Australis Oil & Gas Ltd: Detailed Financial Analysis Report

This report provides a financial analysis of Australis Oil & Gas Limited, an oil and gas company listed on the ASX. It examines the company's profitability, liquidity, financial stability, and market performance based on its financial report for the year ended 31 December 2016. The analysis covers operating revenue, gross profit ratio, net profit margin, ROE, liquidity ratios, cash flow, and EPS. The report concludes that while the company is relatively new and has experienced losses due to acquisitions, its strong cash position, increasing revenue, and debt-free status make it a potentially good long-term investment. The management team's experience and the company's competitive position in the industry are also highlighted as positive factors.

Executive Summary
Australis Oil & Gas Limited is an oil and gas company it deals in production, development, and exploration activities. It was formed in
2015 its head quarter is in Perth, Australia. Jon Stewart is the chairman of the company. In July, 2016 it was listed on ASX. It is the largest
acreage holder of Tuscaloosa Marine Shale (TMS) located in Louisiana and Mississippi. It also owns a large oil & gas area onshore of Portugal
covering an area of 620,000 acres. Its acquisitions makes it one of the most significant company across the industry. The management of the
company is taking all related actions to make it a profitable company in next 5 years. (Bloomberg 2019).
Profitability
In 2017 year end the company
stated a $23347 mn operating
revenue. The loss recorded was
(1,254) which is $-5,801mn less from
year 2016. The gross profit ratio is
0.47 which is positive. This tells that
for every 100 dollar of revenue the
company is paying $52 in expense.
The net profit margin is negative -
4.96 (Australis Oil & Gas 2019).The loss can be overlooked if the 2017 sales revenue are considered. The company started its operation in 2015
and the majority of the production was done in 2016-17.In 2 years company has already acquired two onshore basin. The ROE ratio is negative -
1.51%.Although the company is not paying a positive return for every one dollar of investment done by the shareholder. This should not
discourage the investors because the loss of this year is majorly due to new acquisitions. The company has just started its operation (Li et al.
2017). Looking at the PNL statement it is clear that it made a high revenue in a year’s operation from 0 to straight away $23,347mn.ROE will
definitely increase giving more confidence to the investors.
Liquidity and financial stability
The liquidity ratio shows a significant rise of-2.77 in 2017 from -25.27 in 2016. The company will be able
to meet all its long and short term obligation. As mentioned by the director the company has no debt at
present (Australis Oil & Gas 2019). The cash equivalent decreased from $21,474mn in 2017 to $16,602mn
in 2016. This was due the new acquisitions. The non-current asset comes up to $107,257mn in 2017 as
compared to $27,523mnin 2016. The Trade and other payables in current liability has decreased by $-
6422mn giving a clear view that the company has done successful operation in 2017. The company has a
strong cash position giving it flexibility to expansion. As it started its operation in 2015 and in two years it
has managed to bring the ratio to positive investors should invest in this company. The investors should be
confident of its performance due to the cash stability it hold as of now (Eljelly & AM 2004).

Market analysis
The company has EPS for year 2017 as -0.18, comparing the value of 2016 the EPS was even low to be -
2.77 which meant that company is working hard to increase the creditability for its investors. No dividend
has been announced for year 2017. Investor should not worry for future performance as the company is
working on large scale for large outputs (De Silva et al. 2016).The highest shares price recorded on ASX in
3 years was $0.54 in 2018.
Cash Management
Cash flow from the operating activity was
high from 2016, $-4,456mn to $2,570mn in 2017.
The increase was due to the payments of $
20,648mn the company was able to get from its
debtors. Cash and cash equivalents at the end of the
year 2017 was lesser by $-4,872mn.Cash from
financing activity has increased by $43,039mn in
2017. This is due to trading on ASX from July,
2016 raising an IPO of $30mn alone with $11 mn
contributed by the directors. It proves to be a strong indication that company is moving towards a stable financial position. Basically the
operating cash flow are improving indicating the improved performance. The investors can directly relate to the managements working style.
The company is fast forwarding and focusing majorly on profit making.
Conclusion (Resource B)
Australis oil and gas ltd is a new company on ASX which started to trade from 2016. It is a debt free company which makes it a safe
investment stock. If share prices analysed it can be concluded that it was trading at 0.25$ in July, 2016 and whereas the highest price reached is
0.54$ in 2018 (ASX 2019). The scope for growth is high in comparison to other company in the same industry. At present the company is
trading again at its base price which is a direct scope for investors to buy the stocks and hold it for long term for better returns ( Enekwe & CI
2015). Talking about the management of the company Mr Jonathan Stewart is the non-executive chairman and Mr Ian Lusted is the managing
director and CEO of the company. The board maintains a remuneration and nomination Committee. It operates according to the charter as per
approval by the Board. The base salary of the executive KMP is revised annually and benefits like health, dental and insurance is also given. For
employees work related incentive and equity based plans as per performance is considered. The management of the company is very strong
looking at the experience of the KMP members. The financial performance has improved in 2 years and company is moving towards making
profit. With new acquisition the company has given competition to its industry competitors. This indicates a long term growth for the company
and the non-financial performance indicators makes it a good stock for long term investment.

References
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