Grand Gulf Energy Limited
ABN 22 073 653 175
Annual Financial Report
for the financial year ended
30 June 2017
CONTENTS
Corporate Directory
Operating and Financial Review
Directors’ Statutory 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
2-10
11-19
20
21-24
25-48
49
50-53
54-59
60-61
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
110 Stirling Hwy
Nedlands WA 6009
Australia
Telephone: +61 8 9389 8033
Facsimile: +61 8 9262 3723
BANKERS
National Australia Bank
1232 Hay Street
Perth WA 6005
ASX CODE
GGE
ABN
22 073 653 175
1
OPERATING AND FINANCIAL REVIEW
FOR THE YEAR ENDED 30 JUNE 2017
Summary Overview
Grand Gulf Energy Limited (“Grand Gulf”/the “Company”) has concluded the 2017 financial year (“FY17”
or “the year”). This makes the 7th continuous year that the Company has not required any equity or debt
injections from the capital markets. The Company has generated revenue in excess of AUD $28 million
over the last 7 years and during the current year undertook oil and gas investments of ~AUD $1.2 million
in two new exploration opportunities, Boleslaw and Pleasant Home.
Grand Gulf continues to have a sound financial balance sheet with no debt, AUD $1.9 million cash and
strong reserves that generated gross revenues of over AUD $3 million for last year. The Company’s
operating activities are tabled below:
Sales Revenue
Costs of sales
Employee benefits expense
Other Administration Costs
Net Operating Profit
$3,100,527
$(1,551,562)
$(444,542)
$(302,787)
$801,636
Business Strategies and Projects
Fundamentally the Company has been focussing on the following core activities:
1. Exploit Napoleonville Salt Dome 3D – The Company owns fifty two square kilometers (52 km2) of
proprietary seismic over the Napoleonville Salt Dome in South Lousiana. The Dome has produced
in excess of one hundred and eighty BCF of gas (“180” BCF) and twenty two million barrels of oil (22
mmbo). Two of the Company’s most prominent fields, Desiree and D&L, are located on the
Napoleonville Salt Dome and collectively have produced in excess of seven hundred and thirty two
thousand (732,000) barrels of oil providing ~$ 65 million of revenue over the last four (4) years. The
Company believes that the Napoleonville Salt Dome continues to have substantial untapped oil and
gas opportunities.
Of significant interest to potential farm-in partners has been the opportunity to explore for oil and gas
below the Cris R sands. To date there has been little exploration below these sands (which typically
sit below the top of pressure at 13,000ft). Essentially the Napoleonville Salt Dome is a prolific oil and
gas salt dome where the opportunity to unlock substantial reserves in the deeper Marg Vag, Miogyp,
Camerina and Cib Haz resevoirs, which are highly productive in the region, with the benefit of 3D
seismic is yet to be realised. In addition, there continues to be attic opportunities in younger units to
extract remaining reserves.
2. Continue to Develop Existing Oil and Gas Fields
Fields
WI
Daily
(bbl/d)
Gas
(mcf/d)
Desiree
D&L
Abita
Pleasant Home
West Klondike
Total
39.65%
55.5%
20%
66%
11.93%
200
70
5
22
5
-
-
900
-
-
Monthly
Net Rev
(US$)
$80,000
$40,000
$11,000
$5,000
$2,000
$138,000
Years of
Reserves
Left (2P) *
7.2 yrs
7 yrs
2.6 yrs
8.3 yrs
6.4 yrs
* Assumes Production continues at the current rates. Typically wells decline production over time. A
detailed summary of each well is provided below to be used in conjunction with this table when analysing
the Company’s producing assets.
2
OPERATING AND FINANCIAL REVIEW
FOR THE YEAR ENDED 30 JUNE 2017
Desiree Field
Desiree, Assumption Parish, Louisiana, Non
Operator 39.65%WI
The Hensarling #1 well (Desiree Field) has produced a
total for the year of 79,182 barrels of oil. The well is
presently producing at ~210 bopd and has produced
465,462 barrels in total to 30 June 2017.
Remaining proved and probable reserves as at 30 June
2017 are estimated at 163,000 boe net to the Company
after royalties.
The Hensarling #1 well produces from the Cris R3 sands.
Production will move to the Cris R2 sand above the Cris
R3, once the Chris R3 has depleted . The Hensarling
well has 1P reserves of 413,000 bbls of oil. It is
anticipated that the well will continue to produce for an
additional 5.6 years on the basis that it produces at 200
bbls of oil per day. However, once the well is
recompleted in the Cris R2 productions rate may rise to
approximately 400 barrels per day due to the fact
there will be no
water production. The
Hensarling #1 well produced at over 400 bopd for the
first 2 years of production from the Cris R3 interval.
initial
In addition, the Hensarling Field has the potential to deliver additional reserves of up to 200,000 barrels
from updip locations in the same fault block. These reserves have the potential to be accessed from a
sidetrack to the Hensarling #1.
Desiree remains a substantial asset to the Company with significant long term reserves and cash flow.
3
OPERATING AND FINANCIAL REVIEW
FOR THE YEAR ENDED 30 JUNE 2017
Dugas & Leblanc Field
Napoleonville- Dugas & Leblanc #3 Well, Assumption
Parish, Louisiana, Non Operator 55.5% WI*
The D&L#3 well (Dugas & Leblanc Field) produced a total for
the year of 23,064 barrels of oil. The well is presently
producing at 69 bopd and has produced over 266,714 barrels
of oil and 0.5 BCF gas. The D&L #3 well continues to
outperform previous reserve estimates.
Remaining proved and probable reserves as at 30 June 2017 are
estimated at 77,000 boe.
In addition to the continuing production from D&L#3, the structure
of the D&L Field has the potential to yield an additional 1.5 BCF
of gas from an updip attic well. An updip well will be relatively
inexpensive, with an estimated cost of US$440,000 to the
Company’s interest but has the ability to generate in excess of
US$4.5m of gross revenue ($1.8million net) from a known and
productive oil and gas field.
Abita Field
Plaquemines Parish, Louisiana, Non Operator 20%WI
The SL 19706 #1 well produced a total for the year of 2,970 bbls of
oil and 213,356 mcfg. The well is presently producing at 7 bopd and
847 mcfgd.
The well was drilled to 10,700ft TVD and completed in June 2011
and logged 171ft of net pay in 9 intervals.
Abita is presently producing from its final known productive
interval, the 15 sand. The Company believes there is
significant potential to drill a lookalike well to target a
potential accumulation in a fault bounded compartment
immediately to the north of the main field. The Company
further believes that the discovery well did not penetrate an
important producing horizon (32 sand) because it was
faulted out. This suggests there is significant untested
potential across the fault in another trap to the north. The 32
sand in the discovery fault block was accordingly not tested
in the first well and any future development wells will be
designed to penetrate this sand. The 32 sand had a pre-drill
estimate of 400,000 bbls of oil and is a significant producer
in an adjacent field.
Recently, the operator, Wapiti Energy LLC sold its interest to
Krewe Energy LLC and Grand Gulf is working closely with the new operator of the field to determine its
interest and the interest of the other partners in drilling a development well.
Over US$7,000,000 has been spent in developing the field,
securing the seismic and drilling and completing facilities.
The Abita project provides the opportunity for significant additional
oil and gas in the northerly, untested segment of the field. GGE
estimate the feature could hold in excess of 700,000-1,100,000
bbls oil and 8 BCF gas.
4
OPERATING AND FINANCIAL REVIEW
FOR THE YEAR ENDED 30 JUNE 2017
Pleasant Home Field
Smak Dixon, Covington County, Alabama, Non-Operator (Earn-in 50%
WI)
The Company executed an earn-in agreement over Pleasant Home in October
2016. Operations commenced in November 2016 on the Smak Dixon 31-11
well and were completed in January 2016 when the well was immediately
placed on production. During the re-completion the well tested 4 separate
intervals which yielded, collectively, 140-160 bopd. However, production
initially commenced at ~50 bbls per day and is presently at ~22 bopd. The
well produced a total for the year of 2,561 barrels of oil from the top three
intervals. The Company earns a 60% WI in all net revenue from this well until
its investment is recovered.
Whilst the Company was pleased with the RST results and the completion of
the 9,850ft Hosston zone and the other 3 previously productive zones, the 31-
11 well had cement integrity issues and this resulted in over-runs on
recompletion and ongoing production.
The Company gained significant new information in respect of the methods
needed to recomplete these intervals and in particular the benefits of using
the RST log tool to identify bypassed pay zones. The RST log also confirmed
multiple, thinner, potential zones of interest above the 9850ft Hosston Sand.
The results of the re-completion indicate that a new well in the field may be justified. Such a well would
avoid some of the challenges encountered during the 31-11 operations associated with zone isolation and
allow the application of production enhancement techniques (such as an acid wash) which are expected
to deliver higher flow rates from the reservoirs.
The Company is presently reviewing plans to either re-complete the Smak Dixon 31-6 or drill a new well.
West Klondike Field
Wilbert Sons LLC #1 well, West Klondike, Iberville Parish, Louisiana, Non Operator 11.925% WI
The Wilbert Sons LLC #1 well produced a total for the year of 965 barrels of oil. The well is presently
producing at 4 bopd. Due to flooding the well was taken off production on 21 May 2017 and resumed
production on 26 June 2017. The Operator switched the power fluid from water to oil when the well was
placed back on production in June. It is anticipated that this will assist the movement of the oil and
increase production rates.
The well is producing from the Lorio interval which is the last economic interval in the well bore.
Boleslaw Project 20.4% WI – Poland
GGE acquired 20.4% of the high impact 87BCF Boleslaw gas prospect in the Kolo License in central
Poland. The Well spud on 10 December 2016 and reached a total depth (‘TD’) of 1550 meters on 10th
January 2017. The well intersected the designated objectives, however no commercial recoverable
hydrocarbons were indicated and the well has been plugged and abandoned.
Partners in the Kolo license continue to conduct post-drill technical review of all relevant well and seismic
data to determine the way forward with this exploration license. GGE also have a 20.4% interest in the
Kolo License which covers 1,150 square kilometers.
5
OPERATING AND FINANCIAL REVIEW
FOR THE YEAR ENDED 30 JUNE 2017
Net Reserves
Competent Persons Statement
The information in this report has been reviewed and signed off by Kevin Kenning (Registered Reservoir Engineer)
and Mr Henry Greaves (Registered Geologist, Mississippi, USA), with over 33 years and 22 years respective relevant
experience within oil and gas sector. This report contains forward looking statements that are subject to risk factors
associated with resources businesses. It is believed that the expectations reflected in these statements are reasonable
but they may be affected by a variety of variables and changes in underlying assumptions which could cause actual
results or trends to differ materially, including but not limited to: price fluctuations, actual demand, currency
fluctuations, drilling and production results, reserve estimates, loss of market, industry competition, environmental
risks, physical risks, legislative, fiscal and regulatory developments, economic and financial market conditions in
various countries and regions, political risks, project delay or advancement, approvals and cost estimates.
Financial Performance
Grand Gulf Energy recorded a statutory loss after tax of $2.2 million for the financial year which compares
with the loss after tax of $0.6 million recorded in the 2016 financial year. The 2017 statutory loss includes
a number of items which adversely affected the loss after tax by a total of $2 million. These items
principally comprise impairments and exploration expenses.
Financial Performance
FY17
FY16
Change
%
Sales revenue
Cost of Sales
Gross Profit (before amortisation)
Gross Profit/Sales Revenue
Amortisation
Gross Profit
Operating Cash Flow
Reported Loss
Underlying Ebitdae*
$
$
$
%
$
$
$
$
3,100,527
3,631,297
(530,770)
-15%
(1,551,562)
(1,712,067)
160,505
-9%
1,548,965
1,919,230
(370,265)
-19%
50%
53%
(573,202)
(517,577)
(55,625)
11%
975,763
1,401,653
(425,890)
-30%
(1,102,020)
2,406,153
(3,564,327)
-146%
(2,223,633)
(560,509)
(1,663,123)
-297%
(29,276)
1,052,184
(1,081,461)
-103%
* Earning before interest, tax,depreciation, amortisation and exploration
Calculation of underlying EBITDA is not a defined measure under International Financial Reporting
Standards and is not audited.
6
OPERATING AND FINANCIAL REVIEW
FOR THE YEAR ENDED 30 JUNE 2017
The underlying EBITDAE was ($29,276) compared with an underlying EBITDAE of $1,052,184 in the
2016 financial year. The factors which contributed to the movement between the periods were:
• lower sales revenue of $530,000 as a result of lower production numbers; and
• higher exploration and evaluation expenditure of $1.78 million, due to Pleasant Home exploration costs
and the Boleslaw well drilled in the 2017 financial year.
Financial Position
Financial Position
FY17
FY16
Change
%
Total Assets
Total Liabilities
Total Equity
Assets
$
$
$
5,091,152
7,413,602
(2,322,450)
-31%
561,712
887,758
(326,046)
-37%
4,529,440
6,525,844
(1,996,404)
-31%
Total assets decreased by $2.3 million from $7.4 million to $5.1 million. At 30 June the Company held
cash balances of $1.9 million and no debt.
Cash balances decreased by $1.2 million over the period after gross profit (before amortisation) of $1.55
million partially offset by funding exploration and development expenditure of $1.78 million as summarised
above.
Oil and gas assets decreased by $822,000 from $3.6 million to $2.7 million mainly as a result of
amortisation of $573,000 and $306,000 impairment of the Abita asset.
Trade and other receivables decreased $65,000 from $578,000 to $490,000, mainly due to expiry of the
put options.
Total Liabilities
Total liabilities decreased by $326,000 from $887,000 to $561,000.
Trade and other payables decreased $317,000 from $517,000 to $200,000.
Total Equity
Total equity has decreased by $2 million from $6.5 million to $4.5 million. In comparing equity for the
period to the prior corresponding period the key movements were:
•
•
•
higher accumulated losses of $2.2 million due to the reported loss for the period
higher contributed equity of $58,000 due to 19,500,000 Shares issued during the Financial Year
as part consideration for the Pleasant Home Field farmin acquisition.
higher reserves of $169,000 mainly due to the issue of equity incentives to employees partially
offset by Foreign Currency Translation Reserve movements.
Outlook
Grand Gulf Energy anticipates production of approximately 42,600 bbl oil and 66,000 mcf gas from its
operations in FY18. The large majority of the Company’s revenue is forecast to come from Desiree’s oil
production of approximately 27,000bbl oil.
The Company continues to manage general and administration costs tightly. General and administration
cost estimates for FY18 are now expected to be approximately $654K. Directors costs have reduced by
$60,000 per annum as have the costs of operating in Houston by ~$100,000.
7
OPERATING AND FINANCIAL REVIEW
FOR THE YEAR ENDED 30 JUNE 2017
Funding and Capital Management
Grand Gulf Energy seeks to manage its capital with the objective of providing shareholders with the
optimal risk-weighted return from the application of its expertise in the exploration, development,
production and sale of hydrocarbons.
At 30 June the Company had cash of $1.9 million.
Risk Management
The Company manages risks in accordance with its risk management policy with the objective of ensuring
all risks inherent in oil and gas exploration and production activities are identified, measured and then
managed or kept as low as reasonably practicable. The Board performs risk assessments on a regular
basis.
Key risks which may materially impact the execution and achievement of the business strategies and
prospects for Grand Gulf Energy are summarised below and are risks largely inherent in the oil and gas
industry. This should not be taken to be a complete or exhaustive list of risks nor are risks disclosed in
any particular order. Many of the risks are outside the control of the Company and its officers.
Appropriate policies and procedures are continually being developed and updated to manage these risks.
Risk
Exploration
1
Description
Exploration is a speculative activity with an associated risk of discovery to
find any oil and gas in commercial quantities and a risk of development. If
Grand Gulf Energy is unsuccessful in locating and developing or acquiring
new reserves and resources that are commercially viable, this may have a
material adverse effect on future business, results of operations and
financial conditions.
2
Development
and
Production
3
Regulatory
Grand Gulf Energy utilises established methodologies and experienced
personnel to evaluate prospects and manage the risk associated with
exploration. The Company also ensures that all major decisions are subjected
to assurance reviews which includes external experts and contractors where
appropriate.
Development and production of oil and gas projects may be exposed to low
side reserve outcomes, cost overruns, production decrease or stoppage,
which may result from facility shutdowns, mechanical or technical failure and
other unforeseen events. Grand Gulf Energy undertakes technical, financial,
business and other analysis in order to determine a project’s readiness to
proceed from an operational, commercial and economic perspective. Even if
Grand Gulf Energy recovers commercial quantities of oil and gas, there is no
guarantee that a commercial return can be generated.
Grand Gulf Energy has a project risk management and reporting system to
monitor the progress and performance of material projects and is subject to
regular review by senior management and the Board. All major development
and investment decisions are subjected to assurance reviews which includes
experts and contractors where appropriate.
Grand Gulf Energy operates in a highly regulated environment. Grand Gulf
Energy endeavours to comply with the regulatory authorities requirements.
There is a risk that regulatory approvals are withheld, take longer than
expected or unforeseen circumstance arise where requirements are not met
and costs may be incurred to remediate non compliance and/or obtain
approval(s). Changes in Government, monetary, taxation and other laws in
Australia or internationally may impact the Company’s operations.
Grand Gulf Energy monitors legislative and regulatory developments and
works to ensure that all stakeholder concerns are addressed fairly and
managed. Policies and procedures are independently reviewed and audited
to help ensure they are appropriate and comply with all regulatory
requirements.
8
OPERATING AND FINANCIAL REVIEW
FOR THE YEAR ENDED 30 JUNE 2017
4
Market
The oil market and Australian domestic gas market are subject to the
fluctuations of supply and demand and price. To the extent that future actions
of third parties contribute to demand destruction or there is an expansion of
alternative supply sources, there is a risk that this may have a material adverse
effect on price for the oil and gas produced and the Company’s business,
results of operations and financial condition.
Grand Gulf Energy monitors developments and changes in the international
oil and domestic gas market and conducts regular risk assessments.
5
Oil and Gas
Prices
Future value, growth and financial condition are dependent upon the prevailing
prices for oil and gas. Prices for oil and gas are subject to fluctuations and are
affected by numerous factors beyond the control of Grand Gulf Energy.
Grand Gulf Energy monitors and analyses the oil and gas markets and seeks
to reduce price risk where reasonable and practical. The Company has
policies and procedures for entering into hedging contracts to mitigate against
the fluctuations in oil price and exchange rates.
6
Operating
There are a number of risks associated with operating in the oil and gas
industry. The occurrence of any event associated with these risks could result
in substantial losses to the Company that may have a material adverse effect
on Grand Gulf Energy’s business, results of operations and financial condition.
To the extent that it is reasonable to do so, Grand Gulf Energy mitigates the
risk of loss associated with operating events through insurance contracts.
Grand Gulf Energy operates with a comprehensive range of operating and risk
management plans and an HSEC management system to ensure safe and
sustainable operations.
7
Counterparties The ability of the Company to achieve its stated objectives will depend on the
performance of the counterparties under various agreements it has entered
into. If any counterparties do not meet their obligations under the respective
agreements, this may impact on operations, business and financial conditions.
8
Reserves
Grand Gulf Energy monitors performance across material contracts against
contractual obligations to minimise counterparty risk and seeks to include
terms in agreements which mitigate such risks.
Oil and gas reserves are expressions of judgement based on knowledge,
experience and industry practice. These estimates may alter significantly or
become uncertain when new information becomes available and/or there are
material changes of circumstances which may result in Grand Gulf Energy
altering its plans which could have a positive or negative effect on Grand Gulf
Energy’s operations.
Reserve management is consistent with the definitions and guidelines in the
Society of Petroleum Engineers 2007 Petroleum Resources Management
Systems. The assessment of Reserves and Resources is also subject to
independent review from time to time.
9
Environmental Grand Gulf Energy’s exploration, development and production activities are
subject to state, national and international environmental laws and regulations.
Oil and gas exploration, development and production can be potentially
environmentally hazardous giving rise to substantial costs for environmental
rehabilitation, damage control and losses.
Grand Gulf Energy has a comprehensive approach to the management of
risks associated with health, safety, environment and community which
includes standards for asset reliability and integrity, as well as technical and
operational competency and requirements.
9
OPERATING AND FINANCIAL REVIEW
FOR THE YEAR ENDED 30 JUNE 2017
10
Funding
11
Abandonment
Liabilities
Grand Gulf Energy must undertake significant capital expenditures in order to
conduct its development appraisal and exploration activities. Limitations on
the accessing to adequate funding could have a material adverse effect on the
business, results from operations, financial condition and prospects. Grand
Gulf Energy’s business and, in particular development of large scale projects,
relies on access to debt and equity funding. There can be no assurance that
sufficient debt or equity funding will be available on acceptable terms or at all.
Grand Gulf Energy endeavours to ensure that the best source of funding to
maximise shareholder benefits and having regard to prudent risk management
is obtained and is supported by economic and commercial analysis of all
business undertakings
from
legislative and regulatory requirements concerning
Grand Gulf Energy has certain obligations in respect of decommissioning of
its fields, production facilities and related infrastructure. These liabilities are
derived
the
decommissioning of wells and production facilities and require Grand Gulf
Energy to make provisions for such decommissioning and the abandonment
of assets. Provisions for the costs of this activity are informed estimates and
there is no assurance that the costs associated with decommissioning and
abandoning will not exceed the amount of long term provisions recognised to
cover these costs.
Grand Gulf Energy recognises restoration provisions after the construction of
the facility and conducts a review on an annual basis. Any changes to the
estimates of the provisions for restoration are recognised in line with
accounting standards.
10
Director’s Statutory Report
FOR THE YEAR ENDED 30 JUNE 2017
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 2017 (referred to hereafter as the group).
REVIEW AND RESULTS OF OPERATIONS
For the financial year ended 30 June 2017, the loss attributable to members of the Group is $2,223,633
(2016: loss $560,508).
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
Experience and Expertise
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 Mark Freeman
B.com, CA, F.Fin
Managing Director –
Appointed 27 October 2010
and Company Secretary -
Appointed 22 April 2010
Mr Stephen Keenihan
B.Sce (Hons Geology)
Non-Executive Director
Appointed 13 November 2006
Responsibilities
Mr Morgan is Chairman of the Board of Directors. As a part time
executive
the Company, Mr Morgan was
responsible for overseeing corporate, acquisition, exploration and
production activities and providing technical expertise in these areas.
team member of
Former and current directorships in last 3 years
Current:, Whitebark Energy Ltd (formerly Transerv Energy Limited)
(appointment 9 October 2016).
Former: Tamaska Oil & Gas Limited (resigned 17 February 2014),
ADG Global Supply Ltd (resigned 29 July 2016).
Experience and Expertise
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.
Responsibilities
Mr Freeman Managing Director and is responsible for the day to day
management of Grand Gulf Energy.
Former and current directorships in last 3 years
Former: Macro Energy Ltd (resigned 5 June 2014), Mustang
Resources Ltd (resigned 10 June 2015), Tamaska Oil and Gas Ltd
(resigned 1 February 2015).
Experience and Expertise
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
Responsibilities
As a part time non-executive team of the Company, Mr
Keenihan was responsible for providing technical expertise in the
Company’s exploration and production activities.
Former and current directorships in last 3 years
Current: Whitebark Energy Ltd (formerly Transerv Energy
Limited) (appointed 23 March 2011).
11
Director’s Statutory Report
FOR THE YEAR ENDED 30 JUNE 2017
Mr Allan Boss
B. Com
Doctor of Jurisprudence
Executive Director
Appointed 13 November 2006
Experience and Expertise
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.
Responsibilities
As a part time non-executive team of the Company, Mr Boss was
responsible for overseeing exploration and production activities and
providing technical expertise in these areas.
Former and current directorships in last 3 years
None
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 production, exploration and evaluation
of oil and gas leases.
There has been no significant change in the nature of these activities during the year.
Equity Issues
•
19,500,000 Shares were issued during the Financial Year as part consideration for the Pleasant
Home Field farmin acquisition.
As at 30 June 2017 the consolidated cash position was $1,859,399 (2016: $3,108,828).
EVENTS SINCE THE END OF FINANCIAL YEAR
No matter or circumstance has arisen since 30 June 2017 that has significantly affected, or may
significantly affect the consolidated entity’s operations, the results of those operations, or the
consolidated entity’s state of affairs in future financial years.
SIGNIFICANT CHANGES IN THE STATE OF AFFAIRS
In the opinion of the Directors, other than those referred to in the review of operations, there were no
matters that significantly affected the state of affairs of the Group during the financial year.
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 (2016: nil).
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.
12
Director’s Statutory Report
FOR THE YEAR ENDED 30 JUNE 2017
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 (2016: nil listed options) and 92,000,000
unlisted options (2016: 27,000,000). Refer to note 23 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.
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
Mr S Keenihan
Mr M Freeman
Mr A Boss
Total
Options
Holder
158,100,476
3,917,229
-
2,481,720
164,499,425
-
-
-
-
-
-
-
-
-
-
158,100,476
3,917,229
-
2,481,720
164,499,425
Balance at
beginning of
year
Granted as
compensation
Expired
Balance as at
date of report
Vested and
exercisable
Mr C Morgan
-
15,000,000
Mr M Freeman
8,000,000
20,000,000
Mr S Keenihan
3,000,000
10,000,000
Mr A Boss
5,000,000
10,000,000
Total
16,000,000
55,000,000
-
-
-
-
-
15,000,000
28,000,000
13,000,000
15,000,000
15,000,000
28,000,000
13,000,000
15,000,000
71,000,000
71,000,000
13
Director’s Statutory Report
FOR THE YEAR ENDED 30 JUNE 2017
REMUNERATION REPORT (Audited)
Details of key management personnel
Mr C Morgan - Chairman
Mr M Freeman – Managing Director
Mr S Keenihan – Non-Executive Director
Mr A Boss – Executive Director
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.
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:
Restated* profit / (loss) for the
year
Restated 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 (%)
2017
2016
2015
2014
2013
(2,223,633)
(560,508)
(2,145,306)
(2,889,318)
(6,899,589)
(0.297)
-
-
(0.075)
-
-
(0.287)
-
-
(0.39)
-
-
(0.92)
-
-
(33%)
(17%)
(25%)
100%
(73%)
10.8%
2%
1%
1%
1%
The Corporate Governance Statement provides further information on the role of the Board.
*Balance at 30 June 2015 and prior years restated as a result of change in accounting policy disclosed.
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.
14
Director’s Statutory Report
FOR THE YEAR ENDED 30 JUNE 2017
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 2017 the following options were issued and not expired during the reporting
period:
Name
C Morgan
A Boss
S Keenihan
M Freeman
Number of options granted
15,000,000
10,000,000
10,000,000
20,000,000
These options were 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.
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,
Board 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 2016 Annual General Meeting
GGE received more than 99.9% of “yes” votes (excluding director’s votes) on its remuneration report for
the 2016 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, determined
and paid on the basis of the Company’s performance reflected through increase in the market
capitalisation of the Company and upon successful capital raisings, 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. 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:
15
Director’s Statutory Report
FOR THE YEAR ENDED 30 JUNE 2017
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 March 2016
$200,000(i)
3 months base salary
Mr S Keenihan
Commencing 1 July 2013
$48,000
3 months base salary
Mr A Boss
Commencing 1 November 2011
US$120,000 (AU$160,000)
3 months base salary
(i)
During the period ended 30 June 2016 Mark Freeman’s salary was reduced from $260,000 to $200,000. This change
was made effective March 2016.
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 2017 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 23 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:
2017
Directors
Mr C Morgan
Mr S Keenihan
Mr A Boss
Mr M Freeman
Total
2016
Directors
Mr C Morgan
Mr S Keenihan
Mr A Boss
Mr M Freeman
Total
Short term
benefits
Post-
employment
Equity
Total
Salary and
fees
$
72,000
48,000
160,000
200,000
480,000
Bonus
Super-annuation Options
Shares
$
-
-
-
-
-
$
$
$
$
-
-
-
-
-
60,000
40,903
41,505
82,409
224,817
-
-
-
-
-
132,000
88,903
201,505
282,409
704,817
Short term
benefits
Post-
employment
Equity
Total
Salary
and fees
$
72,000
48,000
164,808
240,000
524,808
Bonus
Super-annuation
Options
Shares
$
-
-
-
-
-
$
$
-
-
-
-
-
-
2,722
4,537
7,260
14,519
$
-
-
-
-
-
$
72,000
50,722
169,345
247,260
539,327
16
Director’s Statutory Report
FOR THE YEAR ENDED 30 JUNE 2017
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
C. Morgan
7 Dec 16
15,000,000
A Boss
7 Dec 16
10,000,000
S Keenihan
7 Dec 16
10,000,000
(i)
(i)
(i)
(ii)
(ii)
(ii)
$0.014
$0.014
$0.014
$0.008
$0.008
$0.008
30 Nov 18
30 Nov 18
30 Nov 18
30 Jun 20
30 Jun 20
30 Jun 20
Value per
option at
grant date
$0.0025
$0.0025
$0.0025
$0.0040
$0.0040
$0.0040
M Freeman
(i)
7 Dec 16
$0.0040
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.
(ii) The options vested immediately
20,000,000
30 Jun 20
$0.008
(ii)
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.
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 over ordinary shares held by Key Management Personnel during the financial year
is as follows:
30 June 2017
Balance at
start of the
year
Granted
during the
year
Lapsed/
Expired/
Forfeited
Balance
at the end
of the year
Vested and
Exercisable
at end of
year
Unvested at
end of year
No.
No.
No.
No.
No.
No.
Directors & KMP
Mr M Freeman
Mr A Boss
Mr C Morgan
Mr S Keenihan
8,000,000
5,000,000
-
3,000,000
20,000,000
10,000,000
15,000,000
10,000,000
Total
16,000,000
55,000,000
-
-
-
-
-
28,000,000
15,000,000
15,000,000
13,000,000
28,000,000
15,000,000
15,000,000
13,000,000
71,000,000
71,000,000
-
-
-
-
-
17
Director’s Statutory Report
FOR THE YEAR ENDED 30 JUNE 2017
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 2017
Directors & KMP
Mr C Morgan
Mr M Freeman
Mr A Boss
Mr S Keenihan*
Total
Balance at start
of the year
Received during
the year on
exercise of
options
Other changes
during the year
Balance at end
of the year
No.
No.
No.
No.
158,100,476
-
2,481,720
3,917,229
164,499,425
-
-
-
-
-
-
-
-
-
-
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
Charlie Morgan provided an unsecured, interest free and repayable on demand loan to Grand Gulf Energy
Limited, totalling $180,385. The loan has been repaid in full during January 2017.
The Company acquired a 20.4% interest in Hutton Poland from Hutton Energy Ltd in November 2016.
Charles Morgan, Chairman of Grand Gulf Energy, is a director and shareholder of Hutton Energy Ltd,
Stephen Keenihan, a director in Grand Gulf Energy, is a minority shareholder in Hutton Energy Ltd and
Craig Burton, a major shareholder in Grand Gulf Energy, is a shareholder in Hutton Energy Ltd. The
independent directors of Grand Gulf, Mark Freeman and Allan Boss assessed the acquisition of the 20.4%
interest in Hutton Poland Ltd independently. In addition the acquisition fell below the level of materiality
as set out in ASX Listing Rule 10.1.
As a result of the petroleum licence laws in Poland, which do not allow more than one holder of the licence,
the Kolo Licence is held by Strzelecki Sp. z.o.o. (Strzelecki) a 100% owned subsidiary of Hutton Poland
(UK) Ltd. GGE as part of the acquisition has acquired a 20.4% equity interest in Hutton Poland (UK) Ltd.
The other shareholders include Hutton Energy Ltd (30.6%) and Prospex Oil and Gas plc (49%).
This the end of the audited remuneration report.
18
Director’s Statutory Report
FOR THE YEAR ENDED 30 JUNE 2017
Shares issued on the exercise of options
There were no ordinary shares of Grand Gulf Energy Limited issued during the year ended 30 June 2017
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).
Mr C Morgan
Mr A Boss
Mr S Keenihan
Mr M Freeman
Board of Directors
Attended
3
5
5
5
Held
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:
–BDO supplied corporate finance advice to the company at a cost of $2,000
The board of Directors has considered the position and 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.
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 26 September 2017, and signed in accordance with a resolution of the Directors.
Mr Mark Freeman
Managing Director
19
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 2017, 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, 26 September 2017
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 2017
Notes
2
3(a)
3(b)
23(c)
8
8
3(b)
3(b)
4
Revenue from continuing operations
Other income
Cost of sales
Interest income
Exploration and evaluation expenditure
Corporate office expenses
Employee benefits expense
Share based payment expense
Amortisation of oil and gas properties
Impairment of oil and gas properties
Hedging Cost
Foreign exchange
Professional and statutory fees
Depreciation
Bad debt written off
Other expenses
Loss before income tax
Income tax (expense)/ benefit
Loss from continuing operations
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
2017
$
2016
$
3,100,527
305
3,631,297
1,126,432
(1,551,562)
(1,712,067)
50,123
21,759
(1,781,857)
(1,114,339)
(100,187)
(444,542)
(268,128)
(573,202)
(306,147)
(140,962)
(75)
(135,649)
(5,326)
-
(66,951)
(2,223,633)
-
(77,588)
(479,404)
(24,502)
(517,576)
(582,292)
(345,292)
(52,588)
(181,024)
(2,537)
(185,518)
(65,269)
(560,508)
-
(2,223,633)
(560,508)
(2,223,633)
(560,508)
(99,399)
(2,323,032)
345,506
(215,002)
Basic earnings/(loss) per Share (cents per share)
Diluted earnings/(loss) per share (cents per share)
19
19
(0.297)
(0.297)
(0.075)
(0.075)
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.
21
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
FOR THE YEAR ENDED 30 JUNE 2017
ASSETS
Current Assets
Cash and cash equivalents
Trade and other receivables
Other assets
Total Current Assets
Non-Current Assets
Investment
Property plant & equipment
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
Notes
14(a)
6
6
7
8
9
10
11
12
13
2017
$
2016
$
1,859,399
484,267
5,838
2,349,504
2
5,167
2,736,479
2,741,648
5,091,152
200,370
200,370
361,342
361,342
561,712
3,108,828
578,315
157,125
3,844,268
-
10,685
3,558,649
3,569,334
7,413,602
517,377
517,377
370,381
370,381
887,758
4,529,440
6,525,844
42,104,442
5,005,017
42,045,942
4,836,288
(42,580,019)
(40,356,386)
4,529,440
6,525,844
The above consolidated statement of financial position should be read in conjunction with the
accompanying notes to the financial statements
22
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 30 JUNE 2017
Contributed
Equity
Foreign
currency
translation
reserve
Share
Option
Reserve
Option
premium
reserve
Accumulated
losses
Total
$
$
$
$
$
$
Balance at 1 July 2016
42,045,942
2,411,279
1,748,209
676,800
(40,356,386)
6,525,844
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 2017
-
-
-
-
(99,399)
(99,399)
-
-
-
-
-
-
(2,223,633)
(2,223,633)
-
(99,399)
(2,223,633)
(2,323,032)
58,500
-
42,104,442
-
-
2,311,880
-
268,128
2,016,337
-
-
676,800
-
-
(42,580,019)
58,500
268,128
4,529,440
Balance at 1 July 2015
42,045,942
2,065,773
1,723,707
676,800
(39,795,878)
6,716,344
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 2016
-
-
-
-
345,506
345,506
-
-
-
-
-
-
(560,508)
(560,508)
-
345,506
(560,508)
(215,002)
-
-
42,045,942
-
-
2,411,279
-
24,502
1,748,209
-
-
676,800
-
-
(40,356,386)
-
24,502
6,525,844
The above consolidated statement of changes in equity should be read in conjunction with the
accompanying notes to the financial statements.
23
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED 30 JUNE 2017
Cash flows from operating activities
Receipts from customers
Payments to suppliers and employees
Interest received
Insurance pre-payment (refundable)
Production costs
Payments for exploration and evaluation
Notes
2017
$
2016
$
3,152,825
5,216,301
(1,053,422)
(1,091,651)
50,123
23,373
21,759
1,086,150
(1,551,562)
(1,712,067)
(1,723,357)
(1,114,339)
Net cash inflows/(outflows) from operating activities
14(b)
(1,102,020)
2,406,153
Cash flows from investing activities
Payment for property, plant and equipment
Payments for development of oil & gas properties
Net cash (outflows) from investing 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
-
(147,599)
(147,599)
(3,758)
(210,506)
(214,264)
(1,249,619)
2,191,889
3,108,828
969,526
190
(52,587)
14(a)
1,859,399
3,108,828
The above consolidated statement of cash flows should be read in conjunction with the
accompanying notes to the financial statements.
24
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 2017 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 26 September 2017.
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 2017 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.
Reference and
Title
AASB 9 -
Financial
Instruments
Summary
Application date
of standard
Impact on
30 June 2017
financial
statements
AASB 9 (December 2014) is a new Principal standard which replaces
AASB 139. This new Principal version supersedes
AASB 9 issued in December 2009 (as amended) and AASB 9
(issued in December 2010) and includes a model for
classification and measurement, a single, forward-looking expected
loss’ impairment model and a substantially-reformed
approach to hedge accounting.
Annual reporting
The introduction of
periods
AASB 9 is not
commencing on or
expected to have a
after 1 January
significant impact
2018
on the operations of
AASB 9 is effective for annual periods beginning on or after
1 January 2018. However, the Standard is available for
early application
the Group when
implemented.
AASB 15 –
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
reflects the 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.
Annual reporting
The impact of this
periods beginning
adoption is currently
on or after 1
in the process of
January 2018
being assessed by
the Group, however
the impact has yet
to be quantified.
The Group will
adopt this standard
from 1 July 2018.
25
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
AASB 16 (issued
February 2016)
Leases
AASB 16 eliminates the operating and finance lease
classifications for lessees currently accounted for under
AASB 117 Leases. It instead requires an entity to bring
most leases onto its balance sheet in a similar way to how
existing finance leases are treated under AASB 117.
An entity will be required to recognise a lease liability
and a right of use asset in its balance sheet for most leases.
There are some optional exemptions for leases with a period
of 12 months or less and for low value leases.
Lessor accounting remains largely unchanged from AASB 117.
Annual reporting
The impact of this
periods beginning
adoption is currently in
on or after 1
the process of being
January 2019.
assessed by the
Group, however the
impact has yet to be
quantified. The Group
will adopt this standard
from 1 July 2019.
Significant accounting estimates and judgements
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. Refer to Note
23.
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 2017
rehabilitation obligations have a carrying value of $361,342 (2016: $370,381).
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 2017, the carrying value of oil & gas properties is $2,736,479 (2016: $3,558,649).
Refer to Note 8 for further details.
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
26
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
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.
(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.
27
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
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.
(d)
Non-operator interests in oil & gas properties
Exploration and evaluation asset
The Group expenses all exploration and evaluation expenditure as incurred in respect of each identifiable
area of interest until a time where an asset is in development.
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.
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, 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 these 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.
28
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
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 is recognised in Statement of profit or loss and other
comprehensive income.
(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 or loss. Impairment testing is performed annually for goodwill
and intangible assets with indefinite lives.
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(USD) transactions are translated into functional currency(AUD) 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 or 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 consolidated statement of profit or loss and other comprehensive income.
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 or loss in the period in which the operation is disposed.
29
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(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.
(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.
(l)
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.
30
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Other revenue
(i)
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.
Service income
(ii)
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.
Dividends
(o)
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.
(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
(iii) Wages, salaries and annual leave
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
(iv)
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
(v)
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
(vi)
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.
(vii) Options
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.
31
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(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.
(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 24 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.
32
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
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.
(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
The Company executed an earn-in agreement over Pleasant Home in October 2016. Grand Gulf’s has
met it’s earn-in financial commitment of $350,000 of re-completion costs. All future costs are now shared
50/50 with the operator. In addition, GGE has paid an entry fee of US$50,000.
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
Sale of oil and gas
Total revenues from ordinary
activities
2017
2016
$
$
3,100,527
3,631,297
3,100,527
3,631,297
33
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
3. Profit/ (loss) from operations
(a) Other Income
Settlement of oil put options sales and purchased
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/(gains)
4.
Income tax
(a) Income tax expense
2017
2016
$
$
-
305
305
826,663
299,769
1,126,432
2017
$
2016
$
933,810
617,752
1,551,562
944,014
768,053
1,712,067
5,326
5,326
2,537
2,537
100,187
100,187
77,588
77,588
75
52,588
2017
$
2016
$
Current tax
Deferred tax
Under (over) provided in prior years
-
-
-
-
-
-
-
-
34
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(b) Reconciliation of income tax benefit to prima facie tax payable
Profit/(loss)from ordinary activities before
income tax expense
Prima facie tax benefit on gain from ordinary
activities at 27.5% (2016: 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
Unused tax losses for which no deferred tax
asset has been recognised - Overseas
Unused tax losses for which no deferred tax
asset has been recognised - Australia
2017
$
2016
$
(2,223,633)
(560,508)
611,499
168,152
53,122
460
664,621
(167,692)
88,308
36,722
(324,132)
(428,797)
-
(229,134)
360,104
-
2017
$
2016
$
10,135,453
10,055,298
3,887,060
3,188,041
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.
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.
35
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
6. Trade and other receivables
Current
Trade and other receivables (i)
Insurance claim receivables
Other Assets
Prepayments
Put options
2017
2016
$
$
484,267
5,838
490,105
548,951
29,364
578,315
-
-
-
14,335
142,790
157,125
(i)
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.
Refer to note 22 for the Group’s financial risk management policies.
The Group has no impairments to receivables or have receivables that are past due but not impaired.
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. 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
Foreign exchange differences
Amortisation
Impairment of oil and gas properties
Carrying amount at end of year
2017
2016
$
$
20,616
(15,449)
5,167
20,616
(9,931)
10,685
2017
$
2016
$
7,856,278
(5,119,799)
2,736,479
7,799,099
(4,240,450)
3,558,649
3,558,649
151,895
(94,716)
(573,202)
(306,147)
2,736,479
4,263,353
253,663
141,501
(517,576)
(582,292)
3,558,649
The Company recorded impairment of oil and gas properties of $306,147 and $582,292 for the years
ended 30 June 2017 and 2016, respectively.
36
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
During 2017, as a result of a decline in the Group’s estimated reserves and the performance of its wells,
an impairment assessment was performed. The impairment testing of long-lived assets was based upon
a single step process as prescribed in the accounting standards.
The recoverable amount of Oil and Gas Properties is estimated on the basis of the discounted value of
future cash flows (i.e. value in use model). The estimates of future cash flows are based on significant
assumptions including:
-
-
-
Estimates of the quantitries of oil and gas reserves for which there is a high degree of confidence
of economic extraction and the timing of access to these reserves;
Future oil and gas prices based on consensus forecasts by economic forecasters; and
The asset specific discount rate applicable to the cash generating unit.
Future changes in assumptions upon which these estimates are based may give rise to a material
adjustment by impairing Oil and Gas Properties.
For those wells that failed the impairment test, the Company has valued its assets on a PV10 basis and
has used forward pricing as at 30 June 2017 (Oil: $US$50/barrel, Gas: $2.80mcf). 2P reserves have been
used when calculating the net present value of the assets. Based on these results the Company
recognised an impairment of $306,147 in the current year.
9. Trade and other payables
Current
Trade creditors
2017
2016
$
$
200,370
200,370
517,377
517,377
Risk exposure: Information about the Group’s exposure to foreign exchange risk is provided in note 22.
Due to the short-term nature of the current payable, their carrying amount is assumed to be the same as
their fair value.
10. 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
2017
2016
$
$
361,342
370,381
370,381
(9,039)
361,342
366,788
3,593
370,381
37
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
11. Contributed equity
(a) Issued and paid up share capital
2017
2016
Number of
Shares
$
Number of
Shares
$
Balance at the beginning of the year
Shares issued to Gulf Coast Minerals,
LLC
747,998,870 42,045,942
58,500
19,500,000
747,998,870 42,045,942
-
-
767,498,870 42,104,442
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 22 for details of the Group’s capital management policy.
(c) Share options
As at 30 June 2017 the Company has on issue 92,000,000 (30 June 2016: 27,000,000) 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
Number
Number
Number
Number
Number
Unlisted options
Unlisted options
$0.014
$0.008
30/11/18
30/06/20
27,000,000
-
-
65,000,000
27,000,000
65,000,000
-
-
-
-
-
-
27,000,000
65,000,000
92,000,000
38
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
12. Reserves
Foreign currency translation (a)
Share option reserve (b)
Option premium reserve (c)
2017
2016
$
$
2,311,880
2,016,337
676,800
2,411,279
1,748,209
676,800
5,005,017
4,836,288
(a)
Foreign currency translation reserve
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
Loss on translation of foreign
controlled entities
Balance at end of year
(b)
Share option reserve
2017
2016
$
$
2,411,279
2,065,773
(99,399)
345,506
2,311,880
2,411,279
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
2017
2016
$
$
1,748,209
268,128
2,016,337
1,723,707
24,502
1,748,209
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
2017
$
676,800
676,800
2016
$
676,800
676,800
39
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
13. Accumulated losses
Balance at beginning of year
Net profit/(loss) attributable to members of the
Company
Balance at end of year
14. Notes to the statement of cash flows
(a)
Reconciliation of cash and cash equivalents
2017
2016
$
$
(40,356,386)
(39,795,878)
(2,223,633)
(560,508)
(42,580,019)
(40,356,386)
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
2017
2016
$
$
1,859,399
3,108,828
The Group’s exposure to interest rate risk is discussed in note 22. 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
Exploration expenditure
Debt write off
Exchange rate differences on assets/liabilities held
in foreign currencies
Changes in net assets and liabilities
(Increase) / decrease in assets:
Trade and other receivables
Increase / (decrease) in liabilities:
Trade and other creditors
Net cash inflows/(outflows) from operating activities
15. Expenditure commitments
Lease commitments
There were no liabilities as at 30 June 2017
2017
2016
$
(2,223,633)
5,326
306,147
573,202
268,128
58,500
-
$
(560,508)
2,537
582,292
517,576
24,502
-
185,518
75
52,587
232,491
1,445,979
(322,256)
(1,102,020)
155,670
2,406,153
40
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
16. 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 23.
There were no other non-cash investing or financing activities during the period.
17. Contingent liabilities
The Group had no current contingent liabilities as at 30 June 2017 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$250,000. 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 Resolved
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.
The litigation, over the disputed 5.3% working interest in Desiree, was dealt with in private arbitration in
January 2016 and the judgment found in favour of the Company. In addition, the judge ruled that legal
fees of $100,000 were to be reimbursed to the Company. This removes a significant burden and
uncertainty over the Company’s interest in Desiree.
Apart from the potential contingent liabilities noted above, there are no further contingent assets or
liabilities existing at 30 June 2017.
The Board is mindful of its obligations to investors and will immediately update ASX as and when further
information becomes available.
18. Events occurring after reporting date
No matter or circumstance has arisen since 30 June 2017 that has significantly affected, or may
significantly affect the consolidated entity’s operations, the results of those operations, or the consolidated
entity’s state of affairs in future financial years.
41
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
19. 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
2017
$
2016
$
Profit/(loss) used in calculating basic gain per share
Weighted average number of ordinary shares used in calculating
basic earnings per share
Basic/Diluted earnings/(loss) per share (cents per share)
(2,223,633)
(560,508)
748,897,089
(0.297)
747,998,870
(0.075)
20. Auditor’s remuneration
Audit or review of financial report AUS
2017
$
52,424
52,424
2016
$
49,000
49,000
The auditor of Grand Gulf Energy Limited is BDO Audit (WA) Pty Ltd.
During the 2017 period BDO supplied corporate finance advice to the company at a cost of $2,000.
21. 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 are the production and exploration operations in the 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.
22. 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.
42
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 2017 and June 2016.
(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.
Cash and cash equivalents
Trade and other receivables
Insurance claim
CARRYING AMOUNT
2017
$
2016
$
1,859,399
3,108,828
484,267
5,838
548,951
29,364
(v)
Capital Risk and Liquidity Risk Management
The Group’s total capital is defined as shareholder’s funds, plus net debt and amounted to $2,349,504 at
30 June 2017 (2016: $3,844,268). 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.
Financing Arrangements
The Group did not have access to the borrowing facilities during the year.
43
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
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
2017
Less than
6 months
6-12
months
Between
1 and 2
years
Between 2
and 5 years
Over 5
years
Total
contractual
cash flows
Carrying
amount
liabilities
Non-
derivatives
Trade
creditors
Total
200,370
200,370
-
-
-
-
-
-
At 30 June 2016
Less than
6 months
6-12
months
Between
1 and 2
years
Between 2
and 5 years
Over 5
years
Non-
derivatives
Trade creditors
517,377
Total
517,377
-
-
-
-
-
-
23. Share Based Payments
(a)
Employee Option Plan
-
-
-
-
200,370
200,370
200,370
200,370
Total
contractual
cash flows
Carrying
amount
liabilities
517,377
517,377
517,377
517,377
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 2016 the Company issued options to
Executives and Consultants outside of this plan.
Grand Gulf Energy Limited – 2017
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
Exercisable at
end of the year
Number
Number
Number
Number
Number
20 Nov 14
7 Dec 16
Total
30 Nov 18
30 Jun 20
$0.014
$0.008
27,000,000
-
-
65,000,000
27,000,000
65,000,000
Weighted Average Exercise price
1.4c
1.8c
-
-
-
27,000,000
65,000,000
92,000,000
1.68c
27,000,000
65,000,000
92,000,000
Grand Gulf Energy Limited – 2016
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
Exercisable at
end of the year
20 Nov 14
30 Nov18
$0.014
27,000,000
Total
Weighted Average Exercise price
27,000,000
1.4c
-
-
-
-
27,000,000
13,500,000
27,000,000
13,500,000
Number
Number
Number
Number
Number
44
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 2017. During the half-year ended 31 December 2016, 65,000,000 incentive options were
granted to directors and consultants and approved by shareholders at the AGM on 30 November 2016.
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 30 November 2016 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 2017 are as follows:
Number
Vesting
Conditions
Exercise Price
Expiry Date
Share Options (iii)
Executive Directors (i)
Non-Executive Directors (i)
Consultants
45,000,000
10,000,000
10,000,000
(ii)
(ii)
(ii)
$0.008
$0.008
$0.008
30 Jun 20
30 Jun 20
30 Jun 20
(i) 20,000,000 options were issued to Mark Freeman, 10,000,000 were issued to Allan Boss,
15,000,000 were issued to Charles Morgan and 10,000,000 options were issued to Stephen
Keenihan.
(ii) the options were vested immediately
(iii) Option grant date was 30 November 2016 and issue date was 7 December 2016.
Fair value of options granted is 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)
Consultants (b)
$0.006
$0.007
$0.008
100%
3.68 years
Nil
1.68%
$0.006
$0.007
$0.008
100%
3.68 years
Nil
1.68%
(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:
2017
2016
$
$
Options issued to consultants*
Options issued to Directors**
9,983
14,519
24,502
*The expense of $3,312 (2016: $9,983) is related to the fair value of the 11,000,000 options issued
to consultants and finance providers during 2014. These options were valued at a total of $27,533
and the total balance has been expensed over the vesting period. On 7 December 2016
10,000,000 options were issued to consultants and finance providers, these options were valued
at a total of $40,000. These options vested immediately. The purpose of the grant is for the
Company to retain their high calibre services and to provide cost effective remuneration to these
consultants for their ongoing commitment and contribution to the Company.
43,312
224,817
268,128
45
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
** The expense of $4,817 (2016: $14,519) is related to the fair value of the 16,000,000 options
issued to consultants and finance providers during 2014. These options were valued at a total of
$40,048 and the total balance has been expensed over the vesting period. On 7 December 2016
65,000,000 options were issued to Directors, these options were valued at a total of $220,000.
These options vested immediately.
24. 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
2017
$
2016
$
1,534,835
2,719,557
4,254,392
3,015,339
3,322,564
6,337,903
84,901
4,169,491
131,766
6,206,137
42,104,442
2,693,135
(40,628,086)
4,169,491
42,045,942
2,425,007
(38,264,812)
6,206,137
(2,363,274)
(8,940,391)
(i)
Contingent Liabilities and Commitments
The Parent Company has no contingent liabilities or commitments other than as those disclosed in the
notes.
25. Related Party Transactions
(ii)
Parent entity
The ultimate parent entity within the group is Grand Gulf Energy Limited (the legal parent).
(iii)
Subsidiaries
Interests in subsidiaries are set out below.
(iii)
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.
46
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
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
2017
%
-
100
100
100
100
100
2016
%
100
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
2017
%
100
2016
%
100
(iv) Key management personnel compensation
Short-term employee benefits
Share-based payments
2017
$
480,000
224,817
704,817
2016
$
524,808
14,519
539,327
Detailed remuneration disclosures are provided in the Remuneration Report on pages 14-18.
(v)
Other transactions with key management personnel
Charlie Morgan provided an unsecured, interest free and repayable on demand loan to Grand Gulf Energy
Limited, totalling $180,385 at balance date. The loan was repaid in full during January 2017.
The Company acquired a 20.4% interest in Hutton Poland from Hutton Energy Ltd in November 2016.
Charles Morgan, Chairman of Grand Gulf Energy, is a director and shareholder of Hutton Energy Ltd,
Stephen Keenihan, a director in Grand Gulf Energy, is a minority shareholder in Hutton Energy Ltd and
Craig Burton, a major shareholder in Grand Gulf Energy, is a shareholder in Hutton Energy Ltd. The
independent directors of Grand Gulf, Mark Freeman and Allan Boss assessed the acquisition of the 20.4%
interest in Hutton Poland Ltd independently. In addition the acquisition fell below the level of materiality
as set out in ASX Listing Rule 10.1.
As a result of the petroleum licence laws in Poland, which do not allow more than one holder of the licence,
the Kolo Licence is held by Strzelecki Sp. z.o.o. (Strzelecki) a 100% owned subsidiary of Hutton Poland
(UK) Ltd. GGE as part of the acquisition has acquired a 20.4% equity interest in Hutton Poland (UK) Ltd.
The other shareholders include Hutton Energy Ltd (30.6%) and Prospex Oil and Gas plc (49%).
47
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
.
48
DIRECTORS’ 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 2017 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, 26 September 2017
49
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 Audit of the Financial Report
Opinion
We have audited the financial report of Grand Gulf Energy Limited (the Company) and its subsidiaries
(the Group), which comprises the consolidated statement of financial position as at 30 June 2017, 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, and notes
to the financial report, including a summary of significant accounting policies and the directors’
declaration.
In our opinion the accompanying financial report of the Group, is in accordance with the Corporations
Act 2001, including:
(i)
Giving a true and fair view of the Group’s financial position as at 30 June 2017 and of its
financial performance for the year ended on that date; and
(ii)
Complying with Australian Accounting Standards and the Corporations Regulations 2001.
Basis for opinion
We conducted our audit in accordance with Australian Auditing Standards. Our responsibilities under
those standards are further described in the Auditor’s responsibilities for the audit of the Financial
Report section of our report. We are independent of the Group in accordance with the Corporations
Act 2001 and the ethical requirements of the Accounting Professional and Ethical Standards Board’s
APES 110 Code of Ethics for Professional Accountants (the Code) that are relevant to our audit of the
financial report in Australia. We have also fulfilled our other ethical responsibilities in accordance
with the Code.
We confirm that the independence declaration required by the Corporations Act 2001, which has been
given to the directors of the Company, would be in the same terms if given to the directors as at the
time of this auditor’s report.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis
for our opinion.
Key audit matters
Key audit matters are those matters that, in our professional judgement, were of most significance in
our audit of the financial report of the current period. These matters were addressed in the context of
our audit of the financial report as a whole, and in forming our opinion thereon, and we do not provide
a separate opinion on these matters.
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
Recoverability of oil and gas properties
Key audit matter
How was the matter addressed in our audit
As at 30 June 2017, the carrying value of the
oil and gas properties was $2,736,479 (2016:
$3,558,649), as disclosed in Note 8.
The Group identified, due to performance of
the wells and a decline in estimated reserves,
it was required to perform an impairment
assessment of its oil and gas properties. As a
result the Group recognised and impairment
loss of $306,147 during the year.
This is a key audit matter as there are
judgements used by management in assessing
the discounted future cash flows as disclosed
in Note 8.
We evaluated management’s assessment of
impairment as at 30 June 2017 pursuant to the
requirements of AASB 136, Impairment of Assets.
Our work included, but was not limited to, the
following procedures:
(cid:127)
(cid:127)
(cid:127)
Obtaining and reviewing the updated
reserve estimates from the management’s
expert. This included assessing the
competency and objectivity of
management’s expert;
Obtaining an understanding of the value in
use model and assumptions used, including
comparing oil and gas prices to market
data, checking the reasonableness of the
discount rate used and checking the
updated reserve report estimates were
included within the model; and
Assessing the adequacy of the related
disclosures in Note 8 to the financial
statement.
Other information
The directors are responsible for the other information. The other information comprises the
information in the Group’s annual report for the year ended 30 June 2017, but does not include the
financial report and the auditor’s report thereon.
Our opinion on the financial report does not cover the other information and we do not express any
form of assurance conclusion thereon.
In connection with our audit of the financial report, our responsibility is to read the other information
and, in doing so, consider whether the other information is materially inconsistent with the financial
report or our knowledge obtained in the audit or otherwise appears to be materially misstated.
If, based on the work we have performed, we conclude that there is a material misstatement of this
other information, we are required to report that fact. We have nothing to report in this regard.
Responsibilities of the directors 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 preparing the financial report, the directors are responsible for assessing the ability of the group to
continue as a going concern, disclosing, as applicable, matters related to going concern and using the
going concern basis of accounting unless the directors either intend to liquidate the Group or to cease
operations, or has no realistic alternative but to do so.
Auditor’s responsibilities for the audit of the Financial Report
Our objectives are to obtain reasonable assurance about whether the financial report as a whole is free
from material misstatement, whether due to fraud or error, and to issue an auditor’s report that
includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an
audit conducted in accordance with the Australian Auditing Standards will always detect a material
misstatement when it exists. Misstatements can arise from fraud or error and are considered material
if, individually or in the aggregate, they could reasonably be expected to influence the economic
decisions of users taken on the basis of this financial report.
A further description of our responsibilities for the audit of the financial report is located at the
Auditing and Assurance Standards Board website (http://www.auasb.gov.au/Home.aspx) at:
http://www.auasb.gov.au/auditors_responsibilities/ar1.pdf
This description forms part of our auditor’s report.
Report on the Remuneration Report
Opinion on the Remuneration Report
We have audited the Remuneration Report included in pages 14 to 18 of the directors’ report for the
year ended 30 June 2017.
In our opinion, the Remuneration Report of Grand Gulf Energy Limited, for the year ended 30 June
2017, complies with section 300A of the Corporations Act 2001.
Responsibilities
The directors of the Company are responsible for the preparation and presentation of the
Remuneration Report in accordance with section 300A of the Corporations Act 2001. Our responsibility
is to express an opinion on the Remuneration Report, based on our audit conducted in accordance with
Australian Auditing Standards.
BDO Audit (WA) Pty Ltd
Jarrad Prue
Director
Perth, 26 September 2017
CORPORATE GOVERNANCE STATEMENT FOR THE YEAR ENDED 30 JUNE 2017
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.
53
CORPORATE GOVERNANCE STATEMENT FOR THE YEAR ENDED 30 JUNE 2017
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.
54
CORPORATE GOVERNANCE STATEMENT FOR THE YEAR ENDED 30 JUNE 2017
Grand Gulf Energy's Board Meetings
The Board met 5 times between 1 July 2016 and 30 June 2017.
The Board meets formally at least 4 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.
55
CORPORATE GOVERNANCE STATEMENT FOR THE YEAR ENDED 30 JUNE 2017
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 two (2) female employees/executives:
Its financial controller; and
its office manager;
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 2016 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.
56
CORPORATE GOVERNANCE STATEMENT FOR THE YEAR ENDED 30 JUNE 2017
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.
Key identified risks to the business are monitored on an ongoing basis as follows:
57
CORPORATE GOVERNANCE STATEMENT FOR THE YEAR ENDED 30 JUNE 2017
•
•
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.
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.
58
CORPORATE GOVERNANCE STATEMENT FOR THE YEAR ENDED 30 JUNE 2017
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.
59
ASX INFORMATION
FOR THE YEAR ENDED 30 JUNE 2016
1.
a)
b)
c)
Statement of issued capital
Distribution of fully paid ordinary shares as at 19 September 2017
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
63
14
14
225
455
─────────
771
═════════
Shares
Held
6,392
44,489
116,150
13,247,294
754,084,545
─────────
767,498,870
═════════
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
21.84%
23.14%
Listed securities in Grand Gulf Energy Limited are quoted on the Australian Stock Exchange.
60
ASX INFORMATION
FOR THE YEAR ENDED 30 JUNE 2016
4.
Top Twenty Shareholders as at 19 September 2017
The twenty largest shareholders hold 65.48% of the total issued ordinary shares in the Company as at
15 September 2017.
Name
Number
of Shares
% of Issued
Shares
CHARLES WAITE MORGAN
ALBA CAPITAL PTY LTD
SKYE EQUITY PTY LTD
SACHA INVESTMENTS PTY LTD
ALBA CAPITAL PTY LTD
BNP PARIBAS NOMINEES PTY LTD
MR RAYMOND JEPP
ARMDIG PTY LTD
MR ADRIAN HARTONO
OJVM PTY LTD
MR ALEX TAN
CRAIG BURTON
MR STUART CHARLES GRACE + MR TRENT
CHRISTIAN GARDNER
MR DOUGAL JAMES FERGUSON
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
167,600,476
90,041,561
67,917,114
27,098,974
19,619,108
21.84
11.73
8.85
3.53
2.56
15,646,642
2.04
13,000,000
11,250,000
10,913,372
10,000,000
9,050,000
8,482,220
7,800,000
7,000,000
1.69
1.47
1.42
1.3
1.18
1.11
1.02
0.91
0.89
0.83
0.79
HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED
6,810,000
CRIMSON HOLDINGS PTY LTD
LIFWARD PTY LIMITED
MR KRISHNA RAVICHANDRAN + MR SRINIVASAN
6,400,000
6,047,594
18
RAVICHANDRAN
6,000,000
0.78
19
20
MR RAYMOND PHILIP JEPP + MRS KATE MARY
SHAW
MR THOMAS ZDUN
6,000,000
5,825,466
0.78
0.76
502,502,527
65.48
61