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DOCUMENT: v462120_8k.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 8-K

 

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

 

Date of Report (Date of earliest event reported): March 15, 2017

 

Samson Oil & Gas Limited

(Exact name of registrant as specified in its charter)

 

Australia   001-33578   N/A
(State or other jurisdiction of incorporation or organization)   (Commission file number)   (I.R.S. Employer
Identification Number)
         

Level 16, AMP Building,

140 St Georges Terrace

Perth, Western Australia 6000

   
(Address of principal executive offices)   (Zip Code)

 

Registrant’s telephone number, including area code:  +61 8 9220 9830

 

(Former name or former address, if changed since last report)

 

 

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

 

o Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
   
o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
   
o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
   
o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 


 

 

 

ITEM 2.02Results of Operations and Financial Conditions.

 

On March 15, 2017, Samson Oil & Gas Limited filed its Australian Stock Exchange (ASX) half-year report for the six months ended December 31, 2016, with the ASX. A copy of the ASX half-year report is furnished as Exhibit 99.1 hereto.

 

The information contained in this Item 2.02 (including Exhibit 99.1) shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Exchange Act, except as shall be expressly set forth by specific reference in such filing.

 

ITEM 9.01Financial Statements and Exhibits.

 

(d)       Exhibits

 

Exhibit No.   Description
99.1   ASX half-year report of Samson Oil & Gas Limited for the six month period ended December 31, 2016

 

 

 

SIGNATURE

 

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 hereunto duly authorized.

 

Date: March 17, 2017    
  Samson Oil & Gas Limited
     
     
  By: /s/ Robyn Lamont
    Robyn Lamont
    Chief Financial Officer

 

 

DOCUMENT: v462120_ex99-1.htm

Exhibit 99.1

 

 

 

 

 

 

 

SAM SON OIL & GAS LIMITED

 

ABN 25 009 069 005

 

 

 

 

INTERIM FINANCIAL REPORT

 

31 December 2016

 

 

 

 

SAMSON OIL & GAS LIMITED

 

Table of Contents

 

 

 

Corporate Information 1
Directors’ Report 2
Consolidated Statement of Profit or Loss and other Comprehensive Income 5
Consolidated Balance Sheet 6
Consolidated Cash Flow Statement 7
Consolidated Statement of Changes in Equity 8
Notes to the Half-Year Financial Statements 9
Directors’ Declaration 18
Auditor’s Independence Declaration 19
Independent Auditor’s Review Report 20

  

 

 

  

SAMSON OIL & GAS LIMITED

 

Corporate Information

 

 

 

Directors Bankers
P. Hill (Chairman) National Australia Bank
T. Barr (Managing Director) Perth, WA, 6000
G. Channon*  
D. Rakich*  
  Mutual of Omaha Bank
  Houston, TX 77027
Secretary  
D. Rakich*  
   
Registered Office & Business Address Solicitors
Level 16, AMP Building Squire Sanders
140 St Georges Terrace 152-158 St Georges Terrace
Perth, WA, 6000 Perth, WA, 6000
Telephone:  +61 8 9220 9830  
Facsimile:    +61 8 9220 9820  
   
   
   
OPERATIONS OFFICE – DENVER Auditors
1331 17th Street, Suite 710 RSM Australia Partners
Denver, CO, 80202 8 St Georges Terrace
Telephone: +1 303 295 0344 Perth, WA, 6000
Facsimile:   +1 303 295 1961  
   
   
SHARE REGISTRY Stock Exchange
Security Transfer Registrars Pty Ltd Australian Securities Exchange Limited
770 Canning Highway Code:  SSN
Applecross, WA, 6153  
Telephone:  +61 8 9315 2333 NYSE Mkt US
Facsimile:    +61 8 9315 2233 Code: SSN
   
   
Australian Company Number Australian Business Number
009 069 005 25 009 069 005
   
* denotes Australian resident.  

 

- 1 - 

 

 

SAMSON OIL & GAS LIMITED

 

Directors’ Report

 

 

 

Your directors submit their report on Samson Oil & Gas Limited and its consolidated entities (the “Consolidated Entity” or “Samson”) for the half-year ended 31 December 2016. All amounts are in United States Dollars (US$), unless otherwise indicated.

 

Directors

 

The names of the company’s directors in office during the half-year and until the date of this report are as follows. Directors were in office for this entire period unless otherwise stated.

 

Mr Terence Maxwell Barr – Managing Director

Dr Peter Hill – Chairman (appointed 27 January 2016)

Mr Greg Channon* (appointed 27 January 2016)

Mr Denis Rakich* (appointed 27 January 2016)

* denotes Australian resident

 

Principal Activities

 

The principal continuing activities during the half-year of entities within the Consolidated Entity were oil and gas exploration, development and production in the United States of America.

 

Review and Results of Operations

 

The Consolidated Entity’s net loss after tax for the half-year was $2.1 million compared to a loss of $15.9 million for the half-year ended 31 December 2015. The net loss in the current year relates in part to loss on derivatives of $1.0 million and finance costs of $1.2 million.

 

During the period, the Consolidated Entity also recognised other income of $1.7 million. This relates to the sale of the North Stockyard property.

 

Acquisition

Foreman Butte Project, North Dakota and Montana

During the six months ended 31 December 2016, the Company completed workovers on two wells in the Forman Butte field to test the effectiveness of two different workover techniques.

 

The Company completed a mutli-stage acid stimulation job on the Maris 1-16H well. This placed 4,600 barrels of hydrochloric acid into the wellbore. In addition to other water based fluids, 4,200 barrels of diversion agent, spares and pads necessary to complete the placement of acid in 19 stages across 5 zones.

 

The Evans 1-10H fresh water cleanout operation involved pumping 4,000 barrels of water into the wellbore to remove any blockages and salt deposits potentially blocking the well bore or reducing production.

 

While the initial results of the multi-stage acid stimulation on the Maris 1-16H well are inconclusive, due to an emulsion now being produced with the oil, the fresh water cleanout of the Evans 1-10H well was a success in that it created a two times uplift in production. These two wells are horizontal open hole completions in the Ratcliffe Member of the Mississippian Madison Formation, which is predominantly a limestone reservoir.

 

The Company plans to continue to assess the results of both the acid stimulation and the fresh water clean out, however it currently appears as if the remaining 18 wells to be worked over in Foreman Butte Field would be better suited for fresh water cleanouts rather than multi-stage acid stimulations. Importantly a fresh water clean out is substantially less expensive ($100,000) than an acid stimulation ($500,000).

 

- 2 - 

 

 

SAMSON OIL & GAS LIMITED

 

Directors’ Report

 

 

  

The Company is continuing with its workover operations to return several shut-in wells back to production in the Foreman Butte Project. A fluid-level/production efficiency study has been completed on all the wells in the field to optimize well pump efficiency. The Company has discovered that many of the wells have sub-performing pump stroke lengths and/or improperly sized pumping units as evidenced from high-fluid levels located inside the wells. Concurrently, a number of wells with behind-pipe pay zones have been identified as recompletion candidates. These recompletions, well optimizations, and several fresh-water cleanout jobs will commence this quarter and should result in a substantial increase in production.

 

Additionally, two new horizontal laterals are currently being planned to be drilled out of the Maris 1-16H wellbore this spring. The first will test the Ratcliffe Formation of the Mississippian Madison Group. The second will test the Mission Canyon Formation of the Mississippian Madison Group. The lateral in the Ratcliffe Formation will help define the pressure depletion radius from the existing producing wellbores which will ultimately determine the number of PUD’s (proven undeveloped drilling locations) we can drill in this reservoir. Third-party pressure modelling of the Ratcliffe reservoir shows that relatively high reservoir pressure resides approximately 500 feet away from the Maris 1-16 surface location. It is estimated that this new lateral could produce at around 300 BOPD if the third-party pressure modelling proves to be correct. The second lateral in the Mission Canyon Formation will test an undeveloped reservoir that could prove up a new oil field with the potential for many additional well locations.

 

Operational

North Stockyard Oilfield

The six months ended 31 December 2016, the Company sold its interest in the North Stockyard field for $15 million. The carrying value of this asset was $13.3 million at the time of the sale and the Company recognised a profit on sale of assets of $1.7 million after allowing for expenses. The effective date of this transaction was 30 October 2016, after this date, revenue and expenses ceased to accrue to the Company.

 

Exploration

Hawk Springs Project, Goshen County, Wyoming

Bluff #1-11 well

Samson 37.5% BPO Working Interest in the 1st Bluff Prospect well

The Bluff Prospect, in Samson’s Hawk Spring project in Goshen County, Wyoming commenced drilling June 2014 to test multiple targets in the Permian and Pennsylvanian sections. The well reached a total depth of 9,000 feet after intersecting the pre-Cambrian basement. Various oil shows were observed in the Cretaceous, Jurassic, Permian and Pennsylvanian intervals while drilling.

 

A recompletion in the Bluff #1-11 well will be attempted in April 2017. The Jurassic Canyon Springs formation will be perforated and flow tested first. If this unsuccessful, the Cretaceous Dakota Formation will subsequently be perforated and flow tested. This well will be plugged and abandoned should these two operations be unsuccessful.

 

Cane Creek Project, Grand & San Juan Counties, Utah

Pennsylvanian Paradox Formation, Paradox Basin

Samson 100% Working Interest

On 5 November 2014, the Company entered into an Other Business Arrangement (“OBA”) with the Utah School and Institutional Trust Lands Administration (“SITLA”) covering approximately 8,080 gross/net acres located in Grand and San Juan Counties, Utah, all of which are administered by SITLA. The Company was granted an option period for two years in order to enter into a Multiple Mineral Development Agreement (“MMDA”) with another company who hold leases to extract potash in an acreage position situated within the project area. In November 2015, the Company paid an extension fee of $40,000 in order to extend the option period to December 2016. In November 2016, the Company paid a further extension fee of $40,000 in order to extend the option period to December 2017.

 

- 3 - 

 

  

SAMSON OIL & GAS LIMITED

 

Directors’ Report

 

 

 

Subsequently, the MMDA has been finalized and executed by both parties. Upon entering into the MMDA, SITLA is obligated to deliver oil and gas leases covering the project area at cost of $75 per acre to the Company.

 

SignifIcant changes in the state of afFairs

 

There were no significant changes in the state of affairs of the Consolidated Entity during the financial half-year.

 

 

Auditor’s Independence Declaration

 

A copy of the auditor’s independence declaration as required under section 307C of the Corporations Act 2001 is set out on page 19.

 

This report is made in accordance with a resolution of directors, pursuant to section 306(3)(a) of the Corporations Act 2001.

 

On behalf of the directors

 

 

/s/ Terry Barr

T. M. Barr

Director

 

Denver, Colorado

15 March 2017

 

- 4 - 

 

  

SAMSON OIL & GAS LIMITED

consOLIDATED STATEMENT OF profit or loss and other COMPREHENSIVE INCOME

For the half-year ended 31 December 2016

 

 

 

   NOTE  Half-year ended 31 December 
        
      2016   2015 
      $   $ 
Revenue from continuing operations             
              
Sale of oil and gas  3(a)   6,982,574    4,776,329 
Total revenue      6,982,574    4,776,329 
              
Cost of sales  3(a)   (5,750,080)   (5,623,236)
              
Gross profit      1,232,494    (846,907)
              
Other income  3(a)   1,748,018    1,472,361 
              
Finance costs  3(c)   (1,239,577)   (492,918)
Impairment expense  4   (244,480)   (9,785,495)
Loss on derivative instruments      (1,045,148)   - 
Exploration expense      (24,545)   (4,192,719)
General and administration expenses  3(b)   (2,539,542)   (2,036,829)
Loss before income tax      (2,112,780)   (15,882,507)
Income tax benefit      -    - 
Net loss after income tax for the year attributable to owners of Samson Oil & Gas Limited      (2,112,780)   (15,882,507)
              
Other comprehensive expense             
Items that may be reclassified to profit and loss             
Net foreign currency translation differences      (10,243)   (64,160)
              
Total comprehensive expense for the period attributable to equity holders of the parent      (2,123,023)   (15,946,667)
              
Basic loss per share (cents) from continuing operations attributable to ordinary equity holders of the Company             
Basic loss per share (cents)      (0.07)   (0.56)
Diluted loss per share (cents)      (0.07)   (0.56)
              

 

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

 

- 5 - 

 

 

SAMSON OIL & GAS LIMITED

consOLIDATED BALANCE SHEET

As at 31 December 2016

 

 

 

        
   NOTE  31-Dec-16   30-Jun-16 
            
      $   $ 
            
Current assets             
Cash and cash equivalents      1,554,198    2,654,812 
Trade and other receivables      2,641,012    1,996,344 
Tax receivable      15,188    - 
Oil inventory      219,288    463,768 
Prepayments  5   320,390    183,305 
Assets held for sale  7   -    13,798,987 
Total current assets      4,750,076    19,097,216 
              
Non-current assets             
Other receivables      82,309    139,552 
Restricted cash      450,000    450,000 
Plant and equipment      322,805    308,474 
Exploration  and evaluation assets  6   261,103    220,703 
Oil and gas properties  7   32,293,088    31,827,573 
Total non-current assets      33,409,305    32,946,302 
Total assets      38,159,381    52,043,518 
              
Current liabilities             
Trade and other payables      5,106,921    5,958,285 
Provisions      -    300,000 
Borrowings  10   23,001,609    15,546,428 
Derivative Instruments  8   1,989,336    1,671,654 
Total current liabilities      30,097,866    23,476,367 
              
Non-current liabilities             
Derivative instruments  8   1,006,580    1,233,077 
Borrowings  10   -    18,665,227 
Provisions      3,271,370    3,011,150 
Total non-current liabilities      4,277,950    22,909,454 
Total Liabilities      34,375,816    46,385,821 
              
Net assets      3,783,565    5,657,697 
              
Equity             
              
Contributed equity  12   99,648,913    99,523,411 
Accumulated losses      (102,183,086)   (100,070,306)
Reserves      6,317,738    6,204,592 
Total equity      3,783,565    5,657,697 

 

The above Consolidated Balance Sheet should be read in conjunction with the accompanying notes.

 

- 6 - 

 

 

SAMSON OIL & GAS LIMITED

 

consolidated Cash Flow Statement

for the half-year ended 31 December 2016

 

 

 

   Half-year ended 31 December 
     
   2016   2015 
   $   $ 
Cash flows from operating activities          
           
Receipts from customers and debtors   6,752,951    6,543,082 
Payments to suppliers and employees   (6,594,906)   (5,738,780)
Payments for derivative instruments   (699,606)   109,684 
Interest received   276    2,188 
Net cash (outflows)/inflows from operating activities   (541,285)   916,174 
           
           
Cash flows from investing activities          
Proceeds from sale of assets   14,101,512    - 
Cash paid for oil and gas properties and development   (2,007,220)   (1,558,976)
Payments for exploration and evaluation   (64,945)   (314,639)
Net cash inflows/(outflows) from investing activities   12,029,347    (1,873,615)
           
Cash flows from financing activities          
Repayment of borrowings   (11,597,443)   - 
Proceeds from exercise of options   -    1,475 
Proceeds from borrowings   -    301,000 
Interest paid   (954,923)   (398,837)
Payments associated with issue of share capital   (34,004)   - 
Net cash outflows from financing activities   (12,586,370)   (96,362)
           
           
Net decrease in cash and cash equivalents held   (1,098,308)   (1,053,803)
           
Effects of foreign exchange on cash balances   (2,306)   (65,628)
Cash and cash equivalents at beginning of period   2,654,812    2,062,720 
Cash and cash equivalents at end of period   1,554,198    943,289 

 

The above Consolidated Cash Flow Statement should be read in conjunction with the accompanying notes.

 

- 7 - 

 

 

SAMSON OIL & GAS LIMITED

 

consolidated Statement of Changes in Equity

for the half-year ended 31 December 2016

 

 

 

   Contributed Equity   Accumulated Losses   Foreign Currency Translation Reserve   Share Based Payments Reserve   Equity Reserves   Total 
   $   $   $   $   $   $ 
At 1 July 2015   98,296,001    (88,703,374)   2,094,038    5,276,872    (1,097,780)   15,865,757 
Loss for the period   -    (15,882,507)   -    -    -    (15,882,507)
Other comprehensive expense   -    -    (64,160)   -    -    (64,160)
Total comprehensive expense for the period   -    (15,882,507)   (64,160)   -    -    (15,946,667)
Issue of share capital   1,475    -    -    -    -    1,475 
At 31 December 2015   98,296,001    (104,585,881)   2,029,878    5,276,872    (1,097,780)   (80,910)
                               
At 1 July 2016   99,523,411    (100,070,306)   2,025,500    5,276,872    (1,097,780)   5,657,697 
Loss for the period   -    (2,112,780)   -    -    -    (2,112,780)
Other comprehensive expense   -    -    (10,243)   -    -    (10,243)
Total comprehensive expense for the period   -    (2,112,780)   (10,243)   -    -    (2,123,023)
Share based payments   159,506    -    -    123,389    -    282,895 
Costs associated with issue of share capital   (34,004)   -    -    -    -    (34,004)
At 31 December 2016   99,648,913    (102,183,086)   2,015,257    5,400,261    (1,097,780)   3,783,565 

 

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

  

- 8 - 

SAMSON OIL & GAS LIMITED

Notes to the Half-Year Financial Statements

31 December 2016

 

1.Corporate Information

 

The condensed consolidated interim financial report of Samson Oil & Gas Limited (“the Company”) and its controlled entities together, the “Consolidated Entity” for the half-year ended 31 December 2016 was authorised for issue in accordance with a resolution of the directors on 15 March 2017.

 

Samson Oil & Gas Limited is a company incorporated in Australia and limited by shares, which are publicly traded on the Australian Stock Exchange (ASX code “SSN”).

 

On 7 January 2008 the Company commenced trading of its American Depositary Shares (“ADS’s”) on the NYSE Mkt (previously known as NYSE Amex). Each ADS represents 20 ordinary Samson shares.

 

2.BASIS OF PREPARATION OF HALF-YEAR REPORT

 

The half-year consolidated financial report has been prepared in accordance with the requirements of the Corporations Act 2001 and Accounting Standard AASB 134 Interim Financial Reporting.

 

The half-year financial report does not include all notes of the type normally included within the annual financial report. Accordingly, this report is to be read in conjunction with the annual report for the year ended 30 June 2016 and any public announcements by Samson Oil & Gas Limited during the interim reporting period in accordance with the continuous disclosure requirements of the Corporations Act 2001.

 

The accounting policies adopted are consistent with those of the previous financial reporting year and corresponding interim reporting period.

 

The financial report is presented in United States Dollars (US$).

 

New and amended standards adopted by the group

 

New or amended Accounting Standards and Interpretations adopted

 

The Consolidated Entity has adopted all of the new or amended Accounting Standards and Interpretations issued by the Australian Accounting Standards Board (‘AASB’) that are mandatory for the current reporting period.

 

Going concern

 

These financial statements have been prepared on the going concern basis, which contemplates the continuity of normal business activities and the realisation of assets and settlement of liabilities in the normal course of business.

 

As disclosed in the financial statements, the Consolidated Entity incurred a net loss of $2,112,780 and had net cash outflows from operating activities of $541,285, for the half year ended 31 December 2016. As at that date, the Consolidated Entity had net current liabilities of $25,347,790. The Consolidated Entity’s ability to continue as a going concern is dependent on the renegotiation of its finance facilities and in the absence of a successful renegotiation, the divestment of assets.

 

These factors indicate material uncertainty which may cast significant doubt as to whether the Consolidated Entity will continue as a going concern and therefore whether it will realise its assets and extinguish its liabilities in the normal course of business and at the amounts stated in the financial report.

 

The Directors believe that it is reasonably foreseeable that the Consolidated Entity will continue as a going concern and that it is appropriate to adopt the going concern basis in the preparation of the financial report after consideration of the following factor:

 

- 9 - 

SAMSON OIL & GAS LIMITED

Notes to the Half-Year Financial Statements

31 December 2016

 

-The Consolidated Entity has current borrowings payable under their credit facility and other borrowings of $23,001,609. Samson is currently negotiating with the Mutual of Omaha Bank in an effort to re-negotiate the terms of their facility, including the ability to draw down additional funds. While there can be no guarantee that the Consolidated Entity will be successful in negotiating a revision to its facility, the Directors are confident of a positive outcome, be it with Mutual of Omaha or another lending group. In the event the Consolidated Entity is unsuccessful in its attempt to renegotiate the finance facility, the Consolidated Entity could investigate a potential divestment of its recently acquired producing and non-producing wells in the Madison and Ratcliffe formations in North Dakota and Montana, formerly the Forman Butte Project.

 

Accordingly, the Directors believe that the Consolidated Entity will be able to continue as a going concern and that it is appropriate to adopt the going concern basis in the preparation of the financial report.

 

The financial report does not include any adjustments relating to the amounts or classification of recorded assets or liabilities that might be necessary if the Consolidated Entity does not continue as a going concern.

 

3.REVENUE, INCOME AND EXPENSES

 

         
   Half-year ended 31 December 
   2016   2015 
Revenue, income and expenses from operations  $   $ 
(a) Revenue          
Sale of oil and gas          
Oil sales   6,747,723    4,320,823 
Gas sales   208,278    426,959 
Other   26,573    28,547 
    6,982,574    4,776,329 
           
Cost of sales          
Lease operating expenses   5,060,846    2,831,170 
Depletion of oil and gas properties   689,234    2,792,066 
    5,750,080    5,623,236 
           
Other Income          
Finance revenue   276    2,202 
Other   -    17,902 
Gain on sale of asset *   1,747,742    - 
Gain on movement in derivative instruments   -    572,569 
Recoupment of costs previously expensed as a result of litigation   -    879,688 
    1,748,018    1,472,361 

 

* During the six months ended 31 December 2016, the Company sold its interest in the North Stockyard field for $15 million. The carrying value of the asset was $13.3 million at the time of the sale. The Consolidated Entity recognised a profit on sale of assets of $1.7 million after allowing for expenses. The effective date of the transaction was 30 October 2016, and subsequent there to, revenue and expenses attached to this asset ceased to accrue against the Consolidated Entity.

 

- 10 - 

SAMSON OIL & GAS LIMITED

Notes to the Half-Year Financial Statements

31 December 2016

 

3.REVENUE, INCOME AND EXPENSES (cont)

 

   Half-year ended 31 December 
     
   2016   2015 
        (b) Expenses  $   $ 
Employee entitlement   1,287,168    1,091,963 
Depreciation   72,870    64,309 
Consultants fees   193,326    137,114 
Lease payments   83,863    84,775 
Travel and accommodation   66,714    61,751 
Insurance   164,761    162,153 
Assurance and Advisory   306,915    68,820 
Investor Relations   52,310    142,841 
Legal fees   55,394    153,090 
Filing and listing fees   33,242    2,334 
Other   222,979    67,679 
Total   2,539,542    2,036,829 
           
           
(c) Finance Costs          
Interest expense   966,648    386,396 
Amortisation of borrowing costs   133,698    70,972 
Accretion of asset retirement obligation   139,231    35,550 
    1,239,577    492,918 

 

 4.

Impairment

 

   Half-year ended 31 December 
     
   2016   2015 
    $    $ 
           
Impairment expense   244,480    9,785,495 

 

During the period, the Consolidated Entity recognised impairment expense of $0.2 million. This related to the carrying value of our oil inventory purchased in the Foreman Butte acquisition.

 

An independent review by the Consolidated Entity’s reserve engineers, Netherland Sewell Associates Inc. was performed to assess the recoverable amount based on the net present value of the Consolidated Entity’s assets on a field by field basis (by cash generating unit). The factors used to determine net present value include, but are not limited to, recent sales prices of comparable properties, the present value of future cash flows, net of estimated operating and development costs using estimates of reserves, future commodity pricing, future production estimates, anticipated capital expenditures and various discount rates commensurate with the risk associated with realizing the projected cash flows. The discount rate used to assess the recoverable amount (based on the fair value less cost of disposal) was 10%. Samson’s current cost of debt is 3.98%, which is calculated as the LIBOR rate plus 3.75%.

 

- 11 - 

SAMSON OIL & GAS LIMITED

Notes to the Half-Year Financial Statements

31 December 2016

 

5.prepayments

 

   31-Dec-16   30-Jun-16 
   $   $ 
         
Other prepayments   320,390    183,305 
    320,390    183,305 

 

6.Exploration and evaluation assets

 

   31-Dec-16   30-Jun-16 
   $   $ 
         
Balance at beginning of period   220,703    3,880,220 
Costs capitalised during the period   40,400    508,111 
Costs expensed during the period   -    (4,167,628)
Balance at the end of the period   261,103    220,703 

 

The exploration and evaluation costs capitalized in the current year relates to expenditure incurred in relation to the Consolidated Entity’s Cane Creek project, in Grand and San Juan counties, Utah.

 

During the prior period, $4.2 million of previously deferred costs were expensed to the Income Statement. $1.3 million related to the Bluff well in the Hawk Spring project, $2.4 million relates to leasehold costs with respect to the Hawk Springs project, $0.5 million relates to work performed on the Spirit of America 1 and 11 wells in the Hawk Springs project and $0.1 million relates to the Badger well in the South Prairie project. This well was drilled during the period and failed to produce economic quantities of hydrocarbons.

 

The recoverability of the carrying value of deferred exploration and evaluation expenditure is dependent on the successful exploitation, or alternatively sale, of the respective areas of interest.

 

7.oil and gas properties

  

   31-Dec-16   30-Jun-16 
   $   $ 
Current Assets        
Assets held for sale   -    13,798,987 
           
Non Current Assets          
Oil and Gas Properties   46,319,084    45,215,057 
Accumulated Depletion and Impairment   (14,025,996)   (13,387,484)
    32,293,088    31,827,573 

 

- 12 - 

SAMSON OIL & GAS LIMITED

Notes to the Half-Year Financial Statements

31 December 2016

 

8.derivatives

 

The Company enters into derivative contracts, primarily collars, swaps and option contracts, to hedge future crude oil and natural gas production in order to mitigate the risk of market price fluctuations. All derivative instruments are recorded on the balance sheet at fair value. The Company has elected not to apply hedge accounting to any of its derivative transactions and consequently, the Company recognizes mark-to-market gains and losses in earnings currently, rather than deferring such amounts in other comprehensive income for those commodity derivatives that qualify as cash flow hedges.

 

At 31 December 2016, the Company’s commodity derivative contracts consisted of collars and fixed price swaps, which are described below:

 

Collar Collars contain a fixed floor price (put) and fixed ceiling price (call). If the market price exceeds the call

strike price or falls below the put strike price, the Company receives the fixed price and pays the market price. If the market price is between the call and the put strike price, no payments are due from the either party.

 

Fixed price swap The Company receives a fixed price for the contract and pays a floating market price to the counterparty over a specified period for a contracted volume.

 

All of the Company’s derivative contracts are with the same counterparty and are shown on a net basis on the Balance Sheet. The Company’s counterparty has entered into an inter-creditor agreement with Mutual of Omaha Bank, the provider of the Company’s credit facility, as such, no additional collateral is required by the counterparty.

 

Fair value is defined as the price that would be received in the sale of an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (exit price). The Company utilizes market data or assumptions that market participants would use in pricing the asset or liability, including assumptions about risk and the risks inherent in the inputs to the valuation technique. These inputs can be readily observable, market corroborated, or generally unobservable. The Company classifies fair value balances based on the observability of those inputs. There is an established fair value hierarchy that prioritizes the inputs used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (level 1 measurement) and the lowest priority to unobservable inputs (level 3 measurement).

 

The three levels of the fair value hierarchy are as follows:

 

Level 1—Quoted prices are available in active markets for identical assets or liabilities as of the reporting date. Active markets are those in which transactions for the asset or liability occur in sufficient frequency and volume to provide pricing information on an ongoing basis.

 

Level 2—Pricing inputs are other than quoted prices in active markets included in level 1, but are either directly or indirectly observable as of the reported date and for substantially the full term of the instrument. Inputs may include quoted prices for similar assets and liabilities. Level 2 includes those financial instruments that are valued using models or other valuation methodologies.

 

Level 3—Pricing inputs include significant inputs that are generally less observable from objective sources. These inputs may be used with internally developed methodologies that result in management’s best estimate of fair value.

 

 

- 13 - 

SAMSON OIL & GAS LIMITED

Notes to the Half-Year Financial Statements

31 December 2016

 

   Fair Value at 31 December 2016 
                     
   Level 1   Level 2   Level 3   Netting (1)   Total 
Current Assets                         
Derivative instruments   -    27,040    -    (27,040)   - 
                          
Non Current Assets                         
Derivative instruments   -    364,425    -    (364,425)   - 
                          
Current Liability                         
Derivative instruments   -    2,016,376    -    (27,040)   1,989,336 
                          
Non Current Liability                         
Derivative instruments   -    1,371,005    -    (364,425)   1,006,580 

 

   Fair Value at 30 June 2016 
                     
   Level 1   Level 2   Level 3   Netting (1)   Total 
Current Assets                         
Derivative instruments   -    136,726    -    (136,726)   - 
                          
Non Current Assets                         
Derivative instruments   -    220,316    -    (220,316)   - 
                          
Current Liability                         
Derivative instruments   -    1,808,380    -    (136,726)   1,671,654 
                          
Non Current Liability                         
Derivative instruments   -    1,453,393    -    (220,316)   1,233,077 

 

(1) Financial assets and liabilities are offset and the net amount reported in the balance sheet where the Consolidated Entity currently has a legally enforceable right to offset the recognised amounts, and there is an intention to settle on a net basis or realise the asset and settle the liability simultaneously. Agreements with derivative counterparties are based on an ISDA Master Agreement. Under the terms of these arrangements, only where certain credit events occur (such as default), the net position owing/ receivable to a single counterparty in the same currency will be taken as owing and all the relevant arrangements terminated.

 

9.DIVIDENDS PAID AND PROPOSED


No dividends have been paid or declared by the Company during the half-year or to the date of this report (half-year ended 31 December 2015: Nil).

 

- 14 - 

SAMSON OIL & GAS LIMITED

Notes to the Half-Year Financial Statements

31 December 2016

 

10.borrowings

  

   31-Dec-16   30-Jun-16 
Current  $   $ 
Credit Facility with Mutual of Omaha   18,902,557    11,500,000 
Promissory note from Oasis Petroleum   4,300,142    4,046,428 
less deferred borrowing costs   (201,090)   - 
    23,001,609    15,546,428 
           
Non - Current          
Credit Facility with Mutual of Omaha   -    18,665,227 
    -    18,665,227 

 

Borrowings have been classified as a current liability for the period ended 31 December 2016. The promissory note from Oasis Petroleum is due for repayment 31 March 2017 ($4,300,142) and the credit facility with Mutual of Omaha Bank is due 31 October 2017 ($18,902,557).

 

In addition, as at 31 December 2016, the Consolidated Entity was in breach of its general and administrative covenant relating to its credit facility with the Mutual of Omaha Bank.

 

As a result of the above, the amount of $18,902,557 is due and payable to the Mutual of Omaha, as at the reporting date. Whilst the Mutual of Omaha have not called upon the debt it is payable on demand.

 

The Consolidated Entity is currently negotiating with the Mutual of Omaha Bank to increase and extend the current facility based on the Company’s 31 December 2016 reserve report. The Directors anticipate completion by 31 March 2017. If successful, the increased facility will be used to repay the Oasis promissory note when it falls due on 31 March 2017.

 

The current borrowing base is $20 million, of which $18.9 million was drawn as at 31 December 2016. The Consolidated Entity drew down a further $1 million in February 2017.

 

11.CONTINGENCIES and commitments

 

Contingencies

 

There are no unrecorded contingent assets or liabilities in place for the Consolidated Entity at balance date (2015: $nil).

 

- 15 - 

SAMSON OIL & GAS LIMITED

Notes to the Half-Year Financial Statements

31 December 2016

  

12.contributed equity

 

Issued and paid up capital

 

   31-Dec-16   30-Jun-16 
   $   $ 
Ordinary fully paid shares   99,648,913    99,523,411 

  

Movements in contributed equity for the year  31-Dec-16 
   No. of shares   $ 
           
Opening balance   3,215,854,701    99,523,411 
Shares issued  (i)   67,005,600    231,139 
Less shares withheld   (15,256,600)   (71,633)
Transaction costs incurred   -    (34,004)
Shares on issue at balance date   3,267,603,701    99,648,913 
           
Shares to be issued as part of Kestrel acquisition (ii)   65,000    - 
Closing Balance   3,267,668,701    99,648,913 

 

(i)During the six months ended 31 December 2016, the Company issued 67,005,600 ordinary shares to Directors and employees in lieu of salary following the salary cuts taken from 1 August 2015 to 31 August 2016. The shares were valued on the day the shareholders approved the issue. Certain shares were withheld in order to pay the tax liability in the United States for US based employees and Directors. These shares will be held as Treasury Stock.

 

(ii)

In prior years, shares were issued to Kestrel shareholders as part of the offer to non-US resident shareholders whereby they received five Samson shares for every one Kestrel share held. The Samson share price on the acceptance date of the offer was deemed to be the fair value of the share. As at balance date acceptances had been received for 65,000 (2015:65,000) shares which have not yet been issued. These shares will be issued upon the presentation of Kestrel Share Certificates by the owner of the shares.

 

Share issue costs of $34,004 were incurred (half-year ended 31 December 2015:$nil).

 

The Company also issued 320,000,000 options to employees and Directors. 48,000,000 options have an exercise price of $0.007 and expiry date of 17 November 2026. 272,000,000 options have an exercise price of $0.0055 and expiry date of 17 November 2026. All options vest on 17 November 2017, assuming the employee or Director is still employed by the Company. The expense associated with the issue of the options will be recognised on a straight line basis over the vesting period.

 

- 16 - 

SAMSON OIL & GAS LIMITED

Notes to the Half-Year Financial Statements

31 December 2016

  

At the end of the half-year there were 640,615,486 (June 2016: 320,615,486) unissued ordinary shares in respect of which options were outstanding. Option holders do not have any right by virtue of the option to participate in any share issue of the Company or any related body corporate.

 

 2016                     
 Options   Balance at           Expired/   Balance at 
    the start of           forfeited/   the end of 
    the period   Granted   Exercised   other   the period 
                      
      320,615,486    320,000,000    -    -    640,615,486 
      320,615,486    320,000,000    -    -    640,615,486 

 

    Options  Exercise   Exercise 
       Price   Price 
        $0.007   $0.0055 
     Amount granted   48,000,000    272,000,000 
     Amount expensed   *$18,396     *$104,993  
     FV of Options  $134,902   $769,935 
                

 

  * Expense associated with the issue of options recognised on a straight line bases over the vesting period

 

13.OPERATING SEGMENTS

 

The Company has considered the requirements of AASB8 – Operating Segments and has identified its operating segments based on the internal reports that are reviewed and used by the board of directors (chief operating decision makers) in assessing performance and determining the allocation of resources.

 

During the financial period, the Company operated in one operating segment being oil and gas exploration, development and production in the United States of America.

 

14.events after the balance sheet date

 

Since the end of the half-year, the directors are not aware of any other matters or circumstances not otherwise dealt with in the report or financial statements that have, or may significantly affect the operations, the results of the operations, or the state of affairs of the Company or the Group in the subsequent financial year.

 

- 17 - 

SAMSON OIL & GAS LIMITED

Notes to the Half-Year Financial Statements

31 December 2016

 

In the directors’ opinion:

 

·The attached financial statements and notes thereto comply with the Corporations Act 2001, Accounting Standard AASB 134 ‘Interim Financial Reporting’, and the Corporations Regulations 2001 mandatory professional reporting requirements;

 

·The attached financial statements and notes thereto give a true and fair view of the Consolidated Entity’s financial position as at 31 December 2016 and of its performance for the financial half-year ended on that date; and

 

·There are reasonable grounds to believe that the Company will be able to pay its debts as and when they become due and payable.

 

Signed in accordance with a resolution of the directors made pursuant to section 303(5)(a) of the Corporations Act 2001.

 

/s/ Terry Barr

T. M. Barr

Director

 

Denver, Colorado

15 March 2017

 

- 18 - 

 

  

 

AUDITOR’S INDEPENDENCE DECLARATION

 

 

As lead auditor for the review of the financial report of Samson Oil & Gas Limited for the half-year ended 31 December 2016, I declare that, to the best of my knowledge and belief, there have been no contraventions of:

 

(i)       the auditor independence requirements of the Corporations Act 2001 in relation to the review; and

 

(ii)       any applicable code of professional conduct in relation to the review. 

 

  /s/ RSM Australia Partners
   
  RSM AUSTRALIA PARTNERS
   
   
   
   
  /s/ J A Komninos
   
Perth, WA J A KOMNINOS
Dated: 15 March 2017 Partner

 

  

 

 

 

 

 

- 19 - 

 

 

 

INDEPENDENT AUDITOR’S REVIEW REPORT

TO THE MEMBERS OF

SAMSON OIL & GAS LIMITED

 

 

We have reviewed the accompanying half-year financial report of Samson Oil & Gas Limited, which comprises the consolidated balance sheet as at 31 December 2016, and the consolidated statement of profit or loss and other comprehensive income, consolidated statement of changes in equity and consolidated cash flow statement for the half-year ended on that date, notes comprising a summary of significant accounting policies and other explanatory information, and the directors’ declaration of the consolidated entity comprising the company and the entities it controlled at the half-year end or from time to time during the half-year.

 

Directors’ Responsibility for the Half-Year Financial Report

 

The directors of the company are responsible for the preparation of the half-year financial report that gives a true and fair view in accordance with Australian Accounting Standards and the Corporations Act 2001 and for such internal control as the directors determine is necessary to enable the preparation of the half-year financial report that is free from material misstatement, whether due to fraud or error.

 

Auditor’s Responsibility

 

Our responsibility is to express a conclusion on the half-year financial report based on our review. We conducted our review in accordance with Auditing Standard on Review Engagements ASRE 2410 Review of a Financial Report Performed by the Independent Auditor of the Entity, in order to state whether, on the basis of the procedures described, we have become aware of any matter that makes us believe that the half-year financial report is not in accordance with the Corporations Act 2001 including: giving a true and fair view of the consolidated entity’s financial position as at 31 December 2016 and its performance for the half-year ended on that date; and complying with Accounting Standard AASB 134 Interim Financial Reporting and the Corporations Regulations 2001. As the auditor of Samson Oil & Gas Limited, ASRE 2410 requires that we comply with the ethical requirements relevant to the audit of the annual financial report.

 

A review of a half-year financial report consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with Australian Auditing Standards and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

 

Independence

 

In conducting our review, we have complied with the independence requirements of the Corporations Act 2001. We confirm that the independence declaration required by the Corporations act 2001, which has been given to the directors of Samson Oil & Gas Limited, would be in the same terms if given to the directors as at the time of this auditor’s report.

 

Conclusion

 

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 Samson Oil & Gas Limited is not in accordance with the Corporations Act 2001 including:

 

- 20 - 

 

  

(a)giving a true and fair view of the consolidated entity’s financial position as at 31 December 2016 and of its performance for the half-year ended on that date; and

 

(b)complying with Accounting Standard AASB 134 Interim Financial Reporting and Corporations Regulations 2001.

 

Material uncertainty related to going concern

 

We draw attention to Note 2 to the financial statements, which indicates that the consolidated entity incurred a net loss of $2,112,780 and had net cash outflows from operating activities of $541,285 for the half-year ended 31 December 2016. As at that date, the consolidated entity had net current liabilities of $25,347,790. These conditions, along with other matters as set forth in Note 2, indicate the existence of a material uncertainty which may cast significant doubt about the consolidated entity’s ability to continue as a going concern and therefore, the consolidated entity may be unable to realise its assets and discharge its liabilities in the normal course of business. Our opinion is not modified in respect of this matter.

 

  /s/ RSM Australia Partners
   
  RSM AUSTRALIA PARTNERS
   
   
   
  /s/ J A Komninos
   
Perth, WA J A KOMNINOS
Dated: 16 March 2017 Partner

 

 

 

 

 

- 21 - 

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