Financial Report

18 Mar 2005 14:30

Global Petroleum Ltd18 March 2005 GLOBAL PETROLEUM LIMITED ABN 68 064 120 896 FINANCIAL REPORT FOR THE HALF-YEAR ENDED 31 DECEMBER 2004 CORPORATE DIRECTORY Directors AuditorDr John Armstrong - KPMGExecutive ChairmanPeter Blakey Level 30 Central Plaza OnePeter Dighton 345 Queen StreetMark Savage Brisbane QLD 4000Peter Taylor Australia Secretary BankersDes Olling Australia and New Zealand Banking Group LimitedRegistered and Principal Level 3OfficeLevel 9 324 Queen Street46 Edward Street Brisbane QLD 4000Brisbane QLD 4000 AustraliaAustraliaTelephone: (61 7) Stock Exchange Listing3211 1122Facsimile: (61 7) Global Petroleum Limited shares3211 0133Website: are listed on the Australian Stockwww.globalpetroleum.com.au Exchange (Symbol: GBP).Share RegisterComputershare Investor Home Exchange: Brisbane OfficeServices Pty LtdLevel 27 Central Plaza Australian Stock ExchangeOne345 Queen Street Riverside CentreBrisbane Queensland 4000 Level 6 123 Eagle StreetAustralia Brisbane QLD 4000Telephone: (61 7) 3237 Australia2100Facsimile: (61 7) 32299860 Global Petroleum Limited shares are listed on the Alternative Investment Market (AIM) of the London Stock Exchange. DIRECTORS' REPORT FOR THE HALF-YEAR ENDED 31 DECEMBER 2004 The Directors of Global Petroleum present their report on the consolidatedentity consisting of Global Petroleum Limited ("the Company" or "Global") andthe entities it controlled during the half-year ended 31 December 2004("Consolidated Entity" or "Group"), together with the consolidated financialreport for the half-year ended 31 December 2004 and the review report thereon. DIRECTORS The names of the Directors of Global in office during the half-year and untilthe date of this report are: Dr John Armstrong (Executive Chairman) - appointed 31 May 2002Peter Blakey - appointed 4 October 2001Peter Dighton - appointed 23 December 2003Mark Savage - appointed 22 November 1999Peter Taylor - appointed 4 October 2001 REVIEW AND RESULTS OF OPERATIONS Operating Results During the December 2004 half-year, the Group recorded a net loss of $729,503(2003: net loss of $2,380,249). Principal Activities The principal activities in regard to the Company's projects were: (a) Alternative Investment Market ("AIM") The Company announced its intention to seek admission to AIM in thefirst quarter of 2005. On 7 March 2005, the Company's ordinary shares wereadmitted to trading on AIM. (b) Kenya: (i) Woodside elected to continue in Blocks L-5 and L-7; (ii) Woodside increased its equity from 40 to 50% in Blocks L-5 and L-7; (iii) New seismic survey in Blocks L-5 and L-7; (iv) Woodside withdrew from Block L-10. Remaining parties, Dana and Global, are seeking revised terms from the Kenyan Government; and (v) Woodside has until late 2005 to notify its intentions in regard to Block L-11. Principal Activities (continued) (c) Falkland Oil and Gas Limited ("FOGL") www.fogl.co.uk (i) Global retained 16.06% shareholding in listed FOGL; and (ii) FOGL began trading on the UK Alternative Investment Market ("AIM") on 14 October 2004. (d) Falkland Gold and Minerals Limited ("FGML") www.fgml.co.uk (i) Global retained 10.1% shareholding in listed FGML; and (ii) FGML began trading on the UK Alternative Investment Market ("AIM") on 9 December 2004. (e) Astral Petroleum Limited As a result of the acquisition of 100% of the share capital ofAstral Petroleum Limited, Global now has: (i) 100% of Ireland Licence option 03/3; and (ii) 100% of Malta Exploration Study Agreements for Blocks 4 and 5. (f) Queensland - ATP728P The Company surrendered its interest in its 100% held ATP728P to theQueensland Government in February 2005. (g) Montenegro The Company's interest was sold for £350,000 (A$852,933). (h) Iraq The Company continues to seek a suitable opportunity for participation in the Iraqi oil and gas industry. (i) Rights Issue A$5.5 million (before costs) raised via one-for-threenon-renounceable rights issue. Review of Operations (a) Alternative Investment Market ("AIM") The Company has appointed London based broker KBC Peel Hunt to actas Nominated Advisor and Broker. The Company achieved its target compliancelisting on the AIM on 7 March 2005. (b) Kenya The Company has a holding of 20% in three blocks L-5, L-7, and L-11offshore Kenya. In regard to the fourth Block L-10 which is now held by Dana(80% and operator) and Global (20%) - as a result of the withdrawal of Woodside- the terms of an extension of the Licence including the work programme areunder negotiation with the Kenyan authorities. In L-5, L-7 and L-11 Global is in a Joint Venture with Woodside (50%and operator in L5 and L7, and 40% in L11) and Dana Petroleum (E&P) Limited (30%in L5 and L7 and 40% in L11). The costs associated with Global's 20% equity arecarried for all activities including the drilling and testing of two wells. Mapping of the 2003 5,500km 2D seismic survey revealed several leadsin Blocks L-5 and L-7 in water depths of 1,650 -2,800 metres with the leads(potential targets for drilling) ranging in size from 10 sq km (2,500 acres) to60 sq km (15,000 acres). A new 3,600 km 2D seismic survey to investigate nine (9) of theseleads began on 23 November 2004 and was completed on 10 January 2005. Recordsfrom this survey will now be processed. Interpreted results of this latestseismic survey, which are anticipated to be available in the second quarter ofcalendar year 2005, will assist the Joint Venture in reviewing prospects fordrilling - with the first well expected to commence in the fourth quarter ofcalendar year 2005. In Block L-11, Woodside has until late 2005 to determine whether ornot to continue in this Block. (c) Falkland Oil and Gas Limited ("FOGL") (Global shareholding 16.06%) www.fogl.co.uk FOGL raised £12 million (A$30 million) and began trading on the UKAlternative Investment Market ("AIM") on 14 October 2004. The shares have sincetraded between 40p and 117.5p per share. At the closing price of 117.5p/share on11 March 2005, the Company's shareholding in FOGL is valued at approximatelyA$36.6 million (21.6c per Global Petroleum Limited ordinary share). FOGL was awarded new Falkland Island licences covering an additional50,000 sq km in its own right in early December 2004 - refer to FOGL's releasedated 7 December 2004. FOGL began a 10,500km 2D seismic survey over both the oldand new areas on 28 December 2004 and by 10 March 2005 had recorded 7,107km -refer to FOGL's release dated 21 December 2004 and weekly progress reports, themost recent being 11 March 2005, which are on the FOGL website. Review of Operations (continued) (d) Falkland Gold and Minerals Limited ("FGML") (Global shareholding 10.1%) www.fgml.co.uk FGML (the company changed its name from Falkland Minerals Limited)raised £10 million (A$25 million) and began trading on AIM on 9 December 2004and the shares have since traded between 37p and 46.5p per share. At the closingprice of 40p on 11 March 2005, the Company's shareholding in FGML is valued atapproximately A$7.7 million (4.5c per Global Petroleum Limited ordinary share). FGML's earlier work (stream sampling and an aeromagnetic survey)conducted in 2004 and previously, identified 23 targets for drilling and thepresence of alluvial gold in several drainage systems. FGML's plans including beginning drilling in February 2005 are setout in its releases dated 9 December 2004, 7 February 2005 and 3 March 2005which can be found on the FGML website. (e) Astral Petroleum Limited (i) Ireland Licence Option 03/3 (Global 100%) Global acquired 100% of this Licence Option in December2004. The area comprises part blocks 57/3, 57/4, 57/8 and 57/9 in the NorthCeltic Sea Basin and is located 30-70km to the south and south west of the SevenHeads and Kinsala Head gas fields. Well 57/9-1 drilled in the Licence Optionarea in 1984 flowed 2.6 million cubic feet of gas per day from Lower CretaceousWealdon Sands and recovered some oil. The company plans further studies focusedon a Jurassic lead which has been mapped in the area below the Wealdon Sands.The company plans to convert the Licencing Option to an Exploration Licence andto farmout a significant part of its holding. (ii) Malta Blocks 4 & 5 (Global 100%) Global acquired 100% of an Exploration Study Agreementfor Blocks 4 and 5 in December 2004. These Blocks are located at the south endof the Ragusa Trough which appears to be the source of the oil in fields in thenorthern Italian part of the Trough. The company plans further studies with aview to converting this current agreement to Production Sharing Contract andfarming out a significant part of its equity. (f) Queensland ATP 728P (Global 100%) The Company surrendered its interest in its 100% held ATP728P to theQueensland Government in February 2005. All exploration and evaluationexpenditure relating to the project has been written off in the financialstatements for the half-year ended 31 December 2004. (g) Montenegro The Group has sold its 51% interest in a contract over an area inMontenegro for £350,000 (A$852,933). Review of Operations (continued) (h) Iraq The Company is maintaining contact with Iraqi authorities regardingopportunities for it to participate in the petroleum industry in Iraq. (i) Rights Issue The Company lodged a Prospectus for a one for three non-renounceablerights issue at a price of 15 cents per new share with ASIC and ASX on 24 August2004 and the Offer closed on 20 September 2004. The offer raised A$5.5 million(before costs) to fund ongoing work obligations, meet working capitalrequirements and to add projects which fit the overall strategy of the Company. Lead Auditor's Independence Declaration under Section 307C of the CorporationsAct 2001 The lead auditor's independence declaration is set out on page 7 and forms partof the directors' report for the half-year ended 31 December 2004. Signed in accordance with a resolution of Directors. JD ArmstrongDirectorBrisbane15 March 2005 LEAD AUDITOR'S INDEPENDENCE DECLARATION UNDER SECTION 307C OF THE CORPORATIONS ACT 2001 To the Directors of Global Petroleum Limited: I declare that, to the best of my knowledge and belief, in relation to thereview for the half-year ended 31 December 2004 there have been: (a) no contraventions of the auditor independence requirements as set outin the Corporations Act 2001 in relation to the review; and (b) no contraventions of any applicable code of professional conduct inrelation to the review. KPMGRobert S JonesPartnerBrisbane15 March 2005 INDEPENDENT REVIEW REPORT TO THE MEMBERS OF GLOBAL PETROLEUM LIMITED Scope The financial report and Directors' responsibility The financial report comprises the statement of financial position, statement offinancial performance, statement of cash flows, accompanying notes 1 to 11 tothe financial statements, and the directors' declaration set out in pages 10 to19 for Global Petroleum Limited Consolidated Entity ("Consolidated Entity"), forthe half-year ended 31 December 2004. The Consolidated Entity comprises GlobalPetroleum Limited ("the Company') and the entities it controlled during thathalf-year. The directors of the Company are responsible for the preparation and true andfair presentation of the financial report in accordance with the CorporationsAct 2001. This includes responsibility for the maintenance of adequateaccounting records and internal controls that are designed to prevent and detectfraud and error, and for the accounting policies and accounting estimatesinherent in the financial report. Review Approach We conducted an independent review in order for the Company to lodge thefinancial report with the Australian Securities and Investment Commission. Ourreview was conducted in accordance with Australian Auditing Standards applicableto review engagements. We performed procedures in order to state whether on the basis of the proceduresdescribed anything has come to our attention that would indicate the financialreport does not present fairly, in accordance with the Corporations Act 2001,Australian Accounting Standard AASB 1029 'Interim Financial Reporting" and othermandatory financial reporting requirements in Australia, a view which isconsistent with our understanding of the Consolidated Entity's financialposition, and of its performance as represented by the results of its operationsand cash flows. We formed our statement on the basis of the review procedures performed, whichwere limited primarily to: - enquiries of company personnel; and - analytical procedures applied to the financial data. While we considered the effectiveness of management's internal controls overfinancial reporting when determining the nature and extent of our procedures,our review was not designed to provide assurance on internal controls. The procedures do not provide all the evidence that would be required in anaudit, thus the level of assurance is less than given in an audit. We have notperformed an audit and, accordingly, we do not express an audit opinion. A review cannot guarantee that all material misstatements have been detected. Independence In conducting our review, we followed applicable independence requirements ofAustralian professional ethical pronouncements and the Corporation Act 2001. Statement Based on our review, which is not an audit, we have not become aware of anymatter that makes us believe the half-year financial report of Global PetroleumLimited is not in accordance with: (a) the Corporations Act 2001, including: (i) giving a true and fair view of the Consolidated Entity'sfinancial position as at 31 December 2004 and of its performance for thehalf-year ended on that date; and (ii) complying with Australian Accounting Standard AASB 1029"Interim Financial Reporting" and the Corporations Regulations 2001; and (b) other mandatory financial reporting requirements in Australia. KPMGRobert S JonesPartnerBrisbane15 March 2005 DIRECTORS' DECLARATION In the opinion of the Directors of Global Petroleum Limited ("the Company"): 1. the financial statements and notes set out on pages 11 to 19 are inaccordance with the Corporations Act 2001, including: (a) giving a true and fair view of the financial position of theconsolidated entity as at 31 December 2004 and of its performance, asrepresented by the results of its operations and cash flows, for the half-yearended on that date; and (b) complying with Australian Accounting Standard AASB 1029 "InterimFinancial Reporting" and the Corporations Regulations 2001; and 2. there are reasonable grounds to believe that the Company will be ableto pay its debts as and when they become due and payable. Signed in accordance with a resolution of Directors. JD ArmstrongDirectorBrisbane15 March 2005 STATEMENT OF FINANCIAL PERFORMANCE FOR THE HALF-YEAR ENDED 31 DECEMBER 2004 Consolidated Consolidated Note 2004 2003 $ $ Revenue from operating activities 420,012 40,634Proceeds on disposal of exploration 852,933 -assets ----------- -----------Revenue from ordinary activities 1,272,945 40,634 Borrowing costs - (1,712)Depreciation expense (33,412) (13,563)Salaries and employee benefits expense (219,670) (54,939)Consulting and professional fees (213,235) (106,719)Shareholder costs (163,126) (54,893)Occupancy costs (19,868) (8,260)Carrying amount of non-current assets - (2,357)disposedExploration and evaluation expenditurewritten offRelating to exploration assets disposed 5 (922,035) -Other 5 (158,135) (2,142,996)Unrealised foreign exchange gain/(loss) 1,303 (13,168)Net (other expenses)/recovery of expensesfrom ordinary activities (198,140) (22,276)Share of net losses of associatesaccounted for using the equity method (76,130) - ----------- -----------Loss from ordinary activities beforerelated income tax expense/benefit (729,503) (2,380,249) Income tax (expense)/benefit - - ----------- ----------- Net loss (729,503) (2,380,249) ----------- ----------- Non-owner transaction changes in equity - - =========== =========== Total changes in equity from non-ownertransactions attributable to members ofthe parent entity (729,503) (2,380,249) =========== =========== Basic earnings per share (cents per share) (0.46) (1.77) Diluted earnings per share (cents per (0.46) (1.77)share) The statement of financial performance is to be read in conjunction with thenotes to the half-year financial statements set out on pages 14 to 19. STATEMENT OF FINANCIAL POSITIONAS AT 31 DECEMBER 2004 Note Consolidated Consolidated 31 December 30 June 2004 2004 $ $Current AssetsCash assets 7,046,034 3,289,133Receivables 228,644 119,222Other financial assets 601 61,480Other assets 69,827 13,929 ---------- ---------- Total Current Assets 7,345,106 3,483,764 ---------- ---------- Non-current AssetsInvestments accounted for using the equity 7 - 2,112,981methodOther financial assets 7 2,502,139 -Property, plant and equipment 80,957 114,318Exploration and evaluation expenditure 18,331,041 18,107,796 ---------- ---------- Total Non-current Assets 20,914,137 20,335,095 ---------- ---------- TOTAL ASSETS 28,259,243 23,818,859 ---------- ---------- Current LiabilitiesPayables 341,908 945,838Provisions 39,146 48,801 ---------- ---------- TOTAL LIABILITIES 381,054 994,639 ---------- ---------- NET ASSETS 27,878,189 22,824,220 ========== ========== EquityContributed equity 3 34,322,129 28,538,657Accumulated losses 4 (6,443,940) (5,714,437) ---------- ---------- TOTAL EQUITY 27,878,189 22,824,220 ========== ========== The statement of financial position is to be read in conjunction with the notesto the half-year financial statements set out on pages 14 to 19. STATEMENT OF CASH FLOWS FOR THE HALF-YEAR ENDED 31 DECEMBER 2004 Consolidated Consolidated 2004 2003 $ $ CASH FLOWS FROM OPERATING ACTIVITIES Payments to suppliers and employees (822,648) (436,232)Goods and services tax refunded 48,990 30,824Interest received 128,598 40,999Management fees received 293,787 -Receipts from joint venture partners - 94,222Interest and other costs of finance paid - (1,718) ---------- --------- --------- Net cash flows used in operating activities (351,273) (271,905) ---------- --------- CASH FLOWS FROM INVESTING ACTIVITIES Acquisition of property, plant and equipment (6,650) (3,769)Payments for exploration expenditure, includingoverheads capitalised (308,435) (598,474)Proceeds on disposal of exploration assets 852,933 -Payments for controlled entities (741,782) -Payments for other financial assets (1,183,369) -Proceeds from other financial assets 60,879 149,678 ---------- --------- Net cash flows used in investing activities (1,326,424) (452,565) ---------- --------- CASH FLOWS FROM FINANCING ACTIVITIES Proceeds from the issue of shares 5,536,518 1,624,000Share issue expenses (123,046) (73,281) ---------- --------- Net cash flows from financing activities 5,413,472 1,550,719 ---------- --------- NET INCREASE IN CASH HELD 3,735,775 826,249 Cash acquired on acquisition of controlled 21,126 -entities Cash at beginning of half-year 3,289,133 2,046,677 ---------- --------- CASH AT END OF HALF-YEAR 7,046,034 2,872,926 ========== ========= The statement of cash flows is to be read in conjunction with the notes to thehalf-year financial statements set out on pages 14 to 19. NOTES TO THE FINANCIAL STATEMENTS FOR THE HALF-YEAR ENDED 31 DECEMBER 2004 1. BASIS OF PREPARATION OF THE HALF-YEAR FINANCIAL REPORT The half-year consolidated financial report is a general purpose financialreport which has been prepared in accordance with Accounting Standard AASB 1029"Interim Financial Reporting", the recognition and measurement requirements ofapplicable AASB standards, Urgent Issues Group Consensus Views, otherauthoritative pronouncements of the Australian Accounting Standards Board andthe Corporations Act 2001. This half-year financial report is to be read inconjunction with the 30 June 2004 Annual Financial Report and any publicannouncements by Global Petroleum Limited and its Controlled Entities during thehalf-year in accordance with the continuous disclosure obligations arising underthe Corporations Act 2001. It has been prepared on the basis of historical costs and exceptwhere stated, does not take into account changing money values or fair values ofnon-current assets. These accounting policies have been consistently applied by eachentity in the consolidated entity and are consistent with those applied in the30 June 2004 Annual Financial Report. The half-year report does not include full note disclosures of thetype normally included in an annual financial report. 2. SEGMENT REPORTING Geographical Segments2004 Australia Europe Africa Fiji Falkland Iraq Indonesia Eliminations Consolidated Islands $ $ $ $ $ $ $ $ $Segment 149,195 852,933 - - 270,817 - - 1,272,945revenue Total 149,195 852,933 - - 270,817 - - 1,272,945revenue Segment (490,530) (95,148) - - (114,578) - (29,247) (729,503)result - ========= Consolidatedloss from ordinaryactivitiesbefore income tax (729,503) NOTES TO THE FINANCIAL STATEMENTS (continued) 2. SEGMENT REPORTING (continued) Geographical Segments2003 Australia Europe Africa Fiji Falkland Iraq Indonesia Eliminations Consolidated Islands $ $ $ $ $ $ $ $ $ Segment 40,634 - - - - - - - 40,634revenue Total 40,634 - - - - - - - 40,634revenue Segment (205,091) (1,470,850) (11,624) (689,179) (3,505) - - (2,380,249)result - ========= Consolidatedprofit/(loss)from ordinary (2,380,249)activitiesbefore income tax Intersegment pricing is on an arms-length basis. 3. CONTRIBUTED EQUITY 31 December 2004 30 June 2004 $ $(a) Issued and paid up capital: 34,322,129 28,538,657 ========= ========Issued and paid-up capital is net of prospectus and capital-raising costs of$431,032 (30 June 2004: $307,986). (b) Movements in securities on issue during the period were as follows: Date Details No. of Ordinary Issue $ Shares Price ($) 1/07/04 Opening balance 131,384,666 28,846,64328/09/04 Rights issue 36,910,121 0.15 5,536,51816/12/04 Shares issued on acquisition of controlled entity (Note 6) 1,000,000 0.37 370,000 ========= ====== =========31/12/04 Closing balance 169,294,787 34,753,161 ========= ====== ========= (c) On 28 September 2004 the Company issued 36,910,121 ordinaryshares at a price of $0.15 per share following a one for three non-renounceablerights issue that closed on 20 September 2004. Transaction costs of $123,046were recognised as a reduction of the proceeds of issue. On 16 December 2004 the Company issued 1,000,000 ordinary shares at a deemedprice of $0.37 per share as part consideration to the vendors on acquisition ofAstral Petroleum Limited (Note 6). 714,982 shares are subject to escrow until16 December 2005. NOTES TO THE FINANCIAL STATEMENTS (continued) 4. ACCUMULATED LOSSES Consolidated Consolidated 2004 2003 $ $Accumulated losses at beginning of the half-year (5,714,437) (2,660,029)Net loss attributable to members of the parent (729,503) (2,380,249)entity ------------ ----------Accumulated losses at end of the half-year (6,443,940) (5,040,278) ============ ==========5. SIGNIFICANT ITEMS Loss from ordinary activities before related income taxexpense/benefit includes the following revenue / (expense)whose disclosure is relevant in explaining the financialperformance of the consolidated entity: ============ ==========Proceeds on disposal of exploration assets 852,933 -Exploration and evaluation expenditure written offRelating to exploration assets disposed (922,035) -Other (158,135) (2,142,996) ============ ========== In October 2004 the consolidated entity received proceeds of £350,000 ($852,933)on the sale of its 51% interest in a contract over a licensed area inMontenegro. Other exploration and evaluation expenditure written off relatesprincipally to the surrender of the Company's interest in ATP728P to theQueensland Government in February 2005. (2003: other exploration and evaluationexpenditure written off related to the proposed release of the remaining twoFiji licences and the write-down in the Montenegro interest.) 6. ACQUISITION OF CONTROLLED ENTITIES On 6 December 2004 the Company acquired 100% of the Astral Petroleum Limitedgroup, consisting of the following entities. In each case, the consolidatedentity's interest is 100%. Name of entity Country of incorporation Astral Petroleum Limited United KingdomAstral Petroleum Resources (Ireland) Ltd British Virgin IslandsAstral (Malta) Ltd British Virgin Islands The consideration payable under the acquisition agreement consists of threetranches. The Company paid cash of £195,000 ($504,000) and issued 1 millionordinary shares in December 2004 (Tranche 1). Tranches 2 and 3 are contingenton certain conditions relating to the farmout of the interests acquired by theconsolidated entity in the Irish and Maltese permit areas (refer Note 9). Theeffect of the results of the Astral Petroleum Limited group on the half-year netloss was not material. The consolidated entity did not gain control over any entities during the priorcorresponding half-year period. NOTES TO THE FINANCIAL STATEMENTS (continued) 7. INVESTMENTS ACCOUNTED FOR USING THE EQUITY METHOD Details of investments in associates are as follows. Ordinary Share Investment Carrying Amount Ownership Interest Consolidated Consolidated 31 Dec 30 Jun 31 Dec 31 Dec 30 Jun 31 Dec 2004 2004 2003 2004 2004 2003 % % % $ $ $Falkland Gold and 10.1 21.9 - - 330,757 -Minerals Ltd (formerlyFalkland Minerals Ltd)Falkland Oil and Gas 16.1 25.7 - - 1,782,224 -Ltd -------- -------- -------- - 2,112,981 - ======== ======== ======== The use of the equity method of accounting for the consolidated entity'sinvestment in Falkland Oil and Gas Limited was discontinued in October 2004subsequent to a share placing and public offer by that company, and the listingof the company's shares for trading on the Alternative Investment Market ("AIM")of the London Stock Exchange. The use of the equity method of accounting for the consolidated entity'sinvestment in Falkland Gold and Minerals Limited was discontinued in December2004 subsequent to a share placing and public offer by that company, and thelisting of the company's shares for trading on the Alternative Investment Market("AIM") of the London Stock Exchange. The consolidated entity's investment in these entities is included within "otherfinancial assets" (non-current) as investments in listed shares at cost, withcarrying amounts of $1,761,971 for Falkland Oil and Gas Limited and $740,168 forFalkland Gold and Minerals Limited (total $2,502,139). 8. INVESTMENTS IN JOINT VENTURE ENTITIES The consolidated entity holds the following interests in various joint ventures,whose principal activities are in petroleum or minerals exploration. Joint Venture Principal Activity Ownership interest (Consolidated) 2004 2003 % % Kenya Petroleum exploration 20.0 20.0Falkland Island Offshore Petroleum exploration - 50.0Falkland Island Minerals Gold, diamonds exploration - 33.3Fira - Global (Iraq) Production sharing applications 20.0 20.0Indonesia Petroleum exploration - 90.0 NOTES TO THE FINANCIAL STATEMENTS (continued) 9. CONTINGENT LIABILITIES AND CONTINGENT ASSETS Other than as set out below, there were no material changes in contingentliabilities or contingent assets since 30 June 2004. Acquisition of Astral Petroleum Limited - contingent consideration Consideration payable upon the acquisition of Astral Petroleum Limited (referNote 6) includes amounts contingent on certain conditions relating to thefarmout of the interests acquired by the consolidated entity in the Irish andMaltese permit areas. If the consolidated entity enters into a farmout inrelation to the Irish permit area that satisfies the conditions under theacquisition agreement by 25 November 2005, the Company will be required to issuean additional 4 million ordinary shares. If the consolidated entity enters intoa farmout in relation to the Maltese permit area that satisfies the conditionsunder the acquisition agreement by 25 November 2005, the Company will berequired to issue a further 4 million ordinary shares. 10. EVENTS SUBSEQUENT TO REPORTING DATE International Financial Reporting Standards For reporting periods beginning on or after 1 January 2005, the consolidatedentity must comply with Australian equivalents to International FinancialReporting Standards (AIFRS) as issued by the Australian Accounting StandardsBoard. This half-year financial report has been prepared in accordance with theAustralian accounting standards and other financial reporting requirements(Australian GAAP) applicable for reporting periods ending on 31 December 2004. The differences between Australian GAAP and AIFRS identified to date aspotentially having a significant effect on the consolidated entity's financialperformance and financial position are summarised below. This summary shouldnot be taken as an exhaustive list of all the differences between AustralianGAAP and AIFRS. No attempt has been made to identify all disclosure,presentation or classification differences that would affect the manner in whichtransactions or events are presented. Management has made an initial impact assessment of conversion to AIFRS, and iscurrently reviewing this assessment. A detailed analysis of the specificimpacts of AIFRS is planned; however the consolidated entity has not quantifiedthe effects of the differences discussed below. There can be no assurances thatthe consolidated financial performance and financial position as disclosed inthis financial report would not be significantly different if determined inaccordance with AIFRS. Any assessments made in respect of the transition to AIFRS may requireadjustment before inclusion in the first complete annual / half-year financialreport prepared in accordance with AIFRS due to new or revised standards orinterpretations, changes in the operations of the business, or additionalguidance on the application of AIFRS in a particular industry or to a particulartransaction. NOTES TO THE FINANCIAL STATEMENTS (continued) 10. EVENTS SUBSEQUENT TO REPORTING DATE (continued) International Financial Reporting Standards (continued) The key potential implications of the conversion to AIFRS on the consolidatedentity, identified to date, are as follows: • Financial instruments must be recognised in the statement of financialposition and all derivatives and most financial assets must be carried at fairvalue. • Income tax will be calculated based on the "balance sheet" approach,which will result in more deferred tax assets and liabilities and, as taxeffects follow the underlying transaction, some tax effects will be recognisedin equity. • Certain exploration and evaluation costs may be required to beexpensed as incurred. However, AASB 6 permits the capitalisation of explorationand evaluation costs post-exploration stage and pre-feasibility stage, asprescribed by the standard. • Impairments of assets will be determined on a discounted basis, withstrict tests for determining whether goodwill, exploration and evaluationexpenditure and cash-generating operations have been impaired. • Equity-based compensation in the form of shares and options will berecognised as expenses in the periods, based on the fair value of shares andoptions, during which the employee provides related services. • Investments accounted for using the equity method may be affected bydifferences in the recognition, measurement and disclosure requirements underAIFRS. • In accounting for business combinations, the identifiable assets,liabilities and contingent liabilities of the acquiree are recognised at theirfair value. • The primary statements in the financial statements include a statementof changes in equity. Certain items which are recognised directly in equitywill be disclosed in the statement of changes in equity. • Changes in accounting policies will be recognised by restatingcomparatives rather than making current year adjustments with note disclosure ofprior year effects. 11. RECONCILIATION OF AUSTRALIAN GENERALLY ACCEPTED ACCOUNTING PRINCIPLES TOUNITED KINGDOM GENERALLY ACCEPTED ACCOUNTING PRINCIPLES These half-year financial statements are prepared in accordance with AustralianGenerally Accepted Accounting Principles (Australian GAAP) which differs incertain respects from United Kingdom Generally Accepted Accounting Principles(UK GAAP). There are no material differences between UK GAAP and AustralianGAAP for the half-year ended 31 December 2004. This information is provided by RNS The company news service from the London Stock Exchange