For personal use only

Transcription

1 NuEnergy Gas Limited ABN HALF-YEAR FINANCIAL REPORT 31 December 2014

2 CORPORATE DIRECTORY ABN: ASX CODE: NGY Ordinary shares: 751,687,364 DIRECTORS: Kok Keong Kong (Non-Executive Chairman) Yong Wah Kee (Executive Director) Alan Fraser (Non-Executive Director) Graeme Robertson (Non-Executive Director) Goh Tian Chuan (Non-Executive Director) Chen Heng Mun (Non-Executive Director) COMPANY SECRETARY: Rozanna Lee ADMINISTRATION OFFICE: Suite 2001, Level George Street SYDNEY NSW 2000 Phone: (02) Fax: (02) REGISTERED OFFICE: Suite 2001, Level George Street SYDNEY NSW 2000 SHARE REGISTER: Link Market Services Limited Ground Floor 178 St Georges Terrace PERTH WA 6000 Telephone: Fax: (02) AUDITORS: Hall Chadwick Chartered Accountants Level 40 2 Park Street Sydney NSW 2000 Telephone: (02) Fax: (02) STOCK EXCHANGE LISTING: Australian Securities Exchange Ltd Level 8, Exchange Plaza 2 The Esplanade PERTH WA 6000 CONTENTS: Directors Report 2-5 Auditor s Independence Declaration 6 Consolidated Statement of profit or loss and other comprehensive income 7 Consolidated Statement of Financial Position 8 Consolidated Statement of Changes in Equity 9 Consolidated Statement of Cash Flows 10 Notes to the Financial Statements Directors Declaration 17 Independent Auditor s Review Report 18 1

3 DIRECTORS REPORT The directors present their report together with the consolidated Financial Report of the economic entity for the half-year ended 31 December Directors The directors of the Company in office during and since the half-year are as follows: Kok Keong Kong Non-Executive Chairman (appointed 21 August 2014) Yong Wah Kee Executive Director (appointed 21 August 2014)) Alan Fraser Non-Executive Director (Director since 1992) Graeme Robertson Non-Executive Director (appointed 29 March 2011) Goh Tian Chuan - Non-Executive Director (appointed 17 December 2014) Chen Heng Mun - Non-Executive Director (appointed 1 January 2015) Peter Cockcroft - Non-Executive Director (resigned 21 August 2014) Jonathan Warrand - Non-Executive Director (resigned 18 December 2014) REVIEW OF OPERATIONS Indonesian Operations NuEnergy Gas Limited ( NuEnergy or the Company ) is the operator for three Production Sharing Contracts (PSCs) in Indonesia: - Muara Enim PSC (40% participating interest) - South Sumatra - Muara Enim II PSC (30% participating interest) - South Sumatra - Rengat PSC (100% participating interest) - Central Sumatra Gas flared at Muara Enim (ME) PSC Location Map: NuEnergy s three PSCs are located in Sumatra, Indonesia, close to existing infrastructure South Sumatra As part of the recent recapitalisation of NuEnergy the Company intends to solely focus on its three Indonesian Production Sharing Contracts (PSCs). NuEnergy s core PSCs in South Sumatra will be the primary focus with the Company aiming to drill further pilot wells at the Muara Enim PSC and commence drilling at the Muara Enim II PSC, including a focus on the highly prospective western area. 2

4 Drilling is set to commence at the Muara Enim II PSC during the first half of calendar year 2015 with the tendering process currently underway. Rengat PSC NuEnergy is also focusing on drilling wells at the Rengat PSC, targeting the identified 15 metre coal seam revealed after extensive geological and geophysical work completed in The Company also expects to commence drilling at Rengat during the first half of calendar year NuEnergy has a 100% interest in Rengat PSC (located in the Central Sumatra coal basin in the vicinity of a major gas pipeline from Jakarta to the Chevron Duri Steam Flood project and related infrastructure). The recently completed Investment Agreement includes a provision for a farm-out of the Rengat PSC. INVESTMENT AGREEMENT - SHARE PLACEMENTS COMPLETE During the half-year, NuEnergy completed two share placements under the Investment Agreement, as amended, with a strategic Asian investor, New Century Energy Resources Limited ( NCE ) or its nominees, to fund the development of the Indonesian Coal Bed Methane (CBM) program through recapitalisation of NuEnergy. NCE has extensive experience in the CBM exploration and production industry, including subsurface (geological, geophysical & reservoir), well drilling, completion and production techniques that can significantly enhance the productivity of CBM wells. NCE is 60% owned by Globaltec Formation Berhad (MYX:5220), a public company listed on the Bursa Malaysia main market. The two successfully completed share placements totalled $12.5 million, as follows: An initial share placement of 83,333,333 shares at 3 cents per share raising $2.5 million was completed on 20 August 2014; and A second share placement of 333,333,333 shares at 3 cents per share raising $10 million was completed on 16 December Board Changes Upon completion of the initial share placement, NCE appointed two of its nominees, Mr Yong Wah Kee and Mr Kok Keong Kong, as directors of NuEnergy. Mr Peter Cockcroft resigned as director at this time to leave NuEnergy with a five member Board. At completion of the second share placement, further changes to the Board occurred, as follows: NCE appointed Mr Goh Tian Chuan as Non-Executive Director of NuEnergy; NCE appointed Mr Chen Heng Mun as Non-Executive Director of NuEnergy (effective 1 January 2015); Mr Jonathan Warrand resigned as Non-Executive Director; Mr Yong Wah Kee transitioned from Non-Executive Director to Executive Director (effective 1 January 2015); and Mr Kok Keong Kong (Non-Executive Director) replaced Mr Graeme Robertson as Non- Executive Chairman. Mr Robertson remains a Non-Executive Director of NuEnergy. The Company welcomes the new Board members and welcomes Mr Kee as Executive Director as he becomes increasingly involved with the implementation of the Company s strategy. Mr Kee is founder and CEO of NCE. He has extensive experience in the oil and gas industry spanning more than 30 years, including 26 years with Haliburton. 3

5 NEW CHIEF EXECUTIVE OFFICER During the half-year, the Board of NuEnergy welcomed the appointment of Dr Ian Wang as Chief Executive Officer. Dr Wang has more than 30 years of experience in the oil and gas Industry and previously held the position of General Manager of Greka Exploration & Production (Green Dragon Gas). Prior to joining Greka Exploration & Production in August 2012, Dr Wang was employed as General Manager of Clarke Energy China. Dr Wang has held senior exploration roles at Sino Gas & Energy, Sydney Gas and Molopo. He also held roles as Regional Manager with In-Situ Australia providing consultancy to Lowell Petroleum on Coal Bed Methane (CBM) projects in China and Operations Manager for Huawell CBM Zhengzhou. Dr Wang holds a Master of Science and PhD from Imperial College, both in Rock Mechanics and Structural Geology and was an Associate Professor at the Chinese Academy of Science, Beijing, where he worked on tectonic and basin analysis. Dr Wang s role is to deliver and commercialise the existing Production Sharing Contracts (PSCs) in Indonesia and to expand the unconventional and conventional portfolio across the ASEAN region. Dr Wang will be based in Jakarta to fulfill his new role as CEO. CAPITAL STRUCTURE Set out below is the Company s current capital structure: Ordinary Shares 751,687,364 Options: Exercise Price Expiry date $ December ,050,000 4

6

7 HALL CHADWICK a Chartered Accountants and Business Advisers as)-eit4- Graham Webb Partner Date: 15th March 2015 NUENERGY GAS LIMITED ACN AND ITS CONTROLLED ENTITIES AUDITOR'S INDEPENDENCE DECLARATION UNDER SECTION 307C OF THE CORPORATIONS ACT 2001 TO THE DIRECTORS OF NUENERGY GAS LIMITED I declare that, to the best of my knowledge and belief, during the half year ended 31 December 2014 there have been no contraventions of: i. the auditor independence requirements as set out in the Corporations Act 2001 in relation to the review, and ii. any applicable code of professional conduct in relation to the review. out a, Hall Chadwick Level 40, 2 Park Street Sydney NSW 2000 SYDNEY Level 40 2 Park Street Sydney NSW 2000 Australia GPO Box 3555 Sydney NSW 2001 Ph: (612) Fx : (612) NEWCASTLE Ph: (612) Fx : (612) PARRAMATTA Ph: (612) Fx : (612) PENRITH Ph: (612) Fx : (612) MELBOURNE Ph: (613) Fx : (613) PERTH Ph: (618) Fx : (618) BRISBANE Ph: (617) Fx: (617) GOLD COAST Ph: (617) Fx : (617) DARWIN Ph: (618) Fx : (618) A member of AGN International Ltd, a worldwide association of separate and independent accounting and consulting firms SYDNEY NEWCASTLE PARRAMATTA PENRITH MELBOURNE PERTH BRISBANE GOLD COAST DARWIN Liability limited by a scheme approved under Professional Standards Legislation.

8 CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME FOR THE HALF-YEAR ENDED 31 December 2014 Note 31/12/ /12/2013 $ $ Revenue 2 26,288 55,789 Consultants (71,146) (50,331) Directors & executives remuneration (394,847) (474,115) Legal expenses (91,589) (42,277) Administration expenses (469,452) (329,989) Travel expenses (19,206) (40,395) Foreign Exchange losses (47,429) (19,140) Depreciation (38,938) (68,667) Asset write-down (12,186) - Impairment of exploration and evaluation 3 (32,218,582) - Loss before income tax (33,337,087) (969,125) Income tax benefit - 71,016 Net loss after income tax (33,337,087) (898,109) Other comprehensive income for the period, net of income tax: Items that may be reclassified subsequently to profit or loss: Movement in fair value of available for sale financial assets (7,461) (9,948) Foreign currency translation reserve 869,566 (290,327) Total comprehensive loss for the period (32,474,982) (1,198,384) Loss attributable to: Members of the parent entity (33,320,192) (890,039) Non-controlling interest (16,894) (8,070) (33,337,087) (898,109) Earning per share From continuing and discontinued operations: - Basic earnings per share (cents) (7.88) (0.32) - Diluted earning per share (cents) (7.76) (0.32) From continuing operations: - Basic earnings per share (cents) (7.88) (0.32) - Diluted earning per share (cents) (7.76) (0.32) The Consolidated Statement of profit or loss and other comprehensive Income should be read in conjunction with the notes to the financial statements. 7

9 CONSOLIDATED STATEMENT OF FINANCIAL POSITION AS AT 31 December 2014 Note 31/12/ /06/2014 CURRENT ASSETS $ $ Cash and cash equivalents 10,374,787 67,032 Trade and other receivables 98, ,320 _ TOTAL CURRENT ASSETS 10,473, ,352 _ NON-CURRENT ASSETS Available for sale financial assets 14,922 22,383 Plant and equipment 270, ,156 Exploration and evaluation expenditure 3 27,386,053 57,925,433 Other financial assets 1,208,610 1,034,458 _ TOTAL NON-CURRENT ASSETS 28,880,547 59,329,430 _ TOTAL ASSETS 39,353,994 59,617,782 _ CURRENT LIABILITIES Trade and other payables 927,907 1,158,367 Provisions 103,450 86,796 _ TOTAL CURRENT LIABILITIES 1,031,357 1,245,163 _ NON-CURRENT LIABILITIES Deferred tax liabilities 10,166,899 10,166,899 Provisions 10,000 10,000 _ TOTAL NON-CURRENT LIABILITIES 10,176,899 10,176,899 _ TOTAL LIABILITIES 11,208,256 11,422,062 _ NET ASSETS 28,145,738 48,195,720 ========= ========= EQUITY Issued capital 5 85,324,979 72,899,979 Reserves 6 14,044,130 13,182,025 Accumulated losses (71,506,571) (38,186,378) Parent Entity Interest 27,862,538 47,895,626 Non-controlling interest 283, ,094 _ TOTAL EQUITY 28,145,738 48,195,720 ========= ========= The Consolidated Statement of Financial Position should be read in conjunction with the notes to the financial statements. 8

10 CONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR THE HALF-YEAR ENDED 31 December 2014 Issued Capital Prepaid Share Reserves Accumulated Losses Reserves Non- Controlling Interest Total Equity $ $ $ $ $ $ At 1 July ,086,872 - (35,715,598) 13,467, ,401 49,159,396 Total comprehensive income (loss) for the period, - - (890,039) (300,275) (8,070) (1,198,384) net of income tax Shares issued 1,167, ,167,627 Pre-paid share capital 700, ,000 Equity issue costs (40,600) (40,600) At 31 December ,213, ,000 (36,605,637) 13,167, ,331 49,788,039 At 1 July ,899,979 - (38,186,378) 13,182, ,094 48,195,720 Total comprehensive income (loss) for the period, net of income tax - - (33,320,193) 862,105 (16,894) (32,474,982) Shares issued 12,500, ,500,000 Pre-paid share capital Equity issue costs (75,000) (75,000) At 31 December ,324,979 0 (71,506,571) 14,044, ,200 28,145,738 The Consolidated Statement of Changes in Equity should be read in conjunction with the notes to the financial statements. 9

11 CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE HALF-YEAR ENDED 31 December 2014 CASH FLOWS FROM OPERATING ACTIVITIES 31/12/ /12/2013 $ $ Interest received 9,968 11,062 Payments to suppliers and employees (1,174,815) (851,427) Net cash (used in) operating activities (1,164,847) (840,365) CASH FLOWS FROM INVESTING ACTIVITIES Payments for Exploration and Evaluation (1,063,908) (3,235,018) Payment for Plant and Equipment (28,490) - Net cash (used in) investing activities (1,092,398) (3,235,018) CASH FLOWS FROM FINANCING ACTIVITIES Proceeds from issues of shares 12,500,000 1,167,627 Payments for costs associated with equity issued (75,000) (12,600) Proceeds from sale of subsidiary 140,000 - Net cash provided by financing activities 12,565,000 1,155,027 Net increase/(decrease) in cash and cash equivalents 10,307,755 (2,920,356) Cash and cash equivalents at the beginning of the period 67,032 4,484,302 Cash and cash equivalents at the end of the period 10,374,787 1,563,946 ======== ======== The Consolidated Statement of Cash Flows should be read in conjunction with the notes to the financial statements. 10

12 NOTES TO THE FINANCIAL STATEMENTS FOR THE HALF-YEAR ENDED 31 December BASIS OF PREPARATION OF THE HALF-YEAR FINANCIAL REPORT (a) Basis of Accounting These general purpose interim financial statements for half-year reporting period ended 31 December 2014 have been prepared in accordance with requirements of the Corporations Act 2001 and Australian Accounting Standard AASB 134: Interim Financial Reporting. The Group is a for-profit entity for financial reporting purposes under Australian Accounting Standards. This interim financial report is intended to provide users with an update on the latest annual financial statements of NuEnergy Gas Limited and its controlled entities (referred to as the consolidated group or group ). As such, it does not contain information that represents relatively insignificant changes occurring during the half-year within the Group. It is therefore recommended that this financial report be read in conjunction with the annual financial statements of the Group for the year ended 30 June 2014, together with any public announcements made during the following half-year. These interim financial statements were authorised for issue on 15 March (b) Significant Accounting Policies The same accounting policies and methods of computation have been followed in this interim financial report as were applied in the most recent annual financial statement. (c) Going concern The consolidated entity has recorded a loss of $33,337,087 (which includes the impairment of exploration and evaluation expenditure of $32,218,582 as outlined in note 3 below), had net cash outflows from operations of $1,164,847 for the half year ended 31 December 2014, and has no ongoing source of operating income. At 31 December 2014 the consolidated entity had net assets of $28,145,738. The financial report has been prepared on a going concern basis which assumes the realisation of assets and the extinguishment of liabilities in the normal course of business and at the amounts stated in the financial statements. The directors believe the going concern basis is appropriate for the following reasons: The Company successfully raised $12,500,000 during the period. At 31 December 2014 the consolidated entity had cash and cash equivalents of $10,374,787. The directors have prepared cash flow forecasts which include a further capital raising of $7,000,000 to cover total exploration expenditure of approximately $5,500,000. We note the minimum expenditure requirement for all tenements is approximately $16,000,000 in the next 12 months. The short fall between the minimum expenditure requirement and the capital raising will be covered by a farm out initiative relating to Rengat PSC and/or further capital raisings in future. Minimum expenditure commitments may, subject to negotiation and with approval from the Indonesian regulator, be avoided by sale and farm-out. Expenditure commitments may also be postponed subject to agreement with the Indonesian regulator. Based on the above, the directors are satisfied that the consolidated entity will be able to fund its operations and continue as a going concern, and it is appropriate that the financial statements have been prepared on that basis. 11

13 1. BASIS OF PREPARATION OF THE HALF-YEAR FINANCIAL REPORT (CONT D) (d) Impairment of assets At the end of each reporting period, the company assesses whether there is any indication that an asset may be impaired. The assessment will include the consideration of external and internal sources of information including dividends received from subsidiaries, associates or jointly controlled entities deemed to be out of pre-acquisition profits. If such an indication exists, an impairment test is carried out on the asset by comparing the recoverable amount of the asset, being the higher of the asset s fair value less costs to sell and value in use, to the asset s carrying amount. Any excess of the asset s carrying amount over its recoverable amount is recognised immediately in profit or loss, unless the asset is carried at a revalued amount in accordance with another standard (eg in accordance with the revaluation model in AASB116: property, plant and equipment). Any impairment loss of a revalued asset is treated as a revaluation decrease in accordance with that other standard. Where it is not possible to estimate the recoverable amount of an individual asset, the group estimates the recoverable amount of the cash generating unit to which the asset belongs. Impairment testing is performed annually for goodwill, intangible assets with indefinite lives and intangible assets not yet available for use. 12

14 NOTE 2 REVENUE NOTES TO THE FINANCIAL STATEMENTS FOR THE HALF-YEAR ENDED 31 December /12/ /12/2013 $ $ Non-Operating Activities Bank Interest 9,968 55,789 Other Income 16,320 - Total revenues 26,288 55,789 NOTE 3 EXPLORATION AND EVALUATION EXPENDITURE 31/12/ /6/2013 $ $ Exploration and evaluation expenditure 27,386,053 57,925,433 Balance at beginning of year 16,987,911 12,857,743 Exploration rights 40,586,873 40,159,303 Impairment of Indonesia assets 1 (32,218,582) - Expenditure incurred during the year 791,877 4,089,362 Impairment of Tanzanian assets - (233,039) VAT Receivable 2 1,237,975 1,052,064 Balance at end of year 3 27,386,053 57,925,433 1 During the half-year period, as part of the recapitalisation of NuEnergy Gas Limited, the Company was valued at $27,386,053 (High) by an independent expert. The exploration and evaluation assets were therefore impaired in order to reflect this value. 2 VAT receivable is eligible to be claimed back from SKKMIGAS (The Indonesian Oil and Gas Regulator) upon production of Coal Bed Methane (CBM) on a commercial basis. 3 Recoverability of the carrying amount of exploration costs is dependent on the successful exploration and sale of CBM. 13

15 NOTE 4 SEGMENT INFORMATION NOTES TO THE FINANCIAL STATEMENTS FOR THE HALF-YEAR ENDED 31 December 2014 The consolidated group has identified its operating segments based on the internal reports that are reviewed and used by the management team in assessing performance and determining the allocation of resources. The operating segments are identified by management based on the manner in which the expenses are incurred and resources allocated. Discrete financial information about each of these operating segments is reported to the Board on a regular basis. The reportable segments are based on aggregated operating segments determined by similarity of expenses, where expenses in the reportable segments exceeds 10% of the total expenses for either the current and/or previous reporting period. Business segment Oil & Gas Mineral Exploration Corporate Consolidated $ $ $ $ $ $ $ $ Segment revenue ,288 55,789 26,288 55,789 Segment result (337,874) (204,975) - - (32,999,213) (764,150) (33,337,087) (969,125) Dec Jun Dec Jun Dec Jun Dec Jun $ $ $ $ $ $ $ $ Segment assets 28,987,322 59,486,579 10,000 10,000 10,356, ,203 39,353,994 59,617,782 Segment liabilities 10,999,187 11,283,431 10,000 10, , ,631 11,208,256 11,422,062 NOTE 5 SHARE CAPITAL 31/12/ /6/2014 $ $ Issued and Paid Up Capital (number of shares) 751,687, ,020,698 Fully paid ordinary shares ($) 85,324,979 72,899,979 The Company has 4,050,000 unlisted options on issue as at 31 December

16 NOTES TO THE FINANCIAL STATEMENTS FOR THE HALF-YEAR ENDED 31 December 2014 NOTE 6 RESERVES 31/12/ /6/2014 $ $ Foreign Currency Translation Reserve 2,987,170 2,117,604 Available for Sale Financial Asset Reserve (109,428) (101,967) Option Premium Reserve 11,166,388 11,166,388 14,044,130 13,182,025 NOTE 7 EVENTS SUBSEQUENT TO BALANCE DATE The Company is not aware of any material events that have occurred subsequent to balance date. NOTE 8 COMMITMENTS AND CONTINGENT LIABILITIES There were no significant changes in commitments and contingent liabilities since the last reporting period. Commitments under the Indonesian Production Sharing Contracts (PSC) can be moved into future years after negotiation with the Indonesian gas regulator. NuEnergy has managed to postpone various commitments until future periods and has met the required commitments for the current period to 31 December The consolidated entity has bank guarantees amounting to $1,097,550 (30/6/14: $1,034,458) at year end. NOTE 9 RELATED PARTIES Dealings with related parties have been consistent with those disclosed in the 30 June 2014 Financial Report, other than: Based on the core focus on Indonesia NuEnergy entered into agreements for the transfer of its Mozambique interests and assigned all associated rights and obligations to NuAfrica Gas Limited (a wholly owned subsidiary of NuEnergy). Intrasia Capital Pte Ltd, a Singapore-based investment company and related party of the Company's Chairman, Graeme Robertson, acquired the interests in NuAfrica Gas Limited for a consideration of $240,000. The acquisition for the interests in NuAfrica Gas Limited was based on direct and indirect exploration costs incurred in Mozambique. NuEnergy has not applied for or been granted any concessions or permits in Mozambique. $100,000 was paid on 16 June 2014 by Intrasia Capital Pte Ltd and the remaining balance was paid subsequent to 30 June 2014, during the current period. During December 2014, upon completion of a share placement, Intrasia Capital Pty Limited, a related party to Graeme Robertson and Jonathan Warrand, was paid a $75,000 corporate advisory fee. During the period NuEnergy entered into a Technical Services Agreement with New Century Energy Resources Limited, a related party of the Company s directors, Yong Wah Kee, Goh Tian Chuan, Chen Heng Mun and the Company s chairman Kok Keong Kong. Key terms of the agreement include: NCE has the professional expertise and software, especially in the field of coal bed methane resource exploration and development, to assist the Company to undertake geological and geophysical studies and other technical work involved with the coring and drilling programs at NuEnergy s coal bed methane PSCs in Indonesia. 15

17 NCE will charge NuEnergy for service personnel called in to perform technical work either on a day rate or monthly rate basis. This basis of rate shall be stated in an official call-off order. NCE and NuEnergy shall negotiate and mutually agree on the day rate and/or monthly rate for each Service Personnel. The rates are to be negotiated during the time of call-off so that the rates will commensurate with the competency profile of the Service Personnel and the prevailing market conditions. The maximum fee chargeable by NCE per well is capped at $150,000. NOTE 10 FAIR VALUE The Group measures and recognises the following assets and liabilities at fair value on a recurring basis after initial recognition: - Available for sale financial assets; - Exploration and evaluation expenditure The group does not subsequently measure any liabilities at fair value on a non-recurring basis. Fair value Hierarchy AASB 13: Fair value measurement requires the disclosure of fair value information by level of the fair value hierarchy, which categorises fair value measurements into one of three possible levels based on the lowest level that an input that is significant to the measurement can be categorised into as follows: Level 1 Level 2 Level 3 Measurements based on quoted prices (unadjusted) in active markets for identical assets or liabilities that the entity can access at the measurement date. Measurements based on inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly or indirectly. Measurements based on unobservable inputs for the asset or liability. The fair values of assets and liabilities that are not traded in an active market are determined using one or more valuation techniques. These valuation techniques maximise, to the extent possible, the use of observable market data. If all significant inputs required to measure fair value are observable, the asset or liability is included in Level 2. If one or more significant inputs are not based on observable market data, the asset or liability is included in Level 3. The company s available for sale financial assets are valued using Level 1, as follows: Consolidated 2014 Note Carrying value Fair value Available for sale financial assets - Shares in listed securities at fair value 14,922 14,922 14,922 14,922 The company s exploration and evaluation expenditure are valued using level 3, as follows: Consolidated 2014 Note Carrying value Fair value Exploration and Evaluation expenditure 3 27,386,053 27,386,053 27,386,053 27,386,053 16

18

19 HALL CHADWICK a Chartered Accountants and Business Advisers NUENERGY GAS LIMITED ACN AND CONTROLLED ENTITIES INDEPENDENT AUDITOR'S REVIEW REPORT TO THE MEMBERS OF NUENERGY GAS LIMITED Report on the Half-Year Financial Report We have reviewed the accompanying half-year financial report of NuEnergy Gas Limited, which comprises the consolidated statement of financial position as at 31 December 2014, the consolidated statement of profit or loss and other comprehensive income, the consolidated statement of changes in equity and consolidated statement of cash flows for the half year ended on that date, notes comprising a summary of significant accounting policies and other explanatory notes and the directors' declaration. Directors' Responsibility for the Financial Report The directors of NuEnergy Gas Limited are responsible for the preparation of the halfyear financial report that gives a true and fair view in accordance with Australian Accounting Standards (including Australian Accounting Interpretations) and the Corporations Act 2001 and for such internal control as the directors determine is necessary to enable the preparation of the half year financial report that gives a true and fair view and 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 an Interim and other Financial Reports 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 half year financial report is not in accordance with the Corporations Act 2001 including: giving a true and fair view of NuEnergy Gas Limited's financial position as at 31 December 2014 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 NuEnergy Gas Limited, 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 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. SYDNEY Level 40 2 Park Street Sydney NSW 2000 Australia GPO Box 3555 Sydney NSW 2001 Ph: (612) Fx : (612) NEWCASTLE Ph: (612) Fx : (612) PARRAMATTA Ph: (612) Fx : (612) PENRITH Ph: (612) Fx : (612) MELBOURNE Ph: (613) Fx : (613) PERTH Ph: (618) Fx : (618) BRISBANE Ph: (617) Fx: (617) GOLD COAST Ph: (617) Fx : (617) DARWIN Ph: (618) Fx : (618) A member of AGN International Ltd, a worldwide association of separate and independent accounting and consulting firms SYDNEY NEWCASTLE PARRAMATTA PENRITH MELBOURNE PERTH BRISBANE GOLD COAST DARWIN Liability limited by a scheme approved under Professional Standards Legislation.

20 HALL CHADWICK di (NSW) NUENERGY GAS LIMITED ACN AND CONTROLLED ENTITIES INDEPENDENT AUDITOR'S REVIEW REPORT TO THE MEMBERS OF NUENERGY GAS LIMITED Independence In conducting our review, we have complied with the independence requirements of the Corporations Act 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 NuEnergy Gas Limited is not in accordance with the Corporations Act 2001 including: a. giving a true and fair view of NuEnergy Gas Limited's financial position as at 31 December 2014 and of its performance for the half-year ended on that date; and b. complying with AASB 134: Interim Financial Reporting and the Corporations Regulations 2001 Emphasis of Matter Without modifying our conclusion, we draw attention to Note 1 (c) in the half year financial report which indicates that the consolidated entity incurred a net loss of $33,337,087; incurred net cash outflows from operations of $1,164,847 and has no ongoing source of operating income for the half year ended 31 December These conditions, along with other matters as set forth in Note 1 (c), indicate the existence of a material uncertainty which may cast significant doubt about the consolidated entity's ability to continue as a going concern and therefore, the consolidated entity may be unable to realise its assets and discharge its liabilities in the normal course of business and at the amounts stated in the financial report. Hall Chadwick Level 40, 2 Park Street Sydney NSW Graham Webb Partner Date: 15th March 2015