TAMA OILG For the year ended 30 June 2015
ContentsCHAIRMAN'S LETTER TO SHAREHOLDERS 3
AUDITOR'S INDEPENDENCE DECLARATION 24
CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME 25
CONSOLIDATED STATEMENT OF FINANCIAL POSITION 26
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY 27
CONSOLIDATED STATEMENT OF CASH FLOWS 28
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 29
INDEPENDENT AUDIT REPORT TO THE MEMBERS 58
SHAREHOLDER INFORMATION 69
Corporate DirectoryDirectors | Alexander Parks - Managing Director Brett Lawrence - Executive Director Justin Norris - Non-Executive Director |
Company Secretary | Sylvia Moss |
Registered & Principal Office | Level 7, 1008 Hay Street Perth WA 6000 Telephone: + 61 8 9389 2000 Facsimile: + 61 8 9389 2099 |
Postal Address | PO Box 7209 Cloisters Square WA 6850 |
Auditors | BDO Audit (WA) Pty Ltd 38 Station Street Subiaco WA 6008 |
Solicitors | GTP Legal Level 1, 28 Ord St West Perth WA 6005 |
Website Address | www.tamaska.com.au |
Stock Exchange Listings | Tamaska Oil & Gas Ltd securities are listed on the Australian Stock Exchange under the code TMK |
Share Registry | Automic Registry Services Level 1, 7 Ventnor Avenue West Perth WA 6005 Telephone: +61 8 9324 2099 Facsimile: + 61 8 9321 2337 |
It has been a turbulent year for the oil industry, the rapid fall in oil prices and resulting market sentiment has been felt widely. Tamaska and joint venture partner in the Montney Project Transerv Energy (JV) capitalised on the downturn by acquiring petroleum exploration rights in the Montney resource play in British Columbia, Canada at competitive prices.
The Montney formation is located in north-east British Columbia and adjoining parts of Alberta and was originally known as one of the most productive and low cost natural gas plays in Canada. The liquids-rich parts of the Montney play emerged and began to be developed in late 2013 and 2014. Following some exceptional results, the liquids-rich Montney has become one of the most commercially attractive unconventional plays in North America.
Like other unconventional plays, the heterogeneous nature of reservoir quality and liquids content within the Montney creates sweet-spots both laterally and vertically within prospective areas. Using an extensive digital well-log dataset of over 10,000 wells, the JV identified new potential liquids sweet-spots in the play using a regional Common Risk Segment Mapping approach.
The JV identified and has established a position of 92 Land Sections (25,035 Ha) in three liquids-rich areas along the trend. All three of the new areas have yielded impressive drilling results from near-by operators in 2015 which has begun to de-risk the newly identified areas.
As the industry adapts to lower oil prices, there is an emphasis placed on developing the best of the North American unconventional plays. The Montney is one of the most economically robust of the plays and the land secured by Tamaska is interpreted to be in the liquids-rich areas further enhancing its potential value.
The next steps for the project are to monitor drilling results in nearby areas, incorporating results into ongoing geoscience studies and seek to enter into a partnering arrangement in respect of the project with a reputable Canadian company to move to the drilling phase of the project.
The Directors resolved to demerge the Montney project in order to preserve project value and maximise the chance of commercialisation of this asset. The Montney is not well known outside of North America, and the value is considered unlikely to be recognised in the Australian market in the near term. Both Tamaska and Transerv have severally resolved to demerge their Canadian assets subject to shareholder approval. Please refer to the Notice of Meeting dated 17 August 2015 for more details.
To effect the demerger, Tamaska has incorporated a new subsidiary, TMK Montney Limited. Shareholders approved the demerger at a meeting held on 15 September 2015 and subject to the Company obtaining the appropriate ATO Rulings, TMK Montney will be transferred 100% of Warren (a subsidiary of Tamaska which holds a 40% interest in the Montney project) in return for issuing TMK Montney Shares to Tamaska. The total of 71,400,000 TMK Montney shares on issue will then be distributed by Tamaska to shareholders on a 1 for 10 basis (an in-specie distribution).
The Directors are of the view that the following advantages make the demerger attractive:
Shareholders will retain their current shareholding in Tamaska and also receive a proportional share holding in TMK Montney with a book value of 0.68 cents per Tamaska Share held.
Tamaska will be free to pursue new business opportunities likely to achieve greater recognition on the ASX, without diluting Shareholder's interests in the Montney Asset.
In an unlisted structure, the underlying value of the Montney Asset can be unlocked over time and with low overheads and minimal dilution to shareholders.
The Company anticipates an ATO class ruling to confirm the tax implications for shareholders will be received in early October and the demerger will be completed thereafter.
The Company's other assets have also progressed during the year. The West Klondike well was brought on-stream in September 2014 with the lower most zone producing 0.3 bcf and 3,000bbls of condensate (gross). The well was shut-in due to low flowing pressure in June 2015. In August 2015 the well was assessed with wireline and shown to be partially filled with sand and sediment which appears to be what was restricting the production. Subject to benefit analysis by the Operator, the well will be cleaned out with coiled tubing and placed back on production either from the current zone or from one of the higher zones.
Production has also continued from the Fusselman oil project. Whilst the production is modest (~20bopd gross), the production has a low decline rate. The Operator has negotiated lower operating costs, particularly water disposal costs and the project remains cash flow positive down to approximately US$40/bbl.
Following the successful demerger of the Montney project Tamaska will seek a new opportunity to add shareholder value. To this end Tamaska has announced a Rights Issue to raise approximately $2.14 million on a 3 for 2 basis at 0.2 cents per share.
In summary, over the past year the Company has secured a low cost project with high potential value in the emerging Montney resource play. The Companywill distribute this directly to shareholders via the planned demerger, with plans to monetise over the coming years. With $2million in new funds, the Company will seek to repeat this value creation for shareholders, with an emphasis on finding a project more likely to be recognised in the Australian market.
I would like to thank the shareholders for their continuing supporting of the Company over the past year, and look forward to an exciting future in identifying and commercialising new opportunities.
Yours faithfully,
Alexander Parks Managing Director
Review of OperationsCorporate Activities
In mid-late 2014 a renounceable rights issue was undertaken to raise $6.4 million before costs at a price of 1 cent per share. The Company used the funds raised to pay for the completion of the West Klondike well and production facilities, pay off short term debts and invest in the Montney Project.
The Board restructured and reduced Director fees and hours to minimise overheads and best capture the expertise to take the Company forward in a difficult market, ensuring the maximum possible funds could be invested to capture value for shareholders.
Tamaska's capital structure as of 31 August 2015 is summarised as:
Security | Price & Date | Number on Issue |
Ordinary Shares on Issue (ASX:TMK) | 0.5 cents (Last trade at 31 August 2015) | 714 million |
Unlisted Options | 1.6c exercise price, expiring March 2019 | 180 million |
Unlisted Options | 15c exercise price, expiring October 2017 | 3 million* |
At 0.5 cents per share the Company's market capitalisation is A$3.57 million.
*These options will be cancelled prior to the Demerger
Following Shareholder approval and receipt of ATO Class Ruling the Company will return the Montney project directly to Shareholders via the in-specie distribution of 71.4 million TMK Montney Ltd Shares on a 1 for 10 basis. The book value of these shares is 6.8c/share (0.68 cents per TMK share).
As part of the Demerger, the Company has sort rulings from the Australian Taxation Office as follows:
Company Projects
Montney Resource Play Project, British Columbia 40% Working Interest (to be demerged)
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The Montney Play
The Montney is a Lower Triassic aged formation in the Western Canadian Sedimentary Basin extending over 180,000 square kilometres from north-east British Columbia to north-west Alberta, Figure 1. The siltstones of the Montney Formation form part of the Western Canada 'Deep Basin' system, a pervasive hydrocarbon system of organic rich shales and siltstones where tight reservoirs exist in close proximity to matured hydrocarbon expelling source rocks.
Like the Eagle Ford, Utica Shale, and other unconventional plays in North America, the Montney has dry gas, liquids- rich gas, and oil windows. As the generated hydrocarbons are in-situ, or in very close proximity to the mature source rocks, the system becomes 'inverted' from the conventional sense so that water sits above the oil window, which in turn sits above increasingly dryer gas with depth (Figures 1 and 2).
Figure 1 - Location of the Montney Siltstone Play (Western Canada)
Figure 2 - Representative cross section across the Western Canadian Sedimentary Basin illustrating the 'Deep Basin' hydrocarbon system Review of Operations -
Context
Liquids-rich parts of the Montney in north-east British Columbia emerged and began to be developed in late 2013 and 2014. Following some exceptional results in liquids-rich areas the Montney was thrust on to the scene as one of the most commercially attractive and compelling unconventional prospects in North America. A rush to find where new liquid-rich sweet-spots might emerge along the play ensued as existing and aspiring Montney companies started assessing new areas for land acquisition.
Like other unconventional plays, the heterogeneous nature of reservoir quality and liquids content within the Montney creates sweet-spots both laterally and vertically within the Land Section. Using an extensive digital well- log dataset of over 10,000 existing public domain wells, the JV aimed to identify potential new liquids sweet-spots in the play using a regional Common Risk Segment Mapping approach.
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Sweet-spot Mapping
The first step in understanding the play was to characterise and isolate the interpreted play components of the system. Studying the more than 3,500 horizontal wells currently producing in the play allowed the JV to develop an understanding of what the key components of the hydrocarbon system were. Proven and potential 'sweet-spots' became apparent as the play components were 'stacked'. Following the sweet-spot mapping process several areas
were high graded for targeted land acquisition,
Figure 3 - Sweet-spot mapping for areas of high liquids potential in the Montney Play. The key components mapped spatially included Porosity, Resistivity, Pressure, Liquids-Gas ratio and above ground considerations such as terrain and infrastructure. The resultant 'stacked' map identifies potential 'sweet-spots' within the play.Following the detailed regional play fairway analysis the JV has developed a current acreage positon of 92 Land Sections (25,035 Ha) in three recognised liquids-rich areas. All three of the new areas have yielded impressive drilling results from near-by operators in 2015 which has already begun to de-risk the newly identified areas,
Figure 4 - Emerging and Proven Liquids-rich areas of the Montney Play in British Columbia, Canada -
Calculating Recovery Potential
Calculating estimated ultimate recovery (EUR) and recovery factor (RF) in unconventional plays is challenging because the RF and resultant EUR is dependent on how the resource is developed (e.g. well density, horizontal length, and fracking technique). By calibrating the geological drivers to known nearby production, and assuming equivalent development density, completion design, and production results, an interpretation of how recovery may change spatially due to geological variations is possible. This is a useful exercise used for sweet-spot identification, however, it does not produce reportable resource estimates.
Review of Operations - Summary
The JV has used an internally developed calibrated approach to identifying potential sweet-spots in the Montney and subsequently quantify the resource potential.
The resource potential of the play has been identified using calibrated reservoir characteristics and production performance from key nearby wells, multi-attribute cross-plot analysis, and mapping of the key geological play components. The approach combines efficient data manipulation of the Canadian public data system with the Common Risk Segment Mapping method.
The JV believes that this detailed, multi-layer technical approach is likely to have identified the best available sweet- spots in the liquids-rich Montney play (which have now been acquired), and this will be recognised and proven-up over time.
West Klondike Project, Wilbert Sons LLC #1 well, Iberville Parish, Louisiana (10.2% Working Interest)
The Wilberts Sons LLC #1 exploration well on the West Klondike Prospect in Louisiana drilled to its total depth of 10,900ft on 13 December 2012. Electric logs confirmed it as a discovery well with material net pay in 2 separate target horizons, with 4ft in the Lario sands, 6ft in the U Nod Blan and 35ft in the Lower Nod Blan sands. Production from the base member of the Lower Nod Blan commenced in September 2014.
Due to non-participation by one of the JV partners in the facilities and pipeline program, Tamaska has increased its contributing and beneficial interest to 11.4%. This increase will revert back to the original owner following 400% recovery of the incremental programs cost to the Company.
Gross production from the well declined during the final quarter of FY15 due to water encroachment. The well was shut in on 15th June 2015. Well intervention in August showed that sand was filling the lower part of the completion covering the Lower and Upper Nod Blan intervals. The operator is conducting studies to determine the best course of action. The well will potentially be cleaned out and the second gas zone produced (contingent resources) or the well will not be cleaned out and the next completed zone will be the Lario oil sand (partly 2P/Probable reserves and 2C contingent resources).
FY15 (9 Months) | FY 16 (8 months) | |
Actual | Forecast | |
Net Produced gas MMscf Net Produced bbls | 33,766 349 bbls | 25,000 ~250 bbls |
Net Revenue after Royalty and well head taxes (US$) | ~$64,605 | ~$53,200 |
Operating Costs (US$) excluding workovers | ~$29,722 | ~$20,800 |
Tamaska3 currently estimates the reserves as follows:
Estimated Ultimate Recovery | 100% Cumulative production as at 30/06/2015 | 100% Reserves estimated as at 1/07/2015 | Net TMK Reserves at 11.4% Beneficial interest estimated as at 1/07/2015 | |
Proven Developed Producing (1P) Lower Nod Plan Produced and shut in | 297MMscf 3,073 bbls | 297MMscf 3,073 bbls | 0 | 0 |
Remaining Zones Probable (2P) | 60MMscf 98,570 bbls | 0 0 | 60MMscf 98,570bbl | 7MMscf 11,200bbls |
2C Contingent Resources | 1,500MMscf 470,000bbls | 0 0 | 1,500MMscf 470,000bbls | 170MMscf 53,000bbls |
Fusselman Project - Clayton Johnson #3F Well, Borden County, Texas (12.5% Working Interest)
The Fusselman Well, Clayton Johnson #3F, operated by Marshfield Oil & Gas, was drilled to its total depth of 9,883ft on 3 January 2013. Tamaska holds a 12.5% working interest in the Fusselman Project in Borden County, Texas.
Production commenced from the #3F well on 23 January 2013. Production from the well is with a pump jack (nodding donkey) and is a mixture of oil and formation water. After approximately 50% downtime in April and May due to weather in Texas, June and July have had good uptime and the oil rate has climbed to approximately 20bopd on a gross basis. The well has a low inherent decline rate and production can potentially continue for years. The current production costs equate to approximately US$35-40/bbl so whilst modest, the production is forecast to provide positive income for the next financial year.
FY14 (12 Months) | FY15 (12 Months) | FY 16 (12 months) | |
Actual | Actual | Forecast | |
Net Produced bbls | 1,046 bbls | 1,026 bbls | ~500 bbls |
Net Revenue after Royalty and well head taxes (US$) | $70,305 | ~$51,650 | ~$25,000 |
Operating Costs (US$) excluding workovers | $33,751 | ~$52,094 | ~$20,000 |
Tamaska3 currently estimates the reserves as follows:
Estimated Ultimate Recovery | Cumulative production as at 30/06/2015 | 100% Reserves estimated as at 1/07/2015 | Net TMK Reserves at 12.5% WI estimated as at 1/07/2015 | |
Barrels | Barrels | Barrels | Barrels | |
Proven Developed Producing (1P) | 26,640 | 22,916 | 3,724 | 466 |
Probable (2P) | 42,438 | 22,916 | 19,522 | 2,440 |
3All of the technical information, including information in relation to reserves and resources that is contained in this document has been reviewed internally
by the Company's Managing Director, Mr Alexander Parks. Mr Parks is a Petroleum Engineer who is a suitably qualified person with over 15 years' experience in assessing hydrocarbon reserves and has reviewed the release and consents to the inclusion of the technical information.
Review of OperationsDuvernay Shale and Rock Creek Acreage, Alberta Canada (8/16% Working Interest)
Tamaska holds a 16% interest in Rock Creek Oil rights and 8% interest in Duvernay Shale rights in approximately 87 licences in Central Alberta, Canada. Together with JV partners, the Company selectively relinquished some lower value acreage to the Crown as rent fell due during the year. The remaining Duvernay acreage is included in the package to be demerged. TMK Montney Ltd will continue to try and commercialise this acreage or drop the lands as rent falls due.
Directors' ReportYour Directors present their report on the consolidated entity (Group) for the year ended 30 June 2015.
Directors
The names and details of the Company's Directors in office at any time during the financial year and until the date of this report are detailed below.
Alexander Parks
Brett Lawrence (appointed 1 February 2015)
Justin Norris (appointed 23 October 2014)
Brett Mitchell (resigned 1 February 2015)
Mark Freeman (resigned 1 February 2015)
Principal Activities
The principal continuing activities of the Group during the financial year was the acquisition, exploration and production of petroleum and gas properties.
There were no changes in the nature of the activities of the group during the year.
Operating Results
The net operating loss of the Group for the year ended 30 June 2015 after income tax amounted to $1,698,435 (2014: Loss
$3,954,977).
Dividends Paid or Recommended
No dividend was paid or declared during the year and the Directors do not recommend the payment of a dividend.
Review of Operations
Information on the operations and corporate activities of the group and its business strategies and prospects is set out in the review of operations and activities on page 5 of this financial report.
Significant Changes in the State of Affairs
There were no significant changes in the state of affairs during the year.
Events since the end of the financial year Corporate
On 10 June 2015 the Company announced the establishment of a share sale facility for holders of less than a
marketable parcel of shares. The closing date for Share Retention forms was 29 July 2015. In total, 612 shareholders (representing 8,805,677 shares) participated in the facility and those with registered bank accounts with Automic have received the proceeds from the sale of these shares by the Company.
On 16 July 2015 the Company announced that 32,600,000 listed options, exercisable at 50c per option, were due to expire on 17 August 2015. These options have now lapsed. As announced with the demerger documentation 3,000,000 options are due to be cancelled after year end.
Subsequent to year end the directors resolved to demerger the group's Canadian assets. These assets will be transferred to a new subsidiary 'TMK Montney Limited' following the appropriate approval from shareholders and ATO tax rulings obtained. Under the strategic direction of the new entity Tamaska will seek new opportunities for these assets and hope to attract a new farm-in partner to pursue further exploration at the prospects.
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