ADVANCE ENERGY LIMITED ACN

Transcription

1 ADVANCE ENERGY LIMITED ACN QUARTERLY REPORT 30 JUNE 2008

2 ADVANCE ENERGY LIMITED QUARTERLY REPORT 30 JUNE 2008 OVERVIEW Advance Energy Limited, ( AVD ) is pleased to present the following highlights for the ended 30 June 2008: Revenues for the were a record US$1,559,742 a 95% increase on the previous. Closed on the acquisition of an additional 67.5% working interest in the Company s cornerstone asset, Motherlode I. Increased the production by 236% on one of the wells by installing improved artificial lift devices. Realised the highest production and revenue from its Motherlode II assets. This does not include the addition of production from its two most recently completed wells whose connection has been delayed. Continued the leasing of current prospects and made preparations to drill the first well on the Motherlode Phase III Project. The Lone Camp Project again realised the highest production since it was acquired in February Prior best was 1 st of this year. This was due to continued optimisation of surface and equipment and the commencement of a two well workover program. Possum Kingdom Project saw production further stabilise due to optimisation of surface facilities and the installation of compressors on several key wells. Further, the Company commenced a five well workover program designed to increase and further stabilise production from these assets. Announced a 5 for 7 fully-underwritten, non-renounceable rights issue to raise $3,959,949. Announced that W D Von Gonten & Co, independent valuer to Sterling Bank of Texas, had valued Advance s producing assets as at 1 March 2008 at USD million. On the basis of US$0.95:AU$1.00, this equates to a net asset backing (post rights issue) of approximately 17 cents. OPERATIONS Martin County-Motherlode Projects As highlighted, the company continues to implement the previously announced development plans on the prior held and newly acquired Martin County properties situated in long life reserve heart of the Permian Basin.. Motherlode Phase I The acquisition of the operated 67.5% in the Motherlode I project took the Company ownership in this project to 90%. Further, this allows the Company to have control and dictate the pace of the development of these assets going forward as Advances Operations Manager, Hibernia Resources, is the operator of these assets. Subsequent to the effective date of this project Hibernia performed a small workover on the Graham #1 which took the production from 11 BOEPD to 26 BOEPD. Additional workovers and the drilling of the first development well are planned for the 3 rd and 4 th s of this year. ADVANCE ENERGY LIMITED ASX CODE: AVD pg. 1

3 ADVANCE ENERGY LIMITED QUARTERLY REPORT 30 JUNE 2008 Motherlode Phase II During the 2 nd of 2008, the company realised its highest production and revenue from these assets since the original acquisition in august It should be noted that this was accomplished without the addition of the newly drilled wells on the Company s Key East Prospect. The Williams 9-1 and Thomas 9-2 wells, successfully drilled and completed on the Key East Prospect in the 1 st of this year, were delayed in getting put on production due to numerous reasons of which the majority was an explosion at the gas treating plant which the gas is sold to. This has caused a three month delay in getting several hundred wells in the area hooked up to gas sales. Subsequent to the end of the 2 nd, the lines have been laid to the two wells and both should be online and producing in early August. Motherlode Phase III AVD finished the leasing of its first two prospects on this project during the. Further, the Company has designed its drilling program and anticipates it will commence drilling on the 3 rd of These first two prospects will be tested with two wells and developed with up to ten additional wells in Continued prospect development and leasing will continue throughout. Palo Pinto County Projects The company continues to develop its asset base in the Palo Pinto County portion of the highly active Fort Worth Basin. Palo Pinto-Lone Camp Project The Company is pleased to announce that the 2 nd of 2008 saw a 28% increase in production from these assets compared to the 4 th of This success is due to the operator optimising the artificial lift issues and working with the gas purchaser in developing a routine pipeline maintenance program designed to keep the line pressure at a minimum. In June Hibernia executed the Company s development plans on the Alexander # 1 well and the production was increased from 30 MCFPD to 110 MCFPD. Additional drilling and workovers are planned on this project in the 3 rd and 4 th s of this year. Palo Pinto-Possum Kingdom Project During the 2 nd Hibernia executed the Company s prior designed work over campaign on this project consisting of, major workovers on the Francis 1, Dabney 1 and Coleman 2 and minor procedures on the Coleman 1 and Deno Gragg 3. All of the workovers were underway by the end of the. Palo Pinto-Brown Vick Project AVD participated in three completions in the Brown Vick #1 well on the Brown Vick Project. Although all three completions encountered some quantities of oil and gas, the decision was made to plug and abandon this well due the volumes being too small to justify ongoing production. These completion attempts set up a minimum of one more well to be drilled on this project in 2008 and ADVANCE ENERGY LIMITED ASX CODE: AVD pg. 2

4 ADVANCE ENERGY LIMITED QUARTERLY REPORT 30 JUNE 2008 CORPORATE Independent Valuation of Producing Properties On 23 May 2008, Advance announced the most recent valuation of producing properties prepared by independent valuation firm WD Von Gonten & Co. The valuation was commissioned by Sterling Bank of Texas and was effective 1 March It therefore includes the additional 67.5% acquisition of Mother Lode I but excludes Mother Lode III (not fully leased), the Barnett Shale rights and wells completed since then (Thomas9-2 and Williams 9-1). Von Gonten determined that the producing properties were valued at USD32.145m on a PV10 basis. Risk Management Activities On 2 May 2008, Advance announced that it had entered into additional risk management arrangements by hedging the production of an additional 1,000 Barrels of Oil Per Month for 24 months commencing 1 June The arrangements use various options with a price floor of $95 per barrel and a ceiling of $105 per barrel. In addition, the company announced the purchase of an additional call option at $120 thereby providing it with the upside of any sales above this price and capping the cost at $15 per barrel. As well as guaranteeing a minimum sales price, these hedging arrangements serve to raise the valuation of the assets against which Sterling Bank will lend. Non-Renounceable Rights Issue On 23 June 2008, Advance announced its intention to undertake a 5 for 7 Non-Renounceable Rights Issue to raise $3.9m. The prospectus was lodged with ASIC and ASX on 4 th July 2008 and was subsequently mailed to shareholders on 21 July The Offer is fully underwritten by Anndev Pty Ltd and funds will be used to retire debt and for working capital. The Closing Date for the Offer has been extended to 12 th August 2008 The Company will be lodging a Supplementary Prospectus on 1 August As part of the Rights Issue, Advance also secured a $2m finance facility with Anndev to facilitate the payment of convertible notes that fall due before completion of the offer. Resignation/Appointment of Company Secretary In June 2008, Advance announced the resignation of Lance Camacho as Company Secretary. The new Company Secretary is David Ballantyne. For further information contact: Mr Anthony Short Managing Director Telephone: Facsimile: Advance Energy Limited is focused on the acquisition and development of oil and gas producing assets in Texas USA. The company aims to acquire assets with a combination of debt and equity that have current production and cash flow and to enhance production and cash flow through the further development of these assets. Once a property has reached its full productive potential and/or has achieved economic payout to Advance Energy, the Company will look to on sell all or part of its interest. It is the aim of the Company to develop a portfolio of assets which will be developed and traded to maximise returns on funds invested. ADVANCE ENERGY LIMITED ASX CODE: AVD pg. 3

5 Rule 5.3 Introduced 1/7/96. Origin: Appendix 8. Amended 1/7/97, 1/7/98, 30/9/2001. Name of entity Advance Energy Limited ABN Quarter ended ( current ) June 2008 Consolidated statement of cash flows Cash flows related to operating activities Current Year to date (6 months) 1.1 Receipts from product sales and related debtors 1,158 2, Payments for (a) exploration and evaluation (b) development (c) production (d) administration 1.3 Dividends received 1.4 Interest and other items of a similar nature (304) (382) (599) (792) received 1.5 Interest and other costs of finance paid (290) (726) 1.6 Income taxes paid 1.7 Other (provide details if material) Net Operating Cash Flows Cash flows related to investing activities 1.8 Payment for purchases of: (a)prospects (b)equity investments (c)other fixed assets (3,700) (868) (3,700) (1,335) 1.9 Proceeds from sale of: (a)prospects (b)equity investments (c)other fixed assets 1.10 Loans to other entities (50) (50) 1.11 Loans repaid by other entities 1.12 Other (provide details if material) Net investing cash flows (4,618) (5,085) 1.13 Total operating and investing cash flows (carried forward) (4,384) (5,003) 30/9/2001 Page 1

6 1.13 Total operating and investing cash flows (brought forward) (4,384) (5,003) Cash flows related to financing activities 1.14 Proceeds from issues of shares, options, etc Proceeds from sale of forfeited shares 1.16 Proceeds from borrowings 4,283 4, Repayment of borrowings (300) (778) 1.18 Dividends paid 1.19 Other (provide details if material) Net financing cash flows 3,983 3,505 Net increase (decrease) in cash held (401) (1,498) 1.20 Cash at beginning of /year to date 787 1, Exchange rate adjustments to item (22) 1.22 Cash at end of Payments to directors of the entity and associates of the directors Payments to related entities of the entity and associates of the related entities Current $A' Aggregate amount of payments to the parties included in item Aggregate amount of loans to the parties included in item Explanation necessary for an understanding of the transactions Non-cash financing and investing activities 2.1 Details of financing and investing transactions which have had a material effect on consolidated assets and liabilities but did not involve cash flows The US subsidiary, Advance Exploration and Production Inc, has a provision of US$966,000 in relation to its hedging programme. This effectively represents the amount that would have to be paid out at 30 June 2008 to terminate its hedging contracts. This number is a combination of the time still to expire on the contracts and oil and gas prices, and has no impact on the group s cash flow unless contracts are terminated. At the date of this report (31 July) this provision has significantly unwound. 2.2 Details of outlays made by other entities to establish or increase their share in projects in which the reporting entity has an interest Page 2 30/9/2001

7 Financing facilities available Add notes as necessary for an understanding of the position. Amount available Amount used 3.1 Loan facilities 4,300 2, Credit standby arrangements - line of credit US$40 mil * US$7.62 mil * Generally, the borrowing base of the line of credit, as determined by the bank, approximates to the Company s investments in oil and gas properties, up to a maximum as reflected above. For further details please refer to the Company s recently released Annual Report. Estimated cash outflows for next 4.1 Exploration and evaluation Development - discretionary 3,335 Total 3,335 Reconciliation of cash Reconciliation of cash at the end of the (as shown in the consolidated statement of cash flows) to the related items in the accounts is as follows. Current Previous 5.1 Cash on hand and at bank Deposits at call 5.3 Bank overdraft 5.4 Other (provide details): Security deposit Total: cash at end of (item 1.22) Changes in interests in mining tenements 6.1 Interests in mining tenements relinquished, reduced or lapsed Tenement reference Nature of interest (note (2)) Interest at beginning of Interest at end of 6.2 Interests in mining tenements acquired or increased Martin County Working Interest 22.5% 90% 30/9/2001 Page 3

8 Issued and quoted securities at end of current Description includes rate of interest and any redemption or conversion rights together with prices and dates. 7.1 Preference + securities (description) Total number Number quoted Issue price per security (see note 3) (cents) 9 unquoted Amount paid up per security (see note 3) (cents) 7.2 Changes during (a) Increases through issues (b) Decreases through returns of capital, buybacks, redemptions Ordinary securities 69,299,099 69,299,099 Fully paid 7.4 Changes during (a) Increases through issues (b) Decreases through returns of capital, buybacks Convertible debt securities (description) 7.6 Changes during (a) Increases through issues (b) Decreases through securities matured, converted 7.7 Options (description and conversion factor) 19,350, Issued during 7.9 Exercised during 7.10 Expired during 7.11 Debentures (totals only) 7.12 Unsecured notes (totals only) 9,375,000 Unquoted, 11% coupon, 18 month term Exercise price various Fully paid Expiry date various Page 4 30/9/2001

9 Compliance statement 1 This statement has been prepared under accounting policies which comply with accounting standards as defined in the Corporations Act or other standards acceptable to ASX (see note 5). 2 This statement does /does not* (delete one) give a true and fair view of the matters disclosed. Sign here: Date:...31 July (Director/Company secretary) Print name: David Ballantyne... Notes 1 The ly report provides a basis for informing the market how the entity s activities have been financed for the past and the effect on its cash position. An entity wanting to disclose additional information is encouraged to do so, in a note or notes attached to this report. 2 The Nature of interest (items 6.1 and 6.2) includes options in respect of interests in mining tenements acquired, exercised or lapsed during the reporting period. If the entity is involved in a joint venture agreement and there are conditions precedent which will change its percentage interest in a mining tenement, it should disclose the change of percentage interest and conditions precedent in the list required for items 6.1 and Issued and quoted securities The issue price and amount paid up is not required in items 7.1 and 7.3 for fully paid securities. 4 The definitions in, and provisions of, AASB 1022: Accounting for Extractive Industries and AASB 1026: Statement of Cash Flows apply to this report. 5 Accounting Standards ASX will accept, for example, the use of International Accounting Standards for foreign entities. If the standards used do not address a topic, the Australian standard on that topic (if any) must be complied with. == == == == == 30/9/2001 Page 5