More annual reports from Jupiter Energy Limited:
2023 ReportANNUAL REPORT 2012
ANNU
THE YEAR
UAL REP
R ENDED
PORT
D 30 JUNEE 2012
FOR T
JUPITER ENERGY LIMITED – 2012 ANNUAL REPORT
CORPORATE INFORMATION
Jupiter Energy Limited
ABN 65 084 918 481
Directors
Geoffrey Gander (Executive Chairman/Chief Executive Officer)
Alastair Beardsall (Non-Executive Director)
Baltabek Kuandykov (Non-Executive Director)
Scott Mison (Executive Director)
Company Secretary
Scott Mison
Registered Office & Principal Place of Business
Level 2, 28 Kings Park Road
West Perth WA 6005
PO Box 1282
Western Australia 6872
Telephone
Facsimile
Email
Website
+61 8 9322 8222
+61 8 9322 8244
info@jupiterenergy.com
www.jupiterenergy.com
Solicitors
Steinepreis Paganin
Level 4,
16 Milligan Street
Perth WA 6000
Auditors
Ernst & Young
11 Mount Bay Road
Perth WA 6000
Bankers
National Australia Bank Limited
Perth Central Business Banking Centre
UB13.03, 100 St Georges Terrace
Perth WA 6000
Share Registry
Computershare Investor Services Pty Ltd
Level 2, 45 St George’s Terrace
Perth WA 6000
Telephone
Facsimile
Website
1300 557 010 (within Australia)
+61 8 9323 2000
+61 8 9323 2033
www.computershare.com
Stock Exchange Listing
Jupiter Energy Limited shares are listed on the Australian Securities Exchange under the code JPR and on the
Alternative Investment Market under the code JPRL.
ii
JUPITER ENERGY LIMITED – 2012 ANNUAL REPORT
Contents of Financial Report
Chairman’s Letter ................................................................................................................................................ 1
Background on Kazakhstan ................................................................................................................................ 2
Directors' Report ................................................................................................................................................. 3
Corporate Governance Statement .................................................................................................................... 22
Auditor Independence Declaration ................................................................................................................... 28
Consolidated Jupiter Energy Limited Financial Statements
Consolidated Statement of Comprehensive Income ...................................................................................... 30
Consolidated Statement of Financial Position ............................................................................................... 31
Consolidated Statement of Cash Flows ......................................................................................................... 32
Consolidated Statement of Changes in Equity ............................................................................................. 33
Notes to the Consolidated Financial Statements .............................................................................................. 34
Directors' Declaration ........................................................................................................................................ 71
Independent Audit Report to the members of Jupiter Limited ........................................................................... 72
ASX Additional Information ............................................................................................................................... 74
iii
JUPITER EN
J
NERGY LIMIT
TED – 2012
ANNUAL RE
EPORT
CHAIRMAN
C
N’S LETTE
ER
Dear Shareho
D
lder,
I
am pleased t
to present the
2012 Annual
Report for Jup
piter Energy L
Limited (JPR).
T
The past 12 m
T
The key opera
wells (J-51 and
w
Details on all
D
Review.
R
months have s
ational events
d J-53) on its
these wells
een JPR cont
for the year w
Block 31 perm
that now del
tinue to progre
were the drillin
mit as well as
ineate the Ak
ess with its tra
ng, completion
gaining Trial
kkar East oilf
ansformation f
n and producti
Production Li
field discovery
from an explo
ion testing of J
cences for the
y are contain
orer to an oil p
JPR's third an
e J-50 and J-5
ed in the Op
producer.
nd fourth
52 wells.
perations
The prospectiv
T
he 2nd half of
t
southern exten
s
vity of our 100
f the 2012 cal
nsion area tha
0% owned Blo
lendar year s
at was granted
ock 31 continu
hould continu
d to the Comp
ues to improv
ue to provide
any in 2011.
ve and the dril
a good indica
ling of two ex
ation of the po
xploration well
otential of the
ls during
e 59 km2
The Company
T
given the Co
g
developed und
d
y listed on Lon
mpany increa
derstanding of
ndon’s Alterna
ased exposur
f the opportun
ative Investme
re into the U
ities and inves
ent Market (A
UK and Europ
stment upside
AIM) in Novem
pean investm
e available in K
mber 2011 an
ment commun
Kazakhstan.
nd the dual lis
ity where the
sting has
ere is a
O
Our two major
support for the
s
r shareholders
e Company an
s, the Waterfo
nd the 1 for 4 R
rd Group and
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d Soyuznefteg
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as Capital Lim
late June 201
mited (SNG) c
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continue to sho
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The Rights Iss
deducting cost
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t
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and SNG, aft
ares on issue a
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ter also conve
as of the date
uent to the fin
f the Rights Is
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of this report
nancial period
ssue Waterfor
US3.45m Con
now totals 15
end in Augus
rd Group now
vertible Notes
3,377,693.
st 2012 and ra
hold 29.5% o
s in August 20
aised $A11.25
of the issued c
012, hold 19.8
5m (after
capital of
8%. The
I
believe that
foundation for
f
producing cou
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the Company
Jupiter Energ
ntries in the w
y has a very
gy Limited to g
world today.
exciting 12 m
grow into a sig
months ahead
gnificant oil pr
of it and con
roducer in wha
ntinued drilling
at is one of the
g success wil
e most prospe
l lay the
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I
thank shareh
he Annual Ge
t
holders for the
eneral Meeting
ir continued s
g scheduled to
upport and loo
o be held in Pe
ok forward to
erth, Western
meeting as m
Australia on 0
many of you as
09 November
s possible in p
2012.
person at
Sincerely
S
Geoff Gander
G
Chairman/CE
C
O
1
JUPITER ENERGY LIMITED – 2012 ANNUAL REPORT
Some Background on Kazakhstan
Despite being the ninth largest country in the world by area, Kazakhstan remains, for many people, an unknown
quantity. Its territory is over 2.7 million km2 which equates to an area equivalent to that of Western Australia or
approximately one third the total land mass of Europe. The population of the country is estimated at around 16
million people who are predominantly ethnic Kazakhs. Interestingly, however, there are around 130 nationalities
representing 46 religious denominations also living in Kazakhstan.
The modern capital of Kazakhstan, Astana, is one of the youngest and quickest growing capitals of the world. The
city was established in 1997 and the President of Kazakhstan, Nursultan Nazarbaev, has set an ambitious goal for
Astana to become one of the world’s top-30 most beautiful, competitive and business-favourable cities by 2030.
Kazakhstan is strategically located in Central Asia between Russia and China, and its status as one of the most
politically stable and economically developed states in the Central Asian region means that it is well situated to
develop its rich natural resources as well as to sell these resources into the growing Chinese market.
Kazakhstan has one of the most successfully developing economies in the world. It has enjoyed a steady growth in
its Gross Domestic Product for the last five years, increasing 7% year on year in 2011 (www.cia.gov). This is
principally due to the systematic reforms (including privatisation of state assets and liberalisation of trade and prices),
foreign investment, and the increases in both agricultural production and commodities prices over the past few
years.
Since 1993, Kazakhstan has attracted more than $US118 billion of foreign direct investment into its economy with
significant investors including Shell, Exxon Mobil, Chevron and BG Group as well as a range of large Russian and
Chinese corporations. By way of example, China currently owns assets that produce 20% of Kazakhstan's oil
production. Kazakhstan produced 80.4 million tonnes of crude exports to China in 2011, which is predicted to
increase to 132.1 million tonnes by 2020 (www.reuters.com).
Kazakhstan has the 6th largest reserves of natural resources in the world; oil and gas reserves produced 1.608
million barrels per day (boe/d) in 2011 (www.cia.gov). Continued development of its giant Tengiz, Karachaganak,
and Kashagan fields is expected to at least double its current production by 2019 (www.eia.gov). Kazakhstan’s
Caspian Basin holds an additional 184 billion barrels of recoverable oil. This level of proven reserves would nearly
equal the amount now held by Saudi Arabia and could come to about 15% of total world reserves (CRS Congress
report).
The oil and gas sector of the country accounts for 58 percent of all foreign investments and the industry provides
more than 30 percent of all tax proceeds and over 40 percent of the available funds of the country. According to the
estimates of international experts, the resource potential of Kazakhstan equates to $US9 trillion with $US500 billion
of investment still required to unlock this potential.
Industry analysts believe that planned expansion of oil production, together with the development of new fields, will
enable the country to produce as much as 10 million barrels per annum by 2015 making the country one of the
world’s top 10 oil producers (www.government.kz).
More information about Kazakhstan is available from the website www.government.kz, the official website of the
Government of Kazakhstan.
2
JUPITER ENERGY LIMITED – 2012 ANNUAL REPORT
DIRECTORS’ REPORT
Your Directors submit their report for the year ended 30 June 2012.
DIRECTORS
The names and details of the Company’s Directors in office during the financial year and until the date of this report
are as follows. Directors were in office for this entire period unless otherwise stated.
Names, qualifications experience and special responsibilities
Geoffrey Anthony Gander (49)
B.COM
Executive Chairman/CEO
Appointed 27 January 2005
Alastair Beardsall (58)
Non-Executive Director
Appointed 5 October 2010
Baltabek Kuandykov (64)
Non-Executive Director
Appointed 5 October 2010
Mr Gander graduated from the University of Western Australia in
1984 where he completed a Bachelor of Commerce Degree.
Mr Gander is responsible for Group Corporate Development, Group
Investor Relations and the overall Operational Leadership of the
Company.
Other Current Directorships of Listed Companies
None
Former Directorships of Listed Companies in last three years
Equatorial Resources Ltd, Vector Resources Limited and
Queensland Bauxite Limited (all ASX).
Mr Beardsall has been involved in the oil industry for more than 30
years. In 1980 he started work with Schlumberger, the oil-field
services company. From 1992 he began working for a series of
independent oil companies, with
for
specific exploration, development and production ventures.
Between September 2003 and October 2009, he was Executive
Chairman of Emerald Energy plc; Emerald grew, from a market
capitalisation of less than £8 million, until in October 2009 Emerald
was acquired by Sinochem Resources UK Limited, in a transaction
that valued Emerald at £532 million.
increasing responsibility
Other Current Directorships of Listed Companies
Sterling Energy Plc – (AIM)
Former Directorships of Listed Companies in last three years
Emerald Energy Plc – (LSE)
Mr Kuandykov has considerable experience in the oil and gas
industry in the region, having served as President of Kazakhoil
(predecessor of the Kazakh State oil company KazMunaiGas) and
is a well respected consultant to Chevron Overseas Petroleum on
CIS projects. He also worked
for
Kazneftegazrazvedka and was president of Kazakhstancaspishelf.
Mr Kuandykov also has extensive government experience in
Kazakhstan, having served as Deputy Minister of Geology, Head of
the Oil and Gas Directorate at the Ministry of Geology, and was
Deputy Minister of Energy and Fuel Resources
in a senior capacity
Other Current Directorships of Listed Companies
Chagala Group Limited (LSE)
Former Directorships of Listed Companies in last three years
Nelson Resources Limited (TSX)
Kazakhoil (predecessor of KazMunaiGas)
Kazakhstancaspishelf
3
JUPITER ENERGY LIMITED – 2012 ANNUAL REPORT
Scott Adrian Mison (36)
B.Bus, CA, ACSA
Executive Director
Company Secretary
Mr Mison holds a Bachelor of Business degree majoring in
Accounting and Business Law, is a Member of the Institute of
Chartered Accountants in Australia and Chartered Secretaries
Australia.
Appointed 31 January 2011
Mr Mison is also Company Secretary of IDM International Limited.
Other Current Directorships of Listed Companies
None.
Former Directorships of Listed Companies in last three years
Equatorial Resources Limited (ASX)
Interests in the shares and options of the company and related bodies corporate
At the date of this report, the interest of the Directors in the shares and options of Jupiter Energy Limited were:
Director
G Gander
A Beardsall
B Kuandykov
S Mison
Number of
ordinary shares
3,147,224
1,250,000
-
391,234
Performance
Rights
666,667
666,667
666,667
133,334
Number of
unlisted options
-
-
-
66,667
4
JUPITER ENERGY LIMITED – 2012 ANNUAL REPORT
Corporate Structure
Jupiter Energy Limited is a company limited by shares that is incorporated and domiciled in Australia. Jupiter Energy
Limited has prepared a consolidated financial report incorporating the entities that it controlled during the financial
year, which are outlined in note 28 of the financial statements.
Principal Activities
The principal activities of the consolidated entity during the course of the financial year included:
Exploration for oil and gas in Kazakhstan: and
Appraisal, development and production of oil and gas properties in Kazakhstan
Employees
The consolidated entity employed 39 employees as at 30 June 2012 (2011: 29 employees).
DIVIDENDS
No dividends in respect of the current or previous financial year have been paid, declared or recommended for
payment.
FINANCIAL REVIEW
Operating Results
The consolidated loss for the year after income tax was $4,295,102 (2011: $4,889,671).
Review of Financial Condition
At the end of the 2012 financial year, cash resources were $395,445 (2011: $13,968,248). Assets increased to
$44,297,607 (2011: $41,747,462) and equity decreased to $38,468,617 (2011: $40,920,376).
CAPITAL RAISING / CAPITAL STRUCTURE
During the year the following capital raisings occurred:
- A 1 for 4 non renounceable Rights Issue was announced in June 2012. This offer was priced at $0.40 per
share and raised approximately $11,613,016 (before costs). The issue was fully underwritten by Waterford
Petroleum Limited and Soyuzneftegas Capital Limited.
In August Soyuzneftegas Capital Limited converted its $US3.45m Convertible Notes in exchange for
8,215,000 shares.
-
Post the issue of shares from the June 2012 Rights Issue, the Company had 145,162,693 listed shares on issue.
Post the August 2012 conversion of the Convertible Notes, and as at the date of this report, shares on issue
numbered 153,377,693.
5
JUPITER ENERGY LIMITED – 2012 ANNUAL REPORT
Summary of share and share options on issue
At the date of this report, the unissued ordinary shares of Jupiter Energy Limited under Option and Performance
Rights are as follows:
Date of Expiry
31 Dec 2012
31 Dec 2012
31 Dec 2012
Exercise Price
$
2.775
1.50
2.25
Date of Vesting
Vesting Conditions
Number under
Option
200,001
400,000
266,668
866,669
Number under
Performance
Rights
31 December 2013
Share Price Performance from a base
level of $0.735
2,133,335
Summary of Conditions relating to the vesting of the Performance Rights:
Subject to a minimum increase of 25%, the Performance Rights for each holder shall vest in proportion to the %
increase in the Share price of the Company above $0.735 (Vesting Condition), i.e. Performance Rights will start
vesting at $0.919. For 100% of the performance rights to vest, the share price of the Company needs to reach $1.47.
In respect of the Vesting Condition, the % increase in the Share price of the Company will be calculated by reference
to the volume weighted average price of Shares in the 20 consecutive trading days immediately prior to the Vesting
Date.
OPERATING REVIEW
This section provides details on the operations of the past 12 months. The key operational events for the year were
the drilling, completion and production testing of JPR's third and fourth operated wells (J-51 and J-53) on Block 31 as
well as bringing the J-50 and J-52 wells onto Trial Production. Details on all these wells are also outlined below as
are details on other work carried out over the course of the year.
Well Operations
J-50 and J-52 Trial Production
The Company announced on 24 April 2012 that Trial Production had commenced on the J-50 and J-52 wells. The
Trial Production Licences are issued for maximum three year duration to allow the Company to concurrently produce
oil from the J-50 and J-52 wells while completing the planning and implementation of the necessary surface
infrastructure required to develop the discoveries for long term production.
J-51 Drilling and Production Testing
The J-51 well was the Company’s 2011 Commitment Well and the 3rd well drilled since 2009. The surface location
for J-51 was 2 km southwest from J-50 and 1.7 km northwest from J-52 and this location was selected to evaluate
the prospectivity of the primary Triassic and secondary Jurassic targets within the structure now known as Akkar
East.
On 1 August 2011 the Company announced the spudding of the J-51 exploration well and on 22 September 2011
confirmed that target depth had been reached and open hole logging completed. Analysis of these open hole logs,
carried out by independent consulting firm Reservoir Evaluation Services LLC (RES), confirmed that the thickness of
the mid Triassic primary objective was 123m of gross and 83m of net oil pay. The net/gross analysis was based on
6
JUPITER ENERGY LIMITED – 2012 ANNUAL REPORT
cut-offs of 3.8% for porosity and 50% for oil saturation. These results were consistent with the Company’s well
prognosis.
After completion, the J-51 well produced on a 9mm choke at a stabilised rate of over 600 bopd from the Mid Triassic
(B) horizon. In June 2012 an application to carry out a completion and testing of the Mid Triassic (A) horizon was
approved by the Kazakh authorities. The production testing period ended on 12 September 2012 and ~25,700
barrels of oil was produced from the well during this time.
An application is being prepared for submission to the relevant regulatory authorities for the well to be granted a Trial
Production Licence. This application will be lodged at the same time as the Trial Production application for the J-53
exploration well and it is expected that J-51 will be on Trial Production before the end of calendar 2012.
J-53 Drilling and Production Testing
The J-53 well was the Company’s fourth exploration well and the first of its two 2012 commitment wells on Block 31.
The well is located 2.8 km southeast of the J-52 well and increases the known areal extent of the Akkar East field.
The J-53 well took a total of 58 days to drill and reached a total depth of 3,113 m on 21 January 2012. Open hole
logs were run and production casing and cement completed. Operational progress and geological results were
consistent with the Company's expectations.
Analysis by independent consulting firm RES confirmed approximately 87m of gross and 56m of net pay at the
Middle Triassic carbonate reservoir unit, the primary reservoir objective in the well.
During the well’s 3 month testing period, J-53 was fracture stimulated and exhibited a flow regime with only periods
of intermittent production, recovering oil and water. Analysis of the chemical composition of the recovered water and
pressure transient data indicated that during the frac and acid stimulation work carried out on the well during its
completion, the zone from 2,996m - 2,999m propagated a fracture down to penetrate the oil water contact.
The resultant water influx from this 3m zone has impacted the overall performance of the well and the composition
and quantity of the liquids produced. Selective water shutoff using a permeability modifier was then determined as
the most effective way to isolate the water within this zone such that the flow of hydrocarbons is able to take place
uninhibited and not reduce the overall productivity of the mid Triassic formation.
The workover of J-53 will be carried out during the 4th quarter 2012 and an extension to the initial 3 month production
testing period will be required as part of the workover process. Assuming success with the workover, an application
to bring the J-53 well onto Trial Production will be lodged at the same time as the Trial Production application for the
J-51 exploration well. It is expected that J-53 will be on Trial Production before the end of calendar 2012.
Reserve Upgrade
As part of the Trial Production application process for the J-51 and J-53 wells, an estimation of reserves associated
with the two wells was prepared under the accepted Kazakh standards and submitted to the Kazakh authorities for
approval. In June 2012, the Company announced that the State Reserves Committee had approved reserves for the
areas associated with the J-50, 51, 52 and 53 wells.
The State Reserves Committee approved C1+C2 reserves equivalent to ~37 million barrels (mmbbl) of oil
recoverable under the Russian GOST classification system; while similar, the Board cautioned against extrapolation
of this figure directly into the 1P (proved) or 2P (proved plus probable) classification of the Petroleum Resource
Management System (“PRMS”) used by international oil and gas companies.
The most recent estimation of reserves under PRMS is 24 mmbbl 2P recoverable reserves, the details are in the
May 2011 Competent Persons Report prepared by Synergy Limited. This report was based on reserves only within
the Triassic horizon after the drilling of J-50 and J-52.
7
JUPITER ENERGY LIMITED – 2012 ANNUAL REPORT
The Company expects to appoint an independent reserves engineer to undertake a comprehensive reserves study
using the standards set out within the PRMS document in early 2013, following the drilling of the next two exploration
wells to be drilled on the new southern extension scheduled for 2nd half of calendar 2012 (J-55 and J-58). The 2013
reserves study will be based on the results from the J-50, J-51, J-52, J-53, J-55 and J-58 wells.
Forward Plan for Drilling Activity
Following the 2011 southern extension of Block 31, the permit size increased from ~63km2 to ~123km2 and this new
acreage has provided the Company with a range of potential new exploration leads. The Company acquired 3D
seismic over this new acreage before the end of 2011 and the new data was processed and interpreted and several
new prospects were identified.
The 1st well to be drilled on this new area (J-55) will be the final commitment well under the current 6 year exploration
licence and this well spudded in early August 2012. A 2nd exploration well is planned with the spud date expected
during 4th quarter 2012.
Both these wells are fully funded after the closing of the August 2012 Rights Issue.
Prolongation of Exploration Licence
In March 2012 the Company applied for a 2 year extension to the Block 31 Exploration Licence. The Exploration
Licence has an initial 6 year term (ending December 2012) with two 2 year extensions. The first of these extensions
has now been approved by the Kazakh authorities, thus enabling the Company to continue exploring on Block 31
until at least December 2014. It is expected that the second 2 year extension will be applied for during 2014.
The Block 31 contract also has the right to a 27 year Production Licence and it is the Company’s intention to
continue exploring on the southern section of Block 31 whilst also applying, during 2013, for a Production Licence for
the already discovered Akkar East field in the northern section of Block 31. The initial 25 year Production Licence
was increased by two years to 27 years as a result of the two year increase to the Exploration Licence.
8
JUPITER ENERGY LIMITED – 2012 ANNUAL REPORT
Prospectivity
The Company believes the prospectivity of Jupiter’s Block 31 continues to improve and the Board are confident that
further additions to the reserves are achievable. As outline in the Forward Plan for Drilling Activity section of this
report, the drilling of J-55 and J-58 during the 2nd half of calendar 2012 has the potential, assuming success, for an
independent upgrade of Block 31 reserves as well as increased production.
Further exploration wells are planned for 2013.
Production
The J-50 and J-52 wells are already in Trial Production and it is expected that J-51 and J-53 will be in Trial
Production by the end of calendar 2012.
Oil produced during the Trial Production period is sold into the domestic market and the initial oil sales contract for J-
50 and J-52 oil was concluded in April 2012 and was for 6,000 tonnes (~42,000 barrels). Oil was transported from
the field to a nearby processing and storage facility and achieved a price of $US400/tonne FOB the facility. Oil was
purchased on a pre-paid basis.
Total barrels sold during the 2011/12 financial year totalled 27,806 for revenues of $1,063,086.
Future oil sales contracts will be negotiated for the 2nd half of calendar 2012 and it is also the intention to negotiate
these to be on a pre-paid basis.
Board and Staffing
The Board of Directors continues to be hands on with the relocation of Chairman/CEO Geoff Gander to the United
Kingdom ensuring that he is regularly in Kazakhstan working with the Aktau based workforce.
An integrated operating team that has proven in country experience as well as the capacity to operate major assets
is a critical component to success in Kazakhstan. The continued building of such a team has been a major priority
over the course of several years and the past 12 months has been no exception.
The Board is confident that Jupiter is well prepared for continued growth over the coming years.
SIGNIFICANT CHANGES IN THE STATE OF AFFAIRS
Except as otherwise set out in this report, the Directors are unaware of any significant changes in the state of affairs
or principal activities of the consolidated entity that occurred during the period under review.
SIGNIFICANT EVENTS AFTER THE BALANCE DATE
On 16 July 2012 the Company advised that the J-51 well had received approval to be tested at the Mid
Triassic (A) horizon and after the workover was completed the co-mingled flow rate from the Mid Triassic
(A) and (B) was between 600 and 650 bopd. This rate was confirmed on 30 July 2012 as having stabilized
at 600 bopd on a 9mm choke. The well was shut in on 12 September 2012 after production of ~25,700
barrels of oil.
On 25 July 2012 the Company announced the closure of its 1 for 4 Rights Issue, raising $11,613,016
(before costs). There was a shortfall of 35% meaning that the joint underwriters took up additional shares.
On 01 August 2012, SNG elected to convert its $US3.45m Convertible Notes into equity. Under the terms of
the Convertible Notes, the conversion price was the same price as the Rights Issue ($0.40). A total of
8,215,000 shares were issued to SNG in full satisfaction of all outstanding Convertible Notes.
9
JUPITER ENERGY LIMITED – 2012 ANNUAL REPORT
On 03 August 2012, change in substantial holding notices were lodged reflecting the impact of the shortfall
of the Rights Issue and the conversion of the Convertible Notes. At this date, Waterford held 29.5% of the
issued shares of the Company and SNG held 19.8%.
On 06 August 2012 the Company announced that the J-55 well had spud.
On 21 August 2012 the Company announced details of further oil sales for the August/September period
based on a volumes of 2000 tonnes at a price of $US365/tonne ($US52/barrel)
LIKELY DEVELOPMENTS AND EXPECTED RESULTS
The Directors will continue to pursue oil and gas exploration and production opportunities in the Republic of
Kazakhstan.
Further information on likely developments in the operations of the consolidated entity has not been included in this
report because at this stage the Directors believe it would be likely to result in unreasonable prejudice to the
consolidated entity. As Jupiter Energy Limited is listed on the Australian Stock Exchange and London’s Alternative
Investment Market (AIM), it is subject to the continuous disclosure requirements of the ASX and AIM Listing Rules
which require immediate disclosure to the market of information that is likely to have a material effect on the price or
value of Jupiter Energy Limited’s securities.
ENVIRONMENTAL REGULATION
The consolidated entity is committed to achieving the highest standards of environmental performance. Standards
set by the Government of Kazakhstan are comprehensive and highly regulated. The consolidated entity strives to
comply not only with all Kazakh government regulations, but also maintain industry standards.
To maintain these high standards the Company is committed to a locally developed environmental monitoring
programme. This monitoring programme will continue to expand as and when new regulations are implemented and
adopted in Kazakhstan.
HEALTH & SAFETY
The Company has developed a comprehensive Health and Safety policy for its operations in Kazakhstan and has
the appropriate personnel in place to monitor the performance of the Company with compliance under this policy.
The Company outsources many of its key drilling functions and as part of any contract entered into with 3rd parties, a
commitment to Health & Safety and a demonstrated track record of success in this area is a key performance
indicator in terms of deciding on which companies will be contracted.
MEETINGS OF DIRECTORS
The number of meetings of the Directors held during the year and the number of meetings attended by each Director
was as follows:
Current Directors
G A Gander
A Beardsall
B Kuandyukov
S Mison
Board of Directors
Number
attended
Number
eligible to
attend
10
10
10
10
10
10
10
10
10
JUPITER ENERGY LIMITED – 2012 ANNUAL REPORT
Committee membership
Due to the small number and geographical spread of the Directors, it was determined that the Board would
undertake all of the duties of properly constituted Audit & Compliance and Remuneration Committees.
Competent Persons Statements
General
Keith Martens, BSc Geology and Geophysics, with over 35 years' oil & gas industry experience, is the qualified
person who has reviewed and approved the technical information contained in this report. Keith Martens has no
material interest in the Company.
Independent Reserves (PRMS)
Certain information in this report which relates to independent Triassic oil reserves (1P, 2P, 3P) and prospective
resource (P90, P50, P10) is based on information compiled by Senergy Limited, an international oil & gas consulting
company that specialises in oil & gas reserve estimations. Senergy Limited has sufficient experience which is
relevant to reserve estimations and to the specific exploration permit in Kazakhstan to qualify as competent to verify
information pertaining to the Triassic oil reserves (1P, 2P, 3P) and prospective resource (P90, P50, P10). Senergy
Limited has given and not withdrawn its written consent to the inclusion of its name and the Triassic 1P, 2P, 3P
reserves and prospective resource (P90, P50, P10) figures in the form and context in which they appear in this
report. Senergy Limited has no interest in the Company.
Certain information in this report which relates to Triassic prospective resources (P50) and open hole logging
interpretation is based on information compiled by Reservoir Evaluation Services LLP (RES), a Kazakh based oil &
gas consulting company that specialises in oil & gas reserve estimations. RES has sufficient experience which is
relevant to oil & gas reserve estimation and open hole logging analysis and to the specific permit in Kazakhstan to
qualify as competent to verify the information pertaining to the Triassic prospective resource (P50) and open hole
logging analysis. RES has given and not withdrawn its written consent to the inclusion of the Triassic prospective
resource (P50) figure or open hole logging analysis in the form and context in which they appear in this report. RES
has no interest in the Company.
Kazakh State Approved Reserves
The information in this report which relates to the Kazakh state approved oil reserves (C1, C2) is based on Jurassic
and Triassic oil reserves approved by the Kazakh State Reserves Committee. Information presented to the State
Reserves Committee was compiled by Reservoir Evaluation Services LLP (RES), a Kazakh based oil & gas
consulting company that is an approved body by the Kazakh authorities to prepare such reserve estimations. RES
has sufficient experience which is relevant to oil & gas reserve estimation under the Russian GOST classification
system. RES has no interest in the Company.
11
JUPITER ENERGY LIMITED – 2012 ANNUAL REPORT
REMUNERATION REPORT (Audited)
This remuneration report outlines the Director and executive remuneration arrangements of the Company and the
Group in accordance with the requirements of the Corporations Act 2001 and its Regulations. For the purposes of
this report, key management personnel (KMP) of the Group are defined as those persons having authority and
responsibility for planning, directing and controlling the major activities of the Company and the Group, directly or
indirectly, including any Director (whether executive or otherwise) of the parent company, and includes the three
executives in the Company and the Group.
For the purposes of this report, the term 'executive' encompasses the chief executive, senior executives, general
managers and secretaries of the Company and the Group.
Details of key management personnel (including the three highest executives of the Company and the
Group)
(i) Directors
Geoff Gander
Alastair Beardsall
Baltabek Kuandykov
Scott Mison
(ii) Executives
Keith Martens
Henry Wolski
Gamal Kulumbetov
Chairman / CEO (Executive)
Director (Non-Executive)
Director (Non-Executive)
Director / CFO / Company Secretary (Executive)
Technical Consultant
Technical Director (Kazakhstan) (resigned 30 November 2011)
Managing Director (Kazakhstan)(appointed 8 August 2011 and resigned 4
June 2012)
There were no other changes after reporting date and before the date the financial report was authorised for issue.
Remuneration Philosophy
The remuneration policy of the Group has been designed to align Directors and executives objectives with
shareholder and business objectives by providing a fixed remuneration component and offering long term incentives
based on key performance areas affecting the economic entity's financial result. The Board of the Group believes the
remuneration policy to be appropriate in its ability to attract and retain the best executives and Directors to run and
manage the economic entity, as well as create goal congruence between Directors, executives and shareholders.
The Board's policy for determining the nature and amount of remuneration for Board members and senior executives
of the economic entity is as follows:
*
*
*
The remuneration policy, setting the terms and conditions for the executive directors and other senior
executives, was developed by the Board after a review of similar listed and unlisted companies with
activities in overseas jurisdictions and taking into account the experience and skill set required to
successfully develop operations in these jurisdictions from early stage development. The Company does
not have a remuneration committee. The Board is of the opinion that due to the nature and size of the
Company, the functions performed by a Remuneration Committee can be adequately handled by the full
Board.
All executives receive a base salary (which is based on factors such as length of service and experience),
superannuation, fringe benefits, options and performance incentives.
The Board reviews executive packages annually by reference to the company's performance, executive
performance and comparable information from industry sectors and other listed companies in similar
industries.
Executives are entitled to participate in the Company’s long term performance rights plan.
12
JUPITER ENERGY LIMITED – 2012 ANNUAL REPORT
The executive Directors and executives receive a superannuation guarantee contribution required by the
government which is currently 9%, and do not receive any other retirement benefits.
The remuneration paid to Directors and executives is valued at the cost to the Company and expensed. Shares
given to Directors and executives are valued as the difference between the market price of those shares and the
amount paid by the Director or executive. Options are valued using the Black & Scholes methodology. Performance
Rights are valued using a hybrid employee share option model. The hybrid model incorporates a trinomial option
valuation and a Monte Carlo simulation.
Remuneration Structure
Non-Executive Director Remuneration
Objective
The Board seeks to set aggregate remuneration at a level which provides the Company with the ability to attract and
retain directors of the highest calibre, whilst incurring a cost which is acceptable to shareholders.
Structure
The Board policy is to remunerate non-executive directors at market rates for comparable companies for time,
commitment and responsibilities. The Board determines payments to the non-executive Directors and reviews their
remuneration annually, based on market practice, duties and accountability. Independent external advice is sought
when required. The maximum aggregate amount of fees that can be paid to non-executive directors is subject to
approval by shareholders at the Annual General Meeting. Total remuneration for all Non-Executive Directors, is not
to exceed $350,000 per annum as approved by shareholders at the Annual General Meeting held on 15 November
2010. Fees for non-executive directors are not linked to performance of the company. However, to align directors'
interests with shareholder interests, the non-executive directors have been issued Performance Rights which have
vesting conditions that are specifically linked to share price performance. Non-executive Directors are also
encouraged to hold shares in the company.
The amount of aggregate remuneration sought to be approved by shareholders and the manner in which it is
apportioned amongst directors is reviewed annually. The Board considers the fees paid to non-executive directors of
comparable companies and the potential value provided via the allocation of Performance Rights when undertaking
the annual review process.
Each director receives a fee for being a Director of the Company. Directors who are called upon to perform extra
services beyond the director’s ordinary duties may be paid additional fees for those services.
Executive Remuneration
Objective
The Group aims to reward executives with a level and mix of remuneration commensurate with their position and
responsibilities within the Group so as to:
-
-
-
-
reward executives for Company, business unit and individual performance;
align the interests of executives with those of shareholders;
link reward with the strategic goals and performance of the Company; and
ensure total remuneration is competitive by market standards.
Structure
In determining the level and make-up of executive remuneration, the Board reviews remuneration packages
provided by similar listed and unlisted companies with activities in overseas jurisdictions and taking into account the
experience and skill set required to successfully develop operations in these jurisdictions from early stage
development as well as the salary levels of local workers in that jurisdiction. It is the Board’s policy that employment
contracts are entered into with the Chief Executive Officer and all key management personnel.
13
JUPITER ENERGY LIMITED – 2012 ANNUAL REPORT
Fixed Remuneration
The fixed remuneration of executives is comprised of a base salary and superannuation. The fixed remuneration of
executives is reviewed annually.
Variable remuneration – Short Term Incentives (STI)
The Group operates a STI program that is available to executives and awards a cash bonus subject to the
attainment of clearly defined Group and individual measures.
Actual STI payments awarded to each executive depended on the extent to which specific targets are met. The
targets consist of a number of key performance indicators (KPIs) covering financial and non-financial, corporate and
individual measures of performance.
Variable Remuneration – Long Term Incentives (LTI)
Objective
The objectives of long term incentives are to:
-
-
align executives remuneration with the creation of shareholder wealth;
recognise the ability and efforts of the directors, employees and consultants of the Company who have
contributed to the success of the Company and to provide them with rewards where deemed appropriate;
provide an incentive to the directors, employees and consultants to achieve the long term objectives of the
Company and improve the performance of the Company; and
attract persons of experience and ability to employment with the Company and foster and promote loyalty
between the Company and its directors, employees and consultants.
-
-
Structure
Long term incentives granted to senior executives are delivered in the form of Performance Rights, issued under the
Performance Rights Plan.
In compliance with Corporations Law, none of the directors’ shareholdings in the Company is subject to hedging.
Each director must disclose any changes via formal ASX and AIM announcement within 5 working days of that
change. Any changes in directors’ shareholdings are also confirmed at each Board meeting.
Company Performance
Due to the current embryonic stage of the company’s growth it is not appropriate at this time to evaluate the
Company’s financial performance using generally accepted measures such as EBITDA and profitability; this
assessment will be developed over the next few years.
The following information provides a summary of the Company’s financial performance for the last five years:
2008
$
(2,533,868)
(11.40)
1.22
27.6m
The earnings per share and last share price have been adjusted for all periods to reflect the 15:1 share consolidation approved on 12 August 2011.
Loss before income tax
Earnings per share (cents)*
Last share price at Balance Date*
Market capitalisation
2010
$
(5,512,070)
(8.25)
0.51
30.1m
2011
$
(4,889,671)
(5.25)
0.72
83.4m
2012
$
(4,295,102)
(3.70)
0.415
48.2m
(2,610,253)
(10.80)
0.36
8.7m
2009
$
Relationship of Reward and Performance
The value of performance rights will represent a significant portion of an executive’s salary package. The ultimate
value to the executives of the performance rights and options depends on the share price of Jupiter Energy Ltd. The
share price is the key performance criteria for the long term incentive as the realised value arising from performance
14
JUPITER ENERGY LIMITED – 2012 ANNUAL REPORT
rights and options issued is dependent upon an increase in the share price to above the exercise price of the options
and minimum vesting price for the rights.
Below is a summary of performance conditions for performance rights:
The number of performance rights vest in proportion to the percentage increase in share price above $0.735 at
vesting date. If the share price is less than $0.919 (minimum vesting price) no performance rights vest. For 100% of
the performance rights to vest, the share price of the Company needs to reach $1.47.
In respect of the Vesting Condition, the % increase in the Share price of the Company will be calculated by reference
to the volume weighted average price of Shares in the 20 consecutive trading days immediately prior to the Expiry
Date (31 December 2013). No performance rights vest if the calculated share price is less than the minimum vesting
price at vesting date. The minimum vesting price was set based on 25% premium to the Company’s share price at
the original grant date.
15
JUPITER ENERGY LIMITED – 2012 ANNUAL REPORT
Details of remuneration (Audited)
Remuneration of Directors and Executives
Table 1: Remuneration for the year ended 30 June 2012
Short-term benefits
Post-employmen
t benefits
Share-based
payment
Cash
salary and
Consulting fees
$
Cash
bonus
$
Super-
annuation
$
Options /
Performance rights
/ shares
$
Total
$
Other
$
40,000
40,000
80,000
-
49,135 (a)
49,135
-
-
-
-
-
-
119,203 (b)
-
48,000
-
164,462
164,462
328,924
188,021
32,891
204,462
253,597
458,059
617,211
164,558
261,987
131,667 (c)
107,875
146,936
-
-
-
-
-
-
-
-
-
-
107,875
146,936
Name
Non-executive director
A Beardsall
B Kuandykov
Total non-executive directors
Executive directors
G Gander
S Mison
Other key management
personnel
K Martens
H Wolski
(resigned 30 November 2011)
G Kulumbetov
(appointed 8 August 2011;
resigned 4 June 2012)
Total executives
Totals
169,863
818,328
898,328
-
48,000
48,000
(a): Relates to a one off cash bonus for work completed outside his duties as a non executive director.
(b): Other relates to living expenses covering cost of apartment/office in London as per service agreement.
(c): Fees relate to CFO, Company Secretary and Director Fees.
Table 2: Remuneration for the year ended 30 June 2011
-
119,203
119,203
-
-
49,135
-
220,912
549,836
169,863
1,206,443
1,664,502
Remuneration
consisting of
performance
rights
%
80.44
64.85
Performance
related
%
80.44
84.23
30.46
19.99
30.46
19.99
-
-
-
-
-
-
Short-term benefits
Post-employmen
t benefits
Share-based
payment
Cash
salary and
Consulting fees
$
Cash
bonus
$
Super-
annuation
$
Options /
Performance rights
/ shares
$
Total
$
Remuneration
consisting of
options
%
Performance
related
%
Termination
$
Name
Non-executive director
A Childs
(resigned 5 October 2010)
A Beardsall
(appointed 5 October 2010)
B Kuandykov
(appointed 5 October 2010)
Total non-executive directors
Executive directors
G Gander
D Thorpe 2
(resigned 31 January 2011)
E Svanbayev 3
(resigned 5 October 2010)
S Mison 1
(appointed 31 January 2011)
Other key management
personnel
K Martens
H Wolski
Total executives
Totals
15,000
30,000
30,000
75,000
307,159
224,000
202,919
152,850
-
-
-
-
-
-
-
-
-
-
-
-
-
96,000
-
-
1,350
88,125
104,475
84.35%
84.35%
-
-
-
-
30,000
30,000
1,350
88,125
164,475
135,764
54,960
465,018
374,960
22,095
-
-
-
194,109
397,028
22.19%
48.89%
-
152,850
-
-
-
-
-
-
-
29.20%
14.66%
-
-
-
123,600
213,647
1,224,175
1,299,175
-
-
-
-
1: Fees relate to CFO / Company Secretary for the period 1 July 2010 to 30 June 2011 and director fees from 31 January 2011.
2: Included in fees was a break fee of $96,000. As a result of David’s resignation his performance rights were cancelled. Therefore as per AASB 2, previous expense
of unvested rights were reversed. The fair value of the performance rights lapsed was nil.
3: As a result of Erkin’s resignation his performance rights were cancelled. Therefore as per AASB 2, previous expense of unvested rights were reversed. The fair
value of the performance rights lapsed was nil. As part of his resignation, subject to share-holder approval and obtaining the extension to Block 31, Erkin has
received US $200,000 in Jupiter shares through the issue of 266,667 shares at a deemed value of $US0.75 per share. As the terms and conditions were agreed at
resignation, this has been accounted for and included in the remuneration report as a share-based payment as at 30 June 2011.
123,600
213,647
1,727,103
1,891,578
-
-
384,833
472,958
-
-
96,000
96,000
-
-
22,095
23,445
-
-
16
JUPITER ENERGY LIMITED – 2012 ANNUAL REPORT
Details of remuneration (Audited)
Remuneration of Directors and Executives
Compensation Options: Granted and vested during the year ended 30 June 2011
During the 2012 year, there were no options granted. No options lapsed or were exercised during the year.
During the 2011, there were no options granted, however 666,666 options vested and able to be exercised.
Share issued on Exercise of Compensation Options
There were no shares issued on the exercise of compensation options during the financial years ended 30 June 2012 or 30
June 2011.
Performance Rights
On 12 August 2011, 2,133,335 performance rights were approved by shareholders to directors. The number of
performance rights vest in proportion to the percentage increase in share price at vesting date $0.919 (minimum
vesting price). For 100% of the performance rights to vest, the share price of the Company needs to reach $1.47. In
respect of the Vesting Condition, the % increase in the Share price of the Company will be calculated by reference to
the volume weighted average price of Shares in the 20 consecutive trading days immediately prior to the Vesting
Date (25th August 2012). No performance rights vest if the calculated share price is less than the minimum vesting
price at vesting date. The minimum vesting price was set based on 25% premium to the Company’s share price at
the original grant date.
On 14 May 2012, shareholders approved the extension of the expiry date on the same terms and conditions to the 31
December 2013.
The fair value of performance rights granted to directors is estimated as at the grant date using a hybrid model incorporates
a trinomial option valuation and a Monte Carol simulation option pricing model taking into account the terms and conditions
upon which the instruments were granted. Two valuations were performed during the year:
1. As at 26 August 2011 with an expiry date of 25th August 2012
2. Modification as at 14 May 2012 with an expiry date of 31 December 2013.
The following table lists the inputs to the models for the period ended 30 June 2012:
Grant / Modification date
Number of performance rights
Share price
Exercise price
Dividend Yield
Expected volatility
Risk-free interest rate
Expected life
Weighted average fair value
Performance Rights
Performance Rights
26 August 2011
2,133,335
60 cents
0 cents
0.0%
80.0%
4.80%
1 year
27.0 cents
14 May 2012
2,133,335
50 cents
0 cents
0.0%
80.0%
2.67%
1.63 year
19.5 cents
During the year 10,000,000 (pre consolidation) performance rights were cancelled. $23,559 has been expensed in relation
to these rights.
17
JUPITER ENERGY LIMITED – 2012 ANNUAL REPORT
Details of remuneration (Audited)
Remuneration of Directors and Executives
Table 3: Compensation Performance Rights: Granted and vested during the year ended 30 June 2012
Granted
Number
Grant /
Modification
Date
Fair Value
per right at
grant date
$
Terms & Conditions for each Grant
Exercise price
per right
$
Expiry
Date
First
Exercise
Date
Vested
Number
%
Original Grant
Directors
A Beardsall
B Kuandykov
G Gander
S Mison
666,667
666,667
666,667
133,334
26 August 2011
26 August 2011
26 August 2011
26 August 2011
$0.27
$0.27
$0.27
$0.27
$0.00
$0.00
$0.00
$0.00
21 August 2012
21 August 2012
21 August 2012
21 August 2012
21 August 2012
21 August 2012
21 August 2012
21 August 2012
Total
2,133,335
Modification *
A Beardsall
B Kuandykov
G Gander
S Mison
-
-
-
-
14 May 2012
14 May 2012
14 May 2012
14 May 2012
$0.19(i)
$0.19(i)
$0.19(i)
$0.19(i)
$0.00
$0.00
$0.00
$0.00
31 Dec 2013
31 Dec 2013
31 Dec 2013
31 Dec 2013
31 Dec 2013
31 Dec 2013
31 Dec 2013
31 Dec 2013
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Total
*The only modification was the expiry vesting date was extended from 21 August 2012 to 31 December 2013. All other terms and conditions
remained the same.
(i) Represents the incremental fair value, between the original and modified awards at modification date.
-
-
Service agreements
Remuneration and other terms of employment for the Executive Chairman/CEO, and all other key management
positions held in Kazakhstan have been formalised in service agreements. The main provisions of the agreements in
relation to Directors holding management roles are set out below.
Geoff Gander, Executive Chairman (Effective – 1 July 2011)
Base Terms
This agreement was effective from 1 July 2011 and was for a term of 1 year.
Base Salary of GBP200,000 including Director Fees and the current Superannuation Levy of 9%.
Living expenses of GBP 75,000 per year, covering the cost of an apartment/office in London.
Mr Gander has been issued, after shareholder approval in August 2011, 666,667 Performance Rights. The
terms and conditions are outlined on page 17 of this report.
At a General Meeting on 14 May 2012, shareholders approved an extension of the expiry date of the
Performance Rights from 21 August 2012 to 31 December 2013.
Mr Gander had his Service Agreement renewed in June 2012 and is effective from 1 July 2012. The term of
the agreement runs to 31 December 2013 and the base terms remain the same. An additional allocation of
1.5m Performance Rights and their associated vesting terms will be put to shareholders for approval at the
November 2012 Annual General Meeting.
18
JUPITER ENERGY LIMITED – 2012 ANNUAL REPORT
Details of remuneration (Audited)
Remuneration of Directors and Executives
The termination provisions are as follows:
Employer - initiated
termination with reason
Employer - initiated
termination without reason
Termination for serious
misconduct
Employee – initiated
termination
Notice period
1 or 3 months
Payment in lieu of
notice
1 or 3 months
Treatment of Performance
Rights
Unvested rights forfeited
3 months
3 months
Unvested rights forfeited
None
1 or 3 month
None
None
Unvested rights forfeited
Unvested rights forfeited
Scott Mison, CFO / Company Secretary / Executive Director (Effective – 1 July 2011)
Base Terms
This agreement was effective from 1 July 2011 and was for a term of 1 year.
Base Salary of A$90,000.
Director fees of A$40,000.
Mr Mison has been issued, after shareholder approval in August 2011, 133,334 Performance Rights. The
terms and conditions are outlined on page 17 of this report.
At a General Meeting on 14 May 2012, shareholders approved an extension of the expiry date of the
Performance Rights from 21 August 2012 to 31 December 2013.
Mr Mison had his Service Agreement renewed in June 2012 and is effective from 1 July 2012. The
agreement runs until 31 December 2013. The base terms remain the same. An additional allocation of
366,666 Performance Rights and their associated vesting terms will be put to shareholders for approval at
the November 2012 Annual General Meeting.
The termination provisions are as follows:
Employer - initiated
termination with reason
Employer - initiated
termination without reason
Termination for serious
misconduct
Employee – initiated
termination
Notice period
1 or 3 months
Payment in lieu of
notice
1 or 3 months
Treatment of Performance
Rights
Unvested rights forfeited
3 months
3 months
Unvested rights forfeited
None
1 or 3 month
None
None
Unvested rights forfeited
Unvested rights forfeited
19
JUPITER ENERGY LIMITED – 2012 ANNUAL REPORT
Details of remuneration (Audited)
Remuneration of Directors and Executives
Keith Martens, Technical Consultant (Effective – 1 July 2011)
Base Terms
This agreement is effective from 1 July 2011. The term is on a rolling month basis.
Fee is $2,000 (excluding GST) per full working day.
The termination provisions are as follows:
Employer - initiated
termination with reason
Employer - initiated
termination without reason
Termination for serious
misconduct
Employee – initiated
termination
Notice period
1 month
1 month
None
1 month
Payment in lieu of
notice
1 month
1 month
None
None
End of Remuneration Report (Audited)
20
JUPITER EN
J
NERGY LIMIT
TED – 2012
ANNUAL RE
EPORT
NDEMNIFICA
I
ATION AND IN
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OF DIRECTOR
RS AND OFF
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21
JUPITER ENERGY LIMITED – 2012 ANNUAL REPORT
CORPORATE GOVERNANCE STATEMENT
In recognising the need for the highest standards of corporate behaviour and accountability, the Directors of Jupiter
adhere to strict principles of corporate governance.
The Board of Directors of Jupiter Energy Limited is responsible for the overall corporate governance of the
consolidated entity, guiding and monitoring the business and affairs of Jupiter on behalf of the shareholders by whom
they are elected and to whom they are accountable.
The Company’s corporate governance principles and policies are structured with reference to the Corporate
Governance Councils best practice recommendations, which are as follows:
Principle 1. Lay solid foundations for management and oversight
Principle 2. Structure the Board to add value
Principle 3. Promote ethical and responsible decision making
Principle 4. Safeguard integrity in financial reporting
Principle 5. Make timely and balanced disclosure
Principle 6. Respect the rights of shareholders
Principle 7. Recognise and manage risk
Principle 8. Remunerate fairly and responsibly
The Board’s Corporate Governance Charter includes procedures for compliance with the ASX Listing Rule
continuous disclosure requirements, trading in the Company’s securities, the management of risk, and a Code of
Conduct. Jupiter’s corporate governance practices were in place throughout the year ended 30 June 2012.
BOARD OF DIRECTORS
Role of the Board
In general, the Board is responsible for, and has the authority to determine, all matters relating to the policies,
practices, management and operations of the Company. It is required to do all things that may be necessary to be
done in order to carry out the objectives of the Company.
Without intending to limit this general role of the Board, the principal functions and responsibilities of the Board
include the following:
To set the strategic direction for the Company and monitor progress of those strategies;
Establish policies appropriate for the Company;
Monitor the performance of the Company, the Board and management;
Approve the business plan and work programmes and budgets;
Authorise and monitor investment and strategic commitments;
Review and ratify systems for health, safety and environmental management; risk and internal control;
codes of conduct and regulatory compliance;
Report to shareholders, including but not limited to, the Financial Statements of the Company; and
Take responsibility for corporate governance.
22
JUPITER ENERGY LIMITED – 2012 ANNUAL REPORT
Composition of the Board
To add value to the Company the Board has been formed so that it has effective composition, size and commitment
to adequately discharge its responsibilities and duties given its current size and scale of operations.
The names of Directors of the Company in office at the date of this statement are set out in the Directors’ Report.
Information regarding Directors’ experience and responsibilities are included in the Directors’ Report section of this
Annual Report.
The number of Directors is specified in the Constitution of the Company as a minimum of three up to a maximum of
ten.
The preferred skills and experiences for a Director of the Company include:
Exploration for oil and gas accumulations;
Development and production operations of hydrocarbon accumulations;
Financing of operations
Business Development; and
Public Company financial reporting and administration.
Chairman of the Board
The Chairman of the Board should be a Non-Executive Director and the Chairman will be elected by the Directors.
Mr Geoff Gander, however is an Executive Chairman and is not independent. Given his skills, experience and
knowledge of the Company, the Board considers that it is appropriate for him to be Chairman.
Independent Directors
The Board considers that a Director is independent if that Director complies with the following criteria:
Apart from Director’s fees and shareholding, independent Directors should not have any business dealings
which could materially affect their independent judgment;
Must not have been in an Executive capacity in the Company in the last 3 years;
Must not have been in an advisory capacity to the Company in the last 3 years;
Must not be a significant customer or supplier for the Company;
Must not be appointed through a special relationship with a Board member;
Must not owe allegiance to a particular group of shareholders which gives rise to a potential conflict of
interest;
Must not hold conflicting cross Directorships; and
Must not be a substantial shareholder or a nominee of a substantial shareholder (as defined under section 9
of the Corporations Act).
Using the ASX Best Practice Recommendations on the assessment of the independence of Directors. The Board
considers that of a total of four Directors there are none considered independent.
Mr Geoff Gander is an Executive Chairman of the Company and is not considered to be independent. However, his
experience and knowledge of the Company makes his contribution to the Board such that it is appropriate for him to
remain on the Board.
Mr Baltabek Kuandykov is a Non-Executive Director of the Company and is not considered to be independent as he
was a nominee Director by The Waterford Group, a substantial shareholder. However, his experience, especially
within Kazakhstan makes his contribution to the Board such that it is appropriate for him to remain on the Board.
Mr Alastair Beardsall is a Non-Executive Director of the Company and is not considered to be independent as he
was a nominee Director by The Waterford Group, a substantial shareholder. However, his experience and
knowledge of the Company makes his contribution to the Board such that it is appropriate for him to remain on the
Board.
23
JUPITER ENERGY LIMITED – 2012 ANNUAL REPORT
Mr Scott Mison is CFO / Company Secretary of the Company and is not considered to be independent. However, his
experience and knowledge of the Company makes his contribution to the Board such that it is appropriate for him to
remain on the Board.
Retirement and Rotation of Directors
Retirement and rotation of Directors are governed by the Corporations Act 2001 and the Constitution of the
Company. Each year one third Directors must retire and offer themselves for re-election. Any casual vacancy filled
will be subject to shareholder vote at the next Annual General Meeting of the Company.
Independent Professional Advice
Each Director has the right to seek independent professional advice at the Company’s expense after consultation
with the Chairman. Once received the advice is to be made immediately available to all Board members.
Access to Employees
Directors have the right of access to any employee. Any employee shall report any breach of corporate governance
principles or Company policies to the Executive Director and/or Company Secretary/CFO who shall remedy the
breach. If the breach is not rectified to the satisfaction of the employee, they shall have the right to report any breach
to an independent Director without further reference to senior managers of the Company.
Insurance
The Directors review the requirements for insurance cover for the associated risks for its field operations, including
drilling, production and storage of hydrocarbons and other activities and procures insurance cover at levels and
costs they feel are appropriate.
Directors and officers insurance for Directors will be arranged by the Company at Company expense.
Share Ownership
Directors are encouraged to own Company shares.
Board Meetings
The following points identify the frequency of Board Meetings and the extent of reporting from management at the
meetings:
A minimum of four meetings are to be held per year;
Other meetings will be held as required, meetings can be held by telephone link; and
Information provided to the Board includes all material information on: operations, budgets, cash flows,
funding requirements, shareholder movements, broker activity in the Company’s securities, assets and
liabilities, disposals, financial accounts, external audits, internal controls, risk assessment, new venture
proposals, and health, safety and environmental reports.
The number of Directors’ meetings and the number of meetings attended by each of the Directors of the Company
during the financial year are set out in the Directors’ Report.
Board Performance Review
The Board intends to commence an evaluation of its performance annually.
There was no evaluation conducted during the financial year.
24
JUPITER ENERGY LIMITED – 2012 ANNUAL REPORT
Other Areas for Board Review
Reporting to shareholders and the market to ensure trade in the Company’s securities takes place in an
efficient, competitive and informed market; and
Insurance, both corporate and joint venture related insurances.
Board Committees
Audit Committee
The Company does not have an audit committee. The Board is of the opinion that due to the nature and size of the
Company, the functions performed by an audit committee can be adequately handled by the full Board.
The CEO (or equivalent) and the CFO (or equivalent) declare in writing to the Board that the Company’s financial
statements for the year ended 30 June 2012 present a true and fair view, in all material aspects, of the Company’s
financial condition and operational results and are in accordance with relevant accounting standards. This
representation is made by the CEO (or equivalent) and the CFO (or equivalent) prior to the Director’s approval of the
release of the annual and six monthly accounts. This representation is made after enquiry of, and representation by,
appropriate levels of management.
A non-executive Director meets with the Auditors without Executives present to go through the financial statements
prior to sign off on the accounts.
Jupiter Energy Limited has requested the external auditors to attend the annual general meeting to be available to
answer shareholders questions regarding the audit.
Nomination Committee
The Board of Directors of the Company does not have a nomination committee. The Board is of the opinion that due
to the nature and size of the Company, the functions performed by a nomination committee can be adequately
handled by the full Board.
Remuneration Committee
The Company does not have a remuneration committee. The Board is of the opinion that due to the nature and size
of the Company, the functions performed by a remuneration committee can be adequately handled by the full Board.
Remuneration levels for Directors, Secretaries, Senior Executives of the Company, and relevant group Executives of
the consolidated entity (“the Directors and Senior Executives”) are competitively set to attract and retain
appropriately qualified and experienced Directors and Senior Executives.
The remuneration structures explained below are designed to attract suitably qualified candidates, reward the
achievement of strategic objectives, and achieve the broader outcome of creation of value for shareholders. The
remuneration structures take into account:
the capability and experience of the directors and senior executives
the Directors and Senior Executives ability to control the relevant segment/s’ performance
the consolidated entity’s performance including:
o
o
the consolidated entity’s earnings
the growth in share price and returns on shareholder wealth
the amount of incentives within each Directors and Senior Executives remuneration
25
JUPITER ENERGY LIMITED – 2012 ANNUAL REPORT
For details of remuneration paid to Directors and officers for the financial year please refer to the Directors’ Report
on page 16.
Risk Management
The risks involved in oil and gas exploration Company and the specific uncertainties for the Company continue to be
regularly monitored and the full Board of the Company meets on an annual basis to formally review such risks. All
proposals reviewed by the Board include a consideration of the issues and risks of the proposal.
The potential exposures, including financial, reputation, and HSE, with running the Company have been managed by
the Board and senior management in Kazakhstan who together have significant broad-ranging industry experience.
Additionally, it is the responsibility of the Board to assess the adequacy of the Company’s internal control systems
and that its financial affairs comply with applicable laws and regulations and professional practices. The CEO (or
equivalent) and the CFO (or equivalent) declare in writing to the Board that the financial reporting risk management
and associated compliance controls have been assessed and found to be operating efficiently and effectively. This
representation is made by the CEO (or equivalent) and CFO (or equivalent) prior to the Director’s approval of the
release of the annual and six monthly accounts. This representation is made after enquiry of, and representation by,
appropriate levels of management.
PROMOTION OF ETHICAL AND RESPONSIBLE DECISION-MAKING
Code of Conduct
The goal of establishing the Company as a significant Australian-based petroleum exploration and production
Company is underpinned by its core values of honesty, integrity, common sense and respect for people. The
Company desires to remain a good corporate citizen and appropriately balance, protect and preserve all
stakeholders’ interests.
The Board has adopted a Code of Conduct for Directors and employees of the Company. The Company’s goal of
achieving above average wealth creation for our shareholders should be enhanced by complying with this Code of
Conduct which provides principles to which Directors and employees should be familiar and to which they are
expected to adhere and advocate.
It is the responsibility of the Board to ensure the Company performs under this Code and for its regular review.
Diversity
The Board has not adopted a separate diversity policy, however is committed to workplace diversity and recognizes
the benefits arising from recruitment, development and retention of talented, diverse and motivated workforce. The
Company is not of a sufficient size to justify measurable objectives at this stage. As at 30 June 2012, there were
eleven women in the Groups workforce, two of which held key executive positions.
Trading in Company Securities by Directors, officers and employees
Trading of shares is covered by, amongst other things, the Corporations Act, the ASX Listing Rules and the AIM
Listing Rules. The Board has established a Securities Trading Policy that establishes strict guidelines as to when a
Director, officer or an employee can deal in Company shares. The policy prohibits trading in the Company’s
securities whilst the Directors, officer or employee is in the possession of price sensitive information.
For details of shares held by Directors and officers please refer to the Directors’ Report on page 3.
26
JUPITER ENERGY LIMITED – 2012 ANNUAL REPORT
SHAREHOLDER COMMUNICATION
The Board aims to ensure that shareholders and the general investing community have equal access to the
Company’s information.
The Company has policies and procedures that are designed to ensure compliance with ASX Listing Rule disclosure
requirements and to ensure accountability at a senior management level for that compliance. This disclosure policy
includes processes for the identification of matters that may have material effect on the price of the Company’s
securities, notifying them to the ASX and posting them on the Company’s website.
The Company also has a strategy to promote effective communication with shareholders and encourage effective
participation at general meetings through a policy of open disclosure to shareholders, regulatory authorities and the
broader community of all material information with respect to the Company’s affairs including, but not limited to:
Company’s activities
Conflicts of interest and related party transactions;
Executive remuneration;
The grant of options and details of Share Option and Performance Rights Plans;
The process for performance evaluation of the Board, its committees, individual Directors and key
managers;
The link between remuneration paid to Directors and Executives and corporate performance; and
The use of clear and concise text in all communications.
following
The
(www.jupiterenergy.com):
information
is communicated
to shareholders and available on
the Company web site
The Annual Report and notices of meetings of shareholders;
Quarterly reports reviewing the operations, activities and financial position of the Company;
All documents that are released to the ASX are made available on the Company’s website; and
All other information on the Company’s website is updated on an ongoing basis.
27
Auditor’s Independence Declaration to the Directors of Jupiter Energy
Limited
In relation to our audit of the financial report of Jupiter Energy Limited for the financial year ended
30 June 2012, to the best of my knowledge and belief, there have been no contraventions of the auditor
independence requirements of the Corporations Act 2001 or any applicable code of professional conduct.
Ernst & Young
R J Curtin
Partner
25 September 2012
RC:DR:JUPITER:035
Liability limited by a scheme approved
under Professional Standards Legislation
JUPITER ENERGY LIMITED – 2012 ANNUAL REPORT
Financial Statements
FOR THE YEAR ENDED 30 JUNE 2012
29
JUPITER ENERGY LIMITED – 2012 ANNUAL REPORT
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEAR ENDED 30 JUNE 2012
Revenue
Cost of sales
Gross profit
Other income
Gain / (loss) on derivative financial instrument
General and administrative costs
Operating loss
Finance income
Finance costs
Loss before tax
Income tax expense
Loss after income tax
Note
Consolidated
2012
$
2011
$
1,063,086
(898,654)
164,432
131,418
761,813
(4,659,544)
(3,601,881)
24,475
(717,696)
-
-
-
-
(59,455)
(4,894,945)
(4,954,400)
64,729
-
(4,295,102)
(4,889,671)
-
-
(4,295,102)
(4,889,671)
4
5
Other comprehensive income net of tax
Foreign currency translation
1,337,981
(4,943,666)
Total comprehensive loss for the period
(2,957,121)
(9,833,337)
Earnings per share for loss attributable to the
ordinary equity holders of the Company:
Basic loss per share (cents)
Diluted loss per share (cents)
24
24
(3.70)
(3.70)
(5.25)
(5.25)
The consolidated statement of comprehensive income is to be read in conjunction with the notes of the financial statements
30
JUPITER ENERGY LIMITED – 2012 ANNUAL REPORT
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
AS AT 30 JUNE 2012
ASSETS
Current Assets
Cash and cash equivalents
Trade and other receivables
Other current assets
Inventories
Total Current Assets
Non Current Assets
Trade and other receivables
Oil and gas properties
Plant and equipment
Exploration and evaluation expenditure
Other financial assets
Total Non Current Assets
Total Assets
Current Liabilities
Payables
Deferred revenue
Provisions
Total Current Liabilities
Non-current Liabilities
Provisions
Other financial liabilities
Derivative liability
Total Non-Current Liabilities
Total Liabilities
Net Assets
Equity
Contributed equity
Share based payment reserve
Foreign currency translation reserve
Accumulated losses
Total Equity
Note
Consolidated
2012
$
2011
$
6
7
8
9
7
10
11
12
13
14
15
16
16
17
17
18
19
19
395,445
527,566
460,496
53,320
1,436,827
13,968,248
1,410,979
521,174
-
15,900,401
2,401,889
14,225,282
926,336
25,014,521
292,752
42,860,780
44,297,607
-
-
398,851
25,319,806
128,404
25,847,061
41,747,462
1,124,623
1,192,039
90,957
2,407,619
356,594
2,789,897
274,880
3,421,371
5,828,990
534,616
-
61,918
596,534
230,552
-
-
230,552
827,086
38,468,617
40,920,376
71,236,136
4,472,289
(4,746,987)
(32,492,821)
38,468,617
71,280,610
3,922,453
(6,084,968)
(28,197,719)
40,920,376
The consolidated statement of financial position is to be read in conjunction with the notes of the financial statements.
31
JUPITER ENERGY LIMITED – 2012 ANNUAL REPORT
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED 30 JUNE 2012
Note
Consolidated
2012
$
2011
$
Cash flow from operating activities
Receipts from customers
Payments to suppliers and employees
Interest received
Net cash flows (used in) operating activities
3,244,141
(5,996,508)
24,476
(2,727,891)
26
Cash flows from investing activities
Payment for oil field extension
Payments for exploration and development expenditure
Payments for plant and equipment
Net Cash flows (used in) investing activities
Cash flows from financing activities
Proceeds from issues of shares
Proceeds from convertible notes
Transactions cost from issue of shares
Interest paid
Proceeds from option issue
Net cash flows from financing activities
Net increase / (decrease) in cash held
Effects of exchange rate changes
Cash at beginning of the year
Cash at end of the year
-
(13,255,794)
(752,218)
(14,008,012)
-
3,487,987
(44,473)
(379,093)
-
3,064,421
(13,671,482)
98,679
13,968,248
395,445
6
1,578,406
(6,092,821)
64,729
(4,449,686)
(766,964)
(8,298,650)
(348,876)
(9,414,490)
27,770,973
(1,181,608)
10,000
26,599,365
12,735,189
(94,747)
1,327,806
13,968,248
The statement of cash flows is to be read in conjunction with the notes of the financial statements.
32
JUPITER ENERGY LIMITED – 2012 ANNUAL REPORT
STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 30 JUNE 2012
Share Based
Payment
Reserve
Issued capital
$
$
Foreign
Currency
Translation
Reserve
$
Accumulated
Losses
$
Total
$
44,681,247
-
-
-
3,164,908
-
-
-
(1,141,302)
-
(4,943,666)
(4,943,666)
(23,308,048)
(4,889,671)
-
(4,889,671)
23,396,805
(4,889,671)
(4,943,666)
(9,833,337)
-
757,545
-
-
757,545
27,780,971
(1,181,608)
71,280,610
-
-
3,922,453
-
-
(6,084,968)
-
-
(28,197,719)
27,780,971
(1,181,608)
40,920,376
71,280,610
-
-
-
3,922,453
-
-
-
(6,084,968)
-
1,337,981
1,337,981
(28,197,719)
(4,295,102)
-
(4,295,102)
40,920,376
(4,295,102)
1,337,981
(2,957,121)
-
549,836
-
-
549,836
(44,474)
71,236,136
-
4,472,289
-
(4,746,987)
-
(32,492,821)
(44,474)
38,468,617
CONSOLIDATED
At 1 July 2010
Loss for the period
Other comprehensive income
Total comprehensive income
Transactions by owners recorded
directly in equity:
Share based payments
Shares issued
- Ordinary shares
- Costs of issue
At 30 June 2011
As at 1 July 2011
Loss for the period
Other comprehensive income
Total comprehensive income
Transactions by owners recorded
directly in equity:
Share based payments
Shares issued
- Costs of issue
At 30 June 2012
The statements of changes in equity are to be read in conjunction with the notes of the financial statements.
33
JUPITER ENERGY LIMITED – 2012 ANNUAL REPORT
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2012
1
CORPORATE INFORMATION
The financial report of Jupiter Energy Limited for the year ended 30 June 2012 was authorised for issue in accordance
with a resolution of the directors on 25 September 2012.
Jupiter Energy Limited is a company limited by shares incorporated in Australia whose shares are publicly traded on the
Australian Stock Exchange and on London’s Alternative Investment Market (as CDI’s). Jupiter Energy Limited is a for
profit entity.
The nature of the operations and principal activities of the Group are described in the Directors Report on pages 5 to 10 of
this report.
2
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a) Basis of Preparation
The financial report is a general-purpose financial report, which has been prepared in accordance with the requirements of
the Corporations Act 2001, Australian Accounting Standards and other authoritative pronouncements of the Australian
Accounting Standards Board. The financial report has also been prepared on a historical cost basis except for certain
financial instruments measured at fair value. The financial report is presented in Australian dollars.
Going Concern
The consolidated financial statements have been prepared on a going concern basis with the Directors of the opinion that
the Group can meet its obligations as and when they fall due.
Subsequent to 30 June 2012, the Company raised $11,613,016 (before costs) from an entitlement offer to fund ongoing
development of Block 31 and working capital. The Directors recognise that the Company will need to secure Trial
Production Licenses for the J-51 and J-53 wells to allow for oil production from these wells. The Company is also reliant
on planned production forecasts to fund ongoing exploration, drilling and development activities for Block 31. The
Directors are confident that these matters will be achieved.
(b) Statement of compliance
The financial report complies with Australian Accounting Standards as issued by the Australian Accounting Standards
Board and International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board.
From 1 July 2011, the Group has adopted the following Standards and Interpretations, mandatory for annual periods
beginning on 1 July 2011. Adoption of these standards and interpretations did not have any significant effect on the
financial position or performance of the Group
AASB 2009-5 Further Amendments to Australian Accounting Standards arising from the Annual Improvements Project
[AASB 5, 8, 101, 107, 117, 118, 136 & 139]
AASB 2009-8 Amendments to Australian Accounting Standards – Group Cash-settled Share-based Payment
Transactions [AASB 2]
AASB 2009-10 Amendments to Australian Accounting Standards – Classification of Rights Issues [AASB 132]
AASB 2010-3 Amendments to Australian Accounting Standards arising from the Annual Improvements Project [AASB 3,
AASB 7, AASB 121, AASB 128, AASB 131, AASB 132 & AASB 139]
Interpretation 19 Extinguishing Financial Liabilities with Equity Instruments
34
JUPITER ENERGY LIMITED – 2012 ANNUAL REPORT
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2012
Australian Accounting Standards and Interpretations that have recently been issued or amended but are not yet effective have
not been adopted by the Group for the annual reporting period ending 30 June 2012. These are outlined in the following table.
Reference
Title
Summary
2010-8
Amendments to Australian
Accounting Standards –
Deferred Tax: Recovery of
Underlying Assets
[AASB 112]
These amendments address
the determination of
deferred tax on investment property measured at fair
value and introduce a rebuttable presumption that
deferred tax on investment property measured at fair
value should be determined on the basis that the
carrying amount will be recoverable through sale. The
amendments also incorporate SIC-21 Income Taxes –
Recovery of Revalued Non-Depreciable Assets into
AASB 112.
Application
date of
standard
Impact on
Group
financial
report
Application
date for
Group
1 July 2012
1 Jan 2012
The group
has not yet
determined
the financial
impact of the
change.
AASB 2011-
9
of
Amendments to Australian
Accounting Standards –
Other
Presentation
Comprehensive Income
[AASB 1, 5, 7, 101, 112,
120, 121, 132, 133, 134,
1039 & 1049]
AASB 10
Consolidated
Statements
Financial
1 July 2012
1 July 2013
The group
has not yet
determined
the financial
impact of the
change.
The group
has not yet
determined
the financial
impact of the
change.
This Standard
items
requires entities
presented in other comprehensive income on the basis
of whether they might be reclassified subsequently to
profit or loss and those that will not.
to group
1 July 2012
1 January
2013
AASB 10 establishes a new control model that applies
to all entities.
It replaces parts of AASB 127
Consolidated and Separate Financial Statements
dealing with the accounting for consolidated financial
statements and UIG-112 Consolidation – Special
Purpose Entities.
The new control model broadens the situations when
an entity is considered to be controlled by another entity
and includes new guidance for applying the model to
specific situations, including when acting as a manager
may give control, the impact of potential voting rights
and when holding less than a majority voting rights may
give control.
Consequential amendments were also made to other
standards via AASB 2011-7.
35
JUPITER ENERGY LIMITED – 2012 ANNUAL REPORT
Application
date of
standard
Impact on
Group
financial
report
Application
date for
Group
1 July 2013
1 January
2013
The group
has not yet
determined
the financial
impact of the
change.
1 July 2013
1 July 2013
1 January
2013
1 January
2013
The group
has not yet
determined
the financial
impact of the
change.
The group
has not yet
determined
the financial
impact of the
change.
Reference
Title
Summary
AASB 11
Joint Arrangements
AASB 12
Disclosure of
Other Entities
Interests
in
AASB 13
Fair Value Measurement
Interests
in Joint
AASB 11 replaces AASB 131
Ventures and UIG-113 Jointly- controlled Entities –
Non-monetary Contributions by Ventures. AASB 11
uses the principle of control in AASB 10 to define joint
control, and therefore the determination of whether joint
control exists may change. In addition it removes the
option to account for jointly controlled entities (JCEs)
using proportionate consolidation. Instead, accounting
for a joint arrangement is dependent on the nature of
the rights and obligations arising from the arrangement.
Joint operations that give the venturers a right to the
underlying assets and obligations
is
accounted for by recognising the share of those assets
and obligations. Joint ventures that give the venturers
a right to the net assets is accounted for using the
equity method.
themselves
Consequential amendments were also made to other
standards via AASB 2011-7 and amendments to AASB
128.
AASB 12 includes all disclosures relating to an entity’s
interests in subsidiaries, joint arrangements, associates
and structures entities. New disclosures have been
introduced about the judgments made by management
to determine whether control exists, and to require
summarised
joint arrangements,
associates and structured entities and subsidiaries with
non-controlling interests.
information about
AASB 13 establishes a single source of guidance for
determining the fair value of assets and liabilities. AASB
13 does not change when an entity is required to use
fair value, but rather, provides guidance on how to
determine fair value when fair value is required or
permitted. Application of this definition may result in
different fair values being determined for the relevant
assets.
AASB 13 also expands the disclosure requirements for
all assets or liabilities carried at fair value. This
includes information about the assumptions made and
the qualitative impact of those assumptions on the fair
value determined.
Consequential amendments were also made to other
standards via AASB 2011-8.
36
JUPITER ENERGY LIMITED – 2012 ANNUAL REPORT
Reference
Title
Summary
AASB 119
Employee Benefits
AASB 2012-
5
Annual
2009–2011 Cycle
Improvements
to
The main change introduced by this standard is to
revise the accounting for defined benefit plans. The
amendment removes the options for accounting for the
liability, and requires that the liabilities arising from such
plans is recognized in full with actuarial gains and
in other comprehensive
losses being
income. It also revised the method of calculating the
return on plan assets.
recognized
The revised standard changes the definition of short-
term employee benefits. The distinction between short-
term and other long-term employee benefits is now
based on whether the benefits are expected to be
settled wholly within 12 months after the reporting date.
Consequential amendments were also made to other
standards via AASB 2011-10.
(IFRSs) and
This standard sets out amendments to International
Financial Reporting
for
Standards
conclusions
the
International Accounting Standards Board’s Annual
Improvements process. These amendments have not
yet been adopted by the AASB.
the
guidance made
related bases
during
and
Application
date of
standard
Impact on
Group
financial
report
Application
date for
Group
1 July 2013
1 January
2013
The group
has not yet
determined
the financial
impact of the
change.
1 July 2013
1 January
2013
The group
has not yet
determined
the financial
impact of the
change.
The following items are addressed by this standard:
AASB 1 First-time Adoption of International Financial
Reporting Standards
• Repeated application of IFRS 1
• Borrowing costs
AASB 1 Presentation of Financial Statements
• Clarification of
the
comparative information
requirements
for
AASB 16 Property, Plant and Equipment
• Classification of servicing equipment
AASB 32 Financial Instruments: Presentation
• Tax effect of distribution to holders of equity
instruments
AASB 34 Interim Financial Reporting
• Interim
financial reporting and segment
information for total assets and liabilities
AASB 2011-
4
Amendments to Australian
Accounting Standards
to
Individual Key
Remove
Personnel
Management
Disclosure
Requirements
[AASB 124]
This Amendment deletes from AASB 124 individual key
management personnel disclosure requirements for
disclosing entities that are not companies.
1 July 2013
1 July 2013
The group
has not yet
determined
the financial
impact of the
change.
37
JUPITER ENERGY LIMITED – 2012 ANNUAL REPORT
Reference
Title
Summary
Application
date of
standard
Impact on
Group
financial
report
Application
date for
Group
AASB 1053
Application of Tiers of
Australian
Accounting
Standards
This Standard establishes a differential
financial
reporting framework consisting of two Tiers of reporting
requirements for preparing general purpose financial
statements:
(a) Tier 1: Australian Accounting Standards
(b) Tier 2: Australian Accounting Standards –
Reduced Disclosure Requirements
1 July 2013
The group
has not yet
determined
the financial
impact of the
change.
1 July 2013
disclosures
Tier 2 comprises the recognition, measurement and
presentation requirements of Tier 1 and substantially
reduced
those
requirements.
The following entities apply Tier 1 requirements in
preparing general purpose financial statements:
(a) For-profit entities in the private sector that have
corresponding
to
public accountability (as defined in this Standard)
(b) The Australian Government and State, Territory
and Local Governments
The following entities apply either Tier 2 or Tier 1
requirements in preparing general purpose financial
statements:
(a) For-profit private sector entities that do not have
public accountability
(b) All not-for-profit private sector entities
(c) Public sector entities other than the Australian
Government and State, Territory and Local
Governments.
Consequential amendments
to
implement the regime were introduced by AASB 2010-
2, 2011-2, 2011-6, 2011-11 and 2012-1.
to other standards
AASB 2012-
2
Amendments to Australian
Accounting Standards –
Disclosures – Offsetting
Financial
and
Assets
Financial Liabilities
to
AASB 2012-2 principally amends AASB 7 Financial
Instruments: Disclosures
require disclosure of
information that will enable users of an entity’s financial
statements to evaluate the effect or potential effect of
rights of set-off
netting arrangements,
associated with the entity’s recognised financial assets
and recognised financial liabilities, on the entity’s
financial position.
including
1 July 2013
1 January
2013
The group
has not yet
determined
the financial
impact of the
change.
AASB 2012-
5
Amendments to Australian
Standards
Accounting
Annual
from
arising
Improvements 2009–2011
Cycle; and
AASB 2012-5 makes amendments resulting from the
2009-2011 Annual Improvements Cycle. The Standard
addresses a range of improvements, including the
following:
1 January
2013
• repeat application of AASB 1 is permitted (AASB 1);
and
1 July 2013
The group
has not yet
determined
the financial
impact of the
change.
the
clarification of
•
information
requirements when an entity provides a third balance
sheet
of Financial
101 Presentation
Statements).
comparative
(AASB
38
JUPITER ENERGY LIMITED – 2012 ANNUAL REPORT
Reference
Title
Summary
Application
date of
standard
Impact on
Group
financial
report
Application
date for
Group
1 July 2015
1 July 2015
The group
has not yet
determined
the financial
impact of the
change.
The group
has not yet
determined
the financial
impact of the
change.
AASB 2012-
3
Amendments to Australian
Accounting Standards –
Offsetting Financial Assets
and Financial Liabilities;
Instruments: Presentation
AASB 2012-3 adds application guidance to AASB 132
Financial
to address
inconsistencies identified in applying some of the
offsetting criteria of AASB 132, including clarifying the
meaning of “currently has a legally enforceable right of
set-off” and that some gross settlement systems may
be considered equivalent to net settlement.
1 January
2014
AASB 9
Financial Instruments
1 January
2015
AASB 9 includes requirements for the classification and
measurement of financial assets. It was further
amended by AASB 2010-7 to reflect amendments to
the accounting for financial liabilities.
These requirements improve and simplify the approach
for classification and measurement of financial assets
compared with the requirements of AASB 139. The
main changes are described below.
(a)
for managing
irrevocable election on
Financial assets that are debt instruments will be
classified based on (1) the objective of the
entity’s business model
the
financial assets; (2) the characteristics of the
contractual cash flows.
initial
Allows an
recognition to present gains and losses on
investments in equity instruments that are not
held for trading in other comprehensive income.
Dividends in respect of these investments that
are a return on investment can be recognised in
profit or loss and there is no impairment or
recycling on disposal of the instrument.
Financial assets can be designated and
measured at fair value through profit or loss at
if doing so eliminates or
initial recognition
significantly
reduces a measurement or
recognition inconsistency that would arise from
measuring assets or liabilities, or recognising the
gains and losses on them, on different bases.
(b)
(c)
(d) Where the fair value option is used for financial
liabilities the change in fair value is to be
accounted for as follows:
► The change attributable to changes in credit
risk are presented in other comprehensive
income (OCI)
► The remaining change is presented in profit
or loss
If this approach creates or enlarges an accounting
mismatch in the profit or loss, the effect of the changes
in credit risk are also presented in profit or loss.
Consequential amendments were also made to other
standards as a result of AASB 9, introduced by AASB
2009-11 and superseded by AASB 2010-7 and 2010-
10.
39
JUPITER ENERGY LIMITED – 2012 ANNUAL REPORT
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2012
2
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(c) Basis of consolidation
The consolidated financial statements comprise the financial statements of Jupiter Energy Limited and its subsidiaries
as at 30 June each year ('the Group').
Subsidiaries are all those entities over which the Group has the power to govern the financial and operating policies
so as to obtain benefits from their activities. The existence and effect of potential voting rights that are currently
exercisable or convertible are considered when assessing whether a group controls another entity.
The financial statements of subsidiaries are prepared for the same reporting period as the parent company, using
consistent accounting policies.
Subsidiaries and special purpose entities are fully consolidated from the date on which control is obtained by the
Group and cease to be consolidated from the date on which control is transferred out of the Group.
Adjustments are made to bring into line any dissimilar accounting policies that may exist. All intercompany balances
and transactions, including unrealised profits arising from intra-group transactions, have been eliminated in full.
Unrealised losses are eliminated unless costs cannot be recovered.
Subsidiaries are consolidated from the date on which control is transferred to the Group and cease to be consolidated
from the date on which control is transferred out of the Group. Where there is loss of control of a subsidiary, the
consolidated financial statements include the results for the part of the reporting period during which Jupiter Energy
Limited has control.
The acquisition of subsidiaries is accounted for using the acquisition method of accounting. The acquisition method of
accounting involves recognising at acquisition date, separately from goodwill, the identifiable assets acquired, the
liabilities assumed and any non-controlling interest in the acquisition. The identifiable assets acquired and the
liabilities assumed are measured at their acquisition date fair values.
(d) Significant accounting estimates and assumptions
The carrying amounts of certain assets and liabilities are often determined based on estimates and assumptions of
future events. The key estimates and assumptions that have a significant risk of causing a material adjustment to the
carrying amounts of certain assets and liabilities within the next annual reporting period are:
Share-based payment transactions
The Group measures the cost of equity-settled transactions with employees by reference to the fair value of the equity
instruments at the date at which they are granted. The fair value is determined using a Black and Scholes model,
trinomial and Monte Carlo using the assumptions detailed in note 21.
Exploration and evaluation
The Group's accounting policy for exploration and evaluation is set out in note 2(f). The application of this policy
necessarily requires management to make certain estimates and assumptions as to future events and circumstances,
in particular the assessment of whether economic quantities of reserves may be found. Any such, estimates and
assumptions may change as new information becomes available. If, after having capitalised expenditure under the
Group’s policy, management concludes that the Group is unlikely to recover the expenditure by future exploitation or
sale, then the relevant capitalised amount will be written off to the income statement.
40
JUPITER ENERGY LIMITED – 2012 ANNUAL REPORT
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2012
2
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Provision for restoration
Costs of site restoration are provided over the life of the facility from when exploration commences and are included
in the costs of that stage. Site restoration costs include the dismantling and removal of plant, equipment and building
structures, waste removal, and rehabilitation of the site in accordance with clauses of the permits. Such costs have
been determined using estimates of future costs, current legal requirements and technology on an undiscounted
basis.
Any changes in the estimates for the costs are accounted on a prospective basis. In determining the costs of site
restoration, there is uncertainty regarding the nature and extent of the restoration due to community expectations and
future legislation. Accordingly the costs have been determined on the basis that the restoration will be completed
within one year of abandoning the site.
Units of production depreciation of oil and gas properties
Oil and gas properties are depreciated using the units of production (UOP) method over total proved developed
hydrocarbon reserves. This results in a depreciation/amortisation charge proportional to the depletion of the
anticipated remaining production from the field.
Each items’ life, which is assessed annually, has regard to both its physical life limitations and to present
assessments of economically recoverable reserves of the field at which the asset is located. These calculations
require the use of estimates and assumptions, including the amount of recoverable reserves. The calculation of the
UOP rate of depreciation could be impacted to the extent that actual production in the future is different from current
forecast production based on total proved reserves. Changes to proved reserves could arise due to changes in the
factors or assumptions used in estimating reserves, including:
The effect on proved reserves of differences between actual commodity prices and commodity price
assumptions
Or
Unforeseen operational issues
Changes are accounted for prospectively.
Recoverability of oil and gas properties
The Group assesses each asset or cash generating unit (CGU) (excluding goodwill, which is assessed annually
regardless of indicators) every reporting period to determine whether any indication of impairment exists. Where an
indicator of impairment exists, a formal estimate of the recoverable amount is made, which is considered to be the
higher of the fair value less costs to sell and value in use. These assessments require the use of estimates and
assumptions such as long-term oil prices (considering current and historical prices, price trends and related factors),
discount rates, operating costs, future capital requirements, decommissioning costs, exploration potential, reserves
operating performance (which includes production and sales volumes). These estimates and assumptions are subject
to risk and uncertainty. Therefore, there is a possibility that changes in circumstances will impact these projections,
which may impact the recoverable amount of assets and/or CGUs.
41
JUPITER ENERGY LIMITED – 2012 ANNUAL REPORT
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2012
2
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Fair value is determined as the amount that would be obtained from the sale of the asset in an arm’s length
transaction between knowledgeable and willing parties. Fair value for oil and gas assets is generally determined as
the present value of estimated future cash flows arising from the continued use of the assets, which includes
estimates such as the cost of future expansion plans and eventual disposal, using assumptions that an independent
market participant may take into account. Cash flows are discounted to their present value using a discount rate that
reflects current market assessments of the time value of money and the risks specific to the asset. Management has
assessed its CGUs as being an individual field, which is the lowest level for which cash inflows are largely
independent of those of other assets.
(e) Plant and equipment
Plant and equipment is stated at historical cost less accumulated depreciation and any accumulated impairment
losses. Such cost includes the cost of replacing parts that are eligible for capitalisation when the cost of replacing the
part is incurred. Similarly, when each major inspection is performed, its cost is recognised in the carrying amount of
the plant and equipment as a replacement only if it is eligible for capitalisation. All other repairs and maintenance are
recognised in profit or loss as incurred.
Depreciation is calculated on a straight-line basis over the estimated useful life of the assets as follows:
Plant and equipment – over 3 to 10 years
The assets’ residual values, useful lives and amortisation methods are reviewed, and adjusted if appropriate, at each
financial year end.
Disposal
An item of property, plant and equipment is derecognised upon disposal or when no further future economic benefits
are expected to be derived from its use or disposal.
Any gain or loss arising on derecognition of the asset (calculated as the difference between the net disposal proceeds
and the carrying amount of the asset) is included in the income statement in the year the asset is derecognised.
42
JUPITER ENERGY LIMITED – 2012 ANNUAL REPORT
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2012
2
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(f) Exploration and Evaluation Expenditure
Exploration and evaluation expenditure incurred is accumulated in respect of each identifiable area of interest. These
costs are only carried forward to the extent that they are expected to be recouped through the successful
development of the area or where activities in the area have not yet reached a stage that permits reasonable
assessment of the existence of economically recoverable reserves. A regular review is undertaken of each area of
interest to determine the appropriateness of continuing to carry forward costs in relation to that area of interest.
Costs of evaluation, seismic and unsuccessful exploration in the area of interest are expensed as incurred even if
activities in this area of interest are continuing. Accumulated costs in relation to an abandoned area are written off in
full against profit in the year in which the decision to abandon the area is made.
When a discovered oil or gas field enters the development phase the accumulated exploration and evaluation
expenditure is transferred to oil and gas assets – assets in development.
(g) Oil and Gas Properties
Oil and gas properties are usually single oil or gas fields being developed for future production or which are in the
production phase. Where several individual oil fields are to be produced through common facilities, the individual oil
field and the associated production facilities are managed and reported as a single oil and gas asset.
Assets in development
When the technical and commercial feasibility of an undeveloped oil or gas field has been demonstrated, the field
enters its development phase. The costs of oil and gas assets in the development phase are separately accounted for
as tangible assets and include past exploration and evaluation costs, development drilling and plant and equipment
and any associated land and buildings. When commercial operation commences the accumulated costs are
transferred to oil and gas assets – producing assets.
Producing assets
The costs of oil and gas assets in production are separately accounted for as tangible assets and include past
exploration and evaluation costs, pre-production development costs and the ongoing costs of continuing to develop
reserves for production and to expand or replace plant and equipment and any associated land and buildings.
Producing assets are depreciated over proved reserves on a unit of production basis.
43
JUPITER ENERGY LIMITED – 2012 ANNUAL REPORT
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2012
2
(h)
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Impairment of assets
At each reporting date, the company 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
asset’s carrying value. Any excess of the asset’s carrying value over its recoverable amount is expensed to the
income statement.
(i)
Trade and other receivables
Trade receivables, which generally have 30-90 day terms, are recognised and carried at original invoice amount less
an allowance for any uncollectible amounts.
An estimate for doubtful debts is made when collection of the full amount is no longer probable. Bad debts are written
off when identified.
(j) Cash and cash equivalents
Cash and short-term deposits in the balance sheet comprise cash at bank and in hand and short-term deposits with
an original maturity of three months or less.
For the purposes of the Cash Flow Statement, cash and cash equivalents consist of cash and cash equivalents as
defined above, net of outstanding bank overdrafts.
(k)
Inventories
Inventories are stated at the lower of cost and net realisable value. Net realisable value is the estimated selling price
in the ordinary course of business less any estimated selling costs.
Cost includes those costs incurred in bringing each component of inventory to its present location and condition.
(l)
Trade and other payables
Trade payables and other payables are carried at amortised costs and due to their short-term nature are not
discounted. They represent liabilities for goods and services provided to the Group prior to the end of the financial
year that are unpaid and arise when the Group becomes obliged to make future payments in respect of the purchase
of these goods and services. The amounts are unsecured and are usually paid within 30 days of recognition.
(m) Financial liabilities
Financial liabilities within the scope of AASB 139 are classified as financial liabilities at fair value through profit or
loss, loans and borrowings, or as derivatives designated, as appropriate. The Group determines the classification of
its financial liabilities at initial recognition.
All financial liabilities are recognised initially at fair value and in the case of loans and borrowings, plus directly
attributable transaction costs. The Group’s financial liabilities include trade and other payables, loans and
borrowings and derivative financial instruments.
Derivative Financial Instruments
Derivatives are fair valued using appropriate valuation techniques. Such techniques may include using recent arm’s
length market transactions; reference to the current fair value of another instrument that is substantially the same; a
discounted cash flow analysis or other valuation techniques.
44
JUPITER ENERGY LIMITED – 2012 ANNUAL REPORT
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2012
2
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(n) Share-based payment transactions
Share-based compensation benefits are provided to directors and executives.
Options
The fair value of options granted to directors and executives is recognised as an employee benefit expense with a
corresponding increase in contributed equity. The fair value is measured at grant date and recognised over the
vesting period during which the directors and/or executives becomes entitled to the options.
The fair value at grant date is determined using an 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 share, the expected divided yield and the
risk-free interest rate for the term of the option.
Performance Rights
The cost of performance rights are measured by reference to the fair value at the date at which they are granted. The
fair value is determined using a Monte Carlo methodology, which considers the incorporation of market based
hurdles. Non market conditions are not factored into the fair value of the performance rights at grant. Probability
factors are assigned to the vesting expense as to whether non market conditions will be met.
(o) Revenue recognition
Sales revenue
Revenue is recognised when the significant risks and rewards of ownership of the goods have passed to the buyer
and can be measured reliably. Incidental revenue generated during the development stage of an asset, is offset
against the carrying value of the asset, rather than recognised in the statement of comprehensive income.
Interest
Revenue is recognised as the interest accrues (using the effective interest method, which is the rate that exactly
discounts estimated future cash receipts through the expected life of the financial instrument) to the net carrying
amount of the financial asset.
(p) Convertible Note
The Convertible Note is split into two components: a debt component and a component representing the embedded
derivatives in the Convertible Note. The debt component represents the Group’s liability for future interest coupon
payments and the redemption amount. The embedded derivatives represent the value of the option that note holders
have to convert into ordinary shares in the Company.
45
JUPITER ENERGY LIMITED – 2012 ANNUAL REPORT
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2012
2
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(q)
Income tax
The consolidated entity adopts the liability method of tax-effect accounting whereby the income tax expense is based
on the profit adjusted for any non-assessable or disallowed items.
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 income statement 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 consolidated entity will derive
sufficient future assessable income to enable the benefit to be realised and comply with the conditions of deductibility
imposed by the law.
(r) Other taxes
Revenues, expenses and assets are recognised net of the amount of GST except:
• where the GST incurred on a purchase of goods and services is not recoverable from the taxation authority,
in which case the GST is recognised as part of the cost of acquisition of the asset or as part of the expense
item as applicable; and
• receivables and payables are stated with the amount of GST included.
The net amount of GST recoverable from, or payable to, the taxation authority is included as part of receivables
or payables in the balance sheet.
Cash flows are included in the Cash Flow Statement on a gross basis and the GST component of cash flows
arising from investing and financing activities, which is recoverable from, or payable to, the taxation authority are
classified as operating cash flows.
Commitments and contingencies are disclosed net of the amount of GST recoverable from, or payable to, the
taxation authority.
(s) 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 the proceeds.
46
JUPITER ENERGY LIMITED – 2012 ANNUAL REPORT
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2012
2
(t)
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Earnings per share
Basic earnings per share is calculated as net profit attributable to members of the parent, adjusted to exclude
any costs of servicing equity (other than dividends) and preference share dividends, divided by the weighted
average number of ordinary shares, adjusted for any bonus element.
Diluted earnings per share is calculated as net profit attributable to members of the parent, adjusted for:
• costs of servicing equity (other than dividends) and preference share dividends;
• the after tax effect of dividends and interest associated with dilutive potential ordinary shares that have been
recognised as expenses; and
• other non-discretionary changes in revenues or expenses during the period that would result from the dilution
of potential ordinary shares;
divided by the weighted average number of ordinary shares and dilutive potential ordinary shares, adjusted for
any bonus element.
(u) Provisions
Provisions are recognised when the Group has a present obligation (legal or constructive) as a result of a past
event, it is probable that an outflow of resources embodying economic benefits will be required to settle the
obligation and a reliable estimate can be made of the amount of the obligation.
Where the Group expects some or all of a provision to be reimbursed, for example under an insurance contract,
the reimbursement is recognised as a separate asset but only when the reimbursement is virtually certain. The
expense relating to any provision is presented in the income statement net of any reimbursement.
If the effect of the time value of money is material, provisions are determined by discounting the expected future
cash flows at a pre-tax rate that reflects current market assessments of the time value of money and, where
appropriate, the risks specific to the liability.
Where discounting is used, the increase in the provision due to the passage of time is recognised as a finance
cost.
Employee leave benefits
Liabilities for wages and salaries, including non-monetary benefits, annual leave and accumulating sick leave
expected to be settled within 12 months of the reporting date are recognised in provisions in respect of
employees' services up to the reporting date. They are measured at the amounts expected to be paid when the
liabilities are settled. Liabilities for non accumulating sick leave are recognised when the leave is taken and are
measured at the rates paid or payable.
Restoration
Costs of site restoration are provided over the life of the facility from when exploration commences and are
included in the costs of that stage. Site restoration costs include the dismantling and removal of plant, equipment
and building structures, waste removal, and rehabilitation of the site in accordance with clauses of the permits.
Such costs have been determined using estimates of future costs, current legal requirements and technology on
an undiscounted basis.
Any changes in the estimates for the costs are accounted on a prospective basis. In determining the costs of site
restoration, there is uncertainty regarding the nature and extent of the restoration due to community expectations
and future legislation. Accordingly the costs have been determined on the basis that the restoration will be
completed within one year of abandoning the site.
47
JUPITER ENERGY LIMITED – 2012 ANNUAL REPORT
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2012
2
(v)
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Foreign Currency Transactions and Balances
(i) Functional and presentation currency
Both the functional and presentation currency of Jupiter Energy Limited and its Australian subsidiaries are
Australian dollars ($). The Singapore subsidiaries' functional currency is United States Dollars which is translated
to the presentation currency. The functional currency of the Branch of the Singapore subsidiary is Tenge. (see
below for consolidated reporting).
(ii) Transactions and balances
Transactions in foreign currencies are initially recorded in the functional currency by applying the exchange rates
ruling at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies are
retranslated at the rate of exchange ruling at the reporting date.
Non-monetary items that are measured in terms of historical cost in a foreign currency are translated using the
exchange rate as at the date of the initial transaction. Non-monetary items measured at fair value in a foreign
currency are translated using the exchange rates at the date when the fair value was determined.
(iii) Translation of Group Companies’ functional currency to presentation currency
The results of the Singapore subsidiaries are translated into Australian Dollars (presentation currency) as at the
date of each transaction. Assets and liabilities are translated at exchange rates prevailing at reporting date.
Exchange variations resulting from the translation are recognised in the foreign currency translation reserve in
equity
On consolidation, exchange differences arising from the translation of the net investment in the Singapore
subsidiaries and it’s Branch are taken to the foreign currency translation reserve. If a Singapore subsidiary was
sold, the proportionate share of exchange differences would be transferred out of equity and recognised in the
statement of comprehensive income.
(w) Segments
An operating segment is a component of an entity that engages in business activities from which it may earn
revenue and incur expenses (including revenues and expenses relating to transactions with other components of
the same entity), whose operating results are regularly reviewed by the Board of Directors (the chief operating
decision makers) to make decisions about resources to be allocated to the segment and assess its performance
and for which discrete financial information is available. Management will also consider other factors in
determining operating segments such as the existence of a line manager and the level of segment information
presented to the executive management team.
Operating segments are identified based on the information provided to the chief operating decision makers,
being the Board of Directors. Currently the Group has only one operating segment, being the Group.
48
JUPITER ENERGY LIMITED – 2012 ANNUAL REPORT
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2012
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
2
(x) Borrowing costs
Borrowing costs consist of interest and other costs that an entity incurs in connection with the borrowing of
funds.
Where funds are borrowed specifically to finance a project, the amount capitalised represents the actual
borrowing costs incurred. Where surplus funds are available for a short term out of money borrowed specifically
to finance a project, the income generated from the temporary investment of amounts is also capitalised and
deducted from the total capitalised borrowing cost. Where the funds used to finance a project form part of
general borrowings, the amount capitalised is calculated using a weighted average of rates applicable to relevant
general borrowings of the Group during the period.
All other borrowing costs are recognised in profit or loss in the period in which they are incurred.
Even though exploration and evaluation assets can be qualifying assets, they generally do not meet the
―probable economic benefits test and also are rarely debt funded. Any related borrowing costs are therefore
generally recognised in profit or loss in the period they are incurred.
49
JUPITER ENERGY LIMITED – 2012 ANNUAL REPORT
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2012
3.
FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES
The Group's principal financial instruments comprise receivables, borrowings, payables, cash and short-term
deposits.
Risk Exposures and Responses
The main purpose of these financial instruments is to provide finance for the Group’s operations. The Group has
various other financial assets and liabilities such as trade receivables and trade payables, which arise directly from its
operations. The main risks arising from the Group’s financial instruments are cash flow interest rate risk, liquidity risk,
foreign currency risk and credit risk.
Primary responsibility for identification and control of financial risks rests with the Board. The Board reviews the risks
identified below, including the setting of limits for trading in derivatives, hedging cover of foreign currency and interest
rate risk, credit allowances, and future cash flow forecast projections.
Interest rate risk
The Group’s exposure to market risk for changes in interest rates is only on short term deposits and cash and cash
equivalents.
At balance date, the Group had the following mix of financial assets and liabilities exposed to interest rate risk:
Financial Assets
Cash and cash equivalents
Net exposure
Consolidated
2012
$
2011
$
395,445
13,968,248
395,445
13,968,248
The following table summarises the sensitivity of the fair value of the financial instruments held at balance date, if
interest rates had moved, with all other variables held constant, post tax profit would have been affected as follows:
Post – tax gain / (loss)
+ 1%
-1%
Consolidated
2012
$
2011
$
3,954
(3,954)
139,682
(139,682)
50
JUPITER ENERGY LIMITED – 2012 ANNUAL REPORT
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2012
3.
FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES (cont.)
Foreign currency risk
The Group has transactional currency exposures. Such exposure arises from sales or purchases by an operating
entity in currencies other than the functional currency.
At balance date, the Group had the following exposure to United States Dollars (USD), Kazakhstan Tenge (KZT),
Great Britain Pound (GBP) and Singapore Dollars (SGD) foreign currency that is not designated in cash flow hedges:
Financial Assets
Cash and cash equivalents
- USD
- KZT
- SGD
GBP
-
Liquidation Fund
Trade and other receivables
Other debtors
Financial Liabilities
Trade and other payables
Other financial liabilities
Derivative
Consolidated
2012
$
2011
$
341,630
-
-
4,200
244,151
-
-
589,981
11,948,540
-
-
8,511
128,404
7,426
-
12,092,881
-
(2,789,897)
(274,880)
(3,064,777)
-
-
-
-
Net exposure
(2,474,796)
12,092,881
The following table summarises the sensitivity of financial instruments held at balance date to movement in the
exchange rate of the Australian dollar to the United States dollar and Kazakhstan Tenge, with all other variables held
constant. The 5% sensitivity is based on reasonably possible changes, over a financial year, using the observed
range of actual historical rates for the preceding 5 periods.
Post – tax gain / (loss)
+5%
-5%
Consolidated
2012
$
2011
$
(123,740)
123,740
604,644
(604,644)
Credit risk
Credit risk represents the loss that would be recognised if counterparties fail to perform as contracted.
Part of the Group's receivables balances are represented by GST input tax credits, which are received on a quarterly
basis, and deposits held in trust in respect of leases for office premises.
With respect to credit risk arising from the financial assets of the Group, which comprise cash and cash equivalents and
trade receivables, the Group’s exposure to credit risk arises from default of the counter party, with a maximum exposure
equal to the carrying amount of these instruments.
There are no significant concentrations of credit risk within the Group.
51
JUPITER ENERGY LIMITED – 2012 ANNUAL REPORT
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2012
3.
FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES (cont.)
Liquidity Risk
The Group’s objective is to maintain a balance between continuity of funding and flexibility through use of
bank overdrafts, bank loans, finance leases and hire purchase contracts.
The contractual maturities of the Group’s financial liabilities are shown in the table below. Undiscounted
cash flows for the respective years are presented.
Financial Assets
Within one year
After one year but not more than five years
More than five years
Financial Liabilities
Within one year
After one year to two years
More than two years
Consolidated
2012
$
2011
$
527,566
2,401,889
292,752
3,222,207
(2,316,661)
(3,064,777)
-
(5,381,438)
-
-
128,404
128,404
(534,616)
-
-
(534,616)
Net Exposure
(2,159,231)
(406,212)
Management and the Board monitor the Group’s liquidity on the basis of expected cash flow. The information that is
prepared by senior management and reviewed by the Board includes monthly and annual cash flow budgets.
Fair value
The Group uses various methods in estimating the fair value of a financial instrument. The methods comprise:
Level 1 – the fair value is calculated using quoted prices in active markets.
Level 2 – the fair value is estimated using inputs other than quoted prices included in Level 1 that are observable for the
asset or liability, either directly (as prices) or indirectly (derived from prices).
Level 3 – the fair value is estimated using inputs for the asset or liability that are not based on observable market data.
All of the Group’s other financial liabilities are carried at amortised cost, where the carrying value approximates the fair value.
The fair value of the derivative was determined using the level 2 method.
NOTE 4. EXPENSES
Administration and compliance expenses
Consulting fees
Depreciation and amortisation expenses
Directors fees
Legal fees
Occupancy expenses
Share based payments
Foreign currency loss
Total expenses
Consolidated
2012
$
2,846,275
252,673
241,723
321,147
112,022
335,868
549,836
-
4,659,544
2011
$
2,183,445
481,258
43,156
564,911
133,512
262,092
343,266
883,305
4,894,945
During the year, employee benefits were $1,052,621. This is included in administration and compliance expenses.
52
JUPITER ENERGY LIMITED – 2012 ANNUAL REPORT
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2012
NOTE 5. TAXATION
Prima facie income tax on operating (loss) is reconciled to the income tax benefit provided in the financial statements as
follows:
Prima facie income tax benefit on operating (loss) at the Australian tax rate
of 30% (2011: 30%)
Non deductible expenditure:
- Effect of tax rates in foreign jurisdictions
- Share Based payments
- Administration expenses
Temporary differences and tax losses not
bought to account as a deferred tax asset
Income tax expense
Deferred Income Tax
Deferred income tax at 30 June relates to the following:
Consolidated
Deferred tax liabilities
Deferred tax assets
Unrealised FX (gain) / loss
Unrealised derivative gain
Share issue costs
Revenue tax losses – Australia
Deferred tax assets not recognised
Deferred tax (income)/expense
Net deferred tax recognised in Balance Sheet
Consolidated
2012
$
2011
$
(1,288,531)
(1,466,901)
523,042
164,951
6,619
593,919
165,642
94,880
57,812
1,148,567
-
-
-
-
32,989
228,544
52,136
6,572,464
(6,886,133)
-
-
264,991
-
27,164
5,438,370
(5,730,525)
-
-
The Consolidated Group has tax losses of $6,886,133 (2011: $5,730,525) that are available indefinitely for offset against future
taxable profits of the companies in which the losses arose.
The potential deferred tax asset will only be realised if:
(a) The relevant Company derives future assessable income of a nature and an amount sufficient to enable the asset to
be realised, or the asset can be utilised by another Company in the consolidated entity in accordance with Division
170 of the Income Tax Assessment Act 1997;
(b) The relevant Company and/or consolidated entity continues to comply with the conditions for deductibility imposed by
the Law; and
(c) No changes in tax legislation adversely affect the relevant Company and/or consolidated entity in realising the asset.
53
JUPITER ENERGY LIMITED – 2012 ANNUAL REPORT
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2012
NOTE 6. CASH ASSETS
Cash at bank and in hand
Consolidated
2012
$
2011
$
395,445
395,445
13,968,248
13,968,248
The bank accounts are at call and pay interest at a weighted average interest rate of 0.30% at 30 June 2012 (2011:
0.84%)
NOTE 7. RECEIVABLES
Current
Trade receivables
Other debtors
Non current
Other debtors
23,911
503,655
527,566
7,426
1,403,553
1,410,979
2,401,889
-
The Group’s exposure to credit and currency risks is disclosed in Note 3. The majority of the non-current other debtor
balance is VAT receivable which will be offset against future taxes payable on oil revenue.
At 30 June, the aging analysis of receivables is as follows:
2012
2011
Total
2,929,455
1,410,979
0 – 30
Days
23,911
55,425
31 – 60
days
150,926
16,919
61 - 90
days
11,336
34,702
90+
days
2,743,282
1,303,933
There are no receivables as at 30 June 2012 that are impaired.
NOTE 8. OTHER CURRENT ASSETS
Prepayment
Other
NOTE 9. INVENTORIES
Raw Material
Crude oil
Provision of obsolete items
336,995
123,501
460,496
460,969
60,205
521,174
58,113
11,265
(16,058)
53,320
-
-
-
-
54
JUPITER ENERGY LIMITED – 2012 ANNUAL REPORT
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2012
NOTE 10. OIL AND GAS PROPERTIES
Cost as at 1 July 2011
Additions
Transferred from exploration and evaluation assets
Disposals
Net exchange differences
Cost as at 30 June 2012
Depletion and impairment as at 1 July 2011
Charge for the year
Provision for impairment
Disposals
Depletion and impairment as at 30 June 2012
Net book value as at 30 June 2012
Consolidated
$
-
14,241,140
-
82,137
14,323,277
(97,995)
-
-
(97,995)
14,225,282
During the year, costs associated with J50 and J52 were transferred to oil and gas properties as during the
year these wells were granted a trial production licence and are producing.
NOTE 11. PLANT AND EQUIPMENT
Year ended 30 June 2012
At 1 July 2011 net of accumulated depreciation
Additions
Depreciation charge for the year
Disposals
Reclassifications
Net exchange differences
At 30 June 2012 net of accumulated depreciation
At 30 June 2012
Cost
Accumulated depreciation
Net carrying amount
Year ended 30 June 2011
At 1 July 2010 net of accumulated depreciation
Additions
Depreciation charge for the year
Disposals
Reclassifications
Net exchange differences
At 30 June 2011 net of accumulated depreciation
At 30 June 2011
Cost
Accumulated depreciation
Net carrying amount
55
$
398,851
752,218
(241,723)
-
-
16,990
926,336
1,254,140
(327,804)
926,336
144,140
349,102
(43,156)
-
-
(51,235)
398,851
564,301
(165,450)
398,851
JUPITER ENERGY LIMITED – 2012 ANNUAL REPORT
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2012
NOTE 12. EXPLORATION & EVALUATION EXPENDITURE
Exploration expenditure carried forward in respect of areas of interest
in:
Exploration and evaluation expenditure at cost
Movements during the year
Balance at beginning of year
Expenditure incurred during the year
Reclassification to oil and gas properties
Foreign exchange translation
Balance at end of year
NOTE 13. OTHER FINANCIAL ASSETS
Liquidation fund
Other
Consolidated
2012
$
2011
$
25,014,521
25,319,806
25,319,806
12,856,785
(14,241,140)
1,079,070
25,014,521
22,282,954
7,189,909
-
(4,153,057)
25,319,806
244,151
48,601
292,752
128,404
-
128,404
The Group has a deposit for the purpose of a Liquidation fund in the amount of $244,151. The deposit is to be
used for land restoration when required. Under the laws of Kazakhstan, the deposit must be replenished in the
amount of 1% of the annual investments.
56
JUPITER ENERGY LIMITED – 2012 ANNUAL REPORT
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2012
NOTE 14. PAYABLES
Trade creditors
Accrued expenses
Other payables
NOTE 15. DEFERRED REVENUE
As at July
Deferred during the year
Released during the year
At 30 June
Consolidated
2012
$
675,335
36,889
412,399
1,124,623
-
2,358,621
(1,166,582)
1,192,039
2011
$
298,307
47,401
188,908
534,616
-
-
-
-
The deferred revenue refers to an amount received in advance for oil sales. As at 30 June 2012, there is 2,904 tonnes of oil to
be delivered under the contract.
NOTE 16. PROVISIONS
Current
Annual leave
Non - current
Provision for rehabilitation
90,957
90,957
61,918
61,918
356,594
356,594
230,552
230,552
The Group accrues provisions for the forthcoming costs of rehabilitation of the territory. On the basis of forecasts the cost
of rehabilitation of the oilfield would be $258,836
Movements in rehabilitation provision
Carrying amount at beginning of the year
Unwinding of discount rate
Foreign exchange translation
Provision for the year
Carrying amount at the end of year
230,552
13,362
8,641
104,039
356,594
85,713
10,553
(684)
134,970
230,552
57
JUPITER ENERGY LIMITED – 2012 ANNUAL REPORT
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2012
NOTE 17. OTHER FINANCIAL LIABILITIES
Convertible note
Derivative liability
Consolidated
2012
$
2,789,897
274,880
3,064,777
2011
$
-
-
On 29 September 2011, the Company agreed terms on its US$3.45m Convertible Notes with major shareholder
Soyuzneftegas Capital Limited (SNG). On 2 August 2012, the convertible notes were converted into 8,125,000 Jupiter shares,
being the share price of the Rights Issue that occurred in July 2012.
The key terms of the Convertible Notes are:
Effective date: 29 September 2011
Coupon Rate: 15% per annum
Term: 24 months with interest payable quarterly in arrears
Conversion price: US$0.75, SNG has right to convert earlier if there is a capital raising prior to conversion and the
price of that capital raising is less than $0.75. In this instance, the conversion price will be reduced to be in line with
the capital raising price.
Number of shares to be issued if note converted at US$0.75: 4.6 million, representing approximately 4% of the issued
share capital
Arrangement Fee: 1%
Valuation of Convertible Notes
The Notes have an embedded derivative in the form of a call option for the holder to convert the Notes at US$0.75 into Jupiter
ordinary shares.
The convertible equity feature of the Notes has been separated from the liability component of the Notes for financial reporting
purposes. The call option to convert the notes into shares does not meet the definition of an equity instrument, as the exercise
price is denominated in foreign currency to the company’s functional currency and the conversion price is not fixed. The
convertible call option is classified as a Derivative liability and measured at fair value through the income statement.
The Derivative component of the Notes was valued using the Black Scholes option valuation methodology. The Black Scholes
option valuation methodology calculates the expected benefit from acquiring the shares outright less the present value of
paying the exercise price for the options at expected exercise date.
58
JUPITER ENERGY LIMITED – 2012 ANNUAL REPORT
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2012
NOTE 18. CONTRIBUTED EQUITY
Consolidated
Shares issued and fully paid
Ordinary shares (a)
Share options (b)
(a) Movements in ordinary share
capital:
Balance as at 1 July 2010
Issue of shares – Placement
Issue of shares – Rights issue 1 for 3
Issue to Pursuit Capital
Cost of issue
Issue of shares - Placement
Cost of issue
Balance 30 June 2011
1 for 15 reconstruction
Cost of issue - Rights Issue
Issue of shares – share based payment *
Balance 30 June 2012
* In respect of share based payments, refer to Note 20 and 21.
(b) Movements in options
Balance as at 1 July 2011
1 for 15 reconstruction
Balance 30 June 2012
2012
$
70,941,938
294,198
71,236,136
Number of
Shares
886,220,391
277,777,778
339,717,817
7,718,695
-
226,500,061
-
1,737,934,742
(1,622,071,255)
-
266,667
116,130,154
2011
$
70,986,412
294,198
71,280,610
$
44,397,049
7,500,000
9,172,380
-
(875,075)
11,098,591
(306,533)
70,986,412
-
(44,474)
-
70,941,938
13,000,000
(12,133,331)
866,669
294,198
294,198
Terms and conditions
Ordinary shares have no par value and the Company does not have a limited amount of authorised capital.
Holders of ordinary shares are entitled to receive dividends as declared from time to time and are entitled to one vote per share
at shareholders’ meetings.
(c) Movement in performance rights
Balance as at 1 July 2011
Cancelled during year
Granted during the year
Balance as at 30 June 2012
10,000,000
(10,000,000)
2,133,335
2,133,335
-
-
-
-
59
JUPITER ENERGY LIMITED – 2012 ANNUAL REPORT
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2012
NOTE 18. CONTRIBUTED EQUITY (continued)
Capital risk management
When managing capital, management’s objective is to ensure the entity continues as a going concern as well as to
maintain optimal returns to shareholders and benefits for other stakeholders. Management also aims to maintain a capital
structure that ensures the lowest cost of capital available to the entity.
In order to maintain or adjust the capital structure, the entity may adjust the amount of dividends paid to shareholders,
return capital to shareholders, issue new shares, enter into joint ventures or sell assets.
The entity does not have a defined share buy-back plan.
No dividends were paid in 2011 and nil are expected to be paid in 2012.
The Company is not subject to any externally imposed capital requirements.
NOTE 19. RESERVES
CONSOLIDATED
Foreign currency
translation
reserve
Share based
payments
reserve
Total
$
(6,084, 968)
-
1,337,981
(4,746,987)
$
3,922,453
549,836
-
4,472,289
$
(2,162, 515)
549,836
1,337,981
(274,698)
At 30 June 2011
Share based payment
Foreign currency translation
At 30 June 2012
Nature and purpose of reserves
Foreign currency translation reserve
The foreign currency translation reserve is used to record exchange differences arising from the translation of the
financial statements of foreign subsidiaries.
Share based payments reserve
The share based payments plan reserve is used to record the value of equity benefits provided to eligible
employees as part of their remuneration. Refer to note 21 for further details of this plan.
During the period, Erkin Svanbayev (after shareholder approval) received 266,667 Jupiter Shares. This was
included in the share based payment reserve at 30 June 2011.
60
JUPITER ENERGY LIMITED – 2012 ANNUAL REPORT
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2012
NOTE 20. KEY MANAGEMENT PERSONNEL
This note is to be read in conjunction with the Remuneration Report, which is included in the Directors Report on pages 12
to 20.
(a) Key management personnel compensation
Short-term employee benefits
Post-employment benefits
Other
Termination benefits
Share-based payments
Shareholdings
Consolidated
2012
$
2011
$
947,463
48,000
119,203
-
549,836
1,664,502
1,299,175
23,445
-
96,000
472,958
1,891,578
The number of shares in the Company held during the financial year by each Key Management Personnel of Jupiter Energy
Limited, including their personally-related entities, are set out below.
Balance
01-Jul-11
Granted as
Remuneration
On Exercise of
Options
Net Change
Other*
Balance
30-June-12
2012
Directors
G A Gander
A Beardsall
B Kuandykov
S Mison
Executives
K Martens
H Wolski
38,266,668
10,000,000
-
4,694,812
4,138,420
-
-
-
-
-
-
-
*Change relates to the consolidation of shares and options which occurred during the year.
2011
Directors
G A Gander
A Beardsall
B Kuandykov
S Mison
A R Childs 1
E Svanbayev 1
D Thorpe 1
Executives
K Martens
H Wolski
Balance
01-Jul-10
Granted as
Remuneration
On Exercise of
Options
28,700,000
-
-
3,692,220
13,000,000
11,000,000
5,300,000
4,138,420
-
-
-
-
-
-
-
-
-
-
1 The director resigned during the year. This was the holding at time of resigning.
61
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(35,715,555)
(9,000,000)
-
(4,381,825)
2,551,113
1,000,000
-
312,987
(4,138,420)
-
-
-
Net Change
Other
Balance
30-June-11
9,566,668
10,000,000
-
1,002,592
3,500,000
-
1,767,667
38,266,668
10,000,000
-
4,694,812
16,500,000
11,000,000
7,067,667
-
-
4,138,420
-
JUPITER ENERGY LIMITED – 2012 ANNUAL REPORT
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2012
NOTE 20. KEY MANAGEMENT PERSONNEL (continued)
Option Holdings
The number of options in the Company held during the financial year by each Key Management Personnel of the consolidated
entity, including their personally-related entities, is set out below.
2012
(i) Unlisted Options
Directors
G A Gander
A Beardsall
B Kuandykov
S Mison
Executives
K Martens
H Wolski
Balance at
beg of
period
01-Jul-11
Granted as
Remune-
ration
Options
Exercised
Net Change
Other *
Balance at
end of
period
30-Jun-12
Not Vested
& Not
Exercisable
Vested &
Exercisable
-
-
-
1,000,000
2,000,000
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(933,333)
-
-
-
66,667
(1,866,667)
-
133,333
-
-
-
-
-
-
-
-
-
-
66,667
133,333
-
*Change relates to the consolidation of shares and options which occurred during the year.
2011
(ii) Unlisted Options
Directors
G A Gander
A Beardsall
B Kuandykov
S Mison
A R Childs
E Svanbayev
D Thorpe
Executives
K Martens
S Sinistin
H Wolski
Balance at
beg of
period
01-Jul-10
Granted as
Remune-
ration
Options
Exercised
Net Change
Other
Balance at
end of
period
30-Jun-11
Not Vested
& Not
Exercisable
Vested &
Exercisable
-
-
-
1,000,000
5,000,000
5,000,000
-
12,000,000
10,000,000
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
1,000,000
5,000,000
5,000,000
-
(10,000,000)1
(10,000,000)2
-
2,000,000
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
1,000,000
5,000,000
5,000,000
-
2,000,000
-
-
1 Relates to options cancelled unexercised
2 Relates to options expired unexercised.
3 Options held by Messer’s Childs and Svanbayev were not cancelled upon them resigning.
62
JUPITER ENERGY LIMITED – 2012 ANNUAL REPORT
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2012
NOTE 20. KEY MANAGEMENT PERSONNEL (continued)
Performance Rights Holdings
The number of Performance Rights in the Company held during the financial year by each Director of Jupiter Energy Limited
and each of the specified Executives of the consolidated entity, including their personally-related entities, are set out below.
2012
Directors
G A Gander
A Beardsall
B Kuandykov
S Mison
Executives
K Martens
H Wolski
Balance at
beg of
period
01-Jul-11
Granted as
Remune-
ration
10,000,000
-
-
-
666,667
666,667
666,667
133,334
-
-
-
-
* Relates to rights cancelled.
Rights
Exercised
Net Change
Other *
Balance at
end of
period
30-Jun-12
Not Vested
& Not
Exercisable
Vested &
Exercisable
-
-
-
-
-
-
(10,000,000)
-
-
-
666,667
666,667
666,667
133,334
666,667
666,667
666,667
133,334
-
-
-
-
-
-
-
-
-
-
-
-
2011
Directors
G A Gander
A Beardsall
B Kuandykov
S Mison
A R Childs
E Svanbayev
D Thorpe
Executives
K Martens
S Sinistin
H Wolski
Balance at
beg of
period
01-Jul-10
Granted as
Remune-
ration
Rights
Exercised
Net Change
Other *
Balance at
end of
period
30-Jun-11
Not Vested
& Not
Exercisable
Vested &
Exercisable
15,000,000
-
-
-
-
15,000,000
15,000,000
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(5,000,000)
-
-
-
-
(15,000,000)
(15,000,000)
10,000,000
-
-
-
-
-
-
10,000,000
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
* Relates to rights lapsed or forfeited.
Transactions between the Group and other related parties
(b) Other Transactions with Key Management Personnel and Related Parties
i. Consultancy fees
During the year, consulting fees of $136,649 (2011: Nil) were accrued and paid under normal terms and conditions to Meridian
Petroleum LLP of which Mr Kuandykov is a director, for the provision of geological services at normal commercial rates.
63
JUPITER ENERGY LIMITED – 2012 ANNUAL REPORT
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2012
NOTE 21. SHARE BASED PAYMENTS
Types of share based payment plans
Employee share option plan and Performance Rights Plan
Included under expenses in the income statement is $549,836 (2011: $343,266), and relates, in full, to equity-settled share-
based payment transactions for employees.
Employee Share Option Plan
The Jupiter Energy Employee Share Option Plan was established whereby Jupiter Energy Limited may, at the discretion of
the Jupiter Energy Limited Board, grant options over unissued shares of Jupiter Energy Limited to directors, executives,
employees and consultants of the consolidated entity. The options are issued for nil consideration, will not be quoted on the
ASX, cannot be transferred and are granted at the discretion of the Jupiter Energy Board. The options are issued for a term
of five years. The options have a service period of 12 months attached to them before they vest.
The Employee Share Option Plan was approved by shareholders at the November 2007 Annual General Meeting.
Options
The fair value of the options is estimated at the date of grant using the Black -Scholes option pricing model.
No options were granted during the year ended 30 June 2012 (2011: Nil)
During the year ended 30 June 2012, no options were exercised over ordinary shares (2011: Nil).
The following table illustrates the number (No.) and weighted average exercise prices (WAEP) of share options issued
under the ESOP.
2012
2011
Outstanding at the beginning of the
year
Reconstruction of options (1:15)
Granted
Cancelled / forfeited
Exercised
Expired
Outstanding at year end
Exercisable at year end
Number of
Options
13,000,000
(12,133,331)
-
-
-
-
866,669
866,669
Weighted
Average
Exercise
$
Number of
Options
Weighted
Average
Exercise
$
0.14
33,000,000
0.102
-
(10,000,000)
-
(10,000,000)
13,000,000
13,000,000
2.08
2.08
0.08
0.08
0.14
0.14
64
JUPITER ENERGY LIMITED – 2012 ANNUAL REPORT
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2012
NOTE 21. SHARE BASED PAYMENTS (CONT.)
Performance Rights
The Jupiter Energy Performance Rights Plan was established whereby Jupiter Energy Limited may, at the discretion of the
Jupiter Energy Limited Board, grant performance rights over unissued shares of Jupiter Energy Limited to directors,
executives, employees and consultants of the consolidated entity. The rights are issued for nil consideration, will not be quoted
on the ASX, cannot be transferred and are granted at the discretion of the Jupiter Energy Board.
The Performance Rights Plan was approved by shareholders at the November 2009 Annual General Meeting.
On 12 August 2011, 2,133,335 performance rights were approved by shareholders to directors. The number of performance
rights vest in proportion to the percentage increase in share price at vesting date $0.919 (minimum vesting price). For 100% of
the performance rights to vest, the share price of the Company needs to reach $1.47. In respect of the Vesting Condition, the
% increase in the Share price of the Company will be calculated by reference to the volume weighted average price of Shares
in the 20 consecutive trading days immediately prior to the Vesting Date (25th August 2012). No performance rights vest if the
calculated share price is less than the minimum vesting price at vesting date. The minimum vesting price was set based on
25% premium to the Company’s share price at the original grant date.
On 14 May 2012, shareholders approved the extension of the expiry date on the same terms and conditions to the 31
December 2013.
The fair value of performance rights granted to directors is estimated as at the grant date using a hybrid model incorporates a
trinomial option valuation and a Monte Carlo simulation option pricing model taking into account the terms and conditions
upon which the instruments were granted. Two valuations were performed during the year:
1. As at 26 August 2011 with an expiry date of 25th August 2012
2 Modification as at 14 May 2012 with an expiry date of 31 December 2013.
The following table lists the inputs to the models for the period ended 30 June 2012:
Grant / Modification date
Number of performance rights
Share price
Exercise price
Dividend Yield
Expected volatility
Risk-free interest rate
Expected life
Weighted average fair value
Total amount
Expensed to 30 June 2012
Performance Rights
Performance Rights
26 August 2011
2,133,335
60 cents
0 cents
0.0%
80.0%
4.80%
1 year
27.0 cents
$576,000
$480,000
14 May 2012
2,133,335
50 cents
0 cents
0.0%
80.0%
2.67%
1.63 year
19.5 cents
$601,600
$46,277
During the year, no performance rights vested.
During the year 10,000,000 (pre consolidation) performance rights were cancelled. $23,559 has been expensed in relation to
these rights.
65
JUPITER ENERGY LIMITED – 2012 ANNUAL REPORT
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2012
NOTE 22. COMMITMENTS FOR EXPENDITURE
Exploration Work Program Commitments
The Group has entered into a subsoil utilisation rights for petroleum exploration and extraction in Areas 1 and 2 in
Mangistauskaya Oblast in accordance with Contract No. 2272 dated 29th of December 2006 with the Ministry of Energy
and Mineral Resources of the Republic of Kazakhstan.
Exploration work program commitments contracted for (but not capitalised in the accounts) that are payable:
- not later than one year
- later than one year but not later than five years
4,783,196
-
4,783,196
5,661,900
10,380,150
16,042,050
NOTE 23. AUDITORS REMUNERATION
The auditor of Jupiter Energy Limited is Ernst & Young.
Amounts received or due and receivable by Ernst & Young (Australia) for:
-
-
auditing or reviewing the financial report
reporting accountant services – AIM listing
Amounts received or due and receivable by Ernst & Young (Kazakhstan) for:
-
-
auditing or reviewing the financial report
tax compliance
Amounts received or due and receivable by Ernst & Young (Singapore) for:
-
-
auditing or reviewing the financial report
other services
2012
$
73,511
121,025
194,536
51,569
14,725
66,294
6,966
-
6,966
2011
$
79,655
-
79,655
26,872
-
26,872
7,156
-
7,156
Total paid to Ernst & Young
267,796
113,683
66
JUPITER ENERGY LIMITED – 2012 ANNUAL REPORT
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2012
NOTE 24. EARNINGS PER SHARE
Basic earnings per share
Basic earnings per share are calculated by dividing the profit / (loss) attributable to equity holders of the Company by the
weighted average number of ordinary shares outstanding during the period.
The following reflects the income and data used in the basic and diluted earnings per share computations:
Net loss attributable to ordinary equity holders of the
Parent from continuing operations
Weighted average number of ordinary shares for basic
and diluted earnings per share
Consolidated
2012
2011
(4,295,102)
(4,889,671)
Number of
shares
Number of
shares
115,973,076
91,870,460*
*The weighted average number of ordinary shares for basic earnings per share has been adjusted to reflect the rights issue
during the year ended 30 June 2011.
A share consolidation was completed on 30 August 2011. The weighted average number of ordinary shares for basic and
diluted earnings per share has been adjusted retrospectively for both the 2012 and 2011 earnings per share.
NOTE 25. SEGMENT REPORTING
Identification of reportable segments
The Group has identified its operating segments based on the internal reports that are used by the chief operating decision
makers in assessing performance and determining the allocation of resources.
The Group has identified that it has one operating segments being related to the activities in Kazakhstan, on the basis that the
operations in Australia relate to running the Corporate Head Office only.
Accounting policies and inter-segment transactions
The accounting policies used by the Group in reporting segments internally are the same as those contained in Note 1 to the
accounts.
Interest revenue is derived in Australia. Non-current assets relate to capitalised exploration and evaluation expenditure located
in Kazakhstan.
67
JUPITER ENERGY LIMITED – 2012 ANNUAL REPORT
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2012
NOTE 26. STATEMENT OF CASHFLOWS RECONCILIATION
(a) Reconciliation of operating (loss) after income tax to net cash (used in) operating activities
Operating (loss) after income tax:
Add/(less) non cash items:
Depreciation
Share based payments
(Gain) / Loss on derivative
Finance costs
Effect of foreign exchange translation
Other
Changes in assets and liabilities:
(Increase)/decrease in receivables
(Increase)/decrease in inventories
(Increase)/decrease in other current
assets
Increase/ (decrease) in deferred revenue
Increase/ (decrease) in payables
Increase/(decrease) in provisions
Consolidated
2012
$
(4,295,102)
2011
$
(4,889,671)
339,178
549,836
(761,813)
717,696
(114,781)
989,016
(1,518,476)
(53,320)
(103,671)
1,192,039
174,265
155,081
(2,727,892)
43,156
343,266
59,455
-
883,305
-
(437,437)
87,499
(372,268)
(333,786)
166,795
(4,449,686)
For the purposes of the cash flow statement, cash includes cash on hand, at banks, and money market investments readily
convertible to cash on hand, net of outstanding bank overdrafts.
(b) Non- cash financing and investing activities
Issue of shares to Pursuit Capital Pty Ltd (note 15)
-
239,279
Consolidated
2012
$
2011
$
68
JUPITER ENERGY LIMITED – 2012 ANNUAL REPORT
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2012
NOTE 27. EVENTS OCCURING AFTER THE BALANCE SHEET DATE
On 16 July 2012 the Company advised that the J-51 well had received approval to be tested at the Mid Triassic (A)
horizon and after the workover was completed the co-mingled flow rate from the Mid Triassic (A) and (B) was between
600 and 650 bopd. This rate was confirmed on 30 July 2012 as having stabilized at 600 bopd on a 9mm choke. The
well was shut in on 15 September 2012 after the 90 day production testing period expired.
On 25 July 2012 the Company announced the closure of its 1 for 4 Rights Issue, raising $11,613,016 (before costs).
There was a shortfall of ~35% meaning that the joint underwriters took up additional shares.
On 01 August 2012, SNG elected to convert its $US3.45m Convertible Notes into equity. Under the terms of the
Convertible Notes, the conversion price was the same price as the Rights Issue ($0.40). A total of 8,215,000 shares
were issued to SNG in full satisfaction of all outstanding Convertible Notes.
On 03 August 2012, change in substantial holding notices were lodged reflecting the impact of the shortfall of the
Rights Issue and the conversion of the Convertible Notes. At this date, Waterford held 29.5% of the issued shares of
the Company and SNG held 19.8%.
On 06 August 2012 the Company announced that the J-55 well had spud.
On 21 August 2012 the Company announced details of further oil sales for the August/September period based on a
volumes of 2000 tonnes at a price of $US365/tonne ($US52/barrel)
NOTE 28. INFORMATION ON PARENT ENTITY
(a)
Information relating to Jupiter Energy Ltd:
Current assets
Total assets
Current liabilities
Total liabilities
Issued capital
Retained earnings
Share based payment reserve
Total shareholders’ equity
Profit or (loss) of the parent entity
Total comprehensive income / (loss) of the parent entity
2012
$
2011
$
570,756
13,416,085
41,624,671
41,094,709
(91,277)
(3,156,054)
71,236,136
(174,332)
(174,332)
71,519,889
(37,239,808)
(34,282,686)
4,472,289
3,683,174
38,468,617
40,920,377
(2,957,121)
(9,833,338)
(2,957,121)
(9,833,338)
69
JUPITER ENERGY LIMITED – 2012 ANNUAL REPORT
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2012
Name of Entity
Jupiter Energy (Victoria) Pty Ltd
Jupiter Biofuels Pty Ltd
Jupiter Energy (Kazakhstan) Pty Ltd
Jupiter Energy Pte. Ltd
Jupiter Energy (Services) Pte. Ltd
Equity Holding
Country of
incorporation
Australia
Australia
Australia
Singapore
Singapore
2012
%
100
100
100
100
100
2011
%
100
100
100
100
100
(b) Details of any guarantees entered into by the parent entity in relation to the debts of its subsidiaries
There are no guarantees entered into by the parent entity.
(c) Details of any contingent liabilities of the parent entity
There are no contingent liabilities of the parent entity as at reporting date.
(d) Details of any contractual commitments by the parent entity
There are no contractual commitments by the parent entity
NOTE 29. CONTINGENT LIABILITIES
The Group has no contingent liabilities as at 30 June 2012. (30 June 2011: Nil)
70
JUPITER
R ENERGY L
LIMITED – 20
012 ANNUA
L REPORT
Directors' Dec
D
claration
In accordance
e with a resolu
ution of the dir
rectors of Jupi
ter Energy Lim
mited, I state t
that:
1
3
In the o
opinion of the
directors:
(a)
(b)
(c)
the financial s
in accordance
statements an
e with the Corp
nd notes of Ju
porations Act
piter Energy L
2001, includin
Limited for the
ng:
e financial yea
ar ended 30 J
une 2012 are
(i) Giving a
ended o
a true and fair
on that date.
r view of its fi
inancial positi
on as at 30 J
une 2012 and
d performance
r
e for the year
(ii) Comply
Corpora
ing with Acco
ations Regulat
ounting Stand
tions 2011
ards (includin
ng the Austral
lian Accountin
ng Interpretati
ions) and the
The financial
disclosed in n
statements
note 2(a)
and notes al
lso comply w
with Internatio
nal Financial
Reporting S
s
Standards, as
There are rea
become due a
asonable grou
and payable.
unds to believe
e that the Com
mpany will be
able to pay it
ts debts as a
y
nd when they
This d
accord
declaration ha
dance with sec
as been mad
ction 295A of t
de after recei
the Corporatio
iving the dec
ons Act 2001 f
clarations req
for the financia
uired to be
al year ended
made to the
Directors in
2.
30 June 2012
On behalf of th
O
e Board
Geoff Gander
G
xecutive Chai
E
irman
Perth, 25 Septe
P
ember 2012
71
Independent auditor's report to the members of Jupiter Energy Limited
Report on the financial report
We have audited the accompanying financial report of Jupiter Energy Limited, which comprises the
consolidated statement of financial position as at 30 June 2012, the consolidated statement of
comprehensive income, the consolidated statement of changes in equity and the consolidated statement
of cash flows for the year then ended, notes comprising a summary of significant accounting policies and
other explanatory information, and the directors' declaration of the consolidated entity comprising the
company and the entities it controlled at the year's end or from time to time during the financial year.
Directors' responsibility for the financial report
The directors of the company are responsible for the preparation of the financial report that gives a true
and fair view in accordance with Australian Accounting Standards and the Corporations Act 2001 and for
such internal controls as the directors determine are necessary to enable the preparation of the financial
report that is free from material misstatement, whether due to fraud or error. In Note 2, the directors also
state, in accordance with Accounting Standard AASB 101 Presentation of Financial Statements, that the
financial statements comply with International Financial Reporting Standards.
Auditor's responsibility
Our responsibility is to express an opinion on the financial report based on our audit. We conducted our
audit in accordance with Australian Auditing Standards. Those standards require that we comply with
relevant ethical requirements relating to audit engagements and plan and perform the audit to obtain
reasonable assurance about whether the financial report is free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in
the financial report. The procedures selected depend on the auditor's judgment, including the assessment
of the risks of material misstatement of the financial report, whether due to fraud or error. In making
those risk assessments, the auditor considers internal controls relevant to the entity's preparation and
fair presentation of the financial report in order to design audit procedures that are appropriate in the
circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity's
internal controls. An audit also includes evaluating the appropriateness of accounting policies used and
the reasonableness of accounting estimates made by the directors, as well as evaluating the overall
presentation of the financial report.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for
our audit opinion.
Independence
In conducting our audit we have complied with the independence requirements of the Corporations Act
2001. We have given to the directors of the company a written Auditor’s Independence Declaration, a
copy of which is included in the directors’ report.
RC:DR:JUPITER:034
Liability limited by a scheme approved
under Professional Standards Legislation
Opinion
In our opinion:
a.
the financial report of Jupiter Energy Limited is in accordance with the Corporations Act 2001,
including:
i
ii
giving a true and fair view of the consolidated entity's financial position as at 30 June 2012
and of its performance for the year ended on that date; and
complying with Australian Accounting Standards and the Corporations Regulations 2001;
and
b.
the financial report also complies with International Financial Reporting Standards as disclosed
in Note 2.
Report on the Remuneration Report
We have audited the Remuneration Report included in the directors' report for the year ended 30 June
2012. The directors of the company are responsible for the preparation and presentation of the
Remuneration Report in accordance with section 300A of the Corporations Act 2001. Our responsibility
is to express an opinion on the Remuneration Report, based on our audit conducted in accordance with
Australian Auditing Standards.
Opinion
In our opinion, the Remuneration Report of Jupiter Energy Limited for the year ended 30 June 2012,
complies with section 300A of the Corporations Act 2001.
Ernst & Young
RJ Curtin
Partner
Perth
25 September 2012
RC:DR:JUPITER:034
JUPITER ENERGY LIMITED – 2012 ANNUAL REPORT
ASX ADDITIONAL INFORMATION
Additional information required by the Australian Stock Exchange Ltd Listing Rules and not disclosed elsewhere in
this report is as follows.
SHAREHOLDINGS (as at 24 September 2012)
Substantial shareholders
WATERFORD PETROLEUM LIMITED
SOYUZNEFTEGAS CAPITAL LIMITED
45,246,108
30,373,941
29.50%
19.80%
Voting Rights
Each shareholder is entitled to receive notice of and attend and vote at general meetings of the Company. At a general
meeting, every shareholder present in person or by proxy, representative or attorney will have one vote on a show of hands
and on a poll, one vote for each share held.
DISTRIBUTION OF EQUITY SECURITY HOLDINGS
Category
1 – 1,000
1,001 – 5,000
5,001 – 10,000
10,001 – 100,000
100,001 and over
Total
Ordinary
Shares
232,796
2,311,097
3,407,725
18,060,081
129,365,994
153,377,693
The number of shareholders holding less than a marketable parcel of ordinary shares is 556.
On-market buy back
There is no current on-market buy back.
Securities on Issue
The number of shares and options issued by the Company are set out below:
Category
Ordinary Shares
Unlisted Options - $2.775 expire 31 December 2012
Unlisted Options - $1.50 expire 31 December 2012
Unlisted Options - $2.25 expire 31 December 2012
Performance Shares – expire 25 August 2012
Number
200,001
400,000
266,668
2,133,335
74
JUPITER ENERGY LIMITED – 2012 ANNUAL REPORT
TWENTY LARGEST SHAREHOLDERS
Name of Holder
No. of Ordinary
Shares Held
%
of Issued
Capital
COMPUTERSHARE CLEARING PTY LTD
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