ANNUAL REPORT FOR THE FINANCIAL YEAR ENDED 30 JUNE 2017 CORPORATE DIRECTORY ABN 13 008 694 817 Directors Peter F Mullins, Chairman Giustino Guglielmo Hector M Gordon Mark L Lindh Managing Director Giustino Guglielmo Company Secretary Robyn M Hamilton Registered Office and Principal Administration Office Level 2, 15 Queen Street Melbourne, Victoria 3000 Australia Telephone +61 (3) 9927 3000 Facsimile +61 (3) 9614 6533 Email admin@bassoil.com.au Auditors Deloitte Touche Tohmatsu 11 Waymouth Street Adelaide SA 5000 Australia Share Registry Link Market Services Limited Tower 4, 727 Collins Street Melbourne, Victoria 3008 Australia Telephone +61 (3) 9615 9800 Facsimile +61 (3) 9615 9900 Stock Exchange Listing Australian Stock Exchange Ltd 525 Collins Street Melbourne, Victoria 3000 Australia ASX Codes: BAS – Ordinary Shares Web Site: www.bassoil.com.au CONTENTS Chairman’s Letter ............................................... 1 Managing Director’s Report ................................. 2 Directors’ Report ................................................. 8 Remuneration Report ........................................ 11 Auditor’s Independence Declaration .................. 17 Directors’ Declaration ....................................... .18 Consolidated Statement of Profit or Loss and Other Comprehensive Income ........................... 19 Consolidated Statement of Financial Position .... 20 Consolidated Statement of Changes in Equity .. .21 Consolidated Statement of Cash Flows ............. 22 Notes to the Financial Statements ..................... 23 Independent Auditor’s Report ........................... 48 Shareholder & Other Information....................... 51 FORWARD LOOKING STATEMENTS about This Annual Report includes certain forward-looking that have been based on current statements and future expectations circumstances. These forward-looking statements are, however, risks, uncertainties and assumptions that could cause those acts, events and circumstances the from forward-looking expectations described statements. differ materially in such subject events acts, to to factors include, among other These things, commercial and other risks associated with the investment meeting of objectives and other considerations, as well as other matters not yet known to the Group or not currently considered material by the Group. CHAIRMAN’S MESSAGE On behalf of the Board, I present to you the Annual Report of your company, Bass Oil Limited (“Bass”) for the year ended 30 June 2017. Amidst the ongoing subdued state of the oil and gas market, Bass has taken the opportunity to refocus the Company’s corporate strategy and as a result, established an emerging South-east Asia focused oil production business. In October 2016, Bass announced the acquisition of Cooper Energy Limited’s 55% interest in the Tangai-Sukananti KSO which lies in the South Sumatra Basin, Indonesia. The acquisition was a culmination of significant efforts in securing a strategic project and project team which has transformed the Company from an Australian explorer to an Indonesian oil producer. Bass has successfully established a solid platform for near-term expansion of its oil business across South-east Asia. Following transaction completion in February 2017, the Company began searching for and has since undertaken due diligence on additional growth opportunities in close proximity to the existing KSO, within the prolific hydrocarbon province. Location of Bass’ Indonesian operations in relation to neighbouring oil and gas fields The Company is also focusing its efforts on production optimisation and resource development at the existing operations in an effort to increase total production of the field over the coming period and maximise field recoveries. Bass is grateful for the support of existing shareholders, particularly during the non-renounceable rights issue undertaken in November 2016. The Company raised approximately $772,000 to fund the up-front costs associated with the recent Tangai-Sukananti KSO acquisition. This support demonstrates the confidence in the future potential of Bass’ team, its assets and our ability to create shareholder value. Finally, I wish to thank the executive team based in Melbourne, the Indonesian-based operations team and my fellow directors for their diligent attention to the affairs of your Company, as we continue to work on strategically positioning ourselves for future growth. Peter Mullins Chairman 27 September 2017 1 Bass Oil Limited Annual Report 2017 MANAGING DIRECTORS’ REPORT Over the past year, Bass revised its corporate strategy in transforming from an Australian-based explorer to a South-east Asian oil producer. The new strategy places the Company in a position to grow shareholder value allowing it to significantly benefit from a sector recovery, whilst growing the value of its production assets and pursuing acquisitions. On 19 October 2016, Bass entered into a Share Sale Agreement to acquire Cooper Energy Limited’s 55% interest in the Tangai-Sukananti Indonesia KSO – an Indonesian producing asset comprising 11 exploration and development wells drilled from 1992 to 2015. The transaction was completed 28 February 2017, with an effective date of 1 October 2016. The transaction consideration is outlined below: Upfront cash consideration of $500,000 Upfront Scrip consideration of 180 million shares at 0.2 cent per share (being the share price on date of issue), equivalent to $360,000 Deferred cash consideration of $2.27million, payable in four instalments between 31 December 2017 and 31 December 2018 Bass to take on all the existing Indonesian-based office and field staff The recent acquisition of the Tangai-Sukananti production asset provides an ability to pursue regional growth opportunities through acquisitions within the world-class Indonesian hydrocarbon province. In the June quarter, the Company commenced production optimisation activities at the KSO, and subsequently expects total production uplift at the field in due course. With the overwhelming support of its shareholders, Bass has been able to seamlessly implement its revised corporate strategy in securing a value accretive investment, and will now focus on growth, building a sustainable and profitable South-east Asian based oil business. Bass will continue to take advantage of the subdued market and build a portfolio of assets which share synergies with existing operations. Bass will target potential acquisitions of certain assets no longer core to the portfolios of other companies, and prospective late development stage or non-core producing assets that have become un- economic to run for larger operators and which lie in close proximity to Bass’ existing operations. The highlights of a busy year in review include: The successful acquisition of Tangai-Sukananti KSO, South Sumatra Basin The evaluation and implementation of production optimisation opportunities at Tangai-Sukananti Ongoing due diligence and screening of regional growth opportunities in Indonesia Completion of a successful Rights Issue in December 2016, raising approximately $772,000 to fund the upfront transaction costs to purchase the Tangai-Sukanati KSO Relinquishing Bass’ interests in offshore Gippsland Basin permit Vic/P41 during the March Quarter Reviewing options for the Company’s Vic/P68 Gippsland Basin permit, including a farm-out or potential sale or surrendered Minimising activity and expenditure in the Otway Basin on permit PEP 150 due to the Victorian Government moratorium on onshore exploration activities 2 Bass Oil Limited Annual Report 2017 MANAGING DIRECTORS’ REPORT (continued) Figure 1: Tangai-Sukananti KSO REVIEW OF OPERATIONS Tangai-Sukananti KSO Bass holds a 55% interest in the Tangai-Sukananti production assets, located within the South Sumatra basin, a prolific Indonesian oil and gas region. Following the acquisition from Cooper Energy Limited on 28 February 2017, Bass assumed the operator role and retained the experienced Indonesian on-site personnel and the Jakarta based management teams, who have proven experience in efficiently managing the operation. The KSO contains four producing wells in two fields, Bunian and Tangai. The Bunian field is the main producer and contains the greatest potential for expansion. The KSO is considered long-life with production expected beyond current licence expiry in mid-2025. Historically it has been possible to negotiate extensions to licence terms within 3 years of expiry. Bass will likely apply for an extension of this licence in 2022. The assets provide a future platform for growth through low-cost field development opportunities and execution of value-accretive acquisitions whereby minimal additional corporate overheads are required given Bass’ established Jakarta-based personnel. Since acquiring the Tangai-Sukananti KSO, Bass has sustained strong, consistent levels of production, as seen in figure 2. The asset has performed at expectations, producing approximately 116,000 barrels (55% basis) for year ending 30 June 2017. Bass has now commenced a field optimisation program which aims to further increase output at the operation. The optimisation program thus far has led to the removal of scale restriction in the Tangai-1 flowline, subsequently increasing production from 50 to 150BOPD from the Tangai-1 well. Bass continues to expand its development and optimisation program, aiming to further increase the field’s total production and efficiency, which the Company expects to be reflected in the upcoming financial year. 3 Bass Oil Limited Annual Report 2017 MANAGING DIRECTORS’ REPORT (continued) Figure 2: Strong sustained production at the Indonesian KSO since Bass assumed operatorship in March As at 30 June 2017, the Tangai-Sukananti KSO was producing over 600 barrels of oil per day (BOPD) from 4 wells (100% JV Share) and contained 2P oil reserves of 1.35 million barrels (55% JV share) with net attributable 2P reserves to Bass of 0.7 million barrels (refer to 2017 reported Resource & Reserves). Sixty five percent of 2P reserves currently remain undeveloped, representing substantial low-risk upside potential. DEVELOPMENT and APPRAISAL Since assuming the operator role at the Tangai-Sukananti KSO, Bass has highlighted a number of prospective targets and leads that warrant further testing and development. The Company believes there is a substantial quantity of oil reserves that remain undeveloped, within the Bunian and Tangai Fields. Significant expansion opportunities have also been identified at Bunian-West, and will likely be tested with a planned future appraisal well in 2018. Additionally, Bunian-5 and 6 represent low-risk development opportunities with high flow-rate potential. The Tangai Field also shows potential for further development, with Tangai-5 highlighted as a low risk development well targeting the up-dip potential from strongly performing Tangai-1. A further three un-drilled structures have been identified for future evaluation. Those are, Updip Sukananti, Updip TMB-6 and Updip Kupang and an untested shallow gas zone, Bunian ABF, which extends beyond the existing active well zones. Bass is currently undertaking an integrated reservoir study, in order to evaluate this potential and determine the best way of addressing these opportunities. This study is due for completion by year end 2017. Figure 3: Tangai-Sukananti Prospects Leads 4 Bass Oil Limited Annual Report 2017 MANAGING DIRECTORS’ REPORT (continued) PERMIT MANAGEMENT Vic/P68 (Bass 100%) PEP 150 (Bass 15%) Vic/P41 (relinquished) In December 2016, the National Offshore Petroleum Administrator (NOPTA) advised Bass that its application for a suspension and extension of the permit duration for Vic/P68 in the Gippsland Basin was successful. Year three now expires on 3 November 2017, with year five of the primary term now ending 3 November 2019. Year three requires the acquisition of 225sq km of 3D seismic. In the absence of a farmout or sale of the tenement, Vic/P68 is likely to be surrendered in November 2017. In relation to PEP 150 in the Otway Basin, minimal activity and expenditure was undertaken over the past year, given the Victorian Government moratorium on onshore exploration activities. The Government has legislated for a permanent ban on the use of fracture simulation. Subsequent to the year end, Bass has withdrawn from this Joint Venture as the interest is immaterial and no longer a part of its core strategy. During the March quarter, Bass advised the market of its decision to relinquish its interests in the Vic/P41, Gippsland Basin permit, in line with its revised corporate strategy. The permit was relinquished on the 13th January, 2017. RESERVES and RESOURCES Reserves: Bass Oil’s Gross (55% share) 2P Reserves at 30 June 2017 are assessed to be 1.35 million barrels of oil. In accordance with ASX reporting requirements for fiscal environments that use production sharing contracts or similar, Bass reports Net 2P Oil Reserves of 0.70 million barrels. Net Reserves are the reserves to which Bass has a net economic entitlement, consisting of a share of cost oil and profit oil that Bass is entitled to receive under the terms of the KSO signed with the Indonesian government body, PT Pertamina. (1) Aggregated 1P, estimates may be conservative and aggregated 3P estimates may be optimistic due to the effects of arithmetic summation. (2) Totals may not exactly reflect arithmetic addition due to rounding (3) Deterministic methods have been used 5 Bass Oil Limited Annual Report 2017 MANAGING DIRECTORS’ REPORT (continued) Notes on Calculation of Reserves: The approach for all reserves and resources estimates is consistent with the definitions and guidelines in the Society of Petroleum Engineers (SPE) 2007 Petroleum Resources Management System (PRMS). Reserves are estimated by deterministic estimation methodologies consistent with the PRMS definitions and guidelines. The Bunian Field has three producing reservoirs (TRM3, GRM and K1 sandstones) and the Tangai Field has one producing reservoir (the M sandstone). Qualified Petroleum Reserves and Resources Evaluator Statement: The information contained in this report regarding the Bass Oil Limited reserves is based on and fairly represents the data and supporting documentation reviewed by Mr Giustino Guglielmo who is an employee of Bass Oil Limited and holds a Bachelor of Engineering (Mech). He is a member of the Society of Petroleum Engineers (SPE) and as such is qualified in accordance with ASX listing rule 5.4.1 and has consented to the inclusion of this information in the form and context in which it appears. RISC consents that the Developed Producing Reserves forecasts used in this report relating to the Bunian and Tangai fields are based on an independent review conducted by RISC Operations Pty Ltd (RISC) and fairly represent the information and supporting documentation reviewed. The review was carried out under the supervision of Mr Antony Corrie-Keilig, a Principal Petroleum Engineer at RISC, a leading independent petroleum advisory firm. Mr Corrie-Keilig is a Chartered Professional Engineer (CPEng) and is registered on the National Engineering Register (NER) in Petroleum Engineering. He is a Fellow of the Institution of Engineers Australia (FIE Aust) and is a member of both the Society of Petroleum Engineers (SPE) and Society of Petroleum Evaluation Engineers (SPEE). His qualifications include a Bachelor of Engineering (Mechanical) from Monash University and a Graduate Diploma (Petroleum Engineering) from University of New South Wales. Mr Corrie-Keilig consents to the inclusion of this information in this report. HEALTH and SAFETY PERFORMANCE Upon assuming control of the Tangai-Sukananti Production assets in March 2017, Bass integrated the Indonesian health, safety and environmental management system with its own corporate management system and implemented a focus on quality and quality outcomes. The initiatives maintain a robust and inclusive safety culture, reporting continued positive safety statistics. The Company is highly focussed on the well-being of the Indonesian crew, reliability of operations, preservation of the environment and respect for the local communities within the area which we work. We make certain this is our absolute priority and thus ensure this focus is maintained. Since March, Bass has steadily increased the number of Safe Man Hours at the operation (see figure 4), despite increases in work activity and production rates due to optimisation initiatives in the recent quarter. Furthermore, Bass reduced the occurrence of reportable incidents, which led to a significant decline in the TRIR of ~47% (see figure 5). Bass is pleased to confirm there were no lost-time injuries or work-related recordable injuries that required medical treatment in this recent period. The Company is committed to delivering exceptional standards of health and safety year-on-year, and will focus on developing its current health, safety environment, quality and community (HSEQC) management processes, to further improve and monitor our ability to identify, manage and subsequently minimise potential hazards and risks associated with the operations moving forward. Figure 4: Tangai-Sukananti Safe Man Hours 6 Bass Oil Limited Annual Report 2017 MANAGING DIRECTORS’ REPORT (continued) Figure 5: Tangai-Sukananti Total Recordable Incident Rate 7 Bass Oil Limited Annual Report 2017 DIRECTORS’ REPORT The Directors present their report on the results of Bass Oil Limited consolidated entity (“BAS” or “Bass” or “the Company” or “the Group”) for the year ended 30 June 2017. DIRECTORS The names and details of the Company’s directors in office during the financial year and until the date of this report follow. Directors were in office for the entire period unless otherwise stated. Peter F Mullins FFin – Chairman and non-executive independent director (Appointed 16 December 2014) Mr Mullins has over 40 years banking experience in Australia and New York, USA, specialising in Institutional and Corporate Finance across the Agriculture, Defence, Energy, Infrastructure, Mining, Oil & Gas, Property and Wine industries. He is experienced in Mergers and Acquisitions, Privatisations, Structured Finance, IPO’s and Capital Raisings. Mr Mullins retired as Head of Institutional Banking SA&NT with the Commonwealth Bank of Australia in 2009 to take up a part time role as Senior Advisor, Institutional, Corporate and Business Banking for Commonwealth Bank in SA&NT. He retired from this role in 2013. Mr Mullins was a Director of Somerton Energy Limited, a listed oil and gas exploration company, from April 2010 until it merged with Cooper Energy Limited in July 2012. He is a Fellow of the Financial Services Institute of Australasia and graduated from the Advanced Management Program at the University of Melbourne – Mt Eliza, in 1987. Mr Mullins served on the audit committee during the period. Giustino (Tino) Guglielmo BEng (Mech) – Managing director from 1 February 2017, previously was Executive Director (Appointed 16 December 2014) Mr Guglielmo is a Petroleum Engineer with over 36 years of technical, managerial and senior executive experience in Australia and internationally. Mr Guglielmo was the CEO and Managing Director of two ASX listed companies; Stuart Petroleum Limited for seven years and Ambassador Oil & Gas Limited for three years. Both companies merged with larger ASX listed companies generating significant value for shareholders following the identification of compelling resource potential in their respective petroleum resource portfolios. Mr Guglielmo also worked at Santos Limited, Delhi Petroleum Limited, and internationally with NYSE listed Schlumberger Corp. His experience spans the Cooper basin, Timor Sea, Gippsland basin, and exposure to US land and other international basins. Mr Guglielmo is currently a director of Octanex NL and a member of the Resources and Infrastructure Task Force and the Minerals and Energy Advisory Council, both South Australian Government advisory bodies. He is a Fellow of the Institution of Engineers, Australia, a member of the Society of Petroleum Engineers and Australian Institute of Company Directors. Mr Guglielmo served on the audit committee during the period. Hector M Gordon BSc (Hons) – Non-executive independent director (Appointed 23 October 2014) Mr Gordon currently serves on the Board of Cooper Energy Limited as a Non-Executive Director. Mr Gordon is a geologist with over 40 years of experience in the upstream petroleum industry, primarily in Australia and southeast Asia. Until June 2017 Mr Gordon was employed by Cooper Energy Limited as Executive Director - Exploration & Production. Mr Gordon's previous employers also include Beach Energy, Santos Limited, AGL Petroleum, TMOC Resources, Esso Australia and Delhi Petroleum Pty Ltd. He is currently a Non-Executive Director of Cooper Energy Limited, which is a substantial shareholder of Bass Oil Limited. Mr Gordon is a member of the American Association of Petroleum Geologists and a member of the Society of Petroleum Engineers. Mr Gordon served as Chair on the audit committee during the period. 8 Bass Oil Limited Annual Report 2017 DIRECTORS’ REPORT (CONTINUED) Mark L Lindh - Non-executive non-independent director (Appointed 16 December 2014) Mr Mark Lindh is a corporate advisor with in excess of 15 years experience in advising mining and resources companies with a particular focus on the energy sector. He is a founding director of Adelaide Equity Partners Limited, an investment and advisory company. Mr Lindh served on the audit committee during the period. INTERESTS IN THE SHARES & OPTIONS OF THE COMPANY As at the date of this report, the interests of the Directors in the shares and options of Bass Oil Limited were: P F Mullins G Guglielmo H M Gordon M L Lindh (a) Number of Ordinary Shares Number of Options over Ordinary Shares 38,400,000 223,688,815 17,066,668 215,829,397 7,200,000 41,941,650 3,200,000 40,295,515 (a) Mr Lindh’s interest includes 18,112,000 shares held directly and 197,717,397 shares held indirectly by a related party, South Australian Resource Investments Pty Ltd, a subsidiary of Adelaide Equity Partners Ltd. COMPANY SECRETARY Mrs R Hamilton was appointed Company Secretary on the 31st March 2011. She has been a Chartered Accountant for over 20 years. DIVIDENDS During the year and to the date of this report, no dividends were recommended, provided for or paid. PRINCIPAL ACTIVITY The principal activities of the Group during the year were oil and gas exploration and oil production after the completion of the acquisition of low cost oil production assets in Indonesia. The Company has realigned its corporate strategy following the landmark acquisition of a 55% interest in Tangai-Sukananti KSO which contains producing assets located in the prolific oil and gas region of South Sumatra, Indonesia. OPERATING AND FINANCIAL REVIEW Operating results for year During the financial year, the Group acquired a subsidiary which has a 55% interest in Tangai-Sukananti KSO, an oil producing asset in South Sumatra. This is a significant transaction for the Group and enables the Group to have a future income stream and other opportunities in this prolific oil producing basin. These financial statements are the twelve months ended 30 June 2017 and reflect the change in the Groups strategic direction for a period of four months, after the acquisition of the oil producing assets was completed on the 28 February 2017. The Company’s operating loss for the year ended 30 June 2017 after income tax was $1,795,591 (2016: $4,030,740) and includes impairment of the Gippsland exploration assets of $1,062,325. Review of Financial Condition Liquidity The Group’s consolidated statement of cash flows for the year recorded an increase of $916,822 (2016: decrease of $294,571) in cash and cash equivalents. The cash flows were derived from operating receipts of $963,991 (2016: $38,933), other receipts of $3,178 (2016: $6,162), proceeds from sale of assets $nil (2016: $56,148), capital raising net of transaction costs of $712,429 (2016: $434,397) and the net cash acquired on the acquisition of a subsidiary of $587,066 (2016:$nil) 9 Bass Oil Limited Annual Report 2017 Cash outflows relating to operations of $1,255,563 (2016: $607,821). There were also cash outflows in investing activities of $94,279 (2016: net cash outflows $166,242) mainly relating to petroleum exploration expenditure activities and oil properties. DIRECTORS’ REPORT (CONTINUED) Cash assets at 30 June 2017 were $1,346,338 (2016: $457,054). CHANGES IN THE STATE OF AFFAIRS On 27 February 2017 the Group with shareholder approval, changed its name from Bass Strait Oil Company Ltd to Bass Oil Limited. On 28 February 2017 the Group acquired a subsidiary, Cooper Energy Sukananti Ltd, which has a 55% interest in Tangai-Sukananti KSO, an oil producing asset in South Sumatra, Indonesia and has moved its focus from exploration in Australia to oil production and exploration in South East Asia. LIKELY DEVELOPMENTS AND EXPECTED RESULTS Since assuming the operator role at the Tangai-Sukananti KSO, Bass has highlighted a number of prospective targets and leads that warrant further testing and development. The Company believes there is a substantial quantity of oil reserves that remain undeveloped, within the Bunian and Tangai Fields. Bass is currently undertaking an integrated reservoir study, in order to evaluate this potential and determine the best way of addressing these opportunities. This study is due for completion by year end 2017. SHARE OPTIONS Unissued shares As at the date of this report there were 386,103,297 unissued ordinary shares under options (nil at 30 June 2016). INDEMNIFICATION AND INSURANCE OF DIRECTORS AND OFFICERS BAS maintains a directors and officers insurance policy and has paid an insurance premium for the policy. The contract of insurance prohibits disclosure of the amount of the premium and the nature of the liabilities insured. Pursuant to the constitution the Company has entered into Deeds of Indemnity with the Directors and Chief Financial Officer. INDEMNIFICATION OF AUDITORS To the extent permitted by law, the Company has agreed to indemnify its auditors, Deloitte Touche Tohmatsu, as part of the terms of its audit engagement agreement against claims by third parties arising from the audit (for an unspecified amount). No payment has been made to indemnify Deloitte Touche Tohmatsu during or since the financial year. DIRECTORS’ MEETINGS The number of meetings of directors (including meetings of committees of directors) held during the year and the number of meetings attended by each director was as follows: P F Mullins G Guglielmo H M Gordon M L Lindh Board Meetings Audit Committee Held 9 9 9 9 Attended 9 9 9 9 Held 2 2 2 2 Attended 2 2 2 2 10 Bass Oil Limited Annual Report 2017 DIRECTORS’ REPORT (CONTINUED) REMUNERATION REPORT (AUDITED) (30 June 2017) This Remuneration Report outlines the director and executive remuneration arrangements of the Group in accordance with the Corporations Act 2001 and its Regulations. For the purposes of this report, key management personnel (KMP) of the Group are defined as those persons having authority and responsibility for planning, directing and controlling the major activities of the Group, directly or indirectly, including any director (whether executive or otherwise) of the parent company, and includes the Company Secretary. Details of Key Management Personnel (including executives of the Group) (i) Directors P F Mullins G Guglielmo H M Gordon M L Lindh Chairman Managing Director (was an Executive Director until 1 February 2017) Director (Non-executive) Director (Non-executive) (ii) Executives R M Hamilton Company Secretary There have been no changes to key management personnel after 30 June 2017 and before the date the financial report was authorised for issue. The Board of Directors (“the Board”) is responsible for determining and reviewing remuneration arrangements for the directors and executives. No remuneration consultant was engaged nor was any remuneration advice sought during the period. The Board assesses the appropriateness of the nature and amount of remuneration of executives on a periodic basis by reference to relevant employment market conditions with the overall objective of ensuring maximum stakeholder benefit from retention of a high quality, high performing executive team. Remuneration Philosophy The performance of the Company largely depends upon the quality of its directors and executives. To this end, the Company embodies the following principles in its remuneration framework: Provide competitive rewards to attract high calibre executives. Remuneration Structure In accordance with best practice corporate governance, the structure of non-executive director and executive remuneration is separate and distinct. Non-Executive Director Remuneration Remuneration policy The Board seeks to set aggregate remuneration at a level that provides the Company with the ability to attract and retain directors of the highest calibre, whilst incurring a cost that is acceptable to shareholders. The amount of aggregate remuneration sought to be approved by shareholders and the fee structure is reviewed annually. The Board considers advice from external consultants if required, as well as the fees paid to non-executive directors of comparable companies when undertaking the annual review process. The Company’s constitution and the ASX Listing Rules specify that the aggregate remuneration of non-executive directors shall be determined from time to time by a general meeting. The latest determination was at the Annual General Meeting held on 3 October 2001, when shareholders approved an aggregate remuneration of $250,000 per year. Structure The remuneration of non-executive directors consists of director’s fees and committee fees for the non-executive director who chairs the Audit committee. The payment of additional fees for chair of the Audit committee recognises the additional time commitment required by a non-executive director who chairs a sub-committee. The non-executive directors also receive retirement benefits in the form of superannuation. There are no other retirement benefits, other than superannuation. 11 Bass Oil Limited Annual Report 2017 DIRECTORS’ REPORT (CONTINUED) REMUNERATION REPORT (AUDITED) (30 June 2017) (continued) The table below summaries the non-executive director remuneration (excluding superannuation): Board fees Chairman Directors Incremental Audit Committee fees Chairman $75,000 $50,000 $5,000 No other fees are paid for serving on Board committees or on boards of wholly owned subsidiaries. Non-executive directors have been encouraged by the Board to hold shares in the Company. The remuneration of non-executive directors for the period ending 30 June 2017 and 30 June 2016 is detailed in Table 1 and 2 respectively of this Remuneration Report. The Directors agreed to a reduction of 50% of the above amounts to 31 January 2017 when they reverted to the above agreed levels based on the strengthening of the Company’s cash position. As at the date of this report no further reassessment has occurred. Executive Remuneration Objective The Company aims to reward executives with a level and mix of remuneration commensurate with their position and responsibilities within the Company so as to: Reward executives for individual performance; Align the interests of executives with those of shareholders; and Ensure that total remuneration is competitive by market standards. Structure In determining the level and make-up of executive remuneration, the Board engages external consultants as needed to provide independent advice. No consultant was engaged in the current year. Remuneration consists of fixed remuneration being base salary and superannuation and/or consultancy fees. The proportion of base salary and superannuation and/or consultancy fees for each executive is set out in Table 1. Fixed remuneration Objective Fixed remuneration is reviewed regularly by the Board, with access to external advice if required. Structure Executives are given the opportunity to receive their fixed (primary) remuneration in a variety of forms including cash and superannuation. It is intended that the manner of payment chosen will be optimal for the recipient without creating undue costs for the Company. The fixed remuneration component of executives is detailed in Table 1. Employment contracts Managing Director and Chief Executive Officer Mr G Guglielmo was appointed Managing Director and Chief Executive Officer (“CEO”) on 1 February 2017. Prior to this date, Mr Guglielmo was an executive director engaged on a Consultancy Services Agreement that required a minimum of 2 days per week at $150,000 per annum, from 2 February 2015. The Managing Director and CEO is employed under a rolling contract and under the terms of the contract, Mr Guglielmo receives fixed remuneration of $300,000 per annum. If there is cause for termination, the Company can terminate the contract immediately without compensation, other than any employee entitlements up to the date of termination. Otherwise, the contract may be terminated at any time by either side giving six months notice in writing or by the Company paying six months salary in lieu of notice, unless mutually agreed. 12 Bass Oil Limited Annual Report 2017 DIRECTORS’ REPORT (CONTINUED) REMUNERATION REPORT (AUDITED) (30 June 2017) (continued) Consultancy Services Agreements The Group has entered into consultancy agreements with Robyn Hamilton. Details of the agreements entered into by the Group and outstanding as at 30 June 2017 are set out below: Type Details Term Robyn Hamilton Consultancy Minimum of 1 day per week at an agreed hourly rate, from 6 October 2014. The agreement is on a going forward basis with the Company being able to terminate the agreement, at no less than one months notice. Company performance The remuneration of Bass executives and contractors is not formally linked to financial performance measures of the Company. In accordance the Section 300A of the Corporations Act 2001 the following table summarises Bass’s performance over a five year period: Measure 2017 2016 2015 2014 2013 Net (loss)/profit - $ (1,795,591) (4,030,740) (836,252) (3,091,993 ) (3,641,170 ) Basic (loss) per share – cents per share (0.001) (0.001) (0.001) (0.006) (0.007) Share price at the beginning of year* - $ 0.001 0.002 0.003 0.004 0.010 Share price at end of year* - $ 0.001 0.001 0.002 0.003 0.004 Dividends per share – cents Nil Nil Nil Nil Nil * Prices have been rounded to two decimal points Remuneration of key management personnel No key management personnel appointed during the period received a payment as part of his or her consideration for agreeing to hold the position. 13 Bass Oil Limited Annual Report 2017 DIRECTORS’ REPORT (CONTINUED) REMUNERATION REPORT (AUDITED) (30 June 2017) (continued) Table 1: Remuneration for the year ended 30 June 2017 Short-term benefits Post employmen t Share- based payments Long-term benefits Super- annuation $ Options $ Long service leave $ Non-executive Directors P F Mullins H M Gordon M L Lindh Sub-total non- executive directors Managing Director G Guglielmo Other key management personnel R M Hamilton Totals Non-executive Directors P F Mullins H M Gordon M L Lindh Sub-total non- executive directors Executive Director G Guglielmo Other key management personnel R M Hamilton Totals Salary & fees $ 53,125 38,958 35,416 5,047 3,701 3,364 127,499 12,112 189,375 35,000 54,680 - 371,554 47,112 Salary & fees $ 37,500 27,500 25,000 90,000 150,000 41,080 3,563 2,612 2,375 8,550 - - 281,080 8,550 Table 2: Remuneration for the year ended 30 June 2016 Short-term benefits Post employmen t Share- based payments Long-term benefits Super- annuation $ Options $ Long service leave $ Total $ 58,172 42,659 38,780 139,611 224,375 54,680 418,666 Total $ 41,063 30,112 27,375 98,550 150,000 41,080 289,630 - - - - - - - - - - - - - - - - - - - - - - - - - - - - 14 Bass Oil Limited Annual Report 2017 DIRECTORS’ REPORT (CONTINUED) REMUNERATION REPORT (AUDITED) (30 June 2017) (continued) Table 3: Shareholdings of key management personnel Shares held in Bass Oil Limited (number) 2017 Directors P F Mullins G Guglielmo H M Gordon M L Lindh (a) Other key management personnel R M Hamilton 1 July 2016 Balance at beginning of period 24,000,000 139,805,515 10,666,668 135,118,377 309,590,560 Participation in Rights Issue Net change other 30 June 2017 Balance at end of period 14,400,000 83,883,300 6,400,000 80,591,030 185,274,330 - - - 119,990 119,990 38,400,000 223,688,815 17,066,668 215,829,397 494,984,880 - - 5,000,000 5,000,000 - - 5,000,000 5,000,000 (a) Mr M Lindh’s interest includes 18,112,000 (2016: 11,320,000) shares held directly and 197,717,397 (2016: 121,385,043) shares held indirectly by related parties, South Australian Resource Investments Pty Ltd and Chesser Nominees Pty Ltd, both subsidiaries of Adelaide Equity Partners Ltd, a director related entity of Mr M Lindh. Options held in Bass Oil Limited (number) 2017 Directors P F Mullins G Guglielmo H M Gordon M L Lindh (b) Other key management personnel R M Hamilton 1 July 2016 Balance at beginning of period Participation in Rights Issue Net change other 30 June 2017 Balance at end of period - - - - - - - 7,200,000 41,941,650 3,200,000 40,295,515 92,637,165 2,500,000 2,500,000 - - - - - - - 7,200,000 41,941,650 3,200,000 40,295,515 92,637,165 2,500,000 2,500,000 (b) Mr M Lindh’s interest includes 3,396,000 (2016: nil) options held directly and 36,899,515 (2016: nil) options held indirectly by related parties, South Australian Resource Investments Pty Ltd and Chesser Nominees Pty Ltd, both subsidiaries of Adelaide Equity Partners Ltd, a director related entity of Mr M Lindh. Rights Issue On 14 December 2016 the Company issued 772,206,594 ordinary shares completing a non-renounceable rights issue of three new shares for every five shares held at an issue price of $0.001 cents per share. The company also issued one free attaching option to every two new shares purchased with an exercise price of $0.003 cents and an expiry date of 15 December 2017. Each new option upon exercise will receive one new piggy back option having an exercise price of $0.006 cents and an expiry date of 15 December 2018. The Company issued 386,103,275 options. Other transactions and balances with key management personnel and their related parties In accordance with AASB 124: “Related Party Disclosures”, key management personnel (KMP) have authority and responsibility for planning, directing and controlling the activities of the Bass Oil Limited. Hence, KMP are deemed to include the following: the non-executive Directors of Bass Oil Limited; and certain executives in the Managing Director’s senior leadership team. 15 Bass Oil Limited Annual Report 2017 DIRECTORS’ REPORT (CONTINUED) REMUNERATION REPORT (AUDITED) (30 June 2017) (continued) During the year the Group paid corporate advisory and investor relations fees to Adelaide Equity Partners Limited (a director related entity of Mr M Lindh) of $97,500 (2016:$60,000) (under a corporate advisory and investor relations mandate). The fees were provided under normal commercial terms and conditions. Amounts outstanding at balance date were $8,250 (2016: $5,500). The corporate advisory and investor relations mandate has a monthly retainer of $7,500 per month and can be terminated at anytime by written notice to the other party. HEALTH, SAFETY AND ENVIRONMENT The Company has adopted an Environment Policy and a Safety Policy and conducts its operations in accordance with the APPEA Code of Environmental Practice 2008. The Company’s petroleum exploration and development activities are subject to environmental conditions specified in the Offshore Petroleum and Greenhouse Gas Storage Act 2006, associated Regulations and Directions, as well as the Environment Protection and Biodiversity Conservation Act 1999. During the period there were no known contraventions by the Company of any relevant environmental regulations. The Company considers all injuries are avoidable and has policies and procedures to ensure employees and contractors manage safety accordingly. There is a continuous process of monitoring and evaluating our procedures. During the year there were no recorded health and safety incidents. CORPORATE GOVERNANCE The Company’s Corporate Governance Statement for the year ended 30 June 2017 may be accessed from the Company’s website at www.bassoil.com.au. AUDITOR INDEPENDENCE AND NON-AUDIT SERVICES A copy of the auditor’s independence declaration as required under section 307C of the Corporations Act 2001 in relation to the audit for the year ended 30 June 2017 is included on page 17. Non-audit services The Directors are satisfied that the provision of non-audit services, during the year, by the auditor (or by another person or firm on the auditor’s behalf) is compatible with the general standard of independence for auditors imposed by the Corporations Act 2001. The Audit Committee, in conjunction with the Chief Financial Officer, assesses the provision of non-audit services by the auditors to ensure that the auditor independence requirements of the Corporation Act 2001 in relation to the audit are met. Details of amounts paid or payable to the auditor for non-audit services provided during the year by the auditor are outlined in note 8 to the financial statements. The directors are of the opinion that the services as disclosed in note 8 to the financial statements do not compromise the external auditor’s independence, based on advice received from the Audit Committee, for the following reasons: All non-audit services have been reviewed and approved to ensure that they do not impact the integrity and objectivity of the auditor, and none of the services undermine the general principles relating to auditor independence as set out in Code of Conduct APES 110 Code of Ethics for Professional Accountants issued by the Accounting Professional & Ethical Standards Board, including reviewing or auditing the auditor’s own work, acting in a management or decision-making capacity for the company, acting as advocate for the company or jointly sharing economic risks and rewards. Signed in accordance with a resolution of the Directors Chairman Melbourne, 27 September 2017 16 Bass Oil Limited Annual Report 2017 Deloitte Touche Tohmatsu ABN 74 490 121 060 11 Waymouth Street Adelaide, SA, 5000 Australia Phone: +61 8 8407 7000 www.deloitte.com.au 27 September 2017 The Board of Directors Bass Oil Limited Level 2 15 Queen Street MELBOURNE VIC 3000 Dear Board Members Bass Oil Limited In accordance with section 307C of the Corporations Act 2001, I am pleased to provide the following declaration of independence to the directors of Bass Oil Limited. As lead audit partner for the audit of the financial statements of Bass Oil Limited for the financial year ended 30 June 2017, I declare that to the best of my knowledge and belief, there have been no contraventions of: The auditor independence requirements of the Corporations Act 2001 in relation to the audit Any applicable code of professional conduct in relation to the audit. (i) (ii) Yours faithfully DELOITTE TOUCHE TOHMATSU Darren Hall Partner Chartered Accountants Liability limited by a scheme approved under Professional Standards Legislation. Member of Deloitte Touche Tohmatsu Limited 17 Bass Oil Limited Annual Report 2017 DIRECTORS’ DECLARATION In accordance with a resolution of the directors of Bass Oil Limited, I state that: In the opinion of the directors: (a) the financial statements and notes of the consolidated entity, are in accordance with the Corporations Act 2001, including: (i) giving a true and fair view of the consolidated entity’s financial position as at 30 June 2017 and it’s performance for the year ended on that date; and (ii) complying with Accounting Standards and Corporations Regulations 2001; and there are reasonable grounds to believe that the Company will be able to pay its debts as and when they become due and payable; and the financial statements and notes comply with International Financial Reporting Standards as stated in Note 2(a). (b) (c) This declaration has been made after receiving the declarations required to be made to the directors in accordance with section 295A of the Corporations Act 2001 for the financial year ended 30 June 2017. On behalf of the Board Chairman Melbourne, 27 September 2017 18 Bass Oil Limited Annual Report 2017 CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME FOR THE YEAR ENDED 30 JUNE 2017 Note Consolidated 2017 $ Revenue Oil revenue Cost of oil sold Gross profit Other income Interest received Operator fees Rent received Total revenue and other income Administrative expenses Depreciation Employee benefits expense Finance costs Exploration costs impaired and written off Change in fair value of the equity options Acquisition expenses Loss before income tax Income tax expense Loss for the year Other comprehensive income, net of income tax Items that may be reclassified to profit or loss Exchange difference on translation of foreign operations Other comprehensive income, net of income tax 4 6 7 16 23 18 9 2016 $ - - - 6,065 18,072 16,900 41,037 (609,163) (3,104) (698) - (3,421,325) - - 1,911,320 (901,843) 1,009,477 3,178 25,590 - 1,038,245 (909,556) (1,578) (323,341) (16,516) (1,062,325) (262,727) (189,774) (1,727,572) (3,993,253) (68,019) (37,487) (1,795,591) (4,030,740) (16,740) (16,740) - - Total comprehensive income/(loss) for the year (1,812,331) (4,030,740) Basic and diluted (loss)/earnings per share 27 ($0.001) ($0.005) The above statement of comprehensive income should be read in conjunction with the accompanying notes. 19 Bass Oil Limited Annual Report 2017 CONSOLIDATED STATEMENT OF FINANCIAL POSITION AS AT 30 JUNE 2017 ASSETS Current assets Cash and cash equivalents Trade and other receivables Other current assets Inventories Other financial assets Total current assets Non-current assets Trade and other receivables Other financial assets Plant and equipment Exploration and evaluation expenditure Oil properties Total non-current assets TOTAL ASSETS LIABILITIES Current liabilities Trade and other payables Provisions Provision for tax Other financial liabilities Borrowings Total current liabilities Non-current liabilities Trade and other payables Provisions Borrowings Total non-current liabilities TOTAL LIABILITIES NET ASSETS EQUITY Contributed equity Reserves Accumulated losses TOTAL EQUITY Note 10 11 12 13 14 11 14 15 16 17 21 22 9(e) 23 24 21 22 24 Consolidated 2017 $ 1,346,338 1,180,622 98,864 66,376 16,133 2,708,333 275,770 35,507 1,257 - 2,072,227 2,384,761 2016 $ 457,054 10,511 7,860 - - 475,425 - 16,133 2,674 1,034,689 - 1,053,496 5,093,094 1,528,921 585,936 177,883 654,468 364,261 963,993 2,746,541 118,994 387,403 1,260,769 1,767,166 131,145 - - - - 131,145 - - - - 4,513,707 131,145 579,387 1,397,776 25 26 33,798,034 (16,740) (33,201,907) 32,804,092 - (31,406,316) 579,387 1,397,776 The above statement of financial position should be read in conjunction with the accompanying notes. 20 Bass Oil Limited Annual Report 2017 CONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 30 JUNE 2017 Consolidated Note Contributed equity $ 32,804,092 Accumulated losses $ (31,406,316) Currency translation reserve $ - Total $ 1,397,776 - - - (1,795,591) - (1,795,591) - (16,740) (16,740) (1,795,591) (16,740) (1,812,331) At 1 July 2016 Net loss for the year Foreign currency translation differences Total comprehensive income for the period Shares issued Transaction costs on share issues Tax consequences of share issue costs 25 1,030,672 25 25 & 9 (59,777) 23,047 - - - - - - 1,030,672 (59,777) 23,047 At 30 June 2017 33,798,034 (33,201,907) (16,740) 579,387 At 1 July 2015 32,332,208 (27,375,576) Net loss for the year Total comprehensive income for the period - - (4,030,740) (4,030,740) Shares issued Transaction costs on share issues Tax consequences of share issue costs 25 482,629 25 25 & 9 (48,232) 37,487 - - - At 30 June 2016 32,804,092 (31,406,316) - - - - - - - 4,956,632 (4,030,740) (4,030,740) 482,629 (48,232) 37,487 1,397,776 The above statement of changes in equity should be read in conjunction with the accompanying notes. 21 Bass Oil Limited Annual Report 2017 CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE YEAR ENDED 30 JUNE 2017 Cash flows from operating activities Receipts from customers Payments to suppliers and employees Interest received Net cash used in operating activities Cash flows from investing activities Proceeds from the disposal of plant & equipment Proceeds from other financial asset Oil properties expenditure Net cash inflow on acquisition of subsidiary Petroleum exploration expenditure Net cash provided by/(used in) investing activities Cash flows from financing activities Proceeds from issue of shares and equity options Transaction costs on issue of shares Net cash provided by financing activities Net (decrease)/increase in cash and cash equivalents Net foreign exchange differences Cash and cash equivalents at the beginning of the year Note 34 17 18 16 Consolidated 2017 $ 963,991 (1,255,563) 3,178 (288,394) - - (66,643) 587,066 (27,636) 492,787 772,206 (59,777) 712,429 916,822 (27,538) 457,054 2016 $ 38,933 (607,821) 6,162 (562,726) 228 55,920 (16,133) - (206,257) (166,242) 482,629 (48,232) 434,397 (294,571) - 751,625 Cash and cash equivalents at the end of the year 10 1,346,338 457,054 The above statement of cash flows should be read in conjunction with the accompanying notes. 22 Bass Oil Limited Annual Report 2017 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2017 Note 1. Corporate Information The consolidated financial statements of Bass Oil Limited (“Parent Entity” or “Company”) and its controlled entities (collectively as “Consolidated Entity” or “the Group”) for the year ended 30 June 2017 was authorised for issue in accordance with a resolution of the directors on 27 September 2017. Bass Oil Limited is a company limited by shares incorporated in Australia whose shares are publicly traded on the Australian Stock Exchange. The nature of the operations and principal activities of the Group are oil production and exploration. Note 2. Summary of Significant Accounting Policies Basis of Preparation The financial report has been prepared on the basis of historical cost, except for the revaluation of certain non- current assets and financial instruments. Cost is based on the fair values of the consideration given in exchange for assets. All amounts are presented in Australian dollars, unless otherwise noted. In the application of the Group’s accounting policies, which are described below, management is required to make judgements, estimates and assumptions about carrying values of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on historical experience and various other factors that are believed to be reasonable under the circumstances, the results of which form the basis of making the judgements. Actual results may differ from these estimates. (a) Statement of Compliance These financial statements are general purpose financial statements which have been prepared in accordance with the Corporations Act 2001, Accounting Standards and Interpretations, and comply with other requirements of the law. The financial statements comprise the consolidated statements of the Group. For the purpose of preparing the consolidated financial statements, the Company is a for-profit entity. Accounting Standards include Australian Accounting Standards. Compliance with Australian Accounting Standards ensures that the financial statements and notes of the Company and the Group comply with International Financial Reporting Standards. (b) New Accounting Standards and Interpretations In the current year, the Group has adopted all of the new and revised Standards and Interpretations issued by the Australian Accounting Standards Board that are relevant to its operations and effective for the current annual reporting period, resulting in no accounting policy changes and no changes to recognition and measurement At the date of authorisation of the financial statements, the Group has not applied the following new and revised Australian Accounting Standards, Interpretations and amendments that have been issued but are not yet effective. Standard/Interpretation AASB 9 ‘Financial Instruments’, and the relevant amending standards AASB 15 ‘Revenue from Contracts with Customers’ and AASB 2014-5 ‘Amendments to Australian Accounting Standards arising from AASB 15’, AASB 2015-8 ‘Amendments to Australian Accounting Standards – Effective date of AASB 15’ Effective for annual reporting periods beginning on or after 1 January 2018 Expected to be initially applied in the financial year ending 30 June 2019 1 January 2018 30 June 2019 AASB 16 ‘Leases’ 1 January 2019 30 June 2020 Impact of New and Revised Requirements AASB 9 ‘Financial Instruments’ (December 2009), and the relevant amending standards AASB 9 applies to annual periods beginning on or after 1 January 2018. The directors of the Company anticipate that the application of AASB 9 in the future is not anticipated to have a material impact on amounts reported, based on current transactions, in respect of the Group’s financial assets and financial liabilities, but will affect disclosures made in the Group’s consolidated financial statements. 23 Bass Oil Limited Annual Report 2017 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2017 Note 2. Summary of Significant Accounting Policies (continued) (b) New Accounting Standards and Interpretations (continued) AASB 15 Revenue from Contracts with Customers, AASB 2014-5 Amendments to Australian Accounting Standards arising from AASB 15, AASB 2015-8 Amendments to Australian Accounting Standards – Effective Date of AASB 15, and AASB 2016-3 Amendments to Australian Accounting Standards – Clarifications to AASB 15 AASB 15 applies to annual periods beginning on or after 1 January 2018. The directors of the Company anticipate that the application of AASB 15 in the future will not have a material impact on the amounts reported, based on current transactions, but will affect disclosures made in the Group's consolidated financial statements. AASB 16 ‘Leases’ AASB 16 provides a comprehensive model for the identification of lease arrangements and their treatment in the financial statements of both lessees and lessors. The accounting model for lessees will require lessees to recognise all leases on balance sheet, except for short- term leases and leases of low value assets. AASB 16 applies to annual periods beginning on or after 1 January 2019. The directors of the Company anticipate that the application of AASB 16 in the future may have a material impact on the amounts reported and disclosures made in the Group's consolidated financial statements. However, it is not practicable to provide a reasonable estimate of the effect of AASB 16 until the Group performs a detailed review. (c) Basis of consolidation The consolidated financial statements comprise the financial statements of Bass Oil Limited and its subsidiaries as at 30 June each year (the Group). Control is achieved when the Group is exposed, or has rights, to variable returns from its involvement with the investee and has the ability to affect those returns through its power over the investee. Specifically, the Group cotrols an investee if and only if the Group has: Power over the investee (i.e. existing rights that give it the current ability to direct the relevant activities of the investee); Exposure, or rights, to variable returns from its involvement with the investee, and The ability to use its power over the investee to affect its returns. The financial statements of subsidiaries are prepared for the same reporting period as the parent company, using consistent accounting policies. In preparing the consolidated financial statements, all intercompany balances and transactions, income and expenses and profit and losses resulting from intra-group transactions have been eliminated in full. Subsidiaries are fully consolidated from the date on which control is transferred to the Group and cease to be consolidated from the date on which control is transferred out of the Group. (d) Foreign currency translation (i) Functional and presentation currency Both the functional and presentation currency of Bass Oil Limited and its subsidiaries is Australian dollars ($). (ii) Transactions and balances Transactions in foreign currencies are initially recorded in the functional currency by applying the exchange rates applicable at the date of transaction. Monetary assets and liabilities denominated in foreign currencies are retranslated at the rate of exchange ruling at the balance date. Non-monetary items that are measured in terms of historical cost in a foreign currency are translated at the date of the initial transaction. Non-monetary items measured at fair value in a foreign currency are translated using the exchange rates at the date when the fair value was determined. (e) Cash and cash equivalents Cash and cash equivalents in the statement of financial position comprise cash at bank and short term deposits with an original maturity of three months or less that are readily convertible to known cash amounts of cash which are subject to an insignificant risk of changes in value. 24 Bass Oil Limited Annual Report 2017 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2017 Note 2. Summary of Significant Accounting Policies (continued) (e) Cash and cash equivalents (continued) For the purposes of the statement of cash flows, cash and cash equivalents consist of cash and cash equivalents as defined above. (f) Trade and other receivables Trade and other receivables are recognised initially at fair value and subsequently measured at amortised cost less an allowance for impairment. An impairment provision is recognised when there is objective evidence that the Group will not be able to collect the receivable. The amount of the impairment loss is the receivable carrying amount compared to the present value of estimated future cash flows, discounted at the original effective interest rate. (g) Inventories Inventories are stated at the lower of cost and net realisable value. Costs of inventories are determined on a first-in- first-out basis. Net realisable value represents the estimated selling price for inventories less all estimated costs of completion and costs necessary to make the sale. (h) Investments and other financial assets Investments and financial assets in the scope of AASB 139 Financial Instruments: Recognition and Measurement are categorised as either financial assets at fair value through profit or loss, loans and receivables, held to maturity financial assets or available for sale financial assets. The classification depends on the purpose for which the assets were acquired or originated. Designation is re-evaluated at each reporting date, but there are restrictions on reclassifying to other categories. When financial assets are recognised initially, they are measured at fair value, plus, in the case of assets not at fair value through profit or loss, directly attributable transactions costs. Recognition and Derecognition All regular purchases and sales of financial assets are recognised on the trade date. Regular way purchases or sales are purchases or sales of financial assets under contracts that require delivery of the assets within the period established generally by regulation or convention in the market place. Financial assets are derecognised when the right to receive cash flows from the financial assets has expired or when the entity transfers substantially all of the risks and rewards of the financial assets. If the entity neither retains nor transfers substantially all of the risks and rewards, it derecognises the asset if it has transferred control of the asset. (i) Joint arrangements A joint operation is a joint arrangement whereby the parties that have joint control of the arrangement have rights to the assets, and obligations for the liabilities, relating to the arrangement. The consolidated entity has recognised its share of jointly held assets, liabilities, revenues and expenses of joint operations. These have been incorporated in the financial statements under the appropriate classifications. (j) Plant and equipment Plant and equipment is stated at cost less accumulated depreciation and any accumulated impairment losses. Depreciation is calculated on a straight-line basis over the estimated useful life of the assets as follows: Office furniture and equipment – over 3 to 10 years The assets' residual values, useful lives and amortisation methods are reviewed and adjusted, if appropriate, at each financial year end. Gains or losses on disposals are determined by comparing proceeds with the carrying amount and are included in profit or loss. (k) Leases The determination of whether an arrangement is or contains a lease is based on substance of the arrangement and requires assessment of whether the fulfilment of the arrangement is dependent on the use of a specific asset or assets and the arrangement conveys a right to use the asset. Operating lease payments are recognised as an expense in profit or loss on a straight-line basis over the lease term. Operating lease incentives are recognised as a liability when received and subsequently reduced by allocating lease payments between rental expense and reduction of the liability. 25 Bass Oil Limited Annual Report 2017 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2017 Note 2. Summary of Significant Accounting Policies (continued) (l) Impairment of non-financial assets other than indefinite life intangibles Non-financial assets other than indefinite life intangibles are tested for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. The Group conducts an annual internal review of asset values, which is used as a source of information to assess any indicators for impairment. If any impairment exists, an estimate of the asset’s recoverable amount is calculated. An impairment loss is recognised for the amount by which the asset’s carrying amount exceeds its recoverable amount. Recoverable amount is the higher of an assets fair value less costs of disposal and value in use. Non- financial assets that suffered an impairment are tested for possible reversal of the impairment whenever events or changes in circumstances indicate that the impairment may have reversed. (m) Exploration and evaluation expenditure Exploration and evaluation expenditure is carried forward separately for each area of interest provided that the rights to tenure of the area of interest is current and either: the exploration and evaluation activities are expected to be recouped through successful development and exploitation of the area of interest or, alternatively, by its sale; or exploration and evaluation activities in the area of interest have not at the reporting date reached a stage that permits a reasonable assessment of the existence or otherwise of economically recoverable reserves, and active and significant operations in or relating to, the area of interest are continuing. The carrying value of capitalised exploration and evaluation expenditure is assessed for impairment at the area of interest level whenever facts and circumstances suggest that the carrying value may exceed its recoverable amount. An impairment exists when the carrying amount of capitalised exploration and evaluation expenditure relating to an area of interest exceeds its recoverable amount. The asset is then written down to its recoverable amount and any impairment losses are recognised in profit or loss. (n) Oil properties Oil properties are carried at cost including construction, installation of infrastructure such as roads and the cost of development of wells. Subsequent costs are included in the asset’s carrying amount or recognised as a separate asset, as appropriate, only when it’s probable that future economic benefits associated with the item will flow to the Group and the cost of the item can be measured reliably. All other repairs and maintenance are charged to the profit or loss during the financial period in which they are incurred. Oil properties are amortised on the Units of Production basis using the latest approved estimate of Proven (1P) Reserves. Amortisation is charged only once production has commences. No amortisation is charged on areas under development where production has not yet commenced. (o) Provision for restoration The Group records the present value of its share of the estimated cost to restore operating locations. The provision is based on the net present value of the current agreed monthly payment to Pertamina to cover the anticipated obligations relating to the reclamation, waste site closure, plant closure, production facility removal and other costs associated with the restoration of the site. Pertamina is responsible for all restoration. When the liability is recorded the carrying amount of the production asset is increased by the restoration costs which are depreciated over the producing life of the asset. Over time, the liability is increased for the change in the present value based on a risk free discount rate and monthly payment to Pertamina. The unwinding of the discount is recorded as an accretion charge within finance costs. Any changes in the estimate of the provision for restoration arising from changes in the amount required to be paid to pertamina or changes in the discount rate of the restoration provision are recorded by adjusting the provision and the carrying amount of the production or exploration asset and then depreciated over the producing life of the asset. Any change in the discount rate is applied prospectively. 26 Bass Oil Limited Annual Report 2017 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2017 Note 2. Summary of Significant Accounting Policies (continued) (q) Trade and other payables Trade payables and other payables are carried at amortised cost due to their short term nature they are not discounted. They represent liabilities for goods and services provided to the Group prior to the end of the financial year that are unpaid and arise when the Group becomes obliged to make future payments in respect of the purchase of these goods and services. (r) Contributed equity Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of new shares or options are shown in equity as a deduction, net of tax, from the proceeds. (s) Revenue recognition Revenue is recognised in profit or loss when the significant risks and rewards of ownership have been transferred to the buyer. Revenue is recognised and measured at the fair value of the consideration or contributions received, net of goods and service tax (“GST”), to the extent it is probable that the economic benefits will flow to the Group and the revenue can be reliably measured. Sales revenue Sales revenue is recognised on the basis of the Group’s interest in a producing field (“entitlements” method), when the physical product and associated risks and rewards of ownership pass to the purchaser, which is at the time the oil is received at the Pertamina terminal. Revenue earned under a production sharing contract (“KSO”) is recognised on a net entitlements basis according to the terms of the KSO. Other income Other income is recognised in profit or loss at the fair value of the consideration received or receivable, net of GST, when the significant risks and rewards of ownership have been transferred to the buyer or when the service has been performed. Interest income Interest income from a financial asset is recognised when it is probable that the economic benefits will flow to the Group and the amount of revenue can be measured reliably. Interest income is accrued on a time basis, by reference to the principle outstanding and at the effective interest rate applicable, which is the rate that exactly discounts estimated future cash receipts through the expected life of the financial asset to that asset’s net carrying amount on initial recognition. (t) Employee benefits A liability is recognised for benefits accruing to employees in respect of wages and salaries, annual leave and sick leave in the period the related service is rendered. Liabilities recognised in respect of short term employee benefits, are measured at their nominal values using the remuneration rate expected at the time of settlement. (u) Income tax and other taxes Current tax assets and liabilities for the current and prior periods are measured at the amount expected to be recovered from or paid to the taxation authorities. The tax rates and tax laws used to compute the amount are those that are enacted or substantively enacted by the reporting date. Deferred income tax is provided on all temporary differences at the reporting date between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes. Deferred income tax liabilities are recognised for all taxable temporary differences except: when the deferred income tax liability arises from the initial recognition of goodwill or of an asset or liability in a transaction that is not a business combination and that, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss; or when the taxable temporary difference is associated with investments in subsidiaries, associates or interests in joint ventures, and the timing of the reversal of the temporary difference can be controlled and it is probable that the temporary difference will not reverse in the foreseeable future. 27 Bass Oil Limited Annual Report 2017 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2017 Note 2. Summary of Significant Accounting Policies (continued) (u) Income tax and other taxes (continued) Deferred income tax assets are recognised for all deductible temporary differences, carry-forward of unused tax assets and unused tax losses, to the extent that it is probable that taxable profit will be available against which the deductible temporary differences and the carry-forward of unused tax credits and unused tax losses can be utilised, except: when the deferred income tax asset relating to the deductible temporary difference arises from the initial recognition of an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss; or when the deductible temporary difference is associated with investments in subsidiaries, associates or interests in joint ventures, in which case a deferred tax asset is only recognised to the extent that it is probable that the temporary difference will reverse in the foreseeable future and taxable profit will be available against which the temporary difference can be utilised. The carrying amount of deferred income tax assets is reviewed at each reporting date and reduced to the extent that it is no longer probable that sufficient taxable profit will be available to allow all or part of the deferred income tax asset to be utilised. Unrecognised deferred income tax assets are reassessed at each reporting date and are recognised to the extent that it has become probable that future taxable profit will allow the deferred tax asset to be recovered. Deferred income tax assets and liabilities are measured at the tax rates that are expected to apply in the year when the asset is realised or the liability is settled, based on tax rates (and tax laws) that have been enacted or substantively enacted at the reporting date. Deferred tax assets and deferred tax liabilities are offset only if a legally enforceable right exists to set off current tax assets against current tax liabilities and the deferred tax assets and liabilities relate to the same taxable entity and the same taxation authority. Indonesian First Tranche Petroleum A provision for deferred income tax payable related to tax potentially payable by the Group on its share of First Tranche Petroleum which has already been recovered from Tangai-Sukananti KSO production. This tax will only be payable in the event the contractors exhaust the pool of cost recovery prior to expiry of the KSO. Based on the amount of the cost recovery pool, the Group believes that the cost recovery pool could be exhausted in 2018 and that the tax will become payable in the 2019. Other taxes Revenues, expenses and assets are recognised net of the amount of GST or VAT except: when the GST or VAT incurred on a purchase of goods and services is not recoverable from the taxation authority, in which case the GST or VAT is recognised as part of the cost of acquisition of the asset or as part of the expense item as applicable; and receivables and payables, which are stated with the amount of GST or VAT included. The net amount of GST or VAT recoverable from, or payable to, the taxation authority is included as part of receivables or payables in the statement of financial position. Commitments and contingencies are disclosed net of the amount of GST or VAT recoverable from, or payable to, the taxation authority. (v) Earnings per share Basic earnings per share is calculated as net profit/(loss) attributable to members of the parent, adjusted to exclude any costs of servicing equity (other than dividends), divided by the weighted average number of ordinary shares, adjusted for any bonus element. (w) Critical accounting estimates and judgements The preparation of a financial report in conformity with Australian Accounting Standards requires management to make judgements, estimates and assumptions that affect the application of policies and reported amounts of assets and liabilities, income and expenses. The estimates and associated assumptions are based on historical experience and various other factors that are believed to be reasonable under the circumstances, the results of which form the basis of making the judgements about carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates. 28 Bass Oil Limited Annual Report 2017 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2017 Note 2. Summary of Significant Accounting Policies (continued) (w) Critical accounting estimates and judgements (continued) These accounting policies have been consistently applied by each entity in the consolidated entity, and the estimates and underlying assumptions are reviewed on an ongoing basis. The judgements, estimates and assumptions that have a significant risk of causing a material adjustment to the carrying values of assets and liabilities within the next financial year are discussed below. (i) Impairment of Oil Property Assets Oil properties impairment testing requires an estimation of the fair value less cost to sell of the cash generating unit to which deferred costs have been allocated. The fair value less cost to sell calculation requires the entity to estimate the future cash flows expected to arise from the cash generating unit and a suitable discount rate in order to calculate present value. Other assumptions used in the calculations which could have an impact on future years includes USD rates, available reserves and oil prices. (ii) Useful Life of Oil Property Assets As detailed at Note 2 (n) oil properties are amortised on a unit-of-production basis, with separate calculations being made for each resource. Estimates of reserve quantities are a critical estimate impacting amortisation of oil property assets. (iii) Estimates of Reserve Quantities The estimated quantities of Proven and Probable hydrocarbon reserves reported by the Company are integral to the calculation of the amortisation expense relating to oil properties, and to the assessment of possible impairment of these assets. Estimated reserve quantities are based upon interpretations of geological and geophysical models and assessments of the technical feasibility and commercial viability of producing the reserves. These assessments require assumptions to be made regarding future development and production costs, commodity prices, exchange rates and fiscal regimes. The estimates of reserves may change from period to period as the economic assumptions used to estimate the reserves can change from period to period, and as additional geological data is generated during the course of operations. Reserves estimates are prepared in accordance with the Company’s policies and procedures for reserves estimation which conform to guidelines prepared by the Society of Petroleum Engineers. Note 3. Financial Risk Management Objectives and Policies The Group’s principal financial instruments comprise receivables, payables, cash, deposits and borrowings. The Group manages its exposure to key financial risks, including oil price, interest rate and currency risk in accordance with the Group’s financial risk management policy. The objective of the policy is to support the delivery of the Group’s financial targets whilst protecting future financial security. The main risks arising from the Group’s financial instruments are interest rate risk, foreign currency risk, commodity price risk, credit risk and liquidity risk. The Group uses different methods to measure and manage different types of risk to which it is exposed. These include monitoring levels of exposure to interest rate and foreign exchange risk and assessments of market forecasts for interest rates, foreign exchange and commodity prices. The risks are summarised below. Primarily responsibility for identification and control of financial risks rests with the Managing Director under the authority of the Board. The Board reviews and agrees management’s assessment for managing each of the risks identified below. The carrying amounts and net fair values of the Group’s financial assets and liabilities at 30 June 2017 are cash and cash equivalents $1,346,338, trade and other receivables $1,456,392, other financial assets $51,640, trade and other payables $704,930 and borrowings $2,224,762. 29 Bass Oil Limited Annual Report 2017 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2017 Note 3. Financial Risk Management Objectives and Policies (continued) Market risk Market risk is the risk that the fair value of future cash flows of a financial instrument will fluctuate because of changes in market prices. Market risk comprises three types of risk: foreign currency risk, commodity price risk and interest rate risk. Financial instruments affected by market risk include deposits, trade and other receivables, trade and other payables, and borrowings. The sensitivity analyses in the following sections relate to the position as at 30 June 2017. The sensitivity analyses have been prepared on the basis that the amount of the financial instruments in foreign currencies is all constant. The sensitivity analyses are intended to illustrate the sensitivity changes in market variables on the Group’s financial instruments and show the impact on profit and loss and shareholders’ equity, where applicable. Foreign currency risk The Group has transactional currency exposure arising from oil sales which are denominated in United States dollars (USD), whilst costs are denominated in Indonesian Rupiah (IDR), USD and Australian dollars. The Group does not undertake any hedging activities. During the year the Group acquired oil production assets in Indonesia and is now exposed to foreign currency risk arising from various currency exposures, to the United States dollar. The Board approved the policy of holding certain funds in United States dollars to manage foreign exchange risk. The Group’s exposure to foreign exchange risk at the reporting date was as follows (holdings are shown in AUD equivalent): Financial assets: Cash and cash equivalents Trade and other receivables Financial liabilities: Trade and other payables 30 JUNE 2017 USD $ 1,038,530 1,224,590 28,429 IDR $ 136,950 218,584 591,253 At the reporting date, if the currencies set out in the table above, strengthened or weakened against the Australian dollar by the percentage shown, with all other variables held constant, net profit for the year would increase/(decrease) and net assets would increase/(decrease) by: Impact on post tax profit Exchange rate +10% Exchange rate -10% Impact on equity Exchange rate +10% Exchange rate -10% 30 JUNE 2017 USD $ 223,469 (223,469) 223,469 (223,469) IDR $ (23,571) 23,571 (23,571) 23,571 Management believes the risk exposures as at the reporting date are representative of the risk exposure inherent in the financial instruments. A movement of +/– 10% is selected because a review of recent exchange rate movements and economic data suggests this range is reasonable. 30 Bass Oil Limited Annual Report 2017 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2017 Note 3. Financial Risk Management Objectives and Policies (continued) Commodity Price Risk The Group is exposed to commodity price fluctuations through the sale of petroleum products denominated in US dollars. The Group may enter into commodity crude oil price swap and option contracts to manage its commodity price risk. If the US dollar oil price changed by +/-10% from the average oil price during the period since acquisition (4 months), with all other variables held constant, the estimated impact on post-tax profit and equity would have been: Impact on post tax profit USD dollar oil price +10% USD dollar oil price -10% Impact on equity USD dollar oil price +10% USD dollar oil price -10% Interest rate risk 30 JUNE 2017 USD $ 191,132 (191,132) 191,132 (191,132) The Group’s exposure to market interest rates is related primarily to the Group’s cash and cash equivalents. The Group constantly analyses its interest rate opportunity and exposure. Within analysis consideration is given to existing positions and alternative arrangement on fixed or variable deposits. The following sensitivity analysis is based on the interest rate opportunity/risk in existence at reporting date. At reporting date, if interest rates changed by +/- 1%, with all other variables held constant, the estimated impact on post-tax profit and equity would have been: Impact on post tax profit Interest rates +1% Interest rates -1% Impact on equity Interest rates +1% Interest rates -1% 30 JUNE 2017 $ 13,463 (13,463) 13,463 (13,463) A movement of + and-1% is selected because this is historically within the range of rate movements and available economic data suggests this range is reasonable. Liquidity risk Liquidity risk is the risk that the Group will not be able to meet its financial obligations as they fall due. The Group’s approach to managing liquidity is to ensure, as far as possible, that it will always have sufficient liquidity to meet its liabilities when due, under both normal and stressed conditions, without incurring unacceptable losses or risking damage to the Group’s reputation. Ultimate responsibility for liquidity risk management rests with the Board of Directors, which has built an appropriate liquidity risk framework for the management of the Group’s short, medium and longer term funding and liquidity management requirements. The Group manages liquidity risk by maintaining adequate banking facilities through monitoring of future rolling cash flow forecasts of its operations, which reflect management’s expectations of the settlement of financial assets and liabilities. The financial liabilities are trade and other payables, and borrowings. At 30 June 2017, the Group had $704,930 (2016: $131,145) in trade and other payables. Trade payables are non-interest bearing and have a contractual maturity of less than 30 days. At 30 June the Group had borrowings of $2,224,762 and are interest free. 31 Bass Oil Limited Annual Report 2017 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2017 Note 3. Financial Risk Management Objectives and Policies (continued) The only financial assets are cash and cash equivalents, trade and other receivables, and other financial assets. At 30 June 2017, the Group had $1,346,338 (2016: $457,054) in cash and cash equivalents, $1,456,392 (2016: $10,511) in trade and other receivables, and $51,640 (2016: $16,133) in other financial assets. The following table details the Group’s remaining contractual maturity for its non-derivative financial liabilities. The table has been drawn up based on the undiscounted cash flows of financial liabilities based on the earliest date on which the Group can be required to pay. The table includes both interest and principal cash flows. Weighted average effective interest rate % - 1.81% - Less than one year One to two years Greater than two years $ $ $ Total $ 585,936 1,000,000 - 1,270,000 118,994 - 704,930 2,270,000 131,145 - - 131,145 2017 Trade and other payables Borrowings 2016 Trade and other payables Credit risk Credit risk arises from financial assets of the Group, which comprise cash and cash equivalents, trade and other receivables, and other financial assets. Credit risk refers to the risk that a counterparty will default on its contractual obligations resulting in financial loss to the Group. The Group have adopted a policy of only dealing with creditworthy counterparties and obtaining sufficient collateral or other security, where appropriate, as a means of mitigating the risk of financial loss from defaults. The carrying amount of financial assets recorded in the financial statements, net of any provisions for losses, represents the Group’s maximum exposure to credit risk without taking account of any collateral or other security obtained. In addition, receivable balances are monitored on an ongoing basis with the result being that the Group’s exposure to bad debts is not significant. Currently there are no receivables that are impaired or past due but not impaired. Apart from Pertamina, the Indonesian State owned oil Company, the largest customer of the Group, the Group does not have significant credit risk exposure to any other counterparty. The credit risk on liquid funds is banks with high ratings assigned by international credit rating agencies. Fair value of financial instruments The Directors consider that the carrying amount of the financial assets and liabilities recorded in the financial statements approximate their fair values unless otherwise stated. Capital management Capital is defined as equity. When managing capital, management’s objective is to ensure the entity continues as a going concern as well as to maintain optimal returns to shareholders. The Group will seek to raise further capital, if required, to fund its future strategy for the development of the Tangai- Sukananti field. The Group is not subject to any externally imposed capital requirements. 32 Bass Oil Limited Annual Report 2017 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2017 Note 4. Administrative expenses Note Audit and tax fees Consultants fees other Corporate related costs Directors’ remuneration (i) Foreign exchange losses Insurance Legal expenses Loss on disposal of assets Operating lease costs Travel Other administrative expenses Consolidated 2017 $ 78,443 250,440 32,992 227,111 3,807 12,542 3,375 123 82,758 103,022 114,943 909,556 2016 $ 35,000 143,061 38,091 248,550 - 11,926 34,523 2,031 49,886 5,102 40,993 609,163 (i) Mr Guglielmo’s remuneration is included in directors’ remuneration when he was an Executive Director until he was appointed Managing Director on 1 February 2017. From that date, his remuneration is included in Employee benefits expense. Note 5. Depreciation and amortisation Depreciation and amortisation included in the profit and loss is as follows: Depreciation of plant and equipment Amortisation of oil properties 14 Note 6. Employee benefits expense Wages and salaries Superannuation Provision for annual leave Medical expenses Termination benefits Workers compensation Note 7. Finance costs Accretion interest Consolidated 2017 $ 1,578 184,824 186,402 Consolidated 2017 $ 240,151 35,000 10,525 3,097 34,532 36 323,341 Consolidated 2017 $ 16,516 16,516 2016 $ 3,104 - 3,104 2016 $ - - - - - 698 698 2016 $ - - 33 Bass Oil Limited Annual Report 2017 Note Consolidated 2017 $ 2016 $ NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2017 Note 8. Auditor’s Remuneration . Amounts received or due and receivable by Deloitte for: An audit or review of the financial report of the entity paid to: Deloitte Touche Tomatsu Australia Deloitte Touche Tomatsu Indonesia Total The auditor of Bass Oil Limited is Deloitte Touche Tohmatsu. Audit costs included in acquisition costs amounted to $12,499, refer to Note 18. Note 9. Income Tax (a) Income tax recognised in profit or loss Current tax In respect of the current year Deferred tax In respect of the current year 61,000 29,942 90,942 35,000 - 35,000 Consolidated 2017 $ 44,972 23,047 2016 $ - 37,487 Total income tax expenses recognised in profit or loss 68,019 37,487 The income tax expense for the year can be reconciled to the accounting profit or loss as follows: Loss before tax (1,727,572) (3,993,253) Income tax calculated at 30% (2016: 30%) (518,272) (1,197,976) Difference in tax rates Cost recovery profit that is not liable to income tax in Indonesia Change in fair value of options recorded in other liabilities Expenses associated with the acquisition Other Tax losses previously recognised now not recognised Current year revenue tax losses not recognised Income tax expense recognised in the profit or loss (b) Recognised deferred tax assets and (liabilities) Deferred tax assets and (liabilities) are attributable to the following: Other assets Exploration and evaluation expenditure Plant and equipment Trade and other payables Provisions Share issue costs Net deferred tax assets not recognised Tax value of revenue losses carried forward 11,243 (167,629) 78,818 56,932 37 48,710 558,180 68,019 (7,829) - - 27,383 3,158 32,142 54,854 (54,854) - - - - - - 944,228 291,235 37,487 (2,358) (310,406) 159 15,191 - 37,255 (260,159) - 260,159 Net deferred tax assets and (liabilities) - - 34 Bass Oil Limited Annual Report 2017 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2017 Note 9. Income Tax (continued) (c) Unrecognised deferred tax assets Deferred tax assets have not been recognised in respect of the following items: Temporary differences Revenue tax losses Capital tax losses Deferred tax assets have not been recognised in respect to these items as it is not probable at this time that future taxable profits will be available against which the group can utilise the benefit. (d) Movement in recognised net deferred tax asset Opening balance Recognised in equity Recognised in income Closing balance (e) Movement in provision for tax Opening balance Provision acquired on acquisition Income tax expense Foreign exchange movement Closing balance Consolidated 2017 $ 2016 $ 54,854 6,017,585 232,200 - 5,403,696 232,200 6,304,639 5,635,896 - (23,047) 23,047 - - 610,911 44,972 (1,415) 654,468 - (37,487) 37,487 - - - - - - The provision for tax relates to income tax payable in Indonesia. The tax only becomes payable when there are no cost recoveries available to be carried forward at the end of the tax year in Indonesia (31 December). Based on the current life of field model, there will be no cost recoveries carried forward at 31 December 2019, meaning that the tax will become payable on 30 April 2020. The provision for tax covers the tax years from 2010 to 2016 and the six months to 30 June 2017. Note 10. Cash and Cash Equivalents Cash at bank and in hand Consolidated 2017 $ 1,346,338 1,346,338 2016 $ 457,054 457,054 35 Bass Oil Limited Annual Report 2017 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2017 Note 11. Trade and Other Receivables Current: Trade debtors (i) Other receivables Goods and services tax Value-added tax Non-current: Other receivables Consolidated 2017 $ 948,865 7,896 5,276 218,585 2016 $ - 3,543 6.968 - 1,180,622 10,511 275,770 275,770 - - (i) At balance date, there are no trade receivables that are past due but not impaired. Due to the short-term nature of these receivables, their carrying value approximates fair value. Trade receivables are non-interest bearing and are generally on 60 day terms. Details regarding the credit risk of receivables are disclosed in Note 3. All sales from the Tangai-Sukananti KSO are to Pertamina, the Indonesia State owned oil Company. Note 12. Other Current Assets Prepayments Accrued revenue Note 13. Inventories Oil inventories in tank (at cost) Maintenance spares (at cost) Note 14. Other Financial Assets Current Security Deposit Non-current: Security Deposits Consolidated 2017 $ 83,515 15,349 98,864 Consolidated 2017 $ 33,022 33,354 66,376 Consolidated 2017 $ 16,133 16,133 35,507 35,507 2016 $ 6,974 886 7,860 2016 $ - - - 2016 $ - - 16,133 16,133 36 Bass Oil Limited Annual Report 2017 Note 18 5 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2017 Note 15. Plant and Equipment Office equipment, furniture and fittings Opening balance, net of accumulated depreciation Assets acquired on acquisition Disposals Depreciation charge for the year Closing balance, net of accumulated depreciation Cost Accumulated depreciation Net carrying amount Note 16. Exploration and Evaluation Costs Exploration and evaluation costs Movement in the carrying value of exploration and evaluation costs Petroleum tenements in the exploration phase Balance at the beginning of year Cost capitalised for the year Exploration costs impaired and written off Balance at the end of year Consolidated 2017 $ 2,674 284 (123) (1,578) 1,257 81,382 (80,125) 2016 $ 8,037 - (2,259) (3,104) 2,674 66,367 (63,693) 1,257 2,674 Consolidated 2017 $ - 2016 $ 1,034,689 - 1,034,689 Consolidated 2017 $ 2016 $ 1,034,689 27,636 (1,062,325) 4,249,757 206,257 (3,421,325) - 1,034,689 The net carrying amount of exploration and evaluation costs is represented by Vic/P41 $nil (2016: $577,983), Vic/P68 $nil (2016: $401,091) and PEP 150 $nil (2016: $55,615). An impairment exists when the carrying amount of capitalised exploration and evaluation expenditure relating to an area of interest exceeds its recoverable amount. The asset is then written down to its recoverable amount. Any impairment losses are recognised in the profit or loss. In the current year, Vic/P41 was surrendered prior to the commencement of Year 5 work program and the capitalised expenditure was written off. As a result of the change in the strategic direction of the Group, no further work is planned to be performed in relation Vic/P68 and the amounts capitalised have been fully impaired. The Group had been seeking to farm out or sell this permit but has been unable to gain sufficient interest. It is likely the permit will be surrendered at the end of the permit year. Costs associated with PEP 150 have been written off after the Victorian Government extended the moratorium on onshore exploration activity till 30 June 2020. Commitments and tenure of each permit are included in Note 30. 37 Bass Oil Limited Annual Report 2017 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2017 Note 17. Oil Properties Tangai-Sukananti KSO Movement in the carrying value of oil properties Balance at the beginning of year Oil properties acquired on acquisition (Note 18) Expenditure during the period Foreign exchange movement Depreciation, depletion and amortisation Balance at the end of year Note 18. Business Combinations (a) Subsidiaries acquired Consolidated 2017 $ 2,072,227 2,072,227 Consolidated 2017 $ - 2,187,609 66,643 2,799 (184,824) 2,072,227 2016 $ - - 2016 $ - - - - - - Principal activity Date of Acquisition Proportion of shares acquired Consideration transferred $ Cooper Energy Sukananti Ltd Oil Producer 28/02/2017 100% 860,000 Cooper Energy Sukananti Ltd holds a 55% interest in the Tangai-Sukananti KSO, an oil producing field, located in South Sumatra, Indonesia. (b) Consideration for the acquisition Cash Issue of 180,000,000 fully paid ordinary shares Deferred consideration agreement Consolidated 2017 $ 500,000 360,000 860,000 2,211,444 3,071,444 2016 $ - - - - - The Deferred consideration of $2,270,000 is payable over four instalments between 31 December 2017 and 31 December 2018 and has been recorded at the net present value amount. Acquisition related costs amounting to $189,774 have been excluded from the consideration transferred and have been recognised as an expense in the profit or loss in the current year, within the ‘acquisition expenses’ line item. 38 Bass Oil Limited Annual Report 2017 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2017 Note 18. Business Combinations (continued) (c) Assets acquired and liabilities assumed at the date of acquisition Current assets Cash and cash equivalents Trade and other receivables Other current assets Inventories Non-current assets Trade and other receivables Other financial assets Plant and equipment Oil properties Current liabilities Trade and other payables Provisions Provision for tax Non-current liabilities Trade and other payables Provisions Fair value of asset and liabilities acquired Less consideration for the acquisition Cooper Energy Sukananti Ltd $ 1,087,066 1,507,296 47,268 55,279 178,028 35,606 284 2,187,609 (633,097) (269,852) (610,910) (111,075) (402,058) 3,071,444 (3,071,444) - Some of the above fair values have been accounted for on a provisional basis, as the transaction only recently occurred. (d) Net cash inflow on acquisition of subsidiaries Consideration paid in cash Cash and cash equivalent balances acquired Net cash inflow on acquisition of subsidiaries (e) Impact of acquisition on the results of the Group Consolidated 2017 $ (500,000) 1,087,066 587,066 2016 $ - - - Included in the loss for the year is $626,223 profit attributable to the additional business generated by Cooper Energy Sukananti Ltd. Revenue for the year includes $1,911,320 in respect of Cooper Energy Sukananti Ltd. Had these business combinations been effected at 1 July 2016, the revenue of the Group from continuing businesses would have been $5,733,963, and the loss for the year from continuing operations would have been $543,146. The directors of the Group consider these ‘pro-forma’ numbers to present an approximate measure of the performance of the combined Group on an annualised basis and to provide a reference point for future comparisons. 39 Bass Oil Limited Annual Report 2017 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2017 Note 19. Subsidiaries Details of the Group’s subsidiaries at the end of the reporting period are as follows: Name of Subsidiary Principal activity Place of Incorporation and operation Proportion of ownership interest and voting power held by the Group BSOC Business Services Pty Ltd Non-operating Australia Cooper Energy Sukananti Ltd Oil Producer British Virgin Islands 30/06/17 30/06/16 100% 100% 100% - Note 20. Joint Arrangements The Group has interests in a number of joint arrangements which are classified as joint operations. Details of the Group’s joint arrangements at the end of the reporting period are as follows: Name of Joint Venture Principal activity Place of Incorporation and operation Proportion of ownership interest and voting power held by the Group 30/06/17 30/06/16 (i) Joint arrangements in which Bass Oil Limited is the operator Vic/P41 Oil & Gas exploration Australia - 64.6% Tangai-Sukananti KSO Oil Producer Indonesia 55% - (ii) Joint arrangements in which Bass Oil Limited is not the operator PEP 150 Oil & Gas exploration Australia 15% 15% Note 21. Trade and Other Payables Current: Trade payables (i) Other payables Non-current: Other payables Consolidated 2017 $ 164,294 421,642 585,936 118,994 118,994 2016 $ 52,176 78,969 131,145 - - (i) The Groups settles creditors on average within 30 days and no interest is charged. 40 Bass Oil Limited Annual Report 2017 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2017 Note 22. Provisions Current Employee benefits Non-current: Restoration Movement in the carrying value of restoration provision Balance at the beginning of year Restoration provision acquired on acquisition (Note 18) Expenditure during the period Accretion interest Foreign exchange movement Balance at the end of year Consolidated 2017 $ 2016 $ 177,883 177,883 387,403 387,403 - - - - Consolidated 2017 $ 2016 $ - 402,058 (11,611) (3,196) 152 387,403 - - - - - - The restoration provision was agreed with Pertamina for when the licenses expire in July 2025. Note 23. Other financial liabilities Movement in equity options Balance at the beginning of year Value on issue Change in fair value Closing value Consolidated 2017 $ 2016 $ - 101,534 262,727 364,261 - - - - The equity option relates to the piggy back option as disclosed in Note 25 and Note 29. This liability will not result in a payment by the Group, as when the equity options are exercised the amount associated with the exercised option will be transferred to equity and if the options are not exercised by the expiry date, 15 December 2017, the equity option will be transferred to the profit or loss. 41 Bass Oil Limited Annual Report 2017 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2017 Note 24. Borrowings Current Non-current Consolidated 2017 $ 963,993 1,260,769 2,224,762 2016 $ - - - The acquisition of Cooper Energy Sukananti Ltd (see Note 18) from Cooper Energy Limited was agreed and approved by shareholders at a Special General Meeting on 13 February 2017. The transaction was settled on the 28 February 2017 with the payment of $500,000 cash and the issue of 180,000,000 ordinary shares, valued at $360,000. Additionally a deferred settlement of $2,270,000 was agreed to be repaid by 31 December 2018. The deferred settlement is interest free. The borrowings are secured by a registered charge over the shares the Company holds in Cooper Energy Sukananti Ltd. The amount due has been recorded at its net present value. Note 25. Contributed Equity Issued and paid up capital Ordinary shares fully paid Movements in ordinary shares on issue Ordinary shares on issue at beginning of period Entitlements Issue Consideration for acquisition Transaction costs Tax consequences of share issue costs 2017 Shares 2016 Shares Consolidated 2017 $ 2016 $ 2,239,217,584 1,287,010,990 33,798,034 32,804,092 1,287,010,990 772,206,594 180,000,000 - 804,381,671 482,629,319 - - 32,804,092 670,672 360,000 (59,777) 32,332,208 482,629 - (48,232) - - 23,047 37,487 2,239,217,584 1,287,010,990 33,798,034 32,804,092 On 14 December 2016 the Company issued 772,206,594 ordinary shares after undertaking a non-renounceable rights issue of three new shares for every five shares held at an issue price of $0.001 cents per share. The company also issued one free attaching option to every two new shares purchased with an exercise price of $0.003 cents and expiry date of 15 December 2017. Each new option upon exercise will receive one new piggy back option having an exercise price of $0.006 cents and an expiry date of 15 December 2018. The Company issued 386,103,297 options. The rights issue raised $772,206 before costs and expenses. As the new option will result in a piggy back option being granted on exercise, AASB 132 “Financial Instruments: Presentation” requires the option to be treated as a financial liability instead of equity. Therefore, the Company recognised the option as a financial liability at fair value through profit and loss. See Note 23. On 28 February 2017 the Company issued 180,000,000 ordinary shares to Cooper Energy Limited in part consideration for the acquisition of Cooper Energy Sukananti Ltd. The issue price was $0.002 cents per share. The shares are being held in subject to a voluntarily agreed escrow agreement for a period of twelve months. Terms and Conditions of Contributed Equity Ordinary shares entitle the holder to receive dividends as declared and, in the event of winding up the Company, to participate in the proceeds from the sale of all surplus assets in proportion to the number of and amounts paid up on shares held. Ordinary shares entitle their holder to one vote, either in person or by proxy, at a meeting of the Company. Share Options on Issue As at 30 June 2017, the Company has 386,103,275 (2016: nil) share options on issue, exercisable on a 1:1 basis for 386,103,275 (2016: nil) ordinary shares of the Company at an exercise price of $0.003 and an expiry date of 15 December 2017. 42 Bass Oil Limited Annual Report 2017 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2017 Note 26. Accumulated Losses Balance at beginning of year Net loss Balance at end of year Note 27. Earnings per Share Consolidated 2017 $ (31,406,316) (1,795,591) 2016 $ (27,375,576) (4,030,740) (33,201,907) (31,406,316) The following reflects the income used in the basic earnings per share computations. Basic earnings/(loss) per share Consolidated 2017 $ (0.001) 2016 $ (0.005) Net loss attributable to ordinary equity shareholders of the parent (1,795,591) (4,030,740) Weighted average number of ordinary shares: Issued ordinary shares at 1 July Effect of shares issued June 2016 Effect of shares issued December 2016 Effect of shares issued February 2017 2017 Number 1,287,010,990 - 418,895,632 60,164,384 2016 Number 804,381,671 25,668,107 - - Weighted average number of ordinary shares at 30 June 1,766,071,006 830,049,778 Note 28. Key Management Personnel Disclosures The aggregate compensation made to directors and other members of key management personnel of the Group is set out below: Short-term employee benefits Post-employment benefits Consolidated 2017 $ 371,554 47,112 418,666 2016 $ 281,080 8,550 289,630 43 Bass Oil Limited Annual Report 2017 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2017 Note 29. Financial instruments This note provides information about how the Group determines fair values of various financial assets and financial liabilities. Fair value of the Group's financial assets and financial liabilities that are measured at fair value on a recurring basis Some of the Group's financial assets and financial liabilities are measured at fair value at the end of each reporting period. The following table gives information about how the fair values of these financial assets and financial liabilities are determined (in particular, the valuation technique(s) and inputs used). Financial assets/ Financial liabilities Fair value as at 30/06/17 $ Fair value as at 30/6/16 $ Fair value hierarchy Other financial liability – equity option $364,261 $- Level 3 Significant unobservable input(s) Relationship of unobservable inputs to fair value The share price volatility used in the valuation was estimated based on the average volatility of a peer group of companies. A higher stock price volatility would result in a higher fair value, and vice versa. Valuation technique(s) and key input(s) Black Scholes option pricing model. The option call price was estimated based on the market observable share price, historical share price volatility and prevailing interest rates. Fair value of financial assets and financial liabilities that are not measured at fair value on a recurring basis (but fair value disclosures are required) The directors consider that the carrying amounts of financial assets and financial liabilities recognised in the consolidated financial statements approximate their fair values. Reconciliation of Level 3 fair value measurements: Opening balance Issued during the year Change in fair value taken to profit or loss Closing balance Held to Maturity – Options for Company Equities $ - 101,534 262,727 364,261 44 Bass Oil Limited Annual Report 2017 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2017 Note 30. Commitments and contingencies (a) Permit work commitments Set out below are the minimum work obligations with associated indicative costings under the current significant exploration permits the group has as at 30 June 2017. Vic/P68 (Group’s interest is 100%) The Group is currently in year three of a six year work programme which expires on 3 May 2019. The table below shows details of the commitments: Year of permit 3 4 5 6 Permit year end Minimum work commitments 3 November 2017 3 May 2018 3 May 2019 3 May 2020 225sq km 3D seismic survey Geotechnical studies One exploration well Geotechnical studies Estimated expenditure 3,000,000 250,000 20,000,000 250,000 The commitment for year 3 has not been met as at 30 June 2017. The Group has been seeking to farm out or sell this permit but has been unable to gain sufficient interest. It is likely the permit will be surrendered at the end of the permit year. (b) Non-cancellable operating lease commitments Future operating lease rentals relating to the rent of the Group’s office in Melbourne that is not provided for in the financial statements and payable: Within one year After one year but not more than five years Consolidated 2017 $ 11,000 - 11,000 2016 $ 44,000 11,000 55,000 Set out below are the Group’s share of operating lease commitments that are in Tangai –Sukananti KSO. Future operating lease rentals relating to the rental of the Jakarta office and equipment in the Jakarta office that are not provided for in the financial statements and payable: Within one year After one year but not more than five years Consolidated 2017 $ 143,159 114,873 258,032 2016 $ - - - Future operating lease rentals relating to the field equipment & vehicles in Indonesia that are not provided for in the financial statements and payable: Within one year After one year but not more than five years (c) Employment Agreements Consolidated 2017 $ 157,012 14,147 171,159 2016 $ - - - The Group may terminate Mr Guglielmo’s employment agreement by giving six months’ notice. The Group has a contingent liability of $150,000 in relation to this agreement, if Mr Guglielmo is not required to work out the notice period. 45 Bass Oil Limited Annual Report 2017 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2017 Note 31. Parent Entity Disclosures Information relating to Bass Oil Limited Current assets Total assets Current liabilities Total liabilities Net assets Contributed equity Accumulated losses Total shareholders’ equity Loss of the parent entity Total comprehensive income/(loss) of the parent entity Parent 2017 $ 1,321,608 4,143,431 1,123,424 4,073,528 2016 $ 475,053 1,528,921 131,145 131,145 69,903 1,397,776 33,798,034 (33,728,131) 32,804,092 (31,406,316) 69,903 1,397,776 (2,321,815) (2,321,815) (4,030,740) (4,030,740) The commitments and contingencies of the parent entity are the same as disclosures in Note 30 excluding the commitments relating to Tangai-Sukananti KSO. Note 32. Related Party Disclosures Terms and conditions of transactions with related parties other than KMP During the year the Group paid corporate advisory and investor relations fees of $97,500 (2016:$60,000) (under a corporate advisory & investor relations mandate) and a capital raising fee of $nil (2016: $22,105) to Adelaide Equity Partners Ltd (a director related entity of Mr M Lindh). The fees were provided under normal commercial terms and conditions. Amounts outstanding at balance date were $8,250 (2016: $5,500). The Group has a corporate advisory & investor relations mandate with Adelaide Equity Partners. The mandate has a monthly retainer of $7,500 per month. The acquisition of Cooper Energy Sukananti Ltd from Cooper Energy Limited (a shareholder and director related entity) was agreed and approved by shareholders at a Special General Meeting on 13 February 2017. The transaction was settled on the 28 February 2017 with the payment of $500,000 cash and the issue of 180,000,000 ordinary shares, valued at $360,000. Additionally a deferred settlement of $2,300,000 was agreed to be paid by 31 December 2018. The deferred settlement is interest free and secured by a registered charge over the shares the Company holds in Cooper Energy Sukananti Ltd. Note 33. Segment Information For management purposes there is only one operating segment, which was exploration until 28 February 2017 and oil production from 1 March 2017 The chief operating decision maker only reviews consolidated financial information. The chief operating decision maker, who is responsible for allocating resources and assessing performance of the operating segment, has been identified as the Board. The Board does not currently receive segment Statement of Financial Position and Statement of Comprehensive Income information. For exploration activities the Board managed each exploration activity of each permit through review and approval of joint venture cash calls, Authority for Expenditure (AFE’s) and other operational information. For oil production (from the Tangai–Sukananti KSO located in South Sumatra Basin in Indonesia) the Board manages the activity through review of production details, review and approval of the joint venture cash calls and other operational information. The result for the year from exploration activities was a loss of $1,169,368 and from oil production was a profit of $626,223. For the prior year the result related to exploration activities only. The consolidated entity operated in the petroleum exploration industry within Australia until 28 February 2017 and in the oil and gas industry in Indonesia from 1 March 2017. 46 Bass Oil Limited Annual Report 2017 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2017 Note 33. Segment Information (continued) The consolidated assets and liabilities as at 30 June 2017 relate to oil production and the consolidated assets and liabilities as at 30 June 2016 related to exploration activities. For the current year the Group’s revenue of $1,911,320 was received from the sale of oil in Indonesia to Pertamina (the Indonesian State owned oil Company). Note 34. Reconciliation of Cash flows from Operating Activities For the purposes of the Statement of Cash Flows, cash includes cash on hand and at bank, and short term deposits at call. Reconciliation of profit after income tax to net cash provided/used in operating activities Net loss after tax Adjustments for: Depreciation Loss on disposal of fixed assets Amortisation Write-down in exploration Change in fair value of options Accretion interest Changes in assets and liabilities Decrease/(increase) in trade and other receivables (Increase)/decrease in other assets (Increase) in inventories (Decrease) In provisions (Decrease)/increase in trade and other payables Increase In provision for tax Increase/(decrease) in deferred tax Consolidated 2017 $ (1,795,591) 2016 $ (4,030,740) 1,578 123 184,824 1,062,325 262,727 16,516 (267,496) 241,110 (43,074) (10,790) (103,068) (167,291) 39,169 23,047 3,104 2,031 - 3,421,325 - - (604,280) 18,789 16,599 - - (31,321) - 37,487 Net cash flows used in operating activities (288,394) (562,726) Non-cash transactions During the current year the Group entered into the following non-cash investing and financing activities which are not reflected in the statement of cash flows: As part of the consideration paid for Cooper Energy Sukananti Ltd, on the 28th February 2017 the Group issued 180,000,000 shares valued at $360,000 to Cooper Energy Limited. Deferred consideration of the $2,211,444 relating to the balance of the consideration due for the acquisition of Cooper Energy Sukananti Ltd. The issue of shares ($670,672) and equity options ($101,534) as a result of the rights issue that occurred during December 2016. Note 35. General Information Bass Oil Limited (the Company) is a listed public company incorporated in Australia. The address of its registered office and principle place of business is as follows: Level 2, 15 Queen Street Melbourne, VIC 3000 Australia 47 Bass Oil Limited Annual Report 2017 Deloitte Touche Tohmatsu ABN 74 490 121 060 11 Waymouth Street Adelaide, SA, 5000 Australia Phone: +61 8 8407 7000 www.deloitte.com.au Independent Auditor’s Report to the members of Bass Oil Limited Report on the Audit of the Financial Report Opinion We have audited the financial report of Bass Oil Limited (the “Company”) and its subsidiaries (the “Group”), which comprises the consolidated statement of financial position as at 30 June 2017, the consolidated statement of profit or loss and other comprehensive income, the consolidated statement of changes in equity and the consolidated statement of cash flows for the year then ended, and notes to the financial statements, including a summary of significant accounting policies and the directors’ declaration. In our opinion, the accompanying financial report of the Group is in accordance with the Corporations Act 2001, including: (a) giving a true and fair view of the Group’s financial position as at 30 June 2017 and of its financial performance for the year then ended; and (b) complying with Australian Accounting Standards and the Corporations Regulations 2001. Basis for Opinion We conducted our audit in accordance with Australian Auditing Standards. Our responsibilities under those standards are further described in the Auditor’s Responsibilities for the Audit of the Financial Report section of our report. We are independent of the Group in accordance with the auditor independence requirements of the Corporations Act 2001 and the ethical requirements of the Accounting Professional and Ethical Standards Board’s APES 110 Code of Ethics for Professional Accountants (the Code) that are relevant to our audit of the financial report in Australia. We have also fulfilled our other ethical responsibilities in accordance with the Code. We confirm that the independence declaration required by the Corporations Act 2001, which has been given to the directors of the Company, would be in the same terms if given to directors as at the time of this auditor’s report. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Key Audit Matters Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the financial report for the current period. These matters were addressed in the context of our audit of the financial report as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. Liability limited by a scheme approved under Professional Standards Legislation. Member of Deloitte Touche Tohmatsu Limited Key Audit Matter How the scope of our audit responded to the Key Audit Matter Accounting for acquisitions Our procedures included, but were not limited to: On 28 February 2017 the Group acquired Cooper Energy Sukananti Limited (“CESL”) for gross consideration of $3,071,444. This is a significant acquisition for the Group and details are disclosed in Note 18. Accounting for this acquisition requires significant judgement by management to determine the fair value of the acquired assets and liabilities. obtaining an understanding of the terms and conditions of the share sale agreement to enable us to assess management’s accounting treatment including the determination of the deferred consideration; evaluating the process that management and the directors were following to account for the acquisition; assessing the fair values of the assets and liabilities acquired; and assessing the fair values of the consideration payable. We also assessed the appropriateness of the Groups’ disclosures in note 18 to the financial statements. Other Information The directors are responsible for the other information. The other information comprises the information included in the Group’s annual report for the year ended 30 June 2017, but does not include the financial report and our auditor’s report thereon. Our opinion on the financial report does not cover the other information and we do not express any form of assurance conclusion thereon. In connection with our audit of the financial report, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial report or our knowledge obtained in the audit, or otherwise appears to be materially misstated. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard. Responsibilities of the Directors for the Financial Report The directors of the Company are responsible for the preparation of the financial report that gives a true and fair view in accordance with Australian Accounting Standards and the Corporations Act 2001 and for such internal control as the directors determine is necessary to enable the preparation of the financial report that gives a true and fair view and is free from material misstatement, whether due to fraud or error. In preparing the financial report, the directors are responsible for assessing the ability of the Group to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the directors either intend to liquidate the Group or to cease operations, or has no realistic alternative but to do so. Auditor’s Responsibilities for the Audit of the Financial Report Our objectives are to obtain reasonable assurance about whether the financial report as a whole is free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with the Australian Auditing Standards will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of this financial report. As part of an audit in accordance with the Australian Auditing Standards, we exercise professional judgement and maintain professional scepticism throughout the audit. We also: Identify and assess the risks of material misstatement of the financial report, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. 49 Bass Oil Limited Annual Report 2017 Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Group’s internal control. Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by the directors. Conclude on the appropriateness of the directors’ use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Group’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the financial report or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause the Group to cease to continue as a going concern. Evaluate the overall presentation, structure and content of the financial report, including the disclosures, and whether the financial report represents the underlying transactions and events in a manner that achieves fair presentation. Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Group to express an opinion on the financial report. We are responsible for the direction, supervision and performance of the Group’s audit. We remain solely responsible for our audit opinion. We communicate with the directors regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit. We also provide the directors with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards. From the matters communicated with the directors, we determine those matters that were of most significance in the audit of the financial report of the current period and are therefore the key audit matters. We describe these matters in our auditor’s report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication. Report on the Remuneration Report Opinion on the Remuneration Report We have audited the Remuneration Report included in pages 11 to 16 of the Director’s Report for the year ended 30 June 2017. In our opinion, the Remuneration Report of Bass Oil Limited, for the year ended 30 June 2017, complies with section 300A of the Corporations Act 2001. Responsibilities The directors of the Company are responsible for the preparation and presentation of the Remuneration Report in accordance with section 300A of the Corporations Act 2001. Our responsibility is to express an opinion on the Remuneration Report, based on our audit conducted in accordance with Australian Auditing Standards. DELOITTE TOUCHE TOHMATSU Darren Hall Partner Chartered Accountants Adelaide, 27 September 2017 50 Bass Oil Limited Annual Report 2017 SHAREHOLDER AND OTHER INFORMATION Compiled as at 22 September 2017 DISTRIBUTION OF ORDINARY SHARES Numbers of members by size of holding and the total number of shares on issue: Ordinary Shares No. of Holders No. of Shares 1 – 1,000 1,001 – 5,000 5,001 – 10,000 10,001 – 100,000 100,001 and over 192 313 203 663 696 59,073 872,051 1,711,595 27,722,823 2,208,852,042 TOTAL ON ISSUE 2,067 2,239,217,584 1,480 holders held less than a marketable parcel of ordinary shares. There is no current on-market buy-back. DISTRIBUTION OF OPTIONS EXP 15 DECEMBER 2017 @$0.003 Numbers of members by size of holding and the total number of shares on issue: Ordinary Shares No. of Holders No. of Shares 1 – 1,000 1,001 – 5,000 5,001 – 10,000 10,001 – 100,000 100,001 and over TOTAL ON ISSUE 11 28 26 126 165 356 6,212 91,881 197,937 5,221,350 380,585,895 386,103,275 260 holders held less than a marketable parcel of ordinary shares. SUBSTANTIAL SHAREHOLDERS As disclosed in notices given to the Company. Name of Substantial Shareholders Interest in Number of Shares Beneficial and non-beneficial % of Shares Cooper Energy Ltd Miller Anderson Pty Ltd South Australian Resource Investments Pty Ltd Tattersfield Group 353,361,294 223,688,815 215,829,397 197,978,993 15.78 9.99 9.64 8.84 51 Bass Oil Limited Annual Report 2017 SHAREHOLDER AND OTHER INFORMATION (Continued) Compiled as at 22 September 2017 VOTING RIGHTS At meetings of members or classes of members: (a) each member entitled to vote may vote in person or by proxy, attorney or representative; (b) on a show of hands, every person present who is a member or a proxy, attorney or representative of a member has one vote; and (c) on a poll, every person present who is a member or a proxy, attorney or representative of a member has: (i) (ii) for each fully paid share held by him, or in respect of which he is appointed a proxy, attorney or representative, one vote for the share; for each partly paid share, only the fraction of one vote which the amount paid (not credited) on the share bears to the total amounts paid and payable on the share (excluding amounts credited), subject to any rights or restrictions attached to any shares or class or classes of shares. THE 20 LARGEST HOLDERS OF ORDINARY SHARES Holder Ordinary Shares % of Total Issued Somerton Energy Ltd Miller Anderson Pty Ltd Tattersfield Securities Ltd South Australian Resource Investments Pty Ltd Icon Holdings Pty Ltd Chesser Nominees Pty Ltd Crescent Nominees Pty Ltd Wingmont Pty Ltd Small Business Finance Pty Ltd Mr P Sciancalepore & Mrs P Sciancalepore Starbush Pty Ltd Mr T Burrows BNP Paribas Nominees Pty Ltd Mr P H Chua Mr D Vigolo Mr M A Tkocz & Ms S E Evans Mr S H Bell & Mrs J K Berveling Yavern Creek Holdings Pty Ltd Mr N Guglielmo & Mr G Guglielmo Mr M Lindh & Mrs B Lindh 353,361,294 204,800,000 104,108,778 100,867,999 96,151,310 92,068,120 88,174,215 38,400,000 37,401,351 26,886,372 24,337,000 23,371,076 21,781,006 20,230,000 20,000,000 20,000,000 19,704,765 19,704,765 18,888,815 18,112,000 15.78 9.15 4.65 4.50 4.29 4.11 3.94 1.71 1.67 1.20 1.09 1.04 0.97 0.90 0.89 0.89 0.88 0.88 0.84 0.81 The 20 largest shareholders hold 1,348,348,866 shares representing 60.22% of the issued share capital. 52 Bass Oil Limited Annual Report 2017 SHAREHOLDER AND OTHER INFORMATION (Continued) Compiled as at 22 September 2017 THE 20 LARGEST HOLDERS OF OPTIONS EXP 15 DECEMBER 2017 @$0.003 Holder Ordinary Shares % of Total Issued Miller Anderson Pty Ltd South Australian Resource Investments Pty Ltd Icon Holdings Pty Ltd Chesser Nominees Pty Ltd Crescent Nominees Pty Ltd Tattersfield Securities Ltd Small Business Finance Pty Ltd Mr S H Bell & Mrs J K Berveling Yavern Creek Holdings Pty Ltd Mr M A Tkocz & Ms S E Evans Mr C L Bollam Allowside Pty Ltd Margadh Stoc Pty Ltd Mr M Burford Wingmont Pty Ltd Mr O J Foster Mr A D Beijl Campbell Trading Co. Ltd Mr P Sciancalepore & Mrs P Sciancalepore Mr D G Knight 38,400,000 18,912,745 18,028,370 17,262,770 16,532,660 13,895,395 11,700,675 9,602,382 9,602,382 8,456,381 8,219,563 7,776,929 7,671,348 7,653,751 7,200,000 6,000,000 5,724,138 5,402,051 5,041,195 5,000,003 9.95 4.90 4.67 4.47 4.28 3.60 3.03 2.49 2.49 2.19 2.13 2.01 1.99 1.98 1.86 1.55 1.48 1.40 1.31 1.29 53 Bass Oil Limited Annual Report 2017
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