(Administrators Appointed) (EPL) Second Meeting of Creditors 27 - PowerPoint PPT Presentation

Elk Petroleum Limited (Administrators Appointed) (EPL) Second Meeting of Creditors 27 September 2019 Elk Petroleum Limited (Administrators Appointed) 1

Agenda Introduction  Meeting formalities and overview of voting process – Purpose of meeting – Administrators’ Report  Voluntary Administration timeline – Administrators’ actions to date – The Voluntary Administration and reasons for failure – Elk Group financials – Investigations – Proposed Deed of Company Arrangement – Expected return to creditors – Administrators’ recommendation  Questions  Resolutions  Elk Petroleum Limited (Administrators Appointed) 2

Meeting formalities Open meeting  Administrator is Chairperson: IPR 75-50  Introductions:  - Jason Preston (Administrator and Chairperson) - Jonathan Henry (Partner, McGrathNicol) - Scott Rogers (McGrathNicol) Attendance register  Quorum: IPR 75-105  Time and place convenient: IPR 75-30  Administrators’ report to creditors pursuant to IPR 75 -225 ( the Administrators’ Report )  Proofs of debt and proxies  Updated Declaration of Independence, Relevant Relationships and Indemnities ( DIRRI )  Voting  Elk Petroleum Limited (Administrators Appointed) 3

Voting On the voices By poll On your voting slip, tick “In favour of” or “Against”, add your name and (for proxy holders) How to Show of hands the creditor you represent vote Hand voting slip to Administrators’ staff General proxies: fill in a voting slip for each Each creditor/proxy holder Voting general proxy you hold in the room gets one vote, via regardless of how many Special proxies: we already have your creditor’s vote (provided in advance or at proxy proxies held sign-in) When more creditors (either in the room or via proxy) vote for it than vote against it When more creditors/ How the AND resolution proxy holders vote for it When those who vote for it are more than those who vote against it OR, IF EITHER than vote against it is passed OF THE ABOVE (BUT NOT BOTH), when the Chairman exercises a casting vote in accordance with IPR 75-115 Elk Petroleum Limited (Administrators Appointed) 4

Purpose of meeting Creditors of EPL to resolve one of the following: EPL be returned to the Directors EPL enter into a Deed of Company Arrangement (DOCA) EPL enter liquidation Creditors of EPL may also resolve that the meeting be adjourned for a period of up to 45 business days Elk Petroleum Limited (Administrators Appointed) 5

Voluntary Administration timeline Today 15 May 27 May 3-14 June 1 July 21 August 27 September Data room VA appointed Advertised for Negotiations access and due Initial DOCA Second Meeting expressions of with interested diligence Proposal of Creditors interest parties commencement received 8 July 20 September 27 May 3 June 12 June Extension of the EOIs due convening Non-binding Administrators’ First Meeting of indicative offers report issued Creditors period granted due and DOCA Term sheet received Elk Petroleum Limited (Administrators Appointed) 6

Administrators’ actions to date Statutory Discontinuing Sale/recapitalisation Employees Creditors Investigations obligations operations & DOCA proposal Elk Petroleum Limited (Administrators Appointed) 7

Reasons for failure Delayed and lower than forecast production from Grieve Decrease in oil pricing Tightening of capital markets Misapplication/misallocation of Aneth loan funds High general and administrative costs AB’s share conversion Restriction of the repatriation of funds from EPI to EPL The Administrators do not dispute the Directors’ views in relation to the reasons for EPL’s failure Elk Petroleum Limited (Administrators Appointed) 8

Elk Group Statement of Financial Performance Revenue for FY18 increased by Consolidated statement of financial performance US$90.1m due to the Aneth US$'000 FY17 FY18 acquisition Revenue 4,965 95,120 Cost of sales (5,691) (67,151) Gross profit (726) 27,969 Finance costs of the Elk Group increased by US$20.5m due to Gross margin (15%) 29% increased borrowings to fund losses Expenses and the acquisition of Aneth Aneth transaction costs - (4,544) Depreciation and amortisation expense (52) (67) Falling oil prices resulted in losses on Finance costs (1,000) (21,508) unfavorable derivative positions, Impairments and fair value adjustments - (24,536) impairments and fair value Net loss on derivatives 165 (73,672) adjustments of operating assets. Other net expenses (6,165) (12,647) Total expenses (7,053) (136,973) FY18 Elk Group revenue and expenses by project Profit/(Loss) (7,779) (109,004) 200 Income tax expense - - 150 Loss after income tax expense (7,779) (109,004) 79% 21% 0% 0% 100 Source: Annual audited accounts 75 50 20 - Other comprehensive income - (30) (38) Items that may be reclassified to profit or loss Foreign currency trans 338 530 US$m (4) (50) (133) Other comprehensive income for the year, net of tax 338 530 (100) Total comprehensive loss for the year attributable to Elk Petroleum (7,441) (108,474) (150) 65% 19% 2% 15% Basic earnings (loss) per share (1.0) (8.9) (200) Aneth Madden Grieve Unallocated Diluted earnings per share (1.0) (8.9) Source: Annual audited accounts Revenue Expenses Elk Petroleum Limited (Administrators Appointed) 9

Elk Group Statement of Financial Position Composition of borrowings Consolidated statement of financial position US$'000 FY17 FY18 US$'000 Cash and cash equivalents 4,859 34,918 Revolver loan 10,000 Trade and other receivables 2,184 13,826 Senior debt - Grieve (BSP) 56,071 Other current assets 8,240 1,048 Senior debt - Aneth and Madden (AB and others) 111,582 Derivative financial instruments 3,018 204 Convertible notes and other debt 11,163 Total borrowings 188,816 Property, plant and equipment 105 915 Oil and gas properties 93,064 239,490 Other non-current assets 229 23,547 Total assets 111,698 313,947 Current liabilities FY18 Elk Group asset and liability composition Trade and other payables (10,795) (22,009) 400 Borrowings (6,736) (31,132) 300 66% 25% 9% < 1% Other current liabilities - (40,751) 200 Borrowings (Long-term) (55,846) (157,684) 100 207 28 2 77 Derivative financial instruments (3,603) (28,951) - (78) US$m (3) Preferred stock – debt - (62,355) (100) (21) (269) (200) Other non-current liabilities (14,213) (27,525) (300) Total liabilities (91,193) (370,407) 73% 6% 21% < 1% (400) Net assets/(liabilities) 20,505 (56,460) Aneth Madden Grieve Unallocated Issued capital 63,455 95,046 Assets Liabilitiies Reserves 11,005 10,172 Accumulated losses (53,954) (161,677) Total equity/(deficiency) 20,505 (56,460) Source: Annual audited accounts Elk Petroleum Limited (Administrators Appointed) 10

EPL operating cash flows and funding 20.0 21.0 1.8 59.2 10.0 4.0 - (13.3) (10.0) 0.7 0.3 A$m (9.9) (4.0) (20.0) (30.0) (69.1) (40.0) (50.0) (60.0) (70.0) (59.2) (80.0) Opening cash EPL expenses US recharges Interest Impairment charge Loss for the 12 Loan impairment Convertible notes Issued capital, Net advances to US Closing cash months ending 30 provision retained earnings & Subsidiaries April 2019 reserves Non-cash impairment of Debt and equity raised to EPL net costs of $5.9m to intercompany loans made to fund EPL costs and to fund operate over 12 months reviewed US Subsidiaries US Subsidiaries Elk Petroleum Limited (Administrators Appointed) 11

Investigations Potential claims that may be available in a liquidation Voidable transactions Insolvent trading Discharge of Directors’ duties Director Defences Business judgement rule Significant litigation and delay risk Considerations and defences Elk Petroleum Limited (Administrators Appointed) 12

Proposed Deed of Company Arrangement DOCA Proposal Deed Proponents Deed Funder Deed Administrator Neale Taylor and Republic Investment Management Pte Giles Geoffrey Woodgate Timothy Hargreaves Ltd of Woodgate & Co $710,000 The purpose of the Proposed DOCA is to provide an opportunity to pursue a  ‘Holding’ style of contribution from recapitalisation proposal for EPL during the DOCA period (up to a period of DOCA Deed Funder 14 months from the effective date). If a recapitalisation proposal is secured, it is intended that the Proposed  DOCA be varied to facilitate that proposal. No return to Priority employees unsecured creditors. The claims of ordinary unsecured creditors will not be released, discharged  are expected to be claims are not and extinguished by the Proposed DOCA. paid in full compromised The Proposed DOCA will terminate when one of the following events occur:  - The Court makes an order terminating the Proposed DOCA; Republic takes Directors are not - Creditors pass a resolution terminating the Proposed DOCA; or security over the released assets of EPL - The Proposed DOCA has not been amended within 14 months following the commencement date and EPL shall automatically be wound up. Elk Petroleum Limited (Administrators Appointed) 13

Outcomes DOCA Liquidation Nil. Employee would need to Priority employees 100 c/$ access FEG Ordinary unsecured creditors Nil Nil. Claims are not compromised Nil. Possibility of value being Nil Shareholders restored Elk Petroleum Limited (Administrators Appointed) 14