Grand Gulf Energy Limited
ABN 22 073 653 175
Annual Financial Report
for the financial year ended
30 June 2015
CONTENTS
Corporate Directory
Letter from Chairman
Directors’ Report
Auditor’s Independence Declaration
Consolidated Financial Statements
Notes to the Consolidated Financial Statements
Directors’ Declaration
Independent Audit Report
Corporate Governance Statement
Australian Stock Exchange Information
1
2
3-14
15
16-19
20-43
44
45-46
47-53
54-55
CORPORATE DIRECTORY
DIRECTORS
Mr Charles Morgan – Chairman
Mr Mark Freeman - Managing Director
Mr Stephen Keenihan – Non-Executive Director
Mr Allan Boss – Executive Director
COMPANY SECRETARY
Mr Mark Freeman
REGISTERED AND PRINCIPAL OFFICE
Grand Gulf Energy Limited
Level 7, 1008 Hay Street, Perth WA 6005
Telephone: +61 (0) 8 9389 2000
Facsimile: +61 (0) 8 9389 2099
Email: info@grandgulf.net
Website: www.grandgulfenergy.com
AUDITORS
BDO Audit (WA) Pty Ltd
38 Station Street
Subiaco WA 6008
Telephone: +61 8 6382 4600
Facsimile: +61 8 6382 4723
LEGAL ADVISORS
Steinepreis Paganin
GPO Box 2799
PERTH WA 6001
Telephone: +61 8 9321 4000
Facsimile: +61 8 9321 4333
SHARE REGISTRY
Advanced Share Registry Services
150 Stirling Hwy
Nedlands WA 6009
Australia
Telephone: +61 8 9389 8033
Facsimile: +61 8 9389 7871
BANKERS
National Australia Bank
1232 Hay Street
Perth WA 6005
ASX CODE
GGE
ABN
22 073 653 175
1
LETTER FROM CHAIRMAN
Dear Shareholder,
In 2014/2015 Grand Gulf Energy continued to focus on its Louisiana Gulf Coast production.
The Company acquired an additional 3.99% WI in Desiree Field and 15% WI in the Dugas & Leblanc
Field in November 2014. This increased the Company’s interest in Desiree to 39.6% and Dugas
&Leblanc #3 to 55.3%. The purchase price was US$575,000 and settled in June 2015 for US$375,000.
The Company’s reserves increased by 57,000 barrels of oil for an average cost of $8 per recoverable
barrel of oil.
The Company’s main producer, Hensarling #1, in the Desiree Field on the Napoleonville Salt Dome
continued to perform with production of over 400 bbls average per day total production for the year
was 149,056 barrels.
Dugas & Leblanc #3 continued to perform and had total production for the year of 30,162 bbls oil and
15,752 mcf gas. Whilst the well is in decline it continues to be an excellent source of revenue.
Remediation at the Dugas & Leblanc #1 site is now at minimal levels with the JV required to continue
testing salinity levels and remediation around the blowout location. The JV settled all remaining claims
with litigants during the year and is now awaiting the court’s ratification of the settlement at which
point the remaining insurance claim of A$970,000 will be paid. This will finalise insurance in respect of
the Company’s initial 40% WI and whilst there will continue to be remedial work required it is minimal
and is limited to ongoing soil sampling and water well testing. The Company continues to be insured in
respect of the additional 15% WI in D&L acquired from Birdwood.
Significant G&G work was completed during the year with the focus on developing the sizeable 1.4 – 2
TCF Yellowfin Project within the Company’s Napoleonville seismic. The Company is working diligently
to farm out the project.
With the steep decline in oil prices Grand Gulf is continuing to assess production for sale in the US. The
Company is also assessing other options corporately.
Financially the Company continues to make an operating profit before write-downs, notwithstanding
the significant reduction in the oil price, production revenue was over $6.7 million. Earnings before
interest, tax and amortisation or impairments was $2.13 million.
I would like to thank the CEO, Mark Freeman, co-directors, Alan Boss and Stephen Keenihan and our
exploration team of KC Whittemore and Mark Hartman for their work.
Yours faithfully,
Charles W. Morgan
Chairman
Chairman
2
DIRECTOR’S REPORT FOR THE YEAR ENDED 30 JUNE 2015
The Directors of Grand Gulf Energy Limited submit herewith the annual financial report of the Group
consisting of Grand Gulf Energy Limited and the entities it controlled at the end of, or during the year
ended 30 June 2015 (referred to hereafter as the group).
DIRECTORS
The names and details of the directors of the Company in office during the financial year and until the date
of this report, unless otherwise stated, are:
Mr Charles Morgan
Executive Chairman
Appointed 19 January 2006
Mr Morgan has been involved in the oil and gas industry since 1995. He has been involved in oil and gas
assets in South East Asia, USA, Africa and Europe.
Mr Morgan is also a director of ADG Global Supply Ltd.
Directorships in Listed entities in last 3 years - Alcyone Resources Ltd (resigned 8 March 2013) and
Tamaska Oil & Gas Ltd (resigned 17 February 2014).
Mr Mark Freeman
B.com, CA, F.Fin
Managing Director – Appointed 27 October 2010
and Company Secretary - Appointed 22 April 2010
Mr Freeman is a Chartered Accountant and has more than 19 years' experience in corporate finance and
the resources industry. He has experience in project acquisitions and management, strategic planning,
business development, M&A, asset commercialisation, and project development. Prior experience with
Mirabela Nickel Ltd, Exco Resources NL, Panoramic Resources Ltd and Matra Petroleum Plc.
Former and current directorships in last 3 years – Former: Quest Petroleum NL (resigned 24 November
2011), Macro Energy Ltd (resigned 5 June 2014), Mustang Resources Ltd (resigned 10 June 2015),
Tamaska Oil and Gas Ltd (resigned 1 February 2015).
Mr Allan Boss
B. Com
Doctor of Jurisprudence
Executive Director
Appointed 13 November 2006
Mr Boss is a Houston-based banker and lawyer with 30 years’ experience providing legal services and
representations to the oil and gas industry and was lead counsel to NiSource Inc, a Fortune 500 energy
utility.
Former directorships in last 3 years – none.
Mr Stephen Keenihan
B.Sce (Hons Geology)
Non-Executive Director
Appointed 13 November 2006
Mr Keenihan is a geologist with more than 40 years’ of experience in the upstream oil and gas industry
and extensive international experience. Previous positions include exploration manager for Apache
Australia and LASMO, regional managers Australia for Novus Petroleum and WMC Resources Petroleum
Division. He has managed exploration, development, operations, commercial and marketing activities in
the energy industry.
Directorships in last 4 years – Transerv Energy Ltd
3
DIRECTOR’S REPORT FOR THE YEAR ENDED 30 JUNE 2015
CORPORATE INFORMATION
Corporate Structure
Grand Gulf Energy Limited is a company limited by shares that is incorporated and domiciled in Australia.
Grand Gulf Energy Limited has prepared a consolidated financial report incorporating the entities that it
controlled during the financial year.
Nature of Operations and Principal Activities
The principal activity of the Group during the financial year was the exploration and evaluation of oil and
gas leases.
There has been no significant change in the nature of these activities during the year.
REVIEW AND RESULTS OF OPERATIONS
For the financial year ended 30 June 2015, the loss attributable to members of the Group is $546,306
(2014: profit $1,400,466).
The Company is focusing its activities on the following primary objectives:
1. Farming out the Yellowfin Project – whilst the US market has seen steep declines in
exploration budgets as a result of the oil price downturn, the Company continues to see strong
US interest for the Yellowfin project due to its significant reserve size and potential production
flow rates.
2. Acquisition of producing assets – the Company’s ability to review and quickly secure assets
(as in Birdwood) enables it to capitalise on a weak US oil and gas prices.
3. Reviewing ongoing opportunities at Napoleonville – the Company has secured the services
of Mark Hartman as its Senior Geophysicist. Mark assisted in the generation of the La Posada
discovery and has over 30 years’ experience in the industry. Mark has so far been
concentrated on the seismic depth conversion of Yellowfin, but is now focused on looking at
and de-risking prospects at Napoleonville.
Below is a detailed summary of the Company’s exploration and development activities.
Review of operations of Grand Gulf Energy Limited consolidated group
Reserves
4
DIRECTOR’S REPORT FOR THE YEAR ENDED 30 JUNE 2015
The information contained in these statements has been compiled by Kevin Kenning, Senior Petroleum
Engineer, who is a consultant of the Company, is qualified in accordance with ASX listing rule 5.11 and
has consented to the publication of this report. The reserve estimates in this report are solely based on
Kevin Kennings professional opinion and are consistent with accepted industry standards for proved
reserves. The proved reserve definition is based upon the criteria contained within the "SPE PRMS"
(Society of Petroleum Engineers Petroleum Resources Management System).
Napoleonville Salt Dome
Yellowfin Prospect (96% WI) – Potential for 1.4-2TCF
• Proven Productive Trend, Tuscaloosa Sands & Column Height
• Syncline separated from Freeport McMoran’s 2014 “Highlander” “3.0 TCF” Discovery,
tested at 75 MMCFD
8,000 acre 3-Way Compressional Fold Trap analog feature
2,000’ Objective Interval
•
• Deeper Pool Test - Migration Pathway to 20 MMBO & 180 BCF Field
•
• Analogous to Offshore Ultra Deep Sub-Salt Discoveries
• Proprietary 3D
• Wilcox & Marg vag Upside
•
• MOST LIKELY RESERVES in the case of a discovery: 1.7 TCF (5,200 ac., 2,000’ relief)
Land Location, Infrastructure & Pipelines
Located in Assumption Parish, Louisiana, the Yellowfin Prospect targets Cretaceous Tuscaloosa sands
over a 2,000ft interval on a structural closure covering an area of 8,000 acres. The Prospect is currently
being marketed to industry and will likely be of interest to a large US GOM Oil and Gas Company. This
initial test well will be drilled to a total depth of 29,500ft.
Over the last 12 months the Company has secured leases over the Yellowfin Project. The Project has
been developed in house using the Company’s proprietary 52 square miles seismic survey headed by
chief geologist and project manager KC Whittemore (who developed the deep La Posada Prospects, now
fields, in Vermilion Parish, Louisiana).
Yellowfin follows Freeport McMoran’s “Highlander” Jeanerette #1 Discovery which establishes sand, pay
and significant column height and multi-TCF potential in the new trend. Freeport McMoran’s reported
potential of the discovery is 3TCF with 50,000+ acres under lease and two additional wells permitted in
the area. Yellowfin is a large, similar sized feature situated on the adjacent structure to the Discovery. The
Freeport McMoran well was recently tested at 75 mmcfd (42/62” choke) and has been on production at
over 25,000 mcf per day since February. The facilities are awaiting additional amine units to remove Co2.
Based on the production test in February 2015, Freeport McMoran can anticipate production of in-excess
of 100,000 mcfg per day.
At current gas prices, the NPV10 of the project based on a 10 well program and recovering 1.6 TCF will
generate in excess of US$2 billion dollars before income tax.
Highlander and Yellowfin are characterised by and analogous to the sub-salt, compressional structural
style and sand depositional setting comparative to the ultra-deep offshore deep water sub-salt play and
discoveries being developed by major oil companies.
Following recent completion of the seismic depth conversion work, the Company recommenced marketing
efforts in July 2015 and, based on feedback and interest in what can only be described as a very
challenging exploration market, we continue to be impressed with the interest received.
5
DIRECTOR’S REPORT FOR THE YEAR ENDED 30 JUNE 2015
PRODUCTION
Desiree Field
Desiree, Assumption Parish, Louisiana, Non Operator 39.65%WI*
The Hensarling #1 well (Desiree Field) has produced over 287,000 barrels of oil with production rates of
over 400 barrels per day being maintained. Remaining P1 reserves are estimated at 737,000 barrels and
P1/P2 are 916,000. Production during the year was 149,056 barrels.
In June 2015 a partner in Desiree sold its 17% WI in Desiree for US$2.5m valuing GGE’s interest at
~US$6,000,000 (A$7.8m).
Production from the CRIII will continue through a 25/64 inch choke until depletion takes place, or water
production becomes excessive, and will then switch to the thinner Cris R II (31ft pay) formation. The JV
has secured the Templet #1 as a disposal well for Hensarling #1 when it commences to produce water.
Desiree Litigation
The Company advised in July 2014 that a previous JV partner in the Desiree Project was suing the
Company for a 5.3% WI (4.63% WI net to GGE) in the Desiree Project and leases. The partner formally
withdrew from the project in December 2011 and, subsequent to the well having commenced drilling,
demanded their interest be reinstated. GGE’s right to its working interest is being vehemently defended.
The matter was removed from court and will be dealt with in private arbitration with a hearing set for 23
November 2015.
Dugas & Leblanc Field
Napoleonville- Dugas & Leblanc #3 Well, Assumption Parish, Louisiana, Non Operator 55.5% WI*
The D&L#3 “M” sand was successfully perforated and placed on production on 18 October 2011.
Production is presently 75 bod, 38 mcfd and 380 barrels of water per day from a 21/64 inch choke.
Production during the year was 30,863 barrels and 16,288 mcf gas.
Remaining reserves as at 30 June 2015 are estimated at 139,000 boe.
Abita, Plaquemines Parish, Louisiana, Non Operator 20%WI
The field is being operated by Clayton Williams Energy Inc in Plaquemines Parish, Louisiana. The well
commenced producing on 18 March 2012.
The well was re-completed in the 17 sand in May 2015 and has since produced over 1 mmcfd and 5 bopd
through a 7/64 inch choke. Production during the year was 1,753 barrels and 224,449 mcf gas.
West Klondike Development
Wilbert Sons LLC #1 well, West Klondike, Iberville Parish, Louisiana, Non Operator 11.7% WI
The well commenced producing from the lower Nod Blan on 4 September 2014 and is presently awaiting
a rig to re-complete in the upper member of the L Nod Blan. Production during the period was 3,073
barrels and 297,142 mcf gas.
Following depletion in the L Nod Blan the well will be completed and produced from the upper Nod Blan.
The third, and most substantial interval to be produced following the depletion of the Nod Blan sands, is
the Lorio interval which has the potential for up to 500,000 barrels of oil.
6
DIRECTOR’S REPORT FOR THE YEAR ENDED 30 JUNE 2015
Equity Issues
•
No Shares were issued during the Financial Year
As at 30 June 2015 the consolidated cash position was $969,526 (2014: $1,840,990).
Exploration and development expenditure during the year was $3.11m (2014: $1.48m).
EVENTS SINCE THE END OF FINANCIAL YEAR
Other than as stated below, no events occurred subsequent to year end that would impact on the financial
statements:
SIGNIFICANT CHANGES IN THE STATE OF AFFAIRS
In the opinion of the Directors, other than as stated below and those referred to in the review of operations,
there were no other matters that significantly affected the state of affairs of the Group during the financial
year:
•
•
Effective 1 November 2014 the Company acquired Birdwood Louisiana for US$575,000.
Birdwood owns 3.99WI in the Desiree Field, 15% WI in the Dugas and Leblanc Field and seismic
and facilities in the Fausse Point Field, LA. The Company settled the purchase on 23 June 2015
for US375,000.
The Templet #1 well commenced drilling on 10 August 2014 and was determined to be a dry well
on 8 September 2014.
DIVIDENDS
The Directors recommend that no amount be paid by way of dividend. No dividend has been paid or
declared since the start of the financial year.
ENVIRONMENTAL REGULATION
The group holds various exploration licences to regulate its exploration activities in the USA. These include
conditions and regulations with respect to the rehabilitation of areas disturbed during the course of its
exploration activities. So far as Directors are aware, all exploration activities have been undertaken in
compliance with all relevant environmental regulations in all jurisdictions in which the group operates.
NGER ACT
The Directors consider the National Greenhouse and Energy Reporting Act 2007 (the NGER Act) which
introduces a single national reporting framework for the reporting and dissemination of information about
the greenhouse gas emissions, greenhouse gas projects, and energy use and production of corporations.
At the current stage of development, the Directors have determined that the NGER Act will have no effect
on the Company for the current nor subsequent financial year. The Directors will reassess this position as
and when the need arises.
SHARE OPTIONS
As at the date of this report, there were a total of nil listed options (2014: nil listed options) and 27,000,000
unlisted options (2014: Nil). Refer to note 12 of the financial statements for further details of the options
outstanding.
Option holders do not have any right, by virtue of an option, to participate in any share issue of the
Company or any related body corporate or in the interest issue of any other registered scheme. During
the financial year, the Company did not issue any employee options. Details regarding the issue of share
options under this plan are provided in the directors’ report. There were no shares issued on the exercise
of options during the year.
7
DIRECTOR’S REPORT FOR THE YEAR ENDED 30 JUNE 2015
INTERESTS IN THE SHARES AND OPTIONS OF THE COMPANY AND RELATED BODIES
CORPORATE
Securities
As at the date of this report the interests of the Directors in the shares and options of Grand Gulf Energy
Limited were as follows:
Ordinary Shares
Holder
Balance at
Beginning of Year
Other
Purchases/Sales
Other changes
during the year
Balance at the date of
report
Mr C Morgan
158,100,476
Mr S Keenihan
3,917,229
Mr M Freeman
-
2,481,720
164,499,425
-
-
-
-
-
-
-
-
-
-
158,100,476
3,917,229
-
2,481,720
164,499,425
Mr A Boss
Total
Options
Holder
Mr C Morgan
Mr M Freeman
Mr S Keenihan
Mr A Boss
Total
Balance at
beginning of
year
Granted as
compensation
Expired
Balance as at
date of report
Vested and
exercisable
-
-
-
-
-
-
8,000,000
3,000,000
5,000,000
16,000,000
-
-
-
-
-
-
8,000,000
3,000,000
5,000,000
16,000,000
-
1,600,000
600,000
1,000,000
3,200,000
REMUNERATION REPORT (Audited)
This report outlines the remuneration arrangements in place for Directors and executives of Grand Gulf
Energy Limited. The report has been set out under the following main headings:
A.
B.
C.
D.
E.
F.
Principles Used to Determine the Nature and Amount of Remuneration
Service Agreements
Details of Remuneration
Share Based Compensation
KMP Interest in Securities
Other transactions with key management personnel
The information provided in this remuneration report has been audited as required by section 308(3C) of
the Corporations Act 2001.
A.
Principles Used to Determine the Nature and Amount of Remuneration
The Remuneration Committee of the Board of Directors is responsible for determining and reviewing
compensation arrangements for the Directors and Executive Officers. The Board has determined due to
the size and nature of the Company the functions of the remuneration committee will be performed by the
Board. The Board will assess the appropriateness of the nature and amount of emoluments of such
officers on a periodic basis by reference to relevant employment market conditions with the overall
objective of ensuring maximum stakeholder benefit from the retention of a high quality Board and
executive team. Such officers are paid their base remuneration in cash only.
To assist in achieving these objectives, the Board will link the nature and amount of executive Directors’
and officers’ emoluments to the Company’s financial and operational performance.
8
DIRECTOR’S REPORT FOR THE YEAR ENDED 30 JUNE 2015
Executive Officers are those directly accountable for the operational management and strategic direction
of the Company and the Group. The following table shows key performance indicators for the group over
the last five years:
Profit / (loss) for the year
Basic earnings/(loss) per share
(cents per share)
Dividend payments
Dividend payment ratio (%)
Increase/(decrease) in share
price (%)
Total KMP incentives as
percentage of profit/(loss) for the
year (%)
2015
2014
2013
2012
2011
(546,306)
1,400,466
(2,167,264)
2,917,786
(5,610,950)
(0.07)
0.11
(0.29)
0.40
(0.90)
-
-
-
-
-
-
-
-
-
-
(25%)
100%
(73%)
(25%)
(60%)
-
1%
2%
2%
2%
The Corporate Governance Statement provides further information on the role of the Board.
Non-executive Directors
Fees and payments to non-executive directors reflect the demands which are made on, and the
responsibilities of, the Directors. Non-executive Directors’ fees and payments are reviewed annually by
the Board. The Chairman’s fees are determined independently to the fees of non-executive Directors
based on comparative roles in the external market. The Chairman is not present at any discussions
relating to determination of his own remuneration.
Fixed remuneration
Fixed remuneration consists of a base remuneration package, which includes directors’ fees (in the case
of Directors), salaries, consulting fees and employer contributions to superannuation funds.
Fixed remuneration levels for Directors and executive officers are reviewed annually by the Board through
a process that considers the employee’s personal development, achievement of key performance
objectives for the year, industry benchmarks wherever possible and CPI data. Key performance
indicators (KPIs) are individually tailored by the Board for each director and executive officer each year,
and reflect an assessment of how that employee can fulfil their particular responsibilities in a way that best
contributes to Company performance and shareholder wealth in that year.
Performance-linked remuneration
All employees may receive bonuses and/or share options as part of a package to retain their services
and/or based on achievement of specific goals related to performance against individual KPIs and to the
performance of the Company as a whole as determined by the Directors, based on a range of factors.
These factors include traditional financial considerations such as operating performance, cash
consumption and deals concluded and also industry-specific factors relating to the advancement of the
Company’s exploration and development activities and relationships with third parties and internal
employees.
During the year ended 30 June 2015 the following options were issued and not expired during the reporting
period:
Name
A Boss
S Keenihan
M Freeman
Number of options granted
5,000,000
3,000,000
8,000,000
These options where not linked to any performance linked remuneration, but rather an overall
remuneration packed aligning the KMP with the Company’s growth strategy.
The plan rules contain a restriction on removing the ‘at risk’ aspect of the instruments granted to
executives. Plan participants may not enter into any transaction designed to remove the ‘at risk’ aspect of
an instrument before it vests.
9
DIRECTOR’S REPORT FOR THE YEAR ENDED 30 JUNE 2015
The Board determines the total amount of performance-linked remuneration payable as a percentage of
the total annualised salaries for all employees employed as at the end of the financial year (with pro rata
reductions to the annualised salary made for any employee not employed for the entire financial year).
Once the Board has determined the total performance-linked remuneration payable across the Company,
Committee members assess the performance of each individual staff member within their department,
relative to that staff member’s KPIs and decide how much performance-linked remuneration should be
paid to that person.
The Company did not engage with remuneration consultants during the year.
Voting and comments made at the Company’s 2014 Annual General Meeting
GGE received more 100% of “yes” votes (excluding director’s votes) on its remuneration report for the
2014 financial year. The Company did not receive any specific feedback at the AGM or throughout the
year on its remuneration practices.
B.
Service Agreements
Remuneration and other terms of employment for the Executive Director is formalised in a service
agreement. The agreement provides for the provision of performance-related cash bonuses, other
benefits including health insurance, car allowances, and participation when eligible, in the Grand Gulf
Energy Limited Employee Option Plan. Other major provisions of the agreements relating to remuneration
are set out below.
Other major provisions of the agreements relating to remuneration are set out below. The contract may
be terminated early by the Company with reason or by the executive, with three months’ notice, or by the
Company without reason, giving 3 months’ notice, subject to termination payments as detailed below:
Name
Term of agreement
Base salary
including
superannuation
Termination benefit
Mr C Morgan
Commencing 1 July 2013
$72,000
3 months base salary
Mr M Freeman
Commencing 1 November 2011
$260,000
3 months base salary
Mr S Keenihan
Commencing 1 July 2013
$52,600
3 months base salary
Mr A Boss
Commencing 1 November 2011
US$120,000
3 months base salary
C.
Details of Remuneration
Details of the remuneration of the Directors and the key management personnel of Grand Gulf Energy
Limited consolidated group are set out in the following tables. The key management personnel of Grand
Gulf Energy Limited consolidated group during the year ended 30 June 2015 includes the following
Directors and executives:
•
•
•
•
Mr C Morgan (Executive Chairman)
Mr M Freeman (Managing Director)
Mr A Boss (Executive Director)
Mr S Keenihan (Non-Executive Director)
Remuneration packages contain the following key elements:
a)
b)
c)
d)
Primary benefits – salary / fees and bonuses;
Post-employment benefits – including superannuation;
Equity – share options granted under the Employee Share Option Plan as disclosed in Note 24 to
the financial statements; and
Other benefits.
The following tables disclose the detailed remuneration of the Directors of Grand Gulf Energy Limited and
controlled entities within the Group:
10
DIRECTOR’S REPORT FOR THE YEAR ENDED 30 JUNE 2015
2015
Short term
benefits
Post-
employment
Equity
Equity
Total
Remune-
ration
relating to
Options
Perfor-
mance
based
remune
-ration
Salary and
fees
$
72,000
52,600
144,300
Directors
Mr C Morgan
Mr S Keenihan
Mr A Boss
Mr M Freeman
260,000
Total Directors
528,900
2014
Bonus
$
-
-
-
-
-
Super-
annuation
$
-
-
-
-
-
Options
Shares
$
-
3,884
6,473
10,357
20,714
$
-
-
-
-
-
$
72,000
56,484
150,773
270,357
549,614
%
-
6.88
4.29
3.83
3.77
%
-
-
-
-
-
Short term
benefits
Post-
employment
Equity
Equity
Total
Remune-
ration
relating
to
Options
Perfor-
mance
based
remune-
ration
Salary and
fees
Bonus
$
72,000
48,000
$
-
-
Directors
Mr C Morgan
Mr S Keenihan
Mr A Boss
130,087
32,403*
Mr M Freeman
260,000
-
Total Directors
510,087
32,403
Super-
annuation
$
-
-
-
-
-
Options
Shares
$
-
2,573
5,146
12,261
19,980
$
-
-
-
-
-
$
72,000
50,573
167,636
272,261
562,470
$
-
5.09
3.07
4.5
%
-
-
19.33
-
* Allan Boss received a discretionary bonus of A$32,403 for services performed for the year.
D.
Share Based Compensation
The terms and conditions of each grant of options affecting remuneration in the current or a future reporting
period as follows:
Name
Grant
Date
Number
Vesting
Conditions
Exercise Price
Expiry Date
A Boss
20 Nov 14
5,000,000
S Keenihan
20 Nov 14
3,000,000
M Freeman
20 Nov 14
8,000,000
(i)
(i)
(i)
$0.014
$0.014
$0.014
30 Nov 18
30 Nov 18
30 Nov 18
Value per
option at
grant date
$0.0025
$0.0025
$0.0025
(i) 20% of the options will vest immediately; 30% of the options will vest on the first anniversary and; 50% will
vest on the second anniversary.
Principles used to determine the nature and amount of remuneration: relationship between remuneration and
company performance.
In considering the Company’s performance and its effect on shareholder wealth, the Board have regard
to a broad range of factors, some of which are financial and others of which relate to the progress on the
Company’s projects, results and progress of exploration and development activities, joint venture
agreements etc. The Board also gives consideration to the Company’s result and cash consumption for
the year. It does not utilise earnings per share as a performance measure or contemplate payment of any
dividends in the short to medium term given that all efforts are currently being expended to build the
business and establish self-sustaining revenue streams.
11
DIRECTOR’S REPORT FOR THE YEAR ENDED 30 JUNE 2015
E. KMP Interest in Securities
The number of options over ordinary shares in the Company held during the financial year by each Director
of Grand Gulf Energy Limited and other key management personnel of the group, including their
personally related parties, are set out below.
Options
The number of options iver ordinary shares held by Key Management Personnel during the financial year
is as follows:
Balance
at start of
the year
Granted
during the
year
Lapsed/
Expired/
Forfeited
Balance
at the end
of the year
No.
No.
No.
No.
Vested and
Exercisable
at end of
year
No.
-
-
-
-
-
8,000,000
5,000,000
-
3,000,000
16,000,000
-
-
-
-
-
8,000,000
5,000,000
-
3,000,000
16,000,000
1,600,000
1,000,000
-
600,000
3,200,000
Unvested at
end of year
No.
6,400,000
4,000,000
-
2,400,000
12,800,000
30 June 2015
Directors & KMP
Mr M Freeman
Mr A Boss
Mr C Morgan
Mr S Keenihan
Total
Shareholdings
The number of ordinary shares in Grand Gulf Energy Limited held by Key Management Personnel during
the financial year is as follows:
30 June 2015
Balance at start
of the year
Directors & KMP
Mr C Morgan
Mr M Freeman
Mr A Boss
Mr S Keenihan*
Total
No.
158,100,476
-
2,481,720
3,917,229
164,499,425
Received
during the year
on exercise of
options
No.
Other changes
during the year
Balance at end of the
year
No.
No.
-
-
-
-
-
-
-
-
-
-
158,100,476
-
2,481,720
3,917,229
164,499,425
*Mr S Keenihan holds 1 million shares directly and 2.9 million shares indirectly through his superannuation fund.
F.
Other transactions with key management personnel
No loans have been made during the financial period or at the date of this report to any key management
personnel. A number of key management personnel, or their personally-related entities, hold positions in
other entities that result in them having control or significant influence over the financial or operating
policies of those entities. A number of these entities transacted with the Company in the reporting period.
The terms and conditions of those transactions were no more favourable than those available, or which
might reasonably be expected to be available, on similar transactions to unrelated entities on an arm’s
length basis.
Transaction
Specified Directors & Executives
Mr A Boss
Note
(i)
2015
$
2014
$
37,828
31,167
(i) $37,828 was paid to Mr. Boss during the year for legal secretarial services performed by his
legal assistant.
This the end of the audited remuneration report.
12
DIRECTOR’S REPORT FOR THE YEAR ENDED 30 JUNE 2015
Shares issued on the exercise of options
There were no ordinary shares of Grand Gulf Energy Limited issued during the year ended 30 June 2015
on the exercise of options granted under the Grand Gulf Energy Limited Employee Option Plan. No
amounts are unpaid on any of the shares.
Indemnification and Insurance of Directors and officers
During the financial period, the Company maintained an insurance policy which indemnifies the Directors
and Officers of Grand Gulf Energy Limited in respect of any liability incurred in connection with the
performance of their duties as Directors or Officers of the Company. The Directors made a personal
contribution toward the premium to satisfy Section 199B of the Corporations Act 2001. The Company's
insurers have prohibited disclosure of the amount of the premium payable and the level of indemnification
under the insurance contract.
DIRECTORS' MEETINGS
The following table sets out the number of Directors’ meetings held during the financial year and the
number of meetings attended by each Director (while they were a director or committee member).
Grand Gulf Energy Limited
Mr C Morgan
Mr A Boss
Mr S Keenihan
Mr M Freeman
Board of Directors
Held
Attended
5
5
5
5
5
5
5
5
The Company did not have committee meetings in the year.
NON-AUDIT SERVICES
The Company may decide to employ the auditor on assignments additional to their statutory audit duties
where the auditor’s expertise and experience with the Company and/or the group are important.
Details of the amounts paid or payable to the auditor (BDO WA) non-audit services provided during the
year are set out below.
The board of Directors has considered the position and, in accordance with advice received from the audit
committee, is satisfied that the provision of the non-audit services is compatible with the general standard
that the provision of non-audit services by the auditor, as set out below, did not compromise the auditor
independence requirements of the Corporation Act 2001 for the following reasons:
•
•
All non-audit services have been reviewed by the audit committee to ensure they do not impact
the impartially and objectivity of the auditor; and
None of the services undermine the general principles relating to auditor independence as set
out in APES 110 Code of Ethics for Professional Accountants.
During the year no fees were paid or payable for non-audit services provided by the auditor of the parent
entity, its related practices and non-related audit firm.
13
DIRECTOR’S REPORT FOR THE YEAR ENDED 30 JUNE 2015
AUDITOR’S INDEPENDENCE DECLARATION
The auditor’s independence declaration as required under section 307C of the Corporations Act 2001 is
included on the following page.
Dated at Perth 30 September 2015, and signed in accordance with a resolution of the Directors.
Mr Mark Freeman
Managing Director
14
Tel: +61 8 6382 4600
Fax: +61 8 6382 4601
www.bdo.com.au
38 Station Street
Subiaco, WA 6008
PO Box 700 West Perth WA 6872
Australia
DECLARATION OF INDEPENDENCE BY JARRAD PRUE TO THE DIRECTORS OF GRAND GULF ENERGY
LIMITED.
As lead auditor of Grand Gulf Energy Limited for the year ended 30 June 2015, I declare that, to the
best of my knowledge and belief, there have been:
1. No contraventions of the auditor independence requirements of the Corporations Act 2001 in
relation to the audit; and
2. No contraventions of any applicable code of professional conduct in relation to the audit.
This declaration is in respect of Grand Gulf Energy Limited and the entities it controlled during the
period.
Jarrad Prue
Director
BDO Audit (WA) Pty Ltd
Perth, 30 September 2015
BDO Audit (WA) Pty Ltd ABN 79 112 284 787 is a member of a national association of independent entities which are all members of BDO Australia Ltd ABN
77 050 110 275, an Australian company limited by guarantee. BDO Audit (WA) Pty Ltd and BDO Australia Ltd are members of BDO International Ltd, a UK
company limited by guarantee, and form part of the international BDO network of independent member firms. Liability limited by a scheme approved under
Professional Standards Legislation, other than for the acts or omissions of financial services licensees.
CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER
COMPREHENSIVE INCOME
FOR THE YEAR ENDED 30 JUNE 2015
Notes
2
3(a)
3(b)
2015
$
2014
$
6,683,166
7,510,572
89,172
-
(2,814,932)
(2,700,173)
Amortisation of oil and gas properties
9
Impairment of capitalised oil and gas expenditure
8 & 9
(2,658,583)
Revenue from continuing operations
Other income
Cost of sales
Interest income
Corporate office expenses
Employee benefits expense
Share based payment expense
Hedging Cost
Foreign exchange
Professional and statutory fees
Depreciation
Other expenses
Profit/(loss) before income tax
Income tax (expense)/ benefit
Profit/(loss) from continuing operations
Profit/(loss) after income tax
Items that may be reclassified to profit or loss
Foreign currency translation
Total comprehensive profit/(loss) for the year
Earnings/(loss) per share for the year
attributable to the member of Grand Gulf
Energy Ltd
Basic earnings/(loss) per Share (cents per share)
Diluted earnings/(loss) per share (cents per share)
3(b)
3(b)
4
14
20
20
110
(79,849)
(479,401)
(34,960)
(925,694)
(76,885)
10,757
(157,597)
(1,602)
(100,008)
(546,306)
-
41
(215,117)
(614,080)
(53,772)
(1,165,143)
(1,210,382)
-
10,499
(155,305)
(461)
(6,240)
1,400,466
-
(546,306)
1,400,466
(546,306)
1,400,466
3,968,522
3,422,216
(567,344)
833,122
(0.07)
(0.07)
0.19
0.19
The above consolidated statement of Profit or Loss and Other Comprehensive Income should be read in
conjunction with the accompanying notes to the financial statements.
16
CONSOLIDATED STATEMENT OF FINANCIAL POSITION AS AT 30 JUNE 2015
Notes
2015
$
2014
$
ASSETS
Current Assets
Cash and cash equivalents
Trade and other receivables
Insurance claim receivable
Prepayments
Total Current Assets
Non-Current Assets
Property plant & equipment
Exploration expenditure
Oil & gas properties
Total Non-Current Assets
Total Assets
LIABILITIES
Current Liabilities
Trade and other payables
Total Current Liabilities
Non-Current Liabilities
Restoration provision
Total Non-Current Liabilities
Total Liabilities
Net Assets
EQUITY
Contributed equity
Reserves
Accumulated losses
Total Equity
15(a)
969,526
6
6
6
7
8
9
10
11
12
13
14
1,156,439
1,017,781
47,906
1,840,990
1,423,152
84,550
111,819
3,191,652
3,460,511
9,466
9,081
13,551,464
10,141,894
4,937,950
4,264,994
18,498,880
14,415,969
21,690,532
17,876,480
381,338
381,338
174,873
174,873
366,788
366,788
748,126
216,377
216,377
391,249
20,942,406
17,485,230
42,045,942
42,046,976
6,672,458
2,668,976
(27,775,994)
(27,229,688)
20,942,406
17,485,230
The above consolidated statement of financial position should be read in conjunction with the
accompanying notes to the financial statements.
17
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR YEAR ENDED 30 JUNE 2015
Contributed
Equity
Foreign
currency
translation
reserve
Share
Option
Reserve
Option
premium
reserve
Accumulated
losses
Total
$
$
$
$
$
$
42,045,942
303,429
1,688,747
676,800
(27,229,688)
17,485,230
-
-
-
3,968,522
-
3,968,522
-
-
-
-
-
-
-
-
34,960
-
-
(546,306)
(546,306)
-
3,968,522
-
(546,306)
3,422,216
-
-
-
-
-
34,960
42,045,942
4,271,951
1,723,707
676,800
(27,775,994)
20,942,406
42,046,976
870,773
1,634,975
676,800 (26,630,154)
16,599,370
-
-
-
(567,344)
-
(567,344)
(1,034)
-
-
-
-
-
-
-
53,772
-
-
1,400,466
1,400,466
-
(567,344)
-
1,400,466
833,122
-
-
-
-
(1,034)
53,772
42,045,942
303,429
1,688,747
676,800 (27,229,688)
17,485,230
Balance at 1 July
2014
Profit/(loss)
attributable to
members of the
parent entity
Foreign currency
translation
adjustment
Total
comprehensive
income/(loss) for
the year
Transactions
with owners in
their capacity of
owners
Shares issued, net
of issue costs
Share based
payment
Balance at 30
June 2015
Balance at 1 July
2013
Profit/(loss)
attributable to
members of the
parent entity
Foreign currency
translation
adjustment
Total
comprehensive
income/(loss) for
the year
Transactions
with owners in
their capacity of
owners
Shares issued, net
of issue costs
Share based
payment
Balance at 30
June 2014
The above consolidated statement of changes in equity should be read in conjunction with the
accompanying notes to the financial statements.
18
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED 30 JUNE 2015
Notes
2015
$
2014
$
Cash flows from operating activities
Receipts from customers
Payments to suppliers and employees
Interest received
Production costs
6,731,412
(807,188)
95
(2,933,822)
Net cash inflows from operating activities
15(b)
2,990,497
Cash flows from investing activities
6,946,822
(833,207)
42
(2,470,121)
3,643,536
Payments for exploration and evaluation
Payments for development of oil & gas properties
Acquisition of project assets
(2,759,031)
(699,659)
(750,893)
9(i)
(1,570,167)
(1,228,974)
-
Net cash (outflows) from investing activities
(4,209,583)
(2799,141)
Cash flows from financing activities
Share issue costs
Net cash (outflows) from financing activities
Net increase / (decrease) in cash and cash equivalents
Cash and cash equivalents at the beginning of the
financial year
Effects of exchange rate changes on the balance of cash and
cash equivalents in foreign currencies
Cash and cash equivalents at the end of the financial year
15(a)
-
-
(1,219,086)
(1,034)
(1,034)
843,361
1,840,990
1,005,646
347,622
969,526
(8,017)
1,840,990
The above consolidated statement of cash flows should be read in conjunction with the
accompanying notes to the financial statements.
19
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
1.
Notes to the Consolidated Financial Statements
REPORTING ENTITY
Grand Gulf Energy Ltd (the ‘Parent Entity’) is a company listed on the Australian Securities Exchange,
limited by shares, incorporated and domiciled in Australia. The consolidated financial statements of the
Group for the financial year ended 30 June 2015 comprises the Parent Entity and its subsidiaries (together
referred to as the ‘Group’).
The financial statements were authorised for issue by the Board of Directors on 30 September 2015.
BASIS OF PREPARATION
Statement of compliance
(a)
The financial report is a general purpose financial report which has been prepared in accordance with
Australian Accounting Standards (‘AASBs’) (including Australian Interpretations) adopted by the
Australian Accounting Standards Board (‘AASB’) and the Corporations Act 2001. The financial statements
of the Group also complies with International Financial Reporting Standards and interpretations adopted
by the International Accounting Standards Board. Grand Gulf Energy Limited is a for-profit entity for the
purpose of preparing the financial statements.
New accounting standards and interpretations
Certain new accounting standards and interpretations have been published that are not mandatory for
ended 30 June 2015 reporting periods and have not been early adopted by the Company. The Company’s
assessment of the impact of these new standards and interpretations is set out below.
Application Date/Date
adopted by company
Must be applied for financial years
commencing on or after 1 January
2018. Therefore application date
for the company will be 30 June
2018.
The company does not currently
have any hedging arrangements in
place.
Title of
standard
AASB 9
Financial
Instruments
Nature of Change
Nature of Change
9
addresses
AASB
the
classification, measurement
and derecognition of financial
assets and financial liabilities.
Since December 2013, it also
sets out new rules for hedge
accounting.
There will be no impact on the
company’s accounting for financial
assets and financial liabilities, as the
new requirements only effect the
for available-for-sale
accounting
financial assets and the accounting
for
liabilities that are
designated at fair value through
profit and loss and the company
does not have any such financial
assets or financial liabilities.
financial
The new hedging rules align hedge
accounting more closely with the
risk management
company’s
practices. As a general rule it will be
easier to apply hedge accounting
going forward. The new standard
also introduces expanded disclosure
in
and
requirements
presentation.
changes
Due to the recent release of this
standard the company has not yet
made an assessment of the impact
of this standard.
Must be applied
for annual
reporting periods beginning on or
after 1 January 2018. Therefore
application date for the company
will be 30 June 2018.
IFRS
15
(issued June
2014)
Revenue
from
contracts
with
customers
An entity will
recognise
revenue to depict the transfer
of promised goods or services
to customers in an amount
that
the
reflects
consideration to which the
entity expects to be entitled
in exchange for those goods
or services. This means that
revenue will be recognised
when control of goods or
services is transferred, rather
than on transfer of risks and
rewards as is currently the
case under IAS 18 Revenue.
20
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
The following standards are not yet effective and are not expected to have a significant impact on the
Group’s consolidated financial statements:
Standard/Interpretation
AASB 2014-3 ‘Amendments to Australian Accounting Standards –
Accounting for Acquisitions of Interests in Joint Operations’
AASB 2015-1 ‘Amendments to Australian Accounting Standards –
Annual Improvements to Australian Accounting Standards 2012-2014
Cycle’
AASB 2015-2 ‘Amendments to Australian Accounting Standards –
Disclosure Initiative: Amendments to AASB 101’
AASB 2015-3 ‘Amendments to Australian Accounting Standards arising
from the Withdrawal of AASB 1031 Materiality’
Effective for
annual
reporting
periods
beginning on or
after
Expected to
be initially
applied in
the financial
year ending
1 January 2016
30 June 2017
1 January 2016
30 June 2017
1 January 2016
30 June 2017
1 July 2015
30 June 2016
Significant accounting judgements
In the process of applying the Group’s accounting policies, management has made the following
judgements, apart from those involving estimations, which have the most significant effect on the amounts
recognised in the financial statements:
Exploration, evaluation and development expenditure
The Group's accounting policy for exploration, evaluation and development is set out at note 1(d).
Application of this policy necessarily requires management to make certain estimates and assumptions
as to future events and circumstances, in particular, the assessment of whether economic quantities of
reserves exist. Any such estimates and assumptions may change as new information becomes available.
If, after having capitalised expenditure under our policy, management conclude that it is unlikely that
capitalised expenditure will be recovered by future exploitation or sale, the relevant capitalised amount
will be written off to profit or loss. As at 30 June 2015 the carrying amount of Capitalised Oil and Gas
Expenditure is $13,551,464 (2014: $10,141,894).
Recoverability of Insurance receivable
The group has incurred costs in relation to the well blow out of the Dugas & Leblanc #1 well with an
associated recognised an insurance claim receivable of $972,655 (2014: $84,550). Management consider
this balance to be recoverable, however until the insurance company has fully assessed the claim, the
amount recognised cannot be guaranteed.
Acquisition of Birdwood
Effective of 1 November 2014, the company completed the 100% acquisition of Birdwood Louisiana LLC
(“Birdwood”). Birdwood’s main assets are its non-operator interests in oil and gas assets in particular a
3.99% working interest in the Hendarling #1 well and 15% in the Dugas abd LeBlanc #3 well. The
company has determined that the acquisition has taken the form of an asset acquisition and not a business
combination. In making this decision, the company determined that the nature of the oil and gas activities
which is governed by the joint venture operating agreement did not constitute an integrated set of activities
in that the company does not control the operational processes of the joint venture. The control of the
processes lies with the operator and the right to remove the operator is a protective right rather than a
substantive right. Based on the facts above, the acquisition of Birdwood does not constitute a business
under the requirements of AASB3 Business conmbination and instead was accounted for as an asset
acquisition (refer note 9(i) below).
21
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Critical accounting estimates
The carrying amounts of certain assets and liabilities are often determined based on estimates and
assumptions of future events. The key estimates and assumptions that have a significant risk of causing
a material adjustment to the carrying amounts of certain assets and liabilities within the next annual
reporting period are:
Share-based payment transactions
The cost of share-based payments to employees is measured by reference to the fair value of the equity
instruments at the date at which they are granted. The fair value is determined using the Black-Scholes
model, taking into account the terms and conditions upon which the options were granted.
Rehabilitation obligations
The Group estimates its share of the future removal and remediation costs of oil and gas production
facilities, wells and pipelines at the time of acquisition or installation of the assets. In most instances,
removal of assets occurs many years into the future. This requires judgemental assumptions regarding
removal date, future environmental legislation, the extent of remediation activities required, the
engineering methodology for estimating cost, future removal technologies in determining the removal cost,
and asset specific discount rates to determine the present value of these cash flows. For more detail
regarding the policy in respect of provision for rehabilitation refer to note 1(h). As at 30 June 2015
rehabilitation obligations have a carrying value of $366,788 (2014: $216,377).
Impairment of oil and gas properties
In the absence of readily available market prices, the recoverable amounts of assets are determined using
estimates of the present value of future cash flows using asset-specific discount rates. For oil & gas
properties, these estimates are based on assumptions concerning reserves, future production profiles and
costs. As at 30 June 2015, the carrying value of oil & gas properties is $4,965,133 (2014: $4,264,994).
Reserves estimates
Estimation of reported recoverable quantities of Proven and Probable reserves include judgemental
assumptions regarding commodity prices, exchange rates, discount rates and production and
transportation costs for future cash flows. It also requires interpretation of complex geological and
geophysical models in order to make an assessment of the size, shape, depth and quality of reservoirs
and their anticipated recoveries. These factors used to estimate reserves may change from period to
period.
Reserve estimates are used to calculate depletion of producing assets and therefore a change in reserve
estimates impacts the carrying value of assets and the recognition of deferred tax assets due to the
changes in expected future cash flows.
Depletion and depreciation
In relation to the depletion, depreciation and amortisation of capitalised expenditure related to producing
oil and gas properties, the Group uses a unit of production reserve depletion model to calculate depletion,
depreciation and amortisation. This method of depletion, depreciation and amortisation necessitates the
estimation of the oil and gas reserves over which the carrying value of the relevant assets will be expensed
to the profit or loss. The calculation of oil and gas reserve is complex and requires management to make
judgements about commodity prices, future production costs and geological structures. The nature of
reserves estimation is such that reserves are not intended to be 100% accurate but rather provide a
statistically probable outcome in relation to the economically recoverable reserve. As the actual reserve
can only be accurately determined once production has ceased, depletion, depreciation and amortisation
expensed during the production may not on a year to year basis accurately reflect the actual percentage
of reserve depleted. However, over the entire life of the producing assets all capitalised costs will be
expensed to the profit or loss.
22
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(b)
Income Tax
The charge for current income tax expense is based on the profit for the year adjusted for any non-
assessable or disallowed items. It is calculated using tax rates that have been enacted or are substantively
enacted by the reporting date.
Deferred tax is accounted for using the liability method in respect of temporary differences arising between
the tax bases of assets and liabilities and their carrying amounts in the financial statements. No deferred
income tax will be recognised from the initial recognition of an asset or liability, excluding a business
combination, where there is no effect on accounting or taxable profit or loss.
Deferred tax is calculated at the tax rates that are expected to apply to the period when the asset is
realised or liability is settled. Deferred tax is credited in the statement of profit or loss and other
comprehensive income except where it relates to items that may be credited directly to equity, in which
case the deferred tax is adjusted directly against equity.
Deferred income tax assets are recognised to the extent that it is probable that future tax profits will be
available against which deductible temporary differences can be utilised.
The amount of benefits brought to account or which may be realised in the future is based on the
assumption that no adverse change will occur in income taxation legislation and the anticipation that the
Group will derive sufficient future assessable income to enable the benefit to be realised and comply with
the conditions of deductibility imposed by the law.
(c)
Property, Plant and Equipment
Each class of plant and equipment is carried at cost or fair value less, where applicable, any accumulated
depreciation and impairment losses.
Plant and equipment are measured on the cost basis less depreciation and impairment losses.
The carrying amount of plant and equipment is reviewed annually by Directors to ensure it is not in excess
of the recoverable amount from these assets. The recoverable amount is assessed on the basis of the
expected net cash flows which will be received from the assets’ employment and subsequent disposal.
The expected net cash flows have been discounted to their present values in determining recoverable
amounts.
The cost of fixed assets constructed within the Group includes the cost of materials, direct labour,
borrowing costs and an appropriate proportion of fixed and variable overheads.
Subsequent costs are included in the asset’s carrying amount or recognised as a separate asset, as
appropriate, only when it is probable that future economic benefits associated with the item will flow to the
group and the cost of the item can be measured reliably. All other repairs and maintenance are charged
to the profit or loss during the financial period in which they are incurred.
Depreciation
The depreciable amount of all fixed assets including capitalised lease assets is depreciated on a straight-
line basis over their useful lives to the Group commencing from the time the asset is held ready for use.
Leasehold improvements are depreciated over the shorter of either the unexpired period of the lease or
the estimated useful lives of the improvements. The major categories of assets are depreciated as follows:
• Oil and gas properties are amortised over the useful lives of the asset on a unit of production
basis once a reserve has been established.
• Motor Vehicles are depreciated based on diminishing value at 22.5%.
•
Plant and equipment and drilling parts are depreciated based on diminishing value at 25% to
40%.
• Office equipment is depreciated based on diminishing value at 25% to 40%.
•
Currently there are no buildings owned by the Group.
The assets’ residual values and useful lives are reviewed, and adjusted if appropriate, at each reporting
date. An asset’s carrying amount is written down immediately to its recoverable amount if the asset’s
carrying amount is greater than its estimated recoverable amount.
Gains and losses on disposals are determined by comparing proceeds with the carrying amount. These
gains or losses are included in profit or loss.
23
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(d)
Non-operator interests in oil & gas properties
Exploration and evaluation expenditures
Expenditure on exploration and evaluation is accounted for in accordance with the area of interest method
which is closely aligned to the US GAAP based successful efforts method of accounting for oil and gas
exploration and evaluation expenditure.
This approach is strongly linked to the Group’s oil and gas reserves determination and reporting process
and is considered to most fairly reflect the results of the Group’s exploration and evaluation activity
because only assets with demonstrable value are carried on the statement of financial position.
Once a well commences producing commercial quantities of oil and gas, capitalised exploration and
evaluation costs are transferred to Oil and Gas Properties – Producing Projects and amortisation
commences.
This method allows the costs associated with the acquisition, exploration and evaluation of a prospect to
be aggregated on the Consolidated Statement of Financial Position and matched against the benefits
derived from commercial production once this commences.
Costs
Exploration lease acquisition costs relating to greenfield oil and gas exploration provinces are expensed
as incurred while the costs incurred in relation to established or recognised oil and gas provinces are
initially capitalised and then amortised over the shorter term of the lease or the expected life of the project.
All other exploration and evaluation costs, including general permit activity, geological and geophysical
costs and new venture activity costs are charged as expenses as incurred except where:
-
the expenditure relates to an exploration discovery that, at the reporting date, had not been
recognised as an area of interest as an assessment of the existence or otherwise of
economically recoverable reserves has not yet been completed; or
- where there exists an economically recoverable reserve, and it is expected that the capitalised
expenditure will be recouped through exploitation of the area of interest, or alternatively, by its
sale.
Areas of interest are recognised at field level. Subsequent to the recognition of an Area of Interest, all
further costs relating to the Area of Interest are initially capitalised. Each Area of Interest is reviewed at
least bi-annually to determine whether economic quantities of reserves exist or whether further exploration
and evaluation work is required to support the continued carry forward of capitalised costs. To the extent
it is considered that the relevant expenditure will not be recovered, it is written off.
The cost of drilling exploration and evaluation wells are initially capitalised pending the results of the well.
Costs are expensed where the well does not result in the discovery of economically recoverable
hydrocarbons. To the extent that it is considered that the relevant expenditure will not be recovered, it is
immediately expensed.
Prepaid drilling and completion costs
Where the Company has a non-operator interest in an oil and gas property, or has outsourced certain
development processes of an operated interest in an oil and gas property, it may periodically be required
to make a cash contribution for its share of the operator’s/contractors estimated drilling and/or completion
costs, in advance of these operations taking place.
Where these contributions relate to a prepayment for exploratory or early stage drilling activity, prior to a
decision on the commerciality of a well having been made, the costs are capitalised as prepaid drilling
costs.
Where these contributions relate to a prepayment for well completion, these costs are capitalised as
prepaid completion costs within current assets.
As the operator/contractor notifies the Company as to how funds have been expended, the costs are
reclassified from prepaid costs to the appropriate expenditure or capitalised category.
24
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Transfer of capitalised exploration and evaluation expenditure to producing projects (oil and gas
properties)
When a well comes into commercial production, accumulated exploration and evaluation expenditure for
the relevant Area of Interest it is transferred to producing projects and amortised on a units of production
basis.
Producing projects
Producing projects are stated at cost less accumulated amortisation and impairment charges. Producing
projects include construction, installation or completion of production and infrastructure facilities such as
pipelines, transferred exploration and evaluation assets, development wells and the provisions for
restoration.
Amortisation and depreciation of producing projects
The Group uses the “units of production” (“UOP”) approach when amortising and depreciating field-
specific assets. Using this method of amortisation and depreciation requires the Consolidated Entity to
compare the actual volume of production to the reserves end then to apply this determined rate of
depletion to the carrying value of depreciable asset.
Capitalised producing projects costs relating to commercially producing wells are depreciated/amortised
using the UOP basis once commercial quantities are being produced within an area of interest. The
reserves used in this calculations are the Proved plus Probable reserves and are reviewed at least
annually.
(e)
Financial Instruments
Recognition
Financial instruments are initially measured at cost on trade date, which includes transaction costs, when
the related contractual rights or obligations exist. Subsequent to initial recognition these instruments are
measured as set out below.
Trade and Other Receivables
Trade receivables, which generally have 30-90 day terms, are recognised initially at fair value and
subsequently measured at amortised cost using the effective interest method, less an allowance for any
uncollectible amounts.
Collectability of trade receivables is reviewed on an ongoing basis. Debts that are known to be
uncollectible are written off when identified. An allowance for doubtful debts is raised when there is
objective evidence that the Group will not be able to collect the debt.
Loans and receivables
Loans and receivables are non-derivative financial assets with fixed or determinable payments that are
not quoted in an active market and are stated at amortised cost using the effective interest rate method.
Fair value
Fair value is determined based on current bid prices for all quoted investments. Valuation techniques are
applied to determine the fair value for all unlisted securities, including recent arm’s length transactions,
reference to similar instruments and option pricing models.
Impairment
At each reporting date, the Group assess whether there is objective evidence that a financial instrument
has been impaired. Impairment of receivables are recognised in profit or loss statement.
(f)
Impairment of Assets
At each reporting date, the group reviews the carrying values of its tangible and intangible assets to
determine whether there is any indication that those assets have been impaired. If such an indication
exists, the recoverable amount of the asset, being the higher of the asset’s fair value less costs to sell and
value in use, is compared to the assets carrying value. Any excess of the asset’s carrying value over its
recoverable amount is expensed to the profit and loss. Impairment testing is performed annually for
goodwill and intangible assets with indefinite lives.
25
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Where it is not possible to estimate the recoverable amount of an individual asset, the group estimates
the recoverable amount of the cash-generating unit to which the asset belongs.
(g)
Foreign Currency Transactions and Balances
Transaction and balances
Foreign currency transactions are translated into 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 profit and loss,
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 in the profit or loss statement.
Group companies
The financial results and position of foreign operations whose functional currency is different from the
group’s presentation currency are translated as follows:
- assets and liabilities are translated at year-end exchange rates prevailing at that reporting date; and
- income and expenses are translated at average exchange rates for the period.
Exchange differences arising on translation of foreign operations are transferred directly to the Group’s
foreign currency translation reserve in the statement of financial position. These differences are
recognised in the profit and loss in the period in which the operation is disposed.
(h)
Provisions
Provisions are recognised when the Group has a present obligation as a result of a past event, the future
sacrifice of economic benefits is probable and the amount of the obligation can be reliably estimated.
When some or all of the economic benefits required to settle a provision are expected to be recovered
from a third party, the receivable is recognised as an asset if it is virtually certain that recovery will be
received and the amount of the receivable can be measured reliably.
The amount recognised as a provision is the best estimate of the consideration required to settle the
present obligation at reporting date, taking into account the risks and uncertainties surrounding the
obligation. Where a provision is measured using the cash flows estimated to settle the present obligation,
its carrying amount is the present value of those cash flows.
An onerous contract is considered to exist where the Group has a contract under which the unavoidable
cost of meeting the contractual obligations exceed the economic benefits estimated to be received.
Present obligations arising under onerous contracts are recognised as a provision to the extent that the
present obligation exceeds the economic benefits estimated to be received.
Provision for restoration and rehabilitation
Provision is made in the statement of financial position for restoration of operating locations. The estimated
restoration and rehabilitation costs are initially recognised as part of the capitalised cost of the relevant
project which gave rise to the future obligation. During the production phase of the project the capitalised
restoration costs is amortised using the units of production method. Any actual costs incurred by the Group
are allocated against the provision.
The provision for restoration and rehabilitation are based on the latest estimated future costs, determined
on a discounted basis, which are re-assessed regularly and exclude any allowance for potential changes
in technology or material changes in legislative requirements.
26
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(i)
Inventories
Inventories consist of hydrocarbon stocks. Inventories are valued at the lower of cost and net realisable
value. Cost is determined on a weighted average basis and includes direct costs and an appropriate
portion of fixed and variable production overheads where applicable.
(j)
Cash and Cash Equivalents
Cash and cash equivalents includes cash on hand, deposits held at call with banks, other short-term highly
liquid investments with original maturities of three months or less, and bank overdrafts. Bank overdrafts
are shown within short-term borrowings in current liabilities on the statement of financial position.
(k)
Revenue Recognition
Revenue is recognised at the fair value of consideration received or receivable to the extent that it is
probable that economy benefits will flow to the Group ant the revenue can be reliably measured.
Revenue is recognised when significant risks and rewards of ownership have been transferred to the
customer, recovery of the consideration is probable, there is no continuing management involvement with
the goods ant the amount of revenue can be measured reliably
(I)
Oil and Gas Sales
Revenue from the sale of oil/condensate, gas and natural gas liquids produced is recognised when the
Consolidated Entity has transferred to the buyer the significant risks and rewards of ownership of the
products from the following product streams:
- Dry Gas – upon transfer to third party, typically upon entry to a third party sale pipeline;
- Natural Gas Liquids (NGL’s) – upon transfer to a third party, typically upon entry to a third party sales
pipeline; or
- Oil/Condensate – upon transfer of product to purchasers’ transportation mode, either truck or pipeline.
(II)Other revenue
Dividend revenue is recognised on a receivable basis. Interest revenue is recognised on a time
proportionate basis that takes into account the effective yield on the financial asset.
(III)Service income
Revenue from the provision of services is recognised when an entity has legally enforceable right to
receive payment for services rendered.
All revenue is stated net of the amount of goods and services tax (GST).
(m) Goods and Services Tax (GST)
Revenues, expenses and assets are recognised net of the amount of GST, except where the amount of
GST incurred is not recoverable from the Australian Tax Office. In these circumstances the GST is
recognised as part of the cost of acquisition of the asset or as part of an item of the expense. Receivables
and payables in the statement of financial position are shown inclusive of GST.
Cash flows are presented in the statement of cash flows on a gross basis, except for the GST component
of investing and financing activities, which are disclosed as operating cash flows.
(n) Trade and Other Creditors
These amounts represent liabilities for goods and services provided to the Group prior to the end of the
financial year and which are unpaid. The amounts are unsecured and are usually paid within 30 days of
recognition. They are recognised initially at fair value and subsequently at amortised cost.
(o) Dividends
Provision is made for the amount of any dividend declared, determined, or publicly recommended by the
Directors on or before the end of the financial year, but not distributed at reporting date.
27
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(p)
Options
The fair value of options in the shares of the Company issued to Directors and other parties is recognised
as an expense in the financial statements in relation to the granting of these options.
(q)
Employee Benefits
Wages, salaries and annual leave
(i)
Liabilities for wages, salaries and annual leave expected to be settled within 12 months of the reporting
date are recognised 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.
Employee benefits payable later than one year
(ii)
Employee benefits payable later than one year have been measured at the present value of the estimated
future cash outflows to be made for those benefits.
Superannuation
(iii)
Contributions are made by the Group to superannuation funds as stipulated by statutory requirements and
are charged as expenses when incurred.
Employee benefit on costs
(iv)
Employee benefit on costs, including payroll tax, are recognised and included in employee benefits
liabilities and costs when the employee benefits to which they relate are recognised as liabilities.
Options
(v)
The fair value of options granted is recognised as an employee benefit expense with a corresponding
increase in equity. The fair value is measured at grant date.
The fair value at grant rate is independently determined using the Black-Scholes option pricing model that
takes into account the exercise price, the term of the option, the vesting and performance criteria, the
impact of dilution, the non-tradeable nature of the option, the share price at grant date and expected price
volatility of the underlying shares.
(r)
Earnings Per Share
Basic earnings per share
(i)
Basic earnings per share is determined by dividing the net profit after income tax attributable to members
of the Company, excluding any costs of servicing equity other than ordinary shares, by the weighted
average number of ordinary shares outstanding during the financial year, adjusted for bonus elements in
ordinary shares issued during the year.
Diluted earnings per share
(ii)
Diluted earnings per share adjusts the figures used in the determination of basic earnings per share to
take into account the after income tax effect of interest and other financing costs associated with dilutive
potential ordinary shares and the weighted average number of shares assumed to have been issued for
no consideration in relation to dilutive potential ordinary shares.
(s)
Fair Value Estimation
The fair value of financial assets and financial liabilities must be estimated for recognition and
measurement or for disclosure purposes.
The fair value of financial instruments traded in active markets (such as publicly traded derivatives, and
trading and available-for-sale securities) is based on quoted market prices at the reporting date. The
quoted market
price used for financial assets held by the Group is the current bid price; the appropriate quoted market
price for financial liabilities is the current ask price.
The fair value of financial instruments that are not traded in an active market (for example, over-the-
counter derivatives) is determined using valuation techniques. The Group uses a variety of methods and
makes assumptions that are based on market conditions existing at each reporting date. Quoted market
prices or dealer quotes for similar instruments are used for long-term debt instruments held. Other
techniques, such as estimated discounted cash flows, are used to determine fair value for the remaining
financial instruments. The nominal value less estimated credit adjustments of trade receivables and
payables are assumed to approximate their fair values. The fair value of financial liabilities for disclosure
purposes is estimated by discounting the future contractual cash flows at the current market interest rate
that is available to the Group for similar financial instruments.
28
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(t)
Segment reporting
Operating segments are now reported in a manner that is consistent with the internal reporting provided
to the chief operating decision maker. The chief operating decision maker, who is responsible for allocating
resources and assessing performance of operating segments, has been identified as the Board of
Directors.
AASB 8 requires a ‘management approach’ under which segment information is presented on the same
basis as that used for internal reporting purposes. In addition, the segments are reported in a manner that
is consistent with the internal reporting provided to the chief operating decision makers.
The Board of Directors review internal management reports on a monthly basis that is consistent with the
information provided in the Statement of Profit or Loss and Other Comprehensive Income, statement of
financial position and statement of cash flows. As a result no reconciliation is required, because the
information as presented is used by the Board to make strategic decisions.
(u)
Parent entity financial information
The financial information for the parent entity, Grand Gulf Energy Ltd, disclosed in note 25 has been
prepared on the same basis as the consolidated financial statements, except as set out below.
Investment in subsidiaries, associates and joint venture entities
Investments in subsidiaries, associated and joint venture entities are accounted for at cost in the financial
statements of Grand Gulf Energy Ltd. Dividends received from associated are recognised in the parent
entity’s profit or loss, rather than being deducted from the carrying amount of these investments.
Tax consolidation legislation
Grand Gulf Energy Ltd and its wholly-owned Australian controlled entities have implemented the tax
consolidation legislation.
The head entity, Grand Gulf Energy Ltd, and the controlled entities in the tax consolidated group account
for their own current and deferred tax amounts. These tax amounts are measured as if each entity in the
tax consolidated group continues to be a stand-alone taxpayer in its own right.
In addition to its own current and deferred tax amounts, Grand Gulf Energy Ltd also recognised the current
tax liabilities (or assets) and the deferred tax assets arising from unused tax losses and unused tax credits
assumed from controlled entities in the tax consolidation group.
The entities have also entered into a tax funding agreement under which the wholly-owned entities fully
compensate Grand Gulf Energy Ltd for any current tax payable assumed and are compensated by Grand
Gulf Energy Ltd for any current tax receivable and deferred tax assets relating to unused tax losses or
unused tax credits that are transferred to Grand Gulf Energy Ltd under the tax consolidation legislation.
The funding amounts are determined by reference to the amount recognised in the wholly-owned entities’
financial statements.
The amounts receivable/payable under the tax funding agreement are due upon receipt of the funding
advice from the head entity, which is issued as soon as practicable after the end of each financial year.
The head entity may also require payment of interim funding amounts to assist with its obligation to pay
tax instalments.
Assets or liabilities arising under tax funding agreements with the tax consolidation entities are recognised
as current amounts receivable from or payable to other entities in the group.
Any difference between the amounts assumed and amounts receivable or payable under the tax funding
agreement are recognised as a contribution to (or distribution from) wholly-owned tax consolidated
entities.
Financial guarantees
Where the parent entity has provided financial guarantees in relation to loans and payables of subsidiaries
for no compensation, the fair values of these guarantees are accounted for as contributions and
recognised as part of the cost of the investment. No such guarantees have been provided at this time.
29
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(v) Contributed Equity
Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of new shares
or options are shown in equity as a deduction, net of tax, from proceeds.
(w) Asset Acquisition not Constituting a business
On 1 November 2014, the Company acquired Birdwood Louisiana for US$575,000. As the acquisition is
not deemed a business acquisition, the transaction has been accounted for as an asset acquisition.
When an asset acquisition does not constitute a business combination, the assets and liabilities are
assigned a carrying amount based on their relative fair values in an asset purchase transaction and no
deferred tax will arise in relation to the acquired assets and assumed liabilities as the initial recognition
exemption for deferred tax under AASB 112 applies. No goodwill will arise on the acquisition and
transaction costs of the acquisition will be included in the capitalised cost of the asset.
2.
Revenue
Revenues
Sale of oil and gas
Total revenues from ordinary
activities
3.
Profit from operations
(a) Other income
Other income
Total other income
(b)
Expenses
Loss before income tax includes the following specific expenses:
Cost of sales
Operating Costs
Royalties
Total cost of sales
Depreciation
Plant and equipment
Total depreciation
Rental expense relating to
operating leases
Minimum lease payments
Total rental expense relating to
operating leases
Foreign exchange gains and
losses
Net foreign exchange losses
2015
$
2014
$
6,683,166
7,510,572
6,683,166
7,510,572
2015
$
89,172
89,172
2015
$
1,325,770
1,489,162
2,814,932
1,602
1,602
2014
$
-
-
2014
$
973,506
1,726,667
2,700,173
461
461
96,437
96,437
98,800
98,800
10,757
10,499
30
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
4.
Income tax
(a)
Income tax expense
Current tax
Deferred tax
Under (over) provided in prior years
\
(b) Reconciliation of income tax benefit to prima facie tax payable
2015
$
-
-
-
-
2015
$
2014
$
-
-
-
-
2014
$
Profit/(loss)from ordinary activities before
income tax expense
Prima facie tax benefit on gain from ordinary
activities at 30% (2014: 30%)
Adjustment for foreign jurisdiction tax rate
differential
Add tax effect of non-temporary adjustments
Tax effect of current year tax losses for which
no deferred tax asset has been
recognised/(Recoupment of prior period tax
losses)
Timing differences previously not recognised
Income tax expense / (benefit)
(c)
Unrecognised temporary differences
Deferred tax assets
Tax losses at 30%
Temporary differences at 30%
Tax losses – foreign subsidiaries (30%)
Temporary differences at 34%
Set off against DTLs
Net DTAs
Deferred tax liabilities
Temporary differences at 30%
Temporary differences at 34%
Set off against DTAs
Net DTLs
(546,306)
1,400,467
(163,892)
420,140
10,199
(153,693)
38,518
97,493
517,633
248,298
410,400
(295,225)
-
282,044
(1,047,974)
-
2015
$
2014
$
3,033,396
11,897
10,034621
3,277,900
-
(4,008,540)
12,349,273
-
4,008,540
(4,008,540)
-
2,829,554
6,000
8,892,829
1,041,816
-
(2,142,340)
10,627,860
-
2,142,340
(2,142,340)
Net deferred tax asset not recognised
12,349,273
10,627,860
Net deferred tax assets have not been brought to account as it is not probable within the immediate future
that tax profits will be available against which deductible temporary differences and tax losses can be
utilised.
The ability of the group to use tax losses in the future is subject to the group entities satisfying the
relevant taxation laws applicable at the time of submitting the return.
31
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
5.
Dividends paid or provided for on ordinary shares
No dividend has been declared or paid during the current financial year or the prior financial year.
The Group does not have any franking credits available for current or future years as the Group is not in
a tax paying position.
6.
Trade and other receivables
Current
Trade and other receivables (i)
Insurance claim receivables
Prepayments (ii)
2015
$
2014
$
1,156,439
1,017,781
47,906
2,222,126
1,423,152
84,550
111,819
1,619,521
(i)
(ii)
Other receivables include trade debtors, sales revenue amounts outstanding for goods &
services tax (GST). GST amounts are non-interest bearing and have repayment terms
applicable under the relevant government authorities.
Prepayments include cash calls remaining prepaid at balance date of $47,906 made to the
Abita project.
Refer to note 23 for the Group’s financial risk management policies.
Due to the short-term nature of the current receivables, their carrying amount is assumed to be the same
as their fair value.
7.
Computer equipment
Plant and equipment
At cost
Accumulated amortisation
8.
Exploration expenditure and evaluation
Capitalised exploration and evaluation expenditure
Provision for impairment
Capitalised exploration and evaluation expenditure
Capitalised exploration and evaluation expenditure
Carrying amount at beginning of year
Expenditure during the year
Disposals
Acquisitions (9(i))
Transfer to development
Foreign exchange differences
Impairment of capitalised expenditure
Carrying amount at end of year
2015
$
11,529
(2,063)
9,466
2015
$
2014
$
9,452
(461)
9,081
2014
$
30,336,011
(16,784,54
7)
13,551,464
26,368,582
(16,226,688)
10,141,894
10,141,894
3,109,577
-
78,354
(1,657,223
)
2,436,720
10,176,369
1,488,852
-
-
-
(324,480)
(557,858)
13,551,464
(1,198,847)
10,141,894
32
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
8.
Exploration expenditure and evaluation (contimued)
The ultimate recoupment of costs carried forward for capitalised expenditure is dependent on either the
sale or successful development and commercial exploitation of lease acreage. Amortisation will be
calculated over the life of the area according to the rate of depletion of economically recoverable reserves,
at the time when production commences. Impairments of capitalised expenditure relate to costs
associated with General Project costs and residual Port Hudson costs.
9.
Oil and Gas Properties
Producing oil & gas assets
Provision for impairment and amortisation
Capitalised oil and gas properties
Carrying amount at beginning of period
Expenditure during the year
Transfer from Exploration and Evaluation Expenditure
Acquisitions (9(i))
Foreign exchange differences
Amortisation
Impairment of capitalised expenditure
Carrying amount at end of year
2015
2014
$
8,639,687
(3,701,737)
4,937,950
$
7,041,037
(2,776,043)
4,264,994
4,264,994
385,530
1,657,223
748,832
907,790
(925,694)
(2,100,725)
4,937,950
5,162,200
407,456
-
-
(139,519)
(1,165,143)
-
4,264,994
Oil and Gas properties are stated at the higher of its fair value less costs to sell and its value in use.
Impairment loss is recognised when the carrying amount of the asset (CGU) exceeds its recoverable
value.
(i)
Birdwood Acquisition
During the period the Group acquired Birdwood Louisiana LLC. The effective date of the acquisition was
1 November 2014 with the fair value of assets and liabilities acquired (in Australian dollars) as follows:
Purchase Consideration
Cash
Net Assets Acquired
Fause Point
Dugas & Leblanc #3
Hensarling #1
Less : Restoration Provision
Deferred exploration and evaluation
10.
Trade and other payables
Current
Trade creditors
1-Nov-2014
$
750,893
78,354
130,590
618,242
(76,293)
750,893
2015
$
2014
$
381,338
174,872
381,338
174,872
Risk exposure: Information about the Group’s exposure to foreign exchange risk is provided in note 23.
Due to the short-term nature of the current payable, their carrying amount is assumed to be the same as
their fair value.
33
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
11.
Provisions
Non-Current
Asset retirement obligation
(a)
Reconciliations
Asset retirement obligation
Carrying amount at beginning of year
Additional provisions recognised/recalculated
Carrying amount at end of year
12.
Contributed equity
(a)
Issued and paid up share capital
2015
$
2014
$
366,788
216,377
216,377
150,411
366,788
207,618
8,759
216,377
2015
Number of
Shares
$
2014
Number of
Shares
$
Balance at the beginning of the year
Less: transaction costs
747,998,870 42,045,942
-
747,998,870 42,046,976
(1,034)
747,998,870 42,045,942
747,998,870 42,045,942
(b) Terms and conditions of contributed equity
Ordinary shares
Ordinary shares have the right to receive dividends as declared and, in the event of winding up the
Company, to participate in the proceeds from the sale of all surplus assets in proportion to the
number of and amounts paid up on shares held.
Ordinary shares entitle their holder to one vote, either in person or by proxy, at a meeting of the
Company. Refer note 23 for details of the Group’s capital management policy.
(c) Share options
During the period the Company issued 27,000,000 incentive options. As at 30 June 2015 the
Company has on issue 27,000,000 (30 June 2014: Nil) options over unissued ordinary shares.
Movement of options during the period are summarised below:
Exer-
cise
price
Expiry
date
Balance at
beginning
of year
Issued
during the
year
Exercised
during the
year
Cancelled
during the
year
Balance at
end of
year
Unlisted options $0.014
30/11/18
Number
Number
Number
Number
Number
-
-
27,000,000
27,000,000
-
-
-
-
27,000,000
27,000,000
34
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
13.
Reserves
Foreign currency translation (a)
Share option reserve (b)
Option premium reserve (c)
(a)
Foreign currency translation reserve
2015
$
2014
$
4,271,951
1,723,707
676,800
6,672,458
303,429
1,688,747
676,800
2,668,976
The foreign currency translation reserve is used to record exchange differences arising from the
translation of the financial statements of self-sustaining foreign operations.
Balance at beginning of year
Gain / (loss) on translation of foreign
controlled entities
Balance at end of year
(b)
Share option reserve
2015
$
303,429
2014
$
870,773
3,968,522
4,271,951
(567,344)
303,429
The share option reserve is used to recognise the value of options issued to employees, Directors,
consultants, and external finance companies.
Balance at beginning of year
Share based payment expense
Balance at end of year
(c) Option premium reserve
2015
$
1,688,747
34,960
1,723,707
2014
$
1,634,975
53,772
1,688,747
The option premium reserve is used to recognise the options issued under a rights issue at 1 cent
per option.
Balance at beginning of year
Balance at end of year
14.
Accumulated losses
Balance at beginning of year
Net profit(loss) attributable to members of the Company
Balance at end of year
2015
$
676,800
676,800
2014
$
676,800
676,800
2015
$
(27,229,688)
(546,306)
2014
$
(28,630,154)
1,400,466
(27,775,994)
(27,229,688)
35
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
15.
Notes to the statement of cash flows
(a)
Reconciliation of cash and cash equivalents
For the purposes of the statement of cash flows, cash includes cash on hand and in banks and
investments in money market instruments. Cash at the end of the financial year as shown in the
statement of cash flows is reconciled to the related items in the statement of financial position as
follows:
Cash on hand
2015
$
2014
$
969,526
1,840,990
The Group’s exposure to interest rate risk is discussed in note 23. The above figures are reconciled
to cash at the end of the financial year as shown in the statement of cash flows as follows:
(b) Reconciliation of profit after related income tax to net cash outflows from operating
activities
Profit/(loss) for the year
Depreciation
Impairment and write-off of oil and
gas assets
Amortisation
Share based payments
Exchange rate differences on
assets/liabilties held in foreign
currencies
Changes in net assets and
liabilities
(Increase) / decrease in assets:
Trade and other receivables
Capitalised expenditure
Increase / (decrease) in liabilities:
Trade and other creditors
Provisions
Net cash inflows from operating
activities
16.
Expenditure commitments
Lease commitments
Operating leases (non-cancellable)
Not later than one year
Later than one year and not later than five years
2015
$
(546,306)
1,602
2,658,583
925,694
34,960
2014
$
1,400,466
461
1,210,382
1,165,143
53,772
225,606
(27,648)
(666,518)
-
(415,336)
702,257
206,465
150,411
(454,720)
8,759
2,990,497
3,643,536
2015
$
96,437
-
96,437
2014
$
98,800
-
98,800
The above commitments relate to the sub-lease of premises held by the Group.
36
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
17.
Non-cash investing and financing activities
Options issued to employees, consultants, Directors and financiers for no cash consideration are shown
in Directors’ Report and note 24.
18.
Contingent liabilities
The Group had no current contingent liabilities as at 30 June 2015 other than as stated below.
Napoleonville Well control
Grand Gulf advised on 11 August 2010 that the Operator, Mantle Oil & Gas LLC of the Dugas & Leblanc
# 1 well reported that the well was flowing uncontrollably to the atmosphere. The well was brought under
control on 24 August 2010.
Since 12 August 2010, the Company made a series of important announcements on the ASX in relation
to efforts to control the blowout of the Dugas & Leblanc #1 Well (“#1 Well”) at its Napoleonville Project in
Louisiana, United States (U.S.), and the subsequent effects on the Company.
In June 2013 the Company settled all other commercial cases associated with landowners and
neighbouring businesses operating in close proximity to the #1 Well event. In addition, a commercial
settlement between the JV partners and the workover operator of the rig were reached. Both settlements
were similar in value and have resulted in a negligible net impact to Grand Gulf but have removed a
significant amount of exposure for the Company.
On 23 September 2015 the Company finalised the class action that was filed in the U.S. against the
Operator of the #1 Well in State Court for damages by certain residents of the Napoleonville area in 2010.
This brings to a close all litigation in respect of the blowout.
The Company has some minimal remediation remaining at the site where the blowout occurred. The vast
majority of the affected lands have been handed back and is presently being farmed. The JV continues
to be liable for ongoing salinity testing on the blowout location and remediation mostly around the blow
out location. Whilst the insurance for the Company’s initial 40% WI in the blowout will terminate following
the reimbursement of the latest claims (including the recovery of the class action litigation noted above)
the Company will continue to be insured for the recent acquisition of Birdwoods 15% WI exposure. The
potential ongoing cost to the Company is expected to be no more than US$500,000. Based on current
and future cashflows expected, the Board does not consider this potential outflow to have a material
adverse effect on the company.
Desiree Litigation
The Company advised in July 2014 that a previous JV partner in the Desiree Project was suing the
Company for a 5.3% WI (4.63% WI net to GGE) in the Desiree Project and leases. The partner formally
withdrew from the project in December 2011 and, subsequent to the well having commenced drilling,
demanded their interest be reinstated. GGE’s right to its working interest is being vehemently defended.
The matter was removed from court and will be dealt with in private arbitration with a hearing set for
November 2015.
Apart from the potential contingent liabilities noted above, there are no further contingent assets or
liabilities existing at 30 June 2015.
The Board is mindful of its obligations to investors and will immediately update ASX as and when further
information becomes available.
19.
Events occurring after reporting date
There were no subsequent events.
37
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
20.
Earnings per share
The Company has no options or other convertible securities, accordingly the based and diluted earnings
per share are the same. The following reflects the gain and share data used in the calculation of basic
and diluted gain per share:
Basic/diluted earnings/(loss) per share
2015
$
2014
$
Profit/(loss) used in calculating basic gain per share
(546,306)
1,400,466
Weighted average number of ordinary shares used in calculating
basic earnings per share
Basic/Diluted earnings/(loss) per share (cents per share)
747,998,8
70
(0.07)
_
747,998,870
0.19
21. Auditor’s remuneration
Audit or review of financial report AUS
2015
$
2014
$
50,000
50,000
50,000
50,000
The auditor of Grand Gulf Energy Limited is BDO Audit (WA) Pty Ltd.
22.
Segment information
Operating segments
The consolidated entity is organised into one operating segment, being oil & gas production and
exploration operations. This operating segment is based on internal reports that are reviewed and used
by the Board of Directors, who are identified as the Chief Operating Decision Makers (‘CODM’), in
assessing performance and in determining the allocation of resources.
The principle products and services of this operating segment is the production and exploration operations
in Louisiana, United States.
As noted above, the board only considers one segment to be a reportable segment for its reporting
purposes. As such, the reportable information the CODM reviews is detailed throughout the financial
statements.
23.
Financial instruments
FINANCIAL RISK MANAGEMENT
The Group’s policies with regard to financial risk management are clearly defined and consistently applied.
They are a fundamental part of the Group’s long term strategy covering areas such as foreign exchange
risk, interest rate risk, commodity price risk, credit risk and liquidity risk and capital management. The
natural hedges provided by the relationship between commodity prices and the US currency reduces the
necessity for using derivatives or other forms of hedging. The Group does not issue derivative financial
instruments, nor does it believe that it has exposure to such trading or speculative holdings through its
investments in wholly owned subsidiaries. Risk management is carried out by the Board as a whole, which
provides written principles for overall risk management, as well as policies covering specific areas such
as foreign exchange risk, interest rate risk, credit risk and liquidity risk. The group uses different methods
to measure different types of risk to which it is exposed. These methods include sensitivity analysis in the
case of interest rate, foreign exchange and other price risks and aging analysis for credit risk.
38
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Market Risk
(i)
Foreign exchange risk
There is no foreign currency exposure on a group or company level. Such exposure arises from sales or
purchases by an operating unit in currencies other than the unit’s functional currency. The Group currently
does not engage in any hedging or derivative transactions to manage foreign currency risk.
The only occasion in which there is an exposure on a group or company level to foreign exchange risk is
when the Company is raising capital on ASX. As its domicile is Australia it must raise equity capital in
Australian $. As its primary currency is the US$ due to its assets, operations and commodities being priced
in US$ the Company has taken the view that while it is raising US$ to finance US$ operations that it might
from time to time hedge its currency for the time period over which it has received funds via an equity
raising but has not issued the equity securities which have been subscribed for.
(ii)
Commodity price risk
Due to the nature of the Group’s principal operations being oil & gas exploration and production the Group
is exposed to the fluctuations in the price of oil & gas. Although the Group is economically exposed to
commodity price risk of the abovementioned inputs, this is not a recognised market risk under the
accounting standards as the risk is embedded within normal purchase and sales and are therefore not
financial instruments.
(iii)
Interest rate risk
Interest rate risk relates to the statement of financial position values of the consolidated cash at bank at
June 2015 and June 2014. Due to the majority of the Company funds held in US$ and the US$ interest
rates being less than 0.25% the materiality of any sensitivity movements would be immaterial.
(iv)
Credit risk
Credit risk is the risk that a counterparty will not meet its obligations under a financial instrument or
customer contract, leading to a financial loss. The Group is not significantly exposed to credit risk from its
operating activities, however the Board constantly monitors customer receivables. The maximum
exposure to credit risk at the reporting date is the carrying value of each class of financial asset. The
Group does not hold collateral as security. No material exposure is considered to exist by virtue of the
possible non-performance of the counterparties to financial instruments and cash deposits. Credit rating
of cash is A+; all funds are held by Frost Bank and NAB which have government guarantees on deposits.
The maximum exposure to credit risk at the reporting date is the carrying amount of the assets as
summarised below, none of which are impaired or past due.
In thousands of AUD
Cash and cash equivalents
Trade and other receivables
Insurance claim
CARRYING AMOUNT
2015 ($)
969,526
1,156,439
1,017,781
2014 ($)
1,840,990
1,423,152
84,550
(v)
Capital Risk and Liquidity Risk Management
The Group’s total capital is defined as shareholder’s funds, plus net debt and amounted to $20,354,218
at 30 June 2015 (2014: $15,819,113). The Group’s overriding objectives when managing capital are to
safeguard the business as a going concern; to maximise returns for shareholders and benefits for other
stakeholders and to maintain an optimal capital structure in order to reduce the cost of capital. Prudent
liquidity risk management implies maintaining sufficient cash and marketable securities and the availability
of funding through an adequate credit facility. The Group manages liquidity risk by continuously monitoring
forecast and actual cash flows. Surplus funds are generally only invested in instruments that are tradeable
in highly liquid markets.
39
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Financing Arrangements
The Group did not have access to the borrowing facilities during the year.
Maturities of financial liabilities
The tables below analyse the Group’s financial liabilities and relevant maturity groupings based on the
remaining period at reporting date to the contractual maturity date. The amounts disclosed are the
contractual undiscounted cash flows.
At 30 June
2015
Less than
6 months
6-12
months
Betwee
n 1 and
2 years
Betwee
n 2 and
5 years
Over 5
years
Total
contractual
cash flows
Carrying
amount
liabilities
Non-
derivatives
Trade
creditors
Total
381,338
381,338
-
-
-
-
-
-
-
-
381,338
381,338
381,338
381,338
At 30 June
2014
Less than
6 months
6-12
months
Betwee
n 1 and
2 years
Betwee
n 2 and
5 years
Over 5
years
Total
contractual
cash flows
Carrying
amount
liabilities
Non-
derivatives
Trade
creditors
Total
174,872
174,872
-
-
-
-
-
-
-
-
174,872
174,872
174,872
174,872
24.
Share Based Payments
(a)
Employee Option Plan
The Grand Gulf Energy Limited Employee Option Plan was approved at the general meeting held on 26
June 2007. Options which are granted under the plan and under the discretion of the board to executives
and consultants of the Company are for no consideration. Options granted under the plan carry no
dividend or voting rights and have varied contractual lives. During the year the Company issued options
to Executives and Consultants outside of this plan.
Grand Gulf Energy Limited – 2015
Grant date
Expiry
date
Exercise
price
Balance
at start of
the year
Granted
during the
year
Cancelled
during
the year
Balance at
end of the
year
Exercis
able at
end of
the year
30 Nov 18
20 Nov 14
Total
Weighted Average Exercise price
$0.014
Number
Number
Number
Number
Number
-
-
27,000,000
27,000,000
-
-
27,000,000
27,000,000
-
-
1.4c
The weighted average share price at the date of exercise of options exercised during the year
ended 30 June 2015 was 1.4c (2014 – 3.75c).
Grand Gulf Energy Limited – 2014
Grant date
Expiry date Exercise
price
Balance at
start of the
year
Granted
during
the year
Cancelled
during the
year
Balance at
end of the
year
Exercis
able at
end of
the year
Number
Number
Number
Number
Number
30 Nov 13
15 Mar 14
01 Dec 11
7 May 10
Total
Weighted Average Exercise price
$0.03
$0.045
18,000,000
3,000,000
21,000,000
3.75c
-
-
-
18,000,000
3,000,000
21,000,000
-
-
-
-
-
-
40
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(b)
Fair value of options granted
The Company has an established Employee Share Option Plan (“Plan”) that allows executives and
consultants to participate in Share Option allocations as determined by the Board from time to
time. Details of the Employee Share Option Plan are disclosed in the Remuneration Report for the year
ended 30 June 2014. During the half-year ended 31 December 2014, 27,000,000 incentive options were
granted to directors and consultants and approved by shareholders at the AGM on 20 November 2014.
The purpose of the grant is for the Company to retain their high calibre services and to provide cost
effective remuneration to these directors and consultants for their ongoing commitment and contribution
to the Company. On 20 November 2014 shareholders approved the issue of Share Options to non-
executive Directors, executive Directors and the Company’s consultants. The terms and conditions of the
grants made during the year ended 30 June 2015 are as follows:
Share Options (iii)
Executive Directors (i)
Non-Executive Directors
Consultants
Number
Vesting
Conditions
Exercise Price
Expiry Date
13,000,000
3,000,000
11,000,000
(ii)
(ii)
(ii)
$0.014
$0.014
$0.014
30-Nov-18
30-Nov-18
30-Nov-18
(i) 8,000,000 options were issued to Mark Freeman, 5,000,000 were issued to Allan Boss and
3,000,000 options were issued to Stephen Keenihan.
(ii) 20% of the options will vest immediately; 30% of the options will vest on the first anniversary
and; 50% will vest on the second anniversary.
(iii) Option grant date was 20 November 2014 and issue date was 27 November 2014
Fair value of options granted are as follows:
Fair Value of Security at measurement date
Share Price at Grant Date
Exercise Price
Expected Volatility
Option Life
Expected Dividends
Risk Free interest rate
Directors (a)
$0.0025
$0.007
$0.014
50%
4 years
Nil
2.25%
Consultants (b)
$0.0025
$0.007
$0.014
50%
4 years
Nil
2.25%
(c)
Expenses arising from share-based payment transactions
Total expenses arising from share based payment transactions recognised during the period as part of
employee benefit expense were as follows:
Options issued to consultants*
Options issued to Directors**
2015
$
14,241
20,714
34,955
2014
$
40,048
27,533
67,581
*This expense related to the fair value of the 11,000,000 options issued to consultants and finance
providers. These options were valued at a total of $27,533 and the balance will be expensed over
the life of the options.
** This expense related to the fair value of the 16,000,000 options issued to consultants and finance
providers. These options were valued at a total of $40,048 and the balance will be expensed over
the life of the options.
41
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
25.
Parent Entity Financial Information
Summary financial information
The individual financial statements for the parent entity show the following aggregate amounts:
Statement of Financial Position
Current assets
Non-current assets
Total assets
Total liabilities
Net assets
Shareholders’ equity
Issued capital
Reserves
Accumulated losses
Loss for the year
26.
Related Party Transactions
(i)
Parent entity
2015
$
196,741
15,005,826
15,202,567
82,774
15,119,793
2014
$
141,744
15,823,464
15,965,208
76,574
15,888,634
42,045,942
2,398,362
(29,324,511)
15,119,793
42,045,942
2,365,548
(28,522,856)
15,888,634
(799,916)
(1,035,443)
The ultimate parent entity within the group is Grand Gulf Energy Limited (the legal parent).
(ii)
Subsidiaries
Interests in subsidiaries are set out below.
Investments in controlled entities
The consolidated entity financial statements incorporate the assets, liabilities and results of the following
subsidiaries in accordance with the accounting policy described in note 1.
Investments in controlled entities held by Grand Gulf Energy Limited
Grand Gulf Operating Inc*
Alto Energy Limited
GG Oil & Gas 1, INC
GG Oil & Gas 2, INC
GG Oil & Gas, INC
Birdwood Louisiana LLC
Country of
incorporation
USA
Australia
USA
USA
USA
USA
2015
%
100
100
100
100
100
100
2014
%
100
100
100
100
100
-
* Previously named Golden Fleece Petroleum Inc
Investments in controlled entities held by Alto Energy Limited
Grand Gulf Energy Inc
USA
Country of
incorporation
2015
%
100
2014
%
100
42
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(iii) Key management personnel compensation
Short-term employee benefits
Share-based payments
2015
$
528,900
20,714
549,614
2014
$
542,49
0
19,980
562,47
0
Detailed remuneration disclosures are provided in the Remuneration Report on pages 10-13.
(iv) Other transactions with key management personnel
No loans have been made during the financial period or at the date of this report to any key management
personnel. A number of key management personnel, or their personally-related entities, hold positions in
other entities that result in them having control or significant influence over the financial or operating
policies of those entities. A number of these entities transacted with the Company in the reporting period.
The terms and conditions of those transactions were no more favourable than those available, or which
might reasonably be expected to be available, on similar transactions to unrelated entities on an arm’s
length basis.
Transaction
Specified Directors & Executives
Mr C Morgan
Mr S Keenihan
Mr A Boss
Note
2015
$
2014
$
(i)
-
-
37,828
3,713
11,025
31,167
(i) $37,828 was paid to Mr. Boss during the year for legal secretarial services performed relating to
ongoing litigation.
(v) Contingent Liabilities and Commitments
The Parent Company has no contingent liabilities or commitments other than as those disclosed in the
notes
43
DIRECTOR’S DECLARATION
Directors’ Declaration
1.
2.
3.
4.
The financial statements, comprising the consolidated statement of Profit or Loss and Other
Comprehensive Income, consolidated statement of financial position, consolidated statement of
cash flows and consolidated statement of changes in equity and accompanying notes, are in
accordance with the Corporations Act 2001 and:
(a) comply with Accounting Standards and the Corporations Regulations 2001 and other
mandatory professional reporting requirements ; and
(b) give a true and fair view of the consolidated financial position as at 30 June 2015 and of its
performance for the year ended on that date.
In the Directors’ opinion, there are reasonable grounds to believe that the company will be able
to pay its debts as and when they become due and payable.
The Directors have been given the declarations by the chief executive officer and chief financial
officer required by s295A.
Note 1(a) confirms that the financial standards also comply with the International Financial
Reporting Standards as issued by the International Accounting Standards Board
This declaration is made in accordance with a resolution of the Board of Directors and is signed for and
on behalf of the Directors by:
Mr Mark Freeman
Director
Perth, 30 September 2015
44
Tel: +61 8 6382 4600
Fax: +61 8 6382 4601
www.bdo.com.au
38 Station Street
Subiaco, WA 6008
PO Box 700 West Perth WA 6872
Australia
INDEPENDENT AUDITOR’S REPORT
To the members of Grand Gulf Energy Limited
Report on the Financial Report
We have audited the accompanying financial report of Grand Gulf Energy Limited, which comprises the
consolidated statement of financial position as at 30 June 2015, the consolidated statement of profit or
loss and other comprehensive income, the consolidated statement of changes in equity and the
consolidated statement of cash flows for the year then ended, notes comprising a summary of
significant accounting policies and other explanatory information, and the directors’ declaration of the
consolidated entity comprising the company and the entities it controlled at the year’s end or from
time to time during the financial year.
Directors’ Responsibility for the Financial Report
The directors of the company are responsible for the preparation of the financial report that gives a
true and fair view in accordance with Australian Accounting Standards and the Corporations Act 2001
and for such internal control as the directors determine is necessary to enable the preparation of the
financial report that gives a true and fair view and is free from material misstatement, whether due to
fraud or error. In Note 1(a), the directors also state, in accordance with Accounting Standard AASB 101
Presentation of Financial Statements, that the financial statements comply with International
Financial Reporting Standards.
Auditor’s Responsibility
Our responsibility is to express an opinion on the financial report based on our audit. We conducted our
audit in accordance with Australian Auditing Standards. Those standards require that we comply with
relevant ethical requirements relating to audit engagements and plan and perform the audit to obtain
reasonable assurance about whether the financial report is free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in
the financial report. The procedures selected depend on the auditor’s judgement, including the
assessment of the risks of material misstatement of the financial report, whether due to fraud or error.
In making those risk assessments, the auditor considers internal control relevant to the company’s
preparation of the financial report that gives a true and fair view in order to design audit procedures
that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the
effectiveness of the company’s internal control. An audit also includes evaluating the appropriateness
of accounting policies used and the reasonableness of accounting estimates made by the directors, as
well as evaluating the overall presentation of the financial report.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis
for our audit opinion.
BDO Audit (WA) Pty Ltd ABN 79 112 284 787 is a member of a national association of independent entities which are all members of BDO Australia Ltd ABN
77 050 110 275, an Australian company limited by guarantee. BDO Audit (WA) Pty Ltd and BDO Australia Ltd are members of BDO International Ltd, a UK
company limited by guarantee, and form part of the international BDO network of independent member firms. Liability limited by a scheme approved under
Professional Standards Legislation, other than for the acts or omissions of financial services licensees.
Independence
In conducting our audit, we have complied with the independence requirements of the Corporations
Act 2001. We confirm that the independence declaration required by the Corporations Act 2001, which
has been given to the directors of Grand Gulf Energy Limited, would be in the same terms if given to
the directors as at the time of this auditor’s report.
Opinion
In our opinion:
(a)
the financial report of Grand Gulf Energy Limited is in accordance with the Corporations Act 2001,
including:
(i)
giving a true and fair view of the consolidated entity’s financial position as at 30 June 2015
and of its performance for the year ended on that date; and
(ii) complying with Australian Accounting Standards and the Corporations Regulations 2001; and
(b)
the financial report also complies with International Financial Reporting Standards as disclosed in
Note 1(a).
Report on the Remuneration Report
We have audited the Remuneration Report included in the directors’ report for the year ended 30 June
2015. The directors of the company are responsible for the preparation and presentation of the
Remuneration Report in accordance with section 300A of the Corporations Act 2001. Our responsibility
is to express an opinion on the Remuneration Report, based on our audit conducted in accordance with
Australian Auditing Standards.
Opinion
In our opinion, the Remuneration Report of Grand Gulf Energy Limited for the year ended 30 June 2015
complies with section 300A of the Corporations Act 2001.
Yours sincerely
BDO Audit (WA) Pty Ltd
Jarrad Prue
Director
Perth, 30 September 2015
CORPORATE GOVERNANCE STATEMENT FOR THE YEAR ENDED 30 JUNE 2015
Grand Gulf Energy's Board and Corporate Governance
Introduction
Since the introduction of the ASX Corporate Governance Council’s Principles of Good Corporate
Governance and Best Practice Recommendations ("ASX Guidelines" or “the Recommendations”), Grand
Gulf Energy Limited ("Company") has made it a priority to adopt systems of control and accountability as
the basis for the administration of corporate governance. Some of these policies and procedures are
summarised in this report. Commensurate with the spirit of the ASX Guidelines, the Company has followed
each Recommendation where the Board has considered the Recommendation to be an appropriate
benchmark for corporate governance practices, taking into account factors such as the size of the
Company, the Board, resources available and activities of the Company. Where, after due consideration,
the Company's corporate governance practices depart from the Recommendations, the Board has offered
full disclosure of the nature of, and reason for, the adoption of its own practice.
The Company has adopted systems of control and accountability as the basis for the administration of
corporate governance. The Board of the Company is committed to administering the policies and
procedures with openness and integrity, pursuing the true spirit of corporate governance commensurate
with the Company's needs.
Further information about the Company's corporate governance practices is set out on the Company's
website at www.grandgulfenergy.net. In accordance with the recommendations of the ASX, information
published on the Company's website includes:
•
•
•
•
•
•
•
•
Board Charter;
Code of Conduct;
Communications Strategy Policy;
Continuous Disclosure Policy;
Securities Trading Policy;
Risk Policy;
Remuneration Policy; and
Remuneration Committee Charter.
Explanation for Departures from Best Practice Recommendations
During the Company's 2014 financial year the Company has complied with the Corporate Governance
Principles and the corresponding Best Practice Recommendations as published by the ASX Corporate
Governance Council ("Corporate Governance Principles and Recommendations") and has adopted the
revised Principles and Recommendations taking effect from reporting periods beginning on or after 1
January 2008. Significant policies and details of any significant deviations from the principles are specified
below.
Corporate Governance Council Recommendation 1
Lay Solid Foundations for Management and Oversight
The Role of the Board and the Board Charter
The Board's Duties
As the Board acts on behalf of and is accountable to the shareholders, the Board seeks to identify the
expectations of the shareholders, as well as other regulatory and ethical expectations and obligations and
strives to meet those expectations. In addition, the Board is responsible for identifying areas of significant
business risk and ensuring arrangements are in place to adequately manage those risks.
The role of the Board is to oversee and guide the management of Grand Gulf Energy with the aim of
protecting and enhancing the interests of its shareholders and taking into account the interests of other
stakeholders including employees and the wider community.
In complying with Recommendation 1.1 of the Corporate Governance Council, the Company has adopted
a formal Board Charter which clearly establishes the relationship between the Board and management
and describes their functions and responsibilities. A summary of the Board Charter has been posted on
the corporate governance section of the Company’s website.
The Board is responsible for setting the strategic direction of the Company, establishing goals for
management and monitoring the achievement of those goals. The Executive Director is responsible to
the Board for the day to day management of the Company.
47
CORPORATE GOVERNANCE STATEMENT FOR THE YEAR ENDED 30 JUNE 2015
Corporate Governance Council Recommendation 2
Structure the Board to Add Value
The Composition of Grand Gulf Energy's Board
The composition of the Board is determined in accordance with the following principles and guidelines:
•
•
•
the Board should comprise at least 3 directors;
the Board should comprise directors with an appropriate range of qualifications and expertise; and
the Board shall meet regularly and follow meeting guidelines set down to ensure all directors are
made aware of, and have available all necessary information, to participate in an informed
discussion of all agenda items.
As at the date of this report, the Board comprises an executive chairperson, two executive directors and
one non-executive director. Details of the Directors are set out in the Directors’ Report.
Independence of Directors
The Board has reviewed the position and associations of each of the four Directors in office at the date of
this report and considers that one of the directors is independent. In considering whether a director is
independent, the Board has regard to the independence criteria in ASX Best Practice Recommendations
Principle 2 and other facts, information and circumstances that the Board considers relevant. The Board
assesses the independence of new directors upon appointment and reviews their independence, and the
independence of other directors, as appropriate.
The Board considers that Mr Keenihan meets the criteria in Principle 2. He has no material business or
contractual relationship with the Company, other than as a director and no conflicts of interest which could
interfere with the exercise of independent judgement.
The Board considers that Mr Morgan does not meet the criteria in Principle 2 as he is deemed to be a
substantial shareholder of the Company as outlined by the Corporations Act 2001.
Mr Freeman and Mr Boss are employed in an executive capacity by the Company and so cannot be
considered to be independent.
The Grand Gulf Energy Board did not have a majority of independent directors throughout the entire
financial year, and therefore was not in compliance with Best Practice Recommendation 2.1 for the entire
period. The Board considered that given the Company's stage of development and resources available
that it was not in the best interests of maximising the efficiency of the Board and developing the Company's
business to have a majority independent Board.
The directors will continue to monitor the composition of the Board to ensure its structure remains
appropriate and consistent with effective management and good governance.
Independent Chairman
The Chairman is not considered to be an independent director and as such Recommendation 2.2 of the
Corporate Governance Council has not been complied with. However, the Board believes that Mr Morgan
is the most appropriate person for the position as Chairman because of his industry experience and proven
track record as a public company director.
Roles of Chairman and Chief Executive Officer
The roles of Chairman and Chief Executive Officer are exercised by different individuals, and as such the
Company complies with Recommendation 2.3 of the Corporate Governance Council.
Nomination and Appointment of New Directors
The Board does not have a separate Nomination Committee as the selection and appointment process
for Directors is carried out by the full Board in accordance with the Company’s Constitution. The Company
is not of a sufficient size to warrant a separate committee.
The Constitution of the Company requires one third of the directors, other than the Executive Director, to
retire from office at each Annual General Meeting. Directors who have been appointed by the Board are
required to retire from office at the next Annual General Meeting and are not taken into account in
determining the number of directors to retire at that Annual General Meeting.
48
CORPORATE GOVERNANCE STATEMENT FOR THE YEAR ENDED 30 JUNE 2015
Grand Gulf Energy's Board Meetings
The Board met 5 times between 1 July 2014 and 30 June 2015.
The Board meets formally at least 5 times each year, and from time to time meetings are convened outside
the scheduled dates to consider issues of importance.
Directors’ attendance at Board and Committee meetings is in the directors’ report.
Performance Review
The Board's policy with respect to performance evaluation is to review its performance and that of its
Committees and executive management at least annually. The Chairman discusses with each director,
on a one on one basis, their contribution to the Board.
The method of the assessment is to be set by the Board.
Due to the changes in Board structure and strategic direction of the business the Board has not undertaken
a performance evaluation of itself or each director before the date of this annual report.
The Board will continue to review the need for a performance evaluation to be conducted.
Board Members' Rights to Independent Advice
The Board has procedures to allow directors, in the furtherance of their duties as directors or members of
a Committee, to seek independent professional advice at the Company's expense, subject to the prior
written approval of the Chairman.
Education
All Directors are encouraged to attend professional education courses relevant to their roles.
Corporate Governance Council Recommendation 3
Promote Ethical and Responsible Decision Making
The Board actively promotes ethical and responsible decision making.
Code of Conduct
The Board has adopted a Code of Conduct that applies to all employees, executives and Directors of the
Company. This code covers a broad range of issues and refers to those practices necessary to maintain
confidence in Grand Gulf Energy's integrity, including procedures in relation to:
•
•
•
•
•
•
•
•
•
•
compliance with the law;
financial records;
contributions to political parties, candidates or campaigns;
occupational health and safety;
confidential information;
conflict of interest;
efficiency;
equal opportunity;
corporate bribery; and
membership to industry and professional associations.
The Code directs individuals to report any contraventions of the Code to their superior or the Executive
Director.
The Company is committed to the highest level of integrity and ethical standards in all business practices.
Directors and employees must conduct themselves in a manner consistent with current community and
corporate standards and in compliance with all legislation. In addition, the Board subscribes to the
Statement of Ethical Standards as published by the Australian Institute of Company Directors.
All Directors and employees are expected to act with the utmost integrity and objectivity, striving at all
times to enhance the reputation and performance of the Company.
49
CORPORATE GOVERNANCE STATEMENT FOR THE YEAR ENDED 30 JUNE 2015
Diversity Policy
The Board has adopted a Diversity Policy as per Recommendation 3.2. The Diversity Policy addresses
equal opportunities in the hiring, training and career advancement of directors, officers and employees.
The Diversity Policy outlines the processes by which the Board will set measurable objectives to achieve
the aims of its Diversity Policy, with particular focus on gender diversity within the Company.
The Company is committed to ensuring a diverse mix of skills and talent exists amongst its directors,
officers and employees and is utilised to enhance the Company’s performance.
The Board is responsible for monitoring Company performance in meeting the Diversity Policy
requirements, including the achievement of diversity objectives.
Gender Diversity
The Company is focusing on the participation of women on its Board and within senior management. The
Board is in the process of determining appropriate measurable objectives for achieving gender diversity.
Women Employees, Executives and Board Members
The Company and its consolidated entities have three (3) female employees/executives:
Its financial controller;
its office manager; and
an executive assistant
which represent approximately 33% of the total employees, executives and/or board members of the
Company and its consolidated entities. There are currently no female members of the Board of the
Company.
Based on the above information the Company believes it is fully compliant with Recommendations 3.
Securities Trading by Grand Gulf Energy Directors and Employees
The Grand Gulf Energy Securities Trading Policy summarises the law relating to insider trading and sets
out the policy of the Company on directors, officers, employees and consultants dealing in securities of
Grand Gulf Energy.
A summary of the Securities Trading Policy has been posted to the corporate governance section of the
Company’s website. This policy is provided to all directors and employees and compliance with it is
reviewed on an ongoing basis in accordance with the Company’s risk management systems.
Corporate Governance Council Recommendation 4
Safeguarding Integrity in Financial Reporting
Financial Reporting
Consistent with ASX Principle 4.1, the Company's financial report preparation and approval process for
the financial year ended 30 June 2015 involved both the Executive Director and the Company Secretary
providing detailed representations to the Board covering:
•
•
•
•
compliance with Grand Gulf Energy's accounting policies and relevant accounting standards;
the accuracy of the financial statements and that they provide a true and fair view;
integrity and objectivity of the financial statements; and
effectiveness of the system of internal control.
Audit and Compliance Committee
The Board reviews the performance of the external auditors on an annual basis and meets with them
during the year to review findings and assist with Board recommendations
50
CORPORATE GOVERNANCE STATEMENT FOR THE YEAR ENDED 30 JUNE 2015
The Board no longer has a separate Audit Committee with a composition as suggested in the best practice
recommendations. The full Board carries out the function of an audit committee.
The Board believes that the Company is not of a sufficient size to warrant a separate committee and that
the full board is able to meet objectives of the best practice recommendations and discharge its duties in
this area.
The Board is directly responsible for the appointment, reappointment or replacement (subject, if
applicable, to shareholder ratification), remuneration, monitoring of effectiveness, and independence of
the external auditors, including resolution of disagreements between management and the auditor
regarding financial reporting.
Corporate Governance Council Recommendation 5
Make Timely and balanced disclosure
Continuous Disclosure
Grand Gulf Energy has established policies and procedures in order to comply with its continuous and
periodic disclosure requirements under the Corporations Act 2001 (Cth) and the ASX Listing Rules. The
Grand Gulf Energy Board has adopted a formal Continuous Disclosure Policy, a summary of which is
available from the corporate governance section of the Company’s website.
The Company Secretary has primary responsibility for the disclosure of material information to ASIC and
ASX and maintains a procedural methodology for disclosure, as well as for record keeping.
Grand Gulf Energy's Continuous Disclosure Policy requires all management to notify the Executive
Director, or the Company Secretary in his absence, of any potentially material information as soon as
practicable. The Policy also sets out what renders information material.
Corporate Governance Council Recommendation 6
Respect the Rights of Shareholders
Shareholder Communications
The Board's formal policy on communicating with shareholders, its Communications Strategy Policy, is
available from the corporate governance section of the Company’s website and supplements Grand Gulf
Energy's Continuous Disclosure Policy.
The aim of the Communications Strategy Policy is to make known Grand Gulf Energy's methods for
disclosure to shareholders and the general public. The Policy details the steps between disclosure to
ASIC and ASX and communication to shareholders, with the Company's website playing an important role
in Grand Gulf Energy's communications strategy.
The Board reviews this policy and compliance with it on an ongoing basis.
To add further value to Grand Gulf Energy's communications with shareholders, the external auditor will
be requested to attend the Company's AGM and be available to answer shareholders' questions about
the conduct of the audit and the preparation of the auditor's report.
Corporate Governance Council Recommendation 7
Recognise and manage risk
Risk Identification and Management
The Grand Gulf Energy Board accepts that taking and managing risk is central to building shareholder
value. The Board manages Grand Gulf Energy's level of risk by adhering to a formal Risk Policy
statement. The Grand Gulf Energy Risk Policy statement is available from the corporate governance
section of the Company’s website.
The Board has primary responsibility for oversight of the financial risks of the Company with particular
emphasis on Grand Gulf Energy's accounting, financial and internal controls. The Board will receive
regular reports from the external auditor on critical policies and practices of the Company and in relation
to alternative treatments of financial information.
The Company employs executives and retains consultants each with the requisite experience and
qualifications to enable the Board to manage the risks to the Company. The Board reviews risks to the
Company at regular Board meetings.
51
CORPORATE GOVERNANCE STATEMENT FOR THE YEAR ENDED 30 JUNE 2015
Key identified risks to the business are monitored on an ongoing basis as follows:
• Business risk management
The Company manages its activities within budgets and operational and strategic plans.
•
Internal controls
The Board has implemented internal control processes typical for the Company’s size and stage
of development. It requires the senior executives to ensure the proper functioning of internal
controls and in addition it obtains advice from the external auditors as considered necessary.
•
Financial reporting
Directors approve an annual budget for the Company and regularly review performance against
budget at Board Meetings.
• Operations review
Members of the Board regularly visit the Company’s exploration project areas, reviewing both
geological practices, and environmental and safety aspects of operations.
• Environment and safety
The Company is committed to ensuring that sound environmental management and safety
practices are maintained on its exploration activities.
The Company’s risk management strategy is evolving and will be an ongoing process and it is recognised
that the level and extent of the strategy will develop with the growth and change in the Company’s
activities.
Risk Reporting
As the Board has responsibility for the monitoring of risk management it has not required a formal report
regarding the material risks and whether those risks are managed effectively therefore not complying with
Recommendation 7.2 of the Corporate Governance Council. The Board believes that the Company is
currently effectively communicating its significant and material risks to the Board and its affairs are not of
sufficient complexity to justify the implementation of a more formal system for identifying, assessing
monitoring and managing risk in the Company.
The Company does not have an internal audit function.
Executive Director and Chief Financial Officer Written Statement
The Board requires the Executive Director and the Company Secretary provide a written statement that
the financial statements of company present a true and fair view, in all material aspects, of the financial
position and operational results and have been prepared in accordance with Australian Accounting
Standards and the Corporation Act. The Board also requires that the Executive Director and Company
Secretary provide sufficient assurance that the declaration is founded on a sound system of risk
management and internal control, and that the system is working effectively.
The declarations have been received by the Board, in accordance with Recommendation 7.3 of the
Corporate Governance Council.
52
CORPORATE GOVERNANCE STATEMENT FOR THE YEAR ENDED 30 JUNE 2015
Corporate Governance Council Recommendation 8
Remunerate Fairly and Responsibly
Remuneration for directors and executives
A brief discussion on the Company's remuneration policies and retailed disclosure of the remuneration
paid to directors and executives is set out on in the directors report.
Remuneration paid to the Company's directors and executives is determined with reference to the market
level of remuneration for other listed oil and gas companies both in Australia and the USA. This
assessment is undertaken with reference to advice and comment provided by various search executive
firms operating in the sector.
Bonuses which may be paid to the Company's directors and executives will be determined and paid on
the basis of the Company’s performance reflected through increases in the market capitalisation of the
Company and upon successful capital raisings.
Share options are awarded under the Employee Share Option Plan to the Company's directors and
executives and are determined on the individuals’ performance against milestones, the level of
involvement in achieving the corporate milestones and goals and to an extent the relativity between
executives.
Distinguish Between Executive and Non-Executive Remuneration
Total remuneration for non-executive directors is determined by resolution of shareholders. The Board
determines actual payments to directors and reviews their remuneration annually, based on independent
external advice, relativities and the duties and accountabilities of the directors. The maximum available
aggregate remuneration approved for non-executive directors is $200,000.
Non-executive directors may provide specific consulting advice to the Company upon direction from the
Board. Remuneration for this work is made at market rates.
Non-executive directors do not receive any other retirement benefits other than a superannuation
guarantee contribution required by government regulation, which is currently 9% of their fees. Non-
executive directors do participate in the Company's Employee Share Option Plan, given the Company's
size and stage of development and the necessity to attract the highest calibre of professionals to the role,
whilst maintaining the Company's cash reserves.
The equity based executive remuneration is made under the Company's Employee Share Option Plan
(“Plan”).
Remuneration Committee
The Board determines all compensation arrangements for Directors. It is also responsible for setting
performance criteria, performance monitors, share option schemes, incentive performance schemes,
superannuation entitlements, retirement and termination entitlements and professional indemnity and
liability insurance cover.
The Board has determined that a separate Remuneration Committee is not warranted due to the size and
nature of the Company.
The Board ensures that all matters of remuneration are in accordance with Corporations Act requirements,
by ensuring that none of the Directors participates in any deliberations regarding their own remuneration
or related issues.
Additional information included in accordance with the Listing Rules of the Australian Stock Exchange
Limited. The information is current as at.
53
ASX INFORMATION FOR THE YEAR ENDED 30 JUNE
2015
1.
a)
b)
c)
Statement of issued capital
Distribution of fully paid ordinary shares
Size of Holding
1
1,001
5,001
10,001
-
-
-
-
100,001 and
1,000
5,000
10,000
100,000
Over
Number of
Shareholders
61
16
15
266
503
─────────
861
═════════
Shares
Held
6,022
52,466
122,150
16,253,687
731,564,545
─────────
747,998,870
═════════
There are 302 shareholders holding unmarketable parcels represented by shares.
There are no restrictions on voting rights attached to the ordinary shares. On a show of hands
every member present in person shall have one vote and upon a poll, every member present or by
proxy shall have one vote for every share held.
2.
Substantial shareholders
The names of substantial shareholders who had notified the Company in accordance with section
671B of the Corporations Act 2001 are:
Charles Morgan
Craig Ian Burton
3. Quotation
21.1%
24.6%
Listed securities in Grand Gulf Energy Limited are quoted on the Australian Stock Exchange.
54
ASX INFORMATION FOR THE YEAR ENDED 30 JUNE
2015
4.
Top Twenty Shareholders as at 22 September 2015
The twenty largest shareholders hold 62.475% of the total issued ordinary shares in the Company as
at 22 September 2015.
Name
Number
of Shares
% of Issued
Shares
SEASPIN PTY LTD
158,100,476
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
11.
12.
13.
14.
15.
16.
17.
18.
19.
20.
ALBA CAPITAL PTY LTD
SKYE EQUITY PTY LTD
SACHA INVESTMENTS PTY LTD
ALBA CAPITAL PTY LTD
AVIEMORE CPITAL PTY LTD
ARMDIG PTY LTD
MR ADRIAN HARTONO
KAMIRA INVESTMENTS PTY LTD
PROSPERO CAPITAL PTY LTD
CRAIG BURTON
AUZY PTY LTD
MR STUART CHARLES GRACE & MR TRENT
CHRISTIAN GARDNER
90,041,561
52,800,000
25,098,974
19,619,108
15,117,114
11,250,000
10,913,372
9,856,000
9,150,193
8,482,220
8,000,000
21.136
12.038
7.059
3.355
2.623
2.021
1.504
1.459
1.318
1.223
1.134
1.070
7,800,000
1.043
MR DOUGAL JAMES FERGUSON
7,000,000
0.936
CRIMSON HOLDINGS PTY LTD
6,400,000
0.856
LIFWARD PTY LIMITED
6,047,594
0.809
MR KRISHNA RAVICHANDRAN & MR SRINIVASAN
RAVICHANDRAN
DR HUA YI LI & MRS MEI LUN LIN
MR NATHAN KOKOSZKA
MR CRAIG DAVID MERCOVICH
6,000,000
0.802
5,332,000
5,300,000
5,000,000
0.713
0.709
0.668
467,308,612
62.475
55