for personal use only - australian securities exchange december 2011 for personal use only bass...

BASS STRAIT OIL COMPANY LTD

HALF-YEAR FINANCIAL REPORT

31 DECEMBER 2011

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Corporate directory Directors John L C McInnes (Chairman) Andrew P Whittle David J Lindh Jayme McCoy Company Secretary Robyn M Hamilton Registered office and principal place of business Level 1, 99 William Street Melbourne, Victoria 3000 Australia Telephone +61 (3) 9927 3000 Facsimile +61 (3) 9614 6533 Email [email protected] Auditors Ernst & Young 8 Exhibition Street Melbourne, Victoria 3000 Australia Share register Link Market Services Limited Level 9, 333 Collins Street Melbourne, Victoria 3000 Australia Telephone +61 (3) 9615 9800 Facsimile +61 (3) 9615 9900 Stock exchange listing Australian Stock Exchange Ltd 525 Collins Street Melbourne, Victoria 3000 Australia ASX codes: BAS – Ordinary Shares Web site: www.bassoil.com.au

Contents Directors’ report ..................................................... 2

Auditor’s independence declaration ....................... 5

Directors’ declaration ............................................. 6

Statement of financial position ............................... 7

Condensed statement of comprehensive income .. 8

Statement of changes in equity ............................. 9

Statement of cash flows ..................................... 10

Notes to the half-year financial statements .......... 11

Independent auditor’s review report .................... 17

Currency The Group’s functional and presentation currency is Australian Dollars. FORWARD LOOKING STATEMENTS This half-year report includes certain forward-looking statements that have been based on current expectations about future acts, events and circumstances. These forward-looking statements are, however, subject to risks, uncertainties and assumptions that could cause those acts, events and circumstances to differ materially from the expectations described in such forward-looking statements. These factors include, among other things, commercial and other risks associated with the meeting of objectives and other investment considerations, as well as other matters not yet known to the Company or not currently considered material by the Company.

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Directors’ report The directors of Bass Strait Oil Company Ltd (the “Company”) and its subsidiary (“BAS” or the “Group”) submit their report for the half-year ended 31 December 2011. DIRECTORS The names of the Company’s directors in office during the half-year and until the date of this report are set out below. Directors were in office for this entire period unless otherwise stated. John L C McInnes (Chairman) Henry J Askin (retired 31 December 2011) John G Tuohy (resigned 25 November 2011) Andrew P Whittle (appointed 9 August 2011) David J Lindh (appointed 25 November 2011) Jayme McCoy (appointed 25 November 2011) REVIEW AND RESULTS OF OPERATIONS The main projects undertaken by the company during the half-year were:

• The capital raising which resulted in 97,009,363 new BAS shares being issued and raised approximately $2.4 million before costs;

• The drilling of the Windermere-3 well in PEP 167 in the onshore Otway during December 2011. Although Windermere-3 was plugged and abandoned, the well high-graded the Casterton shale play in the permit area; and

• The seismic reprocessing and inversion of 2 seismic surveys in Vic/P47 which have helped delineate the

Judith and Moby gas fields ahead of commercialisation. The following section provides more detail on these matters. The consolidated net loss for the half-year, after income tax, was $4,490,088 (2010:$243,193). The net loss includes the following significant items before income tax:

• Write down on PEP 167 of $1,970,649 after the Winderemere-3 well was plugged and abandoned; • An impairment has been recognised on the T/42 & T/43 permits of $2,143,446 after it was agreed not to

renew the permits for a second term. EXPLORATION ACTIVITIES Otway Basin onshore - PEP 167: BAS 50% and Operator Exploration permit PEP 167 is located in the onshore Otway Basin, near Port Fairy, in western Victoria. Hunt Energy and Mineral Company Australia were contracted by the Joint Venture to drill Windermere-3 with Hunt Rig #2. Mobilisation commenced on 22 November 2011 and the well was spudded at 08:00 7 December 2011. A 16” conductor was preset to 17 mKB and a 12¼” hole was drilled from 17 mKB to 305mKB and which point 9⅝” casing was run. The 8½” hole was then drilled to Total Depth of 1839.4 mKB.

GGiippppssllaanndd VVIICC//PP4411 –– 4455%% ooppeerraattoorr VVIICC//PP4422 –– 110000%% ooppeerraattoorr VVIICC//PP4477 –– 4400%% ooppeerraattoorr VVIICC//PP6666 –– 6600%% ooppeerraattoorr BBaassss TT//4422PP && TT//4433PP –– 110000%% ooppeerraattoorr OOttwwaayy PPEEPP116677 –– 5500%% ooppeerraattoorr PPEEPP115500 –– 1155%%,, BBeeaacchh ooppeerraattoorr

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Directors’ report continued Evaluation was undertaken using electric logs, wireline formation tests, seismic checkshots and an open hole drill stem test (DST). The result of the evaluation showed no moveable hydrocarbons and the decision was made to plug and abandon the well. This commenced at 22:00 20 December 2011. Six plugs were set at various intervals in the wellbore with a near surface plug tagged and pressure tested to ensure that the wellbore had been appropriately sealed. The rig was released at 24:00 on 22 December 2011. The objective horizon, the Heathfield Member of the Eumeralla Formation was intersected on prognosis, 50 metres updip from its intersection at Windermere-1. It was considerably thicker than Windermere-1 with similar lithostratigraphy and thickness to Windermere-2. The DST analysis indicated that the intersection had a permeability of 0.13MDft. The objective was therefore too tight to allow lateral migration of any oil that may have vertically migrated from the deeper source kitchen. Any future exploration program in the area will likely focus on the deeper, so called, Windermere Member of the Eumeralla Formation which had hydrocarbon shows in Windermere-2. The key play in the area will be the Laira Formation of the Crayfish Group and the Casterton Formation as a tight oil or unconventional (shale oil) play. Otway Basin onshore - PEP 150 (application area): BAS 15% (Operator: Beach Energy) This area is located in the onshore Otway Basin, near Portland, in Western Victoria and contains the 1989 Lindon and 1995 Digby oil discoveries. Grant of PEP 150 is contingent on entering into an agreement with native title claimants. During the period negotiations were completed in relation to the key principles of the agreement. This is expected to lead to finalisation of the agreement and grant of the permit during the first half of 2012. Gippsland Basin offshore - Vic/P47, BAS 40% and Operat or Permit Vic/P47 is located in the offshore Gippsland Basin, approximately 10 kilometers offshore, south of the Victorian town of Orbost. Water depths range up to 80 meters. The permit contains the Judith and Moby gas discoveries. The Judith gas resource has been certified by Gaffney Cline & Associates (GCA) to hold 194 BCF (2C) and 934 BCF (3C) of recoverable Contingent Resources. Both Judith and Moby are in close proximity to existing or planned infrastructure in adjacent licences. During the period seismic reprocessing of the Moby 3D seismic survey and simultaneous seismic inversions were undertaken on the reprocessed Moby 3D volume and 200 square kilometres of the Northern Fields 3D seismic survey. The work covered the Moby and Judith fields and was aimed at delineating the field boundaries with more certainty as well as increasing the certainty that the seismic amplitudes surrounding the Judith Field are representative of gas saturated sandstone reservoirs. These objectives were met and the Vic/P47 joint venture is now actively seeking farmin partners to fund appraisal and development operations. The opportunity has attracted credible interest and while no offers have been received to date, evaluation and assessment is continuing. Eastern Gippsland Basin offshore - Vic/P41, BAS 45% and Operator plus Vic/P66, BAS 60% and Operator Permits Vic/P41 (539 square kilometres) and Vic/P66 (2160 square kilometres) are located adjacent to each other in the east of the offshore Gippsland Basin, approximately 40 kilometres south of the Victorian coast. Together, these permits provide BAS with exposure to the easterly extension of proven producing trends. BAS maps extensions of two producing trends in its East Gippsland permits. During the period the Vic/P41 joint venture was granted a renewal of the permit for a further 5 years commencing 29th November 2011. The key work programs in the renewal consist of acquiring a 3D seismic survey during the second year (committed) and drilling an exploration well during the fourth year (contingent). Also during the period the Vic/P66 joint venture was granted a variation and suspension to the permit. The joint venture varied out the current year 3 work program of acquiring 2D seismic data over the permit and replaced it with acquiring 3D seismic. This was then suspended for 12 months to facilitate acquiring the survey in conjunction with the Vic/P41 joint venture. These changes to the permits will result in the two joint ventures acquiring a 3D seismic survey over Lead A towards the end of 2012 or early 2013 dependent on availability of a seismic vessel. Both Vic/P41 and Vic/P66 is the subject of farmin reviews and have attracted credible interest. While no offers have been received to date, evaluation and assessment is continuing.

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Directors’ report continued Gippsland Basin offshore - Vic/P42, BAS 100% Vic/P42 is located approximately 40 kilometres offshore and contains moderate water depths from 50 to 80 metres. Vic/P42 is located adjacent to Kingfish, Australia’s largest oil field, as well as to Bream and other producing Esso/BHP oil and gas fields. Existing non-producing gas and condensate discoveries within Vic/P42 at ZaneGrey and Omeo further underline the prospectivity of the area. BAS has initially focused on re-evaluating known 3D-defined prospects such as Tarra Southeast, which was mapped as a low risk prospect by the previous operator and is analogous to the producing Dolphin and Perch fields (to the west of the permit). During the period the full inventory of identified prospects and leads was reviewed ahead of preparing for reprocessing and inversion of the various 3D seismic surveys that cover the permit during the second half of 2012 to facilitate determining the best prospect for drilling. Bass Basin offshore Tasmania - T/42P and T/43P, BAS 10 0% These permits are located off the north coast of Tasmania, in an area of the Bass Basin known as the Durroon Sub-basin. The T/42P and T/43P permits cover approximately 6120 square kilometres and have been little explored in the past. These permits both expire on 23 February 2012 and the Directors have decided not to renew these permits for a second term. CORPORATE MATTERS During the half-year the Company successfully completed a non-renounceable rights issue and shortfall placement of shares resulting in 97,009,363 new BAS shares being issued on 14 October 2011. There are now 388,039,613 BAS shares on issue together with 12,000,000 options exercisable at 4 cents prior to 14th October 2014. The rights issue and placement combined raised a total of $2,425,234 before costs. Auditor’s independence declaration We have obtained an independence declaration from our auditor, Ernst & Young, a copy of which is attached to this report. Signed in accordance with a resolution of the directors.

John L C McInnes Chairman Melbourne, 9 March 2012

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Liability limited by a scheme approved under Professional Standards Legislation

Auditor’s Independence Declaration to the Directors of Bass Strait Oil Company Ltd In relation to our review of the financial report of Bass Strait Oil Company Ltd for the half-year ended 31 December 2011, to the best of my knowledge and belief, there have been no contraventions of the auditor independence requirements of the Corporations Act 2001 or any applicable code of professional conduct.

Ernst & Young

Matthew A Honey Partner 9 March 2012

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Directors’ declaration In accordance with a resolution of the directors of Bass Strait Oil Company Ltd, I state that: In the opinion of the Directors: (a) the financial statements and notes of the Group are in accordance with the Corporations Act 2001,

including: (i) give a true and fair view of the financial position as at 31 December 2011 and the performance

for the half-year ended on that date of the Group; and (ii) comply with Accounting Standard AASB 134 “Interim Financial Reporting” and the Corporations

Regulations 2001; and (b) there are reasonable grounds to believe that the Company will be able to pay its debts as and when they

become due and payable. On behalf of the Board

John L C McInnes Chairman Melbourne, 9 March 2012

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Statement of financial position As at 31 December 2011

Consolidated Note 31/12/2011 30/6/2011 $ $ ASSETS Current assets Cash and cash equivalents 4 3,131,702 2,254,605 Trade and other receivables 134,242 26,624 Other current assets 52,687 45,176 ________ ________ Total current assets 3,318,631 2,326,405 ________ ________ Non-current assets Plant and equipment 52,949 42,491 Intangible assets 9 124,347 135,450 Exploration and evaluation costs 5 6,508,266 9,082,266 ________ ________ Total non-current assets 6,685,562 9,260,207 ________ ________ TOTAL ASSETS 10,004,193 11,586,612 ________ ________ LIABILITIES Current liabilities Trade and other payables 806,147 152,846 Provisions 19,644 2,245 ________ ________ Total current liabilities 825,791 155,091 ________ ________ NET ASSETS 9,178,402 11,431,521 ========= ========= EQUITY Contributed equity 6 29,089,313 26,945,138 Share-based payment reserve 92,794 - Accumulated losses (20,003,705) (15,513,617) ________ ________ TOTAL EQUITY 9,178,402 11,431,521 ========= ========= The above statement of financial position should be read in conjunction with the accompanying notes. F

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Condensed statement of comprehensive income For the half-year ended 31 December 2011

Consolidated Note 31/12/2011 31/12/2010 $ $ Total revenue 3 259,566 330,282 Total expenses 3 (4,730,258) (557,456) ________ ________ Profit/(loss) before income tax (4,470,692) (227,174) Income tax (expense)/benefit (19,396) (16,019) ________ ________ Net profit/(loss) for the period (4,490,088) (243,193) ________ ________ Total comprehensive income for the period (4,490,088) (243,193) ________ ________ Cents Cents Basic (loss) per share (cents per share) (1.36) (0.08) Diluted (loss) per share (cents per share) (1.36) (0.08) The above condensed statement of comprehensive income should be read in conjunction with the accompanying notes.

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Statement of changes in equity For the half-year ended 31 December 2011 Consolidated Share based Contributed Accumulated Payments Equity Losses Reserve Total

$ $ $ $ At 1 July 2011 26,945,138 (15,513,617) - 11,431,521 _________ __________ ________ _________ Profit/(loss) for the period - (4,490,088) - (4,490,088) _________ ________ ________ ________ Total comprehensive income for the period - (4,490,088) - (4,490,088) _________ ________ ________ _________ Transactions with owners in their capacity as owners Shares issued 2,425,234 - - 2,425,234 Transaction costs on share issues (300,455) - - (300,455) Share-based payments - - 92,794 92,794 Income tax on items recognised directly in equity 19,396 - - 19,396 _________ __________ ________ ________ Balance at 31 December 2011 29,089,313 (20,003,705) 92,794 9,178,402 ========= ========= ======== ======== At 1 July 2010 26,913,100 (14,626,607) 44,814 12,331,307 _________ __________ ________ _________ Profit/(loss) for the period - (243,193) - (243,193) _________ ________ ________ ________ Total comprehensive income for the period - (243,193) - (243,193) _________ ________ ________ _________ Transactions with owners in their capacity as owners Share-based payments - - 254 254 Transfer to accumulated losses for forfeited options - 4,667 (4,667) - Income tax on items recognised directly in equity 16,019 - - 16,019 _________ __________ ________ ________ Balance at 31 December 2010 26,929,119 (14,865,133) 40,401 12,104,387 ========= ========= ======== ======== The above statement of changes in equity should be read in conjunction with the accompanying notes.

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Statement of cash flows For the half-year ended 31 December 2011

Consolidated Note 31/12/2011 31/12/2010 $ $ Cash flows from operating activities Receipts from customers 139,381 219,654 Payments to suppliers and employees (603,156) (514,426) Interest received 72,047 98,425 ________ ________ Net cash used in operating activities (391,728) (196,347) ________ ________ Cash flows from investing activities Petroleum exploration expenditure (910,167) (215,999) Purchase of property, plant & equipment (23,177) - ________ ________ Net cash used in investing activities (933,345) (215,999) ________ ________ Cash flows from financing activities Proceeds from issue of shares 2,425,234 - Share issue costs (223,064) - ________ ________ Net cash from financing activities 2,202,170 - ________ ________ Net increase/(decrease) in cash and cash equivalents 877,097 (412,346) Cash and cash equivalents at beginning of period 2,254,605 3,696,781 ________ ________ Cash and cash equivalents at end of period 4 3,131,702 3,284,435 ======== ======== The above statement of cash flows should be read in conjunction with the accompanying notes.

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Notes to the financial statements For the half-year ended 31 December 2011 Note 1. Basis of preparation and accounting polic ies Basis of preparation This condensed financial report for the half-year ended 31 December 2011 has been prepared in accordance with AASB 134 Interim Financial Reporting and the Corporations Act 2001. The half-year financial report does not include all notes of the type normally included within the annual financial report and therefore cannot be expected to provide as full an understanding of the financial performance, financial position and financing and investing activities of the Group as the full financial report. It is recommended that the half-year financial report be read in conjunction with the annual report for the year ended 30 June 2011 and considered together with any public announcements made by Bass Strait Oil Company Ltd during the half-year ended 31 December 2011 in accordance with the continuous disclosure obligations of the ASX listing rules. Apart from the changes in accounting policy noted below, the accounting policies and methods of computation are the same as those adopted in the most recent annual financial report. Changes in accounting policy The following amending Standards have been adopted from 1 July 2011. Adoption of these Standards did not have any effect on the financial position or performance of the Group:

• AASB 2009-10 Amendments to Australian Accounting Standards – Classification of Rights Issues; • AASB 2010-3 Amendments to Australian Accounting Standards Arising from the Annual Improvements

Project; • Interpretation 19 Extinguishing Financial Liabilities with Equity Instruments; • AASB 124 (Revised) Related Party Disclosures; • AASB 2009-12 Amendments to Australian Accounting Standards; • AASB 2010-4 Further Amendments to Australian Accounting Standards Arising from the Annual

Improvements Project; and • AASB 2010-5 Amendments to Australian Accounting Standards.

The Group has not elected to early adopt any other new standards or amendments. Significant accounting estimates and assumptions The carrying amounts of certain assets and liabilities are often determined based on estimates and assumptions of future events. The key estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of certain assets and liabilities within the next annual reporting period are: Exploration and evaluation costs At each reporting period, the Group assesses indicators of impairment. Exploration and evaluation costs are deferred until exploration and evaluation activities reach a stage which permits reasonable assessment of the existence or otherwise of economically recoverable reserves and active and significant operation are continuing. Significant judgement is required in determining whether it is likely that future economic benefits will be derived from the capitalised exploration and evaluation expenditure. In the judgement of the Directors, at 31 December 2011 exploration activities in each area of interest have not yet reached a stage which permits a reasonable assessment of the existence or otherwise of economically recoverable reserves. Substantive expenditure in relation to each area of interest is planned based on permit commitments and cash reserves of the Group and on the basis that nothing has come to the attention of Directors to indicate future economic benefits will not be realised. The Directors are continually monitoring the areas of interest and continue to assess and explore alternatives for funding the development of areas of interest when economically recoverable reserves are confirmed. If new information becomes available that suggests the recovery of expenditure is unlikely, the amounts capitalised will need to be reassessed at that time. F

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Notes to the financial statements For the half-year ended 31 December 2011 Note 1. Basis of preparation and accounting polic ies (continued) Going concern The financial report has been prepared on a going concern basis, which assumes that the Group will be able to realise its assets and extinguish its liabilities in the normal course of business and at amounts stated in the financial report. This includes the Group’s exploration expenditure commitments, being the minimum work requirements under exploration permits for petroleum as set out in Note 8. At 31 December 2011, the Group has cash reserves of $3,313,702, current liabilities of $825,791 and exploration commitments of $1,867,500 as set out in note 8. In order to meet these exploration commitments, and continue to pay its debts as and when they fall due and payable, the Group will rely on taking appropriate steps, including: • Meeting its obligations by either farmout or partial sale of the Group’s exploration interests; • Raising capital by one of a combination of the following: placement of shares, pro-rata issue to

shareholders, the exercise of outstanding share options, and/or further issue of shares to the public; • In some circumstances, subject to negotiation and approval, minimum work requirements may be varied

or suspended, and/or permits may be surrendered or cancelled. • Other avenues that may be available to the Group. The Directors believe that there are reasonable grounds to expect that the Group will continue to be able to meet its exploration commitments and pay its debts as and when they fall due and payable. No adjustments have been made relating to the recoverability and reclassification of recorded asset amounts and classification of liabilities that might be necessary should the Group not continue as a going concern, particularly the write-down of capitalised exploration expenditure should the exploration permits be ultimately surrendered or cancelled. Note 2. Operating Segments The Group operates in the petroleum exploration industry within Australia. The Group determines its operating segments by reference to internal reports that are reviewed and used by the Board of Directors of the Group (the chief operating decision maker) in assessing performance and in determining the allocation of resources. The executive management team currently receive consolidated Statement of Financial Position and Statement of Comprehensive Income information that is prepared in accordance with Australian Accounting Standards therefore there is no additional information to disclose. The executive team does not currently receive segment Statement of Financial Position and Statement of Comprehensive Income information. The executive team manages each exploration activities of each permit through review and approval of joint venture cash calls, joint venture budgets and other operational information. Note 3. Revenue and expenses

Consolidated 31/12/2011 31/12/2010 $ $ Loss before income tax includes the following revenue and expenses: Revenue Exploration management services 188,085 233,043 Bank interest 71,481 97,056 Sundry income - 183 ________ ________ 259,566 330,282 ======= ======= F

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Notes to the financial statements For the half-year ended 31 December 2011 Note 3. Revenue and expenses (continued)

Consolidated Note 31/12/2011 31/12/2010 $ $ Expenses Audit costs 34,000 32,000 Amortisation of intangible assets 11,103 12,339 Computer expenses 13,684 5,634 Consultants fees 28,338 26,194 Depreciation of non-current assets 8,819 9,189 Directors remuneration 97,982 76,300 Insurance 11,091 11,096 Legal 26,252 560 Printing and stationery 24,174 22,009 Rent and premises costs 33,808 32,847 Salaries employee benefits and costs 198,505 268,417 Share based payment 7 15,403 254 Stock exchange and registry costs 33,594 42,047 Travel and corporate promotion costs 26,969 2,575 Other expenses from ordinary activities 23,772 15,995 Exploration expenses 28,669 - Exploration expenditure write down 5 4,114,095 - ________ ________ 4,730,258 557,456 ======= ======= Note 4. Cash and cash equivalents

Consolidated 31/12/2011 31/12/2010 $ $ For the purposes of the half-year statement of cash flows, cash and cash equivalents are comprised of the following: Cash at bank and in hand 1,106,120 358,121 Short-term deposits 2,025,582 2,926,314 ________ ________ 3,131,702 3,284,435 ======= ======= Note 5. Exploration and evaluation assets The Group assesses the carrying value of capitalised exploration and evaluation expenditure for impairment at the area of interest level whenever facts and circumstances suggest that the carrying value may exceed its recoverable amount. An impairment exists when the carrying amount of capitalised exploration and evaluation expenditure relating to an area of interest exceeds its recoverable amount. The asset is then written down to its recoverable amount. Any impairment losses are recognised in profit or loss. During the 4th quarter of 2011, the Group drilled Windermere-3, in permit area PEP 167. The well was subsequently determined to be a dry well and consequently plugged and abandoned. The capitalised exploration and evaluation expenditure relating to this area of interest, had been leading towards drilling Windermere-3. Based upon the fact that the well was dry, the Group has identified an impairment of $1,970,649 on exploration and evaluation expenditure. The write down is included in Total expenses in the income statement. The carrying amount for this area of interest, PEP 167 is now nil (30 June 2011: $550,527). The Tasmanian permits, T/42 & T/43 expired on the 23rd February 2012. The Directors have decided not to renew these permits for a second term. An impairment of $2,143,446 has been recognised for the capitalised exploration and evaluation expenditure relating to these areas of interest. The carrying amount for T/42 & T/43 is now nil (30 June 2011: $2,105,954).

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Notes to the financial statements For the half-year ended 31 December 2011 Note 5. Exploration and evaluation assets (contin ued) Capitalised exploration and evaluation costs at 31 December 2011 are $6,508,266 (June 2011: $9,082,267). Note 6. Contributed equity

Consolidated 31/12/2011 30/6/2011 $ $ Ordinary shares fully paid 29,089,313 26,945,138 ========== ========== No. $ Movement in ordinary shares on issue At 1 July 2010 291,030,250 26,913,100 Deferred tax on share issue costs - 32,038 __________ _________ At 30 June 2011 291,030,250 26,945,138 Share issue on 30 October 2011 97,009,363 2,425,234 Costs of share issue - (300,455) Deferred tax on share issue costs - 19,396 ___________ __________ At 31 December 2011 388,039,613 29,089,313 ========== ========= Note 7. Share-based payment In October 2011, 2,000,000 share options were vested to the CEO and 10,000,000 share options were vested to the underwriter, as part of the cost of the capital raising. The exercise price of the options is 4 cents. The fair value of the options granted is estimated at the date of grant using a binomial pricing model, taking into account the terms and conditions upon which the options were granted. The contractual life of each option is 3 years. There is no cash settlement of the options. The fair value of options granted during the six months ended 31 December 2011 was estimated on the date of grant using the following assumptions: Dividend yield (%) 0 Expected volatility (%) 70.0 Risk-free interest rate (%) 3.99 Expected life (years) 3.0 Weighted average share price ($) 0.03 For the six months ended 31 December 2011, the Group has recognised $15,403 of share-based payment transactions expense in the income statement (31 December 2010: $254) and $77,391 of share-based payment transactions expense in the statement of equity (31 December 2010: $nil). F

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Notes to the financial statements For the half-year ended 31 December 2011 Note 8. Commitments and contingencies Consolidated 31/12/2011 30/6/2011 $ $ Expenditure commitments Within one year 1,417,500 2,725,000 After one year but not more than five years 450,000 900,000 More than five years - - _________ _________ 1,867,500 3,625,000 ======== ======== Permit commitments comprise minimum work obligations with associated indicative costings for the initial 3 year period of exploration permits (and thereafter annually). Vic/P41 (currently in Year 1) The permit renewal was granted on 29 November 2011. The Year 1 commitment of geological and geophysical studies is being completed ($67,500). The committed work program consists of a 3D seismic survey in Year 2 ($382,500) and further geological and geophysical studies in Year 3 ($67,500). Vic/P42 (currently in Year 3) The Year 3 commitment of seismic reprocessing is being completed ($500,000). All permit commitments have been met to date. Vic/P47 (currently in Year 3) The Year 3 commitment of geological and geophysical studies is being completed ($400,000). The Vic P47 joint venture has met all permit commitments to date. Vic/P66 (currently in Year 3) The permit was granted a twelve month suspension for Year 3 on 12 December 2011. The committed work program consists of a 3D seismic survey in Year 3 ($450,000). The Vic P66 joint venture has met all permit commitments to date. PEP 167 (currently in Year 5) The Year 5 commitment of a well has been completed. The PEP167 joint venture has met all permit commitments to date. Non-cancellable operating lease commitments Consolidated 31/12/2011 31/12/2010 $ $ Within one year 59,403 76,919 After one year but not more than five years - 59,403 More than five years - - ______ _______ 59,403 136,322 ====== =======

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Notes to the financial statements For the half-year ended 31 December 2011 Note 9. Yolla royalty The Yolla Royalty is a 0.0648% overriding royalty from the total net production of the Production Licence T/L1, being the area of the Yolla Field, and the adjacent T/RL1 in the Bass Basin. The royalty was acquired in 2003 through the issue of shares and has a finite life depending upon economic gas and oil condensate reserves in the field. The amortisation of the royalty is based on the units of production method. The current owners commenced commercial production in early July 2006. The Group has received only minimal royalty amounts to date, and the methodology used by the owners in calculating payment sums is in dispute. Judgement is required in determining the extent of future economic benefits to be derived from the Yolla Royalty. Under AASB 136 Impairment of Assets, the receipt of lower than expected royalty amounts received to date are an indicator of impairment. The Directors are confident that the carrying value of the royalty at 31 December 2011 is supported by the minimum expected future economic benefits to be derived from the Yolla Royalty. The Directors continue to seek legal advice on the position adopted by the Group, and are actively taking steps to resolve the dispute through agreement with the owners regarding the calculation methodology to be adopted. Alternatively, the directors may pursue legal action to resolve the dispute. Note 10. Related party transactions During the half-year the Group paid Adelaide Equity Partners Limited consultancy fees of $25,000 (31 December 2010: $nil). A Director, D J Lindh (appointed 25 November 2011) is also a Director of Adelaide Equity Partners Limited. The consultancy services were paid under normal commercial terms and conditions. No amounts were outstanding at balance date (31 December 2010: nil). During the half-year the Group received fees as the operator of Vic/P47 of $52,321 (31 December 2010: $22,398) and Vic/P41 of $26,786 (31 December 2010: $83,133) in which Moby Oil & Gas Limited (“Moby”) is a co-venturer. A Director, J G Tuohy (resigned 25/11/11), is also a Director of Moby. The fees were provided under normal commercial terms and conditions. No amounts were outstanding at balance date (31 December 2010: nil). Note 11. Subsequent events No matters or circumstances have arisen since the end of the reporting period which have significantly affected, or may significantly affect, the operations of the Group, the results of these operations, or the state of affairs of the Group in future financial periods.

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Liability limited by a scheme approved under Professional Standards Legislation

To the members of Bass Strait Oil Company Ltd

Report on the Half-Year Financial Report We have reviewed the accompanying half-year financial report of Bass Strait Oil Company Ltd, which comprises the statement of financial position as at 31 December 2011, the condensed statement of comprehensive income, statement of changes in equity and statement of cash flows 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 controls as the directors determine are 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 2011 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 Bass Strait Oil Company Ltd and the entities it controlled during the half-year, 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 have given to the directors of the company a written Auditor’s Independence Declaration, a copy of which is included in the Directors’ Report.

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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 Bass Strait Oil Company Ltd is not in accordance with the Corporations Act 2001, including:

a) giving a true and fair view of the consolidated entity’s financial position as at 31 December 2011 and of its performance for the half-year ended on that date; and

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

Ernst & Young

Matthew A Honey Partner Melbourne 9 March 2012

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