16 Mar 2012 07:00
15 March 2012 Red Emperor Resources NL ("Red Emperor" or "the Company") Half Year Report for the Period Ending 31 December 2011
Please see below extracts from the Company's Half Year Report for the period ended 31 December 2011, being the:
* Directors' Report
* Consolidated Statement of Comprehensive Income
* Consolidated Statement of Financial Postion
* Consolidated Statement of Cashflows
A copy of the entire Half Year Report is available on the Company's website:
www.redemperorresources.com
For further information please visit www.redemperorresources.com or contact:
Red EmperorGreg Bandy +61 8 9225 2826Rebecca Sandford +44 20 7025 7040Cairn Financial Advisers LLP (Nominated Adviser)Jo Turner +44 20 7148 7900Tony RawlinsonOld Park Lane Capital plc (Broker)Luca Tenuta +44 20 7493 8188Michael ParnesTavistock CommunicationsPaul Youens +44 20 7920 3150Ed PortmanDIRECTORS' REPORTYour directors present their report on the consolidated entity of Red EmperorResources NL and the entities it controlled at the end of, or during, the halfyear ended 31 December 2011.
1. Directors
The persons who were directors of Red Emperor Resources NL during the half year and up to the date of this report are:
Mr Greg Bandy (Executive Director)Mr Jason Bontempo (Non Executive Director)Mr Stephen Brockhurst (Non Executive Director)
2. Review of Operations for the Half Year ended 31 December 2011
The Consolidated Statement of Comprehensive Income shows a consolidated net loss for the half year ended 31 December 2011 to members of ($2,907,696) (2010: net loss of $892,063).
Puntland ProjectDuring the period the operator of the Puntland onshore licenses, Horn PetroleumCorp. (TSV: HRN) ("Horn") completed all of the sourcing of drilling relatedmaterials with the majority of materials arriving on site. Site preparation,including the drill site, air strip, ingress route construction and water wellswere completed in readiness for the spudding of the historic first explorationwell (of two planned), Shabeel-1 well on the Dharoor Block in Puntland.The Sakson 501 rig will be used to drill both exploration wells which areexpected to take approximately 90 days each for drilling and evaluation and arethe first oil exploration well in the region to be drilled in over 20 years.Red Emperor has an option, but not an obligation to participate in the secondwell.The Shabeel and Shabeel North prospects are located on a Jurassic aged riftsystem, which is part of the same system that has proven to be highlyproductive in the Masila and Shabwa Basins in Yemen. These basins contain anestimated 6 billion barrels of oil. Both Shabeel and Shabeel North are verylarge fault block prospects with internal most likely estimates of potentialoil volumes of over 300 million barrels of recoverable oil. Source rocks areexpected to be rich Jurassic Kimmeridgian shales in the deep portion of therift immediately down dip from the Shabeel prospects. Reservoirs are expectedto be sandstones and carbonates of the Lower Cretaceous and Jurassic systemsanalogous to Yemen.Georgian ProjectDuring the period, the Company, along with its joint venture partners,successfully spudded the first exploration well - Mukhiani 1, on the Vani 3Prospect on Block VIa with a planned target depth of circa 3,500m. The MukhianiWell reached a total depth of circa 1,550m, and following the analysis of there interpretation of the seismic supported by the Mukhiani-1 Vertical SeismicProfiling ("VSP"), results indicated that the well encountered previouslyunrecognised faults that led to possible basement being encountered far earlierthan predicted.New fault trap and stratigraphic trapping potential were also identified in thevicinity of the well and based on these findings; the joint venture has theoption to side-track and test these targets. However, the Company and itspartners decided that, based on its exploration schedule and the availabilityof the drilling rig, that it would continue onto the next proposed Kursebi wellwith site. Severe weather that has been experienced in Georgia over recentweeks which has delayed the anticipated spudding of the second Georgian wellinto April 2012.
Also during the period, new independent technical consultants were engaged, NTD Energy, to provide overall technical support with respect to the Georgian operations which include:
* Providing a fresh review of all of the seismic and geological data across
the top 3 Kursebi prospects previously identified, as well as across the
whole license areas;
* Assisting in the management and supervision of the Company's drilling
program for the Namakhavani well on the Kursebi 6 prospect; and
* Assisting in the promotion and development of the unconventional (shale /
CBM) plays that may exist across the two license areas.
Jillewarra Project
During the period the Company was advised by its joint venture partner, CazalyResources, that Maxtrix Metals had not exercised their option to proceed withdrilling on the Jillewarra Project. As a result of the obligation to spendmoney on the project reverting back to Red Emperor, the Company decided torelinquish its rights and as a result all obligations with respect to theJillewarra Project.
Corporate
During the period, the Company sought shareholder approval at a general meetingin respect of its change of activity to a natural resources explorer andre-compliance with the ASX Listing Rules. As part of the re compliance, theCompany raised a further $1 million by issue of 2,857,142 shares at an issueprice of A$0.35 pursuant to a prospectus. The Company also issued a total of9,226,162 options to directors, management and advisors, and completed thesecond tranche of an earlier placement raising of $400,000 by the issue of2,000,000 shares at an issue price of A$0.20.During December 2011 the Company completed a placement raising approximately$6.32 million by issue of 37,178,123 shares at an issue price of £0.11 (A$0.17)to sophisticated investors in Australia and the UK. As part of the placement,the Company issued 2,331,596 unlisted options exercisable at £0.11 and A$0.17respectively by 31 December 2014 to advisors assisting with the capitalraising.
3. Subsequent Events
Subsequent to period end the Company, along with its joint venture partners,successfully spudded the historic Shabeel-1 well on the Dharoor Block inPuntland which has a total planned maximum depth of 3,800 meters. Drillingoperations also commenced on the Shabeel North-1 well with the setting of the30 inch surface casing and the drilling of a 50 meter pilot hole. The Companyhas an option over the second well where a decision to participate will be madefollowing consideration of the drilling results of the first well.The Sakson 501 rig is being used to drill both wells which are expected to takeapproximately 90 days each for drilling and evaluation. These two wellsrepresent the first exploration wells to be drilled in the country in over 20years and will satisfy the first exploration period drilling commitments asrequired under the Production Sharing Contracts for both the Dharoor and NugaalBlocks. In order to provide sufficient time to evaluate drilling results, thePuntland Government has granted an extension of the first exploration periodexpiry date to 17 October 2012.As released to ASX on 8 March 2012, "the Shabeel-1 well continues drillingahead on the Dharoor Block in Puntland, Somalia and is currently at a depth of2002 meters. The upper 1600 meters of section drilled to date includes a thicksection of Tertiary limestones and shales that appear to be a regional seal asno oil or gas shows were encountered above this depth. The well is currentlydrilling a 400 meter section composed of interbedded sandstones and shalesbelieved to be Upper Cretaceous in age. Most of the sandstone intervals in thissection have exhibited oil and gas shows confirming the existence of a workingpetroleum system. Determination of the quality of the reservoir andprospectivity of any potential oil bearing intervals cannot be determined untildownhole electric logs and formation tests are concluded."Subsequent to the period end, the Company has announced details of a 2 tranchecapital raising to raise approximately £8.2 million by way of issue of45,472,204 Shares at an issue price of £0.18 (A$0.265). In March 2012 theCompany completed the first tranche and issued 16,194,013 shares. It isanticipated that the tranche 2 shares and oversubscription shares will settlefollowing shareholder approval at a meeting to be held on 28 March 2012.
4. Auditors Independence Declaration
The Auditor's Independence Declaration on page 4 forms part of the Director's Report for the half year ended 31 December 2011.
This relates to the audit report, where they state that they have issued an independent declaration.
This report is signed in accordance with a resolution of the Board of Directors.
Greg BandyExecutive DirectorPerth, Western Australia, 15 March 2012
Consolidated Statement of Comprehensive Income
Note Half Year Half Year 2011 2010 $ $ Revenue from continuing operations Profit on sale of shares - 3,441 Interest income 85,761 9,769 Administration expenses (319,454) (182,829) Compliance and regulatory (237,873) (18,588) expenses Consultancy costs - (16,667) Director fees (174,400) (83,189) Occupancy expense - (4,000) Corporate advisory (40,000) (600,000) Share based payments expense 4 (1,040,198) - Impairment of exploration 5 (774,026) - expenditure Loss of associate 6 (629,620) - Forex gain/(loss) 222,114 -
Loss before income tax expense (2,907,696) (892,063)
Income tax expense - - Loss for the half year (2,907,696) (892,063)
attributable to owners of the
company Exchange difference on 438,746 - translation of foreign operations Other comprehensive income 438,746 -
Total comprehensive income for (2,468,950) (892,063) the half year attributable to
owners of the company
Basic loss per share (cents per (0.162) (0.011)
share) Diluted loss per share (cents N/A N/A per share)
The above consolidated statement of comprehensive income should be read in conjunction with the accompanying notes set out in the full report.
Consolidated Statement of Financial Position
Note 31 December 2011 30 June 2011 $ $ ASSETS Current Assets Cash and cash equivalents 4,680,656 7,942,356 Trade and other receivables 3,572,564 2,816,113 Total Current Assets 8,253,220 10,758,469 Non-Current Assets
Property, plant and equipment 19,997
-
Financial assets at fair value through 400
400profit and loss Investment accounted for using the 6 4,540,314 3,208,487equity method Exploration and evaluation expenditure 5 7,794,763 1,950,369 Total Non-current Assets 12,355,474 5,159,256 TOTAL ASSETS 20,608,694 15,917,725 LIABILITIES Current Liabilities Trade and other payables 141,062 596,964
Derivative financial liability 10 177,666
- Total Current Liabilities 318,728 596,964 TOTAL LIABILITIES 318,728 596,964 NET ASSETS 20,289,966 15,320,761 EQUITY Issued Capital 4 28,812,151 21,976,015 Accumulated losses (9,557,368) (6,649,673) Reserves 1,035,183 (5,581) TOTAL EQUITY 20,289,966 15,320,761
The above consolidated statement of financial position should be read in conjunction with the accompanying notes set out in the full report.
Consolidated Statement of Cashflows
Note 31 December 2011 31 December 2010 $ $ CASH FLOWS FROM OPERATING ACTIVITIES Payments to suppliers and (763,524) (576,476)employees (inclusive of GST) Finance and interest costs (541) (3,793) Interest received 85,761 9,769 Net cash provided by (used in) (678,304) (570,500)operating activities CASH FLOWS FROM INVESTING ACTIVITIES Payments for exploration and (8,579,867) (8,264)evaluation Payment for purchase PP&E (19,997) Payments for other financial - (9,349)assets at fair value through profit or loss Proceeds from disposal of - 332,185financial assets through profit or loss Payments for asset acquisition -
(2,206,775)
Net cash provided by (used in) (8,599,864) (1,892,203)investing activities CASH FLOW FROM FINANCING ACTIVITIES Proceeds from issue of shares 6,512,224 2,800,000and options Payments for share issue costs (530,756) (180,732) Proceeds from repayment of 35,000 -loan Net cash provided by (used in) 6,016,468 2,619,268financing activities Net increase/(decrease) in (3,261,700) 156,565cash held Cash and cash equivalents at 7,942,356 60,001
the beginning of the half-year
Cash and cash equivalents at 4,680,656 216,566end of half-year
The above consolidated statement of cashflows should be read in conjunction with the accompanying notes set out in the full report.
XLON