Basf
Annual Report 2019

Plain-text annual report

ANNUAL REPORT For the financial year ended 31 December 2019 CORPORATE DIRECTORY ABN: 13 008 694 817 Contents 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 5, 11-19 Bank Place 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, South Australia, 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 Chairman’s Message .................................. 3 Managing Director’s Report ......................... 4 Reserves and Resources ............................. 9 Safety ................................................... .12 Environment ........................................... 13 Directors’ Report ..................................... 14 Remuneration Report ............................... 17 Auditor’s Independence Declaration ........... 25 Directors’ Declaration .............................. .26 Consolidated Statement of Profit or Loss and Other Comprehensive Income ...... 27 Consolidated Statement of Financial Position .................................................. 28 Consolidated Statement of Changes in Equity ................................................ .29 Consolidated Statement of Cash Flows ....... 30 Notes to the Financial Statements ............. 31 Independent Auditor’s Report ................... 64 Shareholder & Other Information ............... 68 Forward Looking Statements This Annual Report includes certain forward- looking statements that have been based on current expectations about future acts, events and circumstances. These forward-looking statements are, however, subject to risks, uncertainties and assumptions that could cause those acts, events and circumstances to differ materially from the expectations described in such forward-looking statements. These factors include, among other things, commercial and other risks associated with the meeting of objectives and other investment considerations, as well as other matters not yet known to the Group or not currently considered material by the Group. CHAIRMAN’S MESSAGE Dear fellow shareholders, After a strong performance in 2019, a year that has seen Bass record its maiden profit, it gives me pleasure on behalf of your Board to present to you the Annual Report of Bass Oil Limited for the 12 months ended 31 December, 2019. Importantly, Bass is proud to report that it recorded zero incidents resulting in injuries over 2019, which is a credit to all staff in Indonesia and Australia. Furthermore, the Company, its employees, consultants and contractors have accumulated over 4 million working hours without a Lost Time Injury, a truly creditable performance. In 2019 Bass drilled the successful Bunian 5 development well under budget and without incident. The Company posted two consecutive record months of production in November and December 2019 on the back of strong production performance in the field and with the addition of production from the Bunian 5 well. Net entitlement oil production increased 46% from 57,222 barrels to 83,276 barrels year on year. Sales revenue increased 32% from $3.84 million to $5.05 million as a result. Importantly, I am pleased to report that Bass recorded its maiden profit of $0.40 million this year, up from a $0.42 million loss in 2018 representing almost a $1 million turn around. Bass Oil’s focus is on building an energy business, initially in Indonesia. Your Board is confident that our three-tiered growth strategy detailed further in this report, and predicated on our cornerstone Indonesian producing asset, is the right balance at the right time to deliver on our stated objectives and build shareholder value. Our engagement with and assessment of potential acquisitions and other growth building initiatives increased over the period. While no transaction moved to completion, this reflects your Company’s tight due diligence and adherence to an expansion policy based on identifying projects with significant growth potential, proven economics and profitability, not sentiment. I would like to make some comments regarding the current lower oil price environment and the COVID- 19 threat. Bass has actively put measures in place to mitigate the effect of COVID-19 and the depressed oil price. Firstly, Bass is actively monitoring and complying with all Government directions to ensure the health and safety of all staff is protected throughout these trying times. To mitigate against the current oil price environment the Company is safeguarding its financial position, via a reduction in overheads, which includes a cut to directors’ fees and salaries. Fortunately, Bass is in the stable position, given it is operating in a low-cost oilfield. The Company has optimised its field, reducing direct operating costs to US$20/barrel at current production rates. In closing, I thank particularly this year, our shareholders for your loyalty, support of the Company, and your personal encouragement through the year to our Board and management. Finally, I thank our Melbourne-based executive team, our Indonesian-based operations team and my fellow Directors for their diligent attention to the affairs of your Company. We will continue to work on strategically positioning ourselves for growth in Indonesia, a country with an emerging economy hungry for energy to facilitate the growth of its economy. Peter Mullins Chairman 31 March 2020 Bass Oil Limited Annual Report December 2019 3 MANAGING DIRECTOR’S REPORT During 2019, your Company achieved a number of key objectives while putting in place an invigorated growth structure for the future of our business in Indonesia. The year saw Bass Oil deliver a maiden profit on the back of record production and revenues. This result is a validation of the Company’s strategy in focusing on exploiting the latent potential of previously underperforming assets. This model is one that is highly scalable in Indonesia and drives our business development focus. This augurs well for Bass Oil. 2019 saw Bass demonstrate its operating capability beyond production optimisation initiatives to drilling our successful Bunian 5 development well, both under budget and without incident. The results of the well are being integrated into our field models. This result, in combination with the production performance of the Bunian and Tangai field, has resulted in an increase in field reserves with the effect of almost replacing the entirety of 2019 production. This is discussed later in the report. In combination, these factors provide Bass with the confidence that the fields are capable of underpinning the future growth of our business in Indonesia. Indonesia’s energy consumption is increasing with GDP, ~5% again in 2019. The local supply cannot meet demand. Following the 2019 presidential elections in Indonesia it is clear that there is an increased focus in addressing the country’s shortfall in energy supply of oil and gas. This supply pressure will provide Bass with further opportunities for growth in this regional energy market. Indonesia’s hydrocarbon basins are world-class and have extensive infrastructure in place – factors favouring our growth outlook. Bass corporate growth strategy comprises a three tiered approach to potential acquisitions:   ‘Company Transforming’ (Type 1) transactions via the acquisition of producing asset(s) representing material company-changing assets. We are actively screening such opportunities; ‘Material Growth’ (Type 2 opportunities) which would emanate from measured exposure to high impact exploration – a scenario offering larger scale potential but with a low financial commitment from Bass. Examples include Production Sharing exploration contracts, identifying prospective areas to request as KSOs, or working with Indonesia’s Government body, PT Pertamina, on the Improved Oil Recovery potential (IOR) of their legacy assets. Shortlisted opportunities are under assessment; and,  An ‘Optimisation and Technology’ focus whereby our proven IOR skill set allows the assessment and potential acquisition of mature production assets offering synergies with our existing field production infrastructure. Such assets could be under-performing, stranded or dormant oil and gas fields in close proximity to our existing production footprint in southern Sumatra. Key financial highlights for the year included: Successful capital raise resulting in $1.01 million in new funds being raised - - Completion of $0.884 million, the final two deferred payments for the purchase of the Tangai- Sukananti asset from Cooper Energy - Gross revenue totalled $5.05 million – up 32% YoY - Gross Profit $2.65 million – up 84% YoY - - - Maiden Net Profit After Tax of A$0.40 million, representing a turn-around of almost $1 million Earnings before interest, tax and depreciation and amortisation (EBITDA) $1.25 million Earnings before interest and tax (EBIT) $0.800 million Bass Oil Limited Annual Report December 2019 4 MANAGING DIRECTOR’S REPORT (cont’d) In regard to COVID-19 and the current lower oil price environment, our key focus is to remain disciplined, ensuring the health and safety of our staff, whilst delivering and optimising, ongoing production throughout CY2020, whilst not compromising field integrity. We share the view that the current depression in oil prices has been exacerbated by external forces, which will inevitably result in a correction in due course, at which time, Bass will be positioned to take advantage of attractive opportunities. Bass is committed to supporting government and community efforts to limit the spread of the virus, and supporting business continuity with regard to its staff and contractors. Bass has activated a Business Continuity Plan (BCP) during this period of significant health and economic uncertainty. The Company has implemented a series of measures to protect the health and safety of our people, including health screening protocols, restricting travel and meetings, implementing social distancing measures and making changes to field and office access arrangements. The BCP includes contingency plans that will allow production operations to continue in the event of any of the field operations team contracting the virus. Figure 1 Tangai-Sukananti KSO Location Map Bass Oil Limited Annual Report December 2019 5 MANAGING DIRECTOR’S REPORT (cont’d) Tangai-Sukananti KSO Bass’ experienced Indonesian on-site personnel and Jakarta-based technical and management teams operate the Tangai-Sukananti KSO production assets containing the producing Bunian and Tangai oil fields. It was pleasing to see our success from mid-2019 in optimising production within the KSO. This lifted total production capacity and increased output from selected wells. The KSO is considered long- life with production expected beyond license expiry in mid-2025. The assets provide a future platform for growth through low-cost field development opportunities and execution of value-accretive acquisitions requiring minimal additional corporate overheads, given Bass’ established Jakarta-based personnel. Since acquiring the Tangai-Sukananti KSO, Bass has sustained strong and consistent levels of production at the operations (see Figure 2). The result of the 2018 de-bottlenecking operations at Bunian 3 boosted production from ~300 to more than 700 barrels of oil per day, consistently, throughout 2019. Total production for the year ending 31 December 2019 was 151,410 barrels on a 55% basis (or 83,276 barrels on a net entitlement basis). Bass expects a production up-lift during 2020, due to the drilling of the Bunian 5 development well in November of last year and the continued focus on implementation of field optimisation activities. Bass is also planning to drill the Tangai-5 development well in the second half of 2020 to maintain overall field production capacity at or above the current facility limits subject to a recovery in the economic climate. Tangai-Sukananti Historical Production (55% basis) ) l b b k ( n o i t c u d o r P 22.5 18. 13.5 9. 4.5 0. Figure 2: Tangai-Sukananti Historical Production (55% basis) Bass Oil Limited Annual Report December 2019 6 MANAGING DIRECTOR’S REPORT (cont’d) Substantive technical review The focus of the Jakarta and Melbourne based sub-surface teams in 2020 is to update the comprehensive, integrated reservoir study and dynamic reservoir model following the drilling of the successful Bunian-5 development well. Following the completion of this work development scenarios and production forecasts from the Dynamic Modelling project will inform the Company’s future development plan and update the 1P and 2P reserves and contingent resource. The total 100% Field 2P Reserves at 31 December, 2019 are assessed to be 2.191 million barrels of oil. This reflects the reserves for the Bunian and Tangai oil Fields (Figure 1). In accordance with ASX reporting requirements for fiscal environments that use production sharing contracts or similar, Bass reports Net Entitlement 2P Reserves of 0.567 million barrels. Net Entitlement Reserves are the share of cost oil and profit oil that Bass is entitled to receive under the KSO signed with PT Pertamina. Improved Oil Recovery (IOR) a future business cornerstone There are billions of barrels of unrecovered oil in Indonesia that can potentially be exploited using currently available IOR technologies on mature fields, a growth target under our business model and a huge opportunity for experienced operators with technical expertise such as Bass Oil. The average oil recovery factor in Indonesia is ~10-30% while analogues including the Cooper Basin are ~45% and greater. Current estimates point to an approximate 10-25% additional recovery potential for Indonesian fields utilising available IOR technologies. Bass will pursue this value-add business stream with vigour over 2020 including developing new IOR technology specific to the Indonesian region under our Memoranda of Understandings (MOUs) with local and leading regional universities. The first significant step into our IOR program is the conversion of Tangai-4 to a water injection well. Tangai-4 will host the field pilot for the Low Salinity Water Injection (LSWI) trial. The pilot is targeting an increase in field recovery via the injection of tailored low salinity water to improve oil recoveries. The pilot will likely commence in late Q1 2020. Bass Oil Limited Annual Report December 2019 7 MANAGING DIRECTOR’S REPORT (cont’d) Business Development Bass entered the 2020 calendar year actively engaged in the evaluation of, and negotiations on a number of growth opportunities across our three categories of Business Development initiatives. This strong level of potential stakeholder and project engagement resulted from a successful ramp-up during 2019 of our initiatives to develop a pipeline of emerging opportunities designed to provide short- term growth, and, medium to long-term organic increases in Bass’ exposure to diverse but opportunistic and commercially economic assets. More than 20 assets proceeded to detailed technical evaluation over calendar year 2019. This resulted over the period under review, in a shortlist of a number of strategically compatible opportunities, each of which was the subject of a formal offer and advanced negotiations. At time of going to press two of these opportunities are “live” and Bass will keep the market appraised of the outcome of any of these negotiations. Bass applies stringent and consistent evaluation criteria to all opportunities which it considers, commencing with the Petroleum System, and including all aspects of production materiality, geographic location, acquisition costs and execution risk. The Business Development effort will continue during calendar 2020. Bass Oil Limited Annual Report December 2019 8 RESERVES AND RESOURCES Reserves and Contingent Resources (For 12 month period ending 31 December 2019) The 2019 reserves review has been influenced by stronger than forecast performance at all existing wells, in particular Bunian-3, throughout 2019. Furthermore, this year saw the successful drilling and completion in November, 2019 of Bunian-5 as another producing well on the Bunian Field. The results from Bunian-5 have also encouraged Bass to include additional reserves in the K reservoir for the first time. Geological results from the Bunian-5 well are being incorporated into the 2018 Field static and dynamic reservoir models to yield updated oil volumetrics and scenarios for future drilling locations. Whilst the gross field reserves remained relatively constant or went up slightly, the year-on-year movements in Net Entitlement Reserves reflect a slight decrease in both the 1P and 2P reserves for the Bunian and Tangai fields under the fiscal terms of the KSO. Overall the field reserves were revised upwards offsetting oil produced from these fields during 2019. These upward revisions are primarily due to Bunian-5 being successfully drilled and coming on-line in November, 2019. The outcomes at Bunian-5 endorsed the inclusion of reserves for the K reservoir at the Bunian Field. Additionally, there was an improved performance of all existing wells, particularly Bunian-3. The results give your Board and management a high level of confidence in our forward development drilling program for 2020/21 and beyond. Resources & Reserves as at 31 December, 2019 100% Field Reserves (MMbbl) Category Proved - 1P Proved & Probable - 2P Developed & Undeveloped 1.725 2.191 BAS Net Entitlement Reserves (MMbbl) Category Proved - 1P Proved & Probable - 2P Developed & Undeveloped 0.483 0.567 100% Field Contingent Resources (MMbbl) Category Total 1C 0.189 2C 0.426 Table 1: Tangai-Sukananti Reserves and Resources Reserves The 2P Field Reserves in the Tangai-Sukananti KSO are assessed as at 31 December, 2019, to be 2.191 million barrels of oil on a 100% JV basis. This reflects the proved and probable reserves for the Bunian and Tangai oilfields (Tables 1 and 2). Bass Oil Limited Annual Report December 2019 9 RESERVES AND RESOURCES (cont’d) In accordance with ASX reporting requirements for fiscal environments that use production sharing contracts or similar, Bass reported Net Entitlement 2P Reserves of 0.567 million barrels. Net Entitlement Reserves are the share of cost oil and profit oil that Bass is entitled to receive under the KSO signed with PT Pertamina. The Net Entitlement Reserves formula varies with the fiscal environment, cost recovery status and oil price. Contingent Resources The total 100% field 2C Contingent Resources for the Tangai-Sukananti KSO as at 31 December, 2019, are assessed to be 0.426 million barrels of oil. The field Contingent Resources comprise volumes attributed to currently producing or future planned wells in the Bunian and Tangai oil fields post licence expiry in July, 2025. This presents a future development opportunity to increase reserves. Resources & Reserves as at 31 December, 2019 100% Field Reserves (MMbbl) Category 100% Field Reserves at 31 Dec 2018 CY 2019 Production Revisions 100% Field Reserves at 31 Dec 2019 Proved 1P Proved & Probable 2P 1.777 (0.275) 0.223 1.725 2.019 (0.275) 0.447 2.191 BAS Net Entitlement Reserves (MMbbl) Category Proved 1P Proved & Probable 2P Net Entitlement Reserves at 31 Dec 2018 CY 2019 Production Revisions Net Entitlement Reserves at 31 Dec 2019 0.505 (0.083) 0.061 0.483 100% Field Contingent Resources (MMbbl) Category 1C 100% Field Contingent Resources - 31 Dec 2018 0.552 0.602 (0.083) 0.048 0.567 2C 0.882 Revisions (0.363) (0.456) 100% Field Contingent Resources - 31 Dec 2019 0.189 0.426 Table 2: Tangai-Sukananti Reserves and Resources including revisions Bass Oil Limited Annual Report December 2019 10 RESERVES AND RESOURCES (cont’d) Notes on Calculation of Reserves and Resources Bunian-5 was successfully drilled and came on line in November, 2019. Pending the revision of the Static and Dynamic Field Models with the geological results of Bunian-5, the reserves and contingent resources have been updated by accounting for the year’s production and using revised forecasts for the existing and planned development wells utilising the decline curve analysis method. The Bunian Field currently has one producing reservoir (TRM3 sandstone) but following the encouraging results at Bunian-5, the K reservoir is expected to become a significant contributor to production. The Tangai Field has one producing reservoir (the M sandstone). All reserves and resources are estimated by deterministic estimation methodologies consistent with the definitions and guidelines in the Society of Petroleum Engineers (SPE) 2007 Petroleum Resources Management System (PRMS). Under the SPE PRMS guidelines, “Reserves are those quantities of petroleum anticipated to be commercially recoverable by application of development projects to known accumulations from a given date forward under defined conditions”. Net Entitlement Reserves are the reserves that Bass has a net economic entitlement to - that is, a share of cost oil and profit oil that Bass is entitled to receive under the KSO signed with PT Pertamina. Contingent Resources are “those quantities of petroleum estimated, as of a given date, to be potentially recoverable from known accumulations by application of development projects, but which are not currently considered to be commercially recoverable owing to one or more contingencies”. Qualified Petroleum Reserves and Resources Evaluator Statement The information contained in this section regarding Bass Oil’s 2019 reserves and contingent resources is based on and fairly represents information 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 a Fellow of the Institution of Engineers Australia (FIEAust) 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 in this section. Bass Oil Limited Annual Report December 2019 11 SAFETY Bass Oil implements daily, a strict, industry-standard health and safety regime around its Operatorship of the Tangai-Sukananti production assets. This safety regime is energetically promoted by Pertamina, the Indonesian state owned Oil Company. In February 2020, the senior management of Bass reaffirmed its commitment to resourcing and promoting our safety program to Pertamina at the annual safety review held in Bogor, Indonesia. The Bass approach, under our Heath, Safety, Environment, Quality and Community (HSEQC) protocols, prioritises the ongoing design, implementation and monitoring of robust and inclusive safety cultures and outcomes across the entire business but in particular, to ensure the well-being of our Indonesian field teams and reliability of field operations. In short, we strive for ‘zero incidents’ in all activities. Bass is proud to report that it recorded zero incidents resulting in injuries over 2019, which is a credit to all staff in Indonesia and Australia. The total Safe Work Man Hours achieved up to 31 December 2019 was 4,070,090 hours. This is an outstanding achievement. Our successful delivery of a safe work environment over 2019 was achieved despite increases in work activity associated with the drilling, completion and connection of the Bunian 5 well and production optimisation initiatives. All staff and employees are to be commended for their diligence in making Bass a safe place to work. The challenge, however, is always an ongoing one. We will continue to minimise potential hazards and risks associated with the operations moving forward, as our assets and operating environment change. Bass Oil Limited Annual Report December 2019 12 ENVIRONMENT In addition to our Safety focus, the Company is highly focused to preserve the natural onshore environment in which we operate, including respect for local communities within our operating footprint. Over 2019, our field teams fully met regulated air management and noise management requirements. Our monitoring systems indicated all parameters of ambient air quality and emissions were better than established quality standards. Noise monitoring in production operations was conducted in accordance with the provisions of the Indonesian UKL-UPL guidelines and indicated that noise levels at all locations monitored met the set quality standards. In terms of on-site surface Water Quality and Aquatic Biota, new internal monitoring systems to ensure local water quality remains good and not impacted by production processes, are being implemented, with stability to date in the diversity index of plankton being monitored in local water bodies. Laboratory analysis of samples of water drainage, surface water and wells showed good water quality that met biological measuring standards. Bass Oil’s environmental protocols include respect for community. In 2019 the Company continued to deliver on its Corporate Social Responsibility program, via community development assistance, especially for the villages of Tanjung Leaning and Kayu Ara. Bass also ensured that the increased movements in heavy vehicle traffic had a minimal impact on the local communities in the area. Bass continues to strive to achieve the lightest possible footprint in the environment in which we work. Bass Oil Limited Annual Report December 2019 13 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 31 December 2019. 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 and Risk 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 39 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 was 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 resigned as a director of Octanex Limited - on 17 July 2018. Mr Guglielmo served on the Audit and Risk 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. Bass Oil Limited Annual Report December 2019 14 DIRECTORS’ REPORT (cont’d) 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 of the Audit and Risk Committee during the period. Mark L Lindh - Non-executive 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. He is currently a non-executive Chairman of Aerometrex Limited (ASX Code AMX) and a Non-Executive Director of Advanced Braking Technology Limited. Mr Lindh served on the Audit and Risk 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: Number of Ordinary Shares Number of Options over Ordinary Shares 60,800,000 285,630,465 25,266,668 113,811,393 7,600,000 10,000,000 2,500,000 10,000,000 P F Mullins G Guglielmo H M Gordon M L Lindh COMPANY SECRETARY Mrs R Hamilton was appointed Company Secretary on the 31st March 2011. She has been a Chartered Accountant for over 25 years. DIVIDENDS During the year and to the date of this report, no dividends were recommended, provided for or paid. PRINCIPAL ACTIVITY The principal activity of the Group during the year was oil production from low cost oil production assets in Indonesia. The Company realigned its corporate strategy following the 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. Bass Oil Limited Annual Report December 2019 15 DIRECTORS’ REPORT (cont’d) OPERATING AND FINANCIAL REVIEW Operating results for year The Group’s operating profit for the year ended 31 December 2019 after income tax was $398,418 (31 December 2018: loss of $419,615). Review of Financial Condition Liquidity The Group’s consolidated statement of cash flows for the year recorded a decrease of $212,686 (2018: decrease of $729,351) in cash and cash equivalents. The cash flows were derived from operating receipts of $5,064,484 (2018: $4,084,968) and capital raising net of transaction costs of $944,649 (2018: $nil). There were cash outflows to suppliers and employees of $3,768,975 (2018: $4,420,433) and taxation paid of $486,512 (2018: $nil). Further cash outflows of deferred payments to Cooper Energy of $883,638 (2018: $369,550), and net cash outflows in investing activities of $940,023 (2018: $26,114) relating to expenditure on oil properties. Cash assets at 31 December 2019 were $640,871 (2018: $854,117). CHANGES IN THE STATE OF AFFAIRS There have been no changes in the state of affairs. 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’s view is that there is a substantial quantity of oil reserves that remain undeveloped, within the Bunian and Tangai Fields. Subsequent Events – Refer to note 34 to the financial report for the details of subsequent events. SHARE OPTIONS Unissued shares As at the date of this report there were 367,986,328 unissued ordinary shares under options (nil at 31 December 2018). 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. Bass Oil Limited Annual Report December 2019 16 DIRECTORS’ REPORT (cont’d) INDEMNIFICATION OF OFFICERS AND AUDITORS The company has not otherwise, during or since the end of the financial year, except to the extent permitted by law, indemnified or agreed to indemnify an officer or auditor of the company or of any related body corporate against a liability incurred as such an officer or auditor. 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 and Risk Committee Held Attended Held Attended 6 6 6 6 6 6 6 6 2 2 2 2 2 2 2 2 REMUNERATION REPORT (AUDITED) (31 December 2019) 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 Chairman G Guglielmo Managing Director H M Gordon Director (Non-executive) M L Lindh Director (Non-executive) (ii) Executives S J Brealey Staff Geologist New Ventures R M Hamilton Company Secretary Bass Oil Limited Annual Report December 2019 17 DIRECTORS’ REPORT (cont’d) REMUNERATION REPORT (AUDITED) (31 December 2019) (cont’d) There have been no changes to key management personnel after 31 December 2019 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 AUD 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 and Risk Committee. The payment of additional fees for chair of the Audit and Risk 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. Bass Oil Limited Annual Report December 2019 18 DIRECTORS’ REPORT (cont’d) REMUNERATION REPORT (AUDITED) (31 December 2019) (cont’d) The table below summaries the non-executive director remuneration (excluding superannuation): Board fees Chairman Directors Incremental Audit and Risk Committee fees Chairman AUD 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 31 December 2019 and 31 December 2018 is detailed in Table 1 and 2 respectively of this Remuneration Report. 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. Bass Oil Limited Annual Report December 2019 19 DIRECTOR’S REPORT (cont’d) REMUNERATION REPORT (AUDITED) (31 December 2019) (cont’d) Employment contracts Managing Director and Chief Executive Officer Mr G Guglielmo was appointed Managing Director and Chief Executive Officer (“CEO”) on 1 February 2017. The Managing Director and CEO is employed under a rolling contract and under the terms of the contract, Mr Guglielmo receives fixed remuneration of AUD$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. Staff Geologist New Ventures Dr S Brealey was appointed Staff Geologist New Ventures on 16 May 2018. The Staff Geologist New Ventures is employed under a maximum term contract of 24 months and under the terms of the contract, Dr Brealey receives fixed remuneration of AUD$225,000 per annum. A short term incentive (STI) of up to 50% of his base salary will be payable in cash in July each year based upon performance against criteria to be agreed with the Managing Director. 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 three months notice in writing or by the Company paying three months salary in lieu of notice, unless mutually agreed. 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 31 December 2019 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 month’s notice. Bass Oil Limited Annual Report December 2019 20 DIRECTORS’ REPORT (cont’d) REMUNERATION REPORT (AUDITED) (31 December 2019) (cont’d) 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’ performance over a four and half year period: Measure Dec 2019 Dec 2018 Dec 2017 June 2017 June 2016 (6 months) Net profit/(loss) $ Basic profit/(loss) per share ¢ per share * Share price at the beginning of the year * $ Share price at the end of the year * $ Dividends per share ¢ 398,418 (419,615) (98,149) (1,357,287) (3,044,418) 0.000 (0.000) (0.000) (0.001) (0.001) 0.003 0.003 0.001 0.001 0.002 0.003 0.003 0.003 0.001 0.001 Nil Nil Nil Nil Nil * Prices have been rounded to three 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. Table 1: Remuneration for the year ended 31 December 2019 Short-term benefits Post employment Share- based payments Long-term benefits Salary & fees Superannuation Options Long service leave Total USD USD USD USD USD Non-executive Directors P F Mullins H M Gordon M L Lindh Sub-total non-executive directors Managing Director 52,491 38,491 34,990 4,987 3,657 3,324 125,972 11,968 G Guglielmo 208,920 19,847 Other key management personnel S J Brealey R M Hamilton 156,690 14,886 69,821 - Sub-total key management personnel Totals 226,511 561,403 14,886 46,701 Bass Oil Limited Annual Report December 2019 - - - - - - - - - - - - - 57,478 42,148 38,314 137,940 - 228,767 - - - - 171,576 69,821 241,397 608,104 21 DIRECTORS’ REPORT (cont’d) REMUNERATION REPORT (AUDITED) (31 December 2019) (cont’d) Remuneration of key management personnel (cont’d) Table 2: Remuneration for the year ended 31 December 2018 Short-term benefits Post employment Share- based payments Long-term benefits Salary & fees Superannuation Options Long service leave Total USD USD USD USD USD Non-executive Directors P F Mullins H M Gordon M L Lindh Sub-total non-executive directors Managing Director 55,353 40,592 36,901 5,234 3,839 3,490 132,846 12,563 G Guglielmo 224,590 21,211 Other key management personnel S J Brealey R M Hamilton 104,546 9,932 69,016 - Sub-total key management personnel Totals 173,562 530,998 9,932 43,706 Table 3: Shareholdings of key management personnel Shares held in Bass Oil Limited (number) - - - - - - - - - - - - - 60,587 44,431 40,391 145,409 - 245,801 - - - - 114,478 69,016 183,494 574,704 1 January 2019 Balance at beginning of period Purchases Sales 31 December 2019 Balance at end of period 45,600,000 15,200,000 265,630,465 20,000,000 20,266,668 5,000,000 93,811,393 20,000,000 425,308,526 60,200,000 - 25,000,000 7,500,000 2,000,000 - - - - - - - 60,800,000 285,630,465 25,266,668 113,811,393 485,508,526 25,000,000 9,500,000 2019 Directors P F Mullins G Guglielmo H M Gordon M L Lindh (a) Other key management personnel S J Brealey R M Hamilton (a) Mr M Lindh’s interest includes 26,885,000 (2018: 21,508,000) shares held directly and 86,926,393 (2018: 72,303,393) shares held indirectly by related parties, Marbel Capital Pty Ltd and Chesser Nominees Pty Ltd (2018: Marbel Capital Pty Ltd and Chesser Nominees Pty Ltd), all subsidiaries of Adelaide Equity Partners Ltd, a director related entity of Mr M Lindh. Bass Oil Limited Annual Report December 2019 22 DIRECTORS’ REPORT (cont’d) REMUNERATION REPORT (AUDITED) (31 December 2019) (cont’d) Remuneration of key management personnel (cont’d) Options held in Bass Oil Limited (number) 1 January 2019 Balance at beginning of period Option issued Options expired Net change other 31 December 2019 Balance at end of period 2019 Directors P F Mullins G Guglielmo H M Gordon M L Lindh Other key management personnel S J Brealey R M Hamilton Options - - - - - - 7,600,000 10,000,000 2,500,000 10,000,000 12,500,000 1,000,000 - - - - - - - - - - 7,600,000 10,000,000 2,500,000 10,000,000 - - 12,500,000 1,000,000 On 30 July as part of the Entitlement issue , options were issued to key management personnel as follows: P F Mullins 7,600,000; G Guglielmo 10,000,000; H M Gordon 2,500,000; M L Lindh 10,000,000; S J Brealey 12,500,000 and R M Hamilton 2,500,000. 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. 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 $24,015 (31 December 2018: $34,522) and capital raising success fees to Adelaide Equity Partners Limited of $47,304 (31 December 2018: $nil) (both under a corporate advisory and investor relations mandate). The fees were provided under normal commercial terms and conditions. Amounts outstanding at balance date were $11,365 (31 December 2018: $nil). The Group has a corporate advisory & investor relations mandate with Adelaide Equity Partners. The mandate has a monthly retainer of A$5,000 per month and can be terminated at anytime by written notice to the other party. During the year the Group paid rent to Adelaide Equity Partners Limited of $7,377 (31 December 2018: $3,985) (under a rental of premises mandate). The fees were provided under normal commercial terms and conditions. Amounts outstanding at balance date were $nil (31 December 2018: $nil). HEALTH, SAFETY AND ENVIRONMENT The Company has adopted an Environment Policy and a Safety Policy and conducts its operations in accordance with the Indonesian government regulations. Bass Oil Limited Annual Report December 2019 23 DIRECTORS’ REPORT (cont’d) HEALTH, SAFETY AND ENVIRONMENT (cont’d) The Company’s petroleum exploration and development activities are subject to environmental conditions specified by the Indonesian regulatory authorities. 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 31 December 2019 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 31 December 2019 is included on page 25. Non-audit services The Directors are satisfied that the provision of non-audit services, during the period, 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 and Risk 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 period by the auditor are outlined in note 9 to the financial statements. The directors are of the opinion that the services as disclosed in note 9 to the financial statements do not compromise the external auditor’s independence, based on advice received from the Audit and Risk 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, 31 March 2020 Bass Oil Limited Annual Report December 2019 24 17 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 31 December 2019 and its performance for the year ended on that date; and (ii) complying with Accounting Standards and Corporations Regulations 2001; and (b) 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 (c) the financial statements and notes comply with International Financial Reporting Standards as stated in Note 2(a). 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 31 December 2019. On behalf of the Board Chairman Melbourne, 31 March 2020 Bass Oil Limited Annual Report December 2019 26 CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME For the financial year ended 31 December 2019 Revenue Oil revenue Cost of oil sold Gross profit Other income Interest received Operator fees Other income Total revenue and other income Administrative expenses Employee benefits expense Finance costs Profit/(loss) before income tax Income tax expense Profit/(loss) for the year Other comprehensive loss, net of income tax Items that may be reclassified to profit or loss Other comprehensive loss, net of income tax Consolidated Note 2019 $ 2018 $ 4 5 7 8 10(a) 5,052,319 (2,398,969) 2,653,350 3,838,237 (2,395,667) 1,442,570 770 70,443 - 1,778 60,970 448,566 2,724,563 1,953,884 (1,065,617) (859,472) (58,709) 740,765 (342,347) 398,418 (1,399,759) (622,220) (31,686) (99,781) (319,834) (419,615) - - - - Total comprehensive profit/(loss) for the year 398,418 (419,615) Basic and diluted earnings/(loss) per share 26 0.000 (0.000) The above statement of comprehensive income should be read in conjunction with the accompanying notes Bass Oil Limited Annual Report December 2019 27 CONSOLIDATED STATEMENT OF FINANCIAL POSITION As at 31 December 2019 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 Right of use assets Oil properties Total non-current assets TOTAL ASSETS LIABILITIES Current Liabilities Trade and other payables Provisions Lease liabilities Provision for tax Borrowings Note 2019 $ 2018 $ 11 12 13 14 15 12 15 16 17 18 21 22 10(e) 23 640,871 1,408,644 32,694 277,357 3,853 854,117 1,312,608 131,060 55,944 3,882 2,363,419 2,357,611 337,925 27,469 1,769 169,779 1,945,213 2,482,155 4,845,574 1,296,255 144,760 92,320 715,359 - 175,898 27,312 3,178 - 1,345,408 1,551,796 3,909,407 751,391 75,587 - 870,624 896,366 Total current liabilities 2,248,694 2,593,968 Non current liabilities Provisions Lease liabilities Total non current liabilities TOTAL LIABILITIES NET ASSETS EQUITY Contributed equity Reserves Accumulated losses TOTAL EQUITY 22 24 33 25 100,346 83,808 184,154 2,432,848 2,412,726 246,896 - 246,896 2,840,864 1,068,543 26,674,268 3,129,996 25,728,503 3,129,996 (27,391,538) (27,789,956) 2,412,726 1,068,543 The above statement of comprehensive income should be read in conjunction with the accompanying notes Bass Oil Limited Annual Report December 2019 28 CONSOLIDATED STATEMENT OF CHANGES IN EQUITY For the financial year ended 31 December 2019 Note Contributed equity Accumulated losses Consolidated Currency translation reserve Share option reserve Total $ $ $ $ $ At 1 January 2019 25,728,503 (27,789,956) 3,129,996 - 1,068,543 Net profit for the year Total comprehensive income for the period Shares issued Transaction costs on share issues Tax consequences of share issue costs - - 398,418 398,418 1,008,708 (74,043) 11,100 - - - - - - - - - - 398,418 398,418 - 1,008,708 - - (74,043) 11,100 At 31 December 2019 26,674,268 (27,391,538) 3,129,996 - 2,412,726 At 1 January 2018 25,720,096 (27,502,223) 3,129,996 131,882 1,479,751 Net loss for the year Total comprehensive income for the period Transfer on expiry and cancellation of options Tax consequences of share issue costs - (419,615) - (419,615) - - - (419,615) - (419,615) 131,882 (131,882) - 8,407 - - - 8,407 At 31 December 2018 25,728,503 (27,789,956) 3,129,996 - 1,068,543 The above statement of comprehensive income should be read in conjunction with the accompanying notes Bass Oil Limited Annual Report December 2019 29 CONSOLIDATED STATEMENT OF CASH FLOWS For the financial year ended 31 December 2019 Consolidated Note 2019 $ 2018 $ Cash flows from operating activities Receipts from customers Payments to suppliers and employees Interest received Interest paid Taxation paid Net cash (used in)/provided by operating activities Cash flows from investing activities Proceeds from plant and equipment Oil properties expenditure Purchase plant and equipment Net cash (used in)/provided by investing activities 32 16 18 16 Cash flows from financing activities Proceeds from issue of shares and equity options Payment share issue costs Principal elements of lease payments Payment of deferred consideration 23 Net cash (used in)/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 5,064,484 (3,768,975) 770 (31,706) (486,512) 4,084,968 (4,420,433) 1,778 - - 778,061 (333,687) - (940,023) - 3,895 (26,834) (3,175) (940,023) (26,114) 1,008,708 (64,059) (111,740) (883,638) (50,729) (212,691) (555) 854,117 - - - (369,550) (369,550) (729,351) (24,361) 1,607,829 Cash and cash equivalents at the end of the year 11 640,871 854,117 The above statement of comprehensive income should be read in conjunction with the accompanying notes Bass Oil Limited Annual Report December 2019 30 NOTES TO THE FINANCIAL STATEMENTS For the financial year ended 31 December 2019 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 31 December 2019 was authorised for issue in accordance with a resolution of the directors on 31 March 2020. 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. 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 United States 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. Going Concern The consolidated financial statements have been prepared on the going concern basis, which assumes that the Group will be able to realise its assets and extinguish its liabilities in the normal course of business and at amounts stated in the financial report. For the year ended 31 December 2019 the Group made a profit after tax of $398,418 (31 December 2018: incurred a loss of $419,615), had a net cash inflow from operating activities of $778,061 (31 December 2018: outflows of $333,687) had a net cash outflow from investing activities of $940,023 (31 December 2018: $26,114) and a net cash outflow from financing activities of $50,729 (31 December 2018: $369,550). At 31 December 2019, the Group has a cash balance of $640,871 (31 December 2018: $854,117) and the current assets exceed current liabilities by $114,725 (31 December 2018: current liabilities exceed current assets by $236,357). Subsequent to year end, the spot oil price has decreased significantly and the worldwide spread of COVID-19 along with current economic uncertainty has caused significant disruption to businesses and economic activity. The current low oil price environment and the subsequent quarantine measures imposed by the Australian and Indonesian governments, along with the travel and trade restrictions imposed by Australia and other countries in early 2020, are likely to have a negative impact on the operations of the Group in the year ending 31 December 2020. The Group’s key focus is to remain disciplined, ensuring the health and safety of our staff, whilst delivering and optimising, ongoing production throughout FY2020, whilst not compromising field integrity. The Group has activated a Business Continuity Plan (BCP) during this period of significant health and economic uncertainty. The BCP includes contingency plans that will allow production operations to continue in the event of any of the field operations team contracting the virus. Bass Oil Limited Annual Report December 2019 31 NOTES TO THE FINANCIAL STATEMENTS For the financial year ended 31 December 2019 Note 2. Summary of Significant Accounting Policies (cont’d) As the situation remains fluid as at the date these financial statements are authorised for issue, the directors of the Group considered that the financial effects of COVID-19 and the current low oil price environment on the Group's consolidated financial statements cannot be reasonably estimated. Nevertheless, the economic effects arising from the COVID-19 outbreak and the current low oil price are expected to affect the consolidated results of the Group for the first half and full year of 2020. The Group has implemented a number of cost control measures including the following:  Deferring the drilling of Tangai-5;  All discretionary capital expenditure not essential to maintaining the operation has been deferred to 2021; Focus on accelerating Cost Recovery approvals;   Minimised the contractor workforce in the field as a result of decreasing non-essential tasks to sustain operations;  Ensuring all expenditure is minimised, including eliminating any discretionary operational expenditure that is not cost recoverable;  All director fees and executive director salary cut by 50% till March 2021; and  Ongoing discussions with the Indonesian Tax office regarding the status of the current tax liability as disclosed in note 10 to the financial statements (plus any interest) with the objective of entering into a payment plan acceptable to both parties. The Directors have prepared a cash flow forecast through to March 2021 which indicates that assuming the Group is successful in achieving the above matters; the Group will have sufficient cash to continue as a going concern. The cash flow has been prepared using the current oil price and foreign exchange rates. Should the oil price fall below current levels, the Australian dollar appreciate against the US dollar above current levels, or should the Indonesian tax office not agree to enter into an acceptable payment plan for the current tax liability, the Group will be required to raise additional funds. At the date of signing this report, the Directors have reasonable grounds to believe that the Group will be able to raise further funds if required and that it is appropriate to prepare the financial report on the going concern basis. Should the Group be unsuccessful in achieving the initiatives set out above, a material uncertainty would exist that may cast significant doubt on the ability of the Group to continue as a going concern and, therefore, whether it will realise its assets and extinguish its liabilities in the normal course of business. The financial report does not include any adjustments relating to the recoverability and classification of recorded asset amounts and the amount and classification of liabilities that might be necessary should the Group not continue as a going concern. The financial report does not include any adjustments relating to the recoverability and classification of recorded asset amounts and the amount and classification of liabilities that might be necessary should the Group not continue as a going concern. Bass Oil Limited Annual Report December 2019 32 NOTES TO THE FINANCIAL STATEMENTS For the financial year ended 31 December 2019 Note 2. Summary of Significant Accounting Policies (cont’d) (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 The Group has adopted all of the new and revised Standards and Interpretations issued by the Australian Accounting Standards Board (the AASB) that are relevant to its operations and effective for an accounting period that begins on or after 1 January 2019. AASB 16 Leases The group leases office space in Melbourne and Jakarta. The group also leases office equipment and motor vehicles in Jakarta. Impact of application of AASB 16 Leases AASB 16 provides a comprehensive model for the identification of lease arrangements and their treatment in the financial statements. AASB 16 supersedes the lease guidance including AASB 117 Leases and the related Interpretations when it became effective for the accounting period beginning on 1 January 2019. The date of initial application of AASB 16 for the Company was 1 January 2019. The Group has chosen the modified retrospective application of AASB 16 in accordance with AASB 16:C8(a). Consequently, the Group will not restate the comparative information. In contrast to lessee accounting, AASB 16 substantially carries forward the lessor accounting requirements in AASB 117. Impact of the new definition of a lease The Group has made use of the practical expedient available on transition to AASB 16 not to reassess whether a contract is or contains a lease. Accordingly, the definition of a lease in accordance with AASB 117 and Interpretation 4 will continue to apply to those leases entered or modified before 1 January 2019. The change in definition of a lease mainly relates to the concept of control. AASB 16 distinguishes between leases and service contracts on the basis of whether the use of an identified asset is controlled by the customer. Control is considered to exist if the customer has:   The right to obtain substantially all of the economic benefits from the use of an identified asset; and The right to direct the use of that asset. The Group has applied the definition of a lease and related guidance set out in AASB 16 to all lease contracts entered into or modified on or after 1 January 2019. Bass Oil Limited Annual Report December 2019 33 NOTES TO THE FINANCIAL STATEMENTS For the financial year ended 31 December 2019 Note 2. Summary of Significant Accounting Policies (cont’d) (b) New Accounting Standards and Interpretations (cont’d) In preparation for the first-time application of AASB 16, the Company has carried out an implementation project. The project has shown that the new definition in AASB 16 will not change significantly the scope of contracts that meet the definition of a lease for the Group. Operating leases AASB 16 has changed how the Group accounts for leases previously classified as operating leases under AASB 117, which were off-balance sheet. On initial application of AASB 16, for all leases (except as noted below), the Group has: a) Recognised Right-Of-Use assets (ROU Assets) and lease liabilities in the consolidated statement of financial position, initially measured at the present value of the future lease payments; b) Recognised depreciation of right-of-use assets and interest on lease liabilities in the consolidated statement of profit or loss; c) Separated the total amount of cash paid into a principal portion (presented within financing activities) and interest (presented within operating activities) in the consolidated cash flow statement. Under AASB 16 lease incentives (e.g. rent-free period) are recognised as part of the measurement of the right-of-use assets and lease liabilities. Previously, lease incentives resulted in the recognition of a lease liability incentive, amortised as a reduction of rental expenses on a straight-line basis. Under AASB 16, right-of-use assets will be tested for impairment in accordance with AASB 136 Impairment of Assets. This replaces the previous requirement to recognize a provision for onerous lease contracts. For short-term leases (lease term of 12 months or less) and leases of low-value assets (such as personal computers and office furniture), the Group opted to recognise a lease expense on a straight- line basis as permitted by AASB 16. As at 31 December 2018, the Group had non-cancellable lease commitments of $262,835 after removing arrangements that relate to leases which are of a short-term nature and leases of low-value assets, therefore the Group recognised ROU Assets with a net book value of $262,835 and corresponding lease liabilities of $262,835 at 1 January 2019. Rolling these balances forward to 31 December 2019, the Group recorded ROU Assets with a net book value of $169,779, and corresponding lease liabilities of $176,128. The impact on profit or loss as at 31 December 2019 is to decrease administrative expenses by $195,250, to increase depreciation by $107,123, and to increase interest expense by $25,033. Under AASB 117, all lease payments on operating leases were presented as part of cash flows from operating activities. The impact of the changes under AASB 16 resulted in an increase in the cashflows from operating activities by $111,740 and a decrease in cashflows from financing activities by $111,740. The Group has made use of the practical expedient to not separate non-lease and lease components at the adoption date (AASB16.15). Critical judgements required in the application of AASB 16 Determination of whether it is reasonably certain that an extension or termination option will be exercised Bass Oil Limited Annual Report December 2019 34 NOTES TO THE FINANCIAL STATEMENTS For the financial year ended 31 December 2019 Note 2. Summary of Significant Accounting Policies (cont’d) (b) New Accounting Standards and Interpretations (cont’d) The Group reflected a reasonable expectation of the period over which the underlying asset will be used as this approach provides the most useful information to the readers of the financial statements. For lease agreements with 12 months or less remaining from adoption date (1 January 2019), the Group has made an assessment on the terms over which it was reasonably certain to extend the agreements by including lease payments and length of lease. Determination of whether variable payments are in-substance fixed For lease agreements subject to lease payments with fixed increases, the Group factored in the fixed increases into its calculation of the lease liability. The Group has no lease agreements subject to lease payments based on a variable index. Key sources of estimation uncertainty in the application of AASB 16 Determination of the appropriate rate to discount the lease payments The Group estimated the incremental borrowing rates applicable to the lease portfolio, which is the rate of interest that a lessee would have to pay to borrow over a similar term, and with a similar security, the funds necessary to obtain an asset of a similar value to the right of use asset in a similar economic environment, by using a country and asset risk adjusted rate depending on the location and nature of the asset. The incremental borrowing rate applied to leases in Indonesia was 10.95% and the incremental borrowing rate on leases in Australia was 5%. The following is a reconciliation of total operating lease commitments at 31 December 2018 to the lease liabilities recognised at 1 January 2019: Operating lease commitments disclosed at 31 December 2018 Discounted using the incremental borrowing rate at the date of initial application Less: short term leases recognised on a straight line basis as expense Opening leases at 1 January 2019 The recognised right of use assets relate to the following types of assets: Office Premises Office Computers Motor Vehicles Total 735,480 511,887 (249,052) 262,835 93,750 26,455 142,630 262,835 (c) Basis of consolidation The consolidated financial statements comprise the financial statements of Bass Oil Limited and its subsidiaries as at 31 December 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 controls 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. Bass Oil Limited Annual Report December 2019 35 NOTES TO THE FINANCIAL STATEMENTS For the financial year ended 31 December 2019 Note 2. Summary of Significant Accounting Policies (cont’d) (c) Basis of consolidation (cont’d) 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 Transactions and balances Transactions in currencies other than an entity’s functional currency are initially recorded in the functional currency by applying the exchange rate ruling at the date of the transaction. Monetary assets and liabilities denominated in currencies other than an entity’s functional currency are retranslated at the foreign exchange rate ruling at the reporting date. Foreign exchange differences arising on translation are recognised in the income statement. Foreign exchange differences that arise on the translation of monetary items that form part of the net investment in a foreign operation are recognised in the translation reserve in the consolidated financial statements. Non-monetary assets and liabilities that are measured in terms of historical cost in currencies other than an entity’s functional currency are translated using the exchange rate at the date of the initial transaction. Non-monetary assets and liabilities denominated in currencies other than an entity’s functional currency that are stated at fair value are translated to the functional currency at foreign exchange rates ruling at the dates the fair value was determined. The year-end exchange rate used for 31 December 2019 was A$/US$ 1:0.7006 (31 December 2018: 1:0.7058, 31 December 2017: 1:0.7800). (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. For the purposes of the statement of cash flows, cash and cash equivalents consist of cash and cash equivalents as defined above. (f) Financial assets All regular way purchases or sales of financial assets are recognised and derecognised on a trade date basis. Regular way purchases or sales are purchases or sales of financial assets that require delivery of assets within the time frame established by regulation or convention in the marketplace. All recognised financial assets are measured subsequently in their entirety at either amortised cost or fair value, depending on the classification of the financial assets. Classification of financial assets Debt instruments that meet the following conditions are measured subsequently at amortised cost:   the financial asset is held within a business model whose objective is to hold financial assets in order to collect contractual cash flows; and the contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding. Bass Oil Limited Annual Report December 2019 36 NOTES TO THE FINANCIAL STATEMENTS For the financial year ended 31 December 2019 Note 2. Summary of Significant Accounting Policies (cont’d) (f) Financial assets (cont’d) Debt instruments that meet the following conditions are measured subsequently at fair value through other comprehensive income (FVTOCI):   the financial asset is held within a business model whose objective is achieved by both collecting contractual cash flows and selling the financial assets; and the contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding. By default, all other financial assets are measured subsequently at fair value through profit or loss (FVTPL). Despite the foregoing, the Group may make the following irrevocable election/designation at initial recognition of a financial asset:   the Group may irrevocably elect to present subsequent changes in fair value of an equity investment in other comprehensive income if certain criteria are met (see (iii) below); and the Group may irrevocably designate a debt investment that meets the amortised cost or FVTOCI criteria as measured at FVTPL if doing so eliminates or significantly reduces an accounting mismatch (see (iv) below). (i) Amortised cost and effective interest method The effective interest method is a method of calculating the amortised cost of a debt instrument and of allocating interest income over the relevant period. For financial assets other than purchased or originated credit-impaired financial assets (i.e. assets that are credit-impaired on initial recognition), the effective interest rate is the rate that exactly discounts estimated future cash receipts (including all fees and points paid or received that form an integral part of the effective interest rate, transaction costs and other premiums or discounts) excluding expected credit losses, through the expected life of the debt instrument, or, where appropriate, a shorter period, to the gross carrying amount of the debt instrument on initial recognition. For purchased or originated credit-impaired financial assets, a credit-adjusted effective interest rate is calculated by discounting the estimated future cash flows, including expected credit losses, to the amortised cost of the debt instrument on initial recognition. The amortised cost of a financial asset is the amount at which the financial asset is measured at initial recognition minus the principal repayments, plus the cumulative amortisation using the effective interest method of any difference between that initial amount and the maturity amount, adjusted for any loss allowance. The gross carrying amount of a financial asset is the amortised cost of a financial asset before adjusting for any loss allowance. Interest income is recognised using the effective interest method for debt instruments measured subsequently at amortised cost and at FVTOCI. For financial assets other than purchased or originated credit-impaired financial assets, interest income is calculated by applying the effective interest rate to the gross carrying amount of a financial asset, except for financial assets that have subsequently become credit-impaired (see below). For financial assets that have subsequently become credit-impaired, interest income is recognised by applying the effective interest rate to the amortised cost of the financial asset. If, in subsequent reporting periods, the credit risk on the credit-impaired financial instrument improves so that the financial asset is no longer credit-impaired, interest income is recognised by applying the effective interest rate to the gross carrying amount of the financial asset. Bass Oil Limited Annual Report December 2019 37 NOTES TO THE FINANCIAL STATEMENTS For the financial year ended 31 December 2019 Note 2. Summary of Significant Accounting Policies (cont’d) (f) Financial assets (cont’d) For purchased or originated credit-impaired financial assets, the Group recognises interest income by applying the credit-adjusted effective interest rate to the amortised cost of the financial asset from initial recognition. The calculation does not revert to the gross basis even if the credit risk of the financial asset subsequently improves so that the financial asset is no longer credit-impaired. Interest income is recognised in profit or loss and is included in the "finance income – interest income" line item. Impairment of financial assets The Group recognises a loss allowance for expected credit losses on investments in debt instruments that are measured at amortised cost or at FVTOCI, lease receivables, trade receivables and contract assets, as well as on financial guarantee contracts. The amount of expected credit losses is updated at each reporting date to reflect changes in credit risk since initial recognition of the respective financial instrument. The Group always recognises lifetime ECL for trade receivables, contract assets and lease receivables. The expected credit losses on these financial assets are estimated using a provision matrix based on the Group’s historical credit loss experience, adjusted for factors that are specific to the debtors, general economic conditions and an assessment of both the current as well as the forecast direction of conditions at the reporting date, including time value of money where appropriate. For all other financial instruments, the Group recognises lifetime ECL when there has been a significant increase in credit risk since initial recognition. However, if the credit risk on the financial instrument has not increased significantly since initial recognition, the Group measures the loss allowance for that financial instrument at an amount equal to 12-month ECL. Lifetime ECL represents the expected credit losses that will result from all possible default events over the expected life of a financial instrument. In contrast, 12-month ECL represents the portion of lifetime ECL that is expected to result from default events on a financial instrument that are possible within 12 months after the reporting date. (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) 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. (i) 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 Bass Oil Limited Annual Report December 2019 38 NOTES TO THE FINANCIAL STATEMENTS For the financial year ended 31 December 2019 Note 2. Summary of Significant Accounting Policies (cont’d) (i) Plant and equipment (cont’d) 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. (j) Leases The Group as lessee The Group assesses whether a contract is or contains a lease, at inception of the contract. The Group recognises a right-of-use asset and a corresponding lease liability with respect to all lease arrangements in which it is the lessee, except for short-term leases (defined as leases with a lease term of 12 months or less) and leases of low value assets (such as tablets and personal computers, small items of office furniture and telephones). For these leases, the Group recognises the lease payments as an operating expense on a straight-line basis over the term of the lease unless another systematic basis is more representative of the time pattern in which economic benefits from the leased assets are consumed. The lease liability is initially measured at the present value of the lease payments that are not paid at the commencement date, discounted by using the rate implicit in the lease. If this rate cannot be readily determined, the Group uses its incremental borrowing rate. Lease payments included in the measurement of the lease liability comprise:  Fixed lease payments (including in-substance fixed payments), less any lease incentives receivable;  Variable lease payments that depend on an index or rate, initially measured using the index or    rate at the commencement date; The amount expected to be payable by the lessee under residual value guarantees; The exercise price of purchase options, if the lessee is reasonably certain to exercise the options; and Payments of penalties for terminating the lease, if the lease term reflects the exercise of an option to terminate the lease. The lease liability is presented as a separate line in the consolidated statement of financial position. The lease liability is subsequently measured by increasing the carrying amount to reflect interest on the lease liability (using the effective interest method) and by reducing the carrying amount to reflect the lease payments made. The Group remeasures the lease liability (and makes a corresponding adjustment to the related right- of-use asset) whenever:   The lease term has changed or there is a significant event or change in circumstances resulting in a change in the assessment of exercise of a purchase option, in which case the lease liability is remeasured by discounting the revised lease payments using a revised discount rate. The lease payments change due to changes in an index or rate or a change in expected payment under a guaranteed residual value, in which cases the lease liability is remeasured by discounting the revised lease payments using an unchanged discount rate (unless the lease payments change is due to a change in a floating interest rate, in which case a revised discount rate is used).  A lease contract is modified and the lease modification is not accounted for as a separate lease, in which case the lease liability is remeasured based on the lease term of the modified lease by discounting the revised lease payments using a revised discount rate at the effective date of the modification. Bass Oil Limited Annual Report December 2019 39 NOTES TO THE FINANCIAL STATEMENTS For the financial year ended 31 December 2019 Note 2. Summary of Significant Accounting Policies (cont’d) (j) Leases (cont’d) The Group did not make any such adjustments during the periods presented. The right-of-use assets comprise the initial measurement of the corresponding lease liability, lease payments made at or before the commencement day, less any lease incentives received and any initial direct costs. They are subsequently measured at cost less accumulated depreciation and impairment losses. Whenever the Group incurs an obligation for costs to dismantle and remove a leased asset, restore the site on which it is located or restore the underlying asset to the condition required by the terms and conditions of the lease, a provision is recognised and measured under AASB 137. To the extent that the costs relate to a right-of-use asset, the costs are included in the related right-of-use asset, unless those costs are incurred to produce inventories. Right-of-use assets are depreciated over the shorter period of lease term and useful life of the underlying asset. If a lease transfers ownership of the underlying asset or the cost of the right-of-use asset reflects that the Group expects to exercise a purchase option, the related right-of-use asset is depreciated over the useful life of the underlying asset. The depreciation starts at the commencement date of the lease. The right-of-use assets are presented as a separate line in the consolidated statement of financial position. The Group applies AASB 136 to determine whether a right-of-use asset is impaired and accounts for any identified impairment loss as described in Note 2(k) below. (k) 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. (l) 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 commenced. No amortisation is charged on areas under development where production has not yet commenced. Bass Oil Limited Annual Report December 2019 40 NOTES TO THE FINANCIAL STATEMENTS For the financial year ended 31 December 2019 Note 2. Summary of Significant Accounting Policies (cont’d) (m) 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. (n) 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. (o) 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. (p) 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. Bass Oil Limited Annual Report December 2019 41 NOTES TO THE FINANCIAL STATEMENTS For the financial year ended 31 December 2019 Note 2. Summary of Significant Accounting Policies (cont’d) (q) 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. (r) 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. 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. Bass Oil Limited Annual Report December 2019 42 NOTES TO THE FINANCIAL STATEMENTS For the financial year ended 31 December 2019 Note 2. Summary of Significant Accounting Policies (cont’d) (r) Income tax and other taxes (cont’d) 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 is payable in the event the contractors exhaust the pool of cost recovery prior to expiry of the KSO. The cost recovery pool has been exhausted during the year and tax is now payable. 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. (s) 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. (t) 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. 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 value in use of the cash generating unit to which deferred costs have been allocated. The value in use 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 available reserves and oil prices. Bass Oil Limited Annual Report December 2019 43 NOTES TO THE FINANCIAL STATEMENTS For the financial year ended 31 December 2019 Note 2. Summary of Significant Accounting Policies (cont’d) (t) Critical accounting estimates and judgements (cont’d) (ii) Useful Life of Oil Property Assets As detailed at Note 2 (l) in the Annual Report, 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 commenced. No amortisation is charged on areas under development where production has not yet commenced. 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 31 December 2019 are cash and cash equivalents $640,871, trade and other receivables $1,746,569, other financial assets $31,322, trade and other payables $1,296,255. 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 31 December 2019. Bass Oil Limited Annual Report December 2019 44 NOTES TO THE FINANCIAL STATEMENTS For the financial year ended 31 December 2019 Note 3. Financial Risk Management Objectives and Policies (cont’d) 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 corporate costs which are denominated in Australian dollars (AUD), and oil sales costs which are denominated in Indonesian Rupiah (IDR) and United States dollars. The Group does not undertake any hedging activities. The Group owns oil production assets in Indonesia and is 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: Financial assets: Cash and cash equivalents Trade and other receivables Financial liabilities: Trade and other payables 31 December 2019 AUD $ 342,728 1,402 IDR $ 131,213 334,455 156,368 934,082 At the reporting date, if the currencies set out in the table above, strengthened or weakened against the United States 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% 31 December 2019 AUD $ 18,776 (18,776) 18,776 (18,776) IDR $ (46,841) 46,841 (46,841) 46,841 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. Bass Oil Limited Annual Report December 2019 45 NOTES TO THE FINANCIAL STATEMENTS For the financial year ended 31 December 2019 Note 3. Financial Risk Management Objectives and Policies (cont’d) 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, with all other variables held constant, the estimated impact on post-tax profit and equity would have been: Impact on post tax profit USD oil price +10% USD oil price -10% Impact on equity USD oil price +10% USD oil price -10% Interest rate risk 31 December 2019 $ 505,232 (505,232) 505,232 (505,232) 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% 31 December 2019 $ 6,409 (6,409) 6,409 (6,409) 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. Bass Oil Limited Annual Report December 2019 46 NOTES TO THE FINANCIAL STATEMENTS For the financial year ended 31 December 2019 Note 3. Financial Risk Management Objectives and Policies (cont’d) Liquidity risk (cont’d) 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 31 December 2019, the Group had $1,296,255 (2018: $751,391) in trade and other payables. Trade payables are non- interest bearing and have a contractual maturity of less than 30 days. At 31 December 2019 the Group had borrowings of $nil (2018: $896,366) which are incurring interest at nil (2018: 7.5%). The only financial assets are cash and cash equivalents, trade and other receivables, and other financial assets. At 31 December 2019, the Group had $640,871 (2018: $854,117) in cash and cash equivalents, $1,746,569 (2018: $1,488,506) in trade and other receivables, and $31,322 (2018: $31,194) 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 Less than one year One to two years Greater than two years Total % $ $ $ $ 31 December 2019 Trade and other payables Borrowings 31 December 2018 Trade and other payables Borrowings Credit risk - - - 1,296,255 - 751,391 7.50 896,366 - - - - - - - - 1,296,255 - 751,391 896,366 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. Bass Oil Limited Annual Report December 2019 47 NOTES TO THE FINANCIAL STATEMENTS For the financial year ended 31 December 2019 Note 3. Financial Risk Management Objectives and Policies (cont’d) Credit risk (cont’d) 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. Bass Oil Limited Annual Report December 2019 48 NOTES TO THE FINANCIAL STATEMENTS For the financial year ended 31 December 2019 Note 4. Other Income Recovery of Consultancy fees Royalty revenue Net foreign exchange gains Note 5. Administrative Expenses Audit and tax fees Consultants fees other Corporate related costs Directors’ remuneration Foreign exchange losses Insurance Legal expenses Operating lease costs Travel Other administrative expenses Consolidated Note 2019 $ - - - - 2018 $ 4,050 311,632 132,884 448,566 Note 9 Consolidated 2019 $ 2018 $ 58,107 298,392 54,170 138,001 13,459 21,067 46,325 - 125,618 310,478 69,179 352,120 71,853 145,409 - 28,173 132,527 69,409 158,330 372,759 1,065,617 1,399,759 Note 6. Depreciation and Amortisation Depreciation and amortisation included in the profit and loss is as follows: Depreciation plant and equipment Depreciation of right of use assets Amortisation of oil properties Consolidated Note 16 17 18 2019 $ 1,361 107,123 340,218 448,702 2018 $ 1,156 - 201,171 202,327 Bass Oil Limited Annual Report December 2019 49 NOTES TO THE FINANCIAL STATEMENTS For the financial year ended 31 December 2019 Note 7. Employee Benefits Expense Consolidated Note 2019 $ 2018 $ Wages and salaries Superannuation Provision for annual leave Medical expense Termination benefits Workers’ compensation Payroll tax Note 8. Finance Costs Interest on borrowings Interest on leases Accretion interest 717,880 34,733 3,862 8,990 89,178 2,497 2,332 859,472 Consolidated Note 2019 $ 31,706 25,033 1,970 58,709 606,031 31,143 4,041 5,808 (27,425) 2,622 - 622,220 2018 $ 6,671 - 25,015 31,686 Note 9. 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 Tohmatsu Australia Deloitte Touche Tohmatsu Indonesia The auditor of Bass Oil Limited is Deloitte Touche Tohmatsu Tax services paid to Deloitte Touche Tohmatsu Australia Total Consolidated Note 2019 $ 2018 $ 45,463 11,220 56,683 1,424 58,107 43,823 13,280 57,103 12,076 69,179 Bass Oil Limited Annual Report December 2019 50 NOTES TO THE FINANCIAL STATEMENTS For the financial year ended 31 December 2019 Note 10. Income Tax Consolidated Note 2019 $ 2018 $ (a) Income tax recognised in profit or loss Current tax In respect of the current financial year 331,247 311,427 Deferred tax In respect of the current financial year 11,100 8,407 Total income tax expenses recognised in profit or loss The income tax expense for the year can be reconciled to the accounting profit or loss as follows: Profit/(loss) before tax Income tax calculated at 30% (2018: 30%) Difference in tax rates Cost recovery profit that is not liable to income tax in Indonesia Other Current financial year temporary differences 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 Trade and other payables Provisions Share issue costs Net deferred tax assets not recognised Net deferred tax assets and (liabilities) (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 342,347 319,834 740,765 222,230 82,812 (281,018) - 14,980 303,343 (99,781) (29,934) 77,857 (15,470) 54,891 (15,480) 247,970 342,347 319,834 (9,271) 7,717 1,792 22,983 23,220 (23,220) - (6,887) 8,999 601 11,870 14,583 (14,583) - 23,220 5,193,647 162,679 5,379,546 14,583 4,890,304 163,887 5,068,774 Bass Oil Limited Annual Report December 2019 51 NOTES TO THE FINANCIAL STATEMENTS For the financial year ended 31 December 2019 Note 10. Income Tax (cont’d) Deferred tax assets have not been recognised in respect to these items as it is not probably 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 assets Opening balance Recognised in equity Recognised in income Closing balance (e) Movement in provision for tax Opening balance Current tax expense Less payments Closing balance Consolidated Note 2019 $ 2018 $ - (11,100) 11,100 - 870,624 331,247 (486,512) 715,359 - (8,407) 8,407 - 559,197 311,427 - 870,624 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). There were no cost recoveries available to be carried forward at 31 December 2018, meaning that the tax was payable on 30 April 2019. The Group has entered into discussions with the Indonesian tax office regarding a payment plan for the tax provision of $715,359. The provision for tax covers the tax years from 2010 to 2019. Note 11. Cash and Cash Equivalents Cash at bank and in hand Note Consolidated 2019 $ 640,871 640,871 2018 $ 854,117 854,117 Bass Oil Limited Annual Report December 2019 52 NOTES TO THE FINANCIAL STATEMENTS For the financial year ended 31 December 2019 Note 12. Trade and Other Receivables Current Trade debtors (1) Other receivables Goods and services tax Value-added tax Non-current Other receivables Consolidated Note 2019 $ 1,072,787 7,110 1,402 327,345 1,408,644 2018 $ 913,619 7,690 5,514 385,785 1,312,608 337,925 337,925 175,898 175,898 (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 13. Other Current Assets Prepayments Accrued revenue Note 14. Inventories Oil inventories in tank (at cost) Maintenance spares (at cost) Note Note Consolidated 2019 $ 26,580 6,114 32,694 Consolidated 2019 $ 59,650 217,707 277,357 2018 $ 56,794 74,266 131,060 2018 $ 31,438 24,506 55,944 Bass Oil Limited Annual Report December 2019 53 NOTES TO THE FINANCIAL STATEMENTS For the financial year ended 31 December 2019 Note 15. Other Financial Assets Current Security deposit Non-current Security deposit Note 16. Plant and Equipment Consolidated Note 2019 $ 2018 $ 3,853 3,853 3,882 3,882 27,469 27,469 27,312 27,312 Consolidated Note 2019 $ 2018 $ Office equipment, furniture and fittings Opening balance, net of accumulated depreciation Purchases Disposals Foreign exchange movement Depreciation charge for the year 6 Closing balance, net of accumulated depreciation Cost Accumulated depreciation Net carrying amount Note 17. Leases (a) Right of Use Assets 3,178 - - (47) (1,362) 1,769 32,002 (30,233) 1,769 1,775 3,175 - (616) (1,156) 3,178 32,457 (29,279) 3,178 Office Premises Computers Motor Vehicles Total Consolidated Opening balance 93,750 26,455 142,630 262,835 Depreciation (34,855) (16,459) (55,809) (107,123) Foreign exchange movement Closing balance, net of accumulated depreciation 4,533 1,440 8,094 14,067 63,428 11,436 94,915 169,779 Bass Oil Limited Annual Report December 2019 54 NOTES TO THE FINANCIAL STATEMENTS For the financial year ended 31 December 2019 Note 17. Leases (cont’d) The Group leases several assets including buildings, IT equipment and vehicles. The average lease term is 3 years (2018: 3 years). Amounts recognised in profit and loss Depreciation expense on right-of-use assets Interest expense on lease liabilities Expense relating to short term leases Expense relating to leases of low value assets The total cash outflow for leases amounts to $111,740. (b) Lease Liabilities Current Non-current Maturity analysis: Year 1 Year 2 Year 3 Year 4 Year 5 Onwards Note 18. Oil Properties 31 December 2019 107,123 25,033 4,517 - 31 December 2019 92,320 83,808 176,128 31 December 2019 92,320 69,563 14,245 - - - 176,128 Tangai-Sukananti KSO Note Movement in the carrying value of oil properties Balance at the beginning of year Expenditure during the period Disposals during the period Depreciation, depletion and amortisation 6 Balance at the end of year Bass Oil Limited Annual Report December 2019 Consolidated 2019 $ 1,945,213 1,945,213 1,345,408 940,023 - (340,218) 1,945,213 2018 $ 1,345,408 1,345,408 1,523,640 26,834 (3,895) (201,171) 1,345,408 55 NOTES TO THE FINANCIAL STATEMENTS For the financial year ended 31 December 2019 Note 19. Subsidiaries 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 Bass Oil Sukananti Ltd Oil Producer British Virgin Islands 31 Dec 19 31 Dec 18 100% 100% 100% 100% Note 20. Joint Arrangements Name of Joint Venture Principal activity Place of incorporation and operation Proportion of ownership interest and voting power held by the Group 31 Dec 19 31 Dec 18 Tangai-Sukananti KSO (i) Oil Producer Indonesia 55% 55% (i) Joint arrangements in which Bass Oil Limited is the operator. Note 21. Trade and Other Payables Current Trade payables (i) Other payables Consolidated Note 2019 $ 2018 $ 328,387 967,868 1,296,255 191,955 559,436 751,391 (i) The Group settles creditors on average within 30 days and no interest is charged. Bass Oil Limited Annual Report December 2019 56 NOTES TO THE FINANCIAL STATEMENTS For the financial year ended 31 December 2019 Note 22. Provisions Current Employee benefits Non-current Restoration Make Good Consolidated Note 2019 $ 2018 $ 144,760 144,760 92,519 7,827 100,346 75,587 75,587 246,896 - 246,896 2018 $ 281,160 - (40,532) 6,268 246,896 Movement in the carrying value of restoration provision Balance at the beginning of year Re-estimation of liability Expenditure during the period Accretion interest Balance at the end of year Note Consolidated 2019 $ 246,896 (140,989) (15,358) 1,970 92,519 The restoration provision was agreed with Pertamina EP and will be fully paid when the license expires in July 2025. Note 23. Borrowings Current Non-current Consolidated Note 2019 $ - - - 2018 $ 896,366 - 896,366 The acquisition of Bass Oil Sukananti Limited formally Cooper Energy Sukananti Limited 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 AUD 500,000 cash and the issue of 180,000,000 ordinary shares, valued at AUD 360,000. Additionally, a deferred settlement of AUD 2,270,000 was agreed to be paid by 31 December 2018. The Company paid the first repayment of AUD 500,000 in December 2017 and the second repayment of AUD 500,000 in June 2018. The Company secured an extension of 6 months for the remaining payments. The timetable for a third payment of AUD 500,000, due 30 September 2018, was paid on the 30 April 2019 and the fourth and final payment of AUD 770,000, due 31 December 2018, was paid on the 31 July 2019. The Company paid Cooper Energy an interest cost of 7.5% per annum on the outstanding AUD1,270,000 over the period of the deferral. The deferred settlement was secured by a registered charge over the shares the Company holds in Bass Oil Sukananti Limited. The security has been released. Bass Oil Limited Annual Report December 2019 57 NOTES TO THE FINANCIAL STATEMENTS For the financial year ended 31 December 2019 Note 24. Contributed Equity Issued and paid up capital 2019 Shares 2018 Shares 2019 $ 2018 $ Ordinary share fully paid 2,606,167,481 2,606,167,481 25,728,503 25,728,503 Movements in ordinary shares on issue Ordinary shares on issue at beginning of period 2,606,167,481 2,606,167,481 25,728,503 25,720,096 Issue of ordinary shares 735,972,615 Transaction costs Tax consequences of share issues costs Ordinary shares on issue at end of period - - - 1,008,708 (74,043) - - 11,100 8,407 - 3,342,140,096 2,606,167,481 26,674,268 25,728,503 On 5 July 2019 the Company issued 75,000,000 ordinary shares in a private placement to sophisticated and professional investors through the issue of New Shares at A$0.002 per share. The placement included a 1 for 2 free attaching option exercisable at A$0.004 on or before 30 July 2021. The placement raised $105,300 before costs. On 30 July 2019 the Company issued 240,972,615 ordinary shares in a non-renounceable entitlement offer of new shares on a 1 for 2 basis, at an issue price of A$0.002 per share. The Rights Issue included a 1 for 2 free attaching option exercisable at A$0.004 on or before 30 July 2021. On 8 October 2019 the Company issued 195,000,000 ordinary shares and on 23 October 2019 the Company issued 225,000,000 ordinary shares, both as part of the shortfall shares from the Rights Issue. In total the rights issue raised $903,408 before costs and expenses. 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 31 December 2019, the Company has 367,986,328 (2018: nil) share options on issue, exercisable on a 1:1 basis for 367,986,328 (2018: nil) ordinary shares of the Company at an exercise price of A$0.004 and an expiry date of 31 July 2021. Movements in options on issue Balance at the beginning of year Options issued Options exercised Options expired and cancelled Closing value Consolidated Note 2019 Options 2018 Options - - 367,986,328 366,688,205 - - - (366,668,205) 367,986,328 - Bass Oil Limited Annual Report December 2019 58 NOTES TO THE FINANCIAL STATEMENTS For the financial year ended 31 December 2019 Note 25. Accumulated Losses Balance at the beginning of year Net profit/(loss) Options expired and cancelled Balance at the end of year Note 26. Earnings per Share Consolidated Note 2019 $ 2018 $ (27,789,956) (27,502,223) 398,418 - (419,615) 131,882 (27,391,538) (27,789,956) The following reflects the income used in the basic earnings per share computations. Consolidated Note 2019 $ 2018 $ Basic earnings/(loss) per share Net profit/(loss) attributable to ordinary equity shareholders of the parent 0.000 (0.000) 398,418 (419,615) Issued ordinary shares at 1 January Effect of shares issued July 2019 Effect of shares issued October 2019 Weighted average number of ordinary shares at 31 December Note 2019 $ 2018 $ 2,606,167,481 2,606,167,481 138,451,459 87,410,959 - - 2,832,029,899 2,606,167,481 Note 27. 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 (a) Employment agreements Note Consolidated 2019 $ 561,403 46,701 608,104 2018 $ 530,998 43,706 574,704 The Group may terminate Mr Guglielmo’s employment agreement by giving six months’ notice. The Group has a contingent liability of $115,000 (2018: $116,000) in relation to this agreement, if Mr Guglielmo is not required to work out the notice period. The Group may terminate Dr Brealey’s employment agreement by giving three months’ notice. The Group has a contingent liability of $43,000 (2018: $43,000) in relation to this agreement, if Dr Brealey is not required to work out the notice period. Bass Oil Limited Annual Report December 2019 59 NOTES TO THE FINANCIAL STATEMENTS For the financial year ended 31 December 2019 Note 29. Parent Entity Disclosures Information relating to Bass Oil Limited Current assets Total assets Current liabilities Total liabilities Net assets Contributed equity Foreign exchange reserve Accumulated losses Total shareholder’s equity Parent 2019 $ 404,242 2,606,217 162,343 2,866,962 2018 $ 477,256 2,680,639 1,025,995 2,851,970 (260,745) (171,331) 26,674,268 3,129,996 25,728,504 3,129,996 (30,065,009) (29,029,831) (260,745) (171,331) Loss of the parent entity Total comprehensive income/(loss) of the parent entity (1,035,178) (1,035,178) (755,352) (755,352) The Parent Entity has a net asset deficiency of $260,745 as at 31 December 2019. The commitments and contingencies of the parent entity are the same as disclosures in Note 28 excluding the commitments relating to Tangai-Sukananti KSO. Note 30. 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 to Adelaide Equity Partners Limited (a director related entity of Mr M Lindh) of $24,015 (31 December 2018: $34,522) and capital raising success fees to Adelaide Equity Partners Limited of $47,304 (31 December 2018: $nil) (both under a corporate advisory and investor relations mandate). The fees were provided under normal commercial terms and conditions. Amounts outstanding at balance date were $11,365 (31 December 2018: $nil). The Group has a corporate advisory & investor relations mandate with Adelaide Equity Partners. The mandate has a monthly retainer of A$5,000 per month and can be terminated at anytime by written notice to the other party. During the year the Group also paid rent to Adelaide Equity Partners Limited of $7,377 (31 December 2018: $3,985) (under a rental of premises mandate). The fees were provided under normal commercial terms and conditions. Amounts outstanding at balance date were $nil (31 December 2018: $nil). Bass Oil Limited Annual Report December 2019 60 NOTES TO THE FINANCIAL STATEMENTS For the financial year ended 31 December 2019 Note 30. Related Party Disclosures (cont’d) The acquisition of Bass Oil Sukananti Limited formally Cooper Energy Sukananti Limited 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 AUD 500,000 cash and the issue of 180,000,000 ordinary shares, valued at AUD 360,000. Additionally, a deferred settlement of AUD 2,270,000 was agreed to be paid by 31 December 2018. The Company paid the first repayment of AUD 500,000 in December 2017 and the second repayment of AUD 500,000 in June 2018. The Company secured an extension of 6 months for the remaining payments. The timetable for a third payment of AUD 500,000, due 30 September 2019, was paid on the 30 April 2019 and the fourth and final payment of AUD 770,000, due 31 December 2019, was paid on the 31 July 2019. The Company paid Cooper Energy an interest cost of 7.5% per annum on the outstanding AUD1,270,000 over the period of the deferral. The deferred settlement was secured by a registered charge over the shares the Company holds in Bass Oil Sukananti Limited. The security has been released. Note 31. Segment Information For management purposes there is only one operating segment, which is oil production. 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 ended 31 December 2019 was from oil production. The consolidated entity operates in the oil and gas industry in Indonesia. The consolidated assets and liabilities as at 31 December 2019 and 2018 relate to oil production. For the current financial year, the Group’s revenue of $5,052,319 was received from the sale of oil in Indonesia to Pertamina EP (the Indonesian State owned oil Company). Bass Oil Limited Annual Report December 2019 61 NOTES TO THE FINANCIAL STATEMENTS For the financial year ended 31 December 2019 Note 32. 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 profit/(loss) after tax Adjustments for: Depreciation Amortisation Impairment of receivables Accretion interest Non-cash decrease in provision Foreign exchange adjustment Changes in assets and liabilities (Increase)/decrease in trade and other receivables Decrease/(increase) in other assets (Increase) in inventories Increase/(decrease) in provisions Increase/(decrease) in trade and other payables (Decrease)/increase in provision for tax Increase in deferred tax Net cash flows used in operating activities Note 33. Reserves Currency translation reserve (i) Note 6 Consolidated 2019 $ 2018 $ 398,418 (419,615) 108,485 340,213 - 27,003 (204,658) (26,315) 643,146 (258,064) 98,366 (221,413) 125,311 534,880 (155,265) 11,100 778,061 1,156 201,171 182,974 24,927 - (98,854) (108,241) (375,092) (66,361) 49,000 (124,165) (28,662) 311,427 8,407 (333,687) Note Consolidated 2019 $ 3,129,996 3,129,996 2018 $ 3,129,996 3,129,996 (i) The Currency translation reserve was recognised at 31 December 2017 with the change in functional and presentational currency to USD. In order to derive US dollar opening balances, the Australian dollar functional currency assets and liabilities at 1 July 2017 were converted at the spot rate of US$1:A$0.77 on the reporting date; and the contributed equity, reserves and retained earnings were converted at applicable historical rates and the difference has given rise to the recognition of the Currency translation reserve. Bass Oil Limited Annual Report December 2019 62 NOTES TO THE FINANCIAL STATEMENTS For the financial year ended 31 December 2019 Note 34. Subsequent Events The current low oil price environment together with the outbreak of COVID-19 and the subsequent quarantine measures imposed by the Australian and Indonesian governments as well as the travel and trade restrictions imposed by Australia and other countries in early 2020 have caused disruption to businesses and economic activity. The Group considers this to be a non-adjusting post balance sheet event. This has had a negative impact on the operations of the Group. The Group’s operations are located in Australia and Indonesia. In regard to COVID-19 and the current lower oil price environment, the Group’s key focus is to remain disciplined, ensuring the health and safety of our staff, whilst delivering and optimising, ongoing production throughout CY2020, whilst not compromising field integrity. The Group is of the view that the current depression in oil prices has been exacerbated by external forces, which will inevitably result in a correction in due course, at which time, the Group will be positioned to take advantage of attractive opportunities. The Group is committed to supporting government and community efforts to limit the spread of the virus, and supporting business continuity with regard to its staff and contractors. The Group has activated a Business Continuity Plan (BCP) during this period of significant health and economic uncertainty. The Group has implemented a series of measures to protect the health and safety of our people, including health screening protocols, restricting travel and meetings, implementing social distancing measures and making changes to field and office access arrangements. The BCP includes contingency plans that will allow production operations to continue in the event of any of the field operations team contracting the virus. As the situation remains fluid (due to continuing changes in government policy and evolving business and customer reactions thereto) as at the date these financial statements are authorised for issue, the directors of the Group considered that the financial effects of COVID-19 and the current low oil price environment on the Group's consolidated financial statements cannot be reasonably estimated. Nevertheless, the economic effects arising from the COVID-19 outbreak and the current low oil price are expected to affect the consolidated results of the Group for the first half and full year of 2020. No other matter or circumstance has occurred subsequent to year end that has significantly affected, or may significantly affect, the operations of the Company, the results of those operations or the state of affairs of the entity in subsequent financial years. 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 5 11-19 Bank Place Melbourne, VIC, 3000 Australia Bass Oil Limited Annual Report December 2019 63  3 4 5 SHAREHOLDER AND OTHER INFORMATION Compiled as at 27 March 2020 DISTRIBUTION OF ORDINARY SHARES Ordinary Shares Number of Holders Number of Shares 1 – 1,000 1,001 – 5,000 5,001 – 10,000 10,001 – 100,000 100,001 and over Total on Issue 193 305 184 599 954 2,235 58,914 852,264 1,529,555 24,923,118 3,314,776,245 3,342,140,096 1,515 holders held less than a marketable parcel of ordinary shares. There is no current on-market buy back. SUBSTANTIAL SHAREHOLDERS As disclosed in notices given to the Company. Name of substantial shareholder Interest in number of shares Beneficial and non-beneficial % of shares Cooper Energy Ltd Miller Anderson Pty Ltd Tattersfield Group VOTING RIGHTS 353,361,294 285,630,465 171,475,048 10.57 8.55 5.13 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) (c) 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 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. Bass Oil Limited Annual Report December 2019 68 SHAREHOLDER AND OTHER INFORMATION Compiled as at 27 March 2020 THE 20 LARGEST SHAREHOLDERS OF ORDINARY SHARES Holder Somerton Energy Ltd Miller Anderson Pty Ltd Tattersfield Securities Ltd Miss S Masalkovski Mr M Saboundjian Scintilla Strategic Investments Limited Marbel Capital Pty Ltd Wingmont Pty Ltd Mr S H Bell & Mrs J K Berveling Yavern Creek Holdings Pty Ltd Mr B W Smith Mr W C Wheelahan Crescent Nominees Limited Mr N Guglielmo & Mr G Guglielmo Mr P Sciancalepore & Mrs P Sciancalepore Mr M K Pagliarulo Small Business Finance Pty Ltd Mr M K H Raabe Accord MBO Pty Ltd Emmett Enterprises Pty Ltd Ordinary shares % of total issued 353,361,294 243,200,000 120,004,173 103,649,828 95,000,000 79,115,710 68,176,383 60,800,000 59,403,577 53,250,000 62,000,000 45,000,000 44,706,875 42,430,465 40,000,000 39,833,333 37,401,351 36,000,000 31,000,000 30,000,000 10.57 7.28 3.59 3.10 2.84 2.37 2.04 1.82 1.78 1.59 1.56 1.35 1.33 1.27 1.20 1.19 1.12 1.08 0.93 0.90 The 20 largest shareholders hold 1,634,332,989 shares, representing 48.91% of the issued share capital. Bass Oil Limited Annual Report December 2019 69 

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