Global Petroleum Limited
Annual Report 2017

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ABN 68 064 120 896 A N N U A L F I N A N C I A L R E P O R T 3 0 J U N E 2 0 17 DIRECTORS’ REPORT For the year ended 30 JUNE 2017 The Directors of Global Petroleum Limited present their report together with the consolidated financial statements of the Group comprising of Global Petroleum Limited (“the Company” or “Global” or “Parent”) and the entities it controlled at the end of, or during, the year ended 30 June 2017 (“Consolidated Entity” or “Group”). Contents Directors’ Report 1 Letter to shareholders Operating and financial review ...................................................................................................................... 2 1. Directors ........................................................................................................................................................ 4 2. Company secretary ....................................................................................................................................... 6 3. Directors' meetings……………………………………………………………………………………………………6 4. Directors' interests ........................................................................................................................................ 7 5. Discretionary grant of shares and share options ........................................................................................... 7 6. Principal activities, likely developments and dividends ................................................................................. 7 7. Significant changes to the state of affairs ...................................................................................................... 7 8. Events subsequent to reporting date ............................................................................................................ 7 9. Indemnification insurance of officers ............................................................................................................. 7 10. Non-audit services ........................................................................................................................................ 8 11. Remuneration report - audited ...................................................................................................................... 8 12. Corporate governance statement ................................................................................................................ 14 13. Auditor’s independence declaration ............................................................................................................ 14 14. 15. Directors' resolution .................................................................................................................................... 15 Independent auditor’s report to the members of Global Petroleum Limited ................................................................. 17 Consolidated statement of profit or loss and other comprehensive income ................................................................. 21 Consolidated statement of financial position ................................................................................................................ 22 Consolidated statement of changes in equity .............................................................................................................. 23 Consolidated statement of cashflows ........................................................................................................................... 24 Notes to the consolidated financial statements ............................................................................................................ 25 Directors’ declaration………….. ................................................................................................................................... 46 Additional Information…………………………………………………………………………………………………...……….47 Corporate directory ...................................................................................................................................................... 50 Global Petroleum Ltd ANNUAL FINANCIAL STATEMENTS DIRECTORS’ REPORT For the year ended 30 JUNE 2017 19 September 2017 Dear Shareholders We are pleased to present to you the Global Petroleum 2017 Annual Report. In terms of the wider economic picture during the last financial year, commodity prices have improved slightly with the Brent oil price averaging $51 per barrel in the reporting year to 30 June 2017, compared to $45 in the preceding year to end June 2016. Unsurprisingly, the outlook for operational and commercial activity remains challenging, but recent equity raisings by energy companies in the London capital market demonstrate that financing is available for the right opportunities. The Company’s Petroleum Exploration Licence offshore Namibia is currently in Phase 2, which has a duration of 24 months until December 2017. In place of the previous well commitment in Phase 2, the Company undertook to reprocess and re-interpret previously acquired 2D seismic data and to shoot 800 kilometres of new 2D. The evaluation of the reprocessed data proved to be very encouraging, increasing confidence in a syn-rift oil play in the outboard or deep water region offshore Namibia as well as the likely presence of both reservoir and source within the Company’s blocks. This evaluation has significantly improved Global’s view of the overall prospectivity of its acreage enabling the upgrading of the three leads previously identified to prospects, in particular the Gemsbok prospect. Accordingly, the Company announced during the reporting period that it had entered into a contract with seismic contractor Seabird Exploration of Norway to acquire 834 km of full fold 2D seismic data over its blocks, primarily focused on Gemsbok. The seismic survey was duly carried out, and successfully completed post the end of the reporting period. Based on the preliminary technical information obtained, the Company remains highly encouraged as efforts now move to interpretation of the 2D seismic. Regarding the Company’s four exploration applications offshore Italy, environmental decrees were published in late 2016 by the Italian authorities in relation to two of the Company’s four applications (d 82 F.R-GP and d 83 F.R - GP). Subsequently, a number of appeals were lodged against the two environmental decrees by a mixture of local and urban authorities, and by special interest groups. The Company understands that similar appeals have been made over the last two years or so against environmental decrees granted to other companies in the Southern Adriatic, and that these appeals were rejected by the Regional Administrative Tribunal of Latium. The slow progress towards final grant of the Italian licences is disappointing, however, the Company has not lost sight of its very positive view of the prospectivity of the application areas and we intend to persevere through the appeals process. Financial During the year ended 30 June 2017, the Group recorded a loss after tax of US$1,856,463 (2016: loss US$2,336,513). Cash balances at 30 June 2017 amounted to US$7,807,605 (2016: US$10,172,598). The Group has no debt. Strategy and Outlook The further evaluation of the prospectivity of the Company’s Namibian Licence - in particular the delineation of the Gemsbok structure - in our view constitutes real progress. In addition, the Company has continued to evaluate opportunities which would balance its existing portfolio, notably those more in the nature of investment in contingent resources or exploration in proven hydrocarbon provinces. Accordingly, over the past 12 months, we have been engaged in detailed discussions with certain counterparties, which ultimately proved unsuccessful. However, we will continue to evaluate appropriate opportunities, both asset purchases and potential corporate combinations. We retain a significant cash position compared to many of our peers, and remain confident of making a key investment in due course. We look forward to meeting Shareholders at the Company’s Annual General Meeting later in 2017. John van der Welle Non-Executive Chairman Peter G. Hill Chief Executive Officer Global Petroleum Ltd ANNUAL FINANCIAL STATEMENTS 1 DIRECTORS’ REPORT For the year ended 30 JUNE 2017 1. OPERATING AND FINANCIAL REVIEW Namibian Project The Namibian Project consists of a participating interest in Petroleum Exploration Licence Number 29 (“Licence”) covering Offshore Blocks 1910B and 2010A in the Republic of Namibia. The Licence, issued on 3 December 2010, originally covered 11,730 square kilometres and is located offshore Namibia in water depths ranging from 1,300 metres to 3,000 metres (Refer Figure 1). The Company’s wholly owned subsidiary, Jupiter Petroleum (Namibia) Limited, is operator of the Licence with an 85% interest in the two blocks. Partners NAMCOR (the Namibian state oil company) and Bronze Investments Pty Ltd hold 10% and 5% respectively, both as carried interests. In December 2015, the Company entered into the First Renewal Exploration Period (Phase 2) of the Licence, making a mandatory relinquishment of 50% of the Licence Area. Phase 2 is for a duration of 24 months with a reduced Minimum Work Programme. In place of the previous well commitment in Phase 2, the Company undertook to reprocess and re-interpret previously acquired 2D seismic data, and to shoot 800 kilometres of new 2D data. To this end, in 2016 the Company’s technical team evaluated reprocessed 2D seismic data from the 1990s which it had purchased, and also reprocessed and evaluated speculative 2D seismic data shot over its Blocks in 2011/12 by seismic contractor TGS. The evaluation of this data proved to be very encouraging. Notably the work increased confidence in a syn-rift oil play in the outboard or deep water region offshore Namibia as well as the likely presence of both reservoir and source within the Company’s blocks, thus significantly increasing Global’s confidence in the overall prospectivity of its blocks. Accordingly, the three leads previously identified were upgraded to prospect status as a consequence of the perceived reduction in risk. Of these, Global believes that the Gemsbok structure is currently the most significant exploration opportunity. Gemsbok is mapped as a 200 sq km structurally controlled dip closure adjacent to a deep syn-rift graben. The feature has closure at several levels from the Lower Cretaceous to the Tertiary and the proximity to the mapped graben means that it is also well placed on the hydrocarbon migration pathway. Clearly this is a very exciting development for Global - the direct analogue to Gemsbok is the multi-billion barrel, sub salt, syn-rift play of Southern Angola. Despite recent encouragement from exploration further south offshore Namibia, the syn-rift remains relatively under-explored and we believe Gemsbok is ideally located for a syn-rift test. During the reporting period, the Company announced that it had entered into a contract with seismic contractor Seabird Exploration of Norway in order to acquire 834 km of full fold 2D seismic data over its blocks, primarily focused on Gemsbok. The seismic survey was duly carried out, and successfully completed post the end of the reporting period. The initial preliminary technical information from the vessel is of a very high quality and appear to confirm the scale and structural extent of Gemsbok. The Company remains highly encouraged as efforts now move to seismic data processing and interpretation. Figure 1. Map of offshore Namibia showing Global blocks. Global Petroleum Ltd ANNUAL FINANCIAL STATEMENTS 2 DIRECTORS’ REPORT For the year ended 30 JUNE 2017 1. OPERATING AND FINANCIAL REVIEW (continued) Permit Applications in the Southern Adriatic, Offshore Italy In August 2013, the Company submitted an application and proposed work programme and budget to the Italian Ministry of Economic Development for four exploration areas offshore Italy (the “Permit Applications” – Figure 2). The Permit Applications were then published on 30 September 2013 in the Official Bulletin allowing other competitive bids to be made over the subsequent three months. In accordance with Italian offshore regulations, Global subsequently submitted the relevant documentation to the respective authorities in relation to environmental requirements, and in connection with the satisfaction of certain technical and financial requirements. The Company was subsequently informed that it had duly satisfied the technical/financial requirements. The Company has previously announced that environmental decrees have been published by the Italian authorities in relation to two of the Company’s four applications (d 82 F.R-GP and d 83 F.R -GP), and that a number of appeals have been launched against the two environmental decrees by a mixture of local and urban authorities, and by special interest groups. The Company understands that similar appeals were recently made against environmental decrees granted to other companies in the Southern Adriatic, and that these appeals were rejected by the Regional Administrative Tribunal of Latium. Figure 2. Map of Southern Adriatic showing Global’s Permit Applications. The southern Adriatic is currently undergoing a significant new phase of oil and gas exploration. Seismic acquisition companies have begun large, multi-client 2D acquisition programmes across the entire basin, from Italy to Croatia. In Montenegro, offshore concessions were awarded in 2016 to Marathon, OMV and Eni, with these companies also having been awarded offshore licences in Croatia. Shell have operated with some success in Albania exploring and developing fields with similar geological characteristics to those encountered offshore in the Southern Adriatic. The activity in terms of licensing and the size of companies involved underscores the interest in the Adriatic area and is viewed very positively by the Company as an endorsement of its Mediterranean focus. Global Petroleum Ltd ANNUAL FINANCIAL STATEMENTS 3 DIRECTORS’ REPORT For the year ended 30 JUNE 2017 1. OPERATING AND FINANCIAL REVIEW (continued) Business Development Global remains in a strong financial position from which to fund work activity on its Namibian acreage, its Italian application interests (subject to award), and to implement a change of focus through acquisition. The Company has continued to evaluate opportunities which would balance its existing portfolio, notably those more in the nature of investment in contingent resources or exploration in proven hydrocarbon provinces. Accordingly it has, over the past 12 months, been engaged in detailed discussions with certain counterparties, which ultimately proved unsuccessful. However the Company intends to continue to evaluate appropriate opportunities, both asset purchases and potential corporate combinations. The Company retains a significant cash position compared to many of its peers, and remains confident of making a key investment in due course. Presentation currency The financial information in this annual report is presented in United States dollars (US$). Results of operations 2017 US$ 2016 US$ Loss from continuing operations before tax (1,856,463) (2,336,513) Income tax benefit (expense) Net profit (loss) - - (1,856,463) (2,336,513) The results of the Group include revenue from interest income of US$48,814 (2016: US$43,942). Review of financial condition As at 30 June 2017, the Group had cash of US$7,807,605 (2016: US$10,172,598) and had no debt. 2. DIRECTORS The names of Directors in office at any time during the financial year or since the end of the financial year are as follows: Unless otherwise disclosed, Directors held their office from 1 July 2016 until the date of this report. Mr John van der Welle B.Sc. ACA Chairman Mr van der Welle is a chartered accountant with over 30 years’ experience in the oil and gas industry and is currently a Non-Executive Director of AIM listed exploration companies Hurricane Energy Plc and Lekoil Limited, both of which had IPO’s on AIM in 2013-2014. Mr van der Welle has previously been a senior executive with, or Director of, a number of UK listed upstream oil and gas companies – Enterprise Oil, Hardy Oil and Gas, Premier Oil, First Calgary Petroleums and Stratic Energy Corp. Mr van der Welle was appointed as Non-Executive Chairman on 10 February 2014. Global Petroleum Ltd ANNUAL FINANCIAL STATEMENTS 4 DIRECTORS’ REPORT For the year ended 30 JUNE 2017 2. DIRECTORS (continued) Mr Peter Hill MA Law (Oxon) Managing Director Chief Executive Officer Mr Peter Blakey B.Sc CEng Non-Executive Director Mr Damien Cronin MAICD MQLS Independent Non-Executive Director and Company Secretary Mr Hill has extensive experience in the energy sector as a senior executive with a significant track record worldwide in high-level M&A and business development roles, primarily in the oil industry. Most recently Mr Hill was the global head of Corporate M&A for Statoil ASA, where he was responsible for several large transactions, being a key member of the team responsible for Statoil’s merger with Norsk Hydro Oil & Gas in December 2006, and leading the acquisition of EnCana’s Gulf of Mexico deepwater assets in 2005. Prior to agreeing to join Global, Mr Hill was responsible for supervising execution of the IPO of Statoil’s Energy & Retail division in the latter part of 2010. Previously Mr Hill set up the international business of Waterous & Co as Managing Director in the UK, and before that worked for Enterprise Oil for many years, latterly as Head of International New Ventures. Mr Hill started in the energy industry with Total Oil Marine and is a UK qualified solicitor, having commenced his career with Clifford Chance. He holds an MA in Law from Oxford University. Mr Hill was appointed as Managing Director and Chief Executive Officer of the Company on 1 September 2011. Mr Hill has not held any other directorships of publicly listed companies in the last three years. Peter Blakey has worked in the oil and gas industry for over 50 years including positions with ICI, Shell and BP/Union Carbide. After a spell with PA Management Consultancy he and Peter Taylor formed T M Services, an international oil and gas consultancy which was awarded the Queens Award for Export Achievement in 1985. He cofounded and was a Director of TM Oil Production which later became Dana Petroleum. Dana grew to become one of the leading UK oil and gas exploration companies and was taken over by KNOC for £1.8bn in 2010. He also cofounded Consort Resources, a significant North Sea gas transportation and production company, and Planet Oil International which acquired various interests in Mauritania, Guyana (formally French Guiana) and Uganda, and subsequently reversed into Hardman Resources in 1998. Peter Blakey was also a founding member with Peter Taylor of Star Petroleum, Jupiter Petroleum and Neptune Petroleum. Star Petroleum was incorporated into Global Petroleum in 2002. Jupiter Petroleum, with assets in offshore Namibia, was acquired by Global Petroleum in 2011. Neptune Petroleum, with interests in Namibia and Uganda, was reversed into AIM listed Tower Resources Plc in 2005. Mr Cronin is a solicitor who has over 30 years’ experience in the oil and gas and resources sectors and has held senior legal and commercial roles with Rio Tinto, Shell, Duke Energy and Incitec Pivot. He has previously served as Company Secretary to a number of listed public companies in the oil and gas sector including Sunshine Gas and Blue Energy and as secretary to the operating committee of a number of mining joint ventures, including that for the Sonoma Coal Mine. Mr Cronin was appointed Director and Company Secretary on 31 December 2011. Mr Cronin has not held any other directorships of publicly listed companies in the last three years. Global Petroleum Ltd ANNUAL FINANCIAL STATEMENTS 5 DIRECTORS’ REPORT For the year ended 30 JUNE 2017 2. DIRECTORS (continued) Mr Andrew Draffin (CA) Independent Non-Executive Director Mr Peter Taylor B.Sc CEng Non-Executive Director Mr Draffin is a chartered accountant with over 17 years’ experience in financial reporting, treasury management and corporate advisory services. He currently provides services as a Director, Company Secretary and CFO to ASX listed, OTCQX listed and private companies operating in renewable energy, exploration and mining and the investment sectors. Mr Draffin is a Director of EnviroMission and Gladiator Resources. Peter Taylor has over 40 years’ experience in the oil and gas industry. He cofounded T M Services, an international oil and gas consulting company, in 1980 and became involved in the upstream exploration and production sectors in 1990. He cofounded and was a Director of TM Oil Production which later became Dana Petroleum. Dana grew to become one of the leading UK oil and gas exploration companies and was taken over by KNOC for £1.8bn in 2010. He also cofounded Consort Resources, a significant North Sea gas transportation and production company, and Planet Oil International which acquired various interests in Mauritania, Guyana (formally French Guiana) and Uganda, and subsequently reversed into Hardman Resources in 1998. Peter Taylor was also a founding member with Peter Blakey of Star Petroleum, Jupiter Petroleum and Neptune Petroleum. Star Petroleum was incorporated into Global Petroleum in 2002. Jupiter Petroleum, with assets in offshore Namibia, was acquired by Global Petroleum in 2011. Neptune Petroleum, with interests in Namibia and Uganda, was reversed into AIM listed Tower Resources Plc in 2005. 3. COMPANY SECRETARY Mr Damien Cronin was appointed to the position of Company Secretary on 31 December 2011. Mr Cronin has been Company Secretary to a number of publicly listed companies in the mining and oil and gas sectors as well as secretary to the operating committee of a number of unincorporated mining joint ventures. 4. DIRECTORS’ MEETINGS The number of Directors’ meetings and the number of meetings attended by each of the Directors of the Company during the financial year are: Mr J van der Welle Mr P Hill Mr P Blakey Mr D Cronin Mr A Draffin Mr P Taylor Board Meetings Number Eligible to Attend Board Meetings Number Attended 7 7 7 7 7 7 7 7 4 6 7 7 The Company does not currently have separate committees of the Board, given the current size of the Board. Matters that would otherwise be within the charter of such committees are considered by the Board at its meetings. Global Petroleum Ltd ANNUAL FINANCIAL STATEMENTS 6 DIRECTORS’ REPORT For the year ended 30 JUNE 2017 5. DIRECTORS' INTERESTS The following table sets out each Director's relevant interest, including related parties, in shares and options of the Company as at the 30 June 2017: Directors Mr J van der Welle Mr P Hill Mr P Blakey Mr D Cronin Mr A Draffin Mr P Taylor Interest in Securities at the Date of this Report Ordinary Shares(1) Incentive Options (2) 291,151 2,744,472 39,840,133 478,015 - 41,629,071 1,000,000 6,000,000 - 300,000 - - Notes (1) (2) Ordinary Shares means fully paid ordinary shares in the capital of the Company. Incentive Options means an option over ordinary share exercisable at various amounts and dates – see below. 6. DISCRETIONARY GRANTS OF SHARES AND SHARE OPTIONS During the year the Company made the final discretionary grant of shares to Directors approved at the AGM on 17 November 2015. 838,842 ordinary shares were issued for no consideration as part of the Directors’ remuneration (US$22,347) - refer 12.3 and 12.4. Since 30 June 2017, no shares have been issued as a result of the exercise of options and no further options or shares have been granted. 7. PRINCIPAL ACTIVITIES, LIKELY DEVELOPMENTS AND DIVIDENDS The principal activities of the Group during the year consisted of oil and gas exploration, and there has been no change in the nature of those activities. The Company expects to continue as an oil and gas explorer with a specific focus of enhancing of shareholder value by the identification and commercialisation of oil and gas assets. No dividends were paid during the financial year ended 30 June 2017 (2016: Nil). 8. SIGNIFICANT CHANGES IN THE STATE OF AFFAIRS There have been no significant changes in the state of affairs of the Company and Group during the financial year. 9. EVENTS SUBSEQUENT TO REPORTING DATE No material events have occurred from the balance sheet date up to the release date of this report. 10. INDEMNIFICATION INSURANCE OF OFFICERS The Constitution of the Company requires the Company, to the extent permitted by law, to indemnify any person who is or has been a Director or officer of the Company or Group for any liability caused as such a Director or officer and any legal costs incurred by a Director or officer in defending an action for any liability caused as such a Director or officer. During or since the end of the financial year, no amounts have been paid by the Company or Group in relation to these indemnities. During the financial year, an indemnity insurance premium of US$26,944 (2016: US$34,054) was paid by the Company. Global Petroleum Ltd ANNUAL FINANCIAL STATEMENTS 7 DIRECTORS’ REPORT For the year ended 30 JUNE 2017 11. NON-AUDIT SERVICES During the year KPMG, the Group’s auditor, has performed certain other services in addition to their statutory duties. The Board has considered the non-audit services provided during the year by the auditor and in accordance with written resolution of the Directors of the Company, and is satisfied that the provision of those non-audit services during the year by the auditor is compatible with, and did not compromise, the auditor independence requirements of the Corporations Act 2001, for the following reasons: The non-audit services provided do not undermine the general principles relating to auditor independence as set out in APES 110 Code of Ethics for Professional Accountants, as they did not involve reviewing or auditing the auditor’s own work, acting in a management or decision making capacity for the Group, acting as an advocate for the Group of jointly sharing risks and rewards. Details of the amounts paid to the auditor of the group, KPMG, and its related practices for audit and non-audit services provided during the reporting year are set out below. Audit services: Auditors of the Group, KPMG Australia – audit and review of financial reports Other services: Auditors of the Group, KPMG Australia - taxation services Total audit and other services 2017 US$ 2016 US$ 39,925 39,925 53,088 53,088 6,700 6,700 46,625 10,052 10,052 63,140 12. REMUNERATION REPORT - AUDITED 12.1 Principles of compensation – audited The Group’s remuneration policy for its key management personnel (KMP) has been developed by the Board taking into account the size of the Group, the size of the management team for the Group, the nature and stage of development of the Group’s current operations, and market conditions and comparable remuneration levels for companies of a similar size and operating in similar sectors. In addition to considering the above general factors, the Board has also placed emphasis on the following specific issues in determining the remuneration policy for KMP: (i) (ii) the Group is currently focused on undertaking exploration, appraisal and development activities; risks associated with developing oil and gas companies while exploring and developing projects; and (iii) measures other than profit which may be generated from asset sales, as the Group is currently undertaking new project acquisition, exploration and development activities with the result it does not expect to be undertaking profitable operations until sometime after the commencement of commercial production on any of its projects. These principles were reflected in the discretionary grant of shares in financial years 2016 and 2017, approved by shareholders on 17 November 2015, and the grant of options approved by shareholders, in 2013 and 2014. 12.2 Directors’ and executive officers’ remuneration – audited Executive Director remuneration The Group’s remuneration policy is to provide a fixed remuneration component and a performance based component (short term incentive and long-term incentive) – see details below. The Board believes that this remuneration policy is appropriate given the considerations discussed in the Section above and aims to align executives’ objectives with shareholder and business objectives. Global Petroleum Ltd ANNUAL FINANCIAL STATEMENTS 8 DIRECTORS’ REPORT For the year ended 30 JUNE 2017 12. REMUNERATION REPORT – AUDITED (continued) Currently given the size and nature of the Group’s operations, there is only one executive, Mr Peter Hill, who is also a Director. Mr P Hill, Managing Director and Chief Executive Officer, has a Contract of Employment with Global Petroleum Limited dated 1 August 2011 (amended, with effect, 1 August 2014). The contract specifies the duties and obligations to be fulfilled by the Managing Director and Chief Executive Officer. The contract has a rolling annual term and provides for termination by either party on twelve months’ notice. Upon notice, Mr Hill will be entitled to his remuneration and related benefits up to the end of the notice period. The Contract of Employment does not provide for any additional termination payout. His base remuneration under the terms of the contract is set at GBP 250,000 (US$325,175) plus health insurance. In July 2015, the Board resolved to reduce the remuneration of Board members in response to the low oil price and the other difficult economic conditions then being experienced. From 1 August 2015 Mr Hill’s remuneration was therefore reduced by 25% so that his gross remuneration for the prior reporting period was GBP192,708 (US$283,801) plus health insurance of GBP7,966 (US$12,413). The Board reviewed this resolution in July 2016 and resolved to re-instate all remuneration to pre July 2015 levels from 1 August 2016. Mr Hill received GBP 244,792 (US$311,136) for the current financial year plus health insurance GBP 9,275 (US$12,226). (i) Fixed remuneration Fixed remuneration consists of a base remuneration, as well as an employer contribution to a superannuation fund and other non-cash benefits. Non-cash benefits may include provision of motor vehicles and healthcare benefits. The fixed remuneration is reviewed annually by the Board in the absence of a Remuneration and Nomination Committee. The process consists of a review of Company and individual performance, relevant comparative remuneration externally and internally and, where appropriate, external advice on policies and practices. However external advice has not been sought in 2017 (2016: none) although independent external advice was obtained subsequent to the reporting period – refer 12.5. (ii) Performance based remuneration – short term incentive The executive is entitled to an annual cash bonus upon achieving various key performance indicators (“KPI’s”), as set by the Board. Having regard to the current size, nature and opportunities of the Company, the Board has determined that these KPI’s will include measures such as successful completion of exploration activities (e.g. completion of exploration programmes within budgeted timeframes and costs), development activities (e.g. completion of feasibility studies), corporate activities (e.g. recruitment of key personnel) and business development activities (e.g. project acquisitions and capital raisings). The Board is continuously in the process of determining specific KPI’s. During the 2017 financial year, no cash bonuses were paid or are payable (2016: Nil). (iii) Performance based remuneration – long term incentive The Board may issue incentive options to the executive as a key component of the incentive portion of their remuneration, in order to attract and retain the services of the executive and to provide an incentive linked to the performance of the Group. The Board has a policy of granting incentive options to the executive with exercise prices at or above market share price (at the time of agreement). As such, incentive options granted to the executive will generally only be of benefit if the executive performs to the level whereby the value of the Group increases sufficiently to warrant exercising the incentive options granted. No options were granted as remuneration during the 2017 financial year (2016: Nil). Other than service-based vesting conditions, there are not any additional performance criteria on the incentive options granted to executives, as given the speculative nature of the Group’s activities and the small management team responsible for its running, it is considered the performance of the executive and the performance and value of the Group are closely related. In July 2015, the Board resolved that the reduction in Directors’ remuneration may, if the Board decides at the relevant time, be replaced by periodically issuing Shares to those Directors up to a maximum value of the reduction in each Director’s cash remuneration. Any such share award made to a Director will be subject to that Director being a Director of the Company on the date of award, and in making an award, the Board will take account of the Director’s performance. This was approved at the AGM on 17 November 2015. The shareholders approved the issue of shares to the Directors to be given in four instalments with the final one being on 26 August 2016. Global Petroleum Ltd ANNUAL FINANCIAL STATEMENTS 9 DIRECTORS’ REPORT For the year ended 30 JUNE 2017 12. REMUNERATION REPORT – AUDITED (continued) Share awards to UK Directors are subject to UK Income Tax and National Insurance deduction under the Pay As You Earn scheme (PAYE). UK Directors were allocated part of their share based payment as cash in order to pay these PAYE obligations. The value of the shares issued to Mr Hill was US$13,788 (2016 US$34,117) and corresponding PAYE was US$9,754 (2016 US$26,038) - refer 12.3. Non-Executive Director remuneration The Board’s policy is for fees to Non-Executive Directors to be no greater than market rates for comparable companies for time, commitment and responsibilities. Given the current size, nature and risks of the Group, incentive options have been used to attract and retain certain Non-Executive Directors. The Board determines payments to the Non-Executive Directors and reviews their remuneration annually, based on market practice, duties and accountability. Independent external advice is sought when required, however no external advice has been sourced in 2017 (2016: none), although independent external advice was obtained subsequent to the reporting period – refer 12.5. The maximum aggregate amount of fees that can be paid to Non-Executive Directors is subject to approval by shareholders at a General Meeting. Fees for Non-Executive Directors are not linked to the performance of the Group. However, to align Directors’ interests with shareholder interests, the Directors are encouraged to hold shares in the Company and Non-Executive Directors may in limited circumstances receive unlisted incentive options in order to secure their initial or ongoing services. In July 2015, the Board resolved to reduce the remuneration of the Non-Executive Directors by 25% in response to the low oil price and the other difficult economic conditions then being experienced. This change was effective from 1 August 2015. In July 2016, the Board reviewed this resolution and resolved to re-instate all remuneration/Director’s fees to pre July 2015 levels from 1 August 2016. In addition, the Board also resolved in July 2015 that the reduction in Directors’ remuneration may, if the Board decides at the relevant time, be replaced by periodically issuing shares to those Directors up to a maximum value of the reduction in each Director’s cash remuneration. Any such share award made to a Director will be subject to that Director being a Director of the Company on the date of award, and in making an award, the Board will take account of the Director’s performance. This resolution was approved by shareholders at the AGM on 17 November 2015. . Share awards to UK Directors are subject to UK Income Tax and National Insurance deduction under the Pay As You Earn scheme (PAYE). UK Directors were allocated part of their share based payment as cash in order to pay these PAYE obligations. The value of the shares issued to Mr J van der Welle was US$2,495 (2016: US$4,373) and corresponding PAYE tax was US$709 (2016: US$3,327), for Messrs Blakey and Taylor the value of the shares issued was US$1,299 and corresponding PAYE tax was US$848 (2016: US$2,197). Refer Section 12.3. Australian based Directors’ shares were valued as follows: Mr Cronin US$3,466 (2016: US$7,806), Mr Dighton US$Nil (2016: US$1,035) and Mr Draffin US$Nil (2016: $Nil). There was no cash element paid to Australian Directors. Non-Executive Director fees for the reporting period for Messrs Blakey and Taylor were set at GBP34,269 fees were set at (US$43,506) each (2016: GBP29,382 (US$34,882) each). Mr van der Welle’s GBP31,823(US$40,386) (2016: GBP25,051 (US$36,988)). Messrs Cronin and Draffin fees were set at AU$29,375 and AU$30,000 respectively (US$22,158 and US$22,795 respectively) - (2016: AU$23,125 (US$18,376) and AU$30,000 (US$24,643) respectively). These fees relate to responsibilities as a Director only. Non-Executive Directors can rescind their position at any time by submitting their resignation in writing. A Non- Executive Director’s appointment can be terminated by a shareholder vote. The Non-Executive Directors are not entitled to any pay-outs on termination. The Board has no retirement scheme in place. Directors who retire from the Board of Directors are not entitled to any retirement payment. The Group will make contributions to superannuation funds where required - in 2017 contributions to Messrs Cronin and Draffin were US$2,136 and US$2,163 respectively (2016: US$1,517 and US$116 respectively). Relationship between remuneration of KMP, shareholder wealth and earnings During the Group’s project identification, acquisition, exploration and development phases of its business, the Board anticipates that the Group will retain earnings (if any) and other cash resources for the exploration and development of its resource projects. Accordingly, the Group does not currently have a policy with respect to the payment of dividends and returns of capital. Therefore, there was no relationship between the Board’s policy for determining the nature and amount of remuneration of KMP and dividends paid and returns of capital by the Group during the current and previous four financial years. The Board did not determine the nature and amount of remuneration of the KMP by reference to changes in the price at which shares in the Company traded between the beginning and end of the current and the previous four financial years. However, as noted above, a number of KMP have received or are entitled to receive incentive options which generally will only be of value to the individual should the value of the Company’s shares increase sufficiently to warrant exercising the incentive options. Global Petroleum Ltd ANNUAL FINANCIAL STATEMENTS 10 DIRECTORS’ REPORT For the year ended 30 JUNE 2017 12. REMUNERATION REPORT – AUDITED (continued) Relationship between remuneration of KMP and earnings As discussed above, the Group is currently undertaking new project acquisition, exploration and development activities, and does not expect to be undertaking profitable operations (other than by way of material asset sales), until sometime after the successful commercialisation, production and sales of commodities from one or more of its projects. Accordingly, the Board does not consider earnings during the current and previous four financial years when determining the nature and amount of remuneration of KMP. Global Petroleum Ltd ANNUAL FINANCIAL STATEMENTS 11 DIRECTORS’ REPORT For the year ended 30 JUNE 2017 12. REMUNERATION REPORT – AUDITED (continued) Currently the Company only employs one KMP, Mr P Hill. Details of his contract are shown above. Details of the nature and amount of each element of the remuneration of the Directors and key management personnel of the Group for the financial year are as follows: Short-Term(1) Post-Employment Share- Based Payments Total Proportion of Remuneration Performance Related Remuneration (7) Directors’ Fees(7) Superannuation and other benefits Shares(2)/ Options (3) Director Executive officers Mr P Hill Sub-total executive officers remuneration Non-Executive Directors Mr van der Welle Mr P Blakey Mr D Cronin (4) Mr P Dighton(5) Mr A Draffin(6) Mr P Taylor Sub-total Non-Executive Directors’ remuneration Total directors’ and executive officers’ remuneration Notes on following page 2017 2016 2017 2016 2017 2016 2017 2016 2017 2016 2017 2016 2017 2016 2017 2016 2017 2016 2017 2016 US$ US$ 320,8907 309,8397 320,8907 309,8397 - - - - - - - - - - - - - - 320,890 309,839 - - 41,0957 40,3157 44,3547 37,0797 22,158 18,376 - 32,3435 22,795 1,342 44,3547 37,1817 174,756 166,636 174,756 166,636 US$ 12,226 12,413 12,226 12,413 - - - - 2,136 1,517 - 1,413 2,163 116 - - 4,299 3,046 16,525 15,459 US$ 13,7882 34,1172 13,7882 34,1172 2,4952 4,3732 1,2992 2,9262 3,4662 7,8062 - 1,0352 - - 1,2992 2,9262 8,558 19,0662 22,3472 53,1832 US$ 346,904 356,369 346,904 356,369 43,590 44,688 45,653 40,005 27,760 27,699 - 34,791 24,958 1,458 45,653 40,107 187,614 188,748 534,518 545,117 % - - - - - - - - - - - - - - - - - - - - Global Petroleum Ltd ANNUAL FINANCIAL STATEMENTS 12 DIRECTORS’ REPORT For the year ended 30 JUNE 2017 12. REMUNERATION REPORT - AUDITED (continued) Notes in relation to the table of Directors' and executive officers' remuneration: (1) (2) (3) (4) (5) (6) (7) There was no short-term cash bonus paid during the year. Shares, refer to 12.3 and 12.4 below. Amounts paid in cash to UK Directors relating to PAYE deductions have been included in remuneration and Directors’ fees. Options, refer to 12.3 and 12.4 below. Mr D Cronin was remunerated US$26,671 (2016: US$19,950) as Company Secretary, separate to his role as Director and thus not included in the table above. Mr P Dighton resigned on 25 January 2016. Included in Mr Dighton’s fees is an ex gratia cash payment of AU$25,000 (US$17,851). Mr A Draffin was appointed on 10 June 2016. The UK Directors received part of their share based payments in cash in order to meet their UK Income Tax and National Insurance obligations on the issue of discretionary shares This amount is included in the remuneration/Directors’ fee figures above. 12.3 Equity instruments – audited Shares or Options granted to Directors and Key Management Personnel – audited During years ended 30 June 2017 and 2016 the Company made several discretionary grants of shares, following shareholder approval at the AGM on 17 November 2015, to Directors. (Refer 12.2 Non-Executive Director remuneration and Employment contracts with key management personnel). 838,842 (2016: 2,369,298) ordinary shares were issued and fully paid with a fair value of US$22,347 (2016: US$53,183). The fair values of the shares were determined as the ASX market value on the days of issue. Refer to 12.4 for the details of shares issued to individual Directors. Details of options granted to each Key Management Personnel of the Group during the financial year are as follows: No options were issued during the financial year ended 30 June 2017 (2016 Nil) 12.4 Directors and Key Management Personnel transactions-audited Loans to Directors There have been no loans to any Director or Key Management Personnel or their related parties during the period. Movement in Shareholdings 2017 Directors Mr J van der Welle Mr P Hill Mr P Blakey Mr D Cronin Mr P Taylor1 Held at 1 July 2016 Shares granted2 Held at 30 June 2017 197,522 2,226,927 39,791,362 347,889 41,580,300 93,629 517,545 48,771 130,126 48,771 291,151 2,744,472 39,840,133 478,015 41,629,071 Notes (1) (2) Includes shares held by related parties. Shares granted represents the number of shares granted to Directors as part of the discretionary share scheme approved by shareholders at the AGM on 17 November 2015. Global Petroleum Ltd ANNUAL FINANCIAL STATEMENTS 13 DIRECTORS’ REPORT For the year ended 30 JUNE 2017 12. REMUNERATION REPORT - AUDITED (continued) Movement in options 2017 Directors Held at 1 July 2016 Granted as compensation Exercised Other changes Held at 30 June 2017 Mr J van der Welle 1,000,000 Mr P Hill Mr P Blakey Mr D Cronin Mr A Draffin Mr P Taylor 6,000,000 - 300,000 - - - - - - - - - - - - - - - - - - - - 1,000,000 6,000,000 - 300,000 - - All options held by Directors are vested and exercisable at AU$0.065 each on or before 23 December 2019. Other transactions A number of Directors, or their related parties, hold positions in other entities that result in them having control or significant influence over the financial or operating policies of those entities. A number of these entities transacted with the Company or its controlled entities in the reporting period. During the year the Company paid US$Nil (2016: US$58,780) to TM Services Limited, a company controlled by Mr P Taylor and Mr P Blakey, for administrative and technical assistance, Damien Cronin Pty Ltd trading as Law Projects, a company controlled by Mr D Cronin, US$26,671 (2016: US$19,950) for company secretarial services and Northlands Advisory Services Limited, a company controlled by Mr J van der Welle, US$40,838 (2016: US$36,817) for consulting services. Included in the above are the following amounts payable to related parties at 30 June 2017. All payable in full within 30 days of invoice, have standard industry terms and conditions and none of the amounts are secured on any assets. Amount owed to Law Projects US$2,303 and Northlands Advisory Services US$10,568. 12.5 Voting at the 2016 AGM held on 8 November 2016 – First Strike At the 2016 AGM, held on 8 November 2016 the Company failed to secure 75% of the votes cast in favour of the audited remuneration report for the year ended 30 June 2016. The Company received votes against its Remuneration Report representing percentage slightly greater than 25% of the votes cast by persons entitled to vote, as such a “first strike” was recorded against the Remuneration Report. The Board considered the impact of the first strike and noted that remuneration for the reported period was significantly less than the previous corresponding period, in particular executive Director remuneration was down 33% whist Non-Executive Director remuneration was on average down approximately 7%. Notwithstanding this the Board has acknowledged shareholders’ concerns about Board remuneration, however it remains of the opinion that the level of remuneration paid is reasonable for the Company, its stage of development and its level of activities. In September 2017 the Board received remuneration benchmarking advice from independent remuneration consultants Godfrey Remuneration Group Pty Limited which reinforces this view. The Board has also considered the consequences in the event that a “second strike” is recorded at the 2017 AGM. A recorded second strike would trigger a “spill motion” of the current Board of the Company. However it is the Board’s belief that the resulting spill motion would be unlikely to succeed given that the first and second strike resolutions, and the spill resolution, will have different thresholds, noting the latter requires favourable votes in excess of 50% cast by persons entitled to vote to pass the spill resolution. 13. CORPORATE GOVERNANCE STATEMENTS In accordance with changes to the ASX Listing Rules, the Company’s Corporate Governance Statement is available on the Company’s website at www.globalpetroleum.com.au. 14. AUDITOR’S INDEPENDENCE DECLARATION The auditor's independence declaration is on Page 16, and forms part of the Directors’ Report for the financial year ended 30 June 2017. Global Petroleum Ltd ANNUAL FINANCIAL STATEMENTS 14 DIRECTORS’ REPORT For the year ended 30 JUNE 2017 15. DIRECTORS’ RESOLUTION This report is made in accordance with a resolution of the Directors made pursuant to Section 298(2) of the Corporations Act 2001. DAMIEN CRONIN DIRECTOR and COMPANY SECRETARY Global Petroleum Ltd ANNUAL FINANCIAL STATEMENTS 15 Lead Auditor’s Independence Declaration under Section 307C of the Corporations Act 2001 To the directors of Global Petroleum Limited I declare that, to the best of my knowledge and belief, in relation to the audit for the financial year ended 30 June 2017 there have been: i. no contraventions of the auditor independence requirements as set out in the Corporations Act 2001 in relation to the audit; and ii. no contraventions of any applicable code of professional conduct in relation to the audit. KPM_INI_01 KPMG Jason Adams Partner Brisbane 19 September 2017 PAR_SIG_01 PAR_NAM_01 PAR_POS_01 PAR_DAT_01 PAR_CIT_01 16 KPMG, an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. Liability limited by a scheme approved under Professional Standards Legislation. Independent Auditor’s Report To the shareholders of Global Petroleum Limited Report on the audit of the Financial Report Opinion We have audited the Financial Report of Global Petroleum Limited (the Company). In our opinion, the accompanying Financial Report of the Company is in accordance with the Corporations Act 2001, including: • giving a true and fair view of the Group’s financial position as at 30 June 2017 and of its financial performance for the year ended on that date; and • complying with Australian Accounting Standards and the Corporations Regulations 2001. Basis for opinion The Financial Report comprises: • Consolidated statement of financial position as at 30 June 2017; • Consolidated statement of profit or loss and other comprehensive income, consolidated statement of changes in equity, and consolidated statement of cash flows for the year then ended; • Notes including a summary of significant accounting policies; and • Directors’ Declaration. The Group consists of the Company and the entities it controlled at the year-end or from time to time during the financial year. We conducted our audit in accordance with Australian Auditing Standards. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Our responsibilities under those standards are further described in the Auditor’s responsibilities for the audit of the Financial Report section of our report. We are independent of the Group in accordance with the Corporations Act 2001 and the ethical requirements of the Accounting Professional and Ethical Standards Board’s APES 110 Code of Ethics for Professional Accountants (the Code) that are relevant to our audit of the Financial Report in Australia. We have fulfilled our other ethical responsibilities in accordance with the Code. Key Audit Matters The Key Audit Matter we identified was the capitalisation of exploration and evaluation expenditure as exploration assets. Key Audit Matters are those matters that, in our professional judgment, 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. KPMG, an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. Liability limited by a scheme approved under Professional Standards Legislation. 17 Exploration assets ($1,109,115) Refer to Note 3.1 ‘Exploration assets’ The key audit matter How the matter was addressed in our audit Our audit procedures included: • Evaluating the Group’s accounting policy to recognise exploration and evaluation assets using the criteria in the accounting standard; • We assessed the Group’s determination of its areas of interest for consistency with the definition in the accounting standard; • We assessed the Group’s current rights to tenure by corroborating the ownership of the relevant license. We also tested for compliance with conditions such as minimum expenditure requirements. • We tested the Group’s additions to E&E for the year by evaluating a sample of recorded expenditure for consistency to underlying records, the capitalisation requirements of the Group’s accounting policy and the requirements of the accounting standard; • We evaluated Group documents, such as minutes of Board meetings, for consistency with their stated intentions for continuing E&E in certain areas. We corroborated this through interviews with key personnel. Exploration and evaluation expenditure capitalised as exploration assets (E&E) is a key audit matter due to: • • the significance of the activity to the Group’s business and the balance (being 12% of total assets); and the greater level of audit effort to evaluate the Group’s application of the requirements of the industry specific accounting standard AASB 6 Exploration for and Evaluation of Mineral Resources, in particular the conditions allowing capitalisation of relevant expenditure and presence of impairment indicators. The presence of impairment indicators would necessitate a detailed analysis by the Group of the value of E&E. In assessing the conditions allowing capitalisation of relevant expenditure, we focused on: • the determination of the areas of interest (areas); • documentation available regarding rights to tenure, via licensing, and compliance with relevant conditions, to maintain current rights to an area of interest and the Group’s intention to continue the relevant E&E activities; and • the Group’s determination of whether the E&E are expected to be recouped through successful development and exploitation of the area of interest, or alternatively, by its sale. In assessing the presence of impairment indicators, we focused on considering the existence of any matters that may draw into question the commercial continuation of E&E activities for the Group’s Namibian area of interest where significant capitalised E&E exists. 18 Other Information Other Information is financial and non-financial information in Global Petroleum Limited’s annual reporting which is provided in addition to the Financial Report and the Auditor's Report. The Directors are responsible for the Other Information. Our opinion on the Financial Report does not cover the Other Information and, accordingly, we do not express an audit opinion or any form of assurance conclusion thereon, with the exception of the Remuneration Report and our related assurance opinion. In connection with our audit of the Financial Report, our responsibility is to read the Other Information. In doing so, we consider whether the Other Information is materially inconsistent with the Financial Report or our knowledge obtained in the audit, or otherwise appears to be materially misstated. We are required to report if we conclude that there is a material misstatement of this Other Information, and based on the work we have performed on the Other Information that we obtained prior to the date of this Auditor’s Report we have nothing to report. Responsibilities of the Directors for the Financial Report The Directors are responsible for: • preparing the Financial Report that gives a true and fair view in accordance with Australian Accounting Standards and the Corporations Act 2001; • implementing necessary internal control to enable the preparation of a Financial Report that gives a true and fair view and is free from material misstatement, whether due to fraud or error; and • assessing the Company’s and Group’s ability to continue as a going concern. This includes disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless they either intend to liquidate the Company and Group or to cease operations, or have no realistic alternative but to do so. Auditor’s responsibilities for the audit of the Financial Report Our objective is: • • to obtain reasonable assurance about whether the Financial Report as a whole is free from material misstatement, whether due to fraud or error; and to issue an Auditor’s Report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with Australian Auditing Standards will always detect a material misstatement when it exists. Misstatements can arise from fraud or error. They are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of this Financial Report. A further description of our responsibilities for the Audit of the Financial Report is located at the Auditing and Assurance Standards Board website at: http://www.auasb.gov.au/auditors_files/ar2.pdf. This description forms part of our Auditor’s Report. 19 Report on the Remuneration Report Opinion Directors’ responsibilities In our opinion, the Remuneration Report of Global Petroleum Limited for the year ended 30 June 2017 complies with Section 300A of the Corporations Act 2001. The Directors of the Company are responsible for the preparation and presentation of the Remuneration Report in accordance with Section 300A of the Corporations Act 2001. Our responsibilities We have audited the Remuneration Report included in Section 12 of the Directors’ Report for the year ended 30 June 2017. Our responsibility is to express an opinion on the Remuneration Report, based on our audit conducted in accordance with Australian Auditing Standards. KPMG Jason Adams Partner Brisbane 19 September 2017 20 CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME FOR THE YEAR ENDED 30 JUNE 2017 Continuing operations Salaries and employee benefits expense Administrative expenses Other expenses Foreign exchange gain (loss) Equity based remuneration Notes 2017 US$ 2016 US$ (421,502) (366,325) (1,039,363) (1,280,992) (410,274) (11,791) (22,347) (540,856) (139,099) (53,183) Results from operating activities before income tax (1,905,277) (2,380,455) Finance income Net finance income 48,814 48,814 43,942 43,942 Profit (loss) from continuing operations before tax (1,856,463) (2,336,513) Income tax benefit (expense) Profit (loss) from continuing operations after tax Profit (loss) for the year Other comprehensive income 6.2 - - (1,856,463) (2,336,513) (1,856,463) (2,336,513) Items that may be reclassified subsequently to profit or loss Transfer from foreign exchange reserve on dissolution of a controlled entity Other comprehensive income (loss) for the year, net of tax (16,417) (16,417) - - Total comprehensive income (loss) for the year (1,872,880) (2,336,513) Earnings per share Basic earnings (loss) per share (cents) Diluted earnings (loss) per share (cents) 6.3 6.3 (0.917) (1.167) (0.917) (1.167) The Notes on pages 25 to 45 are an integral part of these consolidated financial statements. Global Petroleum Ltd ANNUAL FINANCIAL STATEMENTS 21 CONSOLIDATED STATEMENT OF FINANCIAL POSITION AS AT 30 JUNE 2017 Assets Cash and cash equivalents Trade and other receivables Prepayments Total current assets Plant and equipment Exploration assets Total non-current assets Total assets Liabilities Trade and other payables Current tax payable Provisions Total current liabilities Total non-current liabilities Total liabilities Net assets Equity Share capital Reserves Accumulated losses Total equity Notes 2017 US$ 2016 US$ 4.1 7,807,605 10,172,598 131,972 50,352 128,710 58,925 7,989,929 10,360,233 5,943 3.1 1,109,115 1,115,058 9,104,987 12,341 286,667 299,008 10,659,241 4.3.9 444,555 6.2 7.1 - 143,819 588,374 - 588,374 193,543 - 98,553 292,096 - 292,096 8,516,613 10,367,145 5.1 5.2 39,221,112 1,407,138 39,198,764 1,423,555 5.2.3 (32,111,637) (30,255,174) 8,516,613 10,367,145 The Notes on pages 25 to 45 are an integral part of these consolidated financial statements. Global Petroleum Ltd ANNUAL FINANCIAL STATEMENTS 22 CONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 30 JUNE 2017 Attributable to owners of the Company Share Capital Option Reserve Foreign Currency Translation Reserve Accumulated Losses Total Equity US$ US$ US$ US$ US$ 2017 Balance at 1 July 2016 39,198,764 836,728 586,827 (30,255,174) 10,367,145 Issue of options Issue of shares - 22,348 Total comprehensive (loss) for the year: Profit (loss) for the year Other comprehensive profit (loss) for the year: Transfer of foreign exchange reserve on dissolution of a controlled entity Total comprehensive income (loss) for the year - - - - - - - - - - - - - - 22,348 (1,856,463) (1,856,462) (16,417) - (16,417) (16,417) (1,856,463) (1,872,880) Balance at 30 June 2017 39,221,112 836,728 570,410 (32,111,637) 8,516,613 2016 Balance at 1 July 2015 39,145,581 836,728 586,827 (27,918,661) 12,650,475 Issue of options Issue of shares Total comprehensive profit (loss) for the year: Profit (loss) for the year Other comprehensive profit (loss) for the year: Transfer of foreign exchange reserve on dissolution of a controlled entity Total comprehensive income (loss) for the year 53,183 - - - - - - - - - - - - 53,183 (2,336,513) (2,336,513) - - (2,336,513) (2,336,513) Balance at 30 June 2016 39,198,764 836,728 586,827 (30,255,174) 10,367,145 Amounts are stated net of tax The Notes on pages 25 to 45 are an integral part of these consolidated financial statements. Global Petroleum Ltd ANNUAL FINANCIAL STATEMENTS 23 CONSOLIDATED STATEMENT OF CASHFLOWS FOR THE YEAR ENDED 30 JUNE 2017 Cash flows from operating activities Cash paid to suppliers and employees Interest received GST/VAT refunds received Tax (paid)/refund Notes 2017 US$ 2016 US$ (1,572,858) (2,290,121) 48,814 43,942 178,230 252,410 - - Net cash from (used in) operating activities 4.2 (1,345,814) (1,993,769) Cash flows from investing activities Exploration and business development expenditure Net cash from (used in) investing activities Net decrease in cash and cash equivalents Cash and cash equivalents at 1 July (1,020,692) (596,704) (1,020,692) (596,704) (2,366,506) (2,590,473) 10,172,598 12,707,727 Effects of exchange rate fluctuations on cash and cash equivalents 1,513 55,344 Cash and cash equivalents at 30 June 4.1 7,807,605 10,172,598 The Notes on pages 25 to 45 are an integral part of these consolidated financial statements. Global Petroleum Ltd ANNUAL FINANCIAL STATEMENTS 24 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2017 1. CORPORATE AND GROUP INFORMATION Global Petroleum Limited (“Global”, the “Company”) is a company domiciled in Australia. Global is a company limited by shares incorporated in Australia whose shares are publicly traded on the Australian Securities Exchange (“ASX”) and the AIM market of the London Stock Exchange (“AIM”). The consolidated financial statements of the Company as at, and for the twelve months ended, 30 June 2017 comprises the Company and its controlled entities (together referred to as the “Group”). The Group is a for-profit entity and is primarily involved in oil and gas exploration and development. The consolidated annual financial statements of the Group as at, and for the year ended, 30 June 2017 are available upon request from the Company’s registered office at Level 5, Toowong Tower, 9 Sherwood Road Brisbane, QLD 4066, Australia or at www.globalpetroleum.com.au. All controlled entities are included in the consolidated financial statements. The financial year-end of the controlled entities is the same as that of the parent entity. Country of incorporation Ownership interest 2017 % 2016 % Parent entity Global Petroleum Limited Australia Subsidiaries Global Petroleum UK Limited Jupiter Petroleum Limited United Kingdom United Kingdom Jupiter Petroleum (Namibia) Limited British Virgin Islands Jupiter Petroleum Juan De Nova Limited(1) British Virgin Islands 100 100 100 - 100 100 100 100 (1) Jupiter Petroleum Juan De Nova Limited was dissolved during the year - effective 30 April 2017. STATEMENT OF COMPLIANCE The consolidated financial statements are general purpose financial statements which have been prepared in accordance with Australian Accounting Standards (“AASBs”) adopted by the Australian Accounting Standards Board (“AASB”) and the Corporations Act 2001. The consolidated statements comply with International Financial Reporting Standards (IFRSs) adopted by the International Accounting Standards Board (IASB). The consolidated financial statements were authorised for issue by the Board of Directors on 19 September 2017. 2. BASIS OF PREPARATION AND SIGNIFICANT ACCOUNTING POLICIES 2.1 BASIS OF PREPARATION 2.1.1 Overview The consolidated financial statements have been prepared on an accrual and historical cost basis. The financial information in this report has been presented in United States dollars (“US$”) which is also the Company’s functional currency. Revenues, expenses and assets are recognised net of the amount of GST/VAT except: (i) where the GST/VAT incurred on a purchase of goods and services is not recoverable from the taxation authority, in which case the GST/VAT is recognised as part of the cost of acquisition of the asset or as part of the expense item as applicable; and (ii) receivables and payables are stated with the amount of GST/VAT included. The net amount of GST/VAT recoverable from, or payable to, the taxation authority is included as part of receivables or payables in the Consolidated Statement of Financial Position. Global Petroleum Ltd ANNUAL FINANCIAL STATEMENTS 25 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2017 2. BASIS OF PREPARATION AND SIGNIFICANT ACCOUNTING POLICIES (continued) Cash flows are included in the Consolidated Statement of Cash Flows on a gross basis and the GST/VAT component of cash flows arising from investing and financing activities, which is recoverable from, or payable to, the taxation authority are classified as operating cash flows. 2.2 BASIS OF CONSOLIDATION The consolidated financial statements incorporate the assets and liabilities of all subsidiaries of the Company as at 30 June 2017 and the results of all subsidiaries for the year then ended. Subsidiaries are entities controlled by the Group. The Group controls an entity when it is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity. The financial statements of the subsidiaries are included in the consolidated financial statements from the date on which control commences until the date on which control ceases. Accounting policies of subsidiaries have been changed where necessary to ensure consistency with the policies adopted by the Group. 2.2.1 Interest in joint operations A joint operation exists when the Group has rights to the assets and obligations for the liabilities relating to the arrangement. The Group recognises the assets, liabilities, expenses and income in respect of its interest in the joint operation. 2.2.2 Business combinations Acquisitions of subsidiaries and businesses are accounted for using the acquisition method. The consideration for each acquisition is measured at the aggregate of the fair values (at the date of exchange) of assets given, liabilities incurred or assumed, and equity instruments issued by the Group in exchange for control of the acquiree. Acquisition-related costs are recognised in profit or loss as incurred. 2.2.3 Loss of control Upon loss of control, the Group derecognises the assets and liabilities of the subsidiary, any non-controlling interests and the other components of equity related to the subsidiary. Any surplus or deficit arising on the loss of control is recognised in profit or loss. If the Group retains any interest in the previous subsidiary, then such interest is measured at fair value at the date that control is lost. Subsequently it is accounted for as an equity-accounted investee or as an available-for-sale financial asset depending on the level of influence retained. 2.2.4 Transactions eliminated on consolidation Intra-group transactions and balances, and any unrealised income or expenses arising from intra-group transactions are eliminated in preparing the consolidated financial statements. Unrealised losses are also eliminated unless the transaction provides evidence of the impairment of the asset transferred. 2.3 SIGNIFICANT ACCOUNTING POLICIES 2.3.1 Impairment Financial assets A financial asset is considered to be impaired if objective evidence indicates that one or more events have had a negative effect on the estimated future cash flows of that asset. An impairment loss in respect of a financial asset measured at amortised cost is calculated as the difference between its carrying amount and the present value of the estimated cash flows discounted at the original effective interest rate. Financial assets are tested for impairment on an individual basis. All impairment losses are recognised in the Consolidated Statement of Profit or Loss and Other Comprehensive Income. An impairment loss is reversed if the reversal can be related objectively to an event occurring after the impairment loss was recognised. For financial assets measured at amortised cost the reversal is recognised in the Consolidated Statement of Profit or Loss and Other Comprehensive Income. Global Petroleum Ltd ANNUAL FINANCIAL STATEMENTS 26 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2017 2. BASIS OF PREPARATION AND SIGNIFICANT ACCOUNTING POLICIES (continued) Non-Financial assets The carrying amounts of the Group’s non-financial assets are reviewed at each reporting date to determine whether there is any indication of impairment. If any such indication exists then the recoverable amount is estimated. For intangible assets that have indefinite lives or that are not yet available for use, recoverable amount is estimated at each reporting date. The recoverable amount of an asset is the greater of its value in use and its fair value less costs to sell. An impairment loss is recognised in the Consolidated Statement of Profit or Loss and Other Comprehensive Income if the carrying amount of an asset exceeds its recoverable amount. 2.3.2 Assets held for sale Non-current assets that are expected to be recovered primarily through sale rather than through continuing use are classified as held for sale. The assets held for sale are measured at the lower of their carrying amount and fair value less costs to sell. Impairment losses on initial classification as held for sale and subsequent gains or losses on re-measurement are recognised in profit or loss. Gains are not recognised in excess of any cumulative impairment loss. Once classified as held for sale or distribution, intangible assets and property, plant and equipment and oil and gas assets are no longer amortised or depreciated. 2.3.3 Foreign Currency Foreign currency transactions Foreign currency transactions are translated into the Company’s functional currency using the exchange rates prevailing at the date of the transaction. Foreign currency monetary items are translated at the year-end exchange rate. Non-monetary items measured at historical cost continue to be carried at the exchange rate at the date of the transaction. Non-monetary items measured at fair value are reported at the exchange rate at the date when fair values were determined. Exchange differences arising on the translation of monetary items are recognised in the Consolidated Statement of Profit or Loss and Other Comprehensive Income, except where deferred in equity as a qualifying cash flow or net investment hedge. Exchange differences arising on the translation of non-monetary items are recognised directly in equity to the extent that the gain or loss is directly recognised in equity; otherwise the exchange difference is recognised in the Consolidated Statement of Profit or Loss and Other Comprehensive Income. Foreign operations The financial results and position of foreign operations whose functional currency is different from the Group's presentation currency are translated as follows: (i) assets and liabilities are translated into US$ at year-end exchange rates prevailing at that reporting date; (ii) income and expenses are translated into US$ at the date of transaction. For practical reasons, a rate that approximates the US$ exchange rate at the date of the transaction is used, for example average US$ exchange rate for the period. Exchange differences arising on translation of foreign operations are transferred directly to the Group's foreign currency translation reserve in the Consolidated Statement of Financial Position. These differences are recognised in the Consolidated Statement of Profit or Loss and Other Comprehensive Income in the period in which the operation is disposed. 2.4 USE OF ESTIMATES AND JUDGEMENTS The preparation of the consolidated financial statements in conformity with IFRSs requires management to make judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses. Actual results may differ from these estimates. Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimates are revised and in any future periods affected. Information about critical judgements in applying accounting policies that have the most significant effect on the amounts recognised in the financial statements is included in the following Notes: • • • Note 3.1 – Exploration assets Note 6.2 – Taxes Note 7.1 – Provisions Global Petroleum Ltd ANNUAL FINANCIAL STATEMENTS 27 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2017 2. BASIS OF PREPARATION AND SIGNIFICANT ACCOUNTING POLICIES (continued) 2.4.1 Fair value estimation The fair value of financial instruments in the Group approximates their carrying amounts at the year-end. The Group’s financial instruments consist mainly of trade and other receivables, trade and other payables, cash and term deposits. 2.4.2 Determination of fair value A number of the Group’s accounting policies and disclosures require the determination of fair value, for both financial and non-financial assets and liabilities. Fair values have been determined for measurement and/or disclosure purposes based on the following methods. Short-term receivables and payables These are recorded at their carrying amount which is a reasonable approximation of fair value. The Group does not hold any financial instruments which are measured using level 2 or 3 in the fair value hierarchy. Share-based payment transactions The fair value of options granted is measured using the Black-Scholes or the Binomial option pricing formula. Measurement inputs include the share price on the grant date, the exercise price of the instrument, expected volatility (based on an evaluation of the Company’s historic volatility), expected term of the instruments (based on historical experience and general option holder behaviour), expected dividends, and risk free interest rate (based on government bonds). Service and non-market performance conditions attached to the transactions are not taken into account in determining fair value. The fair value is measured at grant date and recognised over the period during which option holders become unconditionally entitled to the options. When applicable, further information about the assumptions made in determining fair values is disclosed in the Notes specific to that asset or liability. 2.5 NEW STANDARDS AND INTERPRETATIONS NOT YET ADOPTED The following standards, amendments to standards and interpretations are relevant to current operations. They are available for early adoption but have not been applied by the Group in this financial report: • AASB 9 Financial Instruments (December 2014), AASB 2014-7 Amendments to AAS arising from AASB 9 (December 2014), AASB 2014-8 Amendments to AAS arising from AASB 9 (December 2014) (effective 1 January 2018). The new AASB 9 Financial Instruments includes revised guidance on the classification and measurement of the financial instruments, a new expected credit loss model for calculating impairment on financial assets and new general hedge accounting requirements. It also carried forward the guidance on recognition and derecognition of financial instruments from AASB 139. Certain aspects of the standard may be early adopted but have not been as the changes therein are not expected to materially impact Global, apart from some minor classification and disclosure changes in the financial statements as such. • • AASB 15 Revenue from Contracts with Customers - AASB 15 establishes a comprehensive framework for determining whether, how much and when revenue is recognised. It replaces existing revenue recognition guidance, including AASB 118 Revenue, AASB 111 Construction Contracts and IFRIC 13 Customer Loyalty Programmes. AASB 15 is effective for annual reporting periods beginning on or after 1 January 2018. Currently AASB15 does not have any impact given the Group has no revenue. AASB 16 Leases - AASB 16 removes the classification of leases as either operating leases or finance leases for the lessee - effectively treating all leases as finance leases. AASB 16 is effective for annual reporting periods beginning on or after 1 January 2019 with early adoption permitted for entities that also adopt AASB 15 Revenue from Contracts with Customers. The Group currently plans to apply AASB 16 initially on 1 July 2019 and the extent of the impact has not been determined. Global Petroleum Ltd ANNUAL FINANCIAL STATEMENTS 28 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2017 3. INVESTED CAPITAL 3.1 EXPLORATION ASSETS Balance at beginning of year Expenditure capitalised during the period Balance at end of year 2017 US$ 286,667 822,448 1,109,115 2016 US$ - 286,667 286,667 At 30 June 2017, the balance of the Group’s exploration assets relates solely to its interests in Namibia. During the year, the Group also incurred exploration and evaluation expenditure of US$Nil (2016: US$91,749) which has been expensed as business development as it did not meet the criteria for recognition as exploration assets under the Group’s accounting policy - refer below. In addition, an amount of US$198,243 (2016: US$218,288) was spent on business development, which relates to the Group’s activities in assessing opportunities in the oil and gas sector. Namibia During the year ended 30 June 2016, the Group recommenced capitalising exploration costs relating to its Namibian Exploration Licence 29. This followed the approval of the Deed of Amendment to Exploration Licence 29 on 16 October 2015, which extended the term of the licence from December 2015 until December 2017, and reduced the Group’s minimum expenditure commitments during the renewal period - refer 3.2.2. Juan De Nova On 30 April 2017, the Group’s subsidiary Jupiter Petroleum Juan de Nova Ltd was dissolved and deregistered. All capitalised exploration expenditure relating to this entity’s activities was written off in prior years. it is expected that the expenditure will be recouped through successful exploitation of the area of interest, Exploration and evaluation expenditure - accounting policy Expenditure on exploration and evaluation is accounted for in accordance with the 'area of interest' method and with AASB 6 Exploration for and Evaluation of Mineral Resources, which is the Australian equivalent of IFRS 6 Exploration for and Evaluation of Mineral Resources. Exploration and evaluation costs are capitalised as intangible assets and assessed for impairment where facts and circumstances suggest that the carrying amount of an exploration and evaluation asset may exceed the recoverable amount. Exploration and evaluation costs are capitalised if the rights to tenure of the area of interest are current and either: (i) the expenditure relates to an exploration discovery that, at balance date, activities have not yet reached a stage which permits an assessment of the existence or otherwise of economically recoverable reserves and active and significant operations in, or in relation to, the area of interest are continuing; or (ii) or alternatively, by its sale. Costs incurred before the Group has obtained the legal rights to explore an area are expensed. Each potential or recognised area of interest is reviewed every six months to determine whether economic quantities of reserves have been found or whether further exploration and evaluation work is underway or planned to support the continued carry forward of capitalised costs. Where a determination is made that there is no further value to be extracted from the data licenses then any unamortised balance is written off. Once management has determined the existence of economically recoverable reserves for an area of interest, deferred costs are tested for impairment and then reclassified from exploration assets to oil and gas assets on the Consolidated Statement of Financial Position. The recoverability of the carrying amount of the exploration assets is dependent on successful development and commercial exploitation, or alternatively, sale of the respective areas of interest. Global Petroleum Ltd ANNUAL FINANCIAL STATEMENTS 29 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2017 3. INVESTED CAPITAL (continued) 3.2 COMMITMENTS 3.2.1 Exploration expenditure commitments In order to maintain current rights of tenure to exploration tenements, the Group is required to perform minimum exploration work to meet the minimum expenditure requirements specified by various foreign governments where exploration tenements are held. These obligations are subject to renegotiation when application for a tenement is made and at other times. These obligations are not provided for in the financial statements. Financial commitments for subsequent periods can only be determined at future dates, as the success or otherwise of exploration programmes determines courses of action allowed under options available in tenements. The Group’s only exploration expenditure commitments relate to its interest in joint ventures – refer 3.2.2. 3.2.2 Joint venture commitments Jupiter Petroleum (Namibia) Limited, a 100% owned subsidiary of the Group, holds prospective oil and gas exploration interests offshore Namibia. In order to maintain current rights of tenure to the exploration licences, Global is required to perform minimum exploration work to meet the minimum expenditure requirements specified in the Namibian Petroleum Exploration Licence. The obligations include: Namibian Petroleum Exploration Licence (a) First Renewal Exploration Period (Two years from 4 December 2015 to 3 December 2017): The Ministry of Mines and Energy agreed a 2 year renewal period to run until 3 December 2017. They also agreed a 50% relinquishment of the licence area. Minimum exploration expenditure for the First Renewal Exploration Period: • The reprocessing of existing 2D seismic lines across that portion of the Licence Area which is retained following the mandatory 50% relinquishment. This was completed during the second and third quarter of 2016. • Acquisition of 800km of long offset 2D over the retained acreage. The reprocessed existing 2D data to be used to assist with the design and location of the new survey. The 2D acquisition commenced on 24th June 2017, and completed on 3 July 2017. Processing of the acquired data will follow and is expected to be completed during the 2018 financial year. Following processing and interpretation of the data the Company will determine its plans for the next phase of exploration. (b) Second Renewal Period (Two years from 4 December 2017): Acquisition, processing and interpretation of additional seismic data (if necessary) and the drilling of one exploration well. Minimum exploration expenditure for the Second Renewal Exploration Period: US$20 million, or US$21 million if new seismic is required. Jupiter has an 85% interest in the Petroleum Exploration Licence, however, it is responsible for 100% of the expenditure requirements with its joint venture partners holding a total of 15% free carried interest. 4. WORKING CAPITAL AND FINANCIAL RISK MANAGEMENT 4.1 CASH AND CASH EQUIVALENTS Cash at bank and on hand Term deposits Cash and cash equivalents 2017 US$ 2016 US$ 7,807,605 9,986,973 - 185,625 7,807,605 10,172,598 Global Petroleum Ltd ANNUAL FINANCIAL STATEMENTS 30 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2017 4. WORKING CAPITAL AND FINANCIAL RISK MANAGEMENT (continued) 4.2 RECONCILIATION OF CASH FLOWS FROM OPERATING ACTIVITIES Cash flows from operating activities Profit (loss) for the year (1,856,463) (2,336,513) Adjustments for items classified as investing/financing activities: 198,243 310,037 2017 US$ 2016 US$ Adjustments for non-cash items: Depreciation of fixtures and fittings Unrealised net foreign exchange (gain) loss Equity based remuneration Changes in operating assets and liabilities, net of effects of purchase of controlled entities during the financial year: Decrease (increase) in receivables and prepayments (Decrease) increase in payables (Decrease) increase in provisions 6,399 2,906 (17,929) (55,237) 22,347 53,183 5,311 251,012 45,266 80,462 (52,999) 4,392 Net cash from (used in) operating activities (1,345,814) (1,993,769) Credit standby arrangements with banks At the balance sheet date, the Company had no used or unused financing facilities. Non-cash financing and investing activities There were no significant non-cash financing or investing activities in the current or prior year. 4.3 FINANCIAL INSTRUMENTS 4.3.1 Overview The Group's principal financial instruments comprise trade and other receivables, trade and other payables, cash and term deposits. The main risks arising from the Group's financial instruments are interest rate risk, foreign currency risk, credit risk and liquidity risk. This note presents information about the Group's exposure to each of the above risks, its objectives, policies and processes for measuring and managing risk, and the management of capital. Other than as disclosed, there have been no significant changes since the previous financial year to the exposure or management of these risks. The Board of Directors has overall responsibility for the establishment and oversight of the risk management framework. Given the nature and size of the business, no formal risk management committees have been established, however responsibility for control and risk management is delegated to the appropriate level of management with the Chairman, CEO and Company Secretary (or their equivalent) having ultimate responsibility to the Board for the risk management and control framework. Risk management policies are established to identify and analyse the risks faced by the Group, to set appropriate risk limits and controls, and to monitor risks and adherence to limits. Risk management policies and systems are reviewed regularly to reflect changes in market conditions and the Group’s activities. Arrangements put in place by the Board to monitor risk management include regular reporting to the Board in respect of the operations and financial position of the Group. The Board also reviews risks that relate to operations and financial instruments as required, at least every six months. Given the uncertainty as to the timing and amount of cash inflows and outflows, the Group has not implemented any additional strategies to mitigate the financial risks and no hedging has been put in place. As the Group's operations change, the Directors will review this policy periodically going forward. Global Petroleum Ltd ANNUAL FINANCIAL STATEMENTS 31 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2017 4. WORKING CAPITAL AND FINANCIAL RISK MANAGEMENT (continued) 4.3.2 Credit risk Credit risk is the risk of financial loss to the Group if a customer or counterparty to a financial instrument fails to meet its contractual obligations. This arises principally from cash and cash equivalents and trade and other receivables. There are no significant concentrations of credit risk within the Group with exception of cash on deposit as described below. The carrying amount of the Group's financial assets represents the maximum credit risk exposure, as represented below: Cash and cash equivalents Trade and other receivables 2017 US$ 7,807,605 131,972 7,939,577 2016 US$ 10,172,598 128,710 10,301,308 Trade and other receivables comprise accrued interest, GST, VAT and other tax refunds due. Where possible the Group trades only with recognised, creditworthy third parties. It is the Group's policy that all customers who wish to trade on credit terms are subject to credit verification procedures. In addition, receivable balances are monitored on an ongoing basis with the result that the Group's exposure to bad debts is not significant. At 30 June 2017, none (2016: none) of the Group's receivables are past due. No impairment losses have been recognised in the Consolidated Statement of Profit or Loss and Other Comprehensive Income. With respect to credit risk from cash and cash equivalents the Group’s exposure to credit risk arises from default of the counterparty, with a maximum exposure equal to the carrying amount of these instruments. 4.3.3 Liquidity risk Liquidity risk is the risk that the Group will not be able to meet its financial obligations as they fall due. The Board's approach to managing liquidity is to ensure, as far as possible, that the Group will always have sufficient liquidity to meet its liabilities when due. At 30 June 2017, the Group has sufficient liquid assets to meet its financial obligations. The contractual maturities of financial liabilities are provided below. There are no netting arrangements in respect of financial liabilities. ≤6 months US$ 6-12 months US$ 1-5 years US$ ≥5 years US$ Total US$ 444,555 444,555 193,543 194,543 - - - - - - - - - - - - 444,555 444,555 193,543 194,543 2017 Financial liabilities Trade and other payables 2016 Financial liabilities Trade and other payables 4.3.4 Interest rate risk The Group's exposure to the risk of changes in market interest rates relates primarily to the cash at bank and term deposits with a floating interest rate. These financial assets with variable rates expose the Group to cash flow interest rate risk. All other financial assets and liabilities, in the form of receivables and payables, are non-interest bearing. Global Petroleum Ltd ANNUAL FINANCIAL STATEMENTS 32 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2017 4. WORKING CAPITAL AND FINANCIAL RISK MANAGEMENT (continued) Interest bearing financial instruments Cash at bank and on hand Term deposits 2017 US$ 2016 US$ 7,807,605 9,986,973 - 185,625 7,807,605 10,172,598 The Group's cash at bank and on hand and short term deposits had a weighted average floating interest rate at year end of 0.56% (2016: 0.39%). The Group currently does not engage in any hedging or derivative transactions to manage interest rate risk. 4.3.5 Interest rate sensitivity A sensitivity of 50 basis points (“bp”) increase or decrease to the existing floating rate has been selected as this is considered reasonable given the current level of both short term and long term interest rates. A change of 50 basis points in interest rate at the reporting date would have increased (decreased) profit or loss and equity by the amount shown below. The analysis assumes that all other variables, in particular foreign currency rates, remain constant. 2017 Cash and cash equivalents 2016 Cash and cash equivalents 4.3.6 Foreign currency risk Profit or Loss 50bp Increase 50bp Decrease 44,510 44,510 56,464 43,942 The Company and its subsidiaries in the Group have a functional currency of US$. The Group is exposed to foreign currency risk from transactional currency exposure. Such exposure arises from transactions denominated in currencies other than the functional currency of the entities in the Group. As at 30 June 2017, the Group had foreign denominated deposits of AU$131,466 (US$100,934) and GBP171,635 (US$223,245). The Group had current liabilities of AU$65,008 (US$49,911), GBP66,362 (US$86,318) and Euro 27,100 (USD30,924) and prepayments and other debtors of AU$14,093 (US$10,821) and GBP119,581 (US$155,539) and provisions of GBP110,570 (US$143,819). As at 30 June 2016, the Group had foreign denominated deposits of AU$343,356 (US$254,944) and GBP131,898 (US$177,215). The Group had current liabilities of AU$103,547 (US$76,884) and GBP73,538 (US$98,804) and prepayments and other debtors of AU$14,206 (US$10,548) and GBP131,803 (US$177,087) and provisions of GBP73,350 (US$95,553). The Group currently does not engage in any hedging or derivative transactions to manage foreign currency risk. 4.3.7 Sensitivity analysis for currency risk A sensitivity of 10% has been selected as this is considered reasonable given historic and potential future changes in foreign currency rates. This sensitivity analysis is prepared as at the balance sheet date. Global Petroleum Ltd ANNUAL FINANCIAL STATEMENTS 33 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2017 4. WORKING CAPITAL AND FINANCIAL RISK MANAGEMENT (continued) 30 June 2017 A 10% strengthening of the US$ against the AUD and GBP at 30 June 2017 would have decreased equity for the year for the Group by US$80,462. This analysis assumes that all other variables, in particular interest rates and equity prices, remain constant. No material effect on profit or loss. A 10% weakening of the US$ against the AUD and GBP at 30 June 2017 would have increased equity for the year for the Group by US$79,842 on the basis that all other variables remain constant. No material effect on profit or loss. 30 June 2016 A 10% strengthening of the US$ against the AUD and GBP at 30 June 2016 would have decreased equity for the year for the Group by US$43,700. This analysis assumes that all other variables, in particular interest rates and equity prices, remain constant. No material effect on profit or loss. A 10% weakening of the US$ against the AUD and GBP at 30 June 2016 would have increased equity for the year for the Group by US$44,168 on the basis that all other variables remain constant. No material effect on profit or loss. 4.3.8 Capital management The Board's policy is to maintain a strong capital base so as to maintain investor, creditor and market confidence and to sustain future development of the business. Given the stage of development of the Group, the Board's objective is to minimise debt and to raise funds as required through the issue of new shares. There were no changes in the Group's approach to capital management during the year. The Group is not subject to externally imposed capital requirements. 4.3.9 Trade and other payables Current Trade payables Accrued expenses Balance at 30 June 2017 US$ 2016 US$ 49,339 71,825 395,216 121,718 444,555 193,543 Financial instruments - accounting policy The Group classifies its financial assets in the following category: loans and receivables. Management determines the classification of its financial assets at initial recognition and re-evaluates this designation at each reporting date. The classification depends on the purpose for which the financial assets were acquired. Loans and receivables Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. Loans and receivables are initially recognised at fair value and subsequently at amortised cost less impairment losses. They arise when the Group provides money, goods or services directly to a debtor with no intention of selling the receivable. They are included in current assets, except for those with maturities greater than twelve months after the balance sheet date which are classified as non-current assets. Loans and receivables are included in receivables and other financial assets in the Consolidated Statement of Financial Position. Cash and cash equivalents Cash and cash equivalents include cash on hand, deposits held at call with banks, other short-term highly liquid investments with original maturities of 3 months or less, and bank overdrafts. Bank overdrafts are shown within short-term borrowings in current liabilities on the Consolidated Statement of Financial Position. Trade and other receivables Trade receivables are recognised initially at fair value and subsequently measured at amortised cost less an allowance for doubtful debts. Trade receivables are due for settlement no more than 30 days from the date of recognition. An estimate of doubtful debts is made and taken to a provision account when collection of the full amount is no longer probable. Bad debts are written off as incurred. Global Petroleum Ltd ANNUAL FINANCIAL STATEMENTS 34 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2017 4. WORKING CAPITAL AND FINANCIAL RISK MANAGEMENT (continued) Trade and other payables Liabilities for trade creditors and other amounts are carried at amortised cost. The amounts are unsecured and are usually paid within 30 days. 5. CAPITAL AND RELATED PARTIES DISCLOSURE 5.1 SHARE CAPITAL Issued and paid up capital In issue at 1 July Issued during the year In issue at 30 June 2017 2016 Number of shares 2017 US$ 2016 US$ 201,814,085 199,444,787 39,198,764 39,145,581 838,842 2,369,298 22,348 53,183 202,652,927 201,814,085 39,221,112 39,198,764 Terms and conditions of ordinary shares The rights attaching to fully paid ordinary shares (“ordinary shares”) arise from a combination of the Company's Constitution, statute and general law. The shares have no par value and are fully paid ordinary shares. Copies of the Company's Constitution are available for inspection during business hours at the Company's registered office. They should be read in conjunction with the Corporations Act 2001 and the ASX and AIM Listing Rules. Shares The issue of shares in the capital of the Company and options over unissued shares by the Company is under the control of the Directors, subject to the Corporations Act 2001, ASX Listing Rules and any rights attached to any special class of shares. Issued capital - accounting policy Ordinary shares are classified as equity. Issued and paid up capital is recognised at the fair value of the consideration received by the Company. 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. 5.2 RESERVES Option reserve Foreign currency translation reserve Total reserves 5.2.1 Option reserve 2017 US$ 836,728 570,410 2016 US$ 836,728 586,827 1,407,138 1,423,555 The option reserve comprises the cumulative grant date fair value of options issued to Directors and other personnel and consultants over the vesting period. Global Petroleum Ltd ANNUAL FINANCIAL STATEMENTS 35 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2017 5. CAPITAL AND RELATED PARTIES DISCLOSURE (continued) 5.2.2 Foreign currency translation reserve The foreign currency translation reserve comprises all foreign exchange differences arising from the translation of the financial statements of foreign operations where their functional currency is different to the presentation currency of the Parent Entity. As a result of the change in functional currency of the Company and several of its subsidiaries on 1 July 2014, no further foreign currency translation differences were recognised as all entities in the Group have a US$ functional currency. On 30 April 2017 Jupiter Petroleum Juan De Nova Limited was dissolved and is no longer part of the Group. On consolidation any foreign exchange gains/losses relating to translation of this company’s financial statements, which was previously recorded in foreign currency translation reserves, was transferred to the Consolidated Statement of Profit and Loss and Other Comprehensive Income. Balance at 1 July Transfer from foreign exchange reserve on dissolution of a controlled entity Balance at 30 June 5.2.3 Accumulated losses Balance at 1 July Loss for the year Total accumulated (losses) 5.2.4 Dividends 2017 US$ 2016 US$ 586,827 586,827 (16,417) 570,410 - 586,827 2017 US$ 2016 US$ (30,255,174) (27,918,661) (1,856,463) (2,336,513) (32,111,637) (30,255,174) No dividends have been declared, provided for or paid in respect of the years ended 30 June 2017 and 30 June 2016. With respect to the payment of dividends by Global Petroleum in subsequent reporting periods (if any), no franking credits are currently available. 5.3 SHARE BASED PAYMENTS From time to time, the Group may provide shares or incentive options to Directors, officers, employees, consultants and other key advisors as part of remuneration and incentive arrangements. The number of shares and options granted, and the terms of the options granted are determined by the Board. Shareholder approval is sought where required. Shares granted to Directors During years ended 30 June 2017 and 2016 the Company made several discretionary grants of shares, following shareholder approval at the AGM on 17 November 2015, to Directors - 838,842 (2016: 2,369,298) ordinary shares were issued for no consideration with a fair value of US$22,347 (2016: US$53,183). The fair values of the shares were determined as the ASX market value on the days of issue. Global Petroleum Ltd ANNUAL FINANCIAL STATEMENTS 36 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2017 5. CAPITAL AND RELATED PARTIES DISCLOSURE (continued) Directors Mr J van der Welle Mr P Hill Mr P Blakey Mr D Cronin Mr P Dighton (resigned 25 January 2016) Mr A Draffin Mr P Taylor Shares granted in year ended 30 June 2017 Shares granted in year ended 30 June 2016 93,629 517,545 48,771 130,126 - - 48,771 197,522 1,516,927 130,389 347,889 46,182 - 130,389 Options granted to Directors No options were issued during the financial year ended 30 June 2017 or 2016. 5.3.1 Reconciliation of outstanding share options The number and weighted average exercise prices of the share options under the share option scheme are as follows: Number of options 2017 Weighted average exercise prices 2017 Number of options 2016 Weighted average exercise price 2016 Outstanding at 1 July 7,600,000 AU$ 0.065 8,035,000 Cancelled during the period Granted during the period Options exercised during the period Options expired during the period Outstanding at 30 June Exercisable at 30 June - - - - - - - - 7,600,000 7,600,000 0.065 0.065 - - - (435,000) 7,600,000 7,600,000 AU$ 0.078 - - - 0.3 0.065 0.065 Share based payments – accounting policy The fair value of options granted (determined using the Black-Scholes option or Binomial pricing model) is recognised as an expense with a corresponding increase in equity. The fair value is measured at grant date and recognised over the period during which option holders become unconditionally entitled to the options. Share based payments vest only if non-market performance criteria are met, the value of the share based payment is recognised only when it is likely that such criteria may be met, and the expense recognised is adjusted to reflect the number of awards that ultimately vest. 5.4 RELATED PARTIES 5.4.1 Ultimate parent Global Petroleum Limited is the ultimate parent entity of the Group. 5.4.2 Key management personnel The key management personnel of the Group during or since the end of the financial year were as follows: Global Petroleum Ltd ANNUAL FINANCIAL STATEMENTS 37 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2017 5. CAPITAL AND RELATED PARTIES DISCLOSURE (continued) Directors Mr John van der Welle Mr Peter Hill Mr Peter Blakey Mr Damien Cronin Mr Andrew Draffin Mr Peter Taylor Non-Executive Chairman Managing Director and Chief Executive Officer Non-Executive Director Non-Executive Director and Company Secretary Non-Executive Director Non-Executive Director Key management personnel compensation Short-term employee benefits ** Share based payments * Post-employment benefits Total compensation *This represents the value of the shares issued. 2017 US$ 2016 US$ 495,646 476,475 22,347 16,525 53,183 15,459 534,518 545,117 ** Includes the cash element paid to the UK based Directors to cover the cost of PAYE income tax due on share issues. Other key management personnel transactions A number of Directors, or their 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 or its controlled entities in the reporting period. During the year the Company paid US$Nil (2016: US$58,780) to TM Services Limited, a company controlled by Mr P Taylor and Mr P Blakey, for administrative and technical assistance, Damien Cronin Pty Ltd trading as Law Projects, a company controlled by Mr D Cronin, US$26,671 (2016: US$19,950) for company secretarial services and Northlands Advisory Services Limited, a company controlled by Mr J van der Welle, US$40,838 (2016: US$36,817) for consulting services. Included in the above are the following amounts payable to related parties at 30 June 2017. All payable in full within 30 days of invoice, have standard industry terms and conditions and none of the amounts are secured on any assets. Amount owed to Law Projects US$2,303 and Northlands Advisory Services US$10,568. 6. RESULTS FOR THE YEAR 6.1 OPERATING SEGMENTS 6.1.1 Information about reporting segments The Group operates in the oil and gas exploration, development and production segments as described below: The Group currently holds prospective oil and gas exploration interests offshore Namibia. 6.1.2 Segment results The following is an analysis of the Group’s results by reportable segment. The Group had no revenue during the period (2016: Nil) Global Petroleum Ltd ANNUAL FINANCIAL STATEMENTS 38 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2017 6. RESULTS FOR THE YEAR (continued) Segment results Impairment of exploration asset Interest income Net foreign exchange gain (loss) Corporate and administration costs Equity based remuneration Profit (loss) before income tax Income tax (expense) benefit for continuing operations Profit (loss) for the year 6.1.3 Segment assets and liabilities Segment assets Assets Total segment assets Unallocated assets Consolidated assets Segment liabilities Liabilities Total segment liabilities Unallocated liabilities Consolidated liabilities Africa Consolidated 2017 US$ - - - - - - - - - 2016 US$ (91,749) (91,749) - - - - 2017 US$ - - 48,814 (11,791) 2016 US$ (91,749) (91,749) 43,942 (139,099) (1,871,139) (2,096,424) (22,347) (53,183) (91,749) (1,856,463) (2,336,513) - - - (91,749) (1,856,463) (2,336,513) Africa Consolidated 2017 US$ 2016 US$ 2017 US$ 1,125,077 1,125,077 301,912 301,912 1,125,077 1,125,077 2016 US$ 301,912 301,912 277,397 277,397 15,293 15,293 7,979,910 10,357,329 9,104,987 10,659,241 277,397 277,397 310,976 588,373 15,293 15,293 276,803 292,096 Acquisition of non-current assets, including exploration capitalised assets 822,448 286,667 822,448 286,667 Segment reporting – accounting policy Segment results that are reported to the CEO include items directly attributable to a segment as well as those that can be allocated on a reasonable basis. Unallocated items comprise mainly corporate assets, head office expenses, and income tax assets, liabilities and tax expense. Discontinued operations – accounting policy Classification as a discontinued operation occurs upon disposal or when the operation meets the criteria to be classified as held for sale. When an operation is classified as a discontinued operation, the comparative Consolidated Statement of Profit or Loss and Other Comprehensive Income is re-presented as if the operation had been discontinued from the start of the comparative year. Global Petroleum Ltd ANNUAL FINANCIAL STATEMENTS 39 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2017 6. RESULTS FOR THE YEAR (continued) 6.2 TAXES Reconciliation between profit (loss) before tax and tax expense Profit (loss) of continuing operations before tax expense (1,856,463) (2,336,513) 2017 US$ 2016 US$ Prima facie tax expense (benefit) at 19.75% (2016: 20%) Increase (decrease) in income tax expense due to: Expenditure not allowable for income tax purposes Adjustment for different tax rates and consequences of changing tax domicile Deferred tax assets not recognised Income tax (benefit) expense on pre-tax net profit (loss) 6.2.1 Current tax payable The Group has no current tax payable (2016: Nil) (366,651) (467,302) 10,667 50,483 305,501 - 32,251 43,505 391,546 - On 1 April 2014, Global Petroleum Limited changed its tax domicile from Australia to the United Kingdom. However it must be noted that under Australian tax law, Global Petroleum Limited remains an Australian tax resident. As a result, Global Petroleum Limited is a tax resident of both Australia and the United Kingdom. Under the terms of the Australia-United Kingdom Double Tax Treaty Global Petroleum Limited will be a dual resident company deemed to be a resident in the UK for the purposes of allocating taxing rights. 6.2.2 Deferred income tax Deferred tax assets Tax losses available to offset future taxable income Tax benefit not brought to account 2017 US$ 1,583,604 (1,583,604) - 2016 US$ 1,341,242 (1,341,242) - Deferred tax assets have not been recognised in respect of tax losses because there is no convincing other evidence that future taxable profit will be available against which the Group can utilise the benefits which amount to US$1,583,604 (2016: US$1,341,242). The amount of UK tax losses carried forward is US$8.03m as at 30 June 2017 (2016: US$6.35m). A corresponding deferred tax asset, calculated using the rate of 17%, of US$1.36m (2016: US$1.14m) has not been recognised due to insufficient certainty regarding the availability of future profits against which the losses can be utilised. The reduction in the main rate of corporation tax rate to 17% from 2020 was enacted in September 2016. It is not expected that the tax losses will be utilised before 2020 therefore a potential deferred tax asset has been calculated using this rate. In addition, the Group has a pool of pre-trading expenditure of US$0.36m (2016: US$0.21m) arising in the overseas subsidiaries for which no deferred tax asset has been recognized due to insufficient certainty regarding the availability of future profits against which the costs can be utilised. Global Petroleum Ltd ANNUAL FINANCIAL STATEMENTS 40 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2017 6. RESULTS FOR THE YEAR (continued) Tax - accounting policy The income tax expense or revenue for the period is the tax payable on the current period's taxable income based on the national income tax rate for each jurisdiction adjusted by changes in deferred tax assets and liabilities attributable to temporary differences between the tax bases of assets and liabilities and their carrying amounts in the financial statements, and to unused tax losses. Deferred tax assets and liabilities are recognised using the balance sheet method for temporary differences at the tax rates expected to apply when the assets are recovered or liabilities are settled, based on those tax rates which are enacted or substantively enacted for each jurisdiction. The relevant tax rates are applied to the cumulative amounts of deductible and taxable temporary differences to measure the deferred tax asset or liability. An exception is made for certain temporary differences arising from the initial recognition of an asset or a liability. No deferred tax asset or liability is recognised in relation to these temporary differences if they arose in a transaction, other than a business combination, that at the time of the transaction did not affect either accounting profit or taxable profit or loss. Deferred tax assets are recognised using the balance sheet method 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. Deferred tax liabilities and assets are not recognised for temporary differences between the carrying amount and the tax bases of investments in controlled entities where the parent entity is able to control the timing of the reversal of the temporary differences and it is probable that the differences will not reverse in the foreseeable future. Current and deferred tax balances attributable to amounts recognised directly in equity are also recognised directly in equity. In determining the amount of current and deferred tax the Group takes into account the impact of uncertain tax positions and whether additional taxes and interest may be due. The Group believes that its accruals for tax liabilities are adequate based on its assessment of many factors, including interpretations of tax law and prior experience. This assessment relies on estimates and assumptions and may involve a series of judgments about future events. New information may become available that causes the Group to change its judgement regarding the adequacy of existing tax liabilities; such changes to tax liabilities will impact tax expenses in the period that such a determination is made. Deferred tax assets and liabilities are offset if there is a legally enforceable right to offset current tax liabilities and assets, and they relate to income taxes levied by the same tax authority in the same taxable entity, or on different tax entities, but they intend to settle current tax liabilities and assets in a net basis or their tax assets and liabilities will be realised simultaneously. A deferred tax asset is recognised for unused tax losses, tax credits and deductible temporary differences, to the extent that it is probable that future taxable profits will be available against which they can be utilised. Deferred tax assets are reviewed at each reporting date and are reduced to the extent that it is no longer probable that the related tax benefit will be realised. 6.3 EARNINGS PER SHARE Basic earnings (loss) per share Diluted earnings (loss) per share 2017 US Cents per share 2016 US Cents per share (0.917) (0.917) (1.167) (1.167) The following reflects the income and share data used in the calculations of basic and diluted earnings per share: Global Petroleum Ltd ANNUAL FINANCIAL STATEMENTS 41 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2017 6. RESULTS FOR THE YEAR (continued) Net profit (loss) used in calculating basic and diluted earnings per share (1,856,463) (2,336,513) 2017 US$ 2016 US$ Weighted average number of ordinary shares used in calculating basic earnings per share Effect of dilutive securities Adjusted weighted average number of ordinary shares and potential ordinary shares used in calculating basic and diluted earnings per share Number of shares 2017 Number of shares 2016 202,519,632 200,221,714 - - 202,519,632 200,221,714 Earnings per share - accounting policy Basic earnings per share is calculated by dividing the profit attributable to equity holders of the Company, excluding any costs of servicing equity other than ordinary shares, by the weighted average number of ordinary shares outstanding during the year, adjusted for bonus elements in ordinary shares issued during the year. Diluted earnings per share adjusts the figures used in the determination of basic earnings per share to take into account the after tax effect of interest and other financing costs associated with dilutive potential ordinary shares and the weighted average number of shares assumed to have been issued for no consideration in relation to dilutive potential ordinary shares. 7. OTHER 7.1 PROVISIONS Current Make good provision Employee benefits 2017 US$ 26,764 117,055 143,819 2016 US$ 27,647 70,906 98,553 Global Petroleum Ltd ANNUAL FINANCIAL STATEMENTS 42 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2017 7. OTHER (continued) Provisions - accounting policy A provision is recognised if, as a result of a past event, the Group has a present legal or constructive obligation that can be estimated reliably, and it is probable that an outflow of economic benefits will be required to settle the obligation. Provisions are determined by discounting the expected future cash flows at a pre-tax rate that reflects current market assessments of the time value of money and the risks specific to the liability. The unwinding of the discount is recognised as a finance cost. Employee benefits – accounting policy Liabilities for wages, salaries and remuneration, including non-monetary benefits, annual leave and accumulating sick leave expected to be settled within 12 months of the reporting date are recognised in provisions in respect of employees' services up to the reporting date and are measured at the amounts expected to be paid when the liabilities are settled. Liabilities for non-accumulating sick leave are recognised when the leave is taken and measured at the rates paid or payable. Employee benefits payable later than one year are measured at the present value of the estimated future cash flows to be made for those benefits. 7.2 CONTINGENCIES 7.2.1 Indemnities Indemnities have been provided to Directors and certain executive officers of the Company in respect of liabilities to third parties arising from their positions, except where the liability arises out of conduct involving a lack of good faith. No monetary limit applies to these agreements and there are no known obligations outstanding at 30 June 2017 and 30 June 2016. 7.2.1 Joint operations In accordance with normal industry practice the Group has entered into joint ventures with other parties for the purpose of exploring for and developing petroleum interests. If a party to a joint venture defaults and does not contribute its share of joint venture obligations, then the other joint venture participants may be liable to meet those obligations. In this event the interest in the permit held by the defaulting party may be redistributed to the remaining joint venturers. 7.3 SUBSEQUENT EVENTS As at the date of this report, there are no other matters or circumstances which have arisen since 30 June 2017 that have significantly affected or may significantly affect: (i) (ii) the operations, in financial years subsequent to 30 June 2017, of the Group; the results of those operations, in financial years subsequent to 30 June 2017, of the Group; or (iii) the state of affairs, in financial years subsequent to 30 June 2017, of the Group. Global Petroleum Ltd ANNUAL FINANCIAL STATEMENTS 43 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2017 7. OTHER (Continued) 7.4 AUDITOR’S REMUNERATION Audit services: Auditors of the Group, KPMG Australia – audit and review of financial reports Other services: Auditors of the Group, KPMG Australia - assurance, taxation and due diligence services 2017 US$ 39,925 39,925 6,700 6,700 46,625 2016 US$ 53,088 53,088 10,052 10,052 63,140 7.5 PARENT ENTITY DISCLOSURES As at and throughout the financial year ended 30 June 2017, the parent entity of the Group was Global Petroleum Limited. (a) Financial position of parent entity Assets Current assets Non-current assets Total assets Liabilities Current liabilities Non-current liabilities Total liabilities Net assets Equity Issued capital Option premium reserve Accumulated losses Total equity (Loss) for the year Total comprehensive gain (loss) 2017 US$ 7,973,968 1,094,850 9,068,818 310,976 - 310,976 8,757,842 39,221,112 836,728 (31,299,998) 8,757,842 (1,715,822) (1,715,822) 2016 US$ 10,344,988 380,574 10,725,562 274,246 - 274,246 10,451,316 39,198,764 836,728 (29,584,176) 10,451,316 (2,239,265) (2,239,265) At 30 June 2017, the parent entity has no capital commitments (2016: Nil). Global Petroleum Ltd ANNUAL FINANCIAL STATEMENTS 44 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2017 7. OTHER (Continued) 7.6 INTERESTS IN JOINT OPERATIONS The Group holds the following interests in various joint ventures, whose principal activities are in petroleum exploration and production. For income and expenses attributable to joint operations refer to Note 5. Included in the assets and liabilities of the Group are the following assets and liabilities: Current assets Trade and other receivables Total current assets Non-current assets Exploration asset Total non-current assets Total assets Current liabilities Trade and other payables Total current liabilities Total liabilities Net assets 2017 US$ 15,961 15,961 1,109,115 1,109,115 1,125,076 277,397 277,397 277,397 847,679 2016 US$ 15,245 15,245 286,667 286,667 301,912 15,293 15,293 15,293 286,619 The parent entity does not guarantee to pay the deficiency of its controlled entities in the event of a winding up of any controlled entity. Global Petroleum Ltd ANNUAL FINANCIAL STATEMENTS 45 DIRECTORS’ DECLARATION FOR THE YEAR ENDED 30 JUNE 2017 DIRECTORS’ DECLARATION (1) (a) (i) (ii) (b) (2) (3) In the opinion of the Directors of Global Petroleum Limited: the Consolidated financial statements and Notes that are set out on pages 21 to 46 and the Remuneration Report in Section 12 in the Directors’ Report, are in accordance with the Corporations Act 2001, including: giving a true and fair view of the Group’s financial position as at 30 June 2017 and of its performance for the financial year ended on that date; and complying with Australian Accounting Standards and the Corporations Regulations 2001; and there are reasonable grounds to believe that the Group will be able to pay its debts as and when they become due and payable. The Directors draw attention to Note 2 to the consolidated financial statements, which include a statement of compliance with International Financial Reporting Standards. The Directors have been given a declaration required by Section 295A of the Corporations Act 2001 from the Chief Executive Officer for the financial year ended 30 June 2017. Signed in accordance with a resolution of the Directors of Global Petroleum Limited DAMIEN CRONIN DIRECTOR and COMPANY SECRETARY 19 September 2017 Global Petroleum Ltd ANNUAL FINANCIAL STATEMENTS 46 ADDITIONAL INFORMATION The shareholder information set out below was applicable as at 15 September 2017. 1. TWENTY LARGEST SHAREHOLDERS As at the date of this Report, the names of the twenty largest holders of securities listed on the Company’s Australian Share Register are listed below. Certain other interests may be held in the Depository Interests Register maintained in the United Kingdom by Computershare UK Limited on behalf of the Company. Directors’ total shareholdings as at 30 June 2017 are given in Section 5 and 12 of the Remuneration Report. Ordinary Shares Number Percentage 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 Computershare Clearing Pty Ltd 59,047,543 29.14% Mr Peter Blakey Mr Peter Taylor Mrs Sandra Anne David 39,099,318 37,543,319 6,845,660 COSMOS NOMINEES PTY LTD 3,450,000 Mr Thomas Patrick Cross & Ms Linda Cross PIAT CORP PTY LTD J P MORGAN NOMINEES AUSTRALIA LIMITED 2,776,400 2,400,000 2,101,738 19.29% 18.53% 3.38% 1.70% 1.37% 1.18% 1.04% Mr Terrence Peter Williamson & Ms Jonine Maree Jancey 1,700,000 0.84% I P M PERSONAL PENSION TRUSTEES LIMITED TOLTEC HOLDINGS PTY LTD Mr Brian Crawshaw ARREDO PTY LTD MILLSY PTY LTD TCH HOLDINGS PTY LTD MANLE PTY Piat Corp Pty Ltd CITICORP NOMINEES PTY LIMITED CORPORATE PROPERTY SERVICE PTY LTD Mr Robert Hastings Smythe Total Top 20 Others Total Ordinary Shares on Issue 1,556,000 1,525,000 1,500,000 1,430,000 1,170,000 1,100,000 1,000,000 1,000,000 979,067 900,000 871,800 0.77% 0.75% 0.74% 0.71% 0.58% 0.54% 0.49% 0.49% 0.48% 0.44% 0.43% 167,995,845 34,657,082 82.90% 17.10% 202,652,927 100.00% Global Petroleum Ltd ANNUAL FINANCIAL STATEMENTS 47 ADDITIONAL INFORMATION 2. DISTRIBUTION OF EQUITY SECURITIES Analysis of numbers of shareholders by size of holding: 1 – 1,000 1,001 – 5,000 5,001 – 10,000 10,001 – 100,000 100,001 and over Ordinary Shares Number of Shareholders 828 618 187 344 87 Number of Shares 364,545 1,607,414 1,469,880 10,710,538 188,500,550 2,064 202,652,927 The number of shareholders holding less than a marketable parcel of shares are: 1,658 3,706,837 3. VOTING RIGHTS See Note 5 of the Notes to the Financial Statements. 4. SUBSTANTIAL SHAREHOLDERS The last Substantial Shareholder notices have been received previously from the following (current for the number of voting rights as at the date of the notices). Messrs Blakey and Taylor’s’ total shareholdings as at 30 June 2017 are given in Sections 5 and 12 of the Remuneration Report: Substantial Shareholder Peter Blakey Peter Taylor 5. UNQUOTED SECURITIES Number of Votes 80,590,770 80,590,770 The names of the security holders holding more than 20% of an unlisted class of security are listed below: Options Peter Hill - A$0.065 incentive options vesting 27 November 2014 Peter Hill - A$0.065 incentive options vesting 23 June 2015 Total Peter Hill incentive options John van der Welle - A$0.065 incentive options vesting 27 November 2014 John van der Welle – A$0.065 incentive options vesting 23 June 2015 Total John van der Welle incentive options Total unquoted securities in issue Incentive Options 3,000,000 3,000,000 6,000,000 500,000 500,000 1,000,000 8,035,000 Global Petroleum Ltd ANNUAL FINANCIAL STATEMENTS 48 ADDITIONAL INFORMATION 6. ON-MARKET BUY BACK There is currently no on-market buyback programme for any of Global Petroleum Limited's listed securities. 7. EXPLORATION/PROJECT INTERESTS As at 19 September 2017 the Company has an interest in the following projects: Project Namibia Petroleum Exploration Licence No.0029 Interest 85% WI Global Petroleum Ltd ANNUAL FINANCIAL STATEMENTS 49 CORPORATE DIRECTORY Directors Managing Director and Chief Executive Officer Mr Peter Hill Mr John van der Welle Non-Executive Chairman Non-Executive Director Mr Peter Blakey Mr Damien Cronin Non-Executive Director Mr Andrew Draffin Non-Executive Director Non-Executive Director Mr Peter Taylor Company Secretary Mr Damien Cronin Registered and Principal Office UK Office Website Email Solicitors Auditor Bankers Stock Exchange Listing ASX/AIM Code Share Register Level 5, Toowong Tower 9 Sherwood Road Brisbane QLD 4066, Australia Telephone +61 7 3310 8732 Facsimile +61 7 3310 8823 111 Buckingham Palace Rd London SW1W OSR, United Kingdom Telephone Facsimile +44 20 7495 6802 +44 20 7340 8501 www.globalpetroleum.com.au info@glo-pet.com McCullough Robertson KPMG, Brisbane Barclays Bank Limited Australian Securities Exchange Home Exchange – Sydney Office Australia Square Level 6, 123 George Street Sydney NSW 2000, Australia AIM of the London Stock Exchange 10 Paternoster Square London EC4M 7LS, United Kingdom GBP – Fully paid ordinary shares Computershare Investor Services Pty Ltd 117 Victoria Street West End QLD 4101, Australia Telephone Facsimile +61 7 3237 2100 +61 7 3237 2152 Computershare Investor Services PLC The Pavilions, Bridgewater Road Bristol BS99 7NH, United Kingdom Telephone Facsimile +44 870 889 3105 +44 870 703 6106 Global Petroleum Ltd ANNUAL FINANCIAL STATEMENTS 50

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