TALIUS GROUP LIMITED — Annual Report 2010

Feb 27, 2011

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ADVANCE ENERGY LIMITED ACN 111 823 762

Appendix 4E Preliminary final report (Unaudited)

Financial year ended 31 December 2010

Appendix 4E Preliminary Final Report Financial year ended 31 December 2010

Contents 1. RESULTS FOR ANNOUNCEMENT TO THE MARKET ....................................................... 2 2. COMMENTARY ........................................................................................................................ 3 3. CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME .................................... 5 4. CONSOLIDATED STATEMENT OF FINANCIAL POSITION ............................................. 6 5. CONSOLIDATED STATEMENT OF CASH FLOW ............................................................... 7 6. CONSOLIDATED STATEMENT OF CHANGES IN EQUITY .............................................. 8 7 . NOTES TO THE FINANCIAL STATEMENTS ...................................................................... 9 8. COMPLIANCE STATEMENT ................................................................................................ 12

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 2010

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 2010 2009 A$’000 A$’000 2,194 2,361 167 Down 7.07% (9,140) (3,926) (5,214) Up 132.80% (9,140) (3,926) (5,214) Up 132.80% (4,865) 4,495 (9,360) Down 208.23% (2.23) 2.87 (5.1) Down 177.70%

Financial results in general were affected by the appreciation of the Australian dollar against the US dollar and fluctuations in oil and gas pricing throughout the course of the year.

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

The group has a 50% working interest in the Mother Lode 3 project in Martin County, Permian Basin, Texas. This interest is carried at cost of approximately US$730,000 in the consolidated balance sheet at 31 December 2010. On 17 June 2009, in an announcement to the market, and based upon an independent assessment of proved, probable and possible reserves for Mother Lode 3, an unrisked PV10 valuation considerably in excess of the carrying value was assessed. Further we note that during 2010 the first well in the prospect (Roman 27-1) was drilled and completed as a producer, thereby enhancing this project further as an oil and gas producing asset. However, we are advised that in spite of the reserves, and in spite of the successful drilling of the Roman 27-1 well, current accounting standards do not allow the group to make a revaluation of its interest. Were we able to reflect just some of the value attributed to this asset in the 2009 independent assessment, on our consolidated statement of financial position we would be reporting a net tangible asset position at 31 December 2010. Further we note that the group is in a $1.811 million net current asset position as at 31 December 2010, and that more than 80% of total liabilities do not fall due until 31 December 2014.

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 2010

2. COMMENTARY

Operational Review

In the year ending 31 December 2010, the company posted an unaudited loss after tax of AUD $9,140,160 of which almost $6 million arises from a book loss on the sale of oil and gas assets during the year..

Acquisitions

During the year the Company acquired minor overriding royalty interests increasing its net revenue interest in the Martin West project from 55.5% to 62%.

Divestments

In the first half of 2010, the Company undertook a review of its projects and determined to reduce its debt levels by divesting part or all of its mature assets. Advance entered a marketing agreement with PLS Inc for the development of a divestment process. In December 2010, the Company sold its interests in the Mother Lode 1, Martin West and Possum Kingdom projects for USD $11,300,000 enabling it to retire its bank debt of USD 3.1 million and its unlisted notes of AUD 5.3 million. At 31 December 2010 it retained cash reserves of AUD 2.5 million.

Development

Advance undertook behind pipe workovers of the Cazares#2 well (Mother Lode 1), Holt#5 and Holt#6 wells (both Martin West).

2010 versus 2009 Operational Comparison

	2009	2010 (Nine months)
Net Gas Production (MCF)	112,169	87,245
Net Oil Production (Barrels)	20,906	18,286
RevenueUSD	$1,911,611	$2,077,158
Workovers Performed	3	3
AcquisitionsUSD	$2,816,000	$330,000
DivestmentsUSD	$2,015,000	$11,300,000

Placement of Shares and Rights Issue

During the year, Advance undertook a placement of 23,000,000 shares at one cent per share raising $230,000 before costs. It then undertook a 1 for 1 rights issue of shares at the same price issuing a further 38,058,173 shares to raise an additional $380,582 before costs.

Options Issue

In November 2010, Advance undertook a renounceable rights issue of options on the basis of 14 options for every 15 shares held at an issue price of 0.1 cents per option. The options are exercisable at 3 cents per share on or before 31 August 2012. The rights issue was fully subscribed and resulted in the issue of 202,931,768 options raising an additional $202,932 before costs.

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 2010

Unlisted Convertible Notes

As a result of the sale of assets, Advance redeemed its outstanding unlisted convertible notes early thereby reducing its annual interest expense by over $600,000.

Sterling Bank

On settlement of the sale of its interests in Martin West, Possum Kingdom and Mother Lode 1, Advance repaid the balance of its loan facility. However, it has retained its USD 40 million line of credit.

Director Appointments

Mr Alex Bajada, Chairman of the Company since prior to listing in 2006, retired as a Director of the Company on 21 June 2010. Mr Paul Berresford, who appointed as a Non-Executive Director on 14 September 2009, was not reappointed at the Annual General Meeting in May 2010.

Likely Developments

Advance retains its interests in the Mother Lode III project on which the Roman 27-1 well was drilled and completed as a producer in 2010 by the operator, Endeavor Energy Resources. Advance currently intends to participate in further developments on the Greene prospect as they are proposed by Endeavor. The drilling of the Roman 27-1 well has further enhanced the value of the Mother Lode III asset, situated in the long life, slow decline Permian Basin area of Texas. The group’s interest is only carried at a cost of US$730,000 in the consolidated balance sheet, which doesn’t reflect its considerable value, and significant proved and probable reserves.

In addition the Board is actively reviewing new projects in the energy sphere, both within the US and elsewhere.

Subsequent Events

There were no significant events subsequent to the end of the financial 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 2010

3. CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME FOR THE YEAR ENDED 31 DECEMBER 2010

Notes Revenue Other income Loss on sale of asset Direct costs attributed to reserves Depreciation & depletion of oil and gas properties Employee benefits expense Derivative instruments Administrative expenses Finance costs Share of profits/(losses) of Joint Venture entity accounted for using the equity method Loss before income tax Income tax expense Loss for the year Other comprehensive income Exchange differences on translation of foreign operations Other comprehensive income for the year, net of tax Total comprehensive income for the year Loss is attributable to Owners of Advance Energy Ltd Total comprehensive income for the half year is attributable to: Owners of Advance Energy Ltd Loss per share Basic (cents per share) Diluted (cents per share)	Group
	2010 2009 $’000 $’000
	2,194 2,361 14 58 (5,990) (268) (1,023) (854) (1,062) (1,313) - - (48) (226) (1,665) (2,580) (1,465) (1,104) - - (9,045) (3,926) (95) -
	(9,140) (3,926) (1,021) (4,111)
	(1,021) (4,111)
	(10,161) (8,037)
	(9,140) (3,926)
	(9,140) (3,926)
	(10,161) (8,037)
	(10,161) (8,037)
	(4.95) (2.9) - -

The Statement of Comprehensive Income 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 2010

4. CONSOLIDATED STATEMENT OF FINANCIAL POSITION AS AT 31 DECEMBER 2010

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 Computers and other equipment Other financial assets Escrowed Funds Non Current Portion of Commodity Financial Instruments Total non current assets Total Assets Current Liabilities Payables Provisions Investment in associate liability Interest bearing liabilities 3 Total current liabilities Non current liabilities Deferred tax liability Interest bearing liabilities 3 Total non current liabilities Total Liabilities Net Assets Equity Issued share capital 4 Reserves Accumulated losses Total Equity	Group
	2010 $’000 2009 $’000
	2,546 1,255 71 - 434 77
	2,617 1,766
	- 443 699 18,373 11 - 27 988 18 - -
	755 19,804
	3,372 21,570
	747 385 29 233 - - 785 686
	1,561 1,302
	- - 6,676 15,773
	6,676 15,773
	8,237 17,075
	(4,865) 4,495
	16,144 15,547 (483) 333 (20,526) (11,385)
	(4,865) 4,495

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 2010

5. CONSOLIDATED STATEMENT OF CASH FLOW

FOR THE YEAR ENDED 31 DECEMBER 2010

Note Cash flows from operating activities Receipts from customers Payments to suppliers and staff Interest received Derivative instruments Interest and borrowing costs Other income Net cash provided by/ (used in) operating activities Cash flows from investing activities Purchase of oil and gas assets/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
	2010 $’000 2009 $’000
	2,556 2,853 (2,675) (6,044) 14 58 - (206) (1,465) (1,250) - -
	(1,570) (4,589)
	(1,247) 11,307 (3,511) 2,298 (2) -
	10,061 (1,213)
	819 2,500 (15) (153) 893 5,465 (9,122) (2,804)
	(7,427) 5,008
	1,063 (794) 1,255 228 2,421 (372)
	2,546 1,255

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 2010

6. CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

Period ended 31 December 2010 $’000 Balance at beginning of period Loss for the period Currency translation on foreign operations Total comprehensive income for half year Transactions with equity holders in their capacity as equity holders Issues of share capital, net of transaction costs Balance at 31 December 2010 Period ended 31 December 2009 $’000 Balance at beginning of period Loss for the period Currency translation on foreign operations Total comprehensive income for half year Transactions with equity holders in their capacity as equity holders Issues of share capital, net of transaction costs Balance at 31 December 2009	Issued Capital Equity Reserve Option Reserve Foreign Currency Translation Reserve Accumulated losses TOTAL
	15,547 150 1,822 (1,639) (11,385) 4,495 - - - - (9,140) (9,140) - - - (1,021) - (1,021)
	- - - (1,021) (9,140) (10,161) 597 - 204 - - 801
	16,144 150 2,026 (2,660) 20,525 (4,865)
	Issued Capital Equity Reserve Option Reserve Foreign Currency Translation Reserve Accumulated losses TOTAL
	12,692 150 1,822 2,472 (7,459) 9,677 - - - - (3,926) (3,926) - - - (4,111) - (4,111)
	- - - (4,111) (3,926) (8,037) 2,855 - - - - 2,855
	15,547 150 1,822 (1,639) (11,385) 4,495

The above Consolidated Statement of Changes in Equity 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 2010

7 . NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2009

1. BASIS OF PREPARATION OF PRELIMINARY FINAL REPORT

This preliminary final report for the year ended 31 December 2010 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. REVENUE FROM CONTINUING OPERATIONS

Oil and gas sales 3. INTEREST BEARING LOANS AND BORROWINGS Current Short term loans – secured - unsecured Non-current Convertible Notes – unsecured Convertible Notes – listed Face value of the note Interest accrued Bank loan – secured 4. ISSUED CAPITAL 4.1 Ordinary shares 217,676,895 fully paid ordinary shares (2009: 156,367,722) Movements in shares on issue Beginning of period Shares issued during the period 61,309,173 fully paid ordinary shares @$0.01	GROUP
	2010 $’000 2009 $’000
	2,194 2,361
	GROUP
	2010 $’000 2009 $’000
	- 785 - 630
	785 630
	- 5,250 6,678 6,650
	6,678 11,900 - 66
	- 11,966 - 3,806
	6,678 15,772
	GROUP
	2010 $’000 2009 $’000
	16,144 15,547 15,547 12,692 613 3,006
	16,160 15,698

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 2010

Less capital raising costs

End of period

	(16)	(151)
	16,144	15,574

• (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.

4.2 Options

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

2010 Expiry Date	Exercise Price	Number at beginning of period	Issued	Exercised	Expired during the period	Number at end of period
31 August 2012 $0.03 202,931,76 - - 202,931,768 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 - - 19,350,000 202,931,768

2009 Expiry Date	Exercise Price	Number at beginning of period	Issued	Exercised	Number at end 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

4.3 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:

2010
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
2009
Class No. at beginning	Issued	Converted	No. at end of
ofperiod		into ords	period
CPS - B 5	-	-	5
CPS - C 2	-	-	2

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 2010

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

5. EARNINGS PER SHARE

5. EARNINGS PER SHARE
	GROUP
	2010	2009
	$’000	$’000
Reconciliation of earnings to net loss
Net loss	(9,140)	(3,926)
Earnings/(loss) used in the calculation of basic and
dilutive EPS	(9,140)	(3,926)
	Number	Number
Weighted average number of ordinary shares
outstanding during the period used in calculation of	184,484,575	134,311,390
basic and dilutive EPS

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.

6. INTERESTS IN JOINT VENTURES

As at 30 June 2010, the investment in the associate is not brought to account as the Company’s share of losses exceeds its interest in the associate and as such these further losses are not recognised.

7. SUBSIDIARIES

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

Name of Subsidiary	Place of	Percentage held	Percentage held
	Incorporation	2009	2008
Advance Exploration and Production,
Inc	Texas USA	100%	100%
AEPI Midstream,Inc	Texas USA	100%	100%
Advance Wolfberry,Inc	Texas, USA	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).

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 2010

8. COMPLIANCE STATEMENT

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

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____ David Ballantyne Company Secretary

Date: 28 February 2011