MEC RESOURCES LIMITED — Interim / Quarterly Report 2008

Feb 12, 2008

MEC RESOURCES LTD ACN 113 900 020

Appendix 4D Half Year Financial Report For the half year ended 31 December 2007

MEC Resources Ltd

Contents

Page Number

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|Directors’ Report.................................................................................................................................... 1|
|Auditor Independence Statement ..................................................................................................... 3|
|Directors’ Declaration........................................................................................................................... 4|
|Consolidated Income Statement ....................................................................................................... 5|
|Consolidated Balance Sheet............................................................................................................... 6|
|Consolidated Statement of Changes in Equity................................................................................. 7|
|Consolidated Cash Flow Statement................................................................................................... 8|
|Notes to the Financial Statements ...................................................................................................... 9|
|Independent Audit Report................................................................................................................. 15|
|Appendix 4D......................................................................................................................................... 17|

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Company Information

Directors

H Goh – Non-Executive Chairman SK Yap – Non-Executive Director D L Breeze – Executive Director and Company Secretary K O Yap – Non-Executive Director C T Lim – Non-Executive Director

Auditor

Rix Levy Fowler Level 1, 12 Kings Park Road WEST PERTH WA 6005

Share Registry

Registered Office 14 View Street NORTH PERTH WA 6006

Principal Business Address

14 View Street NORTH PERTH WA 6006 Telephone: (08) 9328 8400 Facsimile: (08) 9328 8733 Website: www.mecresources.com.au E-mail: admin@mecresources.com.au

Security Transfer Registrars Pty Ltd 770 Canning Highway APPLECROSS WA 6153

Australian Stock Exchange Listing Australian Stock Exchange Limited (Home Exchange: Perth, Western Australia) ASX Code: MMR

Australian Business Number

44 113 900 020

Directors’ Report (continued)

MEC Resources Ltd

The directors of MEC Resources Ltd submit herewith the financial report for the half year ended 31 December 2007. In order to comply with the provisions of the Corporations Act 2001, the directors report as follows:

Directors

The names of the directors of the company during or since the end of the period are: H Goh

S K Yap

D L Breeze

K O Yap C T Lim

Review of Operations

• Operating loss for the entity after tax for the half-year ended 31 December 2007 was $353,550 (2006: $278,321).

• MEC Limited has signed a Memorandum of Understanding with China National Logging Corporation (CNLC). The MOU relates to the potential formation of a Joint Venture Company (JVC) to :

• provide oil and gas exploration and production services to projects identified by MEC Resources Ltd and its investee company Advent Energy Ltd;

• and market these services to other companies operating in Australia

• MEC Investee Advent Energy Ltd has received confirmation from the Northern Territory Government of the renewal of retention licence RL1 in the Northern Territory for a period of five years from 4 November 2007.

• Pep11 – A literature review has resulted in a number of key studies being identified which were produced by prior tenement holder Santos and Ampolex. MEC Ltd has released this to the Australian Stock Exchange. Bounty Oil and Gas has applied for an extension of this permit while negotiations to source a rig continue.

1

Directors’ Report (continued) MEC Resources Ltd

Subsequent Events

Other than referred in note 5 of these financial accounts there have not been any matters or circumstance that have arisen since the end of the period, that have significantly affected, or may significantly affect, the operations of the consolidated entity, the results of those operations, or the state of affairs of the consolidated entity in future financial years.

Dividends

The Directors recommend that no dividend be paid in respect of the current period and no dividends have been paid or declared since the commencement of the period.

Auditor’s Independence

The directors received a declaration of independence from the auditor. This is included in the financial report on page 3.

Signed in accordance with a resolution of the directors made pursuant to s.306 (3) of the Corporations Act 2001.

On behalf of the Directors

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D L Breeze Executive Director PERTH, 12 February 2008

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To The Board of Directors

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

This declaration is made in connection with our review of the financial report of MEC Resources Limited and controlled entities for the half-year ended 31 December 2007 and in accordance with the provisions of the Corporations Act 2001.

We declare that, to the best of our knowledge and belief, there have been:

• No contraventions of the auditor independence requirements of the Corporations Act 2001 in relation to the review;

• No contraventions of the Code of Professional Conduct of the Institute of Chartered Accountants in Australia in relation to the review.

Yours faithfully

RIX LEVY FOWLER Audit & Corporate Pty Ltd

RANKO MATIC Director

DATED at PERTH this 12[th] day of February 2008

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Directors’ Declaration MEC Resources Ltd

The directors of the company declare that:

1. The financial statements and notes, as set out on pages 5 to 14:

2. a) Comply with Accounting Standard AASB 134 Interim Financial Reporting and the Corporations Regulations; and

3. b) give a true and fair view of the economic entity’s financial position as at 31 December 2007 and of its performance for the half-year ended on that date.

4. In the directors’ opinion there are reasonable grounds to believe that the company will be able to pay its debts as and when they become due and payable.

This declaration is made in accordance with a resolution of the Board of Directors.

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D L Breeze Executive Director PERTH, 12 February 2008

4

Consolidated Balance Sheet as at 31 December 2007 MEC Resources Ltd and its controlled entities

Revenue from ordinary activities Administration expenses Consulting and legal expenses Management services expense Employee Benefits expense Research and Development Other expenses Prospectus expense Traveling expense Loss before income tax Income tax expense Loss from continuing operations Loss attributable to members of the parent entity Earnings Per Share - Basic (cents per share)	31 December 2007 $ 342,854 (99,106) (169,523) (108,000) (130,894) (25,000) (123,367) - (40,514)	31 December 2006 $
		13,042 (19,168) (111,105) (108,000) - - (9,528) (30,738) (12,824)
	(353,550) -	(278,321) -
	(353,550)	(278,321)
	(353,550)	(278,321)
	(0.525)	(0.533)

The accompanying notes form part of these financial statements.

5

Consolidated Balance Sheet as at 31 December 2007 MEC Resources Ltd and its controlled entities

Current Assets Cash and cash equivalents Trade and other receivables Other current assets Total Current Assets Non-Current Assets Financial assets Capitalised Exploration Costs Property, Plant and Equipment Other non-current assets Total Non-Current Assets Total Assets Current Liabilities Trade and other payables Short-term provisions Total Current Liabilities Total Liabilities Net Assets Equity Issued Capital Option Reserve Accumulated losses Total Equity

31 December 2007 $ 30 June 2007 $

2,816,926 3,027,592 62,134 192,005 35,086 - 2,914,146 3,219,597 1,673,120 148,360 721,670 686,270 13,027 1,740 167,629 - 2,575,446 836,370 5,489,592 4,055,967 267,298 137,608 5,762 - 273,060 137,608 273,060 137,608 5,216,532 3,918,359 6,416,279 4,349,560 26,001 440,997 (1,225,748) (872,198) 5,216,532 3,918,359

The accompanying notes form part of these financial statements.

6

Consolidated Statement of Changes in Equity as at 31 December 2007 MEC Resources Ltd

Balance at 30 June 2006 Recoupment of transaction costs Options issued during the financial year Loss attributable to members of the consolidated entity Balance at the half year ended 31 December 2006 Balance at 30 June 2007 Shares issued during the financial year Options exercise during the financial year Options expired at 31 December 2007 Transaction costs Loss attributable to members of the consolidated entity Balance at the half year ended 31 December 2007	Ordinary Share Capital $ Accumulated losses $ Options $ Total $
	4,332,709 (106,981) - 4,225,728 36,885 - - 36,885 - - - - - (278,321) (278,321)
	4,369,594 (385,302) - 3,984,292
	4,349,560 (872,198) 440,997 3,918,359 1,517,347 - 1,517,346 140,028 - (6,668) 133,360 408,328 (408,328) - 1,016 - 1,016 - (353,550) (353,550)
	6,416,279 (1,225,748) 26,001 5,216,532

The accompanying notes form part of these financial statements.

7

Consolidated Cash Flow Statement for the period ended 31 December 2007 MEC Resources Ltd and its controlled entities

Cash Flows From Operating Activities Receipts from customers Payments to suppliers and employees Interest received Net cash used in operating activities Cash Flows From Investing Activities Payment for Property, Plant and Equipment Amounts loaned to other entities Payment for investments Net cash used in investing activities Cash Flows From Financing Activities Proceeds from share issue Net cash provided by financing activities Net increase (decrease) in Cash Held Cash At the Beginning Of The Period Cash At The End Of The Period	31 December 2007 $ 31 December 2006 $ 70,000 - (511,421) (368,102) 87,060 13,042
	(354,361) (355,060)
	(6,730) - (126,931) (24,026) (1,374,364) (656,345)
	(1,508,025) (680,371)
	1,651,720 36,885
	1,651,720 36,885
	(210,666) (998,546) 3,027,592 4,213,588 2,816,926 3,215,042

The accompanying notes form part of these financial statements

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Notes to the Financial Statements for the period ended 31 December 2007 MEC Resources Ltd and its controlled entities

1. Introduction

The half-year consolidated financial statements are a general purpose financial report prepared in accordance with the requirements of the Corporations Act 2001, Australian Accounting Standard AASB 134: Interim Financial Reporting, Australian Accounting Interpretations and other authoritative pronouncements of the Australian Accounting Standards Board.

It is recommended that this financial report be read in conjunction with the annual financial report for the year ended 30 June 2007 and any public announcements made by MEC Resources Limited and its controlled entities during the half-year in accordance with continuous disclosure requirements arising under the Corporations Act 2001.

The accounting policies have been consistently applied by the entities in the consolidated group and are consistent with those in the June 2007 financial report.

The half-year report does not include full disclosures of the type normally included in an annual financial report.

Reporting Basis and Conventions

The half-year report has been prepared on an accruals basis and is based on historical costs modified by the revaluation of selected non-current assets, financial assets and financial liabilities for which the fair value basis of accounting has been applied.

2. Significant Accounting Policies

(a) Basis of Consolidation

Controlled Entities

Subsidiaries are entities controlled by the Company. Control exists when the Company has the power, directly or indirectly, to govern the financial and operating policies of an entity so as to obtain benefits from its activities. In assessing control, potential voting rights that presently are exercisable or convertible are taken into account. The financial statements of subsidiaries are included in the condensed consolidated interim financial report from the date that control commences until the date that control ceases.

The financial statements of controlled entities are included in the consolidated financial statements from the date control commenced until the date control ceases.

Transactions eliminated on consolidation

Unrealised gains or losses and inter entity balances resulting from transactions with or between controlled entities are eliminated in full on consolidation.

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Notes to the Financial Statements (continued) for the period ended 31 December 2007 MEC Resources Ltd and its controlled entities

( b) Revenue

Rendering of services

When the outcome of a transaction involving the rendering of services can be estimated reliably, revenue associated with the transaction is recognised by reference to the percentage of the services performed.

Interest Revenue

Interest revenue is recognised as interest accrues (Using the effective interest method, which is the rate that exactly discounts estimated future cash receipts through the expected life of the financial instrument).

(c) Plant and Equipment

Plant and equipment is stated at cost less accumulated depreciation and any impairment value. An item of other plant and equipment is derecognised upon disposal or when no future economic benefits are expected to arise from the continued use of the asset. Any gain or loss arising on derecognition of the asset (calculated as the difference between the net disposal proceeds and the carrying amount of the item) is included in the income statement in the year the item is recognised.

(d) Depreciation and Amortisation

Plant and equipment are depreciated to their residual values at rates based on their expected useful lives. The assets are depreciated using the straight line approach.

(e) Impairment

The carrying amounts of the consolidated entity’s assets, other than inventories (see accounting policy l), are reviewed at each reporting date to determine whether there is any indication of impairment. If any such indication exists, the asset’s recoverable amount is estimated.

For goodwill the recoverable amount is estimated annually.

An impairment loss is recognised whenever the carrying amount of an asset or its cash generating unit exceeds its recoverable amount. Impairment losses are recognised in the income statement unless the asset has previously been re-valued, in which case the impairment loss is recognised as a reversal to the extent of that previous revaluation with any excess recognised through the income statement.

Impairment losses recognised in respect of cash-generating units are allocated first to reduce the carrying amount of any goodwill allocated to the cash-generating unit (group of units) and then, to reduce the carrying amount of the other assets in the unit (group of units) on a pro rata basis.

Calculation of recoverable amount

The recoverable amount of the consolidated entity’s receivables carried at amortised cost is calculated as the present value of estimated future cash flows, discounted at the original

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Notes to the Financial Statements (continued) for the period ended 31 December 2007 MEC Resources Ltd and its controlled entities

effective interest rate (i.e., the effective interest rate computed at initial recognition of these financial assets). Receivables with a short duration are not discounted.

The recoverable amount of other assets is the greater of their fair value less costs to sell and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. For an asset that does not generate largely independent cash inflows, the recoverable amount is determined for the cash-generating unit to which the asset belongs.

Reversals of impairment

An impairment loss in respect of a receivable carried at amortised cost is reversed if the subsequent increase in recoverable amount can be related objectively to an event occurring after the impairment loss was recognised.

An impairment loss in respect of goodwill is not reversed.

In respect of other assets, an impairment loss is reversed if there has been a change in the estimates used to determine the recoverable amount.

An impairment loss is reversed only to the extent that the asset’s carrying amount does not exceed the carrying amount that would have been determined, net of depreciation or amortisation, if no impairment loss had been recognised.

(f) Earning per share

Basic earnings per share (EPS) is calculated by dividing the net profit for the financial period, after excluding any costs of servicing equity (other than ordinary shares) by the weighted average number of ordinary shares of the Company, adjusted for any bonus issue.

Diluted EPS is calculated by dividing the basic EPS earnings, adjusted by the after tax effect of financing costs associated with the dilutive potential ordinary shares and the effect on revenues and expenses of conversion to ordinary shares associated with dilutive potential ordinary shares, by the weighted average number of ordinary shares and dilutive potential ordinary shares of the Company adjusted or any bonus issue.

(g) Cash and cash equivalents

Cash or short term deposits in the balance sheet comprise cash at bank and short term deposits with an original maturity of three months or less.

(h) Trade and other receivables

Trade debtors are initially recorded at the amount of contracted sales proceeds. Receivables from related parties are recognised and carried at the nominal amount due.

Trade accounts and notes receivable and other receivables represent the principal amounts due at balance date plus accrued interest less, where applicable, any unearned income and provision for doubtful debts.

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Notes to the Financial Statements (continued) for the period ended 31 December 2007 MEC Resources Ltd and its controlled entities

(i) Investments

Investment Securities

Shares in listed investments are measured at fair values determined by reference to quoted market securities.

Shares in unlisted investments are measured at fair value estimated on the basis of underlying net assets and after taking into account their profitability.

Loans and advances

Loans and advances held for trading are measured at fair value estimated on the basis of recoverable amount.

(j) Investments in Subsidiaries

An associate is an entity over which the parent entity has significant influence. In the consolidated financial statements investments in associates are accounted for using the equity method (refer xi below) except when the investment is classified as held for sale in which case it is measured at the lower of its carrying amount and fair value less costs to sell.

In the financial statements of MEC Resources Ltd, investments in associates that are not classified as held for sale or included in a disposal group classified as held for sale are accounted for at cost.

MEC has complied with all of the conditions contained in paragraph 13(c) of AASB 128 "Investments in Associates" and as a consequence has elected not to use equity accounting for investments in associates.

(k) Employee Provisions

Provision is made for employee benefits accumulated as a result of employees rendering services up to the end of the reporting period. These benefits include wages and salaries, annual leave, and long service leave. Liabilities expected to be settled within twelve months of the reporting date are measured at the amount expected to be paid. Liabilities expected to be settled after twelve months are measured at the present value of the estimated future cash outflow to be made to the employee.

In determining the present value of future cash outflows, the interest rates attached to government guaranteed securities which have terms to maturity approximately the terms of the related liability are used.

(l) Financial Liabilities and trade payables

Trade and other Payables are stated at cost.

Dividends payable are recognised when payment is due by the Company.

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Notes to the Financial Statements (continued) for the period ended 31 December 2007 MEC Resources Ltd and its controlled entities

(m) Income Tax

Income tax on the income statement for the periods presented comprises current and deferred tax. Income tax is recognised in the income statement except to the extent that it relates to items recognised directly in equity, in which case it is recognised in equity. Current tax is the expected tax payable on the taxable income for the year, using tax rates enacted or substantially enacted at the balance sheet date, and any adjustment to tax payable in respect of previous years.

Deferred tax is provided using the balance sheet liability method, providing for temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes.

The following temporary differences are not provided for: goodwill, the initial recognition of assets or liabilities that affect neither accounting not taxable profit, and differences relating to investments in subsidiaries to the extent that they will probably reverse in the foreseeable future. The amount of deferred tax provided is based on the expected manner of realisation or settlement of the carrying amount of assets and liabilities, using tax rates enacted or substantively enacted at the balance sheet date.

A deferred tax asset is recognised only to the extent that is probable that the related tax benefit will be realised.

Additional income taxes that arise from the distribution of dividends are recognised at the same time as the liability to pay the related dividend.

(n) Goods and Services Tax

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

• Where the GST incurred on a purchase of goods and services is not recoverable from the taxation authority, in which case the GST is recognised as part of the cost of the acquisition of the asset or as part of the expense item as applicable; and

• Receivables and payables are stated with the amount of GST included.

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

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

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

(o) Issued Capital

Ordinary share capital is recorded at value of consideration received. The costs of issuing shares are charged against the share capital. Ordinary share capital bears no special terms or conditions affecting income or capital entitlements of the shareholders.

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Notes to the Financial Statements (continued) for the period ended 31 December 2007 MEC Resources Ltd and its controlled entities

(p) Research and Development Expenditure

Research expenditure is recognised as an expense in the period in which incurred.

Intangible assets arising from development activities are recognised when resources are available to complete the assets and future economic benefits from use or sale of the assets is probable.

(q) Contingent Liabilities

A contingent loss is recognised as an expense and a liability if it is probable that future events will confirm that, after taking into account any related probable recovery, an asset has been impaired or a liability incurred and, a reasonable estimate of the amount of the resulting loss can be made.

3. Segment Information

MEC Resources Ltd operates predominantly in one industry, namely investment in mining and resources. These activities are only within Australia at present.

4. Contingent Liabilities

There has been no change in contingent liabilities since the last annual reporting date.

5. Events after the Balance Sheet Date

A review of the market value of MEC Resources’ investments in other listed entities has been performed at reporting date. An unrealised loss of $241,000 on the carrying value of these investments has been noted. The movement in these assets is wholly attributable to the recent fluctuations of the share market. The carrying value of these assets will be reviewed and amended if required at 30 June 2008.

MEC Resources investee, Advent Energy Ltd, has received notification terminating its agreement with Central Petroleum Ltd.

14

Independent Auditor’s Review Report

To the Members of MEC Resources Limited

We have reviewed the accompanying half-year financial report of MEC Resources Limited (the company) and controlled entities (the consolidated entity) which comprises the balance sheet as at 31 December 2007, and the income statement, statement of changes in equity and cash flow statement for the half-year ended on that date, a statement of accounting policies, other selected explanatory notes and the directors’ declaration.

Directors Responsibility for the Half-Year Financial Report

The directors of the consolidated entity are responsible for the preparation and fair presentation of the halfyear financial report in accordance with Australian Accounting Standards (including the Australian Accounting Interpretations) and the Corporations Act 2001. This responsibility includes establishing and maintaining internal control relevant to the preparation and fair presentation of the half-year financial report that is free from material misstatement, whether due to fraud or error; selecting and applying appropriate accounting policies; and making accounting estimates that are reasonable in the circumstances.

Auditor’s Responsibility

Our responsibility is to express a conclusion on the half-year financial report based on our review. We conducted our review in accordance with Auditing Standard on Review Engagements ASRE 2410 Review of an Interim Financial Report Performed by the Independent Auditor of the Entity, in order to state whether, on the basis of the procedures described, we have become aware of any matter that makes us believe that the financial report is not in accordance with the Corporations Act 2001 including: giving a true and fair view of the consolidated entity’s financial position as at 31 December 2007 and its performance for the half-year ended on that date; and complying with Accounting Standard AASB 134: Interim Financial Reporting and the Corporations Regulations 2001. As the auditor of MEC Resources Limited and Controlled Entities, ASRE 2410 requires that we comply with the ethical requirements relevant to the audit of the annual financial report.

A review of a half-year financial report consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with Australian Auditing Standards and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

Independence

In conducting our review, we have complied with the independence requirements of the Corporations Act 2001. We confirm that the independence declaration required by the Corporations Act 2001, provided to the directors of MEC Resources Limited and Controlled Entities on 12[th] February 2008, would be in the same terms if provided to the directors as at the date of this auditor’s review report.

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Independent Auditor’s Review Report To the Members of MEC Resources Limited (Continued)

Conclusion

Based on our review, which is not an audit, we have not become aware of any matter that makes us believe that the half-year financial report of MEC Resources Limited and Controlled Entities is not in accordance with the Corporations Act 2001 including:

• a. Giving a true and fair view of the company’s financial position as at 31 December 2007 and of its performance for the halfyear ended on that date; and

• b. Complying with Accounting Standard AASB 134 Interim Financial Reporting and Corporations Regulations 2001.

RIX LEVY FOWLER Audit & Corporate Pty Ltd

RANKO MATIC Director

DATED at PERTH this 12[th] day of February 2008

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Appendix 4D Half year report Period ending 31 December 2007

Appendix 4D Half year report

MEC Resources Limited ACN 113 900 020 Half Year ended 31 December 2007

Results for announcement to the market

Results for announcement to the market
	$A'000
Revenues from ordinary activities (Loss) from ordinary activities after tax attributable to members Net (loss) for the period attributable to members	Up 2630% to 342 Up 27% to (353) Up 27% to (353)
Dividends (distributions)	Amount per security	Franked amount per security
Final dividend Interim dividend	Nil	Nil
Previous corresponding period	N/A	N/A

Other notes to the condensed financial statements

Ratios	Current period	Previous corresponding Period
Loss before tax / revenue Consolidated (loss) from ordinary activities before tax as a percentage of revenue	(103)%	(2,134)%
Loss after tax / equity interests Consolidated net (loss) from ordinary activities after tax attributable to members as a percentage of equity (similarly attributable) at the end ofthe period	(5.51)%	(6.37)%
NTA Backing	Current period	Previous corresponding Period
Net tangible asset backing per ordinary security	3.9cps	7.6cps

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