Melbana Energy Limited
L3, 350 Collins St,
Melbourne Victoria 3000 Australia
Telephone: +61 (3) 8625 6000
Email: admin@melbana.com
ABN 43 066 447 952
melbana.com
2019
Melbana Energy Limited
Corporate directory
30 June 2019
Directors
Andrew Purcell (Non-executive Director and Chairman)
Michael Sandy (Executive Director and Interim Chief Executive Officer)
Peter Stickland (Non-executive Technical Director)
Company secretary
Melanie Leydin
Registered office
Principal place of business
Share register
Level 3, 350 Collins Street
Melbourne, Victoria 3000 Australia
Telephone +61 (3) 8625 6000
Level 3, 350 Collins Street
Melbourne, Victoria 3000 Australia
Telephone +61 (3) 8625 6000
Link Market Services Limited
Locked Bag A14
Sydney South, NSW 1235 Australia
Telephone +61 1300 554 474
Website: linkmarketservices.com.au
Email: registrars@linkmarketservices.com.au
Auditor
Grant Thornton Audit Pty Ltd
Collins Square, Tower 5
727 Collins Street
Melbourne VIC 3008
Stock exchange listing
Melbana Energy Limited securities are listed on the Australian Securities Exchange
(ASX code: MAY)
Website
www.melbana.com
Corporate Governance Statement Corporate governance statements are available in Group's website. Please refer to
http://www.melbana.com/site/About-Us/corporate-governance
1
Melbana Energy Limited
Directors' report
30 June 2019
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 ‘Melbana’, the 'Company' or
'parent entity') and the entities it controlled at the end of, or during, the year ended 30 June 2019.
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 (Appointed Interim Chief Executive Officer on 19 July 2019)
Peter Stickland
Principal activities
The principal activities during the year of the consolidated entity were oil and gas exploration in Cuba and Australia
together with development concepts for the Tassie Shoal Methanol Project and Tassie Shoal 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 $3,357,696 (30 June 2018: $6,100,290).
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.
Your Board is pleased to advise there were no reported Lost Time Injuries or environmental incidents during the year.
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 14.8 billion barrels of Oil-in-Place with a
Prospective Resource of 676 million barrels (Best Estimate, 100% basis)1.
In October 2018, Melbana agreed commercial terms with Anhui Guangda Mining Investment Co Ltd (AGMI) for it to take an
interest in Block 9 PSC in return for agreeing to, amongst other things, fund the drilling of the first three exploration wells. A
formal agreement was executed in December 2018 but in April 2019 Melbana decided to terminate it given the lack of
progress AGMI was making towards satisfying the conditions precedent. Melbana subsequently reopened its farmout
process and is currently in negotiations with several interested parties. As at 30 June 2019, the Block 9 Cuban asset is
currently without a farmout partner. Work is ongoing to secure an alternative farmout partner following the termination of
the AGMI arrangement. An extension to the sub period has been approved by CUPET and forwarded to a higher
competent authority for consideration.
1 This estimate should be read with reference to the footnote “Notes regarding Contingent and Prospective resource
estimates” on page 17
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Melbana Energy Limited
Directors' report
30 June 2019
Cuba - Santa Cruz (Melbana 100%,subject to receiving final regulatory approvals)
The Santa Cruz oil field has produced at least 7.4 million barrels from 18 wells since its discovery in 2004. In December
2018, Melbana finalised a binding contract with CUPET and is now working to clarify some commercial issues before
seeking final regulatory approval. Santa Cruz would give Melbana a long term opportunity to develop new oil production
from the field area and therefore the potential for early revenue.
In April 2019, the United States (U.S.) of America announced that it would no longer suspend Title III of the Helms-Burton
Act, effective 2 May 2019. This enables U.S. nationals to sue any person who traffics in property expropriated from a U.S.
national by the Cuban Government on or after 1 January 1959. Your Board considers it unlikely that this development
could directly affect its interests in Cuba.
New Zealand - PEP51153
The Company completed the divestment of its interest in PEP51153 in April 2019 following receipt of the necessary
regulatory consent. The Company therefore has no further interest or liability associated with New Zealand.
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 an
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).
The Beehive 3D Seismic Survey was completed in August 2018 safely and without incident, having been extended by
~100km2 (~16%) to provide coverage over the newly identified lead (Egret) that is partially within the boundary of WA-488-
P. The Beehive 3D Seismic Survey, including the extension over the Egret lead, was fully funded by Santos and Total. In
December 2018 Melbana Energy reached an agreement with Total and Santos to modify the commercial agreement
between the parties to provide for Total and Santos to undertake preliminary well planning activities, to ensure the viability
of drilling the Beehive-1 exploration well during the third Quarter of 2020, in case of option exercise. This included the
drafting of an environment plan, well concept identification and commencement of rig selection activity.
The processed data from the Beehive 3D Seismic Survey was received and accepted on 3 April 2019, giving Santos and
Total until 2 October 2019 to notify Melbana of their intention to exercise their option to farm-in and drill the Beehive-1
well. The 3D seismic data set is currently being interpreted and will be used to update resource assessment of the Beehive
prospect.
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.
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Melbana Energy Limited
Directors' report
30 June 2019
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 methanol plant requires ~200 to 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.
In May 2019, Santos announced the contract to supply the subsea production system and associated installation support
had been awarded for the Barossa Gas Field. The following month, the Barossa Joint Venture entered into exclusive
commercial negotiations with the Darwin LNG Joint Venture for the supply of backfill gas, thus firming as favourite to be
selected to backfill Darwin LNG. A Final Investment Decision (FID) is expected early next year. This leaves the Evans
Shoal Gas field (~28% CO2) without a publicly stated development path. Melbana remains ready to engage with the Evans
Shoal Joint Venture on using the Tassie Shoal Projects as an LNG and/or methanol development path once a FID has
been 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.
The environmental approvals for TSLNG are valid to 2052.
Results for the year
The net loss after tax of the consolidated entity for the financial year was $3,357,696 (2018: net loss after tax of
$6,100,290). The loss for the year was mainly due to:
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●
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net administration costs of $2,484,647 (2018: $2,353,690)
an increase in finance costs, to $1,246,320 for the year ended 30 June 2019 from $96,105 for the year ended 30 June
2018, mainly due to share options of $973,600 recognised as finance cost measured in accordance with AASB 2
increase interest expense of $272,270 (2018: $96,105)
However, overall loss after tax for the financial year decreased significantly compared to previous financial year. Net losses
after tax was higher in 2018 financial year due to exploration expenditure write-offs of $3,691,000 and settlement cost of
$300,000. During 2018 financial year, the consolidated entity write-off costs for the AC/P50-AC/P51 permits and
PEP51153 venture.
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 position
At reporting date the consolidated entity held cash and cash equivalents of $3,363,168 (2018: $3,047,017), a net decrease
of $316,151 (2018: net decrease of $442,000), while its net assets were $7,852,718 (2018: $6,694,997), a net increase of
$1,157,721 (2018: net increase of $916,000). The main determinants of the consolidated entity's financial condition were:
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Melbana Energy Limited
Directors' report
30 June 2019
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loss after tax of $3,357,696 (2018: $6,100,290);
repayment of short term borrowings of $3,583,847 and realization of term deposit of $3,271,381;
net proceeds from share issue of $3,460,491 (2018: 6,569,999)
cash flows as follows: net operating cash outflows of $2,757,996 (2018: $2,327,159), net investing cash inflows of
$2,827,996 (2018: out flows of $6,703,251) and net financing cash outflows of $123,356 (2018: inflows of $9,418,432)
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.
During the reporting period, the Company examined listing its shares on the London Stock Exchange. The conclusion
drawn was that this may be a better market for an oil and gas company like Melbana Energy but that it would probably only
make economic sense to pursue this route once the Company has at least doubled in size.
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 6 July 2018, the Consolidated entity issued 5,333,333 shares to Mr Peter Stickland following the exercise of
performance rights. The performance rights were issued to Mr Stickland when he held the position of Managing Director
and had an exercise price of $Nil.
On 7 August 2018, the Consolidated entity announced that Independent Expert McDaniel & Associates (Canada) had
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 Consolidated entity issued 3,141,226 shares upon the exercise of unlisted options with an
exercise price of $0.02. This included 2,004,507 shares issued to Directors of the Consolidated entity.
On 13 August 2018, the Consolidated entity issued 80,000,000 unquoted options to Mr Andrew Purcell, the Chairman of
the Consolidated entity. Each option is an option to acquire a fully paid ordinary share in the Consolidated entity. The
options were issued to Mr Purcell as compensation for providing a personal guarantee over the Loan Agreement pursuant
to Resolution 3, approved by shareholders at the Company's General Meeting held on 9 August 2018. The options will vest
seven months after the repayment of the loan and will expire twelve months after the vesting date. The loan was repaid on
4 January 2019, therefore, the options will vest on 4 August 2019 and will expire on 4 August 2020. The options have an
exercise price of $0.022 (2.2 cents) each. The Consolidated entity will receive $1,760,000 cash from Mr. Purcell if all
options are exercised.
On 14 August 2018, the Consolidated entity announced that the acquisition of the Beehive 3D Seismic Survey had 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 Consolidated entity issued 4,761,215 shares upon the exercise of unlisted options with an
exercise price of $0.02.
On 22 August 2018, the Consolidated entity 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 Consolidated entity 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.
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Melbana Energy Limited
Directors' report
30 June 2019
On 28 August 2018, the Consolidated entity issued 1,247,988 shares upon the exercise of unlisted options with an
exercise price of $0.02.
On 5 September 2018, the Consolidated entity issued 827,228 shares upon the exercise of unlisted options with an
exercise price of $0.02.
On 21 September 2018, the Consolidated entity announced that it had 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. On completion,188,817,582 fully paid ordinary shares and 62,939,202 free
attaching options were issued on 27 September 2018.
On 8 October 2018, the Consolidated entity announced that it had signed a non-binding Letter of Intent ("LOI") with Anhui
Guangda Mining Investment Co Ltd ("AGMI") with respect to Block 9 Production Sharing Contract ("Block 9 PSC") in Cuba.
However, on 26 April 2019, the Company terminated the farmout agreement due to lack of progress by the farminee
towards satisfying the Conditions Precedent.
On 19 October 2018, the Consolidated entity announced that it has executed a binding agreement for the sale of its 30%
interest in the non-core New Zealand Permit PEP51153 to the current operator and joint venture participant (CX Oil
Limited) for A$100,000. The sale was completed and proceeds were received on 26 April 2019.
On 21 November 2018, the Consolidated entity issued 5,626,863 shares and 1,875,621 unlisted options (exercisable at
$0.03, expiry 27 March 2020), pursuant to the terms of the Share Placement announced 21 September 2018 and
subsequent shareholder approval at the Annual General Meeting held 15 November 2018.
On 3 December 2018, the Consolidated entity announced that it had reached an agreement with Total and Santos to
modify the current commercial agreement between the parties to accelerate the work required to ensure readiness for
potential drilling of the Beehive-1 exploration well in 3Q 2020. On 3 April 2019, the Company announced that the final
processed 3D seismic survey data was received and accepted by Total, Santos and Melbana. Based on this acceptance
Total and Santos now have 6 months to notify Melbana of the intention to exercise their option to farm-in and drill the first
exploration well which is planned to be the Beehive-1 exploration well. If the option is exercised, Melbana (20%) will be
fully carried through drilling.
On 5 December 2018, the Consolidated entity announced that it had finalised a long term binding Incremental Oil Recovery
Production Sharing Contract with the national oil company of Cuba, CubaPetroleo. This formal award of this contract is
subject to standard Cuban regulatory approvals and clarifying certain commercial issues. Should this contract be formally
awarded it would provide the Consolidated entity with a long term right to share in any enhanced production from the Santa
Cruz oil field.
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 15 July 2019, the Company made a conditional intention to make a takeover offer (Offer) for 100% of the ordinary
shares in Metgasco Limited (ASX: MEL) (Metgasco). On 25 July 2019, the Offer was made unconditional following ASIC
granting a modification of section 629 of the Corporations Act 2001 (Cth) to include as a defeating condition of the Offer the
receipt of Melbana shareholder approval for the purposes of Listing Rule 10.1 to permit M&A Advisory Pty Ltd (being a
Metgasco shareholder associated with Andrew Purcell, a director of Melbana) to participate under the Offer (or a waiver of
that requirement or confirmation shareholder approval is not required) (Listing Rule 10.1 Condition).
The last day of employment of Robert Zammit, Chief Executive Officer of the Company, was 19 July 2019.
No other matters or circumstances have arisen since 30 June 2019 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.
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Melbana Energy Limited
Directors' report
30 June 2019
Likely developments and expected results of operations
During FY2020, Melbana is advancing negotiations with potential partners to fund the drilling of up to 2 wells in Block 9
Cuba, seeking to finalise a PSC for the Santa Cruz oil field and awaiting a decision by Santos and Total regarding the
Beehive-1 exploration well in WA-488-P. The Company also looks forward to satisfactorily concluding the offmarket offer it
has made to the shareholders of Metgasco in order to move forward with testing the exploration potential of both
company’s portfolios. 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
Within the last year there have been zero incidents, zero lost time injuries and zero significant spills within the Company
and joint operations.
Information on Directors
Name:
Title:
Qualifications:
Experience and expertise:
Interests in shares:
Interests in options:
Name:
Title:
Qualifications:
Experience and expertise:
Other current directorships:
Former directorships (last 3 years): Metgasco Limited (ASX:MEL)
Special responsibilities:
Andrew Purcell
Non-executive Director and Chairman
B Eng; MBA
Mr Purcell founded the Lawndale Group (formerly Teknix Capital) in Hong Kong over
15 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 & Nomination Committee and a member of the Audit
& Risk Committee
62,666,307 fully paid ordinary shares
80,000,000 unlisted options expiring 4 August 2020
1,875,621 unlisted options expiring 27 March 2020
Peter Stickland
Non-Executive Technical Director
BSc, Hons (Geology), GDipAppFin (Finsia), GAICD
Peter Stickland has over 25 years global experience in oil and gas exploration. Mr
Stickland was CEO and subsequently Managing Director of Melbana from December
2014 until he resigned from his executive role in January 2018 and became a non-
executive director. Previously, Mr Stickland was CEO and subsequently Managing
Director 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. Prior to joining Tap Oil, Mr Stickland had a successful career with BHP
Billiton including a range of technical and management roles. Mr Stickland is also a
life member of the Australian Petroleum Production and Exploration Association
Limited (APPEA).
XCD Energy Limited (ASX:XCD), Talon Petroleum Limited (ASX:TDP)
Member of the Remuneration & Nomination Committee, a member of the Audit and
Risk Committee and Chairman of the Reserves Committee
16,597,279 fully paid ordinary shares
3,000,000 unlisted options expiring 27 September 2020
Other current directorships:
Former directorships (last 3 years): None
Special responsibilities:
Interests in shares:
Interests in options:
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Melbana Energy Limited
Directors' report
30 June 2019
Name:
Title:
Qualifications:
Experience and expertise:
Michael Sandy
Executive Director and Interim Chief Executive Officer (Appointed as Interim Chief
Executive Officer on 19 July 2019)
BSC Hons (Geology), MAICD
Michael Sandy is a geologist with 40 years’ experience in the resources industry –
mostly focused on oil and gas. Mr. Sandy had a varied early career with roles in
minerals exploration and research and a role with the PNG Government based in
Port Moresby. In the early 1990s he was Technical Manager of Oil Search Limited
also based in Port Moresby. Mr. Sandy was involved in establishing Novus
Petroleum Ltd and preparing that company for its $186m IPO in April 1995. Over 10
years, he held various senior management roles with Novus including manager of
assets in Australia, Asia, the Middle East and the USA and as Business Development
Manager was involved in numerous acquisitions and divestments. He co-managed
the defence effort in 2004 when Novus was taken over by Medco Energi.
For the last 15 years, Mr Sandy has been the principal of energy consultancy
company Sandy Associates P/L and was previously a director of Tap Oil Limited
(ASX:TAP), Hot Rock Ltd (ASX:HRL), Caspian Oil and Gas (ASX:CIG) and Pan
Pacific Petroleum (ASX:PPP)
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, a member of the Remuneration &
Nomination Committee and member of the Reserves Committee.
5,400,000 fully paid ordinary shares
Interests in shares:
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.
Company secretary
Ms Melanie Leydin, CA
Ms Leydin has 25 years’ experience in the accounting profession including 13 years in the Corporate Secretarial profession
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, Ms Leydin has been the principal of
LeydinFreyer. The practice provides outsourced company secretarial and accounting services to public and private
companies specialising in ASX listed entities.
Meetings of Directors
The number of meetings of the Company's Board of Directors ('the Board') and of each Board committee held during the
year ended 30 June 2019, and the number of meetings attended by each Director were:
Nomination and
Full Board
Attended
Held
Remuneration Committee Audit and Risk Committee
Attended
Attended
Held
Held
Andrew Purcell
Michael Sandy
Peter Stickland
7
7
7
7
7
7
2
2
2
2
2
2
2
2
2
2
2
2
Held: represents the number of meetings held during the time the Director held office or was a member of the relevant
committee.
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.
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Melbana Energy Limited
Directors' report
30 June 2019
The remuneration report is set out under the following main headings:
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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
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 practices 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:
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competitiveness and reasonableness
acceptability to shareholders
performance linkage / alignment of executive compensation
transparency
The Remuneration and Nomination Committee 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:
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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
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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.
Offer competitive remuneration benchmarked against the external market to attract high calibre executives;
To this end, the Company embodies the following principles in its remuneration framework:
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● Where appropriate, provide executive rewards linked to shareholder value; and
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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.
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Melbana Energy Limited
Directors' report
30 June 2019
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 Committee 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
Remuneration and Nomination Committee did not use the services of a remuneration consultant during the year.
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.
Generally non-executive directors do not receive share options or other incentives. However, from time to time, the Board
may grant share options subject to specified criteria are met. There has not been an increase in director remuneration
during the 2019 FY.
The Constitution and the ASX listing rules specify that the aggregate remuneration of non-executive directors shall be
determined from time to time 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.
The combined payment to all non-executive directors does not exceed this aggregate amount.
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:
●
●
Fixed remuneration
Variable remuneration consisting of Short Term Incentive (‘STI’); and Long Term Incentive (‘LTI’).
The combination of these comprises the executive's total remuneration. The mix between fixed and variable remuneration
is established for the Executive by the Remuneration and Nomination Committee.
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. Fixed remuneration is reviewed annually by the Remuneration and Nomination Committee having regard to
company-wide and individual performance, relevant comparative remuneration in the market and internally, and where
appropriate, external advice on policies and practices. As noted above, the Remuneration and Nomination Committee has
access to external advice independent of management.
The STI program is designed to align the targets of the business units with the performance hurdles of executives. STI
payments are granted to executives based on specific annual targets and key performance indicators ('KPI's') being
achieved. KPI's include profit contribution, customer satisfaction, leadership contribution and product management.
The 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.
10
Melbana Energy Limited
Directors' report
30 June 2019
Voting and comments made at the Company's 2018 Annual General Meeting ('AGM')
At the 15 November 2018 AGM, 34.7% of the votes were cast against the adoption of the remuneration report for the year
ended 30 June 2018.
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.
Directors:
●
● Michael Sandy - Executive Director and Interim Chief Executive Officer (Appointed as Interim Chief Executive Officer
Andrew Purcell - Non-Executive Chairman
on 19 July 2019)
Peter Stickland - Non-Executive Technical Director
●
Executives:
●
Robert Zammit - Chief Executive Officer (until 19 July 2019)
Changes since the end of the reporting period:
The last day of Mr Zammit's employment with the Company was 19 July 2019. Mr Michael Sandy - Executive Director and
Interim Chief Executive Officer is acting as Chief Executive Officer on an interim basis.
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
$
Termination
benefit
$
Total
$
100,000
75,000
75,000
-
-
-
265,873
515,873
30,000
30,000
-
-
-
-
-
-
-
-
-
-
-
-
-
6,874
20,129
20,129
11,681
11,681
6,279
13,153
-
-
-
-
-
100,000
75,000
81,874
333,962
590,836
2019
Non-Executive
Directors:
Andrew Purcell
Michael Sandy
Peter Stickland
Other Key
Management
Personnel:
Robert Zammit
11
Melbana Energy Limited
Directors' report
30 June 2019
Short-term benefits
Post-
employment
benefits
Long-term
benefits
Share-
based
payments
Salary
and fees
$
Cash
bonus monetary
Non-
$
$
Super-
annuation
$
Long
service
leave
$
Equity-
settled
$
Termination
benefit
$
Total
$
100,000
75,000
35,081
252,918
294,029
282,428
1,039,456
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
20,049
(22,095)
17,568
-
-
-
-
100,000
75,000
35,081
268,440
20,049
20,049
60,147
(7,582)
4,988
(24,689)
24,181
20,931
62,680
-
251,922
251,922
330,677
580,318
1,389,516
2018
Non-Executive
Directors:
Andrew Purcell
Michael Sandy
Peter Stickland *
Executive
Directors:
Peter Stickland *
Other Key
Management
Personnel:
Robert Zammit**
Colin Naylor***
*
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 agreed 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.
The proportion of remuneration linked to performance and the fixed proportion are as follows:
Name
Non-Executive Directors:
Andrew Purcell
Michael Sandy
Peter Stickland *
Executive Directors:
Peter Stickland *
Other Key Management
Personnel:
Robert Zammit
Colin Naylor
Fixed remuneration
2018
2019
At risk - STI
At risk - LTI
2019
2018
2019
2018
100%
100%
93%
100%
100%
100%
-
94%
-
-
-
-
89%
-
93%
96%
9%
-
-
-
-
-
-
-
-
-
7%
-
2%
-
-
-
-
6%
7%
4%
*
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.
12
Melbana Energy Limited
Directors' report
30 June 2019
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:
Agreement commenced:
Term of agreement:
Details:
Robert Zammit*
Chief Executive Officer
12 January 2018
No fixed term
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, which vested on 30
April 2019. 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.
* Mr Zammit's last day of employment with the Company was 19 July 2019.
Share-based compensation
Issue of shares
There were no shares issued to Directors and other key management personnel as part of compensation during the year
ended 30 June 2019.
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:
Name
Andrew Purcell
Robert Zammit
Robert Zammit
Peter Stickland
Peter Stickland
Number of
options
granted
80,000,000
1,000,000
1,000,000
1,500,000
1,500,000
Grant date
Vesting date and
exercisable date
Expiry date
Exercise
price
Fair value
per option at
grant date
13 Aug 2018
28 Mar 2017
28 Mar 2017
23 Nov 2017
23 Nov 2017
13 Aug 2018
28 Mar 2018
28 Mar 2019
28 Mar 2018
28 Mar 2019
4 Aug 2020
27 Sep 2020
27 Sep 2020
27 Sep 2020
27 Sep 2020
$0.0220
$0.0320
$0.0320
$0.0320
$0.0320
$0.0121
$0.0160
$0.0160
$0.0080
$0.0080
Options granted carry no dividend or voting rights.
13
Melbana Energy Limited
Directors' report
30 June 2019
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 2019 are set out below:
Name
Colin Naylor*
Peter Stickland
Robert Zammit
Number of
options
granted
during the
year
2019
Number of
options
granted
during the
year
2018
Number of
options
vested
during the
year
2019
Number of
options
vested
during the
year
2018
-
-
-
-
3,000,000
-
-
1,500,000
1,000,000
1,000,000
1,500,000
1,000,000
*
Mr Naylor ceased employment with the Company during July 2018.
Performance rights
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
Number of
rights
granted
Grant date
Vesting date and
exercisable date
Expiry date
Fair value
per right
at grant date
Robert Zammit
2,584,949 10 May 2018
30 April 2019
30 April 2021
$0.0090
Performance rights granted carry no dividend or voting rights.
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 2019 are set out below:
Name
Robert Zammit
Number of
rights
granted
during the
year
2019
Number of
rights
granted
during the
year
2018
Number of
rights
vested
during the
year
2019
Number of
rights
vested
during the
year
2018
-
2,584,949
-
-
Additional information
The earnings of the consolidated entity for the five years to 30 June 2019 are summarised below:
2019
$
2018
$
2017
$
2016
$
2015
$
Profit/(loss) after income tax
(3,357,696)
(6,100,290)
(2,121,000)
(10,406,000)
(10,042,000)
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)
0.01
(0.18)
0.01
(0.41)
0.02
(0.26)
0.02
(1.31)
0.02
(1.34)
2019
2018
2017
2016
2015
14
Melbana Energy Limited
Directors' report
30 June 2019
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:
Ordinary shares
Andrew Purcell
Michael Sandy
Peter Stickland
Robert Zammit
Colin Naylor*
Balance at
the start of
the year
Exercise of
performance
rights
/ options
Additions
Disposals
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
-
656,112
6,681,728
-
-
7,337,840
8,634,010
1,058,887
-
-
-
9,692,897
-
-
-
(3,248,889)
(5,592,186)
(8,841,075)
62,666,307
5,400,000
16,597,279
4,539,612
-
89,203,198
*
Colin Naylor resigned from the Company in July 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:
Options over ordinary shares
Andrew Purcell
Michael Sandy
Peter Stickland
Robert Zammit
Colin Naylor*
Balance at
the start of
the year
Options
granted
pursuant to a
placement
Options
granted for
other
services**
Exercised /
expired
Balance at
the end of
the year
17,048,033
656,112
4,348,395
2,000,000
2,000,000
26,052,540
1,875,621
-
-
-
-
1,875,621
80,000,000
-
-
-
-
80,000,000
(17,048,033)
(656,112)
(1,348,395)
-
(2,000,000)
(21,052,540)
81,875,621
-
3,000,000
2,000,000
-
86,875,621
Colin Naylor resigned from the Company in July 2018.
*
** During the previous financial year, the Chairman of the Company, Mr Andrew Purcell, provided a personal guarantee
in connection with a loan made by a third party to the Company. As a consideration for the provision of the personal
guarantee, the Company issued 80,000,000 options to Mr Purcell on 13 August 2018, following shareholders'
approval at a General Meeting held on 9 August 2018.
Performance rights holding
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:
Performance rights over ordinary shares
Peter Stickland
Robert Zammit
Balance at
the start of
the year
Received
as part of
remuneration
Exercised
Expired
5,333,333
2,584,949
7,918,282
-
-
-
(5,333,333)
-
(5,333,333)
Balance at
the end of
the year
-
-
-
-
2,584,949
2,584,949
This concludes the remuneration report, which has been audited.
15
Melbana Energy Limited
Directors' report
30 June 2019
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
27 September 2018
21 November 2018
Expiry date
3 November 2019
27 September 2020
23 November 2020
27 September 2020
4 August 2020
27 March 2020
27 March 2020
Exercise
price $
Number
under option
$0.0650
$0.0320
$0.0180
$0.0320
$0.0220
$0.0300
$0.0300
4,000,000
8,250,000
20,000,000
3,000,000
80,000,000
62,939,202
1,875,621
180,064,823
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
$0.0000
4,178,209
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 2019 and up to the
date of this report on the exercise of options granted:
Date options granted
Exercise
price $
Number of
shares issued
Granted on 13 September 2017 (shares were issued on 13 August 2018)
Granted on 13 September 2017 (shares were issued on 21 August 2018)
Granted on 13 September 2017 (shares were issued on 28 August 2018)
Granted on 13 September 2017 (shares were issued on 5 September 2018)
$0.0200
$0.0200
$0.0200
$0.0200
3,141,226
4,761,215
1,247,988
827,228
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 2019 and up to the
date of this report on the exercise of performance rights granted:
Date performance rights granted
7 December 2015 (shares were issued on 6 July 2018)
10 May 2018 (shares were issued on 24 July 2019)
Exercise
price
Number of
shares issued
$0.0000
$0.0000
5,333,333
2,584,949
7,918,282
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.
16
Melbana Energy Limited
Directors' report
30 June 2019
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.
Indemnity and insurance of auditor
To the extent permitted by law, the Company has agreed to indemnify its auditors, Grant Thornton, 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 Grant Thornton 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 24 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 24 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 Grant Thornton Audit Pty Ltd
There are no officers of the Company who are former partners of Grant Thornton Audit Pty Ltd.
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
Grant Thornton Audit Pty Ltd continues in office in accordance with section 327 of the Corporations Act 2001.
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.
The information that relates to Prospective Resources for Melbana is based on, and fairly represents, information
and supporting documentation compiled by Peter Stickland, a director of Melbana Energy. Mr Stickland B.Sc (Hons)
has over 25 years of relevant experience, is a member of the European Association of Geoscientists & Engineers
and the Petroleum and Exploration Society of Australia, and consents to the publication of the resource assessments
contained herein. The Prospective Resource estimates are consistent with the definitions of hydrocarbon resources
that appear in the Listing Rules.
Total Liquids = oil + condensate
6 Bcf gas equals 1 MMboe; 1 MMbbl condensate equals 1 MMboe
Melbana share can be derived by pro-rating the resource ranges described in the tables above by its percentage
equity.
2.
3.
4.
5.
17
Melbana Energy Limited
Directors' report
30 June 2019
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
30 August 2019
18
Collins Square, Tower 5
727 Collins Street
Melbourne VIC 3008
Correspondence to:
GPO Box 4736
Melbourne VIC 3001
T +61 3 8320 2222
F +61 3 8320 2200
E info.vic@au.gt.com
W www.grantthornton.com.au
Auditor’s Independence Declaration
To the Directors of Melbana Energy Limited
In accordance with the requirements of section 307C of the Corporations Act 2001, as lead auditor for the audit of Melbana
Energy Limited for the year ended 30 June 2019, I declare that, to the best of my knowledge and belief, there have been:
a
b
no contraventions of the auditor independence requirements of the Corporations Act 2001 in relation to the audit; and
no contraventions of any applicable code of professional conduct in relation to the audit.
Grant Thornton Audit Pty Ltd
Chartered Accountants
B A Mackenzie
Partner – Audit & Assurance
Melbourne, 30 August 2019
Grant Thornton Audit Pty Ltd ACN 130 913 594
a subsidiary or related entity of Grant Thornton Australia Ltd ABN 41 127 556 389
www.grantthornton.com.au
‘Grant Thornton’ refers to the brand under which the Grant Thornton member firms provide assurance, tax and advisory services to their clients
and/or refers to one or more member firms, as the context requires. Grant Thornton Australia Ltd is a member firm of Grant Thornton International
Ltd (GTIL). GTIL and the member firms are not a worldwide partnership. GTIL and each member firm is a separate legal entity. Services are
delivered by the member firms. GTIL does not provide services to clients. GTIL and its member firms are not agents of, and do not obligate one
another and are not liable for one another’s acts or omissions. In the Australian context only, the use of the term ‘Grant Thornton’ may refer to
Grant Thornton Australia Limited ABN 41 127 556 389 and its Australian subsidiaries and related entities. GTIL is not an Australian related entity to
Grant Thornton Australia Limited.
Liability limited by a scheme approved under Professional Standards Legislation.
19
Melbana Energy Limited
Statement of profit or loss and other comprehensive income
For the year ended 30 June 2019
Other income
Interest income
Expenses
Settlement costs
Exploration expenditure written off/down
Net administration costs
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
2019
$
2018
$
5
6
14
7
8
9
324,667
48,604
392,711
19,966
-
-
(2,484,647)
(1,246,320)
(300,000)
(3,691,211)
(2,353,690)
(96,105)
(3,357,696)
(6,028,329)
-
(71,961)
(3,357,696)
(6,100,290)
(674)
(674)
1,130
1,130
(3,358,370)
(6,099,160)
Cents
Cents
32
32
(0.18)
(0.18)
(0.41)
(0.41)
The above statement of profit or loss and other comprehensive income should be read in conjunction with the
accompanying notes
20
Melbana Energy Limited
Statement of financial position
As at 30 June 2019
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
2019
$
2018
$
10
11
12
13
14
15
16
17
18
3,363,168
107,014
72,018
3,542,200
3,047,017
63,133
3,073,078
6,183,228
40,765
4,842,424
4,883,189
101,241
4,470,011
4,571,252
8,425,389
10,754,480
387,582
-
185,089
572,671
453,944
3,098,829
453,077
4,005,850
-
-
53,633
53,633
572,671
4,059,483
7,852,718
6,694,997
19
20
276,330,665 272,790,174
494,824
(269,937,232) (266,590,001)
1,459,285
7,852,718
6,694,997
The above statement of financial position should be read in conjunction with the accompanying notes
21
Melbana Energy Limited
Statement of changes in equity
For the year ended 30 June 2019
Consolidated
Issued
capital
$
Share based
payment
reserve
$
Foreign
currency
reserve
$
Accumulated
losses
$
Total equity
$
Balance at 1 July 2017
265,934,973
316,558
17,667 (260,489,711)
5,779,487
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 19)
Share issue costs (note 19)
Share issue as part settlement of Block 9
commercial dispute (note 19)
Share based payments (performance rights)
(note 20)
Share based payments (options) (note 20)
Exercise of performance rights (note 20)
-
-
-
7,307,332
(909,647)
250,000
-
-
207,516
-
-
-
-
-
-
122,711
244,274
(207,516)
-
(6,100,290)
(6,100,290)
1,130
-
1,130
1,130
(6,100,290)
(6,099,160)
-
-
-
-
-
-
-
-
-
-
-
-
7,307,332
(909,647)
250,000
122,711
244,274
-
Balance at 30 June 2018
272,790,174
476,027
18,797 (266,590,001)
6,694,997
Consolidated
Issued
capital
$
Share based
payment
reserve
$
Foreign
currency
reserve
$
Accumulated
losses
$
Total equity
$
Balance at 1 July 2018
272,790,174
476,027
18,797 (266,590,001)
6,694,997
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:
Shares issued (note 19)
Share issue cost (note 19)
Exercise of options (note 19)
Exercise of performance rights (note 19)
Share options lapsed (note 20)
Share based payments (options and
performance rights) (note 20)
Share based payments on finance cost (note
20)
-
-
-
-
-
-
-
(3,357,696)
(3,357,696)
(674)
-
(674)
(674)
(3,357,696)
(3,358,370)
3,500,000
(239,063)
199,554
80,000
-
-
-
-
-
-
(80,000)
(10,465)
82,000
973,600
-
-
-
-
-
-
-
-
-
-
-
10,465
-
-
3,500,000
(239,063)
199,554
-
-
82,000
973,600
Balance at 30 June 2019
276,330,665
1,441,162
18,123 (269,937,232)
7,852,718
The above statement of changes in equity should be read in conjunction with the accompanying notes
22
Melbana Energy Limited
Statement of cash flows
For the year ended 30 June 2019
Cash flows from operating activities
Payments to suppliers and employees (inclusive of GST)
Interest received
Interest paid
Research and development tax incentive received
Consolidated
Note
2019
$
2018
$
(2,533,880)
48,604
(272,720)
-
(2,708,817)
24,342
-
357,316
Net cash used in operating activities
31
(2,757,996)
(2,327,159)
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 sale of exploration interest
Proceeds from disposal of property, plant and equipment
Proceeds from security deposits for bank guarantee
Net cash from/(used in) investing activities
Cash flows from financing activities
Proceeds from issue of shares
(Repayment of) / Proceeds from borrowings
Share issue transaction costs
Net cash from/(used in) financing activities
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
13
14
14
19
(1,954)
(472,413)
(72,018)
100,000
3,000
3,271,381
(50,058)
(3,715,813)
(2,937,380)
-
-
-
2,827,996
(6,703,251)
3,699,554
(3,583,847)
(239,063)
7,307,332
2,848,433
(737,333)
(123,356)
9,418,432
(53,356)
3,047,017
369,507
388,022
2,605,008
53,987
Cash and cash equivalents at the end of the financial year
10
3,363,168
3,047,017
The above statement of cash flows should be read in conjunction with the accompanying notes
23
Melbana Energy Limited
Notes to the financial statements
30 June 2019
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 30 August 2019.
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.
Any new or amended Accounting Standards or Interpretations that are not yet mandatory have not been early adopted.
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 2019, the consolidated entity:
●
●
had, for the financial year ending on that date, incurred a net loss after tax of $3,357,696 (2018: $6,100,290);
had, for the financial year ending on that date, net cash outflows from operating and investing activities of $70,000
(2018: $9,030,410);
had cash and cash equivalents on hand of $3,363,168 (2018: $3,047,017); and
had a net working capital position of $2,969,529 (2018: $2,177,378).
●
●
The consolidated entity is involved in the exploration and evaluation of oil and gas tenements. Further expenditure will
be required on these tenements to ascertain whether they contain economically recoverable reserves. The cash reserves
as at 30 June 2019 may not be sufficient to meet the consolidated entity’s planned exploration commitments and activities
for the 12 months from the date of this report. To meet its funding requirements the consolidated entity will rely on taking
appropriate steps, including:
● Meeting its additional obligations by either farm-out or partial sale of the consolidated entity's exploration interests;
●
Raising capital by one of a combination of the following: placement of shares, pro-rata issue to shareholders, the
exercise of outstanding share options, and/or further issue of shares to the public;
In some circumstances, 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 consolidated entity.
●
●
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.
24
Melbana Energy Limited
Notes to the financial statements
30 June 2019
Note 2. Significant accounting policies (continued)
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 2019 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:
·
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.
Power over the investee (i.e. existing rights that give it the current ability to direct the relevant activities of the
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.
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.
25
Melbana Energy Limited
Notes to the financial statements
30 June 2019
Note 2. Significant accounting policies (continued)
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
The consolidated entity recognises revenue as follows:
AASB 15 Revenue from Contracts with Customers
The Consolidated entity has adopted AASB 15 from 1 July 2018. The standard provides a single standard for revenue
recognition. The core principle of the standard is that an entity will recognise revenue to depict the transfer of promised
goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in
exchange for those goods or services.
The Consolidated entity has elected to adopt AASB 15 using the cumulative effect method, with any adjustment required
when transitioning to the new standard being recognised on the 1 July 2018 (date of initial application) in retained earnings.
Comparative figures have not been restated. The consolidated entity has not generated any revenue from contracts with
customers. Therefore, there are no changes in the consolidated entity’s revenue recognition which means there have been
no adjustments made to the opening retained earnings balance.
Other income
Other income is recognised when it is received or when the right to receive payment is established.
Interest income
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.
Research and development tax credits
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, unless the grant received is related to a capital asset in which case the grant is deducted against the
carrying amount of the asset.
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.
26
Melbana Energy Limited
Notes to the financial statements
30 June 2019
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.
27
Melbana Energy Limited
Notes to the financial statements
30 June 2019
Note 2. Significant accounting policies (continued)
AASB 9 Financial Instruments
The Consolidated entity has adopted AASB 9 from 1 July 2018. AASB 9 replaces the provisions of AASB 139 that relate to
the recognition, classification and measurement of financial assets and financial liabilities, derecognition of financial
instruments, impairment of financial assets and hedge accounting.
The adoption of AASB 9 Financial Instruments resulted in changes in accounting policies. There were no changes to the
classification of financial instruments in the financial statements. The new accounting policies are set out below. In
accordance with the transitional provisions in AASB 9 (7.2.15) and (7.2.26), comparative figures have not been restated.
There is no impact on the groups opening retained earnings as at 1 July 2018.
(i) Trade Receivables
Trade receivables are amounts due from customers for goods sold in the ordinary course of business. They are generally
due for settlement within 30 days and therefore are all classified as current. Trade receivables are recognised initially at the
amount of consideration that is unconditional unless they contain significant financing components, when they are
recognised at fair value.
The Consolidated entity holds the trade receivables with the objective to collect the contractual cash flows and therefore
measures them subsequently at amortised cost using the effective interest method. Details about the group’s impairment
policies and the calculation of the loss allowance are provided in (ii) below.
(ii) Allowance for expected credit loss
The consolidated entity applies the AASB 9 simplified approach to measuring expected credit losses which uses a lifetime
expected loss allowance for all trade receivables. To measure the expected credit losses, trade receivables have been
grouped based on shared credit risk characteristics and the days past due.
(iii) Trade and other payables
Trade payables are unsecured and are usually paid within 30 days of recognition. The carrying amounts of trade and other
payables are considered to be the same as their fair values, due to their short-term nature.
(iv) Loans and borrowings
Loans and borrowings are recognised initially at fair value, being the consideration received, less directly attributable
transaction costs, with subsequent measurement at amortised cost using the effective interest rate method. Any gains or
losses arising from non - substantial modifications are recognised immediately in the statement of profit and loss and the
financial liability continues to amortise using the original effective interest rate. 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.
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.
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.
28
Melbana Energy Limited
Notes to the financial statements
30 June 2019
Note 2. Significant accounting policies (continued)
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.
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.
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.
29
Melbana Energy Limited
Notes to the financial statements
30 June 2019
Note 2. Significant accounting policies (continued)
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.
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.
30
Melbana Energy Limited
Notes to the financial statements
30 June 2019
Note 2. Significant accounting policies (continued)
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.
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 2019.
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 16 Leases
This standard is applicable to annual reporting periods beginning on or after 1 January 2019. The standard replaces AASB
117 'Leases' and for lessees will eliminate the classifications of operating leases and finance leases. Subject to exceptions,
a 'right-of-use' asset will be capitalised in the statement of financial position, measured at the present value of the
unavoidable future lease payments to be made over the lease term. The exceptions relate to short-term leases of 12
months or less and leases of low-value assets (such as personal computers and small office furniture) where an
accounting policy choice exists whereby either a 'right-of-use' asset is recognised or lease payments are expensed to profit
or loss as incurred. A liability corresponding to the capitalised lease will also be recognised, adjusted for lease
prepayments, lease incentives received, initial direct costs incurred and an estimate of any future restoration, removal or
dismantling costs. Straight-line operating lease expense recognition will be replaced with a depreciation charge for the
leased asset (included in operating costs) and an interest expense on the recognised lease liability (included in finance
costs). In the earlier periods of the lease, the expenses associated with the lease under AASB 16 will be higher when
compared to lease expenses under AASB 117. However, EBITDA (Earnings Before Interest, Tax, Depreciation and
Amortisation) results will be improved as the operating expense is replaced by interest expense and depreciation in profit
or loss under AASB 16. For classification within the statement of cash flows, the lease payments will be separated into
both a principal (financing activities) and interest (either operating or financing activities) component. For lessor accounting,
the standard does not substantially change how a lessor accounts for leases.
The consolidated entity will adopt this standard from 1 July 2019. As at reporting date, the Group has assessed the impact
of the standard and the expected impacts are as follows:
1.
2.
3.
Increase in assets and liabilities amounting to $177,048 and $178,786 respectively.
Increase in the accumulated losses amounting of $1,737.
It is not expected that there will be any net impact on the consolidated statement of cash flows.
31
Melbana Energy Limited
Notes to the financial statements
30 June 2019
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 2019 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.
32
Melbana Energy Limited
Notes to the financial statements
30 June 2019
Note 4. Operating segments
The consolidated entity operates in the petroleum exploration industry within Australia 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 14.
Note 5. Other income
Net foreign exchange gain
R&D tax incentive
Net refunds from project
Other income
Consolidated
2019
$
2018
$
83,466
-
241,201
35,395
357,316
-
324,667
392,711
R&D tax incentive
Government grant income relates to Research and Development tax incentive received during the financial year. The R&D
Tax Incentive is an entitlement program to help businesses offset some of the costs of conducting research and
development. It is jointly managed by AusIndustry and the Australian Taxation Office.
Other revenue
Other revenue is recognised when it is received or when the right to receive payment is established.
Note 6. Settlement costs
Settlement costs
Consolidated
2019
$
2018
$
-
300,000
33
Melbana Energy Limited
Notes to the financial statements
30 June 2019
Note 7. 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 and outgoing expenses
Investor relations and corporate promotion costs
Travel costs
Depreciation and amortisation expense
Less: Allocation to exploration activities
Note 8. Finance costs
Share based payment on finance cost
Interest expenses
Consolidated
2019
$
2018
$
460,950
1,116,879
64,429
82,000
323,980
68,500
140,821
160,260
49,296
89,273
29,116
(100,857)
498,031
1,736,568
120,709
122,711
315,533
58,600
106,118
149,330
84,913
105,251
21,473
(965,547)
2,484,647
2,353,690
Consolidated
2019
$
2018
$
973,600
272,720
-
96,105
1,246,320
96,105
Share based payment on finance cost
During the previous financial year, the Chairman of the Company, Mr Andrew Purcell, provided a personal guarantee in
connection with a loan made by a third party to the Company (refer to note 16). As consideration for the provision of the
personal guarantee, the Company issued 80,000,000 options to Mr Purcell on 13 August 2018, following shareholders’
approval at a General Meeting held on 9 August 2018.
The options were independently valued by an external expert and the full non-cash valuation of $973,600 was booked as a
finance cost during the year and measured in accordance with AASB 2. The options have an exercise price of $0.022 (2.2
cents) each. The Consolidated entity will receive $1,760,000 cash from Mr. Purcell if all options are exercised.
34
Melbana Energy Limited
Notes to the financial statements
30 June 2019
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%
Tax effect amounts which are not deductible/(taxable) in calculating taxable income:
Share-based payments
Write off/impairment of overseas exploration expenses
Non-deductible expenses
Current year tax losses not recognised
Income tax expense
Note 10. Current assets - cash and cash equivalents
Cash at bank
Short term deposits
Note 11. Current assets - other receivables
Other receivables
Prepayments
GST receivable
Consolidated
2019
$
2018
$
-
-
71,961
71,961
(3,357,696)
(6,028,329)
(923,366)
(1,657,790)
290,290
-
-
33,746
735,786
944
(633,076)
633,076
(887,314)
959,275
-
71,961
Consolidated
2019
$
2018
$
3,363,168
-
3,002,717
44,300
3,363,168
3,047,017
Consolidated
2019
$
2018
$
7,500
83,070
90,570
33,630
-
33,630
16,444
29,503
107,014
63,133
35
Melbana Energy Limited
Notes to the financial statements
30 June 2019
Note 12. Current assets - other financial assets
Term deposits
Security deposits represent
Consolidated
2019
$
2018
$
72,018
3,073,078
- a term deposit of $27,718 (2018: Nil) lodged as security for the short term lease.
- The security deposit of $3,073,000 was made, during the 30 June 2018 financial year, 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. During the year, the Company used the proceeds from cash security deposit to repay the short-term loan
from Trans Asia Private Capital Limited.
Note 13. Non-current assets - plant and equipment
Office equipment - at cost
Less: Accumulated depreciation
Consolidated
2019
$
2018
$
251,007
(210,242)
645,566
(544,325)
40,765
101,241
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 2017
Additions
Depreciation expense
Balance at 30 June 2018
Additions
Disposals
Depreciation expense
Balance at 30 June 2019
Note 14. Non-current assets - exploration and evaluation
Exploration and evaluation Block 9 Cuba - at cost
Exploration and evaluation PEP 51153 - at cost
36
Plant &
equipment
$
72,656
50,058
(21,473)
101,241
1,954
(33,314)
(29,116)
40,765
Consolidated
2019
$
2018
$
4,842,424
4,370,011
-
100,000
4,842,424
4,470,011
Melbana Energy Limited
Notes to the financial statements
30 June 2019
Note 14. 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 2017
Expenditure during the year
Exchange differences
Write off/impairment of assets
Costs expensed
Balance at 30 June 2018
Expenditure during the year
Disposals
Balance at 30 June 2019
Block 9 Cuba
$
AC/P50 &
AC/P51
$
PEP 51153
$
Other
$
Total
$
3,096,453
1,273,558
-
-
-
4,370,011
472,413
-
4,842,424
632,500
-
-
(632,500)
-
88,238
2,475,558
(33,302)
(2,430,494)
-
-
628,216
-
-
(628,216)
3,817,191
4,377,332
(33,302)
(3,062,994)
(628,216)
-
-
-
-
100,000
-
(100,000)
-
-
-
-
-
4,470,011
472,413
(100,000)
4,842,424
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 2019 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. On 26 April 2019 the consolidated entity completed sale of PEP 51153 to a subsidiary of TAG Oil for a cash
consideration of $100,000.
As at 30 June 2019, the Block 9 Cuban asset is currently without a farmout partner. Work is ongoing to secure an
alternative farmout partner following the termination of the AGMI arrangement. An extension to the sub period has been
approved by CUPET and forwarded to a higher competent authority for consideration.
Note 15. Current liabilities - trade and other payables
Trade payables
Other payables
Refer to note 22 for further information on financial instruments.
Consolidated
2019
$
2018
$
166,773
220,809
406,194
47,750
387,582
453,944
37
Melbana Energy Limited
Notes to the financial statements
30 June 2019
Note 16. Current liabilities - borrowings
Short term loan payable
Refer to note 22 for further information on financial instruments.
Consolidated
2019
$
2018
$
-
3,098,829
During the financial year ended 30 June 2018, the Company obtained a US$2.5 million loan facility from Trans Asia 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 were:
1. Annualised interest rate of 15%;
2. Maturity Date of the loan was 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 26 Related party
transactions.
The Company repaid this loan in full on 4 January 2019 using proceeds from cash security deposit used to support the
Bank Guarantee in relation to Block 9 Cuba.
Note 17. Current liabilities - provisions
Annual leave
Long service leave
Employee benefits
Consolidated
2019
$
2018
$
89,255
95,834
-
88,819
112,336
251,922
185,089
453,077
Employee benefits
The provision represents the obligation to pay a termination payment in relation to an executive who ceased employment
with the consolidated entity in the previous financial year.
Note 18. Non-current liabilities - provisions
Long service leave
Note 19. Equity - issued capital
Consolidated
2019
$
2018
$
-
53,633
Ordinary shares - fully paid
1,875,505,915
1,665,750,480 276,330,665 272,790,174
Consolidated
2019
Shares
2018
Shares
2019
$
2018
$
38
Melbana Energy Limited
Notes to the financial statements
30 June 2019
Note 19. Equity - issued capital (continued)
Movements in ordinary share capital
Details
Date
Shares
Issue price
$
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)
1 July 2017
18 August 2017
23 August 2017
13 September 2017
15 September 2017
21 December 2017
Balance
Share issue upon exercise of performance rights
Share issue upon exercise of options
Share issue upon exercise of options
Share issue upon exercise of options
Share issue upon exercise of options
Share placement*
Share placement*
Share issue costs (net of tax)
30 June 2018
6 July 2018
13 August 2018
21 August 2018
28 August 2018
5 September 2018
27 September 2018
21 November 2018
953,243,886
20,940,032
178,733,229
152,185,161
189,814,839
20,833,333
150,000,000
-
1,665,750,480
5,333,333
3,141,226
4,761,215
1,247,988
827,228
188,817,582
5,626,863
-
$0.0000
$0.0100
$0.0100
$0.0100
$0.0000
$0.0140
$0.0000
$0.0000
$0.0200
$0.0200
$0.0200
$0.0200
$0.0180
$0.0180
$0.0000
265,934,973
207,516
1,787,332
1,521,852
1,898,148
250,000
2,100,000
(909,647)
272,790,174
80,000
62,825
95,224
24,960
16,545
3,398,716
101,284
(239,063)
Balance
30 June 2019
1,875,505,915
276,330,665
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.
*The Company issued 62,938,202 options and 1,875,621 options as part of the share placement during the year. Refer to
note 33 Share based payments for further details on these and other options issued.
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.
39
Melbana Energy Limited
Notes to the financial statements
30 June 2019
Note 19. Equity - issued capital (continued)
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 2018 Annual Report.
Note 20. Equity - reserves
Foreign currency reserve
Share-based payments reserve
Consolidated
2019
$
2018
$
18,123
1,441,162
18,797
476,027
1,459,285
494,824
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 2017
Foreign currency translation
Cost of share based payments
Exercise of performance rights
Issues of options to service providers
Balance at 30 June 2018
Foreign currency translation
Share options lapsed
Exercise of performance rights
Share based payments (options and performance rights)
Share based payments on finance cost
Balance at 30 June 2019
Note 21. Equity - dividends
Share based
payment
reserve
$
Foreign
currency
reserve
$
316,558
-
122,711
(207,516)
244,274
476,027
-
(10,465)
(80,000)
82,000
973,600
17,667
1,130
-
-
-
18,797
(674)
-
-
-
-
Total
$
334,225
1,130
122,711
(207,516)
244,274
494,824
(674)
(10,465)
(80,000)
82,000
973,600
1,441,162
18,123
1,459,285
There were no dividends paid, recommended or declared during the current or previous financial year.
40
Melbana Energy Limited
Notes to the financial statements
30 June 2019
Note 22. 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 2019. 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 2019 (2018: $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.
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
41
Consolidated
2019
$
2018
$
1,378,571
-
1,895,779
3,073,078
1,378,571
4,968,857
Consolidated
2019
$
2018
$
217,287
-
65,973
3,098,829
217,287
3,164,802
Consolidated
2019
$
2018
$
63
62,646
Consolidated
2019
$
2018
$
1,617
851
Melbana Energy Limited
Notes to the financial statements
30 June 2019
Note 22. Financial instruments (continued)
EUR financial liabilities
Trade creditors
Consolidated
2019
$
2018
$
-
31,809
The consolidated entity had net assets denominated in foreign currencies of $1,162,964 as at 30 June 2019 (2018: of
$1,835,743). Based on this exposure, had the Australian dollars strengthened by 5%/weakened by 5% (2018:
strengthened by 5%/weakened by 5%) against these foreign currencies with all other variables held constant, the
consolidated entity's profit before tax for the year would have been $55,379 lower/$61,208 higher (2018: $96,618
lower/$87,416 higher) and equity would have been $55,379 lower/$61,208 higher (2018: $96,618 lower/$87,416 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:
Consolidated - 2019
% change
AUD strengthened
Effect on
profit before
tax
Effect on
equity
% change
AUD weakened
Effect on
profit before
tax
Effect on
equity
US dollars net financial
assets/liabilities
NZ dollars net financial
assets/liabilities
Euros net financial
assets/liabilities
5%
5%
5%
(55,299)
(55,299)
(3)
(77)
(3)
(77)
5%
5%
5%
61,120
61,120
3
85
3
85
(55,379)
(55,379)
61,208
61,208
Consolidated - 2018
% change
AUD strengthened
Effect on
profit before
tax
Effect on
equity
% change
AUD weakened
Effect on
profit before
tax
Effect on
equity
US dollars net financial
assets/liabilities
NZ dollars net financial
assets/liabilities
Euros net financial
assets/liabilities
5%
5%
5%
85,907
85,907
2,983
2,983
(1,474)
(1,474)
5%
5%
5%
(94,950)
(94,950)
(3,297)
(3,297)
1,629
1,629
87,416
87,416
(96,618)
(96,618)
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.
42
Melbana Energy Limited
Notes to the financial statements
30 June 2019
Note 22. Financial instruments (continued)
The consolidated entity had no interest bearing liabilities at 30 June 2019. However, at 30 June 2018 the consolidated
entity had in place a significant short term loan payable, which had a fixed interest rate of 15% per annum. This loan was
repaid in full during the year. The consolidated entity also had in place a significant short term deposit with a fixed interest
rate of 1.75% per annum (2018: 0.72%).
Credit risk
The consolidated entity has adopted a lifetime expected loss allowance in estimating expected credit losses to trade
receivables through the use of a provisions matrix using fixed rates of credit loss provisioning. These provisions are
considered representative across all customers of the consolidated entity based on recent sales experience, historical
collection rates and forward-looking information that is available.
Generally, trade receivables are written off when there is no reasonable expectation of recovery. Indicators of this include
the failure of a debtor to engage in a repayment plan, no active enforcement activity and a failure to make contractual
payments for a period greater than 1 year.
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 - 2019
Non-derivatives
Non-interest bearing
Trade and other payables
Employee provision
Total non-derivatives
Weighted
average
interest rate
%
1 year or
less
$
Between 1
and 2 years
$
Between 2
and 5 years Over 5 years
$
$
Remaining
contractual
maturities
$
-
-
387,582
185,089
572,671
-
-
-
-
-
-
-
-
-
387,582
185,089
572,671
43
Melbana Energy Limited
Notes to the financial statements
30 June 2019
Note 22. Financial instruments (continued)
Consolidated - 2018
Non-derivatives
Non-interest bearing
Trade and other payables
Employee provision
Interest-bearing - fixed rate
Other loans
Total non-derivatives
Weighted
average
interest rate
%
1 year or
less
$
Between 1
and 2 years
$
Between 2
and 5 years Over 5 years
$
$
Remaining
contractual
maturities
$
-
-
453,944
453,077
15.00%
3,098,829
4,005,850
-
-
-
-
-
-
-
-
-
-
-
-
453,944
453,077
3,098,829
4,005,850
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.
Note 23. Key management personnel disclosures
Compensation
The aggregate compensation made 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 24. Remuneration of auditors
Consolidated
2019
$
2018
$
545,873
20,129
11,681
-
13,153
1,039,456
60,147
(24,689)
251,922
62,680
590,836
1,389,516
During the financial year the following fees were paid or payable for services provided by Grant Thornton Audit Pty Ltd, the
auditor of the Company:
Audit services - Grant Thornton Audit Pty Ltd (2018: Ernst & Young)
Audit or review of the financial statements
Other services - Grant Thornton Audit Pty Ltd (2018: Ernst & Young)
Tax services
Consolidated
2019
$
2018
$
56,000
58,600
7,500
9,000
63,500
67,600
Audit and tax fees paid for the year ended 30 June 2018 were paid to Ernst & Young. Grant Thornton was appointed as the
Company auditor on 29 January 2019 following the resignation of Ernst & Young.
44
Melbana Energy Limited
Notes to the financial statements
30 June 2019
Note 25. Commitments
Lease commitments - operating
Committed at the reporting date but not recognised as liabilities, payable:
Within one year
One to five years
Consolidated
2019
$
2018
$
67,828
124,223
131,000
-
192,051
131,000
Operating lease commitments comprises contracted amounts for office rental under a non-cancellable operating lease
expiring within 3 year with an option to extend. The lease has an escalation clause.
Guarantee
The consolidated entity has provided guarantees of $27,718 (2018: $44,300) at 30 June 2019 for lease of premises.
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.
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. On 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 2 October 2019) to fully fund the first well in the WA-488-P permit in return for an 80%
participating interest in the permit.
45
Melbana Energy Limited
Notes to the financial statements
30 June 2019
Note 25. 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 the Cuban
regulatory authority of commitment to Block 9 second exploration sub-period.
In May 2019, the Company applied to CUPET to extend the second exploration sub-period by one year to November 2020
and to also extend the waiver of the requirement to provide a financial guarantee for 50% of the work commitments for this
sub-period to the requested extension date. CUPET has agreed to these requests and forwarded the proposed
amendments to a higher competent authority whose approval is required for such changes.
As at 30 June 2019, the Block 9 Cuban asset is currently without a farmout partner. Work is ongoing to secure an
alternative farmout partner following the termination of the AGMI arrangement. An extension to the sub period has been
approved by CUPET and forwarded to a higher competent authority for consideration.
Summary
For the current sub-period of Block 9 the remaining committed activity is the drilling of one well. The cost of this activity is
not defined and depends on whether the current active farmout process for Block 9 is successful.
There are no material commitments or contingencies other than as set out in this note.
Note 26. Related party transactions
Parent entity
Melbana Energy Limited is the parent entity.
Subsidiaries
Interests in subsidiaries are set out in note 28.
Key management personnel
Disclosures relating to key management personnel are set out in note 23 and the remuneration report included in the
Directors' report.
Transactions with related parties
The following transactions occurred with related parties:
Payment for goods and services:
Payment for consulting services*
Consolidated
2019
$
2018
$
15,500
-
*
Payments for consulting services represent the payments made to Springhead Petroleum Pty Ltd, an entity
associated with Mr Peter Stickland.
46
Melbana Energy Limited
Notes to the financial statements
30 June 2019
Note 26. Related party transactions (continued)
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 16. As consideration for the provision of the personal guarantee, the Company
issued 80,000,000 options to Mr Purcell on 13 August 2018. As consideration for the provision of the personal guarantee,
the Company issued 80,000,000 options to Mr Purcell on 13 August 2018, following shareholders' approval at a General
Meeting held on 9 August 2018. The options were independently valued by external expert and the full non-cash valuation
of $973,600 was recognised as finance cost for the year ended 30 June 2019 and measured in accordance with AASB 2.
The options have an exercise price of $0.022 (2.2 cents) each. The Consolidated entity will receive $1,760,000 cash from
Mr. Purcell if all options are exercised.
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.
Note 27. 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
47
Parent
2019
$
2018
$
(7,338,216)
(6,567,397)
(7,338,216)
(6,567,397)
Parent
2019
$
2018
$
3,541,146
10,234,642
8,424,343
10,591,379
572,670
3,978,407
572,670
4,032,040
273,158,138 269,617,648
476,027
(266,747,627) (263,534,336)
1,441,162
7,851,673
6,559,339
Melbana Energy Limited
Notes to the financial statements
30 June 2019
Note 27. Parent entity information (continued)
Guarantees entered into by the parent entity in relation to the debts of its subsidiaries
The parent entity had no guarantees in relation to the debts of its subsidiaries as at 30 June 2019 and 30 June 2018.
Contingent liabilities
The parent entity had no contingent liabilities as at 30 June 2019 and 30 June 2018.
Capital commitments - Property, plant and equipment
The parent entity had no capital commitments for property, plant and equipment as at 30 June 2019 and 30 June 2018.
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.
Note 28. 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
Principal place of business /
Country of incorporation
Ownership interest
2018
2019
%
%
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
New Zealand
-
100%
100%
-
-
-
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
*
These entities were dormant and had no assets for distribution. The Company liquidated these entities during the
year.
Note 29. Interests in joint operations
Name
PEP 51153*
Principal place of business /
Country of incorporation
Ownership interest
2018
2019
%
%
New Zealand
-
30%
*
Melbana Energy, through its wholly-owned subsidiary, MEO New Zealand Pty Limited, held a 30% interest in the
PEP 51153 in New Zealand. The principal activity of the joint operation was exploration, development and production
of hydrocarbons. On 26 April 2019 the consolidated entity sold PEP 51153 to a subsidiary of TAG Oil.
48
Melbana Energy Limited
Notes to the financial statements
30 June 2019
Note 30. Events after the reporting period
On 15 July 2019, the Company made a conditional intention to make a takeover offer (Offer) for 100% of the ordinary
shares in Metgasco Limited (ASX: MEL) (Metgasco). On 25 July 2019, the Offer was made unconditional following ASIC
granting a modification of section 629 of the Corporations Act 2001 (Cth) to include as a defeating condition of the Offer the
receipt of Melbana shareholder approval for the purposes of Listing Rule 10.1 to permit M&A Advisory Pty Ltd (being a
Metgasco shareholder associated with Andrew Purcell, a director of Melbana) to participate under the Offer (or a waiver of
that requirement or confirmation shareholder approval is not required) (Listing Rule 10.1 Condition).
The last day of employment of Robert Zammit, Chief Executive Officer of the Company, was 19 July 2019.
No other matters or circumstances have arisen since 30 June 2019 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.
Note 31. Reconciliation of loss after income tax to net cash used in operating activities
Loss after income tax expense for the year
(3,357,696)
(6,100,290)
Consolidated
2019
$
2018
$
Adjustments for:
Depreciation and amortisation
Net loss on disposal of property, plant and equipment
Share-based payments
Foreign exchange differences
Exploration expenditure written-off/down
Deferred income tax expense
Interest expense capitalised to loan account
Share based payment on finance cost
Change in operating assets and liabilities:
Increase in other receivables
Decrease in prepayments
Increase/(decrease) in trade and other payables
Increase/(decrease) in provisions
Net cash used in operating activities
Note 32. Earnings per share
29,116
30,314
82,000
(83,466)
-
-
-
973,600
21,473
-
372,717
(34,266)
3,062,994
71,961
96,105
-
(56,940)
13,059
(66,362)
(321,621)
(40,025)
10,633
142,393
69,146
(2,757,996)
(2,327,159)
Consolidated
2019
$
2018
$
Loss after income tax attributable to the owners of Melbana Energy Limited
(3,357,696)
(6,100,290)
Weighted average number of ordinary shares used in calculating basic earnings per share
1,825,745,057
1,484,600,383
Weighted average number of ordinary shares used in calculating diluted earnings per share
1,825,745,057
1,484,600,383
Number
Number
Basic earnings per share
Diluted earnings per share
49
Cents
Cents
(0.18)
(0.18)
(0.41)
(0.41)
Melbana Energy Limited
Notes to the financial statements
30 June 2019
Note 32. Earnings per share (continued)
For financial years ended 30 June 2019 and 30 June 2018 outstanding options and performance rights are anti-dilutive and
are therefore excluded from the calculation of diluted earnings per share.
Note 33. Share based payments (options and rights)
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 previous financial year, the Chairman of the Company, Mr Andrew Purcell, provided a personal guarantee in
connection with a loan made by a third party to the Company (refer to note 16). As consideration for the provision of the
personal guarantee, the Company issued 80,000,000 options to Mr Purcell on 13 August 2018, following shareholders'
approval at a General Meeting held on 9 August 2018. The options were independently valued by external expert and the
full non-cash valuation of $973,600 was booked as finance cost during the year, and measured in accordance with AASB
2. The options have an exercise price of $0.022 (2.2 cents) each.
Set out below are summaries of options granted under the plan, and to service providers.
2019
Grant date
Expiry date
03/11/2016
28/03/2017
23/11/2017
24/11/2017
09/08/2018
27/09/2018
21/11/2018
03/11/2019
27/09/2020
23/11/2020
27/09/2020
04/08/2020
27/03/2020
27/03/2020
Exercise
price
Balance at
the start of
the year
Granted
Exercised
Forfeited
$0.0650
$0.0320
$0.0180
$0.0320
$0.0220
$0.0300
$0.0300
4,000,000
9,250,000
20,000,000
3,000,000
-
-
-
36,250,000
-
-
-
-
80,000,000
62,939,202
1,875,621
144,814,823
-
-
-
-
-
-
-
-
-
(1,000,000)
-
-
-
-
-
(1,000,000)
Balance at
the end of
the year
4,000,000
8,250,000
20,000,000
3,000,000
80,000,000
62,939,202
1,875,621
180,064,823
Weighted average exercise price
$0.0260
$0.0250
$0.0000
$0.0320
$0.0260
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
Forfeited
$0.0650
$0.0320
$0.0180
$0.0320
4,000,000
9,250,000
-
-
13,250,000
-
-
20,000,000
3,000,000
23,000,000
-
-
-
-
-
Balance at
the end of
the year
-
-
-
-
-
4,000,000
9,250,000
20,000,000
3,000,000
36,250,000
Weighted average exercise price
$0.0420
$0.0190
$0.0000
$0.0000
$0.0280
50
Melbana Energy Limited
Notes to the financial statements
30 June 2019
Note 33. Share based payments (options and rights) (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
27/09/2018
21/11/2018
03/11/2019
27/09/2020
23/11/2020
27/09/2020
27/03/2020
27/03/2020
2019
Number
2018
Number
4,000,000
8,250,000
20,000,000
3,000,000
62,939,202
1,875,621
4,000,000
4,625,000
20,000,000
1,500,000
-
-
100,064,823
30,125,000
The weighted average share price during the financial year was $0.0155 (2018: $.0132).
The weighted average remaining contractual life of options outstanding at the end of the financial year was 1 year (2018:
2.23 years).
Set out below are summaries of performance rights granted under the plan:
2019
Grant date
Expiry date
Exercise
price
Balance at
the start of
the year
Granted
Exercised
Forfeited
07/12/2015
10/05/2018
29/11/2018
30/04/2021
$0.0000
$0.0000
5,333,333
6,763,158
12,096,491
-
-
-
(5,333,333)
-
(5,333,333)
2018
Grant date
Expiry date
07/12/2015
04/02/2016
10/05/2018
29/11/2018
31/01/2019
30/04/2021
Exercise
price
Balance at
the start of
the year
Granted
Exercised
Forfeited
$0.0000
$0.0000
$0.0000
5,333,333
20,940,032
-
26,273,365
-
-
6,763,158
6,763,158
-
(20,940,032)
-
(20,940,032)
Balance at
the end of
the year
-
6,763,158
6,763,158
Balance at
the end of
the year
5,333,333
-
6,763,158
12,096,491
-
-
-
-
-
-
-
Set out below are the performance rights exercisable at the end of the financial year:
Grant date
Expiry date
07/12/2015
11/05/2018
29/11/2018
30/04/2021
2019
Number
2018
Number
-
6,763,158
5,333,333
-
6,763,158
5,333,333
The weighted average remaining contractual life of performance rights outstanding at the end of the financial year was 1.84
years (2018: 1.77 years).
51
Melbana Energy Limited
Notes to the financial statements
30 June 2019
Note 33. Share based payments (options and rights) (continued)
For the performance rights granted during the previous 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
$0.0100
$0.0000
191.900%
-
2.175%
$0.0090
52
Melbana Energy Limited
Directors' declaration
30 June 2019
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 2019 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
30 August 2019
53
Independent Auditor’s Report
To the Members of Melbana Energy Limited
Report on the audit of the financial report
Collins Square, Tower 5
727 Collins Street
Melbourne VIC 3008
Correspondence to:
GPO Box 4736
Melbourne VIC 3001
T +61 3 8320 2222
F +61 3 8320 2200
E info.vic@au.gt.com
W www.grantthornton.com.au
Opinion
We have audited the financial report of Melbana Energy Limited (the Company) and its subsidiaries (the Group), which
comprises the consolidated statement of financial position as at 30 June 2019, the consolidated statement of profit or loss
and other comprehensive income, consolidated statement of changes in equity and consolidated statement of cash flows
for the year then ended, and notes to the consolidated financial statements, including a summary of significant accounting
policies, and the Directors’ declaration.
In our opinion, the accompanying financial report of the Group is in accordance with the Corporations Act 2001, including:
a giving a true and fair view of the Group’s financial position as at 30 June 2019 and of its performance for the year
ended on that date; and
b complying with Australian Accounting Standards and the Corporations Regulations 2001.
Basis for opinion
We conducted our audit in accordance with Australian Auditing Standards. Our responsibilities under those standards are
further described in the Auditor’s Responsibilities for the Audit of the Financial Report section of our report. We are
independent of the Group in accordance with the auditor independence requirements of the Corporations Act 2001 and
the ethical requirements of the Accounting Professional and Ethical Standards Board’s APES 110 Code of Ethics for
Professional Accountants (the Code) that are relevant to our audit of the financial report in Australia. We have also fulfilled
our other ethical responsibilities in accordance with the Code.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Material uncertainty related to going concern
We draw attention to Note 2 in the financial statements, which indicates that the Group incurred a net loss of $3,357,696 and
had net cash outflows from operating and investing activities of $70,000 during the year ended 30 June 2019. As stated in
Note 2, these events or conditions, along with other matters as set forth in Note 2, indicate that a material uncertainty exists
that may cast doubt on the Group’s ability to continue as a going concern. Our opinion is not modified in respect of this matt er.
Key audit matters
Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the financial
report of the current period. These matters were addressed in the context of our audit of the financial report as a whole, an d in
forming our opinion thereon, and we do not provide a separate opinion on these matters.
Grant Thornton Audit Pty Ltd ACN 130 913 594
a subsidiary or related entity of Grant Thornton Australia Ltd ABN 41 127 556 389
www.grantthornton.com.au
‘Grant Thornton’ refers to the brand under which the Grant Thornton member firms provide assurance, tax and advisory services to their clients
and/or refers to one or more member firms, as the context requires. Grant Thornton Australia Ltd is a member firm of Grant Th ornton International
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delivered by the member firms. GTIL does not provide services to clients. GTIL and its member firms are not agents of, and do not obligate one
another and are not liable for one another’s acts or omissions. In the Australian context only, the use of the term ‘Grant Thornton’ may refer to
Grant Thornton Australia Limited ABN 41 127 556 389 and its Australian subsidiaries and related entities. GTIL is not an Aust ralian related entity to
Grant Thornton Australia Limited.
Liability limited by a scheme approved under Professional Standards Legislation.
54
In addition to the matter described in the Material uncertainty related to going concern section, we have determined the
matters described below to be the key audit matters to be communicated in our report.
Key audit matter
How our audit addressed the key audit matter
Exploration and Evaluation Assets – valuation (Note 14)
The assessment of the carrying value of the capitalised
exploration and evaluation costs is subjective based on
Melbana Energy Limited’s ability, and intention, to continue to
explore the asset. As per AASB 6 Exploration for and
Evaluation of Mineral Resources, the carrying value may also
be impacted by the results of exploration work indicating
whether the mineral reserves are likely to be commercially
viable for extraction. This creates a risk that the amounts
stated in the financial statements may not be recoverable.
The Company is required to assess at each reporting date if
there are any triggers for impairment which may suggest the
carrying value is in excess of the recoverable value. Any
impairment losses are then measured in accordance with
AASB 136 Impairment of Assets.
AASB 6 requires exploration and evaluation asset to be
assessed for impairment when facts and circumstances
suggest that the carrying amount of an exploration and
evaluation asset may exceed its recoverable amount. AASB 6
provides a list of 4 indicators, however that list is not
exhaustive and therefore subjectivity is involved in the
assessment.
This area is a key audit matter as significant judgement is
required in determining whether the facts and circumstances
suggest that the carrying amount of an exploration and
evaluation asset may exceed its recoverable amount, and
then consequently in measuring any impairment loss.
Valuation of share-based payments (Notes 19 and 20)
AASB 2 Share-based payments requires share-based
payments issued to be to be valued at the date of grant and
recognised over the vesting period. The valuation of share-
based payments is a risk due to the complex basis upon which
the value at the grant date is determined.
During the period, the Group issued share options and
performance rights to Directors and employees. In addition,
during the prior year, the Group issued share options and
performance rights with multiple vesting conditions. The Group
engaged a valuation expert during the current period to
provide a valuation of these share-based payments.
This area is a key audit matter due to the inherent subjectivity
involved in the Group making judgments relating to the key
inputs and assumptions used to value the options, as well as
the judgements required relating to vesting conditions.
Our procedures included, amongst others:
• Obtaining management's reconciliation of capitalised
exploration and evaluation expenditure and agreeing to the
general ledger;
• Evaluating the accuracy of capitalised costs by
substantively testing a sample of capitalised expenditure for
the period, and assessing whether the capitalisation was in
line with AASB 6;
• Conducting a detailed review of management's assessment
of trigger events prepared in accordance with AASB 6
including tracing projects to statutory registers, exploration
licenses and third party confirmations to determine whether
a right of tenure existed and enquiring of management
regarding their intentions to carry out exploration and
evaluation activity in the relevant exploration area;
• Understanding whether any data exists to suggest that the
carrying value of these exploration and evaluation assets
are unlikely to be recovered through development or sale;
and
• Reviewing the appropriateness of the related disclosures
within the financial statements.
Our procedures included, amongst others:
• Agreeing the issue of instruments to relevant option and
right agreements, and evaluating the awards and their
accounting treatment for compliance with AASB 2;
• Evaluating the qualifications, expertise and objectivity of the
external specialist in order to assess their professional
competence and capabilities as they relate to the work
undertaken;
• Reviewing and testing the assumptions applied by: (a)
verifying the reasonableness and historical accuracy and
(b) agreeing certain key inputs to the relevant terms within
the share option agreement;
• Testing the mathematical accuracy of the valuation
provided by the specialist and utilising an auditor’s
valuation specialist to review the appropriateness of the
model used in the valuation of the share-based payments;
• Evaluating and challenging management’s judgements
regarding vesting conditions; and
• Assessing the adequacy of the Group’s disclosures in
respect to share-based payments.
55
Information other than the financial report and auditor’s report thereon
The Directors are responsible for the other information. The other information comprises the information included in the
Group’s annual report for the year ended 30 June 2019, but does not include the financial report and our auditor’s report
thereon.
Our opinion on the financial report does not cover the other information and we do not express any form of assurance
conclusion thereon.
In connection with our audit of the financial report, our responsibility is to read the other information and, in doing so, consider
whether the other information is materially inconsistent with the financial report or our knowledge obtained in the audit or
otherwise appears to be materially misstated.
If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are
required to report that fact. We have nothing to report in this regard.
Responsibilities of the Directors for the financial report
The Directors of the Company are responsible for the preparation of the financial report that gives a true and fair view in
accordance with Australian Accounting Standards and the Corporations Act 2001 and for such internal control as the Directors
determine is necessary to enable the preparation of the financial report that gives a true and fair view and is free from mat erial
misstatement, whether due to fraud or error.
In preparing the financial report, the Directors are responsible for assessing the Group’s ability to continue as a going concern,
disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the
Directors either intend to liquidate the Group or to cease operations, or have no realistic alternative but to do so.
Auditor’s responsibilities for the audit of the financial report
Our objectives are to obtain reasonable assurance about whether the financial report as a whole is free from material
misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance
is a high level of assurance, but is not a guarantee that an audit conducted in accordance with the Australian Auditing
Standards will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are
considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions
of users taken on the basis of this financial report.
A further description of our responsibilities for the audit of the financial report is located at the Auditing and Assurance
Standards Board website at: http://www.auasb.gov.au/auditors_responsibilities/ar1.pdf. This description forms part of our
auditor’s report.
Report on the remuneration report
Opinion on the remuneration report
We have audited the Remuneration Report included in the Directors’ report for the year ended 30 June 2019.
In our opinion, the Remuneration Report of Melbana Energy Limited, for the year ended 30 June 2019 complies with
section 300A of the Corporations Act 2001.
56
Responsibilities
The Directors of the Company are responsible for the preparation and presentation of the Remuneration Report in accordance
with section 300A of the Corporations Act 2001. Our responsibility is to express an opinion on the Remuneration Report,
based on our audit conducted in accordance with Australian Auditing Standards.
Grant Thornton Audit Pty Ltd
Chartered Accountants
B A Mackenzie
Partner – Audit & Assurance
Melbourne, 30 August 2019
57
Melbana Energy Limited
Shareholder information
30 June 2019
The shareholder information set out below was applicable as at 28 August 2019.
Distribution of equity securities
Analysis of number of equity security holders by size of holding:
1 to 1,000
1,001 to 5,000
5,001 to 10,000
10,001 to 100,000
100,001 and over
Holding less than a marketable parcel
Equity security holders
Number of
holders of
performance
rights
Number of
holders of
options over
ordinary
shares
Number of
holders of
ordinary
shares
-
-
-
-
2
2
-
-
-
-
-
49
49
-
432
1,094
1,089
2,664
1,613
6,892
4,393
Twenty largest quoted equity security holders
The names of the twenty largest security holders of quoted equity securities are listed below:
Ordinary shares
Number held
% of total
shares
issued
113,917,478
62,666,307
26,111,111
25,623,183
25,288,889
25,000,000
24,200,000
23,150,431
21,005,000
20,622,531
19,384,094
19,253,947
16,597,279
16,000,000
15,555,556
13,714,551
13,691,242
13,233,833
12,751,757
12,000,000
6.07
3.34
1.39
1.37
1.35
1.33
1.29
1.23
1.12
1.10
1.03
1.03
0.88
0.85
0.83
0.73
0.73
0.71
0.68
0.64
519,767,189
27.70
HSBC Custody Nominees (Australia) Limited
M&A Advisory Pty Ltd
Mr John Oldani
Ms Hong Nhung Nguyen
Mr Matthew Dean Marshall
Tets Pty Ltd
Five Elements Design Pty Ltd
Mr Jason Meinhardt
Mrs Danielle Gordon
Mrs Cathy Ann Bender
BNP Paribas Nominees Pty Ltd
Miss Anita Tsang & Mr Bradley Garth Wright
Mrs Susan Jane Stickland
Esselmont Pty Limited
Budworth Capital Pty Ltd
Mr David Coghill
Valui Pty Ltd
Mr Aaron Francis Quirk
North West Six Pty Ltd
First Growth Funds Limited
58
Melbana Energy Limited
Shareholder information
30 June 2019
Unquoted equity securities
Options over ordinary shares
Performance rights
Number
on issue
Number
of holders
180,064,823
4,178,209
49
2
The following persons hold 20% or more of unquoted equity securities (options over ordinary shares):
Name
Andrew Purcell
Zenix Nominees Pty Ltd
Class
Options over ordinary shares
Options over ordinary shares
Number held
81,875,621
24,000,000
Substantial holders
There are no substantial holders in the Company.
(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.
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60
Melbana Energy Limited
L3, 350 Collins St,
Melbourne Victoria 3000 Australia
Telephone: +61 (3) 8625 6000
Email: admin@melbana.com
ABN 43 066 447 952
melbana.com
2019