AJ Lucas Group annual report 2007-08

Environmental regulations
and native title
As infrastructure engineers, meeting stringent environmental and land
use regulations, including native title issues, are an important element
of our work. Lucas is committed to identifying environmental risks and
engineering solutions to avoid, minimise or mitigate them. We work
closely with all levels of government, landholders, Aboriginal land
councils and other bodies to ensure our activities have minimal or no
effect on land use and areas of environmental, archaeological or cultural
importance. One of the key benefits of directional drilling is its ability to
avoid or substantially mitigate environmental impact.
Group policy requires all operations to be conducted in a manner that
will preserve and protect the environment.
At PEL285 in the Gloucester Basin, the Group holds together with its
joint venture partner, two bore licence certificates under the Water Act
1912, for the drainage of water from the production wells.
The directors are not aware of any significant environmental incidents, or
breaches of environmental regulations during or since the end of the year.
Events subsequent to reporting date
On 23 July 2008, the Company purchased the business of Mitchell
Drilling, the largest specialist drilling company for the coal seam gas
industry in Queensland. The purchase price of $150 million was funded
by a $15 million equity placement to the vendor, with the balance out
of an equity placement to institutional shareholders of $29.15 million,
deferred consideration of $15 million and increased borrowing facilities.
At the same time, the Group’s bank facilities have been renegotiated and
their terms extended.
Subsequent to year-end, the directors have declared a final ordinary
dividend of 4.5¢ per share, franked to 15%.
Other than these matters, there has not arisen in the interval between
the end of the financial year and the date of this report any item,
transaction or event of a material or unusual nature likely, in the opinion
of the directors of the Company, to affect significantly the operations of the
Group, the results of those operations, or the state of affairs of the Group,
in future financial years.
Likely developments
The Group has successfully established itself as the leading service
provider in each of its chosen activities. Its strategy of being an integrated
service provider to the resources water and wastewater, oil and gas
and property sectors presents many opportunities to leverage its service
offering.
The coal seam gas industry is expected to experience significant growth
in preparation for the proposed export of LNG through Gladstone, AJ Lucas
is the only company with the full service capability to provide technical
services, drilling and management services, well head completions,
work overs, well services, gas gathering systems through to pipelines to
market. This gives the Group a significant strategic advantage over all its
competitors. The acquisition of Mitchell Drilling strengthens this capability
through adding additional capacity, customer contacts, drilling expertise
and management depth. The Group will continue to invest in additional
plant and equipment to provide it with the extra capacity to service the
expected increase in demand from the coal seam gas producers.
The complementary nature of the Group’s activities will also be
drawn upon to undertake civil works for the infrastructure works
to be undertaken by the pipeline division. Partnering with selected
entities through joint ventures and alliances, and the development and
application of innovative technology and practices, are expected to create
opportunities to apply the Group’s civil works expertise.
The Group also intends to restructure its coal seam gas interests to
provide investor transparency to their underlying value. The form of this
restructuring is yet to be determined but will relieve the Group of any
direct funding obligation, in particular in respect to Gloucester Basin, as
the investment projects move into their commercialisation stage.
The Group will however, continue to investigate direct investment
opportunities in the water and wastewater sectors, initially based on the
water being produced from the dewatering of coal seam gas properties
where the Group is drilling. The Group will also pursue investment
opportunities in unconventional hydrocarbons (shale gas), sustainable
energies (geothermal and tidal) and other technologies being developed to
reduce green house gas emissions by carbon geosequestration.
Further information about likely developments in the operations of the
Group and the expected results of those operations in future financial years
has not been included in this report because disclosure of the information
would be likely to result in unreasonable prejudice to the Group.
Other Disclosures
Unissued shares under rights or options
At the date of this report, unissued shares of the Company under rights or
options are:
Expiry date Exercise price Number of shares
28 May 2009 — 24,000
30 June 2010 — 369,183
30 June 2010 — 369,183
26 November 2011 $1.10 550,000
31 August 2012 — 1,119,063
23 November 2012 $2.11 250,000
All rights and options expire on the earlier of their expiry date, termination
of the employee’s employment and cessation of the officer’s service.
The rights or options do not entitle the holders to participate in any
share issue of the Company.
Shares issued on exercise of rights
During or since the end of the financial year, the Company issued ordinary
shares as result of the exercise of rights:
Number of shares
Amount paid
on each share
474,333 $Nil
There were no amounts unpaid on the shares issued.
Directors’ shareholdings
and other interests
The relevant interest of each director and their director-related entities in
the shares and options over shares issued by the Company, as notified
by the directors to the Australian Securities Exchange in accordance with
Section 205G(1) of the Corporations Act 2001, at the date of this report
are:
Options issued under
Management
Ordinary Shares
Rights Plan
Allan Campbell 10,140,083 360,000
Ian Stuart-Robertson 1,386,750 220,000
Andrew Lukas 6,204,833 220,000
Martin Green 125,000 —
Garry O’Meally 219,180 —
22 LUCAS group