ELIXIR ENERGY LIMITED - Annual Report 2010

a n d c o n t r o l l e d e n t i t i e s ABN 51 108 230 995

Financial Report for the year ended 30 June 2010

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	Page
Corporate Directory	1
Directors’ Report	2
Auditors’ independence declaration	13
Independent audit report	14
Directors’ declaration	16
Consolidated statement of comprehensive income	17
Consolidated statement of financial position	18
Consolidated statement of changes in equity	19
Consolidated statement of cash flows	20
Notes to the financial statements	21

Corporate Directory

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Directors

Share Registry

Mr Jonathan Stewart – Non–Executive Chairman

Mr Andrew Ross – Managing Director Mr Iain Knott – Executive Director, Exploration Dr John Robertson – Non-Executive Director

Computershare Investor Services Pty Ltd Level 2, 45 St Georges Terrace Perth WA 6000 Telephone (+61) 8 9323 2000

Company Secretary

Bankers

Ms Julie Foster (Appointed 23 October 2009)

Registered and Principal Administration Office

Level 20, 77 St Georges Terrace Perth 6000 Western Australia Telephone: (+61) 8 9440 2650 Facsimile: (+61) 8 9440 2699

National Australia Bank Limited Ground Floor, 100 St Georges Terrace Perth WA 6000

Barclays Bank plc 5 The North Colonnade Canary Wharf London E14 4BB

UK Office

8 The Courtyard Eastern Road Bracknell Berkshire RG12 2XB United Kingdom Telephone (+44) 1344 423 170 Facsimile (+44) 1344 360 268

Stock Exchange Listing

Australian Securities Exchange Home Exchange: Perth, Western Australia Code: EXR

Website and Email

www.elixirpetroleum.com [email protected]

Auditors - Australia

Mack & Co Level 2, 35 Havelock Street West Perth WA 6005

Auditors - UK

MacIntyre Hudson LLP New Bridge Street House 30-34 New Bridge Street London EC4V 6BJ

Directors’ Report

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The Directors present their report on the consolidated entity consisting of Elixir Petroleum Limited (“Company” or “Elixir”) and the entities it controlled during the financial year ended 30 June 2010 (“Consolidated Entity” or “Group”).

Directors

The names of the Directors of the Company in office during the financial year and at the date of this report are:

Mr Iain Knott

Dr John Robertson

Mr Andrew Ross

Mr Jonathan Stewart

Unless otherwise stated, each director held office from 1 July 2009 until the date of this report.

Principal activities

The principal activity of the Company during the financial year was oil and gas exploration and production.

Summary review of operations

Results

For the financial year ended 30 June 2010, the Consolidated Entity recorded a net loss after tax of $5,695,000 (2009: $28,564,000) after charging as expenses, amortisation costs of $3,231,000 (2009: $8,835,000), exploration and evaluation costs of $2,002,000 (2009: $1,187,000). There were no impairment expenses (2009: $18,386,000) or discontinued operations losses (2009: $1,215,000) during the year.

The Consolidated Entity had no financing debt during the reporting period.

Gulf of Mexico

During the financial year the Company maintained production from four wells at two projects located in the Gulf of Mexico.

At the High Island Project, where Elixir holds a 30% working interest, process modifications were undertaken in July 2009 in an attempt to remedy compressor capacity constraints which were restricting gas production from well ATO#2. The modifications were successfully completed in the same month, however additional gas production from a workover of a well owned by the third party platform owner resulted in similar capacity constraints arising once more. These capacity constraints have had the effect of limiting production from High Island over the last 9 months.

Each well at High Island remains capable of being recompleted on a shallower horizon that has been penetrated and logged. As the new zones will be at virgin reservoir pressure, it is expected that the field will again be capable of exporting directly to sales without relying on export compression. The operator has sought and obtained joint venture approval to the work over of the wells with operational planning presently underway. It is expected the workovers will occur in 2H, 2010.

Production achieved from the High Island Project during the reporting period totalled 297 mmscf of gas and 60,600 bbls of condensate. In total, the field has produced over 3.95 Bcf of gas and 146,580 bbls of condensate.

At the Pompano project where Elixir maintains a 25% working interest, a remedial workover to restore production from well ATO#1 commenced in September 2009. The workover was successfully completed in October 2009 and the well placed back into production. Production achieved from the Pompano Project for the reporting period totalled 1,826 mmscf of gas and 800 bbls of condensate (100% project). In total, the field has produced over 5.26 Bcf of gas and 5,500 bbls of condensate.

No safety incidents were reported at either project during the financial year.

Elixir's share of sales revenue from these projects for the year to 30 June 2010 was $2,522,000 (2009: $5,556,000). The lower revenues for the financial period were due largely to the extended period of restricted gas production at the High Island Project and the decline in natural gas prices achieved during the year relative to the 2009 financial year.

Directors’ Report

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North Sea

Elixir’s objective in the North Sea is to acquire interests in exploration licences which are considered to have high prospectivity, to work-up attractive prospects in a cost-effective manner and to farm these prospects out to drill.

During the financial year Block 211/18b which contained the Leopard prospect was relinquished at the conclusion of the licence’s five year term. Farmout activities continued with respect to the Mulle accumulation in Block 211/22b. Technical studies were completed on the Tiger prospect in Block 211/12b and marketing activities to industry commenced in August 2010.

France

In May 2010, Elixir acquired 100% of the interests in the Moselle Permit which is located in the East Paris Basin, onshore France. The permit is over 5,500 km[2 ] in area and is thought to be prospective for both conventional and unconventional hydrocarbons. Elixir has commenced a detailed technical review of existing data over the Permit, which includes the processing and re-interpretation of over 500kms of 2D seismic data and the geochemical analysis of a number of cores and cuttings from existing oil and gas wells.

Significant changes in state of affairs

Other than those events noted above, there were no other significant changes in the state of affairs of the Group during the year that requires separate disclosure.

Financial Position

The net assets of the consolidated group have decreased by $5,825,000 from 30 June 2009 to be $8,575,000 at 30 June 2010. This is primarily as a result of the loss incurred for the year.

The group’s working capital, being current assets less current liabilities, has decreased from $7,921,000 at 30 June 2009 to $5,974,000 at 30 June 2010.

The directors believe the group is in a strong and stable financial position to expand and grow its current operations.

Directors

Mr. Jonathan Stewart – Executive Chairman

Qualification – B.Com, CA

Board Committees: Member of Remuneration and Nomination Committees and Audit Committee

Mr. Stewart was appointed a director of the Company on 12 November 2007. Mr. Stewart began his career as a Chartered Accountant and since leaving the profession has held several executive management positions working in a number of countries in several industries. Mr. Stewart has extensive experience in the international oil and gas sector.

Mr. Stewart holds a Bachelor of Commerce and is a member of the Institute of Chartered Accountants.

Other current directorships of Australian listed public companies: Aurora Oil & Gas Limited.

Former directorships (of Australian listed public companies) in last three years: Gawler Resources Ltd.

Interests in shares and options over shares in Group companies:

281,250 fully paid ordinary shares, and 2,500,000 share options in Elixir Petroleum Ltd (excludes 24,000,000 Fully Paid Ordinary Shares held by Aurora Oil & Gas Limited)

Mr Andrew Ross – Managing Director

Qualifications – LLB, B.Com, GAICD Board Committees: Member of Audit Committee

Mr. Ross was appointed Managing Director of the Company on 12 November 2007 following the successful completion of the merger between Elixir and Gawler Resources Limited. From 2003 to 2007, Mr. Ross was Managing Director and cofounder of the privately owned oil and gas group, Cape Energy. Prior to establishing Cape, Mr. Ross spent several years as a Director - Corporate Finance of a private merchant banking group based in London where he worked on a range of M&A transactions, public listings and fundraisings for clients in the upstream oil and gas industry as well as other industry sectors. Mr. Ross also acted as In-house Counsel for Sibir Energy Plc, working in the UK and Russia.

Mr. Ross is a qualified lawyer as well has holding a Bachelor of Commerce. Mr. Ross is a graduate of the Australian Institute of Company Directors and a member of the Society of Petroleum Engineers.

Directors’ Report

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Other current directorships of Australian listed public companies: Nil.

Former directorships (of Australian listed public companies) in last three years: Nil.

Interests in shares and options over shares in Group companies:

35,000 fully paid ordinary shares and 2,500,000 share options in Elixir Petroleum Ltd.

Mr Iain Knott – Executive Director

Qualifications – BSc (Hons), MSc

Mr Knott is a Petroleum Geologist who has over 26 years of North Sea and international oil and gas experience. After graduating from Kingston University in 1983, Mr Knott was employed in a number of geological roles by Core-Lab, Paleoservices and British Gas. Since 1996 he has held senior roles in the oil and gas and investment banking industries, firstly as an Assistant Director with NatWest Markets – Wood Mackenzie, then as Technical Director responsible for Northwest Europe for Burlington Resources, and most recently as Technical Director of Ingen.

Mr. Knott holds a Bachelor of Science (Hons) and a Master of Science degree.

Other current directorships of Australian listed public companies: Nil

Former directorships (of Australian listed public companies) in last three years: Nil

Interests in shares and options over shares in Group companies: 2,500,000 share options in Elixir Petroleum Ltd.

Dr John Robertson – Non-Executive Director

Qualifications – BSc (Hons), PhD

Board Committees: Member of Audit, Remuneration and Nomination Committees

Dr. Robertson was appointed as a Non-Executive Director in May 2006, and held the position of Non-Executive Chairman until November 2007. He has a wealth of experience in the finance and oil and gas industries. Dr. Robertson joined the corporate banking department of Schroder’s, a London merchant bank, in 1970 before working in corporate finance at Cannon Street Investments. Subsequently, he accrued over 14 years experience in senior management positions in Canada, the US and the UK with Ultramar, a leading UK independent oil company. He returned to the UK in the early 1990’s and became a Director of Corporate Finance at Durlacher. From 1995 to June 2005 Dr. Robertson was a Director of Nabarro Wells, a London-based independent corporate advisory firm where he provided capital raising and corporate advice to private and quoted companies, particularly in the oil and gas and mining sectors.

Dr. Robertson holds a Bachelor of Science (Eng.) (Hons) and a PhD in Engineering.

Other current directorships of Australian listed public companies: Nil

Former directorships (of Australian listed public companies) in last three years: Bonaparte Diamond Mines NL.

Interests in shares and options over shares in Group companies:

425,000 fully paid ordinary shares and 250,000 share options in Elixir Petroleum Ltd.

Directors’ Report

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Company Secretary

Ms Julie Foster

Qualifications – BA(Hons), ACA (ICAEW), ACIS

Ms Foster was appointed Company Secretary on 23 October 2009. Ms Foster has a degree in Accounting and Finance and is a Chartered Accountant (UK) and an associate member of Chartered Secretaries Australia. She is also currently Company Secretary for ASX Listed Aurora Oil & Gas Limited and Imugene Limited. Ms Foster previously worked for Chartered Accounting firms in both the UK and Perth.

Interests in shares and options over shares in Group companies: Nil

Mr David Lim ( ceased 23 October 2009 )

Qualifications – B.Bus, CPA

Interests in shares and options over shares in Group companies: Nil

Meetings of Directors

The following table sets out the number of meetings of the Company’s directors held during the year ended 30 June 2010, and the number of meetings attended by each director.

	Directors’	Meetings	Committee	Meetings
	Eligible to attend	Attended	Audit	Remuneration
Mr. Iain Knott	5	5	*	*
Dr. John Robertson	5	5	1	-
Mr. Andrew Ross	5	5	1	*
Mr. Jonathan Stewart	5	5	1	-

Not a member of the relevant committee.
Appointed a member of the relevant committee 19 August 2009.

Share options

At the date of this report the following unlisted options have been granted over unissued capital.

Type			Number	Exercise Price	Expiry Date	Date Granted
ESOP Tranche	1	(EXRAI)	1,750,000	$0.250	31-Mar-11	26 June 2008*
ESOP Tranche	2	(EXRAI)	3,250,000	$0.300	31-Mar-12	26 June 2008*
ESOP Tranche	3	(EXRAI)	2,750,000	$0.350	31-Mar-13	26 June2008*
			7,750,000

In accordance with applicable AASB 2, the deemed grant date disclosed above is the date of shareholder approval for the grant of these options under the Elixir Employee Share Option Plan, rather than the actual dates of Offer and Acceptance under the Plan.

Directors’ Report

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Remuneration Report (Audited)

This remuneration report outlines the director and executive remuneration arrangements of the Company and the Group in accordance with the requirements of the Corporations Act 2001 and its regulations. For the purposes of this report, key management personnel of the Group are defined as those persons having authority and responsibility for planning, directing and controlling the major activities of the Company and the Group, directly or indirectly, including any director (whether executive or otherwise) of the parent company, and includes the five executives in the parent company and the Group receiving the highest remuneration.

For the purposes of this report, the term 'executive' encompasses the chief executive, senior executives, asset managers and secretaries of the Parent and the Group.

Details of key management personnel (including the five highest paid executives of the Company and the Group)

(i) Directors

Jonathan Stewart Non-Executive Chairman Andrew Ross Managing Director Iain Knott Executive Director, Exploration John Robertson Non-Executive Director

(ii) Executives

Julie Foster Company Secretary ( appointed 23 October 2009 David Lim Company Secretary ( ceased 23 October 2009 )

Remuneration committee

The remuneration committee of the board of directors of the Company is responsible for determining and reviewing remuneration arrangements for the directors and executives. The remuneration committee assesses the appropriateness of the nature and amount of remuneration of executives on a periodic basis by reference to relevant employment market conditions with the overall objective of ensuring maximum stakeholder benefit from the retention of a high quality, high performing director and executive team.

Remuneration philosophy

The performance of the Company, among other things, depends upon the quality of its management. To prosper, the Company must attract, motivate and retain highly skilled directors and executives. To this end, the charter adopted by the remuneration committee aims to align rewards with achievement of strategic objectives. The remuneration framework applied provides for a mixture of fixed and variable pay and a blend of short and long term incentives as appropriate.

Remuneration structure

In accordance with best practice corporate governance, the structure of non-executive director and executive remuneration is separate and distinct.

Non-executive directors

The maximum aggregate amount of fees that can be paid to non-executive directors is subject to approval by shareholders at a General Meeting. The Company’s policy is to remunerate non-executive directors at market rates (for comparable companies) for time, commitment and responsibilities. Fees for non-executive directors are not linked to the performance of the Company. However to align directors’ interests with shareholders’ interests, directors are encouraged to hold shares in the Company. Non-executive directors are eligible to participate in the Elixir Employee Share Option Plan.

Retirement benefits and allowances

No retirement benefits or allowances are paid or payable to directors of the Company (other than statutory or mandatory superannuation contributions, where applicable).

Directors’ Report

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Executives

Base pay

Executives are offered a competitive level of base pay which comprises the fixed (unrisked) component of their pay and rewards. Base pay for senior executives is reviewed annually to ensure market competitiveness. There is no guaranteed base pay increases included in any senior executives’ contracts.

Short term incentives

Payment of short term incentives is dependent on the achievement of key performance milestones as determined by the remuneration committee. These milestones require performance in relation to key strategic, non-financial measures linked to drivers of performance in future reporting periods.

Short-term bonus payments may be adjusted up or down in line with under or over achievement relative to target performance levels at the discretion of the remuneration committee. For the year ended 30 June 2010 no short term bonus payments were paid or payable to key management personnel of the Group (2009: Nil). There have been no forfeitures of bonuses by key management personnel during the current or prior periods and no cash bonuses remained unvested at year end.

Long term Incentive - Share-based compensation

Options over shares in the Company are granted under the Elixir Employee Share Option Plan (“ESOP”) which was approved by shareholders at a general meeting on 26 June 2008. The ESOP is designed to provide long-term incentives for the Company’s directors, employees and consultants to deliver long-term shareholder returns. Under the ESOP, participants are granted options subject to vesting conditions set by the Board. The terms may be related to periods of service or achievement of certain performance standards. Participation in the ESOP is at the board’s discretion and no individual has a contractual right to participate in the ESOP or to receive any guaranteed benefits.

The terms and conditions of each grant of options affecting remuneration in the previous, this or future reporting periods are as follows:

	Date vested and			Value per option at
Grant date*	exercisable	Expiry date	Exercise price	grant date
26-Jun-08	01-Jul-08	31-Mar-11	$ 0.250	$ 0.0965
26-Jun-08	31-Mar-09	31-Mar-12	$ 0.300	$ 0.1070
26-Jun-08	31-Mar-10	31-Mar-13	$ 0.350	$ 0.1202

In accordance with applicable accounting standards, the deemed grant date above is the date upon which shareholders approved the grant of the relevant options, not the actual date of offer, acceptance or the record date.

Options granted under the ESOP carry no dividend or voting rights.

The ESOP rules at present contain no restriction on participants entering into transactions to remove the “at risk” aspect of the unvested equity instruments granted to them. During the year the board of directors resolved that future issues of options by the Consolidated Entity under an employee share option Plan will be structured to prevent the removal of the at risk component of the options without the approval of the board.

Details of options over ordinary shares in the Company provided as remuneration to each director and each of the key management personnel of the Consolidated Entity are set out below. When exercisable, each option is convertible into one ordinary share of the Company. Further information on the options is set out in notes 21 and 25 of the Financial Statements.

Group performance

At present, remuneration for key management personnel is not directly linked to common financial measures of the Consolidated Entity’s performance such as share price, earnings per share or dividends.

Directors’ Report

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The table set out below shows various commonly used measures of performance for the 2007 to 2010 financial years:

Revenues and finance income Loss after tax Share price at start of year Share price at end of year Change Loss per share Total Shareholder Return (TSR)(i)	Year ended 30 June 2007 2008 2009 2010
	$’000 $’000 $’000 $’000 459 9,289 5,886 2,795 3,085 6,414 27,349 5,695 $ $ $ $ 0.39 0.27 0.26 0.05 0.27 0.26 0.05 0.05
	(0.12) (0.01) (0.21) (0.00) (0.04) (0.05) (0.15) (0.03)
	(0.16) (0.06) (0.36) (0.03)

(i) Defined as the net change in share price (opening share price less the closing share price for the year), plus the loss per share for the year.

Service agreements

Remuneration and other terms of agreement for the Executive Chairman are formalised in a consultancy agreement with Epicure Capital Pty Ltd, an associated company of Mr. Jonathan Stewart. Material terms of the contract with Epicure Capital Pty Ltd are as follows:

Term of agreement – indefinite.
Consultancy fee inclusive of superannuation and taxes, but excluding GST, currently $80,000 per annum, to be reviewed annually by the board.
Payment of a termination benefit on early termination by the Company, other than for gross misconduct, equal to three months consultancy fees.

Remuneration and other terms of employment for Mr. Iain Knott are formalised in a contract of employment, the material terms of which are as follows:

Term of agreement – indefinite.
Notice period or termination benefit in lieu of notice, other than for gross misconduct, on a sliding scale based on years of service, twelve months and one week as at report date.

Remuneration and other terms of employment for Mr Andrew Ross are formalised in a contract of employment, the material terms of which are as follows:

Term of agreement – indefinite
Notice period or termination benefit in lieu of notice, other than for gross misconduct, equal to three months salary and superannuation.

Remuneration and other terms of agreement with other named executives are not formalised in service agreements.

Directors’ Report

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Remuneration of key management personnel and the five highest paid executives of the Company and Consolidated Entity

2010	Short term benefits Post employment benefits Share- based payment Cash salary and fees Cash bonus Non- monetary benefits Other Super- annuation Retirement benefits Options Total Performance- related $ $ $ $ $ $ $ $ %
*Non-executive* *directors* Current John Robertson Sub-total non- executive directors *Executive* *directors* Current Jonathan Stewart Andrew Ross Iain Knott Sub-total executive directors Other Executives Julie Foster (1) David Lim (2) James Stockley (3) Sub-total other executives Total Key Management Personnel*	26,759 - - - - - - 26,759 -
	26,759 - - - - - - 26,759
	80,000 - - - - - 38,335 118,335 - 186,697 - - - 16,803 - 63,891 267,391 - 303,608 - - - - - 38,335 341,943 -
	570,305 - - - 16,803 - 140,561 727,669
	- - - - - - - - - - - - - - - - - - 79,631 79,631 -
	79,631 - - - - - - 79,631 -
	676,695 - - - 16,803 - 140,561 834,059

(1) Ms Foster was appointed Company Secretary on 23 October 2009

(2) Mr Lim resigned as Company Secretary on 23 October 2009

(3) Mr Stockley resigned 30 September 2009
Mr. Stewart held an Executive position for the year ended 30 June 2010. Subsequent to year end Mr. Stewart assumed the position of Non-Executive Chairman.

Directors’ Report

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2009	Short-term benefits Post-employment benefits Share- based payment Cash salary and fees cash payment Non- monetary benefits Super- annuation Retirement benefits Options Total Performance- related $ $ $ Other (4) $ $ $ $ %
*Non-executive* *directors* Current John Robertson Former Trevor Benson (1) Sub-total non- executive directors *Executive* *directors* Current Jonathan Stewart Andrew Ross Iain Knott Sub-total executive directors *Other Executives* David Lim (3) Alex Neuling (2) James Stockley Sub-total other executives Total Key Management Personnel	30,943 - - - - - - 30,943 - 27,523 - - - 2,477 - - 30,000 -
	58,466 - - - 2,477 - - 60,943
	80,004 - - - - - 156,708 236,712 - 186,697 - - (1,887) 16,803 - 217,241 418,854 - 344,401 - - 5,855 - - 156,708 506,964 -
	611,102 - - 3,968 16,803 - 530,657 1,162,530
	- - - - - - - - - - - - - - - - - - 266,150 - - (6,817) - - - 259,333 -
	266,150 - - (6,817) - - - 259,333
	935,718 - - (2,849) 19,280 - 530,657 1,482,806

(1)Mr. Benson resigned as director on 30 June 2009.

(2)Mr. Neuling ceased being an executive of the Consolidated Entity on 9 April 2009.

(3)Mr. Lim commenced as an executive of the Consolidated Entity on 28 April 2009.

(4)“Other” short term benefits include current year movements in leave and termination benefits

Compensation options: granted and vested during the year

No compensation options were granted during the financial reporting period ended 30 June 2010 (2009: Nil).

Options granted as part of remuneration

No share options were granted during the financial reporting period ended 30 June 2010 (2009: Nil).

This is the end of the audited remuneration report.

Directors’ Report

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Dividends

No dividends have been declared, provided for or paid in respect of the financial year ended 30 June 2010 (2009: Nil).

Subsequent events

There are no events subsequent to the balance date that require disclosure.

Likely developments

Due to the nature of the Consolidated Entity’s business activities, the Directors are not able to state:

likely developments in the entities’ operations; or
the expected results of these operations,

as to do so would result in unreasonable prejudice to the Consolidated Entity.

Environmental regulation

The Consolidated Entity has a policy of exceeding or at least complying with its environmental performance obligations. During the financial year, the Consolidated Entity was not aware of any material breach of any particular or significant Commonwealth, State, Territory or other regulation in respect to environmental management.

Indemnification and insurance of Officers and Auditors

During the year, the Company paid a premium in respect of a contract insuring the directors of Elixir and the Company Secretary, Ms Julie Foster, against liabilities incurred as such a director or officer of the Company to the extent permitted by the Corporations Act 2001 . The contract of insurance prohibits disclosure of the nature of the insured liabilities and the amount of the premium. The Company has not otherwise, during or since the financial year, indemnified or agreed to indemnify an officer or auditor of the Company or of any related body corporate against a liability incurred as such an officer or auditor.

Proceedings on behalf of company

No person has applied for leave of court to bring proceedings on behalf of the Company or to intervene in any proceeding 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 Board of Directors is satisfied that the provision of non-audit services performed during the year by the entity’s auditors is compatible with the general standard of independence for auditors imposed by the Corporations Act 2001 .

The nature of the services provided does not compromise the general principles relating to auditor independence
in accordance with APES 110: Code of Ethics for Professional Accountants set by the Accounting Professional and Ethical Standards Board.

Auditor’s Independence Declaration

The Auditor’s independence declaration is included on page 11 of the financial report.

Rounding of amounts to the nearest thousand dollars

The Company satisfies the requirements of Class Order 98/0100 issued by the Australian Investments and Securities Commission relating to "rounding off" of amounts in the Directors' Report and the Financial Report to the nearest thousand dollars. Amounts have been rounded off in the Financial Report in accordance with that Class Order.

Directors’ Report

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Signed in accordance with a resolution of the Directors made pursuant to s.298 (2) of the Corporations Act 2001 .

On behalf of the Directors

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ANDREW ROSS

Managing Director Perth, Western Australia

24 September 2010

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Auditors’ Independence Declaration

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Independent Audit Report

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Independent Audit Report

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Directors’ declaration

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In the Directors’ opinion:

(a) the financial statements and accompanying notes set out on pages 17 to 55, are in accordance with the Corporations Act 2001 , including:
(i) complying with Accounting Standards, the Corporations Regulations 2001 and other mandatory professional reporting requirements; and
(ii) giving a true and fair view of the Consolidated Entity’s financial position as at 30 June 2010 and of its performance for the financial year ended on that date; and
(b) there are reasonable grounds to believe that the Consolidated Entity will be able to pay its debts as and when they become due and payable, and
(c) the financial statements and accompanying notes are presented in compliance with IFRS and interpretations adopted by the International Accounting Standards Board.
(d) the remuneration disclosures set out in the Directors’ report (as part of the audited remuneration report) for the year ended 30 June 2010 comply with section 300A of the Corporations Act 2001; and
(e) at the date of this declaration, there are reasonable grounds to believe that the members of the Extended Closed Group identified in note 27 will be able to meet any obligations or liabilities to which they are, or may become, subject by virtue of the deed of cross guarantee described in note 27.

The Directors have been given the declarations by the chief executive officer and chief financial officer required by section 295A of the Corporations Act 2001 .

Signed in accordance with a resolution of the Directors made pursuant to section 295(5) of the Corporations Act 2001 .

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Andrew Ross

Managing Director

Perth, Western Australia

24 September 2010

Consolidated statement of comprehensive income for the year ended 30 June 2010

Note Revenue from continuing operations Revenue from oil and gas sales (4) Other income (5) Total revenue Operating and production costs General and administrative costs (6) Other costs (7) Total operating expense EBITDAX1 Depreciation, depletion and amortisation expense (6) Exploration, evaluation and development costs expensed (6) Impairment of oil and gas properties (6) EBIT2 Finance income (4) Finance costs (6) Loss before income tax Income tax expense (8) Loss from continuing operations Loss from discontinued operations Net loss attributable to members of the Company Other comprehensive income Foreign currency translation differences Other comprehensive income for the year Total comprehensive income for the year Loss per share Basic loss per share (cents per share) (9) Diluted loss per share (cents per share) (9)	Consolidated 2010 2009 $'000 $'000 2,592 5,574 - 392 2,592 5,966 (1,097) (1,846) (1,884) (2,576) (246) (611) (3,227) (5,033) (635) 933 (3,261) (8,845) (2,002) (1,187) - (18,386) (5,898) (27,485) 203 312 - (176) (5,695) (27,349) - - (5,695) (27,349) - (1,215) (5,695) (28,564) (270) 726 (270) 726 (5,965) (27,838) (3.0) (15.1) (3.0) (15.1)	Consolidated 2010 2009 $'000 $'000 2,592 5,574 - 392 2,592 5,966 (1,097) (1,846) (1,884) (2,576) (246) (611) (3,227) (5,033) (635) 933 (3,261) (8,845) (2,002) (1,187) - (18,386) (5,898) (27,485) 203 312 - (176) (5,695) (27,349) - - (5,695) (27,349) - (1,215) (5,695) (28,564) (270) 726 (270) 726 (5,965) (27,838) (3.0) (15.1) (3.0) (15.1)
		5,966 (1,846) (2,576) (611)
		(5,033)
		933 (8,845) (1,187) (18,386)
		(27,485) 312 (176)
		(27,349) -
		(27,349) (1,215)
		(28,564)
		726
		726
		(27,838)
		(15.1) (15.1)

1 EBITDAX: Earnings before Interest, tax, depreciation, depletion and amortisation, Exploration and evaluation costs written off and provisions against group borrowings.

2 EBIT: Earnings before Interest and tax

The above consolidated statement of comprehensive income should be read in conjunction with the accompanying notes.

Consolidated statement of financial position As at year ended 30 June 2010

Note Assets Current assets Cash and cash equivalents (10) Trade and other receivables (11) Total current assets Non-current assets Oil and gas properties (12) Other plant and equipment (13) Deferred exploration and evaluation expenditure (14) Total non-current assets Total assets Liabilities Current liabilities Trade and other payables (15) Provisions (17) Total current liabilities Non-current liabilities Provisions (17) Total non-current liabilities Total liabilities Net Assets Equity Contributed equity (18) Reserves (19) Accumulated losses (19) Total parent entity interest in equity	Consolidated 2010 2009 $'000 $'000 5,084 8,081 1,686 667 6,770 8,748 3,177 6,581 39 87 778 1,295 3,994 7,963 10,764 16,711 488 557 308 270 796 827 1,393 1,484 1,393 1,484 2,189 2,311 8,575 14,400 60,644 60,644 2,590 2,720 (54,659) (48,964) 8,575 14,400	Consolidated 2010 2009 $'000 $'000 5,084 8,081 1,686 667 6,770 8,748 3,177 6,581 39 87 778 1,295 3,994 7,963 10,764 16,711 488 557 308 270 796 827 1,393 1,484 1,393 1,484 2,189 2,311 8,575 14,400 60,644 60,644 2,590 2,720 (54,659) (48,964) 8,575 14,400
		8,748
		6,581 87 1,295
		7,963
		16,711
		557 270
		827
		1,484
		1,484
		2,311
		14,400
		60,644 2,720 (48,964)
		14,400

The above consolidated statement of financial position should be read in conjunction with the accompanying notes.

Consolidated statement of change in equity for the year ended 30 June 2010

Consolidated Balance as at 1 July 2008 Loss for the year Other comprehensive income Exchange differences on translation of foreign operations Total comprehensive income for the year Transactions with owners, in their capacity as owners Share option expense Issue of ordinary shares Cost of share issue Balance as at 30 June 2009 Loss for the year Other comprehensive income Exchange differences on translation of foreign operations Total comprehensive income for the year Transactions with owners, in their capacity as owners Share option expense Balance as at 30 June 2010	Share Capital Option Premium Reserve Share Based Payment Reserve Foreign Currency Translation Reserve Accumulated Losses Total $’000 $’000 $’000 $’000 $’000 $’000 58,609 1,773 200 (510) (20,400) 39,672 - - - - (28,564) (28,564) - - - 726 - 726
	- - - 726 (28,564) (27,838)
	- - 531 - - 531 2,125 - - - - 2,125 (90) - - - - (90)
	2,035 - 531 - - 2,566
	60,644 1,773 731 216 (48,964) 14,400 - - - - (5,695) (5,695) - - - (270) - (270)
	- - - (270) (5,695) (5,965)
	- - 140 - - 140
	- - 140 - - 140
	60,644 1,773 871 (54) (54,659) 8,575

The above consolidated statement of change in equity should be read in conjunction with the accompanying notes.

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Consolidated statement of cash flows for the year ended 30 June 2010

	Consolidated	Consolidated
Note	2010	2009
	$'000	$'000
Cash flows from operating activities	2,479 (4,891)	8,301 (6,646)
Receipts from sales
Payments to suppliers and employees

Net cash(outflow)/inflow from operating activities (23)	(2,412)	1,655

Cash flows from investing activities
Proceeds from sale of projects	-	326

Payments for capitalised exploration, evaluation and development	(800)	(3,015)
Interest received	237	275
Cash flows from discontinued operations (33)	-	(991)

Net cash(outflow) from investing activities	(563)	(3,405)

Cash flows from financing activities	- - - -	1,607 (3,000) (177) (90)
Proceeds from issues of shares
Convertible note
Interest paid
Share issue costs

Net cash (outflow) from financing activities	-	(1,660)
Net (decrease) in cash and cash equivalents	(2,975)	(3,410)
Cash and cash equivalents at 1 July	8,081	10,604
Effect of change in exchange rates	(22)	887

Cash and cash equivalents at 30 June (10)	5,084	8,081

The above consolidated statement of cash flows should be read in conjunction with the accompanying notes.

Notes to the financial statements for the year ended 30 June 2010

1. Summary of significant accounting policies

The principal accounting policies adopted in the preparation of the financial statements are set out below. These policies have been applied consistently to all the years presented, unless otherwise stated. The financial report consists of consolidated financial statements for Elixir Petroleum Limited and its subsidiaries (“Group” or “Consolidated Entity”).

Elixir Petroleum Limited is a company limited by shares, incorporated and domiciled in Australia, and whose shares are publicly traded on the Australian Securities Exchange.

(a) Basis of preparation

These general purpose financial statements have been prepared in accordance with Australian Accounting Standards, other authoritative pronouncements of the Australian Accounting Standards Board, Urgent Issues Group Interpretations and the Corporations Act 2001 .

Going concern

The financial statements have been prepared on the going concern basis, which contemplates the continuity of normal business activity and the realisation of assets and the settlement of liabilities in the normal course of business.

Compliance with International Financial Reporting Standards

The consolidated financial statements comply with Australian Accounting Standards which include Australian equivalents to International Financial Reporting Standards (AIFRS). Compliance with AIFRS ensures that the financial statements of the Group comply with International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board (IASB).

Historical cost convention

These financial statements have been prepared under the historical cost convention. Expenditure is initially recognised at cost and revalued to fair value when required to do so by the application of Australian Accounting Standards.

Critical accounting estimates and significant judgements

The preparation of financial statements requires the use of certain critical accounting estimates. It also requires management to exercise its judgement in the process of applying the Group’s accounting policies. The areas involving a higher degree of judgement or complexity, or areas where assumptions and estimates are significant to the financial statements are disclosed in note 2.

Financial statement preparation

The Group has applied revised AASB 101 Presentation of Financial Statements, which became effective as of 1 July 2009. The revised standard requires the separate presentation of a statement of comprehensive income and a statement of changes in equity. All non-owner changes in equity must now be presented in the consolidated statement of comprehensive income. As a consequence, the Group had to change the presentation of its financial statements. Comparative information has been represented so that it also is in conformity with the revised standard. Since the change in accounting policy only impacts presentation aspects, there is no impact on loss per share.

(b) Principles of consolidation

(i) Subsidiaries

The consolidated financial statements incorporate the assets and liabilities of Elixir Petroleum Limited and its subsidiaries as at 30 June 2010 and the financial performance of the Company and its subsidiaries for the year then ended.

Subsidiaries are all those entities (including special purpose entities) over which the Group has the power to govern the financial and operating policies, generally accompanying a shareholding of more than one half of the voting rights. The existence and effect of potential voting rights that are currently exercisable or convertible are considered when assessing whether the Group controls another entity.

Subsidiaries are consolidated from the date on which control is transferred to the Company. They are de-consolidated from the date that control ceases.

The acquisition method of accounting is used to account for the acquisition of subsidiaries by the Group.

Intercompany transactions, balances and unrealised gains on transactions between Group companies are eliminated. Unrealised losses are eliminated unless the transaction provides evidence of the impairment of the assets transferred.

Notes to the financial statements for the year ended 30 June 2010

1. Summary of significant accounting policies (continued)

Accounting policies of subsidiaries have been changed where necessary to ensure consistency with the policies adopted by the Consolidated Entity.

Investments in subsidiaries are accounted for at cost in the separate financial statements of the Company.

(ii) Joint ventures

Jointly controlled assets

The Group’s proportionate interests in the assets, liabilities and expenses of a joint venture activity are incorporated in the financial statements under the appropriate headings. Details of joint ventures are set out in note 24.

(c) Segment reporting

Operating segments are now reported in a manner that is consistent with the internal reporting provided to the chief operating decision maker. The chief operating decision maker, who is responsible for allocating resources and assessing performance of operating segments, has been identified as the Board of Directors.

Change in accounting policy

The Group has adopted AASB 8 Operating Segments from 1 July 2009. AASB 8 replaces AASB 114 Segment Reporting. AASB 8 requires a ‘management approach’ under which segment information is presented on the same basis as that used for internal reporting purposes. In addition, the segments are reported in a manner that is consistent with the internal reporting provided to the chief operating decision makers.

The Board of Directors review internal management reports on a monthly basis that is consistent with the information provided in the statement of comprehensive income, statement of financial position and statement of cash flows. As a result no reconciliation is required, because the information as presented is used by the Board to make strategic decisions.

Management has determined, based on the reports reviewed by the Board of Directors and used to make strategic decisions, that the Group has one reportable segment being oil & gas exploration and production. The Group’s management and administration office is located in Australia. There has been no other impact on the measurement of the company’s assets and liabilities. Comparative information has been restated.

(d) Foreign currency translation

(i) Functional and presentation currency

Items included in the financial statements of the Group are measured using the currency of the primary economic environment in which the Group operates (‘the functional currency’). The consolidated financial statements are presented in Australian dollars, which is Aurora’s functional and presentation currency.

The functional currency of US subsidiary has changed. As from 1 July 2009 the functional currency was changed to USD, primarily because the trend in the source currency of the majority of US subsidiaries costs, from AUD to USD, was not considered temporary. Cash receipts from the US operations are received in USD, and the majority of US subsidiary payments, including operating expenses and income tax, are also payable in USD.

The change was implemented by translating the assets and liabilities of the US subsidiaries at spot rates at the date of the change and application of accounting for subsidiaries with a different functional currency being applied prospectively.

(ii) Transactions and balances

Foreign currency transactions are translated into functional currency using the exchange rates prevailing at the dates of the transactions.

Foreign currency monetary assets and liabilities at the reporting date are translated at the exchange rate existing at reporting date.

Exchange differences are recognised in profit or loss in the period in which they arise.

Notes to the financial statements for the year ended 30 June 2010

1. Summary of significant accounting policies (continued)

Group companies

The results and financial position of all the Group companies that have a functional currency different from the presentation currency are translated into the presentation currency as follows:

assets and liabilities for each statement of financial position presented are translated at the closing rate at the date of the statement of financial position’,
income and liabilities for each statement of comprehensive income are translated at average exchange rates’, and
exchange differences arising on translation of intercompany payables and/or receivables of foreign operations, in a currency that is not the same as the parent’s functional currency, are recognised in the foreign currency translation reserve, as a separate component of equity. These differences are only recognised in the profit or loss upon disposal of the foreign operations.

(e) Revenue recognition

(i) Sale of goods

Revenue from the sale of goods and disposal of other assets is recognised when the Consolidated Entity has transferred to the buyer the significant risks and rewards of ownership of the goods.

(ii) Other revenue

Dividend revenue is recognised on a receivable basis. Interest revenue is recognised on a time proportionate basis that takes into account the effective yield on the financial asset.

(iv) Service income

Revenue from the provision of services is recognised when the Consolidated Entity has a legally enforceable right to receive payment for services rendered.

(f) Income tax

The income tax expense or benefit for the period is the tax payable on the current period’s taxable income / (loss) based on the applicable income tax rate for each jurisdiction adjusted by changes in deferred tax assets and liabilities attributable to temporary differences, and to unused tax losses.

Deferred income tax is provided in full, using the liability method, on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the consolidated financial statements. However, the deferred income tax is not accounted for if it arises from initial recognition of an asset or liability in a transaction other than a business combination that at the time of the transaction affects neither accounting or taxable profit or loss. Deferred income tax is determined using tax rates (and laws) that have been enacted or substantially enacted by the reporting date and are expected to apply when the related deferred income tax assets is realised or the deferred income tax liability is settled.

Deferred tax assets are recognised for deductible temporary differences and unused tax losses only if it is probable that future taxable amounts will be available to utilise those temporary differences and losses.

Deferred tax liabilities and assets are not recognised for temporary differences between the carrying amount and tax base of investments in controlled entities where the Company is able to control the timing of the reversal of the temporary differences and it is probable that the differences will not reverse in the foreseeable future.

Deferred tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets and liabilities and when the deferred tax balances relate to the same taxation authority. Current tax assets and tax liabilities are offset where the entity has a legally enforceable right to offset and intends either to settle on a net basis or to realise the asset and settle the liability simultaneously.

Current and deferred tax balances attributable to amounts recognised directly in equity are also recognised directly in equity.

Notes to the financial statements for the year ended 30 June 2010

1. Summary of significant accounting policies (continued)

(g) Impairment of assets

Goodwill and intangible assets that have an indefinite useful life are not subject to amortisation and are tested annually for impairment, or more frequently if events or changes in circumstances indicate that they might be impaired. Other assets are tested for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognised for the amount by which the asset’s carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset’s fair value less costs to sell and value in use. For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash inflows which are largely independent of the cash inflows from other assets or groups of assets (cash-generating units). Non-financial assets other than goodwill that have been previously impaired are reviewed for possible reversal of the impairment at each reporting date.

(h) Cash and cash equivalents

For cash flow statement presentation purposes, cash and cash equivalents includes cash on hand, deposits held at call with financial institutions and other short-term, highly liquid investments with original maturities of three months or less.

(i) Financial assets

Classification

The Group classifies its financial assets in the following categories: financial assets ‘at fair value through profit or loss’, ‘held-tomaturity’ investments, ‘available-for-sale’ financial assets, and ‘loans and receivables’. The classification depends on the purpose for which the financial assets were acquired. Management determines the classification of its investments at initial recognition.

(i) Trade and other receivables

Trade and other receivables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest rate method, less provision for impairment. Trade receivables are generally due for settlement within 30 days.

(ii) Available-for-sale financial assets

Available-for-sale financial assets, comprising principally marketable equity securities, are non-derivatives that are either designated in this category or not classified in any of the other categories. They are included in non-current assets unless management intends to dispose of the investment within 12 months of the reporting date. Investments are designated as available-for-sale if they do not have fixed maturities and fixed or determinable payments and management intends to hold them for the medium to long term.

(iii) Held-to-maturity investments

Bills of exchange and debentures are recorded at amortised cost using the effective interest method less impairment, with revenue recognised on an effective yield basis. The effective interest method is a method of calculating the amortised cost of a financial asset and of allocating interest income over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash receipts through the expected life of the financial asset, or, where appropriate, a shorter period.

Recognition and de-recognition

Regular purchases and sales of financial assets are recognised on trade date – the date on which the Group commits to purchase or sell the asset. Investments are initially recognised at fair value plus transaction costs for all financial assets not carried at fair value through profit or loss. Financial assets carried at fair value through profit or loss are initially recognised at fair value and transaction costs are expensed in the income statement. Financial assets are derecognised when the rights to receive cash flows from the financial assets have expired or have been transferred and the Group has transferred substantially all the risks and rewards of ownership.

When securities classified as available-for-sale are sold, the accumulated fair value adjustments recognised in equity are included in the income statement as gains and losses from sale of investment securities.

Subsequent measurement

Loans and receivables and held-to-maturity investments are carried at amortised cost less impairment using the effective interest method.

Notes to the financial statements for the year ended 30 June 2010

1. Summary of significant accounting policies (continued)

Available-for-sale financial assets and financial assets at fair value through profit or loss are subsequently carried at fair value. Any changes in fair value are recognised directly in other comprehensive income. No further impairment of the available for sale asset will be recognised.

Details on how the fair value of financial instruments is determined are disclosed in note 29.

Impairment

The Group assesses at each balance date whether there is objective evidence that a financial asset or group of financial assets is impaired. In the case of equity securities classified as available-for-sale, a significant or prolonged decline in the fair value of a security below its cost is considered as an indicator that the securities are impaired. If any such evidence exists for availablefor-sale financial assets, the cumulative loss, measured as the difference between the acquisition cost and the current fair value, less any impairment loss on that financial asset previously recognised in profit or loss, is removed from equity and recognised in the income statement. Impairment losses recognised in the income statement on equity instruments classified as available-for-sale are not reversed through the income statement.

(j) Property, plant and equipment (other than oil & gas properties)

Property, plant and equipment is stated at cost less accumulated depreciation and impairment. Cost includes expenditure that is directly attributable to the acquisition of the item. In the event that settlement of all or part of the purchase consideration is deferred, cost is determined by discounting the amounts payable in the future to their present value as at the date of acquisition.

Depreciation is provided on property, plant and equipment, including freehold buildings but excluding land. Depreciation is calculated on a straight line basis so as to write down the net cost or other revalued amount of each asset over its expected useful life to its estimated residual value. Leasehold improvements are depreciated over the period of the lease or estimated useful life, whichever is the shorter, using the straight line method.

The estimated useful lives, residual values and depreciation method are reviewed at the end of each annual reporting period. The following estimated useful lives are used in the calculation of depreciation:

Fixtures and fittings 5 years Plant and equipment 5 - 15 years

(k) Non-operator interests in oil & gas properties

Exploration & evaluation expenditure

The Consolidated Entity’s accounting policy for the cost of exploring and of evaluating discoveries is based on the “successful efforts” method.

This approach is strongly linked to the Group’s oil and gas reserves determination and reporting process and is considered to most fairly reflect the results of the Group’s exploration and evaluation activity because only assets with demonstrable value are carried on the balance sheet.

Once a decision has been made to develop an oil or gas prospect, accumulated exploration and evaluation costs for that prospect are transferred from Deferred Exploration, Evaluation to Development Projects. Once production commences capitalised costs associated with the producing well are transferred to Oil and Gas Properties and are amortised or depreciated over the useful life of the asset.

This method allows the costs of discovery, evaluation and development of a prospect to be aggregated on the balance sheet and matched against the benefits derived from production once this commences.

Costs

Exploration and evaluation expenditure is accounted for in accordance with the area of interest method. Exploration licence acquisition costs relating to greenfields oil and gas exploration provinces are expensed as incurred while these costs incurred in relation to established or recognised oil and gas exploration provinces are initially capitalised and then amortised over the shorter term of the licence or the expected life of the project.

Notes to the financial statements for the year ended 30 June 2010

1. Summary of significant accounting policies (continued)

All other exploration and evaluation costs, including general permit activity, geological and geophysical costs and new venture activity costs are charged as expenses as incurred except where:

the expenditure relates to an area of interest that, at balance date, no assessment of the existence of economically recoverable reserves has been made; or
where there exists an economically recoverable reserve and it is expected that the capitalised expenditure will be recouped through successful exploitation of the area of interest, or alternatively, by its sale.

Areas of interest are recognised at the field level. Subsequent to the recognition of an area of interest, all further costs relating to the area of interest are initially capitalised. Each area of interest is reviewed at least bi-annually to determine whether economic quantities of reserves exist or whether further exploration and evaluation work is required to support the continued carry forward of capitalised costs.

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 economically recoverable hydrocarbons. To the extent it is considered that the relevant expenditure will not be recovered, it is immediately expensed.

Transfer to development projects

Upon a decision being made to commercially develop an area of interest, accumulated expenditure for the area of interest is transferred to Oil & Gas Properties and amortised or depreciated over the useful life of the project.

Producing projects

Exploration, evaluation and development costs are initially capitalised as deferred exploration, evaluation and development expenditure and upon commencement of commercial operations are transferred to Oil & Gas Properties. Operating costs of projects in commercial production are expensed as incurred.

Prepaid drilling and completion costs

Where the Group has a non-operator interest in an oil or gas property, it may periodically be required to make a cash contribution for its share of the operator’s drilling and / or completion costs, in advance of these operations taking place.

Where these contributions relate to a prepayment for exploratory or early stage drilling activity, prior to a decision on the commerciality of a well having been made, the costs are capitalised as prepaid drilling costs within Deferred Exploration, Evaluation and Development Expenditure.

Where these contributions relate to a prepayment for well completion, these costs are capitalised as prepaid completion costs within Deferred Exploration, Evaluation and Development Expenditure.

As the operator notifies the Company as to how funds have been expended, the costs are reclassified from prepaid costs to the appropriate expenditure category.

Once a decision has been made to proceed with completion of a well, all costs are transferred from Exploration and Evaluation to Oil and Gas Properties, including any prepaid amounts.

Amortisation of producing projects

Upon commencement of production, the Consolidated Entity amortises the accumulated costs for the relevant area of interest over the life of the area according to the rate of depletion of the economically recoverable quantities of reserves. Estimates of recoverable reserve quantities include judgemental assumptions regarding commodity prices, exchange rates, discount rates, and production and transportation costs for future cash flows. It also requires interpretation of complex and difficult geological and geophysical models in order to make an assessment of the size, shape, depth and quality of reservoirs, and their anticipated recoveries. The economic, geological and technical factors used to estimate reserves may change from period to period. Amortisation charged for the year to 30 June 2010 was $3,231,000 (2009: $8,835,000).

Future restoration costs

The Consolidated Entity’s aim is to avoid or minimise environmental impact resulting from its operations.

Work scope and cost estimates for restoration are reviewed annually and updated at least every three years.

Provision is made in the balance sheet for restoration of operating locations. The estimated costs are capitalised as part of the cost of the related project where recognition occurs upon acquisition of an interest in the operating locations. The costs are then recognised as an expense on a units of production basis during the production phase of the project.

Notes to the financial statements for the year ended 30 June 2010

1. Summary of significant accounting policies (continued)

The costs are based on the latest estimated future costs, determined on a discounted basis, which are re-assessed regularly and exclude any allowance for potential changes in technology or material changes in legislative requirements.

The Group accounts for changes in cost estimates on a prospective basis.

(l) Trade and other payables

Trade payables and other accounts payable are recognised when the Consolidated Entity becomes obliged to make future payments resulting from the purchase of goods and services. They are initially recognised at fair value and subsequently at amortised cost using the effective interest rate method.

(m) Employee benefits

Provision is made for benefits accruing to employees in respect of employee entitlements when it is probable that settlement will be required and these benefits can be measured reliably.

Provisions made in respect of employee entitlements expected to be settled within 12 months are measured at their nominal values using the remuneration rate expected to apply at the time of settlement.

Provisions made in respect of employee benefits which are not expected to be settled within 12 months are measured as the present value of the estimated future cash outflows to be made by the Consolidated Entity in respect of services provided by employees up to reporting date.

(n) Provisions

Provisions are recognised when the Consolidated Entity has a present obligation as a result of a past event, the future sacrifice of economic benefits is probable and the amount of the obligation can be reliably estimated.

When some or all of the economic benefits required to settle a provision are expected to be recovered from a third party, the receivable is recognised as an asset if it is virtually certain that recovery will be received and the amount of the receivable can be measured reliably.

The amount recognised as a provision is the best estimate of the consideration required to settle the present obligation at reporting date, taking into account the risks and uncertainties surrounding the obligation. Where a provision is measured using the cashflows estimated to settle the present obligation, its carrying amount is the present value of those cashflows.

An onerous contract is considered to exist where the Consolidated Entity has a contract under which the unavoidable cost of meeting the contractual obligations exceed the economic benefits estimated to be received. Present obligations arising under onerous contracts are recognised as a provision to the extent that the present obligation exceeds the economic benefits estimated to be received.

Provision for restoration and rehabilitation

Provision is made in the balance sheet for restoration of operating locations. The estimated restoration and rehabilitation costs are initially recognised as part of the capitalised cost of the relevant project which gave rise to the future obligation. During the production phase of the project the capitalised restoration costs is amortised using the units of production method. Any actual costs incurred by the Consolidated Entity are allocated against the provision.

The provision for restoration and rehabilitation are based on the latest estimated future costs, determined on a discounted basis, which are re-assessed regularly and exclude any allowance for potential changes in technology or material changes in legislative requirements.

(o) Contributed equity

Ordinary shares are classified as equity

Incremental costs directly attributable to the issue of new shares or options are shown in equity as a deduction, net of tax, from the proceeds. Incremental costs directly attributable to the issue of new shares or options for the acquisition of a business are not included in the cost of the acquisition as part of the purchase consideration.

If the Company reacquires its own equity instruments, e.g. as the result of a share buy-back, those instruments are deducted from equity and the associated shares are cancelled. No gain or loss is recognised in the profit or loss and the consideration paid including any directly attributable incremental costs (net of income taxes) is recognise directly in equity.

Notes to the financial statements for the year ended 30 June 2010

1. Summary of significant accounting policies (continued)

(p) Borrowing costs

Borrowing costs are expensed in the period in which they are incurred, except to the extent which they are directly attributable to the acquisition, construction or production of an asset and it is probable that they will result in future economic benefits to the entity and the costs can be measured reliably.

(q) Good and services tax

Revenues, expenses and assets are recognised net of the amount of goods and services tax (GST), except:

where the amount of GST incurred is not recoverable from the taxation authority, it is recognised as part of the cost of acquisition of an asset or as part of an item of expense; or
for receivables and payables which are recognised inclusive of GST.

The net amount of GST recoverable from, or payable to, the taxation authority is included as part of receivables or payables. Cash flows are included in the cash flow statement on a gross basis. 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.

(r) Earnings per share

(i) Basic earnings per share Basic earnings per share is calculated by dividing the profit / (loss) attributable to equity holders of the Company, excluding any costs of servicing equity other than ordinary shares, by the weighted average number of ordinary shares on issue during the financial year, adjusted for bonus elements in ordinary shares issued during the year.

(ii) Diluted earnings per share

Diluted earnings per share adjusts the figures used in the determination of basic earnings per share to take into account the after income tax effect of interest and other financing costs associated with dilutive potential ordinary shares and the weighted average number of shares assumed to have been issued for no consideration in relation to dilutive potential ordinary shares.

(s) Share-based payments

The fair value determined at the grant date of the equity-settled share-based payments is expensed on a straight-line basis over the vesting period, based on the Consolidated Entity’s estimate of shares that will eventually vest.

(t) Rounding of amounts

The Company is of a kind referred to in Class order 98/0100, issued by the Australian Securities and Investments Commission, relating to the “rounding off” of amounts in the financial report. Amounts in the financial report have been rounded off in accordance with the class order to the nearest thousand dollars, or in certain cases, the nearest dollar.

(u) New accounting standards and interpretations

The following Australian Accounting Standards have been issued or amended but are not yet effective. The Consolidated Entity has decided against early adoption of these standards. A discussion of the future requirements of the amendments and their impact on the financial accounts of the Consolidated Entity follows:

The Group does not anticipate early adoption of any of the above reporting requirements and does not expect these requirements to have any material effect on the Group’s financial statements.

Notes to the financial statements for the year ended 30 June 2010

1. Summary of significant accounting policies (continued)

AASB 2009-8 Amendments to Australian Accounting Standards – Group Cash-Settled Share-based Payment Transactions [AASB 2] (effective from 1 January 2010)

The amendments made by the AASB to AASB 2 confirm that an entity receiving goods or services in a group share-based payment arrangement must recognise an expense for those goods or services regardless if which entity in the group settles the transaction or whether the transaction is settled in shares or cash. They also clarify how the group share-based payment arrangement should be measured, that is, whether it is measured as an equity- or cash-settled transaction. The group will apply these amendments retrospectively for the financial reporting period commencing on 1 July 2010. There will be no impact on the group’s financial statements.

AASB 2009-10 Amendments to Australian Accounting Standards – Classification of Rights Issues [AASB 132] (effective

from 1 February 2010)

In October 2009 the AASB issued an amendment to AASB 132 Financial Instruments: Presentation, which addresses the accounting for rights issues that are denominated in a currency other than the functional currency of the issuer. Provided certain conditions are met, such rights issues are now classified as equity regardless of the currency in which the exercise price is denominated. Previously, these issues had to be accounted for as derivative liabilities. The amendment must be applied retrospectively in accordance with AASB 108 Accounting Policies, Changes in Accounting Estimates and Errors. The group will apply the amended standard from 1 July 2010. As the performance rights issue made by the group is denominated in the groups functional currency (AUD), the amendment will not have any effect on the group’s financial statements.

AASB 9 Financial Instruments and AASB 2009-11 Amendments to Australian Accounting Standards arising from AASB 9 (effective from 1 January 2013)

AASB 9 Financial Instruments addresses the classification and measurement of financial assets and is likely to affect the group’s accounting for its financial assets. The standard is not applicable until 1 January 2013 but is available for early adoption. The group is yet to assess its full impact. However, initial indications are that it may affect the group’s accounting for its available-for-sale financial assets, since AASB 9 only permits the recognition of fair value gains and losses in other comprehensive income if they relate to equity investments that are not held for trading. Fair value gains and losses on available-for-sale debt investments, for example, will therefore have to be recognised directly in profit or loss. In the current reporting period, the group recognised $15,000 of such gains in other comprehensive income. The group has not yet decided when to adopt AASB 9.

Revised AASB 124 Related Party Disclosures and AASB 2009-12 Amendments to Australian Accounting Standards (effective from 1 January 2011)

In December 2009 the AASB issued a revised AASB 124 Related Party Disclosures. It is effective for accounting periods beginning on or after 1 January 2011 and must be applied retrospectively. The amendment removes the requirement for government-related entities to disclose details of all transactions with the government and other government-related entities and clarifies and simplifies the definition of a related party. The group will apply the amended standards from 1 July 2011. When the amendments are applied, the group and the parent will need to disclose any transaction between its subsidiaries. However, it has yet to put systems in place to capture the necessary information. It is therefore not possible to disclose the financial impact, if any, of the amendment on the related party disclosures.

AASB Interpretation 19 Extinguishing financial liabilities with equity instruments and AASB 2009-13 Amendments to Australian Accounting Standards arising from Interpretation 19 (effective from 1 July 2010)

AASB Interpretation 19 clarifies the accounting when an entity renegotiates the terms of its debt with the results that the liability is extinguished by the debtor issuing its own equity instrument to the creditor (debt for equity swap). It requires a gain or loss to be recognised in profit or loss which measured as the difference between the carrying amount of the financial liability and the fair value of the equity instruments issued. The group will apply the interpretation from 1 July 2010. It is not expected to have any impact on the group’s financial statements since it is only retrospectively applied from the beginning of the earliest period presented (1 July 2009) and the group has not entered into any debt for equity swaps since that date.

Notes to the financial statements for the year ended 30 June 2010

2. Critical accounting estimates & judgments

In preparing this financial report the Consolidated Entity has been required to make certain estimates and assumptions concerning future occurrences. There is an inherent risk that the resulting accounting estimates will not equate exactly with actual events and results.

(a) Significant accounting judgements

In the process of applying the Consolidated Entity’s accounting policies, management has made the following judgements, apart from those involving estimations, which have the most significant effect on the amounts recognised in the financial statements:

Functional currency of US-based subsidiary operations

Exploration, evaluation and development expenditure (Oil & Gas Properties)

The Group's accounting policy for exploration, evaluation and development is set out at note 1(k). Application of this policy necessarily requires management to make certain estimates and assumptions as to future events and circumstances, in particular, the assessment of whether economic quantities of reserves exist. Any such estimates and assumptions may change as new information becomes available. If, after having capitalised expenditure under our policy, management conclude that it is unlikely that capitalised expenditure will be recovered by future exploitation or sale, the relevant capitalised amount will be written off to the income statement. As at 30 June 2010 the carrying amount of Oil & Gas Properties is $3,177,000 (2009: $6,581,000).

Deferred tax assets

The Consolidated Entity has carried forward tax losses which have not been recognised as deferred tax assets as it is not considered sufficiently probable that these losses will be recouped by means of future profits taxable in the appropriate jurisdictions.

In addition, the Consolidated Entity’s interests in jointly controlled oil & gas operations are held through the Company's whollyowned US entities (note 22 (b)). Taxation of oil & gas activities in the US allows a number of alternative treatments which are not available under Australian taxation legislation. In particular, companies may elect to:

(i) claim an immediate deduction for Intangible Drilling Costs ("IDC"); and
(ii) must use either the cost or percentage depletion method, whichever yields the largest tax deduction, when calculating applicable tax deductions in relation to the entities economic interest in it oil and gas properties.

The election to expense IDC applies to all expenditures incident to and necessary for the drilling of wells and the preparation of wells for the production of oil or gas. Once the election to expense IDC is made, the election is binding upon the taxpayer for the first taxable year for which it is effective and for all subsequent taxable years.

At balance date a determination had not been made as to whether the cost or percentage depletion method would apply for the current years US income tax calculation. The directors have not recognised a deferred tax asset or liability in respect of this potential difference in the tax base of these properties as they do not believe it is capable of being reliably estimated at balance date.

(b) Critical accounting estimates

The carrying amounts of certain assets and liabilities are often determined based on estimates and assumptions of future events. The key estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of certain assets and liabilities within the next annual reporting period are:

Notes to the financial statements for the year ended 30 June 2010

2. Critical accounting estimates & judgments (continued)

Amortisation

Upon commencement of production, the Company amortises the accumulated costs for the relevant area of interest over the life of the area according to the rate of depletion of the economically recoverable quantities of reserves. Estimates of recoverable reserve quantities include judgemental assumptions regarding commodity prices, exchange rates, discount rates, and production and transportation costs for future cash flows. It also requires interpretation of the quality of reservoirs, and their

anticipated recoveries. The economic, geological and technical factors used to estimate reserves may change from period to period. Amortisation charge for the year ended 30 June 2010 was $3,231,000 (2009: $8,835,000).

Share-based payment transactions

The Consolidated Entity measures the cost of equity-settled transactions with employees and consultants by reference to the fair value of the equity instruments at the date at which they are granted. The fair value is determined using a Binomial model, using the assumptions detailed in note 21.

Rehabilitation obligations

The Consolidated Entity estimates its share of the future removal and remediation costs of oil and gas platforms, production facilities, wells and pipelines at the time of acquisition or 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 remediation 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 1(k). As at 30 June 2010 rehabilitation obligations have a carrying value of $1,393,000 (2009: $1,484,000).

Impairment of assets

In the absence of readily available market prices, the recoverable amounts of assets are determined using estimates of the present value of future cashflows using asset-specific discount rates. For oil & gas properties, these estimates are based on assumptions concerning reserves, future production profiles and costs. As at 30 June 2010, the carrying value of oil & gas properties is $3,177,000 (2009: $6,581,000).

3. Segment Information

Management has determined, based on the reports reviewed by the Board of Directors that are used to make strategic decisions, that the Group has one reportable segment being oil & gas exploration and production.

The Board of Directors review internal management reports on a monthly basis is consistent with the information provided in the statement of comprehensive income, statement of financial position and cash flow statement. As a result no reconciliation is required, because the information as presented is used by the Board to make strategic decisions.

Revenue from external sources Reportable segments loss Reportable segments assets Reconciliation of reportable segment profit or loss Reportable segment loss Unallocated: Other income Corporate expenses Loss before income tax	Consolidated 2010 2009 $’000 $’000 2,593 5,577 (4,013) (25,474) 5,675 8,841 (4,013) (25,474) 202 701 (1,884) (2,576) (5,695) (27,349)	Consolidated 2010 2009 $’000 $’000 2,593 5,577 (4,013) (25,474) 5,675 8,841 (4,013) (25,474) 202 701 (1,884) (2,576) (5,695) (27,349)
		(27,349)

Notes to the financial statements for the year ended 30 June 2010

4. Revenue from continuing operations

Revenue from oil & gas sales Interest received	Consolidated 2010 2009 $'000 $'000 2,592 5,574 203 312 2,795 5,886	Consolidated 2010 2009 $'000 $'000 2,592 5,574 203 312 2,795 5,886
		5,886

5. Other income

	Consolidated
	2010	2009
	$'000	$'000
Unrealised foreign exchange gain	-	392

6. Expenses

Loss before income tax is arrived at after deducting the following expenses:

Amortisation of oil & gas properties Depreciation of plant and equipment Employee benefits expense (excluding share-based payment) Borrowing costs Exploration expenditure expensed Impairment of oil and gas properties	Consolidated 2010 2009 $'000 $'000 3,231 8,835 30 10 3,261 8,845 834 1,748 - 176 2,002 1,187 - 18,386	Consolidated 2010 2009 $'000 $'000 3,231 8,835 30 10 3,261 8,845 834 1,748 - 176 2,002 1,187 - 18,386
		8,845 1,748 176 1,187 18,386

7. Other expenses

Share based payments (note 21) Foreign exchange loss	Consolidated 2010 2009 $'000 $'000 140 608 106 3 246 611

Notes to the financial statements for the year ended 30 June 2010

8. Income tax

The prima facie income tax expense on pre-tax accounting loss from operations reconciles to the income tax expense in the financial statements as follows:

Prima facie tax benefit on loss at 30% (2009: 30%) Add tax effect of: Foreign/overseas tax losses not recognised Revenue losses not recognised Effect of lower tax rate on overseas losses Share based payments Other non-allowable items Less tax effect of: Other allowable items Income tax (benefit) / expense The following deferred tax balances have not been recognised (a) Deferred tax assets Tax losses Capital raising costs Provisions and accruals Total deferred tax assets Less set off of deferred tax liabilities under set-off provisions (b) Deferred tax assets not brought to account	Consolidated 2010 2009 $’000 $’000 (1,708) (8,205) 1,537 7,178 293 633 (49) (12) 42 182 53 32 168 192 - - 7,382 6,217 59 115 39 110 7,480 6,442 - (10) 7,480 6,432 (7,480) (6,432) - -	Consolidated 2010 2009 $’000 $’000 (1,708) (8,205) 1,537 7,178 293 633 (49) (12) 42 182 53 32 168 192 - - 7,382 6,217 59 115 39 110 7,480 6,442 - (10) 7,480 6,432 (7,480) (6,432) - -
		-
		6,217 115 110
		6,442 (10)
		6,432 (6,432)
		-

The tax benefits of the above deferred tax assets will only be obtained if:

(a) the Group derives future assessable income of a nature and amount sufficient to enable the benefits to be utilised;

(b) the Group continues to comply with the conditions for deductibility imposed by law; and

(b) Deferred tax liabilities

Oil & gas properties Other Total deferred tax liabilities Less set off of deferred tax assets under set-off provisions (a) Amounts recognised in equity	- - - - -	- 10
		10 (10)
		-

Notes to the financial statements for the year ended 30 June 2010

9. Loss per share

Loss per share
Loss used in calculation of basic / diluted loss per share Loss attributable to the ordinary equity holders of the company Weighted average number of ordinary shares used as the denominator in calculating basic / diluted loss per share Basic / diluted loss per share Loss attributable to the ordinary equity holders of the company	Consolidated 2010 2009 $'000 $'000 (5,695) (28,564) 188,988,472 188, 853,375 Cents Cents (3.0) (15.1)
		188, 853,375
		Cents (15.1)

The options on issue (note 20) represent potential ordinary shares but are not dilutive as they would decrease the loss per share. Accordingly they have been excluded from the weighted average number of ordinary shares and potential ordinary shares used in the calculation of diluted earnings per share.

10. Cash and cash equivalents

Cash at bank and in hand Deposits at call	Consolidated 2010 2009 $’000 $’000 1,409 3,081 3,675 5,000 5,084 8,081	Consolidated 2010 2009 $’000 $’000 1,409 3,081 3,675 5,000 5,084 8,081
		8,081

Cash at bank bears interest at market rate (floating). Short term deposits are made for varying periods of between one day and three months depending on forecast cash requirements of the Consolidated Entity and earn interest at the respective short term deposit rates.

11. Trade and other receivables

Trade receivables Other receivables and prepayments	Consolidated 2010 2009 $’000 $’000 590 428 1,096 239 1,686 667	Consolidated 2010 2009 $’000 $’000 590 428 1,096 239 1,686 667
		667

Trade and other receivables are non-interest bearing and are normally settled on 30 days terms. Amounts receivable from group entities are non interest bearing, with no fixed terms of repayment.

Notes to the financial statements for the year ended 30 June 2010

12. Oil and gas properties

Oil and gas properties
Producing projects At cost Less amortisation Impairment Development projects At cost Impairment Written off Total	Consolidated 2010 2009 $’000 $’000 23,995 40,958 (20,935) (18,379) - (16,119) 3,060 6,460 117 3,471 - (2,266) - (1,084) 117 121 3,177 6,581
		6,460
		3,471 (2,266) (1,084)
		121
		6,581

Notes to the financial statements for the year ended 30 June 2010

12. Oil and gas properties (continued)

A reconciliation of movements in oil & gas properties during the year is as follows:

Tangible Costs $’000 Producing Projects 2010 At Cost At 1 July 2009 3,004 Additions during the year - Transfer to accumulated amortisation1. - Net movement in prepaid - Foreign exchange movement (183) At 30 June 2010 2,821 Associated future restoration costs capitalised At 1 July 2009 - Foreign exchange movement - At 30 June 2010 - Accumulated amortisation At 1 July 2009 (700) Amortisation for the year - Transfer from impairment1. - Foreign exchange movement 43 At 30 June 2010 (657) Net carrying value At 1 July 2009 2,304 At 30 June 2010 2,164 2009 At Cost At 1 July 2008 3,013 Additions during the year (9) Impairment for the year - Net movement in prepaid - At 1 July 2009 3,004 Associated future restoration costs capitalised At 1 July 2008 - At 1 July 2009 - Accumulated amortisation At 1 July 2008 (700) Amortisation for the year - At 1 July 2009 (700)	Intangible Costs $’000 20,339 339 344 - (1,252) 19,770 1,484 (90) 1,394 (17,679) (3,261) (344) 1,006 (20,278) 4,144 886 36,616 (158) (16,119) - 20,339 1,484 1,484 (8,844) (8,835) (17,679)	Prepaid Drilling & Completion Costs $’000 12 - - (2) - 10 - - - - - - - - 12 10 - - 12 12 - - - - -	Total $’000 23,355 339 344 (2) (1,435)
			22,601
			1,484 (90)
			1,394
			(18,379) (3,261) (344) 1,049
			(20,935)
			6,460
			3,060
			39,629 (167) (16,119) 12
			23,355
			1,484
			1,484
			(9,544) (8,835)
			(18,379)

Notes to the financial statements for the year ended 30 June 2010

12. Oil and gas properties (continued)

Net carrying value At 1 July 2008 At 30 June 2009 Development projects Cost At 1 July 2009 Additions during the year Foreign exchange movement At 30 June 2010 At 1 July 2008 Additions during the year Impairment for the year Written off At 30 June 2009 Total oil & gas properties At 1 July 2009 At 30 June 2010	Tangible Costs $’000 2,313 2,304 19 - (1) 18 - 19 - - 19 2,323 2,182	Intangible Costs $’000 29,256 4,144 102 3 (6) 99 - 3,452 (2,266) (1,084) 102 4,246 985	Prepaid Drilling & Completion Costs $’000 - 12 - - - - - - - - - 12 10	Total $’000 31,569
				6,460
				121 3 (7)
				117
				- 3,471 (2,266) (1,084)
				121
				6,581
				3,177

13. Plant and equipment

Plant and equipment at cost Additions during the year Accumulated depreciation Foreign exchange movement Carrying value at 30 June	Consolidated 2010 2009 $’000 $’000 87 10 - 112 (30) (34) (18) (1) 39 87	Consolidated 2010 2009 $’000 $’000 87 10 - 112 (30) (34) (18) (1) 39 87
		87

Notes to the financial statements for the year ended 30 June 2010

14. Deferred exploration & evaluation expenditure

Balance at 1 July Amount capitalised during the year Written-off during the year Foreign exchange movements Balance at 30 June	Consolidated 2010 2009 $’000 $’000 1,295 1,286 460 439 (791) (376) (186) (54) 778 1,295	Consolidated 2010 2009 $’000 $’000 1,295 1,286 460 439 (791) (376) (186) (54) 778 1,295
		1,295

The ultimate recoupment of exploration expenditure carried forward is dependent on successful development and exploitation, or alternatively sale, or the respective area of interest.

15. Trade and other payables

Trade payables(1) Other payables(2)	Consolidated 2010 2009 $’000 $’000 465 513 23 44 488 557	Consolidated 2010 2009 $’000 $’000 465 513 23 44 488 557
		557

(1) Trade payables are non interest-bearing and are normally settled on 30 day terms.

(2) Other payables are non interest-bearing and are normally settled on 30 day terms.

16. Borrowings

During the 2009 financial year convertible notes were redeemed at cost for $3,000,000. Interest payable on the convertible notes up until the redemption date is included in finance costs on the income statement for the year ended 30 June 2009.

17. Provisions

Current Provision for annual leave Provision for termination benefits Non-current Provision for restoration costs	Consolidated 2010 2009 $’000 $’000 20 49 288 221 308 270 1,393 1,484	Consolidated 2010 2009 $’000 $’000 20 49 288 221 308 270 1,393 1,484
		270
		1,484

The Consolidated Entity’s policy with regard to providing for its share of future restoration costs for jointly controlled assets is documented in note 1(k). Movements in this provision during the current and prior year are as follows:

Non-current Opening balance Foreign exchange movement Closing balance	1,484 (91) 1,393	1,484 -
		1,484

Notes to the financial statements for the year ended 30 June 2010

18. Contributed equity Share capital Fully paid ordinary shares	2010 No. 188,988,472	2009 No. 188,988,472	2010 $’000 60,644	2009 $’000 60,644

Ordinary shares entitle the holder to participate in dividends and the proceeds on winding up of the Company in proportion to the number of shares held. On a show of hands every holder of ordinary shares present at a meeting or by proxy, is entitled to one vote. Upon a poll every holder is entitled to one vote per share held.

Movements in share capital during the current and prior financial year are as follows:

Description Date Balance at 1 July 2008 01 Jul 08 Right issue 01 Jul 08 Placement 08 Jul 08 Less: transaction costs Balance 30 June 2009 30 Jun 09 Balance at 30 June 2010 30 Jun 10	Number of shares Issue Price 181,117,922 1,950,550 $0.270 5,920,000 $0.270 188,988,472 188,988,472	$'000 58,609 527 1,598 (90)
		60,644 60,644

The Consolidated Entity’s objectives when managing capital are to safeguard its ability to continue as a going concern so that it can provide returns for shareholders and benefits for other stakeholders, and maintain a capital structure appropriate to the size, stage and nature of its activities whilst reducing the cost of capital where possible.

In order to maintain or adjust the capital structure, the Company may issue new shares, adjust future dividend payments, return capital to shareholders or sell assets.

During the 2009 financial year the Consolidated Entity retired $3,000,000 of debt, in the form of convertible notes, through the cash settlement of the outstanding amount borrowed. At balance date the Consolidated Entity had no debt facilities in place (2009: Nil). In future periods the Consolidated Entity may seek to increase gearing levels if required.

The Company and its subsidiaries are not subject to any externally imposed capital requirements.

Notes to the financial statements for the year ended 30 June 2010

19. Reserves and accumulated losses

Option premium reserve Opening balance Balance 30 June Foreign currency translation reserve Opening balance Currency translation differences arising during the year Balance 30 June Share-based payment reserve Opening balance Share-based payment expense Balance 30 June Accumulated losses Opening balance Net loss for the year Balance 30 June	Consolidated 2010 2009 $’000 $’000 1,773 1,773 1,773 1,773 216 (510) (270) 726 (54) 216 731 200 140 531 871 731 (48,964) (20,400) (5,695) (28,564) (54,659) (48,964)	Consolidated 2010 2009 $’000 $’000 1,773 1,773 1,773 1,773 216 (510) (270) 726 (54) 216 731 200 140 531 871 731 (48,964) (20,400) (5,695) (28,564) (54,659) (48,964)
		1,773
		(510) 726
		216
		200 531
		731
		(20,400) (28,564)
		(48,964)

The option premium reserve is used to record any premium received upon grant of options.

The share-based payment reserve is used to record the deferred expense in relation to share based payments.

The foreign currency translation reserve is used to record exchange differences arising on consolidation of subsidiaries with different functional currencies from the Company.

With respect to the payment of dividends (if any) by the Company in subsequent financial years, no franking credits are currently available, or are likely to become available in the next 12 months. No dividends were paid or declared during the current financial year.

20. Options

As at balance date, the Company and Consolidated Entity have the following classes of options on issue:

Type Ambrian Options (EXRAO) ESOP Tranche 1 (EXRAI) ESOP Tranche 2 (EXRAI) ESOP Tranche 3 (EXRAI)	2010 Number - 1,750,000 3,250,000 2,750,000 7,750,000	2009 Exercise Price Expiry Number ($) 637,148 0.600 16-May-10 2,000,000 0.250 31-Mar-11 3,250,000 0.300 31-Mar-12 2,750,000 0.350 31-Mar-13 8,637,148

These options are unlisted and carry no dividend or voting rights. Upon exercise, each option is convertible into one ordinary share to rank pari passu in all respects with the Company’s existing fully paid ordinary shares.

Notes to the financial statements for the year ended 30 June 2010

20. Options (continued)

Movements in the number of options on issue during the year are as follows:

Date Opening balance Expired during the year ESOP Tranche 1 (EXRAI) Ambrian Options (EXRAO) At 30 June	Number Number 2010 2009 8,637,148 8,637,148 (250,000) - (637,148) -
	7,750,000 8,637,148

21. Share-based payments

No options were granted or forfeited during the current financial year (2009: Nil).

Employee Share Option Plan

The granting of up to 15,000,000 options under the Elixir Employee Share Option Plan (“Plan”) was approved by shareholders at a general meeting held on 26 June 2008. Under the terms of the Plan the Board may offer options to eligible persons (as determined by the Board) at such times and on such terms as the Board considers appropriate.

The fair value of options granted was calculated using the binomial option pricing model. An expense is recognised on a pro rata basis over the period from grant date to vesting date.

22. Parent entity information

The following details information related to the parent entity, Elixir Petroleum Limited, at 30 June 2010. The information presented here has been prepared using accounting policies consistent with those presented in Note 1.

Current assets Non-current assets Total assets Current liabilities Total liabilities Contributed equity Share-based payment reserve Option premium reserve Accumulated losses Total equity Loss for the year Other comprehensive income for the year Total comprehensive loss for the year	Company 2010 2009 $’000 $’000 4,138 5,582 \ 5,023 9,371 9,161 14,953 586 553 586 553 60,644 60,644 871 731 1,773 1,773 (54,713) (48,748) 8,575 14,400 (5,966) (27,838) - - (5,966) (27,838)	Company 2010 2009 $’000 $’000 4,138 5,582 \ 5,023 9,371 9,161 14,953 586 553 586 553 60,644 60,644 871 731 1,773 1,773 (54,713) (48,748) 8,575 14,400 (5,966) (27,838) - - (5,966) (27,838)
		14,953
		553
		553
		60,644 731 1,773 (48,748)
		14,400
		(27,838) -
		(27,838)

Notes to the financial statements for the year ended 30 June 2010

22. Parent entity information (continued)

At balance date amounts receivable from controlled entities at cost totalled $13,975,788 (2009: $15,357,194). The amounts receivable were fully impaired at 30 June 2010 and 30 June 2009. The transactions were made interest free with no fixed terms for repayment.

(a) Wholly-owned Group

Details of interests in wholly-owned controlled entities are set out at part (b) of this note. Details of dealings with controlled entities are as follows:

Inter-company Account

Elixir Petroleum Limited provides working capital to its controlled entities. Transactions between Elixir Petroleum Limited and other controlled entities in the Consolidated Entity during the year ended 30 June 2010 consisted of:

(i) Working capital advanced by Elixir Petroleum Limited.

(ii) Provision of services by Elixir Petroleum Limited.

(iii) Expenses paid by Elixir Petroleum Limited on behalf of its controlled entities.

The above transactions were made interest free with no fixed terms for the repayment of amounts advanced by Elixir Petroleum Limited.

Details of transactions with controlled entities during the year are as follows:

Sale of goods and services Management fees & recharges to subsidiaries Loans to subsidiaries Balance at 1 July Loans written off Balance at 30 June	Consolidated 2010 2009 $’000 $’000 383 627 15,357 19,582 (1,381) (4,225) 13,976 15,357	Consolidated 2010 2009 $’000 $’000 383 627 15,357 19,582 (1,381) (4,225) 13,976 15,357
		19,582 (4,225)
		15,357

(b) Investments in controlled entities

	Country of	Class of	Equity holding
Name of Entity	incorporation	shares
			2010	2009
Elixir Petroleum (Australia) Pty Ltd	Australia	Ordinary	100%	100%
Transition Resources Ltd	Australia	Ordinary	100%	100%
Globe Resources Pty Ltd	Australia	Ordinary	100%	100%
Elixir Petroleum (Europe) Ltd	United Kingdom	Ordinary	100%	100%
Elixir Petroleum (Technical Services) Ltd(1)	United Kingdom	Ordinary	100%	100%
Elixir Petroleum (Moselle) Ltd(2)	United Kingdom	Ordinary	100%	-
Cottesloe Oil & Gas LLC	USA	Ordinary	100%	100%
Cottesloe Oil & Gas Inc	USA	Ordinary	100%	100%

(1) Incorporated during the 2009 financial year.

(2) Acquired during the 2010 financial year.

Notes to the financial statements for the year ended 30 June 2010

22. Parent entity information (continued)

(c) Ultimate Parent Company

Elixir Petroleum Limited, an ASX listed public company incorporated and domiciled in Australia, is the ultimate parent of the Group.

(d) Corporate restructure

During the current financial year the Consolidated Entity completed the acquisition of the entire issued share capital of Elixir Petroleum (Moselle) Limited (“EPM”), formerly East Paris Petroleum Development Limited. EPM is the 100% interest holder and operator of the Moselle Permit, a 5,360 km[2] oil and gas exploration permit located in the East Paris Basin, onshore northeastern France.

The Moselle Permit is the largest single exploration block onshore France and was awarded in January 2009 to EPM for an initial five year term. The Permit is prospective for a number of different play types including conventional oil and gas, unconventional gas (i.e. tight sand and shale gas) and coal bed methane.

During the 2009 financial year the Consolidated Entity undertook a restructure of its UK and African exploration assets. The restructure resulted in the incorporation of a new UK registered entity, Elixir Petroleum (Technical Services) Limited. A decision was also made to sell Elixir Petroleum (UK) Limited, along with its interest in the Sierra Leone exploration licence, Block SL-4. Prior to the sale of Elixir Petroleum (UK) Limited, all assets and liabilities of the entity which were not related to the Block SL-4 licence were sold to other members of the Consolidated Entity as part of the Sale and Purchase Agreement between Elixir Petroleum Limited and Prontinal Ltd. At the date of sale, being 30 April 2010, Elixir Petroleum (UK) Ltd ceased to be a member of the Consolidated Entity as it no longer met the consolidation requirements of AASB 127 Consolidated and Separate Financial Statements. Financial information in relation to Elixir Petroleum (UK) Limited can be found in the discontinued operations information disclosed in note 33.

23. Reconciliation of loss after income tax to net cash outflow from operating activities

Operating loss from continuing operations after tax Non-cash items Impairment write down of oil and gas properties Depreciation, depletion & amortisation Exploration & evaluation costs written down Share-based payment Net exchange rate differences Non-operating cashflows Finance costs Interest income Movement in assets and liabilities (Decrease) in current liabilities (Increase) / decrease in current assets (Decrease) / increase / in provisions Net cash (outflow) / inflow from operating activities	Consolidated 2010 2009 $'000 $'000 (5,695) (27,349) - 18,386 3,261 8,835 791 1,187 140 530 303 (445) - 176 (203) (279) (69) (2,261) (902) 2,605 (38) 270 (2,412) 1,655	Consolidated 2010 2009 $'000 $'000 (5,695) (27,349) - 18,386 3,261 8,835 791 1,187 140 530 303 (445) - 176 (203) (279) (69) (2,261) (902) 2,605 (38) 270 (2,412) 1,655
		1,655

Notes to the financial statements for the year ended 30 June 2010

24. Jointly controlled assets

At the balance date, the Consolidated Entity has working interests in joint operating agreements for the following projects:

Project	Blocks	Activity	Location	Working	Interest
				2010	2009
High Island Project	268A	Oil & Gas field, production project	USA	30%	30%
Pompano Project	446-L SE/4	Oil & Gas field, production project	USA	25%	25%
Red Fish Prospect	479-L N/2 & NE/4	Oil & Gas, exploration project	USA	25%	25%
Mulle Prospect	211/22b, 211/27d	Oil & Gas, appraisal project	UK	40%	40%
Tiger Prospect	211/12b	Oil & Gas, exploration project	UK	100%	100%
Moselle Permit(1)	Moselle	Oil & Gas, exploration project	France	100%	-
Leopard Prospect(2)	211/18b	Oil & Gas, exploration project	UK	-	56%
Fat Cat Prospect(3)	13/25	Oil & Gas, exploration project	UK	-	12.5%

(1) Moselle Permit – The acquisition of this permit was completed in April 2010.

(2) Leopard Prospect – The tenement was relinquished in December 2009.

(3) Fat Cat Prospect – The tenement was relinquished in April 2010.

Details of capital commitments in respect of these jointly controlled assets are disclosed in note 31.

25. Key management personnel disclosures

(a) The directors of Elixir Petroleum Limited during the year were:

Mr Jonathan Stewart – Non – Executive Chairman

Mr Andrew Ross - Managing Director

Mr Iain Knott - Executive Director

Dr John Robertson - Non-Executive Director

(b) Other key management personnel

Ms Julie Foster – Chief Financial Officer & Company Secretary ( appointed 23 October 2009 ). Mr David Lim – Chief Financial Officer & Company Secretary ( resigned 23 October 2009 ).

(c) Key management personnel compensation

Short term employee benefits Post-employment benefits Share-based payments	Consolidated 2010 2009 $'000 $'000 677 933 17 19 140 531 834 1,483	Consolidated 2010 2009 $'000 $'000 677 933 17 19 140 531 834 1,483
		1,483

Notes to the financial statements for the year ended 30 June 2010

25. Key management personnel disclosures (continued)

(d) Equity instrument disclosures relating to Key Management Personnel

Option holdings

The number of options over ordinary shares in the Company held during the financial year by each director of Elixir Petroleum Limited and other key management personnel of the Consolidated Entity, including their personally related parties, are set out below.

	Balance at 1 July	Granted as compensation	Exercised during the year	Net other change	Balance when ceased to be a director	Balance at 30 June
2010
Directors
Current Jonathan Stewart Andrew Ross(1) Iain Knott John Robertson Other executives Julie Foster(2) David Lim(3)	2,500,000 2,500,000 2,500,000 250,000 - -	- - - - - -	- - - - - -	- - - - - -	- - - - - -	2,500,000 2,500,000 2,500,000 250,000 - -
2009
Directors
Current Jonathan Stewart Andrew Ross Iain Knott Trevor Benson(4) John Robertson Other executives David Lim(3) Alex Neuling(5)	2,500,000 2,500,000 2,500,000 250,000 250,000 - -	- - - - - - -	- - - - - - -	- - - - - - -	- - - (250,000) - - -	2,500,000 2,500,000 2,500,000 - 250,000 - -

(1) Mr. Ross was appointed Company Secretary on 9 April 2009 and resigned on 12 May 2009

(2) Ms. Foster was appointed as Company Secretary on 23 October 2009.

(3) Mr. Lim was appointed as Company Secretary on 12 May 2009 and resigned on 23 October 2009.

(4) Mr. Benson resigned being a Director on 30 June 2009.

(5) Mr. Neuling resigned as Company Secretary on 9 April 2009

Details of options provided as remuneration and shares issued on exercise of such options, together with the terms and conditions of the options, can be found in the section of the Directors’ Report titled “Remuneration Report”.

Notes to the financial statements for the year ended 30 June 2010

25. Key management personnel disclosures (continued)

Share holdings

The numbers of shares in the Company held during the financial year by each director of Elixir Petroleum Limited and other Key Management Personnel of the Consolidated Entity, including their personally related parties, are set out below. No shares were granted as compensation during the current reporting period.

	Balance at 1 July	Initial held when appointed	Exercised during the year	Net other change	Balance when ceased to be director	Balance at 30 June
2010
Directors
Current Jonathan Stewart(1) Andrew Ross Iain Knott John Robertson Other executives Julie Foster(2) David Lim(4)	281,250 35,000 - 425,000 - -	- - - - - -	- - - - - -	- - - - - -	- - - - - -	281,250 35,000 - 425,000 - -
2009
Directors
Current Jonathan Stewart(1) Andrew Ross Iain Knott Trevor Benson(3) John Robertson Other executives David Lim(4) Alex Neuling(5)	281,250 35,000 - - 425,000 - -	- - - - - - -	- - - - - - -	- - - - - - -	- - - - - - -	281,250 35,000 - - 425,000 - -

(1) The holding above excludes the 24,000,000 shares held by Aurora Oil & Gas Ltd (ASX:AUT). Mr. Stewart is Chairman of Aurora Oil & Gas Ltd which is not a related party under the Corporations Act.

(2) Ms Foster appointed as CFO and Company Secretary on 23 October 2009

(3) Mr. Benson ceased being a Director on 30 June 2009.

(4) Mr. Lim was appointed as CFO and Company Secretary 12 May 2009 and resigned on 23 October 2009.

(5) Mr. Neuling resigned as Company Secretary on 9 April 2009

Notes to the financial statements for the year ended 30 June 2010

26. Related party transactions

Transactions with controlled entities are disclosed in note 22(a). Compensation and equity transactions with Key Management Personnel are disclosed in note 25 and in the section of the Directors’ Report titled “Remuneration Report”.

Details of other transactions with related parties during the current and prior financial year are set out below:

Note Payments for services (i)	Consolidated 2010 2009 $'000 $'000 165,441 163,492

(i) During the year an amount of $165,441 (2009: $163,492) was paid on commercial terms for office accommodation (rental and outgoings), car parking & office equipment to Epicure Administration Pty Ltd, a company of which Mr. Jonathan Stewart, Chairman, is also a director and beneficial shareholder. The outstanding balance payable at year end was $31,142 (2009: $40,873).

27. Deed of cross guarantee

Elixir Petroleum Limited and Elixir Petroleum (Australia) Pty Ltd are parties to a deed of cross guarantee under which each company guarantees the debts of the other. By entering into the deed, the wholly-owned entities have been relieved from the requirement to prepare a financial report and directors’ report under class Order 98/1418 (as amended) issued by the Australian Securities and Investments Commission.

Consolidated income statements and a summary of movements in consolidated retained earnings The above companies represent a “Closed Group” for the purposes of the Class Order, and as there are no other parties to the Deed of Cross Guarantee that are controlled by Elixir Petroleum Limited, they also represent the “Extended Closed Group”.

Set out below is a consolidated income statement and a summary of movements in consolidated retained earnings for the year ended 30 June 2010 of the Closed Group consisting of Elixir Petroleum Limited and Elixir Petroleum (Australia) Pty Ltd.

Notes to the financial statements for the year ended 30 June 2010

27. Deed of cross guarantee (continued)

(i) Income Statement for the year ended 30 June 2010

General and administrative costs Share based payment expenses Other Costs Other income EBITDAX Exploration & evaluation costs written off Provision against loans to Elixir Group companies (outside the Closed Group / E t d d Cl d G ) EBIT Finance income Finance costs Loss before income tax Income tax expense Net loss attributable to members of Closed Group Movement in accumulated losses for the year end 30 June Closed Group accumulated losses at 1 July Net loss of Closed Group for the year to 30 June Closed Group accumulated losses as at 30 June	Closed Group 2010 2009 $'000 $'000 (1,458) (2,628) (140) (605) (2,021) - 383 810 (3,236) (2,423) (10) 18 - (4,120) (3,246) (6,525) 202 312 - (176) (3,044) (6,389) - - (3,044) (6,389) (27,376) (20,987) (3,044) (6,389) (30,420) (27,376)	Closed Group 2010 2009 $'000 $'000 (1,458) (2,628) (140) (605) (2,021) - 383 810 (3,236) (2,423) (10) 18 - (4,120) (3,246) (6,525) 202 312 - (176) (3,044) (6,389) - - (3,044) (6,389) (27,376) (20,987) (3,044) (6,389) (30,420) (27,376)
		(2,423) 18 (4,120)
		(6,525) 312 (176)
		(6,389)
		-
		(6,389)
		(20,987) (6,389)
		(27,376)

Notes to the financial statements for the year ended 30 June 2010

27. Deed of cross guarantee (continued)

(ii) Balance sheet for the period ended 30 June 2010

Assets Current assets Cash and cash equivalents Trade and other receivables Total current assets Non-current assets Receivables Investment in subsidiaries Total non-current assets Total assets Liabilities Current liabilities Trade and other payables Provisions Total liabilities Net assets Equity Contributed equity Reserves Accumulated losses Total parent entity interest in equity	Closed Group 2010 2009 $'000 $'000 4,133 7,337 5 47 4,138 7,384 6,542 6,174 22,775 22,775 29,317 28,949 33,455 36,333 279 291 308 270 587 561 32,868 35,772 60,644 60,644 2,644 2,504 (30,420) (27,376) 32,868 35,772	Closed Group 2010 2009 $'000 $'000 4,133 7,337 5 47 4,138 7,384 6,542 6,174 22,775 22,775 29,317 28,949 33,455 36,333 279 291 308 270 587 561 32,868 35,772 60,644 60,644 2,644 2,504 (30,420) (27,376) 32,868 35,772
		7,384
		6,174 22,775
		28,949
		36,333
		291 270
		561
		35,772
		60,644 2,504 (27,376)
		35,772

28. Remuneration of auditors

During the year the following fees were paid or payable for services provided by the auditors of the Consolidated Entity, its related practices and non-related audit firms:

Mack & Co for: an audit or review of financial reports and other audit work under the_Corporations Act 2001_ taxation services MacIntyre Hudson LLP for: an audit of UK subsidiary accounts Total remuneration for audit services	Consolidated 2010 2009 $’000 $’000 68,000 68,000 3,250 - 51,000 28,854 122,250 96,854	Consolidated 2010 2009 $’000 $’000 68,000 68,000 3,250 - 51,000 28,854 122,250 96,854
		96,854

Notes to the financial statements for the year ended 30 June 2010

29. Financial risk management

The Consolidated Entity’s board of directors (“Board”) performs the duties of a risk management committee in identifying and evaluating sources of financial and other risks. The Board seeks to balance the potential adverse effects of financial risks on the Consolidated Entity’s financial performance and position with the “upside” potential made possible by exposure to these risks. The Board manages the risks facing the Consolidated Entity by regularly monitoring the various risks affecting the business and regularly reviewing the entities operating activities, financial performance and position both prospectively and retrospectively.

These risks include financial risks such as market risks (including currency risk, fair value interest rate risk and commodity price risk), credit risk & liquidity risk. These disclosures are not, nor are they intended to be an exhaustive list of risks to which the Consolidated Entity is exposed.

(a) Market risk

(i) Commodity price risk

As a result of its operations, the Consolidated Entity is exposed to commodity price risk arising due to fluctuations in the prices of natural gas and crude oil. The demand for, and prices of, natural gas and crude oil are dependent on a variety of factors, including:

Supply and demand;
The level of consumer product demand;
Weather conditions;
The price and availability of alternative fuels;
Actions taken by governments and international cartels; and,
Global economic and political developments.

During the year the Board decided that it would not be beneficial for the Consolidated Entity to purchase forward contracts or other derivative financial instruments to hedge its commodity price risk. Factors which the Board considered in arriving at this position included the expense of purchasing such instruments, the low spot price of gas and the inherent difficulties associated with forecasting future production levels. The Board regularly monitors oil and gas prices and market factors that affect these prices. In future periods the Board may decide to enter into hedges to manage the Consolidated Entity’s exposure to commodity price risk if it is beneficial to do so.

(ii) Foreign exchange risk

The Consolidated Entity’s management is based in Australia, its shares are listed on the Australian Securities Exchange and the Consolidated Entity reports its financial performance and position in Australian dollars ($A). The Consolidated Entity maintains a UK office and, as its activities include operations in the south of the USA, it also has significant United States dollar ($US) denominated cash flows. As a result of these factors, the Consolidated Entity is exposed to foreign exchange risk arising from fluctuations in the $A / $US and $A / £GBP exchange rates.

On the 1 July 2009 the functional currency of US subsidiaries changed to USD, primarily because the trend in the source currency of the majority of the costs of the US subsidiaries from AUD to USD, was not considered temporary. As a result of the change in US subsidiaries functional currency, the Group is now only exposed to USD foreign exchange risk arising from fluctuations in the $A / $US exchange rate at parent entity level.

During the year the Board decided that it would not be beneficial for the Consolidated Entity to purchase forward contracts or other derivative financial instruments to hedge its foreign exchange risk. Factors which the board considered in arriving at this position included, the expense of purchasing such instruments, the inherent difficulties associated with forecasting the timing and quantum of $US cash inflows and outflows, the natural hedge provided by $US denominated production and the Consolidated Entity’s $US cash holdings. The Board regularly monitors the Consolidated Entity’s foreign exchange requirements and its foreign exchange risk. The Board may in future periods enter into transactions to hedge its foreign exchange risk if it is beneficial to do so.

Notes to the financial statements for the year ended 30 June 2010

29. Financial risk management (continued)

The Consolidated Entity’s exposure to foreign currency risk at the reporting date was as follows: Cash Trade and other receivables Trade payables	2010 US$'000 £'000 250 231 - 620 - (47) 250 804	2009 US$'000 £'000 1,635 264 318 110 (95) (73) 1,858 301	2009 US$'000 £'000 1,635 264 318 110 (95) (73) 1,858 301
			301

Group sensitivity

Based on the financial instruments held at reporting date, with all other variables assumed to be held constant, the table below sets out the notional effect on consolidated loss after tax for the year and equity at reporting date under varying hypothetical fluctuations in prevailing exchange rates:

	Consolidated
	2010	2009
	$'000	$'000
Hypothetical 20%(1)strengthening of AU$ relative to US$ and £
Increase / (decrease) in loss after tax	284	266
Increase / (decrease) in equity	(284)	(266)
Hypothetical 20%(1)weakening of AU$ relative to US$ and £
Increase / (decrease) in loss after tax	(426)	(325)
Increase / (decrease) in equity	426	325

(1) Management has determined that the above hypothetical outcomes are the most appropriate estimation of share price movements given the current market and economic conditions (2009: 10%).

(iii) Interest rate risk

As at, and during the year ended on balance date, the Consolidated Entity had no significant interest-bearing assets or liabilities other than liquid funds on deposit and convertible notes (fixed rate). As such, the Consolidated Entity’s income and operating cash flows (other than interest income from funds on deposit) are substantially independent of changes in market interest rates. The Consolidated Entity’s exposure to interest rate risk and the effective weighted average interest rate for each class of financial assets and liabilities is set out below.

Financial Assets Cash assets Floating rate* Weighted average effective interest rate 4.31% (2009: 2.8%).	Consolidated 2010 2009 $'000 $'000 5,084 8,081	Consolidated 2010 2009 $'000 $'000 5,084 8,081
		8,081

Notes to the financial statements for the year ended 30 June 2010

29. Financial risk management (continued)

Group sensitivity

	Consolidated
	2010	2009
	$'000	$'000
Hypothetical 90(1)basis point increase
Increase / (decrease) in loss after tax	(46)	(65)
Increase / (decrease) in equity	46	65
Hypothetical 90(1)basis point decrease
Increase / (decrease) in loss after tax	46	65
Increase / (decrease) in equity	(46)	(65)

(1) A hypothetical change of 90 basis points was used to calculate the Group’s sensitivity to future interest rate movements as this figure approximates the movement in bond yields published by the Reserve Bank of Australia for bonds with a 12 month maturity (2009: 0.80%).

(b) Credit risk

The Consolidated Entity seeks to trade only with recognised, trustworthy third parties and it is the Consolidated Entity’s policy to perform credit verification procedures in relation to any customers wishing to trade on credit terms with the Consolidated Entity.

Notwithstanding the above, the Consolidated Entity is exposed to level of credit risk arising from the fact that a large proportion of its receivables and non-current oil & gas assets relate to its interests in projects operated by private companies.

The Board are of the opinion that the credit risk arising as a result of this concentration of the Consolidated Entity’s assets is more than offset by the potential benefits to be gained through continuing to build on the Consolidated Entity’s relationship with the operators of its existing projects.

The maximum exposure to credit risk at the reporting date is the carrying amount of the assets as summarised below, none of which are impaired. The Group has a number of recourse options available in the event of counterparty default, including but not limited to de facto security over jointly held assets.

Trade and other receivables Total	Consolidated 2010 2009 $'000 $'000 1,686 667 1,686 667	Consolidated 2010 2009 $'000 $'000 1,686 667 1,686 667
		667

Credit risk also arises from cash and cash equivalents and deposits with financial institutions. For banks and financial institutions, only independently rated parties with minimum rating of ‘A’ are accepted.

Cash at bank and short-term bank deposits AA Rated A Rated	Consolidated 2010 2009 $'000 $'000 4,697 7,336 387 745 5,084 8,081	Consolidated 2010 2009 $'000 $'000 4,697 7,336 387 745 5,084 8,081
		8,081

Notes to the financial statements for the year ended 30 June 2010

29. Financial risk management (continued)

(c) Liquidity risk

Prudent liquidity management involves the maintenance of sufficient cash, marketable securities, committed credit facilities and access to capital markets. It is the policy of the Board to ensure that the Consolidated Entity is able to meet its financial obligations and maintain the flexibility to pursue attractive investment opportunities through keeping committed credit lines available where possible, and ensuring that the Consolidated Group has sufficient working capital and preserving the 15% share issue limit available to the Company under the ASX Listing Rules.

Maturities of financial liabilities

As at reporting date the Consolidated Entity had total financial liabilities of $488,454 (2009: $557,289), comprised of non interest-bearing trade creditors and accruals with a maturity of less than 6 months.

(d) Net fair value

The carrying amount of financial assets and liabilities recorded in the financial statements approximate their fair value as at 30 June 2010.

30. Subsequent events

There are no significant events that have occurred since balance date requiring separate disclosure.

31. Commitments and contingencies

The Consolidated Entity has no contingent assets or liabilities at balance date and has no firm contractual commitments for expenditure not reflected in the financial statements other than:

Capital commitments Within one year Total Non-cancellable operating lease commitments Within one year More than one year but less than five years Total	Consolidated 2010 2009 $'000 $'000 356 - 356 - 77 77 154 232 231 309	Consolidated 2010 2009 $'000 $'000 356 - 356 - 77 77 154 232 231 309
		-
		77 232
		309

During the previous financial year a rental lease to which Elixir Petroleum (UK) Ltd ( discontinued operation ) was party, was assigned to Elixir Petroleum (Technical Services) Ltd. At balance date the remaining lease term was 3 years (2009: 4 years).

32. Dividends

No dividends have been proposed or paid during the year (2009: Nil).

Notes to the financial statements for the year ended 30 June 2010

33. Discontinued operations

During the 2009 financial year Elixir Petroleum (UK) Limited together with its interest in exploration licence, Block SL-4, located in Sierra Leone was sold. The decision to divest this licence was made on the basis that the continued involvement with the license was not in the best interest of the Consolidated Entity. Sale of Elixir Petroleum (UK) Limited, which held the interest in Block SL-4, to Prontinal Limited was completed on 30 April 2009. Prior to the sale of Elixir Petroleum (UK) Limited to Prontinal Ltd, interests held in exploration licences other than Block SL-4, along with various assets and liabilities held by the disposal company were acquired by other members of the Consolidated Entity.

The financial performance and cash flows from the discontinued operation, Elixir Petroleum (UK) Limited, are set out below.

(i) Financial performance of discontinued operation

The financial performance information presented is for the 10 months to 30 April 2009. This is the period when the Consolidated Entity controlled the discontinued operation.

Revenue from discontinued operation Interest earned Gain on sale of assets Unrealised foreign exchange gains Total Revenue Expenses Other expenses Exploration & evaluation costs written off Loss on disposal of subsidiary Loss before income tax Income tax expense Loss from discontinued operation Earnings / (loss) per share Basic loss per share (cents per share) Diluted loss per share (cents per share)	Consolidated 2010 2009 $'000 $'000 - 4 - 850 - 112 - 966 - (930) - (317) - (934) - (2,181) - (1,215) - - - (1,215) - (0.64) - (0.64)	Consolidated 2010 2009 $'000 $'000 - 4 - 850 - 112 - 966 - (930) - (317) - (934) - (2,181) - (1,215) - - - (1,215) - (0.64) - (0.64)
		966 (930) (317) (934)
		(2,181)
		(1,215)
		-
		(1,215)
		(0.64) (0.64)

Notes to the financial statements for the year ended 30 June 2010

33. Discontinued operations (continued)

(ii) Cash flows from discontinued operation

Cash flows from operating activities Payments to suppliers Net cash flows from operations Cash flows from investing activities Payment for property, plant and equipment Payment for exploration, evaluation and development Interest received Net cash outflows from investing activities Cash flows from financing activities Loans - related entities Finance costs Net cash inflows from financing activities Effect of exchange rates on cash Net decrease in cash and cash equivalents Cash and cash equivalent at beginning of period Cash and cash equivalent at end of period	Consolidated 2010 2009 $'000 $'000 - (1,282) - (1,282) - (88) - (647) - 4 - (731) - 608 - (1) - 607 - 415 - (991) - 1,004 - 13	Consolidated 2010 2009 $'000 $'000 - (1,282) - (1,282) - (88) - (647) - 4 - (731) - 608 - (1) - 607 - 415 - (991) - 1,004 - 13
		(1,282) (88) (647) 4
		(731) 608 (1)
		607 415
		(991) 1,004
		13

AI assistant

ELIXIR ENERGY LIMITED — Annual Report 2010

64893_rns_2010-09-23_171999f9-4fed-4775-a6d1-c0b5f76a11c8.pdf

Directors

Share Registry

Company Secretary

Bankers

Registered and Principal Administration Office

UK Office

Stock Exchange Listing

Website and Email

Auditors - Australia

Auditors - UK

Directors

Principal activities

Summary review of operations

Results

Gulf of Mexico

North Sea

France

Significant changes in state of affairs

Financial Position

Directors

Mr. Jonathan Stewart – Executive Chairman

Interests in shares and options over shares in Group companies:

Mr Andrew Ross – Managing Director

Mr Iain Knott – Executive Director

Dr John Robertson – Non-Executive Director

Company Secretary

Ms Julie Foster

Mr David Lim ( ceased 23 October 2009 )

Qualifications – B.Bus, CPA

Meetings of Directors

Share options

Remuneration Report (Audited)

Details of key management personnel (including the five highest paid executives of the Company and the Group)

(i) Directors

Remuneration committee

Remuneration philosophy

Remuneration structure

Non-executive directors

Retirement benefits and allowances

Executives

Base pay

Short term incentives

Long term Incentive - Share-based compensation

Group performance

Directors’ Report

Service agreements

Directors’ Report

Directors’ Report

Compensation options: granted and vested during the year

Options granted as part of remuneration

Dividends

Subsequent events

Likely developments

Environmental regulation

Indemnification and insurance of Officers and Auditors

Proceedings on behalf of company

Non-audit services

Auditor’s Independence Declaration

Rounding of amounts to the nearest thousand dollars

Directors’ Report

ANDREW ROSS

Independent Audit Report

Independent Audit Report

Consolidated statement of comprehensive income for the year ended 30 June 2010

Consolidated statement of change in equity for the year ended 30 June 2010

Consolidated statement of cash flows for the year ended 30 June 2010

1. Summary of significant accounting policies

(a) Basis of preparation

Going concern

Compliance with International Financial Reporting Standards

Historical cost convention

Critical accounting estimates and significant judgements

Financial statement preparation

(b) Principles of consolidation

(i) Subsidiaries

1. Summary of significant accounting policies (continued)

(ii) Joint ventures

ELIXIR ENERGY LIMITED Annual Report 2010