Level 2
47 Stirling Highway
Nedlands WA 6009
T: + 61 (08) 6389 0322
F: + 61 (08) 6389 0697
26 September 2017
The Manager
The Australian Securities Exchange
The Announcements Officer
Level 4/20 Bridge Street
SYDNEY NSW 2000
Please find attached Key Petroleum Limited’s 2017 Annual Report.
2017 ANNUAL REPORT
Regards
IAN GREGORY
Company Secretary
KEY PETROLEUM LIMITED
ANNUAL REPORT
FOR THE 12 MONTHS ENDED 30 JUNE 2017
ACN 120 580 618
CORPORATE INFORMATION
ABN 50 120 580 618
Directors
Rex Turkington (Chairman & Non-Executive Director)
Kane Marshall (Managing Director)
Dennis Wilkins (Non-Executive Director)
Min Yang (Non-Executive Director)
Geoff Baker (Non-Executive Director)
Company Secretary
Ian Gregory
Registered Office and Principal Place of Business
Level 2, 47 Stirling Highway
NEDLANDS WA 6009
Telephone: +61 8 6389 0322
Facsimile: +61 8 6389 0697
Solicitors
Mizen & Mizen
Barristers & Solicitors
69 Mount Street
WEST PERTH WA 6005
Bankers
National Australia Bank Limited
1232 Hay Street
WEST PERTH WA 6005
Share Register
Computershare Investor Services Pty Ltd
Level 11
172 St George’s Terrace
PERTH WA 6000
Auditors
Bentleys
Level 3, 216 St George’s Terrace
PERTH WA 6000
Internet Address
www.keypetroleum.com.au
Email Address
investors@keypetroleum.com.au
Stock Exchange Listings
Key Petroleum Limited shares (Code: KEY) are listed on the Australian Securities Exchange
1
CONTENTS
Directors' Report
Auditor’s Independence Declaration
Consolidated Statement of Profit or Loss and Other Comprehensive Income
Consolidated Statement of Financial Position
Consolidated Statement of Changes in Equity
Consolidated Statement of Cash Flows
Notes to the Consolidated Financial Statements
Directors' Declaration
Independent Auditor’s Report
ASX Additional Information
3
14
15
16
17
18
19
47
48
54
2
DIRECTORS’ REPORT
Your Directors submit their report on the consolidated entity (referred to hereafter as the Company or Group) consisting of Key
Petroleum Limited and the entities it controlled at the end of, or during, the year ended 30 June 2017.
DIRECTORS
The names and details of the Company’s Directors in office during the year and until the date of this report are as follows. Where
applicable, all current and former directorships held in listed public companies over the last three years have been detailed below.
Directors were in office for this entire period unless otherwise stated.
Names, qualifications, experience and special responsibilities
Rex Turkington, BCom(Hons), BCA, GAICD, AAFSI, ADA1(ASX) (Non-Executive Director, appointed 18 July 2012 and
Non-Executive Chairman, appointed 14 January 2014)
Mr Turkington is a highly experienced corporate advisor and economist who has worked extensively in the financial services and
stockbroking industry in Australia, specialising in the exploration and mining sectors. He has extensive experience with equities,
derivatives, foreign exchange and commodities, and has participated in numerous corporate initial public offerings and capital raisings
for listed exploration and mining companies. Mr Turkington is currently a Director of an Australian corporate advisory company,
offering corporate finance and investor relations advice to listed companies. He holds a First-Class Honours degree in Economics, is
a graduate of the Australian Institute of Company Directors and is an associate of the Institute of Financial Services of Australia. Mr
Turkington is also a Non-Executive Director of TNG Limited and a Non-Executive Director of Todd River Resources Ltd.
Kane Marshall, BSc/Geology, BCom/Corp.Finance, MPetEng (Managing Director, appointed 3 April 2012)
Mr Marshall has several years’ experience working in the international oil industry. In more recent times, he was employed by Santos
Ltd as a Consultant Production Engineer with the Roma Implementation Team in Brisbane, and prior to that, as a Reservoir Engineer
for both Chevron Australia and Woodside Energy on the North-West Shelf projects based in Perth.
Early in 2002 Mr Marshall moved to the United Kingdom where he worked for Highland Energy Limited as a Petroleum Geologist
and Reservoir Engineer and then later with RWE Dea UK Limited as a Petroleum Engineer.
Mr Marshall holds academic qualifications which include a Masters of Petroleum Engineering from Curtin University, Bachelor of
Science (Petroleum Geology) from the University of Western Australia and a Bachelor of Commerce in Investment Finance and
Corporate Finance from the University of Western Australia.
Dennis Wilkins, BBus, AICD, ACIS (Non-Executive Director, appointed 12 January 2007)
Mr Wilkins is an accountant who has been a Director, Company Secretary and acted in a corporate advisory capacity to listed resource
companies for over 23 years.
Mr Wilkins previously served as the Finance Director and Company Secretary for a mid-tier gold producer and also spent five years
working for a leading merchant bank in the United Kingdom. Resource postings to Indonesia, South Africa and New Zealand in
managerial roles has broadened his international experience.
Mr Wilkins has extensive experience in capital raising, specifically for the resources industry, and is the principal of DW Corporate
Pty Ltd which provides advisory, funding and administrative management services to the resource sector.
Min Yang, (Non-Executive Director, appointed 28 January 2014)
Ms Yang resides in Hong Kong and has over 20 years of experience with private and state-run businesses in China and has expertise
in the identification of opportunities in resources and financial investment. Currently the Director and Chairman of ASF Group Limited
and a Non-Executive Chairman of Rey Resources Limited and ActivEX Limited. Ms Yang has also held a non-executive position with
Metaliko Resources Limited (resigned 27 October 2016).
Geoff Baker, BCom, LLB, MBA (Non-Executive Director, appointed 1 March 2015)
Mr Baker is an Australian solicitor residing and working in Hong Kong and UK and has over 30 years of experience assisting
companies in conducting business in China in addition to providing advice in mining, resources and finance. Currently a Non-Executive
Director of ASF Group Limited, ActivEX Limited and Rey Resources Limited. Mr Baker has also held a non-executive position with
Metaliko Resources Limited (resigned 12 January 2017).
COMPANY SECRETARY
Ian Gregory, BBus, FGIA, FCIS, F Fin, MAICD
Mr Gregory is a professionally well-connected Director and Company Secretary with over 30 years’ experience in the provision of
company secretarial, governance and business administration services with listed and unlisted companies in a variety of industries,
including oil and gas, exploration, mining, mineral processing, banking and insurance. He also has expertise which includes launching
successful start-up operations through the development of the company secretarial role and board reporting processes. Mr Gregory
currently consults on company secretarial and governance matters to a number of listed and unlisted companies.
Prior to founding his own consulting Company Secretarial business in 2005 Mr Gregory was the Company Secretary of Iluka Resources
Ltd (6 years), IBJ Australia Bank Ltd Group, the Australian operations of The Industrial Bank of Japan (12 years), and the Griffin
Coal Mining Group of companies (4 years).
Mr Gregory is a past member and Chairman of the Western Australian Branch Council of Governance Institute of Australia (GIA) and
has also served on the National Council of GIA.
3
DIRECTORS’ REPORT (CONTINUED)
Interests in the shares and options of the Company and related bodies corporate
As at the date of this report, the interests of the directors in the shares and options of Key Petroleum Limited were:
Rex Turkington
Kane Marshall
Dennis Wilkins
Min Yang
Geoff Baker
Ordinary Shares
-
17,500,000
-
221,147,588(1)
221,147,588(1)
Options over
Ordinary Shares
Performance
Rights
6,000,000
32,000,000
1,500,000
-
-
-
4,000,000
-
-
-
(1) Ms Yang and Mr Baker are both directors of ASF Group Limited which is the ultimate holding company of ASF Oil & Gas
Holdings Pty Ltd which holds shares in Key Petroleum Limited.
PRINCIPAL ACTIVITIES
The principal activities of the Group during the year were the acquisition of petroleum permits, and the exploration of these permits
with the objective of identifying economic oil and gas reserves.
DIVIDENDS
No dividends were paid or declared during the year. No recommendation for payment of dividends has been made.
OPERATING AND FINANCIAL REVIEW
Operations Review
2016/2017 has been a pivotal year for Key Petroleum Limited (“Key”) where it established its position as a major Perth Basin explorer,
as well as setting the company on an exciting new path with the acquisition of three permits from Beach Petroleum in south west
Queensland portion of the Cooper Eromanga Basin.
Key was instrumental in establishing a partnership with Pilot Energy, who then managed to secure the offshore Perth Basin permit
WA-481-P from Murphy Oil for a small outlay and a net profit interest of 10%. Murphy, and its joint venture partners Kufpec and
Samsung had previously acquired two 3D seismic surveys and drilled three wells with expenditure exceeding US$100 million. All of
their efforts were focussed on the outboard Turtle Dove Ridge trend, leaving the highly prospective inboard trend where previous
discoveries had been made by Roc Oil. In addition, Pilot and Key have secured Murphy’s PRRT credits, making the economics of any
future developments much more attractive.
Key has agreed to Binding Terms with AWE Perth Pty Ltd for the Acquisition of L7 (R1), onshore Perth Basin, which covers the Mt
Horner oil field and adjoins eastward of Key’s EP 437 permit, providing strategic additional prospectivity to Key’s onshore Perth
Basin portfolio. The terms include an Option for AWE to farm in for 50% of Key’s 40% interest in WA-481-P L7 in return for a
capped carry of Key’s ongoing costs and commitments in the permit.
Key entered a new phase with the completion of a sale and purchase agreement with subsidiaries of Beach Energy Limited (“Beach”)
to acquire 100% ownership of authorities to prospect ATPs 783, 920 and 924 located in the Cooper Eromanga Basin in south west
Queensland, subject to standard Ministerial approvals. An Environmental audit of ATP924 seismic survey lines to assess the
rehabilitation status was completed as part of the conditions precedent for the sale and purchase agreement.
Outlook
EP437
Key has finalised a location for the drilling of Wye Knot-1 which will, in the coming year, test for a commercial oil leg below the
previous Wye-1 discovery. Tendering for drilling and third-party services had commenced prior to the end of the review period. The
Joint Venture has also received notification from the Department of Mines and Petroleum (“DMP”) that it was successful in its
application for a $200,000 Exploration Incentive Scheme grant, which will be applied to the cost of drilling the well through Permian
targets.
4
DIRECTORS’ REPORT (CONTINUED)
EP104/R1/L15
For EP104 Key was granted an extension of 6 months by the DMP, with the permit year expiry moved from 29 July 2017 to 29 January
2018. An application for permission to access and conduct the Saddleback Geochemical Survey is still pending, however Key is
confident that the survey will be completed within the revised timeline.
Key also completed care and maintenance activities on suspended / shut-in wells in R1 and L15 as recommended by the DMP after
an inspection last year. Key also conducted an Environmental Field Assessment and will submit its report to DMIRS in the first
quarter.
The planned AEM-PTP aerial survey over R1, to further evaluate economic potential of Retention Lease, is expected to be completed
by the first week of October 2017.
WA-481-P
Pilot Energy Limited, operator of WA-481-P, provided a work program update to the market in July 2017, stating that NOPTA has
agreed to remove the two commitment wells from the remaining secondary term and replace the work program with seismic
reprocessing. Key understands that tendering the reprocessing work has been conducted by the operator and the prospectivity of the
inboard play fairway will be matured in the coming year.
ATPs 783, 920 and 924
Key has commenced preliminary geological and geophysical mapping of the Cooper Eromanga ATP’s and is confident that significant
oil and gas potential will be realised in the area. Key has identified two significant oil trends and has also captured a large portion of
the Permian basin centred gas play in which there has been recent positive results in neighbouring acreage. Key expects to release the
results of its resource assessment within the next year.
Finance Review
The Group has recorded an operating loss after income tax for the year ended 30 June 2017 of $1,144,731 (2016: $2,186,709).
At 30 June 2017 funds available totalled $1,126,887 (2016: $1,573,472).
Operating Results for the Year
Summarised operating results are as follows:
Consolidated entity revenues and loss
Shareholder Returns
Basic loss per share (cents)
Risk Management
2017
Revenues
$
Results
$
57,882
(1,144,731)
2017
(0.11)
2016
(0.28)
The Board is responsible for ensuring that risks, and also opportunities, are identified on a timely basis and that activities are aligned
with the risks and opportunities identified by the board.
The Company believes that it is crucial for all Board members to be a part of this process, and as such the Board has not established a
separate Audit and Risk Management Committee.
The Board has a number of mechanisms in place to ensure that management's objectives and activities are aligned with the risks
identified by the Board. These include the following:
•
•
Board approval of a strategic plan, which encompasses strategy statements designed to meet stakeholder’s needs and manage
business risk.
Implementation of Board approved operating plans and budgets and Board monitoring of progress against these budgets.
5
DIRECTORS’ REPORT (CONTINUED)
SIGNIFICANT CHANGES IN THE STATE OF AFFAIRS
Other than as disclosed in this Annual Report, no significant changes in the state of affairs of the Group occurred during the financial
year.
SIGNIFICANT EVENTS AFTER THE BALANCE DATE
Subsequent to the end of the year:-
• Key Petroleum Limited issued 100 million shares at $0.01 per share on 15 August 2017 to raise $1million before costs.
LIKELY DEVELOPMENTS AND EXPECTED RESULTS
The Group expects to maintain the present status and level of operations and hence there are no likely developments in the Group’s
operations.
ENVIRONMENTAL REGULATION AND PERFORMANCE
The Group is subject to significant environmental regulation in respect of its production and exploration activities.
The Group aims to ensure the appropriate standard of environmental care is achieved, and in doing so, that it is aware of and is in
compliance with all environmental legislation. The Directors of the Company are not aware of any breach of environmental legislation
for the year under review.
The Group is in compliance with the various environmental legislation and regulations that govern its activities in the jurisdictions in
which it operates.
REMUNERATION REPORT
The information provided in this remuneration report has been audited as required by section 308(3C) of the Corporations Act 2001.
Principles used to determine the nature and amount of remuneration
Remuneration Policy
The Remuneration Committee Charter of Key Petroleum Limited has been designed to align director and executive objectives with
shareholder and business objectives by providing a fixed remuneration component and offering specific long-term incentives based on
key performance areas affecting the Company’s strategic goals. The Board of Key Petroleum Limited believes the Remuneration
Policy to be appropriate and effective in its ability to attract and retain the best executives and directors to run and manage the Group.
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. All executives receive a base salary or an agreed fee (which is based on factors such as length of service and experience)
and superannuation. 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.
The Board may exercise discretion in relation to approving incentives, bonuses and options. The policy is designed to attract and retain
the highest calibre of executives and reward them for performance that results in long-term growth in shareholder wealth.
Executives are also eligible to participate in the employee share and option arrangements.
The executives receive a superannuation guarantee contribution required by the government, which was 9.5% for the 2017 financial
year, and do not receive any other retirement benefits. Some individuals, however, may choose to sacrifice part of their salary to
increase payments towards superannuation.
Given the low oil price environment, effective from 1 February 2016 Non-Executive Directors agreed to reduce their fees by 25%.
The Managing Director and Chief Financial Officer also reduced salaries by 30% and 20% respectively effective from 1 February
2016. On 1 January 2017 the previous reduction for the managing director’s salary was reinstated and the salary package is now
$250,000 plus statutory superannuation.
6
DIRECTORS’ REPORT (CONTINUED)
All remuneration paid to directors and executives is valued at the cost to the Group. Based on each individual’s timesheet, costs are
allocated to exploration projects and treated in accordance with the accounting policy described at Note 1(p), or expensed where the
time is not allocated directly to a project. Options are valued using the Black-Scholes Option Pricing methodology.
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 (currently
$500,000). Fees for non-executive directors are not linked to the performance of the Group. However, to align directors’ interests with
shareholder interests, the Directors are encouraged to hold shares in the Company and are eligible to participate in the employee share
option plan.
Performance based remuneration
The Group currently has performance based remuneration components built into director and executive remuneration packages.
Kane Marshall was issued 4,000,000 performance rights for nil consideration following shareholder approval granted at a General
Meeting held on 6 August 2012. Half of the performance rights will vest if the volume weighted average price of the Company’s shares
as quoted on ASX increases by 100% from the share price reference point for a consecutive period of at least 30 business days during
a calendar year. The other half will vest if the volume weighted average price of the Company’s shares as quoted on ASX increases
by 150% from the share price reference point for a consecutive period of at least 30 business days during a calendar year.
In addition, Mr Marshall received 20,000,000 options for nil consideration following shareholder approval granted at the Annual
General Meeting on 22 November 2016. The options will vest where the average 30 consecutive day VWAP of the Company’s shares
is equal or greater than 1.5 cents.
Group performance, shareholder wealth and directors' and executives' remuneration
The remuneration policy has been tailored to increase the direct positive relationship between shareholders’ investment objectives and
directors’ and executives’ performance. The Company plans to facilitate this process by directors and executives participating in future
option issues to encourage the alignment of personal and shareholder interests. The Company believes this policy will be effective in
increasing shareholder wealth.
Use of remuneration consultants
The Group did not employ the services of any remuneration consultants during the financial year ended 30 June 2017.
Voting and comments made at the Company’s 2016 Annual General Meeting
The Company received 92.32% of “yes” votes on its remuneration report for the 2016 financial year. The Company did not receive
any specific feedback at the AGM or throughout the year on its remuneration practices.
Details of remuneration
Details of the remuneration of the directors and the key management personnel of the Group are set out in the following table.
The key management personnel of the Group include the directors as per page 3 above and this also includes the chief financial officer.
Given the size and nature of operations of the Group, there are no other employees who are required to have their remuneration disclosed
in accordance with the Corporations Act 2001.
7
DIRECTORS’ REPORT (CONTINUED)
Key management personnel of the Group
Short Term Benefits
Post-Employment
Benefits
Long-Term
Benefits
Equity-
Settled Share-
Based
Payments
Salary
& Fees
Profit
Share &
Bonuses
Non-
Monetary
Other
Pension &
Super-
annuation
Other
Incentive
Plans
LSL
Shares/
Units
Options/
Rights
Cash-
Settled
Share
Based
Payments
Termin
-ation
Benefits
Total
$
$
$
$
$
$
$
$
$
$
$
$
$
Directors
Rex Turkingto
(appointed 18
July 2013)
2017
45,000
2016
53,750
Kane Marshall
2017
213,542
2016
218,750
Dennis Wilkins
2017
24,000
Min Yang
(appointed 28
January 2014)
Geoff Baker
(appointed 28
January 2014)
Executives
Robert Ierace
(1)
2016
28,666
2017
24,000
2016
28,666
2017
24,000
2016
28,666
2017
94,498
2016
161,875
Total key
management
personnel
2017
425,040
2016
520,373
-
-
-
-
-
-
-
-
-
-
-
-
(1) Resigned on 10 February 2017.
Service agreements
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
19,792
20,781
-
-
-
-
-
8,447
15,378
28,239
36,159
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
12,844
12,880
34,203
29,713
7,408
7,428
-
-
-
-
-
54,455
50,021
-
-
-
-
-
-
-
-
-
-
-
-
57,844
66,630
267,536
269,244
31,408
36,094
24,000
28,666
24,000
28,666
102,945
177,253
507,734
606,553
The details of service agreements of the key management personnel of Key Petroleum Limited are as follows:
Rex Turkington, Non-Executive Chairman:
•
•
•
Annual consulting fee of $45,000 to be paid to Katarina Corporation Pty Ltd, a business of which Mr Turkington is principal.
From 1 July 2017, the previous 25% reduction in fees was re-instated and the amount is now $60,000).
Agreement commenced 14 January 2014 for a twelve month period and has since been renewed for a further twelve months in
each of the last three years.
The agreement may be terminated, without cause, by either party with one months’ written notice.
Kane Marshall, Managing Director:
• Mr Marshall is a full-time employee of the Company with an annual salary of $250,000, plus statutory superannuation.
•
The agreement may be terminated, without cause, by either party with three months’ written notice.
Min Yang, Non-Executive Director:
•
•
•
Annual consulting fee of $24,000 to be paid to Luxe Hill Ltd, a business of which Ms Yang is principal. From 1 July 2017, the
previous 25% reduction in fees was re-instated and the amount is now $32,000).
Agreement commenced 28 January 2014 for a twelve month period and has since been renewed for a further twelve months in
each of the last three years.
The agreement may be terminated, without cause, by either party with three months’ written notice.
8
DIRECTORS’ REPORT (CONTINUED)
Geoff Baker, Non-Executive Director:
•
•
•
Annual consulting fee of $24,000 to be paid to Gold Star Industry Limited, a business of which Mr Baker is principal. From 1
July 2017, the previous 25% reduction in fees was re-instated and the amount is now $32,000).
Agreement commenced 3 March 2015 for a twelve month period and has since been renewed for a further twelve months in
each of the last two years.
The agreement may be terminated, without cause, by either party with three months’ written notice.
Robert Ierace – Chief Financial Officer (resigned 10 February 2017)
• Mr Ierace was a full time employee of the Company with an annual salary of $140,000 plus statutory superannuation.
•
The agreement may be terminated, without cause, by either party with two months’ written notice.
Share-based compensation
Options
Options are issued at no cost to key management personnel as part of their remuneration. The options are not issued based on
performance criteria, but are issued to the majority of key management personnel of Key Petroleum Limited to increase goal
congruence between key management personnel and shareholders. The following options over ordinary shares of the Company were
granted to or vesting with key management personnel during the year:
Grant Date
Granted
Number
Vesting Date Expiry Date
Exercise
Price
(cents)
Value per
option at
grant date
(cents)
Exercised
Number
% of
Remuneration
Directors
Kane Marshall
06/08/2012
4,000,000
Kane Marshall
06/08/2012
4,000,000
Kane Marshall
06/08/2012
4,000,000
Dennis Wilkins
06/08/2012
1,000,000
Dennis Wilkins
06/08/2012
1,000,000
Dennis Wilkins
06/08/2012
1,000,000
Rex Turkington
30/11/2012
2,000,000
Rex Turkington
30/11/2012
2,000,000
Rex Turkington
30/11/2012
2,000,000
Kane Marshall
22/11/2016
20,000,000
(1)
(2)
(3)
(1)
(2)
(3)
(4)
(5)
(6)
(7)
06/08/2017
06/08/2017
06/08/2017
06/08/2017
06/08/2017
06/08/2017
06/08/2017
06/08/2017
06/08/2017
22/11/2020
5.5
6.4
7.4
5.5
6.4
7.4
4.4
5.2
5.9
1.5
2.5
2.5
2.4
2.5
2.5
2.4
2.1
2.0
1.9
0.4
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
3.5
2.9
2.2
6.8
5.5
4.3
7.3
5.8
4.5
3.0
(1) These options will vest once the market capitalisation of the Company appreciates 100% from 6 August 2012.
(2) These options will vest once the market capitalisation of the Company appreciates 150% from 6 August 2012.
(3) These options will vest once the market capitalisation of the Company appreciates 200% from 6 August 2012.
(4) These options will vest once the market capitalisation of the Company appreciates 100% from 30 November 2012.
(5) These options will vest once the market capitalisation of the Company appreciates 150% from 30 November 2012.
(6) These options will vest once the market capitalisation of the Company appreciates 200% from 30 November 2012.
(7) The options will vest once the market price of the shares is above 1.5 cents for a period of 30 consecutive days trading on ASX.
There were no ordinary shares issued upon exercise of remuneration options to directors or other key management personnel of Key
Petroleum Limited during the year.
9
DIRECTORS’ REPORT (CONTINUED)
Performance Rights
Performance rights are issued to directors and executives as part of their remuneration. The Company does not have a formal policy
in relation to the key management personnel limiting their exposure to risk in relation to the securities, but the Board actively
discourages key personnel from obtaining mortgages in securities held in the Company.
The following performance rights were granted to or vesting with key management personnel during the year, there were no
performance rights forfeited during the year:
Directors
Kane Marshall
Kane Marshall
Grant Date
Granted
Number
Vested
Number
Date Vesting
and
Exercisable
Expiry Date
Value per
right at
grant date
(cents)(1)
% of
Remuneration
06/08/2012 2,000,000
06/08/2012 2,000,000
Nil
Nil
(2)
(3)
N/A
N/A
3.6
3.6
6.6
5.5
(1) The value at grant date in accordance with AASB 2: Share Based Payments of performance rights granted during the year as part
of remuneration. The value is the closing share price on grant date.
(2) These rights vest upon the satisfaction of the following performance hurdle:
“When the volume weighted average price of the Company’s shares increases by 100% for a consecutive period of at least 30
business days during each calendar year of the directors’ term.”
At the grant date, the Board determined that the probability of this performance condition being met was 60%.
(3) These rights vest upon the satisfaction of the following performance hurdle:
“When the volume weighted average price of the Company’s shares increases by 150% for a consecutive period of at least 30
business days during each calendar year of the directors’ term.”
At the grant date, the Board determined that the probability of this performance condition being met was 50%.
Equity instruments held by key management personnel
Share holdings
The numbers of shares in the Company held during the financial year by each director of Key Petroleum Limited and other key
management personnel of the Group, including their personally related parties, and any nominally held, are set out below. There were
no shares granted during the reporting period as compensation.
2017
Directors of Key Petroleum Limited
Ordinary shares
Rex Turkington
Kane Marshall
Dennis Wilkins
Min Yang (1) (2)
Geoff Baker (1) (2)
Executives
Balance at
start of the
year
Received
during the year
on the exercise
of options
Other
changes
during the
year
Balance at
end of the
year
-
17,500,000
-
141,147,588
141,147,588
-
-
-
-
-
-
-
-
-
-
17,500,000
-
80,000,000
221,147,588
80,000,000
221,147,588
-
-
Robert Ierace (resigned on 10 February 2017)
-
(1) Amount held at the respective dates of appointment.
(2) Ms Yang and Mr Baker are both directors of ASF Group Limited which is the ultimate holding company of ASF Oil & Gas
Holdings Pty Ltd which holds shares in Key Petroleum Limited.
10
DIRECTORS’ REPORT (CONTINUED)
Option holdings
The numbers of options over ordinary shares in the Company held during the financial year by each director of Key Petroleum Limited
and other key management personnel of the Group, including their personally related parties, are set out below:
Balance at
start of the
year
Granted as
compensation
Exercised
Other
changes
Balance at
end of the
year
Vested and
exercisable
Unvested
2017
Directors of Key Petroleum
Limited
Rex Turkington
Kane Marshall
Dennis Wilkins
Min Yang
Geoff Baker
Executives
6,000,000
-
12,000,000
20,000,000
1,500,000
-
-
-
-
-
-
-
-
-
-
-
-
6,000,000
-
6,000,000
- 32,000,000
- 32,000,000
-
-
-
1,500,000
-
-
-
-
-
-
-
1,500,000
-
-
-
Robert Ierace (1)
5,000,000
- 5,000,000
(1) Held as at the date of resignation (10 February 2017). The options lapsed on 12 March 2017.
All vested options are exercisable at the end of the year.
Performance Right holdings
Kane Marshall was issued 4,000,000 Performance Rights for nil consideration on 6 August 2012 following shareholder approval
granted at the General Meeting held on that date. The performance rights were issued in two equal tranches that will vest on the
respective satisfaction of the following performance conditions:
(1) Performance rights A:
“When the volume weighted average price of the Company’s shares increases by 100% for a consecutive period of at least 30
business days during each calendar year of the directors’ term.”
(2) Performance rights B:
“When the volume weighted average price of the Company’s shares increases by 150% for a consecutive period of at least 30
business days during each calendar year of the directors’ term.”
Loans to key management personnel
There were no loans to key management personnel during the year.
Other transactions with key management personnel
There are no other related party transactions during the year.
End of audited Remuneration Report
11
DIRECTORS’ REPORT (CONTINUED)
DIRECTORS’ MEETINGS
During the year the Company held eight meetings of the board of directors. The attendance of directors at meetings of the board and
its committees were:
Directors’ Meetings
Audit & Risk Committee
Meetings
Remuneration Committee
Meetings
A
8
8
7
5
7
B
8
8
8
8
8
A
3
*#
3
1
*
B
3
*#
3
3
*
A
2
*#
4
#
4
B
4
*#
4
#
4
Rex Turkington
Kane Marshall
Dennis Wilkins
Min Yang
Geoff Baker
Notes
A – Number of meetings attended.
B – Number of meetings held during the time the director held office during the year.
* – Not a member of the Audit & Risk Committee.
# - Not a member of the Remuneration Committee.
SHARES UNDER OPTION
Unissued ordinary shares of Key Petroleum Limited under option at the date of this report are as follows:
Date options granted
7 December 2012
7 December 2012
8 August 2012
7 December 2012
8 August 2012
8 August 2012
9 March 2015
Expiry date
6 August 2017
6 August 2017
6 August 2017
6 August 2017
6 August 2017
6 August 2017
9 March 2019
22 November 2016
30 November 2020
Total number of options outstanding at the date of this report
Exercise price (cents)
Number of options
4.4
5.2
5.5
5.9
6.4
7.4
1.287
1.5
2,000,000
2,000,000
7,000,000
2,000,000
7,000,000
7,000,000
1,000,000
20,000,000
48,000,000
No option holder has any right under the options to participate in any other share issue of the Company or any other entity.
12
DIRECTORS’ REPORT (CONTINUED)
INSURANCE OF DIRECTORS AND OFFICERS
During the financial year, Key Petroleum Limited paid a premium of $17,864 to insure the directors and secretary of the company.
The liabilities insured are legal costs that may be incurred in defending civil or criminal proceedings that may be brought against the
officers in their capacity as officers of the Company, and any other payments arising from liabilities incurred by the officers in
connection with such proceedings. This does not include such liabilities that arise from conduct involving a wilful breach of duty by
the officers or the improper use by the officers of their position or of information to gain advantage for themselves or someone else or
to cause detriment to the company. It is not possible to apportion the premium between amounts relating to the insurance against legal
costs and those relating to other liabilities.
NON-AUDIT SERVICES
There were no non-audit services provided by the entity's auditor, Bentleys, or associated entities.
PROCEEDINGS ON BEHALF OF THE COMPANY
No person has applied to the Court under section 237 of the Corporations Act 2001 for leave to bring proceedings on behalf of the
Group, or to intervene in any proceedings to which the Group is a party, for the purpose of taking responsibility on behalf of the Group
for all or any part of those proceedings.
No proceedings have been brought or intervened in on behalf of the Group with leave of the Court under section 237 of the
Corporations Act 2001.
AUDITOR’S INDEPENDENCE DECLARATION
A copy of the Auditor's Independence Declaration as required under section 307C of the Corporations Act 2001 is set out on page 14
Signed in accordance with a resolution of the directors for Key Petroleum Limited.
Kane Marshall
Managing Director
Perth, 26 September 2017
CORPORATE GOVERNANCE STATEMENT
The Company’s 2017 Corporate Governance Statement has been released as a separate document and is located on our website at
http://www.keypetroleum.com.au/corporate_governance.
13
To The Board of Directors
Auditor’s Independence Declaration under Section 307C of the
Corporations Act 2001
As lead audit director for the audit of the financial statements of Key Petroleum Limited
for the financial year ended 30 June 2017, I declare that to the best of my knowledge
and belief, there have been no contraventions of:
the auditor independence requirements of the Corporations Act 2001 in relation to
the audit; and
any applicable code of professional conduct in relation to the audit.
Yours faithfully
BENTLEYS
Chartered Accountants
DOUG BELL CA
Director
Dated at Perth this 26th day of September 2017
CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER
COMPREHENSIVE INCOME
YEAR ENDED 30 JUNE 2017
Notes
2017
$
2016
$
REVENUE FROM CONTINUING OPERATIONS
2
57,882
75,686
EXPENDITURE
Depreciation expense
Salaries and employee benefits expense
Corporate expenditure
Administration costs
Exploration costs not capitalised
Exploration costs written off
Share-based payments expense
Finance costs
LOSS BEFORE INCOME TAX
INCOME TAX BENEFIT / (EXPENSE)
LOSS FOR THE YEAR
OTHER COMPREHENSIVE INCOME
Items that may be reclassified to profit or loss
Exchange differences on translation of foreign operations
Other comprehensive income for the year, net of tax
TOTAL COMPREHENSIVE INCOME FOR THE YEAR ATTRIBUTABLE TO
MEMBERS OF KEY PETROLEUM LIMITED
Basic loss per share for loss (cents per share)
Dilutive loss per share for loss (cents per share)
(37,383)
(364,881)
(54,681)
(408,884)
(230,581)
-
(69,271)
(36,932)
(43,363)
(442,301)
(58,944)
(300,555)
(244,251)
(1,095,916)
(64,878)
(12,187)
(1,144,731)
(2,186,709)
-
-
(1,144,731)
(2,186,709)
228
228
(1,698)
(1,698)
(1,144,503)
(2,188,407)
(0.11)
(0.11)
(0.28)
(0.28)
9
22
3
4
21
21
The above Consolidated Statement of Profit or Loss and Other Comprehensive Income should be read in conjunction with the Notes to
the Consolidated Financial Statements.
15
8
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
AT 30 JUNE 2017
CURRENT ASSETS
Cash and cash equivalents
Trade and other receivables
TOTAL CURRENT ASSETS
NON-CURRENT ASSETS
Receivables
Plant and equipment
Capitalised exploration costs
TOTAL NON-CURRENT ASSETS
TOTAL ASSETS
CURRENT LIABILITIES
Trade and other payables
Provisions
TOTAL CURRENT LIABILITIES
NON-CURRENT LIABILITIES
Provisions
TOTAL NON-CURRENT LIABILITIES
TOTAL LIABILITIES
NET ASSETS
EQUITY
Issued capital
Reserves
Accumulated losses
TOTAL EQUITY
Notes
2017
$
2016
$
5
6
7
8
9
10
11
11
1,126,887
54,905
1,181,792
15,000
254,970
4,675,209
4,945,179
6,126,971
212,641
-
212,641
2,866,782
2,866,782
3,079,423
3,047,548
1,573,472
146,463
1,719,935
15,000
292,352
4,084,087
4,391,439
6,111,374
154,396
2,479,543
2,633,939
349,468
349,468
2,983,407
3,127,967
12
13(a)
38,535,283
613,744
(36,101,479)
3,047,548
37,540,470
544,245
(34,956,748)
3,127,967
The above Consolidated Statement of Financial Position should be read in conjunction with the Notes to the Consolidated Financial
Statements.
16
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
YEAR ENDED 30 JUNE 2017
Issued
Capital
Share-
Based
Payments
Reserve
Foreign
Currency
Translation
Reserve
Accumulated
Losses
Total
$
$
$
$
$
BALANCE AT 1 JULY 2015
36,844,550
559,262
(78,197)
(32,770,039)
4,555,576
Loss for the year
Exchange differences on translation
of foreign operations
TOTAL COMPREHENSIVE INCOME
TRANSACTIONS WITH OWNERS IN
THEIR CAPACITY AS OWNERS
Shares issued during the year
Share issue transaction costs
Share-based payments
-
-
-
700,000
(4,080)
-
-
-
-
-
-
64,878
-
(2,186,709)
(2,186,709)
(1,698)
-
(1,698)
(1,698)
(2,186,709)
(2,188,407)
-
-
-
-
-
-
700,000
(4,080)
64,878
BALANCE AT 30 JUNE 2016
37,540,470
624,140
(79,895)
(34,956,748)
3,127,967
BALANCE AT 1 JULY 2016
37,540,470
624,140
(79,895)
(34,956,748)
3,127,967
Loss for the year
Exchange differences on translation
of foreign operations
TOTAL COMPREHENSIVE LOSS FOR
THE YEAR
TRANSACTIONS WITH OWNERS IN
THEIR CAPACITY AS OWNERS
Shares issued during the year
Share issue transaction costs
Share-based payments
BALANCE AT 30 JUNE 2017
-
-
-
1,000,000
(5,187)
-
-
-
-
-
-
69,271
-
(1,144,731)
(1,144,731)
228
-
228
228
(1,144,731)
(1,144,503)
-
-
-
-
-
-
1,000,000
(5,187)
69,271
38,535,283
693,411
(79,667)
(36,101,479)
3,047,548
The above Consolidated Statement of Changes in Equity should be read in conjunction with the Notes to the Consolidated Financial
Statements.
17
CONSOLIDATED STATEMENT OF CASH FLOWS
Notes
2017
$
2016
$
YEAR ENDED 30 JUNE 2017
CASH FLOWS FROM OPERATING ACTIVITIES
Receipts from customers
Payments to suppliers and employees
Interest received
Finance costs paid
Expenditure on petroleum interests
NET CASH OUTFLOW FROM OPERATING ACTIVITIES
5(a)
CASH FLOWS FROM INVESTING ACTIVITIES
Payments for plant and equipment
NET CASH OUTFLOW FROM INVESTING ACTIVITIES
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issues of ordinary shares and options
Payments of share issue transaction costs
NET CASH INFLOW FROM FINANCING ACTIVITIES
31,246
(735,761)
19,135
(1,990)
(754,028)
(1,441,398)
115,299
(797,729)
50,033
(3,804)
(1,134,446)
(1,770,647)
-
-
(243)
(243)
1,000,000
(5,187)
994,813
700,000
(4,080)
695,920
NET DECREASE IN CASH AND CASH EQUIVALENTS
(446,585)
(1,074,970)
Cash and cash equivalents at the beginning of the financial year
Effects of exchange rate changes on cash and cash equivalents
CASH AND CASH EQUIVALENTS AT THE END OF THE YEAR
5
1,573,472
-
1,126,887
2,648,442
-
1,573,472
The above Consolidated Statement of Cash Flows should be read in conjunction with the Notes to the Consolidated Financial Statements.
18
NOTES TO THE FINANCIAL STATEMENTS
30 JUNE 2017
1.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The principal accounting policies adopted in the preparation of the financial statements are set out below. These policies have been
consistently applied to all the years presented, unless otherwise stated. The financial statements are for the consolidated entity
consisting of Key Petroleum Limited and its subsidiaries. The financial statements are presented in Australian currency. Key Petroleum
Limited is a company limited by shares, domiciled and incorporated in Australia. The financial statements were authorised for issue
by the directors on 26 September 2017. The directors have the power to amend and reissue the financial statements.
(a) Basis of preparation
These general purpose financial statements have been prepared in accordance with Australian Accounting Standards and
Interpretations issued by the Australian Accounting Standards Board and the Corporations Act 2001. Key Petroleum Limited is a for-
profit entity for the purpose of preparing the financial statements.
(i) Compliance with IFRS
The consolidated financial statements of the Key Petroleum Limited Group also comply with International Financial Reporting
Standards (IFRS) as issued by the International Accounting Standards Board (IASB).
(ii) New and amended standards adopted by the Group
The Group has adopted all of the new and revised Standards and Interpretations issued by the AASB that are relevant to their operations
and effective for the current annual reporting period.
The adoption of all the new and revised Standards and Interpretations has not resulted in any changes to the Group’s accounting
policies and has no effect on the amounts reported for the current or prior years.
(iii) Early adoption of standards
The Group has not elected to apply any pronouncements before their operative date in the annual reporting period beginning 1 July
2017.
(iv) Historical cost convention
These financial statements have been prepared under the historical cost convention, as modified by the amount of share based payments
expense, which have been measured at fair value.
(v) Going concern
The financial report has been prepared on the going concern basis, which contemplates the continuity of normal business activity and
the realisation of assets and the settlement of liabilities in the ordinary course of business.
The Group incurred a loss for the year of $1,144,731 (2016: $2,186,709) and net cash outflows from operating activities of $1,441,398
(2016: $1,770,647).
The directors have prepared an estimated cash flow forecast for the period to September 2018 to determine if the Company may require
additional funding during the next 15 month period. Where this cash flow forecast includes the likelihood that additional amounts will
be needed and these funds have not yet been secured, it creates uncertainty as to whether the Company will continue to operate in the
manner it has planned over the next 15 months.
Where the cash flow forecast includes these uncertainties, the directors are required to make an assessment of whether it is reasonable
to assume that the Company will be able to continue its normal operations. The directors are satisfied that the going concern basis of
preparation is appropriate based on the following factors and judgements:
19
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT’D)
•
•
•
•
The Company has access to cash reserves of $1,126,887 as at 30 June 2017 (30 June 2016: $1,573,472).
The Company has the ability to adjust its exploration expenditure subject to results of its exploration activities and has a history
of attracting Farm-in partners to assist in funding exploration commitments;
The Company has raised $1,000,000 subsequent to year end via the issue of shares; and
The Directors anticipate the support of the Company’s major shareholders to continue with the advancement of the Company’s
assets.
Should the Group be unable to continue as a going concern it may be required to realise its assets and extinguish its liabilities other
than in the ordinary course of business and at amounts different to those stated in the annual report. The annual report does not include
any adjustments relating to the recoverability and classification of asset carrying amounts or to the amount and classification of
liabilities that might result should the Group be unable to continue as a going concern and meet its debts as and when they fall due.
(b) Principles of consolidation
(i)
Subsidiaries
Subsidiaries are all entities (including structured entities) over which the Group has control. The Group controls an entity when the
Group is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns
through its power to direct the activities of the entity. Subsidiaries are fully consolidated from the date on which control is transferred
to the Group. They are de-consolidated from the date that control ceases.
The acquisition method of accounting is used to account for business combinations by the Group.
Intercompany transactions, balances and unrealised gains on transactions between Group companies are eliminated. Unrealised losses
are also eliminated unless the transaction provides evidence of the impairment of the transferred asset. Accounting policies of
subsidiaries have been changed where necessary to ensure consistency with the policies adopted by the Group.
Non-controlling interests in the results and equity of subsidiaries are shown separately in the consolidated statement of profit or loss
and other comprehensive income, statement of changes in equity and statement of financial position respectively.
(ii) Changes in ownership interests
The Group treats transactions with non-controlling interests that do not result in a loss of control as transactions with equity owners of
the Group. A change in ownership interest results in an adjustment between the carrying amounts of the controlling and non-controlling
interests to reflect their relative interests in the subsidiary. Any difference between the amount of the adjustment to non-controlling
interests and any consideration paid or received is recognised in a separate reserve within equity attributable to owners of Key
Petroleum Limited.
When the Group ceases to have control, any retained interest in the entity is remeasured to its fair value with the change in carrying
amount recognised in profit or loss. The fair value is the initial carrying amount for the purposes of subsequently accounting for the
retained interest as an associate, jointly controlled entity or financial asset. In addition, any amounts previously recognised in other
comprehensive income in respect of that entity are accounted for as if the group had directly disposed of the related assets or liabilities.
This may mean that amounts previously recognised in other comprehensive income are reclassified to profit or loss.
If the ownership interest in a jointly controlled entity or associate is reduced but joint control or significant influence is retained, only
a proportionate share of the amounts previously recognised in other comprehensive income are reclassified to profit or loss where
appropriate.
20
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT’D)
(iii)
Interests in joint operations
A joint operation is a joint arrangement whereby the parties that have joint control of the arrangement have rights to the assets, and
obligations for the liabilities, relating to the arrangement. Joint control is the contractually agreed sharing of control of an arrangement,
which exists only when decisions about the relevant activities require unanimous consent of the parties sharing control.
When a Group entity undertakes its activities under joint operations, the Group as a joint operator recognises in relation to its interest
in a joint operation:
•
•
•
•
•
its assets, including its share of any assets held jointly;
its liabilities, including its share of any liabilities incurred jointly;
its revenue from the sale of its share of the output arising from the joint operation;
its share of the revenue from the sale of the output by the joint operation; and
its expenses, including its share of any expenses incurred jointly.
The Group accounts for the assets, liabilities, revenues and expenses relating to its interest in a joint operation in accordance with the
AASBs applicable to the particular assets, liabilities, revenues and expenses.
When a Group entity transacts with a joint operation in which a Group entity is a joint operator (such as a sale or contribution of
assets), the Group is considered to be conducting the transaction with the other parties to the joint operation, and gains and losses
resulting from the transactions are recognised in the Group's consolidated financial statements only to the extent of other parties'
interests in the joint operation.
When a Group entity transacts with a joint operation in which a Group entity is a joint operator (such as a purchase of assets), the
Group does not recognise its share of the gains and losses until it resells those assets to a third party.
(c) Segment reporting
Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision maker. The
chief operating decision maker, who is responsible for allocating resources and assessing performance of the operating segments, has
been identified as the full Board of Directors.
(d) Foreign currency translation
(i) Functional and presentation currency
Items included in the financial statements of each of the Group’s entities are measured using the currency of the primary economic
environment in which the entity operates (‘the functional currency’). The consolidated financial statements are presented in Australian
dollars, which is Key Petroleum Limited's functional and presentation currency.
(ii) Transactions and balances
Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the
transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at year end
exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in profit or loss, except when they
are deferred in equity as qualifying cash flow hedges and qualifying net investment hedges or are attributable to part of the net
investment in a foreign operation.
Translation differences on financial assets and liabilities carried at fair value are reported as part of the fair value gain or loss.
Translation differences on non-monetary financial assets and liabilities such as equities held at fair value through profit or loss are
recognised in profit or loss as part of the fair value gain or loss. Translation differences on non-monetary financial assets such as
equities classified as available-for-sale financial assets are included in the fair value reserve in equity.
21
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT’D)
(iii) Group companies
The results and financial position of all the Group entities (none of which has the currency of a hyperinflationary economy) that have
a functional currency different from the presentation currency are translated into the presentation currency as follows:
•
•
assets and liabilities for each statement of financial position presented are translated at the closing rate at the date of that statement
of financial position;
income and expenses for each statement of comprehensive income are translated at average exchange rates (unless that is not a
reasonable approximation of the cumulative effect of the rates prevailing on the transaction dates, in which case income and
expenses are translated at the dates of the transactions); and
•
all resulting exchange differences are recognised in other comprehensive income.
On consolidation, exchange differences arising from the translation of any net investment in foreign entities, and of borrowings and
other financial instruments designated as hedges of such investments, are recognised in other comprehensive income. When a foreign
operation is sold or any borrowings forming part of the net investment are repaid, the associated exchange differences are reclassified
to profit or loss, as part of the gain or loss on sale.
Goodwill and fair value adjustments arising on the acquisition of a foreign entity are treated as assets and liabilities of the foreign
entities and translated at the closing rate.
(e) Revenue recognition
The consolidated entity’s revenue is derived primarily from services to external parties. Sales revenue is recognised on a proportionally
basis over the period to which the services are provided. Interest revenue is recognised on a time proportionate basis that takes into
account the effective yield on the financial assets.
(f)
Income tax
The income tax expense or revenue for the year is the tax payable on the current year’s taxable income based on the applicable income
tax rate for each jurisdiction adjusted by changes in deferred tax assets and liabilities attributable to temporary differences and to
unused tax losses.
The current income tax charge is calculated on the basis of the tax laws enacted or substantively enacted at the end of the reporting
period in the countries where the Company’s subsidiaries and associated operate and generate taxable income. Management
periodically evaluates positions taken in tax returns with respect to situations in which applicable tax regulation is subject to
interpretation. It establishes provisions where appropriate on the basis of amounts expected to be paid to the tax authorities.
Deferred income tax is provided in full, using the liability method, on temporary differences arising between the tax bases of assets
and liabilities and their carrying amounts in the consolidated financial statements. However, the deferred income tax is not accounted
for if it arises from initial recognition of an asset or liability in a transaction other than a business combination that at the time of the
transaction affects neither accounting nor taxable profit or loss. Deferred income tax is determined using tax rates (and laws) that have
been enacted or substantially enacted by the reporting date and are expected to apply when the related deferred income tax asset is
realised or the deferred income tax liability is settled.
Deferred tax assets are recognised for deductible temporary differences and unused tax losses only if it is probable that future taxable
amounts will be available to utilise those temporary differences and losses.
Deferred tax liabilities and assets are not recognised for temporary differences between the carrying amount and tax bases of
investments in controlled entities where the parent entity is able to control the timing of the reversal of the temporary differences and
it is probable that the differences will not reverse in the foreseeable future.
Deferred tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets and liabilities and when
the deferred tax balances relate to the same taxation authority. Current tax assets and tax liabilities are offset where the entity has a
legally enforceable right to offset and intends either to settle on a net basis, or to realise the asset and settle the liability simultaneously.
Current and deferred tax is recognised in profit or loss, except to the extent that it relates to items recognised in other comprehensive
income or directly in equity. In this case, the tax is also recognised in other comprehensive income or directly in equity, respectively.
22
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT’D)
(g) Leases
Leases of property, plant and equipment where the Group, as lessee, has substantially all the risks and rewards of ownership are
classified as finance leases. Finance leases are capitalised at the lease’s inception at the fair value of the leased property or, if lower,
the present value of the minimum lease payments. The corresponding rental obligations, net of finance charges, are included in other
short-term and long-term payables. Each lease payment is allocated between the liability and finance cost. The finance cost is charged
to profit or loss over the lease period so as to produce a constant periodic rate of interest on the remaining balance of the liability for
each period. The property, plant and equipment acquired under finance leases is depreciated over the shorter of the asset’s useful life
and the lease term.
Leases where a significant portion of the risks and rewards of ownership are not transferred to the Group as lessee are classified as
operating leases. Payments made under operating leases (net of any incentives received from the lessor) are charged to profit or loss
on a straight-line basis over the period of the lease.
(h) Business combinations
The acquisition method of accounting is used to account for all business combinations, regardless of whether equity instruments or
other assets are acquired. The consideration transferred for the acquisition of a subsidiary comprises the:
•
•
•
•
•
fair values of the assets transferred;
liabilities incurred;
equity interests issued by the Group;
fair value of any asset or liability resulting from a contingent consideration arrangement; and
fair value of any pre-existing equity interest in the subsidiary.
Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are, with limited exceptions,
measured initially at their fair values at the acquisition date. The Group recognises any non-controlling interest in the acquired entity
on an acquisition-by-acquisition basis either at fair value or at the non-controlling interest’s proportionate share of the acquired entity’s
net identifiable assets.
Acquisition-related costs are expensed as incurred.
The excess of:
•
•
•
consideration transferred;
amount of any non-controlling interest in the acquired entity; and
acquisition-date fair value of any previous equity interest in the acquired entity;
over the fair value of the net identifiable assets acquired is recorded as goodwill. If those amounts are less than the fair value of the net
identifiable assets of the subsidiary acquired, the difference is recognised directly in profit or loss as a bargain purchase.
Where settlement of any part of cash consideration is deferred, the amounts payable in the future are discounted to their present value
as at the date of exchange. The discount rate used is the entity’s incremental borrowing rate, being the rate at which similar borrowing
could be obtained from an independent financier under comparable terms and conditions.
Contingent consideration is classified either as equity or a financial liability. Amounts classified as a financial liability are subsequently
remeasured to fair value with changes in fair value recognised in profit or loss.
If the business combination is achieved in stages, the acquisition date carrying value of the acquirer’s previously held equity interest
in the aquiree is remeasured to fair value at the acquisition date. Any gains or losses arising from such re-measurement are recognised
in profit or loss.
23
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT’D)
(i)
Impairment of non-financial assets
Goodwill and intangible assets that have an indefinite useful life are not subject to amortisation and are tested annually for impairment,
or more frequently if events or changes in circumstances indicate that they might be impaired. Exploration and Evaluation Expenditure
is assessed for impairment indicators under AASB 6 paragraph 20 and where there are indicators of impairment the Company will test
for impairment. Other assets are tested for impairment whenever events or changes in circumstances indicate that the carrying amount
may not be recoverable. An impairment loss is recognised for the amount by which the asset’s carrying amount exceeds its recoverable
amount. The recoverable amount is the higher of an asset’s fair value less costs to sell and value in use. For the purposes of assessing
impairment, assets are grouped at the lowest levels for which there are separately identifiable cash flows which are largely independent
of the cash inflows from other assets or groups of assets (cash-generating units). Non-financial assets other than goodwill that suffered
an impairment are reviewed for possible reversal of the impairment at the end of each reporting period.
(j) Cash and cash equivalents
For statement of cash flows presentation purposes, cash and cash equivalents includes cash on hand, deposits held at call with financial
institutions, other short-term highly liquid investments with original maturities of three months or less that are readily convertible to
known amounts of cash and which are subject to insignificant risk of changes in value, and bank overdrafts. Bank overdrafts are shown
within borrowings in current liabilities on the statement of financial position.
(k) Trade and other receivables
Receivables are recognised and carried at original invoice amount less a provision for any uncollectible debts. An estimate for doubtful
debts is made when collection of the full amount is no longer probable. Bad debts are written-off as incurred.
(l)
Investments and other financial assets
Classification
The Group classifies its investments in the following categories: financial assets at fair value through profit or loss, loans and
receivables, held-to-maturity investments and available-for-sale financial assets. The classification depends on the purpose for which
the investments were acquired. Management determines the classification of its investments at initial recognition and, in the case of
assets classified as held-to-maturity, re-evaluates this designation at each reporting date.
(i)
Financial assets at fair value through profit or loss
Financial assets at fair value through profit or loss are financial assets held for trading. A financial asset is classified in this category
if acquired principally for the purpose of selling in the short term. Derivatives are classified as held for trading unless they are
designated as hedges. Assets in this category are classified as current assets.
(ii)
Loans and receivables
Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market.
They are included in current assets, except for those with maturities greater than 12 months after the reporting date which are classified
as non-current assets. Loans and receivables are included in trade and other receivables in the statement of financial position.
(iii) Held-to-maturity investments
Held-to-maturity investments are non-derivative financial assets quoted in an active market with fixed or determinable payments and
fixed maturities that the Group’s management has the positive intention and ability to hold to maturity. If the Group were to sell other
than an insignificant amount of held-to-maturity financial assets, the whole category would be tainted and reclassified as available-
for-sale. Held-to-maturity financial assets are included in non-current assets, except for those with maturities less than 12 months from
the reporting date, which are classified as current assets.
(iv) Available-for-sale financial assets
Available-for-sale financial assets, comprising principally marketable equity securities, are non-derivatives that are either designated
in this category or not classified in any of the other categories. They are included in non-current assets unless management intends to
dispose of the investment within 12 months of the reporting date. Investments are designated available-for-sale if they do not have
fixed maturities and fixed or determinable payments and management intends to hold them for the medium to long term.
24
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT’D)
Financial assets - reclassification
The Group may choose to reclassify a non-derivative trading financial asset out of the held-for-trading category if the financial asset
is no longer held for the purpose of selling it in the near term. Financial assets other than loans and receivables are permitted to be
reclassified out of the held-for-trading category only in rare circumstances arising from a single event that is unusual and highly
unlikely to recur in the near term. In addition, the Group may choose to reclassify financial assets that would meet the definition of
loans and receivables out of the held-for-trading or available-for-sale categories if the Group has the intention and ability to hold these
financial assets for the foreseeable future or until maturity at the date of reclassification.
Reclassifications are made at fair value as of the reclassification date. Fair value becomes the new cost or amortised cost as applicable,
and no reversals of fair value gains or losses recorded before reclassification date are subsequently made. Effective interest rates for
financial assets reclassified to loans and receivables and held-to-maturity categories are determined at the reclassification date. Further
increases in estimates of cash flows adjust effective interest rates prospectively.
Recognition and derecognition
Regular purchases and sales of financial assets are recognised on trade-date – the date on which the Group commits to purchase or sell
the asset. Investments are initially recognised at fair value plus transaction costs for all financial assets not carried at fair value through
profit or loss. Financial assets carried at fair value through profit or loss are initially recognised at fair value and transaction costs are
expensed to the statement of comprehensive income. Financial assets are derecognised when the rights to receive cash flows from the
financial assets have expired or have been transferred and the Group has transferred substantially all the risks and rewards of ownership.
When securities classified as available-for-sale are sold, the accumulated fair value adjustments recognised in equity are included in
the statement of comprehensive income as gains and losses from investment securities.
Measurement
At initial recognition, the Group measures a financial asset at its fair value plus, in the case of a financial asset not at fair value through
profit or loss, transactions costs that are directly attributable to the acquisition of the financial asset. Transaction costs of financial
assets carried at fair value through profit or loss are expensed in profit or loss.
Loans and receivables and held-to-maturity investments are carried at amortised cost using the effective interest method.
Available-for-sale financial assets and financial assets at fair value through profit or loss are subsequently carried at fair value. Gains
or losses arising from changes in the fair value of the ‘financial assets at fair value through profit or loss’ category are presented in the
statement of comprehensive income within other income or other expenses in the period in which they arise. Dividend income from
financial assets at fair value through profit or loss is recognised in the statement of comprehensive income as part of revenue from
continuing operations when the Group’s right to receive payments is established.
Changes in the fair value of monetary securities denominated in a foreign currency and classified as available-for-sale are analysed
between translation differences resulting from changes in amortised cost of the security and other changes in the carrying amount of
the security. The translation differences related to changes in the amortised cost are recognised in profit or loss, and other changes in
carrying amount are recognised in equity. Changes in the fair value of other monetary and non-monetary securities classified as
available-for-sale are recognised in equity.
Impairment
The Group assesses at the end of each reporting period whether there is objective evidence that a financial asset or group of financial
assets is impaired. A financial asset or a group of financial assets is impaired and impairment losses are incurred only if there is
objective evidence of impairment as a result of one or more events that occurred after the initial recognition of the asset (a ‘loss event’)
and that loss event (or events) has an impact on the estimated future cash flows of the financial asset or group of financial assets that
can be reliably estimated. In the case of equity investments classified as available-for-sale, a significant or prolonged decline in the
fair value of the security below its cost is considered an indicator that the assets are impaired.
25
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT’D)
(i) Assets carried at amortised cost
For loans and receivables, the amount of the loss is measured as the difference between the asset’s carrying amount and the present
value of estimated future cash flows (excluding future credit losses that have not been incurred) discounted at the financial asset’s
original effective interest rate. The carrying amount of the asset is reduced and the amount of the loss is recognised in profit or loss. If
a loan or held-to-maturity investment has a variable interest rate, the discount rate for measuring any impairment loss is the current
effective interest rate determined under the contract. As a practical expedient, the Group may measure impairment on the basis of an
instrument’s fair value using an observable market price.
If, in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring
after the impairment was recognised (such as an improvement in the debtor’s credit rating), the reversal of the previously recognised
impairment loss is recognised in profit or loss.
(ii) Assets classified as available-for-sale
If there is objective evidence of impairment for available-for-sale financial assets, the cumulative loss – measured as the difference
between the acquisition cost and the current fair value, less any impairment loss on that financial asset previously recognised in profit
or loss – is removed from equity and recognised in profit or loss.
Impairment losses on equity instruments that were recognised in profit or loss are not reversed through profit or loss in a subsequent
period.
If the fair value of a debt instrument classified as available-for-sale increases in a subsequent period and the increase can be objectively
related to an event occurring after the impairment loss was recognised in profit or loss, the impairment loss is reversed through profit
or loss.
(m) Plant and equipment
All plant and equipment is stated at historical cost less depreciation. Historical cost includes expenditure that is directly attributable to
the acquisition of the items.
Subsequent costs are included in the asset’s carrying amount or recognised as a separate asset, as appropriate, only when it is probable
that future economic benefits associated with the item will flow to the Group and the cost of the item can be measured reliably. The
carrying amount of any component accounted for as a separate asset is derecognised when replaced. All other repairs and maintenance
are charged to the statement of comprehensive income during the reporting period in which they are incurred.
Depreciation of plant and equipment is calculated using the reducing balance method to allocate their cost or revalued amounts, net of
their residual values, over their estimated useful lives or, in the case of leasehold improvements and certain leased plant and equipment,
the shorter lease term. The rates vary between 20% and 40% per annum.
The assets’ residual values and useful lives are reviewed, and adjusted if appropriate, at each reporting date.
An asset’s carrying amount is written down immediately to its recoverable amount if the asset’s carrying amount is greater than its
estimated recoverable amount (Note 1(i)).
Gains and losses on disposals are determined by comparing proceeds with carrying amount. These are included in the statement of
comprehensive income. When revalued assets are sold, it is Group policy to transfer the amounts included in other reserves in respect
of those assets to retained earnings.
26
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT’D)
(n) Exploration and evaluation costs
Exploration and evaluation expenditures in relation to each separate area of interest are recognised as an exploration and evaluation
asset in the year in which they are incurred where the following conditions are satisfied.
the rights to tenure of the area of interest are current; and
(i)
(ii) at least one of the following conditions is also met:
(a)
the exploration and evaluation expenditures are expected to be recouped through successful development and
exploration of the area of interest, or alternatively, by its sale; or
(b) exploration and evaluation activities in the area of interest have not at the reporting date reached a stage which permits
a reasonable assessment of the existence or otherwise of economically recoverable reserves, and active and significant
operations in, or in relation to, the area of interest are continuing
Exploration and evaluation assets are initially measured at cost and include acquisition of rights to explore, studies, salaries of exploration
personnel, exploratory drilling, trenching and sampling and associated activities and amortised of assets used in exploration and
evaluation activities. General and administrative costs are only included in the measurement of exploration and evaluation costs where
they are related directly to operational activities in a particular area of interest.
Exploration and evaluation assets are assessed for impairment when facts and circumstances suggest that the carrying amount of an
exploration and evaluation asset may exceed its recoverable amount. The policy on impairment can be found at 1(i) above. The
recoverable amount of the exploration and evaluation asset is estimated to determine the extent of the impairment loss (if any). Where
an impairment loss subsequently reverses, the carrying amount of the asset is increased to the revised estimate of its recoverable
amount, but only to the extent that the increased carrying amount does not exceed the carrying amount that would have been determined
had no impairment loss been recognised for the asset in previous years.
When an area of interest is abandoned or the directors decide that it is not commercial, any accumulated costs in respect of that area
are written off in the financial year the decision is made.
(o) Trade and other payables
These amounts represent liabilities for goods and services provided to the Group prior to the end of the financial year which are unpaid.
The amounts are unsecured, non-interest bearing and are paid on normal commercial terms.
(p) Employee benefits
(i) Wages and salaries and annual leave
Liabilities for wages and salaries, including non-monetary benefits, and annual leave expected to be settled within 12 months of the
reporting date are recognised in other payables in respect of employees’ services up to the reporting date and are measured at the
amounts expected to be paid when the liabilities are settled.
(ii) Share-based payments
The Group provides benefits to employees (including directors) of the Company in the form of share-based payment transactions,
whereby employees render services in exchange for shares or rights over shares (‘equity-settled transactions’).
The cost of these equity-settled transactions with employees is measured by reference to the fair value at the date at which they are
granted. The fair value is determined by an internal valuation using a Black-Scholes Option Pricing model.
The cost of equity-settled transactions is recognised, together with a corresponding increase in equity, over the period in which the
performance conditions are fulfilled, ending on the date on which the relevant employees become fully entitled to the award (‘vesting
date’).
The cumulative expense recognised for equity-settled transactions at each reporting date until vesting date reflects (i) the extent to
which the vesting period has expired and (ii) the number of options that, in the opinion of the directors of the Company, will ultimately
vest. This opinion is formed based on the best available information at balance date. No adjustment is made for the likelihood of market
performance conditions being met as the effect of these conditions is included in the determination of fair value at grant date.
No expense is recognised for awards that do not ultimately vest, except for awards where vesting is conditional upon a market
condition.
Where an equity-settled award is cancelled, it is treated as if it had vested on the date of cancellation, and any expense not yet recognised
for the award is recognised immediately. However, if a new award is substituted for the cancelled award, and designated as a
replacement award on the date that it is granted, the cancelled and new award are treated as if they were a modification of the original
award.
27
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT’D)
(q) Provisions and Asset Retirement Obligation
Provisions are recognised when the Group has a legal or constructive obligation, as a result of past events, for which it is probable that
an outflow of economic benefits will result and that outflow can be reliably measured. When this provision gives access to future
economic benefits, an asset is recognised and then subsequently depreciated in line with the life of the underlying producing asset,
otherwise the costs are charged to the income statement. The unwinding of the discount on the provision is included in the profit or
loss and other comprehensive income within finance costs. Any changes to estimated costs or discount rates are dealt with
prospectively.
(r)
Issued capital
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. Incremental costs directly attributable to the issue of new shares or options for the acquisition of a business are not included
in the cost of the acquisition as part of the purchase consideration.
(s) Earnings per share
(a) Basic earnings per share
Basic earnings per share is calculated by dividing the profit attributable to owners of the Company, excluding any costs of servicing
equity other than ordinary shares, by the weighted average number of ordinary shares outstanding during the financial year, adjusted
for bonus elements in ordinary shares issued during the year.
(t) Goods and Services Tax (GST)
Revenues, expenses and assets are recognised net of the amount of associated GST, unless the GST incurred is not recoverable from
the taxation authority. In this case it is recognised as part of the cost of acquisition of the asset or as part of the expense.
Receivables and payables are stated inclusive of the amount of GST receivable or payable. The net amount of GST recoverable from,
or payable to, the taxation authority is included with other receivables or payables in the statement of financial position.
Cash flows are presented on a gross basis. The GST components of cash flows arising from investing or financing activities which are
recoverable from, or payable to the taxation authority, are presented as operating cash flows.
(u) Comparative figures
When required by Accounting Standards, comparative figures have been adjusted to conform to changes in presentation for the current
financial year.
28
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT’D)
(v) New accounting standards and interpretations
The group has adopted all of the new, revised or amending Accounting Standards and Interpretations issued by the Australian
Accounting Standards Board ('AASB') that are mandatory for the current reporting period. The adoption of these Accounting
Standards and Interpretations did not have any significant impact on the financial performance or position of the group during
the financial year.
Any new, revised or amending Accounting Standards or Interpretations that are not yet mandatory have not been early adopted.
New Accounting Standards and Interpretations not yet mandatory or early adopted
Australian Accounting Standards and Interpretations that have recently been issued or amended but are not yet mandatory, have
not been early adopted by the Group for the annual reporting period ended 30 June 2017. The Group's assessment of the impact
of these new or amended Accounting Standards and Interpretations, most relevant to the group, are set out below.
Title and Reference
AASB 9 Financial
Instruments AASB 9
Nature of Change
Amends the requirements for classification and measurement of
financial assets. The available-for-sale and held-to-maturity categories
of financial assets in AASB 139 have been eliminated.
Application date for
entity
1 July 2018
AASB 15 Revenue from
contracts with customers
AASB 16 (issued February
2016) Leases
Adoption of AASB 9 is only mandatory for the year ending 30 June
2019. The entity has a number of receivables which may be subject to
the assessment of recoverability under the new standard. This
assessment of expected credit losses will be undertaken at each
reporting date to determine if, in the directors’ opinion, an impairment
should be recorded in the financial statements. As at 30 June 2017, if
the Company were to make this assessment using the future
requirements, the Company would not record an impairment on
consolidation. The Company is expected to have significant losses in
the parent entity with the adoption of this standard which may result in
the impairment of all inter-company balances.
An entity will recognise revenue to depict the transfer of promised good
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. This means that revenue will be recognised when control of
goods or services is transferred, rather than on transfer of risks and
rewards as is currently the case under IAS 18 Revenue.
The entity does not yet have a substantial amount of revenue and the
impact of the new standard on transition is likely to be low for the year
ended 30 June 2017 if the Company adopted the full transition.
AASB 16 eliminates the operating and finance lease classifications for
lessees currently accounted for under AASB 117 Leases. It instead
requires an entity to bring most leases onto its balance sheet in a
similar way to how existing finance leases are treated under AASB
117. An entity will be required to recognise a lease liability and a
right of use asset in its balance sheet for most leases.
There are some optional exemptions for leases with a period of 12
months or less and for low value leases.
Lessor accounting remains largely unchanged from AASB 117.
The entity has one significant lease, being the rental of its premises.
This is due to expire in February 2018. As the Company does not have
significant operating leases in place, the impact of the transition to this
standard is low with the likely result of an asset and liability recorded
at a similar value to the operating lease commitment note at year end.
29
1 July 2018
1 Jan 2019
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT’D)
(w) Critical accounting judgements, estimates and assumptions
The preparation of these financial statements requires the use of certain critical accounting estimates. It also requires management to
exercise its judgement in the process of applying the Group’s accounting policies. The areas involving a higher degree of judgement
or complexity, or areas where assumptions and estimates are significant to the financial statements are:
Exploration and evaluation costs
Exploration and evaluation costs are accumulated in respect of each identifiable area of interest. The write-off or carrying forward of
exploration expenditure is based on a periodic assessment of the viability of an area of interest and/or the existence of economically
recoverable reserves. This assessment is based on pre-determined impairment indicators, taking into account the requirements of the
accounting standard, and with the information available at the time of preparing this report. Information may come to light in
subsequent periods which requires the asset to be impaired or written down for which the directors are unable to predict the outcome.
When an area of interest is abandoned or the directors decide that it is not commercial, any accumulated costs in respect of that area
are written off in the financial year the decision is made.
Environmental Issues
Balances disclosed in the financial statements and notes thereto are not adjusted for any pending or enacted environmental legislation,
and the directors understanding thereof. At the current stage of the Group’s development and its current environmental impact the
directors believe such treatment is reasonable and appropriate.
Taxation
Deferred tax assets are recognised for deductible temporary differences and taxation losses when the directors and management
considers that it is probable that sufficient future tax profits will be available to utilise those temporary differences and losses.
Significant judgement is required to determine the amount of deferred tax assets that can be recognised, based upon the likely timing
and the level of future taxable profits over the future period together with future tax planning strategies and the impact of the current
income taxation legislation. Where there are significant variables relating to generating taxable profits in the future and there is limited
operating history, the Company will disclose the unrecognised deferred taxes.
Share-based payments
Share-based payment transactions, in the form of options to acquire ordinary shares, are valued using the Black-Scholes option pricing
model. This model uses assumptions and estimates as inputs based on historical information available at the time the valuation was
undertaken. This historical information may not be indicative of the future result.
Provisions for rehabilitation
A provision for restoration and rehabilitation is recognised when there is a present obligation as a result of development activities
undertaken, it is probable that an outflow of economic benefits will be required to settle the obligation, and the amount of the provision
can be measured reliably. The estimated future obligations include the costs of abandoning sites, removing facilities and restoring
the affected areas.
The provision for future restoration costs is the best estimate of the present value (including an appropriate discount rate relevant to
the time value of money plus any risk premium associated with the liability) of the expenditure required to settle the restoration
obligation at the reporting date. Future restoration costs are reviewed annually and any changes in the estimate are reflected in the
present value of the restoration provision.
The initial estimate of the restoration and rehabilitation provision is capitalised into the cost of the related asset and amortised on the
same basis as the related asset, unless the present obligation arises from the production of inventory in the period, in which case the
amount is included in the cost of production for the period. Changes in the estimate of the provision for restoration and rehabilitation
are treated in the same manner, except that the unwinding of the effect of discounting on the provision is recognised as a finance cost
rather than being capitalised into the cost of the related asset.
The non-current provision for rehabilitation relates to the West Kora 1 well and disused production facilities in Production Licence
L15. The estimate is based upon converting the well to a water well following confirmation from the pastoral lease owner and
removing the tank farm and restoring the site back to its original condition. This is the best estimate of the engineering methodology
for estimating cost and future removal technologies in determining the removal cost. The provision for rehabilitation also includes the
Retention Lease 1 in the Canning Basin and is based upon an estimate to plug and abandon the Stokes Bay 1 and Point Torment 1
wells using a completion rig as well as removal of the causeway to each of the well pads. The causeway removal includes replacement
of gravel to the original borrow pit.
30
30 JUNE 2017
2.
REVENUE AND OTHER INCOME
From continuing operations
Other revenue
Interest from financial institutions
Management fees
Fuel tax credits
Consulting services
3.
EXPENSES
Loss before income tax includes the following specific expenses:
Directors fees
Employee expenses (net of amount capitalised)
Superannuation and leave entitlements expense
Minimum lease payments relating to operating leases
4.
INCOME TAX
(a) Income tax expense
Current tax
Deferred tax
2017
$
2016
$
19,135
20,350
8,197
10,200
57,882
117,000
208,944
38,937
67,610
-
-
-
47,456
20,351
7,879
-
75,686
137,032
305,269
45,287
56,324
-
-
-
(b) Numerical reconciliation between tax expense to pre-tax net loss
payable
Loss before income tax expense
Income tax benefit calculate at 27.5% (2016: 30.0%)
Effect of non-deductible item
Share based payments:
Sundry items
Movements in unrecognised temporary differences
Tax effect of current year tax losses for which no deferred tax asset has been
recognised
Income tax expense
(1,144,731)
(2,186,709)
(314,801)
(656,013)
19,050
1,139
(294,612)
(520,691)
19,463
4,335
(632,215)
415,580
815,303
216,635
-
-
31
30 JUNE 2017
4.
INCOME TAX (cont’d.)
(c) Deferred tax assets not brought to account
Capital raising costs
Provision and accruals
Tax losses
Total
(d) Deferred tax liabilities
Accrued revenue
Capitalised exploration and evaluation costs
Total
(e) Offset provisions
Deferred tax liabilities
Deferred tax assets (portion off-set deferred tax liabilities)
Unused tax losses for which no deferred tax asset has been recognised
2017
$
2016
$
4,477
15,365
3,633,907
3,985,908
-
1,585,952
1,585,952
(1,585,952)
1,585,952
-
25,339
-
2,948,244
2,976,583
873
928,582
929,455
(929,455)
929,455
-
Potential deferred tax assets attributable to tax losses and exploration expenditure carried forward have not been brought to account at
30 June 2017 because the directors do not believe it is appropriate to regard realisation of the deferred tax assets as probable at this
point in time. These benefits will only be obtained if:
(i) the Company derives future assessable income of nature and of an amount sufficient to enable the benefits to be utilised;
(ii) the Company continues to comply with the conditions for deductibility imposed by law; and
(iii) no changes in income tax legislation adversely affects the Company in utilising the benefits
5.
CURRENT ASSETS - CASH AND CASH EQUIVALENTS
Cash at bank and in hand
Short-term deposits
Cash and cash equivalents as shown in the statement of financial position
and the statement of cash flows
590,179
536,708
125,461
1,448,011
1,126,887
1,573,472
Short-term deposits are made for varying periods of between one day and three months depending on the immediate cash requirements
of the Group, and earn interest at the respective short-term deposit rates.
Credit risk
A-1+
1,126,887
1,573,472
1. The equivalent S&P rating of the financial assets represent that rating of the counterpart with whom the financial asset is held rather
than the rating of the financial asset itself.
32
30 JUNE 2017
5.
CURRENT ASSETS – CASH AND CASH EQUIVALENTS (cont’d)
(a) Reconciliation of net loss after income tax to net cash outflow
from operating activities
Net loss for the year
Non-cash items
Depreciation of non-current assets
Share-based payments expense
Impairment of Exploration
Unwind of discount in provision for restoration
Change in operating assets and liabilities
Decrease in trade and other receivables
(Increase) in petroleum permits and capitalised exploration costs
Increase/(decrease) in trade and other payables
Net cash outflow from operating activities
(b) Non-cash items
2017
$
2016
$
(1,144,731)
(2,186,709)
37,383
69,271
-
37,337
91,558
(591,121)
58,905
43,363
64,878
1,095,916
-
176,188
(669,084)
(295,198)
(1,441,398)
(1,770,646)
The Company issued 20,000,000 options on 22 November 2016 in respect of long term incentives to its managing director. The details
of this transaction can be found in Note 22.
6.
CURRENT ASSETS - TRADE AND OTHER RECEIVABLES
Trade receivables
Other receivables
Credit Risk – Trade and Other Receivables
8,250
46,655
54,905
-
146,643
146,643
The Group has no significant concentration of credit risk with respect to any single counter party or group of counterparties other than
those receivables specifically provided for and mentioned within note 24. The class of assets described as Trade and Other Receivables
is considered to be the main source of credit risk related to the Group.
The following table details the Group’s trade and other receivables exposed to credit risk with ageing analysis and impairment provided
for thereon. Amounts are considered to be ‘past due’ when the debt has not been settled, with the terms and conditions agreed between
the Group and the customer or counterparty to the transaction. Receivables that are past due are assess for impairment by ascertaining
solvency of the debtors and are provided for where there are specific circumstances indicating that the debt may not be fully repaid to
the Group.
The balances of receivables that remain within initial trade terms (as detailed in the table) are considered to be of high quality.
The table below outlines the amounts due, past due and not impaired.
33
6.
CURRENT ASSETS - TRADE AND OTHER RECEIVABLES (cont’d)
Gross
Amount
Past due
and
impaired
Past due but not impaired
(days overdue)
$
$
< 30
$
31 - 60
61 - 90
$
$
> 90
$
2017
Trade receivables
Other receivables
Total
2016
Trade receivables
Other receivables
Total
8,250
46,655
54,905
-
146,643
146,643
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Within
initial
trade
terms
$
8,250
46,655
54,905
-
146,643
146,643
-
-
-
-
-
-
7.
NON-CURRENT RECEIVABLES
Bank guarantees
2017
$
2016
$
15,000
15,000
15,000
15,000
The guarantee is held by the Company financial institution in cash. The credit rating has been disclosed above in Note 5.
8.
PLANT AND EQUIPMENT
Plant and equipment
Cost
Accumulated depreciation
Net book amount
Reconciliation of movements in Plant and Equipment
Opening net book amount
Additions
Disposals
Depreciation charge
Closing net book amount
34
409,215
(154,245)
254,970
292,353
-
-
(37,383)
254,970
409,215
(116,862)
292,353
335,611
243
-
(43,501)
292,353
30 JUNE 2017
9.
CAPITALISED EXPLORATION COSTS
2017
$
2016
$
Exploration, evaluation and development costs carried forward in respect
of areas of interest
4,675,209
4,084,087
Reconciliation - Pre-production
Carrying amount at the beginning of the year
Additions to the exploration and evaluation costs
Asset Retirement Obligation (movement)
Exploration and evaluation costs written off
Carrying amount at the end of the year
4,084,087
4,504,095
588,293
2,829
734,824
(58,915)
-
(1,095,917)
4,675,209
4,084,087
The ultimate recoupment of costs carried forward for exploration and evaluation phases is dependent on the successful development
and commercial exploitation or sale of the respective petroleum interests. In the prior financial year, the Company surrendered EP488.
As a result, $1,095,917 carried forward exploration was written off.
Capitalised exploration and evaluation costs include the asset restoration obligation relating to L15 Production Licence and R1
Retention lease.
(a) Joint operations
The Group accounts for the assets, liabilities, revenues and expenses relating to its interests in Joint Operations in accordance with the
accounting policy of the Group (refer note 1(b)(iii)). The Group has the following interests in Joint Operations:
EP448
EP104
R1
L15
EP437
ATP 783/920/924
WA-481-P
2017
%
0.00
89.23
85.23
85.40
43.47
100.00
40.00
2016
%
78.00
89.23
85.23
85.40
43.47
0.00
0.00
All joint operations do not have any profit or loss items as the costs are capitalised to exploration assets. The amounts below represent
the Group’s interests in each joint operation.
EP104
Balance sheet
NON-CURRENT ASSETS
Exploration assets
TOTAL NON-CURRENT ASSETS
CURRENT LIABILITIES
Trade and other payables
TOTAL NON-CURRENT LIABILITIES
357,298
357,298
71,586
71,586
309,117
309,117
230,111
230,111
35
30 JUNE 2017
9.
CAPITALISED EXPLORATION COSTS (cont’d)
2017
$
2016
$
R1
Balance sheet
NON-CURRENT ASSETS
Exploration assets
TOTAL NON-CURRENT ASSETS
CURRENT LIABILITIES
Trade and other payables
TOTAL NON-CURRENT LIABILITIES
L15
Balance sheet
NON-CURRENT ASSETS
Exploration assets
TOTAL NON-CURRENT ASSETS
CURRENT LIABILITIES
Trade and other payables
TOTAL NON-CURRENT LIABILITIES
EP437
Balance sheet
CURRENT ASSETS
Cash and cash equivalents
Receivables
TOTAL CURRENT ASSETS
NON-CURRENT ASSETS
Exploration assets
TOTAL NON-CURRENT ASSETS
CURRENT LIABILITIES
Trade and other payables
TOTAL NON-CURRENT LIABILITIES
Commitments and contingencies
492,258
492,258
23,544
23,544
349,265
349,265
40,657
40,657
381,682
381,682
248,031
248,031
272,238
272,238
216,102
216,102
29,669
-
29,669
10,053
43,471
53,524
1,299,659
1,299,659
1,199,911
1,199,911
37,222
37,222
6,104
6,104
There are not capital commitments or contingencies as at 30 June 2017 for the Joint Ventures outside the work programme
commitments listed as part of Note 17 below.
36
30 JUNE 2017
10.
TRADE AND OTHER PAYABLES
Trade payables
Other payables and accruals
11. PROVISIONS
Restoration provision (R1) – current
Restoration provision (L15) – non-current
Restoration provision (R1) – non-current
JV provisions – current (due for payment within 12 months)
Reconciliation
Balance brought forward
Transferred to non-current
Additions
Unwind of discount
Balance carried forward
Restoration provisions – non-current liabilities (debts payable after 12
months)
Reconciliation
Balance brought forward
Transferred from current
Adjustment to rates
Unwind of discount
Balance carried forward
2017
$
24,101
188,540
212,641
2016
$
44,271
110,124
154,395
-
466,929
2,399,853
2,866,782
2,479,543
-
349,468
2,829,011
2,479,543
(2,479,543)
-
-
-
349,468
2,479,543
2,829
34,942
2,866,782
-
-
2,479,543
-
2,479,543
400,000
-
(58,915)
8,383
349,468
The current liability for the prior period in the annual report related to the rehabilitation estimate for Retention Lease 1 in the Canning
Basin. The current provision was based upon an estimate to plug and abandon the Stokes Bay 1 and Pont Torment 1 wells using a
completion rig as well as removal of the causeway to each of the well pads. The causeway removal includes replacement of gravel to
the original borrow pit.
At the beginning of this financial year, the renewal of the Retention Lease R1 for a further five years was granted by the DMP. The
prior period comparative classification of the rehabilitation liability is current as the renewal only occurred during this period.
The non-current provision for rehabilitation related to the West Kora 1 well and disused production facilities in Production License
L15. The estimate is based upon converting the well to a water well following confirmation from the pastoral lease owner and removing
the tank farm and restoring the site back to its original condition.
37
30 JUNE 2017
12.
ISSUED CAPITAL
(i)
Share capital
Ordinary shares fully paid
Total issued capital
(ii) Movements in ordinary share capital
Number of
shares
$
Number of
shares
$
2017
2016
1,147,358,441
38,535,283
897,358,441
37,540,470
1,147,358,441
38,535,283
897,358,441
37,540,470
Beginning of the financial year
897,358,441
37,540,470
722,358,441
36,844,550
Share placement
Share issue transaction costs
End of the financial year
(iii) Movements in options on issue
Beginning of the financial year
Issued during the year:
Exercisable at 1.287 cents, on or before 9 March 2019
Options expired
Options lapsed
Exercisable at 1.5 cents, on or before 22 November 2020
250,000,000
1,000,000
175,000,000
700,000
-
(5,187)
-
(4,080)
1,147,358,441
38,535,283
897,358,441
37,540,470
Number of options
2017
2016
33,500,000
33,500,000
-
(500,000)
(5,000,000)
20,000,000
-
-
End of the financial year
48,000,000
33,500,000
(iv) Movements in performance rights on issue
Beginning of the financial year
Expired during the year:
Performance Rights A
Performance Rights B
End of the financial year
(v) Ordinary shares
Number of performance
rights
2017
2016
4,000,000
4,000,000
-
-
-
-
4,000,000
4,000,000
Ordinary shares entitle the holder to participate in dividends and the proceeds on winding up of the Company in proportion to the
number of and amounts paid on the shares held.
On a show of hands every holder of ordinary shares present at a meeting in person or by proxy, is entitled to one vote, and upon a poll
each share is entitled to one vote.
Ordinary shares have no par value and the Company does not have a limited amount of authorised capital.
38
30 JUNE 2017
12. ISSUED CAPITAL (cont’d)
(vi) Capital risk management
The Group’s objectives when managing capital are to safeguard their ability to continue as a going concern, so that they may continue
to provide returns for shareholders and benefits for other stakeholders.
Due to the natures of the Group’s activities, being petroleum exploration, the Group does not have the access to credit facilities, with
the primary source of funding being equity raisings. Therefore, the focus of the Group’s capital risk management is the current
working capital position against the requirements of the Group to meet exploration programmes and corporate overheads. The
Group’s strategy is to ensure appropriate liquidity is maintained to meet anticipated operating requirements, with a view to initiating
appropriate capital raisings as required. Refer to Note 1 for management plans to remain a going concern. The working capital
position of the Group as 30 June 2017 and 30 June 2016 are as follows:
Cash and cash equivalents
Trade and other receivables
Trade and other payables
Provisions
Working capital position
2017
$
1,126,887
54,905
(212,640)
-
969,152
2016
$
1,573,472
146,463
(154,395)
(2,479,543)
(914,003)
In the comparative year the provision related to the rehabilitation estimate for Retention Lease 1 in the Canning Basin which has an
expiry date of 31 January 2016. At the beginning of this financial year the DMP granted a renewal of the Retention Lease R1 for a
further 5 years and as such the current liability of $2,479,543 was deferred for a further 5 years.
13. RESERVES
(a) Reserves
Foreign currency translation reserve
Share-based payments reserve
(b) Nature and purpose of reserves
(i)
Foreign currency translation reserve
(79,667)
693,411
613,744
(79,895)
624,140
544,245
Exchange differences arising on translation of the foreign controlled entity are recognised in other comprehensive income as
described in Note 1(d) and accumulated within a separate reserve within equity. The cumulate amount is reclassified to profit or loss
when net investment is disposed of.
(ii)
Foreign currency translation reserve
The share-based payments reserve is used to recognise the fair value of options issued.
14. DIVIDENDS
No dividends were paid during the financial year. No recommendation for payment of dividends has been made.
39
30 JUNE 2017
15. REMUNERATION OF AUDITORS
2017
$
2016
$
During the year the following fees were paid or payable for services provided by the auditor of the parent entity, its related practices
and non-related audit firms:
Audit services
Bentleys – audit of financial reports
Total remuneration for audit services
16. CONTINGENCIES
31,584
31,584
28,728
28,728
There are no material contingent liabilities or contingent assets of the Group at the reporting date.
17. COMMITMENTS
(a) Exploration commitments
The Company has certain commitments to meet minimum expenditure requirements on the mineral exploration assets it has an interest
in. Outstanding exploration commitments are as follows:
Within one year
Later than one year but not later than five years
1,644,350
13,476,413
15,120,763
959,240
13,788,463
14,747,703
(b) Lease commitments: Group as lessee
Operating leases (non-cancellable):
Minimum lease payments
within one year
later than one year but not later than five years
Aggregate lease expenditure contracted for at reporting date but not
recognised as liabilities
46,028
-
46,028
67,012
46,028
113,040
The property lease is a non-cancellable lease with a three-year term, with a rent payable monthly in advance. Contingent rental
provisions within the lease agreement require the minimum lease payments to increase by 3.5% on each annual anniversary of the
commencement date. An option exists to renew the lease at the end of the three-year term for an additional term of one year. The lease
allows for subletting of all lease areas.
18. RELATED PARTY TRANSACTIONS
(a) Parent entity
The ultimate parent entity within the Group is Key Petroleum Limited.
(b) Subsidiaries
Interests in subsidiaries are set out in Note 19.
40
30 JUNE 2017
18. RELATED PARTY TRANSACTIONS (cont’d)
(c) Key management personnel compensation
Short-term benefits
Post-employment benefits
Share-based payments
2017
$
2016
$
425,040
28,239
54,455
507,734
520,373
36,159
50,021
606,553
Detailed remuneration disclosures are provided in the remuneration report within the directors’ report.
(d) Transactions and balances with other related parties
Transactions with key management personnel are disclosed in the Directors’ Report.
19. SUBSIDIARIES
The consolidated financial statements incorporate the assets, liabilities and results of the following subsidiaries in accordance with the
accounting policy described in note 1(b):
Name
Country of
Incorporation
Class of Shares
Equity Holding*
Gulliver Productions Pty Ltd
Puma Petroleum S.r.L.
Key Petroleum (Australia) Pty Ltd
Cooper Basin Pty Ltd (formerly Key
Petroleum Offshore Pty Ltd)
Australia
Italy
Australia
Australia
Key Petroleum Taranaki Limited
New Zealand
Key Petroleum Services Pty Ltd
Australia
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
20. EVENTS OCCURRING AFTER THE REPORTING DATE
Subsequent to the end of the financial year the following items occurred:
2017
2016
%
100
100
100
100
100
100
%
100
100
100
100
100
100
• Key Petroleum Limited issued 100 million shares at $0.01 per share on 15 August 2017 to raise $1million before costs.
41
30 JUNE 2017
2017
$
2016
$
21. LOSS PER SHARE
(a) Reconciliation of earnings used in calculating loss per share
Loss attributable to the owners of the Company used in calculating basic
and diluted loss per share:
(b) Weighted average number of shares used as the denominator
Weighted average number of ordinary shares used as the denominator in
calculating basic and diluted loss per share
22. SHARE-BASED PAYMENTS
(a) Employees and contractors options
(1,144,731)
(1,144,731)
(2,186,709)
(2,186,709)
Number of shares
Number of shares
995,988,578
781,453,556
The Group provides benefits to employees (including Directors) and contractors of the Group in the form of share-based payment
transactions, whereby options to acquire ordinary shares are issued as a incentive to improve employee and shareholder goal
congruence. The exercise of the options granted range from 1.5 cents to 7.4 cents, and the expiry dates range from 6 August 2017 to
22 November 2020.
Options granted carry no dividend or voting rights. When exercisable, each option is convertible into one ordinary share of the
Company with full dividend and voting rights.
Set out below are summaries of the options granted:
2017
2016
Outstanding at the beginning of the year
Granted
Forfeited/cancelled
Exercised
Expired / lapsed
Outstanding at year-end
Exercisable at year-end
Weighted
average
exercise
price cents
Number of
options
Weighted
average
exercise
price cents
33,500,000
5.2
Number of
options
33,500,000
20,000,000
-
-
5.20
0.63
-
-
(5,500,000)
(1.40)
48,000,000
1,000,000
4.11
2.50
33,500,000
6,500,000
-
-
-
-
-
-
-
-
5.2
2.5
During the year, the Company issued 20,000,000 to the managing director. The Options issued during the year have been valued using
a Black Scholes Option Pricing model. The inputs to the model are listed on the following page.
42
30 JUNE 2017
22. SHARE-BASED PAYMENTS (cont’d)
Exercise price
Life of options
Underlying share price
Expected volatility
Risk free rate
2017
1.5 cents
4 years
0.4 cents
91%
1.79%
Historical volatility has been the basis for determining expected share price volatility as it assumed that this is indicative of future trends,
which may not eventuate.
The life of the options is based on historical exercise patterns, which may not eventuate in the future.
(b) Employees and contractors performance rights
The Group provides benefits to employees (including directors) and contractors of the Group in the form of share-based payment
transactions, whereby performance rights over ordinary shares are issued as an incentive to improve employee and shareholder goal
congruence. Performance rights granted to directors have no expiration date.
Performance rights granted carry no dividend or voting rights. When each performance condition is satisfied, each performance right is
converted into one ordinary share of the Company with full dividend and voting rights.
Set out below are summaries of the performance rights granted:
Outstanding at the beginning of the year
Granted
Forfeited/cancelled
Exercised
Expired
Outstanding at year-end
There were no performance rights granted during the 2017 and 2016 financial years.
(c) Expense arising from share based payment transactions
Total expenses arising from share-based payment transactions recognised during the
year were as follows:
Total expense arising from share-based payments
2017
$
2016
$
4,000,000
4,000,000
-
-
-
-
-
-
-
-
4,000,000
4,000,000
69,271
69,721
64,878
64,878
43
30 JUNE 2017
23. PARENT ENTITY INFORMATION
2017
$
2016
$
The following information relates to the parent entity, Key Petroleum Limited, at 30 June 2017. The information presented here has
been prepared using accounting policies consistent with those presented in Note 1.
Current assets
Non-current assets
Total assets
Current liabilities
Total liabilities
Issued capital
Share-based payments reserve
Accumulated losses
Total equity
Loss for the year
Total comprehensive income
1,996,653
1,012,981
3,009,634
188,851
188,851
3,176,494
730,431
3,906,925
130,808
130,808
38,535,283
37,540,471
693,411
624,140
(36,407,911)
(34,388,494)
2,820,783
3,776,117
(2,240,571)
(2,240,571)
(1,721,715)
(1,721,715)
The parent entity is responsible for the contingent liabilities outlined in Note 16.
The parent entity is responsible for funding the commitments outlined in Note 17.
Interests in subsidiaries are set out in Note 19.
24.
FINANCIAL RISK MANAGEMENT
The Group’s financial instruments consist mainly of deposits with banks and accounts receivable and payable.
The totals for each category of financial instruments, measured in accordance with AASB 139 as detailed in the accounting policies to
these financial statements, are as follows:
Financial Assets
Cash and cash equivalents
Loans and Receivables
Total Financial Assets
Financial Liabilities
Trade and other payables
Total Financial Liabilities
Foreign currency
Cash and cash equivalents
Trade receivables
Trade payables
1,126,887
54,905
1,181,792
1,573,472
146,463
1,719,935
24,101
24,101
154,395
154,395
2017
NZD
20,922
-
-
2016
NZD
22,112
-
-
44
30 JUNE 2017
24. FINANCIAL RISK MANAGEMENT (cont’d)
Sensitivity analysis
At 30 June 2017, if interest rates had changed by -/+ 80 basis points from the weighted average rate for the year with all other variables
held constant, post-tax loss for the Group would have been $6,422 lower/higher (2016: $14,647 lower/higher) as a result of
lower/higher interest income from cash and cash equivalents.
(a) Credit risk
Exposure to credit risk relating to financial assets arises from the potential non-performance by counterparties of contract obligations
that could lead to a financial loss to the Group.
Credit risk is minimised by investing surplus funds in financial institutions that maintain a minimum of an A credit ratings and by
ensuring customers and counterparties to transactions are of sound credit worthiness.
Credit Risk Exposures
The maximum exposure to credit risk by class of recognised financial assets at balance date is equivalent to the carrying value and
classification of those financial assets (net of any provisions) as presented in the statement of financial position.
All cash holdings within the Group are currently held with A-1+ rated financial institutions.
(b) Liquidity risk
The Group manages liquidity risk by continuously monitoring forecast and actual cash flows and ensuring sufficient cash and
marketable securities are available to meet the current and future commitments of the Group. Due to the nature of the Group’s activities,
being oil and gas exploration, the Group does not have ready access to credit facilities, with the primary source of funding being equity
raisings. The Board of Directors constantly monitor the state of equity markets in conjunction with the Group’s current and future
funding requirements, with a view to initiating appropriate capital raisings as required. Refer to Note 1 for managements plans to
remain a going concern.
The tables below reflect an undiscounted contractual maturity analysis for financial liabilities. Cash flows realised from financial
assets reflect management’s expectation as to the timing of realisation. Actual timing may therefore differ from that disclosed. The
timing of cash flows presented in the table to settle financial liabilities reflects the earliest contractual settlement dates.
Financial Liability and Financial Asset Maturity Analysis
Within 1 Year
1 to 5 Years
Total
2017
$
2016
$
2017
$
2016
$
2017
$
2016
$
Financial liabilities due for payment
Trade and other payables (excluding
estimated annual leave)
Total contractual outflows
Financial assets – cash flows
realisable
24,101
24,101
100,414
100,414
Cash and cash equivalents
1,126,887
1,573,472
Trade and loan receivables
54,905
146,463
Total anticipated inflows
1,181,792
1,719,935
Net inflow on financial instruments
1,157,691
1,619,521
-
-
-
-
-
-
-
-
-
-
-
-
24,101
24,101
100,414
100,414
1,126,887
1,573,472
54,905
146,463
1,181,792
1,719,935
1,157,691
1,619,521
(c) Fair value estimation
The fair value of financial assets and financial liabilities must be estimated for recognition and measurement or for disclosure purposes.
All financial assets and financial liabilities of the Group at the balance date are recorded at amounts approximating their fair value.
The carrying value less impairment provision of trade receivables and payables are assumed to approximate their fair values due to
their short-term nature.
As disclosed in Note 1 should the Company not continue as a going concern then the fair value of financial assets and financial
liabilities may not reflect the true fair value of financial assets and financial liabilities on a liquidation basis.
45
30 JUNE 2017
25.
SEGMENT INFORMATION
Identification of reportable segments
The Company has identified its operating segments based on the internal reports that are reviewed and used by the board of directors
(chief operating decision makers) in assessing performance and determining the allocation of resources. During the period, the
Company is managed primarily on the basis of one segment being oil and gas exploration in Australia.
26. COMPANY DETAILS
The registered office of the company is:
Key Petroleum Limited
Level 2, 47 Stirling Highway
NEDLANDS WA 6009
The principal place of business is:
Key Petroleum Limited
Level 2, 47 Stirling Highway
NEDLANDS WA 6009
46
DIRECTORS' DECLARATION
In the directors’ opinion:
(a)
the financial statements and notes set out on pages 15 to 46 are in accordance with the Corporations Act 2001, including:
(i)
complying with Accounting Standards, the Corporations Regulations 2001 and other mandatory professional reporting
requirements; and
(ii) giving a true and fair view of the Company’s financial position as at 30 June 2017 and of its performance for the financial
year ended on that date;
(b)
(c)
there are reasonable grounds to believe that the Company will be able to pay its debts as and when they become due and payable;
and
a statement that the attached financial statements are in compliance with International Financial Reporting Standards has been
included in the notes to the financial statements.
The directors have been given the declarations by the managing director and equivalent chief financial officer required by section 295A
of the Corporations Act 2001.
This declaration is made in accordance with a resolution of the directors for Key Petroleum Limited.
Kane Marshall
Managing Director
Perth, 26 September 2017
47
Independent Auditor's Report
To the Members of Key Petroleum Limited
Report on the Audit of the Financial Report
Opinion
We have audited the financial report of Key Petroleum Limited (“the Company”) and its
subsidiaries (“the Consolidated Entity”), which comprises the consolidated statement of
financial position as at 30 June 2017, the consolidated statement of profit or loss and
other comprehensive income, the consolidated statement of changes in equity and the
consolidated statement of cash flows for the year then ended, and notes to the financial
statements, including a summary of significant accounting policies, and the directors’
declaration.
In our opinion:
a.
the accompanying financial report of the Consolidated Entity is in accordance with
the Corporations Act 2001, including:
(i)
giving a true and fair view of the Consolidated Entity’s financial position as
at 30 June 2017 and of its financial performance for the year then ended;
and
(ii)
complying with Australian Accounting Standards and the Corporations
Regulations 2001.
b.
the financial report also complies with International Financial Reporting Standards
as disclosed in Note 1.
Basis for Opinion
We conducted our audit in accordance with Australian Auditing Standards. Those
standards require that we comply with relevant ethical requirements relating to audit
engagements and plan and perform the audit to obtain reasonable assurance about
whether the financial report is free from material misstatement. 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 Consolidated Entity 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.
Independent Auditor’s Report
To the Members of Key Petroleum Limited (Continued)
Material Uncertainty Related to Going Concern
We draw attention to Note 1(a)(v) in the financial report, which indicates that the Consolidated Entity incurred a
net loss of $1,144,731 during the year ended 30 June 2017. As stated in Note 1(a)(v), these events or
conditions, along with other matters as set forth in Note 1, indicate that a material uncertainty exists that may
cast significant doubt on the Consolidated Entity’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 judgement, were of most significance in our audit
of the financial report of the current period. These matters were addressed in the context of our audit of the
financial report as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on
these matters.
Key audit matter
How our audit addressed the key audit matter
Capitalised Exploration Costs
As disclosed in note 9 to the financial statements, as
at 30 June 2017, the Group’s capitalised exploration
costs were carried at $4,675,209.
The recognition and recoverability of the capitalised
exploration costs was considered a key audit matter
due to:
The carrying value of capitalised exploration
costs represents a significant asset of the
Group, we considered it necessary to assess
whether facts and circumstances existed to
suggest the carrying amount of this asset may
exceed the recoverable amount; and
Determining whether impairment indicators
judgement by
exist
involves significant
management
Our audit procedures included but were not limited to:
Assessing management’s determination of its
areas of interest for consistency with the
definition
in AASB 6 Exploration and
Evaluation of Mineral Resources (“AASB 6”);
Assessing the Group’s rights to tenure to its
tenements;
recorded
Testing the Group’s additions to capitalised
exploration costs for the year by evaluating a
for
of
sample
consistency
the
to underlying
capitalisation requirements of the Group’s
accounting policy and the requirements of
AASB 6;
expenditure
records,
future activities,
By testing the status of the Group’s tenure and
planned
reading board
minutes and discussions with management
we assessed each area of interest for one or
more of the following circumstances that may
indicate
the capitalised
exploration costs:
impairment of
The licenses for the rights to explore
expiring in the near future or are not
expected to be renewed;
Substantive expenditure
further
exploration in the area of interest is not
budgeted or planned;
for
Independent Auditor’s Report
To the Members of Key Petroleum Limited (Continued)
Key audit matter
How our audit addressed the key audit matter
Decision or intent by the Group to
discontinue activities in the specific
area of
lack of
commercially viable quantities of
resources; and
interest due
to
indicating
Data
that, although a
development in the specific area is
likely to proceed, the carrying amount
of the exploration asset is unlikely to be
recorded
development or sale.
full
in
from successful
Recognition and Measurement of Restoration
Provision
As disclosed in note 11 to the financial statements, as
at 30 June 2017 the Group had a Restoration
Provision of $2,866,782 relating to the Group’s
requirement to rehabilitate its exploration fields
(Retention Lease 1 and L15).
The recognition and measurement of restoration
provisions was considered a key audit matter as the
calculation of the provision requires judgment in
estimating the future costs, the timing as to when the
future costs will be incurred and the determination of
an appropriate rate to discount the future costs to
their net present value.
We also assessed the appropriateness of the related
disclosures in note 9 to the financial statements.
Our audit procedures included but were not limited to:
the
legal and/or constructive
Evaluating
obligations with respect to the rehabilitation for
Retention Lease 1 and L15 and the intended
method of rehabilitation;
for
Assessing
determining the rehabilitation provision, and
the Group’s
process
enquiring about material movements in the
provision during the year;
Assessing whether sufficient evidence was
available to support the cost estimates; and
Assessing the accuracy of the calculations
used to determine the rehabilitation provision
including the discount rate applied and the
appropriateness of the current or non-current
classification of the provision.
We also assessed the appropriateness of the related
disclosures in note 11 to the financial statements.
Independent Auditor’s Report
To the Members of Key Petroleum Limited (Continued)
Other Information
The directors are responsible for the other information. The other information comprises the information
included in the Consolidated Entity’s annual report for the year ended 30 June 2017, 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.
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 Note 1, the
directors also state in accordance with Australian Accounting Standard AASB 101 Presentation of Financial
Statements, that the financial report complies with International Financial Reporting Standards.
In preparing the financial report, the directors are responsible for assessing the Consolidated Entity’s ability to
continue as a going concern, disclosing, as applicable, matters related to going concern and using the going
concern basis of accounting unless the directors either intend to liquidate the Consolidated Entity or to cease
operations, or has no realistic alternative but to do so.
Auditor’s Responsibilities for the Audit of the Financial Report
Our responsibility is to express an opinion on the financial report based on our audit. 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 judgement
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.
Independent Auditor’s Report
To the Members of Key Petroleum Limited (Continued)
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 Consolidated Entity’s internal control.
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 Consolidated Entity’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 Consolidated Entity 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.
Obtain sufficient appropriate audit evidence regarding the financial information of the entities or
business activities within the Consolidated Entity to express an opinion on the financial report. We are
responsible for the direction, supervision and performance of the Consolidated Entity audit. We remain
solely responsible for our audit opinion.
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 with the directors, we determine those matters that were of most significance
in the audit of the financial report of the current period 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 Remuneration Report
We have audited the Remuneration Report included in the directors’ report for the year ended 30 June 2017.
The directors of the Company are responsible for the preparation and presentation of the remuneration report
in accordance with s 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.
Independent Auditor’s Report
To the Members of Key Petroleum Limited (Continued)
Auditor’s Opinion
In our opinion, the Remuneration Report of the Company, for the year ended 30 June 2017, complies with
section 300A of the Corporations Act 2001.
BENTLEYS
Chartered Accountants
DOUG BELL CA
Director
Dated at Perth this 26th day of September 2017
ASX ADDITIONAL INFORMATION
Additional information required by the Australian Securities Exchange and not shown elsewhere in this report is as follows. The
information is current as at 19 September 2017.
(a)
Distribution of equity securities
Analysis of numbers of equity security holders by size of holding:
1
1,001
5,001
10,001
-
-
-
-
1,000
5,000
10,000
100,000
100,001 and over
Ordinary shares
Number of holders Number of shares
66
95
136
613
11,276
319,312
1,219,197
27,040,718
1,330
1,247,358,441
The number of equity security holders holding less than a marketable parcel of securities are:
(Minimum $500.00 parcel at $0.008 per unit – minimum parcel size 62,500)
768
16,012,153
(b)
Twenty largest shareholders
The names of the twenty largest holders of quoted ordinary shares are:
1
2
3
4
5
6
7
8
9
10
11
12
13
13
13
16
17
18
19
20
ASF Oil & Gas Holdings Pty Ltd
Star Surpass Limited
Start Grand Global Limited
Elite Ray Investments Limited
Forever New Limited
Mr Jiarong He
HSBC Custody Nominees (Australia) Ltd
Renown Capital Holdings Ltd
BNP Paribas Noms Pty Ltd
Bellaire Capital Pty Ltd
HC Investment Holdings Pty Limited
Granborough Pty Ltd
KJM Consultants Pty Ltd
Seaville Investments Pty Ltd
Ms Hongqing Wang
Mr Andrew Christopher Mayes
Odyssey Oil Pty Ltd
BNP Paribas Nominees Pty Ltd
Mr Hercules Philippus Bronn & Mrs Charmaine Bronn
Mr Kenneth Raymond Pettit
54
Listed ordinary shares
Number of shares
Percentage of
ordinary shares
221,147,588
175,000,000
170,000,000
100,000,000
92,500,000
57,325,075
35,483,582
32,500,000
22,808,867
20,110,621
12,190,159
10,000,000
7,500,000
7,500,000
7,500,000
7,000,000
6,875,000
4,584,854
4,500,000
4,417,062
998,942,808
17.73
14.03
13.63
8.02
7.42
4.60
2.84
2.61
1.83
1.61
0.98
0.80
0.60
0.60
0.60
0.56
0.55
0.37
0.36
0.35
80.08
ASX ADDITIONAL INFORMATION
(b) Substantial shareholders
The names of substantial shareholders who have notified the Company in accordance with section 671B of the Corporations Act 2001
are:
ASF Oil & Gas Holdings Pty Ltd
Star Surpass Limited
Start Grand Global Limited
Elite Ray Investments Limited
Forever New Limited
(c) Voting rights
Number of Shares
221,147,588
175,000,000
170,000,000
100,000,000
92,500,000
All ordinary shares (whether fully paid or not) carry one vote per share without restriction.
(d) Schedule of interests in petroleum blocks
Location
Australia – Onshore
Australia – Onshore
Australia – Onshore
Australia – Onshore
Australia – Onshore**
Australia – Onshore
Block
EP437
EP104
R1
L15
ATP 783/920/924
WA-481-P
Percentage held/earning
43.47%
89.23%
85.23%
85.40%
100.00%
40.00%
** Key is in the process of transferred the title into its name after completion the acquisition.
(e) Unquoted Securities
Class
Number of
Securities
Number of
Holders
Holder Name
Number of
Securities
Holders of 20% or more of the class
Unlisted 1.287 cent Options, Expiry 9 March 2019
1,000,000
Unlisted 1.5 cent Options, Expiry 30 November 2020
20,000,000
Performance Rights A
Performance Rights B
2,000,000
2,000,000
1
1
1
1
Michelle Armitage
1,000,000
JL Kane Marshall
20,000,000
JL Kane Marshall
JL Kane Marshall
2,000,000
2,000,000
55