(XTR) Xtract Energy

Post Period Highlights

Andy Morrison, Chief Executive of Xtract Energy, commented:

"The operations of the Group have been substantially transformed over the period under review in response to dramatic changes in market conditions. The move away from being essentially a passive investment company to one with more active involvement in its assets was achieved more quickly than was foreseen last year. Although much has been done to position the Company for the future, the transformation is as yet incomplete. The prize for getting it right can be substantial, even in these more challenging post-boom times."

For further information, please contact:

Xtract Energy plc Andy Morrison, CEO +44 (0) 20 7079 1798

Smith & Williamson Corporate David Jones +44 (0) 20 7131 4000
Finance Limited Azhic Basirov

For further Information on Xtract please visit www.xtractenergy.co.uk

Chairman's Statement

The first six to nine months of the financial year were marked by financial turmoil and declining commodity prices which made for extremely challenging investment conditions. Share prices for smaller quoted energy firms such as Xtract declined, driven in part by the need for liquidity of hedge funds and other investors. The sustained adverse market conditions and a heightened uncertainty over the outlook for oil prices necessitated a reassessment of the Group's investment priorities. The final months of the period saw some tentative signs of recovery in the global economy, although there remains a high level of uncertainty over future trends and management of the Group's cash position remains a priority.

Given the circumstances, I am pleased to be able to say that there are some notable positive achievements to report in the period. Indications are that our new joint venture in Turkey, Extrem Energy A.S. ("Extrem"), may have made a more promising oil discovery than was expected with its first on-shore well in its Alasehir license area and that it has the potential to become a cornerstone of the portfolio. Further details of the developments and operations in Turkey can be found in the CEO's Review section of this report.

Some tough decisions were needed

In the first part of the period, the Company had to make some tough decisions to reduce cash burn and to focus its investments in the most promising areas. This included placing the technology development of subsidiary Xtract Oil Ltd into hibernation, although Xtract Oil Ltd intends to maintain its mineral rights over its 2.12 billion barrels of indicated and inferred resources until conditions improve sufficiently to attract further investment.

The Company succeeded in putting its interests in Kyrgyzstan onto a stable footing by ending its involvement in the water injection project and farming out 75% of the exploration venture to Santos in exchange for commitments to fund up to US$8.5 million towards a 2009-10 exploration programme. These arrangements significantly reduced overall cash burn and enabled the Company to gain exposure to a potentially interesting exploration target at a manageable level of investment.

In order to help protect and advance shareholder interests in the new business environment, we decided that action was required to change the board of associate, Elko Energy Inc ("Elko"). In December 2008, three independent non-executive directors of Elko resigned, together with the CEO, Rudolf Kleiber. John Conlon (a director of Xtract) and Jack Bray (a director of DM Bray Capital) were appointed and Jeremy Kane agreed to remain as an independent non-executive director for a temporary period to continue to represent the interests of the minority shareholders. Andy Morrison remained on the Board and became Acting CEO of Elko, pending the appointment of Peter Moir who commenced full time employment as director, President and CEO of Elko on 26 January 2009.

The back-drop provided by the economic and financial challenges in the early part of the year were made more serious for the Group by the disappointing outcome of the drilling campaign by associate MEO Australia Ltd ("MEO") in the North-West Shelf of Australia. The Zeus-1 well spudded in January 2009. Testing results confirmed the primary objective sands to be water rather than gas-bearing and the well was plugged and abandoned in February 2009. Fortunately, the Group was not over-committed to MEO having positioned itself to gain from the significant upside that would have arisen from success at Zeus-1, whilst at the same time seeking to ensure that its other portfolio businesses had sufficient funding whatever the drilling result.

Our investment in Turkey proved to be a turning point

In Turkey, under the terms of the agreement with Merty Energy ("Merty"), we created a Turkish company, Extrem Energy A.S. ("Extrem") in which Xtract and Merty initially held 20% and 80% interests respectively. Xtract invested US$5.0 million to fund Extrem's initial work programme and Merty applied for the transfer of a portfolio of seven licence interests into Extrem. On 30 June 2009, Xtract exercised its option to increase its share-holding by contributing a second tranche of US$1.75 million. A third and final optional tranche of US$1.75 million was subscribed on 05 August 2009 to take the Company's holding to the current level of 34%.

The Group remained flexible as market conditions evolved

The new Elko board has advanced the asset portfolio considerably during the year and is now much better placed to attract industry participants to farm in to developments in the Netherlands and Denmark. Discussions with infrastructure providers have advanced alongside discussions with potential partners. The external market remains capital-constrained which presents challenges to even the best-prepared projects, but we remain optimistic that Xtract can recover its investment in Elko and potentially achieve an attractive return. We would like to bring Elko to a liquidity event as soon as practicable.

In April 2009, Xtract announced that it had entered into a conditional agreement with Lysander Minerals Corporation ("Lysander") of Canada under which the Company would acquire new common shares and warrants in Lysander in exchange for Xtract's entire interest in Elko. The proposed arrangement aimed to crystallise the value of Elko within the Company's portfolio and provide valuable commercial flexibility to the Xtract Group. From a financial perspective it promised to strengthen liquidity by increasing the proportion of the Group's holdings in publicly listed entities.

At the present time, discussions with Lysander are paused while Lysander works on its other planned investments. Negotiations on the conditional agreement may or may not resume at a later date.

During the second quarter of 2009, Xtract began a process of managed exit from its investment in MEO in order to finance other investments within its portfolio and to improve overall liquidity. During the course of the reporting period, the Company had reduced its holding in MEO from approximately 14.2% to approximately 3.4% of the issued capital, raising a total of A$8.95 million. By 7 August 2009, the Company had sold all of its remaining shares in MEO. As a result of the disposals, Xtract no longer holds any interest in MEO. The total return on investment over the holding period was an estimated 124% (see side panel for details).

In other developments, investee company Wasabi Energy Ltd ("Wasabi") raised approximately A$4.6 million in June 2009 through a pro-rata rights issue of convertible preference shares. Funds from the issue were used to discharge A$2.36 million of convertible loan notes and to provide working capital. The balance of $1.15 million of the outstanding loan notes was repaid by the distribution of 35,000,000 Xtract shares to the note holders. The distribution of the Xtract shares resolved the cross-holding situation that had arisen from the 2008 sale of these shares by Cambrian Mining Plc to Wasabi. As a result of the rights issue, Xtract's holding in Wasabi at the end of the period had reduced to approximately 12.1%. In post-period developments the disposal of Xtract's remaining holding in Wasabi was completed.

The need for additional liquidity in the Company has been reduced for the time being by the disposal of our stakes in MEO Australia Ltd and Wasabi Energy Ltd, but liquidity remains a challenge on which management is focused.

On 13 July 2009, Cambrian Mining Plc was itself taken over by Western Coal Corporation ("Western Coal") with the result that Western Coal took over as the Group's major shareholder holding approximately 45.3% of the issued capital.

Increased focus on core oil and gas portfolio

The year under review has been one of considerable change. Xtract has demonstrated its flexibility to adapt to these challenging and unprecedented times. The consolidation that has taken place over the past twelve months has resulted in a stronger and leaner company. Xtract looks forward to further success in Turkey and the return to the overall stability of world financial markets. Xtract is committed to focusing its resources on its core oil and gas portfolio (including oil shale) and to continue to provide sustained growth for shareholders.

Dated: 13 November 2009

John Newton

Executive Chairman

CEO's Review

The operations of the Group have been substantially transformed over the period under review in response to dramatic changes in market conditions. The move away from being essentially a passive investment company to one with more active involvement in its assets was achieved more quickly than was foreseen last year. Although much has been done to position the Company for the future, the transformation is as yet incomplete. The prize for getting it right can be substantial, even in these more challenging post-boom times.

Underpinning our relative confidence in the future is our recent investment in Turkey, where on-shore appraisal and development opportunities offer promising rewards for manageable levels of financial commitment. The off-shore licences within the Turkish portfolio provide additional upside potential which can be accessed when investment conditions permit.

Extrem Energy A.S. (Turkey)

On 31 August 2008, the Company completed a definitive agreement with Merty Energy, Petroleum Exploration, Education and Services Inc ('Merty') of Turkey regarding an investment in a new exploration and production joint venture. Xtract and Merty, together, aim to create medium-sized oil and gas exploration and production business initially focused on Turkey, where Merty has particular expertise and experience.

Under the terms of the agreement, the parties created a Turkish company, Extrem Energy A.S. ("Extrem") in which Xtract and Merty initially held 20% and 80% interests respectively. Xtract invested US$5.0 million to fund Extrem's initial work programme and Merty applied for the transfer of a portfolio of seven licence interests into Extrem.

The licences transferred to the new company include 100% interests in offshore licences at Candarli Bay and in the Sea of Marmara and onshore licences at Edirne and Siraseki plus an 80% interest in an onshore licence at Alasehir. The other 20% of the Alasehir licence is owned by Turkish company, Petrako Petrol Gas and Industrial Co. The intention of the partners is that the lower risk onshore developments at Alasehir and at Edirne will provide early oil and gas revenues to enable the company to develop the offshore licences, including the very exciting prospect at Candarli Bay.

The first well drilled by Extrem, known after as Sarikiz-2 was drilled in the Alasehir licence area. The Alasehir Basin is a tertiary clastic basin located in the XVII-Izmir District of South-West Turkey, in an industrial area. The basin has a sedimentary succession of 3,000-4,500m in thickness created by large rifting faults and has a geothermal gradient that causes early maturation of hot shales. The reservoir is lower-middle Miocene clastics, which are also thought to provide the source. Effective seals are provided by bounding faults and clay zones within the formation.

The well was spudded on 31 October 2008 and drilling was completed to the target depth of 1,843m at 1630hrs on 07 December 2008. Wire line logging and pressure testing indicated a producible and commercial oil discovery. Following completion of the logging procedures, 23 levels of sandstone were assessed to have producible oil. Of these, 12 levels with a combined reservoir thickness of 75m were selected for subsequent production testing. The total reservoir thickness encountered greatly exceeded the pre-drill estimate of 10m.

The Sarikiz-2 production test began on 15 May 2009 and was completed on 30 July 2009. It took much longer than originally expected due to various technical complexities that were encountered, but it was ultimately successful. The well was shut in as a production well with commercial production expected to commence in the final quarter of 2009 following construction of the necessary surface facilities. Production performance from the initial wells will be analysed to determine the optimal well configuration to drain the structures over a reasonable field life of 20-25 years. Formal field development plans and reserve categorisation will be finalised once commercial production has been established.

In addition to developments at Alasehir, Extrem completed technical work on its other on-shore licence areas during the year with a view to identifying future drilling targets. The results from seismic and GORE geochemical surveys over the Siraseki licence area near the Syrian border gave rise to a new prospect called Menekselik. The sandstone structure is a fault bounded anticline with an estimated area of 11.2 square km and an expected pay thickness of 30m.

At Edirne in the Thrace basin of western Turkey, a programme of seismic acquisition was completed on 9 August 2009. The acquisition of GORE geochemical data was completed on 19 September 2009. The seismic and geochemical data will be analysed together to identify drilling targets in this well-established gas-bearing zone. If successful, these targets will be drill-ready by early 2010. The area is close to existing downstream infrastructure, so production can be established quickly in the event of success.

In summary, Extrem has developed an impressive portfolio of near term production potential and highly prospective drill-ready targets. The rate of growth of Extrem will be governed to a large extent by the speed at which production can be brought on and at which reserves are confirmed by independent experts.

Elko Energy Inc (Dutch and Danish North Sea)

Elko operates the largest offshore exploration licence in Denmark with an area of 1.3 million acres. The licence area offers P50 un-risked net prospective resources of 1.8 billion barrels oil or 8.4 Tcf of gas (evaluated by Tracs International, an independent reservoir engineer, in May 2008). Elko owns 80% of the licence with 20% held by a Danish government entity.

In the Netherlands sector of the North Sea, Elko operates two gas-bearing exploration blocks. Block P1 is located on the southern margin of Southern Permian Gas basin and covers 51,623 acres. Eight wells have been drilled by previous operators. Of these, five encountered gas on three separate structures. Block P2 is directly adjacent and east of Block P1. Elko holds both licences which represent a 60% working interest. Dutch Government partner Energie Beheer Nederland BV (EBN) owns the remaining 40% working interest.

A National Instrument 51-101 independent engineering report was prepared by TRACS International during 2008 on the hydrocarbon resources contained within the P1 and P2 Blocks. The report estimated hydrocarbon gas in place at over 250 bcf within the Slochteren sandstone with additional prospects identified which could contain a further 500 bcf.

Progress on the Dutch assets was hampered during 2008 by the lack of a joint operating agreement and the inability of former licence partner Oyster BV to attract interest in the intended disposal of its holding. This situation became more acute with the decline in oil and gas prices and the significant deterioration in investment conditions in the later part of the year.

Unfortunately, Elko did not meet its objective of making an Initial Public Offering and a listing on a recognised stock exchange within one year of the December 2007 pre-IPO fund-raising. Although much of the preparatory work was completed, Elko's financial advisors suggested the IPO be delayed due to market volatility. As equity and debt markets became largely inaccessible to small-cap companies, attention has turned to finding funding partners amongst strategic and industry participants.

The disappointing performance of Elko in the first part of the year led Xtract to review its approach to the investment. Whilst recognising the achievements of Mr Rudi Kleiber, founder and former CEO, in establishing Elko as a promising independent operator, Xtract determined that a new board at Elko would leave it better positioned to advance its attractive asset portfolio and bring it to market when conditions permitted.

The board changes were brought about by a process initiated in December 2008 by Xtract and DM Bray Capital LLC ("DM Bray"), at that time the two largest shareholders of Elko who together held approximately 48% of the voting interests in Elko. Xtract and DM Bray called for the replacement of the Board with a new slate of directors.

As a result of the changes, Andy Morrison remained a director of Elko and was joined on the Elko Board by fellow Xtract Director, Mr John Conlon and DM Bray nominee Mr Jack Bray. Former Elko Chairman, Jeremy Kane agreed to remain as an independent non-executive director for a temporary period to continue to represent the interests of the minority shareholders. The board changes were aimed at increasing alignment of Elko's strategy with the interests of all shareholders.

In January 2009, Elko confirmed the appointment of a new President and Chief Executive Officer, Mr Peter Moir with effect from 26 January 2009.

The new board got to work quickly. Elko completed the acquisition of Oyster Energy BV on 19 February 2009, increasing Elko's combined working interest in Netherlands Blocks P1 and P2 from 33% to 60%. The acquisition of Oyster resolved the previous lack of a joint operating agreement and enabled Elko to proactively progress the development and marketing of the Dutch assets.

During the first quarter of 2009, an integrated block development concept for the discoveries and prospects on Blocks P1 and P2 was prepared. The concept provided for the offshore removal and underground storage of CO2 contained in gas within the P1/P2 discoveries. The geology, geophysical and reservoir engineering definitions were further developed to create an outline field development plan and to pin-point an appraisal well location.

Discussions with offshore facilities and pipeline infrastructure owners identified a number of options for the offshore removal and storage of CO2 and the onward transportation of sales gas to European markets. A number of potential new financing partners have been identified to replace Oyster via a farm out of a percentage of Elko's working interest in Blocks P1 and P2. Partnering discussions continue in parallel with discussion with infrastructure owners.

After the reporting period on 26 August 2009, Elko and its subsidiary Dragon Energy Inc ("Dragon") signed an overriding royalty agreement whereby Elko will benefit from a 2.5% overriding royalty from future revenues from the Kotaneelee field, over a maximum term of five years capped at an aggregate value of CDN$750,000. In exchange Elko returned to Dragon 15,600,000 common shares representing its 51% ownership and Jack Bray, Peter Moir and Andy Morrison resigned from the board of Dragon.

Dragon holds a 30.667% working interest in the Kotaneelee field in the Yukon Territory, Canada operated by Devon Energy Corp. Gas production at Kotaneelee is in decline and gas prices in North America are depressed resulting in a significantly weakened revenue stream from current production levels. The disposal of Dragon eliminated a potential liability from Elko's balance sheet.

In Denmark, enhanced seismic processing of the Chalk prospects was undertaken. The results are part of a marketing initiative aimed at securing an additional financing partner or partners. Elko has designed a low cost exploration drilling initiative that will further de-risk its future work on the Danish asset. These plans have been favourably received by its Danish state partner and the Danish Energy Agency because of the lower risk scenario they offer as Elko aims to exploit the asset's exceptionally high potential.

Whilst much has been achieved by the new Elko board, the company remains in a challenging situation. Its projects are attractive, but capital-intensive. Financing discussions are advanced, but there can be no assurance that these will ultimately lead to definitive arrangements. It is hoped to unlock the assets and enable them to be taken forward through the exploration and appraisal phases thereby adding significant intrinsic value to the portfolio. In managing its investment in Elko, Xtract drives for its success whilst at the same time preparing for alternative scenarios.

MEO Australia Ltd (Australia)

At the beginning of the reporting period, MEO Australia Ltd ("MEO") had formed a strategic alliance with Resource Development International ("RDI") whereby RDI farmed into WA-361-P for a 35% interest by funding 80% of the Zeus-1 well and was granted options to participate in MEO's remaining projects.

The global financial market downturn in late 2008 caused a deferral of the planned IPO of RDI. As a result, RDI was unable to exercise its options to farm-in to WA-359-P and WA-360-P by December 1 and they lapsed. RDI's options in relation to MEO's Timor Sea Projects also lapsed on 31 December 2008. MEO secured a 12 month extension to drill/drop options on WA-359-P and WA-360-P which were originally due to expire 1 January 2009 and negotiated variations to the work programs with the Designated Authority.

The Zeus-1 well spudded on 17 January 2009. An MDT formation pressure testing program confirmed the primary objective sands to be water bearing and the well was plugged and abandoned in February 2009. While the results from Zeus-1 were disappointing, MEO remains optimistic that its North West Shelf acreage has the potential to host substantial gas accumulations adjacent to existing and planned LNG infrastructure.

In May 2009, the Federal Government renewed Major Project Facilitation status for the Tassie Shoal Methanol and the Timor Sea LNG Projects. Tassie Shoal is an area of shallow water in Australian waters about 275 km north-west of Darwin with significant undeveloped gas fields within a 150 km radius.

As noted in the Chairman's statement, Xtract had largely exited its position in MEO by the end of the year and has now completed that manoeuvre. Whilst we continued to have confidence in the prospects for MEO, we decided to focus our resources on our investment in Extrem. We believe that Extrem offers a stable growth platform and one which can only be accessed by market investors through participation in Xtract.

Zhibek Resources Ltd (Kyrgyzstan)

In October 2008, Xtract and Santos International Holdings Pty Ltd ("Santos"), a subsidiary of Santos Ltd, Australia's second largest oil and gas company entered a farm-in agreement in relation to Xtract's wholly-owned subsidiary, Zhibek Resources Limited ("Zhibek"). Santos assumed operatorship and control of Zhibek.

Under the agreement, Santos is funding up to US$8.5 million of Zhibek's near-term exploration programme, which includes a 2D seismic programme over the Tash Kumyr and Pishkaran licence areas in the Fergana basin area in the Kyrgyz Republic, to earn a 75% interest in Zhibek. The seismic acquisition programme commenced in November 2008 and was completed in February 2009. Analysis and interpretation are in progress. If the seismic results are in line with expectations, a well is planned for 2010. Zhibek has now dropped the Pishkaran licence in order to focus on Tash Kumyr.

Xtract retains representation on the Board of Zhibek and will contribute up to US$1.5 million to Zhibek's funding in the latter stages of the current exploration programme and may contribute to Zhibek's future exploration and development programs.

As part of re-arranging its Central Asian investments, commitments, and staffing, Xtract ceased its involvement in development of a water injection project at the Beshkent-Togap oil field in Kyrgyzstan. Wholly owned subsidiary Zhibek Oil and Gas Ltd was closed and de-registered.

Oil Shale

Julia Creek, Queensland, Australia

In August 2008, the Queensland Premier announced a 20-year moratorium on a proposed oil shale development in the Whitsunday coastal region, and a 2-year review period for oil shale developments throughout the state during which no new mining activity would be permitted. Although the mineral rights of Xtract's 100% subsidiary Xtract Oil Ltd ("XOL") in Queensland were not affected, the review created uncertainty over the extraction of the underlying oil shale.

In December 2008, XOL held a meeting with representatives of the Queensland government to present the progress of XOL's technology and to understand the proposed review process. The response to the technical progress was encouraging but the government representatives were not able to give much further information about the review process or its likely impact. Under these circumstances, Xtract took the decision to scale back significantly its projected investment in the development of oil shale technology.

Prior to scaling back Julia Creek activities, laboratory testing had provided indicative temperature and pressure conditions for generation of oil using natural gas as a source of both hydrogen and heat. A scoping study, which was based on the results of tests completed before the Government announced its policy review, indicated that a commercial project based on XOL's technology could be feasible.

XOL continues to maintain mineral rights over its 2.12 billion barrels of indicated and inferred resources at Julia Creek. By maintaining the mineral rights at limited cash expense, Xtract retains the option to exploit the resource when investment conditions are more supportive.

Tarfaya, Morocco and Nevis Valley, New Zealand

In September 2008, the company announced the creation of a joint venture in Morocco with Alraed Limited Investment Holding Company WLL, a company controlled by His Highness, Prince Bandar Bin Mohd. Bin Abdulrahman Al-Saud of Saudi Arabia. This was the culmination of discussions that had lasted several months. The joint venture company, Xtract Energy (Oil Shale) Morocco SA, went on to sign a Memorandum of Understanding with the Moroccan Office National des Hydrocarbures et des Mines ("ONHYM") for the purposes of evaluation and possible development of an oil shale deposit near Tarfaya, in the south west part of Morocco. Xtract holds 70% of the joint venture.

Following the decision in December to hibernate work on Xtract's proprietary technology in Australia and in light of market turmoil and falling oil prices, no significant work was done by the joint venture during the reporting period. A decision as to whether to conduct an initial pre-feasibility study is pending. Since July 2009, investment conditions have started to improve and it is hoped that work can begin during the current financial year.

The Company's oil shale tenements in the Nevis Valley in New Zealand were relinquished.

Other Interests

Until the end of the period, Xtract continued to hold approximately 12.1% of Wasabi Energy Ltd ("Wasabi"), a diversified investor in traditional and renewable energy technologies. As part of its drive to simplify its portfolio and to focus on its oil and gas interests, Xtract sold its entire remaining interest in Wasabi during September 2009.

In Mexico, Xtract maintained its ownership of Sermines Inc and its licence portfolio of gold exploration properties. No significant operational activity was undertaken during the year.

Dated: 13 November 2009

Andy Morrison

Chief Executive Officer

Investing policy

Xtract Energy identifies opportunities and invests in a portfolio of early stage energy sector businesses and projects with very significant growth potential. We engage actively with the associated management teams to build and crystallise shareholder value through critical technical inputs, board-level experience and the application of corporate finance expertise. We aim to achieve returns for our shareholders through the capital growth of our investments.

The Directors evaluate new investment opportunities from time to time and may engage the Company in additional businesses and projects in conventional and non-conventional fields such as oil shale. Opportunities considered may be green field and/or involve the acquisition of or participation in already existing businesses which may be quoted or unquoted. Due to the typically active nature of our engagement with investee companies, we expect that our portfolio will continue to be focused on a relatively limited number of significant investments rather than being very broadly spread.

Geological information and estimates of resources

Extrem Energy

The geological information and estimates of resources contained in the annual report relating to Xtreme Energy has been provided using the SPE standards and includes the following terms: "mbbl" (million barrels); "bcf" (billion cubic feet); "P50" ("development pending - contingent resources"). This information has been reviewed and approved by Ongun Yoldemir, Managing Director of Extrem Energy, who has a masters degree in geological engineering and worked as an explorationist in the oil and gas sector in the Middle East, Kazakhstan, Azerbaijan, and North Sea, has over 28 years' experience in the resource and energy sector and is a member of the American Association of Petroleum Geologists, European Association of Geologists and Engineers, the Society of Exploration Geophysicists and several related Turkish institutions.

XOL

The geological information and estimates of resources contained in the annual report relating to XOL has been provided using the internationally recognised Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves (The JORC Code - 2004 Edition). This information has been reviewed and approved by Dr John E. Shirley (Managing Director of Xtract Oil Limited), who has a BSc and PhD in Geophysics from the University of Tasmania, over 40 years' experience in the resource and energy sector and is a member of the Society of Petroleum Engineers.

Elko and MEO

Elko, as an unquoted company, and MEO, as an ASX quoted company, are not subject to the AIM Rules and the geological information and estimates of resources contained in this annual report relating to these companies has been supplied by these companies and has not been reviewed by a named "qualified person" as defined and required by the AIM Note for Mining, Oil and Gas Companies.

Consolidated Income Statement

Year ended 30 June 2009
Note Year Year
ended ended
30 June 30 June

£'000 £'000

Continuing operations
Administrative and operating (2,101) (2,885)

expenses
Share of results of associates (1,431) (1,707)

Operating loss (3,532) (4,592)

Investment revenue 3 124 207
Finance costs (323) -
Other gains and losses 3 (18,805) 5,340

(Loss)/Profit before tax (22,536) 955

Tax credit/(expense) 5 5,729 (932)

(Loss)/Profit for the year from (16,807) 23

continuing operations Discontinued operations
Loss for the year from discontinued 9 (1,294) (811)

operations
Loss for the year 4 (18,101) (788)

Attributable to:
Equity holders of the parent (18,101) (788)
Minority interest - -

(18,101) (788)

Net Loss per share From continuing operations
Basic (pence) 6 (2.24) 0.00

Diluted (pence) 6 (2.24) 0.00

From continuing and discontinued operations
Basic (pence) 6 (2.41) (0.11)

Diluted (pence) 6 (2.41) (0.11)
Consolidated statements of recognised income and expenditure

Year ended 30 June 2009
Note Year Year
ended ended
30 June 30 June

£'000 £'000

(Losses)/gains on revaluation of 10 (9,098) (1,963)

available-for-sale investments taken to equity
Unwinding of fair value gains on transfer 10 - (547)

to investment in associate
Minority interest movement due to a 10 91 -

subsidiary becoming an associate
Exchange differences on translation of 10 705 829

foreign operations
Tax credit/(expense) on items taken 10 2,616 540

directly to equity
Net (loss)/gain recognised directly in (5,686) (1,141)

equity
Transferred to income statement on sale 6,518 (1,558)

of available-for-sale investment
Loss for the year (18,101) (788)

Total recognised income and expense for the year
(17,269) (3,487)

Attributable to:
Equity holders of the parent (17,269) (3,487)

(17,269) (3,487)

Consolidated balance sheets

As at 30 June 2009
Note As at As at
30 June 2009 30 June
£'000 2008
£'000

Non-current assets
Intangible assets 7 - 10,494
Property, plant and equipment 21 28
Investments in associates 5,619 3,900
Investments in subsidiaries - -
Financial assets 8 3,215 15,962
Loans to subsidiaries - -
Deferred consideration 310 -
Deferred tax asset 284 595
9,449 30,979

Current assets
Derivative financial instruments 8 - 23
Trade and other receivables 717 130
Advance payment 2,760 -
Cash and cash equivalents 3,182 6,362
Assets held for sale 9 - 2,324
6,659 8,839

Total assets 16,108 39,818

Current liabilities
Trade and other payables 486 439
Current tax liabilities 3,740 3,636
Loans from subsidiaries - -
Liabilities directly associated with assets 9 - 69

classified as held for sale
4,226 4,144

Net current assets/(liabilities) 2,433 4,695

Non-current liabilities
Deferred tax liabilities 14 5,595

Total liabilities 4,240 9,739

Net assets 11,868 30,079

Consolidated balance sheets

As at 30 June 2009

Note As at As at
June 30 June 30

£'000 £'000

Equity
Share capital 10 752 752
Share premium account 10 24,394 24,394
Share based payments reserve 10 976 956
Available for sale reserve 10 (2,945) (2,981)
Revaluation reserve 10 - 962
Exchange translation reserve 10 1,516 811
Retained earnings 10 (12,825) 5,276

Equity attributable to equity holders of the 11,868 30,170

parent
Minority interest 10 - (91)

Total equity 11,868 30,079

Consolidated cash flow statements

Year ended 30 June 2009
Note Year ended Year
30 June ended
2009 30 June
£'000 2008
£'000

Net cash used in operating activities 11 (2,332) (2,431)

Investing activities
Interest received 3 124 207
Government grants 3 179 119
Purchase of property plant and equipment (8) (83)
Acquisition of intangible assets - (78)
Disposal of trading investments - 665
Purchase of trading investments - (433)
Disposal of available for sale 3,668 1,086

investments
Purchase of available for sale 8 (65) (424)

investments
Disposal of associates 8 - 9,751
Acquisition of associates 8 (1,465) (4,223)
Prepayment for an associate (2,760) -
Purchase of shares (590) -

Net cash (used in)/from investing (917) 6,587

activities Financing activities
Proceeds on issue of shares - warrants - 642
Loans to subsidiaries - -
Loans from subsidiaries - -

Net cash (used in)/from financing - 642

activities
Net (decrease)/increase in cash and cash (3,249) 4,798

equivalents
Cash and cash equivalents at beginning 6,362 1,582

of year
Effect of foreign exchange rate changes 69 (18)

Cash and cash equivalents at end of year 3,182 6,362

1. General information

Xtract Energy plc is a company incorporated in Great Britain under the Companies Act 2006. The address of the registered office is 55-56 St James Street, London SW1 1LA.

The financial information set out in this announcement does not constitute the Group's statutory accounts for the years ended 30 June 2009 or 2008, but is derived from those accounts. Statutory accounts for the period ended 30 June 2008 have been delivered to the Registrar of Companies and those for the year ended 30 June 2009 will be delivered following the Company's annual general meeting. The auditors have reported on those accounts; their report for the years ended 30 June 2008 and 30 June 2009 drew attention to disclosures made in those financial statements concerning existence of a material uncertainty relating to the Group's ability to continue as a going concern, without qualifying the report. Please refer to note 12 for further information on this matter.

2. Significant accounting policies

Basis of accounting and going concern

These financial statements have been prepared in accordance with International Financial Reporting Standards ("IFRS") and IFRIC interpretations and with those parts of the Companies Act 2006 applicable to companies reporting under IFRS. A summary of the more important accounting policies is set out in the Company's statutory accounts, and consideration of a material uncertainty relating to the application of the going concern basis is detailed in note 12.

3. Revenue and other gains and losses An analysis of the Group's revenue and other gains and losses is as follows:
Year Year
ended ended
30 June 30 June

£'000 £'000

Continuing operations
Interest on bank deposits 124 207

Total revenue 124 207

Continuing operations Other gains and losses:
Gains on disposal of associate - 2,920
(Loss)/Gains on disposal of available for (9,312) 568

sale assets
Other income 37 255
Research and development grants (a) 179 119
Intangible impairment (9,431) -
Write down of investment in associate (267) -
(Decrease)/Increase in the fair value of (21) 233

derivative financial instruments
Gain on dilution of interest in associates 10 1,245

Total other gains and losses from (18,805) 5,340

continuing operations Discontinued operations

Other gains and losses:
Write down of intangible assets - (530)
Dilution loss on the sale of subsidiary (698) -
Gains/Losses on disposal of fixed assets (477) 1

Total other gains and losses from (1,175) (529)

discontinued operations
Total other gains and losses (19,980) 4,811

(a) Government grants received in relation to research and development expenditure on oil shale extraction technologies in Australia.

4. Loss for the year

Loss for the year has been arrived at after charging/(crediting):
Year Year
ended ended
30 June 30 June

£'000 £'000

Net foreign exchange losses/(gains) 241 (17)
Research and development costs 371 310
Depreciation of property, plant and equipment 15 37
Share based payments expense 20 200
Staff costs 520 666

Auditors' remuneration
Year Year
ended ended
30 June 30 June

£'000 £'000

The analysis of auditors' remuneration is as follows:
Fees payable to the Company's auditors and 68 80

their associates for the audit of the Group's annual accounts
Fees payable to the Company's auditors and 25 102

their associates for the audit of the Company's subsidiaries pursuant to legislation

Total audit fees 93 182

Fees payable to the Group's auditors and its associates for other services:

Total non-audit fees 45 27

5. Tax
Year Year
ended ended
30 June 30 June

£'000 £'000
Current tax 47 2,530
Deferred tax (5,776) (1,598)
(5,729) 932

Corporation tax is calculated at 28% (2008: 28%) of the estimated assessable (loss)/profit for the year.

Taxation for other jurisdictions is calculated at the rates prevailing in the respective jurisdictions.

The Group tax (credit)/charge for the year can be reconciled to the (loss)/profit per the income statement as follows:
Year Year
ended ended
30 June 30 June

£'000 £'000

(Loss) / profit before tax:
Continuing operations (22,536) 955
Discontinued operations (1,294) (811)
(23,830) 144
Tax at the UK corporation tax rate of 28% (6,672) 41

(2008: 28%)
Tax effect of permanent differences (839) 35
Tax effect of unrecognised tax losses carried 1,351 559

forward and other temporary differences
Overseas taxes on disposal 47 2,466
Double tax relief (47) (2,231)
Impact of differing tax rates in overseas - 62

jurisdictions
Tax effect of writing off non-taxable 431 -

goodwill

Tax (credit)/expense for the year (5,729) 932

6. (Loss)/Earnings per share

From continuing operations
Year Year
ended ended
30 June 30 June

£'000 £'000
(Loss)/Earnings for the purposes of basic (16,807) 23

and diluted earnings per share ("EPS") being net (loss)/ profit for the year attributable to equity holders of the parent

Number Number
Weighted average number of ordinary shares 751,765,026 729,535,781

for purposes of basic EPS
Effect of dilutive potential ordinary shares - 22,078,162

for purposes of diluted EPS

The basic and diluted loss per share from continuing operations have been calculated using the loss from continuing operations for the year ended 30 June 2009 of £16,807,000 (2008 profit £23,000). The basic and diluted loss per share were calculated using a weighted average number of shares in issue of 751,765,026 (2008: 751,613,943).

From continuing and discontinued operations
Year Year
ended ended
30 June 30 June

£'000 £'000
Loss for the purposes of basic and diluted (18,101) (788)

earnings per share ("EPS") being net loss for the year attributable to equity holders of the parent

Number Number
Weighted average number of ordinary shares 751,765,026 729,535,781

for purposes of basic EPS
Effect of dilutive potential ordinary shares - -

for purposes of diluted EPS

The basic and diluted loss per share from continuing and discontinued operations have been calculated using the loss from continuing and discontinued operations for the year ended 30 June 2009 of £18,101,000 (2008 loss £788,000). The basic and diluted loss per share were calculated using a weighted average number of shares in issue of 751,765,026 (2008: 751,613,943).

Where a loss has occurred, basic and diluted earnings per share are the same because the outstanding share options and warrants are anti-dilutive. Accordingly diluted EPS is equal to basic EPS.

7. Intangible assets
Total
£'000
At 1 July 2007 11,601
Foreign currency translation 1,203
Written off during the period (530)
Transfer to held for sale (1,858)
Additions 78
At 30 June 2008 10,494
Foreign currency translation (101)

Written off during the year (a) (10,393)

At 30 June 2009 -

(a) The assessment of intangible assets for any indications of impairment involves judgment. If an indication of impairment, as defined in IFRS 6 Exploration for and Evaluation of Mineral Reserves exists, a formal estimate of recoverable amount is performed and an impairment loss recognised to the extent that carrying amount exceeds recoverable amount, as prescribed by IAS 36 Impairment.

During the year under review, impairment indicators were identified in regard to mining rights for oil shale reserves, an intangible exploration and evaluation asset previously recognised in relation to Xtract Oil Limited which resulted in an impairment charge being recorded in the first half of the year. A period of sustained adverse market conditions and a heightened uncertainty over the outlook for oil prices have necessitated a reassessment of the Group's investment priorities. Under these circumstances, Xtract took the decision to scale back significantly its projected investment in the development of oil shale technology.

Due to the early stage of the exploration and evaluation of these mining rights, the directors are not able to establish a reliable and supportable estimate of recoverable amount as per the requirements of IAS 36 Impairment. Whilst the directors remain committed to the project in the long term, and perceive that the mining rights do continue to have potential value, because of the early development stage of the project, the perceived potential value was not supportable under the applicable accounting standards, as noted. Therefore the balance of mining rights, of £10,392,847 is deemed to be impaired and was written down to £nil through the income statement in the first half of the year and remains fully impaired at the year end..

8. Financial assets
Available for sale investments As at 30 June 2009 As at 30 June 2008
£'000 £'000
Opening balance 15,962 3,206
Unwinding of fair value on transfer - (547)

to investment in associate
Movement in fair value prior to - 26

transfer to investment in associate
Transferred to investments in - (818)

associates
Transferred from investments in - 21,021

associates
Acquired during the year (a) 590 424
Rights issue purchased during the 65 -

year
Disposed during the year (b) (4,304) (5,359)
Movement in fair value (c) (9,098) (1,991)
3,215 15,962

(a) During the financial year, the Company acquired 3,825,000 shares in an AIM-listed company, Rheochem Plc, for £589,873.

(b) MEO Australia Limited 44,772,185 shares sold during the year, as at 30 June 2009 14,375,629 MEO shares were still held by the Company.

(c) Movement in fair value of investments during the year based on the market value of shares held.

Available for sale investments comprise the Group's investment in listed securities, which are held by the Group as strategic investments. The fair value of available for sale investments is based on the share price at 30 June 2009. Available for sale investments held are subject to currency and market risk, refer to note 23. In the period subsequent to year end, the Group has disposed of all its holding in MEO Australia Limited and Wasabi Energy Limited, refer to note 13.

Derivative financial instruments As at 30 June 2009 As at 30 June 2008
£'000 £'000
Opening balance 23 9
Purchased during the period - 135
Expired during period (23)
Fair value increase - 311
Transferred to investments in - (128)

associates
Transferred to held for trading on - (304)

exercise of options

9. Discontinued operations

On 17 November 2008, Xtract International Limited, a wholly owned subsidiary of Xtract Energy Plc, entered into a Farm In Subscription Agreement over its wholly owned subsidiary, Zhibek Resources Limited ('Zhibek'). Under the terms of the agreement, Santos International Holdings Pty Ltd ('Santos'), a subsidiary of Santos Ltd, was issued shares to provide them with a 75% ownership interest in Zhibek. Santos will fund up to US$8.5 million of Zhibek's near term exploration programme, and assume operatorship and control of Zhibek. Xtract will maintain a presence on the board of Zhibek and will contribute US$1.5 million to Zhibek in the latter stages of the near term exploration programme.

Based on the terms of the Farm In Subscription Agreement, consideration received for the deemed disposal of 75% of Xtracts' interest in Zhibek has been established as the minimum excess funding to be provided by Santos over and above their ownership stake, being US$1 million. This consideration has been discounted using a rate of 15%, a rate deemed appropriate by the directors given the circumstances of the transaction, over the estimated time required to complete the near term exploration programme of 2 years. Accordingly the net present value of the deferred consideration for this transaction has been calculated at £609,793 and is being released as Santos provides the excess funding under the agreement.

The details of assets and liabilities sold are as follows:

As at
17 November 2008
£'000
Carrying value of subsidiary sold 1,778
Consideration received 610
Value of associate retained 470
Loss on sale 698

On the deemed disposal Xtract have recognised their remaining interest in Zhibek at 25% of Zhibek's previous carrying value of £470,000.

The directors undertook an impairment assessment of the investment in the associate and concluded that an impairment charge of £267,000 should be recognised in order to reflect the associate balance at its fair value indicated by the purchase consideration received from Santos.

The Group's balance sheet at 30 June 2009 reflects the following position with respect to Zhibek:

Investment in associate 456
Deferred consideration 310

Zhibek has been reflected as a discontinued operation for the periods ended 30 June 2009 and 30 June 2008.

The summary of Zhibek Balance Sheet as at 17 November 2008 was as follows:

As at
17 November

£'000
Mining exploration rights 401
Cash and cash equivalents 31
Trade and other receivables 116
Inventories 11
Total assets classified as held for sale 559
Trade and other payables (112)
Total liabilities classified as held for sale (112)
Net assets of the disposal group 447

The results of the discontinued operations which have been included in the consolidated income statement, were as follows:

Year ended Year ended
30 June 30 June

£'000 £'000
Administrative and operating expenses (119) (282)
(Loss)/Gain on disposal of property, plant and - 1

equipment

Operating loss (119) (281)
Loss on disposal (698) -
Write down of intangible assets - (530)
Write down of tangible assets (477) -
Loss before tax (1,294) (811)
Attributable tax expense - -
Net loss attributable to discontinued operations (1,294) (811)

During the year, the discontinued operations operating cash inflow was £1,000. It did not generate or receive any cash in respect of financing or investing activities.

The effect of discontinued operations on segment results is disclosed in note 3.

10. Reconciliation of Changes in Equity
Share Share Share Available-for-sale Revaluation reserve Foreign currency Retained Minority Interest Total Equity
Capital premium based payments investments reserve translation reserve Earnings
account reserve
£'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000
At 1 July 2007 704 23,800 411 547 962 (18) 6,064 (91) 32,379
Issue of shares 48 594 - - - - - - 642
Share based payments expense - - 200 - - - - - 200
Movement in share based - - 493 - - - - - 493

payments reserves of associates
Tax effect of movement in - - (148) - - - - - (148)

share based payments reserves of associates
Loss on revaluation of - - - (1,963) - - - - (1,963)

available-for-sale investments
Unwinding of fair value on - - - (547) - - - - (547)

transfer to investment in associate
Tax effect of unwind of fair - - - 164 - - - - 164

value on transfer to investment in associate
Deferred tax on revaluation of - - - 376 - - - - 376

available-for-sale investments
Transfer of available-for-sale - - - (2,236) - - - - (2,236)

revaluations to income statement on disposal
Transfer of deferred tax on - - - 678 - - - - 678

revaluation of available-for-sale assets on disposal
Currency translation - - - - - 1,190 - - 1,190

differences
Tax effect of currency (361) (361)

translation differences
Loss for the period - - - - - - (788) - (788)
At 30 June 2008 752 24,394 956 (2,981) 962 811 5,276 (91) 30,079
Share Share Share Available-for-sale Revaluation reserve Foreign currency Retained Minority Interest Total Equity
Capital premium based payments investments reserve translation reserve Earnings
account reserve
£'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000
At 1 July 2008 752 24,394 956 (2,981) 962 811 5,276 (91) 30,079
Issue of shares - - - - - - - - -
Share based payments expense - - 20 - - - - - 20
Subsidiary becoming associate - - - - - - - 91 91

(a)
Revaluation of intangible - - - - (962) - - - (962)

asset (b)
Loss on revaluation of - - - (9,098) - - - - (9,098)

available-for-sale investments
Deferred tax on revaluation of - - - 2,616 - - - - 2,616

available-for-sale investments
Transfer of available-for-sale - - - 9,312 - - - - 9,312

revaluations to income statement on disposal
Transfer of deferred tax on - - - (2,794) - - - - (2,794)

revaluation of available-for-sale assets on disposal
Currency translation - - - - - 705 - - 705

differences
Profit for the year - - - - - - (18,101) (18,101)
At 30 June 2009 752 24,394 976 (2,945) - 1,516 (12,825) - 11,868

(a) Derecognising of minority interest on deconsolidation

(b) Reversal of previously recognised revaluation reserves on impairment of intangible assets

Available for sale reserve

The available for sale reserve is used to recognise fair value changes on available-for-sale investments.

Foreign Currency Translation reserve

The foreign currency translation reserve is used to record exchange differences arising from translation of the financial statements of foreign subsidiaries.

Share based payments reserve

The share based payments reserve is used to recognise the equity component of share base payments.

Revaluation Reserve

The revaluation reserve is made up of the revaluation of the assets of Xtract Oil Limited upon the piecemeal acquisition of that company.

11. Notes to the cash flow statement
Year ended 30 June 2009 Year ended 30 June 2008
£'000 £'000
Loss for the year (18,101) (788)

Adjustments for:
Share of results of associates 1,431 1,707
Investment revenue (124) (207)
Other (gains) and losses 20,158 (4,617)
Income tax (credit)/expense (5,729) 932
Government grants (179) (119)
Depreciation of property, 31 38

plant and equipment
Share-based payments expense 20 200
Due diligence fee income - (74)
Loss on disposal of property, - (1)

plant and equipment

Operating cash flows before (2,493) (2,929)

movements in working capital
(Increase)/Decrease in 47 (42)

inventories
(Increase)/Decrease in (573) 31

receivables
Increase /(Decrease) in 192 134

payables

Cash used in operations (2,827) (2,806)
Income taxes paid - -
Interest expenses 323 -
Foreign exchange differences 172 375
Net cash used in operating (2,332) (2,431)

activities

12. Going Concern

The Group is not currently generating revenues from its operations, and its forecasts and projections show that it would not have sufficient cash to make further investments in its existing and new projects in line with the Group's strategy as well as settle its current liabilities when due and meet its ongoing overheads without gaining access to additional funds. The Group continues to manage its investments as a portfolio, seeking to dispose of investments, bring in strategic partners and raise funds as appropriate to finance its obligations and to fund new investments. Management plans to address the Group's funding requirements through a combination of these measures. Management believes that it will be able to manage the Group's liquidity position successfully, but at this stage there is no committed transaction which would address the Group's cash requirements.

The directors have concluded that, given that the general economic climate remains challenging, these circumstances represent a material uncertainty that casts significant doubt upon the Group's and the Company's ability to continue as a going concern and that, therefore, the Company may be unable to realise its assets and discharge its liabilities in the normal course of business. Nevertheless after making enquiries, and considering the uncertainties above, the directors have a reasonable expectation that the Group and the Company have adequate resources to continue in operational existence for the foreseeable future. For these reasons, they continue to adopt the going concern basis in preparing the annual report and financial statements.

13. Events after the balance sheet date

Disposal shares in MEO Australia Limited.

Between 23 July and 7 August 2009, Xtract sold the remaining 14,375,629 shares in MEO Australia Limited, receiving AUD $6,998,351 after brokerage costs.

Disposal shares in Wasabi Energy Limited.

During August - September 2009, Xtract disposed of its entire shareholding in Wasabi Energy Limited, receiving AUD $1,376,757 after brokerage costs for 126,551,786 shares. The remaining 26,625,000 Wasabi shares were exchanged into 1,775,000 Elko shares.

Elko Energy

In August 2009 Xtract has acquired additional 1,775,000 shares of Elko increasing its holding in the company to 36,775,000 (36.81%).

After the reporting period on 26 August 2009, Elko and its subsidiary Dragon Energy Inc ("Dragon") signed an overriding royalty agreement whereby Elko will benefit from a 2.5% overriding royalty from future revenues from the Kotaneelee field, over a maximum term of five years capped at an aggregate value of CDN$750,000. In exchange Elko returned to Dragon 15,600,000 common shares representing its 51% ownership and Jack Bray, Peter Moir and Andy Morrison resigned from the board of Dragon.

Dragon holds a 30.67% working interest in the Kotaneelee field in the Yukon Territory, Canada operated by Devon. Gas production at Kotaneelee is in decline and gas prices in North America are depressed resulting in a significantly weakened revenue stream from current production levels. The disposal of Dragon eliminated a potential liability from Elko's balance sheet.

This information is provided by RNS The company news service from the London Stock Exchange

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