ANNUAL REPORT
FOR THE YEAR ENDED 30 JUNE 2014
JUPITER ENERGY LIMITED – 2014 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, 23 Barrack Street
Perth WA 6000
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 Mounts Bay Road
Perth WA 6000
Bankers
National Australia Bank Ltd
UB13.03, 100 St Georges Terrace
Perth WA 6000
Stock Exchange Listing
Nomad
finnCap Ltd
60 New Broad St
London, EC2M 1JJ
United Kingdom
Share Registry
Computershare Investor Services Pty Ltd
Level 2, 45 St George’s Terrace
Perth WA 6000
Telephone
Facsimile
Website
1300 557 010 (only within Australia)
+61 8 9323 2000
+61 8 9323 2033
www.computershare.com
Jupiter Energy Limited shares are listed on the Australian Securities Exchange under the code JPR, on the AIM Market
under the code JPRL and on the Kazakh Stock Exchange (KASE) under the code AU_JPRL.
ii
JUPITER ENERGY LIMITED – 2014 ANNUAL REPORT
Contents of Financial Report
Chairman’s Letter ................................................................................................................................................ 1
Directors' Report ................................................................................................................................................. 2
Remuneration Report ....................................................................................................................................... 12
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 ........................................................................................................................................ 72
Independent Audit Report to the members of Jupiter Energy Limited ............................................................... 73
ASX Additional Information................................................................................................................................ 74
ii
JUPITER ENERGY LIMITED – 2014 ANNUAL REPORT
CHAIRMAN’S LETTER
Dear Shareholder,
I am pleased to present the 2014 Annual Report for Jupiter Energy Limited (Jupiter Energy or the Company).
The past twelve months has seen slow but steady progress with the development of the Block 31 licence area
supported by the ongoing trial production from the wells in the Akkar East field and the approval by the Kazakh
authorities of Preliminary Reserves in the West Zhetybai field.
Funding constraints have meant that more drilling on the field has not been possible but the Company is
expecting to drill its eighth well during the final month of this calendar year and a funding package for this
well is in progress. The Company also has plans to drill a further two wells in 2015, assuming the
appropriate finances are in place. Details on the operational activities of the Company are contained in the
Operating Review section of this report.
The prospectivity of our 100% owned licence area continues to improve and on 4 July 2014 the Company
announced that the relevant Kazakh State Authorities had approved Preliminary Reserves for the West Zhetybai
field of ~27 million barrels of oil (mmbbls) recoverable (C1+C2). When added to the 2012 Akkar East State approved
C1+C2 figure of 37 million barrels, the total approved C1+C2 estimated recoverable reserves for Block 31 now
stands at ~64 mmbbls.
There is little doubt that the Company has a pivotal 12 months ahead of it with a need to focus on both exploration
and appraisal drilling as well as to start the building of the requisite infrastructure to allow the Akkar East oilfield to
move into its Full Field Development phase – a key step in the Company achieving the first sale of export oil.
Building of the infrastructure, like the drilling program, will require additional funding and the Board is currently
progressing a number of financing options including the review of an equity raising and/or the issue of debt finance.
The Board remains confident of the prospectivity of the licence area and that the two oilfields that have already been
discovered on our permit area can be both developed into significant producers. The Company also continues to
progress applications for further land extensions which could provide further exploration upside on the licence area.
I encourage shareholders to read the Annual Report in detail and I would like to take this opportunity to thank all our
employees and shareholders for their continued support over the past twelve months.
Sincerely
Geoff Gander
Chairman/CEO
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JUPITER ENERGY LIMITED – 2014 ANNUAL REPORT
DIRECTORS’ REPORT
Your Directors submit their report for the year ended 30 June 2014.
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 (51)
B.COM
Executive Chairman/CEO
Appointed 27 January 2005
Alastair Beardsall (60)
Non-Executive Director
Appointed 5 October 2010
Baltabek Kuandykov (66)
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 was involved in the identification and purchase of the
Block 31 licence in Kazakhstan and has driven the development of
the business there since 2007. He is currently responsible for the
overall Operational Leadership of the Company as well as Investor
Relations and Group Corporate Development.
Other Current Directorships of Listed Companies
None
Former Directorships of Listed Companies in last three years
None
Mr Beardsall has been involved in the oil industry for more than 30
years starting in 1980 with Schlumberger, the oil-field services
company. From 1992 he began working for independent oil
companies, with increasing responsibility for specific exploration,
development and production ventures. Between 2003 and 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.
Other Current Directorships of Listed Companies
Sterling Energy Plc – (AIM)
Former Directorships of Listed Companies in last three years
None
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). He
was also seconded by the Kazakh Government to work with
Chevron Overseas Petroleum on CIS projects. 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.
Other Current Directorships of Listed Companies
Caspian Energy Inc (TSX)
Former Directorships of Listed Companies in last three years
Chagala Group Limited (LSE)
2
JUPITER ENERGY LIMITED – 2014 ANNUAL REPORT
DIRECTORS’ REPORT (continued)
Scott Adrian Mison (38)
B.Bus, CA, ACSA
Executive Director
Appointed 31 January 2011
Company Secretary
Appointed 29 May 2007
Mr Mison holds a Bachelor of Business degree, is a Member of the
Institute of Chartered Accountants in Australia and Chartered
Secretaries Australia.
Mr Mison has over 15 years' experience in finance and corporate
compliance within Australia, UK, Central Asia and USA.
He is currently a Director / CFO / Company Secretary of ASX listed
InterMet Resources Limited, CFO / Company Secretary of Rift
Valley Resources Ltd and IDM International Limited. Mr Mison is
also a board member of Wheelchair Sports WA Inc. a not for profit
organisation.
Other Current Directorships of Listed Companies:
Intermet Resources Ltd.
Former Directorships of Listed Companies in last three years:
None
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 performance rights 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
2,500,000
2,500,000
2,500,000
575,000
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, AIM and KASE announcement without delay. Any changes
in Directors’ shareholdings are also confirmed at each Board meeting.
3
JUPITER ENERGY LIMITED – 2014 ANNUAL REPORT
DIRECTORS’ REPORT (continued)
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.
PRINCIPLE 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 37 employees as at 30 June 2014 (2013: 50 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 $2,547,271 (2013: $4,885,829).
Review of Financial Condition
At the end of the 2014 financial year, cash resources were $1,285,358 (2013: $4,131,731). These accounts have
been prepared on a going concern basis, predicated on the Company’s ability to raise additional cash in order to
finance its proposed work programme and general and administrative costs for the next 12 months. The Board is
currently progressing a number of financing options including the review of an equity raising and/or the issue of debt
finance.
Assets decreased to $59,218,198 (2013: $72,091,204) and equity decreased to $39,830,138 (2013: $54,573,145).
CAPITAL RAISING / CAPITAL STRUCTURE
In September 2013, the Group raised US$6.5m through the issue of Series B Convertible Notes with a coupon of
12% and an exercise price of US$1.25 and expiring 20 September 2016. The net cash raised was US$3.5m before
costs, as the March 2014 Promissory Notes were converted to Convertible Notes.
4
JUPITER ENERGY LIMITED – 2014 ANNUAL REPORT
DIRECTORS’ REPORT (continued)
Summary of share and share options on issue
At the date of this report, the unissued ordinary shares of Jupiter Energy Limited under Performance Rights are as
follows:
Date of Vesting
Vesting Conditions
Number under
Performance Rights
31 December 2014 Share Price Performance from a base
8,075,000
level of $0.919
Summary of Conditions relating to the vesting of the Performance Rights:
The Performance Rights for each holder shall vest in proportion to the % increase in the Share price of the Company
above $0.735 subject to a minimum increase of 25%, 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 (Vesting Conditions). In
respect of the Vesting Conditions, 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 event for the year was the ongoing trial production from the J-50, J-51 and J-52 wells with some
limited production from the J-53 well. Details on all these wells are outlined below as are details on other work
carried out over the course of the year.
Well Operations
J-50, J-51 and J-52 Trial Production
The J-50, J-51 and J-52 wells all have trial production licences in place and during year the Company achieved
revenues of $US7.6 million from the sale of approximately 247,400 barrels of oil at an average price of $US31 per
barrel.
All oil sales were made into the Kazakhstan domestic market, as is required under Trial Production, and made
predominantly through three local traders. All sales were made on a pre-paid basis, with oil collected by the traders
from the well head.
Production from the J-50 well was restricted for the first half of the financial year due to the need to amend the gas
emissions permit approved for the well. The new permit was approved in January 2014. Wells J-51 and J-52
operated throughout the year.
The J-53 well had remedial work carried out on it during the year and some production was achieved but it appears
that the well will require a new Electric Submersible Pump installed in order to achieve optimal production and this
new pump is expected to be installed during 2015. At this time the well is shut in.
Overall, average daily production for the 2013/14 year was ~680 barrels of oil per day. (2012/13: ~530 bopd)
5
JUPITER ENERGY LIMITED – 2014 ANNUAL REPORT
DIRECTORS’ REPORT (continued)
West Zhetybai Field (J-55, J-58 and J-59 wells)
The Kazakh authorities require companies that believe they have discovered a new oilfield to submit a Preliminary
Reserves Report for their review and approval. This report must be prepared under the approved Kazakh standards
which have been developed from the Russian reserves system; the standards are based on the analysis of
geological attributes.
Once Preliminary Reserves have been approved for a field, a company is then able to submit applications for various
environmental and emission approvals to complete the Trial Production Licence (TPL) application process for the
relevant wells on that field. Once these TPLs have been received the wells can be put on Trial Production and oil
from those wells (and subsequent ones that are drilled on the same field) can be sold into the domestic market.
Jupiter has drilled three wells on the West Zhetybai field (J-55, J-58 and J-59) and after being allowed to carry out a
maximum of 90 days testing on each well, the wells were shut in awaiting the preparation, review and ultimate
approval of the West Zhetybai Preliminary Reserves Report.
Jupiter engaged independent Kazakh reserves institute, Reservoir Evaluation Services LLC (“RES”), to complete a
reserves determination of the West Zhetybai oilfield on behalf of the Company (the RES 2013 Report). This report
was completed in September 2013 and submitted to the relevant authorities for their review and approval. The State
Approval was received in July 2014.
In summary the West Zhetybai accumulation covers the area delineated by the J-55, J-58 and J-59 wells and
reserves were evaluated for the T31, T32, T2A and T2B reservoir horizons. The State approved quantity of Oil in
Place (OIP) for this area has been estimated at ~173.5 million barrels of oil (mmbbls) from all horizons with
preliminary recoverable reserves (C1 + C2) estimated at ~27.0 mmbbls.
The approved C1 reserves have been estimated at ~4.0 mmbbls and C2 reserves at ~23.0 mmbbls; the recoverable
reserves are calculated from the OIP using individual recovery factors for each horizon. The weighted average
recovery rate approved by the authorities was ~15.5%. The best recovery is expected from the T2B horizon and
when estimating C1 reserves in this horizon, a recovery factor of 21.8% was used. This rate was based on
production data from nearby fields that have been producing from this horizon for several years.
The proportion of approved C1 to C1+C2 reserves indicates the need for (i) further testing of the J-55 and J-59 wells
and (ii) drilling of additional appraisal wells on the field. The Company currently plans, subject to receipt of additional
funding, to drill at least two more wells on the area before submitting its Final Reserves Report for the West Zhetybai
field. The Board anticipates that completion of this work should see existing C2 reserves moved into the C1 category
as well as the identification of further C1 and C2 reserves.
When one compares the State Approved Reserve numbers with the RES 2013 Report it is clear that almost all the
decrease in the reserves approved for West Zhetybai results from the reduction in the C2 reserves from ~58.9
mmbbls to ~23.0 mmbbls.
The reduction in the C2 reserves was as a result of a number of factors:
• A weighted average recovery factor of ~15.5% used for calculating C2 reserves as compared to a 27.2%
recovery factor used when the RES 2013 Report was prepared. The 27.2% recovery rate was based on
RES modelling and the production data obtained from Jupiter’s operations since 2010.
• The authorities taking a view that there was insufficient test data from the J-55 and J-59 wells to
demonstrate recoverable reserves from the area around these wells.
• The need for further appraisal drilling between the existing J-55, J-58 and J-59 wells; the distance between
each well is ~4km and a distance of ~2km between wells (as is the case on the Akkar East field) is
generally expected by the authorities.
6
JUPITER ENERGY LIMITED – 2014 ANNUAL REPORT
DIRECTORS’ REPORT (continued)
In addition, more recent Pressure Volume Temperature (PVT) analysis indicated a less favourable oil volume
(shrinkage) factor that also resulted in a reduction in the reserves that were approved by the authorities.
The key point to note is that the approval of the Preliminary Reserves Report for West Zhetybai enables the TPL
application process to begin and during the three year TPL phase further appraisal work on West Zhetybai will be
carried out before a Final Reserves Report is prepared for approval by the State authorities.
Forward Plan for Drilling Activity
The Company is currently reviewing the funding plan for the coming twelve months. Assuming the funding is in
place, it is expected that there will be a combination of exploration, appraisal and early development wells drilled.
In the North, the Company expects to drill at least two additional wells; one well on Akkar East will be drilled in an
area of already proven C1 reserves and as such will be the Company’s first ‘production’ well after the previous
exploration and appraisal wells and will be named well 19 (the J-xx nomenclature being used for exploration and
appraisal wells only). The other well will be an exploration well on the north east area of the permit (J-54).
Well 19 will be located between the J-51 and J-52 wells and (assuming success) will be placed on Trial Production
as soon as it has been drilled.
The J-54 prospect is a large structural closure mapped using 3D seismic to the north of the producing Akkar East
field. The Company believes the prospect is a separate field and the prognosis is that it is structurally up dip of Akkar
East.
The Company considers that the main risk associated with the J-54 well is the presence of an adequate top seal to
trap oil. Assuming success, the Company believes that the reservoir quality and flow rates should be similar to that
found in the Akkar East field.
In the South, the J-58 and J-59 wells are both currently suspended awaiting approval of their respective TPLs. After
the TPLs are granted wells J-58 will be put on production from the T2B horizon, and the J-59 well will be used to test
the potential of the shallow Jurassic horizon before being completed for production from the T2B horizon.
Further remedial work will be carried out on J-55 to determine if commercial production can be established and this
work may require separate approvals from the relevant bodies.
It is expected that, subject to the Company obtaining the requisite funding, two appraisal wells will be drilled on the
West Zhetybai field during 2015/16.
Details on the Exploration and Production Licences
On 30 January 2014the Company submitted an application for a further two year extension to the Block 31
Exploration Licence. The Exploration Licence had an initial 6 year term (ending December 2012) and already has
had its 1st two year extension approved to December 2014. This further extension, should it be approved, will take
the exploration period through to December 2016. The application is well progressed and the Company expects to
have the extension finalised during the 4th quarter of this calendar year.
The Block 31 contract also has the right to a 25 year Production Licence and it is the Company’s intention to
continue exploring on the southern section of Block 31 whilst also applying, during 2016, for a Production Licence for
the already discovered Akkar East field in the northern section of Block 31.
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JUPITER ENERGY LIMITED – 2014 ANNUAL REPORT
DIRECTORS’ REPORT (continued)
Prospectivity
As outlined in the Forward Plan for Drilling Activity section of this report, the drilling of J-54 during the 1st quarter of
calendar 2015 has the potential, assuming success, for an a further upgrade of Block 31 reserves. The Company
believes the prospectivity of Jupiter Energy’s Block 31 continues to improve and the Board is confident that further
additions to the reserves are achievable.
The Company is also progressing two land extension applications and if these are successful there could be further
exploration targets identified for drilling in 2015/2016
Production
As outlined above, the J-50, J-51, J-52 and J-53 wells already have their respective Trial Production Licences
approved and it is expected that wells J-55, J-58 and J-59 will have their application for Trial Production licences
approved during 2015.
Total barrels sold under Trial Production during the 2013/14 financial year totalled 247,500 for revenues of $7.6
million. This figure represents a 31.03% increase in revenues achieved in the 2012/13 financial year ($5.8m).
Board and Staffing
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 majority priority
over the course of several years and the past 12 months has been no exception.
The Board is confident that the Company is well prepared for continued growth over the coming years.
SIGNIFICANT EVENTS POST PERIOD END
State Approved Preliminary Reserve Report – West Zhetybai
On 04 July 2014 the Company announced the details of the State Approved Preliminary Reserves Report for the
West Zhetybai field. The details of this announcement are covered in the Operating Review above under the section
“West Zhetybai Field (J-55, J-58 and J-59 wells)”.
In summary, the approved C1+C2 reserves for the West Zhetybai field have been estimated at ~27.0 mmbbls; C1
reserves of ~4.0 mmbbls and C2 reserves of ~23.0 mmbbls. The proportion of approved C1 to C1+C2 reserves
indicates the need for (i) further testing of the J-55 and J-59 wells and (ii) drilling of additional appraisal wells on the
field. The Company currently plans, subject to receipt of additional funding, to drill at least two more wells on the
area before submitting its Final Reserves Report for the West Zhetybai field. The key point to note is that the
approval of the Preliminary Reserves Report for West Zhetybai enables the Trial Production Licence (TPL)
application process to begin and during the three year TPL phase further appraisal work on West Zhetybai will be
carried out before a Final Reserves Report is prepared.
Forward Plan:
The focus for West Zhetybai is to commence the TPL application process and bring wells J-58 and J-59 onto
production as soon as possible subject to the availability of additional financing. In the medium term there will be
more testing work carried out on the J-55 well and the plan is to drill at least two appraisal wells on the West
Zhetybai field.
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JUPITER ENERGY LIMITED – 2014 ANNUAL REPORT
DIRECTORS’ REPORT (continued)
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.
LIKELY DEVELOPMENTS AND EXPECTED RESULTS
The Directors will continue to pursue oil and gas exploration and production opportunities in the Republic of
Kazakhstan.
As Jupiter Energy Limited is listed on the Australian Stock Exchange, London’s AIM Market (AIM) and the Kazakh
Stock Exchange (KASE), it is subject to the continuous disclosure requirements of the ASX Listing Rules, the AIM
Rules and the KASE Rules for Companies 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 worldwide 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 third 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.
9
JUPITER ENERGY LIMITED – 2014 ANNUAL REPORT
DIRECTORS’ REPORT (continued)
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:
Board of Directors
Number
attended
Number
eligible to
attend
4
4
4
4
4
4
4
4
Current Directors
G Gander
A Beardsall
B Kuandykov
S Mison
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.
Kazakh State Approved Reserves
The information in this report which relates to the C1 and C2 Block 31 reserve estimations 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 used the Kazakh Reserve classification system in determining
their estimations. RES has sufficient experience which is relevant to oil & gas reserve estimation and to the specific
permit in Kazakhstan to qualify as competent to verify the information pertaining to the C1 and C2 reserve
estimations. RES has given and not withdrawn its written consent to the inclusion of the C1 and C2 reserve
estimations in the form and context in which they appear in this report. RES has no financial interest in the
Company.
10
JUPITER ENERGY LIMITED – 2014 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
John Kroshus
Chairman / CEO (Executive)
Director (Non-Executive)
Director (Non-Executive)
Director / CFO / Company Secretary (Executive)
Technical Consultant
Technical Consultant (resigned July 2013)
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 interests with the
shareholder and business objectives by providing a fixed remuneration component and offering long term incentives
based on a key performance area – the material improvement in share price performance. The Board of the Group
believes the remuneration policy to be appropriate to attract and retain the best executives and Directors to run and
manage the Company, 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 Company 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 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 eligible to participate in the Company’s long term performance rights plan.
11
JUPITER ENERGY LIMITED – 2014 ANNUAL REPORT
REMUNERATION REPORT (Audited) (continued)
The executive Directors and executives receive a superannuation guarantee contribution as required by the
government which is currently 9.5%, 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.
12
JUPITER ENERGY LIMITED – 2014 ANNUAL REPORT
REMUNERATION REPORT (Audited) (continued)
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.
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 for its Kazakh based employees, which is based on a cash bonus subject to the
attainment of clearly defined Branch and individual measures.
Actual STI payments awarded to each employee depends 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 Branch and
individual measures of performance.
Directors are not eligible for participation in the STI program.
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 Directors and senior executives are delivered in the form of Performance Rights,
issued under the Performance Rights Plan.
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.
13
JUPITER ENERGY LIMITED – 2014 ANNUAL REPORT
REMUNERATION REPORT (Audited) (continued)
The following information provides a summary of the Company’s financial performance for the last five years:
Revenue
Loss before income tax
Earnings per share (cents)*
Last share price at Balance Date*
Market capitalisation
2014
$
7,586,442
(2,547,271)
(1.66)
0.40
61.4m
2013
$
5,778,057
(4,885,829)
(3.25)
0.55
82.7m
2012
$
1,063,086
(4,295,102)
(3.70)
0.415
48.2m
2011
$
-
(4,889,671)
(5.25)
0.72
83.4m
2010
$
-
(5,512,070)
(8.25)
0.51
30.1m
*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.
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 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
Rights issued is dependent upon an increase in the share price to above the minimum vesting price for the
Performance 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 2014). 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.
14
JUPITER ENERGY LIMITED – 2014 ANNUAL REPORT
REMUNERATION REPORT (Audited) (continued)
Details of remuneration (Audited)
Remuneration of Directors and Executives
Table 1: Remuneration for the year ended 30 June 2014
Short-term benefits
Post-employment
benefits
Share-based
payment
Cash
salary and
Consulting fees
$
Cash
bonus (c)
$
Other
$
Super-
annuation
$
Performance
Rights
$
Total
$
Remuneration
consisting of
Performance
Rights
%
Performance
related
%
40,000
42,810
82,810
321,577
130,000
67,000
47,998
566,575
649,385
-
-
-
-
-
-
-
-
-
-
11,250
138,728
-
30,000
-
143,200
143,200
286,400
143,200
32,063
183,200
186,010
369,210
633,505
173,313
78.16%
76.98%
78.16%
76.98%
22.60%
18.50%
22.60%
24.99%
-
-
-
-
-
-
-
(14,194)
67,000
33,804
-
-
-
-
11,250
11,250
138,728
138,728
30,000
30,000
161,069
447,468
907,622
1,276,832
Name
Non-executive director
A Beardsall
B Kuandykov
Total non-executive directors
Executive directors
G Gander (a)
S Mison (b)
Other key management
personnel
K Martens
J Kroshus
Total executives
Totals
(a): Other relates to living expenses covering cost of apartment/office in London as per service agreement.
(b): Fees relate to CFO / Company Secretary ($90,000) and Director Fees ($40,000).
(c): The cash bonus to Mr Mison was for the period 1 January 2014 to 30 June 2014. Under his service agreement, he is entitled a cash bonus every six months to a
maximum of $15,000 per six months. The performance criteria were to ensure full compliance with ASX, AIM and KASE and sign off of debt funding package. The %
of bonus granted was 75%, with 25% being forfeited.
Table 2: Remuneration for the year ended 30 June 2013
Short-term benefits
Post-employment
benefits
Share-based
payment
Name
Non-executive director
A Beardsall
B Kuandykov
Total non-executive directors
Executive directors
G Gander (a)
S Mison (b)
Other key management
personnel
K Martens
J Kroshus
Total executives
Totals
Cash
salary and
Consulting fees
$
Cash
bonus
$
Other
$
Super-
annuation
$
Performance
Rights
$
Total
$
Remuneration
consisting of
Performance
Rights
%
Performance
related
%
40,000
40,415
80,415
296,990
130,000
157,200
290,190
874,380
954,795
-
-
-
-
-
-
-
-
-
-
-
-
120,429
-
-
38,567
158,996
158,996
-
-
-
16,000
-
236,611
236,611
473,222
236,611
52,054
276,611
277,026
553,637
670,030
182,054
85.54%
85.41%
85.54%
85.41%
35.31%
28.59%
35.31%
28.59%
-
-
-
14,194
157,200
342,951
-
4.14%
-
4.14%
16,000
16,000
302,859
776,081
1,352,235
1,905,872
(a): Other relates to living expenses covering cost of apartment/office in London as per service agreement.
(b): Fees relate to CFO / Company Secretary ($90,000) and Director Fees ($40,000).
15
JUPITER ENERGY LIMITED – 2014 ANNUAL REPORT
REMUNERATION REPORT (Audited) (continued)
Details of remuneration (Audited)
Remuneration of Directors and Executives (continued)
Compensation Options: Granted and vested during the year ended 30 June 2014
During the 2014 and 2013 year, there were no options granted. No options, listed or unlisted, were exercised during
the year.
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
2014 or 30 June 2013.
Performance Rights
On 7 November 2013, 1,074,999 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 percentage 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 (31 December 2014). No performance rights vest if the calculated share price is less than the
minimum vesting price at vesting date.
At the same meeting shareholders approved the extension of the existing 7,000,001 performance rights to 31
December 2014, with the same terms and conditions. This brings the total number of performance rights on issue as
at 30 June 2014 to 8,075,000 and these performance rights all expire on 31 December 2014.
The fair value of performance rights granted to directors is estimated as at the grant date using a Monte
Carlo simulation option pricing model taking into account the terms and conditions upon which the
instruments were granted.
The following table lists the inputs to the models for the year ended 30 June 2014:
Grant 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 2014
During the current period, no performance rights vested.
Performance Rights
7 November 2013
1,074,999
37.5 cents
0 cents
0.0%
55.0%
2.54%
1.15 year
1.97 cents
$21,177
$12,101
16
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
JUPITER ENERGY LIMITED – 2014 ANNUAL REPORT
REMUNERATION REPORT (Audited) (continued)
Details of remuneration (Audited)
Remuneration of Directors and Executives (continued)
Table 3: Compensation Performance Rights: Granted and vested during the year ended 30 June 2014
Granted
Number
333,333
333,333
333,333
75,000
Grant /
Modification
Date
7 Nov 2013
7 Nov 2013
7 Nov 2013
7 Nov 2013
New Grant
A Beardsall
B Kuandykov
G Gander
S Mison
Total
1,074,999
Fair Value
per right at
grant date
$
Terms & Conditions for each Grant
Exercise price
per right
$
Expiry
Date
First
Exercise
Date
Vested
Number
%
$0.0197
$0.0197
$0.0197
$0.0197
$0.00
$0.00
$0.00
$0.00
31 Dec 2014
31 Dec 2014
31 Dec 2014
31 Dec 2014
31 Dec 2014
31 Dec 2014
31 Dec 2014
31 Dec 2014
Modification *
A Beardsall
B Kuandykov
G Gander
S Mison
Total
Modification *
A Beardsall
B Kuandykov
G Gander
S Mison
-
-
-
-
-
-
-
-
-
7 Nov 2013
7 Nov 2013
7 Nov 2013
7 Nov 2013
$0.0197(i)
$0.0197(i)
$0.0197(i)
$0.0197(i)
$0.00
$0.00
$0.00
$0.00
31 Dec 2014
31 Dec 2014
31 Dec 2014
31 Dec 2014
31 Dec 2014
31 Dec 2014
31 Dec 2014
31 Dec 2014
14 May 2012
14 May 2012
14 May 2012
14 May 2012
$0.0197(i)
$0.0197(i)
$0.0197(i)
$0.0197(i)
$0.00
$0.00
$0.00
$0.00
31 Dec 2014
31 Dec 2014
31 Dec 2014
31 Dec 2014
31 Dec 2014
31 Dec 2014
31 Dec 2014
31 Dec 2014
Total
*The only modification was the expiry vesting date was extended from 7 November 2013 to 31 December 2014. All other terms and conditions
remained the same.
(i) Represents the incremental fair value, between the original and modified awards at modification date.
-
-
Table 4: Compensation Performance Rights: Granted and vested during the year ended 30 June 2013
Original Grant
Directors
A Beardsall
B Kuandykov
G Gander
S Mison
Total
Number
1,500,000
1,500,000
1,500,000
366,666
4,866,666
Granted
Grant Date
Fair Value
per right at
grant date
$
Terms & Conditions for each Grant
Exercise price
per right
$
Expiry
Date
9 Nov 2012
9 Nov 2012
9 Nov 2012
9 Nov 2012
$0.51
$0.51
$0.51
$0.51
$0.00
$0.00
$0.00
$0.00
31 Dec 2013
31 Dec 2013
31 Dec 2013
31 Dec 2013
17
First
Exercise
Date
31 Dec 2013
31 Dec 2013
31 Dec 2013
31 Dec 2013
Vested
Number
%
-
-
-
-
-
-
-
-
-
JUPITER ENERGY LIMITED – 2014 ANNUAL REPORT
REMUNERATION REPORT (Audited) (continued)
Details of remuneration (Audited)
Remuneration of Directors and Executives (continued)
Shareholdings
The number of shares in the Company held by each Key Management Personnel of Jupiter Energy Limited during
the financial year, including their personally-related entities, is set out below:
2014
Directors
G Gander
A Beardsall
B Kuandykov
S Mison
Executives
K Martens
J Kroshus
2013
Directors
G Gander
A Beardsall
B Kuandykov
S Mison
Executives
K Martens
J Kroshus
Balance
30 June 2013
Granted as
Remuneration
On Exercise of
Options
Net Change
Other
Balance
30 June 2014
3,147,224
1,250,000
-
391,238
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
3,147,224
1,250,000
-
391,238
-
-
Balance
1 July 2012
Granted as
Remuneration
On Exercise of
Options
Net Change
Other
Balance
30 June 2013
2,551,113
1,000,000
-
312,987
-
-
-
-
-
-
-
-
-
-
-
-
-
-
596,111
250,000
-
78,251
-
-
3,147,224
1,250,000
-
391,238
-
-
Performance Rights Holdings
The number of Performance Rights in the Company held by each Director of Jupiter Energy Limited and each of the
specified Executives of the consolidated entity during the financial year, including their personally-related entities, is
set out below:
2014
Directors
G Gander
A Beardsall
B Kuandykov
S Mison
Executives
K Martens
J Kroshus
Balance at
beg of period
1 July 2013
Granted
as
Remune-
ration
Rights
Exercised
Net
Change
Other
Not Vested
& Not
Exercisable
Vested &
Exercisable
Balance at
end of
period
30 June
2014
2,166,667
2,166,667
2,166,667
500,000
333,333
333,333
333,333
75,000
-
-
-
-
-
-
-
-
-
-
18
-
-
-
-
-
-
2,500,000
2,500,000
2,500,000
575,000
2,500,000
2,500,000
2,500,000
575,000
-
-
-
-
-
-
-
-
-
-
JUPITER ENERGY LIMITED – 2014 ANNUAL REPORT
REMUNERATION REPORT (Audited) (continued)
Details of remuneration (Audited)
Remuneration of Directors and Executives (continued)
2013
Directors
G Gander
A Beardsall
B Kuandykov
S Mison
Executives
K Martens
J Kroshus
Balance
at beg of
period
1 July
2012
Granted
as
Remune-
ration
666,667
666,667
666,667
133,334
1,500,000
1,500,000
1,500,000
366,666
-
-
-
200,000
* Relates to rights cancelled.
Rights
Exercised
Net Change
Other *
Not Vested
& Not
Exercisable
Vested &
Exercisable
Balance at
end of
period
30 June
2013
-
-
-
-
-
-
-
-
-
-
2,166,667
2,166,667
2,166,667
500,000
2,166,667
2,166,667
2,166,667
500,000
-
(200,000)
-
-
-
-
-
-
-
-
-
-
Option Holdings
The number of options in the Company held by each Key Management Personnel of the consolidated entity during
the financial year, including their personally-related entities, is set out below:
Balance at
beg of
period
1 July
2013
Granted
as
Remune-
ration
Options
Exercised
Net
Change
Other
Balance at
end of
period
30 June
2014
Not Vested
& Not
Exercisable
Vested &
Exercisable
-
-
-
-
-
-
Balance at
beg of
period
1 July
2012
Granted
as
Remune-
ration
-
-
-
66,667
133,333
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Options
Exercised
Net Change
Other *
Not Vested
& Not
Exercisable
Vested &
Exercisable
Balance at
end of
period
30 June
2013
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(66,667)
(133,333)
19
*Change relates to the expiry of options which occurred during the year.
2014
Unlisted Options
Directors
G Gander
A Beardsall
B Kuandykov
S Mison
Executives
K Martens
J Kroshus
2013
Unlisted Options
Directors
G Gander
A Beardsall
B Kuandykov
S Mison
Executives
K Martens
J Kroshus
JUPITER ENERGY LIMITED – 2014 ANNUAL REPORT
REMUNERATION REPORT (Audited) (continued)
Details of remuneration (Audited)
Remuneration of Directors and Executives (continued)
Service agreements
Remuneration and other terms of employment for the Executive Chairman/CEO, Company Sec/CFO, 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 January 2014)
Base Terms
• This agreement was effective from 1 January 2014 and is for a term of 1 year (to 31 December 2014).
• Base Salary of GBP200,000 ($360,000) including Director Fees and the current Superannuation Levy of
9.5%.
• Living expenses of GBP 80,000 ($144,000) per year, covering the cost of an apartment/office in London.
• GBP 100,000 ($180,000) incentive bonus in the event a change of control occurs.
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 months
None
None
Unvested rights forfeited
Unvested rights forfeited
Scott Mison, CFO / Company Secretary / Executive Director (Effective – 1 January 2014)
Base Terms
• This agreement was effective from 1 January 2014 and is for a term of 1 year (to 31 December 2014).
• CFO / Company Secretary fees of $90,000.
• Director fees of $40,000.
• Bonus of $30,000 incentive bonus, with KPI’s set by the board every six months.
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 months
None
None
Unvested rights forfeited
Unvested rights forfeited
20
JUPITER ENERGY LIMITED – 2014 ANNUAL REPORT
REMUNERATION REPORT (Audited) (continued)
Details of remuneration (Audited)
Remuneration of Directors and Executives (continued)
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)
21
JUPITER ENERGY LIMITED – 2014 ANNUAL REPORT
INDEMNIFICATION AND INSURANCE OF DIRECTORS AND OFFICERS
The Company has entered into Deeds of Indemnity with the Directors, indemnifying them against certain liabilities
and costs to the extent permitted by law.
The Company has also agreed to pay a premium in respect of a contract insuring the Directors and Officers of the
Company against certain liabilities and costs to the extent permitted by law. Full details of the cover and premium
are not disclosed as the insurance policy prohibits the disclosure.
CORPORATE GOVERNANCE
In recognising the need for the highest standards of corporate behaviour and accountability, the Directors of Jupiter
Energy Limited adhere to strict principles of corporate governance. The Company’s corporate governance statement
is included on page 22 of this annual report.
AUDITOR INDEPENDENCE
The Directors received the declaration included on page 28 of this annual report from the auditor of Jupiter Energy
Limited.
NON-AUDIT SERVICES
There were no non-audit services provided by the entity’s auditors, Ernst & Young during the year.
This report has been made in accordance with a resolution of the Directors.
G A Gander
Director
Perth, Western Australia
23 September 2014
22
JUPITER ENERGY LIMITED – 2014 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 Rules
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 2014.
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.
23
JUPITER ENERGY LIMITED – 2014 ANNUAL REPORT
CORPORATE GOVERNANCE STATEMENT (continued)
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, only one is 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 an independent Non-Executive Director of the Company. His oil industry experience,
especially within Kazakhstan, makes his contribution to the Board important and significant.
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.
24
JUPITER ENERGY LIMITED – 2014 ANNUAL REPORT
CORPORATE GOVERNANCE STATEMENT (continued)
Mr Scott Mison is an executive director / 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 a 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 (HSE) 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
There was no evaluation conducted during the financial year.
25
JUPITER ENERGY LIMITED – 2014 ANNUAL REPORT
CORPORATE GOVERNANCE STATEMENT (continued)
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 and the CFO declare in writing to the Board that the Company’s financial statements for the year ended 30
June 2014 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 and the
CFO 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
For details of remuneration paid to Directors and officers for the financial year please refer to the Directors’ Report
on page 17.
26
JUPITER ENERGY LIMITED – 2014 ANNUAL REPORT
CORPORATE GOVERNANCE STATEMENT (continued)
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 and
the CFO 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 and CFO 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 2014, there were
thirteen 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, the AIM Listing
Rules and the KASE 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.
27
JUPITER ENERGY LIMITED – 2014 ANNUAL REPORT
CORPORATE GOVERNANCE STATEMENT (continued)
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, AIM and KASE Listing
Rules 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, AIM and KASE are made available on the Company’s website;
and
• All other information on the Company’s website is updated on an ongoing basis.
28
Ernst & Young
11 Mounts Bay Road
Perth WA 6000 Australia
GPO Box M939 Perth WA 6843
Tel: +61 8 9429 2222
Fax: +61 8 9429 2436
ey.com/au
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 2014, 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
23 September 2014
A member firm of Ernst & Young Global Limited
Liability limited by a scheme approved under Professional Standards Legislation
RC:KW:Jupiter Energy:059
JUPITER ENERGY LIMITED – 2014 ANNUAL REPORT
Financial Statements
FOR THE YEAR ENDED 30 JUNE 2014
30
JUPITER ENERGY LIMITED – 2014 ANNUAL REPORT
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEAR ENDED 30 JUNE 2014
Revenue
Cost of sales
Gross profit
FX gain / (loss)
Loss on extinguishment of convertible notes
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
2014
A$
2013
A$
7,586,442
(5,540,935)
2,045,507
809,868
(295,194)
614,301
(3,790,286)
(615,804)
23,910
(1,955,377)
(2,547,271)
5,778,057
(4,869,004)
909,053
(694,342)
-
(161,442)
(4,499,291)
(4,446,022)
34,779
(474,586)
(4,885,829)
-
-
(2,547,271)
(4,885,829)
4
5
Other comprehensive income net of tax
Foreign currency translation
(12,643,204)
5,816,477
Total comprehensive profit / (loss) for the period
(15,190,475)
930,648
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
(1.66)
(1.66)
(3.25)
(3.25)
The consolidated statement of comprehensive income is to be read in conjunction with the notes of the financial statements
31
JUPITER ENERGY LIMITED – 2014 ANNUAL REPORT
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
AS AT 30 JUNE 2014
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
Trade and other payables
Deferred revenue
Other financial liabilities
Derivative liability
Provisions
Total Current Liabilities
Non-current Liabilities
Provisions
Other financial liabilities
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
2014
A$
2013
A$
6
7
8
9
7
10
11
12
13
14
15
17
17
16
16
17
18
19
19
1,285,358
1,296,631
268,880
49,606
2,900,475
2,522,291
20,283,793
1,042,508
31,986,316
482,815
56,317,723
59,218,198
1,030,222
844,773
-
229,400
58,061
2,162,456
4,131,731
1,119,496
264,717
59,087
5,575,031
3,818,391
25,908,977
1,617,097
34,710,757
460,951
66,516,173
72,091,204
2,678,639
1,642,837
3,280,160
763,177
86,574
8,451,387
294,538
16,931,066
17,225,604
19,388,060
452,942
8,613,730
9,066,672
17,518,059
39,830,138
54,573,145
85,633,935
5,695,838
(11,573,714)
(39,925,921)
39,830,138
85,633,935
5,248,370
1,069,490
(37,378,650)
54,573,145
The consolidated statement of financial position is to be read in conjunction with the notes of the financial statements.
32
JUPITER ENERGY LIMITED – 2014 ANNUAL REPORT
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED 30 JUNE 2014
Cash flow from operating activities
Receipts from customers
Payments to suppliers and employees
Interest received
Net cash flows (used in) operating activities
Cash flows from investing activities
Payments for exploration and evaluation expenditure
Payments for plant and equipment
Net Cash flows (used in) investing activities
Cash flows from financing activities
Proceeds from issues of shares
(Repayment) / Proceeds from unsecured loan
Proceeds from convertible notes
Fee on issue of convertible note
Transactions cost from issue of shares and convertible
notes
Interest paid
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
Note
Consolidated
2014
A$
2013
A$
8,565,902
(10,580,704)
23,910
(1,990,892)
9,250,333
(11,257,385)
34,779
(1,972,273)
26
(3,954,596)
(20,461)
(3,975,057)
(16,634,046)
(843,706)
(17, 477,752)
-
(3,190,500)
6,916,800
(208,065)
-
-
3,518,235
(2,447,714)
(398,659)
4,131,731
1,285,358
6
11,613,015
5,760,840
6,189,480
(281,988)
(501,217)
(148,378)
22,631,752
3,181,727
554,559
395,445
4,131,731
The statement of cash flows is to be read in conjunction with the notes of the financial statements.
33
JUPITER ENERGY LIMITED – 2014 ANNUAL REPORT
STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 30 JUNE 2014
Share Based
Payment
Reserve
Issued capital
A$
A$
Foreign
Currency
Translation
Reserve
A$
Accumulated
Losses
A$
Total
A$
71,236,136
-
-
-
4,472,289
-
-
-
(4,746,987)
-
5,816,477
5,816,477
(32,492,821)
(4,885,829)
-
(4,885,829)
38,468,617
(4,885,829)
5,816,477
930,648
-
14,899,015
(501,216)
85,633,935
776,081
-
-
5,248,370
-
-
-
1,069,490
-
-
-
(37,378,650)
776,081
14,899,015
(501,216)
54,573,145
85,633,935
-
-
-
5,248,370
-
-
-
1,069,490
-
(12,643,204)
(12,643,204)
(37,378,650)
(2,547,271)
-
(2,547,271)
54,573,145
(2,547,271)
(12,643,204)
(15,190,475)
CONSOLIDATED
As at 1 July 2012
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 2013
As at 1 July 2013
Loss for the period
Other comprehensive income
Total comprehensive income
Transactions by owners recorded
directly in equity:
Share based payments
At 30 June 2014
-
85,633,935
447,468
5,695,838
-
(11,573,714)
-
(39,925,921)
447,468
39,830,138
The statements of changes in equity are to be read in conjunction with the notes of the financial statements.
34
JUPITER ENERGY LIMITED – 2014 ANNUAL REPORT
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2014
1
CORPORATE INFORMATION
The financial report of Jupiter Energy Limited for the year ended 30 June 2014 was authorised for issue in accordance
with a resolution of the directors on 23 September 2014.
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 AIM 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 2 to 11
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.
The amounts contained within this report have been rounded to nearest $1 (where rounding is applicable) under the
option available to the Company under ASIC Class Order 98/100.
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.
At 30 June 2014 the Group has a net working capital surplus of $0.74 million. The Group is reliant on planned
production forecasts being achieved during 2014 / 2015 and being able to raise additional capital.
The Directors are currently reviewing a range of financing options which may include the further issue of new equity,
reserve based debt, convertible debt or a combination of these and other funding instruments. While financing is
expected to be finalised within the short term to allow the Group to further the development of the East Akkar field during
2014 - 2015 there is no certainty that financing will be completed as anticipated.
The Directors are confident of being able to raise the required capital, but note that financing has not been secured at
the date of this report. Should the Group not achieve the matters set out above, there is uncertainty whether the Group
would continue as a going concern and therefore whether it would realise its assets and extinguish its liabilities in the
normal course of business and at the amounts stated in the financial report. The financial report does not include
adjustments relating to the recoverability or classification of the recorded assets amounts nor to the amounts or
classification of liabilities that might be necessary should the Group not be able to continue as a 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.
35
JUPITER ENERGY LIMITED – 2014 ANNUAL REPORT
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2014
(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 2013, the Group has adopted the following Standards and Interpretations, mandatory for annual periods
beginning on 1 July 2013. Adoption of these standards and interpretations did not have any significant effect on the
financial position or performance of the Group:
AASB 10 Consolidated Financial Statements
AASB 12 Disclosure of Interests in Other Entities
AASB 13 Fair Value Measurement
AASB 119 Employee Benefits
AASB 2012-2 Amendments to Australian Accounting Standards - Disclosures - Offsetting Financial Assets
and Financial Liabilities
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 2014. These are outlined in the following table.
Reference
Title
Summary
AASB 2012-3
Amendments to Australian
Accounting Standards -
Offsetting Financial Assets
and Financial Liabilities
AASB 2012-3 adds application guidance to AASB 132
Financial Instruments: Presentation 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.
Application
date for
Group
1 July 2014
Application
date of
standard
1 January
2014
Impact on
Group
financial
report
The group has
not yet
determined
the financial
impact of the
change.
36
JUPITER ENERGY LIMITED – 2014 ANNUAL REPORT
Application
date for
Group
1 July 2018
Application
date of
standard
1 January
2018
Impact on
Group
financial
report
The group has
not yet
determined
the financial
impact of the
change.
Reference
Title
Summary
AASB 9
Financial Instruments
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.
b.
c.
Financial assets that are debt instruments will be
classified based on (1) the objective of the entity's
business model for managing the financial assets; (2)
the characteristics of the contractual cash flows.
Allows an irrevocable election on initial 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 initial recognition if doing
so eliminates or 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.
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.
The AASB issued a revised version of AASB 9 (AASB 2013-9)
during December 2013. The revised standard incorporates
three primary changes:
1.
2.
3.
New hedge accounting requirements including changes
to hedge effectiveness testing, treatment of hedging
costs, risk components that can be hedged and
disclosures
Entities may elect to apply only the accounting for gains
and losses from own credit risk without applying the
other requirements of AASB 9 at the same time
In February 2014, the IASB tentatively decided that the
mandatory effective date for AASB 9 will be 1 January
2018
AASB 2013-3
Amendments to AASB 136
– Recoverable
Amount Disclosures for
Non-Financial Assets
AASB 2013-3 amends the disclosure requirements in AASB
136 Impairment of Assets. The amendments include the
requirement to disclose additional information about the fair
value measurement when the recoverable amount of impaired
assets is based on fair value less costs of disposal.
1 January
2014
1 July 2014
The group has
not yet
determined
the financial
impact of the
change.
37
JUPITER ENERGY LIMITED – 2014 ANNUAL REPORT
Reference
Title
Summary
AASB 2013-4
AASB 2013-5
Amendments to Australian
Accounting Standards –
Novation of Derivatives
and Continuation of Hedge
Accounting [AASB 139]
AASB 2013-4 amends AASB 139 to permit the continuation of
hedge accounting in specified circumstances where a
derivative, which has been designated as a hedging
instrument, is novated from one counterparty to a central
counterparty as a consequence of laws or regulations.
Amendments to Australian
Accounting Standards –
Investment Entities
[AASB 1, AASB 3, AASB 7,
AASB 10, AASB 12, AASB
107, AASB 112, AASB
124, AASB 127, AASB
132, AASB 134 & AASB
139]
These amendments define an investment entity and require
that, with limited exceptions, an investment entity does not
consolidate its subsidiaries or apply AASB 3 Business
Combinations when it obtains control of another entity.
These amendments require an investment entity to measure
unconsolidated subsidiaries at fair value through profit or loss
in its consolidated and separate financial statements.
These amendments also introduce new disclosure
requirements for investment entities to AASB 12 and AASB
127.
AASB 2013-7
Amendments to AASB
1038 arising from AASB 10
in relation to Consolidation
and Interests of
Policyholders [AASB 1038]
AASB 2013-7 removes the specific requirements in relation to
consolidation from AASB 1038, which leaves AASB 10 as the
sole source for consolidation requirements applicable to life
insurer entities.
AASB 1031
Materiality
AASB 2013-9
Amendments to Australian
Accounting Standards –
Conceptual Framework,
Materiality and Financial
Instruments
The revised AASB 1031 is an interim standard that cross-
references to other Standards and the Framework (issued
December 2013) that contain guidance on materiality.
AASB 1031 will be withdrawn when references to AASB 1031
in all Standards and Interpretations have been removed.
The Standard contains three main parts and makes
amendments to a number Standards and Interpretations.
Part A of AASB 2013-9 makes consequential amendments
arising from the issuance of AASB CF 2013-1.
Part B makes amendments to particular Australian Accounting
Standards to delete references to AASB 1031 and also makes
minor editorial amendments to various other standards.
Part C makes amendments to a number of Australian
Accounting Standards, including incorporating Chapter 6
Hedge Accounting into AASB 9 Financial Instruments.
Application
date for
Group
1 July 2014
1 July 2014
1 July 2014
1 July 2014
1 July 2014
Application
date of
standard
1 January
2014
1 January
2014
1 January
2014
1 January
2014
1 January
2014
Impact on
Group
financial
report
The group has
not yet
determined
the financial
impact of the
change.
The group has
not yet
determined
the financial
impact of the
change.
The group has
not yet
determined
the financial
impact of the
change.
The group has
not yet
determined
the financial
impact of the
change.
The group has
not yet
determined
the financial
impact of the
change.
38
JUPITER ENERGY LIMITED – 2014 ANNUAL REPORT
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2014
2
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
(c) Basis of consolidation
The consolidated financial statements comprise the financial statements of Jupiter Energy Limited and its subsidiaries
(as outlined in Note 28). Interests in associates are equity accounted (see accounting policy Note 2(e)). Control is
achieved when the Group is exposed, or has rights, to variable returns from its involvement with the investee and has
the ability to affect those returns through its power over the investee. Specifically, the Group controls an investee if
and only if the Group has:
Power over the investee (i.e. existing rights that give it the current ability to direct the relevant activities of the
investee);
Exposure, or rights, to variable returns from its involvement with the investee; and
The ability to use its power over the investee to affect its returns.
When the Group has less than a majority of the voting or similar rights of an investee, the Group considers all relevant
facts and circumstances in assessing whether it has power over an investee, including:
The contractual arrangement with the other vote holders of the investee;
Rights arising from other contractual arrangements; and
The Group’s voting rights and potential voting rights.
The Group re-assesses whether or not it controls an investee if facts and circumstances indicate that there are
changes to one or more of the three elements of control. Consolidation of a subsidiary begins when the Group
obtains control over the subsidiary and ceases when the Group loses control of the subsidiary. Assets, liabilities,
income and expenses of a subsidiary acquired or disposed of during the year are included in the statement of
comprehensive income from the date the Group gains control until the date the Group ceases to control the
subsidiary.
Profit or loss and each component of other comprehensive income (OCI) are attributed to the equity holders of the
parent of the Group and to the non-controlling interests, even if this results in the non-controlling interests having a
deficit balance. When necessary, adjustments are made to the financial statements of subsidiaries to bring their
accounting policies into line with the Group’s accounting policies. All intra-group assets and liabilities, equity, income,
expenses and cash flows relating to transactions between members of the Group are eliminated on consolidation.
A change in the ownership interest of a subsidiary, without a loss of control, is accounted for as an equity transaction.
If the Group loses control over a subsidiary, it:
De-recognises the assets (including goodwill) and liabilities of the subsidiary;
De-recognises the carrying amount of any non-controlling interests;
De-recognises the cumulative translation differences recorded in equity;
Recognises the fair value of the consideration received;
Recognises the fair value of any investment retained;
Recognises any surplus or deficit in profit or loss; and
Reclassifies the parent’s share of components previously recognised in OCI to profit or loss or retained earnings, as
appropriate, as would be required if the Group had directly disposed of the related assets or liabilities.
39
JUPITER ENERGY LIMITED – 2014 ANNUAL REPORT
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2014
2
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
(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 – 2014 ANNUAL REPORT
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2014
2
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
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 and probable
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.
Production start date
The group assesses each well to determine when the well moves into the production stage. This is when the well is
substantially completed and ready for intended use. The group considers various criteria in determining the production
start date, including but not limited to, results of well testing, the ability of the well to sustain ongoing production,
installation of the relevant well infrastructure and receiving the relevant regulatory approvals.
When the well moves into the production stage the capitalisation of certain development costs ceases and costs
incurred are expensed as a production cost. It also at this point when that the well commences depreciation. Any
proceeds received from oil sales prior to the production start date as part of any well testing, are capitalised to the
asset.
41
JUPITER ENERGY LIMITED – 2014 ANNUAL REPORT
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2014
2
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Production start date (continued)
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.
(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.
42
JUPITER ENERGY LIMITED – 2014 ANNUAL REPORT
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2014
2
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
(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.
(h)
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.
43
JUPITER ENERGY LIMITED – 2014 ANNUAL REPORT
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2014
2
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
(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.
(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.
44
JUPITER ENERGY LIMITED – 2014 ANNUAL REPORT
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2014
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
2
(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
A 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.
(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.
45
JUPITER ENERGY LIMITED – 2014 ANNUAL REPORT
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2014
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
(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 – 2014 ANNUAL REPORT
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2014
2
(t)
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
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:
•
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 – 2014 ANNUAL REPORT
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2014
2
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
(v)
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 its 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 – 2014 ANNUAL REPORT
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2014
2
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
(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.
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
2014
$
2013
$
1,285,358
1,285,358
4,131,731
4,131,731
49
JUPITER ENERGY LIMITED – 2014 ANNUAL REPORT
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2014
3
FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES (continued)
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%
Foreign currency risk
Consolidated
2014
$
2013
$
12,853
(12,853)
41,317
(41,317)
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
-
-
-
-
Liquidation Fund
USD
KZT
SGD
GBP
Financial Liabilities
Other financial liabilities
Derivative
Net exposure
Consolidated
2014
$
2013
$
1,072,868
-
1,859
21,706
468,155
1,564,588
3,029,199
798,661
1,859
281,854
418,349
4,529,922
(16,931,066)
(229,400)
(17,160,466)
(15,595,878)
(11,893,890)
(763,177)
(12,657,067)
(8,127,145)
50
JUPITER ENERGY LIMITED – 2014 ANNUAL REPORT
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2014
3
FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES (continued)
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, Singapore 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%
Credit risk
Consolidated
2014
$
2013
$
(779,794)
779,794
(406,357)
406,357
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.
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
Net Exposure
Consolidated
2014
$
2013
$
-
-
-
468,155
468,155
-
418,349
418,349
(229,400)
-
(16,931,066)
(17,160,466)
(16,692,311)
(3,280,160)
(9,376,907)
-
(12,657,067)
(12,238,718)
51
JUPITER ENERGY LIMITED – 2014 ANNUAL REPORT
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2014
3
FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES (continued)
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 3 method.
The convertible notes are sensitive to the changes in currency volatility. The table below outlines the impact a change in the
USD volatility input has on the fair value of the convertible notes.
5% increase in volatility
5 % decrease in volatility
Equity Price Risk
30 June 2014
$
846,553
(846,553)
The Group has exposure in equity risk through the convertible notes, which is susceptible to market price risk arising from
uncertainties about future values of the Company’s share price.
At the reporting date, the exposure to market price risk at fair value was $229,400. A decrease in the company’s share price by
10% could have an impact of approximately $22,940 on profit and loss or equity attributable to the Group, depending on
whether the decline is significant or prolonged. An increase in the company’s share price by 10% could have an impact of
approximately $22,940 on profit and loss or equity attributable to the Group, depending on whether the decline is significant or
prolonged.
4.
EXPENSES
Administration and compliance expenses
Consulting fees
Depreciation and amortisation expenses
Directors fees
Legal fees
Occupancy expenses
Share based payments
Total expenses
Consolidated
2014
$
2,555,319
178,189
2,582
239,862
108,642
258,224
447,468
3,790,286
2013
$
2,795,630
210,989
142,201
239,450
108,405
226,536
776,081
4,499,291
During the year, employee benefits were $929,240. This is included in administration and compliance expenses.
52
JUPITER ENERGY LIMITED – 2014 ANNUAL REPORT
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2014
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% (2013: 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) / loss
Share issue costs
Revenue tax losses – Australia
Revenue tax losses – Kazakhstan
Interest expense
Deferred tax assets not recognised
Deferred tax (income)/expense
Net deferred tax recognised in Balance Sheet
Consolidated
2014
$
2013
$
(764,181)
(1,465,749)
1,101,686
134,240
-
(471,745)
203,065
232,825
-
1,029,859
-
-
-
-
-
(242,961)
184,290
20,139
6,945,693
3,859,022
933,763
(11,699,947)
-
-
213,444
48,433
145,455
6,580,747
1,655,650
-
(8,643,729)
-
-
The Consolidated Group has tax losses of $11,352,797 (2013: $8,643,729) 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 – 2014 ANNUAL REPORT
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2014
6.
CASH AND CASH EQUIVALENTS
Cash at bank and in hand
Consolidated
2014
$
1,285,358
1,285,358
2013
$
4,131,731
4,131,731
The bank accounts are at call and pay interest at a weighted average interest rate of 0.88% at 30 June 2014 (2013: 1.54%)
7.
TRADE AND OTHER RECEIVABLES
Current
Trade receivables
VAT receivable
Other debtors
Non-current
VAT receivable
Consolidated
2014
$
159,083
1,126,212
11,336
1,296,631
2013
$
23,222
1,084,938
11,336
1,119,496
2,522,291
3,818,391
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:
2014
2013
Total
3,818,922
4,937,887
0 – 30
Days
159,083
23,222
31 – 60
days
61 - 90
days
-
-
90+
days
3,659,839
4,914,665
-
-
There are no receivables as at 30 June 2014 that are impaired.
8.
OTHER CURRENT ASSETS
Prepayment
Other
9.
INVENTORIES
Raw Material
Crude oil
Provision of obsolete items
Consolidated
2014
$
106,396
162,484
268,880
49,514
13,952
(13,860)
49,606
2013
$
58,815
205,902
264,717
59,750
16,805
(17,468)
59,087
54
JUPITER ENERGY LIMITED – 2014 ANNUAL REPORT
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2014
10.
OIL AND GAS PROPERTIES
Consolidated
$
26,599,737
(4,850,662)
21,749,075
(690,760)
(774,522)
1,465,282
20,283,793
1,617,096
20,461
(293,531)
(301,518)
1,042,508
1,819,160
(776,653)
1,042,508
926,336
843,706
(142,201)
(10,745)
1,617,096
2,040,995
(423,899)
1,617,096
Cost as at 30 June 2013
Net exchange differences
Cost as at 30 June 2014
Depletion and impairment as at 30 June 2013
Charge for the year
Depletion and impairment as at 30 June 2014
Net book value as at 30 June 2014
11.
PLANT AND EQUIPMENT
Year ended 30 June 2014
At 1 July 2013 net of accumulated depreciation
Additions
Depreciation charge for the year
Net exchange differences
At 30 June 2014 net of accumulated depreciation
At 30 June 2014
Cost
Accumulated depreciation
Net carrying amount
Year ended 30 June 2013
At 1 July 2012 net of accumulated depreciation
Additions
Depreciation charge for the year
Net exchange differences
At 30 June 2013 net of accumulated depreciation
At 30 June 2013
Cost
Accumulated depreciation
Net carrying amount
55
JUPITER ENERGY LIMITED – 2014 ANNUAL REPORT
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2014
12.
EXPLORATION AND EVALUATION EXPENDITURE
Consolidated
2014
$
2013
$
Exploration expenditure carried forward in respect of areas of interest in:
Exploration and evaluation expenditure at cost
31,986,316
34,710,757
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
34,710,757
3,954,596
-
(6,679,037)
31,986,316
25,014,521
16,627,189
(9,782,935)
2,851,982
34,710,757
Oil sales revenue capitalised into exploration and evaluation expenditure for the year was $nil (2013: $1,506,193).
13.
OTHER FINANCIAL ASSETS
Liquidation fund
Other
468,155
14,660
482,815
418,349
42,602
460,951
The Group has a deposit for the purpose of a Liquidation fund in the amount of $468,155. 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.
14.
TRADE AND OTHER PAYABLES
Trade creditors
Accrued expenses
Other payables
15.
DEFERRED REVENUE
As at 1 July
Deferred during the year
Released during the year
Foreign exchange translation
At 30 June
474,226
73,417
482,579
1,030,222
889,235
364,154
1,425,250
2,678,639
1,642,837
868,776
(1,340,499)
(326,341)
844,773
1,192,039
9,424,424
(9,093,730)
120,104
1,642,837
The deferred revenue refers to an amount received in advance for oil sales. As at 30 June 2014, there is 5,777 tonnes of oil to
be delivered under contracts.
56
JUPITER ENERGY LIMITED – 2014 ANNUAL REPORT
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2014
16.
PROVISIONS
Current
Annual leave
Non - current
Provision for rehabilitation
Consolidated
2014
$
2013
$
58,061
58,061
86,574
86,574
294,538
294,538
452,942
452,942
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 $294,538.
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
452,942
(67,650)
(90,754)
-
294,538
356,594
21,334
31,305
43,709
452,942
57
JUPITER ENERGY LIMITED – 2014 ANNUAL REPORT
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2014
17.
DERIVATIVES AND OTHER FINANCIAL LIABILITIES
Current
Unsecured loans
Derivative liability
Non-Current
Convertible note
Promissory Notes
Consolidated
2014
$
-
229,400
229,400
16,931,066
16,931,066
2013
$
3,280,160
763,177
4,043,337
8,613,730
8,613,730
On 28 March 2013, Jupiter entered into a second unsecured loan agreement with Mobile Energy Limited. The Loan was for
US$3 million via 3 Promissory Notes, each with exactly the same terms and each with a face value of US$1m. The Loan was
repayable on 31 March 2014 or at such time that the Company raised additional funding of a minimum of $20 million via debt,
equity or other funding. The Loan had a coupon rate of 15% per annum, payable quarterly in arrears, with the first interest
payment due on 30 June 2013. During the period, the Promissory Notes were converted into Convertible Notes (Series B).
US$9m Convertible Notes (Series A):
On 31 May 2013, Jupiter issued US$9m Series A convertible notes.
The key terms of the Convertible Notes are as follows:
• Term: 3 years
• Conversion Price: US$1.25 per share (maximum of 7.2 million shares may be issued)
• Coupon Rate: 12% per annum, payable quarterly in arrears
• The Convertible Notes may be redeemed by Jupiter at any time with a minimum of 12 months interest payable if the
Convertible Notes are redeemed within the 1st 12 months of their Term
• The issue of the Convertible Notes was carried out under Jupiter’s 15% capacity in accordance with ASX Listing Rule
7.1
The breakdown of subscriptions for the Convertible Notes were as follows:
• Waterford Petroleum Limited: US$3m
• SNG Investments Limited: US$2m
• Midocean Holdings Limited: US$1m
• Mobile Energy Limited: US$3m
The net cash proceeds of the fundraising was US$5.7m, following the repayment of US$3m of the December 2013 Promissory
Notes held by Mobile Energy Limited and the payment of a fee of 3% of the proceeds of the raising (US$270,000) by the
Company to Waterford Petroleum Limited for its role in arranging the funding.
58
JUPITER ENERGY LIMITED – 2014 ANNUAL REPORT
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2014
US$6.5m Convertible Notes (Series B)
On 23 September 2013, the Company announced details regarding the issue of US$6.5million of Series B Convertible Notes,
issued on 20 September 2013. The key terms of these Convertible Notes were as follows:
• Term: 3 years
• Conversion Price: US$1.25 per share (maximum of 5.2 million shares may be issued)
• Coupon Rate: 12% per annum, with the interest accruing from and including the Issue Date until the earlier of the
Conversion Date, Redemption Date or Maturity Date of the Note.
• The Convertible Notes may be redeemed by Jupiter at any time with a minimum of 12 months interest payable if the
Convertible Notes are redeemed within the 1st 12 months of their Term
• The issue of the Convertible Notes is carried out under Jupiter’s 15% capacity in accordance with ASX Listing Rule
7.1
The breakdown of subscriptions for the Convertible Notes is as follows:
• Waterford Petroleum Limited: US$1.5m
• Mid Ocean Limited US$0.5m
• Mobile Energy Limited: US$4m
• Other Private Investors: US$0.5m
The net cash proceeds of the fundraising was US$3.305m, following the repayment of US$3m of Promissory Notes held by
Mobile Energy Limited and the payment of a fee of 3% of the proceeds of the raising (US$195,000) by the Company to
Waterford Petroleum Limited for its role in arranging the funding.
The holders of Series A Convertible Notes issued on 31 May 2013 also agreed to convert their notes to Series B Convertible
Notes, effective from 20 September 2013.
This means that all interest payable on the entire US$15.5m Convertible Notes now outstanding will be deferred and accrue
from and including the Issue Date of the Series B Convertible Notes until the earlier of the Conversion Date, Redemption Date
or Maturity Date of the Note. However, if there is a capital raising prior to the conversion of the notes and the raising is at less
than US$1.25 per share, then the note holders can elect to convert the notes at the lower price, subject to shareholder
approval.
Valuation Techniques 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$1.25 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. 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. An input into the Black Scholes option valuation is the
expected share price volatility over the remaining term of the options. The expected share price volatility used in the option
valuation at reporting date was 55% which was based on historical share price volatility.
59
JUPITER ENERGY LIMITED – 2014 ANNUAL REPORT
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2014
The fair value of the embedded derivative is sensitive to changes in share price volatility. The table below outlines the impact a
change in the share price volatility input has on the fair value of the embedded derivative.
15% increase in volatility
15 % decrease in volatility
Fair value hierarchy
30 June 2014
$
263,810
(194,990)
All financial instruments, such as the Series B convertible notes, for which fair value is recognised or disclosed are categorised
within the fair value hierarchy, described as follows, based on the lowest level input that is significant to the fair value
measurement as a whole:
Level 1 — Quoted market prices in an active market (that are unadjusted) for identical assets or liabilities
Level 2 — Valuation techniques (for which the lowest level input that is significant to the fair value measurement is directly or
indirectly observable)
Level 3 — Valuation techniques (for which the lowest level input that is significant to the fair value measurement is
unobservable)
For financial instruments that are recognised at fair value on a recurring basis, the Group determines whether transfers have
occurred between Levels in the hierarchy by re-assessing categorisation (based on the lowest level input that is significant to
the fair value measurement as a whole) at the end of each reporting period.
As at 30 June 2014, the Group held the following classes of financial instruments measured at fair value:
Derivative financial liabilities
Embedded derivative
Level 3
$
30 June 2014
$
229,400
229,400
There were no transfers between Level 1, Level 2 or Level 3 fair value measurements during the year ended 30 June 2014.
Reconciliation of recurring fair value measurements categorised within level 3 of the fair value hierarchy
Opening balance
Fair Value at inception
Net unrealised gain (loss) recognised in income statement during the period*
Closing balance
30 June 2014
$
-
(839,480)
610,080
(229,400)
*included in the Gain / (loss) on derivative financial instrument amount in the statement of comprehensive income is the movement in derivative of Tranche
A convertible notes that were classified as Level 2 financial instruments in the 30 June 2013 Annual Report and were extinguished and realised during the
period.
60
JUPITER ENERGY LIMITED – 2014 ANNUAL REPORT
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2014
18.
CONTRIBUTED EQUITY
Shares issued and fully paid
Ordinary shares (a)
Share options (b)
(a) Movements in ordinary share capital:
Balance 30 June 2013
Balance 30 June 2014
Movements in options
Balance 30 June 2013
Balance 30 June 2014
Consolidated
2014
$
85,339,736
294,198
85,633,934
2013
$
85,339,736
294,198
85,633,934
Number of
Shares
$
153,377,693
153,377,693
85,339,736
85,339,736
-
-
866,669
866,669
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 30 June 2013
Cancelled during year
Granted during the year
Balance as at 30 June 2014
7,000,001
-
1,074,999
8,075,000
2,133,335
(200,000)
5,066,666
7,000,001
61
JUPITER ENERGY LIMITED – 2014 ANNUAL REPORT
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2014
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 2013 and nil are expected to be paid in 2014.
The Company is not subject to any externally imposed capital requirements.
19.
RESERVES
At 30 June 2013
Share based payment
Foreign currency translation
At 30 June 2014
Foreign currency
translation
reserve
$
1,069,490
-
(12,643,204)
(11,573,714)
CONSOLIDATED
Share based
payments reserve
Total
$
5,248,370
447,468
-
5,695,838
$
6,317,860
447,468
(12,643,204)
(5,877,876)
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.
62
JUPITER ENERGY LIMITED – 2014 ANNUAL REPORT
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2014
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 13
to 21.
(a) Key management personnel compensation
Short-term employee benefits
Post-employment benefits
Other
Share-based payments
(b) Transactions between the Group and other related parties
Consultancy fees
Consolidated
2014
$
2013
$
660,635
30,000
138,728
447,468
1,276,832
954,795
16,000
158,996
776,081
1,905,872
During the year, consulting fees of $144,584 (2013: $115,637) 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.
21.
SHARE BASED PAYMENTS
Employee Share Option Plan (ESOP) and Performance Rights Plan
Included under expenses in the income statement is $447,468 (2013: $776,081), and relates, in full, to equity-settled share-
based payment transactions for employees.
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 2014 (2013: Nil)
During the year ended 30 June 2014, no options were exercised over ordinary shares (2013: Nil).
The following table illustrates the number and weighted average exercise prices (WAEP) of share options issued under the
ESOP:
2014
2013
Number of
Options
WAEP
$
Number of
Options
WAEP
$
Outstanding at the beginning of the year
Granted
Cancelled / forfeited
Exercised
Expired
Outstanding at year end
Exercisable at year end
-
-
-
-
-
-
-
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2014
63
-
-
-
-
-
-
-
866,669
-
-
-
(866,669)
-
-
2.08
-
-
-
2.08
-
-
JUPITER ENERGY LIMITED – 2014 ANNUAL REPORT
21.
SHARE BASED PAYMENTS (continued)
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 7 November 2013, 1,074,999 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
percentage 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 (31st December 2014). No performance rights
vest if the calculated share price is less than the minimum vesting price at vesting date.
At the same meeting shareholders approved the extension of the existing 7,000,001 performance rights to 31 December 2014,
with the same terms and conditions. This brings the total number of performance rights on issue as at 30 June 2014 to
8,075,000 and these performance rights all expire on 31 December 2014.
The fair value of performance rights granted to directors is estimated as at the grant date using a Monte Carlo simulation
option pricing model taking into account the terms and conditions upon which the instruments were granted.
The following table lists the inputs to the models for the period ended 30 June 2014:
Grant 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 2014
During the current period, no performance rights vested.
Performance Rights
7 November 2013
1,074,999
37.5 cents
0 cents
0.0%
55.0%
2.54%
1.15 year
1.97 cents
$21,177
$12,101
64
JUPITER ENERGY LIMITED – 2014 ANNUAL REPORT
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2014
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 29 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
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
Amounts received or due and receivable by Ernst & Young (Kazakhstan) for:
-
auditing or reviewing the financial report
Amounts received or due and receivable by Ernst & Young (Singapore) for:
-
auditing or reviewing the financial report
2014
$
5,118,377
-
5,118,377
2013
$
-
-
-
89,615
89,615
56,907
56,907
6,254
6,254
90,293
90,293
49,917
49,917
7,876
7,876
Total paid to Ernst & Young
152,776
148,086
65
JUPITER ENERGY LIMITED – 2014 ANNUAL REPORT
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2014
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
2014
2013
(2,547,271)
(4,885,829)
Number of
shares
Number of
shares
153,377,693
150,373,286
The convertible note was excluded from the calculation of diluted earnings per share. This could potentially dilute basic
earnings per share in the future.
There have been no other transactions involving ordinary shares or potential ordinary shares between the reporting date and
the date of authorisation of these financial statements.
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.
66
JUPITER ENERGY LIMITED – 2014 ANNUAL REPORT
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2014
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 / Depletion
Share based payments
(Gain) / Loss on derivative
Finance costs
Effect of foreign exchange translation
Other
Changes in assets and liabilities:
Decrease/(increase) in receivables
Decrease/(increase in inventories
(Increase)/decrease in other current
assets
Increase/ (decrease) in deferred revenue
Increase/ (decrease) in payables
Decrease/(increase) in provisions
Consolidated
2014
$
(2,547,271)
1,108,685
447,467
(614,301)
(809,868)
1,955,377
1,118,965
9,481
(26,027)
798,064
1,648,420
(186,917)
(1,990,892)
2013
$
(4,885,829)
734,966
776,081
161,442
474,586
711,481
-
(2,008,432)
(5,767)
(27,580)
450,798
1,554,016
91,965
(1,972,273)
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.
67
JUPITER ENERGY LIMITED – 2014 ANNUAL REPORT
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2014
27.
EVENTS OCCURING AFTER THE BALANCE SHEET DATE
State Approved Preliminary Reserve Report – West Zhetybai
On 04 July 2014 the Company announced the details of the State Approved Preliminary Reserves Report for the West
Zhetybai field. The details of this announcement are covered in the Operating Review in the Directors Report under the section
“West Zhetybai Field (J-55, J-58 and J-59 wells)”.
In summary, the approved C1+C2 reserves for the West Zhetybai field have been estimated at ~27.0 mmbbls; C1 reserves of
~4.0 mmbbls and C2 reserves of ~23.0 mmbbls. The proportion of approved C1 to C1+C2 reserves indicates the need for (i)
further testing of the J-55 and J-59 wells and (ii) drilling of additional appraisal wells on the field. The Company currently plans,
subject to receipt of additional funding, to drill at least two more wells on the area before submitting its Final Reserves Report
for the West Zhetybai field. The key point to note is that the approval of the Preliminary Reserves Report for West Zhetybai
enables the Trial Production Licence (TPL) application process to begin and during the three year TPL phase further appraisal
work on West Zhetybai will be carried out before a Final Reserves Report is prepared.
There have been no other significant events occurring subsequent to 30 June 2014.
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
2014
$
2013
$
827,226
3,396,958
57,232,378
67,645,695
(241,774)
(3,695,643)
(17,402,240)
(13,072,550)
85,633,935
85,633,935
(51,499,634)
(36,309,158)
5,695,838
5,248,370
39,830,138
54,573,147
15,190,476
930,650
15,190,476
930,650
68
JUPITER ENERGY LIMITED – 2014 ANNUAL REPORT
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2014
28.
INFORMATION ON PARENT ENTITY (continued)
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
2014
%
100
100
100
100
100
2013
%
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
29.
CONTINGENT LIABILITIES
The Group has no contingent liabilities as at 30 June 2014 (30 June 2013: Nil)
69
JUPITER ENERGY LIMITED – 2014 ANNUAL REPORT
Directors' Declaration
In accordance with a resolution of the directors of Jupiter Energy Limited, I state that:
1
In the opinion of the directors:
(a)
the financial statements and notes of Jupiter Energy Limited for the financial year ended 30 June 2014 are
in accordance with the Corporations Act 2001, including:
(i) Giving a true and fair view of its financial position as at 30 June 2014 and performance for the year
ended on that date.
(ii) Complying with Accounting Standards (including the Australian Accounting Interpretations) and the
Corporations Regulations 2011
The financial statements and notes also comply with International Financial Reporting Standards, as
disclosed in note 2(b)
Subject to the matter set out in Note 2(a) there are reasonable grounds to believe that the Company will be
able to pay its debts as and when they become due and payable.
(b)
(c)
3
This declaration has been made after receiving the declarations required to be made to the Directors in
accordance with section 295A of the Corporations Act 2001 for the financial year ended 30 June 2014.
On behalf of the Board
Geoff Gander
Executive Chairman
Perth, Western Australia
23 September 2014
70
Ernst & Young
11 Mounts Bay Road
Perth WA 6000 Australia
GPO Box M939 Perth WA 6843
Tel: +61 8 9429 2222
Fax: +61 8 9429 2436
ey.com/au
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 2014, 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.
A member firm of Ernst & Young Global Limited
Liability limited by a scheme approved under Professional Standards Legislation
RC:KW:Jupiter Energy:058
Opinion
In our opinion:
a. the financial report of Jupiter Energy Limited is in accordance with the Corporations Act 2001,
including:
i. giving a true and fair view of the consolidated entity's financial position as at 30 June 2014
and of its performance for the year ended on that date; and
ii. complying with Australian Accounting Standards and the Corporations Regulations 2001; and
b. the financial report also complies with International Financial Reporting Standards as disclosed in
Note 2.
Emphasis of Matter
Without qualifying our conclusion, we draw attention to Note 2(a) in the financial report. These conditions
indicate the existence of a material uncertainty that may cast significant doubt about the consolidated
entity’s ability to continue as a going concern and therefore, the consolidated entity may be unable to
realise its assets and discharge its liabilities in the normal course of business.
Report on the remuneration report
We have audited the Remuneration Report included in the directors' report for the year ended 30 June
2014. 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 2014,
complies with section 300A of the Corporations Act 2001.
Ernst & Young
R J Curtin
Partner
Perth
23 September 2014
A member firm of Ernst & Young Global Limited
Liability limited by a scheme approved under Professional Standards Legislation
RC:KW:Jupiter Energy:058
JUPITER ENERGY LIMITED – 2014 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 31 August 2014)
Substantial shareholders
Waterford Petroleum Ltd
Arrow Business Ltd
Central Asian Oil Holdings Ltd
Voting Rights
45,246,108
30,373,941
10,488,123
29.5%
19.8%
6.80%
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
Total holders
458
658
306
395
56
1,873
Ordinary
Shares
188,504
1,775,827
2,225,899
11,112,795
138,074,668
153,377,693
The number of shareholders holding less than a marketable parcel of ordinary shares is 504.
On-market buy back
There is no current on-market buy back.
Securities on Issue
The number of shares and performance rights issued by the Company are set out below:
Category
Ordinary Shares
Performance Rights – expire 31 December 2014
Number
153,377,693
8,075,000
73
No. of Ordinary
Shares
% of Issued capital
62.49
7.80
4.66
3.48
1.95
1.55
0.87
0.42
0.41
0.40
0.33
0.30
0.29
0.28
0.25
0.22
0.20
0.20
0.20
0.20
86.49
JUPITER ENERGY LIMITED – 2014 ANNUAL REPORT
TWENTY LARGEST SHAREHOLDERS
Name of Holder
1.
2.
3.
4.
5.
6.
7.
8.
9.
COMPUTERSHARE CLEARING PTY LTD
HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED
BNP PARIBAS NOMS PTY LTD
J P MORGAN NOMINEES AUSTRALIA LIMITED
CITICORP NOMINEES PTY LIMITED
VITORIA PTY LTD
GLENNBROWN PTY LTD
MR ERKIN SVANBAYEV
MR GEOFFREY ANTHONY GANDER
10. MR ATHOL GEOFFREY JAMES
11. MR STEPHEN JOHN KINMOND
12.
GLENNBROWN PTY LTD
RACOVALIS SUPERANNUATION FUND PTY LTD
13.
14. MR JASON NUTTMAN
15.
16.
17.
PALS INVESTMENTS PTY LTD
GAINSPELL PTY LTD
NATIONAL NOMINEES LIMITED
18.
19.
20.
ASCENT CAPITAL HOLDINGS PTY LT
SILVERLIGHT HOLDINGS PTY LTD
NORDCO AUSTRALIA PTY LTD
95,843,303
11,970,915
7,142,656
5,340,278
2,988,399
2,377,779
1,333,334
640,000
625,000
608,148
505,041
465,000
440,000
435,541
385,000
333,334
308,891
308,334
306,450
300,000
TOTAL
132,657,403
74