HiFound this passage(Note 1C in the auditors report)- The...

Hi

Found this passage(Note 1C in the auditors report)- The comments on second option relate to a NO VOTE to the scheme of arrangement.

Regards DB


Quote

(c) Going concern
The Group has acquired gas tenements in Australia and applied its exploration expertise using seismic, exploration drilling and pilot production wells to certify coal seam gas (CSG) reserves on its key tenements. The Group is currently seeking markets and evaluating the best alternatives for commercially exploiting these reserves. In addition to the many uncertainties inherent in the exploration and CSG industry, the Group does not yet have a significant revenue stream and has been relying on raising money in capital markets to fund exploration and operational activities.
At 30 June 2011 the Group had cash balances of $63.59M with committed expenditure of $22.5M at that date for the next twelve months and current liabilities of $20.1M excluding operational and administrative costs. Subsequent to the year-end additional commitments have been entered into including those relating to the Santos Scheme of Arrangement and LNG Newcastle FEED. As such, based on the current financial position of the Group and committed expenditure by the Group at the date of this Report there are insufficient funds available for the Group to meets
its liabilities as and when they fall due over the next
12 months, which gives rise to significant doubt as to how the Group will fund its activities as a Going Concern.
Despite the material uncertainties regarding the source of future funding, Management have assessed the Group�s ability to continue as a Going Concern based on the following alternative options available:
Firstly, on 18 July 2011, Santos announced a takeover
of the Company by way of Scheme of Arrangement under which the Company�s shareholders will receive 0.06881 Santos shares for every ESG share. The Scheme requires ESG shareholders to vote on or around 28 October 2011. If the Company�s shareholders vote in favour of the Scheme, the Company will become a subsidiary of Santos. Given Santos�s desire to purchase the Company and its commercial insight to its operations, being a joint venture partner in PEL 238, it is expected that Santos will provide continued support to enable to Group to meet its obligations until September 2012.
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Secondly, if the Company�s shareholders vote against
the Scheme, the Company may increase liquidity over
the next 12 months by:
a) raising capital to meet its budgeted expenditure
b) significantly reducing discretionary Budgeted
cash outflows
c) selling a portion of its 65% interest in the
Narrabri Gas Project
d) selling non-core assets

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The Financial Report has been prepared on a Going Concern basis, as the Directors believe that one, or a combination, of the above options available to management will be implemented, which will enable the Group to pay its debts as and when they become due for a period of twelve months from the date of approving this Report.
Should the Group be unable to continue as a going concern it may be required to realise its assets and discharge its liabilities in the normal course of business at amounts different to those stated in the financial statements.
The financial statements do not include any adjustment relating to the recoverability and classification of asset carrying amounts or the amount of liabilities that might result should the Group be unable to continue.

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