27th Feb 2007 09:42
ABN 50 078 652 632 INTERIM FINANCIAL REPORT 31 DECEMBER 2006 ABN 50 078 652 632 CONTENTS 1) DIRECTORS' REPORT 1
2) AUDITOR'S INDEPENDENCE DECLARATION 3
3) CONSOLIDATED INTERIM INCOME STATEMENT 4
4) CONSOLIDATED INTERIM BALANCE SHEET 5
5) CONSOLIDATED INTERIM STATEMENT OF CHANGES IN EQUITY 6
6) CONSOLIDATED INTERIM STATEMENT OF CASH FLOWS 7
7) NOTES TO THE CONSOLIDATED INTERIM FINANCIAL REPORT 8
8) DIRECTORS' DECLARATION 12
9) INDEPENDENT REVIEW REPORT 13
The Directors present their report together with the financial report of OilexLtd (the "Company") and its subsidiaries ("Oilex") for the half-year ended 31December 2006 and the review report thereon.
DIRECTORS
The names of Directors who held office during the half-year and until the date of this report are as follows.
Mr Max D.J. Cozijn - Non-Executive Chairman
Dr Bruce H. McCarthy - Managing Director
Mr Raymond G. Barnes - Technical Director
Dr Geoffrey I. Johnson - Non-Executive Director (resigned 23 November 2006)
Mr Laxmi Lal Bhandari - Non-Executive Director (appointed 23 November 2006)
Directors were in office for this entire period unless otherwise stated.
REVIEW OF OPERATIONS
Financial Performance
The reported loss for the period was $3,442,105 after accounting for a gain of$2,819,195 on the sale of the Oilex interests in its onshore Queensland oil
andgas permits.HighlightsOilex has established a portfolio of exploration and production interests inIndia, Australia, Oman and Timor-Leste. This is in line with the company'sstated strategy of acquiring high quality exploration acreage in countriesaround the Indian Ocean rim in joint ventures with its Indian alliance members,with the main highlights being:
* Oilex (Operator 25%) awarded permit JPDA 06-103 offshore Timor Leste /
Australia.
* Oilex (Operator 20%) awarded permit WA-388-P offshore Western Australia.
* Successful share placement completed in July 2006 raising gross proceeds of
A$20,060,000.
* Oilex's onshore Queensland petroleum interests sold to Bow Energy Limited
for 13.3 million shares and 13.3 million options.
* Government of India approved assignment of interests in Bhandut, Sabarmati
(Oilex 40% Operator) and Cambay Fields (Oilex 45%, Operator), onshore
Gujarat, India.
* 2 wells drilled and suspended in first phase drilling programme on Cambay
Field with indications of hydrocarbons. * Testing and completion of Eocene EP IV potential reservoir interval in Cambay-72 commenced January. * 3D seismic acquisition over Cambay Field completed in early December. * Cambay 3D data set is excellent quality - 22 locations selected for potential phase 2 drilling programme of up to 8 wells in 2007. * 2-3 wells planned in Block 56, Oman Q3 2007.
* 8 prospects mapped with potential volumes of 40 to 150 million barrels of
oil in place on EPP 27.
* Negotiations finalised for drilling rig for EPP 27, offshore Otway Basin.
Further details are contained within releases made by the Company over this period.
CORPORATE MATTERS
Sale of Queensland assets to Bow Energy Limited
Oilex signed Share Sale & Purchase Agreements for the sale to Bow Energy Limited ("Bow") of its onshore Queensland oil and gas permit interests (with the exception of ATP 548P) in the Bowen-Surat and Cooper-Eromanga Basins.
As consideration for the sale of the assets, Oilex was issued with 13.3 millionfully paid ordinary shares and 13.3 million options to purchase Bow shares at50 cents per share on or before 5 years from the issue date.
By concluding this agreement with Bow, Oilex shareholders will share in any price appreciation of Bow's shares in the event of successful drilling by Bow on the permit areas that are being sold by Oilex and on Bow's existing exploration permits.
Capital Structure
As at 31 December 2006, Oilex has a total issued capital of 76,883,885 ordinary shares.
In addition there are a total of 26,025,100 unlisted options on issue exercisable at prices of between $0.20 and $1.75.
1,000,100 ordinary shares and 1,000,100 unlisted options were released from voluntary escrow on 7 December 2006.
AUDITORS' INDEPENDENCE DECLARATION
The lead auditors' independence declaration is set out on page 3 and forms part of the Directors' Report for the half-year ended 31 December 2006.
This report is signed in accordance with a resolution of the Board of Directors.
M.D.J. Cozijn B.H. McCarthyChairman Managing Director
Dated this 27th day of February 2007
Lead Auditor's Independence Declaration under Section 307C of the Corporations Act 2001
To: the directors of Oilex Limited
I declare that, to the best of my knowledge and belief, in relation to the review for the half-year ended 31 December 2006 there have been:
i. no contraventions of the auditor independence requirements as set out in
the Corporations Act 2001 in relation to the review; and
ii. no contraventions of any applicable code of professional conduct in
relation to the review. KPMGB C FULLARTONPartnerPerth27 February 2007KPMG, an Australian partnership, is part of theKPMG International network.KPMG International is a Swiss cooperative. Note 31 December 31 December 2006 2005 $ $ Continuing operations Revenue - 16,691 Employee benefits expense (1,675,927) (313,791) Depreciation expense (57,520) (17,355) Exploration expenditure (1,726,436) (1,482,652) Administration expense (1,207,933) (455,588) Share based payments (1,194,035) - Other expenses (545,188) (55,724) Financial income 503,941 187,704 Financial costs (358,202) - LOSS BEFORE INCOME TAX (6,261,300) (2,120,715) Income tax expense - - NET LOSS FROM CONTINUING OPERATIONS (6,261,300) (2,120,715) Discontinued operation Profit/(loss) from discontinued operation 6 2,819,195 (911,050)(net of tax) LOSS FOR THE PERIOD (3,442,105) (3,031,765) Earnings per share Basic loss per share (cents per share) (4.5)
(7.1)
Diluted loss per share (cents per share) (4.5) (7.1) Continuing operations Basic loss per share (cents per share) (8.2)
(2.1)
Diluted loss per share (cents per share) (8.2)
(2.1)
The income statement is to be read in conjunction with the notes to the consolidated interim financial report.
31 December 30 June 2006 2006 $ $ Current Assets 14,793,966 21,262,211 Cash and cash equivalents Trade and other receivables 1,826,233 1,457,402 Inventories 233,324 1,066,701 TOTAL CURRENT ASSETS 16,853,523 23,786,314 Non Current Assets 2,205,358 2,411,552 Trade and other receivables Exploration and evaluation 3,572,047 - Property, plant & equipment 604,011 485,498 Investments 3,453,279 - TOTAL NON CURRENT ASSETS 9,834,695 2,897,050 TOTAL ASSETS 26,688,218 26,683,364 Current Liabilities 2,023,841 1,757,537 Trade and other payables Provisions 566,715 164,353 Loans and borrowings 5,000,000 5,000,000 TOTAL CURRENT LIABILITIES 7,590,556 6,921,890 TOTAL LIABILITIES 7,590,556 6,921,890 NET ASSETS 19,097,662 19,761,474 Equity 37,142,619 36,563,991 Issued capital Option reserve 4,514,543 2,499,908 Available-for-sale reserve 185,030 - Accumulated losses (22,744,530) (19,302,425) TOTAL EQUITY 19,097,662 19,761,474
The balance sheet is to be read in conjunction with thenotes to theconsolidated interim financial report.
Issued Option Available-for-sale Reserve Accumulated Total Capital Reserve Losses Equity $ $ $ $ $ Balance at 1 July 17,039,127 - - (8,622,320) 8,416,8072005 Total recognised - - - (3,031,765) (3,031,765)income and expense Transactions with equity holders in their capacity as equity holders: Shares issued 302,410 - - - 302,410 Options issued - 179,551 - - 179,551 Balance at 31 17,341,537 179,551 - (11,654,085) 5,867,003December 2005 Balance at 1 July 36,563,991 2,499,908 - (19,302,425) 19,761,4742006 Total recognised - - - (3,442,105) (3,442,105)income and expense Revaluation of - - 185,030 - 185,030investments Transactions with equity holders in their capacity as equity holders: Exercise of options 552,801 (202,801) - - 350,000 Share based payments 25,827 2,217,436 - - 2,243,263 Balance as at 31 37,142,619 4,514,543 185,030 (22,744,530) 19,097,662December 2006
The statement of changes in equity is to be read in conjunction with thenotes to the consolidated interim financial report.
31 December 31 December 2006 2005 $ $
Cash Flows From Operating Activities
Inflows: Cash receipts from customers 34,618 124,986 Interest received 463,717 187,704 Other income - 139,857 Outflows: Payments to suppliers and employees (1,961,327) (742,863) Interest paid (265,111) - Net Cash Flows Used In Operating Activities (1,728,103)
(290,316)
Cash Flows From Investing Activities
Inflows: Proceeds from sale of property, plant and - 25,704equipment Outflows: Payments for exploration and evaluation (4,813,447) (2,200,596)expenditure Acquisition of property, plant and equipment (276,695)
(134,498)
Net Cash Flows Used In Investing Activities (5,090,142)
(2,309,390)
Cash Flows From Financing Activities
Inflows:
Proceeds from the exercise of options 350,000
-
Net Cash Flows From Financing Activities 350,000
-
NET DECREASE IN CASH AND CASH EQUIVALENTS (6,468,245)
(2,599,706)
CASH AND CASH EQUIVALENTS AT 1 JULY 21,262,211
8,137,627
CASH AND CASH EQUIVALENTS AT 31 DECEMBER 14,793,966
5,537,921
The statement of cash flows is to be read in conjunction with the notes to the consolidated interim financial report.
NOTE 1 - REPORTING ENTITY
Oilex Ltd (the "Company") is a company domiciled in Australia. The consolidatedinterim financial report of the Company as at and for the six months ended 31December 2006 comprises the Company and its subsidiaries (together referred toas "Oilex") and Oilex's interests in jointly controlled operations.The consolidated annual financial report of Oilex as at and for the year ended30 June 2006 is available upon request from the Company's registered office atLevel 3, 50 Kings Park Road, West Perth, Western Australia 6005 or atwww.oilex.com.au.
NOTE 2 - STATEMENT OF COMPLIANCE
The consolidated interim financial report is a general purpose financial report which has been prepared in accordance with AASB 134: Interim Financial Reporting and the Corporations Act 2001.
The condensed consolidated interim financial report does not include all of theinformation required for a full annual financial report, and should be read inconjunction with the consolidated annual financial report of Oilex as at andfor the year ended 30 June 2006.
This condensed consolidated interim financial report was approved by the Board of Directors on 27 February 2007.
NOTE 3 - SIGNIFICANT ACCOUNTING POLICIES
The accounting policies applied by Oilex in this interim financial report arethe same as those applied by Oilex in its consolidated financial report as atand for the year ended 30 June 2006.
NOTE 4 - ESTIMATES
The preparation of an interim financial report requires management to make judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets and liabilities, income and expense. Actual results may differ from these estimates.
In preparing this interim financial report, the significant judgements made bymanagement in applying Oilex's accounting policies and the key sources ofestimation uncertainty were the same as those that applied to the consolidatedfinancial report as at and for the year ended 30 June 2006.
NOTE 5 - SEGMENT INFORMATION
Primary Reporting- Geographical Segments
India Australia Oman Timor-Leste Discontinued Group and Consolidated Operation Unallocated $ $ $ $ $ $ $ Half-year ended 31 December 2006 Segment - - - - 21,110 503,941 525,051revenue Segment (335,522) (391,134) (327,080) (86,582) 2,819,195 (5,120,982) (3,442,105)result/ (loss) Half-year ended 31 December 2005 Segment - 16,691 - - 135,861 187,704 340,256revenue Segment (640,275) (1,480,440) - - (911,050)
- (3,031,765)result/ (loss)
NOTE 6 - DISCONTINUED OPERATION
In August 2006 Oilex signed a Share Sale and Purchase Agreement for the sale toBow Energy Ltd ("Bow") of its onshore Queensland oil and gas permit interestsin the Bowen-Surat and Cooper-Eromanga Basins. As consideration for the sale ofthe assets, Oilex was issued 13.3 million fully paid ordinary shares and 13.3million options to purchase Bow shares at $0.50 per share on or before 5 yearsfrom the issue date. The effective date of sale is 24 August 2006 withsettlement effected on 8 November 2006. The shares will be subject to voluntaryescrow 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 by the parent entity.
The segment was not a discontinued operation or classified as held for sale asat 30 June 2006 and the comparative income statement has been restated to showthe discontinued operation separately from continuing operations.
The effect of the disposal was an increase in the net assets of Oilex of $2,819,195.
During the six months ended 31 December 2006, Seqoil Pty Ltd had net cashoutflows from operating activities of $9,152 (six months ended 31 December2005: $941,762), net cash outflows from investing activities of nil (six monthsended 31 December 2005: $16,800) and net cash outflows from financingactivities of $101,812 (six months ended 31 December 2005: net cash inflow of$1,201,004).
NOTE 6 - DISCONTINUED OPERATION (continued)
Gains/losses attributable to the discontinued operation for the six months ended 31 December 2006 were as follows:
2006 2005 $ $
Results of discontinued operation
Revenue 21,110 135,861 Expenses (60,507) (1,046,911) Results from operating activities (39,397) (911,050) Income tax expense - - Loss after tax but before gain on sale of discontinued (39,397) (911,050)operation
Gain on sale of discontinued operation 2,858,592
-
Tax on gain on sale of discontinued operation -
- Gain for the period 2,819,195 (911,050)
NOTE 7 - SHARE BASED PAYMENTS
The Company has an established Employee share option plan ("ESOP") thatentitles key management personnel ("KMP") and employees to purchase shares inthe Company. The terms and conditions of the ESOP and grants made during theyear ended 30 June 2006 are disclosed in the most recent annual financialreport. In July 2006 a further grant on similar terms was made to keymanagement personnel and in October 2006 a further grant on similar terms wasmade to key financiers. The basis of measuring fair value of options granted isconsistent with that disclosed in the consolidated financial report as at andfor the year ended 30 June 2006.The Company also has established a Performance Rights ("PRs") plan, approved byshareholders on 23 November 2006 at the 2006 AGM that entitles employees tozero exercise price options. The PRs are subject to a performance hurdle, basedon Oilex's percentage share price growth compared to the growth in the S&P/ASX200 Energy Sector Accumulation Index, which must be satisfied before any PRscan be exercised. To the extent that the performance hurdle is achieved, thePRs vest and may be exercised to acquire shares in the Company. No PR's havebeen granted during the half-year.
The terms and conditions of the grants made during the six months ended 31 December 2006 are as follows:
Grant date/employees Number of Vesting conditions Contractual entitled instruments life of options Options granted to KMP since 2,825,000 Three years of 3-4 years 1 July 2006 service
Options granted to advisers 1,500,000 Immediately 3-4 years since 1 July 2006
NOTE 7 - SHARE BASED PAYMENTS (continued)
Fair value of options granted during the six months ended 31 December 2006 has been determined using the following assumptions:
Options granted to Options granted to advisers KMP Fair value at measurement date $0.75 - $0.85 $0.65 - $0.75 Share price $1.34 $0.97 Exercise price $1.50 - $2.00 $0.45 - $0.90 Expected volatility 92.75% 90.85% Option life 3 - 4 years 3 - 4 years Expected dividends - - Risk-free interest rate 6.00% 5.75%
NOTE 8 - EQUITY SECURITIES ISSUED
2006 Shares 2005 Shares Issue of share capital 19,566 1,008,034 Exercise of options 750,000 - 769,566 1,008,034NOTE 9 - CONTINGENCIES
1. The vendor of Oilex's previous equity in Barcoo Junction North retained a
5% Net Profits Interest (NPI). Under the acquisition agreement with the
vendor, Oilex was obliged to use its best endeavours to initiate a drilling
program on the Barcoo Junction North Prospect within 12 months of the grant
of the permit which occurred on 31 October 2005. The vendor has continued
to threaten legal action regarding Oilex's performance of its obligations
under this acquisition agreement since October 2005 and again more recently
in February 2007, notwithstanding that Oilex has disposed of its interest
in the Barcoo Junction North prospect in November 2006. The directors have
sought legal advice in relation to these claims. The directors consider
there is no merit in the threatened action.
2. Pursuant to shareholder approval granted at the General Meeting of
Shareholders held on 28 July 2006, approval was granted for the issue of
shares to India Hydrocarbons Limited in 2 tranches. 2.5 million shares
remain to be issued within 1 year of obtaining shareholder approval at
A$0.20 per share, by 28 July 2007.
NOTE 10 - SUBSEQUENT EVENTSOn 9 January 2007 Oilex received the approval of the Government of India forthe assignment of 40% participating interests in the Bhandut and SabarmatiFields PSC's and an additional 15% net participating interest in the CambayField PSC. The interests were acquired from Niko Resources Ltd under anagreement that was made in February 2006.
In the opinion of the Directors of Oilex Ltd (the "Company"):
1. the financial statements and notes set out on pages 4 to 11, are in
accordance with the Corporations Act 2001 including:
a. giving a true and fair view of the financial position of the consolidated
entity as at 31 December 2006 and of its performance, as represented by the
results of its operations and cash flows for the half-year ended on that
date; and
b. complying with Australian Accounting Standard AASB 134 Interim Financial
Reporting and the Corporations Regulations 2001; and
2. there are reasonable grounds to believe that the Company will be able to
pay its debts as and when they become due and payable.
Dated at West Perth this 27th day of February 2007.
Signed in accordance with a resolution of the Directors.
Mr M.D.J. Cozijn Dr B.H. McCarthy
Chairman Managing DirectorWest Perth, Western Australia27 February 2007
Independent auditor's review report to the members of Oilex Limited
Report on the Financial Report
We have reviewed the accompanying half-year financial report of Oilex Limited,which comprises the consolidated interim balance sheet as at 31 December 2006,income statement, statement of changes in equity and cash flow statement forthe half-year ended on that date, a statement or accounting policies and otherexplanatory notes and the directors' declaration of the consolidated entitycomprising the company and the entities it controlled at the half-year's end orfrom time to time during the half-year.
Directors' Responsibility for the Financial Report
The directors of the company are responsible for the preparation and fairpresentation of the half-year financial report in accordance with AustralianAccounting Standard AASB 134 Interim Financial Reporting and the CorporationsAct 2001. This responsibility includes designing, implementing and maintaininginternal control relevant to the preparation and fair presentation of thehalf-year 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.
Auditor's Responsibility
Our responsibility is to express a conclusion on the half-year financial reportbased on our review. We conducted our review in accordance with AuditingStandard on Review Engagements ASRE 2410 Review of an Interim Financial ReportPerformed by the Independent Auditor of the Entity, in order to state whether,on the basis of the procedures described, we have become aware of any matterthat makes us believe that the half-year financial report is not in accordancewith the Corporations Act 2001 including: giving a true and fair view of theCompany's financial position as at 31 December 2006 and its performance for thehalf-year ended on that date; and complying with Australian Accounting StandardAASB 134 Interim Financial Reporting and the Corporations Regulations 2001. Asauditor of Oilex Limited, ASRE 2410 requires that we comply with the ethicalrequirements relevant to the audit of the annual financial report.A review of a half-year financial report consists of making enquiries,primarily of persons responsible for financial and accounting matters, andapplying analytical and other review procedures. A review is substantially lessin scope than an audit conducted in accordance with Australian AuditingStandards and consequently does not enable us to obtain assurance that we wouldbecome aware of all significant matters that might be identified in an audit.Accordingly, we do not express an audit opinion.
Conclusion
Based on our review, which is not an audit, we have not become aware of any matter that makes us believe that the half-year financial report of Oilex Limited is not in accordance with the Corporations Act 2001, including:
* (a) giving a true and fair view of the consolidated entity's financial
position as at 31 December 2006 and of its performance for the half-year
ended on that date; and KPMG, an Australian partnership, is part of the KPMG International network. KPMG International is a Swiss cooperative. * (b) complying with Australian Accounting Standard AASB 134 Interim Financial Reporting and the Corporations Regulations 2001. KPMGB C FULLARTONPartnerPerth27 February 2007 2
OILEX LTDRelated Shares:
OEX.L