Grand Gulf Energy Limited
ABN 22 073 653 175
Annual Report
for the financial year ended
30 June 2020
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
Australian Stock Exchange Information
1
2-7
8-14
15
16-19
20-40
41
42-44
45-46
CORPORATE DIRECTORY
FOR THE YEAR ENDED 30 JUNE 2020
DIRECTORS
Mr Craig Burton – Chairman
Mr Mark Freeman - Executive Director
Mr Chris Bath – Non-Executive Director
COMPANY SECRETARY
Mr Mark Freeman
REGISTERED AND PRINCIPAL OFFICE
Grand Gulf Energy Limited
Suite 4, 246-250 Railway Parade,
West Leederville WA 6007
Telephone: +61 (0) 8 6102 4826
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 2020
Summary Overview
Grand Gulf Energy Limited (“Grand Gulf”/the “Company”) has concluded the 2020 financial year (“FY20”
or “the year”). This marks the 10th successive year in a row that the Company has not required any equity
or debt funding.
Grand Gulf continues to have a sound financial position with no debt, and solid production that generated
gross revenues of over AUD $1.6m pa after royalties.
Business Strategies and Projects
Existing Oil and Gas Fields
Fields
WI
Daily
(bbl/d)
Desiree
D&L
Total
39.65%
55.50%
75
75
Monthly
Net Rev
(AUD$)
$42,500
$31,200
$73,700
Years of
Reserves
Left (2P) *
4.41 yrs
2.5 yrs
2P
Reserves
116,000
66,000
182,000
* 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.
Quarterly Production 2020
BBLS
16,000
14,000
12,000
10,000
8,000
6,000
4,000
2,000
0
Sept Qtr
Dec Qtr
Mar Qtr
Jun Qtr
Oil (bbls)
US Oil Price & Production Commentary
The Company receives Louisiana Light (LLS) () pricing
per barrel which is trading at US$42/bbl ($A59.08/bbl)
as at 21 September 2020. The graph below shows the
relative trading of WTI vs LLS with LLS typically trading
at a slight premium to WTI. Grand Gulf trading contracts
are based on monthly average prices. We have seen a
strong recovery since last quarter’s negative pricing.
WTI’s floor of $40/bbl has proved resilient amid
improving demand.
From last November to May 2020, US oil production fell
by 1.5 MM b/d to 11.4 MMb/d as operators reduced
Drilling and Completion operations amid oil price
uncertainty and a price shock, according to the EIA. The agency forecasts that US output will continue to
decline to 10.6 MMb/d by March 2021, before increasing for the remainder of 2021. Operators have
announced significant curtailments in May and June as producers grapple with US$40/bbl pricing, driven
by coronavirus-related demand destruction
2
OPERATING AND FINANCIAL REVIEW
FOR THE YEAR ENDED 30 JUNE 2020
US operators are spending significantly less in 2020. Compared to 2019, capex by core North American
operators is expected be down by US$43.2 billion in 2020, or 42%, at US$58.6 billion. The most dramatic
cuts have come from multi-basin operators. The recent price drop has greatly reduced completion activity,
which is leading to a Drilled Uncompleted (DUC) build-ups. As of May 2020, the number of frac crews
operating was below 50, and their activity was being outpaced by the less than 400 drilling rigs operating
in the US. Completion efficiencies are about 3.3 wells monthly per crew, while rigs are drilling 1.25 wells
apiece per month. Therefore, the US needs about 150 crews at these rig levels to keep DUCs flat. US
DUCs accumulated since YE19 could reach 3,500 by late 2020. Additionally from March 2020 through
May 2020, the rig count fell by 670, or 66%.
Reserves
PROVED(1P)
NET REV
LIQUIDS
INTEREST MBBL
GAS
MMCF
OIL EQUIV(1)
MBOE
PROVED + PROBABLE (2P)
GAS
MMCF
OIL EQUIV(1)
MBOE
LIQUIDS
MBBL
PROVED, PROBABLE, POSSIBLE (3P)
OIL EQUIV(1)
LIQUIDS
GAS
MBOE
MMCF
MBBL
FILED (LICENCE)
Reserves
USA
Dugas & Leblanc #3
Desiree
Total Reserves
CONTINGENT RESOURCES
Reserves
USA
Dugas & Leblanc #3
Desiree
Total Contingent Resources
Total Reserves and Resources
43.20%
30.96%
43.20%
30.96%
22
50
72
-
-
-
72
1C
238
-
238
216
-
216
454
62
50
112
36
-
36
148
27
116
143
-
-
-
143
2C
238
-
238
324
-
324
562
66
116
182
54
-
54
236
38
132
170
-
-
-
170
3C
238
-
238
648
-
648
886
77
132
209
108
-
108
317
(1) Oil equivalent conversion factor: 6MSCF per BBL
Competent Persons Statement
The information in this report has been reviewed and signed off by Kevin Kenning (Registered Reservoir Engineer)
with over 38 years 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.
Desiree Field
Desiree, Assumption Parish, Louisiana, Non-Operator (39.65%WI - 30.96% NRI)
The Hensarling #1 well (Desiree Field) produced a total for the quarter of 2,673 barrels of oil. The well
averaged 63 b/d. The well has produced 612,706 barrels of oil to 30 June 2020.
On 20 May 2020 the well was shut in with a suspected hole in the tubing. Repairs were completed in July
2020 and the well was placed back on production on 24 July 2020.
The well continues to produce from the Cris R3 sands. Following depletion of the Cris R3 the well will be
perforated in the Cris R2. Desiree has 3P reserves net to the Company effective 30 June 2020 of 132,000
barrels of oil.
Desiree remains a substantial asset to the Company with long term reserves and cash flow.
Dugas & Leblanc Field
Dugas & Leblanc #3 Well, Assumption Parish, Louisiana, Non-Operator (55.5% WI – 43.20% NRI)
The D&L#3 well (Dugas & Leblanc Field) produced a total for the quarter of 7,375 barrels of oil. The well
is presently producing at 82 b/d and has produced over 343,304 barrels of oil.
The D&L #3 well continues to outperform previous reserve estimates. Dugas & Leblanc has 3P reserves
net to the Company effective 30 June 2020 of 77,000 barrels of oil equivalent.
3
OPERATING AND FINANCIAL REVIEW
FOR THE YEAR ENDED 30 JUNE 2020
EXPLORATION AND DEVELOPMENT
DJ Basin, Colorado (66% WI*) – 355 net acres
The Company has ~66% working interests in 355 net acres in Weld County.
The Company was notified in May 2020 by Bayswater Exploration and Production of their intention to
permit two wells to drill within the Company’s leases. The Company is working with the operator to
determine its working interests in the proposed wells.
On 20 July 2020 Chevron Corporation announced it would acquire Noble Energy for US$5 billion. Grand
Gulf has a variety of working interests in leases shared with Noble Energy. Noble Energy’s Wells Ranch
Comprehensive Drilling Plan was approved by the Colorado Oil and Gas Conservation Commission
(COGCC). The Company has yet to be notified of Nobles’ future drilling programs along with its respective
interests.
East Texas Prospect (40-50% WI) – 1,238 acres in the Eagle Ford
The Company owns a 40-50% interest in 1,238 net
acres of 1,319 gross acres in Burleson County, Texas.
The Company continues to pursue farm-down/sale
opportunities.
Financial Performance
Grand Gulf Energy recorded a statutory profit after tax of $324,514 for the financial year which compares
with the loss after tax of $188,496 recorded in the 2019 financial year.
Financial Performance
FY20
FY19
Change
Sales revenue
Cost of Sales
Gross Profit (before amortisation)
Gross Profit/Sales Revenue
Amortisation
Gross Profit
Operating Cash Flow
Reported gain/(loss)
Underlying Ebitdae* (Non – IFRS)
$
$
$
%
$
$
$
$
1,604,778
2,403,597
(798,819)
(569,401)
(696,856)
127,455
1,035,377
1,706,741
(671,364)
65%
71%
84%
(197,172)
(237,783)
40,611
838,205
877,481
1,468,958
(630,753)
256,653
726,002
283%
324,514
(188,496)
513,010
-272%
587,762
866,463
(278,701)
-32%
%
-33%
-18%
-39%
-17%
-43%
* Earnings before interest, tax, depreciation, amortisation and exploration
4
OPERATING AND FINANCIAL REVIEW
FOR THE YEAR ENDED 30 JUNE 2020
Calculation of underlying EBITDAE (Non-IFRS) is not a defined measure under International Financial
Reporting Standards and is not audited.
The underlying EBITDAE (Non-IFRS) for the year ended 30 June 2020 was $587,762 compared with an
underlying EBITDAE (Non-IFRS) of $866,463 for the year ended 30 June 2019. The most significant
factor which contributed to the movement between the periods was the lower sales revenue (a decrease
of $798,820 from 30 June 2019) as a result of lower oil prices.
Financial Position
Financial Position
Total Assets
Total Liabilities
Total Equity
FY20
FY19
Change
%
$
$
$
3,244,769
2,862,549
382,220
13%
429,482
414,571
14,911
4%
2,815,287
2,447,978
367,309
15%
Cash & cash equivalents
At 30 June 2020 the Company had cash of $1,035,406.
Outlook
Grand Gulf Energy anticipates net production after royalties of approximately 23,701 bbl’s oil from its
operations in FY 2021. The Company continues to manage general and administration costs tightly.
The new management remuneration along with ongoing cost cutting has resulted in an annual reductions
in total operating costs of ~$327,000. The total operating costs of the Company (excluding cost of sales
and amortisation) has been reduced to $432,912 (2019: 760,649).
Funding and Capital Management
Grand Gulf 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.
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 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 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.
Grand Gulf 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.
5
OPERATING AND FINANCIAL REVIEW
FOR THE YEAR ENDED 30 JUNE 2020
2
Development
and
Production
3
Regulatory
4
Market
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 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 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 operates in a highly regulated environment. Grand Gulf
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 the
USA or internationally may impact the Company’s operations.
Grand Gulf 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.
The oil 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 monitors developments and changes in the international oil
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.
Grand Gulf 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. The Company has no hedging in
place at present.
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’s business, results of operations and financial condition.
To the extent that it is reasonable to do so, Grand Gulf mitigates the risk of
loss associated with operating events through insurance contracts. Grand Gulf
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.
Grand Gulf monitors performance across material contracts against
contractual obligations to minimise counterparty risk and seeks to include
terms in agreements which mitigate such risks.
8
Reserves
Oil and gas reserves are expressions of judgement based on knowledge,
6
OPERATING AND FINANCIAL REVIEW
FOR THE YEAR ENDED 30 JUNE 2020
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 altering its
plans which could have a positive or negative effect on Grand Gulf’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’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.
10
Funding
11
Abandonment
Liabilities
Grand Gulf 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.
Grand Gulf must undertake significant capital expenditures in order to conduct
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’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 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
Grand Gulf has certain obligations in respect of decommissioning of its fields,
production facilities and related infrastructure. These liabilities are derived
from legislative and regulatory requirements concerning the decommissioning
of wells and production facilities and require Grand Gulf 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 recognises restoration provisions after the construction of faciliiesy
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.
7
DIRECTOR’S STATUTORY REPORT
FOR THE YEAR ENDED 30 JUNE 2020
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 2020
(referred to hereafter as the group).
REVIEW AND RESULTS OF OPERATIONS
For the financial year ended 30 June 2020, the gain attributable to members of the Group is $324,514 (2019: loss
$188,496).
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 Craig Burton
Executive Chairman
Appointed 5 March 2019
Experience and Expertise
Mr Burton is an experienced investor in emerging companies, projects
and businesses. He has a track record of providing financial backing
and strategic advice to successful technical teams and business
managers. He is an active investor in the oil and gas sector with an
in-house technical and project generation team.
Responsibilities
Mr Burton is Chairman of the Board of Directors. Mr Burton is
responsible for guiding Company strategy and for reviewing and
providing guidance on finance, corporate, acquisition, exploration and
production activities.
Former and current directorships in last 3 years
Mr Burton is currently Chairman of Cradle Resources Limited and a
Non-executive Director of the Mader Group, Director of MPS
Engineering and FeCon Limited. In the past three years Mr Burton
has been a Non-Executive Director of Capital Drilling Limited
(resigned 31 August 2018).
Mr Mark Freeman
B.com, CA, F.Fin
Executive Director –
Appointed 27 October 2010
and Company Secretary -
Appointed 22 April 2010
Experience and Expertise
Mr Freeman is a Chartered Accountant and has more than 21 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
finance, corporate,
acquisition, exploration and production activities and the day to day
management of Grand Gulf Energy.
is responsible
for strategy,
Former and current directorships in last 3 years
Mr Freeman is currently a Director of Pursuit Minerals Limited and a
former director of Frontier Diamonds Limited (resigned 11 June 2020)
and
Mr Chris Bath
CA, MAICD
Non- Executive Director
Appointed 5 March 2019
Experience and Expertise
Mr Bath is a Chartered Accountant with significant experience in the
energy and resource sectors in both Australia and Asia. Previous
positions include CFO and General Manager for Tap Oil Limited, CFO
for Oilex Limited and prior to that CFO for Buru Energy Limited.
Former and current directorships in last 3 years
Mr Bath is currently a director of Cradle Resources Limited.
8
DIRECTOR’S STATUTORY REPORT
FOR THE YEAR ENDED 30 JUNE 2020
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. As at 30
June 2020 the consolidated cash position was $1,035,406 (2019: $162,391).
EVENTS SINCE THE END OF FINANCIAL YEAR
The impact of the Coronavirus (COVID-19) pandemic is ongoing and while it has not significantly impacted the
entity up to 30 June 2020, it is not practicable to estimate the potential impact, positive or negative, after the
reporting date. The situation is rapidly developing and is dependent on measures imposed by the Australian
Government and other countries, such as maintaining social distancing requirements, quarantine, travel restrictions
and any economic stimulus that may be provided.
No other matter or circumstance has arisen since 30 June 2020 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
During the period there were no specific changes to the state of affairs.
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 (2019: 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.
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 (2019: nil listed options) and nil unlisted options
(2019: 32,500,000). Refer to note 11c 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.
9
DIRECTOR’S STATUTORY REPORT
FOR THE YEAR ENDED 30 JUNE 2020
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
Mr C I Burton
Mr M Freeman
Mr C Bath
Total
Balance at
Beginning of
Year/Date of
Appointment
Other *
Other changes
during the year/
Resignation
Balance at the date
of report
200,311,736
(100,155,867)
-
-
-
-
200,311,736
(100,155,867)
-
-
-
-
100,155,869
-
-
100,155,869
* Consolidation of shares 2:1 completed 10 December 2019
Options
Holder
Balance at
beginning of
year/Date of
Appointment
Other *
Expired
Balance as at
date of report
Vested and
exercisable
Mr C I Burton
10,000,000
(5,000,000)
(5,000,000)
Mr M Freeman
20,000,000
(10,000,000)
(10,000,000)
Mr C Bath
Total
-
-
-
30,000,000
(15,000,000)
(15,000,000)
* Consolidation of options 2:1 completed 10 December 2019
-
-
-
-
-
-
-
-
REMUNERATION REPORT (Audited)
Details of key management personnel
Mr C I Burton – Chairman
Mr M Freeman – Executive Director
Mr C Bath – Non-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.
Principles Used to Determine the Nature and Amount of Remuneration
Service Agreements
Details of Remuneration
KMP Interest in Securities
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.
10
DIRECTOR’S STATUTORY REPORT
FOR THE YEAR ENDED 30 JUNE 2020
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
324,514
(188,496)
(543,093)
(2,223,633)
(560,508)
2020
2019
2018
2017
2016
Restated basic earnings/(loss) per
share (cents per share)*
Dividend payments
Dividend payment ratio (%)
Increase/(decrease) in share price (%)
0.042
(0.050)
(0.142)
(0.594)
(0.150)
-
-
50%
-
-
50%
-
-
Nil
-
-
(33%)
-
-
(17%)
* EPS comparative have been updated to be consistent with the share consolidation.
The Corporate Governance Statement provides further information on the role of the Board.
Non-executive Directors
Fees and payments to non-executive directors reflect the demands which are made on, and the responsibilities of,
the Directors. Non-executive Directors’ fees and payments are reviewed annually by the Board. The Chairman’s
fees are determined independently to the fees of non-executive Directors based on comparative roles in the
external market. The Chairman is not present at any discussions relating to determination of his own remuneration.
Fixed remuneration
Fixed remuneration consists of a base remuneration package, which includes directors’ fees (in the case of
Directors), salaries, consulting fees and employer contributions to superannuation funds.
Fixed remuneration levels for Directors and executive officers are reviewed annually by the Board through a
process that considers the employee’s personal development, achievement of key performance objectives for the
year, industry benchmarks wherever possible and CPI data. Key performance indicators (KPIs) are individually
tailored by the Board for each director and executive officer each year and reflect an assessment of how that
employee can fulfil their particular responsibilities in a way that best contributes to Company performance and
shareholder wealth in that year.
Performance-linked remuneration
All employees may receive bonuses and/or share options as part of a package to retain their services and/or based
on achievement of specific goals related to performance against individual KPIs and to the performance of the
Company as a whole as determined by the Directors, based on a range of factors. These factors include traditional
financial considerations such as operating performance, cash consumption and deals concluded and also industry-
specific factors relating to the advancement of the Company’s exploration and development activities and
relationships with third parties and internal employees.
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.
11
DIRECTOR’S STATUTORY REPORT
FOR THE YEAR ENDED 30 JUNE 2020
The Company did not engage with remuneration consultants during the year.
Voting and comments made at the Company’s 2019 Annual General Meeting
GGE received more than 99.9% of “yes” votes (excluding director’s votes) on its remuneration report for the 2019
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:
Name
Term of agreement
Base salary including
superannuation
Termination benefit
Mr C I Burton
Commencing 5 March 2019
$30,000
Nil
Mr M Freeman
Commencing 30 June 2019
$120,000
3 months base salary
Mr C Bath
Commencing 5 March 2019
$30,000
Nil
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 2020 includes the following Directors and executives:
•
•
•
Mr C I Burton (Executive Chairman)
Mr M Freeman (Executive Director)
Mr C Bath (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 11 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:
2020
Directors
Mr CI Burton
Mr C Bath
Mr M Freeman
Total
Short term
benefits
Post-
employment
Equity
Total
Salary and
fees
$
30,000
30,000
120,000
180,000
Bonus
Super-annuation Options
Shares
$
-
-
-
-
$
-
-
-
-
$
-
-
-
-
$
$
-
-
-
-
30,000
30,000
120,000
180,000
12
DIRECTOR’S STATUTORY REPORT
FOR THE YEAR ENDED 30 JUNE 2020
2019
Directors
Mr CI Burton
Mr C Bath
Mr C Morgan
Mr S Keenihan
Mr A Boss
Mr M Freeman
Total
Short term
benefits
Post-
employment
Equity
Total
Salary
and fees
Bonus
Super-annuation
Options
Shares
$
$
$
$
$
$
10,000
10,000
64,774
39,733
146,820
200,012
471,339
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
10,000
10,000
64,774
39,733
146,820
200,012
471,339
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 2020
Directors & KMP
Mr C I Burton
Mr M Freeman
Mr C Bath
Balance at
start of the
year/Date of
appointment
Other *
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.
10,000,000
20,000,000
-
(5,000,000)
(10,000,000)
-
(5,000,000)
(10,000,000)
-
-
-
-
-
-
-
-
-
-
-
-
-
Total
30,000,000
(15,000,000)
(15,000,000)
* Consolidation of options 2:1 completed 10 December 2019
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 2020
Directors & KMP
Mr CI Burton
Mr M Freeman
Mr C Bath
Total
Balance at start
of the year/Date
of appointment
Received during
the year on
exercise of
options
Other *
Balance at end
of the year
No.
No.
No.
No.
200,311,736
-
-
200,311,736
-
-
-
-
(100,155,867)
-
-
100,155,869*
-
-
(100,155,867)
100,155,869
* Consolidation of shares 2:1 completed 10 December 2019
This the end of the audited remuneration report.
13
DIRECTOR’S STATUTORY REPORT
FOR THE YEAR ENDED 30 JUNE 2020
Shares issued on the exercise of options
There were no ordinary shares of Grand Gulf Energy Limited issued during the year ended 30 June 2020 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 I Burton
Mr M Freeman
Mr C Bath
Board of Directors
Held
2
2
2
Attended
2
2
2
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.
No non-audit services were provided during the year.
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 25 September 2020, and signed in accordance with a resolution of the Directors.
Mr Mark Freeman
Managing Director
14
Tel: +61 8 6382 4600
Fax: +61 8 6382 4601
www.bdo.com.au
38 Station Street
Subiaco, WA 6008
PO Box 700 West Perth WA 6872
Australia
DECLARATION OF INDEPENDENCE BY DEAN JUST TO THE DIRECTORS OF GRAND GULF ENERGY
LIMITED
As lead auditor of Grand Gulf Energy Limited for the year ended 30 June 2020, 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.
Dean Just
Director
BDO Audit (WA) Pty Ltd
Perth, 25 September 2020
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.
CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER
COMPREHENSIVE INCOME
FOR THE YEAR ENDED 30 JUNE 2020
Revenue from continuing operations
Other income
Government Grant
Cost of sales
Amortisation of oil and gas properties
Interest income
Profit/(loss) on investment
Sale of Asset
Corporate office expenses
Employee benefits expense
Exploration and evaluation expenditure
Foreign exchange
Professional and statutory fees
Depreciation
Other expenses
Profit/(loss) before income tax
Income tax (expense)/ benefit
Net profit/(loss) after income tax
Items that may be reclassified to profit or loss
Foreign currency translation
Total comprehensive profit for the year
Earnings/(loss) per share for the year
Attributable to the members of Grand Gulf
Energy Ltd
Basic earnings/(loss) per share (cents per share)
Diluted earnings/(loss) per share (cents per share)
Notes
2
3(a)
3(b)
8
4
3(a)
3(b)
5
19
19
2020
$
2019
$
1,604,778
2,403,597
28,128
10,000
(569,401)
(197,172)
38
-
-
(46,918)
(280,383)
(65,446)
(32)
(115,649)
(636)
-
367,307
(42,793)
629
-
(696,856)
(237,783)
32
(195,000)
71,876
(92,241)
(437,870)
(836,237)
(15,780)
(127,779)
(971)
(24,114)
(188,496)
-
324,514
(188,496)
42,795
367,309
217,065
28,569
0.042
0.042
(0.050)
(0.050)
The above consolidated statement of profit or loss and other comprehensive Income should be read in
conjunction with the accompanying notes to the financial statements.
16
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
FOR THE YEAR ENDED 30 JUNE 2020
ASSETS
Current Assets
Cash and cash equivalents
Trade and other receivables
Other assets
Investment
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)
7
7
8
9
10
11
12
13
2020
$
1,035,406
99,199
37,876
-
1,172,481
2
-
2,072,286
2,072,288
3,244,769
134,150
134,150
295,332
295,332
429,482
2019
$
162,391
419,024
36,535
28,127
646,077
2
636
2,215,834
2,216,472
2,862,549
125,445
125,445
289,126
289,126
414,571
2,815,287
2,447,978
40,377,570
5,424,811
40,377,570
5,382,016
(42,987,094)
(43,311,608)
2,815,287
2,447,978
The above consolidated statement of financial position should be read in conjunction with the
accompanying notes to the financial statements
17
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 30 JUNE 2020
Contributed
Equity
Foreign
currency
translation
reserve
Share
Option
Reserve
Option
premium
reserve
Accumulated
losses
Total
$
$
$
$
$
$
Balance at 1 July 2019
40,377,570
2,688,879
2,016,337
676,800
(43,311,608)
2,447,978
Profit attributable to members of
the parent entity
Foreign currency translation
adjustment
Total comprehensive income for
the year
Transactions with owners in
their capacity of owners
In-specie distribution
Shares issued, net of issue
costs
Share based payment
Balance at 30 June 2020
-
-
-
-
-
42,795
42,795
-
-
-
-
-
-
-
-
-
324,514
324,514
-
42,795
324,514
367,309
-
-
-
-
40,377,570
-
-
2,731,674
-
-
2,016,337
-
-
676,800
-
-
(42,987,094)
-
-
2,815,287
Balance at 1 July 2018
42,104,442
2,471,814
2,016,337
676,800
(43,123,112)
4,146,281
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
In-specie distribution
Shares issued, net of issue
costs
Share based payment
Balance at 30 June 2019
-
-
-
-
217,065
217,065
(1,726,872)
-
-
-
-
-
-
-
-
-
(188,496)
(188,496)
-
217,065
(188,496)
28,569
-
(1,726,872)
-
-
40,377,570
-
-
2,688,879
-
-
2,016,337
-
-
676,800
-
-
(43,311,608)
-
-
2,447,978
The above consolidated statement of changes in equity should be read in conjunction with the
accompanying notes to the financial statements.
18
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED 30 JUNE 2020
Cash flows from operating activities
Receipts from customers
Payments to suppliers and employees
Interest received
Government grant
Other Payments Received
Production costs
Tax
Payments for exploration and evaluation
2020
2019
Notes
$
$
2,426,832
2,933,824
(369,602)
(504,972)
39
10,000
-
378
-
256
(1,095,329)
(1,230,274)
(42,793)
(51,666)
-
(942,558)
Net cash inflow from operating activities
14(b)
877,481
256,653
Cash flows from investing activities
Proceeds from sale of oil & gas properties
Payments for development of oil & gas properties
Purchase of Whitebark Shares
Net cash (outflows) from investing activities
Net increase 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
-
-
-
-
138,101
(14,874)
(1,950,000)
(1,826,773)
877,481
(1,570,120)
162,391
1,686,664
(4,466)
45,847
14 (a)
1,035,406
162,391
The above consolidated statement of cash flows should be read in conjunction with the
accompanying notes to the financial statements.
19
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
1. Notes to the Consolidated Financial Statements
REPORTING ENTITY
Grand Gulf Energy Ltd (the ‘Parent Entity’) is a company listed on the Australian Securities Exchange, limited
by shares, incorporated and domiciled in Australia. The consolidated financial statements of the Group for
the financial year ended 30 June 2020 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 25 September 2020.
BASIS OF PREPARATION
(a)
Statement of compliance
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
A number of new or amended standards became applicable for the current reporting period and the Company
had to change its accounting policies as a result of the adoption of the following standards:
• AASB 16 Leases
The consolidated entity has adopted all of the new and amended Accounting Standards and Interpretations
issued by the Australian Accounting Standards Board (‘AASB’) that are mandatory for the current reporting
period.
Any new or amended Accounting Standards or Interpretations that are not yet mandatory have not been early
adopted.
The following Accounting Standards and Interpretations are most relevant to the consolidated entity:
AASB 16 Leases
The consolidated entity has adopted AASB 16 from 1 July 2019. The standard replaces AASB 117 'Leases'
and for lessees eliminates the classifications of operating leases and finance leases. Except for short-term
leases and leases of low-value assets, right-of-use assets and corresponding lease liabilities are recognised
in the statement of financial position. Straight-line operating lease expense recognition is replaced with a
depreciation charge for the right-of-use assets (included in operating costs) and an interest expense on the
recognised lease liabilities (included in finance costs). In the earlier periods of the lease, the expenses
associated with the lease under AASB 16 will be higher when compared to lease expenses under AASB 117.
However, EBITDA (Earnings Before Interest, Tax, Depreciation and Amortisation) results improve as the
operating expense is now replaced by interest expense and depreciation in profit or loss. For classification
within the statement of cash flows, the interest portion is disclosed in operating activities and the principal
portion of the lease payments are separately disclosed in financing activities.
Impact of adoption
T his standard has not had any impact on the amounts presented in the Group’s financial statements as the
Group does not have any leases.
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:
20
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Share-based payment transactions
The cost of share-based payments to employees is measured by reference to the fair value of the equity
instruments at the date at which they are granted. The fair value is determined using the Black-Scholes
model, taking into account the terms and conditions upon which the options were granted.
Rehabilitation obligations
The Group estimates its share of the future removal and remediation costs of oil and gas production facilities,
wells and pipelines at the time of acquisition or installation of the assets. In most instances, removal of assets
occurs many years into the future. This requires judgemental assumptions regarding removal date, future
environmental legislation, the extent of remediation activities required, the engineering methodology for
estimating cost, future removal technologies in determining the removal cost, and asset specific discount
rates to determine the present value of these cash flows. For more detail regarding the policy in respect of
provision for rehabilitation refer to note 1(h). As at 30 June 2020 rehabilitation obligations have a carrying
value of $295,332 (2019: $289,126).
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 2020, the carrying value of oil & gas properties is $2,072,286 (2019: $2,215,834). 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
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.
Coronavirus (Covid-19) pandemic
Judgement has been exercised in considering the impacts that the Coronavirus (COVID-19) pandemic has
had, or may have, on the consolidated entity based on known information. This consideration extends to the
nature of the supply chain, staffing and geographic regions in which the consolidated entity operates. Other
than as addressed in specific notes, there does not currently appear to be either any significant impact upon
the financial statements or any significant uncertainties with respect to events or conditions which may impact
the consolidated entity unfavourably as at the reporting date or subsequently as a result of the Coronavirus
(COVID-19) pandemic.
(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.
21
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Deferred tax is accounted for using the liability method in respect of temporary differences arising between
the tax bases of assets and liabilities and their carrying amounts in the financial statements. No deferred
income tax will be recognised from the initial recognition of an asset or liability, excluding a business
combination, where there is no effect on accounting or taxable profit or loss.
Deferred tax is calculated at the tax rates that are expected to apply to the period when the asset is realised
or liability is settled. Deferred tax is credited in the statement of profit or loss and other comprehensive income
except where it relates to items that may be credited directly to equity, in which case the deferred tax is
adjusted directly against equity.
Deferred income tax assets are recognised to the extent that it is probable that future tax profits will be
available against which deductible temporary differences can be utilised.
The amount of benefits brought to account or which may be realised in the future is based on the assumption
that no adverse change will occur in income taxation legislation and the anticipation that the Group will derive
sufficient future assessable income to enable the benefit to be realised and comply with the conditions of
deductibility imposed by the law.
(c)
Property, Plant and Equipment
Each class of plant and equipment is carried at cost or fair value less, where applicable, any accumulated
depreciation and impairment losses.
Plant and equipment are measured on the cost basis less depreciation and impairment losses.
The carrying amount of plant and equipment is reviewed annually by Directors to ensure it is not in excess
of the recoverable amount from these assets. The recoverable amount is assessed on the basis of the
expected net cash flows which will be received from the assets’ employment and subsequent disposal. The
expected net cash flows have been discounted to their present values in determining recoverable amounts.
The cost of fixed assets constructed within the Group includes the cost of materials, direct labour, borrowing
costs and an appropriate proportion of fixed and variable overheads.
Subsequent costs are included in the asset’s carrying amount or recognised as a separate asset, as
appropriate, only when it is probable that future economic benefits associated with the item will flow to the
group and the cost of the item can be measured reliably. All other repairs and maintenance are charged to
the profit or loss during the financial period in which they are incurred.
Depreciation
The depreciable amount of all fixed assets including capitalised lease assets is depreciated on a straight-line
basis over their useful lives to the Group commencing from the time the asset is held ready for use. Leasehold
improvements are depreciated over the shorter of either the unexpired period of the lease or the estimated
useful lives of the improvements. The major categories of assets are depreciated as follows:
• Oil and gas properties are amortised over the useful lives of the asset on a unit of production basis
once a reserve has been established.
• Motor Vehicles are depreciated based on diminishing value at 22.5%.
• Plant and equipment and drilling parts are depreciated based on diminishing value at 25% to 40%.
• Office equipment is depreciated based on diminishing value at 25% to 40%.
• Currently there are no buildings owned by the Group.
The assets’ residual values and useful lives are reviewed, and adjusted if appropriate, at each reporting date.
An asset’s carrying amount is written down immediately to its recoverable amount if the asset’s carrying
amount is greater than its estimated recoverable amount.
Gains and losses on disposals are determined by comparing proceeds with the carrying amount. These
gains or losses are included in profit or loss.
(d)
Non-operator interests in oil & gas properties
Exploration and evaluation expenses
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.
22
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Prepaid drilling and completion expenses
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
Classification and measurement
Except for certain trade receivables the Group initially measures a financial asset at its fair value plus, in the
case of a financial asset not at fair value through profit or loss, transaction costs.
Under AASB 9 financial assets are subsequently measured at fair value through profit or loss (FVPL),
amortised cost, or fair value through other comprehensive income (FVOCI). The classification is based on
two criteria: the Group’s business model for managing the assets; and whether the instruments’ contractual
cash flows represent ‘solely payments of principal and interest’ on the principal amount outstanding (the
‘SPPI criterion’).
Trade and Other Receivables
Trade receivables are recognised initially at fair value and subsequently measured at amortised cost, using
the effective interest rate method, less Expected Credit Loss. Trade receivables are generally due for
settlement between thirty (30) and ninety (90) days from the date of recognition. They are presented as
current assets unless collection is not expected for more than 12 months after reporting date.
Cash flows relating to short-term receivables are not discounted if the effect of discounting is immaterial. The
movement in the provision is recognised in profit or loss.
Expected credit losses of financial asset at amortised cost
Loss allowances for financial assets are based on assumptions about risk of default and expected loss rates.
The Group uses judgement in making these assumptions and selecting the inputs to the impairment
calculation, based on the Group’s past history, existing market conditions as well as forward looking
estimates at the end of each reporting period.
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.
23
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
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
The group assesses on a forward looking basis the expected credit losses (ECLs) associated with its debt
instruments carried at amortised cost and FVOCI. ECLs are based on the difference between the contractual
cash flows due in accordance with the contract and all the cash flows that the Group expects to receive. The
shortfall is then discounted at an approximation to the asset’s original effective interest rate.
The Group assesses at each balance date whether there is objective evidence that a financial asset or group
of financial assets is impaired. For trade and other receivables, the Group applies the simplified approach
permitted by AASB 9, which requires expected lifetime losses to be recognised from initial recognition of the
receivables. The expected credit losses on these financial assets are estimated using a provision matrix
based on the Group’s historical credit loss experience.
(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 presentational 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.
(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.
24
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
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)
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.
(j)
(i)
Revenue Recognition
Oil & Gas Sale
Revenue from the sale of oil/condensate, gas and natural gas liquids produced is recognised when the
Consolidated Entity has transferred to the buyer and the costs incurred or to be incurred in respect of the
transaction can be measured reliably.
- 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.
Revenue is stated net of royalties.
(ii)
Other revenue
Dividend revenue is recognised on a receivable basis. Interest revenue is recognised on a time proportionate
basis that takes into account the effective yield on the financial asset.
All revenue is stated net of the amount of goods and services tax (GST).
(k) 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.
(l)
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.
25
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(m)
Dividends
Provision is made for the amount of any dividend declared, determined, or publicly recommended by the
Directors on or before the end of the financial year, but not distributed at reporting date.
(n)
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.
(o)
Employee Benefits
(i) 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
(ii)
Employee benefits payable later than one year have been measured at the present value of the estimated
future cash outflows to be made for those benefits.
Superannuation
(iii)
Contributions are made by the Group to superannuation funds as stipulated by statutory requirements and
are charged as expenses when incurred.
Employee benefit on costs
(iv)
Employee benefit on costs, including payroll tax, are recognised and included in employee benefits liabilities
and costs when the employee benefits to which they relate are recognised as liabilities.
Options
(v)
The fair value of options granted is recognised as an employee benefit expense with a corresponding
increase in equity. The fair value is measured at grant date.
The fair value at grant rate is independently determined using the Black-Scholes option pricing model that
takes into account the exercise price, the term of the option, the vesting and performance criteria, the impact
of dilution, the non-tradeable nature of the option, the share price at grant date and expected price volatility
of the underlying shares.
(p)
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.
(q)
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.
26
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
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.
(r)
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.
(s)
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.
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.
27
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(t)
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.
(i)
In-specie distribution
The share capital of the Company is reduced by the fair value of the investment that was returned to the
shareholders.
(u) Assets held for sale
Non-current assets and liabilities that are expected to be recovered primarily through sale rather than through
continuing use are classified as held for sale. Immediately before classification as held for sale the assets
are re-measured in accordance with the Consolidated Group’s accounting policies. Thereafter generally the
assets are measured at the lower of their carrying amount and fair value less cost to sell. Impairment losses
on initial classification as held for sale and subsequent gains or losses on re-measurement are recognised
in profit or loss. Gains are not recognised in excess of any cumulative impairment loss. Once classified as
held for sale or distribution, assets are not amortised or depreciated.
2. Revenue
Sale of oil and gas
Royalties
Total revenues from ordinary activities
2020
2019
$
$
2,077,372
(472,594)
1,604,778
3,106,464
(702,867)
2,403,597
Revenue is recognised when or as the Group transfers control of goods or services to a customer at the
amount to which the Group expects to be entitled.
3. Profit/ (loss) from operations
(a) Other Income
Recovery of cost
Profit on sale of Whitebark Shares
Profit on sale of Abita
Total other income
2020
2019
$
$
-
28,128
-
28,128
629
-
71,876
72,505
28
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(b) Expenses
Loss before income tax includes the following specific expenses:
Cost of sales
Operating Costs
Total cost of sales
Corporate Office Expenses
Insurance
Office Rent
Legal Services
Telephones
IT Expenses
Website
Subscriptions
Other
Total corporate office expenses
Foreign exchange gains and losses
Net foreign exchange losses/(gains)
4. Loss on investment
390,000,000 Whitebark Shares Issued @ $0.005
390,000,000 Whitebark Shares Traded @ $0.045
Loss on Investment
2020
$
2019
$
569,401
569,401
696,856
696,856
23,861
-
2,139
1,962
2,949
1,411
668
13,928
46,918
15,152
23,605
19,993
4,349
3,264
2,849
2,849
20,181
92,241
-
15,780
2020
2019
$
-
-
-
$
1,950,000
1,755,000
195,000
During May 2019 the Company completed the in-specie distribution of $1.92m (383.75 million shares)
in Whitebark Energy Ltd (WBE) to shareholders, which equates to 0.25 cents per GGE share.
29
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
5.
Income tax
(a) Income tax expense
Current tax
Deferred tax
Under (over) provided in prior years
(b) Reconciliation of income tax benefit to prima facie tax payable
Profit/(loss)from ordinary activities before
income tax expense
Prima facie tax benefit on gain from ordinary
activities at 27.5% (2019: 27.5%)
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)
Impact of lower future income tax rates
Timing differences previously not recognised
Income tax expense / (benefit)
The income tax expense in FY2020 relates to tax payable in the USA
(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
2020
$
42,793
-
-
-
2020
$
2019
$
-
-
-
-
2019
$
367,307
(587,368)
(101,009)
161,526
38,713
30,864
(62,296)
192,390
-
7,869
(73,263)
393,267
(214,915)
42,793
(292,105)
-
91,846
-
2020
$
2019
$
8,139,211
9,543,710
3,998,235
4,134,510
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.
6. 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.
30
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
7. Trade and other receivables
Current
Trade and other receivables(i)
Insurance claim receivables
2020
2019
$
$
99,199
37,876
137,075
419,024
36,535
455,559
(i)
Other receivables include, 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 estimated the expected
credit loss to be nil. Due to the short-term nature of the current receivables, their carrying amount is assumed
to be the same as their fair value.
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
Carrying amount at end of year
2020
$
2019
$
7,956,432
(5,884,146)
2,072,286
2,215,834
-
53,624
(197,172)
2,072,286
7,956,432
(5,740,598)
2,215,834
2,307,526
14,874
131,217
(237,783)
2,215,834
The Company recorded no impairment of oil and gas properties for the year ended 30 June 2020 (30 June
2019: impairment of Nil).
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 quantities 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.
31
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
9. Trade and other payables
Current
Trade creditors
2020
$
2019
$
134,150
134,150
125,445
125,445
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
Foreign exchange differences
West Klondike sold
Carrying amount at end of year
11. Contributed equity
(a) Issued and paid up share capital
2020
$
2019
$
295,332
289,126
289,126
(303)
6,509
-
295,332
320,509
(3,089)
13,815
(42,109)
289,126
2020
2019
Number of
Shares
$
Number of
Shares
$
Balance at the beginning of the year
Capital reduction(i)
Consolidation 2:1(ii)
Balance carried forward at the
end of the year
767,498,870
-
383,749,478
40,377,570
-
-
767,498,870
-
-
42,104,442
(1,726,872)
-
383,749,478
40,377,570
767,498,870
40,377,570
(i)
(ii)
Distribution of Whitbark Energy LTD (WBE) shares to shareholder during May 2019.
On 10 December 2019, the Company’s securities were consolidated on the basis that:
(a)
(b)
Every two (2) fully paid ordinary shares be consolidated into 1 fully paid ordinary
share; and
Every two (2) share options be consolidated into 1 share option.
Fractional entitlements were rounded down to the nearest whole number. Following consolidation, there
were 383,749,478 fully paid ordinary shares on issue at 30 June 2020 (30 June 2019: 767,498,870)
32
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(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 2020 the Company has on issue nil (30 June 2019: 65,000,000) 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
Expired
during the
year
Balance at
end of year
Unlisted options
Consolidation 2:1
0.65 c
30/06/20
Number
Number
Number
Number
Number
65,000,000
(32,500,000)
32,500,000
-
-
-
-
-
-
-
(32,500,000)
(32,500,000)
-
-
-
12. Reserves
Foreign currency translation (a)
Share option reserve (b)
Option premium reserve (c)
(a)
Foreign currency translation reserve
2020
2019
$
$
2,731,674
2,016,337
676,800
2,688,879
2,016,337
676,800
5,424,811
5,382,016
The foreign currency translation reserve is used to record exchange differences arising from the
translation of the financial statements of self-sustaining foreign operations.
Balance at beginning of year
Gain on translation of foreign
controlled entities
Balance at end of year
2020
2019
$
$
2,688,879
2,471,814
42,795
217,065
2,731,674
2,688,879
33
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(b)
Share option reserve
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
2020
2019
$
$
2,016,337
-
2,016,337
2,016,337
-
2,016,337
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
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
2020
$
676,800
676,800
2019
$
676,800
676,800
2020
2019
$
$
(43,311,608)
(43,123,112)
324,514
(188,496)
(42,987,094)
(43,311,608)
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
2020
2019
$
$
1,035,406
162,391
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:
34
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(b)
Reconciliation of profit after related income tax to net cash outflows from operating activities
2020
2019
$
324,514
636
197,172
-
(28,128)
42,793
$
(188,496)
971
237,783
195,000
-
-
11,964
(64,269)
319,825
78,425
8,705
877,481
(2,761)
256,653
Profit/(loss) for the year
Depreciation
Amortisation
Loss on investment
Profit on investment
Tax
Exchange rate differences on assets/liabilities held
in foreign currencies
Changes in net assets and liabilities
(Increase)/decrease in assets:
Trade and other receivables
(Decrease) in liabilities:
Trade and other creditors
Net cash inflows from operating activities
15. Expenditure commitments
There were no commitments as at 30 June 2020.
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 non-cash investing or financing activities during the year.
17. Contingent liabilities
The Group had no contingent liabilities as at 30 June 2020 other than as stated below.
Napoleonville Well control
The JV partners continue to remain obligated to complete the remaining remediation of the land affected by
the blowout. As most of the location has been remediated and handed back to the farmer the Company
believes that the remaining remediation will be no more than US$200,000 in respect of the existing 55% WI
the Company held. The Company confirms that the blowout insurances will cover ~23% WI of likely
remaining remediation costs.
During the 12 months ended 30 June 2020, the Company incurred US$700 in respect of rehabilitation related
costs of which around 5.57% is recoverable from insurers. A refund of ~US$23,009 was received from costs
incurred in 2019.
35
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
18. Events occurring after reporting date
The impact of the Coronavirus (COVID-19) pandemic is ongoing and while it has not significantly impacted
the entity up to 30 June 2020, it is not practicable to estimate the potential impact, positive or negative, after
the reporting date. The situation is rapidly developing and is dependent on measures imposed by the
Australian Government and other countries, such as maintaining social distancing requirements, quarantine,
travel restrictions and any economic stimulus that may be provided.
No other matter or circumstance has arisen since 30 June 2020 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.
19. Profit/Loss 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
2020
$
2019
$
Profit/(loss) used in calculating basic loss per share
Weighted average number of ordinary shares used in calculating
basic earnings per share
Basic/Diluted earnings/(loss) per share (cents per share)
324,514
(188,496)
383,749,478
0.042
383,749,478
(0.050)
20. Auditor’s remuneration
2020
$
43,212
43,212
2019
$
49,388
49,388
Audit and review of financial reports
The auditor of Grand Gulf Energy Limited is BDO Audit (WA) Pty Ltd.
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.
36
NOTES TO THE CONSOLIDATED 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.
Market Risk
(i)
Foreign exchange risk
There is no material 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 30
June 2020 and 30 June 2019.
(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.
37
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
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
Receivables
Insurance claim
CARRYING AMOUNT
2020
$
1,035,406
99,199
37,876
2019
$
162,391
419,024
36,535
(v)
Capital Risk and Liquidity Risk Management
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.
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
2020
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
Financial
Liabilities
Trade
creditors
Total
134,150
134,150
-
-
-
-
-
-
At 30 June
2019
Less than
6 months
6-12
months
Between
1 and 2
years
Between 2
and 5 years
Over 5
years
Financial
Liabilities
Trade
creditors
Total
125,445
125,445
-
-
-
-
-
-
-
-
-
-
134,150
134,150
134,150
134,150
Total
contractual
cash flows
Carrying
amount
liabilities
125,445
125,445
125,445
125,445
38
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
23. Share Based Payments
Employee Option Plan
The Grand Gulf Energy Limited Employee Option Plan was approved at the general meeting held on 26 June
2007. Options which are granted under the plan and under the discretion of the board to executives and
consultants of the Company are for no consideration. Options granted under the plan carry no dividend or
voting rights and have varied contractual lives.
Grand Gulf Energy Limited – 2020
Grant date
Expiry
date
Exercise
price
Balance at
start of
the year
Granted
during
the year
Expired
during the
year
Balance at
end of the
year
Exercisable at
end of the year
7 Dec 16
Total
30 Jun 20
$0.013
32,500,000
-
(32,500,000)
32,500,000
-
(32,500,000)
-
-
-
-
Number
Number
Number
Number
Number
Weighted Average Exercise price
0.13c
24. Parent Entity Financial Information
(i)
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
2020
$
2019
$
49,065
548,609
597,674
124,631
473,043
154,166
658,270
812,436
111,117
701,322
40,377,570
2,693,138
(42,597,665)
473,043
40,377,569
2,693,138
(42,369,386)
701,322
(228,279)
(1,062,196)
(ii)
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
(i)
Parent entity
The ultimate parent entity within the group is Grand Gulf Energy Limited (the legal parent).
(ii)
Subsidiaries
Interests in subsidiaries are set out below.
39
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(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.
Investments in controlled entities held by Grand Gulf Energy Limited
Alto Energy Limited
GG Oil & Gas 1, INC
GG Oil & Gas 2, INC
GG Oil & Gas, INC
Birdwood Louisiana LLC
Country of
incorporation
Australia
USA
USA
USA
USA
2020
%
100
100
100
100
100
2019
%
100
100
100
100
100
Investments in controlled entities held by Alto Energy Limited
Grand Gulf Energy Inc
USA
Country of incorporation
2020
%
100
2019
%
100
(iv) Key management personnel compensation
Short-term employee benefits
Share-based payments
2020
$
180,000
-
180,000
2019
$
471,339
-
471,339
Detailed remuneration disclosures are provided in the Remuneration Report on pages 10-13.
(v)
Other transactions with key management personnel
There were no changes to transactions with key management personnel during the period.
40
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 2020 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, 25 September 2020
41
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 2020, 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 2020 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 (including Independence Standards) (the Code)
that are relevant to our audit of the financial report in Australia. We have also fulfilled our other
ethical responsibilities in accordance with the Code.
We confirm that the independence declaration required by the Corporations Act 2001, which has been
given to the directors of the Company, would be in the same terms if given to the directors as at the
time of this auditor’s report.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis
for our opinion.
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 a BDO network of independent a firms. Liability limited by a scheme approved under Professional Standards Legislation.
Recoverability of oil and gas properties
Key audit matter
How the matter was addressed in our audit
The Group’s carrying value of oil and gas
properties as disclosed in Note 8 represents a
significant asset to the Group. The Australian
Accounting Standards require the Group to assess
whether there are any indicators that oil and gas
properties may be impaired.
The Group concluded there was an impairment
indicator as the net assets of the Group exceeded
its market capitalisation as at 30 June 2020 and
due to the volatility in the oil price during the
financial year. Accordingly, the Group was
required to estimate the recoverable amount of
the assets in accordance with the Australian
Accounting Standards from which no impairment
was recognised.
The assessment of impairment is complex and
highly judgemental and it is affected by future
performance and market conditions. The key
judgements and assumption used in the group’s
impairment assessment are disclosed in Note 1(a)
to the financial report. A reasonable possible
change in these key assumptions could impact the
recoverable amount. Accordingly, this matter was
considered to be a key audit matter.
Our work included but was not limited to the
following procedures:
· Obtaining and reviewing available
reserve data from management’s
external expert to determine whether
the data has been correctly included in
the impairment model. This included
assessing the competency and
objectivity of management’s expert;
·
Assessing key inputs used in the value in
use calculations including the following:
o Benchmarking and analysing
management’s oil and gas price
assumptions against external
market data; and
o Performing sensitivity analysis
on the commodity pricing, key
operating costs and discount
rates.
·
·
Reviewing the Director’s minutes and
ASX announcements for evidence of
consistency of information with
management’s assessment of the
carrying value; and
Assessing the adequacy of the related
disclosures in Note 1(a) and Note 8 to
the financial statements.
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 2020, 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:
https://www.auasb.gov.au/admin/file/content102/c3/ar1_2020.pdf
This description forms part of our auditor’s report.
Report on the Remuneration Report
Opinion on the Remuneration Report
We have audited the Remuneration Report included in pages 10 to 13 of the directors’ report for the
year ended 30 June 2020.
In our opinion, the Remuneration Report of Grand Gulf Energy Limited, for the year ended 30 June
2020, 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
Dean Just
Director
Perth, 25 September 2020
ASX INFORMATION
FOR THE YEAR ENDED 30 JUNE 2020
1.
a)
b)
c)
Statement of issued capital
Distribution of fully paid ordinary shares as at 21 September 2020
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
74
25
29
313
257
─────────
698
═════════
Shares
Held
10,440
81,559
243,258
16,856,552
366,557,669
─────────
383,749,478
═════════
There are 337 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:
Craig Ian Burton
Charles Morgan
3. Quotation
26.10%
19.88%
Listed securities in Grand Gulf Energy Limited are quoted on the Australian Stock Exchange.
45
ASX INFORMATION
FOR THE YEAR ENDED 30 JUNE 2020
Top Twenty Shareholders as at 21 September 2020
The twenty largest shareholders hold 71.10% of the total issued ordinary shares in the Company as at
21 September 2020
Name
CHARLES WAITE MORGAN
ALBA CAPITAL PTY LTD
SKYE EQUITY PTY LTD
SACHA INVESTMENTS PTY LTD
MR THOMAS ZDUN
BNP PARIBAS NOMINEES PTY LTD
MR BOBBY VINCENT LI
AUSTRALIAN FINANCE ASSOCIATION PTY LTD
TELTOO PTY LTD
CRAIG BURTON
ALBA CAPITAL PTY LTD
KANGSAV PTY LIMITED
MR DOUGAL JAMES FERGUSON
Number
of Shares
76,300,238
54,830,335
33,958,557
23,999,487
19,674,149
13,712,677
6,666,665
5,000,000
4,660,306
4,241,110
3,976,867
3,570,884
3,500,000
CRIMSON HOLDINGS PTY LTD
3,200,000
LIFWARD PTY LIMITED
MR SRINIVASAN RAVICHANDRAN + MRS LATHA RAVICHANDRAN
ALITON PTY LTD
MR MICHAEL ANTHONY KENNEDY
MR DAVID BELL
MR JOHN ROBERT LOWING
3,023,797
3,000,000
3,000,000
2,500,000
2,105,000
2,000,000
% of Issued Shares
19.88
14.29
8.85
6.25
5.13
3.57
1.74
1.3
1.21
1.11
1.04
0.93
0.91
0.83
0.79
0.78
0.78
0.65
0.55
0.52
272,920.072
72.12
46