quarterly activity report for the quarter ended 31 … · 63 hay street west perth wa 6872 west...

ANTARES ENERGY LIMITED A.C.N. 009 230 835

Ground Floor PO Box 690

63 Hay Street West Perth WA 6872

West Perth WA 6008 www.antaresenergy.com

30 January 2015

QUARTERLY ACTIVITY REPORT

FOR THE QUARTER ENDED 31 DECEMBER 2014

Highlights:

1. Southern Star sold to Breitburn Energy Partners LP for 50,000,000 USD and 4,300,000 Breitburn common units - Full sale details reported in ASX Announcement 27th October 2014

2. Northern Midland Basin - Dawson County - Part of Lower Spraberry oil sweet spot

3. Northern Star Project

- Significant Lower Spraberry/Wolfcamp A/B & D results adjacent - Occidental Petroleum major acquisition of Three Rivers acreage adjacent

4. Big Star Project

- Successful RSP test of offsetting Lower Spraberry oil production - Occidental Petroleum major acquisition of Three Rivers acreage adjacent

5. Northern Star Project - Leasing complete

- ~13,500 gross acres - 3 year leases plus 2 year option where possible

6. Southern Star Project - Leasing progressing as planned

- ~12,500 gross acres - 3 year leases plus 2 year option where possible

7. Buy Back AZZ - Shares on issue reduced to 242,000,000

8. Buy Back AZZG - Convertible Notes on issue reduced to 23,750,000

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OPERATIONAL UPDATE FOR THE QUARTER ENDED 31 DECEMBER 2014 LETTER TO SHAREHOLDERS FROM THE CHIEF SCIENTIST

Dear Shareholders, I am pleased to report the following positive developments relative to your company’s

Permian portfolio during the 4th Quarter of 2014:

Northern Midland Basin Update Along with the successful sale of Southern Star for 50,000,000 USD and 4,300,000 Breitburn Energy Partners LP Common Units in October 2014, companies with long term strategic production goals have continued to acquire producing assets in the Northern Midland Basin.

In early December 2014, Occidental Petroleum Corp (OXY:US) announced the imminent purchase of 87,400 acres and associated oil rich production (281 wells with 11,500 BOPED (69% oil)) from Three Rivers Operating Company (TROC) below $20,000 per acre ($1.75 B gross transaction – industry estimates are $1.2 -1.35 B). Occidental is the leading producer in the Permian Basin with 224,000 BOEPD currently and this acquisition will boost their drilling inventory from 7,000+ to over 9,000 locations.

Occidental is reported to be an accretive buyer of Permian assets for the long term.

Please note in Figure 1 the contiguous nature of our ~13,500 gross acre Northern Star and ~12,500 gross acre Big Star footprints to this most recent significant acquisition.

Fig. 1 – TROC Production Relative to AEC Assets (PLS - December 2014)

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In summary, over $21.1 B AUD of transactions (total 2014 US transactions $120 B AUD) were concluded in the Permian Basin during 2014 despite a declining oil price. Northern Star Project – Lower Spraberry Bench Horizontals

Since the third quarter report, the following completions and results have taken place directly adjacent to Northern Star. Diamondback (FANG:NASDAQ) acquired an 11,150 acre position to the south of Northern Star in 2013 with 11 Wolfcamp wells either completed or permitted in 2014 (see Figure 2) with a dedicated horizontal rig. The most significant new wells relative to Northern Star are the Andrews County UL Tawny Unit 8-12 1LS (18 miles SW directly offsetting Pioneer’s initial Lower Spraberry completion) and Estes B 1601 I LS (6 miles SW of Cozart 19 #1). Both of these wells are part of Diamondbacks Midland Basin testing of the Lower Spraberry horizontal bench (ten+ wells – See Figure 3 for locations). In Diamondback’s November 2014 Investor presentation, they stated that petrophysically and by core analysis the Lower Spraberry reservoir in SW Dawson County is analogous to their proven wells further south. The UL Tawny Unit 8-12 1H completed 33 stages along a 7,500 foot lateral IPing at 968 BO and 485 MCF (1,049 BOEPD) with 30 day rates of two phase production of 1,239 BOEPD (92% oil). The Estes B 1601 1 LS well is flowing back a similar frac completion to the UL Tawny Unit 8-12 1H but 30 day results have been interrupted by the recent loss of power due to a severe ice storm. It is believed this well will perform akin to the UL Tawny Unit 8-12 1H and results are expected 1Q 2015.

Fig. 2 – Offsetting 2014 Spraberry/Wolfcamp Horizontal Wells

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Fig. 3 – Key FANG Lower Spraberry Fairway Wells

We conclude from our Northern Star core and geochem sampling results that the Lower

Spraberry should provide an economic, brittle fracture stimulating bench in Dawson County,

Northern Midland Basin. In the Cozart wells, Lower Spraberry cores have whole rock

mineralogies of 88% quartz/calcite and 12% shale mineralogies constituting an excellent brittle

unconventional reservoir. The generative nature of the Lower Spraberry is solely in the oil

window with excellent TOC (Total Organic Content) and HI (Hydrocarbon Index) character

(See Figures 4 & 5).

The early Lower Spraberry play leaders Pioneer and Diamondback are seeing long term production behavior (1.5+ years) from this bench that supports production from 650 MBOE to greater than 1 MMBOE. The Lower Spraberry production curves from these operators in the Midland Basin south of Northern Star show encouraging 120 day production increases followed by gentle declines compared to the Wolfcamp objectives. Northern Star wells have all encountered approximately 500 feet of Lower Spraberry across our ~13,500 acre footprint.

Wolfcamp Wells

In other activity, W&T Offshore is currently flowing back a Wolfcamp B lateral in the

Beaujolais A 1302 1H well on the western edge of Northern Star adjacent to Antares Cozart

19 #1 vertical well. To the north of Northern Star, Elk River Resources (Quantum Energy

Partners) has drilled the Glass 277 1H and is preparing to fracture stimulate a Wolfcamp B

bench. IP results are expected in 1Q 2015.

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Fig. 4 – Northern Star Lower Spraberry Oil Maturity Character (Archer 16 #1)

Fig. 5 – Northern Star Lower Spraberry TOC & HI Character (Archer 16 #1)

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Big Star Project

Please note the RSP Permian Morgan 3601 WB (Figure 2 – SW of Big Star AOI) completed as a horizontal test of the Lower Spraberry. The well was fracture stimulated along a 7,500 foot lateral in June 2014. Pumped IP rates were 255 BO, 121 MCF, and 1,844 BW following a clean-up period in which 26,904 BO were produced. RSP noted that the IP rates were constrained by the lack of SWD facilities in this portion of the Northern Midland Basin. 120 day production rates from July to November, 2014 were 318 BOEPD (34,855 BO and 19,515 MCF). The production is 91% oil with RSP noting a flat production profile for the first 120 day period which is analogous to other Lower Spraberry horizontal production to the southern and western Midland Basin. Existing core data from AEC wells support a high quality Lower Spraberry unconventional stimulation bench. Akin to Northern Star, the formation is generally 450 feet in thickness with a higher percentage of quartz (60%) and somewhat shalier than the Northern Star samples (See Figure 5). We are encouraged by the initial RSP Lower Spraberry test in Southeastern Dawson County as it relates to horizontal reservoir bench development in our Big Star project.

Fig. 6 – Big Star Lower Spraberry Core Character

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In conclusion, Antares continues its Portfolio Management approach to its Permian Projects with a singular focus on creating as much shareholder value as possible throughout its ownership life of the project assets. Now that Antares has successfully divested its Howard County Project a singular focus is maintained upon its Dawson County Projects. Antares is encouraged by the significant adjacent developments both at the Operational and Corporate level. Antares looks forward to concluding its well advanced leasing activity in Big Star and will continue Dawson County project analysis, inclusive of development, joint venture and sale considerations.

Very truly yours, Gregory D. Shoemaker Director & Chief Scientist

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Appendix 5B Mining exploration entity quarterly report

+ See chapter 19 for defined terms. 17/12/2010 Appendix 5B Page 1

Rule 5.3

Appendix 5B

Mining exploration entity quarterly report Introduced 01/07/96 Origin Appendix 8 Amended 01/07/97, 01/07/98, 30/09/01, 01/06/10, 17/12/10

Name of entity

ANTARES ENERGY LIMITED

ABN Quarter ended (“current quarter”)

75 009 230 835 31 December 2014

Consolidated statement of cash flows

Cash flows related to operating activities

Current quarter $A’000

Year to date (12 months)

$A’000

1.1 Receipts from product sales and related debtors

679 17,377

1.2 Payments for (a) exploration & evaluation (b) development (c) production (d) administration

(1,517) (816) (197) (843)

(21,234) (5,979) (2,188) (2,656)

1.3 Dividends received 1,787 1,787 1.4 Interest and other items of a similar nature

received 20 111

1.5 Interest and other costs of finance paid (2,248) (6,808) 1.6 Income taxes paid - 1,111 1.7 Other:-

Texas Franchise Tax Withholding Tax

-

(815)

(63)

(815)

Net Operating Cash Flows (3,950) (19,357)

Cash flows related to investing activities

1.8 Payment for purchases of: (a) prospects (b) equity investments (c) other fixed assets

(477) -

(70)

(477) -

(70) 1.9 Proceeds from sale of: (a) prospects

(b) equity investments (c) other fixed assets

60,961 - -

60,961 - -

1.10 Loans to other entities - - 1.11 Loans repaid by other entities - - 1.12 Other (provide details if material) - -

Net investing cash flows 60,414 60,414

1.13 Total operating and investing cash flows (carried forward)

56,464 41,057

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+ See chapter 19 for defined terms. Appendix 5B Page 2 17/12/2010

1.13 Total operating and investing cash flows (brought forward)

56,464 41,057

Cash flows related to financing activities

1.14 Proceeds from issues of shares, options, etc. - 29,500 1.15 Proceeds from sale of forfeited shares - - 1.16 Proceeds from borrowings - - 1.17 Repayment of borrowings (24,568) (37,722) 1.18 Dividends paid - - 1.19 Other (provide details if material)

• Share issue transaction costs • Share buy-back • Convertible Note buy-back • Frictional costs

-

(4,355) (7,467) (11,088)

-

(4,355) (7,467) (11,088)

Net financing cash flows (47,478) (31,132)

Net increase (decrease) in cash held

8,986 9,925

1.20 Cash at beginning of quarter/year to date 5,592 4,681 1.21 Exchange rate adjustments to item 1.20 154 126

1.22 Cash at end of quarter 14,732 14,732

Payments to directors of the entity and associates of the directors Payments to related entities of the entity and associates of the related entities Current quarter

$A'000

1.23

Aggregate amount of payments to the parties included in item 1.2 (459)

1.24

Aggregate amount of loans to the parties included in item 1.10 -

1.25

Explanation necessary for an understanding of the transactions

Item 1.23 includes aggregate amounts paid to directors including salary, directors' fees and

superannuation.

Non-cash financing and investing activities

2.1 Details of financing and investing transactions which have had a material effect on consolidated assets and liabilities but did not involve cash flows

Item 1.9 Antares’ Southern Star asset was sold in October 2014. The asset sold for 50 Million USD plus 4,300,000 securities in Breitburn Energy. The value of the securities is NOT included in this report.

2.2 Details of outlays made by other entities to establish or increase their share in projects in

which the reporting entity has an interest

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Financing facilities available Add notes as necessary for an understanding of the position.

Amount available US$’000

Amount used US$’000

3.1 Loan facilities

- -

3.2 Credit standby arrangements:- Antares Energy has renewed its 200,000,000 USD term debt facility for a 5 year period at an interest rate of LIBOR plus 4.0 percent with Macquarie Bank Limited.

US$200,000 US Nil

Estimated cash outflows for next quarter

$A’000

4.1 Exploration and evaluation

1,000

4.2 Development

500

4.3 Production

500

4.4 Administration

1,000

Total 3,000

Reconciliation of cash

Reconciliation of cash at the end of the quarter (as shown in the consolidated statement of cash flows) to the related items in the accounts is as follows.

Current quarter $A’000

Previous quarter $A’000

5.1 Cash on hand and at bank 1,322 63

5.2 Deposits at call 13,410 5,529

5.3 Bank overdraft - -

5.4 Other (provide details):Escrow for convertible

notes not issued as at 30 June 2014 - -

Total: cash at end of quarter (item 1.22) 14,732 5,592

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Changes in interests in mining tenements

Tenement reference Nature of interest

(note (2))

Interest at beginning of

quarter

Interest at end of quarter

6.1 Interests in mining tenements relinquished, reduced or lapsed

Southern Star Project Northern Star Project Big Star Project

Sold and Lapsed 5,904 Gross Acres Relinquished/Lapsed 1,018 Gross Acres Relinquished/Lapsed 8,819 Gross Acres

5,824

12,100

13,710

Nil

13,199

11,049

6.2 Interests in mining tenements acquired or increased

Southern Star Project Northern Star Project Big Star Project

Acquired/ Increased 80 Gross Acres Acquired/ Increased 2,117 Gross Acres Acquired/ Increased 6,158 Gross Acres

5,824

12,100

13,710

Nil

13,199

11,049

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Issued and quoted securities at end of current quarter Description includes rate of interest and any redemption or conversion rights together with prices and dates.

Total number

Number quoted

Issue price per security (see

note 3) (cents)

Amount paid up per security (see note 3) (cents)

7.1 Preference +securities (description)

Nil

7.2 Changes during quarter (a) Increases through issues (b) Decreases through returns of capital, buy-backs, redemptions

Nil

Nil

7.3 +Ordinary securities

242,000,000 242,000,000

7.4 Changes during quarter (a) Increases through issues (b) Decreases through buy-backs

Nil

(13,000,000)

7.5 +Convertible debt securities*

26,000,000 26,000,000 $2.00 Fully paid

7.6 Changes during quarter (a) Increases through issues (b) Decreases through buy-backs

Nil

(3,750,000)

7.7 Performance Rights Nil

Nil

Exercise price Nil

Expiry date N/A

7.8 Issued during quarter Nil

7.9 Exercised during quarter Nil

7.10 Expired during quarter Nil

7.11 Debentures (totals only)

Nil

7.12 Unsecured notes (totals only)

Nil

* Effective 12 July 2013 - Convertible at a rate of 1:3. Interest paid at 10% quarterly in arrears. Expiry date is 30 October 2023. The notes can be converted to ordinary shares at any time.

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Compliance statement 1 This statement has been prepared under accounting policies which comply with

accounting standards as defined in the Corporations Act or other standards acceptable to ASX (see note 5).

2 This statement does /does not* (delete one) give a true and fair view of the

matters disclosed.

Sign here: ............................................................ Date: 30 January 2015

(Director) Print name: Vicky McAppion

Notes 1 The quarterly report provides a basis for informing the market how the entity’s

activities have been financed for the past quarter and the effect on its cash position. An entity wanting to disclose additional information is encouraged to do so, in a note or notes attached to this report.

2 The “Nature of interest” (items 6.1 and 6.2) includes options in respect of

interests in mining tenements acquired, exercised or lapsed during the reporting period. If the entity is involved in a joint venture agreement and there are conditions precedent which will change its percentage interest in a mining tenement, it should disclose the change of percentage interest and conditions precedent in the list required for items 6.1 and 6.2.

3 Issued and quoted securities The issue price and amount paid up is not

required in items 7.1 and 7.3 for fully paid securities.

4 The definitions in, and provisions of, AASB 6: Exploration for and Evaluation of

Mineral Resources and AASB 107: Statement of Cash Flows apply to this report. 5 Accounting Standards ASX will accept, for example, the use of International

Financial Reporting Standards for foreign entities. If the standards used do not address a topic, the Australian standard on that topic (if any) must be complied with.

== == == == ==

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CHANGE IN TENEMENT HOLDINGS

FOR THE QUARTER ENDING 31 DECEMBER 2014

USA – Wells

Project Name County/State Well Name % Interest

% Interest

Acquired/Increased

During the Quarter

% Interest Disposed

During the Quarter

Oyster Creek Brazoria/TX Harrison 2 67.50

Harrison 3 67.50

Southern

Star

Howard/TX Alamo 1 50.00 100

Alamo 2 50.00 100

Aloe Vera 1 100.00 100

Aloe Vera 2 100.00 100

Aloe Vera 3 100.00 100

Billie Jo 33-1 20.00 100

Billie Jo 33-2 20.00 100

Cottonwood 1 50.00 100

Cottonwood A 50.00 100

Coyote 1 100.00 100

Coyote 2 100.00 100

CR21 1 100.00 100

CR21 2 100.00 100

CR21 3 100.00 100

CR21 4 100.00 100

Dagwood 1 50.00 100

Levy 1 97.00 100

Live Oak 1 50.00 100

Live Oak 2 50.00 100

Lonestar 1 50.00 100




McCann 1 50.00 100

McCann 2 50.00 100

McNew 1 100.00 100

McNew 2 100.00 100

Mesquite 1 50.00 100

Nichols 1 48.50 100

Nova 33-1 19.20 100

Nova 33-2 19.20 100

Paloma 1 97.00 100

Paloma 2 97.00 100

Pecan 1 50.00 100

Pecan 2 50.00 100

Ray 1 97.00 100

Ray 2 97.00 100

Ray 3 97.00 100

Ray 5 97.00 100

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USA – Wells (continued)

Project Name County/State Well Name % Interest

% Interest

Acquired/Increased

During the Quarter

% Interest Disposed

During the Quarter

Southern

Star

Ray 6 97.00 100

Smith 1 100.00 100

Smith 2 100.00 100

Texan 1 100.00 100

Texan 2 100.00 100

Texan A 1 100.00 100

Texan A 2 100.00 100

Thomas 1 97.00 100

Thomas 2 97.00 100

Windmill 1 100.00 100

Windmill 2 100.00 100

Yucca 1 100.00 100

Yucca 2 100.00 100

Barnes 1 100.00 100

Robinson 1 100.00 100

Robinson 2 100.00 100

SLKT 1 100.00 100

Big Star Dawson/TX Cline 46-1 100.00

Esmond 20-1 100.00

Simmons 27-2 72.00

Stuart 12-1 100.00

Woodward 7-1 100.00

Northern

Star

Dawson/TX Archer 16-1 100.00

Cozart A-1 100.00

Cozart 11-1 100.00

Cozart 19-1 100.00

Debnam 22-1 100.00

Pettaway 7-1 100.00

Hawkville

(ORRI Only)

McMullen/TX Donnell 457-

1H

0.12500

Donnell C-1H 0.99345

Donnell C-2H 1.06054

Donnell-

Mulholland #1

0.059553

Donnell-

Mulholland #2

0.059553

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USA – Areas of Interest

Project Name County/State Notes Acquired/Increased

During the Quarter

Disposed

During the Quarter

Oyster Creek Brazoria/TX

Hawkville McMullen/TX ORRI Interest only

Northern

Star

Dawson/TX

Big Star Dawson/TX

Southern

Star

Howard/TX 100

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quarterly activity report for the quarter ended 31 … · 63 hay street west perth wa 6872 west...

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