Interim Results

Xtract Energy plc 28 March 2008 28 March 2008 AIM: XTR XTRACT ENERGY PLC Interim Results for the six months ended 31 December 2007 Xtract Energy ('Xtract' or 'the Company') today announces its unaudited interim results for the six months ended 31 December 2007. Financial Highlights â€¢ Profit before tax of Â£3.8 million (2006: Â£3.4 million) â€¢ Other gains of Â£6.0 million included the disposal of MEO shares during the period at an average price of A$1.20 / share. â€¢ Strong balance sheet with a net asset position of Â£49.0 million (2006: Â£26.8 million) and cash of Â£4.7 million (2006: Â£4.2 million). Operational Highlights â€¢ Elko Energy Inc ('Elko'): US$18 million raised in pre-IPO fundraising, including US$6 million follow-on investment by Xtract, increasing Xtract's holding to approximately 35.2% of Elko's total issued capital. â€¢ MEO Australia Ltd ('MEO'): Disposal by Xtract of 16.5 million shares in MEO raising Â£8.5 million for investment and working capital. â€¢ Simplification of holding structure through the sale of Xtract's 61.5 million shares in Aviva Corporation Ltd to Wasabi Energy Ltd ('Wasabi') in exchange for 175 million new shares and 25 million warrants in Wasabi. â€¢ Appointment of Andrew Morrison as Chief Executive Officer (CEO). Post Period Highlights â€¢ Elko: Awarded offshore exploration license in Block P2, Dutch North Sea. â€¢ Oil Shale: Significant increase in oil shale resource estimate at Julia Creek, Queensland. â€¢ MEO: Two new gas discoveries declared from a two-well exploration and appraisal drilling programme in the Australian Timor Sea. â€¢ Mark Nichols appointed to the Board as a non-executive director. Andy Morrison, Chief Executive of Xtract Energy, commented 'The reported results for the period were strong and reflect the profits taken on the sale of part of Xtract's shareholding in MEO Australia. The Board remains confident of the enormous potential in its diversified portfolio of high quality assets in which Xtract is taking an increasingly active role and which offer investors considerable upside potential in the short-, medium-, and long-term. Furthermore, Xtract's strong and liquid balance sheet and active management portfolio approach gives Xtract the potential to capitalise on future potential investment opportunities. These combined factors give the Board confidence that Xtract will continue to make progress in the current year and thereafter.' For further information, please contact: Xtract Energy plc Andy Morrison, CEO +44 (0) 20 7079 1798 Smith & Williamson Corporate David Jones +44 (0) 20 7131 4000 Finance Limited Azhic Basirov Scott Harris Stephen Scott +44 (0) 20 7653 0030 Annabel Michie For further Information on Xtract please visit www.xtractenergy.co.uk CHAIRMAN'S STATEMENT Xtract continues to identify and invest in a diversified portfolio of early stage energy sector businesses and technologies with very significant growth potential. In line with the Company's strategy, Xtract is making further progress in its move from a 'pure' holding company to a company with a more active role in its underlying investments. During the period, the Company's wholly owned subsidiary Xtract International Ltd ('Xtract International') increased its holding in Elko Energy Inc ('Elko') and Xtract invested further in Wasabi Energy Limited ('Wasabi'), of which it currently holds approximately 35.4%. Elko Elko Energy Inc ('Elko') is a privately held Canadian oil and gas exploration company formed in 2005. It has an interest in a 5,370 km2 exploration and production licence in the Danish North Sea, an interest in two gas-bearing blocks in the Dutch North Sea, and a majority holding in Dragon Energy Inc, a private Canadian company with a 30% share in a producing field in Canada and a field redevelopment project in Gansu Province, China. In early 2007, Elko applied for two off-shore blocks in the Dutch sector of the North Sea, both of which contain a number of drilled and tested gas bearing structures. Block P1 has been awarded to a consortium in which Elko will be the operator and will retain a 33% interest. The award of adjacent Block P2 was announced in February 2008 on similar terms. A number of Rotliegendes gas bearing structures containing an estimated 700 BCF hydrocarbon gas have been confirmed on blocks P1 and P2 through the drilling of 18 exploration wells and 3-D seismic. Work has been started to appraise and develop these gas accumulations. Xtract invested a total of US$8 million in Elko through two direct private placements and currently holds approximately 35.2% of the issued capital of Elko. The second placing was as part of a successful US$18 million pre-IPO fundraising completed in December 2007. Xtract's holding in Elko offers the Company's shareholders an opportunity to participate in an unlisted company investing in exciting exploration acreage in the North Sea. Oil Shale Xtract's wholly owned subsidiary, Xtract Oil Ltd, is focused upon the development of the Company's oil shale resources in Australia and the technology for oil extraction from oil shale minerals. The development of Xtract's oil shale technology could lead to the production of liquid hydrocarbons to partially address the global decline of conventional oil reserves with significant environmental benefits and higher yields over previously tried extraction methods. A supplementary drilling programme was completed in the Julia Creek concession area in Queensland, Australia in 2007. 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 have been assessed 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% compared with the previously declared figure of 825 million barrels. Advanced autoclave equipment designed to scale up the batch size for testing and development of Xtract's proprietary technology was commissioned on the campus of one of Australia's leading Universities in November 2007. *Based on the internationally recognised Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves (The JORC Code - 2004 Edition.) MEO Australia Ltd MEO is focused on developing gas-to-liquids ('GTL') projects in the Timor Sea, Australia, in an area of shallow water known as Tassie Shoal, located approximately 275km northwest of Darwin, Australia. MEO has secured Australian Government environmental approvals to install two large scale methanol plants and one 3 million tonne per annum (Mtpa) Liquefied Natural Gas (LNG) plant in Tassie Shoal. 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 Australian waters of the Timor Sea. The first well, Heron-2, was funded 25% by farm-in partner Petrofac Resources Ltd to earn a 10% interest in the asset. The second well, Blackwood-1, was drilled as a sole-risk venture 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 between 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 was not successful 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 is currently planning a re-drill of the Heron North structure to production test the Plover sandstone section. Blackwood-1 confirmed 49m of gross Plover gas bearing sands to a preliminary gas-water contact (GWC) at 3225mMD (3188m subsea). The raw gas contingent resource gas in place (GIP) (P50 - 'most likely') was announced as 2,473 billion cubic feet (Bcf). Given current assumptions of a 60% net to gross and 10% matrix porosity, MEO has assumed a 70% recovery factor, and estimated that Blackwood may offer approximately 1700 Bcf of raw recoverable gas. The first methanol plant proposed for the Tassie Shoal Methanol Project requires approximately 1400 Bcf of raw gas (including inerts) to produce 1,750,000 tonnes per annum for 20 years of operation. Given the encouraging results from the Blackwood-1 well and indications of a possible gas resource adequate in volume and quality to supply a methanol plant, MEO has 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. MEO has also initiated the development of the Basis of Design documentation in preparation for the commencement of Front End Engineering and Design (FEED) studies of the Tassie Shoal Methanol Project (TSMP) later in the year. Following the sale of 16.5 million shares at an average price of A$1.20 / share for cash, Xtract now holds 15.7% of the total issued share capital of MEO. The proceeds of this sale provided Xtract with working capital and the opportunity to offer development support to other investee companies within its portfolio. Subsequent to period end, MEO's share price decreased significantly due to inconclusive appraisal well results at Heron-2. Xtract's carrying value for MEO at 31st December 2007 was Â£39.3 million based on the company's 60.7 million shareholding and an MEO share price of A$ 1.49. As MEO is classified as an available for sale investment any reduction in its carrying value will be offset against the available for sale reserve at 30 June 2008, net of deferred tax impact. Wasabi Energy and other businesses Wasabi Energy Limited ('Wasabi') is a diversified investor in renewable energy and low greenhouse emission technologies, with interests in geothermal waste/ heat, uranium exploration and biodiesel investments in Australia. Wasabi holds approximately 38% of Rum Jungle Uranium Ltd ('Rum Jungle'), which was admitted to the official list of the Australian Stock Exchange (ASX) in November 2007. Rum Jungle has interests in exploration licences covering some 4,150 km2 of the Northern Territory of Australia, and has entered into agreements which will give it rights to explore for uranium over a further 3,330 km2. Subsequent to the period end, Xtract provided a loan of A$1.25 million to Wasabi for the specific purpose of assisting Wasabi to participate in the IPO of ASX listed Greenearth Energy Ltd who are intending to explore and develop geothermal resources in Australia, New Zealand and the wider Pacific Rim. The loan was repaid in full by Wasabi in February 2008. Xtract is also participating in several oil & gas projects in the Kyrgyz Republic, including exploration (2D seismic programme completed) and water injection (with Kyrgyzneftegas, the state oil company) and continues to hold gold exploration tenements in Mexico. Portfolio Simplification During the period Xtract Energy completed the sale of its holding of 61.5 million ordinary shares in Aviva Corporation Ltd ('Aviva'), together with an interest in a steel-making technology, to Wasabi in exchange for 175 million new Wasabi ordinary shares and 25 million warrants. Xtract continues to focus on its strategy of building a diversified portfolio of high potential businesses in the energy sector to provide growth opportunities over the short-, medium- and longer-term. Xtract works closely with the management teams of its investee companies to build value, including overseeing the development of its oil shale extraction technology. John Newton Chairman The information in this announcement in relation to oil shale has been reviewed by Dr John E. Shirley, Managing Director of Xtract Oil Ltd. Dr. Shirley has a BSc and PhD in Geophysics from the University of Tasmania, over 40 years experience in the resources and energy sector and is a member of the Society of Petroleum Engineers. The information in this announcement relating to the resources of Xtract's other investee companies (none of which are subject to the AIM Rules) has not been reviewed by a named 'qualified person' as defined and required by the AIM Guidance Note for Mining, Oil and Gas Companies. Consolidated Income Statement For the six months ended 31 December 2007 18 months Six months ended ended Notes 31 December 31 December 30 June 2007 2006 2007 Unaudited Unaudited Audited (Restated) Â£'000 Â£'000 Â£'000 Administrative expenses (1,426) (492) (2,124) Other operating income 5 66 66 Gain on disposal of fixed assets - - 10 ------ ----- ------ Operating loss (1,421) (426) (2,048) Investment revenue 55 25 99 Other gains and losses 3 6,046 822 5,968 Finance costs - (89) (128) Share of results of associates 5 (906) (17) (362) Negative goodwill on acquisition - 3,077 5,730 of subsidiary ------ ----- ------ Profit before tax 3,774 3,392 9,259 Tax expense (1,461) (246) (1,787) ------ ----- ------ Profit for the period 2,313 3,146 7,472 ------ ----- ------ Attributable to: Equity holders of the parent 2,313 2,983 6,284 Minority interest - 163 1,188 ------ ------ ------ 2,313 3,146 7,472 ------ ------ ------ Earnings per share Basic (pence) 4 0.33 0.77 1.49 ------ ------ ------ Diluted (pence) 4 0.30 0.62 1.29 ------ ------ ------ The Group's results relate to continuing operations. Consolidated statement of recognised income and expense For the six months ended 31 December 2007 18 months Six months ended ended Notes 31 December 31 December 30 June 2007 2006 2007 Unaudited Unaudited Audited (Restated) Â£'000 Â£'000 Â£'000 Movements in available-for-sale 19,268 374 782 investments taken to equity Movements in share based payments 253 134 - reserve taken to equity Revaluation of intangible assets - - 962 962 acquisition of subsidiaries Exchange differences 219 - (18) Tax on items taken directly to equity (5,820) (113) (235) ------ ------ ----- Net income recognised directly in equity 13,920 1,357 1,491 Profit for the period 2,313 3,146 7,472 ------ ----- ----- Total recognised income and expense for 16,233 4,503 8,963 the period ------ ----- ----- Attributable to: Equity holders of the parent 16,233 4,340 7,775 Minority interests - 163 1,188 ------ ----- ----- 16,233 4,503 8,963 ------ ----- ----- The Group's results relate to continuing operations. Consoldiated balance sheet As at 31 December 2007 Notes 31 December 31 December 30 June 2007 2006 2007 Unaudited Unaudited Audited (Restated) Â£'000 Â£'000 Â£'000 Non-current assets Intangible assets 11,974 11,408 11,601 Property, plant and equipment 298 190 231 Interests in associates 5 7,746 10,075 23,818 Available-for-sale investments 6 39,323 2,798 3,206 Deferred tax asset 501 268 312 ------ ------ ------ 59,842 24,739 39,168 ------ ------ ------ Current assets Inventories 118 13 16 Financial assets 376 4,848 9 Trade and other receivables 281 398 293 Cash and cash equivalents 4,670 4,214 1,582 ------ ------ ------ 5,445 9,473 1,900 ------ ------ ------ Total assets 65,287 34,212 41,068 ------ ------ ------ Current liabilities Trade and other payables 390 285 375 Current tax liabilities 2,838 - 698 Amounts due to parent company - 1,529 - ------ ------ ------ 3,228 1,814 1,073 ------ ------ ------ Net current assets 2,217 7,659 827 ------ ------ ------ Non-current liabilities Deferred tax liabilities 13,050 5,564 7,616 ------ ------ ------ Total liabilities 16,278 7,378 8,689 ------ ------ ------ Net assets 49,009 26,834 32,379 ------ ------ ------ Notes 31 December 31 December 30 June 2007 2006 2007 Unaudited Unaudited Audited (Restated) Â£'000 Â£'000 Â£'000 Equity Share capital 7 734 557 704 Share premium account 7 24,168 17,210 23,800 Share based payments reserve 7 636 257 411 Available-for-sale investment 7 14,035 261 547 reserve Revaluation reserve 7 962 962 962 Foreign currency translation 7 188 - (18) reserve Retained earnings 7 8,377 2,289 6,064 ------ ------ ------ Equity attributable to equity 49,100 21,536 32,470 holders of the parent Minority interest 7 (91) 5,298 (91) ------ ------ ------ Total equity 49,009 26,834 32,379 ------ ------ ------ Consolidated cash flow statement For the six months ended 31 December 2007 6 month 6 month 18 months Period ended Period ended ended 31 December 31 December 30 June 2007 2006 2007 Unaudited Unaudited Audited (Restated) Â£'000 Â£'000 Â£'000 Net cash used in operating activities (1,574) (410) (1,634) ------ ----- ------- Investing activities Interest received 55 25 99 Government grants 5 - 66 Purchase of property, plant and equipment (69) (15) (65) Disposal of property, plant and equipment 2 - 11 Acquisition of intangible assets (24) (172) (282) Disposal of trading investments 345 - 2,326 Purchase of trading investments (433) (406) (406) Acquisition of associates (4,224) (1,545) (2,973) Disposal of associate 8,515 - - Acquisition of subsidiaries, net of - 831 (149) cash acquired ------ ------ ------- Net cash used in investing activities 4,172 (1,282) (1,373) ------ ------ ------ Financing activities Interest paid - - (80) Proceeds on issue of shares 398 6,185 6,504 Proceeds received on exercise of - - 639 options in subsidiary Issue of subsidiary shares to minority - 128 - interests Short term loan repayments - (400) (3,436) Share issue expenses - (355) (354) ------ ------ ------- Net cash from financing activities 398 5,558 3,273 ------ ------ ------- Net increase in cash and cash 2,996 3,866 266 equivalents Cash and cash equivalents at beginning 1,582 348 1,321 of period Effect of foreign exchange rate changes 92 - (5) ------ ------ ------- Cash and cash equivalents at end of 4,670 4,214 1,582 period ------ ------ ------- Notes to the interim financial information For the six months ended 31 December 2007 1. Corporate information The interim consolidated financial statements of the Group for the six months ended 31 December 2007 were authorised for issue in accordance with a resolution of the directors on 27 March 2008. Xtract Energy Plc is a company incorporated in the United Kingdom under the Companies Act 1985. The company's ordinary shares are traded on the AIM market of the London Stock Exchange. 2. Basis of preparation Xtract Energy Plc prepares its Group Financial Statements on the basis of International Financial Reporting Standards (IFRS) as adopted for use by the European Union (EU). The financial information presented herein has been prepared in accordance with the accounting policies expected to be used in preparing the Group Financial Statements for the year ending 30 June 2008 which do not differ significantly from those used for the 2007 Group Financial Statements. The interim consolidated financial statements do not include all the information and disclosures required in the annual financial statements, and should be read in conjunction with the Group's annual financial statements for the period ended 30 June 2007. The Group's interim financial statements for the period ended 31 December 2006 had incorrectly accounted for the acquisition of Xtract Oil Limited and Cambrian Oil and Gas Plc. The annual financial statements for the period ended 30 June 2007 had correctly accounted for these acquisitions. Accordingly, the comparative financial information for the six months ended 31 December 2006 has been restated. A reconciliation of the restated comparative interim financial information from the previously published interim financial statements for the six months period to 31 December 2006 is included at note 8. The interim financial information is not audited and does not constitute statutory accounts within the meaning of section 240 of the Companies Act 1985. Comparative figures for the period ended 30 June 2007 have been extracted from the Group Financial Statements which received an unqualified opinion from the auditors and have been filed with the Registrar of Companies. The interim financial information is presented in Sterling and all values are rounded to the nearest thousand pounds (Â£'000) unless otherwise stated. 3. Other gains and losses An analysis of the Group's other gains and losses are as follows: Period ended Period ended 18 months 31 December 31 December ended 30 June 2007 2006 2007 (Restated) Â£'000 Â£'000 Â£'000 Disposal of associate 3,335 - - Disposal of available for sale 1,002 - - investments Fair value movement on derivative 272 822 - assets Gain on dilution of interests in 1,255 - - associates (note 5) Commission received 182 - - Realised gains on sale of held for - - 1,233 trading investments Unrealised gains on held for trading - - 5,091 investments Loss on dilution from subsidiary share - - (356) issue ------ ------ ------ Total other gains and losses 6,046 822 5,968 ------ ------ ------ 4. Earnings per share The calculation of the basic and diluted earnings per share is based on the following data: Six months 18 months ended ended Earnings 31 December 31 December 30 June 2007 2006 2007 (Restated) Â£'000 Â£'000 Â£'000 Earnings for the purposes of basic earnings per share being net profit attributable to equity holders of the parent 2,313 2,983 6,284 ----------------------------- Six months 18 months ended ended 31 December 31 December 30 June 2007 2006 2007 (Restated) Number of shares Weighted average number of ordinary shares for the purposes of basic earnings per share 709,330,848 388,196,649 420,569,934 Effect of dilutive potential ordinary shares - options and warrants 63,236,220 95,792,873 67,143,088 -------------------------------------- Weighted average number of ordinary shares for the purposes of diluted earnings per share 772,567,068 483,989,522 487,713,022 -------------------------------------- Certain options and warrants of the Group are not dilutive and are therefore excluded from the weighted average number of ordinary shares for the purposes of diluted earnings per share. 5. Interests in Associates Details of the Group's associates for the period ended 31 December 2007 are as follows: 31 December 31 December 30 June 2007 2006 2007 (Restated) Â£'000 Â£'000 Â£'000 At beginning of the period 23,818 - 412 Acquired on acquisition of subsidiary - 10,093 10,093 Revaluation on acquisition of minority - - 3,481 interest Investment in associate (a) 6,621 - - Exercise of options in associate 333 - 2,973 Transferred from derivatives 128 - - Gain on dilution of interests in associates 1,255 - - Share of associates' share based payments 91 - - reserve Share of associates' foreign currency (2) - - translation reserve Share of associates' available for sale (188) - - reserve Disposal of investment in associate (b) (5,180) - - Transferred to available for sale investments (18,268) - - (c) (note 6) Transferred from trading investments - - 7,628 Transferred to investment in subsidiary - - (407) Share of associates losses for the period (906) (17) (362) Exchange translation 44 (1) - ------- ------ ------ At end of the period 7,746 10,075 23,818 ------- ------ ------ a) Includes additional investments in the Group's Wasabi Energy Limited and Elko Energy Limited associates during the period. b) Carrying value of MEO shares disposed during the period. c) Carrying value of Wasabi Energy Limited transferred from available for sale investments on becoming an associate in August 2007 and the transfer of MEO Australia Limited cost to available for sale investments on ceasing to be an associate in December 2007. Name Place of Date Date Proportion of Principal Incorporation associate associate ownership & Activities and Operation interest interest voting power acquired disposed held % MEO Australia Australia 15/11/06 13/12/07 N/A Oil & gas Limited i) exploration Elko Energy Canada 15/11/06 N/A 35.24 Oil & gas Limited exploration Wasabi Energy Australia 2/08/07 N/A 36.02 Energy and Limited technology investments i) Transferred to available for sale investment during the period. 6. Available-for-sale investments Details of the Group's available-for-sale investments for the period ending 31 December 2007 are as follows: 31 December 31 December 30 June 2007 2006 2007 (Restated) Â£'000 Â£'000 Â£'000 At beginning of the period 3,206 - - Acquired during the period - 2,424 2,424 Disposals (a) (4,274) - - Unwinding of fair value on transfer to (547) - - investment in associate (b) Transferred from investments in 18,268 - - associates (c) (note 5) Movement in fair value (d) 22,670 374 782 ------ ----- ----- At end of the period 39,323 2,798 3,206 ------ ----- ----- (a) Carrying value of Aviva investment disposed during the period. (b) Fair value adjustments unwound against available-for-sale reserve upon ceasing to be available-for-sale and becoming an associate. (c) Carrying value of Wasabi Energy Limited transferred from available-for-sale investments on becoming an associate in August 2007 and the transfer of MEO Australia Limited cost to available-for-sale investments on ceasing to be an associate in December 2007. (d) Movement in fair value of investments during the period. Available-for-sale investments Available-for-sale investments comprise the Group's investment in listed securities and unlisted securities, which have been held by the Group for long term returns. 7. Reconciliation of changes in equity Share Share Share Available- Revaluation Foreign Retained Minority Total Capital premium based for-sale reserve currency Earnings Interest Equity account payments investments translation reserve reserve reserve Â£'000 Â£'000 Â£'000 Â£'000 Â£'000 Â£'000 Â£'000 Â£'000 Â£'000 At 1 July 2006 287 6,009 123 - - - (695) - 5,724 Issue of shares 270 11,690 - - - - - - 11,960 Share issue - (489) - - - - - - (489) expenses Share based - - 134 - - - - - 134 payments expense Gain on - - - 374 - - - - 374 revaluation of available-for-sale investments Deferred tax on - - - (113) - - - - (113) revaluation of available-for-sale investments Currency - - - - - - 1 128 129 translation differences Revaluation on - - - - - 962 - - 962 acquisition of subsidiaries Minority interest - - - - - - - 5,007 5,007 arising on acquisition of subsidiary Profit for the - - - - - - 2,983 163 3,146 period ----- ------ ---- ----- ----- ----- ----- ----- ----- At 31 December 557 17,210 257 261 962 - 2,289 5,298 26,834 2006 (restated) Issue of shares 147 6,699 - - - - - - 6,846 Share issue - (109) - - - - - - (109) expenses Share based - - 154 - - - - - 154 payments expense Gain on - - - 408 - - - - 408 revaluation of available-for-sale investments Deferred tax on - - - (122) - - - - (122) revaluation of available-for-sale investments Currency - - - - - (18) - - (18) translation differences Issue of shares by - - - - - - - 995 995 subsidiary Acquisition of - - - - - - - (7,281) (7,281) minority interest Profit for the - - - - - - 3,775 897 4,672 period ----- ------ ---- ---- ---- ---- ----- ---- ------ At 30 June 2007 704 23,800 411 547 962 (18) 6,064 (91) 32,379 ----- ------ ---- ---- ---- ---- ----- ---- ------ Share Share Share Available- Revaluation Foreign Retained Minority Total Capital premium based for-sale reserve currency Earnings Interest Equity account payments investments translation reserve reserve reserve Â£'000 Â£'000 Â£'000 Â£'000 Â£'000 Â£'000 Â£'000 Â£'000 Â£'000 At 1 July 2007 704 23,800 411 547 962 (18) 6,064 (91) 32,379 Issue of shares 30 368 - - - - - - 398 Share based - - 162 - - - - - 162 payments expense Gain on - - - 22,670 - - - - 22,670 revaluation of available-for-sale investments Unwinding of fair - - - (545) - - - - (545) value on transfer to investment in associate Deferred tax on - - - (6,638) - - - - (6,638) revaluation of available-for-sale investments Transfer of - - - (2,669) - - - - (2,669) available-for-sale revaluations to income statement on disposal Transfer of - - - 802 - - - - 802 deferred tax on revaluation of available-for-sale assets on disposal Share of - - 91 (188) - (1) - - (98) associates reserves Deferred tax on - - (28) 56 - (12) - - 16 share of associates reserves Currency - - - - - 219 - - 219 translation differences Profit for the - - - - - - 2,313 - 2,313 period ----- ------ ---- ------ ------ ----- ----- ----- ------ At 31 December 734 24,168 636 14,035 962 188 8,377 (91) 49,009 2007 ----- ------ ----- ------ ------ ----- ----- ----- ------ 8. Adjustments to restate comparative interim financial information In preparing this interim financial information, the comparative results for the six months to 31 December 2006 have been restated in line with the accounting treatment of the acquisition of Xtract Oil Limited and Cambrian Oil and Gas Plc in the previously published financial statements of the Group for the period ended 30 June 2007. A reconciliation of the comparative amounts previously reported to restate comparative amounts for the consolidated income statement and the consolidated balance sheet is provided below. A description of each adjustment then follows. a) Consolidated income statement Six months ended 31 December 2006 As previously reported Adjustments Restated Â£'000 Â£'000 Â£'000 Income statement Administrative expenses (331) (162) (493) Other operating income 67 - 67 ----- ----- ----- Operating loss (264) (162) (426) Investment revenues 25 - 25 Other gains and losses 822 - 822 Finance costs (89) - (89) Share of results of associates 812 (829) (17) Negative goodwill on acquisition - 3,077 3,077 of subsidiary ------ ------ ------ Profit before tax 1,306 2,086 3,392 Tax (246) - (246) ------ ------ ------- Profit for the period 1,060 2,086 3,146 ------ ------ ------- Attributable to: Equity holders of the parent 897 2,086 2,983 Minority interest 163 - 163 ------ ------ ------- 1,060 2,086 3,146 ------ ------ ------- b) Consolidated balance sheet 31 December 2006 As previously stated Adjustments Restated Â£'000 Â£'000 Â£'000 Non-current assets Intangible assets 10,170 1,238 11,408 Property, plant and equipment 190 - 190 Interests in associates 1,216 8,859 10,075 Available-for-sale investments 2,798 - 2,798 Deferred tax asset - 268 268 ------ ------ ------ 14,374 10,365 24,739 ------ ------ ------ Current assets Cash and cash equivalents 4,214 - 4,214 Inventories 14 - 13 Trade and other receivables 398 - 398 Financial assets 4,847 - 4,848 ------ ------- ------ 9,473 - 9,473 ------ ------- ------ Total assets 23,847 10,365 34,212 ------ ------- ------ Current liabilities Trade and other payables 285 - 285 Amounts due to parent company 1,529 - 1,529 ------ ------- ------ 1,814 - 1,814 ------ ------- ------ Net current assets 7,659 - 7,659 ------ ------- ------ Non-current liabilities Deferred tax liabilities 1,332 4,232 5,564 ------ ------- ------ Total liabilities 3,146 4,232 7,378 ------ ------- ------ Net assets 20,701 6,133 26,834 ------ ------- ------ Equity Share capital 557 - 557 Share premium account 17,210 - 17,210 Share based payments reserve 257 - 257 Available-for-sale investment 374 (113) 261 reserve Revaluation reserve - 962 962 Retained earnings 208 2,081 2,289 ------ ------ ------ Equity attributable to equity 18,606 2,930 21,536 holders of the parent Minority interest 2,095 3,203 5,298 ------ ------ ------ Total equity 20,701 6,133 26,834 ------ ------ ------ c) Consolidated income statement reconciliation Six months ended 31 December 2006 Â£'000 Reported profit for the period after tax as 1,060 previously stated Revisions to acquisition accounting for Xtract 2,086 Oil Limited and Cambrian Oil and Gas Plc ----- Total adjustments 2,086 ----- Revised profit for the period 3,146 ----- d) Consolidated balance sheet reconciliation 31 December 2006 Â£'000 Net assets as previously stated 20,701 Revision to acquisition accounting for Xtract Oil 957 Limited (i) Revisions to acquisition accounting for Cambrian Oil 5,289 and Gas Plc (ii) Deferred tax on available for sale investments (113) ------ Total adjustments 6,133 ------ Revised net assets 26,834 ------ Description of restatement of comparative interim information (i) Revision to acquisition accounting for Xtract Oil Limited On 17 February 2006, the Group acquired the remaining 78.3% share capital of Xtract Oil Limited ('Xtract Oil' or 'XOIL'). On acquisition of the remaining share capital, the Group accounted for the transaction as a business combination and applied purchase accounting but did not take account of the 'step-up' in accordance with IFRS 3 'Business Combinations'. Furthermore, the fair value of the net assets acquired is assessed to have been Â£5,351,000, rather than Â£6,308,000, a difference of Â£957,000. In addition, Xtract Oil was an associate of the Group prior to this transaction but no share of its result was previously recognised. The revised purchase accounting resulted in the adjustments in the following tables. (ii) Revisions to acquisition accounting for Cambrian Oil and Gas Plc As at 15 November 2006 the Group acquired a controlling interest of 65.5% in Cambrian Oil and Gas Plc ('COIL'). The Group accounted for the transaction as a business combination and applied purchase accounting. However, the fair value of the net assets acquired is assessed to have been Â£14,663,000 rather than Â£9,213,000, an increase of Â£5,450,000. Also, the Group had previously accounted for initial interest in COIL as an associate when instead these initial transactions formed part of a group of closely related transactions in a short period of time to acquire a controlling interest of 65.5% of COIL. The revised accounting for the business combination and subsequent purchases of minority interests resulted in the adjustments in the tables following: Income statement adjustments COIL XOIL Six months Six months ended 31 ended 31 December December 2006 2006 Â£'000 Â£'000 Reversal of incorrectly recorded share of (829) - associate results Recognition of negative goodwill on acquisition 3,077 - Adjustment to administrative costs (162) - ----- ----- 2,086 - ----- ----- Balance sheet adjustments COIL XOIL 31 December 31 December 2006 2006 Â£'000 Â£'000 Mining rights - 3,603 Intangible assets (2,365) - Investment in associates 8,859 - Deferred tax asset 268 - Deferred tax liabilities (1,586) (2,646) ------- ------- 5,176 957 ------- ------- Revaluation reserve - 962 Available-for-sale investment reserve (113) Minority interests 3,203 - Profit for the period 2,086 - Retained earnings - (5) ------- ------- 5,176 957 ------- ------- Refer to note 21 of the Audited Group Financial Statements for the period ended 30 June 2007 for the full details of the acquisitions. 9. Subsequent events In January 2008, MEO Australia Limited (MEO) announced that the results of the Heron-2 appraisal well were inconclusive. Production testing at the time was unsuccessful in confirming economically recoverable reserves within the Epenarra Darwin formation. A decline in the share price of MEO coincided with the release of these results. At 31 December 2007, MEO had a share price (ASX: MEO) of AUD$1.49, and at 27 March 2008 a share price of $AUD 0.29. MEO was classified as an available for sale investment at 31 December 2007 with its carrying value recorded at the market value at that date. This information is provided by RNS The company news service from the London Stock Exchange

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