Final Results

RNS Number : 8576F

Xtract Energy plc

15 October 2008

 



15 October 2008    

AIM: XTR

XTRACT ENERGY PLC

('Xtract' or 'the Company') 

Preliminary Results for the year ended 30 June 2008

Xtract, which identifies and invests in a diversified portfolio of early stage energy sector technologies and businesses with significant growth potential, today announces its Preliminary Results for the year ended 30 June 2008.

Financial Highlights

• Pre-tax gain of £2.9 million on disposal of 21.5 million shares in MEO Australia Ltd (ASX: MEO).

• £1.0 million gain on disposal of Aviva Corporation (ASX: AVA) through share for share swap with Wasabi Energy (ASX: WAS).

• Cash position increased by £4.8 million to £6.4 million (2007: £1.6 million).

Operational Highlights

• In April 2008, following a strategic review, Cambrian Mining ('CBM'), announced its intention to divest its interests in Xtract, through the sale to strategic investors and/or through a dividend in specie of its holding in Xtract to its shareholders.

• MEO Australia Ltd ('MEO'): The sale of 21.5 million shares in MEO at an average price of A$1.03 / share in cash provided Xtract with working capital and the opportunity to offer development support to other investee companies.

• Elko Energy Inc ('Elko'): The investment of US$8 million in Elko through two private placings increased Xtract's holding over the period to 35.2%. The second placing was part of a successful US$18 million pre-IPO fundraising completed in December 2007.

• Oil Shale: In late 2007, a supplementary drilling programme was completed in Julia Creek. As a result, the revised resource estimate represents an increase of over 150% relative to the previously declared figure of 825 million barrels.

• Wasabi Energy ('Wasabi'): The sale of 132 million shares in Wasabi in April 2008 resulted in Xtract holding approximately 153 million Wasabi shares, representing 19.4% of Wasabi's total issued share capital.

Post Period Highlights

• Turkey Joint Venture: The Company has made a significant new investment in Turkey, together with local partner Merty Energy, to create a new medium-sized oil and gas exploration and production business containing a portfolio of 7 licences. The new company is known as Extrem Energy A.S.

• Turmoil in the equity markets and consequential declines in the share prices of Xtract and its listed investments has put considerable pressure on future investment and expenditure plans of the Company. Xtract will continue to be responsive to market conditions as best as possible, amending future expenditure and strategy where necessary to reflect the changing economic environment.  

Andy Morrison, Chief Executive of Xtract Energy, commented: 

'I believe that Xtract's fundamental business model is sound and that the Company has the appropriate strategy to negotiate the current market conditions. Xtract's policy of maintaining a high proportion of liquid assets should enable the Company to withstand the current downturn in the global equity markets and we will seek to take advantage of opportunities as external market conditions permit. We are committed to develop the value of our existing asset base, to identify and invest in new opportunities for the Company in the medium-term and to deliver value to shareholders.'

For further information, please contact:

Xtract Energy plc	Andy Morrison, CEO	[phone]
Smith & Williamson Corporate Finance Limited	David Jones Azhic Basirov	[phone]
Scott Harris	Ian Middleton James O'Shaughnessy	[phone]

For further Information on Xtract please visit www.xtractenergy.co.uk 

CHAIRMAN'S STATEMENT

The period under review has been one of considerable change and evolution for the Company. As outlined in the accompanying Operational Review, a great deal has been achieved in developing the operations of our portfolio companies. Despite this progress, the share price performance during the period has been disappointing, and subsequent to the year end market conditions have continued to worsen. This has put further downward pressure on the share price of the Company, its listed investments and on the future investment and expenditure plans of the Company. Given more favourable market conditions the Company is positioned to generate positive returns as its investments mature.

Xtract continues to identify and invest in a diversified portfolio of early stage energy sector businesses and technologies with significant growth potential. The arrival of Andy Morrison as Chief Executive at the beginning of the period enabled the Company to make further progress in its move from a holding company to one with a more active role in its underlying investments.

The principal assets of the Company are its investments in MEO Australia Ltd, Elko Energy Inc and an oil shale development project. Worldwide interest in oil shale has increased markedly over the last year in response to higher oil prices. Xtract's oil shale technology is intended to result in the production of liquid hydrocarbons to help address the global decline of conventional oil reserves. This method of extraction should produce enhanced economic and environmental performance over previous methods.

We remain optimistic about our investment in MEO Australia and we continue to be the largest shareholder with over 59 million shares. The sale of part of the Company's holding, 21.5 million shares, in MEO Australia at an average price of A$1.03 per share during the period generated a profit of £2.9 million, representing a return of 71 % on the initial investment and thereby demonstrating our ability to deliver superior returns from our portfolio management strategy.

Subsequent to year end the MEO share price declined significantly as a result of market conditions, therefore any further sales conducted by the Company at prevailing share prices would not yield the same level of return.

Cambrian Mining Divestment 

Throughout the period under review, Xtract was treated as a subsidiary of Cambrian Mining Plc ('Cambrian Mining'), its major shareholder. As at the end of the period, Cambrian Mining, together with its wholly-owned subsidiary Cambrian Investment Holdings Limited, held approximately 50.1% of Xtract's issued ordinary shares.

In April 2008, following a strategic review, Cambrian Mining announced its intention to divest its interests in Xtract, through the sale to strategic investors and/or through a dividend in specie of its holding in Xtract to its shareholders. This intention was reinforced in July 2008 with the announcement of the sale of 36.5 million shares and an equal number of options to Wasabi Energy Ltd. 

Xtract looks forward to the completion of the Cambrian Mining divestment process which will remove a significant uncertainty and offers the Company the chance to develop its independent strategy and to broaden its investor base. 

Xtract aims to provide its shareholders with strong returns through investment in a portfolio of high potential businesses that develop and mature over various time horizons. We aim to provide value through exposure to a diversified portfolio of assets in which we actively participate. Xtract provides unique access to unlisted opportunities, whilst maintaining listed companies as a significant part of the portfolio. Based on the balance sheet numbers presented in this report, 56 % of the Company's assets were in cash and listed securities at 30 June 2008.  

Corporate Highlights

With the focus during the period on developing the existing businesses, there were fewer corporate transactions than in the previous period. Significant transactions include:

• The sale of Xtract's holding of 61.5 million ordinary shares in Aviva Corporation Ltd ('Aviva'), together with an interest in a steel-making technology, to Wasabi Energy Ltd ('Wasabi') in exchange for 175 million new Wasabi ordinary shares and 25 million warrants.
• The sale of 21.5 million shares in MEO Australia at an average price of A$1.03/share in cash. The proceeds of this sale provided Xtract with working capital and the opportunity to offer development support to other investee companies within its portfolio.
• The investment of US$8 million in Elko through two private placings thereby increasing our holding over the period to approximately 35.2% of the issued capital. The second placing was as part of a successful US$18 million pre-IPO fundraising completed in December 2007.
• The sale in April 2008 of 132 million shares in Wasabi together with the grant of a call option over a further 100 million Wasabi shares for a total cash consideration receivable of approximately A$2.6 million. Following this transaction, Xtract held approximately 153 million Wasabi shares, representing about 19.4% of Wasabi's total issued share capital.

Business Outlook

Subsequent to year end the Company made a significant new investment in Turkey, together with local partner Merty Energy. The agreement with Merty Energy covers the farm-in to a new joint venture company containing a portfolio of 7 licenses in Turkey. Xtract has so far invested US$5m for a 20% share of the joint venture and holds an option to increase this to 34%. The license portfolio includes early oil production which promises to help fund the development of projects within the remaining licenses. 

Over the coming months we can expect to see the commencement of drilling operations by the new joint venture in Turkey, along with the commencement of the drilling campaign at MEO's Zeus prospect in its North-West shelf license area. We also hope to conclude the farm-out of our exploration business in Kyrgyzstan.

Recent months have seen testing macroeconomic conditions in a backdrop of volatile capital markets. The market turmoil continues at the time of writing. The Company and its management are aware of the challenges presented and will adjust strategy to respond appropriately to address a continuing downturn and/or a subsequent period of opportunity.

The Group aims to manage its cash position through orderly and planned realisation of existing investments in order to fund investment in new opportunities and provide working capital for operating costs and overheads. Historically, the Group's portfolio of listed investments has provided a relatively liquid source of funding when required. As discussed in note 12 of this results announcement, the market value of the Group's assets has declined since the year end to the extent that our ability to meet committed investments and expenses through realizing these assets could be threatened. In the absence of improved market sentiment or any better alternative opportunities arising, the Group would need to realize significantly more of its holdings in MEO and Wasabi than it may otherwise have intended.

Having taken this uncertainty into account, the Directors have a reasonable expectation that the Group will be able to continue as a going concern and will continue to make decisions on this basis and to capitalise on opportunities in the sector as they arise.

The recent investment in Merty Energy demonstrates the Company's ability to source new opportunities and execute an appropriate investment strategy as other assets within the portfolio begin to mature.  The Board believes that Merty Energy together with MEO, Elko Energy and Oil Shale represent a strong and diversified investment portfolio that will generate positive returns for shareholders.

John Newton

Chairman

CEO's OPERATIONAL REVIEW

The financial year under review has seen a focus on the development of the underlying businesses and correspondingly less corporate activity and restructuring. The capital markets back-drop was difficult after the onset of the global credit crunch, but this did not materially affect the underlying business operations during the period. Our investee companies MEO Australia Ltd ('MEO') and Elko Energy Inc. ('Elko') both completed capital raisings before the end of December 2007.

Subsequent to the end of the financial year, turmoil in the equity markets and consequential declines in the share prices of the Company and its listed investments has put considerable pressure on future investment and expenditure plans of the Company. Xtract will continue to be responsive to market conditions as best as possible, amending future expenditure and strategy where necessary to reflect the changing economic environment.

With the majority of our resources focused on supporting existing businesses, new business development activity has been highly selective and consistent with our strategy of only investing in opportunities that have the potential to deliver significant growth.  

MEO Australia Ltd

MEO (ASX:MEO) is focused on developing gas-to-liquids ('GTL') projects in the Timor Sea, Australia, on an area of shallow water known as Tassie Shoal, located approximately 275km northwest of Darwin, Australia. MEO has secured Australian Government environmental approvals which are valid until 2052 and which allow it to install two large scale (1.75 million tonnes per annum - Mtpa) methanol plants and one 3 Mtpa Liquefied Natural Gas (LNG) plant in Tassie Shoal.

MEO is focused on securing suitable feed gas for the projects.  To that end, during the fourth quarter of 2007 and the first quarter of 2008, MEO conducted a two-well exploration and appraisal drilling programme in its NT/P68 permit in the Australian waters of the Timor Sea. The first well, Heron-2, was funded 25% by farm-in partner Petrofac Resources Ltd as part of a two well farm-in deal to earn a 10% interest in the permit. The second well, Blackwood-1, was drilled as a sole-risk venture (ie funded 100%) by MEO.

The Heron-2 well penetrated the Epenarra Darwin Formation and the deeper Elang/Plover Formation of the Heron North structure. Electric logging indicated that both of the target reservoirs were gas saturated. Production testing of the Heron North Elang/Plover sandstone section recorded a maximum interpreted hydrocarbon flow of between 6 and 8 million standard cubic feet (MMscf) per day before operations were halted due to the approach of Cyclone Helen. Further testing attempts of this deeper interval were unsuccessful due to the partial collapse of the well. 

Given the encouraging mud log indications while drilling the Plover formation, including the possible existence of wet gas (gas with associated liquefied petroleum gas (LPG) and condensate), a significant gross column (164m) of Plover gas saturated sands and positive electric log interpretation, MEO remains optimistic that a significant hydrocarbon resource was encountered in the Heron North Plover formation. The recovery of hydrocarbons to surface led to a formal declaration of a discovery pursuant to clause 34 of the Petroleum (Submerged Lands) Act 1967 being made. The joint venture is presently reviewing the Heron-2 data and conducting geo-scientific studies before selecting a second well location for drilling in 2009.

Blackwood-1 was spudded in February 2008. It confirmed 49m of gross gas bearing Plover sands which MEO has estimated may contain sufficient resource for the first methanol plant proposed for the Tassie Shoal Methanol Project, which requires approximately 1,400 Bcf of raw gas to produce 1.75 million tonnes of methanol per annum for 20 years of operation. This chain of events led to a formal declaration of a discovery pursuant to clause 34 of the Petroleum (Submerged Lands) Act 1967 being made.

Initial gas analysis conducted on the rig has confirmed that the gas is relatively dry and contains CO2 levels in the 25% to 30% range (very similar to gas found at the nearby Evans Shoal field), which is highly suitable for methanol production.

Given these encouraging results MEO accelerated the selection process to identify and secure a casting basin site in Southeast Asia for the possible construction of the concrete gravity base structure for the first methanol plant. MEO also initiated the development of the Basis of Design documentation in preparation for the expected commencement of Front End Engineering and Design (FEED) studies for the Tassie Shoal Methanol Project (TSMP).

During the year, MEO significantly broadened the scope of its upstream interests. In October 2007 MEO farmed into three offshore permits operated by Cue Energy Resources Limited in the Carnarvon Basin off the North West Shelf of Australia. MEO agreed to meet the seismic acquisition obligations in relation to these permits and assumed the role of Operator for each permit. The permits are located within a proven world-class hydrocarbon province with highly developed production and LNG infrastructure. The interests are complementary to plans to develop LNG and methanol production projects in the Timor Sea.

The most advanced prospect within the new permits is Zeus, a stratigraphically trapped Legendre shoreface/shallow marine sandstone play within the fault bounded Keast Graben, immediately adjacent to the Woodside Operated acreage that hosts Australia's North West Shelf Gas Project. MEO has estimated that Zeus has the potential to host at least 10 Trillion Cubic Feet (Tcf) of gas in place. The most encouraging indications are MEO's observations, on the existing 1997 vintage 3D seismic data, of amplitude-related possible hydrocarbon indicators (bright spots) with related Amplitude versus Offset (AVO) responses that are similar to those observed in the same age reservoir gas sands in the Perseus gas field (approx 12 Tcf) in the adjacent fault block. 

MEO completed its committed acquisition of 250 line km of 2D seismic and 250 km2 of 3D seismic in April 2008 to earn a 60% interest in all three permits. This later increased to 70% following the election by existing permit holders not to take up their option to fund 10% The Songa Venus semi-submersible drilling rig has been contracted to drill the Zeus prospect in WA-361-P in November 2008. 

In July 2008, MEO announced a major strategic alliance with Resource Development International Ltd ('RDI'), an unlisted public entity associated with and chaired by prominent businessman Professor Clive Palmer. Subject to completion of its proposed public listing in Hong Kong, RDI has undertaken to fund the vast majority of MEO's share of costs in up to nine wells in its three North West Shelf permits to earn a 35% interest in each permit. MEO's interest in these permits will become 25% in the event the option to drill in each is exercised by RDI and in turn by MEO. RDI has initially committed to fund 80% of the forthcoming Zeus-1 well (to a cap of US$31.25m) to earn a 35% interest. MEO will fund 10% of the well and retain a 25% interest. In the event the existing permit holders elect not to fund 10% of the Zeus-1 well, the funding obligation together with an additional 10% interest will revert to MEO to take its interest to 35%.

The agreement executed with RDI fully funds the immediate drilling programme and has the potential to see MEO fully funded with a 20% carried equity interest through to commercial production on each of its approved GTL projects in the Timor Sea, subject to securing adequate gas resources from NT/P68 or 3rd party sources.

As an ASX listed company, MEO is not subject to the AIM Rules and the statements herein relating to reserves, resources and drilling results do not contain the information required by the AIM Guidance Note for Mining, Oil and Gas Companies.

Elko Energy

Elko made satisfactory progress during the period. Its exploration strategy aims to realize the potential of its highly significant gas and oil assets in the Danish and Dutch North Sea to maximize long term shareholder value. 

In September 2007, Xtract provided Elko with US$2 million of development equity through a private placement. In December 2007, Elko undertook a successful private placement with Jennings Capital Inc and Cormark Securities Inc as joint lead agents, mainly with US and Canadian investors, for an additional US$12.1 million. At the same time Xtract contributed a further US$6 million, maintaining its ownership interest at 35.4% of the issued capital.

Elko operates the largest exploration licence in Denmark, with an off-shore area of 1.3 million acres. The licence is held 80% by Elko and 20% by a Danish government entity. The licence offers a number of attractive targets with aggregate P50 un-risked net prospective resources of 1.8 billion barrels oil or 8.4 Tcf of gas (evaluated by Tracs International, an independent reservoir engineer, in May 2008).

During 2007 Elko completed their Phase I evaluation and re-processed a number of 2D seismic lines from the field tapes to improve the resolution of the Rotliegendes interval. The re-processing work was completed in October 2007, enabling seismic attribute mapping. Additional technical studies are under way to evaluate the migration pathway from the Central Graben and to reduce the risk of the chalk prospects.

Elko is committed to drilling at least one well on its Danish Licence, with the addition of further wells as funding is secured. Elko plans to farm out part of its 80% interest before moving ahead with drilling the first exploratory well, which is projected to cost approximately $25 million.

Elko's Dutch assets comprise a 33% operator working interest in the P1 and adjacent P2 off-shore licenses. Block P1 is located on the southern margin of the Southern Permian Gas basin and covers approximately 209 km2 (51,623 acres). Elko benefits from seven wells having been drilled by previous operators, of which five encountered gas on three separate structures which are currently under appraisal for development. The discoveries were not developed for a variety of reasons, including the prevailing gas price, low well productivity and the carbon dioxide content of the gas. These issues have been significantly alleviated by higher gas prices and improved offshore technology.

Immediately following the award of P1 in June 2007, Elko commenced work to review cores, cuttings and logs to improve understanding of the reservoirs on the Block. This work was then combined with seismic attribute studies and the preparation of a static reservoir model.

Awarded in February 2008, Block P2 is adjacent to and east of Block P1. Significant new data has been acquired, including a previously unavailable 3D survey over the western portion of the block. Following interpretation of this data the overall reserves of the Block have been increased significantly with several new structures identified.

The development of the very significant gas reserves on their Netherlands blocks, clearly identified through drilling, testing and extensive 3D seismic coverage, remains Elko's priority project. Elko is working on a plan to develop the low CO2 gas discoveries through an early production scheme. The development of the remainder of the gas reserves will require the removal of the associated CO2 before the sales gas can be transported onshore in the existing pipeline system. 

Prior to drilling the first well, anticipated in 2009, Elko plans to image the proposed structure with a Pre-Stack Depth Migration (PSDM) study which will improve understanding of the potential resources within the structure. 

The success of the work carried out in the Netherlands and Denmark solidifies Elko's reputation as an operator able to identify significant new reserves in established and previously drilled areas. 

The Board of Elko is continuing to work towards an Initial Public Offering on a recognised stock exchange. 

As an unquoted company, Elko is not subject to the AIM Rules and the statements herein relating to reserves, resources and drilling results do not contain the information required by the AIM Guidance Note for Mining, Oil and Gas Companies.

Oil Shale

Oil shale is an organic-rich sedimentary rock, which is different from tar sands. In oil shale the contained kerogen has not yet been naturally transformed into petroleum by heat and pressure. Oil shales vary considerably in their mineral content, chemical composition, age, type of kerogen, and depositional history, and are derived from a number of different organisms.

The oil shale industry has been in existence around the world for over a hundred years. Oil shale industries are active in China, Estonia and Brazil. However, the traditional extraction technologies that have been employed have been expensive and relatively inefficient. The decline of low cost oil resources and the rising world demand for oil have re-awakened interest in oil shale and the development of new extraction technologies that address previous concerns.

Through its wholly owned Australian subsidiary, Xtract is pursuing a twin-track strategy to build its oil shale resource base and to develop a proprietary oil shale technology directed towards improving economic and environmental performance compared with traditional technologies. The mining and production of refinery feed-stock crude oil from oil shale represents a potentially significant and valuable source of hydrocarbon to help satisfy future international energy demands.

The oil shale at Julia Creek (Queensland, Australia), where Xtract has a license area, consists of a 40-50 million year old area of sedimentary rock. Xtract's license area is a portion of a more extensive area which was explored for oil shale and vanadium by CSR Limited (CSR), Esso Exploration, Shell Limited and others between 1968 and 1988. By 1979-1980, CSR had delineated the area most likely to provide economically exploitable oil shale reserves and appraised the resources within three possible open-cut mines. Due to financial and technical feasibility problems at the time, this project was discontinued.

In late 2007, a supplementary drilling programme was completed in Julia Creek. A review of the new data in conjunction with existing data was carried out by independent geologists Nolan and Associates Pty Ltd. The total indicated and inferred resources were assessed at this time as 2.12 billion barrels of oil in situ*, comprising 240 million barrels of indicated resources and 1,875 million barrels of inferred resources. The revised resource statement represents an increase of over 150% relative to the previously declared figure of 825 million barrels.

The research programme conducted together with Monash University and the Commonwealth Scientific and Industrial Research Organisation of Australia (CSIRO) continued throughout the period. Advanced autoclave equipment designed to scale up the batch size for testing and development of Xtract's proprietary technology was commissioned on Monash University campus in November 2007. 

The Monash research program has made significant progress. Approximately 30 autoclave tests were run, testing variations in the ratio of shale to solvent, recycle fluids, solvents, particle size, temperature and pressure. Progress in 2007-08 supports Xtract's identification of direct hydrogenation as the most appropriate way to extract the maximum possible commercial quantities of petroleum products from the Julia Creek oil shale. Early indications are that Xtract's proprietary technology could double the yield of liquid hydrocarbons from oil shale and achieve superior environmental performance compared with the traditional retorting methods**. 

Based upon the technology and resource developments and product material supplied, Worley Parsons, a leading Australian-based international project services supplier, completed a technical review of Xtract's conceptual bench scale reactor design and the conceptual development of a commercial oil shale plant at Julia Creek. This was used to define the development programme for 2008-09.

In August 2008, the Queensland Premier announced a 20-year moratorium on a proposed oil shale development in the Whitsunday coastal region, and a 2-year review period for oil shale developments throughout the state during which no new mining activity will be permitted. Xtract's existing mineral rights are not affected and the review period itself does not materially affect our development plans on the ground. On the face of it, the development is negative but it demonstrates clearly that oil shale development is coming into mainstream focus and it may prove possible to participate in the review and turn the situation to the Company's advantage. The board is keeping the situation under close watch. Depending upon the outcome of ongoing consultations, Xtract intends to consolidate its Julia Creek tenement rights within one or more Mining Development Licenses (MDL's). 

Further laboratory testing and other technical studies are required to define Xtract's proposed technology to a sufficient level to enable it to complete a feasibility study and to register a patent over the defined hydrogenation and retorting process to protect it as a proprietary technology. 

Xtract intends to continue its 'twin-track' approach of resource and technology development. As the development moves from the scientific to the engineering world, resources will focus more on the characterization of rock and particle properties for input to facilities design and on the definition of petroleum product characteristics and how to best process, transport and market them. 

Successful development of the technology has the potential to unlock oil shale resources beyond Australia. In addition to ultimately seeking licence opportunities, Xtract is actively seeking out additional oil shale resources with a current focus on North Africa. A memorandum of understanding has been signed with the Moroccan authorities to enable the phased development of a license area in the extensive Tarfaya oil shale deposit in the south-west of the country. A joint venture company has been established in Morocco to conduct the work, which will begin with a pre-feasibility study. 

*Based on the internationally recognised Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves (The JORC Code - 2004 Edition.)

**Compared with the traditional reporting methods assumed for JORC calculations above.

The information relating to Julia Creek and oil shale has been reviewed and approved by Dr John E. Shirley (Managing Director of Xtract Oil Limited), who has a BSc and PhD in Geophysics from the University of Tasmania, over 40 years' experience in the resource and energy sector and is a member of the Society of Petroleum Engineers.

Central Asia

Through its subsidiary companies, Xtract continued its oil and gas exploration, development and production programs in the Kyrgyz Republic.

Interpretation work on the main South Karagundai exploration prospect in the Tash Kumyr Licence area was completed and a further seismic survey was organised to address structural uncertainties not resolved by previous use of old seismic data and equipment. The new survey uses modern seismic equipment, which has been recently been made available in the Kyrgyz Republic. The survey planned for fourth quarter 2008 should substantially improve definition of the South Karagundai prospect prior to drilling in 2009. 

Xtract is in the final phase of negotiations towards funding the exploration program in the Kyrgyz Republic by the farm-out of a major interest in subsidiary Zhibek Resources Ltd to a third party. The arrangement will result in the third party earning a 75% interest in Zhibek Resources Ltd in exchange for funding 85% of the US$10m seismic and drilling programme. The arrangement will also cover Zhibek's Pishkaran licence area.

Exploration licences at West Kyzl Djar, Shink Sai and Toktogul were not renewed due to future exploration work being focused on the Tash Kumyr and Pishkaran licences.

At the Beshkent-Togap water injection project, a number of work overs were completed and an additional injection well was commissioned after extending the water injection distribution system. Testing and incremental oil production continued during the reporting period and a report on project performance was obtained from an independent consultant, showing how improvements could be achieved. However, after review, Xtract decided it would not be in a position to recognize value from this investment going forward. Therefore in October 2008, Xtract's interests in the project were assigned to a local company, Consultant Centre Limited.  

Wasabi Energy and Other Interests

During the period under review, Wasabi Energy Ltd ('Wasabi', ASX:WAS) refined and executed its strategy of holding and developing pre-IPO positions in the energy and related sectors.

During the year Wasabi transferred its interests in the Woolner Dome, Alice Springs and Mount Bundy leases to Rum Jungle Uranium Limited for 44 million shares in Rum Jungle Uranium and 10 million options. Rum Jungle Uranium (ASX: RUM) then successfully raised a further A$12 million and floated on the Australia Stock Exchange in November 2007. Rum Jungle Uranium is an exploration company with a highly prospective portfolio focused on licenses in the Northern Territory of Australia.

In August 2007, Wasabi formed a new Company, 'Global Geothermal Limited' (GGL) with Wasabi taking a 70% ownership interest and the remaining 30% being held by AMP Resources LLC subsidiary Recurrent Engineering, a company which specializes in geothermal and waste heat power stations. GGL has a particular interest in the patented Kalina cycle technology for which Recurrent Engineering is worldwide licensee. Follow-on investments were made by Wasabi in January and April 2008 in order to maintain their 70% interest.

At the end of January 2008, Xtract loaned Wasabi A$1.25 million to enable it to make an investment in Greenearth Energy Ltd ('Greenearth'), following on from a seed fundraising conducted in November 2007. Greenearth is a geothermal energy company focused on exploration and development of geothermal resources in Australia, New Zealand and the Pacific Rim. Greenearth (ASX: GER) listed on the ASX in February 2008. The loan was repaid in full.

Later in the period, Wasabi went on to invest in listed companies EQITX Ltd (ASX: EQX), Lysander Minerals Corporation (TSX-V: LYM) and Australian Renewable Fuels Ltd (ASX: ARW), thereby increasing the breadth of its portfolio in energy and related sector. These and its other investments were funded in part by the progressive realization for cash of Wasabi's interest in Aviva Corporation (ASX: AVA) which Wasabi had reduced from 14.1 million shares to 10.1 million shares by the end of the period.

In July 2008, Wasabi made an investment in Xtract through the purchase of 36.5 million shares and an equivalent number of options from Cambrian Mining Plc. Xtract currently holds 153 million shares in Wasabi, representing approximately 19.4% of the issued capital. The cross-holding created emphasizes the strong strategic links between the companies. Further evolution of the ownership position is expected as outstanding options in both companies become exercisable during the last quarter of calendar year 2008.

In Mexico, Xtract maintained its ownership of Sermines Inc and its licence portfolio of gold exploration properties. The licences were maintained in good order but no significant operational activity was undertaken during the year.

Conclusions and Outlook

During the course of the year the operations of the Company and its investees have made considerable progress. MEO Australia progressed towards securing its future as a substantial integrated gas-to-liquids player. Elko Energy has advanced its plans towards an initial public offering whilst the oil shale resources of Xtract have been increased by over 150% and potentially attractive oil shale resource areas have been identified in Morocco.

There has been good progress with the smaller assets and in developing new businesses which can secure future growth as current investments mature. Xtract formalised a developing relationship with Merty Energy ('Merty'), a Turkish Oil and Gas operator through the signing of definitive agreements in August 2008 to create a new joint venture company. Xtract has confirmed an initial investment of US$5 million, with the option to increase its stake by funding a further US$3.5 million during 2009. This funding will allow the joint venture project to generate benefits from a license portfolio contributed by Merty. It is hoped that the early production of oil and gas in lower-risk prospects will provide cash-flow to help realise the considerable upside potential of other licenses within the portfolio. Drilling of the first joint venture prospect at Sarakiz is scheduled to commence in October 2008. 

I believe that Xtract's fundamental business model is sound and that the Company has the appropriate strategy to negotiate the current market conditions.. Xtract's policy of maintaining a high proportion of liquid assets should enable the Company to withstand the current downturn and we will seek to take advantage of opportunities as external market conditions permit. I look forward to developing the value of our existing asset base, and in the medium term identifying and investing in new opportunities.

Andy Morrison

Chief Executive Officer

  Consolidated Income Statement

Year ended 30 June 2008

		Year	Period
		ended	ended
		30 June	30 June
	Note	2008	2007
		£'000	£'000
Continuing operations
Administrative and operating expenses		(2,885)	(1,707)
Share of results of associates		(1,707)	(362)
Operating loss		(4,592)	(2,069)
Investment revenue	3	207	99
Finance costs		-	(128)
Other gains and losses	3	5,340	6,034
Negative goodwill on acquisition of subsidiary		-	5,730
Profit before tax		955	9,666
Tax expense	5	(932)	(1,787)
Profit for the year / period from continuing operations		23	7,879
Discontinued operations
Loss for the period from discontinued operations	9	(811)	(407)
(Loss)/profit for the period		(788)	7,472
Attributable to:
Equity holders of the parent		(788)	6,284
Minority interest		-	1,188
		(788)	7,472
Net (loss)/earnings per share
From continuing operations
Basic (pence)	6	0.00	1.59
Diluted (pence)	6	0.00	1.37
From continuing and discontinued operations
Basic (pence)	6	(0.11)	1.49
Diluted (pence)	6	(0.11)	1.29

  Consolidated statement of recognised income and expenditure

Year ended 30 June 2008

		Year	Period
		ended	ended
		30 June	30 June
	Note	2008	2007
		£'000	£'000
(Losses)/gains on revaluation of available-for-sale investments taken to equity	10	(1,963)	782
Unwinding of fair value gains on transfer to investment in associate	10	(547)	-
Revaluation of intangible assets - acquisition of subsidiaries	10	-	962
Exchange differences on translation of foreign operations	10	829	(18)
Tax credit/(expense) on items taken directly to equity	10	540	(235)
Net (loss)/gain recognised directly in equity		(1,141)	1,491
Transferred to income statement on sale of available-for-sale investment	10	(1,558)	-
(Loss)/profit for the year / period	10	(788)	7,472
Total recognised income and expense for the year / period
		(3,487)	8,963
Attributable to:
Equity holders of the parent		(3,487)	7,775
Minority interests		-	1,188
		(3,487)	8,963

  Consolidated balance sheet

As at 30 June 2008

		As at	As at
		30 June	30 June
	Note	2008	2007
		£'000	£'000
Non-current assets
Intangible assets	7	10,494	11,601
Property, plant and equipment		28	231
Investments in associates		3,900	23,818
Investments in subsidiaries		-	-
Financial assets	8	15,962	3,206
Loans to subsidiaries		-	-
Deferred tax asset		595	312
		30,979	39,168
Current assets
Inventories		-	16
Derivative financial instruments	8	23	9
Trade and other receivables		130	293
Cash and cash equivalents		6,362	1,582
Assets held for sale	9	2,324	-
		8,839	1,900
Total assets		39,818	41,068
Current liabilities
Trade and other payables		439	375
Current tax liabilities		3,636	698
Loans from subsidiaries		-	-
Liabilities directly associated with assets classified as held for sale	9	69	-
		4,144	1,073
Net current assets		4,695	827
Non-current liabilities
Deferred tax liabilities		5,595	7,616
Total liabilities		9,739	8,689
Net assets		30,079	32,379

		As at	As at
		June 30	June 30
	Note	2008	2007
		£'000	£'000
Equity
Share capital	10	752	704
Share premium account	10	24,394	23,800
Share based payments reserve	10	956	411
Available for sale reserve	10	(2,981)	547
Revaluation reserve	10	962	962
Exchange translation reserve	10	811	(18)
Retained earnings	10	5,276	6,064
Equity attributable to equity holders of the parent		30,170	32,470
Minority interest	10	(91)	(91)
Total equity		30,079	32,379

  Consolidated cash flow statement

Year ended 30 June 2008

	Note	Year	Period
		ended	ended
		30 June	30 June
		2008	2007
		£'000	£'000
Net cash used in operating activities	11	(2,431)	(1,634)
Investing activities
Interest received	3	207	99
Government grants	3	119	66
Purchase of property plant and equipment		(83)	(65)
Disposal of property plant and equipment		-	11
Acquisition of intangible assets		(78)	(282)
Disposal of trading investments		665	2,326
Purchase of trading investments	8	(433)	(406)
Disposal of available for sale investments	8	1,086	-
Purchase of available for sale investments	8	(424)	-
Disposal of associates		9,751	-
Acquisition of associates		(4,223)	(2,973)
Acquisition of subsidiaries, net of cash acquired		-	(149)
Net cash from/(used in) investing activities		6,587	(1,373)
Financing activities
Interest paid		-	(80)
Proceeds on issue of shares - placing		-	5,500
Proceeds on issue of shares - warrants		642	1,004
Proceeds received on exercise of options in subsidiary		-	639
Short term loan repayments		-	(3,436)
Share issue expenses		-	(354)
Net cash from financing activities		642	3,273
Net increase in cash and cash equivalents		4,798	266
Cash and cash equivalents at beginning of year / period		1,582	1,321
Effect of foreign exchange rate changes		(18)	(5)
Cash and cash equivalents at end of year / period		6,362	1,582

Notes to the consolidated financial statements

Year ended 30 June 2008

1.  General information

Xtract Energy plc is a company incorporated in the United Kingdom under the Companies Act 1985. The address of the registered office is 27 Albemarle Street, London W1S 4DW. The nature of the Group's operations and its principal activities are set out in the operating and financial review.

The financial information set out in this announcement does not constitute the Group's statutory accounts for the years ended 30 June 2008 or 2007, but is derived from those accounts. Statutory accounts for the period ended 30 June 2007 have been delivered to the Registrar of Companies and those for the year ended 30 June 2008 will be delivered following the Company's annual general meeting. The auditors have reported on those accounts; their report for the period ended 30 June 2007 was unqualified, their report for the year ended 30 June 2008 drew attention to disclosures made in those financial statements concerning existence of a material uncertainty relating to the Group's ability to continue as a going concern, without qualifying the report. Please refer to note 12 for further information on this matter.

2.  Significant accounting policies

The financial information has been prepared in accordance with the recognition and measurement criteria of International Financial Reporting Standards (IFRS) as adopted for use in the European Union. However, this announcement does not itself contain sufficient information to comply with IFRS. The financial information was prepared on the basis of the accounting policies as stated in the 2007 financial statements. The Company will publish full financial statements that comply with IFRS in October 2008.

The comparative information relates to the 18 month period ended 30 June 2007.

This financial information is presented in pounds sterling because that is the currency of the primary economic environment in which the group operates. 

3.    Revenue and other gains and losses

An analysis of the Group's revenue and other gains and losses is as follows:

	Year	Period
	ended	ended
	30 June	30 June
	2008	2007
	£'000	£'000
Continuing operations
Investment revenue :
- Interest on bank deposits	207	99
Total revenue	207	99
Continuing operations
Other gains and losses
Gains on disposal of associate	2,920	-
Gains on disposal of available for sale assets	568	-
Other income	255	-
Research and development grants a)	119	66
Gains on disposal of derivative financial instruments	-	1,233
Increase in the fair value of derivative financial instruments	233	5,091
Gain/(loss) on dilution of interest in associates	1,245	(356)
Total other gains and losses from continuing operations	5,340	6,034
Discontinued operations Other gains and losses
-Write down of intangible assets	(530)	-
-Gains on disposal of fixed assets	1	10
Total other gains and losses	4,811	6,044

a) Government grants received in relation to research and development expenditure on oil shale  extraction
    technologies in Australia.

4.    Profit  for the year/period

Profit for the year/period has been arrived at after charging/(crediting):

	Year	Period
	ended	ended
	30 June	30 June
	2008	2007
	£'000	£'000
Net foreign exchange (gains)/losses	(17)	39
Research and development costs	310	269
Depreciation of property, plant and equipment	37	11
Share based payments expense	200	152
Staff costs	666	230
Research and development grants (see note 3)	(119)	(66)
Gain on disposal of property, plant, and equipment	(1)	(10)

5.    Tax

	Year	Period
	ended	ended
	30 June	30 June
	2008	2007
	£'000	£'000
Current tax	2,530	698
Deferred tax	(1,598)	1,089
	932	1,787

Corporation tax is calculated at 28% (2007: 30%) of the estimated assessable profit for the year.

Taxation for other jurisdictions is calculated at the rates prevailing in the respective jurisdictions. 

The Group tax charge for the year/period can be reconciled to the profit per the income statement as follows:

	Year	Period
	ended	ended
	30 June	30 June
	2008	2007
	£'000	£'000
Profit/(loss) before tax:
Continuing operations	955	9,666
Discontinued operations	(811)	(407)
	144	9,259
Tax at the UK corporation tax rate of 28% (2007: 30%)	41	2,778
Tax effect of permanent differences	35	39
Tax effect of  unrecognised tax losses carried forward and other temporary differences	559	688
Overseas taxes on disposal	2,466	698
Double tax relief	(2,231)	(698)
Impact of differing tax rates in overseas jurisdictions	62	-
Tax effect of non-taxable negative goodwill	-	(1,718)
Tax expense for the year/period	932	1,787

6.         Earnings per share

From continuing operations

	Year	Period
	ended	ended
	30 June	30 June
	2008	2007
	£'000	£'000
Earnings for the purposes of basic and diluted earnings per share ('EPS') being net profit/(loss) for the year attributable to equity holders of the parent	23	6,284
	Number	Number
Weighted average number of ordinary shares for purposes of basic EPS	729,535,781	420,569,934
Effect of dilutive potential ordinary shares - options and warrants	22,078,162	67,143,088
Weighted average number of ordinary shares for purposes of diluted EPS	751,613,943	487,713,022

From continuing and discontinued operations

	Year	Period
	ended	ended
	30 June	30 June
	2008	2007
	£'000	£'000
(Loss)/earnings for the purposes of basic and diluted earnings per share ('EPS') being net (loss)/profit for the year attributable to equity holders of the parent	(788)	6,284
	Number	Number
Weighted average number of ordinary shares for purposes of basic EPS	729,535,781	420,569,934
Effect of dilutive potential ordinary shares - options and warrants	-	67,143,088
Weighted average number of ordinary shares for purposes of diluted EPS	729,535,781	487,713,022

As in the year 30 June 2008, where a loss has occurred, basic and diluted earnings per share are the same because the outstanding share options and warrants are anti-dilutive.

7.    Intangible assets

Group
	Total
	£'000
At 1 January 2006	81
Additions	602
Acquired on acquisition of subsidiaries	10,918
At 30 June 2007	11,601
Foreign currency translation	1,203
Written off during the period (a)	(530)
Transfer to held for sale (refer to note 9)	(1,858)
Additions	78
At 30 June 2008	10,494

Costs of exploration and evaluation are capitalised and carried forward during the exploration and evaluation stage. No amortisation is charged prior to the commencement of production.

(a) Subsequent to year end, Zhibek Resources Limited ('Zhibek'), a subsidiary company of Xtract, served notice of their desire to terminate the service agreement in regard to the Beshkent -Togap water injection project. The result of this action is to cease operations in regard to the project and therefore, all assets held in relation to this project have been written off, including previously capitalised exploration and development costs of £431,324 and exploration and evaluation assets recognised on acquisition of £98,817.

8.    Financial assets

Available for sale investments	As at 30	As at 30
	June 2008	June 2007
	£'000	£'000
Opening balance	3,206	-
Unwinding of fair value on transfer to investment in associate (a)	(547)	-
Movement in fair value prior to transfer to investment in associate (b)	26	-
Transferred to investments in associates (c)	(818)	-
Transferred from investments in associates (d)	21,021	-
Acquired during the period (e)	424	2,424
Disposed during the period (f)	(5,359)	-
Movement in fair value (b)	(1,991)	782
	15,962	3,206

(a) Fair value adjustments for Wasabi Energy Limited unwound against available-for-sale reserve upon ceasing to be available-for-sale and becoming an associate.

         (b) Movement in fair value of Wasabi Energy Limited shares.

         (c) Wasabi Energy Limited shares transferred to investment in associate. 

         (d) MEO Australia Limited shares and Wasabi Energy Limited shares transferred from investment in associate

         (e) MEO Australia Limited shares acquired in the period after the transfer from investment in associate.

         (f)  Aviva Holdings Limited and MEO Australia Limited shares sold during the period.

Available for sale investments comprise the Group's investment in listed securities, which are held by the Group as strategic investments. The fair value of available for sale investments is based on the share price at 30 June 2008. Available for sale investments held are subject to currency and market risk. In the period subsequent to year end, the share price of MEO Australia Limited has declined significantly, refer to note 13. 

Derivative financial instruments	As at 30	As at 30
	June 2008	June 2007
	£'000	£'000
Opening balance	9	-
Purchased during the period (a)	135	406
Acquired on acquisition	-	3,639
Disposals	-	(1,093)
Fair value increase (b)	311	5,082
Transferred to investments in associates (c)	(128)	(7,628)
Transferred to held for trading on exercise of options	(304)	-
Transferred to investment in subsidiary on acquisition of subsidiary (e)	-	(406)
Other	-	9
	23	9

(a) Options in Elko Energy Limited and Wasabi Energy Limited purchased during the period

(b) Fair value increase in held for trading investments during the period. Fair value has been calculated using the Black-Scholes model.

(c) Fair value of share options transferred to investments in associates upon exercise of options.

(d) Fair value of share options transferred to held for trading upon exercise of options.

At 30 June 2008, Xtract held 480,000 warrants in Elko Energy Limited, with an expiry date of 20 December 2008 and a strike price of USD $0.60 per share. The fair value of these warrants at 30 June 2008 is £14,538. Xtract also held 3,665,364 warrants in Wasabi Energy Limited, with an expiry date of 27 May 2009 and a strike price of AUD $0.04 per share. The fair value of these warrants at 30 June 2008 is £8,740.  

9.    Assets and liabilities held for sale and discontinued operations

At the balance sheet date certain parts of the Group's assets in the Kyrgyz Republic are expected to be sold within 12 months and therefore have been classified as a disposal group held for sale and presented separately in the balance sheet. The proceeds of the disposal are expected to exceed the book value of the related net assets and accordingly the assets and liabilities continue to be recognised at their carrying value. The major classes of assets and liabilities included as held for sale are as follows:

	As at
	30 June
	2008
	£'000
Mining exploration rights	426
Exploration and evaluation assets	1,432
Property, plant and equipment	261
Cash and cash equivalents	16
Trade and other receivables	131
Inventories	58
Total assets classified as held for sale	2,324
Trade and other payables	69
Total liabilities classified as held for sale	69
Net assets of the disposal group	2,255

The results of the discontinued operations which have been included in the consolidated income statement, were as follows:

	Year ended	Year ended
	30 June	30 June
	2008	2007
	£'000	£'000
Administrative and operating expenses	(282)	(417)
Gain on disposal of property, plant and equipment	1	10
Operating loss	(281)	(407)
Write down of intangible assets	(530)	-
Loss before tax	(811)	(407)
Attributable tax expense	-	-
Net loss attributable to discontinued operations	(811)	(407)

During the year, the operations to be sold used £344,000 of the Group's operating cash flow, and did not generate or receive any cash in respect of financing or investing activities.

10.    Reconciliation of Changes in Equity

Group	Share	Share	Share	Available-for	Revaluation	Foreign	Retained	Minority	Total
	Capital	premium	based	sale	reserve	currency	Earnings	Interest	Equity
		account	payments	investments		translation
			reserve	reserve		reserve
	£'000	£'000	£'000	£'000	£'000	£'000	£'000	£'000	£'000
At 1 January  2006	199	1,756	33	-	-	-	(220)	-	1,768
Issue of shares	505	22,641	-	-	-	-	-	-	23,146
Share based payments expense	-	-	378	-	-	-	-	-	378
Share issue expenses	-	(597)	-	-	-	-	-	-	(597)
Gain on revaluation of available-for-sale investments	-	-	-	782	-	-	-	-	782
Deferred tax on revaluation of available-for-sale investments	-	-	-	(235)	-	-	-	-	(235)
Revaluation on acquisition of subsidiaries	-	-	-	-	962	-	-	-	962
Exchange differences on translation	-	-	-	-	-	(18)	-	-	(18)
Minority interest arising on acquisition of subsidiary	-	-	-	-	-	-	-	5,007	5,007
Issue of shares by subsidiary	-	-	-	-	-	-	-	995	995
Acquisition of minority interest	-	-	-	-	-	-	-	(7,281)	(7,281)
Profit for the period	-	-	-	-	-	-	6,284	1,188	7,472
At 30 June 2007	704	23,800	411	547	962	(18)	6,064	(91)	32,379

Group	Share	Share	Share	Available-for	Revaluation	Foreign	Retained	Minority	Total
	Capital	premium	based	sale	reserve	currency	Earnings	Interest	Equity
		account	payments	investments		translation
			reserve	reserve		reserve
	£'000	£'000	£'000	£'000	£'000	£'000	£'000	£'000	£'000
At 1 July 2007	704	23,800	411	547	962	(18)	6,064	(91)	32,379
Issue of shares	48	594	-	-	-	-	-	-	642
Share based payments expense	-	-	200	-	-	-	-	-	200
Movement in share based payments reserves of associates	-	-	493	-	-	-	-	-	493
Tax effect of movement in share based payments reserves of associates			(148)						(148)
Loss on revaluation of available-for-sale investments	-	-	-	(1,963)	-	-	-	-	(1,963)
Unwinding of fair value on transfer to investment in associate	-	-	-	(547)	-	-	-	-	(547)
Tax effect of unwind of fair value on transfer to investment in associate	-	-	-	164	-	-	-	-	164
Deferred tax on revaluation of available-for-sale investments	-	-	-	376	-	-	-	-	376
Transfer of available-for-sale revaluations to income statement on disposal	-	-	-	(2,236)	-	-	-	-	(2,236)
Transfer of deferred tax on revaluation of available-for-sale assets on disposal	-	-	-	678	-	-	-	-	678
Currency translation differences	-	-	-	-	-	1,190	-	-	1,190
Tax effect of currency translation differences						(361)			(361)
Profit for the period	-	-	-	-	-	-	(788)	-	(788)
At 30 June 2008	752	24,394	956	(2,981)	962	811	5,276	(91)	30,079

Available for sale reserve

The available for sale reserve is used to recognise fair value changes on available-for-sale investments.

Foreign Currency Translation reserve

The foreign currency translation reserve is used to record exchange differences arising from translation of the financial statements of foreign subsidiaries.

Share based payments reserve

The share based payments reserve is used to recognise the equity component of share base payments.

Revaluation Reserve

The revaluation reserve is made up of the revaluation of the assets of Xtract Oil Limited upon the piecemeal acquisition of that company.

11.   Notes to the cash flow statement

	Year ended	Period ended
	30 June 2008	30 June 2007
	£'000	£'000
(Loss)/profit for the year/period	(788)	7,472
Adjustments for:
Share of results of associates	1,707	362
Investment revenue	(207)	(99)
Other gains and losses	(4,617)	(5,968)
Income tax expense	932	1,787
Government grants	(119)	(66)
Depreciation of property, plant and equipment	38	11
Negative goodwill released to income	-	(5,730)
Share-based payments expense	200	152
Due diligence fee income	(74)	-
Gain on disposal of property, plant and equipment	(1)	(10)
Operating cash flows before movements in working capital	(2,929)	(2,089)
Increase in inventories	(42)	(2)
Decrease/(increase) in receivables	31	175
Increase in payables	134	172
Cash used in operations	(2,806)	(1,744)
Income taxes paid	-	-
Interest paid	-	128
Foreign exchange differences	375	(18)
Net cash used in operating activities	(2,431)	(1,634)

12.    Going Concern 

Historically, the Group's portfolio of listed investments has provided a relatively liquid source of funding when required.  

At 30 June 2008, the Group's available for sale investment portfolio, which consists of investments in MEO Australia Ltd of  59,147,814 shares at AUD 0.495 and in Wasabi Energy Ltd, of 153,176,786 shares at AUD 0.026 , which had a total market value of £15,962,000.  At 30 September 2008, the MEO share price had fallen to AUD 0.21 and Wasabi to AUD 0.021 caused by prevailing conditions across equity markets. This has resulted in a decrease to the market value of the portfolio to £7,060,539.  

At prevailing share prices, the majority of the available for sale portfolio would need to be realised in order to meet committed investments and budgeted operating costs and overheads. Consequently, there is a material uncertainty in that a  further decrease in the market value of the investment portfolio would cast a significant doubt as to the Group's ability to continue as a going concern and therefore realise its assets and discharge its liabilities in the normal course of business.  

Having taken into account this material uncertainty, the Directors have a reasonable expectation that the group will be able to continue as a going concern and therefore the financial statements have been prepared on this basis.

13.    Events after the balance sheet date

Investment with Merty Energy

On 16 July 2008 Xtract entered into an agreement to establish a joint venture operation with Merty Energy, Petroleum Exploration, Education and Services ('Merty'), Inc, a Turkish company. At this time Xtract provided funding of USD $1.5 million as part of the deal. On 1 August 2008, Xtract signed a definitive agreement with Merty to establish a new company in which Xtract would initially take a 20% holding, with the opportunity to increase this before 30 June 2009.  On this date Xtract contributed a further USD $2 million, along with another USD $1.5 million on 1 October 2008.  The new company, Extrem Energy A.S. will be involved in Oil and Gas exploration and drilling both onshore and offshore in Turkey, on licenses previously granted to Merty, which are being provided to the new company as part of the deal.

Beshkent- Togap Project 

Subsequent to year end, Zhibek Resources Limited ('Zhibek'), a subsidiary company of Xtract served notice of their intent to terminate the service agreement in regard to the Beshkent -Togap water injection project. The result of this action is to cease operations in regard to the project and therefore, all assets held in relation to this project have been written off, refer to note 13 for further details. 

Morocco Oil Shale

On the 23 July 2008, Xtract established a joint venture company with Alraed Limited Investment Holding Company WLL, to evaluate and develop oil shale projects in Morocco. Xtract has a 70% ownership stake in the joint venture. The joint venture company, Xtract Energy (Oil Shale) Morocco SA, signed on 29 July 2008 a Memorandum of Understanding with the Office National des Hydrocarbures et des Nines in Morocco for the purposes of evaluation and possible development of an oil shale deposit near Tarfaya, in south west Morocco.

Decline in share price of MEO Australia Limited.

In the period subsequent to year end the share price of available for sale investment MEO Australia has declined from AUD $0.495 at 30 June 2008 to AUD $0.16 at 13 October 2008. This has an impact of reducing the value of that investment and available for sale reserve of £10,615,887 at prevailing exchange rates. Management do not see this as a permanent decrease in the value of this investment, therefore there is no impact to the income statement of this movement.

 

END

 

 

FR MIBRTMMBBBFP