TIDM88E

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:investor-relations@88energy.com 
 
 Finlay Thomson , Investor Relations      Tel: +44 7976 248471 
 
 Fivemark Partners , Investor and         Tel: +61 410 276 744 
  Media Relations                          Tel: +61 422 602 720 
  Andrew Edge / Michael Vaughan 
 
 EurozHartleys Ltd                        Tel: + 61 8 9268 2829 
  Dale Bryan 
 
 Cenkos Securities                        Tel: + 44 131 220 6939 
  Neil McDonald / Derrick Lee 
 

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

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 YEARED 30 JUNE 2021

 
                                                     Note 
                                                               30 June            30 June 
                                                                 2021               2020 
                                                                   $                 $ 
 
 Income                                              3(a)        4,331,646              75,860 
 Administration expenses                             3(b)      (1,794,435)           (522,909) 
 Occupancy expenses                                               (37,408)            (22,101) 
 Employee benefit expenses                           3(c)        (704,958)           (742,005) 
 Share based payment expense                          13         (153,747)            (52,861) 
 Depreciation and amortisation expense                            (55,606)            (41,765) 
 Finance cost                                                  (1,160,411)         (1,483,612) 
 Realised/unrealised gain on foreign exchange                     (11,295)            43,428 
 Other income /(expenses)                            3(d)           31,660       (1,274,345) 
 Profit/(loss) before income tax                                   445,446       (4,020,311) 
 Income tax benefit/(expense)                                            -                   - 
 Net profit/(loss) attributable to members of 
  the parent                                                       445,446       (4,020,311) 
 
 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           1,155,379 
 Total comprehensive profit/(loss) for the period             2,507,141          (2,864,932) 
 
 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      31 December 
                                                     2021           2020 
                                                      $              $ 
ASSETS 
Current Assets 
Cash and cash equivalents                  5       14,762,499     14,845,347 
Other receivables                          6        7,833,085      5,079,630 
Total Current Assets                               22,595,584     19,924,977 
 
Non-Current Assets 
Plant and equipment                                     2,134          4,641 
Exploration and evaluation expenditure     7       93,688,369     48,213,290 
Other assets                               8          935,128     17,216,644 
Total Non-Current Assets                           94,625,631     65,434,576 
TOTAL ASSETS                                      117,221,215     85,359,552 
 
LIABILITIES 
Current Liabilities 
Provisions                                            105,412        339,199 
Trade and other payables                   9       22,650,749      5,326,634 
Total Current Liabilities                          22,756,161      6,309,010 
 
Non-Current Liabilities 
Borrowings                                10                -     20,782,366 
Total Non-Current Liabilities                               -     20,782,366 
TOTAL LIABILITIES                                  22,756,161     26,448,199 
NET ASSETS                                         94,465,054     58,911,353 
 
EQUITY 
Issued and fully paid shares             11(a)    241,856,327    208,963,513 
Reserves                                 11(b)     18,796,417     16,580,975 
Accumulated losses                              (166,187,690)  (166,633,135) 
TOTAL EQUITY                                       94,465,054     58,911,353 
 

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

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

FOR THE HALF YEARED 30 JUNE 2021

 
                                   Issued and     Reserves     Accumulated   Non-Controlling         Total 
                                   fully paid            $          losses          Interest        equity 
                                       shares                            $                 $             $ 
                                            $ 
 
   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 YEARED 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 YEARED 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       30 June 
                                                                     2021          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                   31 December 
                                                                                     2021                        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                   31 December 
                                                                                     2021                        2020 
                                                                                       $                          $ 
 
        7. EXPLORATION EXPITURE 
        Capitalised expenditure at the 
         beginning 
         of the period                                                                   48,213,290                  52,928,315 
            Additions                                                                    42,017,705                  45,560,030 
         Acquisition of 50% interest in APDC (i)                                         18,621,974                           - 
         Acquisition of XCD Energy Limited Exploration 
          Assets                                                                                  -                (34,063,751) 
         JV Contributions (ii)                                                         (16,188,417)                           - 
         Less Impairment (iii)                                                                    -                (11,384,288) 
         Foreign Currency translation                                                     1,023,817                 (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                                                         137,043                     170,461 
         Emerald House Bond                                                                 399,042                     389,509 
         Tax credit receivable (i)                                                                -                  16,226,055 
         XCD Acquisition Other Non-Current Assets                                                 -                      41,110 
         Investments in Jade                                                                399,042                     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                                                                4,619,294                   4,736,237 
         Shares to be Issued (i)                                                         13,441,969                           - 
                                                                          =========================  ========================== 
                                                                                         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                  31 December 
                                                                                       2021                       2020 
                                                                                        $                           $ 
           10. BORROWINGS 
        Non-Current 
         Bank Facility (i)                                                                        -                  20,782,366 
                                                                          =========================  ========================== 
                                                                                                 -             20,782,366 
                                                                          =========================  ========================== 
 
 
             (i) On 21(st) 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                               30 June 
                                                                         of shares                               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)                                                                                1,500,500,000                  12,027,500 
   Issue of shares to Directors                                                         235,454,781                   5,180,005 
   Costs associated with share issues                                                   796,619,048                  16,406,334 
   Issued and fully paid shares at 30                                                    11,666,667                      70,000 
   June                                                                                                               (791,025) 
   2021                                                                              13,146,545,212                 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   30 June 
                                        2021      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 
 
      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         Tranche      Tranche      Tranche      Tranche       Total 
             Executives              A            B            C            D 
                                            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       Performance rights vesting 
              growth 
               <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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END

IR URAARAWUWAUR

(END) Dow Jones Newswires

August 11, 2021 02:00 ET (06:00 GMT)

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