11 Nov 2013 07:11
CHAirman's review
Dear Shareholders,
Your Company has continued to make significant progress in evaluating the potential of the extensive, Eocene low permeability "tight" reservoirs in the Cambay Field, onshore Gujarat, India.
The Company's strategy in commercialising the Cambay Field reservoirs is to apply proven reservoir evaluation, drilling and production technologies and techniques that have been developed in recent years in the rapidly expanding "tight" and shale gas industry in North America.
The Cambay Contract Area is a large acreage position of 161 square kilometres and is located at the hub of India's largest gas distribution network close to the existing gas grid in the State of Gujarat. The Indian gas market is expected to be one of the fastest growing in the world over the next two decades. The inherent advantages of gas over alternate fuels, has resulted in the demand for gas in India to consistently outpace supply and the gas deficit in India is expected to increase. The Indian government is looking to stimulate domestic gas production to fill this supply gap and recently approved a new pricing formula for gas prices with the new rates effective from 1 April 2014, with the new gas price expected to be as high as $8/mmbtu.
During the year the Company completed an independent review of Cambay-76H, which failed to record a flow test due to operational difficulties. The independent review provided various recommendations to minimise the risk of similar issues being encountered on any planned horizontal multi stage fracture stimulation wells. Following the recommendations of the independent expert the Company and its Joint Venture partner, GSPC, approved the 2013/14 Work Program and Budget which includes the drilling of Cambay-77H, a planned offset well to be drilled from the same drill pad as Cambay-76H. Cambay-77H is intended to complete the "proof-of-concept" phase before proceeding with a pilot development.
The Company appointed senior drilling personnel during the year with extensive experience in North American horizontal multi-stage fracture stimulation wells.
During the year the Company announced it had accepted an offer for a Special Prospecting Authority with Acreage option in the Canning Basin, Western Australia. The Special Prospecting Authority allows the Company a low cost and low risk entry into one of Australia's premier unconventional basins. Subsequent to the end of the financial year the Company accepted offers for two Canning Basin exploration blocks immediately adjacent to the awarded Special Prospecting Authority following a successful competitive bid for these areas. The additional acreage is interpreted to contain an extension of the play to the north of the Special Prospecting Authority, potentially capturing an entire newly-defined play fairway.
During the year the Company also announced the transition of Dr Bruce McCarthy from Managing Director to Non-Executive Director, as well as the appointment from 1 January 2013 of Mr Ronald Miller as Managing Director, previously Non-Executive Director. Mr Ray Barnes retired as Technical Director in November 2012 and Mr Ben Clube resigned as a Finance Director in September 2012.
After the end of the financial year Oilex, on behalf of its Joint Venture participants in the Timor Lesté Joint Venture, submitted to the Autoridade Nacional do Petróleo ("ANP") a request to terminate the Production Sharing Contract by mutual agreement in accordance with its terms and without penalty or claim due to the ongoing uncertainty relating to tenure.
Also after the end of the financial year the Company successfully negotiated a farm-out of up to 15% of the Cambay asset with Magna Energy Limited. The farmout is comprised of US$4 million for a 10% equity share with an additional option for a further 5% equity share for US$2 million. The farm out of up to 15% covers up to 100% of Oilex's share of the upcoming Cambay 77H work program while ensuring Oilex retains a substantial interest in the prolific Cambay tight hydrocarbon asset. On the 4 October 2013 a General Meeting was held approving the issue of shares in Oilex to Magna for any funds Magna has paid to Oilex, should certain conditions, including the Government of India approval of the transfer to Magna not being satisfied by 1 May 2014.
Also after the end of the financial year the Company completed a placement of 68 million shares with a one for two attaching option with the assistance of DJ Carmichael Pty Ltd and Patersons Securities Limited acting as Joint Lead Managers with RFC Ambrian acting as arranger in the UK. A total of $1.9 million before expenses was raised in September 2013 with an additional $1.5 million before expenses raised in October 2013 following shareholder approval at an EGM held on the 28 October 2013. The funds will be used by the Company to fund its share of the Cambay work program as well as Oilex's work program in the Canning Basin and working capital purposes.
The 2013 financial year has been an encouraging year for the Company with progression in the Company's flagship Cambay project as well as securing excellent exploration acreage in the Canning Basin in Western Australia. The Company is seeking to reinvigorate its asset portfolio with onshore acreage targeting tight oil and gas formations located around the Indian Ocean rim.
On behalf of the Board I wish to record our appreciation for the support and dedication of our staff, joint venture partners, contractors, local communities, shareholders and stakeholders during the year, and in particular the contribution of Ron Miller who has taken on the role of Managing Director while the Company progresses the development of the Cambay project.
Mr MDJ Cozijn
Chairman
11 November 2013