TALIUS GROUP LIMITED — Annual Report 2008

Mar 1, 2009

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ADVANCE ENERGY LIMITED ACN 111 823 762

Appendix 4E Preliminary final report (Unaudited)

Financial year ended 31 December 2008

Appendix 4E Preliminary Final Report

Financial year ended 31 December 2008

Contents

		Page
1.	Results for announcement to the Market	2
2.	Commentary	3
3.	Consolidated Income Statement	6
4.	Consolidated balance sheet	7
5.	Consolidated cash flow statement	8
6.	Consolidated statement of changes in equity	9
7.	Notes to the financial statements	10
8.	Compliance statement	15

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Appendix 4E Preliminary Final Report

Financial year ended 31 December 2008

1. RESULTS FOR ANNOUNCEMENT TO THE MARKET

Revenues from continuing operations Loss from continuing operations after tax attributable to members Net loss for the period attributable to ordinary shareholders Net tangible assets Net tangible assets per security	Year ended 31 December Change Up/Down Percentage change 2008 2007 A$’000 A$’000 5,071 3,630 1,441 Up 88.4% (1,329) (1,789) 460 Down 25.7% (1,329) (1,789) 460 Down 25.7% 9,184 2,986 6,198 Up 207.6% 0.077 0.043 0.034 Up 79.1%

No dividends were paid or are proposed for the current or corresponding period.

ADVANCE ENERGY LIMITED Preliminary Final Report ASX CODE: AVD www.advanceenergyltd.com.au

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Appendix 4E Preliminary Final Report

Financial year ended 31 December 2008

2. COMMENTARY

Operational Overview

In the year ended 31 December 2008 the group posted unaudited earnings before interest, depreciation/depletion and tax of $2.431 million and operational net cash inflows of $1.61 million. After accounting for depletion and depreciation charges in respect of its oil and gas properties of $1.71 million, interest charges of $1.64 million and a tax charge of $0.41 million it recorded an unaudited loss after tax of $1.3 million. In the light of volatile commodity and currency markets, and the considerable level of pain being experienced in the wider business community, the Board is encouraged by the result.

Divestments

During the year the Company sold its Lone Camp project for US$2 million, representing a profit in the order of US$570,000. After taking account of operational net cash inflows from the project since acquisition of more than US$900,000, this represents an IRR in excess of 58% and a return on investment of 112% over a 35 month period, an outstanding result in the current financial climate and a validation of the original business model.

Acquisitions

The Company made one major acquisition and one smaller consolidating acquisition during the year. These projects enhanced the existing asset base and production, enabled it to assume operatorship and contributed towards the marketability of the Lone Camp asset before divestment.

In April 2008, Advance increased its working interest in the Mother Lode 1 project from 22.5% to 90%. In August 2008, Advance made a number of minor acquisitions from North America Energy Inc including an additional 2.5% working interest on Mother Lode 1 and the remaining 10% working interests of the Lone Camp and Possum Kingdom projects bringing ownership of these two projects up to 100%.

Enhancement Activities

Throughout the course of 2008, Advance Energy Ltd participated in:

• a) The drilling of 3 new wells; and

• b) The major workover of 8 of its existing wells.

The activity was designed to consolidate an incremental increase in daily production and consolidate proven reserves.

The following table summarises the major operational and production factors in play in the 2008 and 2007 years.

ADVANCE ENERGY LIMITED Preliminary Final Report ASX CODE: AVD www.advanceenergyltd.com.au

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Appendix 4E Preliminary Final Report

Financial year ended 31 December 2008

2008 versus 2007 Operational Comparison

	2007	2008
Net Gas Production	284,755	213,311
Net Oil Production	13,615	21,230
Revenue	US$3,066,406	US$4,373,835
Wells Drilled	4	3
Workovers Performed	9	8
Acquisitions	$1,400,000	$4,480,000
Sales	-	$2,000,000

Rights Issue

The Company completed a 5 for 7 non-renounceable rights issue at 8 cents per share to raise $3.9 million before costs. The issue was fully underwritten, and was also sub-underwritten by several parties including director related companies. The underwriter is currently pursuing an amount of $260,000 from a non associated overseas sub-underwriter. The Company now has issued capital of 118,798,222 fully paid ordinary shares.

Loan and Debt Facilities

In the US the debt facility with Sterling Bank of Texas was renegotiated in March 2008 with interest now payable at US Prime (currently 3.25%) plus 1.0%. Advance is therefore currently paying interest at the rate of 4.25% per annum on the outstanding balance (or less than US$20,000) per month based on its current balance of US$5.4m. This balance has reduced by a net US$740,000 during the year.

Advance reduced the balance of its issued convertible notes from $8.025m to $4.3m largely as a result of the rights issue.

Risk Management Activities

In 2008, Advance Energy entered the following risk management (hedging) activities achieved through costless collar contracts with MF Global Ltd:

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• 1,000 barrels per month for 12 months from March 2008 at a floor price of US$90.00 per barrel and a ceiling price of US$100.75 per barrel;

• 1,000 barrels per month for 24 months from May 2008 at a floor price of US$95.00 per barrel and a ceiling price of US$105.00 per barrel. An additional call option at US$120 per barrel caps the hedging exposure at US$15 per barrel and provides the company with upside above this price; and

• 15,000 million British Thermal Units (MMBTU) per month hedged for 12 months from February 2008 at a floor price of US$7.75 per MMBTU and a ceiling price of US$10.50 per MMBTU.

ADVANCE ENERGY LIMITED Preliminary Final Report ASX CODE: AVD www.advanceenergyltd.com.au

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Appendix 4E Preliminary Final Report

Financial year ended 31 December 2008

In September 2008, in anticipation of the sale of the Lone Camp project, the company closed 10,000 MMBTU of its gas hedging commitment leaving it with a monthly hedged volume of 5,000 MMBTU.

As at 31 December 2008, Advance Energy’s mark to market gain on these contracts was in excess of US$810,000, demonstrating once again the benefits of a sound hedging position in volatile commodity markets.

Likely Developments

Advance Energy has deferred any development activities in order to take advantage of anticipated falling prices for goods and services. Once the pricing for goods and services reaches equilibrium with current commodity prices, the development work will recommence. At this stage, the company anticipates development to recommence in late second quarter/early third quarter of calendar year 2009.

Subsequent Events

There were no material events subsequent to the end of the financial year.

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Appendix 4E Preliminary Final Report

Financial year ended 31 December 2008

3. CONSOLIDATED INCOME STATEMENT FOR THE YEAR ENDED 31 DECEMBER 2008

Note Revenue from continuing operations 3 Cost of Oil & Gas sold Gross profit Other revenue Depreciation Depletion of oil and gas properties Exploration written off Staff costs Administrative expenses Operating result before interest and tax Net finance costs Finance charges earned Finance costs Loss before tax Income tax benefit/(expense) Net loss for the year attributable to the ordinary shareholders of the Company Earnings per share Basic (cents per share) 6	Group	Group
	2008 $’000	2007 $’000
	5,071 (1,348)	3,630 (735)
	3,723 1,154 (323) (1,385) - (157) (2,288)	2,895 266 (319) (793) (292) (629) (1,641)
	724 (1,639)	(513) (1,210)
	3 (1,642)	56 (1,266)
	(915) (414)	(1,723) (66)
	(1,329)	(1,789)
	(1.56)	(2.61)

The Income Statement should be read in conjunction with the accompanying notes to the financial statements.

ADVANCE ENERGY LIMITED Preliminary Final Report ASX CODE: AVD www.advanceenergyltd.com.au

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Appendix 4E Preliminary Final Report

Financial year ended 31 December 2008

4. CONSOLIDATED BALANCE SHEET AS AT 31 DECEMBER 2008

Note Current Assets Cash and cash equivalents Receivables Current Portion of Commodity Financial Instruments Total current assets Non current Assets Property, plant and equipment Oil and gas properties Non Current Portion of Commodity Financial Instruments Total non current assets Total Assets Current Liabilities Payables Provisions Interest bearing liabilities Mark-to-Market Escrowed Funds 4 Total current liabilities Non current liabilities Deferred tax liability Interest bearing liabilities 4 Total non current liabilities Total Liabilities Net Assets Equity Issued share capital 5 Reserves Accumulated losses Total Equity	Group	Group
	2008 $’000	2007 $’000
	2,421 943 1,056	1,936 740 -
	4,420	2,676
	1,472 22,964 254	1,327 14,484 - -
	24,690	15,811
	29,110	18,487
	2,438 - 5,985 1,213	418 28 5,800 -
	9,636	6,246
	556 9,734	37 9,218
	10,290	9,255
	19,926	15,501
	9,184	2,986
	12,694 4,444 (7,954)	9,029 581 (6,624)
	9,184	2,986

The Balance Sheet should be read in conjunction with the accompanying notes to the financial statements.

ADVANCE ENERGY LIMITED Preliminary Final Report ASX CODE: AVD www.advanceenergyltd.com.au

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Appendix 4E Preliminary Final Report

Financial year ended 31 December 2008

5. CONSOLIDATED CASH FLOW STATEMENT FOR THE YEAR ENDED 31 DECEMBER 2008

Note Cash flows from operating activities Receipts from customers Payments to suppliers and staff Interest received Interest and borrowing costs Other income Net cash provided by/ (used in) operating activities 7 Cash flows from investing activities Purchase of oil and gas properties Sale of oil and gas properties Purchase of plant and equipment Net cash provided by/ (used in) investing activities Cash flows from financing activities Proceeds from issues of shares Financing costs Proceeds from borrowings Repayments of borrowings Net cash flows provided by financing activities Net increase in cash held Cash and cash equivalents at the beginning of the financial period Foreign exchange adjustment Cash and cash equivalents at the end of the financial period	Group	Group
	2008 $’000	2007 $’000
	5,666 (2,595) 3 (1,314) (151)	3,267 (2,711) 56 (1,259) 115
	1,609	(532)
	(5,831) 2,850 (65)	(2,643) - (348)
	(3,046)	(2,991)
	3,190 (95) 4,687 (4,449)	400 (135) 5,285 (1,818)
	3,333	3,732
	1,896 1,936 (1,411)	209 1,727 -
	2,421	1,936

The statement of Cash Flows should be read in conjunction with the accompanying notes to the financial statements.

ADVANCE ENERGY LIMITED Preliminary Final Report ASX CODE: AVD www.advanceenergyltd.com.au

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Appendix 4E Preliminary Final Report

Financial year ended 31 December 2008

6. CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

Year ended 31 December 2008 $’000	Issued Capital	Equity Reserve	Option Reserve	Foreign Currency Translated Reserve	Accumulated losses	TOTAL
Balance at beginning of period	9,029	150	1,821	(1,391)	(6,624)	2,985
Issues of share capital	3,960	-	-	-	-	3,960
Capital Raising Costs	(295)	-	-	-	-	(295)
Value of conversion rights – convertible note	-	-	-	-	-	-
Currency translation difference	-	-	-	3,863	-	3,863
Loss for period	-	-	-	-	(1,329)	(1,329)
	12,694	150	1,821	2,472	(7,953)	9,184
Year ended 31 December 2007 $’000	Issued Capital	Equity Reserve	Option Reserve	Foreign Currency Translated Reserve	Accumulated losses	TOTAL
Balance at beginning of period	8,764	150	1,778	(414)	(4,835)	5,443
Issues of share capital	265	-	44	-	-	309
Cost of share based payments	-	-	-	-	-	-
Value of conversion rights – convertible note	-	-	-	-	-	-
Currency translation difference	-	-	-	(977)	-	(977)
Loss for period	-	-	-	-	(1,789)	(1,789)
	9,029	150	1,821	(1,391)	(6,624)	2,986

The above Consolidated Statement of Changes in Equity should be read in conjunction with the accompanying notes to the financial statements

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Appendix 4E Preliminary Final Report

Financial year ended 31 December 2008

7 . NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2008

1. BASIS OF PREPARATION OF PRELIMINARY FINAL REPORT

This preliminary final report for the year ended 31 December 2008 has been prepared in accordance with Australian Accounting Standards, other authoritative pronouncements of the Australian Standards Board, Urgent Issues Group Interpretations and the Corporations Act 2001.

The accounting policies adopted and methods of computation have been consistently applied in this preliminary final report as compared to all years presented unless otherwise stated. Reference should be made to previous financial reports.

This report is based on financial statements which are subject to audit.

2. SEGMENT REPORTING

Business Segment

The consolidated entity operates solely in the exploration and development of properties for the development of oil and gas. Therefore only geographical segment information is provided.

Geographical Segments

All operational activities are located in Texas in the USA. The head office is based in Perth, Australia.

2007 Geographical segment Revenues from continuing operations Segment result (loss) Segment assets Segment liabilities Acquisition of plant & equipment, exploration & evaluation and other non- current assets Depreciation and amortisation 2008 Geographical segment Revenues from continuing operations Segment result (loss) Segment assets Segment liabilities Acquisition of plant & equipment, exploration & evaluation and other non- current assets Depreciation and amortisation	USA $’000	Australia $’000	Eliminations $’000	Consolidated $’000
	5,071	-	-	5,071
	824	1,273	(3,426)	(1,329)
	28,120	16,996	(16,006)	29,110
	27,082	8,849	(16,005)	19,926
	5,831	-	-	5,831
	1,661	48		1,709
	USA $’000	Australia $’000	Eliminations $’000	Consolidated $’000
	3,630	-	-	3,630
	(21)	(2,545)	777	(1,789)
	16,839	11,615	(9,967)	18,487
	16,819	8,406	(9,724)	15,501
	2,858	133	-	2,991
	1,053	59	-	1,112

3. REVENUE FROM CONTINUING OPERATIONS

Oil and gas sales	**GROUP **	**GROUP **
	2008 $’000	2007 $’000
	5,071	3,630

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Appendix 4E Preliminary Final Report

Financial year ended 31 December 2008

ADVANCE ENERGY LTD ACN 111 823 762

NOTES TO THE FINANCIAL STATEMENTS (Continued) FOR THE YEAR ENDED 31 December 2008

4. INTEREST BEARING LOANS AND BORROWINGS

Current Convertible Notes – unsecured Comprising: Face value of the note Interest accrued on all notes Short term loans – secured - unsecured	**GROUP **	**GROUP **
	2008 $’000	2007 $’000
	2,365	5,800
	2,300 65	5,725 75
	2,365 2,900 720	5,800 - -
	5,985	5,800

Non-current Convertible Notes – unsecured Face value of the note Interest accrued Bank loan – secured	GROUP	GROUP
	2008 $’000	2007 $’000
	2,000	2,300
	2,000	2,300 -
	2,000 7,734	2,300 6,918
	9,734	9,218

ADVANCE ENERGY LIMITED Preliminary Final Report ASX CODE: AVD www.advanceenergyltd.com.au

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Appendix 4E Preliminary Final Report

Financial year ended 31 December 2008

ADVANCE ENERGY LTD ACN 111 823 762

NOTES TO THE FINANCIAL STATEMENTS (Continued)

FOR THE YEAR ENDED 31 December 2008

5. ISSUED CAPITAL

5.1 Ordinary shares 118,798,222 fully paid ordinary shares (2007: 69,299,099) Movements in shares on issue Beginning of period Shares issued during the period Convertible note conversion 100,000 @ $0.50 1,000,000 shares issued @ $0.35 49,499,123 shares issued @ $0.08¢ Less capital raising costs End of period	**GROUP **	**GROUP **
	2008 $’000	2007 $’000
	12,694 9,029 3,960	9,029 9,961 50 350 -
	12,989 (295)	10,361 (1,332)
	12,694	9,029

• (a) Effective 1 July 1998 the Corporations Legislation in place abolished the concepts of authorised capital and par value of shares. Accordingly the Parent does not have authorised capital or par value in respect of issued shares.

• (b) Ordinary shares participate in dividends and the proceeds on winding up of the parent entity in proportion to the number of shares held.

• (c) At shareholders meetings each ordinary share is entitled to one vote when a poll is called, otherwise each shareholder has one vote on a show of hands.

5.2 Options

The movements in options over ordinary shares during the year were as follows:

2008		Number at
	Exercise	beginning of					Number at end
Expiry Date	Price	period	Issued		Exercised		ofperiod
31 December 2010	$0.25	13,850,000		-		-	13,850,000
15 December 2009	$0.60	5,000,000		-		-	5,000,000
29 December 2009	$0.65	250,000		-		-	250,000
31 December 2010	$0.40	250,000		-			250,000
		19,350,000		-		-	19,350,000

ADVANCE ENERGY LIMITED Preliminary Final Report ASX CODE: AVD www.advanceenergyltd.com.au

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Appendix 4E Preliminary Final Report

Financial year ended 31 December 2008

ADVANCE ENERGY LTD ACN 111 823 762

NOTES TO THE FINANCIAL STATEMENTS (Continued) FOR THE YEAR ENDED 31 December 2008

5.2 Options (Cont.)

2007		Number at
	Exercise	beginning of				Number at end
Expiry Date	Price	period	Issued	Exercised		ofperiod
31 December 2010	$0.25	13,850,000	-		-	13,850,000
15 December 2009	$0.60	5,000,000	-		-	5,000,000
29 December 2009	$0.65	250,000	-		-	250,000
31 December 2010	$0.40	-	250,000			250,000
		19,100,000	250,000		-	19,350,000

No options have expired or have been cancelled since incorporation.

5.3 Converting Preference Shares

All convertible preference shares were issued during the period ended 31 December 2005. The movement in Converting Preference Shares during the year were as follows:

2008
Class No. at beginning	Issued	Converted	No. at end of
ofperiod		into ords	period
CPS - B 5	-	-	5
CPS - C 2	-	-	2
CPS - D 2	-	-	2
9	-		9
2007
Class No. at beginning	Issued	Converted	No. at end of
ofperiod		into ords	period
CPS - B 5	-	-	5
CPS - C 2	-	-	2
CPS - D 2	-	-	2
9	-		9

Each Converting Preference Share (CPS) converts into 1,000,000 ordinary shares as follows: CPS-A – upon the Company’s shares being listed on the main board of the ASX; these were converted into ordinary shares on date of listing, being 2 June 2006.

CPS-B – upon the Company achieving production of 500 BOEPD CPS-C – upon the Company achieving production of 1000 BOEPD CPS-D – upon the Company achieving production of 1500 BOEPD

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Appendix 4E Preliminary Final Report

Financial year ended 31 December 2008

ADVANCE ENERGY LTD ACN 111 823 762

NOTES TO THE FINANCIAL STATEMENTS (Continued)

FOR THE YEAR ENDED 31 December 2008

6. EARNINGS PER SHARE

6. EARNINGS PER SHARE
Reconciliation of earnings to net loss Net loss Earnings/(loss) used in the calculation of basic and dilutive EPS Weighted average number of ordinary shares outstanding during the period used in calculation of basic and dilutive EPS	**GROUP **
	2008 $’000	2007 $’000
	(1,329) (1,329)	(1,788) (1,788)
	Number 85,270,405	Number 68,506,496

Details of the shares issued are included under note 5. Dilutive EPS is not reflected as it would result in the reduction of the loss per share.

7. CASH FLOW INFORMATION

Reconciliation of cash flow from operations with loss from continuing operations after income tax.

Loss from ordinary activities after income tax Non cash flows in loss from continuing operations Depletion and depreciation Exploration assets written off Increase/(decrease) in provisions Option cost expensed Loss on sale of asset Commodity financial instrument Foreign exchange difference Changes in assets and liabilities Increase/(decrease) in trade creditors and accruals (Increase)/decrease in trade and other receivables (Increase)/decrease in deferred tax assets Increase/(decrease) in deferred tax liabilities Cash flows from (used in) operations	**GROUP **	**GROUP **
	2008 $’000	2007 $’000
	(1,329) 1,708 - - - 1 1,310 1,596 (1,542) 384 (519)	(1,789) 1,112 292 (16) 43 - - 3 36 (275) 110 (48)
	1,609	(532)

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Appendix 4E Preliminary Final Report

Financial year ended 31 December 2008

ADVANCE ENERGY LTD ACN 111 823 762 NOTES TO THE FINANCIAL STATEMENTS (Continued) FOR THE YEAR ENDED 31 December 2008

8. SUBSIDIARIES

The Company has the following Subsidiaries at all times during the year.

Name of Subsidiary	Place of	Percentage held	Percentage held
	**Incorporation **	2008	**2007 **
Advance Exploration and Production,
Inc	Texas USA	100%	100%
AEPI Midstream,Inc	Texas USA	100%	100%

Advance Exploration and Production, Inc was incorporated on 1 July 2005 with initial issued capital of US$1,000 (A$1,282).

AEPI Midstream was incorporated on 20 September 2006 to hold the Group’s midstream assets, with initial issued capital of US$1,000. (A$1,282).

There were no movements in subsidiaries during the current year.

9. COMPLIANCE STATEMENT

• 9.1 This report is based on accounts which are currently in the process of being audited.

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____ Date: 27 February 2009 David Ballantyne Company Secretary

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