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
ANNUAL REPORT
2020
Melbana Energy Limited
Contents
30 June 2020
Corporate directory
Directors' report
Auditor's independence declaration
Consolidated statement of profit or loss and other comprehensive income
Consolidated statement of financial position
Consolidated statement of changes in equity
Consolidated statement of cash flows
Notes to the consolidated financial statements
Directors' declaration
Independent auditor's report to the members of Melbana Energy Limited
Shareholder information
1
2
16
17
18
19
20
21
54
55
58
Melbana Energy Limited
Corporate directory
30 June 2020
Directors
Andrew Purcell (Executive Chairman)
Michael Sandy (Non-Executive Director)
Peter Stickland (Non-Executive Director)
Company secretary
Melanie Leydin
Notice of annual general meeting
The Company will hold its annual general meeting of shareholders on 19 November
2020
Registered office
Principal place of business
Share register
Auditor
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
Level 1, 333 Collins Street
Melbourne, Victoria 3000 Australia
Telephone +61 (3) 9615 9800
Grant Thornton Audit Pty Ltd
Collins Square, Tower 5
727 Collins Street
Melbourne VIC 3008 Australia
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 2020
The Directors present their report, together with the financial statements, on the consolidated entity (referred to hereafter as
the 'Consolidated Entity') consisting of Melbana Energy Limited (referred to hereafter as the 'Company' or 'parent entity') and
the entities it controlled at the end of, or during, the year ended 30 June 2020.
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 (Non-Executive Chairman until 20 February 2020 and appointed as Executive Chairman on 21 February
2020)
Michael Sandy (Appointed Non-Executive Director since 30 July 2015 and served as Interim CEO from 22 July 2019 to 20
February 2020)
Peter Stickland (Non-Executive Director)
Principal activities
The principal activities of the Consolidated Entity during the year were oil and gas exploration in Cuba and Australia together
with development concepts for the Tassie Shoal Methanol and LNG Project.
Dividends
There were no dividends paid, recommended or declared during the current or previous financial year.
Review of operations
INTERNATIONAL OPERATIONS
Cuba - Block 9 (Melbana 30%)1
In December 2019, Melbana executed a binding Heads of Agreement (HOA) with Sonangol E.P. (Sonangol), the National
Oil Company of Angola. The terms of the HOA provided for Sonangol to receive a 70% interest in Block 9 PSC, subject to
satisfaction of certain Conditions Precedent, in return for agreeing to fund 85% of a two well exploration drilling program in
Block 9 (for which Melbana is to be the operator) and repaying Melbana’s Past Costs. In April 2020, the HOA was superseded
by a more detailed Farm-in Agreement (FIA). In July 2020 Melbana received its first payment from Sonangol, which was
counted towards the repayment of its Past Costs, and the Conditions Precedent in the FIA were satisfied in full on 14 August
2020.
Planning for the two well exploration drilling program in Cuba are advancing. All material regulatory approvals and permits
necessary to commence drilling of the first exploration well have been received and are expected to be finalized for the
second exploration well this year. Preferred drilling and other service contractors have been shortlisted and contract
negotiations are currently being finalized. An international tender for certain inventory items necessary to commence drilling
operations is underway and construction of the first well pad and related civil works is expected to commence soon.
Melbana has committed to drilling the first of these two exploration wells by November 2020. Application has been made to
CUPET to extend the period available to meet this commitment, as per their recommendation.
Project management of the two well drilling campaign has been affected by COVID-19 but is not expected to impact the
commencement of drilling operations, unless restrictions for the management of the pandemic were to materially worsen and
logistics and border controls be adversely affected as a result.
During the reporting period, the United States of America (U.S.) expanded the scope of its sanctions against the Republic of
Cuba. These included increased travel restrictions to Cuba for U.S. nationals and further restrictions on access to goods with
U.S. content. The ending of the suspension of Title III of the Helms-Burton Act resulted in litigation being brought before U.S.
Courts against parties reportedly trafficking in property confiscated from U.S. nationals by the Cuban Government on or after
1 January 1959. Your Board has planned the two well exploration program cognisant of these sanctions and believes it
remains outside of their scope.
1 Sonangol received Cuban regulatory approval for their 70% interest in Block 9 on 14 August 2020.
2
Melbana Energy Limited
Directors' report
30 June 2020
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)2.
Cuba - Santa Cruz (Melbana 100%,subject to receiving final regulatory approvals)
No material progress was made towards the receipt of final regulatory approval for the binding contract Melbana has entered
into for the Santa Cruz oil field during the reporting period.
The Santa Cruz oil field has produced at least 7.4 million barrels from 18 wells since its discovery in 2004.
AUSTRALIAN OPERATIONS
WA-488-P (Melbana 100%)
Melbana was awarded 100% interest in WA-488-P, located in the Bonaparte Basin, in May 2013. The permit is located
between the producing Blacktip gas field and the undeveloped Turtle and Barnett oil fields and contains the giant Beehive
prospect. Beehive was identified as a follow-up to the 2011 Ungani-1 oil discovery in the adjacent Canning Basin
and represents a new play type in the Bonaparte Basin.
Beehive is considered prospective for oil at the upper Carboniferous aged carbonate target and is considered analogous to
the giant Tengiz oil field in the Caspian Sea. An independent assessment by McDaniel & Associates in 2018 has assessed
the Beehive prospect as having a Prospective Resource of 388 million barrels of oil equivalent (Best Estimate, 100% basis)2.
During the reporting period, the options held by Total and Santos to acquire an 80% interest in WA-488-P expired
unexercised. As a result, Melbana once again holds an unencumbered 100% interest in the permit. Total and Santos had
previously funded the acquisition of a 3D seismic survey in WA-488-P, particularly over the Beehive prospect,
in
consideration for having been granted this option. Melbana is now in possession of these data from this survey and is actively
seeking a partner to assist it to drill an exploration well into the Beehive prospect. Several parties are currently conducting
due diligence on the opportunity.
In May 2020, Melbana received a 12-month suspension and extension for WA-488-P from the National Offshore Petroleum
Titles Administrator. Melbana therefore now has until December 2021 to meet its commitment to drill an exploration well in
WA-488-P.
Tassie Shoal (100%)
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. These Environmental Approvals are valid
until 2052. These projects uniquely provide a development option for discovered but undeveloped gas resources in the
region.
Progress for these projects is dependent on securing access to proximate gas supply on suitable commercially terms. No
material progress was made in this regard during the reporting period but developments such as Santos’ progress towards
FID of its Barossa project (a decision on which has been delayed until economic conditions improve) and ENI’s decision to
sell its Australian assets both being of interest to your Board.
Results for the year
The net loss after tax of the Consolidated Entity for the financial year was $2,157,906 (2019: net loss after tax of $3,357,696).
The loss for the year was mainly due to administration costs of $2,228,545 (2019: $2,484,647). Overall loss for the year
decreased by $1,199,790 compared to the 2019 financial year. The loss for the 2019 financial year was higher largely due
to a one off non-cash finance charge of $973,600 incurred, being the fair value of the 80,000,000 unquoted options issued
in relation a personal guarantee provided by Executive Chairman of the Company, Mr Andrew Purcell, in connection with a
loan made by a third party to the Company. There were no such transactions during the year, resulting in a lower finance
costs and losses. These options were unexercised and expired on 4 August 2020.
2 This estimate should be read with reference to the footnote “Notes regarding Contingent and Prospective resource estimates” on page 15.
3
Melbana Energy Limited
Directors' report
30 June 2020
During the year, the Consolidated Entity incurred net operating cash outflows of $2,133,832 (2019: outflows of $2,757,996),
net investing cash inflows of $498,027 (2019: inflows of $2,827,996) and net financing cash outflows of $24,199 (2019:
outflows of $123,356).
The successful drilling and commercialisation of any commercial oil and gas discoveries in Cuban and Australian exploration
permits 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 its offshore Australian exploration permit and
overseas acreage and in the project development phase for its other offshore Australian interests, 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
The net assets increased by $993,364 to $8,846,082 at 30 June 2020 (30 June 2019: $7,852,718). During the year, the
Consolidated Entity incurred $410,169 (2019: $472,413) on exploration, mainly in relation to Block 9 in Cuba. The main
determinants of the Consolidated Entity's financial condition were:
●
●
loss after tax of $2,157,906 (2019: $3,357,696);
Increase in share capital amounting to $3,972,110 (2019: $3,540,491). The Consolidated Entity issued ordinary shares
amounting to $3,911,241 as non-cash consideration for the acquisition of equity shares in a public listed company.
The working capital position as at 30 June 2020 of the Consolidated Entity results in an excess of current assets over current
liabilities of $367,256 (30 June 2019: $2,969,529). The cash balances, including term deposits, as at 30 June 2020 were
$1,752,263 (2019: $3,363,168).
Corporate
The Consolidated Entity’s future prospects are centred on its ability to secure quality exploration, development and producing
opportunities and seeking to maximise the value to shareholders of its current portfolio, identifying and securing additional
value-accretive projects, and/or undertaking a corporate transaction.
Adequacy of funding will remain a key focus for the Consolidated Entity for the immediate future. The Consolidated Entity
may 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 15 July 2019, the Company made an off market takeover bid to acquire ordinary shares in Metgasco Limited (ASX: MEL).
The transaction was completed on 5 February 2020 and the Company acquired 27.81% of the issued shares in MEL. The
takeover offer to MEL shareholders was a scrip for scrip offer under which the Company issued 434,582,340 ordinary shares
as non-cash consideration for the acquisition, to all the shareholders of MEL who accepted the offer.
On 25 July 2019, the Company issued 2,584,949 shares with a nil issue price following the exercise of performance rights.
On 14 October 2019, the Company issued 4,178,209 shares with a nil issue price following the exercise of performance
rights.
On 22 October 2019, the Company announced it had received final formal approvals for amendments to its Block 9 PSC in
Cuba, which extended the current exploration sub period by one year until 02 November 2020 by which time the Company
must drill one exploration well.
On 23 December 2019, the Company entered into a Heads of Agreement (HOA) with Sonangol E.P. (Sonangol), the National
Oil Company of Angola, for it to acquire a 70% interest in the Block 9 PSC in Cuba. This includes a firm commitment from
Sonangol to fund 85% of the costs of drilling two exploration wells in Block 9. The Company will remain as the operator,
contribute 15% of the costs of the drilling program and maintain a 30% interest. Upon completion of confirmatory due
diligence, the Company and Sonangol entered into a Farm-In Agreement (FIA) on 25 May 2020. The Company has received
$688,959 from Sonangol as part of the approximately USD$3.8 million to cover its expenditure to date related to Block 9
PSC.
4
Melbana Energy Limited
Directors' report
30 June 2020
On 4 March 2020, Santos Limited (Santos) advised the Company that it had not concluded a farm out of its contingent
interest in WA-488-P. Santos therefore no longer has any right to acquire any interest in WA-488-P and the Company now
has a 100% unencumbered interest. The Company currently is in discussions with potential partners to assist it to drill an
exploration well in the permit area.
In March 2020, the World Health Organization declared the outbreak of a novel coronavirus (COVID-19) as a
pandemic, which continues to spread globally as well as in Australia. The spread of COVID-19 has caused significant
volatility in Australian and international markets. There is a significant uncertainty around the breadth and duration
of business disruptions related to COVID-19 and therefore the Company has taken precautionary measures by
temporarily closing the Company’s office and having arranged for its employees to work remotely, as well as minimising
non-critical activities and curtailing travel. At the date of this report, the impact of these measures is not expected to
significantly impact the completion of the current work being undertaken. However, as the circumstances continue to
evolve, there may be disruptions to the future work timelines if employees, consultants or their respective families are
personally impacted by COVID-19 or if travel and other operational restrictions are not lifted.
On 29 May 2020, the Company received approval for a 12-month suspension and extension of the work program
conditions in respect of WA-488-P permit Year 3 from the National Offshore Petroleum Titles Administrator. The
Company now has until 21 December 2021 to drill an exploration well in WA-488-P.
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
Subsequent to the end of the financial year, on 17 August 2020, the last unsatisfied Condition Precedent to the
Completion of the Farm-in Agreement was resolved when Cuban regulatory approval was received for Sonangol’s
70% Participating Interest in Block 9 PSC.
Subsequent to the end of the financial year, on 24 August 2020 the Company announced it had completed updating the
Prospective Resource assessment of the Beehive prospect in WA-488-P to incorporate the recently acquired 3D seismic
data over the prospect. The presence of the Beehive prospect was validated by the new seismic data set and the
best estimate prospective resource increased to 416MMboe, a 7% uplift to the previous independent resource assessment
based on the pre-existing 2D seismic dataset.
No other matter or circumstance has arisen since 30 June 2020 that has significantly affected, or may significantly affect
the Consolidated Entity's operations, the results of those operations, or the Consolidated Entity's state of affairs in future
financial years.
Likely developments and expected results of operations
The Consolidated Entity will continue to pursue its exploration interests in:
- Block 9 PSC in Cuba in partnership with Sonangol. Significant progress was made during the year on well planning,
permitting, contractor engagement and sourcing of inventory in prosecution of the commencement of drilling operations.
- WA-488-P in the Joseph Bonaparte Gulf in northern Australia (Melbana 100%)
- Santa Cruz Incremental Oil Recovery Project in Cuba (Melbana 100%)
5
Melbana Energy Limited
Directors' report
30 June 2020
Environmental regulation
The Consolidated Entity holds participating interests in a number of oil and gas areas. The various authorities granting such
tenements require the licence holder to comply with the terms of the grant of the licence and all directions given to it under
those terms of the licence.
Your Board of Directors believe 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.
There have been no known breaches of the tenement conditions, and there have been zero incidents, zero lost time injuries
and zero spills within the Company and farm-out operations during the year ended 30 June 2020.
Information on Directors
Name:
Title:
Qualifications:
Experience and expertise:
Interests in shares:
Name:
Title:
Qualifications:
Experience and expertise:
Other current directorships:
Former directorships (last 3 years): Metgasco Limited (ASX: MEL)
Special responsibilities:
Andrew Purcell
Executive Chairman (Non-Executive Chairman until 20 February 2020 and appointed
as Executive Chairman on 21 February 2020)
B Eng; MBA
Andrew 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 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 and then for 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)
Member of the Remuneration and Nomination Committee and a member of the Audit
and Risk Committee
368,733,939 fully paid ordinary shares
Peter Stickland
Non-Executive Director
BSc, Hons (Geology), GDipAppFin (Finsia), GAICD
Peter Stickland has over 30 years' global experience in oil and gas exploration. Mr
Stickland was CEO and subsequently Managing Director of the Company until January
2018 and then 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).
Talon Petroleum Limited (ASX: TPD)
Chairman of Reserves Committee, member of the Remuneration and Nomination
Committee and a member of the Audit and Risk 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): XCD Energy Limited (ASX: XCD)
Special responsibilities:
Interests in shares:
Interests in options:
6
Melbana Energy Limited
Directors' report
30 June 2020
Name:
Title:
Qualifications:
Experience and expertise:
Michael Sandy
Non-Executive Director (served as Interim CEO from 22 July 2019 until 20 February
2020)
BSC Hons (Geology), MAICD
Michael Sandy is a geologist with over 40 years' experience in the resources industry
– mostly focused on oil and gas. In the early 1990s he was Technical Manager of Oil
Search Limited, based in Port Moresby, PNG. 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 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.
None
Other current directorships:
Former directorships (last 3 years): MEC Resources Limited (Chairman) (ASX: MMR)
Special responsibilities:
Interests in shares:
Chairman of the Audit and Risk Committee, Chairman of the Remuneration and
Nomination Committee and a member of Reserves Committee
5,400,000 fully paid ordinary 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, BBus (Acc. Corp Law) CA FGIA
Melanie Leydin holds a Bachelor of Business majoring in Accounting and Corporate Law. She is a member of the Institute
of Chartered Accountants, Fellow of the Governance Institute of Australia and is a Registered Company Auditor. She
graduated from Swinburne University in 1997, became a Chartered Accountant in 1999 and since February 2000 has been
the principal of Leydin Freyer. The practice provides outsourced company secretarial and accounting services to public and
private companies across a host of industries including but not limited to the Resources, technology, bioscience,
biotechnology and health sectors.
Melanie has over 25 years’ experience in the accounting profession and over 15 years as a Company Secretary. She has
extensive experience in relation to public company responsibilities, including ASX and ASIC compliance, control and
implementation of corporate governance, statutory financial reporting, reorganisation of Companies and shareholder
relations.
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 2020, and the number of meetings attended by each Director were:
Full Board
Reserves committee
Audit and Risk Committee
Attended
Held
Attended
Held
Attended
Held
Andrew Purcell
Michael Sandy
Peter Stickland
10
10
10
10
10
10
-
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.
The Company did not hold any Remuneration and Nomination Committee meetings during 2020 financial year.
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.
7
Melbana Energy Limited
Directors' report
30 June 2020
Key management personnel are those persons having authority and responsibility for planning, directing and controlling the
activities of the entity, directly or indirectly, including all directors.
The remuneration report is set out under the following main headings:
●
●
●
●
●
●
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:
●
●
●
●
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:
●
●
having profit as a core component of plan design
focusing on sustained growth in shareholder wealth, consisting of dividends and growth in share price, and delivering
constant or increasing return on assets as well as focusing the executive on key non-financial drivers of value
attracting and retaining high calibre executives
●
The performance of the Consolidated Entity depends upon the quality of its directors and executives. To prosper, the
Consolidated Entity must attract, motivate and retain highly skilled directors and executives.
To this end, the Consolidated Entity embodies the following principles in its remuneration framework:
●
●
●
Offer competitive remuneration benchmarked against the external market to attract high calibre executives;
Where appropriate, provide executive rewards linked to shareholder value; and
Encourage non-executive directors to hold shares in the Company.
In accordance with best practice corporate governance, the structure of non-executive director and executive director
remuneration is separate.
8
Melbana Energy Limited
Directors' report
30 June 2020
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.
The Board approved a fee increase to non-executive directors effective 1 July 2019 following the resignation of the CEO in
recognition of additional responsibilities and workload placed on the non-executive directors. Due to the near-term market
and operational uncertainty as a result of the outbreak of COVID-19 during the year, the Board agreed to reduce Director
fee payments by 50% effective 1 April 2020 with the remainder of the entitlements to be accrued until further notice.
Subsequent to the year-end, the board approved that effective from 1 September 2020, non-executive director fees will be
reduced to $75,000 per annum. The non-executive directors will be entitled to charge the Consolidated Entity at a rate of
$1,200 per day for any work performed in excess of 5 days per calendar month, subject to submitting a description of the
works required and prior approval from the Executive Chairman.
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 remuneration 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 and where appropriate,
external advice on policies and practices are obtained. 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 comprised of options and/or performance rights awarded to executives and conditional upon the recipient meeting
service objectives.
9
Melbana Energy Limited
Directors' report
30 June 2020
Consolidated Entity performance and link to remuneration
Remuneration for certain executives granted options or performance rights is linked to the performance of the Consolidated
Entity, as an improvement in the Company's share price will correspondingly increase the benefits to the executive. This will
align the interests of the executive and the shareholders. Refer to the section ''Additional information" below for details of the
earnings and share price movements for the last five years.
Voting and comments made at the Company's 2019 Annual General Meeting ('AGM')
At the 22 November 2019 AGM, 37.6% of the votes were cast against the adoption of the remuneration report for the year
ended 30 June 2019 and the resulting spill resolution was not carried at the meeting.
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:
●
Andrew Purcell - Executive Chairman (Non-Executive Chairman until 20 February 2020 and appointed as Executive
Chairman on 21 February 2020)
Michael Sandy - Non-Executive Director (served as Interim CEO from 22 July 2019 until 20 February 2020)
Peter Stickland - Non-Executive Technical Director
●
●
Executives:
●
Robert Zammit - Chief Executive Officer (until 19 July 2019)
Short-term benefits
Post-
employme
nt benefits
Long-term
benefits
Share-
based
payments
Salary
and fees
$
Cash
bonus
$
Super-
annuation
$
Long
service
leave
$
Equity-
settled
$
Terminatio
n
benefit
$
30 June 2020
Non-Executive Directors:
Andrew Purcell*
Michael Sandy
Peter Stickland
Executive Directors:
Andrew Purcell*
Michael Sandy**
Other Key Management
Personnel:
Robert Zammit**
Total
$
95,548
45,616
112,500
107,055
66,884
-
-
-
-
-
89,999
89,999
161,933
589,536
95,548
45,616
112,500
107,055
66,884
51,442
479,045
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
6,962
6,962
13,530
13,530
-
-
-
-
-
-
-
10
Melbana Energy Limited
Directors' report
30 June 2020
30 June 2019
Non-Executive Directors:
Andrew Purcell***
Michael Sandy
Peter Stickland
Other Key Management
Personnel:
Robert Zammit
Short-term benefits
Post-
employme
nt benefits
Long-term
benefits
Share-
based
payments
Salary
and fees
$
Cash
bonus
$
Super-
annuation
$
Long
service
leave
$
Equity-
settled
$
Terminatio
n
benefit
$
100,000
75,000
75,000
-
-
-
-
-
-
-
-
-
-
-
6,874
265,873
515,873
30,000
30,000
20,129
20,129
11,681
11,681
6,279
13,153
-
-
-
-
-
Total
$
100,000
75,000
81,874
333,962
590,836
*
**
Mr Purcell was appointed as Executive Chairman on 21 February 2020 and prior to that held the role of Non-Executive
Chairman. The disclosures above reflect his remuneration during his tenure as Non-Executive Director and Executive
Director, respectively.
Mr Zammit resigned from the Company on 19 July 2019. Mr Sandy was appointed as Interim CEO on 22 July 2019 and
remained in that role until 20 February 2020. The disclosures above reflect his remuneration during his tenure as Non-
Executive Director and Executive Director, respectively.
*** On 1 April 2020, the board approved to reduce directors fee payments by 50% with the remainder of the entitlements
accrued until further notice.
The proportion of remuneration linked to performance and the fixed proportion are as follows:
Name
Non-Executive Directors:
Andrew Purcell
Michael Sandy
Peter Stickland
Other Key Management
Personnel:
Robert Zammit
Fixed remuneration
At risk - STI
30 June 2020 30 June 2019 30 June 2020 30 June 2019 30 June 2020 30 June 2019
At risk - LTI
100%
100%
100%
100%
100%
93%
100%
89%
-
-
-
-
-
-
-
9%
-
-
-
-
-
-
7%
2%
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:
Andrew Purcell
Executive Chair
21 February 2020
No fixed term
Mr Purcell’s fixed remuneration is $300,000 per annum (inclusive of statutory
superannuation).
At the discretion of the board, Mr Purcell, entitled for a short-term cash incentive up to
a maximum of 100% of fixed remuneration based on the achievement of key
performance indicators over a 2 year period aligned with shareholder interests.
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.
11
Melbana Energy Limited
Directors' report
30 June 2020
Key management personnel have no entitlement to termination payments in the event of removal for misconduct.
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 2020 (2019: Nil).
Options
There were no options over ordinary shares issued to Directors and other key management personnel as part of
compensation that were outstanding as at 30 June 2020.
Performance rights
There were no performance rights over ordinary shares granted to or vested by Directors and other key management
personnel as part of compensation during the year ended 30 June 2020.
Additional information
The earnings of the Consolidated Entity for the five years to 30 June 2020 are summarised below:
2020
$
2019
$
2018
$
2017
$
2016
$
Loss after income tax
(2,157,906)
(3,357,696)
(6,100,290)
(2,121,000)
(10,406,000)
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
(0.11)
0.01
(0.18)
0.01
(0.41)
0.02
(0.26)
0.02
(1.31)
2020
2019
2018
2017
2016
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*
Balance at
the start of
the year
Exercise of
performance rights
/ options
Additions
Disposals/Other
Balance at
the end of
the year
62,666,307
5,400,000
16,597,279
4,539,612
89,203,198
-
-
-
-
-
306,067,632
-
-
-
306,067,632
-
-
-
(4,539,612)
(4,539,612)
368,733,939
5,400,000
16,597,279
-
390,731,218
*
Mr Zammit resigned from the Company on 19 July 2019.
12
Melbana Energy Limited
Directors' report
30 June 2020
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**
Peter Stickland
Robert Zammit*
Balance at
Balance at
the start of
the year
Options granted
pursuant
to a placement
Options granted
for
other services**
Expired /
Others
the end of
the year
81,875,621
3,000,000
2,000,000
86,875,621
-
-
-
-
-
-
-
-
(1,875,621)
-
(2,000,000)
(3,875,621)
80,000,000
3,000,000
-
83,000,000
*
**
Mr Zammit resigned from the Company on 19 July 2019.
During 2018 financial year, Mr Purcell, provided a personal guarantee in connection with a loan made by a third party
to the Company. As a consideration for this 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. These options
expired unexercised on 4 August 2020.
Options over ordinary shares
Peter Stickland
Andrew Purcell
Vested and
exercisable
Balance at
the end of
the year
3,000,000
80,000,000
83,000,000
3,000,000
80,000,000
83,000,000
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:
Balance at
the start of
the year
Received
as part of
remuneration Exercised
Balance at
the end of
the year
Others
Performance rights over ordinary shares
Robert Zammit*
2,584,949
2,584,949
-
-
-
-
(2,584,949)
(2,584,949)
-
-
* Mr Zammit resigned from the Company on 19 July 2019.
This concludes the remuneration report, which has been audited.
Shares under option
Unissued ordinary shares of Melbana Energy Limited under option at the date of this report are as follows:
Grant date
28 March 2017
23 November 2017
23 November 2017
Expiry date
27 September 2020
23 November 2020
27 September 2020
Exercise
price $
Number
under option
$0.0320
$0.0180
$0.0320
5,500,000
20,000,000
3,000,000
28,500,000
13
Melbana Energy Limited
Directors' report
30 June 2020
During 2018 financial year, Mr Purcell, provided a personal guarantee in connection with a loan made by a third party to the
Company. As a consideration for this 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. These options were unexercised
and expired on 4 August 2020.
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
There were no unissued ordinary shares of Melbana Energy Limited under performance rights outstanding at the date of this
report.
Shares issued on the exercise of options
There were no ordinary shares of Melbana Energy Limited issued on the exercise of options during the year ended 30 June
2020 and up to the date of this report.
Shares issued on the exercise of performance rights
The following ordinary shares of Melbana Energy Limited were issued during the year ended 30 June 2020 and up to the
date of this report on the exercise of performance rights granted:
Date performance rights granted
10 May 2018 (issued on 25 July 2019)
10 May 2018 (issued on 14 October 2019)
Exercise
price
Number of
shares issued
$0.0000
$0.0000
2,584,949
4,178,209
6,763,158
Indemnity and insurance of officers
The Company has indemnified the directors and executives of the Company for costs incurred, in their capacity as a director
or executive, for which they may be held personally liable, except where there is a lack of good faith.
During the financial year, the Company paid a premium in respect of a contract to insure the directors and executives of the
Company against a liability to the extent permitted by the Corporations Act 2001. The contract of insurance prohibits
disclosure of the nature of the liability and the amount of the premium.
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 25 to the financial statements.
14
Melbana Energy Limited
Directors' report
30 June 2020
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 25 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 30 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.
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
Executive Chairman
26 August 2020
15
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 2020, 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
T S Jackman
Partner – Audit & Assurance
Melbourne, 26 August 2020
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
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 Th ornton’ 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.
16
Melbana Energy Limited
Consolidated statement of profit or loss and other comprehensive income
For the year ended 30 June 2020
Other income
Interest income
Expenses
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 will not be reclassified subsequently to profit or loss
Loss on the revaluation of equity instruments at fair value through other
comprehensive income, net of tax
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
Note 30 June 2020 30 June 2019
$
$
5
6
7
8
70,655
10,349
324,667
48,604
(2,228,545)
(10,365)
(2,484,647)
(1,246,320)
(2,157,906)
(3,357,696)
-
-
(2,157,906)
(3,357,696)
11
(759,971)
-
-
(759,971)
(674)
(674)
(2,917,877)
(3,358,370)
Cents
Cents
33
33
(0.11)
(0.11)
(0.18)
(0.18)
The above consolidated statement of profit or loss and other comprehensive income should be read in conjunction with the
accompanying notes
17
Melbana Energy Limited
Consolidated statement of financial position
As at 30 June 2020
Assets
Current assets
Cash and cash equivalents
Other receivables
Other financial assets
Total current assets
Non-current assets
Financial assets at fair value through other comprehensive income
Plant and equipment
Right-of-use assets
Exploration and evaluation
Total non-current assets
Total assets
Liabilities
Current liabilities
Trade and other payables
Lease liabilities
Provisions
Advances from farm-out arrangement
Total current liabilities
Non-current liabilities
Lease liabilities
Total non-current liabilities
Total liabilities
Net assets
Equity
Issued capital
Reserves
Accumulated losses
Total equity
Note 30 June 2020 30 June 2019
$
$
9
10
13
11
14
12
15
16
17
18
19
17
1,752,263
87,487
28,385
1,868,135
3,363,168
107,014
72,018
3,542,200
3,149,272
28,482
100,996
5,252,593
8,531,343
-
40,765
-
4,842,424
4,883,189
10,399,478
8,425,389
623,727
63,846
124,347
688,959
1,500,879
387,582
-
185,089
-
572,671
52,517
52,517
-
-
1,553,396
572,671
8,846,082
7,852,718
20
21
280,302,775 276,330,665
1,459,285
(272,077,015) (269,937,232)
620,322
8,846,082
7,852,718
The above consolidated statement of financial position should be read in conjunction with the accompanying notes
18
Melbana Energy Limited
Consolidated statement of changes in equity
For the year ended 30 June 2020
Issued
capital
$
Share based
payment
reserve
$
Other
reserves
$
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 20)
Share issue cost (note 20)
Exercise of options (note 20)
Exercise of performance rights (note 20)
Share options lapsed (note 21)
Share based payments (options and
performance rights) (note 21)
Share based payments on finance cost (note
21)
-
-
-
-
-
-
-
(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
Issued
capital
$
Share based
payment
reserve
$
Other
reserves
$
Accumulated
losses
$
Total equity
$
Balance at 1 July 2019
276,330,665
1,441,162
18,123 (269,937,232)
7,852,718
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 20)
Exercise of performance rights (note 20)
Transfer of FCTR to accumulated losses
-
-
-
-
-
-
-
(2,157,906)
(2,157,906)
(759,971)
-
(759,971)
(759,971)
(2,157,906)
(2,917,877)
3,911,241
60,869
-
-
(60,869)
-
-
-
(18,123)
-
-
18,123
3,911,241
-
-
Balance at 30 June 2020
280,302,775
1,380,293
(759,971) (272,077,015)
8,846,082
The above consolidated statement of changes in equity should be read in conjunction with the accompanying notes
19
Melbana Energy Limited
Consolidated statement of cash flows
For the year ended 30 June 2020
Cash flows from operating activities
Payments to suppliers and employees (inclusive of GST)
Interest received
Interest paid
COVID-19-related government grants
Note 30 June 2020 30 June 2019
$
$
(2,156,531)
10,349
(8,868)
21,218
(2,533,880)
48,604
(272,720)
-
Net cash used in operating activities
32
(2,133,832)
(2,757,996)
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 farm-out arrangement
Proceeds from disposal of property, plant and equipment
Proceeds from security deposits for bank guarantee
Net cash from investing activities
Cash flows from financing activities
Proceeds from issue of shares
Repayment of borrowings
Share issue transaction costs
Payment of principal element of lease liabilities
Net cash used in financing activities
Net 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
15
-
(234,565)
-
-
688,959
-
43,633
(1,954)
(472,413)
(72,018)
100,000
-
3,000
3,271,381
498,027
2,827,996
-
-
-
(24,199)
3,699,554
(3,583,847)
(239,063)
-
(24,199)
(123,356)
(1,660,004)
3,363,168
49,099
(53,356)
3,047,017
369,507
Cash and cash equivalents at the end of the financial year
9
1,752,263
3,363,168
The above consolidated statement of cash flows should be read in conjunction with the accompanying notes
20
Melbana Energy Limited
Notes to the consolidated financial statements
30 June 2020
Note 1. General information
The financial statements cover Melbana Energy Limited as a Consolidated Entity consisting of Melbana Energy Limited and
the entities it controlled at the end of, or during, the year. The financial statements are presented in Australian dollars, which
is Melbana Energy Limited's functional and presentation currency.
Melbana Energy Limited is a listed public company limited by shares, incorporated and domiciled in Australia. Its registered
office and principal place of business are disclosed on the Corporate Summary accompanying these financial statements.
A description of the nature of the Consolidated Entity's operations and its principal activities are included in the Directors'
report, which is not part of the financial statements.
The financial statements were authorised for issue, in accordance with a resolution of Directors, on 26 August 2020. The
Directors have the power to amend and reissue the financial statements.
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.
The following Accounting Standards and Interpretations are most relevant to the Consolidated Entity:
AASB 16 Leases
The Consolidated Entity has adopted AASB 16 from 1 July 2019. The standard replaces AASB 117 'Leases' and for lessees
eliminates the classifications of operating leases and finance leases. Except for short-term leases and leases of low-value
assets, right-of-use assets and corresponding lease liabilities are recognised in the statement of financial position. Straight-
line operating lease expense recognition is replaced with a depreciation charge for the right-of-use assets (included in
operating costs) and an interest expense on the recognised lease liabilities (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 improve as the
operating expense is now replaced by interest expense and depreciation in profit or loss. For classification within the
statement of cash flows, the interest portion is disclosed in operating activities and the principal portion of the lease payments
is separately disclosed in financing activities. Please refer to note 17 to the financial statements for further information
regarding adoption of AASB 16.
21
Melbana Energy Limited
Notes to the consolidated financial statements
30 June 2020
Note 2. Significant accounting policies (continued)
Interpretation 23 Uncertainty over Income Tax Treatments
Interpretation 23 requires the assessment of whether the effect of uncertainty over income tax treatments should be included
in the determination of taxable profit (tax loss), tax bases, unused tax losses, unused tax credits and tax rates. The
Interpretation outlines the requirements to determine whether an entity considers uncertain tax treatments separately, the
assumptions an entity makes about the examination of tax treatments by taxation authorities, how an entity determines
taxable profit (tax loss), tax bases, unused tax losses, unused tax credits and tax rates and how an entity considers changes
in facts and circumstances.
The Consolidated Entity has adopted Interpretation 23 from 1 July 2019, based on an assessment of whether it is ‘probable’
that a taxation authority will accept an uncertain tax treatment. This assessment takes into account that for certain
jurisdictions in which the Consolidated Entity operates, a local tax authority may seek to open a company’s books as far back
as inception of the Consolidated Entity. Where it is probable, the Consolidated Entity has determined tax balances
consistently with the tax treatment used or planned to be used in its income tax filings. Where the Consolidated Entity has
determined that it is not probable that the taxation authority will accept an uncertain tax treatment, the most likely amount or
the expected value has been used in determining taxable balances (depending on which method is expected to better predict
the resolution of the uncertainty). There has been no impact from the adoption of Interpretation 23 in this reporting period.
Other accounting pronouncements which have become effective from 1 July 2019 and have therefore been adopted have
not had a significant impact on the Consolidated Entity’s financial results or position.
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 2020, the Consolidated Entity:
●
●
had, for the financial year ending on that date, incurred a net loss after tax of $2,157,906 (2019: $3,357,696);
had, for the financial year ending on that date, net cash outflows from operating and investing activities of $1,635,805
(2019: net inflows of $70,000);
had cash and cash equivalents of $1,752,263 (2019: $3,363,168); and
had a net working capital position of $367,256 (2019: $2,969,529).
●
●
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 2020 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.
In March 2020, the World Health Organization declared the outbreak of a novel coronavirus (COVID-19) as a pandemic,
which continues to spread globally as well as in Australia. The spread of COVID-19 has caused significant volatility in
Australian and international markets. There is a significant uncertainty around the breadth and duration of business
disruptions related to COVID-19 and therefore the Company has taken precautionary measures by temporarily closing the
Company’s office and having arranged the employees to work remotely, as well as minimising non-critical activities and
curtailing travel. At the date of this report, the impact of these measures is not expected to significantly impact the completion
of the current work being undertaken. However, as the circumstances continue to evolve, there may be disruptions to the
future work timelines if employees, consultants or their respective families are personally impacted by COVID-19 or if travel
and other operational restrictions are not lifted.
22
Melbana Energy Limited
Notes to the consolidated financial statements
30 June 2020
Note 2. Significant accounting policies (continued)
This financial report has been prepared on a going concern basis which contemplates the continuity of normal business
activities and the realisation of assets and settlement of liabilities in the ordinary course of business. In the event these steps
do not provide sufficient funds to meet the Consolidated Entity's exploration commitments, the interest in some or all of the
Consolidated Entity's tenements may be affected. No adjustments have been made relating to the recoverability and
reclassification of recorded asset amounts and classification of liabilities that might be necessary should the Consolidated
Entity not continue as a going concern, particularly the write-down of capitalised exploration expenditure should the
exploration permits be ultimately surrendered or cancelled.
Having 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 2020 and the results of all subsidiaries for the year then ended. Melbana Energy
Limited and its subsidiaries together are referred to in these financial statements as the 'consolidated entity'.
Subsidiaries are all those entities over which the Consolidated Entity has control. The Consolidated Entity controls an entity
when the Consolidated Entity is exposed to, or has rights to, variable returns from its involvement with the entity and has the
ability to affect those returns through its power to direct the activities of the entity. Specifically, the Consolidated Entity controls
an investee if and only if the Consolidated Entity has:
●
●
●
Power over the investee (i.e. existing rights that give it the current ability to direct the relevant activities of the investee);
Exposure, or rights, to variable returns from its involvement with the investee; and
The ability to use its power over the investee to affect its returns.
When the Consolidated Entity has less than a majority of the voting or similar rights of an investee, the Consolidated Entity
considers all relevant facts and circumstances in assessing whether it has power over an investee, including:
●
●
●
The contractual arrangement with the other vote holders of the investee;
Rights arising from other contractual arrangements;
The Consolidated Entity’s voting rights and potential voting rights.
Subsidiaries are fully consolidated from the date on which control is transferred to the Consolidated Entity. They are de-
consolidated from the date that control ceases.
Intercompany transactions, balances and unrealised gains on transactions between entities in the Consolidated Entity are
eliminated. Unrealised losses are also eliminated unless the transaction provides evidence of the impairment of the asset
transferred. Accounting policies of subsidiaries have been changed where necessary to ensure consistency with the policies
adopted by the Consolidated Entity.
23
Melbana Energy Limited
Notes to the consolidated financial statements
30 June 2020
Note 2. Significant accounting policies (continued)
The acquisition of subsidiaries is accounted for using the acquisition method of accounting. A change in ownership interest,
without the loss of control, is accounted for as an equity transaction, where the difference between the consideration
transferred and the book value of the share of the non-controlling interest acquired is recognised directly in equity attributable
to the parent.
Where the Consolidated Entity loses control over a subsidiary, it derecognises the assets including goodwill, liabilities and
non-controlling interest in the subsidiary together with any cumulative translation differences recognised in equity. The
Consolidated Entity recognises the fair value of the consideration received and the fair value of any investment retained
together with any gain or loss in profit or loss.
Foreign currency translation
The Consolidated Entity's consolidated financial statements are presented in Australian dollars, which is also the parent
company’s functional currency. Each entity in the Consolidated Entity determines its own functional currency and items
included in the financial statements of each entity are measured using that functional currency.
Foreign currency transactions
Transactions in foreign currencies are initially recorded in the functional currency by applying the exchange rates ruling at
the date of the transaction. Non-monetary items that are measured in terms of historical cost in a foreign currency are
translated using the exchange rate at the dates of the initial transactions. Non-monetary items measured at fair value in a
foreign currency are translated using the exchange rates at the date when the fair value is determined. Monetary assets and
liabilities denominated in foreign currencies are retranslated at the rate of exchange ruling at the balance date. All exchange
differences in the consolidated report are taken to profit or loss.
Foreign operations
The assets and liabilities of foreign operations are translated into Australian dollars using the exchange rates at the reporting
date. The revenues and expenses of foreign operations are translated into Australian dollars using the average exchange
rates, which approximate the rates at the dates of the transactions, for the period. All resulting foreign exchange differences
are recognised in other comprehensive income through the foreign currency reserve in equity.
The foreign currency reserve is recognised in profit or loss when the foreign operation or net investment is disposed of.
Revenue recognition
The Consolidated Entity recognises revenue as follows:
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.
Government Grants
Government grants are recognised in the financial statements at expected values or actual cash received when there is a
reasonable assurance that the Consolidated Entity will comply with the requirements and that the grant will be received.
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.
24
Melbana Energy Limited
Notes to the consolidated financial statements
30 June 2020
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.
Financial Instruments
(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.
25
Melbana Energy Limited
Notes to the consolidated financial statements
30 June 2020
Note 2. Significant accounting policies (continued)
(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.
Investments and other financial assets
Investments and other financial assets are initially measured at fair value. Transaction costs are included as part of the initial
measurement, except for financial assets at fair value through profit or loss. Such assets are subsequently measured at
either amortised cost or fair value depending on their classification. Classification is determined based on both the business
model within which such assets are held and the contractual cash flow characteristics of the financial asset unless an
accounting mismatch is being avoided.
Financial assets are derecognised when the rights to receive cash flows have expired or have been transferred and the
Consolidated Entity has transferred substantially all the risks and rewards of ownership. When there is no reasonable
expectation of recovering part or all of a financial asset, its carrying value is written off.
Financial assets at fair value through other comprehensive income
Financial assets at fair value through other comprehensive income include equity investments which the Consolidated Entity
intends to hold for the foreseeable future and has irrevocably elected to classify them as such upon initial recognition.
Subsequent measurement of financial assets at fair value through other comprehensive income
Gains and losses on these financial assets are never recycled to profit or loss. Dividends are recognised as other income in
the statement of profit or loss when the right of payment has been established, except when the Consolidated Entity benefits
from such proceeds as a recovery of part of the cost of the financial asset, in which case, such gains are recorded in OCI.
Equity instruments designated at fair value through OCI are not subject to impairment assessment. The Consolidated Entity
elected to classify irrevocably its listed equity investment under this category.
26
Melbana Energy Limited
Notes to the consolidated financial statements
30 June 2020
Note 2. Significant accounting policies (continued)
Impairment of financial assets
The Consolidated Entity recognises a loss allowance for expected credit losses on financial assets which are either measured
at amortised cost or fair value through other comprehensive income (only debt instruments, not equity instruments). The
measurement of the loss allowance depends upon the Consolidated Entity's assessment at the end of each reporting period
as to whether the financial instrument's credit risk has increased significantly since initial recognition, based on reasonable
and supportable information that is available, without undue cost or effort to obtain.
Where there has not been a significant increase in exposure to credit risk since initial recognition, a 12-month expected credit
loss allowance is estimated. This represents a portion of the asset's lifetime expected credit losses that is attributable to a
default event that is possible within the next 12 months. Where a financial asset has become credit impaired or where it is
determined that credit risk has increased significantly, the loss allowance is based on the asset's lifetime expected credit
losses. The amount of expected credit loss recognised is measured on the basis of the probability weighted present value of
anticipated cash shortfalls over the life of the instrument discounted at the original effective interest rate.
For financial assets mandatorily measured at fair value through other comprehensive income (only debt instruments, not
equity instruments), the loss allowance is recognised in other comprehensive income with a corresponding expense through
profit or loss. In all other cases, the loss allowance reduces the asset's carrying value with a corresponding expense through
profit or loss.
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.
Right-of-use assets
A right-of-use asset is recognised at the commencement date of a lease. The right-of-use asset is measured at cost, which
comprises the initial amount of the lease liability, adjusted for, as applicable, any lease payments made at or before the
commencement date net of any lease incentives received, any initial direct costs incurred, and, except where included in the
cost of inventories, an estimate of costs expected to be incurred for dismantling and removing the underlying asset, and
restoring the site or asset.
Right-of-use assets are depreciated on a straight-line basis over the unexpired period of the lease or the estimated useful
life of the asset, whichever is the shorter. Where the Consolidated Entity expects to obtain ownership of the leased asset at
the end of the lease term, the depreciation is over its estimated useful life. Right-of use assets are subject to impairment or
adjusted for any remeasurement of lease liabilities.
27
Melbana Energy Limited
Notes to the consolidated financial statements
30 June 2020
Note 2. Significant accounting policies (continued)
The Consolidated Entity has elected not to recognise a right-of-use asset and corresponding lease liability for short-term
leases with terms of 12 months or less and leases of low-value assets. Lease payments on these assets are expensed to
profit or loss as incurred.
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 farm-in partner 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.
●
Lease liabilities
A lease liability is recognised at the commencement date of a lease. The lease liability is initially recognised at the present
value of the lease payments to be made over the term of the lease, discounted using the interest rate implicit in the lease or,
if that rate cannot be readily determined, the Consolidated Entity's incremental borrowing rate. Lease payments comprise of
fixed payments less any lease incentives receivable, variable lease payments that depend on an index or a rate, amounts
expected to be paid under residual value guarantees, exercise price of a purchase option when the exercise of the option is
reasonably certain to occur, and any anticipated termination penalties. The variable lease payments that do not depend on
an index or a rate are expensed in the period in which they are incurred.
Lease liabilities are measured at amortised cost using the effective interest method. The carrying amounts are remeasured
if there is a change in the following: future lease payments arising from a change in an index or a rate used; residual
guarantee; lease term; certainty of a purchase option and termination penalties. When a lease liability is remeasured, an
adjustment is made to the corresponding right-of use asset, or to profit or loss if the carrying amount of the right-of-use asset
is fully written down.
Employee benefits
Short-term employee benefits
Liabilities for wages and salaries, including non-monetary benefits, annual leave and long service leave expected to be
settled wholly within 12 months of the reporting date are recognised in provisions in respect of employees’ service up to the
reporting date and are measured at the amounts expected to be paid when the liabilities are settled.
Other long-term employee benefits
The liability for annual leave and long service leave not expected to be settled within 12 months of the reporting date are
measured at the present value of expected future payments to be made in respect of services provided by employees up to
the reporting date using the projected unit credit method. Consideration is given to expected future wage and salary levels,
experience of employee departures and periods of service. Expected future payments are discounted using market yields at
the reporting date on high quality corporate bonds with terms to maturity and currency that match, as closely as possible, the
estimated future cash outflows.
Share-based payments
Equity-settled share-based compensation benefits are provided to employees.
28
Melbana Energy Limited
Notes to the consolidated financial statements
30 June 2020
Note 2. Significant accounting policies (continued)
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.
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.
29
Melbana Energy Limited
Notes to the consolidated financial statements
30 June 2020
Note 2. Significant accounting policies (continued)
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 2020. 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.
Conceptual Framework for Financial Reporting (Conceptual Framework)
The revised Conceptual Framework is applicable to annual reporting periods beginning on or after 1 July 2020 and early
adoption is permitted. The Conceptual Framework contains new definition and recognition criteria as well as new guidance
on measurement that affects several Accounting Standards. Where the Consolidated Entity has relied on the existing
framework in determining its accounting policies for transactions, events or conditions that are not otherwise dealt with under
the Australian Accounting Standards, the Consolidated Entity may need to review such policies under the revised framework.
At this time, the application of the Conceptual Framework is not expected to have a material impact on the Consolidated
Entity's financial statements.
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.
30
Melbana Energy Limited
Notes to the consolidated financial statements
30 June 2020
Note 3. Critical accounting judgements, estimates and assumptions (continued)
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 2020 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.
Coronavirus (COVID-19) pandemic
Judgement has been exercised in considering the impacts that the Coronavirus (COVID-19) pandemic has had, or may have,
on the Consolidated Entity based on known information. This consideration extends to the nature of the products and services
offered, customers, supply chain, staffing and geographic regions in which the Consolidated Entity operates. Other than as
addressed in specific notes, there does not currently appear to be either any significant impact upon the financial statements
or any significant uncertainties with respect to events or conditions which may impact the Consolidated Entity unfavourably
as at the reporting date or subsequently as a result of the Coronavirus (COVID-19) pandemic.
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.
Estimation of useful lives of assets
The Consolidated Entity determines the estimated useful lives and related depreciation and amortisation charges for its
property, plant and equipment and finite life intangible assets. The useful lives could change significantly as a result of
technical innovations or some other event. The depreciation and amortisation charge will increase where the useful lives are
less than previously estimated lives, or technically obsolete or non-strategic assets that have been abandoned or sold will
be written off or written down.
Recovery of deferred tax assets
Deferred tax assets are recognised for deductible temporary differences only if the Consolidated Entity considers it is
probable that future taxable amounts will be available to utilise those temporary differences and losses.
Lease term
The lease term is a significant component in the measurement of both the right-of-use asset and lease liability. Judgement
is exercised in determining whether there is reasonable certainty that an option to extend the lease or purchase the underlying
asset will be exercised, or an option to terminate the lease will not be exercised, when ascertaining the periods to be included
in the lease term. In determining the lease term, all facts and circumstances that create an economical incentive to exercise
an extension option, or not to exercise a termination option, are considered at the lease commencement date. Factors
considered may include the importance of the asset to the Consolidated Entity's operations; comparison of terms and
conditions to prevailing market rates; incurrence of significant penalties; existence of significant leasehold improvements;
and the costs and disruption to replace the asset. The Consolidated Entity reassesses whether it is reasonably certain to
exercise an extension option, or not exercise a termination option, if there is a significant event or significant change in
circumstances.
31
Melbana Energy Limited
Notes to the consolidated financial statements
30 June 2020
Note 3. Critical accounting judgements, estimates and assumptions (continued)
Incremental borrowing rate
Where the interest rate implicit in a lease cannot be readily determined, an incremental borrowing rate is estimated to discount
future lease payments to measure the present value of the lease liability at the lease commencement date. Such a rate is
based on what the Consolidated Entity estimates it would have to pay a third party to borrow the funds necessary to obtain
an asset of a similar value to the right-of-use asset, with similar terms, security and economic environment.
No significant influence over entities where more than 20% voting rights held
Management have determined that the Consolidated Entity does not have significant influence over Metgasco Limited, even
though it holds 27.81% of the issued capital of this entity. Currently the Company does not have a board representation in
Metgasco Limited. The Company’s request for a board representation was not successful as confirmed by the Metgasco
Limited shareholders' meeting on 23 June 2020. Other than publicly available information, the Company does not have
access to other information on Metgasco Limited. In addition, there are no arrangements exist for transactions, resource,
and knowledge transfers between the Company and Metgasco Limited.
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 15.
Note 5. Other income
Net foreign exchange gain
COVID-19-related government grants
Net refunds from project
Other income
30 June 2020 30 June 2019
$
$
49,099
21,556
-
83,466
-
241,201
70,655
324,667
Other income
Other income is recognised when it is received or when the right to receive payment is established.
COVID-19-related government grants
COVID-19-related government grants represent the cash flow boost payments received from Federal Government in
response to ongoing novel coronavirus (COVID-19) pandemic. Government grants are recognised in the financial statements
at expected values or actual cash received when there is a reasonable assurance that the Consolidated Entity will comply
with the requirements and that the grant will be received.
32
Melbana Energy Limited
Notes to the consolidated financial statements
30 June 2020
Note 6. Administration costs
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, tax and other compliance related costs
Securities exchange, share registry and reporting costs
Operating lease and outgoing expenses
Investor relations and corporate promotion costs
Travel costs
Depreciation expense - plant & equipment
Depreciation expense - right-of-use assets
Tenement application and other related expenses
Transaction costs paid for acquisition of an investment
Less: Allocation to exploration activities
Note 7. Finance costs
Share-based payment on finance cost
Interest expenses
30 June 2020 30 June 2019
$
$
48,622
937,642
34,286
-
226,172
60,771
95,247
3,602
27,000
109,908
12,283
49,667
49,496
575,564
(1,715)
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)
2,228,545
2,484,647
30 June 2020 30 June 2019
$
$
-
10,365
973,600
272,720
10,365
1,246,320
Interest expenses for the year ended 30 June 2020 represent the interest expense in relation to office space lease accounted
under AASB 16 Leases.
Share-based payment on finance cost
During the previous financial year, the Executive 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 consideration for this 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. These options were independently valued by an external expert and the full non-cash valuation of
$973,600 was booked as a finance cost and measured in accordance with AASB 2 Share-based Payment.
33
Melbana Energy Limited
Notes to the consolidated financial statements
30 June 2020
Note 8. 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
Non-assessable non-exempt income
Other non-deductible expenditure
Current year tax losses not recognised
Income tax expense
Tax losses not recognised
Unused tax losses for which no deferred tax asset has been recognised
Potential tax benefit @ 26% (2019: 27.5%)
30 June 2020 30 June 2019
$
$
(2,157,906)
(3,357,696)
(593,424)
(923,366)
-
5,928
284
290,290
-
-
(587,212)
587,212
(633,076)
633,076
-
-
30 June 2020 30 June 2019
$
$
191,152,997 189,594,318
49,699,779 52,138,437
The above potential tax benefit for tax losses has not been recognised in the statement of financial position. These tax losses
can only be utilised in the future if the continuity of ownership test is passed, or failing that, the same business test is passed.
Note 9. Cash and cash equivalents
Current assets
Cash at bank
Note 10. Other receivables
Current assets
Other receivables
Prepayments
GST receivable
30 June 2020 30 June 2019
$
$
1,752,263
3,363,168
30 June 2020 30 June 2019
$
$
4,820
65,160
69,980
7,500
83,070
90,570
17,507
16,444
87,487
107,014
34
Melbana Energy Limited
Notes to the consolidated financial statements
30 June 2020
Note 11. Financial assets at fair value through other comprehensive income
Non-current assets
Ordinary shares
Reconciliation
Reconciliation of the fair values at the beginning and end of the current and previous
financial year are set out below:
Opening fair value
Additions
Disposals
Revaluation decrements
Closing fair value
30 June 2020 30 June 2019
$
$
3,149,272
-
-
3,911,241
(1,998)
(759,971)
3,149,272
-
-
-
-
-
On 5 February 2020, the Company acquired 27.81% issued shares in Metgasco Limited (ASX: MEL). The takeover offer to
MEL shareholders, was a scrip for scrip offer under which the Company issued 434,582,340 ordinary shares as non-cash
consideration for the acquisition, to all the shareholders of MEL who accepted the offer. The implied value of the offer
consideration was $0.009 cents per share. Shares were issued on 14 February 2020. On 4 April 2020, the Company sold
50,000 Metgasco Limited shares for a consideration of $1,998 in an off-market transaction. Refer note 27 for further
information.
The transaction was initially assessed under AASB 128 Investments in Associates and Joint Ventures as the Company holds
more than 20 per cent of the voting rights. However, due to lack of significant influence, the Company irrevocably elected to
recognise this investment at fair value through other comprehensive income under AASB 9 Financial Instruments. Under
this, only dividend income (if any) is recognised in the profit or loss with all other gains and losses recognised in OCI and
there is no reclassification on derecognition.
Investments in MEL held by the Consolidated Entity at fair value are valued in accordance with AASB 13 Fair Value
Measurement, using Level 1 of the fair value hierarchy - quoted prices (unadjusted) in active markets for identical assets or
liabilities. The fair values of the financial assets held have been determined by reference to the quoted price on the ASX at
30 June 2020.
Note 12. Right-of-use assets
Non-current assets
Office space - right-of-use
Less: Accumulated depreciation
Refer note 17 for further information on the Consolidated Entity's leasing arrangements.
Note 13. Other financial assets
Current assets
Term deposits
30 June 2020 30 June 2019
$
$
150,663
(49,667)
100,996
-
-
-
30 June 2020 30 June 2019
$
$
28,385
72,018
Security deposits represent a term deposit of $28,385 (2019: $27,718) lodged as security for the short term lease.
35
Melbana Energy Limited
Notes to the consolidated financial statements
30 June 2020
Note 14. Plant and equipment
Non-current assets
Office equipment - at cost
Less: Accumulated depreciation
30 June 2020 30 June 2019
$
$
251,007
(222,525)
251,007
(210,242)
28,482
40,765
Reconciliations
Reconciliations of the written down values at the beginning and end of the current and previous financial year are set out
below:
Balance at 1 July 2018
Additions
Disposals
Depreciation expense
Balance at 30 June 2019
Depreciation expense
Balance at 30 June 2020
Note 15. Exploration and evaluation
Non-current assets
Exploration and evaluation Block 9 Cuba - at cost
Office
equipment
$
101,241
1,954
(33,314)
(29,116)
40,765
(12,283)
28,482
Consolidated
30 June 2020 30 June 2019
$
$
5,252,593
4,842,424
Reconciliations
Reconciliations of the written down values at the beginning and end of the current and previous financial year are set out
below:
Balance at 1 July 2018
Expenditure during the year
Disposals
Balance at 30 June 2019
Additions
Balance at 30 June 2020
Block 9 Cuba PEP 51153
$
$
Total
$
4,370,011
472,413
-
4,842,424
410,169
5,252,593
100,000
-
(100,000)
4,470,011
472,413
(100,000)
-
-
-
4,842,424
410,169
5,252,593
36
Melbana Energy Limited
Notes to the consolidated financial statements
30 June 2020
Note 15. Exploration and evaluation (continued)
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 2020 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.
A review of the consolidated entity's exploration licenses was undertaken during the financial year and based on the review
management identified no impairment indicators on Block 9. Further information on operating activities and development are
included in the Directors' report.
Note 16. Trade and other payables
Current liabilities
Trade payable
Other payable
Refer to note 23 for further information.
Note 17. Lease liabilities
30 June 2020 30 June 2019
$
$
378,250
245,477
166,773
220,809
623,727
387,582
The Consolidated Entity has lease arrangement for office space. Rental contracts are typically made for fixed periods of 12
to 36 months, but may have an extension option. This note provides information for leases where the Consolidated Entity is
a lessee.
Lease terms are negotiated on an individual basis and may contain a wide range of different terms and conditions. The lease
agreements do not impose any covenants other than the security interests in the leased assets that are held by the lessor.
Leased assets may not be used as security for borrowing purposes.
Right-of-use assets and lease liabilities
The Consolidated Entity has adopted AASB 16 Leases (AASB 16) on 1 July 2019, but has not restated comparatives for the
2019 reporting period, as permitted under the specific transition provisions in the standard. The reclassifications and the
adjustments arising from the new leasing rules are therefore recognised in the opening statement of financial position on 1
July 2019.
On adoption of AASB 16, the Consolidated Entity recognised lease assets (known as "right-of-use") and liabilities in relation
to leases which had previously been classified as ‘operating leases’ under the principles of AASB 117 Leases. These assets
and liabilities were measured at the present value of the remaining lease payments, discounted using the Consolidated
Entity's incremental borrowing rate as of 1 July 2019. In applying AASB 16 for the first time, the Consolidated Entity has used
the following practical expedients permitted by the standard:
●
●
●
●
●
applying a single discount rate to a portfolio of leases with reasonably similar characteristics
relying on previous assessments on whether leases are onerous as an alternative to performing an impairment review
– there were no onerous contracts as at 1 July 2019
accounting for operating leases with a remaining lease term of less than 12 months as at 1 July 2019 as short-term
leases
excluding initial direct costs for the measurement of the right-of-use asset at the date of initial application, and
using hindsight in determining the lease term where the contract contains options to extend or terminate the lease.
37
Melbana Energy Limited
Notes to the consolidated financial statements
30 June 2020
Note 17. Lease liabilities (continued)
The Consolidated Entity has also elected not to reassess whether a contract is or contains a lease at the date of initial
application. Instead, for contracts entered into before the transition date the Consolidated Entity relied on its assessment
made applying AASB 117 and Interpretation 4 Determining whether an Arrangement contains a Lease.
Please refer to note 12 to the financial statements for the details of right-of use asset balances at 30 June 2020. The balance
sheet shows the following amounts relating to lease liabilities:
Current liabilities
Lease liability
Non-current liabilities
Lease liability
Reconciliation of lease liability
Adoption of AASB 16 at 1 July 2019
Payments during the period
Interest expenses
Balance at 30 June 2020
30 June 2020 30 June 2019
$
$
63,846
52,517
116,363
-
-
-
30 June 2020
$
150,663
(44,665)
10,365
116,363
Refer to note 23 for further information on financial instruments.
The Consolidated Entity had no short-term lease arrangements during the year ended 30 June 2020.
On adoption of AASB 16, the Consolidated Entity recognised lease liabilities in relation to leases which had previously been
classified as ‘operating leases’ under the principles of AASB 117 Leases. These liabilities were measured at the present
value of the remaining lease payments, discounted using the incremental borrowing rate as of 1 July 2019. The weighted
average incremental borrowing rate applied to the lease liabilities on 1 July 2019 was 7.5%.
Right-of use assets were measured at an amount equal to the lease liability at 1 July 2019. The change in accounting policy
affected the following items in the statement of financial position on 1 July 2019:
Operating lease commitments disclosed as at 30 June 2019 (Note 26)
Impact of discount (using the incremental borrowing rate) and lease incentives at the date of initial
application
Value of lease liabilities and right-of-use assets recognised at 1 July 2019
30 June 2020
$
192,051
(41,388)
150,663
38
Melbana Energy Limited
Notes to the consolidated financial statements
30 June 2020
Note 18. Provisions
Current liabilities
Annual leave
Long service leave
Note 19. Advances from farm-out arrangement
Current liabilities
Advances from farm-out arrangement
30 June 2020 30 June 2019
$
$
74,163
50,184
89,255
95,834
124,347
185,089
30 June 2020 30 June 2019
$
$
688,959
-
Advances from farm-out arrangement represent amounts received from Sonangol as reimbursement for Block 9 as per the
FIA which was executed on 25 May 2020. This amount will be offset against exploration and evaluation assets once
conditions attached to the contract are fulfilled. Refer note 30 to the financial statements and Directors' report for further
information on the arrangement.
Note 20. Issued capital
30 June 2020 30 June 2019 30 June 2020 30 June 2019
Shares
Shares
$
$
Ordinary shares - fully paid
2,316,851,413 1,875,505,915 280,302,775 276,330,665
Movements in ordinary share capital
Details
Date
Shares
Issue price
$
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)
1 July 2018
6 July 2018
13 August 2018
21 August 2018
28 August 2018
5 September 2018
27 September 2018
21 November 2018
Balance
Share issue upon exercise of performance rights
Share issue upon exercise of performance rights
Share issued for acquisition of investments
30 June 2019
25 July 2019
14 October 2019
14 February 2020
1,665,750,480
5,333,333
3,141,226
4,761,215
1,247,988
827,228
188,817,582
5,626,863
-
1,875,505,915
2,584,949
4,178,209
434,582,340
272,790,174
80,000
-
62,825
$0.0200
95,224
$0.0200
24,960
$0.0200
16,545
$0.0200
3,398,716
$0.0180
101,284
$0.0180
(239,063)
-
$0.0090
$0.0090
$0.0090
276,330,665
23,265
37,604
3,911,241
Balance
30 June 2020
2,316,851,413
280,302,775
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.
39
Melbana Energy Limited
Notes to the consolidated financial statements
30 June 2020
Note 20. Issued capital (continued)
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.
Shares under options
Information relating to the Consolidated Entity's details of options issued, exercised and lapsed during the financial year and
options outstanding at the end of the reporting period, is set out in note 34 to the financial statements.
Capital risk management
The Consolidated Entity's objectives when managing capital is to safeguard its ability to continue as a going concern, so that
it can provide returns for shareholders and benefits for other stakeholders and to maintain an optimum capital structure to
reduce the cost of capital.
Capital is regarded as total equity, as recognised in the statement of financial position, plus net debt. Net debt is calculated
as total borrowings less cash and cash equivalents.
In order to maintain or adjust the capital structure, the Consolidated Entity may adjust the amount of dividends paid to
shareholders, return capital to shareholders, issue new shares or sell assets to reduce debt.
The Consolidated Entity would look to raise capital when an opportunity to invest in a business or company was seen as
value adding relative to the current Company's share price at the time of the investment. The Consolidated Entity is not
actively pursuing additional investments in the short term as it continues to integrate and grow its existing businesses in
order to maximise synergies.
The Consolidated Entity is subject to certain financing arrangements covenants and meeting these is given priority in all
capital risk management decisions. There have been no events of default on the financing arrangements during the financial
year.
The capital risk management policy remains unchanged from the 2019 Annual Report.
Note 21. Reserves
Foreign currency reserve
Share-based payments reserve
Financial assets at fair value through other comprehensive income reserve
30 June 2020 30 June 2019
$
$
-
1,380,293
(759,971)
18,123
1,441,162
-
620,322
1,459,285
Financial assets at fair value through other comprehensive income reserve
The reserve is used to recognise increments and decrements in the fair value of financial assets at fair value through other
comprehensive income.
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. The Consolidated Entity ceased its foreign operations during the year and the foreign currency translation reserve
balance at 30 June 2020 was transferred to the accumulated losses.
40
Melbana Energy Limited
Notes to the consolidated financial statements
30 June 2020
Note 21. Reserves (continued)
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.
Information relating to the Consolidated Entity's details of options issued, exercised and lapsed during the financial year and
options outstanding at the end of the reporting period, is set out in note 34 to the financial statements.
Movements in reserves
Movements in each class of reserve during the current and previous financial year are set out below:
Balance at 1 July 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
Revaluation decrements
Foreign currency translation transferred to accumulated
losses
Exercise of performance rights
Financial assets
at fair value
through other
comprehensive
income reserve
$
Share based
payment
reserve
$
Foreign
currency
reserve
$
-
-
-
-
-
-
476,027
-
(10,465)
(80,000)
82,000
973,600
18,797
(674)
-
-
-
-
Total
$
494,824
(674)
(10,465)
(80,000)
82,000
973,600
-
(759,971)
1,441,162
-
18,123
-
1,459,285
(759,971)
-
-
-
(60,869)
(18,123)
-
(18,123)
(60,869)
Balance at 30 June 2020
(759,971)
1,380,293
-
620,322
Note 22. Dividends
There were no dividends paid, recommended or declared during the current or previous financial year.
Note 23. 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 2020. 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 2020 (2019: $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.
41
Melbana Energy Limited
Notes to the consolidated financial statements
30 June 2020
Note 23. Financial instruments (continued)
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
USD financial liabilities
Trade creditors
NZD financial assets
Cash on hand and at bank
EUR financial assets
Cash on hand and at bank
EUR financial liabilities
Trade Creditors
30 June 2020 30 June 2019
$
$
727,078
1,378,571
30 June 2020 30 June 2019
$
$
8,762
217,287
30 June 2020 30 June 2019
$
$
-
63
30 June 2020 30 June 2019
$
$
802
1,617
30 June 2020 30 June 2019
$
$
182,881
-
The Consolidated Entity had net assets denominated in foreign currencies of $536,237 as at 30 June 2020 (2019: of
$1,162,964). Based on this exposure, had the Australian dollars strengthened by 10% / weakened by 10% (2019:
strengthened by 5% and weakened by 5%) against these foreign currencies with all other variables held constant, the
Consolidated Entity's loss before tax for the year would have been $48,748 higher / $59,582 lower (2019: $55,379 lower /
$61,208 higher) and equity would have been $48,748 lower / $59,582 higher (2019: $55,379 lower / $61,208 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 and the spot
rate at each reporting date.
An analysis of the exchange rate sensitivity by foreign currency is as follows:
42
Melbana Energy Limited
Notes to the consolidated financial statements
30 June 2020
Note 23. Financial instruments (continued)
30 June 2020
US dollars net financial
assets/liabilities
Euros net financial
assets/liabilities
30 June 2019
US dollars net financial
assets/liabilities
NZ dollars net financial
assets/liabilities
Euros net financial
assets/liabilities
AUD strengthened
Effect on
AUD weakened
Effect on
% change
profit before
tax
Effect on
equity
% change
profit before
tax
Effect on
equity
10%
(65,301)
65,301
10%
79,813
(79,813)
10%
16,553
(16,553)
10%
(20,231)
20,231
(48,748)
48,748
59,582
(59,582)
AUD strengthened
Effect on
AUD weakened
Effect on
% change
profit before
tax
Effect on
equity
% change
profit before
tax
Effect on
equity
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
Price risk
The Consolidated Entity's exposure to equity investment price risk arises from investments held by the Consolidated Entity
and classified in the statement of financial position as at fair value through other comprehensive income (FVOCI) (Note 11).
This investment is publicly traded on the ASX. Had the equity share price improved by 50% / weakened by 50% with all other
variables held constant, the Consolidated Entity's other comprehensive income for the year and equity balance at year-end
would have been $1,574,636 higher / $1,574,636 lower. The percentage change is considered reasonable based on the
overall movement of the equity share price of the investment over the last 12 months.
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 and prevailing interest rates, 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.
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.
43
Melbana Energy Limited
Notes to the consolidated financial statements
30 June 2020
Note 23. Financial instruments (continued)
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.
30 June 2020
Non-derivatives
Non-interest bearing
Trade and other payables
Interest-bearing - variable
Lease liability
Total non-derivatives
30 June 2019
Non-derivatives
Non-interest bearing
Trade and other payables
Total non-derivatives
Weighted
average
interest rate
%
1 year or
less
$
Between 1
and 2 years
$
Between 2
and 5 years
$
Remaining
contractual
maturities
$
Over 5 years
$
-
623,727
-
7.50%
70,202
693,929
54,021
54,021
-
-
-
-
-
-
623,727
124,223
747,950
Weighted
average
interest rate
%
1 year or
less
$
Between 1
and 2 years
$
Between 2
and 5 years
$
Remaining
contractual
maturities
$
Over 5 years
$
-
387,582
387,582
-
-
-
-
-
-
387,582
387,582
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. The carrying amounts of trade
receivables and trade payables are assumed to approximate their fair values due to their short-term nature. Where
appropriate, the fair value of financial liabilities is estimated by discounting the remaining contractual maturities at the current
market interest rate that is available for similar financial instruments.
44
Melbana Energy Limited
Notes to the consolidated financial statements
30 June 2020
Note 24. 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 25. Remuneration of auditors
30 June 2020 30 June 2019
$
$
479,045
6,962
13,530
89,999
-
545,873
20,129
11,681
-
13,153
589,536
590,836
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
Audit or review of the financial statements
Preparation of the tax return
Due diligence
Note 26. Commitments
Lease commitments - operating
Committed at the reporting date but not recognised as liabilities, payable:
Within one year
One to five years
30 June 2020 30 June 2019
$
$
39,500
56,000
17,420
4,000
21,420
-
-
-
60,920
56,000
30 June 2020 30 June 2019
$
$
-
-
-
67,828
124,223
192,051
Operating lease commitments at 30 June 2019 comprised contracted amounts for office rental under a non-cancellable
operating lease expiring within 3 year with an option to extend. The lease had an escalation clause. From 1 July 2019 the
Consolidated Entity has recognised right-of-use assets and lease liabilities for this lease.
Guarantee
The Consolidated Entity has provided guarantees of $28,385 (2019: $27,718) at 30 June 2020 for lease of premises.
45
Melbana Energy Limited
Notes to the consolidated financial statements
30 June 2020
Note 26. Commitments (continued)
Exploration Commitments
In order to maintain rights of tenure to petroleum exploration tenements, the Consolidated Entity has minimum exploration
requirements to fulfil. These requirements 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 $6,300,000 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) was to 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 had 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) is the drilling of an exploration well. French major Total and
Australia's Santos had an option to fully fund the first well in the WA-488-P permit in return for an 80% participating interest
in the permit. However, these options expired unexercised during the year and the Consolidated Entity is currently in
discussions with several interested parties with a view to participating in the drilling of an exploration well.
During the year, the Consolidated Entity's application for a 12 month suspension of the work program conditions in respect
of Permit Year 3 (and a corresponding 12 month suspension of the permit term) was granted by the National Offshore
Petroleum Titles Administrator. The Consolidated Entity now has until 21 December 2021 to drill an exploration well in
WA-488-P.
46
Melbana Energy Limited
Notes to the consolidated financial statements
30 June 2020
Note 26. 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 September 2016, 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 2017 with a corresponding reduction in the term of future sub-periods. The work
program in the first sub-period consisting of evaluating existing exploration data in the block and reprocessing selected 2D
seismic data was unchanged and completed in October 2017.
In May 2017, CUPET approved a further amendment to the Block 9 PSC exploration work program, deferring the obligation
to undertake a 200km 2D seismic survey in the second exploration sub-period starting November 2017 to the third sub-
period starting November 2019 and accelerating the obligation to drill an exploration well from the third sub-period to the
second sub-period. On 11 August 2017 Melbana announced it had provided official notice to the Cuban regulatory authority
of its decision to enter 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 also to extend the waiver of the requirement to provide a financial guarantee for 50% of the work commitments for this
sub-period. The extension was granted in October 2019. As explained in Note 30 to the financial statements, the Company
entered into an agreement with Sonangol with respect to Block 9 during the year.
As at 30 June 2020, Melbana, as Operator, is advanced in its planning to drill two wells in Block 9. At the date of this report,
significant progress has been made on well planning, permitting, contractor engagement and sourcing of inventory to allow
commencement of drilling operations.
Summary
For the current sub-period of Block 9, the remaining committed activity is the drilling of one well.
For the current permit year of WA-488-P, the remaining committed activity is the drilling of one well.
There are no material commitments or contingencies other than as set out in this note.
Note 27. Related party transactions
Parent entity
Melbana Energy Limited is the parent entity.
Subsidiaries
Interests in subsidiaries are set out in note 29.
Key management personnel
Disclosures relating to key management personnel are set out in note 24 and the remuneration report included in the
Directors' report.
47
Melbana Energy Limited
Notes to the consolidated financial statements
30 June 2020
Note 27. Related party transactions (continued)
Transactions with related parties
As noted in note 11 to the financial statements, on 14 February 2020 the Company issued 434,582,340 ordinary shares as
purchase consideration (‘consideration shares”) to acquire 27.81% equity interest in Metgasco Limited. Out of the total
number of consideration shares being issued, 306,067,632 were issued to M&A Advisory Pty Ltd, an entity in which Mr
Andrew Purcell (Executive Chairman of the Company) is a director and a substantial shareholder.
On 4 April 2020, the Company sold 50,000 Metgasco Limited shares to M&A Advisory Pty Ltd for a consideration of $1,998
in an off-market transaction.
During the previous financial year, the Executive 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 consideration for this 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. These options were independently valued by an external expert and the full non-cash valuation of
$973,600 was booked as a finance cost and measured in accordance with AASB 2 Share-based Payment.
The following transactions occurred with related parties:
Payment for goods and services:
Payment for consulting services*
30 June 2020 30 June 2019
$
$
-
15,500
*
Payments for consulting services represent the payments made to Springhead Petroleum Pty Ltd, an entity associated
with Mr Peter Stickland.
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
The following balances are outstanding at the reporting date in relation to loans with related parties:
Current receivables:
Receivables from director
Terms and conditions
All transactions were made on normal commercial terms and conditions and at market rates.
Note 28. 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
48
30 June 2020 30 June 2019
$
$
1,998
-
Parent
30 June 2020 30 June 2019
$
$
(2,156,864)
(7,338,216)
(2,156,864)
(7,338,216)
Melbana Energy Limited
Notes to the consolidated financial statements
30 June 2020
Note 28. Parent entity information (continued)
Statement of financial position
Total current assets
Total assets
Total current liabilities
Total liabilities
Equity
Issued capital
Share-based payments reserve
Financial assets at fair value through other comprehensive income reserve
Accumulated losses
Total equity
Parent
30 June 2020 30 June 2019
$
$
1,868,131
3,541,146
10,399,478
8,424,343
1,500,879
572,670
1,553,396
572,670
277,130,250 273,158,138
1,441,162
-
(268,904,490) (266,747,627)
1,380,293
(759,971)
8,846,082
7,851,673
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 2020 and 30 June 2019.
Contingent liabilities
The parent entity had no contingent liabilities as at 30 June 2020 and 30 June 2019.
Capital commitments
Refer note 26 to the financial statements for the details of the exploration commitments. The parent entity had no other capital
commitments for property, plant and equipment as at 30 June 2020 and 30 June 2019.
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 29. 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
Principal place of business /
Country of incorporation
Ownership interest
30 June 2020 30 June 2019
%
%
Methanol Australia Pty Ltd
LNG Australia Pty Ltd
MEO International Pty Ltd
Finniss Offshore Exploration Pty Ltd
MEO New Zealand Pty Limited*
Melbana Operations Pty Ltd (Australia) Pty Ltd
Australia
Australia
Australia
Australia
New Zealand
Australia
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
-
*
This entity was dormant and had no assets for distribution. The Consolidated Entity is currently is in the process to
liquidating this entity.
49
Melbana Energy Limited
Notes to the consolidated financial statements
30 June 2020
Note 30. Interests in farm-out arrangements
Name
Block 9
Principal place of business /
Country of incorporation
Republic of Cuba
On 23 December 2019, the Consolidated Entity has signed a binding heads of agreement (HOA) with Sonangol E.P.
(Sonangol) for it to acquire a 70% Participating Interest in the Block 9 PSC in Cuba. As part of the HOA, on 25 May 2020,
the Consolidated Entity entered into a Farm-in Agreement (FIA) with Sonangol. The FIA details the commercial arrangement
and responsibilities for the drilling of two exploration wells in Block 9.
The FIA defined certain conditions precedent requiring satisfaction before the FIA becomes effective, and at the date of this
report all of which have been completed resulting in Melbana’s Ownership interest in Block 9 PSC reducing to 30% post
balance date.
Farm-outs in the exploration and evaluation phase
The Consolidated Entity does not record any expenditure made by the farmee on its accounts. It does not recognise any
gains or losses on its exploration and evaluation farm-out arrangements, but redesignates any costs previously capitalised
in relation to the whole interest as relating to the partial interest retained. Any cash consideration received directly from the
farmee credited against the cost previously capitalised in relation to the whole interest with any excess accounted by the
farmor as a gain on disposal.
Note 31. Events after the reporting period
Subsequent to the end of the financial year, on 17 August 2020, the last unsatisfied Condition Precedent to the Completion
of the Farm-in Agreement was resolved when Cuban regulatory approval was received for Sonangol’s 70%
Participating Interest in Block 9 PSC.
Subsequent to the end of the financial year, on 24 August 2020 the Company announced it had completed updating the
Prospective Resource assessment of the Beehive prospect in WA-488-P to incorporate the recently acquired 3D seismic
data over the prospect. The presence of the Beehive prospect was validated by the new seismic data set and the
best estimate prospective resource increased to 416MMboe, a 7% uplift to the previous independent resource assessment
based on the pre-existing 2D seismic dataset.
No other matter or circumstance has arisen since 30 June 2020 that has significantly affected, or may significantly affect
the Consolidated Entity's operations, the results of those operations, or the Consolidated Entity's state of affairs in future
financial years.
50
Melbana Energy Limited
Notes to the consolidated financial statements
30 June 2020
Note 32. Reconciliation of loss after income tax to net cash used in operating activities
Loss after income tax expense for the year
Adjustments for:
Depreciation and amortisation
Net loss on disposal of property, plant and equipment
Share-based payments
Foreign exchange differences
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 33. Earnings per share
30 June 2020 30 June 2019
$
$
(2,157,906)
(3,357,696)
61,950
-
-
(49,099)
-
29,116
30,314
82,000
(83,466)
973,600
(1,063)
22,588
50,440
(60,742)
(56,940)
13,059
(66,362)
(321,621)
(2,133,832)
(2,757,996)
30 June 2020 30 June 2019
$
$
Loss after income tax attributable to the owners of Melbana Energy Limited
(2,157,906)
(3,357,696)
Weighted average number of ordinary shares used in calculating basic earnings per share
2,044,014,360 1,825,745,057
Weighted average number of ordinary shares used in calculating diluted earnings per share 2,044,014,360 1,825,745,057
Number
Number
Basic earnings per share
Diluted earnings per share
Cents
Cents
(0.11)
(0.11)
(0.18)
(0.18)
For financial year ended 30 June 2020 outstanding options and performance rights totalling to 108,500,000 (2019:
186,827,981) are anti-dilutive and are therefore excluded from the calculation of diluted earnings per share.
Note 34. 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.
51
Melbana Energy Limited
Notes to the consolidated financial statements
30 June 2020
Note 34. Share based payments (options and rights) (continued)
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 2018 financial year, Executive 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 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 2019 financial 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.
30 June 2020
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
Weighted average exercise price
30 June 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
Balance at
the end of
the year
Forfeited
$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
$0.0260
-
-
-
-
-
-
-
-
-
(4,000,000)
(2,750,000)
-
-
-
(62,939,202)
(1,875,621)
(71,564,823)
-
5,500,000
20,000,000
3,000,000
80,000,000
-
-
108,500,000
$0.0320
$0.0220
Exercise
price
Balance at
the start of
the year
Granted
Balance at
the end of
the year
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)
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
$0.0279
$0.0256
$0.0320
$0.0260
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
30 June 2020 30 June 2019
Number
Number
-
5,500,000
20,000,000
3,000,000
-
-
4,000,000
8,250,000
20,000,000
3,000,000
62,939,202
1,875,621
28,500,000
100,064,823
52
Melbana Energy Limited
Notes to the consolidated financial statements
30 June 2020
Note 34. Share based payments (options and rights) (continued)
The weighted average share price during the financial year was $0.00829 (2019: $0.0155).
The weighted average remaining contractual life of options outstanding at the end of the financial year was 0.25 year (2019:
1 year).
Set out below are summaries of performance rights granted under the plan:
30 June 2020
Grant date
10/05/2018
30 June 2019
Grant date
07/12/2015
10/05/2018
Expiry date
30/04/2021
Expiry date
29/11/2018
30/04/2021
Exercise
price
Balance at
the start of
the year
Balance at
the end of
the year
Exercised
$0.0000
6,763,158
6,763,158
(6,763,158)
(6,763,158)
-
-
Exercise
price
Balance at
the start of
the year
Exercised
Balance at
the end of
the year
$0.0000
$0.0000
5,333,333
6,763,158
12,096,491
(5,333,333)
-
(5,333,333)
-
6,763,158
6,763,158
Set out below are the performance rights exercisable at the end of the financial year:
Grant date
Expiry date
11/05/2018
30/04/2021
30 June 2020 30 June 2019
Number
Number
-
-
6,763,158
6,763,158
The weighted average remaining contractual life of performance rights outstanding at 30 June 2020 Nil (2019 1.84 years).
53
Melbana Energy Limited
Directors' declaration
30 June 2020
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 2020 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
Executive Chairman
26 August 2020
54
Independent Auditor’s Report
To the Members of Melbana Energy Limited
Report on the audit of the financial report
Opinion
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
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 2020, 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 2020 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 $2,157,906 and
had net cash outflows from operating and investing activities of $1,635,805 for the year ended 30 June 2020, and as of that
date, the Group had cash reserves of $1,752,263 and a net working capital position of $367,256. 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 matter.
Key audit matters
Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the financia l
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.
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.
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
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 ar e 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 Th ornton’ 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.
55
Key audit matter
How our audit addressed the key audit matter
Exploration and evaluation Assets – valuation (Note 15)
At 30 June 2020 the carrying value of exploration and
evaluation assets was $5,252,593.
In accordance with AASB 6 Exploration for and Evaluation of
Mineral Resources, the Group 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.
The process undertaken by management to assess whether
there are any impairment triggers in each area of interest
involves an element of management judgement.
This area is a key audit matter due to the significant
judgement involved in determining the existence of impairment
triggers.
Investment in Metgasco Limited (Note 11)
During the period, the Group acquired 27.81% of the ordinary
shares in Metgasco Limited. The Group issued 434,582,340
ordinary shares as consideration for the acquired shares.
The determination of whether significant influence exists
creates a risk due to the inherent subjectivity involved in the
determination.
AASB 128 Investments in Associates requires investments to
be accounted for under the equity method if it is deemed that
the investor holds, directly or indirectly, significant influence
over the investment.
This area is a key audit matter due to the inherent subjectivity
involved in the Group making judgements relating to the
assessment of significant influence for the investment, and the
accounting treatment and presentation thereon.
Our procedures included, amongst others:
(cid:31) Reviewing management's reconciliation of capitalised
exploration and evaluation expenditure and ensuring it agrees
to the general ledger;
(cid:31) 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;
(cid:31) Performing 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;
(cid:31) Enquiring of management regarding their intentions to carry
out exploration and evaluation activity in the relevant
exploration areas;
(cid:31) Determining 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;
(cid:31) Assessing the accuracy of impairment recorded for the year
as it pertained to explorations interests; and
(cid:31) Reviewing the appropriateness of the related disclosures
within the financial statements.
Our procedures included, amongst others:
(cid:31) Obtaining the Group’s assessment of significant influence for
the investment;
(cid:31) Evaluating the Group’s assessment of significant influence
against the specific requirements of AASB 128, including:
o Whether the Group has representation on the board of
directors or equivalent governing body of the investee;
o Whether the Group participates in policy-making
processes of the investee;
o Whether there are material transactions between the
Group and the investee;
o Whether there is interchange of managerial personnel
between the Group and the investee;
o Whether there is provision of essential technical
information between the Group and the investee; and
o Whether the Group is able to obtain any information from
the investee other than that which is publically available;
(cid:31) Assessed the asset acquisition in compliance with AASB 9 as
fair value through other comprehensive income given the
above considerations; and
(cid:31) Reviewing the appropriateness of the related disclosures
within the financial statements.
56
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 2020, 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 mater ial
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: https://www.auasb.gov.au/admin/file/content102/c3/ar1_2020.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 2020.
In our opinion, the Remuneration Report of Melbana Energy Limited, for the year ended 30 June 2020 complies with
section 300A of the Corporations Act 2001.
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
T S Jackman
Partner – Audit & Assurance
Melbourne, 2 August 2020
57
Melbana Energy Limited
Shareholder information
30 June 2020
The shareholder information set out below was applicable as at 13 August 2020.
Distribution of equity securities
Analysis of number of equity security holders by size of holding:
Number of holders
of options over
ordinary shares
Total units
%
Number of
holders of
ordinary
shares
Total
units
%
-
-
-
-
6
6
-
-
-
-
-
28,500,000
-
-
-
-
100%
432
1,076
1,048
2,629
1,610
122,235
3,732,373
8,404,283
105,851,041
2,198,741,480
0.01%
0.16%
0.36%
4.57%
94.90%
28,500,000
100%
6,795
2,316,851,412
100%
-
-
4,653
-
-
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
Twenty largest quoted equity security holders
The names of the twenty largest security holders of quoted equity securities are listed below:
M&A Advisory Pty Ltd
National Nominees Limited
Terrace Management Pty Ltd
Tets Pty Ltd
Mr Matthew Dean Marshall
Mr Jason Meinhardt
Twinkle Capital Pty Ltd
Five Elements Design Pty Ltd
Mr John Oldani
Ms Hong Nhung Nguyen
North West Six Pty Ltd
Mrs Cathy Ann Bender
Mr Michael Culling
Ms Anita Tsang & Mr Bradley Garth Wright
Mrs Danielle Gordon
Pedomml Pty Ltd
Mrs Susan Jane Stickland
Mr David Coghill
Mf Medical Pty Ltd
Unquoted equity securities
Options over ordinary shares
58
Ordinary shares
Number held
% of total
shares
issued
368,733,939
98,184,101
68,224,656
47,001,000
40,756,331
35,650,431
32,000,000
29,000,000
26,611,111
25,806,133
23,751,757
20,622,531
19,454,232
19,253,947
19,005,000
17,000,000
16,597,279
15,055,507
13,450,483
936,158,438
15.92
4.24
2.94
2.03
1.76
1.54
1.38
1.25
1.15
1.11
1.03
0.89
0.84
0.83
0.82
0.73
0.72
0.65
0.58
40.41
Number
on issue
Number
of holders
28,500,000
6
Melbana Energy Limited
Shareholder information
30 June 2020
The following persons hold 20% or more of unquoted equity securities (options over ordinary shares):
Name
Class
Zenix Nominees Pty Ltd
Options over ordinary shares
Number held
20,000,000
Substantial holders
Substantial holders in the Company, as disclosed in substantial holding notices given to the Company
M&A Advisory Pty Ltd
Ordinary shares
Number held
% of total
shares
issued
368,733,939
15.92
(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
Director Nomination
The Company will hold its Annual General Meeting of shareholders on 19 November 2020. The Company also advises that
in accordance with ASX Listing Rule 14.5 and the Company’s constitution the Closing Date for receipt of nominations for the
position of Director is Thursday, 8 October 2020. Any nominations must be received in writing no later than 5.00pm
(Melbourne time) on this date at the Company’s Registered Office.
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.
59
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
ANNUAL REPORT
2020