Jupiter Energy Ltd Half-year Report

Jupiter Energy Ltd Half-year Report

 

Jupiter Energy Ltd

27 February 2017

HALF YEAR FINANCIAL REPORT

31 DECEMBER 2016

CORPORATE DIRECTORY

Directors and Officers

Geoff Gander

Executive Chairman/CEO

Alexey Kruzhkov

Non-Executive Director

Baltabek Kuandykov

Non-Executive Director

Scott Mison

Executive Director/Company Secretary

Principal and Registered Office

   Ground Floor                                                       PO Box 1282 
   10 Outram Street                                                 West Perth 
   West Perth                                                            Western Australia 6872

Western Australia 6005

   Telephone     +61 8 9322 8222 
   Facsimile       +61 8 9322 8244 
   Email               info@jupiterenergy.com 
   Website           www.jupiterenergy.com

Auditors

Ernst & Young

11 Mounts Bay Road

Perth, Western Australia 6000

   Telephone     +61 8 9429 2222 
   Facsimile       +61 8 9429 2436

Bankers

National Australia Bank Limited

Perth Central Business Banking Centre

UB13.03, 100 St Georges Terrace

Perth WA 6000

Share Registry

Computershare Investor Services Pty Ltd

Level 2, 45 St George’s Terrace

Perth, Western Australia 6000

   Telephone     1300 557 010 (within Australia)

+61 3 9415 4000 (outside Australia)

   Facsimile       +61 8 9323 2033 
   Website           www.computershare.com

ASX, AIM and KASE Codes

Jupiter Energy Limited shares are listed on the Australian Securities Exchange under the code JPR, on the AIM Market of the London Stock Exchange under the code JPRL and on the Kazakh Stock Exchange under JPRL_AU.

DIRECTORS’ REPORT

Your directors submit the financial report of the consolidated entity for the half-year ended 31 December 2016.

Directors

The names of directors who held office during or since the end of the half-year:

Name

Mr Geoff Gander

Mr Baltabek Kuandykov

Mr Scott Mison

   Mr Alexey Kruzhkov                             Appointed Director 29 August 2016

The directors have been in office since the beginning of the period unless otherwise stated.

Operating Results

This review covers the 6 months from 1 July 2016 to 31 December 2016 and the “Subsequent Events” section includes any significant events that have occurred between 1 January 2017 and the release date of this report.

The consolidated loss for the period after income tax was $6,277,355 (2015: $7,729,875).

At the end of December 2016, cash levels were $472,758 (June 2016: $663,446). Assets increased to $50,197,124 (June 2016: $47,557,046) and equity decreased to $(143,346) (June 2016: $3,711,243).

Review of Operations

The 6 month period to 31 December 2016 (“the Review Period”) saw little operational progress with restricted funding and uneconomic domestic oil prices both negatively impacting the further development of the Block 31 licence area as well as not enabling the Company to take on additional exploration acreage.

That said, progress was made in terms of positioning the Company for a return to oil production during the 2017 calendar year.

Oil Production and Revenues:

There was no oil production during the Review Period. No barrels of oil were produced during the same Review Period in 2015.

Revenues from oil sales in this Review Period amounted to $A nil (previous Review Period: $ nil).

Production Report/Status of Well Licences:

Production – Akkar North (East Block) Oilfield (J-50 well):

The J-50 well remained shut in during the Review Period as discussions continued regarding the division of reserves on the Akkar North field. The J-50 well is located on the Akkar North (East Block) accumulation and no Trial Production Licence (TPL) has been in effect on this area since 29 December 2014.

Production – Akkar East Oilfield (J-51, J-52, J-53 and # 19 wells):

During the Review Period, no oil was produced from either the J-51 or J-52 wells under their respective Trial Production Licences (TPLs). These two wells are located on the northern section of the permit and are part of the East Akkar oilfield.

The J-53 well, which is also located on the Akkar East oilfield, was shut in for the entire Review Period, awaiting further remedial work before potentially coming back onto production. This work will be carried out when the appropriate funding and approvals are in place.

Well 19 which is also located on the Akkar East field and was drilled in an area of already proven C(1) reserves between the J-51 and J-52 wells and as such was the Company’s first ‘production’ well.

The limited completion and testing of well 19 in early 2015 included perforating the well underbalanced with tubing conveyed perforating guns, monitoring fluid levels and running pressure gauges. Testing of the well indicated severe skin damage which will require an acid treatment to stimulate the well and assist oil flow into the well bore. This is consistent with other wells in the area.

Further work on well 19, including an acid stimulation, will not take place until the requisite approvals and funding for the work are in place and the Company is ready to return to domestic oil production.

No oil was produced from well 19 during the Review Period.

Production – West Zhetybai Oilfield (J-55, J-58 and J-59 wells):

During the Review Period, no oil was produced from either the J-58 or J-59 wells under their respective TPLs. These two wells are located on the southern section of the permit and are part of the West Zhetybai oilfield.

The J-55 well, which is also located on the West Zhetybai oilfield, was shut in for the entire Review Period, awaiting further remedial work before potentially coming back onto production. This work will be carried out when the appropriate funding and approvals are in place.

It should be noted that in order to get the J-58 and J-59 wells ready for Trial Production, the appropriate surface production infrastructure must be put in place for both the wells. This equipment will need to be either relocated from the Akkar East field and/or purchased and funding is not available at this time to complete the acquisition of the equipment required.

When the TPLs for West Zhetybai have been approved, the funding is in place and domestic oil prices have recovered, the forward plan is for the J-58 well to be put on production from the T(2) B horizon, and J-59 will be used to test the potential of the shallow Jurassic horizon discovered during the drilling of the well, before being completed for production from the T(2) B horizon.

Extension of the Exploration Period

On 19 September 2016, the Company announced that it had signed Addendum 7 to Contract 2275 which confirmed that the Kazakh Ministry of Energy had approved a three (3) year extension to the Exploration Period on Block 31, through to 29 December 2019. The 3 year extension is based on the Company maintaining its current acreage and the Ministry of Energy has indicated that if the Company does proceed with the North East and South East land extensions currently under consideration then a further one (1) year extension (to 29 December 2020) could also be considered.

Extension of Trial Production Licences – Akkar East and West Zhetybai oilfields

The Company submitted applications for the extension of the TPLs on the Akkar East oilfield (J-51, J-52, J-53 and well 19) and the West Zhetybai oilfield (J-58 and J-59) during the Review Period. If and when these extensions have been approved, the TPLs for the Akkar East and West Zhetybai fields will run until 29 December 2019 to coincide with the term of the newly extended Exploration Licence period.

Status of Operations:

The Company announced on 19 February 2015, as a result of the material reduction in world oil prices, the sales price being achieved for domestic oil in Kazakhstan had fallen to levels that made oil production from Block 31 cashflow negative.

The Company therefore decided to cease production from its producing Akkar East wells (J-51 and J-52) until the domestic oil price improved. The Company continued to monitor local pricing during the Review Period and believes that production may recommence during 2017 but is unable to give any guarantee that this will occur.

The Company has opened dialogue with various local oil marketing groups and if the oil prices offered are at a level that can sustain a positive cashflow from field operations, Jupiter will consider recommencing oil production during 2017.

Reserves Dispute:

Akkar North (East Block) Reserves Dispute (J-50 well)

The Company advised shareholders on 28 November 2014 that the application to extend the TPL for well J-50 was being held by the Kazakh Committee of Geology pending resolution of the allocation of reserves associated with the well.

The J-50 well has been shut in since 29 December 2014 (the date at which the last Trial Production licence expired).

The underlying issue delaying the Trial Production Licence renewal is the demand by the Committee of Geology that Jupiter Energy reach agreement with its neighbour MangistauMunaiGas (MMG) over the division of reserves associated with both companies’ share of the Akkar North accumulation. Jupiter Energy has been in dialogue with MMG on this issue for some time but has been unable to reach formal agreement with MMG with respect to the division of Akkar North reserves or another form of settlement of the matter.

During the Review Period the Company continued to actively work with MMG and the relevant Kazakh authorities to resolve this matter and the Company will advise shareholders when a definitive resolution has been reached on this matter.

Drilling Report:

No drilling activity took place during the Review Period.

Subject to obtaining the requisite approvals and funding, the Company plans to continue with its drilling program as soon as it is possible. At this stage, under the proposed minimum 2017-2019 Work Program that is currently with the Kazakh authorities for approval, the drilling of two new wells is planned for 2018 and sidetracks are scheduled for wells J-53 and J-55 in 2019.

Significant Corporate Appointments:

During the Review Period a number of key appointments were made to the Jupiter Energy organisation.

On 30 August 2016 the Company announced the appointment of Alexey Kruzhkov as a Non-Executive Director of the Company. Alexey is the appointed Board representative of Waterford Finance and Investment Limited, the Company’s largest shareholder and replaced Alastair Beardsall who retired on 31 May 2016. Alexey also joins the board of each Jupiter subsidiary.

Alexey holds an Engineering Degree and an MBA and has over 10 years’ experience working in the investment industry, focusing primarily on organisations involved in Oil & Gas, Mining and Real Estate. He has served as a Director on the Boards of companies listed in Canada and Norway. He is a member of the executive team of Waterford Investment and Finance Limited.

On 27 October 2016 the Company announced that Baltabek Kuandykov had been appointed as President: Jupiter (Kazakhstan). Baltabek has been on the Board of Jupiter Energy Limited since 2010 and this new position was created to ensure that the Jupiter organisation is represented at the appropriate level within Kazakhstan, particularly in relation to interaction with government officials and at events such as the upcoming EXPO 2017, at which Jupiter is a sponsor.

On 2 December 2016 the Company announced the appointment of Alexander Kuzev as an Advisor to the Jupiter Energy Limited Board.

Alexander Kuzev (51) is an oil industry professional with over 26 years of experience.

Most of Alexander’s career has been spent working in the Former Soviet Union (FSU) with much of that time responsible for the overall management of field operations with a focus on production sustainability, technology and field maintenance. He has worked with a range of oil and gas companies including Schlumberger and Gazprom Drilling.

Alexander brings an important technical skill set to Jupiter Energy as well as in country experience, having been involved with various Kazakhstan based oil and gas operations since the late 1990’s.

Alexander is currently Managing Director of an oil production company with operations in Astrakhan, Southern Russia and he holds a Bachelor of Engineering.

On 2 December 2016, the Company also announced the appointment of Sergey Kostin as the new Head of Operations in Kazakhstan.

Sergey is based in Aktau and is responsible for leading the operations team based both in the Aktau office and in the field as the Company looks to prepare to recommence production during the 1H 2017. His direct reports include all operations, marketing, geology and geophysics personnel and he works closely with the heads of Finance & Administration and Legal.

Sergey (52) has 30 years experience in the oil sector with over 14 years spent in a variety of operational roles with the international oil services organisation Schlumberger. He has also worked with a number of Russian oil companies, most recently with SGC Drilling as their Director of Drilling.

He has vast experience in the drilling of wells and the Company believes that he will bring Jupiter Energy an important combination of international drilling expertise and cultural awareness at what will be a critical period in the development of Block 31.

Once a decision to recommence production has been made it is expected that a number of further hiring decisions will be made in Aktau to bolster the current staffing levels there.

2016 Annual General Meeting:

The 2016 Annual General Meeting was held in Perth on Friday 04 November 2016 and all Resolutions were passed.

Funding and Capital Management:

As at 31 December 2016, the Company had 153,377,693 listed shares trading under the ASX ticker “JPR”, the AIM ticker “JPRL” and the KASE ticker “AU_JPRL”.

The Company has no options or Performance Shares, listed or unlisted, on issue.

As at 31 December 2016, total Company debt outstanding was $US35,732,987 (A$49,439,089) through a total of five (5) Promissory Notes, with the following holders:

   --     Waterford Petroleum Limited: $US13,053,950 
   --     Waterford Petroleum Limited: $US9,559,670 
   --     Mobile Energy Limited: $US10,199,502 
   --     Midocean Holdings Limited: $US2,199,914 
   --     Other Private Investors: $US719,951

As at 31 December 2016, the Company has drawn down $US2,291,238 (including accrued interest) under the new Funding Agreement with Waterford Petroleum Limited, as announced on 29 July 2016, and therefore has a further $US2,708,762 (including accrued interest) available to it under this Agreement.

Directors have deferred their Directors’ Fees since February 2015 and will continue to do so until such time that the Company has an improved cashflow position.

The Company is still reviewing its ongoing funding requirements for 2017 and the directors are exploring a range of options for financing the further development of the East Akkar and West Zhetybai fields during 2017 and beyond, to the stage where export oil sales are being achieved and further development of the field is self-funding; these options may include the further issue of new equity, reserve based debt, convertible debt or a combination of these and other funding instruments.

Once the appropriate funding has been secured, the further development of both the Akkar East and West Zhetybai fields, and in particular building of the topside infrastructure on Akkar East including a processing facility and gas separation plant, will be accelerated.

Based on current management forecasts, the Company has sufficient working capital, including its access to the remaining funding under the Waterford Promissory Notes, until June 2017. The Company continues to seek a longer term funding package that will enable the commencement of the proposed 2017 Work Program, recommencing domestic oil production from the Akkar East field and for on-going working capital in the 2nd half of 2017 and beyond.

Subsequent Events:

On 31 January 2017 the Company received a further $US240,000 from Waterford under the existing funding facility and these funds will be put towards meeting working capital commitments.

The Board believes the remaining funding available from the Waterford Promissory Notes will be sufficient to provide the Company with working capital for the 1(st) half of 2017 calendar year based on the current Care & Maintenance budget. If a broader amount of work is to be carried out including recommencing oil production from the Akkar East oilfield, additional funding will first need to be sourced.

There are no further “Subsequent Events” to report prior to the release of this report.

Summary:

The Company had a productive 6 month period from 1 July to 31 December 2016.

The extension of the Exploration Licence to 29 December 2019 was a key milestone and good progress was made in getting the TPLs approved for the Akkar East and West Zhetybai oilfields.

Whilst global oil prices have remained low and domestic oil prices have meant that production has been shut in, market conditions appear to be improving and a return to domestic production appears possible during 2017 assuming the requisite regulatory approvals and funding are in place.

Since acquiring an exploration permit in 2008, independent reserve reports continue to confirm that that Jupiter has now discovered two sizeable oilfields with significant reserves and resources. In addition, oil production has moved from zero at the beginning of 2011 to over 230,000 barrels for calendar year 2014, with 2014 calendar year revenues reaching $A8.75 million ($US7.568m).

The goal of developing Jupiter Energy into a full cycle E&P company with a meaningful production profile and sizeable 2P reserves base remains the key objective for the Board and Management and the Company remains confident of continuing to make progress towards achieving this goal during 2017.

Competent Persons Statement:

General

Alexey Glebov, PhD, with over 33 years’ oil & gas industry experience, is the qualified person as defined in the AIM Guidance Note on Mining and Oil & Gas Companies dated June 2009, who has reviewed and approved the technical information contained in this report. Alexey PhD’s in technical science (1992) and geology science (2006), an Honors Degree in Geology and Geophysics (1984) from Novosibirsk State University and a Gold Medal (1985) from USSR Academy of Sciences. He is a member since 2001 of the European Association of Geoscientists & Engineers (EAGE #M2001-097) and was made an Honorary Oilman in 2011 by the Ministry of Energy of the Russian Federation. Alexey Glebov is qualified in accordance with ASX Listing Rule 5.41.

Auditor’s Independence Declaration

In accordance with section 307C of the Corporations Act 2001, the Directors have obtained a declaration of independence from Ernst & Young, the consolidated entity’s auditors. The independence declaration is included at page 9 of the financial report.

Dated at Perth on 24 February 2017.

This report is signed in accordance with a resolution of the Board of Directors.

G A Gander

Executive Chairman/CEO

[AUDIT INDEPENCE DECLARATION]

AUDITORS’ REVIEW REPORT

PAGE 1

AUDITORS’ REVIEW REPORT

PAGE 2

DIRECTORS’ DECLARATION

In accordance with a resolution of the Directors of Jupiter Energy Limited, I state that:

In the opinion of the Directors:

a. The financial statements and notes of the consolidated entity are in accordance with the Corporations Act 2001, including:

I. giving a true and fair view of the financial position of the consolidated entity as at 31 December 2016 and the performance for the half-year ended on that date, and

II. complying with Accounting Standard AASB 134 “Interim Financial Reporting” and the Corporations Regulations 2001; and

b. Subject to the matters disclosed at note 2(a), there are reasonable grounds to believe that the company will be able to pay its debts as and when they become due and payable.

This declaration is made in accordance with a resolution of the Board of Directors.

G A Gander

Executive Chairman/CEO

Signed at Perth 24 February 2017.

STATEMENT OF COMPREHENSIVE INCOME

FOR THE HALF YEARED 31 DECEMBER 2016

 
 
 
                                          Consolidated Entity 
                                 Note     6 months      6 months 
                                             to            to 
                                           31 Dec        31 Dec 
                                             2016          2015 
                                             $A            $A 
 
Revenue                                            -             - 
Cost of sales                                      -     (179,872) 
                                        ------------  ------------ 
Gross profit                                       -     (179,872) 
                                        ------------  ------------ 
 
Foreign currency gain / (loss)           (1,343,720)   (1,871,391) 
General and administrative 
 costs                                   (1,702,186)   (3,275,414) 
Operating loss                           (3,045,906)   (5,326,677) 
                                        ------------  ------------ 
 
Finance income                                 9,363        12,529 
Finance costs                            (3,240,812)   (2,415,727) 
                                        ------------  ------------ 
Loss before tax                          (6,277,355)   (7,729,875) 
                                        ------------  ------------ 
 
Income tax expense                                 -             - 
                                        ------------  ------------ 
Loss after income tax                    (6,277,355)   (7,729,875) 
                                        ------------  ------------ 
 
Other comprehensive income 
 in subsequent periods (net 
 of tax) 
 
Foreign currency translation               2,422,766  (26,024,936) 
                                        ------------  ------------ 
Total comprehensive loss 
 for the period                          (3,854,589)  (33,754,811) 
                                        ------------  ------------ 
 
Loss per share attributable 
 to ordinary equity holders 
 of the parent (cents per 
 share) 
Basic loss per share                          (4.09)        (5.04) 
Diluted loss per share                        (4.09)        (5.04) 

The above Statement of Comprehensive Income should be read in conjunction with the accompanying notes.

STATEMENT OF FINANCIAL POSITION

AS AT 31 DECEMBER 2016

 
                                Note  31 Dec 2016     30 June 
                                                        2016 
                                            $A            $A 
 
ASSETS 
Current Assets 
Cash and cash equivalents        4         472,758          663,446 
Trade and other receivables                 24,727           24,064 
Other current assets                        79,009           67,459 
Inventories                                 18,219           17,886 
                                      ------------   -------------- 
Total Current Assets                       594,713          772,855 
                                      ------------   -------------- 
 
Non-Current Assets 
Trade and other receivables              2,897,779        2,787,367 
Oil and gas properties           6      15,605,794       14,976,550 
Plant and equipment                        426,970          417,142 
Exploration and evaluation 
 expenditure                     5      30,253,333       28,215,402 
Other financial assets                     418,535          387,732 
                                      ------------   -------------- 
Total Non-Current Assets                49,602,411       46,784,193 
                                      ------------   -------------- 
Total Assets                            50,197,124       47,557,048 
                                      ------------   -------------- 
 
Current Liabilities 
Trade and other payables         7         669,054          755,133 
Total Current Liabilities                  669,054          755,133 
                                      ------------   -------------- 
 
Non-current Liabilities 
Provisions                                 232,327          154,442 
Other financial liabilities      8      49,439,089       42,936,226 
Total Non-Current Liabilities           49,671,416       43,090,668 
                                      ------------   -------------- 
Total Liabilities                       50,340,470       43,845,801 
                                      ------------   -------------- 
 
Net (Liability) / Assets                 (143,346)        3,711,247 
                                      ============   ============== 
 
Equity 
Contributed equity               9      85,633,935       85,633,935 
Share based payment reserve              5,764,014        5,764,014 
Foreign currency translation 
 reserve                              (23,880,886)     (26,303,650) 
Accumulated losses                    (67,660,407)     (61,383,052) 
                                      ------------   -------------- 
Total (Deficiency)/ Equity               (143,346)        3,711,247 
                                      ============   ============== 
 

The above Statement of Financial Position should be read in conjunction with the accompanying notes.

STATEMENT OF CHANGES IN EQUITY

FOR THE HALF YEARED 31 DECEMBER 2016

 
     CONSOLIDATED          Issued        Share         Foreign       Accumulated         Total 
                           Capital        based        currency         Losses           Equity 
                                         payment     translation 
                                         reserve       reserve 
                             $A            $A            $A               $A              $A 
                        ------------  -----------  --------------  ---------------  -------------- 
 
 As at 1 July 
  2016                    85,633,935    5,764,014    (26,303,650)     (61,383,052)       3,711,247 
 Loss for the 
  period                           -            -               -      (6,277,355)     (6,277,355) 
 Other comprehensive 
  income                           -            -       2,422,766                -       2,422,766 
                        ------------  -----------  --------------  ---------------  -------------- 
 Total comprehensive 
  income / (loss)                  -            -       2,422,766      (6,277,355)     (3,854,589) 
 As at 31 December 
  2016                    85,633,935    5,764,014    (23,880,886)     (67,660,407)       (143,346) 
                        ------------  -----------  --------------  ---------------  -------------- 
 
 
 As at 1 July 
  2015                    85,633,935    5,764,014       1,165,133     (50,908,182)      41,654,900 
 Loss for the 
  period                           -            -               -      (7,729,875)     (7,729,875) 
 Other comprehensive 
  income                           -            -    (26,024,936)                -    (26,024,936) 
                        ------------  -----------  --------------  ---------------  -------------- 
 Total comprehensive 
  income / (loss)                  -            -    (26,024,936)      (7,729,875)    (33,754,811) 
 Share based payments              -            -               -                -               - 
                        ------------  -----------  --------------  ---------------  -------------- 
 As at 31 December 
  2015                    85,633,935    5,764,014    (24,859,802)     (58,638,059)       7,900,088 
                        ------------  -----------  --------------  ---------------  -------------- 
 

The above Statement of Changes in Equity should be read in conjunction with the accompanying notes.

STATEMENT OF CASH FLOWS

FOR THE HALF YEARED 31 DECEMBER 2016

 
                                                Consolidated 
                                                   Entity 
                                          6 months       6 months 
                                              to             to 
                                          31 December    31 December 
                                             2016           2015 
                                              $A             $A 
Cash flows from operating activities 
Receipts from customers                             -              - 
Payments to suppliers and employees       (1,775,861)    (1,781,022) 
Interest received                               9,363         12,529 
Net cash used in operating activities     (1,766,498)    (1,768,493) 
                                        -------------  ------------- 
 
Cash flows from investing activities 
Payments for exploration and 
 development expenditure                    (321,074)      (471,062) 
Payments for plant and equipment              (5,000)              - 
Net cash used in investing activities       (326,074)      (471,062) 
                                        -------------  ------------- 
 
Cash flows from financing activities 
Proceeds from unsecured loan                1,910,923        912,780 
Net cash provided by financing 
 activities                                 1,910,923        912,780 
                                        -------------  ------------- 
 
Net decrease in cash held                   (181,649)    (1,326,775) 
Cash at the beginning of the 
 financial period                             663,446      1,613,560 
Foreign exchange gain/(loss)                  (9,039)         13,201
                                        -------------  ------------- 
Cash at the end of the financial 
 period                                       472,758        299,986 
                                        -------------  ------------- 

The above Statement of Cash Flows should be read in conjunction with the accompanying notes

   1.             CORPORATE INFORMATION

The half year financial report of Jupiter Energy Limited for the period 31 December 2016 was authorised for issue in accordance with a resolution of the Directors on 24 Feb 2017.

Jupiter Energy Limited is a company limited by shares that is incorporated and domiciled in Australia and whose shares are publicly listed and traded on Australian Securities Exchange, KASE, the Kazakh Stock Exchange, and the London’s Alternative Investment Market. Jupiter Energy is a for profit entity.

The registered office is Ground Floor, 10 Outram Street, West Perth, Western Australia 6005.

   2.             BASIS OF PREPARATION AND ACCOUNTING POLICIES 
   (a)           Basis of preparation

This condensed financial report for the half-year ended 31 December 2016 has been prepared in accordance with AASB 134 Interim Financial Reporting and the Corporations Act 2001.

All monetary values are reported in Australian Dollar unless otherwise stated.

The half-year financial report does not include all notes of the type normally included within the annual financial report and therefore cannot be expected to provide as full an understanding of the financial performance, financial position and financing and investing activities of the consolidated entity as the full financial report.

It is recommended that the half-year financial report be read in conjunction with the annual report for the year ended 30 June 2016 and considered together with any public announcements made by Jupiter Energy Limited during the half-year ended 31 December 2016 and in the subsequent period to the date of this report in accordance with the continuous disclosure obligations of the ASX listing rules.

Going Concern

The consolidated financial statements have been prepared on a going concern basis with the Directors of the opinion that the Group can meet its obligations as and when they fall due.

At 31 December 2016 the Group has a net current liability position of $74,341 and a net deficiency position of ($143,346).

As at 31 December 2016, the Group has in place a US$5,000,000 promissory note facility. US$2,820,000 of the facility has been used with US$2,708,762 remaining. Based on current forecasts, the Group does not have sufficient working capital for the 12 months from the signing date of this report based on its current 2017 budget. The Group is reviewing its ongoing funding requirements for 2017 and beyond, to enable the Company to carry out its 2017-2019 Work Program and develop Block 31 to the stage where export oil sales are being achieved and further development of the field is self-funding. Funding options may include the further issue of new equity, reserve based debt, convertible debt or a combination of these and other funding instruments.

The Directors, after consultation with the major shareholders and debt providers, are confident of being able to raise the required capital, but note that financing has not been secured at the date of this report and that the recommencement of production is dependent on a recovery in the Kazakh domestic oil price which is in turn linked to an overall recovery in world oil prices. Should the Group not achieve the matters set out above, there is uncertainty whether the Group would continue as a going concern and therefore whether it would realise its assets and extinguish its liabilities in the normal course of business and at the amounts stated in the financial report. The financial report does not include adjustments relating to the recoverability or classification of the recorded assets amounts nor to the amounts or classification of liabilities that might be necessary should the Group not be able to continue as a going concern.

   2.             BASIS OF PREPARATION AND ACCOUNTING POLICIES (CONTINUED) 
   (b)           Accounting policies

The accounting policies adopted in the preparation of the half year financial report are consistent with those followed in the preparation of the Group’s financial statements for the year ended 30 June 2016. All new and amended accounting standards and interpretations effective 1 July 2016 have been adopted by the Group. The adoption of new standards and amendments from 1 July 2016 has not had a significant impact on the accounting policies of the Group.

The Group has not elected to early adopt any new standards or amendments that are issued but not yet effective.

   3.             SEGMENT REPORTING

The Consolidated Entity is exploring for oil and gas in Kazakhstan. Each activity has been aggregated as they have similar economic characteristics and are being conducted in one area of interest. The operations of the Consolidated Entity therefore present one operating segment under AASB 8 Operating Segments.

The accounting policies applied for internal reporting purposes are consistent with those applied in the preparation of the half year financial report.

   4.             CASH AND CASH EQUIVALENTS 
 
                                         Consolidated 
                                            Entity 
                                       31 Dec     31 Dec 
                                        2016       2015 
                                         $A         $A 
 For the purpose of the half year 
  cash flow statement, cash and 
  cash equivalents are comprised 
  of the following: 
 
 Cash at bank                         472,758    299,985 
                                      472,758    299,985 
                                    ---------  --------- 
 
   5.             EXPLORATION AND EVALUATION EXPITURE 
 
                                                  Consolidated 
                                                     Entity 
                                              31 Dec      30 June 
                                               2016         2016 
                                                $A            $A 
 Exploration expenditure carried 
  forward in respect of areas of 
  interest in: 
 Exploration and evaluation expenditure 
  at cost                                  30,253,333     28,215,402 
                                          ===========  ============= 
 
 Movements during the period 
 Balance at beginning of period            28,215,402     44,166,103 
 Expenditure incurred during the 
  period                                      321,074        279,759 
 Impairment                                         -              - 
 Foreign exchange translation               1,716,858   (16,230,460) 
                                          -----------  ------------- 
 Balance at end of period                  30,253,333     28,215,402 
                                          ===========  ============= 

Exploration and evaluation assets are capitalised on the basis that the Company continues to hold a current contract (“the Contract”) for all areas of interests to which the capitalised costs relate.

 
                                                 Consolidated 
                                                    Entity 
                                             31 Dec       30 June 
                                              2016          2016 
                                                $A           $A 
 Movements during the period 
 Balance at beginning of period 
  - 1 July                                 16,805,439    26,227,918 
 Net exchange differences                     629,244   (9,422,479) 
                                         ------------  ------------ 
 Balance at end of period                  17,434,683    16,805,439 
                                         ------------  ------------ 
 
 Depletion and impairment at beginning 
  of period                               (1,828,889)   (1,828,889) 
 Charge for the period / year                       -             - 
                                         ------------  ------------ 
 Depletion and impairment at end 
  of period                               (1,828,889)   (1,828,889) 
                                         ------------  ------------ 
 
 Net book value at end of period           15,605,794    14,976,550 
                                         ------------  ------------ 
 
 
   6.             OIL AND GAS PROPERTIES 
   7.             TRADE AND OTHER PAYABLES 
 
                       Consolidated 
                           Entity 
                     31 Dec    30 June 
                       2016      2016 
                        $A        $A 
 
 Trade creditors     562,952   652,938 
 Accrued expenses    106,102   102,195 
                     669,054   755,133 
                    --------  -------- 
 
   8.             OTHER FINANCIAL LIABILITIES 
 
                                           Consolidated 
                                               Entity 
                                        31 Dec      30 June 
                                         2016         2016 
                                           $A           $A 
 
 Non-Current 
 Promissory notes (unsecured)         49,439,089   42,936,226 
                                      49,439,089   42,936,226 
                                     -----------  ----------- 
 

Promissory Notes

On 31 May 2016, the major shareholder Waterford Petroleum Limited (“Waterford”) agreed to re-finance its current Promissory Note (as originally announced on 7 October 2014 and subsequently amended on 30 April 2015) that, as at 31 May 2016, amounted to US$8,633,333 (A$11,636,956) in principal with accrued interest of US$1,250,894 (A$1,686,092) (total US$9,914,227 / A$13,323,048) into a new Promissory Note with the following key terms:

   --     Unsecured 
   --     Effective 31 May 2016 
   --     Repayable on 1 July 2018 
   --     Interest rate of 15% pa 
   --     Interest will accrue and be repayable with principal

Lender can elect to be repaid if there is a change of control in Jupiter Energy Limited or Jupiter Energy Pte Ltd or there is a change in control in contract 2275 covering the Block 31 Licence

The previous Promissory Note and all accrued interest were due for repayment on 1 July 2016.

As at 31 December 2016, the above promissory notes with accrued interest totaled US$10,762,712 (A$14,890,965)

On 24 May 2016, the Group and Waterford agreed to put in place a new Framework Funding Agreement that makes up to a further US$5,000,000 (including accrued interest) available to the Group by way of a new US$5,000,000 Promissory Note. This takes the total facility available under the existing and the new Framework Funding Agreement to US$15,000,000 (including accrued interest) of which a further US$5,088,822 (A$6,859,274) can be drawn down on (including accrued interest). This is in order to fund the Group’s operations whilst it continues to finalise long term funding arrangements for the development of its Block 31 licence area in Kazakhstan.

The key terms of the new Framework Agreement with Waterford are:

   --     Effective 24 May 2016 
   --     Drawdowns will roll into a Promissory Note 
   --     Promissory Note is repayable on 1 July 2018 
   --     Interest rate of 15% pa 
   --     Interest will accrue and be repayable with principal

— Lender can elect to be repaid if there is a change of control in Jupiter Energy Limited or Jupiter Energy Pte Ltd or there is a change in control in contract 2275 covering the Block 31 Licence

As at 31 December 2016, US$2,291,238, (A$3,163,799) (30 June 2016: US$744,989, A$1,004,171) has been drawn from the US$5,000,000 facility.

US$15.5m Convertible Notes (Series B):

On 3 June 2016, the Group announced it had reached agreement with its Convertible Note holders to refinance the 12,400,000 Convertible Notes with a total value of approx. US$20,800,000 (A$28,761,900) (including accrued interest) into Promissory Notes with a repayment date of 1 July 2018.

The key terms for the new Promissory Notes are:

   --     Unsecured 
   --     Effective 31 May 2016 
   --     Repayable on 1 July 2018 
   --     Interest rate of 15% pa 
   --     Interest will accrue and be repayable with the principal

— Lenders can elect to be repaid if there is a change of control in Jupiter Energy Limited or Jupiter Energy Pte Ltd or there is a change in control of the ownership of the Block 31 Licence

The Convertible Notes and all accrued interest were due for repayment on 20 September 2016.

As at 31 December 2016, the above promissory notes with accrued interest totaled US$22,679,037 (A$31,378,035)

    9.            CONTRIBUTED EQUITY 
 
                                            31 Dec       30 June 
                                             2016          2016 
                                              $A            $A 
Issued Capital 
 Ordinary shares (a)                        85,339,737  85,339,737 
 Options (b)                                   294,198     294,198 
                                        --------------  ---------- 
                                            85,633,935  85,633,935 
                                        --------------  ---------- 
 
 
      (a) Movements in ordinary share 
       capital                               No.            $A 
 
Balance 30 June 2015                       153,377,693  85,339,737 
Movement during the period                           -           - 
                                        --------------  ---------- 
Balance 31 December 2015                   153,377,693  85,339,737 
                                        --------------  ---------- 
 
Balance 30 June 2016                       153,377,693  85,339,737 
Movement during the period                           -           - 
Balance 31 December 2016                   153,377,693  85,339,737 
                                        --------------  ---------- 
 
      (b) Movements in options               No.            $A 
                                        --------------  ---------- 
Balance 30 June 2015                                 -     294,198 
Movement during the period                           -           - 
                                        --------------  ---------- 
Balance 31 December 2015                             -     294,198 
                                        --------------  ---------- 
 
Balance 30 June 2016                                 -     294,198 
Movement during the period                           -           - 
                                        --------------  ---------- 
Balance 31 December 2016                             -     294,198 
                                        --------------  ---------- 
 
 
   10.          SHARE BASED PAYMENTS

During the current period, there were no share based payments.

   11.          CONTINGENT LIABILITIES

There has been no significant change in contingent liabilities since the last annual reporting date.

   12.          EVENTS SUBSEQUENT TO REPORTING DATE

On 31 January 2017 the Company received a further $US240,000 from Waterford under the existing funding facility and these funds will be put towards meeting working capital commitments.

The Board believes the remaining funding available from the Waterford Promissory Notes will be sufficient to provide the Company with working capital for the 1(st) half of 2017 calendar year based on the current Care & Maintenance budget. If a broader amount of work is to be carried out including recommencing oil production from the Akkar East oilfield, additional funding will first need to be sourced.

There are no further “Subsequent Events” to report prior to the release of this report.

This information is provided by RNS

The company news service from the London Stock Exchange

 

Share