2017 Annual Report
Buru Energy Limited Annual Report
For the year ended 31 December 2017
ABN 71 130 651 437
Contents
Chairman’s Letter
Business Review
Operations Review
Directors’ Report
Remuneration Report
Auditor’s Independence Declaration
Consolidated Statement Of Financial Position
Consolidated Statement Of Profit Or Loss And Other Comprehensive Income
Consolidated Statement Of Changes In Equity
Consolidated Statement Of Cash Flows
Notes To The Financial Statements
Directors’ Declaration
Independent Auditor’s Report
Corporate Governance Statement
Additional ASX Information
Corporate Register
1
3
6
19
25
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30
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32
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34
61
62
66
77
79
BURU ENERGY LIMITED
Dear Shareholder
I am pleased on behalf of your Board
to present the Annual Report of the
Company for the 2017 year. 2017 was a
transformational year for the Company and
I am pleased to report that we are now in
a position to be able to deliver significant
value from our Canning Basin assets if our
objectives are achieved as planned.
2017 was a very active year with many different components
coming together to allow the Company to move forward on a
much sounder footing. Our transformation was also assisted
by the recovery in the oil price and the beginnings of a
recovery in the investment climate for small resource stocks.
There were a number of corporate transactions and activities
that drove this transformation, the most significant of these
being the asset swap transaction with our principal joint
venture partner, Mitsubishi Corporation. This asset swap
resulted in the joint asset portfolio across the Canning
Basin being split between the two companies, with Buru
concentrating on the oil assets and Mitsubishi concentrating
on the gas assets. Mitsubishi has been a supportive and
committed joint venture partner through some difficult
times and this transaction allowed each company to move
forward concentrating on those areas most appropriate to its
corporate objectives.
Subsequent to this transaction Buru quickly moved forward
with its restart and further development of the Ungani
Oilfield. This activity was strongly supported by shareholders,
with a rights issue to fund the development of the field being
substantially oversubscribed. It was also pleasing to see that
the rights issue price of 15 cents a share has since more than
doubled.
As part of the re-structuring of the Company, the balance
sheet was also strengthened by the re-negotiation of the
30 June 2018 liability to Alcoa which arose from a legacy
gas sales and funding agreement. Buru and Mitsubishi also
entered into an agreement with the State of Western Australia
to terminate the State Agreement for the Canning Basin. This
was a mutually agreed outcome between the three parties,
and in conjunction with the Mitsubishi Asset Swap Agreement
has secured the Company’s strategic acreage position in the
Canning Basin. Together these transactions have provided
the Company with a secure platform to add value to its
Canning Basin assets.
Chairman’s Letter
2017 was a very active year
with many different components
coming together to allow the
Company to move forward on a
much sounder footing.
1
ANNUAL REPORT 2017 Chairman’s Letter
However, one area of concern was the announcement by
the WA Government of yet another inquiry into hydraulic
fracture stimulation or fraccing. We are confident that this
current scientific inquiry will come to the same conclusion
as all previous inquiries, that the industry is safe if properly
regulated, and we look forward to the outcome.
The corporate transactions also provided the platform for the
Company to achieve its operational objectives. The principal
of these was the resumption of production from the Ungani
Oilfield through an enhanced export route, including an
80,000 barrel export tank in Wyndham.
After the field restart, the two wells in the field were initially
produced on free flow and subsequent to the capital
raising, electric submersible pumps were installed to ensure
production rates could be maintained. The pumps have
performed as expected and the export system is working well
with three oil liftings from Wyndham by Trafigura, our oil sales
partner, since production recommenced.
The major activity at the field during the year was the drilling
of two additional production wells, Ungani 4 and Ungani
5. These wells are currently shut in because of the recent
anomalously high level of rainfall in the Kimberley, with some
two years’ worth of rain falling in Broome in the first two
months of 2018 causing closure of both the Great Northern
Highway and the Ungani access road. The two wells will,
however, provide a path to the target output of 3,000 bopd
which is planned to be achieved in 2018.
The Company is also preparing for a major exploration drilling
program during 2018 with the objective of increasing its oil
resources in the Basin and achieving economies of scale in its
operations.
The Company cannot achieve its objectives without the
support of its staff and shareholders, and their support during
2017 was exceptional, particularly given the previous difficult
periods in 2015 and 2016. The Board extends its thanks and
gratitude to all our stakeholders.
We have laid the foundation for the continued success of the
Company and I look forward to delivering on our next set
of objectives in 2018, including increasing and maintaining
Ungani production and undertaking a successful oil
exploration campaign.
Eric Streitberg
2
BURU ENERGY LIMITED Corporate Summary
Current Issued Capital
Fully paid ordinary shares
Options (unlisted – Staff )
Trading History
Share price range during 2017
Liquidity (annual turnover as % of average issued capital)
Average number of shares traded per month
Business Philosophy and Strategy
432,021,333
4,550,000
$0.15 to $0.33
29.99%
~ 9.25 million
Buru Energy Limited (ASX: BRU) is a Western Australian oil and
gas exploration and production company headquartered in
Perth with an operational office in Broome. The Company’s
petroleum assets and tenements are located onshore in
the Canning Basin in the southwest Kimberley region of
Western Australia. It owns 100% of its flagship high quality
conventional Ungani Oilfield project and potentially world
class tight gas resources, in addition to significant acreage
holdings with world class exploration prospects as shown on
the map below.
Location of the Company’s Assets
3
Business ReviewANNUAL REPORT 2017 The Company’s goal is to deliver material benefits to its
shareholders, the State of Western Australia, the Traditional
Owners of the areas in which it operates and the Kimberley
community, by successfully exploring for and developing
the petroleum resources of the Canning Basin in an
environmentally and culturally sensitive manner.
The Company’s strategy in the short term includes the
following:
Increasing Ungani Oilfield production
•
• Undertaking an exploration drilling program on the
Ungani trend conventional oil prospects
• A continuing focus on costs and on strengthening the
balance sheet
Corporate Governance
The ASX core principles of corporate governance have been
integrated into the governance policy of the Company
together with specific principles relevant to a company of
Buru Energy’s nature and size. The Board currently has three
Directors and a majority (two out of three) of independent
Directors. The Chairman is not independent as he is a major
shareholder and acts as the chief executive of the Company.
This does not comply with ASX best practice guidelines, but
the Board is of the view that the current composition of the
Board is appropriate for the current situation of the Company.
The full Corporate Governance Statement is included in this
Annual Report at pages 66 to 76.
Shareholder Communications
Corporate Responsibility
The Company’s responsibilities to the community and its
shareholders are supported by codes of conduct and a
number of specific policies, the details of which are available
on the Company’s website. The Company’s activities include
engagement with a broad variety of stakeholders including
local communities, Traditional Owners, and pastoralists in the
areas in which it operates. The level of this engagement varies
directly with the level of the Company’s activities but includes
a long term program of information provision and feedback.
This longer term program also includes substantial support
of local community activities through a structured program
aimed at community development.
The Company has a strong commitment to ensuring that
it engages local community members and contractors in
its activities to the extent possible. It is also committed
to assisting Aboriginal people to achieve economic
independence through employment, business development
and training and gives support to those activities that are
sustainable in the longer term.
Under its ASX disclosure obligations and generally in regard
to shareholder communication, Buru Energy provides
shareholders with all relevant and price sensitive information.
These communications include regular shareholder
updates and the quarterly, half yearly and annual reporting
obligations. All this information is made available on the
Company’s website (www.buruenergy.com) which also
contains details of the Company’s general activities.
This report provides a general summary of these details and
also communicates to shareholders the Company’s business
philosophy, economic and financial condition and future
prospects.
Funding, Commitments and Prospects
The funding requirements of the Company are continuously
reviewed through detailed internal cash flow models that are
updated as required for external and internal factors. Cash
flow testing is carried out over time periods that ensure all
reasonable scenarios are modelled, including the Company’s
ability to meet commitments as they fall due. Discretionary
investment decisions including exploration, development,
and production are tested against these cash flow models to
ensure the appropriate use of the Company’s funds.
Formal control over the Company’s activities is maintained
through a budget and cash flow monitoring process with
annual budgets considered in detail and monthly detailed
accounts and cash flow projections provided for review by the
Board. Based on these cash flow projections, the Company
anticipates that it will have sufficient funds to meet its
commitments for at least the next 12 months.
4
Business ReviewBURU ENERGY LIMITED Business Risk Management
The Company manages risk through a formal risk
identification and risk management system, details of which
are included in the Corporate Governance Statement. The
identified risks are considered to be in the normal course
of the Company’s specific business in the current business
climate, and the internal processes of the Company are
considered sufficient to properly identify them and to provide
mechanisms to manage them. The Board has direct oversight
and involvement in the risk review and management process
and engages external consultants to assist with the process as
appropriate.
The operational risk management system is formalised
through regulatory compliant Health, Safety and Environment
management systems. The operational risks these processes
address include the specific risks associated with the oil
and gas industry including the production, processing and
transport of crude oil and the testing and evaluation of high
pressure gas accumulations.
Corporate risks are managed through a series of policies
and procedures and the formal risk identification and
management system.
The Company is cognisant of the potential effects of climate
change policies instigated by Government on both the costs
and time frames of projects. These factors are considered in
the investment decisions made by the Company, together
with the effects such policies may have on commodity prices
on both a local and global scale.
Additional matters that are considered under the Company’s
risk evaluation processes include social and regulatory risk
including the various anti fossil fuel campaigns that are
both general to the industry and in some cases specific to
Buru Energy. There have been no material effects on the
Company’s operations by these campaigns during the year. In
regard to hydraulic fracture stimulation or fraccing, the State
Government has introduced a moratorium on this process
while a scientific inquiry is undertaken. Buru expects that the
inquiry will return a similar finding to the numerous previous
inquiries in Australia and internationally, that fraccing is
safe if properly regulated, which it is under the current WA
regulatory regime.
The Company will be carrying on its current operations
including drilling for and producing oil and exploring for
conventional oil and gas while the current moratorium on gas
fraccing is in place.
The Company’s activities during the year continued to be
focused on exploration, development and production within
its petroleum exploration permit and licence areas in the
Canning Basin in the northwest of Western Australia.
5
Business ReviewANNUAL REPORT 2017 Operations Review
Production and Development
– Ungani Oilfield
Acquisition of 100% of the Ungani Oilfield and restart
of production
The Ungani Oilfield was discovered in 2011 and is a
cornerstone asset of the Company. Oil production from
the field commenced in May 2012 under various short term
production testing regimes. The field was shut in in January
2016 as a consequence of then low oil prices. On 25 May 2017,
Buru Energy acquired the 50% interest in the L20 and L21
Production Licences held by Mitsubishi Corporation giving
Buru Energy 100% ownership of the Ungani Oilfield. Full
details of the Asset Swap Agreement which implemented
this transaction are set out in the Corporate section of this
report. Production from the Ungani Oilfield was restarted on
16 June 2017 with oil being produced from the two existing
wells. In late 2017, a further two wells were successfully drilled.
Production from those wells will commence as soon as they
are tied in to the existing Ungani production system which is
expected to be the first half of 2018 dependent on weather
conditions.
In preparation for the restart of production in June 2017, a
number of changes were made to the oil export system and
to the field facilities in order to improve safety and reliability,
increase capacity and reduce costs. These changes included
accessing a larger 80,000 bbl export crude oil storage tank
at Wyndham Port bringing significant commercial benefits
through access to larger ships. Previously, oil at Wyndham
was stored in a smaller 30,000 bbl tank.
A contract for crude transport by truck from the Ungani Oilfield
to Wyndham Port was executed with Fuel Trans Australia (FTA)
after a rigorous selection process which included analysis and
review by a third party independent expert on road transport
risk management. The trucking system includes state of the
art safety systems as described in the HSE section later in this
report. The full system now utilises quad road trains, reducing
the number of truck movements.
80,000 bbl and 30,000 bbl tanks at Wyndham
Ship loading at Wyndham Port
6
BURU ENERGY LIMITED Operations Review
Opening up the Ungani 1ST1 well
First oil to surface at Ungani at production restart
The work at the field undertaken prior to startup included
installation of the produced water injection system at the
Ungani Far West 1 well to allow re-injection of produced water
into the lower water bearing zone of the Ungani Dolomite
reservoir in that well, general operational streamlining, the
installation of a new load out system that was purchased prior
to the 2016 shut in, and an upgrade to the access road. These
works were completed on time and under budget with no
incidents.
The workover operations to install the ESPs in Ungani 1ST1
and Ungani 2 commenced on 3 October and were completed
on 16 October. Both workover operations were completed on
time and on budget and included the recovery of the existing
completion string and then re-completion of each well with
an ESP set at 1,534 metres on an 89 mm (3-1/2 inch) tubing
string. Following completion of these operations, the rig
was demobilised to the Ungani 4 well location and the two
recompleted wells were brought back on production.
Ungani Development
Further development of the Ungani Oilfield was undertaken
during the year to expand the production facility and increase
production capacity. This included the drilling of two new
development wells, the expansion of the production facility
and the installation of electric submersible pumps (ESPs) in
the existing Ungani 1ST1 and Ungani 2 wells, together with
their associated surface power and control systems.
The further work at the field during the year to increase
production capacity included the installation of two
additional 1,250 bbl oil storage tanks and a 600 bbl oil/water
segregation tank. Following the completion of this work, the
Ungani Production Facility storage capacity was increased
from 2,400 bbls of oil to 4,900 bbls of oil and an overall fluid
processing capability of up to 8,000 bbls of fluid per day at up
to a 90% water cut.
DDGT1 Workover Operations at the Ungani 1ST1 well
1,250 bbl storage tank under construction
7
ANNUAL REPORT 2017 Operations Review
ESP power and control systems
New tank installation
Ungani Production Facility showing ESP surface equipment and new tank installation
The next phase of surface development including the tie ins
of the Ungani 4 and Ungani 5 wells commenced in late 2017
and is expected to be completed when access to the site has
been regained.
Ungani 4 Development Well
Following completion of the workover operations, the
DDGT1 rig was mobilised to the Ungani 4 well location and
commenced drilling operations on 19 October 2017. The well
is located some 500 metres to the southwest of Ungani 1ST1
on a separate drilling pad and was designed to provide an
additional drainage point in the Ungani Oilfield and to verify
reservoir continuity.
The well was drilled to a total depth of 2,249 metres and
then suspended while additional equipment was mobilised
to deal with the unexpected hole conditions. The rig was
then moved to drill the Ungani 5 well and after the successful
completion of that well, resumed operations at Ungani 4 and
successfully completed the well.
DDGT1 Rig at Ungani 4
8
BURU ENERGY LIMITED Operations Review
Ungani production facility
Laydown area
Ungani 3/5
Flowline route
Ungani 4
Ungani Operations Area
Ungani 5 Appraisal Well
The DDGT1 rig spudded the Ungani 5 well on 1 December.
The well is located some 1,140 metres to the east of Ungani 1
on a separate drilling pad and was a test of the eastern fault
block of the Ungani Oilfield initially identified by the Ungani
3 well. Ungani 3 was an oil discovery but later interpreted to
have not accessed the more porous section of the reservoir.
The well was drilled to a total measured depth of 2,239
metres. The top of the Ungani Dolomite was encountered as
prognosed at 2,122 metres with interpreted similar reservoir
quality to the other wells in the field. The overlying Ungani
Shale section was a similar thickness to other wells in the
field in contrast to its anomalously thin section in Ungani 3.
The well was successfully completed with swellable packers
for zonal isolation and suspended pending hookup to the
production facility.
9
ANNUAL REPORT 2017 Operations Review
Field performance and oil sales
As part of the asset swap transaction with Mitsubishi the
marketing rights for Ungani crude oil held by Mitsubishi were
terminated. Buru Energy subsequently received a number
of commercially attractive proposals for crude oil marketing
services, particularly for the larger parcels from the enhanced
export system with the larger tank. An offtake agreement was
executed with Trafigura Pte Ltd (Singapore) for the sale of the
crude oil FOB at Wyndham for an initial period of 12 months.
Production from the Ungani 1ST1 and Ungani 2 production
wells recommenced in late June 2017. Initial production
from the field included a series of rate and interference tests
to quantify reservoir properties prior to full scale production,
and to provide base line production data prior to the
installation of the downhole pumps. Production from the
Ungani field was temporarily shut in on 28 September 2017
whilst workover operations on both Ungani 1ST1 and Ungani
2 wells were undertaken.
Production recommenced on 22 October 2017 and continued
until the field was again shut in on 29 December 2017 when
a monsoonal low from Tropical Cyclone Hilda delivered some
260 mm of rain on the Ungani operations area. Although this
amount of rain caused only minor interruptions to rig activity
it closed the Ungani access road to heavy vehicle traffic
including crude oil haulage trucks. Crude trucking operations
recommenced on 6 January 2018, when the crude haulage
trucks were able to access the road, however, further heavy
rain has caused further suspension of operations.
FTA quad road train with ~880 bbls of Ungani oil bound for Wyndham Port
10
BURU ENERGY LIMITED Operations Review
Truck unloading at Wyndham
Sao Domingos Savio loading at Wyndham
Traditional Owner Engagement
The company continues to work cooperatively with the
Traditional Owners in the Ungani area through compliance
with the relevant agreements. These agreements ensure
all Ungani operations are undertaken with respect for the
social, cultural and environmental interests of the Traditional
Owners. With the restart of oil production from the Ungani
Oilfield, Buru engaged a further two Aboriginal staff based
in the Kimberley, one as an Ungani Oilfield operator and
another in HSE duties. The Company had full retention of its
Aboriginal workforce and has also put in place a traineeship
program to train further Aboriginal workers as operators at
the Ungani Facility. The Company continues to put preference
on contracting local Kimberley Aboriginal businesses to
provide services and contracting of Aboriginal businesses
more than doubled in 2017 compared to 2016.
The two existing production wells performed in line with
expectations with average production for the days that
the wells were online of ~1,233 bopd from the installation
of the ESPs to the end of the year. Notwithstanding the
interruptions to production, the Ungani Oilfield produced
approximately ~172,000 bbls for the period from the restart
of production to the end of 2017. During that same period
~115,000 bbls were sold with the remaining crude being held
as crude inventories at year end. Revenue from the Ungani
Oilfield for the year totalled A$7.89m (an average of ~A$68/
bbl) with cost of sales of A$4.22m (A$37/bbl) giving a gross
profit from sales of Ungani crude of $3.67m (a margin of
A$32/bbl) before amortisation charges.
The crude production is trucked to Wyndham to Storage Tank
10 and sold “FOB at the Wyndham Port” which means that
the buyer, Trafigura, is responsible for all shipping related
charges to the relevant refinery. Two liftings from Wyndham
took place during the year with a third lifting made in January
2018. All liftings took place without incident.
* 60,275 bbls were lifted on 4 September 2017 for A$3.72m
at A$62/bbl by the MT Marlin Ametrine
* 54,981 bbls were lifted on 19 November 2017 for A$4.18m
at A$76/bbl by the MT Marlin Apatite
* 53,377 bbls were lifted on 11 January 2018 for A$4.17m at
A$78/bbl by the Sao Domingos Savio
11
ANNUAL REPORT 2017 Operations Review
Forward production plan
Following the high intensity rain from Cyclone Hilda,
subsequent to the end of the year, Cyclone Joyce and Cyclone
Kelvin have brought continued heavy rainfall to the Ungani
operations. Broome has had its wettest year on record with
more than two years’ worth of rain falling on the Kimberley in
just the first two months of the year. Consequently, Ungani
production has been shut in from 12 January 2018 and
production will recommence as soon as the crude haulage
trucks are able to gain access to the field.
The wet weather after year end has delayed the
commencement of production from Ungani 4 and Ungani
5 which will be undertaken as soon as access to the site has
been regained.
Subject to the production results from the Ungani 4 and
Ungani 5 wells, the forward plan is to continue to build
production and transport capacity to the target rate of 3,000
barrels of oil per day in Q2 2018. Key components of this plan
include installation of flowlines for Ungani 4 and Ungani 5 and
bringing additional trucks into service to match the increases
in production capacity as the wells are connected into the
central processing facility.
Ungani Oilfield Resources
The field has produced a total of some 790,000 bbls during
the various production phases from when production first
commenced on 31 May 2012. In May 2016, the Company
received the Gaffney Cline and Associates (GCA) assessment
of the resources of the Ungani Oilfield as set out below
in summary. Buru Energy’s interest is now 100% of these
estimates. These estimates will be reassessed once sufficient
production data is obtained from the newly drilled Ungani 4
and 5 wells.
Ungani Oilfield Contingent Resources (100%WI, MMstb)
Original in place
Estimated Ultimate Recovery (EUR)
Production until 31 December 2016
Contingent Resources
P90
8.99
2.70
0.79
1C
1.91
P50
16.13
7.26
0.79
2C
6.47
P10
32.30
19.38
0.79
3C
18.59
• GCA’s assessment of Contingent Resources has been prepared using the probabilistic method and an evaluation date of 30 April 2016.
• Contingent Resources are quantities of petroleum estimates as of a given date to be potentially recoverable from known accumulations by application of development
project(s) but which are not currently considered to be commercially recoverable due to one or more contingencies. Contingent Resources are a class of discovered
recoverable resources. GCA assessed the resource as a Contingent Resource as the field was shut in at the time.
• The full resource statement is set out in accordance with ASX Listing Rules in Buru’s ASX release of 16 May 2016. Buru Energy is not aware of any new information or data
that materially affects the information included in that ASX release, other than Buru acquiring 100% of the resource and subsequent production since that date which
has been taken into account above. All other material assumptions and technical parameters underpinning the estimates in that release continue to apply and have not
materially changed. The estimates will be updated when a material amount of data has been obtained from Ungani 4 and Ungani 5.
12
BURU ENERGY LIMITED Production and Development – Blina /
Sundown Oilfield
The Blina and Sundown Oilfields remained shut in during
the year with maintenance and well inspections continuing
together with further rehabilitation operations. Review of the
potential for restart of production from this area continued
during the year.
Operations Review
Exploration
The Company’s exploration portfolio was enhanced by
its assumption of 100% of the Ungani trend permits and
associated prospects on 24 May 2017 when Buru and
Mitsubishi Corporation (MC) entered into an asset swap
agreement as detailed in the Corporate section below.
Planning continued during the year for the 2018 drilling
program of up to four exploration wells and the Company
is currently in the process of considering potential farmin
partners for the program. The planned drilling locations for
this program include a range of play types from the proven
Ungani Dolomite and Reeves discovery to new high potential
concepts for both oil and gas.
Map of selected exploration prospects
13
ANNUAL REPORT 2017 Operations Review
Independent review of Yulleroo resources
Subsequent to the end of the year RISC Advisory Pty Ltd
(RISC) completed an independent assessment of the tight gas
and hydrocarbon liquid resources of the Yulleroo Gas Field
within exploration permits EP 391 and EP 436.
RISC has estimated Contingent and Prospective Resource
sales gas and associated liquids in the Yulleroo Field as at 1
December 2017 as follows:
Contingent Resources Net to Buru
Sales Gas (PJ)
Associated Liquids (MMbbls)
Prospective Resources Net to Buru
Sales Gas (PJ)
Associated Liquids (MMbbls)
1C
321.4
9.5
Low
124.6
4.3
2C
714.0
24.9
Best
302.8
11.9
3C
1,267.0
47.6
High
611.0
24.8
• RISC’s Contingent Resource and Prospective Resource assessment has been prepared using the probabilistic method and an evaluation date of 1 December 2017.
• Contingent Resources are quantities of petroleum estimates as of a given date to be potentially recoverable from known accumulations by application of development
project(s) but which are not currently considered to be commercially recoverable due to one or more contingencies. Contingent Resources are a class of discovered
recoverable resources.
• Prospective Resources are estimated quantities of petroleum that may potentially be recovered by the application of a future development project(s) that relate to
undiscovered accumulations. These estimates have both an associated risk of discovery and a risk of development. Further exploration, appraisal and evaluation is
required to determine the existence of a significant quantity of potentially moveable hydrocarbons.
• The full resource statement is set out in accordance with ASX Listing Rules in Buru’s ASX release of 18 January 2018. Buru Energy is not aware of any new information or
data that materially affects the information included in the 18 January 2018 release and all material assumptions and technical parameters underpinning the estimates in
that release continue to apply and have not materially changed.
14
BURU ENERGY LIMITED These are significant increases on previous estimates and
result from a combination of an increase in the Company’s
interest in the field and the underlying EP 391 and EP 436
permits (from 50% to 100% following the asset swap with
Mitsubishi Corporation), and a consideration of the additional
data obtained from further drilling in the field along with the
results of the further unconventional appraisal activity of the
Laurel Formation undertaken in the Canning Basin.
To convert the identified Contingent Resources and
Prospective Resources to Reserves will require additional
data to be acquired, and drilling to be carried out, including
vertical and horizontal wells, together with extended
production tests to determine commerciality. There is
extensive production from tight gas reservoirs internationally
and there is a well understood and systematic process that
can be undertaken to progress the resources to commercial
production.
The forward plan for the Yulleroo Field is currently on
hold due to the WA Government fraccing moratorium.
Development of this resource would bring substantial
benefits to the Traditional Owners of the area and the State
of Western Australia, together with local customers and the
Kimberley generally.
Health, Safety and Environment
As an onshore petroleum operator in Western Australia, Buru
Energy is primarily regulated by the Department of Mines,
Industry, Resources and Safety (DMIRS) under the Petroleum
and Geothermal Energy Resources Act 1967 (PGER Act),
Petroleum Pipelines Act 1969 and associated regulations.
Buru is also regulated by the Department of Water and
Environmental Regulation (DWER) under the Rights and Water
and Irrigation Act 1914 and the Environmental Protection Act
1986.
Health, safety and environmental approvals are required
to be in place prior to undertaking petroleum activities.
During all activities, the Company implements an internal
environmental audit process to identify opportunities
for improvement and measurement of HSE performance.
Regular external audits and inspections are also undertaken
by regulatory agencies to measure compliance against HSE
approvals. During 2017, Buru Energy was not aware of any
material, non-compliance in relation to health, safety or
environmental legislation.
Operations Review
This focus on internal audits and continuous improvement
has led to continuing improvement in the Company’s HSE
performance in recent years. Buru had zero reportable health
and safety incidents in 2017 and environmental performance
also continues to improve. Environmental performance is
measured against ‘environmental performance objectives’
which are set under the PGER (Environment) Regulations
2012. Over the last five years, The Company has had year-
on-year improvement in compliance against environmental
performance objectives with no environmental performance
objectives requiring action in 2016 or 2017.
Transport of crude oil between Ungani Oilfield and Wyndham
Port is one of the Company’s key HSE risks. Prior to the restart
of the Ungani Oilfield in June 2017, a rigorous contractor
selection process was undertaken with an emphasis on
HSE management. This included analysis and advice from
Barbaro Group, an independent expert on land transport risk
management, to ensure transport risks were reduced to as low
as reasonably practicable for the route. Following this process,
Fuel Trans Australia (FTA) were selected and engaged as the
trucking contractor for crude transport between Ungani Oilfield
and Wyndham Port. Trucking risk management includes use
of local and experienced drivers, minimal night time driving,
identification and geo-fencing of potential high-risk sections of
road, in-cabin monitoring and external monitoring of driving
parameters and truck position. Since restart of production from
the Ungani Oilfield in June 2017 there have been no material
HSE incidents relating to crude trucking.
Corporate
Asset Swap Agreement
On 25 May 2017 Buru Energy entered into a transaction with
its joint venture partners Diamond Resources (Fitzroy) Pty
Ltd (DRF) and Diamond Resources (Canning) Pty Ltd (DRC)
(which are both wholly owned subsidiaries of Mitsubishi
Corporation), on its exploration and production assets in the
Canning Basin in the northwest of Western Australia. The
agreement had the following effect:
• DRF agreed to transfer to Buru Energy its 50% interest in
the Ungani Oilfield Production Licences (L 20 and L 21)
and its 50% interest in exploration permits EP 391, EP 431
and EP 436.
• DRC agreed to transfer to Buru Energy its 50% interest in
exploration permit EP 428.
• Buru Energy agreed to transfer to DRF, its 50% interest in
EP 371 and its 50% interest in the application for special
prospecting authority STP-SPA-0065 and STP-AAA-0031.
• DRF and DRC also agreed that Buru Energy will provide
services in relation to EP 371, including community
engagement and liaison.
15
ANNUAL REPORT 2017 Operations Review
As part of the transaction the parties agreed to terminate
the Ungani Development Funding Agreement (UDFA). On
termination of the UDFA, DRF paid its share of the costs for
restarting the Ungani Oilfield ($1.5 million) as part of the
remaining first tranche of funding under the UDFA. The asset
swap is summarised below:
The applications to approve and register the instruments of
transfer were lodged with the then Department of Mines and
Petroleum, now DMIRS on 16 June 2017. DMIRS approved the
abovementioned instruments of transfer and registered the
transfers on 8 January 2018.
Title
EP 371
EP 391
EP 428
EP 431
EP 436
L 20
L 21
Holder before transaction
Type
Holder after transaction
Buru and DRC each 50%
Exploration
DRC and DRF each 50%
Buru and DRF each 50%
Exploration
Buru and DRC each 50%
Exploration
Buru and DRF each 50%
Exploration
Buru and DRF each 50%
Exploration
Buru and DRF each 50%
Production
Buru and DRF each 50%
Production
Buru 100%
Buru 100%
Buru 100%
Buru 100%
Buru 100%
Buru 100%
SPA0065
Buru and DRC each 50%
Application
DRC and DRF each 50% (of any permit grant)
Map of transaction permits
16
BURU ENERGY LIMITED Balance sheet restructured with variation of Alcoa repayments
As at 30 June 2017, Buru Energy’s then $12.5 million loan
repayment to Alcoa of Australia Limited (Alcoa) was due in
full on 30 June 2018. On 5 July 2017 Buru Energy announced
it had entered into an agreement with Alcoa to vary the
repayment terms under which payments are now being made
in the tranches set out below:
•
•
•
•
$5.0 million was paid on 14 July 2017
$2.5 million to be paid on or before 31 December 2018
$2.5 million to be paid on or before 31 December 2019
$2.5 million to be paid on or before 31 December 2020
The remaining $7.5 million loan continues to be unsecured
and from 1 January 2018 is now subject to an interest rate
of 5% on the outstanding balances, payable annually in
arrears. The $2.5 million annual tranches are further subject
to an accelerated capital repayment mechanism based on
Buru Energy’s gross revenue from Ungani oil sales exceeding
an agreed base level. This aligns the amortisation of the
remaining Alcoa loan to the future oil revenue profile of the
Ungani Oilfield and provides more funding flexibility for
repayment of this debt from surplus cash flow.
Rights Issue to Fund Accelerated Development of
Ungani Oilfield
On 31 July 2017, Buru announced a 1 for 5 non-renounceable
entitlement offer (Rights Issue) to raise up to $10.2 million
to accelerate the development of the Ungani Oilfield. The
Rights Issue offered the opportunity to acquire shares in the
Company at an issue price of $0.15 per share, an approximate
22% discount to the then 15-day VWAP on ASX of ~$0.19.
Further details of the Rights Issue were set out in the
Prospectus lodged with ASIC and ASX on 1 August 2017.
On 6 September 2017, Buru advised that the Rights Issue had
closed with applications of some $14.5 million for entitlement
and shortfall shares received from eligible shareholders,
significantly exceeding the $10.2 million full subscription
amount under the Rights Issue.
Rather than undertaking a wholesale pro-rata scale back in
respect of shareholders who applied for shortfall shares to
reduce the total subscription amount to $10.2 million, the
Board decided to make an additional placement of shares
in respect of approximately $3.6 million of the excess funds.
The top-up share placement was made only to existing Buru
shareholders who submitted shortfall applications and who
qualified as sophisticated and professional investors and
was made pursuant to the Company’s ASX Listing Rule 7.1
placement capacity (“Top-up Placement”).
Operations Review
The total capital raised by Buru under the Rights Issue and
Top-up Placement was approximately $13.8 million (before
costs) and upon share allotment the Company’s issued capital
increased to 432 million shares.
WA Government inquiry into hydraulic fracturing
In September 2017, the WA Government announced a
moratorium on hydraulic fracturing (fraccing) in Western
Australia, pending the outcome of an independent scientific
inquiry. Buru Energy notes that this latest inquiry came less
than two years after the completion of a comprehensive
inquiry into fraccing carried out by the WA Parliament from
2013 to 2015. That parliamentary inquiry spent more than
two years gathering evidence, examining research and
engaging with the community through public hearings
and submissions. The final report tabled in November 2015
concluded that hydraulic fracturing posed negligible risk if
properly regulated.
Buru Energy is confident that this current scientific inquiry
will come to the same conclusion as all previous inquiries,
that the industry is safe if properly regulated. Any extended
moratorium on unconventional gas activity in Western
Australia will prevent people in regional areas enjoying the
benefits of a gas industry that include opportunities for
employment and generation of investment and the provision
of energy security. The industry also has the potential to
provide economic empowerment to Traditional Owners in
remote areas, which was the case when a successful frac
program was completed on Noonkanbah Station in 2015 by
the then joint venture partners, Buru Energy and Mitsubishi
Corporation, with the full support and involvement of
the Traditional Owners and members of the Noonkanbah
community.
Termination of State Agreement for Canning Basin
In November 2017, Buru Energy entered into an agreement
with Mitsubishi Corporation and the State of Western
Australia to mutually terminate the State Agreement for the
Canning Basin. The State Agreement was originally executed
in November 2012 by the State of Western Australia, Buru
Energy, Mitsubishi Corporation and two of its subsidiaries,
and was subsequently ratified by the Natural Gas (Canning
Basin Joint Venture) Agreement Act 2013 (WA) and varied
by agreement of the parties dated 1 July 2015. The State
Agreement covered exploration permits EP 371, 391, 428, 431
and 436 (Permits).
17
ANNUAL REPORT 2017 Operations Review
The termination agreement will come into operation once
it has been ratified by an Act of the Parliament of Western
Australia which is expected to occur in 2018. This process has
commenced in the Legislative Assembly of the Parliament
of Western Australia. Once the termination of the State
Agreement is ratified by Parliament, the Permits will remain
valid in their current form with no relinquishments required,
and with no additional work commitments to those already in
place, until 30 July 2023 for EP 371, EP428, EP431 and EP 436,
and until 31 January 2024 for EP 391.
The termination of the agreement has no effect on Buru’s
current operations or in relation to any of the Company’s
activities, apart from fraccing. The Company will be carrying
on its current operations including drilling for and producing
oil and exploring for conventional oil and gas while the
current moratorium on fraccing is in place.
18
BURU ENERGY LIMITED The Directors present their report together with the consolidated financial statements of the Group comprising Buru Energy
Limited (“Buru Energy” or “Group”) and its subsidiaries for the year ended 31 December 2017, and the auditor’s report thereon.
The remuneration report for the year ended 31 December 2017 on pages 25 to 28 forms part of the Directors’ report.
Directors
The Directors of the Company at any time during or since the end of the financial year are:
Name, qualifications and independence status
Experience, special responsibilities and other directorships
Mr Eric Streitberg, BSc (App Geoph)
Executive Chairman
Mr Streitberg has more than 40 years of experience in petroleum geology and
geophysics, oil and gas exploration and oil and gas company management.
He was a founding shareholder and held the position of Managing Director
of ARC Energy Limited from 1997 until August 2008, during which time
ARC Energy Limited was transformed from a junior oil and gas exploration
company into a mid-size Australian oil and gas producer. He was a founding
Non-executive Director of Adelphi Energy Limited from 2005 until its
takeover in 2010 by AWE Limited. He was also the founding shareholder and
Managing Director of Discovery Petroleum which was a key participant in the
renaissance of the Perth Basin as a significant gas producer until the takeover
of that company in 1996. Prior to that he held various senior international
exploration roles with Occidental Petroleum and BP.
He is a Fellow of the Australian Institute of Mining and Metallurgy and
the Australian Institute of Company Directors, a member of the Society of
Exploration Geophysicists, Petroleum Exploration Society of Australia and the
American Association of Petroleum Geologists.
Mr Streitberg is a Director and past Chair of the Australian Petroleum
Production and Exploration Association and has also chaired the APPEA
Exploration and Environment Committees. He is a past Chair of the Marine
Parks and Reserves Authority of Western Australia.
Mr Streitberg is a Certified Petroleum Geologist and Geophysicist and holds a
Bachelor of Science (App. Geoph.) from the University of Queensland.
Mr Streitberg has been a Director since October 2008 and has been the
Executive Chairman since May 2014, he is a member of the Audit and Risk
Committee and the Remuneration and Nomination Committee.
19
Directors’ ReportFor the year ended 31 December 2017ANNUAL REPORT 2017 Name, qualifications and independence status
Experience, special responsibilities and other directorships
Ms Eve Howell
Independent Non-executive Director
Mr Robert Willes
Independent Non-executive Director
20
Ms Howell has over 40 years of experience in the oil and gas industry in a number
of technical and managerial roles, primarily with Amoco Corporation, Apache
Energy Ltd and Woodside Energy Ltd. She is a director of MMA Offshore Ltd.
Ms Howell has previously served on a number of boards including Downer
EDI Ltd, Tangiers Petroleum (as Executive Chairman), the Fremantle Port
Authority, the Australian Petroleum Production and Exploration Association
where she chaired the Environment Committee, and as a board member and
President of the Australian Mines and Metals Association. She is a Graduate
of the Australian Institute of Company Directors.
Ms Howell began her exploration career in the UK and since 1981 has worked
for several Australian based companies including Apache during a time
when the company developed significant oil production from the offshore
Carnarvon Basin and became the second largest domestic gas supplier
in Western Australia. She held various senior positions with Apache in
Australia including Exploration Manager, Business Development Manager
and Managing Director. Between 2006 and 2011, Ms Howell was a Woodside
Executive Committee member, with her positions including Executive Vice
President - North West Shelf and Executive Vice President – Health, Safety and
Security for all Woodside’s operations.
Ms Howell holds a Bachelor of Science (with Honours in Geology and
Mathematics) from King’s College, University of London and an MBA from the
Edinburgh Business School, Heriot Watt University.
Ms Howell has been a Director since July 2014, is the Chairperson of the
Remuneration and Nomination Committee and a member of the Audit and
Risk Committee.
Mr Willes has over 30 years of extensive international experience in the oil and
gas and energy industries. He is currently Managing Director of Challenger
Energy Ltd, an ASX-listed oil and gas explorer with exposure to the emerging
world-scale shale gas province in South Africa’s Karoo Basin. He has previously
served on a number of boards including the Australian Petroleum Production
and Exploration Association (APPEA), North West Shelf Gas Pty Ltd, North West
Shelf Liaison Co. Pty Ltd, North West Shelf Australia LNG Pty Ltd, North West
Shelf Shipping Services Co. Pty Ltd, Carbon Reduction Ventures Pty Ltd and
Perth Centre for Photography. His early career with BP involved several positions
in petroleum product supply, trading and marketing, and as a lead negotiator
for numerous gas transactions in Europe. He subsequently joined BP’s Group
Mergers and Acquisitions team, where he led the divestments of Burmah
Castrol’s Chemicals Division and Great Yarmouth Power Ltd, and advised the
Corporation on a number of acquisition opportunities. In Australia, Mr Willes
was BP’s General Manager of the North West Shelf LNG Project. He also had
overall accountability for BP’s interests in the Browse LNG and Greater Gorgon
LNG Projects, and for Business Development activities in Asia Pacific. More
recently, Mr Willes was CEO of Eureka Energy Limited, and was instrumental
in managing the recommended A$107million on-market takeover by Aurora
Oil and Gas Limited. Mr Willes is a Graduate of the Australian Institute of
Company Directors and member of the Association of International Petroleum
Negotiators. He holds an Honours Degree in Geography from Durham
University in the UK, and has completed Executive Education Programmes at
Harvard Business School in the USA and Cambridge University in the UK.
Mr Willes has been a Director since July 2014, is the Chairperson of the Audit and
Risk Committee and a member of the Remuneration and Nomination Committee.
Directors’ Report For the year ended 31 December 2017BURU ENERGY LIMITED Company Secretary
Mr Shane McDermott, CA, AGIA, BComm (Accounting and Finance) has an accounting and auditing background having worked
at a large international accounting practice for five years at its Perth office before joining Buru Energy in 2009. He is a member
of the Institute of Chartered Accountants Australia and an Associate of the Governance Institute of Australia. Mr McDermott has
been Company Secretary since December 2011.
Board and Committee Meetings
The number of Board and Committee meetings and the number of meetings attended by each of the Directors of the Company
during the year were:
Meeting
Board Meetings
Audit & Risk
Committee Meetings
Remuneration & Nomination
Committee Meetings
Director
Eric Streitberg
Eve Howell
Robert Willes
Eligible to
Attend
Attended
Eligible to
Attend
Attended
Eligible to
Attend
Attended
15
15
15
15
15
15
4
4
4
4
4
4
3
3
3
3
3
3
Principal Activities
The principal activity of the Group during the period was oil and gas exploration and production in the Canning Basin, in the
northwest of Western Australia. There were no significant changes in the nature of the Group’s principal activities during the
period.
Operations Review
The Operations Review for the year ended 31 December 2017 is set out on pages 6 to 18 and forms part of this Directors’ Report.
Operating Results
The consolidated loss of the Group after providing for income tax for the year ended 31 December 2017 was $6,205,000 (31
December 2016: $33,982,000).
Financial Position
The net assets of the Group totalled $64,090,000 as at 31 December 2017 (31 December 2016: $56,216,000).
Dividends
The Directors do not propose to recommend the payment of a dividend for the period. No dividends have been paid or declared
by the Company during the current period.
Significant Changes in the State of Affairs
No significant change in the state of affairs of the Group occurred during the period other than already referred to elsewhere in
this report.
After Balance Date Events
No significant events have occurred subsequent to balance date other than those already disclosed in the Operations Review.
21
Directors’ ReportFor the year ended 31 December 2017ANNUAL REPORT 2017 Likely Developments
The Group’s likely developments in its operations in future financial years and the expected results of those operations have
been included generally in the Operations Review. Other than as disclosed elsewhere, disclosure of information regarding likely
developments in the operations of the consolidated entity in future financial years and the expected results of those operations
is likely to result in unreasonable prejudice to the Group. Accordingly, this information has not been disclosed.
Environmental Regulations
Buru Energy is subject to environmental regulation under relevant Australian and Western Australian legislation in relation to
its oil and gas exploration and production activities. DMIRS is the primary regulator in Western Australia for petroleum activities
though the Group’s activities are also regulated by DWER. The Directors actively monitor compliance with these regulations. As
at the date of this report, the Directors are not aware of any material breaches in respect of the regulations.
Directors’ Interests
The relevant interest of each Director in the shares or options issued by the Company, as notified by the Directors to the ASX in
accordance with s205G(1) of the Corporations Act 2001, at the date of this report are as follows:
Directors
Eric Streitberg
Eve Howell
Robert Willes
Total
Share Options
Ordinary Shares
Unlisted Options
29,747,406
294,000
132,000
30,173,406
–
–
–
–
At the date of this report, the unissued shares of the Company (all of which are held by employees of the Company) under option
are as follows:
Date of Expiry
31 December 2019
Exercise Price
Number of shares under Option
$0.31
4,550,000
All unissued shares are ordinary shares in the Company. All options expire on the earlier of their expiry date or within 30 days
from termination of the employee’s employment. These options do not entitle the holder to participate in any share issue of
the Company or any other body corporate. Further details about options granted to senior executives during the financial
year are included in the Remuneration Report on pages 25 to 28. No options have been granted since the end of the reporting
period. During or since the end of the reporting period, no shares were issued on the exercise of options previously granted as
remuneration.
Share Appreciation Rights
Details of the Share Appreciation Rights (SARs) outstanding as at the date of this report are as follows:
Number of
SARs granted
Grant
date
Vesting
date
Exercise price per
SAR ($)
Expiry
date
% of SARs
vested
% of SARs
forfeited
Year in which
grant vests
1,020,066
3 Jan 14
31 Oct 16*
1.63
3 Jan 18
0%
0%
2016
* This is the service period vesting date. The vesting is also subject to various performance hurdles relating to Relative Total
Shareholder Return
No SARs were granted to Directors or senior executives during the financial year as set out in the Remuneration Report on pages
25 to 28.
22
Directors’ Report For the year ended 31 December 2017BURU ENERGY LIMITED Indemnification and Insurance of Officers
The Company has agreed to indemnify all current Directors and officers of the Company and its controlled entities against all
liabilities to another person (other than the Company or a related body corporate) that may arise from their position as Directors
and officers of the Company and its controlled entities, except where the liability arises out of conduct involving a lack of good
faith. The agreement stipulates that the Company will meet the full amount of any such liabilities, including costs and expenses.
During the year, the Company has paid insurance premiums of $79,860 (2016: $47,619) in respect of Directors’ and officers’
liability. The premiums cover current and former Directors and officers, including senior executives of the Company and
Directors and secretaries of its controlled entities. The insurance premiums relate to:
•
costs and expenses incurred by the relevant officers in defending proceedings, whether civil or criminal and whatever their
outcome; and
• other liabilities that may arise from their position, with the exception of conduct involving a wilful breach of duty or improper
use of information or position to gain a personal advantage.
Proceedings on Behalf of Company
No person has applied for leave from any Court to bring proceedings on behalf of the Company or intervene in any proceedings
to which the Company is a party for the purpose of taking responsibility on behalf of the Company for all or any part of those
proceedings. The Company was not a party to any such proceedings during the period.
Non-audit Services
During the period, the Company’s auditor did not perform any other services in addition to their statutory full year audit, half
year review, joint venture audits and a taxation audit. During the year ended 31 December 2017, the amount paid or payable to
the Group’s auditor (KPMG Australia) for statutory and other audit and review services totalled to $96,000 (31 December 2016:
$80,250)
23
Directors’ ReportFor the year ended 31 December 2017ANNUAL REPORT 2017 Auditor’s Independence Declaration
The lead auditor’s independence declaration is set out on page 29 and forms part of the Directors’ Report for the year ended 31
December 2017.
Rounding off
The Company is of a kind referred to in ASIC Corporations (Rounding in Financial / Directors’ Reports) Instrument 2016/191 and in
accordance with that instrument, amounts in the Consolidated Financial Statements and Directors’ Report have been rounded off
to the nearest thousand dollars, unless otherwise stated.
This report is made in accordance with a resolution of Directors.
Mr Eric Streitberg
Executive Chairman
Perth
14 March 2018
Mr Robert Willes
Non-executive Director
Perth
14 March 2018
24
Directors’ Report For the year ended 31 December 2017BURU ENERGY LIMITED
Remuneration Report - Audited
For the year ended 31 December 2017
Principles of remuneration - Audited
The Directors present their Remuneration Report for Buru Energy for the year ended 31 December 2017. This remuneration
report outlines the remuneration arrangements of the Company’s Directors and other key management personnel (KMP) in
accordance with the requirements of the Corporations Act 2001 and its Regulations. In accordance with section 308(3C) of the
Corporations Act 2001, the Remuneration Report has been audited and forms part of the Directors’ Report.
KMP have the authority and responsibility for planning, directing and controlling the activities of the Group and comprise the
Directors, executives and senior management in accordance with s300A of the Corporations Act 2001.
Remuneration levels for KMP are competitively set to attract and retain appropriately qualified and experienced Directors and
executives. The remuneration structures explained below are designed to reward the achievement of the Company’s strategic
objectives and achieve the broader outcome of the creation of shareholder value. The Company’s remuneration structures take
into account:
•
•
the capability and experience of KMP; and
the Group’s corporate, operational and financial performance.
Remuneration packages include a mix of fixed and variable remuneration, and short and long term performance based
incentives.
Fixed remuneration
Fixed remuneration consists of base remuneration (which is calculated on a total cost basis and includes any FBT charges related
to employee benefits), as well as employer contributions to superannuation funds. Remuneration levels are reviewed annually
by the Remuneration and Nomination Committee through a process that considers individual, segment and overall performance
of the Group. In addition, external consultants may provide analysis and advice to ensure the Directors, executive and senior
management remuneration is competitive in the market place. Remuneration is also reviewed on promotion.
Performance linked remuneration
Performance linked remuneration includes both short term and long term incentives, and is designed to reward KMP for meeting
or exceeding the Company’s expectations and agreed objectives. Any short term incentive (STI) is an ‘at risk’ bonus provided in
the form of cash, while any long term incentive (LTI) is provided under the Employee Share Option Plan (ESOP) to KMP. The LTIs
are structured to ensure that incentives are appropriately aligned to sustainable shareholder value creation.
Short term incentive bonuses
The payments of bonuses are linked to the fulfilment of key performance indicators (KPIs). The KPIs are designed to promote
shareholder value creation and include financial and non-financial measures. The individual’s reward under the STI bonus
scheme is directly aligned to the creation of shareholder value through the achievement of the Company’s strategic and
performance goals. All STI bonuses are subject to Board approval. The financial and non-financial measures vary with position
and responsibility and include measures such as achieving operational outcomes and ensuring high levels of safety and
environmental performance.
There were no STI bonuses paid during 2017.
Long-term incentive bonuses
The Remuneration and Nomination Committee considers that an LTI scheme structured around equity based remuneration is
necessary to attract and retain the highest calibre of professionals to the Group, whilst preserving the Group’s cash reserves.
The purpose of these schemes is to align the interests of KMP with shareholders and to reward, over the medium term, KMP for
delivering value to shareholders through share price appreciation.
Options are issued under the ESOP in accordance with the thresholds set in the plan approved by shareholders. The number
of options available to be issued under the ESOP is limited to 5% of the total number of ordinary shares in the Company. The
options are issued for no consideration and vest immediately. All options refer to options over ordinary shares of Buru Energy
Limited which are exercisable on a one for one basis.
25
ANNUAL REPORT 2017 Remuneration Report - Audited
For the year ended 31 December 2017
Consequences of performance on shareholder wealth
The Board considers that the most effective way to increase shareholder wealth is through the successful exploration and
development of the Group’s oil and gas exploration permits. The Board considers that the Group’s LTI schemes incentivise KMP
to successfully explore the Group’s oil and gas permits by providing rewards, over the short and long term that are directly
correlated to delivering value to shareholders through share price appreciation. The Company’s relative share price performance
is the primary measure when the Board considers the effectiveness of STI and LTI remuneration consequences on shareholder
wealth.
Service contracts
The employment contract with the Executive Chairman, Mr Eric Streitberg, is unlimited in term but capable of termination with
three months’ notice by either party, or by payment in lieu thereof at the discretion of the Company.
Service contracts with all other current non-Director KMP are unlimited in term but capable of termination on three months’
notice by either party, or by payment in lieu thereof at the discretion of the Company.
The Remuneration & Nomination Committee determined the amount of remuneration payable to KMP under each agreement.
KMP are also entitled to receive their contractual and statutory entitlements including accrued annual and long service leave,
together with any superannuation benefits, on termination of employment. Remuneration levels are reviewed each year to take
into account cost-of-living changes, any change in the scope of the role performed by KMP and any changes required to meet
the principles of the Group’s remuneration policy.
Services from remuneration consultants
There were no services received from remuneration consultants during the period.
Non-executive Directors
Total fixed remuneration for all Non-executive Directors, last voted upon by shareholders at the 2012 Annual General Meeting, is
not to exceed $600,000 per annum. The Non-executive Directors’ base fee is $94,000 plus statutory superannuation per annum.
The Chairman’s base fee is ordinarily $150,000 plus statutory superannuation per annum, however the current Chairman, Mr
Streitberg, is not eligible for this remuneration as he is not acting in a non-executive capacity. An additional fee of $7,100 plus
statutory superannuation per annum is payable for Non-executive Directors being a member of a Committee and the fee for
chairing a Committee is $14,250 plus statutory superannuation.
26
BURU ENERGY LIMITED Remuneration Report - Audited
For the year ended 31 December 2017
Key Management Personnel Remuneration - Audited
Details of the nature and amount of each major element of remuneration of each director of the Company and other key management personnel of the consolidated entity are:
Short term
Post –
employment
Other
long term
Sharebased
payments
Salary &
Fees
Annual
leave
STI cash
bonus
Non-monetary
benefits (A)
Superannuation
benefits
Long service
leave
Termination
benefits
Total
ESOP
(B)
Total
s300A(1)(e)(i)
proportion of
remuneration
performance
related
s300A(1)(e)(vi)
value of share
based payments
as a proportion
of remuneration
Non –executive Directors
Ms E Howell, NED
Mr R Willes, NED
Total Non-executive
Directors’ Remuneration
Executive Directors
Mr E Streitberg,
Executive Chairman
Total Directors’
Remuneration
Executives
Mr N Rohr,
General Counsel
Mr S McDermott,
Head of Finance & Company Secretary
Mr R Aden, General Manager - Commercial
(Ceased employment Feb 2016)
Total Executive Officer
Remuneration
2017
2016
2017
2016
2017
2016
2017
2016
2017
2016
2017
2016
2017
2016
2017
2016
2017
2016
113,392
113,000
113,392
113,000
226,784
226,000
610,462
47,692
605,567
47,692
837,245 47,692
831,567 47,692
368,478
31,000
376,200
30,963
263,339
21,513
245,850
21,058
–
64,718
631,817 52,513
686,768 52,021
Total Directors and Executive Officer
Remuneration
2017 1,469,061 100,205
2016 1,518,335 99,713
Notes in relation to the table of KMP remuneration
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
113,392
113,000
113,392
113,000
226,784
226,000
17,935
676,089
16,792
670,051
17,935
902,872
16,792
896,051
17,265
416,743
15,198
422,362
10,482
295,334
10,516
277,424
–
–
1,180
65,898
27,747
712,076
26,894
765,683
45,682 1,614,949
43,686 1,661,735
10,772
10,735
10,772
10,735
21,544
21,470
58,900
58,900
80,444
80,370
38,285
30,000
26,568
26,006
–
21,823
64,853
77,829
145,297
158,199
–
–
–
–
–
–
6,678
4,296
6,678
4,296
5,596
3,906
10,044
9,121
–
–
15,640
13,027
22,318
17,323
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
165,000
–
–
–
–
–
–
–
–
–
–
124,164
123,735
124,164
123,735
248,328
247,470
741,667
733,247
989,994
980,717
32,966
493,590
49,819
506,086
32,966
364,912
15,180
327,731
–
–
–
252,721
–
65,932
858,501
165,000
64,999 1,086,538
–
65,932 1,848,495
165,000
64,999 2,067,255
0.00%
0.00%
0.00%
0.00%
0.00%
0.00%
0.00%
0.00%
6.68%
9.84%
9.03%
4.63%
–
–
0.00%
0.00%
0.00%
0.00%
0.00%
0.00%
0.00%
0.00%
6.68%
9.84%
9.03%
4.63%
–
–
A. Non-monetary benefits to KMP relate to the provision of car parking, life insurance and salary continuance insurance.
B. The fair value of the options issued under the ESOP in 2017 are calculated at the date of grant using the Black & Scholes option-pricing model and expensed at grant date. The value
disclosed is the portion of the fair value of the options recognised in this reporting period.
ANNUAL REPORT 2017
27
Remuneration Report - Audited
For the year ended 31 December 2017
Loans to Key Management Personnel
There were no loans outstanding at the end of the period to key management personnel or their related parties.
Shares held by Key Management Personnel
KMP
Held at
1 Jan 17
Granted as
remuneration
Exercise of
options
Purchased
Sold
Mr E Streitberg
28,720,566
Ms E Howell
Mr R Willes
Mr S McDermott
245,000
–
70,000
–
–
–
–
–
–
–
–
1,026,840
49,000
132,000
30,000
–
–
–
–
Held at
31 Dec 17
29,747,406
294,000
132,000
100,000
Analysis of share based payments - ESOP
The movement during the period by number of options granted under the ESOP to KMP during the period is detailed below.
KMP
Held at
1 Jan 17
Granted as
remuneration
Exercised
Lapsed /
Forfeited
Held at
31 Dec 17
Vested during
the year
Vested and
exercisable
Mr N Rohr
300,000
Mr S McDermott
300,000
300,000
300,000
–
–
(300,000)
300,000
300,000
300,000
(300,000)
300,000
300,000
300,000
No options have been granted since the end of the financial year. All options were provided at no cost to the recipients and
expire on the earlier of their expiry date or 30 days after the termination of the individual’s employment. All options vested
immediately and were exercisable from grant date. No terms of options granted as remuneration to a KMP have been altered
or modified by the issuing entity during the reporting period or the prior period. During the reporting period, no shares were
issued on the exercise of options previously granted as remuneration.
Analysis of share based payments - SARs
No Share Appreciation Rights (SARs) were granted to KMP during the reporting period. The movement during the period by
number of SARs granted to KMP during the period is detailed below.
KMP
Held at
1 Jan 17
Granted as
remuneration
Exercised
Lapsed
Held at
31 Dec 17
Vested during
the year
Vested and
exercisable
Mr N Rohr
221,839
Mr S McDermott
67,596
–
–
–
–
–
–
221,839
67,596
–
–
–
–
During the reporting period, no shares were issued on the exercise of SARs previously granted as remuneration and following the
end of year, all SARs lapsed on 3 January 2018.
28
BURU ENERGY LIMITED Auditor’s Independence Declaration
Lead Auditor’s Independence Declaration under
Section 307C of the Corporations Act 2001
To the Directors of Buru Energy Limited
Lead Auditor’s Independence Declaration under
Section 307C of the Corporations Act 2001
I declare that, to the best of my knowledge and belief, in relation to the audit for the year ended
31 December 2017 there have been:
i.
no contraventions of the auditor independence requirements as set out in the
Corporations Act 2001 in relation to the audit; and
To the Directors of Buru Energy Limited
no contraventions of any applicable code of professional conduct in relation to the audit.
ii.
I declare that, to the best of my knowledge and belief, in relation to the audit for the year ended
31 December 2017 there have been:
i.
no contraventions of the auditor independence requirements as set out in the
Corporations Act 2001 in relation to the audit; and
ii.
KPMG Graham Hogg
Partner
Perth
14 March 2018
no contraventions of any applicable code of professional conduct in relation to the audit.
KPMG Graham Hogg
Partner
Perth
14 March 2018
KPMG, an Australian partnership and a member firm of the KPMG
network of independent member firms affiliated with KPMG
International Cooperative (“KPMG International”), a Swiss entity.
Liability limited by a scheme approved under
Professional Standards Legislation.
29
KPMG, an Australian partnership and a member firm of the KPMG
network of independent member firms affiliated with KPMG
International Cooperative (“KPMG International”), a Swiss entity.
Liability limited by a scheme approved under
Professional Standards Legislation.
ANNUAL REPORT 2017
Consolidated Statement of Financial Position
As at 31 December 2017
in thousands of AUD
CURRENT ASSETS
Cash and cash equivalents
Trade and other receivables
Inventories
Total Current Assets
NON-CURRENT ASSETS
Property, plant and equipment
Exploration and evaluation expenditure
Oil and gas assets
Investments
Total Non-Current Assets
TOTAL ASSETS
CURRENT LIABILITIES
Trade and other payables
Loans and borrowings
Provisions
Total Current Liabilities
NON-CURRENT LIABILITIES
Loans and borrowings
Provisions
Total Non-Current Liabilities
TOTAL LIABILITIES
NET ASSETS
EQUITY
Contributed equity
Reserves
Accumulated losses
TOTAL EQUITY
Note
31 December
2017
31 December
2016
13a
11
12
7
8
9
10
16
17
18
17
18
16,859
1,289
3,018
21,166
4,117
6,363
55,646
40
66,166
87,332
8,757
5,250
1,427
15,434
2,250
5,558
7,808
23,242
64,090
21,052
912
2,372
24,336
5,254
21,962
21,550
51
48,817
73,153
630
–
1,256
1,886
10,989
4,062
15,051
16,937
56,216
271,803
1,173
(208,886)
64,090
258,211
1,213
(203,208)
56,216
The notes on pages 34 to 60 are an integral part of these consolidated financial statements
30
BURU ENERGY LIMITED Consolidated Statement of Profit or Loss
and Other Comprehensive Income
For the year ended 31 December 2017
Note
31 December
2017
31 December
2016
in thousands of AUD
Continuing operations
Revenue
Cost of sales
Amortisation of oil and gas assets
Gross loss
Other income
Gain on acquisition of oil and gas assets
Exploration and evaluation expenditure
Impairment of exploration expenditure
Impairment of inventories
Impairment of financial assets
Corporate and administrative expenditure
Share based payment expenses
Operating loss
Net finance costs
Loss before tax
Income tax expense
Loss from continuing operations
Discontinued operations
Profit / (loss) from discontinued operation, net of tax
(Yakka Munga Pastoral Lease)
Net loss
Other comprehensive income
Items that may be reclassified subsequently to profit or loss
Change in fair value of available-for-sale financial assets net of tax
Other comprehensive income / (loss) for the period, net of income tax
Total comprehensive loss for the period
Loss per share and diluted loss per share (cents)
15
Loss per share and diluted loss per share for continuing operations (cents)
The notes on pages 34 to 60 are an integral part of these consolidated financial statements
2
9
3
27
8
12
4
19
5
6
7,893
(4,224)
(4,219)
(550)
455
4,331
(2,353)
–
(207)
–
(6,286)
(499)
(5,109)
(1,096)
(6,205)
–
(6,205)
219
(1,446)
(2,788)
(4,015)
80
–
(3,308)
(21,327)
(464)
(224)
(5,842)
–
(35,100)
(1,221)
(36,321)
–
(36,321)
–
2,339
(6,205)
(33,982)
(12)
(12)
171
171
(6,217)
(33,811)
(1.69)
(1.69)
(9.99)
(10.68)
31
ANNUAL REPORT 2017 Consolidated Statement of Changes in Equity
For the year ended 31 December 2017
in thousands of AUD
Share based
payment
reserve
$
Financial asset
revaluation
reserve
$
Share
capital
$
Retained
losses
$
Total
equity
$
Balance as at 1 January 2016
258,211
2,797
(171)
(170,810)
90,027
Comprehensive income for the period
Loss for the period
Net change in fair value of available-for-sale financial assets
Total comprehensive loss for the period
Transactions with owners recorded directly in equity
Share options / share appreciation rights forfeited
Total transactions with owners recorded directly in equity
–
–
–
–
–
–
–
–
(1,584)
(1,584)
–
(33,982)
(33,982)
171
171
–
–
–
171
(33,982)
(33,811)
1,584
1,584
–
–
Balance as at 31 December 2016
258,211
1,213
–
(203,208)
56,216
in thousands of AUD
Share based
payment
reserve
$
Financial asset
revaluation
reserve
$
Share
capital
$
Retained
losses
$
Total
equity
$
Balance as at 1 January 2017
258,211
1,213
–
(203,208)
56,216
Comprehensive income for the period
Loss for the period
Net change in fair value of available-for-sale financial assets
Total comprehensive loss for the period
Transactions with owners recorded directly in equity
–
–
–
Issue of ordinary shares, net of transaction costs
13,592
Share based payment transactions
Share options / share appreciation rights forfeited
–
–
Total transactions with owners recorded directly in equity
13,592
–
–
–
–
499
(527)
(28)
–
(12)
(12)
(6,205)
(6,205)
–
(12)
(6,205)
(6,217)
–
–
–
–
–
–
527
527
13,592
499
–
14,091
Balance as at 31 December 2017
271,803
1,185
(12)
(208,886)
64,090
The notes on pages 34 to 60 are an integral part of these consolidated financial statements
32
BURU ENERGY LIMITED Consolidated Statement of Cash Flows
For the year ended 31 December 2017
31 December
2017
31 December
2016
in thousands of AUD
CASH FLOWS FROM OPERATING ACTIVITIES
Cash receipts from sales of crude oil
Cash receipts from other income
Payments to suppliers and employees
Payments for exploration and evaluation
Net cash outflow from operating activities
13b
CASH FLOWS FROM INVESTING ACTIVITIES
Interest received
Payments for purchase of plant and equipment
Payments for exploration and evaluation
Research and development tax concession received
Payments for oil and gas development
Joint Venture partner’s final contribution towards Ungani Development
Disposal of discontinued operation (Yakka Munga Pastoral Lease)
Net cash inflow / (outflow) from investing activities
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issue of share capital (net of transaction costs)
Repayment of loan
Net cash inflow / (outflow) from financing activities
Net decrease in cash and cash equivalents
Cash and cash equivalents at the beginning of the period
Effect of exchange rate changes on cash and cash equivalents
Cash and cash equivalents at end of the period
13a
The notes on pages 34 to 60 are an integral part of these consolidated financial statements
7,893
455
(10,200)
(2,458)
(4,310)
423
(75)
(142)
–
(10,192)
1,500
–
(8,486)
13,592
(5,000)
8,592
(4,204)
21,052
11
16,859
744
80
(6,543)
(5,065)
(10,784)
842
(99)
(5,354)
5,814
(386)
–
9,654
10,471
–
(12,500)
(12,500)
(12,813)
33,897
(32)
21,052
33
ANNUAL REPORT 2017 Basis of Preparation
Buru Energy Limited (Buru Energy or the Company) is a for profit company domiciled in Australia. The address of the Company’s
registered office is Level 2, 16 Ord Street, West Perth, Western Australia. The consolidated financial statements of the Company as
at, and for the year ended 31 December 2017 comprise the Company and its subsidiaries (together referred to as the Group) and
the Group’s interest in jointly controlled entities. The Group is primarily involved in oil and gas exploration and production in the
Canning Basin in the Kimberley region of northwest Western Australia.
This section sets out the basis upon which the Group’s financial statements are prepared as a whole. Significant accounting
policies and key judgements and estimates of the Group that summarise the measurement basis used and assist in
understanding the financial statements are described in the relevant note to the financial statements or are otherwise provided
in this section. The consolidated financial statements are general purpose financial statements which have been prepared in
accordance with Australian Accounting Standards (AASBs) (including Australian Interpretations) adopted by the Australian
Accounting Standards Board (AASB) and the Corporations Act 2001. The consolidated financial statements of the Group comply
with International Financial Reporting Standards (IFRSs) and interpretations adopted by the International Accounting Standards
Board (IASB). The financial statements were approved by the Board of Directors on 14 March 2018. The accounting policies
have been applied consistently by Group entities to all periods presented in these consolidated financial statements. The
consolidated financial statements have been prepared on the historical cost basis, except for the following material items in the
statement of financial position:
• Available-for-sale-financial assets are measured at fair value; and
•
Share based payments are measured at fair value.
A number of the Group’s accounting policies and disclosures require the determination of fair value, for both financial and non-
financial assets and liabilities. When measuring the fair value of an asset or a liability, the Group uses market observable data as
far as possible. Fair values are categorised into different levels in a fair value hierarchy based on the inputs used in the valuation
techniques as follows.
•
•
Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities.
Level 2: inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly (i.e. as
prices) or indirectly (i.e. derived from prices).
•
Level 3: inputs for the asset or liability that are not based on observable market data (unobservable inputs).
If the inputs used to measure the fair value of an asset or a liability might be categorised in different levels of the fair value
hierarchy, then the fair value measurement is categorised in its entirety in the same level of the fair value hierarchy as the lowest
level input that is significant to the entire measurement.
The Group recognises transfers between levels of the fair value hierarchy at the end of the reporting period during which the
change has occurred.
Further information about the assumptions made in measuring fair values is included in the following notes:
• Note 10 – Investments
• Note 17 – Loans and borrowings; and
• Note 19 – Share-based payment arrangements.
The Company is of a kind referred to in ASIC Corporations (Rounding in Financial/Directors’ Reports) Instrument 2016/191 and in
accordance with that instrument, amounts in the Consolidated Financial Statements and Directors’ Report have been rounded off
to the nearest thousand dollars, unless otherwise stated.
34
BURU ENERGY LIMITEDNotes to the Financial StatementsFor the year ended 31 December 2017 Basis of Consolidation
Subsidiaries are entities controlled by the Group. The Group controls an entity when it is exposed to, or has rights to, variable
returns from its involvement with the entity and has the ability to affect those returns through its power over the entity. The
financial statements of subsidiaries are included in the consolidated financial statements from the date that control commences
until the date that control ceases. Intra-group balances and transactions, and any unrealised income and expenses arising
from intra-group transactions, are eliminated in preparing the consolidated financial statements. Unrealised gains arising from
transactions with equity accounted investees are eliminated against the investment to the extent of the Group’s interest in the
investee. Unrealised losses are eliminated in the same way as unrealised gains, but only to the extent that there is no evidence
of impairment.
Functional and Presentation Currency
These consolidated financial statements are presented in Australian dollars, which is each of the Group entities’ functional
currency. Transactions in foreign currencies are translated to Australian Dollars at the foreign exchange rate ruling at the date
of the transaction. Monetary assets and liabilities denominated in foreign currencies at the balance sheet date are translated
to Australian dollars at the foreign exchange rate ruling at that date. Foreign exchange differences arising on translation are
recognised in the income statement.
Use of Estimates and Judgements
The preparation of financial statements in conformity with IFRS requires management to make estimates and assumptions
that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses. Actual
results may differ from these estimates. Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions
to accounting estimates are recognised in the period in which the estimate is revised and in any future periods affected.
Information about assumptions and estimation uncertainties in applying accounting policies that have the most significant
effect on the amount recognised in the financial statements are:
• Note 6 – Recognition of tax losses
• Note 8 – Exploration and evaluation expenditure
• Note 9 – Oil and gas assets
• Note 17 – Loans and borrowings
• Note 18 – Provisions
• Note 19 – Measurement of share-based payments
Discontinued Operations
A discontinued operation is a component of the Group’s business, the operations and cash flows of which can be clearly
distinguished from the rest of the Group and which:
•
•
•
represents a single major line of business or geographic area of operations;
is part of a single co-ordinated plan to dispose of a separate major line of business or geographic area of operations; or
is a subsidiary acquired exclusively with a view to sell.
Classification as a discontinued operation occurs at the earlier of disposal or when the operation meets the criteria to be
classified as held-for-sale. When an operation is classified as a discontinued operation, the comparative statement of profit
or loss and other comprehensive income is represented as if the operation has been discontinued from the start of the
comparative year.
Standards issued but not yet effective
A number of new standards, amendments to standards and interpretations are effective for annual periods beginning after 1
January 2018, and have not been applied in preparing these consolidated financial statements. Those which may be relevant to
the Group are set out below. The Group does not plan to adopt these standards early.
35
ANNUAL REPORT 2017Notes to the Financial StatementsFor the year ended 31 December 2017 AASB 15 Revenue from Contracts with Customers – Application date of standard 1 January 2018
This standard establishes a comprehensive framework for determining whether, how much and when revenue is recognised. It
replaces existing revenue recognition guidance, including AASB 118 Revenue and AASB 111 Construction Contracts. The new
standard is based on the principles that revenue is recognised when control of a good or service transfers to a customer. The
implementation of this standard will not have a material impact on the financial statements.
AASB 9 Financial Instruments – Application date of standard 1 January 2018
AASB 9 Financial Instruments includes revised guidance on the classification and measurement of financial instruments,
including a new credit loss model for calculating impairment on financial assets, and the new general hedge accounting
requirements. It also carries forward the guidance on recognition and de-recognition of financial instruments from AASB 139.
AASB 9 is effective for annual periods beginning on or after 1 January 2018, with early adoption permitted. The Group does not
expect the implementation of this standard to have a material impact on the financial statements.
AASB 16 Leases – Application date of standard 1 January 2019
This standard AASB 16 Leases will result in almost all leases being recognised on the balance sheet, as the distinction between
operating and finance lease have been removed. The new standard requires a lessee to recognise assets (the right to use the
leased item) and liabilities (obligations to make lease repayments). Short term leases (less than 12 months) and leases of low
value assets are exempt from the lease accounting requirements. Lessor accounting remains similar to current practice. AASB
16 is effective for annual reporting periods beginning on or after 1 January 2019, with early adoption permitted. The Group is
currently assessing the impact of the new standard on its financial statements.
Results for the Year
This section explains the results and performance of the Group including additional information about those individual line
items in the financial statements most relevant in the context of the operations of the Group, including accounting policies that
are relevant for understanding the items recognised in the financial statements and an analysis of the Group’s result for the year
by reference to key areas, including operating segments, revenue, expenses, employee costs, taxation and earnings per share.
1. Segment Information
An operating segment is a component of Buru Energy that engages in business activities from which it may earn
revenues and incur expenses, including revenues and expenses that relate to transactions with any of Buru Energy’s
other components. All operating segments’ operating results are reviewed regularly by the Group’s Executive Chairman,
Head of Finance and other executives to make decisions about resources to be allocated to the segment and to assess its
performance, and for which discrete financial information is available. Segment results that are reported to the Executive
Chairman and Head of Finance include items directly attributable to a segment as well as those that can be allocated
on a reasonable basis. Unallocated items comprise mainly corporate assets and head office expenses. Segment capital
expenditure is the total cost incurred during the year to acquire property, plant and equipment, and intangible assets
other than goodwill.
The Group has only one reportable geographical segment being the Canning Basin in northwest Western Australia. The
reportable operating segments are based on the Group’s strategic business units: oil, gas and exploration. The following
summary describes the operations in each of the Group’s reportable operating segments:
• Oil: Primarily includes the development and production of the Ungani Oilfield and the currently shut in Blina and
Sundown Oilfields.
• Gas: Exploration and appraisal of gas is currently concentrated in the Yulleroo area where gas resources have been
identified in the Laurel Formation.
•
Exploration: The exploration program is focused on prospects along the Ungani oil trend and evaluation of the other
areas in the Group’s portfolio.
Information regarding the results of each reportable segment is included below. Performance is measured in regard
to the Group and its segments principally with reference to earnings before interest and tax, and capital expenditure
on exploration and evaluation assets, oil and gas assets, and property, plant and equipment. The corporate segment
represents a reconciliation of reportable segments revenues, profit or loss and assets to the consolidated figures.
36
BURU ENERGY LIMITEDNotes to the Financial StatementsFor the year ended 31 December 2017 Profit or loss
Oil
Gas
Exploration
(Discontinued)
Corporate*
Total
in thousands of AUD
Dec 17 Dec 16 Dec 17 Dec 16 Dec 17 Dec 16 Dec 17 Dec 16 Dec 17 Dec 16 Dec 17 Dec 16
Pastoral Lease
External revenues
Operating costs
7,893
219
(4,224)
(1,446)
Amortisation of oil and gas assets
(4,219)
(2,788)
(550)
(4,015)
Gross Loss
Other income
Exploration and evaluation
expenditure
Gain on acquisition of oil and
4,331
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
3,781
(4,015)
–
–
gas assets
Impairment of exploration and
evaluation expenditure
Impairment of inventories
Impairment of financial assets
Corporate and administrative
expenditure, including depreciation
Share based payment expenses
Profit / (loss) from discontinued
operation
EBIT
Net finance costs
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(2,353)
(3,308)
–
–
– (21,327)
(207)
(464)
–
–
–
–
–
–
–
–
(2,560) (25,099)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
455
–
–
–
–
–
–
–
–
–
80
–
7,893
219
(4,224)
(1,446)
(4,219)
(2,788)
(550)
(4,015)
455
80
(2,353)
(3,308)
–
4,331
–
–
–
– (21,327)
(207)
(464)
(224)
–
(224)
(6,286)
(5,842)
(6,286)
(5,842)
–
–
–
–
–
–
–
–
–
–
–
–
(499)
–
–
(499)
–
–
2,339
2,339
–
2,339
(6,330)
(5,986)
(5,109) (32,761)
–
(1,096)
(1,221)
(1,096)
(1,221)
Reportable segment profit / (loss)
before tax
3,781
(4,015)
–
(2,560) (25,099)
–
2,339
(7,426)
(7,207)
(6,205) (33,982)
* Corporate represents reconciliation of reportable segments to IFRS measures
37
ANNUAL REPORT 2017Notes to the Financial StatementsFor the year ended 31 December 2017 Total Assets
Oil
Gas
Exploration
(Discontinued)
Corporate*
Total
in thousands of AUD
Dec 17 Dec 16 Dec 17 Dec 16 Dec 17 Dec 16 Dec 17 Dec 16 Dec 17 Dec 16 Dec 17 Dec 16
Pastoral Lease
Current assets
Property, plant and equipment
Exploration and evaluation assets
Oil and gas assets
Investments
Total Assets
1,359
–
–
–
–
–
–
–
–
–
6,363
21,962
55,646
21,550
–
–
–
–
–
–
1,659
2,372
–
–
–
–
–
–
–
–
57,005 21,550
6,363 21,962
1,659
2,372
Capital Expenditure
17,917
209
Total Liabilities
Current liabilities
7,727
Loans and borrowings (Non-current)
–
Provisions (Non-current)
Total Liabilities
2,136
9,863
–
–
519
519
–
–
–
–
–
–
–
–
–
–
468
863
1,779
1,489
–
–
3,321
3,387
5,100
4,876
* Corporate represents reconciliation of reportable segments to IFRS measures
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
18,148
21,964
21,166
24,336
4,117
5,254
4,117
5,254
–
–
40
–
–
51
6,363
21,962
55,646
21,550
40
51
– 22,305 27,269 87,332 73,153
–
–
–
–
–
81
106 18,466
1,178
5,928
397
15,434
1,886
2,250
10,989
2,250
10,989
101
156
5,558
4,062
8,279 11,542 23,242 16,937
38
BURU ENERGY LIMITEDNotes to the Financial StatementsFor the year ended 31 December 2017 2. Revenue
in thousands of AUD
Sales of crude oil
31 December
2017
31 December
2016
7,893
7,893
219
219
Revenue from the sale of crude oil in the course of ordinary activities is recognised in the income statement at the fair
value of the consideration received or receivable. Revenue is recognised when the significant risks and rewards of
ownership have been transferred to the buyer, recovery of the consideration is probable and the amount of revenue can
be estimated reliably.
3. Other Income
in thousands of AUD
Equipment rental
Operating services
Other revenue
4. Administrative Expenditure
in thousands of AUD
Personnel and associated expenses
Office and other administration expenses
The above expense excludes share based payments disclosed at note 19.
5.
Finance Income and Expenses
in thousands of AUD
Interest income on bank deposits
Net foreign exchange gain / (loss)
Interest expense of unwinding of the fair value difference of borrowings (note 17)
Net finance income / (expense) recognised in profit or loss
31 December
2017
31 December
2016
–
428
27
455
17
–
63
80
31 December
2017
31 December
2016
3,243
3,043
6,286
3,062
2,780
5,842
31 December
2017
31 December
2016
404
11
(1,511)
(1,096)
793
(32)
(1,982)
(1,221)
Finance income comprises interest income on funds invested (including available-for-sale financial assets), the difference
between fair value and cash consideration received under interest free loans and gains on the disposal of available-
for-sale financial assets. Interest income is recognised as it accrues in profit or loss, using the effective interest method.
Finance expenses comprise unwinding of the discount on provisions and impairment losses recognised on financial
assets. All borrowing costs are recognised in profit or loss using the effective interest method.
Foreign currency gains and losses are reported on a net basis.
39
ANNUAL REPORT 2017Notes to the Financial StatementsFor the year ended 31 December 2017 6. Taxation
in thousands of AUD
Current income tax
Current income tax charge
Adjustments in respect of previous current income tax
Deferred income tax
Deferred tax recognised on movement in financial asset revaluation reserve
Benefit relating to origination and reversal of temporary differences
Total income tax (expense) / benefit reported in equity
31 December
2017
31 December
2016
–
–
–
4
–
4
4
–
–
–
(51)
–
(51)
(51)
Numerical reconciliation between tax expense and pre-tax accounting profit
Accounting loss before tax
(6,205)
(33,982)
Income tax benefit using the domestic corporation tax rate of 30%
1,861
10,195
Increase in income tax due to:
– Non-deductible expenses
– Temporary differences and tax losses not brought to account as a DTA
Income tax benefit / (expense) on pre-tax loss
(161)
(1,700)
–
(8)
(10,187)
–
Income tax expense comprises current and deferred tax. Income tax expense is recognised in the income statement
except to the extent that it relates to items recognised directly in equity, in which case it is recognised in equity. Current
tax is the expected tax payable or receivable on the taxable income or loss for the year, using tax rates enacted or
substantively enacted at the reporting date, and any adjustment to tax payable in respect of previous years. Deferred
tax is recognised in respect of temporary differences between the carrying amounts of assets and liabilities for financial
reporting purposes and the amounts used for taxation purposes.
Tax recognised directly in equity
12 months ended 31 December 2017
12 months ended 31 December 2016
in thousands of AUD
Before Tax Tax (Expense)Benefit Net of tax
Before Tax Tax (Expense)Benefit Net of tax
Financial Assets
(13)
4
(9)
171
(51)
120
40
BURU ENERGY LIMITEDNotes to the Financial StatementsFor the year ended 31 December 2017
Unrecognised net deferred tax assets
Net deferred tax assets have not been recognised in respect of the following items.
in thousands of AUD
Deferred tax assets
Business related costs
Capital loss on bad debts
Accruals
Provisions
Development expenditure
Inventories
Tax losses
PRRT
Other
Deferred tax liabilities
Exploration expenditure
Property, plant and equipment
Investments in listed entities
Rehabilitation
31 December
2017
31 December
2016
Net
Movement
302
–
15
2,095
3,493
1,189
41,278
175,409
–
223,781
(1,811)
(877)
(36)
(739)
(3,463)
377
526
35
1,595
2,227
1,024
45,903
95,310
3
147,000
(6,588)
(1,139)
(36)
–
(7,763)
(75)
(526)
(20)
500
1,266
165
(4,625)
80,099
(3)
76,781
4,777
262
–
(739)
4,300
Net deferred tax assets not brought to account
220,318
139,237
81,081
Deferred tax is not provided for temporary differences on the initial recognition of assets or liabilities in a transaction
that is not a business combination and that affects neither accounting nor taxable profit, nor differences relating to
investments in subsidiaries to the extent that they will not reverse in the foreseeable future. The amount of deferred tax
provided is based on the expected manner of realisation or settlement of the carrying amount of assets and liabilities,
using tax rates enacted or substantively enacted at the balance sheet date. In accordance with the group’s accounting
policies for deferred taxes, a deferred tax asset is recognised for unused tax losses only if it is probable that future taxable
profits will be available to utilise those losses. Determination of future taxable profits requires estimates and assumptions
as to future events and circumstances, in particular, whether successful development and commercial exploitation, or
alternatively sale, of the respective areas of interest will be achieved. This includes estimates and judgements about oil
and gas prices, reserves, exchange rates, future capital requirements, future operational performance and the timing
of estimated cash flows. Changes in these estimates and assumptions could impact on the amount and probability of
estimated taxable profits and accordingly the recoverability of deferred tax assets.
The deductible temporary differences and tax losses do not expire under current tax legislation. Deferred tax assets have
not been recognised in respect of these items because it is not yet probable that future taxable profit will be available
against which the Group can utilise the benefits.
41
ANNUAL REPORT 2017Notes to the Financial StatementsFor the year ended 31 December 2017 Tax consolidation
The company and its 100% owned entities have formed a tax consolidated group. Members of the consolidated entity
have entered into a tax sharing arrangement in order to allocate income tax expense to the wholly owned controlled
entities on a pro-rata basis. The agreement provides for the allocation of income tax liabilities between the entities
should the head entity default on its tax payment obligations. At balance date, the possibility of default is remote.
Tax effect accounting by members of the Consolidated Group
Members of the tax consolidated group have entered into a tax funding agreement. The tax funding agreement provides
for the allocation of current taxes to members of the tax consolidated group. Deferred taxes are allocated to members
of the tax consolidated group in accordance with a group allocation approach which is consistent with the principles of
AASB 112 Income Taxes. The allocation of taxes under the tax funding agreement are recognised as an increase/decrease
in the controlled entities intercompany accounts with the tax consolidated group head entity, Buru Energy. In this regard,
Buru Energy has assumed the benefit of tax losses from the member entities. The nature of the tax funding agreement is
such that no tax consolidation contributions by or distributions to equity participants are required.
Petroleum Resource Rent Tax
Petroleum Resource Rent Tax (PRRT) is considered for accounting purposes to be a tax on income. Accordingly, current
and deferred PRRT expense is measured and disclosed on the same basis as income tax.
Goods and Services Tax
Revenue, expenses and assets are recognised net of the amount of goods and services tax (GST), except where the
amount of GST incurred is not recoverable from the taxation authority. In these circumstances, the GST is recognised as
part of the cost of acquisition of the asset or as part of the expense. Receivables and payables are stated with the amount
of GST included. The net amount of GST recoverable from, or payable to, the ATO is included as a current asset or liability
in the balance sheet. Cash flows are included in the statement of cash flows on a gross basis. The GST components of
cash flows arising from investing and financing activities which are recoverable from, or payable to, the ATO are classified
as operating cash flows.
42
BURU ENERGY LIMITEDNotes to the Financial StatementsFor the year ended 31 December 2017 7. Property, Plant and Equipment (PPE)
in thousands of AUD
Cost
Plant and
equipment
Pastoral Lease
(Discontinued
Operation)
Office
equipment
Fixtures
and fittings
Heritage
and cultural
assets
Intangible
Assets
Total
Carrying amount at 1 January 2016
5,567
4,375
1,628
1,799
877
897 15,143
Additions
Disposals
Balance at 31 December 2016
Carrying amount at 1 January 2017
Additions
Disposals
106
(71)
5,602
5,602
82
(98)
Balance at 31 December 2017
5,586
Depreciation
Carrying amount at 1 January 2016
(1,680)
Depreciation for the period
Disposal
Balance at 31 December 2016
Carrying amount at 1 January 2017
Depreciation for the period
Disposal
Balance at 31 December 2017
Carrying amounts
At 31 December 2016
At 31 December 2017
(454)
65
(2,069)
(2,069)
(401)
32
(2,438)
3,533
3,148
–
(4,375)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(8)
1,620
1,620
3
(7)
1,616
(1,331)
(229)
8
(1,552)
(1,552)
(47)
7
(1,592)
–
–
1,799
1,799
–
(1,712)
87
(926)
(308)
–
(1,234)
(1,234)
(258)
1,444
(48)
–
–
877
877
–
–
–
–
106
(4,454)
897 10,795
897 10,795
–
–
85
(1,817)
877
897
9,063
–
–
–
–
–
–
–
–
(504)
(4,441)
(182)
(1,173)
–
73
(686)
(5,541)
(686)
(5,541)
(182)
(888)
–
1,483
(868)
(4,946)
68
24
565
39
877
877
211
5,254
29
4,117
Items of PPE are measured at cost less accumulated depreciation and accumulated impairment losses. Cost includes
expenditure that is directly attributable to the acquisition of the asset. Gains and losses on disposal of an item of PPE are
determined by comparing the proceeds from disposal with the carrying amount of PPE and are recognised net in profit
or loss. Subsequent expenditure is capitalised only when it is probable that the future economic benefits associated with
the expenditure will flow to the Group, and its cost can be measured reliably. The costs of the day-to-day servicing of PPE
are recognised in profit or loss as incurred. Depreciation is recognised in profit or loss on a straight-line basis over the
estimated useful lives of each component of PPE, since this most closely reflects the expected pattern of consumption of
the future economic benefits embodied in the asset.
The estimated useful lives for the current and comparative period are as follows:
•
•
•
•
•
plant & equipment
office equipment
fixtures and fittings
intangibles
10 – 30 years
3 – 20 years
6 – 20 years
5 years
heritage and cultural assets
not depreciated
The useful life, residual value and the depreciation method applied to an asset are reassessed at least annually. Heritage
and cultural assets with the potential to be maintained for an indefinite period through conservation, restoration and
preservation activities are considered to have an indefinite life and not depreciated.
43
ANNUAL REPORT 2017Notes to the Financial StatementsFor the year ended 31 December 2017
8.
Exploration and Evaluation Expenditure Capitalised
in thousands of AUD
Carrying amount at beginning of the period
Exploration expenditure capitalised
Disposal of exploration expenditure in Asset Swap (Note 27)
Exploration expenditure written off during the period
Research and development tax concession
Carrying amount at the end of the period
31 December
2017
31 December
2016
21,962
468
(16,067)
–
–
6,363
48,240
863
–
(21,327)
(5,814)
21,962
Exploration and evaluation expenditure in respect of each area of interest is accounted for using the successful efforts method
of accounting. The successful efforts method requires all exploration and evaluation expenditure to be expensed in the period
it is incurred, except the costs of successful wells and the costs of acquiring interests in new exploration assets, which are
capitalised as intangible exploration and evaluation. The costs of wells are initially capitalised pending the results of the well.
An area of interest refers to an individual geological area where the presence of oil or a natural gas field is considered
favourable or has been proved to exist, and in most cases will comprise an individual prospective oil or gas field.
Exploration and evaluation expenditure is recognised in relation to an area of interest when the rights to tenure of the
area of interest are current and either:
•
•
such expenditure is expected to be recovered through successful development and commercial exploitation of the
area of interest or, alternatively, by its sale; or
the exploration activities in the area of interest have not yet reached a stage which permits reasonable assessment of
the existence of economically recoverable reserves and active and significant operations in, or in relation to, the area
of interest are continuing.
Where an ownership interest in an exploration and evaluation asset is exchanged for another, the transaction is
recognised by reference to the carrying value of the original interest. Any cash consideration paid, including transaction
costs, is accounted for as an acquisition of exploration and evaluation assets. Any cash consideration received, net of
transaction costs, is treated as a recoupment of costs previously capitalised with any excess accounted for as a gain on
disposal of non-current assets.
The carrying amounts of the Group’s exploration and evaluation assets are reviewed at each reporting date to determine
whether any of the following indicators of impairment exists:
•
•
•
•
tenure over the licence area has expired during the period or will expire in the near future, and is not expected to be
renewed; or
substantive expenditure on further exploration for and evaluation of resources in the specific area is not budgeted or
planned; or
exploration for and evaluation of resources in the specific area has not led to the discovery of commercially viable
quantities of resources, and the Group has decided to discontinue activities in the specific area; or
sufficient data exists to indicate that although a development is likely to proceed, the carrying amount of the
exploration and evaluation asset is unlikely to be recovered in full from successful development or from sale.
Where an indicator of impairment exists, a formal estimate of the recoverable amount is made and any resultant
impairment loss is recognised in the income statement. When a discovered oil or gas field enters the development phase
the accumulated exploration and evaluation expenditure is transferred to oil and gas assets.
Determining the recoverability of exploration and evaluation expenditure capitalised requires estimates and judgements as
to future events and circumstances, in particular, whether successful development and commercial exploitation or sale of
the respective area of interest is likely. Critical to this assessment are estimates and assumptions as to the timing of expected
cash flows, exchange rates, commodity prices and future capital requirements. If, after having capitalised the expenditure a
judgement is made that recovery of the expenditure is unlikely, an impairment loss is recorded in the income statement.
44
BURU ENERGY LIMITEDNotes to the Financial StatementsFor the year ended 31 December 2017 9. Oil and Gas Assets
in thousands of AUD
Carrying amount at beginning of the period
Oil and gas assets acquired in Asset Swap (Note 27)
Development expenditure capitalised
Amortisation expensed
Carrying amount at the end of the period
31 December
2017
31 December
2016
21,550
20,398
17,917
(4,219)
55,646
24,129
–
209
(2,788)
21,550
Oil and gas assets are measured at cost less amortisation and impairment losses. The assets useful lives are reviewed,
and adjusted if appropriate, at each reporting date. The carrying amount of petroleum assets is reviewed bi-annually.
Gains and losses on disposals are determined by comparing proceeds with the carrying amount and included in the
profit or loss. Oil and gas assets are amortised over the life of the area according to the rate of depletion of the proved
and probable hydrocarbon reserves. Retention of petroleum assets is subject to meeting certain work obligations/
commitments.
The estimated quantities of proved and probable hydrocarbon reserves and resources reported by the group are integral
to the calculation of amortisation (depletion), depreciation and assessments of possible impairments. Estimated reserves
and resources quantities are based upon interpretations of geological and geophysical models and assessment of the
technical feasibility and commercial viability of producing the reserves and resources. Management prepare estimates
which conform to guidelines prepared by the Society of Petroleum Engineers. These assessments require assumptions to
be made regarding future development and production costs, commodity prices, exchange rates and fiscal regimes. The
estimates of reserves and resources 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.
10. Investments
in thousands of AUD
Non-Current
Available-for-sale financial assets
31 December
2017
31 December
2016
40
40
51
51
The Group’s financial assets comprise of ASX listed shares held in New Standard Energy Limited. These available-for-sale
financial assets are categorised as Level 1 within the fair value hierarchy and are measured at fair value based on quoted
market prices at the reporting date, without any deduction for transaction costs. There were no transfers between levels
during the period.
45
ANNUAL REPORT 2017Notes to the Financial StatementsFor the year ended 31 December 2017 11. Trade and Other Receivables
in thousands of AUD
Interest receivable
Joint venture receivables
Joint venture’s share of DMIRS transfer fees
Prepayments
GST receivable
Other receivables
31 December
2017
31 December
2016
54
8
386
199
476
166
1,289
72
525
–
110
38
167
912
The Group’s exposure to credit and currency risks and impairment losses related to trade and other receivables are
disclosed in note 28.
12. Inventories
in thousands of AUD
Materials and consumables at net realisable value
Petroleum products at cost
31 December 2017 31 December 2016
1,659
1,359
3,018
2,372
–
2,372
Inventories are valued at the lower of cost or net realisable value. Net realisable value is the estimated selling price in the
ordinary course of business, less the estimated costs of completion and selling expenses. Cost is determined as follows:
• Materials and consumables, which include drilling and maintenance stocks, are valued at the cost of acquisition
which includes expenditure incurred in acquiring the inventories and bringing them to their existing location and
condition; and
•
Petroleum products, comprising extracted crude oil stored in tanks and pipeline systems, are valued using the full
absorption cost method.
Materials and consumables are accounted for on a FIFO basis. During the year, the Group tested its materials and
consumables inventories for impairment and wrote down inventories to their net realisable value, which resulted in a loss
of $207,000 (2016: $464,000).
46
BURU ENERGY LIMITEDNotes to the Financial StatementsFor the year ended 31 December 2017 13. (a) Cash and Cash Equivalents
in thousands of AUD
Bank balances
Term deposits maturing within 3 months
Cash and cash equivalents in the statement of cash flows
31 December
2017
31 December
2016
1,291
15,568
16,859
3,012
18,040
21,052
The Group’s exposure to interest rate risk and sensitivity analysis for financial assets is disclosed in note 28.
(b) Reconciliation of Cash Flows from Operating Activities
in thousands of AUD
Cash flows from operating activities
Loss for the period
Adjustments for:
Depreciation
Impairment losses on exploration expenditure
Amortisation on development expenditure
Impairment on inventories
Impairment of available-for-sale-financial assets
Gain on sale of discontinued operation
Gain on acquisition of oil and gas assets
Loss on asset disposal
Share based payment expenses
Net finance costs
Operating loss before changes in working capital and provisions
Changes in working capital
Change in trade and other receivables
Change in trade and other payables
Change in inventories
Change in provisions
Cash used in operating activities
Net cash outflow from operating activities
Note
31 December
2017
31 December
2016
(6,205)
(33,982)
7
9
12
27
19
5
888
–
4,219
207
–
–
(4,331)
325
499
1,096
(3,302)
(530)
648
(1,360)
234
(1,008)
(4,310)
1,173
21,327
2,788
464
224
(2,654)
–
–
–
1,221
(9,439)
759
(2,032)
131
(203)
(1,345)
(10,784)
47
ANNUAL REPORT 2017Notes to the Financial StatementsFor the year ended 31 December 2017
14. Capital and Reserves
Share capital
On issue at the beginning of the period
Issued under Rights Issue and Top-up Placement
On issue at the end of the period – fully paid
Ordinary Shares
Ordinary Shares
31 December
2017
31 December
2016
No.
No.
339,997,078
339,997,078
92,024,255
-
432,021,333
339,997,078
During the period, the Company successfully raised a total of $13.8 million (before fees) under a 1 for 5 non-renounceable
entitlement offer (Rights Issue) and an additional top-up share placement (Top-up Placement) to accelerate the
development of the Ungani Oilfield.
The Company does not have authorised capital or par value in respect of its issued shares. The holders of ordinary shares
are entitled to receive dividends as declared from time to time and are entitled to one vote per share at meetings of the
Company. All shares rank equally with regard to the Company’s residual assets.
The share-based payments reserve represents the fair value of equity-based compensation to the Group’s employees.
The financial asset revaluation reserve represents the revaluation of the Group’s available for sale financial assets.
15. Loss Per Share
Basic loss per share
in thousands of AUD
Loss attributable to ordinary shareholders from continuing operations
(Profit) / loss from discontinued operation
Net loss
Weighted average number of ordinary shares
Issued ordinary shares at beginning of the period
Effect of shares issued
31 December
2017
31 December
2016
6,205
–
6,205
36,321
(2,339)
33,982
31 December
2017
31 December
2016
No.
No.
339,997,078
339,997,078
27,985,458
–
Weighted average number of ordinary shares at the end of the period
367,982,536
339,997,078
The Group presents basic and diluted earnings or loss per share (EPS or LPS) data for its ordinary shares. Basic EPS or LPS
is calculated by dividing the profit or loss attributable to ordinary shareholders of the Group by the weighted average
number of ordinary shares outstanding during the period. Diluted EPS or LPS is determined by adjusting the profit or loss
attributable to ordinary shareholders and the weighted average number of ordinary shares outstanding, for the effects of
all dilutive potential ordinary shares, which comprise share options granted to employees.
The Company’s potential ordinary shares, being its options granted, are not considered dilutive as the conversion of these
options would result in a decrease in the net loss per share.
48
BURU ENERGY LIMITEDNotes to the Financial StatementsFor the year ended 31 December 2017 16. Trade and Other Payables
in thousands of AUD
Trade payables
Accruals
Other payables
31 December
2017
31 December
2016
3,248
5,337
172
8,757
95
380
155
630
The Group’s exposure to currency and liquidity risk related to trade and other payables is disclosed in note 28.
17. Loans and Borrowings
in thousands of AUD
Borrowings at beginning of the year
Repayment to Alcoa on 22 December 2016
Repayment to Alcoa on 14 July 2017
Interest expense of unwinding of the fair value difference
Loan at the end of the period
in thousands of AUD
Current
Non-current
31 December
2017
31 December
2016
10,989
–
(5,000)
1,511
7,500
21,507
(12,500)
–
1,982
10,989
31 December
2017
31 December
2016
5,250
2,250
7,500
–
10,989
10,989
Loans and borrowings are initially recognised at fair value. If a loan or borrowing is not based upon market terms then
it is accounted for in accordance with AASB 139 Application Guidance 64 (AG64), which states that “the fair value of an
originated long-term loan or borrowing that carries no interest can be estimated as the present value of all future cash
payments discounted using the market rate of interest for a similar instrument with a similar credit rating”.
The Group’s exposure to currency and liquidity risk related to loans and borrowings is disclosed in note 28.
During 2017, Buru and Alcoa reached an agreement to vary the repayment terms on the $12.5 million loan to Alcoa of
Australia Limited due on 30 June 2018, with the varied payments now being made in the tranches set out below:
•
•
•
•
$5.0 million was paid on 14 July 2017
$2.5 million to be paid on or before 31 December 2018
$2.5 million to be paid on or before 31 December 2019
$2.5 million to be paid on or before 31 December 2020
The debt continues to be unsecured and from 1 January 2018 is subject to an agreed interest rate of 5% on the outstanding
balances, payable annually in arrears. The $2.5 million annual tranches are further subject to an accelerated capital
repayment mechanism. The current liability above is based on an estimate of an accelerated capital repayment of $2.75
million as at 31 December 2018. The actual accelerated capital repayment as at 31 December 2018 will be calculated based
on Buru Energy’s gross revenue from Ungani oil sales exceeding an agreed base level. Any accelerated capital repayment
at 31 December 2018 will reduce the remaining repayments in subsequent years.
49
ANNUAL REPORT 2017Notes to the Financial StatementsFor the year ended 31 December 2017 Prior to 1 January 2018, the borrowings were interest free and unsecured and the fair value of the borrowing was
estimated as the present value of all future cash payments discounted using the market rate of interest for a similar
instrument with a similar credit rating. The difference between fair value and cash consideration to be repaid under the
borrowings was recognised in the income statement as interest income. The borrowings are measured at the end of the
period at amortised cost using the effective interest method. The amortised cost during the life of the loan is the sum of
the initial fair value of the loan and the unwinding of the fair value difference.
18. Provisions
in thousands of AUD
Current
Provision for annual leave
Provision for long-service leave
Provision for site restoration
Non-Current
Provision for long-service leave
Provision for site restoration
Movements in the site restoration provision
in thousands of AUD
Opening balance
Provision used during the period
Revaluation of provision during the period
Balance at the end of the period
31 December
2017
31 December
2016
541
137
749
1,427
101
5,457
5,558
397
–
859
1,256
156
3,906
4,062
31 December
2017
31 December
2016
4,765
(110)
1,551
6,206
4,765
–
–
4,765
A provision is recognised when the Group has a present legal or constructive obligation as a result of a past event, and it
is probable that an outflow of economic benefits will be required to settle the obligation and that the obligation can be
measured reliably. Provisions are determined by discounting the expected future cash flows at a pre-tax rate that reflects
current market assessments of the time value of money and, where appropriate, the risks specific to the liability. The
unwinding of the discount is recognised as a finance cost.
The site restoration provision is in respect of the Group’s obligation to rectify environmental liabilities relating to
exploration and production in the Canning Basin in accordance with the requirements of DWER and DMIRS. The
provision is derived from an internal review of the liabilities. Due to the long-term nature of the liability, there is
significant uncertainty in estimating the costs that will be incurred at a future date. Changes to estimated future costs
are recognised in the statement of financial position by adjusting the rehabilitation asset and liability. The rehabilitation is
expected to continue to occur progressively.
The Group’s net obligation in respect of long-term employee benefits is the amount of future benefit that employees
have earned in return for their service in the current and prior periods plus related on-costs; that benefit is discounted
to determine its present value, and the fair value of any related assets is deducted. The discount rate is the yield at the
reporting date on AA credit-rated or government bonds that have maturity dates approximating the terms of the Group’s
obligations. The calculation is performed using the projected unit credit method. Any actuarial gains or losses are
recognised in profit or loss in the period in which they arise.
50
BURU ENERGY LIMITEDNotes to the Financial StatementsFor the year ended 31 December 2017 19. Share-based Payments
Fair value expensed in thousands of AUD
Employee Share Option Plan expense
31 December
2017
31 December
2016
499
499
–
–
The grant date fair value of share-based payment awards granted to employees is recognised as an employee expense,
with a corresponding increase in equity, over the period that the employees unconditionally become entitled to the
awards. The amount recognised as an expense is adjusted to reflect the number of awards for which the related service
and non-market vesting conditions are expected to be met, such that the amount ultimately recognised as an expense
is based on the number of awards that meet the related service and non-market performance conditions at the vesting
date. For share-based payment awards with non-vesting conditions, the grant date fair value of the share-based payment
is measured to reflect such conditions and there is no true-up for differences between expected and actual outcomes.
The fair value of the amount payable to employees in respect of share appreciation rights, which are settled in cash, is
recognised as an expense, with a corresponding increase in liabilities, over the period that the employees unconditionally
become entitled to payment. The liability is remeasured at each reporting date and at settlement date. Any changes in
the fair value of the liability are recognised as personnel expense in profit or loss.
Share-based payment arrangements in which the Group receives goods or services as consideration for its own equity
instruments are accounted for as equity-settled share-based payment transactions, regardless of how the equity
instruments are obtained by the Group. When the Company grants options over its shares to employees of subsidiaries,
the fair value at grant date is recognised as an increase in the investments in subsidiaries, with a corresponding increase
in equity over the vesting period of the grant.
The fair value of share options granted under the Employee Share Option Plan are measured using the Black & Scholes
valuation model. Measurement inputs include share price on a measurement date, exercise price of the instrument,
expected volatility (based on weighted average historic volatility adjusted for changes expected due to publicly available
information) weighted average expected life of the instruments (based on historical experience and general option
holder behaviour), expected dividends, and the risk-free interest rate (based on government bonds). Service and non-
market performance conditions attached to the transactions are not taken into account in determining fair value.
Employee Share Option Plan (ESOP)
At the 2015 Annual General Meeting, shareholders reapproved the Company’s ESOP for a further three years. Options are
issued for no consideration and vest immediately on grant date. All options refer to options over ordinary shares of Buru
Energy Limited which are exercisable on a one for one basis. The inputs used in the measurement of the fair values at
grant date of the equity settled share based payment plans were as follows:
Number ESOP
options granted
Share Price
at Grant Date
Exercise
Price
Volatility
Expected
Dividends
Risk free
interest rate
Expiry
Date
Fair
Value
4,550,000
$0.22
$0.31
104%
Nil
2.0%
31 Dec 19
$0.11
The number and weighted average exercise prices of share options are as follows:
Outstanding unlisted options as at 1 January 2017 (i)
Granted 3 October 2017
Forfeited during the period ended 31 December 2017
Outstanding as at 31 December 2017
Weighted average
exercise price ($)
0.79
0.31
0.79
0.31
Number of
options
3,150,000
4,550,000
(3,150,000)
4,550,000
(i) The weighted average exercise price of the unlisted options as at 31 December 2016 was $0.80. Following the
non-renounceable rights issue announced on 1 August 2017, in accordance with ASX Listing Rule 6.22.2, the exercise
price was adjusted to $0.79. Further information is included in the Company’s ASX release dated 4 August 2017.
51
ANNUAL REPORT 2017Notes to the Financial StatementsFor the year ended 31 December 2017 The unlisted share options outstanding as at 31 December 2017 have a weighted average exercise price of $0.31
(Dec 2016: $0.79), and a weighted average contractual life of 2.0 years (Dec 2016: 1.0 years). All options outstanding fully
vested in previous reporting periods.
Share Appreciation Rights (SARs)
No share appreciation rights were issued or exercised during the current reporting period. The movement during the
reporting period in the number of share appreciation rights was as follows:
SARs on issue as at 1 January 2017
Forfeited during the period ended 31 December 2017
Outstanding as at 31 December 2017
Subsequent to the end of the year, all SARs lapsed on 3 January 2018.
Number of SARS
1,020,066
–
1,020,066
20. Group Entities
Parent entity
Buru Energy Limited
Subsidiaries
Terratek Drilling Tools Pty Limited
Royalty Holding Company Pty Limited
Buru Energy (Acacia) Pty Limited
Buru Operations Pty Limited
Yakka Munga Pastoral Company Pty Limited
Buru Fitzroy Pty Limited
Country of
incorporation
Australia
Ownership
interest
Ownership
interest
31 December
2017
31 December
2016
Australia
Australia
Australia
Australia
Australia
Australia
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
Buru Energy Limited is the head entity of the tax consolidated group. All subsidiaries are members of the tax
consolidated group.
52
BURU ENERGY LIMITEDNotes to the Financial StatementsFor the year ended 31 December 2017 21. Parent Entity Disclosures
As at, and throughout the year ended 31 December 2017 the parent company of the Group was Buru Energy Limited.
in thousands of AUD
Result of the parent entity
Loss for the period
Other comprehensive income / (expense)
Total comprehensive loss for the period
Financial position of the parent entity at year end
Current assets
Total assets
Current liabilities
Total liabilities
Total equity of the parent entity at year end
Share capital
Reserves
Accumulated losses
Total equity
Company
12 months ended
31 December
2017
Company
12 months ended
31 December
2016
(5,603)
(12)
(5,615)
21,147
84,583
21,690
29,630
271,803
1,173
(218,023)
54,953
(35,994)
171
(35,823)
24,336
73,153
1,886
25,998
258,211
1,213
(212,269)
47,155
53
ANNUAL REPORT 2017Notes to the Financial StatementsFor the year ended 31 December 2017 22. Joint Operations
A joint arrangement is an arrangement over which two or more parties have joint control. Joint control exists only when
decisions about the relevant activities - i.e. those that significantly affect the returns of the arrangement - require the
unanimous consent of the parties sharing control of the arrangement. In accordance with AASB 11, the arrangements
have been classified as joint operations (whereby the jointly controlling parties have rights to the assets and obligations
for the liabilities relating to the arrangement) as opposed to a joint venture because separate vehicles have not been
established through which activities are conducted. The Group therefore recognises its assets, liabilities and transactions,
including its share of those incurred jointly, in its consolidated financial statements.
The consolidated entity has an interest in the following joint operations as at 31 December 2017 whose principal
activities were oil and gas exploration, development and production.
Permit/Joint
Operation
December 2017
Beneficial Interest
December 2016
Beneficial Interest
L20
L21
EP 371
EP 391
EP 428
EP 431
EP 436
EP 457
EP 458
100.00%
100.00%
0.00%
100.00%
100.00%
100.00%
100.00%
37.50%
37.50%
50.00%
50.00%
50.00%
50.00%
50.00%
50.00%
50.00%
37.50%
37.50%
Operator
Buru Energy Ltd
Buru Energy Ltd
Buru Energy Ltd
Buru Energy Ltd
Buru Energy Ltd
Buru Energy Ltd
Buru Energy Ltd
Buru Fitzroy Pty Ltd
Buru Fitzroy Pty Ltd
Country
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
The Group’s interests in assets/liabilities and income/expenditure employed in the above joint operations are detailed
below. The amounts are included in the financial statements under their respective asset categories.
in thousands of AUD
Income
Expenditure
Current assets
Trade and other receivables
Inventories
Total current assets
Non-current assets
Exploration expenditure
Oil and gas assets
Total non-current assets
Current Liabilities
Trade and other payables
Total current Liabilities
Share of net assets of joint venture operations
54
31 December
2017
31 December
2016
1
(178)
(177)
–
–
–
–
–
–
–
–
–
1
(6,088)
(6,087)
22
505
527
21,962
21,550
43,512
182
182
43,857
BURU ENERGY LIMITEDNotes to the Financial StatementsFor the year ended 31 December 2017 23. Operating Leases
Leases as lessee
Non-cancellable operating lease rentals are payable as follows:
in thousands of AUD
Less than one year
Between one and five years
31 December
2017
31 December
2016
1,990
3,554
5,544
1,136
–
1,136
Leases in terms of which the Group does not assume substantially all the risks and rewards of ownership are classified as
operating leases. The leased assets are not recognised in the Group’s statement of financial position. During the year, the
Group’s corporate lease in the Perth CBD expired and a new lease was executed over a corporate office in West Perth. The
Group also continues to lease an office/warehouse facility in Broome. These leases expire in October 2022 and November
2018 respectively. The Group leases a crude oil storage tank at Wyndham Port with an expiry date in June 2020 and also
maintains operating leases for vehicles. The total operating lease amount recognised as an expense during the period
was $2,097,000 (31 Dec 2016: $1,254,000).
Payments made under operating leases are recognised in profit or loss on a straight-line basis over the term of the
lease. Lease incentives received are recognised as an integral part of the total lease expense, over the term of the lease.
Minimum lease payments made under finance leases are apportioned between the finance expense and the reduction
of the outstanding liability. The finance expense is allocated to each period during the lease term so as to produce a
constant periodic rate of interest on the remaining balance of the liability. Contingent lease payments are accounted for
by revising the minimum lease payments over the remaining term of the lease when the lease adjustment is confirmed.
Determining whether an arrangement contains a lease
At inception of an arrangement, the Group determines whether such an arrangement is or contains a lease. A specific
asset is the subject of a lease if fulfilment of the arrangement is dependent on the use of that specified asset and the
arrangement conveys the right to use the asset. At inception or upon reassessment of the arrangement, the Group
separates payments and other consideration required by such an arrangement into those for the lease and those for
other elements on the basis of their relative fair values. If the Group concludes for a finance lease that it is impracticable
to separate the payments reliably, an asset and a liability are recognised at an amount equal to the fair value of the
underlying asset. Subsequently the liability is reduced as payments are made and an imputed finance charge on the
liability is recognised using the Group’s incremental borrowing rate.
24. Capital and Other Commitments
in thousands of AUD
Exploration expenditure commitments
Contracted but not yet provided for and payable:
Within one year
One year later and no later than five years
31 December
2017
31 December
2016
3,188
263
3,451
8,200
3,450
11,650
The commitments are required in order to maintain the petroleum exploration permits in which the Group has interests
in good standing with the Department of Mines, Industry Regulation & Safety (DMIRS), and these obligations may
be varied from time to time, subject to approval by DMIRS. On 23 November 2017, DMIRS granted exemptions for
commitments on EP436 and EP428. The commitments within one year above primarily relate to a well commitment in
EP129. Buru has applied to DMIRS for a suspension on this commitment as a result of the fraccing moratorium and DMIRS
has responded by requesting Buru to lodge a new application for its consideration.
55
ANNUAL REPORT 2017Notes to the Financial StatementsFor the year ended 31 December 2017 25. Contingencies
There were no material contingent liabilities or contingent assets for the Group as at 31 December 2017 (31 Dec 2016: nil).
26. Related Parties
Key management personnel compensation
The key management personnel compensation comprised:
in AUD
Short term employee benefits
Post-employment benefits
Termination benefits
Long term employee benefits
Share-based payments
31 December
2017
1,614,949
145,297
–
10,044
65,932
31 December
2016
1,661,735
158,199
165,000
9,121
64,999
1,836,222
2,059,054
Individual Directors and executives compensation disclosures
Information regarding individual Directors and executives compensation and some equity instruments disclosures as
required by Corporations Regulations 2M.3.03 is provided in the Remuneration Report section of the Directors’ report on
pages 25 to 28.
Apart from the details disclosed in this note, no Director has entered into a material contract with the Group since the
end of the previous financial year and there were no material contracts involving directors’ interests existing at the end of
the period.
Other related party transactions
No other related party transaction has occurred during the reporting period.
27. Asset Swap
On 25 May 2017 Buru Energy entered into a transaction with its joint venture partners Diamond Resources (Fitzroy) Pty
Ltd (DRF) and Diamond Resources (Canning) Pty Ltd (DRC), which are both wholly owned subsidiaries of Mitsubishi
Corporation, on its exploration and production assets in the Canning Basin in the northwest of Western Australia.
The agreement had the following effect:
• DRF agreed to transfer to Buru Energy its 50% interest in the Ungani Oilfield Production Licences (L 20 and L 21) and
its 50% interest in exploration permits EP 391, EP 431 and EP 436.
• DRC agreed to transfer to Buru Energy its 50% interest in exploration permit EP 428.
•
Buru Energy agreed to transfer to DRF, its 50% interest in EP 371 and its 50% interest in the application for special
prospecting authority STP-SPA-0065 and STP-AAA-0031.
• DRF and DRC also agreed that Buru Energy will provide services in relation to EP 371, including community
engagement and liaison.
The transfer of the title was approved and registered by the Department of Mines, Industry Regulation and Safety on 8
January 2018.
56
BURU ENERGY LIMITEDNotes to the Financial StatementsFor the year ended 31 December 2017 As part of the transaction the parties agreed to terminate the Ungani Development Funding Agreement (UDFA). On
termination of the UDFA, DRF paid its share of the costs for restarting the Ungani Oilfield ($1.5 million) as part of the
remaining first tranche of funding under the UDFA. The asset swap is summarised below:
Title
EP 371
Holder before transaction
Type
Buru and DRC each 50%
Exploration
Holder after transaction
DRC and DRF each 50%
SPA0065
Buru and DRC each 50%
Application
DRC and DRF each 50% (of any permit grant)
EP 391
EP 428
EP 431
EP 436
L 20
L 21
Buru and DRF each 50%
Buru and DRC each 50%
Buru and DRF each 50%
Buru and DRF each 50%
Buru and DRF each 50%
Buru and DRF each 50%
Exploration
Exploration
Exploration
Exploration
Production
Production
Buru 100%
Buru 100%
Buru 100%
Buru 100%
Buru 100%
Buru 100%
The Company’s 50% interest before the Asset Swap in EP 371 had a carrying value of capitalised exploration expenditure
of $16,067,000. Given the 50% interest in EP 371 was consideration for the additional 50% interest acquired in L 20
and L 21 (the Ungani Oilfield) as well as the other exploration permits, this balance was transferred from exploration
expenditure to oil and gas assets on the acquisition date of 24 May 2017. The oil and gas assets acquired were fair valued
on acquisition (considering also the existing interest in Ungani) at $20,398,000 resulting in a fair value gain on acquisition
of the oil and gas assets of $4,331,000.
28. Financial Risk Management
Financial instruments are initially measured at fair value being the cost on trade date, which includes transaction costs,
when the related contractual rights or obligations exist. Subsequent to initial recognition these instruments are measured
as set out below:
Held-to-maturity investments: These investments have fixed maturities, and it is the Group’s intention to hold these
investments to maturity. Any held-to-maturity investments of the Group are stated at amortised cost using the effective
interest rate method.
Loans and receivables - non-derivative financial assets with fixed or determinable payments that are not quoted in an
active market and are stated at amortised costs using the effective interest method.
Available-for-sale financial assets - non-derivative financial assets that are not classified in any of the other categories of
financial assets. Available-for-sale financial assets are recognised initially at fair value plus any attributable transaction
costs. Unrealised gains or losses arising from changes in fair value are taken directly to equity. When an investment is
derecognised, the cumulative gain or loss is reclassified to profit or loss.
Financial liabilities: Non-derivative financial liabilities are recognised at amortised cost, comprising original debt less
principal payments and amortisation.
Impairment: At each reporting date, the consolidated entity assesses whether there is objective evidence that a financial
instrument has been impaired. In the case of available-for-sale financial instruments, a significant or prolonged decline
in the value of the instrument is considered to determine whether an impairment has arisen. Impairment losses are
transferred from the available-for-sale reserve to be recognised in the profit or loss.
Fair value vs carrying amounts
The carrying value of financial assets and liabilities in the statement of financial position not already measured at fair
value are materially equal to their fair values.
57
ANNUAL REPORT 2017Notes to the Financial StatementsFor the year ended 31 December 2017 Credit risk of trade and other receivables
Credit risk is the risk of financial loss to the Group if a customer or counterparty to a financial instrument fails to meet
its contractual obligations and arises principally from the Group’s receivables from customers. All Ungani sales are to
Trafigura Pte Ltd (Singapore). The Group’s exposure to credit risk for Ungani sales is managed through Letters of Credit
from first class international banks being obtained prior to each sale of crude FOB Wyndham.
The Group does not have an allowance for impairment on trade and other receivables. To date the Group have always
received full consideration for trade receivables in a timely manner and as such there is no reason to believe that this will
not continue going forward. No other receivables are considered to have a material credit risk.
Exposure to credit risk
The carrying amount of the Group’s financial assets represents the Group’s maximum credit exposure. The Group’s
maximum exposure to credit risk at the reporting date was:
in thousands of AUD
Trade and other receivables (excluding prepayments)
Cash and cash equivalents
Available-for-sale financial assets
Note
11
13a
10
Carrying amount
31 December
2017
31 December
2016
1,090
16,859
40
17,989
802
21,052
51
21,905
Trade and other receivables include accrued interest receivable from Australian accredited banks of $54,000
(31 Dec 2016: $72,000), and tax amounts receivable of $476,000 (31 Dec 2016: $38,000) from the Australian Taxation
Office (refer to note 11).
Cash and cash equivalents
The Group held cash and cash equivalents of $16,859,000 at 31 December 2017 (31 Dec 2016: $21,052,000) which
represents its maximum credit exposure on these assets. The cash and cash equivalents are held with bank and financial
institution counterparties, which are rated at least AA-, based on rating agency Fitch Ratings.
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. This is monitored through rolling cash flow forecasts. The Group maintains sufficient cash to
safeguard liquidity risk.
The following are contractual maturities of trade and other payables (excluding provisions) and loans and borrowings:
in thousands of AUD
Less than 1 year
1 – 5 years
Carrying amount
31 December
2017
31 December
2016
14,008
2,250
16,258
630
12,500
13,130
The borrowings from Alcoa of Australia Limited are subject to an agreed interest rate of 5% on the outstanding balances
commencing 1 January 2018 and payable annually in arrears (Note 17).
58
BURU ENERGY LIMITEDNotes to the Financial StatementsFor the year ended 31 December 2017 Market risk
Market risk is the risk that changes in market prices, such as foreign exchange rates, interest rates and equity prices will
affect the Group’s income or the value of its holdings of financial instruments. The objective of market risk management is
to manage and control market risk exposures within acceptable parameters, while optimising the return.
Currency risk
The companies in the Group are exposed to currency risk on sales that are denominated in a currency other than the
functional currency of the companies in the Group (AUD). All sales of crude oil are denominated in US dollars. The Group
does not hedge its foreign currency exposure.
The Group’s exposure to foreign currency risk at balance date was as follows, based on notional amounts:
in thousands
Cash and cash equivalents
Trade receivables
Gross balance sheet exposure
31 December 2017
31 December 2016
AUD
USD
AUD
USD
85
–
85
66
–
66
7
–
7
5
–
5
The average exchange rate from AUD to USD during the period was AUD 1.0000 / USD 0.7669 (Dec 2016: AUD 1.0000 /
USD 0.7443). The reporting date spot rate was AUD 1.0000 / USD 0.7800 (Dec 2016: AUD 1.0000 / USD 0.7236).
A 10 percent strengthening of the Australian dollar against the USD over the period would have increased the loss after
tax for the financial period by $718,000 (Dec 2016: increased loss after tax by $20,000). A 10 percent weakening of the
Australian dollar against the USD over the period would have decreased the loss after tax for the financial period by
$877,000 (Dec 2016: decreased loss after tax by $22,000). This analysis assumes that all other variables remain constant.
Commodity price risk
The Group is exposed to commodity price fluctuations through the sale of Ungani crude at a fixed differential against the
dated Brent crude. The Group does not hedge its commodity price exposure.
The Group had no exposure to commodity price risk at balance date as there was no outstanding trade receivables at
balance date. The average Brent Platts price for crude sold over the period was AUD 68/bbl.
A 10 percent strengthening of the dated Brent crude price over the period would have decreased the loss after tax for
the financial period by $877,000. A 10 percent weakening of the dated Brent crude price over the period would have
increased the loss after tax for the financial period by $718,000. This analysis assumes that all other variables remain
constant.
Interest rate risk
At balance date the Group’s exposure to market risk for changes in interest rates relate primarily to the Group’s short term
cash deposits. The interest rate risk is only applicable to interest revenue as the Group does not have any interest-bearing
short or long term borrowings other than the loan to Alcoa which has a fixed interest rate. The Group constantly analyses
its exposure to interest rates, with consideration given to potential renewal of the terms of existing deposits. Fixed rate
instruments are term deposits held for less than 3 months, therefore the fair value approximates the carrying amount.
At the reporting date the Group’s interest-bearing financial instruments were as follows:
in thousands of AUD
Fixed rate instruments
Cash and cash equivalents with fixed interest
Total fixed interest bearing financial assets
Carrying amount
31 December
2017
31 December
2016
15,568
15,568
18,040
18,040
59
ANNUAL REPORT 2017Notes to the Financial StatementsFor the year ended 31 December 2017 The Group does not account for any fixed rate financial assets and liabilities at fair value through profit or loss. Therefore a
change in interest rates at the reporting date would not affect profit or loss.
in thousands of AUD
Variable rate instruments
Cash and cash equivalents with variable interest
Total variable interest bearing financial assets
Carrying amount
31 December
2017
31 December
2016
1,291
1,291
3,012
3,012
Other market price risk
Equity price risk arises from available-for-sale equity securities held in other listed exploration companies. The Group
monitors its available for sale equity instruments on a regular basis including regular monitoring of ASX listed prices and
ASX releases. The Group did not enter into any commodity derivative contracts during the year.
The Group’s equity investments are listed on the Australian Securities Exchange. For such investments classified as
available for sale, a 10 percent increase in the value of the shares at the current and comparative reporting dates would
have decreased the Group’s other comprehensive loss of $4,000; an equal change in the opposite direction would have
increased the Group’s other comprehensive loss for the period by $4,000.
Capital management
The Group’s objective when managing capital is to safeguard its ability to continue as a going concern, so as to maintain
future exploration and development of its projects. Capital consists of share capital of the Group. In order to maintain
or adjust its capital structure, Buru Energy may in the future return capital to shareholders, issue new shares, borrow
funds from financiers or sell assets. Buru Energy’s focus has been to maintain sufficient funds to fund exploration and
development activities.
During 2017, Buru and Alcoa reached an agreement to vary the repayment terms on the $12.5 million loan to Alcoa of
Australia Limited due on 30 June 2018, with the varied payments now being made in the tranches set out below:
•
•
•
•
$5.0 million was paid on 14 July 2017
$2.5 million to be paid on or before 31 December 2018
$2.5 million to be paid on or before 31 December 2019
$2.5 million to be paid on or before 31 December 2020
The remaining $7.5 million loan continues to be unsecured and from 1 January 2018 is subject to an agreed interest rate of 5%
and is payable annually in arrears. The $2.5 million annual tranches are further subject to an accelerated capital repayment
mechanism based on Buru Energy’s gross revenue from Ungani oil sales exceeding an agreed base level (see note 17).
29. Subsequent Events
There has not arisen in the interval between the end of the financial year and the date of this report any item, transaction
or event of a material or unusual nature which in the opinion of the Directors of the Group, has significantly affected or is
likely to affect the results or operations of the Group in future financial years.
30. Auditors’ Remuneration
Audit services
KPMG Australia: Audit and review of financial reports
KPMG Australia: Audit of Joint Venture reports
KPMG Australia: Audit of Traditional Owner Royalty Statements
KPMG Australia: Other audit/assurance services
31 December
2017
31 December
2016
73,500
5,500
5,000
12,000
60,000
15,250
5,000
-
All amounts payable to the Auditors of the Company were paid or payable by the parent entity.
60
BURU ENERGY LIMITEDNotes to the Financial StatementsFor the year ended 31 December 2017 Directors’ Declaration
1
In the opinion of the Directors of Buru Energy Limited (‘the Company’):
(a) the consolidated financial statements and notes that are contained on pages 30 to 60 and the Remuneration report in
the Directors’ report, set out on pages 25 to 28, are in accordance with the Corporations Act 2001, including:
(i) Giving a true and fair view of the Group’s financial position as at 31 December 2017 and of its performance,
for the financial period ended on that date; and
(ii) Complying with Australian Accounting Standards (including the Australian Accounting Interpretations) and the
Corporations Regulations 2001.
(b) There are reasonable grounds to believe that the Group will be able to pay its debts as and when they become due
and payable.
The Directors have been given the declarations required by Section 295A of the Corporations Act 2001 from the Executive
Chairman and Head of Finance, for the year ended 31 December 2017.
The Directors draw attention to the consolidated financial statements, which includes a statement of compliance with
International Financial Reporting Standards.
2
3
Signed in accordance with a resolution of the Directors:
Mr Eric Streitberg
Executive Chairman
Perth
14 March 2018
Mr Robert Willes
Non-executive Director
Perth
14 March 2018
61
ANNUAL REPORT 2017
Independent Auditor’s Report
Independent Auditor’s Report
To the shareholders of Buru Energy Limited
Report on the audit of the Financial Report
Independent Auditor’s Report
Opinion
To the shareholders of Buru Energy Limited
We have audited the Financial Report of Buru
Energy Limited (the Company).
Report on the audit of the Financial Report
In our opinion, the accompanying Financial
Report of the Company is in accordance with
the Corporations Act 2001, including:
Opinion
• Giving a true and fair view of the Group’s
financial position as at 31 December 2017
We have audited the Financial Report of Buru
and of its financial performance for the year
Energy Limited (the Company).
ended on that date; and
In our opinion, the accompanying Financial
•
Complying with Australian Accounting
Report of the Company is in accordance with
Standards and the Corporations
the Corporations Act 2001, including:
Regulations 2001.
• Giving a true and fair view of the Group’s
financial position as at 31 December 2017
and of its financial performance for the year
ended on that date; and
The Financial Report comprises:
• Consolidated statement of financial position as
at 31 December 2017
• Consolidated statement of profit or loss and
other comprehensive income, consolidated
statement of changes in equity, and
consolidated statement of cash flows for the
year then ended
The Financial Report comprises:
• Consolidated statement of financial position as
• Notes including a summary of significant
at 31 December 2017
accounting policies
• Consolidated statement of profit or loss and
• Directors’ Declaration.
other comprehensive income, consolidated
The Group consists of the Company and the
statement of changes in equity, and
entities it controlled at the year-end or from time
consolidated statement of cash flows for the
to time during the financial year.
year then ended
• Notes including a summary of significant
Basis for opinion
•
We conducted our audit in accordance with Australian Auditing Standards. We believe that the audit
evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Complying with Australian Accounting
Standards and the Corporations
Regulations 2001.
• Directors’ Declaration.
The Group consists of the Company and the
Our responsibilities under those standards are further described in the Auditor’s responsibilities for
entities it controlled at the year-end or from time
the audit of the Financial Report section of our report.
to time during the financial year.
accounting policies
We are independent of the Group in accordance with the Corporations Act 2001 and the ethical
Basis for opinion
requirements of the Accounting Professional and Ethical Standards Board’s APES 110 Code of Ethics
for Professional Accountants (the Code) that are relevant to our audit of the Financial Report in
We conducted our audit in accordance with Australian Auditing Standards. We believe that the audit
Australia. We have fulfilled our other ethical responsibilities in accordance with the Code.
evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Our responsibilities under those standards are further described in the Auditor’s responsibilities for
the audit of the Financial Report section of our report.
We are independent of the Group in accordance with the Corporations Act 2001 and the ethical
requirements of the Accounting Professional and Ethical Standards Board’s APES 110 Code of Ethics
for Professional Accountants (the Code) that are relevant to our audit of the Financial Report in
Australia. We have fulfilled our other ethical responsibilities in accordance with the Code.
KPMG, an Australian partnership and a member firm of the KPMG
network of independent member firms affiliated with KPMG
International Cooperative (“KPMG International”), a Swiss entity.
Liability limited by a scheme approved under
Profession Standards Legislation.
62
KPMG, an Australian partnership and a member firm of the KPMG
Liability limited by a scheme approved under
network of independent member firms affiliated with KPMG
International Cooperative (“KPMG International”), a Swiss entity.
Profession Standards Legislation.
BURU ENERGY LIMITED
Independent Auditor’s Report
Key Audit Matters
The Key Audit Matter we identified was:
• Acquisition of Oil & Gas Assets.
Key Audit Matters are those matters that, in our
professional judgement, were of most significance
in our audit of the Financial Report of the current
period.
These matters were addressed in the context of
our audit of the Financial Report as a whole, and in
forming our opinion thereon, and we do not
provide a separate opinion on these matters.
Acquisition of Oil & Gas Assets ($20.4 million)
Refer to Notes 9 and 27 to the Financial Report
The key audit matter
How the matter was addressed in our audit
The acquisition of Oil and Gas Assets is a key
audit matter due to:
•
•
The size of the transaction ($20.4 million);
and
The judgement required to determine the
fair value of the assets acquired in the
transaction.
The Asset Swap Deed (‘agreement’) required
the two parties to swap their interests in a
number of oil and gas tenements. The Group
performed a valuation of the Oil and Gas Assets
acquired in accordance with the accounting
standards.
The assessment of the fair value of the Asset
Swap applies significant judgements through
the use of assumptions. The key fair value
assumptions include:
•
•
•
•
Forecast sales, production levels,
production costs and capital expenditure
Expected oil prices
Life of oil resources
Foreign exchange and discount rate.
To assess the significant judgements of this
key audit matter we involved senior audit team
members.
Our procedures included:
•
•
•
•
Analysing the Asset Swap Deed and
evaluation of the key terms and conditions
Assessing and challenging the key
assumptions included in the valuation model
(discounted cash flow), including assessing
the reasonableness of:
-
-
-
-
-
Oil sales price by comparing to market
commentators’ views
Oil volume by comparing to the contingent
resources report prepared by
management’s external expert
The production profile of the Ungani Oil
Field by comparing it to actual
performance achieved to date
Operational and capital costs by
comparing to actual production costs
achieved, existing supplier agreements
and capital expenditure cost budget
Foreign exchange and discount rate
assumptions by comparing to market data.
Testing the valuation model for mathematical
accuracy
Assessing the allocation of the fair value to
the acquired tenements.
63
ANNUAL REPORT 2017 Independent Auditor’s Report
Other Information
Other Information is financial and non-financial information in Buru Energy Limited’s annual reporting
which is provided in addition to the Financial Report and the Auditor's Report. The Directors are
responsible for the Other Information.
Our opinion on the Financial Report does not cover the Other Information and, accordingly, we do not
express an audit opinion or any form of assurance conclusion thereon, with the exception of the
Remuneration Report and our related assurance opinion.
In connection with our audit of the Financial Report, our responsibility is to read the Other
Information. In doing so, we consider whether the Other Information is materially inconsistent with
the Financial Report or our knowledge obtained in the audit, or otherwise appears to be materially
misstated.
We are required to report if we conclude that there is a material misstatement of this Other
Information, and based on the work we have performed on the Other Information that we obtained
prior to the date of this Auditor’s Report we have nothing to report.
Responsibilities of the Directors for the Financial Report
The Directors are responsible for:
• Preparing the Financial Report that gives a true and fair view in accordance with Australian
Accounting Standards and the Corporations Act 2001
•
Implementing necessary internal control to enable the preparation of a Financial Report that gives
a true and fair view and is free from material misstatement, whether due to fraud or error
• Assessing the Group’s ability to continue as a going concern and whether the use of the going
concern basis of accounting is appropriate. This includes disclosing, as applicable, matters related
to going concern and using the going concern basis of accounting unless they either intend to
liquidate the Group or to cease operations, or have no realistic alternative but to do so.
Auditor’s responsibilities for the audit of the Financial Report
Our objective is:
• To obtain reasonable assurance about whether the Financial Report as a whole is free from
material misstatement, whether due to fraud or error; and
• To issue an Auditor’s Report that includes our opinion.
Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in
accordance with Australian Auditing Standards will always detect a material misstatement when it
exists.
Misstatements can arise from fraud or error. They are considered material if, individually or in the
aggregate, they could reasonably be expected to influence the economic decisions of users taken on
the basis of this Financial Report.
A further description of our responsibilities for the audit of the Financial Report is located at the
Auditing and Assurance Standards Board website at:
http://www.auasb.gov.au/auditors_responsibilities/ar2.pdf. This description forms part of our Auditor’s
Report.
64
BURU ENERGY LIMITED Independent Auditor’s Report
Report on the Remuneration Report
Opinion
Directors’ responsibilities
In our opinion, the Remuneration Report of
Buru Energy Limited for the year ended
31 December 2017, complies with Section
300A of the Corporations Act 2001.
The Directors of the Company are responsible for
the preparation and presentation of the
Remuneration Report in accordance with Section
300A of the Corporations Act 2001.
Our responsibilities
We have audited the Remuneration Report
included in 25 to 28 of the Directors’ report for the
year ended 31 December 2017.
Our responsibility is to express an opinion on the
Remuneration Report, based on our audit
conducted in accordance with Australian Auditing
Standards.
KPMG
Graham Hogg
Partner
Perth
14 March 2018
65
ANNUAL REPORT 2017
Corporate Governance Statement
The ASX Listing Rules require listed entities to disclose the extent to which they have followed the Corporate Governance
Principles and Recommendations set by the ASX Corporate Governance Council during the reporting period. This corporate
governance statement summarises the Company’s corporate governance practices that have been in place during the year
taking into consideration the corporate governance principles relevant to a company of Buru Energy’s nature and size.
This Corporate Governance Statement has been prepared on the basis of disclosure under the 3rd edition of the ASX Corporate
Governance Principles and Recommendations, detailing the Company’s compliance with these principles during the financial
year ended 31 December 2017 on an “if not, why not” basis.
This Corporate Governance statement can be viewed in the corporate governance section of the Company’s website: www.
buruenergy.com.
ASX Principle 1 – Lay solid foundations for management and oversight
Role of the Board
The respective roles and responsibilities of both the Board and management are set out in the Board Charter which can be
viewed in the corporate governance section of the Company’s website.
The Board is collectively responsible for the governance of the Company and for promoting its success. The Board’s primary
purpose is to govern the Company on behalf of all shareholders. The Board’s specific job outputs are to maintain a link between
the Company’s shareholders and its operations and to create and maintain governance policies that address the broadest levels
of all decisions and situations. The Board retains the responsibility for setting the Company’s strategic direction and objectives
and for setting limitations on the means by which management may achieve those objectives. Limitations on management
are primarily imposed by approved corporate strategy and expenditure limits. The Board delegates to management the
responsibility for developing the capability to achieve Buru Energy’s aims and objectives and employing that capability
within the limitations set by the Board. The Board monitors and maintains this delegation by requiring regular reporting by
management to the Board.
The mandate to lead Buru Energy is placed by shareholders in the hands of the entire Board. The principles endorsed by the
Board are as follows:
• no person within Buru Energy, whether a Board member or a member of management, can have any authority unless the
Board grants that authority;
•
•
all Board members are accountable individually and as a whole for any lapses of performance or behaviour by Buru Energy;
and
the Board possesses authority only as a group, the Chairman and individual Directors have no power unless specifically given
it by the Board collectively.
A Director or other officer of Buru Energy who makes a business judgment will have met the requirements as a Director of Buru
Energy and their equivalent duties at common law and in equity, if they:
• make the judgment in good faith for a proper purpose;
• do not have a material personal interest in the subject matter of the judgment;
•
•
inform themselves about the subject matter of the judgment to the extent they reasonably believe to be appropriate; and
rationally believe that the judgment is in the best interests of Buru Energy.
The Director’s or officer’s belief that the judgment is in the best interests of Buru Energy is a rational one unless the belief is one
that no reasonable person in their position would hold.
To assist in the execution of its responsibilities, the Board has established an Audit and Risk Committee and a Remuneration and
Nomination Committee. Further details on both Committees are included in this Corporate Governance Statement.
66
BURU ENERGY LIMITED Corporate Governance Statement
Delegation to management
The Board delegates a portion of its authority through management limitations, policies and holding the Executive Chairman
accountable. It also recognises in its policies, strategic direction and setting of objectives for management, its accountability to
legal and ethical obligations and its broader responsibility to non-equity stakeholders and the community. Senior executives are
responsible for supporting the Executive Chairman and assisting him with the management of the Company in accordance with
the delegated authority of the Board. Senior executives are responsible for reporting all matters which fall within the Company’s
materiality thresholds to the Executive Chairman.
Election of directors
The Remuneration and Nomination Committee oversees the appointment and induction process for Directors and Committee
Members, and the selection, appointment and succession planning processes for the Company’s Executive Chairman, executives
and senior management. The Committee makes recommendations to the Board on the appropriate skill mix, personal qualities,
expertise and diversity of each position. When a Board vacancy exists or there is a need for particular skills, the Committee in
consultation with the Board determines the selection criteria based on the skills deemed necessary. The Committee identifies
potential Board candidates with advice from external consultants when necessary. The Board then appoints the most suitable
candidate. Board candidates appointed through this process must stand for election at the next general meeting of shareholders
following their appointment.
All relevant information is to be provided in the Notice of Meeting seeking the election or re-election of a director including:
• biographical details including qualifications and experience;
• other directorships and material interests;
•
•
•
•
term of office;
statement by the board on independence of the director;
statement by the board as to whether it supports the election or re-election; and
any other material information.
Terms of appointment
To facilitate a clear understanding of roles and responsibilities, all non-executive directors have a signed letter of appointment.
This letter of appointment letter includes acknowledgement of:
• director responsibilities under the Corporations Act, Listing Rules, the Company’s Constitution and other applicable laws;
•
corporate governance processes and Company policies;
• board and board committee meeting obligations;
•
•
•
•
conflicts and confidentiality procedures;
securities trading and required disclosures;
access to independent advice and employees;
confidentiality obligations;
• directors fees;
•
expenses reimbursement;
• directors and officers insurance arrangements;
• other directorships and time commitments; and
• board performance review and succession.
The Executive Chairman and senior executives have signed executive services agreements. For further information refer to the
Remuneration Report.
67
ANNUAL REPORT 2017 Role of Company Secretary
The Company Secretary is accountable to the Board for:
•
•
•
•
advising the Board and committees on corporate governance matters;
the completion and distribution of board and committee papers;
completion of board and committee minutes; and
the facilitation of director induction processes and ongoing professional development of directors.
All directors have access to the Company Secretary who has a direct reporting line to the Chairman.
Diversity
The Board is committed to having an appropriate level of diversity on the Board and in all areas of the Group’s business. The
Board has established a policy regarding gender, age, ethnic and cultural diversity. Details of the policy are available on the
Company’s website.
The key elements of the Group’s diversity policy are as follows:
• disclose the Group’s commitment to attracting and retaining a diverse range of talented people to work in all levels of its
business, from entry positions to Board members;
•
annual assessment of gender diversity on the Board and in all areas of the Group’s business and reporting against the gender
diversity objectives approved by the Board.
Due to workforce numbers, Buru Energy is not a ‘relevant employer’ under the Workplace Agenda Equality Act. The Group’s
gender diversity as at the end of the reporting period was as follows:
Period
Gender
Level
Directors
Senior Executives
All Other Employees
TOTAL
31 December 2017
31 December 2016
Males
Females
Number
2
2
27
31
%
67
100
84
84
Number
1
-
5
6
%
33
-
16
16
Males
Number
2
2
17
21
%
67
100
77
78
Females
Number
1
-
5
6
%
33
-
23
22
Due to the technical nature of the company’s operations it is difficult to find suitably qualified and experienced female staff,
however, the Company actively encourages and supports its female staff in their career development and provides external
scholarships and support for female students studying earth sciences.
In respect of Aboriginal engagement, the Company’s objectives in 2017 were as follows:
• Continue to grow and develop the Company’s Aboriginal workforce
• Continue to increase partnering with local Kimberley Aboriginal businesses to provide services
With the restart of oil production from the Ungani Oilfield, Buru engaged a further two Aboriginal workers based in the
Kimberley, one as operator and another in HSE. The Company had full retention of its Aboriginal workforce and has also put in
place a traineeship program to train further Aboriginal workers as Operators at the Ungani Facility. This will focus on Nyikina
Mangala Traditional Owners who are the recognised Native Title Holders in the Ungani area.
The Company puts a preference on contracting local Kimberley Aboriginal businesses to provide services. Contracting of
Aboriginal businesses more than doubled in 2017 compared to 2016. Services were provided by Aboriginal businesses in
the areas of civil works, rehabilitation operations, rehabilitation monitoring, site security and inspections and environmental
monitoring.
68
Corporate Governance StatementBURU ENERGY LIMITED Performance review
Approximately every three years, or more frequently if appropriate, the Remuneration and Nomination Committee will undertake
an evaluation of the performance of the Board, its Committees, individual Directors, and senior executives. The other Directors
have an opportunity to contribute to the review process. The reviews generate recommendations to the Board, which votes on
them. The Committee’s nomination of existing Directors for reappointment is not automatic and depends on, amongst other
things, the outcome of the review process. The Committee reviews and makes recommendations to the Board on remuneration
packages and policies applicable to the executive officers and Directors of the Company and of other Group executives for
the Group. It is also responsible for short and long term incentive performance packages, superannuation entitlements and
retirement and termination entitlements.
During the 2017 year there were no formal performance reviews undertaken and Executive Management and Non-executive
Directors only received a modest increase in line with CPI. There was no change to the Executive Chairman’s remuneration.
Board Meetings
Full Board meetings are conducted in accordance with the Company’s constitution at least nine times a year, but generally
monthly, at venues, dates and times agreed, where practical, in advance. In accordance with the constitution, the quorum for a
meeting is two Directors, however all meetings are scheduled so that all Directors can attend.
The agenda for each Board meeting is developed by the Company Secretary in consultation with the Executive Chairman. Board
papers are distributed to Directors at least three business days before the meeting, unless the meeting has been called urgently.
Board papers contain the information required for the Directors to make informed decisions in the efficient discharge of their
responsibilities. The minutes of Board meetings are circulated, approved and signed by the Chairman within fourteen days of the
date of the meeting.
Urgent matters that cannot wait until the next scheduled Board meeting and for which an impromptu Board meeting cannot be
arranged are dealt with by a circular resolution in accordance with Buru Energy’s Constitution (Article 11.22). Circular resolutions
are normally preceded by telephone or email correspondence if practical, and are approved by the Executive Chairman before
being circulated. The resolution is passed when it is signed by the last of the Directors. Signed circular resolutions are entered
into the minute book. The Board meets informally as required to discuss matters and to ensure members are fully informed of
the Company’s operations. Directors are also provided with a weekly report setting out material matters that have occurred.
Independent professional advice and access to company information
Each Director has the right to access all relevant Company information and to speak to and have access to management. Subject
to prior consultation with and approval by the Chairman, each Director may seek independent professional advice in respect of
the Company and the Board’s affairs from a suitably qualified adviser at the Group’s expense. A copy of the advice received by a
Director in these circumstances will, subject to the Chairman’s discretion, be made available to all other members of the Board.
No Director sought such advice during the year.
ASX Principle 2 – Structure the board to add value
Composition of the Board & Director Independence
The names of the Directors of the Company in office at the date of this statement, and information regarding Director’s
independence, experience and length of service, is set out in the Directors’ Report.
The composition of the Board is determined using the following principles:
•
•
•
•
a minimum of three and no more than eight Directors, with extensive knowledge relevant to the conduct of the Company’s
business;
a majority of independent Non-executive Directors;
a Non-executive Independent Director as Chairman (however this is not currently complied with as set out below); and
all Directors are subject to re-election every three years, except for the Managing Director (currently the functional role of the
Executive Chairman).
69
Corporate Governance StatementANNUAL REPORT 2017 The Board should, collectively, have the appropriate level of personal qualities, skills, experience and time commitment to
properly fulfil its responsibilities or have ready access to such skills where they are not available.
The Board considers the mix of skills and the diversity of Board members when assessing the composition of the Board. The
Board assesses existing and potential Directors’ skills to ensure they have appropriate capabilities, experiences, skills and
ability to add value to the Company’s business as a whole. The composition of the Board is also assessed having regard to
the Company’s Diversity Policy, which is designed to promote and achieve diversity at all levels of Buru Energy’s business,
including the Board. A detailed skills matrix of the Board for a company of Buru Energy’s size and nature is not considered
necessary. The Board assesses the independence of each Director annually in light of the interests declared by them. Directors
will be considered independent if they meet the definition of an ‘Independent Director’ in accordance with the ASX Corporate
Governance Council Corporate Governance Principles and Recommendations.
Mr Eric Streitberg is a major shareholder of the Company and undertakes full time executive duties with the Company.
Consequently his role as the Executive Chairman of the Company does not comply with ASX Recommendation 2.5 which states
that the Chairman of the Board should be an Independent Director. This has been the arrangement following the restructure
of the Buru Energy Board in 2014. This does not comply with ASX best practice guidelines, but the Board is of the view that the
current composition of the Board is appropriate for the current situation of the Company.
Nomination Committee
The Company has a combined Nomination Committee and Remuneration Committee. The composition of the Remuneration
and Nomination Committee is a minimum of three members, the majority of whom are independent Non-executive Directors.
The members of the Remuneration and Nomination Committee during the period were:
• Ms Eve Howell – Chairperson, Independent Non-executive
• Mr Robert Willes – Independent Non-executive
• Mr Eric Streitberg
The Company Secretary is the Secretary of the Remuneration and Nomination Committee. The Executive Chairman and
Company Secretary do not attend meetings involving matters pertaining to themselves. The Remuneration and Nomination
Committee meet at least three times a year and as often as required as determined by the Chairperson of the Committee. The
number of meetings that the Committee held, and the number of meetings attended by each Committee member during the
year is disclosed in the Directors’ Report. Any Committee member may convene a meeting of the Committee and two members
constitute a quorum. The Committee has the right to access management and may engage independent professional advisers as
it requires, to assist it to discharge its purpose and responsibilities. The minutes of meetings are circulated, approved and signed
by the Chairman within twenty one days of the date of the meeting. Further details on the Remuneration and Nomination
Committee, including its charter, the Board Renewal and Performance Evaluation Policy and the Diversity Policy can be viewed in
the corporate governance section of the Company’s website.
Director Education
Each new Director will undergo a formal induction at the earliest opportunity to enable them to gain an understanding of
the Company’s financial, strategic, operational and risk management position and to participate fully and actively in Board
decision-making. Directors also have the opportunity to visit Company facilities and meet with management to gain a better
understanding of business operations and both Mr Willes and Ms Howell did so during the year. Directors are also given access
to continuing education opportunities to update and enhance their skills and knowledge.
70
Corporate Governance StatementBURU ENERGY LIMITED ASX Principle 3 – Act ethically and responsibly
Code of conduct
Buru Energy has established a Code of Conduct and this can be viewed in the corporate governance section of the Company’s
website. The Code of Conduct applies to all Directors, senior executives, employees and contractors working on Buru Energy
sites. It sets out the practices necessary to maintain confidence in the Company’s honesty and integrity and the practices
necessary to take into account the legal obligations and the expectations of the Company’s stakeholders and the responsibility
and accountability of individuals for reporting and investigating reports of unethical practices.
The Code of Conduct sets out the procedure to be followed if there is, or may be, a conflict between the personal or other
interests of a Director and the business of the Company including the notification of an interest to the Board and a withdrawal
from a meeting in which the material matter is discussed. There have been no reports of a departure from the Code of Conduct.
Trading in Company securities by Directors and employees
The key elements of the Company’s share trading policy for Directors and employees are:
•
Identification of those restricted from trading – Directors and Senior Executives may acquire shares in the Company, but are
prohibited from dealing in Company shares or exercising options:
-
in respect of a well drilling program in which Buru Energy has an interest, from the date on which the casing string above
the first objective is set (or such earlier time or event as may be notified to staff by the Executive Chairman) until the close
of trading on the day that the drilling rig has been released from the relevant location;
-
two weeks prior to the release of Buru Energy’s half-year and annual reports;
- whilst in possession of price sensitive information not yet released to the market.
•
•
•
•
•
•
to raise the awareness of legal prohibitions including transactions with colleagues and external advisers;
to raise awareness that the Group prohibits entering into transactions that limit economic risks related to unvested share-
based payments;
to raise awareness that the Group prohibits those restricted from trading in Company shares as described above from
entering into transactions such as margin loans that could trigger a trade during a prohibited period;
to require details to be provided of intended trading in the Company’s shares;
to require details to be provided of the subsequent confirmation of the trade; and
the identification of processes for unusual circumstances where discretions may be exercised in cases such as financial
hardship.
The policy also details the insider trading provisions of the Corporations Act 2001 and is reproduced in full on the Company’s
website.
ASX Principle 4 – Safeguard integrity in corporate reporting
Audit Committee
The Company has a combined Audit Committee and Risk Committee. The Audit and Risk Committee advises on the
establishment and maintenance of a framework of internal control and appropriate ethical standards for the management of the
Group.
71
Corporate Governance StatementANNUAL REPORT 2017 The Audit and Risk Committee is responsible for oversight and review of:
•
the annual and half yearly statutory financial statements;
• procedures and issues that could have a significant impact on financial results (for example impairment testing);
• Buru Energy’s internal controls including accounting controls;
•
•
•
•
external auditor’s independence and monitoring the audit process in accordance with the international auditing standards
and any other applicable regulations;
the appropriateness of the external auditor’s provision of non-audit services;
the need for and, if required, the scope and conduct of internal audit;
the establishment and implementation of a risk management process to identify, assess, monitor and control risk;
• management’s periodic risk assessments and recommendations;
•
•
•
the adequacy of Buru Energy’s insurances;
compliance with appropriate regulations (including environmental and safety); and
reporting on reserves in accordance with the appropriate regulations and guidelines.
The Audit and Risk Committee reviews the performance of the external auditors on an annual basis and will meet with them
during the year to:
• discuss the external audit plans, identifying any significant changes in structure, operations, internal controls or accounting
policies likely to impact the financial statements and to review the fees proposed for the audit work to be performed;
•
•
review the half-year and full year financial reports prior to lodgement with the ASX, and any significant adjustments required
as a result of the auditor’s findings, and to recommend Board approval of these documents, prior to announcement; and
review the results and findings of the auditor, the adequacy of accounting and financial controls, and to monitor the
implementation of any recommendations made.
The composition of the Audit and Risk Committee is a minimum of three members and is ordinarily comprised of only Non-
executive Directors. The members of the Audit and Risk Committee during the period were:
• Mr Robert Willes (Chairperson) – Independent Non-executive
• Ms Eve Howell – Independent Non-executive
• Mr Eric Streitberg – (Not independent but required to meet the minimum number of three members)
The external auditors, the Executive Chairman (when not a member of the Committee) and the Head of Finance, are invited to
Audit and Risk Committee meetings at the discretion of the Committee.
The Audit and Risk Committee meet at least three times a year and as often as required as determined by the Chairman of the
Committee. The number of meetings that the Committee held, and the number of meetings attended by each Committee
member during the year is disclosed in the Directors’ Report. Any Committee member may convene a meeting of the Committee
and two members constitute a quorum. The Committee has the right to access management and may engage independent
professional advisers as it requires, assisting to discharge its purpose and responsibilities. The Company Secretary is the
Secretary of the Audit and Risk Committee. The minutes of meetings are circulated, approved and signed by the Chairman within
twenty one days of the date of the meeting. The external auditor met with the Audit and Risk Committee twice during the year.
Further details on the Audit and Risk Committee including its charter can be viewed in the corporate governance section of the
Company’s website.
72
Corporate Governance StatementBURU ENERGY LIMITED Financial Statements
The Executive Chairman and the Head of Finance have declared in writing to the Board that in respect of both the 31 December
2017 financial report and 30 June 2017 half-year financial report of the Company and its controlled entities that:
•
•
•
•
•
the Company’s financial records have been properly maintained;
the financial statements comply with accounting standards;
the financial statements give a true and fair view;
these statements are based on a sound system of risk management; and
the Company’s risk management and internal controls are operating efficiently and effectively.
These representations are made prior to the board approval of the release of the financial reports and is made after enquiry of,
and representation by, appropriate levels of management.
External Auditor
The external auditor attends the annual general meeting to answer questions concerning the conduct of the audit, the
preparation and content of the auditor’s report, accounting policies adopted by the Group and the independence of the auditor
in relation to the conduct of the audit.
Internal Audit
Given the size and scale of Buru Energy, it does not have an internal audit function.
ASX Principle 5 – Make timely and balanced disclosure
The Board provides shareholders with information using a comprehensive Continuous Disclosure and Market Communications
Policy which includes identifying matters that may have a material effect on the price of the Company’s securities, notifying them
to the ASX, posting them on the Company’s website, and issuing media releases. More details of the policy are available on the
Company’s website.
In summary, the Continuous Disclosure and Market Communications Policy operates as follows:
•
•
•
the Executive Chairman and Company Secretary are responsible for interpreting the Group’s policy and where necessary
informing and seeking approval from the Board. The Executive Chairman and Company Secretary are primarily responsible
for all external communications including releases made on ASX;
the full annual report is made available to all shareholders via the Company’s website. A physical copy will be sent to any
shareholder that specifically requests it. The full annual report includes relevant information about the operations of the
Group during the year, changes in the state of affairs and details of future developments;
the half-yearly report is made available to all shareholders via the Company’s website. A physical copy will be sent to any
shareholder that specifically requests it. The half-yearly report contains summarised financial information and a review of the
operations of the Group during the period;
• proposed major changes in the Group which may impact on share ownership rights are submitted to a vote of shareholders;
•
•
•
all announcements made to ASX, and related information (including information provided to analysts or the media during
briefings), are placed on the Company’s website after they are released to the ASX;
the full texts of notices of meetings and associated explanatory material are placed on the Company’s website; and
all of the above information, dating back to the listing of the Company, is made available on the Company’s website within
one day of public release, and is emailed to all shareholders who lodge their email contact details with the Company.
Information on lodging email addresses with the Company is available on the Company’s website.
73
Corporate Governance StatementANNUAL REPORT 2017 ASX Principle 6 – Respect the rights of security holders
Company website and corporate governance
The following information is included in the Corporate Information section of the Company’s website:
•
company overview;
• profiles of directors and senior executives;
•
•
corporate directory; and
corporate governance documents including key policies, board and committee charters and the Company constitution.
Investor Relations
The Board aims to ensure that shareholders and investors have appropriate access to Company information. The Company has
a strategy to promote effective two way communication with shareholders through a policy of open disclosure to shareholders,
regulatory authorities and the broader community of all material information with respect to the Company’s affairs including, but
not limited to:
• process for performance evaluation of the board, its committees, the Executive Chairman and senior executives;
•
the link between remuneration paid to directors and key executives and corporate performance, as more fully disclosed in
the annual Remuneration Report;
•
shorter, more comprehensible notices of meetings.
The Company will ensure that:
•
•
all documents that are released to the ASX are made available as soon as possible on the Company’s website; and
all other information on the Company’s website is updated on a regular basis.
The Company will also make timely announcements concerning:
•
•
changes to directors;
changes to the Executive Chairman’s contract or remuneration package;
• grant, expiry or vesting of employee share options or share appreciation rights;
•
•
•
share purchases or divestment by Directors;
conflicts of interest & related party transactions; and
significant changes to accounting policies.
In addition to communicating with shareholders, the Company also communicates with investors who may or may not be
shareholders. These communication activities must not involve the disclosure of confidential or potentially market sensitive
information. When briefings with investors and analysts are held any price sensitive information included in such presentations
is first made available to the market.
Participation at Meetings
The Board encourages full participation of shareholders at the Annual General Meeting, to ensure a high level of accountability
and identification with the Group’s strategy and goals. Important issues are presented to the shareholders as single resolutions.
Shareholders are requested to vote on the appointment and aggregate remuneration of Directors, the granting of options
and shares to Directors, the Remuneration report and changes to the Constitution and all other matters requiring shareholder
approval. A copy of the Constitution is available to any shareholder who requests it.
Shareholder communications
Shareholders have the option of electing to receive all Company and share registry communications electronically, and also to
send communications via email or to the Company website. All shareholders have the ability to request an electronic copy of ASX
releases.
74
Corporate Governance StatementBURU ENERGY LIMITED ASX Principle 7 – Recognise and manage risk
Risk Committee
The Company has a combined Audit Committee and Risk Committee. Information on that Committee is included above under
ASX Principle 4.
Risk management
The Audit and Risk Committee oversees the establishment, implementation, and annual review of the Group’s Risk Management
System. Management has established and implemented the Risk Management System for assessing, monitoring and managing
all risks, including material business risks, for the Group (including sustainability risk). The Executive Chairman and the Head
of Finance have provided assurance, in writing to the Board, that the financial reporting risk management and associated
compliance and controls have been assessed and found to be operating effectively. The operational and other risk management
compliance and controls have also been assessed and found to be operating effectively.
Management provide the risk profile to the Audit and Risk Committee that outlines the material business risks to the Group.
Risk reporting includes the status of risks through integrated risk management programs aimed at ensuring risks are identified,
assessed and appropriately managed. The Audit and Risk Committee reports the status of material business risks to the Board
on an annual basis, and a review was undertaken with senior management during the year. Further details of the Group’s risk
management policy and internal compliance and control system are available on the Company’s website.
The risks involved with oil and gas exploration generally and the specific risks associated with Buru Energy’s activities in
particular are regularly monitored and all exploration and investment proposals reviewed by the Committee include a conscious
consideration of the issues and risks of each proposal. The Company’s executive and senior management have extensive
experience in the industry and manage and monitor potential exposures facing Buru Energy. The Group’s operations are subject
to significant environmental regulation under both Commonwealth and State legislation in relation to its oil and gas exploration
and production activities. The Group is committed to achieving a high standard of environmental performance and continuous
improvement. It has established a Group-wide Environmental Policy together with operation and activity specific environmental
management plans to manage this area of the Company’s activities. Compliance with the requirements of environmental
regulations and with specific requirements of site environmental approvals was substantially achieved across all operations with
no instances of material, non-compliance in relation to approval requirements noted. Based on the results of enquiries made, the
Board is not aware of any significant breaches during the period covered by this report.
Internal Audit
Given the size and scale of Buru Energy, it does not have an internal audit function.
The Board is responsible for the overall internal control framework, but recognises that no cost-effective internal control system
will preclude all errors and irregularities. Comprehensive practices have been established to ensure:
•
•
capital expenditure and commitments above a certain size obtain prior Board approval;
financial exposures are controlled, further details of the Group’s policies relating to interest rate management, forward
exchange rate management and credit risk management are included in the financial statements;
• occupational health and safety standards and management systems are monitored and reviewed to achieve high standards
of performance and compliance with regulations;
• business transactions are properly authorised and executed;
•
•
•
the quality and integrity of personnel;
financial reporting accuracy and compliance with the financial reporting regulatory framework; and
environmental regulation compliance.
75
Corporate Governance StatementANNUAL REPORT 2017 ASX Principle 8 – Remunerate fairly and responsibly
Remuneration Committee
The Company has a combined Nomination Committee and Remuneration Committee. Information on that Committee in
included above under ASX Principle 2.
The Company is committed to adopting remuneration practices that:
•
•
align the interests of employees and shareholders;
attract and retain suitably qualified employees; and
• motivate employees to achieve superior performance.
The Remuneration and Nomination Committee is responsible for making recommendations to the Board on remuneration
policies and employment practices applicable to directors, senior executives and employees of the Company.
For details of the Company’s policies and practices regarding the remuneration of directors and senior executives and
remuneration paid to directors and senior executives please refer to the Remuneration Report.
For details of the Company’s Employee Share Option Plan please refer to the Remuneration Report. Note that employees are
prohibited from entering into hedge contracts which limit the economic risk of participation in this plan.
Formal appraisals are conducted at least annually for all employees. Training and development and appropriate remuneration
and incentives with regular performance reviews create an environment of cooperation and constructive dialogue with
employees and senior management.
76
Corporate Governance StatementBURU ENERGY LIMITED Additional ASX Information
Additional information required by the ASX Limited Listing Rules and not disclosed elsewhere in this report is set out below.
The distribution of ordinary shares ranked according to size as at 28 February 2018 was as follows:
Category
100,001 and Over
10,001 to 100,000
5,001 to 10,000
1,001 to 5,000
1 to 1,000
Total
Unmarketable Parcels
Ordinary Shares
330,822,303
82,425,865
10,624,122
7,627,865
521,178
432,021,333
1,019,001
%
76.58
19.08
2.46
1.77
0.12
100.00
0.24
No of Holders
519
2,556
1,382
2,585
1,112
8,154
1,490
The 20 largest ordinary shareholders of the ordinary shares as at 28 February 2018 were as follows:
Rank
Name
Number of ordinary shares
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
BIRKDALE ENTERPRISES PTY LTD
CHEMCO PTY LTD
COOGEE RESOURCES PTY LTD
HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED
MR ERIC CHARLES STREITBERG
PERSHING AUSTRALIA NOMINEES PTY LTD
MR STEPHEN HARRY JONES
CITICORP NOMINEES PTY LIMITED
MAXIGOLD HOLDINGS PTY LTD
ROCKET SCIENCE PTY LTD
MR JOHN PHILIP DANIELS
WANDJI INVESTMENTS LIMITED
BNP PARIBAS NOMINEES PTY LTD
J P MORGAN NOMINEES AUSTRALIA LIMITED
SINO PORTFOLIO INTERNATIONAL LIMITED
MAJOR DEVELOPMENT GROUP PTY LTD
JH NOMINEES AUSTRALIA PTY LTD
PARAMON HOLDINGS PTY LTD
TWINSOUTH HOLDINGS PTY LTD
CHARRINGTON PTY LTD
Total twenty largest shareholders
Balance of register
Total register
%
6.36
31.35
16.95
31.70
13.64
100.00
18.27
%
8.11
4.01
3.70
3.17
2.57
1.85
1.65
1.40
1.40
1.26
1.11
1.09
0.95
0.88
0.88
0.86
0.79
0.69
0.69
0.68
35,056,269
17,333,333
16,000,000
13,694,364
11,103,133
7,971,996
7,149,240
6,052,021
6,043,780
5,450,000
4,816,121
4,722,400
4,091,938
3,823,195
3,820,588
3,707,890
3,400,000
3,000,000
3,000,000
2,940,000
163,176,268
268,845,065
37.77
62.23
432,021,333
100.00
77
ANNUAL REPORT 2017 Additional ASX Information
The following interests were registered on the Company’s register of Substantial Shareholders as at 28 February 2018:
Shareholder
Birkdale Enterprises Pty Ltd
Chemco Pty Ltd
Eric Streitberg and his associates
Voting rights
Ordinary shares
At a general meeting of shareholders:
Number of ordinary shares
35,056,269
33,333,333
29,747,406
%
8.11
7.71
6.89
(a) On a show of hands, each person who is a member or sole proxy has one vote.
(b) On a poll, each shareholder is entitled to one vote for each fully paid share.
Unlisted Options
There are no voting rights attached to the unlisted options:
Other information
Buru Energy Limited, incorporated and domiciled in Australia, is a publicly listed company limited by shares.
The Company is listed on the Australian Securities Exchange. ASX Code: BRU
The Company and its controlled entities schedule of interests in permits as at 28 February 2018 were as follows:
TYPE
OWNERSHIP
Production licence
Production licence
Production licence
Production licence
Production licence
Exploration permit
Exploration permit
Exploration permit
Exploration permit
Exploration permit
Exploration permit
Exploration permit
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
37.50%
37.50%
OPERATOR
Buru Energy Ltd
Buru Energy Ltd
Buru Energy Ltd
Buru Energy Ltd
Buru Energy Ltd
Buru Energy Ltd
Buru Energy Ltd
Buru Energy Ltd
Buru Energy Ltd
Buru Energy Ltd
Buru Fitzroy Pty Ltd
Buru Fitzroy Pty Ltd
PERMIT
L6
L8
L17
L20
L21
EP129*
EP391
EP428
EP431
EP436
EP457
EP458
* Excluding Backreef Area
78
BURU ENERGY LIMITED Directors
Mr Eric Streitberg
Ms Eve Howell
Mr Robert Willes
Company Secretary
Mr Shane McDermott
Executive Chairman
Independent Non-executive Director
Independent Non-executive Director
Registered and Principal Office
Level 2
16 Ord St
West Perth WA 6005
Telephone:
Email:
Website:
+61 (08) 9215 1800
info@buruenergy.com
www.buruenergy.com
1300 554 474
registrars@linkmarketservices.com.au
www.linkmarketservices.com.au
Share Registry
Link Market Services Limited
Level 12, QV1 Building
250 St Georges Terrace
Perth WA 6000
Telephone:
Email:
Website:
Auditors
KPMG
235 St George’s Terrace
Perth WA 6000
Stock Exchange
Australian Stock Exchange
Exchange Plaza
2 The Esplanade
PERTH WA 6000
ASX Code:
Shares on issue:
Unlisted options:
BRU
432,021,333
4,550,000
Corporate Register
79
ANNUAL REPORT 2017
www.buruenergy.com