Tlou Energy Limited

A.B.N. 79 136 739 967

Consolidated Financial Statements

for the half-year ended 31 December 2023

Tlou Energy Limited - Half-year report December 2023

Corporate Directory

ABN

79 136 739 967

Directors

Martin McIver

Anthony Gilby

Gabaake Gabaake

Colm Cloonan

Hugh Swire

Company Secretary

Solomon Rowland

Administration & Registered Office

210 Alice Street

Brisbane

QLD 4000

Australia

Telephone:

+61 7 3040 9084

Auditors

BDO Audit Pty Ltd

Level 10

12 Creek Street

Brisbane QLD 4000

Bankers

Westpac Banking Corporation

GPO Box 3433

Sydney NSW 2001

Share register

Australian Securities Exchange Ltd (ASX Code: TOU)

AIM Stock Exchange UK (AIM Code: TLOU)

Botswana Stock Exchange (BSE Code: TLOU)

Page 2

Tlou Energy Limited - Half-year report December 2023

Contents

Directors' report

4

Auditor's independence declaration

9

Consolidated statement of comprehensive income

10

Consolidated statement of financial position

11

Consolidated statement of changes in equity

12

Consolidated statement of cash flows

13

Notes to the consolidated financial statements

14

Directors' declaration

21

Independent auditor's review report

22

Page 3

Tlou Energy Limited - Half-year report December 2023

Directors' report

The Directors present their report, together with the financial statements, on the consolidated entity (referred to hereafter as the

'consolidated entity' or the 'Group') consisting of Tlou Energy Limited (referred to hereafter as the 'Company' or "Tlou") and the entities it controlled at 31 December 2023.

Directors

The names of the directors who held office at any time during the half-year and up to the date of this report are:

Martin McIver

Non-Executive Chairman

Anthony Gilby

Managing Director & Chief Executive Officer

Gabaake Gabaake

Executive Director

Colm Cloonan

Finance Director

Hugh Swire

Non-Executive Director

Directors have been in office since the start of the half-year to the date of this report unless otherwise stated.

Principal Activities

The principal activity of the consolidated entity is to explore and evaluate power solutions in Sub-Saharan Africa through Coalbed Methane (CBM) gas-fired power. No revenue from these activities has been earned to date, as the consolidated entity is still in the exploration and evaluation or pre-development stage.

There have been no significant changes in the nature of the group's principal activities during the half-year.

Review and results of operations

The loss for the half-year after income tax amounted to $1,821,374 (December 2022 loss $2,245,259). Information on operations and results during the period are set out below.

Lesedi Project

The Lesedi Project consists of four Prospecting Licences (PL) and a Production Licence. The first stage of development is a 10MW power generation facility which will be located in the Company's Production Licence area.

The status of the Lesedi licences is as follows:

Licence

Expiry

Status

Production Licence 2017/18L

August 2042

Current

PL 001/2004

TBA

Awaiting renewal

PL 003/2004

TBA

Awaiting renewal

PL 035/2000

March 2025

Current

PL 037/2000

March 2025

Current

PL renewal applications are submitted three months prior to expiration. Renewal applications were submitted for PL001/2004 and PL003/2004 in June 2023. The Company has been informed that following a processing delay at the relevant department the renewed licences are expected to be issued in March 2024.

Lesedi Gas-to-Power project

The Lesedi project is Tlou's most advanced. At Lesedi the Company is developing a proposed 10MW gas-to-power project. The first electricity to be generated at Lesedi is planned to go towards satisfying the 10MW Power Purchase Agreement (PPA) with Botswana Power Corporation (BPC), the national power utility. The Lesedi project has several components of the development process either completed or ongoing including the construction of transmission lines, substations, a field operations facility and generation site as well as production wells.

Transmission Line Construction

The Lesedi project was approximately 100km from the nearest BPC substation connection in Serowe. To connect to the national grid, the Company had to construct a 100km 66kV transmission line. This, together with associated infrastructure and gas production wells should enable the Company to connect and provide electricity into Botswana's power network. Construction of the 66kV transmission line has been completed by the contractor Zismo Engineering Pty Ltd (Zismo). Minor finishing works and the addition of switchgear at the Serowe substation will be done prior to the line being energised. The line is planned to remain under care and maintenance until energisation, which is expected around mid-2024.

Substation Construction

In addition to the transmission line, an electrical substation is required at the Lesedi end of the transmission line whereas at the opposite end the line has been connected to the existing BPC substation at Serowe. The substation at Lesedi was initially designed for the first 5MW of power, however during the half year the Company changed the design to facilitate expansion beyond 10MW. This will be beneficial as the projects grows. The connection at Serowe is complete and the Lesedi substation is approximately 38% complete. It is currently anticipated that the work will be completed around mid-2024.

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Tlou Energy Limited - Half-year report December 2023

Directors' report continued

Future gas production

The Company has two gas production pods, Lesedi 4 and Lesedi 6 currently flaring gas. During the reporting period, the Company completed a redrill of both lateral wells of the Lesedi 4 production pod. The aim of redrilling the lateral wells was to provide straighter lateral sections using a specialist rotary steerable system (RSS). The lateral sections were drilled for approximately 700m and successfully intersected with the Lesedi 4P vertical production well. These straighter laterals are expected to assist with removing water from the reservoir to more efficiently dewater and flow gas. Also during the period a new production pod, Lesedi 6, was completed. The RSS was also used for the lateral sections of this production pod. Post drilling, both Lesedi 4 and Lesedi 6 pods had production equipment installed to commence dewatering ahead of gas production.

Lesedi 6 experienced a rapid increase in casing pressure in both lateral wells with first gas production to surface occurring soon thereafter. The rapid build-up of casing pressure and production of first gas to surface in a relatively short time was very encouraging. This was the fastest gas to surface in the Lesedi field to date.

Lesedi 4 and Lesedi 6 continue to flow gas as the water level is being gradually lowered to just above the coal. Once the wells stabilise and stop surging (gas and water), gas flow rates will be measured. Tlou is confident that with the in-house knowledge gained from previous drilling efforts, extracting more and more gas out of the coal reservoir will become progressively simpler and more cost effective due to economies of scale.

Mamba Project

The Mamba project is in the exploration and evaluation phase with further operations required on the licences. It consists of five Prospecting Licences covering an area of approximately 4,500 Km2. The Mamba area is situated adjacent to Lesedi. In the event of successful drilling results at Mamba, it is envisioned that this area would be developed as a separate project from Lesedi. The Mamba area provides the Company with flexibility and optionality. The status of the Mamba licences is as follows:

Licence

Expiry

Status

PL 237/2014

December 2025

Current

PL 238/2014

December 2025

Current

PL 239/2014

December 2025

Current

PL 240/2014

December 2025

Current

PL 241/2014

TBA

Awaiting renewal

PL renewal applications are submitted three months prior to expiration. A renewal application for PL 241/2014 was submitted in June 2023. The Company has been informed that following a processing delay at the relevant department the renewed licence is expected to be issued in March 2024. Further work on the Mamba project is proposed once the Lesedi project is in production. The next stage of operations is likely to include a seismic survey and the drilling of core-holes.

Boomslang Project

Prospecting Licence, PL011/2019 designated "Boomslang", is approximately 1,000 Km2 and is situated adjacent to the Company's existing licences. To date, the Company has not carried out ground operations in the Boomslang area. Like the Mamba project the first stage of operations is likely to include a seismic survey following by core-hole drilling. The status of the Boomslang licence is as follows:

Licence

Expiry

Status

PL 011/2019

June 2024

Current

PL renewal applications are submitted three months prior to expiration.

Significant changes in the state of affairs

During the half-year ended 31 December 2023, there were no other significant changes to the state of affairs of the consolidated entity other than those stated above and disclosed in the financial report and notes thereof.

Matters subsequent to the end of the half-year

In February 2024, the Company issued 32,554,360 ordinary shares at $0.035 per share, raising $1,139,403. The total number of issued shares following this capital raising is 1,076,536,717. Also, on 31 January 2024, 2,275,000 performance rights lapsed.

Other than the matters discussed in this report, there has not arisen in the interval between the end of the half-year and the date of this report any item, transaction or event of a material and unusual nature likely, in the opinion of the directors, to affect significantly the operations of the group, the results of those operations or the state of affairs of the group in subsequent financial periods.

Page 5

Tlou Energy Limited - Half-year report December 2023

Directors' report continued

Likely developments and expected results of operations

The Company has drilled two wells in the Lesedi project area which have produced CBM gas. These wells are planned to be the first two gas producing wells that will be used to generate power at the Lesedi project. These wells were designed to achieve enhanced gas flow rates in the area proposed for the Company's initial project development. The gas flow rates from these wells are vitall y important to assess the viability of the Lesedi project and the Company is yet to confirm commercial gas flow rates and there is no guarantee that the required rates can or will be achieved. In addition, further wells flowing commercial gas volumes will be required to produce sufficient gas for the planned Lesedi project.

The Company is advancing plans to develop ancillary projects in addition to the gas-fired power project. These projects may be subject to regulatory approvals. No guarantee can be given in relation to the results of the Company's operations, gas flow rates, re gulatory approvals being granted or the ability to secure the funds required to progress all or any of the Company's existing or planned operations.

The Company is subject to risks which may have a material adverse effect on operating and financial performance. Tlou's Risk Management Policy can be found on the Company's website. It is not possible to identify every risk that could affect the busi ness or shareholders. Any actions taken to mitigate these risks cannot provide complete assurance that a risk will not materialise or have a material adverse effect on the business, strategies, assets or performance of the Company. A list of risks currently considered material and mitigation strategies are set out below. This is not an exhaustive list and risks are outlined in no particular order.

Risk

Description

Mitigation

Funding

The Company will need to raise additional debt and/or

The Company has operated in Botswana for over a

equity funds to support its ongoing operations or

decade with extensive local and international

implement its planned activities and strategies. This

relationships with investors who have supported the

includes but is not limited to funding to complete the

Company.

infrastructure necessary to connect to the power grid

and generate electricity at the Lesedi project and funds

The Company actively manages its capital

to facilitate drilling of additional gas wells to deliver

requirements and maintains close relationships with

sufficient gas for development of the proposed 10MW

potential investors. The Company continues to

power project. There can be no assurance that such

explore sources of both equity and debt capital.

funding will be available when required or on

satisfactory terms or at all. Inability to find sufficient

funds may result in the delay or abandonment of

certain activities which would likely have an adverse

effect on the Company's progress.

Health and

The project operations are in a remote location, in a

The Company employs highly skilled and

Safety

sometimes-harsh environment and involves the use of

experienced personnel where possible. The Chief

heavy machinery and equipment.

Operations Officer is supported by a dedicated

Safety, Health and Environment (SHE) officer and a

paramedic is also on duty at all times at the field

operations. The Company has a training and safety

management system and external audits of the

safety management system are conducted. All

visitors to site are given a safety briefing.

Page 6

Tlou Energy Limited - Half-year report December 2023

Directors' report continued

Freedom to

The Company has licences to operate over 8,000

The Company continues to support regular and

Operate

square km and has had continued access to key

extensive Government engagement activities to

licence areas when required. Negative sentiment

interest and educate lawmakers to the country's

towards the project or industry may impair Tlou's

natural resource opportunities as well as keep up to

freedom to operate. Changes to key Government

date with changing national power strategies and

personnel and/or national policy could also impact

requirements.

ability to operate effectively.

Tlou supports and interacts with a wide network of

local stakeholders including farmers and

landowners to try and ensure that the needs of the

community are being met and that the project can

provide benefits for all stakeholders including

providing long term and sustainable employment

opportunities.

Environment

Botswana's natural habitat, water and wildlife needs to

Tlou has full environmental approval in place for

be protected. Botswana rigorously enforces its

development of the gas-to-power project. The

environmental regulations so the risk of fines or other

Company aims to not just meet environmental

liabilities for noncompliance is commensurately high.

requirements but exceed them.

The Company uses local specialists to support its

ongoing permit renewals, environmental

assessments and licence applications. Continual

monitoring of actual and potential impacts on the

environment is practiced to try and ensure that any

impact on the natural habitat is eliminated or

minimised.

Climate

Climate change initiatives could have an impact on

Tlou's Lesedi gas-to-power project aims to be part

Tlou's operations in the future. Climate initiatives could

of a power market in sub-Saharan Africa that will

have a material impact on fossil fuel projects such as

move away from carbon intensive coal and diesel

Tlou's Lesedi gas-to power project.

fired power generation. While also a fossil fuel, gas

is viewed as a transitional fuel that can assist with

providing base load power until such time that

sustainable and/or renewable power sources can

provide reliable 24-hour base load power.

The Company is aware that it may need to adapt its

process to meet future climate needs and will

continue to assess new information as it becomes

available.

Power Sales

The Company has signed a 10MW Power Purchase

The Company works closely with its contractors and

Agreement (PPA) with Botswana Power Corporation

engineers to progress infrastructure projects in a

(BPC) with the aim for first power to be supplied into

timely manner.

the national grid in 2024. There is a risk that the grid

connection infrastructure could be delayed thereby

Management continues to explore opportunities with

postponing first power sales. No other agreements are

other potential customers across the region,

currently in place for sale of power or gas to other

potentially via the Southern African Power Pool or

parties.

within Botswana. The Company also aims to

diversify its products including potentially producing

solar power, hydrogen, carbon black/graphite and

crypto currencies.

Page 7

Tlou Energy Limited - Half-year report December 2023

Directors' report continued

Geological

The Company has over 8,000 square km of licence

Tlou has invested in seismic surveys and core hole

Risk

areas part of which has not had significant CBM

drilling to identify areas of lower risk prior to

operations to date. There remains significant geological

conducting further exploration and evaluation. This

risk in these areas and subject to operational results

strategy is planned for undeveloped areas of the

these areas may not be commercial.

project. After a decade of operating in the region

and supported by external resource certifications,

the operations team have and continue to develop

an excellent knowledge of the geological area to

help de-risk future exploration and evaluation

operations.

Remote

The Company operates over 100km from established

The Company has on-site paramedic support and

Operations

medical and engineering support facilities in the closest

has invested in its own stock of equipment so that it

urban area which increases costs and risks as well as

can operate as autonomously as possible over a

requiring adequate insurance.

greater range of activities. A purpose-built field

operations camp is close to completion and will be

suitable for development of the 10MW project and

for further expansion.

People

The Company may lose key executives and

The Company continues to search for skilled staff to

management. The Company operates in a competitive

grow the team to satisfy the Company's needs and

environment in relation to talented corporate and

ideally to have a lead person and back-up support

technical personnel.

person for all key positions. In addition,

implementation of appropriate staff training and

succession plans is a key target. The Company

offers incentives and development opportunities for

key executives and management to attract the best

talent to the Company.

Auditor's Independence Declaration

The auditor's independence declaration for the half-year ended 31 December 2023 has been received and is attached to this report.

Signed in accordance with a resolution of the Board of Directors.

Anthony Gilby

Managing Director

Brisbane

8 March 2024

Page 8

Page 9

Tlou Energy Limited - Half-year report December 2023

Auditor's independence declaration

Tel: +61 7 3237 5999

Level 10, 12 Creek Street

Fax: +61 7 3221 9227

Brisbane QLD 4000

www.bdo.com.au

GPO Box 457 Brisbane QLD 4001

Australia

DECLARATION OF INDEPENDENCE BY R J LIDDELL TO THE DIRECTORS OF TLOU ENERGY LIMITED

As lead auditor for the review of Tlou Energy Limited for the half-year ended 31 December 2023, I declare that, to the best of my knowledge and belief, there have been:

  1. No contraventions of the auditor independence requirements of the Corporations Act 2001 in relation to the review; and
  2. No contraventions of any applicable code of professional conduct in relation to the review.

This declaration is in respect of Tlou Energy Limited and the entities it controlled during the period.

R J Liddell

Director

BDO Audit Pty Ltd

Brisbane, 8 March 2024

BDO Audit Pty Ltd ABN 33 134 022 870 is a member of a national association of independent entities which are all members of BDO Australia Ltd ABN 77 050 110 275, an Australian company limited by guarantee. BDO Audit Pty Ltd and BDO Australia Ltd are members of BDO International Ltd, a UK company limited by guarantee, and form part of the international BDO network of independent member firms. Liability limited by a scheme approved under Professional Standards Legislation.

Tlou Energy Limited - Half-year report December 2023

Consolidated statement of comprehensive income for the half-year ended 31 December 2023

Consolidated

Note

Dec 2023

Dec 2022

$

$

Interest income

11,383

6,351

Foreign exchange gain

207,437

189,605

Expenses

Employee benefits expense

(640,430)

(564,644)

Depreciation expense

(56,351)

(147,104)

Interest expense

(484,393)

(296,013)

Share based payment expense

(28,751)

(76,369)

Professional fees

(144,539)

(271,658)

Occupancy costs

(7,800)

(6,746)

Other expenses

2

(676,181)

(1,032,014)

Fair value gain/(loss) on financial instruments

(1,749)

(46,667)

LOSS BEFORE INCOME TAX

(1,821,374)

(2,245,259)

Income tax

-

-

LOSS FOR THE PERIOD

(1,821,374)

(2,245,259)

OTHER COMPREHENSIVE INCOME/(LOSS)

Items that may be reclassified to profit or loss

Exchange differences on translation of foreign operations

(1,877,010)

(1,009,425)

TOTAL OTHER COMPREHENSIVE INCOME/(LOSS)

(1,877,010)

(1,009,425)

TOTAL COMPREHENSIVE INCOME/(LOSS)

(3,698,384)

(3,254,684)

Earnings per share

Cents

Cents

Basic loss per share

(0.2)

(0.3)

Diluted loss per share

(0.2)

(0.3)

Notes to the consolidated financial statements are attached.

Page 10

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TLOU Energy Limited published this content on 08 March 2024 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 08 March 2024 06:36:04 UTC.