2 Nov 2020 07:00
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Contents
Chairman's Review..................................................................................................................................................................... 2
Business Review......................................................................................................................................................................... 4
Permit Schedule....................................................................................................................................................................... 11
Directors' Report...................................................................................................................................................................... 13
Remuneration Report - Audited............................................................................................................................................... 22
Lead Auditor's Independence Declaration ............................................................................................................................... 30
Consolidated Statement of Profit or Loss and Other Comprehensive Income.......................................................................... 31
Consolidated Statement of Financial Position........................................................................................................................... 32
Consolidated Statement of Changes in Equity.......................................................................................................................... 33
Consolidated Statement of Cash Flows.................................................................................................................................... 34
Notes to the Consolidated Financial Statements...................................................................................................................... 35
Directors' Declaration............................................................................................................................................................... 75
Independent Audit Report........................................................................................................................................................ 76
Shareholder Information........................................................................................................................................................... 81
Definitions................................................................................................................................................................................. 83
Corporate Information.............................................................................................................................................................. 84
Dear Shareholder,
The 2020 financial year produced two remarkable global events. The first of these was the effect of COVID-19 and the fundamental change it brought to the daily and working lives of all of us. The other key event was the global oil and gas price reduction, the third time this occurred within a 12 year period. Virtually every community in our modern world and every industry has been affected in some way by one or both of these events. Certainly, it has brought about further changes and downward pressure on an already embattled oil and gas industry. Our industry has seen an increase in the number of project delays and project re-assessments along with several corporate collapses, related to combinations of reduced commodity prices, scarcity of risk capital and significantly altered working environments. Oilex's experiences were in line with this and included the non-completion of the initial proposal for the Cooper-Eromanga basin package spin-out and additional and significant delays to our Cambay project in India.
This unusual period has also produced positive occurrences with new projects becoming available as beleaguered corporations seek funding solutions for their projects and as some governments seek to stimulate industry activity in response to declining domestic oil and gas production.
As a result, this has been a period of consolidation for the Company. Management's focus has been to:
i) capitalise on held projects, determining the best value realisation for each one,
ii) continue to press forward with the existing projects in the Oilex portfolio,
iii) resolve long running problematic historical issues, and
iv) reduce the company's cost base in both India and Australia.
Despite the very challenging climate, Oilex remains focused on returning value to shareholders with the short to medium focus of restoring value to the share price through sound management practices.
To that end, during the reporting period, Oilex successfully acquired a new package of highly prospective acreage in the Cooper-Eromanga Basins in Australia, it worked with the Indian government to define a solution for the dispute with the joint venture partner on the Cambay project, it continued to work to restore ownership of the West Kampar project in Indonesia, it acquired acreage in the East Irish Sea in the United Kingdom , and it worked with joint venture partners to resolve a long running dispute in East Timor. At the same time funding was secured while our cost base was dramatically reduced. Our cornerstone shareholders, Singapore based Republic Investment Management and the Malta based Lombard Group deserve particular mention, as they have continued to provide strong support for which the board and management expresses its sincere thanks. Similarly, the company has many long-suffering shareholders who continue to hold the stock in the shared belief in the intrinsic value proposition offered by the company and its assets.
The Company's resolve in India is based on the significant undeveloped multi TCF gas resource within the Cambay PSC - the Cambay Tight Gas Project. This requires further investment and appraisal work to ultimately demonstrate the project's commerciality and Oilex retains the support of the Indian government to re-commence an appraisal/development effort for this project. The solution lies with the exit of GSPC through a sales process supported by the Indian National Government, the Gujarat State Government and GSPC's own board of directors. But for COVID, we believe that an outcome would have been reached in the first part of the 2020 calendar year. The effect of COVID on India has been particularly severe resulting in the unavoidable continued delay in reaching a solution. It has also changed the investment capability of companies which bid in the GSPC sale, and this has been an additional complicating factor. We do believe that a solution will occur, however in the current circumstance, it is difficult to provide accurate timing estimates. In the absence of senior management travel to India, our enormously dedicated Indian staff continue to successfully drive our business forward. An eventual conclusion will allow the Company to return to the planning and field work needed for the actual appraisal drilling, completion and stimulation program identified by the technical studies undertaken with Schlumberger, Baker Hughes GE and Oilfield Data Services Inc. which outlined the next stage of work program to prove the commerciality of the Cambay Tight Gas Project.
The Company's new business development efforts bore fruit through the establishment of the focus on "super-basin areas" in Australia's Cooper-Eromanga Basins and the UK's Continental Shelf. With prior knowledge and experience in both of these areas, the company set about reviewing available opportunities, identifying target areas within proven fairways, and target companies, following a strict set of investment and risk exposure guidelines. As a result, a high potential package of acreage which includes existing discoveries was captured in Australia. Further work added additional acreage won in a government bid round. Funding considerations, particularly in relation to upfront costs related to government environment and rehabilitation bonds, meant that the best value realisation was to place the asset group into a new entity and the various options of IPO and sales were investigated. A favourable agreement was initially struck where the assets would be purchased by an existing entity looking for a change of focus, however, the advent of COVID and the reduction in funding options meant that this did not materialize. Management responded quickly and secured an alternative option with Armour Energy, a company with an existing viable asset base looking for additional projects. The move of Oilex's immediate past Chairman, Brad Lingo, to an executive role in Armour provided continuity of focus on the asset set and the transaction, assuming completion, provides Oilex with a significant value position in relation to the Australian assets.
In the UK, Oilex struck a series of deals and options with a number of UK based entities, for both discovered and exploration assets in the highly productive East Irish Sea basin. Through a series of agreements, Oilex established line of sight over a number of low entry cost, complementary projects in the East Irish Sea immediately adjacent to large producing gas fields with refurbished production and processing facilities and where new sources of gas production would help to extend the productive life of the greater projects. However, once again COVID resulted in reduced ability to secure risk capital for these projects, and Oilex reduced its position to a single licence containing two high potential exploration targets, again adjacent to existing producing fields.
In East Timor, a dispute with the government regulator stretching back more than 5 years had moved to the stage of arbitration in a Singapore arbitration centre. Oilex and its partners believed that all processes had been correctly followed in executing the historical Joint Venture work programs, and that arbitration provided a very costly resolution process with an uncertain outcome. As a result, a settlement was agreed with the regulator that ceased the arbitration process. The settlement agreement provided Oilex with a financial obligation of US$800,000 to be paid to the regulator, and with the uncertainties surrounding the industry as a whole, Oilex set about finding a solution to manage the exposure. This was provided by some of our existing joint venture partners in the form of a loan facility effectively deferring the payment schedule for several years.
In Indonesia, Oilex had continued to seek redress for a historic dispute with an Indonesian partner and operator in relation to the West Kampar PSC, into which Oilex had paid funds, but where it was excluded from production income and project decision making. While a successful arbitration ruling was gained in Singapore courts, it proved almost impossible to enforce in Indonesia. With the eventual demise of the partner company, Oilex continued to press it rights with the Indonesian government, even re-bidding for the asset in a government sponsored bid round. Oilex has an agreement with a very reputable Indonesia entity, PT Ephindo to work together on an equal basis for the return of the rights to the PSC with Government support for the same.
In addition to the above efforts to create and return value, Oilex continues to review business opportunities in high potential areas, relying on its contact base, its demonstrated capabilities and its belief that good projects with good management can be funded. It remains our objective to apply our skill base to deliver value to our shareholders through solid project and corporate management. We seek your continued support in our efforts. On behalf of the Board, I wish to thank our staff, contractors, local communities, shareholders, and stakeholders for your ongoing support.
Mr J Salomon
Interim Chairman
31 October 2020