OILEX FY20 Results Show Net Assets Increase to $5.0m

  FY20 report highlighted the various stage of its progress across India, Indonesia, Australia and UK. 

During the period, the main focus of the Company has been around developing existing projects in the portfolio, determining the best value realisation pathway for each project, resolving the long running problematic issues where necessary while reducing the Company’s cost base in both India and Australia. 

 

Financial Highlights 

Financial results for the period were unsurprising with exploration costs of $1.1m (FY19: $0.5m) with $2.0m ($FY19: $2.0m) of administration expenses. 

Other costs $1.3m (FY19; Cost of sales $0.5m) includes an increase in write-down of inventory to net realisable values of $1.0m (FY19: $0.2m). 

Loss before tax, for the pre-revenue explorer, was therefore $4.5m (FY19: $3.1m). 

The net assets of the consolidated entity totalled $5.0m as at 30 June 2010 (FY19: $3.4m) with cash and cash equivalents, held by the Group as at 30 June 2020, decreased to $0.2m (FY19: 0.4m).

 

Operating Highlights 

India - Cambay Field, Onshore Gujarat, (Oilex - 45%, Operator) 

Development of the potential gas resources in the Cambay has been held up for some years as the result of a dispute with GSPC. 

Oilex remains in discussion with a number of companies who have expressed interest in the Cambay PSC and its potential.  

Oilex has developed a work plan to drill 2 vertical wells to test the EP-IV tight gas accumulation in a pilot programme involving stimulation of the reservoir to determine flow rate potential.  A Field Development Plan (“FDP”) has been approved by the government regulator. This was additionally submitted to the Government as a requirement for the application to secure a 10 year extension to the PSC beyond 2019. 

The amended Cambay contract, reflecting the new expiry date of September 2029, is now pending finalisation by the Directorate General of Hydrocarbons. 

It is intended that this initial pilot programme, subject to securing the necessary funding will be followed by a larger drilling programme, with the aim of aggregating sufficient production volumes to connect to the high-pressure pipelines which offer greater offtake stability and improved gas prices. 

Any early production will utilise existing processing and storage facilities upgraded as required to provide a low-cost path to commercialisation.  Further work on this work programme will restart once the GPSC sales process is complete. 

Oilex is presently in the final stages in obtaining a new environmental clearance from the Ministry of Environment and Forest  and Cabinet Committee to supercede the previous clearances already obtained under the previous regulatory requirements.  The clearances are necessary to recommence production at Cambay and are in support of the planned drilling programme at Cambay. 

An Environmental Impact Assessment has been prepared by the Company's independent consultants and is pending submission to the applicable authorities and following public hearings.  The public hearings are delayed due to the continued 'lockdown' on account of Covid-19.   Following the necessary environmental clearances, production from well C-73 and C-77H are on standby for production commencement. 

During the financial year, the Joint venture received US$0.15 million gross from GSPC against outstanding cash calls for Cambay. At 30 June 2020, gross unpaid cash calls issued to GSPC totalled US$5.67 million. 

 

India - Bhandut Field, Onshore Gujarat (Oilex - 40%, Operator) 

Oilex N.L. Holdings (India) Limited is the Operator of the Bhandut Field Production Sharing Contract (PSC) in the Cambay Basin onshore Gujarat India and holds a 40% participating interest.  

The remaining 60% interest is held by Joint Venture partner Gujarat State Petroleum Corporation Limited (GSPC). 

In January 2020, Oilex announced that it had accepted an offer from Kiri and Company Logistics (Kiri) to acquire the Company's participating interest in Bhandut for US$0.14 million in cash. Kiri also has expressed an interest in engaging the services of Oilex's office for ongoing support. 

All necessary documentation for the sale has been submitted to the Government of India to affect the transfer and completion is anticipated in the fourth quarter of 2020 after some delays related to COVID-19. 

During the financial year, the Joint Venture received US$0.02 million gross from GSPC against outstanding cash calls for Bhandut. As at 30 June 2020, gross unpaid cash calls issued to GSPC totalled US$0.09 million. 

 

India - Timor Sea - JPDA 06-103 (Oilex - 10%, Operator) 

In early 2020, the arbitration panel dismissed ANPM's application to increase their claim against the joint venture from A$17.0 million to US$22.6 million (plus interest). Also in early 2020, Oilex announced that the arbitration hearing, scheduled to commence on 10 February 2020, was suspended while the parties continue their commercial settlement negotiations. 

In August 2020, Oilex announced that it had executed a Deed of Settlement and Release with the ANPM to terminate the arbitration proceedings and to settle all claims and counterclaims between the parties. 

Under the Deed, Oilex has committed to a settlement of US$800,000 payable in the 2021 and 2022 financial years. In addition, the Company has entered into an unsecured loan facility agreement with two of its joint venture partners which further provides the Company with the option, at its sole discretion, to extend the settlement payments into the 2023-24 financial year. 

Each Joint Venture party remained jointly and severally liable and had provided parent company guarantees.  A notice of default has been issued against Bharat PetroResources JPDA Limited, Videocon JPDA 06-103 Limited and GSPC (JPDA) Limited for their failure to pay the joint venture cash calls. 

 

Indonesia - West Kampar PSC, Central Sumatra, Indonesia (Oilex - 50%) 

The West Kampar PSC is located in central Sumatra adjacent to the most prolific oil producing basin in Indonesia. As initially granted the PSC covered some 4,470 square kilometres. This was reduced to around 900 square kilometres through statutory partial relinquishments over a number of years and any return to production will require careful execution in the field given that it has been shut in since 2016. 

The Company continues to engage with the regulator with a view to restoring its interest in West Kampar.  This confirmation from the GoI is exclusive to Oilex, and  provides a pathway to return of the PSC, with final terms to be negotiated.  Oilex will share in any award of the PSC on a 50-50 joint basis with its local Indonesian partner, PT Ephindo. 

 

Australia - Cooper Eromanga Basins 

Oilex has been working to access acreage in the highly productive Cooper Eromanga Basins since 2017, focussing on the South Australian parts of the basins. 

In January 2020, Oilex announced that it had signed an agreement with Doriemus plc for the sale of certain interests.

However, in response to the financial market uncertainties at the time, this process was terminated in April 2020 by Doriemus.   

In May 2020, Oilex announced that it had signed a conditional binding Heads of Agreement with Armour Energy Limited, and in June Oilex further announced it had entered into a conditional binding Share Purchase Agreement. 

Subsequent to the reporting period, on 14 September 2020, a further announcement was made outlining amendments to the Share Purchase Agreement whereby the completion date was extended from 15 September 2020 until 15 October 2020. 

 Under the SPA Armour will acquire 100% of the issued capital of CoEra Limited, a wholly owned subsidiary of Oilex holding the Cooper-Eromanga assets. 

Armour will assume all costs and liabilities associated with the asset package. As consideration Armour will issue up to 34.5 million Armour shares to Oilex (or its nominees) upon completion of the Proposed Transaction. 

The issue of the Consideration Shares was approved at an Extraordinary General Meeting held by Armour on 18 September 2020. 

The Consideration Shares are subject to a 12 month voluntary escrow from completion.  In addition, Armour will reimburse Oilex, in cash, for past costs of A$125,000 to be paid within 5 business days of Armour's above shareholder approval. 

This amount was paid by Armour in late September 2020. Completion of the transaction is expected to occur on or before 15 October 2020. 

Oilex will nominate 10% of the abovementioned Share Consideration to Orthogonal Enterprises Pty Ltd for past and future services rendered in building the Cooper-Eromanga portfolio. 

 

United Kingdom  - East Irish Sea 

Oilex's new business strategy looking at high potential, well regulated, well understood basins with ready access to data included the UK Continental Shelf with a focus on the Southern Gas Basin and the East Irish Sea. 

A number of assets and holdings have been reviewed, and discussions held with the holders of those assets. 

In December 2019, the Company announced that it had entered into a binding term sheet with Burgate Exploration to acquire a 100% participating interest in the Doyle-Peel licence (P2446) in the East Irish Sea.  In addition, the Company entered into an exclusivity agreement for the potential acquisition of a 100% participating interest in the adjacent Castletown licence (P2076). 

In March 2020 ,and in response to rapidly changing global events, Oilex announced that it would not be exercising its rights on Castletown allowing the agreement to lapse.  At the same time, amendments to the Doyle-Peel licence were announced with the effect that the completion date was extended from 30 June 2020 to 31 December 2020.  

Shareholder approval required for the issue of 42,500,000 consideration shares to Burgate as part of the purchase price was obtained at a General Meeting held on 30 June 2020.   

  The Doyle-Peel EIS licence is located in a proven gas fairway in the centre of the East Irish Sea Basin in shallow water near existing infrastructure reducing the complexity, risk and cost of any future development.  

The EIS is a prolific basin which has produced around 8 TCF of gas to date with considerable existing gas production, gathering, processing and transportation infrastructure. The depth to the target reservoirs is less than 2,000 metres thus providing modest drilling costs. 

In addition to the above efforts to create and return value to shareholders, Oilex stated that it ‘continues to review business opportunities in high potential areas’ through its contact base and its belief that good projects with good management can be funded.