REG - 88 Energy Limited - ASX Lodgement of Annual Report <Origin Href="QuoteRef">88E.AX</Origin>

88 EnergyAnnouncement

16/02/2017 07:06

RNS Number : 0255X
88 Energy Limited
16 February 2017
16 February 2017
88 ENERGY LIMITED
ASX LODGEMENT OF ANNUAL REPORT
88 Energy Limited (ASX:88E; AIM:88E)("88 Energy" or "Company") advises that a copy of the Company's Annual Report for the year ended 31 December 2016 has been lodged on the ASX and is also available on the Company's website at www.88energy.com. The Annual Report was sent to shareholders today.
Set out below is the Chairman's Statement as included in the Company's Annual Report. 
Also set out below is a summary of the Company's audited financial information for the year ended 31 December 2016 as extracted from the Annual Report, being:
Consolidated Statement of Comprehensive Income;
Consolidated Statement of Financial Position;
Consolidated Statement of Changes in Equity; and
Consolidated Statement of Cash Flows.
CHAIRMAN'S STATEMENT
Dear Shareholders 
It is a pleasure to present my Chairman's Report for the 2016 financial year.
2016 marks only the second year in which your Company has traded under the 88 Energy ("88E") banner. I am pleased to report some significant milestones have been achieved as 88E progresses along the pathway leading to appraisal of Project Icewine on Alaska's North Slope. These milestones are detailed in the Operations Report.
Measuring success for a junior explorer is a complex process. Year on Year the market capitalisation of 88E has grown from around $25 million to $188 million and the Company has been cited as the best performing oil and gas stock based on share price appreciation on the ASX during this period.
As we move into the appraisal drilling phase we do so with a strong balance sheet and high level of project equity providing excellent leverage to our shareholders in the success case. This begs the question "what are the hallmarks of a successful junior explorer?" With over 3 decades in the industry I am well placed to address this question.
Geologists love to base their exploration models on successful analogues just as we have done in drawing comparisons to the Eagle Ford and the Haynesville shales Texas, USA. This makes good sense, however we can look beyond the geological modelling and seek to identify what constitutes a successful analogue at the entity level. I have always considered Hardman Resources (HDR) as the flagship analogue when measuring success in the junior oil space.
Some of you will be familiar with its history: this tiny oil explorer went from a market capitalisation of $10 million dollars around the turn of the century to $1.5 billion dollars in 2006 with accompanying share price appreciation from 4 cents to $2.36. Interestingly, the oil price at the time of its maiden offshore discovery was a mere US$28.80 per barrel.
Leaving aside the fundamental geology, the key attributes of this historical success story included; leadership with both vision and drive, first mover advantage, attractive regime, meaningful prospect volumes, high project equity over oil prone play type, operatorship, dual ASX and AIM listing, strong financial credentials and farm out capability.
It is my conviction that 88E has many, if not all of these same attributes; in particular the strong leadership capabilities that have been exhibited to date by our Managing Director, David Wall. We are clearly the first mover over this unconventional play type on Alaska's North Slope; our potential has been independently evaluated in excess of a billion barrels; we control the play; enjoy high project equity and acreage along with operatorship; and our balance sheet is strong.
The science behind Project Icewine was originated by Paul Basinski, a geoscientist with an enviable track record in unconventional oil exploration. 88E is backing his proposition that Alaska hosts vast undiscovered potential in an unconventional play targeting the HRZ shale which shares a common source rock with the Giant Prudhoe Bay oil field, the largest conventional field ever discovered in North America. The Project is located in a prolific oil producing region where 88E has assembled a land bank that would befit an oil major, many of whom are already engaged in successful conventional oil exploration in Alaska, as recent discoveries in the region attest.
Alaska is a supportive regime that encourages exploration, offering rebates up to 85 percent for every dollar spent prior to 2016; an incentive that was not only attractive to 88 Energy but one backed by Bank of America (BOA). This has enabled 88E to maintain leverage without the larger equity dilution normally associated with funding a program of this magnitude. Our strong acreage position is further enhanced due to the proximity of the all-weather Dalton Highway and the ability to connect into the trans-Alaska pipeline that can handle up to 2.1 million barrels per day and has considerable spare capacity.
The funding and execution of Project Icewine is being overseen by our Managing Director, David Wall, with the assistance of a small dedicated team including our Exploration Manager Elizabeth Pattillo, our Alaskan based Operations Manager, Erik Opstad and the full support of my fellow Directors. To date, the results speak for themselves and back up the early prognosis that formed the basis of our original investment decision. I would also like to welcome our new Chief Financial Officer, Ashley Gilbert, to the team, a Chartered Accountant with more than 20 years' experience in commerce and significant experience in the oil and gas sector.
The process of evaluation is ongoing and not without considerable risk; however, we look to the future with measured optimism as we unlock both the conventional and unconventional potential of our Alaskan exploration acreage. One only needs to compare this program with better known shale plays in Texas, like the Eagle Ford and Haynesville, to gain an appreciation of the impact that successful exploration can have on 88E as oil prices recover. 
Before closing I would like to thank the Department of Natural Resources, the Alaska Oil and Gas Conservation Commission; the North Slope Borough and other regulatory agencies that have facilitated our exploration effort in the State.
My fellow Directors and I acknowledge David and his staff for their sterling efforts in managing 88E's exciting Alaskan program on a tight budget and timeframe. Their efforts have resulted in 88E turning in the best performance of a junior oil explorer on the ASX in 2016. Indeed, there is little more 88E could have done in the lead up to the appraisal program than what has already been achieved. We should recognise this point as we move forward to the drilling of Icewine #2. 
In turn, this progress would not be possible without your support as shareholders in what has been a challenging environment. Our dual listing on both ASX and AIM has garnered a wide investor base and we have been ably supported by our brokers and advisers including Hartleys, Cenkos and Patersons.
We look forward to a successful 2017 appraisal program at Project Icewine. 
Yours faithfully,
Michael Evans
Non-Executive Chairman


CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER CONSOLIDATED INCOME





Note
2016
2015


$
$
Revenue from continuing operations



Other income
3(a)
 158,627 
108,852




Administrative expenses
3(b)
(2,278,431)
(2,921,653)
Occupancy expenses

(169,301)
(164,629)
Employee benefit expenses
3(c)
(1,295,150)
(491,828)
Share-based payment expense
18
(100,000)
(1,723,534)
Depreciation and amortisation expense

(8,232)
(15,038)
Finance cost

(1,702,878)
(689,503)
Other expenses

(4,790,093)
(407,379)
Foreign exchange gains / (losses)

784,194 
-
Loss before income tax

(9,401,264)
(6,304,712)
Income tax expense
4
- 
-
Loss after income tax for the year

(9,401,264)
(6,304,712)




Other comprehensive income for the year
Items that may be reclassified to profit or loss


Exchange differences on translation of foreign operations

440,218
383,900
Other comprehensive income / (loss) for the year, net of tax

 440,218
383,900




Total comprehensive loss for the year attributable to members of 88 Energy Limited 

(8,961,046)
(5,920,812)




Loss per share for the year attributable to the members of 88 Energy Limited:



Basic and diluted loss per share 
5
(0.003)
(0.002)




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

Note
2016
2015


$
$
ASSETS



Current Assets



Cash and cash equivalents
6
27,303,178 
9,604,249
Trade and other receivables
7
312,644 
463,601
Total Current Assets

27,615,822 
10,067,850




Non-Current Assets



Plant and equipment
8
 6,131 
10,960
Exploration and evaluation expenditure
9
38,227,059
25,403,611
Other assets
10
11,158,742
994,687
Total Non-Current Assets

 49,391,932 
26,409,258




TOTAL ASSETS

77,007,754
36,477,108




LIABILITIES



Current Liabilities



Trade and other payables
11
 6,127,943 
4,003,386
Provisions
12
 90,085 
55,388
Total Current Liabilities

 6,218,028 
4,058,774




Non-Current Liabilities



Borrowings
13
22,779,313
10,930,281
Total Non-Current Liabilities

22,779,313
10,930,281




TOTAL LIABILITIES

28,997,341
14,989,055




NET ASSETS

48,010,413
21,488,053




EQUITY



Contributed equity
14
 125,157,965 
90,654,560
Reserves
15
 16,268,985 
14,848,766
Accumulated losses

 (93,416,537)
(84,015,273)
TOTAL EQUITY

 48,010,413 
21,488,053
The Consolidated Statement of Financial Position should be
read in conjunction with the notes to the financial statements.

CONSOLIDATED STATEMENT OF CHNAGES IN EQUITY







Issued Capital
Shares Reserved for Share Plan
Reserves
Accumulated Losses
Total Equity

$
$
$
$
$

At 1 January 2016
90,654,560
-
14,848,766
(84,015,273)
21,488,053
Loss for the year
-
-
-
(9,401,264)
(9,401,264)
Other comprehensive income
-
-
440,218
-
440,218
Total comprehensive income/(loss) for the year after tax 
-
-
440,218
(9,401,264)
(8,961,046)






Transactions with owners in their capacity as owners:





Issue of share capital
 37,496,660 
-
-
-
 37,496,660 
Shares cancelled
-
-
-
-
-
Share-based payments
-
-
980,001
-
980,001
Share issue costs
(2,993,255)
-
-
-
(2,993,255)

Balance at 31 December 2016
125,157,965
-
16,268,985
(93,416,537)
48,010,413






At 1 January 2015
67,985,300
(1,667,500)
12,741,333
(77,710,561)
1,348,572
Loss for the year
-
-
-
(6,304,712)
(6,304,712)
Other comprehensive income
-
-
383,900
-
383,900
Total comprehensive income/(loss) for the year after tax 
-
-
383,900
(6,304,712)
(5,920,812)






Transactions with owners in their capacity as owners:





Issue of share capital
24,538,797
-
-
-
24,538,797
Shares cancelled
-
1,667,500
-
-
1,667,500
Share-based payments
-
-
1,723,534
-
1,723,534
Share issue costs
(1,869,537)
-
-
-
(1,869,537)

Balance at 31 December 2015
90,654,560
-
14,848,766
(84,015,273)
21,488,053






The Consolidated Statement of Changes in Equity should be
read in conjunction with the notes to the financial statements
CONSOLIDATED STATEMENT OF CASH FLOWS





Note
2016
2015


$
$




Cash flows from operating activities



Payment to suppliers and employees

(3,676,801)
(4,082,521)
Interest received

54,248
24,995
Finance costs

(4,867)
(599,501)
Other income

129,812
-
Net cash flows used in operating activities
6(b)
(3,497,608)
(4,657,027)




Cash flows from investing activities



Payments for exploration and evaluation activities

(25,588,985)
(21,941,810)
Payment for plant and equipment

(3,404)
(2,408)
Net cash flows used in investing activities

(25,592,389)
(21,944,218)




Cash flows from financing activities



Proceeds from drawdown of facility

10,621,424
10,930,280
Proceeds from issue of shares

37,367,107
26,339,541
Share issue costs

(1,983,702)
(1,869,537)
Net cash flows from financing activities

46,004,829
35,400,284




Net increase/(decrease) in cash and cash equivalents

16,914,832
8,799,039




Cash and cash equivalents at the beginning of the year

9,604,249
805,210
Effect of exchange rate fluctuations on cash held

784,097
-
Cash and cash equivalents at end of year
6(a)
27,303,178
9,604,249
The Consolidated Statement of Cash Flows should be
read in conjunction with the notes to the financial statements
END
David Wall
Managing Director
COMPETENT PERSONS STATEMENT
Pursuant to the requirements of the ASX Listing Rules Chapter 5 the technical information and resource reporting contained in this Annual Report was prepared by, or under the supervision of, Mr Brent Villemarette, who is a Non-Executive Director of the Company. It has been produced for the Company, and at its request, for adoption by the Directors. Mr Villemarette has more than 30 years experience in the petroleum industry and is a qualified Reservoir Engineer who has sufficient experience that is relevant to the style and nature of the oil prospects under consideration and to the activities discussed in this document. He has consented to the inclusion of the petroleum prospective resource estimates prepared by DeGolyer & MacNaughton (as of 31 December 2015) and supporting information being included in this announcement in the form and context in which they are presented. His academic qualifications and industry memberships appear on the Company's website and both comply with the criteria for "Competence" under clauses 18-21 of the Valmin Code 2005. Terminology and standards adopted by the Society of Petroleum Engineers "Petroleum Resources Management System" have been applied in producing this document.
Media and Investor Relations:
88 Energy Ltd
Dave Wall, Managing Director Tel: +61 8 9485 0990
Email: admin@88energy.com
Finlay Thomson, Investor Relations Tel: +44 7976 248471
Hartleys Ltd
Dale Bryan Tel: + 61 8 9268 2829
Cenkos Securities
Neil McDonald/Derrick Lee Tel: +44 131 220 6939

This information is provided by RNS
The company news service from the London Stock Exchange
  END
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