MEC RESOURCES LIMITED — Interim / Quarterly Report 2017

Feb 27, 2017

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Appendix 4D -Half year report Results for announcement to the market

Appendix 4D -Half year report Results for announcement to the market
Name of Entity	MEC Resources Limited
ABN	44 113 900 020
Half Year Ended	31 December 2016
Previous Corresponding Reporting Period	31 December 2015
$A'000
Revenues from ordinary activities (Loss) from ordinary activities after tax attributable to members Net (loss) for the period attributable to members		down 12% to 11 down 22% to (409) down 22% to (409)
Dividends (distributions)		Amount per security	Franked amount per security
Final dividend Interim dividend		Nil	Nil
Previous corresponding period		N/A	N/A

Please refer to attached accounts for commentary on the results

Other notes to the condensed financial statements

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	(3673.37)%	(4178.88)%
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 of theperiod	(1.57)%	(2.07)%
NTA Backing	Current period	Previous corresponding Period
Net tangible asset backing per ordinary security	15.6cps	15.8 cps

Contents

MEC Resources Ltd and its controlled entities

The operating loss for the consolidated entity after tax for the half- year ended 31 December 2016 was $474,963 (2015: $674,943).

The net assets of the consolidated entity have decreased by $473,888 to $28,372,932 at 31 December 2016.

Developments during the year included:

MEC Resources Ltd

• On 24 November 2016 MEC Resources announced that it had terminated the consultancy agreement with immediate effect between the Company, Trandcorp Pty Ltd (Trandcorp)and Mr David Breeze (Trandcorp’s Nominee) under which Mr David Breeze was appointed as Managing Director of the Company. In the interim Mr Goh Hock has taken over Mr Breeze’s role with the assistance of Mr Tobias Foster who has been a long term employee of the Company.

• On 24 November 2016 the Company appointed Mr Heng Yu as a Director of the Company. Mr Heng Yu is a qualified Geologist with over 30 years experience working for a number of multi national organisations including Schlumberger, Baker Hughes, PetroChina and MEC Resources in Senior roles.

• On 20 December 2016 MEC Resources announced that it had received notices under sections 203D(2) and 249D of the Corporations Act 2001 (Cth) on behalf of Grandbridge Limited, Trandcorp Pty Ltd, Trandcorp Pty Ltd and Mr David Breeze, who collectively hold over 5% of the votes that may be cast at a general meeting of the Company. The notices sought to convene a further meeting to remove all of the existing Directors of the Company and appoint three new Directors recommended by the convening parties. On 3 January 2016 the Company advised that the resolutions to remove the existing Directors were invalid and they would not be put forward at the up and coming meeting to be held on 16 February 2016. The meeting was held on the 16[th] February with the majority of the shareholders voting against the appointment of the three new proposed Directors. A further meeting is to be held on 9 March 2017 to consider the removal of the existing Directors.

Advent Energy Ltd

• On 28 January 2016 Advent Energy announced that the National Offshore Petroleum Titles Administrator (NOPTA) had approved a suspension of the PEP11 Year 2 work program of a 200 km 2D seismic survey and geotechnical studies until 12th August 2016.

MEC Resources Ltd and its controlled entities

Page Number

Contents

Directors’ Report .................................................................................................................................... 1 Auditor Independence Declaration ................................................................................................... 4 Directors’ Declaration ........................................................................................................................... 5 Condensed Consolidated Statement of Profit or Loss and Other Comprehensive Income ...... 6 Condensed Consolidated Statement of Financial Position ............................................................ 7 Condensed Consolidated Statement of Changes in Equity........................................................... 8 Condensed Consolidated Statement of Cash Flows ....................................................................... 9 Notes to the Financial Statements .................................................................................................... 10 Independent Auditor’s Review Report ............................................................................................. 17

Company Information

Directors

H Goh – Non-Executive Chairman D L Breeze – Executive Director (terminated 24 November 2016) K O Yap – Non-Executive Director D Ambrosini – Executive Director H Yu – Non-Executive Director (appointed 24 November 2016)

Company Secretary

Deborah Ambrosini

Auditor

HLB Mann Judd Level 4, 130 Stirling Street PERTH WA 6000

Share Registry

Advanced Share Registry Ltd 110 Stirling Highway NEDLANDS WA 6009

Registered Office

Level 1, 100 Havelock Street WEST PERTH WA 6005

Principal Business Address

Level 1, 100 Havelock Street WEST PERTH WA 6005 Telephone: (08) 9245 6187 Facsimile: (08) 6160 5901 Website: www.mecresources.com.au E-mail: info@mecresources.com.au

Australian Securities Exchange Listing

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

Australian Business Number

44 113 900 020

MEC Resources Ltd and its controlled entities

Directors’ Report (continued)

The directors of MEC Resources Ltd (“ MEC Resources ”) submit herewith the financial report for the half year ended 31 December 2016. 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

D L Breeze (terminated 24 November 2016)

K O Yap D Ambrosini H Yu (appointed 24 November 2016)

Review of Operations

Operating loss for the entity after tax for the half-year ended 31 December 2016 was $474,963 (2015: $674,943).

MEC Resources Ltd

• On 24 November 2016 MEC Resources announced that it had terminated the consultancy agreement with immediate effect between the Company, Trandcorp Pty Ltd (Trandcorp) and Mr David Breeze (Trandcorp’s Nominee) under which Mr David Breeze was appointed as Managing Director of the Company. In the interim Mr Goh Hock has taken over Mr Breeze’s role with the assistance of Mr Tobias Foster who has been a long term employee of the Company.

• On 24 November 2016 the Company appointed Mr Heng Yu as a Director of the Company. Mr Heng Yu is a qualified Geologist with over 30 years experience working for a number of multi national organisations including Schlumberger, Baker Hughes, PetroChina and MEC Resources in Senior roles.

• On 20 December 2016 MEC Resources announced that it had received notices under sections 203D(2) and 249D of the Corporations Act 2001 (Cth) on behalf of Grandbridge Limited, Trandcorp Pty Ltd, Trandcorp Pty Ltd and Mr David Breeze, who collectively hold over 5% of the votes that may be cast at a general meeting of the Company. The notices seek to convene a further meeting to remove all of the existing Directors of the Company and appoint three new Directors recommended by the convening parties. On 3 January 2016 the Company advised the the resolutions to remove the existing Directors were invalid and they would not be put forward at the up and coming meeting to be held on 16 February 2016.

Advent Energy Ltd

• In December 216 Advent Energy appointed Mr Matthew Battrick to conduct a strategic review on the petroleum assets of PEP11, EP386 & RL1. Mr Battrick is a proven oil and gas explorer as a leader of high performing, multi-disciplinary teams. He has demonstrable success in resetting strategic direction at Board level and in delivering five-fold growth in shareholder value. In addition, he has worked successfully with or joint ventured with major and super major oil companies as well as ASX 100 companies.

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Directors’ Report (continued)

MEC Resources Ltd and its controlled entities

• In January and February 2017 the Company released the results of its strategic review of its Petroleum Exploration Permit PEP 11 and Exploration Permit EP 386.

The strategic review advised that the quality of the existing 2D data is technically insufficient to derisk the multi-trillion cubic feet prospects sufficiently to attract suitable investment partners to drill test these exciting gas targets. Thus, should the PEP11 title be explored effectively in future, then the company needs to expedite a quality 3D seismic survey over the main gas prospects and potentially extend further to increase the portfolio of drilling targets. Without improved data quality the PEP11 title may remain untested for commercially recoverable gas resources.

In regards to the EP386 and RL1 assets in the onshore Bonaparte Basin, Advent Energy holds 100% of these titles in the north of WA/NT. Importantly, the WA, NT and Federal governments have all committed to investing into critical road infrastructure in this region. This will directly benefit the potential commercialisation of Advent Energy’s resources in this developing region.

The strategic review recommended new interventions in the Waggon Creek-1, Vienta-1 and Weaber-4 wells (which are currently cased and suspended for future potential production). Pending review of the integrity of the wells (they are about 20 years old), stimulation of the reservoirs using modern techniques is considered beneficial in potentially achieving stable commercial gas flow rates. In addition, an untested oil leg towards the base of the Waggon Creek1 well may provide commercial upside with rapid potential monetisation opportunity. Stable commercial gas flow rates are considered critical to achieve should these resources ever be economically produced.

Subsequent Events

• On 10th January 2017 MEC Resources announced that it had once again received notices under sections 203D(2) and 249D of the Corporations Act 2001 (Cth) on behalf of Grandbridge Limited, Trandcorp Pty Ltd, Trandcorp Pty Ltd and Mr David Breeze, who collectively hold over 5% of the votes that may be cast at a general meeting of the Company. The notices seek to convene a further meeting to remove all of the existing Directors of the Company. On 27[th] January 2017 the Company announced that it would hold a further meeting to consider these resolutions on 9 March 2017.

• During the year Advent, through wholly owned subsidiary Onshore Energy Pty Ltd, applied to the Western Australian Department of Mines and Petroleum for a variation, suspension and extension of current work commitments including an exploration well and 2D seismic. In February 2017 The Western Australian Department of Mines and Petroleum granted a conditional suspension and extension on the work commitments until 31 March 2018.

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 4.

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Directors’ Report (continued)

MEC Resources Ltd and its controlled entities

Signed in accordance with a resolution of the directors made pursuant to s306(3) of the Corporations Act 2001 .

On behalf of the Directors

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G Hock Chairman

PERTH, 28 February 2017

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AUDITOR’S INDEPENDENCE DECLARATION

As lead auditor for the review of the consolidated financial report of MEC Resources Limited for the half-year ended 31 December 2016, I declare that to the best of my knowledge and belief, there have been no contraventions of:

• a) the auditor independence requirements of the Corporations Act 2001 in relation to the review; and

• b) any applicable code of professional conduct in relation to the review.

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Perth, Western Australia 28 February 2017

B G McVeigh Partner

HLB Mann Judd (WA Partnership) ABN 22 193 232 714 Level 4, 130 Stirling Street Perth WA 6000 | PO Box 8124 Perth BC 6849 | Telephone +61 (08) 9227 7500 | Fax +61 (08) 9227 753 3. Email: hlb@hlbwa.com.au | Website: http://www.hlb.com.au Liability limited by a scheme approved under Professional Standards Legislation

HLB Mann Judd (WA Partnership) is a member of International, a worldwide organisation of accounting firms and business advisers.

MEC Resources Ltd and its controlled entities

Directors’ Declaration

The directors declare that:

• (a) 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; and

• (b) in the directors’ opinion, the attached financial statements and notes thereto are in accordance with the Corporations Act 2001 , including compliance with accounting standards and giving a true and fair view of the financial position and performance of the consolidated entity.

Signed in accordance with a resolution of the directors made pursuant to s.303(5) of the Corporations Act 2001 .

On behalf of the Directors

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G Hock Chairman PERTH, 28 February 2017

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Condensed Consolidated Statement of Profit or Loss and Other Comprehensive Income for the half year ended 31 December 2016 MEC Resources Ltd and its controlled entities

Note Revenue Revenue from ordinary activities 4 Other gains/(losses) 4 Administration expenses Consulting and legal expenses Management services expense Employee Benefits expense Interest expense Insurance expenditure Other expenses Traveling expense Loss before income tax Income tax expense Loss from continuing operations Other Comprehensive Income Total Comprehensive Income for the period Loss attributable to non-controlling interest Loss attributable to members of the parent entity Total Comprehensive Loss attributable to non-controlling interest Total Comprehensive Loss attributable to parent Earnings Per Share - Basic and Diluted (cents per share)	Consolidated 31 December 2016 $ 31 December 2015 $ 11,159 12,656 (28,733) (57,465) (23,210) (72,287) (129,537) (68,238) (80,323) (154,860) (191,476) (234,641) (1,364) (2,251) (15,462) (16,818) (12,471) (50,990) (3,546) (30,049)
	(474,963) (674,943) - -
	(474,963) (674,943) - -
	(474,963) (674,943)
	(65,050) (146,064)
	(409,913) (528,879)
	(65,050) (146,064)
	(409,913) (528,879)
	(0.22) (0.29)

The accompanying notes form part of these financial statements.

6

Condensed Consolidated Statement of Financial Position as at 31 December 2016 MEC Resources Ltd and its controlled entities

Note Current Assets Cash and cash equivalents 5 Trade receivables Financial assets 10 Other current assets Total Current Assets Non-Current Assets Other non-current assets Evaluation and exploration costs 11 Financial Assets 10 Property, plant & equipment Total Non-Current Assets Total Assets Current Liabilities Trade and other payables Financial Liabilities 12 Short-term provisions Total Current Liabilities Non-Current Liabilities Provisions Total Non-Current Liabilities Total Liabilities Net Assets Equity Issued capital 6 Option Reserve Accumulated losses Total Equity Attributable to Owners Non-controlling Interest Total Equity	Consolidated
	31 December 2016 $ 30 June 2016 $
	440,563 877,018 111,942 118,322 337,737 44,867 30,847 30,138
	921,089 1,070,345
	22,674 22,674 29,032,046 29,022,046 141,739 453,415 1,294 1,782
	29,197,753 29,499,917
	30,118,842 30,570,262
	814,192 793,795 813,378 810,973 89,073 91,190
	1,716,643 1,695,958
	29,267 27,484
	29,267 27,484
	1,745,910 1,723,442
	28,372,932 28,846,820
	26,165,961 26,165,961 15,846,284 15,845,209 (26,284,233) (25,874,320)
	15,728,012 16,136,850 12,644,920 12,709,970
	28,372,932 28,846,820

The accompanying notes form part of these financial statements.

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Condensed Consolidated Statement of Changes in Equity for the half year ended 31 December 2016

MEC Resources Ltd and its controlled entities

Consolidated Balance at 1 July 2015 Loss attributable to members of the consolidated entity Other comprehensive income Total comprehensive income Shares issued on exercise of options Balance at the half year ended 31 December 2015 Balance at 1 July 2016 Loss attributable to members of the consolidated entity Other comprehensive income Total comprehensive income Share based payments Balance at the half year ended 31 December 2016	Issued Capital $ Accumulated losses $ Option Reserve $ Contribution Reserve $ Total attributable to owners S Non- Controlling Interest $ Total Equity $
	25,529,466 (24,839,843) 522,672 - 1,212,295 28,292,390 29,504,685 - (528,879) - - (528,879) (146,064) (528,879) - - - - - - -
	- (528,879) - - (528,879) - (528,879) - - 528 - 528 - 528
	25,529,466 (25,368,722) 523,200 - 683,944 28,146,326 28,830,270
	26,165,961 (25,874,320) 528,990 15,316,219 16,136,850 12,709,970 28,846,820 - (409,913) - - (409,913) (65,050) (474,963) - - - - - - -
	- (409,913) - - (409,913) (65,050) (474,963) - - 1,075 - 1,075 - 1,075
	26,165,961 (26,284,233) 530,065 15,316,219 15,728,012 12,644,920 28,372,932

The accompanying notes form part of these financial statements.

8

Condensed Consolidated Statement of Cash Flows for the half year ended 31 December 2016 MEC Resources Ltd and its controlled entities

Note Cash Flows From Operating Activities Payments to suppliers and employees Interest received Net cash used in operating activities Cash Flows From Investing Activities Repayment of loans to other entities Deferred exploration costs Net cash used in investing activities Net decrease in Cash Held Cash At the Beginning Of The Period Cash At The End Of The Period 5	Consolidated 31 December 2016 $ 31 December 2015 $
	(428,817) (475,560) 2,362 8,432
	(426,455) (467,128)
	- (90,000) (10,000) 62,585
	(10,000) (27,415)
	(436,455) (494,543) 877,018 1,265,571
	440,563 771,028

The accompanying notes form part of these financial statements

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Notes to the Financial Statements For the half year ended 31 December 2016 MEC Resources Ltd and its controlled entities

1. CORPORATE INFORMATION

The financial report of MEC Resources Ltd (the company) and its controlled entities for the half-year ended 31 December 2016 was authorised for issue in accordance with a resolution of the directors on 28 February 2016.

MEC Resources Ltd is a company incorporated in Australia and limited by shares which are publicly traded on the Australian Securities Exchange.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Statement of Compliance

The half-year financial report is a general purpose financial report prepared in accordance with the requirements of the Corporations Act 2001 and Australian Accounting Standard AASB 134: Interim Financial Reporting. Compliance with AASB 134 ensures compliance with International Financial Reporting Standards IAS 34 Interim Financial Reporting.

The half-year financial report does not include all of the notes of the type normally included within the annual financial report and therefore cannot be expected to provide as full an understanding of the financial performance, financial position and financing and investing activities of the consolidated entity as the full financial report.

The half-year financial report should be read in conjunction with the Annual Financial Report of MEC Resources Ltd as at 30 June 2016.

For the purpose of preparing the half-year financial report, the half-year has been treated as a discrete reporting period.

It is also recommended that the half-year financial report be considered together with any public announcements made by MEC Resources Ltd and its controlled entities during the half-year ended 31 December 2015 in accordance with the continuous disclosure obligations arising under the Corporations Act 2001 and the ASX Listing Rules.

(a) Basis of Preparation

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.

(b) Significant Accounting Policies

The half-year condensed consolidated financial statements have been prepared using the same accounting policies as used in the annual financial statements for the year ended 30 June 2016.

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Notes to the Financial Statements For the half year ended 31 December 2016 MEC Resources Ltd and its controlled entities

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

(c) Financial Position

The consolidated entity has incurred losses for the year ended 31 December 2016 of $474,963 (2015: $674,943). The consolidated entity has cash assets of $440,563 as at 31 December 2016 (30 June 2016: $877,018). The consolidated entity had a working capital deficit of $795,554 at 31 December 2016 (30 June 2016 deficit of $625,613).

Included in trade and other payables is a balance of $743,268 owing to directors for outstanding fees payable at 31 December 2016 . The directors have reviewed the non-exploration expenditure and commitments for the consolidated entity. The directors as a part of their cash monitoring, have voluntarily suspended cash payments for their director’s fees to conserve cash resources for a period of 12 months from the date of the approval of the financial report or until termination of their services in accordance with their contracts, including any outstanding fees owed at 31 December 2016.

The Group’s subsidiary Advent Energy Ltd, has commitments for its exploration permits of $14,747,500 over the next 12 months under the terms of its application licence in order to maintain tenure. Advent is continually seeking and reviewing potential sources of both equity and debt funding. Advent has commenced a strategic review of its core assets and is now embarking on a fresh marketing campaign to attract new investors and/or joint venture partners. Management has confidence that a suitable outcome will be achieved however there is no certainty at this stage that this will result in further funding being made available. Refer to note 11 for further details.

The directors have prepared cash flow forecasts that indicate that the consolidated entity will have sufficient cash flows to meet its non-exploration commitments for a period of at least 12 months from the date of this report.

Based on the cash flow forecast, the directors not calling their outstanding fees and suspending cash payments at this time and the monitoring of operational costs, the directors are satisfied that, the going concern basis of preparation is appropriate. Notwithstanding this there exists a historical liability for which, Directors are seeking legal advice as to its current legal standing. Should this be determined unfavourably this may cast doubt on the Group's ability to continue as a going concern. The financial report has been prepared on a going concern basis, which assumes continuity of normal business activities and the settlement of liabilities in the ordinary course of business.

For further disclosure concerning the exploration permits and expenditure commitments of the Group and for the uncertainty regarding the ability of the Group to realise the associated capitalised exploration expenditure please refer to Note 11.

Application of New and Revised Accounting Standards

Standards and Interpretations applicable to 31 December 2016

In the half year ended 31 December 2016, the Directors have reviewed all of the new and revised Standards and Interpretations issued by the AASB that are relevant to the Company and effective for the half year reporting periods beginning on or after 1 July 2016.

As a result of this review, the Directors have determined that there is no material impact of the new and revised Standards and Interpretations on the Company and therefore no material change is necessary to Group accounting policies.

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Notes to the Financial Statements For the half year ended 31 December 2016 MEC Resources Ltd and its controlled entities

Standards and Interpretations in issue not yet adopted applicable to 31 December 2016

The Directors have also reviewed all of the new and revised Standards and Interpretations in Issue not yet adopted that are relevant to the Company and effective for the half year reporting periods beginning on or after 1 July 2016.

As a result of this review, the Directors have determined that there is no material impact of the new and revised Standards and Interpretations in Issue not yet adopted on the Company and therefore no material change is necessary to Group accounting policies.

3. SEGMENT INFORMATION

Identification of reportable segments

The group has identified its operating segments based on the internal reports that are reviewed and used by the managing director and his management team (the chief operating decision makers) in assessing performance and in determining the allocation of resources.

The operating segments are identified by management based on their investment in exploration companies. Discrete financial information about each of these operating segments is reported to the managing director and his management team on at least a monthly basis. Currently, management’s focus is on the exploration program of Advent Energy projects PEP 11 and EP 386/RL1.

The group operates predominantly in one segment, namely investments in mining and resources. These activities are predominantly in Australia.

Accounting policies and inter-segment transactions

The accounting policies used by the group in reporting segments are the same as those contained in note 1 to the accounts and in the prior period.

4. REVENUE, INCOME AND EXPENSES

Revenue Interest revenue : other entities Other gains and losses Net loss on financial assets designated as fair value through profit and loss	Consolidated 31 December 2016 $ 31 December 2015 $
	11,159 12,656
	11,159 12,656
	(28,733) (57,465)
	(28,733) (57,465)

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Notes to the Financial Statements For the half year ended 31 December 2016 MEC Resources Ltd and its controlled entities

5. CASH AND CASH EQUIVALENTS

Consolidated

For the purpose of the half-year condensed consolidated statement of cash flows, cash and cash equivalents are comprised of the following: Cash at bank and in hand	31 December 2016 $ 30 June 2016 $
	440,563 877,018
	440,563 877,018

6. CONTRIBUTED EQUITY

ONTRIBUTED EQUITY
Ordinary shares (i) Less :Capital Raising Costs	Consolidated 31 December 2016 $ 30 June 2016 $
	27,196,110 27,196,110 (1,030,149) (1,030,149)
	26,165,961 26,165,961

(i)Fully paid ordinary shares carry one vote per share and carry the right to dividends.

Movement in ordinary shares on issue As at 1 July 2016 Conversion of options Balance as at 31 December 2016	Number $
	200,034,633 26,165,961 - -
	200,034,633 26,165,961

7. CONTINGENT LIABILITIES

There were no contingent liabilities at balance date.

8. COMMITMENTS

Capital Commitments

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Notes to the Financial Statements For the half year ended 31 December 2016 MEC Resources Ltd and its controlled entities

In order to maintain an interest in the exploration tenements in which the group is involved, the group is committed to meet the conditions under which the tenements were granted.

Group expenditure required to meet the terms of the exploration licences at the reporting date but not recognised as liabilities is as follows:

	Consolidated	Consolidated
	31 December 2016 $	30 June 2016 $
Work Program Commitments – Exploration permits
Payable:
Within one year	14,747,500	4,797,500
Greater than one year less than five years	5,775,000	15,722,500
Total	20,522,500	20,520,500

9. EVENTS AFTER THE BALANCE DATE

On 10th January 2017 MEC Resources announced that it had once again received notices under sections 203D(2) and 249D of the Corporations Act 2001 (Cth) on behalf of Grandbridge Limited, Trandcorp Pty Ltd, Trandcorp Pty Ltd and Mr David Breeze, who collectively hold over 5% of the votes that may be cast at a general meeting of the Company. The notices seek to convene a further meeting to remove all of the existing Directors of the Company.

10. FINANCIAL ASSETS Current Loan receivable – Grandbridge Limited Loan receivable – BPH Energy Ltd (b) Total Loan receivable – BPH Energy Ltd (b) Fair Value through Profit and Loss financial assets (a) Investment in BPH Energy Ltd Available for sale financial assets (a) Investment in Molecular Discovery Systems Ltd		Consolidated 31 December 2016 $ 30 June 2016 $
		44,867 44,867 292,870 -
		337,737 44,867 - 282,942 71,828 100,562 69,911 69,911
		141,739 453,415

Fair Value of Financial Assets

The methods and valuation techniques used for the purpose of measuring fair value of the company’s financial assets are unchanged compared to the previous reporting period. The levels of the hierarchy are as follows:

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Notes to the Financial Statements For the half year ended 31 December 2016 MEC Resources Ltd and its controlled entities

Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities Level 2: inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices) Level 3: inputs for the asset or liability that are not based on observable market data (unobservable inputs).

• (a) For financial instruments that are measured at fair value on a recurring basis, Level 1 and Level 3 applies to the company’s non-current Fair Value through Profit and Loss financial assets and available for sale financial assets, respectively.

• (b) On 22 October 2014 MEC Resources entered into a convertible loan agreement with BPH Energy Ltd up to $200,000. Interest is charged monthly at a rate of 8.97% per annum. The funds are to be used for working capital. The loan agreement is convertible at the election of MEC Resources. The issue price on conversion will be the higher of $0.04 cents per share and the average closing price of the Borrower Shares on the ASX over the 5 trading days immediately prior to the date of conversion. On the 18th August 2015 the facility was further extended to a maximum draw down amount of $295,000. On 18 February 2016 the loan was once again extended to a maximum amount of $324,000. As at reporting date the closing balance of the loan including interest accrued to 31 December 2016 was $292,870 (2015: $282,942). The term of the loan concluded on 24 December 2014 and has not been repaid at the date of these accounts. In addition to the standard interest rate mentioned above it is now subject to an additional interest rate on overdue monies until full repayment is received.

11. CAPITALISED EXPLORATION COSTS

Consolidated

Exploration expenditure capitalised Exploration and evaluation phases Reconciliation of movement during the year Opening balance at 1 July Capitalised expenditure – EP 325 Capitalised expenditure – PEP 11 Capitalised expenditure – EP 386 Closing balance	31 December 2016 $ 30 June 2016 $
	29,032,046 29,022,046
	29,032,046 29,022,046
	29,022,046 29,024,515 - - 10,000 (2,469) - - 29,032,046 29,022,046

Recoverability of the carrying amount of exploration assets is dependent on the successful exploration and sale of natural gas.

Exploration costs amounting to $10,000 (2015:$nil) have been included in cash flows from investing activities in the statement of cash flows.

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Notes to the Financial Statements For the half year ended 31 December 2016 MEC Resources Ltd and its controlled entities

The consolidated group, has commitments for its exploration permits of $14,747,500 over the next 12 months from the reporting date under the terms of its application licences in order to maintain tenure.

Advent has commenced a strategic review of its core assets and is now embarking on a fresh marketing campaign to attract new investors and/or joint venture partners. Management has confidence that a suitable outcome will be achieved however there is no certainty at this stage that this will result in further funding being made available.

In relation to the Group’s exploration commitments (which include Asset Energy Pty Ltd completing 200km of 2D seismic and geotechnical studies within the PEP 11 area by 12 August 2016), Advent’s wholly owned subsidiary, Asset Energy Pty Ltd, lodged an application in respect of Petroleum Exploration Permit 11 (“PEP11”) with the National Offshore Petroleum Titles Administrator (“NOPTA”) during 2016 to vary a condition of PEP11, suspend the years 2 and 3 work commitments and request a subsequent extension of the PEP11 permit term. NOPTA is currently assessing the application. A successful application to NOPTA will extend the Year 4 well commitment from August 2017 to August 2018. Following completion of the Year 2 and Year 3 work commitments it is open to the PEP 11 JV to request a variation to the remaining permit commitments which could include performing a 3d seismic prior to exploration drilling.

The application to vary a condition of the title and suspend the years 2 and 3 work commitments was prepared following discussions with NOPTA, however a decision has not been received by the Company from NOPTA.

Asset Energy Pty Ltd has invested over $24 million in the PEP11 title in recent history, and, along with its JV partner Bounty Oil and Gas NL, is committed to continuing to explore for and ultimately exploit any petroleum accumulations which may be identified in this title area.

These commitments comprise the significant balance of $14,747,500.

The above conditions indicate the uncertainty that may affect the ability of the Group to realise the carrying value of the exploration assets in the ordinary course of business.

12. FINANCIAL LIABILITIES

FINANCIAL LIABILITIES
Loans payable Loan from BPH Energy Limited (i) Loan from Grandbridge Limited (i) Loans from other entities (i)	Consolidated 31 December 2016 $ 30 June 2016 $
	41,891 39,486 770,129 770,129 1,358 1,358
	813,378 810,973

(i) Loans payable are unsecured, non-interest bearing and repayable on demand.

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INDEPENDENT AUDITOR’S REVIEW REPORT

To the members of MEC Resources Limited

Report on the Half-Year Financial Report

We have reviewed the accompanying half-year financial report of MEC Resources Limited (“the company”) which comprises the condensed consolidated statement of financial position as at 31 December 2016, the condensed consolidated statement of profit or loss and other comprehensive income, the condensed consolidated statement of changes in equity and the condensed consolidated statement of cash flows for the half-year ended on that date, notes comprising a summary of significant accounting policies and other explanatory notes, and the directors’ declaration, for the Group comprising the company and the entities it controlled at the half-year end or from time to time during the half-year.

Directors’ responsibility for the half-year financial report

The directors of the company are responsible for the preparation of the half-year financial report that gives a true and fair view in accordance with Australian Accounting Standards and the Corporations Act 2001 and for such internal control as the directors determine is necessary to enable the preparation of the half-year financial report that gives a true and fair view and is free from material misstatement, whether due to fraud or error.

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 a 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 half-year financial report is not in accordance with the Corporations Act 2001 including: giving a true and fair view of the Group’s financial position as at 31 December 2016 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 the company, 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 .

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HLB Mann Judd (WA Partnership) ABN 22 193 232 714 Level 4, 130 Stirling Street Perth WA 6000 | PO Box 8124 Perth BC 6849 | Telephone +61 (08) 9227 7500 | Fax +61 (08) 9227 753 3. Email: hlb@hlbwa.com.au | Website: http://www.hlb.com.au Liability limited by a scheme approved under Professional Standards Legislation

HLB Mann Judd (WA Partnership) is a member of

International, a worldwide organisation of accounting firms and business advisers.

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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 is not in accordance with the Corporations Act 2001 including:

• (a) giving a true and fair view of the Group’s financial position as at 31 December 2016 and of its performance for the half-year ended on that date; and

• (b) complying with Accounting Standard AASB 134 Interim Financial Reporting and the Corporations Regulations 2001 .

Emphasis of Matters

Without modifying our conclusion we draw attention to Note 2(c) to the half-year financial report which sets out the uncertainty around Group’s ability to continue as a going concern and therefore, whether the Group will be unable to realise its assets and discharge its liabilities in the normal course of business.

Additionally, we draw attention to Note 11 to the half-year financial report which describes the uncertainty around the basis of continuing to recognise the carrying value of exploration and evaluation assets.

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B G McVeigh Partner

HLB Mann Judd Chartered Accountants

Perth, Western Australia 28 February 2017