UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 6-K
REPORT OF FOREIGN PRIVATE ISSUER PURSUANT TO RULE 13a-16 OR
15d-16 UNDER THE SECURITIES EXCHANGE ACT OF 1934
Commission file number 0-28608
PETSEC ENERGY LTD
(Translation of registrant's name into English)
LEVEL 13, 1 ALFRED STREET, SYDNEY, NSW 2000, AUSTRALIA
(Address of principal executive offices)
Indicate by check mark whether the registrant files or will file annual reports
under cover of Form 20-F or Form 40-F. Form 20-F [X] Form 40-F [ ]
Indicate by check mark whether the registrant by furnishing the information
contained in this Form is also thereby furnishing the information to the
Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934.
Yes [ ] No [X]
Certain statements in this report regarding future expectations and
plans of the Company may be regarded as "forward-looking statements" within the
meaning of Section 27A of the USA Securities Act of 1933 and Section 21E of the
USA Securities Exchange Act of 1934. Although the Company believes that its
expectations and plans are based upon reasonable assumptions, it can give no
assurance that its goals will be met. Actual results may vary significantly from
those anticipated due to many factors, including oil and gas prices, operating
hazards, drilling risks, environmental risks and uncertainties in interpreting
engineering and other data relating to oil and gas reservoirs, as well as other
risks discussed in the Company's SEC filings.
[PETSEC ENERGY LOGO]
PETSEC ENERGY LTD
ACN 000 602 700
MEDIA RELEASE
25 August 2004
VERMILION 258 FIELD TO FUEL PETSEC ENERGY GROWTH
Petsec Energy Ltd (ASX, PSA; ADR's, PSJEY.PK)
The start of production in July from the Vermilion 258 field in the Gulf of
Mexico, USA is expected to significantly boost production and cash flow for
Petsec in the second half of 2004.
Petsec said today that its production for the current December 31 half year
was expected to rise by more than 50% on the back of the recent production
start-up from the Vermilion 258 gas field.
The Vermilion field was discovered late last year and early in the current
half-year has provided a significant boost to Petsec's total net production
which is currently around 24.3 million cubic feet of gas equivalent (MMcfe)
per day from its Gulf of Mexico operations.
"Operating cash flow, which was $13.3 million in the six months to 30 June
2004 , is also forecast to be up some 50% in the current six months,"
Petsec's Executive Chairman, Mr Terry Fern, said today.
"The cash flow generated by the Company during the latest period came from
the production of 2.2 bcfe from the West Cameron 343/352 field in the USA"
Mr Fern said.
"In the current half, we are forecasting increased production to be within
the range of 3.3 bcfe to 3.8 bcfe - a rise of more than 50% on the June
half output."
In the June 2004 half- year results, released today, total revenues were
$20 million, net operating cash flow $13.3 million and a profit before tax
of $ 1.2 million.
[PETSEC ENERGY LOGO]
Petsec Energy Ltd
Vermilion 258 field to Fuel Petsec Energy Growth
Page 2
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MEDIA RELEASE
Earnings were impacted by a rising Australian dollar against the US dollar,
the expensing of two wells in China and higher depreciation, depletion and
amortisation.
Petsec invested $19.5 million in the latest June half year to bring the
recent Vermilion 258 discovery to production, drill 3 wells in China and
further develop the West Cameron field.
The Company also acquired three new leases during the period - Vermilion
244 and 259, and Main Pass 19 - two of which are expected to be drilled
this year.
Net cash on hand at the end of the period was $12.7m.
The Company also today outlined a further expansion of its Gulf of Mexico,
USA, exploration and development operations in the current half.
Mr Fern said Petsec's expected second half drilling program would include
two development wells on Vermilion 258, commencing in September/October
2004.
These would be followed in November/December by a one to three well program
on the newly-acquired Main Pass 19 lease, to test targets that hold
potential for a net 12 to 15 bcfe.
For Further Information:
Mr. Terrence N. Fern Mr. Ross A. Keogh
Petsec Energy Ltd Petsec Energy Inc.
Level 13 3861 Ambassador Caffery Parkway
1 Alfred Street Suite 500
Sydney NSW 2000 Lafayette, LA 70503
Tel: 612 9247 4605 Tel: 1 (337) 989 1942
Fax: 612 9251 2410 Fax: 1 (337) 989 7271
Level 13, Gold Fields House, 1 Alfred Street, Sydney NSW 2000, Australia
PO Box R204, Royal Exchange NSW 1225, Australia
Telephone (61 2) 9247 4605 Facsimile (61 2) 9251 2410
Company information is available on: petsec.com.au
[PETSEC ENERGY LOGO]
PETSEC ENERGY LTD
ACN 000 602 700
APPENDIX 4D &
HALF-YEARLY REPORT
FOR THE PERIOD ENDED 30 JUNE 2004
(CURRENT PERIOD: HALF YEAR ENDED 30 JUNE 2004;
PREVIOUS CORRESPONDING PERIOD: HALF YEAR ENDED 30 JUNE 2003)
RESULTS FOR ANNOUNCEMENT TO THE MARKET
Total revenues for the current period were $20.5 million. Net oil & gas revenues
after royalties were $16.2 million from net production of 2.2 bcf of gas
equivalent at an average price received of US$5.54 per thousand cubic feet of
gas equivalent.
In the six month period, net operating cash flow was $13.3 million and net cash
invested in exploration and production development activities was $19.5 million.
Cash at balance date was $12.7 million.
Profit before tax for the period was $1.2 million and profit after tax was $0.7
million.
A stronger Australian dollar, the write-off of the cost of two wells in China
and higher depletion, depreciation and amortisation ("D,D&A") at West Cameron
resulted in a significantly lower profit than that achieved in the previous
corresponding period.
Production, revenues, operating cash flow and profit are expected to be higher
in the second half reflecting the start of production in July from the Vermilion
258 field, which was developed during the half-year period.
<Table>
<Caption>
INCREASE
HALF YEAR TO HALF YEAR TO (DECREASE)
TABLE JUN 2004 JUN 2003 %
- ----- ------------ ------------ ----------
Net production (bcfe) 2.2 2.4 (11.7)
Average net price/Mcfe (USD) 5.54 6.27 (11.6)
USD/AUD exchange rate 0.7322 0.6175 18.6
Net revenues after royalties (A$m) 16.2 24.6 (34.1)
Total revenues (A$m) 20.5 30.3 (32.3)
Operating cash flow (A$m) 13.3 18.1 (26.5)
Profit before tax (A$m) 1.2 16.0 (92.5)
Profit after tax (A$m) 0.7 16.2 (95.7)
Basic earnings per share (AUD cents) 0.6 15.4 (96.1)
</Table>
COMMENTARY ON RESULTS FOR ANNOUNCEMENT
PRODUCTION/PRICES
Production of 2.2 bcfe was 3.5% higher than achieved in the six months to Dec
2003 and 11.7% lower than the previous corresponding period. With the
commencement of production from the Vermilion 258 discoveries in Dec 2003/Jan
2004, production for the second half is expected to be 50% higher than reported
for the first half of this year.
Gas prices received averaged US$5.54/Mcf representing an increase of 14.5% on
the six months to Dec 2003 and a decrease of 11.6% on the previous corresponding
period. The current NYMEX Henry Hub spot price is approximately US$5.40/Mcf and
the 12 month forward strip price is trading at approximately US$6.25/Mcf.
REVENUES
Total revenues of $20.5 million were 16.3% higher than that earned in the six
months to Dec 2003 and 32.3% lower than the previous corresponding period. The
strengthening of the Australian dollar against the US dollar from an average of
0.6175 for the previous corresponding period to an average of 0.7322 for the
current period significantly reduced US dollar denominated revenues when
reported in AUD.
EXPENSES FROM ORDINARY ACTIVITIES
The before tax profit of $1.2 million was struck after royalties of $3.7
million, lease operating costs of $1.2 million, depreciation, depletion and
amortisation of $8.9 million, dry hole costs of $1.7 million and major
maintenance expense of $0.8 million.
The significant items affecting profit were dry hole costs of $1.7 million for
two wells in China, expenses incurred on a failed completion repair at West
Cameron of $0.8 million and higher D,D&A charges of $8.9 million.
Petsec calculates D,D&A on the units of production method based on the ratio of
actual production to remaining proved reserves as estimated by independent
petroleum engineers at the start of each year. Revisions of West Cameron 343/352
proved reserves at January 1, 2004 resulted in a significant increase in DD&A
expense for the period. These proved reserves are significantly less than the
Company's internally generated expected recoverable gas.
CASH FLOW
Net operating cash flow of $13.3 million increased 40.3% on the six months to
Dec 03 and decreased by 26.5% on the previous corresponding period.
During the period, $19.5 million was invested in the successful drilling of two
wells, construction of platform, pipeline and production facilities at V258,
drilling of 3 wells in China of which one was successful and development work at
West Cameron. Included was also the acquisition of leases at Vermilion 244 and
259, and Main Pass 19.
Cash on hand at the end of the period is $12.7 million.
DIVIDEND
Petsec does not propose the payment of any dividend in respect of the half year
ended 30 June 2004.
[PETSEC ENERGY LOGO]
PETSEC ENERGY LTD
and its Controlled Entities
================================================================================
Directors' Report and
Half Year Financial Report
For period ended 30 June 2004
The Secretary
Petsec Energy Ltd
PO Box R204
Royal Exchange NSW 1225
61 (2) 9247 4605
PETSEC ENERGY LTD AND ITS CONTROLLED ENTITIES
DIRECTORS' REPORT FOR THE HALF YEAR ENDED 30 JUNE 2004
The directors present their report together with the consolidated financial
report for the half year ended 30 June 2004 and the auditor's review opinion
thereon.
Petsec Energy Ltd is an independent oil and gas exploration and production
company operating primarily in the shallow waters of the Gulf of Mexico, U.S.A.
and in the Beibu Gulf, offshore China investigating lower-risk, high-yielding
oil and gas opportunities.
REVIEW OF OPERATIONS
In the half year to 30 June 2004 Petsec Energy produced a net 2.2 bcfe of gas
predominately from the West Cameron 343/352 field in the USA.
In terms of exploration, one well was drilled on Vermilion 258 (G 2 well) in the
USA and was completed for production. This well and the G 1 well drilled in
December 2003 discovered an estimated 23 bcfe net to Petsec. A platform,
pipeline and production facilities were established by July 2004 and the two
wells brought into production. The wells are currently producing at a combined
rate of approximately 16 mmcf/d net to the Company.
In the period Petsec Energy was awarded three new leases in the USA, (Vermilion
244 and 259, Main Pass 19) on which it was the high bidder at the Central Gulf
of Mexico OCS lease sale held by the Minerals Management Service (MMS) in March
2004.
Three wells were drilled on Block 22/12 in China. The 12.8.3 well intersected 11
metres of net oil pay and is being analysed for its economic potential. The two
other wells failed to find significant hydrocarbons.
Analysis of drilling results and economic assessments of the potential to
develop the 12.8.1/12.8.2 fields in Block 22/12 are expected to be completed in
the third quarter.
In the second half of 2004 it is anticipated that production from Vermilion 258
will result in a 50% increase in total production compared to the first half.
The drilling programme for the remainder of the year anticipates two development
wells on Vermilion 258 in September/October and one to three wells on Main Pass
19 in November/December to test a net potential of 12 to 15 bcfe.
USA
VERMILION 244, 246, 257, 258, 259
Working interest 100%
Net revenue interest 83.33%
Operator: Petsec Energy
The Vermilion 258 project is located 114 kms (70 miles) offshore Vermilion
Parish, Louisiana, USA, in 42 metres (138 feet) of water.
The Vermilion 258 G-1 and G-2 wells were drilled in December 2003 and January
2004 discovering an estimated 23 bcfe of recoverable gas. The G-1 well
intersected 27 metres (85 feet) of net gas pay in six sands and the G-2 well
intersected 13 metres (42 feet) of net gas pay in three sands. Both wells were
suspended for future gas production. In January, Petsec Energy commenced the
construction of a production platform, facilities and pipeline with initial
capacity of 45 mmcf of gas per day. The platform and facilities installation was
completed in mid-June and the two wells brought into production in July for an
expenditure of US$16.9 million. The wells are currently producing at a rate of
16 mmcf/d net to Petsec.
A programme of two development wells, drilled from the newly installed Vermilion
258 G platform, is planned to commence in September/October 2004.
The MMS awarded the Vermilion 244 and 259 leases to Petsec Energy following
successful bids at the March 2004 Central Gulf of Mexico OCS lease sale. The
leases are adjacent and to the west of Vermilion 258. The Company now holds five
contiguous leases centred on Vermilion 258.
WEST CAMERON 343, 352
Working interest 75%
Net revenue interests West Cameron 343 61.75%
West Cameron 352 57.375% bpo, 46.31% apo
Operator: Petsec Energy
West Cameron 343, 352 project is located 80 kms offshore Louisiana in
approximately 20 metres of water.
Petsec has drilled five wells on the leases, since October 2002. All wells were
completed for production. Four wells remain productive.
Production net to Petsec Energy for the half-year was 2.1 bcf of gas and 1,839
bbls of oil.
MAIN PASS 19
Working interest 55%
Net revenue interest 45.8%
Operator: Petsec Energy
Petsec was awarded the Main Pass 19 lease at a cost of US$955,275 by the MMS in
June. The lease is approximately 40 kms (25 miles) north-east of the Mississippi
Delta in eight metres (27 feet) of water. Main Pass 19 is adjacent to the Main
Pass 104 lease which Petsec held previously and on which Petsec discovered and
produced oil and gas.
The Company expects to commence a drilling programme of one to three wells in
November/December at Main Pass 19 to test net potential of 12 to 15 bcfe.
CHINA
BLOCK 22/12, BEIBU GULF
Working Interest 25%
Operator: Roc Oil
The block is located approximately 60 kms off the southern coast of China,
northwest of Hainan Island in shallow water, 25 to 40 metres deep. The Wei 12-1,
11-4 and 10-3/3N oilfields, operated by CNOOC, are located nearby to the north
and west with production via a pipeline to the Weizhou Island oil processing
facilities, 10 kms to the north of 22/12.
Petsec Energy earned a 25% interest in the contract area in March 2002 by
participating in the drilling of the Wei 6-12-1 well which discovered nine
metres of net oil pay.
Three wells were drilled on the block during the half year. The 12.7.1
exploration well was located two kms north of the 12.8.1 oil discovery (12
metres of oil pay and estimated to hold 5 to 10 million bbls of recoverable
oil). The well was drilled to a total depth of 1,795 metres (5,888 feet). The
well encountered non economic oil shows in two formations and was plugged and
abandoned. The 12.8.3 well was drilled to appraise the 12.8.2 oil discovery
(eight metres of oil pay) made in 1994. The well was located 800 metres to the
north of the 12.8.2 well and eight kms to the east of the 12.8.1 oil discovery.
The well was drilled to a total depth of 1,378 metres and intersected 11 metres
of oil pay. Estimated oil in place of 80 to 90 million bbls of 18 to 20 degree
API oil was confirmed, however the oil has very high viscosity which adversely
affects production rates, and amount of oil recovered. The 12.3.4 well was
drilled to a total depth of 1,529 metres and 35 metres down dip to the 12.3.1
oil discovery (11.5 metres of oil pay) made in 1982 and two kms north of the
12.8.3 well. The well intersected no significant hydrocarbons and was plugged
and abandoned. The cost of the 12.7.1 and the 12.3.4 wells, of approximately
US$1.5 million, were written off in the financial statements for the half year
to 30 June 2004. The Joint Venture is presently reviewing development economics
for the 12.8.1 and 12.8.2 oil fields and the exploration potential of the area
in the vicinity of the 6.12.1 oil discovery, made by the joint venture in 2002.
RESULTS FOR THE HALF-YEAR
The net profit from ordinary activities after tax for the half year was $0.7
million compared with a profit of $16.2 million for the comparable period in
2003.
Revenues for the half year were $20.5 million compared to $30.3 million for the
comparable period in 2003. These revenues reflect the Company's US production
from the West Cameron 352/343 gas field. Revenues after payment of royalties
amounted to $16.2 million from net production of 2.2 bcf of gas equivalent.
Average gas prices achieved in the half year were US$5.54 per thousand cubic
feet.
The half-year profit after tax of $0.7 million was struck after payment of
royalties of $3.7 million, lease operating costs of $1.2 million, geology,
geophysics and administration costs of $3.1 million and depreciation, depletion
and amortisation of $8.9 million. Petsec invested $19.5 million in further
development and exploration during the half year.
At the end of the period, Petsec Energy held cash and liquid assets of $12.7
million.
DIRECTORS
The directors of the Company during or since the end of the half year are:
Terrence N. Fern (Chairman & Managing Director) Director since 1987
David A. Mortimer Director since 1985
Peter E. Power Director since 1999
ROUNDING OFF
The Company is of a kind referred to in ASIC Class Order 98/100 dated 10 July
1998 and in accordance with the Class Order, amounts in this report and the
financial report have been rounded off to the nearest thousand dollars unless
otherwise stated.
Signed in accordance with a resolution of the directors.
T N Fern
Director
Dated: 25 August 2004
[PETSEC ENERGY LOGO]
PETSEC ENERGY LTD AND ITS CONTROLLED ENTITIES
STATEMENT OF FINANCIAL PERFORMANCE
FOR THE HALF YEAR ENDED 30 JUNE 2004
CONSOLIDATED
-----------------------------
2004 2003
NOTE $'000 $'000
- ----------------------------------------------------------------------------------------------------------------------------------
Revenues from sale of oil & gas and royalties 19,918 29,831
Other revenues from ordinary activities 601 450
------ ------
TOTAL REVENUE 20,519 30,281
Expenses from ordinary activities
Royalties (3,726) (5,276)
Lease operating costs (1,152) (1,345)
Depreciation, depletion and amortisation (8,875) (4,646)
Dry hole costs (1,734) --
Major maintenance expense (776) --
Employee expenses (1,180) (1,685)
Borrowing costs (7) --
Other expenses from ordinary activities (1,899) (1,299)
------ ------
PROFIT FROM ORDINARY ACTIVITIES BEFORE RELATED INCOME TAX EXPENSE 1,170 16,030
Income tax (expense)/benefit relating to ordinary activities 3 (489) 204
------ ------
NET PROFIT FROM ORDINARY ACTIVITIES AFTER RELATED INCOME TAX EXPENSE 681 16,234
Net exchange differences recognised in equity 2,844 (4,395)
------ ------
TOTAL CHANGES IN EQUITY FROM NON-OWNER RELATED TRANSACTIONS ATTRIBUTABLE TO THE
MEMBERS OF THE PARENT ENTITY 3,525 11,839
====== ======
Basic earnings per share:
Ordinary shares 4 $0.006 $0.154
Diluted earnings per share:
Ordinary shares 4 $0.006 $0.151
</Table>
The statement of financial performance should be read in conjunction with the
notes to the half year financial statements set out on pages 7 to 15.
[PETSEC ENERGY LOGO]
PETSEC ENERGY LTD AND ITS CONTROLLED ENTITIES
STATEMENT OF FINANCIAL POSITION
AS AT 30 JUNE 2004
CONSOLIDATED
-----------------------------
2004 2003
30 JUNE 31 DECEMBER
NOTE $'000 $'000
- ----------------------------------------------------------------------------------------------------------------------------------
CURRENT ASSETS
Cash assets 12,686 16,770
Receivables 4,840 5,582
Other financial assets 1,182 --
Prepayments 393 493
-------- --------
TOTAL CURRENT ASSETS 19,101 22,845
-------- --------
NON-CURRENT ASSETS
Receivables 344 2,334
Other financial assets 640 464
Property, plant and equipment 592 310
Exploration, evaluation and development expenditure 40,654 28,563
Deferred tax assets -- 499
Other 71 --
-------- --------
TOTAL NON-CURRENT ASSETS 42,301 32,170
-------- --------
TOTAL ASSETS 61,402 55,015
-------- --------
CURRENT LIABILITIES
Payables 10,160 8,984
Share subscriptions received in advance -- 9,761
Interest bearing liabilities -- 441
Provisions 52 51
-------- --------
TOTAL CURRENT LIABILITIES 10,212 19,237
-------- --------
NON-CURRENT LIABILITIES
Payables -- 94
Deferred tax liabilities -- 15
Provisions 628 469
-------- --------
TOTAL NON-CURRENT LIABILITIES 628 578
-------- --------
TOTAL LIABILITIES 10,840 19,815
======== ========
NET ASSETS 50,562 35,200
======== ========
EQUITY
Contributed equity 5 155,957 144,120
Reserves 936 (1,908)
Accumulated losses (106,331) (107,012)
======== ========
TOTAL EQUITY 50,562 32,295
======== ========
</Table>
The statement of financial position should be read in conjunction with the notes
to the half year financial statements set out on pages 7 to 15.
(PETSEC ENERGY LOGO)
PETSEC ENERGY LTD AND ITS CONTROLLED ENTITIES
STATEMENT OF CASH FLOWS
FOR THE HALF YEAR ENDED 30 JUNE 2004
<Table>
<Caption>
CONSOLIDATED
---------------------
2004 2003
NOTE $'000 $'000
---- ------ ------
CASH FLOWS FROM OPERATING ACTIVITIES
Cash receipts in the course of operations 21,824 23,599
Cash payments in the course of operations (8,838) (5,680)
Interest received 294 145
Borrowing costs paid (7) --
------ ------
NET CASH PROVIDED BY OPERATING ACTIVITIES 13,273 18,064
------ ------
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds on sale of investments -- 1,835
Payments for investments (175) --
Payments for property, plant and equipment (317) (118)
Payments for exploration, evaluation and development expenditure (19,462) (7,100)
------ ------
NET CASH (USED IN) INVESTING ACTIVITIES (19,954) (5,383)
------ ------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issue of shares 2,076 --
------ ------
NET CASH PROVIDED BY FINANCING ACTIVITIES 2,076 --
------ ------
NET (DECREASE)/INCREASE IN CASH HELD (4,605) 12,681
CASH AT THE BEGINNING OF THE FINANCIAL YEAR 16,770 2,270
Effects of exchange rate fluctuations on the balances of cash held in foreign
currencies 521 (306)
------ ------
CASH AT THE END OF THE FINANCIAL YEAR 12,686 14,645
------ ------
</Table>
The statement of cash flow should be read in conjunction with the notes to the
half year financial statements set out on pages 7 to 15.
(PETSEC ENERGY LOGO)
PETSEC ENERGY LTD AND ITS CONTROLLED ENTITIES
NOTES TO THE FINANCIAL STATEMENTS
FOR THE HALF YEAR ENDED 30 JUNE 2004
- --------------------------------------------------------------------------------
1. STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES
(a) BASIS OF PREPARATION OF HALF-YEAR FINANCIAL REPORT
The half-year consolidated financial report is a general purpose
financial report which has been prepared in accordance with Accounting
Standard AASB 1029 "Interim Financial Reporting", the recognition and
measurement requirements of applicable AASB standards, Urgent Issues
Group Consensus Views, other authoritative pronouncements of the
Australian Accounting Standards Board and the Corporations Act 2001. This
half-year financial report is to be read in conjunction with the 31
December 2003 Annual Financial Report and any public announcements by
Petsec Energy Ltd and its Controlled Entities during the half year in
accordance with continuous disclosure obligations arising under the
Corporations Act 2001.
It has been prepared on the basis of historical costs and, except where
stated, does not take into account changing money values or current
valuations of non-current assets.
These accounting policies have been consistently applied by each entity
in the consolidated entity and, except where there is a change in
accounting policy as disclosed in Note 2, are consistent with those
applied in the 31 December 2003 Annual Financial Report.
The half-year report does not include full note disclosures of the type
normally included in an annual financial report.
The carrying amounts of non-current assets are reviewed to determine
whether they are in excess of their estimated recoverable amount at the
end of the half year. If the carrying amount of a non-current asset
exceeds the estimated recoverable amount, the asset is written down to
the lower amount. In assessing recoverable amounts the relevant cash
flows have not been discounted to their present value.
For the purpose of preparing the half-year financial report, the half
year has been treated as a discrete reporting period.
2. CHANGES IN ACCOUNTING POLICY
There are no changes in accounting policies for the half year ended 30
June 2004.
(PETSEC ENERGY LOGO)
PETSEC ENERGY LTD AND ITS CONTROLLED ENTITIES
NOTES TO THE FINANCIAL STATEMENTS
FOR THE HALF YEAR ENDED 30 JUNE 2004
- --------------------------------------------------------------------------------
<Table>
<Caption>
CONSOLIDATED
----------------------
2004 2003
$'000 $'000
------- -------
3. INCOME TAX
PROFIT FROM ORDINARY ACTIVITIES BEFORE INCOME TAX EXPENSE 1,170 16,030
------- -------
Prima facie income tax (expense) calculated at 30% (2003: 30%) on the profit from
ordinary activities (351) (4,809)
(Increase)/decrease in income tax expense due to:
Non tax deductible items (1) (1)
Recovery of tax losses of foreign subsidiary previously not brought to account 352 5,014
Timing differences not brought to account (489) --
------- -------
INCOME TAX (EXPENSE)/BENEFIT ON ORDINARY ACTIVITIES (489) 204
------- -------
</Table>
4. EARNINGS PER SHARE
The Company has only one type of security, being ordinary shares, included
in the basic earnings per share calculation.
An additional 3,482,000 options outstanding under the Employee Option Plan
have been classified as potential ordinary shares and are included in
diluted earnings per share for ordinary shares only.
Subsequent to 30 June 2004 none of these of options have been exercised.
Further details of these securities are contained in Note 5 (Contributed
equity).
<Table>
<Caption>
CONSOLIDATED
---------------------
2004 2003
$'000 $'000
------ ------
EARNINGS RECONCILIATION
Net profit 681 16,234
Earnings used to calculate basic earnings per share 681 16,234
------ ------
</Table>
(PETSEC ENERGY LOGO)
PETSEC ENERGY LTD AND ITS CONTROLLED ENTITIES
NOTES TO THE FINANCIAL STATEMENTS
FOR THE HALF YEAR ENDED 30 JUNE 2004
- --------------------------------------------------------------------------------
<Table>
<Caption>
CONSOLIDATED
-----------------------------
2004 2003
----------- -----------
4. EARNINGS PER SHARE (CONTINUED)
WEIGHTED AVERAGE NUMBER OF SHARES USED AS THE DENOMINATOR
NUMBER FOR BASIC EARNINGS PER SHARE
Ordinary shares 118,447,000 105,736,041
NUMBER FOR DILUTED EARNINGS PER SHARE
Ordinary share number 118,447,000 105,736,041
Effect of employee options on issue 2,556,906 1,506,308
----------- -----------
121,003,906 107,242,349
----------- -----------
</Table>
<Table>
<Caption>
CONSOLIDATED
-----------------------
30 JUNE 31 DECEMBER
2004 2003
$'000 $'000
------- -----------
5. CONTRIBUTED EQUITY
ISSUED AND PAID-UP SHARE CAPITAL
119,193,841 (2003: 105,736,041) ordinary shares fully paid 155,957 144,120
------- -------
ORDINARY SHARES
Movements during the half year
Balance at beginning of period 105,736,041 (2003: 105,736,041) shares 144,120 144,120
Shares issued
- 12,846,800 ordinary shares for cash pursuant to placement 12,204 --
- Transaction costs arising from issue for cash pursuant to placement (560) --
- 611,000 (2003: Nil) under the employee share option plan 193 --
------- -------
Balance at end of period 155,957 144,120
------- -------
</Table>
(PETSEC ENERGY LOGO)
PETSEC ENERGY LTD AND ITS CONTROLLED ENTITIES
NOTES TO THE FINANCIAL STATEMENTS
FOR THE HALF YEAR ENDED 30 JUNE 2004
- --------------------------------------------------------------------------------
5. CONTRIBUTED EQUITY (CONTINUED)
At 30 June 2004, there were the following unexercised options to purchase
The Company's ordinary shares:
Date of grant Expiry date Number of shares Exercise price
under option
- ------------------------------------------------------------------------------------------------
3 June 2002 1 June 2007 3,005,000 $0.30 (employee options)
1 July 2002 1 June 2007 15,000 $0.30 (employee options)
23 January 2003 1 December 2007 15,000 $0.40 (employee options)
1 April 2003 1 December 2007 142,000 $0.40 (employee options)
1 April 2003 1 April 2008 75,000 $0.40 (employee options)
25 August 2003 31 December 2007 200,000 $0.82 (employee options)
16 January 2004 30 November 2008 15,000 $0.83 (employee options)
8 March 2004 1 March 2009 15,000 $1.25 (employee options)
---------
3,482,000
---------
The options become exercisable at various dates and after various share
price hurdles of the Company have been reached.
No options expired or were cancelled during the half year (2003: Nil). In
the 2004 half year, 15,000 options expiring 30 November 2008 with and
exercise price of $0.83 and 15,000 options expiring 1 March 2009 with an
exercise price of $1.25 were granted (2003: 250,000).
During the half year to 30 June 2004 the following options to purchase
ordinary shares in the Company were exercised:
Date exercised Expiry date Number of shares Exercise price
issued on exercise
- -----------------------------------------------------------------------------------
13 January 2004 16 April 2004 5,000 $0.41
13 January 2004 1 December 2007 3,000 $0.40
19 March 2004 16 April 2004 55,000 $0.41
16 April 2004 16 April 2004 23,000 $0.41
3 May 2004 1 June 2007 525,000 $0.30
-------
611,000
-------
(PETSEC ENERGY LOGO)
PETSEC ENERGY LTD AND ITS CONTROLLED ENTITIES
NOTES TO THE FINANCIAL STATEMENTS
FOR THE HALF YEAR ENDED 30 JUNE 2004
- --------------------------------------------------------------------------------
<Table>
<Caption>
CONSOLIDATED
--------------------------
2004 2003
$'000 $'000
-------- --------
6. ACCUMULATED LOSSES
Accumulated losses at the beginning of the half year (107,012) (129,726)
Net profit attributable to members of the parent entity 681 16,234
-------- --------
ACCUMULATED LOSSES AT END OF HALF YEAR (106,331) (113,492)
-------- --------
7. TOTAL EQUITY RECONCILIATION
Total equity at beginning of the half year 35,200 20,456
Total changes in parent entity interest in equity recognised
in statement of financial performance 3,525 11,839
Transactions with owners as owners:
Contributions of equity 11,837 --
-------- --------
TOTAL EQUITY AT END OF THE HALF YEAR 50,562 32,295
-------- --------
</Table>
8. CONTROL GAINED OR LOST OVER ENTITIES DURING THE PERIOD
No control was gained or lost over any entity during the current period
that would have a material effect on profit (previous corresponding period:
Nil).
9. DIVIDENDS
ORDINARY SHARES
No interim dividend is to be paid on the ordinary shares (previous
corresponding period: Nil).
INTERIM DIVIDENDS ON ALL SECURITIES
No dividend or distribution plans are currently in operation.
(PETSEC ENERGY LOGO)
PETSEC ENERGY LTD AND ITS CONTROLLED ENTITIES
NOTES TO THE FINANCIAL STATEMENTS
FOR THE HALF YEAR ENDED 30 JUNE 2004
- --------------------------------------------------------------------------------
10. SEGMENT REPORTING
For the half year ended 30 June 2004, the consolidated entity operated
predominantly in two geographic segments and one business segment, namely
the USA and China and in exploration for and production of oil and gas.
These operations are supported by a corporate head office in Australia.
The consolidated entity's assets are predominantly exploration and
development properties in the USA and China and cash held in Australia.
PRIMARY REPORTING
GEOGRAPHIC SEGMENTS
<Table>
<Caption>
AUSTRALIA USA CHINA CONSOLIDATED
------------------ ------------------ ------------------- ------------------
2004 2003 2004 2003 2004 2003 2004 2003
$'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000
------ ------ ------ ------ ------ ------ ------ ------
Oil & gas sales & royalties -- -- 19,918 29,831 -- -- 19,918 29,831
Other revenue 86 20 71 48 -- -- 157 68
Unallocated revenue 444 382
------ ------ ------ ------ ------ ------ ------ ------
TOTAL REVENUE * 86 20 19,989 29,879 -- -- 20,519 30,281
====== ====== ====== ====== ====== ====== ====== ======
Segment result (571) (683) 3,652 16,713 (1,911) -- 1,170 16,030
------ ------ ------ ------ ------ ------ ------ ------
Income tax (expense)/benefit (489) 204
------ ------
PROFIT FROM ORDINARY
ACTIVITIES AFTER INCOME TAX 681 16,234
------ ------
Depreciation and amortisation 17 16 8,858 4,630 -- -- 8,875 4,646
INDIVIDUALLY SIGNIFICANT ITEMS
Dry hole costs & abandonments -- -- -- -- 1,734 -- 1,734 --
Major workovers/repair expense -- -- 776 -- -- -- 776 --
ASSETS:
Segment assets 1,075 859 50,731 35,180 3,889 1,730 55,695 37,769
Unallocated assets 5,707 3,984
------ ------ ------ ------ ------ ------ ------ ------
TOTAL ASSETS 61,402 41,753
====== ====== ====== ====== ====== ====== ====== ======
Segment liabilities 853 788 9,891 7,325 96 -- 10,840 8,113
Unallocated liabilities -- 1,345
------ ------ ------ ------ ------ ------ ------ ------
TOTAL LIABILITIES 10,840 9,458
------ ------ ------ ------ ------ ------ ------ ------
Acquisition of non-current assets 30 -- 17,164 6,275 2,654 320 19,848 6,595
------ ------ ------ ------ ------ ------ ------ ------
</Table>
* There were no inter-segment sales in the period.
(PETSEC ENERGY LOGO)
PETSEC ENERGY LTD AND ITS CONTROLLED ENTITIES
NOTES TO THE FINANCIAL STATEMENTS
FOR THE HALF YEAR ENDED 30 JUNE 2004
- --------------------------------------------------------------------------------
11. DETAILS OF ASSOCIATES AND JOINT VENTURE ENTITIES
Included in the assets of the consolidated entity are the following items
which represent the consolidated entity's interest in the assets and
liabilities in joint ventures:
<Table>
<Caption>
CONSOLIDATED
----------------------
2004 2003
$'000 $'000
------- -------
EXPLORATION, EVALUATION AND DEVELOPMENT EXPENDITURE:
- Main Pass 89 209 177
- Main Pass 19 1,415 --
- West Cameron 343 4,016 6,046
- West Cameron 352 2,847 5,100
- Block 22/12 Beibu Gulf 3,889 1,730
------- -------
12,376 13,053
------- -------
THE CONTRIBUTION OF THE CONSOLIDATED ENTITY'S JOINT VENTURE INTERESTS TO
THE OPERATING PROFIT:
- West Cameron 343 5,992 11,467
- West Cameron 352 209 4,967
- Block 22/12 Beibu Gulf (1,911) --
------- -------
4,290 16,434
------- -------
</Table>
The principal activity of all the joint venture operations is oil & gas
exploration. Listed below is the name of each of the joint-venture
operations and the percentage interest held in the joint venture by the
consolidated entity:
<Table>
<Caption>
INTEREST INTEREST
HELD HELD
2004 2003
-------------- --------
Main Pass 89 30.0% 30.0%
Main Pass 19 55.0% --
West Cameron 343 75.0% TO 100% 75.0%
West Cameron 352 56.3% TO 75.0% 75.0%
Block 22/12 Beibu Gulf 25.0% 25.0%
</Table>
12. CONTINGENT LIABILITIES AND CONTINGENT ASSETS.
There are no material changes to the contingent liabilities or contingent
assets reported at 31 December 2003.
(PETSEC ENERGY LOGO)
PETSEC ENERGY LTD AND ITS CONTROLLED ENTITIES
NOTES TO THE FINANCIAL STATEMENTS
FOR THE HALF YEAR ENDED 30 JUNE 2004
- --------------------------------------------------------------------------------
13. EVENTS SUBSEQUENT TO REPORTING DATE
INTERNATIONAL FINANCIAL REPORTING STANDARDS
For reporting periods beginning on or after 1 January 2005, the
consolidated entity must comply with International Financial Reporting
Standards (IFRS) as issued by the Australian Accounting Standards Board.
The financial report has been prepared in accordance with Australian
Accounting Standards and other financial reporting requirements (Australian
GAAP). The differences between Australian GAAP and IFRS identified to date
as potentially having a significant effect on the consolidated entity's
financial performance and financial position are summarised below. The
summary should not be taken as an exhaustive list of all the differences
between Australian GAAP and IFRS. No attempt has been made to identify all
disclosure, presentation or classification differences that would affect
the manner in which transactions or events are presented.
The consolidated entity has not quantified the effects of the differences
discussed below. Accordingly, there can be no assurances that the financial
performance and financial position as disclosed in this financial report
would not be significantly different if determined in accordance with IFRS.
Regulatory bodies that promulgate Australian GAAP and IFRS have significant
ongoing projects that could affect the differences between Australian GAAP
and IFRS described below and the impact of these differences relative to
the consolidated entity's financial reports in the future. The potential
impact on the consolidated entity's financial performance and financial
position of the adoption of IFRS, including system upgrades and other
implementation costs which may be incurred, have not been quantified as at
the transition date of 1 January 2004 due to the short time between
finalisation of the IFRS standards and the date of preparing this report.
The impact on future years will depend on the particular circumstances
prevailing in those years.
The key potential implications of the conversion to IFRS on the
consolidated entity are as follows:
o impairment of assets will be determined on a discounted basis, with
strict tests for determining whether cash-generating operations have
been impaired
o income tax will be calculated based on the "balance sheet" approach,
which will result in more deferred tax assets and liabilities and, as
tax effects follow the underlying transaction, some tax effects will
be recognised in equity
o equity-based compensation in the form of shares and options will be
recognised as expenses in the periods during which the employee
provides related services
o the consolidated entity conducts most of its transactions and reports
internally in US dollars (USD). While no decision has yet been made,
it is possible that the consolidated entity will consider USD to be
its functional currency
o financial instruments must be recognised in the statement of financial
position and all derivatives and most financial assets must be carried
at fair value
o changes in accounting policies will be recognised by restating
comparatives rather than making current year adjustments with note
disclosure of prior year effects.
(PETSEC ENERGY LOGO)
PETSEC ENERGY LTD AND ITS CONTROLLED ENTITIES
NOTES TO THE FINANCIAL STATEMENTS
FOR THE HALF YEAR ENDED 30 JUNE 2004
- --------------------------------------------------------------------------------
13. EVENTS SUBSEQUENT TO REPORTING DATE (CONTINUED)
The impact of exposure draft ED 6 Exploration for and Evaluation of Mineral
Resources on the consolidated entity's accounting policy for the treatment
of exploration and evaluation expenditure cannot be determined until the
final standard is issued by the International Accounting Standards Board in
September 2004, and the equivalent Australian accounting standard is
subsequently issued by the Australian Accounting Standards Board.
Recent announcements from the AASB indicate that the IASB will amend ED6
and will fully grandfather Australia's existing areas of interest method of
accounting for exploration and evaluation expenditure. Until these proposed
changes are enacted it is not possible to determine the potential impact in
respect to extractive industries.
(PETSEC ENERGY LOGO)
DIRECTORS' DECLARATION
In the opinion of the Directors of Petsec Energy Ltd ("the Company"):
1. The financial statements and notes set out on pages 4 to 15 are in
accordance with the Corporations Act 2001, including:
a) giving a true and fair view of the financial position of the
Company and consolidated entity as at 30 June 2004 and of its
performance, as represented by the results of its operations and
cash flows for the half year ended on that date; and
b) complying with Accounting Standard AASB 1029 Interim Financing
Reporting and the Corporations Regulations 2001; and
2. There are reasonable grounds to believe that the Company will be able
to pay its debts as and when they become due and payable.
Dated at Sydney this 25th day of August 2004.
Signed in accordance with a resolution of the Directors made on 25th August
2004:
Terrence N. Fern
Managing Director
(KPMG LOGO)
INDEPENDENT REVIEW REPORT TO THE MEMBERS OF PETSEC ENERGY LIMITED
SCOPE
We have reviewed the financial report of Petsec Energy Limited for the
half-year ended 30 June 2004, consisting of the statement of financial
performance, statement of financial position, statement of cash flows,
accompanying notes 1 to 14 and the directors' declaration set out on pages 3 to
15. The financial report includes the consolidated financial statements of the
consolidated entity comprising the Company and the entities it controlled at
the end of the half-year or from time to time during the half-year. The
Company's directors are responsible for the financial report.
We have performed an independent review of the financial report in order to
state whether, on the basis of the procedures described, anything has come to
our attention that would indicate that the financial report is not presented
fairly in accordance with Australian Accounting Standard AASB 1029 "Interim
Financial Reporting" and other mandatory financial reporting requirements in
Australia and statutory requirements, so as to present a view which is
consistent with our understanding of the consolidated entity's financial
position, and performance as represented by the results of its operations and
its cash flows and in order for the Company to lodge the financial report with
the Australian Securities and Investments Commission.
Our review has been conducted in accordance with Australian Auditing Standards
applicable to review engagements. A review is limited primarily to inquiries of
company personnel and analytical procedures applied to the financial data.
These procedures do not provide all the evidence that would be required in an
audit, thus the level of assurance is less than given in an audit. We have not
performed an audit and, accordingly, we do not express an audit opinion.
STATEMENT
Based on our review, which is not an audit, we have not become aware of any
matter that makes us believe that the half-year financial report of Petsec
Energy Limited is not in accordance with:
(a) the Corporations Act 2001, including:
i. giving a true and fair view of the consolidated entity's financial
position as at 30 June 2004 and of its performance for the half-year
ended on that date; and
ii. complying with Australian Accounting Standard AASB 1029 "Interim
Financial Report" and the Corporations Regulations 2001; and
(b) other mandatory financial reporting requirements in Australia.
KPMG
/s/ KPMG
- -------------
Nicola Davis
Partner
Sydney
25 August 2004
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
Petsec Energy Ltd
Date: August 27, 2004 By: /s/ Fiona A. Robertson
----------------------------
Fiona A. Robertson
Chief Financial Officer