ASX Lodgement of Annual Report

RNS Number : 0255X

88 Energy Limited

16 February 2017

 



16 February 2017

88 ENERGY LIMITED

ASX LODGEMENT OF ANNUAL REPORT

88 Energy Limited (ASX:88E; AIM:88E)("88 Energy" or "Company") advises that a copy of the Company's Annual Report for the year ended 31 December 2016 has been lodged on the ASX and is also available on the Company's website at www.88energy.com. The Annual Report was sent to shareholders today.

Set out below is the Chairman's Statement as included in the Company's Annual Report. 

Also set out below is a summary of the Company's audited financial information for the year ended 31 December 2016 as extracted from the Annual Report, being:

Consolidated Statement of Comprehensive Income;

Consolidated Statement of Financial Position;

Consolidated Statement of Changes in Equity; and

Consolidated Statement of Cash Flows.

CHAIRMAN'S STATEMENT

Dear Shareholders

It is a pleasure to present my Chairman's Report for the 2016 financial year.

2016 marks only the second year in which your Company has traded under the 88 Energy ("88E") banner.  I am pleased to report some significant milestones have been achieved as 88E progresses along the pathway leading to appraisal of Project Icewine on Alaska's North Slope.  These milestones are detailed in the Operations Report.

Measuring success for a junior explorer is a complex process. Year on Year the market capitalisation of 88E has grown from around $25 million to $188 million and the Company has been cited as the best performing oil and gas stock based on share price appreciation on the ASX during this period.

As we move into the appraisal drilling phase we do so with a strong balance sheet and high level of project equity providing excellent leverage to our shareholders in the success case. This begs the question "what are the hallmarks of a successful junior explorer?" With over 3 decades in the industry I am well placed to address this question.

Geologists love to base their exploration models on successful analogues just as we have done in drawing comparisons to the Eagle Ford and the Haynesville shales Texas, USA.  This makes good sense, however we can look beyond the geological modelling and seek to identify what constitutes a successful analogue at the entity level. I have always considered Hardman Resources (HDR) as the flagship analogue when measuring success in the junior oil space.

Some of you will be familiar with its history: this tiny oil explorer went from a market capitalisation of $10 million dollars around the turn of the century to $1.5 billion dollars in 2006 with accompanying share price appreciation from 4 cents to $2.36.   Interestingly, the oil price at the time of its maiden offshore discovery was a mere US$28.80 per barrel.

Leaving aside the fundamental geology, the key attributes of this historical success story included; leadership with both vision and drive, first mover advantage, attractive regime, meaningful prospect volumes, high project equity over oil prone play type, operatorship, dual ASX and AIM listing, strong financial credentials and farm out capability.

It is my conviction that 88E has many, if not all of these same attributes; in particular the strong leadership capabilities that have been exhibited to date by our Managing Director, David Wall.  We are clearly the first mover over this unconventional play type on Alaska's North Slope; our potential has been independently evaluated in excess of a billion barrels; we control the play; enjoy high project equity and acreage along with operatorship; and our balance sheet is strong.

The science behind Project Icewine was originated by Paul Basinski, a geoscientist with an enviable track record in unconventional oil exploration.  88E is backing his proposition that Alaska hosts vast undiscovered potential in an unconventional play targeting the HRZ shale which shares a common source rock with the Giant Prudhoe Bay oil field, the largest conventional field ever discovered in North America. The Project is located in a prolific oil producing region where 88E has assembled a land bank that would befit an oil major, many of whom are already engaged in successful conventional oil exploration in Alaska, as recent discoveries in the region attest.

Alaska is a supportive regime that encourages exploration, offering rebates up to 85 percent for every dollar spent prior to 2016; an incentive that was not only attractive to 88 Energy but one backed by Bank of America (BOA). This has enabled 88E to maintain leverage without the larger equity dilution normally associated with funding a program of this magnitude. Our strong acreage position is further enhanced due to the proximity of the all-weather Dalton Highway and the ability to connect into the trans-Alaska pipeline that can handle up to 2.1 million barrels per day and has considerable spare capacity.

The funding and execution of Project Icewine is being overseen by our Managing Director, David Wall, with the assistance of a small dedicated team including our Exploration Manager Elizabeth Pattillo, our Alaskan based Operations Manager, Erik Opstad and the full support of my fellow Directors. To date, the results speak for themselves and back up the early prognosis that formed the basis of our original investment decision. I would also like to welcome our new Chief Financial Officer, Ashley Gilbert, to the team, a Chartered Accountant with more than 20 years' experience in commerce and significant experience in the oil and gas sector.

The process of evaluation is ongoing and not without considerable risk; however, we look to the future with measured optimism as we unlock both the conventional and unconventional potential of our Alaskan exploration acreage.  One only needs to compare this program with better known shale plays in Texas, like the Eagle Ford and Haynesville, to gain an appreciation of the impact that successful exploration can have on 88E as oil prices recover.

Before closing I would like to thank the Department of Natural Resources, the Alaska Oil and Gas Conservation Commission; the North Slope Borough and other regulatory agencies that have facilitated our exploration effort in the State.

My fellow Directors and I acknowledge David and his staff for their sterling efforts in managing 88E's exciting Alaskan program on a tight budget and timeframe. Their efforts have resulted in 88E turning in the best performance of a junior oil explorer on the ASX in 2016.  Indeed, there is little more 88E could have done in the lead up to the appraisal program than what has already been achieved. We should recognise this point as we move forward to the drilling of Icewine #2.

In turn, this progress would not be possible without your support as shareholders in what has been a challenging environment.  Our dual listing on both ASX and AIM has garnered a wide investor base and we have been ably supported by our brokers and advisers including Hartleys, Cenkos and Patersons.

We look forward to a successful 2017 appraisal program at Project Icewine.

Yours faithfully,

Michael Evans
Non-Executive Chairman

 CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER CONSOLIDATED INCOME

	Note	2016	2015
		$	$
Revenue from continuing operations
Other income	3(a)	158,627	108,852
Administrative expenses	3(b)	(2,278,431)	(2,921,653)
Occupancy expenses		(169,301)	(164,629)
Employee benefit expenses	3(c)	(1,295,150)	(491,828)
Share-based payment expense	18	(100,000)	(1,723,534)
Depreciation and amortisation expense		(8,232)	(15,038)
Finance cost		(1,702,878)	(689,503)
Other expenses		(4,790,093)	(407,379)
Foreign exchange gains / (losses)		784,194	-
Loss before income tax		(9,401,264)	(6,304,712)
Income tax expense	4	-	-
Loss after income tax for the year		(9,401,264)	(6,304,712)
Other comprehensive income for the year Items that may be reclassified to profit or loss
Exchange differences on translation of foreign operations		440,218	383,900
Other comprehensive income / (loss) for the year, net of tax		440,218	383,900
Total comprehensive loss for the year attributable to members of 88 Energy Limited		(8,961,046)	(5,920,812)
Loss per share for the year attributable to the members of 88 Energy Limited:
Basic and diluted loss per share	5	(0.003)	(0.002)

The Consolidated Statement of Profit or Loss and Other Comprehensive Income should be
read in conjunction with the notes to the financial statements.

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

		Note	2016	2015
			$	$
ASSETS
Current Assets
Cash and cash equivalents		6	27,303,178	9,604,249
Trade and other receivables		7	312,644	463,601
Total Current Assets			27,615,822	10,067,850
Non-Current Assets
Plant and equipment		8	6,131	10,960
Exploration and evaluation expenditure		9	38,227,059	25,403,611
Other assets		10	11,158,742	994,687
Total Non-Current Assets			49,391,932	26,409,258
TOTAL ASSETS			77,007,754	36,477,108
LIABILITIES
Current Liabilities
Trade and other payables		11	6,127,943	4,003,386
Provisions		12	90,085	55,388
Total Current Liabilities			6,218,028	4,058,774
Non-Current Liabilities
Borrowings		13	22,779,313	10,930,281
Total Non-Current Liabilities			22,779,313	10,930,281
TOTAL LIABILITIES			28,997,341	14,989,055
NET ASSETS			48,010,413	21,488,053
EQUITY
Contributed equity		14	125,157,965	90,654,560
Reserves		15	16,268,985	14,848,766
Accumulated losses			(93,416,537)	(84,015,273)
TOTAL EQUITY			48,010,413	21,488,053

The Consolidated Statement of Financial Position should be
read in conjunction with the notes to the financial statements.

CONSOLIDATED STATEMENT OF CHNAGES IN EQUITY

	Issued Capital	Shares Reserved for Share Plan	Reserves	Accumulated Losses	Total Equity
	$	$	$	$	$
At 1 January 2016	90,654,560	-	14,848,766	(84,015,273)	21,488,053
Loss for the year	-	-	-	(9,401,264)	(9,401,264)
Other comprehensive income	-	-	440,218	-	440,218
Total comprehensive income/(loss) for the year after tax	-	-	440,218	(9,401,264)	(8,961,046)
Transactions with owners in their capacity as owners:
Issue of share capital	37,496,660	-	-	-	37,496,660
Shares cancelled	-	-	-	-	-
Share-based payments	-	-	980,001	-	980,001
Share issue costs	(2,993,255)	-	-	-	(2,993,255)
Balance at 31 December 2016	125,157,965	-	16,268,985	(93,416,537)	48,010,413
At 1 January 2015	67,985,300	(1,667,500)	12,741,333	(77,710,561)	1,348,572
Loss for the year	-	-	-	(6,304,712)	(6,304,712)
Other comprehensive income	-	-	383,900	-	383,900
Total comprehensive income/(loss) for the year after tax	-	-	383,900	(6,304,712)	(5,920,812)
Transactions with owners in their capacity as owners:
Issue of share capital	24,538,797	-	-	-	24,538,797
Shares cancelled	-	1,667,500	-	-	1,667,500
Share-based payments	-	-	1,723,534	-	1,723,534
Share issue costs	(1,869,537)	-	-	-	(1,869,537)
Balance at 31 December 2015	90,654,560	-	14,848,766	(84,015,273)	21,488,053

The Consolidated Statement of Changes in Equity should be
read in conjunction with the notes to the financial statements

CONSOLIDATED STATEMENT OF CASH FLOWS

	Note	2016	2015
		$	$
Cash flows from operating activities
Payment to suppliers and employees		(3,676,801)	(4,082,521)
Interest received		54,248	24,995
Finance costs		(4,867)	(599,501)
Other income		129,812	-
Net cash flows used in operating activities	6(b)	(3,497,608)	(4,657,027)
Cash flows from investing activities
Payments for exploration and evaluation activities		(25,588,985)	(21,941,810)
Payment for plant and equipment		(3,404)	(2,408)
Net cash flows used in investing activities		(25,592,389)	(21,944,218)
Cash flows from financing activities
Proceeds from drawdown of facility		10,621,424	10,930,280
Proceeds from issue of shares		37,367,107	26,339,541
Share issue costs		(1,983,702)	(1,869,537)
Net cash flows from financing activities		46,004,829	35,400,284
Net increase/(decrease) in cash and cash equivalents		16,914,832	8,799,039
Cash and cash equivalents at the beginning of the year		9,604,249	805,210
Effect of exchange rate fluctuations on cash held		784,097	-
Cash and cash equivalents at end of year	6(a)	27,303,178	9,604,249

The Consolidated Statement of Cash Flows should be
read in conjunction with the notes to the financial statements

END

David Wall

Managing Director

COMPETENT PERSONS STATEMENT

Pursuant to the requirements of the ASX Listing Rules Chapter 5 the technical information and resource reporting contained in this Annual Report was prepared by, or under the supervision of, Mr Brent Villemarette, who is a Non-Executive Director of the Company. It has been produced for the Company, and at its request, for adoption by the Directors. Mr Villemarette has more than 30 years experience in the petroleum industry and is a qualified Reservoir Engineer who has sufficient experience that is relevant to the style and nature of the oil prospects under consideration and to the activities discussed in this document. He has consented to the inclusion of the petroleum prospective resource estimates prepared by DeGolyer & MacNaughton (as of 31 December 2015) and supporting information being included in this announcement in the form and context in which they are presented. His academic qualifications and industry memberships appear on the Company's website and both comply with the criteria for "Competence" under clauses 18-21 of the Valmin Code 2005. Terminology and standards adopted by the Society of Petroleum Engineers "Petroleum Resources Management System" have been applied in producing this document.

Media and Investor Relations:

88 Energy Ltd

Dave Wall, Managing Director                                                   Tel: [phone]

Email: [e-mail] 

Finlay Thomson, Investor Relations                                        Tel: [phone]

Hartleys Ltd

Dale Bryan                                                                                          Tel: + 61 8 9268 2829

Cenkos Securities

Neil McDonald/Derrick Lee                                                         Tel: [phone]

 

END

 

 

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