More annual reports from Melbana Energy Limited:
2023 Report About the Company
Notes to the Consolidated Financial Statements (Cont)
For the Year Ended 30 June 2017
Melbana Energy Limited is an Australian ASX listed, independent oil and gas company with a portfolio of
exploration, appraisal and development stage opportunities in Cuba, New Zealand and offshore northern Australia.
The Company has a diverse and high impact exploration asset portfolio with material near-term value drivers:
•
Unique Cuban leverage (Block 9 – MAY 100%*) with enormous onshore conventional oil potential and early
mover advantage. Multiple prospects and leads identified with up to two exploration wells to be drilled
commencing mid-2018
•
Beehive prospect (WA-488-P – MAY 100%) potentially the largest undrilled hydrocarbon prospect offshore
Australia
•
New Zealand Pukatea prospect (PEP51153 – MAY 30%) onshore Taranaki Basin, targeting the highly productive
conventional Tikorangi Limestone reservoir
• Long-term potential value from Tassie Shoal Projects (MAY 100%)
Melbana has a focused objective of growing a material oil and gas business through the development of its portfolio
whilst also seeking and assessing new venture opportunities that will enhance the Company’s asset base.
Contents
Directors’ report
Review of operations
Auditor’s independence declaration
Remuneration report
Corporate governance statement
Consolidated statement of 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
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5
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14
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24
25
26
27
5 1
52
Forward Looking Statements
This Financial Report includes certain forward-looking statements
that have been based on current expectations about future acts,
events and circumstances. These forward-looking statements are,
however, subject to risks, uncertainties and assumptions that could
cause those acts, events and circumstances to differ materially from
the expectations described in such forward-looking statements.
These factors include, among other things, commercial and other
risks associated with the meeting of objectives and other investment
considerations, as well as other matters not yet known to the Group
or not currently considered material by the Group.
About the Company
Melbana Annual Report 2017 (formerly MEO Australia)
Highlights for the Year
•
Cuban Block 9 PSC sees 50% upgrade to exploration
potential
•
New Zealand Pukatea prospect PEP51153 significantly
upgraded
–
Reaffirms Block 9 as one of the world’s most exciting
exploration plays
–
Prospective Resources of 12.4 million barrels of oil
equivalent (Best Estimate, 100% basis)**
•
Update to Block 9 Prospectivity Assessment identified 19
leads and prospects
–
Alameda-1 prospect offers access to three
independent exploration objectives
•
Block 9 priority drill targets, Alameda-1 and Zapato-1
identified
–
Combined exploration potential of 2.5 billion barrels
Oil-in-Place and 130 million barrels recoverable oil
(Best Estimate, 100% basis)**
•
•
High impact Pukatea-1 exploration well to be drilled
early-2018
–
Rig secured and site upgrades completed
Melbana free carried through AC/P50 & AC/P51 seismic
reprocessing and primary term work program
• Relaunched as Melbana Energy Limited
–
Highlighting new era for the Company focused on
Cuba
* Subject to Petro Australis receiving the necessary Cuban regulatory approvals
(including pre-qualification) for its 40% back-in option which Petro Australis
notified Melbana that it was exercising on 25 August 2017
** See prospective Resources Cautionary statement on p. 12.
Melbana Project Areas
Highlights for the Year 1
Melbana Annual Report 2017 (formerly MEO Australia)
Chairman’s Letter
It is with great pleasure that I present Melbana’s Annual Report for
financial year 2017, a year that has seen the Company’s sustained
efforts move it closer to testing the exciting exploration potential
of its acreage in Cuba.
whose focus is on making decisions in the best interests of
our shareholders.
Please take a moment to register at our recently upgraded
website (www.melbana.com) so that you might more easily
receive timely and relevant information of our progress.
We pay close attention to the utility of this platform so any
comments you may wish to submit there will be received by
us and considered.
Finally, I would like to thank Peter Stickland and his team
for their efforts this year and on behalf of the Board and
management, I would also like to thank our shareholders for
their continued and loyal support. We look forward to the year
ahead with great confidence that Melbana will continue to
make significant progress.
Andrew G Purcell
Chairman
Financial year 2017 saw a 15% increase in the average price of oil
to US$49/bbl and a significant reduction in its volatility. Increased
stability is exactly what the sector needed to encourage it to make
longer term plans and to attract capital. Good returns can be
made from the right portfolio of projects at these levels so I would
expect to see interest in the sector continue to increase if financial
year 2018 continues on this trend.
In August 2016, Melbana raised $2.23 million in new capital
(via share placement and Share Purchase Plan) to fund its
activities in Cuba and providing additional working capital.
That placement has been complemented by a further capital
raising completed shortly after the 2017 financial year end
with an additional $5.21 million (before costs) raised via a
share placement and entitlement offer (of which $1 million
was underwritten by your directors). Again, these funds are
to be primarily directed towards meeting our objective of
commencing drilling in Cuba in mid-2018. We appreciate the
support shown by existing shareholders and welcome new
investors to the company.
These two successful capital raisings were strong validation
from our shareholders and the market of the strategic focus
we have placed on Cuba because of its attractive risk/return
profile.
Melbana’s focus on Cuba means your Company will consider
all alternatives to fund its permits in Australia and New
Zealand, all of which have the potential to be Company
changing in their own right. Our 30% interest in the highly
prospective Pukatea-1 well in New Zealand, for example,
is currently scheduled to be drilled early in 2018 and
maintaining an exposure to a success is a priority for your
Company whilst it seeks avenues by which it can reduce its
non-Cuban expenditure.
During financial year 2017, the Company changed its name to
Melbana Energy Limited to better reflect its future direction
and strategic focus on Cuba. Financial year 2018 has already
seen significant progress made towards permitting our
preferred drill sites in Cuba and we expect to see the level
of activity increase as we move into planning. In addition,
we continue to review our Corporate Governance policies,
ensuring they are upheld to the highest of standards due to
the great importance we put on maintaining an effective,
stable and independent Board with the correct mix of skills
2 Chairman’s Letter
Melbana Annual Report 2017 (formerly MEO Australia) Managing Director’s Message
Financial year 2017 has been one of focus and determination for
the team at Melbana. As the only ASX-listed oil and gas company
with exploration acreage in Cuba, the Company holds a truly unique
position which provides it with an ideal platform to grow.
Melbana furthered its understanding of the onshore Cuban asset,
Block 9 PSC, with continued evaluation of exploration data during
financial year 2017. This was followed by an update of its 2016
Prospectivity Assessment which resulted in a 50% increase to
the exploration potential with estimates of 12.5 billion barrels of
Oil-in-Place with a Prospective (Recoverable) Resource of 637
million barrels (Best Estimate, 100% basis*). Melbana believes this
reaffirms Block 9 as one of the world’s most exciting exploration
plays.
The updated assessment also identified 19 leads and prospects
which the Company reviewed to identify those with the greatest
impact and lowest drilling risk. Following that review, two
prospects, Alameda-1 and Zapato-1, were identified as the highest
ranked drilling opportunities.
In particular, the Alameda-1 prospect offers access, via a slightly
deviated well, to three independent exploration objectives with
combined exploration potential of over 2.5 billion barrels Oil-in-
Place and 130 million barrels of recoverable oil (Best Estimate,
100% basis*). Melbana is now focused on detailed planning for a
two-well drilling campaign in Block 9 with the goal of spudding the
first well, Alameda-1, mid-2018.
During the Financial Year the Company took steps to establish
its presence in Cuba by appointing a Cuban representative and
opening an office in Havana. In preparation for field activity in
Block 9, the company proceeded to engage a Cuban engineering
firm to design surface facilities, conduct studies and manage the
regulatory permitting process. Field work has commenced with
the survey of the Alameda-1 well location, camp site and access
road complete.
Subsequent to the end of the Financial Year Petro Australis
Limited notified Melbana that it was exercising its right to back-in
for a 40% participating interest in Block 9, subject to necessary
Cuban regulatory approvals (including pre-qualification). In the
event such approvals are forthcoming, Melbana will retain a
60% interest and operatorship, with Petro Australis responsible
for 40% of certain back costs and 40% of future costs. It is our
view that this back-in validates the high quality and significant
petroleum prospectivity of Block 9.
Along with its world-class resource in Cuba, Melbana has other
quality assets in its portfolio. Among these is the PEP51153 permit,
which sits onshore in New Zealand’s Taranaki Basin. During
FY2017 the Prospective Resources Best Estimate for PEP51153
increased to 12.4 million barrels of oil equivalent (100% share),
as did the chance of success to 19%*. The Pukatea prospect is
targeting a highly productive conventional reservoir, is close to
existing infrastructure and has been de-risked by the number of
low-cost alternative development paths open to it. Preparations
for the drilling of exploration well, Pukatea-1, continue with drilling
currently planned to start early 2018.
The Company continued to advance its Australian projects,
including the evaluation of exploration data and farm-out
discussions for WA-488-P in the Bonaparte Gulf. Subsequent to
the end of financial year 2017, Rouge Rock Pty Ltd exercised its
options to acquire a 45% participating interest in AC/P50 and
AC/P51 in the Vulcan sub-basin, offshore north-west Australia.
While the Company intends to undertake a farm out process to
potentially assist funding the drilling phase Melbana is positioned
to complete initial preparations for the planned Cuba drilling
program in 2018. As the Company enters this exciting phase I
would like to thank staff for their continued support and diligence.
I believe they possess the skills and enthusiasm to achieve the
strategic vision developed by the Board. I would also like to thank
our many shareholders for your support and continuing interest in
Melbana.
*See prospective Resources Cautionary statement on p. 12.
Peter Stickland
Managing Director & Chief Executive Officer
Managing Director’s Message 3
Melbana Annual Report 2017 (formerly MEO Australia) Director’s Report
For The Year Ended 30 June 2017
The directors of Melbana Energy Limited (variously the
“Company”, “Melbana” and “Melbana Energy”) submit their
report for the financial year ended 30 June 2017. Melbana is
a company limited by shares, incorporated and domiciled in
Australia.
Directors
The names and details of the Company’s directors in office
during the financial year and until the date of this report
are as follows. The directors were in office during the entire
period unless otherwise stated.
Andrew G Purcell, B Eng; MBA
Chairman (Appointed Independent Non-Executive Director
30 July 2015, appointed Chairman 25 November 2015)
Mr Purcell founded the Lawndale Group (formerly Teknix
Capital) in Hong Kong over 10 years ago, a company
specialising in the development and management of
projects in emerging markets across the heavy engineering,
petrochemical, resources and infrastructure sectors. Prior to
this, Mr Purcell spent 12 years working in investment banking
across the region for Macquarie Bank then Credit Suisse. Mr
Purcell also has significant experience as a public company
director, both in Australia and across Asia.
Mr Purcell is a Non-Executive Director of AJ Lucas Group
Limited (ASX: AJL) and Metgasco Limited (ASX:MEL).
Mr Purcell is Chairman of the Remuneration & Nomination
Committee and a member of the Audit & Risk Committee.
4 Director’s Report
Peter J Stickland, BSc, Hons (Geology), GDipAppFin (Finsia), GAICD
Chief Executive Officer (Appointed 19 December 2014) and
Managing Director (Appointed 30 January 2015)
Peter Stickland has over 25 years’ global experience in
oil and gas exploration. Peter was CEO of Tap Oil Limited
(ASX: TAP) from 2008 until late 2010 during which time he
oversaw the evolution of the company into a South East Asia/
Australia focused E&P Company and was directly involved in
a number of oil and gas discoveries. Prior to joining Tap Oil,
Peter had a successful career with BHP Billiton including a
range of technical and management roles both in Australia
and internationally. Peter has been a member of the Board of
Australian Petroleum Production and Exploration Association
Limited (APPEA) since 2009.
Michael J Sandy, BSC Hons (Geology), MAICD
Independent Non-Executive Director (Appointed 30 July 2015)
Michael Sandy is a geologist with 40 years’ experience in the
resources industry – mostly focused on oil and gas. Michael
had a varied early career with roles in minerals exploration
and research and a role with the PNG Government based in
Port Moresby. In the early 1990s he was Technical Manager
of Oil Search Limited also based in Port Moresby. Michael was
involved in establishing Novus Petroleum Ltd and preparing
that company for its $186m IPO in April 1995. Over 10
years, he held various senior management roles with Novus
including manager of assets in Australia, Asia, the Middle
East and the USA and as Business Development Manager was
involved in numerous acquisitions and divestments. He co-
managed the defence effort in 2004 when Novus was taken
over by Medco Energi.
Melbana Annual Report 2017 (formerly MEO Australia) For the last 13 years, Michael has been the principal of
consultancy company Sandy Associates P/L involved in
petroleum, minerals, geothermal, environmental and disaster
management projects and resources industry start-ups.
He was previously a non-executive director of Tap Oil Limited
(ASX: TAP), Hot Rock Ltd (ASX: HRL), Caspian Oil and Gas
(ASX: CIG) and Pan Pacific Petroleum (ASX:PPP) and ex-
chairman of Burleson Energy Limited (ASX: BUR).
Mr Sandy is Chairman of the Audit & Risk Committee and a
member of the Remuneration & Nomination Committee.
Interests in the shares and options of the
company
As at the date of this report, the relevant beneficial and non-
beneficial interests of each of the directors in the shares and
share options in the Company were:
Ordinary
Shares
Unlisted 31
August 2018
Options
Share
Performance
Rights
A G Purcell
53,532,297
17,048,033
M J Sandy
3,685,001
656,112
-
-
P J Stickland
9,915,551
1,348,395
5,333,333
The terms of the share performance rights are set out in note 19 to
the consolidated financial statements.
Company Secretary
Mr Colin Naylor was appointed Chief Financial Officer on 5
February 2007 and Company Secretary on 23 February 2007.
Mr Naylor has previously worked in senior financial roles in
major resource companies and is a Fellow of CPA Australia.
Dividends
No dividend has been paid, provided or recommended during
the financial year and to the date of this report (2016: nil).
Principal Activities
The principal activities during the year of the consolidated
entity were oil and gas exploration in Australia, New Zealand
and Cuba together with development concepts for the Tassie
Shoal Methanol Project and Timor Sea LNG Project.
At 30 June 2017 the Company had 4 full-time and 5 part-
time employees including directors (2016: 3 full-time and
6 part-time employees including directors). In addition, the
Company engages consultants to assist in the development and
management of its various activities on an as required basis.
Review Of Operations
Environment, Health and Safety
Your Board believes that all workplace injuries are avoidable.
Policies and procedures are in place to ensure employees and
contractors conduct all activities in a safe manner. Melbana
has adopted an environmental, health and safety policy and
conducts its operations in accordance with the Australian
Petroleum Production & Exploration Association (APPEA)
Code of Practice.
Directors specifically address Health, Safety and Environment
issues at each Board meeting and are pleased to advise
there were no reported Lost Time Injuries or environmental
incidents during the year.
Upstream activities including seismic surveys, well site
surveys and drilling operations require a variety of regulatory
approvals as detailed in the applicable regulatory regime,
including environment plans, safety cases and the preparation
of plans to manage the undertaking of the activities and the
contractors engaged in undertaking the activities.
Any proposed development activities on Tassie Shoal are
subject to environment conditions specified in the Offshore
Petroleum and Greenhouse Gas Storage Act (2006),
associated Regulations and Directions, as well as the
Environment Protection and Biodiversity Conservation
(EPBC) Act (1999).
International Operations
Cuba
Block 9 (Melbana 100%**)
The Production Sharing Contract (PSC) for Block 9, onshore
Cuba, was executed on 3 September 2015. The Block 9
PSC area is in a proven hydrocarbon system with multiple
discoveries within close proximity, including the multi-billion
barrel Varadero oil field. It also contains the Motembo field -
the first oil field discovered in Cuba. As an early mover into
Cuba, Melbana is now one of the few western companies with
a footprint in the expanding Cuban hydrocarbon sector.
During the year Melbana identified Block 9 as one of the
world’s most exciting exploration plays with exploration
potential for approximately 12.5 billion barrels of Oil-in-Place
with a Prospective (Recoverable) Resource of 637 million
barrels (Best Estimate, 100% basis)# of potentially high
quality oil. The prospectivity assessment also identified 19
individual prospects and leads which the Company has been
prioritising so as to focus on the highest impact, lowest risk
drill opportunities.
Director’s Report (continued) 5
Melbana Annual Report 2017 (formerly MEO Australia) Review Of Operations (cont)
The Company’s aim is to drill up to two wells in Block 9 commencing mid-2018. Melbana engaged a Cuban engineering
consulting firm to undertake some aspects of well design and manage the regulatory permitting process for drilling,
incorporating operating and environmental licences as well as civil approvals of the two highest priority prospects, Alameda and
Zapato.
Funding for an exploration program of up to two wells is subject to capital raising and/or a farm-out process. Melbana
commenced a farmout process during the year.
Net Entitlement Interest** (based on approximate 67.5% contractor share under Production Sharing Contract)
Block 9 Prospects & Leads
CoS*
Low
Best
Mean
High
Alameda
Zapato
Piedra
A1
A2
B
C2
E
F
G1
G2
J
L
N
Q1
Q2
Q3
R
U1
Total unrisked
Oil
Oil
Oil
Oil
Oil
Oil
Oil
Oil
Oil
Oil
Oil
Oil
Oil
Oil
Oil
Oil
Oil
Oil
Oil
Oil
MMstb
MMstb
MMstb
MMstb
MMstb
MMstb
MMstb
MMstb
MMstb
MMstb
MMstb
MMstb
MMstb
MMstb
MMstb
MMstb
MMstb
MMstb
MMstb
MMstb
32%
25%
22%
18%
21%
14%
18%
25%
22%
15%
15%
16%
21%
22%
14%
14%
14%
17%
17%
2
3
2
1
6
7
2
1
1
2
1
2
0
3
1
1
3
1
1
44
48
26
4
46
62
40
27
17
9
5
18
3
28
4
2
22
9
17
61
80
36
6
63
88
64
40
23
12
8
28
4
38
6
3
26
14
26
144
200
83
15
144
207
160
97
54
26
20
67
9
87
14
8
57
36
63
39
430
625
1,490
* CoS = Chance of Geologic Success
# These estimates should be read with reference to the footnote “Notes regarding Contingent and Prospective resource estimates” on page 12.
** Subject to Petro Australis receiving the necessary Cuban regulatory approvals (including pre-qualification) for its 40% back-in option which Petro Australis
notified Melbana that it was exercising on 25 August 2017
Subsequent to the end of the Financial Year, Petro Australis Limited (“Petro Australis”) provided a notice to Melbana exercising
its back-in right with respect to a 40% participating interest in Block 9 PSC. Subject to Petro Australis receiving the necessary
Cuban regulatory approvals (including pre-qualification) for this transfer, the Block 9 PSC Joint Venture would consist of
Melbana 60% (and Operator) and Petro Australis 40%. Petro Australis is responsible for 40% of certain back costs as well as
40% of future costs associated with Block 9 PSC.
6 Director’s Report (continued)
Melbana Annual Report 2017 (formerly MEO Australia) New Zealand
PEP51153 (Melbana 30%)
During the year the PEP51153 Joint Venture (Melbana 30%, Tag Oil (TSX: TAO) 70% and Operator) has approved plans to drill
Pukatea-1, with the Operator advising that drilling is currently planned to commence early 2018.
During the year the PEP51153 Joint Venture significantly upgraded the prospective resources attributable to the Pukatea prospect
which are estimated to range from 1.3 to 40 million barrels (Low-High estimates) with a Best Estimate of 12.4 million barrels of oil
equivalent. The chance of success* for Pukatea has also been revised upward from 16% to 19%. The Pukatea prospect is proximal
to existing infrastructure and has a number of low cost alternative development paths. The Pukatea-1 well is planned to be drilled
from the existing Puka production pad where three wells have previously been drilled. Subsequent to the end of the year the
PEP51153 Joint Venture secured a local rig to drill Pukatea-1 and commenced site civil and construction works to upgrade the
existing drill pad.
PEP51153 also contains the shallower Puka oil accumulation, which was discovered in 2012 and has previously produced from
two wells under extended production test at 100bpd, but is currently shut-in.
The Company is currently exploring opportunities to reduce its funding requirements whilst maintaining exposure to a
successful result in the highly prospective Pukatea-1 well.
Net Contingent Resources (30% share)
Discovery Name
Puka
Gas
Total Liquids
Barrels Equiv
Net Prospective Resources (30% share)
Prospect Name
Pukatea
Gas
Oil
Barrels Equiv
* CoS = Chance of Geologic Success
Bscf
MMstb
MMboe
Bscf
MMstb
MMboe
1C
-
0.1
0.1
2C
-
0.2
0.2
3C
-
0.6
0.6
CoS*
Low
Best
Mean
High
0.3
0.3
0.3
3.4
3.1
3.7
4.8
4.6
5.4
11.1
10.1
12.0
19%
These tables should be read with reference to the footnote “Notes regarding Contingent and Prospective resource estimates” on page 12.
Australian Operations
WA-488-P (Melbana 100%)
Melbana was awarded 100% interest in WA-488-P, located
in the Bonaparte Basin, in May 2013. The permit is
located between the producing Blackktip gas field and the
undeveloped Turtle and Barnett oil fields and contains the
giant Beehive prospect. Beehive was identified as a follow-
up to the 2011 Ungani-1 oil discovery in the adjacent Canning
Basin and represents a new play type in the Bonaparte Basin.
Beehive is considered prospective for oil at the upper
Carboniferous aged carbonate target and is considered
analogous to the giant Tengiz oil field in the Caspian Sea.
During the year, Melbana completed 2D seismic reprocessing
and inversion studies of selected seismic lines to enhance
the prospectivity of the Beehive prospect, results of
which showed a significant enhancement to data quality.
Subsequently a further 2D seismic reprocessing study was
commenced incorporating a complete grid of 2D seismic lines
across Beehive.
In November 2016 Melbana was granted a 16 month extension
to the work program for WA-488-P. Permit Year 2 is now
extended to 21 March 2018. The timeframe within which to
drill the Beehive-1 exploration well has also been deferred
commensurately. The additional time will provide an
opportunity for Melbana to undertake a further 330km of
2D seismic broadband reprocessing and additional studies,
including a stratigraphic interpretation study and an analogue
field study.
A renewed farmout/partial sale process was commenced
during the year.
Director’s Report (continued) 7
Melbana Annual Report 2017 (formerly MEO Australia) Review Of Operations (cont)
Net Prospective Resources (100% share)
Beehive – Carboniferous Prospect
Oil Dominant Scenario
Gas
Gas Dominant Scenario
Gas
Total Liquids
Aggregate (oil equivalent)**
* CoS = Chance of Geologic Success
Total Liquids
Barrels Equiv
Bscf
MMstb
Bscf
MMstb
MMboe
CoS*
13%
3%
16%
Low
-
104
415
20
101
Best
Mean
High
-
598
2,374
117
581
-
1,009
3,996
207
982
-
2,182
8,615
457
2,124
** Aggregate Risk Weighted Average (80:20) of Oil Dominant and Gas Dominant Scenarios
These tables should be read with reference to the footnote “Notes regarding Contingent and Prospective resource estimates” on page 12.
AC/P50 & AC/P51 (both Melbana 55%#)
AC/P50 and AC/P51 are located in the proven Vulcan sub-
basin, immediately to the east of the producing Montara oil
field. The area has historically been challenged by structural
complexity and poor seismic image quality.
During the year, Melbana executed an agreement with Rouge
Rock Pty Ltd (“Rouge Rock”) which granted Rouge Rock an
option to acquire a 45% interest in the AC/P50 and AC/P51
Exploration Permits (“Permits”). In exchange for the grant
of the option, Rouge Rock undertook and funded the
remaining primary statutory work program for each permit
consisting of seismic reprocessing and other technical
activities (“Reprocessing Work”). The Reprocessing Work was
completed as required by the timing stated in the primary
statutory work program and subsequently Rouge Rock
advised Melbana that it was exercising its options to acquire
a 45% interest in the Permits. The exercise of the Rouge Rock
option is subject to the usual regulatory approvals.
The 3D seismic reprocessing undertaken in AC/P50 and
AC/P51 has significantly improved the data quality in an
area with historically poor data.
Both permits are also subject to an option to acquire a 5%
interest in each permit currently held by Far Cape Energy Pte
Ltd (“Far Cape”). Under this option agreement, Melbana will
carry Far Cape’s participating interest in the first well should
Melbana elect to drill a well in either of the permits.
Prospective Resources (55% share#)
Ramble On Prospect
CoS*
Low
Best
Mean
High
Oil Dominant Scenario
Gas
Total Liquids
Gas Dominant Scenario
Gas
Aggregate (oil equivalent)**
* CoS = Chance of Geologic Success
Total Liquids
Barrels Equiv
Bscf
MMstb
Bscf
MMstb
MMboe
9%
2%
11%
-
4
16
1
4
-
21
89
3
21
-
31
254
9
35
-
72
625
21
82
** Aggregate Risk Weighted Average (80:20) of Oil Dominant and Gas Dominant Scenarios
Jur’maker Prospect
CoS*
Low
Best
Mean
High
Oil Dominant Scenario
Gas
Total Liquids
Gas Dominant Scenario
Gas
Aggregate (oil equivalent)**
* CoS = Chance of Geologic Success
Total Liquids
Barrels Equiv
Bscf
MMstb
Bscf
MMstb
MMboe
5%
1%
6%
-
2
6
-
2
-
8
30
1
7
-
18
64
2
17
-
40
152
6
38
** Aggregate Risk Weighted Average (80:20) of Oil Dominant and Gas Dominant Scenarios
These tables should be read with reference to the footnote “Notes regarding Contingent and Prospective resource estimates” on page 12.
# Assumes Rouge Rock receives regulatory approval for its option to acquire a 45% interest in the Permits and subject to a 5% option granted to Far Cape Energy
Pte Ltd.
8 Director’s Report (continued)
Melbana Annual Report 2017 (formerly MEO Australia)
Tassie Shoal Gas Processing Projects
Melbana has Australian Government environmental approvals
to construct, install and operate two stand-alone world scale 1.75
Mta methanol plants collectively referred to as the Tassie Shoal
Methanol Project (TSMP) and a single 3 Mta LNG plant known
as the Tassie Shoal LNG Project (TSLNG) on Tassie Shoal, an
area of shallow water in the Australian waters of the Timor Sea
approximately 275 km north-west of Darwin, Northern Territory.
Environmental Approvals are valid until 2052.
Industry is expected to seek opportunities to collaborate to
secure lowest cost and efficient resource development in
Australia, especially as titleholders with stranded discoveries
are under resource tenure pressure. The unique concept
of the Tassie Shoal Projects represents an opportunity for
collaboration with Melbana to develop a commercialisation
path for the significant, discovered but undeveloped resources
in the region, for the benefit of all stakeholders.
Tassie Shoal Methanol Project (TSMP, Melbana 100%)
Melbana proposes the staged construction of two large
natural gas reforming and methanol production plants, each
with an annual production capacity of 1.75 million tonnes
on its own concrete gravity structure (CGS). Each TSMP
requires ~200 – 220 Million Standard Cubic Feet per day
(MSCFD) of raw gas, preferably with up to 25% CO2, resulting
in a potential total requirement of up to 440 MSCFD and ~4
Trillion Cubic Feet (TCF) of gas over an initial 25 year period.
It was reported by ConocoPhillips that the Barossa gas field
is proposed to be developed as feedstock to the Darwin
LNG facility from 2023, this leaves the Evans Shoal Gas field
(~28% CO2) without a publically stated development path.
Tassie Shoal LNG Project (TSLNG, Melbana 100%)
The TSLNG requires approximately 3 Tcf of low CO2 gas to
operate for 20 years. Gas supply for the LNG plant could come
from one or more of the neighbouring undeveloped gas fields
confronting economic challenges imposed by long distances
from land, high domestic construction costs and/or high FLNG
development costs. The Greater Sunrise resource represents the
most obvious source of gas for the LNG project. Any LNG project
proposed for gas in the region of Tassie Shoal has the potential
to utilise the TSLNG development path as an alternative to FLNG
or piping gas to an onshore LNG facility. Due to its proximity
to the resource and modularised construction, TSLNG has a
significant cost advantage when compared to both floating LNG
(FLNG) and onshore Australia development paths.
In August 2016, the company was advised that the
environmental approvals for TSLNG were extended to 2052,
and, the limit of 3% CO2 feed gas was removed with the
project now able to receive gas of varying qualities.
Results For The Year
The net loss of the Group for the financial year, after provision
for income tax, was $2,120,937 (2016: net loss after tax
of $10,406,105). The loss for the year was mainly due to
administration costs of $1,672,180.
The successful drilling and commercialisation of any
commercial oil and gas discoveries in offshore Australian
exploration permits and onshore overseas acreage and/or the
development/sale of the Group’s methanol and LNG Projects
could ultimately lead to the establishment of a profitable
business. While the Group is in the exploration/appraisal stage
of drilling for hydrocarbons in offshore Australian exploration
permits and overseas acreage and in the project development
phase, funding will be provided by equity capital raised from
the issue of new shares and/or farm out or joint development
arrangements with other companies.
Review Of Financial Condition
At balance date the Group held cash and cash equivalents
of $2,605,011 (2016: $4,135,989). During the year the Group
decreased the cash balance by $1,497,858 (before foreign
exchange fluctuations) with funds used to meet exploration
cash outflows of $2,290,400, net corporate costs of $1,359,856
and expenditure on plant and equipment ($15,520) partly offset
by a proceeds from share issues ($2,080,864 net of costs),
interest received ($73,642) and proceeds from sale of plant
and equipment ($13,412).
Share Issues
In August 2016, the Company announced it had raised
$1,688,400 (before costs) through a placement of 46,900,000
ordinary shares at 3.6 cents per share to qualified institutional
and sophisticated investors. The Company also completed a
Share Purchase Plan which raised $545,000 (before costs) from
the issue of 15,138,926 ordinary shares to Melbana shareholders
at 3.6 cents per share. Proceeds from the Placement and Share
Purchase Plan have been used to accelerate Melbana’s onshore
exploration activities on Block 9 Cuba.
Corporate
Following approval by shareholders at the Annual General
Meeting held on 3 November 2016, the company name
was changed to Melbana Energy Limited. The Company
commenced trading under the new name and ASX Ticker
“MAY” on 8 November 2016.
Melbana’s future prospects are centred on continuing to secure
quality exploration, development and producing opportunities
and seeking to maximise the value to shareholders of its
current portfolio including the Tassie Shoal projects and/or
undertaking a corporate transaction.
Adequacy of funding will, for the immediate future, remain
a key focus for the Group and its Shareholders. The Group
will look to raise additional funding either through farm-in/
sale and/or capital injection to advance its projects. In the
event that the Group cannot meet its share of work program
commitments, permits may need to be surrendered.
Director’s Report (continued) 9
Melbana Annual Report 2017 (formerly MEO Australia) Significant Changes In The State
Of Affairs
Total equity increased to $5,779,484 from $5,603,741,
an increase of $175,743. The major movements were net
proceeds from the share placement and share purchase plan
($2,080,864) and the 2017 net loss ($2,120,937).
Likely Developments And
Expected Results
During FY2018, Melbana is advancing preparations for drilling
up to 2 wells in Block 9 Cuba and considering opportunities
to reduce its exposure to an exploration well in New Zealand
whilst maintaining exposure to a successful result in the
Pukatea-1 well. The Company will also continue with farmout/
partial sale opportunities and pursue attractive new venture
opportunities.
Significant Events After The
Balance Date
On 19 July 2017 the Company announced an amendment
to the Cuba Block 9 work program with the deferral of the
obligation to undertake a 200km 2D seismic survey in the
second exploration sub-period starting November 2017 to
the third exploration sub-period starting November 2019 and
accelerating the obligation to drill an exploration well from
the third exploration sub-period to the second exploration
sub-period. The amendment was requested by the Company
due to it being able to define a number of high quality
drill targets from the data it received and further studies
undertaken during the first exploration sub-period.
On 26 July 2017 it was announced that Rouge Rock Pty
Ltd (“Rouge Rock”) had formally notified Melbana of the
exercise of its options to acquire a forty five percent (45%)
participating interest in the AC/P50 and AC/P51 exploration
permits. Melbana granted the option to Rouge Rock on 5 July
2016 in exchange for a free carry for Melbana on the costs of
the committed work program for the 2016-18 primary term of
each of the exploration permits. The exercise of the farm-in
by Rouge Rock follows its evaluation of reprocessed data and
the resulting suite of enhanced technical products which are
intended to further de-risk the identified prospects and leads,
facilitating a potential further farm-out of the Permits to fund
future discretionary exploration drilling.
On 31 July 2017 PEP51153 Operator (TAG Oil 70%) advised
that the commencement of drilling of the Pukatea-1
exploration well had been delayed until mid - January,
2018 to provide additional time to undertake civil works on
the primary access road and drilling pad and to undertake
potential drill rig modifications. Under the terms of PEP51153
an exploration well is required to be drilled prior to 23
February 2018.
In August 2017 the Company announced that it had raised
$1,787,332 (before costs) from qualified institutional and
sophisticated investors through the placement of 178,733,229
fully paid ordinary shares at $0.01 per share together with
the issue of 59,577,743 options on the basis of one unlisted
option for every three shares subscribed. In addition to the
share placement and to enable all Melbana shareholders
to participate, the Company announced a 1 for 2 pro-rata
non-renounceable entitlement offer of Shares to raise up to
approximately $4,766,000 (before costs). Hartleys Limited and
Patersons Limited were Joint Lead Managers to the Placement
and the Entitlement Offer, and Patersons Limited is partially
underwriting the Entitlement Offer up to $3,420,000. Proceeds
from the Placement and the Entitlement Offer will be used
primarily to allow the Company to undertake the necessary
initial preparations for the planned, but not committed, Cuba
drilling program in 2018 on onshore Block 9 (but excluding
drilling itself). The net proceeds will also be used for corporate
costs and for general working capital purposes.
On 28 August 2017, the Company advised that Petro Australis
Limited (“Petro Australis”) had provided a notice to Melbana
exercising its back-in right with respect to a 40% participating
interest in Cuba Block 9 Production Sharing Contract (“Block
9 PSC”). Subject to Petro Australis receiving the necessary
Cuban regulatory approvals (including pre-qualification) for
this transfer, the Block 9 PSC Joint Venture would consist of
Melbana 60% (and Operator) and Petro Australis 40%. Petro
Australis is responsible for 40% of certain back costs as well
as 40% of future costs associated with Block 9 PSC.
Other than the above, there has not arisen in the interval
between the end of the financial year and the date of this
report any item, transaction or event of a material and
unusual nature likely, in the opinion of the directors of the
Company, to affect significantly the operations of the Group,
the results of those operations, or state of affairs of the Group
in future financial years.
Business Strategy And Prospects
Melbana’s business strategy is to create shareholder value by
successful exploration, development and production of oil and
gas. Key elements of this strategy include securing a portfolio
of attractive upstream oil and gas growth opportunities
and seek to underpin this growth portfolio with a moderate
production base.
Future Prospects
Melbana’s future prospects are centred on continuing to
secure quality exploration, development and producing
opportunities and seeking to maximise the value to
shareholders of its current portfolio.
Business Risks
Oil and gas exploration and appraisal involves significant risk.
The future profitability of Melbana and the value of Melbana’s
10 Director’s Report (continued)
Melbana Annual Report 2017 (formerly MEO Australia) shares are directly related to the results of exploration
and appraisal activities. There are inherent risks in these
activities. No assurances can be given that funds spent on
exploration and appraisal will result in discoveries that will
be commercially viable. Future exploration and appraisal
activities, including drilling and seismic acquisition, may
result in changes in current prospectivity perceptions of
individual prospects, leads and permits. It may even lead to a
relinquishment of the permit, or a portion of the permit.
Oil and gas drilling activities are subject to numerous
risks, many of which are beyond Melbana’s control. Drilling
activities may be curtailed, delayed or cancelled as a result
of weather conditions, mechanical difficulties, availability
of the necessary technical equipment and appropriately
skilled and experienced technicians. Drilling may result in
wells that, whilst encountering oil and gas, may not achieve
commercially viable results.
Industry operating risks include fire, explosions, blow outs, pipe
failures, abnormally pressured formations and environmental
hazards such as accidental spills or leakage of petroleum
liquids, gas leaks, ruptures, or discharge of toxic gases. The
occurrence of any of these risks could result in substantial losses
to Melbana due to injury or loss of life; damage to or destruction
of property, natural resources, or equipment; pollution or other
environmental damage; clean-up responsibilities; regulatory
investigation and penalties or suspension of operations.
Damages occurring to third parties as a result of such risks may
give rise to claims against Melbana.
Permits in which Melbana has an interest are subject to
compulsory work or expenditure obligations for each permit
year which must be met in order to keep the permit in good
standing. It is possible for these commitments to be varied
by deferment and combination with later year requirements
on application of the holders but any such variation is at the
discretion of the relevant Minister administering the relevant
legislation and regulatory authorities in Australia and foreign
jurisdictions. If no variation is approved by the relevant
Minister then a failure to meet compulsory obligation could
lead to forfeiture of the permit.
Melbana, in order to meet future ongoing work programs,
may consider raising additional capital. There can be no
assurance that sufficient funding will be available to Melbana
on favourable terms or at all. If Melbana is unable to raise
necessary finance, there may be a reduction in planned
exploration expenditure which could have a material adverse
effect on Melbana’s business, financial condition and
operations. Any additional equity financing may dilute existing
shareholdings.
Melbana is also exposed to a range of market, financial,
cultural and governance risks. The Company has risk
management and internal control systems to manage material
business risks which include insurance coverage over major
operational activities and regular review of material business
risks by the Audit & Risk Committee.
Share Options And Share
Performance Rights
Options and Share Performance Rights
granted to directors and executives of the
Company
In March 2017, the company granted 9,250,000 Share Options
to employees of which 4,000,000 Share Options were
granted to executives of the company.
There were no share options or performance rights granted to
employees and contractors since the end of the financial year.
Unissued shares under options and share
performance rights
At the date of this report unissued ordinary shares of the
Company under option and share performance rights are:
Options
Expiry Date
Exercise Price
Number of Shares
27 September 2020
$0.032
9,250,000
Share Performance Rights
Expiry Date
29 November 2018
Number of Shares
5,333,333
Shares issued on the Exercise of
Compensation Options or Performance
Rights
During the financial year, there has been no issue of ordinary
shares as a result of the exercise of options or performance
rights. Since the end of the financial year, 20,940,032
ordinary shares have been issued as a result of the exercise of
20,940,032 performance rights (2016: nil).
Indemnification And Insurance
Of Directors
The Company has an insurance policy indemnifying all
directors of the Company against legal costs incurred in
defending proceedings as permitted by Section 199B of
the Corporations Act 2001. Under the policy, details of the
premium cannot be disclosed.
Indemnification Of Auditors
To the extent permitted by law, the Company has agreed to
indemnify its auditors, Ernst & Young, as part of the terms
of its audit engagement agreement against claims by third
parties arising from the audit (for an unspecified amount).
No payment has been made to indemnify Ernst & Young
during or since the end of the financial year.
Director’s Report (continued) 11
Melbana Annual Report 2017 (formerly MEO Australia) Board And Committee Meetings
The following table sets out the members of the Board of
Directors and the members of the Committees of the Board,
the number of meetings of the Board and of the Committees
held during the year and the number of meetings attended
during each Director’s period of office.
Board of
Directors
Audit & Risk
Committee
A
11
11
11
B
11
11
11
A
2
2
-
B
2
2
-
Remuneration
& Nomination
Committee
A
5
5
-
B
5
5
-
A G Purcell
M J Sandy
P J Stickland
A – Number of meetings attended
B – Number of meetings held during the time the director held office during the year
Auditor Independence And
Non-Audit Services
The directors have received the independence declaration
from the auditor, Ernst & Young, set out on page 13.
Non Audit Services
The following non-audit services were provided by the
entity’s auditor, Ernst & Young. The Directors are satisfied
that the provision of non-audit services is compatible with
the general standard of independence for auditors imposed
by the Corporations Act 2001. The nature and scope of each
non-audit service provided means that auditor independence
was not compromised. Tax services were provided by Ernst &
Young during the year.
Notes regarding Contingent and Prospective resource
estimates
1.
The estimated quantities of petroleum that may potentially
be recovered by the application of a future development
project(s) relate to undiscovered accumulations. These
estimates have both an associated risk of discovery and
a risk of development. Further exploration appraisal and
evaluation is required to determine the existence of a
significant quantity of potentially moveable hydrocarbons.
2. The assessments are based on, and fairly represent,
information and supporting documentation prepared by
Mr Peter Stickland, Melbana’s Managing Director & Chief
Executive Officer, who is an employee of the company
and has more than 25 years of relevant experience.
Mr. Stickland is a member of the European Association
of Geoscientists and Engineers and the Petroleum
Exploration Society of Australia. Mr Stickland consents
to the publication of the resource assessments contained
herein.
3. Total Liquids = oil + condensate
4. 6 Bcf gas equals 1 MMboe; 1 MMbbl condensate equals 1
MMboe
5. Melbana share can be derived by pro-rating the resource
ranges described in the tables above by its percentage
equity
12 Director’s Report (continued)
Melbana Annual Report 2017 (formerly MEO Australia) Independence Declaration
Independence Declaration 13
Melbana Annual Report 2017 (formerly MEO Australia) Remuneration Report (Audited)
This remuneration report for the year ended 30 June 2017
outlines the remuneration arrangements of the Company in
accordance with the requirements of the Corporations Act
2001 and its regulations.
The information provided in this Remuneration Report
has been audited as required by Section 308 (3C) of the
Corporations Act. This Remuneration Report forms part of the
Directors’ Report.
The remuneration report details the remuneration arrangements
for Key Management Personnel (KMP) who are defined as
those persons having authority and responsibility for planning,
directing and controlling the major activities of the Company and
the group, directly and indirectly, including any director (whether
executive or otherwise) of the parent company.
The remuneration report is presented under the following
sections:-
1. Key Management Personnel disclosures for FY2017
2. Remuneration Strategy and Board oversight of
remuneration
3. Non-executive director remuneration arrangements
4. Executive remuneration arrangements
5. Remuneration outcomes for FY2017
6. Additional disclosures relating to shares and options
7. Company performance
1. Key Management Personnel
(KMP) for FY2017
The names and positions of the KMP during the 2017 financial
year (FY2017) and up to the date of this remuneration report
are listed below.
(i) Directors
A G Purcell Director (independent non-executive appointed
30 July 2015) (appointed Chairman 25
November 2015)
M J Sandy
Director (independent non-executive) appointed
30 July 2015
P J Stickland
Managing Director and Chief Executive
Officer (appointed Chief Executive Officer
– 19 December 2014 and Managing Director
– 30 January 2015)
14 Remuneration Report (Audited)
(ii) Executives
C H Naylor
Chief Financial Officer and Company Secretary
R Zammit
Executive Manager - Commercial & Business
Development
2. Remuneration Strategy and
Board oversight of remuneration
Remuneration and nomination committee
The Remuneration and Nomination Committee of the Board
of Directors of the Company is responsible for determining
and reviewing compensation arrangements for the directors,
including the Managing Director and Chief Executive Officer
and making recommendations to the Board.
It is important that the Board maintains independence from
management when making decisions affecting executive
remuneration, particularly in respect of the Managing Director
and Chief Executive Officer. Accordingly, the Company’s
Remuneration and Nomination Committee is comprised solely
of non-executive directors and has an independent chair. The
Committee can have access to external advisors on a ‘case by
case’ basis.
The Remuneration and Nomination Committee assesses the
appropriateness of the nature and amount of remuneration
on a periodic basis by reference to relevant employment
market conditions with the overall objective of ensuring
maximum stakeholder benefit from the retention of high
quality directors and the Managing Director and Chief
Executive Officer.
Further details regarding the role, responsibilities and
composition of the Remuneration and Nomination Committee
are set out in the Corporate Governance Statement on the
company’s website.
Remuneration approval process
The Board approves the remuneration arrangements of the
Managing Director and Chief Executive Officer and awards
under short term and long term incentive arrangements
following recommendations from the Remuneration and
Nomination Committee. The Board also sets the remuneration
of non-executive directors which is within the aggregate
amount approved by shareholders.
The Managing Director and Chief Executive Officer approves
the annual extension of consultants’ contracts and their
consulting fees and will make recommendations to the
Remuneration and Nomination Committee for granting of
awards to executives and contractors under the short term
and long term incentive arrangements.
Melbana Annual Report 2017 (formerly MEO Australia) Remuneration consultants and external
advisors
The Corporations Act sets out a detailed regime in relation
to the engagement of external remuneration consultants
to ensure that remuneration consultants are free from
undue influence by any member of the KMP to whom a
‘remuneration recommendation’ relates, and requires that
certain information be disclosed in the Remuneration Report
where a remuneration recommendation has been provided.
During the reporting period, the Company did not receive a
‘remuneration recommendation’ in relation to the quantum
or elements of the remuneration packages of the Company’s
KMP within the meaning of the Corporations Act.
Remuneration strategy
The performance of the Company depends upon the quality
of its directors and executives. To prosper, the Company
must attract, motivate and retain highly skilled directors and
executives.
To this end, the Company embodies the following principles in
its remuneration framework:
•
•
•
Offer competitive remuneration benchmarked against the
external market to attract high calibre executives;
Where appropriate, provide executive rewards linked to
shareholder value; and
Encourage non-executive directors to hold shares in the
Company.
Remuneration structure
In accordance with best practice corporate governance,
the structure of non-executive director remuneration and
executive remuneration is separate and distinct. Further
details regarding the structure of non-executive director
remuneration and executive remuneration (including the
Managing Director and Chief Executive Officer) are set out in
sections 3 and 4.
Changes in Remuneration – 2016-2017
In FY2016 the Board implemented the following remuneration
changes which continued into FY2017 as follows:-
(i) In November 2015, after receiving shareholder approval,
the company granted 5,333,333 Exercisable Performance
Rights to the Managing Director and Chief Executive
Officer, Mr Peter Stickland under the Company’s Long
Term incentive Plan in return for reducing the cash
component of Mr Stickland’s annual remuneration from
$400,000 to $320,000 per annum for the period 1
December 2015 to 30 November 2016. From December
2016, the cash component of Mr Stickland’s annual
remuneration reverted to $400,000.
(ii) In February 2016, the company revised the remuneration
arrangements for senior staff. Senior staff members
voluntarily agreed to a 20% reduction in the cash
component of their annual remuneration packages in
exchange for Exercisable Performance Rights. 20,940,032
Exercisable Performance Rights were granted to senior
staff, of which 10,550,131 Rights were granted to Key
Management Personnel. From February 2017, the cash
component of senior staff annual remuneration reverted
back to the original annual cash component of their
respective remuneration packages.
(iii) The changing activities of the company, particularly
in Cuba increased the involvement of non-executive
directors, while a review of fees paid/payable to the
Chairman and Non-executive directors of peer companies
was tabled for consideration. With effect from 1st March
2017, the fee payable to the Chairman was increased
from $70,000 per annum (inclusive of superannuation)
to $100,000 per annum (inclusive of superannuation)
and the annual fee payable to the Non-executive director
was increased from $50,000 per annum (inclusive of
superannuation) to $75,000 per annum (inclusive of
superannuation).
(iv) In March 2017, the company granted 9,250,000 share
options to employees of which 4,000,000 were granted to
Key Management Personnel. Each option is exercisable at
a price of 3.2 cents with 50% of the share options vesting
on 27 March 2018 and 50% vesting on 27 March 2019. The
expiry date is 27 September 2020. Options are subject to
employees being in continuous service with the Company
up to the date of vesting.
As a result of the above changes, remuneration to Key
Management Personnel increased by 4.4% or $47,594 from
$1,087,734 in FY2016 to $1,135,328 in FY2017.
3. Non-executive director
remuneration arrangements
Remuneration policy and structure
The Board seeks to set remuneration at a level which provides
the Company with the ability to attract and retain directors of
high calibre, at a cost which is acceptable to shareholders.
The amount of aggregate remuneration approved by
shareholders and the fee structure is reviewed annually by
the Remuneration and Nomination Committee against fees
paid to non-executive directors of comparable companies.
The Remuneration and Nomination Committee receives
independent market data when undertaking this annual
review process.
The Chairman, Mr Andrew Purcell and non-executive director,
Mr Michael Sandy have been engaged by the Company under
consulting contracts. Under such agreements current at the
date of this report, there are no annual, long service leave,
other termination entitlements or retirement benefits.
Remuneration Report (Audited) (continued) 15
Melbana Annual Report 2017 (formerly MEO Australia) The Constitution and ASX Listing Rules specify that the
aggregate remuneration of non-executive directors shall
be determined from time to time by members in a general
meeting. An amount not exceeding the amount determined is
then divided between the directors as agreed. At the Annual
General Meeting held on 18 November 2010 shareholders
approved an increase in the aggregate annual remuneration
to $500,000 per year, with effect from the financial year
commencing 1 July 2010.
Non-executive directors are encouraged by the Board to hold
shares in the Company. Shares are purchased on market at
the prevailing market share price.
There are currently no options or performance rights
granted to non-executive directors. Directors may consider
the granting of options or performance rights in the future,
subject to shareholder approval at a General Meeting.
During the year, no additional remuneration was paid to
Directors for service on Board committees.
In addition, Directors are entitled to be paid all travelling and
other expenses they incur in attending to the Company’s
affairs, including attending and returning from general
meetings of the Company or meetings of the Directors or of
Committees of the Directors.
The remuneration of non-executive directors for the year
ended 30 June 2017 and 30 June 2016 is detailed in Table 1
and Table 2 of this report.
4. Executive remuneration
arrangements
The Company aims to reward executives with a level and
mix of remuneration commensurate with their position and
responsibilities within the Company and so as to:
•
•
ensure total remuneration is competitive by market
standards;
reward executives for exceptional individual performance;
and
•
align the interests of executives with those of shareholders.
Remuneration mix
The Company’s executive remuneration is structured as
a mix of fixed annual remuneration and variable ‘at risk’
remuneration. The mix of these components varies for
different management levels.
The table below sets out the relative proportion and
components of the senior executives’ total remuneration
packages for FY2017:
% of Total Remuneration
Performance-based remuneration
Fixed remuneration
Share Performance Rights and Share Options
Short Term Incentive
Long Term Incentive
8.2%
11.4%
13.3%
-
-
-
-
-
-
Variable Remuneration –
Long Term Incentives
Melbana considers the retention of high calibre staff as
essential to the growth of the Company. Therefore as an
incentive to recruit high calibre individuals to Melbana
or retain high calibre staff the Board will grant LTI
Securities (which may be in the form of share options and/
or performance rights) under the Company’s Long Term
Incentive Plan (LTI Plan).
Executives
P J Stickland
C H Naylor
R Zammit
91.8%
88.6%
86.7%
Fixed Remuneration
The level of fixed remuneration is set so as to provide a base
level of remuneration which is both appropriate to the position
and is competitive in the market. Executive contracts of
employment do not include any guaranteed base pay increases.
The fixed component of executives’ remuneration is detailed
in Table 1 and Table 2 of this report.
Variable Remuneration –
Short Term Incentives
Melbana does not have a formal Short Term Incentive
Program, however the Company does, when applicable,
recognise exceptional individual performances in any financial
year through the award of a cash bonus. There were no short
term incentives awarded in the financial year.
16 Remuneration Report (Audited) (continued)
Melbana Annual Report 2017 (formerly MEO Australia) Overview of the LTI Plan
The LTI Plan was adopted by the Board on 13 September
2011. Under the Plan, the Board may invite Eligible Executives
(being an employee of the Melbana Group (including a director
employed in an executive capacity) or any other person who
is declared by the Board to be eligible to receive a grant of
LTI Securities under the Plan) to participate in a grant of LTI
Securities, which may comprise of performance rights and/or
options. Offers will be made on the terms set out in the Plan
and on any additional terms as the Board determines.
Options and/or performance rights granted under the Plan will
only vest, and in the case of options, become exercisable, where
any performance condition and any other relevant conditions
advised to the participant by the Board have been satisfied.
On vesting of a performance right or following the exercise
of an option (as the case may be), the Board will allocate the
number of shares in respect of which the performance right
have vested, or the options have been exercised. Any shares
issued under the Plan will rank equally in all respects with
other shares on issue at that time (except as regards any
rights attaching to such shares by reference to a record date
prior to the date of their issue).
In the event of a takeover, a scheme of arrangement, other
reconstruction or amalgamation of the Company, a winding
up of the Company or other event which is likely to result in
a change of control of the Company, the Board may, in its
absolute discretion, determine that all or a specified number of
a participant’s unvested performance rights and/or options vest,
having regard to all relevant circumstances, including whether
performance is in line with any applicable performance condition
over the period from the date of grant to the relevant event, and
the portion of any applicable performance period or period of
service that has expired at the date of the relevant event. Unless
the Board determines otherwise, any vested options will be
exercisable for a period specified by the Board and will lapse if
not exercised within the specified period.
In accordance with the terms of the Plan, prior to the
allocation of shares to a participant upon vesting of
performance rights or exercise of options (as the case may
be), the Board may make any adjustments it considers
appropriate to the terms of a performance right and/or option
granted to a participant in order to minimise or eliminate any
material advantage or disadvantage to a participant resulting
from a corporate action or capital reconstruction. Without
limiting the foregoing, if:
•
•
•
shares are issued pro rata to the Company’s shareholders
generally by way of a bonus issue (other than an issue in
lieu of dividends or by way of a dividend reimbursement)
involving capitalisation of reserves of distributable profits;
shares are issued pro rata to the Company’s shareholders
generally by way of a rights issue; or
any reorganisation (including consolidated, subdivision,
reduction or return) of the issued capital of the Company
is effected, then the Board may, in its discretion, adjust:
•
•
•
•
the number of performance rights or options to which
each participant is entitled;
the number of shares to which each participant is entitled
upon vesting of performance rights or exercise of options;
any amount payable on vesting of the performance rights
or exercise of options; or
where appropriate, a combination of the above, in the
manner determined by the Board, having regard to
the ASX Listing Rules and the general principle set out
above. Where additional performance rights or options
are granted to a participant, such performance rights or
options will be subject to the same terms and conditions
as the original performance rights or options granted to
the participant (including any performance conditions)
unless the Board determines otherwise.
Grants made during FY2017
In March 2017, the company granted 9,250,000 share options
to employees, of which 4,000,000 were granted to executives.
Each option is exercisable at a price of 3.2 cents with 50% of
the share options vesting on 27 March 2018 and 50% vesting
on 27 March 2019. The expiry date is 27 September 2020.
Options are subject to employees being in continuous service
with the Company up to the date of vesting.
There were no director related options granted during the
financial year.
Consultants
The Managing Director and Chief Executive Officer approves
the terms and conditions of consultant’s contracts including
fees, taking into account market conditions for the services
that are provided. Consultant contracts do not include any
guaranteed fee increases.
Hedging of equity awards
The Company prohibits executives from entering into
arrangements to protect the value of invested share options.
The prohibition includes entering into contracts to hedge their
exposure to options awarded as part of their remuneration
package.
Executive contractual arrangements
The remuneration arrangements and other terms of
employment for Key Management Personnel are formalised
in employment agreements. The material terms of the KMP
employment agreements are set out below.
•
Managing Director and Chief Executive Officer
Remuneration
On 1 December 2015, the Company entered into an executive
agreement with Mr Peter Stickland. Mr Stickland had
previously signed a one-year fixed term contract on 19th
December 2014. The new executive agreement contains the
following major key terms:-
Remuneration Report (Audited) (continued) 17
Melbana Annual Report 2017 (formerly MEO Australia) -
-
-
-
Remuneration: Total Fixed Remuneration is set at
$400,000 (including compulsory superannuation)
which is reviewed on an annual basis. As approved by
shareholders at the 2015 Annual General Meeting, 20% of
the Total Fixed Remuneration (i.e. $80,000) was granted
as Exercisable Performance Rights, thus reducing the
cash component of annual remuneration from $400,000
to $320,000 per annum for the period 1 December
2015 to 30 November 2016. From December 2016, the
cash component of Mr Stickland’s annual remuneration
reverted back to $400,000.
Term: From 1 December 2015 until either the Company or
Mr Stickland terminates the Agreement
Notice: The Company and Mr Stickland may terminate
the Agreement at any time by giving 3 Months’ notice in
writing.
Payments on Termination: If the Executive’s employment
is terminated by reason of Fundamental Change or by
the Company for other reasons, the Company must pay
the Executive a lump sum amount (Separation Amount)
up to the Total Fixed Remuneration for the 6 months
immediately preceding the Termination Date.
• Other Executives
All executives have standard employment contracts. Each
executive is employed until such time as the Company or
the executive terminate by giving notice. The Company
may terminate the executive’s employment agreement by
providing written notice (ranging from 4 weeks’ notice to 3
months’ notice) or providing payment in lieu of the notice
period (based on the fixed component of the executive’s
remuneration). The executive may terminate by giving notice
under the employment contract, ranging from 4 weeks’ notice
to 2 months’ notice. On termination of notice by the Company
or the executive, any options that have vested or that will vest
during the notice period will be released. Options that have
not vested will be forfeited. The Company may terminate the
contract at any time without notice if serious misconduct has
occurred. Where termination with cause occurs the executive
is only entitled to that portion of remuneration that is fixed,
and only up to the date of termination. On termination with
cause any unvested options will immediately be forfeited.
5. Remuneration outcomes for FY2017
5.1 Remuneration of key management personnel of the Company
Details of the remuneration of KMP (including the non-executive directors) for FY2017 and comparative information for FY2016
are set out in Tables 1 and 2 below.
Table 1: Remuneration for the year ended 30 June 2017
Short term
Post
employment
Share-based
payments
Long term
Total
Performance
related
Directors
fees
$
Salary and
consultant
fees
$
Super-
annuation
benefits
$
*Performance
Rights and
share options
$
Long
service
leave
$
Non - executive directors
81,250
56,250
137,500
-
-
-
-
-
-
-
-
-
-
-
-
A G Purcell
M J Sandy
Sub-total
non-executive
directors
Executive director
$
81,250
56,250
137,500
%
-
-
-
P J Stickland
-
341,500
19,616
33,333
9,839
404,288
8.2
Other key management personnel
C H Naylor
R Zammit
Sub-total
executives
TOTAL
-
-
-
214,906
239,185
32,150
19,616
32,932
40,615
7,856
6,280
287,844
305,696
795,591
71,382
106,880
23,975
997,828
137,500
795,591
71,382
106,880
23,975
1,135,328
11.4
13.3
10.7
9.4
* Refer note 19 to the consolidated financial statements for fair value calculation of performance rights and share options.
Commentary
Key Management Personnel remuneration increased by 4.4% or $47,594 from $1,087,734 in FY2016 to $1,135,328 in FY2017.
18 Remuneration Report (Audited) (continued)
Melbana Annual Report 2017 (formerly MEO Australia) Table 2: Remuneration for the year ended 30 June 2016
Short term
Post
employment
Share-based
payments
Long term
Total
Performance
related
Directors
fees
$
Salary and
consultant
fees
$
Super-
annuation
benefits
$
*Performance
Rights and
share options
$
Long
service
leave
$
$
%
Non - executive directors
41,941
33,582
18,392
29,807
123,722
A G Purcell (i)
M J Sandy (i)
S W Hopley (ii)
G A Short (ii)
Sub-total
non-executive
directors
Executive director
-
-
-
-
-
-
-
1,747
2,832
4,579
-
-
-
-
-
-
-
-
-
-
41,941
33,582
20,139
32,639
128,301
-
-
-
-
-
P J Stickland
-
328,114
30,000
46,667
12,306
417,087
11.2
Other key management personnel
C H Naylor
R Zammit
Sub-total
executives
TOTAL
-
-
-
198,973
204,273
35,000
35,000
731,360
100,000
123,722
731,360
104,579
19,038
24,526
90,231
90,231
11,704
13,832
264,715
277,631
37,842
959,433
37,842
1,087,734
7.2
8.8
9.4
8.3
* Refer note 19 to the consolidated financial statements for fair value calculation of performance rights.
(i) A G Purcell and M J Sandy were appointed directors on 30 July 2015.
(ii) G A Short resigned as Chairman and non-executive director on 25 November 2015 and S W Hopley retired as non-executive director on 25 November 2015.
Remuneration Report (Audited) (continued) 19
Melbana Annual Report 2017 (formerly MEO Australia) 5.2 Equity instruments
Table 3: Options and share performance rights awarded, vested and lapsed during the year
Options
30 June 2017
Award date
Non-executive directors
Options awarded
during the year
No.
Fair value per
option at award
date (cents)
Vesting date
No. vested
during year
No. lapsed
during year
Expiry date
Nil
Executives
C H Naylor
C H Naylor
R Zammit
R Zammit
28 Mar 2017
28 Mar 2017
28 Mar 2017
28 Mar 2017
1,000,000
1,000,000
1,000,000
1,000,000
1.6745
1.6745
1.6745
1.6745
27 Mar 2018
27 Mar 2019
27 Mar 2018
27 Mar 2019
-
-
-
-
-
-
-
-
27 Sep 2020
27 Sep 2020
27 Sep 2020
27 Sep 2020
Share Performance Rights
30 June 2017
Award date
Executives
Share
performance
rights awarded
during the year
No.
Fair value
per share
performance
right at
award date
(cents)
Vesting date
No. vested
during year
No. lapsed
during year
Expiry Date
P J Stickland
25 Nov 2015
C H Naylor
R Zammit
4 Feb 2016
4 Feb 2016
5,333,333
4,610,519
5,939,612
1.500
0.991
0.991
30 Nov 2016
5,333,333
31 Jan 2017
4,610,519
31 Jan 2017
5,939,612
-
-
-
29 Nov 2018
31 Jan 2019
31 Jan 2019
Table 4: Value of options awarded, exercised and lapsed during the year
C H Naylor
R Zammit
Value of options
granted during
the year
$
33,489
33,489
Value of options
exercised during
the year
$
-
-
Table 5: Value of share performance rights, awarded, exercised and lapsed during the year
P J Stickland
C H Naylor
R Zammit
Value of rights
granted during
the year
$
-
-
-
Value of options
and rights exercised
during the year
$
-
-
-
Value of options
lapsed during
the year
$
-
-
Value of options
and rights lapsed
during the year
$
-
-
-
For details on the valuation of the options and share performance rights, including models used and assumptions used please
refer to note 19 to the consolidated financial statements.
Table 6: Shares issued on exercise of options and share performance rights
There was no exercise of options or share performance rights during the reporting period (2016: nil).
20 Remuneration Report (Audited) (continued)
Melbana Annual Report 2017 (formerly MEO Australia) 6. Additional disclosures relating to shares and options
Shareholdings of key management personnel
The movement during the reporting period in the number of ordinary shares in Melbana Energy Limited held directly, indirectly
or beneficially, by Key Management Personnel, including their related parties, is as follows:
30 June 2017
Held at
1 July 2016
Purchases
Received on
Exercise of
Options
Sales
Held at
30 June 2017
Shares held in Melbana Energy Limited (number)
Non-executive directors
A G Purcell
M J Sandy
Executives
P J Stickland (Executive Director)
C H Naylor
R Zammit
1,971,531
800,000
5,453,700
565,000
1,710,000
416,667
916,667
416,667
416,667
138,889
-
-
-
-
-
-
-
-
-
-
2,388,198
1,716,667
5,870,367
981,667
1,848,889
No shares were granted to key management personnel during the reported period as compensation.
Option holdings of key management personnel
The movement during the reporting period in the number of options over ordinary shares in Melbana Energy Limited held,
directly, indirectly and beneficially by key management personnel, including their related parties is as follows:
Held at
1 July 2016
Granted as
Remuneration
Options
Exercised
Options
Lapsed
Held at
30 June 2017
Vested
in 2017
Vested and
exercisable at
30 June 2017
Options (number)
Executive Director and other Executives
P J Stickland
C H Naylor
R Zammit
C H Naylor
R Zammit
500,000
1,000,000
1,000,000
-
-
-
-
-
2,000,000
2,000,000
-
-
-
-
-
500,000
1,000,000
1,000,000
-
-
-
-
-
2,000,000
2,000,000
-
-
-
-
-
-
-
-
-
-
Share performance rights holdings of key management personnel
The movement during the reporting period in the number of share performance rights over ordinary shares in Melbana Energy
Limited held, directly, indirectly and beneficially by key management personnel, including their related parties is as follows:
Held at
1 July 2016
Granted as
Remuneration
Rights
Exercised
Rights
Lapsed
Held at
30 June 2017
Vested
in 2017
Vested and
exercisable at
30 June 2017
Share performance rights (number)
Executive Director and other Executives
P J Stickland
C H Naylor
R Zammit
5,333,333
4,610,519
5,939,612
-
-
-
-
-
-
-
-
-
5,333,333
5,333,333
5,333,333
4,610,519
5,939,612
4,610,519
5,939,612
4,610,519
5,939,612
Remuneration Report (Audited) (continued) 21
Melbana Annual Report 2017 (formerly MEO Australia) 7. Company performance
The remuneration of Melbana executives and contractors is not formally linked to financial performance measures of the
Company. However, as explained on pages 16 and 17, executives are strongly incentivised to maximise shareholder wealth
because of the fact that the exercise price of the options granted to executives, should they vest, is higher than the market
price on the grant date. In accordance the Section 300A of the Corporations Act 2001 the following table summarises Melbana’s
performance over a five year period:
Measure
Net (loss)/profit - $000
Basic (loss)/earnings per share - cents per share
Share price at the beginning of year - $
Share price at end of year - $
Dividends per share – cents
2017
(2,121)
(0.26)
0.015
0.017
Nil
2016
2015
2014
(10,406)
(10,042)
(135,910)
(1.31)
0.015
0.015
Nil
(1.34)
0.03
0.015
Nil
(21.12)
0.06
0.03
Nil
2013
(67,210)
(11.26)
0.25
0.06
Nil
Corporate Governance Statement
The Company’s Corporate Governance Statement for the year ended 30 June 2017, ASX Appendix 4G (Key to Disclosure of
Corporate Governance Principles and Recommendations) and other ancillary corporate governance related documents may be
accessed from the Company’s website at http://www.melbana.com/irm/content/corporate-governance.aspx?RID=376
Signed in accordance with a resolution of the directors
P J STICKLAND
Managing Director and Chief Executive Officer
Melbourne, 15 September 2017
22 Remuneration Report (Audited) (continued)
Melbana Annual Report 2017 (formerly MEO Australia) Financial Report
Consolidated Statement of Comprehensive Income
For The Year Ended 30 June 2017
Interest income
Total income
Net administration costs
Exploration expenditure written-off/down
Exchange (losses)/gains on revaluation of foreign currency bank accounts
Foreign currency gain on closure of foreign operation
Loss before income tax
Income tax expense
Net loss for the period
Other comprehensive income/(loss)
Items that may be reclassified subsequently to profit or loss
Exchange differences on translation of foreign operations
Transfer of foreign currency gain on closure of foreign operation
Other comprehensive income/(loss) for the period, net of tax
Total comprehensive loss for the period
Basic loss per share (cents per share)
Diluted loss per share (cents per share)
Note
4
5
6
6
2017
$
70,796
70,796
(1,672,180)
(454,849)
(33,120)
-
2016
$
96,562
96,562
(1,980,008)
(10,774,401)
30,105
2,264,862
(2,089,353)
(10,362,880)
(31,584)
(43,225)
(2,120,937)
(10,406,105)
805
-
805
(2,120,132)
(0.26)
(0.26)
10,126
(2,264,862)
(2,254,736)
(12,660,841)
(1.31)
(1.31)
The above consolidated statement of comprehensive income should be read in conjunction with the accompanying notes.
Where appropriate, prior year comparative information has been amended for the purposes of consistency.
Financial Report 23
Melbana Annual Report 2017 (formerly MEO Australia) Consolidated Statement of Financial Position
As At 30 June 2017
CURRENT ASSETS
Cash and cash equivalents
Other receivables
TOTAL CURRENT ASSETS
NON-CURRENT ASSETS
Property, plant and equipment
Exploration and evaluation 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
Contributed equity
Reserves
Accumulated losses
TOTAL EQUITY
Note
7
8
9
11
12
13
13
14
14
14
2017
$
2,605,011
33,740
2,638,751
72,656
3,817,191
3,889,847
2016
$
4,135,989
183,652
4,319,641
106,312
1,764,514
1,870,826
6,528,598
6,190,467
311,550
311,630
623,180
125,934
125,934
219,622
205,085
424,707
162,019
162,019
749,114
586,726
5,779,484
5,603,741
265,934,973
334,225
263,822,525
464,603
(260,489,714)
(258,683,387)
5,779,484
5,603,741
The above consolidated statement of financial position should be read in conjunction with the accompanying notes.
24 Financial Report (continued)
Melbana Annual Report 2017 (formerly MEO Australia)
Consolidated Statement of Changes in Equity
For The Year Ended 30 June 2017
Issued
capital
$
Share based
payments
reserve
$
Foreign
Currency
Translation
Reserve
$
Accumulated
losses
$
Total
equity
$
Balance at 1 July 2016
263,822,525
447,741
16,862
(258,683,387)
5,603,741
Net loss after tax for the period
Other comprehensive income/(loss)
Total comprehensive income/(loss)
after tax for the year
Transactions with owners in their capacity as owners:
Cost of share based payments
Share placement
Share purchase plan
Costs of issues (net of tax)
Transfer of equity instruments
expired unvested
At 30 June 2017
1,688,400
545,000
(120,952)
-
265,934,973
(314,610)
316,558
-
-
-
183,427
-
-
-
-
805
(2,120,937)
(2,120,937)
-
805
805
(2,120,937)
(2,120,132)
-
-
-
-
-
-
-
-
-
183,427
1,688,400
545,000
(120,952)
314,610
-
17,667
(260,489,714)
5,779,484
Issued
capital
$
Share based
payments
reserve
$
Foreign Currency
Translation
Reserve
$
Accumulated
losses
$
Total
equity
$
Balance at 1 July 2015
262,406,308
1,248,623
2,271,598
(249,211,295)
16,715,234
Net loss after tax for the period
Other comprehensive income/(loss)
Total comprehensive income/(loss)
after tax for the year
Transactions with owners in their capacity as owners:
Cost of share based payments
Share placement
Costs of issues (net of tax)
Transfer of equity instruments
expired unvested
1,407,166
9,051
-
-
-
-
133,131
-
-
(934,013)
-
(10,406,105)
(10,406,105)
(2,254,736)
-
(2,254,736)
(2,254,736)
(10,406,105)
(12,660,841)
-
-
-
-
-
-
-
934,013
133,131
1,407,166
9,051
-
At 30 June 2016
263,822,525
447,741
16,862
(258,683,387)
5,603,741
The above consolidated statement of changes in equity should be read in conjunction with the accompanying notes.
Financial Report (continued) 25
-
-
-
-
-
-
-
-
Melbana Annual Report 2017 (formerly MEO Australia) Consolidated Statement of Cash Flows
For the Year Ended 30 June 2017
CASH FLOWS FROM OPERATING ACTIVITIES
Payments to suppliers and employees
Cost recovery from joint venture partners
Merger and takeover costs
Interest received
Note
2017
$
2016
$
(1,359,856)
-
-
73,642
(1,641,391)
65,531
(16,585)
117,877
Net cash (used in) operating activities
15
(1,286,214)
(1,474,568)
CASH FLOWS FROM INVESTING ACTIVITIES
Expenditure on plant and equipment
Expenditure on exploration tenements
Proceeds from sale of plant and equipment
(15,520)
(2,290,400)
13,412
-
(1,577,994)
-
Net cash (used in) investing activities
(2,292,508)
(1,577,994)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from share issues
Transaction costs on issue of shares
2,233,400
(152,536)
1,407,166
(34,174)
Net cash from financing activities
2,080,864
1,372,992
Net decrease in cash and cash equivalents
(1,497,858)
(1,679,570)
Cash and cash equivalents at beginning of period
4,135,989
5,785,454
Net foreign exchange differences
(33,120)
30,105
Cash and cash equivalents at end of period
7
2,605,011
4,135,989
The above consolidated statement of cash flows should be read in conjunction with the accompanying notes.
26 Financial Report (continued)
Melbana Annual Report 2017 (formerly MEO Australia) Notes to the Consolidated Financial Statements
For the Year Ended 30 June 2017
Note 1: Corporate Information
The financial report of Melbana Energy Limited (“Melbana Energy”, or the “Company”) for the year ended 30 June 2017 was
authorised for issue in accordance with a resolution of the directors on 15 September 2017.
Melbana Energy Limited is a company limited by shares incorporated in Australia whose shares are publicly traded on Australian
Securities Exchange.
The nature of operations and principal activities of the Group are described in note 3.
Note 2: Summary Of Significant Accounting Policies
(a) Basis of Preparation
The financial report is a general-purpose financial report of a “for-profit” entity, which has been prepared in accordance with
the requirements of the Corporations Act 2001, Australian Accounting Standards and other authoritative pronouncements of
the Australian Accounting Standards Board, and is presented in Australian dollars.
(i) Compliance with IFRS
The financial report complies with Australian Accounting Standards issued by the Australian Accounting Standards Board
and International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board.
(ii) New and amended standards adopted by the Group
The following new standards and amendments to standards are mandatory for the first time for the financial year beginning
1 July 2016:
Reference
Title
Summary
AASB
2015-2
Amendments to Australian
Accounting Standards
– Disclosure Initiative:
Amendments to AASB 101
This Standard amends AASB 101 Presentation of Financial
Statements to clarify existing presentation and disclosure
requirements and to ensure entities are able to use
judgement when applying the Standard in determining
what information to disclose, where and in what order
information is presented in their financial statements.
For example, the amendments make clear that materiality
applies to the whole of financial statements and that
the inclusion of immaterial information can inhibit the
usefulness of financial disclosures.
Application
date of
standard
1 January
2016
Application
date for
Group
1 July 2016
Adoption of this standard did not have a material effect on the financial position or performance of the Group. Other new
Australian accounting standards and Interpretations issued and effective are not relevant to the Group.
(iii) Early adoption of new Accounting Standards
The Group has not elected to early adopt any of the standards set out under (b) New Accounting Standards and Interpretations’
for the current reporting period.
(iv) Historical cost convention
The financial statements have been prepared under a historical cost convention.
Financial Report (continued) 27
Melbana Annual Report 2017 (formerly MEO Australia)
Notes to the Consolidated Financial Statements (Cont)
For the Year Ended 30 June 2017
Note 2: Summary Of Significant Accounting Policies (Cont)
(b) New Accounting Standards and Interpretations
The following standards and interpretations have been issued by the AASB but are not yet effective for the period ending 30
June 2017. Adoption of these standards is not expected to have a material effect on the financial position or performance of
the Group however the position will be further reviewed during FY2018.
Application
date of
standard
Application
date for
Group
1 January
2018
1 July
2018
1 January
2018
1 July
2018
Reference
Title
Summary
Revenue
from
Contracts
with
Customers
Financial
Instruments
AASB 15
AASB 9,
and relevant
amending
standards
AASB 15 Revenue from Contracts with Customers replaces the existing revenue
recognition standards AASB 111 Construction Contracts, AASB 118 Revenue and
related Interpretations. AASB 15 incorporates the requirements of IFRS 15
Revenue from Contracts with Customers issued by the International Accounting
Standards Board (IASB) and developed jointly with the US Financial Accounting
Standards Board (FASB).
AASB 9 replaces AASB 139 Financial Instruments: Recognition and Measurement.
Except for certain trade receivables, an entity initially measures a financial asset
at its fair value plus, in the case of a financial asset not at fair value through
profit or loss, transaction costs.
Debt instruments are subsequently measured at fair value through profit or loss
(FVTPL), amortised cost, or fair value through other comprehensive income
(FVOCI), on the basis of their contractual cash flows and the business model
under which the debt instruments are held.
Equity instruments are generally measured at FVTPL. However, entities have an
irrevocable option on an instrument-by-instrument basis to present changes in
the fair value of non-trading instruments in other comprehensive income (OCI)
without subsequent reclassification to profit or loss.
For financial liabilities designated as FVTPL using the FVO, the amount of change
in the fair value of such financial liabilities that is attributable to changes in
credit risk must be presented in OCI. The remainder of the change in fair value
is presented in profit or loss, unless presentation in OCI of the fair value change
in respect of the liability’s credit risk would create or enlarge an accounting
mismatch in profit or loss.
All other AASB 139 classification and measurement requirements for financial
liabilities have been carried forward into AASB 9, including the embedded
derivative separation rules and the criteria for using the FVO.
The following standards and interpretations have been issued by the AASB but are not yet effective for the period ending
30 June 2017. Adoption of these standards may have an effect on the financial position or performance of the Group however
the position will be further reviewed during FY2018.
AASB 16
Leases
1 January
2019
1 July 2019
AASB 16 requires lessees to account for all leases under a single on-balance
sheet model in a similar way to finance leases under AASB 117 Leases. The
standard includes two recognition exemptions for lessees – leases of ’low-value’
assets (e.g., personal computers) and short-term leases (i.e., leases with a lease
term of 12 months or less). At the commencement date of a lease, a lessee will
recognise a liability to make lease payments (i.e., the lease liability) and an asset
representing the right to use the underlying asset during the lease term (i.e., the
right-of-use asset).
Lessees will be required to separately recognise the interest expense on the
lease liability and the depreciation expense on the right-of-use asset.
Lessees will be required to remeasure the lease liability upon the occurrence
of certain events (e.g., a change in the lease term, a change in future lease
payments resulting from a change in an index or rate used to determine
those payments). The lessee will generally recognise the amount of the
remeasurement of the lease liability as an adjustment to the right-of-use asset.
For the Group, at this stage, it is expected that at least the present value of the
operating lease commitments will be brought onto the balance sheet. Other
potential impacts are yet to be assessed.
Other new Australian accounting standards and Interpretations issued but not yet effective are not relevant to the Group.
28 Financial Report (continued)
Melbana Annual Report 2017 (formerly MEO Australia) (c) Basis of consolidation
The consolidated financial statements comprise the financial
statements of the Group and its subsidiaries as at 30 June
2017. Control is achieved when the Group is exposed, or
has rights, to variable returns from its involvement with the
investee and has the ability to affect those returns through its
power over the investee. Specifically, the Group controls an
investee if and only if the Group has:
•
•
•
Power over the investee (i.e. existing rights that give it
the current ability to direct the relevant activities of the
investee)
Exposure, or rights, to variable returns from its
involvement with the investee, and
The ability to use its power over the investee to affect its
returns.
When the Group has less than a majority of the voting or
similar rights of an investee, the Group considers all relevant
facts and circumstances in assessing whether it has power
over an investee, including:
•
The contractual arrangement with the other vote holders
of the investee
• Rights arising from other contractual arrangements
• The Group’s voting rights and potential voting rights
The Group re-assesses whether or not it controls an investee
if facts and circumstances indicate that there are changes to
one or more of the three elements of control. Consolidation
of a subsidiary begins when the Group obtains control over
the subsidiary and ceases when the Group loses control of
the subsidiary. Assets, liabilities, income and expenses of
a subsidiary acquired or disposed of during the year are
included in the statement of comprehensive income from the
date the Group gains control until the date the Group ceases
to control the subsidiary.
Profit or loss and each component of other comprehensive
income (OCI) are attributed to the equity holders of the
parent of the Group and to the non-controlling interests, even
if this results in the non-controlling interests having a deficit
balance. When necessary, adjustments are made to the
financial statements of subsidiaries to bring their accounting
policies into line with the Group’s accounting policies. All
intra-group assets and liabilities, equity, income, expenses and
cash flows relating to transactions between members of the
Group are eliminated in full on consolidation.
A change in the ownership interest of a subsidiary, without
a loss of control, is accounted for as an equity transaction. If
the Group loses control over a subsidiary, it:
•
•
De-recognises the assets (including goodwill) and liabilities
of the subsidiary
De-recognises the carrying amount of any non-controlling
interests
•
De-recognises the cumulative translation differences
recorded in equity
• Recognises the fair value of the consideration received
• Recognises the fair value of any investment retained
• Recognises any surplus or deficit in profit or loss
• Reclassifies the parent’s share of components previously
recognised in OCI to profit or loss or retained earnings, as
appropriate, as would be required if the Group had directly
disposed of the related assets or liabilities
(d) Significant accounting judgements, estimates and
assumptions
The carrying amounts of certain assets and liabilities are
often determined based on judgements, estimates and
assumptions of future events. The key estimates and
assumptions that have a significant risk of causing a material
adjustment to the carrying amounts of certain assets and
liabilities within the next annual reporting period are:
Share-based payment transactions
The Group measures the cost of equity-settled transactions
with employees by reference to the fair value of the equity
instruments at the date at which they are granted. The fair
value of share options is determined using a binomial option
pricing model, and using the assumptions detailed in note 19.
Exploration and evaluation costs
Exploration and evaluation costs are accumulated separately
for each area of interest and carried forward provided that
one of the following conditions is met:
•
•
such costs are expected to be recouped through
successful development or sale; or
exploration activities have not yet reached a stage which
permits a reasonable assessment of the existence or
otherwise of economically recoverable reserves, and
active and significant operations in relation to the area
are continuing.
Significant judgement is required in determining whether it
is likely that future economic benefits will be derived from
the capitalised exploration and evaluation expenditure. In
the judgement of the Directors, at 30 June 2017 exploration
activities in each area of interest have not yet reached a stage
which permits a reasonable assessment of the existence or
otherwise of economically recoverable reserves. Active and
significant operations in relation to each area of interest
are continuing and nothing has come to the attention of
the Directors to indicate future economic benefits will not
be achieved. The Directors are continually monitoring the
areas of interest and are exploring alternatives for funding
the development of areas of interest when economically
recoverable reserves are confirmed. If new information
becomes available that suggests the recovery of expenditure
is unlikely, the amounts capitalised will need to be reassessed
at that time.
Financial Report (continued) 29
Melbana Annual Report 2017 (formerly MEO Australia) Notes to the Consolidated Financial Statements (Cont)
For the Year Ended 30 June 2017
Note 2: Summary Of Significant Accounting Policies (Cont)
(d) Significant accounting judgements, estimates and
assumptions (cont)
-
Going concern
The Group is involved in the exploration and evaluation of
oil and gas tenements. Further expenditure will be required
on these tenements to ascertain whether they contain
economically recoverable reserves.
At 30 June 2017, the Group:
•
•
•
•
has incurred a net loss after tax of $2,120,937 (2016:
$10,406,105);
had net cash outflows from operating and investing
activities of $3,578,722 (2016: $3,052,562);
has cash and cash equivalents on hand of $2,605,011
(2016: $4,135,989); and
in August 2017 the Group announced that it had
successfully raised $1,787,332 before costs (estimated at
$165,000) from qualified institutional and sophisticated
investors. In addition, the Group announced a 1 for 2
pro-rata non-renounceable entitlement offer of Shares
to raise up to approximately $4,766,000 before costs
(estimated at $428,000). Patersons Limited has partially
underwritten the Entitlement Offer up to $3,420,000.
At the date of this report, the Group is contractually
committed to the following exploration activities (further
details are located in Note 17):
-
-
the commencement of drilling of the Pukatea-1 exploration
well in mid-January 2018 (Melbana 30% interest);
and
evaluating existing exploration data in the Cuba Block 9
and reprocessing selected 2D seismic data as part of the
first sub period work program (Melbana 100%).
The cash reserves at 30 June 2017, plus the capital raising
completed and underwritten subsequent to year-end are
expected to be sufficient to meet the Group’s committed
exploration activities and ongoing operational expenditure for
the 12 months from the date of this report.
Notwithstanding the contractual commitments detailed above,
in forming a conclusion on the going concern assumption,
consideration has been given to the Group’s intentions with
respect to future exploration activity, in line with recent
market announcements.
The Group has prepared cash flow forecasts to support the
going concern assumption based on its intended exploration
activities and events subsequent to the reporting date (30
June 2017) as follows:
30 Financial Report (continued)
The Cuban national oil company, Union Cuba Petroleo
(“CUPET”) has approved an amendment to the Block 9
exploration work program deferring the obligation to
undertake a 200km 2D seismic survey in the second
exploration sub-period starting November 2017 to the
third exploration sub-period starting November 2019 and
accelerating the obligation to drill an exploration well from
the third exploration sub-period to the second exploration
sub-period;
-
-
In the event that the Group exercises its option to enter
the second exploration sub period (November 2017 to
November 2019) the budget to reflect the minimum work
program of one well is currently estimated to cost US$5m
with related cash backed bank guarantee also required.
The Group aims to drill up to two wells commencing mid-
2018; and
The Group is actively pursuing opportunities to reduce its
committed funding requirements for Pukatea-1 well while
maintaining exposure to a successful drilling result.
In the event the Group exercises its option to successfully
enter the second sub period for Block 9 (November 2017) and
is unable to reduce its funding requirements for the Pukatea-1
well, the current cash reserves will not be sufficient to meet
the Group’s planned exploration activities for the 12 months
from the date of this report. In these circumstances Directors
would consider options including raising additional capital to
mitigate uncertainty as to whether the Group would be able
to meet its debts as and when they fall due and thus continue
as a going concern.
Directors consider they have reasonable basis to prepare the
financial report on a going concern basis after having regards
to the following:
-
-
-
On 28 August 2017, Petro Australis Limited has provided
a notice to the Group to exercise its back-in right with
respect to a 40% participating interest in Block 9, which
is subject to regulatory approval. Should the regulatory
approvals be forthcoming, Melbana would retain a
60% interest and operatorship of Block 9. Under this
arrangement Petro Australis would be responsible of 40%
of certain costs incurred to date, and 40% of future costs
relating to Block 9;
The Group’s intention to execute a farm-out or sale
process of its interest in the Pukatea-1 well;
Raising additional capital by one of a combination of
the following: placement of shares, pro-rata issue to
shareholders, the exercise of outstanding share options,
and/or further issue of shares to the public for the
proposed drilling in Cuba Block 9;
-
In some circumstances, subject to negotiation and approval,
Melbana Annual Report 2017 (formerly MEO Australia)
minimum work requirements may be varied or suspended,
and/or permits may be surrendered or cancelled; or
- Other avenues that may be available to the Group.
The financial report has been prepared on a going concern
basis which contemplates the continuity of normal business
activities and the realisation of assets and settlement of
liabilities in the ordinary course of business. No adjustments
have been made relating to the recoverability and
reclassification of recorded asset amounts and classification
of liabilities that might be necessary should the Group not
continue as a going concern, particularly the write-down of
capitalised exploration expenditure should the exploration
permits be ultimately surrendered or cancelled.
Having carefully assessed the potential uncertainties relating
to the Group’s ability to effectively fund exploration planned
activities and operating expenditures, the Directors believe
that the Group will continue to operate as a going concern
for the foreseeable future. Therefore, the Directors consider
it appropriate to prepare the financial statements on a going
concern basis.
(e) Segment reporting
Operating segments are reported in a manner which is
materially 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 Board of Directors.
(f) Foreign currency translation
(i) Functional and presentation currency
The Group’s consolidated financial statements are presented in
Australian dollars, which is also the parent company’s functional
currency. Each entity in the Group determines its own functional
currency and items included in the financial statements of each
entity are measured using that functional currency.
(ii) Transactions and balances
Transactions in foreign currencies are initially recorded in the
functional currency by applying the exchange rates ruling at the
date of the transaction. Non-monetary items that are measured
in terms of historical cost in a foreign currency are translated
using the exchange rate at the dates of the initial transactions.
Non-monetary items measured at fair value in a foreign currency
are translated using the exchange rates at the date when the fair
value is determined. Monetary assets and liabilities denominated
in foreign currencies are retranslated at the rate of exchange
ruling at the balance date. All exchange differences in the
consolidated report are taken to profit or loss.
(iii) Group companies
On consolidation the assets and liabilities of foreign
operations are translated into Australian dollars at the rate
of exchange prevailing at the reporting date. The exchange
differences arising on translation for consolidation are
recognised in other comprehensive income.
(g) Cash and cash equivalents
Cash and cash equivalents in the consolidated statement
of financial position comprise cash at bank and in hand and
short-term deposits that are readily convertible to a known
amount of cash and used for meeting short term cash needs.
For the purpose of the consolidated statement of cash flows,
cash and cash equivalents consist of cash and cash equivalents
as defined above, net of outstanding bank overdrafts.
(h) Plant and equipment
Plant and equipment is stated at cost less accumulated
depreciation and any impairment losses. Depreciation is
calculated on a straight-line basis over the estimated useful
lives of the assets which range from 3 to 15 years.
Impairment
The carrying values of plant and equipment are reviewed for
impairment when events or changes in circumstances indicate
the carrying value may not be recoverable.
For an asset that does not generate largely independent
cash inflows, the recoverable amount is determined for the
cash-generating unit to which the asset belongs. Impairment
exists when the carrying value of an asset exceeds its
estimated recoverable amount. The asset is written down to
its recoverable amount.
The recoverable amount of plant and equipment is the
greater of fair value less costs of disposal and value in use.
In assessing value in use, the estimated future cash flows are
discounted to their present value using a pre-tax discount rate
that reflects current market assessments of the time value of
money and the risks specific to the asset.
An item of plant and equipment is derecognised upon disposal
or when no future economic benefits are expected to arise from
the continued use of the asset. Any gain or loss arising on de-
recognition of the asset (calculated as the difference between
the net disposal proceeds and the carrying amount of the item)
is included in the profit or loss in the consolidated statement of
comprehensive income in the period the item is derecognised.
(i) Exploration and evaluation costs
Exploration and evaluation expenditure is carried at cost. If
indication of impairment arises, the recoverable amount is
estimated and an impairment loss is recognised to the extent
that the recoverable amount is lower than the carrying amount.
Exploration and evaluation costs are accumulated separately
for each current area of interest and carried forward provided
that one of the following conditions is met:
•
•
such costs are expected to be recouped through
successful development or sale; or
exploration activities have not yet reached a stage which
permits a reasonable assessment of the existence or
otherwise of economically recoverable reserves, and
active and significant operations in relation to the area are
continuing.
Financial Report (continued) 31
Melbana Annual Report 2017 (formerly MEO Australia) Notes to the Consolidated Financial Statements (Cont)
For the Year Ended 30 June 2017
Note 2: Summary Of Significant Accounting Policies (Cont)
(i) Exploration and evaluation costs (cont)
Impairment of exploration and evaluation costs
To the extent that capitalised exploration and evaluation
expenditure is determined not to be recoverable in the future,
profits/(losses) and net assets will be varied in the period in
which this determination is made.
Farm-outs
The Group will account for farm-out arrangements as follows:
an arrangement, which exists only when decisions about the
relevant activities require unanimous consent of the parties
sharing control.
The Group accounts for its share of the joint operation assets,
and liabilities it has incurred, its share of any liabilities jointly
incurred with other ventures, income from the sale or use
of its share of the joint operation’s output, together with its
share of the expenses incurred by the joint operation, and
any expenses it incurs in relation to its interest in the joint
operation.
The Group will not record any expenditure made by the
farminee on its behalf;
(l) Leases
•
•
•
The Group will not recognise a gain or loss on the farm-
out arrangement but rather will redesignate any costs
previously capitalised in relation to the whole interest
as relating to the partial interest retained; and
Any cash consideration to be received will be credited
against costs previously capitalised in relation to the
whole interest with any excess to be accounted for by
the Group as gain on disposal.
(j) 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
balance date which are classified as non-current assets. Loans
and receivables are included in receivables in the consolidated
statement of financial position.
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.
Subsequent measurement
Loans and receivables are carried at amortised cost using the
effective interest method.
Impairment
The Group assesses at each balance date whether there is
objective evidence that a financial asset or group of financial
assets is impaired.
(k) Interests in joint arrangements
Joint operations
A joint operation is a joint arrangement whereby the parties
that have joint control of the arrangement, have rights to assets,
and obligations for the liabilities of the joint arrangement.
Joint control is the contractual agreed sharing of control of
32 Financial Report (continued)
The determination of whether an arrangement is or contains
a lease is based on the substance of the arrangement and
requires an assessment of whether the fulfilment of the
arrangement is dependent on the use a specific asset or
assets and the arrangement conveys a right to use the asset.
Leases under which the lessor retains substantially all of the
risks and benefits of ownership of the asset are classified as
operating leases. Operating lease payments are recognised
in the consolidated statement of comprehensive income on a
straight-line basis over the lease term.
(m) Trade and other payables
Trade and other payables are carried at amortised cost and
represent liabilities for goods and services provided to the
Group prior to the end of the financial year that are unpaid
and arise when the Group becomes obliged to make future
payments in respect of the purchase of the goods and
services.
(n) Provisions
Provisions are recognised when the Group has a present
obligation (legal or constructive) as a result of a past event, and
it is probable that an outflow of resources embodying economic
benefits will be required to settle the obligation and a reliable
estimate can be made of the amount of the obligation.
When the Group expects some or all of a provision to be
reimbursed, for example under an insurance contract, the
reimbursement is recognised as a separate asset but only when
the reimbursement is virtually certain. The expense relating
to any provision is presented in the consolidated statement of
comprehensive income net of any reimbursement.
Provisions are measured at the present value of
management’s best estimate of the expenditure required
to settle the present obligation at the balance date. If the
effect of the time value of money is material, provisions are
determined by discounting the expected future cash flows at
a pre-tax rate that reflects current market assessments of the
time value of money and, where appropriate, the risks specific
Melbana Annual Report 2017 (formerly MEO Australia) to the liability. The increase in the provision resulting from the
passage of time is recognised in finance costs.
Employee leave benefits
Short term benefits
Liabilities for wage and salaries, including non-monetary
benefits and certain annual leave entitlements expected to be
settled within 12 months of the reporting date are recognised
in provisions in respect of employees’ service up to the
reporting date. They are measured at the amounts expected
to be paid when the liabilities are settled. Liabilities for non-
accumulating sick leave are recognised when the leave is
taken and are measured at the rates paid or payable.
Long term benefits
The liability for long service leave and certain annual benefits
are recognised in the provision for employee benefits and
measured as the present value of expected future payments
to be made in respect of services provided by employees up
to the reporting date using the projected unit credit method.
Consideration is given to expected future wage and salary
levels, experience of employee departures, and periods of
service. Expected future payments are discounted using
market yields at the reporting date in high quality corporate
bonds with terms to maturity and currencies that match, as
closely as possible, the estimated future cash outflows.
(o) Share-based payment transactions
The Group provides benefits to employees (including
directors) of, and consultants to, the Group in the form
of share-based payment transactions, whereby services
are rendered in exchange for shares or rights over shares
(‘equity-settled transactions’). The Board adopted the Long
Term Incentive Plan on 13 September 2011.
The cost of equity-settled transactions is measured by
reference to the fair value at the date at which they are
granted. The fair value of options and performance rights
with market based performance criteria is determined using a
binomial option pricing model. The fair value of performance
plan rights with non-market performance criteria is determined
by reference to the Company’s share price at date of grant.
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 recipient becomes 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 awards that, in the opinion of the directors, based on
the best available information at balance date, will ultimately
vest. No adjustment is made for the likelihood of market
conditions being met as the effect of these conditions is included
in determination of fair value at grant date. The charge or credit
for the period represents the movement in cumulative expense
recognised as at the beginning and end of the period.
No expense is recognised for awards that do not ultimately
vest, except for awards where vesting is conditional upon a
market condition.
Where the terms of an equity-settled award are modified,
as a minimum an expense is recognised as if the terms had
not been modified. In addition, an expense is recognised for
any increase in the value of the transaction as a result of the
modification, as measured at the date of modification.
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, as described
in the previous paragraph.
The dilutive effect, if any, of outstanding options is reflected
as additional share dilution in the computation of earnings
per share.
(p) Contributed equity
Ordinary shares are classified as equity. Incremental costs
directly attributable to the issue of new shares or options are
shown in equity as a deduction, net of tax, from the proceeds.
(q) Revenue
Revenue is recognised to the extent that it is probable that
the economic benefits will flow to the Group and the revenue
can be reliably measured.
Interest income is recognised as it accrues using the effective
interest method.
(r) Income tax
Current tax assets and liabilities for the current and prior
periods are measured at the amount expected to be
recovered from or paid to the taxation authorities. The tax
rates and tax laws used to compute the amount are those that
are enacted or substantially enacted by the reporting date.
Deferred income tax is provided on all temporary differences
at balance date between the tax bases of assets and liabilities
and their carrying amounts for financial reporting purposes.
Deferred income tax liabilities are recognised for all taxable
temporary differences, except:
•
•
where the deferred income tax liability arises from the
initial recognition of an asset or liability in a transaction
that is not a business combination and, at the time of
the transaction, affects neither the accounting profit nor
taxable profit or loss; or
when the taxable temporary difference is associated with
investments in subsidiaries, associates or interests in joint
ventures, and the timing of the reversal of the temporary
differences can be controlled and it is probable that the
temporary differences will not reverse in the foreseeable
future.
Financial Report (continued) 33
Melbana Annual Report 2017 (formerly MEO Australia) Notes to the Consolidated Financial Statements (Cont)
For the Year Ended 30 June 2017
Note 2: Summary Of Significant Accounting Policies (Cont)
(r) Income tax (cont)
Deferred income tax assets are recognised for all deductible
temporary differences, carry-forward of unused tax assets
and unused tax losses, to the extent that it is probable that
taxable profit will be available against which the deductible
temporary differences, and the carry-forward of unused tax
assets and unused tax losses can be used, except:
•
•
where the deferred income tax asset relating to the
deductible temporary difference arises from the initial
recognition of an asset or liability in a transaction that
is not a business combination and, at the time of the
transaction, affects neither the accounting profit nor
taxable profit or loss; and
when the deductible temporary differences is associated
with investments in subsidiaries, associates or interests
in joint ventures, in which case a deferred tax asset is
only recognised to the extent that it is probable that the
temporary differences will reverse in the foreseeable
future and taxable profit will be available against which
the temporary differences can be applied.
The carrying amount of deferred income tax assets is
reviewed at each balance date and reduced to the extent that
it is no longer probable that sufficient taxable profit will be
available to allow all or part of the deferred income tax asset
to be utilised.
Unrecognised deferred income tax assets are reassessed at
each reporting date and are recognised to the extent that it is
has become probable that future taxable profit will allow the
deferred tax asset to be recovered.
Deferred income tax assets and liabilities are measured at
the tax rates that are expected to apply to the year when
the asset is realised or the liability is settled, based on tax
rates (and tax laws) that have been enacted or substantively
enacted at the balance date.
Deferred tax assets and deferred tax liabilities are offset only
if a legally enforceable right of set off exists to set off current
tax assets against current liabilities and the deferred tax
assets and liabilities relate to the same taxable entity and the
same taxable authority.
Income taxes relating to items recognised directly in
equity are recognised in equity and not in the consolidated
statement of comprehensive income.
Tax consolidation legislation
Melbana Energy Limited and its wholly owned subsidiaries
have implemented the tax consolidation legislation as of 1
July 2004.
34 Financial Report (continued)
The head entity, Melbana Energy Limited and the controlled
entities in the tax consolidated group continue to account
for their own current and deferred tax amounts. The Group
has applied the group allocation approach in determining
the appropriate amount of current tax and deferred taxes to
allocate to members of the tax consolidated group.
In addition to its own current and deferred tax amounts,
Melbana Energy Limited also recognises the current tax
liabilities (or assets) and the deferred tax assets arising from
unused tax losses and unused tax credits assumed from
controlled entities in the tax consolidated group.
Assets or liabilities arising under tax funding agreements
with the tax consolidated entities are recognised as amounts
receivable from or payable to other entities in the group.
Any difference between the amounts assumed and amounts
receivable or payable under the tax funding agreement are
recognised as a contribution to (or distribution from) wholly
owned tax consolidated entities.
(s) Goods and services tax
Revenues, expenses and assets are recognised net of GST,
except receivables and payables which are stated with GST
included. Where GST incurred on a purchase of goods or
services is not recoverable from the taxation authority, the
GST is recognised as part of the cost of acquisition of the
asset or as part of the expense item as applicable.
The net amount of GST recoverable from, or payable to,
the taxation authority is included as part of receivables or
payables in the consolidated statement of financial position.
Cash flows are included in the Consolidated Statement of
Cash Flows on a gross basis and the GST component of cash
flows arising from investing and financing activities, which
is recoverable from, or payable to, the taxation authority is
classified as operating cash flows.
Commitments and contingencies are disclosed net of the
amount of GST recoverable from, or payable to, the taxation
authority.
(t) Earnings per share
Basic earnings per share is calculated as net profit/(loss)
attributable to members divided by the weighted average
number of ordinary shares.
Diluted earnings per share is calculated as net profit/(loss)
attributable to members divided by the weighted average
number of ordinary shares and dilutive potential ordinary
shares.
Melbana Annual Report 2017 (formerly MEO Australia) (u) Parent entity financial information
The financial information for the parent entity, Melbana
Energy Limited, disclosed in note 22 has been prepared on
the same basis as the consolidated financial statements,
except as set out below.
(i) Investments in subsidiaries
Investments in subsidiaries are accounted for at cost less
accumulated impairment losses in the financial statements of
Melbana Energy Limited.
Note 3: Segment Information
The Group operates in the petroleum exploration industry
within Australia, New Zealand and Cuba.
The Board of Directors currently receive regular consolidated
cash flow information as well as Consolidated Statement of
Financial Position and Statement of Comprehensive Income
information that is prepared in accordance with Australian
Accounting Standards.
The Board does not currently receive segmented Statement
of Financial Position and Statement of Comprehensive Income
information. The Board manages exploration activities of
each permit area through review and approval of budgets,
joint venture cash calls and other operational information.
Information regarding exploration expenditure capitalised for
each area is contained in note 11.
Note 4: Net Administration Expenses
Consultants fees and expenses
Non-executive directors remuneration (excluding share based payments)
Salaries and on-costs
Share based payments
Administration and other expenses
Audit costs
Securities exchange, share registry and reporting costs
Operating lease expenses
Investor relations and corporate promotion costs
Travel costs
Depreciation and amortisation expense
Office relocation costs
Gross administration costs
Less allocation to exploration activities
Net administration costs
Consolidated
2017
$
159,998
137,500
1,757,969
183,427
274,751
52,500
125,657
151,816
98,917
106,924
24,803
57,379
3,131,641
(1,459,461)
1,672,180
2016
$
219,208
147,051
1,684,993
133,131
229,451
70,000
110,990
276,354
75,484
53,528
84,636
-
3,084,826
(1,104,818)
1,980,008
Financial Report (continued) 35
Melbana Annual Report 2017 (formerly MEO Australia) Notes to the Consolidated Financial Statements (Cont)
For the Year Ended 30 June 2017
Note 5: Income Tax
Statement of Comprehensive Income
Current income tax
Current income tax credit/(expense)
Tax losses (not recognised)/recognised
Deferred income tax
Relating to origination and reversal of temporary differences
Tax losses derecognised
Income tax expense reported in the Statement of Comprehensive Income
Statement of Changes in Equity
Deferred income tax related to items charged or credited directly to equity
Share issue costs
Share issue costs not recognised as not probable
Amount recognised in respect of prior years share issue costs now considered probable
Income tax benefit reported in equity
Tax Reconciliation
A reconciliation between tax expense and the product of accounting profit before
income tax multiplied by the Group’s applicable income tax rate is as follows:
Consolidated
2017
$
1,215,254
(653,027)
562,227
(593,811)
-
(593,411)
(31,584)
Consolidated
2017
$
45,761
(27,457)
13,280
31,584
2016
$
(232,265)
189,040
(43,225)
2,770,490
(2,770,490)
-
(43,225)
2016
$
10,252
(6,151)
39,124
43,225
Consolidated
2017
$
2016
$
Accounting loss before tax
(2,120,937)
(10,406,105)
At the Group’s statutory 30% tax rate (2016: 30%)
636,281
3,121,831
Share based payment expense
Non-deductible expenses
Difference in overseas tax rates
Tax losses not brought to account
Income tax expense reported in the Statement of Comprehensive Income
(55,028)
(513)
(68,707)
(543,617)
(31,584)
(39,939)
(67,248)
(422,144)
(2,635,725)
(43,225)
36 Financial Report (continued)
Melbana Annual Report 2017 (formerly MEO Australia) Deferred Income Tax
Deferred income tax at 30 June relates to the following:
CONSOLIDATED
Deferred tax liabilities
Interest receivable
Exploration and evaluation costs
Gross deferred income tax liabilities
Deferred tax assets
Accruals
Provisions
Share issue costs
Temporary differences not recognised as not
probable
Tax losses brought to account to offset net deferred
tax liability
Gross deferred income tax assets
Net deferred tax asset
Deferred tax expense
Tax losses
Statement of Financial Position
Income Statement
2017
$
2016
$
2017
$
2016
$
(1,313)
(1,145,157)
(1,146,470)
(2,167)
(529,354)
(531,521)
854
(615,803)
6,394
2,727,479
-
131,269
59,041
(27,457)
-
110,131
49,376
(6,151)
-
21,138
-
-
(42,289)
45,617
-
-
983,617
378,165
562,227
(2,780,426)
1,146,470
-
531,521
-
(31,584)
(43,225)
At balance date, the Group has estimated unused gross tax losses of $163.6 million (2016: $161.6 million) that are available to
offset against future taxable profits subject to continuing to meet relevant statutory tests. To the extent that it does not offset
a net deferred tax liability, a deferred tax asset has not been recognised in the accounts for these unused losses because it is
not probable that future taxable profit will be available to use against such losses.
Financial Report (continued) 37
Melbana Annual Report 2017 (formerly MEO Australia) Notes to the Consolidated Financial Statements (Cont)
For the Year Ended 30 June 2017
Note 6: Earnings/(Loss) Per Share
Basic earnings/(loss) per share amounts are calculated by dividing net loss for the year attributable to ordinary equity holders
of the parent by the weighted average number of ordinary shares outstanding during the year.
Diluted earnings/(loss) per share amounts are calculated by dividing the net loss attributable to ordinary equity holders of the
parent by the weighted average number of ordinary shares outstanding during the year plus the weighted average number of
ordinary shares that would be issued on the conversion of all the dilutive potential ordinary shares into ordinary shares.
The following data was used in the calculations of basic and diluted loss per share:
Net loss
Consolidated
2017
$
2016
$
(2,120,937)
(10,406,105)
Shares
Shares
Weighted average number of ordinary shares used in calculation of basic loss per share
803,629,702
796,624,968
Effect of dilution:
Exercisable Performance Rights and Share Options
28,627,798
11,743,018
Weighted average number of ordinary shares adjusted for the effect of dilution
832,257,500
808,367,986
Other than the exercise of performance rights, rights issue and share placement in August/September 2017 totalling
520,733,229 shares, there have been no transactions involving ordinary shares or potential ordinary shares that would
significantly change the number of ordinary shares or potential ordinary shares outstanding between the reporting date and
the date of completion of these financial statements.
Note 7: Cash And Cash Equivalents
Cash at bank and in hand
Short term deposits
Cash backed bank guarantee for Block 9 Cuba
Consolidated
2017
$
590,690
2,014,321
-
2,605,011
2016
$
728,107
2,876,926
530,956
4,135,989
Cash at bank earns interest at floating rates based on daily bank rates. Short term deposits are made for varying maturities
depending on the immediate cash requirements of the Group, and earn interest at the respective short term deposit rates.
38 Financial Report (continued)
Melbana Annual Report 2017 (formerly MEO Australia) Note 8: Trade And Other Receivables
Goods and services tax refund
Interest receivable
Other receivables
Consolidated
2017
$
10,446
4,376
18,918
33,740
2016
$
12,094
7,223
164,335
183,652
At balance date, there are no trade receivables or other receivables that are past due but not impaired. Due to the short term
nature of these receivables, their carrying value approximates fair value. Trade receivables are non-interest bearing and are
generally on 30-90 day terms. Details regarding the credit risk of current receivables are disclosed in note 16.
Note 9: Property, Plant And Equipment
Plant and Equipment
Plant and Equipment
At cost
Accumulated depreciation
Total Property, Plant and Equipment
Movement in Plant and Equipment
Net carrying amount at beginning of year
Additions
Disposals
Depreciation
Net carrying amount at end of year
Consolidated
2017
$
595,508
(522,852)
72,656
106,312
15,520
(24,373)
(24,803)
72,656
The useful life of plant and equipment for 2017 and 2016 is estimated to be between 3 and 15 years.
Note 10: Intangible Assets
Software licences at cost
Accumulated amortisation
Movement in Intangibles
Net carrying amounts at beginning of year
Amortisation
Net carrying amount at end of year
Consolidated
2017
$
372,963
(372,963)
-
-
-
-
2016
$
661,660
(555,348)
106,312
150,094
-
-
(43,782)
106,312
2016
$
372,963
(372,963)
-
40,854
(40,854)
-
Financial Report (continued) 39
Melbana Annual Report 2017 (formerly MEO Australia)
Notes to the Consolidated Financial Statements (Cont)
For the Year Ended 30 June 2017
Note 11: Exploration And Evaluation Costs
Balance at beginning of year
Expenditure for the year
Expenditure written-off/down during the year
Balance at end of year
Consolidated
2017
$
1,764,514
2,507,526
(454,849)
3,817,191
2016
$
10,856,110
1,682,805
(10,774,401)
1,764,514
Significant judgement is required in determining whether it is likely that future economic benefits will be derived from capitalised
exploration and evaluation expenditure. In the judgement of the Directors, at 30 June 2017 exploration activities in each area of
interest, where costs are carried forward, have not yet reached a stage which permits a reasonable assessment of the existence
or otherwise of economically recoverable reserves. Active and significant operations in relation to each area of interest are
continuing and nothing has come to the attention of the Directors to indicate future economic benefits will not be achieved.
The Directors are continually monitoring the areas of interest and are exploring alternatives for funding the development of
areas of interest when economically recoverable reserves are confirmed.
The exploration write-off for the financial year is $454,849. In FY2016 exploration expenditure written-off/down was $10,774,401
consisting of a $3,151,435 write-off of expenditure ($2,236,280 relating to WA-454-P and $679,381 relating to WA-488-P) and a
write-down of $7,622,966 relating to AC/P50 and AC/P51. The write-down was a result of the execution of the agreement with
Rouge Rock which grants Rouge Rock an option to acquire a 45% interest in each permit in exchange for funding the remaining
primary statutory work program for each permit.
Capitalised exploration and evaluation costs at 30 June 2017 are $3,817,191 (June 2016: $1,764,514) which relate to the following:-
Area of Interest
Block 9 Cuba
AC/P50 & AC/P51
PEP 51153
TOTAL
Note 12: Trade And Other Payables
Trade and other payables
Trade payables are non-interest bearing and are normally settled on 30 day terms.
30 June 2017
30 June 2016
$3,096,453
$632,500
$88,238
$3,817,191
$1,132,014
$632,500
-
$1,764,514
Consolidated
2017
$
311,550
2016
$
219,622
40 Financial Report (continued)
Melbana Annual Report 2017 (formerly MEO Australia) Note 13: Provisions
CURRENT
Employee benefits
Annual leave entitlement
Long service leave entitlement
NON-CURRENT
Employee benefits
Long service leave entitlement
Consolidated
2017
$
2016
$
149,541
162,089
311,630
133,416
71,669
205,085
125,934
162,019
Note 14: Contributed Equity And Reserves
ISSUED AND PAID UP CAPITAL
Ordinary shares
Movements in Ordinary Shares
Balance at beginning of year
Share Issues:
2017
Shares
Consolidated
2017
$
2016
Shares
2016
$
953,243,886
265,934,973
891,204,960
263,822,525
2017
Shares
2017
$
2016
Shares
2016
$
891,204,960
263,822,525
750,488,387
262,406,308
Share Placement at $0.01 per share
-
-
140,716,573
1,407,166
Share Placement at $0.036 per share
46,900,000
1,688,400
15,138,926
-
545,000
(120,952)
-
-
-
-
-
9,051
953,243,886
265,934,973
891,204,960
263,822,525
Share Purchase Plan at $0.036 per share
Transaction costs (net of tax)
Balance at end of year
(a) Terms and Condition of Ordinary Shares
Ordinary shares entitle their holder to receive dividends as declared. In the event of winding up the Company, ordinary
shares entitle their holder to participate in the proceeds from the sale of all surplus assets in proportion to the number of
and amounts paid up or which should have been paid up on shares held. Each ordinary share entitles the holder to one
vote, either in person or by proxy, at a meeting of the Company. Ordinary shares issued during the year and since the end
of the year, from date of issue rank equally with the ordinary shares on issue.
(b) Share Options and Performance Rights
At 30 June 2017, 9,250,000 share options and 26,273,365 share performance rights granted to directors, executives and
employees were outstanding. The options and share performance rights are granted pursuant to the Senior Executives
and Officers Option Plan, details of which are set out in note 19.
Financial Report (continued) 41
Melbana Annual Report 2017 (formerly MEO Australia)
Notes to the Consolidated Financial Statements (Cont)
For the Year Ended 30 June 2017
Note 14: Contributed Equity And Reserves (Cont)
(c) Capital Management
Capital is defined as equity. When managing capital, management’s objective is to ensure the entity continues as a going
concern as well as to maintain optimal returns to shareholders and benefits of other stakeholders. All methods of returning
funds to shareholders outside of dividend payments or raising funds are considered within the context of the Company’s
objectives.
The Group will seek to raise further capital, if required, as and when necessary to meet its projected operations. The
decision of how the Group will raise future capital will depend on market conditions existing at that time. It is the Group’s
plan that this capital will be raised by any one or a combination of the following: placement of shares, pro-rata issue to
shareholders, the exercise of outstanding options, and/or a further issue of shares to the public. Should these methods
not be considered to be viable, or in the best interests of shareholders, then it would be the Company’s intention to meet
its obligations by either partial sale of the Company’s interests or farmout, the latter course of action being part of the
Company’s overall strategy.
Accumulated Losses
Balance at beginning of year
Net loss for the year
Consolidated
2017
$
2016
$
(258,683,387)
(249,211,295)
(2,120,937)
(10,406,105)
Transfer from share based payments reserve - cost of equity instruments expired unexercised
314,610
934,013
Balance at end of year
(260,489,714)
(258,683,387)
The Group is not subject to any externally imposed capital requirements.
Other Reserves
Share based payments reserve
The share based payment reserve is used to record the value of share based payments provided to employees and contractors,
including Key Management Personnel as part of their remuneration. Refer to note 19 for further details of the plan.
Share based payments reserve
Balance at beginning of year
Cost of share based payments
Transfer to accumulated losses -
cost of equity instruments expired unexercised
Balance at end of year
Foreign currency translation reserve
Consolidated
2017
$
447,741
183,427
(314,610)
316,558
2016
$
1,248,623
133,131
(934,013)
447,741
The foreign currency translation reserve is used to record exchange differences for the translation of the financial statements
of foreign subsidiaries. It is also used to record the effect of hedging net investments in foreign operations.
In FY2016, the surrender of the Seruway and South Madura Production Sharing Contracts were formalised during the year.
Exchange differences of $2,264,862 previously recognised in other comprehensive income and accumulated in the foreign
currency translation reserve were reclassified from the reserve to profit or loss on cessation of the foreign operation.
42 Financial Report (continued)
Melbana Annual Report 2017 (formerly MEO Australia)
Foreign currency translation reserve
Balance at beginning of year
Exchange differences on translation of foreign operations
Transfer of foreign currency gain on closure of foreign operation
Balance at end of year
Note 15: Cash Flow Statement Reconciliation
Reconciliation of net loss after tax to net cash flows used in operating activities
Net (loss)
Adjustments for:
Exploration expenditure written-off/down
Depreciation and amortisation
Share based payments
Exchange rate adjustments on revaluation of foreign currency bank accounts
Foreign currency gain on closure of foreign operation
Deferred income tax expense
Changes in assets and liabilities
(Increase)/decrease in trade and other receivables
(Decrease)/increase in trade and other payables
(Decrease)/increase in provisions
Net cash flows (used in) operating activities
Consolidated
2017
$
16,862
805
-
17,667
2016
$
2,271,598
10,126
(2,264,862)
16,862
Consolidated
2017
$
2016
$
(2,120,937)
(10,406,105)
454,849
10,774,401
24,803
183,427
33,120
-
31,584
15,564
20,916
70,460
84,636
133,131
(30,105)
(2,264,862)
43,225
69,123
(30,068)
152,056
(1,286,214)
(1,474,568)
Note 16: Financial Risk Management Objectives And Policies
The Group’s principal financial instruments comprise cash and short term deposits, the main purpose of which is to finance the
Group’s operations. The Group has various other financial assets and liabilities such as trade receivables and trade payables
which arise directly from its operations. The main risks arising from the Group’s financial instruments are credit risk, interest
rate risk, exchange rate risk and liquidity risk. The Board of Directors has reviewed each of those risks and has determined that
they are not significant in terms of the Group’s current activities. The Group also enters into derivative financial instruments,
principally forward currency contracts. The purpose is to manage the currency risks arising from the Group’s operations.
Speculative trading in derivatives is not permitted. There are no derivatives outstanding at 30 June 2017 (2016: $nil).
Details of the significant accounting policies and methods adopted, including the criteria for recognition, the basis of
measurement and the basis on which income and expenses are recognised, in respect of each class of financial asset, financial
liability and equity instrument are disclosed in note 2 to the consolidated financial statements.
Credit risk
The Group trades only with recognised, creditworthy third parties. Receivable balances are monitored on an ongoing basis with
the results being that the Group’s exposure to bad debts is not significant.
Credit risk arises from the financial assets of the Group, which comprise cash and cash equivalents and trade and other
receivables. The Group’s exposure to credit risk arises from potential default of the counter party, with a maximum exposure
equal to the carrying amount of these instruments. No collateral is held as security. Exposure at balance date is the carrying
value as disclosed in each applicable note.
Financial Report (continued) 43
Melbana Annual Report 2017 (formerly MEO Australia) Notes to the Consolidated Financial Statements (Cont)
For the Year Ended 30 June 2017
Note 16: Financial Risk Management Objectives And Policies (Cont)
Interest rate risk
The Group’s exposure to the risk of changes in market interest rates relates primarily to the Group’s cash and cash equivalents
with a floating interest rate. Short term deposits are made for varying periods depending on the immediate cash requirements
of the group, and earn interest at the respective short term deposit rates.
Taking into account the current cash balance, a +/- 1.0% movement from the year-end Australian interest rates will not have a
material impact on the profit or loss and cash balances of the group.
Foreign currency risk
The Group’s exposure to exchange rate risk relates primarily to trade payables and cash denominated in US dollars. Where a
payable is significant, US dollars are purchased on incurring the liability or commitment. The Group also manages its currency
risk through the active management of its exposures which may include entering into various forward currency contracts
throughout the year.
The Group’s exposure to its unhedged financial assets and liabilities is as follows:
USD
Cash
Total Financial Assets
Trade Creditors
Total Financial Liabilities
Consolidated
2017
$
554,470
554,470
2017
$
-
-
2016
$
985,817
985,817
2016
$
12,707
12,707
The following sensitivity analysis is based on the foreign currency risk exposure in existence at the balance date, with all other
variables remaining constant:
10% strengthening in AUD/USD rate (for 2017 from 0.7692 to 0.8461 and for 2016
from 0.7522 to 0.8274) with all other variables held constant
10% weakening in AUD/USD rate (for 2017 from 0.7692 to 0.6923 and 2016
from 0.7522 to 0.6770) with all other variables held constant
Consolidated Net Profit
2017
$
(65,531)
2016
$
(117,608)
80,093
143,743
A sensitivity of 10% has been selected as this is considered reasonable given the current level of exchange rates and the
volatility observed both on a 5 year historical basis and market expectations for potential future movement.
There is no impact on equity other than the above net profit sensitivities on retained earnings/accumulated losses.
Liquidity Risk
The Group’s exposure to financial obligations relating to corporate administration and exploration expenditure, are subject to
budgeting and reporting controls, to ensure that such obligations do not exceed cash held and known cash inflows for a period
of at least 1 year.
Ultimate responsibility for liquidity risk management rests with the Board of Directors, which has built in an appropriate
liquidity risk framework for the management of the Group’s short, medium and longer term funding and liquidity management
requirements. The Group manages liquidity risk by maintaining adequate equity funding through the monitoring of future cash
flow forecasts of its operations, which reflect management’s expectations of the settlement of financial assets and liabilities.
44 Financial Report (continued)
Melbana Annual Report 2017 (formerly MEO Australia)
The Group has limited financial resources and will need to raise additional capital from time to time and such fund raisings
may be subject to factors beyond the control of the Company and its directors. When Melbana requires further funding for
its programs, then it is the Company’s intention that the additional funds will be raised by any one or a combination of the
following: placement of shares, pro-rata issue to shareholders, the exercise of outstanding options, and/or a further issue of
shares to the public. Should these methods not be considered to be viable, or in the best interests of shareholders, then it would
be the Company’s intention to meet its obligations by either partial sale of the Company’s interests or farmout, the latter course
of action being part of the Company’s overall strategy.
At balance date, the group holds $311,550 (2016: $219,622) of financial liabilities consisting of trade and other payables. All
financial liabilities have a contractual maturity of 30 days. The fair values of the financial assets and liabilities approximate the
carrying values in the statement of financial position.
Note 17: Commitments And Contingencies
Commitments
Operating Lease
Future minimum rentals payable under operating lease for office premises at balance date:
Payable not later than one year
Payable later than one year but not later than five years
Consolidated
2017
$
150,804
25,555
176,359
2016
$
123,863
-
123,863
Guarantee
The Group has provided guarantees of $44,300 (2016: $70,752) at 30 June 2017 for lease of premises.
Exploration Commitments
In order to maintain rights of tenure to petroleum exploration tenements, the Group has discretionary exploration requirements
up until the expiry of the primary term of the tenements. These requirements, which are subject to renegotiation, are not
provided for in the financial statements. If the economic entity decides to relinquish certain tenements and/or does not
meet these obligations, assets recognised in the Statement of Financial Position may require review in order to determine
the appropriateness of carrying values. The commitments for exploration expenditure of $21,848,000 include the minimum
expenditure requirements that the Consolidated Entity is required to meet in order to retain its present permit interests. These
obligations may be subject to renegotiation, may be farmed out or may be relinquished.
The majority of Melbana’s exploration permits are located in the jurisdiction of the Commonwealth of Australia and have been
awarded on the basis of an exploration work program bid, although there is an increase in focus on international permits held in
Cuba and NZ. The first three-years of a work program are referred to as the primary term. The work program is guaranteed and
cannot be reduced. Later years (4, 5 and 6) are referred to as the secondary term and the work program for each year becomes
guaranteed upon entry to that year. Whilst failure to complete a guaranteed work program does not result in a financial penalty,
it is grounds for cancellation of the permit. Further, the default may be considered by the Regulator in relation to future
interactions with the defaulting party for a period of 5 years.
- AC/P50 (Melbana 55%*)
AC/P50 was renewed for a further 5 year term commencing 19 May 2015 and the minimum work program requirement during
the 3 year Primary Term consists of:-
Year 1 (ending 18 May 2016) - geological and geophysical studies; Status – Work program completed
Year 2 (ending 18 May 2017) - seismic data reprocessing: Status – Work program completed; and
Year 3 (ending 18 May 2018) - geological and geophysical studies.
As announced on 5 July 2016, Melbana will be “free-carried” through the Year 2 and Year 3 work programs following an
agreement with Rouge Rock Pty Ltd which grants Rouge Rock an option to acquire a 45% interest in the Permit in exchange for
undertaking and funding the remaining work program.
*Assumes Rouge Rock receives regulatory approval for its option to acquire a 45% interest in the Permits and subject to a 5% option granted to Far Cape Energy Pte Ltd.
Financial Report (continued) 45
Melbana Annual Report 2017 (formerly MEO Australia)
Notes to the Consolidated Financial Statements (Cont)
For the Year Ended 30 June 2017
Note 17: Commitments And Contingencies (Cont)
- AC/P51 (Melbana 55%*)
AC/P51 was renewed for a further 5 year term commencing 19 May 2015 and the minimum work program requirement during
the 3 year Primary Term consists of:-
Year 1 (ending 18 May 2016) - geological and geophysical studies – Work program completed
Year 2 (ending 18 May 2017) - seismic data reprocessing – Work program completed
Year 3 (ending 18 May 2018) - geological and geophysical studies.
As announced on 5 July 2016, Melbana will be “free-carried” through the Year 2 and Year 3 work programs following an
agreement with Rouge Rock Pty Ltd which grants Rouge Rock an option to acquire a 45% interest in the Permit in exchange for
undertaking and funding the remaining work program.
- WA-488-P (Melbana 100%)
In 2013, Melbana was awarded WA-488-P for a six year period with a minimum commitment being the three year primary term
ending 21 May 2016.
Permit Year 1 work program (ending 21 May 2014) was 400km 2D seismic – Work program completed
Permit Year 2 - during FY2016 the Regulator approved a suspension of the Permit Year 2 work program conditions by twelve
months to 21 November 2016 with the work program varied to include 150km 2D broadband reprocessing and 2D seismic
inversion, and, in November 2016, the company was advised by the Regulator of approval to extend Permit Year 2 by 16 months
to 21 March 2018. This additional time will provide an opportunity to undertake 330km of 2D seismic broadband reprocessing
and additional studies including a stratigraphic interpretation study and an analogue field study.
Permit Year 3 - the potential drilling of the Beehive-1 exploration well has also been deferred 16 months with Permit Year 3 now
commencing on 22 March 2018 and ending on 21 March 2019.
- PEP51153 (Melbana 30% interest)
The minimum work program for PEP51153 is as follows:
Period
Work Commitment
No later than 23 March 2017
Acquire, process and interpret a minimum of 28.5km of gravity data across the permit
Status - Work program completed
No later than 23 February 2018
Drill one well to an agreed location and depth
PEP51153 expires on 23 September 2018.
- Cuba Block 9 (Melbana 100% interest**)
In September 2015, Melbana executed the Cuba Block 9 Production Sharing Contract (PSC) with the national oil company Cuba
Petróleo Union (CUPET).
The exploration period of the Block 9 PSC is split into four sub-periods with withdrawal options at the end of each sub-period.
In November 2016 the company announced that the national oil company Union Cuba Petrole (CUPET) approved an adjustment
to the Block 9 PSC exploration sub-periods such that the first exploration sub-period, which commenced in September 2015
(for an 18 month period) was extended by eight months to November 2017 with a corresponding reduction in the term of
future sub-periods. The work program in the first sub-period consisting of evaluating existing exploration data in the block and
reprocessing selected 2D seismic data is unchanged and substantially complete.
*Assumes Rouge Rock receives regulatory approval for its option to acquire a 45% interest in the Permits and subject to a 5% option granted to Far Cape Energy Pte Ltd.
** Subject to Petro Australis receiving the necessary Cuban regulatory approvals (including pre-qualification) for its 40% back-in option which Petro Australis
notified Melbana that it was exercising on 25 August 2017
46 Financial Report (continued)
Melbana Annual Report 2017 (formerly MEO Australia)
In July 2017 CUPET approved a further amendment to the Block 9 PSC exploration work program, deferring the obligation to
undertake a 200km 2D seismic survey in the second exploration sub-period starting November 2017 to the third sub-period
starting November 2019 and accelerating the obligation to drill an exploration well from the third sub-period to the second
exploration sub-period. In the event the Company enters into the second exploration sub-period (November 2017 to November
2019) the firm budget to reflect the minimum work program of one well is estimated to cost ~US$5million.
There are no material commitments or contingencies other than as set out in this note.
Summary
Should Melbana proceed with its share of exploration commitments, they are currently estimated to be $21,848,000 of which
$1,848,000 is estimated within one year and $20,000,000 is estimated after one year but not more than five years.
Note 18: Related Party Disclosures
Subsidiaries
The consolidated financial statements include the financial statements of Melbana Energy Limited, and the following
subsidiaries.
Country of Incorporation
Equity Interest
2017
%
2016
%
North West Shelf Exploration Pty Ltd
Methanol Australia Pty Ltd
LNG Australia Pty Ltd
TSP Arafura Petroleum Pty Ltd
Oz-Exoil Pty Ltd
Vulcan Exploration Pty Ltd
MEO International Pty Ltd*
Finniss Offshore Exploration Pty Ltd
MEO New Zealand Pty Limited
Drysdale Offshore Exploration Pty Ltd**
Gastech Systems Pty Ltd**
Offshore Methanol Pty Ltd**
Innovative Energy Pty Ltd**
Seruway Offshore Exploration Limited**
Rayong Offshore Exploration Limited**
MEO Malaysia Pty Ltd**
*MEO International Pty Ltd holds:-
• a 100% interest in MEO New Zealand Pty Limited
**Companies liquidated during FY2017
Compensation of key management personnel by category:
Short term employee benefits and fees
Post-employment benefits
Share-based payments
Long service leave expense
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
New Zealand
100
100
100
100
100
100
100
100
100
-
-
-
-
-
-
-
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
Consolidated
2017
$
933,091
71,382
106,880
23,975
2016
$
855,082
104,579
90,231
37,842
1,135,328
1,087,734
During the year there were no payments for consulting services to non-executive directors, other than director fees, which were
paid to entities controlled by directors (2016: nil).
Financial Report (continued) 47
Melbana Annual Report 2017 (formerly MEO Australia)
Notes to the Consolidated Financial Statements (Cont)
For the Year Ended 30 June 2017
Note 19: Share Based Payment Plans
Melbana Long Term Incentive Plan
Share Options
During the year 9,250,000 share options were granted to employees, excluding the managing director (2016: Nil). Each share
option is an option to acquire one ordinary share in the Company. Any new shares which are issued in satisfaction of options
will be issued at the prevailing market price at the time of issue.
Movements in share options on issue during the year:
Outstanding at the beginning of the year
Granted during the year
Forfeited during the year
Exercised during the year
Outstanding at the end of the year
2017
Options
4,200,000
9,250,000
2016
Options
11,080,000
-
(4,200,000)
(6,880,000)
-
-
9,250,000
4,200,000
•
In March 2017, 9,250,000 share options were granted to employees exercisable at a price of 3.2 cents per option on or
before 27 September 2020. These options vested 50% on 27 March 2018 and 50% on 27 March 2019.
The fair value of the options at date of grant was estimated to be 1.67 cents. The fair value was determined using a Binomial
pricing model, taking into account the terms and conditions upon which the options were granted, and using the following
inputs to the model:
Expected volatility
135%
Contractual life (years)
3.5
Risk-free interest rate
2.19%
Dividend yield
0%
The expense in the year relating to these share options was $29,043.
Share Performance Rights
Movements in share performance rights on issue during the year:
Outstanding at the beginning of the year
Granted during the year
Forfeited during the year
Outstanding at the end of the year
2017
Rights
26,273,365
-
-
2016
Rights
-
26,273,365
-
26,273,365
26,273,365
In November 2015, 5,333,333 Exercisable Performance Rights were granted to the Managing Director and Chief Executive
Officer, Mr Peter Stickland under the Company’s Long Term incentive Plan. The vesting date for the Exercisable Performance
Rights is 30 November 2016 and expiry date on 29 November 2018. The Exercisable Performance Rights vest and become
exercisable after 12 months continuous service ending 29 November 2016. There is no price payable on exercising the
Exercisable Performance Rights. The Exercisable Performance Rights are valued at $80,000 of which $33,333 was expensed
in the year (FY2016: $46,667).
In February 2016, the company implemented revised remuneration arrangements with its senior staff as part of the Company’s
ongoing cost reduction initiatives. Senior staff voluntarily agreed to a 20% reduction in the cash component of their annual
remuneration packages in exchange for Exercisable Performance Rights. 20,940,032 Exercisable Performance Rights were
granted. The vesting date for the Exercisable Performance Rights is 31 January 2017 and expiry date on 31 January 2019. The
Exercisable Performance Rights vest and become exercisable after 12 months continuous service ending 31 January 2017.
There is no price payable on exercising the Exercisable Performance Rights. The Exercisable Performance Rights are valued at
$207,515 of which $121,051 was expensed in the year (FY2016: $86,464).
48 Financial Report (continued)
Melbana Annual Report 2017 (formerly MEO Australia) Note 20: Auditors’ Remuneration
Amounts received or due and receivable by Ernst & Young (Australia) for:
Audit and review of the financial reports
Tax services in relation to the entity and other entities in the consolidated group
Consolidated
2017
$
52,500
7,810
60,310
2016
$
70,000
4,471
74,471
NOTE 21: INTERESTS IN JOINT OPERATIONS
Melbana Energy, through its wholly-owned subsidiary, MEO New Zealand Pty Limited, holds a 30% interest in the PEP51153 in
New Zealand. The principal activity of the joint operation is the exploration, development and production of hydrocarbons.
Commitments related to joint operation assets
Commitments relating to the joint operation assets are set out in note 17 to the accounts.
Contingent liabilities
As at 30 June 2017, there are no contingent liabilities relating to PEP51153.
NOTE 22: PARENT ENTITY INFORMATION
Information relating to Melbana Energy Limited
Current assets
Total assets
Current liabilities
Total liabilities
Issued capital
Share based payments reserve
Accumulated losses
Total shareholders’ equity
Loss of the parent entity
Total comprehensive loss of the parent entity
Details of any guarantees entered into by the parent entity in
relation to the debts of its subsidiaries
Details of any contingent liabilities of the parent entity
Details of any contractual commitments by the parent entity
for the acquisition of property, plant or equipment.
2017
$
3,735,451
6,904,569
594,609
720,543
2016
$
4,117,462
6,089,044
383,450
545,469
262,834,408
260,753,544
316,557
447,741
(256,966,939)
(255,657,710)
6,184,026
(1,623,839)
(1,623,839)
5,543,575
(12,429,130)
(12,429,130)
n/a
n/a
n/a
n/a
n/a
n/a
Financial Report (continued) 49
Melbana Annual Report 2017 (formerly MEO Australia)
Notes to the Consolidated Financial Statements (Cont)
For the Year Ended 30 June 2017
Note 23: Events Subsequent To Balance Date
On 19 July 2017 the Company announced an amendment to the Cuba Block 9 work program with the deferral of the obligation to
undertake a 200km 2D seismic survey in the second exploration sub-period starting November 2017 to the third exploration sub-
period starting November 2019 and accelerating the obligation to drill an exploration well from the third exploration sub-period to
the second exploration sub-period. The amendment was requested by the Company due to it being able to define a number of high
quality drill targets from the data it received and further studies undertaken during the first exploration sub-period.
On 26 July 2017 it was announced that Rouge Rock Pty Ltd (“Rouge Rock”) had formally notified Melbana of the exercise of its
options to acquire a forty five percent (45%) participating interest in the AC/P50 and AC/P51 exploration permits. Melbana granted
the option to Rouge Rock on 5 July 2016 in exchange for a free carry for Melbana on the costs of the committed work program for
the 2016-18 primary term of each of the exploration permits. The exercise of the farm-in by Rouge Rock follows its evaluation of
reprocessed data and the resulting suite of enhanced technical products which are intended to further de-risk the identified prospects
and leads, facilitating a potential further farm-out of the Permits to fund future discretionary exploration drilling.
On 31 July 2017 PEP51153 Operator (TAG Oil 70%) advised that the commencement of drilling of the Pukatea-1 exploration well
had been delayed until mid - January, 2018 to provide additional time to undertake civil works on the primary access road and
drilling pad and to undertake potential drill rig modifications. Under the terms of PEP51153 an exploration well is required to be
drilled prior to 23 February 2018.
In August 2017 the Company announced that it had raised $1,787,332 (before costs) from qualified institutional and
sophisticated investors through the placement of 178,733,229 fully paid ordinary shares at $0.01 per share together with the
issue of 59,577,743 options on the basis of one unlisted option for every three shares subscribed. In addition to the share
placement and to enable all Melbana shareholders to participate, the Company announced a 1 for 2 pro-rata non-renounceable
entitlement offer of Shares to raise up to approximately $4,766,000 (before costs). Hartleys Limited and Patersons Limited
were Joint Lead Managers to the Placement and the Entitlement Offer, and Patersons Limited is partially underwriting the
Entitlement Offer up to $3,420,000. Proceeds from the Placement and the Entitlement Offer will be used primarily to allow the
Company to undertake the necessary initial preparations for the planned Cuba drilling program in 2018 on onshore Block 9 (but
excluding drilling itself). The net proceeds will also be used for corporate costs and for general working capital purposes.
On 28 August 2017, the Company advised that Petro Australis Limited (“Petro Australis”) had provided a notice to Melbana
exercising its back-in right with respect to a 40% participating interest in Cuba Block 9 Production Sharing Contract (“Block
9 PSC”). Subject to Petro Australis receiving the necessary Cuban regulatory approvals (including pre-qualification) for this
transfer, the Block 9 PSC Joint Venture would consist of Melbana 60% (and Operator) and Petro Australis 40%. Petro Australis
is responsible for 40% of certain back costs as well as 40% of future costs associated with Block 9 PSC.
Other than the above, there has not arisen in the interval between the end of the financial year and the date of this report
any item, transaction or event of a material and unusual nature likely, in the opinion of the directors of the Company, to affect
significantly the operations of the Group, the results of those operations, or state of affairs of the Group, in future financial years.
50 Financial Report (continued)
Melbana Annual Report 2017 (formerly MEO Australia) Directors’ Declaration
In accordance with a resolution of the directors of Melbana Energy Limited, I state that:
1.
In the opinion of the Directors:
(a)
The financial statements and notes of Melbana Energy Limited for the financial year ending 30 June 2017 are 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 performance
for the year ended on that date; and
(ii)
Complying with Accounting Standards (including the Australian Accounting Interpretations) and Corporations
Regulations 2001.
(b)
(c)
The financial statements and notes also comply with International Financial Reporting Standards as disclosed in Note 2
(a)(i).
There are reasonable grounds to believe that the Company will be able to pay its debts as and when they become due
and payable.
2. This declaration has been made after receiving the declarations required to be made to the Directors from the Managing
Director and Chief Executive Officer and Chief Financial Officer & Company Secretary in accordance with Section 295A of
the Corporations Act 2001 for the financial year ended 30 June 2017.
On behalf of the Board
P J STICKLAND
Managing Director & Chief Executive Officer
Melbourne, 15 September 2017
Director’s Declaration 51
Melbana Annual Report 2017 (formerly MEO Australia)
Independent Auditor’s Report
52 Independent Auditor’s Report
Melbana Annual Report 2017 (formerly MEO Australia) Independent Auditor’s Report (cont) 53
Melbana Annual Report 2017 (formerly MEO Australia) 54 Independent Auditor’s Report (cont)
Melbana Annual Report 2017 (formerly MEO Australia) Independent Auditor’s Report (cont) 55
Melbana Annual Report 2017 (formerly MEO Australia) 56 Independent Auditor’s Report (cont)
Melbana Annual Report 2017 (formerly MEO Australia) Independent Auditor’s Report (cont) 57
Melbana Annual Report 2017 (formerly MEO Australia) Shareholder and Other Information
Compiled as at 6 October 2017
(a) Distribution Of Equity Securities
Ordinary Share Capital
(i)
1,494,917,147 fully paid ordinary shares are held by 6,974 individual shareholders.
All issued ordinary shares carry one vote per share and carry rights to dividends. On a show of hands, every
member at a meeting of shareholders shall have one vote and upon a poll each share shall have one vote.
(ii) Unquoted Options on Issue
173,578,055 - 31 August 2018 options are held by 964 individual option holders.
4,000,000 - 3 November 2019 options are held by 1 individual option holder.
9,250,000 - 27 September 2020 options are held by 6 individual option holders.
There are no voting rights attached to these options.
(iii) Unquoted Share Performance Rights on Issue
5,333,333 performance rights are held by 1 individual holder.
There are no voting rights attached to these performance rights.
The number of shareholders, by size of holding and the total number of shares on issue:
Ordinary Shares
No. of Holders
No. of Shares
1 – 1,000
1,001 – 5,000
5,001 – 10,000
10,001 – 100,000
100,001 and over
TOTAL ON ISSUE
434
1,186
1,190
2,823
1,341
6,974
125,100
4,151,212
9,595,641
107,503,620
1,373,564,284
1,494,917,147
5,014 holders holding 71,768,854 shares held less than a marketable parcel of ordinary shares. There is no current
on-market buy-back.
(b) Substantial Shareholders
The Company has no Substantial Shareholder as at 6 October 2017.
58 Shareholder and Other Information
Melbana Annual Report 2017 (formerly MEO Australia)
(c) 20 Largest Holders Of Ordinary Shares
Compiled as at 6 October 2017
Holder
Ordinary Shares
% of total on issue
HSBC Custody Nominees (Australia) Limited
National Nominees Limited
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