STA.L Regulatory News (STA)

Star Phoenix Group Ltd

("Star Phoenix" or "the Company")

30 April 2021

HALF-YEAR REPORT

Star Phoenix, an AIM listed company (AIM: STA) focused on growth through attractive opportunities, today releases its half-year report (unaudited) for the 6 months ending 31 December 2020.

The information contained within this announcement is considered to be inside information prior to its release, as defined in Article 7 of the Market Abuse Regulation No. 596/2014, and is disclosed in accordance with the Company's obligations under Article 17 of those Regulations.

About this Report

This half-year report (unaudited) is a summary of Star Phoenix Group Ltd ("Star Phoenix") operations, activities and financial position for the half-year ended 31 December 2020. It complies with Australian reporting requirements. Star Phoenix (ABN 88 002 522 009) is a company limited by shares and is incorporated and domiciled in Australia.

Unless otherwise stated in this report, all references to Star Phoenix, the Group, the Company, we, us and our, refer to its controlled entities as a whole. References to the half-year or period are to the half-year ended 31 December 2020. All dollar figures are expressed in United States currency unless otherwise stated.

Directors' Report

The Directors of Star Phoenix and the entities it controls (together, the "Group") present the financial report for the half-year ended 31 December 2020.

Directors

The persons who were Directors at any time during or since the end of the half-year are:

The Directors were in office for the entire period unless otherwise stated.

Principal activities

During the half-year, the Company's main focus was on securing new attractive acquisition and investment opportunities to provide future growth and value for the Company and its shareholders. In addition, the Company's efforts were aimed at resolving matters in relation to its legacy assets and transactions.

Dividends

No dividends have been declared, provided for or paid in respect of the half-year ended 31 December 2020 (half-year ended 31 December 2019: Nil).

Financial position

The loss for the financial half-year ended 31 December 2020 amounted to US$2,129,934 (loss for half-year ended 31 December 2019: US$5,517,131).

At 31 December 2020, the Group had net assets of US$237,570 (30 June 2020: net assets of US$2,488,818) and cash of US$2,732,471 (30 June 2020: US$3,164,752).

Auditor's Independence Declaration 

The Lead auditor's independence declaration under section 307C of the Corporations Act 2001 is set out on page 7 for the half-year ended 31 December 2020. This report is made in accordance with a resolution of the Board of Directors.

Operational and Corporate Review

New acquisition opportunities

The Company's key focus remains on securing new attractive acquisition opportunities to provide future growth and value for the Company and its shareholders. During the previous 12 months, the Company had reviewed significant number of new projects and investment opportunities. Currently, discussions are ongoing with several parties in relation to new projects in the energy sector. The directors are confident that these discussions will eventuate in securing a new project for the Company on attractive terms.

Oilfield services business

During the half-year, the Company took necessary steps to further cut the ongoing costs of its oilfield services business in Trinidad ("Range Resources Drilling Services Limited" or "RRDSL") in light of the COVID-19 pandemic. As part of the cost reduction programme, the Company completed a comprehensive organization restructuring of RRDSL along with other cost cutting measures.

To provide additional cashflow and to strengthen the financial position, the Company completed the sale of four smaller production rigs and equipment for a total sum of US$278,965.

Indonesia interest

Following extensive efforts by the Company to find a suitable purchaser for its non-operated 23% interest in the Indonesia project, the Company made a decision to no longer pursue the sale opportunities of its interest and will instead focus on relinquishing any interests in the project.

Outstanding payable from LandOcean

Following the sale of Range Resources Trinidad Limited (which held interests in the upstream assets in Trinidad) to LandOcean Energy Services Co Ltd ("LandOcean") on 31 March 2020, certain sums remain due and payable to the Company.

During the half-year, the Group received US$282,610 from LandOcean towards the outstanding balance. At 31 December 2020, the Board made the decision to fully impair the receivable from LandOcean to adhere to accounting standards given the situation and age of the balances, resulting to an impairment of US$1,722,462. No further payments have been received to date.

Shares issue to Executives

The Executive Directors and senior management of the Company agreed to accept ordinary shares in the Company ("Shares") in lieu of the accrued salaries in order to preserve cash resources of the Company, resulting in total cash saving of US$201,651 to the Company.

Following shareholder approval received at the Annual General Meeting held on 11 December 2020, the Company issued a total of 7,195,036 at a deemed price of 2 pence to two Executive Directors. Of which, Mr Zhiwei Gu, Executive Chairman, was issued 5,468,959 Shares and Mr Lubing Liu, Executive Director and Chief Operating Officer, was issued 1,726,077 Shares. These Shares were issued subsequent to the half-year end. The management were issued 420,040 Shares at a deemed price of 2 pence subsequent to the half-year end.

Consultancy agreement

The Company entered into a consultancy agreement with Fire Phoenix Ltd ("Consultant") effective from 10 November 2020 to provide the Company with business development and M&A advisory services for a monthly fee of US$13,000. The Consultant is deemed to be a related party of Beijing Sibo Investment Management LP (Sibo) which holds over 10% shareholding in the Company, for the purposes of the AIM Rules for Companies (AIM Rules). In view of this, the entry into the Consultancy Agreement comprised a related party transaction for the purposes of the AIM Rules. The Consultant's total remuneration for the period was US$21,667.

Extraordinary General Meeting of Shareholders

On the requests from two separate Shareholders, each of which holds at least 5% of the votes that may be cast at a general meeting of the Company, the Company held an Extraordinary General Meeting of Shareholders to consider the resolutions proposed pursuant to these requests. The Meeting was held on 25 September 2020, where only one resolution relating to the removal of Dr YuFeng Meng as a Director (nominee of shareholder Sibo) was duly passed. As a result, Dr Meng was removed as a director effective 25 September 2020.

Change of registered office and principal place of business

The Company's registered office and the principal place of business changed to c/o Edwards Mac Scovell, 8 St Georges Terrace, Perth, WA 6000, Australia.

Covid-19 impact

The impact of the Coronavirus (COVID-19) pandemic is ongoing, and it has been financially negative for the Group. It is not practicable to estimate the potential impact as the situation is continuously developing and is dependent on measures imposed by the governments of different countries, such as maintaining social distancing requirements, quarantine, travel restrictions and any economic stimulus that may be provided.

Events subsequent to reporting date

Oilfield services business

The Company engaged an independent specialist broker to assist with sale of the remaining eight rigs and related equipment. Whilst the marketing campaign is currently underway (there being no guarantee that it will eventuate in sale agreements being reached), the Company secured dry lease agreements for some of the rigs which will generate additional revenue for the Company.

Georgia litigation

The Company and Strait Oil and Gas Limited ("SOG"), a private company incorporated in Gibraltar, in which Star Phoenix holds a 65% interest had been working with their legal advisers on progressing an arbitration claim against the government of Georgia.

The Advisers had formally notified the government of Georgia of the existence of an investment dispute under the Energy Charter Treaty (ECT) ("Notice of Dispute"). The Notice of Dispute set out the position on SOG's unfair treatment in Georgia and how its investment in Georgia, which exceeds US$22 million, was damaged. SOG and its shareholders are intending to submit an investment treaty claim under the ECT to international arbitration.

Outstanding payable from LandOcean

The Company's legal advisers notified LandOcean that the Company elected to terminate the SPA due to repudiatory breach by LandOcean and is claiming various sums of US$10,248,000. The Company is planning to commence arbitration proceedings in the London Court of International Arbitration to recover the sums.

Although the receivable amount was fully impaired, the Company remains confident that at least part of these sums will be recovered.

Shares issue to Executives

Following shareholder approval received at the Annual General Meeting held on 11 December 2020, the Company issued a total of 7,195,036 shares to two Executive Directors, of which, Mr Zhiwei Gu, Executive Chairman, was issued 5,468,959 shares and Mr Lubing Liu, Executive Director and Chief Operating Officer, was issued 1,726,077 shares. The shares were issued subsequent to the half-year end. The management were issued 420,040 shares subsequent to the half-year end.

Zhiwei Gu

Chairman

Dated this 29 day of April 2021

Auditor's Independence Declaration

Consolidated Statement of Profit or Loss and Other Comprehensive Income

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

The above consolidated statement of financial position should be read in conjunction with the accompanying notes.

Consolidated Statement of Changes in Equity

The above consolidated statement of changes in equity should be read in conjunction with the accompanying notes.

Consolidated Statement of Cash Flows

The above consolidated statement of cash flows should be read in conjunction with the accompanying notes.

Notes to Consolidated Financial Statements

Note 1: Significant accounting policies

These general purpose financial statements for the interim half-year reporting period ended 31 December 2020 have been prepared in accordance with Australian Accounting Standard AASB 134 'Interim Financial Reporting' and the Corporations Act 2001, as appropriate for for-profit oriented entities. Compliance with AASB 134 ensures compliance with International Financial Reporting Standard IAS 34 'Interim Financial Reporting'.

These general purpose financial statements do not include all the notes of the type normally included in annual financial statements. Accordingly, these financial statements are to be read in conjunction with the annual report for the year ended 30 June 2020 and any public announcements made by the company during the interim reporting period in accordance with the continuous disclosure requirements of the Corporations Act 2001.

The principal accounting policies adopted are consistent with those of the previous financial year and corresponding interim reporting period, unless otherwise stated.

New and amended accounting standards and Interpretations adopted

The consolidated entity has adopted all of the new or amended Accounting Standards and Interpretations issued by the Australian Accounting Standards Board ('AASB') that are mandatory for the current reporting period. Any new or amended Accounting Standards or Interpretations that are not yet mandatory have not been early adopted.

Going concern

The Group's net loss after taxation attributable to the members of Star Phoenix Group Ltd for the period end to 31 December 2020 was US$2,129,934 (loss for half-year ended 31 December 2019: US$5,517,131). The Group also reports a net asset position of US$237,570 (30 June 2020: net assets of US$2,488,818) and cash of US$2,732,471 (30 June 2020: US$3,164,752).

The Directors believe that sufficient funds will be available to meet the Group's working capital requirements as at the date of this report, due to the following factors:

- Expecation to raise funds through the disposal of assets held for sale at period end;

- The ability to raise additional capital through equity or debt financing;

- Favourable outcome in relation to the settlement of Witholding tax liabilities as disclosed in note 2.

In the event that the Company is not able to realise the above factors or secure additional funds and secure new projects, it casts significant doubt on its going concern status.

The above factors result in a material uncertainty that may cast a signficiant doubt about the Group's ability to continue as a going concern, and therefore it may be unable to realise its assets and discharge its liabilities in the normal course of business.

The Directors have prepared the financial statements on a going concern basis, which contemplates continuity of normal business activities and the realisation of assets and discharge of liabilities in the normal course of business.

Should the Company not be able to continue as a going concern, it may be required to realise its assets and discharge its liabilities other than in the ordinary course of business and at amounts that differ from those stated in the financial statements. The financial report does not include any adjustments relating to the amounts or classification of recorded assets or liabilities that might be necessary if the Group does not continue as a going concern.

Non-current assets classified as held for sale

Non-current assets are classified as held for sale if their carrying amount will be recovered principally through a sale transaction rather than through continuing use. They are measured at the lower of their carrying amount and fair value less costs to sell. For non-current assets to be classified as held for sale, they must be available for immediate sale in their present condition and their sale must be highly probable.

An impairment loss is recognised for any initial or subsequent write down of the non-current assets to fair value less costs to sell. A gain is recognised for any subsequent increases in fair value less costs to sell of a non-current asset, but not in excess of any cumulative impairment loss previously recognised.

Non-current assets are not depreciated or amortised while they are classified as held for sale. Interest and other expenses attributable to the liabilities of assets held for sale continue to be recognised.

Non-current assets classified as held for sale are presented separately on the face of the consolidated statement of financial position, in current assets. The liabilities of disposal groups classified as held for sale are presented separately on the face of the statement of financial position, in current liabilities.

Discontinued operations

A discontinued operation is a component of the Group's business, the operations and cash flows of which can be clearly distinguished from the rest of the Group and which:

· represents a separate major line of business or geographical area of operations;

· is part of a single co-ordinated plan to dispose of a separate major line of business or geographical area of operations; and

· is a subsidiary acquired exclusively with a view to re-sale.

Classification as a discontinued operation occurs at the earlier of disposal or when the operation meets the criteria to be classified as held-for-sale.

When an operation is classified as a discontinued operation, the comparative consolidated statement of profit or loss and other comprehensive income is re-presented as if the operation had been discontinued from the start of the comparative year.

Note 2: Significant estimates and judgements

Impairment of rigs and related inventory

The Directors did not deem necessary to undertake an impairment assessment during the reporting period as per AASB 136. The basis of the recoverable value remains the same and the Company continues the sale process of the remaining three production and five drilling rigs.

Deferred tax liability

The carrying value of the deferred tax liability is US$1,150,885 at 31 December 2020. In the event that the manner by which the carrying value of these assets is recovered differs from that which is assumed for the purpose of this estimation, the associated tax charges may be significantly less than this amount.

Recoverability of deferred tax assets

Deferred tax assets are recognised only if it is probable that future taxable amounts will be

available to utilise those temporary differences and losses. Management considers that it

is probable that future taxable profits will be available to utilise those temporary differences. Judgement is required to determine the amount of deferred tax assets that can be recognised, based upon the likely timing and the level of future profits.

Allowance for expected credit losses

The allowance for expected credit losses assessment requires a degree of estimation and judgement. It is based on the lifetime expected credit loss, grouped based on days overdue, and makes assumptions to allocate an overall expected credit loss rate for each group. These assumptions include recent experience and historical collection rates, the impact of the Coronavirus (COVID-19) pandemic and forward-looking information that is available. The allowance for expected credit losses is calculated based on the information available at the time of preparation. The actual credit losses in future years may be higher than the US$1,722,462 recorded.

IFRIC 23 Uncertain tax position and tax-related contingency

The group has estimated that following the disposal of Range Resources Trinidad Limited and the settlement of liabilities in multiple jurisdictions which formed part of the consideration for the disposal, may give rise to the possible payment of withholding tax. The group considers it possible that a withholding tax liability of US$742,713 may be payable in Australia and withholding tax liability of US$2,364,933 payable in Trinidad. As at 31 December 2020, both amounts have been provided for in full.

The group is intending to apply for private rulings in both Australia and Trinidad to confirm its interpretation. If both rulings are favourable, this would decrease the group's current withholding tax payable and expense by US$3,107,646 respectively. The group expects to get a response, and therefore certainty about the tax position, before the next reporting date.

Contingent liabilities

The Directors are of the opinion that no provision is required to be raised in respect to any

of the matters disclosed in note 5 as the likely outcome of any outflow is considered to

be remote.

Coronavirus (COVID-19) pandemic

The impact of the Coronavirus (COVID-19) pandemic is ongoing, and it has been financially negative for the Group. It is not practicable to estimate the potential impact as the situation is continuously developing and is dependent on measures imposed by the governments of different countries, such as maintaining social distancing requirements, quarantine, travel restrictions and any economic stimulus that may be provided.

Non-current assets classified as held for sale and discontinued operations

2021 and 2020: Rigs and related inventory

The Group has been marketing the rigs and equipment in the financial year, therefore all rigs and related equipment were classified as held for sale assets as it is highly probable that these assets will be sold within 12 months.

Note 3: Revenue

Note 4: Expenses

(i) Impairment

Following the sale of Range Resources Trinidad Limited (which held interests in the upstream assets in Trinidad) to LandOcean Energy Services Co Ltd (LandOcean), certain sums remain due and payable to the Group.

During the half-year, the Group received US$282,610 from LandOcean towards the outstanding balance. At 31 December 2020, the Board made the decision to fully impair the receivable from LandOcean to adhere to accounting standards given the situation and age of the balances, resulting to an impairment of US$1,722,462. No further payments have been received to date.

Post-period end, the Group has engaged new legal advisers to assist with this matter. The Advisers have now notified LandOcean that the Group has elected to terminate the SPA due to repudiatory breach by LandOcean and is claiming various sums of US$10,248,000. Although the receivable amount was fully impaired, the Group remains confident that at least part of these sums will be recovered.

(ii) Impairment

In the prior period, as a result of impairment indicators identified management were required to undertake an impairment assessment as per AASB 136. The most significant indicators of impairment were the inactivity of the rigs and the decline in oil price.

As a result, the total impairment recognised for the financial year ended 30 June 2020 was US$15,685,850 bringing the net book value of the rigs, other property, plant and equipment and related inventory to US$7,992,861.

No impairment assessment was undertaken in the current period.

Note 5: Contingent liabilities

Geeta Maharaj: There have been no updates since June 2020 on this case. There are no other changes to report on contingent liabilities.

Note 6: Discontinued operations

Current period discontinued operations relate to Range Resources Drilling Services Ltd.

For the period to 31 December 2019, discontinued operations related to Range Resources Trinidad Ltd, which was sold to LandOcean on 31 March 2020.

Note 7a: Assets of disposal group classified as held for sale

Note 7b: Liabilities directly associated with assets classified as held for sale

Note 8: Trade and other receivables

(i) Trade receivables are generally due for settlement within 30 days. They are presented as current assets unless collection is not expected for more than 12 months after the reporting date.

(ii) Relates to the Beach Marcelle performance bond which was left in place after 31 March 2020. The balance was fully impaired in the current period. Refer to note 4d.

The consolidated entity has increased its monitoring of debt recovery as there is an increased probability of customers delaying payment, due to the Coronavirus (COVID-19) pandemic. An impairment of US$1,722,462 was recorded as at 31 December 2020.

Fair value approximates the carrying value of trade and other receivables at 31 December 2020 and 30 June 2020.

Note 9: Property, plant & equipment

Note 10: Trade and other payables

(i) Amount relates to withholding taxes payable as a result of debt eliminations.

(ii) Mangement and Directors fees accrued have been settled post year end through the issue of shares as disclosed in note 15.

Note 11: Provisions

(i) Provision relates to an estimate of the potential land taxes that may be payable by the Company on expired exploration licences in Trinidad.

Note 12: Contributed equity

Note 13: Related parties

The Company entered into a consultancy agreement with Fire Phoenix Ltd effective 10 November 2020 to provide the Company with business development and M&A advisory services for a monthly fee of US$13,000. The Consultant is deemed to be a related party of Beijing Sibo Investment Management LP which holds over 10% shareholding in the Company, for the purposes of the AIM Rules for Companies. In view of this, the entry into the Consultancy Agreement comprised a related party transaction for the purposes of the AIM Rules. Total fees for the period amount to US$21,667.

The Executive Directors and senior management of the Company agreed to accept ordinary shares in the Company in lieu of the accrued salaries in order to preserve cash resources of the Company, resulting in total cash saving of over US$201,654 to the Company. The management were issued 1,893,979 Shares during the half-year and 420,040 Shares subsequently to the half-year end at a deemed price of 2 pence.

Following shareholder approval received at the Annual General Meeting held on 11 December 2020, the Company issued a total of 7,195,036 to two Executive Directors. Of which, Mr Zhiwei Gu, Executive Chairman, was issued 5,468,959 Shares and Mr Lubing Liu, Executive Director and Chief Operating Officer, was issued 1,726,077 Shares. These Shares were issued subsequent to the half-year end. The management were issued 420,040 Shares subsequent to the half-year end.

Note 14: Segmental reporting

Segment revenues and expenses are those directly attributable to the segments and include any joint revenue and expenses where a reasonable basis of allocation exists. Segment assets include all assets used by a segment and consist principally of cash, receivables, plant and equipment and exploration and development expenditure. While most assets can be directly attributed to individual segments, the carrying amount of certain assets used jointly by two or more segments is allocated to the segments on a reasonable basis. Segment liabilities consist principally of payables, employee benefits, accrued expenses, provisions and borrowings.

(i) Unallocated assets

Intersegment transfers

Segment revenues, expenses and results do not include any transfers between segments. Other unallocated assets relate to assets of Star Phoenix and Star Phoenix Group UK Ltd.

Note 15: Events after the reporting date

Oilfield services business

The Company engaged an independent specialist broker to assist with sale of the remaining eight rigs and related equipment. Whilst the marketing campaign is currently underway (there being no guarantee that it will eventuate in sale agreements being reached), the Company secured dry lease agreements for some of the rigs which will generate additional revenue for the Company.

Georgia litigation

The Company and Strait Oil and Gas Limited (SOG), a private company incorporated in Gibraltar, in which Star Phoenix holds a 65% interest had been working with their legal advisers on progressing an arbitration claim against the government of Georgia.

The Advisers had formally notified the government of Georgia of the existence of an investment dispute under the Energy Charter Treaty (ECT) (Notice of Dispute). The Notice of Dispute set out the position on SOG's unfair treatment in Georgia and how its investment in Georgia, which exceeds US$22 million, was damaged. SOG and its shareholders are intending to submit an investment treaty claim under the ECT to international arbitration.

LandOcean outstanding payment

Substantial sums remain due and payable to the Group from LandOcean pursuant to the sale and purchase agreement of Range Resources Trinidad Limited. All previous attempts by the Group to resolve the matter and recover the outstanding sums were unsuccessful.

The Group has engaged new legal advisers to assist with this matter. The Advisers have now notified LandOcean that the Group has elected to terminate the SPA due to repudiatory breach by LandOcean and is claiming various sums totalling US$10,248,000. Although the receivable amount was fully impaired, the Group remains confident that at least part of these sums will be recovered.

Shares issue to Executives

Following shareholder approval received at the Annual General Meeting held on 11 December 2020, the Company issued a total of 7,195,036 at a deemed price of 2 pence to two Executive Directors. Of which, Mr Zhiwei Gu, Executive Chairman, was issued 5,468,959 Shares and Mr Lubing Liu, Executive Director and Chief Operating Officer, was issued 1,726,077 Shares. These Shares were issued subsequent to the half-year end. The management were issued 420,040 Shares subsequent to the half-year end, resulting in total cash saving of US$201,652 to the Company.

Director's Declaration

The directors of the company declare that:

The financial statements, comprising the consolidated statement of profit or loss and other comprehensive income, consolidated statement of financial position, consolidated statement of cash flows, consolidated statement of changes in equity, accompanying notes, are in accordance with the Corporations Act 2001 and:

a) comply with Accounting Standard AASB 134 Interim Financial Reporting, the Corporations Regulations 2001 and other mandatory professional reporting requirements; and

b) give a true and fair view of the consolidated entity's financial position as at 31 December 2020 and of its performance for the half-year ended on that date.

In the Directors' opinion there are reasonable grounds to believe that the Company will be able to pay its debts as and when they become due and payable.

This declaration is made in accordance with a resolution of the Board of Directors and is signed for and on behalf of the directors by:

Zhiwei Gu

Chairman

29 April 2021

Independent Audit Report to the Members of Star Phoenix Group Ltd

Independent Audit Report to the Members of Star Phoenix Group Ltd

Independent Audit Report to the Members of Star Phoenix Group Ltd

Corporate Directory