More annual reports from Melbana Energy Limited:
2023 ReportAnnual Report
2023
Melbana Energy Limited
ABN 43 066 447 952
Contents
Chairman’s
Letter
4
Highlights
7
At a Glance
6
Directors’
Report
12
2 Our Compass
4 Chairman’s Letter
6
At a Glance
7 Highlights
8 Operating Review
11 Board of Directors
12 Directors’ Report
32 Governance and Risk
35 Auditor’s Independence Declaration
36 Consolidated Statement of Profit or Loss
and Other Comprehensive Income
37 Consolidated Statement of Financial Position
38 Consolidated Statement of Changes in Equity
39 Consolidated Statement of Cash Flows
40 Notes to the Consolidated Financial Statements
65 Directors’ Declaration
66
71 Shareholder Information
73 Corporate Directory
Independent Auditor’s Report
Melbana Energy is an
Australian ASX listed,
independent oil and
gas company that has
a portfolio of attractive
exploration, appraisal
and development stage
opportunities in Cuba
and Australia.
1
Melbana Energy Limited Annual Report 2023 Our Compass
Who we are.
We are an Australian Energy
Company that specialises in high
impact oil and gas exploration.
We are an experienced team of
incredible technical specialists who
have a track record of finding and
drilling large oil and gas prospects.
We are ethical, have high integrity
and are recognised as a good
partner by the many major oil
companies who join our projects.
Where we are going.
We are fully funded and aim to
develop our high-impact Cuban
oil discovery to increase the
company value.
We will continue to look for high
impact exploration opportunities
to grow our opportunity base for
our shareholders.
We will continue to build our
team by bringing in highly skilled
specialists to make our ambitious
plans a reality.
How we will get there.
We will deploy our capital wisely;
we will work our extensive networks
and bring in partners to fund our
activities when we need to.
We will build on our technical
and commercial capability; we
will reward our stakeholders’
support by creating value for our
shareholders and the countries
we operate in.
We will always be true to our
values and continue to make our
company a fantastic place to work.
2
i
h
g
H
n
a
i
l
a
r
t
s
u
A
:
h
t
w
o
r
G
l
n
o
i
t
a
r
o
p
x
E
t
c
a
p
m
I
Growth: Apply extensive
experience to find deals
Melbana Energy Limited Annual Report 2023
Growth: Cuba Block 9
Development
I
m
p
a
c
t
E
x
p
o
r
a
t
i
o
n
l
G
r
o
w
t
h
:
C
u
b
a
H
g
h
i
Our Vision
Our Vision is to reward our
shareholders by becoming a
billion dollar company in the
next three years.
How we will achieve our vision
We will explore, appraise develop,
produce and/or acquire to become
a successful oil and gas production
company in Cuba; we will replicate this
success in other non-OECD countries.
Our Mission
Our Mission is to discover
and produce oil and gas in
countries that need and
support the hydrocarbon
industry.
“Affordable, reliable energy is a
fundamental human right. Without this
most basic requirement many parts of the
world will not actualise the potential of
their people. We will bring energy to the
regions of the world that need it most.”
3
Melbana Energy Limited Annual Report 2023
Chairman’s Letter
Operations during the reporting
period focussed on advancing our
understanding of our Block 9 contract
area in Cuba and our offshore permit
areas in Australia. Highlights included
completing our second exploration
well in Cuba, Zapato-1, advancing our
assessment of our offshore permit
areas in Australia and commencing
the Alameda-2 appraisal well in Cuba.
Zapato-1 successfully reached its
planned total depth after a longer
than planned drilling program,
primarily due to some challenging
down hole conditions. Although it
was disappointing to not reach the
target formation, we gained valuable
operational experience and increased
our knowledge of the subsurface.
These data have allowed us to review
our geological models and improve
our work practices. Following
completion of Zapato-1, efforts turned
to preparing for the commencement
It’s my pleasure to present
the 2023 Annual Report for
Melbana Energy Limited, which
marked another exciting period
of development for our world-
class portfolio of oil & gas assets.
of the Alameda-2 appraisal well, which
started drilling late in the reporting
period. The purpose of this year’s
appraisal program (Alameda-2 will
be followed by Alameda-3) is to
undertake detailed analysis of the
three geologically independent
oil-bearing Formations encountered
by our Alameda-1 exploration well;
designated Amistad, Alameda and
Marti, respectively. All three of these
Formations demonstrated a working
hydrocarbon system with moveable oil
often accompanied by high formation
pressures that our independent
resources certifier, McDaniel &
4
Associates Consultants Ltd. of
Canada, estimated may contain 5.0
billion barrels of oil in place. Their best
estimate was that 267 million barrels
of this may be recoverable, a number
they arrived at by applying average
Cuban recovery rates.
Typical Cuban production is from the
upper sheet and is therefore typically
heavy, leading to lower than average
recovery rates. If our exploration
thesis is correct that the oil gets lighter
with depth, our actual recovery rates
should be higher which could lead
to an upward revision of the above
recoverable resource estimate. The
current two well appraisal program
is designed to give us all the data
we and our independent experts
needs to better understand the
production characteristics of these
reservoirs in order to make this
assessment. Following the end of
the reporting period, the first result
from the Alameda-2 appraisal well
that gave support to this thesis
was obtained when the oil freely
recovered at surface from Unit 1B of
the Amistad Formation was shown
to be considerably lighter and of
lower viscosity than what is typically
encountered in Cuba. That it flowed
at a rate much higher than previous
vertical wells in Cuba at this depth
gave us sufficient information to
declare a discovery – something
that received wide media attention
in Cuba and generated renewed
excitement among our management
team, our technical leads and project
development partners.
Your Company is now positioned
with a broader range of short-term
production options to complement
the ongoing appraisal program
at Block 9. As a result, we have
commenced the new financial year
with a sound framework for both
commercial production pathways
and longer-term exploration at Block
9. As clearly stated to the Melbana
investor base, the Company’s Board
and management team continue
to maintain high conviction in the
project’s long-term potential, and our
efforts over the past 12 months have
further enforced that view.
Melbana Energy Limited Annual Report 2023 What was also pleasing throughout
the reporting period was that in
the course of our extensive work
in planning and development,
we further strengthened and
developed our relationships with key
stakeholders including Sonangol –
the national oil company of Angola
which maintains a 70% interest in
the Block 9 PSC, as well as with
the Cuban government. These
partnerships have formed a core
part of Melbana’s value proposition.
Since inception, the Company –
alongside its project development
partners – has been committed to
developing their stated exploration
and commercialisation strategy in
alignment with the objectives of
government representatives and
industry regulators in Cuba. In turn,
the ongoing potential of the project
and the strength of the regulatory
framework in which we operate is a
testament to the consistent dialogue
and strong relationships in Cuba
which have been developed over a
period of years now. We look forward
to maintaining this strong working
relationship with all stakeholders
into the future as the long-term
commercial potential of Block 9 PSC
continues to emerge.
It was also my pleasure during the
year to welcome a number of new
colleagues to our team to help us
realise our vision for the future. These
included Mr. Uno Makotsvana as
Chief Financial Officer, Ms. Cate
Friedlander as General Counsel and
Company Secretary, Dr. Duncan
Lockhart, as Exploration Manager,
Dr. Chris McKeown as our Chief
Commercial Officer and, more
recently, Mr. Chris Thompson as Chief
Operating Officer. The experience
and capability of these individuals
have greatly contributed to our
business, and we have the benefit
now of leveraging their respective
skills and experience in pursuit of
the Company’s stated development
strategy in the months and
years ahead.
Along with our highly-skilled team of
geoscientists and engineers, I’d also
like to take this opportunity to again
thank my fellow Board members
for their ongoing commitment to
Melbana’s strategic vision, and the
work that will be required to get
there. With the hard work carried
out to-date and the operational
milestones already achieved,
Melbana heads into FY24 at a
particularly exciting juncture. We
have reached this point with the
ongoing support of a broad, diverse
and loyal shareholder base, and I’d like
to sincerely thank our shareholders
for their continued engagement
with our development strategy and
value proposition. In closing, I look
forward to continuing to provide many
updates in FY24 and beyond as we
reach the numerous milestones ahead
of us as we seek to capitalise on this
unique exploration opportunity
in Cuba.
Andrew Purcell
Chairman
5
Melbana Energy Limited Annual Report 2023 Cuba
Cuba Block 9
At a Glance
Australia
Tassie Shoal Methanol
LNG Projects
AC/P70
AC/P50
AC/P51
WA-488-P
NT/P87
WA-544-P
6
Melbana Energy Limited Annual Report 2023 Highlights
Cuba
Australia
Advanced Exploration at Block 9
Extensions at key exploration sites
Strong execution on a detailed planning works
program led to the successful commencement of
the Alameda-2 well appraisal program. The program
was designed to further assess the oil quality and
reservoir characteristics of the three formations
containing moveable hydrocarbons encountered
by the Alameda-1 program (6.4 billion barrels of oil
in place for a Prospective Resource of 362 million
barrels of oil).
– The defined objectives of the Alameda-2 program were
to recover oil to surface from each of the three units
of the Amistad reservoir; evaluate the quality of the
recovered oil to assess production characteristics of
each reservoirs and increase the overall reported net oil
and gas pay estimate.
– Flow testing operations for Unit 1A were successfully
completed during the period; a total volume of 40
barrels of oil were recovered at surface and samples
sent for laboratory analysis.
– Post balance-date, flow testing for Unit 1B was
completed which confirmed the presence of moveable
that was oil considerably lighter than that observed
in Unit 1A. The fluid produced to surface was close to
100% oil with almost zero comingled water.
– As at the date of this report, further laboratory
testing of the oil’s properties is in progress to
better understand its commercial and production
characteristics. To-date, over 1,000 barrels of oil have
flowed naturally to surface during the testing program.
– The Unit 1B section has now been completed for future
production. The field development plan for Block 9
is now being reviewed, given the 1B results support
the management team’s decision to investigate
accelerated production pathways earlier than
previously planned.
– The next appraisal well, Alameda-3, will test the lower
two geologically independent oil-bearing formations
intercepted by Alameda-1 – designated Alameda and
Marti, respectively.
– During the period, Melbana’s application for a
suspension and extension of its 100%-owned AC/
P70 exploration permit was approved by the National
Offshore Petroleum Titles Administrator.
– The agreement extends the primary term, during which
the drilling of one exploration well must take place, by
2.5 years to August 2027. Located offshore northern
Australia, the project remains an attractive opportunity
for Melbana to leverage its expertise with modern
exploration technologies to unlock potential value at
AC/P70, where an appraisal well in 2007 identified a
gas cap.
– Melbana also advanced its two fully-owned Petroleum
Exploration Permits, NT/P87 and WA-544-P, (both
located offshore northern Australia) where it carried
out initial studies to reprocess and reinterpret legacy
2D seismic data.
– Post balance-date, Melbana announced it had
identified a new conceptual target within these permit
areas. The Company has now commenced a process to
farmout some of its 100% interest in the permit areas
to fund the acquisition of a 3D seismic survey which will
further de-risk the project.
7
Melbana Energy Limited Annual Report 2023 Operating
Review
Cuba
We are fully funded and aim to
appraise our high-impact Cuban oil
discovery to increase the company
value and will continue to look for
high impact exploration opportunities
and deals to grow our opportunity
base for our shareholders.
We are often asked “Why Cuba?” to
which we reply, why not Cuba? Given
we have been active in Cuba for over
a decade it is pertinent to review
what brought us to explore for oil and
gas here.
Cuba is a country that needs energy
to fuel its 11 million population. Cuba
is crying out for energy: it currently
produces about 45,000 barrels oil
per day of heavy (10° API), viscous
(~3,000 cP) crude oil that is used
almost entirely for generating
electricity. As there is a shortage of
domestic production, Cuba imports
crude to maintain its electricity grid.
8
Melbana Energy Limited Annual Report 2023 In Australia we often talk about the
energy trilemma: Sustainability (low
carbon), Affordability and Security
of supply. We also routinely focus on
Sustainability and there is a huge push
away from fossil fuels to alternative
sources of energy. Unfortunately for
less affluent nations, the de-emphasis
of affordability and security of supply
comes at a huge cost to society.
It has been said that these two key
limbs of the energy trilemma are
essentially the lowest rungs on
Maslow’s hierarchy of needs. Without
these, societies will labour to rise up
the ladder: with self-actualisation a
somewhat distant goal. It has also
been said that we all want to breathe
clear clean air, just not in the pitch
black of a power cut.
Our technical people were drawn
to Cuba as it was underexplored,
underdeveloped and overlooked
by the wider oil and gas industry.
We had the thesis that there were
untapped billions of barrels of oil in
the onshore geological formations,
with a significant proportion of that
potential in the deeper unexplored
rocks.
Cuba - Block 9
(Melbana 30%)
Melbana were awarded the Block 9
PSC (100%) in 2015 for 25 years on
internationally attractive terms. This
is a large onshore block (2,344km2),
prolific hydrocarbon zone: close to
a multibillion-barrel field, with well-
developed oil field infrastructure,
service providers and international
airports.
Melbana then set about integrating
all the gravity, magnetic seismic,
well production data we could find
to build a complete model of the
genesis of the structures that the
Cuban industry had been producing
from before we got there. Our team
identified nineteen leads and two
drillable prospects and set about a
farmout campaign to try and attract
co-investment.
Melbana were successful in attracting
Sonangol (National Oil Company of
Angola – Africa’s largest oil producer)
in 2021 to fund 85% of the cost of
drilling two exploration wells for a
70% working interest (completed
2022) but crucially Melbana
retained Operatorship.
In 2021, Melbana spudded the
Alameda-1 well to test 4 separate
target zones. The well intersected oil
starting at 454 metres and continued
to intersect reservoirs through to total
depth of 3,916 metres when drilling
stopped due to a highly pressured
influx of oil and gas into the well bore.
The Company then elected to shut
in the well and designed a 2 well
appraisal program.
As a result of drilling Alameda-1, net
pay areas totalling approximately
300 mMD were defined across gross
reservoir intervals totalling circa
2,155mMD.
In August 2022, on the back of the
Alameda discovery, the Company’s
Independent Experts, McDaniel
and Associates, released updated
estimates for Oil in Place and
Prospective Resources for the
three reservoirs intersected by the
Alameda-1 well.
The Alameda-1 exploration well
(2022) discovered three geologically
separate and vertically stacked oil-
bearing formations accompanied by
high formation pressure that each
flowed oil to surface. This resulted
in independently certified oil in
place and prospective resources, of
over 5 billion barrels of oil in place
and a gross unrisked best estimate
prospective resource of 267 million
barrels as per table below.
Table 1 – Independently estimated Prospective Resources
following completion of Alameda-1
Zone
Amistad
Alameda
Marti
Total
1
This estimate should be read with reference to the footnote “Notes regarding Contingent
and Prospective resource estimates” on page 34
Gross (100%)
Unrisked Prospective Resources1 (MMbbl)
Low (1U)
Best (2U)
Mean
High (3U)
30
34
21
85
88
109
70
267
119
148
95
362
240
297
197
734
9
Melbana Energy Limited Annual Report 2023 Operating
Review continued
The objective of the second
exploration well of the two well
program (designated Zapato-1) was
to test whether the Zapato structure,
identified by studying gravity and
magnetic data sets, could be the
source of the very light oil (50 – 64.5°
API) present in the historic Motembo
oil field. The well successfully reached
planned total depth of 3,150 metres
measured depth but did not reach the
target formation given the greater than
expected thickness of the ophiolitic
sequence that existed above it.
Activity post reporting period
Alameda-2 was spudded in June 2023
and reached total depth of 1975m on
31 July 2023. This well was focused on
logging, coring and flow testing the
Amistad 1A, 1B, 2 & 3 units.
Unit 1A recovered 11.7° API oil with
3,783 cP viscosity at surface from a
63 metre MD interval starting from
445 metres MD. Flow rates at surface
were not established but 40 barrels
of oil flowed unassisted to surface
(through a 32/64” choke), exceeding
expectations.
Unit 3 was intercepted 200 metres
up dip and 500 metres to the south
of where Alameda-1 intercepted it.
Moveable oil of a similar quality to Unit
1A was confirmed and testing indicated
the potential to flow at about 750
bopd.
The DST run on the pre-drill prognosed
Unit 2 did not demonstrate moveable
hydrocarbons to surface at the
location tested.
The Unit 1B recovered 18.7° API oil with
30 cP viscosity at surface from a 70
metre TVD perforated section – less
than 20% of the total Net Pay for Unit
1B (when incorporating fractures).
This is a higher API (thus lighter) and
considerably lower viscosity than oil
commonly produced in Cuba.
Such an improvement in oil quality is
an important factor for the value of this
oil, as is the lack of sulphur normally
present in Cuban production but
absent here.
Stabilised unassisted flow to surface
was measured at 1,235 barrels of oil per
day over 12 hours on a 36/64” choke,
peaking at 1,903 barrels of oil per day.
10
Analyses of performance of hundreds
of wells in the region indicate that
the flow rates observed in Unit 1B are
around the high case rates expected
for a shallow vertical well and are closer
to the average of a shallow horizontal
well through this Formation.
These upper formations in Cuba are
typically drilled close to horizontal
with the goal of intersecting the
dominant fracture systems at an
optimal angle which can result in flow
rates around three times that achieved
by vertical wells.
Logged Net Pay for the entire Amistad
Formation has been increased from
109 metres to 346 metres TVD –
further increasing to 615 metres
when the highly fractured limestones
are incorporated (45% of the gross
interval).
The Unit 1B section was completed for
future production, whilst Units 1A and
3 (also productive) were suspended
for potential future development
and production.
After analysing all options for
re-entering the Alameda-1 well
and undertaking a risk / reward
assessment, the decision was made
to plug and abandon Alameda-1 as
per the original plan.
Abandonment of Alameda-1 was
underway during the preparation of
the Annual Report, with casing removal
and final cementing of the well bore
completed during September 2023.
Once abandonment operations were
completed the rig was put on standby
on the Alameda pad to enable essential
maintenance and equipment upgrades
to be undertaken in preparation for
drilling the deeper Alameda-3 well.
During this standby period deliveries of
all necessary inventory and equipment
will be made to site to enable spud of
Alameda-3 in November 2023.
Alameda-3 will test the lower two
geologically independent oil-bearing
Formations intercepted by Alameda-1
– designated Alameda and Marti,
respectively. The goal of the well is to
prove up the nearly 179 million barrels
of best estimate prospective resource
certified for these lower Formations.
Ahead of the commencement of
drilling of Alameda-3, the Company
is working on plans to take advantage
of the opportunity to obtain early
production from the Amistad
Formation Unit 1B reservoir given
the excellent results obtained in
Alameda-2.
Obtaining early oil production data
will also provide the Company with
important information on reservoir
management, transport, and sales
processes for finalisation of next year’s
field development work plan and
budget.
To date 1,500 barrels of initial test
production has been trucked to a
nearby oil storage facility which also
acts as the custody transfer sales point.
Melbana is currently working through
the work programme and budget
process with the Joint Venture and
the Cuban regulator.
Going forward Melbana aims to drill as
many wells as possible and as quickly
as possible to unlock the massive
potential of this truly world class
discovery.
Melbana Energy Limited Annual Report 2023 Board of Directors
Andrew Purcell
Executive Chairman
Peter Stickland
Non-Executive Director
Michael Sandy
Non-Executive Director
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.
Peter Stickland has over 30 years’
global experience in oil and gas
exploration. Mr Stickland was CEO
and subsequently Managing Director
of the Company from 2014 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 Southeast 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).
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, PNG. He
was involved in establishing Novus
Petroleum Ltd and preparing that
company for its $186m IPO in April
1995 and over 10 years, he held
various senior management roles
with the Company. Subsequently
Mr Sandy has been the principal of
energy consultancy company Sandy
Associates P/L, has set up and taken
companies to IPO and has built
extensive experience on the boards
of listed and unlisted companies,
including Tap Oil, Burleson Energy
and Hot Rock.
See pages 19 to 20 for further information.
11
Melbana Energy Limited Annual Report 2023 Directors’ Report
The Directors present their report, together with the financial statements, on the consolidated entity (referred to hereafter
as the ‘Consolidated Entity’) consisting of Melbana Energy Limited (referred to hereafter as ‘Melbana’, the ‘Company’ or
‘parent entity’) and the entities it controlled at the end of, or during, the year ended 30 June 2023.
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
(Executive Chairman)
Michael Sandy
(Non-Executive Director)
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 or declared during the current or previous financial year.
Review of operations
International Operations
Cuba - Block 9 (Melbana 30%)
The Alameda-1 exploration well, completed during the prior reporting period, encountered three geologically
independent formations each containing moveable hydrocarbons (accompanied at times by significant formation
pressures). These formations (designated Amistad, Alameda and Marti from shallowest to deepest - see Figure 2 on page 13)
had a predrill combined Prospective Resource (Best Estimate, 100% basis)1 of 141 million barrels of oil. During the reporting
period and using the data gathered by Alameda-1, an independent expert estimated the volumes within these formations
to be 5.0 billion barrels of oil in place with a Prospective Resource of 267 million barrels of oil (Best Estimate, 100% basis)1 –
a 90% increase to the Company’s predrill estimate.
It is noteworthy that the latter estimate was informed by actual drilling of the formations which encountered oil and gas
shows and flows confirmed by electric logging whereas the predrill estimate was based on desktop work only yet both
estimates are characterised as prospective resources due to ASX and industry guidelines. The figures in Table 1 are therefore
more derisked than the predrill estimates.
Following these results, planning commenced to drill an appraisal well to test the oil quality and reservoir characteristics of
each of the three formations.
Table 1 – Independently estimated Prospective Resources following completion of Alameda-1
Zone
Amistad
Alameda
Marti
Total
Gross (100%)
Unrisked Prospective Resources1 (MMbbl)
Low (1U)
Best (2U)
Mean
High (3U)
30
34
21
85
88
109
70
267
119
148
95
362
240
297
197
734
1
This estimate should be read with reference to the footnote “Notes regarding Contingent and Prospective resource estimates” on page 34
12
Melbana Energy Limited Annual Report 2023 Figure 1 - Subsurface interpretation following completion of Alameda-1 exploration well
The objective of the second exploration well of the two well program (designated Zapato-1) was to test whether the
Zapato structure, identified by studying gravity and magnetic data sets, could be the source of the very light oil (50 –
64.5º API) present in the historic Motembo oil field. The well successfully reached planned total depth of 3,150 metres
measured depth but did not reach the target formation given the greater than expected thickness of the ophiolitic
sequence that existed above it (see Figure 1). The Company is reviewing the results of this well in conjunction with further
desktop studies to incorporate these learnings into its interpretation of the subsurface lithology of this area of Block 9.
Figure 2 - Subsurface interpretation near total depth for Zapato-1
13
Melbana Energy Limited Annual Report 2023
Directors’ Report
continued
The first of two appraisal wells (designated Alameda-2), the objective of which was to test the shallowest (Amistad) of the
three oil bearing formations encountered by Alameda-1, commenced drilling shortly before the end of the reporting period.
Cuba - Santa Cruz (Melbana 100%, subject to receiving final regulatory approvals)
No material progress was made during the reporting period towards the receipt of final regulatory approval for the binding
contract Melbana has entered into for the Santa Cruz oil field given the activities occurring in Block 9.
The Santa Cruz oil field has produced at least 7.4 million barrels from 18 wells since its discovery in 2004.
The Company notes that Cuba is subject to various sanctions imposed on it unilaterally by the United States of America (US).
Although these sanctions are intended to only apply to US citizens and corporations, their indirect scope is effectively larger
thereby requiring the Company to allow for their impact on operations in Cuba.
Australian Operations
WA-488-P (Melbana contingent cash and royalty interest)
The Company sold its 100% interest in permit area WA-488-P to the Australian subsidiary of US oil major EOG
Resources, Inc. in November 2021. The purchaser is making a country entry to drill the giant Beehive Prospect
located within the permit area. The Company has no exposure to the cost of this exploration well.
Figure 3 – The location of WA-488-P relative to the Company’s other licence areas in the Joseph Bonaparte Gulf
The Beehive Prospect was independently estimated to contain a Prospective Resource1 of 388 million barrels of oil
equivalent (Best Estimate, 100% basis)2 and a high estimate of 1.6 billion boe. Melbana revised these estimates3 to a
Prospective Resource1 of 416 million boe (Best Estimate, 100% basis) with a high estimate of 1.4 billion boe following its
assessment of the 3D seismic data acquired across the prospect in 20184.
The timing of the exploration well into the Beehive Prospect is subject to receipt of the necessary permits. The purchaser
has indicated that it expects the drilling program to be undertaken between January 2024 and December 2025.
Under the terms of the sale and purchase agreement, the Company is entitled to receive contingent future payments of
USD5.0 million (subject to the purchaser making certain future elections with regards to the permit) and USD10.0 million
for each 25 million barrels of oil equivalent in the event oil is produced from the permit area should the exploration well
be a commercial success.
See ASX announcement dated 7 August 2018
See ASX announcement dated 24 August 2020
See ASX announcement dated 14 August 2018
2
3
4
14
Melbana Energy Limited Annual Report 2023 WA-544-P and NT/P87 (Melbana 100%)
These permit areas, containing the undeveloped Turtle and Barnett oil discoveries, were granted to the Company in 2020
under the Australian Government’s 2019 Offshore Petroleum Exploration Acreage Release. They are in shallow water
(20 to 40 metres deep) and located about 300 kilometres southwest of Darwin, Australia. The Blacktip gas field lies to the
northwest and its pipeline transects the northern boundary of NT/P87, allowing potential access to the Darwin LNG facility
and/or the east coast gas market. The permit areas are also adjacent to WA-488-P, which the Company sold in 2021 to a
US oil major that is planning a drilling campaign to test the Beehive Prospect therein.
Figure 4 – Location of the Hudson Prospect within WA-544-P and NT/P87
During the reporting period the Company continued to study these permit areas, leveraging the experience it gained in
studying the adjacent WA-488-P, with the goal of identifying suitable exploration prospects.
AC/P70 (Melbana 100%)
On 16 February 2022, the Company announced that it had been granted petroleum exploration permit AC/P70, located
in the Territory of Ashmore and Cartier Islands, for an initial period of six years. Melbana made an application for this permit
under the Australian Government’s 2020 Offshore Petroleum Exploration Acreage Release.
Since being awarded the permit, the Company has licensed various datasets and undertaken considerable work to better
understand what exploration opportunities might exist there. The undeveloped Vesta-1 oil discovery (drilled in 2005) lies
within the permit area and an appraisal well drilled in 2007 identified a gas cap.
During the reporting period the relevant regulator approved the Company’s application for a 24-month suspension and
extension to the permit’s primary term.
15
Melbana Energy Limited Annual Report 2023 Directors’ Report
continued
Gas Field
Oil Field
Well
20 Km
Cash/Maple
Gas Field
Swan Gas
Discovery
Vesta-2
Vesta-1
AC/P70
Montara
Oil Field
Puffin
Oil Field
Skua
Oil Field
Jabiru
Oil Field
Challis
Oil Field
Figure 5 – Location of AC/P70 and existing well control in and around the permit area
AC/P50, AC/P51 (Melbana contingent cash and royalty interest)
Exploration permits AC/P50 and AC/P51 are in the Vulcan sub-basin, offshore northwestern Australia.
The Company sold its 55% interest in these permits to joint venture partner Rouge Rock Pty Ltd (Rouge Rock) in 2018 in
consideration for an interest in any future farmout or sale of these permits. The Company later received its share of the
consideration Rouge Rock received when it on sold AC/P50. During the reporting period this permit was surrendered so no
further entitlement is possible. The purchasers of AC/P50 also acquired an option to acquire AC/P51. Should this right be
exercised, the Company would be entitled to receive similar cash consideration and contingent royalties.
Tassie Shoals (Melbana 100%)
The Company 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 - and a single 3 Mtpa LNG
plant - known as the Tassie Shoal LNG Project - on Tassie Shoal, an area of shallow water in the Australian waters of the
Timor Sea approximately 275 km northwest of Darwin, Australia. 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 commercial terms.
No material progress was made in this regard during the reporting period.
Results for the year
The net loss after tax of the Consolidated Entity for the financial year was $1,001,999 (2022: net profit after tax of
$6,332,812). The loss for the year was mainly due to the administration costs of running the various exploration programs
of $4,151,532 offset by a partial recovery of these administration costs on Block-9 in Cuba.
During the year, the Consolidated Entity incurred net operating cash outflows of $3,126,076 (2022: outflows of $2,119,543),
net investing cash outflows of $13,363,748 (2022: inflows of $3,264,709) and net financing cash inflows of $15,766,348
(2022: inflows of $23,830,840).
The successful drilling and commercialisation of any 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 asset sales, equity capital raised from the issue of new shares and/or farm out or joint development arrangements with
other companies.
16
Melbana Energy Limited Annual Report 2023 Review of financial position
The net assets increased by $15,820,332 to $52,992,594 at 30 June 2023 (30 June 2022: $37,172,262). During the year,
the Consolidated Entity capitalised $8,140,867 (2022: $9,532,768) 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 $1,001,999 (2022: profit of $6,332,812);
–
Increase in share capital amounting to $17,295,207 (2022: $22,875,044).
The working capital position as at 30 June 2023 of the Consolidated Entity results in an excess of current assets over current
liabilities of $33,859,932 (30 June 2022: $26,450,132). The cash balances, including term deposits, as at 30 June 2023 were
$34,976,625 (2022: $35,570,347).
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.
Funding for the coming Financial Year is sufficient to meet the Company’s forecast exploration and field development
commitments however the Consolidated Entity may 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 8 July 2022 the Company reported that independent reserves and resources expert McDaniel & Associates estimated
the Alameda formation within Block 9, Cuba (encountered by the Alameda-1 exploration well) contained 1.9 billion barrels of
oil in place and a Prospective Resource1 of 109 million barrels of oil (Best Estimate, 100% basis).
On 1 August 2022 the Company reported that independent reserves and resources expert McDaniel & Associates estimated
the Marti formation within Block 9, Cuba (encountered by the Alameda-1 exploration well) contained 1.2 billion barrels of oil
in place and a Prospective Resource1 of 70 million barrels of oil (Best Estimate, 100% basis).
On 10 September 2022, the Company’s listed call options (ASX: MAYO) with a strike of $0.035 expired. Of the 459,758,321
options outstanding at the start of the reporting period, 453,202,268 were exercised on or prior to the expiry date resulting
in payments to the Company of $17,295,207.
On 27 October 2022 the Company reported that its exploration well Zapato-1 being drilled in Block 9, Cuba, had reached
planned total depth of 3,150 metres measured depth but had not reached the target formation.
On 15 November 2022 the Company announced its plans to drill two appraisal wells in Block 9, Cuba, to better understand
the oil qualities and reservoir characteristics of the three geologically independent formations containing moveable
hydrocarbons encountered whilst drilling Alameda-1.
On 7 December 2022 the Company announced it had appointed an Exploration Manager, a General Counsel and a new
Chief Financial Officer.
On 20 February 2023 the Company announced a small holding share facility to about 2,100 eligible holders with small
parcels of shares the opportunity to sell their shareholding without incurring brokerage or handling costs.
On 3 March 2023 it was announced that the Company’s ordinary shares listed on the ASX were to be included in the All
Ordinaries index, effective 10 March 2023.
On 19 April 2023 the Company received the approval of the National Offshore Petroleum Titles Administrator for a
24-month suspension of the permit conditions in respect of the Permit Year 1 - 3 work program (with a corresponding
24-month extension of the permit term) for its exploration permit AC/P70.
On 6 June 2023 the Company announced it had appointed a Chief Commercial Officer.
On 20 June 2023 the Company announced the start of drilling of its Alameda-2 appraisal well, the first of two appraisal
wells planned to better understand the multiple significant hydrocarbon bearing zones intercepted during the drilling of
Alameda-1 in its Block 9 PSC onshore Cuba.
As at 30 June 2023, the Company had no outstanding granted options.
17
Melbana Energy Limited Annual Report 2023 Directors’ Report
continued
Resource upgrades
During the reporting period the Company made significant announcements pertaining to the three oil-bearing formations
encountered by the Alameda-1 exploration well in its Block 9 PSC onshore Cuba.
The combined resource estimate for these three formations was independently assessed5 to contain 5.0 billion barrels of oil
in place for a Prospective Resource1 of 267 million barrels of oil (Best Estimate, 100% basis).
There were no other significant changes in the state of affairs of the Consolidated Entity during the financial year.
Matters subsequent to the end of the financial year
On 4 July 2023 the Company announced it had identified a carbonate buildup, named the Hudson Prospect, within its
permit areas NT/P87 and WA-544-P. The Company’s maiden prospective resource estimates for this prospect are shown in
Table 2. A farmout process was also commenced to seek a partner to fund the acquisition of a 3D seismic survey to further
derisk the exploration opportunity.
Table 2 – Maiden Resource Estimates for the Hudson Prospect
Oil Only (mmbbl)
STOOIP
Recoverable
Gas Only (BCF)
GIIF
Recoverable
GROSS PROSPECTIVE RESOURCES1
COS
P90
P50
Mean
P10
12%
12%
9
2
16
11
371
90
700
466
1,573
395
3,070
2,034
4,845
1,184
10,097
6,741
On 5 July 2023 the Company announced the first results from its Alameda-2 appraisal well in its Block 9 PSC onshore Cuba.
Unit 1A of the Amistad interval demonstrated recovery at surface of about 40 barrels of moveable hydrocarbons from a
productive interval of 63 metres measured depth. API was 11.7° and viscosity was 3,783 cP.
On 14 July 2023 the Company announced that the Alameda-2 appraisal well had reached total depth for Unit 1B, with strong
oil and gas shows between 700 and 1,110 metres measured depth with a core taken and preparations underway to wireline
log the unit.
On 4 August 2023, the Company announced that the Alameda-2 appraisal well had reached total depth ahead of schedule
and that logged Net Pay for Units 1A, 1B and 2 had been increased from 84 metres previously to 243 metres (using
conservative cutoffs and without allowing for the highly fractured limestones identified there.
On 15 August 2023, the Company announced that the Alameda-2 appraisal well had confirmed moveable oil in Unit 3 of
the Amistad interval, about 500 metres to the south and 200 metres updip from where Alameda-1 penetrated the same
unit. The quality of the oil was like that which had been recovered from Unit 1A and it demonstrated the potential to flow at
about 750 barrels per day. No formation water was observed. Incorporating the logged Net Pay for Unit 3 increased the total
Net Pay for the Amistad interval to 346 metres total vertical depth (increasing to 615 metres total vertical depth if natural
fracturing is incorporated).
On 28 August 2023, the Company announced significantly lighter (19° API) and lower viscosity (30 cP) oil had flowed to
surface from Unit 1B of the Amistad interval at a stabilised rate of 1,235 barrels of oil per day (peaking at 1,903 barrels of oil
per day. No formation water was observed, either during the flow test or from logs, and 1,000 barrels of oil had been trucked
away to storage.
On 20 September 2023, the Company announced that the Alameda-3 appraisal well is to commence in November 2023,
prior to which it was planned to commence early production from Unit 1B in Alameda-2.
No other matter or circumstance have arisen since 30 June 2023 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.
5
Independent certifier McDaniel and Associates, see ASX announcement dated 1 August 2022
18
Melbana Energy Limited Annual Report 2023 Likely developments and expected results of operations
The Consolidated Entity will continue to pursue its interests in:
– Block 9 PSC in Cuba in partnership with Sonangol. Appraisal drilling results from Alameda-2 have demonstrated the
presence of significant intervals of moveable hydrocarbons in the shallowest Amistad formation and these are being
studied to inform a field development proposal for the exploitation of the resource therein. The next appraisal well,
Alameda-3, will test the two deeper formations (called Alameda and Marti). Successful appraisal results from either
or both deeper formations should be able to be exploited independently of Amistad and of each other given they are
geologically independent;
– EOG Australia is making preparations for the drilling of its Beehive-1 exploration well in WA-488-P in the Joseph
Bonaparte Gulf in northern Australia which may begin in the following reporting period. The Consolidated Entity has
no exposure to the cost of the drilling of this well or to the permit but is entitled to receive cash and royalty interests
contingent on future elections made by EOG Australia in WA-488-P and commercial success from the drilling of the
exploration well;
– Permit areas NT/P87 and WA-544-P by seeking a farmout partner to fund the acquisition of a 3D seismic survey to further
derisk the Hudson Prospect; and
Its other permit areas and licences.
–
Health Safety and 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 international best practice, where reasonably practicable.
There have been no known breaches of any tenement conditions, no lost time due to injury and no spills during the reporting
period. Subsequent to the reporting period there was one recordable, but not reportable, minor spill.
Information on Directors
Name:
Title:
Qualifications:
Experience and expertise:
Andrew Purcell
Executive Chairman
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.
Other current directorships:
AJ Lucas Group Limited (ASX: AJL)
Former directorships (last three years):
None
Special responsibilities:
Member of the Remuneration and Nomination Committee and a member
of the Audit and Risk Committee
Interests in securities:
234,626,097 Fully Paid Ordinary Shares
19
Melbana Energy Limited Annual Report 2023 Directors’ Report
continued
Name:
Title:
Peter Stickland
Non-Executive Director
Qualifications:
BSc, Hons (Geology), GDipAppFin (Finsia), GAICD
Experience and expertise:
Peter Stickland has over 30 years' global experience in oil and gas exploration.
Mr Stickland was CEO and subsequently Managing Director of the Company
from 2014 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 Southeast 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).
Other current directorships:
None
Former directorships (last three years):
Talon Limited (ASX: TPD) (until October 2020)
XCD Energy Limited (ASX: XCD) (until June 2020)
Special responsibilities:
Chairman of Reserves Committee, Chairman of the Remuneration and
Nomination Committee and a member of the Audit and Risk Committee
Interests in securities:
13,827,419 fully paid ordinary shares
Name:
Title:
Michael Sandy
Non-Executive Director
Qualifications:
BSC Hons (Geology), MAICD
Experience and expertise:
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, PNG. He was involved in establishing
Novus Petroleum Ltd and preparing that company for its $186m IPO in
April 1995 and over 10 years, he held various senior management roles with
the Company. Subsequently Mr Sandy has been the principal of energy
consultancy company Sandy Associates P/L, has set up and taken companies
to IPO and has built extensive experience on the boards of listed and unlisted
companies, including Tap Oil, Burleson Energy and Hot Rock.
Other current directorships:
Omega Oil and Gas Ltd (ASX:OMA)
Former directorships (last three years):
None
Special responsibilities:
Chairman of the Audit and Risk Committee, member of the Remuneration
and Nomination Committee and a member of Reserves Committee
Interests in securities:
6,300,000 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 three years) quoted above are directorships held in the last three years for listed entities only and
excludes directorships of all other types of entities, unless otherwise stated.
20
Melbana Energy Limited Annual Report 2023 Company Secretary
Cate Friedlander, B.A/LLB GradDipACG AGIA – appointed 6 December 2022
Cate Friedlander is a well-known member of the Australian corporate legal community, with extensive experience in the
upstream resources and energy sectors across Australasia, South-East Asia, Middle East and the US. This includes a number
of years living and working in Asia.
Cate has worked for significant listed and unlisted entities in the sector – Novus Petroleum (General Counsel and Company
Secretary), Anzon Australia, Esso Australia and BP and more recently has consulted to Pilot Energy, Bridgeport Energy,
Beach Energy.
Cate’s experience extends to both asset/industry and corporate related work (M&A, IPO’s, contractual, corporate
governance and risk and advisory). Her asset and industry related experience is extensive – covering oil, gas and LNG sale
agreements, FEED and construction of production infrastructure, exploration and development joint venture related
dealings, drilling and governmental negotiations.
In addition to her corporate experience, Cate has previously worked in private practice with top tier firms, across a variety of
commercial and resource matters.
Cate also holds a Graduate Diploma in Applied Corporate Governance from, and is an Associate Member of, the
Governance Institute of Australia.
Meetings of Directors
The number of meetings of the Company’s Board of Directors (Board) and of each Board committee held during the year
ended 30 June 2023, and the number of meetings attended by each Director were:
Andrew Purcell
Michael Sandy
Peter Stickland
Full Board
Reserves Committee
Audit and Risk Committee
Attended
Held
Attended
Held
Attended
Held
9
9
9
9
9
9
-
2
2
2
2
2
2
2
2
2
2
2
Held: represents the number of meetings held during the time the Director held office or was a member of the relevant
committee.
The Remuneration and Nomination Committee held one meeting during the reporting period to review employee salaries,
senior executive performance evaluations and the terms and participants of the Company’s LTI plan. The non-conflicted
members of the Committee met alone prior to the meeting to propose amended remuneration terms to be offered to the
Executive Chairman with effect from 1 July 2023.
21
Melbana Energy Limited Annual Report 2023 Remuneration Report (audited)
The directors are pleased to present the 2023 remuneration report which sets out remuneration information for the
Company’s Non-Executive Directors, Executive Director and key management personnel.
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 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.
22
Melbana Energy Limited Annual Report 2023 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.
The 4th edition of the Corporate Governance Principles and Recommendations released by the ASX Corporate Governance
Council (Council) specifies that it is generally acceptable for Non-Executive Directors to receive securities as part of
their remuneration to align their interest with the interests of other security holders, however Non-Executive Directors
should not receive performance-based remuneration as it may lead to bias in their decision making and compromise their
objectivity. Generally Non-Executive directors do not receive performance-based bonuses and/or other incentives and
prior shareholder approval is required to participate in any issue of equity.
The Board has determined that Non-Executive Directors will be entitled to charge the Consolidated Entity at a rate of
$1,200 per day unless that non-executive director is serving in the capacity of Technical Director in which case the rate
would be $2,000 per day. These rates apply for any work performed in excess of five days per calendar month and subject
to receiving the prior approval of 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 by the Remuneration and Nomination Committee.
Fixed remuneration, consisting of base salary, superannuation and non-monetary benefits, are reviewed annually by the
Remuneration and Nomination 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. 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) being achieved.
KPIs include share price performance, safe execution of the Company’s projects, business development and organisational
management.
The LTI comprised of options and/or performance rights awarded to executives and vest conditional upon the recipient
meeting service objectives and share price hurdles.
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.
23
Melbana Energy Limited Annual Report 2023 Remuneration Report (audited)
continued
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
– Michael Sandy - Non-Executive Director
– Peter Stickland - Non-Executive Technical Director
Key Management Personnel:
– Uno Makotsvana – Chief Financial Officer
– Duncan Lockhart – Exploration Manager
– Errol Johnstone – Chief Geoscientist
– Dean Johnstone – Senior Geoscientist
30-Jun-23
Non-Executive Directors:
Michael Sandy
Peter Stickland
Executive Director:
Andrew Purcell
Key Management:
Uno Makotsvana6
Duncan Lockhart6
Errol Johnstone
Dean Johnstone
Post Employment
Short-term benefits
Benefits
Long-term Benefits
Salary and
fees
$
Cash Bonus
$
Super-
annuation
$
Long Service
Leave
$
Equity
Settled
$
Total
$
100,448
103,557
–
–
–
–
440,000
191,250
46,200
204,166
296,250
–
–
330,507
100,000
330,507
100,000
21,438
31,106
26,839
26,839
1,805,435
391,250
152,422
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
100,448
103,557
677,450
225,604
327,356
457,346
457,346
2,349,107
The Executive Director’s Cash Bonus was paid in the reporting period and related to an award of 85% of the maximum
possible STI for the 15-month period commencing the date of his employment to 30 June 2022.
One-off cash bonuses of $100,000 each were paid to the Chief Geoscientist and the Senior Geoscientist during the year.
6
Uno Makotsvana and Duncan Lockhart commenced employment with the Company during FY2023
24
Melbana Energy Limited Annual Report 2023 30-Jun-22
Non-Executive Directors:
Michael Sandy
Peter Stickland
Executive Director:
Andrew Purcell
Key Management:
Errol Johnstone
Dean Johnstone
Post Employment
Short-term benefits
Benefits
Long-term Benefits
Salary and
fees
$
Cash Bonus
$
Super-
annuation
$
Long Service
Leave
$
Equity
Settled
$
Total
$
75,409
126,125
357,100
133,787
133,787
826,208
–
–
–
–
–
–
–
–
–
12,710
12,710
25,420
–
–
–
–
–
–
–
–
75,409
126,125
636,2417
993,341
–
–
146,497
146,497
636,241
1,487,869
The proportion of remuneration linked to performance and the fixed proportion are as follows:
Non-Executive Directors:
Michael Sandy
Peter Stickland
Executive Director:
Andrew Purcell
Key Management
Uno Makotsvana6,8
Duncan Lockhart6,8
Errol Johnstone
Dean Johnstone
Fixed Remuneration
At Risk (STI)
At Risk (LTI)
30-Jun-23
30-Jun-22
30-Jun-23
30-Jun-22
30-Jun-23
30-Jun-22
100%
100%
100%
100%
–
–
71.7%
35.9%
28.3%
100%
100%
100%
100%
–
–
100%
100%
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
64.1%
–
–
–
–
7
8
Andrew Purcell was issued 31,812,050 performance rights, as approved by the Company’s shareholders at the 2021 AGM. As indicated in the
2021 AGM notice of meeting, the total number of performance rights proposed by the Company was calculated based on 3 years of director’s
fees at $150,000 p.a. divided by the 120-day VWAP up to and including 1 April 2021). However, the fair value of Andrew Purcell’s performance
rights for the purposes of this financial report reflects the prevailing share price as at the date of shareholder approval.
Key Management Personnel that commenced employment in the reporting period will have their entitlement to an STI payment assessed
following the end of the FY2024 financial year.
25
Melbana Energy Limited Annual Report 2023 Remuneration Report (audited)
continued
The Remuneration and Nomination Committee has considered remuneration mix both from a “Target” and “Maximum”
opportunity perspective to ensure targets that are set are challenging to achieve, and any over-performance paid is a
result of significant and measurable achievement. The remuneration mix for Key Management Personnel for FY23 at
award is as follows:
Executive Director – at Maximum
Executive Director – at Target
CFO – at Maximum
CFO – at Target
Exploration Manager – at Maximum
Exploration Manager – at Target
Senior Geologist – at Maximum
Senior Geologist – at Target
Chief Geoscientist – at Maximum
Chief Geoscientist – at Target
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
0%
Fixed Remuneration
STI (at Risk)
LTI (at Risk)
There was no LTI component for the Executive Director in the reporting period.
Service agreements
Name:
Title:
Agreement commenced:
Term of agreement:
Details:
26
Andrew Purcell
Executive Chairman
1 April 2021
No fixed term
Mr Purcell’s fixed remuneration was $480,000 per annum (inclusive of
statutory superannuation), effective 1 July 2022.
The STI will be up to 50% of the fixed remuneration and paid in cash
or shares or both at the discretion of the non-conflicted members of
the Remuneration and Nomination Committee in consultation with
the executive.
The Executive Chairman’ LTI vested into shares of the Company
in March 2022 following satisfaction of all conditions. Shareholder
approval for his next LTI award will be sought at the company’s next
general meeting.
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.
Melbana Energy Limited Annual Report 2023 Name:
Title:
Agreement commenced:
Term of agreement:
Details:
Name:
Title:
Agreement commenced:
Term of agreement:
Details:
Uno Makotsvana
Chief Financial Officer
2 December 2022
No fixed term
Mr Makotsvana’s fixed remuneration is $350,000 per annum (exclusive
of statutory superannuation).
The STI will be up to 25% of the fixed remuneration and paid in cash or
shares or both at the discretion of the Board in consultation with the
executive.
The LTI will issue once every three years equating to a total value of
$315,000.
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.
Duncan Lockhart
Exploration Manager
5 September 2022
No fixed term
Mr Lockhart’s fixed remuneration is $395,000 per annum (exclusive of
statutory superannuation).
The STI will be up to 10% of the fixed remuneration and paid in cash or
shares or both at the discretion of the Board in consultation with the
executive.
The LTI will issue once every three years equating to a total value of
$355,500.
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.
27
Melbana Energy Limited Annual Report 2023 Remuneration Report (audited)
continued
Name:
Title:
Agreement commenced:
Term of agreement:
Details:
Name:
Title:
Agreement commenced:
Term of agreement:
Details:
Errol Johnstone
Chief Geoscientist
4 October 2010
No fixed term
Mr Johnstone’s fixed remuneration is $325,000 per annum (exclusive
of statutory superannuation).
The LTI will issue once every three years equating to a total value of
$292,500.
The executive can terminate the agreement with 1 months’ notice.
The Company can terminate the agreement with 1 months’ notice,
or payment in lieu thereof.
Dean Johnstone
Senior Geoscientist
3 October 2011
No fixed term
Mr Johnstone’s fixed remuneration is $325,000 per annum (exclusive
of statutory superannuation).
The LTI will issue once every three years equating to a total value of
$292,500.
The executive can terminate the agreement with 1 months’ notice.
The Company can terminate the agreement with 1 months’ notice,
or payment in lieu thereof.
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 2023 (2022: Nil, other than 31,812,050 performance rights that vested and then converted into ordinary
shares by the Executive Chairman).
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 2023.
28
Melbana Energy Limited Annual Report 2023 Performance rights
The terms and conditions of each grant of performance rights affecting remuneration of key management personnel in this
financial year or future reporting years are as follows:
Type of
performance
right granted
Vesting
Close
Date
Number of
performance
rights
Value per right
at grant date
$
Target Price
$
Uno Makotsvana
LTI - Tranche 1
2 May 2024
7,103,554
LTI - Tranche 2
2 Dec 2025
5,129,624
Duncan Lockhart
LTI - Tranche 1
28 May 2024
8,016,868
LTI - Tranche 2
28 Nov 2025
5,789,147
Errol Johnstone
LTI - Tranche 1
28 May 2024
6,596,157
LTI - Tranche 2
27 Nov 2025
4,763,223
Dean Johnstone
LTI - Tranche 1
28 May 2024
6,596,157
LTI - Tranche 2
27 Nov 2025
4,763,223
0.022
0.031
0.022
0.031
0.022
0.031
0.022
0.031
0.120
0.192
0.120
0.192
0.120
0.192
0.120
0.192
Conditions for vesting of the performance rights include a) the Company’s share price closing at or greater than the
Target Price for 20 consecutive trading days by Vesting Close Date and, b) continued employment at time of vesting.
Additional information
The earnings of the Consolidated Entity for the five years to 30 June 2023 are summarised below:
Profit/(loss) after income tax
(1,001,999)
6,332,812
(1,398,123)
(2,157,906)
(3,357,696)
2023
$
2022
$
2021
$
2020
$
2019
$
The factors that are considered to affect total shareholder return are summarised below:
Share price at financial year end
Basic earnings (cents per share)
2023
$
0.07
(0.03)
2022
$
0.08
0.24
2021
$
0.02
(0.06)
2020
$
0.01
(0.11)
2019
$
0.01
(0.18)
29
Melbana Energy Limited Annual Report 2023 Remuneration Report (audited)
continued
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 on the next page:
Ordinary shares
Andrew Purcell
Michael Sandy
Peter Stickland
Uno Makotsvana
Duncan Lockhart
Errol Johnstone
Dean Johnstone
Balance
at the start
of the year
Exercise of
performance
rights/options
Additions
Disposals/
Other
Balance
at the end
of the year
243,436,931
5,300,000
15,427,419
–
–
9,200,625
7,971,252
281,336,227
–
–
–
–
–
–
–
–
1,189,166
(10,000,000)
234,626,097
1,000,000
–
6,300,000
600,000
(2,200,000)
13,827,419
200,000
–
–
–
–
–
–
–
200,000
–
9,200,625
7,971,252
2,989,166 (12,200,000)
272,125,393
Option holding
There were no options holdings held and no movements during the financial year ended 30 June 2023.
Performance Rights Holding
2023
Performance rights over
ordinary shares
U. Makotsvana
D. Lockhart
E. Johnstone
D. Johnstone
Balance
at the start
of the year
Granted
Exercised
Other
Changes
Balance
at the end
of the year
Vested and
exercisable
Unvested
–
–
–
–
12,233,178
13,806,015
11,359,380
11,359,380
– 48,757,953
–
–
–
–
–
–
–
–
–
12,233,178
13,806,015
11,359,380
11,359,380
–
–
–
–
12,233,178
13,806,015
11,359,380
11,359,380
– 48,757,953
– 48,757,953
This concludes the remuneration report, which has been audited.
Shares issued on the exercise of options
There were 453,202,268 ordinary shares of Melbana Energy Limited issued on the exercise of options during the year ended
30 June 2023 and up to the date of this report.
Indemnity and insurance of officers or Auditors
The Group has in place a contract insuring the directors, the company secretary and all executive officers of the Group and
any related body corporate against a liability incurred by a director, company secretary or executive officers to the extent
permitted by the Corporations Act 2001 (Cth).
The Group has indemnified the directors, the company secretary and all executive officers of the Group for costs incurred, in
their capacity as officers of the Group, for which they may be held personally liable, except where there is a lack of good faith.
Details of the amount of the premium paid in respect of the insurance policies are not disclosed as such disclosure is
prohibited under the terms of the contract.
No indemnities have been given or agreed to be given or insurance premiums paid or agreed to be paid, during or since the
end of the financial year, to the auditors of the Group or any related entities against a liability incurred by the auditors.
30
Melbana Energy Limited Annual Report 2023 Proceedings on behalf of the Company
No person has applied to the Court under section 237 of the Corporations Act 2001 (Cth) 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 22 to the financial statements.
The Directors are satisfied that the provision of non-audit services during the financial year, by the auditor (or by another
person or firm on the auditor’s behalf), is compatible with the general standard of independence for auditors imposed by the
Corporations Act 2001 (Cth).
The Directors are of the opinion that the services as disclosed in Note 22 to the financial statements do not compromise the
external auditor’s independence requirements of the Corporations Act 2001 (Cth) 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 directors of MNSA
There are no officers of the Company who are former directors of MNSA.
Auditor’s independence declaration
A copy of the auditor’s independence declaration as required under section 307C of the Corporations Act 2001 (Cth) is set
out immediately after this Directors’ report.
Auditor
MNSA continues in office in accordance with section 327 of the Corporations Act 2001 (Cth).
Corporate Governance Statement
The Board is committed to achieving and demonstrating the highest standards of corporate governance. The Board
continues to refine and improve the governance framework and practices in place to ensure they meet the interests of
shareholders.
The Company complies with the Australian Securities Exchange (ASX) Corporate Governance Council’s Corporate
Governance Principles and Recommendations – 4th edition. A copy of the company’s Corporate Governance Statement
is available at the company’s website at the following address: https://www.melbana.com/site/About-Us/Corporate-
governance.
ESG Report
The Company is committed to improving the lives of our employees and the communities in which we operate, as well
as striving to have our operations benefit all of our stakeholders. Our field operations are conducted in accordance with
international best practice, regardless of whether this is of a higher standard than what local regulations or practice require
in the countries where we operate. We also prioritise the hiring of suitably qualified people from the countries in which we
operate so as to transfer financial and educational benefits to local communities and to show, by example, the emphasis we
place on healthy, safe and diverse workplaces and protection of the environment. Our goal is to build sustainable operations
that enhance the lives of our stakeholders, including staff, customers, communities and shareholders.
31
Melbana Energy Limited Annual Report 2023 Governance and Risk
Risk Identification and Management
The Company recognises that the management of risk is a critical component in achieving its purpose of delivering growth in
shareholder value. The Company has a framework to identify, understand, manage and report risks. As specified in its Board
Charter, the Board has responsibility for overseeing The Company’s risk management framework and monitoring its material
business risks. The Board continues to be committed to embedding risk management practices to support the achievement
of business objectives. As such the Board has established the Audit and Risk Committee which is responsibility for reviewing
and overseeing the risk management strategy of the Group and for ensuring it has an appropriate corporate governance
structure. The Board discusses with management and the external auditors at least bi-annually:
Internal controls systems;
–
– Policies and procedures to assess, monitor, and manage business, economic, environmental and social sustainability risks;
–
– Legal and regulatory compliance programs.
Insurance program having regard to the insurable risks and the cost of this cover; and
As part of the Company’s risk management structure, risk registers are maintained and reported to the Audit and Risk
Committee periodically and at least annually, detailing likelihood and severity of risks occurring. Management undertakes a
review of its insurable risks each year in order to fully consider potential impacts and how they are financed in terms of limits
and scope under the Company’s insurance program.
The Company’s material exposures to risk, and how the Company responds and manages these risks, is detailed below.
Material Risks
Risk Management Approach
The United States is the only country that maintains sanctions against
Cuba, and these only apply to people and corporations subject to
the laws of the United States. The Company is domiciled in Australia
and is therefore not subject these sanctions. Australia does not have
sanctions against Cuba.
To ensure it does not fall within the scope of the United States’
sanctions against Cuba, the Company has structured its international
banking, operations and insurance relationships in countries other than
the United States. These countries also afford the Company an avenue
to sell and transport any oil that will be produced in the future.
In relation to its Cuban operations, the Company also does not transact
with United States individuals or corporations, source or use prohibited
goods originating or manufactured in the United States or conduct any
transaction in United States Dollars.
The Company monitors the country risk of operating in Cuba and keeps
appraised of the status of the United States’ Cuba sanctions.
The Company actively monitors the obligations in all its licenses,
permits and production sharing contracts. There is in place an
established process to determine whether licenses and permits are
retained, extended, or surrendered after considering the overall value
of the license or permit to the Company’s portfolio as a whole and
therefore decide whether capital should be allocated to those permits.
Cuba Country Risks
The Company’s main operations currently are
in Cuba. As a result, Melbana is exposed to
the political, economic, environmental and
other risks and uncertainties associated with
operating there. Cuba is currently subject
to sanctions imposed by the United States
and while they remain in place, access to
equipment and personnel of United States
origin in support of operations in Cuba is
restricted. These sanctions also restrict
access to the project financing, banking and
insurance markets of the United States and
may also impact the Company’s ability to sell
and transport abroad to the United States any
oil discovered there.
Permits and Tenure Risks
All licences, permits and production sharing
contracts in which the Company has interests
are subject to renewal and completion of
minimum work conditions which will be at the
discretion of relevant organs of government
in the countries in which it operates. The
maintenance of licences and permits,
obtaining renewals or getting licences and
permits granted often depends on the
Company being successful in obtaining
required statutory approvals for proposed
activities and/or satisfying the various financial
obligations associated with the ongoing
maintenance of such licences and permits,
amongst other obligations.
32
Melbana Energy Limited Annual Report 2023 Material Risks
Risk Management Approach
Joint Operations Risk
The Company is party to a joint operation
arrangement and may enter into further joint
operations. Although The Company has
sought, and will seek, to protect its interests,
existing and future joint operations necessarily
involve special risks., including but not limited
to inconsistent goals with joint operations
partners and potential reputational risk by
association to a partner.
Funding Risks
The oil and gas industry is a capital-intensive
industry with regulator mandated minimum
work program obligations and financial
support for those. There can be no assurances
that all The Company’s future business
activities will in fact be met without future
borrowings or further capital raisings, and
whether such funding will be available and on
terms favourable to The Company.
Exploration Risks
Development of the Company’s petroleum
exploration permits is contingent upon
securing funding and obtaining satisfactory
exploration results. Petroleum exploration and
development is expensive and risky, which
even a combination of experience, knowledge
and careful evaluation may not be able to
adequately mitigate.
Reserves and Resources Risks
Estimates of Reserves, Contingent Resources
and Prospective Resources are based on
limited sampling, are not precise and no
assurance can be given that these reserves or
resources will be recovered during production.
Production estimates, in addition to being
dependent on the above reserve and resource
estimates and the risks associated therewith,
are further reliant on, among other things,
recovery rates.
Pandemic Risks
Large scale pandemic outbreaks of a
communicable disease such as COVID-
19 have the potential to affect personnel,
production and delivery of projects.
The Company has a clearly structured process of contracting with
third parties. In addition, The Company will only participate in joint
operations where it has a real influence in the operation and is not a
dormant partner. The existing Joint Operation the company is the
operator and therefore drives execution and oversight of the joint
operation.
All future Joint operations will continue to be structured in a manner
that ensures an appropriate level of control and direction.
The Company is adequately funded for its approved future work plans.
The Company manages its capital structure and requirements
actively and may issue additional equity securities, raise debt or other
financing solutions to fund future work program obligations, at the best
possible terms.
The Company’s corporate strategy has defined limits for how much
risk it will assume from any one single exploration activity on a sole
risk basis, beyond which it will bring in partners to participate in the
exploration.
This capital allocation discipline combined with best-in-class technical
expertise and resources is the most practical mitigant to this risk.
The Company has a Reserves Committee that is responsible for
establishing and reviewing reserve and resource estimates for the
Company’s portfolio of prospects. The members of this Committee,
and the Company’s geoscientists that prepare estimates for this
Committee, are experienced professionals with suitable formal
qualifications and decades of relevant experience in the oil and
gas sector preparing such estimates in accordance with relevant
international norms and standards. The recommendations of this
Committee are overseen at Board level by competent persons and,
where appropriate, independent external certifiers are used to review
internal estimates.
The Company employs its crisis and emergency management plans,
health emergency plans and business continuity plans to manage
this risk including ongoing monitoring and response to government
directions and advice. This enables the Company to take active steps
to manage risks to the Company’s staff and stakeholders and to
mitigate risks to production and progress of growth projects.
For its field operations, it also maintains strict protocols with regards
to testing of visitors by suitably qualified medical personnel before
permitting entry to the site, isolation of incoming crews for a period
of time before rotation to identify emergence of any symptoms and
maintaining isolation accommodation on site where people suspected
of development symptoms may be monitored in isolation.
Climate Change Risks
Increasing regulations and costs associated
with the identification, management and
reduction of the Company’s environmental
footprint, along with potential disruption
to field operations, are the principal risks
associated with public concerns regarding the
potential for significant climate change.
The objective of the Company’s environmental policy is to minimise
the environmental impact of its operations. The Company actively
pursues initiatives to minimise waste, spills and emissions to optimise
environmental and economic benefits.
The Company also carefully monitors emerging weather conditions
that have the potential to impact its field operations and has formal
protocols for the securing of site equipment and the safety of its
personnel.
33
Melbana Energy Limited Annual Report 2023 Governance and Risk
continued
Notes regarding Contingent and Prospective resource estimates
1.
The estimated quantities of petroleum that may potentially be recovered by the application of a future development
project(s) relate to undiscovered accumulations. These estimates have both an associated risk of discovery and a risk
of development. Further exploration appraisal and evaluation is required to determine the existence of a significant
quantity of potentially moveable hydrocarbons.
2.
The information that relates to Prospective Resources for Melbana is based on, and fairly represents, information
and supporting documentation compiled by Peter Stickland, a director of Melbana. 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.
3. Total Liquids = oil + condensate
4. 6 Bcf gas equals 1 MMboe; 1 MMbbl condensate equals 1 MMboe
5. Melbana’s share can be derived by pro-rating the resource ranges by its percentage equity
This report is made in accordance with a resolution of the Directors, pursuant to section 298(2)(a) of the
Corporations Act 2001 (Cth).
On behalf of the Directors
Andrew Purcell
Executive Chairman
26 September 2023
34
Melbana Energy Limited Annual Report 2023 Auditor’s Independence Declaration
AUDITOR’S INDEPENDENCE DECLARATION UNDER SECTION 307C OF
THE CORPORATIONS ACT 2001
TO THE DIRECTORS OF MELBANA ENERGY LIMITED AND CONTROLLED ENTITIES
ABN 43 066 447 952
In accordance with section 307C of the Corporations Act 2001, I am pleased to provide the following
declaration of independence to the directors of Melbana Energy Limited.
As the auditor for the audit of the financial report of Melbana Energy Limited for the year ended 30 June
2023, I declare that, to the best of my knowledge and belief, there have been no contraventions of:
i.
ii.
the auditor independence requirements of the Corporations Act 2001 in relation to the audit; and
any applicable code of professional conduct in relation to the audit.
MNSA Pty Ltd
Mark Schiliro
Director
Sydney
Dated this 26th of September 2023
35
Melbana Energy Limited Annual Report 2023
Consolidated Statement of Profit or Loss
and Other Comprehensive Income
for the year ended 30 June 2023
Other income
Interest income
Expenses
Consultants fees and expenses
Employee benefits expenses
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 promotions costs
Travel costs
Depreciation expense
Share Based Payment Expense
Tenement application and other related expenses
Foreign exchange loss
Finance costs
Profit/(loss) before income tax expense
Income tax expense
Profit/(loss) after income tax expense for the year attributable to the owners of
Melbana Energy Limited
Other comprehensive incomes
Items that will not be reclassified subsequently to profit or loss
Profit/(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/(loss) for the year, net of tax
Total comprehensive income/(loss) for the year attributable to the owners of
Melbana Energy Limited
Note
30-June-23
$
30-June-22
$
5
2,595,344
10,391,168
626,777
874
(723,342)
(687,275)
(1,846,556)
(1,166,845)
(298,960)
(166,267)
(214,568)
(138,838)
(194,707)
(184,038)
(104,105)
(44,191)
(54,981)
(85,166)
(95,640)
(24,696)
(125,642)
(121,641)
(404,684)
(636,241)
(88,348)
-
241,120
(747,260)
(313,707)
(56,772)
(1,001,999)
(6,332,812)
-
-
(1,001,999)
6,332,812
–
(579,033)
555,567
–
555,567
(579,033)
(446,432)
(5,753,779)
6
7
Basic earnings per share
Diluted earnings per share
30
30
Cents
Cents
(0.03)
(0.03)
0.24
0.21
The above consolidated statement of profit or loss and other comprehensive income should be read in conjunction with the
accompanying notes
36
Melbana Energy Limited Annual Report 2023 Consolidated Statement of Financial Position
as at 30 June 2023
Assets
Current assets
Cash and cash equivalents
Other receivables
Other financial assets
Receivable from farm-out arrangement
Total current assets
Non-current assets
Right-of-Use Asset
Deposits
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
Provisions
Total non-current liabilities
Total liabilities
Net assets
Equity
Issued capital
Reserves
Accumulated losses
Total equity
Note
30-June-23
$
30-June-22
$
8
9
10
16
11
12
13
14
15
16
15
17
18
34,976,625
35,570,347
3,946,949
155,982
150,000
150,000
-
3,648,597
39,073,574
39,524,926
128,326
153,707
-
12,590
18,850,629
10,709,762
19,132,662
10,722,352
58,206,236
50,247,278
4,499,717
12,903,444
130,824
380,971
202,130
-
171,350
-
5,213,642
13,074,794
-
-
222
222
5,213,642
13,075,016
52,992,594
37,172,262
320,473,026
303,177,819
145,732
639,340
(267,626,164) (266,644,897)
52,992,594
37,172,262
The above consolidated statement of financial position should be read in conjunction with the accompanying notes
37
Melbana Energy Limited Annual Report 2023 Consolidated Statement of Changes in Equity
for the year ended 30 June 2023
Issued
Capital
$
Share based
payment
reserve
$
Other
reserves
$
Accumulated
losses
$
Total equity
$
Balance at 1 July 2021
280,302,775
Profit after income tax expense for the year
Other comprehensive loss for the year, net of
tax
Total comprehensive income for the year, net
of tax
–
–
–
Shares Issued
22,128,774
–
–
–
–
–
Issue of Performance Rights
–
636,241
Conversion of Performance Rights
636,241
(636,241)
Issue of Options
Exercise of Options
–
1,728,655
3,316,285
(274,796)
Cost of capital raising
(3,206,256)
Transfer of reserves to accumulated losses
–
–
–
(1,353,836) (271,859,359)
7,089,580
–
6,332,812
6,332,812
(579,033)
–
(579,033)
(579,033)
6,332,812
5,753,779
–
–
–
–
–
–
–
–
–
–
–
–
22,128,774
636,241
–
1,728,655
3,041,489
(3,206,256)
1,118,350
(1,118,350)
–
Balance at 30 June 2022
303,177,819
1,453,859
(814,519) (266,644,897)
37,172,262
Balance at 1 July 2022
303,177,819
1,453,859
(814,519) (266,644,897)
37,172,262
Loss after income tax expense for the year
Total comprehensive income for the year,
net of tax
Exercise of Options
Expiry of Options
Issue of performance rights
Foreign Currency Translation Reserve
–
–
–
–
17,295,207
(1,433,127)
(20,732)
404,684
–
–
–
–
555,567
–
–
–
–
–
(1,001,999)
(1,001,999)
(1,001,999)
(1,001,999)
–
15,862,080
20,732
–
–
–
404,684
555,567
Balance at 30 June 2023
320,473,026
404,684
(258,952) (267,626,164) 52,992,594
The above consolidated statement of changes in equity should be read in conjunction with the accompanying notes
38
Melbana Energy Limited Annual Report 2023 Consolidated Statement of Cash Flows
for the year ended 30 June 2023
Cash flows from operating activities
Payments to suppliers and employees (inclusive of GST)
Exploration and evaluation
Interest paid
Note
30-June-23
$
30-June-22
$
(3,036,669)
(2,062,397)
(88,348)
(57,087)
(1,059)
(59)
Net cash used in operating activities
29
(3,126,076)
(2,119,543)
Cash flows from investing activities
Payments for property, plant and equipment
Payments for exploration and evaluation
Interest Received
Proceeds from sale of exploration interest
Proceeds from farm-out arrangement
Proceeds from disposal of investments
Net cash used in investing activities
Cash flows from financing activities
Proceeds from issue of shares
Share issue transaction costs
Proceeds from exercise of options
Net cash provided by financing activities
Net increase/(decrease) in cash and cash equivalents
Cash and cash equivalents at the beginning of the financial year
Effects of exchange rate changes on cash and cash equivalents
(21,998)
(86,568)
(45,858,329)
(39,134,910)
504,260
–
–
10,391,856
32,012,319
28,615,542
–
3,478,789
(13,363,748)
3,264,709
–
–
24,893,706
(1,062,866)
15,766,348
–
15,766,348 23,830,840
(723,476) 24,976,006
35,570,347
10,683,656
129,754
(89,315)
Cash and cash equivalents at the end of the financial year
8
34,976,625 35,570,347
The above consolidated statement of cash flows should be read in conjunction with the accompanying notes
39
Melbana Energy Limited Annual Report 2023 Notes to the Consolidated Financial Statements
for the year ended 30 June 2023
Note 1. General information
The financial statements cover Melbana Energy Limited as a Consolidated Entity consisting of Melbana Energy Limited and
the entities it controlled at the end of, or during, the year. The financial statements are presented in Australian dollars, which
is Melbana Energy Limited’s functional and presentation currency.
Melbana Energy Limited is a listed public company limited by shares, incorporated and domiciled in Australia. Its registered
office and principal place of business are disclosed on the Corporate Summary accompanying these financial statements.
A description of the nature of the Consolidated Entity’s operations and its principal activities are included in the Directors’
report, which is not part of the financial statements.
The financial statements were authorised for issue, in accordance with a resolution of Directors, on 26 September 2023.
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.
Going concern
The financial report has been prepared on the going concern basis, which assumes that the Consolidated Entity will be able
to discharge its liabilities.
At 30 June 2023, the Consolidated Entity:
– had, for the financial year ending on that date, incurred a net loss after tax of $1,001,999 (2022: profit of $6,332,812);
– had, for the financial year ending on that date, net cash outflows from operating, and investing and financing activities of
$723,476 (2022: inflows of $24,976,006);
– had cash and cash equivalents of $34,976,625 (2022: $35,570,347); and
– had a net working capital position of $33,859,932 (2022: $26,450,132)
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 consolidated entity
is currently adequately funded to meet its exploration commitments.
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 (Cth), 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 2023 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’.
40
Melbana Energy Limited Annual Report 2023 Note 2. Significant accounting policies (continued)
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.
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.
41
Melbana Energy Limited Annual Report 2023 Notes to the Consolidated Financial Statements
for the year ended 30 June 2023
Note 2. Significant accounting policies (continued)
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.
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.
42
Melbana Energy Limited Annual Report 2023 Note 2. Significant accounting policies (continued)
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.
(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.
43
Melbana Energy Limited Annual Report 2023
Notes to the Consolidated Financial Statements
for the year ended 30 June 2023
Note 2. Significant accounting policies (continued)
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
other comprehensive income (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.
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.
44
Melbana Energy Limited Annual Report 2023 Note 2. Significant accounting policies (continued)
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.
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.
45
Melbana Energy Limited Annual Report 2023 Notes to the Consolidated Financial Statements
for the year ended 30 June 2023
Note 2. Significant accounting policies (continued)
Share-based payments
Equity-settled share-based compensation benefits are provided to employees.
Equity-settled transactions are awards of shares, or options over shares, that are provided to employees in exchange for the
rendering of services.
The costs 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 costs 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.
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.
46
Melbana Energy Limited Annual Report 2023 Note 2. Significant accounting policies (continued)
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.
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 basis its judgements, estimates and
assumptions on historical experience and on other various factors, including expectations of future events, management
believes to be reasonable under the circumstances. The resulting accounting judgements and estimates will seldom equal
the related actual results. The judgements, estimates and assumptions that have a significant risk of causing a material
adjustment to the carrying amounts of assets and liabilities (refer to the respective notes) within the next financial year are
discussed below.
Exploration and evaluation costs
Exploration and evaluation costs are accumulated separately for each area of interest and carried forward provided that one
of the following conditions is met:
such costs are expected to be recouped through successful development or sale; or
–
– exploration activities have not yet reached a stage which permits a reasonable assessment of the existence or otherwise of
economically recoverable reserves, and active and significant operations in relation to the area are continuing.
Significant judgement is required in determining whether it is likely that future economic benefits will be derived from the
capitalised exploration and evaluation expenditure.
In the judgement of the Directors, at 30 June 2023 exploration activities in Cuba Block 9 has not yet reached a stage which
permits a reasonable assessment of the existence or otherwise of economically recoverable reserves. Active and significant
operations in relation to Cuba Block 9 is continuing and nothing has come to the attention of the Directors to indicate future
economic benefits will not be achieved. The Directors are continually monitoring the areas of interest and are exploring
alternatives for funding the development of areas of interest when economically recoverable reserves are confirmed. If new
information becomes available that suggests the recovery of expenditure is unlikely, the amounts capitalised will need to be
reassessed at that time.
Share-based payment transactions
The Consolidated Entity measures the cost of equity-settled transactions with employees by reference to the fair value
of the equity instruments at the date at which they are granted. The fair value is determined by using either the Binomial
or Black-Scholes model taking into account the terms and conditions upon which the instruments were granted. The
accounting estimates and assumptions relating to equity-settled share-based payments would have no impact on the
carrying amounts of assets and liabilities within the next annual reporting period but may impact profit or loss and equity.
Fair value measurement hierarchy
The Consolidated Entity is required to classify all assets and liabilities, measured at fair value, using a three level hierarchy,
based on the lowest level of input that is significant to the entire fair value measurement, being: Level 1: Quoted prices
(unadjusted) in active markets for identical assets or liabilities that the entity can access at the measurement date; Level 2:
Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or
indirectly; and Level 3: Unobservable inputs for the asset or liability. Considerable judgement is required to determine what
is significant to fair value and therefore which category the asset or liability is placed in can be subjective.
47
Melbana Energy Limited Annual Report 2023 Notes to the Consolidated Financial Statements
for the year ended 30 June 2023
Note 3. Critical accounting judgements, estimates and assumptions (continued)
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.
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.
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 13.
Note 5. Other income
Grant (overpayment)/income
Operator’s indirect expenses charge
Receipt of sale proceeds from sale of permit
Other income
30-June-23
$
30-June-22
$
–
2,595,344
(688)
–
–
10,391,856
2,595,344
10,391,168
Other income is recognised when it is received or when the right to receive payment is established.
Note 6. Finance costs
Bank’s fees
Interest expense
Finance costs
48
30-June-23
$
30-June-22
$
312,648
56,753
1,059
19
313,707
56,772
Melbana Energy Limited Annual Report 2023 Note 7. Income tax expense
Numerical reconciliation of income tax expense and tax at statutory rate Loss before income
tax expense
Tax at the statutory tax rate of 25%
Tax effect amounts which are not deductible/(taxable) in calculating taxable income:
Non-assessable non-exempt income
Other non-deductible expenditure
Current year tax profits/(losses) not recognised
Interest tax expense
Tax losses not recognised
30-June-23
$
30-June-22
$
(1,001,999)
6,332,812
(250,500)
1,583,203
–
–
–
–
(250,500)
1,583,203
250,500
(1,583,203)
–
–
Unused tax losses for which no deferred tax asset has been recognised
Potential tax benefit @ 25%
187,220,307
186,218,308
46,805,077
46,554,577
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 8. Cash and cash equivalents
Current assets
Cash and cash equivalents
Note 9. Other receivables
Current assets
Trade debtors
Other receivables
Prepayments
GST receivable
Receivables
30-June-23
$
30-June-22
$
34,976,625
35,570,347
30-June-23
$
30-June-22
$
2,631,741
116,360
176,869
1,056,542
81,797
2,000
26,556
11,066
3,946,949
155,982
49
Melbana Energy Limited Annual Report 2023 Notes to the Consolidated Financial Statements
for the year ended 30 June 2023
Note 10. Other financial assets
Current assets
Term deposits
30-June-23
$
30-June-22
$
150,000
150,000
Term deposits represent a term deposit of $150,000 in place as security against a corporate credit card facility.
Note 11. Right-of-use asset
Non-current assets
Office space – right-of-use
Less: accumulated depreciation
Note 12. Exploration and evaluation
Exploration and evaluation Block 9 Cuba – at cost
30-June-23
$
30-June-22
$
323,027
(194,701)
128,326
–
–
–
Consolidated
30-June-23
$
30-June-22
$
18,850,629
10,709,762
Reconciliations
Reconciliations of the written down values at the beginning and end of the current and previous financial year are set out
below:
Block 9
$
NT/P87
$
WA-544-P
$
AC/P70
$
Total
$
Balance at 1 July 2021
1,141,294
18,698
17,002
-
1,176,994
Additions
Disposals
8,105,369
319,584
136,483
971,332
9,532,768
-
-
-
-
-
Balance at 30 June 2022
9,246,663
338,282
153,485
971,332
10,709,762
Additions
Disposals
7,783,306
91,810
133,188
132,563
8,140,867
-
-
-
-
-
Balance at 30 June 2023
17,029,969
430,092
286,673
1,103,895 18,850,629
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 2023 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.
50
Melbana Energy Limited Annual Report 2023 Note 13. Trade and other payables
Refer to Note 20 for further information.
Accounts payable
Other payables
Note 14. Lease Liabilities
Current liabilities
Lease Liability
Reconciliations
Balance as at 1 July 2022
Additions (New Lease for Sydney Office)
Interest
Repayments
Balance as at 30 June 2023
Non-cancellable lease term Commitments
Lease Liability
Note 15. Provisions
Current liabilities
Annual leave
Long service leave
Non-current liabilities
Long service leave
30-June-23
$
30-June-22
$
4,149,766
12,883,161
349,951
20,283
4,499,717
12,903,444
30-June-23
$
30-June-22
$
130,824
–
–
231,970
11,467
(112,613)
130,824
Less than
1 Year
130,824
1-3 Years
More than
3 Years
–
–
30-June-23
$
30-June-22
$
219,649
112,255
161,322
59,095
380,971
171,350
–
222
51
Melbana Energy Limited Annual Report 2023 Notes to the Consolidated Financial Statements
for the year ended 30 June 2023
Note 16. Advances from farm-out arrangement
Current assets
Receivables from Farm-out arrangement
Current liabilities
Advances to Farm-out arrangement
30-June-23
$
30-June-22
$
-
3,648,597
202,130
-
202,130
3,648,597
Project funding from joint operations partner are funds called from Sonangol by the Company as the operator for the
Block 9 drilling program as per the FIA which was executed on 25 May 2020. Refer to Note 27 to the financial statements
and Directors’ report for further information on the arrangement.
Note 17. Issued capital
Movements in ordinary share capital
Ordinary shares – fully paid
3,370,204,104
2,917,001,836
320,473,026
303,177,819
30-June-23
No.
30-June-22
No.
30-June-23
$
30-June-22
$
Opening balance
Shares issued – options exercised
Date
Shares
Issue Price
$
1 Jul 22
2,917,001,836
303,177,819
453,202,268
0.035
17,295,207
Closing balance
30 Jun 23 3,370,204,104
320,473,026
Ordinary Shares
Ordinary shares entitle the holder to participate in dividends and the proceeds on the winding up of the Company in
proportion to the number of and amounts paid on the shares held. The fully paid ordinary shares have no par value and the
Company does not have a limited amount of authorised capital.
On a show of hands every member present at a meeting in person or by proxy shall have one vote and upon a poll each share
shall have one vote.
Share issue costs
Incremental costs directly attributable to the issue of new shares or options, including transactional costs and fees payable
to relevant service providers, are shown in equity as a deduction, net of tax, from the proceeds.
Share buy-back
There is no current on-market share buy-back.
Shares under options
During the reporting period 453,202,268 shares were issued due to exercise of listed options, 6,556,053 options expired.
There were no outstanding at 30 June 2023: (2022: 459,758,321 listed options remained outstanding at an exercise price of
$0.035 with an expiry of 10 Sept 2022).
52
Melbana Energy Limited Annual Report 2023 Note 17. Issued capital (continued)
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 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 grow its existing businesses.
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 2022 Annual Report.
Note 18. Reserves
Share-based payments reserve
Foreign Currency Translation
Financial assets at fair value through other comprehensive income reserve
30-June-23
$
30-June-22
$
404,684
1,453,859
(258,952)
(814,519)
-
–
145,732
639,340
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.
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 the Consolidated statement of changes in equity
on page 38.
53
Melbana Energy Limited Annual Report 2023 Notes to the Consolidated Financial Statements
for the year ended 30 June 2023
Note 18. Reserves (continued)
Movements in reserves
Movements in each class of reserve during the current and previous financial year are set out below:
Balance at 1 July 2021
Issue of Performance Rights
Conversion of performance rights
Issue of Options
Conversion of Options
Disposal of assets
Foreign Currency Translation Reserve
Balance at 30 June 2022
Share Options Exercised
Share Options Expired
Performance Rights Issued
Foreign Currency Translation Reserve
Balance at 30 June 2023
Financial
assets at fair
value
through other
comprehensive
income reserve
$
Share based
payment
reserve
$
Foreign
currency
reserve
$
Total
$
(1,118,350)
-
(235,486)
(1,353,836)
–
–
–
–
1,118,350
–
-
–
–
–
–
-
636,241
(636,241)
1,728,655
(274,796)
–
–
–
–
–
–
–
636,241
(636,241)
1,728,655
(274,796)
1,118,350
(579,033)
(579,033)
1,453,859
(814,519)
639,340
(1,433,127)
(20,732)
404,684
–
–
–
–
555,567
404,684
(258,952)
(1,433,127)
(20,732)
404,684
555,567
145,732
Note 19. Dividends
There were no dividends paid, recommended or declared during the current or previous financial year.
Note 20. 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 2023.
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 2023 (2022: $nil).
Details of the significant accounting policies and methods adopted, including the criteria for recognition, the basis of
measurement and the basis on which income and expenses are recognised, in respect of each class of financial asset,
financial liability and equity instrument are disclosed in Note 2 to the consolidated financial statements.
Market risk
Foreign currency risk
Generally, the Consolidated Entity’s main exposure to exchange rate risk relates primarily to trade payables and cash
denominated in EUR, arising in relation to its activities in Cuba. Where a payable is significant, EUR may be purchased on
incurring the liability or commitment.
54
Melbana Energy Limited Annual Report 2023 Note 20. Financial instruments (continued)
The Consolidated Entity’s exposure to unhedged financial assets and liabilities at balance date is as follows:
USD Financial assets
Cash on hand at bank
USD Financial liabilities
Payables
EUR Financial assets
Cash on hand at bank
EUR Financial liabilities
Payables
CAD Financial liabilities
Payables
30-June-23
$
30-June-22
$
6,610,978
6,430,067
-
55,512
9,841,314
4,617,185
1,383,479
6,103,635
1,431,031
3,222,218
The Consolidated Entity had net assets denominated in foreign currencies as at 30 June 2023 of $22,212,898 (2022:
$3,382,096). Based on this exposure, had the Australian dollar strengthened by 10% / weakened by 10% (2022:
strengthened by 10% and weakened by 10%) against these foreign currencies with all other variables held constant,
the Consolidated Entity’s loss before tax for the year would have been $2,019,355 higher and $2,468,099 lower (2022:
$307,463 higher / $375,788 lower) and equity would have been $2,019,355 lower / $2,468,099, higher 2022: ($307,463
lower / $375,788 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:
AUD strengthened
Change
Effect
on profit
before tax
Effect on
equity
Change
AUD weakened
Effect
on profit
before tax
Effect on
equity
30-Jun-23
USD net financial assets/liabilities
EUR net financial assets/liabilities
CAD net financial assets/liabilities
10%
10%
10%
(906,483)
906,483
(1,261,204)
1,261,204
148,332
(148,332)
10%
10%
10%
1,107,923
(1,107,923)
1,541,471
(1,541,471)
(181,295)
181,295
Cash on hand at bank
(2,019,355)
2,019,355
2,468,099 (2,468,099)
AUD strengthened
Change
Effect
on profit
before tax
Effect on
equity
Change
AUD weakened
Effect
on profit
before tax
Effect on
equity
30-Jun-22
USD net financial assets/liabilities
EUR net financial assets/liabilities
CAD net financial assets/liabilities
10%
10%
10%
(840,503)
840,503
203,843
(203,843)
329,197
(329,197)
10%
10%
10%
1,027,282
(1,027,282)
(249,141)
249,141
(402,352)
402,352
Cash on hand at bank
(307,463)
307,463
375,789
(375,789)
55
Melbana Energy Limited Annual Report 2023 Notes to the Consolidated Financial Statements
for the year ended 30 June 2023
Note 20. Financial instruments (continued)
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.
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.
NON-DERIVATIVE FINANCIAL LIABILITIES
30-Jun-23
Lease Liabilities
Trade/other payables
Total
Average
interest rate
%
1 year
or less
$
Between
1 and 2 years
$
Between
2 and 5 years
$
Over
5 years
$
Remaining
contractual
maturities
$
130,824
4,499,717
4,630,541
–
–
–
–
–
–
–
–
–
130,824
4,499,717
4,630,541
56
Melbana Energy Limited Annual Report 2023 Note 20. Financial instruments (continued)
Average
interest rate
%
1 year
or less
$
Between
1 and 2 years
$
Between
2 and 5 years
$
Over
5 years
$
Remaining
contractual
maturities
$
30-Jun-22
Trade/other payables
Total
12,903,444
12,903,444
–
–
–
–
–
–
12,903,444
12,903,444
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.
Note 21. 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
30-June-23
$
30-June-22
$
2,196,685
1,194,875
152,422
-
-
-
-
-
2,349,107
1,194,875
The fixed remuneration earned by the Exploration Manager, Chief Geoscientist and Senior Geoscientist has a percentage
allocated to the exploration assets based on the percentage of time written to each exploration project by each individual.
Note 22. Remuneration of auditors
During the financial year the following fees were paid or payable for services provided by MNSA, the auditor of the
Company:
Audit services
Audit or review of the financial statements
30-June-23
$
30-June-22
$
41,750
41,750
35,000
35,000
57
Melbana Energy Limited Annual Report 2023 Notes to the Consolidated Financial Statements
for the year ended 30 June 2023
Note 23. Commitments
Guarantee
The Consolidated Entity has provided no guarantees (2022: $23,467) at 30 June 2023.
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 in Australia of approximately $1,000,000 include the minimum expenditure requirements that
the Consolidated Entity is required to meet in order to retain its present permit interests over the next fiscal year. These
obligations may be subject to renegotiation, may be farmed out or may be relinquished.
The Company has met all of its exploration commitments for the current exploration subperiod in Block 9 PSC. The next
exploration subperiod, should the Company choose to enter it, has a commitment of two exploration wells which are
expected to be met by the drilling of appraisal wells Alameda-2 and Alameda-3.
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-544-P and NT/P87 (Melbana 100%)
In November 2020 the Company was awarded petroleum exploration permits as a result of applications it had made
under the Australian Government’s 2019 Offshore Petroleum Exploration Acreage Release. These permits, designated
as WA-544-P and NT/P87, were awarded for an initial period of six years each with work commitments consisting of
reprocessing and various studies in their primary terms (years 1 to 3). The Company may withdraw from the permits prior to
entering their secondary terms, which contain more material expenditure commitments.
These permits lie adjacent to WA-488-P and allow the Company to build on the knowledge it has gained in that permit area
to pursue other leads in this expanded area. Melbana retains a 100% interest in the adjacent permit areas WA-544-P and
NT-P87, which contain the undeveloped oil discoveries Turtle and Barnett. Melbana is currently conducting geoscientific
studies over these permit areas.
During the reporting period the Company applied for an 18-month suspension and extension to the primary term of these
permits.
AC/P70 (Melbana 100%)
On 16 February 2022, the Company announced that it had been granted petroleum exploration permit AC/P70, located in
the Territory of Ashmore and Cartier Islands, for an initial period of six years. Melbana made this application for this permit
under the Australian Government’s 2020 Offshore Petroleum Exploration Acreage Release.
During the first three years of the licence period, the Company must undertake the following activities:
– Licence, reprocess and interpret available seismic survey data
– Drill an exploration well
During the reporting period the relevant regulator approved the Company’s application for a 24-month suspension and
extension to the permit’s primary term.
Cuba Block 9 (Melbana 30%)
In September 2015, Melbana executed the Block 9 Production Sharing Contract (PSC) with the national oil company
of Cuba, 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. The Company is currently in the third exploration subperiod, for which
all work commitments have been met.
There are no material commitments or contingencies other than as set out in this note.
58
Melbana Energy Limited Annual Report 2023 Note 24. Related party transactions
Parent entity
Melbana Energy Limited is the parent entity.
Subsidiaries
Interests in subsidiaries are set out in Note 26.
Key management personnel
Disclosures relating to key management personnel are set out in Note 21 and the remuneration report included in the
Directors’ report.
Transactions with related parties
None.
The following transactions occurred with related parties:
Payments for consulting services*
Payments for Drilling Supervision Services**
30-June-23
$
30-June-22
$
5,750
67,924
73,674
32,375
8,867
41,242
Payments for consulting services represent the payments made to Springhead Petroleum Pty Ltd, an entity associated with Mr Peter Stickland.
*
** Payments for Drilling services were made to Lucas Drilling Pty Ltd a company in which Mr Andrew Purcell is also the Board Chairman.
Receivable from and payable to related parties
There were no trade receivables from or trade payables to related parties at the current and previous reporting date.
Loans to/from related parties
There were no loans from or loans to related parties at the current and previous reporting date.
Terms and conditions
All transactions were made on normal commercial terms and conditions and at market rates.
Note 25. 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
30-June-23
$
30-June-22
$
(1,140,487)
(6,717,952)
(1,140,487)
(6,717,952)
59
Melbana Energy Limited Annual Report 2023 Notes to the Consolidated Financial Statements
for the year ended 30 June 2023
Note 25. Parent entity information (continued)
Statement of financial position
Total current assets
Total assets
Total current liabilities
Total liabilities
Equity
Issued capital
Share-based payment reserve
30-June-23
$
30-June-22
$
25,585,145
21,076,442
47,529,981
34,637,322
2,311,412
4,524,076
2,311,412
4,524,298
320,473,026
303,177,819
404,684
1,453,859
Financial assets at fair value through other comprehensive income reserve
–
–
Accumulated losses
Total equity
(275,659,141)
(274,518,654)
45,218,569
30,113,024
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 2023 and 30 June 2022.
Contingent liabilities
As at 30 June 2023 the parent entity has a contingent liability of US$225,000 to a third party related to the sale of permit
WA-488-P should EOG Australia complete the drilling of an exploration well (currently advised to be drilled in 2024 or
2025) in that permit area. Future additional payments would be owed to this third party related to any future contingent
cash and royalty payments the Consolidated Entity may receive.
As at 30 June 2022 the parent entity had no contingent liabilities other than that referred to in the paragraph above.
Capital commitments
Refer Note 23 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 2023 and 30 June 2022.
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.
60
Melbana Energy Limited Annual Report 2023 Note 26. Interest 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:
Methanol Australia Pty Ltd
LNG Australia Pty Ltd
MEO International Pty Ltd
Finniss Offshore Exploration Pty Ltd
Melbana Operations Pty Ltd
Melbana Energy AC/P70 Pty Ltd
Melbana Exploration Pty Ltd
Note 27. Interest in Farm-out arrangements
Name
Block 9 PSC
Ownership interest
Principal place of
business / Country of
incorporation
30-June-23
%
30-June-22
%
Australia
Australia
Australia
Australia
Australia
Australia
Australia
100
100
100
100
100
100
100
100
100
100
100
100
100
–
Principal place of
business / Country of
incorporation
Cuba
On 25 May 2020 the Consolidated Entity entered into a Farm-in Agreement (FIA) with Sonangol Pesquisa E Produção S.A
(Sonangol). Under the terms of the FIA, Sonangol agreed to fund 85% of the cost of two exploration wells in Block 9 in return
for receiving a 70% interest (Promote). The FIA provides Sonangol with a priority in recovery of the initial consideration it
paid the Company (approximately equal to the Company’s historic costs related to Block 9 at that point) and the Promote
it agreed to pay for the initial two exploration wells. On 17 August 2020, the Company announced that formal Cuban
regulatory approvals had been received for Sonangol to acquire this 70% interest.
Group Commitments and contingent liabilities
The work commitments for the current exploration sub-period of Block 9 were met in full by the drilling of the two
exploration wells, Alameda-1 and Zapato-1. The next exploration sub-period (the fourth and final), should the Company
choose to enter it, has a work commitment of two exploration wells. The Company intends to apply to have the current
two well appraisal program (Alameda-2 and Alameda-3) credited against this future period work commitment. The Cuban
regulator has informally agreed to produce its formal consent for this proposal.
The expected expenditure towards meeting primary term commitments for permits WA-544-P, NT/P87 and AC/P70 up to
the end of the next fiscal year is forecast to be $1,000,000, subject to the regulator approving the suspension and extension
of permits WA-544-P and NT/P87 discussed in Exploration Commitments earlier in this report. If the regulator does not
approve the application for a suspension and extension the Company is not obligated to enter the secondary period.
61
Melbana Energy Limited Annual Report 2023 Notes to the Consolidated Financial Statements
for the year ended 30 June 2023
Note 28. Events after the reporting period
On 4 July 2023 the Company announced it had identified a carbonate buildup, named the Hudson Prospect, within its
permit areas NT/P87 and WA-544-P. The Company’s maiden prospective resource estimates for this prospect are shown in
Table 2. A farmout process was also commenced to seek a partner to fund the acquisition of a 3D seismic survey to further
derisk the exploration opportunity.
On 5 July 2023 the Company announced the first results from its Alameda-2 appraisal well in its Block 9 PSC onshore Cuba.
Unit 1A of the Amistad interval demonstrated recovery at surface of about 40 barrels of moveable hydrocarbons from a
productive interval of 63 metres measured depth. API was 11.7° and viscosity was 3,783 cP.
On 14 July 2023 the Company announced that the Alameda-2 appraisal well had reached total depth for Unit 1B, with strong
oil and gas shows between 700 and 1,110 metres measured depth with a core taken and preparations underway to wireline
log the unit.
On 4 August 2023, the Company announced that the Alameda-2 appraisal well had reached total depth ahead of schedule
and that logged Net Pay for Units 1A, 1B and 2 had been increased from 84 metres previously to 243 metres (using
conservative cutoffs and without allowing for the highly fractured limestones identified there.
On 15 August 2023, the Company announced that the Alameda-2 appraisal well had confirmed moveable oil in Unit 3 of
the Amistad interval, about 500 metres to the south and 200 metres updip from where Alameda-1 penetrated the same
unit. The quality of the oil was like that which had been recovered from Unit 1A and it demonstrated the potential to flow at
about 750 barrels per day. No formation water was observed. Incorporating the logged Net Pay for Unit 3 increased the total
Net Pay for the Amistad interval to 346 metres total vertical depth (increasing to 615 metres total vertical depth if natural
fracturing is incorporated).
On 28 August 2023, the Company announced significantly lighter (19° API) and lower viscosity (30 cP) oil had flowed to
surface from Unit 1B of the Amistad interval at a stabilised rate of 1,235 barrels of oil per day (peaking at 1,903 barrels of oil
per day. No formation water was observed, either during the flow test or from logs, and 1,000 barrels of oil had been trucked
away to storage.
On 20 September 2023, the Company announced that the Alameda-3 appraisal well is to commence in November 2023,
prior to which it was planned to commence early production from Unit 1B in Alameda-2.
All of the volumes quoted above are on a gross unrisked mean estimate basis.
No other matters or circumstance has arisen since 30 June 2023 that has significantly affected, or may significantly affect
the consolidated entity’s operations, the result of those operations, or the consolidated entity’s state of affairs in future
financial years.
Note 29. Reconciliation of loss after income tax to net cash used in operating activities
Profit/(Loss) after income tax expense for the year
Adjustments for:
Non-operating activity income
Depreciation and amortisation
Share-based payments
Foreign exchange differences
Change in operating assets and liabilities
(Increase)/decrease in other receivables
(Increase)/decrease in prepayments
Increase/(decrease) in trade and other payables
Increase/(decrease) in provisions
Net cash used in operating activities
62
30-June-23
$
30-June-22
$
(1,001,999)
6,332,812
–
(10,391,856)
125,642
404,684
597,808
(1,620,742)
(1,029,986)
(392,084)
(209,399)
121,641
636,241
747,260
(77,786)
88,851
411,127
12,167
(3,126,076)
(2,119,543)
Melbana Energy Limited Annual Report 2023 Note 30. Earnings per share
Profit/(loss) after income tax attributable to the owners of Melbana
Energy Limited
Weighted average number of ordinary shares used in calculating basic
earnings per share
Weighted average number of ordinary shares used in calculating diluted
earnings per share
Basic earnings per share
Diluted earnings per share
30-June-23
$
30-June-22
$
(1,001,999)
6,332,812
3,285,215,346
2,660,397,536
3,317,693,239
3,054,070,678
Cents
(0.03)
(0.03)
Cents
0.24
0.21
Note 31. New and Amended Accounting Policies Adopted by the Group
The Entity adopted AASB 2020-3 which makes some small amendments to a number of standards including the following:
AASB 1, AASB 3, AASB 9, AASB 116, AASB 137 and AASB 141. The adoption of the amendment did not have a material
impact on the financial statements.
AASB 2021-7a: Amendments to Australian Accounting Standards – Effective Date of Amendments to AASB 10 and AASB
128 and Editorial Corrections
AASB 2020-7a makes various editorial corrections to a number of standards effective for reporting periods beginning on
or after 1 January 2022. The adoption of the amendment did not have a material impact on the financial statements.
Note 32. New and Amended Accounting Policies Not Yet Adopted by the Entity
AASB 2020-1: Amendments to Australian Accounting Standards – Classification of Liabilities as Current or Non-current
The amendment amends AASB 101 to clarify whether a liability should be presented as current or non-current.
The Group plans on adopting the amendment for the reporting period ending 30 June 2024 along with the adoption of
AASB 2022-6. The amendment is not expected to have a material impact on the financial statements once adopted
AASB 2022-6: Amendments to Australian Accounting Standards – Non-current Liabilities with Covenants
AASB 2022-6 amends AASB 101 to improve the information an entity provides in its financial statements about liabilities
arising from loan arrangements for which the entity’s right to defer settlement of those liabilities for at least 12 months after
the reporting period is subject to the entity complying with conditions specified in the loan arrangement. It also amends an
example in Practice Statement 2 regarding assessing whether information about covenants is material for disclosure.
The Group plans on adopting the amendment for the reporting period ending 30 June 2024. The amendment is not
expected to have a material impact on the financial statements once adopted.
AASB 2021-2: Amendments to Australian Accounting Standards – Disclosure of Accounting Policies and Definition of
Accounting Estimates
The amendment amends AASB 7, AASB 101, AASB 108, AASB 134 and AASB Practice Statement 2. These amendments
arise from the issuance by the IASB of the following International Financial Reporting Standards: Disclosure of Accounting
Policies (Amendments to IAS 1 and IFRS Practice Statement 2) and Definition of Accounting Estimates (Amendments to
IAS 8).
The Group plans on adopting the amendment for the reporting period ending 30 June 2024. The impact of the initial
application is not yet known.
63
Melbana Energy Limited Annual Report 2023 Notes to the Consolidated Financial Statements
for the year ended 30 June 2023
Note 32. New and Amended Accounting Policies Not Yet Adopted by the Entity (continued)
AASB 2021-5: Amendments to Australian Accounting Standards – Deferred Tax related to Assets and Liabilities arising
from a Single Transaction
The amendment amends the initial recognition exemption in AASB 112: Income Taxes such that it is not applicable to leases
and decommissioning obligations – transactions for which companies recognise both an asset and liability and that give rise
to equal taxable and deductible temporary differences.
The Group plans on adopting the amendment for the reporting period ending 30 June 2024. The impact of the initial
application is not yet known.
AASB 2021-7b & c: Amendments to Australian Accounting Standards – Effective Date of Amendments to AASB 10 and
AASB 128 and Editorial Corrections
AASB 2021-7b makes various editorial corrections to AASB 17 Insurance Contracts which applies to annual reporting
periods beginning on or after 1 January 2023, with earlier application permitted.
AASB 2021-7c defers the mandatory effective date (application date) of amendments to AASB 10 and AASB 128 that
were originally made in AASB 2014-10: Amendments to Australian Accounting Standards – Sale or Contribution of Assets
between an Investor and its Associate or Joint Venture so that the amendments are required to be applied for annual
reporting periods beginning on or after 1 January 2025 instead of 1 January 2018.
The Group plans on adopting the amendments for the reporting periods ending 30 June 2024 and 30 June 2026. The
impact of initial application is not yet known.
AASB 2022-7: Editorial Corrections to Australian Accounting Standards and Repeal of Superseded and Redundant
Standards
AASB 2022-7 makes editorial corrections to the following standards: AASB 7, AASB 116, AASB 124, AASB 128, AASB 134
and AASB as well as to AASB Practice Statement 2. It also formally repeals superseded and redundant Australian Account
Standards as set out in Schedules 1 and 2 to the Standard.
The Group plans on adopting the amendments for the reporting period ending 30 June 2024. The amendment is not
expected to have a material impact on the financial statements once adopted.
64
Melbana Energy Limited Annual Report 2023
Directors’ Declaration
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 (Cth), 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 2023 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 (Cth).
Signed in accordance with a resolution of Directors made pursuant to section 295(5)(a) of the Corporations Act 2001 (Cth).
On behalf of the Directors
Andrew Purcell
Executive Chairman
26 September 2023
65
Melbana Energy Limited Annual Report 2023
Independent Auditor’s Report
INDEPENDENT AUDITOR’S REPORT TO THE OWNERS OF
MELBANA ENERGY LIMITED AND CONTROLLED ENTITIES
ABN 43 066 447 952
Report on the Financial Report
Opinion
We have audited the financial report of Melbana Energy Limited (the Company) and its controlled entities
(the Group), which comprises the consolidated statement of financial position as at 30 June 2023, the
consolidated statement of profit or loss and other comprehensive income, the consolidated statement of
changes in equity and the consolidated statement of cash flows for the year then ended, and notes to the
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 2023 and of its financial
performance for the year then ended; and
b. complying with Australian Accounting Standards and the Corporations Regulations 2001.
The financial report also complies with the International Financial Reporting Standards as disclosed in Note 2.
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 confirm that the independence declaration required by the Corporations Act 2001, which has been given
to the directors of the Company, would be in the same terms if given to the directors as at the time of this
auditor’s report.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our
opinion.
66
Melbana Energy Limited Annual Report 2023
Key Audit Matters
Key audit matters are those matters that, in our professional judgement, were of most significance in our
audit of the financial report for the year ended 30 June 2023. These matters were addressed in the context
of our audit of the financial report as a whole, and in forming our opinion thereon, and we do not provide a
separate opinion on these matters.
Key Audit Matter
How Our Audit Addressed the Key Audit Matter
During the period, the group has incurred
$35,214,142 exploration for and evaluation on
mineral resources as part of its farm-out
arrangement with Sonangol. Under this
agreement, Melbana has 30% ownership.
Of the total expenditure, Melbana funded and
capitalised:
• $3,613,931 during the current period being
15% share under the initial agreement with
Sonongol; and
• $3,336,380 during the current period being
30% share of their funding commitment
going forward.
In addition, Melbana incurred capitalised cost
of $832,995.
As at 30 June 2023, $202,130 was prepaid by
Sonangol.
Cash and Cash Equivalents
During our audit, we analysed agreements in
respect to this transaction, assessed internal
reporting and substantiated transactions on a
sample basis. We questioned management on
treatment and challenged their assessment. Our
audit included performing the following:
• assessed accounting treatment of
•
•
•
•
significant transactions;
reviewed disclosures within the financial
report;
reviewed mathematical accuracy of
calculations.
reviewed farm-out reporting and
communication between Melbana and
Sonongol;
completed substantive tests of detail on
expenditure incurred during the period.
Cash and cash equivalents totalling
$34,976,625 is a significant balance to the
group.
We have evaluated disclosure and assessed
controls implemented by management during the
process of our audit. This included:
We do not consider cash and cash equivalents
to be at a high risk of significant misstatement,
or to be subject to a significant level of
judgement. However, due to the materiality in
context to the financial statements as a whole,
they are considered to be an area of risk in our
overall audit strategy.
•
• documenting and assessing the processes
and controls in place to record cash
transactions;
testing and sampling payments to
determine they were bona fide payments,
were properly authorised and recorded in
the general ledger; and
confirm all cash holdings to independent
third-party confirmations.
•
67
Melbana Energy Limited Annual Report 2023
Independent Auditor’s Report
continued
Key Audit Matters (continued)
Key Audit Matter
How Our Audit Addressed the Key Audit Matter
Exploration and evaluation assets
As at 30 June 2023, the carrying value of
exploration and evaluation assets was
$18,850,629.
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.
Our procedures included:
• Reviewing managements reconciliation of
capitalised exploration and evaluation
expenditure and ensuring it agrees to the
general ledger;
• Assessing the impact of farm-out
agreements including recovery of prior
exploration expenditure in relation to Cuba
Block 9;
• Evaluating costs capitalised during the
period and testing on a sample basis;
• Enquiring of management regarding their
intentions to carry out exploration and
evaluation activity in the relevant
exploration areas;
• 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;
• Assessing management judgement in
impairment assessment; and
• Reviewing the appropriateness of the
related disclosures within the financial
statements.
There were no restrictions on our reporting of Key Audit Matters.
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 2023, but does not include the financial
report and our auditor’s report thereon. Our opinion on the financial report does not cover the other
information and accordingly we do not express any form of assurance conclusion thereon. In connection
with our audit of the financial report, our responsibility is to read the other information and, in doing so,
consider whether the other information is materially inconsistent with the financial report or our knowledge
obtained in the audit or otherwise appears to be materially misstated. If, based on the work we have
performed, we conclude that there is a material misstatement of this other information, we are required to
report that fact. We have nothing to report in this regard.
68
Melbana Energy Limited Annual Report 2023
Responsibilities of the Directors for the Financial Report
The directors of the Company are responsible for the preparation of the financial report that gives a true and
fair view in accordance with Australian Accounting Standards and the Corporations Act 2001 and for such
internal control as the directors determine is necessary to enable the preparation of the financial report that
gives a true and fair view and is free from material misstatement, whether due to fraud or error.
In preparing the financial report, the directors are responsible for assessing the ability of the Group 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.
As part of an audit in accordance with the Australian Auditing Standards, we exercise professional
judgement and maintain professional scepticism throughout the audit. We also:
•
Identify and assess the risks of material misstatement of the financial report, whether due to fraud
or error, design and perform audit procedures responsive to those risks, and obtain audit evidence
that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a
material misstatement resulting from fraud is higher than for one resulting from error, as fraud may
involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal
control.
• Obtain an understanding of internal control relevant to the audit in order to design audit procedures
that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the
effectiveness of the Group’s internal control.
• Evaluate the appropriateness of accounting policies used and the reasonableness of accounting
estimates and related disclosures made by the directors.
• Conclude on the appropriateness of the directors’ use of the going concern basis of accounting and,
based on the audit evidence obtained, whether a material uncertainty exists related to events or
conditions that may cast significant doubt on the Group’s ability to continue as a going concern. If
we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s
report to the related disclosures in the financial report or, if such disclosures are inadequate, to
modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our
auditor’s report. However, future events or conditions may cause the Group to cease to continue as
a going concern.
• Evaluate the overall presentation, structure and content of the financial report, including the
disclosures, and whether the financial report represents the underlying transactions and events in a
manner that achieves fair presentation.
69
Melbana Energy Limited Annual Report 2023
Independent Auditor’s Report
continued
• Obtain sufficient appropriate audit evidence regarding the financial information of the entities or
business activities within the Group to express an opinion on the financial report. We are
responsible for the direction, supervision and performance of the Group audit. We remain solely
responsible for our audit opinion.
We communicate with the directors regarding, among other matters, the planned scope and timing of the
audit and significant audit findings, including any significant deficiencies in internal control that we identify
during our audit.
We also provide the directors with a statement that we have complied with relevant ethical requirements
regarding independence, and to communicate with them all relationships and other matters that may
reasonably be thought to bear on our independence, and where applicable, related safeguards.
From the matters communicated with the directors, we determine those matters that were of most
significance in the audit of the financial report of the current period and are therefore the key audit matters.
We describe these matters in our auditor’s report unless law or regulation precludes public disclosure about
the matter or when, in extremely rare circumstances, we determine that a matter should not be
communicated in our report because the adverse consequences of doing so would reasonably be expected
to outweigh the public interest benefits of such communication.
Report on the Remuneration Report
We have audited the remuneration report included in the directors’ report for the year ended 30 June 2023.
In our opinion, the remuneration report of Melbana Energy Limited for the year ended 30 June 2023
complies with s 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 s 300A of the Corporations Act 2001. Our responsibility is to express an opinion on
the remuneration report, based on our audit conducted in accordance with Australian Auditing Standards.
MNSA Pty Ltd
Mark Schiliro
Director
Sydney
Dated this 26th of September 2023
70
Melbana Energy Limited Annual Report 2023
Shareholder Information
30 June 2023
The shareholder information set out below was applicable as at 12 September 2023.
Distribution of equity securities
Analysis of number of equity security holders by size of holding as at 12 September 2023:
Securities
FULLY PAID ORDINARY SHARES
Holdings Ranges
1-1,000
1,001-5,000
5,001-10,000
10,001-100,000
100,001-9,999,999,999
Totals
Securities
PERFORMANCE RIGHTS
Holdings Ranges
1-1,000
1,001-5,000
5,001-10,000
10,001-100,000
100,001-9,999,999,999
Totals
Holders
Total Units
140
148
1,262
4,573
2,839
8,962
13,837
546,040
10,573,017
183,402,761
3,175,668,449
3,370,204,104
Holders
Total Units
–
–
–
–
10
10
–
–
–
–
70,915,618
70,915,618
Equity security holders
Twenty largest quoted equity security holders
The names of the twenty largest holders of quoted fully paid ordinary shares are listed below:
Name/Address 1
M&A ADVISORY PTY LTD
Continue reading text version or see original annual report in PDF format above