - 300,000 - - 300,000 150,000 150,000B H McCarthy 6,000,000 4,000,000 - - 10,000,000 5,000,000 8,000,000R G Barnes 3,000,000 3,000,000 - - 6,000,000 2,500,000 3,500,000 Other Key Management PersonnelB J M Clube - 1,500,000 - - 1,500,000 - -R S Paces 2,325,000 - - - 2,325,000 775,000 1,550,000P G Senycia 1,200,000 - - - 1,200,000 400,000 400,000W K Morrison - 1,200,000 - - 1,200,000 - -J W R Laurie 450,000 - - - 450,000 150,000 150,000G J McCauley 500,000 - 250,000 - 250,000 250,000 -A D Beckett 500,000 - 250,000 250,000 - - - PERFORMANCE RIGHTSDirectorsNo performance rights were issued to Directors during the financial year. Other Key Management PersonnelR S Paces 150,000 - - - 150,000 50,000 50,000P G Senycia 95,000 - - - 95,000 25,000 25,000J W R Laurie - 80,000 - - 80,000 - -G J McCauley 75,000 - - - 75,000 25,000 25,000A D Beckett 120,000 80,000 40,000 40,000 40,000
# Other changes represent options that expired or were forfeited during the year.
No options held by Key Management Personnel are vested but not exercisable.
NOTE 30 - KEY MANAGEMENT PERSONNEL DISCLOSURES (continued)
Options and Performance Rights Over Equity Instruments Granted as Compensation (continued)
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 - - 2,325,000 775,000 775,000P G Senycia - 1,200,000 - - 1,200,000 - -G J McCauley 750,000 - 250,000 - 500,000 250,000 -A D Beckett - 500,000 - - 500,000 250,000 250,000 PERFORMANCE RIGHTSDirectorsNo performance rights were issued to Directors during the financial year. Other Key Management PersonnelR S Paces - 150,000 - - 150,000 - -P G Senycia - 95,000 - - 95,000 - -G J McCauley - 75,000 - - 75,000 - -A D Beckett - 120,000 - - 120,000 - -
# Other changes represent options that expired or were forfeited during the year.
No options held by Key Management Personnel are vested but not exercisable.
NOTE 30 - KEY MANAGEMENT PERSONNEL DISCLOSURES (continued)
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:
2008 Held at Purchases Received on exercise Sales Held at 1 July 2007 of options 30 June 2008DirectorsM D J Cozijn 500,000 - 1,000,000 (200,000) 1,300,000L L Bhandari - - - - -B H McCarthy 800,000 - - - 800,000R G Barnes 623,871 - - - 623,871 Other Key Management PersonnelB J M Clube - - - - -R S Paces 365,000 - - - 365,000P G Senycia - - - - -W K Morrison - - - - -J W R Laurie - - - - -G J McCauley - - 250,000 (250,000) -A D Beckett - - 250,000 (250,000) - 2007 Held at Purchases Received on exercise Sales Held at 1 July 2006 of options 30 June 2007DirectorsM 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 - - - 365,000P G Senycia - - - - -G J McCauley - - 250,000 (250,000) -A D Beckett - - - - -
No shares were granted to key management personnel during the financial year as compensation.
NOTE 31 - RELATED PARTY TRANSACTIONS
Identity of Related Parties
The Group has a related party relationship with its subsidiaries (see Note 24), joint ventures (see Note 27) and with its Key Management Personnel (see Note 30).
Other Related Party Transactions
Subsidiaries
Loans are made by the Company to wholly owned subsidiaries for capital,exploration and production expenditure. At 30 June 2008, the amount owed tothe Company was $27,066,337 (2007: $12,074,384). These loans have beenrecognised as non-current receivables and are subject to impairment testing(refer Note 11). Loans outstanding between the Company and its controlledentities have no fixed date of repayment and are non-interest bearing exceptfor loans to subsidiary companies registered in Cyprus which bear interest ata rate of 5%. Interest income arising from interest bearing loans was $491,475(2007: $221,155).Director Related Parties Consolidated Company 2008 2007 2008 2007 $ $ $ $
Administration service fee paid to Carbon Energy Limited
(M D J Cozijn is a Director of Carbon Energy Limited)
10,000 10,000 10,000 10,000
NOTE 32 - SUBSEQUENT EVENTS
(a) On 21 July 2008 options and performance rights were issued as detailed below:
- 170,000 unlisted performance rights were issued pursuant to the Employee Performance Rights Plan; and
- 2,700,000 unlisted options were issued to employees in accordance with the terms of employment.
(b) On 12 August 2008 the WA-388-P Joint Venture, operated by Oilex Ltd,entered into a Farmout Agreement under which each of the 5 existing jointventure parties (including Oilex Ltd) will assign a 6% participating interestin Exploration Permit WA-388-P in offshore Western Australia to SasolPetroleum Australia Ltd. In return for its 30% participating interest, Sasolhas agreed to bear 60% of certain costs associated with the acquisition ofseismic data in the Permit. The assignment is subject to obtaining thenecessary Government approval and registration.(c) On 14 August 2008 Oilex (West Kampar) Limited entered into an agreement toacquire an additional 15% in the West Kampar PSC, onshore Sumatra Indonesiafrom the operator, PT Sumatera Persada Energi, and thereby increasing Oilex(West Kampar) Limited's working interest from 45% to 60%. The considerationfor the additional 15% interest includes Oilex (West Kampar) Limited carryingcertain operational costs for the operator, PT Sumatera Persada Energi, and aphased cash payment.(d) Subsequent to the year ended 30 June 2008, the carrying value of theinvestment in Bow Energy Limited was reviewed and as at 11 September 2008 theinvestment had decreased by $4,757,237 in value. The reduction in value of theinvestment would have reduced the Asset Revaluation Reserve by $2,528,663(before tax effect) and Other Income by $2,228,574.
The financial effect of the above events has not been brought to account at balance date.
DIRECTORS' DECLARATION
1. In the opinion of the Directors of Oilex Ltd (the "Company"):
(a) the financial statements and notes and the remuneration disclosures thatare contained in the Remuneration Report in the Directors' Report, set out onpages 25 to 31, are in accordance with the Corporations Act 2001, including:
i) giving a true and fair view of the Company's and the Group's financial position as at 30 June 2008 and of their performance, 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 the Remuneration Reportin the Directors' Report comply with Australian Accounting Standard AASB 124Related Party Disclosures, the Corporations Act 2001 and the CorporationsRegulations 2001; 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 Finance and Commercial Officer for the financial year ended 30 June 2008.
Signed in accordance with a resolution of the Directors.
.........................................
............................................
Mr M.D.J. Cozijn Dr B.H. McCarthy Chairman Managing DirectorWest PerthWestern Australia18 September 2008 INDEPENDENT AUDIT REPORT
Independent auditor's report to the members of Oilex Ltd
Report on the financial report
We have audited the accompanying financial report of Oilex Ltd (the Company),which comprises the balance sheets as at 30 June 2008, and the incomestatements, statements of changes in equity and cash flow statements for theyear ended on that date, a summary of significant accounting policies andother explanatory notes 1 to 32 and the directors' declaration of the Groupcomprising the Company and the entities it controlled at the year's end orfrom time to time during the financial year.
Directors' responsibility for the financial report
The directors of the Company are responsible for the preparation and fairpresentation of the financial report in accordance with Australian AccountingStandards (including the Australian Accounting Interpretations) and theCorporations Act 2001. This responsibility includes establishing andmaintaining internal control relevant to the preparation and fair presentationof the financial report that is free from material misstatement, whether dueto fraud or error; selecting and applying appropriate accounting policies; andmaking accounting estimates that are reasonable in the circumstances. Thedirectors also state, in accordance with Australian Accounting Standard AASB101 Presentation of Financial Statements, that the financial report complieswith International Financial Reporting Standards.
Auditor's responsibility
Our responsibility is to express an opinion on the financial report based onour audit. We conducted our audit in accordance with Australian AuditingStandards. These Auditing Standards require that we comply with relevantethical requirements relating to audit engagements and plan and perform theaudit to obtain reasonable assurance whether the financial report is free frommaterial misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial report. The procedures selected depend on the auditor's judgement, including the assessment of the risks of material misstatement of the financial report, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity's preparation and fair presentation of the financial report in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity's internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by the directors, as well as evaluating the overall presentation of the financial report.
We performed the procedures to assess whether in all material respects the financial report presents fairly, in accordance with the Corporations Act 2001 and Australian Accounting Standards (including the Australian Accounting Interpretations), a view which is consistent with our understanding of the Company's and the Group's financial position and of their performance.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.
Auditor's opinion
In our opinion:
(a) the financial report of Oilex Ltd is in accordance with the Corporations Act 2001, including:
(i) giving a true and fair view of the Company's and the Group's financial position as at 30 June 2008 and of their performance for the 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.
Report on the remuneration report
We have audited the Remuneration Report included in the directors' report forthe year ended 30 June 2008. The directors of the Company are responsible forthe preparation and presentation of the remuneration report in accordance withSection 300A of the Corporations Act 2001. Our responsibility is to express anopinion on the remuneration report, based on our audit conducted in accordancewith auditing standards.Auditor's opinion
In our opinion, the remuneration report of Oilex Ltd for the year ended 30 June 2008, complies with Section 300A of the Corporations Act 2001.
KPMGB C FullartonPartnerPerth, WA18 September 2008 SHAREHOLDER INFORMATION
The shareholder information set out below was applicable as at 10 September 2008.
1. Shareholding
(a) Distribution of share and option holdings.
Size of holding Number of Number of Number of shareholders unlisted performance option holders right holders1 - 1,000 319 1 -1,001 - 5,000 861 4 -5,001 - 10,000 438 9 110,001 - 100,000 594 22 22100,001 and over 130 19 2Total 2,342 55 25
(b) Of the above total, 724 ordinary shareholders hold less than a marketable parcel.
(c) There are no substantial shareholders holding 5% or more of the Company's shares.
(d) 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 or representative of aMember shall have one vote and on a poll, every Member present in person or byproxy or by attorney or duly authorised representative shall have one vote foreach share held. None of the options or performance rights give an entitlementto voting rights.
2. The name of the Company Secretary is Mr M D J Cozijn.
3. The address of the principal registered office is Level 2, 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 ComputershareInvestor Services PLC, PO Box 82, The Pavilions, Bridgwater Road, Bristol BS997NH, United Kingdom, Telephone +44 870 703 0300.
5. Stock Exchange Listing
Quotation has been granted for all the ordinary shares of the Company on allMember Exchanges of the Australian Securities Exchange and the AIM Market ofthe 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 39,925,100.
Dr B H McCarthy (Managing Director) holds a total of ten million options, (see Note 22), which represents 25.05% of all outstanding options.
Total performance rights on issue are 1,351,000.
9. There is currently no on-market buy-back in place.
Twenty Largest ShareholdersShareholder Shares held % of issued capitalANZ Nominees Limited 10,737,506 8.13National Nominees Limited 10,078,092 7.63UBS Wealth Management Australia Nominees Pty Ltd 6,598,958 5.00JP Morgan Nominees Australia Limited 6,035,000 4.57Cogent Nominees Pty Ltd 5,889,809 4.46India Hydrocarbons Limited 5,500,000 4.16HSBC Custody Nominees Australia Limited 5,019,152 3.80Citicorp Nominees Pty Limited 3,323,866 2.52Dr Salim Cassim 2,735,000 2.07CIM Special Situations Fund 2,476,978 1.88Macquarie Bank Limited 2,348,162 1.78R W Associates Pty Ltd 2,243,666 1.70Alchemy Securities Pty Ltd 1,900,000 1.44Barclayshare Nominees Limited 1,863,742 (#) 1.41L R Nominees Limited 1,659,125 (#) 1.25Miramar Superannuation Fund Pty Ltd 1,590,000 1.20TD Waterhouse Nominees (Europe) Limited 1,482,729 (#) 1.12J Nicolis Pty Ltd 1,421,503 1.08Forest Nominees Limited 1,390,450 1.05Dyspo Pty Ltd 1,097,031 0.83 Total 75,390,769 57.08Total issued shares as at 10 September 2008 132,083,885 100.00
(#) Included within the total issued capital are 15,228,396 shares held on the AIM register. Included within the top 20 shareholders are certain AIM registered holders as marked.
Business Directory AUSTRALIA Registered and INDIA New Delhi Office Principal Office Oilex NL Holdings (India) Oilex Ltd Limited Level 2 202, Pragati House 50 Kings Park Road 47 - 48 Nehru Place West Perth WA 6005 New Delhi 110019 Australia India Ph +61 8 9485 3200 Fax +61 8 9485 3290 Vadodara Project Office Oilex Ltd Postal Address 101 - 102 Rubillite Hub Oilex Ltd 32, Ajit Nagar Society PO Box 588 Dinesh Mill Road West Perth WA 6872 Vadodara 390007 Australia Gujarat India SULTANATE OF OMAN Muscat Branch Office TIMOR-LESTE Dili Branch Oilex Oman Limited Office 24-26, 2nd Floor Oilex (JPDA 06-103) Ltd Building No 117 Avenida de Portugal Al Ma'aridh Street Kampo Alor Ghala / Bousher Dili Muscat Timor-Leste Sultanate of Oman
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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".
vendorRelated Shares:
OEX.L