ANNUAL REPORT
FOR THE YEAR ENDED 30 JUNE 2016
JUPITER ENERGY LIMITED – 2016 ANNUAL REPORT
CORPORATE INFORMATION
Jupiter Energy Limited
ABN 65 084 918 481
Directors
Geoffrey Gander (Executive Chairman/Chief Executive Officer)
Baltabek Kuandykov (Non-Executive Director)
Scott Mison (Executive Director)
Alexey Kruzhkov (Non-Executive Director)
Group Secretary
Scott Mison
Registered Office & Principal Place of Business
Ground Floor, 10 Outram Street
West Perth WA 6005
PO Box 1282
Western Australia 6872
Telephone
Facsimile
Email
Website
+61 8 9322 8222
+61 8 9322 8244
info@jupiterenergy.com
www.jupiterenergy.com
Solicitors
Steinepreis Paganin
Level 4,
16 Milligan Street
Perth WA 6000
Auditors
Ernst & Young
11 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 – 2016 ANNUAL REPORT
Contents of Financial Report
Chairman’s Letter ................................................................................................................................................ 1
Directors' Report ................................................................................................................................................. 2
Remuneration Report ....................................................................................................................................... 11
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 ................................................................................................................................ 75
ii
JUPITER ENERGY LIMITED – 2016 ANNUAL REPORT
CHAIRMAN’S LETTER
Dear Shareholder,
I am pleased to present the 2016 Annual Report for Jupiter Energy Limited (“Jupiter Energy” or “Group”).
The past year has been a difficult one for the Group. The global decline in the price of oil and the flow on effect to
Kazakh domestic oil prices made Jupiter’s ability to produce oil on a cashflow positive basis impossible. This resulted
in all the operational wells located on our permit area remaining shut in for the entire financial year. In addition,
continued funding constraints meant that there was also no new drilling carried out during the same period.
As a result of this inactivity, the Group operated on a “Care & Maintenance” basis throughout the year and continued
to be supported by its major shareholder with debt funding being provided as required.
On a more positive note, Jupiter Energy announced on 19 September 2016 that it had been successful in extending
its Exploration Licence for a further three years (to 29 December 2019). With this three year Exploration Licence
extension now secured, the Group hopes to return to domestic oil production as soon as the Trial Production Licences
for the Akkar East and West Zhetybai oilfields have been renewed and Kazakh domestic oil prices improve.
As part of the three year extension of the Exploration Licence, the Group has submitted a Work Program to the Kazakh
authorities for approval and this program covers the 2017, 2018 and 2019 calendar years. The Board is now working
to ensure funding will be in place to carry out that program, commencing in early 2017.
The focus of the three year Work Program will be 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 Group achieving the first sale of export oil.
The Board remains confident in the prospectivity of the licence area and furthermore that the two oilfields that have
already been discovered on our permit area can be commercially developed into significant producers.
I look towards 2017 with renewed confidence and may I take this opportunity to thank all our employees and
shareholders for their continued support over the past twelve months and encourage shareholders to attend the Annual
General Meeting to be held in Perth on 4 November 2016.
Sincerely
Geoff Gander
Chairman/CEO
1
JUPITER ENERGY LIMITED – 2016 ANNUAL REPORT
DIRECTORS’ REPORT
Your Directors submit their report for the year ended 30 June 2016.
DIRECTORS
The names and details of the Group’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 (53)
B.COM
Executive Chairman/CEO
Appointed 27 January 2005
Baltabek Kuandykov (68)
Non-Executive Director
Appointed 5 October 2010
Scott Adrian Mison (40)
B.Bus, CA, ACSA
Executive Director
Appointed 31 January 2011
Company Secretary
Appointed 29 May 2007
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 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
None
Former Directorships of Listed Companies in last three years
None
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 17 years' experience in finance and corporate
compliance within Australia, UK, Central Asia and USA.
He is also CFO / Company Secretary of Rift Valley Resources Ltd.
Mr Mison is also a board member of Wheelchair Sports WA Inc. a
not for profit organisation.
Other Current Directorships of Listed Companies:
None
Former Directorships of Listed Companies in last three years:
1-Page Limited and IDM International Ltd
2
JUPITER ENERGY LIMITED – 2016 ANNUAL REPORT
DIRECTORS’ REPORT (continued)
Alexey Kruzhkov (49)
Non-Executive Director
Appointed 29 August 2016
Alastair Beardsall (62)
Non-Executive Director
Appointed 5 October 2010
Resigned: 31 May 2016
Mr Kruzhkov holds an Engineering Degree and an MBA and has over
10 years’ experience working in the investment industry, focusing
primarily on organisations involved in Oil & Gas, Mining and Real
Estate. He has served as a Director on the Boards of companies
listed in Canada and Norway. He is a board member and part of the
of the executive team of Waterford Investment and Finance Limited
and resides in Cyprus. He holds British and Russian citizenships.
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
None
Former Directorships of Listed Companies in last three years
Sterling Energy Plc – (AIM)
Gulfsands Petroleum Plc (AIM)
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 of Jupiter Energy Limited were:
Director
G Gander
B Kuandykov
S Mison
A Kruzhkov
Number of
ordinary shares
811,112
-
391,238
-
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 – 2016 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’s consolidated financial report incorporates 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 5 employees as at 30 June 2016 (2015: 21 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 $10,474,870 (2015: $10,982,261).
Review of Financial Condition
At the end of the 2016 financial year, cash resources were $663,446 (2015: $1,613,560). These accounts have been
prepared on a going concern basis, predicated on the Group’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 seeking the requisite waivers for an equity raising and/or the issue
of debt finance.
Assets decreased to $47,557,046 (2015: $76,897,616) and equity decreased to $3,711,245 (2015: $41,654,900). The
decrease is a direct result of the devaluation of the Kazakh Tenge currency during the year.
CAPITAL RAISING / CAPITAL STRUCTURE
Funding and Capital Management:
As at 30 June 2016, the Group had 153,377,693 listed shares trading under the ASX ticker "JPR", the AIM ticker
“JPRL” and the KASE ticker “AU_JPRL”.
The Group announced on 3 June 2016 that it had reached agreement with its Convertible Note holders to re-finance
the 12,400,000 Convertible Notes with a total value of US$20,800,753 (A$28,037,543) (including accrued interest) into
Promissory Notes with a repayment date of 1 July 2018.
The key terms for the new Promissory Notes are:
• Unsecured
• Effective 31 May 2016
• Repayable on 1 July 2018
Interest rate of 15% pa
•
Interest will accrue and be repayable with the principal
•
4
JUPITER ENERGY LIMITED – 2016 ANNUAL REPORT
DIRECTORS’ REPORT (continued)
•
Lenders can elect to be repaid if there is a change of control in Jupiter Energy
Limited or Jupiter Energy Pte Ltd or there is a change in control of the ownership
of the Block 31 Licence
The Convertible Notes and all accrued interest were due for repayment on 20 September 2016.
The Group also advised that its major shareholder Waterford had agreed to re-finance its Promissory Note that as at
31 May 2016, amounted to US$8,633,333 (A$11,636,956) in principal with accrued interest of US$1,250,894
(A$1,686,092) totalling US$9,914,227(A$13,323,048) into a new Promissory Note with the following key terms:
• Unsecured
• Effective 31 May 2016
• Repayable on 1 July 2018
Interest rate of 15% pa
•
Interest will accrue and be repayable with principal
•
Lender can elect to be repaid if there is a change of control in Jupiter Energy
•
Limited or Jupiter Energy Pte Ltd or there is a change in control in contract 2275
covering the Block 31 Licence
The previous Promissory Note and all accrued interest was due for repayment on 1 July 2016.
During the year Waterford also agreed to put in place a new Framework Funding Agreement that made a further
US$5,000,000 (including accrued interest) available to the Group by way of a new US$5,000,000 (A$6,739,550)
Promissory Note. As at 30 June 2016, the Group had drawn down US$744,989 (A$1,004,178) (including accrued
interest) under this new Framework Agreement.
The new Funding Agreement will fund the Group’s operations whilst it continues to finalise long term funding
arrangements for the development of its Block 31 licence area in Kazakhstan.
The funding arrangement will be the same as the previous one, namely that the Group will request monthly drawdowns
against the maximum US$5,000,000 amount and the drawdowns will be based on an agreed Care & Maintenance
budget.
Based on the current budgeted cashflow requirements, this new funding arrangement will provide the Group with
sufficient working capital for the next 12 months based on its current Care & Maintenance budget.
The key terms of the new Framework Agreement with Waterford are:
• Effective 24 May 2016
• Drawdowns will roll into a Promissory Note
• Promissory Note is repayable on 1 July 2018
•
•
•
Interest rate of 15% pa
Interest will accrue and be repayable with principal
Lender can elect to be repaid if there is a change of control in Jupiter Energy
Limited or Jupiter Energy Pte Ltd or there is a change in control in contract 2275
covering the Block 31 Licence
The Group is still reviewing its ongoing funding requirements for 2017 and beyond, to enable the Group to carry out
its 2017-2019 Work Program and develop Block 31 to the stage where export oil sales are being achieved and further
development of the field is self-funding. In addition, the Group may look to take on additional exploration acreage.
Funding options may include the further issue of new equity, reserve based debt, convertible debt or a combination of
these and other funding instruments.
5
JUPITER ENERGY LIMITED – 2016 ANNUAL REPORT
DIRECTORS’ REPORT (continued)
Once the appropriate funding has been secured, the further development of both the Akkar East and West Zhetybai
fields, and in particular building of the topside infrastructure on Akkar East including a processing facility and gas
separation plant, will be accelerated.
Based on management forecasts, the Group has sufficient working capital, including its access to the remaining
funding under the Waterford Funding Framework, for 12 months from the signing date of this report based on its current
Care & Maintenance budget. The Group continues to seek a longer term funding package that will enable the
commencement of the 2017-2019 Work Program and for on-going working capital.
On 29 June 2016, the Ministry of Energy gave permission to the Company (a Waiver) to raise equity via the issue of
new shares.
Summary of share options on issue:
At the date of this report, there were no share options on issue.
OPERATING REVIEW
This section provides details on the operations for the period from 1 July 2015 to 30 June 2016 (“the financial year”).
Events that occurred post 30 June 2016 are covered in the “Subsequent Events” section.
Review of Operations:
The financial year saw little operational progress with restricted funding and uneconomic domestic oil prices both
negatively impacting the further development of the Block 31 licence area. The restricted funding was partially
attributable to the refusal of the Kazakh Ministry of Energy to issue a Waiver and meant that the Group was not able
to take on any additional exploration acreage.
Production Report/Status of Well Licences:
The Group announced on 19 February 2015, as a result of the material reduction in world oil prices at the beginning
of 2015, the sales price being achieved for domestic oil in Kazakhstan fell to levels that made oil production from Block
31 cashflow negative.
The Group therefore ceased production in February 2015 from its producing Akkar East wells (J-51 and J-52) and the
wells remained shut in during the entire Review Period. The Group continues to monitor local pricing and believes that
production may recommence during early 2017 but is unable to give any guarantee that this will occur in that timeframe.
Production – Akkar East (J-51, J-52, J-53 and Well 19):
During the financial year, no oil was produced from the Akkar East J-51 and J-52 wells under their respective Trial
Production Licences (TPL’s). These two wells are located on the northern section of the permit and are part of the
Akkar East oilfield.
The J-53 well, which is also located on the Akkar East oilfield, was shut in for the entire financial year, awaiting further
remedial work before potentially coming back onto production. This work will be carried out when the appropriate
funding and approvals are in place.
Well 19, which is also located on the Akkar East oilfield, awaits a completion and testing program before it goes onto
production. Further work on Well 19, including an acid stimulation, will not take place until the requisite funding for the
work is in place and the Group is ready to return to domestic oil production.
No oil was produced from Well 19 during the financial year.
6
JUPITER ENERGY LIMITED – 2016 ANNUAL REPORT
DIRECTORS’ REPORT (continued)
Production – Akkar North [East Block] (J-50 well):
The Group advised shareholders on 28 November 2014 that the application to extend the TPL for well J-50 located on
the Akkar North (East Block) was being held by the Kazakh Committee of Geology pending resolution of the allocation
of reserves associated with the well.
The J-50 well has been shut in since 29 December 2014 (the date at which the last Trial Production licence expired).
The underlying issue delaying the TPL renewal is the demand by the Committee of Geology that Jupiter Energy reach
agreement with its neighbour MangistauMunaiGas (MMG) over the division of reserves associated with both
companies’ share of the Akkar North accumulation. Jupiter Energy has been in dialogue with MMG on this issue for
some time but has been unable to reach formal agreement with MMG with respect to the division of Akkar North
reserves or another form of settlement of the matter.
The Group continues to try and bring this long running dispute to a conclusion. An application for an extension to the
Akkar North (East Block) TPL will be submitted if and when an agreement has been reached with MMG. The three
year exploration licence extension allows for this TPL to continue until 29 December 2019 on the basis that the division
of reserves dispute has been resolved and the TPL has been approved by the relevant Kazakh authorities.
Extension of Trial Production Licences – Akkar East oilfield (J-51, J-52, J-53 and Well 19):
During the financial year, the Group was granted extensions to the TPL’s on the Akkar East oilfield for the J-51, J-52,
J-53 and #19 wells and these extensions run until 29 December 2016. The Group also received its emission permits
for these wells for the 2016 calendar year meaning that the wells had all the required approvals to operate under trial
production during 2016.
The three year Exploration Licence extension and the associated extension of various TPL’s discussed in the
“Subsequent Events” section of this review, explains the expected extension of the Akkar East TPL’s to 29 December
2019.
Status of West Zhetybai Wells (J-55, 58, 59):
J-58 and J-59 both had their respective 2016 TPL’s approved during the year. The wells are both currently suspended
due to the low domestic oil prices. It should be noted that in order to get the J-58 and J-59 wells ready for Trial
Production, the appropriate surface production infrastructure must be put in place for both the wells. This equipment
will need to be purchased and funding is not available at this time to complete the acquisition of the equipment required.
When funding is in place and domestic oil prices have recovered, the forward plan is for the J-58 well to be put on
production from the T2B horizon, and J-59 will be used to test the potential of the shallow Jurassic horizon discovered
during the drilling of the well, before being completed for production from the T2B horizon.
Further remedial work will need to be carried out on J-55 to determine if commercial production can be established
from this well and this work will require the requisite funding and separate approvals from the relevant Kazakh
authorities.
The three year Exploration Licence extension and the associated extension of various TPL’s discussed in the
“Subsequent Events” section of this review, explains the expected extension of the West Zhetybai TPL’s to 29
December 2019.
Drilling Report:
No drilling activity took place during the year.
Oil Production and Revenues:
There was no oil production during the year. Approximately 108,500 barrels of oil were produced during the 2014/15
Financial Year.
7
JUPITER ENERGY LIMITED – 2016 ANNUAL REPORT
DIRECTORS’ REPORT (continued)
Revenues from oil sales in this financial year amounted to $A Nil (2014/15 Financial Year: $ 3,660,000).
Corporate Restructure:
As a result of the ceasing of domestic oil production, the Group restructured its Aktau operations with a significant
reduction in staff in early 2015.
The focus on costs continued during the year with further reductions in staff numbers at the beginning of 2016 as well
as a further reduction in office space. A total of approximately US$2,400,000 was removed from of the annual operating
costs during the financial year.
Directors have deferred their Directors’ Fees since February 2015 and will continue to do so until such time that the
Group has an improved cashflow position.
Restaffing Operations:
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 building of such a team over the past few years has been a majority
priority. Unfortunately a number of staff were made redundant as a result of the shutdown of field operations in
February 2015 and others were offered part time roles at that time. Reductions in staff continued during the financial
year. Once the Group is ready to resume trial production, these positions will again be filled with past employees given
priority to apply for roles.
The Board is confident that the Group will be well prepared for continued growth when required.
2015 Annual General Meeting:
The 2016 AGM will be held in Perth on Friday 04 November 2016 and all shareholders are encouraged to attend. A
Notice of Meeting outlining business to be covered at the 2016 AGM will be mailed to shareholders in early October
2016.
The 2015 Annual General Meeting (AGM) was held in Perth on Friday 06 November 2015 and all Resolutions were
passed.
Subsequent Events:
On 19 September 2016 the Group announced that it had signed Addendum 7 to Contract 2275 which confirmed that
the Ministry of Energy had agreed to a three (3) year extension to the Exploration Licence taking the Exploration Period
through to 29 December 2019. The 3 year extension is based on the Group maintaining its current acreage and the
Ministry of Energy indicated that if the Group did proceed with the North East and South East land extensions that are
being considered, then a further one (1) year extension (to 29 December 2020) could be available.
The three year licence extension is a positive step forward and will allow the Group to undertake further work on the
Akkar East and West Zhetybai oilfields, further de-risking the current State Accepted preliminary oil reserves on both
oilfields.
The Group is now working on getting its proposed three year Work Program (2017-2019) approved by the Kazakh
Regulatory Authorities. As part of the Work Program submission, Trial Production Licences extensions for the Akkar
East and West Zhetybai oilfields for the period to 29 December 2019 will also be applied for. Currently the Trial
Production Licences approved for the Akkar East and West Zhetybai oilfields both end on 29 December 2016 but if
successful, the licences will be extended to 29 December 2019.
The Group believes that the timeframe for these approvals is the end of 2016 and should culminate in a further
addendum to Contract 2275 (Addendum 8) being signed.
8
JUPITER ENERGY LIMITED – 2016 ANNUAL REPORT
DIRECTORS’ REPORT (continued)
There are no further “Subsequent Events” to report prior to the release of this report.
Summary:
During the 2015/16 Financial Year the Group continued to endure a frustrating operating environment in Kazakhstan
with progress inhibited by a combination of numerous lengthy approval processes, the protracted negotiations with
MMG and restricted funding partially attributable to the refusal of the Kazakh Ministry of Energy to issue a Waiver. The
dramatic fall in world oil prices and the knock on effect this has had on domestic oil prices in Kazakhstan has also
impacted the business and production remains shut in from all wells until domestic oil prices improve to a level that
makes oil production from Block 31 cashflow positive.
The dramatic fall in global oil prices has also had a material impact on the willingness of the equity markets to fund
junior explorers and as such even though the Kazakh authorities have recently issued the Group with approval to raise
fresh equity, in the short term, the ability to raise the required equity to fund the Block 31 development in the current
market environment is uncertain.
These frustrations aside, since acquiring an exploration permit in 2008, independent reserve reports continue to
confirm that that Jupiter has now discovered two sizeable oilfields with significant reserves and resources. In addition,
oil production has moved from zero at the beginning of 2011 to over 230,000 barrels for calendar year 2014, with 2014
calendar year revenues reaching A$8,750,000 (US$7,568,000).
The goal of developing Jupiter Energy into a full cycle E&P Group with a meaningful production profile and sizeable
2P reserves base remains the key objective for the Board and Management and the Group remains confident of
continuing to make progress towards achieving this goal during the period 2017-2019.
9
JUPITER ENERGY LIMITED – 2016 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 financial year.
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 Group 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 Group 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 Group with compliance under this policy. The Group
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.
10
JUPITER ENERGY LIMITED – 2016 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
B Kuandykov
S Mison
Resigned Director
A Beardsall
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 Group.
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 Group 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 Group.
11
JUPITER ENERGY LIMITED – 2016 ANNUAL REPORT
REMUNERATION REPORT (Audited)
This remuneration report outlines the Director and executive remuneration arrangements of 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 Group, directly or indirectly, including any Director (whether
executive or otherwise) of the parent Company, and includes the two executives in the Group.
For the purposes of this report, the term 'executive' encompasses the chief executive, senior executives, general
managers and secretaries of the Group.
Details of key management personnel
(i) Directors
Geoff Gander
Alastair Beardsall
Baltabek Kuandykov
Scott Mison
Chairman / CEO (Executive)
Director (Non-Executive) – Resigned 31 May 2016
Director (Non-Executive)
Director / CFO / Company Secretary (Executive)
Alexey Kruzhkov was appointed to the board on 29 August 2016.
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 – with a focus to 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 Group, 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 Group 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 Group does not have a remuneration
committee. The Board is of the opinion that due to the size of the Group, 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 Group's performance, executive
performance and comparable information from industry sectors and other listed companies in similar
industries.
Executives are eligible to participate in the Group’s long term Performance Rights plan.
12
JUPITER ENERGY LIMITED – 2016 ANNUAL REPORT
REMUNERATION REPORT (Audited) (continued)
The executive Directors 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 Group 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 Group 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 Group. Non-executive Directors are also
encouraged to hold shares in the company.
Each Director receives a fee for being a Director of the Group. 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 Group, business unit and individual performance;
align the interests of executives with those of shareholders;
link reward with the strategic goals and performance of the Group; and
ensure total remuneration is competitive by market standards.
13
JUPITER ENERGY LIMITED – 2016 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 Group who have contributed
to the success of the Group 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 Group
and improve the performance of the Group; and
attract persons of experience and ability to employment with the Group and foster and promote loyalty between
the Group 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. There were no performance rights issued during the current financial year or prior
financial year.
Group Performance
Due to the current embryonic stage of the Group’s growth it is not appropriate at this time to evaluate the Group’s
financial performance using generally accepted measures such as EBITDA and profitability; this assessment will be
developed over the next few years.
14
JUPITER ENERGY LIMITED – 2016 ANNUAL REPORT
REMUNERATION REPORT (Audited) (continued)
The following information provides a summary of Jupiter Energy’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
2016
$
2015
$
-
(10,474,870)
(6.81)
0.25
38.3m
3,896,359
(10,982,261)
(7.16)
0.25
38.3m
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
15
JUPITER ENERGY LIMITED – 2016 ANNUAL REPORT
REMUNERATION REPORT (Audited) (continued)
Details of remuneration (Audited)
Remuneration of Directors and Executives
Table 1: Remuneration for the year ended 30 June 2016
Short-term benefits
Post-employment
benefits
Share-based
payment
Cash
salary and
Consulting fees
$
Cash
bonus
$
Other
$
Super-
annuation
$
Performance
Rights
$
Total
$
Remuneration
consisting of
Performance
Rights
%
Performance
related
%
36,667*
122,223*
158,890
372,251*
108,000*
480,251
639,141
-
-
-
-
-
-
-
-
-
-
163,106
-
163,106
163,106
-
-
-
40,333
-
40,333
40,333
-
-
-
-
-
-
36,667
122,223
158,890
575,690
108,000
683,690
842,580
-
-
-
-
-
-
-
-
Name
Non-executive director
A Beardsall (a)
B Kuandykov (b)
Total non-executive directors
Executive directors
G Gander (c)
S Mison (d)
Total executives
Totals
*Directors fees from February 2015 have been deferred until such time that at least US$5,000,000 in new equity is raised or alternatively the Group sells the Block
31 licence and receives the funds associated with that sale.
(a): Resigned 31 May 2016. Directors Fees of A$36,667 have been deferred.
(b): Fees relate to Non Executive Director fee of US$40,000 (A$54,787) and Consulting Fees from 1 February 2016 to 30 June 2016 of US$50,000 (A$67,436). Director
fees of US$40,000 (A$54,787) have been deferred.
During the year, further consulting fees of A$40,599 (2015: A$144,096) 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.
(c): Directors Fees of A$40,000 have been deferred. Other of A$163,106 relates to living expenses covering cost of apartment/office in London as per service
agreement.
(d): Fees relate to CFO / Company Secretary (A$78,000) and Director Fees (A$30,000). The Directors fees of A$30,000 have been deferred.
Table 2: Remuneration for the year ended 30 June 2015
Short-term benefits
Post-employment
benefits
Share-based
payment
Name
Non-executive director
A Beardsall
B Kuandykov (d)
Total non-executive directors
Executive directors
G Gander (a)
S Mison (b)
Total executives
Totals
Cash
salary and
Consulting fees
$
Cash
bonus (c)
$
Other
$
Super-
annuation
$
Performance
Rights
$
Total
$
40,000*
49,900*
89,900
332,350*
130,000*
462,350
552,250
-
-
-
-
17,000
17,000
17,000
-
-
-
151,682
-
151,682
151,682
-
-
-
48,333
1,900
50,233
50,233
21,107
21,107
42,214
21,107
4,855
25,962
68,176
61,107
71,007
132,114
553,472
153,755
707,227
839,341
Remuneration
consisting of
Performance
Rights
%
Performance
related
%
34.54%
29.73%
34.54%
29.73%
3.81%
3.16%
3.81%
14.21%
*Directors fees from February 2015 have been deferred until such time that at least US$5,000,000 in new equity is raised or alternatively the Group sells the Block
31 licence and receives the funds associated with that sale.
(a): Other relates to living expenses covering cost of apartment/office in London as per service agreement.
(b): Fees relate to CFO / Company Secretary (A$90,000) and Director Fees (A$40,000).
(c): The cash bonus to Mr Mison was for the period 1 July 2014 to 30 June 2015. Under his service agreement, he is entitled a cash bonus every six months to a
maximum of A$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 56%, with 44% being forfeited. This is determined at the board’s discretion.
(d): During the year, consulting fees of $144,096 (2014: $144,584) 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.
16
JUPITER ENERGY LIMITED – 2016 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 2016
During the 2016 and 2015 year, there were no options granted. No options, listed or unlisted, were exercised during
the year.
Shares issued on Exercise of Compensation Options
There were no shares issued on the exercise of compensation options during the financial years ended 30 June 2016
or 30 June 2015.
Performance Rights
During the year, there were no performance rights granted.
During the 2015 year, 8,075,000 performance rights expired unvested.
Compensation Performance Rights: Granted and vested during the year ended 30 June 2016
During the 2016 and 2015 year, there were no performance rights vested and no additional performance rights were
granted.
17
JUPITER ENERGY LIMITED – 2016 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:
2016
Directors
G Gander
A Beardsall
B Kuandykov
S Mison
Balance
1 July 2015
Granted as
Remuneration
On Exercise of
Options
Net Change
Other
Balance
30 June 2016
3,147,224
1,250,000
-
391,238
-
-
-
-
-
-
-
-
(2,336,112)
-
-
-
811,112
1,250,000*
-
391,238
*Mr Beardsall resigned on 31 May 2016. This was the balance at time of resignation.
2015
Directors
G Gander
A Beardsall
B Kuandykov
S Mison
Executives
K Martens
Balance
1 July 2014
Granted as
Remuneration
On Exercise of
Options
Net Change
Other
Balance
30 June 2015
3,147,224
1,250,000
-
391,238
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
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:
There were no performance rights held by any Directors during 2016.
Balance at
beg of
period
1 July 2014
Granted as
Remune-
ration
Rights
Exercised
Net Change
Other
Balance at
end of
period
30 June 2015
Not Vested &
Not
Exercisable
Vested &
Exercisable
2,500,000
2,500,000
2,500,000
575,000
-
-
-
-
-
-
-
-
(2,500,000)
(2,500,000)
(2,500,000)
(575,000)
-
-
-
-
-
-
-
-
-
-
-
-
2015
Directors
G Gander
A Beardsall
B Kuandykov
S Mison
Option Holdings
There were no options held by, granted to or exercised by Key Management Personnel during the financial years
ended 30 June 2016 or 30 June 2015.
18
JUPITER ENERGY LIMITED – 2016 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 – 30 May 2016)
Base Terms
• This agreement was effective from 30 May 2016 and has no set term.
• Base Salary of GBP200,000 (A$360,000) including Director Fees and the current Superannuation Levy of
9.5%.
Living expenses of GBP 85,000 (A$155,000) per year, covering the cost of an apartment/office in London.
•
• Director fees of A$3,333 per month (included in Base Salary figure above), deferred until such time that at
least US$5,000,000 in new equity is raised or alternatively the Group sells the Block 31 licence and receives
the funds associated with that sale.
The termination provisions are as follows:
Contractor - initiated termination with
reason or for Contractor incapacitation
Company - initiated termination
without reason
Company – initiated termination for
serious misconduct
Contractor – initiated termination
without reason
Contractor – initiated termination with
reason
Notice period
Payment in lieu of
notice
1 month
12 months
12 months
12 months
None
None
12 months
12 months
30 days
12 months
Scott Mison, CFO / Company Secretary / Executive Director (Effective – 1 June 2015)
Base Terms
• This agreement is effective from 1 June 2015. The term is on a rolling month basis.
• CFO / Company Secretary Fees of $6,500 per month.
• Director fees of $2,500 per month, deferred until such time that at least US$5,000,000 in new equity is raised
or alternatively the Group sells the Block 31 licence and receives the funds associated with that sale.
The termination provisions are as follows:
Contractor - initiated termination with
reason
Contractor - initiated termination
without reason
Termination for serious misconduct
Contractor – initiated termination
Notice period
Payment in lieu of
notice
1 or 3 months
1 or 3 months
3 months
3 months
None
1 or 3 months
None
None
End of Remuneration Report (Audited)
19
JUPITER ENERGY LIMITED – 2016 ANNUAL REPORT
INDEMNIFICATION AND INSURANCE OF DIRECTORS AND OFFICERS
The Group has entered into Deeds of Indemnity with the Directors, indemnifying them against certain liabilities and
costs to the extent permitted by law.
The Group has also agreed to pay a premium in respect of a contract insuring the Directors and Officers of the Group
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.
INDEMNIFICATION OF AUDITORS
To the extent permitted by law, the Group has agreed to indemnify its auditors, Ernst & Young Australia, as part of the
terms of its audit engagement agreement against claims by third parties arising from the audit (for an unspecified
amount). No payment has been made to indemnify Ernst & Young during or since the financial year.
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 Group’s corporate governance statement is
included on page 21 of this annual report.
AUDITOR INDEPENDENCE
The Directors received the declaration included on page 27 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
30 September 2016
20
JUPITER ENERGY LIMITED – 2016 ANNUAL REPORT
CORPORATE GOVERNANCE STATEMENT
In recognising the need for the highest standards of corporate behaviour and accountability, the Directors of Jupiter
Energy 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 Energy on behalf of the shareholders by whom they
are elected and to whom they are accountable.
The Group’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. Act ethically and responsibly
Principle 4. Safeguard integrity in corporate 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 Group’s securities, the management of risk, and a Code of Conduct. Jupiter
Energy’s corporate governance practices were in place throughout the year ended 30 June 2016.
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 Group. It is required to do all things that may be necessary to be done in order to
carry out the objectives of the Group.
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 Group and monitor progress of those strategies;
• Establish policies appropriate for the Group;
• Monitor the performance of the Group, 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 Group; and
• Take responsibility for corporate governance.
21
JUPITER ENERGY LIMITED – 2016 ANNUAL REPORT
CORPORATE GOVERNANCE STATEMENT (continued)
Composition of the Board
To add value to the Group 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 Group 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 Group as a minimum of three up to a maximum of ten.
The preferred skills and experiences for a Director of the Group include:
• Exploration for oil and gas accumulations;
• Development and production operations of hydrocarbon accumulations;
• Financing of operations;
• Business Development; and
• Public Group 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 Group, 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 Group in the last 3 years;
• Must not have been in an advisory capacity to the Group in the last 3 years;
• Must not be a significant customer or supplier for the Group;
• 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 Group and is not considered to be independent. However, his
experience and knowledge of the Group 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 Group. His oil industry experience, especially
within Kazakhstan, makes his contribution to the Board significant.
Mr. Scott Mison is an Executive Director / CFO / Company Secretary of the Group and is not considered to be
independent. However, his experience and knowledge of the Group makes his contribution to the Board such that it is
appropriate for him to remain on the Board.
22
JUPITER ENERGY LIMITED – 2016 ANNUAL REPORT
CORPORATE GOVERNANCE STATEMENT (continued)
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 Group’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 Group 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 Group.
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 the Company’s 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.
23
JUPITER ENERGY LIMITED – 2016 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 size of the Group, 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 Group’s financial statements for the year ended 30 June
2016 present a true and fair view, in all material aspects, of the Group’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 Company does not have a nomination committee. The Board is of the opinion that due to the size of the Group,
the functions performed by a nomination committee can be adequately handled by the full Board.
Remuneration Committee
The Group does not have a remuneration committee. The Board is of the opinion that due to the size of the Group, the
functions performed by a remuneration committee can be adequately handled by the full Board.
Remuneration levels for Directors, Secretaries, Senior Executives of the Group, 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 16.
24
JUPITER ENERGY LIMITED – 2016 ANNUAL REPORT
CORPORATE GOVERNANCE STATEMENT (continued)
Risk Management
The risks involved in oil and gas exploration Group and the specific uncertainties for the Group 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 Group 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 Group’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 Jupiter Energy Limited 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 Group 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 Group. 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 Group 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
Group is not of a sufficient size to justify measurable objectives at this stage. As at 30 June 2016, there were four
women in the Groups workforce, one 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.
25
JUPITER ENERGY LIMITED – 2016 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 Group 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 Group’s affairs including, but not limited to:
the activities of the Group;
•
• 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 Group;
• 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.
26
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
As lead auditor for the audit of Jupiter Energy Limited for the year ended 30 June 2016, I declare to the
best of my knowledge and belief, there have been:
a. no contraventions of the auditor independence requirements of the Corporations Act 2001 in
relation to the audit; and
b. no contraventions of any applicable code of professional conduct in relation to the audit.
This declaration is in respect of Jupiter Energy Limited and the entities it controlled during the financial
period.
Ernst & Young
D A Hall
Partner
30 September 2016
A member firm of Ernst & Young Global Limited
Liability limited by a scheme approved under Professional Standards Legislation
DH:VH:JUPITER:008
JUPITER ENERGY LIMITED – 2016 ANNUAL REPORT
Financial Statements
FOR THE YEAR ENDED 30 JUNE 2016
28
JUPITER ENERGY LIMITED – 2016 ANNUAL REPORT
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEAR ENDED 30 JUNE 2016
Revenue
Cost of sales
Gross profit
Note
Consolidated
2016
$
2015
$
-
-
-
3,896,359
(3,478,951)
417,408
Foreign exchange loss
Gain on extinguishment of convertible notes
(Loss) / Gain on derivative financial instrument
General and administrative costs
Impairment
Operating loss
17
4
(1,101,692)
282,672
(54)
(3,635,152)
-
(4,454,226)
(4,468,778)
-
227,788
(3,238,047)
(787,046)
(7,848,675)
Finance income
Finance costs
Loss before tax
Income tax expense
Loss after income tax
20,687
28,198
(6,041,331)
(3,161,784)
(10,474,870)
(10,982,261)
5
-
-
(10,474,870)
(10,982,261)
Other comprehensive (loss)/income to be
reclassified to profit or loss in subsequent
periods net of tax
Foreign currency translation
(27,468,783)
12,738,847
Total comprehensive (loss)/income for the period
(37,943,653)
1,756,586
Earnings per share for loss attributable to the
ordinary equity holders of the Group:
Basic loss per share (cents)
Diluted loss per share (cents)
24
24
(6.81)
(6.81)
(7.16)
(7.16)
The consolidated statement of comprehensive income is to be read in conjunction with the notes of the financial statements
29
JUPITER ENERGY LIMITED – 2016 ANNUAL REPORT
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
AS AT 30 JUNE 2016
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
Derivative liability
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
2016
$
2015
$
6
7
8
9
7
10
11
12
13
14
15
17
16
17
18
19
19
663,446
24,064
67,459
17,886
772,855
2,787,367
14,976,550
417,142
28,215,402
387,732
46,784,193
47,557,048
1,613,560
78,051
122,110
68,535
1,882,256
4,842,743
24,399,029
967,247
44,166,103
640,238
75,015,360
76,897,616
755,133
-
-
755,133
1,280,749
60,111
1,612
1,342,472
154,442
42,936,226
43,090,668
43,845,801
527,827
33,372,417
33,900,244
35,242,716
3,711,247
41,654,900
85,633,935
5,764,014
(26,303,650)
(61,383,052)
3,711,247
85,633,935
5,764,014
1,165,133
(50,908,182)
41,654,900
The consolidated statement of financial position is to be read in conjunction with the notes of the financial statements.
30
JUPITER ENERGY LIMITED – 2016 ANNUAL REPORT
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED 30 JUNE 2016
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
Net Cash flows (used in) investing activities
Cash flows from financing activities
Proceeds from unsecured loan
Net cash flows from financing activities
Net (decrease) in cash held
Effects of exchange rate changes
Cash at beginning of the year
Cash at end of the year
Note
Consolidated
2016
$
2015
$
-
(3,478,686)
20,687
(3,457,999)
26
3,952,759
(7,870,285)
28,198
(3,889,328)
(279,759)
(279,759)
(5,519,880)
(5,519,880)
2,803,474
2,803,474
9,141,370
9,141,370
(934,284)
(15,830)
1,613,560
663,446
(267,838)
596,040
1,285,358
1,613,560
6
The statement of cash flows is to be read in conjunction with the notes of the financial statements.
31
JUPITER ENERGY LIMITED – 2016 ANNUAL REPORT
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 30 JUNE 2016
Note
Contributed
Equity
$
Share Based
Payment
Reserve
$
Foreign
Currency
Translation
Reserve
$
Accumulated
Losses
$
Total
$
85,633,935
-
-
-
5,695,838
-
-
-
(11,573,714)
-
12,738,847
12,738,847
(39,925,921)
(10,982,261)
-
(10,982,261)
39,830,138
(10,982,261)
12,738,847
1,756,586
19
-
85,633,935
68,176
5,764,014
-
1,165,133
-
(50,908,182)
68,176
41,654,900
85,633,935
-
-
-
5,764,014
-
-
-
1,165,133
-
(27,468,783)
(27, 468,783)
(50,908,182)
(10,474,870)
-
(10, 474,870)
41,654,900
(10,474,870)
(27,468,783)
(37,943,653)
19
-
85,633,935
-
5,764,014
-
(26,303,650)
-
(61,383,052)
-
3,711,247
CONSOLIDATED
As at 1 July 2014
Loss for the period
Other comprehensive income
Total comprehensive income
Transactions by owners recorded
directly in equity:
Share based payments
At 30 June 2015
As at 1 July 2015
Loss for the period
Other comprehensive loss
Total comprehensive loss
Transactions by owners recorded
directly in equity:
Share based payments
At 30 June 2016
The statements of changes in equity are to be read in conjunction with the notes of the financial statements.
32
JUPITER ENERGY LIMITED – 2016 ANNUAL REPORT
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2016
1
CORPORATE INFORMATION
The financial report of Jupiter Energy Limited for the year ended 30 June 2016 was authorised for issue in accordance
with a resolution of the directors on 30 September 2016.
Jupiter Energy Limited is a Company limited by shares incorporated in Australia whose shares are publicly traded on the
Australian Stock Exchange, on London’s AIM Market (as CDI’s) and on the Kazakh Stock Exchange. 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 Corporations (Rounding in Financial/Directors’ Report) Instrument
2016/191.
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 2016 the Group has a current net asset position of $17,720 (30 June 2015: current asset position of $539,784).
Based on current forecasts, the Group has sufficient working capital, including its access to the remaining funding under
the Waterford Funding Framework, for the 12 months from the signing date of this report based on its current Care &
Maintenance budget. The Group is reviewing its ongoing funding requirements for 2017 and beyond, to enable the
Company to carry out its 2017-2019 Work Program and develop Block 31 to the stage where export oil sales are being
achieved and further development of the field is self-funding. Funding options may include the further issue of new equity,
reserve based debt, convertible debt or a combination of these and other funding instruments.
The Directors, after consultation with the major shareholders and debt providers, are confident of being able to raise the
required capital, but note that financing has not been secured at the date of this report and that the recommencement of
production is dependent on a recovery in the Kazakh domestic oil price which is in turn linked to an overall recovery in
world oil prices. 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.
33
JUPITER ENERGY LIMITED – 2016 ANNUAL REPORT
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2016
(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 2015, the Group has adopted the following Standards and Interpretations, mandatory for annual periods
beginning on 1 July 2015. Adoption of these standards and interpretations did not have any significant effect on the
financial position or performance of the Group:
AASB 2013-9 - Amendments to Australian Accounting Standards – Conceptual Framework, Materiality and Financial
Instruments
AASB 2015-3 - Amendments to Australian Accounting Standards arising from the Withdrawal of AASB 1031 Materiality
AASB 2015-4 - Amendments to Australian Accounting Standards – Financial Reporting Requirements for Australian
Groups with a Foreign Parent
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 2016. These are outlined in the following table.
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 (December 2014) is a new standard which replaces
AASB 139. This new version supersedes AASB 9 issued in
December 2009 (as amended) and AASB 9 (issued in
December 2010) and includes a model for classification and
loss’
measurement, a single,
impairment model and a substantially-reformed approach to
hedge accounting.
forward-looking
‘expected
AASB 9 is effective for annual periods beginning on or after 1
January 2018. However, the Standard is available for early
adoption. The own credit changes can be early adopted in
isolation without otherwise changing the accounting for
financial instruments.
Classification and measurement
AASB 9 includes requirements for a simpler approach for
classification and measurement of financial assets compared
with the requirements of AASB 139. There are also some
changes made in relation to financial liabilities.
The main changes are described below.
34
JUPITER ENERGY LIMITED – 2016 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
(continued)
Financial Instruments
Financial assets
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.
Financial liabilities
Changes introduced by AASB 9 in respect of financial liabilities
are limited to the measurement of liabilities designated at fair
value through profit or loss (FVPL) using the fair value option.
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
AASB 9 also removes the volatility in profit or loss that was
caused by changes in the credit risk of liabilities elected to be
measured at fair value. This change in accounting means that
gains or losses attributable to changes in the entity’s own
credit risk would be recognised in OCI. These amounts
recognised in OCI are not recycled to profit or loss if the liability
is ever repurchased at a discount.
Impairment
The final version of AASB 9 introduces a new expected-loss
impairment model that will require more timely recognition of
the new Standard
expected credit
requires entities to account for expected credit losses from
when financial instruments are first recognised and to
recognise full lifetime expected losses on a more timely basis.
losses. Specifically,
Hedge accounting
Amendments to AASB 9 (December 2009 & 2010 editions and
AASB 2013-9) issued in December 2013 included the new
hedge accounting requirements, including changes to hedge
effectiveness
treatment of hedging costs, risk
components that can be hedged and disclosures.
testing,
to other
Consequential amendments were also made
standards as a result of AASB 9, introduced by AASB 2009-
11 and superseded by AASB 2010-7, AASB 2010-10 and
AASB 2014-1 – Part E.
AASB 2014-7 incorporates the consequential amendments
arising from the issuance of AASB 9 in Dec 2014.
AASB 2014-8 limits the application of the existing versions of
AASB 9 (AASB 9 (December 2009) and AASB 9 (December
2010)) from 1 February 2015 and applies to annual reporting
periods beginning on after 1 January 2015.
35
JUPITER ENERGY LIMITED – 2016 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 15
Revenue from Contracts
with Customers
(Interpretation
13 Customer
Interpretation 15 Agreements
AASB 15 Revenue from Contracts with Customers replaces
the existing revenue recognition standards AASB 111
Construction Contracts, AASB 118 Revenue and related
Loyalty
Interpretations
Programmes,
the
Construction of Real Estate, Interpretation 18 Transfers of
Assets from Customers, Interpretation 131 Revenue—Barter
Transactions Involving Advertising Services and Interpretation
1042 Subscriber Acquisition Costs in the Telecommunications
Industry). AASB 15 incorporates the requirements of IFRS 15
Revenue from Contracts with Customers issued by the
International Accounting Standards Board
(IASB) and
developed jointly with the US Financial Accounting Standards
Board (FASB).
for
AASB 15 specifies the accounting treatment for revenue
arising from contracts with customers (except for contracts
within the scope of other accounting standards such as leases
or financial instruments).The core principle of AASB 15 is that
an entity recognises revenue to depict the transfer of promised
goods or services to customers in an amount that reflects the
consideration to which the entity expects to be entitled in
exchange for those goods or services. An entity recognises
revenue in accordance with that core principle by applying the
following steps:
(a)
Step 1: Identify the contract(s) with a customer
(b)
contract
Step 2: Identify the performance obligations in the
(c)
Step 3: Determine the transaction price
(d)
performance obligations in the contract
Step 4: Allocate the transaction price to the
(e)
satisfies a performance obligation
Step 5: Recognise revenue when (or as) the entity
AASB 2015-8 amended the AASB 15 effective date so it is now
effective for annual reporting periods commencing on or after
1 January 2018. Early application is permitted.
AASB 2014-5 incorporates the consequential amendments to
a number Australian Accounting Standards
(including
Interpretations) arising from the issuance of AASB 15.
the
AASB 2016-3 Amendments
to Australian Accounting
Standards – Clarifications to AASB 15 amends AASB 15 to
clarify
identifying performance
obligations, principal versus agent considerations and the
timing of recognising revenue from granting a licence and
provides further practical expedients on transition to AASB 15.
requirements on
36
JUPITER ENERGY LIMITED – 2016 ANNUAL REPORT
Reference
Title
Summary
Application
date of
standard
AASB 2015-1
Amendments to Australian
Accounting Standards –
Annual Improvements to
Australian Accounting
Standards 2012–2014
Cycle
The subjects of the principal amendments to the Standards are
set out below:
1 January
2016
AASB 5 Non-current Assets Held for Sale and Discontinued
Operations:
• Changes in methods of disposal – where an entity
reclassifies an asset (or disposal group) directly
from being held for distribution to being held for
sale (or visa versa), an entity shall not follow the
guidance in paragraphs 27–29 to account for this
change.
AASB 7 Financial Instruments: Disclosures:
Application
date for
Group
1 July 2016
Impact on
Group
financial
report
The group
has not yet
determined
the impact of
the change.
• Servicing contracts - clarifies how an entity
should apply the guidance in paragraph 42C of
AASB 7 to a servicing contract to decide whether
a servicing contract is ‘continuing involvement’ for
the purposes of applying
the disclosure
requirements in paragraphs 42E–42H of AASB 7.
• Applicability of the amendments to AASB 7 to
condensed interim financial statements - clarify
that the additional disclosure required by the
amendments to AASB 7 Disclosure–Offsetting
Financial Assets and Financial Liabilities is not
specifically required
interim periods.
However, the additional disclosure is required to
be given
financial
statements that are prepared in accordance with
AASB 134 Interim Financial Reporting when its
inclusion would be required by the requirements
of AASB 134.
in condensed
for all
interim
AASB 119 Employee Benefits:
• Discount rate: regional market issue - clarifies that
the high quality corporate bonds used to estimate
the discount rate for post-employment benefit
obligations should be denominated in the same
currency as the liability. Further it clarifies that the
depth of the market for high quality corporate
bonds should be assessed at the currency level.
AASB 134 Interim Financial Reporting:
• Disclosure of information ‘elsewhere in the interim
financial report’ - amends AASB 134 to clarify the
meaning of disclosure of information ‘elsewhere
in the interim financial report’ and to require the
inclusion of a cross-reference from the interim
financial statements
this
to
information.
location of
the
AASB 2015-2
Amendments to Australian
Accounting Standards –
Disclosure Initiative:
Amendments to AASB
101
1 July 2016
1 January
2016
The group
has not yet
determined
the impact of
the change.
The Standard makes amendments to AASB 101 Presentation
of Financial Statements arising from the IASB’s Disclosure
Initiative project. The amendments are designed to further
encourage companies to apply professional judgment in
determining what information to disclose in the financial
statements. For example, the amendments make clear that
materiality applies to the whole of financial statements and
that the inclusion of immaterial information can inhibit the
usefulness of financial disclosures. The amendments also
clarify that companies should use professional judgment in
determining where and in what order information is presented
in the financial disclosures.
37
JUPITER ENERGY LIMITED – 2016 ANNUAL REPORT
Application
date for
Group
1 July 2019
Application
date of
standard
1 January
2019
Impact on
Group
financial
report
The group
has not yet
determined
the financial
impact of the
change.
Reference
Title
Summary
AASB 16
Leases
The key features of AASB 16 are as follows:
Lessee accounting
• Lessees are required to recognise assets and
liabilities for all leases with a term of more than
12 months, unless the underlying asset is of low
value.
• Assets and liabilities arising from a lease are
initially measured on a present value basis. The
measurement includes non-cancellable lease
payments (including inflation-linked payments),
and also includes payments to be made in
optional periods if the lessee is reasonably
certain to exercise an option to extend the lease,
or not to exercise an option to terminate the
lease.
• AASB 16 contains disclosure requirements for
lessees.
Lessor accounting
• AASB 16 substantially carries forward the lessor
accounting requirements in AASB 117.
Accordingly, a lessor continues to classify its
leases as operating leases or finance leases,
and to account for those two types of leases
differently.
• AASB 16 also requires enhanced disclosures to
be provided by lessors that will improve
information disclosed about a lessor’s risk
exposure, particularly to residual value risk.
AASB 16 supersedes:
(a) AASB 117 Leases
(b) Interpretation 4 Determining whether an
Arrangement contains a Lease
(c) SIC-15 Operating Leases—Incentives
(d) SIC-27 Evaluating the Substance of Transactions
Involving the Legal Form of a Lease
The new standard will be effective for annual periods
beginning on or after 1 January 2019. Early application is
permitted, provided the new revenue standard, AASB 15
Revenue from Contracts with Customers, has been applied,
or is applied at the same date as AASB 16.
AASB 2016-5
Classification and
Measurement of
Share-based Payment
Transactions
[Amendments to AASB 2]
This standard amends to AASB 2 Share-based Payment,
clarifying how to account for certain types of share-based
payment transactions. The amendments provide
requirements on the accounting for:
► The effects of vesting and non-vesting conditions
on the measurement of cash-settled share-
based payments
► Share-based payment transactions with a net
settlement feature for withholding tax obligations
A modification to the terms and conditions of a share-based
payment that changes the classification of the transaction
from cash-settled to equity-settled
1 July 2018
1 January
2018
The group
has not yet
determined
the financial
impact of the
change.
38
JUPITER ENERGY LIMITED – 2016 ANNUAL REPORT
Reference
Title
Summary
Application
date of
standard
AASB 2014-3
Amendments to Australian
Accounting Standards –
Accounting for
Acquisitions of Interests in
Joint Operations
[AASB 1 & AASB 11]
AASB 2014-3 amends AASB 11 Joint Arrangements to
provide guidance on the accounting for acquisitions of
interests in joint operations in which the activity constitutes a
business. The amendments require:
1 January
2016
(a)
the acquirer of an interest in a joint operation in which
the activity constitutes a business, as defined in AASB
3 Business Combinations, to apply all of the principles
on business combinations accounting in AASB 3 and
other Australian Accounting Standards except for
those principles that conflict with the guidance in
AASB 11
(b)
the acquirer to disclose the information required by
AASB 3 and other Australian Accounting Standards for
business combinations
This Standard also makes an editorial correction to AASB 11.
Application
date for
Group
1 July 2016
Impact on
Group
financial
report
The group
has not yet
determined
the financial
impact of the
change.
39
JUPITER ENERGY LIMITED – 2016 ANNUAL REPORT
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2016
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). 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.
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS
40
JUPITER ENERGY LIMITED – 2016 ANNUAL REPORT
FOR THE YEAR ENDED 30 JUNE 2016
2
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
(d)
Significant accounting estimates and assumptions
Judgments
In the process of applying the Group’s accounting policies, management has made the following judgments, which
have the most significant effect on the amounts recognised in the consolidated financial statements:
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.
Impairment of assets
In determining the recoverable amount of assets in the absence of quoted markets, judgements are made in
determining events that need to occur that affect future cash flows.
In the case of the Group’s primary asset, Block 31, the over-riding assumption is that Block 31 reaches the point of
export production by January 2018. For this to occur the following matters need to be resolved:
Financing for construction of processing facilities and drilling of development wells
-
- Approval from the Government for construction of processing facilities and drilling of development wells and
ultimately approving of export status.
- Contracts signed for the engineering, procurement, installation and commissioning of the processing facilities
and for the drilling of development wells.
- An export license being granted.
-
An agreement reached with MangistauMunaiGas(MMG) over the division of reserves associated with the
Akkar North accumulation
Recognition of deferred tax assets
Judgement is required in determining whether deferred tax assets are recognised in the statement of financial
position. Deferred tax assets, including those arising from unutilised tax losses, require the Group to assess the
likelihood that the Group will generate sufficient taxable earnings in future periods, in order to utilise recognised
deferred tax assets. Judgment is also required in respect of the application of existing tax laws in each jurisdiction.
Assumptions about the generation of future taxable profits depend on management’s estimates of future cash flows.
These estimates of future taxable income are based on forecast cash flows from operations (which are impacted by
production and sales volumes oil prices, reserves, operating costs, closure and rehabilitation costs, capital
expenditure, and other capital management transactions). To the extent that future cash flows and taxable income
differ significantly from estimates, the ability of the Group to realise the net deferred tax assets recorded at the reporting
date could be impacted.
In addition, future changes in tax laws in the jurisdictions in which the Group operates could limit the ability of the
Group to obtain tax deductions in future periods.
41
JUPITER ENERGY LIMITED – 2016 ANNUAL REPORT
Estimates and assumptions
The key assumptions concerning the future and other key sources of estimation uncertainty at the reporting date that
have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next
financial year, are described below. The Group based its assumptions and estimates on parameters available when
the consolidated financial statements were prepared. Existing circumstances and assumptions about future
developments, however, may change due to market change or circumstances arising beyond the control of the Group.
Such changes are reflected in the assumptions when they occur.
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 judgements, 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 profit and loss.
42
JUPITER ENERGY LIMITED – 2016 ANNUAL REPORT
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2016
2
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Provision for restoration
Costs of site restoration are provided over the life of the field and related facilities 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.
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
hydrocarbon reserves. This results in a depreciation/amortisation charge proportional to the depletion of the anticipated
remaining production from the field/well.
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 and probable reserves. Changes to proved and probable reserves could arise due to
changes in the factors or assumptions used in estimating reserves, including:
• The effect on proved and probable 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 of disposal 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. Management has assessed Block 31 as being an
individual CGU, which is the lowest level for which cash inflows are largely independent.
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2016
43
JUPITER ENERGY LIMITED – 2016 ANNUAL REPORT
2
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Fair value measurement
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 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.
(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 plant and equipment is derecognised upon disposal or when no further future economic benefits are
expected to be derived from its use or disposal on a prospective basis.
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 profit or loss 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.
Unsuccessful exploration in the area of interest is 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 to profit or loss in the year in which
the decision to abandon the area is made.
When a discovered oil or gas field enters the development phase or an individual well is assessed as being in production
(once a trial production licence is granted) the accumulated exploration and evaluation expenditure is transferred to oil
and gas properties.
44
JUPITER ENERGY LIMITED – 2016 ANNUAL REPORT
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2016
2
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
(g) Oil and gas properties
Oil and gas properties 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 accounted for as tangible assets and
include past exploration and evaluation costs, development drilling and plant and equipment and any associated land and
buildings.
Producing assets
The costs of oil and gas assets in production are 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 total proved and probable reserves on a unit of production basis.
(h)
Impairment of assets
At each reporting date, the Group reviews the carrying values of its tangible and intangible assets (excluding goodwill) 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 of disposal 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 profit or
loss.
(i)
Trade and other receivables
Trade receivables, which generally have 30-90 day terms, are recognised and carried at amortised cost 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 the estimated costs of completion and any estimated selling costs.
Cost includes those costs incurred in bringing each component of inventory to its present location and condition.
45
JUPITER ENERGY LIMITED – 2016 ANNUAL REPORT
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2016
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, 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 and are either subsequently measured at amortised cost or fair value through profit or
loss. 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. Fair value movements are recognised in the profit or loss.
(n) Share-based payment transactions
Share-based compensation benefits are provided to directors and executives.
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 date. Probability factors
are assigned to the vesting expense as to whether non market conditions will be met.
46
JUPITER ENERGY LIMITED – 2016 ANNUAL REPORT
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2016
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
revenue can be measured reliably. Revenue generated during the development stage of an asset, is offset against the
carrying value of the asset, rather than recognised in the profit or loss within 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.
47
JUPITER ENERGY LIMITED – 2016 ANNUAL REPORT
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2016
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
(r)
Other taxes
Revenues, expenses and assets are recognised net of the amount of GST or VAT except:
• where the GST or VAT incurred on a purchase of goods and services is not recoverable from the taxation
authority, in which case the GST or VAT 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 or VAT included.
The net amount of GST or VAT 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 or VAT 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 or VAT 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.
48
JUPITER ENERGY LIMITED – 2016 ANNUAL REPORT
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2016
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.
Restoration
Costs of site restoration are provided over the life of the field or 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 based on current legal requirements and technology. In calculating the provision the
future estimated costs are discounted to present value.
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.
(v)
Employee leave benefits
Liabilities for wages and salaries, including non-monetary benefits, annual leave and accumulating sick leave expected
to be settled wholly 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 nominal amounts based on current wage and salary rates,
and include related on-costs. Liabilities for non-accumulating sick leave are recognised when the leave is taken and
are measured at the rates paid or payable..
49
JUPITER ENERGY LIMITED – 2016 ANNUAL REPORT
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2016
2
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
(w) Foreign currency transactions and balances
(i) Functional and presentation currency
Both the functional and presentation currency of Jupiter Energy Limited and each of its Australian subsidiaries are
Australian dollars ($). The Singapore subsidiaries' functional currency is United States Dollars which is translated to
the presentation currency of the Group, being Australian dollars ($). 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 of the Group) 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 reclassified to profit or loss
(x) 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. Currently
the Group has only one operating segment, being the Group.
50
JUPITER ENERGY LIMITED – 2016 ANNUAL REPORT
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2016
2
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
(y) 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
2016
$
2015
$
663,446
663,446
1,613,560
1,613,560
51
JUPITER ENERGY LIMITED – 2016 ANNUAL REPORT
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2016
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
2016
$
2015
$
6,634
(6,634)
16,136
(16,136)
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), Great Britain Pound (GBP) and Singapore
Dollars (SGD) foreign currency that is not designated in cash flow hedges:
Financial Assets
Cash and cash equivalents
-
-
-
USD
SGD
GBP
Financial Liabilities
Other financial liabilities
Derivative
Net exposure
Consolidated
2016
$
2015
$
653,866
1,859
3,098
658,823
(42,936,226)
-
(42,936,226)
(42,277,403)
1,583,211
1,859
17,164
1,602,234
(33,372,417)
(1,612)
(33,374,029)
(31,771,795)
52
JUPITER ENERGY LIMITED – 2016 ANNUAL REPORT
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2016
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, 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
2016
$
2015
$
(2,114,118)
2,114,118
(1,557,046)
1,557,046
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 VAT 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,
promissory notes, finance leases and hire purchase contracts.
The contractual maturities of the Group’s financial assets and liabilities are shown in the table below. Undiscounted cash flows
for the respective years are presented. This excludes cash and cash equivalents and current trade and other receivables.
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
2016
$
2015
$
-
-
387,382
387,382
(755,133)
-
(42,936,226)
(43,691,359)
(43,303,977)
-
-
630,874
630,874
(1,612)
(11,234,458)
(27,968,013)
(39,204,083)
(38,573,209)
53
JUPITER ENERGY LIMITED – 2016 ANNUAL REPORT
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2016
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, with the carrying value approximating the fair value.
The fair value of the derivative was determined using the level 3 method.
4.
GENERAL AND ADMINISTRATIVE EXPENSES
Administration and compliance expenses
Employee benefits1
Superannuation
Consulting fees
Depreciation and amortisation expenses
Directors fees
Legal fees
Occupancy expenses
Share based payments
Total expenses
1In 2015, Cost of Sales included $285,000 of employee benefits.
Consolidated
2016
$
1,791,817
822,043
40,333
362,021
155,873
199,120
20,283
243,662
-
3,653,152
2015
$
1,296,936
951,064
50,233
186,015
33,333
285,502
104,546
262,242
68,176
3,238,047
From February 2015 payment of director fees have been deferred until such time that at least US$5,000,000 in new equity
is raised or alternatively the Group sells the Block 31 licence and receives the funds associated with that sale.
54
JUPITER ENERGY LIMITED – 2016 ANNUAL REPORT
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2016
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% (2015: 30%)
Non-deductible expenditure:
- Effect of tax rates in foreign jurisdictions
- Share Based payments
Interest expense
-
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
E&E assets
Provision for impairment
Deferred tax assets not recognised
Deferred tax (income)/expense
Net deferred tax recognised in Balance Sheet
Consolidated
2016
$
2015
$
(3,142,461)
(3,294,678)
143,528
-
1,812,399
1,186,534
322,384
20,453
-
2,951,841
-
-
-
-
-
-
2,356,420
54
-
7,111,664
910,468
-
(1,028,376)
(252,627)
7,519
7,383,121
4,503,790
2,163,087
(10,378,606)
-
-
(14,651,789)
-
-
The Consolidated Group has tax losses of $24,844,409 (2015: $23,799,948) 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 Group 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 Group in the consolidated entity in accordance with Division 170 of
the Income Tax Assessment Act 1997;
(b) The relevant Group 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 Group and/or consolidated entity in realising the asset.
55
JUPITER ENERGY LIMITED – 2016 ANNUAL REPORT
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2016
6.
CASH AND CASH EQUIVALENTS
Cash at bank and in hand
Consolidated
2016
$
663,446
663,446
2015
$
1,613,560
1,613,560
The bank accounts are at call and pay interest at a weighted average interest rate of 0.04% at 30 June 2016 (2015: 0.04%)
7.
TRADE AND OTHER RECEIVABLES
Current
Trade receivables
Other debtors
Non-current
VAT receivable
Consolidated
2016
$
-
24,064
24,064
2015
$
66,715
11,336
78,051
2,787,367
4,842,743
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 2016, the aging analysis of receivables is as follows:
2016
2015
Total
2,811,431
4,920,794
0 – 30
Days
24,064
78,051
31 – 60
days
61 - 90
days
-
-
90+
days
2,787,367
4,842,743
-
-
There are no receivables as at 30 June 2016 that are impaired (2015: nil)
8.
OTHER CURRENT ASSETS
Prepayment
9.
INVENTORIES
Raw materials
Crude oil
Provision of obsolete items
Consolidated
2016
$
67,459
67,459
2015
$
122,110
122,110
17,886
-
-
17,886
82,351
3,103
(16,919)
68,535
56
JUPITER ENERGY LIMITED – 2016 ANNUAL REPORT
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2016
10.
OIL AND GAS PROPERTIES
Cost as at 30 June 2014
Net exchange differences
Cost as at 30 June 2015
Depletion and impairment as at 30 June 2014
Charge for the year
Depletion and impairment as at 30 June 2015
Net book value as at 30 June 2015
Cost as at 30 June 2015
Net exchange differences
Cost as at 30 June 2016
Depletion and impairment as at 30 June 2015
Charge for the year
Depletion and impairment as at 30 June 2016
Net book value as at 30 June 2016
11.
PLANT AND EQUIPMENT
Consolidated
$
21,749,075
4,478,843
26,227,918
(1,465,282)
(363,607)
(1,828,889)
24,399,029
26,227,918
(9,422,479)
16,805,438
(1,828,889)
-
(1,828,889)
14,976,550
Year ended 30 June 2016
Consolidated
At 1 July 2015 net of accumulated depreciation
Additions
Disposals
Depreciation charge for the year
Net exchange differences
At 30 June 2016 net of accumulated depreciation
At 30 June 2016
Cost
Accumulated depreciation
Net carrying amount
Year ended 30 June 2015
At 1 July 2014 net of accumulated depreciation
Additions
Disposals
Depreciation charge for the year
Net exchange differences
At 30 June 2015 net of accumulated depreciation
At 30 June 2015
Cost
Accumulated depreciation
Net carrying amount
57
$
967,247
-
-
(155,873)
(394,232)
417,142
2,055,094
(1,637,952)
417,142
1,042,507
-
(23,098)
(101,224)
49,062
967,247
2,055,094
(1,087,847)
967,247
JUPITER ENERGY LIMITED – 2016 ANNUAL REPORT
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2016
12.
EXPLORATION AND EVALUATION EXPENDITURE
Exploration expenditure carried forward:
Exploration and evaluation expenditure at cost
Movements during the year
Balance at beginning of year
Expenditure incurred during the year
Impairment
Foreign exchange translation
Balance at end of year
Consolidated
2016
$
2015
$
28,215,402
44,166,103
44,166,103
279,759
-
(16,230,460)
28,215,402
31,986,316
5,519,880
(787,046)
7,446,953
44,166,103
Oil sales revenue capitalised into exploration and evaluation expenditure for the year was $nil (2015: $nil).
In the prior period, Management decided to write-off well NZW 2. No further work had been planned for this particular well.
13.
OTHER FINANCIAL ASSETS
Liquidation fund
Other
387,732
-
387,732
630,874
9,364
640,238
The Group has a deposit for the purpose of a Liquidation fund in the amount of $387,732. 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. The fair value approximates the carrying value.
14.
TRADE AND OTHER PAYABLES
Trade creditors
Accrued expenses
Trade payables are non-interest-bearing and are normally settled on 30-day terms.
15.
DEFERRED REVENUE
As at 1 July
Deferred during the year
Released during the year
Repaid during the year
Foreign exchange translation
At 30 June
652,938
102,195
755,133
1,253,357
27,392
1,280,749
60,111
-
-
(60,111)
-
-
844,773
-
(892,988)
-
108,326
60,111
The deferred revenue refers to an amount received in advance for oil sales. As at 30 June 2016, there is 0 tonnes of oil to be
delivered under contracts. (2015: nil)
58
JUPITER ENERGY LIMITED – 2016 ANNUAL REPORT
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2016
16.
PROVISIONS
Non - current
Provision for rehabilitation
Consolidated
2016
$
2015
$
154,442
154,442
527,827
527,827
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 $154,442 (2015: $527,827). The costs are denominated are Tenge. The timing of
rehabilitation is likely to depend on when the field ceases to produce at economically viable rates which is currently estimated
to be 2044 (2015: 2039). This will depend upon future oil and gas prices, which are inherently uncertain. The underlining
rehabilitation costs are denominated in Tenge and in calculating the provision at 30 June 2016 a discount rate of 10.37%
(2015: 6.94%) was used.
Movements in rehabilitation provision
Carrying amount at beginning of the year
Unwinding of discount rate
Foreign exchange translation
Provision for the year
Re-measurement for changes in estimates1
Carrying amount at the end of year
2016
$
527,827
20,850
(228,195)
-
(166,040)
154,442
2015
$
294,538
24,952
65,025
143,312
-
527,827
1Due to a change in the discount rate and the expected timing of when the rehabilitation activities will be undertaken.
59
JUPITER ENERGY LIMITED – 2016 ANNUAL REPORT
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2016
17.
DERIVATIVES AND OTHER FINANCIAL LIABILITIES
Current
Derivative liability
Non-Current
Promissory notes (unsecured)
Convertible note
Promissory Notes
Consolidated
2016
$
-
-
42,936,226
-
42,936,226
2015
$
1,612
1,612
9,744,164
23,628,253
33,372,417
On 31 May 2016, the major shareholder Waterford Petroleum Limited (“Waterford”) agreed to re-finance its current Promissory
Note (as originally announced on 7 October 2014 and subsequently amended on 30 April 2015) that, as at 31 May 2016,
amounted to US$8,633,333 (A$11,636,956) in principal with accrued interest of US$1,250,894 (A$1,686,092) (total
US$9,914,227)(A$13,323,048) into a new Promissory Note with the following key terms:
• Unsecured
• Effective 31 May 2016
• Repayable on 1 July 2018
Interest rate of 15% pa
•
Interest will accrue and be repayable with principal
•
Lender can elect to be repaid if there is a change of control in Jupiter Energy Limited or
•
Jupiter Energy Pte Ltd or there is a change in control in contract 2275 covering the Block
31 Licence
The previous Promissory Note and all accrued interest were due for repayment on 1 July 2016.
On 24 May 2016, the Group and Waterford agreed to put in place a new Framework Funding Agreement that makes up to a
further US$5,000,000 (including accrued interest) available to the Group by way of a new US$5,000,000 Promissory Note. This
takes the total facility available under the existing and the new Framework Funding Agreement to US$15,000,000 (including
accrued interest) of which a further US$5,088,822 (A$6,859,274) can be drawn down on (including accrued interest). This is in
order to fund the Group’s operations whilst it continues to finalise long term funding arrangements for the development of its
Block 31 licence area in Kazakhstan.
The key terms of the new Framework Agreement with Waterford are:
• Effective 24 May 2016
• Drawdowns will roll into a Promissory Note
• Promissory Note is repayable on 1 July 2018
•
•
•
Interest rate of 15% pa
Interest will accrue and be repayable with principal
Lender can elect to be repaid if there is a change of control in Jupiter Energy Limited or
Jupiter Energy Pte Ltd or there is a change in control in contract 2275 covering the Block
31 Licence
As at 30 June 2016, US$744,989 (A$1,004,171) has been drawn from the US$5,000,000 facility.
60
JUPITER ENERGY LIMITED – 2016 ANNUAL REPORT
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2016
US$15.5m Convertible Notes (Series B):
On 3 June 2016, the Group announced it had reached agreement with its Convertible Note holders to refinance the 12,400,000
Convertible Notes with a total value of approx. US$20,800,000 (including accrued interest) into Promissory Notes with a
repayment date of 1 July 2018.
The key terms for the new Promissory Notes are:
• Unsecured
• Effective 31 May 2016
• Repayable on 1 July 2018
Interest rate of 15% pa
•
Interest will accrue and be repayable with the principal
•
Lenders can elect to be repaid if there is a change of control in Jupiter Energy Limited or
•
Jupiter Energy Pte Ltd or there is a change in control of the ownership of the Block 31
Licence
The Convertible Notes and all accrued interest were due for repayment on 20 September 2016. At the date of refinancing the
carrying value of the Convertible Note liability and derivative liability relating to the conversion option was derecognised and the
new Promissory Notes liability were recognised at fair value. A gain on extinguishment of A$282,672 was recognised in the profit
or loss being the difference between the fair value of the Promissory Notes liability and the carrying value of the Convertible Note
liability and derivative liability that was derecognised. As the Convertible Notes holders and Promissory Notes holders are the
same parties, the refinancing was a non cash transaction. Subsequent to initial recognition the Promissory Notes are being
measured at amortised cost.
Valuation Techniques of the Convertible Notes
The Notes had 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 did not meet the definition of an equity instrument, as the exercise
price was denominated in a currency that is different to the Company’s functional currency. The convertible call option was
classified as a Derivative liability and measured at fair value through the profit or loss.
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.
The fair value of the embedded derivative was sensitive to changes in share price volatility. The table below outlines the impact
a change in the share price volatility input had on the fair value of the embedded derivative.
15% increase in volatility
15 % decrease in volatility
30 June 2016
$
-
-
30 June 2015
$
313,077
(231,405)
61
JUPITER ENERGY LIMITED – 2016 ANNUAL REPORT
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2016
Fair value hierarchy
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 2016, the Group held the following classes of financial instruments measured at fair value:
Derivative financial liabilities
Embedded derivative
30 June 2016
30 June 2015
Level 3
$
-
Level 3
$
1,612
There were no transfers between Level 1, Level 2 or Level 3 fair value measurements during the year ended 30 June 2016 (2015:
Nil).
Reconciliation of recurring fair value measurements categorised within level 3 of the fair value hierarchy
Opening balance
Fair Value at inception
Net unrealised gain recognised in the profit or loss during the period
Closing balance
18.
CONTRIBUTED EQUITY
Shares issued and fully paid
Ordinary shares (a)
30 June 2016
$
(1,612)
-
1,612
-
30 June 2015
$
(229,400)
-
227,788
(1,612)
Consolidated
2016
$
2015
$
85,633,935
85,633,935
85,633,935
85,633,935
Number
Number
(a) Movements in ordinary share capital:
2016
2015
Balance 30 June 2015
Balance 30 June 2016
153,377,693
153,377,693
153,377,693
153,377,693
62
JUPITER ENERGY LIMITED – 2016 ANNUAL REPORT
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2016
18.
CONTRIBUTED EQUITY (continued)
(b) Movement in performance rights
Balance as at 30 June 2015
Lapsed during year
Granted during the year
Balance as at 30 June 2016
-
-
-
-
8,075,000
(8,075,000)
-
-
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 2016 and none are expected to be paid in 2017.
The Group is not subject to any externally imposed capital requirements.
63
JUPITER ENERGY LIMITED – 2016 ANNUAL REPORT
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2016
19.
RESERVES
At 30 June 2014
Share based payment
Foreign currency translation
At 30 June 2015
Share based payment
Foreign currency translation
At 30 June 2016
Foreign currency
translation
reserve
$
(11,573,714)
-
12,738,847
1,165,133
-
(27,468,783)
(26,303,650)
CONSOLIDATED
Share based
payments reserve
Total
$
5,695,838
68,176
-
5,764,014
-
-
5,764,014
$
(5,877,876)
68,176
12,738,847
6,929,147
-
(27,468,783
(20,539,636)
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.
20.
KEY MANAGEMENT PERSONNEL AND RELATED PARTY DISCLOSURE
This note is to be read in conjunction with the Remuneration Report, which is included in the Directors Report on pages 11
to 19.
(a) Key management personnel compensation
Short-term employee benefits
Post-employment benefits
Other
Share-based payments
Consolidated
2016
$
2015
$
639,141
40,333
163,106
-
842,580
569,250
50,233
151,682
68,176
839,341
(b) Transactions between the Group and other related parties
Consultancy fees
During the year, consulting fees of $40,599 (2015: $144,096) 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.
During the year, consulting fees of $211,000 (2015: $146,333) were accrued and paid under normal terms and conditions to
Symdean Pty Ltd, of which Mr Gander is a director.
64
JUPITER ENERGY LIMITED – 2016 ANNUAL REPORT
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2016
21.
SHARE BASED PAYMENTS
Employee Share Option Plan (ESOP) and Performance Rights Plan
There was no share based payments expense in the income statement for 2016 (2015: $68,176).
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 2016 (2015: Nil).
During the year ended 30 June 2016, no options were exercised over ordinary shares (2015: Nil).
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 subject to shareholder approval.
The number of performance rights on issue as at 30 June 2016 was nil.
During the 2015 year, 8,075,000 expired unvested.
65
JUPITER ENERGY LIMITED – 2016 ANNUAL REPORT
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2016
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 Mangistau
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
2016
$
-
-
-
2015
$
5,118,377
-
5,118,377
78,500
78,500
18,645
18,645
12,477
12,477
80,000
80,000
78,315
78,315
12,085
12,085
Total paid to Ernst & Young
109,622
170,400
66
JUPITER ENERGY LIMITED – 2016 ANNUAL REPORT
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2016
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 Group 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
2016
2015
(10,474,870)
(10,982,261)
Number of
shares
Number of
shares
153,377,693
153,377,693
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 segment being related to the activities in Kazakhstan, on the basis that the
operations in Australia relate to running the Corporate Head Office only.
All significant Oil and Gas and Exploration and evaluation expenditure are domiciled in Kazakhstan.
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 and oil
and gas properties located in Kazakhstan.
67
JUPITER ENERGY LIMITED – 2016 ANNUAL REPORT
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2016
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
Gain on extinguishment1
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
Net cash flows from operating activities
1Relates to the refinancing of the Convertible Notes, refer to note 17.
Consolidated
2016
$
(10,474,870)
2015
$
(10,982,261)
155,873
-
54
6,041,331
969,858
(282,672)
986,236
50,651
54,650
(60,111)
(525,614)
(373,385)
(3,457,999)
361,566
68,176
(227,788)
3,161,784
4,468,779
-
(430,233)
(18,929)
146,770
(784,662)
405,531
(58,061)
(3,889,328)
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.
68
JUPITER ENERGY LIMITED – 2016 ANNUAL REPORT
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2016
27.
EVENTS OCCURING AFTER THE BALANCE SHEET DATE
On 19 September 2016 the Group announced that it had signed Addendum 7 to Contract 2275 which confirmed that the Ministry
of Energy had agreed to a three (3) year extension to the Exploration Licence taking the Exploration Period through to 29
December 2019. The 3 year extension is based on the Group maintaining its current acreage and the Ministry of Energy indicated
that if the Group did proceed with the North East and South East land extensions that are being considered, then a further one
(1) year extension (to 29 December 2020) could be available.
There have been no other significant events occurring subsequent to 30 June 2016 apart from those noted above.
28.
INFORMATION ON PARENT ENTITY
(a)
Information relating to Jupiter Energy Limited:
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
2016
$
709,903
47,592,924
(409,456)
2015
$
1,385,083
75,227,570
(198,641)
(43,341,521)
(33,572,670)
85,633,935
85,633,935
(60,958,761)
(49,743,049)
5,764,014
(4,251,403)
(19,735,223)
(19,735,223)
5,764,014
41,654,900
(1,756,586)
(1,756,586)
69
JUPITER ENERGY LIMITED – 2016 ANNUAL REPORT
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2016
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
2016
%
100
100
100
100
100
2015
%
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 2016 (30 June 2015: Nil)
70
JUPITER ENERGY LIMITED – 2016 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 2016 are in
accordance with the Corporations Act 2001, including:
(i) Giving a true and fair view of its financial position as at 30 June 2016 and performance for the year
ended on that date.
(ii) Complying with Accounting Standards (including the Australian Accounting Interpretations) and the
Corporations Regulations 2001
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 Group 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 2016.
On behalf of the Board
Geoff Gander
Executive Chairman
Perth, Western Australia
30 September 2016
71
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 2016, 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
DH:VH:JUPITER:009
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 2016
and of its performance for the year ended on that date;
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 opinion, we draw attention to Note 2(a) in the financial report which describes the
principal conditions that raise doubt about the consolidated entity’s ability to continue as a going concern.
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
2016. 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 2016,
complies with section 300A of the Corporations Act 2001.
Ernst & Young
D A Hall
Partner
Perth
30 September 2016
A member firm of Ernst & Young Global Limited
Liability limited by a scheme approved under Professional Standards Legislation
DH:VH:JUPITER:009
JUPITER ENERGY LIMITED – 2016 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 2016)
Substantial shareholders
Waterford Petroleum Limited
Arrow Business Limited
Central Asian Oil Holdings Ltd
Voting Rights
45,246,108
30,917,255
29,731,484
29.5%
20.2%
19.4%
Each shareholder is entitled to receive notice of and attend and vote at general meetings of the Group. 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
436
549
213
256
26
1,480
Ordinary
Shares
172,342
1,439,836
1,538,323
6,955,688
143,271,504
153,377,693
The number of shareholders holding less than a marketable parcel of ordinary shares is 634.
On-market buy back
There is no current on-market buy back.
Securities on Issue
The number of shares issued by the Group are set out below:
Category
Ordinary Shares
Number
153,377,693
74
JUPITER ENERGY LIMITED – 2016 ANNUAL REPORT
TWENTY LARGEST SHAREHOLDERS
Name of Holder
No. of Ordinary
Shares
% of Issued capital
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
GLENNBROWN PTY LTD
MR GEOFFREY ANTHONY GANDER
MR ATHOL GEOFFREY JAMES
GOLDEN BOUNTY LIMITED
10.
GLENNBROWN PTY LTD
11.
MR WARREN GILMOUR + MRS CATHERINE GILMOUR
12. MR ERKIN SVANBAYEV
13. MR SCOTT MISON
14.
15.
16.
17.
SOUTHAM INVESTMENTS 2003 PTY LTD
MR IAN SHERWOOD LOVE + MRS ANNE MARGARET
LOVE
DR NEIL TANUDISASTRO + MRS YANI SUTANIMAN
R & L EVANS PTY LTD
18. MR YERKIN SVANBAYEV
NATIONAL NOMINEES LIMITED
DALY SF PTY LTD
19.
20.
TOTAL
50,008,958
48,354,956
29,667,795
6,829,357
2,234,562
1,333,334
769,445
608,148
506,450
465,000
282,753
240,000
207,038
179,511
166,667
154,667
150,000
150,000
148,335
146,668
32.61
31.53
19.34
4.45
1.46
0.87
0.50
0.40
0.33
0.30
0.18
0.16
0.13
0.12
0.11
0.10
0.10
0.10
0.10
0.10
142,603,644
92.98
75