ANNUAL REPORT 2008 · RFC Corporate Finance Ltd Level 15 QV1 Building 250 St Georges Terrace Perth WA 6000 Australia SHARE REGISTRIES Security Transfer Registrars Pty Ltd (for ASX)

ABN 50 078 652 632

ANNUAL REPORT 2008

CORPORATE INFORMATIONDIRECTORS

M D J Cozijn BCom ASA MAICDNon-Executive Chairman

B H McCarthy BSc (Hons) PhD GeologyManaging Director

R G Barnes BSc (Hons) GeologyTechnical Director

L L Bhandari BSc Geology and MSc GeologyIndependent Non-Executive Director

COMPANY SECRETARY

M D J Cozijn BCom ASA MAICD

AUDITORS

KPMGLevel 31152 – 158 St Georges TerracePerth WA 6000Australia

SOLICITORS

Deacons Level 39 BankWest Tower 108 St Georges Terrace Perth WA 6000Australia

PUBLIC RELATIONS

Read Corporate 3/100 Hay StreetSubiaco WA 6008Australia

Pelham Public Relations LtdNo. 1 CornhillLondon EC3V 3NDUnited Kingdom

WEBSITE

www.oilex.com.au

EMAIL

[email protected]

REGISTERED AND PRINCIPAL OFFICE

Level 2 50 Kings Park Road West Perth WA 6005Australia

Ph. +61 8 9485 3200Fax +61 8 9485 3290

POSTAL ADDRESS

PO Box 588West Perth WA 6872Australia

STOCK EXCHANGE LISTINGS

Oilex’s shares are listed under the code OEX on the Australian Securities Exchange and the AIM Market of the London Stock Exchange.

NOMINATED ADVISER TO AIM MARKET

RFC Corporate Finance Ltd Level 15 QV1 Building250 St Georges TerracePerth WA 6000Australia

SHARE REGISTRIES

Security Transfer Registrars Pty Ltd (for ASX)770 Canning Highway Applecross WA 6153Australia

Computershare Investor Services PLC (for AIM)PO Box 82, The Pavilions Bridgwater Road Bristol BS99 7NHUnited Kingdom

ANNUAL GENERAL MEETING

The annual general meeting of Oilex Ltd will be held at the Celtic Club, 48 Ord Street, West Perth at 5:00 pm on 20th November 2008.

LOCATION OF OILEX PROJECTS

CHAIRMAN’S REVIEW 2

OPERATIONS REVIEW 4

PERMIT SCHEDULE 14

CORPORATE GOVERNANCE STATEMENT 15

DIRECTORS’ REPORT 18

REMUNERATION REPORT 23

AUDITOR’S INDEPENDENCE DECLARATION 30

INCOME STATEMENTS 31

BALANCE SHEETS 32

STATEMENTS OF CHANGES IN EQUITY 33

STATEMENTS OF CASH FLOWS 34

NOTES TO THE FINANCIAL STATEMENTS 35

DIRECTORS’ DECLARATION 63

INDEPENDENT AUDIT REPORT 64

SHAREHOLDER INFORMATION 66

CONTENTS

page 2 Oilex : : Annual Report 08

CHAIRMAN’S REVIEW

CHAIRMAN’S REVIEW

Dear Shareholder,

The international oil and gas exploration and production industry has maintained a rapid

rate of change over the past year with competition for assets and experienced people

remaining very strong. The effect of the global credit crisis has had a powerful impact

on the performance of all listed companies on stock exchanges around the world with

few exceptions and the end of this phase of the cycle is difficult to predict. In the

meantime, Oilex has continued to develop its asset base in prospective permits and in

consolidating a highly experienced group of talented people to evaluate, develop and

manage these assets.

Initial oil discoveries in each of Oman, Indonesia and India have resulted from the work programs undertaken in the past 12 months. Of those discoveries, Pendalian Field Indonesia is anticipated to be brought into production later this year in the first of 2 phases at a rate of about 1,200 barrels of oil per day (bopd) from the suspended discovery well Pendalian-3. Sarha-1 exploration well in Block 56 Oman flowed oil to surface from one of 4 heavy oil bearing zones and will be appraised by a horizontal well in the next phase of drilling, which commenced in early September 2008. India appears very promising with a discovery in a new oil zone to complement the oil flows from earlier wells.

There have obviously been some disappointments, with Indian drilling operations being delayed by 5 months and slow progress on thewells at Cambay. The results of the 3 wells that remain in the program will be important in determining the development program for Cambay at different stratigraphic levels and whether they are for oil or gas. The emphasis has been on operations in existing permitswhile the company has continued to grow its asset base in the past year and at the same time has investigated many new venture opportunities in the search for high quality projects that fit with the Oilex strategy.

The past year has been a very active year in operations with drilling of 3 wells in Oman, 3 wells in Cambay, 1 well at Bhandut in India and 1 well in West Kampar Indonesia, in addition to completion of the 2D seismic acquisition and processing program onshore Oman along with reprocessing of the two existing Petroleum Development Oman (“PDO”) 3D seismic surveys. In JPDA 06-103 Timor-Leste, the reprocessed Thornton 3D seismic survey of approximately 1,000 km2 was purchased and the Maura 3D seismic survey of over 2,000 km2 was acquired in the Timor Sea. At the time of reporting, the Rose 3D seismic survey of over 1,000 km2

was being acquired in WA-388-P after seismic reprocessing and initial interpretation of the older data had been completed. Oilex increased its equity in the West Kampar PSC in Indonesia to 60% after acquiring its initial interest of 45% in August 2007, and we have farmed out part of our interest in WA-388-P to Sasol during August 2008.

Oilex : : Annual Report 08 page 3

CHAIRMAN’S REVIEW

From an operational safety perspective the Company performed exceptionally well with a Lost Time Incident Frequency Rate (“LTIFR”) of 1.47 per million manhours worked which is about 20% lower than the average LTIFR for onshore Australia and Asia. We look forward to improving on this safety record and moving into production in the forthcoming year. Our aim to is to achieve outstanding results within the framework of “industry best practice” in all of our endeavours, particularly with regard to our safety, health, social and environmental responsibilities as good corporate citizens.

Regrettably, in the context of the current global stock markets and the delays experienced in progressing our development plans in India, our market capitalisation has suffered significantly. Oilex and its management group are dedicated to concentrating on our core objectives of building our asset base to develop sustainable medium to longer term returns for all stakeholders. In this regard we rely heavily on the continued efforts of our employees, contractors, suppliers and joint venture partners, coupled with the support of our shareholders and all stakeholders. On behalf of the Board, I wish to record our appreciation for the ongoing support of these contributors, and we look forward to establishing and developing our commercial operations during the 2009 Financial Year.

Mr M.D.J. CozijnChairman

18 September 2008

Board of Directors

Left to Right: M.D.J. Cozijn, B.H. McCarthy R.G. Barnes and L.L. Bhandari


The drilling program comprising 6 appraisal wells in the Cambay Field Production Sharing Contract area began on 7 March 2008 after extended delays associated with importing and commissioning the new drilling rig. Two wells, Cambay-23Z and Cambay-19Z, have been drilled and evaluated in part and the third well, Cambay–73, spudded in July 2008. Hydrocarbons were intersected in all of the main objective horizons. The most important result to date has been the successful flow test of oil from a level deeper than had been proven in Cambay Field previously. Oil flowed to surface from this unit under natural pressure with no formation water at an initial rate of 800 barrels of oil per day (bopd), later stabilising at 120 bopd. The results to date are very encouraging for the broader potential of the deeper zones.

New prospects at OS II and EP IV particularly in the northern part of the block and at stratigraphic horizons other than OS II

and EP IV including Basal EP IV, are now being developed with the benefit of the newly acquired well data. The information from the new wells will provide a comprehensive basis for certification of oil and gas reserves at the level of the Oligocene and the Eocene main potential reservoir units and any of the exploration targets that may prove to contain hydrocarbons.

On completion of the appraisal drilling program later in 2008, a modern suite of data (including reservoir fluid, pressure, core and wireline data) will have been acquired to normalise the existing data set and to provide accurate correlations to the 3D seismic survey that had been concluded in 2007. The existing database comprises data of variable quality from over 60 wells drilled on the block. These data have been digitised and integrated with the 3D seismic survey. The wells in the current appraisal program are located to provide at least one modern data point in each geological compartment recognised from the 3D seismic data and the existing well data to confirm the ties to seismic and the correlations with old wells. All 6 appraisal wells will test the Oligocene and Eocene primary targets and any of those wells that indicate production potential from these zones may be suspended for future production of oil or gas.

Cambay 19Z EPIII/IV cased hole test


Four of the wells will also test deeper exploration targets at the base of the Eocene section and fractured Deccan basalts that have proven to be oil reservoirs in the Tarapur block to the north of the Cambay Field.

The first two wells in the program have been concluded and the third well is drilling ahead.

Cambay-23Z, the first in the sequence, spudded on 7 March 2008 and was suspended as an intended future gas well. Cambay-23, the initial well drilled in 1963 was reported to have tested gas from the EP IV zone at rates of 14,500 cubic metres per day through a 5mm choke. The appraisal well Cambay-23Z was designed to intersect the primary target about 200 metres from the same zone in the initial well in the area of a strong amplitude anomaly. Good gas shows were recorded while drilling the Miocene and Oligocene secondary objectives in this well. The evaluation of the wireline logs over the Basal Miocene and Oligocene OS II intersected at 1,505 metres and 1,545 metres respectively indicates the presence of about 9 metres of gas-bearing pay in these sandstones that are of good reservoir quality, each with about 25% average porosity.

Cores were cut in the EP IV and wireline logs were run over the Eocene section. Indications from logs are that the EP IV is gas-bearing and a cased-hole DST will be conducted over the interval 1,961m – 2,005m when core results become available and a fracture stimulation program is formalised. Cambay-23Z well has been completed as a potential gas production well.

The second well, Cambay-19Z successfully tested oil at the level of the Basal EP IV sandstone. This is the first test of the Basal Eocene reservoir unit in the Field. The well spudded on 25 May and the rig was released after completing the first of a series of planned tests on 9 July 2008.

Oilex: Basal EP IV - map in TWT 3D oblique perspective

Top Deccan - depth map with appraisal well locations

Basal EPIV - depth map with appraisal well locations

Top EPIV - depth map with appraisal well location

Top OSII - depth map with appraisal well locations

The well has proven the productive potential of deeper zones on the Western High Block. These zones are now considered to be prospective development targets and by comparison with a number of older wells that were drilled in the period 1960-1990 and penetrated the same section, there are probable oil zones that were missed in the initial evaluation. By analogy with the older wells that penetrated the Basal EP IV unit, the Basal EP IV oil bearing sandstone may be present over a significant area of the Western High Block. The volume of oil for the deeper Eocene (including Basal EP IV) and fractured Deccan basement objectives was previously estimated at about 60 million barrels oil in place.


A series of up to 3 additional DST’s at the deeper stratigraphic levels will continue in Cambay-19Z with a workover rig at the earliest opportunity. Strong gas shows were recorded also at the OS II level while drilling. The workover rig has been contracted to continue the testing program at Cambay–19Z and the first test will be of a zone of about 25 metres with similar log response as the zone that flowed oil from the Basal EP IV higher in the section.

The estimate of resources in the Cambay Field was last revised in May 2007. This estimate incorporated the interpretation of the Cambay 3D seismic survey and new well data and is confined to the depth structure mapping of the Oligocene OS II and Eocene EP IV sandstones only. Other potential hydrocarbon

bearing reservoirs have not been included in the estimate. The presence and distribution of in-place hydrocarbons in each of several major hydrocarbon-bearing structural compartments is demonstrated by test and production data combined with wireline log responses from approximately 65 wells drilled in the Contract Area. The resources for the two main intervals Oligocene OS II and Eocene EP IV have been estimated from the existing data base of wells and 3D seismic and presented in the table below. These estimates do not include oil or gas that may be found in both shallower and deeper potential reservoirs that will be intersected during the drilling program.

An estimate of undiscovered (exploration) resources of 60 million barrels of oil and 120 billion cubic feet of gas was also provided to the Directorate General of Hydrocarbons (“DGH”) to account for potential resources mainly in deeper stratigraphic units.

RESOURCES ORIGINAL VOLUME-IN-PLACE

(100% BASIS) Low Estimate Best Estimate High Estimate

Oil (million stock tank barrels) 26 48 91

Gas (billion cubic feet) # 186 356 702

Condensate (million stock tank barrels) 7 14 28

# Includes approximately 52 BCF of gas produced to date. Oilex holds a 45% interest in the Cambay Production Sharing Contract.

The Ministry of Environment and Forests (“MOEF”), Government of India, gave its formal approval in May to the proposal by the Cambay Joint Venture to drill up to 60 additional development wells within the Cambay block in the event that re-development of the Cambay Field is warranted by the current 6 well appraisal drilling program.

With the flexibility to construct new drilling sites, the opportunity now exists to test other prospects at different stratigraphic levels in other areas of the block that have high potential for gas and oil discoveries.

The field was discovered in 1957 by Oil and Natural Gas Corporation Ltd (“ONGC”), the first oil discovery in western India, onshore or offshore and was developed as a gas field mainly from OS II reservoirs in the southern part of the Cambay block. Since inception the field has produced about 52 bcf of gas until it was shut-in and we are of the view that a substantial resource remains to be exploited. The field continues to produce small volumes of oil intermittently from wells on the Western High Block.

The fields were discovered and developed initially by ONGC of India. Hydrocarbons were found in Miocene sandstones at Bhandut and Eocene sandstones at Sabarmati and continue to be produced on an intermittent basis. The fields were acquired by the GSPC and Niko Joint Venture in 1995 and Oilex subsequently acquired Niko’s interest in 2006.

The field is located on the southern culmination of a trend of producing oil fields operated by ONGC, on the outskirts of Ahmedabad, the largest city in Gujarat. Oil has been produced from the one well in the Sabarmati Field Contract Area at very low rates on an intermittent basis since inception of the PSC in 1994. The well produces at a daily average rate 16 bopd from an Eocene reservoir which is about 5m thick, through 2m of perforations.

The contract area is on the outskirts of a major city and the Joint Venture has been unsuccessful to date in procuring a contract to conduct a 2D or 3D seismic survey using an innovative low impact seismic technology over the block. A single vintage seismic line is the only existing coverage.

The first 3D seismic survey over Bhandut field was acquired in February 2007. The main reservoir units in the shallower section are discontinuous sandstones and at deeper stratigraphic levels, exploration targets that are likely to be gas-bearing will be considered for drilling when environmental approvals are received for new well locations. The 3D seismic interpretation indicates that the crest of the main structure is to the northwest of the existing wells.

The Bhandut-2Z well was drilled in October 2007 on the field margin near the oil-water contact and intersected the objective horizon at a depth 6 metres lower than prognosed in the water leg. Modern core, velocity, wireline log and pressure data have been acquired from the well to confirm the seismic correlation to locate future wells on the field. Deeper reservoir objectives identified at Bhandut may be drilled from newly built locations after Joint Venture and Government environmental approvals for new well locations are received later in the development program.


Drilling operations commenced in Oman at the end of 2007 and 3 wells were drilled in the first phase, 2 of which were oil discoveries. The rig was released for a period after the third well to enable results to be evaluated before the second phase of drilling comprising 4 wells, which commenced on 5 September 2008.

OMAN

The Michelle 2D seismic survey comprising 1,080 line km in the southwestern part of Block 56 was acquired by 2 October 2007 and processing was completed in May 2008. Reprocessing of existing 2D and 3D seismic data has also been completed and results have been incorporated into the existing data set.

The results of the Phase 1 drilling program in Block 56, Oman have been very encouraging with the Sarha-1 well flowing oil to surface from one of four interpreted oil zones. Prospects selected for the 3 well program were based on the interpretation of existing seismic data and provided a balance of exploration targets ranging from moderate (Sarha-1, Ghadaq-1) to high risk (Alyanbou-1).

The Sarha-1 discovery well confirmed that the productive trend in the adjacent block continues into Block 56. New seismic acquisition and reprocessing of existing data indicates that there are a number of structures similar to Sarha-1 present in the western flank area of Block 56 and the most prospective of these are the locations for three of the wells in the Phase 2 drilling campaign. An appraisal well, Sarha–2, on the Sarha discovery, the first of the wells in the second phase of drilling, will have a dual purpose: 1) to evaluate the potential of oil zones not able to be tested in Sarha-1; and 2) to provide production information from a 500 metre horizontal well into the Al Khlata Formation that will be critical in designing wells for full field development of the Al Khlata oil pool at the Sarha discovery.

Well Status Total Depth Result

Sarha–1 Oil discovery, suspended 1,890 m Huqf Fm Flowed oil at ~200 bopd in Al Khlata Fm

Ghadaq–1 Oil discovery, suspended 1,442 m Huqf Fm Recovered heavy oil on test from Al Khlata Fm

Alyanbou–1 Dry hole 1,199 m Huqf Fm Basement high

In addition to the Sarha-1 well results, heavy oil (preliminary oil gravity of 13.30 API) was recovered during testing of the Al Khlata zone in the Ghadaq-1 well and these results will also be the subject of further study given that oil with these characteristics is produced in Oman and in other heavy oil areas using various means of thermally enhanced recovery techniques.

The results from Alyanbou-1 which was a higher risk test of a large anticlinal structure in a remote area of the block will be incorporated into the overall prospectivity assessment.

Preliminary estimates of the undiscovered petroleum initially in place based on the current data range from 37 to 94 million barrels (on a 100% basis) for each of the four prospects that will be drilled by wells approved for the Phase 2 program which commenced in September 2008. Given the characteristics of the oil recovered at Sarha-1 there will also be a focus on establishing the recoverable reserves volume and specialists in this type of development are studying the data from Sarha-1 to estimate the recoverable volumes and to provide input to a development plan.

Block 56 area with adjacent infrastructure

Block 56 2D seismic acquisition Vibroseis trucks


Prospect/FieldRange of Estimates of Oil-Initially-in-Place

(100% basis)

Sarha Field 10 - 77 (37 mean) mmstbo

Prospect-D 12 - 196 (78 mean) mmstbo

Prospect-J 13 – 105 (48 mean) mmstbo

Prospect-A 19 - 213 (94 mean) mmstbo

The Government of the Sultanate of Oman awarded the Exploration and Production Sharing Agreement (“EPSA”) for Block 56 to a consortium of Indian companies and Oilex (Operator) on 28 June 2006. The block is located onshore, adjacent to producing fields operated by PDO, the Oman national oil company, in the South Oman Salt Basin, which is one of the main producing basins in Oman.

The South Oman Salt Basin is a prolific oil producing province with extensive pipeline infrastructure linking the producing fields to the refining and export facilities in the north of the country. The oil produced from these fields is characteristically heavier with density in the range 150 - 280 API gravity. All of the 7 reservoir objectives drilled in the first 2 wells appear to be oil-bearing and preliminary studies on the feasibility of producing the heavy oil are now in progress.

Hydrocarbon potential has been recognized for targets ranging from the Cambrian Buah formation to the Cretaceous Wasia group in areas where depth of burial is sufficient to mitigate the biodegradation of oil at the shallower levels. The possible presence of a thicker sedimentary section in the block implying a more extensive distribution of the Ara Salt unit into Block 56 raises the possibility of salt related structures similar to those producing to the west in the main salt basin.

Several of the fields in this area hold over 1 billion barrels of oil in place. Most of these fields were discovered by PDO during the last 20 years. The most recent large field development to take place in the region is Oxy’s Mukhaizna Field which is reported to be over 2 billion barrels of oil in place and which will be produced by steam flood to improve the flow characteristics of the 150 API gravity oil.

The Sarha and Ghadaq prospects, like many others in the western part of the block, are similar in structural form and reservoir objectives to the nearby producing fields operated by PDO. The pipeline network from those producing fields in the main part of the South Oman Salt Basin is only about 30 km to the west from Sarha-1.

A drilling contract was awarded to Abraj-Energy Holdings, an Omani company, for an initial term of 1 year with 2 optional extensions for 6 months each.

Oilex has a Branch Office in Muscat that is home to a team of 14 Omani and international staff.

Prospects and leads Block 56 Oman

Block 56 2D seismic acquisition - cable layout


In August 2008, Oilex signed an agreement with PT Sumatera Persada Energi (“SPE”), the Operator of West Kampar PSC, to acquire 15% additional equity interest in the PSC thereby increasing its interest from 45% to 60% subject to meeting certain conditions precedent. The West Kampar PSC contains the Pendalian Oil Field and prospective exploration areas that will be the subject of active work programs later in 2008. Shallow, low cost wells and the proximity to infrastructure are attractive incentives for the rapid development of the field. Early cash flow generated by Pendalian production will assist in funding the exploration of highly prospective trends that have been recognized on the block.

The Pendalian-3 well spudded on 28 September 2007 to appraise the oil field discovered in 1993 by the Pendalian-1 well, a cored slim hole which encountered a number of oil zones at depths ranging from 250 metres to 500 metres. Two of the zones flowed oil from drillstem tests in Pendalian-1 with maximum rates achieved of up to 530 bopd. Independent technical work carried out for Oilex indicated a Best Estimate of the “in place resource” for the field to be 12 million barrels of oil.

The well successfully tested oil from two intervals. The Operator’s estimate of the Productivity Index for the zone that was swab-tested by DST #3 following a brief period of natural flow of 330 API crude oil, is 2.32 barrels per day per psi which, given an estimated reservoir pressure of 569 psi, indicates that the maximum flow potential from this zone is 1,285 barrels per day. Production rates in the range 700-900 bopd from this zone are likely once artificial lift is installed. Initial flow rates confirm the excellent Sihapas Sandstone reservoir quality interpreted from wireline logs for this 9 metre perforated interval. The Operator’s estimate of the Productivity Index for the zone tested by DST #4, is 2.23 barrels per day per psi measured from the test with an estimated reservoir pressure of 424 psi, inferring a maximum flow potential from this zone of 916 barrels per day and suggests that production rates in the range 400-650 bopd are likely once artificial lift is installed. This zone offers substantial incremental production potential to the deeper sand tested by DST #3. The preliminary evaluation by SPE of the data from DST #5 indicated that flow rates of up to 1,200 barrels of oil per day (bopd) are likely when the well is brought into production with artificial lift, the conventional method of completion for these shallow wells. The test was conducted as a commingled flow over both of the zones tested previously in DST #3 and DST #4. This range of potential production flow rates is in general agreement with the rates achieved for each of those individual tests.

Due to the shallow depth of the reservoir and low volume of associated gas, production from the Sihapas Sandstone oilfields in adjacent areas is carried out by installing beam pumps from inception to provide artificial lift.

Commercial productivity has been confirmed by the Pendalian-3 well and a Plan of Development for that well is in the final stages of approval by the Government of Indonesia. The West Kampar Joint Venture plans to acquire a 3D seismic survey over the Pendalian Field and a number of satellite structures and to accelerate development.

The resource estimate for the broader Pendalian Field has been upgraded to 13.7 million barrels oil in place (Best Estimate Contingent Resource), with 1,800-2,000 bopd production anticipated in Q4 2008. Based on this estimate, a Plan of Development (“POD”) for the Field is being submitted to the Indonesian Government for approval.

The objective of the POD is to bring Pendalian Field into production in 2 phases comprising 1 or 2 wells in phase 1 and full field development of 3-4 wells in phase 2. The first phase of production is expected to commence at a rate of 900 – 1,200 bopd from a single well, Pendalian-3. A second well, Pendalian-4 will be drilled at the earliest opportunity in Q4 2008 with a corresponding increase in the likely production rate to 1,800 – 2,000 bopd.

Prospects and leads West Kampar PSC

Paul Senycia - Exploration Manager and Michelle Vanderputt - Senior Administrator


Contingent Resource – Development

Pending

Low Estimate mmstboip

Best Estimate mmstboip

High Estimate mmstboip

Sihapas Sandstone Units D-6, C-5

5.8 13.7 29.1

To date, significant conclusions arising from an independent evaluation carried out by an independent third party appointed by the regulator (BPMigas) are:

Sihapas sands are continuous reservoirs, supporting the volumetric assumptions for the Pendalian Field.

determined by the independent third party for the two Sihapas zones is 13.7 mmstboip (gross), with a High Estimate volume of 29 mmstboip (gross). These volumes are similar to those determined by both SPE and Oilex.

production from the Pendalian-3 well followed by Pendalian-4 production well, 3D seismic and full field development was recommended, subject to approval by the Indonesian Ministry of Petroleum.

Remaining POD requirements are being finalised by the third party adviser to BPMigas prior to submission to the Indonesian authorities. The recommended development schedule, subject to regulatory approval, calls for both Pendalian-3 and Pendalian-4 to be onstream in Q4 2008.

Plans are in place for the early drilling of the Pendalian-4 well and tenders have been received for conducting both 2D and 3D seismic programs in the West Kampar block in 2008. Ongoing mapping has confirmed the exploration potential of the West Kampar PSC which will be delineated by additional seismic coverage and investigated with the drilling of 3 exploration wells in a campaign scheduled to commence later this year.

The West Kampar Production Sharing Contract area of 4471 km2 is located in central Sumatra adjacent to the most prolific oil producing province in Indonesia, the Central Sumatra Basin, from which over 10 billion barrels of oil have been produced to date. Awarded in October 2005, the PSC work program commitment provides for the acquisition of 250 kms of 2D seismic and 50 km2 of 3D seismic along with drilling of the Pendalian-3 well and an additional 4 exploration wells by October 2008.

In May 2007 Oilex entered into an agreement to acquire a 45% interest in the West Kampar Production Sharing Contract (“PSC”), from PT Sumatera Persada Energi (“SPE”) and the acquisition has been approved by the Government. The block has existing oil discoveries, one of which is the Pendalian Oil Field which should be brought into production in Q4 2008, and it covers some highly prospective structural trends adjacent to major producing fields that will be the subject of an intensive exploration program.

The Maura 3D seismic survey, the first phase of offshore operations in Block JPDA 06–103, was completed successfully by the Geowave Champion seismic vessel in August 2008. The survey covered an area of 2,082 km2. Data from this survey will be combined with existing 3D seismic surveys to provide 3D seismic coverage over more than 90% of the area of the Block. Processing of the data is expected to be concluded about the end of 2008 and the interpretation of the data over the entire block is anticipated to be completed by about end of March 2009. Locations for exploration wells will then be selected for drilling starting about mid-year 2009.

To that end, on 13 June 2008 Oilex issued a conditional Notice of Award jointly with Nexus to Sedco Forex International for the supply of the Transocean Legend semi submersible drilling rig. Oilex has accordingly made application, on behalf of the

Top Sihapas depth map Pendalian Field

Wavefield Geowave Champion vessel


JPDA Block 06-103 Joint Venture, seeking an extension of time under the PSC to enable its 2 wells to be drilled by January 2010 rather than by January 2009. The application is under review by the relevant government authorities.

In April of this year, a significant oil discovery at Kitan-1 and -2 was made by ENI, the operator of block JPDA 06-105 (adjacent to the west of JPDA 06-103). The Kitan-1 discovery well is reported to have flowed oil at a rate of 6,300 bopd from a drillstem test in the Plover Formation. The discovery was followed by an appraisal well at Kitan-2 that confirmed the commercial viability and ENI subsequently made a Declaration of Commercial Discovery and the Timor Sea Designated Authority based in Dili, Timor-Leste declared Kitan a Development Area in May. These wells lie close to the JPDA 06-103 block boundary and confirm the oil potential of the basin.

In November 2006, Oilex (Operator) and the Joint Venture parties entered into a Production Sharing Contract (“PSC”) with the Timor Sea Designated Authority for block JPDA 06-103 and the PSC was signed in January 2007. The block is located to the east of the Laminaria, Corallina, Kakatua, Kuda Tasi and Elang discoveries/oil and gas fields and to the north of the Bayu-Undan gas condensate field.

Oilex has established an office in Dili, Timor-Leste, the first company awarded a PSC or operating in the Joint Petroleum Development Area to do so.

Oilex, Videocon Industries and Gujarat State Petroleum Corporation each acquired a 20% participating interest in the Exploration Permit for block EPP 27, offshore South Australia pursuant to a farmin agreement with Great Artesian Oil & Gas Limited in February 2006. The Christine 2D seismic survey of approximately 1,300 line kilometres was completed on 20 July 2006 and integrated into the interpretation. The Joint Venture agreed that a well was not justified on the block.

The term of the final permit year 6 ended on 24 August 2008 and discussions with the Government authorities are in progress to determine future activity on the permit.

The Rose 3D seismic survey of 1,180 km2 began in August 2008 over the southeastern part of the permit using the vessel “Geowave Champion” and is expected to be completed in September 2008. Interpretation of the reprocessed 2D and existing third party seismic data was completed and provided the basis for Sasol to farmin for 30% equity interest in the permit by funding 60% of certain costs of the Rose 3D seismic survey for 2008. Reprocessing of existing seismic data has been completed and interpretation is in progress.

As part of its offshore gas strategy, Oilex (Operator) and the Joint Venture parties acquired exploration permit WA-388-P by competitive tender in 2007. The block lies to the northwest of

Outline of Maura 3D seismic survey and identified prospects and leads JPDA 06-103

Outline of Rose 3D seismic survey and identified leads WA-388-P


the North Rankin, Goodwyn and Perseus gas and condensate fields currently being produced for the domestic and LNG gas markets by the North West Shelf Venture and to the north of the large gas resources discovered in the Jansz/lo area.

In November 2006, Oilex concluded an agreement with Bow Energy Limited (“Bow”) to sell its permit interests in the Surat-Bowen and Cooper-Eromanga basins. As consideration for the sale of the assets, Oilex was issued with 13.3 million fully paid ordinary Bow shares and 13.3 million options to purchase Bow shares at 50 cents per share on or before 5 years from the issue date. Oilex is the largest shareholder in Bow and indirectly through this shareholding may benefit from success that Bow may have in any of its activities.

John Lamberto - Chief Geophysicist

Left to Right:

Ben Clube: Chief Finance & Commercial Officer

Kim Morrison: Business Development Manager

Rich Paces: Chief Operating Officer

The total issued capital at 30 June 2008 was 132,083,885 fully paid shares in addition to 39,925,100 unlisted options exercisable at prices between $0.40 and $2.75 per share and 1,351,000 performance rights.

At the end of the 2007 financial year, the Company raised $67.5 million and at 30 June 2008 retained $43 million in cash, receivables and realisable investments after having retired $10 million in loans during the financial year.

Oilex holds 13.3 million fully paid shares in Bow Energy Limited, representing 8.79% of the issued capital. At 30 June 2008 these shares had a market value of $5.7 million. In addition the Company holds 13.3 million options exercisable at $0.50 per share by 7 November 2011.

Oilex has achieved an excellent operating record in its operations in Oman, India and JPDA during the past 12 months. A single lost time incident occurred in India during a period in Oman and India when 680,172 manhours were worked including all contractors and Oilex personnel. This equates to a Lost Time Incident Frequency Rate of 1.47 / million manhours worked. By comparison the LTIFR for onshore Australia and Asia is 1.76 and for USA is 6.17 (IADC ASP Program 2007 Final Report issued June 2007).

Oilex is committed to protecting the health and safety of everybody who plays a part in our operations or lives in the communities where we operate. Wherever we operate, we will conduct our business with respect and care for both the local and global, natural and social environment and systematically manage risks to drive sustainable business growth. We will strive to eliminate all injuries, occupational illness, unsafe practise and incidents of environmental harm from our activities. The safety and health of our workforce and our environment stewardship are just as important to our success as operational and financial performance and the reputation of the company.

As Oilex expands its presence in different parts of the world, we shall endeavour to understand the diversity of cultures and customs that we encounter, to incorporate that understanding into the business practice for that country and to have a beneficial impact through our working involvement with local communities. We shall strive to make our facilities safer and better places in which to work and our attention to detail and focus on safety, environmental, health and security issues will help to ensure high standards of performance. We are committed to a process of continuous improvement in all we do and to the adoption of international industry standards and codes wherever practicable. Through implementation of these principles, Oilex seeks to earn the public’s trust and to be recognised as a responsible corporate citizen.


The “Independence Oil and Gas Scholarship Fund” was established by Oilex in 2006 and provided support for Mr Delio Teixeira, a student of Timor-Leste who completed his degree at Murdoch University in 2008. Delio has returned to Timor-Leste and is working in the Ministry of Foreign Affairs and Cooperation.

Oilex is actively contributing to the needs of various rural communities in Timor-Leste, one of the parties, with Australia, to the agreements governing the Joint Petroleum Development Area where Oilex has a significant work program. One of the fundamental long-term issues affecting the communities of Timor-Leste is poor health and Oilex has established a working alliance with Australian Aid International (“AAI”) for the provision of health care and training of health care workers that is needed in remote communities of Timor-Leste. This year the work is focussed on the island of Atauro to the north of Dili where the project team is providing health care facilities to remote villages. This program has had a very beneficial impact on the health system and its intended beneficiaries on Atauro. It is fully coordinated with the objectives of the Timor-Leste Ministry of Health and World Health Organization.

AAI is an Australian-based, independent humanitarian aid organisation that is non-profit and non-sectarian. AAI has made measurable and sustainable improvements to the lives of displaced people around the world, providing emergency medical assistance and implementing rural health programs that focus on building local capacity.

Oilex’s business objective is to produce exceptional results for the Company and all stakeholders. A fundamental component of our strategy is to develop and maintain excellent working relationships with the communities where we work and to maintain a high level of corporate responsibility.

This program has both immediate and long term impacts on the health system and its intended beneficiaries on Artauro. It is fully co-ordinated with the Ministry of Health and World Health Organization and supports their respective objectives. It has also been fully funded by Oilex under its community development program budget. It employs and benefits citizens of Timor-Leste by providing them with long term employment and skills development prospects in medical support for local communities.

(1) Health promotion (2) Mobile clinic consultation at Biquelli (3) AAI pharmacy (4) Local community (5) Consultation at Atekru mobile clinic


PERMIT BASIN / STATE / COUNTRY

JOINT VENTURE PARTIES

EQUITY %

OPERATOR

Cambay Field Cambay / Gujarat / India Oilex Ltd 30.0 Oilex Ltd

Oilex NL Holdings (India) Limited 15.0

Gujarat State Petroleum Corp. Ltd 55.0

Bhandut Field Cambay / Gujarat / India Oilex NL Holdings (India) Limited 40.0 Oilex NL Holdings(India) Limited


Sabarmati Field Cambay / Gujarat / India Oilex NL Holdings (India) Limited 40.0 Oilex NL Holdings (India) Limited


Block 56 South Oman / Oman Oilex Oman Limited 25.0 Oilex Oman Limited

GAIL (India) Limited 25.0

Videocon Industries Ltd 25.0

Bharat Petroresources Limited 12.5

Hindustan Petroleum Corp. Ltd 12.5

West Kampar Block Central Sumatra / Sumatra/ Indonesia

Oilex (West Kampar) Limited 45.0 PT Sumatera Persada Energi

PT Sumatera Persada Energi 55.0

EPP27 Otway / SA / Australia Oilex Ltd 20.0 Oilex Ltd



Great Artesian Oil & Gas Limited 40.0

JPDA 06-103 Flamingo / Joint Petroleum Development

Area/ Timor-Leste & Australia

Oilex (JPDA 06-103) Ltd 25.0 Oilex (JPDA 06-103) Ltd

GSPC (JPDA) Limited 25.0

Global Energy Inc. 25.0

Bharat Petroresources JPDA Ltd 25.0

WA-388-P Carnarvon / WA / Australia

Oilex Ltd 20.0 Oilex Ltd

Gujarat State Petroleum Corp Ltd 20.0


Bharat Petroleum Corporation Ltd 20.0

Hindustan Petroleum Corp. Ltd 20.0


In accordance with the ASX Corporate Governance Council’s Principles of Good Corporate Governance and Best Practice Recommendations (“ASX Principles and Recommendations”), Oilex Ltd (the “Company”) has made it a priority to adopt systems of control and accountability as the basis for the administration of corporate governance. Some of these policies and procedures are summarised in this statement. Commensurate with the spirit of the ASX Principles and Recommendations, the Company has followed each recommendation where the Board of Directors (the “Board”) has considered the recommendation to be an appropriate benchmark for corporate governance practices, taking into account factors such as the size of the Company and the Board, resources available and activities of the Company. Where, after due consideration, the Company’s corporate governance practices depart from the ASX Principles and Recommendations, the Board has offered full disclosure of the nature of, and reason for, the departure.

The Company has undertaken a review of its corporate governance practices as a consequence of the revision to the ASX Principles and Recommendations made by the ASX Corporate Governance Council. The Company will be reporting against the revised ASX Principles and Recommendations in its next annual report.

Further information about the Company’s corporate governance practices is set out on the Company’s website at www.oilex.com.au. In accordance with the ASX Principles and Recommendations, information published on the Company’s website includes charters (for the Board and its committees), the Company’s code of conduct and other policies and procedures relating to the Board and its responsibilities.

During the Company’s 2007/2008 financial year (the “Reporting Period”) the Company has complied with each of the ASX Principles and Recommendations, other than in relation to the matters specified below.

A majority of the Board should be independent directors.

Notification of Departure: The Board does not have a majority of independent directors. Only one of the four directors is independent.

Explanation for Departure: The Board considers that its current composition is an appropriate blend of skills and expertise, relevant to the Company’s business. The Board is aware of the importance of independent judgement and considers independence, amongst other things, when new appointments to the Board are made.

The Chairman should be an independent director.

Notification of Departure: The chair is not independent in accordance with the criteria set out in Box 2.1 of the ASX Principles and Recommendations (“Independence Criteria”).

Explanation for Departure: The Board considers that Mr Cozijn is the most appropriate person for the position as chair because of his industry experience. The Board is of the view that it is only Mr Cozijn’s services as Company Secretary that precludes him from being considered independent and that his role as Company Secretary is unlikely to cause a conflict of interest or impede his ability to exercise independent judgement. Therefore, the Board considers Mr Cozijn to be a suitable Chairman.

The Board should establish a nomination committee.

Notification of Departure: There is no separate nomination committee.

Explanation for Departure: The full Board considers those matters and issues that would usually fall to a nomination committee. Given the size and composition of the Board, the Board does not consider that any efficiencies or other benefits would be gained by establishing a separate committee. However, to assist it with its nomination function, the Board has adopted and disclosed its Nomination Committee Charter.

The Board should establish an audit committee and structure it in accordance with Recommendation 4.3.

Notification of Departure: A separate audit committee has not been formed and therefore is not structured in accordance with the compositional recommendation. Further, Mr Cozijn maintains the chair during audit related discussions.

Explanation for Departure: The role of the audit committee is carried out by the full Board. Given the Board’s size and composition, an audit committee in accordance with the recommended structure is not possible. Therefore, the Board considers no efficiencies or other benefits would be gained by establishing a separate committee. During audit discussions Mr Cozijn maintains the chair due to his financial qualifications and expertise. To assist it with its audit function, the Board has adopted and disclosed its Audit Committee Charter. The Audit Committee Charter also provides that the Board may meet with the external auditor, without management present, as required.


The Board should establish a remuneration committee.

Notification of Departure: There is no separate remuneration committee.

Explanation for Departure: The full Board considers those matters and issues that would usually fall to a remuneration committee. Given the size and composition of the Board, the Board does not consider that any efficiencies or other benefits would be gained by establishing a separate committee. When considering matters of remuneration, the Board functions in accordance with its Remuneration Committee Charter. Further, in accordance with the Corporations Act requirements, no directors participate in any deliberations regarding their own remuneration or related issues.

The Board did not hold any nomination committee meetings during the Reporting Period.

The full Board, in its capacity as the audit committee held two meetings during the Reporting Period. The following table shows the directors attendance at those meetings:

Name Number of Meetings Attended

M D J Cozijn (Chairman) 2

B H McCarthy 2

R G Barnes 2

L L Bhandari (Independent) 2

Details of each of the director’s qualifications are set out in the Directors’ Report.

Mr Cozijn has a Bachelor of Commerce Degree and is an Associate of CPA Australia. He has over 30 years experience in the administration of listed mining companies. Mr Cozijn’s qualifications and experience enable him to meet the test of financial expertise.

Details of remuneration, including the Company’s policy on remuneration, are contained in the Remuneration Report which forms part of the Directors’ Report.

The full Board, in its capacity as the Remuneration Committee, held four meetings during the Reporting Period. The following table shows the directors attendance at those meetings:

Name Number of Meetings Attended

M D J Cozijn (Chairman) 4

B H McCarthy 4

R G Barnes 4

L L Bhandari (Independent) 2

A profile of each Director containing the skills, experience, expertise and term of office of each Director is set out in the Directors’ Report.

In considering the independence of directors, the Board refers to the criteria for independence as set out in Box 2.1 of the ASX Principles and Recommendations (“Independence Criteria”). To the extent that it is necessary for the Board to consider issues of materiality, the Board refers to the thresholds for qualitative and quantitative materiality as adopted by the Board and contained in the Board Charter, which is disclosed in full on the Company’s website.

Applying the Independence Criteria, the independent director of the Company currently is Mr Bhandari.

If a Director considers it necessary to obtain independent professional advice to properly discharge the responsibility of his/her office as a director, then, provided the Director first obtains approval for incurring such expense from the Chairman, the Company will pay the reasonable expenses associated with obtaining such advice.

During the Reporting Period informal discussions were held regarding the overall board performance. All directors participated in the discussions. There were also ongoing discussions between Mr Cozijn and Dr McCarthy in relation to Dr McCarthy’s performance and the Board’s progress in achieving its objectives.

There are no termination or retirement benefits for non-executive directors.


The Directors present their report together with the financial report of Oilex Ltd (the “Company”) and of the consolidated entity, being the Company and its controlled entities (the “Group”) for the financial year ended 30 June 2008 and the Auditors’ report thereon.

DIRECTORS’ REPORT

Board Meetings

Audit Committee Meetings

Remuneration Committee Meetings

A B A B A B

M D J Cozijn 6 6 2 2 4 4

B H McCarthy 6 6 2 2 4 4

R G Barnes 6 6 2 2 4 4

L L Bhandari 6 4 2 2 4 2

A - Number of meetings held during the time the Director held office during the year

B - Number of meetings attended

Mr Raymond George Barnes(Technical Director)

BSc (Hons) Geology

Age: 57

Appointed as a Director in September 2005, Mr Barnes has over 36 years experience in the oil and gas exploration and production industry. Further details of Mr Barnes’ qualifications and experience can be found in the Executive Management section of the Directors’ Report.

During the last three years Mr Barnes has been a director of the following listed company:

September 2005)

Mr Laxmi Lal Bhandari(Independent Non-Executive Director)

BSc Geology and MSc Geology

Age: 73

Mr Bhandari was appointed as a director in November 2006 and is based in New Delhi, India. He trained as a geologist and worked with Oil and Natural Gas Corporation Ltd (“ONGC”), the largest public sector corporation in the oil and gas sector in India, on many significant projects over 37 years including the discovery and development of the Bombay High offshore fields. Mr Bhandari held high level positions including Chairman

exploration arm of ONGC, and Chairman of ONGC. On leaving ONGC, Mr Bhandari became President of Tata Petrodyne, the oil and gas subsidiary of Tata Industries, a very large Indian industrial corporation. In 2003 he took up the position of Managing Director of India Hydrocarbons Ltd and continued until June 2006.

During the last three years Mr Bhandari has not been a director of any other listed companies.

DIRECTORS’ MEETINGS

All members of the Board are members of the Audit, Remuneration and Nomination Committees. The number of meetings of Directors (including meetings of committees of Directors) and the number of meetings attended by each Director of the Company during the financial year are:

DIRECTORS

The names and details of the directors of the Company in office during the financial year and until the date of this report are detailed below. Directors were in office for this entire period unless otherwise stated.

Mr Max Dirk Jan Cozijn(Non-Executive Chairman and Company Secretary)

BCom ASA MAICD

Age: 58

Chairman since the Company listed on the Australian Securities Exchange (“ASX”) in 2003. Mr Cozijn has over 30 years experience in the administration of listed mining and industrial companies. He is the Finance Director of Carbon Energy Limited, Finance Director and Company Secretary of Magma Metals Limited and Chairman of Malagasy Minerals Limited and is a Director of various private companies, having also previously been a Non-Executive Director of Kagara Zinc Ltd for 20 years.

During the last three years Mr Cozijn has been a director of the following listed companies:

to current)

Dr Bruce Henry McCarthy(Managing Director)

BSc (Hons) PhD Geology

Age: 58

Appointed Managing Director in February 2005, Dr McCarthy has over 30 years experience in the oil and gas exploration and production industry in geotechnical and management positions. Further details of Dr McCarthy’s qualifications and experience can be found in the Executive Management section of the Directors’ Report.

During the last three years Dr McCarthy has not been a director of any other listed companies.

Oilex : :

DIRECTORS’ REPORT

EXECUTIVE MANAGEMENT

Dr Bruce Henry McCarthy(Managing Director)

BSc (Hons) PhD Geology

Age: 58

Dr McCarthy has onshore and offshore experience gained in Australia and overseas working for a small independent and a large multinational company. Most recently he worked as an independent consultant and as President-India for Cairn Energy PLC (UK) leading their highly successful operating subsidiary

2000, Dr McCarthy was based in India as Executive Director with Command Petroleum India Ltd (“Command”) and with Cairn Energy India Pty Ltd (“Cairn”) after Command merged with

Corporation working in the North Sea and based in the United Kingdom, working on the North West Shelf of Western Australia and in the Timor Sea based out of Perth, Western Australia.

Mr Raymond George Barnes(Technical Director)

BSc (Hons) Geology

Age: 57

Mr Barnes has worked in Europe, North and South America, South East Asia, the Middle East and Australia with an outstanding record of finding and developing commercial oil and gas discoveries in Australia and internationally. Recent

Limited from 2001 until 2005 and Exploration Manager of Apache Energy based in Perth during a very aggressive exploration and development phase in the offshore Carnarvon

Barnes held senior management positions for Ampolex based in Denver, Colorado where he was responsible for the United States and South American operations following a period in Perth, Western Australia where he was responsible for North West Shelf and Timor Sea operations.

Mr Richard Steven Paces(Chief Operating Officer)

BSc Chemical Engineering

Age: 51

Mr Paces was appointed as Chief Operating Officer in May 2006 and has over 26 years of experience in the oil and gas exploration and production industry. His background includes broad petroleum and reservoir engineering experience as well as extensive operations and management experience. He has worked onshore and offshore with both large and small multinational companies and has a variety of international

Country Manager in Equatorial Guinea, Central Africa where he worked on a major LNG expansion project for Marathon Oil Corporation.

as General Manager – Technical and subsequently as Country Manager in India. After leaving Cairn, he spent one year working for Reliance Industries in India as Chief Operating Officer of their oil and gas division.

Mr Ben Clube(Chief Finance and Commercial Officer)

BSc (Hons) Geology

Age: 42

Mr Clube joined Oilex in May 2008 and brings a depth of commercial international oil and gas expertise to the Oilex group, having spent the past 15 years at BHP Billiton Petroleum in a variety of senior management roles, including

and Perth. A Chartered Accountant, he holds a Bachelor of Science with Honours in Geology from the University of Edinburgh and previously worked as Audit Manager at PricewaterhouseCoopers in London.

Mr Paul Senycia(Exploration Manager)

MAppSc Geophysics

Age: 51

Mr Senycia was formerly Head of Evaluation at Woodside Energy Ltd responsible for worldwide exploration and new ventures, and was seconded from Woodside to PDO in Oman

exploration experience in Australasia, North & West Africa, North America and Europe.

Mr Kim Morrison(Business Development Manager)

BSc (Hons) Geology and Geophysics

Age: 46

Mr Morrison joined Oilex in May 2008 as Business Development Manager with responsibility for growing Oilex’s portfolio of assets in the countries around the Indian Ocean rim. He has more than 23 years of wide ranging experience in Southeast and South Asia, North Africa, North America and Australasia in various senior explorationist roles with Woodside Energy Ltd, Shell International and Marathon Oil Company.

Mr Jay Laurie(General Counsel)

BA LLB (Hons)

Age: 37

Mr Laurie has over 15 years experience in private practice and in-house legal roles. Following a number of years with a large commercial law firm, he has held in-house counsel roles in the

years. Mr Laurie was Senior Counsel at Woodside Energy Ltd before joining Oilex in 2007 as General Counsel.

PRINCIPAL ACTIVITIES

The principal activities of the consolidated entity during the course of the financial year included:

There were no significant changes in the nature of these activities during the year.


OPERATING RESULTS

The loss after income tax of the consolidated entity for the year

$14,721,271).

DIVIDENDS

No dividend was paid or declared during the year and the Directors do not recommend the payment of a dividend.

REVIEW OF OPERATIONS

A review of the operations of the Group during the financial year and the results of those operations are set out on pages 4 to 13 of this report.

SIGNIFICANT CHANGES IN THE STATE OF AFFAIRS

There have been no significant changes in the state of affairs of the Group that occurred during the financial period not otherwise disclosed in this report or the financial statements.

SIGNIFICANT EVENTS AFTER BALANCE DATE

by Oilex Ltd, entered into a Farmout Agreement under which each of the 5 existing joint venture parties (including Oilex Ltd) will assign a 6% participating interest in Exploration Permit WA-388-P in offshore Western Australia to Sasol Petroleum Australia Ltd. In return for its 30% participating interest, Sasol has agreed to bear 60% of certain costs associated with the acquisition of seismic data in the Permit. The assignment is subject to obtaining the necessary Government approval and registration.

b) On 14 August 2008 Oilex (West Kampar) Limited entered into an agreement to acquire an additional 15% in the West Kampar PSC, onshore Sumatra Indonesia from the operator, PT Sumatera Persada Energi, and thereby increasing Oilex (West Kampar) Limited’s working interest from 45% to 60%. The consideration for the additional 15% interest includes Oilex (West Kampar) Limited carrying certain operational costs and a phased cash payment.

c) Subsequent to the year ended 30 June 2008, the carrying value of the investment in Bow Energy Limited was reviewed and as at 11 September 2008 the investment had decreased by $4,757,237 in value. The reduction in value of the investment would have reduced the Asset Revaluation Reserve by $2,528,663 (before tax effect) and Other Income by $2,228,574. The financial effect of the reduction in the value of the investment has not been brought to account at balance date.

LIKELY DEVELOPMENTS

Other than the matters referred to elsewhere in this report, further disclosure as to likely developments in the operations of the Group and expected results of those operations would, in the opinion of the Board, be speculative and not in the best interests of the Group.

FINANCIAL POSITION

Capital Structure and Treasury Policy

At the date of this report, the Company had a total issued

options exercisable at prices between $0.40 and $2.75 per share and 1,351,000 performance rights.

Cash management is reviewed on a regular basis by the Group’s Chief Finance and Commercial Officer and reported to the Board on a monthly basis to ensure the Group is able to meet its financial obligations as and when they fall due. Until sufficient operating cash flows are generated from its operations, the Group remains reliant on equity or debt funding to fund its exploration commitments and administration.

Liquidity and Funding

As at 30 June 2008 the Group had no borrowings or undrawn financing facilities. The Company is currently actively developing funding options in order that it can meet its

discretionary expenditure.

ENVIRONMENTAL ISSUES

The Group’s oil and gas exploration and production activities are subject to environmental regulation under the legislation of the respective states and countries in which it operates. The majority of the Group’s activities involve low level disturbance associated with its exploration drilling programs. The Board actively monitors compliance with these regulations and as at the date of this report is not aware of any material breaches in respect of these regulations.

DIRECTORS’ REPORT

DIRECTORS’ INTERESTS

The relevant interest of each director in shares and options issued by the Company, as notified by the Directors to the ASX in accordance with S205G(1) of the Corporations Act 2001, at the date of this report is as follows:

Number of Ordinary Shares Number of Options Over Ordinary Shares

Direct Indirect Direct Indirect

M D J Cozijn 800,000 500,000 500,000 500,000

L L Bhandari - - - 300,000

B H McCarthy - 800,000 6,000,000 4,000,000

R G Barnes 23,871 600,000 6,023,871 -


DIRECTORS’ REPORT

SHARE OPTIONS AND PERFORMANCE RIGHTS

Options and Performance Rights Granted to Directors and Officers of the Company

During or since the end of the financial year, the Company granted options and performance rights for no consideration over unissued ordinary shares in the Company, to the following Directors and Executives of the Company as part of their remuneration:

OPTIONS Number of Options Granted Exercise Price Expiry Date

Directors

M D J Cozijn 250,000 $2.00 1 July 2011

M D J Cozijn 250,000 $2.50 1 July 2011

L L Bhandari 150,000 $2.00 1 July 2011

L L Bhandari 150,000 $2.50 1 July 2011

B H McCarthy 2,000,000 $2.00 1 July 2011

B H McCarthy 2,000,000 $2.50 1 July 2011

R G Barnes 1,500,000 $2.00 1 July 2011

R G Barnes 1,500,000 $2.50 1 July 2011

Executives

B J M Clube 500,000 $1.75 30 June 2011

B J M Clube 500,000 $2.25 30 June 2011

B J M Clube 500,000 $2.75 30 June 2012

W K Morrison 400,000 $1.75 30 June 2011

W K Morrison 400,000 $2.25 30 June 2011

W K Morrison 400,000 $2.75 30 June 2012

PERFORMANCE RIGHTS Number of Rights Granted Exercise Price Expiry Date

Executives

P G Senycia 50,000 - 1 July 2013

J W R Laurie 80,000 - 1 July 2012

Un-issued Shares Under Options and Rights

At the date of this report unissued ordinary shares of the Company under option (with an exercise price) are:

Expiry Date Exercise Price Number of Shares Expiry Date Exercise Price Number of Shares

7 December 2008 $0.50 1,000,100 30 April 2010 $1.60 350,000

14 December 2008 $0.40 2,000,000 30 April 2010 $2.10 350,000

14 December 2008 $0.50 3,000,000 31 July 2010 775,000

$0.50 1,000,000 31 October 2010 $2.00 500,000

$0.50 775,000 31 January 2011 $2.50 450,000

$0.65 775,000 31 March 2011 $2.00 2,500,000

$1.50 500,000 31 March 2011 $2.25 300,000

$1.75 500,000 30 April 2011 $2.70 350,000

$0.80 4,250,000 30 June 2011 $1.75

$1.00 500,000 30 June 2011 $2.25

$1.50 3,000,000 1 July 2011 $2.00

31 January 2010 $1.40 500,000 1 July 2011 $2.50

31 January 2010 $2.00 450,000 30 September 2011 $1.57 500,000

31 March 2010 $0.50 4,500,000 31 March 2012 $2.75 300,000

31 March 2010 $1.75 300,000 30 June 2012 $2.75

TOTAL

These options do not entitle the holder to participate in any share issue of the Company or any other body corporate.


DIRECTORS’ REPORT

At the date of this report unissued ordinary shares of the Company under option which are subject to performance rights are:

Expiry Date Exercise Price Number of Rights

1 July 2011 – 2006 rights - 782,000

1 July 2012 – 2007 rights -

1 July 2013 – 2008 rights - 170,000

1,351,000

meeting performance conditions based on the share price growth of the Company compared to the growth in the Standard & Poors (S&P) / ASX 200 Energy Sector Index (code XEJ) and to the discretion of the Board of Oilex Ltd.

Shares Issued on Exercise of Options

During or since the end of the financial year, the Company issued ordinary shares as a result of the exercise of options as follows (there were no amounts unpaid on the shares issued):

Number of Shares Amount Paid on Each Share

2,200,000 $0.20

250,000 $0.45

250,000 $0.50

2,700,000

INDEMNIFICATION AND INSURANCE OF DIRECTORS AND OFFICERS

The Group paid a premium in respect of insurance cover for the directors and officers of the Group. The Group has not included details of the nature of the liabilities covered or the amount of the premium paid in respect of the directors’ liability and legal expense insurance contracts, as such disclosure is prohibited under the terms of the insurance contract.

PROCEEDINGS ON BEHALF OF THE COMPANY

No person has applied for leave of Court to bring proceedings on behalf of the Company or intervene in any proceedings to which the Company is a party for the purpose of taking responsibility on behalf of the Company for all or any part of those proceedings.

The Company was not a party to any such proceedings during the year.

NON-AUDIT SERVICES

The Company may decide to employ the Auditor on assignments additional to their statutory audit duties where the Auditor’s expertise and experience with the Group is important.

The Board has considered their position and, in accordance with the advice received from the Audit Committee, is satisfied that the provision of the non-audit services is compatible with the general standard of independence for auditors imposed by the Corporations Act 2001. The Directors are satisfied that the provision of non-audit services by the Auditor, as set out below, did not compromise the auditor independence requirements of the Corporations Act 2001 for the following reasons:

Committee to ensure they do not impact the impartiality and

relating to auditor independence as set out in APES 110 Code of Ethics for Professional Accountants, including reviewing or auditing the auditor’s own work, acting in a management or decision-making capacity for the Company, acting as an advocate for the Company or jointly sharing risks and rewards.

Details of the amounts paid to the Auditor of the Company, KPMG Australia, and its related practices for audit and non-audit services provided during the year are set out below.

Consolidated

2008 2007

$ $

Audit Services

Auditors of the Company

Audit and review of financial reports (KPMG Australia) 49,743 38,040

Audit and review of financial reports (KPMG related practices) 63,543 68,448

113,286 106,488

Other Services

Assurance and Other Services

KPMG Australia 12,350 2,020

KPMG related practices 16,746 43,023

Taxation Services

Taxation compliance services (KPMG Australia) 104,591 128,474

Taxation compliance services (KPMG related practices) 32,426

166,113 184,458


DIRECTORS’ REPORT

REMUNERATION REPORT - AUDITED

1. PRINCIPLES OF COMPENSATION

Remuneration of directors and executives is referred to as compensation as defined in AASB 124.

Compensation levels for key management personnel of the Group are competitively set to attract and retain appropriately qualified and experienced directors and executives. The Remuneration Committee obtains independent advice on the appropriateness of compensation packages of both the Company and the consolidated Group given trends in comparative companies both locally and internationally and the objectives of the Company’s compensation strategy.

The compensation structures explained below are designed to attract suitably qualified candidates, reward the achievement of strategic objectives and achieve the broader outcome of creation of value for shareholders. The compensation structures take into account:

Compensation packages include a mix of fixed compensation and long term performance-based incentives.

1.1 Fixed Compensation

Fixed compensation consists of base compensation as well as employer contributions to superannuation funds. Compensation levels are reviewed annually by the Remuneration Committee through a process that considers individual, segment and overall performance of the Group. In addition, external independent consultants with specific oil and gas industry experience provide analysis and advice to ensure the directors’ and senior executives’ compensation is competitive in the market. Compensation for senior executives is also reviewed on promotion.

1.2 Performance-Linked Compensation

Compensation of employees linked to performance of the Company includes long-term incentives designed to reward key management personnel for growth in shareholder wealth. The long term incentive plan (“LTI”) is used to reward performance by granting options over ordinary shares of the Company. The exercise price of the options is set at a premium to the share price at the time they are granted. The change in share price is the key performance criteria for achieving a benefit under the plan as the value that may be generated on exercise of options is dependent upon an increase in the share price above the exercise price of the options.

The Company has established an Employee Performance Rights Plan that entitles employees to zero exercise price options. The performance rights are subject to a performance benchmark, based on Oilex’s percentage share price growth compared to the growth in the S&P/ASX 200 Energy Sector Index, which, subject to the discretion of the Board of Oilex Ltd, must be satisfied before any performance rights can be exercised enabling the relevant employee to receive shares in the Company.

Given Oilex is an exploration company that is not yet generating profits or net operating cash flows, it is the ability to improve the share price that largely determines the success of Oilex’s management team. The Remuneration Committee therefore considers that fixed compensation combined with an LTI component is achieving the Company’s objectives to the benefit of employees and shareholders alike.

1.3 Non-Executive Directors

Total compensation for all Non-Executive Directors is set based on advice from external advisers with reference to fees paid to non-executive directors of comparable companies. Non-Executive Directors’ base fees are currently $40,000 per annum. The

services and director’s fees. Director’s fees cover all main board activities.


DIRECTORS’ REPORT

2. EMPLOYMENT CONTRACTS

The following table summarises the key terms and conditions of contracts between key executives and the Company:

Executive Position Contract Start Date Contract Termination Date

Resignation Notice Required

B H McCarthy1 Managing Director 1 May 2008 30 April 2011 6 months

R G Barnes2 Technical Director 16 September 2005 16 September 2008 3 months

B J M Clube Chief Finance and Commercial Officer

5 May 2008 n/a 3 months

R S Paces Chief Operating Officer 5 May 2006 6 months

P G Senycia Exploration Manager 30 October 2006 n/a 3 months

W K Morrison Business Development Manager

1 May 2008 n/a 1 month

J W R Laurie General Counsel 12 March 2007 n/a 1 month

1 On 1 May 2008 the Company entered into an agreement with Macuale Consultancy Pty Ltd for the provision of Dr McCarthy’s services in the position of Managing Director of Oilex Ltd.2

of Technical Director of Oilex Ltd for a period of three years.3 The Company may terminate the contract immediately if serious misconduct has occurred. In this case the termination payment is only the fixed remuneration

earned until the date of termination. On termination with cause, any unvested options and performance rights will immediately be forfeited.

3. DIRECTORS’ AND EXECUTIVE OFFICERS’ REMUNERATION (COMPANY AND CONSOLIDATED)

Details of the nature and amount of each major element of remuneration of each Director of the Company and each of the named Company Executives and relevant Group Executives who received the highest remuneration are:

Year

Short – Term Post Employment Superannuation

Benefits

$Salary & Fees STI Cash Bonus

Non Monetary Benefits Total

$ $ $ $

Non-Executive DirectorsM D J CozijnChairman

2008 100,000 - - 100,0002007 16,667 - - 16,667

L L BhandariNon-Executive Director

2008 40,000 - - 40,000 -2007 24,111 - - 24,111 -

Executive DirectorsB H McCarthyManaging Director

2008 387,368 - 86,0822007 275,000 -

R G BarnesTechnical Director

2008 - - -2007 301,000 - - 301,000 -

ExecutivesB J M ClubeChief Finance and Commercial Officer

2008 21,538 - - 21,5382007 - - - - -

(Appointed 5 May 2008)R S PacesChief Operating Officer

2008 424,525 - 514,735 14,6062007 - 645,075 15,461

P G SenyciaExploration Manager

2008 - -2007 144,137 - - 144,137 41,312

(Appointed 30 October 2006)W K MorrisonBusiness Development Manager

2008 47,500 - - 47,500 4,2752007 - - - - -

(Appointed 1 May 2008)J W R LaurieGeneral Counsel

2008 226,251 - - 226,251 20,3632007 - -

(Appointed 12 March 2007)G J McCauleyChief Financial Officer

2008 - - 17,1002007 137,615 - - 137,615 12,385

(To 5 May 2008) 1

A D BeckettGeneral Manager Operations

2008 - - -2007 - - -

The Directors of the Company may be Directors of the Company’s subsidiaries. No remuneration is received for directorships of subsidiaries. All key management personnel are employed by the parent entity.1 Mr McCauley was appointed to a newly created senior finance role on the appointment of Mr Clube to the position of Chief Finance and Commercial Officer.2 Relocation benefits paid on appointment# Not calculated as the inclusion would distort for the period given recent commencement.


DIRECTORS’ REPORT

Unvested Options and Performance Rights on

Resignation

Termination notice required from the

Company 3Termination payment

Forfeited 6 months 12 months fixed remuneration if the Company terminates without notice or if the executive terminates the contract following a material change event (including a material diminution in role or change of work location).

Forfeited 3 months None


Forfeited 3 months 12 months fixed remuneration to be paid on notice from the Company and any options and rights that will vest during the notice period will be retained.


Forfeited 1 month None

Forfeited 1 month None

Other Long-Term Benefits

Termination / Sign-on Benefits

Share Based Payments

Total

Value of Options as Proportion of Remuneration

Value of Performance Rights as Proportion

of Remuneration Options Performance Rights$ $ $ $ $ % %

- - - 301,478 64% -- - - - - -- - 115,487 - 155,487 74% -- - - - 24,111 - -

- - 1,702,762 - 2,187,007 78% -- - - - -- - - 1,528,557 80% -- - - - -

- - 52,842 - 76,318 # -- - - - - - -

- - 435,483 63,287 1,028,111 42% 6%- - - -

- - 715,167 52% 6%- - - -

- 40,0002 84,584 - # -- - - - - - -

- - 135,703 65,830 448,147 30% 15%- - - 101,008 - -

- - 31,644 257,760 7% 12%- - 38,175 237,573 - -

- - - - - -- - 288,677 787,675 - -


DIRECTORS’ REPORT

3. DIRECTORS’ AND EXECUTIVE OFFICERS’ REMUNERATION (COMPANY AND CONSOLIDATED) (CONTINUED)

Notes in Relation to the Table of Directors’ and Executive Officers’ Remuneration

The fair value of the options is calculated at the date of grant using the Black-Scholes Model. Because of the performance condition attaching to the performance rights, a Monte Carlo Simulation is used to value the rights. The fair value of the options and rights is allocated to each reporting period evenly over the period from grant date to vesting date. The value disclosed is the portion of the fair value of the options and performance rights allocated to this financial year. In valuing the options and performance rights, market conditions have been taken into account.

The following factors and assumptions were used in determining the fair value of 2008 options and performance rights on grant date:

Grant Date Expiry Date Fair Value Per Option/Right Exercise Price

Price of Shares on Grant Date

Expected Volatility

Risk Free Interest Rate

Dividend Yield

OPTIONS

22 November 2007 1 July 2011 $0.45 $2.00 $1.62 6.75% -

22 November 2007 1 July 2011 $0.32 $2.50 $1.62 6.75% -

17 March 2008 30 April 2011 $0.47 $1.75 $1.20 64.0% 6.25% -

17 March 2008 30 April 2011 $2.25 $1.20 64.0% 6.25% -

17 March 2008 30 April 2012 $0.42 $2.75 $1.20 64.0% 6.25% -

1 May 2008 30 April 2011 $0.37 $1.75 $1.04 7.25% -

1 May 2008 30 April 2011 $0.31 $2.25 $1.04 7.25% -

1 May 2008 30 April 2012 $0.34 $2.75 $1.04 7.25% -

PERFORMANCE RIGHTS

3 August 2007 1 July 2012 $1.50 - $1.53 6.30% -

3 August 2007 1 July 2012 $1.28 - $1.53 6.30% -

3 August 2007 1 July 2012 $1.11 - $1.53 6.30% -

4. EQUITY INSTRUMENTS

All options refer to options and rights over ordinary shares of the Company, which are exercisable on a one-for-one basis.

4.1 Options and Rights Over Equity Instruments Granted as Compensation

Details on options and rights over ordinary shares in the Company that were granted as compensation to key management personnel during the financial year and details on options that were vested during the financial year are as follows:

Number of Options Granted Grant Date Number of

Options VestedFair Value of

Options GrantedExercise Price of Options Granted

Expiry Date of Options Granted

OPTIONS

Executive Directors

B H McCarthy - - 3,000,000 - - -

B H McCarthy 2,000,000 22 November 2007 2,000,000 $0.45 $2.00 1 July 2011

B H McCarthy 2,000,000 22 November 2007 - $0.32 $2.50 1 July 2011

R G Barnes - - 1,000,000 - - -

R G Barnes 1,500,000 22 November 2007 1,500,000 $0.45 $2.00 1 July 2011

R G Barnes 1,500,000 22 November 2007 - $0.32 $2.50 1 July 2011

Non-Executive Directors

M D J Cozijn 250,000 22 November 2007 250,000 $0.45 $2.00 1 July 2011

M D J Cozijn 250,000 22 November 2007 - $0.32 $2.50 1 July 2011

L L Bhandari 150,000 22 November 2007 150,000 $0.45 $2.00 1 July 2011

L L Bhandari 150,000 22 November 2007 - $0.32 $2.50 1 July 2011


DIRECTORS’ REPORT

Number of Options Granted Grant Date Number of

Options VestedFair Value of

Options GrantedExercise Price of Options Granted

Expiry Date of Options Granted

OPTIONS (CONTINUED)

Executives

B J M Clube 500,000 1 May 2008 - $0.37 $1.75 30 April 2011



R S Paces - - 775,000 - - -

P G Senycia - - 400,000 - - -

W K Morrison 400,000 17 March 2008 - $0.47 $1.75 30 April 2011

W K Morrison 400,000 17 March 2008 - $2.25 30 April 2011

W K Morrison 400,000 17 March 2008 - $0.42 $2.75 30 April 2012

J W R Laurie - - 150,000 - - -

G J McCauley - - 250,000 - - -

Number of Rights Granted Grant Date Number of

Rights VestedFair Value of

Rights GrantedExercise Price of

Rights GrantedExpiry Date of Rights Granted

PERFORMANCE RIGHTS

Executives

R S Paces - - 50,000 - - -

P G Senycia - - 25,000 - - -

J W R Laurie 27,000 3 August 2007 - $1.50 - 1 July 2012



G J McCauley - - 25,000 - - -

With the exception of options that have vested, which can be retained by the employee irrespective of termination or resignation, all options expire on the earlier of their expiry date or termination of the individual’s employment. The options vest over periods of one to three years of continuous service and are exercisable at any time between the vesting date and the expiry date. Further details, including grant dates and exercise dates regarding options granted to key management personnel are in Note 22 to the financial statements.

No performance rights were issued to Directors during the financial year.

Since the end of the financial year, 50,000 performance rights were granted to Mr P G Senycia.

4.2 Modification of Terms of Equity-Settled Share-Based Payment Transactions

No terms of equity-settled share-based payment transactions (including options granted as compensation to key management personnel) have been altered or modified by the issuing entity during the financial year.

4.3 Exercise of Options Granted as Compensation

During the financial year, the following shares were issued on the exercise of options previously granted as compensation:

Number of shares Amount paid per share


M D J Cozijn 1,000,000 $0.20

Executives

G J McCauley 250,000 $0.50


DIRECTORS’ REPORT

4. EQUITY INSTRUMENTS (CONTINUED)

4.4 Analysis of Options and Performance Rights Granted as Compensation

Details of vesting profiles of the options and performance rights granted as remuneration to each key management person and each of the five named Company executives and relevant Group executives is detailed below:

Options and Performance Rights Granted Financial Years in Which Grant

Vests

Value Yet to Vest $

Number Date % Vested in Year

Forfeited in Year Min Max(A)


M D J Cozijn 500,000 22 November 2007 50% - (B) -

L L Bhandari 300,000 22 November 2007 50% - (B) - 48,417

Executive Directors

B H McCarthy 4,000,000 22 November 2007 50% - (B) - 645,558

R G Barnes 3,000,000 22 November 2007 50% - (B) -

Executives

B J M Clube 1,500,000 1 May 2008 0% - (C) -

W K Morrison 1,200,000 17 March 2008 0% - (C) - 510,448

(A) The maximum value of options yet to vest is not determinable as it depends on the market price of shares of the Company on the ASX at the date the option is exercised. The values represent the fair value of the options not vested.

that have vested can be retained by the Director upon resignation or termination of employment.

date and in full three years from grant date. All options that have vested can be retained by the employee upon resignation or termination of employment.

4.5 Analysis of Movements in Options

The movement during the financial year, by value, of options over ordinary shares in the Company held by each key management person and each of the five named Company executives and relevant Group executives is detailed below:

Value of OptionsGranted in Year Exercised in Year Forfeited in Year

(A) (B) (C)$ $ $


M D J Cozijn - -

L L Bhandari 115,705 - -

Executive Directors

B H McCarthy - -

R G Barnes 1,157,047 - -

Executives

B J M Clube - -

W K Morrison 510,448 - -

G J McCauley - 263,750 -

A D Beckett - 275,000

Oilex : :

DIRECTORS’ REPORT

4.5 Analysis of Movements in Options (continued)

(A) The value of options granted in the year is the fair value of the options calculated at grant date using the Black-Scholes Model. The total value of the options granted is included in the table above. This amount is allocated to remuneration over the vesting period.

(B) The value of options exercised during the year is calculated as the market price of shares of the Company on the ASX as at close of trading on the date the options were exercised after deducting the price paid to exercise the option.

(C) The value of options forfeited during the year represents the benefit foregone and is calculated at the date the options were forfeited using the Black-Scholes Model.

There were no movements in options during the financial year for any other Director or Executive other than those disclosed above.

4.6 Analysis of Movements in Performance Rights

The movement during the financial year, by value, of performance rights over ordinary shares in the Company held by each key management person and each of the five named Company executives and relevant Group executives is detailed below:

Value of Performance RightsGranted in Year Exercised in Year Forfeited in Year

(A) (B) (C)$ $ $

Executives

J W R Laurie - -

A D Beckett - -

(A) The value of rights granted in the year is the fair value of the rights calculated at grant date using a Monte Carlo Simulation. The total value of the rights granted is included in the table above. This amount is allocated to remuneration over the vesting period.

(B) The value of rights exercised during the year is calculated as the market price of shares of the Company on the ASX as at close of trading on the date the rights were exercised after deducting the price paid to exercise the option.

(C) The value of performance rights forfeited during the year represents the benefit foregone and is calculated at the date the rights were forfeited using a Monte Carlo simulation.

AUDITOR’S INDEPENDENCE DECLARATION

The lead Auditor’s Independence Declaration for the year ended 30 June 2008 has been received and can be found on page 30.

Signed in accordance with a resolution of the Directors.

Mr M.D.J. Cozijn Dr B.H. McCarthyChairman Managing Director

West PerthWestern Australia

18 September 2008


AUDITOR’S INDEPENDENCE DECLARATION

Lead Auditor’s Independence Declaration under Section 307C of the Corporations Act 2001

To: the directors of Oilex Ltd

I declare that, to the best of my knowledge and belief, in relation to the audit for the financial year ended 30 June 2008 there have been:

(ii) no contraventions of any applicable code of professional conduct in relation to the audit.

Partner

Perth18 September 2008

KPMG, an Australian partnership, and a member firm of the KPMG network of independent member firms affiliated with KPMG International, a Swiss cooperative.


DIRECTORS’ REPORT

Consolidated Company

Note 2008$

2007$

2008$

2007$

Continuing operations

Revenue 7(a) 572,281 325,252 49,552 56,231

Other income 7(b) 2,868,260 204,127 2,868,260 204,127

Employee benefits expense 7(c) (1,236,430) (1,192,631)

Depreciation expense (421,726) (204,771) (346,795) (183,873)

Exploration expenditure (3,943,942) (4,772,748) (1,247,263) (3,172,015)

Production costs (568,603) (640,212) (191,744)

Well abandonment provision (223,017) (1,851,126) (133,810) (1,030,524)

Impairment of loans to subsidiaries - - (3,474,187) (2,566,770)

Administration expense (2,758,438) (2,847,021) (2,645,161) (2,733,771)

Share based payments 22 (5,562,488) (5,441,320)

Results from operating activities (11,274,103) (16,332,061) (11,755,099)

Finance income 3,275,136 1,257,534 4,580,732 1,141,262

Finance costs (695,485) (655,352) (695,485) (655,352)

Foreign exchange loss (394,603) (1,810,587) (4,543,767) (1,800,304)

Net finance income/(expense) 7(d) 2,185,048 (1,208,405) (658,520)

Loss before income tax (9,089,055) (17,540,466) (12,413,619)

Deferred tax income 8 1,112,364 - 1,112,364 -

Loss from continuing operations (7,976,691) (17,540,466) (11,301,255)

Discontinued operation

Profit from discontinued operation (net of tax) 6 - -

Loss for the period (7,976,691) (14,721,271) (11,301,255)

Earnings per share

Basic loss per share (cents per share) (6.1) (18.3)

Diluted loss per share (cents per share) (6.1) (18.3)

Continuing operations

Basic loss per share (cents per share) (6.1) (21.8)

Diluted loss per share (cents per share) (6.1) (21.8)

The income statements are to be read in conjunction with the notes to the financial statements.

INCOME STATEMENTS FOR THE YEAR ENDED 30 JUNE 2008


BALANCE SHEETS AS AT 30 JUNE 2008


Note 2008$

2007$

2008$

2007$

Current assets

Cash and cash equivalents 10 33,487,053 30,409,656 66,264,305

Trade and other receivables 11 4,202,996 4,285,065 4,711,711

Prepayments 12 202,161 82,315 148,721 82,315

Inventories 13 2,887,528 376,704 1,322,869 217,288

Total current assets 40,779,738 71,737,467 36,592,957

Non-current assets

Trade and other receivables 11 - - 21,025,380

Exploration and evaluation 14 31,464,923 8,265,450

Property, plant and equipment 15 1,249,171 1,006,974

Investments 16 9,850,219 3,717,631 9,858,761 3,728,835

Total non-current assets 42,564,313 40,156,565

Total assets 83,344,051 76,749,522 87,620,202

Current liabilities

Trade and other payables 17 8,608,338 2,364,815 2,811,011 1,364,668

Employee benefits 18 193,011 155,362 149,212 155,362

Loans and borrowings 20 - 5,000,000 - 5,000,000

Total current liabilities 8,801,349 7,520,177 2,960,223 6,520,030

Non-current liabilities

Provisions 1,719,838 1,714,387 966,435

Loans and borrowings 20 - 5,000,000 - 5,000,000

Total non-current liabilities 1,719,838 6,714,387 966,435

Total liabilities 10,521,187 14,234,564 3,926,658 12,474,431

Net assets 72,822,864 75,466,477 72,822,864 75,145,771

Equity

Issued capital 21 101,368,396 101,368,396

Reserves 21 13,037,876 16,489,814 8,403,144

Accumulated losses (41,583,408) (45,035,346)

Total equity 72,822,864 75,466,477 72,822,864 75,145,771

The balance sheets are to be read in conjunction with the notes to the financial statements.


DIRECTORS’ REPORT

Issued Capital Option Reserve

Asset Revaluation

Reserve

Foreign Currency

Translation Reserve

Accumulated Losses Total Equity

Consolidated $ $ $ $ $ $

Balance at 1 July 2006 - -

Total recognised income and expense - - 330,053 (14,721,271)

Shares issued 68,000,000 - - - - 68,000,000

Capital raising costs - - - -

Shares issued on exercise of options 350,000 - - - - 350,000

Transfer on exercise of options - (202,801) - - 202,801 -

Equity-settled share-based payment transactions 25,826 - - - 5,481,763

Balance at 30 June 2007 7,753,044 330,053 75,466,477

Balance at 1 July 2007 7,753,044 330,053 75,466,477

Total recognised income and expense - - 2,265,463 (3,172,373) (8,883,601)

Shares issued - - - - - -

Capital raising costs - - - - - -



Equity-settled share-based payment transactions - 5,562,488 - - - 5,562,488

Balance at 30 June 2008 13,101,354 (41,583,408) 72,822,864

Issued Capital Option Reserve

Asset Revaluation

Reserve

Foreign Currency

Translation Reserve

Accumulated Losses Total Equity

Company $ $ $ $ $ $

Balance at 1 July 2006 - -

Total recognised income and expense - - 330,053 320,047

Shares issued 68,000,000 - - - - 68,000,000

Capital raising costs - - - -



Equity-settled share-based payment transactions 25,826 - - - 5,481,763

Balance at 30 June 2007 7,753,044 330,053 320,047 75,145,771

Balance at 1 July 2007 7,753,044 330,053 320,047 75,145,771

Total recognised income and expense - - 2,265,463 (11,301,255)

Shares issued - - - - - -

Capital raising costs - - - - - -



Equity-settled share-based payment transactions - 5,562,488 - - - 5,562,488

Balance at 30 June 2008 13,101,354 (45,035,346) 72,822,864

The statements of changes in equity are to be read in conjunction with the notes to the financial statements.

STATEMENTS OF CHANGES IN EQUITY FOR THE YEAR ENDED 30 JUNE 2008



Note 2008$

2007$

2008$

2007$

Cash flows from operating activities

Cash receipts from customers - 34,618 - 34,618

Payments to suppliers and employees (4,251,366) (4,656,663) (3,775,728)

Interest received 3,044,667 4,350,264 1,141,524

Interest paid (695,485) (655,352) (695,485) (655,352)

Net cash used in operating activities 23 (1,902,184) (120,949)

Cash flows from investing activities

Advances to joint ventures (1,859,211) - (1,040,719) -

Proceeds from sale of assets 184,344 - 184,344 -

Acquisition of petroleum interests - - -

Payments for exploration and evaluation (19,678,692) (14,058,818) (9,587,188)

Acquisition of property, plant and equipment (1,067,948) (601,834) (852,973) (468,516)

Payment for permit bonds - (12,000) - -

Net cash used in investing activities (22,421,507) (11,296,536) (7,167,017)

Cash flows from financing activities

Proceeds from issue of share capital - 68,000,000 - 68,000,000

Proceeds from exercise of options 677,500 350,000 677,500 350,000

Proceeds from borrowings - 5,000,000 - 5,000,000

Repayment of borrowings (10,000,000) - (10,000,000) -

Payment of transaction costs - -

Borrowing costs - (100,000) - (100,000)

Advances to subsidiaries - - (14,843,660) (13,044,217)

Net cash from/(used in) financing activities (9,322,500) (24,166,160)

Net increase/(decrease) in cash held (33,646,191) (35,583,645) 45,314,115

Cash and cash equivalents at 1 July 66,993,383 21,262,211 66,264,305 21,144,106

Effect of exchange rate fluctuations on cash held 139,861 (271,004)

Cash and cash equivalents at 30 June 10 33,487,053 30,409,656 66,264,305

The statements of cash flows are to be read in conjunction with the notes to the financial statements.

STATEMENTS OF CASH FLOWS FOR THE YEAR ENDED 30 JUNE 2008


DIRECTORS’ REPORTNOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2008

NOTE 1 – REPORTING ENTITY

Oilex Ltd (the “Company”) is a company domiciled in Australia. The consolidated financial statements of the Company as at and for the year ended 30 June 2008 comprise the Company and its subsidiaries (together referred to as the “Group”). Oilex Ltd is a limited liability company incorporated in Australia whose shares are publicly traded on the Australian Securities Exchange (“ASX”) and on the AIM Market of the London Stock Exchange. The Group is primarily involved in the exploration, evaluation, development and production of hydrocarbons.

NOTE 2 – BASIS OF PREPARATION

(a) Statement of Compliance

The financial report is a general purpose financial report which has been prepared in accordance with Australian Accounting Standards (“AASBs”) (including Australian Interpretations) adopted by the Australian Accounting Standards Board (“AASB”) and the Corporations Act 2001. The consolidated financial report of the Group also complies with International Financial Reporting Standards (IFRSs) and interpretations adopted by the International Accounting Standards Board (IASB).

The financial statements were approved by the Board of Directors on 18 September 2008.

(b) Basis of Measurement

The consolidated financial statements have been prepared on the historical cost basis except for the following:

arrangements are measured at fair value.

(c) Functional and Presentation Currency

The consolidated financial statements are presented in Australian dollars, which is the Company’s functional currency. The functional currency of the majority of the Company’s subsidiaries is United States dollars.

(d) Use of Estimates and Judgements

The preparation of financial statements requires management to make judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses. Actual results may differ from these estimates. Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised and in any future periods affected.

In the process of applying the Group’s accounting policies, management has made the following judgements, apart from those involving estimates, which have the most significant effect on the amount recognised in the financial statements.

i) Exploration and Evaluation Assets

The Group‘s accounting policy for exploration and evaluation expenditure is set out in Note 3(e). The application of this policy necessarily requires management to make certain estimates and assumptions as to future events and circumstances, including, in particular, the assessment of whether economic quantities of reserves have been found. Any such estimates and assumptions may change as new information becomes available. If, after having capitalised expenditure under this policy, it is determined that the expenditure is unlikely to be recovered by future exploitation or sale, then the relevant capitalised amount will be written off to the income statements.

ii) Rehabilitation Obligations

The Group estimates the future removal costs of onshore oil and gas production facilities, wells and pipeline at the time of installation of the assets. In most instances, removal of assets occurs many years into the future. This requires judgemental assumptions regarding removal date, future environmental legislation, the extent of reclamation activities required, the engineering methodology for estimating cost, future removal technologies in determining the removal cost, and asset specific discount rates to determine the present value of these cash flows. For more detail regarding the policy in respect of provision for rehabilitation refer to Note 3(k).


NOTE 2 – BASIS OF PREPARATION (CONTINUED)

(e) Going Concern

The Directors believe that it is appropriate to prepare the financial statements on a going concern basis. As at 30 June 2008, the Group’s current assets exceeded current liabilities

of $33,487,053. The Directors are satisfied that the value of the Group’s assets can be realised through further evaluation, development and production or alternatively through asset sale. The Directors are also satisfied that the Company has adequate plans in place in order that its funding requirements in the foreseeable future can be met and that the Company is progressing with these plans accordingly. The Group’s cash flow forecast indicates that the financing plans will ensure the Group will have sufficient cash resources to fulfil all of its operational activities in the future, including the Group’s

monitor funding requirements along with the Group’s asset portfolio, operational activities and in light of altering market conditions to ensure they are appropriately balanced by either revising the Company’s financing plans, making changes to its operational activities, realising assets or raising capital as required. Such changes may possibly include the realisation of assets or settling of liabilities other than in the normal course of business at amounts that may be different to those stated in the financial report.

NOTE 3 - SIGNIFICANT ACCOUNTING POLICIES

The accounting policies set out below have been applied consistently to all periods presented in these consolidated financial statements, and have been applied consistently by Group entities.

(a) Basis of Consolidation

i) Subsidiaries

Subsidiaries are entities controlled by the Company. Control exists when the Company has the power, directly or indirectly, to govern the financial and operating policies of an entity so as to obtain benefits from its activities. In assessing control, potential voting rights that presently are exercisable or convertible are taken into account. The financial statements of subsidiaries are included in the consolidated financial statements from the date that control commences until the date that control ceases. The accounting policies of subsidiaries have been changed when necessary to align them with the policies adopted by the Company. All subsidiaries have a June financial year end.

Investments in subsidiaries are carried at their cost of acquisition in the Group’s financial statements, subject to impairment testing.

ii) Joint Ventures

Joint ventures are those entities over whose activities the Group has joint control, established by contractual agreement.

iii) Jointly Controlled Operations and Assets

The interest of the Group in unincorporated joint ventures and jointly controlled assets are brought to account by recognising, in its financial statements, the assets it controls, the liabilities that it incurs, the expenses it incurs and the share of income that it earns from the sale of goods or services by the joint venture.

iv) Transactions Eliminated on Consolidation

Intragroup balances and any unrealised gains and losses or income and expenses arising from intragroup transactions, are eliminated in preparing the consolidated financial statements.

(b) Foreign Currency

i) Foreign Currency Transactions

Transactions in foreign currencies are translated to the respective functional currencies of Group entities at exchange rates at the dates of the transactions. Monetary assets and liabilities denominated in foreign currencies at the reporting date are retranslated to the functional currency at the foreign exchange rate at that date. The foreign currency gain or loss on monetary items is the difference between amortised cost in the functional currency at the beginning of the period, adjusted for effective interest and payments during the period, and the amortised cost in foreign currency translated at the exchange rate at the end of the period. Non-monetary assets and liabilities denominated in foreign currencies that are measured at fair value are retranslated to the functional currency at the exchange rate at the date that the fair value was determined. Foreign currency differences arising on retranslation are recognised in profit or loss.

ii) Foreign Operations

The assets and liabilities of foreign operations are translated to Australian dollars at exchange rates at the reporting date. The income and expenses of foreign operations are translated to Australian dollars at exchange rates at the dates of the transactions.

Foreign currency differences are recognised in the foreign currency translation reserve (FCTR). Foreign exchange gains and losses arising from a monetary item receivable from a foreign operation, the settlement of which is neither planned nor likely in the foreseeable future, are considered to form part of a net investment in a foreign operation and are recognised directly in equity in the FCTR in the financial statements of the Group.

(c) Non-Derivative Financial Instruments

Non-derivative financial instruments comprise investments in equity and debt securities, trade and other receivables, cash and cash equivalents, loans and borrowings and trade and other payables.

Non-derivative financial instruments are recognised initially at fair value plus, for instruments not at fair value through profit or loss, any directly attributable transaction costs, except as described below. Subsequent to initial recognition non-derivative financial instruments are measured as described below.

A financial instrument is recognised if the Group becomes a party to the contractual provisions of the instrument. Financial assets are derecognised if the Group’s contractual rights to the cash flows from the financial assets expire or if the Group transfers the financial asset to another party without retaining control or substantially all risks and rewards of the asset. Regular way purchases and sales of financial assets are accounted for at trade date, i.e. the date that the Group commits itself to purchase or sell the asset. Financial liabilities are derecognised if the Group’s obligations specified in the contract expire or are discharged or cancelled.

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2008



i) Available-for-Sale Financial Assets

The Group’s investments in equity securities and certain debt securities are classified as available-for-sale financial assets. Subsequent to initial recognition, they are measured at fair value and changes therein, other than impairment losses (see Note 3(i)(i)), and foreign exchange gains and losses on available-for-sale monetary items (see Note 3(b)(i)), are recognised as a separate component of equity. When an investment is derecognised, the cumulative gain or loss in equity is transferred to profit or loss.

ii) Investments at Fair Value through Profit and Loss

An instrument is classified as at fair value through profit and loss if it is held for trading or is designated as such upon initial recognition. Financial instruments are designated at fair value through profit or loss if the Group manages such investments and makes purchase and sale decisions based on their fair value in accordance with the Group’s documented risk management or investment strategy. Upon initial recognition, attributable transaction costs are recognised in profit or loss when incurred. Financial instruments at fair value through profit or loss are measured at fair value, and changes therein are recognised in profit or loss.

iii) Other

Other non-derivative financial instruments are measured at amortised cost using the effective interest method, less any impairment losses.

iv) Impairment

At each reporting date, the Group assesses whether there is objective evidence that a financial instrument has been impaired. In the case of available-for-sale financial instruments, a prolonged decline in the value of the instrument is considered to determine whether impairment has arisen. Impairment losses are recognised in the income statement.

(d) Cash and Cash Equivalents

Cash and cash equivalents comprise cash balances, call deposits and short-term deposits with an original maturity of three months or less.

(e) Exploration and Evaluation Expenditure

Exploration and evaluation expenditure in respect of each area of interest is accounted for under the successful efforts method.

Exploration licence acquisition costs relating to established oil and gas exploration areas are capitalised.

The costs of drilling exploration wells are initially capitalised pending the results of the well. Costs are expensed where the well does not result in the successful discovery of potentially economically recoverable reserves.

All other exploration and evaluation expenditure, including general administration costs, geological and geophysical costs and new venture expenditure is expensed as incurred, except where:

which, at balance date, an assessment of the existence or otherwise of economically recoverable reserves is

which it is expected that the expenditure will be recouped through successful development and exploitation or by sale.

When an oil or gas field has been approved for commercial development, the accumulated exploration and evaluation costs are transferred to development expenditure.

(f) Development Expenditure

Development expenditure includes past exploration and evaluation costs, pre-production development costs, development drilling, development studies and other subsurface expenditure pertaining to that area of interest. Costs related to surface plant and equipment and any associated land and buildings are accounted for as property, plant and equipment.

The definition of an area of interest for development expenditure is narrowed from the exploration permit for exploration and evaluation expenditure to the individual geological area where the presence of an oil or natural gas field exists, and in most cases will comprise an individual oil or gas field.

Development expenditure is reviewed for impairment at each reporting date where there is an indication that the individual geological area may be impaired (refer Note 3(i)).

Amortisation is not charged on costs carried forward in respect of areas of interest in the development phase until production commences. When production commences, carried forward development costs are amortised on a units of production basis over the life of economically recoverable reserves.

(g) Property, Plant and Equipment

i) Recognition and Measurement

Items of property, plant and equipment are measured at cost less accumulated depreciation and accumulated impairment losses. The cost of self-constructed assets includes the cost of materials, direct labour, the initial estimate, where relevant, of the costs of dismantling and removing the items and restoring the site on which they are located and an appropriate proportion of overheads.

Gains and losses on disposal of an item of property, plant and equipment are determined by comparing the proceeds from disposal with the carrying amount of property, plant and equipment and are recognised net within ‘other income’ in profit or loss.

ii) Subsequent Costs

The cost of replacing part of an item of property, plant and equipment is recognised in the carrying amount of the item if it is probable that the future economic benefits embodied within the part will flow to the Group and its cost can be measured reliably. All other costs are recognised in the income statement as an expense as incurred.

iii) Depreciation

Depreciation is recognised in profit or loss using the reducing balance method over the estimated useful life of the assets, with the exception of software which is depreciated at 40% prime cost. The estimated useful lives in the current and comparative periods are as follows:

Depreciation methods, useful lives and residual values are reviewed and adjusted if appropriate, at each financial year end.


NOTE 3 - SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

(h) Inventories

Inventories are stated at the lower of cost and net realisable value. Net realisable value is the estimated selling price in the ordinary course of business, less the estimated costs of completion and selling expenses.

(i) Impairment

i) Financial Assets

A financial asset is assessed at each reporting date to determine whether there is any objective evidence that it is impaired. A financial asset is considered to be impaired if objective evidence indicates that one or more events have had a negative effect on the estimated future cash flows of that asset. An impairment loss in respect of a financial asset measured at amortised cost is calculated as the difference between its carrying amount, and the present value of the estimated future cash flows discounted at the original effective interest rate. An impairment loss in respect of an available-for-sale financial asset is calculated by reference to its current fair value. Individually significant financial assets are tested for impairment on an individual basis. The remaining financial assets are assessed collectively in groups that share similar credit risk characteristics.

All impairment losses are recognised in profit or loss. Any cumulative loss in respect of an available-for-sale financial asset recognised previously in equity is transferred to profit or loss.

An impairment loss is reversed if the reversal can be related objectively to an event occurring after the impairment loss was recognised. For financial assets measured at amortised cost and available-for-sale financial assets that are debt securities, the reversal is recognised in profit or loss. For available-for-sale financial assets that are equity securities, the reversal is recognised directly in equity.

ii) Non-Financial Assets

The carrying amounts of the Group’s non-financial assets, other than inventories, are reviewed at each reporting date to determine whether there is any indication of impairment. If any such indication exists then the asset’s recoverable amount is estimated. An impairment loss is recognised if the carrying amount of an asset or its cash-generating unit exceeds its recoverable amount. A cash-generating unit is the smallest identifiable asset group that generates cash flows that are largely independent from other assets and groups. Impairment losses are recognised in profit or loss.

The recoverable amount of an asset or cash-generating unit is the greater of its value in use and its fair value less costs to sell. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset.

Impairment losses recognised in prior periods are assessed at each reporting date for any indications that the loss has decreased or no longer exists. An impairment loss is reversed if there has been a change in the estimate used to determine the recoverable amount. An impairment loss is reversed only to the extent that the asset’s carrying amount does not exceed the carrying amount that would have been determined, net of depreciation or amortisation, if no impairment loss had been recognised.

(j) Employee Benefits

i) Wages, Salaries, Annual Leave and Sick Leave

Liabilities for employee benefits for wages, salaries, annual leave and sick leave that are expected to be settled within 12 months of the reporting date represent present obligations resulting from employee services provided to reporting date. The liabilities are calculated at undiscounted amounts based on remuneration wage and salary rates that the Group expects to pay as at the reporting date.

ii) Long-term Service Benefits

The Group’s net obligation in respect of long-term service benefits is the amount of future benefit that employees have earned in return for their service in the current and prior periods. The obligation is calculated using expected future increases in wage and salary rates including related on-costs and expected settlement dates, and is discounted using the rates attached to the Commonwealth Government Bonds at the balance sheet date which have maturity dates approximating to the terms of the Group’s obligations.

iii) Share-Based Payment Transactions

Employee options allow Oilex employees to acquire shares of the Company. The fair value of options granted is recognised as an employee expense with a corresponding increase in equity. The fair value is measured at grant date and spread over the period during which the employees become unconditionally entitled to the options. Options are also provided as part of consideration for services by financiers and advisers. The fair value of the options granted is measured using the Black-Scholes Model, taking into account the terms and conditions upon which the options were granted. The amount recognised as an expense is adjusted to reflect the actual number of share options that vest except where forfeiture is only due to share prices not achieving the threshold for vesting.

Performance rights are also granted to employees. The fair value of performance rights granted is recognised as an employee expense with a corresponding increase in equity. The fair value is measured at grant date and allocated over the period during which the employees become unconditionally entitled to the performance rights. The fair value of the performance rights is determined using a Monte Carlo Simulation taking into account the terms of the performance condition under which the rights are granted.

When the Group grants options and performance rights over its shares to employees of subsidiaries, the fair value at grant date is recognised as an increase in the investments in subsidiaries, with a corresponding increase in equity over the vesting period of the grant.

(k) Provisions

Provisions are recognised when the Group has a present obligation (legal or constructive) as a result of a past event, when it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and when a reliable estimate can be made of the amount of the obligation. Provisions are determined by discounting the expected future cash flows at a pre-tax rate that reflects current market assessments of the time value of money and where appropriate, the risks specific to the liability.

Provisions are made for site rehabilitation of an oil and gas field on an incremental basis during the life of the field (which includes the field plant closure phase). Provisions include reclamation, plant closure, waste site closure and


Oilex : :


monitoring activities. These costs have been determined on the basis of current costs, current legal requirements and current technology. Changes in estimates are dealt with on a prospective basis.

(l) Interest-bearing Borrowings

All loans and borrowings are initially recognised at the fair value of the consideration received less directly attributable transaction costs. After initial recognition, interest-bearing loans and borrowings are subsequently measured at amortised cost with any difference between cost and redemption value being recognised in the income statement over the period of the borrowings on an effective interest basis.

(m) Revenue

i) Product Revenue

Revenue is recognised when the significant risks and rewards of ownership have transferred to the buyer. Risks and rewards of ownership are considered passed to the buyer at the time of delivery of the product to the customer.

ii) Services Revenue

Revenue from the rendering of a service is recognised upon the delivery of the service to the customers.

All revenue is stated net of the amount of Goods and Services Tax (“GST”).

(n) Leases

The determination of whether an arrangement is or contains a lease is based on the substance of the arrangement and requires an assessment of whether the fulfilment of the arrangement is dependent on the use of a specific asset or assets and the arrangement conveys a right to use the asset.

Leases in which the Group retains substantially all the risks and benefits of ownership of the leased asset are classified as operating leases. Initial direct costs incurred in negotiating an operating lease are added to the carrying amount of the leased asset and recognised as an expense over the lease term on the same basis as rental income.

Payments made under operating leases are recognised in the income statements on a straight line basis over the term of the lease. Lease incentives received are recognised in the income statements as an integral part of the total lease expense and are allocated over the lease term.

(o) Finance Income and Expenses

Finance income comprises interest income on funds invested. Interest income is recognised as it accrues in profit or loss, using the effective interest method. Finance expenses comprise interest expense on borrowings and unrealised foreign exchange losses. Foreign currency gains and losses are reported on a net basis.

(p) Income Tax

Income tax expense comprises current and deferred tax. Income tax is recognised in the income statement except to the extent that it relates to items recognised directly in equity, in which case it is recognised in equity.

Current tax is the expected tax payable on the taxable income for the year, using tax rates enacted or substantively enacted at the balance sheet date and any adjustment to tax payable in respect of previous years.

Deferred tax is recognised using the balance sheet method, providing for temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. Deferred tax is not recognised for differences relating to investments in subsidiaries to the extent that they probably will not reverse in the foreseeable future. Deferred tax is measured at the tax rates that are expected to be applied to the temporary differences when they reverse, based on the laws that have been enacted or substantively enacted by the reporting date.

A deferred tax asset is recognised to the extent that it is probable that future taxable profits will be available against which the temporary difference can be utilised. Deferred tax assets are reviewed at each reporting date and reduced to the extent that it is no longer probable that the related tax benefit will be realised.

The Company and its wholly-owned Australian resident entities formed a tax-consolidated group with effect from 1 July 2004 and are therefore taxed as a single entity from that date. The head entity within the tax-consolidated group is Oilex Ltd.

Current tax expense/income, deferred tax liabilities and deferred tax assets arising from temporary differences of the members of the tax-consolidated group are recognised in the separate financial statements of the members of the tax-consolidated group using the ‘separate taxpayer within group’ approach by reference to the carrying amounts of assets and liabilities in the separate financial statements of each entity and the tax values applying under tax consolidation.

(q) Goods and Services Tax

Revenues, expenses and assets are recognised net of the amount of GST except:

services is not recoverable from the taxation authority, in which case the GST is recognised as part of the cost of acquisition of the asset or as part of the expense

amount of GST included.

The net amount of GST recoverable from, or payable to, the taxation authority is included as part of receivables or payables in the balance sheet.

Cash flows are included in the Statements of Cash Flows on a gross basis and the GST component of cash flows arising from investing and financing activities, which is recoverable from, or payable to, the taxation authority, is classified as operating cash flows.

Commitments and contingencies are disclosed net of the amount of GST recoverable from, or payable to, the taxation authority.

(r) Discontinued Operations

A discontinued operation is a component of the Group’s business that represents a separate major line of business or geographical area of operations that has been disposed of or is held for sale, or is a subsidiary acquired exclusively with a view to resale. Classification as a discontinued operation occurs upon disposal or when the operation meets the criteria to be classified as held for sale, if earlier. When an operation is classified as a discontinued operation, the comparative income statement is restated as if the operation had been discontinued from the start of the comparative period.


NOTE 3 - SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

(s) Earnings Per Share

Basic earnings per share is calculated as net profit attributable to members of the Group, adjusted to exclude any costs of servicing equity (other than dividends), divided by the weighted average number of ordinary shares, adjusted for any bonus element.

Diluted earnings per share is calculated as net profit attributable to members of the Group, adjusted for:

with dilutive potential ordinary shares that have not

expenses during the period that would result from the dilution of potential ordinary shares

divided by the weighted average number of ordinary shares and dilutive potential ordinary shares, which comprise share options and performance rights granted, adjusted for any bonus element.

(t) Segment Reporting

A segment is a distinguishable component of the Group that is engaged either in providing products or services (business segment), or in providing products or services within a particular economic environment (geographical segment), which is subject to risks and rewards that are different from those of other segments.

(u) Joint Ventures

The Group’s interest in joint venture entities is accounted for by recognising its proportionate share of assets and liabilities from joint ventures.

Joint venture expenses and the Group’s entitlement to production are recognised on a pro-rata basis according to the Group’s joint venture interest.

(v) Comparatives

Certain comparatives have been reclassified to conform with the presentation and classification in the current year.

(w) New Standards and Interpretations Not Yet Adopted

The following standards, amendments to standards and interpretations have been identified as those which may impact the entity in the period of initial application. They are available for early adoption at 30 June 2008, but have not been applied in preparing this financial report:

i) AASB 8 Operating Segments introduces the “management approach” to segment reporting. AASB 8, which becomes mandatory for the Group’s 30 June 2010 financial statements, will require the disclosure of segment information based on the internal reports regularly reviewed by the Group’s Chief Operating Decision Maker in order to assess each segment’s performance and to allocate resources to them. The Group has not yet determined the potential effect of the revised standard on the Group’s disclosures.

ii) Revised AASB 101 Presentation of Financial Statements introduces as a financial statement (formerly “primary” statement) the “statement of comprehensive income”. The revised standard does not change the recognition, measurement or disclosure of transactions and events that are required by other AASBs. The revised AASB 101 will become mandatory for the Group’s 30 June 2010 financial statements. The Group has not yet determined the potential effect of the revised standard on the Group’s disclosures.

iii) Revised AASB 123 Borrowing Costs removes the option to expense borrowing costs and requires that an entity capitalise borrowing costs directly attributable to the acquisition, construction or production of a qualifying asset as part of the cost of that asset. The revised AASB 123 will become mandatory for the Group’s 30 June 2010 financial statements and will constitute a change in accounting policy for the Group. In accordance with the transitional provisions the Group will apply the revised AASB 123 to qualifying assets for which capitalisation of borrowing costs commences on or after the effective date. The Group has not yet determined the potential effect of the revised standard on future earnings.

iv) Revised AASB 3 Business Combinations changes the application of acquisition accounting for business combinations and the accounting for non-controlling (minority) interests. Key changes include: the

measurement of contingent consideration at acquisition date with subsequent changes through the income

interests at full fair value or the proportionate share of

on issues such as reacquired rights and vendor

contract alone and those involving mutuals. The revised standard becomes mandatory for the Group’s 30 June 2010 financial statements. The Group has not yet determined the potential effect of the revised standard on the Group’s financial report.




v) Revised AASB 127 Consolidated and Separate Financial Statements changes the accounting for investments in subsidiaries. Key changes include: the re-measurement to fair value of any previous/retained investment when control is obtained/lost, with any resulting gain or loss

increases in ownership interest after control is obtained as transactions with equity holders in their capacity as equity holders. The revised standard will become mandatory for the Group’s 30 June 2010 financial statements. The Group has not yet determined the potential effect of the revised standard on the Group’s financial report.

vi) AASB 2008-1 Amendments to Australian Accounting Standard – Share-based payment: Vesting Conditions and Cancellations changes the measurement of share-based payments that contain non-vesting conditions. AASB 2008-1 becomes mandatory for the Group’s 30 June 2010 financial statements. The Group has not yet determined the potential effect of the amending standard on the Group’s financial report.

NOTE 4 – DETERMINATION OF FAIR VALUES

A number of the Group’s accounting policies and disclosures require the determination of fair value, for both financial and non-financial assets and liabilities. Fair values have been determined for measurement and/or disclosure purposes based on the following methods. Where applicable, further information about the assumptions made in determining fair values is disclosed in the notes specific to that asset or liability.

Investments In Equity and Debt Securities

The fair value of available-for-sale financial assets is determined by reference to their quoted bid price at the reporting date.

Trade and Other Receivables

The fair value of trade and other receivables, excluding construction work in progress, is estimated as the present value of future cash flows, discounted at the market rate of interest at the reporting date.

Non-derivative Financial Liabilities

Fair value, which is determined for disclosure purposes, is calculated based on the present value of future principal and interest cash flows, discounted at the market rate of interest at the reporting date.

Share-based Payment Transactions

The fair value of options is measured using the Black-Scholes Model. The fair value of performance rights is measured using a Monte Carlo Simulation. Measurement inputs include share price on measurement date, exercise price of the instrument, expected volatility (based on weighted average historic volatility adjusted for changes expected due to publicly available information), weighted average expected life of the instruments (based on historical experience and general option holder behaviour), expected dividends, and the risk-free interest rate (based on government bonds). Service and non-market performance conditions attached to the transactions are not taken into account in determining fair value.

NOTE 5 – SEGMENT REPORTING

Segment information is presented in respect of the Group’s business and geographical segments. The primary format, geographical segments, is based on the Group’s management and internal reporting structure.

Geographical Segments

The petroleum exploration and production segment is managed on a worldwide basis, but as at 30 June 2008 operated in five

and Indonesia.

Segment results, assets and liabilities include items directly attributable to a segment as well as those that can be allocated on a reasonable basis. Unallocated items comprise mainly income-earning assets and revenue, interest-bearing loans, borrowings and expenses, and corporate assets and expenses.

Segment capital expenditure is the total cost incurred during the period to acquire segment assets that are expected to be used for more than one period.

Business Segments

The Group operates in one business segment, being the development, exploration and production of hydrocarbons.


NOTE 5 – SEGMENT REPORTING (CONTINUED)

Geographical Segments

India Australia Oman2008 2007 2008 2007 2008 2007

$ $ $ $ $ $

Revenue

Total segment revenue 572,281 325,252 - - - -

Segment Result (2,477,626) (3,822,884) 477,883 (1,854,903) (856,730)

Unallocated expenses

Loss before finance costs

Net finance (costs)/income

Deferred tax income

Loss

Segment Assets 23,899,307 15,322,404 84,016 6,771,142 185,571

Unallocated assets

Total assets

Segment Liabilities 5,282,472 31,028 1,129,363 148,747

Unallocated liabilities

Total liabilities

Other

Acquisition of non-current segment assets # 6,559,836 11,037,803 - - 4,609,243

Unallocated acquisitions

Total acquisitions

Depreciation of segment assets 64,548 33,048 - - 35,446 14,161

Unallocated depreciation

Total depreciation

Other non-cash segment expenses - - - - - -

# The acquisition of non-current segment assets includes capitalised exploration and evaluation expenditure.



Timor-Leste Indonesia Discontinued Operation Consolidated2008 2007 2008 2007 2008 2007 2008 2007

$ $ $ $ $ $ $ $

- - - - - - 572,281 325,252

(256,637) (617,392) - (4,728,675)

(6,545,428)

(11,274,103)

2,185,048 (1,004,278)

1,112,364 -

(7,976,691) (14,721,271)

4,649,621 64,748 6,132,097 - - 41,536,183

41,807,868

83,344,051

3,260,693 185,160 - - 9,888,716 3,467,736

632,471 10,766,828

10,521,187 14,234,564

3,444,581 13,440 3,586,826 - - 18,200,486 13,645,333

769,605 454,835

18,970,091 14,100,168

27,651 1,263 - - - (2,341) 127,645 46,131

294,081 158,640

421,726 204,771

- - - - - - 5,562,488



NOTE 6 – DISCONTINUED OPERATION

In August 2006 Oilex signed a Share Sale and Purchase Agreement for the sale to Bow Energy Limited (“Bow”) of its onshore Queensland oil and gas permit interests in the Bowen-Surat and Cooper-Eromanga Basins. As consideration for the sale of the assets, Oilex was issued 13.3 million fully paid ordinary shares and 13.3 million options to purchase Bow shares at $0.50 per share on or before five years from the issue date. The effective date of sale is 24 August 2006 with settlement effected on 8 November 2006. The shares are subject to voluntary escrow for a period of two years from the date of issue.

This disposal involved the sale of 100% of Oilex’s interest in Seqoil Pty Ltd and other Queensland assets held in the parent entity.


Note 2008$

2007$

2008$

2007$

Results of discontinued operation

Revenue - 21,110 - 21,110

Expenses - (60,507) - (60,507)

Results from operating activities - -

Income tax expense - - - -

Results from operating activities, net of income tax - -

Gain on sale of discontinued operation - -

Income tax on gain on sale of discontinued operation - - - -

Profit for the period - -

Basic earnings per share (cents per share) - 3.5 - -

Diluted earnings per share (cents per share) - 2.6 - -

Cash flows from discontinued operation

Net cash used in operating activities - -

Net cash used in investing activities - - - -

Net cash used in financing activities - (101,812) - (101,812)

Net cash used in discontinued operation - -

NOTE 7 – REVENUE AND EXPENSES Loss from ordinary activities before income tax has been determined after the following revenues and expenses:


2008$

2007$

2008$

2007$

(a) Revenue

Oil Sales 572,281 325,252 49,552 56,231

(b) Other Income

Profit on sale of exploration assets 113,500 - 113,500 -

Fair value movement on investment 2,754,760 204,127 2,754,760 204,127

2,868,260 204,127 2,868,260 204,127

(c) Employee Benefits Expense

Wages and salaries including superannuation (1,000,359) (847,187) (1,000,359) (847,187)

Other associated personnel expenses (198,422) (198,422)

Increase/(decrease) in liability for employee benefits (37,649) 6,150

(1,236,430) (1,192,631)

(d) Net Finance Income/(Expenses)

Interest income 3,275,136 1,257,534 4,580,732 1,141,262

Interest expense (695,485) (655,352) (695,485) (655,352)

Unrealised foreign exchange loss (394,603) (1,810,587) (4,543,767) (1,800,304)

2,185,048 (1,208,405) (658,520)

(e) Operating Lease Rentals (624,182) (574,360) (210,320)




NOTE 8 – INCOME TAX EXPENSE

Numerical reconciliation between tax expense and pre-tax accounting loss:


2008$

2007$

2008$

2007$

Loss before tax (9,089,055) (14,721,271) (12,413,619)

Income tax using the domestic corporation tax rate of 30% (2007: 30%) (2,726,717) (4,416,381) (3,724,086)

Non-deductible expenses

Share-based payments 1,668,747 1,636,781 1,632,396 1,636,781

Other non-deductible expenses 7,145 224,537 1,224,034

(1,050,825) (2,555,063) (867,656) (1,802,751)

Unrecognised deferred tax assets not brought to account at balance date as realisation is not regarded as probable - 2,555,063 - 1,802,751

Recognition of current year tax losses 1,050,825 - 867,656 -

Recognition of prior year tax losses 61,539 - 244,708 -

Deferred tax income 1,112,364 - 1,112,364 -

Unrecognised deferred tax assets not brought to account at balance date as realisation is not regarded as probable – temporary differences

Other 519,031 2,117,445 197,432

Losses available for offset against future taxable income 7,673,009 7 ,445,063 6,173,333 6,755,330

Deferred tax asset not brought to account 8,192,040 6,370,765

The deductible temporary differences and tax losses do not expire under current tax legislation.

The deferred tax asset not brought to account for the 2008 financial year will only be obtained if:

Tax Consolidation

In accordance with tax consolidation legislation the Company, as the head entity of the Australia tax-consolidated group, has assured the deferred tax assets initially recognised by members of the tax-consolidated group.

Tax Assets and Liabilities

During the year ended 30 June 2008 $1,112,364 of tax losses were recognised and were offset against the deferred tax liability resulting in nil tax assets and liabilities.


2008$

2007$

2008$

2007$

Opening balance - - - -

Liabilities

Available-for-sale financial assets 1,112,364 - 1,112,364 -

Tax liabilities recognised in equity 1,112,364 - 1,112,364 -

Assets

Tax losses carried forward (1,112,364) - (1,112,364) -

Tax assets recognised in loss for the period (1,112,364) - (1,112,364) -

Closing balance

Net tax (assets)/liabilities after set off of tax - - - -


NOTE 9 – LOSS PER SHARE

(a) Basic Loss Per Share

(2007: loss of $14,721,271) and a weighted average number of ordinary shares outstanding during the financial year ended 30 June

Consolidated

2008$

2007$

i) Loss Attributable to Ordinary Shareholders

Loss for the Period 7,976,691 14,721,271

ii) Weighted Average Number of Ordinary Shares

Issued ordinary shares at 1 July 129,383,885

Effect of shares issued 1,248,904 4,518,583

Weighted average number of ordinary shares at 30 June 130,632,789

(b) Diluted Loss Per Share

The Company’s potential ordinary shares, being its options and performance rights granted, are not considered dilutive as the conversion of these options and rights would result in a decrease in the net loss per share.

NOTE 10 – CASH AND CASH EQUIVALENTS Consolidated Company

2008$

2007$

2008$

2007$

Cash at bank and on hand 4,138,319 1,060,922 1,761,581

Short–term bank deposits 29,348,734 64,502,723 29,348,734 64,502,724

33,487,053 30,409,656 66,264,305

The Group’s exposure to interest rate risk and a sensitivity analysis for financial assets and liabilities are disclosed in Note 25.

NOTE 11 – TRADE AND OTHER RECEIVABLES

CURRENT

Joint venture receivables 2,529,373 662,588 3,066,007 662,588

Working advances to subsidiaries (a) - - 859,896 -

Other receivables 1,673,623 3,622,477 785,808

4,202,996 4,285,065 4,711,711

NON-CURRENT

Loans to subsidiaries (b) - - 27,066,337 12,074,384

Impairment of loans to subsidiaries - - (6,040,957) (2,566,770)

- - 21,025,380

(a) Working advances to subsidiaries are short term and non-interest bearing.

(b) Unsecured loans to subsidiaries are non-interest bearing with the exception of loans to subsidiaries registered in Cyprus amounting to $25,286,488 (2007: $11,638,327) which bear interest at 5% per annum (2007: 5%). All loans are repayable on demand but will not be recalled for repayment until the subsidiaries are in a position to repay the loans.

NOTE 12 – PREPAYMENTS Consolidated Company

2008$

2007$

2008$

2007$

Prepayments 202,161 82,315 148,721 82,315

NOTE 13 – INVENTORIES

Oil on hand – net realisable value 215,185 85,434 26,770 23,107

Drilling inventory – at cost 2,672,343 1,296,099

2,887,528 376,704 1,322,869 217,288




NOTE 14 – EXPLORATION AND EVALUATION


2008$

2007$

2008$

2007$

Balance at 1 July 13,498,334 - 4,396,926 -Expenditure 19,560,074 4,387,583 4,623,526Acquisition of exploration assets - - -Effect of movements in exchange rates (1,593,485) (519,059) (226,600)Balance at 30 June 31,464,923 8,265,450

NOTE 15 – PROPERTY, PLANT AND EQUIPMENT

ConsolidatedMotor Vehicles

$Plant and Equipment

$Office Furniture

$Total

$CostBalance at 1 July 2006 45,257 620,440Other acquisitions 40,442 48,002 601,834Disposals - (146,615) - (146,615)Currency translation differences - - - -Balance at 30 June 2007 113,861

Balance at 1 July 2007 113,861Other acquisitions 3,842 184,685 1,003,502Disposals (65,877) (74,603) - (140,480)Currency translation differences (4,774) (16,304) (5,300) (26,378)Balance at 30 June 2008 1,600,167

Depreciation and Impairment LossesBalance at 1 July 2006 116,308 13,545Depreciation charge for the year 18,511 16,623Disposals - - - -Currency translation differences - - - -Balance at 30 June 2007 23,600 274,282 30,168 328,050

Balance at 1 July 2007 23,600 274,282 30,168 328,050

Depreciation charge for the year 8,575 356,107 57,044 421,726Disposals (23,703) -Currency translation differences (11,717) (17 ,008)Balance at 30 June 2008 6,878 83,515 663,132

Carrying AmountsAt 1 July 2006 40,168 52,314At 30 June 2007 601,817

At 1 July 2007 601,817At 30 June 2008 12,012 1,027,428

CompanyCostBalance at 1 July 2006 45,257 467,713Other acquisitions 422,527 468,516Disposals - (40,001) - (40,001)Currency translation differences - - - -Balance at 30 June 2007 73,250 83,855

Balance at 1 July 2007 73,250 83,855Other acquisitions - 663,535 806,520Disposals (65,877) (34,448) - (100,325)Currency translation differences (3,305) (8,242) (13,306)Balance at 30 June 2008 4,068 225,081

Depreciation and Impairment LossesBalance at 1 July 2006 72,747 13,545Depreciation charge for the year 151,523 183,873Disposals - - - -Currency translation differences - - - -Balance at 30 June 2007 22,488 224,270 275,254

Balance at 1 July 2007 22,488 224,270 275,254Depreciation charge for the year 5,451 306,066 35,278Disposals (23,703) (5,778) -Currency translation differences (1,252) (7,154) (10,425)Balance at 30 June 2008 517,404 61,755 582,143

Carrying AmountsAt 1 July 2006 40,168 283,850 52,314 376,332At 30 June 2007 50,762 514,853

At 1 July 2007 50,762 514,853At 30 June 2008 1,084 842,564 163,326


NOTE 16 – INVESTMENTS Consolidated Company

2008$

2007$

2008$

2007$

Listed equity securities available for sale 5,705,700 2,327 ,872 5,705,700 2,327,872

Unlisted equity securities 4,144,519 4,144,519

Investments in controlled entities – at cost - - 8,542 11,204

9,850,219 3,717 ,631 9,858,761 3,728,835

The available-for-sale financial assets consist of investments in the ordinary shares of Bow Energy Limited (ASX:BOW). Unlisted equity securities represent options to purchase Bow Energy Limited shares. The fair value of the listed shares has been based on the closing share price at the financial year end and the fair value of the unlisted options has been calculated using the Black-Scholes Model. The movement in the fair value of the unlisted options is recorded in the Income Statement.


2008$

2007$

2008$

2007$

NOTE 17 – TRADE AND OTHER PAYABLES

Trade creditors and accruals 8,608,338 2,364,815 2,811,011 1,364,668

NOTE 18 – EMPLOYEE BENEFITS

Employee entitlements – annual leave 193,011 155,362 149,212 155,362

NOTE 19 – PROVISIONS

CURRENT

Site Restoration

Balance at 1 July - 125,000 - -

Provision reversed due to sale of ATP608P permit to Bow Energy Limited - (125,000) - -

Balance at 30 June - - - -

NON-CURRENT

Site Restoration

Balance at 1 July 1,714,387 - 954,401 -

Provisions made during the year 223,017 1,714,387 133,810

Effect of movements in exchange rates (217,566) - (121,776) -

Balance at 30 June 1,719,838 1,714,387 966,435

NOTE 20 – LOANS AND BORROWINGS

CURRENT

Secured loan facility - 5,000,000 - 5,000,000

NON-CURRENT

Secured loan facility - 5,000,000 - 5,000,000

NOTE 21 – ISSUED CAPITAL AND RESERVES(a) Issued Capital

A reconciliation of the movement in capital and reserves for the Company and the consolidated entity can be found in the Statements of Changes in Equity.

Number of Ordinary Shares

2008 2007

On issue at 1 July – fully paid

Shares issued for cash - 52,500,000

Shares issued on exercise of options 2,700,000 750,000

Equity-settled transactions -

On issue at 30 June – fully paid 132,083,885

The Company has issued share options and performance rights to employees (see Note 22) and issued share options to financiers and advisers.

The Company does not have authorised capital or par value in respect of its issued shares.

The holders of ordinary shares are entitled to receive dividends as declared from time to time and are entitled to one vote per share at meetings of the Company.

(b) Option Reserve


Oilex : :


The option reserve recognises the fair value of options and performance rights issued but not exercised. Upon the exercise of options, the balance of the option reserve relating to those options is recognised in profit or loss.

(c) Asset Revaluation Reserve

Changes in the fair value of investments classified as available-for-sale financial assets are taken to the asset revaluation reserve.

(d) Foreign Currency Translation Reserve

The foreign currency translation reserve comprises exchange differences arising from the translation of the financial statements of foreign operations.

NOTE 22 – SHARE BASED PAYMENTS

The terms and conditions of options and performance rights granted by the Company to employees are as follows, whereby all options and performance rights are settled by physical delivery of shares:

Grant Date Number of Instruments Vesting Conditions Contractual Life of Options

OPTIONS

Key Management Personnel

3 December 2004 800,000 5 years

14 December 2005 5,000,000 Yearly over three years of service 3 years

14 December 2005 4,250,000 Yearly over three years of service 4 years

31 July 2006 1,550,000 Yearly over two years of service 3 years

31 July 2006 775,000 Three years of service 4 years

18 January 2007 800,000 Yearly over two years of service 3 years

18 January 2007 400,000 Three years of service 4 years

3 April 2007 150,000 In the first year of service 3 years

3 April 2007 150,000 Two years of service 4 years

3 April 2007 150,000 Three years of service 5 years

22 November 2007 3 years

22 November 2007 One year of service 3 years

17 March 2008 400,000 One year of service 3 years

17 March 2008 400,000 Two years of service 3 years

17 March 2008 400,000 Three years of service 4 years

1 May 2008 500,000 One year of service 3 years

1 May 2008 500,000 Two years of service 3 years

1 May 2008 500,000 Three years of service 4 years

Other Employees

3 December 2004 200,000 5 years

18 January 2007 50,000 3 years

18 January 2007 50,000 In the first year of service 3 years

18 January 2007 50,000 Two years of service 3 years


3 April 2007 150,000 In the first year of service 3 years

3 April 2007 150,000 Two years of service 4 years

3 April 2007 150,000 Three years of service 5 years

31 August 2007 350,000 One year of service 3 years

31 August 2007 350,000 Two years of service 3 years

31 August 2007 350,000 Three years of service 4 years

Former Managing Director

3 December 2004 2,500,000 5 years

Financiers and Advisers

7 December 2005 1,000,100 3 years

17 February 2006 1,000,000 3 years

22 March 2006 3,100,000 4 years

31 July 2006 1,400,000 4 years

10 October 2006 1,000,000 3 years

10 October 2006 500,000 4 years

22 March 2007 2,500,000 4 years

25 July 2007 500,000 One year of service 4 years


NOTE 22 – SHARE BASED PAYMENTS (CONTINUED)

Grant Date Number of Instruments Vesting Conditions Contractual Life of

Performance Rights

PERFORMANCE RIGHTS


11 January 2007 140,000 One year of service 5 years






Other Employees

11 January 2007 One year of service 5 years


11 January 2007 Three years of service 5 years




14 October 2007 33,000 One year of service 5 years

14 October 2007 33,000 Two years of service 5 years

14 October 2007 34,000 Three years of service 5 years

The number and weighted average exercise prices of share options are as follows:

Weighted Average Exercise Price Number of Options

Weighted Average Exercise Price Number of Options

2008 2008 2007 2007

Outstanding at the beginning of the period $0.93 30,825,100 $0.67 21,050,100

Forfeited during the period $0.55 (250,000) - -

Exercised during the period $0.25 (2,700,000) $0.47 (750,000)

Granted during the period $2.21 12,050,000 $1.42 10,525,000

Outstanding at the end of the period $1.37 39,925,100 30,825,100

Exercisable at the end of the period $1.09 28,600,100 $0.88 21,275,100

The options outstanding at 30 June 2008 have an exercise price in the range of $0.40 to $2.75 and a weighted average contractual

The weighted average share price at the date of exercise for share options exercised during the year ended 30 June 2008 was $1.44 (2007: $1.18).




The following factors and assumptions were used in determining the fair value of options and performance rights on grant date that were expensed in the current financial year:

Grant Date Vesting Date Expiry Date Fair Value Per Option

Exercise Price

Price of Shares on Grant Date

Expected Volatility

Risk Free Interest Rate

Dividend Yield

OPTIONS7 December 2005 7 December 2005 7 December 2008 $0.11 $0.50 75.5% 5.50% -

14 December 2005 15 September 2006 14 December 2008 $0.15 $0.40 $0.31 5.50% -

14 December 2005 15 September 2007 14 December 2008 $0.13 $0.50 $0.31 5.50% -

14 December 2005 15 September 2008 $0.80 $0.31 5.50% -

17 February 2006 17 February 2006 $0.50 $0.40 76.4% 6.00% -

22 March 2006 22 March 2006 31 March 2010 $0.33 $0.50 $0.53 78.7% 5.75% -

31 July 2006 5 May 2007 $0.71 $0.50 5.75% -

31 July 2006 5 May 2008 $0.66 $0.65 5.75% -

31 July 2006 31 July 2010 $0.67 5.75% -

31 July 2006 24 January 2007 $0.73 $0.45 5.75% -

31 July 2006 24 January 2008 $0.55 5.75% -

4 October 2006 4 October 2006 7 December 2008 $0.50 $1.32 6.00% -

10 October 2006 10 October 2006 $0.80 $1.50 $1.34 6.00% -

10 October 2006 10 October 2006 $0.76 $1.75 $1.34 6.00% -

10 October 2006 10 October 2006 31 October 2010 $0.83 $2.00 $1.34 6.00% -

18 January 2007 31 October 2007 31 January 2010 $0.75 $1.40 $1.31 85.8% 6.25% -

18 January 2007 31 October 2008 31 January 2010 $0.64 $2.00 $1.31 85.8% 6.25% -

18 January 2007 31 January 2011 $0.70 $2.50 $1.31 85.8% 6.25% -

18 January 2007 31 January 2007 31 January 2010 $0.75 $1.40 $1.31 85.8% 6.25% -

22 March 2007 22 March 2007 31 March 2011 $0.61 $2.00 $1.31 68.3% 6.25% -

3 April 2007 31 March 2008 31 March 2010 $0.55 $1.75 $1.35 66.0% 6.25% -

3 April 2007 31 March 2011 $0.57 $2.25 $1.35 66.0% 6.25% -

3 April 2007 31 March 2010 31 March 2012 $0.60 $2.75 $1.35 66.0% 6.25% -

25 July 2007 30 September 2008 30 September 2011 $0.56 $1.57 $1.58 50.7% 6.25% -

31 August 2007 30 April 2008 30 April 2010 $0.52 $1.60 $1.22 61.5% 6.25% -

31 August 2007 30 April 2010 $0.36 $2.10 $1.22 61.5% 6.25% -

31 August 2007 30 April 2010 30 April 2011 $0.33 $2.70 $1.22 61.5% 6.25% -

22 November 2007 30 November 2007 1 July 2011 $0.45 $2.00 $1.62 6.75% -

22 November 2007 1 July 2008 1 July 2011 $0.32 $2.50 $1.62 6.75% -

17 March 2008 30 April 2011 $0.47 $1.75 $1.20 64.0% 6.25% -

17 March 2008 30 April 2010 30 April 2011 $2.25 $1.20 64.0% 6.25% -

17 March 2008 30 April 2011 30 April 2012 $0.42 $2.75 $1.20 64.0% 6.25% -

1 May 2008 30 April 2011 $0.37 $1.75 $1.04 7 .25% -

1 May 2008 30 April 2010 30 April 2011 $0.31 $2.25 $1.04 7 .25% -

1 May 2008 30 April 2011 30 April 2012 $0.34 $2.75 $1.04 7 .25% -

PERFORMANCE RIGHTS11 January 2007 1 July 2007 1 July 2011 $1.40 Nil $1.40 6.20% -

11 January 2007 1 July 2008 1 July 2011 $1.22 Nil $1.40 6.20% -

11 January 2007 1 July 2011 $1.05 Nil $1.40 6.20% -

3 August 2007 1 July 2008 1 July 2012 $1.50 Nil $1.53 6.30% -

3 August 2007 1 July 2012 $1.28 Nil $1.53 6.30% -

3 August 2007 1 July 2010 1 July 2012 $1.11 Nil $1.53 6.30% -

14 October 2007 1 July 2008 1 July 2012 $1.50 Nil $1.72 6.60% -

14 October 2007 1 July 2012 $1.45 Nil $1.72 6.60% -

14 October 2007 1 July 2010 1 July 2012 $1.26 Nil $1.72 6.60% -


NOTE 22 – SHARE BASED PAYMENTS (CONTINUED)


2008$

2007$

2008$

2007$

The following share-based payments have been recognised in the Income Statements:

Directors and employees

Share options – equity settled 4,715,161 2,163,783 4,715,161 2,163,783

Performance rights – equity settled 624,809 503,641

5,339,970 5,218,802

Financiers and advisers

Share options – equity settled 222,518 2,727 ,258 222,518 2,727 ,258

Total share-based payments expense 5,562,488 5,441,320

NOTE 23 – RECONCILIATION OF CASH FLOWS FROM OPERATING ACTIVITIES


2008$

2007$

2008$

2007$

Net loss for the period (7,976,691) (14,721,271) (11,301,255)

Depreciation 421,726 346,795 183,873

Profit from discontinued operation - -

Unrealised gain on investment (2,754,760) (204,127) (2,754,760) (204,127)

Exploration expenditure 3,943,942 4,784,411 1,247 ,263 3,172,015

Equity-settled share-based payments 5,562,488 5,441,320

Borrowing costs - 100,000 - 100,000

Unrealised foreign exchange losses 394,603 2,016,056 4,543,767

Deferred tax income (1,112,364) - (1,112,364) -

Profit on sale of exploration assets (113,500) - (113,500) -

Impairment of loans to subsidiaries - - 3,474,187 2,566,770

Operating Loss Before Changes in Working Capital and Provisions (1,634,556) (228,547)

Increase in trade and other payables 251,750 23,842 291,340 23,842

Increase in prepayments (66,406) (82,315) (66,406) (82,315)

Increase in trade and other receivables (496,072) (123,220) (342,270)

Increase in provisions 5,451 12,034

Increase/(decrease) in employee benefits 37,649 (6,150)

Net Cash Used In Operating Activities (1,902,184) (120,949)

NOTE 24 – CONSOLIDATED ENTITIES

Ownership Interest %

Country of Incorporation 2008 2007

Parent Entity

Oilex Ltd Australia

Subsidiaries

Independence Oil and Gas Limited Australia 100 100

Admiral Oil NL Australia 100 100

Oilex NL Holdings (India) Limited Cyprus 100 100

Oilex India Pvt Ltd India 90

Oilex Oman Limited Cyprus 100 100

Oilex (JPDA 06-103) Ltd Australia 100 100

Oilex (West Kampar) Limited Cyprus 100 100

Although the Group holds less than 100% of the voting power of Oilex India Pvt Ltd, the value attributable to outside equity interests is not material and therefore is not disclosed separately in the accounts.




NOTE 25 – FINANCIAL INSTRUMENTS

(a) Financial risk management

The Company and Group have exposure to the following risks from their use of financial instruments:

i) Credit riskii) Liquidity riskiii) Market risk

This note presents qualitative and quantitative information in relation to the Company’s and Group’s exposure to each of the above risks and the management of capital.

The Board of Directors has overall responsibility for the establishment and oversight of the risk management framework and the development and monitoring of risk management policies. Risk management policies are established to identify and analyse the risks faced by the Company and Group, to set appropriate risk limits and controls, and to monitor risks and adherence to limits. Risk management policies and systems are reviewed regularly to reflect changes in market conditions and the Company’s and Group’s activities.

(b) Credit risk

Credit risk is the risk of financial loss to the Group if a customer or counterparty to a financial instrument fails to meet its contractual obligations, and arises principally from the Group’s receivables from customers and joint ventures. For the Company it arises primarily from receivables from subsidiaries and joint ventures, along with an investment.

Trade and other receivables

The Company’s and Group’s exposure to credit risk is influenced mainly by the individual characteristics of each customer. The demographics of the Group’s customer base, including the default risk of the industry and country in which customers operate, has less of an influence on credit risk.

The maximum exposure to credit risk is represented by the carrying amount of each financial asset. The maximum exposure to credit risk at the reporting date was:


2008$

2007$

2008$

2007$

Cash and cash equivalents 33,487,053 30,409,656 66,264,305

Trade and other receivables - current 4,202,996 4,285,065 4,711,711

Trade and other receivables - non current - - 21,025,380

Investments 9,850,219 3,717,631 9,858,761 3,728,835

47,540,268 66,005,508

The Group’s most significant customer, an Indian public sector petroleum company, accounts for $583,667 of the trade and other receivables carrying amount as 30 June 2008 (2007: $215,636).

Impairment losses

The aging of the trade receivables at the reporting date was:2008 2007

Gross$

Impairment$

Gross$

Impairment$

Consolidated

Not past due 3,738,564 - -

Past due 0-30 days 62,064 - 60,125 -

Past due 31-120 days 36,282 - 7 ,442 -

Past due 121 days to one year 328,613 - -

More than one year 37,473 - 5,282 -

4,202,996 - 4,285,065 -

Company

Not past due 31,718,872 6,040,957 2,566,770

Past due 0-30 days 12,867 - -

Past due 31-120 days 12,179 - -

Past due 121 days to one year 12,022 - -

More than one year 22,108 - 3,521 -

31,778,048 6,040,957 2,566,770

The Company and Group have established an allowance for impairment that represents their estimate of incurred losses in respect of trade and other receivables and investments. The main components of this allowance are a specific loss component that relates to individually significant exposures.


NOTE 25 – FINANCIAL INSTRUMENTS (CONTINUED)

(b) Credit risk (continued)

The movement in the allowance for impairment in respect of trade receivables during the year was as follows:

Company

2008$

2007$

Balance at 1 July 2,566,770 -

Impairment loss recognised 3,474,187 2,566,770

Balance at 30 June 6,040,957 2,566,770

The impairment loss relates to loans provided by the Company to subsidiaries, which are not supported by underlying assets of subsidiaries.

Based on the credit status of the counterparties, the Group and the Company believe that no impairment allowance is necessary in respect of trade and other receivables that are past due.

(c) Liquidity risk

Liquidity risk is the risk that the Group will not be able to meet its financial obligations as they fall due. The Group’s approach to managing liquidity is to ensure, as far as possible, that it will always have sufficient liquidity to meet its liabilities when due without incurring unacceptable losses or risking damage to the Group’s reputation.

The Group manages liquidity by monitoring present cash flows and ensuring that adequate cash reserves, financing facilities and equity raisings are undertaken to ensure that the Group can meet its obligations.

The table below analyses the Group’s financial liabilities by relevant maturity groupings based on the remaining period at the balance date to the contractual maturity date. The amounts disclosed in the table are the contractual undiscounted cash flows.

Consolidated

Carrying Amount

$

ContractualCash Flows

$

6 months or less

$

6 – 12 months

$

1 – 2 years

$

2008

Trade and other payables 8,608,338 8,608,338 8,608,338 - -

Loans and borrowings - - - - -

Total financial liabilities 8,608,338 8,608,338 8,608,338 - -

2007


Loans and borrowings 10,000,000 5,363,368 5,364,008

Total financial liabilities 12,364,815 13,601,244 2,873,868 5,363,368 5,364,008

Company

2008


Loans and borrowings - - - - -

Total financial liabilities 2,811,011 2,811,011 2,811,011 - -

2007


Loans and borrowings 10,000,000 5,363,368 5,364,008

Total financial liabilities 11,364,668 1,873,721 5,363,368 5,364,008




(d) Market risk

Market risk is the risk that changes in market prices, such as foreign exchange rates, interest rates and equity prices will affect the Group’s income or the value of its holdings of financial instruments. The objective of market risk management is to manage and control market risk exposures within acceptable parameters, while optimising the return.

i) Currency risk

An entity is exposed to currency risk on sales and purchases that are denominated in a currency other than the functional currency of the entity. The currencies giving rise to this risk are the US dollar and Indian rupee.

The exposure to currency risk at balance date was as follows:


2008 2007 2008 2007

In equivalents of Australian dollar

USD INR USD INR USD INR USD INR$ $ $ $ $ $ $ $

Cash and cash equivalents 6,054,958 - - 6,054,958 - -

Trade and other receivables - 1,643,371 - 445,166 27,422,497 4,660,563 7,001,554 1,748,287

Trade and other payables - (426,931) - (412,801) - (170,798) -

Gross balance sheet exposure 6,054,958 1,216,440 32,365 33,477,455 4,489,765 1,518,568

The following significant exchange rates applied during the year:

Average rate Reporting date spot rate

2008 2007 2008 2007

AUD 1

USD 0.8968 0.7857 0.9623 0.8487

INR 36.0683 35.0302 40.8000 34.6140

Foreign currency sensitivity

A 10% strengthening/weakening of the Australian dollar against the following currencies at 30 June would have (increased)/ decreased the loss by the amounts shown below. This analysis assumes that all other variables, in particular interest rates, remain constant. The analysis is performed on the same basis for 2007.


2008$

2007$

2008$

2007$

10% Strengthening

United States dollars (USD) (464,776) (2,980,037) (826,443)

Indian rupees (INR) (110,585) (215,768)

10% Weakening

United States dollars (USD) 568,060 3,642,268

Indian rupees (INR) 135,160 263,717

ii) Interest rate risk

At the reporting date the interest rate profile of the interest-bearing financial instruments was:

ConsolidatedCarrying Amount

CompanyCarrying Amount

2008$

2007$

2008$

2007$

Fixed Rate Instruments

Financial assets 29,348,732 64,502,723 29,348,732 64,502,723

Financial liabilities - 10,000,000 - 10,000,000

Variable Rate Instruments

Financial assets 4,028,538 2,357 ,076 951,143


NOTE 25 – FINANCIAL INSTRUMENTS (CONTINUED)

(d) Market risk (continued)

ii) Interest rate risk (continued)

Fair value sensitivity analysis for fixed rate instruments

The Group does not account for any fixed rate financial instruments at fair value through profit or loss so a change in interest rates at the reporting date would not affect profit or loss or equity.

Cash flow sensitivity analysis for variable rate instruments

An increase of 100 basis points in interest rates at the reporting date would have decreased the loss by the amounts shown below. A decrease of 100 basis points in interest rates at the reporting date would have had the opposite impact by the same amount. This analysis assumes that all other variables, in particular foreign currency rates, remain constant. The analysis is performed on the same basis for 2007.


2008$

2007$

2008$

2007$

Impact on profit or loss 40,285 23,571 40,285 23,571

iii) Other Price Risks

The Group is exposed to equity price risks arising from equity investments. Equity investments are held for strategic rather than trading purposes. The Group does not actively trade these investments.

Equity Price Sensitivity

The sensitivity analysis below has been determined based on the exposure to equity price risks at the reporting date:


2008$

2007$

2008$

2007$

If equity prices had been 10% higher:

Impact on profit or loss 505,436 505,436

Impact on asset revaluation reserve 570,570 232,787 570,570 232,787

If equity prices had been 10% lower:

Impact on profit or loss (498,948) (498,948)

Impact on asset revaluation reserve (570,570) (232,787) (570,570) (232,787)

(e) Capital risk management

The Board’s policy is to maintain a strong capital base so as to maintain investor, creditor and market confidence and to sustain future development of the business. The capital structure of the Group consists of equity attributable to equity holders of the Company, comprising issued capital, reserves and accumulated losses as disclosed in the statements of changes in equity.

(f) Fair values of financial assets and liabilities

The net fair values of assets and liabilities of the Group approximate their carrying values. The net fair value of other monetary financial assets and liabilities are based on market prices. The Group has no off-balance sheet financial instruments.




NOTE 26 – AUDITORS’ REMUNERATION


2008$

2007$

2008$

2007$

Audit ServicesAuditors of the Company

Audit and review of financial reports (KPMG Australia) 49,743 38,040 42,082 24,040

Audit and review of financial reports (KPMG related practices) 63,543 68,448 16,962 -

113,286 106,488 59,044 24,040

Other Services

Assurance and Other Services

KPMG Australia 12,350 2,020 12,350 2,020

KPMG related practices 16,746 43,023 - -

Taxation Services

Taxation compliance services (KPMG Australia) 104,591 128,474 91,296 128,474

Taxation compliance services (KPMG related practices) 32,426 10,531 -

166,113 184,458 114,177

NOTE 27 – INTEREST IN JOINT VENTURE OPERATIONS

The Group has the following interests in joint ventures as at 30 June 2008. Principal activities are oil and gas exploration, development and production:

Interest %

Permit Country 2008 2007

OFFSHORE

EPP27 Australia (Otway Basin) 20.00 20.00

JPDA 06-103 Timor-Leste / Australia (JPDA) 25.00 25.00

WA-388-P Australia (Carnarvon Basin) 20.00 20.00

ONSHORE

Cambay Field India (Cambay Basin) 45.00 45.00

Bhandut Field India (Cambay Basin) 40.00 40.00

Sabarmati Field India (Cambay Basin) 40.00 40.00

Block 56 Oman (South Oman Salt Basin) 25.00 25.00

West Kampar Block Indonesia (Central Sumatra) 45.00 45.00

ATP 548P Australia (Cooper - Eromanga Basin) - 11.35

NOTE 28 – OPERATING LEASES


2008$

2007$

2008$

2007$

Leases as Lessee

Non-cancellable operating lease rentals are payable as follows:

Less than one year 448,258 488,420 441,705 464,607

Between one and five years 127,918 274,846 127,918 274,846

576,176 763,266 569,623

The Group leases its head office premises at Levels 2 and 3, 50 Kings Park Road, West Perth under operating leases. The leases

that date. Lease payments are increased every 18 months to reflect market rentals. The leases do not include contingent rentals.

leases run for periods of between 1 and 2 years, with an option to renew the lease for a further term after that date. The leases do not include contingent rentals.


NOTE 29 – EXPENDITURE COMMITMENTS


2008$

2007$

2008$

2007$

Exploration Expenditure Commitments

In order to maintain current rights of tenure to exploration permits, the Group is required to perform minimum exploration work to meet the minimum expenditure requirements specified by various state and national governments. These obligations are subject to renegotiation when application for an exploration permit is made and at other times. These obligations are not provided for in the financial report and are estimated to be payable as follows:

Within one year 25,234,658 3,368,364

One year or later and no later than five years 17 ,470,634 23,587 ,683 - 355,682

42,705,292 3,368,364 10,084,768

Financial commitments for subsequent periods are contingent upon future exploration results and can not be estimated. These obligations are subject to renegotiation upon expiry of the exploration leases.


2008$

2007$

2008$

2007$

Employee Compensation Commitments


Commitments under non-cancellable employment contracts not provided for in the financial statements and payable:

Within one year 663,729 888,751 663,729 888,751

Other Employees

Commitments under non-cancellable employment contracts not provided for in the financial statements and payable:

Within one year 268,311 221,732 268,311 221,732

NOTE 30 – KEY MANAGEMENT PERSONNEL DISCLOSURES

The following were Key Management Personnel of the Group at any time during the financial year and unless otherwise indicated were key management personnel for the entire period:

Non-Executive Directors Position

Mr Max Cozijn Chairman and Company Secretary

Mr Laxmi Bhandari Non-Executive Director

Executive Directors Position

Dr Bruce McCarthy Managing Director

Mr Raymond Barnes Technical Director

Executives Position

Mr Ben Clube (appointed 5 May 2008) Chief Finance and Commercial Officer

Mr Richard Paces Chief Operating Officer

Mr Paul Senycia Exploration Manager

Mr Kim Morrison (appointed 1 May 2008) Business Development Manager

Mr Jay Laurie General Counsel

Mr Graham McCauley (to 5 May 2008) Chief Financial Officer

Mr Anthony Beckett General Manager Operations


Oilex : :



2008$

2007$

2008$

2007$

Key Management Personnel Compensation

The compensation of non-executive Directors and Key Management Personnel was as follows:

Short-term employee benefits 2,029,559 1,824,183 2,029,559 1,824,183

Non monetary benefits 101,005 158,733 101,005 158,733

Post-employment benefits 222,388 260,310 222,388 260,310

Sign on benefits 40,000 - 40,000 -

Equity compensation benefits 4,546,236 4,546,236

6,939,188 6,939,188

Individual Directors and Executives Compensation Disclosures

Information regarding individual Directors and Executives compensation is provided in the Remuneration Report section of the Directors’ Report.

Apart from the details disclosed in this note, no Director has entered into a material contract with the Company since the end of the previous financial year and there were no material contracts involving Directors’ interests existing at year end.

Key Management Personnel Transactions with the Company or its Controlled Entities

The terms and conditions of the transactions with Key Management Personnel and their related parties were no more favourable than those available, or which might reasonably be expected to be available, on similar transactions to non-key management personnel related entities on an arm’s length basis.

The aggregate amounts recognised during the year relating to Key Management Personnel and their related parties were as follows:


Key Management Personnel Transaction Note 2008$

2007$

2008$

2007$

Dr B H McCarthy Management services 1 83,333 - 83,333 -

Mr R G Barnes Technical, management and administrative services

2 299,600 301,000 299,600 301,000

1 From 1 May 2008, the Group used the services of Macuale Consultancy Pty Ltd of which Dr McCarthy is a director. Rates charged were at market rates and have been included in the remuneration of key management personnel disclosure.

have been included in the remuneration of key management personnel disclosure.


NOTE 30 – KEY MANAGEMENT PERSONNEL DISCLOSURES (CONTINUED)

Options and Performance Rights over Equity Instruments Granted as Compensation

The movement during the financial year in the number of options and performance rights over ordinary shares in the Company held, directly, indirectly or beneficially, by each key management person, including their related parties, is as follows:

2008 Held at 1 July 2007

Granted as compensation Exercised Other changes #

Held at 30 June 2008

Vested during the year

Vested and exercisable at 30 June 2008

OPTIONS

Directors

M D J Cozijn 1,500,000 500,000 1,000,000 - 1,000,000 250,000 750,000

L L Bhandari - 300,000 - - 300,000 150,000 150,000

B H McCarthy 6,000,000 4,000,000 - - 10,000,000 5,000,000 8,000,000

R G Barnes 3,000,000 3,000,000 - - 6,000,000 2,500,000 3,500,000

Other Key Management Personnel

B J M Clube - 1,500,000 - - 1,500,000 - -

R S Paces 2,325,000 - - - 2,325,000 775,000 1,550,000

P G Senycia 1,200,000 - - - 1,200,000 400,000 400,000

W K Morrison - 1,200,000 - - 1,200,000 - -

J W R Laurie 450,000 - - - 450,000 150,000 150,000

G J McCauley 500,000 - 250,000 - 250,000 250,000 -

A D Beckett 500,000 - 250,000 250,000 - - -

PERFORMANCE RIGHTS

Directors



R S Paces 150,000 - - - 150,000 50,000 50,000

P G Senycia - - - 25,000 25,000

J W R Laurie - 80,000 - - 80,000 - -

G J McCauley 75,000 - - - 75,000 25,000 25,000

A D Beckett 120,000 80,000 40,000 40,000 40,000

# Other changes represent options and rights that expired or were forfeited during the year.

No options held by Key Management Personnel are vested but not exercisable.






OPTIONS

Directors

M D J Cozijn 1,500,000 - - - 1,500,000 - 1,500,000

G I Johnson 500,000 - - - 500,000 - 500,000

L L Bhandari - - - - - - -

B H McCarthy 6,000,000 - - - 6,000,000 2,000,000 3,000,000

R G Barnes 3,000,000 - - - 3,000,000 1,000,000 1,000,000


R S Paces - 2,325,000 - - 2,325,000 775,000 775,000

P G Senycia - 1,200,000 - - 1,200,000 - -

G J McCauley 750,000 - 250,000 - 500,000 250,000 -

A D Beckett - 500,000 - - 500,000 250,000 250,000









PERFORMANCE RIGHTS

Directors



R S Paces - 150,000 - - 150,000 - -

P G Senycia - - - - -

G J McCauley - 75,000 - - 75,000 - -

A D Beckett - 120,000 - - 120,000 - -

# Other changes represent options and rights that expired or were forfeited during the year.

No options held by Key Management Personnel are vested but not exercisable.

Movements in Shares

The movement during the financial year in the number of ordinary shares in the Company held, directly, indirectly or beneficially, by each Key Management Personnel, including their related parties, is as follows:

2008 Held at 1 July 2007 Purchases Received on

exercise of options Sales Held at30 June 2008

Directors

M D J Cozijn 500,000 - 1,000,000 (200,000) 1,300,000

L L Bhandari - - - - -

B H McCarthy 800,000 - - - 800,000

R G Barnes 623,871 - - - 623,871


B J M Clube - - - - -

R S Paces 365,000 - - - 365,000


W K Morrison - - - - -

J W R Laurie - - - - -

G J McCauley - - 250,000 (250,000) -

A D Beckett - - 250,000 (250,000) -

2007 Held at1 July 2006 Purchases Received on

exercise of options Sales Held at 30 June 2007

Directors

M D J Cozijn 500,000 - - - 500,000

G I Johnson - - - - -

L L Bhandari - - - - -

B H McCarthy 850,000 - - (50,000) 800,000

R G Barnes 623,871 - - - 623,871


R S Paces 365,000 - - - 365,000


G J McCauley - - 250,000 (250,000) -

A D Beckett - - - - -

No shares were granted to key management personnel during the financial year as compensation.


NOTE 31 – RELATED PARTY TRANSACTIONS

Identity of Related Parties

The Group has a related party relationship with its subsidiaries (see Note 24), joint ventures (see Note 27) and with its Key Management Personnel (see Note 30).

Other Related Party Transactions

Subsidiaries

Loans are made by the Company to wholly owned subsidiaries for capital, exploration and production expenditure. At 30 June 2008, the amount owed to the Company was $27,066,337 (2007: $12,074,384). These loans have been recognised as non-current receivables and are subject to impairment testing (refer Note 11). Loans outstanding between the Company and its controlled entities have no fixed date of repayment and are non-interest bearing except for loans to subsidiary companies registered in Cyprus

Director Related Parties


2008$

2007$

2008$

2007$

Administration service fee paid to Carbon Energy Limited (M D J Cozijn is a Director of Carbon Energy Limited) 10,000 10,000 10,000 10,000

NOTE 32 – SUBSEQUENT EVENTS

(a) On 21 July 2008 options and performance rights were issued as detailed below:

the 5 existing joint venture parties (including Oilex Ltd) will assign a 6% participating interest in Exploration Permit WA-388-P in offshore Western Australia to Sasol Petroleum Australia Ltd. In return for its 30% participating interest, Sasol has agreed to bear 60% of certain costs associated with the acquisition of seismic data in the Permit. The assignment is subject to obtaining the necessary Government approval and registration.

(c) On 14 August 2008 Oilex (West Kampar) Limited entered into an agreement to acquire an additional 15% in the West Kampar PSC, onshore Sumatra Indonesia from the operator, PT Sumatera Persada Energi, and thereby increasing Oilex (West Kampar) Limited’s working interest from 45% to 60%. The consideration for the additional 15% interest includes Oilex (West Kampar) Limited carrying certain operational costs for the operator, PT Sumatera Persada Energi, and a phased cash payment.

(d) Subsequent to the year ended 30 June 2008, the carrying value of the investment in Bow Energy Limited was reviewed and as at 11 September 2008 the investment had decreased by $4,757,237 in value. The reduction in value of the investment would have reduced the Asset Revaluation Reserve by $2,528,663 (before tax effect) and Other Income by $2,228,574.

The financial effect of the above events has not been brought to account at balance date.



DIRECTOR’S DECLARATION

1. In the opinion of the Directors of Oilex Ltd (the “Company”):

(a) the financial statements and notes and the remuneration disclosures that are contained in the Remuneration Report in the

i) giving a true and fair view of the Company’s and the Group’s financial position as at 30 June 2008 and of their

ii complying with Australian Accounting Standards (including the Australian Accounting Interpretations) and the

(c) the remuneration disclosures that are contained in the Remuneration Report in the Directors’ Report comply with Australian Accounting Standard AASB 124 Related Party Disclosures, the Corporations Act 2001 and the Corporations Regulations

(d) there are reasonable grounds to believe that the Company will be able to pay its debts as and when they become due and payable.

Director and Chief Finance and Commercial Officer for the financial year ended 30 June 2008.

Signed in accordance with a resolution of the Directors.

Mr M.D.J. Cozijn Dr B.H. McCarthyChairman Managing Director

West PerthWestern Australia

18 September 2008


INDEPENDENT AUDIT REPORT


Independent auditor’s report to the members of Oilex Ltd

Report on the financial report

We have audited the accompanying financial report of Oilex Ltd (the Company), which comprises the balance sheets as at 30 June 2008, and the income statements, statements of changes in equity and cash flow statements for the year ended on that date, a summary of significant accounting policies and other explanatory notes 1 to 32 and the directors’ declaration of the Group comprising the Company and the entities it controlled at the year’s end or from time to time during the financial year.

Directors’ responsibility for the financial report

The directors of the Company are responsible for the preparation and fair presentation of the financial report in accordance with Australian Accounting Standards (including the Australian Accounting Interpretations) and the Corporations Act 2001. This responsibility includes establishing and maintaining internal control relevant to the preparation and fair presentation of the financial

and making accounting estimates that are reasonable in the circumstances. The directors also state, in accordance with Australian Accounting Standard AASB 101 Presentation of Financial Statements, that the financial report complies with International Financial Reporting Standards.

Auditor’s responsibility

Our responsibility is to express an opinion on the financial report based on our audit. We conducted our audit in accordance with Australian Auditing Standards. These Auditing Standards require that we comply with relevant ethical requirements relating to audit engagements and plan and perform the audit to obtain reasonable assurance whether the financial report is free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial report. The procedures selected depend on the auditor’s judgement, including the assessment of the risks of material misstatement of the financial report, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the financial report in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by the directors, as well as evaluating the overall presentation of the financial report.

We performed the procedures to assess whether in all material respects the financial report presents fairly, in accordance with the Corporations Act 2001 and Australian Accounting Standards (including the Australian Accounting Interpretations), a view which is consistent with our understanding of the Company’s and the Group’s financial position and of their performance.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.


INDEPENDENT AUDIT REPORT


Auditor’s opinion

In our opinion:

(a) the financial report of Oilex Ltd is in accordance with the Corporations Act 2001, including:

(i) giving a true and fair view of the Company’s and the Group’s financial position as at 30 June 2008 and of their performance for

(ii) complying with Australian Accounting Standards (including the Australian Accounting Interpretations) and the Corporations Regulations 2001.

(b) the financial report also complies with International Financial Reporting Standards as disclosed in note 2.

Report on the remuneration report

We have audited the Remuneration Report included in the directors’ report for the year ended 30 June 2008. The directors of the Company are responsible for the preparation and presentation of the remuneration report in accordance with Section 300A of the Corporations Act 2001. Our responsibility is to express an opinion on the remuneration report, based on our audit conducted in accordance with auditing standards.

Auditor’s opinion

In our opinion, the remuneration report of Oilex Ltd for the year ended 30 June 2008, complies with Section 300A of the Corporations Act 2001.

Partner

Perth18 September 2008


The shareholder information set out below was applicable as at 10 September 2008.

1. Shareholding

a) Distribution of share and option holdings.

Size of holding Number of shareholders Number of unlisted option holders

Number of performance right holders

1 - 1,000 1 -

1,001 - 5,000 861 4 -

5,001 - 10,000 438 1

10,001 - 100,000 22 22

100,001 and over 130 2

Total 2,342 55 25

b) Of the above total, 724 ordinary shareholders hold less than a marketable parcel.

c) There are no substantial shareholders holding 5% or more of the Company’s shares.

The voting rights attached to the ordinary shares are governed by the Constitution.

On a show of hands every person present who is a Member or representative of a Member shall have one vote and on a poll, every Member present in person or by proxy or by attorney or duly authorised representative shall have one vote for each share held. None of the options or performance rights give an entitlement to voting rights.

2. The name of the Company Secretary is Mr M D J Cozijn.

3. The address of the principal registered office is Level 2, 50 Kings Park Road, West Perth WA 6005, Australia, Telephone +61 8

4. Register of Securities

The register of securities listed on the Australian Securities Exchange is held by Security Transfer Registrars Pty Ltd, 770

The register of securities listed on the AIM Market is held by Computershare Investor Services PLC, PO Box 82, The Pavilions,

5. Stock Exchange Listing

Quotation has been granted for all the ordinary shares of the Company on all Member Exchanges of the Australian Securities Exchange and the AIM Market of the London Stock Exchange and trades under the symbol OEX.

6. Detailed schedules of exploration and production permits held are included in the Operations Review.

7. Directors’ interest in share capital is disclosed in the Directors’ Report.

8. Unquoted Securities – Options & Performance Rights

Dr B H McCarthy (Managing Director) holds a total of ten million options, (see Note 22), which represents 25.05% of all outstanding options.

Total performance rights on issue are 1,351,000.

SHAREHOLDER INFORMATION


SHAREHOLDER INFORMATION

Twenty Largest Shareholders

Shareholder Shares held % of issued capital

ANZ Nominees Limited 10,737 ,506 8.13

National Nominees Limited 7 .63

UBS Wealth Management Australia Nominees Pty Ltd 5.00

JP Morgan Nominees Australia Limited 6,035,000 4.57

Cogent Nominees Pty Ltd 4.46

India Hydrocarbons Limited 5,500,000 4.16

HSBC Custody Nominees Australia Limited 3.80

Citicorp Nominees Pty Limited 3,323,866 2.52

Dr Salim Cassim 2,735,000 2.07

CIM Special Situations Fund 1.88

Macquarie Bank Limited 2,348,162 1.78

R W Associates Pty Ltd 2,243,666 1.70

Alchemy Securities Pty Ltd 1.44

Barclayshare Nominees Limited 1,863,742 (#) 1.41

L R Nominees Limited (#) 1.25

Miramar Superannuation Fund Pty Ltd 1.20

TD Waterhouse Nominees (Europe) Limited (#) 1.12

J Nicolis Pty Ltd 1,421,503 1.08

Forest Nominees Limited 1.05

Dyspo Pty Ltd 0.83

Total 75,390,769 57.08Total issued shares as at 10 September 2008 132,083,885 100.00

registered holders as marked.


SULTANATE OF OMAN

Muscat Branch Office

Oilex Oman Limited24-26, 2nd FloorBuilding No 117Al Ma’aridh StreetGhala / BousherMuscatSultanate of Oman

INDIA

Vadodara Project Office

Oilex Ltd101 – 102 Rubillite Hub32, Ajit Nagar SocietyDinesh Mill Road

GujaratIndia

TIMOR-LESTE

Dili Branch Office

Oilex (JPDA 06-103) LtdAvenida de PortugalKampo AlorDiliTimor–Leste

REGIONAL OFFICES

REGISTERED AND PRINCIPAL OFFICE

Level 2,50 Kings Park RoadWest Perth WA 6005 AustraliaPh: +61 8 9485 3200 Fax: +61 8 9485 3290

Documents

ANNUAL REPORT 2008 · RFC Corporate Finance Ltd Level 15 QV1 Building 250 St Georges Terrace Perth WA 6000 Australia SHARE REGISTRIES Security Transfer Registrars Pty Ltd (for ASX)