88 Energy Limited ASX LODGEMENT OF ANNUAL REPORT (5742R)

TIDM88E

RNS Number : 5742R

88 Energy Limited

09 March 2021

88 ENERGY LIMITED

ASX LODGEMENT OF ANNUAL REPORT

88 Energy Limited (ASX:88E; AIM:88E) ("88 Energy" or "Company") advises that a copy of the Company's Annual Report for the year ended 31 December 2020 (the "Annual Report") has been lodged on the ASX along with the Company's 2020 year-end Corporate Governance Statement and Appendix 4G.

The Annual Report, which was sent to shareholders today, is available on the Company's website at www.88energy.com along with copies of each of these other documents.

Set out below is the Chairman's Statement as included in the Annual Report.

Also, set out below is a summary of the Company's audited financial information for the year ended 31 December 2020 as extracted from the Annual Report, being:

   --       Consolidated Statement of Comprehensive Income; 
   --       Consolidated Statement of Financial Position; 
   --       Consolidated Statement of Changes in Equity; and 
   --       Consolidated Statement of Cash Flows. 

Media and Investor Relations:

 
 88 Energy Ltd                         Tel: [phone] 
  Dave Wall, Managing Director          Email: [e-mail] 
 Finlay Thomson , Investor Relations   Tel: [phone] 
 EurozHartleys Ltd                     Tel: + 61 8 9268 2829 
  Dale Bryan 
 Cenkos Securities                     Tel: + 44 131 220 6939 
  Neil McDonald/Derrick Lee 
 

CHAIRMAN'S STATEMENT

Dear Shareholders

2020 will be remembered as a year in which a global pandemic wreaked havoc on the world economy driving down demand for crude oil. A price war between OPEC and Russia, US political upheaval and the charge toward greener energy added to this volatile mix. It is pleasing therefore to report that in this very high-risk environment confronted by adverse conditions 88E retained its focus, growing its Alaskan portfolio and exploration program.

In April 2020, the company announced the results of the Charlie-1 well. The well was drilled on time and within budget and penetrated sandstones in seven stacked targets and shale in one target. Analysis of logs and sidewall cores subsequently confirmed condensate discoveries in the Torok Formation and oil in the Seabee Formations. Importantly the cost for Charlie-1 was borne by an industry partner and the well results have provided an excellent base for follow up exploration / appraisal via industry farmout.

Success at Charlie-1 was followed by an off market bid for XCD Energy, which delivered the Project Peregrine to 88E. adding to our Alaskan exploration portfolio. The project was then farmed out to a US based group, maintaining leverage for our shareholders whilst lowering the cost risk. The takeover and subsequent farmout were both executed during an adverse environment and speaks volumes for 88E's management.

As I write, Rig-111 is on location preparing to drill the Merlin-1 well which is targeting 645 million barrels of gross mean prospective resource. Flow testing of Merlin-1 is planned if wireline logging confirms a discovery. A second well, Harrier-1, is planned to commence immediately following completion of operations at Merlin-1, subject to results from Merlin-1, scheduling and permit approvals. Harrier-1 is targeting a gross mean prospective resource of 417 million barrels.

Each of the Merlin and Harrier prospects is located on trend to an existing discovery in the same play type. This has de-risked the prospects considerably and resulted in a relatively high independently estimated geologic chance of success. This continues our record of participating in significant wells offering substantial upside to 88E shareholders in the event of success.

As we approach the results of the Merlin-1 well, it is again worth reminding ourselves why 88E chose to explore in Alaska. At the outset, 88E cast the net far and wide in search of a project that could make a meaningful difference; one which would capture investor attention with transformational upside. The source rocks of Alaska have been described as unbelievably rich and prolific, having generated and expulsed about 1.5 trillion barrels of oil. Yet only a small fraction of that 1.5 trillion barrels has been found, leaving vast potential remaining to be discovered. Almost all the remaining fields in Alaska are stratigraphic traps rather than anticlines and require a subtler exploration approach, which 88E is pursuing as it targets reservoirs adjacent to those same source rocks.

Our early initiative to target Alaska has been validated by recent exploration successes and the arrival of new entrants on the Alaskan exploration scene. As recently as February 2021 exploration success has been reported by Pantheon Resources close to the border of our central acreage. During the year, S&P Global Platts reported that Oil companies could spend up to $24 billion on new production in Alaska over the next ten years. Access to existing infrastructure; a very supportive and stable State Government and significant exploration upside have long been recognised by 88E.

88E is now Operator on several active Exploration / Appraisal Projects across 444,517 net acres, including the recently acquired Tract 29 and Umiat Unit Leases. Unlike the lower 48 States, Alaskan leases have an attractive 7-10-year term with no mandatory work commitments and a low 16.5% base royalty. Our prospective land holding is now of a size one would normally associate with the big end of town and provides continued scope to attract partners.

The Alaskan program has been competently executed by our Managing Director, David Wall, with the assistance of a small, dedicated team. David has announced that he will be moving on once drilling and evaluation of Project Peregrine is concluded this season. David leaves on good terms and we wish him well. His role will be filled by Ashley Gilbert who has worked closely with David over several years. Our Alaskan based Operations Manager, Erik Opstad will continue in this role and enjoys our full support.

88E has prudently raised additional capital in advance of the 2021 program. We all know the process of evaluation is not without risk; however, we look to the future with considerable optimism as we unlock both the conventional and unconventional potential of our Alaskan exploration acreage.

Amidst the gloom cast by Covid-19 there is the potential for a future oil boom for several reasons. There has been a big decline in exploration; major oil companies are hedging bets by betting on renewable energy; widespread Covid-19 inoculations, unprecedented fiscal stimulation and low interest rates will drive economic growth and hence demand for oil. Some analysts predict oil will trade in the plus $80 per barrel range later this year and these factors will likely create tailwinds for our Alaskan initiatives.

Before closing I would like to thank the Department of Natural Resources, the Alaska Oil and Gas Conservation Commission; the North Slope Borough, Bureau of Land Management and other regulatory agencies that have facilitated our exploration effort in the State.

Our mission would not be possible without your support as shareholders in what has been a challenging yet exciting environment. Our dual listing on both ASX and AIM has garnered a wide investor base and we have been ably supported by our brokers and advisers EurozHartleys and Cenkos.

We look forward to a successful 2021 year.

Yours faithfully,

Michael Evans

Non-Executive Chairman

CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME

FOR THE FINANCIAL YEARED 31 DECEMBER 2020

 
 
                                            Note      2020          2019 
                                                       $             $ 
Revenue from continuing operations 
Other income                                3(a)       246,778        35,931 
 
Administrative expenses                     3(b)   (1,399,215)   (1,215,226) 
Occupancy expenses                                    (60,664)      (34,596) 
Employee benefit expenses                   3(c)   (1,841,758)   (1,983,685) 
Share-based payment expense                  18      (122,870)      (95,276) 
Depreciation and amortisation expense                 (93,387)      (58,110) 
Finance cost                                       (2,595,406)   (3,095,466) 
Other expenses                              3(d)  (16,218,575)  (30,277,141) 
Foreign exchange (loss) / gain                          51,463      (56,888) 
                                                                ------------ 
Loss before income tax                            (22,033,633)  (36,780,457) 
Income tax expense                           4               -             - 
                                                  ------------  ------------ 
Loss after income tax for the year                (22,033,633)  (36,780,457) 
                                                  ------------  ------------ 
 
Other comprehensive income / (loss) for 
 the year 
 Items that may be reclassified to profit 
 or loss 
Exchange differences on translation of 
 foreign operations                                (7,120,022)       854,461 
                                                  ------------  ------------ 
Other comprehensive income / (loss) for 
 the year, net of tax                              (7,120,022)       854,461 
                                                  ------------  ------------ 
 
Total comprehensive income / (loss) for 
 the year attributable to members of 88 
 Energy Limited                                   (29,153,655)  (35,925,996) 
                                                  ------------  ------------ 
 
Loss per share for the year attributable 
 to the members of 88 Energy Limited: 
Basic and diluted loss per share             5         (0.003)       (0.005) 
 
 
 

The Consolidated Statement of Profit or Loss and Other Comprehensive Income should be read in conjunction with the notes to the financial statements.

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

AS AT 31 DECEMBER 2020

 
 
                                          Note      2020           2019 
                                                      $              $ 
ASSETS 
Current Assets 
Cash and cash equivalents                  6       14,845,347     15,903,117 
Trade and other receivables                7        5,079,630      1,120,550 
                                                -------------  ------------- 
Total Current Assets                               19,924,977     17,023,667 
                                                -------------  ------------- 
 
Non-Current Assets 
Plant and equipment                        8            4,641         12,900 
Exploration and evaluation expenditure     9       48,213,290     52,928,315 
Other Assets                               10      17,216,644     23,615,216 
                                                               ------------- 
Total Non-Current Assets                           65,434,576     76,556,431 
                                                               ------------- 
 
TOTAL ASSETS                                       85,359,552     93,580,098 
                                                -------------  ------------- 
 
LIABILITIES 
Current Liabilities 
Trade and other payables                   11       5,326,634      6,026,811 
Provisions                                 12         339,199        282,199 
Total Current Liabilities                           5,665,833      6,309,010 
                                                               ------------- 
 
Non-Current Liabilities 
Borrowings                                 13      20,782,366     22,672,578 
Total Non-Current Liabilities                      20,782,366     22,672,578 
                                                -------------  ------------- 
 
TOTAL LIABILITIES                                  26,448,199     28,981,588 
                                                -------------  ------------- 
 
NET ASSETS                                         58,911,353     64,598,510 
                                                -------------  ------------- 
 
EQUITY 
                                          14 & 
Contributed equity                         (a)    208,963,513    185,619,885 
Reserves                                   15      16,580,975     23,578,127 
Accumulated losses                              (166,633,135)  (144,599,502) 
                                                               ------------- 
TOTAL EQUITY                                       58,911,353     64,598,510 
                                                -------------  ------------- 
 
 
 

The Consolidated Statement of Financial Position should be read in conjunction with the notes to the financial statements.

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2020

 
 
                                        Issued                     Accumulated 
                                        Capital      Reserves         Losses         Total 
                                           $             $              $              $ 
                                     ------------  ------------  --------------  ------------- 
 
  At 1 January 2020                   185,619,885    23,578,127   (144,599,502)     64,598,510 
                                     ------------  ------------  --------------  ------------- 
 
   Loss for the year                            -             -    (22,033,633)   (22,033,633) 
 Other comprehensive income                         (7,120,022)               -    (7,120,022) 
                                     ------------  ------------  --------------  ------------- 
 Total comprehensive income/(loss) 
  for the year after tax                        -   (7,120,022)    (22,033,633)   (29,153,655) 
 
 Transactions with owners 
  in their capacity as 
  owners: 
 Issue of share capital                24,130,013             -               -     24,130,013 
 Share-based payments                                   122,870               -        122,870 
 Share issue costs                      (786,386)             -               -      (786,386) 
                                     ------------  ------------  --------------  ------------- 
 
  Balance at 31 December 
  2020                                208,963,513    16,580,975   (166,633,135)     58,911,353 
                                     ------------  ------------  --------------  ------------- 
 
 
  At 1 January 2019                   179,304,850    22,628,390   (107,819,045)     94,114,195 
                                     ------------  ------------  --------------  ------------- 
 
   Loss for the year                            -             -    (36,780,457)   (36,780,457) 
 Other comprehensive loss                       -       854,461               -        854,461 
                                     ------------  ------------  --------------  ------------- 
 Total comprehensive income/(loss) 
  for the year after tax                        -       854,461    (36,780,457)   (35,925,996) 
 
 Transactions with owners 
  in their capacity as 
  owners: 
 Issue of share capital                 6,750,000             -               -      6,750,000 
 Share-based payments                           -        95,276               -         95,276 
 Share issue costs                      (434,965)             -               -      (434,965) 
                                     ------------  ------------  --------------  ------------- 
 
  Balance at 31 December 
  2019                                185,619,885    23,578,127   (144,599,502)     64,598,510 
                                     ------------  ------------  --------------  ------------- 
 
 

The Consolidated Statement of Changes in Equity should be read in conjunction with the notes to the financial statements.

CONSOLIDATED STATEMENT OF CASH FLOWS

FOR THE FINANICAL YEAR ENDED 31 DECEMBER 2020

 
 
                                              Note      2020          2019 
                                                         $             $ 
 
Cash flows from operating activities 
Payment to suppliers and employees                   (3,141,403)   (3,465,770) 
Interest received                                          2,634        22,930 
Interest & finance costs                             (2,237,210)   (2,395,536) 
Other Income                                             259,072 
Net cash flows used in operating activities   6(b)   (5,116,907)   (5,838,376) 
                                                    ------------  ------------ 
 
Cash flows from investing activities 
Payments for exploration and evaluation 
 activities                                         (41,521,267)  (29,725,227) 
Contribution from JV Partners in relation 
 to Exploration                                       32,184,152    23,860,234 
Net cash flows used in investing activities          (9,337,115)   (5,864,993) 
                                                    ------------  ------------ 
 
Cash flows from financing activities 
Proceeds from issue of shares                  14     14,870,000     6,530,000 
Share issue costs                                      (840,000)     (461,498) 
Payment of borrowing costs                             (398,880)             - 
Net cash flows from financing activities              13,631,120     6,068,501 
                                                    ------------  ------------ 
 
Net (decrease) in cash and cash equivalents            (822,902)   (5,634,867) 
 
Cash and cash equivalents at the beginning 
 of the year                                          15,903,117    21,722,211 
Effect of exchange rate fluctuations on 
 cash held                                             (234,868)     (184,227) 
                                                    ------------  ------------ 
Cash and cash equivalents at end of year      6(a)    14,845,347    15,903,117 
                                                    ------------  ------------ 
 

The Consolidated Statement of Cash Flows should be read in conjunction with the notes to the financial statements.

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March 09, 2021 02:00 ET (07:00 GMT)