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88 Energy Limited - ASX Lodgement of Annual Report

RNS Number : 8747I
88 Energy Limited
26 March 2018
 

88 ENERGY LIMITED

ASX LODGEMENT OF ANNUAL REPORT

88 Energy Limited (ASX:88E; AIM:88E)("88 Energy" or "Company") advises that a copy of the Company's Annual Report for the year ended 31 December 2017 has been lodged on the ASX and is also available on the Company's website at www.88energy.com and from this link http://www.rns-pdf.londonstockexchange.com/rns/8747I_-2018-3-26.pdf. The Annual Report was sent to shareholders today.

Set out below is the Chairman's Statement as included in the Company's Annual Report.  

Also set out below is a summary of the Company's audited financial information for the year ended 31 December 2017 as extracted from the Annual Report, being:

Consolidated Statement of Comprehensive Income;

Consolidated Statement of Financial Position;

Consolidated Statement of Changes in Equity; and

Consolidated Statement of Cash Flows.

 

CHAIRMAN'S STATEMENT

Dear Shareholders

It is a pleasure to present my Chairman's Report for the 2017 financial year.

When we look back on the 2017 year it is worth reminding ourselves of why we chose to explore in Alaska. I recall that 88E cast the net far and wide in search of a project that could make a meaningful difference; one which would capture investor attention with significant upside. Many projects were reviewed; some with existing production, both in Australia and internationally. Project Icewine, as it became known, ticked three of our key boxes for a start-up project: funding flexibility, ground floor entry and huge upside potential.

The recent entry by one of Australia's leading oil companies, Oil Search, into Alaska serves to validate our own endeavours. It is noteworthy that Oil Search screened over 150 projects before settling on Alaska. Access to existing infrastructure; a very supportive and stable State Government and significant exploration upside were all cited as supporting factors.

Oil Search investor briefings quote vendor Bill Armstrong as describing the source rocks of Alaska as unbelievably rich and prolific, having generated and expulsed about 1.5 trillion barrels of oil. Yet only a small fraction of that 1.5 trillion barrels has been found, leaving vast potential remaining to be discovered. Almost all the fields in Alaska are stratigraphic traps rather than anticlines and require a subtler exploration approach, which 88E is pursuing as it targets reservoirs adjacent to those same source rocks.

During 2017, 88E continued to leverage its early mover advantage building on its strategic acreage position prior to embarking upon a 3D seismic shoot to mature prospects for drilling, targeted for early 2019. Following a successful December 2017 bid round, the Company's net acreage position will be further expanded to approximately 301,000 acres. Unlike the lower 48 States, these leases have an attractive 10-year term with no mandatory relinquishment and a low 16.5% base royalty. Our prospective land holding is now of a size one would normally associate with the big end of town and provides scope to introduce drilling partners once prospects have been defined.

When 88E entered Alaska, exploration was encouraged via rebates for exploration; an incentive that 88E found attractive. Debt funding of these rebates enabled 88E to maintain leverage without the larger equity dilution normally associated with frontier exploration. The leverage from our enlarged acreage position is further enhanced due to the proximity of the all-weather Dalton Highway and the ability to connect into the trans-Alaska pipeline that can handle up to 2.1 million barrels per day and has considerable spare capacity.

During 2017, 88E drilled Icewine#2 targeting unconventional oil in a program that is ongoing. Concurrently we advanced our work on conventional targets where 3D seismic is being acquired as at the date of this report. Further details can be found in the Operations Review section of this Annual Report. The Alaskan program has been competently executed by our Managing Director, David Wall, with the assistance of a small dedicated team including senior geologist and Exploration Manager, Elizabeth Pattillo; petroleum engineer Hassan Fatahi; our Alaskan based Operations Manager, Erik Opstad and the full support of my fellow Directors. The confidence of the Board in their work has been more than demonstrated in the recent take up of options by Directors, which further aligns our risk with that of our shareholders.

The process of evaluation is ongoing and not without risk; however, we look to the future with considerable optimism as we unlock both the conventional and unconventional potential of our Alaskan exploration acreage. One only needs to compare this program with better known shale plays in Texas, like the Eagle Ford and Barnett, to gain an appreciation of the impact successful exploration can have on 88E as oil prices recover.

Speaking of oil prices, the consensus view is that crude oil prices will range around US$60 a barrel in coming years, with flexible US shale oil acting as a "swing producer" to prevent spikes. Saudi oil minister Khalid al-Falih has stepped up warnings that insufficient supply and above-consensus demand are likely to severely tighten markets in the coming years, despite shale. In any event US$60 pricing more than underpins our Alaskan endeavours.

Before closing I would like to thank the Department of Natural Resources, the Alaska Oil and Gas Conservation Commission; the North Slope Borough and other regulatory agencies that have facilitated our exploration effort in the State.

My fellow Directors and I acknowledge David and his staff for their sterling efforts in managing 88E's exciting Alaskan program on a tight budget and timeframe.

In turn, this result would not be possible without your support as shareholders in what has been a challenging yet exciting environment. Our dual listing on both ASX and AIM has garnered a wide investor base and we have been ably supported by our brokers and advisers Hartleys and Cenkos.

Icewine, like crude itself, can be sweet and may this prove to be the case as we embark upon our exciting 2018 program.

Yours faithfully,

Michael Evans Non-Executive Chairman 

 

CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER CONSOLIDATED INCOME

 


Note

2017

2016



$

$

Revenue from continuing operations




Other income

3(a)

56,711

        158,627





Administrative expenses

3(b)

(930,848)

(2,278,431)

Occupancy expenses


(154,689)

(169,301)

Employee benefit expenses

3(c)

(1,676,706)

(1,295,150)

Share-based payment expense

18

(2,020,772)

(100,000)

Depreciation and amortisation expense


(3,952)

(8,232)

Finance cost


(2,703,317)

(1,702,878)

Other expenses


(269,358)

(4,790,093)

Foreign exchange losses


(705,984)

784,194

Loss before income tax


(8,408,915)

(9,401,264)

Income tax expense

4

-

-

Loss after income tax for the year


(8,408,915)

(9,401,264)





Other comprehensive income for the year

Items that may be reclassified to profit or loss




Exchange differences on translation of foreign operations


(2,644,471)

440,218

Other comprehensive income / (loss) for the year, net of tax


(2,644,471)

        440,218





Total comprehensive loss for the year attributable to members of 88 Energy Limited


(11,053,386)

 

(8,961,046)





Loss per share for the year attributable to the members of 88 Energy Limited:




Basic and diluted loss per share

5

(0.002)

(0.003)





 

The Consolidated Statement of Profit and Loss and other Consolidated Income should be
read in conjunction with the notes to the financial statements.

 

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

 

 


Note

2017

2016



$

$

ASSETS




Current Assets




Cash and cash equivalents

6

14,014,422

 27,303,178

Trade and other receivables

7

357,723

 312,644

Total Current Assets


14,372,145

 27,615,822





Non-Current Assets




Plant and equipment

8

4,575

                6,131

Exploration and evaluation expenditure

9

46,934,162

38,227,059

Other receivables

10

20,248,981

11,158,742

Total Non-Current Assets


67,187,718

      49,391,932





TOTAL ASSETS


81,559,863

77,007,754





LIABILITIES




Current Liabilities




Trade and other payables

11

4,667,815

        6,127,943

Provisions

12

195,865

              90,085

Borrowings

13

21,164,883

-

Total Current Liabilities


26,028,563

        6,218,028





Non-Current Liabilities




Borrowings

13

-

22,779,313

Total Non-Current Liabilities


-

22,779,313





TOTAL LIABILITIES


26,028,563

28,997,341





NET ASSETS


55,531,300

48,010,413





EQUITY




Contributed equity

14

141,711,466

   125,157,965

Reserves

15

15,645,286

      16,268,985

Accumulated losses


(101,825,452)

    (93,416,537)

TOTAL EQUITY


55,531,300

      48,010,413





 

 

The Consolidated Statement of Financial Position should be
read in conjunction with the notes to the financial statements.

 

 

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

 


Issued Capital

Reserves

Accumulated Losses

Total

 


$

$

$

$

 


At 1 January 2017

125,157,965

16,268,985

(93,416,537)

48,010,413

 

 

Loss for the year

-

-

(8,408,915)

(8,408,915)

 

Other comprehensive loss

-

(2,644,471)


(2,644,471)

 

Total comprehensive loss for the year after tax

-

(2,644,471)

(8,408,915)

(11,053,386)

 






 

Transactions with owners in their capacity as owners:





 

Issue of share capital

17,792,774

-

-

17,792,774

 

Share-based payments

-

2,020,772

-

2,020,772

 

Share issue costs

(1,239,273)

-

-

(1,239,273)

 


Balance at 31 December 2017

141,711,466

15,645,286

(101,825,452)

55,531,300

 






 

 

At 1 January 2016

90,654,560

14,848,766

(84,015,273)

21,488,053

 

 

Loss for the year

-

-

(9,401,264)

(9,401,264)

 

Other comprehensive income

-

440,218


440,218

 

Total comprehensive income/(loss) for the year after tax

-

440,218

(9,401,264)

(8,961,046)

 






 

Transactions with owners in their capacity as owners:





 

Issue of share capital

   37,496,660

-

-

    37,496,660

 

Share-based payments


980,001

-

980,001

 

Share issue costs

(2,993,255)

-

-

(2,993,255)

 


Balance at 31 December 2016

125,157,965

16,268,985

(93,416,537)

48,010,413

 






 

 

 

The Consolidated Statement of Changes In Equity should be
read in conjunction with the notes to the financial statements.

 

 

CONSOLIDATED STATEMENT OF CASH FLOWS

 

 

Note

 

2017

 

2016



$

$





Cash flows from operating activities




Payment to suppliers and employees


(3,729,444)

(3,676,801)

Interest received


12,359

54,248

Interest & finance costs


(814,137)

(4,867)

Other income


101,792

129,812

Net cash flows used in operating activities

6(b)

(4,429,430)

(3,497,608)





Cash flows from investing activities




Payments for exploration and evaluation activities


(34,080,618)

(25,588,985)

Payment for plant and equipment


-

(3,404)

Contribution from JV Partners in relation to Exploration


11,324,969

-

Net cash flows used in investing activities


(22,755,649)

(25,592,389)





Cash flows from financing activities




Proceeds from drawdown of facility


-

10,621,424

Proceeds from issue of shares


17,644,774

37,367,107

Share issue costs


(1,250,296)

(1,983,702)

Payment of borrowing costs


(665,868)

-

Net cash flows from financing activities


15,728,610

46,004,829





Net increase/(decrease) in cash and cash equivalents


(11,456,469)

16,914,832





Cash and cash equivalents at the beginning of the year


27,303,178

9,604,249

Effect of exchange rate fluctuations on cash held


(1,832,287)

784,097

Cash and cash equivalents at end of year

6(a)

14,014,422

27,303,178


 

The Consolidated Statement of Cash Flows should be
read in conjunction with the notes to the financial statements.

 

 

Media and Investor Relations: 

Australia




88 Energy Ltd


[email protected]

+61 8 9485 0990




Hartleys Limited


As Corporate Advisor


Mr Dale Bryan

+61 8 9268 2829




United Kingdom




Cenkos Securities Plc


As Nominated Adviser


Mr Neil McDonald

Mr Derrick Lee

Tel: +44 (0)131 220 9771 / +44 (0)207 397 1953

Tel: +44 (0)131 220 9100 / +44 (0)207 397 8900

 

 

Pursuant to the requirements of the ASX Listing Rules Chapter 5 and the AIM Rules for Companies, the technical information and resource reporting contained in the Investor Presentation was prepared by, or under the supervision of, Mr Brent Villemarette, who is a Non Executive Director of the Company. It has been produced for the Company, and at its request, for adoption by the Directors. Mr Villemarette has more than 30 years' experience in the petroleum industry and is a qualified Reservoir Engineer who has sufficient experience that is relevant to the style and nature of the oil prospects under consideration and to the activities discussed in this document. He has consented to the inclusion of the petroleum prospective resource estimates prepared by DeGolyer & MacNaughton (as of 31 December 2015) and supporting information being included in this announcement in the form and context in which they are presented. His academic qualifications and industry memberships appear on the Company's website and both comply with the criteria for "Competence" under clauses 18-21 of the Valmin Code 2005. Terminology and standards adopted by the Society of Petroleum Engineers "Petroleum Resources Management System" have been applied in producing this document.

 


This information is provided by RNS
The company news service from the London Stock Exchange
 
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