Half Yearly Report

RNS Number : 8868O

Global Petroleum Ltd

16 March 2009

 



16 March 2009

RNS AIM release

INTERIM FINANCIAL REPORT FOR THE HALF YEAR ENDED 31 DECEMBER 2008

The directors of Global Petroleum Limited ('the Company' or 'Global') present their report together with the consolidated financial report for the half year ended 31 December 2008 and the review report thereon.

Enquiries:

Global Petroleum Limited
Shane Cranswick	Tel	+ 61 8 9322 6322
	Email	[e-mail]
Blue Oar Securities Plc (Nominated Adviser and Broker)
William Vandyk/Olly Cairns	Tel	[phone] [phone]

DIRECTORS

The directors of the Company at any time during or since the end of the half year are:

Mr Mark Savage

Mr Peter Blakey

Mr Peter Taylor 

Mr Ian Middlemas

Mr Shane Cranswick

REVIEW OF OPERATIONS

Operating Results

During the six months ended 31 December 2008, the consolidated group recorded a profit after tax of $2,449,461 (six months ended 31 December 2007: loss of $6,569,197).  

Principal Activities

Uganda Block EA5 (Global earning up to 50%)

During the half year, Global announced that it has reached agreement ('Farm In Agreement') with Neptune Petroleum (Uganda) Limited ('Neptune'), a wholly-owned subsidiary of Tower Resources plc ('Tower'), an AIM listed oil and gas exploration company, to farm in to an interest in Neptune's Uganda acreage. The agreement was subject to the consent of the Government of Uganda Minister of Energy and Mineral Development, which was received subsequent to the half year end. Global has the right to earn a 50% interest in Exploration Area 5 ('EA5'), north western Uganda by meeting the cost of two exploration commitment wells. 

EA5 is a 6,040 sq km licence area situated at the northern end of the Albertine Graben in northern Uganda. A regional aeromagnetic survey has identified that EA5 contains one of five identified sedimentary depocentres (or basins), called the Rhino Camp Basin, within the Albertine Graben and a programme of seismic interpretation and geochemical sampling has been completed. The Blocks to the south of EA5 have had consistent success with a 100% exploration and appraisal success rate since mid 2006, including the recently announced successful and significant well, Giraffe-1 exploration well in EA1 held by Tullow Oil Plc and Heritage Oil Limited. 

Under the terms of the Farm In Agreement, Global has the right to earn a 50% interest in the EA5 Production Sharing Agreement by funding the Authority for Expenditure ('AFE') cost of drilling Iti-1 (subject to a cap as outlined below), the first well of a two well programme, and a second well, currently expected to be Sambia-1, when the results of Iti-1 have been interpreted. 

It has been agreed that Global's funding of Iti-1 will be capped at US$6.5 million in the event that drill stem testing is not justified and US$7.5 million in the event that the presence of hydrocarbons supports the need for a drill stem test programme, after which Global would fund 25% of continuing well costs.

There are no expenditure cap levels for the drilling of the second well. Notwithstanding the above, Global may, after the first well, opt not to fund the second well in which case Global may, at its sole discretion, continue with a 25% interest or withdraw from EA5 altogether.

Tower and Global have begun to finalise the contractual and logistical negotiations for a drilling rig to begin drilling operations within the next two months. The first well is expected to be completed within two weeks of commencement of drilling.

The carrying value of the Consolidated Entity's Uganda exploration expenditure is $148,183 at the end of the half year. 

Leighton Prospect - Texas, USA (Global earning a 15% WI)

Also during the half year, Global announced it would farm in to the Leighton oil prospect owned by Texon Petroleum Limited (ASX: TXN). The Leighton Prospect is located onshore on the Gulf Coast of Texas, USA. The Company earned a 15% Working Interest ('WI') in the first well by funding 30% of the cost of drilling the well, in addition to reimbursing Texon US$180,000 in respect of prospect generation, land and lease costs for the well.

Drilling of the first well, Peeler #1, commenced in September 2008 and Texon advised that it has tested oil and gas at an unstablised rate of approximately 400 barrels of oil equivalent per day (boepd) comprising some 250bopd and 900 mcf of gas per day and 90 barrels per day of water through a quarter inch choke at a flowing pressure at the surface of about 1,500psi. 

Texon also advised that the flowing tubing pressure of the first well on Peeler #1 was close to stabilising with oil and gas flow rates continuing to show some fluctuation. As of 31 December 2008 the well has produced a gross 6,470 barrels of oil and gas sales of 17,975mcf. 

The gas has a heating value of about 1,350btu/cubic foot, which is achieving a premium sales price, some 30-35% above the benchmark Texas gas price. 

Global has exercised its option to participate in the drilling of a second well on the Leighton prospect under the same terms to earn a WI in the Leighton leases. Global only earns a 15% WI in Leighton when this second well has been drilled, which is due to commence in March 2009. All subsequent wells drilled on Leighton will be at each company's earned working interest. 

The carrying value of the Consolidated Entity's Leighton exploration expenditure is $821,667 at the end of the half year. 

Kenya L5 and L7 Joint Venture (Global 20%)

As previously advised, notice has been given to Woodside Energy (Kenya) Pty Limited ('Woodside') terminating the Farm-In Agreement ('FIA'). The termination notice has been given based on Woodside's refusal to drill a second exploratory well in the project area in accordance with the FIA and its failure to take any steps to remedy this refusal, which the Company considers to be a repudiation and breach of the FIA.

The Company and joint venture partner Dana Petroleum (E&P) Limited have commenced legal proceedings in the English High Court of Justice to recover losses suffered as a result. Both parties have filed pleadings with the Court at this stage.

The carrying value of the Consolidated Entity's Kenya exploration expenditure is nil at the end of the half year. 

Malta Exploration Study Agreement Area 3 - Blocks 4 & 5 (Global 80%)

RWE Dea AG ('RWE'), which has farmed into Global's interest in the Exploration Study Agreement covering Blocks 4 & 5, has the right to earn up to a total 70% interest if the parties enter into a PSC with the Malta Government and RWE commits to the drilling of a well. The Maltese Government have not granted an extension to the Exploration Agreement that expired on 30 June 2008 however RWE are continuing talks with a potential farminee.

The carrying value of the Consolidated Entity's Malta exploration expenditure is nil at the end of the half year. 

 SUBSEQUENT EVENTS

On 13 February 2009, the Company announced that consent of the Minister of Energy and Mineral Development of the Government of the Republic of Uganda had been received in relation to its Farm In Agreement with Neptune Petroleum (Uganda) Limited to earn a 50% interest in Neptune's EA5. Global's funding of Iti-1 will be capped at US$6.5 million in the event that drill stem testing is not justified and US$7.5 million in the event that the presence of hydrocarbons supports the need for a drill stem test programme, after which Global would fund 25% of continuing well costs.

In addition, Global announced on 20 February 2009 that the Company had elected to participate in the follow up well to the Leighton oil and gas discovery, Tyler Ranch #1, by funding 30% of the cost of drilling the well, which is forecast to be approximately US$650,000 in total, in addition to reimbursing Texon US$180,000 in respect of prospect generation and lease costs for the well. Global will have earned a 15% WI (11.25% NRI) in the Leighton leases when this second well has been drilled.

Other than as outlined above, there were no significant events occurring after the balance sheet date requiring disclosure.

LEAD AUDITOR'S INDEPENDENCE DECLARATION UNDER SECTION 307C OF THE CORPORATIONS ACT 2001

The lead auditor's independence declaration is set out on page 4 and forms part of the directors' report for the half year ended 31 December 2008.

Signed in accordance with a resolution of Directors.

Mark Savage

Chairman

16 March 2009

Consolidated Interim Income Statement 
For the six months ended 31 December 2008

	Note	31 December 2008 $	31 December 2007 $
Administration costs		(481,703)	(502,986)
Business development costs		-	(123,283)
Exploration and evaluation expenditure written off	7	(416,552)	(8,310,549)
Results from operating activities		(898,255)	(8,936,818)
Net financial income	3	1,126,426	2,367,621
Profit/(loss) before income tax		228,171	(6,569,197)
Income tax benefit	4	2,221,290	-
Profit/(loss) for the period		2,449,461	(6,569,197)
		Cents	Cents
Basic earnings/(loss) per share		1.40	(3.77)
Diluted earnings/(loss) per share		1.40	(3.77)

The income statement is to be read in conjunction with the attached notes to the interim financial statements.

Consolidated Interim Balance Sheet
As at 31 December 2008

	Note	31 December 2008 $	30 June 2008 $
ASSETS
Current Assets
Cash and cash equivalents		34,024,005	34,454,208
Trade and other receivables		28,660	38,900
Other financial assets		600	600
Total Current Assets		34,053,265	34,493,708
Non-current Assets
Investments	6	2,403,236	4,618,239
Exploration and evaluation expenditure	7	969,850	-
Total Non-current Assets		3,373,086	4,618,239
TOTAL ASSETS		37,426,351	39,111,947
LIABILITIES
Current Liabilities
Trade and other payables		518,137	213,378
Current tax payable	4	-	1,654,255
Total Current Liabilities		518,137	1,867,633
Non-current Liabilities
Deferred tax liabilities		28,963	1,260,497
Total Non-current Liabilities		28,963	1,260,497
TOTAL LIABILITIES		547,100	3,128,130
NET ASSETS		36,879,251	35,983,817
EQUITY
Issued capital	5	35,590,053	35,590,053
Reserves		1,558,107	3,112,134
Accumulated losses		(268,909)	(2,718,370)
TOTAL EQUITY		36,879,251	35,983,817

The balance sheet is to be read in conjunction with the attached notes to the interim financial statements.

Consolidated Interim Statement of Cash Flows
For the six months ended 31 December 2008

	31 December 2008 $	31 December 2007 $
Cash flows from operating activities
Cash paid to suppliers and employees	(367,588)	(693,908)
Interest received	1,126,426	216,094
Net cash provided by/(used in) operating activities	758,838	(477,814)
Cash flows from investing activities
Proceeds from sale of listed shares	-	2,287,959
Exploration expenditure	(1,189,010)	(159,512)
Net cash from/(used in) investing activities	(1,189,010)	2,128,447
Cash flows from financing activities
Proceeds from the issue of share capital	-	-
Share issue expenses	-	-
Net cash from financing activities	-	-
Net increase/(decrease) in cash and cash equivalents	(430,172)	1,650,633
Cash and cash equivalents at 1 July	34,454,208	6,324,089
Effect of exchange rate changes on cash and cash equivalents	(31)	(174)
Cash and cash equivalents at 31 December	34,024,005	7,974,548

The statement of cash flows is to be read in conjunction with
the attached notes to the interim financial statements

Consolidated Interim Statement of Changes in Equity

For the six months ended 31 December 2008

	Share Capital $	Fair Value Reserve $	Foreign Currency Translation Reserve $	Accumu-lated Losses $	Total Equity $
Six Months Ended 31 December 2007
Balance at 1 July 2007	35,590,053	22,513,778	52,759	(18,551,398)	39,605,192
Foreign exchange translation differences	-	-	14,422	-	14,422
Change in fair value - available-for-sale investments	-	14,268,156	-	-	14,268,156
Change in fair value transferred to profit and loss - available-for-sale investments	-	(2,188,606)	-	-	(2,188,606)
Income and expense recognised directly in equity	-	12,079,550	14,422	-	12,093,972
Loss for the period	-	-	-	(6,569,197)	(6,569,197)
Total recognised income and expense for the period	-	12,079,550	14,422	(6,569,197)	5,524,775
Balance at 31 December 2007	35,590,053	34,593,328	67,181	(25,120,595)	45,129,967
Six Months Ended 31 December 2008
Balance at 1 July 2008	35,590,053	3,089,566	22,568	(2,718,370)	35,983,817
Foreign exchange translation differences	-	-	(3,525)	-	(3,525)
Change in fair value - available-for-sale investments	-	(2,215,003)	-	-	(2,215,003)
Reversal of deferred tax liability in respect of available-for-sale investments	-	664,501	-	-	664,501
Income and expense recognised directly in equity	-	(1,550,502)	(3,525)	-	(1,554,027)
Profit for the period	-	-	-	2,449,461	2,449,461
Total recognised income and expense for the period	-	(1,550,502)	(3,525)	2,449,461	895,434
Balance at 31 December 2008	35,590,053	1,539,064	19,043	(268,909)	36,879,251

The statement of changes in equity is to be read in conjunction with
the attached notes to the interim financial statements.

Notes to the Interim Financial Statements 
For the six months ended 31 December 2008

1.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

This general purpose financial report for the interim half year reporting period ended 31 December 2008 has been prepared in accordance with Accounting Standard AASB 134 Interim Financial Reporting and the Corporations Act 2001.

This interim financial report does not include all the notes of the type normally included in an annual financial report. Accordingly, this report is to be read in conjunction with the annual report of Global Petroleum Limited for the year ended 30 June 2008 and any public announcements made by Global Petroleum Limited and its controlled entities during the interim reporting period in accordance with the continuous disclosure requirements of the Corporations Act 2001.

(a)   Basis of Preparation of Half Year Financial Report

The interim financial report has been prepared on the basis of historical cost, except for the revaluation of available-for-sale investments. Cost is based on the fair values of the consideration given in exchange for assets. All amounts are presented in Australian dollars.

The accounting policies and methods of computation adopted in the preparation of the half year financial report are consistent with those adopted and disclosed in the company's 2008 annual financial report for the year ended 30 June 2008, other than as detailed below.

In the current year, the Group has adopted all of the new and revised Standards and Interpretations issued by the Australian Accounting Standards Board (the AASB) that are relevant to its operations and effective for annual reporting periods beginning on or after 1 July 2008. The adoption of these new and revised standards has not resulted in any significant changes to the Group's accounting policies or to the amounts reported for the current or prior periods.

(b)   Estimates

The preparation of the interim financial report requires management to make judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets and liabilities, income and expense. Actual results may differ from these estimates.

Except as described below, in preparing this consolidated interim financial report, the significant judgements made by management in applying the consolidated entity's accounting policies and the key sources of estimation uncertainty were the same as those that applied to the consolidated financial report as at and for the year ended 30 June 2008.

During the six months ended 31 December 2008 and 2007 management reassessed its estimates in respect of the carrying value of all exploration properties based on the exploration activities during the half year and the status of the projects at those dates. This assessment resulted in exploration expenditure in Kenya being written off.  

 2.   SEGMENT INFORMATION

(a)  Geographical Segments

The consolidated entity's geographical segments are as follows:

31 Dec 2008	Australia $	Europe $	Africa $	Falkland Islands $	Elimi- nations $	Consoli- dated $
Segment revenue
External revenue	-	-	-	-	-	-
Total revenue						-
Result
Segment result	655,070	(6,770)	(420,129)	-	-	228,171
Income tax benefit						2,221,290
Profit for the period						2,449,461

31 Dec 2007	Australia $	Europe $	Africa $	Falkland Islands $	Elimi- nations $	Consoli- dated $
Segment revenue
External revenue	-	-	-	-	-	-
Total revenue						-
Result
Segment result	1,799,437	(36,404)	(8,332,230)	-	-	(6,569,197)
Income tax benefit						-
Loss for the period						(6,569,197)

(b)   Business Segments

The consolidated entity operates within one business segment, being the petroleum and mineral exploration industry. Accordingly, the consolidated entity's total revenue and profit/loss for the period relates to that business segment.

  3.   PROFIT/(LOSS) FROM OPERATIONS

	31 December 2008 $	31 December 2007 $
Financial Income/(Expenses)
Interest income	1,126,426	216,094
Gain on disposal of available-for-sale investments	-	2,188,606
Net foreign exchange gain/(loss)	-	(37,079)
	1,126,426	2,367,621

4.   INCOME TAX

	31 December 2008 $	31 December 2007 $
(a)   Recognised in the Income Statement
Current tax expense/(benefit)
Current year	-	-
Adjustments in respect of current income tax of previous years	(1,654,255)	-
	(1,654,255)	-
Deferred tax expense
Origination and reversal of temporary differences	-	-
Temporary differences not previously brought to account	(567,035)	-
	(567,035)	-
Total income tax expense/(benefit) in the income tax statement	(2,221,290)	-

The adjustment in respect of income tax of previous years was in relation to the treatment of the sale of Falkland Oil and Gas shares during the financial year ended 30 June 2008. Documentation provided to the Company following the lodgement of the 2008 Financial Report allowed the Company to adjust its income tax calculations and reduce the tax liability on the sale of the shares.

5.   EQUITY SECURITIES LISTED

There were no movements in ordinary share capital during the six month periods ended 31 December 2007 and 2008.

200,000 options with an exercise price of $0.25 expired on 31 December 2008. No other options are outstanding at 31 December 2008.

6.   INVESTMENTS

	31 December 2008 $	30 June 2008 $
Listed equity securities available-for-sale - at fair value	2,403,236	4,618,239

Investments in listed equity securities available-for-sale have been recognised at fair value (current market value) and represent an investment in Falkland Oil and Gas Limited ('FOGL').  

7.   CAPITALISED EXPLORATION AND EVALUATION EXPENDITURE

	31 December 2008 $	31 December 2007 $
Costs
Balance at 1 July	-	9,247,206
Foreign currency movement	-	(25,106)
Expenditure incurred	1,386,402	159,512
Expenditure written-off	(416,552)	(8,310,549)
Balance at 31 December	969,850	1,071,063

Expenditure written-off during the 2008 and 2007 half years related to the Kenya project.  

The recoverability of the carrying amounts of exploration and evaluation assets is dependent on the successful development and commercial exploitation or sale of the respective area of interest.

8.   RELATED PARTIES

Arrangements with related parties continue to be in place. For details on these arrangements, refer to the 30 June 2008 annual financial report.  

9.   CONTINGENCIES 

There have been no changes in contingent liabilities since 30 June 2008.

10.  SUBSEQUENT EVENTS

On 13 February 2009, the Company announced that consent of the Minister of Energy and Mineral Development of the Government of the Republic of Uganda had been received in relation to its Farm In Agreement with Neptune Petroleum (Uganda) Limited to earn a 50% interest in Neptune's EA5. Global's funding of Iti-1 will be capped at US$6.5 million in the event that drill stem testing is not justified and US$7.5 million in the event that the presence of hydrocarbons supports the need for a drill stem test programme, after which Global would fund 25% of continuing well costs.

In addition, Global announced on 20 February 2009 that the Company had elected to participate in the follow up well to the Leighton oil and gas discovery, Tyler Ranch #1, by funding 30% of the cost of drilling the well, which is forecast to be approximately US$650,000 in total, in addition to reimbursing Texon US$180,000 in respect of prospect generation and lease costs for the well. Global will have earned a 15% WI (11.25% NRI) in the Leighton leases when this second well has been drilled.

Other than as outlined above, there were no significant events occurring after the balance sheet date requiring disclosure.

11.  CONTROLLED ENTITIES

During the half-year, the Company incorporated a new Australian subsidiary Global Petroleum (USA) Pty Ltd, a $2 company with a subsidiary GP Exploration, Inc which is incorporated in the US. There were no other changes in the composition of the consolidated entity during the period.

DIRECTORS' DECLARATION

 

END

 

 

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