ANNUAL REPORT
FOR THE YEAR ENDED 30 JUNE 2017
JUPITER ENERGY LIMITED – 2017 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)
Alexander Kuzev (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
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
Stock Exchange Listing
Jupiter Energy Limited shares are listed on the Australian Securities Exchange under the code JPR and on the Kazakh
Stock Exchange (KASE) under the code AU_JPRL.
ii
JUPITER ENERGY LIMITED – 2017 ANNUAL REPORT
Contents of Financial Report
Chairman’s Letter ................................................................................................................................................ 1
Directors' Report ................................................................................................................................................. 2
Remuneration Report ....................................................................................................................................... 12
Corporate Governance Statement .................................................................................................................... 20
Auditor Independence Declaration ................................................................................................................... 27
Consolidated Jupiter Energy Limited Financial Statements
Consolidated Statement of Comprehensive Income ...................................................................................... 29
Consolidated Statement of Financial Position ............................................................................................... 30
Consolidated Statement of Cash Flows ......................................................................................................... 31
Consolidated Statement of Changes in Equity ............................................................................................. 32
Notes to the Consolidated Financial Statements .............................................................................................. 33
Directors' Declaration ........................................................................................................................................ 67
Independent Audit Report to the members of Jupiter Energy Limited ............................................................... 68
ASX Additional Information ................................................................................................................................ 73
ii
JUPITER ENERGY LIMITED – 2017 ANNUAL REPORT
CHAIRMAN’S LETTER
Dear Shareholder,
I am pleased to present the 2017 Annual Report for Jupiter Energy Limited (“Jupiter Energy” or “the Group”).
The past year has been another difficult one for the Group. The global decline in the price of oil and the flow on effect
to Kazakh domestic oil prices continued to make 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.
Despite operational inactivity, there was progress made on several fronts with regards the granting of regulatory
approvals from the Kazakh authorities.
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). On 10 July 2017 the Company announced that its’ Trial Production
Licences for the Akkar East and West Zhetybai oilfields had also been renewed (to 29 December 2019) and with the
recent improvement in Kazakh domestic oil prices, the Company is now planning to return to production during the 4th
quarter of the 2017 calendar year.
Another major milestone achieved during the year was the resolution of the Akkar North (East Block) reserves division.
The split of reserves had been the matter of an ongoing dispute with Jupiter’s neighbour but the Company was able
to announce on 28 April 2017 that the State Reserves associated with the Akkar North (East Block) area had been
confirmed as belonging to Jupiter. This resolution now allows the Company to submit the required documentation to
seek approval to return the J-50 well to Trial Production.
The Board remains confident in the prospectivity of the licence area and furthermore that the two new oilfields that
have already been discovered on our permit area can be commercially developed into significant producers.
I therefore look towards 2018 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 10 November 2017.
Sincerely
Geoff Gander
Chairman/CEO
1
JUPITER ENERGY LIMITED – 2017 ANNUAL REPORT
DIRECTORS’ REPORT
Your Directors submit their report for the year ended 30 June 2017.
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 (54)
B.COM
Executive Chairman/CEO
Appointed 27 January 2005
Baltabek Kuandykov (69)
Non-Executive Director
Appointed 5 October 2010
Scott Adrian Mison (41)
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
Zyber Holdings Limited (ASX)
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 18 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
and Interim CEO / Director of Longford Resources Ltd.
Mr Mison is also a board member of Rebound WA inc. (formerly
Wheelchair Sports WA Inc.) a not for profit organisation.
Other Current Directorships of Listed Companies:
Longford Resources Limited
Former Directorships of Listed Companies in last three years:
1-Page Limited
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JUPITER ENERGY LIMITED – 2017 ANNUAL REPORT
DIRECTORS’ REPORT (continued)
Alexey Kruzhkov (50)
Non-Executive Director
Appointed 29 August 2016
Alexander Kuzev (52)
Non-Executive Director
Appointed 12 September 2017
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 Kuzev is an oil industry professional with over 27 years of
experience.
Most of Alexander’s career has been spent working in the Former
Soviet Union (FSU) with much of that time responsible for the overall
management of field operations with a focus on production
sustainability, technology and field maintenance. He has worked with
a range of oil and gas companies including Schlumberger and
Gazprom Drilling.
Alexander brings an important technical skill set to the Jupiter Energy
Board as well as in country experience, having been involved with
various Kazakhstan based oil and gas operations since the late
1990’s.
Other Current Directorships of Listed Companies
None
Former Directorships of Listed Companies in last three years
None
Interests in the shares and options of the Company and related bodies corporate
At the date of this report, the interest of the Directors in the shares of Jupiter Energy Limited were:
Director
G Gander
B Kuandykov
S Mison
A Kruzhkov
A Kuzev
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 and KASE announcement without delay. Any changes in Directors’
shareholdings are also confirmed at each Board meeting.
3
JUPITER ENERGY LIMITED – 2017 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 10 employees as at 30 June 2017 (2016: 5 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 $8,076,857 (2016: $10,474,870).
Review of Financial Condition
At the end of the 2017 financial year, cash resources were $397,109 (2016: $663,446). 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 program 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 increased to $49,200,046 (2016: $47,557,046) and equity decreased to $(3,584,203) (2016: $3,711,245).
CAPITAL RAISING / CAPITAL STRUCTURE
Funding and Capital Management:
As at 30 June 2017, the Group had 153,377,693 listed shares trading under the ASX ticker "JPR", and the KASE ticker
“AU_JPRL”. On 29 August 2017, the Company delisted from London’s Alternative Investment Market (AIM).
In the 2016 year Waterford agreed to put in place a 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
(“the 2016 Funding Agreement”).
The key terms of the 2016 Framework Agreement 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
4
JUPITER ENERGY LIMITED – 2017 ANNUAL REPORT
DIRECTORS’ REPORT (continued)
•
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 2017, the Group had drawn down US$3,808,733 (A$4,976,831) (including accrued interest) under the
2016 Funding Agreement. This means that a further $US1,191,267 (including accrued interest) (A$1,554,365) is still
available under this agreement.
During the financial year the Group was granted a range of approvals that positioned it to return to domestic production.
As a result, major shareholder and debtholder Waterford Petroleum Limited (“Waterford”) and debt holder Midocean
Holdings Limited (“Midocean”) (together “the Lenders”) agreed to provide up to a total of a further US$5,000,000
(including accrued interest), in the amounts of up to US$4,900,000 and US$100,000, respectively under a new Funding
Agreement signed on 28 July 2017 (the “2017 Funding Agreement”).
The 2017 Funding Agreement is similar to the 2016 Funding Agreement with the addition of one new condition. This
condition relates to the payment of a bonus to the Lenders should all or part of the permit area be sold during the term
of the 2017 Funding Agreement.
A summary of the terms of the 2017 Funding Agreement is as follows:
• Unsecured
• Effective 31 July 2017
• Repayable on 31 July 2019 (or such later date agreed by the parties in writing)
•
•
•
(the “Repayment Date”)
Interest rate of 15% pa
Interest will accrue and be repayable with 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 in contract 2275
covering the Block 31 Licence
• Bonus will be payable to the Lenders equivalent to 5% of the sale price of
contract 2275 in the event that the contract is assigned, transferred or sold to a
3rd party during the period of the facility
The bonus would equate to 5% of the value of the consideration received by the Company if Jupiter or Contract 2275
is assigned, transferred or sold to a third party prior to the Repayment Date and will be payable in cash, shares or a
combination of both, at the absolute discretion of the Lenders subject to all relevant Australian and Kazakh
regulatory bodies (if required), including pursuant to the ASX Listing Rules, KASE Listing Rules and the Corporations
Act.
The bonus amount payable to each of the Lenders will be calculated on the basis of the proportion of debt funding
provided by each as measured against the total funding provided under the 2017 Funding Agreement.
The 2017 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.
In terms of drawdowns, the Group will still request monthly drawdowns against the maximum US$5,000,000 amount
and the drawdowns will be based on an agreed Operations budget, with the budget reflecting revenues and expenses
associated with the planned return to domestic production during the 4th quarter of calendar 2017.
Based on management forecasts, the Group has sufficient working capital, including its access to the remaining
funding under 2017 Funding Agreement, until April 2018. The Group continues to seek a longer term funding package
that will enable the commencement of the 2018-2019 Work Program and for on-going working capital.
5
JUPITER ENERGY LIMITED – 2017 ANNUAL REPORT
DIRECTORS’ REPORT (continued)
The Group is still reviewing its ongoing funding requirements from April 2018 and beyond, to enable Jupiter to carry
out its 2018-2019 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.
Once the appropriate funding has been secured, the further development of both the Akkar East and West Zhetybai
fields, and in particular the possibility of building the topside infrastructure on Akkar East including a processing facility
and gas separation plant, will be accelerated.
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 2016 to 30 June 2017 (“the financial year”).
Events that occurred post 30 June 2017 are covered in the “Subsequent Events” section.
Review of Operations:
The financial year saw little operational progress with restricted funding, uneconomic domestic oil prices and delays in
the granting of regulatory approvals all negatively impacting the further development of the Block 31 licence area.
Production Report/Status of Well Licences:
The Group ceased production of domestic oil in February 2015 due to the decline in world oil prices and that situation
did not change during the financial year. All the company wells were shut in during the entire Review Period.
Due a recent improvement in domestic oil pricing and with all the required approvals now in place, the Group is planning
to recommence production during the 4th quarter of calendar 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 most likely take place during October 2017 and
it should be ready to produce oil during November 2017.
No oil was produced from Well 19 during the financial year.
6
JUPITER ENERGY LIMITED – 2017 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 was 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 was in dialogue with MMG on this issue for some
time but was unable to reach formal agreement with MMG with respect to the division of Akkar North reserves or
another form of commercial settlement of the matter.
After ongoing discussions, the Group announced on 28 April 2017 that it had been successful with its ownership claim
over these reserves and with this having being achieved the requisite applications for a Trial Production Licence for
the J-50 well will now be submitted for approval 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 Well 19 wells and these extensions will now run until 29 December 2019. The Group also received its
emission permits for these wells for the 2017 calendar year, meaning that the wells had all the required approvals to
operate under Trial Production during 2017.
The current plan is to return the J-51, J-52 and Well 19 wells during the 4th quarter of calendar year 2017.
Status of West Zhetybai Wells (J-55, 58, 59):
J-58 and J-59 both had their respective 2017-2019 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 it is expected this will be carried out during the first half of calendar year
2018.
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. This work is scheduled to
occur early in calendar year 2018.
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.
Drilling Report:
No drilling activity took place during the year.
Oil Production and Revenues:
There was no oil production during the year. No oil was produced during the 2015/16 Financial Year.
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JUPITER ENERGY LIMITED – 2017 ANNUAL REPORT
DIRECTORS’ REPORT (continued)
Revenues from oil sales in this financial year amounted to $A NIL (2015/16 Financial Year: $ NIL).
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. Limited staff numbers remained in place during the financial year.
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 since 2010 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. Now that
the Group is ready to resume trial production, these positions are 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 production recommences during
the 4th quarter calendar 2017.
2017 Annual General Meeting:
The 2017 AGM will be held in Perth on 10 November 2017 and all shareholders are encouraged to attend. A Notice
of Meeting outlining business to be covered at the 2017 AGM will be mailed to shareholders in early October 2017.
The 2016 Annual General Meeting (AGM) was held in Perth on Friday 04 November 2016 and all Resolutions were
passed.
Directors Remuneration:
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.
Subsequent Events:
On 10 July 2017 the Company announced that the Kazakh Ministry of Energy had signed Addendum 8 to Contract
2275 thereby approving Jupiter’s three year Work Program (2017-2019) that supports the 3 year Exploration Licence
Extension that was granted by the Ministry of Energy during the 4th quarter of 2016.
As part of the signing of Addendum 8, the Ministry of Energy also approved Trial Production Licences extensions for
the Akkar East and West Zhetybai oilfields for the period to 29 December 2019. The approval of the Trial Production
Licences enables the Company to recommence oil production as soon as is practical and it is expected that initial
production will be from wells J-51, J-52 and Well 19 which are all located on the Akkar East oilfield.
The current expectation is that oil production will recommence during the 4th Quarter of 2017.
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JUPITER ENERGY LIMITED – 2017 ANNUAL REPORT
DIRECTORS’ REPORT (continued)
On 10 July 2017 the Company also announced the cancellation of admission of Depository Interests over Ordinary
Shares trading on AIM.
The Company was originally dual listed on the AIM market of the London Stock Exchange in 2011 as a means of
accessing capital from the UK and European equity markets. During the financial year, the Board reviewed the
Company’s AIM listing and concluded that these benefits of listing have not been realised, due to a range of reasons.
Given the Company's shareholder base is predominantly Australian, the relatively low volume of trading in shares on
AIM and the Company’s current cash position, the Board concluded that the costs incurred in maintaining a secondary
listing on AIM, exceeded the benefits obtained from the listing. On this basis, the Board considered it in the best
interests of the Company and all shareholders to seek a cancellation of its depository interests (“DIs”) over ordinary
shares (“Ordinary Shares”) from trading on AIM (the “Cancellation”).
The Cancellation was not subject to shareholder approval however the Board discussed this issue with Jupiter’s three
major shareholders being Waterford Petroleum Limited, Arrow Business Limited and Central Asian Oil Holdings
Limited and each entity gave their unequivocal support in respect of the Cancellation. As a result the Company
proceeded with the Cancellation and the last trading day in DIs on AIM was 25 August 2017 and cancellation was
effective at 7.00 a.m. on 29 August 2017 (the “Cancellation Date”). Following the cancellation of admission of the
Company's Ordinary Shares on AIM, the DIs which had been trading on AIM were cancelled and holding statements
were issued to current DI holders.
The Company continues to maintain its listing on the Australian Stock Exchange (ASX) and shareholders wishing to
trade the Company’s Ordinary Shares after the Cancellation Date have been able to do so on the ASX.
Summary:
During the 2016/17 Financial Year the Group continued to endure a difficult operating environment in Kazakhstan.
However there was progress with the Company being able to successfully be granted a three year extension of its
Exploration Licence (to December 2019), get approval to return its wells on the Akkar East and West Zhetybai fields
to Trial Production and also get confirmation from the Kazakh authorities that it was the legal owner of the oil reserves
that form part of the Akkar North (East Block) accumulation.
That all said, 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 therefore the ability to raise the required equity to fund the Block 31 development in the
current market environment remains uncertain. The major shareholder (Waterford Petroleum Limited) continues to be
the cornerstone debt funder for the Company with a further US$10,000,000 in debt funding provided to the Company
over the past 12 months to fund operations and enable a planned return to domestic production during the 4th quarter
of calendar 2017.
Frustrations aside, since acquiring an exploration permit in 2008, independent reserve reports continue to confirm 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.
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JUPITER ENERGY LIMITED – 2017 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 and the Kazakh Stock Exchange (KASE), it is
subject to the continuous disclosure requirements of the ASX Listing 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 program.
This monitoring program 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 – 2017 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
A Kruzhkov
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
Alexey Glebov, PhD, with over 33 years' oil & gas industry experience, is the qualified person who has reviewed and
approved the technical information contained in this report. Alexey PhD’s in technical science (1992) and geology
science (2006), an Honors Degree in Geology and Geophysics (1984) from Novosibirsk State University and a Gold
Medal (1985) from USSR Academy of Sciences. He is a member since 2001 of the European Association of
Geoscientists & Engineers (EAGE #M2001-097) and was made an Honorary Oilman in 2011 by the Ministry of Energy
of the Russian Federation. Alexey Glebov is qualified in accordance with ASX Listing Rule 5.41.
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.
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JUPITER ENERGY LIMITED – 2017 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
Alexey Kruzhkov
Baltabek Kuandykov
Scott Mison
Alexander Kuzev
Chairman / CEO (Executive)
Director (Non-Executive)
Director (Non-Executive)
Director / CFO / Company Secretary (Executive)
Director (Non-Executive) (Appointed 12 September 2017)
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.
12
JUPITER ENERGY LIMITED – 2017 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.
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 – 2017 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 – 2017 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 capitalization
2017
$
2016
$
2015
$
-
(8,076,857)
(5.27)
0.25
38.3m
-
(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
15
JUPITER ENERGY LIMITED – 2017 ANNUAL REPORT
REMUNERATION REPORT (Audited) (continued)
Details of remuneration (Audited)
Remuneration of Directors and Executives
Table 1: Remuneration for the year ended 30 June 2017
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
%
52,961*
211,805*
264,766
305,410*
108,000*
413,410
678,176
-
-
-
-
-
-
-
-
-
-
142,972
-
142,972
142,972
-
-
-
40,000
-
40,000
40,000
-
-
-
-
-
-
-
52,961
211,805
264,766
488,382
108,000
596,382
861,147
-
-
-
-
-
-
Name
Non-executive director
A Kruzhkov (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): Appointed 26 August 2016. Directors Fees of US$40,000 (A$52,961) have been deferred.
(b): Fees relate to Non Executive Director fee of US$40,000 (A$52,961) and Consulting Fees of US$120,000 (A$158,844). Director fees of US$40,000 (A$52,961)
have been deferred.
During the year, further consulting fees of A$222,084 (2016: A$40,599) 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$142,972 relates to living expenses covering cost of apartment/office in London as per service
agreement. During the year, consulting fees of $189,000 (2016: $211,000) were accrued and paid under normal terms and conditions to Symdean Pty Ltd, of
which Mr Gander is a director for his role as CEO.
(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 2016
Short-term benefits
Post-employment
benefits
Share-based
payment
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
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
*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.
16
-
-
-
-
-
-
-
-
-
-
JUPITER ENERGY LIMITED – 2017 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 2017
During the 2017 and 2016 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 2017
or 30 June 2016.
Performance Rights
During the 2017 and 2016 year, there were no performance rights granted.
Compensation Performance Rights: Granted and vested during the year ended 30 June 2017
During the 2017 and 2016 year, there were no performance rights vested and no additional performance rights were
granted.
17
JUPITER ENERGY LIMITED – 2017 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:
2017
Directors
G Gander
A Kruzhkov*
B Kuandykov
S Mison
Balance
1 July 2016
Granted as
Remuneration
On Exercise of
Options
Net Change
Other
Balance
30 June 2017
811,112
-
-
391,238
-
-
-
-
-
-
-
-
-
-
-
-
811,112
-
-
391,238
*Mr Kruzhkov was appointed on 29 August 2016
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.
Performance Rights Holdings
There were no performance rights held by, granted to or exercised by Key Management Personnel during the financial
years ended 30 June 2017 or 30 June 2016.
Option Holdings
There were no options held by, granted to or exercised by Key Management Personnel during the financial years
ended 30 June 2017 or 30 June 2016.
18
JUPITER ENERGY LIMITED – 2017 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 – 8 September 2017)
Base Terms
• This agreement was effective from 8 September 2017 and has no set term.
• Base Salary of GBP200,000 (A$340,000) including Director Fees and the current Superannuation Levy of
9.5%.
• Mr Gander will be paid a Bonus of $US350,000 or 0.5% (whichever is greater) of the value of the consideration
received by the Group if the Company or Contract 2275 is assigned, transferred or sold to a third party during
the term of the Agreement.
• 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 – 2017 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
29 September 2017
20
JUPITER ENERGY LIMITED – 2017 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 2017.
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 – 2017 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 – 2017 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 – 2017 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
2017 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 – 2017 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, 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 – 2017 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 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 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 2017, 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
Perth
29 September 2017
A member firm of Ernst & Young Global Limite1
Liability limited by a scheme approved under Professional Standards Legislation
DH:NL:JUPITER:019
JUPITER ENERGY LIMITED – 2017 ANNUAL REPORT
Financial Statements
FOR THE YEAR ENDED 30 JUNE 2017
28
JUPITER ENERGY LIMITED – 2017 ANNUAL REPORT
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEAR ENDED 30 JUNE 2017
Revenue
Cost of sales
Gross profit
Foreign exchange gain / (loss)
Gain on extinguishment of convertible notes
(Loss) / Gain on derivative financial instrument
General and administrative costs
Operating loss
Finance income
Finance costs
Loss before tax
Income tax expense
Loss after income tax
Note
Consolidated
2017
$
2016
$
-
-
-
-
-
-
17
4
1,516,992
-
-
(2,965,210)
(1,448,218)
(1,101,692)
282,672
(54)
(3,635,152)
(4,454,226)
19,030
20,687
(6,647,669)
(6,041,331)
(8,076,857)
(10,474,870)
5
-
-
(8,076,857)
(10,474,870)
Other comprehensive (loss)/income to be
reclassified to profit or loss in subsequent
periods net of tax
Foreign currency translation
781,407
(27,468,783)
Total comprehensive (loss)/income for the period
(7,295,450)
(37,943,653)
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
(5.27)
(5.27)
(6.81)
(6.81)
The consolidated statement of comprehensive income is to be read in conjunction with the notes of the financial statements
29
JUPITER ENERGY LIMITED – 2017 ANNUAL REPORT
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
AS AT 30 JUNE 2017
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
Total Current Liabilities
Non-current Liabilities
Provisions
Other financial liabilities
Total Non-Current Liabilities
Total Liabilities
Net Asset / (Deficit)
Equity
Contributed equity
Share based payment reserve
Foreign currency translation reserve
Accumulated losses
Total Equity / (Deficit)
Note
Consolidated
2017
$
2016
$
6
7
8
9
7
10
11
12
13
14
16
17
18
19
19
397,109
145,139
16,489
18,352
577,089
2,845,507
15,112,180
338,386
29,930,249
396,635
48,622,957
49,200,046
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
877,359
877,359
755,133
755,133
234,680
51,672,210
51,906,890
52,784,249
154,442
42,936,226
43,090,668
43,845,801
(3,584,203)
3,711,247
85,633,935
5,764,014
(25,522,243)
(69,459,909)
(3,584,203)
85,633,935
5,764,014
(26,303,650)
(61,383,052)
3,711,247
The consolidated statement of financial position is to be read in conjunction with the notes of the financial statements.
30
JUPITER ENERGY LIMITED – 2017 ANNUAL REPORT
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED 30 JUNE 2017
Cash flow from operating activities
Receipts from customers
Payments to suppliers and employees
Interest received
Net cash flows (used in) operating activities
Cash flows from investing activities
Payments for exploration and evaluation expenditure
Payments for property, plant and equipment
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
2017
$
2016
$
-
(2,817,239)
19,030
(2,798,209)
26
-
(3,478,686)
20,687
(3,457,999)
(1,099,755)
(279,759)
(5,000)
-
(1,104,755)
(279,759)
3,626,893
3,626,893
(276,071)
9,734
663,446
397,109
2,803,474
2,803,474
(934,284)
(15,830)
1,613,560
663,446
6
The statement of cash flows is to be read in conjunction with the notes of the financial statements.
31
JUPITER ENERGY LIMITED – 2017 ANNUAL REPORT
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 30 JUNE 2017
Note
Contributed
Equity
$
Share Based
Payment
Reserve
$
Foreign
Currency
Translation
Reserve
$
Accumulated
Losses
$
Total
$
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
85,633,935
-
-
-
5,764,014
-
-
-
(26,303,650)
-
781,407
781,407
(61,383,052)
(8,076,857)
-
(8,076,857)
3,711,247
(8,076,857)
781,407
(7,295,450)
19
-
85,633,935
-
5,764,014
-
(25,522,243)
-
(69,459,909)
-
(3,584,203)
CONSOLIDATED
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
As at 1 July 2016
Loss for the period
Other comprehensive loss
Total comprehensive loss
Transactions by owners recorded
directly in equity:
Share based payments
At 30 June 2017
The statements of changes in equity are to be read in conjunction with the notes of the financial statements.
32
JUPITER ENERGY LIMITED – 2017 ANNUAL REPORT
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2017
1
CORPORATE INFORMATION
The financial report of Jupiter Energy Limited for the year ended 30 June 2017 was authorised for issue in accordance
with a resolution of the directors on 29 September 2017.
Jupiter Energy Limited is a Company limited by shares incorporated in Australia whose shares are publicly traded on the
Australian Stock Exchange 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.
As at 30 June 2017 The Group had a net liability position of ($3,584,203). However at 30 June 2017, the Group had a
Framework Funding Agreement in place and at that time. At 30 June 2017 the Group had drawn down US$3,808,733
interest)
that a
interest) meaning
(A$4,976,831)(including accrued
(A$1,554,365) was still available under this agreement.
further $US1,191,267 (including accrued
Based on management forecasts, the Group has sufficient working capital, including its access to the remaining funding
under the 2017 Funding Agreement, until April 2018. The Group is still reviewing its ongoing funding requirements from
April 2018 and beyond, to enable the Group to carry out its 2018-2019 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 – 2017 ANNUAL REPORT
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2017
(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 2016, the Group has adopted the following Standards and Interpretations, mandatory for annual periods
beginning on 1 July 2016. 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 2017. These are outlined in the following table.
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 measurement,
a single, forward-looking ‘expected loss’ impairment model and a
substantially-reformed approach to hedge accounting.
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.
Applicatio
n date of
standard
1 January
2018
Applica
tion
date for
Group
1 July
2018
Impact on Group
financial report
is yet
to
The Group
undertake
detailed
a
assessment of the impact of
AASB 9. However
the
Standard is not expected to
have a material impact on
the
and
transactions
balances recognised in the
financial statements when it
is first adopted for the year
ending 30 June 2019.
34
JUPITER ENERGY LIMITED – 2017 ANNUAL REPORT
Applicatio
n date of
standard
1 January
2018
Applica
tion
date for
Group
1 July
2018
Impact on Group
financial report
is yet
to
The Group
undertake
detailed
a
assessment of the impact of
AASB 9. However
the
Standard is not expected to
have a material impact on
the
and
transactions
balances recognised in the
financial statements when it
is first adopted for the year
ending 30 June 2019.
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.
that are not held
Allows an irrevocable election on initial recognition to
present gains and losses on investments in equity
instruments
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.
trading
for
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
expected credit losses. Specifically, the new Standard 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.
Hedge accounting
Amendments to AASB 9 (December 2009 & 2010 editions and
AASB 2013-9) issued in December 2013 included the new hedge
to hedge
accounting
effectiveness
risk
components that can be hedged and disclosures.
treatment of hedging costs,
requirements,
testing,
including changes
Consequential amendments were also made to other standards
as a result of AASB 9, introduced by AASB 2009-11 and
superseded by AASB 2010-7, 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 – 2017 ANNUAL REPORT
Applicatio
n date of
standard
1 January
2018
Applica
tion
date for
Group
1 July
2018
Impact on Group
financial report
is yet
to
The Group
undertake
detailed
a
assessment of the impact of
AASB 15. However
the
Standard is not expected to
have a material impact on
the
and
transactions
balances recognised in the
financial statements when it
is first adopted for the year
ending 30 June 2019.
Reference
Title
Summary
AASB 15
Revenue from
Contracts with
Customers
AASB 15 Revenue from Contracts with Customers replaces the
existing revenue recognition standards AASB 111 Construction
Contracts, AASB 118 Revenue and related Interpretations
(Interpretation 13 Customer Loyalty Programmes, Interpretation
15 Agreements for 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
incorporates
Telecommunications
the
requirements of
from Contracts with
Customers issued by the International Accounting Standards
Board (IASB) and developed jointly with the US Financial
Accounting Standards Board (FASB).
Industry). AASB 15
IFRS 15 Revenue
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
(including
Accounting
Interpretations) arising from the issuance of AASB 15.
Standards
Australian
AASB 2016-3 Amendments to Australian Accounting Standards
– Clarifications to AASB 15 amends AASB 15 to clarify the
requirements on 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.
36
JUPITER ENERGY LIMITED – 2017 ANNUAL REPORT
Applicatio
n date of
standard
1 January
2019
Impact on Group
financial report
Applica
tion
date for
Group
is yet
to
The Group
undertake
detailed
a
assessment of the impact of
AASB 16.
1 July
2019
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 January
2018
The group has not yet
determined the financial
impact of the change.
1 July
2018
37
JUPITER ENERGY LIMITED – 2017 ANNUAL REPORT
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2017
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.
38
JUPITER ENERGY LIMITED – 2017 ANNUAL REPORT
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2017
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 2019 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.
39
JUPITER ENERGY LIMITED – 2017 ANNUAL REPORT
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2017
2
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
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.
40
JUPITER ENERGY LIMITED – 2017 ANNUAL REPORT
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2017
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.
41
JUPITER ENERGY LIMITED – 2017 ANNUAL REPORT
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2017
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.
42
JUPITER ENERGY LIMITED – 2017 ANNUAL REPORT
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2017
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.
43
JUPITER ENERGY LIMITED – 2017 ANNUAL REPORT
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2017
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.
44
JUPITER ENERGY LIMITED – 2017 ANNUAL REPORT
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2017
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.
45
JUPITER ENERGY LIMITED – 2017 ANNUAL REPORT
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2017
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.
46
JUPITER ENERGY LIMITED – 2017 ANNUAL REPORT
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2017
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.
47
JUPITER ENERGY LIMITED – 2017 ANNUAL REPORT
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2017
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.
48
JUPITER ENERGY LIMITED – 2017 ANNUAL REPORT
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2017
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
2017
$
2016
$
397,109
397,109
663,446
663,446
49
JUPITER ENERGY LIMITED – 2017 ANNUAL REPORT
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2017
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
2017
$
2016
$
3,971
(3,971)
6,634
(6,634)
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
Net exposure
Consolidated
2017
$
2016
$
289,924
1,859
681
292,464
653,866
1,859
3,098
658,823
(51,672,210)
(51,672,210)
(51,379,746)
(42,936,226)
(42,936,226)
(42,277,403)
50
JUPITER ENERGY LIMITED – 2017 ANNUAL REPORT
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2017
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
2017
$
2016
$
(2,544,166)
2, 544,166
(2,114,118)
2,114,118
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 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
2017
$
2016
$
-
-
396,635
396,635
(877,363)
-
(51,672,210)
(52,549,573)
(52,152,938)
-
-
387,382
387,382
(755,133)
-
(42,936,226)
(43,691,359)
(43,303,977)
51
JUPITER ENERGY LIMITED – 2017 ANNUAL REPORT
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2017
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 financial liabilities are carried at amortised cost, with the carrying value approximating the fair value.
4.
GENERAL AND ADMINISTRATIVE EXPENSES
Administration and compliance expenses
Employee benefits
Superannuation
Consulting fees
Depreciation and amortisation expenses
Directors fees
Legal fees
Occupancy expenses
Total expenses
Consolidated
2017
$
1,663,575
394,386
40,000
374,067
87,929
225,921
3,869
175,463
2,965,210
2016
$
1,791,817
822,043
40,333
362,021
155,873
199,120
20,283
243,662
3,635,152
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.
52
JUPITER ENERGY LIMITED – 2017 ANNUAL REPORT
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2017
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% (2016: 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
Kazakhstan Losses
Provision for impairment
Deferred tax assets not recognized
Deferred tax (income)/expense
Net deferred tax recognised in Balance Sheet
Consolidated
2017
$
2016
$
(2,423,057)
(3,142,461)
(149,406)
1,994,301
578,162
143,528
-
1,812,399
1,186,534
-
-
-
-
-
-
570,526
-
-
8,867,767
689,136
-
706,926
54
-
7,111,664
910,468
-
(10,127,429)
-
-
(8,729,112)
-
-
The Consolidated Group has tax losses of $16,629,280 (2016:$24,844,409) 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.
53
JUPITER ENERGY LIMITED – 2017 ANNUAL REPORT
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2017
6.
CASH AND CASH EQUIVALENTS
Cash at bank and in hand
Consolidated
2017
$
397,109
397,109
2016
$
663,446
663,446
The bank accounts are at call and pay interest at a weighted average interest rate of 0.04% at 30 June 2017 (2016: 0.04%)
7.
TRADE AND OTHER RECEIVABLES
Current
Trade receivables
Other debtors
Non-current
VAT receivable
Consolidated
2017
$
-
145,139
145,139
2016
$
-
24,064
24,064
2,845,507
2,787,367
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 2017, the aging analysis of receivables is as follows:
2017
2016
Total
2,990,506
2,811,431
0 – 30
Days
145,139
24,064
31 – 60
days
61 - 90
days
-
-
90+
days
2,845,367
2,787,367
-
-
There are no receivables as at 30 June 2017 that are impaired (2016: nil)
8.
OTHER CURRENT ASSETS
Prepayment
9.
INVENTORIES
Raw materials
Crude oil
Provision of obsolete items
Consolidated
2017
$
16,489
16,489
2016
$
67,459
67,459
18,352
-
-
18,352
17,886
-
-
17,886
54
JUPITER ENERGY LIMITED – 2017 ANNUAL REPORT
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2017
10.
OIL AND GAS PROPERTIES
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
Cost as at 30 June 2016
Net exchange differences
Cost as at 30 June 2017
Depletion and impairment as at 30 June 2016
Charge for the year
Depletion and impairment as at 30 June 2017
Net book value as at 30 June 2017
11.
PLANT AND EQUIPMENT
Consolidated
$
26,227,918
(9,422,479)
16,805,439
(1,828,889)
-
(1,828,889)
14,976,550
16,805,439
135,630
16,941,069
(1,828,889)
-
(1,828,889)
15,112,180
Year ended 30 June 2017
Consolidated
At 1 July 2016 net of accumulated depreciation
Additions
Disposals
Depreciation charge for the year
Net exchange differences
At 30 June 2017 net of accumulated depreciation
At 30 June 2017
Cost
Accumulated depreciation
Net carrying amount
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
55
$
417,142
6,201
(3,233)
(87,929)
6,205
338,386
2,058,062
(1,719,676)
338,386
967,247
-
-
(155,873)
(394,232)
417,142
2,055,094
(1,637,952)
417,142
JUPITER ENERGY LIMITED – 2017 ANNUAL REPORT
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2017
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
2017
$
2016
$
29,930,249
28,215,402
28,215,402
1,099,755
-
615,092
29,930,249
44,166,103
279,759
-
(16,230,460)
28,215,402
Oil sales revenue capitalised into exploration and evaluation expenditure for the year was $nil (2016 $nil).
13.
OTHER FINANCIAL ASSETS
Liquidation fund
Other
396,635
-
396,635
387,732
-
387,732
The Group has a deposit for the purpose of a Liquidation fund in the amount of $396,635. 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
451,161
426,198
877,359
652,938
102,195
755,133
-
-
-
-
-
-
60,111
-
-
(60,111)
-
-
The deferred revenue refers to an amount received in advance for oil sales. As at 30 June 2017, there is 0 tonnes of oil to be
delivered under contracts. (2016: nil)
56
JUPITER ENERGY LIMITED – 2017 ANNUAL REPORT
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2017
16.
PROVISIONS
Non – current
Provision for rehabilitation
Consolidated
2017
$
2016
$
234,680
234,680
154,442
154,442
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 $234,680 (2016: $154,442). 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 (2016: 2044). 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 2017 a discount rate of 8.58% (2016:
10.37%) 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
2017
$
154,442
8,803
2,408
-
69,027
234,680
2016
$
527,827
20,850
(228,195)
-
(166,040)
154,442
1Due to a change in the discount rate and the expected timing of when the rehabilitation activities will be undertaken.
57
JUPITER ENERGY LIMITED – 2017 ANNUAL REPORT
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2017
17.
OTHER FINANCIAL LIABILITIES
Non-Current
Promissory notes (unsecured)
Promissory Notes
Consolidated
2017
$
2016
$
51,672,210
51,672,210
42,936,226
42,936,226
During the 2016 year Waterford agreed to put in place a 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 (“the 2016
Funding Agreement”).
The key terms of the 2016 Framework Agreement 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 2017, the Group had drawn down US$3,808,733 (A$4,976,831) (including accrued interest) under the 2016
Funding Agreement. This means that a further $US1,191,267 (including accrued interest) (A$1,554,365) is still available under
this agreement.
During the financial year The Group was granted a range of approvals that positioned it to return to domestic production. As a
result, major shareholder and debtholder Waterford Petroleum Limited (“Waterford”) and debt holder Midocean Holdings Limited
(“Midocean”) (together “the Lenders”) agreed to provide up to a total of a further US$5,000,000 (including accrued interest), in
the amounts of up to US$4,900,000 and US$100,000, respectively under a new Funding Agreement signed on 28 July 2017 (the
“2017 Funding Agreement”).
The 2017 Funding Agreement is similar to the 2016 Funding Agreement with the addition of one new condition. This condition
relates to the payment of a bonus to the Lenders should all or part of the permit area be sold during the term of the 2017 Funding
Agreement.
A summary of the terms of the 2017 Funding Agreement is as follows:
• Unsecured
• Effective 31 July 2017
• Repayable on 31 July 2019 (or such later date agreed by the parties in writing) (the
•
•
•
“Repayment Date”)
Interest rate of 15% pa
Interest will accrue and be repayable with 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 in contract 2275 covering the Block
31 Licence
• Bonus will be payable to the Lenders equivalent to 5% of the sale price of contract 2275 in
the event that the contract is assigned, transferred or sold to a 3rd party during the period
of the facility. No Liability has been recognized, as no sale agreement has been entered
into.
58
JUPITER ENERGY LIMITED – 2017 ANNUAL REPORT
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2017
18.
CONTRIBUTED EQUITY
Shares issued and fully paid
Ordinary shares (a)
Consolidated
2017
$
2016
$
85,633,935
85,633,935
85,633,935
85,633,935
Number
Number
(a) Movements in ordinary share capital:
2017
2016
Balance 30 June 2016
Balance 30 June 2017
153,377,693
153,377,693
153,377,693
153,377,693
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.
59
JUPITER ENERGY LIMITED – 2017 ANNUAL REPORT
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2017
19.
RESERVES
At 30 June 2015
Share based payment
Foreign currency translation
At 30 June 2016
Share based payment
Foreign currency translation
At 30 June 2017
Foreign currency
translation
reserve
$
1,165,133
-
(27,468,783)
(26,303,650)
-
781,407
(25,522,243)
CONSOLIDATED
Share based
payments reserve
Total
$
5,764,014
-
-
5,764,014
-
-
5,764,014
$
6,929,147
-
(27,468,783)
(20,539,636)
-
781,407
(19,758,229)
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
2017
$
2016
$
678,176
40,000
142,972
-
861,148
639,141
40,333
163,106
-
842,580
(b) Transactions between the Group and other related parties
Consultancy fees
During the year, consulting fees of $222,084 (2016: $40,599) 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 $189,000 (2016: $211,000) were accrued and paid under normal terms and conditions to
Symdean Pty Ltd, of which Mr Gander is a director.
60
JUPITER ENERGY LIMITED – 2017 ANNUAL REPORT
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2017
As at 30 June 2017 to following director fees have been accrued to Directors:
Geoff Gander
Baltabek Kuandykov
Scott Mison
Alexey Kruzhkov
$97,377
$133,997
$73,332
$52,961
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 2017 (2016: $Nil).
Options
No options were granted during the year ended 30 June 2017 (2016: Nil).
During the year ended 30 June 2017, no options were exercised over ordinary shares (2016: 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 2017 was nil.
61
JUPITER ENERGY LIMITED – 2017 ANNUAL REPORT
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2017
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
2017
$
2016
$
-
-
-
-
-
-
83,000
83,000
27,400
27,400
11,500
11,500
78,500
78,500
18,645
18,645
12,477
12,477
Total paid to Ernst & Young
121,900
109,622
62
JUPITER ENERGY LIMITED – 2017 ANNUAL REPORT
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2017
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
2017
2016
(8,076,857)
(10,474,870)
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.
63
JUPITER ENERGY LIMITED – 2017 ANNUAL REPORT
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2017
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
(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
Consolidated
2017
$
(8,076,857)
2016
$
(10,474,870)
2,529
-
6,647,669
(1,445,303)
-
(179,215)
(468)
50,971
-
122,227
80,238
(2,798,209)
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)
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.
64
JUPITER ENERGY LIMITED – 2017 ANNUAL REPORT
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2017
27.
EVENTS OCCURING AFTER THE BALANCE SHEET DATE
On 10 July 2017 the Company announced that the Kazakh Ministry of Energy had signed Addendum 8 to Contract 2275 thereby
approving Jupiter’s three year Work Program (2017-2019) that supports the 3 year Exploration Licence Extension that was
granted by the Ministry of Energy during the 4th quarter of 2016.
As part of the signing of Addendum 8, the Ministry of Energy also approved Trial Production Licences extensions for the Akkar
East and West Zhetybai oilfields for the period to 29 December 2019. The approval of the Trial Production Licences enables the
Company to recommence oil production as soon as is practical and it is expected that initial production will be from wells J-51,
J-52 and Well 19 which are all located on the Akkar East oilfield.
The current expectation is that oil production will recommence during the 4th Quarter of 2017.
On 10 July 2017 the Company also announced the cancellation of admission of Depository Interests over Ordinary Shares trading
on AIM.
On 31 July 2017, the Company signed The 2017 Funding Agreement. The 2017 Funding Agreement is similar to the 2016
Funding Agreement with the addition of one new condition. This condition relates to the payment of a bonus to the Lenders
should all or part of the permit area be sold during the term of the 2017 Funding Agreement.
A summary of the terms of the 2017 Funding Agreement is as follows:
• Unsecured
• Effective 31 July 2017
• Repayable on 31 July 2019 (or such later date agreed by the parties in writing) (the
•
•
•
“Repayment Date”)
Interest rate of 15% pa
Interest will accrue and be repayable with 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 in contract 2275 covering the Block
31 Licence
• Bonus will be payable to the Lenders equivalent to 5% of the sale price of contract 2275 in
the event that the contract is assigned, transferred or sold to a 3rd party during the period
of the facility. No Liability has been recognized, as no sale agreement has been entered
into.
On 12 September 2017, Mr Alexander Kuzev was appointed to the Board as a Non-Executive Director.
There have been no other significant events occurring subsequent to 30 June 2017 apart from those noted above.
65
JUPITER ENERGY LIMITED – 2017 ANNUAL REPORT
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2017
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’ deficit
Profit or (loss) of the parent entity
Total comprehensive income / (loss) of the parent entity
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
Country of
incorporation
Australia
Australia
Australia
Singapore
Singapore
2017
$
357,427
48,613,559
(525,556)
2016
$
709,903
47,592,924
(409,456)
(52,197,766)
(43,341,521)
85,633,935
85,633,935
(94,982,152)
(95,649,352)
5,764,014
5,764,014
(3,584,203)
(4,251,403)
(7,831,450)
(19,735,223)
(7,831,450)
(19,735,223)
Equity Holding
2017
%
100
100
100
100
100
2016
%
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 2017 (30 June 2016: Nil)
66
JUPITER ENERGY LIMITED – 2017 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 2017 are in
accordance with the Corporations Act 2001, including:
(i) Giving a true and fair view of its financial position as at 30 June 2017 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 2017.
On behalf of the Board
Geoff Gander
Executive Chairman
Perth, Western Australia
29 September 2017
67
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 audit of the financial report
Opinion
We have audited the financial report of Jupiter Energy Limited (the Company) and its subsidiaries
(collectively the Group), which comprises the consolidated statement of financial position as at 30 June
2017, the consolidated statement of comprehensive income, consolidated statement of changes in equity
and consolidated statement of cash flows for the year then ended, notes to the financial statements,
including a summary of significant accounting policies, and the director’s declaration.
In our opinion, the accompanying financial report of the Group is in accordance with the Corporations Act
2001, including:
a)
giving a true and fair view of the consolidated financial position of the Group as at 30 June 2017
and of its consolidated financial performance for the year ended on that date; and
b)
complying with Australian Accounting Standards and the Corporations Regulations 2001.
Basis for opinion
We conducted our audit in accordance with Australian Auditing Standards. Our responsibilities under
those standards are further described in the Auditor’s Responsibilities for the Audit of the Financial
Report section of our report. We are independent of the Group in accordance with the auditor
independence requirements of the Corporations Act 2001 and the ethical requirements of the Accounting
Professional and Ethical Standards Board’s APES 110 Code of Ethics for Professional Accountants (the
Code) that are relevant to our audit of the financial report in Australia. We have also fulfilled our other
ethical responsibilities in accordance with the Code.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for
our opinion.
Material uncertainty related to going concern
We draw attention to Note 2a in the financial report, which describes the principal conditions that raise
doubt about the Group’s ability to continue as a going concern. These conditions indicate the existence of
a material uncertainty that may cast significant doubt about the Group’s ability to continue as a going
concern. Our opinion is not modified in respect of this matter.
Key audit matters
Key audit matters are those matters that, in our professional judgment, were of most significance in our
audit of the financial report of the current year. These matters were addressed in the context of our audit
of the financial report as a whole, and in forming our opinion thereon, but we do not provide a separate
opinion on these matters. In addition to the matter described in the Material Uncertainty Related to Going
Concern section, we have determined the matter described below to be the key audit matter to be
communicated in our report. For the matter below, our description of how our audit addressed the matter
is provided in that context.
A member firm of Ernst & Young Global Limited
Liability limited by a scheme approved under Professional Standards Legislation
DH:NL:JUPITER:020
We have fulfilled the responsibilities described in the Auditor’s Responsibilities for the Audit of the
Financial Report section of our report, including in relation to these matters. Accordingly, our audit
included the performance of procedures designed to respond to our assessment of the risks of material
misstatement of the financial report. The results of our audit procedures, including the procedures
performed to address the matter below, provide the basis for our audit opinion on the accompanying
financial report.
Why significant
How our audit addressed the key audit matter
The Group’s non-current assets comprising
property, plant and equipment of $338,386, oil
and gas properties of $15,112,180 and
exploration and evaluation expenditure of
$29,930,249 are required to be assessed for
indicators of impairment in accordance with the
Group’s accounting policies at each reporting
date and, where impairment indicators are
identified, the applicable Cash Generating Unit
(CGU) is required to be tested for impairment.
As at 30 June 2017, the Block 31 CGU was
tested for impairment and the CGU recoverable
amount was determined based on the present
value of the future cash-flows expected to be
derived from the CGU. As disclosed in note 2 to
the financial report, the CGU recoverable
amounts are highly sensitive to changes in key
assumptions including long term oil prices,
discount rates, operating and capital costs and
reserves. The recoverability of Block 31 is also
dependent on an export license being granted. No
impairment was recognised for the Block 31 CGU
during the year ended 30 June 2017.
With respect to the Block 31 CGU, as there were
indicators of impairment, we assessed the
appropriateness of the recoverable amounts
determined by the Group. In performing our
procedures we:
► Considered the Group’s assessment of
impairment indicators and considered
whether all indicators of impairment had been
identified;
► Assessed whether forecasted production,
operating and capital expenditure used for
the impairment testing were aligned to the
latest life reserve statements;
► Considered whether all appropriate assets
and liabilities were included in the CGU
carrying values;
► Considered whether tenure over the Block 31
was current and from inquiries as to whether
there had been any instances of non-
compliance with the terms of the Block 31
exploration and production license which
could impact whether an export license is
granted;
►
Involved our valuation specialists to assess
the discount rates and long term oil prices
with reference to market prices (where
available), market research, market practice,
market indices, broker consensus and
historical performance;
► Performed sensitivity analysis on key
assumptions to assess the impact that they
have on the recoverable amount; and
► Considered whether the financial report
appropriately discloses the key estimates in
determining the recoverable value.
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Information other than the financial report and auditor’s report thereon
The directors are responsible for the other information. The other information comprises the information
included in the Company’s 2017 Annual Report, but does not include the financial report and our
auditor’s report thereon.
Our opinion on the financial report does not cover the other information and accordingly we do not
express any form of assurance conclusion thereon, with the exception of the Remuneration Report and
our related assurance opinion.
In connection with our audit of the financial report, our responsibility is to read the other information and,
in doing so, consider whether the other information is materially inconsistent with the financial report or
our knowledge obtained in the audit or otherwise appears to be materially misstated.
If, based on the work we have performed, we conclude that there is a material misstatement of this other
information, we are required to report that fact. We have nothing to report in this regard.
Responsibilities of the directors for the financial report
The directors of the Company are responsible for the preparation of the financial report that gives a true
and fair view in accordance with Australian Accounting Standards and the Corporations Act 2001 and for
such internal control as the directors determine is necessary to enable the preparation of the financial
report that gives a true and fair view and is free from material misstatement, whether due to fraud or
error.
In preparing the financial report, the directors are responsible for assessing the Group’s ability to
continue as a going concern, disclosing, as applicable, matters relating to going concern and using the
going concern basis of accounting unless the directors either intend to liquidate the Group or to cease
operations, or have no realistic alternative but to do so.
Auditor's responsibilities for the audit of the financial report
Our objectives are to obtain reasonable assurance about whether the financial report as a whole is free
from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes
our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit
conducted in accordance with the Australian Auditing Standards will always detect a material
misstatement when it exists. Misstatements can arise from fraud or error and are considered material if,
individually or in the aggregate, they could reasonably be expected to influence the economic decisions of
users taken on the basis of this financial report.
As part of an audit in accordance with the Australian Auditing Standards, we exercise professional
judgment and maintain professional scepticism throughout the audit. We also:
►
Identify and assess the risks of material misstatement of the financial report, whether due to fraud or
error, design and perform audit procedures responsive to those risks, and obtain audit evidence that
is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material
misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve
collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.
► Obtain an understanding of internal control relevant to the audit 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 Group’s internal control.
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► Evaluate the appropriateness of accounting policies used and the reasonableness of accounting
estimates and related disclosures made by the directors.
► Conclude on the appropriateness of the directors’ use of the going concern basis of accounting and,
based on the audit evidence obtained, whether a material uncertainty exists related to events or
conditions that may cast significant doubt on the Group’s ability to continue as a going concern. If we
conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report
to the related disclosures in the financial report or, if such disclosures are inadequate, to modify our
opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s
report. However, future events or conditions may cause the Group to cease to continue as a going
concern.
► Evaluate the overall presentation, structure and content of the financial report, including the
disclosures, and whether the financial report represents the underlying transactions and events in a
manner that achieves fair presentation.
We communicate with the directors regarding, among other matters, the planned scope and timing of the
audit and significant audit findings, including any significant deficiencies in internal control that we
identify during our audit.
We also provide the directors with a statement that we have complied with relevant ethical requirements
regarding independence, and to communicate with them all relationships and other matters that may
reasonably be thought to bear on our independence, and where applicable, related safeguards.
From the matters communicated to the directors, we determine those matters that were of most
significance in the audit of the financial report of the current year and are therefore the key audit
matters. We describe these matters in our auditor’s report unless law or regulation precludes public
disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should
not be communicated in our report because the adverse consequences of doing so would reasonably be
expected to outweigh the public interest benefits of such communication.
Report on the audit of the remuneration report
Opinion on the remuneration report
We have audited the Remuneration Report included in pages 12 to 19 of the directors' report for the year
ended 30 June 2017.
In our opinion, the Remuneration Report of Jupiter Energy Limited for the year ended 30 June 2017,
complies with section 300A of the Corporations Act 2001.
A member firm of Ernst & Young Global Limited
Liability limited by a scheme approved under Professional Standards Legislation
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Responsibilities
The directors of the Company are responsible for the preparation and presentation of the Remuneration
Report in accordance with section 300A of the Corporations Act 2001. Our responsibility is to express an
opinion on the Remuneration Report, based on our audit conducted in accordance with Australian
Auditing Standards.
Ernst & Young
D A Hall
Partner
Perth
29 September 2017
A member firm of Ernst & Young Global Limited
Liability limited by a scheme approved under Professional Standards Legislation
DH:NL:JUPITER:020
JUPITER ENERGY LIMITED – 2017 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 28 September 2017)
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
426
514
203
230
25
1,398
Ordinary
Shares
162,140
1,343,502
1,476,472
6,228,782
144,166,797
153,377,693
The number of shareholders holding less than a marketable parcel of ordinary shares is 923.
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
70
No. of Ordinary
Shares % of Issued capital
JUPITER ENERGY LIMITED – 2017 ANNUAL REPORT
TWENTY LARGEST SHAREHOLDERS
Name of Holder
HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED
FISKE NOMINEES LIMITED
BNP PARIBAS NOMS PTY LTD
J P MORGAN NOMINEES AUSTRALIA LIMITED
SECURE NOMINEES LIMITED
GLENNBROWN PTY LTD
CITICORP NOMINEES PTY LIMITED
BNP PARIBAS NOMINEES PTY LTD
MR GEOFFREY ANTHONY GANDER
1.
2.
3.
4.
5.
6.
7.
8.
9.
10. MR ATHOL GEOFFREY JAMES
11. GOLDEN BOUNTY LIMITED
12. GLENNBROWN PTY LTD
13. MR WARREN GILMOUR + MRS CATHERINE GILMOUR
14.
P H NOMINEES LIMITED
15. NATIONAL NOMINEES LIMITED
16. MR SCOTT MISON
17.
SOUTHAM INVESTMENTS 2003 PTY LTD
18. MR IAN SHERWOOD LOVE + MRS ANNE MARGARET LOVE
19. DR NEIL TANUDISASTRO + MRS YANI SUTANIMAN
20. DALY SF PTY LTD
50,548,879
45,541,678
32,001,825
5,757,434
1,610,357
1,333,334
1,229,863
999,999
769,445
608,148
506,450
465,000
282,753
250,001
233,605
207,038
179,511
166,667
154,667
146,668
TOTAL
142,993,322
71
32.96
29.69
20.86
3.75
1.05
0.87
0.80
0.65
0.50
0.40
0.33
0.30
0.18
0.16
0.15
0.13
0.12
0.11
0.10
0.10
93.23