Global Petroleum Regulatory News (GBP)

25 Sep 2008 07:00



GLOBAL: PETROLEUM LIMITED

PRELIMINARY RESULTS FOR THE YEAR ENDED 30 JUNE 2008

Review of Operations AND ACTIVITIES

Kenya 

The L5 and L7 Joint Venture comprises:

Woodside Energy (Kenya) Pty Ltd  30% (and operator)

Dana Petroleum (E&P) Ltd 30%

Repsol Exploracion S.A. 20%

Global Petroleum  20%

PSC L5 expired on 11 July 2008 and PSC L7 on 8 June 2008. None of the joint venture parties have given notice that they wish to renew the PSC's.

Notice has been given to Woodside Energy (Kenya) Pty Limited ("Woodside") terminating the Farm-In Agreement ("FIA"). The termination notice has been given based on Woodside's refusal to drill a second exploratory well in the project area in accordance with the FIA and its failure to take any steps to remedy this refusal, which Global considers to be a repudiation and breach of the FIA.

Global and joint venture partner Dana Petroleum (E&P) Ltd have commenced legal proceedings in the English High Court of Justice to recover losses suffered as a result. 

The carrying value of the Consolidated Entity's Kenya exploration expenditure has been written-down to nil during the financial year.

Falkland Oil and Gas Limited ("FOGL") 

During the year FOGL announced it had entered into a farm-out agreement with a subsidiary of BHP Billiton over FOGL's 2002 and 2004 licences to the South and East of the Falkland Islands. Under the agreement, BHP Billiton will acquire a 51% interest, and will take over the operatorship of the licences. A minimum of two exploration wells will be drilled in the next 3 years and BHP Billiton pays FOGL US$12.75 million in reimbursement of certain historical costs.

Global sold a significant parcel of its FOGL shares during the year, realising a gain before tax of approximately $27.1 million. As at 30 June 2008, Global held approximately 1.85% of the issued shares of FOGL, valued at approximately $4.6 million. 

Malta Exploration Study Agreement Area 3 - Blocks 4 & 5 

RWE Dea AG ("RWE"), which has farmed into Global's interest in the Exploration Study Agreement covering Blocks 4 & 5, has the right to earn up to a total 70% interest if the parties enter into a PSC with the Malta Government and RWE commits to the drilling of a well. The Maltese Government have not granted an extension to the Exploration Agreement that expired on 30 June 2008 however RWE are continuing talks with a potential farminee. 

Should a well be drilled, Global's 30% share (including 3% on behalf of a UK marketing agency that assisted Global in the farm-in process) of the costs of such a well would be fully carried by RWE.

The carrying value of the Consolidated Entity's Malta exploration expenditure has been written-down to nil during the financial year.

Significant Changes in the State of Affairs

Other than as outlined in the Review of Operations and Activities above, the following significant changes in the state of affairs of the Consolidated Entity occurred during the year:

Mr Peter Dighton resigned from the Board on 31 January 2008 and Mr Shane Cranswick was appointed a Non-Executive Director of the Company on 6 June 2008. 

Significant Post Balance Date EvenTS

On 15 August 2008, the Company announced it was farming in to the Leighton oil prospect owned by Texon Petroleum Limited (ASX: TXN). The Company will earn a 15% Working Interest ("WI") in the first well by funding 30% of the cost of drilling the well, which is forecast to be approximately US$300,000.

In addition, Global reimbursed Texon US$180,000 in respect of prospect generation and lease costs for the well.

When the first well on Leighton has been drilled, Global will have the option to participate in the drilling of a second well on the Leighton prospect under the same terms to earn a WI in the Leighton leases. Global only earns a 15% WI in Leighton when this second well has been drilled. All subsequent wells drilled on Leighton will be at each company's earned working interest. 

Other than as outlined above, as at the date of this report there are no matters or circumstances, which have arisen since 30 June 2008 that have significantly affected or may significantly affect:

the operations, in financial years subsequent to 30 June 2008 of the Consolidated Entity;

the results of those operations, in financials years subsequent to 30 June 2008 of the Consolidated Entity; or

the state of affairs, in financial years subsequent to 30 June 2008 of the Consolidated Entity.

Environmental Regulation and Performance

The Consolidated Entity's operations are subject to various environmental laws and regulations under the relevant government's legislation. Full compliance with these laws and regulations is regarded as a minimum standard for all operations to achieve.

Instances of environmental non-compliance by an operation are identified either by external compliance audits or inspections by relevant government authorities. 

There have been no significant known breaches by the Consolidated Entity during the financial year. 

Likely Developments and Expected Results 

It is the Board's current intention that the Consolidated Entity will focus on maximising the value of its oil and gas exploration assets in Kenya and Malta and continue to examine new opportunities in mineral exploration, particularly in the oil and gas sector.

All of these activities are inherently risky and the Board is unable to provide certainty that any or all of these activities will be able to be achieved. In the opinion of the Directors, any further disclosure of information regarding likely developments in the operations of the Consolidated Entity and the expected results of these operations in subsequent financial years may prejudice the interests of the Company and accordingly, has not been disclosed.

INCOME STATEMENTS

FOR THE FINANCIAL YEAR ENDED 30 JUNE 2008

	Consolidated		Company
	2008	2007	2008	2007
	$	$	$	$
Other Income	27,108,462	64,482	-	64,066
Administration costs	(992,491)	(1,285,363)	(959,011)	(1,238,373)
Business development	(125,126)	-	(125,126)	-
Exploration and evaluation expenditure written off	(9,378,112)	(9,001,772)	(547,607)	(231,734)
Impairment provision for inter-company loans	-	-	(672,679)	(381,835)
Impairment write-down of investment in controlled entities	-	-	(8,641,664)	(8,215,592)
Results from operating activities	16,612,733	(10,222,653)	(10,946,087)	(10,003,468)
Net financial income	819,917	339,564	392,764	401,717
Profit/(loss) before income tax	17,432,650	(9,883,089)	(10,553,323)	(9,601,751)
Income tax expense	(1,599,622)	-	-	-
Profit/(loss) after tax	15,833,028	(9,883,089)	(10,553,323)	(9,601,751)
Profit/(loss) attributable to members of the parent	15,833,028	(9,883,089)	(10,553,323)	(9,601,751)
Basic loss per share from continuing operations (cents per share)	9.08	(5.69)
Diluted loss per share from continuing operations (cents per share)	9.08	(5.69)

The accompanying notes form part of the Income Statements.

BALANCE SHEETS

AS AT 30 JUNE 2008

	Consolidated		Company
	2008	2007	2008	2007
	$	$	$	$
Current assets
Cash and cash equivalents	34,454,208	6,324,089	5,365,560	6,318,687
Trade and other receivables	38,900	8,228	38,900	8,228
Other assets	600	600	600	600
Total current assets	34,493,708	6,332,917	5,405,060	6,327,515
Non-current assets
Trade and other receivables	-	-	326,198	950,606
Investments	4,618,239	24,275,749	925,624	9,567,288
Property, plant and equipment	-	-	-	-
Exploration and evaluation expenditure	-	9,247,206	-	388,095
Total non-current assets	4,618,239	33,522,955	1,251,822	10,905,989
TOTAL ASSETS	39,111,947	39,855,872	6,656,882	17,233,504
Current liabilities
Trade and other payables	213,378	250,680	112,573	135,872
Current tax payable	1,654,255	-	-	-
Total current liabilities	1,867,633	250,680	112,573	135,872
Non-current liabilities
Trade and other payables	-	-	61,260	61,260
Deferred tax liabilities	1,260,497	-	-	-
Total non-current liabilities	1,260,497	-	61,260	61,260
TOTAL LIABILITIES	3,128,130	250,680	173,833	197,132
NET ASSETS	35,983,817	39,605,192	6,483,049	17,036,372
Equity
Issued capital	35,590,053	35,590,053	35,590,053	35,590,053
Reserves	3,112,134	22,566,537	-	-
Accumulated losses	(2,718,370)	(18,551,398)	(29,107,004)	(18,553,681)
TOTAL EQUITY	35,983,817	39,605,192	6,483,049	17,036,372

The accompanying notes form part of the Balance Sheets. 

CASH FLOW STATEMENTS

FOR THE FINANCIAL YEAR ENDED 30 JUNE 2008

	Consolidated		Company
	2008	2007	2008	2007
	$	$	$	$
Cash flows from operating activities
Cash paid to suppliers and employees	(1,186,073)	(1,212,795)	(1,138,812)	(1,333,488)
Interest received	820,621	401,717	393,468	401,717
Management fees received	-	50,000	-	50,000
Net cash used in operating activities	(365,452)	(761,078)	(745,344)	(881,771)
Cash flows from investing activities
Acquisition of property, plant and equipment	-	(18,459)	-	(18,459)
Exploration expenditure	(160,706)	(473,889)	(159,512)	(506,141)
Proceeds from disposal of property, plant and equipment	-	53,140	-	52,250
Proceeds from sale of investments	28,656,891	-	-	-
Repayment of loans from controlled entities	-	-	-	180,022
Advances to controlled entities	-	-	(48,271)	(22,147)
Net cash from/(used in) investing activities	28,496,185	(439,208)	(207,783)	(314,475)
Cash flows from financing activities
Proceeds from the issue of share capital	-	537,500	-	537,500
Share issue expenses	-	(4,131)	-	(4,131)
Net cash from financing activities	-	533,369	-	533,369
Net increase/(decrease) in cash and cash equivalents	28,130,733	(666,917)	(953,127)	(662,877)
Cash and cash equivalents at 1 July	6,324,089	6,991,006	6,318,687	6,981,564
Effects of exchange rate changes on cash and cash equivalents	(614)	-	-	-
Cash and cash equivalents at 30 June	34,454,208	6,324,089	5,365,560	6,318,687

The accompanying notes form part of the Cash Flow Statements.

STATEMENTS OF CHANGES IN EQUITY

FOR THE FINANCIAL YEAR ENDED 30 JUNE 2008

	Share capital	Fair value reserve	Foreign currency translation reserve	Accumulated losses	Total equity
	$	$	$	$	$
Consolidated 2008
Balance at 1 July 2007	35,590,053	22,513,778	52,759	(18,551,398)	39,605,192
Foreign exchange translation differences	-	-	(30,191)	-	(30,191)
Change in fair value - available-for-sale investments taken to profit and loss on disposal	-	(19,496,789)	-	-	(19,496,789)
Change in fair value - available-for-sale investments	-	1,387,707	-	-	1,387,707
Deferred tax liability in respect of available-for-sale investments	-	(1,315,130)	-	-	(1,315,130)
Total non-profit items recognised directly in equity	-	(19,424,212)	(30,191)	-	(19,454,403)
Profit for the period	-	-	-	15,833,028	15,833,028
Total recognised income and expense for the period	-	(19,424,212)	(30,191)	15,833,028	(3,621,375)
Balance at 30 June 2008	35,590,053	3,089,566	22,568	(2,718,370)	35,983,817

Consolidated 2007
Balance at 1 July 2006	35,056,684	33,411,563	47,154	(8,668,309)	59,847,092
Foreign exchange translation differences	-	-	5,605	-	5,605
Change in fair value - available-for-sale investments	-	(10,897,785)	-	-	(10,897,785)
Total non-profit items recognised directly in equity	-	(10,897,785)	5,605	-	(10,892,180)
Loss for the period	-	-	-	(9,883,089)	(9,883,089)
Total recognised income and expense for the period	-	(10,897,785)	5,605	(9,883,089)	(20,775,269)
Exercise of options	537,500	-	-	-	537,500
Share issue expenses	(4,131)	-	-	-	(4,131)
Balance at 30 June 2007	35,590,053	22,513,778	52,759	(18,551,398)	39,605,192

Amounts are stated net of tax

The accompanying notes form part of the Statements of Changes in Equity.

STATEMENTS OF CHANGES IN EQUITY

FOR THE FINANCIAL YEAR ENDED 30 JUNE 2008

	Share capital	Accumulated losses	Total equity
	$	$	$
Company 2008
Balance at 1 July 2007	35,590,053	(18,553,681)	17,036,372
Loss for the period	-	(10,553,323)	(10,553,323)
Total recognised income and expense for the period	-	(10,553,323)	(10,553,323)
Balance at 30 June 2008	35,590,053	(29,107,004)	6,483,049
Company 2007
Balance at 1 July 2006	35,056,684	(8,951,930)	26,104,754
Loss for the period	-	(9,601,751)	(9,601,751)
Total recognised income and expense for the period	-	(9,601,751)	(9,601,751)
Exercise of options	537,500	-	537,500
Share issue expenses	(4,131)	-	(4,131)
Balance at 30 June 2007	35,590,053	(18,553,681)	17,036,372

Amounts are stated net of tax

The accompanying notes form part of the Statements of Changes in Equity.

NOTES

1. PROFIT/(LOSS) FROM OPERATIONS

(a) Other Income

			Consolidated		Company
			2008	2007	2008	2007
			$	$	$	$
Gain on disposal of available-for-sale investments		27,108,462		-	-	-
Gain on disposal of plant and equipment		-		14,482	-	14,066
Rendering of services		-		50,000	-	50,000
		27,108,462		64,482	-	64,066

(b) Profit/(loss) before tax

Profit/(loss) before income tax has been arrived at 

after charging the following expenses 

attributable to continuing operations:

Salaries and employee benefits expense		166,982	543,518	166,982	543,518
Consulting and professional fees		98,159	190,853	75,592	154,708
Shareholder costs		229,994	300,796	229,994	299,796
Occupancy costs		-	47,622	-	47,622
Depreciation expense		-	13,665	-	12,376
Administrative and other expenses		497,356	188,909	486,443	180,353
		992,491	1,285,363	959,011	1,238,373

(c) Financial income/(expenses)

Interest income		820,621	401,717	393,468	401,717
Net foreign exchange gain/(loss)		(704)	(62,153)	(704)	-
		819,917	339,564	392,764	401,717

2. INCOME TAX 

(a) Recognised in the income statement

Current tax expense/(benefit)
Current year		1,654,255	(371,882)	(213,029)	(339,264)
Deferred tax expense
Origination and reversal of temporary differences		(1,425,371)	-	(2,865,472)	-
Temporary differences not previously bought to account		1,370,738	-	1,870,172	-
Tax losses not brought to account		-	371,882	1,208,329	339,264
		(54,633)	371,882	213,029	339,264
Total income tax expense in the income statement		1,599,622	-	-	-

(b) Reconciliation between profit/(loss) before tax and tax expense

		Consolidated		Company
		2008	2007	2008	2007
		$	$	$	$
Profit/(loss) before tax expense		17,432,650	(9,883,089)	(10,553,323)	(9,601,751)
Prima facie tax expense/(benefit) at 30% (2007: 30%)		5,229,795	(2,964,927)	(3,165,997)	(2,880,525)
Increase/(decrease) in income tax expense due to:
Exploration and evaluation expenditure written off		-	2,700,531	87,496	69,520
Write-down of investment		-	-	2,592,499	2,464,677
Provision for intercompany loans		-	-	-	114,550
Gain on disposal of investments not assessable for income tax purposes		(5,079,826)	-	-	-
Other items		78,915	(107,486)	-	(107,486)
Temporary differences not previously brought to account		1,370,738	-	1,870,172	-
Tax losses not brought to account		-	371,882	1,208,328	339,264
Income tax expense on pre-tax net profit/(loss)		1,599,622	-	-	-

(c) Deferred income tax 

Deferred income tax at 30 June 2008 relates to the following: Deferred tax liabilities
Available-for-sale investments		1,315,130	-	-	-
Deferred tax assets used to offset deferred tax liabilities		(54,633)	-	-	-
		1,260,497	-	-	-
Deferred tax assets
Capitalised overheads		-	(619,196)	-	(619,196)
Share issue costs		33,033	71,007	33,033	71,007
Accrued expenses		21,600	14,100	21,600	14,100
Deferred tax assets used to offset deferred tax liabilities		(54,633)	-	-	-
Tax losses available to offset against future taxable income		-	-	1,153,695	-
Tax losses not brought to account		-	(534,089)	(1,208,328)	(534,089)
		-	-	-	-

3. EXPLORATION AND EVALUATION EXPENDITURE

 

Cost
Carrying amount at beginning of year		9,247,206	17,775,089	388,095	113,687
Expenditure incurred		171,093	529,858	159,512	506,142
Exchange differences		(40,487)	(55,969)	-	-
Expenditure written off		(9,378,112)	(9,001,772)	(547,607)	(231,734)
Carrying amount at end of year		-	9,247,206	-	388,095

Expenditure written-off during the 2008 year primarily relates to the balance of the Kenya project. The balance of capitalised exploration in relation to Malta was written off as at 30 June 2008 in accordance with AASB 6 - Exploration for and Evaluation of Mineral Resources. However, RWE Dea AG ("RWE"), which has the right to earn up to a total 70% interest in the project if the parties enter into a PSC with the Malta Government and RWE commits to the drilling of a well, are continuing talks with a potential farminee. 

The recoverability of the carrying amounts of exploration and evaluation assets is dependent on the successful development and commercial exploitation or sale of the respective area of interest.

4. ISSUED CAPITAL

(a) Issued and paid up capital:

174,444,787 (2007: 174,444,787 ) fully paid ordinary shares

35,590,053

35,590,053

35,590,053

35,590,053

(b) Movements in ordinary share capital during the past two years were as follows:-

Date	Details		Number of ordinary shares	Issue price
				$	$
1 July 2006	Opening balance		172,294,787		35,056,684
	Allotment upon exercise of options		2,150,000	0.25	537,500
	Share issue expenses				(4,131)
30 June 2007	Closing balance - fully paid		174,444,787		35,590,053
30 June 2008	Closing balance - fully paid		174,444,787		35,590,053

Effective 1 July 1998, the Company Law Review Act abolished the concept of par value shares and the concept of authorised capital. Accordingly, the Company does not have authorised capital or par value in respect of its issued shares.

(c) Terms and conditions of Ordinary Shares

General

The ordinary shares ("Shares") are ordinary shares and rank equally in all respects with all ordinary shares in the Company.

The rights attaching to the Shares arise from a combination of the Company's Constitution, statute and general law. Copies of the Company's Constitution are available for inspection during business hours at its registered office.

Voting

Subject to any rights or restrictions at the time being attached to any class or classes of shares, at a general meeting of the Company on a show of hands, every ordinary Shareholder present in person, or by proxy, attorney or representative (in the case of a company) has one vote and upon a poll, every Shareholder present in person, or by proxy, attorney or representative (in the case of a company) has one vote for any Share held by the Shareholder.

A poll may be demanded by the Chairperson of the meeting, any 5 Shareholders entitled to vote in person or by proxy, attorney or representative or by any one or more Shareholders holding not less than 5% of the total voting rights of all Shareholders having the right to vote.

Dividends

No dividends have been declared, provided for or paid in respect of the years ended 30 June 2008 or 2007. With respect to the payment of dividends by Global Petroleum in subsequent reporting periods (if any), no franking credits are currently available, or are likely to become available in the next 12 months.

5. EARNINGS PER SHARE

	Consolidated	Consolidated
	2008 Cents per Share	2007 Cents per Share
Basic profit/(loss) per share:	9.08	(5.69)
Diluted profit/(loss) per share:	9.08	(5.69)

The following reflects the income and share data used in the calculations of basic and diluted earnings per share:

	Consolidated	Consolidated
	2008	2007
	$	$
Net profit/(loss) used in calculating basic and diluted earnings per share	15,833,028	(9,883,089)

	Number of	Number of
	Shares	Shares
	2008	2007
Weighted average number of ordinary shares used in calculating basic earnings per share	174,444,787	173,679,034
Effect of dilutive securities	-	-
Adjusted weighted average number of ordinary shares and potential ordinary shares used in calculating basic and diluted earnings per share	174,444,787	173,679,034

Non-dilutive securities

As at balance date, 200,000 Unlisted Options (which represent 200,000 potential ordinary shares) were not dilutive as the market price of the Company's ordinary shares did not exceed the exercise price of the options. 

Conversions, calls, subscriptions or issues after 30 June 2008

Since 30 June 2008, no shares have been issued and no incentive options have been granted. No shares have been issued as a result of the exercise of options since 30 June 2008.

6. SEGMENT INFORMATION

Segment information is presented in respect of the Consolidated Entity's geographical segments. The primary format, geographical segments, is based on the Consolidated Entity's management and internal reporting structure.

Inter-segment pricing is determined on an arm's length basis. Segment results, assets and liabilities include items directly attributable to a segment as well as those that can be allocated on a reasonable basis. 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.

Geographical segments

The Consolidated Entity's geographical segments are as follows:

	Australia	Europe	Africa	Falkland Islands	Other	Eliminations	Consolidated
2008	$	$	$	$	$	$	$
Segment revenue
External revenue	-	-	-	-	-	-	-
Total revenue	-	-	-	-	-	-	-
Result
Segment result	(258,406)	(1,084,315)	(8,333,091)	27,108,462	-	-	17,432,650
Income tax expense							(1,599,622)
Profit for the period							15,833,028
Exploration and evaluation expenditure written off	-	1,071,877	8,306,235	-	-	-	9,378,112
Assets
Segment assets	35,549,364	4,481	-	4,618,239	-	(1,060,137)	39,111,947
Liabilities
Segment liabilities	3,088,585	572,080	201,404	326,198	-	(1,060,137)	3,128,130
Acquisitions of non-current assets, including capitalised exploration and evaluation expenditure	-	15,547	155,546	-	-	-	171,093

	Australia	Europe	Africa	Falkland Islands	Iraq	Other	Eliminations	Consolidated
2007	$	$	$	$	$	$	$	$
Segment revenue
External revenue	-	-	-	-	-	-	-	-
Total revenue								-
Result
Segment result	(1,011,879)	(757,620)	(8,112,731)	(359)	-	-	(500)	(9,883,089)
Income tax expense								-
Loss for the period								(9,883,089)
Depreciation	21,836	-	-	-	-	-	-	21,836
Exploration and evaluation expenditure written off	-	769,339	8,128,738	-	19,629	84,066	-	9,001,772
Assets
Segment assets	7,660,267	1,096,515	8,155,784	24,275,749	-	-	(1,332,443)	39,855,872
Liabilities
Segment liabilities	141,872	925,780	189,272	326,199	-	-	(1,332,443)	250,680
Acquisitions of non-current assets, including capitalised exploration and evaluation expenditure	18,459	222,883	203,266	-	19,629	84,080	-	548,317

Business segments

The Consolidated Entity operates within one business segment, being the petroleum and mineral exploration industry. Accordingly, the Consolidated Entity's total revenue and result for the year relate to that business segment.

7. SUBSEQUENT EVENTS

On 15 August 2008, the Company announced it was farming in to the Leighton oil prospect owned by Texon Petroleum Limited (ASX: TXN). The Company will earn a 15% Working Interest ("WI") in the first well by funding 30% of the cost of drilling the well, which is forecast to be approximately US$300,000.

In addition, Global reimbursed Texon US$180,000 in respect of prospect generation and lease costs for the well.

When the first well on Leighton has been drilled, Global will have the option to participate in the drilling of a second well on the Leighton prospect under the same terms to earn a WI in the Leighton leases. Global only earns a 15% WI in Leighton when this second well has been drilled. All subsequent wells drilled on Leighton will be at each company's earned working interest. 

Other than as outlined above, as at the date of this report there are no matters or circumstances, which have arisen since 30 June 2008 that have significantly affected or may significantly affect:

the operations, in financial years subsequent to 30 June 2008 of the Consolidated Entity;

the results of those operations, in financials years subsequent to 30 June 2008 of the Consolidated Entity; or

the state of affairs, in financial years subsequent to 30 June 2008 of the Consolidated Entity.

8. AVAILABILITY OF ACCOUNTS

A full copy of the report and accounts of Global is available on the company's website at http://www.globalpetroleum.com.au/

ENDFR SEWFLLSASEEU