17 Sep 2018 07:00
17 September 2018
Red Emperor Resources NL
Annual Report for the Year Ending 30 June 2018 and Corporate Governance Statement
Red Emperor Resources NL ("the Company") today announces the release of its Annual Report for the Year Ending 30 June 2018. Please see below extracts from this Annual Report, including:
· Directors' Report
· Consolidated Statement of Profit or Loss and Other Comprehensive Income
· Consolidated Statement of Financial Position as at 30 June 2018
· Consolidated Statement of Changes in Equity for the year ended 30 June 2018
· Consolidated Statement of Cash Flows for the year ended 30 June 2018
A copy of the entire Annual Report will be sent to shareholders and is available on the Company's website - www.redemperorresources.com.
The Company has also released its Appendix 4G Key to Disclosures Corporate Governance Council Principles and Recommendations and its Corporate Governance Statement to the Australian Securities Exchange ("ASX"). Copies are available on the Company's website www.redemperorresources.com
For further information please visit http://www.redemperorresources.com/ or contact:
Red Emperor Resources:
Greg Bandy +61 8 9212 0102
Grant Thornton UK LLP (Nominated Adviser):Philip Secrett, Jen Clarke 020 7383 5100
The information contained within this announcement is deemed to constitute inside information as stipulated under the Market Abuse Regulations (EU) No. 596/2014. Upon the publication of this announcement, this inside information is now considered to be in the public domain.
RESULTS OF OPERATIONS
The Company's net loss after taxation attributable to the members of Red Emperor for the year to 30 June 2018 was $690,097 (2017: $758,918).
DIVIDENDS
No dividend was paid or declared by the Company during the year and up to the date of this report.
CORPORATE STRUCTURE
Red Emperor Resources NL is a company limited by shares, which is incorporated and domiciled in Australia.
NATURE OF OPERATIONS AND PRINCIPAL ACTIVITIES
The principal activity of the Company during the financial year was oil and gas exploration and project identification.
REVIEW OF OPERATIONS
Alaska North Slope
Red Emperor executed definitive agreements in July 2018 that will see the Company participate in the drilling of a highly prospective Nanushuk oil trend exploration well on the Alaska North Slope in early 2019.
Commercial Agreement
Red Emperor, along with Otto Energy Limited (ASX: OEL) ("Otto") and 88 Energy Limited (ASX: 88E) ("88 Energy") (collectively the "Consortium Partners"), executed definitive agreements with Great Bear Petroleum Ventures II LLC ("Great Bear") to acquire the majority of Great Bear's working interest in four leases on the western flank of the Alaska North Slope, specifically ADL#s 391718, 391719, 319720 & 391721; collectively the "Western Blocks".
In consideration for acquiring the leases, the consortium partners agreed to undertake the following:
§ Provide a performance bond to the State of Alaska of US$3.0 million (RMP share US$1.05m) by 31 July 2018; and
§ Drill an exploration well in the Western Blocks by 31 May 2019.
The Consortium Partners agreed to provide the following consideration to Great Bear:
§ Free carry Great Bear for a 10% working interest in the leases for the drilling, completion and production testing of an initial test well, including all associated costs such as permitting, ice road access and test production disposition;
§ Pay US$500,000 (RMP share US$175,000) upon execution of the definitive agreements;
§ Pay US$500,000 (RMP share US$175,000) upon receipt of final permits necessary to drill the initial test well, in any case by no later than 31 December 2018; and
§ Provide an option for Great Bear to acquire a further 10% working interest prior to the initial test well by paying its pro-rata share of all costs of the initial test well or, if exercised within 6 months of completing the initial test well, by paying 200% of its pro-rata share of all costs of the initial test well.
The relevant interests in the Western Blocks under the commercial agreements (subject to standard regulatory approval by the State of Alaska) are as follows:
|
Current Working Interest % | Post Transaction | |||
Working Interest (before back-in) % | Paying Interest (before back-in) % | Net Revenue Interest* (before back-in) % | Working Interest*** (after back-in) % | ||
Red Emperor | - | 31.5 | 35.0 | 26.25 | 28.0 |
88 Energy (Drilling Manager) | - | 36.0 | 40.0 | 30.0 | 32.0 |
Otto Energy | 10.8 | 22.5 | 25.0 | 18.75 | 20.0 |
Great Bear Petroleum** | 89.2 | 10.0 | - | 8.33 | 20.0 |
Alaskan State | - | - | - | 16.67 |
|
| 100 | 100 | 100 | 100 | 100 |
* Government royalty of 16.67%
** Currently Operator of record on leases
*** "After back-in" interests reflect position if Great Bear exercise option to acquire further 10% working interest
Drilling Planning
88 Energy will manage the drilling of the initial test well within the Western Blocks on behalf of the joint venture and Consortium Partners. 88 Energy has already commenced a rig market survey and is identifying a suitable rig with which to commence the drilling operations. Given that the location is only accessible through an ice road, drilling will be undertaken during the winter operational months once the Alaska North Slope is opened for operations. The joint venture has met with the Alaska Department of Natural Resources to expedite required approvals and permits to undertake the initial test well.
Lease Terms
The four North Slope leases comprising the Western Blocks have recently been extended by three years with the term now expiring on 30 April 2021. During this period the joint venture is required to post a US$3.0 million performance bond and undertake the drilling and testing of an initial test well by no later than 31 May 2019. The leases have an annual rental of US$10.00 per acre or fraction thereof and have been fully paid through to May 2019.
Funding
The well is estimated to cost approximately US$15 million (100% dry hole cost) of which Red Emperor's share will be US$5.25 million. There is also a performance bond of US$3 million (RMP share US$1.05m) that was posted to the Alaska DNR prior to 31 July 2018. The bond will be refunded if the well is drilled before 31 May 2019. The Company expects to fund the cost of drilling the well from its current, strong cash position. Red Emperor's working interest is held through its wholly owned Alaskan subsidiary, Red Emperor Alaska Limited.
Philippines (SC 55)
In April 2018, the Company finally received official confirmation from the Philippine Department of Energy (DoE) ratifying the request for the transfer of participating interests in Service Contract no. 55 (SC55) from Otto Energy Limited (ASX: OEL) to its partners, Century Red Pte. Ltd (a 100% owned subsidiary of Red Emperor Resources NL), PaIawan55 Exploration & Production Corporation and Pryce Gases, Inc.
Red Emperor's equity interest in Block SC 55 is now 37.5% (previously 15%) after the DoE found the partners to be "Financially qualified to assume the proposed interests. Legally qualified to assume the participating interest from Otto Energy considering that they are existing petroleum companies operating either as operator and/or consortium members in petroleum service contracts; And technically qualified, as exemplified by the joint cooperation and completion of previous exploration activities, such as the drilled Hawkeye-1 well."
As a result, the participating interests in SC55 are as follows:
Company | Participating Interests % |
Palawan55 Exploration & Production Corporation (Operator) | 37.50 |
Century Red Pte. Ltd (Red Emperor Resources) | 37.50 |
Pryce Gases, Inc. | 25.00 |
Subsequent to the quarter end, nominated "Operator" Palawan55 chaired an Operating Committee Meeting to discuss the proposed amendments to the Joint Operating Agreement and, having recently completed their evaluation of prospective geophysical contractors, propose a Work Program and Budget for the remainder of the moratorium period. Additionally, each company was asked to identify their representative to the Operating Committee. A formal vote on the proposed resolutions is expected in the coming weeks.
California
Red Emperor's proposed Californian Joint Venture partner, Oil Ventures Limited (Oil Ventures), were unsuccessful in agreeing commercial terms to acquire a number of leases prospective for oil & gas in the Sacramento Gas Basin. As a result, Red Emperor and Oil Ventures entered into an amended HoA whereby if either party wishes to lease or explore in Areas of Mutual Interest (AMI) in the Sacramento Basin before May 1, 2020 they will do so under certain conditions (refer to announcement dated 17 May 2018). While the Company was disappointed in not being able to execute any lease agreements as anticipated, it deployed minimal capital in pursuit of the venture and was grateful for the opportunity provided.
Corporate
Board and Management Changes
Red Emperor appointed Gracjan P. Lambert as its new Chief Executive Officer ("CEO"). Mr. Lambert brings with him a wealth of technical and commercial experience in the global oil and gas industry, built over more than 20 years working in Europe, Asia (including the Middle East), Australia, North and South America, and Africa. He has spent the last 10 years at ExxonMobil in diverse roles including managing global field operations and leading complex international commercial negotiations. Over the course of his career he has leveraged his proven commercial track record and technical expertise to inform profitable decision making and leadership. Mr. Lambert holds a PhD in Exploration Geophysics from Curtin University in Western Australia and will be relocating back to Perth to fulfil his role as CEO.
In June 2018 the Company appointed Aaron Bertolatti to the Board following the resignation of Nathan Rayner.
SIGNIFICANT CHANGES IN THE STATE OF AFFAIRS
There have been no significant changes in the state of affairs of the Group during the financial year, other than as set out in this report.
SIGNIFICANT EVENTS AFTER THE REPORTING DATE
Red Emperor Alaska Limited, a wholly owned subsidiary entity, was incorporated on 11 July 2018 in the State of Alaska.
On 8 August 2018 the Company issued 16,000,000 unlisted options exercisable at $0.04 each on or before 31 December 2020.
On 29 August 2018 the Company advised that consortium operator, 88 Energy Limited via its wholly owned subsidiary, Captivate Energy Alaska, Inc, had executed a rig contract with Nordic-Calista Services for the drilling of the "Winx" Prospect, located on the Western Blocks, North Slope of Alaska.
There have been no other significant events subsequent to the end of the financial year to the date of this report.
LIKELY DEVELOPMENTS AND EXPECTED RESULTS OF OPERATIONS
The Group will continue its investment in resource projects with the object of identifying commercial resources. The Company intends to pursue acquisition and investment opportunities to secure new projects in the natural resources sector.
ENVIRONMENTAL REGULATIONS AND PERFORMANCE
The Group operates within the resources sector and conducts its business activities with respect for the environment while continuing to meet the expectations of the shareholders, employees and suppliers. The Group aims to ensure that the highest standard of environmental care is achieved, and that it complies with all relevant environmental legislation.
The Group has no current reporting obligations under the Natural Greenhouse and Energy Reporting Act 2007 due to all operations occurring overseas. The Directors are mindful of the regulatory regime in relation to the impact of the organisational activities on the environment. There have been no known breaches by the Group during the year.
Greg Bandy
Managing Director
Perth, Western Australia
17 September 2018
Consolidated Statement of Profit or Loss and Other Comprehensive Income
for the year ended 30 June 2018
| Note | 30 June 2018 $ | 30 June 2017 $ |
Continuing Operations |
|
|
|
Interest received |
| 134,982 | 158,634 |
|
|
|
|
Employee and director benefits expense |
| (253,950) | (274,103) |
Professional and Consultants |
| (303,830) | (308,959) |
ASX and AIM and share registry fees |
| (86,803) | (69,969) |
Travel expenditure |
| (113,717) | (66,922) |
Exploration expenditure written off |
| (24,389) | - |
Realised gain on investment |
| 10,445 | - |
Realised Foreign exchange gain |
| 2,199 | - |
Unrealised Foreign exchange gain/(loss) |
| 107,065 | (112,584) |
Other expenses |
| (162,099) | (85,015) |
Loss before income tax |
| (690,097) | (758,918) |
|
|
|
|
Income tax expense | 3 | - | - |
Loss after Income Tax |
| (690,097) | (758,918) |
|
|
|
|
Other comprehensive loss |
|
|
|
Items that may be reclassified to profit or loss |
|
|
|
Other comprehensive income/(loss) |
| 556 | (607) |
Other comprehensive income/(loss) for the year net of tax |
| 556 | (607) |
Total comprehensive loss for the year |
| (689,541) | (759,525) |
Loss per share for the year attributable to the members of Red Emperor Resources NL |
|
|
|
Basic and diluted loss per share (cents) | 13 | (0.16) | (0.18) |
The above Consolidated Statement of Profit or Loss and Other Comprehensive Income should be read in conjunction with the accompanying notes. | |||
Consolidated Statement of Financial Position as at 30 June 2018
|
Note | 2018 $ | 2017 $ |
Current Assets |
|
|
|
Cash and cash equivalents | 4 | 10,344,621 | 10,921,315 |
Trade and other receivables |
| 17,883 | 51,727 |
Total Current Assets |
| 10,362,504 | 10,973,042 |
|
|
|
|
Non-Current Assets |
|
|
|
Financial assets at fair value through profit or loss |
| 400 | 400 |
Total Non-Current Assets |
| 400 | 400 |
Total Assets |
| 10,362,904 | 10,973,442 |
|
|
|
|
Current Liabilities |
|
|
|
Trade and other payables | 5 | 132,561 | 53,558 |
Total Current Liabilities |
| 132,561 | 53,558 |
Total Liabilities |
| 132,561 | 53,558 |
|
|
|
|
Net Assets |
| 10,230,343 | 10,919,884 |
|
|
|
|
Equity |
|
|
|
Issued capital | 6 | 57,329,505 | 57,329,505 |
Reserves | 7 | 4,096,828 | 4,096,272 |
Accumulated losses | 8 | (51,195,990) | (50,505,893) |
Total Equity |
| 10,230,343 | 10,919,884 |
|
|
|
|
The above Consolidated Statement of Financial Position should be read in conjunction with the accompanying notes. | |||
Consolidated Statement of Changes in Equity for the year ended 30 June 2018
| Issued capital $ | Accumulated losses $ | Foreign exchange translation reserve $ | Share based payments reserve $ | Total $ |
|
|
|
|
|
|
Balance at 1 July 2016 | 57,329,505 | (49,746,975) | (14,823) | 4,111,702 | 11,679,409 |
Total comprehensive loss for the year |
|
|
|
|
|
Loss for the year | - | (758,918) | - | - | (758,918) |
Other Comprehensive loss | - | - | (607) | - | (607) |
Total comprehensive loss for the year | - | (758,918) | (607) | - | (759,525) |
Transactions with owners in their capacity as owners |
|
|
|
|
|
Balance at 30 June 2017 | 57,329,505 | (50,505,893) | (15,430) | 4,111,702 | 10,919,884 |
Balance at 1 July 2017 | 57,329,505 | (50,505,893) | (15,430) | 4,111,702 | 10,919,884 |
Total comprehensive loss for the year |
|
|
|
|
|
Loss for the year | - | (690,097) | - | - | (690,097) |
Other Comprehensive loss | - | - | 556 | - | 556 |
Total comprehensive loss for the year | - | (690,097) | 556 | - | (689,541) |
Transactions with owners in their capacity as owners |
|
|
|
|
|
Balance at 30 June 2018 | 57,329,505 | (51,195,990) | (14,874) | 4,111,702 | 10,230,343 |
The above Consolidated Statement of Changes in Equity should be read in conjunction with the accompanying notes.
Consolidated Statement of Cash Flows for the year ended 30 June 2018
| Note | 2018 $ | 2017 $ |
Cash flows from operating activities |
|
|
|
Payments to suppliers and employees |
| (806,995) | (840,275) |
Interest received |
| 134,982 | 158,634 |
Net cash used in operating activities | 4 | (672,013) | (681,641) |
|
|
|
|
Cash flows from investing activities |
|
|
|
Payments for exploration and evaluation |
| (159,590) | - |
Refund of SC55 Operator cash at bank |
| 96,255 | - |
Refund of Californian lease deposit |
| 38,946 | - |
Proceeds from sale of equities |
| 10,445 | - |
Net cash used in investing activities |
| (13,944) | - |
|
|
|
|
|
|
|
|
Net decrease in cash and cash equivalents |
| (685,957) | (681,641) |
Cash and cash equivalents at beginning of year |
| 10,921,315 | 11,715,540 |
Effects of exchange rate changes on cash and cash equivalents |
| 109,263 | (112,584) |
Cash and cash equivalents at the end of the year | 4 | 10,344,621 | 10,921,315 |
| |||
The above Consolidated Statement of Cash Flows should be read in conjunction with the accompanying notes. | |||
Notes to the Consolidated Financial Statements for the year ended 30 June 2018
1. Cash and Cash Equivalents
Reconciliation of cash
Cash comprises of: |
|
|
Cash at bank | 10,344,621 | 10,921,315 |
Reconciliation of operating loss after tax to net cash flow from operations |
|
|
Loss after tax | (690,097) | (758,918) |
Non-cash items |
|
|
Exploration expenditure written off | 24,389 | - |
Net exchange differences | (108,707) | 111,977 |
Change in assets and liabilities |
|
|
(Increase) / decrease in trade and other receivables | 33,844 | (18,312) |
(Increase) / decrease in other assets | (10,445) | - |
Increase/(decrease) in trade and other payables | 79,003 | (16,388) |
Net cash flow used in operating activities | (672,013) | (681,641) |
About Red Emperor Resources NL
Red Emperor Resources NL is an Australian natural resource exploration company listed on both the Australian Securities Exchange (ASX: RMP) and Alternative Investment Market (AIM: RMP). Red Emperor has oil and gas interests on the Alaska North Slope and in South East Asia.
Alaska
Red Emperor has executed Definitive Agreements with its consortium partners 88 Energy Limited and Otto Energy Limited that will see the Company participate in the drilling of a highly prospective Nanushuk oil trend exploration well on the Alaska North Slope in early 2019. The drill target is immediately adjacent to and a direct analogue of the Horseshoe-1/1A oil well drilled in 2017. Horseshoe is part of the billion-barrel plus Nanushuk oil play-fairway, one of the largest conventional oil fields discovered in the US in more than 30 years.
Technical work on the Western Blocks has identified a gross best estimate prospective resource volume of 400 MMbbls (126 MMbbls net to RMP), and a geological chance of success of 25%-35%. The estimated quantities of petroleum that may potentially be recovered by the application of future development projects relate to undiscovered accumulations. These estimates have both an associated risk of discovery and a risk of development. Further appraisal and evaluation is required to determine the existence of a significant quantity of potentially moveable hydrocarbons.
The relevant interests in the Western Blocks under the commercial agreements (subject to standard regulatory approval by the State of Alaska) are as follows:
|
Current Working Interest | Post Transaction | |||
Working Interest (before back-in) | Paying Interest (before back-in) | Net Revenue Interest* (before back-in) | Working Interest*** (after back-in) | ||
Red Emperor | - | 31.5% | 35% | 26.25% | 28% |
88 Energy (Drilling Manager) | - | 36.0% | 40% | 30.00% | 32% |
Otto Energy | 10.8% | 22.5% | 25% | 18.75% | 20% |
Great Bear Petroleum** | 89.2% | 10.0% | - | 8.33% | 20% |
Alaskan State | - | - | - | 16.67% |
|
| 100.0% | 100.0% | 100.0% | 100.0% | 100% |
* Government royalty of 16.67%
** Currently Operator of record on leases
*** "After back-in" interests reflect position if Great Bear exercise option to acquire further 10% working interest
Philippines
SC55 is located in the southwest Palawan Basin, covers an area of 9,880km2 and was awarded to Otto Energy Investments Ltd (formerly NorAsian Energy Ltd) in 2005. It is a deep-water block in the middle of a proven regional oil and gas fairway that extends from the productive offshore Borneo region in the southwest to the offshore Philippine production assets northwest of Palawan.
Red Emperor participated in a USD $25m exploration well (Hawkeye-1) within the block in 2015 and contributed in excess of AUD $5m towards drilling costs. Over USD $50m has been spent exploring SC55 to date and a number of drill-ready targets remain, including the "Cinco" gas prospect which has a best estimate prospective resource of 1.6tcf recoverable gas.