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88 Energy Limited (88E)

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Wednesday 11 August, 2021

88 Energy Limited

Interim Report

RNS Number : 2266I
88 Energy Limited
11 August 2021
 

 

This announcement contains inside information

11 August 2021

88 Energy Limited

Half Year Financials Release

88 Energy Limited (ASX:88E, AIM:88E, OTC:EEENF) ( 88 Energy or the Company ) is pleased to advise of the release of its financial results for the half-year ending 30 June 2021.

Highlights

· Successful drilling of Merlin-1 well at Project Peregrine in March 2021.

· Encouraging results from the Merlin-1 post well testing program received during half year.

· Acquisition of the Umiat oil field in January 2021, which is located adjacent to Project Peregrine.

· Acquisition of residual 50% working interest in Project Peregrine in June 2021.

· Sale of Alaskan Tax Credits for US$18.7M cash in June 2021, enabling full repayment of debt.

· Adoption of World Economic Forum (WEF) principles, the global standard for ESG reporting.

· At balance date, 88 Energy held A$14.8M cash and zero debt (excluding typical trade creditors).

· Subsequent to half end, received final cash call receipt on Merlin-1 of US$5.0M.

· Strengthened Board and management team in early August.

· Comprehensive Merlin-1 well results and interpretation to be released imminently.

 

A copy of the Company's Interim Report, extracts from which are set out below, has been lodged on the ASX and is also available on the Company's website at www.88energy.com .

 

Media and Investor Relations:

 

88 Energy Ltd

Ashley Gilbert, Managing Director 




Tel: +61 8 9485 0990

Email:[email protected]




Finlay Thomson , Investor Relations

Tel: +44 7976 248471



Fivemark Partners , Investor and Media Relations

Andrew Edge / Michael Vaughan

Tel: +61 410 276 744

Tel: +61 422 602 720



EurozHartleys Ltd

Dale Bryan

Tel: + 61 8 9268 2829



Cenkos Securities 

Neil McDonald / Derrick Lee

Tel: + 44 131 220 6939

 

OPERATING AND FINANCIAL REVIEW

 

During the period, the Group has continued its principal activities in Alaska.  A summary of significant activities is below:

 

Highlights for the first half of 2021:

 

Project Peregrine

· Rig commissioning and mobilisation of snow road construction equipment to the Merlin-1 drill site commenced in early January 2021;

· The Merlin-1 exploration well spudded on 10 March 2021 and drilled to a Total Depth of 5,267';

· In April 2021 the Project Peregrine Joint Venture announced the completion of the Merlin-1 drilling program, as it was too late in the season to initiate flow testing operations;

· Initial petrophysical interpretation of wireline logs indicated several potential pay zones in the Merlin-1 well and side wall cores obtained from the well confirmed presence of oil;

· Following completion of the drilling program, the post well testing program commenced on sidewall cores, cuttings, mud gas and fluid samples from Merlin-1;

· Geochemical analysis of fluid extracts from selected core samples definitively demonstrated presence of hydrocarbons;

· Initial mapping of additional prospective zones encountered in Merlin-1 delivers upside potential; and

· On 7th June 2021, the company announced that it had entered into an agreement with Alaska Peregrine Development Company, LLC ("APDC") to acquire a 50% working interest from APDC in Project Peregrine in exchange for a US$14 million in shares plus 1.5% ORRI and additional bonus payments (as disclosed in Note 15). As at 30 June 235,454,781 shares had been issued to APDC, with the remaining shares issued post June as per Note 14.

 

Umiat Oil Field

· In Q1 2021, 88 Energy, via its wholly owned subsidiary Emerald House LLC, entered into a Sale and Purchase Agreement with Malamute Energy, Inc and Renaissance Umiat LLC to acquire the Umiat Oil Field ("Umiat");

· In March 2021 the Company completed the abandonment of two historic wells, which was a condition of the acquisition;

· Further studies conducted in conjunction with the Merlin-1 post well testing and analysis have identified additional upside at the Umiat oil field; and

· Subsequent to Half Year period end, approval from the Bureau of Land Management was received to defer Umiat Year 2 Unit well commitment by 24 months to 31 August 2023.

 

Project Icewine

· The nearby Talitha-A well drilled by Patheon Resources showed encouraging results with the potential for the Theta West and the prospective sands of the Kuparuk formation extending onto the Icewine acreage. The internal geoscience team are to reassess the potential across the acreage following these results.

 

Yukon Acreage

· Tract 29 was awarded during the half-year as part of the 2021 Coastal Lease Sale;

· Discussions continue to advance with nearby lease owners for a joint development area; and

· Planning for potential future exploration drilling ongoing subject to farm-out and other discussions.

 

Corporate

· David Wall resigned as managing director during the half-year, Ashley Gilbert appointed Managing Director and Sarah Smith appointed Company Secretary;

· Sale of Alaskan Oil and Gas Tax Credits for US$18.7M; proceeds applied towards full repayment of outstanding 88E debt (US$16.1M); and

· Cash as at 30 June 2021 of A$14.8M and zero debt.

 

PROJECT PEREGRINE

Merlin - 1 Exploration Well

 

The Merlin-1 well was spudded in March 2021 and was drilled to a Total Depth of 5,267', with drilling operations completed in April 2021. The post well testing program on the samples and data obtained during the drilling of the Merlin-1 well commencing shortly thereafter, with key results up to half year as follows;

 

· Initial petrophysical interpretation of wireline logs indicated several potential pay zones in the Merlin-1 well and side wall cores obtained from the well confirmed the presence of oil;

· The sidewall cores taken in the Merlin-1 well were analysed at surface prior to being sent to the laboratory for further testing with fluorescence and cut observed over several key horizons;

· Phase one geochemical results were received for the original 18 specifically selected trims from the Merlin-1 side wall cores with 7 of these 18 trims confirming the presence of hydrocarbons which were at depths that were among the most prospective zones noted during drilling and also correspond with depths where good oil shows were noted during drilling, including petroliferous odour, fluorescence and cut. A further 10 trims were sent for analysis subsequent to half-year end also;

· High resolution gas chromatography analysis from a selection of the trims also showed evidence of hydrocarbons.

· Phase two of the geochemical analysis program on the sidewall core trims had commenced prior to half year, which included quantitative extraction, SARA, isotopes and biomarkers analysis;

· Geochemical analysis of fluid extracts from selected core samples has definitively demonstrated presence of hydrocarbons; and

· Initial mapping of additional prospective zones encountered in Merlin-1 delivers upside potential.

 

Costs associated with the Merlin-1 well have been finalized, with 88 Energy's net share of well costs approximately US$9 million, inclusive of wireline costs and additional costs associated with operational issues during the wireline program.

 

Acquisition of APDC 50% interest in Project Peregrine

 

On 7 June 2021, 88 Energy announced that it had entered into an agreement to acquire the 50% working interest in Project Peregrine held by Alaska Peregrine Development Company, LLC (APDC) in exchange for consideration of:

 

· US$14 million, payable in new 88 Energy shares, to be issued in several tranches and subject to a final reconciliation mechanism;

· 1.5% overriding royalty interest on future production from the Project Peregrine licences;

· US$10m cash payment on the achievement of gross 2P reserves of 100 million barrels within 36 months;

· Cash payments of US$2.5m per 50 million barrels on the achievement of gross 2P reserves added over 100 million barrels within 36 months (capped at 5 additional cash payments); and

· 10% of the gross sale proceeds in respect of an assignment of greater than 49% of Project  Peregrine within 24 months, excluding a bona fide farm-out.

 

Final settlement in relation to the acquisition occurred post period end with all consideration shares being received by APDC. 88 Energy now holds a 100% working interest in Project Peregrine.

 

PROJECT ICEWINE

During the half-year, 88 Energy closely monitored activity nearby to the northern border of its Project Icewine acreage, where a flow of light oil from the Kuparuk has been reported from the Talitha-A well. (See Pantheon Resources AIM:PANR press release dated 19th April 2021).

 

Additional insights into the wettability of the Kuparuk formation have also been highlighted as part of the results from Talitha-A, which may have positive ramifications for 88 Energy's previous interpretation of this horizon.

 

All three wells drilled by 88 Energy at Project Icewine have encountered good quality reservoir in the Kuparuk formation, with indications of hydrocarbons. These had previously been interpreted as likely gas condensate or residual oil with no mapped targets being identified, as this was not a pursuing play by 88 Energy.

 

The results at Talitha-A are highly encouraging for the Kuparuk region Formation, including across Project Icewine. In light of these results, the 88 Energy internal geoscience team will reassess the potential across the acreage in the second half of 2021 ahead of a planned farm-out.

 

YUKON LEASES

The Yukon Leases contain the 86-million-barrel Cascade Prospect, which was intersected peripherally by Yukon Gold-1, drilled in 1994, and classified as an historic oil discovery.

 

In the half year Regenerate Alaska, a wholly owned subsidiary of 88 Energy, was awarded Tract 29 as part of the 2021 Coastal Lease Sale. In addition, the Company advanced discussions and negotiations with nearby lease owners to aggregate discovered resources located in the vicinity of the Yukon Leases as part of a joint development of the area.

 

* Refer announcement 7 November 2018

 

Cautionary Statement: The estimated quantities of petroleum that may be potentially recovered by the application of a future development project relate to undiscovered accumulations. These estimates have both an associated risk of discovery and a risk of development. Further exploration, appraisal and evaluation are required to determine the existence of a significant quantity of potentially movable hydrocarbons.

 

UMIAT OIL FIELD

In January 2021, 88 Energy, via its wholly owned subsidiary Emerald House LLC, entered into a Sale and Purchase Agreement with Malamute Energy, Inc and Renaissance Umiat LLC to acquire the Umiat Oil Field ("Umiat"), and in late March 2021 the Company completed the abandonment of two historic wells, which was a condition of the acquisition.

 

During the half-year, studies commenced to review the historical Umiat oil field development plans prepared by Linc Energy, which formed the basis of the Ryder Scott 2015 reserves report.  Initial results of the internal review and studies have identified potential cost savings on planned development CAPEX, as well as alternative potential routes to market for the crude. This could include a potential tie-in to the Willow oil field development to the north of the acreage.

 

Subsequent to half year end, 88 Energy received notification from the Bureau of Land Management for approval of its request to a 24-month extension to the Year 2 Unit Obligations, and corresponding extensions for the Unit obligations in Years 3, 4 and 5.

 

The 24-month extension to the Year 2 Unit Obligations allows 88 Energy to optimise a full field development plan, which will include evaluating potential synergies with plans associated with the Project Peregrine acreage.  It will also enable 88 Energy to use the knowledge gained from drilling the Merlin-1 well to plan an efficient operational program to optimize the potential for success at Umiat.  Any discovery at Project Peregrine would contribute significant value to any development of the Umiat oil field.

 

CORPORATE

Following the resignation of Mr David Wall during the half year, the Company announced on 10 May 2021 that Mr Ashley Gilbert was appointed to the role of Managing Director and Ms. Sarah Smith to the role of Company Secretary.

 

Following the retirement of Chairman Michael Evans, the Company announced on the 2nd August the appointment Philip Byrne as Non-Executive Chairman. Joanne Kendrick was also appointed as a Non - Executive Director.

 

On 21st June 2021 the Company announced that it had entered into an agreement that would facilitate the sale of all the Alaskan Oil and Gas Tax Credits which were held by Accumulate Energy Alaska, Inc. ("Accumulate"), a 100% owned subsidiary of 88 Energy.  The sale price of the Tax Credits was US$18.7 million cash, payable upon completion of the sale and transfer of the outstanding tax certificates.  The deal accelerates the timeframe of Accumulate Energy Alaska's value realisation from the Tax Credits, which under current estimates would not have been fully paid out by the Alaskan state until 2026.  The majority of the proceeds from the sale of the tax credits have been applied towards full repayment of 88 Energy's current outstanding debt of US$16.1 million with FCS Advisors, LLC (d/b/a Brevet Capital Advisors) ("FCS"), which was due to mature on 30 December 2022.  The residual sale consideration of US$2.6m is to be receipted by Accumulate Energy Alaska, which will then be applied towards working capital requirements.

 

On 30th June 2021, 88 Energy Limited and its subsidiaries advised its shareholders and stakeholders that it will adopt the Environmental, Social and Governance (ESG) framework developed by the World Economic Forum (WEF). This framework is regarded as the global standard for ESG reporting and encompasses 21 core metrics and disclosures.  The Company has engaged independent impact monitoring technology provider, Socialsuite, to assist with measuring, monitoring and reporting of these core ESG metrics.

 

FINANCIAL

For the period ended 30 June 2021 the Company recorded a profit of $445,446 (30 June 2020: $4.020 million loss). The profit was largely attributable to the sale of tax credits above their Fair Value.

 

No dividends were paid or declared by the Company during the period.

 

As at 30 June 2021, the Group had cash on hand of $14.762 million (31 December 2020: $14,845 million). Net assets totalled A$94.465 million (31 December 2020: $58.911 million), with the significant increase in net assets being largely due to the repayment of debt (31 Dec 2020 A$20.782 million) and shares to be issued in relation to the APDC transaction which were classified as liability (30 June 2021 A$13.441 million).

 

 

EVENTS AFTER THE PERIOD END

The following events occurred subsequent to the period end;

 

· The Company issued the following shares:

- 1.7.2021 - 235,454,781 @ $0.022 to APDC as part of the Peregrine purchase agreement;

- 6.7.2021 - 152,137,532 @ $0.035 to APDC as part of the Peregrine purchase agreement; and

- 12.7.2021 - 42,230,000 @ $0.032 to APDC as part of the Peregrine purchase agreement.

 

· On 2 August 2021, the Company announced the retirement of Michael Evans from the Board, and the appointment of Philip Byrne as Non-Executive Chairman and Joanne Kendrick as a Non-Executive Director.

· On 4 August the Company announced the approval from the BLM to defer Umiat Year 2 Unit well commitment by 24 months to 31 August 2023.  Refer to ASX Announcement for further details.

 

There were no other subsequent events.

 

CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME
FOR THE HALF YEAR ENDED 30 JUNE 2021


Note

 



30 June

2021

$

30 June

2020

$





Income

3(a)

4,331,646

Administration expenses

3(b)

(1,794,435)

Occupancy expenses


(37,408)

Employee benefit expenses

3(c)

(704,958)

Share based payment expense

13

(153,747)

Depreciation and amortisation expense


(55,606)

Finance cost


(1,160,411)

Realised/unrealised gain on foreign exchange


  (11,295)

  43,428

Other income /(expenses)

3(d)

31,660

 

Profit/(loss) before income tax


445,446

 

Income tax benefit/(expense)


-

Net profit/(loss) attributable to members of the parent


445,446

 




Other comprehensive income for the period

Other comprehensive income that may be recycled to profit or loss in subsequent periods:



Exchange differences on translation of foreign operations


2,061,695

Total comprehensive profit/(loss) for the period


2,507,141

 




Basic and diluted profit/(loss) per share


0.00003

(0,0004)

 

The consolidated statement of profit or loss and other comprehensive income should be read in conjunction with the accompanying notes.

 

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

AS AT 30 JUNE 2021


Note

 



30 June

2021

$

31 December

2020

$

ASSETS


Current Assets


Cash and cash equivalents

5

14,762,499

Other receivables

6

7,833,085

Total Current Assets


22,595,584




Non-Current Assets



Plant and equipment


2,134

Exploration and evaluation expenditure

7

93,688,369

Other assets

8

935,128

Total Non-Current Assets


94,625,631

TOTAL ASSETS


117,221,215




LIABILITIES



Current Liabilities



Provisions


105,412

Trade and other payables

9

22,650,749

Total Current Liabilities


22,756,161




Non-Current Liabilities



Borrowings

10

-

Total Non-Current Liabilities


-

TOTAL LIABILITIES


22,756,161

NET ASSETS


94,465,054




EQUITY



Issued and fully paid shares

11(a)

241,856,327

Reserves

11(b)

18,796,417

Accumulated losses


(166,187,690)

TOTAL EQUITY


94,465,054

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

 

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

FOR THE HALF YEAR ENDED 30 JUNE 2021


Issued and fully paid shares

$

Reserves

$

 

Accumulated

losses

$

Non-Controlling

Interest

$

Total

equity

$

 

Balance at 1 January 2020

185,619,885

23,578,127

(144,599,502)

-

64,598,510

Loss for the period

-

-

(4,020,311)

-

(4,020,311)

Other comprehensive income

-

1,155,379

-

-

1,155,379

Total comprehensive loss for the period, net of tax

-

1,155,379

(4,020,311)

-

(2,864,932)

Shares issued during the period

13,024,297

-

-

-

13,024,297

Non-controlling interests on acquisition of subsidiary

-

-

-

1,342,715

1,342,715

Shares committed and unissued

140,000

-

-

-

140,000

Equity raising costs

(352,136)

-

-

-

(352,136)

Share based payments

-

52,861

-

-

53,924

Balance at 30 June 2020

198,432,045

24,786,367

(148,619,813)

1,342,715

75,941,315







Balance at 1 January 2021

208,963,513

16,580,975

(166,633,135)

-

58,911,353

Profit for the period

-

-

445,446

-

445,446

Other comprehensive income

-

2,061,695


-

2,061,695

Total comprehensive profit for the period, net of tax

-

2,061,695

445,446

-

2,507,141

Shares issued during the period

33,683,839

-

-

-

33,683,839

Equity raising costs

(791,025)

-

-

-

(791,025)

Share based payments

-

153,747

-

-

153,747

Balance at 30 June 2021

241,856,327

18,796,417

(166,187,690)

-

94,465,054

 

C ONSOLIDATED STATEMENT OF CASH FLOWS

FOR THE HALF YEAR ENDED 30 JUNE 2021

 



 


30 June 2021


 

30 June 2020

Cash flows from operating activities


Interest

-


2,634

Interest Paid 

(1,052,616)


(1,187,657)

Payments to suppliers and employees

(2,364,182)


(1,224,781)

Other Income

-


24,000

Exploration Expenditure Expensed

-


(87,749)

Net cash outflows used in operating activities

(3,416,798)


(2,473,552)





Cash flows from investing activities

Cash acquired from acquisition of XCD Energy

-


434,091

Payments for exploration and evaluation activities

(31,218,286)


(35,467,951)

Contributions from JV Partners in relation to Exploration

13,675,903


23,506,461

Payments for bonds

(387,270)


-

Proceeds sale of tax credits

24,233,263


-

Net cash outflows used in investing activities

6,303,610


(11,527,399)





Cash flows from financing activities




Proceeds from issue of shares

18,557,500


5,000,000

Share issue costs

(884,143)


(362,000)

Payment of borrowings

(20,909,692)


-

Net cash inflows from financing activities

(3,236,335)


4,638,000





Net increase/(decrease) in cash and cash equivalents

(349,523)


(9,362,951)

Net foreign exchange differences

266,675


734,481

Cash and cash equivalents at beginning of period

14,845,347


15,903,113

Cash and cash equivalents at end of period

14,762,499


7,274,643

 

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

 

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE HALF YEAR ENDED 30 JUNE 2021

 

1.  CORPORATE INFORMATION

The consolidated financial statements of the Company for the six months ended 30 June 2021 were authorised for issue in accordance with a resolution of the Directors on 11 August 2021.

88 Energy Limited is a for-profit, limited company incorporated and domiciled in Australia whose shares are publicly traded. The principal activities of the company and its subsidiaries (the Company) are oil and gas exploration with a portfolio of exploration interests in Alaska.

2.  BASIS OF PREPARATION AND CHANGES TO THE COMPANY'S ACCOUNTING POLICIES

(a)  Basis of Preparation

The half year financial report for the six months ended 30 June 2021 is a general-purpose financial report prepared in accordance with requirements of the Corporations Act 2001 and Australian Accounting Standard AASB 134: Interim Financial Reporting.

The half year financial report has been prepared on a historical cost basis, except for available for sale assets, which have been measured at fair value.  Unless otherwise noted, the carrying value of financial assets and liabilities as disclosed in the half year financial report approximates their fair value. The company is domiciled in Australia and all amounts are presented in Australian dollars, unless otherwise noted.

For the purpose of preparing the half year financial report, the half-year has been treated as a discrete reporting period.

The accounting policies adopted in the preparation of the half year financial report are consistent with those followed in the preparation of the Company's annual financial report for the year ended 31 December 2020.

The half year financial report does not include all the information and disclosures required in the annual financial statements, and should be read in conjunction with the Company's annual financial statements as at 31 December 2020, together with any public announcements made during the period.

(b)  Adoption of new and revised accounting standards

The half yearly reports have not adopted any new or revised accounting standards which have a material impact on the Company.

 



 

30 June

2021

$

 

30 June

2020

$

 

3.  INCOME AND EXPENSES




(a)  Other Income




Interest Income


795

1,860

Other finance income*


4,330,851

-

Other Income


-

74,000

 

 

*Sale of tax credit receivable


4,331,646

75,860

 

 

 

(b)  Corporate & Administrative expenses




 

Consultancy and professional fees


587,045

98,966

 

Legal fees


55,702

16,115

 

General and administration expenses


1,123,633

371,186

 

Travel


28,055

36,642

 



1,794,435

522,909

 

(c)  Employee benefit expenses




 

Wages and salaries


584,751

622,286

 

Superannuation


50,477

40,914

 

Annual leave expense


51,424

61,031

 

Other employee expenses


18,306

17,774

 



704,958

742,005

 

(d)  Other (income)/expenses




 

Impairment expense - Icewine (2019) & Western Blocks (2020)


-

1,266,729

 

Other (income)/expenses


(31,660)

7,616

 



(31,660)

1,274,345

 

4.  SEGMENT INFORMATION

Identification of reportable segments

For management purposes during the period ended 30 June 2021 the Company was organised into the following strategic unit:

 

· Oil and Gas exploration in Alaska, USA.

 

Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision maker. The chief operating decision maker, who is responsible for allocating resources and assessing performance of the operating segments, has been identified as the Board of Directors.

 

The Board of Directors review internal management reports on a periodic basis that is consistent with the information provided in the statement of profit or loss and other comprehensive income, statement of financial position and statement of cash flows. As a result, no reconciliation is required, because the information as presented is used by the Board to make strategic decisions.

 

Management has determined, based on the reports reviewed by the Board of Directors and used to make strategic decisions, that the Group has one reportable segment being Oil & Gas Exploration in Alaska, USA. Such structural organisation is determined by the nature of risks and returns associated with each business segment and define the management structure as well as the internal reporting system.

 

 

 



30 June

2021

$

31 December

2020

$

 

 





 

 

5.  RECONCILIATION OF CASH




 

 

For the purposes of the statement of cash flows, cash and cash equivalents comprise the following:




 

 

Cash at bank and in hand


14,762,499

14,845,347

 

 



14,762,499

14,845,347

 

 





 

 





 

 

6.  OTHER RECEIVABLES




 

 

Other deposits and receivables (i)


7,833,085

5,079,630

 

 



7,833,085

5,079,630

 

 

 

(i)  A$6,650,705 (US$5,000,000) relates to cash calls receivable from APDC as per the acquisition of APDC agreement. The full US$5,000,000 was received in July 2021.

 

 

 

 

 


30 June

2021

$

31 December

2020

$

 

 

 

7.  EXPLORATION EXPENDITURE



 

 

Capitalised expenditure at the beginning of the period


48,213,290

52,928,315

 

 

Additions

Acquisition of 50% interest in APDC (i) 

Acquisition of XCD Energy Limited Exploration Assets

JV Contributions (ii)

Less Impairment (iii)

Foreign Currency translation 

42,017,705

18,621,974

-

(16,188,417)

-

1,023,817

 

45,560,030

-

(34,063,751)

-

  (11,384,288)

(4,827,016)

 

 

  Closing balance


93,688,369

48,213,290

 

 

 

(i)  88 Energy entered into an agreement with Alaska Peregrine Development Company, LLC (APDC) to acquire 50% working interest from APDC in Project Peregrine in exchange for US14 million in shares plus 1.5% ORRI and additional bonus payments. Refer Note 15 for details regarding the Contingent Liabilities associated with the transaction.

(ii)  JV Contributions received in 2020/21 from APDC for expenditure to be incurred in relation to the Merlin - 1 well in 2021.

(iii)  Impairment of the Icewine-2, Winx-1 exploration wells which were plugged and abandoned in 2019, and Western blocks exploration expenditure impaired following relinquishment of the leases. No impairment or impairment indicators were identified for the period ended 30 June 2021.

 

 

 

 

 

 

8.  OTHER NON-CURRENT ASSETS

 

ROU Asset - Lease 5 Ord St

Emerald House Bond

Tax credit receivable (i)

XCD Acquisition Other Non-Current Assets

Investments in Jade 

 

 

 

137,043

399,042

-

-

399,042

 

 

170,461

389,509

16,226,055

41,110 

389,509

 

 



935,128

17,216,644

 

 





 

 

 

(i)  The company announced on 21st June 2021 that it had entered into an agreement that would facilitate the sale of all the Alaskan Oil and Gas Tax Credits totalling US$18.7M which were held by Accumulate Energy Alaska, Inc. ("Accumulate"), a 100% owned subsidiary of 88 Energy.

 

 

 

 

 

 

9.  TRADE AND OTHER PAYABLES

 



 

 

Trade payables


4,589,486

590,397

 

 

Other payables

Shares to be Issued (i)


4,619,294

13,441,969 

4,736,237

-

 

 



22,650,749

5,326,634

 

 

 

(i)  Outstanding shares to be issued in relation to the APDC transaction as at 30 June 2021 (refer Note 7).

 



 

 





 

 





 

 



30 June

2021

$

31 December

2020

$

 

 

10. BORROWINGS

 




 

 

Non-Current

Bank Facility (i)

 


 

-

 

20,782,366

 

 



  -

20,782,366

 

 





 

 

 

(i)  On 21st June the company  entered into an agreement that would facilitate the sale of all the Alaskan Oil and Gas Tax Credits totalling US$18.7M  which were held by Accumulate Energy Alaska, Inc. ("Accumulate"), a 100% owned subsidiary of 88 Energy. With proceeds of the sale of tax credits applied towards full repayment of Accumulate Energy Alaska's outstanding debt of US$16.1 million. The 88 Energy group is  now debt free.

 

 

 

 





 

 

11. CONTRIBUTED EQUITY AND RESERVES




 

 





 

 

(a) Ordinary shares fully paid

 




 

 

Ordinary shares


13,146,545,212

241,856,327

 

 





 

 



Number

of shares

30 June

2021

$

 

 

Balance at 1 January 2021


10,602,304,716

208,963,513

 

 

Issue of shares for Capital Raising and Option Conversion

Issue of shares to APDC Tranche 1

Issue of shares to Contractors and Vendors (i)

Issue of shares to Directors

Costs associated with share issues

Issued and fully paid shares at 30 June 2021


1,500,500,000

235,454,781

796,619,048

11,666,667

 

13,146,545,212

 

12,027,500

5,180,005

16,406,334

70,000

(791,025)

241,856,327

 

(i) Relates predominantly to Merlin - 1 operations.

 

 

(b)  Reserves    30 June 2021  31 December 2020 

   $  $


 

 

 




Share-based payments

17,859,282

  17,705,535 

 

Foreign currency translation reserve

937,135

  (1,124,560)

 


18,796,417

16,580,975

 

Movement reconciliation



 

Share-based payments reserve



 

Balance at the beginning of the half year

17,705,535

17,582,665

 

Equity settled share-based payment transactions

153,747

122,870

 

Balance at the end of the half year

17,859,282

17,705,535

 




 

Foreign currency translation reserve



 

Balance at the beginning of the half year

(1,124,560)

5,995,462

 

Effect of translation of foreign currency operations to group presentation

2,061,695

(7,120,022)

 

Balance at the end of the half year

937,135

(1,124,560)

 

 

Share-based payment reserve

The share-based payment reserve is used to record the value of share-based payments provided to outside parties, and share-based remuneration provided to employees and directors. Refer to Note 12 for further details.

 

Foreign currency translation reserve

The translation reserve comprises all foreign exchange differences arising from the translation of the financial statements of foreign operations where their functional currency is different to the presentation currency of the reporting entity.

 

12. SHARE BASED PAYMENTS

 

Share-based payment transactions recognised during the reporting period were as follows:



30 June 2021

$

30 June 2020

  $

Options issued to Directors


52,073

21,781

Options issued to employees


101,674

31,080



153,747

52,861

  Options issued to Directors during 2021 - 48,700,000.

  Options granted to Employees/Contractors during 2021 - 91,068,000.

 

During the period Energy entered into an agreement with Alaska Peregrine Development Company, LLC (APDC) to acquire 50% working interest from APDC in Project Peregrine in exchange for US14 million in shares plus 1.5% ORRI and additional bonus payments. Refer Note 7 and Note 9.

 

13. ACQUISITION OF XCD ENERGY LTD

 

The net effect of the adjustments made to the values of assets and liabilities, as included at 30 June 2020, on the acquisition of XCD Energy Ltd are as follows:

XCD assets and liabilities values


30 June 2020

$

Amounts settled in cash



Amounts settled in equity - 1,604,859,200 shares at $0.005


8,024,296

Total


8,024,296




Recognised amounts of Net assets 



Cash and cash equivalents


434,091

Trade and other receivables


93,881

Total Current assets


527,972

Plant and Equipment


12,438

Exploration and evaluation expenditure


5,666,716

Other Assets & Receivables


477,404

Total Non-Current Assets


6,156,558

 



Trade and Other Payables


(188,496)

Provisions


(24,969)

Total Current Liability


(213,465)




Lease Liability


(22,857)

Total Non - current liability


(22,857)




Total Net Assets


6,448,208

 



Non - Controlling Interest


(1,342,715)

Exploration & Evaluation on acquisition


2,918,803

Net Assets Acquired


8,024,296

 

14. EVENTS AFTER THE PERIOD END

 

The following events occurred subsequent to the period end;

 

· The Company issued the following shares:

-  1.7.2021 - 235,454,781 @ $0.022 to APDC as part of the Peregrine purchase agreement;

-  6.7.2021 - 152,137,532 @ $0.035 to APDC as part of the Peregrine purchase agreement; and

-  12.7.2021 - 42,230,000 @ $0.032 to APDC as part of the Peregrine purchase agreement.

· On 2 August 2021, the Company announced the retirement of Michael Evans from the Board, and the appointment of Philip Byrne as Non-Executive Chairman and Joanne Kendrick as a Non-Executive Director.

· On 4 August the Company announced the approval from the BLM to defer Umiat Year 2 Unit well commitment by 24 months to 31 August 2023.  Refer to ASX Announcement for further details.

 

There were no other subsequent events.

 

15. COMMITMENTS AND CONTINGENCIES

 

On 7 June 2021, 88 Energy announced that it had entered into an agreement to acquire the 50% working interest in Project Peregrine held by Alaska Peregrine Development Company, LLC (APDC) in exchange for consideration of US$14 million, payable in new 88 Energy shares, to be issued in several tranches and subject to a final reconciliation mechanism, together with the following commitments;

1.  1.5% overriding royalty interest on future production from the Project Peregrine licences;

2.  US$10m cash payment on the achievement of gross 2P reserves of 100 million barrels within 36 months;

3.  Cash payments of US$2.5m per 50 million barrels on the achievement of gross 2P reserves added over 100 million barrels within 36 months (capped at 5 additional cash payments); and

4.  10% of the gross sale proceeds in respect of an assignment of greater than 49% of Project  Peregrine within 24 months, excluding a bona fide farm-out.

 

16. RELATED PARTY TRANSACTIONS

 

The terms and conditions of transactions with Directors and Executives and their related entities were no more favourable than those available, or which might reasonably be expected to be available, on similar transactions to Non-Director related entities on an arm's length basis.

 

Approval by shareholders at the AGM held on 21 May 2021 was given for 11,200,000 Performance Rights (as per table below) to be issued to the Managing Director as part of the remuneration package as outlined below.

 

Directors and Executives

Tranche A

Tranche B

Tranche C

Tranche D

Total

Share Price

Tenure

Grant Date*

21/05/2021

21/05/2021

21/05/2021

21/05/2021


Expiry Date

21/05/2022

21/05/2023

21/05/2024

21/05/2025


Fair Value per Performance Right $

  0.0110

  0.015

0.019 

  0.027


Exercise Price

 Nil

 Nil

 Nil

 Nil


Performance Rights (ii)






 - A Gilbert

  3,360,000

  3,360,000

  3,360,000

  1,120,000

  11,200,000

Number of Performance Rights Vested

 -

 -

 -

 -

 -

% Vested

 -

 -

 -

 -

 -

Fair Value $;






 - A Gilbert

  36,960

  50,400

  63,840 

  30,240

  181,440

Total Fair Value $

  36,960

50,400 

  63,840 

  30,240

  181,440

Employee Benefits Expense $ (i);






 - During the period: A Gilbert

530

6,300

  7,980 

3,780

18,590

Total $

530

  6,300

  7,980 

3,780

18,590

 

Vesting Conditions (Tranche A, B and C)

Tranche A, B and C will be tested on each 12-month anniversary of the Performances Rights issue, with Tranche A available for testing on the first anniversary, Tranche B available for testing on the second anniversary, and Tranche C available for testing on the third anniversary. These tranches will vest on the test date as follows:

 

Absolute share price growth

Performance rights vesting

<50%

Nil

50%

25%

>50% and <100%

Between 25% and 50%, on a straight line basis

100%

50%

>100% and <150%

Between 50% and 75%, on a straight line basis

150%

75%

>150% and <200%

Between 75% and 100%, on a straight line basis

200%

100%

 

Vesting Conditions (Tranche D)

 

Tranche D performance rights will be tested against the tenure with the Company, where the participant is employed by the Company as at issue date up to and including the date that is three years after that date, 100% of the performance rights will vest.

 

v Mr Ashley Gilbert - Managing Director

Contract: Commenced on 10 May 2021.

Salary & Director's Fee: $395,000 per annum plus superannuation.

Performance Based Bonuses: The Company may at any time pay Mr Gilbert a performance based bonus over and above his salary. In determining the extent of any performance based bonus, the Company shall take into consideration the key performance indicators of Mr Gilbert and the Company.

Termination by Company is with 6 months' notice or payment in lieu thereof.  Termination by Mr Gilbert is with 3 months' notice.

Termination Benefit: Termination benefits to the extent permitted under the ASX Listing Rules and Corporations Act are included in the contract in the event of certain termination events

 

 

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