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ANNUAL
REPORT
EMPIRE ENERGY GROUP LIMITED
AND ITS CONTROLLED ENTITIES
ABN 29 002 148 361
ON THE COVER:
SILVER CITY RIG #40 DURING DRILLING OPERATIONS AT CARPENTARIA-2H
Empire Energy Group Limited
Contents
31 December 2023
Corporate directory
Chair and Managing Director letter to shareholders
Operations review
Directors' report
Directors' report - remuneration report
Auditor's independence declaration
Consolidated statement of profit or loss and other comprehensive income
Consolidated statement of financial position
Consolidated statement of changes in equity
Consolidated statement of cash flows
Notes to the consolidated financial statements
Directors' declaration
Independent auditor's report to the members of Empire Energy Group Limited
Shareholder information
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1
Empire Energy Group Limited
Corporate directory
31 December 2023
Directors
Peter Cleary (Chairman)
Alexander Underwood (Managing Director)
Louis Rozman
Prof John Warburton
Karen Green
Company Secretary
Ben Johnston
Notice of Annual General
Meeting
The details of the annual general meeting of Empire Energy Group Limited
are:
28 May 2024 at 9.30 am
Level 2, 259 George Street, Sydney NSW 2000
Registered Office
Share Registry
Australian Auditor
US Auditor
Australian Solicitors
US Solicitors
Bankers
Level 5
6-10 O'Connell Street
Sydney NSW 2000
Computershare Investors Services Pty Limited
Level 3
60 Carrington Street
Sydney NSW 2000
Nexia Sydney Audit Pty Ltd
Level 22
2 Market Street
Sydney NSW 2000
Schneider Downs & Co. Inc
One PPG Place
Suite 1700
Pittsburgh PA 15222
Baker McKenzie
Level 46, Tower One
International Towers Sydney
100 Barangaroo Avenue
Barangaroo NSW 2000
Hodgson Russ LLP
140 Pearl Street, Suite 100
Buffalo, NY 14202
Macquarie Bank Limited
50 Martin Place
Sydney NSW 2000
Australia & New Zealand Banking Group Limited
1 Chifley Plaza
Sydney NSW 200
PNC Bank
249 Fifth Avenue
One PNC Plaza
Pittsburgh PA 15222
2
Empire Energy Group Limited
Corporate directory
31 December 2023
Stock Exchange Listing
Empire Energy Group Limited shares are listed on:
Australian Securities Exchange (ASX code: EEG)
New York OTC Market (Code: EEGNY) OTC#: 452869103
Sponsor: Bank of New York 1 ADR for 20 Ordinary Shares
Website
www.empireenergygroup.net
3
Empire Energy Group Limited
Chair and Managing Director letter to shareholders
31 December 2023
Dear Shareholders,
Empire continues progress to first commercial gas in the Beetaloo with the Carpentaria Pilot project. We
anticipate commencing pilot production and sales in the first half of 2025 (subject to a final investment decision
by the Board) which would make Empire the first company to sell gas from the Beetaloo Basin.
The critical shortage of new gas supply in Australia is most acute in the Northern Territory where declining
supply from the Blacktip Gas Field and other sources is putting extreme pressure on alternative sources of
gas to power their network. The Beetaloo Basin enjoys existing infrastructure to connect the enormous
Beetaloo resource to markets in dire need.
We continue to process data acquired through our drilling and stimulation of four wells in EP187 as we progress
our pilot project. Flow rates from C2 and C3 indicate to us that the resource is likely commercially viable and
we expect further productivity gains as we apply and continue to build upon the valuable IP we have developed
to date. Independent third-party reservoir engineering consultants Subsurface Dynamics, Inc. have assessed
our results and predict that 3km horizontal development wells can generate EUR of 6-8 BCF of gas per well.
Netherland Sewell & Associates, Inc. has upgraded the 2C contingent resource to 1,739 PJ (>1.5 Tcf), over
an area of less than 1% of our leasehold position.
Late in 2023, an opportunity arose to acquire a fit for purpose gas plant that had been processing gas for AGL
near Sydney. Empire acquired the plant for A$2.5 million utilising existing cash at bank, a small fraction of the
cost of an equivalent new build plant. The plant was relocated to Roma in Queensland and is in the process
of being refurbished ahead of transport and reassembly as the Carpentaria Pilot Gas Plant (CPGP). Empire
believes the cost of acquisition, refurbishment and relocation will result in saving ~$30m when compared with
new build alternatives. Perhaps more importantly due to current global supply chain issues we may save ~12
months to first commercial gas.
We have managed this without dilution of capital. The receipt of $15.6m in R&D and the final Beetaloo
Cooperative Drilling Program funds of $7.7m has meant we have not approached the capital markets since
June 2022. The Empire team is focused on being a careful steward of your capital.
At the Annual General Meeting in May 2023, former Chairman Paul Espie AO announced his retirement from
the Board of Empire Energy. We thank Paul for his substantial contribution to the Company’s strategic direction
as Chairman over the last five years and for his support as a shareholder, and wish him the best for his
retirement.
The Board welcomed Karen Green to its ranks upon the retirement of Paul Fudge and his alternate Jacqui
Clarke. Karen’s deep knowledge of the Northern Territory where she has lived and worked since 1991 brings
valuable experience and relationships as we move into the next phase of our development. We thank Paul
and Jacqui for their service to the Board and we look forward to continuing our important relationship with
them.
Late 2023 saw some extraordinary M&A transactions in global oil and gas, particularly in relation to the US
shale industry. The Exxon Mobil takeover of Pioneer Natural Resources and Chevron’s of acquisition of Hess
continues a consolidation trend amongst large oil and gas companies as the world transitions to lower carbon
dioxide emissions while continuing to satisfy the developed and emerging world’s insatiable demand for
energy.
The future for gas in Australia’s energy security is bright. Governments both Federal and State / Territory are
productively engaging with the industry to ensure supply to underwrite gas supply for manufacturing and
energy for decades to come.
As Empire progresses towards pilot production, we are focused on financing options that will maximise
shareholder value while minimizing dilution of your interests in the Company. We have commenced a farmout
process. Non-disclosure agreements have been signed with multiple global upstream energy companies and
discussions are proceeding well. We are also exploring options for financing including project finance that, in
the success case, will provide efficient capital solutions as we push towards production and cash flow.
4
Empire Energy Group Limited
Chair and Managing Director letter to shareholders
31 December 2023
We thank Empire’s management, technical and operations teams for your hard work and outstanding safety
and environmental performance over the course of 2023 and our shareholders and stakeholders across all of
our operating areas for your support.
Yours sincerely,
Peter Cleary
Chair
Empire Energy Group Limited
Alex Underwood
Managing Director
Empire Energy Group Limited
5
Empire Energy Group Limited
Operations review
31 December 2023
A.
2023 OVERVIEW & HIGHLIGHTS
Empire Group’s functional currency is Australian Dollars. All references to dollars are Australian Dollars unless
otherwise stated.
GROUP FINANCIAL HIGHLIGHTS
• Group Revenue $6.1 million (December 2022: $13.7 million)
• Net production 3,759 Mcfe per day (December 2022: 4,581 Mcfe per day)
• Outstanding debt $8.8 million (December 2022: $7.8 million)
• Cash at bank $13.6 million (December 2022: $21.9 million)
AUSTRALIA – NORTHERN TERRITORY
•
•
•
•
•
•
•
Empire holds a 100% working interest and operatorship in approximately 28.9 million acres of petroleum
exploration tenements across the McArthur Basin and the Beetaloo Sub-basin in onshore Northern
Territory, Australia.
In January 2023, Carpentaria-3H (“C-3H”) was successfully stimulated, significantly below budget,
delivering all 40 planned stages across 1,989 metres (6,526 feet) of horizontal well bore. Carpentaria-4V
(“C-4V”) was also successfully drilled to a depth of 2,000 metres (6,562 feet). C-4V encountered thick, gas
charged Velkerri shales consistent with pre-drill prognosis. These shales are ~150 metres deeper than at
the C-3H location, providing additional pressure support to drive enhanced gas flow rates in future
development scenarios.
In March 2023, C-3H was flow tested for 27 days and then shut in for soaking (the practice of shutting in
a well for a period following fracture stimulation to maximise long-term productivity). The gas production
rate ranged between 2.3 million standard cubic feet per day (“mmcf / day”) and 5.7 mmcf / day with an
average of 2.6 mmcf / day. C-2H was also brought back online to test the benefit of soaking, with excellent
results. C-2H achieved a new average flow rate over 30 days (“IP30”) of 2.81 mmcf per day, equating to
a normalized flow rate of over 3 mmscf per day per 1,000 metres of horizontal section. This represents an
increase of approximately 17% over the initial IP30 rates announced in September 2022 despite partial
reservoir depletion following the initial 51-day flow testing program.
In May 2023, C-2H flow testing was completed with continued strong gas production rates, producing a
total of 323 Terajoules (“TJ”) (281 mmscf) over 127 days. Gas composition remained consistent with high
calorific value and extremely low CO2. This equates to a normalized rate of 2.75 TJ (2.4 mmscf) per day
per 1,000 metres for the entire test period. The post-soak 2023 IP30 was confirmed at 3.5 TJ (3.0 mmscf)
per day per 1,000 metres. C-2H was shut-in for availability as a future gas producer.
Also during May 2023, Empire announced a major EP187 Contingent Resources upgrade following its
2022 Beetaloo work program. Contingent Resources as independently assessed by Netherland, Sewell &
Associates, Inc. (“NSAI”) for Empire’s wholly owned and operated EP187 evidence an LNG scale resource
at EP187. Empire has now booked 2C Contingent Resources of 1,739 PJ for EP187 representing an
average Estimated Ultimate Recovery (“EUR”) per well of 7.9 PJ.
In August 2023, Empire and APA Group (ASX: APA) executed an initial agreement for the establishment
of exclusive midstream infrastructure early works and proposed long-form agreements furthering the
memorandum of understanding announced by Empire on 27 October 2021. Subject to entering long-form
agreements and approvals by each party, APA may fund the Carpentaria Pilot Project midstream gas
infrastructure facilities under a proposed partnering agreement, which would materially reduce the capital
requirements for Empire to commence commercial production.
In September 2023, Empire reported C-3H had flowed gas at an average rate of 3.3 mmcf / day (3.8 TJ /
day) over the first 30 days following reopening. C-3H was brought back online on 3 August 2023 and has
demonstrated the material benefits to productivity of soaking, through significantly increased gas flow
rates.
6
Empire Energy Group Limited
Operations review
31 December 2023
• During October 2023, Empire received an R&D Tax Offset for FY2022 of $15.6 million in cash following
finalisation of its 2022 Australian tax return.
•
•
In November 2023, Ms Karen Green joined the Board as an independent Non-Executive Director and
Chair of the Audit & Risk Committee. Empire also announced that Mr Paul Fudge and Ms Jacqui Clarke
retired as a Non-Executive Director and alternate Director of the Company. Mr Paul Fudge remains
Empire’s largest shareholder.
In December 2023, Empire acquired the Rosalind Park Gas Plant (“RPGP”) from AGL Limited for $2.5
million cash. The RPGP is a fit for purpose facility that may result in >$30 million in cost savings and
reduce lead time by ~12 months compared with new build alternatives for the Carpentaria Pilot Project.
• During the year the Empire team advanced Front-End Engineering and Design, financing, gas sales and
transportation and regulatory approvals for the proposed Carpentaria Pilot Project in EP187.
C-2H Restart - C-2H was brought back online to test the
benefit of soaking, with excellent results
C-3H Restart - C-3H was brought back online on 3
August 2023 and has demonstrated the material
benefits to productivity of soaking, through significantly
increased gas flow rates
7
Empire Energy Group Limited
Operations review
31 December 2023
Managing Director Alex Underwood inspecting the newly acquired
RPGP at the Camden Gas Project Site
Part of the newly acquired RPGP – low
pressure gas is compressed to sales
gas pressure using gas engine driven
reciprocating compressors
Part of the newly acquired RPGP - Gas will
be delivered to the Carpentaria Gas Plant via
the buried gas gathering system at low
pressures to maximise well deliverability
Empire staff visiting the Elliott Community, NT
8
Empire Energy Group Limited
Operations review
31 December 2023
Sonia Harvey (Empire) and Jon Bennett (inGauge Energy) at the
Empire stand at the Alice Springs Show
Managing Director Alex Underwood presenting at the
SEAAOC Conference
9
Empire Energy Group Limited
Operations review
31 December 2023
USA – APPALACHIA
•
•
Empire’s Appalachia operations reported reduced gas production for the year ended 31 December 2023
compared to the prior year. The decreased gas production reflects temporary downtime at a gas pipeline
owned by the local infrastructure utility, National Fuel Gas Company (NYSE: NFG). During part of the year
a key export pipeline for Empire's gas was offline, this reduced production. Later in the year the pipeline
was reopened.
The Henry Hub gas price has also moderated during 2023 reflecting a mild Northern Hemisphere winter
leading to growing gas in storage. Empire has elected to shut-in marginal wells which can be reopened
when gas prices improve. This allows Empire to preserve its gas reserves to maximise returns when prices
are higher.
• Net gas production of 1,355,860 Mcf (2022: 1,654,481 Mcf).
• Net oil production of 2,722 Bbls (2022: 2,919 Bbls) reflects timing of oil sales.
B.
CREDIT FACILITIES
The outstanding balance of the USA Macquarie Bank Limited Credit Facility as at 31 December 2023 was
US$4.75 million. Total repayments of US$550,000 were made during the year.
The Company’s USA Credit Facility with Macquarie Bank Limited has the following key terms:
Principal amount
Initial amount US$7.5 million (outstanding loan balance and availability US$4.75
million, undrawn nil)
Term
5 years to 30 September 2024
Interest rate
30-Day SOFR (5.36% at 31 December 2023) plus 6.61%
Repayment terms
100% of Appalachia Net Operating Cashflow subject to minimum amortisation
of US$550,000 per annum
Key covenants
Proved Developed Producing Reserves PV10 / Net Debt > 1.3x
Current Ratio > 1.0x
Working capital > 0
The Company established an additional credit facility with Macquarie Bank Limited in 2022 to support its
Northern Territory operations. The outstanding balance as at 31 December 2023 was $1.827 million. Key terms
of this credit facility are set out below:
Principal amount
$7.25 million comprising:
•
•
Facility A (Revolving Credit Facility, $2.25 million)
Facility B (Performance Bond Facility, $5 million)
Drawn amount
Facility A: $1.827 million at 31 December 2023
Facility B: undrawn at 31 December 2023
Borrowers
Imperial Oil & Gas Pty Limited
Imperial Oil & Gas A Pty Limited
Guarantor
Empire Energy Group Limited and Borrowers
Security
Fees
First ranking security over all present and after-acquired property of each
Borrower
First ranking security
Utilisation Fee: 1.5% of utilisation
Commitment Fee: 40% of margin
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Empire Energy Group Limited
Operations review
31 December 2023
Margin: Facility A (5.5% p.a.), Facility B (10% p.a.)
Interest rate
Margin plus BBSW
Financial covenants
Ratio of current assets to current liabilities of at least 1.00 to 1.00
Minimum cash balance in the Borrowers and Guarantor of at least $5 million (or
its equivalent in any other currency or currencies)
Repayment date
31 December 2025
Repayment
arrangements
Facility A: on receipt of relevant R&D Tax Incentive payment
Facility B: on release of environmental bonds after rehabilitation
C.
HEDGING
As at 31 December 2023, Empire’s US production assets were unhedged.
D. BUSINESS RISK
Exploration risk – Empire and its subsidiaries have interests in assets at various stages of exploration,
appraisal and development. Many leases have had very low levels of exploration undertaken to date and may
not yield commercial quantities of hydrocarbons. Oil and gas exploration is inherently subject to numerous
risks, including the risk that drilling will not result in commercially viable oil and gas production.
Application risk – Several of Empire’s Northern Territory assets are in application stage requiring native title
and / or regulatory approvals to be granted as leases capable of being explored on. Such approvals may or
may not be granted which could adversely impact the value of the Company.
Regulatory risk – Empire has operations spanning two states in the USA and the Northern Territory, Australia.
Regulatory approvals are required to explore, appraise, develop and produce from the assets. Where such
regulatory approvals are already in place, there is a risk that they could be revoked. Where such regulatory
approvals are not in place, there is a risk that they may not be granted.
Debt facility risk – Empire, through its subsidiaries, has debt facilities in place with Macquarie Bank Limited.
Whilst Empire has financial flexibility and expects to generate sufficient cash flow to repay the debts in full,
there is a risk in the future that financial and other covenants under the debt facilities could be breached, which
could result in Macquarie exercising its security rights under the facilities. The facilities mature in September
2024 and December 2025 and will need to be repaid or refinanced prior to maturity.
Commodity price risk Empire, through its US subsidiaries, sells oil and gas at market prices to customers
who price the products off US benchmark oil and gas markets. Empire is exposed to the risk of material
declines in the prices of those commodities. Empire, through its Australian subsidiary, explores for oil and gas
in Australia and maybe subject to domestic Australian gas price risk, LNG price risk and oil price risk.
Reliance on key personnel – Empire’s success depends in large measure on certain key personnel. The loss
of the services of such key personnel may have a material adverse effect on the business, financial condition,
operational results and prospects.
Economic risk – General economic conditions, movements in interest rates, inflation rates and foreign
exchange rates, investor sentiment, demand for, and supply of capital and other general economic conditions
may have a negative impact on Empire and its subsidiaries ability to carry out its exploration, appraisal,
development and production plans.
Environmental risk – The upstream oil and gas industry is exposed to environmental risks, including the risk
of oil and chemical spills, the risk of uncontrolled gas venting, and other material environmental risks. If an
environmental incident was to occur, it may result in Empire’s subsidiaries’ licenses being revoked, its rights
to carry on its activities suspended or cancelled, or rectification costs, and significant legal consequences.
Title risk – Interests in onshore tenements in Australia are governed by the respective state/territory legislation
and are evidenced by the granting of licences or leases. Each licence or lease is for a specific term and carries
with it annual expenditure and reporting commitments, as well as other conditions requiring compliance.
11
Empire Energy Group Limited
Operations review
31 December 2023
Consequently, the Company could lose title to or its interest in the Tenements if licence conditions are not met
or if insufficient funds are available to meet expenditure commitments. The Northern Territory Government has
declared proposed Reserved Blocks over parts of Empire’s tenements which are likely to impact the
Company’s ability to carry out petroleum exploration and development activities on those areas.
Native title and Aboriginal land - The Tenements extend over areas in which legitimate common law native
title rights of indigenous Australians exist. The ability of the Company to gain access to its Tenements and to
conduct exploration, development and production operations remains subject to native title rights and
aboriginal land rights and the terms of registration of such title agreements.
Reserves risk – Reserves assessment is a subjective process that provides an estimate of the volume of
recoverable hydrocarbons. Oil and gas estimates are not precise and are based on knowledge, experience,
interpretation and industry practices. There is a risk that the Company’s reserves do not generate the actual
revenues and cashflows that are currently being budgeted which could adversely impact the Company.
Services risk – Empire engages the services of third party service providers to carry out exploration, appraisal,
development and operating activities. The cost of such services is subject to very high price volatility,
particularly in remote areas. There is a risk that such services may not be able to be provided at a reasonable
price, thereby preventing exploration, appraisal, development and operations activities from occurring.
Production risk – Empire has producing oil and gas assets in the USA. If these assets do not produce the
level of production currently budgeted by Empire, then the cashflow they deliver will not materialise. The
carrying values of these assets could also be adversely impacted. Production risk has the potential to adversely
impact the Company.
Insurance risk – The Company intends to insure its operations in accordance with industry practice. However,
in certain circumstances, the Company’s insurance may not be of a nature or level to provide adequate
insurance cover. The occurrence of an event that is not covered or fully covered by insurance could have a
material adverse effect on the business, financial condition and results of the Company. Insurance against all
risks associated with exploration and production is not always available and where available the costs can be
prohibitive.
Acquisitions – The Company may decide to pursue potential acquisitions in the future. This may give rise to
various operational and financial risks, including, but not limited to, poor integration resulting in higher than
expected integration costs, and financial underperformance of the acquired assets.
Funding risk – The Company may need capital in the future to progress the development of its acreage. There
can be no guarantee that future capital, debt or equity, will be available or available on suitable terms. It could
adversely impact the value of the Company.
Climate change risk – Empire recognises the science supporting climate change and that the world is
transitioning to a lower carbon economy in which gas has a crucial role to play. Climate change and
management of future carbon emissions may lead to increasing regulation, activism, and costs. Climate
change may also have a direct physical impact on our operations e.g. through changing climate patterns such
as wet seasons and increased frequency of large storms.
12
Empire Energy Group Limited
Operations review
31 December 2023
E. COMPETENT PERSONS STATEMENT
The information in this report which relates to the Company’s reserves is based on, and fairly represents,
information and supporting documentation prepared by or under the supervision of the following qualified
petroleum reserves and resources evaluators, all of whom are licensed professional petroleum engineers,
geologists, or other geoscientists with over five years’ experience and are qualified in accordance with the
requirements of Listing Rule 5.42:
Name
Organisation
Qualifications
Mr William Vail Jr
Mr John G. Hattner
Graves & Co. Consulting
LLC
Netherland Sewell &
Associates Inc
Mr Joseph M. Wolfe
Netherland Sewell &
Associates Inc
BSc in Petroleum
Engineering, MBA
MBA, Master of Science
in Geological
Oceanography, BSc
Master of Petroleum
Engineering, BSc
Mathematics
Professional
Organisation
Society of Petroleum
Engineers
Licenced Professional
Geophysicist in the State
of Texas, USA
Licenced Professional
Engineer in the State of
Texas, USA
None of the above evaluators or their employers have any interest in Empire Energy E&P, LLC or the properties
reported herein. The evaluators mentioned above consent to the inclusion in the report of the matters based
on their information in the form and context in which it appears.
Note Regarding Forward-Looking Statements
Certain statements made and information contained in this report are forward-looking statements and forward-
looking information (collectively referred to as “forward-looking statements” within the meaning of Australian
securities laws. All statements other than statements of historical fact are forward-looking statements.
13
Empire Energy Group Limited
Directors' report
31 December 2023
The Directors present their report, together with the financial statements, on the consolidated entity (referred
to hereafter as the 'Group' or 'Empire Group') consisting of Empire Energy Group Limited (referred to hereafter
as the 'Company' or 'Parent entity' or 'Empire') and the entities it controlled at the end of, or during, the year
ended 31 December 2023.
Directors
The following persons were Directors of Company during the whole of the financial year and up to the date of
this report, unless otherwise stated:
Peter Cleary
Alexander Underwood
Louis Rozman
Prof John Warburton
Karen Green
Paul Espie AO
Paul Fudge
Jacqui Clarke
Non-Executive Director and Chairman (appointed as Chairman on 30 May 2023)
Managing Director
Non-Executive Director
Non-Executive Director
Non-Executive Director (appointed on 17 November 2023)
Non-Executive Director and Chairman (retired on 30 May 2023)
Non-Executive Director (retired on 17 November 2023)
Non-Executive Director – Alternate Director to Paul Fudge (retired on 17
November 2023)
Principal activities
During the financial year the principal continuing activities of the Group consisted of:
●
The progression of appraisal work programs in Empire's wholly owned and operated exploration
tenements located in the highly prospective Northern Territory Beetaloo sub-basin. Key activities
completed during the year include the flow testing of the Carpentaria-2H and Carpentaria-3H wells.
The production and sale of oil and natural gas in the United States of America. The Empire Group sells its
oil and gas products primarily to owners of domestic pipelines, utilities and refiners located in Pennsylvania
and New York.
●
Dividends
There were no dividends paid, recommended or declared during the current or previous financial year.
Business risks
Refer to Operations review for details of the Group's business risks.
Review of operations
The loss for the Group after providing for income tax amounted to $22,081,916 (31 December 2022:
$6,003,206).
For information on a review of the Empire Group’s operations refer to the Operations review prior to the
Directors' report.
14
Empire Energy Group Limited
Directors' report
31 December 2023
Significant changes in the state of affairs
(1) On 6 March 2023 Empire reported that Carpentaria-3H had been flow tested for 27 days. This gas
production rate ranged between 2.6TJ/d and 6.6TJ/d.
(2) On 29 March 2023 Empire announced that Carpentaria-2H had achieved an average flow rate of 3.2TJ/d.
This represents an increase of ~17% over the initial IP30 rates announced in September 2022.
(3) Following Empire's successful 2022 EP187 work programs, Empire announced an increase in its EP187
2C Contingent Resources to 1,739PJ, on LNG scale discovered resources.
(4) On 30 May 2023, Peter Cleary was appointed Chairman following the retirement of Paul Espie AO.
(5) On 4 August 2023, Empire announced that Carpentaria-3H had been reopened for extended production
testing.
(6) On 4 August 2023, Empire advised that 84,848,485 ordinary shares in the Company previously issued
to Pangaea (NT) Pty Limited and EMG Northern Territory Holdings Pty Limited would be released from
escrow on 13 August 2023.
(7) On 8 August 2023, Empire announced it had executed an initial agreement with APA Group (ASX: APA)
for the establishment of exclusive midstream gas infrastructure to support the development of its
Beetaloo assets.
(8) On 5 September 2023, Empire announced Carpentaria-3H (“C-3H”) had flowed gas at an average rate
of 3.3 mmscf / day (3.8 TJ / day) over the first 30 days (“IP30”) following reopening.
(9) On 24 October 2023, Empire announced it had received $15.6 million R&D tax offset for the 2022
Financial year.
(10) On 17 November 2023, Empire announced changes to the Board of Directors. Mr Paul Fudge and Ms
Jacqui Clarke retired as a Non-Executive Director and alternate Director of the Company.
Empire also announced the appointment of Ms Karen Green as an independent Non-Executive Director.
Ms Green was appointed Chair of the Audit & Risk Committee.
(11) On 4 December 2023, Empire acquired the AGL Limited's Rosalind Park Gas Plant for $2.5 million in
cash. The acquisition has accelerated the path to Carpentaria Pilot Project production and reduces
capital expenditure required to commence gas sales.
There were no other significant changes in the state of affairs of the Group during the financial year.
Matters subsequent to the end of the financial year
On 1 March 2024, Empire issued 276,275 ordinary fully paid shares for the conversion of Vested Performance
Rights belonging to former employees under the Empire Energy Group Limited Rights Plan for no
consideration.
No other matter or circumstance has arisen since 31 December 2023 that has significantly affected, or may
significantly affect the Group's operations, the results of those operations, or the Group's state of affairs in
future financial years.
Likely developments and expected results of operations
Except for information disclosed on certain developments and the expected results of those developments
included in this report under review of operations, further information on likely developments in the operations
of the Group and the expected results of operations have not been included in this report because the Directors
believe it would be likely to result in unreasonable prejudice to the Group.
Environmental regulation
There are environmental regulations surrounding oil and gas activities which have been conducted by the
Empire Group. There has been no material breach of these regulations during the financial period or since the
end of the financial period and up to the date of this report.
15
Empire Energy Group Limited
Directors' report
31 December 2023
Information on Directors
Name:
Title:
Age:
Qualifications:
Experience and expertise:
Other current directorships:
Former directorships (last 3
years):
Special responsibilities:
Interests in shares:
Interests in options:
Interests in rights:
Name:
Title:
Age:
Qualifications:
Experience and expertise:
Other current directorships:
Former directorships (last 3
years):
Special responsibilities:
Interests in shares:
Interests in options:
Interests in rights:
Peter Cleary
Non-Executive Director and Chair (appointed as Chair on 30 May 2023)
66
BCom, LLB
Mr Cleary is a leader in the oil and gas sector. He holds relationships with
commercial and government entities gained over a distinguished 29-year
career representing Santos, the North West Shelf Venturers and BP in Asia.
His executive career was in LNG, pipeline gas and chemicals operations.
Mr Cleary is a senior adviser to Mitsubishi’s international LNG and Australian
Carbon businesses. He is currently on the Executive of the Australia Korea
Business Council. He is a Graduate of the Australian Institute of Company
Directors and a Fellow of the Australian Institute of Energy – SA Branch.
He previously held positions as a Board member of the Australian Petroleum
Production & Exploration Association (APPEA), the Australia China Council
and the Australia Japan Foundation. In 2023 he retired after 15 years as a
member of the Executive Committee of the Australia Japan Business Co-
operation Committee.
Australia - Korea Business Council
Australia Japan Business Co-operation Council
None
1,044,546 ordinary shares
227,273 unlisted options expiring on 14 June 2024 @ $0.35 per share
752,707 restricted rights
Alexander Underwood
Managing Director
41
LLB, BCom (Hons)
Mr Underwood has nearly 20 years of specialist upstream oil and gas
investing, financing and management experience. Previously he spent two
years with the Commonwealth Bank of Australia, Singapore as Director of
Natural Resources and nine years with Macquarie Bank in Sydney and
Singapore as Associated Director of Energy Markets Division. He
commenced his career at BHP Billiton Petroleum.
None
None
Chief Executive Officer of Imperial Oil & Gas Pty Limited
Executive Director of Imperial Oil & Gas Pty Limited
Executive Director of Imperial Oil & Gas A Pty Limited
President and Managing Member of the Company’s 100% wholly owned US
subsidiaries
2,750,000 ordinary shares
None
3,329,553 unvested performance rights
1,649,436 vested performance rights
1,000,000 service rights
1,586,579 restricted rights
16
Empire Energy Group Limited
Directors' report
31 December 2023
Name:
Title:
Age:
Qualifications:
Experience and expertise:
Other current directorships:
Former directorships (last 3
years):
Special responsibilities:
Interests in shares:
Interests in options:
Interests in rights:
Name:
Title:
Age:
Qualifications:
Experience and expertise:
Other current directorships:
Former directorships (last 3
years):
Special responsibilities:
Interests in shares:
Interests in options:
Interests in rights:
Louis Rozman
Non-Executive Director
66
BEng, MGeoSc
Mr Rozman is a mining engineer and executive with over 40 years’
experience in operating, constructing and financing resource projects
internationally. He has held numerous senior executive positions in the
mining and energy industries and has been a non-executive director of
several ASX and TSX listed resource companies. Mr. Rozman’s executive
experience as a successful pioneer of coal seam gas development and
production in Queensland is of direct relevance to Empire’s plans.
Mr Rozman is a Fellow of the Australian Institute of Company Directors and
a Fellow and Chartered Professional (Management) of the Australasian
Institute of Mining and Metallurgy. He has a Bachelor of Engineering degree
from the University of Sydney and a Masters in Geoscience from Macquarie
University.
None
None
Chair of the Remuneration Committee
Member of the Technical Committee
683,546 ordinary shares
227,273 unlisted options expiring on 14 June 2024 @ $0.35 per share
None
Prof John Warburton
Non-Executive Director
66
PhD, FGS, FPESA, MAICD
Prof Warburton has over 40 years of professional oil and gas experience in
operated and non-operated conventional and unconventional petroleum
discovery, development and in new business delivery. Prof Warburton has
worked in Western Europe, West Africa, Central Asia, Middle East, Pakistan,
Papua New Guinea, throughout the Asia Pacific Region, including Australia
and New Zealand, and most recently in Mongolia. He has resided as an
expatriate in a number of these regions and has a keen focus on technical
innovation, people, safety, cultural heritage and environment.
Prof Warburton’s career includes 14 years of senior technical and leadership
roles at BP. He was Executive General Manager for Exploration & New
Business at Eni in Pakistan, and until March 2018 John was Chief of
Geoscience & Exploration Excellence at Oil Search Ltd. He has been a
Director of Empire’s wholly owned Northern Territory subsidiary, Imperial Oil
& Gas Pty Limited ('Imperial'), since 2011 and was its Chief Executive Officer
from 2011 to 2014. He continues to serve as a Non-Executive Director of
Imperial. In addition, Prof Warburton is Visiting Professor in the School of
Earth & Environment at Leeds University UK where he has served fourteen
years on the External Advisory Board for integrated Petroleum Engineering,
Geoscience and Climate Research.
Independent Non-Executive Director TMK Energy Limited
Independent Non-Executive Director Senex Energy Limited
Non-Executive Director of Imperial Oil & Gas Pty Limited
Chair of the Technical Committee
Member of the Audit and Risk Committee
772,815 ordinary shares
159,091 unlisted options expiring on 14 June 2024 @ $0.35 per share
1,200,000 service rights
17
Empire Energy Group Limited
Directors' report
31 December 2023
Name:
Title:
Age:
Qualifications:
Experience and expertise:
Other current directorships:
Former directorships (last 3
years):
Special responsibilities:
Interests in shares:
Interests in options:
Interests in rights:
Karen Green (appointed on 17 November 2023)
Non-Executive Director
57
BCom, FCA, FCPA, GAICD
Ms. Green has 37 years' experience in business advisory services in Western
Australia and Northern Territory (“NT”). She has lived in the NT since 1991
where she was an equity partner in the Deloitte Australian partnership for
over 20 years. Ms. Green was the Office Managing Partner of Deloitte in the
NT for several years and the 5th female ever to become a Partner in the
Deloitte Australia partnership. Ms. Green is currently a director of Advisory
HQ which is a business focused on delivering growth for Northern Australia.
Ms. Green has acted as an advisor to numerous public and private sector
clients in Northern Australia, which has included consultation, facilitation, and
development of strategic plans and financial strategies. Ms. Green has
extensive experience in providing business plans, stakeholder engagement,
development plans, strategic planning, and investment attraction to the
private and public sector. Karen has also been an Advisory Board Member
of a number of emerging companies.
Ms. Green is recognised for her strategic direction and leadership through a
variety of board roles including currently as a Non-Executive Director of the
Airport Development Group Pty Ltd (the long term lease holder of Darwin
International Airport, Alice Springs Airport and Tennant Creek Airport), Chair
of the NT Screen Industry Advisory Committee and the NT Council of the
Australian Institute of Company Directors.
Airport Development Group comprising Airport Development Group Pty
Limited, Northern Territory Airports Pty Limited, Darwin International Airport
Pty Limited, Alice Springs Airport Pty Limited, Tennant Creek Airport Pty
Limited, ADGI Pty Ltd, Darwin Airport Resort Operating Company Pty Ltd and
Darwin Airport Resort Operating Company Pty Ltd.
Nil
Chair of the Audit and Risk Committee
Member of the Remuneration Committee
None
None
None
18
Empire Energy Group Limited
Directors' report
31 December 2023
Name:
Title:
Age:
Qualifications:
Experience and expertise:
Other current directorships:
Former directorships (last 3
years):
Special responsibilities:
Interests in shares:
Interests in options:
Interests in rights:
Name:
Title:
Age:
Experience and expertise:
Other current directorships:
Former directorships (last 3
years):
Special responsibilities:
Interests in shares:
Interests in options:
Interests in rights:
Paul Espie AO (retired on 30 May 2023)
Former Non-Executive Director and Chairman
79
BSc, MBA
Mr Paul Espie AO was the founding principal of Pacific Road Capital, a
private equity fund investing in the resources sector internationally, in 2006.
He was Chairman of Oxiana Limited during the development of the Sepon
copper/gold project in Laos (2000 to 2003) and prior to that Chairman of
Cobar Mines Pty Ltd after a management buy-out in 1993. Mr Espie was
previously responsible for Bank of America’s operations in Australia, New
Zealand and Papua New Guinea and Chairman of
the Australian
Infrastructure Fund. He is a Fellow of the Australian Institute of Company
Directors, Trustee of the Australian Institute of Mining & Metallurgy,
Educational Endowment Fund. He is also Chairman of the Menzies Research
Centre.
None
Aurelia Metals Limited
Former Chair of Empire Energy Group Limited
Not applicable as no longer a director
Not applicable as no longer a director
Not applicable as no longer a director
Paul Fudge (retired on 17 November 2023)
Former Non-Executive Director
75
Mr Fudge was appointed to the board of Empire in August 2021. Mr Fudge
brought significant business and investment experience to Empire, having
acquired vast investment experience in onshore Australian oil and gas,
including being an early mover in the Queensland Coal Seam Gas industry
and in the Beetaloo Sub-Basin.
He is the controlling shareholder of Pangaea (NT) Pty Limited, Empire’s
largest shareholder.
None
None
None
Not applicable as no longer a director
Not applicable as no longer a director
Not applicable as no longer a director
19
Empire Energy Group Limited
Directors' report
31 December 2023
Name:
Title:
Age:
Qualifications:
Experience and expertise:
Jacqui Clarke (retired on 17 November 2023)
Former Non-Executive Director (Alternate)
52
CA, FCA, CTA & GAICD
Ms Clarke was appointed to the board of Empire in August 2021.
With over 30 years in professional practice with the Big 4, including more than
16 years as a Partner of Deloitte, Ms Clarke is an experienced professional
with extensive executive track record for building a performance culture,
driving profitable growth, developing and executing on strategy and delivering
results. Ms Clarke advises a broad range of groups, including private family
groups, entrepreneurial growth companies and not-for-profit organisations.
Presently, Ms Clarke is the Chair and Non-Executive Director ('NED') of
SMEG Australia, a NED on ASX Listed BKI Investment Company Ltd, sits on
the Fudge Group Advisory Board, is a Founder of Maxima Private and an
author.
Ms Clarke is a Chartered Accountant and Fellow of Chartered Accountants
Australia and New Zealand, Graduate of AICD (Australian Institute of
Company Directors), Chartered Tax Advisor and Justice of the Peace.
BKI Investments Limited
None
Former Member of the Audit and Risk Committee
Not applicable as no longer a director
Not applicable as no longer a director
Not applicable as no longer a director
Other current directorships:
Former directorships (last 3
years):
Special responsibilities:
Interests in shares:
Interests in options:
Interests in rights:
'Other current directorships' quoted above are current directorships for listed entities only and excludes
directorships of all other types of entities, unless otherwise stated.
'Former directorships (last 3 years)' quoted above are directorships held in the last 3 years for listed entities
only and excludes directorships of all other types of entities, unless otherwise stated.
Company secretary
Ben Johnston
Mr Johnston joined Empire as Vice President Business Development in November 2019. Ben is an energy
sector specialist having worked across M&A, ECM and debt / project finance transactions while at leading
banks including RBC Capital Markets and Commonwealth Bank. Ben is a chartered accountant having trained
with KPMG and holds an MBA from the Australian Graduate School of Management.
20
Empire Energy Group Limited
Directors' report
31 December 2023
Meetings of Directors
The number of meetings of the Company's Board of Directors ('the Board') held during the year ended 31
December 2023, and the number of meetings attended by each Director were:
Full Board
Remuneration
Committee
Audit and Risk
Committee
Attended
Held
Attended
Held
Attended
Held
Technical Committee
Attended
Held
Peter Cleary
Alexander
Underwood*
Louis Rozman
Prof John
Warburton**
Karen Green
Paul Espie AO
Paul Fudge
Jacqui Clarke
8
8
8
7
-
3
5
5
8
8
8
8
-
3
5
5
-
-
1
-
1
-
-
-
-
-
1
-
1
-
-
-
-
-
-
3
1
-
-
2
-
-
-
3
1
-
-
2
-
-
9
9
-
-
-
-
-
-
9
9
-
-
-
-
Held: represents the number of meetings held during the time the Director held office or was a member of the
relevant committee.
* Mr Underwood excused himself from Remuneration Committee Meetings when matters relating to his
remuneration were discussed.
** Mr Warburton was absent from one Full Board meeting as he had to attend to other Board business.
Shares under option
Unissued ordinary shares of Empire Energy Group Limited under option at the date of this report are as follows:
Grant date
Expiry date
13 August 2021
13 August 2021
9 September 2022
31 August 2024
31 August 2024
9 September 2024
Exercise
price
Number
under option
$0.700
8,000,000
1,696,970
$0.700
$0.350 69,227,558
78,924,528
No person entitled to exercise the options had or has any right by virtue of the option to participate in any share
issue of the Company or of any other body corporate.
Shares issued on the exercise of options
There were no ordinary shares of Empire Energy Group Limited issued on the exercise of options during the
year ended 31 December 2023 and up to the date of this report.
21
Empire Energy Group Limited
Directors' report
31 December 2023
Shares under Performance Rights
Unissued ordinary shares of Empire Energy Group Limited under Performance Rights at the date of this report
are as follows:
Grant date
Unvested
13 September 2013
17 June 2022
22 December 2022
21 July 2023
21 December 2023 *
Vested
3 August 2021
30 March 2022
27 January 2023
23 February 2024
Expiry date
N/A
31 December 2037
31 December 2037
31 December 2038
31 December 2038
30 June 2034
30 December 2034
31 December 2035
31 December 2036
Number
under rights
250,000
1,451,409
1,297,209
1,878,144
791,863
1,300,500
563,859
548,234
298,968
8,380,186
*
Performance Rights granted on 21 December 2023 were issued on 15 March 2024.
No person entitled to exercise the Performance Rights had or has any right by virtue of the performance right
to participate in any share issue of the Company or of any other body corporate.
Shares issued on the exercise of Performance Rights
On 1 March 2024, Empire issued 276,275 ordinary fully paid shares for the conversion of Vested Performance
Rights belonging to former employees under the Empire Energy Group Limited Rights Plan for no
consideration.
Shares under Restricted Rights
Unissued ordinary shares of Empire Energy Group Limited under Restricted Rights at the date of this report
are as follows:
Grant date
Expiry date
7 August 2020
1 June 2021
23 December 2020
2 July 2021
21 December 2021
17 June 2022
17 June 2022
9 September 2022
22 December 2022
21 July 2023
21 December 2023 *
31 December 2035
1 June 2036
23 December 2035
2 July 2036
21 December 2036
17 June 2037
17 June 2037
9 September 2037
22 December 2037
21 July 2038
21 December 2038
Exercise
price
Number
under rights
$0.000
$0.000
$0.000
$0.000
$0.000
$0.000
$0.000
$0.000
$0.000
$0.000
$0.000
1,019,753
617,979
455,820
94,908
568,778
509,198
275,360
131,493
613,830
604,141
538,951
5,430,211
*
Restricted Rights granted on 21 December 2023 were issued on 15 March 2024.
No person entitled to exercise the Restricted Rights had or has any right by virtue of the restricted right to
participate in any share issue of the Company or of any other body corporate.
22
Empire Energy Group Limited
Directors' report
31 December 2023
Shares issued on the exercise of Restricted Rights
There were no other ordinary shares of Empire Energy Group Limited issued on the exercise of Restricted
Rights during the year ended 31 December 2023 and up to the date of this report.
Shares under Service Rights
Unissued ordinary shares of Empire Energy Group Limited under Service Rights at the date of this report are
as follows:
Grant date
Expiry date
Exercise
price
Number
under rights
Unvested
21 December 2023 *
Vested
14 June 2019
4 August 2020
1 June 2021
21 December 2038
$0.00
1,248,161
30 June 2034
31 December 2035
31 December 2036
$0.00
$0.00
$0.00
1,000,000
838,558
600,000
3,686,719
*
Service Rights granted on 21 December 2023 were issued on 15 March 2024.
No person entitled to exercise the Service Rights had or has any right by virtue of the service right to participate
in any share issue of the Company or of any other body corporate.
Shares issued on the exercise of Service Rights
There were no other ordinary shares of Empire Energy Group Limited issued on the exercise of Service Rights
during the year ended 31 December 2023 and up to the date of this report.
Indemnity and insurance of officers
The Company has indemnified the Directors and executives of the Company for costs incurred, in their capacity
as a Director or executive, for which they may be held personally liable, except where there is a lack of good
faith.
During the financial year, the Company paid a premium in respect of a contract to insure the Directors and
executives of the Company against a liability to the extent permitted by the Corporations Act 2001. The contract
of insurance prohibits disclosure of the nature of the liability and the amount of the premium.
Indemnity and insurance of auditor
The Company has not, during or since the end of the financial year, indemnified or agreed to indemnify the
auditor of the Company or any related entity against a liability incurred by the auditor.
During the financial year, the Company has not paid a premium in respect of a contract to insure the auditor
of the Company or any related entity.
Proceedings on behalf of the Company
No person has applied to the Court under section 237 of the Corporations Act 2001 for leave to bring
proceedings on behalf of the Company, or to 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 part of those proceedings.
Non-audit services
Details of the amounts paid or payable to the auditor for non-audit services provided during the financial year
by the auditor are outlined in note 29 to the financial statements.
The Directors are satisfied that the provision of non-audit services during the financial year, by the auditor (or
by another person or firm on the auditor's behalf), is compatible with the general standard of independence for
auditors imposed by the Corporations Act 2001.
23
Empire Energy Group Limited
Directors' report
31 December 2023
The Directors are of the opinion that the services as disclosed in note 29 to the financial statements do not
compromise the external auditor's independence requirements of the Corporations Act 2001 for the following
reasons:
●
all non-audit services have been reviewed and approved to ensure that they do not impact the integrity
and objectivity of the auditor; and
none of the services undermine the general principles relating to auditor independence as set out in APES
110 Code of Ethics for Professional Accountants (including Independence Standards) issued by the
Accounting Professional and Ethical Standards Board, including reviewing or auditing the auditor's own
work, acting in a management or decision-making capacity for the Company, acting as advocate for the
Company or jointly sharing economic risks and rewards.
●
Officers of the Company who are former partners of Nexia Sydney Audit Pty Ltd
There are no officers of the Company who are former partners of Nexia Sydney Audit Pty Ltd.
Auditor's independence declaration
A copy of the auditor's independence declaration as required under section 307C of the Corporations Act 2001
is set out immediately after this Directors' report.
This report is made in accordance with a resolution of Directors, pursuant to section 298(2)(a) of the
Corporations Act 2001.
On behalf of the Directors
___________________________
Alexander Underwood
Managing Director
28 March 2024
Sydney
24
Empire Energy Group Limited
Directors' report - remuneration report
31 December 2023
Remuneration Report – Audited
The Remuneration Report for the year ended 31 December 2023 (2023 Financial Year or FY23) forms part of
the Directors’ Report. It has been prepared in accordance with the Corporations Act 2001 (Cth) (the Act),
Corporations Regulation 2M.3.03, in compliance with AASB124 Related Party Disclosures, and audited as
required by section 208(3C) of the Act. It also includes additional information and disclosures that are intended
to support a deeper understanding of remuneration governance and practices, for shareholders, where
statutory requirements are not sufficient.
Letter from the Chair of the Remuneration Committee
Dear Shareholders,
As the Chair of the Remuneration Committee and on behalf of the Board, I am pleased to present Empire
Energy’s (EEG) Remuneration Report for the year ended 31 December 2023 (FY23).
FY23 has seen significant progress in the Beetaloo Sub-basin operations with:
1. All activities carried out safely and in an environmentally responsible manner.
2. The drilling of the Carpentaria 3H well that included the longest horizontal completed and cased well
section in Beetaloo Sub-basin of 2,632 metres.
3. The successful production flow testing of the Carpentaria 2H and Carpentaria 3H wells.
4. The acquisition of a fit for purpose gas plant from AGL Limited for $2.5 million.
5. Ongoing positive engagement through on-country meetings with Traditional Owners and pastoral
stakeholders.
Items 2 and 3 were completed on time and within budget, demonstrating EEG’s cost and operational
efficiencies within the basin. The Board is confident that we will continue to have further progress and cost
efficiencies during FY23 and beyond.
As indicated in the Remuneration Report for FY22, the Board undertook a review of the Managing Director’s
total remuneration and rebalanced it so it better benchmarks with the market. The Managing Director’s FY23
Total Remuneration Package at Target was:
Fixed Pay:
Short term Variable Remuneration:
Long term Variable Remuneration:
$475,000 (FY22 $430,000)
25% of fixed pay (FY22 25%)
40% of fixed pay (FY22 40%)
The Remuneration Committee assessed the Managing Director’s performance against the Key Performance
Indicators (set out in Section 2.2) at 100% of Target primarily due to the successful production flow tests,
material progress on the Carpentaria Pilot Project FEED and securing long lead items for project development
by acquiring the suitably sized Rosalind Park Gas Plant from AGL in FY23. This translated into a Short Term
Incentive award of $118,750 which the Board approved. The Board also gave the Managing Director the option
of receiving his award in cash or Restricted Rights.
The Remuneration Committee continually reviews the total remuneration packages of the senior executives
including the Managing Director and is of the view that Empire Energy’s remuneration level is fairly
benchmarked against its peers.
Louis Rozman
Chair, Remuneration Committee
25
Empire Energy Group Limited
Directors' report - remuneration report
31 December 2023
1. People covered by this report
This report covers Key Management Personnel (KMP) which are defined as those who have the authority and
responsibility for planning, directing and controlling the activities of Empire Energy.
Role
Appointed
Audit & Risk
Remuneration
Technical
Committee Membership
Table 1
Name
Non-Executive KMP
Mr Peter Cleary
Non-Executive
Chairman
Non-Executive Director
30/05/2023
25/05/2020
Prof John Warburton Non-Executive Director 06/02/2019
Mr Louis Rozman
Ms Karen Green
Mr Paul Espie
Mr Paul Fudge
Non-Executive Director 11/03/2021
Non-Executive Director 17/11/2023
05/02/2019
Non-Executive
Chairman
Non-Executive Director
08/11/2018
Non-Executive Director 17/08/2021
Ms Jacqui Clarke
Executive KMP
Mr Alex Underwood Managing Director
Alternate Director
Mr Robin Polson
(‘MD’)
Chief Financial Officer
(‘CFO’)
17/08/2021
23/07/2018
18/07/2022
C
✓
C
✓
✓ C *
C
✓
✓ = Member, C = Chair
* Mr Warburton was Chair of the Audit and Risk Committee prior to Ms Green been appointed Chair.
The following changes to KMP occurred during FY23 or between the end of FY23 and the date of publication
of this report:
• Mr Paul Espie AO retired as Non-Executive Director and Chair on 30 May 2023.
• Mr Peter Cleary was appointed as Chair on 30 May 2023.
• Mr Louis Rozman replaced Mr Peter Cleary as Chair of the Remuneration Committee on 1 September
2023.
Prof John Warburton was appointed Chair of the Technical Committee on 1 September 2023.
•
• Mr Paul Fudge and his alternate Ms Jacqui Clarke retired as Non-Executive Director on 17 November
2023.
• Ms Karen Green was appointed a Non-Executive Director and replaced Prof John Warburton as Chair of
the Audit and Risk Committee on 17 November 2023.
26
Empire Energy Group Limited
Directors' report - remuneration report
31 December 2023
2. Remuneration Overview
2.1
Remuneration Policy
EEG’s Remuneration Policy (the Policy) was updated in February 2024 under the Remuneration Committee
Charter. The Remuneration Committee retains overall responsibility for the review and recommendations in
relation to the remuneration of Executive Directors (including the Managing Director) and executives reporting
to the Managing Director as well as Non-Executive Director Board Fees. In discharging these responsibilities,
the Committee adheres to the following:
•
•
•
•
to ensure the Company’s remuneration structures are equitable and aligned with the long-term
interests of the Company and its shareholders; having regard to relevant Company policies without
rewarding conduct that is contrary to the Company’s values or risk appetite,
to attract and retain skilled executives,
to structure short-term and long-term incentives that are challenging and linked to the creation of
sustainable shareholder returns, and
to ensure any termination benefits are justified and appropriate.
The primary objective of the Policy is to ensure that the quantum and elements of remuneration attract and
retain key talent and are aligned with the company’s current strategy and business objectives. Executive KMP
remuneration is currently made up of Fixed Pay and Variable Remuneration (split into short-term and long-
term components).
Fixed Pay is made up of base salary and any other fixed elements such as superannuation, and other benefits
where applicable. Fixed Pay is intended to be positioned against the median of market benchmarks from a
group of comparable resource and energy companies of similar size to ensure remuneration is competitive
and fair, subject to adjustments to account for individual factors such as experience, qualifications, and
performance.
Total Remuneration Package (TRP) is intended to be composed of an appropriate mix of remuneration
elements including Fixed Pay, short term variable remuneration (STVR) and long-term variable remuneration
(LTVR). The Target TRP (TRP for expected performance) is generally intended to fall between the median
and upper quartile of market benchmarks. This is because market data often shows nil or negative variable
remuneration values, despite an incumbent having a real variable remuneration opportunity when benchmarks
are based on statutory disclosure by other companies. As a result, total package market data median
benchmark values are lower than actual median opportunities offered to incumbents in the market.
This has been established by research conducted by the Board’s appointed independent External
Remuneration Consultant. The Board has selected a competitive TRP market position between median and
upper quartile benchmarks to adjust for the impact of nil and negative reported variable remuneration.
Variable Remuneration fills the gap between Fixed Pay and Total Remuneration Package and is intended to
be a mix of “at-risk” and “incentive” remuneration. The “at-risk” component of variable remuneration that is
below “Target policy” is designed to be what an executive would stand to lose for not meeting expectations.
The “incentive” component is the upside for performing above expectations and represent the true “bonus”.
Metrics selected are intended to be linked to the primary drivers of value creation for stakeholders, and
successful implementation of the long-term strategy over both the short and long term.
The Committee also regularly engages with External Remuneration Consultants (ERCs) to ensure the current
policy and frameworks are aligned with current market practices and remain competitive and fair (refer to
section 5.5.1 for ERCs engaged during FY23).
27
Empire Energy Group Limited
Directors' report - remuneration report
31 December 2023
2.2
Executive Remuneration – Executive Framework Overview
The following table outlines the Company’s approach to executive remuneration:
Fixed Pay
Fixed Pay (FP) is set with
reference to the median of
benchmarks and aimed at
paying fairly for meeting the
requirements of a role.
Base Salary,
superannuation and other
benefits.
Short-Term Variable
Remuneration for FY23
To link achievement of
EEG’s short-term
performance objectives with
the remuneration received
by the executive.
Long-Term Variable
Remuneration
To link achievement of
EEG’s shareholder wealth
creation with the
remuneration received by
the executive.
The Board has discretion to
settle STVR awards in the
form of cash or Restricted
Rights.
Performance Rights to
receive EEG shares, subject
to LTVR performance over a
3-year Measurement Period.
Purpose
Delivery
Fixed Pay is set with
reference to the median of
tailored benchmarks
designed around companies
of comparator market
capitalisation and market
sector.
Opportunity as percentage
of FP:
Intended opportunity as
percentage of FP:
MD
Target Stretch
25%
40%
MD
Target Stretch
40%
70%
STVR Key Performance
Indicators (‘KPIs’):
LTVR Performance
Measures:
•
75% Absolute Total
Shareholder Return
(‘TSR’)
25% Milestones
FY23
Approach
•
• NT Work Program –
50%
• Cost management and
funding coverage for
activities – 35%
• Management of US
•
Assets – 5%
Individual Effectiveness
– 10%
A 'Gate' of no major health,
safety or environmental
incidents occurring during
the measurement period
applies.
A 'Gate' of no major health,
safety or environmental
incidents occurring during
the measurement period
applies.
Empire Energy has in place an executive incentive plan named the Empire Energy Group Limited Rights Plan
or EEG Limited Rights Plan which was approved by shareholders at the 2019 Annual General Meeting and
renewed by shareholders at the 2022 Annual General Meeting.
28
Empire Energy Group Limited
Directors' report - remuneration report
31 December 2023
The following diagram outlines the executive KMP remuneration structure and timing under the remuneration
framework as applicable to FY23 where STVR is Short Term Variable Remuneration, and LTVR is Long Term
Variable Remuneration.
Chart A
FY23
Fixed Pay
STVR Performance
Period*
FY24
FY25
FY26
Audit & STVR
Assessment
Award Paid**
LTVR Performance Period (75%) - Performance Rights with an Absolute
TSR Vesting Condition
LTVR Performance Period (25%) - Performance Rights with a Milestone
Vesting Condition
Vesting Assessments
and Vesting
* STVR awards are generally awarded soon after the release of the audited Annual Report
** STVR awards can be paid in either cash or equity (Restricted Rights)
2.3
FY23 Company Performance At-A-Glance
The following outlines the Company’s performance in FY23, which is intended to assist in demonstrating the
link between performance, value creation for shareholders, and executive reward:
Table 1 – Statutory Performance Disclosure
FY End
Date
Share
Price
(beginning
of period)
Share
Price
(end of
period)
Change
in
Share
Price
$
Dividends
(paid
during
period)
Change in
Shareholder
Wealth
(Share Price
Change +
Dividends)
Total
Value
%
NT P(50)
Prospective
Resource
(TCFe*)
NT 2C
Contingent
Resource
(BCFe**)
USA 2P
Reserves
(MBOE***)
31/12/2023
$0.20
$0.20
$(0.00)
$0.00
$(0.01)
(3)%
46.3
1,669
4,439
31/12/2022
$0.34
$0.20
$(0.14)
$0.00
$(0.14)
(41)%
47.7
575
5,723
221
41
-
-
6,440
6,000
6,075
11,634
31/12/2021
$0.36
$0.34
$(0.02)
$0.00
$(0.02)
(6)%
46.9
31/12/2020
$0.45
$0.36
$(0.09)
$0.00
$(0.09)
(20)%
14.7
31/12/2019
$0.14
$0.45
$0.31
$0.00
$0.31
221%
12.4
$0.12
31/12/2018
* TCFe: Trillion Cubic Feet
** BCFe: Billion Cubic Feet equivalent
*** MBOE: Thousand barrels of oil equivalent
$0.14
$0.02
$0.00
$0.02
17%
12.4
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Empire Energy Group Limited
Directors' report - remuneration report
31 December 2023
2.4
FY23 Executive Remuneration Opportunities and Outcomes At-A-Glance
The following charts outline the remuneration opportunities under executive remuneration structures, with the
outcomes dependent on performance over FY23 for STVR and LTVR, and the “Realised” remuneration
payable in respect of the completed FY23 year and performance delivered:
Chart B.
Note:
•
•
“Realised” refers to Fixed Pay received during FY23 and Cash STVR awarded in respect of FY22
performance and LTVR that vested during FY23.
The Realised STVR outcome was above Target but below Stretch in absolute terms.
2.5
Key KMP Remuneration Governance Considerations and Changes
The following summarises the key remuneration governance matters that were the focus of considerations in
FY23, and those that are expected to be addressed in FY24, including planned changes:
•
benchmarking Managing Director’s compensation against ASX and other comparable listed market data
to inform quantum and mix of compensation decisions, intended to meet EEG’s strategy and market
positioning requirements. (Completed 2023);
benchmarking and review of Non-Executive remuneration (Completed: 2023); and
assessment of vesting conditions for LTVR (Completed 2023).
•
•
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Empire Energy Group Limited
Directors' report - remuneration report
31 December 2023
3
The Empire Energy Strategy, Policy and Framework
3.1
FY23 Short-Term Variable Remuneration (‘STVR’)
A description of the STVR plan is set out below:
Purpose
Measurement
Period
Opportunity
Outcome
Metrics and
Weightings
To provide at-risk remuneration and incentives that rewards executives for
performance against annual safety, operational and financial performance objectives
set by the Board at the beginning of the financial year. The objectives selected are
linked to the Company’s long-term strategy which is designed to provide sustainable
value creation for shareholders
The Financial Year of the Company (1 January – 31 December).
Opportunity as % of Fixed Pay
Target
25%
Stretch
40%
MD
For FY23, the following metrics and weightings – at Target - applied:
• NT Work Program – 50%
• Cost management and funding coverage for activities – 35%
• Management of US Assets – 5%
Individual Effectiveness – 10%
•
These metrics were selected because they were viewed by the Board as being the key
drivers of value creation for FY23.
Gate
A 'Gate' of no major health, safety or environmental incidents occurring during the
measurement period applies.
Award and
Settlement
Awards will be calculated following the auditing of accounts.
STVR awards may be paid as cash or equity. The Board offered the Managing Director
the opportunity to receive his STVR in cash which he accepted. The overarching policy
is to pay STVR awards in the form of Restricted Rights to preserve cash reserves
however the decision to offer cash was based on the Board’s view that this was more
appropriate in the current market. There is currently no STVR deferral mechanism.
Restricted Rights are granted for nil consideration under the EEGLRP, and vest
immediately upon grant. Restricted Rights are subject to a 90-day exercise restriction
and can exercised anytime following vesting and before the end of the Term (15 years).
Disposal
Restrictions
Shares acquired on exercise of vested Restricted Rights ("Restricted Shares") will be
subject to disposal restrictions until all of the following cease to restrict disposals:
•
•
•
the Company’s share trading policy;
the Corporations Act insider trading provisions; and
temporary Specified Disposal Restriction of one (1) year from their date of issue.
Board
Discretion
The Board has discretion to vary awards upwards or downwards, including to nil, in the
circumstance that the award would otherwise be likely to be viewed as inappropriate
given the circumstances that prevailed over the Measurement Period (such as in the
case of harm to the Company’s stakeholders for which participants are accountable).
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Empire Energy Group Limited
Directors' report - remuneration report
31 December 2023
3.2
FY24 Short-Term Variable Remuneration (‘STVR’)
EEG intends to apply the following KPIs and weightings - at Target -in relation to FY24 to provide a sharper
focus on operational expectations:
• NT Work Program – 45%
• Cost management and funding coverage for activities – 45%
• Management of US Assets – 5%
Individual Effectiveness – 5%
•
3.3 FY23 Long-Term Variable Remuneration (‘LTVR’)
A description of the LTVR plan, which is operated under the EEGLRP, is set out below:
Purpose
The purpose of LTVR is to create a strong link between performance and reward for senior
executives over the long term and to align the interests of Participants with those of
stakeholders through share ownership and performance testing.
Measurement
Period
1 January 2023 to 31 December 2025 (3 years).
Grant
Calculation
The number of Rights in a Tranche of LTVR to be granted are calculated via the application
of the following formula:
Target LTVR $ x Tranche Weight at Target ÷ Right Value ÷ % Vesting at Target
where Right Value is the 2022 VWAP of $0.2604
Opportunity
and Grant
Value
MD
Opportunity as % of Fixed Pay
Target
40%
Stretch
70%
Based on the Right Value of $0.2604, the maximum/stretch level of grants made to KMP
disclosed in this report in respect of FY23 LTVR for the Managing Director, Alex Underwood
was 1,878,144 Performance Rights.
Instrument
The LTVR is in the form of Performance Rights with a nil Exercise Price, which are subject
to performance and service vesting conditions .
Performance
Metrics and
Weightings
The Board has discretion to set Vesting Conditions for each tranche of each Invitation. For
FY23 LTVR grants, the following Vesting Conditions were altered to reflect market practice
and recognition of the significant value to shareholders if the Stretch target is achieved.
Tranche 1 (75% weight at Target) is to be subject to an Absolute Total Shareholder Return
(ATSR) vesting condition. The vesting of such Performance Rights will be determined by
comparing the Company’s TSR over FY23 to FY25 according to the following vesting scale:
Table 2
Performance Level
Stretch
Between Target and Stretch
Target
Between Threshold and Target
Threshold
Below Threshold
Empire Energy's
Absolute TSR
(per annum)
≥ 30%
> 15% & < 30%
= 15%
> 10% & < 15%
= 10%
< 10%
% of Tranche
Vesting
100%
Pro-rata
50%
Pro-rata
25%
0%
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31 December 2023
TSR is the sum of Share Price appreciation and dividends (assumed to be reinvested in
Shares) during the Measurement Period. It is annualised for the purpose of the above
vesting scale. The TSR of the Company over the Measurement Period will be calculated
and converted to a compound annual growth rate (CAGR) value for the purpose of
assessment against this scale. During periods of nil dividends being declared, TSR is equal
to the change in Share Price.
The Board is aware that some investors prefer relative TSR over absolute TSR due to the
potential of impact of broad market windfall gains and losses. The Board has set the TSR
objectives sufficiently high such that vesting would not be expected to occur in relation to
broad market movements alone.
This metric was selected in this year and past years because the Board views that this is
the best measure of long-term value creation for shareholders at this stage of Empire’s
strategy.
Tranche 2 (25% weight at Target) is to be subject to the Board’s determination of whether
material value has been added to the Company’s assets through delivering on the
Company’s strategy, including but not limited to exploration results, increasing reserves,
operating cash flow and production rates.
This metric was selected in this and past years because the Board views that this is the
best measure of long-term value creation for shareholders at this stage of EEG’s strategy
particularly when the company held significant producing assets in the USA as well as
exploration opportunities in Australia.
The Board reviews these metrics annually.
Gates
A 'Gate' of no major health, safety or environmental incidents occurring during the
measurement period applies. A Gate is a performance hurdle which must be satisfied before
any Performance Rights can vest.
Settlement
The Rights are “Indeterminate Rights” which may be settled in the form of a Company
Share, or cash equivalent, upon valid exercise.
Term and
Lapse
The Term of the Performance Rights are 15 years from the Grant Date. If not exercised
within the term, the Performance Rights will lapse.
Service
Condition
and
Cessation of
Employment
Under the Rules, in addition to the performance conditions, continued service during the
Measurement Period is a requirement for all Rights to become eligible to vest. On
termination, a portion of Performance Rights granted in the financial year in which the
termination occurs will be forfeited. The proportion that will be forfeited will be equal to the
remainder of the financial year following the termination as a proportion of the full financial
year. This provision recognises that grants of Performance Rights are part of the
remuneration for the year of grant and that if part of the year is not served then some of the
Performance Rights will not have been earned.
Measurement
Period
Modifier
The EEGLRP Rules allow for the Measurement Period to be extended by 12 months, if an
executive is still employed, and nil vesting occurred at the first test. The start of the
Measurement Period would not be affected by this, and modification of the Measurement
Period can only apply to vesting scales that are expressed on an annualised basis, which
ensures the adjustment does not make vesting easier (i.e. will not apply to milestone
conditions, only TSR). The Measurement Period would be extended from three years to
four years. The purpose of this feature is to address short term anomalies that arise at the
relevant calculation points, and to motivate management to strive for improvement if the LTI
fails to vest at the end of the Measurement Period.
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Directors' report - remuneration report
31 December 2023
Cessation of
Employment
Unvested Performance Rights held at the date of termination and granted in the financial
year of the termination will be forfeited in the proportion that the remainder of the financial
year following the termination bears to the full financial year, unless otherwise determined
by the Board.
All other unvested Performance Rights will be retained for possible vesting based on
performance during the Measurement Period, to be assessed following the completion of
the Measurement Period. If at the time of vesting subsequent to termination of employment
the share price is lower than at the date of cessation of employment the value of the Rights
will be paid in cash only, not Shares, unless otherwise determined by the Board.
Corporation
Actions
Change of Control
In the event of a Change of Control:
• Unvested Performance Rights granted in the financial year of the Change of Control
will lapse in proportion that the remainder of the financial year bears to the full
financial year,
For all remaining unvested Performance Rights, the number of Performance Rights
to vest will be determined by the number of unvested Performance Rights multiplied
by the change in share price at the commencement of the Measurement Period
and the share price at Change of Control.
•
Major Return of Capital to Shareholders
In the event of a major return of capital to shareholders, the Board has discretion to
determine how unvested Performance Rights will be dealt with.
Board
Discretion
The Board retains discretion to increase or decrease, including to nil, the vesting percentage
in relation to each Tranche of Performance Rights if it forms the view that it is appropriate
to do so given the circumstances that prevailed during the Measurement Period.
3.4
FY23 Non-Executive Director (‘NED’) Remuneration
3.4.1 Fee Policy
The following outlines the principles that EEG applies to governing NED remuneration:
Fee Policy
Remuneration of Non-Executive Directors is determined by the Board based on
recommendations from the Remuneration Committee and the maximum amount approved
by shareholders from time to time. Non-Executive Directors can participate in the Share
Rights Plan.
The Board undertakes an annual review of its performance and the performance of the Board
Committees against performance goals set. Details of the nature and amount of each
element of the remuneration of each Director and each specified executive of the Empire
Group receiving the highest remuneration are set out in the following tables.
The following table outlines the current Fee Policy:
Role/Function
Main Board
All Committees
Chair
Member
$90,000
$60,000
Fees are exclusive of superannuation.
$10,000
$5,000
Note: Non-Executive Directors are also reimbursed for reasonable out-of-pocket expenses
that are directly related to EEG’s business. Equity grants, if any, are deducted from the
foregoing fees.
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Directors' report - remuneration report
31 December 2023
Aggregate
Board Fees
The total amount of fees paid to Non-Executive Directors in the year ended 31 December
2023 is within the aggregate fee limit of $400,000 which was last approved by shareholders
on 30 May 2019. Grants of equity approved by shareholders are excluded from counting
towards the aggregate Board Fees, in accordance with the ASX Listing Rules.
3.4.2 FY23 NED Equity Grants
A description of the terms Non-Executive Director (NED) equity grants for FY23 is described below:
Purpose
The purpose of NED equity grants in FY23 is to allow Non-Executive Directors to
exchange cash Board Fees for grants of equity in respect of FY23 remuneration.
Opportunity
NEDs may elect to receive up to 100% of their Board Fees including superannuation in
Restricted Rights in lieu of cash payment.
Instrument
The FY23 NED Equity Plan grant is to be in the form of Restricted Rights.
Price and
Exercise Price
The Price is nil, because it forms part of the remuneration of the Participant, however
grants are generally based on an agreement to forego cash Board Fees.
The Exercise Price is nil.
Allocation
method
The Rights are valued using the following method:
Right Value = Share Price – (Dividends expected to be lost before first exercise date)
The Number of Rights to be granted = Sacrificed$ ÷ Right Value
Vesting
Conditions,
Exercise
Restrictions
Disposal
Restriction
Share Price = 3-month Volume Weighted Average Price during each quarter
In order to ensure NED independence is not compromised, and to recognise that the
instruments are an alternative to cash remuneration, the Rights are not subject to any
vesting conditions.
Rights may not be exercised within 90 days of the Grant Date.
The Director Fee Restricted Rights may not be disposed of at any time, but can be
exercised following vesting, up to the end of their Term. Shares acquired on exercise of
vested Director Fee Restricted Rights ("Restricted Shares") will be subject to disposal
restrictions until all of the following cease to restrict disposals:
a)
b)
c) Specified Disposal Restriction of one (1) year from their date of issue.
the Company’s share trading policy;
the Corporations Act insider trading provisions; and
Term and
Lapse
Director Fee Restricted Rights will have a term of 15 years and if not exercised within the
term the Rights will lapse. On exercise, each Director Fee Restricted Right will convert
into one ordinary share.
Fraud, Gross
Misconduct
etc.
In the event that the Board forms the opinion that a Director has committed an act of fraud,
defalcation or gross misconduct in relation to the Company, the Director will forfeit all
unvested Director Fee Restricted Rights.
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4
The Link Between Performance and Reward in FY23
4.1
FY23 STVR Outcomes
The STVR plan is designed to reward executives for the achievement against annual performance objectives
set by the Board at the beginning of the performance period. The payment of an STVR is dependent on the
delivery of performance against a range of outcome metrics. The performance metrics and outcomes of
assessment against those metrics are summarised below:
Table 3 - FY23 Business/Group Performance Scorecard Outcomes
Metric/Measure
Weighting
NT Work Program
Cost management & Funding coverage for
activities
US Assets
Individual Effectiveness
Total
50%
35%
5%
10%
100%
Outcome
(% of Target)
100%
100%
100%
100%
Weighted
Outcome
( % of Target)
50%
35%
5%
10%
100%
Overall STVR outcomes for FY23 are determined through the Board’s assessment of the Business and
Individual Outcomes, as outlined below:
Table 4
Executive
KMP
Alex
Underwood
Opportunity as %
of Fixed Pay
Max
STVR
Target
STVR
STVR
Outcome
as % of
Target
Total
STVR
Awarded
($)
Cash ($)
Restricted
Rights ($)
% Max STVR
Awarded
%
Max
STVR
40%
25%
100%
$118,750
$118,750
N/A
N/A
N/A
4.2
Recent LTVR Outcomes
The LTVR that vested to executives in respect of the completed FY23 reporting period was granted in FY20,
and may be summarised as follows (noting that the FY20 LTVR grant was issued under the same terms and
conditions as the FY23 LTVR plan outlined in section 3.3):
Instrument
Performance Rights under the EEGLRP.
Measurement
Period
Performance
Metrics and
Weightings
CEO: 1 January 2021 – 31 December 2023 (3-year Measurement Period)*
Tranche 1 (75% weight at Target) is to be subject to an Absolute Total Shareholder
Return (ATSR) vesting condition. The vesting of such Performance Rights will be
determined by comparing the Company’s TSR over the Measurement Period
according to the following vesting scale:
Performance Level
Stretch
Between Target and Stretch
Target
Between Threshold and Target
Threshold
Below Threshold
Empire Energy's
Absolute TSR
(per annum)
≥ 40%
> 25% & < 40%
= 25%
> 10% & < 25%
= 10%
< 10%
% of Tranche Vesting
100%
Pro-rata
50%
Pro-rata
25%
0%
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Directors' report - remuneration report
31 December 2023
TSR is the sum of Share Price appreciation and dividends (assumed to be reinvested
in Shares) during the Measurement Period. It is annualised for the purpose of the
above vesting scale. The TSR of the Company over the Measurement Period will be
calculated and converted to a compound annual growth rate (CAGR) value for the
purpose of assessment against this scale. During periods of nil dividends being
declared, TSR is equal to the change in Share Price.
Tranche 2 (25% weight at Target) is to be subject to the Board’s determination of
whether material value has been added to the Company’s assets through delivering
on the Company’s strategy, including exploration results, increasing reserves,
operating cash flow and production rates.
Gate
A 'Gate' of no major health, safety or environmental incidents occurring during the
measurement period applies. A Gate is a performance hurdle that must be satisfied
before any Performance Rights can vest.
Performance
Outcome and
Vesting
Determination
Board
Discretions
Applied
Settlement
The Board has also assessed that the vesting conditions for Tranche 2 were met and
as a result, 100% vesting applies in respect of the Tranche 2 Performance Rights
issued.
The Board exercised its discretion under the Empire Energy Group Limited Rights Plan
to grant vesting of the Tranche 2 Performance Rights issued in 2021.
Rights are not exercised automatically upon vesting. The Rights are “Indeterminate
Rights” which may be settled in the form of a share, or cash equivalent, upon valid
exercise.
Table 5
Role
Tranche
g
n
i
t
h
g
i
e
W
No.
Eligible
To Vest In
Reporting
Period for
FY22
perform-
ance
Target
Perform-
ance
Actual
Outcome
% of
Tranche
Vested
Number
Vested
Absolute
TSR
Milestones
75%
2,093,778
25% TSR
p.a
0%
0%
0
25%
145,089
Board
Discretion
Board
Discretion
100%
145,089
$ Value
of LTVR
that
Vested
(as per
Grant
Date
Valuat-
ion)
Realisable
Value
(Number x
Vesting Date
SP net of
Exercise
Price)
$0
$0
$21,038
$28,292
Grant
Date
Valua
tion
N/A
3-
Aug-
21
MD
CFO
No eligible rights vested in the reporting period for FY23
2,238,867
145,089
$21,038
$28,292
4.3
Achieved Total Remuneration Package for FY23
The following outlines “Achieved” (what became payable, awarded or vested in respect of FY23 performance
completed) total remuneration, including the portions of maximum variable remuneration that were awarded
or vested, and portions that were forfeited or lapsed as the result of performance assessments that were
completed as at the completion of 31 December 2023.
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Directors' report - remuneration report
31 December 2023
Table 6
Name
Role(s)
Year
Fixed
Package
(incl
Super)
Total STVR
Awarded
Following
Completion
of the
Financial
Year (cash)*
Alex
Underwood
MD
MD
2023
$475,000
$118,750
2022
$430,000
$129,600
Total STVR
Awarded
Following
Completion
of the
Financial
Year
(equity-
settled)
$0
$0
Value of LTVR
that Vested
Following
Completion of
the
Measurement
Period**
Total
Remuneration
Package (TRP)
Gains/Losses
on Vested
LTVR from
Change in
Value During
Vesting
Period***
$21,038
$614,788
$7,254
$18,346
$577,946
$22,423
Robin
Polson
(commenced
18/07/2022)
*
CFO
2023
$341,345
$0
$78,750
$0
$420,095
$0
CFO
2022
$41,250
This is the value of the total STVR/bonus award calculated following the end of the Financial Year. The
STVR will be paid in the form of Restricted Rights, subject to Shareholder Approval.
$190,342
$325,292
N/A
N/A
N/A
** This is the grant value of the LTVR/Equity that vested in respect of the FY23 performance i.e. the number
that vested multiplied by the Black-Scholes value at grant.
*** This is the difference between the Black-Scholes value at grant, and the realisable value based on the
market value of a share at the time of vesting, for the LTVR that vested immediately following the end of
the reporting period.
Use of Board Discretion
4.4
During the financial year and to the date of this report, the Board did not exercise any discretions available to
it to modify STVR or LTVR outcomes, vesting or awards.
5
Statutory Tables and Supporting Disclosures
5.1
Executive KMP Statutory Remuneration for FY23
The following table outlines the statutory remuneration of executive KMP:
Table 7
Fixed Pay
Variable Remuneration
Name
Roles
Year
Salary
Super
Other
Benefits
***
Total Fixed
Pay
Cash
STVR*
Current Executive KMP
Alex
Underwood
Robin
Polson
MD
MD
CFO
CFO
2023
2022
2023
2022
Name
Roles
Year
Current Executive KMP
Alex
Underwood
Robin
Polson
MD
MD
CFO
CFO
2023
2022
2023
2022
$449,708
$26,345
$18,454
$494,507
$118,750
$406,432
$24,430
$6,043
$436,905
$129,600
$315,000
$26,346
$137,500
$11,592
$0
$0
$341,346
$149,092
$0
$0
Total
Remuneration
Package (TRP)
Variable
Remuneration as
% TRP
Termination
Benefits
Change in
Accrued Leave
$649,478
$713,487
$420,096
$190,342
24%
35%
19%
22%
$0
$0
$0
$0
$(10,452)
$(8,159)
$13,558
$13,330
Equity-
Settled
STVR*
$0
$0
$78,750
$41,250
LTVR**
$36,221
$147,342
$0
$0
*
Note that the STVR/bonus value reported in this table is the bonus that was paid during the reporting
period, being the award earned during the previous period. Variable remuneration outcomes for the
reporting period are outlined elsewhere in this report.
** Note that the LTVR/Equity value reported in this table is the amortised accounting charge of all grants that
have not lapsed or vested as at the start of the reporting period. Where a market based measure of
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Empire Energy Group Limited
Directors' report - remuneration report
31 December 2023
performance is used such as TSR or share price, no adjustments can be made to reflect actual LTVR
vesting.
*** Other benefits for Alexander Underwood include items such as FBT and depreciation associated with
motor vehicle running costs. $1000 per month is deducted from Mr Underwood’s remuneration pre-tax to
cover motor vehicle running costs including car parking, fuel, interest etc.
5.2
Non-Executive Director (‘NED’) KMP Statutory Remuneration for FY23
The following table outlines the statutory and audited remuneration of NEDs ($, except where otherwise
indicated):
Table 8
Name
Role(s)
Year
Board
Fees
Committee
Fees
Super-
annuation
Other
Benefits
Equity
Grant *
Total
Paul Espie AO (a)
John Warburton
Peter Cleary (b)
Louis Rozman (c)
Paul Fudge (d)
Jacqui Clarke (d)
Karen Green (e)
Non-Executive
Chairman
Non-Executive
Chairman
Non-Executive
Director
Non-Executive
Director
Non-Executive
Chairman
Non-Executive
Director
Non-Executive
Director
Non-Executive
Director
Non-Executive
Director
Non-Executive
Director
Alternate Director
Alternate Director
Non-Executive
Director
Non-Executive
Director
2023
$82,500
2022
-
-
-
$8,663
-
2023
$60,000
$16,904
$8,272
2022
$62,500
2023
2022
-
-
-
-
-
$6,500
-
-
2023
$30,000
$5,000
$3,675
2022
$60,000
2023
$52,726
2022
$55,000
-
-
-
$6,238
$5,650
$5,713
2023
2022
2023
2022
$58,376
$6,967
-
$60,913
-
N/A
-
-
N/A
$2,563
-
N/A
There were no termination payments made to NEDs.
-
-
-
-
-
-
-
-
-
-
-
-
-
-
$91,163
$54,382
$54,382
-
-
$85,176
$69,000
$63,565
$63,565
$36,255
$36,255
-
-
-
-
-
-
-
$38,675
$66,238
$58,376
$60,713
$65,343
$63,476
-
N/A
N/A
N/A
*
Share based payments reflect a proportion of the independently valued cost of options granted under the
Employee Share Option Plan (“ESOP”). The cost shown is a non-cash cost and includes, on a pro-rata
basis, the independently valued cost of options issued using the Black Scholes methodology.
(a) Paul Espie retired as Non-Executive Director and Chairman on 30 May 2023. Paul elected to take his
2023 Director Fees in cash and relates to director fees from July 2022 to May 2023. The $54,382 was
approved at the 2022 AGM and relates to director fees from July 2021 to June 2022.
(b) Peter Cleary has elected to take his Director Fees in Restricted Rights in lieu of a cash payment. The
$63,565 and $36,255 were approved at the 2023 and 2022 AGMs, respectively and relate to director fees
from July 2021 to June 2023.
(c) Louis Rozman has elected to take his Director Fees in Restricted Rights in lieu of a cash payment from
1 July 2023. The equity grant for director fees from July 2023 to June 2024 is yet to be approved at the
2024 AGM.
(d) Paul Fudge and his alternate Jacqui Clarke retired as Non-Executive Directors on 17 November 2023.
(e) Karen Green was appointed Non-Executive Director on 17 November 2023. Karen has elected to take
her Director Fees in Restricted Rights in lieu of a cash payment from date of appointment. The equity
grant for director fees from date of appointment to June 2024 is yet to be approved at the 2024 AGM.
39
Empire Energy Group Limited
Directors' report - remuneration report
31 December 2023
5.3
KMP Equity Interests and Changes During FY23
Movements in equity interests held by executive KMP during the reporting period, including their related
parties, are set out below:
Table 9
Name
Instru-
ment
Number
Held at
Open FY23
Granted FY23
Forfeited
during
FY23
Vested
during
FY23
FY23
Exercised
(or Shares
received
from
Exercising)
FY23
Purchased/
Other
FY23
Sold
Number
Held at
Close 2023
Number
Number
Number
Number
Number
Number
Number
Number
2,550,000
Date
Granted
-
3,887,079
-
-
-
-
-
-
203,847
3,894,123
21/07/23
1,878,144
(203,847)
-
-
-
-
-
-
-
-
-
-
22/12/22
266,418
-
-
-
-
-
-
-
-
-
Alex
Under-
wood
Robin
Polson
Shares
Vested
Rights
Unvested
Rights
Options
Shares
Vested
Rights
Unvested
Rights
TOTALS
10,331,202
N/A
2,144,562
(203,847)
203,847
-
-
-
-
-
-
200,000
-
-
-
-
200,000
-
-
-
-
-
-
-
2,750,000
4,090,926
5,568,420
-
-
-
266,418
12,675,764
Movements in equity interests held by non-executive KMP during the reporting period, including their related
parties, are set out below:
Table 10
Name
Instrument
Number Held
at Open
FY23
Granted FY23
Forfeited
during
FY23
Vested
during
FY23
FY23 Exercised
(or Shares
received from
Exercising)
FY23
Purchased
/Other
Number Held
at Close
FY23
Number
Number
Number
Number
Number
Number
Paul Espie
AO
John
Warburton
Peter
Cleary
Louis
Rozman
Paul Fudge
Shares
Vested
Rights
Unvested
Rights
Options
Shares
Vested
Rights
Unvested
Rights
Options
Shares
Vested
Rights
Unvested
Rights
Options
Shares
Vested
Rights
Unvested
Rights
Options
Shares
Unissued
Shares
Vested
Rights
Number
10,135,363
733,169
-
704,546
772,815
1,200,000
-
159,091
1,044,546
Date
Granted
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
328,943
21/07/23
423,764
-
227,273
621,546
-
-
227,273
140,000,000
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
40
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
62,000
-
-
-
-
-
-
10,135,363
733,169
-
704,546
772,815
1,200,000
-
159,091
1,044,546
752,707
-
227,273
683,546
-
-
227,273
140,000,000
-
-
Empire Energy Group Limited
Directors' report - remuneration report
31 December 2023
Name
Instrument
Unvested
Rights
Options
Shares
Vested
Rights
Unvested
Rights
Shares
Vested
Rights
Unvested
Rights
Jacqui
Clarke
Karen
Green
Number Held
at Open
FY23
Number
-
8,000,000
-
-
-
-
-
-
Date
Granted
-
-
-
-
-
-
-
-
Granted FY23
Forfeited
during
FY23
Vested
during
FY23
FY23 Exercised
(or Shares
received from
Exercising)
FY23
Purchased
/Other
Number Held
at Close
FY23
Number
Number
Number
Number
Number
Number
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
8,000,000
-
-
-
-
-
-
62,000
164,640,329
TOTALS
164,154,565
-
423,764
-
The following outlines the accounting values and potential future costs of equity remuneration granted during
FY23 for executive KMP:
Table 11
2023 Equity
Grants
Name
Alex
Underwood
Max Value
to be
Expensed in
Future
Years
$13,163
Tranche
Grant
Type
Vesting
Conditions
Grant Date
Total Value
at Grant
Value
Expensed
in FY 23
FY23 LTVR
Performance Rights
FY23 LTVR
Performance Rights
LTVR
LTVR
Absolute
TSR
Milestones
21/07/2023
$16,098
$2,935
21/07/2023
$20,123
$3,669
$16,454
Note: the minimum value to be expensed in future years for each of the above grants made in FY23 is nil. A
reversal of previous expense resulting in a negative expense in the future may occur in the event of an
executive KMP departure or failure to meet non market-based conditions including failure for Gate to
open.
*
Pursuant to Section 300A (1)(d) of the Corporations Act, The FY20 STVR Restricted Rights are not
subject to the satisfaction of a performance condition as the Restricted Rights have been used to settle
short term awards already subject to performance conditions.
The following outlines the accounting values and potential future costs of equity remuneration granted during
FY23 for Non-executive KMP:
Table 12
2023 Equity
Grants
Name
Peter Cleary
Tranche
Grant Type
Vesting
Conditions
Grant Date
Total
Value at
Grant
Value
Expensed
in FY 23
Restricted
Rights
Fee Sacrifice
n/a*
21/07/2023
$63,565
$63,565
Max Value to
be Expensed
in Future
Years
-
Note: the minimum value to be expensed in future years for each of the above grants made in FY23 is nil. A
reversal of previous expense resulting in a negative expense in the future may occur in the event of a
NED departure or failure to meet non market-based conditions.
*
Pursuant to Section 300A (1)(d) of the Corporations Act, The Restricted Rights Peter Cleary are not
subject to the satisfaction of a performance condition as the Restricted Rights have been granted in lieu
of cash payments for the fulfilment of their roles as Non-Executive Directors.
41
Empire Energy Group Limited
Directors' report - remuneration report
31 December 2023
5.4
KMP Service Agreements
5.4.1 Executive KMP Service Agreements
The following outlines current executive KMP service agreements:
Table 13
Name
Position
Held at
Close of
FY23
Employing
Company
Duration
of
Contract
Period of Notice
From
Company
From
KMP
Alex
Underwood
Managing
Director
Empire Energy
Group Limited
Robin
Polson
Chief
Financial
Officer
Empire Energy
Group Limited
Permanent
12 months
12 months
Permanent
3 months
3 months
Termination
Payments*
12 months of
salary in lieu of
notice
3 months of
salary in lieu of
notice
*
Under the Corporations Act the Termination Benefit Limit is 12 months average Salary (over prior 3
years) unless shareholder approval is obtained.
5.4.2 Non-Executive Directors (‘NEDs’) Service Agreements
The appointment of Non-Executive Directors is subject to a letter of engagement. Under this approach NEDs
are not eligible for any termination benefits following termination of their office, nor any payments other than
those required under law such as in respect of superannuation. There are no notice periods applicable to either
party under this approach.
5.5 Other Statutory Disclosures
5.5.1 External Remuneration Consultants
The Remuneration Committee may engage the assistance and advice of External Remuneration Consultants
to provide information on remuneration related matters. During FY23 the Board retained Godfrey
Remuneration Group Pty Ltd (GRG) as an External Remuneration Consultant to provide assistance on any
remuneration related matters as they arise. During FY23, GRG provided the following services:
•
Analysis and recommendations regarding executive remuneration in relation to the Managing Director
and Direct Reports - $5,500 + GST
An agreed set of protocols has been put in place in prior years to ensure that the remuneration
recommendations are free from undue influence from key management personnel. These protocols include
requiring that the consultant not communicate with affected key management personnel without a member of
the Remuneration Committee being present or without the authorisation of the Chairman of the Remuneration
Committee, and that the consultant not provide any information relating to the outcome of the engagement
with the affected key management personnel. The Board is also required to make inquiries of the consultants’
processes at the conclusion of the engagement to ensure that they are satisfied that any recommendations
made have been free from undue influence. The Board is satisfied that these protocols were followed and that
there was no undue influence.
5.5.2 Loans to KMP and their related parties
During the financial year and to the date of this report, the Company made no loans to directors and other
KMP and none were outstanding as at 31 December 2023 (2022: Nil).
42
Empire Energy Group Limited
Directors' report - remuneration report
31 December 2023
5.5.3 Other transactions with KMP
Certain directors and KMP, or their personally related entities (Related Parties), hold positions in other entities
that result in them having control or significant influence over the financial or operating policies of those
entities. A number of these entities transacted with the Company in the FY23 reporting periods. The terms
and conditions of the transactions were no more favourable than those available, or which might reasonably
be expected to be available, on similar transactions with unrelated entities on an arms-length basis.
The following transactions occurred with entities controlled by Related Parties:
Related Party
Melissa
Underwood
Related Entity
Spouse of Managing
Director
Transactions
Temporary employment as Accounts Executive
End of Audited Remuneration Report
43
`
To the Board of Directors of
Empire Energy Group Limited
Level 5,
6-10 O’Connell Street
SYDNEY NSW 2000
Auditor’s Independence Declaration under section 307C of the Corporations Act 2001
As lead audit director for the audit of the financial statements of Empire Energy Group Limited for the
financial year ended 31 December 2023, I declare that to the best of my knowledge and belief, there have
been no contraventions of:
(a)
the auditor independence requirements of the Corporations Act 2001 in relation to the audit; and
(b)
any applicable code of professional conduct in relation to the audit.
Yours sincerely
Nexia Sydney Audit Pty Ltd
Brett Hanger
Director
Date: 28 March 2024
44
Empire Energy Group Limited
Consolidated statement of profit or loss and other comprehensive income
For the year ended 31 December 2023
Revenue
Cost of goods sold
Gross margin
Other income
Interest revenue calculated using the effective interest method
Expenses
Exploration expenses
General and administration expenses
Depreciation, depletion and amortisation
Unrealised loss on forward commodity contracts
Finance costs
Loss before income tax expense
Income tax expense
Loss after income tax expense for the year attributable to the
owners of Empire Energy Group Limited
Other comprehensive income/(loss)
Items that may be reclassified subsequently to profit or loss
Foreign currency translation
Other comprehensive income/(loss) for the year, net of tax
Total comprehensive loss for the year attributable to the owners
of Empire Energy Group Limited
Basic earnings per share
Diluted earnings per share
Consolidated
Note
2023
$
2022
$
5
6
7
7
7
8
9
9
6,085,528
(5,892,491)
193,037
13,722,333
(5,960,674)
7,761,659
575,678
308,554
258,613
21,360
(9,093,337)
(8,394,185)
(1,488,031)
(296,020)
(3,636,499)
(2,175,882)
(7,990,122)
(1,087,683)
(272,099)
(2,280,524)
(21,830,803)
(5,764,678)
(251,113)
(238,528)
(22,081,916)
(6,003,206)
311,481
(121,182)
311,481
(121,182)
(21,770,435)
(6,124,388)
Cents
Cents
(2.86)
(2.86)
(0.86)
(0.86)
The above consolidated statement of profit or loss and other comprehensive income should be read in
conjunction with the accompanying notes
45
Empire Energy Group Limited
Consolidated statement of financial position
As at 31 December 2023
Consolidated
Note
2023
$
2022
$
Assets
Current assets
Cash and cash equivalents
Trade and other receivables
Other assets
Inventories
Derivative financial instruments
Total current assets
Non-current assets
Oil and gas properties
Property, plant and equipment
Exploration and evaluation assets
Right-of-use assets
Intangibles
Total non-current assets
Total assets
Liabilities
Current liabilities
Trade and other payables
Borrowings
Lease liabilities
Provisions
Total current liabilities
Non-current liabilities
Lease liabilities
Provisions
Total non-current liabilities
Total liabilities
Net assets
Equity
Contributed equity
Reserves
Accumulated losses
Total equity
10
11
12
13
14
15
16
17
18
19
20
21
22
21
22
13,626,753
1,912,220
4,564,623
38,937
-
20,142,533
21,880,311
6,055,432
4,191,609
66,361
96,410
32,290,123
38,206,087
556,565
36,611,612
608,774
111,514,901 127,039,687
999,606
100,689
151,360,246 165,360,368
982,961
99,732
171,502,779 197,650,491
8,466,291
8,771,474
604,085
271,723
18,113,573
18,469,820
7,822,908
399,195
252,424
26,944,347
370,509
40,715,280
41,085,789
608,977
36,489,377
37,098,354
59,199,362
64,042,701
112,303,417 133,607,790
23
24
255,945,973 255,945,973
10,399,487
(154,819,586) (132,737,670)
11,177,030
112,303,417 133,607,790
The above consolidated statement of financial position should be read in conjunction with the accompanying
notes
46
Empire Energy Group Limited
Consolidated statement of changes in equity
For the year ended 31 December 2023
Consolidated
Issued
Capital
$
Unissued
Shares
$
Reserves
$
Accumulated
losses
$
Total equity
$
Balance at 1 January 2022
220,905,029
5,629,437
9,520,152 (126,734,464) 109,320,154
Loss after income tax expense
for the year
Other comprehensive loss for
the year, net of tax
Total comprehensive loss for
the year
Transactions with owners in
their capacity as owners:
Contributions of equity, net of
transaction costs (note 23)
Share-based payments
-
-
-
-
-
-
-
(6,003,206)
(6,003,206)
(121,182)
-
(121,182)
(121,182)
(6,003,206)
(6,124,388)
35,040,944
-
(5,629,437)
-
-
1,000,517
-
-
29,411,507
1,000,517
Balance at 31 December 2022
255,945,973
-
10,399,487 (132,737,670) 133,607,790
Consolidated
Issued
Capital
$
Unissued
shares
$
Reserves
$
Accumulated
losses
$
Total equity
$
Balance at 1 January 2023
255,945,973
Loss after income tax expense
for the year
Other comprehensive income
for the year, net of tax
Total comprehensive
income/(loss) for the year
Transactions with owners in
their capacity as owners:
Share-based payments
-
-
-
-
Balance at 31 December 2023
255,945,973
-
-
-
-
-
-
10,399,487 (132,737,670) 133,607,790
-
(22,081,916)
(22,081,916)
311,481
-
311,481
311,481
(22,081,916)
(21,770,435)
466,062
-
466,062
11,177,030 (154,819,586) 112,303,417
The above consolidated statement of changes in equity should be read in conjunction with the
accompanying notes
47
Empire Energy Group Limited
Consolidated statement of cash flows
For the year ended 31 December 2023
Cash flows from operating activities
Receipts from customers (inclusive of GST)
Payments to suppliers and employees (inclusive of GST)
Government grants (Beetaloo Cooperative Drilling Program)
R&D tax incentive
Interest received
Interest and other finance costs paid
Income taxes paid
Consolidated
Note
2023
$
2022
$
11,953,249
(35,577,593)
7,697,880
15,336,577
308,554
(1,939,642)
(251,113)
10,693,582
(19,998,504)
7,558,421
7,764,603
21,360
(700,644)
(238,528)
Net cash (used in)/from operating activities
37
(2,472,088)
5,100,290
Cash flows from investing activities
Payments for property, plant and equipment
Payments for exploration and evaluation assets
Proceeds from disposal of property, plant and equipment
Net cash used in investing activities
Cash flows from financing activities
Net proceeds from issue of shares
Proceeds from interest-bearing liabilities
Repayments of interest-bearing liabilities
Repayment of lease liabilities
Net cash from financing activities
Net decrease in cash and cash equivalents
Cash and cash equivalents at the beginning of the financial year
Effects of exchange rate changes on cash and cash equivalents
15
23
(137,043)
(7,024,670)
403,970
(229,274)
(37,356,304)
-
(6,757,743)
(37,585,578)
-
1,827,000
(804,094)
(349,174)
29,411,507
-
(811,808)
(223,159)
673,732
28,376,540
(8,556,099)
21,880,311
302,541
(4,108,748)
25,649,699
339,360
Cash and cash equivalents at the end of the financial year
13,626,753
21,880,311
The above consolidated statement of cash flows should be read in conjunction with the accompanying notes
48
Empire Energy Group Limited
Notes to the consolidated financial statements
31 December 2023
Note 1. General information
The financial statements cover Empire Energy Group Limited as a Group consisting of Empire Energy Group
Limited and the entities it controlled at the end of, or during, the year. The financial statements are presented
in Australian dollars, which is Empire Energy Group Limited's functional and presentation currency.
Empire Energy Group Limited is a listed public company limited by shares, incorporated and domiciled in
Australia. Its registered office and principal place of business is:
Level 5
6 - 10 O’Connell Street
Sydney NSW 2000
A description of the nature of the Group's operations and its principal activities are included in the Directors'
report, which is not part of the financial statements.
The financial statements were authorised for issue, in accordance with a resolution of Directors, on 28 March
2024. The Directors have the power to amend and reissue the financial statements.
Note 2. Material accounting policies information
New or amended Accounting Standards and Interpretations adopted
The Group has adopted all of the new or amended Accounting Standards and Interpretations issued by the
Australian Accounting Standards Board ('AASB') that are mandatory for the current reporting period. The
adoption of these Accounting Standards and Interpretations did not have any significant impact on the financial
performance or position of the Group.
Any new or amended Accounting Standards or Interpretations that are not yet mandatory have not been early
adopted.
Going concern
The Group has prepared the financial report on the going concern basis, which assumes continuity of normal
business activities and the realisation of assets and settlement of liabilities in the ordinary course of business.
As at 31 December 2023 the Group:
● Reported an operating loss after income tax of $22,081,916 and incurred net operating cash outflows of
$2,472,088; and
● Has a loan facility with Macquarie Bank for the US operations totalling USD$4,750,020 (AUD$6,944,474)
which matures in September 2024 and will need to have its maturity extended, be refinanced, or be repaid
by that time.
In addition, the Group continues to incur increased expenditure in the lead up to the sanction of the Carpentaria
Pilot Project. The Group is also planning significant expenditures, not yet committed, for the development of
the Carpentaria Pilot Project within the next 12 months. The existing Group’s cash on hand is not sufficient to
meet all these obligations (committed or otherwise) as they come due over the next twelve months.
These factors raise material uncertainty regarding the Group’s ability to continue as a going concern. The
continuation of the Group as a going concern is dependent upon the ability of the Group to obtain necessary
additional capital to fund ongoing activities and the repayment, refinance, or amendment of terms of the US
loan facility within the next 12 months.
Management has several plans in various stages of progress to source additional funding and the Directors
are confident that funding will be available to provide operating capital and to address the maturity for the US
debt. However, if the Group is not successful in securing sufficient additional funds or through other
arrangements when required, then to meet its expenditure targets there may be uncertainty about whether the
Group is able to realise assets and/or extinguish liabilities in the normal course of business at the amounts
stated in the Financial Report.
49
Empire Energy Group Limited
Notes to the consolidated financial statements
31 December 2023
Note 2. Material accounting policies information (continued)
The consolidated financial statements do not include any adjustments related to the recoverability and
classification of recorded assets and liabilities that might be necessary should the Group be unable to continue
as a going concern.
Basis of preparation
These general purpose financial statements have been prepared in accordance with Australian Accounting
Standards and Interpretations issued by the Australian Accounting Standards Board ('AASB') and the
Corporations Act 2001, as appropriate for for-profit oriented entities. These financial statements also comply
with International Financial Reporting Standards as issued by the International Accounting Standards Board
('IASB').
Historical cost convention
The financial statements have been prepared under the historical cost convention, except for, where
applicable, the revaluation of financial assets and liabilities at fair value through profit or loss and derivative
financial instruments.
Critical accounting estimates
The preparation of the financial statements requires the use of certain critical accounting estimates. It also
requires management to exercise its judgement in the process of applying the Group's accounting policies.
The areas involving a higher degree of judgement or complexity, or areas where assumptions and estimates
are significant to the financial statements, are disclosed in note 3.
Parent entity information
In accordance with the Corporations Act 2001, these financial statements present the results of the Group.
Supplementary information about the parent entity is disclosed in note 34.
Principles of consolidation
The consolidated financial statements incorporate the assets and liabilities of all subsidiaries of Empire Energy
Group Limited ('Company' or 'parent entity') as at 31 December 2023 and the results of all subsidiaries for the
year then ended. Empire Energy Group Limited and its subsidiaries together are referred to in these financial
statements as the 'Group' or 'Empire Group'.
Subsidiaries are all those entities over which the Group has control. The Group controls an entity when the
Group 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 to direct the activities of the entity. Subsidiaries are fully consolidated
from the date on which control is transferred to the Group. They are de-consolidated from the date that control
ceases.
Intercompany transactions, balances and unrealised gains on transactions between entities in the Group are
eliminated. Unrealised losses are also eliminated unless the transaction provides evidence of the impairment
of the asset transferred. Accounting policies of subsidiaries have been changed where necessary to ensure
consistency with the policies adopted by the Group.
The acquisition of subsidiaries is accounted for using the acquisition method of accounting. A change in
ownership interest, without the loss of control, is accounted for as an equity transaction, where the difference
between the consideration transferred and the book value of the share of the non-controlling interest acquired
is recognised directly in equity attributable to the parent.
Where the Group loses control over a subsidiary, it derecognises the assets including goodwill, liabilities and
non-controlling interest in the subsidiary together with any cumulative translation differences recognised in
equity. The Group recognises the fair value of the consideration received and the fair value of any investment
retained together with any gain or loss in profit or loss.
Operating segments
Operating segments are presented using the 'management approach', where the information presented is on
the same basis as the internal reports provided to the Chief Operating Decision Makers ('CODM'). The CODM
is responsible for the allocation of resources to operating segments and assessing their performance.
50
Empire Energy Group Limited
Notes to the consolidated financial statements
31 December 2023
Note 2. Material accounting policies information (continued)
Foreign currency translation
Foreign currency transactions
Foreign currency transactions are translated into the Company's functional currency using the exchange rates
prevailing at the dates of the transactions. Foreign exchange gains and losses resulting from the settlement of
such transactions and from the translation at financial year-end exchange rates of monetary assets and
liabilities denominated in foreign currencies are recognised in profit or loss.
Foreign operations
The assets and liabilities of foreign operations are translated into the Company's functional currency using the
exchange rates at the reporting date. The revenues and expenses of foreign operations are translated into the
Company's functional currency using the average exchange rates, which approximate the rates at the dates
of the transactions, for the period. All resulting foreign exchange differences are recognised in other
comprehensive income through the foreign currency reserve in equity.
The foreign currency reserve is recognised in profit or loss when the foreign operation or net investment is
disposed of.
Revenue recognition
The Group recognises revenue as follows:
Revenue from contracts with customers
Revenue is recognised at an amount that reflects the consideration to which the Group is expected to be
entitled in exchange for transferring goods or services to a customer. For each contract with a customer, the
Group: identifies the contract with a customer; identifies the performance obligations in the contract;
determines the transaction price which takes into account estimates of variable consideration and the time
value of money; allocates the transaction price to the separate performance obligations on the basis of the
relative stand-alone selling price of each distinct good or service to be delivered; and recognises revenue when
or as each performance obligation is satisfied in a manner that depicts the transfer to the customer of the
goods or services promised.
Variable consideration within the transaction price, if any, reflects concessions provided to the customer such
as discounts, rebates and refunds, any potential bonuses receivable from the customer and any other
contingent events. Such estimates are determined using either the 'expected value' or 'most likely amount'
method. The measurement of variable consideration is subject to a constraining principle whereby revenue
will only be recognised to the extent that it is highly probable that a significant reversal in the amount of
cumulative revenue recognised will not occur. The measurement constraint continues until the uncertainty
associated with the variable consideration is subsequently resolved. Amounts received that are subject to the
constraining principle are recognised as a refund liability.
Natural gas revenue
Revenue from the sale of natural gas is recognised when natural gas has been delivered to a custody transfer
point, contracts exist with customers, control of the assets passes to the purchaser upon delivery, collection
of revenue from the sale is reasonably assured, and the sales price is fixed or determinable. Natural gas is
sold by the Empire Group under contracts with terms ranging from one month up to the life of the well.
Virtually all of the Empire Group contracts' pricing provisions are tied to a market index with certain adjustments
based on, among other factors, whether a well delivers to a gathering or transmission line, quality of natural
gas and prevailing supply and demand conditions, so that the price of the natural gas fluctuates to remain
competitive with other available natural gas suppliers.
The timing differences between the delivery of natural gas and the Empire Group's receipt of a delivery
statement results in unbilled revenues. These revenues are accrued based upon volumetric data from the
Empire Group's records and the Empire Group's estimates of the related transportation and compression fees,
which are, in turn, based upon applicable product prices.
51
Empire Energy Group Limited
Notes to the consolidated financial statements
31 December 2023
Note 2. Material accounting policies information (continued)
Oil revenue
Revenue from the sale of oil is recognised when control of the asset has been transferred to the buyer and
can be measured reliably, which is usually at the time of lifting, transferred into a vessel, pipe or other delivery
mechanism.
There are no elements of variable consideration in oil contracts with customers and prices are determined
based on prevailing market sales price data.
Well operations
Well operations and pipeline income are recognised when persuasive evidence of an arrangement exists,
services have been rendered, collection of revenues is reasonably assured and the sales price is fixed or
determinable. The Empire Group is paid a monthly operating fee for each well it operates for outside owners.
The fee covers monthly operating and accounting costs, insurance and other recurring costs. The Empire
Group might also receive additional compensation for special non-recurring activities, such as reworks and
recompletions.
Finance income
Finance income comprises interest income on funds invested as well as fair value gains on oil and gas
derivatives the Group is party to. Interest income is recognised as it accrues, using the effective interest
method.
Other revenue
Other revenue is recognised when it is received or when the right to receive payment is established.
Government grants
Government grants relating to costs are deferred and recognised in profit or loss over the period necessary to
match them with the costs that they are intended to compensate.
Government grants related to assets, including non-monetary grants at fair value, are presented in the
statement of financial position by deducting the grant in arriving at the carrying amount of the asset.
Income tax
The income tax expense or benefit for the period is the tax payable on that period's taxable income based on
the applicable income tax rate for each jurisdiction, adjusted by the changes in deferred tax assets and
liabilities attributable to temporary differences, unused tax losses and the adjustment recognised for prior
periods, where applicable.
Deferred tax assets and liabilities are recognised for temporary differences at the tax rates expected to be
applied when the assets are recovered or liabilities are settled, based on those tax rates that are enacted or
substantively enacted, except for:
● when the deferred income tax asset or liability arises from the initial recognition of goodwill or an asset or
liability in a transaction that is not a business combination and that, at the time of the transaction, affects
neither the accounting nor taxable profits; or
● when the taxable temporary difference is associated with interests in subsidiaries, associates or joint
ventures, and the timing of the reversal can be controlled and it is probable that the temporary difference
will not reverse in the foreseeable future.
Deferred tax assets are recognised for deductible temporary differences and unused tax losses only if it is
probable that future taxable amounts will be available to utilise those temporary differences and losses.
The carrying amount of recognised and unrecognised deferred tax assets are reviewed at each reporting date.
Deferred tax assets recognised are reduced to the extent that it is no longer probable that future taxable profits
will be available for the carrying amount to be recovered. Previously unrecognised deferred tax assets are
recognised to the extent that it is probable that there are future taxable profits available to recover the asset.
52
Empire Energy Group Limited
Notes to the consolidated financial statements
31 December 2023
Note 2. Material accounting policies information (continued)
Deferred tax assets and liabilities are offset only where there is a legally enforceable right to offset current tax
assets against current tax liabilities and deferred tax assets against deferred tax liabilities; and they relate to
the same taxable authority on either the same taxable entity or different taxable entities which intend to settle
simultaneously.
Tax consolidation
Empire Energy Group Limited and its wholly-owned Australian resident entities form a tax-consolidated Empire
Group. As a consequence, all members of the tax-consolidated Empire Group have been taxed as a single
entity since 1 July 2003. The head entity within the tax-consolidated Empire Group is Empire Energy Group
Limited.
Current tax expense/income, deferred tax liabilities and deferred tax assets arising from temporary differences
of the members of the tax-consolidated Empire Group are recognised in the separate financial statements of
the members of the tax-consolidated Empire Group using the ‘separate taxpayer within Empire Group’
approach by reference to the carrying amounts of assets and liabilities in the separate financial statements of
each entity and the tax values applying under tax consolidation.
Any current tax liabilities (or assets) and deferred tax assets arising from unused tax losses of the subsidiaries
are assumed by the head entity in the tax-consolidated Empire Group and are recognised by the Empire Group
as amounts payable/(receivable) to/from other entities in the tax-consolidated Empire Group in conjunction
with any tax funding arrangement amounts (refer below). Any difference between these amounts is recognised
by the Empire Group as an equity contribution or distribution.
The Empire Group recognises deferred tax assets arising from unused tax losses of the tax consolidated
Empire Group to the extent that it is probable that future taxable profits of the tax consolidated Empire Group
will be available against which the asset can be utilised.
Any subsequent period adjustments to deferred tax assets arising from unused tax losses as a result of revised
assessments of the probability of recoverability is recognised by the head entity only.
Nature of tax funding arrangements and tax sharing arrangements
The head entity, in conjunction with other members of the tax-consolidated Empire Group, has entered into a
tax funding arrangement which sets out the funding obligations of members of the tax-consolidated Empire
Group in respect of tax amounts.
The tax funding arrangements require payments to/from the head entity equal to the current tax liability/(asset)
assumed by the head entity and any tax-loss deferred tax asset assumed by the head entity, resulting in the
head entity recognising an inter-entity receivable/(payable) equal in amount to the tax liability/(asset) assumed.
The inter-entity receivables/(payables) are at call. Contributions to fund the current tax liabilities are payable
as per the tax funding arrangement and reflect the timing of the head entity’s obligation to make payments for
tax liabilities to the relevant tax authorities.
The head entity in conjunction with other members of the tax-consolidated Empire Group, has also entered
into a tax sharing agreement. The tax sharing agreement provides for the determination of the allocation of
income tax liabilities between the entities should the head entity default on its tax payment obligations. No
amounts have been recognised in the financial statements in respect of this agreement as payment of any
amounts under the tax sharing agreement is considered remote.
Current and non-current classification
Assets and liabilities are presented in the statement of financial position based on current and non-current
classification.
An asset is classified as current when: it is either expected to be realised or intended to be sold or consumed
in the Group's normal operating cycle; it is held primarily for the purpose of trading; it is expected to be realised
within 12 months after the reporting period; or the asset is cash or cash equivalent unless restricted from being
exchanged or used to settle a liability for at least 12 months after the reporting period. All other assets are
classified as non-current.
53
Empire Energy Group Limited
Notes to the consolidated financial statements
31 December 2023
Note 2. Material accounting policies information (continued)
A liability is classified as current when: it is either expected to be settled in the Group's normal operating cycle;
it is held primarily for the purpose of trading; it is due to be settled within 12 months after the reporting period;
or there is no unconditional right to defer the settlement of the liability for at least 12 months after the reporting
period. All other liabilities are classified as non-current.
Deferred tax assets and liabilities are always classified as non-current.
Cash and cash equivalents
Cash and cash equivalents includes cash on hand, deposits held at call with financial institutions, other short-
term, highly liquid investments with original maturities of three months or less that are readily convertible to
known amounts of cash and which are subject to an insignificant risk of changes in value.
Trade and other receivables
Trade receivables are initially recognised at fair value and subsequently measured at amortised cost using the
effective interest method, less any allowance for expected credit losses. Trade receivables are generally due
for settlement within 30 to 90 days.
An estimate of expected credit is loss is made based on historic data on collectability and consideration of the
credit worthiness of customers. Bad debts are written-off when identified.
The Group has applied the simplified approach to measuring expected credit losses, which uses a lifetime
expected loss allowance. To measure the expected credit losses, trade receivables have been grouped based
on days overdue.
Inventories
Inventories consists of crude oil, stated at the lower of cost to produce or market and other production supplies
intended to be used in natural gas and crude oil operations.
Derivative financial instruments
Derivatives are initially recognised at fair value on the date a derivative contract is entered into and are
subsequently remeasured to their fair value at each reporting date. The accounting for subsequent changes
in fair value depends on whether the derivative is designated as a hedging instrument, and if so, the nature of
the item being hedged.
Derivatives are classified as current or non-current depending on the expected period of realisation.
Cash flow hedges
Cash flow hedges are used to cover the Group's exposure to variability in cash flows that is attributable to
particular risks associated with a recognised asset or liability or a firm commitment which could affect profit or
loss. The effective portion of changes in the fair value of derivatives and other qualifying hedging instruments
that are designated and qualify as cash flow hedges is recognised in other comprehensive income and
accumulated under the heading of cash flow hedging reserve, limited to the cumulative change in fair value of
the hedged item from inception of the hedge. The gain or loss relating to the ineffective portion is recognised
immediately in profit or loss, and is included in the ‘other gains and losses’ line item.
Amounts previously recognised in other comprehensive income and accumulated in equity are reclassified to
profit or loss in the periods when the hedged item affects profit or loss, in the same line as the recognised
hedged item. However, when the hedged forecast transaction results in the recognition of a non-financial asset
or a non-financial liability, the gains and losses previously recognised in other comprehensive income and
accumulated in equity are removed from equity and included in the initial measurement of the cost of the non-
financial asset or non-financial liability. This transfer does not affect other comprehensive income.
Furthermore, if the Group expects that some or all of the loss accumulated in the cash flow hedging reserve
will not be recovered in the future, that amount is immediately reclassified to profit or loss.
54
Empire Energy Group Limited
Notes to the consolidated financial statements
31 December 2023
Note 2. Material accounting policies information (continued)
The Group discontinues hedge accounting only when the hedging relationship (or a part thereof) ceases to
meet the qualifying criteria (after rebalancing, if applicable). This includes instances when the hedging
instrument expires or is sold, terminated or exercised. The discontinuation is accounted for prospectively. Any
gain or loss recognised in other comprehensive income and accumulated in cash flow hedge reserve at that
time remains in equity and is reclassified to profit or loss when the forecast transaction occurs. When a forecast
transaction is no longer expected to occur, the gain or loss accumulated in the cash flow hedge reserve is
reclassified immediately to profit or loss.
Property, plant and equipment
Property, plant and equipment is stated at historical cost less accumulated depreciation and impairment.
Historical cost includes expenditure that is directly attributable to the acquisition of the items.
Depreciation is calculated on a straight-line basis to write off the net cost of each item of property, plant and
equipment (excluding land) over their expected useful lives as outlined below, except for land which is not
depreciated:
Buildings
Equipment
Motor vehicles
40 years
5 years
5 years
The residual values, useful lives and depreciation methods are reviewed, and adjusted if appropriate, at each
reporting date.
An item of property, plant and equipment is derecognised upon disposal or when there is no future economic
benefit to the Group. Gains and losses between the carrying amount and the disposal proceeds are taken to
profit or loss.
Oil and gas properties
Oil and gas properties are stated at cost, less accumulated depletion and accumulated impairment losses.
Oil and natural gas exploration and development expenditure is accounted for using the successful efforts
method of accounting for gas producing activities. Costs to acquire mineral interests in gas properties, drill and
equip exploratory wells that find proved reserves, and drill and equip development wells and related asset
retirement costs are capitalised. Depletion is based on cost less estimated salvage value using the unit-of-
production method. The process of estimating and evaluating gas reserves is complex, requiring significant
decisions in the evaluation of geological, geophysical, engineering and economic data. Costs to drill
exploratory wells that do not find proved reserves, geological and geophysical costs, and costs of carrying and
retaining unproved properties are expensed.
Major maintenance and repairs
Expenditure on major maintenance refits or repairs comprises the cost of replacement assets or parts of
assets, inspection costs and overhaul costs. Where an asset or part of an asset that was separately
depreciated and is now written off is replaced and it is probable that future economic benefits associated with
the item will flow to the Empire Group, the expenditure is capitalised. Where part of the asset was not
separately considered as a component, the replacement value is used to estimate the carrying amount of the
replaced assets which is immediately written off.
Exploration assets
Mineral exploration and evaluation expenditure is written off as incurred or accumulated in respect of each
identifiable area of interest and capitalised. These costs are carried forward only if they relate to an area of
interest for which rights of tenure are current and in respect of which:
●
●
such costs are expected to be recouped through the successful development and exploitation of the area
of interest, or alternatively by its sale; or
exploration and/or evaluation activities in the area have not reached a stage which permits a reasonable
assessment of the existence or otherwise of economically recoverable reserves and active or significant
operations in, or in relation to, the area of interest are continuing.
55
Empire Energy Group Limited
Notes to the consolidated financial statements
31 December 2023
Note 2. Material accounting policies information (continued)
In the event that an area of interest is abandoned or if the Directors consider the expenditure to be of reduced
value, accumulated costs carried forward are written off during the period in which that assessment is made.
A regular review is undertaken of each area of interest to determine the appropriateness of continuing to carry
forward costs in relation to that area of interest.
Immediate restoration, rehabilitation and environmental costs necessitated by exploration and evaluation
activities are expensed as incurred and treated as exploration and evaluation expenditure. Exploration
activities resulting in future obligations in respect of restoration costs result in a provision to be made by
capitalising the estimated costs, on a discounted cash basis, of restoration and depreciating over the useful
life of the asset.
Right-of-use assets
A right-of-use asset is recognised at the commencement date of a lease. The right-of-use asset is measured
at cost, which comprises the initial amount of the lease liability, adjusted for, as applicable, any lease payments
made at or before the commencement date net of any lease incentives received, any initial direct costs
incurred, and, except where included in the cost of inventories, an estimate of costs expected to be incurred
for dismantling and removing the underlying asset, and restoring the site or asset.
Right-of-use assets are depreciated on a straight-line basis over the unexpired period of the lease or the
estimated useful life of the asset, whichever is the shorter. Where the Group expects to obtain ownership of
the leased asset at the end of the lease term, the depreciation is over its estimated useful life. Right-of use
assets are subject to impairment or adjusted for any remeasurement of lease liabilities.
The Group has elected not to recognise a right-of-use asset and corresponding lease liability for short-term
leases with terms of 12 months or less and leases of low-value assets. Lease payments on these assets are
expensed to profit or loss as incurred.
Intangible assets
Goodwill
Goodwill arises on the acquisition of a business. Goodwill is not amortised. Instead, goodwill is tested annually
for impairment, or more frequently if events or changes in circumstances indicate that it might be impaired,
and is carried at cost less accumulated impairment losses. Impairment losses on goodwill are taken to profit
or loss and are not subsequently reversed.
Impairment of non-financial assets
Goodwill has an indefinite useful life and is not subject to amortisation, it is tested annually for impairment, or
more frequently if events or changes in circumstances indicate that they might be impaired. Other non-financial
assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying
amount may not be recoverable. An impairment loss is recognised for the amount by which the asset's carrying
amount exceeds its recoverable amount.
Recoverable amount is the higher of an asset's fair value less costs of disposal and value-in-use. The value-
in-use is the present value of the estimated future cash flows relating to the asset using a pre-tax discount rate
specific to the asset or cash-generating unit to which the asset belongs. Assets that do not have independent
cash flows are grouped together to form a cash-generating unit.
Trade and other payables
Trade and other payables represent liabilities for goods and services provided to the Group prior to the end of
the financial year and which are unpaid. Due to their short-term nature they are measured at amortised cost
and are not discounted. The amounts are unsecured and are usually paid within 30 days of recognition.
Borrowings
Loans and borrowings are initially recognised at the fair value of the consideration received, net of transaction
costs. They are subsequently measured at amortised cost using the effective interest method.
56
Empire Energy Group Limited
Notes to the consolidated financial statements
31 December 2023
Note 2. Material accounting policies information (continued)
Lease liabilities
A lease liability is recognised at the commencement date of a lease. The lease liability is initially recognised
at the present value of the lease payments to be made over the term of the lease, discounted using the interest
rate implicit in the lease or, if that rate cannot be readily determined, the Group's incremental borrowing rate.
Lease payments comprise of fixed payments less any lease incentives receivable, variable lease payments
that depend on an index or a rate, amounts expected to be paid under residual value guarantees, exercise
price of a purchase option when the exercise of the option is reasonably certain to occur, and any anticipated
termination penalties. The variable lease payments that do not depend on an index or a rate are expensed in
the period in which they are incurred.
Lease liabilities are measured at amortised cost using the effective interest method. The carrying amounts are
remeasured if there is a change in the following: future lease payments arising from a change in an index or a
rate used; residual guarantee; lease term; certainty of a purchase option and termination penalties. When a
lease liability is remeasured, an adjustment is made to the corresponding right-of use asset, or to profit or loss
if the carrying amount of the right-of-use asset is fully written down.
Finance costs
Finance costs attributable to qualifying assets are capitalised as part of the asset. All other finance costs are
expensed in the period in which they are incurred.
Provisions
Provisions are recognised when the Group has a present (legal or constructive) obligation as a result of a past
event, it is probable the Group will be required to settle the obligation, and a reliable estimate can be made of
the amount of the obligation. The amount recognised as a provision is the best estimate of the consideration
required to settle the present obligation at the reporting date, taking into account the risks and uncertainties
surrounding the obligation. If the time value of money is material, provisions are discounted using a current
pre-tax rate specific to the liability. The increase in the provision resulting from the passage of time is
recognised as a finance cost.
Employee benefits
Short-term employee benefits
Liabilities for wages and salaries, including non-monetary benefits, annual leave and long service leave
expected to be settled wholly within 12 months of the reporting date are measured at the amounts expected
to be paid when the liabilities are settled.
Other long-term employee benefits
The liability for annual leave and long service leave not expected to be settled within 12 months of the reporting
date are measured at the present value of expected future payments to be made in respect of services provided
by employees up to the reporting date. Consideration is given to expected future wage and salary levels,
experience of employee departures and periods of service. Expected future payments are discounted using
market yields at the reporting date on high quality corporate bonds with terms to maturity and currency that
match, as closely as possible, the estimated future cash outflows.
Share-based payments
Equity-settled and cash-settled share-based compensation benefits are provided to employees.
Equity-settled transactions are awards of shares, or options over shares, that are provided to employees in
exchange for the rendering of services. Cash-settled transactions are awards of cash for the exchange of
services, where the amount of cash is determined by reference to the share price.
The cost of equity-settled transactions are measured at fair value on grant date. Fair value is independently
determined using the Black-Scholes option pricing model that takes into account the exercise price, the term
of the option, the impact of dilution, the share price at grant date and expected price volatility of the underlying
share, the expected dividend yield and the risk free interest rate for the term of the option, together with non-
vesting conditions that do not determine whether the Group receives the services that entitle the employees
to receive payment. No account is taken of any other vesting conditions.
57
Empire Energy Group Limited
Notes to the consolidated financial statements
31 December 2023
Note 2. Material accounting policies information (continued)
The cost of equity-settled transactions are recognised as an expense with a corresponding increase in equity
over the vesting period. The cumulative charge to profit or loss is calculated based on the grant date fair value
of the award, the best estimate of the number of awards that are likely to vest and the expired portion of the
vesting period. The amount recognised in profit or loss for the period is the cumulative amount calculated at
each reporting date less amounts already recognised in previous periods.
The cost of cash-settled transactions is initially, and at each reporting date until vested, determined by applying
the Black-Scholes option pricing model, taking into consideration the terms and conditions on which the award
was granted. The cumulative charge to profit or loss until settlement of the liability is calculated as follows:
●
during the vesting period, the liability at each reporting date is the fair value of the award at that date
multiplied by the expired portion of the vesting period.
from the end of the vesting period until settlement of the award, the liability is the full fair value of the
liability at the reporting date.
●
All changes in the liability are recognised in profit or loss. The ultimate cost of cash-settled transactions is the
cash paid to settle the liability.
Market conditions are taken into consideration in determining fair value. Therefore any awards subject to
market conditions are considered to vest irrespective of whether or not that market condition has been met,
provided all other conditions are satisfied.
If equity-settled awards are modified, as a minimum an expense is recognised as if the modification has not
been made. An additional expense is recognised, over the remaining vesting period, for any modification that
increases the total fair value of the share-based compensation benefit as at the date of modification.
If the non-vesting condition is within the control of the Group or employee, the failure to satisfy the condition is
treated as a cancellation. If the condition is not within the control of the Group or employee and is not satisfied
during the vesting period, any remaining expense for the award is recognised over the remaining vesting
period, unless the award is forfeited.
If equity-settled awards are cancelled, it is treated as if it has vested on the date of cancellation, and any
remaining expense is recognised immediately. If a new replacement award is substituted for the cancelled
award, the cancelled and new award is treated as if they were a modification.
Fair value measurement
When an asset or liability, financial or non-financial, is measured at fair value for recognition or disclosure
purposes, the fair value is based on the price that would be received to sell an asset or paid to transfer a
liability in an orderly transaction between market participants at the measurement date; and assumes that the
transaction will take place either: in the principal market; or in the absence of a principal market, in the most
advantageous market.
Fair value is measured using the assumptions that market participants would use when pricing the asset or
liability, assuming they act in their economic best interests. For non-financial assets, the fair value
measurement is based on its highest and best use. Valuation techniques that are appropriate in the
circumstances and for which sufficient data are available to measure fair value, are used, maximising the use
of relevant observable inputs and minimising the use of unobservable inputs.
Assets and liabilities measured at fair value are classified into three levels, using a fair value hierarchy that
reflects the significance of the inputs used in making the measurements. Classifications are reviewed at each
reporting date and transfers between levels are determined based on a reassessment of the lowest level of
input that is significant to the fair value measurement.
For recurring and non-recurring fair value measurements, external valuers may be used when internal
expertise is either not available or when the valuation is deemed to be significant. External valuers are selected
based on market knowledge and reputation. Where there is a significant change in fair value of an asset or
liability from one period to another, an analysis is undertaken, which includes a verification of the major inputs
applied in the latest valuation and a comparison, where applicable, with external sources of data.
58
Empire Energy Group Limited
Notes to the consolidated financial statements
31 December 2023
Note 2. Material accounting policies information (continued)
Issued capital
Ordinary shares are classified as equity.
Incremental costs directly attributable to the issue of new shares or options are shown in equity as a deduction,
net of tax, from the proceeds.
Earnings per share
Basic earnings per share
Basic earnings per share is calculated by dividing the profit attributable to the owners of Empire Energy Group
Limited, excluding any costs of servicing equity other than ordinary shares, by the weighted average number
of ordinary shares outstanding during the financial year, adjusted for bonus elements in ordinary shares issued
during the financial year.
Diluted earnings per share
Diluted earnings per share adjusts the figures used in the determination of basic earnings per share to take
into account the after income tax effect of interest and other financing costs associated with dilutive potential
ordinary shares and the weighted average number of additional ordinary shares that would have been
outstanding assuming conversion of all dilutive potential ordinary shares.
Goods and Services Tax ('GST') and other similar taxes
Revenues, expenses and assets are recognised net of the amount of associated GST, unless the GST incurred
is not recoverable from the tax authority. In this case it is recognised as part of the cost of the acquisition of
the asset or as part of the expense.
Receivables and payables are stated inclusive of the amount of GST receivable or payable. The net amount
of GST recoverable from, or payable to, the tax authority is included in other receivables or other payables in
the statement of financial position.
Cash flows are presented on a gross basis. The GST components of cash flows arising from investing or
financing activities which are recoverable from, or payable to the tax authority, are presented as operating
cash flows.
Commitments and contingencies are disclosed net of the amount of GST recoverable from, or payable to, the
tax authority.
New Accounting Standards and Interpretations not yet mandatory or early adopted
Australian Accounting Standards and Interpretations that have recently been issued or amended but are not
yet mandatory, have not been early adopted by the Group for the annual reporting period ended 31 December
2023. The Group has not yet assessed the impact of these new or amended Accounting Standards and
Interpretations.
The accounting policies adopted are consistent with those of the previous financial year, unless otherwise
stated.
Note 3. Critical accounting judgements, estimates and assumptions
The preparation of the financial statements requires management to make judgements, estimates and
assumptions that affect the reported amounts in the financial statements. Management continually evaluates
its judgements and estimates in relation to assets, liabilities, contingent liabilities, revenue and expenses.
Management bases its judgements, estimates and assumptions on historical experience and on other various
factors, including expectations of future events, management believes to be reasonable under the
circumstances. The resulting accounting judgements and estimates will seldom equal the related actual
results. The judgements, estimates and assumptions that have a significant risk of causing a material
adjustment to the carrying amounts of assets and liabilities (refer to the respective notes) within the next
financial year are discussed below.
59
Empire Energy Group Limited
Notes to the consolidated financial statements
31 December 2023
Note 3. Critical accounting judgements, estimates and assumptions (continued)
Estimation of useful lives of assets
The Group determines the estimated useful lives and related depreciation and amortisation charges for its
property, plant and equipment and finite life intangible assets. The useful lives could change significantly as a
result of technical innovations or some other event. The depreciation and amortisation charge will increase
where the useful lives are less than previously estimated lives, or technically obsolete or non-strategic assets
that have been abandoned or sold will be written off or written down.
Impairment of non-financial assets other than goodwill
The Group assesses impairment of non-financial assets other than goodwill at each reporting date by
evaluating conditions specific to the Group and to the particular asset that may lead to impairment. If an
impairment trigger exists, the recoverable amount of the asset is determined. This involves fair value less costs
of disposal or value-in-use calculations, which incorporate a number of key estimates and assumptions.
Income tax
The Group is subject to income taxes in the jurisdictions in which it operates. Significant judgement is required
in determining the provision for income tax. There are many transactions and calculations undertaken during
the ordinary course of business for which the ultimate tax determination is uncertain. The Group recognises
liabilities for anticipated tax audit issues based on the Group's current understanding of the tax law. Where the
final tax outcome of these matters is different from the carrying amounts, such differences will impact the
current and deferred tax provisions in the period in which such determination is made.
Recovery of deferred tax assets
Deferred tax assets are recognised for deductible temporary differences only if the Group considers it is
probable that future taxable amounts will be available to utilise those temporary differences and losses.
Employee benefits provision
As discussed in note 2, the liability for employee benefits expected to be settled more than 12 months from
the reporting date are recognised and measured at the present value of the estimated future cash flows to be
made in respect of all employees at the reporting date. In determining the present value of the liability,
estimates of attrition rates and pay increases through promotion and inflation have been taken into account.
Reserves base
Estimates of recoverable quantities of proven, probable and possible reserves reported include judgmental
assumptions regarding commodity prices, exchange rates, discount rates and production and transportation
costs for future cash flows. It also requires interpretation of complex and difficult geological and geophysical
models in order to make assessment of the size, shape, depth and quality of reservoirs, and their anticipated
recoveries. The economic, geological and technical factors used to estimate may change from period to period.
Changes in reported reserves can impact asset carrying values and the recognition of deferred tax assets due
to changes in expected future cash flows. Reserves are integral to the amount of amortisation charged to profit
or loss. Future development costs are estimated using assumptions as to the number of wells required to
produce the commercial reserves, the cost of such wells and associated production and other capital costs.
The current gas price curves are used for price assumptions. The Empire Group uses suitably qualified persons
to prepare annual evaluation of proven hydrocarbon reserves, compliant with US professional standards for
petroleum engineers.
Carrying value of oil and gas assets
Oil and gas properties are depreciated using the units-of-production ('UOP') method over proved developed
and undeveloped reserves.
The calculation of the UOP rate of depreciation, depletion and amortisation could be impacted to the extent
that actual production in the future is different from current forecast production based on proved reserves.
This would generally result from significant changes in any of the factors or assumptions used in estimating
reserves. Estimates of gas reserve quantities provide the basis for calculation of depletion, depreciation and
amortisation and impairment, each of which represents a significant component of the consolidated financial
statements.
60
Empire Energy Group Limited
Notes to the consolidated financial statements
31 December 2023
Note 3. Critical accounting judgements, estimates and assumptions (continued)
These factors could include changes in proved reserves, the effect on proved reserves of differences between
actual commodity prices and commodity price assumptions, and unforeseen operational issues.
Impairment indicators
The fair value of oil and gas properties is determined with reference to estimates of recoverable quantities of
reserves (as outlined above) to determine the estimated future cash flows. An impairment loss is recognised
for the amount by which the asset or Empire Group of assets carrying value exceeds the present value of its
future cash flows.
For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are
separately identifiable cash inflows which are largely independent of the cash inflows from other assets or
groups of assets (cash generating units).
Recoverable amount
The recoverable amount of an asset is the greater of its fair value less costs of disposal and its value-in-use,
using an asset’s estimated future cash flows (as described below) discounted to their present value using a
pre-tax discount rate that reflects current market assessments of the time value of money and risks specific to
the asset.
Impairment of oil and gas assets
For oil and gas assets, the expected future cash flow estimation is based on a number of factors, variables
and assumptions, the most important of which are estimates of reserves, future production profiles, commodity
prices, costs and foreign exchange rates. In most cases, the present value of future cash flows is most sensitive
to estimates of future oil price and discount rates.
The estimated future cash flows for the value-in-use calculation are based on estimates, the most significant
of which are hydrocarbon reserves, future production profiles, commodity prices, operating costs and any
future development costs necessary to produce the reserves.
Estimates of future commodity prices are based on the Group’s best estimate of future market prices with
reference to external market analysts’ forecasts, current spot prices and forward curves. Future commodity
prices are reviewed at least annually.
The discount rates applied to the future forecast cash flows are based on the Group’s weighted average cost
of capital, adjusted for risks where appropriate, including functional currency of the asset, and risk profile of
the country in which the asset operates.
In the event that future circumstances vary from these assumptions, the recoverable amount of the Group’s oil
and gas assets could change materially and result in impairment losses or the reversal of previous impairment
losses.
Due to the interrelated nature of the assumptions, movements in any one variable can have an indirect impact
on others and individual variables rarely change in isolation. Additionally, management can be expected to
respond to some movements, to mitigate downsides and take advantage of upsides, as circumstances allow.
Consequently, it is impracticable to estimate the indirect impact that a change in one assumption has on other
variables and hence, on the likelihood, or extent, of impairments or reversals of impairments under the different
sets of assumptions in subsequent reporting periods.
Asset retirement obligations
Asset retirement costs will be incurred by the Empire Group at the end of the operating life of some of Empire
Group’s facilities and properties. The ultimate asset retirement costs are uncertain and cost estimates can vary
in response to many factors including changes to relevant legal requirements, the emergence of new
restoration techniques or experience at other production sites.
The expected timing and amount of expenditure can also change, for example, in response to changes in
reserves or changes in laws and regulations or their interpretation. As a result, there could be significant
adjustments to the provisions established which would affect future financial results.
61
Empire Energy Group Limited
Notes to the consolidated financial statements
31 December 2023
Note 3. Critical accounting judgements, estimates and assumptions (continued)
Share-based payment transactions
The Group measures the cost of equity-settled transactions with employees by reference to the fair value of
the equity instruments at the date at which they are granted. The fair value is determined by using either the
Binomial or Black-Scholes model taking into account the terms and conditions upon which the instruments
were granted. The accounting estimates and assumptions relating to equity-settled share-based payments
would have no impact on the carrying amounts of assets and liabilities within the next annual reporting period
but may impact profit or loss and equity.
Note 4. Operating segments
Identification of reportable operating segments
The Group is organised into three operating segments:
(1) US Operations - includes all oil and gas operations located in the USA. Revenue is derived from the sale
of oil and gas and operation of wells;
(2) Northern Territory - includes all exploration and drilling activity of the Group in the Northern Territory,
conducted through Imperial Oil & Gas Pty Limited and Imperial Oil & Gas A Pty Limited; and
(3) Corporate - includes all centralised administration costs, minor other income and investments/loans in
Empire Group USA, Imperial Oil & Gas Pty Limited and Imperial Oil & Gas A Pty Limited (eliminated on
consolidation).
These operating segments are based on the internal reports that are reviewed and used by the Board of
Directors (who are identified as the Chief Operating Decision Makers ('CODM')) in assessing performance and
in determining the allocation of resources. There is no aggregation of operating segments.
The revenue reported below represents revenue generated from external customers. Intersegment revenue
relates to Corporate overhead charges only. Included in Other income are gains disclosed separately on the
face of the Statement of Profit and Loss and Other Comprehensive Income. Information reported to the CODM
allows resources to be allocated and subsequent performance to be analysed. This is reviewed on a monthly
basis.
Segment profit/(loss) represents the profit/(loss) earned by each segment without allocation of central
administration costs and share-based payments, finance income and finance expense, gains or losses on
disposal of associates and discontinued operations. This is the measure reported to the CODM for the
purposes of resource allocation and assessment of segment performance.
Major customers
During the year ended 31 December 2023 approximately $4,381,580 (2022: $11,115,090) of the Group's
external revenue was derived from sales to two (2022: two) major customers.
62
Empire Energy Group Limited
Notes to the consolidated financial statements
31 December 2023
Note 4. Operating segments (continued)
Operating segment information
Consolidated - 2023
Revenue
Sales to external customers
Intersegment sales
Total sales revenue
Other income
Interest income (external)
Intersegment interest income
Total revenue
Segment profit/(loss)
Share-based payments
expense
Depreciation and amortisation
Unrealised loss on forward
commodity contracts
Finance costs (net)
Finance costs (non-cash)
Intersegment interest expense
(Loss)/profit before income
tax expense
Income tax expense
Loss after income tax
expense
Assets
Segment assets
Total assets
Liabilities
Segment liabilities
Total liabilities
US
Operations
$
Northern
Territory
$
Corporate
$
Eliminations
$
Total
$
6,085,528
-
6,085,528
521,961
58,813
-
6,666,302
-
-
-
53,717
6,896
-
60,613
-
4,827,588
4,827,588
-
242,845
9,757,939
14,828,372
-
(4,827,588)
(4,827,588)
-
-
(9,757,939)
(14,585,527)
6,085,528
-
6,085,528
575,678
308,554
-
6,969,760
(956,038)
(14,016,792)
8,652,533
(9,643,894)
(15,964,191)
-
(1,198,973)
-
(20,003)
(446,062)
(269,055)
-
-
(446,062)
(1,488,031)
(296,020)
(897,321)
(1,696,857)
(2,509,023)
-
(1,019,260)
-
(7,385,981)
-
(23,061)
-
-
-
-
-
9,895,004
(296,020)
(1,939,642)
(1,696,857)
-
(7,554,232)
(22,442,036)
7,914,355
251,110
(21,830,803)
(251,113)
(22,081,916)
45,826,070
116,534,967
253,594,035 (244,452,293) 171,502,779
171,502,779
(79,912,793) (178,800,101)
(1,894,078) 201,407,610
(59,199,362)
(59,199,362)
63
Empire Energy Group Limited
Notes to the consolidated financial statements
31 December 2023
Note 4. Operating segments (continued)
Consolidated - 2022
Revenue
Sales to external customers
Intersegment sales
Total sales revenue
Other income
Interest income (external)
Intersegment interest income
Total revenue
Segment profit/(loss)
Depreciation and amortisation
Share-based payments
Finance costs (net)
Intersegment interest expense
Finance costs (non-cash)
Unrealised loss on forward
commodity contracts
Profit/(loss) before income
tax expense
Income tax expense
Loss after income tax
expense
Assets
Segment assets
Total assets
Liabilities
Segment liabilities
Total liabilities
Geographical information
US
Operations
$
Northern
Territory
$
Corporate
$
Eliminations
$
Total
$
13,722,333
-
13,722,333
258,613
21,360
-
14,002,306
-
-
-
-
-
-
-
6,249,828
(809,128)
-
(669,842)
(2,381,970)
(1,601,240)
(11,132,729)
(105,113)
-
-
(4,790,771)
-
-
4,262,350
4,262,350
-
-
7,175,887
11,438,237
6,783,723
(173,442)
(1,000,517)
(9,442)
(3,146)
-
-
(4,262,350)
(4,262,350)
-
-
(7,175,887)
(11,438,237)
(3,024,677)
-
-
-
7,175,887
-
13,722,333
-
13,722,333
258,613
21,360
-
14,002,306
(1,123,855)
(1,087,683)
(1,000,517)
(679,284)
-
(1,601,240)
(272,099)
-
-
-
(272,099)
515,549
(16,028,613)
5,597,176
4,151,210
(5,764,678)
(238,528)
(6,003,206)
47,261,555
134,551,461
245,562,697 (229,725,222) 197,650,491
197,650,491
(74,133,741) (174,686,256)
(1,794,148) 186,571,444
(64,042,701)
(64,042,701)
All revenue generated from the sale of oil and gas to external customers is derived from operations in the USA.
All of the Group’s producing oil and gas assets are located in the USA.
The Group has exploration oil and gas tenements in the Northern Territory, Australia.
64
Empire Energy Group Limited
Notes to the consolidated financial statements
31 December 2023
Note 5. Revenue
Revenue from oil sales
Revenue from gas sales
Revenue from well operations
Oil and gas price risk management income
Consolidated
2023
$
2022
$
323,141
5,138,420
545,550
78,417
365,325
12,806,031
550,977
-
6,085,528
13,722,333
The Group's total revenue are all generated in the USA and recognised at a point in time.
Note 6. Other income
Net gain on disposal of property, plant and equipment
US Government stimulus packages
Other income
Other income
Consolidated
2023
$
2022
$
53,717
-
521,961
-
258,613
-
575,678
258,613
65
Empire Energy Group Limited
Notes to the consolidated financial statements
31 December 2023
Note 7. Expenses
Loss before income tax includes the following specific expenses:
Depreciation and depletion
Depletion - oil and gas properties (note 14)
Depreciation - property, plant and equipment (note 15)
Depreciation - right-of-use assets (note 17)
Total depreciation and depletion
General and administration expenses
Salaries and wages - Australia
Other advisory fees
Other overhead
Insurance including NT work programs
Share-based payments expense
Short-term lease payments
Finance costs
Interest paid/payable on financial liabilities
Unwinding of the discount
Accretion of asset retirement obligation (note 22)
Finance costs expensed
Employee costs*
Defined contribution superannuation expense
Salaries and wages
Total employee costs
Consolidated
2023
$
2022
$
985,900
169,890
332,241
645,696
242,597
199,390
1,488,031
1,087,683
2,726,516
582,309
4,148,803
449,258
466,062
21,237
2,282,504
592,928
3,808,633
305,540
1,000,517
-
8,394,185
7,990,122
1,939,642
-
1,696,857
679,284
36,604
1,564,636
3,636,499
2,280,524
182,720
5,818,753
158,886
5,592,909
6,001,473
5,751,795
*
32 employees are based in the US and 7 employees are based in Australia. Employee costs for the US
based employees are recognised in cost of sales and employee costs for Australia based employees are
recognised in general and administration expenses.
66
Empire Energy Group Limited
Notes to the consolidated financial statements
31 December 2023
Note 8. Income tax
Income tax expense
Current tax
Deferred tax - origination and reversal of temporary differences
Aggregate income tax expense
Numerical reconciliation of income tax expense and tax at the statutory rate
Loss before income tax expense
Tax at the statutory tax rate of 25%
Difference in overseas tax rates
Changes in Australian tax rate
Withholding tax paid
Deferred tax asset in relation to tax losses and temporary differences not
recognised
Income tax expense
Deferred tax assets not recognised
Deferred tax assets not recognised comprises temporary differences
attributable to:
Tax losses
Capital losses
Other
Total deferred tax assets not recognised
Consolidated
2023
$
2022
$
-
251,113
-
238,528
251,113
238,528
(21,830,803)
(5,764,678)
(5,457,701)
(1,441,170)
67,652
-
251,113
100,210
96,941
238,528
5,390,049
1,244,019
251,113
238,528
Consolidated
2023
$
2022
$
24,000,839
201,841
8,995,776
18,689,936
201,841
7,739,633
33,198,456
26,631,410
The above potential tax benefit, which excludes tax losses, for deductible temporary differences has not been
recognised in the statement of financial position as the recovery of this benefit is uncertain.
The potential benefit of the deferred tax asset attributable to tax losses will only be obtained if:
(i)
the Group derives future assessable income of a nature and of an amount sufficient to enable the benefit
from the deduction for the loss to be realised; or
the Group continues to comply with the conditions for deductibility imposed by the law; and
(ii)
(iii) no changes in tax legislation adversely affect the Group in realising the asset.
67
Empire Energy Group Limited
Notes to the consolidated financial statements
31 December 2023
Note 8. Income tax (continued)
Deferred tax asset
Deferred tax asset comprises temporary differences attributable to:
Amounts recognised in profit or loss:
Accrued asset retirement obligation
Oil and gas properties and property, plant and equipment
Other
Set-off of deferred tax assets pursuant to set-off provisions
Deferred tax asset
Deferred tax liability
Deferred tax liability comprises temporary differences attributable to:
Amounts recognised in profit or loss:
Forward commodity contracts
Oil and gas properties and property, plant and equipment
Other
Set-off of deferred tax liabilities pursuant to set-off provisions
Deferred tax liability
Note 9. Earnings per share
Consolidated
2023
$
2022
$
3,618,421
4,738,466
638,889
(8,995,776)
2,944,649
4,130,777
664,207
(7,739,633)
-
-
Consolidated
2023
$
2022
$
-
4,144,737
114,035
(4,258,772)
23,616
4,132,842
118,081
(4,274,539)
-
-
Consolidated
2023
$
2022
$
Loss after income tax attributable to the owners of Empire Energy Group
Limited
(22,081,916)
(6,003,206)
Weighted average number of ordinary shares used in calculating basic
earnings per share
773,121,148
700,901,005
Weighted average number of ordinary shares used in calculating diluted
earnings per share
773,121,148
700,901,005
Number
Number
Basic earnings per share
Diluted earnings per share
Cents
(2.86)
(2.86)
Cents
(0.86)
(0.86)
78,924,528 options (2022: 78,924,528), 12,766,951 Performance Rights (2022: 9,765,402), 2,438,558 Service
Rights (2022: 2,438,558) and 4,891,260 Restricted Rights (2022: 3,702,954) have been excluded from the
above calculation as their inclusion would be anti-dilutive.
68
Empire Energy Group Limited
Notes to the consolidated financial statements
31 December 2023
Note 10. Trade and other receivables
Current assets
Trade receivables
Other receivables
GST receivable
Consolidated
2023
$
2022
$
1,408,726
-
503,494
2,970,945
659,448
2,425,039
1,912,220
6,055,432
Allowance for expected credit losses
The Group has recognised a loss of $85,792 (USD$57,000) (2022: $69,095 (USD$48,000)) in profit or loss in
respect of the expected credit losses for the year ended 31 December 2023.
The ageing of the receivables and allowance for expected credit losses provided for above are as follows:
Expected
credit loss
rate
2023
%
Expected
credit loss
rate
2022
%
Carrying
amount
2023
$
Carrying
amount
2022
$
Allowance
for
expected
credit
losses
2023
$
Allowance
for
expected
credit
losses
2022
$
25.00%
-
-
75.00%
-
-
-
10.40%
1,338,517
958
952
68,299
2,286,963
-
1,234
682,748
34,567
-
-
51,225
-
-
-
69,095
1,408,726
2,970,945
85,792
69,095
Consolidated
Current
31 to 60 days overdue
61 to 90 days overdue
Over 90 days overdue
Movements in the allowance for expected credit losses are as follows:
Opening balance
Additional provisions recognised
Closing balance
Consolidated
2023
US$
2022
US$
48,000
9,000
5,300
42,700
57,000
48,000
69
Empire Energy Group Limited
Notes to the consolidated financial statements
31 December 2023
Note 11. Other assets
Current assets
Prepayments
Security deposits*
Consolidated
2023
$
2022
$
791,966
3,772,657
564,022
3,627,587
4,564,623
4,191,609
*
Security deposits of $3,755,990 (2022: $3,627,587) are Northern Territory Environment bonds held with
the Northern Territory Government.
Note 12. Inventories
Current assets
Parts and supplies
Oil
Note 13. Derivative financial instruments
Current assets
Oil and gas price forward contracts
Refer to note 27 for further information on fair value measurement.
Note 14. Oil and gas properties
Non-current assets
Oil and gas - Producing
Less: Accumulated depletion
Oil and gas - Non Producing
Consolidated
2023
$
2022
$
16,706
22,231
22,499
43,862
38,937
66,361
Consolidated
2023
$
2022
$
-
96,410
Consolidated
2023
$
2022
$
95,504,259
(60,481,115)
35,023,144
93,510,669
(60,112,537)
33,398,132
3,182,943
3,213,480
38,206,087
36,611,612
70
Empire Energy Group Limited
Notes to the consolidated financial statements
31 December 2023
Note 14. Oil and gas properties (continued)
Reconciliations
Reconciliations of the written down values at the beginning and end of the current and previous financial year
are set out below:
Consolidated
Balance at 1 January 2022
Additions
Exchange differences
Depletion
Balance at 31 December 2022
Change in estimate
Exchange differences
Depletion
Oil and gas -
Producing
$
Oil and gas -
Non
Producing
$
Total
$
31,899,523
19,199
2,125,106
(645,696)
33,398,132
2,882,216
(271,304)
(985,900)
3,000,459
-
213,021
-
34,899,982
19,199
2,338,127
(645,696)
3,213,480
-
(30,537)
-
36,611,612
2,882,216
(301,841)
(985,900)
Balance at 31 December 2023
35,023,144
3,182,943
38,206,087
At 31 December 2023, the Group assessed the carrying amounts of its non-current assets for indicators of
impairment in accordance with the Group’s accounting policy.
Estimates of recoverable amounts for producing assets are based on an asset’s value in use or fair value less
costs to sell, using a discounted cash flow method, and are most sensitive to the key assumptions described
in note 3.
The pre-tax discount rate that has been applied in assessing oil and gas assets is 12% (2022: 12%). An
impairment loss was not required to be recognised as the recoverable amounts were determined to be higher
than the carrying amounts (2022: $nil).
Note 15. Property, plant and equipment
Consolidated
2023
$
2022
$
7,310
7,380
329,876
(130,547)
199,329
333,039
(121,373)
211,666
2,104,781
(1,961,165)
143,616
2,297,091
(2,065,512)
231,579
1,024,460
(818,150)
206,310
918,695
(760,546)
158,149
556,565
608,774
Non-current assets
Land - at cost
Buildings - at cost
Less: Accumulated depreciation
Equipment - at cost
Less: Accumulated depreciation
Motor vehicles - at cost
Less: Accumulated depreciation
71
Empire Energy Group Limited
Notes to the consolidated financial statements
31 December 2023
Note 15. Property, plant and equipment (continued)
Reconciliations
Reconciliations of the written down values at the beginning and end of the current and previous financial year
are set out below:
Consolidated
Balance at 1 January 2022
Additions
Exchange differences
Depreciation expense
Balance at 31 December 2022
Additions
Exchange differences
Depreciation expense
Land
$
Buildings
$
Equipment Motor vehicles
$
$
Total
$
6,891
-
489
-
7,380
-
(70)
-
207,763
-
14,481
(10,578)
211,666
-
(1,706)
(10,631)
229,277
136,955
50,897
(185,550)
231,579
23,884
(17,759)
(94,088)
109,482
92,319
2,817
(46,469)
158,149
113,159
173
(65,171)
553,413
229,274
68,684
(242,597)
608,774
137,043
(19,362)
(169,890)
Balance at 31 December 2023
7,310
199,329
143,616
206,310
556,565
Note 16. Exploration and evaluation assets
Non-current assets
Capitalised exploration and evaluation assets
Consolidated
2023
$
2022
$
111,514,901 127,039,687
Reconciliations
Reconciliations of the written down values at the beginning and end of the current and previous financial year
are set out below:
Capitalised
exploration
and
evaluation
assets
$
90,849,806
51,512,905
(15,323,024)
127,039,687
7,859,924
(350,253)
(23,034,457)
111,514,901
Consolidated
Balance at 1 January 2022
Additions
Government grants and R&D tax incentive
Balance at 31 December 2022
Additions
Disposals
Government grants and R&D tax incentive
Balance at 31 December 2023
72
Empire Energy Group Limited
Notes to the consolidated financial statements
31 December 2023
Note 17. Right-of-use assets
Non-current assets
Plant and equipment
Less: Accumulated depreciation
Motor vehicles
Less: Accumulated depreciation
Consolidated
2023
$
2022
$
948,345
(285,624)
662,721
1,058,386
(738,146)
320,240
948,345
(48,538)
899,807
748,117
(648,318)
99,799
982,961
999,606
Reconciliations
Reconciliations of the written down values at the beginning and end of the current and previous financial year
are set out below:
Consolidated
Balance at 1 January 2022
Additions
Disposals
Depreciation expense
Balance at 31 December 2022
Additions
Disposals
Foreign exchange
Depreciation expense
Balance at 31 December 2023
Right-of-use
assets
$
752,993
1,015,903
(569,900)
(199,390)
999,606
320,423
-
(4,827)
(332,241)
982,961
The Company currently leases its Australian corporate headquarters in Sydney under a 4-year operating lease
recognised as a right-of-use asset and lease liability, with monthly payments approximately $22,888. The rental
agreement has a 3.75% fixed rent review on the anniversary of the commencement date of the lease being 3
November 2022.
The Group leases trucks under an operating agreement recognised as a right-of-use asset and lease liability.
The term of the agreement begins upon delivery of each truck and lasts for a period of up to 48 months. The
Empire Group has the option to acquire the leased assets at the agreed value on the expiry of the leases.
The Group leases a photocopier under a 4-year operating agreement which commenced in November 2021.
Monthly lease payments are $399.
For AASB 16 Lease disclosures refer to:
●
●
●
note 7 for depreciation on right-of-use assets;
note 21 for lease liabilities; and
consolidated statement of cash flows for repayment of lease liabilities.
73
Empire Energy Group Limited
Notes to the consolidated financial statements
31 December 2023
Note 18. Intangibles
Non-current assets
Goodwill - at cost
Movements in goodwill relate to foreign currency fluctuations.
Note 19. Trade and other payables
Current liabilities
Trade payables
Accruals
Other payables
Refer to note 26 for further information on financial instruments.
Note 20. Borrowings
Current liabilities
Bank loan - secured
Consolidated
2023
$
2022
$
99,732
100,689
Consolidated
2023
$
2022
$
4,459,808
2,281,919
1,724,564
15,019,070
1,801,855
1,648,895
8,466,291
18,469,820
Consolidated
2023
$
2022
$
8,771,474
7,822,908
Classification of borrowings
These financial statements are presented on the basis that all borrowings have been classified as current
liabilities. This treatment is as a result of a strict application of the relevant provisions of AASB 101
'Presentation of Financial Statements'. This accounting standard requires the Group to classify liabilities as
current if the Group does not have an unconditional right to defer payment for at least 12 months after the
reporting date. However, the expected repayment of the borrowings is not for complete repayment within the
12 month period.
Credit facility summary
Empire Energy USA, LLC maintains a long-term credit facility with Macquarie Bank Limited ('Macquarie'),
which matures in September 2024.
The credit facility balance on 31 December 2023 was US$4,750,020 (A$6,944,474) (31 December 2022:
US$5,300,620 (A$7,822,908)).
74
Empire Energy Group Limited
Notes to the consolidated financial statements
31 December 2023
Note 20. Borrowings (continued)
US Operations
The Group maintains a facility which matures in September 2024, with a bank that is a minority owner in the
Group. Interest is charged on the outstanding borrowings at the 30-Day SOFR (5.36% at 31 December 2023)
plus 6.61%. At 31 December 2023, the Group's rate option was the 30-day SOFR.
Outstanding borrowings under the agreement are secured by the assets of the Group under the terms of the
facilities and requires the Group to maintain financial ratios customary for the oil and gas industry. The Group
is required to repay the facilities monthly to the extent certain benchmarks of an applicable percentage of net
operating cash flow and capital transactions are met and occur. Principal payments made in both 2023 and
2022 were approximately US$550,000. The Group was compliant with all financial covenants as of 31
December 2023.
The loan has been classified as a current liability as there is no unconditional right to defer the settlement of
the liability for at least 12 months after the reporting period. The Directors expect the loan facility will be
renewed and do not expect the loan to be repaid in full in the 2024 financial year.
The Group has a credit facility with Macquarie Bank Limited. The facility has the following key terms:
Principal amount
Initial amount US$7.5 million (outstanding loan balance and availability
US$4.75 million, undrawn nil)
Term
5 years
Interest rate
30-Day SOFR (5.36% at 31 December 2023) plus 6.61%
Repayment terms
Key covenants
100% of Appalachia net operating cashflow subject to minimum
amortisation of US$550,000 per annum
Proved Developed Producing Reserves PV10 / Net Debt > 1.3x
Current Ratio > 1.0x
Working capital > 0
75
Empire Energy Group Limited
Notes to the consolidated financial statements
31 December 2023
Note 20. Borrowings (continued)
Australian Operations
The Group established an additional credit facility with Macquarie Bank Limited during the year. The
outstanding balance as at 31 December 2023 was $1,827,000. Key terms of this credit facility are set out
below:
Principal amount
$7.25 million comprising:
- Facility A (Revolving Credit Facility, $2.25 million, $1.827 million
drawn as at 31 December 2023)
- Facility B (Performance Bond Facility, $5 million, undrawn as at
31 December 2023)
Borrowers
Guarantor
Security
Fees
Imperial Oil & Gas Pty Limited
Imperial Oil & Gas A Pty Limited
Empire Energy Group Limited and Borrowers
First ranking security over all present and after-acquired property of each
Borrower
First ranking security
Utilisation Fee: 1.5% of utilisation
Commitment Fee: 40% of margin
Margin: Facility A (5.5% p.a.), Facility B (10% p.a.)
Interest rate
Margin plus BBSW
Financial covenants
- Ratio of current assets to current liabilities of at least 1.00 to 1.00
- Minimum liquidity balance in the Borrowers and Guarantor of at least $5
million (or its equivalent in any other currency or currencies)
Maturity date
31 December 2025
Repayment arrangements
Facility A: on receipt of relevant annual R&D Tax Incentive payment
Facility B: on release of environmental bonds after rehabilitation
76
Empire Energy Group Limited
Notes to the consolidated financial statements
31 December 2023
Note 20. Borrowings (continued)
Financing arrangements
Unrestricted access was available at the reporting date to the following lines of credit:
Total facilities
Bank loan - US Operations
Bank loan - Australia Operations - Facility A
Bank loan - Australia Operations - Facility B
Used at the reporting date
Bank loan - US Operations
Bank loan - Australia Operations - Facility A
Bank loan - Australia Operations - Facility B
Unused at the reporting date
Bank loan - US Operations
Bank loan - Australia Operations - Facility A
Bank loan - Australia Operations - Facility B
Note 21. Lease liabilities
Current liabilities
Lease liability
Non-current liabilities
Lease liability
Refer to note 26 for maturity analysis of lease liabilities.
2023
US$
Consolidated
2022
US$
2023
$
2022
$
4,750,020
-
-
4,750,020
5,300,620
-
-
6,944,474
2,250,000
5,000,000
5,300,620 14,194,474
7,822,908
-
-
7,822,908
4,750,020
-
-
4,750,020
5,300,620
-
-
5,300,620
6,944,474
1,827,000
-
8,771,474
7,822,908
-
-
7,822,908
-
-
-
-
-
-
-
-
-
423,000
5,000,000
5,423,000
-
-
-
-
Consolidated
2023
$
2022
$
604,085
399,195
370,509
608,977
974,594
1,008,172
77
Empire Energy Group Limited
Notes to the consolidated financial statements
31 December 2023
Note 22. Provisions
Current liabilities
Employee benefits
Non-current liabilities
Lease make good
Provision for rehabilitation (Northern Territory)
Asset retirement obligations (USA)
Consolidated
2023
$
2022
$
271,723
252,424
43,940
4,397,865
36,273,475
43,940
4,397,865
32,047,572
40,715,280
36,489,377
40,987,003
36,741,801
Movements in provisions
Movements in provision for rehabilitation and asset retirement obligations during the current financial year, are
set out below:
Consolidated
Provision for
rehabilitation/
Asset
retirement
obligations
$
Lease make
good
$
Total
$
Carrying amount at the start of the year
Change in estimate
Accretion expense for the period, included in finance costs
Foreign currency translation
43,940
-
-
-
36,445,437
2,882,216
1,696,857
(353,170)
36,489,377
2,882,216
1,696,857
(353,170)
Carrying amount at the end of the year
43,940
40,671,340
40,715,280
Lease make good
The provision represents the present value of the estimated costs to make good the premises leased by the
Group at the end of the respective lease terms.
Provision for rehabilitation (NT) / Asset retirement obligations (USA)
The Empire Group makes full provision for the future costs of decommissioning oil and gas production facilities
and pipelines on a discounted basis on the installation or acquisition of those facilities.
The provision represents the present value of decommissioning costs which are expected to be incurred up to
2048. The estimated liability is based on historical experience in plugging and abandoning wells, estimated
remaining lives of those based on reserve estimates, external estimates as to the cost to plug and abandon
the wells in the future, and regulatory requirements. Assumptions, based on the current economic environment,
have been made which management believe are a reasonable basis upon which to estimate the future liability.
These estimates are reviewed regularly to take into account any material changes to the assumptions.
However, actual decommissioning costs will ultimately depend upon future market prices for the necessary
decommissioning works. Furthermore, the timing of decommissioning is likely to depend on when the assets
cease to produce at economically viable rates. This in turn will depend upon the future oil and gas prices,
which are inherently uncertain.
78
Empire Energy Group Limited
Notes to the consolidated financial statements
31 December 2023
Note 23. Contributed equity
Consolidated
2023
Shares
2022
Shares
2023
$
2022
$
Ordinary shares - fully paid
773,121,148
773,121,148
255,945,973 255,945,973
Movements in ordinary share capital
Details
Date
Shares
Issue price
$
Balance
Issue of shares on exercise of options
Issue of shares on conversion of restricted
rights
Issue of shares on raising capital
Issue of unissued shares as script for
asset acquisition
Issue of shares
Issue of shares
Issue of shares on conversion of restricted
rights
Share issue transaction costs, net of tax
Balance
Movements
Balance
1 January 2022
18 February 2022
612,074,341
1,200,000
$0.300
220,905,029
360,000
12 April 2022
10 June 2022
679,345
125,000,000
$0.000
$0.220
-
27,500,000
10 June 2022
19 July 2022
9 September 2022
20,105,132
11,363,702
2,363,638
$0.280
$0.220
$0.220
5,629,437
2,500,000
520,000
28 September 2022
334,990
-
$0.000
$0.000
-
(1,468,493)
31 December 2022
773,121,148
-
255,945,973
-
31 December 2023
773,121,148
255,945,973
Ordinary shares
Ordinary shares entitle the holder to participate in any dividends declared and any proceeds attributable to
shareholders should the Company be wound up, in proportions that consider both the number of shares held
and the extent to which those shares are paid up. The fully paid ordinary shares have no par value and the
Company does not have a limited amount of authorised capital.
On a show of hands every member present at a meeting in person or by proxy shall have one vote and upon
a poll each share shall have one vote.
Share buy-back
There is no current on-market share buy-back.
Capital risk management
The Group's objectives when managing capital is to safeguard its ability to continue as a going concern, so
that it can provide returns for shareholders and benefits for other stakeholders and to maintain an optimum
capital structure to reduce the cost of capital.
Capital is regarded as total equity, as recognised in the statement of financial position, plus net debt. Net debt
is calculated as total borrowings less cash and cash equivalents.
In order to maintain or adjust the capital structure, the Group may adjust the amount of dividends paid to
shareholders, return capital to shareholders, issue new shares or sell assets to reduce debt.
The Group is subject to certain financing arrangements covenants and meeting these is given priority in all
capital risk management decisions. There have been no events of default on the financing arrangements
during the financial year.
The capital risk management policy remains unchanged from the 2022 Annual Report.
79
Empire Energy Group Limited
Notes to the consolidated financial statements
31 December 2023
Note 23. Contributed equity (continued)
The Company considers its capital to comprise its ordinary share capital and reserves.
In managing its capital, the Company’s primary objective is to maintain a sufficient funding base to enable the
Company to meet its working capital and strategic operation needs.
In making decisions to adjust its capital structure to achieve these aims, either through altering its dividend
policy, new share issues, or consideration of debt the Company considers not only its short-term position but
also its long-term operational and strategic objectives.
Note 24. Reserves
Foreign currency translation reserve
Options reserve
Fair value reserve
Consolidated
2023
$
2022
$
(323,796)
11,320,327
180,499
(635,277)
10,854,265
180,499
11,177,030
10,399,487
Foreign currency translation reserve
The reserve is used to recognise exchange differences arising from the translation of the financial statements
of foreign operations to Australian dollars. It is also used to recognise gains and losses on hedges of the net
investments in foreign operations.
Options reserve
The reserve is used to recognise the value of equity benefits provided to employees and Directors as part of
their remuneration, and other parties as part of their compensation for services.
Fair value reserve
The fair value reserve comprises the cumulative net change in the fair value of equity investments until the
investment is derecognised.
Movements in reserves
Movements in each class of reserve during the current and previous financial year are set out below:
Consolidated
Balance at 1 January 2022
Foreign currency translation
Share-based payments
Balance at 31 December 2022
Foreign currency translation
Share-based payments
Foreign
currency
translation
$
Options
$
Fair value
$
Total
$
(514,095)
(121,182)
-
9,853,748
-
1,000,517
(635,277)
311,481
-
10,854,265
-
466,062
180,499
-
-
180,499
-
-
9,520,152
(121,182)
1,000,517
10,399,487
311,481
466,062
Balance at 31 December 2023
(323,796)
11,320,327
180,499
11,177,030
80
Empire Energy Group Limited
Notes to the consolidated financial statements
31 December 2023
Note 25. Dividends
There were no dividends paid, recommended or declared during the current or previous financial year.
Franking credits
There are no franking account credits available as at 31 December 2023 and 31 December 2022.
Note 26. Financial instruments
Financial risk management objectives
The Empire Group’s principal financial instruments, other than derivatives, comprise bank loans, financial
assets, and cash and cash equivalents. The main purpose of these financial instruments is to raise finance for
the Empire Group’s operations. The Empire Group has various other financial assets and liabilities such as
trade receivables and payables, which arise from its operations. The Empire Group also enters derivative
transactions, principally commodity hedges.
The Board has overall responsibility for the determination of the Empire Group’s risk management objectives
and policies and has the responsibility for designing and operating processes that ensure the effective
implementation of the objectives and policies to the Empire Group’s finance function.
The Board receives monthly reports through which it reviews the effectiveness of the processes put in place
and appropriateness of the objectives and policies it sets.
The overall objective of the board is to set policies that seek to reduce risk as far as possible without unduly
affecting the Empire Group’s competitiveness and flexibility.
The Empire Group is exposed to risks that arise from its use of financial instruments. The main risks arising
from the Empire Group’s financial instruments are interest rate risk, commodity price risk, liquidity risk, equity
risk and credit risk. This note describes the Empire Group’s objectives, policies and processes for managing
those risks and methods used to measure them. Further quantitative information in respect of these risks is
presented throughout these financial statements.
There have been no substantive changes in the Empire Group’s exposure to financial instrument risks, its
objectives, policies and processes for managing those risks or the methods used to measure them from
previous periods unless otherwise stated in this note.
Further details regarding these policies are set out below:
Market risk
Foreign currency risk
The Group undertakes certain transactions denominated in foreign currency and is exposed to foreign currency
risk through foreign exchange rate fluctuations.
The Empire Group’s core operations are located in Australia where the main expenditures are recorded. The
Statement of Financial Position can be affected by movement in the A$/US$ exchange rates upon translation
of the US operations into the A$ presentation currency.
Foreign exchange risk arises from commercial transactions and recognised assets and liabilities denominated
in a currency that is not the entity’s functional currency. The Empire Group seeks to mitigate the effect of its
foreign currency exposure by borrowing in US$ for US operations and maintaining a minimum cash balance
in Australia. Excluding presentation translation adjustments, the Empire Group’s exposure to foreign exchange
risk at the reporting date is limited to loans and investments between the Parent entity and the US subsidiaries.
Equity price risk
The Empire Group relies on equity markets to raise capital for its exploration and development activities and
is thus exposed to equity market volatility.
Equity price risk arises from investments in equity securities and Empire Group Limited’s issued capital.
81
Empire Energy Group Limited
Notes to the consolidated financial statements
31 December 2023
Note 26. Financial instruments (continued)
The Group’s equity risk is considered minimal and as such no sensitivity analysis has been completed.
Commodity price risk
The Empire Group’s revenues and cash flows are exposed to commodity price fluctuations, in particular oil
and gas prices. The Empire Group enters into option and forward commodity hedges to manage its exposure
to falling spot oil and gas prices.
To mitigate a portion of the exposure to adverse market changes, the Empire Group’s commodity hedging
programs utilise financial instruments based on regional benchmarks including NYMEX Henry Hub Natural
Gas.
The Empire Group enters into derivative instruments for the Empire Group’s production to protect against price
declines in future periods while retaining some of the benefits of price increases. While these derivatives are
structured to reduce exposure to changes in price associated with the derivative commodity, they also limit
benefits the Empire Group might otherwise have received from price changes in the physical market. The
Empire Group believes the derivative instruments in place continue to be effective in achieving the risk
management objectives for which they were intended.
Interest rate risk
The Group's main interest rate risk arises from long-term borrowings.
The Empire Group is constantly monitoring its exposure to trends and fluctuations in interest rates in order to
manage interest rate risk. The Empire Group’s exposure to interest rate risk at 31 December 2023 is set out
in 'liquidity and interest rate risk management' below.
The Empire Group’s exposure to the risk of changes in market interest rates relates primarily to the Empire
Group’s long-term debt obligations with a floating interest rate in the US.
The Empire Group’s policy is to continually review the portion of its borrowings that are either at floating or
fixed rates of interest. To manage this mix in a cost-efficient manner, the Empire Group previously entered into
interest rate swaps, in which Empire agrees to exchange, at specified intervals, the difference between fixed
and variable interest rate amounts calculated by reference to an agreed upon notional principal amount. These
swaps were designated to hedge underlying debt obligations. There are no interest rate swaps at 31 December
2023.
The Empire Group monitors forecasts and actual cash flows and the maturity profiles of financial assets and
liabilities to manage its liquidity risk.
Credit risk
Credit risk is the risk that the other party to the financial instrument will fail to discharge their financial obligation
in respect of that instrument resulting in the Empire Group incurring a financial loss. The Empire Group’s
exposure to credit risk arises from potential default of the counter party with the maximum exposure equal to
the carrying amount of these instruments. There are no significant concentrations of credit risk within the
Empire Group.
The Empire Group trades only with recognised, credit worthy third parties. In the US, trade receivables,
(balances with oil and gas purchases) have not exposed the Empire Group to any bad debt to date. All
derivatives are with the same counterparty.
In the US, all of the purchasers that the Empire Group’s operators choose to deal with are oil or gas companies
and local utilities.
Trade and other receivable balances are monitored on an ongoing basis with the Empire Group’s exposure to
bad debts minimal.
Generally, trade receivables are written off when there is no reasonable expectation of recovery. Indicators of
this include the failure of a debtor to engage in a repayment plan, no active enforcement activity and a failure
to make contractual payments for a period greater than 1 year.
82
Empire Energy Group Limited
Notes to the consolidated financial statements
31 December 2023
Note 26. Financial instruments (continued)
The maximum exposure to credit risk at balance date is as follows:
Trade and other receivables and derivative financial instruments
Security deposits
The maximum exposure to credit risk at balance by country is as follows:
Australia
United States of America
Consolidated
2023
$
2022
$
1,912,220
3,772,657
6,151,842
3,627,587
5,684,877
9,779,429
Consolidated
2023
$
2022
$
4,276,151
1,408,726
6,114,110
3,665,319
5,684,877
9,779,429
Liquidity risk
Liquidity risk is the inability to access funds, both anticipated and unforeseen, which may lead to the Empire
Group being unable to meet its obligations in an orderly manner as they arise. Empire seeks to maintain
sufficient available liquidity (cash and available debt facilitates) at all times.
The Empire Group’s liquidity position is managed to ensure sufficient funds are available to meet financial
commitments in a timely and cost-effective manner. The Empire Group is primarily funded through on-going
cash flow, debt funding and equity capital raisings, as and when required.
Funding is in place with reputable financial institutions in the US and Australia. Bank compliance reporting is
undertaken quarterly and adherence to covenants checked regularly. Management also regularly monitors
actual and forecast cash flows to manage liquidity risk.
83
Empire Energy Group Limited
Notes to the consolidated financial statements
31 December 2023
Note 26. Financial instruments (continued)
Remaining contractual maturities
The following tables detail the Group's remaining contractual maturity for its financial instrument liabilities. The
tables have been drawn up based on the undiscounted cash flows of financial liabilities based on the earliest
date on which the financial liabilities are required to be paid. The tables include both interest and principal cash
flows disclosed as remaining contractual maturities and therefore these totals may differ from their carrying
amount in the statement of financial position.
Weighted
average
interest rate
%
1 year or
less
$
Between 1
and 2 years
$
Between 2
and 5 years
$
Over 5
years
$
Consolidated - 2023
Non-derivatives
Non-interest bearing
Trade and other payables
Interest-bearing - variable
Bank loan - US
Bank loan - NT
Interest-bearing - fixed rate
Lease liability
Total non-derivatives
Derivatives
Oil and gas price forward
contracts
Total derivatives
Consolidated - 2022
Non-derivatives
Non-interest bearing
Trade and other payables
Interest-bearing - variable
Bank loan
Interest-bearing - fixed rate
Lease liability
Total non-derivatives
Derivatives
Oil and gas price forward
contracts
Total derivatives
Remaining
contractual
maturities
$
-
-
-
8,466,291
6,944,474
1,827,000
-
-
-
370,509
370,509
-
974,594
- 18,212,359
-
-
-
-
-
-
-
8,466,291
11.90%
9.84%
6,944,474
1,827,000
3.87%
604,085
17,841,850
-
-
-
-
-
-
-
-
-
-
Weighted
average
interest rate
%
1 year or
less
$
Between 1
and 2 years
$
Between 2
and 5 years
$
Over 5
years
$
Remaining
contractual
maturities
$
-
18,469,820
8.37%
7,822,908
3.87%
399,195
26,691,923
-
(96,410)
(96,410)
-
-
-
-
-
-
-
-
- 18,469,820
-
7,822,908
608,977
608,977
-
1,008,172
- 27,300,900
-
-
-
-
(96,410)
(96,410)
The cash flows in the maturity analysis above are not expected to occur significantly earlier than contractually
disclosed above.
Fair value of financial instruments
Unless otherwise stated, the carrying amounts of financial instruments reflect their fair value.
84
Empire Energy Group Limited
Notes to the consolidated financial statements
31 December 2023
Note 27. Fair value measurement
Fair value hierarchy
The following tables detail the Group's assets and liabilities, measured or disclosed at fair value, using a three
level hierarchy, based on the lowest level of input that is significant to the entire fair value measurement, being:
Level 1: Quoted prices (unadjusted) in active markets for identical assets or liabilities that the entity can access
at the measurement date
Level 2: Inputs other than quoted prices included within Level 1 that are observable for the asset or liability,
either directly or indirectly
Level 3: Unobservable inputs for the asset or liability
Consolidated - 2023
Assets
Derivative financial instruments
Total assets
Consolidated - 2022
Assets
Derivative financial instruments
Total assets
Level 1
$
Level 2
$
Level 3
$
Total
$
Level 1
$
-
-
-
-
-
-
Level 2
$
Level 3
$
96,410
96,410
-
-
-
-
-
-
Total
$
96,410
96,410
There were no transfers between levels during the financial year.
The carrying amounts of trade and other receivables and trade and other payables are assumed to
approximate their fair values due to their short-term nature.
The fair value of financial liabilities is estimated by discounting the remaining contractual maturities at the
current market interest rate that is available for similar financial liabilities.
Valuation techniques for fair value measurements categorised within level 2 and level 3
Derivative financial instruments have been valued using quoted market rates. This valuation technique
maximises the use of observable market data where it is available and relies as little as possible on entity
specific estimates.
Note 28. Key management personnel disclosures
Directors
The following persons were Directors of the Company at any time during the financial year were:
Peter Cleary
Alexander Underwood
Louis Rozman
Prof John Warburton
Karen Green
Paul Espie AO
Paul Fudge
Jacqui Clarke
(appointed on 17 November 2023)
(retired on 30 May 2023)
(retired on 17 November 2023)
(retired on 17 November 2023)
The following persons were Key Management Personnel of the Company at any time during the financial
year:
Robin Polson - Chief Financial Officer
85
Empire Energy Group Limited
Notes to the consolidated financial statements
31 December 2023
Note 28. Key management personnel disclosures (continued)
Compensation
The aggregate compensation made to Directors and other members of key management personnel of the
Group is set out below:
Short-term employee benefits
Post-employment benefits
Share-based payments
Other transactions with key management personnel and their related parties
Payment for marketing services from Menzies Research Centre Limited
(director-related entity of Former Chairman, Paul Espie)
Payment for contracting services from Melissa Underwood (Spouse of
Managing Director, Alex Underwood)
Consolidated
2023
$
2022
$
1,214,384
78,951
178,536
959,234
57,035
237,984
1,471,871
1,254,253
Consolidated
2023
$
2022
$
-
15,000
101,827
-
101,827
15,000
Note 29. Remuneration of auditors
During the financial year the following fees were paid or payable for services provided by Nexia Sydney Audit
Pty Ltd, the auditor of the Company, its network firms and unrelated firms:
Audit services - Nexia Sydney Audit Pty Ltd
Audit and review of the financial statements
Other services - Nexia Sydney Audit Pty Ltd
Taxation and other advisory services
Audit services - other auditors (US operations)
Audit or review of the financial statements
Other services - other auditors (US operations)
Taxation services
Other services - Deloitte Pty Ltd
Advisory services
86
Consolidated
2023
$
2022
$
185,388
150,724
74,962
54,750
260,350
205,474
126,454
138,891
22,982
37,652
149,436
176,543
303,465
211,308
Empire Energy Group Limited
Notes to the consolidated financial statements
31 December 2023
Note 30. Contingent assets
There are no contingent assets as at the date of this annual report (31 December 2022: nil).
Note 31. Contingent liabilities
Empire Energy Group Limited has executed a Deed of Guarantee and indemnity in favour of Macquarie Bank
Limited guaranteeing the obligations of each of Empire Energy USA LLC and its subsidiary Empire Energy
E&P LLC pursuant to the Macquarie Bank Limited US credit facility.
The Empire Group is subject to various federal, state and local laws and regulations relating to the protection
of the environment. The Empire Group has established procedures for the ongoing evaluation of its operations,
to identify potential environmental exposures and to comply with regulatory policies and procedures.
Empire Energy Group Limited together with its subsidiaries Imperial Oil & Gas Pty Limited and Imperial Oil &
Gas A Pty Limited have granted Macquarie Bank Limited security over their assets as guarantors of the
Australian credit facility to Macquarie the lender.
Environmental expenditures that relate to current operations are expensed or capitalised as appropriate.
Expenditures that relate to an existing condition caused by past operations, and do not contribute to current or
future revenue generation, are expensed. Liabilities are recorded when environmental assessment and or
clean-up is probable, and the costs can be reasonably estimated. The Empire Group maintains insurance that
may cover in whole or in part certain environmental expenditures. At 31 December 2023, the Empire Group
had $4,397,865 (2022: $4,397,865) environmental contingencies requiring specific disclosure.
There have been no other changes in contingent liabilities since the last annual reporting date.
Note 32. Commitments
Exploration and petroleum tenement leases
In order to maintain current rights of tenure to exploration and mining tenements, the Company and the
companies in the Group are required to outlay lease rentals and to meet the minimum expenditure
requirements of the various Government Authorities. These obligations are subject to re-negotiation upon
expiry of the relevant leases or when application for a mining licence is made. No expenditure commitment
exists at 31 December 2023 (2022: nil).
Note 33. Related party transactions
Empire Energy Group Limited is the parent entity.
Subsidiaries
Interests in subsidiaries are set out in note 35.
Key management personnel
Disclosures relating to key management personnel are set out in note 28 and the remuneration report included
in the Directors' report.
Transactions with related parties
There were no transactions with related parties during the current and previous financial year, other than those
identified with key management personnel in note 28.
Receivable from and payable to related parties
There were no trade receivables from or trade payables to related parties at the current and previous reporting
date.
Loans to/from related parties
During the year the Company advanced and received loans and provided accounting and administrative
services to other companies in the Empire Group. These balances, along with associated charges, are
eliminated on consolidation.
87
Empire Energy Group Limited
Notes to the consolidated financial statements
31 December 2023
Note 33. Related party transactions (continued)
Terms and conditions
All transactions were made on normal commercial terms and conditions and at market rates.
Note 34. Parent entity information
Set out below is the supplementary information about the parent entity.
Statement of profit or loss and other comprehensive income
Profit after income tax
Total comprehensive income
Statement of financial position
Total current assets
Total assets
Total current liabilities
Total liabilities
Equity
Contributed equity
Foreign currency translation reserve
Options reserve
Other reserves
Fair value reserve
Accumulated losses
Total equity
Parent
2023
$
2022
$
7,914,357
5,358,979
7,914,357
5,358,979
Parent
2023
$
2022
$
8,251,893
14,892,734
253,594,035 245,562,697
1,432,937
1,094,092
1,894,078
1,794,148
255,945,973 255,945,973
5,656,982
7,849,686
337,482
607,280
(26,628,854)
5,207,973
8,315,748
337,482
607,280
(18,714,499)
251,699,957 243,768,549
Guarantees entered into by the parent entity in relation to the debts of its subsidiaries
Refer to note 31 for details on the guarantee the parent entity has in place in relation to the debts of its
subsidiaries as at 31 December 2023 and 31 December 2022.
Contingent liabilities
Refer to note 31 for details on contingent liabilities as at 31 December 2023 and 31 December 2022.
Capital commitments - Property, plant and equipment
The parent entity had no capital commitments for property, plant and equipment as at 31 December 2023 and
31 December 2022.
Material accounting policy information
The accounting policies of the parent entity are consistent with those of the Group, as disclosed in note 2,
except for the following:
●
● Dividends received from subsidiaries are recognised as other income by the parent entity and its receipt
Investments in subsidiaries are accounted for at cost, less any impairment, in the parent entity.
may be an indicator of an impairment of the investment.
88
Empire Energy Group Limited
Notes to the consolidated financial statements
31 December 2023
Note 35. Interests in subsidiaries
The consolidated financial statements incorporate the assets, liabilities and results of the following subsidiaries
in accordance with the accounting policy described in note 2:
Name
Imperial Oil & Gas Pty Limited
Imperial Oil & Gas A Pty Limited
Empire Energy Holdings, LLC
Empire Energy USA, LLC
Empire Energy (MidCon), LLC
Empire Energy E&P, LLC
Note 36. Share-based payments
Principal place of business /
Country of incorporation
Ownership interest
2022
2023
%
%
Australia
Australia
USA
USA
USA
USA
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
Share-based payments are issued to:
●
enable the Company to provide variable remuneration including both an at-risk component and an
incentive component, that is performance focussed and linked to long-term value creation for
shareholders,
enable the Company to compete effectively for the calibre of talent required for it to be successful,
ensure that Participants have commonly shared goals, and
assist Participants to become Shareholders.
●
●
●
Options
Set out below are summaries of options granted under the plan:
2023
Grant date Expiry date
13/08/2021 31/08/2024
13/08/2021 31/08/2024
09/09/2022 09/09/2024
Exercise
price
Balance at
the start of
the year
8,000,000
$0.700
$0.700
1,696,970
$0.350 69,227,558
78,924,528
Granted
Exercised
Expired/
forfeited/
other
Balance at
the end of
the year
-
-
-
-
-
-
-
-
8,000,000
-
-
1,696,970
- 69,227,558
- 78,924,528
Weighted average exercise price
$0.390
$0.000
$0.000
$0.000
$0.390
2022
Grant date Expiry date
18/06/2018 30/12/2022
30/12/2019 30/12/2022
13/08/2021 31/08/2024
13/08/2021 31/08/2024
09/09/2022 09/09/2024
Exercise
price
Balance at
the start of
the year
Granted
Exercised
$0.300
$0.600
$0.700
$0.700
$0.350
1,700,000
2,800,000
8,000,000
1,696,970
-
-
-
-
- 69,227,558
14,196,970 69,227,558
Expired/
forfeited/
other
Balance at
the end of
the year
-
-
-
-
-
-
-
(1,700,000)
-
(2,800,000)
8,000,000
-
-
1,696,970
- 69,227,558
(4,500,000) 78,924,528
Weighted average exercise price
$0.630
$0.350
$0.000
$0.000
$0.390
All Options are exercisable at the end of the financial year noting trading terms for options held by Company
employees and directors are subject to the Company’s Share Trading Policy.
89
Empire Energy Group Limited
Notes to the consolidated financial statements
31 December 2023
Note 36. Share-based payments (continued)
The weighted average remaining contractual life of options granted during the financial year and outstanding
at the end of the financial year was 0.8 years (2022: 1.8 years).
The weighted average share price during the financial year was $0.164 (2022: $0.263).
Performance Rights
During the 2013 financial year the Company issued 2,500,000 Performance Rights (pre-consolidation) over
fully paid ordinary shares in the Company as part consideration for the buyback of the minority interest equity
holder in Empire Energy USA LLC. The minority interest holder also received 400,000 (on a post-consolidation
bias) fully paid ordinary shares in the issued capital of Empire Energy Group Limited. The Performance Rights
are exercisable at no cost under the following events:
●
●
Lifting of the current moratorium on oil and/or natural gas fracking in New York State;
If the Company sells, transfers or assigns all or substantially all of its property interests in Chautauqua
and Cattaraugus Counties in the State of New York to an unaffiliated third party then the Performance
Rights will vest in accordance with the following schedule:
Fair market value of consideration received by the
Company
Performance Rights exercisable
Less than $25.0 million
0.0%
At least $25.0 million but less than $45.0 million
Percentage calculated by dividing fair market value
of consideration received by the Company by
$45.0 million
$45.0 million or more
100.0%
●
●
●
If the holder of the Performance Rights in any way disposes of more than 75% of the 4 million ordinary
shares assigned as part of the minority interest buy back transaction prior to either the moratorium being
terminated or a third party sale being consummated then the Performance Rights will be cancelled.
The holder of the Performance Rights is an associated entity of a former senior executive of the
Company’s US subsidiaries, Mr Allen Boyer.
At the Company’s Annual General Meeting conducted on 30 May 2019, Shareholders approved the
consolidation of the Company’s equity on a 1 for 10 basis. The effect of the Share Consolidation during
the period reduced the 2,500,000 Performance Rights to 250,000 Performance Rights.
2020 issue
During the 2020 financial year, the Company issued 3,913,960 Performance Rights to the Managing Director
and senior executives under the terms of the Company’s Rights Plan and was approved by Shareholders on
14 July 2020.
2021 issue
During the 2021 financial year, the Company issued 1,015,625 Performance Rights to the Managing Director
and senior executives under the terms of the Company’s Rights Plan and was approved by Shareholders on
3 August 2021.
2022 issue
During the 2022 financial year, the Company issued 2,445,183 Performance Rights to the Managing Director
and employees under the terms of the Company's Rights Plan and was approved by Shareholders on 30 May
2022.
2023 issue
During the 2023 financial year, the Company issued 3,175,353 Performance Rights to the Managing Director
and employees under the terms of the Company's Rights Plan and was approved by Shareholders on 30 May
2023.
90
Empire Energy Group Limited
Notes to the consolidated financial statements
31 December 2023
Note 36. Share-based payments (continued)
During the 2023 financial year, 3,913,960 Performance Rights issued to senior executives in 2020 passed
their three year measurement period for vesting calculation. 548,234 of these Performance Rights vested,
173,804 lapsed, while the remaining 3,191,922 remain unvested.
Set out below are summaries of Performance Rights (unvested) granted under the plan:
2023
Grant date
Expiry date
09/09/2013
07/08/2020
03/08/2021
21/12/2021
17/06/2022
22/12/2022
21/07/2023
01/01/2015
31/12/2035
31/12/2036
31/12/2036
31/12/2037
31/12/2037
31/12/2038
Exercise
price
Balance at
the start of
the year
Granted
Exercised
Expired/
forfeited/
other
Balance at
the end of
the year
$0.000
$0.000
$0.000
$0.000
$0.000
$0.000
$0.000
250,000
3,913,960
1,015,625
993,774
1,451,409
-
-
7,624,768
-
-
-
-
-
1,297,209
1,878,144
3,175,353
-
-
-
-
-
-
-
-
-
(722,038)
-
-
-
-
-
250,000
3,191,922
1,015,625
993,774
1,451,409
1,297,209
1,878,144
(722,038) 10,078,083
Performance Rights granted on 22 December 2022 was issued on 3 February 2023.
2022
Grant date
Expiry date
09/09/2013
30/12/2019
07/08/2020
03/08/2021
21/12/2021
17/06/2022
01/01/2015
31/12/2034
31/12/2035
31/12/2036
31/12/2036
31/12/2037
Exercise
price
Balance at
the start of
the year
Granted
Exercised
Expired/
forfeited/
other
Balance at
the end of
the year
$0.000
$0.000
$0.000
$0.000
$0.000
$0.000
250,000
962,811
3,913,960
1,015,625
-
-
6,142,396
-
-
-
-
993,774
1,451,409
2,445,183
-
-
-
-
-
-
-
-
(962,811)
-
-
-
-
(962,811)
250,000
-
3,913,960
1,015,625
993,774
1,451,409
7,624,768
There are no unvested Performance Rights exercisable at the end of the financial year as they are subject to
a 3-year term and vesting hurdles.
The weighted average remaining time to Vesting Date of Performance Rights (unless extended in accordance
with the rights Plan Rules) granted during the financial year and outstanding at the end of the financial year
was 2 years (2022: 2 years).
Set out below are summaries of Performance Rights (vested) granted under the plan:
2023
Grant date
Expiry date
Exercise
price
Balance at
the start
of the year
Granted
Exercised
Expired/
forfeited/
other
Balance at
the end
of the year
03/08/2021
30/03/2022
27/01/2023
30/06/2034
30/12/2034
31/12/2035
$0.00
$0.00
$0.00
1,300,500
840,134
-
-
-
548,234
2,140,634
548,234
-
-
-
-
-
-
-
-
1,300,500
840,134
548,234
2,688,868
91
Empire Energy Group Limited
Notes to the consolidated financial statements
31 December 2023
Note 36. Share-based payments (continued)
2022
Grant date
Expiry date
Exercise
price
Balance at
the start
of the year
Granted
Exercised
Expired/
forfeited/
other
Balance at
the end
of the year
30/08/2021
30/03/2022
30/06/2034
30/12/2034
$0.00
$0.00
1,300,500
-
-
840,134
1,300,500
840,134
-
-
-
-
-
-
1,300,500
840,134
2,140,634
There are no unvested Performance Rights exercisable at the end of the financial year as they are subject to
a 3-year term and vesting hurdles.
The weighted average remaining time to Vesting Date of Performance Rights (unless extended in accordance
with the rights Plan Rules) granted during the financial year and outstanding at the end of the financial year
was 2 years (2022: 2).
For the Performance Rights granted during the current financial year, the valuation model inputs used to
determine the fair value at the grant date, are as follows:
Grant date
Expiry date
Share price
at grant
date
Exercise
price
Expected
volatility
Dividend
yield
Risk-free
interest rate
Fair value at
grant date
22/12/2022
21/07/2023
31/12/2037
31/12/2038
$0.190
$0.150
$0.000
$0.000
95.90%
95.01%
-
-
3.80%
4.00%
$0.033
$0.019
Restricted Rights
Set out below are summaries of Restricted Rights granted under the plan:
2023
Grant date
Expiry date
07/08/2020
01/06/2021
23/12/2020
02/07/2021
21/12/2021
17/06/2022
17/06/2022
09/09/2022
22/12/2022
21/07/2023
31/12/2035
01/06/2036
23/12/2035
02/07/2036
21/12/2036
17/06/2037
17/06/2037
09/09/2037
22/12/2037
21/07/2038
Exercise
price
Balance at
the start of
the year
Granted
Exercised
Expired/
forfeited/
other
Balance at
the end of
the year
$0.000
$0.000
$0.000
$0.000
$0.000
$0.000
$0.000
$0.000
$0.000
$0.000
1,019,753
617,979
485,485
94,908
568,778
509,198
275,360
131,493
-
-
3,702,954
-
-
-
-
-
-
-
-
613,830
604,141
1,217,971
-
-
-
-
-
-
-
-
-
-
-
-
-
(29,665)
-
-
-
-
-
-
-
(29,665)
1,019,753
617,979
455,820
94,908
568,778
509,198
275,360
131,493
613,830
604,141
4,891,260
Restricted Rights granted on 22 December 2022 was issued on 3 February 2023.
92
Empire Energy Group Limited
Notes to the consolidated financial statements
31 December 2023
Note 36. Share-based payments (continued)
2022
Grant date
Expiry date
07/08/2020
01/06/2021
23/12/2020
02/07/2021
21/12/2021
17/06/2022
17/06/2022
09/09/2022
31/12/2035
01/06/2036
23/12/2035
02/07/2036
21/12/2036
17/06/2037
17/06/2037
09/09/2037
Exercise
price
Balance at
the start of
the year
$0.000
$0.000
$0.000
$0.000
$0.000
$0.000
$0.000
$0.000
1,019,753
617,979
1,499,820
94,908
-
-
-
-
3,232,460
Granted
Exercised
-
-
-
-
568,778
509,198
275,360
131,493
-
-
(1,014,335)
-
-
-
-
-
1,484,829 (1,014,335)
Expired/
forfeited/
other
Balance at
the end of
the year
-
-
-
-
-
-
-
-
-
1,019,753
617,979
485,485
94,908
568,778
509,198
275,360
131,493
3,702,954
Restricted Rights are all exercisable at the end of the financial year noting trading terms for Rights held by
Company employees and directors are subject to the Company’s Share Trading Policy.
The weighted average remaining time to Vesting Date of Restricted Rights (unless extended in accordance
with the rights Plan Rules) granted during the financial year and outstanding at the end of the financial year
was 0.3 years (2022: 0.2 years).
For the Restricted Rights granted during the current financial year, the valuation model inputs used to
determine the fair value at the grant date, are as follows:
Grant date
Expiry date
Share price
at grant
date
Exercise
price
Expected
volatility
Dividend
yield
Risk-free
interest rate
Fair value at
grant date
22/12/2022
21/07/2023
22/12/2037
21/07/2038
$0.190
$0.150
$0.000
$0.000
95.90%
95.01%
-
-
3.80%
4.00%
$0.190
$0.150
Service Rights
Set out below are summaries of Service Rights granted under the plan:
2023
Grant date
Expiry date
Exercise
price
Balance at
the start of
the year
Granted
Exercised
Expired/
forfeited/
other
Balance at
the end of
the year
14/06/2019
04/08/2020
01/06/2021
30/06/2034
31/12/2035
31/12/2036
$0.00
$0.00
$0.00
1,000,000
838,558
600,000
2022
Grant date
Expiry date
Exercise
price
2,438,558
Balance at
the start of
the year
-
-
-
-
-
-
-
-
-
-
-
-
1,000,000
838,558
600,000
2,438,558
Granted
Exercised
Exercised
forfeited/
other
Balance at
the end of
the year
14/06/2019
04/08/2020
01/06/2021
30/06/2034
31/12/2035
31/12/2036
$0.00
$0.00
$0.00
1,000,000
838,558
-
-
-
600,000
1,838,558
600,000
-
-
-
-
-
-
-
-
1,000,000
838,558
600,000
2,438,558
93
Empire Energy Group Limited
Notes to the consolidated financial statements
31 December 2023
Note 36. Share-based payments (continued)
Set out below are the Service Rights exercisable at the end of the financial year:
Grant date
Expiry date
14/06/2019
04/08/2020
01/06/2021
30/06/2034
31/12/2035
31/12/2036
2023
Number
2022
Number
1,000,000
838,558
600,000
1,000,000
838,558
600,000
2,438,558
2,438,558
The weighted average remaining time to Vesting Date of Service Rights (unless extended in accordance with
the rights Plan Rules) granted during the financial year and outstanding at the end of the financial year was 0
year (2022: 0 year).
Note 37. Cash flow information
Reconciliation of loss after income tax to net cash from/(used in) operating activities
Loss after income tax expense for the year
(22,081,916)
(6,003,206)
Consolidated
2023
$
2022
$
Adjustments for:
Depreciation, depletion and amortisation
Net gain on disposal of exploration and evaluation assets
Share-based payments
Government grant offset against oil and gas properties
Unwinding of the discount
Accretion of asset retirement obligation
Unrealised loss on forward commodity contracts
Change in operating assets and liabilities:
Decrease/(increase) in trade and other receivables
Decrease/(increase) in inventories
Increase in prepayments
Decrease in trade and other payables
Increase in employee benefits
Net cash (used in)/from operating activities
Non-cash investing and financing activities
Additions to the right-of-use assets
94
1,488,031
(53,717)
466,062
23,034,457
-
1,696,857
-
1,087,683
-
1,000,517
15,323,024
36,604
1,564,636
272,099
7,770,799
27,424
(4,000,601)
(10,838,783)
19,299
(4,323,168)
(21,757)
(296,398)
(3,578,686)
38,942
(2,472,088)
5,100,290
Consolidated
2023
$
2022
$
320,423
920,297
Empire Energy Group Limited
Notes to the consolidated financial statements
31 December 2023
Note 37. Cash flow information (continued)
Changes in liabilities arising from financing activities
Consolidated
Balance at 1 January 2022
Net cash used in financing activities
Amortisation of deferred finance costs
Acquisition of leases
Exchange differences
Balance at 31 December 2022
Net cash used in financing activities
Proceeds from borrowings
Repayment of borrowings
Acquisition of leases - US leases
Exchange differences
Bank
loan
$
Lease
liabilities
$
8,027,261
(811,808)
36,604
-
570,851
7,822,908
-
1,827,000
(804,094)
-
(74,340)
829,267
(223,159)
-
920,297
(518,233)
1,008,172
(349,174)
-
-
320,423
(4,827)
Total
$
8,856,528
(1,034,967)
36,604
920,297
52,618
8,831,080
(349,174)
1,827,000
(804,094)
320,423
(79,167)
Balance at 31 December 2023
8,771,474
974,594
9,746,068
Note 38. Events after the reporting period
On 1 March 2024, Empire issued 276,275 ordinary fully paid shares for the conversion of Vested Performance
Rights belonging to former employees under the Empire Energy Group Limited Rights Plan for no
consideration.
No other matter or circumstance has arisen since 31 December 2023 that has significantly affected, or may
significantly affect the Group's operations, the results of those operations, or the Group's state of affairs in
future financial years.
95
Empire Energy Group Limited
Directors' declaration
31 December 2023
In the Directors' opinion:
●
●
●
●
the attached financial statements and notes comply with the Corporations Act 2001, the Accounting
Standards, the Corporations Regulations 2001 and other mandatory professional reporting requirements;
the attached financial statements and notes comply with International Financial Reporting Standards as
issued by the International Accounting Standards Board as described in note 2 to the financial statements;
the attached financial statements and notes give a true and fair view of the Group's financial position as
at 31 December 2023 and of its performance for the financial year ended on that date; and
there are reasonable grounds to believe that the Company will be able to pay its debts as and when they
become due and payable.
The Directors have been given the declarations required by section 295A of the Corporations Act 2001.
Signed in accordance with a resolution of Directors made pursuant to section 295(5)(a) of the Corporations
Act 2001.
On behalf of the Directors
___________________________
Alexander Underwood
Managing Director
28 March 2024
Sydney
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Independent Auditor’s Report to the Members of Empire Energy Group Limited
Report on the Audit of the Financial Report
Opinion
We have audited the financial report of Empire Energy Group Limited (the Company and its subsidiaries
(the Group)), which comprises the consolidated statement of financial position as at 31 December 2023,
the 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, and notes to the
financial statements, including material accounting policy information, and the directors’ declaration.
In our opinion, the accompanying financial report of the Group is 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 2023 and of its
financial performance for the year then ended; and
ii) complying with Australian Accounting Standards and the Corporations Regulations 2001.
Basis for opinion
We conducted our audit in accordance with Australian Auditing Standards. Our responsibilities under those
standards are further described in the ‘auditor’s responsibilities for the audit of the financial report’ section
of our report. We are independent of the Group in accordance with the Corporations Act 2001 and the
ethical requirements of the Accounting Professional & Ethical Standards Board’s APES 110 Code of Ethics
for Professional Accountants (including Independence Standards) (the Code) that are relevant to our audit
of the financial report in Australia. We have also fulfilled our other ethical responsibilities in accordance with
the Code.
We confirm that the independence declaration required by the Corporations Act 2001, which has been given
to the directors of the Company, would be in the same terms if given to the directors as at the time of this
auditor’s report.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our
opinion.
Material uncertainty related to going concern
We draw attention to Note 2 in the financial report, which indicates that the Company incurred a operating
loss of $22,081,916 during the year ended 31 December 2023 and incurred net operating cash outflows of
$2,472,088. As stated in Note 2, these events or conditions, along with other matters as set forth in the
note, indicate that a material uncertainty exists that may cast significant doubt on the Company’s ability to
continue as a going concern. Our opinion is not modified in respect of this matter.
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Key audit matters
Key audit matters are those matters that, in our professional judgement, were of most significance in our
audit of the financial report 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.
Key audit matter
How our audit addressed the key audit matter
Carrying value of oil and gas assets
Refer to note 14 (Oil and Gas properties)
Our procedures included, amongst others:
At 31 December 2023, the Group has Oil and
Gas Assets - Producing assets of $35 million.
AASB 136 – ‘Impairment of Assets’ requires
that the recoverable amount of an asset, or
cash generating unit to which it belongs, be
determined whenever an indicator of
impairment exists.
The management assessment based on the
external expert valuation concluded that
there is no impairment of the carrying value
at reporting date.
The Group’s assessment of the recoverable
amount of its Oil and Gas - Producing assets
was a key audit matter because the carrying
value of the assets are material to the
financial statements and management’s
assessment of recoverable amounts
incorporate significant internal and external
judgements and assumptions including
commodity prices, available reserves,
residual values and discount rates.
Exploration and evaluation expenditure
- oil and gas assets
Refer to note 16 (Exploration and evaluation
assets).
At 31 December 2023, the Group has
capitalised exploration and evaluation
expenditure of $111.5 million. These costs
predominately relate to the Northern
Territory area of interest and were the result
of exploration campaigns and the purchase
of new exploration tenements.
The Group’s accounting policy in respect of
exploration and evaluation assets is outlined
in note 2.
This is a key audit matter because the
carrying value of the assets are material to
assessing whether the external expert engaged by
management to provide independent valuations was
appropriately experienced and qualified;
evaluating management’s key assumptions and estimates
used to determine the recoverable amount of its assets,
including those related to forecast commodity prices and
revenue, costs, discount rates and estimated residual
values;
testing a sample of assets to confirm ownership against
third party data sources; and
assessing the accuracy of management’s forecasting by
evaluating the reliability of historical forecasts and
reviewing whether current market conditions would
impact those forecasts.
Our procedures included, amongst others:
agreeing the ownership and tenure of the exploration
permits in the Northern Territory area of interest to the
Spatial Territory Resource Information Kit for Exploration
(“STRIKE”) online registry;
testing a sample of additions of capitalised exploration
expenditure to supporting documentation; and
assessing whether an indicator of impairment exists in
relation to the Group’s exploration assets in accordance
with AASB 6 – ‘Exploration for and Evaluation of Mineral
Resources’, including:
- reviewing the minutes of the Group’s board meetings,
market announcements, financial forecasts and
management assessment; and
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Key audit matter
How our audit addressed the key audit matter
the financial statements, and significant
judgements have been applied in
determining whether an indicator of
impairment exists in relation to capitalised
expenditure assets in accordance with
Australian Accounting Standard AASB 6 –
‘Exploration for and Evaluation of Mineral
Resources’.
Asset retirement obligations
Refer to note 22 (Provisions)
At 31 December 2023, the Group has a
carrying value of Asset Retirement
Obligations (USA) of $36.3 million.
The measurement of the provision for Asset
Retirement Obligations incorporates
significant judgement and uncertainty, with
restoration cost estimates varying in
response to many factors including changes
in process, legal requirements, discount
rates, past experience at other production
sites, and estimates of future restoration well
plugging costs.
The expected timing and amount of
expenditure can also change, for example, in
response to changes in laws and regulations
or their interpretation.
This was a key area of audit focus due to the
size and nature of these estimates and their
consequential effects on assessing the
recoverable amount of producing assets.
- discussing with management the Group’s ability and
intention to undertake further exploration and
evaluation activities.
Our procedures included, amongst others:
evaluating management’s process of estimating and
measuring the provision for asset retirement obligations;
evaluating whether the discount rate applied by
management to the forecast cash outflows is appropriate
and consistent with the requirements of AASB 137 –
‘Provisions, Contingent Liabilities and Contingent Assets’;
considering the Group’s estimates of plugging costs per
well, including assessment of whether there have been
changes in process or costs that would materially impact
those estimates;
considering whether the key assumptions and judgements
used in management’s estimates were consistently
applied in measuring the asset retirement obligations and
in assessing the recoverable amount of the related assets;
and
assessing the reliability of management’s estimates used
in calculating the obligations.
Other information
The directors are responsible for the other information. The other information comprises the information in
Empire Energy Group Limited’s annual report for the year ended 31 December 2023, but does not include
the financial report and the auditor’s report thereon. Our opinion on the financial report does not cover the
other information and we do not express any form of assurance conclusion thereon. In connection with our
audit of the financial report, our responsibility is to read the other information and, in doing so, consider
whether the other information is materially inconsistent with the financial report or our knowledge obtained
in the audit or otherwise appears to be materially misstated.
If, based on the work we have performed, we conclude that there is a material misstatement of the other
information we are required to report that fact. We have nothing to report in this regard.
Directors’ responsibility for the financial report
The directors of the Company are responsible for the preparation of the financial report that gives a true
and fair view in accordance with Australian Accounting Standards and the Corporations Act 2001 and for
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such internal control as the directors determine is necessary to enable the preparation of the financial report
that gives a true and fair view and is free from material misstatement, whether due to fraud or error.
In preparing the financial report, the directors are responsible for assessing the Group’s ability to continue
as a going concern, disclosing, as applicable, matters related to going concern and using the going concern
basis of accounting unless the directors either intend to liquidate the Group or to cease operations, or have
no realistic alternative but to do so.
Auditor’s responsibility for the audit of the financial report
Our objectives are to obtain reasonable assurance about whether the financial report as a whole is free
from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes
our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit
conducted in accordance with the Australian Auditing Standards will always detect a material misstatement
when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in
the aggregate, they could reasonably be expected to influence the economic decisions of users taken on
the basis of this financial report.
A further description of our responsibilities for the audit of the financial report is located at The Australian
Auditing and Assurance Standards Board website at:
www.auasb.gov.au/admin/file/content102/c3/ar1_2020.pdf. This description forms part of our auditor’s
report.
Report on the Remuneration Report
Opinion on the Remuneration Report
We have audited the Remuneration Report included in pages 25 to 43 of the directors’ Report for the year
ended 31 December 2023.
In our opinion, the Remuneration Report of Empire Energy Group Limited for the year ended 31 December
2023, complies with section 300A of the Corporations Act 2001.
Responsibilities
The directors of the Company are responsible for the preparation and presentation of the Remuneration
Report in accordance with section 300A of the Corporations Act 2001. Our responsibility is to express an
opinion on the Remuneration Report, based on our audit conducted in accordance with Australian Auditing
Standards.
Nexia Sydney Audit Pty Ltd
Brett Hanger
Director
Dated: 28 March 2024
Sydney
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Empire Energy Group Limited
Shareholder information
31 December 2023
The shareholder information set out below was applicable as at 16 March 2024 (grouped).
Distribution of equitable securities
Analysis of number of equitable security holders by size of holding:
1 to 1,000
1,001 to 5,000
5,001 to 10,000
10,001 to 100,000
100,001 and over
Holding less than a marketable parcel
Equity security holders
Ordinary shares
Number
of holders
% of total
shares
issued
198
614
362
1,072
537
2,783
467
0.01
0.24
0.37
5.70
93.68
100.00
-
Twenty largest quoted equity security holders
The names of the twenty largest security holders of quoted equity securities are listed below:
Ordinary shares
Number held
% of total
shares
issued
140,000,000
63,000,000
32,842,900
32,294,969
31,818,182
26,515,152
26,451,367
18,000,000
17,807,500
16,129,964
9,245,000
8,624,069
8,424,000
8,190,937
7,573,706
7,229,405
6,690,030
6,550,000
5,338,172
6,650,000
479,375,353
18.11
8.15
4.25
4.18
4.12
3.43
3.42
2.33
2.30
2.09
1.20
1.12
1.09
1.06
0.98
0.94
0.87
0.85
0.69
0.86
62.04
Pangaea (NT) Pty Ltd
Elphinstone Holdings Pty Ltd
Citicorp Nominees Pty Limited
Global Energy and Resources Development Limited
Sheffield Holdings LP
EMG Northern Territory Holding Pty Ltd
Macquarie Bank Limited (Metals Mining and AG A/C)
All-States Finance Pty Limited
Liangrove Media Pty Limited
Grosvenor Equities Pty Ltd (No 2 A/C)
Cha Qian
Robmar Investments Pty Limited
HSBC Custody Nominees (Australia) Limited
National Nominees Limited
HSBC Custody Nominees (Australia) Limited
BNP Paribas Nominees Pty Ltd (IB AU Noms RetailClient)
Invia Custodian Pty Limited (Kuarka A/C)
Mr Andrew Forster
Netwealth Investments Limited Wrap Services A/C
Ms Swati Shukla
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Empire Energy Group Limited
Shareholder information
31 December 2023
Unquoted equity securities as at 16 March 2024
Class of unquoted securities
Number
on issue
Number
of holders
Unlisted options exercisable at A$0.35 per share expiring 14 June 2024
Unlisted options exercisable at A$0.70 expiring 13 August 2024
Unlisted Performance Rights
Unlisted Performance Rights (Vested)
Unlisted Service Rights
Unlisted Service Rights (Unvested)
Unlisted Restricted Rights
69,227,558
9,696,970
5,668,625
2,711,561
2,438,558
1,248,161
5,430,211
362
2
8
6
3
6
11
Substantial holders
Substantial holders in the Company are set out below:
Pangaea (NT) Pty Limited
Elphinstone Group
Sheffield Group
Voting rights
The voting rights attached to ordinary shares are set out below:
Ordinary shares
Number held
140,000,000
64,333,969
40,793,270
% of total
shares
issued
18.11
8.32
5.28
Ordinary shares
On a show of hands every member present at a meeting in person or by proxy shall have one vote and upon
a poll each share shall have one vote.
There are no other classes of equity securities.
102