QUEST PETROLEUM NL AND ITS CONTROLLED ENTITIES ABN

Transcription

1 HALF YEAR FINANCIAL REPORT FOR THE PERIOD ENDED 31 DECEMBER 2010

2 CORPORATE DIRECTORY Directors Brett Mitchell Executive Director James Malone Non Executive Chairman Mark Freeman Non Executive Director Greg Lee Non Executive Director Company Secretary Brett Mitchell Registered & Head Office Level 21, Allendale Square 77 St Georges Tce Perth WA 6000 Tel: (08) Fax: (08) Home Stock Exchange Australian Securities Exchange Limited Level 2 Exchange Plaza 2 The Esplanade PERTH WA 6000 ASX Code: QPN/QPNO Auditors Mack & Co Level 2 35 Havelock Street WEST PERTH WA 6005 Tel: (08) Fax: (08) Share Registry Computershare Investor Services Pty Ltd Level 2 Reserve Bank Building 45 St Georges Terrace PERTH WA 6000 Tel: (08) Fax: (08) Website qpnl.com.au

3 CONTENTS DIRECTORS REPORT... 1 AUDITOR S INDEPENDENCE DECLARATION... 5 CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME... 6 CONSOLIDATED STATEMENT OF FINANCIAL POSITION... 7 CONSOLIDATED STATEMENT OF CHANGES IN EQUITY... 8 CONSOLIDATED STATEMENT OF CASH FLOW... 9 NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS INDEPENDENT REVIEW REPORT... 16

4 DIRECTORS REPORT Your directors present their report together with the consolidated interim financial statements of Quest Petroleum NL for the half year ended 31 December DIRECTORS The following persons held office as directors of Quest Petroleum NL during the half year and until the date of this report: Brett Mitchell James Malone Mark Freeman Greg Lee Executive Director Non Executive Chairman Non Executive Director Non Executive Director Unless otherwise indicated all directors were in office from the beginning of the financial period until the date of this report. REVIEW AND RESULTS OF OPERATIONS The net loss of the consolidated entity for the half year ended 31 December 2010 was $568,615 (2009: $651,289). AMAZON AND THAMES PROSPECTS The Amazon Prospect is a large, high impact exploration prospect located onshore Louisiana, USA, which has the potential to become a company making asset upon successful testing of the target reservoirs. The Company is currently earning a 15% working interest in the Amazon prospect. The Company recently confirmed the spudding of the Marian Baker #1, the first Amazon test well, on 16 January Amazon is considered a multi segment prospect, with prospective reservoirs supported by AVO data within a proven play fairway. The Marian Baker #1 well is expected to encounter multiple, potential, hydrocarbon bearing reservoir sections and is expected to take 50 days to reach its target depth. The test well will drill through the Oligocene target sands between 14,000 ft and 16,000 ft where it is expected to encounter abnormal reservoir pressure. The Amazon prospect is a large exploration target assessed by independent consultants ISIS Petroleum to have a 35% probability of success. Amazon and Thames Prospect Highlights The Amazon prospect has an estimated unrisked potential recoverable resource of between 301 to 736 billion cubic feet of natural gas and 30 to 73 million barrels of oil. The combined potential of the Amazon and Thames targets is between 350 to 840 billion cubic feet of gas and 35 to 83 million barrels of oil. Amazon and Thames Project Background The Amazon and Thames prospects are part of a regional exploration project in south Louisiana. Approximately 1,000 square miles of proprietary reprocessed Seitel 3D data has been completed by the Operator with integrated key well and production data obtained. The Amazon prospect is a large scale, hanging wall fold with nearly 2,000 acres in fault dependent closure including a 400 acre faulted four way closure. The prospective reservoir interval is Oligocene sands which appear seismically very thick with good AVO and Fluid Factor support. The Thames Prospect is currently proposed to drill a 16,000ft exploration test well of this multi segment prospect on the flank of a vertical salt weld. The Thames prospect has stacked objectives in a fault bound block with one larger, deeper objective target interval providing large volume upside. The prospective reservoir interval is Oligocene ponded basin floor fan. The prospect has good AVO support. 1

5 Acquisition of 15% interest in South Sumatra Gas Project On 22 October 2010 the Company announced it had executed a heads of agreement to acquire a 15% interest in Merric Capital Pty Ltd through the subscription of 6.2m shares at 5c each for a total investment of $310,000. Quest has also acquired a further 6.2m options in Merric exercisable at 5c each on or before 30 June 2012, which upon exercise will result in Quest holding a 25% interest in Merric. Quest has put a US$1m term deposit in place to effect a bank guarantee to support performance of the Ranau Joint Study work programs that commenced in December 2010 as consideration for the 6.2m Merric options. The subscription for up to 25% of Merric will provide Quest with access to significant oil and gas opportunities in a highly prolific oil and gas region in South Sumatra. Merric is a private Australian company that has for the past 2 years focused on developing an oil and gas exploration and production business in Indonesia, and specifically Sumatra through its 80% owned subsidiary, PrabuEnergy Pty Ltd. Ranau Project Area, South Sumatra PrabuEnergy has been awarded a Joint Study area covering approximately 2,123km 2 in onshore South Sumatra. The Ranau Joint Study was awarded to PrabuEnergy on 15 September 2010 and will be conducted by PrabuEnergy in conjunction with BPMIGAS and the geological department of a University in Jakarta. The Joint Study process in Indonesia allows PrabuEnergy an exclusive period to complete a technical study over the Ranau area. Upon successful completion of the study, PrabuEnergy will have the right to bid for award of a Production Sharing Contract (PSC) over the area. PrabuEnergy significantly will hold the exclusive access to the data and interpretation acquired on the Ranau area generated through the Joint Study. The Ranau area has only limited drilling data to date. However, it is close to producing areas of the South Sumatra Basin and is thought to contain similar hydrocarbon reservoirs/traps/plays to these producing areas. PrabuEnergy has developed regional models for the existence of these plays in the Joint Study area and will test these models with a work program comprising acquisition of closely spaced gravity data and field work. Merric Experienced Executive Team Merric and PrabuEnergy have been led by Mr Saxon Palmer, a highly experienced oil and gas Executive who until 2007 had previously been an Exploration Manager Australia/Asia and Portfolio Manager for BHP Billiton. PrabuEnergy has developed key relationships with prominent oil and gas players in Indonesia, in particular with Mr Mochamad Thamrin, a leading industry professional with a deep knowledge of the petroleum geology of South Sumatra. These relationships are important to understanding the petroleum geology of South Sumatra, acquiring assets and executing work programs in the area. 2

6 Background on the oil and gas industry in Indonesia and Sumatra Sumatra is the 6 th largest island in the world, and has had a successful oil and gas industry since 1885 when Indonesia s first successful oil well was drilled in North Sumatra, creating the Royal Dutch Shell group. Since then, there have been more than 400 oil and gas fields discovered containing more than 45 billion barrels of oil equivalent. Today Sumatra produces oil for consumption in domestic and international markets and gas for domestic markets in Sumatra and West Java, and to international markets in Singapore, via pipeline, and North Asia, via LNG export. The North and Central Sumatran petroleum basins are dominated by large international petroleum companies such as Chevron, Pertamina, CNOOC, ConocoPhilips and ExxonMobil. In South Sumatra the industry is dominated by Pertamina and smaller local companies. PrabuEnergy believes this creates an opportunity to create value by bringing industry leading ideas and technologies to explore for and produce oil and gas in South Sumatra. Completion of $2.25m Placement In December the Company completed a placement to sophisticated and professional clients raising $2.25m before costs through the issue of million fully paid ordinary shares at 1.3 cents per share. The Placement shares were issued with one (1) free attaching listed option for every two (2) shares subscribed for. The Company issued a total of 86.5m listed options to the placement investors being the same class as the listed option series (QPNO) with an exercise price of $0.025 each and expiry date of 31 March The Placement utilised the 150m share placement facility approved by shareholders at the Company s Annual General Meeting on November 23, with the additional securities issued under the Company s current 15% capacity. 3

7 Subsequent Events There are not any matters or circumstances that have arisen since the end of the reporting date and the date of this report which significantly affects or may significantly affect the results of the operations of the Company which have not been disclosed in Company announcements. AUDITOR S INDEPENDENCE DECLARATION The Auditor s Independence Declaration under section 307C of the Corporations Act 2001 is attached for the half year ended 31 December Signed in accordance with a resolution of the Board of Directors. Brett Mitchell Executive Director Perth, Western Australia Date: 10 February

8 AUDITOR S INDEPENDENCE DECLARATION UNDER SECTION 307C OF THE CORPORATIONS ACT 2001 TO THE DIRECTORS OF I declare that, to the best of my knowledge and belief, during the half year ended 31 December 2010 there has been: a. no contraventions of the auditor independence requirements as set out in the Corporations Act 2001 in relation to the review; and b. no contraventions of any applicable code of professional conduct in relation to the review. MACK & CO S S FERMANIS PARTNER WEST PERTH DATE: 10 TH FEBRUARY

9 CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME FOR THE HALF YEAR ENDED 31 DECEMBER 2010 Dec 10 Dec 09 A$ A$ Revenue 121, ,543 Cost of Sales (63,071) (213,876) Gross Profit 58, ,667 Interest income 31,424 1,844 Profit on sale of assets 71,636 Professional services (62,844) (44,668) Borrowing Costs (18,670) Exploration expenditure written off (3,210) Impairment expense (233,484) (678,537) Corporate costs (250,618) (190,371) Bad debt expense (71,270) Results from operating activities (527,882) (616,309) Financial expense (55,789) Unrealised foreign exchanges gain/(loss) (40,733) 20,809 Net financial expense (40,733) (34,980) Loss before income tax (568,615) (651,289) Income tax expense Loss for the period (568,615) (651,289) Other comprehensive income Net change in fair value of available for sale financial assets 136,000 92,000 Foreign currency translation differences (614,929) (602,685) Other comprehensive income for the period (net of tax) (478,929) (510,685) Total comprehensive income for the period (1,047,544) (1,161,974) Earnings per share Basic and diluted loss per share (cents per share) (0.06) (0.14) The above Consolidated Statement of Comprehensive Income should be read in conjunction with the accompanying notes. 6

10 CONSOLIDATED STATEMENT OF FINANCIAL POSITION AS AT 31 DECEMBER 2010 Dec 10 Jun 10 Note A$ A$ CURRENT ASSETS Cash and cash equivalents 1,972,964 1,771,993 Trade and other receivables 1,080, ,249 TOTAL CURRENT ASSETS 3,053,609 2,751,242 NON CURRENT ASSETS Other Receivables 884,188 Other Financial Assets 3 820,000 88,000 Exploration & evaluation assets 4a 1,858, ,553 Oil and gas properties 4b 708,745 1,065,392 TOTAL NON CURRENT ASSETS 4,271,123 1,320,945 TOTAL ASSETS 7,324,732 4,072,187 CURRENT LIABILITIES Trade and other payables 128, ,958 Borrowings 64,430 TOTAL CURRENT LIABILITIES 128, ,388 NON CURRENT LIABILITIES Restoration provision 5 17,229 20,435 TOTAL NON CURRENT LIABILITIES 17,229 20,435 TOTAL LIABITLITES 145, ,823 NET ASSETS 7,179,144 3,723,364 EQUITY Issued capital 6 124,379, ,876,646 Reserves 964,994 1,443,923 Accumulated losses (118,165,820) (117,597,205) TOTAL EQUITY 7,179,144 3,723,364 The above Consolidated Statement of Financial Position should be read in conjunction with the accompanying notes. 7

11 CONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR THE HALF YEAR ENDED 31 DECEMBER 2010 Issued Capital Accumulated Losses Option Reserve Foreign Currency Translation Reserve Fair Value Reserve Total A$ A$ A$ A$ A$ A$ Balance at 1 July ,876,646 (117,597,205) 463, ,260 (12,000) 3,723,364 Loss for the period (568,615) (568,615) Net Change in fair value of available for financial assets 136, ,000 Foreign currency translation differences (614,929) (614,929) Total comprehensive income for the period (568,615) (614,929) 136,000 (1,047,544) Transactions with owners, recorded directly in equity Shares issued during the period 4,230,186 4,230,186 Options issued during the period 332, ,482 Share issue costs (59,344) (59,344) 4,503,324 4,503,324 Balance at 31 December ,379,970 (118,165,820) 463, , ,000 7,179,144 Issued Capital Accumulated Losses Option Reserve Foreign Currency Translation Reserve Fair Value Reserve Total A$ A$ A$ A$ A$ A$ Balance at 1 July ,356,109 (114,407,827) 463,663 1,421,725 5,833,670 Loss for the period (651,289) (651,289) Net Change in fair value of available for financial assets 92,000 92,000 Foreign currency translation differences (602,685) (602,685) Total comprehensive income for the period (651,289) (602,685) 92,000 (1,161,974) Transactions with owners, recorded directly in equity Balance at 31 December ,356,109 (115,059,116) 463, ,040 92,000 4,671,696 The above Consolidated Statement of Changes in Equity should be read in conjunction with the accompanying notes. 8

12 CONSOLIDATED STATEMENT OF CASH FLOW FOR THE HALF YEAR ENDED 31 DECEMBER 2010 Dec 10 Dec 09 A$ A$ CASH FLOWS FROM OPERATING ACTIVITIES Proceeds from sales 90, ,818 Cost of Sales (28,126) (115,865) Payments to suppliers and employees (296,081) (296,075) Interest expense (22,809) Interest received 28,080 1,844 Net cash used in operating activities (206,044) (106,087) CASH FLOW FROM INVESTING ACTIVITIES Payments for exploration and development expenditure (87,901) (207,288) Payments for acquisition of equity investments (310,000) Sales of Investments 171,635 Sale of prospects 379, ,539 Joint venture prepayments (884,188) (288,214) Security bond deposit (1,065,640) Net cash from (used) in investing activities (1,968,029) 671,672 CASH FLOWS FROM FINANCING ACTIVITIES Proceeds from issue of securities 2,518,091 Payment of share issue costs (59,344) Repayment of borrowings (395,000) Net cash from/(used) in financing activities 2,458,747 (395,000) Net increase/ (decrease) in cash and cash equivalents 284, ,585 Cash and cash equivalents at 1 July 1,771, ,395 Effects of exchange rate fluctuations on cash held (83,703) (56,613) Cash and cash equivalents at 31 December 1,972, ,367 The above Consolidated Statement of Cash Flows should be read in conjunction with the accompanying notes. 9

13 NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS FOR THE HALF YEAR ENDED 31 DECEMBER REPORTING ENTITY Quest Petroleum NL (the Company ) is a company limited by shares, incorporated and domiciled in Australia and listed on the Australian Securities Exchange. The consolidated interim financial report of the Company for the six months ended 31 December 2010, comprise the Company and its subsidiaries (the consolidated entity ). The consolidated financial statements of the consolidated entity as at and for the year ended 30 June 2010 are available upon request from the Company s registered office at Level 21, Allendale Square, 77 St Gorges Terrace, Perth WA 6000 or at qpnl.com.au 2. BASIS OF PREPARATION a) Statement of compliance The half year financial report is a general purpose financial report prepared in accordance with the requirements of the Corporations Act 2001 and AASB 134 Interim Financial Reporting. Compliance with AASB 134 ensures compliance with International Financial Reporting Standard IAS 34 Interim Financial Reporting. This interim financial report does not include all the notes of the type normally included in an annual financial report. Accordingly, this report is to be read in conjunction with the annual report for the year ended 30 June 2010 in accordance with the continuous disclosure requirements of the Corporations Act The half year financial report is presented in Australian Dollars. These consolidated interim financial statements were approved by the Board of Directors on 9 February b) Basis of preparation The consolidated financial statements have been prepared on the basis of historical cost, except for the revaluation of certain non current assets and financial instruments. Cost is based on the fair values of the consideration given in exchange for assets. All amounts are presented in Australian dollars, unless otherwise noted. The accounting policies and methods of computation adopted in the preparation of the half year financial report are consistent with those adopted and disclosed in the consolidated entity s 2010 annual financial report for the financial year ended 30 June 2010, except for the impact of the Standards and Interpretations described below. These accounting policies are consistent with Australian Accounting Standards and with International Financial Reporting Standards. The Group has adopted all of the new and revised Standards and Interpretations issued by the Australian Accounting Standards Board (the AASB) that are relevant to their operations and effective for the current reporting period. New and revised Standards and amendments thereof and Interpretations effective for the current reporting period that are relevant to the Group include: Amendments to AASB 5, 8, 101, 107, 117, 118, 136 and 139 as a consequence of AASB Further Amendments to Australian Accounting Standards arising from the Annual Improvements Project The adoption of these amendments has not resulted in any changes to the consolidated entity s accounting policies, and has no affect on the amounts reported for the current or prior periods. 10

14 NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS FOR THE HALF YEAR ENDED 31 DECEMBER 2010 (continued) c) Going Concern The half year financial statements have been prepared on the going concern basis, which contemplates continuity of normal business activities and the realisation of assets and settlement of liabilities in the normal course of business. The Group incurred a loss of $568,615 for the period ended 31 December 2010 (2009: $651,289). The ability of the Company and the Group to continue to pay its debts as and when they fall due is dependent upon the Company successfully raising additional share capital and ultimately developing one of its mineral properties. The Directors believe it is appropriate to prepare these accounts on a going concern basis because: The Directors have an appropriate plan to raise additional funds as and when it is required. In light of the Group s current exploration projects, the Directors believe that the additional capital required can be raised in the market; and The Directors have an appropriate plan to contain certain operating and exploration expenditure if appropriate funding is unavailable. The accounts have been prepared on the basis that the entity can meet its commitments as and when they fall due and can therefore continue normal business activities, and the realisation of assets and liabilities in the ordinary course of business. d) Impairment of exploration and evaluation assets The ultimate recoupment of the value of exploration and evaluation assets, the Company s investment in subsidiaries, and loans to subsidiaries is dependent on the successful development and commercial exploitation, or alternatively, sale of the exploration and evaluation assets. Impairment tests are carried out on a regular basis to identify whether the assets carrying values exceed their recoverable amounts. There is significant estimation and judgement in determining the inputs and assumptions used in determining the recoverable amounts. The key areas of judgement and estimation include: Recent exploration and evaluation results and resource estimates; Environmental issues that may impact on the underlying tenements; Fundamental economic factors that have an impact on the operations and carrying values of assets and liabilities. e) Estimates The preparation of the interim financial statements requires management to make judgments, estimates and assumptions that affect the application of accounting policies and the reported amount of assets and liabilities, income and expenses. Actual results may differ from these estimates. In preparing these interim financial statements, significant judgment made by management in applying the Group s accounting policies and key sources of estimation were the same as those that were applied to the consolidated financial statements as at and for the year ended 30 June f) Operating segments From 1 July 2009, operating segments are identified and segment information disclosed on the basis of internal reports that are regularly provided to, or reviewed by, the Group s chief operating decision maker which, for the Group, is the Board of Directors. In this regard, such information is provided using different measures to those used in preparing the statement of comprehensive income and statement of financial position. Reconciliations of such management information to the statutory information contained in the interim financial report have been included where applicable. 11

15 3. OTHER FINANCIAL ASSETS NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS FOR THE HALF YEAR ENDED 31 DECEMBER 2010 (continued) 31 Dec Jun 10 A$ A$ Investment in Solimar Energy Ltd* 510,000 88,000 Investment in Merric Capital Pty Ltd 310, ,000 88,000 *These shares were received as non cash part of consideration for the sale of the consolidated entity s San Joaquin acreage in California to Solimar Energy Ltd. 4. EXPLORATION AND DEVELOPMENT 31 Dec Jun 10 Note A$ A$ Exploration and evaluation expenditure (a) 1,858, ,553 Development expenditure (b) 708,745 1,065,392 2,566,935 1,232,945 (a) Movement in exploration and evaluation expenditure Balance at the beginning of the period 167,553 3,708,704 Acquisition of 7.5% interest in Amazon and Thames project (Non Cash Issue of Shares) 1,980,000 Exploration and evaluation expenditure incurred 58, ,823 Sale of assets (3,884,206) Revaluation differences (348,105) (89,768) Carrying amount at the end of the period 1,858, ,553 (b) Movement in development expenditure Balance at the beginning of the year 1,065,392 2,702,856 Sale of assets (231,877) Oil & gas properties expenditure incurred 29,159 34,683 Impairment of development expenditure (233,483) (1,279,650) Revaluation differences (152,323) (160,620) Carrying amount at the end of the period 708,745 1,065,392 The recoverability of the carrying amount of exploration assets is dependent on the successful development and commercial exploitation or sale of the respective oil and gas leases and associated assets. 12

16 NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS FOR THE HALF YEAR ENDED 31 DECEMBER 2010 (continued) 5. RESTORATION PROVISION 31 Dec Jun 10 A$ A$ Balance at the beginning of the year 20, ,176 Change in provision due to sale of exploration assets (82,741) Foreign currency translation movement (3,206) Balance at the end of the period 17,229 20,435 The restoration provision is an estimate only at 31 December 2010 as the reserve value has not been quantified. The restoration will be re estimated at reporting periods or as required. 6. ISSUED CAPITAL 31 Dec Jun Dec Jun 10 Note No of Shares No of Shares A$ A$ Ordinary shares fully paid (a) 1,075,287, ,203, ,192, ,962,320 Ordinary shares partly paid to 2 cent 92,822 92,822 20,420 20,420 Ordinary shares partly paid to 0.1 cents 582, ,963 6,413 6,413 Share issue costs (1,310,096) (1,250,752) Listed options exercisable at 2.5c each (b) 470,727, ,245, , ,245 1,546,690, ,124, ,379, ,876,646 (a) Movement in ordinary shares fully paid For the six months ended 31 December 2010 Date Number of shares Issue price A$ A$ Opening balance 01 Jul ,203, ,962,320 Issue of shares to Pass Petroleum 08 Jul ,000, ,980,000 Exercise of options 17 Sep 10 7, Exercise of options 03 Dec Issue of shares to institutional shareholders 15 Dec ,076, ,250,001 Closing balance 1,075,287, ,192,506 (b) Movement in listed options For the six months ended 31 December 2010 Date Number of options Issue price A$ A$ Opening balance 01 Jul ,245, ,245 Issue of options during the period 14 Jul ,489, ,489 Exercise of options for the period 17 Sep 10 (7,088) (7) Issue of options during the period, free attaching to placement shares 15 Dec 10 86,538,462 Closing balance 557,265, ,727 There was no movement in issued capital during the comparative six months ended 31 December CONTINGENT LIABILITIES AND ASSETS The Directors are not aware of any contingent liabilities or contingent assets as at 31 December 2010, other than the guarantees issued by the Company s bankers in respect of joint study licence. Guarantees are secured by funds held on deposit, totalling $1,065,

17 NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS FOR THE HALF YEAR ENDED 31 DECEMBER 2010 (continued) 8. RELATED PARTIES Arrangements with related parties continue to be in place. For details on these arrangements, refer to the 30 June 2010 annual financial report. 9. CAPITAL AND LEASING COMMITMENTS Quest Petroleum NL is committed to the exploration and development of the areas of interest held under the Amazon and Thames Project and Bullseye Project areas. Under the Joint Venture Agreements for each of these projects that Quest retains an interest, costs of exploration and testing of these areas is incurred at the time of testing. No defined value can be placed on the capital commitments of the testing and exploration programs. Quest Petroleum NL and its subsidiaries are committed to keeping its interests in the Amazon and Thames Project and Bullseye Project areas in good standing by contributing its share of leasehold rental commitments and other related costs as required under the Joint Venture Agreements. 31 Dec Jun 10 LEASING COMMITMENTS A$ A$ Leasehold acreage costs within one year 50,000 84, SEGMENT REPORTING The consolidated entity has identified its operating segments based on the internal reports that are reviewed and used by the Board to make decisions about resources to be allocated to the segments and assess their performance. Operating segments are identified by Management based on the oil and gas reserves and exploration activities in the United States of America. Discrete financial information about each project is reported to the Board on a regular basis. As the Company only has one producing property in South Louisiana, ie Bullseye, no segment reporting is applicable. 31 Dec Dec 09 A$ A$ Revenue from external sources 121, ,543 Reportable segment loss (568,615) (651,289) Reportable segment assets 7,324,732 4,153, DIVIDENDS PAID OR PROPOSED There are no dividends paid or proposed for the half year on ordinary shares. 12. EVENT SUBSEQUENT TO REPORTING DATE No matters or circumstances have arisen since the end of the financial period which significantly affect or may significantly affect the operations of the consolidated entity, the results of those operations, or the state of affairs of the consolidated entity in future financial years. 14

18 Directors of Quest Petroleum NL, declare that: DIRECTORS DECLARATION (a) The financial statements and notes of the consolidated entity are in accordance with the Corporations Act 2001, including : (1) giving a true and fair view of the financial position as at 31 December 2010 and the performance for the half year ended on that date of the consolidated entity; and (2) complying with Accounting Standard AASB 134 Interim Financial Reporting and the Corporations Regulations 2001; and (3) the half year financial statements are in compliance with International Financial Reporting Standards, as stated in note 2 to the financial statements. (b) There are reasonable grounds to believe the company will be able to pays its debts as and when they become due and payable. This declaration is made in accordance with a resolution of the Boards of Directors: Brett Mitchell Executive Director Perth, Western Australia Date: 10 February

19 INDEPENDENT AUDITOR S REVIEW REPORT TO THE MEMBERS OF Report on the Half-Year Financial Report We have reviewed the accompanying half-year financial report of Quest Petroleum NL and its controlled entities (the consolidated entity) which comprises the statement of financial position as at 31 December 2010, the statement of comprehensive income, the statement of changes in equity and the statement of cash flows for the half-year ended on that date, notes comprising a summary of significant accounting policies and other explanatory information and the directors declaration of the consolidated entity comprising the company and the entities it controlled at 31 December 2010, or during the half year. Directors Responsibility for the Half-Year Financial Report The directors of Quest Petroleum NL are responsible for the preparation of the half-year financial report that gives a true and fair view in accordance with the Australian Accounting Standards and the Corporations Act 2001 and for such controls as the directors determine is necessary to enable the preparation of the half-year financial report that is free from material misstatement, whether due to fraud or error. Auditor s Responsibility Our responsibility is to express a conclusion on the half-year financial report based on our review. We conducted our review in accordance with Auditing Standards on Review Engagements ASRE 2410 Review of a Financial Report Performed by the Independent Auditor of the Entity, in order to state whether, on the basis of the procedures described, we have become aware of any matter that makes us believe that the financial report is not in accordance with the Corporations Act 2001 including: giving a true and fair view of the consolidated entity s financial position as at 31 December 2010 and its performance for the half year ended on that date; and complying with Accounting Standard AASB 134 Interim Financial Reporting and the Corporations Regulations As the auditor of Quest Petroleum NL and its controlled entities, ASRE 2410 requires that we comply with the ethical requirements relevant to the audit of the annual financial report. A review of a half-year financial report consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with Australian Auditing Standards and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion. 16

20 Independence In conducting our review, we have complied with the independence requirements of the Corporations Act In accordance with the Corporations Act 2001, we have given the directors of the company a written auditor s independence declaration. Conclusion Based on our review, which is not an audit, we have not become aware of any matter that makes us believe that the half-year financial report of Quest Petroleum NL and its controlled entities is not in accordance with the Corporations Act 2001 including: (a) giving a true and fair view of the consolidated entity s financial position as at 31 December 2010 and of its performance for the half-year ended on that date; and (b) complying with Accounting Standard AASB 134 Interim Financial Reporting and the Corporations Regulations MACK & CO S S FERMANIS PARTNER WEST PERTH DATE: 10 TH FEBRUARY