ANNUAL REPORT
2018
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, the Bonaparte Gulf region in Australia
and New Zealand.
The Company has a diverse and high impact exploration asset portfolio with significant near-term value drivers:
• Unique Cuban footprint and early mover advantage into exciting Cuban energy sector
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Block 9 (MAY 100%) with enormous onshore conventional oil potential Multiple prospects and leads
identified with up to two exploration wells to be drilled
Santa Cruz Incremental Oil Recovery Opportunity (MAY 100%) which potentially provides an accelerated
pathway to becoming an oil producer in Cuba
•
Beehive prospect (WA-488-P – MAY 100%) potentially the largest undrilled oil prospect offshore Australia
•
Potential value from Tassie Shoal Projects (MAY 100%) where Melbana’s development solutions provide and
innovative low cost development path for as regional discovered but undeveloped resources seek development
solutions.
Melbana’s mission is to create a world class E&P company by using the skills of our people to identify and
successfully develop attractive oil and gas exploration and project development opportunities.
Contents
Directors’ report
Review of operations
Remuneration report
Auditor’s independence declaration
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
Shareholder information
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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 2018
Highlights for the Year
• Cuba – Block 9
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Progressed drilling preparations for up to two wells
Appointed Drilling Planning Coordinator in Cuba
office to support drilling preparations
Identified multiple potential drilling rigs for drilling
program
Received regulatory approval to commence civil
works at first well site
Independent gravity and magnetic study verified
Melbana’s structural interpretation; strongly
supporting the Zapato prospect
Farmout process active during year with multiple
potential farminees
• Cuba – Santa Cruz Opportunity
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Incremental Oil Recovery Opportunity agreement
signed with Cuba’s national oil company providing
Melbana with exclusive right to assess potential for
the enhancement of oil production from the Santa
Cruz oil field and negotiate a long term agreement
• Australia – WA-488-P Beehive
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Completed the reprocessing of 330km of 2D seismic
data to assist in farmout activities
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Seismic Funding and Farmin Option Agreement signed
with French major Total and Australia’s Santos to fully
fund a 3D seismic survey over Beehive Prospect in
return for an option to acquire an 80% Participating
Interest in WA-488-P. If Total and/or Santos exercises
its option, Melbana would retain 20% and be fully
carried for the first well drilled in WA-488-P
3D Seismic Survey environmental permit application
submitted to regulator
Tenders for acquisition of 3D seismic survey issued
and bids received
Environmental Plan 3D Seismic Survey approved
Polarcus contracted to undertake 3D Seismic Survey
acquisition which was completed during August 2018
• Australia AC/P50 and AC/P51
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Rouge Rock Pty Ltd exercised its options to acquire
a 45% participating interest in each permit, which
it had earned by undertaking 3D seismic data
reprocessing indicatively valued at $1.15 million.
•
New Zealand – PEP51153
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Oil flowed during test of Pukatea-1 Mt. Messenger
oil zone
Melbana Project Areas
Santa Cruz IOR
Highlights for the Year 1
Melbana Annual Report 2018
Chairman’s Letter
I am pleased to present Melbana Energy’s Annual Report for financial
year 2018. It has been a productive year for your company and one
that saw great advances towards discovering the potential of its
exciting and world class portfolio of oil and gas projects.
Pleasingly, the year not only saw the price of oil continue to
rise but also, as importantly, a decline in its volatility. This has
imbued the sector with a confidence that has been lacking in
recent years which has contributed to an increase in activity. Your
company’s transaction with France’s Total and Australia’s Santos
for its Beehive prospect was evidence of this. It also suggests
a preference by the majors to take more measured steps back
into exploration by choosing prospects that not only have the
potential for significant reward but which are also logistically less
challenging. The size of Beehive’s prospective resource coupled
with its shallow water location close to infrastructure met these
criteria. Similarly, the scale of Block 9 in Cuba and the fact that
it’s onshore are in no small way responsible for the significant
international interest it has received.
The 2018 financial year also saw your company continue to
streamline its portfolio of exploration licences to those that matter
most to its shareholders. A discovery at our primary target in New
Zealand earlier this year would, of course, have been welcome
but we are pleased with the success at our secondary target. Our
joint venture partner believes there is a project to be developed
there so we are in negotiations to divest our interest to them.
If concluded, it would bring to an end our involvement in New
Zealand, release your company from future work commitments
and rehabilitation obligations as well as allow for an increased
focus on our Cuban projects. Similarly, our divestment of our
remaining interests in the two blocks near the Ashmore Cartier
Islands has released us from future work commitments there
whilst retaining exposure to any upside generated from these
licences in future.
The seismic programme shot over our Beehive prospect recently
was planned, permitted and executed in very short order and
extended to cover a new lead identified by Santos. That this
all took place within eight months from a standing start was a
great achievement and testament to the renewed vigour in the
sector and our partners’ abilities. We might expect a similarly
quick programme to drill Beehive, should our partners elect to
do so, given Santos’ comment in their Second Quarter Activities
Report that a wildcat drilling programme is “currently planned
to commence around 2020”. In Cuba, our permitting for drilling
at Block 9 has been advanced in parallel with the international
tenders we ran for rigs and services earlier in the year and the
final decision on when to commence drilling is now subject only
to our concluding a farmout deal with our preferred partner then
requesting the final permit from the Cuban regulators. We have
also been sufficiently encouraged by our investigations to date of
2 Chairman’s Letter
the Santa Cruz opportunity to begin commercial negotiations with
CUPET to formalise our involvement.
Your company also spent a good deal of time this year exploring
alternative sources of capital for the more efficient pursuit of
its objectives. In April it announced it had been successful in
raising debt on transparent and competitive terms that your
board considered more favourable than what was likely to have
been available from the equity capital markets at that time.
Considerable effort was also invested in understanding whether
the Alternative Investment Market on the London Stock Exchange
might be an appropriate jurisdiction to seek funding for your
company’s ambitions in Cuba. This has been a beneficial exercise
and one that may be promoted as an option depending on how
things develop with your company in the year ahead.
A number of corporate changes were implemented throughout
the year, too, to allow your company to more efficiently deploy
its resources as well as to introduce some of the different skills
required to help it prepare for its drilling programme in Cuba. We
welcomed Heriberto Vasco as Drilling Planning Coordinator in our
Havana office and wish to state the board’s appreciation of our
long serving and loyal staff for their cooperative flexibility and to
our new CEO, Rob Zammit, who planned and implemented this
process with the minimum of disruption and who has been tireless
in his pursuit of the company’s goals.
Finally, I wish to express my thanks to Colin Naylor who left the
firm’s employ during the year. His many years of competent and
faithful service established a very strong administrative and
reporting platform that the company continues to benefit from.
We are extremely fortunate, too, to continue to have access to Peter
Stickland’s experience and expertise given he agreed to remain a
director following his stepping down as CEO during the year.
The year ahead is one replete with opportunity and I am confident
your company is now appropriately structured and positioned to
give it the best possible chance at the success its shareholders
deserve.
Thank you for your support and engagement. It is very much
appreciated.
Andrew G Purcell
Chairman
Melbana Annual Report 2018 Chief Executive Officer’s Message
Financial year 2018 has been an exciting year for the team
at Melbana, with a focus on advancing our high impact assets
in Cuba and Australia towards drilling while maintaining a strong
emphasis on exercising fiscal and portfolio discipline.
During the year the Company initiated a portfolio review to ensure
that all the resources at our disposal were optimally allocated to
the highest impact opportunities with non-core assets earmarked
for potential divestment. The divestment analysis weighed up
the ongoing cash costs of maintaining our position as well as
management effort against an assessment of the benefit of
remaining in the asset.
As the Company moves on to its next phase in its growth, I
would like to thank all our highly competent staff in both Cuba
and Australia for their efforts during the year. I would like to
acknowledge the work of my predecessor Peter Stickland who
resigned due to an illness in January 2018 and am pleased to
report he remains active and involved with Melbana as a Non-
Executive Director. Most importantly, I would also like to thank
our many shareholders for their ongoing support and continued
interest in the Company.
1 See prospective Resources Cautionary statement on p. 19.
Robert Zammit
Chief Executive Officer
As the only ASX-listed oil and gas company with exploration
acreage in Cuba and one of the few exploration companies in the
world with a footprint in Cuba, Melbana is in a unique position
in the global oil and gas industry. Coupled with our position in
Australia where we are the titleholder of WA-488-P offshore
exploration permit that contains the largest undrilled hydrocarbon
prospect in Australia, Melbana has an incredibly exciting portfolio
of opportunity for a company of our size.
We achieved two major growth objectives last year, obtaining
funding from French major Total and Australia’s Santos for a 3D
Seismic Survey over the Beehive prospect in WA-488-P with a
subsequent option to fully fund an exploration well, and securing
from the national oil company of Cuba (CUPET) an exclusive right
to study the producing Santa Cruz field and negotiate a long term
incremental oil contract, providing Melbana with an opportunity to
achieve early oil production in Cuba.
While these were very important commercial achievements
for our growth prospects, the technical team provided its full
attention to maturing the drilling opportunities in Block 9,
including proceeding with the permitting process and supporting
a substantial farmout effort for Block 9 in what has been one of
the most challenging farmout markets of the last two decades.
Melbana was present in conferences in London, Hong Kong and
Australia and on each occasion, there was substantial interest in
our unique position in Cuba. I anticipate these efforts will bear
fruit for the Company in due course in multiple ways.
The technical analysis and research work undertaken by our team
interpreting the complex Cuban fold belt geology draws on their
many decades of international technical experience with global
oil companies and has been internationally recognised as of the
highest quality. Our two highest rated Cuban prospects, Alameda
and Zapato, provide an opportunity to test four prospects with
potential for ~5 billion barrels Oil in Place1 and ~236 million barrels
recoverable1. In addition to permitting, procurement of material
and services to support drilling these prospects was progressed
during the year, with key milestones reached.
Chief Executive Officer’s Message 3
Melbana Annual Report 2018 Director’s Report
For The Year Ended 30 June 2018
The directors present their report, together with the financial
statements, on the consolidated entity (referred to hereafter
as the ‘consolidated entity’) consisting of Melbana Energy
Limited (referred to hereafter as the ‘Company’ or ‘parent
entity’) and the entities it controlled at the end of, or during,
the year ended 30 June 2018.
Directors
The following persons were directors of Melbana Energy
Limited during the whole of the financial year and up to the
date of this report, unless otherwise stated:
Andrew Purcell (Chairman)
Michael Sandy
Peter Stickland
Principal activities
The principal activities during the year of the consolidated
entity were oil and gas exploration in Cuba, Australia and New
Zealand together with development concepts for the Tassie
Shoal Methanol Project and Timor Sea LNG Project.
Dividends
There were no dividends paid, recommended or declared
during the current or previous financial year.
Review of operations
The loss for the consolidated entity after providing for income
tax amounted to $6,100,000 (30 June 2017: $2,121,000).
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.
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.
Melbana has identified Block 9 as one of the world’s most
exciting exploration plays with an independent assessment
by McDaniel & Associates identifying exploration potential
of approximately 15.7 billion barrels of Oil-in-Place with a
Prospective (Recoverable) Resource of 718 million barrels
(Best Estimate, 100% basis)1.
The Company’s aim is to drill up to two wells in Block 9 during
the current exploration sub-period which concludes on 3
November, 2019. Melbana has progressed the well design and
regulatory permitting process for drilling for its 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.
During 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 however this was subject to Petro Australis receiving
the necessary Cuban regulatory approvals (including pre-
qualification) for this transfer. Petro Australis failed to
achieve pre-qualification to enable a timely application to
Cuban regulatory authorities for their acquisition of a 40%
participating interest in the Block 9 PSC.
As a result, Melbana has terminated its commercial
arrangements with Petro Australis. On 4 December 2017 the
Company announced it had reached a commercial settlement
with Petro Australis to conclusively resolve its claim to a
right to acquire a 40% participating interest in the Block 9
PSC. The commercial settlement involved Petro Australis
relinquishing all claims to its back-in right to the Block 9 PSC
in consideration for Melbana paying A$50,000 in cash and
issuing 20.8 million Melbana shares to Petro Australis. As
a result of the settlement there are no further obligations
on either party and it is confirmed that Melbana holds an
unencumbered 100% interest in Block 9 PSC.
1 This estimate should be read with reference to the footnote “Notes regarding Contingent and Prospective resource estimates” on page 19
4 Director’s Report
Melbana Annual Report 2018 New Zealand – PEP51153 (Melbana 30%)
During the year the PEP51153 Joint Venture (Melbana 30%, Tag
Oil (TSX: TAO) 70% and Operator) proceeded to drill the Pukatea-1
exploration well primarily targeting the Tikorangi limestone
formation. Pukatea-1 penetrated the secondary Mt. Messenger
objective, which was encountered 2m high to prognosis,
recording encouraging oil shows over a 14mMD gross interval.
Pukatea-1 continued drilling and reached a final total depth of
3100mMD after penetrating a thickened overlying interval without
intersecting the Tikorangi Limestone target. A production test
of the Pukatea-1 oil zone found in the Mt. Messenger formation
was conducted. Over a 12-hour test period using a 24/64” choke
setting, the well flowed at a stabilized rate of approximately 276
boe/d (74% oil) without the need for artificial lift. Based on the
failure of the primary target and the results from the longer term
production test, the Company determined that this permit was
not core to its future activities and has been actively pursuing
divestment of its interest in the permit. Based on the offers
received the company has elected to write down the previously
capitalised value of the permit to $100,000.
The Company is currently undertaking a strategic review of its
New Zealand acreage.
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 Blacktip 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. An
independent assessment by McDaniel & Associates has assessed
the Beehive prospect as having a Prospective Resource of 388
million barrels of oil equivalent (Best Estimate, 100% basis).
During the year, Melbana completed 330km of 2D seismic
broadband reprocessing and additional studies, including a
stratigraphic interpretation study and an analogue field study.
In December 2017 a Seismic Funding and Farm-in Option
Agreement was signed with French major Total and Australia’s
Santos (ASX code: STO) to fully fund 100% of the cost of a
3D seismic survey over the Beehive prospect in consideration
for which, they are granted an option (exercisable together
or individually) to acquire a direct 80% participating interest
in the permit. If the option is exercised, Total and/or Santos
will fully fund the costs of all activities until completion of the
first well in the WA-488-P permit. In the event of a commercial
discovery, Melbana will repay carried funding from its share
of cash flow from the Beehive field. Melbana will have no re-
payment obligations for such carried funding in the event there
is no commercial discovery and development in WA-488-P.
Subsequent to the period, in August 2018 the Company
received notice from the National Offshore Petroleum Titles
Administrator (NOPTA) of the approval of its application for
a WA-488-P work program credit. As a result, the acquisition
of the Beehive 3D Seismic Survey completed in Permit Year 2
is officially credited against meeting the Permit Year 4 work
commitment to acquire a new 400km2 3D seismic survey.
Subsequent to the period, in September 2018 the Company
received notice from the NOPTA of the approval of its
application to suspend the deadline for completion of the
current Year 3 WA-488-P permit year work obligations by
15 months to 21 December 2020.
AC/P50 & AC/P51 (both Melbana 55%*)
*Subject to a 5% option granted to Far Cape Energy Pte Ltd
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,
Rouge Rock Pty Ltd (“Rouge Rock”) exercised its option to
acquire a 45% interest in the AC/P50 and AC/P51 Exploration
Permits (“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.
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,
through it’s wholly-owned subsidiary, Vulcan Exploration Pty
Ltd, will carry Far Cape’s participating interest in the first well
should Melbana elect to drill a well in either of the permits.
Subsequent to the period in July 2018 Melbana received notice
from NOPTA revising the work program to extend the current
year 3 permit year by 12 months to allow for additional work
above the current commitment to be completed and also to
vary the year 4 commitment by deferring one exploration well
to year 5 to allow sufficient time to interpret the extra data
acquired as a result of the new year 3 commitment.
Subsequent to the period in August 2018, both permits were
divested in their entirety. Melbana, through its wholly-owned
subsidiary, Vulcan Exploration Pty Ltd, retains exposure to
upside in both permits.
Director’s Report (continued) 5
Melbana Annual Report 2018 Review Of Operations (cont)
Tassie Shoal Gas Processing Projects
Melbana has Australian Government environmental approvals
to construct, install and operate two stand-alone world scale
1.75 Mtpa methanol plants collectively referred to as the
Tassie Shoal Methanol Project (TSMP) and a single 3 Mtpa
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. These projects uniquely provide a development option
for discovered but undeveloped gas resources in the region.
Tassie Shoal Methanol Project (TSMP, Melbana 100%)
Melbana proposes the staged construction of two large
methanol production plants, each with an annual production
capacity of 1.75 million tonnes on its own concrete gravity
structure. 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 publicly stated development path.
During the year, the competition between Evans Shoal Joint
Venture and the Barossa Joint Venture to back fill Darwin
LNG heightened with Barossa Joint Venture reported to
commence front end engineering and design. Melbana
remains ready to engage with the titleholders on using Tassie
Shoal Projects as an LNG or methanol development path once
there is a decision made on the successful Joint Venture to
supply Darwin LNG.
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 floating LNG (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 FLNG and onshore
Australia development paths.
In August 2017, 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 consolidated entity for the financial year,
after provision for income tax, was $6,100,000 (2017: net loss
after tax of $2,121,000). The loss for the year was mainly due
to:
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a slight increase in gross Administrative costs, to
$3,319,000 for the year ended 30 June 2018 from
$3,131,000 for the year ended 30 June 2017, due mainly to
additional consulting and legal fees;
a decrease in the allocation of Administrative costs to
exploration activities, to $966,000 for the year ended 30
June 2018 from $1,459,000 for the year ended 30 June
2017, due mainly to: a reduction in salary rates in 2018,
compared to 2017; and a reduction in 2018 of staff time
related to exploration projects compared to the previous
year, particularly Cuba Block 9, which was at the staff
time-intensive set up/establishment phase in 2017, and
the fact that the overall number of in-progress projects in
place in 2017 was higher than in 2018;
higher Exploration expenditure write-offs/write-downs in
2018, up to $3,691,000, compared to $455,000 in 2017,
due mainly to: full write off of costs for the AC/P50-AC/
P51 permits, in light of the consolidated entity’s post-year
end disposal of those interests; and a write-down in the
carrying value of the consolidated entity’s interest in the
PEP51153 venture;
Research & Development tax incentive received of
$357,000 (2017: Nil);
interest expense of $96,000 (2017: Nil) and interest
income of $20,000 (2017: $71,000).
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 consolidated entity’s methanol
and LNG Projects could ultimately lead to the establishment
of a profitable business or result in a profit to the Company
if an asset sale occurs. While the consolidated entity 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 consolidated entity held cash and cash
equivalents of $3,047,000 (2017: $2,605,000), a net increase
of $442,000 (2017: net decrease of $1,531,000), while its net
assets were $6,695,000 (2017: $5,779,000), a net increase
of $916,000 (2017: net increase of $176,000). The main
determinants of the consolidated entity’s financial condition
were:
6 Director’s Report (continued)
Melbana Annual Report 2018 loss after tax of $6,100,000 (2017: loss of $2,121,000);
approximately $1.9 million before costs of the issue.
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cash flows as follows: net operating cash outflows of
$2,327,000 (2017: $1,286,000) and net investing cash
outflows of $3,766,000 for plant & equipment and
exploration/evaluation (2017: $2,306,000)
new term deposit of $3,073,000 required to secure
bank guarantees required for Cuba Block 9 (2017: not
applicable);
new short-term borrowings of $3,099,000 (2017: not
applicable);
share issue proceeds of $7,765,000, of which $458,000
were non-cash share issues (2017: $2,233,000, with no
non-cash share issues);
share issue costs of $910,000, of which $244,000 were
non-cash costs (2017: $121,000, with no non-cash share
costs).
Corporate
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 consolidated entity and its Shareholders.
The consolidated entity will look to raise additional funding
either through farm-in/sale and/or capital injection to
advance its projects. In the event that the consolidated entity
cannot meet its share of work program commitments, permits
may need to be surrendered.
Significant Changes In The State
Of Affairs
On 17 August 2017, the Company issued 20,940,032 shares
to employees for no consideration upon the exercise of
employee performance rights.
On 23 August 2017, the Company issued 178,733,229 shares,
at an issue price of $0.01 (1 cent) per share, and 59,577,757
free options to institutional and sophisticated investors
pursuant to a share placement (Placement). Proceeds from
the placement were approximately $1.8 million before costs
of the issue.
On 13 September 2017, the Company issued 152,185,161 shares,
at an issue price of $0.01 (1 cent) per share, and 50,728,685
free options pursuant to a partially underwritten entitlement
offer (Entitlement Offer). Proceeds from the issue were
approximately $1.5 million before costs of the issue.
On 15 September 2017, the Company issued 189,814,839
shares, at an issue price of $0.01 (1 cent) per share, and
63,271,613 free options to underwriters pursuant to a partially
underwritten entitlement offer. Proceeds from the issue were
The funds from the August 2017 and September 2017
Placement and Entitlement Offer were raised to fund
preparatory activities for a planned drilling program of up to
two wells in Cuba anticipated for mid-2018, and to provide
additional working capital.
On 4 December 2017 the Company announced that it had
reached a commercial settlement with Petro Australis Pty Ltd
(Petro Australis) whereby Petro Australis had relinquished
all claims to its back-in right to the Cuba Block 9 Production
Sharing Contract (Block 9 PSC) in consideration for Melbana
making a $A50,000 cash payment and issuing 20.8 million
shares in the Company to Petro Australis. As a result of
the settlement, it was confirmed that the Company held an
unencumbered 100% interest in the Block 9 PSC.
On 21 December 2017, the Company issued 150,000,000
shares, at an issue price of $0.014 (1.4 cents) per share,
to institutional and sophisticated investors pursuant to
a share placement. Proceeds from this placement were
approximately $2.1 million before costs of the issue.
On 12 January 2018 Mr Peter Stickland resigned as Managing
Director with immediate effect and agreed to continue as a
non-executive director of the Company. Mr Robert Zammit
was appointed Chief Executive Officer effective 12 January
2018.
In April 2018 the Company executed a loan facility agreement
for $US2.5 million with TransAsia Private Capital Limited. The
loan has an interest rate of 15% per annum and its maturity
date is 10 January 2019.
There were no other significant changes in the state of affairs
of the consolidated entity during the financial year.
Matters subsequent to the end of
the financial year
On 6 July 2018 the Company issued 5,333,333 shares to Non-
executive Director Mr Peter Stickland following the exercise
by Mr Stickland of performance rights. The performance
rights had an exercise price of $Nil.
On 7 August 2018 the Company announced that Independent
Expert McDaniel & Associates (Canada) has completed its
assessment of the Prospective Resources of Cuba Block 9 and
Beehive in Australia resulting in Block 9 best estimate Oil In
Place increasing by 24% to more than 15.7 billion barrels of oil
and recoverable Prospective Resources increasing by 13% to
718 million barrels of oil.
On 13 August 2018 the Company issued 3,141,226 shares upon
the exercise of Unlisted options with an exercise price of
$0.02. The share issue included 2,004,507 shares issued to
Directors of the Company.
Director’s Report (continued) 7
Melbana Annual Report 2018 Matters subsequent to the end of
the financial year (cont)
On 13 August 2018 the Company issued 80,000,000
unquoted options to Mr Andrew Purcell, the Chairman of the
Company. Each option is an option to acquire a fully paid
ordinary share in the Company. The options were issued to Mr
Purcell as compensation for providing a personal guarantee
over the Loan Agreement with TransAsia Private Capital
Limited (“TransAsia”) pursuant to Resolution 3, approved by
shareholders at the Company’s General Meeting held on 9
August 2018. Details of the loan are set out in Note 17. The
options will vest seven months after the repayment of the
loan and will expire twelve months after the vesting date. The
loan is due for repayment by 10 January 2019, but the actual
repayment date is not currently known and, therefore, the
options’ vesting date and expiry date are also not currently
known. The options have an exercise price of $0.022 (2.2
cents) each.
On 14 August 2018, the Company announced that acquisition
of the Beehive 3D Seismic Survey has been completed safely
and without incident and that during the planning of the
Beehive 3D Seismic Survey, a new lead was identified (Egret)
and the survey area was extended by ~100km2 (~16%) to
provide coverage over the portion of Egret that is partially
within the boundary of WA-488-P. The extension of the survey
area was within the approved scope and operational envelope
of the Beehive 3D Seismic Survey. The Beehive 3D Seismic
Survey, including the extension over the Egret lead, was fully
funded by Santos and Total.
On 21 August 2018 the Company issued 4,761,215 shares upon
the exercise of Unlisted options with an exercise price of $0.02.
On 22 August 2018 the Company announced that it had
divested its interest in the AC/P50 and AC/P51 permits
(“Permits”) via a sale of the holding subsidiary Vulcan
Exploration Pty Ltd to joint venture partner Rouge Rock.
The commercial agreements provide for the Company to
retain exposure to the upside outcomes of a subsequent
sale or farmout of either of the Permits by Rouge Rock. The
agreements are structured such that if Rouge Rock enters
into an arrangement in future for cash or shares, Melbana
earns 10% of the cash benefit or shares received by Rouge
Rock. If Rouge Rock enters into an arrangement in future
that provides for a full or partial carry on a well, Melbana
has the right to back-in for a 5% interest after the well is
drilled, effectively providing a carried interest during the
drilling process and avoiding costs associated with the drilling
process.
On 28 August 2018 the Company issued 1,247,988 shares upon
the exercise of Unlisted options with an exercise price of $0.02.
On 6 September 2018 the Company issued 827,228 shares upon
the exercise of Unlisted options with an exercise price of $0.02.
On 21 September 2018, the Company announced that it has
accepted commitments to raise up to $3.5 million (before
costs) through a placement to qualified institutional and
sophisticated investors of 194 million fully paid ordinary
shares at $0.018 per share plus an accompanying one unlisted
share option per three shares placed exercisable at $0.03 per
option expiring 18 months from grant date. The Placement is
scheduled to settle on Thursday 27 September 2018 with new
shares expected to be allotted on Friday 28 September 2018.
No other matter or circumstance has arisen since 30 June
2018 that has significantly affected, or may significantly
affect the consolidated entity’s operations, the results of
those operations, or the consolidated entity’s state of affairs
in future financial years.
Likely Developments And
Expected Results of Operations
During FY2019, Melbana is advancing preparations for drilling
up to 2 wells in Block 9 Cuba, progressing its assessment
and seeking to finalise a long term aggreement for the
Santa Cruz Incremental Oil Recovery opportunity. Non-core
assets will be considered for divestment on a case by case
basis and the Company will also continue with farmout/
partial sale opportunities and pursue attractive new venture
opportunities.
Environmental regulation
The consolidated entity is not subject to any significant
environmental regulation under Australian Commonwealth or
State law.
8 Director’s Report (continued)
Melbana Annual Report 2018 Information on directors
Name:
Title:
Qualifications:
Experience and expertise:
Other current directorships:
Former directorships (last 3 years): Metgasco Limited (ASX:MEL)
Special responsibilities:
Interests in shares:
Interests in options:
Name:
Title:
Qualifications:
Experience and expertise:
Other current directorships:
Former directorships (last 3 years): None
Special responsibilities
Interests in shares:
Interests in options:
Name:
Title:
Qualifications:
Experience and expertise:
Andrew Purcell
Non-Executive Chairman
B Eng; MBA
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.
AJ Lucas Group Limited (ASX: AJL)
Chairman of the Remuneration and Nomination Committee and a member of the Audit and
Risk Committee
54,032,297 fully paid ordinary shares
80,000,000 unlisted options, vesting approximately 11 August 2019, expiring approximately
11 August 2020; exercise price 2.2 cents (options issued as consideration for Mr Purcell
providing personal guarantee to an entity making a loan to the Company.)
Peter Stickland
Non-Executive Director (was Managing Director until resigned from that position on 12
January 2018 and continues as Non-Executive Director)
BSc, Hons (Geology), GDipAppFin (Finsia), GAICD
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 was a member of the Board of Australian
Petroleum Production and Exploration Association Limited (APPEA) for nine years.
Entek Energy Limited (ASX: ETE)
Member of the Remuneration & Nomination Committee and a member of the Audit and
Risk Committee
16,597,279 fully paid ordinary shares
3,000,000 unlisted employee options
Michael Sandy
Non-Executive Director
BSC Hons (Geology), MAICD
Michael Sandy is a geologist with over 40 years’ experience in the resources industry –
mostly focused on oil and gas. Michael has had a varied career with early roles in minerals
exploration and research and with the PNG Government. In the early 1990s he was
Technical Manager of Oil Search Limited. He was involved in establishing Novus Petroleum
Ltd and preparing that company for its $186m IPO in April 1995 and then held various
senior management roles with that company. He co-managed the defence effort in 2004
when Novus was taken over by Medco Energi.
For the last 14 years, Michael, through his consultancy Sandy Associates P/L, has been
involved in various resources projects and start-ups. He was previously a non-executive
director of Hot Rock Ltd (ASX: HRL), Caspian Oil and Gas (ASX: CIG) and Pan Pacific
Petroleum (ASX:PPP), as well as those mentioned below.
MEC Resources Limited (Chairman) (ASX:MMR)
Other current directorships:
Former directorships (last 3 years): Tap Oil Limited (ASX: TAP), Burleson Energy Limited (ASX: BUR)
Special responsibilities:
Chairman of the Audit & Risk Committee and a member of the Remuneration and
Nomination Committee.
4,341,113 fully paid ordinary shares
Interests in shares:
Director’s Report (continued) 9
Melbana Annual Report 2018
‘Other current directorships’ quoted above are current
directorships for listed entities only and excludes directorships
of all other types of entities, unless otherwise stated.
‘Former directorships (last 3 years)’ quoted above are
directorships held in the last 3 years for listed entities only
and excludes directorships of all other types of entities, unless
otherwise stated.
•
•
•
•
•
•
Principles used to determine the nature and amount of
remuneration
Details of remuneration
Service agreements
Share-based compensation
Additional information
Additional disclosures relating to key management personnel
Company secretary
Ms Melanie Leydin, CA (appointed Chief Financial Officer and
Company Secretary 21 June 2018)
Ms Leydin has 25 years’ experience in the accounting
profession including 13 years in the Corporate Secretarial
professions and is a company secretary and finance officer
for a number of entities listed on the Australian Securities
Exchange. She is a Chartered Accountant and a Registered
Company Auditor. Since February 2000, she has been the
principal of Leydin Freyer, specialising in outsourced company
secretarial and financial duties.
Principles used to determine the nature
and amount of remuneration
The objective of the consolidated entity’s executive reward
framework is to ensure reward for performance is competitive
and appropriate for the results delivered. The framework
aligns executive reward with the achievement of strategic
objectives and the creation of value for shareholders, and
it is considered to conform to the market best practice for
the delivery of reward. The Board of Directors (‘the Board’)
ensures that executive reward satisfies the following key
criteria for good reward governance practices:
Mr Colin Naylor (resigned as Company Secretary 21 June 2018)
Mr 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.
•
•
•
competitiveness and reasonableness
acceptability to shareholders
performance linkage / alignment of executive
compensation
•
transparency
Meetings of directors
The number of meetings of the Company’s Board of Directors
(‘the Board’) held during the year ended 30 June 2018, and
the number of meetings attended by each director were:
Nomination
and
Remuneration
Committee
Audit & Risk
Committee
Full Board
Attended Held Attended Held Attended Held
Andrew Purcell
Michael Sandy
Peter Stickland
10
10
10
10
10
10
-
-
-
-
-
-
1
1
-
1
1
-
Held: represents the number of meetings held during the time
the director held office.
Remuneration report (audited)
The remuneration report details the key management
personnel remuneration arrangements for the consolidated
entity, in accordance with the requirements of the
Corporations Act 2001 and its Regulations.
Key management personnel are those persons having
authority and responsibility for planning, directing and
controlling the activities of the entity, directly or indirectly,
including all directors.
The remuneration report is set out under the following main
headings:
The Remuneration and Nomination Committee, which
comprises non-executive directors, is responsible for
determining and reviewing remuneration arrangements for its
directors and executives. The performance of the consolidated
entity depends on the quality of its directors and executives.
The remuneration philosophy is to attract, motivate and retain
high performance and high quality personnel.
The Remuneration and Nomination Committee has structured an
executive remuneration framework that is market competitive
and complementary to the reward strategy of the consolidated
entity.
The reward framework is designed to align executive reward
to shareholders’ interests. The Board have considered that it
should seek to enhance shareholders’ interests by:
•
•
having profit as a core component of plan design
focusing on sustained growth in shareholder wealth,
consisting of dividends and growth in share price, and
delivering constant or increasing return on assets as well as
focusing the executive on key non-financial drivers of value
•
attracting and retaining high calibre executives
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;
10 Director’s Report (continued)
Melbana Annual Report 2018 •
•
Where appropriate, provide executive rewards linked to
shareholder value; and
Encourage non-executive directors to hold shares in the
Company.
In accordance with best practice corporate governance, the
structure of non-executive director and executive director
remuneration is separate.
Non-executive directors remuneration
Fees and payments to non-executive directors reflect the
demands and responsibilities of their role. Non-executive
directors’ fees and payments are reviewed annually by the
Remuneration and Nomination Committee. The Remuneration
and Nomination Committee receives independent market
data when undertaking this annual review process. The
Remuneration and Nomination may, from time to time,
receive advice from independent remuneration consultants
to ensure non-executive directors’ fees and payments are
appropriate and in line with the market. The chairman’s
fees are determined independently to the fees of other non-
executive directors based on comparative roles in the external
market. The chairman is not present at any discussions
relating to the determination of his own remuneration. Non-
executive directors do not receive share options or other
incentives as part of their remuneration package.
ASX listing rules require the aggregate non-executive
directors’ remuneration be determined periodically by a
general meeting. The most recent determination was at the
Annual General Meeting held on 18 November 2010, where
the shareholders approved a maximum annual aggregate
remuneration of $500,000.
Executive remuneration
The consolidated entity aims to reward executives based
on their position and responsibility, with a level and mix of
remuneration which has both fixed and variable components.
The executive remuneration and reward framework has the
following components:
•
•
base pay and non-monetary benefits
share-based payments
The combination of these comprises the executive’s total
remuneration.
Fixed remuneration, consisting of base salary, superannuation
and non-monetary benefits, are reviewed annually by the
Nomination and Remuneration Committee based on individual
and business unit performance, the overall performance
of the consolidated entity and comparable market
remunerations.
Executives may receive their fixed remuneration in the form
of cash or other fringe benefits (for example motor vehicle
benefits) where it does not create any additional costs to
the consolidated entity and provides additional value to the
executive.
The long-term incentives (‘LTI’) comprise share-based
payments. Options and/or performance rights are awarded to
executives and vest conditional upon the recipient meeting
service objectives. The Board reviewed the long-term equity-
linked performance incentives specifically for executives
during the year ended 30 June 2018 and certain executives
were issued LTIs in consideration for accepting a reduction in
their cash salaries.
Consolidated entity performance and link to
remuneration
Remuneration for certain executives granted options or
performance rights is linked to the performance of the
consolidated entity, as an improvement in the Company’s
share price will correspondingly increase the benefits to the
executive. This will align the interests of the executive and the
shareholders. Refer to the section ‘’Additional information”
below for details of the earnings and share price movements
for the last five years.
Voting and comments made at the Company’s 2017
Annual General Meeting (‘AGM’)
At the 23 November 2017 AGM, 95.9% of the votes received
supported the adoption of the remuneration report for the
year ended 30 June 2017. The Company did not receive any
specific feedback at the AGM regarding its remuneration
practices.
Details of remuneration
Amounts of remuneration
Details of the remuneration of key management personnel of
the consolidated entity are set out in the following tables.
The key management personnel of the consolidated entity
consisted of the following directors of Melbana Energy
Limited:
•
•
•
Andrew Purcell – Non-Executive Chairman (appointed Non-
executive Director 30 July 2015) (appointed Chairman 25
November 2015)
Michael Sandy – Non-Executive Director (appointed 30
July 2015)
Peter Stickland – Non-Executive Director (appointed Chief
Executive Officer - 19 December 2014, and Managing
Director - 30 January 2015, resigned as Managing Director
and Chief Executive Office on 12 January 2018, Appointed
Non-Executive Director from 12 January 2018)
And the following persons:
•
•
Robert Zammit - Chief Executive Officer (appointed
Chief Executive Officer 12 January 2018; previously held
the role of Executive Manager, Commercial & Business
Development)
Colin Naylor - Chief Financial Officer and Company
Secretary (until 21 June 2018)
Director’s Report (continued) 11
Melbana Annual Report 2018 Short term benefits
Post
employment
benefits
Long term
benefits
Share-based
payments
2018
Salary
and fees
$
Cash
bonus
$
Non-
monetary
$
Super-
annuation
$
Long service
leave
$
Equity
settled
$
Termination
benefit
$
Total
$
100,000
75,000
35,081
268,440
330,677
-
-
-
-
-
Non-executive directors
Andrew Purcell
100,000
Michael Sandy
Peter Stickland *
75,000
35,081
Executive Directors:
Peter Stickland *
252,918
Other Key Management Personnel:
Robert Zammit**
294,029
Colin Naylor***
282,428
1,039,456
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
20,049
(22,095)
17,568
20,049
20,049
60,147
(7,582)
4,988
(24,689)
24,181
20,931
251,922
580,318
62,680
251,922
1,389,516
*
Mr Stickland resigned as Managing Director on 12 January 2018 and continued to act Non-executive director thereafter. The disclosures above reflect his
remuneration during his tenure as Non-executive director and Executive director, respectively.
** Mr Zammit was appointed Chief Executive Officer on 12 January 2018. He previously held the role of Executive Manager, Commercial & Business Development.
*** Mr Naylor ceased employment with the Company during July 2018, as agreed with the Company prior to 30 June 2018. A termination benefit was paid in
accordance with contractual obligations and was recorded as an expense in the Company’s accounts in the year ended 30 June 2018 and, accordingly, is
disclosed in the remuneration details for that financial year.
2017
Non-executive directors
Andrew Purcell
Michael Sandy
Executive Directors:
Peter Stickland
Other Key Management Personnel:
Robert Zammit
Colin Naylor
Short term benefits
Post
employment
benefits
Long term
benefits
Share-based
payments
Salary
and fees
$
Cash
bonus
$
Non-
monetary
$
Super-
annuation
$
Long service
leave
$
Equity-
settled
$
Total
$
81,250
56,250
341,500
239,185
214,906
933,091
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
81,250
56,250
19,616
9,839
33,333
404,288
19,616
32,150
71,382
6,280
7,856
23,975
40,615
305,696
32,932
287,844
106,880
1,135,328
12 Director’s Report (continued)
Melbana Annual Report 2018 The proportion of remuneration linked to performance and the fixed proportion are as follows:
Fixed remuneration
At risk - STI
At risk - LTI
2018
2017
2018
2017
2018
2017
Name
Non-executive directors
Andrew Purcell
Michael Sandy
Peter Stickland *
Executive Directors:
Peter Stickland *
100%
100%
100%
100%
100%
-
94%
92%
Other Key Management Personnel:
Robert Zammit
Colin Naylor
93%
96%
87%
89%
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
8%
7%
4%
-
-
-
8%
13%
11%
*
Mr Stickland resigned as Managing Director on 12 January 2018 and continued to act Non-executive director thereafter. The disclosures above reflect his
remuneration during his tenure as Non-executive director and Executive director, respectively.
Service agreements
Remuneration and other terms of employment for key management personnel are formalised in service agreements. Details of
these agreements are as follows:
Name:
Title:
Robert Zammit
Chief Executive Officer
Agreement commenced:
12 January 2018
Term of agreement:
No fixed term
Details:
Total remuneration package of $300,000 per annum (inclusive of superannuation).
He is entitled to an Incentive Bonus of up to 33.3% of the base salary at the discretion of the board
at the end of each year dependent on the success in meeting key deliverables.
He was granted 2,584,949 performance rights on 10 May 2018; these will vest on 30 April 2019,
provided he completes continuous service for the Company until that time. These performance
rights were issued on consideration for Mr Zammit accepting a reduction in his cash salary.
The executive can terminate the agreement with 3 months’ notice. The Company can terminate the
agreement with 3 months’ notice, or payment in lieu thereof. In addition, if the Company terminates
the executive’s employment, the Company must pay a lump sum amount calculated as 16.67 weeks’
remuneration, plus 4 weeks’ remuneration for each completed year of continuous service from
1 February 2016 plus 2 weeks’ remuneration for each part-completed year of continuous service.
Key management personnel have no entitlement to termination payments in the event of removal for misconduct.
Share-based compensation
Issue of shares
Details of shares issued to directors and other key management personnel as part of compensation during the year ended 30
June 2018 are set out below:
Name
Robert Zammit*
Colin Naylor*
Date
18 August 2017
18 August 2017
Shares
5,939,612
4,610,519
Issue price
-
-
$
-
-
*
Shares were issued upon the conversion of performance rights. The performance rights were granted in February 2016.
Director’s Report (continued) 13
Melbana Annual Report 2018
Options
The terms and conditions of each grant of options over ordinary shares affecting remuneration of directors and other key
management personnel in this financial year or future reporting years are as follows:
Number of options
Vesting date and
Fair value per option
Name
granted
Grant date
exercisable date
Expiry date
Exercise price
at grant date
Robert Zammit
1,000,000
28 March 2017
28 March 2018
27 September 2020
Robert Zammit
1,000,000
28 March 2017
28 March 2019
27 September 2020
Colin Naylor
Colin Naylor
1,000,000
28 March 2017
28 March 2018
27 September 2020
1,000,000
28 March 2017
28 March 2019
27 September 2020
Peter Stickland
1,500,000
23 November 2017
28 March 2018
27 September 2020
Peter Stickland
1,500,000
23 November 2017
28 March 2019
27 September 2020
$0.032
$0.032
$0.032
$0.032
$0.032
$0.032
$0.016
$0.016
$0.016
$0.016
$0.008
$0.008
Options granted carry no dividend or voting rights.
The number of options over ordinary shares granted to and vested by directors and other key management personnel as part of
compensation during the year ended 30 June 2018 are set out below:
Name
Robert Zammit
Colin Naylor
Peter Stickland
Number
of options
granted
during the
year 2018
Number
of options
granted
during the
year 2017
Number
of options
vested
during the
year 2018
Number
of options
vested
during the
year 2017
-
-
2,000,000
1,000,000
2,000,000
1,000,000
3,000,000
-
1,500,000
-
-
-
Values of options over ordinary shares granted, exercised and lapsed for directors and other key management personnel as part
of compensation during the year ended 30 June 2018 are set out below:
Name
Robert Zammit
Colin Naylor
Peter Stickland
Performance rights
Value of
options
granted
during the
year 2018
$
Value of
options
exercised
during the
year 2017
$
Value of
options
lapsed
during the
year 2018
$
Remuneration
consisting of
options for
the year
%
-
-
24,442
16,745
16,745
12,221
-
-
-
6%
4%
6%
The terms and conditions of each grant of performance rights over ordinary shares affecting remuneration of directors and
other key management personnel in this financial year or future reporting years are as follows:
Name
Robert Zammit
Number
of rights
granted
Grant date
Vesting date and
exercisable date
Expiry date
Fair value per
right at grant
date
2,584,949
10 May 2018
30 April 2019
30 April 2021
$0.009
Performance rights granted carry no dividend or voting rights.
14 Director’s Report (continued)
Melbana Annual Report 2018
The number of performance rights over ordinary shares granted to and vested by directors and other key management
personnel as part of compensation during the year ended 30 June 2018 are set out below:
Name
Peter Stickland
Robert Zammit
Colin Naylor
Number
of rights
granted
during the
year
2018
-
2,584,949
-
Number of
rights
granted
during the
year
2017
Number of
rights
vested
during the
year
2018
-
-
-
-
-
-
Number of
rights
vested
during the
year
2017
5,333,333
5,939,612
4,610,519
Values of performance rights over ordinary shares granted, vested and lapsed for directors and other key management
personnel as part of compensation during the year ended 30 June 2018 are set out below:
Name
Robert Zammit
Additional information
Value of
rights
granted
during the
year
$
Value of
rights
vested
during the
year
$
Value of
rights lapsed
during the
year
$
Remuneration
consisting of
rights for the
year
%
23,265
-
-
1%
The earnings of the consolidated entity for the five years to 30 June 2018 are summarised below:
Profit/(loss) after income tax
2018
$’000
(6,100)
2017
$’000
(2,121)
2016
$’000
2015
$’000
2014
$’000
(10,406)
(10,042)
(135,910)
The factors that are considered to affect total shareholders return (‘TSR’) are summarised below:
Share price at financial year end ($)
Basic earnings per share (cents per share)
2018
0.012
(0.41)
2017
0.017
(0.26)
2016
0.015
(1.31)
2015
0.015
(1.34)
2014
0.030
(21.12)
Additional disclosures relating to key management personnel
Shareholding
The number of shares in the Company held during the financial year by each director and other members of key management
personnel of the consolidated entity, including their personally related parties, is set out below:
Name
Ordinary shares
Andrew Purcell
Michael Sandy*
Peter Stickland**
Robert Zammit
Colin Naylor
Balance at
the start of
the year
Received upon
exercise of
performance
rights
Additions
Disposals/
other
2,388,198
1,716,667
5,870,367
1,848,889
981,667
12,805,788
-
-
-
5,939,612
4,610,519
10,550,131
51,644,099
1,968,334
4,045,184
-
-
57,657,617
-
-
-
-
-
-
Balance at
the end of
the year
54,032,297
3,685,001
9,915,551
7,788,501
5,592,186
81,013,536
* After the end of the financial year, Mr Sandy acquired a further 656,112 shares on the exercise of unquoted options.
**
After the end of the financial year, Mr Stickland acquired a further 1,348,395 shares on the exercise of unquoted options and an additional 5,333,333 shares on
the conversion of performance rights.
Director’s Report (continued) 15
Melbana Annual Report 2018 Option holding
The number of options over ordinary shares in the Company held during the financial year by each director and other members
of key management personnel of the consolidated entity, including their personally related parties, is set out below:
Name
Options over ordinary shares
Andrew Purcell
Michael Sandy
Peter Stickland
Robert Zammit
Colin Naylor
Options over ordinary shares
Peter Stickland
Robert Zammit
Colin Naylor
Performance rights holding
Balance at
the start of
the year
Received
as part of
renumeration
Acquired in
connection with
shareholders’
share
entitlement
offer
Expired/
forfeited/
other
Balance at
the end of
the year
-
-
-
-
-
17,048,033
656,112
3,000,000
1,348,395
2,000,000
2,000,000
-
-
-
-
4,000,000
3,000,000
19,052,540
-
-
-
-
-
-
Vested and
exercisable
Vested and
unexercisable
1,500,000
1,000,000
1,000,000
3,500,000
-
-
-
-
17,048,033
656,112
4,348,395
2,000,000
2,000,000
26,052,540
Balance at
the end of
the year
1,500,000
1,000,000
1,000,000
3,500,000
The number of performance rights over ordinary shares in the Company held during the financial year by each director and
other members of key management personnel of the consolidated entity, including their personally related parties, is set out
below:
Name
Performance rights over ordinary shares
Peter Stickland
Robert Zammit
Colin Naylor
Performance rights over ordinary shares
Peter Stickland
Balance at
the start of
the year
Received
as part of
renumeration
Converted
Expired/
forfeited/
other
Balance at
the end of
the year
5,333,333
-
-
5,939,612
2,584,949
(5,939,612)
4,610,519
-
(4,610,519)
15,883,464
2,584,949
(10,550,131)
-
-
-
-
Vested and
exercisable
Vested and
unexercisable
5,333,333
2,584,949
-
7,918,282
Balance at
the end of
the year
5,333,333
5,333,333
-
-
5,333,333
5,333,333
This concludes the remuneration report, which has been audited.
16 Director’s Report (continued)
Melbana Annual Report 2018
Shares under option
Unissued ordinary shares of Melbana Energy Limited under option at the date of this report are as follows:
Grant date
03 November 2016
28 March 2017
23 November 2017
23 November 2017
13 August 2018
Expiry date
Exercise price $
Number under option
03 November 2019
27 September 2020
23 November 2020
27 September 2020
Still to be confirmed*
$0.065
$0.032
$0.018
$0.032
$0.022
4,000,000
8,250,000
20,000,000
3,000,000
80,000,000
115,250,000
*
Expiry date of these options is not known at date of this report. The options, which were issued to director Mr Andrew Purcell as compensation for his providing
a personal guarantee to support a loan made to the Company, will vest seven months after the repayment of that loan and will expire twelve months after the
vesting date. The loan is due for repayment by 10 January 2019, but the actual repayment date is not currently known and, therefore, the options’ vesting date
and expiry date are also not currently known.
No person entitled to exercise the options had or has any right by virtue of the option to participate in any share issue of the
Company or of any other body corporate.
Shares under performance rights
Unissued ordinary shares of Melbana Energy Limited under performance rights at the date of this report are as follows:
Grant date
10 May 2018
Expiry date
30 April 2021
Exercise price $
Number under rights
-
6,763,158
No person entitled to exercise the performance rights had or has any right by virtue of the performance right to participate in
any share issue of the Company or of any other body corporate.
Shares issued on the exercise of options
The following ordinary shares of Melbana Energy Limited were issued during the year ended 30 June 2018 and up to the date of
this report on the exercise of options granted:
Date options granted
23 August 2017
Exercise price $
Number of shares issued
$0.02
9,977,657
Shares issued on the exercise of performance rights
The following ordinary shares of Melbana Energy Limited were issued during the year ended 30 June 2018 and up to the date of
this report on the exercise of performance rights granted:
Date options granted
07 December 2015
04 February 2016
Exercise price $
Number of shares issued
-
-
5,333,333
20,940,032
26,273,365
Indemnity and insurance of officers
The Company has indemnified the directors and executives of the Company for costs incurred, in their capacity as a director or
executive, for which they may be held personally liable, except where there is a lack of good faith.
During the financial year, the Company paid a premium in respect of a contract to insure the directors and executives of the
Company against a liability to the extent permitted by the Corporations Act 2001. The contract of insurance prohibits disclosure
of the nature of the liability and the amount of the premium.
Director’s Report (continued) 17
Melbana Annual Report 2018 Indemnity and insurance of auditor
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.
During the financial year, the Company has not paid a premium in respect of a contract to insure the auditor of the Company or
any related entity.
Proceedings on behalf of the Company
No person has applied to the Court under section 237 of the Corporations Act 2001 for leave to bring proceedings on behalf of
the Company, or to intervene in any proceedings to which the Company is a party for the purpose of taking responsibility on
behalf of the Company for all or part of those proceedings.
Non-audit services
Details of the amounts paid or payable to the auditor for non-audit services provided during the financial year by the auditor
are outlined in note 26 to the financial statements.
The directors are satisfied that the provision of non-audit services during the financial year, by the auditor (or by another
person or firm on the auditor’s behalf), is compatible with the general standard of independence for auditors imposed by the
Corporations Act 2001.
The directors are of the opinion that the services as disclosed in note 26 to the financial statements do not compromise the
external auditor’s independence requirements of the Corporations Act 2001 for the following reasons:
•
•
all non-audit services have been reviewed and approved to ensure that they do not impact the integrity and objectivity of
the auditor; and
none of the services undermine the general principles relating to auditor independence as set out in APES 110 Code of Ethics
for Professional Accountants issued by the Accounting Professional and Ethical Standards Board, including reviewing or
auditing the auditor’s own work, acting in a management or decision-making capacity for the Company, acting as advocate
for the Company or jointly sharing economic risks and rewards.
Officers of the Company who are former partners of Ernst & Young
There are no officers of the Company who are former partners of Ernst & Young.
Rounding of amounts
The Company is of a kind referred to in Corporations Instrument 2016/191, issued by the Australian Securities and Investments
Commission, relating to ‘rounding-off’. Amounts in this report have been rounded off in accordance with that Corporations
Instrument to the nearest thousand dollars, or in certain cases, the nearest dollar.
Auditor’s independence declaration
A copy of the auditor’s independence declaration as required under section 307C of the Corporations Act 2001 is set out
immediately after this directors’ report.
Auditor
Ernst & Young continues in office in accordance with section 327 of the Corporations Act 2001.
18 Director’s Report (continued)
Melbana Annual Report 2018 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 information that relates to Contingent Resources and Prospective Resources for Melbana is based on, and fairly
represents, information and supporting documentation compiled by Mr. Dean Johnstone, who is an employee of the
company and has more than 34 years of relevant experience. Mr. Johnstone is a member of the American Association
of Petroleum Geologists. Mr. Johnstone consents to the publication of the resource assessments contained herein. The
Contingent Resource and Prospective Resource estimates are consistent with the definitions of hydrocarbon resources that
appear in the Listing Rules.
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.
This report is made in accordance with a resolution of directors, pursuant to section 298(2)(a) of the Corporations Act 2001.
On behalf of the directors
___________________________
Andrew Purcell
Chairman
26 September 2018
Director’s Report (continued) 19
Melbana Annual Report 2018
Auditor’s Independence Declaration
20 Auditor’s Independence Declaration
Melbana Annual Report 2018 Melbana Energy Limited
Statement of profit or loss and other comprehensive income
For the year ended 30 June 2018
Interest income
Other income
Expenses
Settlement costs
Exploration expenditure written off/down
Administration
Net foreign exchange loss
Finance costs
Loss before income tax expense
Income tax expense
Loss after income tax expense for the year attributable to the owners of
Melbana Energy Limited
Other comprehensive income
Items that may be reclassified subsequently to profit or loss
Foreign currency translation
Other comprehensive income for the year, net of tax
Total comprehensive income for the year attributable to the owners of
Melbana Energy Limited
Basic earnings per share
Diluted earnings per share
Consolidated
Note
2018
$'000
2017
$'000
5
6
7
15
8
9
22
20
392
(300)
(3,691)
(2,353)
-
(96)
71
-
-
(455)
(1,672)
(33)
-
(6,028)
(2,089)
(72)
(32)
(6,100)
(2,121)
1
1
1
1
(6,099)
(2,120)
Cents
Cents
35
35
(0.41)
(0.41)
(0.26)
(0.26)
The above statement of profit or loss and other comprehensive income should be read in conjunction with the
accompanying notes
Financial Report 21
Melbana Annual Report 2018
Melbana Energy Limited
Statement of financial position
As at 30 June 2018
Assets
Current assets
Cash and cash equivalents
Other receivables
Other financial assets
Total current assets
Non-current assets
Plant and equipment
Exploration and evaluation
Total non-current assets
Total assets
Liabilities
Current liabilities
Trade and other payables
Borrowings
Provisions
Total current liabilities
Non-current liabilities
Provisions
Total non-current liabilities
Total liabilities
Net assets
Equity
Issued capital
Reserves
Accumulated losses
Total equity
Consolidated
Note
2018
$'000
2017
$'000
10
11
12
13
15
16
17
18
19
3,047
63
3,073
6,183
102
4,470
4,572
10,755
454
3,099
453
4,006
54
54
4,060
6,695
2,605
23
11
2,639
73
3,817
3,890
6,529
312
-
312
624
126
126
750
5,779
20
21
22
272,790
495
(266,590)
265,935
334
(260,490)
6,695
5,779
The above statement of financial position should be read in conjunction with the accompanying notes
22 Financial Report (continued)
Melbana Annual Report 2018
Melbana Energy Limited
Statement of changes in equity
For the year ended 30 June 2018
Consolidated
Issued
capital
$'000
Share-based
payment
reserve
$'000
Foreign
currency
reserve
$'000
Accumulated
losses
$'000
Total equity
$'000
Balance at 1 July 2016
263,823
448
17
(258,684)
5,604
Loss after income tax expense for the year
Other comprehensive income for the year, net
of tax
Total comprehensive income for the year
Transactions with owners in their capacity as
owners:
Contributions of equity (note 20)
Share issue costs (note 20)
Share-based payments
Expiry of unvested options
Balance at 30 June 2017
-
-
-
2,233
(121)
-
-
265,935
-
-
-
-
-
183
(315)
316
-
1
1
-
-
-
-
(2,121)
(2,121)
-
1
(2,121)
(2,120)
-
-
-
315
2,233
(121)
183
-
18
(260,490)
5,779
Consolidated
Issued
capital
$'000
Share-based
payment
reserve
$'000
Foreign
currency
reserve
$'000
Accumulated
losses
$'000
Total equity
$'000
Balance at 1 July 2017
265,935
316
18
(260,490)
5,779
Loss after income tax expense for the year
Other comprehensive income for the year, net
of tax
Total comprehensive income for the year
Transactions with owners in their capacity as
owners:
Contributions of equity (note 20)
Share issue costs (note 20)
Share issue as part settlement of Block 9
commercial dispute
Share- based payments (performance rights)
Share- based payments (options)
Exercise of performance rights
-
-
-
7,307
(910)
250
-
-
208
Balance at 30 June 2018
272,790
-
-
-
-
-
-
124
244
(208)
476
-
1
1
-
-
-
-
-
-
(6,100)
(6,100)
-
1
(6,100)
(6,099)
-
-
-
-
-
-
7,307
(910)
250
124
244
-
19
(266,590)
6,695
The above statement of changes in equity should be read in conjunction with the accompanying notes
Financial Report (continued) 23
Melbana Annual Report 2018
Melbana Energy Limited
Statement of cash flows
For the year ended 30 June 2018
Cash flows from operating activities
Payments to suppliers and employees (inclusive of GST)
Interest received
Research and development tax incentive received
Consolidated
Note
2018
$'000
2017
$'000
(2,708)
24
357
(1,360)
74
-
Net cash used in operating activities
33
(2,327)
(1,286)
Cash flows from investing activities
Payments for property, plant and equipment
Payments for exploration and evaluation
Payments for security deposits for bank guarantee
Proceeds from disposal of property, plant and equipment
Net cash used in investing activities
Cash flows from financing activities
Proceeds from issue of shares
Proceeds from borrowings
Share issue transaction costs
Net cash from financing activities
13
15
20
Net increase/(decrease) in cash and cash equivalents
Cash and cash equivalents at the beginning of the financial year
Effects of exchange rate changes on cash and cash equivalents
Cash and cash equivalents at the end of the financial year
10
(50)
(3,716)
(2,937)
-
(16)
(2,290)
-
13
(6,703)
(2,293)
7,307
2,848
(737)
9,418
388
2,605
54
3,047
2,233
-
(152)
2,081
(1,498)
4,136
(33)
2,605
The above statement of cash flows should be read in conjunction with the accompanying notes
24 Financial Report (continued)
Melbana Annual Report 2018
Melbana Energy Limited
Notes to the financial statements
30 June 2018
Note 1. General information
The financial statements cover Melbana Energy Limited as a consolidated entity consisting of Melbana Energy Limited and
the entities it controlled at the end of, or during, the year. The financial statements are presented in Australian dollars, which
is Melbana Energy Limited's functional and presentation currency.
Melbana Energy Limited is a listed public company limited by shares, incorporated and domiciled in Australia. Its registered
office and principal place of business are disclosed on the Corporate Summary accompanying these financial statements.
A description of the nature of the consolidated entity's operations and its principal activities are included in the directors'
report, which is not part of the financial statements.
The financial statements were authorised for issue, in accordance with a resolution of directors, on 26 September 2018.
Note 2. Significant accounting policies
The principal accounting policies adopted in the preparation of the financial statements are set out below. These policies
have been consistently applied to all the years presented, unless otherwise stated.
New or amended Accounting Standards and Interpretations adopted
The consolidated entity has adopted all of the new or amended Accounting Standards and Interpretations issued by the
Australian Accounting Standards Board ('AASB') that are mandatory for the current reporting period.
AASB 2016-2 Amendments to Australian Accounting Standards – Disclosure Initiative: Amendments to AASB 107
The amendments to AASB 107 Statement of Cash Flows are part of the IASB’s Disclosure Initiative and help users of financial
statements better understand changes in an entity’s debt. The amendments require entities to provide disclosures about
changes in their liabilities arising from financing activities, including both changes arising from cash flows and non-cash
changes (such as foreign exchange gains or losses).
The requirements of this amendment are disclosed in Note 34.
Going concern
The financial report has been prepared on the going concern basis, which assumes continuity of normal business activities
and the realisation of assets and the settlement of liabilities in the ordinary course of business.
At 30 June 2018, the consolidated entity:
●
●
had, for the financial year ending on that date, incurred a net loss after tax of $6,100,000 (2017: $2,121,000);
had, for the financial year ending on that date, net cash outflows from operating and investing activities of $9,030,000
($6,093,000 excluding security deposit payment) (2017: $3,579,000);
had cash and cash equivalents on hand of $3,047,000 (2017: $2,605,000); and
had a net working capital position of $2,177,000 (2017: $2,015,000).
had current borrowings of $3,099,000 (2017: nil).
●
●
●
At the date of this report, the Group is contractually committed to the commencement of drilling an exploration well within
Cuba Block 9 (Melbana 100%) (further details are located in Note 27)
To meet these funding requirements and its ongoing operational debts as and when they fall due the Group will need to
take appropriate steps, including a combination of:
●
Raising capital by one of or 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;
● Meeting its obligations by either farm-out or partial sale of the Group’s exploration interests;
●
Subject to negotiation and approval, 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.
●
Financial Report (continued) 25
Melbana Annual Report 2018
Melbana Energy Limited
Notes to the financial statements
30 June 2018
Note 2. Significant accounting policies (continued)
This 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. In the event these steps
do not provide sufficient funds to meet the consolidated entity's exploration commitments, the interest in some or all of the
consolidated entity's tenements may be affected. 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 consolidated
entity 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 consolidated entity’s ability to effectively fund exploration
activities and operating expenditures, the Directors believe that the consolidated entity 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.
Basis of preparation
These general purpose financial statements have been prepared in accordance with Australian Accounting Standards and
Interpretations issued by the AASB and the Corporations Act 2001, as appropriate for for-profit oriented entities. These
financial statements also comply with International Financial Reporting Standards as issued by the International Accounting
Standards Board ('IASB').
Historical cost convention
The financial statements have been prepared under the historical cost convention.
Critical accounting estimates
The preparation of the financial statements requires the use of certain critical accounting estimates. It also requires
management to exercise its judgement in the process of applying the consolidated entity's accounting policies. The areas
involving a higher degree of judgement or complexity, or areas where assumptions and estimates are significant to the
financial statements, are disclosed in note 3.
Principles of consolidation
The consolidated financial statements incorporate the assets and liabilities of all subsidiaries of Melbana Energy Limited
('Company' or 'parent entity') as at 30 June 2018 and the results of all subsidiaries for the year then ended. Melbana Energy
Limited and its subsidiaries together are referred to in these financial statements as the 'consolidated entity'.
Subsidiaries are all those entities over which the consolidated entity has control. The consolidated entity controls an entity
when the consolidated entity is exposed to, or has rights to, variable returns from its involvement with the entity and has the
ability to affect those returns through its power to direct the activities of the entity. Specifically, the consolidated entity controls
an investee if and only if the consolidated entity 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 consolidated entity has less than a majority of the voting or similar rights of an investee, the consolidated entity
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 consolidated entity’s voting rights and potential voting rights.
Subsidiaries are fully consolidated from the date on which control is transferred to the consolidated entity. They are de-
consolidated from the date that control ceases.
Intercompany transactions, balances and unrealised gains on transactions between entities in the consolidated entity are
eliminated. Unrealised losses are also eliminated unless the transaction provides evidence of the impairment of the asset
transferred. Accounting policies of subsidiaries have been changed where necessary to ensure consistency with the policies
adopted by the consolidated entity.
26 Financial Report (continued)
Melbana Annual Report 2018
Melbana Energy Limited
Notes to the financial statements
30 June 2018
Note 2. Significant accounting policies (continued)
The acquisition of subsidiaries is accounted for using the acquisition method of accounting. A change in ownership interest,
without the loss of control, is accounted for as an equity transaction, where the difference between the consideration
transferred and the book value of the share of the non-controlling interest acquired is recognised directly in equity attributable
to the parent.
Where the consolidated entity loses control over a subsidiary, it derecognises the assets including goodwill, liabilities and
non-controlling interest in the subsidiary together with any cumulative translation differences recognised in equity. The
consolidated entity recognises the fair value of the consideration received and the fair value of any investment retained
together with any gain or loss in profit or loss.
Foreign currency translation
The consolidated entity's consolidated financial statements are presented in Australian dollars, which is also the parent
company’s functional currency. Each entity in the consolidated entity determines its own functional currency and items
included in the financial statements of each entity are measured using that functional currency.
Foreign currency transactions
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.
Foreign operations
The assets and liabilities of foreign operations are translated into Australian dollars using the exchange rates at the reporting
date. The revenues and expenses of foreign operations are translated into Australian dollars using the average exchange
rates, which approximate the rates at the dates of the transactions, for the period. All resulting foreign exchange differences
are recognised in other comprehensive income through the foreign currency reserve in equity.
The foreign currency reserve is recognised in profit or loss when the foreign operation or net investment is disposed of.
Revenue recognition
Revenue is recognised when it is probable that the economic benefit will flow to the consolidated entity and the revenue can
be reliably measured. Revenue is measured at the fair value of the consideration received or receivable.
Interest
Interest income is recognised as interest accrues using the effective interest method. This is a method of calculating the
amortised cost of a financial asset and allocating the interest income over the relevant period using the effective interest rate,
which is the rate that exactly discounts estimated future cash receipts through the expected life of the financial asset to the
net carrying amount of the financial asset.
Other income
Other income is recognised when it is received or when the right to receive payment is established.
Grant Income
Research and Development tax credits are recognised in accordance with AASB 120: Accounting for Government Grants
and Government Assistance. The Research and development tax credit is recognised when there is reasonable assurance
that the grant will be received and all conditions have been complied with. The Grant has been recognised as other income
within the period.
Income tax
The income tax expense or benefit for the period is the tax payable on that period's taxable income based on the applicable
income tax rate for each jurisdiction, adjusted by the changes in deferred tax assets and liabilities attributable to temporary
differences, unused tax losses and the adjustment recognised for prior periods, where applicable.
Financial Report (continued) 27
Melbana Annual Report 2018
Melbana Energy Limited
Notes to the financial statements
30 June 2018
Note 2. Significant accounting policies (continued)
Deferred tax assets and liabilities are recognised for temporary differences at the tax rates expected to be applied when the
assets are recovered or liabilities are settled, based on those tax rates that are enacted or substantively enacted, except for:
● When the deferred income tax asset or liability arises from the initial recognition of goodwill or an asset or liability in a
transaction that is not a business combination and that, at the time of the transaction, affects neither the accounting nor
taxable profits; or
● When the taxable temporary difference is associated with interests in subsidiaries, associates or joint ventures, and the
timing of the reversal can be controlled and it is probable that the temporary difference will not reverse in the foreseeable
future.
Deferred tax assets are recognised for deductible temporary differences and unused tax losses only if it is probable that
future taxable amounts will be available to utilise those temporary differences and losses.
The carrying amount of recognised and unrecognised deferred tax assets are reviewed at each reporting date. Deferred tax
assets recognised are reduced to the extent that it is no longer probable that future taxable profits will be available for the
carrying amount to be recovered. Previously unrecognised deferred tax assets are recognised to the extent that it is probable
that there are future taxable profits available to recover the asset.
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 liabilities are offset only where there is a legally enforceable right to offset current tax assets against
current tax liabilities and deferred tax assets against deferred tax liabilities; and they relate to the same taxable authority on
either the same taxable entity or different taxable entities which intend to settle simultaneously.
Income taxes relating to items recognised directly in equity are recognised in equity and not in the consolidated statement of
comprehensive income.
Current and non-current classification
Assets and liabilities are presented in the statement of financial position based on current and non-current classification.
An asset is classified as current when: it is either expected to be realised or intended to be sold or consumed in the
consolidated entity's normal operating cycle; it is held primarily for the purpose of trading; it is expected to be realised within
12 months after the reporting period; or the asset is cash or cash equivalent unless restricted from being exchanged or used
to settle a liability for at least 12 months after the reporting period. All other assets are classified as non-current.
A liability is classified as current when: it is either expected to be settled in the consolidated entity's normal operating cycle;
it is held primarily for the purpose of trading; it is due to be settled within 12 months after the reporting period; or there is no
unconditional right to defer the settlement of the liability for at least 12 months after the reporting period. All other liabilities
are classified as non-current.
Deferred tax assets and liabilities are always classified as non-current.
Cash and cash equivalents
Cash and cash equivalents includes cash at bank and on hand, deposits held at call with financial institutions, other short-
term, highly liquid investments with original maturities of three months or less that are readily convertible to known amounts
of cash and which are subject to an insignificant risk of changes in value.
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.
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.
28 Financial Report (continued)
Melbana Annual Report 2018
Melbana Energy Limited
Notes to the financial statements
30 June 2018
Note 2. Significant accounting policies (continued)
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.
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 an
arrangement, which exists only when decisions about the relevant activities require unanimous consent of the parties sharing
control.
The consolidated entity 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.
Plant and equipment
Plant and equipment is stated at historical cost less accumulated depreciation and impairment. Historical cost includes
expenditure that is directly attributable to the acquisition of the items.
Depreciation is calculated on a straight-line basis to write off the net cost of each item of plant and equipment over their
expected useful lives which range from 3 to 15 years.
The residual values, useful lives and depreciation methods are reviewed, and adjusted if appropriate, at each reporting date.
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.
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.
Exploration and evaluation assets
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) 29
Melbana Annual Report 2018
Melbana Energy Limited
Notes to the financial statements
30 June 2018
Note 2. Significant accounting policies (continued)
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 consolidated entity will not record any expenditure made by the farminee on its behalf;
The consolidated entity 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 consolidated entity as gain on disposal.
Trade and other payables
These amounts represent liabilities for goods and services provided to the consolidated entity prior to the end of the financial
year and which are unpaid. Due to their short-term nature they are measured at amortised cost and are not discounted. The
amounts are unsecured and are usually paid within 30 days of recognition.
Borrowings
Loans and borrowings are initially recognised at the fair value of the consideration received, net of transaction costs. They
are subsequently measured at amortised cost using the effective interest method.
Where there is an unconditional right to defer settlement of the liability for at least 12 months after the reporting date, the
loans or borrowings are classified as non-current.
Employee benefits
Short-term employee benefits
Liabilities for wages and salaries, including non-monetary benefits, annual leave and long service leave expected to be
settled wholly within 12 months of the reporting date are recognised in provisions in respect of employees’ service up to the
reporting date and are measured at the amounts expected to be paid when the liabilities are settled.
Other long-term employee benefits
The liability for annual leave and long service leave not expected to be settled within 12 months of the reporting date are
measured at 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 on high quality corporate bonds with terms to maturity and currency that match, as closely as possible, the
estimated future cash outflows.
Share-based payments
Equity-settled share-based compensation benefits are provided to employees.
Equity-settled transactions are awards of shares, or options over shares, that are provided to employees in exchange for the
rendering of services.
The cost of equity-settled transactions are measured at fair value on grant date. Fair value is independently determined using
either the Binomial or Black-Scholes option pricing model that takes into account the exercise price, the term of the option,
the impact of dilution, the share price at grant date and expected price volatility of the underlying share, the expected dividend
yield and the risk free interest rate for the term of the option, together with non-vesting conditions that do not determine
whether the consolidated entity receives the services that entitle the employees to receive payment. No account is taken of
any other vesting conditions.
The cost of equity-settled transactions are recognised as an expense with a corresponding increase in equity over the vesting
period. The cumulative charge to profit or loss is calculated based on the grant date fair value of the award, the best estimate
of the number of awards that are likely to vest and the expired portion of the vesting period. The amount recognised in profit
or loss for the period is the cumulative amount calculated at each reporting date less amounts already recognised in previous
periods.
30 Financial Report (continued)
Melbana Annual Report 2018
Melbana Energy Limited
Notes to the financial statements
30 June 2018
Note 2. Significant accounting policies (continued)
If equity-settled awards are modified, as a minimum an expense is recognised as if the modification has not been made. An
additional expense is recognised, over the remaining vesting period, for any modification that increases the total fair value
of the share-based compensation benefit as at the date of modification.
If the non-vesting condition is within the control of the consolidated entity or employee, the failure to satisfy the condition is
treated as a cancellation. If the condition is not within the control of the consolidated entity or employee and is not satisfied
during the vesting period, any remaining expense for the award is recognised over the remaining vesting period, unless the
award is forfeited.
If equity-settled awards are cancelled, it is treated as if it has vested on the date of cancellation, and any remaining expense
is recognised immediately. If a new replacement award is substituted for the cancelled award, the cancelled and new award
is treated as if they were a modification.
Fair value measurement
When an asset or liability, financial or non-financial, is measured at fair value for recognition or disclosure purposes, the fair
value is based on the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction
between market participants at the measurement date; and assumes that the transaction will take place either: in the principal
market; or in the absence of a principal market, in the most advantageous market.
Fair value is measured using the assumptions that market participants would use when pricing the asset or liability, assuming
they act in their economic best interests. For non-financial assets, the fair value measurement is based on its highest and
best use. Valuation techniques that are appropriate in the circumstances and for which sufficient data are available to
measure fair value, are used, maximising the use of relevant observable inputs and minimising the use of unobservable
inputs.
Issued capital
Ordinary shares are classified as equity and paid up capital is recognised at the fair value of the consideration received
by the consolidated entity.
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.
Earnings per share
Basic earnings per share
Basic earnings per share is calculated by dividing the profit attributable to the owners of Melbana Energy Limited, excluding
any costs of servicing equity other than ordinary shares, by the weighted average number of ordinary shares outstanding
during the financial year, adjusted for bonus elements in ordinary shares issued during the financial year.
Diluted earnings per share
Diluted earnings per share adjusts the figures used in the determination of basic earnings per share to take into account the
after income tax effect of interest and other financing costs associated with dilutive potential ordinary shares and the weighted
average number of shares assumed to have been issued for no consideration in relation to dilutive potential ordinary shares.
Goods and Services Tax ('GST') and other similar taxes
Revenues, expenses and assets are recognised net of the amount of associated GST, unless the GST incurred is not
recoverable from the tax authority. In this case it is recognised as part of the cost of the acquisition of the asset or as part of
the expense.
Receivables and payables are stated inclusive of the amount of GST receivable or payable. The net amount of GST
recoverable from, or payable to, the tax authority is included in other receivables or other payables in the statement of
financial position.
Cash flows are presented on a gross basis. The GST components of cash flows arising from investing or financing activities
which are recoverable from, or payable to the tax authority, are presented as operating cash flows.
Commitments and contingencies are disclosed net of the amount of GST recoverable from, or payable to, the tax authority.
Financial Report (continued) 31
Melbana Annual Report 2018
Melbana Energy Limited
Notes to the financial statements
30 June 2018
Note 2. Significant accounting policies (continued)
Rounding of amounts
The Company is of a kind referred to in Corporations Instrument 2016/191, issued by the Australian Securities and
Investments Commission, relating to 'rounding-off'. Amounts in this report have been rounded off in accordance with that
Corporations Instrument to the nearest thousand dollars, or in certain cases, the nearest dollar.
New Accounting Standards and Interpretations not yet mandatory or early adopted
Australian Accounting Standards and Interpretations that have recently been issued or amended but are not yet mandatory,
have not been early adopted by the consolidated entity for the annual reporting period ended 30 June 2018. The consolidated
entity's assessment of the impact of these new or amended Accounting Standards and Interpretations, most relevant to the
consolidated entity, are set out below.
AASB 9 Financial Instruments
AASB 9 replaces AASB 139 Financial Instruments: Recognition and Measurement.
This standard modifies the classification and measurement of financial assets. It includes:
• A single, principle-based approach for the classification of financial assets, which is driven by cash flow characteristics and
the business model in which an asset is held
• A new expected credit loss impairment model requiring expected losses to be recognised when financial assets are first
recognised;
• A modification of hedge accounting to align the accounting treatment with risk management practices of an entity.
The consolidated entity will adopt this standard from its application date of 1 July 2018. Initial assessment of existing financial
instruments by the consolidated entity has commenced, however we have not fully determined the impact on recognition and
measurement of financial instruments as our analysis is still ongoing.
AASB 15 Revenue from Contracts with Customers
The core principle of AASB 15 is that an entity recognises revenue related to the transfer of promised goods or services
when control of the goods or services passes to the customer. The amount of revenue recognised should reflect the
consideration to which the entity expects to be entitled in exchange for those goods or services.
Assessment of the new standard has focused on identifying any components of the consolidated entity's contractual
arrangements to which AASB 15 would be applicable and understanding the nature of those arrangements, in particular,
whether there are any key terms and conditions that may impact revenue recognition. At present, as the consolidated entity
has no relevant sales contracts in place, there are no significant matters identified which would impact revenue recognition.
The consolidated entity will adopt this standard from its application date of 1 July 2018. Initial assessment of existing
contracts by the consolidated entity has commenced, however we have not fully determined the revenue recognition impact
as our analysis is still ongoing.
AASB 16 Leases
AASB 16 sets out a comprehensive model for the identification of lease arrangements and their treatment in the financial
statements of both lessees and lessors. AASB 16 applies a control model for the identification of leases, distinguishing
between leases and service contracts on the basis of whether there is an identified asset controlled by the customer. The
standard requires lessees to account for leases under an on-balance sheet model with the distinction between operating and
finance leases being removed. Lessors continue to classify leases and account for them as operating or finance leases
The consolidated entity will adopt this standard from its application date of 1 July 2019. The consolidated entity is yet to
finalise its assessment and has not quantified any impact.
32 Financial Report (continued)
Melbana Annual Report 2018
Melbana Energy Limited
Notes to the financial statements
30 June 2018
Note 3. Critical accounting judgements, estimates and assumptions
The preparation of the financial statements requires management to make judgements, estimates and assumptions that
affect the reported amounts in the financial statements. Management continually evaluates its judgements and estimates in
relation to assets, liabilities, contingent liabilities, revenue and expenses. Management bases its judgements, estimates and
assumptions on historical experience and on other various factors, including expectations of future events, management
believes to be reasonable under the circumstances. The resulting accounting judgements and estimates will seldom equal
the related actual results. The judgements, estimates and assumptions that have a significant risk of causing a material
adjustment to the carrying amounts of assets and liabilities (refer to the respective notes) within the next financial year are
discussed below.
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 2018, the carried-forward exploration and evaluation costs associated with
PEP51153, AC/P50 and AC/P51 were assessed to exceed their future recoverable values. Accordingly, PEP51153 was
written down to $100,000, while AC/P50 and AC/P51 were written down to nil, reflecting the estimated future economic
benefits expected to be derived from the sale of these areas of interest.
In the judgement of the Directors, at 30 June 2018 exploration activities in Cuba Block 9 has 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 Cuba Block 9 is 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.
Share-based payment transactions
The consolidated entity measures the cost of equity-settled transactions with employees by reference to the fair value of the
equity instruments at the date at which they are granted. The fair value is determined by using either the Binomial or Black-
Scholes model taking into account the terms and conditions upon which the instruments were granted. The accounting
estimates and assumptions relating to equity-settled share-based payments would have no impact on the carrying amounts
of assets and liabilities within the next annual reporting period but may impact profit or loss and equity.
Fair value measurement hierarchy
The consolidated entity is required to classify all assets and liabilities, measured at fair value, using a three level hierarchy,
based on the lowest level of input that is significant to the entire fair value measurement, being: Level 1: Quoted prices
(unadjusted) in active markets for identical assets or liabilities that the entity can access at the measurement date; Level 2:
Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly;
and Level 3: Unobservable inputs for the asset or liability. Considerable judgement is required to determine what is significant
to fair value and therefore which category the asset or liability is placed in can be subjective.
The fair value of assets and liabilities classified as level 3 is determined by the use of valuation models. These include
discounted cash flow analysis or the use of observable inputs that require significant adjustments based on unobservable
inputs.
Financial Report (continued) 33
Melbana Annual Report 2018
Melbana Energy Limited
Notes to the financial statements
30 June 2018
Note 4. Operating segments
The consolidated entity operates in the oil and gas 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 15.
Note 5. Interest income
Interest
Note 6. Other income
Net foreign exchange gain
Government grants
Other income
Consolidated
2018
$'000
2017
$'000
20
71
Consolidated
2018
$'000
2017
$'000
35
357
392
-
-
-
Government grant income relates to Research and Development tax incentive received during the financial year.
Note 7. Settlement costs
Settlement costs
Consolidated
2018
$'000
2017
$'000
300
-
The settlement costs relate to a commercial settlement reached during the financial year ended 30 June 2018 between the
Company and Petro Australis Limited (Petro Australis) in relation to the cancellation of Petro Australis’ back in right to Block
9 PS. As a result of the settlement, Petro Australis relinquished all claims to its back-in right to the Block 9 PSC in
consideration for Melbana paying A$50,000 in cash and issuing 20.8 million Melbana shares to Petro Australis. As a result
of the settlement, Melbana holds an unencumbered 100% interest in Block 9 PSC. The total of the settlement costs reflect
the value of the consideration provided by the Company to Petro Australis.
34 Financial Report (continued)
Melbana Annual Report 2018
Melbana Energy Limited
Notes to the financial statements
30 June 2018
Note 8. Net Administration expenses
Consultants fees and expenses
Employee benefits expense excluding superannuation and share-based payments
Defined contribution superannuation expense
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
Note 9. Income tax expense
Income tax expense
Deferred tax
Aggregate income tax expense
Numerical reconciliation of income tax expense and tax at the statutory rate
Loss before income tax expense
Tax at the statutory tax rate of 27.5% (2017: 30%)
Tax effect amounts which are not deductible/(taxable) in calculating taxable income:
Share-based payments
Write off/impairment of overseas exploration expenses
Difference in overseas tax rates
Non-deductible expenses
Current year tax losses not recognised
Income tax expense
Consolidated
2018
$'000
2017
$'000
498
1,737
121
123
315
59
106
149
85
105
21
-
3,319
(966)
160
1,779
116
183
274
53
126
152
99
107
25
57
3,131
(1,459)
2,353
1,672
Consolidated
2018
$'000
2017
$'000
72
72
32
32
(6,028)
(2,089)
(1,658)
(627)
34
736
-
1
(887)
959
72
55
-
69
1
(502)
534
32
Financial Report (continued) 35
Melbana Annual Report 2018
Melbana Energy Limited
Notes to the financial statements
30 June 2018
Note 10. Current assets - cash and cash equivalents
Cash at bank
Cash on deposit
Note 11. Current assets - other receivables
Other receivables
BAS receivable
Note 12. Current assets - other financial assets
Prepayments
Security deposits
Consolidated
2018
$'000
2017
$'000
3,003
44
3,047
591
2,014
2,605
Consolidated
2018
$'000
2017
$'000
33
30
63
Consolidated
2018
$'000
2017
$'000
-
3,073
3,073
13
10
23
11
-
11
The security deposit has been made as security for a bank guarantee provided on the Company's behalf for the second
exploration sub-period in accordance with the Block 9 Production Sharing Contract.
Note 13. Non-current assets - plant and equipment
Office equipment - at cost
Less: Accumulated depreciation
Consolidated
2018
$'000
2017
$'000
646
(544)
102
596
(523)
73
36 Financial Report (continued)
Melbana Annual Report 2018
Melbana Energy Limited
Notes to the financial statements
30 June 2018
Note 13. Non-current assets - plant and equipment (continued)
Reconciliations
Reconciliations of the written down values at the beginning and end of the current and previous financial year are set out
below:
Consolidated
Balance at 1 July 2016
Additions
Disposals
Depreciation expense
Balance at 30 June 2017
Additions
Depreciation expense
Balance at 30 June 2018
Note 14. Non-current assets - intangibles
Software - at cost
Less: Accumulated amortisation
Note 15. Non-current assets - exploration and evaluation
Exploration and evaluation Block 9 Cuba - at cost
Exploration and evaluation PEP51153 - at cost
Exploration and evaluation AC/P50 & AC/P51 - at cost
Plant &
equipment
$'000
106
16
(24)
(25)
73
50
(21)
102
Consolidated
2018
$'000
2017
$'000
373
(373)
373
(373)
-
-
Consolidated
2018
$'000
2017
$'000
4,370
3,096
100
-
88
633
4,470
3,817
Financial Report (continued) 37
Melbana Annual Report 2018
Melbana Energy Limited
Notes to the financial statements
30 June 2018
Note 15. Non-current assets - exploration and evaluation (continued)
Reconciliations
Reconciliations of the written down values at the beginning and end of the current and previous financial year are set out
below:
Consolidated
Balance at 1 July 2016
Expenditure during the year
Costs expensed
Balance at 30 June 2017
Expenditure during the year
Exchange differences
Write off/impairment of assets
Costs expensed
Balance at 30 June 2018
Block 9 Cuba
$'000
AC/P50 &
AC/P51
$'000
PEP 51153
$'000
Other
$'000
Total
$'000
1,132
1,964
-
3,096
1,274
-
-
-
4,370
633
-
-
633
-
-
(633)
-
-
88
-
88
2,476
(34)
(2,430)
-
-
455
(455)
-
628
-
-
(628)
1,765
2,507
(455)
3,817
4,378
(34)
(3,063)
(628)
-
100
-
4,470
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 2018 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.
Following review by the Directors and management, the book value of PEP 51153 was written down to $100,000 as at 30
June 2018, reflecting the estimated future economic benefits expected to be derived from this area of interest.
Following review by the Directors and management, the book value of AC/P50 and AC/P51 was written down to nil as at 30
June 2018, as it was not expected that any material future economic benefits would be derived from these areas of interest.
Note 16. Current liabilities - trade and other payables
Trade payables
Other payables
Refer to note 24 for further information on financial instruments.
Consolidated
2018
$'000
2017
$'000
406
48
454
105
207
312
38 Financial Report (continued)
Melbana Annual Report 2018
Melbana Energy Limited
Notes to the financial statements
30 June 2018
Note 17. Current liabilities - borrowings
Short term loan payable
Refer to note 24 for further information on financial instruments.
Consolidated
2018
$'000
2017
$'000
3,099
-
During the financial year ended 30 June 2018, the Company obtained a US$2.5 million loan facility from TransAsia Private
Capital Limited, in its capacity as Manager, for and on behalf of Asian Trade Finance Fund 2, a sub-fund of TA Asian Multi-
Finance Fund. The key terms of the loan are:
1. Annualised interest rate of 15%;
2. Maturity Date of the loan is January 10, 2019;
3. Secured by first ranking security over the Company's cash security deposit used to support the Bank Guarantee in relation
to Block 9 Cuba;
4. A personal guarantee from Melbana’s Chairman, Mr Purcell, in favour of the lender. Refer also Note 28 Related party
transactions.
Note 18. Current liabilities - provisions
Annual leave
Long service leave
Employee benefits
Consolidated
2018
$'000
2017
$'000
89
112
252
453
150
162
-
312
Employee benefits
The provision represents the obligation to pay a termination payment in relation to an executive who ceased employment
after the end of the financial year, where notification of that cessation of employment was given by the Company before the
end of that financial year.
Note 19. Non-current liabilities - provisions
Long service leave
Note 20. Equity - issued capital
Consolidated
2018
$'000
2017
$'000
54
126
Ordinary shares - fully paid
1,665,750,480 953,243,886
272,790
265,935
Consolidated
2018
Shares
2017
Shares
2018
$'000
2017
$'000
Financial Report (continued) 39
Melbana Annual Report 2018
Melbana Energy Limited
Notes to the financial statements
30 June 2018
Note 20. Equity - issued capital (continued)
Movements in ordinary share capital
Details
Date
Shares
Issue price
$'000
Balance
Share placement
Share purchase plan issue
Share issue costs (net of tax)
1 July 2016
26 August 2016
23 September 2016
Balance
Share issue upon exercise of performance rights
Share placement
Entitlement offer
Shares issued to underwriters
Share issue as part settlement of commercial dispute 6 December 2017
Share placement
Share issue costs (net of tax)
30 June 2017
18 August 2017
23 August 2017
13 September 2017
15 September 2017
21 December 2017
891,204,960
46,900,000
15,138,926
-
$0.036
$0.036
-
953,243,886
20,940,032
178,733,229
152,185,161
189,814,839
20,833,333
150,000,000
-
$0.01
$0.01
$0.01
-
$0.014
- -
Balance
30 June 2018
1,665,750,480
263,823
1,688
545
(121)
265,935
208
1,787
1,522
1,898
250
2,100
(910)
272,790
Ordinary shares
Ordinary shares entitle the holder to participate in dividends and the proceeds on the winding up of the Company in proportion
to the number of and amounts paid on the shares held. The fully paid ordinary shares have no par value and the Company
does not have a limited amount of authorised capital.
On a show of hands every member present at a meeting in person or by proxy shall have one vote and upon a poll each
share shall have one vote.
Share issue costs
Incremental costs directly attributable to the issue of new shares or options, including transactional costs and fees payable
to relevant service providers, are shown in equity as a deduction, net of tax, from the proceeds.
Share buy-back
There is no current on-market share buy-back.
Capital risk management
The consolidated entity's objectives when managing capital is to safeguard its ability to continue as a going concern, so that
it can provide returns for shareholders and benefits for other stakeholders and to maintain an optimum capital structure to
reduce the cost of capital.
Capital is regarded as total equity, as recognised in the statement of financial position, plus net debt. Net debt is calculated
as total borrowings less cash and cash equivalents.
In order to maintain or adjust the capital structure, the consolidated entity may adjust the amount of dividends paid to
shareholders, return capital to shareholders, issue new shares or sell assets to reduce debt.
The consolidated entity would look to raise capital when an opportunity to invest in a business or company was seen as
value adding relative to the current Company's share price at the time of the investment. The consolidated entity is not
actively pursuing additional investments in the short term as it continues to integrate and grow its existing businesses in
order to maximise synergies.
The consolidated entity is subject to certain financing arrangements covenants and meeting these is given priority in all
capital risk management decisions. There have been no events of default on the financing arrangements during the financial
year.
The capital risk management policy remains unchanged from the 2017 Annual Report.
40 Financial Report (continued)
Melbana Annual Report 2018
Melbana Energy Limited
Notes to the financial statements
30 June 2018
Note 21. Equity - reserves
Foreign currency reserve
Share-based payments reserve
Consolidated
2018
$'000
2017
$'000
19
476
495
17
317
334
Foreign currency reserve
The reserve is used to recognise exchange differences arising from the translation of the financial statements of foreign
operations to Australian dollars. It is also used to recognise gains and losses on hedges of the net investments in foreign
operations.
Share-based payments reserve
The reserve is used to recognise the value of equity benefits provided to employees and directors as part of their
remuneration, and other parties as part of their compensation for services.
Movements in reserves
Movements in each class of reserve during the current and previous financial year are set out below:
Consolidated
Balance at 1 July 2016
Foreign currency translation
Cost of share based payments
Options expired
Balance at 30 June 2017
Foreign currency translation
Cost of share based payments
Exercise of performance rights
Issues of options to service providers
Balance at 30 June 2018
Note 22. Equity - accumulated losses
Accumulated losses at the beginning of the financial year
Loss after income tax expense for the year
Transfer from share based payment reserve
Accumulated losses at the end of the financial year
Note 23. Equity - dividends
Share based
payments
reserve
$'000
Foreign
currency
reserve
$'000
Total
$'000
448
-
183
(315)
316
-
124
(208)
244
476
17
1
-
-
18
1
-
-
-
19
465
1
183
(315)
334
1
124
(208)
244
495
Consolidated
2018
$'000
2017
$'000
(260,490)
(6,100)
-
(258,684)
(2,121)
315
(266,590)
(260,490)
There were no dividends paid, recommended or declared during the current or previous financial year.
Financial Report (continued) 41
Melbana Annual Report 2018
Melbana Energy Limited
Notes to the financial statements
30 June 2018
Note 24. Financial instruments
Financial risk management objectives
The consolidated entity's principal financial instruments comprise cash and short term deposits, the main purpose of which
is to finance the consolidated entity’s operations. The consolidated entity has various other financial assets and liabilities
such as trade receivables and trade payables which arise directly from its operations and, as at 30 June 2018, a significant
US dollar term deposit and US dollar short term loan payable. The main risks arising from the consolidated entity’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, overall, they are not significant in terms of the consolidated entity’s current activities.
The consolidated entity may also enter into derivative financial instruments, principally forward currency contracts. The
purpose is to manage the currency risks arising from the consolidated entity’s operations. Speculative trading in derivatives
is not permitted. There are no derivatives outstanding at 30 June 2018 (2017: $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.
Market risk
Foreign currency risk
Generally, the consolidated entity's main exposure to exchange rate risk relates primarily to trade payables and cash
denominated in US dollars, arising in relation to its activities in Cuba. Where a payable is significant, US dollars may be
purchased on incurring the liability or commitment.
In addition to the above, as at 30 June 2018, the consolidated entity had in place a significant US dollar term deposit, and a
significant US dollar short term loan liability.
The consolidated entity’s exposure to unhedged financial assets and liabilities at balance date is as follows:
USD financial assets
Cash on hand and at bank
Term deposit
USD financial liabilities
Trade creditors
Short term loan payable
NZD financial assets
Cash on hand and at bank
EUR financial assets
Cash on hand and at bank
42 Financial Report (continued)
Consolidated
2018
$'000
2017
$'000
1,896
3,073
4,969
554
-
554
Consolidated
2018
$'000
2017
$'000
-
-
-
-
66
3,099
3,165
Consolidated
2018
$'000
2017
$'000
63
Consolidated
2018
$'000
2017
$'000
1
-
Melbana Annual Report 2018
Melbana Energy Limited
Notes to the financial statements
30 June 2018
Note 24. Financial instruments (continued)
EUR financial liabilities
Trade creditors
Consolidated
2018
$'000
2017
$'000
32
-
The consolidated entity had net liabilities denominated in foreign currencies of $1,836,000 (assets of $5,033,000 less
liabilities of $3,197,000) as at 30 June 2018 (2017: $554,000 (assets of $554,000 less liabilities of $Nil)). Based on this
exposure, had the Australian dollars strengthened by 5%/weakened by 5% (2017: strengthened by 10%/weakened by 10%)
against these foreign currencies with all other variables held constant, the consolidated entity's profit before tax for the year
would have been $88,000 higher/$96,000 lower (2017: $66,000 lower/$80,000 higher) and equity would have been $88,000
higher/$96,000 lower (2017: $66,000 lower/$80,000 higher). The percentage change is the expected overall volatility of the
significant currencies, which is based on management's assessment of reasonable possible fluctuations taking into
consideration movements over the last 12 months each year and the spot rate at each reporting date.
An analysis of the exchange rate sensitivity by foreign currency is as follows:
AUD strengthened
Consolidated - 2018
% change
Effect on
profit before
tax
$'000
Effect on
equity
$'000
AUD weakened
Effect on
profit before
tax
$'000
Effect on
equity
$'000
% change
US dollars net financial
assets/liabilities
NZ dollars net financial
assets/liabilities
Euros net financial
assets/liabilities
5%
5%
5%
86
3
(1)
88
86
3
(1)
88
5%
5%
5%
(95)
(3)
2
(96)
(95)
(3)
2
(96)
Consolidated - 2017
% change
Effect on
profit before
tax
$'000
Effect on
equity
$'000
AUD strengthened
AUD weakened
Effect on
% change
profit before
tax
$'000
Effect on
equity
$'000
US dollars net financial
assets/liabilities
10%
(66)
(66)
10%
80
80
Price risk
The consolidated entity is not exposed to any significant price risk.
Interest rate risk
The consolidated entity's exposure to the risk of changes in market interest rates relates primarily to the consolidated entity’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 consolidated entity, 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 consolidated entity.
Additionally, as at 30 June 2018 the consolidated entity had in place a significant short term loan payable. This loan has a
fixed interest rate of 15% per annum. The consolidated entity also had in place a significant term deposit with a fixed interest
rate of 0.72% per annum.
Financial Report (continued) 43
Melbana Annual Report 2018
Melbana Energy Limited
Notes to the financial statements
30 June 2018
Note 24. Financial instruments (continued)
Credit risk
The consolidated entity trades only with recognised, creditworthy third parties. Receivable balances are monitored on an
ongoing basis with the results being that the consolidated entity's exposure to bad debts is not significant.
Credit risk arises from the financial assets of the consolidated entity, which comprise cash and cash equivalents and trade
and other receivables. The consolidated entity'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.
Liquidity risk
Vigilant liquidity risk management requires the consolidated entity to maintain sufficient liquid assets (mainly cash and cash
equivalents) and available borrowing facilities to be able to pay debts as and when they become due and payable.
The consolidated entity manages liquidity risk by maintaining adequate cash reserves and available borrowing facilities by
continuously monitoring actual and forecast cash flows and matching the maturity profiles of financial assets and liabilities.
Remaining contractual maturities
The following tables detail the consolidated entity's remaining contractual maturity for its financial instrument liabilities. The
tables have been drawn up based on the undiscounted cash flows of financial liabilities based on the earliest date on which
the financial liabilities are required to be paid. The tables include both interest and principal cash flows disclosed as remaining
contractual maturities and therefore these totals may differ from their carrying amount in the statement of financial position.
Consolidated - 2018
Non-derivatives
Non-interest bearing
Trade and other payables
Employee provision
Interest-bearing - fixed rate
Other loans
Total non-derivatives
Consolidated - 2017
Non-derivatives
Non-interest bearing
Trade and other payables
Total non-derivatives
Weighted
average
interest rate 1 year or less
%
$'000
Between 1
and 2 years
$'000
Between 2
and 5 years Over 5 years
$'000
$'000
Remaining
contractual
maturities
$'000
-
-
15.00%
454
252
3,358
4,064
-
-
-
-
-
-
-
-
-
-
-
-
454
252
3,358
4,064
Weighted
average
interest rate 1 year or less
%
$'000
Between 1
and 2 years
$'000
Between 2
and 5 years Over 5 years
$'000
$'000
Remaining
contractual
maturities
$'000
-
312
312
-
-
-
-
-
-
312
312
The cash flows in the maturity analysis above are not expected to occur significantly earlier than contractually disclosed
above.
Fair value of financial instruments
Unless otherwise stated, the carrying amounts of financial instruments reflect their fair value.
44 Financial Report (continued)
Melbana Annual Report 2018
Melbana Energy Limited
Notes to the financial statements
30 June 2018
Note 25. Key management personnel disclosures
Compensation
The aggregate compensation to directors and other members of key management personnel of the consolidated entity is set
out below:
Short-term employee benefits
Post-employment benefits
Long-term benefits
Termination benefits
Share-based payments
Note 26. Remuneration of auditors
Consolidated
2018
$
2017
$
1,039,456
60,147
(24,689)
251,922
62,680
933,091
71,382
23,975
-
106,880
1,389,516
1,135,328
During the financial year the following fees were paid or payable for services provided by Ernst & Young, the auditor of the
Company:
Audit services - Ernst & Young
Audit or review of the financial statements
Other services - Ernst & Young
Tax services
Note 27. Commitments
Lease commitments - operating
Committed at the reporting date but not recognised as liabilities, payable:
Within one year
One to five years
Consolidated
2018
$
2017
$
58,600
52,500
9,000
7,810
67,600
60,310
Consolidated
2018
$'000
2017
$'000
131
-
131
151
26
177
Operating lease commitments comprises contracted amounts for office rental under a non-cancellable operating lease
expiring within 1 year with an option to extend. The lease has an escalation clause. On renewal, the terms of the lease are
expected to be renegotiated.
Guarantee
The consolidated entity has provided guarantees of $44,300 (2017: $44,300) at 30 June 2018 for lease of premises.
Financial Report (continued) 45
Melbana Annual Report 2018
Melbana Energy Limited
Notes to the financial statements
30 June 2018
Note 27. Commitments (continued)
Exploration Commitments
In order to maintain rights of tenure to petroleum exploration tenements, the consolidated entity 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 consolidated 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 approximately
$7,000,000 include the minimum expenditure requirements that the consolidated entity is required to meet in order to retain its
present permit interests over the next fiscal year. These obligations may be subject to renegotiation, may be farmed out or may
be relinquished.
For Australian exploration permits in the jurisdiction of the Commonwealth of Australia, 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 and AC/P51 (Melbana 55%)
As at 30 June 2018, each permit had an obligation to drill an exploration well in 2019 financial year, however there was
an open application that had been submitted to the regulatory authority to amend the work program obligations,
including a deferral of the well. Subsequently on 3 July 2018, the work program was amended following the approval from
the regulator. On 22 August 2018, the subsidiary holding the AC/P50 and AC/P51 permits was divested and
Melbana has no further obligations.
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 2017.
Permit Year 1 work program (ending 21 May 2014) was 400km 2D seismic – Work program completed.
Permit Year 2 – work program (ending 21 September 2018) undertake 330km of 2D seismic broadband reprocessing and
additional studies including a stratigraphic interpretation study and an analogue field study. In August 2018,
Melbana announced that the Regulator has approved its application for the crediting of the 2018 Beehive 3D Seismic
Survey against meeting the Permit Year 4 work commitment to acquire a new 400km2 3D seismic survey.
Permit Year 3 – work program (ending 21 December 2020) drilling of an exploration well. French major Total
and Australia’s Santos have an option (expiring 6 months from the receipt of processed data from the Beehive 3D
Seismic Survey) to fully fund the first well in the WA-488-P permit in return for an 80% participating interest in the permit.
PEP51153 (Melbana 30% interest)
PEP51153 expires on 23 September 2018. The minimum work program for PEP51153 has been completed during the year
and an appraisal extension of the permit has been applied for.
46 Financial Report (continued)
Melbana Annual Report 2018
Melbana Energy Limited
Notes to the financial statements
30 June 2018
Note 27. Commitments (continued)
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 2017 the company announced that 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 2018 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.
In July 2018 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 2018 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. On August 11, 2017 Melbana announced it had provided official notice to Cuban regulatory
authority of commitment to Block 9 second exploration sub-period.
Summary
Melbana costs for the current sub-period until November 2019 are estimated to be US$5,000,000.
There are no material commitments or contingencies other than as set out in this note.
Note 28. Related party transactions
Parent entity
Melbana Energy Limited is the parent entity.
Subsidiaries
Interests in subsidiaries are set out in note 30.
Key management personnel
Disclosures relating to key management personnel are set out in note 25 and the remuneration report included in the
directors' report.
Transactions with related parties
During the year ended 30 June 2018 the Chairman of the Company, Mr Andrew Purcell, provided a personal guarantee in
favour of TransAsia Private Capital Limited ("TransAsia") in connection with a loan made by TransAsia to the Company.
Details of the loan are set out in Note 17. As consideration for the provision of the personal guarantee, the Company issued
80,000,000 options to Mr Purcell on 13 August 2018. Details of these options are set out in Note 32. The guarantee remained
in place as at 30 June 2018.
Receivable from and payable to related parties
There were no trade receivables from or trade payables to related parties at the current and previous reporting date.
Loans to/from related parties
There were no loans to or from related parties at the current and previous reporting date.
Terms and conditions
All transactions were made on normal commercial terms and conditions and at market rates.
Financial Report (continued) 47
Melbana Annual Report 2018
Melbana Energy Limited
Notes to the financial statements
30 June 2018
Note 29. Parent entity information
Set out below is the supplementary information about the parent entity.
Statement of profit or loss and other comprehensive income
Loss after income tax
Total comprehensive income
Statement of financial position
Total current assets
Total assets
Total current liabilities
Total liabilities
Equity
Issued capital
Share-based payments reserve
Accumulated losses
Total equity
Parent
2018
$'000
2017
$'000
(6,568)
(1,623)
(6,568)
(1,623)
Parent
2018
$'000
2017
$'000
10,235
10,591
3,978
4,032
3,735
6,905
595
721
269,618
476
(263,535)
262,834
317
(256,967)
6,559
6,184
Guarantees entered into by the parent entity in relation to the debts of its subsidiaries
The parent entity, as the Guarantor, unconditionally and irrevocably guarantees the performance of MEO International Pty
Ltd in relation to PEP51153 obligations.
Contingent liabilities
The parent entity had no contingent liabilities as at 30 June 2018 and 30 June 2017.
Capital commitments - Property, plant and equipment
The parent entity had no capital commitments for property, plant and equipment as at 30 June 2018 and 30 June 2017.
Significant accounting policies
The accounting policies of the parent entity are consistent with those of the consolidated entity, as disclosed in note 2, except
for the following:
●
●
Investments in subsidiaries are accounted for at cost, less any impairment, in the parent entity.
Dividends received from subsidiaries are recognised as other income by the parent entity and its receipt may be an
indicator of an impairment of the investment.
48 Financial Report (continued)
Melbana Annual Report 2018
Melbana Energy Limited
Notes to the financial statements
30 June 2018
Note 30. Interests in subsidiaries
The consolidated financial statements incorporate the assets, liabilities and results of the following subsidiaries in accordance
with the accounting policy described in note 2:
Name
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
Note 31. Interests in joint operations
Name
PEP51153*
AC/P50 & AC/P51**
Principal place of business /
Country of incorporation
Ownership interest
2017
2018
%
%
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%
Principal place of business /
Country of incorporation
New Zealand
Australia
Ownership interest
2017
2018
%
%
30%
55%
30%
55%
*
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.
** Melbana Energy, through its wholly-owned subsidiary, Vulcan Exploration Pty Ltd, holds 55% interest in AC/P50 and
AC/P51. 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 27 to the accounts.
Contingent liabilities
As at 30 June 2018, there are no contingent liabilities relating to PEP51153 (2017:Nil).
Note 32. Events after the reporting period
On 6 July 2018 the Company issued 5,333,333 shares to Non-executive Director Mr Peter Stickland following the exercise
by Mr Stickland of performance rights. The performance rights had an exercise price of $Nil.
On 7 August 2018 the Company announced that Independent Expert McDaniel & Associates (Canada) has completed its
assessment of the Prospective Resources of Cuba Block 9 and Beehive in Australia resulting in Block 9 best estimate Oil In
Place increasing by 24% to more than 15.7 billion barrels of oil and recoverable Prospective Resources increasing by 13%
to 718 million barrels of oil.
On 13 August 2018 the Company issued 3,141,226 shares upon the exercise of Unlisted options with an exercise price of
$0.02. The share issue included 2,004,507 shares issued to Directors of the Company.
Financial Report (continued) 49
Melbana Annual Report 2018
Melbana Energy Limited
Notes to the financial statements
30 June 2018
Note 32. Events after the reporting period (continued)
On 13 August 2018 the Company issued 80,000,000 unquoted options to Mr Andrew Purcell, the Chairman of the Company.
Each option is an option to acquire a fully paid ordinary share in the Company. The options were issued to Mr Purcell as
compensation for providing a personal guarantee over the Loan Agreement with TransAsia Private Capital Limited
("TransAsia") pursuant to Resolution 3, approved by shareholders at the Company’s General Meeting held on 9 August 2018.
Details of the loan are set out in Note 17. The options will vest seven months after the repayment of the loan and will expire
twelve months after the vesting date. The loan is due for repayment by 10 January 2019, but the actual repayment date is
not currently known and, therefore, the options' vesting date and expiry date are also not currently known. The options have
an exercise price of $0.022 (2.2 cents) each.
On 14 August 2018, the Company announced that acquisition of the Beehive 3D Seismic Survey has been completed safely
and without incident and that during the planning of the Beehive 3D Seismic Survey, a new lead was identified (Egret) and
the survey area was extended by ~100km2 (~16%) to provide coverage over the potion of Egret that is partially within the
boundary of WA-488-P. The extension of the survey area was within the approved scope and operational envelope of the
Beehive 3D Seismic Survey. The Beehive 3D Seismic Survey, including the extension over the Egret lead, was fully funded
by Santos and Total.
On 21 August 2018 the Company issued 4,761,215 shares upon the exercise of Unlisted options with an exercise price of
$0.02.
On 22 August 2018 the Company announced that it had divested its interest in the AC/P50 and AC/P51 permits (“Permits”)
via a sale of the holding subsidiary Vulcan Exploration Pty Ltd to joint venture partner Rouge Rock. The commercial
agreements provide for the Company to retain exposure to the upside outcomes of a subsequent sale or farmout of either of
the Permits by Rouge Rock. The agreements are structured such that if Rouge Rock enters into an arrangement in future
for cash or shares, Melbana earns 10% of the cash benefit or shares received by Rouge Rock. If Rouge Rock enters into an
arrangement in future that provides for a full or partial carry on a well, Melbana has the right to back-in for a 5% interest after
the well is drilled, effectively providing a carried interest during the drilling process and avoiding costs associated with the
drilling process.
On 28 August 2018 the Company issued 1,247,988 shares upon the exercise of Unlisted options with an exercise price of
$0.02.
On 5 September 2018 the Company issued 827,228 shares upon the exercise of Unlisted options with an exercise price of
$0.02.
On 21 September 2018, the Company announced that it has accepted commitments to raise up to $3.5 million (before costs)
through a placement to qualified institutional and sophisticated investors of 194 million fully paid ordinary shares at $0.018
per share plus an accompanying one unlisted share option per three shares placed exercisable at $0.03 per option expiring
18 months from grant date. The Placement is scheduled to settle on Thursday 27 September 2018 with new shares expected
to be allotted on Friday 28 September 2018.
No other matter or circumstance has arisen since 30 June 2018 that has significantly affected, or may significantly affect the
consolidated entity's operations, the results of those operations, or the consolidated entity's state of affairs in future financial
years.
50 Financial Report (continued)
Melbana Annual Report 2018
Melbana Energy Limited
Notes to the financial statements
30 June 2018
Note 33. Reconciliation of loss after income tax to net cash used in operating activities
Loss after income tax expense for the year
Adjustments for:
Depreciation and amortisation
Share-based payments
Foreign exchange differences
Exploration expenditure written-off/down
Deferred income tax expense
Interest expense capitalised to loan account
Change in operating assets and liabilities:
Decrease/(increase) in other receivables
(Increase)/decrease in prepayments
Increase in trade and other payables
Increase/(decrease) in provisions
Consolidated
2018
$'000
2017
$'000
(6,100)
(2,121)
21
373
(34)
3,063
72
96
(40)
11
142
69
25
183
33
455
32
-
16
-
21
70
Net cash used in operating activities
(2,327)
(1,286)
Note 34. Changes in liabilities arising from financing activities
Consolidated
Balance at 1 July 2016
Balance at 30 June 2017
Loans received
Exchange differences
Loan interest capitalised
Balance at 30 June 2018
Note 35. Earnings per share
Long term
borrowings
$'000
-
-
2,848
155
96
3,099
Consolidated
2018
$'000
2017
$'000
Loss after income tax attributable to the owners of Melbana Energy Limited
(6,100)
(2,121)
Weighted average number of ordinary shares used in calculating basic earnings per share
1,484,600,383 803,629,702
Weighted average number of ordinary shares used in calculating diluted earnings per share 1,484,600,383 803,629,702
Number
Number
Basic earnings per share
Diluted earnings per share
Cents
Cents
(0.41)
(0.41)
(0.26)
(0.26)
Financial Report (continued) 51
Melbana Annual Report 2018
Melbana Energy Limited
Notes to the financial statements
30 June 2018
Note 35. Earnings per share (continued)
For financial years ended 30 June 2018 and 30 June 2017 outstanding options and performance rights are anti-dilutive and
are therefore excluded from the calculation of diluted earnings per share.
Note 36. Share-based payments
An employee share plan ("Plan") has been established by the consolidated entity and approved by shareholders at a general
meeting, whereby the consolidated entity may, at the discretion of the Nomination and Remuneration Committee, grant
options over ordinary shares in the Company or performance rights over ordinary shares in the Company to certain key
management personnel and employees of the consolidated entity. The options are issued for nil consideration and are
granted in accordance with performance guidelines established by the Nomination and Remuneration Committee.
In March 2017, 9,250,000 options were issued to employees pursuant to the Plan. In November 2017 a further 3,000,000
options were issued under the Plan to the then Managing Director and Chief Executive Officer, on the same terms as the
previously-issued employee options.
In addition to options issued under the Plan, the consolidated entity may also issue options to service providers as
consideration for services provided to the consolidated entity. During the financial year, the consolidated entity issued options
to the Joint Lead Manager as part consideration for fees payable in connection with a share placement and entitlement offer
undertaken by the Company
Set out below are summaries of options granted under the plan, and to service providers.
2018
Grant date
Expiry date
03/11/2016
28/03/2017
23/11/2017
24/11/2017
03/11/2019
27/09/2020
23/11/2020
27/09/2020
Exercise
price
Balance at
the start of
the year
Granted
Exercised
Expired/
forfeited/
other
Balance at
the end of
the year
$0.065
$0.032
$0.018
$0.032
4,000,000
9,250,000
-
-
13,250,000
-
-
20,000,000
3,000,000
23,000,000
-
-
-
-
-
-
-
-
-
-
4,000,000
9,250,000
20,000,000
3,000,000
36,250,000
Weighted average exercise price
$0.042
$0.019
$0.000
$0.000
$0.028
2017
Grant date
Expiry date
01/07/2011
03/10/2011
01/12/2011
03/11/2016
28/03/2017
01/07/2016
03/10/2016
01/12/2016
03/11/2019
27/09/2020
Exercise
price
Balance at
the start of
the year
Granted
Exercised
$0.500
$0.000
$0.000
$0.000
$0.000
500,000
1,200,000
2,500,000
-
-
4,200,000
-
-
-
4,000,000
9,250,000
13,250,000
Expired/
forfeited/
other
Balance at
the end of
the year
-
-
-
-
-
-
(500,000)
(1,200,000)
(2,500,000)
-
-
(4,200,000)
-
-
-
4,000,000
9,250,000
13,250,000
Weighted average exercise price
$0.500
$0.042
$0.000
$0.500
$0.042
52 Financial Report (continued)
Melbana Annual Report 2018
Melbana Energy Limited
Notes to the financial statements
30 June 2018
Note 36. Share-based payments (continued)
Set out below are the options exercisable at the end of the financial year:
Grant date
Expiry date
03/11/2016
28/03/2017
23/11/2017
24/11/2017
03/11/2019
27/09/2020
23/11/2020
27/09/2020
2018
Number
2017
Number
4,000,000
4,625,000
20,000,000
1,500,000
4,000,000
-
-
-
30,125,000
4,000,000
The weighted average share price during the financial year was $0.0132 (2017: $0.0315).
The weighted average remaining contractual life of options outstanding at the end of the financial year was 2.23 years (2017:
2.97 years).
Set out below are summaries of performance rights granted under the plan:
2018
Grant date
Expiry date
07/12/2015
04/02/2016
10/05/2018
29/11/2018
31/01/2019
30/04/2021
2017
Grant date
Expiry date
07/12/2015
04/02/2016
29/11/2018
31/01/2019
Exercise
price
Balance at
the start of
the year
Granted
Exercised
Expired/
forfeited/
other
Balance at
the end of
the year
$0.000
$0.000
$0.000
5,333,333
20,940,032
-
26,273,365
-
-
6,763,158
6,763,158
-
(20,940,032)
-
(20,940,032)
Exercise
price
Balance at
the start of
the year
Granted
Exercised
Expired/
forfeited/
other
$0.000
$0.000
5,333,333
20,940,032
26,273,365
-
-
-
-
-
-
-
-
-
-
-
-
-
5,333,333
-
6,763,158
12,096,491
Balance at
the end of
the year
5,333,333
20,940,032
26,273,365
Set out below are the performance rights exercisable at the end of the financial year:
Grant date
Expiry date
07/12/2015
29/11/2018
2018
Number
2017
Number
5,333,333
5,333,333
5,333,333
5,333,333
The weighted average remaining contractual life of performance rights outstanding at the end of the financial year was 1.77
years (2017: 1.27 years).
Financial Report (continued) 53
Melbana Annual Report 2018
Melbana Energy Limited
Notes to the financial statements
30 June 2018
Note 36. Share-based payments (continued)
For the options granted for or first accounted for during the current financial year, the valuation model inputs used to
determine the fair value at the grant date, are as follows:
Grant date
Expiry date
Share price
at grant date
Exercise
price
Expected
volatility
Dividend
yield
Risk-free
Fair value
interest rate at grant date
03/11/2016
23/11/2017
23/11/2017
03/11/2019
23/11/2020
27/09/2020
$0.026
$0.013
$0.013
$0.065
$0.018
$0.032
206.900%
100.800%
134.910%
-
-
-
2.560%
2.510%
2.194%
$0.0241
$0.0074
$0.0081
For the performance rights granted during the current financial year, the valuation model inputs used to determine the fair
value at the grant date, are as follows:
Grant date
Expiry date
Share price
at grant date
Exercise
price
Expected
volatility
Dividend
yield
Risk-free
Fair value
interest rate at grant date
10/05/2018
30/04/2021
$0.010
$0.000
191.900%
-
2.175%
$0.009
54 Financial Report (continued)
Melbana Annual Report 2018
Melbana Energy Limited
Directors' declaration
30 June 2018
In the directors' opinion:
●
●
●
●
the attached financial statements and notes, and the Remuneration report contained in the accompanying Directors'
report, comply with the Corporations Act 2001, Australian Accounting Standards, the Corporations Regulations 2001
and other mandatory professional reporting requirements;
the attached financial statements and notes comply with International Financial Reporting Standards as issued by the
International Accounting Standards Board as described in note 2 to the financial statements;
the attached financial statements and notes give a true and fair view of the consolidated entity's financial position as at
30 June 2018 and of its performance for the financial year ended on that date; and
there are reasonable grounds to believe that the Company will be able to pay its debts as and when they become due
and payable.
The directors have been given the declarations required by section 295A of the Corporations Act 2001.
Signed in accordance with a resolution of directors made pursuant to section 295(5)(a) of the Corporations Act 2001.
On behalf of the directors
___________________________
Andrew Purcell
Chairman
26 September 2018
Financial Report (continued) 55
Melbana Annual Report 2018
Melbana Energy Limited
Independent auditor's report to the members of Melbana Energy Limited
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56 Financial Report (continued)
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Melbana Energy Limited
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Independent auditor's report to the members of Melbana Energy Limited
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60 Financial Report (continued)
Melbana Annual Report 2018
Melbana Energy Limited
Melbana Energy Limited
Shareholder information
Shareholder information
30 June 2018
30 June 2018
The shareholder information set out below was applicable as at 5 September 2018.
The shareholder information set out below was applicable as at 25 September 2018.
Corporate Governance Statement
Corporate Governance Statement
Refer to the company's Corporate Governance statement at: http://www.melbana.com/site/About-Us/corporate-governance.
Refer to the company's Corporate Governance statement at: http://www.melbana.com/site/About-Us/corporate-governance.
Distribution of equity securities
Distribution of equity securities
Analysis of number of equity security holders by size of holding:
Analysis of number of equity security holders by size of holding:
1 to 1,000
1 to 1,000
1,001 to 5,000
1,001 to 5,000
5,001 to 10,000
5,001 to 10,000
10,001 to 100,000
10,001 to 100,000
100,001 and over
100,001 and over
Holding less than a marketable parcel
Holding less than a marketable parcel
Equity security holders
Equity security holders
Number of
Number of
holders of
holders of
performance
performance
rights
rights
Number of
Number of
options of
options of
holders over
holders over
ordinary
ordinary
shares
shares
Number of
Number of
holders of
holders of
ordinary
ordinary
shares
shares
-
-
-
-
-
-
-
-
3
3
3
3
-
-
-
-
-
-
-
-
-
-
9
9
9
9
-
-
437
434
1,132
1,129
1,139
1,137
2,794
2,801
1,555
1,546
7,057
7,047
4,009
3,958
Twenty largest quoted equity security holders
Twenty largest quoted equity security holders
The names of the twenty largest security holders of quoted equity securities are listed below:
The names of the twenty largest security holders of quoted equity securities are listed below:
Ordinary shares
Ordinary shares
Number held
Number held
% of total
% of total
shares
shares
issued
issued
HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED
HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED
M&A ADVISORY PTY LTD (PURCELL FAMILY A/C)
M&A ADVISORY PTY LTD (PURCELL FAMILY A/C)
NATIONAL NOMINEES LIMITED (DB A/C)
NATIONAL NOMINEES LIMITED (DB A/C)
J P MORGAN NOMINEES AUSTRALIA LIMITED
J P MORGAN NOMINEES AUSTRALIA LIMITED
MR JOHN OLDANI
MR JOHN OLDANI
MRS DANIELLE GORDON
MRS DANIELLE GORDON
BNP PARIBAS NOMINEES PTY LTD (IB AU NOMS RETAILCLIENT DRP)
BNP PARIBAS NOMINEES PTY LTD (IB AU NOMS RETAILCLIENT DRP)
MRS CATHY ANN BENDER
MRS CATHY ANN BENDER
TETS PTY LTD
TETS PTY LTD
ESSELMONT PTY LIMITED (ESSELMONT A/C)
ESSELMONT PTY LIMITED (ESSELMONT A/C)
MISS ANITA TSANG & MR BRADLEY GARTH WRIGHT (ATBW INVESTMENTS SF A/C)
MISS ANITA TSANG & MR BRADLEY GARTH WRIGHT (ATBW INVESTMENTS SF A/C)
FIVE ELEMENTS DESIGN PTY LTD (FIVE ELEMENTS DESIGN A/C)
FIVE ELEMENTS DESIGN PTY LTD (FIVE ELEMENTS DESIGN A/C)
MR JASON MEINHARDT
MR JASON MEINHARDT
MRS SUSAN JANE STICKLAND
MRS SUSAN JANE STICKLAND
PEDOMML PTY LTD (PEDOMML SUPER FUND A/C)
MR DAVID COGHILL
CITICORP NOMINEES PTY LIMITED
VALUI PTY LTD
MR DAVID COGHILL
PEDOMML PTY LTD (PEDOMML SUPER FUND A/C)
MR MATTHEW DEAN MARSHALL
CITICORP NOMINEES PTY LIMITED
MR JOHN OLDANI (J O INVESTMENTS S/F A/C)
MR MATTHEW DEAN MARSHALL
MR ROBERT OLDANI
MR JOHN OLDANI (J O INVESTMENTS S/F A/C)
66,564,674
66,564,674
54,032,297
54,032,297
34,032,006
34,032,006
26,206,165
26,341,164
24,111,111
24,111,111
22,005,000
22,005,000
21,935,606
21,525,728
20,622,531
20,622,531
20,000,000
20,000,000
19,642,857
19,642,857
19,253,947
19,253,947
18,180,000
18,180,000
16,649,543
16,649,543
16,597,279
16,597,279
13,000,000
12,805,837
11,881,051
12,191,242
11,794,250
12,000,000
11,120,000
11,647,009
11,111,111
11,120,000
11,005,000
11,111,111
3.96
3.96
3.22
3.22
2.03
2.03
1.56
1.57
1.43
1.43
1.31
1.31
1.31
1.28
1.23
1.23
1.19
1.19
1.17
1.17
1.15
1.15
1.08
1.08
0.99
0.99
0.99
0.99
0.77
0.76
0.71
0.73
0.70
0.71
0.66
0.69
0.66
0.66
0.65
0.66
449,744,428
450,433,336
26.77
26.81
62
Financial Report (continued) 61
Melbana Annual Report 2018
Melbana Energy Limited
Shareholder information
30 June 2018
Unquoted equity securities
Options over ordinary shares
Performance rights
The following persons hold 20% or more of unquoted equity securities:
Name
Class
Andrew Purcell
Zenix Nominees Pty Ltd
Options over ordinary shares
Options over ordinary shares
Substantial holders
Substantial holders in the Company are set out below:
Number
on issue
Number
of holders
115,250,000
6,763,158
9
3
Number held
80,000,000
24,000,000
Ordinary shares
Number held
% of total
shares
issued
Cadence Asset Management Entities and Esselmont Pty Limited (1)
120,612,082
7.18
(1)
Holder has notified the Company that it manages the relevant shares and therefore has a relevant interest in those
shares under section 608(1)(b) or (c) of the Corporations Act
Voting rights
The voting rights attached to ordinary shares are set out below:
Ordinary shares
On a show of hands every member present at a meeting in person or by proxy shall have one vote and upon a poll each
share shall have one vote.
Options and performance rights
Options and performance rights do not carry voting rights.
There are no other classes of equity securities.
Current on-market buy-back
There is no current on-market buy-back.
62 Financial Report (continued)
Melbana Annual Report 2018
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64
Melbana Annual Report 2018 Corporate Directory
Notes to the Consolidated Financial Statements (Cont)
For the Year Ended 30 June 2017
MELBANA ENERGY LIMITED
ABN 43 066 447 952
Directors
Andrew G Purcell (Chairman)
Peter J Stickland
Michael J Sandy
Chief Executive Officer
Robert Zammit
Company Secretary
Melanie Leydin
Registered office and Principal place of business
Level 15, 500 Collins Street
Melbourne, Victoria 3000 Australia
Telephone: +61 (3) 8625 6000
Facsimile: +61 (3) 9614 0660
Email: admin@melbana.com
Website: www.melbana.com
Share registrar
Link Market Services Limited
Locked Bag A14
Sydney South NSW 1235
Telephone: +61 1300 554 474
Facsimile: +61 2 9287 0303
Website: linkmarketservices.com.au
Email: registrars@linkmarketservices.com.au
Auditor
Ernst & Young
8 Exhibition Street
Melbourne, Victoria 3000 Australia
Stock exchange listing
ASX Limited
Level 4, North Tower, Rialto
525 Collins Street
Melbourne, Victoria 3000 Australia
ASX Code: MAY
Incorporated 14 September 1994
Victoria, Australia
Melbana Annual Report 2018
Corporate Directory