New Standard Energy Limited
Annual Report 2011

Plain-text annual report

NEW STANDARD ENERGY LIMITED ACN 119 323 385 ANNUAL FINANCIAL REPORT For the Financial Year Ended 30 June 2011 2011 Level 3 33 Richardson Street WEST PERTH WA 6005 Ph: +61 (8) 9481 7477 Fax: +61 (8) 9486 7670 Web: www.newstandard.com.au NEW STANDARD ENERGY LIMITED ACN 119 323 385 ANNUAL FINANCIAL REPORT For the Financial Year Ended 30 June 2011 CORPORATE DIRECTORY Board of Directors arthur Dixon aM (non-executive chairman) Sam Willis (Managing Director) Mark Hagan (technical Director) ian paton (non-executive Director) Company Secretary Mark clements Place of Business level 3 33 richardson Street WeSt pertH Wa 6005 ph: +61 (8) 9481 7477 fax: +61 (8) 9486 7670 Web: www.newstandard.com.au Auditors BDo audit (Wa) pty ltd 38 Station Street Subiaco Wa 6008 Legal Advisors Steinepreis paganin level 4, next Building 16 Milligan Street pertH Wa 6000 Share Registry Security transfer registrars pty ltd alexandra House Suite 1, 770 canning Highway applecroSS Wa 6153 ASX Code: NSE CONTENTS Page corporate Directory ................................................................. 1 company profile ....................................................................... 2 chairman’s report .................................................................... 8 Directors’ report .................................................................... 10 Director’s Declaration ............................................................ 21 corporate Governance Statement ........................................ 22 auditor’s independence Declaration .................................... 29 independent audit report .................................................... 30 consolidated Statement of comprehensive income ............ 32 consolidated Statement of financial position ..................... 33 consolidated Statement of changes in equity ..................... 34 consolidated Statement of cashflows .................................. 35 notes to the consolidated financial Statements ................. 36 Shareholder information ....................................................... 69 Competent Person: The information in this report is based on information reviewed by Dr Mark Hagan (BSc Hons, PhD) who is a Petroleum Geologist and Geophysicist with more than 35 years experience in the industry. Dr Hagan is Technical Director of New Standard Energy and consents to the inclusion in the report of the matters based on his information in the form and context in which it appears. annual financial report 2011 1 COMPANY PROFILE OIL AND GAS ASSETS new Standard energy limited (New Standard, the Company, Parent Entity) is an aSX listed entity (aSX code: nSe) with onshore oil and gas exploration assets in the canning Basin in the north-West of Western australia, the onshore carnarvon Basin in the Mid-West of Western australia and in colorado county and Wharton county in the onshore texas Gulf coast region, uSa. over the last twelve months the company’s primary focus has been on the following: • • understanding and progressing the large australian shale gas and tight gas portfolio in Western australia with a view to strategically positioning the company at the forefront of this emerging sector; and undertaking a successful initial drilling campaign on the conventional colorado country project in the uSa to establish cash flow and build a meaningful business. excellent progress has been made on achieving both of these objectives during the period and new Standard is now well placed to extract value from further exploration and development activity across its asset portfolio in 2012 and beyond. the following table provides an overview of the company’s exploration portfolio holdings at 30 June 2011: Australian Oil and Gas Exploration Type Interest Operator Joint Venture Partner Canning Basin ep417 ep 443 ep 450 ep 451 ep 456 exploration permit 65% new Standard onshore pty ltd Buru energy limited, Green rock energy limited exploration permit exploration permit 100% 100% new Standard onshore pty ltd new Standard onshore pty ltd exploration permit 100% new Standard onshore pty ltd exploration permit 100% new Standard onshore pty ltd application area 1/09-0 application area 100% new Standard onshore pty ltd application area 2/09 -0 application area 5/09 -0 application area application area 100% 100% new Standard onshore pty ltd new Standard onshore pty ltd Carnarvon Basin Stp-epa 0014 application area 100% new Standard onshore pty ltd Stp-epa 0015 application area 100% new Standard onshore pty ltd US Oil and Gas Exploration Colorado County Project - Brasher #1 (32.5%) - Heintschel #1 (32.5%) - Heintschel #2 (32.5%) - D truchard #1 (32.5%) - Joann #1 (33.68%) Working interest in Mineral rights 32.5% aKG energy llc Working interest in Mineral rights 33.68% aKG energy llc Moeller Project - Moeller #1 (38.5%) Working interest in Mineral rights 38.5% aKG energy llc Wharton County Project Working interest in 36% aKG energy llc Mineral rights - - - - - - - - - Burleson energy limited, aKG energy llc and minority interests Burleson energy limited, aKG energy llc and minority interests Burleson energy limited, aKG energy llc and minority interests Burleson energy limited, aKG energy llc and minority interests 2 neW StanDarD enerGy liMiteD Australian Shale Gas and Tight Gas Portfolio new Standard has amassed one of the largest shale and tight gas portfolios in australia via its 100% operated equity interests in its flagship Goldwyer project in the canning Basin, the emerging laurel project in the canning Basin and the Merlinleigh project in the carnarvon Basin. all projects, whilst at early stage, are highly prospective for large, strategic onshore hydrocarbon resources in Western australia. Goldwyer Project – Canning Basin, Western Australia the Goldwyer project covers in excess of 45,000 kms2 of prospective acreage across ep’s 443, 450, 451 and 456 as well as application areas 1/09-0, 2/09-0 and 5/09-0. During the financial year new Standard met the required work commitments across the permits forming the Goldwyer project through the acquisition of in excess of 13,000 line kms of aerial gravity data. additional technical work concentrated on structural mapping, seismic interpretation and basin modeling for thermal maturity profiling and burial history to provide a more comprehensive technical understanding of the merits of the Goldwyer project. this work was undertaken alongside the analysis of data from in excess of 50 historic wells that have penetrated the Goldwyer formation and provided an enhanced appreciation of the potential for liquids to be associated with a large strategic gas resource. this information had a significant impact on the technical prospectivity of the project and provided the impetus for engagement with numerous interested parties expressing an interest in potential joint venture arrangements for the Goldwyer project. independent confirmation from netherland Sewell and associates (NSAI), riSc pty ltd (RISC) and the uS Government Department of the energy information agency (EIA) was also forthcoming during the period. these reports provided further supportive and independent reviews in relation to the prospectivity and potential scale of the Goldwyer project in the canning Basin. as a result of the work undertaken by new Standard to enhance the understanding of the technical merits of the Goldwyer project and the emergence of these positive independent reviews, a significant level of engagement with potential partners was experienced both in late 2010 and early 2011, leading to exhaustive due diligence being undertaken by various parties. this process culminated in a non-binding Heads of agreement with conocophillips being agreed and announced on July 13, 2011 followed by binding agreements being executed and announced on 30 September, 2011, that formalise a farm-in agreement for exploration funding of up to uS$109.5m being committed by conocophillips in return for the rights to earn up to a 75% interest in the Goldwyer acreage. further information on this agreement can be found in the section on subsequent events in this report. New Standard’s Goldwyer shale acreage highlighting the prospective shale gas window. annual financial report 2011 3  Laurel Project – Canning Basin, Western Australia the laurel project is located in the northern canning Basin in the fitzroy trough and comprises a 65% operated interest in ep417 and a 60% operated interest in the Seven lakes Special prospecting authority (Seven Lakes SPA) that was successfully awarded in July 2011. the laurel project provides a second substantial asset for new Standard in the canning Basin and is emerging as an attractive regional play following the recent exploration success being experienced by Buru energy ltd (aSX: Bru) and its joint venture partners in the region. “New Standard has amassed one of the largest shale and tight gas portfolios in Australia” fund (subject to an expenditure cap of $4m) 27.5% of the costs of drilling, coring, fracture stimulation, flow testing and planned deepening of the lawford #1 well located on ep417. in return Green rock will earn a 15% per cent interest in ep417. Green rock has also committed to fund 22.5% of the costs of a second (but yet to be agreed) well to earn an additional 5% in ep417. at the date of this report the lawford #1 well was being deepened by the ep417 joint venture. as outlined above the laurel project footprint was significantly enhanced subsequent to the end of the period with the successful application and award of the Seven lakes Spa area (Stp- Spa-0017) immediately adjacent to ep417 in which new Standard will have a 60% operated interest. this addition to the portfolio more than doubled the laurel project acreage in the region for new Standard. the laurel project was enhanced during the period via the successful farm-in agreement reached with Green rock energy ltd (Green Rock) (aSX: GrK) on ep417 pursuant to which Green rock will pay $750,000 in back costs and New Standard’s Laurel Project permit area EP 417 and the Seven Lakes SPA hold potentially prospective tight gas plays. 4 neW StanDarD enerGy liMiteD Merlinleigh Project – Carnarvon Basin, Western Australia During the year new Standard completed the required geochemical surveys to meet the work commitments on the Merlinleigh project pursuant to the terms of the two special prospecting authority (SPA) areas in the onshore carnarvon Basin. the acreage is centrally located alongside the major gas infrastructure of the Dampier to Bunbury gas pipeline which provides a strategic position from which to service the growing domestic markets of the MidWest and pilbara mining centres as well as the burgeoning export lnG markets being developed in Western australia. following completion of the geochemical surveys and internal technical studies, new Standard elected to exercise its options attaching to the Spa areas. as a result the Merlinleigh project areas have now been refined to focus on the core areas of interest within the basin. the two acreage areas are now registered as application areas and the company is actively progressing native discussions with the traditional owners in the region in an effort to have the permits granted in early 2012. Significant technical work continues to be undertaken by new Standard to enhance the technical merits of the Merlinleigh project. the company continues to assess its alternatives in relation to progressing exploration work in 2012 on the basis native title agreement can be reached and the permits granted to new Standard. Maturity map of the top Wooramel group showing New Standard’s acreage and prospects within the limits of the maturity envelope. annual financial report 2011 5 Conventional Onshore United States Portfolio the onshore exposure in colorado county and Wharton county in texas, uSa provides a further diversification of risk and reward. the projects are located within a very mature oil and gas production region of the texas Gulf coast – one of the richest onshore hydrocarbon provinces in the world. the primary focus currently remains at the colorado county project where the exploration and development targets are lower risk, the exploration costs are lower and more controllable than those of the australian portfolio and the infrastructure and end user markets are both well established. these factors combine to provide an attractive combination of risk to compliment the more frontier environments of the canning Basin and carnarvon Basin in Western australia. a primary aim for the company in participating in the uSa projects was to provide access to shorter term cash flow opportunities whilst also maintaining a meaningful exposure to sufficient upside. the initial drilling campaign has delivered encouraging results and the company has achieved its aim of becoming a producer from an onshore project with significant upside potential. of the initial exploration wells drilled, four are currently tied into production (Heintschel #1, Heintschel #2, D.truchard #1 and Joann #1) and generating monthly cashflow. considerable technical work continues to be undertaken on the producing wells in the Heintschel field and this work has focused on identifying the source of the water being produced (to mitigate water production in future development wells) in addition to designing alternative fracs for future Heintschel development wells that will optimise the volume of the reservoir connected to the wellbore. in conjunction with these studies, independent expert consultants DeGoyler and Mcnaughton have been commissioned to provide a view on the reserves and resources contained in the Heintschel field. results from this assessment are expected in H2 2011 and will provide valuable input for future development plans for the Heintschel field. the company continues to assess its strategic alternatives for the most appropriate method of value extraction and realisation for the uS portfolio. Heintschel field schematic highlighting significant sand packages. 6 neW StanDarD enerGy liMiteD NON-CORE ASSETS SUMMARY the company inherited a portfolio of tungsten and coal exploration assets as a result of the merger with Hawk resources limited (Hawk) in 2008. new Standard completed the successful divestment of these assets during the period. “New Standard remains well positioned in a rapidly emerging sector in Australia” large equity positions corporately new Standard remains well positioned in a rapidly emerging sector in australia and is well placed in technically attractive with projects providing the opportunity to effectively progress exploration on its portfolio of assets in the coming twelve months. new Standard has also negotiated and established good working relationships and partnerships both domestically here in australia and overseas in the united States providing the ability to access relevant technical skills, expertise and experience as well as significant financial resources to assist with progressing its exploration efforts efficiently. the company is well positioned to extract value from within the current exploration portfolio and will continue to assess and progress other opportunities, both conventional and unconventional, on an ongoing basis in an effort to further enhance the potential for ongoing new Standard shareholder wealth creation. Merlinleigh project site visit with Traditional Owners. annual financial report 2011 7 CHAIRMAN’S REPORT Dear new Standard Shareholders, i am delighted to present this year’s annual report and particularly honoured to have been asked to join the board of new Standard during the year to assume the role of non-executive chairman as the company moves into an exciting new growth period. We can look back on a year of success and forward with a good deal of confidence. as a result of the successful planning and execution over the past 12 months, we find ourselves well positioned with an attractive portfolio of projects in a rapidly emerging sector and an exciting opportunity to deliver further shareholder value. the past year has seen the achievement of what the new Standard team has worked so hard to deliver: an agreement with a high quality partner to explore and appraise our flagship Goldwyer project in the canning Basin. on 13 July this year, we announced we had executed a non-binding Heads of agreement with conocophillips (canning Basin) pty ltd (“conocophillips”) to farm into the various exploration permits and application areas comprising the Goldwyer project, and in so doing entered into a period of exclusivity to allow full due diligence and negotiation of the agreements in detail. i am delighted to report that as announced on 30 September 2011, binding agreements have now been executed within the agreed deadline and as a result, conocophillips has the right to earn and retain a 75% working interest in the Goldwyer project in return for completing four phases of exploration work involving the expenditure of up to $uS109 million over four years. in our view this is truly a company changing transaction that will help underpin the ability to aggressively tackle a very large, challenging and exciting project that has the potential to add significant value for all new Standard shareholders. although some appreciation for the potential value of shale and tight gas is starting to emerge domestically, it currently appears that overseas interests have a much greater appreciation for this potential. Having said this, the positions taken by numerous global majors within the coal seam gas sector in recent years has seen enormous value creation for early movers in the sector, and it is our view that this kind of activity could replicate itself in the shale and tight gas sector here in australia as it develops. i therefore welcome conocophillips’ interest in our Goldwyer project and look forward to a constructive and mutually-rewarding future with them. the board is extremely satisfied that we have secured a world-class partner with world-class expertise to join us in a world-class project. Whilst the Goldwyer has demanded significant attention in recent times, the laurel project is also emerging as a second project with substantial potential scale in the canning Basin that is highly prospective for both conventional and unconventional resources. the laurel formation is the primary target within the laurel project and forms an emerging regional resource play in the fitzroy trough, where Buru energy has recently drilled two wells that have both encountered significant hydrocarbons and successfully flowed gas and condensate to surface - which is always an encouraging sign. the laurel project has recently reached an important milestone with the commencement of drilling activities to deepen the lawford #1 well on ep417 in an effort to test the laurel formation and extend the growing prospectivity of this exciting regional play. the Merlinleigh project rounds out new Standard’s current australian portfolio as a very large acreage position that dominates the Merlinleigh sub-basin within the onshore carnarvon basin in Western australia. the Merlinleigh project is highly prospective for conventional targets as well as a broader regional resource 8 neW StanDarD enerGy liMiteD play within the shales that are present across the acreage. Most importantly the Merlinleigh project has the tremendous advantage of location. it is very near the Dampier-Bunbury natural Gas pipeline and perfectly positioned between the world class mining centre of the pilbara region, the emerging Mid-West resource province and other major users and utilities in and around perth to the south. the technical data is currently being reviewed to build a conceptual exploration program and provide the basis for more substantial discussions with investors seeking participation. these discussions are able to be progressed now that the conocophillips negotiations have been concluded and we anticipate that the Merlinleigh project will receive significant additional focus during the coming year. all three australian project areas require the co-operation of native title owners and i am especially pleased to note the good relationships, constructive discussions and on-the-ground assistance we have enjoyed with the various groups and their representatives. We look forward to maintaining and further building on these good working relationships with all these important stakeholders. the value of the uS assets the company holds in colorado and Wharton counties in texas are currently under review as the operator, aKG energy, investigates optimum completion design and fraccing procedures, and we wait to receive an independent report on resources and reserves within the Heintschel field. We are now benefitting from four wells producing cash flow whilst we evaluate our alternatives to move forward, and we remain of the view that significant potential upside remains within the uS portfolio. new Standard is entering the next 12 months with the prospect of having exploration activity planned on all four projects within the portfolio. We will naturally have to increase staff to manage these activities and a key focus will be to build the team where necessary, but the board remains conscious of the need to utilise shareholder funds carefully whilst maximising returns along the way. Whilst the majority of our attention has recently been focused on completing the conocophillips transaction and progressing the other projects in the current portfolio, moving forward additional resources will be allocated to identifying and assessing opportunities beyond those we have at present, to ensure a pipeline of value-adding prospects continues to emerge as earlier ones crystallize and mature. this remains one of new Standard’s key competitive advantages and a cornerstone of the ability to continue to deliver significant value creation. finally, i would like to sincerely thank all our shareholders for their on-going support and loyalty, our various advisors who have assisted during the year and my fellow directors and all the staff of new Standard who have formed such a dedicated and professional team. We look forward an active and rewarding 2012. Arthur Dixon AM non-executive chairman annual financial report 2011 9 DIRECTORS’ REPORT the Directors of new Standard submit herewith the annual financial report of the company and the entities it controlled at the end of, or during the financial year ended 30 June 2011. in order to comply with the provisions of the Corporations Act 2001, the Directors report as follows: Directors the names and details of the company’s Directors in office during the financial year and until the date of this report are as follows. Directors were in office for the period stated. Name Particulars Mr Arthur Dixon AM non-executive chairman (appointed 1 May 2011) age Qualifications experience 69 B.e. arthur Dixon graduated from Melbourne university as a chemical engineer. arthur is a 40 year oil and gas year veteran with Shell and of that, more than 20 years in the lnG business. He has served on the boards of australia lnG Ship operating company (alSoc), Brunei lnG, Brunei Shell tankers and Shell international Gas and has considerable experience working with joint venture partners. arthur currently advises selected clients, conducts executive training courses on lnG and is chairman of the Board of the australian centre for natural Gas Management, a joint venture between the university of Western australia and curtin university of technology. arthur was made a Member of the order of australia in January 2008. current and former Directorships in listed entities in the last 3 years nil relevant interests in shares and options 36,000 fully paid ordinary shares Mr Sam Willis Managing Director (appointed 28 July 2008) age Qualifications experience 39 B.com prior to his role at new Standard, Sam worked in the corporate advisory and financial markets fields for over 10 years where his primary duties involved assisting companies achieve an aSX listing, providing general corporate advice, M&a assessment, deal co-ordination and structuring and capital raising for unlisted and listed companies. Sam has also previously worked as a private client advisor with Hartleys, in an advisory capacity with red Dingo (venture capital), and as an investment analyst with both Deutsche Bank and Schroders investment Management in london. current and former Directorships in listed entities in the last 3 years Base resources limited (aSX: BSe) northern energy corporation ltd (aSX: nec) (resigned 28 february, 2011) relevant interests in shares and options 8,270,864 fully paid ordinary shares 2,625,000 options exercisable at $0.225 on or before 30 June 2012 2,625,000 options exercisable at $0.275 on or before 30 June 2012 10 neW StanDarD enerGy liMiteD Dr Mark Hagan technical Director (appointed 28 July 2008) age Qualifications experience 65 B.Sc, ph.D Mark holds a ph.D in Geology from the university of Western australia (1974) and has over 30 years experience in oil and gas exploration and production with expertise in the integration and operation of all technical, operational and marketing aspects of oil and gas business ventures. He spent over 18 years in uSa/europe on worldwide projects in a variety of positions and was ultimately responsible for exploration activities in europe, africa, South america and asia for Sun oil company – a large uS based integrated oil company. Mark was on the Board of Sun exploration and production company from 1989 to 1991 during which time new discoveries were made in diverse exploration spheres and oil production rose to 70,000 barrels/day. Since returning to australia in 1991, Mark has been an independent consultant, mainly on projects in the australia/asia region and is past chairman of empire oil and Gas nl (1999-2002) – an aSX listed exploration company. current and former Directorships in listed entities in the last 3 years nil relevant interests in shares and options 2,166,456 fully paid ordinary shares 3,625,000 options exercisable at $0.225 on or before 30 June 2012 3,625,000 options exercisable at $0.275 on or before 30 June 2012 Mr Ian Paton non-executive Director (appointed 28 July 2008; appointed chairman 1 July 2009 to 1 May 2011) age Qualifications experience 59 B.Sc (Hons), M pet eng, MBa ian has been working as an international petroleum consultant specialising in engineering and Geoscience from 2000 until the present. among numerous other roles, ian has been most recently focussed on coogee resources projects in the timor Sea where he has identified and developed significant oil discoveries resulting from exploration success. production from these discoveries will approach 40,000 barrels/day. prior to his consulting role ian was technical Director at amity oil where he discovered two commercial gas fields in turkey. ian also held positions as technical manager of conoco oceania where he ran all operations in australia and pnG as well as holding the role of exploration and development manager at Santos where he was responsible for oil field developments in South australia and leading Santos into the north-west shelf where he oversaw numerous discoveries. current and former Directorships in listed entities in the last 3 years nil relevant interests in shares and options 1,000,000 fully paid ordinary shares 1,000,000 options exercisable at $0.225 on or before 30 June 2012 1,000,000 options exercisable at $0.275 on or before 30 June 2012 Mr Mark Clements company Secretary (appointed 28 July 2008) the Joint company Secretary is Mark clements. Mark has a Bachelor of commerce degree from the university of Western australia and is a fellow of the institute of chartered accountants of australia. Mark is also a member of the australian institute of company Directors and an affiliated member of the institute of chartered Secretaries in australia. He has over 15 years management, corporate administration, finance and accounting experience working for a number of listed and unlisted public companies for which he has held the role of company Secretary for over 10 years. Mark previously worked for an international accounting firm. Mr David Hansen-Knarhoi chief financial officer (appointed 7 September 2011) the chief financial officer is David Hansen-Knarhoi. David has a Bachelor of commerce degree from the university of Western australia. David is a fellow of the institute of chartered accountants of australia and a member of the institute of Directors of the united Kingdom. He has over 17 years management, corporate administration, finance and accounting experience working for a number of listed and unlisted public companies both in australia and the united Kingdom. annual financial report 2011 11 PRINCIPAL ACTIVITIES the principal activities of the company during the course of the year were the continued exploration for oil and gas in the canning Basin in north-west Western australia and investment in onshore development in the texas Gulf region, Southern uSa. in addition, resources were applied to reviewing and securing additional exploration opportunities resulting in the Merlinleigh project in the onshore carnarvon Basin being secured. OPERATING RESULTS the consolidated entity’s net loss attributable to members of new Standard for the year ended 30 June 2011 after applicable income tax was $79,081 (2010: profit of $3,298,537). a summary of consolidated revenues and results for the year by reportable segment is set out below: Segment revenues 30 June 2011 $ Segment results 30 June 2011 $ australia - oil and gas exploration united States - oil and gas exploration tungsten total segment revenue/ result - - - - - - (4,200) (4,200) Segment results are adjusted earnings before interest, tax, depreciation and amortisation, which is the measure of segment result that is reported to the Managing Director to assess the performance of the operating segments. FUTURE DEVELOPMENTS the company intends to pursue its current stated objectives as an oil and gas explorer. DIVIDENDS no dividend has been declared or paid during the financial year and the Directors do not recommend the payment of any dividend in respect of the current or preceding financial years. ENVIRONMENTAL REGULATIONS the economic entity holds participating interests in mining and exploration tenements. the authorities granting such tenements require the tenement holder to comply with the terms of the grant of the tenement and all directions given to it under those terms of the tenement. there have been no known breaches of the tenement conditions, and no such breaches have been notified by any government agencies during the year ended 30 June 2011. Greenhouse gas and energy data reporting requirements Given the nature and location of the Group’s operations in australia and the uSa, both the energy efficiency opportunities act 2006 and the national Greenhouse and energy reporting act 2007 are not expected to have a material impact. SHARE OPTIONS Share options on issue at year end or exercised during the year: Details of unissued ordinary shares of the company under option at the date of this report are as follows: Item unlisted options unlisted options unlisted options unlisted options Number of Shares under Option Exercise Price of Options Expiry Date of Options 7,250,000 $0.225 30 June 2012 7,250,000 $0.275 30 June 2012 500,000 $0.225 30 June 2013 500,000 $0.275 30 June 2013 During the year and up to the date of this report the company issued 500,000 unlisted $0.225 options exercisable on or before 30 June 2013 and 500,000 unlisted $0.275 options exercisable on or before 30 June 2013. 4,000,000 unlisted $0.125 options and 4,000,000 $0.15 options were exercised prior to expiry and 50,000 unlisted $0.35 options and 50,000 unlisted $0.50 options and 100,000 unlisted $0.75 options lapsed without exercise. at 30 June 2011, 16,500,000 unlisted options were on issue and of these, 1,000,000 unlisted $0.20 options were exercised on 20 July 2011. refer to the notes to the financial statements for details of options granted during the period. PROCEEDINGS ON BEHALF OF THE COMPANY no person has applied for leave of the court under Section 327 of the Corporations Act 2001 to bring proceedings on behalf of the company or 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 any part of those proceedings. the company was not a party to any proceedings during the year. EVENTS SUBSEQUENT TO YEAR END on 13 July 2011, the company announced that it had entered into a non-binding Heads of agreement (Heads of agreement) and exclusive negotiating period with conocophillips australia SH4 pty ltd (conocophillips), an affiliate of global energy company conocophillips [nySe:cop]. the Heads of agreement sets the framework for conocophillips to farm-in and jointly explore, new Standard’s flagship Goldwyer project in the canning Basin, Western australia. the project comprises the following permit interests in Western australia’s canning Basin: 12 neW StanDarD enerGy liMiteD Granted exploration permits (eps) 443, 450, 451 and 456; and application areas 1/09-0, 2/09-0 and 5/09-0.it also contains an agreed set of core commercial principles which will form the basis for negotiating and completing binding and definitive agreements. to uS$109.5M over these core commercial principles envisage conocophillips funding up four phases of unconventional hydrocarbon exploration work, including the drilling, coring and evaluation of multiple wells. in return for funding the phased work program conocophillips will have the right to earn up to a 75% working interest in the Goldwyer project which would reduce new Standard’s working interest from 100% to 25%. conocophillips must complete all four phases of work to earn and retain the 75% working interest. in the event that conocophillips elects not to complete all four proposed phases of work a 100% operated working interest in the Goldwyer project will revert to new Standard. conocophillips will also make an upfront payment of a$1M to new Standard in consideration of prior costs. the phased nature of the exploration program provides for initial drilling, coring and evaluation of multiple wells to be undertaken following which conocophillips will be required to decide if it wishes to proceed with further exploration, appraisal and pilot development work in subsequent phases. this structure provides conocophillips with the option to withdraw at the completion of each phase of work on the basis that any working interest (or associated rights) is returned to new Standard. the timing of the proposed work programs will be consistent with permit and work commitment revisions to be sought and agreed with the government. Subject to necessary approvals and rig availability, new Standard envisages that phase 1 work would be carried out in 2012 assuming binding agreements are successfully executed. the Heads of agreement contemplates that new Standard will remain as operator, although conocophillips would have the right to assume operatorship of the Goldwyer project at its election. an integral part of the proposed farm-in arrangement is the proposed provision of technical support by conocophillips to new Standard to enhance the operating arrangement. new Standard believes that conocophillips’ participation will inject invaluable and world class technical knowledge and resources to ensure the Goldwyer project is explored and appraised in conjunction with a world leader in global shale plays. Both parties have committed to an exclusive period to negotiate the proposed transaction with a target of executing binding agreements as soon as possible, but no later than 30 September 2011. the binding agreements will also be subject to any outstanding government approvals. new Standard has agreed to notify conocophillips of any approaches in relation to its interest in the Goldwyer project during this exclusivity period, and to provide conocophillips with a right to match any offers that relate to new Standard’s interest in the Goldwyer project. on 20 July 2011 1,000,000 unlisted $0.20 options were exercised raising a total of $200,000. other than the above, there has been no other matter or circumstance that has arisen since the end of the year that requires disclosure. DIRECTORS’ MEETINGS the following table sets out the number of Directors’ meetings held during the financial year and the number of meetings attended by each Director whilst in office. During the financial year, 7 Board meetings were held. there were 3 remuneration committee meetings and 2 audit committee meetings. there were no nomination committee meetings. Directors Mr a Dixon aM Mr S Willis Dr M Hagan Mr i paton Board of directors Audit Remuneration Committee Committee Held Attended Held Attended Held Attended 2 7 7 7 2 7 7 7 0 2 2 2 0 2 2 2 1 3 3 3 1 1 1 3 INDEMNIFICATION OF OFFICERS AND AUDITORS During or since the financial year the company has indemnified and entered into Deeds of indemnity and access with each of the current Directors to indemnify the Director or any related body corporate against a liability incurred as a Director. the Deeds provide for the company to pay all damages and costs which may be awarded against the Directors. the company has paid premiums to insure each of the Directors against liabilities for cost and expenses incurred by them in defending any legal proceedings arising out of their conduct while acting in the capacity of a Director of the company, other than conduct involving a wilful breach of duty in relation to the company. this cover has also been extended to cover the activity in the uSa through the wholly owned subsidiary, new Standard energy inc. the contract of insurance prohibits disclosure of the nature of the liability and the amount of the premium. NON-AUDIT SERVICES the company may decide to employ the auditor on assignments additional to their statutory duties where the auditor’s expertise and experience with the company and/ or the consolidated entity are important. Details of the amounts paid or payable to the auditor BDo audit (Wa) pty ltd for audit and non-audit services provided during the year are set out below. the Board of Directors has considered the position and, in accordance with the advice received from the audit committee is satisfied that the provision of the non- audit services is compatible with the general standard of independence for auditors imposed by the corporations act 2001. the Directors are satisfied that the provision of annual financial report 2011 13 non-audit services by the auditor, as outlined below, did not compromise the auditor’s independence requirements of the corporations act 2001 for the following reasons: - all non-audit services have been reviewed by the audit committee to ensure they do not impact the impartiality and objectivity of the auditor; and - none of the services undermine the general principle relating to auditor independence as set out in apeS 110 code of ethics for professional accountants, including reviewing or auditing the auditor’s own work, acting in a management or a decision-making capacity for the company, acting as advocate for the company or jointly sharing economic risk and rewards. in the form of a written report detailing market levels of remuneration for comparable executive roles. the executive remuneration review process for the year is still under consideration at the date of this report and is being conducted with the benefit of an independent advisory group and remuneration review to assist the Board and remuneration committee. as a result, executive remuneration for the coming financial year may vary from the structure and levels outlined in this report. executive remuneration generally consists of a fixed remuneration plus superannuation, a short term incentive (cash) and a long term incentive portion (shares funded by non-recourse loans) as appropriate. During the year no fees were paid or payable to the auditor Non-Executive Director Remuneration or related entity for non-audit services. AUDITOR’S INDEPENDENCE DECLARATION a copy of the auditor’s independence declaration under s.307c of the Corporation Act 2001 in relation to the audit of the full year is included on page 25. REMUNERATION REPORT (AUDITED) the remuneration report is set out under the following main headings: a principles used to determine the nature and amount of remuneration B Details of remuneration c Service agreements D Share-based compensation e additional information the information provided in this remuneration report has been audited as required by section 308(3c) of the corporations act 2001. A Principles used to determine the nature and amount of remuneration the Board policy for determining the nature and amount of remuneration of Directors and executives is agreed by the Board of Directors as a whole. the Board obtains professional advice where necessary to ensure that the company attracts and retains talented and motivated Directors and employees who can enhance company performance through their contributions and leadership. Executive Director Remuneration in determining the level and make-up of executive remuneration, the Board along with the remuneration committee negotiates a remuneration to reflect the market salary for a position and individual of comparable responsibility and experience. the company has established a remuneration committee to determine and recommend the level of appropriate executive Director remuneration each year. remuneration is regularly compared with the external market by participation in industry salary surveys and during recruitment activities generally. if required, the Board and the remuneration committee may engage an external consultant to provide independent advice non-executive Directors’ fees are paid within an aggregate limit which is approved by the shareholders from time to time. on 26 november 2010, shareholders approved to increase the total aggregate fixed sum per annum to be paid to the Directors (excluding salaries of executive directors) from $250,000 to $400,000. retirement payments, if any, are agreed to be determined in accordance with the rules set out in the Corporations Act 2001 at the time of the Directors retirement or termination. non-executive Directors’ remuneration may include an incentive portion consisting of bonuses and/or options, as considered appropriate by the Board, which may be subject to shareholder approval in accordance with the aSX listing rules. the amount of aggregate remuneration sought to be approved by Shareholders and the manner in which it is apportioned amongst Directors is reviewed annually. the Board considers the amount of Director fees being paid by comparable companies with similar responsibilities and the experience of the non-executive Directors when undertaking the annual review process. the company determines the maximum amount for remuneration, share-based remuneration, for Directors. thresholds including for Performance Based Remuneration as part of each executive’s remuneration package there is a short term incentive (Sti) based component of up to 20% of base salary payable in cash each year. the remuneration committee considers the appropriate targets and key performance indicators (Kpis) to link the Sti plan and the level of payout if targets are met. this includes setting any maximum payout under the Sti plan, and minimum levels of performance to trigger payment of Sti. the intention is to facilitate goal congruence between executives with that of the business and shareholders. for the year ended 30 June 2011, the Kpis linked to Sti plans were based on capital management, partner, contractor and stakeholder relations, resource base and asset management, office and employee operations, management of technical team and database and corporate governance, weighted depending on the accountabilities of the role and impact on the Group’s performance. 14 neW StanDarD enerGy liMiteD the remuneration committee is responsible for assessing whether the Kpis are met. to help make this assessment, the committee utilises the assistance of external remuneration consultants. the Sti target annual payment is reviewed annually. the remuneration committee has assessed that the Kpi’s for the year ended 30 June 2011 had been achieved. executives are entitled to a cash bonus for the year ended 30 June 2011 of $112,667 representing 20% of the executive’s base salary. the financial statements as at 30 June 2011 include a provision for this amount. the remuneration committee has the discretion to adjust Sti’s downwards in light of unexpected or unintended circumstances. as part of each executive’s remuneration package there is a long term incentive (lti) based component. the lti component is up to 30% of the applicable base salary based on the company’s share price performance over the period in both absolute and relative terms. Subject to any necessary shareholder approvals, the lti component will be payable in shares via the employee Share plan. the lti component will be measured on the following basis: LTI Benchmark LTI Amount Due LTI Weighting % 50% LTI Item absolute return (Share price + Dividends) Shares provide company’s an absolute return of 10% or more over the 12 month period from 1 July to 30 June based on 12 month VWap 50% relative return (Share price + Dividends versus agreed index benchmark) company’s Shares outperform the S&p/aSX 300 energy accumulation index over the 12 month period from 1 July to 30 June based on 12 month VWap lti amount will be 1% of base salary for every 1% of absolute return, capped at a maximum of 15% of base salary. absolute return of <10% will not trigger an lti amount under this item. 1% of base salary for every 1% of outperformance over and above the energy accumulation index, capped at a maximum of 15% of base salary. relative return of less than the benchmark will not trigger an lti amount under this item. the lti components have been assessed for the 2011 financial year and the performance hurdles outlined above have been met and exceeded for the period. as a result, and subject to shareholder approval, lti components equal to the full 30% of base salary have been provided for as at 30 June 2011 for the executive team. this has resulted in a total of $169,000 being accrued for executive ltis that are due including $72,000 for Sam Willis (subject to shareholder approval), $72,000 for Mark Hagan (subject to shareholder approval) and $25,000 for Marcus Gracey. Employee Share Plan the purpose of implementing the plan is to reward key officers and personnel for both services rendered over the past 12 months and importantly, to provide a platform to reward key personnel going forward. the plan provides the ability to negotiate an incentive component of remuneration packages for the recruitment and retention of officers and key personnel to the company. the major aim of the plan is to align mid to long term interests of key officers and personnel with those of shareholders and to do so in a tax effective manner. the issue of any securities pursuant to the plan will be undertaken by way of provision of a non-recourse, interest free loan to be used for the purposes of subscribing for new Shares in the company based on a price that will be not less the volume weighted average price at which Shares were traded on the aSX over the 5 trading days up to and including the trading day before the date of the offer. the issue of any securities to Directors or related parties will be subject to the requisite approvals required. Relationship between the remuneration policy and company performance the tables below set out summary information about the company’s earnings and movements in shareholder wealth for the period from June 2007 to June 2011: 30 June 2011 30 June 2010 30 June 2009 30 June 2008 30 June 2007 revenue net profit/(loss) before tax net profit/(loss) after tax Share price at end of year Basic earnings/(loss) cents per share Diluted earnings/(loss) cents per share annual financial report 2011 $ 179,353 (79,081) (79,081) $0.19 (0.04) (0.04) $ 216,444 3,298,537 3,298,537 $0.215 2.34 1.91 $ 792,289 (5,025,880) (5,025,880) $0.05 (3.75) (3.75) $ 330,068 (134,291) (134,291) $0.24 (0.43) (0.43) $ 5,187 (13,354) (13,354) n/a (0.20) (0.20) 15 no dividends have been declared or paid. B Details of Remuneration the details of the remuneration of Directors and Key Management personnel of the Group (as defined by aaSB 124 related party Disclosures) are set out below: Mr a Dixon aM Mr S Willis Dr M. Hagan Mr i paton Mr M Gracey Mr M clements Mr David Hansen-Knarhoi non-executive chairman (appointed 1 May 2011) executive Director (appointed 28 July 2008) technical Director (appointed 28 July 2008) non-executive Director (appointed as non-executive Director 28 July 2008: appointed non- executive chairman 1 July 2009: retired as non-executive chairman 1 May 2011) commercial & legal Manager (appointed 1 february 2011) company Secretary (appointed 28 July 2008) chief financial officer (appointed 7 September 2011) the above are among the five highest paid executives. Details of Remuneration for Year Ended 30 June 2011 the remuneration for each Director of the consolidated entity during the year was as follows: Short –term employment benefits Post- employment Equity Directors Salary, Fees and Commissions $ 2010 Short-term Incentive(1) Paid $ Mr a Dixon aM 11,000 - Mr S Willis Dr M Hagan Mr i paton 240,000 240,000 100,637 45,600 43,764 - 2011 Short-term Incentive(1) Accrued/ Paid $ - 48,000 48,000 - 591,637 89,364 96,000 - - - - - 2010 Long-term Incentive Received as Compensation(2) $ 2011 Long-term Incentive/ Options Accrued/Paid(2) $ Superannuation Contribution $ Total $ 11,000 481,913 486,827 100,637 Remuneration Consisting Of Options % - - - - - - 76,313 83,063 - - 72,000 72,000 - 159,376 144,000 1,080,377 Key Management Personnel Mr M Gracey Mr M clements 84,098 83,750 167,848 note: - - - 16,667 - 16,667 7,568 - 7,568 - - - 35,546 143,879 - 83,750 7.7 - 35,546 227,629 (1) During the period Mr Willis and Dr Hagan were paid a cash bonus of $45,600 and $43,764 respectively following achievement of Kpi’s for the year ended 30 June 2010 and shareholder approvals received at the annual general meeting held on 26 november 2010. 16 neW StanDarD enerGy liMiteD Mr Willis and Dr Hagan are entitled to a cash bonus for the year ended 30 June 2011 of $48,000 each representing 20% of their base salary, as all Kpi measurements were successfully met. Mr Gracey is entitled to a cash bonus pro rata for the year ended 30 June 2011 of $16,667. (2) the amounts detailed above as equity based compensation for Messer’s Willis and Hagan related to shares issued following achievement of lti for the years ended 30 June 2010 (issued on 4 January 2011) and the year ended 30 June 2011 which are to be issued subject to shareholder approval. refer to note D Share Based compensation for further information. on 4 January 2011 Mr Willis and Dr Hagan were issued fully paid ordinary shares to the value of $76,313 and $83,063 respectively upon achievement of lti’s for the year ended 30 June 2010 and approved by shareholder at the general meeting held 26 november 2010. Mr Willis and Dr Hagan’s lti component of their executive consultancy agreements have been achieved for the year ended 30 June 2011. as a result, resolutions will be put before shareholders at the 2011 annual General Meeting to seek approvals for the issue of fully paid ordinary shares with a value of $72,000 for Mr Willis and $72,000 for Dr Hagan in accordance with the terms of the employee Share Scheme. Mr Gracey’s lti component of his employment contract has been achieved for the year ended 30 June 2011. as a result, subsequent to year end Mr Gracey is entitled to enter into a loan agreement with the company in accordance with the terms of the employee Share Scheme for shares to the value of $25,000. the financial statements as at 30 June 2011 include a provision for this amount. Mr Gracey was also granted options during the year in accordance with his employment contract. the pro rata value of these options as at 30 June 2011 using the Black-Scholes option pricing model was $10,546. the pro rata value of options granted and vested to 30 June 2011 are included in equity – long-term incentive options. the total value of options at grant date is set out at D Share Based compensation. these amounts do not reflect cash payments and represent accounting treatment for options received by directors or key management personnel during the period. a company in which Mr M clements (company Secretary) is a director and shareholder was paid $83,750 for accounting and company secretarial services during the year. Mr M clements nor any associates received options as compensation. other than the executive Directors, the commercial and legal Manager and the company Secretary, there were no other Key Management personnel or executives for the year ended 30 June 2011. Details of the new Standard energy ltd employee Share Scheme are set out in the notes to the consolidated financial statements at note 24. Details of Remuneration for Year Ended 30 June 2010 the remuneration for each Director of the consolidated entity during the year was as follows: Short –term employment benefits Post-employment Equity Salary, Fees and Commissions $ Superannuation Contribution $ Options Received as Compensation(1) $ - - - - - - 92,524 20,191 27,882 140,597 - - Remuneration Consisting of Options % 46.3 7.3 9.1 - Total $ 199,758 274,566 304,758 779,082 84,671 84,671 Directors Mr i paton Mr S Willis Dr M Hagan 107,234 254,375 276,876 638,485 Key Management Personnel Mr M clements note: 84,671 84,671 (1) the pro rata value of options granted and vested during the year to 30 June 2010. the total value of options at grant date is set out at D Share Based compensation. these amounts do not reflect cash payments and represent accounting treatment for options received by directors during the period. annual financial report 2011 17 a company in which Mr M clements (company Secretary) is a director and shareholder was paid $84,671 for accounting and company secretarial services during the year. Mr M clements nor any associates received options as compensation. the amounts detailed above as equity based compensation for Messer’s Willis and Hagan related to options that were issued partly as recompense for options already held prior to the merger with Hawk. refer to note D Share Based compensation for further information. other than the executive Directors and the company Secretary, there were no other Key Management personnel or executives for the year ended 30 June 2010. C Executive Services Agreements the remuneration committee reviews and agrees executive Service agreements for Key Management personnel on a periodic basis. the remuneration committee is also assisted, where appropriate, by external consultants specialising in remuneration reviews and other employment issues. the following executive consultancy agreements were in place at 30 June 2011 and as at the date of this report; the existing executive consultancy agreements with Mr Sam Willis and Dr Mark Hagan are as follows; (i) Monthly fees of $20,000 on a five day a week basis and $20,000 on a four day a week basis for Mr Sam Willis and Dr Mark Hagan respectively, (ii) a short term incentive cash bonus of up to 20% of annual fees subject to achievement of agreed upon Kpi’s, (iii) a long term incentive share component of up to 30% of annual fees based upon achievement of relative and absolute share price performance. (iv) 3 month notice period of termination of consultancy agreement. these agreements and executive remuneration packages are still under review as at the date of this report and therefore remain subject to revision for the 2012 financial year. these reviews are being conducted with the benefit of an independent advisory group and remuneration review to assist the Board and remuneration committee. as a result, executive remuneration for the coming financial year may vary from the structure and levels outlined in this report. Mr M Gracey is subject to an employment agreement based upon the following terms; (i) annual salary of $220,000 inclusive of superannuation. (ii) a short term incentive cash bonus of up to 20% of annual salary subject to achievement of agreed upon Kpi’s. (iii) a long term incentive share component of up to 30% of annual salary based upon achievement of relative and absolute share price performance. (iv) 12 week notice period of termination of employment agreement. Mr D Hansen-Knarhoi is subject to an employment agreement based upon the following terms; (i) annual salary of $200,000 inclusive of superannuation. (ii) a short term incentive cash bonus of up to 20% of annual salary subject to achievement of agreed upon Kpi’s. (iii) a long term incentive share component of up to 30% of annual salary based upon achievement of relative and absolute share price performance. (iv) 12 week notice period of termination of employment agreement. Mr M clements is subject to a service agreement for company secretarial and accounting services based upon monthly fees of $4,000, renewed automatically for successive 1 month periods unless either party gives the other party at least 30 days prior written notice of its intention not to renew the agreement. 18 neW StanDarD enerGy liMiteD D Share-based Compensation the terms and conditions of each grant of options affecting remuneration in the previous, this or future reporting periods are as follows; Directors and Key Management Personnel Grant date Number of Options granted Exercise Price of Options No. $ Expiry Date of Options Vesting Date Vested & Exercisable Vested (1) Lapsed without exercise Value per option at grant date Value of options at grant date No. % No. $ $ Mr S Willis(3) 18/07/2008 18/07/2008 2,625,000 2,625,000 0.225 0.275 30/06/2012 30/06/2012 08/08/2009 08/08/2009 2,625,000 2,625,000 100% 100% Dr M Hagan(3) 18/07/2008 18/07/2008 3,625,000 3,625,000 0.225 0.275 30/06/2012 30/06/2012 08/08/2009 08/08/2009 3,625,000 3,625,000 100% 100% Mr i paton 18/07/2008 18/07/2008 3/12/2009 3/12/2009 Mr M Gracey(2) 29/03/2011 29/03/2011 29/03/2011 29/03/2011 250,000 250,000 750,000 750,000 250,000 250,000 250,000 250,000 0.225 0.275 0.225 0.275 0.225 0.225 0.275 0.275 30/06/2012 30/06/2012 30/06/2012 30/06/2012 08/08/2009 08/08/2009 03/12/2009 03/12/2009 250,000 250,000 750,000 750,000 100% 100% 100% 100% 30/06/2013 30/06/2013 30/06/2013 30/06/2013 01/02/2012 01/08/2012 01/02/2012 01/08/2012 - - - - - - - - - - - - - - - - - - - - 0.098 0.087 0.098 0.087 0.098 0.087 0.062 0.058 0.037 0.052 0.029 0.043 256,725 227,850 354,525 314,650 24,450 21,700 46,827 43,774 9,345 12,940 7,127 10,742 note: (1) all options were issued for nil consideration. (2) on 29 March 2011, the company issued a total of 1,000,000 unlisted options as part of an incentive component of an employment agreement for the senior executive role of legal and commercial Manager for Mr Gracey. the options have been issued in different tranches and 50% have an exercise price of 22.5c and the balance have an exercise price of 27.5c. all options expire on 30 June 2013 if not exercised before. the options are non-transferrable and cannot be exercised until such time as employment periods of 12 and 18 months have been served. provision also exists for immediate lapse in the event employment is terminated for fraud or wilful misconduct. (3) on 8 august 2009. of the options granted on 18 July 2008, 50% vested upon relisting as new Standard energy ltd and 50% vested fair values at grant date are independently determined using a 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 option. Details of Options Details of options over ordinary shares in the company provided as remuneration to each director of new Standard are set out below. When exercisable, each option is convertible into one ordinary share of new Standard. further information on the options is set out in note 26 to the financial statements. 2011 Directors and Key Management Personnel Number of Options granted during the year Number of Options vested during the year Number of Options lapsed during the year Value at date of lapse Mr a Dixon aM Mr i paton Mr S Willis Dr M Hagan Mr M Gracey 2011 No. - - - - 1,000,000 1,000,000 2011 No. - - - - - - 2011 No. - - - - - - $ - - - - - - annual financial report 2011 19 in addition to the above it was agreed as part of arthur Dixon’s appointment in May 2011 that a package of options would be agreed during the first 6 months of his tenure as non-executive chairman of the company. at the date of this report the quantum and terms of arthur Dixon’s options package had not been agreed, however it is anticipated that such agreement will be reached in the near future and that the requisite shareholder approvals for the issue of such options will be sought at the 2011 aGM. 2010 Directors and Key Management Personnel Number of Options granted during the year Number of Options vested during the year Number of Options lapsed during the year Value at date of lapse 2010 No. 1,500,000 - - 1,500,000 2010 No. 2,000,000 2,625,000 3,625,000 8,250,000 2010 No. - (150,000) - (150,000) $ - - - - Mr i paton Mr S Willis Dr M Hagan E Additional Information for each grant of options included in the tables in the remuneration report, the percentage of the available grant that vested, in the financial year, and the percentage that was forfeited because the person did not meet the service and performance criteria is set out below. all the options granted have now met their vesting conditions hence the minimum value of the option yet to vest is nil and the maximum value of the options yet to vest is nil. the Board currently does not have a policy in relation to limiting exposure to risk in relation to directors holding securities. Options 2011 no options vested during the 2011 financial year. 2010 Directors Mr i paton Mr S Willis Dr M Hagan Year Granted Vested % Lapsed % Forfeited % Financial years in which options may vest Minimum total value of grant yet to vest $ Maximum total value of grant yet to vest $ 2009 2010 2009 2009 100 100 100 100 - - 3% - - - - - 2010 2010 2010 2010 - - - - - - - - End of audited Remuneration Report Signed in accordance with a resolution of the Directors made pursuant to s.298 (2) of the Corporations Act 2001. on behalf of the Directors Arthur Dixon AM non-executive chairman 27 September 2011 20 neW StanDarD enerGy liMiteD DIRECTOR’S DECLARATION in the directors’ opinion: (a) the financial statements and notes are in accordance with the corporations act 2001, including: (i) complying with accounting Standards, the corporations regulations 2001 and other mandatory professional reporting requirements, and (ii) giving a true and fair view of the consolidated entity’s financial position as at 30 June 2011 and of its’ performance for the financial year ended on that date, and (b) there are reasonable grounds to believe that the company will be able to pay its debts as and when they become due and payable; and (c) the consolidated entity has included in the notes to the financial statements an explicit and unreserved statement of compliance with international reporting Standards; and (d) the remuneration disclosures included in the Director’s report (as part of the remuneration report) for the year ended 30 June 2011, comply with section 300a of the corporations act 2001. the directors have been given the declarations by the chief executive officer and chief financial officer required by section 295a of the corporations act 2001. this declaration is made in accordance with a resolution of the directors. Arthur Dixon AM non-executive chairman 27 September 2011 annual financial report 2011 21 CORPORATE GOVERNANCE STATEMENT on 2 august 2007, the aSX corporate Governance council released the ‘the revised corporate Governance principles and recommendations’ (second edition corporate Governance Guidelines) (‘guidelines’). in fulfilling its obligations and responsibilities to its various stakeholders, the Board of new Standard is a strong advocate of corporate governance. the Board has adopted corporate governance policies and practices consistent with the aSX corporate Governance council’s “corporate Governance principles and recommendations 2nd edition” (recommendations) where considered appropriate for company of new Standard’s size and nature. this document describes the progress by new Standard in addressing those guidelines. it is structured to address the council’s guidelines and eight corporate governance principles. Principle 1 – Lay solid foundations for management and oversight “Companies should establish and disclose the respective roles and responsibilities of the Board and Management.” the main function of the Board is to set strategic objectives for the company, supervising and guiding management through the implementation process. the aim is for the Board to provide the entrepreneurial leadership required for the company to evolve within a framework of prudent and effective risk management. new Standard has adopted a formal board charter delineating the roles, responsibilities, practices and expectations of the Board collectively, the individual directors and senior management. the Board of new Standard ensures that each member understands its roles and responsibilities and ensures regular meeting so as to retain full and effective control of the company. the Board specifically emphasises on the following: • Setting the strategic aims of new Standard and overseeing management’s performance within that framework; • Making sure that the necessary resources (financial and human) are available to the company and its senior executives to meet its objectives; • overseeing management’s performance and the progress and development of the company’s strategic plan; Selecting and appointing a suitable chief executive officer/Managing Director with the appropriate skills to help the company in the pursuit of its objectives; Determining the remuneration policy for the Board members, company Secretary and Senior Management; • • 22 • • • • • • • controlling and approving financial reporting, capital structures and material contracts; ensuring that a sound system risk management and internal controls is in place; Setting the company’s values and standards; undertaking a formal and rigorous review of the corporate Governance policies; to ensure adherence to the aSX corporate Governance council principles; ensuring that the company’s obligations to shareholders are understood and met; ensuring the health, safety and well-being of employees in conjunction with the senior management team, developing, overseeing and reviewing the effectiveness of the company’s occupational health and safety systems to assure the well-being of all employees; ensuring an adequate system is in place for the proper delegation of duties for the effective operative day to day running of the company without the Board losing sight of the direction that the company is taking. Principle 2 - Structure the Board to add value “Have a board of an effective composition, size and commitment to adequately discharge its responsibilities and duties.” the Board has been structured so as to provide an adequate mix of proficient directors that lead the Board with enterprise, integrity and judgement. the Board acts in the best interest of the company and its stakeholders. the Board is directed on the principles of transparency, accountability and responsibility. the aSX corporate Governance council guidelines recommend that ideally the Board should constitute of a majority of independent directors. the Board consisted of three directors for the majority of the year ended 30 June 2011; only one of whom was independent. the Board increased to four members effective 1 May 2011 upon the appointment of non-executive chairman, Mr arthur Dixon aM. Mr ian paton and Mr Dixon aM are considered to be independent directors. the remaining directors do not meet the company’s criteria for independence. Dr Mark Hagan and Mr Sam Willis are executive directors. Given the size and nature of the company the Board feels the composition of the Board is appropriate at this stage. the Board endeavours to review this policy from time to time. Principle 3 - Promote ethical and responsible decision-making “Actively promote ethical and responsible decision- making” new Standard is aware that law and regulations alone is no guarantee of fair practice and thus to ensure the neW StanDarD enerGy liMiteD integrity of its operations, it has adopted a code of ethics and conduct to sustain its corporate culture. engage independent counsel and other advisers as it determines necessary to carry out its duties. new Standard’s ethical rules demands high standards of integrity, fairness, equity and honesty from all Directors, Senior Management and employees. new Standard expects its employees to understand that the company acts morally and that the main goal of the company is to maximise shareholders value. the code of ethics and conduct include the following issues: the cfo reports in writing on the propriety of compliance on internal controls and reporting systems and ensures that they are working efficiently and effectively in all material respects. the committee also advises on the modification and maintenance of the company’s risk management systems, the company’s risk profile, compliance and control and an assessment as to their effectiveness. • • • • • • • the avoidance of conflicts of interest; employees behaviour towards the use of company property; confidentiality; fair dealing with customers, suppliers, employees and competitors; protection and proper use of the company’s assets; compliance with laws and regulations; encouraging the reporting of illegal and unethical behaviour. Diversity policy the company values diversity and recognises the benefits it can bring to the organisation’s ability to achieve its goals. accordingly the company is developing a diversity policy. this policy will outline the company’s diversity objectives in relation to gender, age, cultural background and ethnicity. it will include requirements for the board to establish measurable objectives for achieving diversity, and for the board to assess annual both the objectives, and the company’s progress in achieving them. Principle 4 - Safeguard integrity in financial reporting “Have a structure to independently verify and safeguard the integrity of the company’s financial reporting” new Standard has a financial reporting process which includes half year and full- year results which are signed off by the Board before they are released to the market. the audit committee has been developed as per the its guidelines of good corporate governance and responsibilities are delineated in the audit committee charter. the audit committee provides assistance to the Board of directors in fulfilling its corporate governance and oversight responsibilities, as well as advise on the modification and maintenance of the company’s financial reporting, internal control structure, external audit functions, and appropriate ethical standards for the management of the company. in discharging its oversight role, the committee is empowered to investigate any matter brought to its attention with full access to all books, records, facilities, and personnel of the company and the authority to Principle 5 - Make timely and balanced disclosure “Promote timely and balanced disclosure of all material matters concerning the company.” new Standard has adopted a formal policy dealing with its disclosure responsibilities. the Board has designated the company Secretary as the person responsible for overseeing and coordinating disclosure of information to the aSX as well as communicating with the aSX. in accordance with the aSX listing rules the company immediately notifies the aSX of information: • • concerning the company that a reasonable person would expect to have a material effect on the price or value of the company’s securities; and that would, or would be likely to, influence persons who commonly invest in securities in deciding whether to acquire or dispose of the company’s securities. the policy also addresses the company’s obligations to prevent the creation of a false market in its securities. new Standard ensures that all information necessary for investors to make an informed decision is available on its website. the Managing Director has ultimate authority and responsibility for approving market disclosure which, in practice, is exercised in consultation with the Board, cfo/ company Secretary. the Board has designated the company Secretary as the person responsible for overseeing and coordinating disclosure of information to the aSX. in addition, the Board will also consider whether there are any matters requiring continuous disclosure in respect of each and every item of business that it considers. Principle 6 - Respect the rights of shareholders “Respect the rights of shareholders and facilitate the effective exercise of those rights” new Standard is aware that regular and constructive two-way communications between the company and its shareholders can help investors understand what the Board of directors is planning to achieve and how the company intends to set about achieving its objectives. the company respects the rights of its shareholders and to facilitate the effective exercise of those rights, the company is committed to: annual financial report 2011 23 • • • communicating effectively in a timely and accurate way with shareholders through releases to the market via aSX, website communication, annual reports, the general meetings of the company and any information mailed to shareholders; sending a notice of any general meetings to which they are entitled to attend together with an explanatory memorandum of proposed resolutions (as appropriate). if shareholders cannot attend the General Meeting, they are entitled to lodge a proxy in accordance with the corporations act and the company’s constitution. giving shareholders ready access to balanced and understandable information about the company and corporate proposals; • making it easy for shareholders to participate in general meetings of the company; and • requesting the external auditor to attend the annual general meeting and be available to answer shareholder questions about the conduct of the audit and the preparation and content of the auditor’s report. the address made by the chairman and/or the Managing Director to the annual General Meeting is released to the aSX. all aSX announcements are accessible via the company’s website. Principle 7 - Recognise and Manage Risk “Companies should establish a sound system of risk oversight and management and internal control” new Standard’s policy is to regularly review processes and procedures to ensure the effectiveness of its internal systems control, so as to keep the integrity and accuracy of its reporting and financial results at a high level at all times. internal controls are devised and enforced to ensure, as far as practicable in the given circumstances, the orderly and efficient conduct of the business. they include measures to safeguard the assets of the company, prevent and detect fraud and error, ensure the accuracy and completeness of accounting records and ensure the timely preparation of reliable financial information. the Board’s charter clearly establishes that it is responsible for ensuring there is a sound system for overseeing and managing risk. as the whole Board only consisted of three (3) members for the majority of the year ended 30 June 2011 and four (4) from 1 May 2011, the company does not have a risk Management committee because it would not be a more efficient mechanism than the full Board for focusing the company on specific issues. the Managing Director and company Secretary/cfo are required to state to the Board, in writing, that to the best of their knowledge the integrity of the financial statements is founded on a sound system of risk management and internal compliance and control which operates efficiently and effectively in all material respects. the Managing Director, technical Director and company Secretary/cfo are also required to report monthly to the Board on the areas they are responsible for, including material business risks and provide an annual written report to the Board summarizing the effectiveness of the companies’ management of material business risks. Principle 8 - Remunerate fairly and responsibly “Companies should ensure that the level and composition of remuneration is sufficient and reasonable and that its relationship to performance is clear.” the company is committed to remunerating its executives in a manner that is market-competitive and consistent with best practice as well as supporting the interests of shareholders. the Board ensures that executive consequently, remuneration follows the guidelines of good governance and the criteria for remuneration are as follows: • • • fixed salary that is determined from a review of the market and reflects core performance requirements and expectations; participation thresholds approved by shareholders; in any share/option scheme with statutory superannuation. new Standard has devised a framework for remuneration that aligns the interest of the company’s shareholders with that of the executives. the aim is to make the structure agreeable to both parties. the elements of consideration are as follows: for the Shareholders: • • • they should see that there is an economic profit in the remuneration structure; the structure is one that focuses on the continued growth of share price and sustained returns on assets; attracts and retains high calibre executives. for the executives: • • • • their capability and experience should be rewarded; the arrangement for reward should be clear and understandable; their active contribution should be rewarded; reward is competitive, tax effective and linked with growth in shareholder value. the Board has extablished a remuneration committee which consists of three members including two independent non-executive directors, the committee may seek external advice where appropriate. new Standard is committed in providing the right remuneration structure so that executives are not unaware to shareholder value. the structure provides long and short term incentive designed to retain and motivate executives in bringing more value to the company. 24 neW StanDarD enerGy liMiteD NEW STANDARD ENERGY LIMITED (ACN 119 323 385) CORPORATE GOVERNANCE STATEMENT CONT’D a summary of how the company has addressed the compliance with the corporate governance principles and A summary of how the Company has addressed the compliance with the corporate governance principles and recommendations is outlined recommendations is outlined below: below: Recommendation Compliance Reason for Non-compliance Principal No 1. 1.1 Lay solid foundations for management and oversight Establish the functions reserved to the Board and those delegated to senior executives and disclose those functions. 1.2 Disclose the process for evaluating the performance of senior executives. Provide the information indicated in the Guide to reporting on Principle 1. Structure the board to add value A majority of the Board should be independent of Directors. The Board has adopted a formal charter setting out the responsibilities of the Board. This charter can be accessed at: www.newstandard.com.au. Any functions not reserved for the Board and not expressly reserved for members by the Corporations Act and ASX Listing Rules are reserved for senior executives. The Board and remuneration committee meets at least once annually to review the performance of executives. The senior executives’ performance is assessed against the performance of the company as a whole. A performance evaluation has been completed during the reporting period in accordance with the process detailed in 1.2 above. Not applicable Not applicable Not applicable the majority of A definition of Director independence can be accessed at www.newstandard.com.au. During the year New Standard had one independent Director and two non independent Directors. However, effective 1 May 2011, New Standard had two independent directors. Given the size and nature of the the the Board Company composition is appropriate at this stage. feels the Board of The chair should be an independent Director. The position of Chairman was fulfilled by an independent director for the year ended 30 June 2011. Not applicable The roles of Chair and Chief Executive Officer should not be exercised by the same individual. New Standard’s Chairman and Managing Director is not the same person. Not applicable The Board should establish a nomination committee. The Board has established a Nomination Committee. Not applicable Disclose the process for evaluating the performance of the Board, its committee and individual Directors. The performance evaluation of Board members occurs by way of an informal review by the full Board (in the absence of the for relevant Board member) and executive remuneration committee which also reports to the Board. directors, the Not applicable 1.3 2. 2.1 2.2 2.3 2.4 2.5 annual financial report 2011 25 24 2.6 Provide the information indicated in the Guide to reporting on Principle 2. NEW STANDARD ENERGY LIMITED (ACN 119 323 385) The skills, experience and expertise relevant to the position held by each Director is disclosed in the Directors’ Report which forms part of the Annual Report. independent The Board consists of two directors, Mr Arthur Dixon AM and Mr Ian Paton. Not applicable to are entitled take The Directors the independent professional advice at expense of the Company. The period of office held by each Director is disclosed in the Directors’ Report which forms part of this Annual Report. The Company has adopted a Board Code of Conduct and a Company Code of Conduct, both of which can be accessed at www.newstandard.com.au. Not applicable Promote ethical and responsible decision-making Establish a code of conduct and disclose the code for a summary of the code as to: • the practice necessary to maintain confidence in the Company’s integrity; the practices necessary to take into account their legal obligations and the reasonable expectations of their stakeholders; the responsibility and accountability of individuals for reporting and investigating reports of unethical practices. • • The Company is developing a diversity policy. policy Companies should establish a policy concerning diversity and disclose the policy or a summary of that policy. The include requirements for the board to establish measureable objectives for achieving gender diversity and for the board to assess annually both the objectives and progress in achieving them. should Companies should disclose in each annual report the measureable objectives for achieving gender diversity set by the board in accordance with the diversity policy and progress in achieving them. information will be disclosed in the This Annual Report. Companies should disclose in each annual report the proportion of women employees in the whole organisation, women in senior executive positions and women on the board. This information will be disclosed in the Annual Report. The Company values diversity and recognises the benefits it can bring to the organisation’s ability to achieve its goals. the Company is developing a diversity policy. Accordingly A diversity policy being developed will outline diversity the Company’s objectives in relation to gender, age, cultural background and ethnicity. It will include requirements for the board to establish measurable objectives for achieving diversity, and for the board to assess annual both the objectives, and in the Company’s progress achieving them. The Company values diversity and recognises the benefits it can bring to the organisation’s ability to achieve its goals. Accordingly the Company is to developing a diversity policy facilitate a greater number of women employees in senior executive positions and on the board. the organisation, in Provide the information indicated in the Guide to reporting on Principle 3. The information has been disclosed in the Annual Report. Not applicable Safeguard integrity in financial reporting The Board should establish an audit committee. The Board has established an Audit Committee. Not applicable 3. 3.1 3.2 3.3 3.4 3.5 4. 4.1 26 25 neW StanDarD enerGy liMiteD 4.2 4.3 4.4 5. 5.1 5.2 6. 6.1 6.2 7. 7.1 7.2 NEW STANDARD ENERGY LIMITED (ACN 119 323 385) The Audit Committee consists of three members, two independent non-executive directors and the Company Secretary and is chaired by an independent director. Due to the size of the Board the Audit Committee does not consist only of non executive directors. The audit committee should be structured so that it: • consists only of Non-Executive Directors; consists of a majority of independent Directors; is chaired by an independent chair, who is not chair of the Board; • • • has at least three members. The Audit Committee should have a formal charter. The formal charter can be accessed at www.newstandard.com.au. Not applicable Provide the information in the Guide to reporting on Principle 4. The members of the Audit Committee for the financial year ended 30 June 2011 were Mr Arthur Dixon AM, Mr Ian Paton and Mr Mark Clements. The Audit Committee met twice during the year, before sign off of the annual and half year financial statements. Not applicable Make timely and balanced disclosure Establish written policies and procedures designed to ensure compliance with ASX Listing Rule disclosure requirements and to ensure accountability at a senior executive level for that compliance and disclose those policies or a summary of those policies. The Company has adopted a Disclosure Policy which can be accessed at www.newstandard.com.au. Not applicable Provide the information indicated in the Guide to reporting on Principle 5. The information has been disclosed in the Annual Report. Not applicable Respect the rights of shareholders Design a communications policy for promoting effective communication with shareholders and encouraging their participation at general meetings and disclose that policy or a summary of that policy. The Company has adopted a Shareholder Communications Policy which can be accessed at www.newstandard.com.au. Not applicable Provide the information indicated in the Guide to reporting on Principle 6. The information has been disclosed in the Annual Report. Not applicable Recognise and manage risk Establish policies for the oversight and management of material business risk and disclose a summary of those policies. The Board should require management to design and implement the risk management and internal control system to manage the Company’s material business risks and report to it on whether those risks are being managed effectively. The Board should disclose that management has reported to it as to the effectiveness of the Company’s management of its material business risks. Not applicable Not applicable The Company has adopted a Risk Management Policy which can be accessed at www.newstandard.com.au. This policy outlines the material risks faced by the Company as identified by the Board. The Managing Director, Technical Director and Chief Financial Officer report monthly to the board on the areas they are responsible for, including material business risks and provide an annual written report to the Board summarising the companies’ management of material business risks. the effectiveness of annual financial report 2011 26 27 NEW STANDARD ENERGY LIMITED (ACN 119 323 385) 7.3 7.4 8. 8.1 The Board should disclose whether it has received assurance from the Chief Executive Officer (or equivalent) and the Chief Financial Officer (or equivalent) that the declaration provided in accordance with section 295A of the Corporations Act is founded on a sound system of risk management and internal control and that the system is operating effectively in all material respects in relation to financial reporting risks. Companies should provide the information indicated in the Guide to reporting on Principle 7. Remunerate fairly and responsibly The Board should establish a Remuneration Committee. The Board receives assurance in the form of a declaration, from Mr Sam Willis (Managing Director) and Mr Mark Clements (Company Secretary the duties of Chief Financial Officer). fulfilling Not applicable The information has been disclosed in the Annual Report. Not applicable The Board has extablished a Remuneration Committee. Not applicable 8.2 The remuneration committee should be structured so that it: • • • !"#$%$&$'"(')'*)+",%&-'"(' %#./0/#./#&'.%,/!&",$' %$'!1)%,/.'2-')#'%#./0/#./#&' .%,/!&",' 1)$')&'3/)$&'&1,//'*/*2/,$' The Remuneration Committee consists of three members, independent non- two executive directors, Mr Ian Paton and Mr Arthur Dixon AM and Company Secretary, Mr Mark Clements. The Remuneration Committee may seek external advice where appropriate. Not applicable 8.3 8.4 Companies should clearly distinguish the structure of Non-Executive Directors’ remuneration from that of Executive Directors and senior executives. The structure of Non-Executive Directors’ remuneration is clearly distinguished from that of Executive Directors and Senior Executives, as described in the Directors’ Report which forms part of this Annual Report. Not applicable Companies should provide the information indicated in the guide to reporting on Principle 8. The information has been disclosed in the Annual Report. Not applicable 28 27 neW StanDarD enerGy liMiteD Tel: +8 6382 4600 Fax: +8 6382 4601 www.bdo.com.au 38 Station Street Subiaco, WA 6008 PO Box 700 West Perth WA 6872 Australia 27 September 2011 The Directors New Standard Energy Limited Level 3, 33 Richardson Street West Perth WA 6005 Dear Sirs, DECLARATION OF INDEPENDENCE BY PETER TOLL TO THE DIRECTORS OF NEW STANDARD ENERGY LIMITED As lead auditor of New Standard Energy Limited for the year ended 30 June 2011, I declare that, to the best of my knowledge and belief, there have been no contraventions of: 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. This declaration is in respect of New Standard Energy Limited and the entities it controlled during the period. Peter Toll Director BDO Audit (WA) Pty Ltd Perth, Western Australia BDO Audit (WA) Pty Ltd ABN 79 112 284 787 is a member of a national association of independent entities which are all members of BDO (Australia) Ltd ABN 77 050 110 275, an Australian company limited by guarantee. BDO Audit (WA) Pty Ltd and BDO (Australia) Ltd are members of BDO International Ltd, a UK company limited by guarantee, and form part of the international BDO network of independent member firms. Liability limited by a scheme approved under Professional Standards Legislation (other than for the acts or omissions of financial services licensees) in each State or Territory other than Tasmania. annual financial report 2011 29 ï ï Tel: +8 6382 4600 Fax: +8 6382 4601 www.bdo.com.au 38 Station Street Subiaco, WA 6008 PO Box 700 West Perth WA 6872 Australia INDEPENDENT AUDITORí S REPORT TO THE MEMBERS OF NEW STANDARD ENERGY LIMITED Report on the Financial Report We have audited the accompanying financial report of New Standard Energy Limited, which comprises the consolidated statement of financial position as at 30 June 2011, the consolidated statement of comprehensive income, the consolidated statement of changes in equity and the consolidated statement of cash flows for the year then ended, notes comprising a summary of significant accounting policies and other explanatory information, and the directorsí declaration of the consolidated entity comprising the company and the entities it controlled at the yearí s end or from time to time during the financial year. Directorsí Responsibility 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 is free from material misstatement, whether due to fraud or error. In Note 1, the directors also state, in accordance with Accounting Standard AASB 101 Presentation of Financial Statements, that the financial statements comply with International Financial Reporting Standards. Auditorí s Responsibility Our responsibility is to express an opinion on the financial report based on our audit. We conducted our audit in accordance with Australian Auditing Standards. Those standards require that we comply with relevant ethical requirements relating to audit engagements and plan and perform the audit to obtain reasonable assurance about whether the financial report is free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial report. The procedures selected depend on the auditorí s judgement, including the assessment of the risks of material misstatement of the financial report, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entityí s preparation of the financial report that gives a true and fair view 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 entityí s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by the directors, as well as evaluating the overall presentation of the financial report. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. Independence In conducting our audit, we have complied with the independence requirements of the Corporations Act 2001. We confirm that the independence declaration required by the Corporations Act 2001, which has been given to the directors of New Standard Energy Limited, would be in the same terms if given to the directors as at the time of this auditorí s report. BDO Audit (WA) Pty Ltd ABN 79 112 284 787 is a member of a national association of independent entities which are all members of BDO (Australia) Ltd ABN 77 050 110 275, an Australian company limited by guarantee. BDO Audit (WA) Pty Ltd and BDO (Australia) Ltd are members of BDO International Ltd, a UK company limited by guarantee, and form part of the international BDO network of independent member firms. Liability limited by a scheme approved under Professional Standards Legislation (other than for the acts or omissions of financial services licensees) in each State or Territory other than Tasmania. 30 neW StanDarD enerGy liMiteD Opinion In our opinion the financial report of New Standard Energy Limited is in accordance with the Corporations Act 2001, including: (a) the financial report of New Standard Energy Limited is in accordance with the Corporations Act 2001, including: (i) giving a true and fair view of the consolidated entityí s financial position as at 30 June 2011 and of its performance for the year ended on that date; and (ii) complying with Australian Accounting Standards and the Corporations Regulations 2001; and (b) the financial report also complies with International Financial Reporting Standards as disclosed in Note 1. Report on the Remuneration Report We have audited the Remuneration Report included in the directorsí report for the year ended 30 June 2011. The directors of the company are responsible for the preparation and presentation of the Remuneration Report in accordance with section 300A of the Corporations Act 2001. Our responsibility is to express an opinion on the Remuneration Report, based on our audit conducted in accordance with Australian Auditing Standards. Opinion In our opinion, the Remuneration Report of New Standard Energy Limited for the year ended 30 June 2011 complies with section 300A of the Corporations Act 2001. BDO Audit (WA) Pty Ltd Peter Toll Director Perth, Western Australia Dated this the 27th day of September 2011 annual financial report 2011 31 CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME FOR THE YEAR ENDED 30 JUNE 2011 Note CONSOLIDATED ENTITY 2011 $ 2010 $ Revenue from Continuing operations Gain on sale of nSex, net of transaction costs Gain on sale of available-for-sale financial assets Gain on sale of subsidiary Expenses from Continuing operations administrative expenses employee benefit expenses occupancy expenses Depreciation expense forgiveness of nSex loan exploration costs impaired unrealised foreign exchange gain/(loss) fixed assets impaired project expenses Share based payments Profit/(loss) before income tax expense income tax expense Profit/(loss) attributable to owners of the Parent entity Other comprehensive income changes in the fair value of available for sale financial assets exchange differences on translation of foreign operations 2 3 3 3 4 179,353 - 1,491,960 33,226 (480,894) (1,051,712) (135,607) (46,283) - (661) 10 (19,164) (38,763) (10,546) (79,081) - 216,444 5,652,156 - - (303,426) (617,955) (65,314) (38,831) (242,493) (866,833) 29,846 - - (465,057) 3,298,537 - (79,081) 3,298,537 3,675,000 (1,507,735) 3,600,000 (309,573) Other comprehensive income for the year 2,167,265 3,290,427 Total comprehensive income for the year 2,088,184 6,588,964 Total comprehensive income for the year is attributable to: owners of the company Earnings/(loss) per Share for profit/(loss) from continuing Operations attributable to the ordinary share holders of the Company Basic earnings/(loss) per share (cents per share) Diluted earnings/(loss) per share (cents per share) 23 2,088,184 6,588,964 Cents Per Share Cents Per Share (0.04) (0.04) 2.34 1.91 the above consolidated statement of comprehensive income should be read in conjunction with the accompanying notes. 32 neW StanDarD enerGy liMiteD CONSOLIDATED STATEMENT OF FINANCIAL POSITION AS AT 30 JUNE 2011 Current Assets cash and cash equivalents available for sale financial assets other current assets Total Current Assets Non-Current Assets exploration and evaluation expenditure oil & gas properties property, plant and equipment other non-current assets Total Non-Current Assets Total Assets Current Liabilities trade and other payables Total Current Liabilities Non-Current Liabilities other non-current liabilities Total Non-Current Liabilities Total Liabilities Net Assets Equity issued capital reserves accumulated losses Total Equity Note 21(a) 8 7 9 10 11 12 13 14 CONSOLIDATED ENTITY 2011 $ 2010 $ 4,552,777 9,825,000 651,455 1,578,480 6,660,000 408,758 15,029,232 8,647,238 12,493,737 2,467,248 111,731 328,376 11,042,652 - 102,989 - 15,401,092 11,145,641 30,430,324 19,792,879 1,062,473 1,062,473 436,209 436,209 26,172 26,172 - - 1,088,645 436,209 29,341,679 19,356,670 15 16 16(d) 24,385,896 7,400,726 (2,444,943) 16,668,616 5,053,916 (2,365,862) 29,341,679 19,356,670 the above consolidated statement of financial position should be read in conjunction with the accompanying notes. annual financial report 2011 33 CONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 30 JUNE 2011 CONSOLIDATED ENTITY Issued Capital Accumulated Losses Share Based Payment Reserve Available for Sale Financial Assets Reserve Foreign Currency Translation Reserve $ $ $ $ $ Total $ Equity as at 1 July 2010 16,668,616 (2,365,862) 1,763,489 3,600,000 (309,573) 19,356,670 profit/(loss) for the year unrealised loss on translation of foreign operations unrealised gain on available for sale financial assets Total comprehensive Income Transactions with owners in their capacity as owners; - - - - (79,081) - - (79,081) issue of shares, net of transaction costs 7,717,280 Share based payments - - - - - - - - 179,545 - - - (79,081) (1,507,735) (1,507,735) 3,675,000 - 3,675,000 3,675,000 (1,507,735) 2,088,184 - - - - 7,717,280 179,545 Equity as at 30 June 2011 24,385,896 (2,444,943) 1,943,034 7,275,000 (1,817,308) 29,341,679 CONSOLIDATED ENTITY Issued Capital Accumulated Losses Share Based Payment Reserve Available for Sale Financial Assets Reserve Foreign Currency Translation Reserve $ $ $ $ $ Total $ Equity as at 1 July 2009 16,373,883 (5,664,399) 1,298,432 profit for the year unrealised loss on translation of foreign operations unrealised gain on available for sale financial assets Total comprehensive Income Transactions with owners in their capacity as owners; - - - - 3,298,537 - - 3,298,537 issue of shares, net of transaction costs 294,733 Share based payments - - - - - - - - 465,057 - - - - - 12,007,916 3,298,537 (309,573) (309,573) 3,600,000 - 3,600,000 3,600,000 (309,573) 6,588,964 - - - - 294,733 465,057 Equity as at 30 June 2010 16,668,616 (2,365,862) 1,763,489 3,600,000 (309,573) 19,356,670 the above consolidated statement of changes of equity should be read in conjunction with the accompanying notes. 34 neW StanDarD enerGy liMiteD CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE YEAR ENDED 30 JUNE 2011 Cash Flows From Operating Activities interest received payments to suppliers and employees other income CONSOLIDATED ENTITY Note 2011 $ 2010 $ 179,353 (1,254,722) - 211,731 (842,757) 4,713 net cash used in operating activities 21(b) (1,075,369) (626,313) Cash Flows From Investing Activities payments for plant and equipment reimbursement of prior exploration expenditure payment for exploration expenditure payment for purchase/ proceeds from sale of legal subsidiary net of cash acquired/disposed (34,362) 300,000 (5,643,467) (37,279) 277,052 (5,145,073) 33,226 2,769,362 net cash used in investing activities (5,344,603) (2,135,938) Cash Flows From Financing Activities proceeds from issue of equity securities proceeds from sale of financial assets payment for share issue costs net cash flows provided by financing activities 7,947,500 2,001,960 (389,596) 9,559,864 297,142 (2,410) 294,732 Net (decrease)/increase in cash and cash equivalents 3,139,892 (2,467,519) cash and cash equivalents at beginning of the financial year exchange rate adjustments Cash and cash equivalents at the end of the financial year 21(a) 1,578,480 (165,595) 4,552,777 4,008,455 37,544 1,578,480 the above statement of cashflows should be read in conjunction with the accompanying notes. annual financial report 2011 35 NOTES TO AND FORMING PART OF THE CONSOLIDATED FINANCIAL STATEMENTS 1. SUMMARY OF ACCOUNTING POLICIES Corporate Information new Standard energy limited (new Standard) is a company limited by shares incorporated in australia whose shares are publicly traded on the australian Securities exchange. Statement of compliance the financial statements are general purpose financial statements which have been prepared in accordance with the corporations act 2001, australian accounting Standards and interpretations and complies with other requirements of the law. accounting Standards include australian equivalents to international financial reporting Standards (‘a-ifrS’). compliance with a-ifrS ensures that the financial statements and notes of the Group complies with international financial reporting Standards (‘ifrS’). the financial statements were authorised for issue by the Directors on 27 September 2011. Basis of preparation the consolidated financial statements have been prepared on the basis of historical cost convention, as modified by the revaluation of available –for-sale financial assets. the accounting policies set out below have been applied in preparing the financial statements for the year ended 30 June 2011. Presentation of financial statements the Group applies revised aaSB 101 Presentation of Financial Statements (2007), which became effective as of 1 January 2009. as a result, the Group presents in the consolidated statement of changes in equity, whereas all non-owner changes are presented in the consolidated statement of comprehensive income. this presentation has been applied in these financial statements as of and for the year ended on 30 June 2011. comparative information has been re-presented so that it is also in conformity with the revised standard. Since the accounting policy only impacts presentation aspects, there is no impact on earnings per share. Reverse Acquisition Accounting on 28 July 2008 the merger between new Standard energy limited (formerly Hawk resources limited) and new Standard exploration ltd (formerly new Standard energy ltd) became effective. this transaction was accounted for using the guidelines as set out in aaSB 3 ‘Business combinations’. in applying the requirements of aaSB 3 ‘Business combinations’ to the Group, new Standard exploration ltd, which was neither the legal parent nor legal acquirer, is deemed to be the accounting acquirer of the Group and consolidated financial information was presented on that basis. in line with the guidelines of that standard, the transaction had been accounted for as a reverse acquisition: (i) the assets and liabilities of the legal subsidiary, “new Standard exploration ltd”, were recognised and measured in the consolidated financial statements at pre-combination carrying amounts. (ii) the retained earnings and other equity balances recognised in the consolidated financial statements were the retained earnings and other equity balances of the legal subsidiary “new Standard exploration ltd” immediately before the business combination. (iii) the amount recognised as issued equity in the consolidated financial statements was the fair value of the notional number of equity instruments that the shareholder of new Standard exploration pty ltd would have had to issue to new Standard energy limited (nSe) to give the owners of nSe the same percentage ownership in the combined entity. Principals of Consolidation (a) Subsidiaries the consolidated financial statements incorporate the assets and liabilities of all subsidiaries of new Standard energy limited (“company” or “parent entity”) as at 30 June 2011 and the results of all subsidiaries for the year then ended. new Standard energy limited as its subsidiaries together are referred to in this financial report as the Group or the consolidated entity. Subsidiaries are all those entities (including special purpose entities) over which the Group has the power to govern the financial and operating policies, generally accompanying a shareholding of more than one-half of the voting rights. the existence and 36 neW StanDarD enerGy liMiteD effect of potential voting rights that are currently exercisable or convertible are considered when assessing whether the Group controls another entity. Subsidiaries are fully consolidated from the date on which control is transferred to the Group. they are de-consolidated from the date that control ceases. the acquisition method of accounting is used to account for the acquisition of subsidiaries by the Group. intercompany transactions, balances and unrealised gains on transactions between Group companies are eliminated. unrealised losses are also eliminated unless the transaction proves 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 Group. non-controlling interest in the results and equity of subsidiaries are shown separately in the consolidated statement of comprehensive income and statement of financial position respectively. (b) Cash and cash equivalents cash and cash equivalents comprise cash on hand, deposits held at call with banks and other short-term highly liquid investments with original maturities of three months or less. (c) Trade receivables trade receivables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method, less provision for impairment. trade receivables are generally due for settlement within 30 days. they are presented as current assets unless collection is not expected for more than 12 months after the reporting date. collectability of trade receivables is reviewed on an ongoing basis. Debts which are known to be uncollectible are written off by reducing the carrying amount directly. an allowance account (provision for impairment of trade receivables) is used when there is objective evidence that the group will not be able to collect all amounts due according to the original terms of the receivables. Significant financial difficulties of the debtor, probability that the debtor will enter bankruptcy or financial reorganisation, and default or delinquency in payments (more than 30 days overdue) are considered indicators that the trade receivable is impaired. the amount of the impairment allowance is the difference between the asset’s carrying amount and the present value of estimated future cash flows, discounted at the original effective interest rate. cash flows relating to short-term receivable are not discounted if the effect of discounting is immaterial. (d) Goods and services tax revenues, expenses and assets are recognised net of the amount of goods and services tax (GSt), except: (i) where the amount of GSt incurred is not recoverable from the taxation authority, it is recognised as part of the cost of acquisition of an asset or as part of an item of expense; or (ii) for receivables and payables which are recognised inclusive of GSt. the net amount of GSt recoverable from, or payable to, the taxation authority is included as part of receivables or payables. cash flows are included in the statement of cashflows on a gross basis. the GSt component of cash flows arising from investing and financing activities which is recoverable from, or payable to, the taxation authority is classified as operating cash flows. (e) Impairment of assets at each reporting date, the entity reviews the carrying amounts of its tangible and intangible assets to determine whether there is any indication that those assets have suffered an impairment loss. if any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss (if any). Where the asset does not generate cash flows that are independent from other assets, the entity estimates the recoverable amount of the cash-generating unit to which the asset belongs. recoverable amount is the higher of fair value less costs to sell 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 for which the estimates of future cash flows have not been adjusted. if the recoverable amount of an asset (or cash-generating unit) is estimated to be less than its carrying amount, the carrying amount of the asset (cash-generating unit) is reduced to its recoverable amount. an impairment loss is recognised in the profit or loss. Where an impairment loss subsequently reverses, the carrying amount of the asset (cash-generating unit) is increased to the revised estimate of its recoverable amount, but only to the extent that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognised for the asset (cash-generating unit) in prior years. a reversal of an impairment loss is recognised in the profit or loss. annual financial report 2011 37 (f) Income tax current tax current tax is calculated by reference to the amount of income taxes payable or recoverable in respect of the taxable profit or tax loss for the period. it is calculated using tax rates and tax laws that have been enacted or substantively enacted by reporting date. current tax for current and prior periods is recognised as a liability (or asset) to the extent that it is unpaid (or refundable). Deferred tax Deferred tax is accounted for using the liability method in respect of temporary differences arising from differences between the carrying amount of assets and liabilities in the financial statements and the corresponding tax base of those items. Deferred tax assets are recognised to the extent that it is probable that sufficient taxable amounts will be available against which deductible temporary differences or unused tax losses and tax offsets can be utilised. However, deferred tax assets and liabilities are not recognised if the temporary differences giving rise to them arise from the initial recognition of assets and liabilities (other than as a result of a business combination) which affects neither taxable income nor accounting profit. furthermore, a deferred tax liability is not recognised in relation to taxable temporary differences arising from goodwill. Deferred tax liabilities are recognised for taxable temporary differences arising on investments in subsidiaries, branches, associates and joint ventures except where the consolidated entity is able to control the reversal of the temporary differences and it is probable that the temporary differences will not reverse in the foreseeable future. Deferred tax assets arising from deductible temporary differences associated with these investments and interests are only recognised to the extent that it is probable that there will be sufficient taxable profits against which to utilise the benefits of the temporary differences and they are expected to reverse in the foreseeable future. (g) Exploration and Evaluation Expenditure exploration for and evaluation of hydrocarbon resources is the search for hydrocarbon resources after the entity has obtained legal rights to explore in a specific area, as well as the determination of the technical feasibility and commercial viability of extracting the hydrocarbon resources. accordingly, exploration and evaluation expenditures are those expenditures incurred by the company in connection with the exploration for and evaluation of hydrocarbon resources before the technical feasibility and commercial viability of extracting a hydrocarbon resource is demonstrable. accounting for exploration and evaluation expenditures is assessed separately for each ‘area of interest’. an ‘area of interest’ is an individual geological area which is considered to constitute a favourable environmental for the presence of a hydrocarbon resource or has been proved to contain such a resource. expenditure incurred on activities that precede exploration of hydrocarbon resources, including all expenditure incurred prior to securing legal rights to explore an area, is expensed as incurred. for each area of interest the expenditure is recognised as an exploration and evaluation asset where the following conditions are satisfied: (a) the rights to tenure of the area of interest are current; and (b) at least one of the following conditions is also met: i. the expenditure is expected to be recouped through the successful development and commercial exploitation of an area of interest, or alternatively by its sale; and ii. exploration and evaluation activities in the area of interest have not, at reporting date, reached a stage which permits a reasonable assessment of the existence or otherwise of ‘economically recoverable reserves’ and active and significant operations in, or in relation to, the area of interest are continuing. economically recoverable reserves are the estimated quantity of product in an area of interest that can be expected to be profitably extracted, processed and sold under current and foreseeable conditions. exploration and evaluation assets include: • • • • acquisition of rights to explore; topographical, geological, geochemical and geophysical studies; exploratory drilling, logging and coring; and activities in relation to evaluating the technical feasibility and commercial viability of extracting the hydrocarbon resource. General and administrative costs are expensed as incurred. 38 neW StanDarD enerGy liMiteD (h) Development Expenditure Development expenditure is accumulated in respect of each separate area of interest. Development expenditure relates to costs incurred to access a mineral resource after the technical feasibility and commercial viability of extracting the mineral resource from the area of interest has been demonstrated. Development expenditure related to an area of interest is carried forward to the extent that they are expected to be recouped either through sale or successful exploitation of the area of interest. When an area of interest is abandoned or the Directors decide that it is not commercial, any accumulated cost in respect of that area is written off in the financial period the decision is made. each area of interest is reviewed at the end of each accounting period and accumulated cost written off to the extent that they will not be recoverable in the future. impairment of assets is discussed at note 1(e). capitalisation of development expenditure ceases once the production commences, at which point it is transferred into property, plant and equipment, and amortised on a units of production basis over the life of economically recoverable reserves. although production revenue has been received during the period, sufficient information has not been obtained from further technical analysis to form a definitive view regarding the economically recoverable reserves associated with the producing wells and field. at the date of this report the results of an independent resource and reserves assessment remains incomplete and technical analysis regarding the quality of the reservoir completion techniques utilised for the producing wells has yet to be fully determined. as a result the Directors deem that it is appropriate under the circumstances to continue to classify the uS oil and Gas properties as development assets as at 30 June 2011. (i) Business Combinations the acquisition method of accounting is used to account for all business combinations. consideration is measured at the fair value of the assets transferred, liabilities incurred and equity interests issued by the group on acquisition date. consideration also include the acquisition date fair values of any contingent consideration arrangements, any pre-existing equity interests in the acquiree and share-based payment awards of the acquiree that are required to be replaced in a business combination. the acquisition date is the date on which the group obtains control of the acquiree. Where equity instruments are issued as part of the consideration, the value of the equity instruments is their published market price at the acquisition date unless, in rate circumstances, it can be demonstrated that the published price at acquisition date is not fair value and that other evidence and valuation methods provide a more reliable measure of fair value. identifiable assets acquired and liabilities and contingent liabilities assumed in business combinations are, with limited exceptions, initially measure at their fair values at acquisition date. Goodwill represents the excess of the consideration transferred and the amount of the non-controlling interest in the acquiree over fair value of the identifiable net assets acquired. if the consideration and non-controlling interest of the acquire is less than the fair value of the net identifiable assets acquired, the difference is recognized in profit or loss as a bargain purchase price, but only after a reassessment of the identification and measurement of the net assets acquired. for each business combination, the group measures non-controlling interests at either fair value or at the non-controlling interest’s proportionate share of the acquiree’s identifiable net assets. acquisition-related costs are expensed when incurred. Where the group obtains control of a subsidiary that was previously accounted for as an equity accounted investment in associate or jointly controlled entity, the group remeasures its previously held equity interest in the acquiree as its acquisition date fair value and the resulting gain or loss is recognized in profit or loss. Where the group obtains control of a subsidiary that was previously accounted for as an available-for-sale investment, any balance on the available-for-sale reserve related to that investment is recognised in profit or loss as if the group had disposed directly of the previously held interest. Where settlement of any part of the cash consideration is deferred, the amounts payable in future are discounted to present value as the date of exchange using the entity’s incremental borrowing rate as the discount rate. assets and liabilities from business combinations involving entities or businesses under common control are accounted for at the carrying amounts recognised in the group’s controlling shareholder’s consolidated financial statements. (j) Investments and Other Financial Assets classification the Group classifies its financial assets in the following categories: loans and receivables, and available-for-sale financial assets. the classification depends on the purpose for which the investments were acquired. Management determines the classification of its investments at initial recognition. annual financial report 2011 39 available-for-sale financial assets available-for-sale financial assets, comprising principally marketable equity securities, are non-derivatives that are either designated in this category or not classified in any of the other categories. they are included in current assets as management may dispose of the investment within 12 months of the reporting date. investments are designated as available-for-sale if they do not have fixed maturities and fixed or determinable payments and management intends to hold them for the short term. available for sale assets are subsequently carried at fair value with movements in fair value are recognised in equity. investments are recognised and derecognised on trade date where the purchase sale or sale of an investment is under a contract whose terms require delivery of the investment within the time frame established by the market concerned; and are initially measured at fair value, net of the transaction costs. loans and receivables trade receivables, loans, and other receivables that have fixed or determinable payments that are not quoted in an active market are classified as ‘loans and receivables’. loans and receivables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method less impairment. interest is recognised by applying the effective interest rate. impairment of financial assets financial assets are assessed for indicators of impairment at each reporting date. financial assets are impaired where there is objective evidence that as a result of one or more events that occurred after the initial recognition of the financial assets carried at amortised cost, the amount of the impairment is the difference between the asset’s carrying amount and the present value of estimated future cash flows, discounted at the original effective interest rate (if applicable). the carrying amount of the financial asset is reduced by the impairment loss directly for all financial assets with the exception of trade receivables where the carrying amount is reduced through the use of an allowance account. When a trade receivable is uncollectible, it is written off against the allowance account. Subsequent recoveries of amounts previously written off are credited against the allowance account. changes in the carrying amount of the allowance account are recognised in profit or loss. impairment of available for sale financial assets in the case of equity securities classified as available-for-sale, a significant or prolonged decline in the fair value of a security below its cost is considered as an indicator that the securities are impaired. if any such evidence exists for available-for-sale financial assets, the cumulative loss - measured as the difference between the acquisition cost and the current fair value, less any impairment loss on that financial asset previously recognised in profit or loss - is reclassified from equity and recognised in profit or loss as a reclassification adjustment. impairment losses recognised in profit or loss on equity instruments classified as available-for-sale are not reversed through profit or loss. if there is evidence of impairment for any of the group’s financial assets carried at amortised cost, the loss is measured as the difference between the asset’s carrying amount and the present value of estimated future cash flows, excluding future credit losses that have not been incurred. the cash flows are discounted at the financial asset’s original effective interest rate. the loss is recognised in profit or loss. (k) Goodwill Goodwill acquired in a business combination is initially measured at its cost, being the excess of the cost of the business combination over the acquirer’s interest in the net fair value of the identifiable assets, liabilities and contingent liabilities recognised. Goodwill is subsequently measured at its cost less any impairment losses. for the purpose of impairment testing, goodwill is allocated to each of the Group’s cash-generating units (cGu’s), or groups of cGu’s, expected to benefit from the synergies of the business combination. cGu’s (or groups of cGu’s) to which goodwill has been allocated are tested for impairment annually, or more frequently if events or changes in circumstances indicate that goodwill might be impaired. (l) Share-Based Payments equity-settled share-based payments with employees and others providing similar services are measured at the fair value of the equity instrument at the grant date and recognised over the vesting period. fair value is measured by use of a Black Scholes model. the above policy is applied to all equity-settled share-based payments. 40 neW StanDarD enerGy liMiteD (m) Revenue revenue is measured at the fair value of the consideration received or receivable. interest revenues interest revenue is accrued on a time basis, by reference to the principal outstanding and at the effective interest rate applicable, which is the rate that exactly discounts estimated future cash receipts through the expected life of the financial asset to that asset’s net carrying amount. (n) Property, Plant and Equipment (other than Oil & Gas Properties) owned assets items of property, plant and equipment are recognised at cost less accumulated depreciation (see below) and impairment losses (see impairment note (e)). Where parts of an item of property, plant and equipment have different useful lives, they are accounted for as separate items of property, plant and equipment. Depreciation/amortisation Depreciation is charged to the profit or loss on a straight-line basis over the estimated useful life of an item of property, plant and equipment. the estimated useful lives for each class of assets in the current and comparative periods are as follows: (i) Motor Vehicles 5 years (ii) plant and equipment 5 -15 years depending on the nature of the asset the useful life and depreciation method applied to an asset are reassessed at least annually. (o) Trade and Other Payables trade payables and other accounts payable are recognised when the entity becomes obliged to make future payments resulting from the purchase of goods and services. they are recognised initially at fair value and subsequently at amortised cost. the amounts are unsecured and are normally settled within 30 days of recognition. (p) Leases the lease of a vehicle where the Group, as lessee, has substantially all the risks and rewards of ownership has been classified as a finance lease. the finance lease has been capitalised at the lease’s inception at the fair value of the leased vehicle. the corresponding rental obligations, net of finance charges, have been included in other short-term payables and long-term borrowings. each lease payment is allocated between the liability and finance cost. the finance cost is charged to the profit or loss over the lease period so as to produce a constant periodic rate of interest on the remaining balance of the liability for each period. the vehicle acquired under the finance lease is being depreciated over the asset’s useful life. (q) Earnings per Share Basic earnings per share Basic earnings per share is determined by dividing the profit attributable to equity holders of the company, excluding any costs of servicing equity other than ordinary shares, by the weighted average number of ordinary shares outstanding during the financial year. Diluted earnings per share Diluted earnings per share adjusts the figures used in the determination of basic earnings per share by taking into account amounts unpaid on ordinary shares and any reduction in earnings per share that will arise from the exercise of options outstanding during the financial year. (r) Segment Reporting the Group has applied aaSB 8 operating Segments. aaSB 8 requires a ‘management approach’ under which segment information is presented on the same basis as that used for internal reporting purposes. this has resulted in an increase in the number of reportable segments presented, as the previously reported geographical segments have been disaggregated into separate segments within the Group. operating segments are reported in a manner that is consistent with the internal reporting provided to the chief operating decision maker. the chief operating decision-maker has been identified as the Managing Director that makes strategic decisions. annual financial report 2011 41 (s) Provisions provisions are recognised when the consolidated entity has a present obligation as a result of a past event, the future sacrifice of economic benefits is probable, and the amount of the provision can be reliably estimated. the amount recognised as a provision is the best estimate of the consideration required to settle the present obligation at reporting date, taking into account the risks and uncertainties surrounding the obligation. Where a provision is measured using the cash flows estimated to settle the present obligation, its carrying amount is the present value of those cash flows. When some or all of the economic benefits required to settle a provision are expected to be recovered from a third party, the receivable is recognised as an asset if it is virtually certain that recovery will be received and the amount of the receivable can be measured reliably. (t) Foreign Currency Translation (i) functional and presentation currency items included in the financial statements of each of the Group’s entities are measured using the currency of the primary economic environment in which the entity operates (‘the functional currency’). the consolidated financial statements are presented in australian dollars, which is new Standard energy limited’s functional and presentation currency. (ii) transactions and balances foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the transactions. foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at year end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in profit or loss. non-monetary items that are measured at fair value in a foreign currency are translated using the exchange rates at the date when the fair value was determined. translation differences on assets and liabilities carried at fair value are reported as part of the fair value gain or loss. for example, translation differences on non-monetary assets and liabilities such as equities held at fair value through profit or loss are recognised in profit or loss as part of the fair value gain or loss and translation differences on non- monetary assets such as equities classified as available-for-sale financial assets are included in the fair value reserve in equity. (iii) Group companies the results and financial position of all the group entities (none of which has the currency of a hyperinflationary economy) that have a functional currency different from the presentation currency are translated into the presentation currency as follows: (i) assets and liabilities for each statement of financial position presented are translated at the closing rate at reporting date (ii) income and expenses for each item in the statement of comprehensive income are translated at average exchange rates (unless this is not a reasonable approximation of the cumulative effect of the rates prevailing on the transaction dates, in which case income and expenses are translated at the dates of the transactions), and (iii) all resulting exchange differences are recognised in other comprehensive income. on consolidation, exchange differences arising from the translation of any net investment in foreign entities, and of borrowings and other financial instruments designated as hedges of such investments, are recognised in other comprehensive income. When a foreign operation is sold or any borrowings forming part of the net investment are repaid, a proportionate share of such exchange differences is reclassified to profit or loss, as part of the gain or loss on sale where applicable. Goodwill and fair value adjustments arising on the acquisition of a foreign entity are treated as assets and liabilities of the foreign entities and translated at the closing rate. (u) Joint Ventures a joint venture is either an entity or operation over which whose activities the entity has joint control, established by contractual agreement. Jointly controlled operations and assets interests in unincorporated joint ventures are reported in the financial statements by including the entity’s share of assets employed in joint ventures, the share of liabilities incurred in relation to the joint ventures and its share of revenue and expenses. 42 neW StanDarD enerGy liMiteD (v) Contributed Equity ordinary shares are classified as equity. incremental costs directly attributable to the issue of new shares or options are shown in equity as a deduction, net of tax, from proceeds. (w) Standards and Interpretations Issued not yet Effective new accounting standards and interpretations certain new accounting standards have been published that are not mandatory for 30 June 2011 reporting periods. the Group has not applied any of the following in preparing this financial report: AASB 9 Financial Instruments and AASB 2009-11 Amendments to Australian Accounting Standards arising from AASB 9 (effective from 1 January 2013) aaSB 9 financial instruments addresses the classification and measurement of financial assets and is likely to affect the Group’s accounting for its financial assets. the standard is not applicable until 1 January 2013 but is available for early adoption. the Group is yet to assess its full impact. However, initial indications are that it may affect the Group’s accounting for its available- for-sale financial assets, since aaSB 9 only permits the recognition of fair value gains and losses in other comprehensive income if they relate to equity investments that are not held for trading. fair value gains and losses on available-for-sale debt investments, for example, will therefore have to be recognised directly in profit or loss. in the current reporting period, the Group recognised $3,600,000 of such gains in other comprehensive income. the Group has not yet decided when to adopt aaSB 9. Revised AASB 124 Related Party Disclosures and AASB 2009-12 Amendments to Australian Accounting Standards (effective from 1 January 2011) in December 2009 the aaSB issued a revised aaSB 124 related party Disclosures. it is effective for accounting periods beginning on or after 1 January 2011 and must be applied retrospectively. the amendment removes the requirement for government- related entities to disclose details of all transactions with the government and other government-related entities and clarifies and simplifies the definition of a related party. the Group will apply the amended standard from 1 July 2011. the Group is not a government related entity. the amendment is therefore not expected to have any impact on the Group’s or parent entity’s financial statements. AASB 2009-14 Amendments to Australian Interpretation – Prepayments of a Minimum Funding Requirement (effective from 1 January 2011) in December 2009, the aaSB made an amendment to interpretation 14 the limit on a Defined Benefit asset, Minimum funding requirements and their interaction. the amendment removes an unintended consequence of the interpretation related to voluntary prepayments when there is a minimum funding requirement in regard to the entity’s defined benefit scheme. it permits entities to recognise an asset for a prepayment of contributions made to cover minimum funding requirements. the Group does not make any such prepayments. the amendment is therefore not expected to have any impact on the Group’s or the parent entity’s financial statements. the Group intends to apply the amendment from 1 July 2011. AASB 2010-6 Amendments to Australian Accounting Standards - Disclosures on Transfers of Financial Assets (effective for annual reporting periods beginning on or after 1 July 2011) amendments made to aaSB 7 financial instruments: Disclosures in november 2010, introduce additional disclosures in respect of risk exposures arising from transferred financial assets. the amendments are not expected to have any significant impact on the Group’s disclosures. the Group intends to apply the amendment from 1 July 2011. AASB 10 Consolidated Financial Statements (effective for the annual reporting periods commencing on or after 1 January 2013) aaSB 10 introduces certain changes to the consolidation principles, including the concept of de facto control and changes in relation to the special purpose entities. the Group is continuing to assess the impact of the standard. AASB 11 Joint Arrangements (effective for the annual reporting periods commencing on or after 1 January 2013) aaSB 11 introduces certain changes to the accounting for joint arrangements. Joint arrangements will be classified as either joint operations (where parties with joint control have rights to assets and obligations for liabilities) or joint ventures (where parties with joint control have rights to the net assets of the arrangement). Joint arrangements structured as a separate vehicle will generally be treated as joint ventures and accounted for using the equity method. the Group is continuing to assess the impact of the standard. annual financial report 2011 43 AASB 13 Fair Value Measurement (effective for annual reporting periods commencing on or after 1 January 2013) aaSB 13 establishes a single framework for measuring fair value of financial and non-financial items recognised at fair value on the balance sheet or disclosed in the notes to the financial statements. the Group is continuing to assess the impact of the standard. AASB 1054 Australian Additional Disclosures (effective for annual reporting periods beginning on or after 1 July 2011) aaSB 1054, issued in May 2011, moves additional australian specific disclosure requirements for for-profit entities from various australian accounting Standards into this Standard as a result of trans-tasman convergence project. aaSB 1054 australian additional Disclosures removes the requirement to disclose each class of capital commitments contracted for at the end of the reporting period (other than commitments for the supply of inventories). When the standard is adopted for the first time for the financial year ending 30 June 2012, the financial statements will no longer include disclosures about capital and other expenditure commitments as these are no longer required by aaSB 1054. AASB 1053 Application of Tiers of Australian Accounting Standards and AASB 2010-2 Amendments to Australian Accounting Standards arising from Reduced Disclosure Requirements (effective from 1 July 2013) on 30 June 2010 the aaSB officially introduced a revised differential reporting framework in australia. under this framework, a two-tier differential reporting regime applies to all entities that prepare general purpose financial statements. the Group is listed on the aSX and is not eligible to adopt the new australian accounting Standards - reduced Disclosure requirements. the two standards will therefore have no impact on the financial statements of the entity. AASB 2010-8 Amendments to Australian Accounting Standards - Deferred Tax: Recovery of Underlying Assets (effective from 1 January 2012) in December 2010, the aaSB amended aaSB 112 income taxes to provide a practical approach for measuring deferred tax liabilities and deferred tax assets when investment property is measured using the fair value model. aaSB 112 requires the measurement of deferred tax assets and liabilities to reflect the tax consequences that would follow from the way management expects to recover or settle the carrying amount of the relevant assets or liabilities, that is through use or through sale. the amendment introduces a rebuttable presumption that investment property which is measured at fair value is recovered entirely by sale. the amendment is not expected to have any significant impact on the Group’s financial statements. the Group intends to apply the amendment from 1 July 2012. Critical accounting judgements and key source of estimation uncertainty in the application of the Group’s accounting policies, which are described in note 1, management is required to make judgements, estimates and assumptions about carrying values of assets and liabilities that are not readily apparent from other sources. the estimates and associated assumptions are based on historical experience and various other factors that are believed to be reasonable under the circumstance, the results of which form the basis of making the judgements. actual results may differ from these estimates. the estimates and underlying assumptions are reviewed on an ongoing basis. revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision affects only that period, or in the period of the revision and future periods if the revision affects both current and future periods. Key sources of estimation uncertainty and significant judgements the following are the key assumptions concerning the future, and other key sources of estimation uncertainty and significant judgements at the reporting date, that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year. carrying value of exploration expenditure the recoverability of the carrying amount of the exploration and evaluation assets is dependent upon the successful development and commercial exploitation, or alternatively, sale of the respective areas of interest. the carrying amount of exploration expenditure at the reporting date was $12,493,737 following an impairment adjustment of $661. Details of the impairment can be found in note 9. Deferred tax assets the Group has carried forward tax losses which have not yet been recognised as deferred tax assets as it is not considered sufficiently probable that these losses will be recouped by means of future profits taxable in the appropriate jurisdictions. 44 neW StanDarD enerGy liMiteD Share-based payment transactions the Group measures the cost of equity-settled transactions with directors and employees by reference to the fair value of the equity instruments at the date at which they are granted. the fair value is determined using a Black-Scholes model. rehabilitation and decommissioning obligations the Group estimates the future rehabilitation costs of production facilities, wells and pipelines at different stages of the development and construction of assets or facilities. in most instances, removal of assets occurs many years into the construction of assets or facilities. in most instances, removal of assets occurs many years into the future. this requires judgemental assumptions regarding removal date, future environmental legislation, the extent of restoration activities, the future removal technology available and liability specific discount rates to determine the present value of these cash flows. as at 30 June 2011 the carrying value of rehabilitation obligations have not been calculated given the preliminary stage of development. impairment assets are reviewed for impairment whenever events or changes in circumstances indicate that their carrying amounts exceed their recoverable amounts. the assessment of the carrying amount often requires estimates and assumptions such as discount rates, exchange rates, commodity prices, future capital requirements and future operating performance. recoverability of development assets the ultimate recoupment of costs carried forward for development assets is dependent upon the successful development and commercial exploitation, or sale, of the respective areas of interest. 2. REVENUE revenue from continuing operations consisted of the following items: interest revenue Well income Total Revenue CONSOLIDATED ENTITY 2011 $ 179,353 - 179,353 2010 $ 211,731 4,713 216,444 as detailed in note 1(h) well revenues of $1,462,409 have been capitalised and offset against the development expenditure incurred to date on the development wells producing the revenue. this amount is reflected at note 10. 3. PROFIT / (LOSS) FROM OPERATIONS profit/(loss) before income tax has been arrived at after crediting/ (charging) the following gains and losses: Gain on sale of subsidiary Gain on sale of available-for-sale financial assets Gain on disposal of nSex, net of transaction costs unrealised foreign exchange gain Share based payments impairment of exploration expenditure impairment of fixed assets project expenses CONSOLIDATED ENTITY 2011 $ 33,226 1,491,960 - 10 (10,546) (661) (19,164) (38,763) 2010 $ - - 5,652,156 29,846 (465,057) (866,833) - - annual financial report 2011 45 4. INCOME TAX EXPENSE (a) The components of tax expense comprise: current tax Deferred tax (b) The prima facie tax from ordinary activities before income tax is reconciled to the income tax expense as follows: CONSOLIDATED ENTITY 2011 $ - - 2010 $ - - profit/(loss) before tax tax expense (benefit) calculated at 30% (79,081) (23,724) 3,298,537 989,561 tax effect of amounts which are not deductible (taxable) in calculating taxable income Gain on sale of investments forgiveness of nSex loan Goodwill impaired Share based payments other permanent differences Difference in overseas tax rate prior year tax losses applied against income tax expense tax losses and timing differences not recognised income tax expense Unrecognised deferred tax assets Deferred tax assets have not been recognised in the statement of financial position for the following items; unused tax losses (i) australia (ii) united States Deductible temporary differences Unrecognised deferred tax liabilities Deferred tax liabilities have not been recognised in the statement of financial position for the following items; (i) foreign currency translation (ii) financial assets held for sale (iii) capitalised exploration expenditure 139,511 3,164 707 (7,303) - 112,355 112,355 - 5,435,926 2,012,285 685,325 8,133,536 183 701,315 4,488,295 5,189,795 (941,260) (214,499) - 139,517 287,718 (3,058) (395,358) (137,379) (137,379) - 4,931,483 1,497,166 103,294 6,531,943 8,954 - 3,312,796 3,321,750 new Standard and its wholly owned australian subsidiaries entered into a tax consolidated group effective 1 July 2008. the company has unrecognised deferred tax assets in the form of carried forward tax losses. the deferred tax assets arising from these balances has not been recognised as an asset because recovery of tax losses is not probable at this point in time. the potential tax benefit will only be obtained if the relevant company derives future assessable income of a nature and an amount sufficient to enable the benefit to be realised; and i. the relevant company continues to comply with the conditions for deductibility imposed by the law; and ii. no changes in tax legislation adversely affect the relevant company in realising the benefit. 46 neW StanDarD enerGy liMiteD 5. KEY MANAGEMENT PERSONNEL COMPENSATION (a) Key management personnel compensation Directors and other Key Management Personnel Short term employee benefits post employment benefits non-monetary benefits Share based payments CONSOLIDATED ENTITY 2011 $ 961,516 7,568 - 338,922 1,308,006 2010 $ 723,156 - - 140,597 863,753 Detailed remuneration disclosures are provided in the remuneration report included in the Director’s report. (b) Equity instrument disclosures relating to key management personnel (i) options provided as remuneration and shares Details of options provided as remuneration and shares issued on the exercise of such options, together with terms and conditions of the options can be found in section D of the audited remuneration report of the Directors report. (ii) option holdings the number of options over ordinary shares in the company held during the financial year by Key Management personnel are set out below. 2011 Balance 1.7.2010 - 5,250,000 7,250,000 2,000,000 - - 14,500,000 Granted as Compensation(1) - - - - 1,000,000 - 1,000,000 Net Change Other - - - - - - - Balance 30.6.2011 - 5,250,000 7,250,000 2,000,000 1,000,000 - 15,500,000 Vested and Exercisable - 5,250,000 7,250,000 2,000,000 - - 14,500,000 Balance 1.7.2009 500,000 5,400,000 7,250,000 - 13,150,000 Granted as Compensation(2) 1,500,000 - - - 1,500,000 Net Change Other(3) - (150,000) - - (150,000) Balance 30.6.2010 2,000,000 5,250,000 7,250,000 - 14,500,000 Vested and Exercisable 2,000,000 5,250,000 7,250,000 - 14,500,000 Unvested - - - - 1,000,000 - 1,000,000 Unvested - - - - - Mr a Dixon aM Mr S Willis Dr M Hagan Mr i paton Mr M Gracey Mr M clements 2010 Mr i paton Mr S Willis Dr M Hagan Mr M clements note: (1) on 29 March 2011, the company issued a total of 1,000,000 unlisted options as part of an incentive component of an employment agreement for the senior executive role of legal and commercial Manager, Mr M Gracey. the options have been issued in different tranches and 50% have an exercise price of 22.5c and the balance have an exercise price of 27.5c. all options expire on 30 June 2013 if not exercised before. the options are non-transferrable and cannot be exercised until such time as employment periods of 12 and 18 months have been served. provision also exists for immediate lapse in the event employment is terminated for fraud or wilful misconduct. (2) issued on 3 December 2009 following shareholder approval. (3) expired without exercise on 14 May 2010. annual financial report 2011 47 5. KEY MANAGEMENT PERSONNEL COMPENSATION (continued) (iii) Share holdings the number of shares in the company held during the financial year by Key Management personnel of the Group are set out below. there were no shares granted during the reporting period as compensation. 2011 Balance held nominally at 30.6.2011 36,000 8,270,864 2,166,456 1,000,000 10,000 420,000 11,903,320 Balance 1.7.2010 Options Exercised Granted as Compensation(iii) Net Change Other Balance 30.6.2011 Mr a Dixon aM(i) Mr S Willis Dr M Hagan Mr i paton Mr M Gracey(ii) Mr M clements 2010 - 6,800,000 1,650,000 - - 50,000 8,500,000 - - - - - - - - 345,864 376,456 - - - 722,320 36,000 1,125,000 140,000 1,000,000 10,000 370,000 2,681,000 Balance 1.7.2009 Options Exercised Net Change Other Balance 30.6.2010 Mr i paton Mr S Willis Dr M Hagan Mr M clements note. - 5,920,000 1,650,000 50,000 7,620,000 - - - - - - 880,000 - - 880,000 - 6,800,000 1,650,000 50,000 8,500,000 36,000 8,270,864 2,166,456 1,000,000 10,000 420,000 11,903,320 Balance held nominally at 30.6.2010 - 6,800,000 1,650,000 50,000 8,500,000 (i) Mr Dixon aM was appointed as chairman on 1 May 2011 and held 36,000 fully paid ordinary shares at the time of his appointment. (ii) Mr Gracey was appointed as commercial and legal Manager on 1 february 2011 and held 10,000 fully paid ordinary shares at the time of his appointment. (iii) on 4 January 2011, the company allotted and issued a total of 722,320 fully paid ordinary shares (Shares) to Managing Director, Mr Sam Willis and technical Director, Dr Mark Hagan, under the employee Share plan (Share plan) as approved by shareholders on 26 november 2010. new Standard has granted Mr Willis and Dr Hagan an interest free limited recourse loan for the full amount to purchase these Shares on the terms set out in the Share plan as summarised in the notice of annual General Meeting dated 25 october 2010 (Loan). the loan is repayable in full by 31 December 2013 (Loan Repayment Date). as set out in the Share plan, all or part of the loan may be repaid prior to the loan repayment Date. the issued Shares are subject to certain restrictions, including restrictions on transfer until the loan is repaid in full. in addition, the loan must be repaid early in certain circumstances as set out in the Share plan. (c) Other transactions with key management personnel other than above there have been no transactions with related parties during the year other than loans between subsidiaries. 48 neW StanDarD enerGy liMiteD 6. AUDITORS REMUNERATION auditor of the parent entity – (a) Audit Services BDo audit (Wa) pty ltd 7. TRADE AND OTHER RECEIVABLES Current Goods and services tax recoverable prepayments other CONSOLIDATED ENTITY 2011 $ 36,257 36,257 2010 $ 35,419 35,419 CONSOLIDATED ENTITY 2011 $ 51,978 508,520 90,957 651,455 2010 $ - 400,269 8,489 408,758 the average credit period on trade and other receivables is 30 days. no interest is charged on prepayments and receivables. the consolidated entity has financial risk management policies in place to ensure that all receivables are received within the credit timeframe. Due to the short term nature of these receivables, their carrying value is assumed to be approximately their fair value. none of the receivables are past due or impaired. refer to note 22 for the Group’s risk management objectives and policies. refer note 5(b) for details regarding loans receivable to related parties which are in accordance with the company’s employee Share plan. 8. AVAILABLE FOR SALE FINANCIAL ASSETS Listed Securities equity Securities CONSOLIDATED ENTITY 2011 $ 2010 $ 9,825,000 6,660,000 on 10 May 2011, the company sold 3 million Buru energy limited (aSX: Bru) shares at $0.67 per share to realise a gain of $1,491,960. the remaining holding as at 30 June 2011 is 15 million Bru shares. the fair value of available for sale securities is based on quoted market price at the end of the reporting period. the quoted market price used for available for sale financial assets held by the Group is the current bid price which as at 30 June 2011 was $0.655 (30 June 2010: $0.37). refer to note 22 for the Group’s risk management objectives and policies. annual financial report 2011 49 9. EXPLORATION AND EVALUATION EXPENDITURE CONSOLIDATED ENTITY Movement in Exploration and Evaluation Expenditure Balance at beginning of the year acquisition /(disposal) of exploration expenditure from business combination expenditure incurred expenditure impaired; lanagan 2 coal & tungsten permits expenditure recovered(1) expenditure transferred to development assets Balance at end of the year Note 2011 $ 11,042,652 - 4,329,001 (661) - (300,000) (2,577,255) 2010 $ 8,120,114 (410,957) 4,200,328 - (866,833) - - 12,493,737 11,042,652 (1) on 17 March 2011 the company announced that it had entered into a farm-in agreement with Green rock energy ltd (Green rock; aSX code: GrK). GrK has agreed to partner new Standard in ep417 by paying $750,000 in back costs and contributing 27.5% of the costs of drilling, coring, fracture stimulation, flow testing and planned completion of the lawford #1 well located on ep417. in return Green rock will earn a 15% per cent interest in ep417. Green rock has also committed to fund 22.5% of the costs of a second (but yet to be agreed) well to earn an additional 5% in ep417. at 30 June 2011 a total of $300,000 had been received pursuant to this agreement. the exploration expenditure incurred during the year largely relates to the company’s oil and gas permits and working interest in the colorado county project. the Board assesses impairment of all exploration expenditure at each reporting date by evaluating the conditions specific to the company and to the particular asset that may lead to impairment. these include if substantive expenditure has been incurred on exploration and evaluation of resources and this has not led to the discovery of commercial viable quantities of resources or sufficient data exists to indicate that the carrying amount of the exploration and evaluation asset is unlikely to be recovered in full from successful development or by sale. the ultimate recoupment of exploration expenditure carried forward is dependent on successful development and exploitation, or alternatively sale, of the respective area of interest. 10. DEVELOPMENT ASSETS Development Assets at cost accumulated amortisation net carrying value CONSOLIDATED ENTITY 2011 $ 2,467,248 - 2,467,248 2010 $ - - - 50 neW StanDarD enerGy liMiteD 10. DEVELOPMENT ASSETS (continued) Tangible Costs $ Intangible Costs $ Prepaid Drilling, Completion and Lease Acquisition Costs $ Development Assets 2011 Cost at 1 July 2010 transfer from exploration projects additions impairment revenue offset foreign exchange movement at 30 June 2011 Provision for future restoration costs at 1 July 2010 Disposals at 30 June 2011 Accumulated amortisation at 1 July 2010 charge for the year Disposals foreign exchange movement at 30 June 2011 Net carrying value at 1 July 2010 at 30 June 2011 - 796,173 - - - - 796,173 - - - - - - - - - 1,781,082 1,352,402 - (1,462,409) - 1,671,075 - - - - - - - - - 796,173 - 1,671,075 - - - - - - - - - - - - - - - - - Total $ - 2,577,255 1,352,402 - (1,462,409) - 2,467,248 - - - - - - - - - 2,467,248 the ultimate recoupment of development assets carried forward is dependent on successful development and exploitation, or alternatively sale, of the respective area of interest. 11. PROPERTY, PLANT AND EQUIPMENT property, plant and equipment accumulated depreciation net book amount Year ended 30 June 2011 opening net book amount additions Disposals Depreciation expense closing net book amount Year ended 30 June 2010 opening net book amount additions Depreciation expense CONSOLIDATED ENTITY 2011 $ 226,628 (114,897) 2010 $ 204,203 (101,214) 111,731 102,989 Furniture and equipment $ 63,462 30,248 - (34,065) 59,645 Furniture and equipment $ 52,358 37,279 (26,175) Motor Vehicles $ 14,959 39,541 - (6,165) 48,335 Motor Vehicles $ 18,967 - (4,008) Leasehold Improvements $ 24,568 4,400 (19,164) (6,053) 3,751 Leasehold Improvements $ 33,216 - (8,648) Total $ 102,989 74,189 (19,164) (46,283) 111,731 Total $ 104,541 37,279 (38,831) 102,989 51 closing net book amount 63,462 14,959 24,568 annual financial report 2011 12. OTHER NON-CURRENT ASSETS loans receivable from related parties Directors other Key Management personnel CONSOLIDATED ENTITY 2011 $ 303,376 25,000 328,376 2010 $ - - - non-recourse loans were issued or accrued relating to the issue of shares following achievement of lti for the years ended 30 June 2010 which were issued on 4 January 2011 and 30 June 2011 which are to be issued subject to shareholder approval. in the event shareholder approval is not granted this amount would reduce by $144,000. 13. TRADE AND OTHER PAYABLES Current trade payables finance lease-vehicle Sundry payables and accrued expenses CONSOLIDATED ENTITY 2011 $ 505,540 13,656 543,277 2010 $ 436,209 - - 1,062,473 436,209 the average credit period on purchases is 30 days. no interest is charged on the trade payables. the consolidated entity has financial risk management policies in place to ensure that all payables are paid within the credit time frame. refer to note 22 for the Group’s risk management objectives and policies. 14. OTHER NON-CURRENT LIABILITIES Borrowings finance lease-vehicle CONSOLIDATED ENTITY 2011 $ 26,172 26,172 2010 $ - - a finance lease was taken out on the purchase of a vehicle on 18 June 2011. the finance lease has been separated into current and non-current liabilities as required by aaSB117. 52 neW StanDarD enerGy liMiteD 15. ISSUED CAPITAL 198,975,169 fully paid ordinary shares (2010: 143,028,723) (a) Fully paid ordinary shares 2010 Balance at beginning of financial year 14 May 2010 – exercise of 1,485,714 $0.20 options less: issue costs Balance at end of financial year 2011 Balance at beginning of financial year on 30 July 2010, issue of shares pursuant to tranche 1 of a placement on 2 September 2010, fully paid ordinary shares issued pursuant to a Share purchase plan on 8 September 2010, issue of shares pursuant to tranche 2 of a placement on 4 January 2011, issue of shares pursuant to employee share plan on 3 June 2011, issue of shares following the exercise of 3,600,000 12.5c options and 3,600,000 15c options on 15 June 2011, issue of shares following the exercise of 378,691 12.5c options on 23 June 2011, issue of shares following the exercise of 21,309 12.5c options and 400,000 15c options less: issue costs Balance at end of financial year (b) Terms and Conditions of Issued Capital CONSOLIDATED ENTITY 2011 $ 2010 $ 24,385,896 16,668,616 No. $ 141,543,009 1,485,714 - 16,373,883 297,143 (2,410) 143,028,723 16,668,616 No. $ 143,028,723 16,668,616 13,679,307 16,189,643 17,355,176 722,320 7,200,000 378,691 421,309 - 198,975,169 1,983,500 2,347,500 2,516,500 159,376 990,000 47,336 62,664 (389,596) 24,385,896 ordinary shares participate in dividends and the proceeds on winding up of the parent entity in proportion to the number of shares held. at the shareholders meetings each ordinary share is entitled to one vote when a poll is called, otherwise each shareholder has one vote on a show of hands. (c) Options information on options granted to Directors and promoters/consultants as remuneration during the period including the employee option plan are disclosed in note 26 of the consolidated financial statements. on 22 July 2010, the company announced it had reached an agreement for a $6.5 million capital raising (capital raising) via a $4.5 million two tranche placement of 31.0 million shares at $0.145 per share to institutional and sophisticated investors (placement) together with a fully underwritten $2.0 million Share purchase plan (Spp). euroz Securities acted as lead Manager to the placement and underwriter to the Spp. the placement was made in two tranches: • tranche one comprising the placement of 13,679,307 shares to raise $a2.0 million, was issued under the company’s available 15% capacity, and • tranche two comprising the placement of 17,355,176 shares to raise $a2.5 million, was issued following receipt of shareholder approval at a general meeting held on Monday 6 September, 2010. new Standard directors participated in tranche two of the placement, following shareholder approval at the general meeting. in conjunction with the placement, new Standard offered eligible shareholders the opportunity to acquire additional shares in the company up to a maximum of $15,000 per shareholder under a share purchase plan (Spp). Shares under the Spp were offered at a$0.145 per share, which is the same price offered to the placement participants. as a result of the demand to participate in the Spp, the maximum amount to be raised under the Spp was increased to $2.35 million. applications totally $2.347 million were accepted and 16,189,643 fully paid ordinary shares were allotted and issued. refer to note 22 for the group’s risk management objectives and policies. annual financial report 2011 53 16. RESERVES AND ACCUMULATED LOSSES available for sale financial assets reserve Share based payments reserve foreign currency translation reserve (a) Movements in Available for sale financial assets reserve Balance at beginning of year revaluation of financial assets available for sale Balance at end of year Nature and purpose of reserve the available for sale investments revaluation reserve represents the unrealised gain or loss on the market value of available for sale financial assets (b) Movements in share based payments reserve Balance at the beginning of the year add: issue of options - Directors - - Balance at the end of year promoters/consultants employees Nature and purpose of reserve the share based payments reserve represents the value of options issued to employees, directors and promoters. (c) Movements in foreign currency translation reserve Balance at the beginning of the year unrealised loss on translation of foreign operation Balance at the end of the year CONSOLIDATED ENTITY 2011 $ 7,275,000 1,943,034 (1,817,308) 7,400,726 3,600,000 3,675,000 7,275,000 2010 $ 3,600,000 1,763,489 (309,573) 5,053,916 - 3,600,000 3,600,000 1,763,489 1,298,432 144,000 - 35,545 1,943,034 142,519 322,538 - 1,763,489 (309,573) (1,507,735) (1,817,308) - (309,573) (309,573) Nature and purpose of reserve the foreign currency translation reserve represents the unrealised gain or loss upon translation of subsidiaries with a different functional currency. (d) Accumulated losses Movements in Accumulated Losses Balance at the beginning of the year net profit/(loss) attributable to members of the company Balance at the end of the year CONSOLIDATED ENTITY 2011 $ (2,365,862) (79,081) (2,444,943) 2010 $ (5,664,399) 3,298,537 (2,365,862) 17. DIVIDENDS there have been no dividends paid or proposed in the 2010 or 2011 financial years. 54 neW StanDarD enerGy liMiteD 18. COMMITMENTS FOR EXPENDITURE Exploration Permits and Tenements – Commitments for Expenditure in order to maintain current rights of tenure to australian exploration permits and tenements, the Group’s required to outlay rentals and to meet the minimum expenditure requirements established with the Western australian Department of Mines and petroleum (DMp). Minimum expenditure commitments may be subject to renegotiation and with approval may otherwise be mitigated or reduced by sale, farm out or relinquishment. these work commitments or obligations are not provided for in the accounts but are to be incurred as outlined below: not longer than 1 year longer than 1 year and not longer than 5 years longer than 5 years Australian Exploration Permits CONSOLIDATED ENTITY 2011 $ 17,431,434 44,055,000 - 2010 $ 8,735,000 35,075,000 - 61,486,434 43,810,000 the above commitments reflect approvals from the DMp on 23 September 2011 for applications for Variations to the Work commitment and 12 month Suspension and extension for permit year 3 for ep’s 443, 450, 451 and 456. it is anticipated that expenditure commitments relating to ep 443, 450, 451 and 456 will be met by conocophillips assuming binding agreements are executed that broadly reflect the terms outlined in the Heads of agreement announced on 13 July, 2011. Goldwyer Project on 13 July 2011, the company announced that it had entered into a non-binding Heads of agreement (Heads of agreement) and exclusive negotiating period with conocophillips australia SH4 pty ltd (conocophillips), an affiliate of global energy company conocophillips [nySe:cop]. the Heads of agreement sets the framework for conocophillips to farm-in and jointly explore, new Standard’s flagship Goldwyer project in the canning Basin, Western australia. the project comprises the following permit interests in Western australia’s canning Basin: Granted exploration permits (eps) 443, 450, 451 and 456; and application areas 1/09-0, 2/09-0 and 5/09-0.it also contains an agreed set of core commercial principles which will form the basis for negotiating and completing binding and definitive agreements. these core commercial principles envisage conocophillips funding up to uS$109.5M over four phases of unconventional hydrocarbon exploration work, including the drilling, coring and evaluation of multiple wells. in return for funding the phased work program conocophillips will have the right to earn up to a 75% working interest in the Goldwyer project which would reduce new Standard’s working interest from 100% to 25%. conocophillips must complete all four phases of work to earn and retain the 75% working interest. in the event that conocophillips elects not to complete all four proposed phases of work a 100% operated working interest in the Goldwyer project will revert to new Standard. conocophillips will also make an upfront payment of a$1M to new Standard in consideration of prior costs. the phased nature of the exploration program provides for initial drilling, coring and evaluation of multiple wells to be undertaken following which conocophillips will be required to decide if it wishes to proceed with further exploration, appraisal and pilot development work in subsequent phases. this structure provides conocophillips with the option to withdraw at the completion of each phase of work on the basis that any working interest (or associated rights) is returned to new Standard. the timing of the proposed work programs will be consistent with permit and work commitment revisions to be sought and agreed with the government. new Standard envisages that phase 1 work would be carried out in 2012 assuming binding agreements are successfully executed. the Heads of agreement contemplates that new Standard will remain as operator, although conocophillips would have the right to assume operatorship of the Goldwyer project at its election. an integral part of the proposed farm-in arrangement is the proposed provision of technical support by conocophillips to new Standard to enhance the operating arrangement. new Standard believes that conocophillips’ participation will inject invaluable and world class technical knowledge and resources to ensure the Goldwyer project is explored and appraised in conjunction with a world leader in global shale plays. annual financial report 2011 55 18. COMMITMENTS FOR EXPENDITURE (continued) Both parties have committed to an exclusive period to negotiate the proposed transaction with a target of executing binding agreements as soon as possible, but no later than 30 September 2011. the binding agreements will also be subject to any outstanding government approvals. as at the date of this report negotiations are continuing between nSe and conocophillips. new Standard has agreed to notify conocophillips of any approaches in relation to its interest in the Goldwyer project during this exclusivity period, and to provide conocophillips with a right to match any offers that relate to new Standard’s interest in the Goldwyer project. Should binding agreements be executed with conocophillips, success fees will be payable to euroz limited for up to 3.5% of the value of conocophillips’ funding. timing of payments to euroz limited will be aligned with the provision of funding from conocophillips. US Exploration Permits united States oil and gas exploration working interests do not have minimum expenditure requirements and due to the expenditure being largely discretionary there are no amounts included in the above table. Leases the company entered into a 3 year operating lease agreement effective 1 february 2011 for the corporate head offices at level 3, 33 richardson Street, West perth. the lease obligation is not provided for in the consolidated Statement of financial position but is to be incurred as outlined below: not longer than 1 year longer than 1 year and not longer than 5 years longer than 5 years CONSOLIDATED ENTITY 2011 $ 109,160 181,270 - 290,430 2010 $ - - - - 19. SEGMENT REPORTING the segment information provided to the Managing Director for the reportable segments for the year ended 30 June 2011 are as follows: Segment Results 30 June 2011 total Segment revenues profit Before tax total Segment assets total Segment liabilities Segment Results 30 June 2010 total Segment revenues loss Before tax total Segment assets total Segment liabilities Australia Oil and Gas Exploration $ - - 7,172,978 (359,175) Australia Oil and Gas Exploration $ - Tungsten $ - (4,200) United States Oil and Gas Exploration $ - - - - 7,803,726 (326,062) Tungsten $ - (43,107) (867,585) 4,843,215 (74,115) - - United States Oil and Gas Exploration $ 4,713 (76,454) 6,199,437 (173,018) Total $ - (4,200) 14,976,704 (685,237) Total $ 4,713 (987,146) 11,042,652 (247,133) 56 neW StanDarD enerGy liMiteD 19. SEGMENT REPORTING (continued) Australia - Oil and Gas Exploration canning Basin comprises of exploration associated with the Group’s interests in oil and gas permits in the canning Basin including ep 417, 443, 450, 451 & 456. carnarvon Basin comprises of exploration associated with the Group’s interests in oil and gas permits in the carnarvon Basin namely in the Merlinleigh project (Stp-epa-0014 and Stp-epa-0015). United States - Oil and Gas Exploration colorado country comprises of exploration expenditure associated with the Group’s working interest in oil and gas projects in the colorado county project in texas, u.S.a. including the Heintschel #1, Heintschel #2, D truchard #1 and Joann #1 wells. Wharton county comprises of exploration expenditure associated with the Group’s interests in oil and gas in the Wharton county project in texas, u.S.a. Moeller comprises of exploration expenditure associated with the Group’s interest in oil and gas in the Moeller #1 well. Tungsten tungsten comprises of exploration expenditure associated with the Group’s interest in the tungsten projects in australia. the Managing Director assesses the performance of the operating segments based on the results of its exploration activities. (a) Other segment information (i) Segment revenue Sales between segments are carried out at arm’s length and are eliminated on consolidation. the revenue from external parties reported to the Managing Director is measured in a manner consistent with that in the statement of comprehensive income. revenues from external customers are derived from the sale of gas. However these are minimal and therefore there are no major customers to report. Segmented revenue reconciles to total revenue from continuing operations as follows: Total Segment Revenue interest revenue other income Total revenue from continuing operations (note 2) CONSOLIDATED ENTITY 2011 $ - 179,353 - 179,353 2010 $ 4,713 211,731 - 216,444 a reconciliation of adjusted segment loss to profit/loss before income tax from continuing operations is provided as follows: CONSOLIDATED ENTITY Adjusted Segment Profit/(loss) (Loss) per above segments intersegment eliminations interest Gain on sale of nSex, net of transaction costs Gain on sale of financial assets Gain on sale of subsidiary Share based payments forgiveness of nSe loan other non-segment and corporate 2011 $ (4,200) 2,218 179,353 - 1,491,960 33,226 (10,546) - (1,771,092) 2010 $ (987,145) 1,889,179 211,731 5,652,156 - - (465,057) (242,493) (2,759,834) Profit/(loss) before income tax from continuing operations (79,081) 3,298,537 annual financial report 2011 57 19. SEGMENT REPORTING (continued) (ii) Segment assets the amounts provided to the Managing Director with respect to total assets are measured in a manner consistent with that of the financial statements. these assets are allocated based on the operations of the segment and the physical location of the asset. investment in shares (classified as available-for-sale financial assets) held by the Group are not considered to be segment assets but rather managed by the corporate office. reportable segment assets are reconciled to total assets as follows: Segment Assets unallocated: available-for-sale financial assets cash other non-segment and corporate CONSOLIDATED ENTITY 2011 $ 2010 $ 14,976,704 11,042,652 9,825,000 4,552,777 1,075,843 6,660,000 1,578,480 511,747 Total assets as per the statement of financial position 30,430,324 19,792,879 (iii) Segment liabilities the amounts provided to the Managing Director with respect to total liabilities are measured in a manner consistent with that of the financial statements. these liabilities are allocated based on the operations of the segment. reportable segment liabilities are reconciled to total liabilities as follows: Segment Liabilities unallocated: other non-segment and corporate Total liabilities as per the statement of financial position CONSOLIDATED ENTITY 2011 $ 685,237 403,408 1,088,645 2010 $ 247,133 189,076 436,209 20. RELATED PARTY DISCLOSURES (a) Key Management Personnel Compensation Disclosures relating to Key Management personnel are set out at note 5. (b) Transactions with related parties loans other than loans to subsidiary companies, there have been no additional transactions with related parties. Transactions with Related Parties Share based payments(i) option issue(ii) note: CONSOLIDATED ENTITY 2011 $ 328,376 10,546 338,922 2010 $ - 140,597 140,597 (i) on 4 January 2011, the company issued 722,320 fully paid ordinary shares for a value of $159,676 to Mr Willis and Dr Hagan pursuant to the employee Share plan as approved by shareholders at the annual General Meeting held 26 november 2010. Mr Willis and Dr Hagan’s lti component of their executive consultancy agreements have been achieved for the year ended 30 June 2011. as a result, resolutions will be put before shareholders at the 2011 annual General Meeting to seek approvals for the issue of fully paid ordinary shares with a value of $72,000 for Mr Willis and $72,000 for Dr Hagan in accordance with the terms of the employee Share Scheme. Mr Gracey’s lti component of his employment contract has been achieved for the year ended 30 June 2011. as a result, subsequent to year end Mr Gracey is entitled to enter into a loan agreement with the company in accordance with the terms of the employee Share Scheme for shares to the value of $25,000. (ii) on 29 March 2011, the company issued 500,000 unlisted $0.225 options exercisable on or before 30 June 2013 and 500,000 unlisted $0.275 options exercisable on or before 30 June 2013 to Mr Gracey as part of an incentive component of an employment agreement in his role of legal and commercial Manager. 58 neW StanDarD enerGy liMiteD 21. NOTES TO THE CASH FLOW STATEMENTS (a) Reconciliation of Cash and Cash Equivalents for the purposes of the statement of cash flows, cash includes cash on hand and in banks and investments in money market instruments, net of outstanding bank overdrafts. cash at the end of the financial year as shown in the cash flow statements are reconciled to the related items in the statement of financial position as follows: cash and cash equivalents (b) Reconciliation of Net Profit / (Loss) After Tax to Net Cash Flows From Operating Activities CONSOLIDATED ENTITY 2011 $ 2010 $ 4,552,777 1,578,480 profit / (loss) after income tax (79,081) 3,298,537 non-cash expenditure: Share based payments Gain on sale of subsidiary, net of transaction costs Gain on sale of financial assets loss on sale of fixed assets impairment of exploration expenditure Depreciation unrealised foreign exchange gain forgiveness of nSex loan changes in net assets and liabilities, net of effects from acquisition and disposal of businesses: (increase)/decrease in assets: receivables other current assets increase/(decrease) in liabilities: current payables 10,546 (33,226) (1,491,960) 19,164 661 46,283 - - 465,057 (5,652,156) - - 866,833 38,831 (19,843) 242,493 (15,925) (45,708) 2,500 2,503 513,877 128,932 net cash used in operating activities (1,075,369) (626,313) (c) Non-cash Financing and Investing Activities 2011 there were no non-cash financing and investing activities during the year. 2010 on 3 December 2009, 4,000,000 $0.125 options exercisable at $0.125 and expiring 30 June 2011 and 4,000,000 $0.15 options exercisable at $0.15 and expiring 30 June 2011 were issued to a consultant as part remuneration for marketing services. other than this transaction, there were no other non-cash financing and investing activities during the year. annual financial report 2011 59 22. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES the Group’s principal financial instruments comprise cash and cash equivalents and also includes available for sale financial assets and payables. the main purpose of these financial instruments is to finance the Group’s operations. the Group has various other financial assets and liabilities such as receivables and trade payables, which arise directly from its operations. it is, and has been throughout the entire period, the Group’s policy is that no trading in financial instruments shall be undertaken. the main risks arising from the consolidated entity’s financial instruments are currency risk, credit risk, price risk, liquidity risk and cash flow interest rate risk. the Board reviews and agrees policies for managing each of these risks. (a) cash flow interest rate risk the Group’s exposure to the risks of changes in market interest rates relates primarily to the Group’s short-term deposits with a floating interest rate. these financial assets with variable rates expose the consolidated entity to cash flow interest rate risk. all other financial assets and liabilities in the form of receivables and payables are non-interest bearing. the Group does not engage in any hedging or derivative transactions to manage interest rate risk. the following tables set out the carrying amount of the Group’s exposure to interest rate risk and the effective weighted average interest rate for each class of these financial instruments. the Group has not entered into any hedging activities to cover interest rate risk. in regard to its interest rate risk, the Group continuously analyses its exposure. Within this analysis consideration is given to potential renewals of existing positions, alternative investments and the mix of fixed and variable interest rates. a sensitivity analysis has not been disclosed in relation to variable rate instruments for Group as the results are immaterial to the statement of comprehensive income. financial assets cash at Bank Total CONSOLIDATED ENTITY Note Float Interest Rate Total Carrying Amount 21 (a) 2011 $ 4,552,777 4,552,777 2010 $ 1,578,480 1,578,480 2011 $ 4,552,777 4,552,777 2010 $ 1,578,480 1,578,480 Weighted average interest rate 4.86% 4.53% (b) liquidity risk prudent liquidity risk management implies maintaining sufficient cash to ensure the ability to meet debt requirements. the Group manages liquidity risk by continuously monitoring forecast and actual cash flows. the Group aims at maintaining flexibility in funding by having in place operational plans to source further capital as required. all trade payables are contractually due within 30 days. liquidity risk is measured using liquidity ratios such as working capital as follows: current assets current liabilities Surplus (c) currency risk CONSOLIDATED ENTITY 2011 $ 15,029,232 (1,062,473) 2010 $ 8,647,238 (436,209) 13,966,759 8,211,029 the Group has operations located in the united States where both revenues and expenditures are recorded. the statement of financial position can be affected by movements in the uSD/auD exchange rates upon translation of the uS operations into auD. foreign exchange risk arises from commercial transactions and recognised assets and liabilities denominated in a currency that is not the Group’s functional currency. this risk arises as at times the Group is exposed to purchasing goods and services denominated in uS dollars, which is unavoidable due to the nature of the working interest acquired in the uS oil and gas permits. 60 neW StanDarD enerGy liMiteD 22. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES (continued) the Group has a wholly owned subsidiary incorporated in Delaware which operates in the united States and this entity will continue to pay for services and costs associated with exploration in the united States in uS dollars and also anticipates receiving income in uS dollars over time. if the cross rates between the uS dollar and the australian dollar move the consolidated entity is exposed to corresponding foreign exchange gains or losses depending upon the direction of the movement. at present no currency hedging is undertaken and no sensitivity analysis has been performed as the company has deemed it will not have a material impact on the consolidated financial Statements as at 30 June 2011. (d) fair Value the fair value of available for sale securities is based on quoted market price at the end of the reporting period. the quoted market price used for available for sale financial assets held by the Group is the current bid price. the following tables classify financial instruments recognised in the statement of financial positions of the Group, according to the hierarchy stipulated in aaSB 7 as follows: level 1 – the instrument has quoted prices (unadjusted) in active markets for identical assets or liabilities; level 2 – a valuation technique is used using other than quoted prices within level 1 that are observable for the financial instrument either directly (i.e. as prices) or indirectly (i.e. derived from prices); or level 3 – a valuation technique is used using inputs that are not based on observable market data (unobservable inputs). comparative information has not been provided as permitted by the transitional provisions of the new rules. 2011 available for sale financial assets listed equity securities 2010 available for sale financial assets listed equity securities CONSOLIDATED ENTITY Level 1 $ Level 2 $ Level 3 $ Total $ 9,825,000 - - 9,825,000 Level 1 $ Level 2 $ Level 3 $ Total $ 6,660,000 - - 6,660,000 the fair value of financial instruments traded in active markets is based upon quoted market price at the end of the reporting period. the quoted market price is the quoted bid prices which are included in level 1. (e) credit risk credit risk is the potential that the Group will suffer a financial loss due to the unwillingness or inability of counterparty to fully meet their contractual debts and obligations. credit risk arises from potential trading activities and holding cash. the carrying amount of financial assets represents the maximum credit exposure. the Group trades only with recognised, credit worthy third parties and has apportioned cash reserves amongst several financial institutions. the credit quality of financial assets that are neither past due nor impaired can be assessed by reference to external credit ratings: cash at Bank and short term bank deposits (aa) cash at Bank and short term bank deposits (a+) cash at Bank and short term bank deposits (a-1) total annual financial report 2011 CONSOLIDATED ENTITY 2011 $ 3,366,211 1,000,000 186,566 4,552,777 2010 $ 1,289,021 289,459 - 1,578,480 61 22. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES (continued) (f) price risk the Group is exposed to equity securities price risk. this arises from investments held by the Group and classified on the Statement of financial position as available-for-sale financial assets. the Group has no formal policies with respect the managing the price risk with respect to this investment. the assessed volatility rate is 102% for the year. the table below summarises the impact of increases/decreases in the investment using volatility rate of 102%. CONSOLIDATED ENTITY Impact on Pre-Tax Profit 2011 Impact on Other Components of Equity Increase $ - Decrease $ Increase $ Decrease $ - 6,793,200 (6,660,000) (g) capital risk Management the Group manages capital to ensure that the Group will be able to continue as a going concern. in order to maintain or adjust the capital structure, the Group may issue new shares. the Group defines capital as equity and net debt. the Group defines net debt as total borrowings less cash and equity as the sum of share capital, reserves and retained earnings (or accumulated losses) as disclosed in the statement of financial position. the Board of Directors monitors capital on an ad-hoc basis by reviewing its future operating cashflows to ensure it maintains an appropriate amount of capital to be able to meet its exploration programs. no formal targets are in place for return on capital, or gearing ratios as the Group has not derived any income from their mineral exploration and currently has no debt facilities in place. equity net cash/(Debt) Surplus 23. EARNINGS/(LOSS) PER SHARE Basic earnings/(loss) per share Diluted earnings/(loss) per share the earnings and weighted average number of ordinary shares used in the calculation of basic and diluted earnings per share are as follows: profit/(loss) for the year Weighted average number of ordinary shares used in the calculation of basic epS CONSOLIDATED ENTITY 2011 $ 29,341,679 4,512,949 2010 $ 19,356,670 1,578,480 33,854,628 20,935,150 2011 Cents Per Share (0.04) (0.04) 2010 Cents Per Share 2.34 1.91 $ $ (79,081) 3,298,537 2011 No. 2010 No. 183,865,943 140,934,319 Weighted average number of ordinary shares used in the calculation of diluted epS 207,165,314 172,528,018 62 neW StanDarD enerGy liMiteD 24. INTERESTS IN JOINT VENTURE OPERATIONS the consolidated entity has an interest in the following joint ventures as at 30 June 2011 whose principal activities were oil and gas exploration. Permit ep417 2011 Interest 65% Operator new Standard onshore pty ltd the consolidated entity’s interest in assets / liabilities venture operations are detailed below. the amounts are included in the financial statements under their respective categories. Current Assets cash and cash equivalents other current assets Total current assets Non-current assets exploration expenditure Total non-current assets CONSOLIDATED ENTITY 2011 $ 2010 $ 11,952 57,563 69,515 3,241,587 3,241,587 11,609 20,013 31,622 3,171,963 3,171,963 Share of total assets of joint venture operations 3,311,102 3,203,585 Income operations overhead recovered interest other income Total Income Share of net income from joint venture operations - - 250 250 250 Details of joint venture agreements entered into during the year are provided in the review of operations. 25. SUBSIDIARIES Name of Entity Parent Entity Country of Incorporation new Standard energy limited australia Subsidiaries tungsten australia pty ltd(1) new Standard onshore pty ltd new Standard energy inc note: (1) Disposal of Subsidiary australia australia Delaware, uSa Ownership Interest 2011 % - 100 100 - - - - - 2010 % 100 100 100 on 28 february 2011, new Standard sold its wholly owned subsidiary, tungsten australia pty ltd for cash consideration of $40,727. annual financial report 2011 63 25. SUBSIDIARIES (continued) Effect of disposal on the financial position of the Group: CONSOLIDATED ENTITY exploration and evaluation expenditure trade and other receivables cash and cash equivalents Deferred tax liabilities trade and other payables Net assets consideration received, satisfied in cash, net of transaction costs cash and cash equivalents disposed of Net cash inflow 26. SHARE BASED PAYMENTS Employee Share Scheme 2011 $ - 392 10,744 - (3,000) 8,136 40,727 (10,744) 29,983 outlined below is a summary of the key terms of the company’s employee Share plan. a) Eligibility: participants in the plan may be Directors, full-time and part-time employees of the company or any of its subsidiaries (participants). b) Administration of Plan: the Board is responsible for the operation of the plan and has a broad discretion to determine which participants will be offered Shares under the plan. c) Number of Shares offered: the Board determines the number of Shares offered to participants in the plan having regard to: (i) the seniority of the participant and the position the participant occupies with the company or any Subsidiary; (ii) the length of service of the participant with the company and its Subsidiaries; (iii) the record of employment of the participant with the company and its Subsidiaries; (iv) the potential contribution of the participant to the growth and profitability of the company and its Subsidiaries; and (v) any other matters which the Board considers relevant. d) Offer: the Board may issue an offer to a participant to participate in the plan. the offer: (i) will invite application for the number of Shares specified in the offer; (ii) will specify the issue price for the Shares; (iii) may invite applications for a loan up to the amount payable in respect of the Shares accepted by the participant in accordance with the offer; (iv) will specify any restriction conditions applying to the Shares; (v) will specify an acceptance period; and (vi) specify any other terms and conditions attaching to the Shares. e) Issue price: the issue price of each Share will be not less the volume weighted average price at which Shares were traded on the aSX over the 5 trading days up to and including the trading day before the date of the offer. f) Restriction Conditions: Shares may be subject to restriction conditions (such as a period of employment) which must be satisfied before the Shares can be sold, transferred, or encumbered. Shares cannot be sold, transferred or encumbered until any loan in relation to the Shares has been repaid or otherwise discharged under the plan. g) Loan: a participant who is invited to subscribe for Shares may also be invited to apply for a loan up to the amount payable in respect of the Shares accepted by the participant (loan), on the following terms: (i) the loan will be interest free; (ii) the loan made available to a participant shall be applied by the company directly toward payment of the issue price of the Shares; (iii) the loan repayment date and the manner for making such payments shall be determined by the Board and set out in the offer; 64 neW StanDarD enerGy liMiteD 26. SHARE BASED PAYMENTS (continued) (iv) a participant must repay the loan in full by the loan repayment date but may elect to repay the loan amount in respect of any or all of the Shares at any time prior to the loan repayment date; (v) the company shall have a lien over the Shares in respect of which a loan is outstanding and the company shall be entitled to sell those Shares in accordance with the terms of the plan; and (vi) a loan will be non recourse except against the Shares held by the participant to which the loan relates. h) Unsatisfied Restriction Condition: Where a restriction condition in relation to Shares is not satisfied by the due date, or becomes incapable of satisfaction in the opinion of the Board, the company must, unless the restriction condition is waived by the Board: (i) arrange to sell the Shares as soon as reasonably practicable either on the aSX or to an investor who falls within an exemption under Section 708 of the corporations act provided that the sale must be at a price that is no less than 80% of the volume weighted average price at which Shares were traded on the aSX on the 10 trading days before the sale date; and (ii) apply the sale proceeds (Sale proceeds) in the following priority: a. first, to pay the company any outstanding loan amount (if any) in relation to the Shares and the company’s reasonable costs in selling the Shares; B. second, to the extent the Sale proceeds are sufficient, to repay the participant any cash consideration paid by the participant or loan amount repayments (including any cash dividends applied to the loan amount) made by or on behalf of the participant. the participant acknowledges that the company is not liable to repay the participant any cash consideration or loan amount repayments except to the extent covered by the remaining Sale proceeds; and c. lastly, any remainder to the company to cover its costs of managing the plan. i) Sale of Shares to repay Loan: (i) a loan shall become repayable in full where: a. the participant (or, where the participant is an associate of an eligible employee, the eligible employee) ceases to be an eligible employee for any reason (including death); B. the participant suffers an event of insolvency; c. the participant breaches any condition of the loan or the plan; or D. a restriction condition in relation to Shares subject to the loan is not satisfied by the due date, or becomes incapable of satisfaction in the opinion of the Board (and is not waived). (ii) Where a loan becomes repayable and at that time a restriction condition in relation to Shares subject to the loan is not satisfied, or is incapable of being satisfied in the opinion of the Board (and is not waived), the Shares must be sold and the Sale proceeds applied to repay the loan in accordance to the plan. (iii) Where a loan in relation to Shares becomes repayable and at that time restriction conditions in relation to the Shares have either been satisfied or are waived, the company must give the participant a 30 day period to repay the loan, failing which the company must sell the Shares and apply the Sale proceeds in accordance with the plan. j) Power of Attorney: the participant irrevocably appoints each of the company and each director of the company severally as his or her attorney to do all things necessary to give effect to the sale of the participant’s Shares in accordance with the plan. k) Plan limit: the company must take reasonable steps to ensure that the number of Shares offered by the company under the plan when aggregated with: (i) the number of Shares issued during the previous 5 years under the plan (or any other employee share plan extended only to eligible employees); and (ii) the number of Shares that would be issued if each outstanding offer for Shares (including options to acquire unissued Shares) under any employee incentive scheme of the company were to be exercised or accepted, does not exceed 5% of the total number of Shares on issue at the time of an offer (but disregarding any offer of Shares or option to acquire Shares that can be disregarded in accordance with relevant aSic class orders). l) Restriction on transfer: participants may not sell or otherwise deal with a plan Share until the loan amount in respect of that plan Share has been repaid and any restriction conditions in relation to the Shares have been satisfied or waived. the company is authorised to impose a holding lock on the Shares to implement this restriction. m) Quotation on ASX: the company will apply for each plan Share to be admitted to trading on aSX upon issue of the plan Share. Quotation will be subject to the aSX listing rules and any holding lock applying to the Shares. n) Rights attaching to Shares: each plan Share shall be issued on the same terms and conditions as the company’s issued Shares (other than in respect of transfer restrictions imposed by the plan) and it will rank equally with all other issued Shares from the issue date except for entitlements which have a record date before the issue Date. annual financial report 2011 65 26. SHARE BASED PAYMENTS (continued) if there is a bonus issue to shareholders, the number of shares over which the option is exercisable may be increased by the number of shares which the holder of the option would have received if the option had been exercised before the record date for the bonus issue. in the event that a pro rata issue (except a bonus issue) is made to the holders of the underlying securities in the company, the exercise price of the options may be reduced in accordance with listing rule 6.22. Expenses arising from share-based payment transactions Shares issued to directors options issued to directors options issued to promoters/consultants options issued to key management personnel CONSOLIDATED ENTITY 2011 $ 328,376 - - 10,546 338,922 2010 $ - 140,597 322,538 - 463,135 2011 Grant date Expiry date Exercise price Balance at start of the year Granted during the year Exercised during the year Forfeited during the year Balance at the end of the year Vested and exercisable at end of the year 3 December 2009 30 June 2012 3 December 2009 30 June 2012 3 December 2009 30 June 2011 3 December 2009 30 June 2011 29 March 2011 30 June 2013 29 March 2011 30 June 2013 $ 0.225 0.275 0.125 0.150 0.225 0.275 No. No. 7,250,000 7,250,000 4,000,000 4,000,000 - - - - - - 500,000 500,000 No. - - 4,000,000 4,000,000 - - 22,500,000 1,000,000 8,000,000 Weighted average exercise price 0.21 0.25 0.14 No. No. No. - - - - - - - - 7,250,000 7,250,000 7,250,000 7,250,000 - - 500,000 500,000 - - - - 15,500,000 14,500,000 0.25 0.25 2010 Grant date Expiry date Exercise price Balance at start of the year Granted during the year Exercised during the year Forfeited during the year Balance at the end of the year Vested and exercisable at end of the year No. No. No. No. No. No. 3 December 2009 30 June 2012 3 December 2009 30 June 2012 3 December 2009 30 June 2011 3 December 2009 30 June 2011 $ 0.225 0.275 0.125 0.150 6,750,000 6,750,000 - - 750,000 750,000 4,000,000 4,000,000 13,500,000 9,500,000 Weighted average exercise price 0.25 0.15 - - - - - - (250,000) 7,250,000 7,250,000 (250,000) 7,250,000 7,250,000 - - 4,000,000 4,000,000 4,000,000 4,000,000 (500,000) 22,500,000 22,500,000 0.25 0.21 0.21 the weighted average remaining contractual life of share options outstanding at the end of the year was 1.06 years (2010 – 1.65 years). options granted as part of remuneration have been valued using a Black-Scholes option pricing model, which takes into account various factors including the option exercise price, the current level and volatility of the underlying share price, the risk-free interest rate, expected dividends on the underlying share, current market price of the underlying share and the expected life of the option. the value of the options at grant date issued in the year ended 30 June 2011 was calculated at $0.16 cents per option. the expected volatility has been based on the historic volatility (based upon the life of the option) adjusted for non trading days and any expected changes to future volatility. 66 neW StanDarD enerGy liMiteD 26. SHARE BASED PAYMENTS (continued) 2011 fair value of share options and assumptions for the year ended 30 June 2011: fair value at grant date of $0.225 and $0.275 options Share price exercise price expected volatility (expressed as a weighted average volatility used in the modelling under Black Scholes model) option life (expressed as weighted average life used in the modelling under Black Scholes model) expected dividends risk-free interest rate (based on government bonds) $0.037 – $0.052 $0.160 $0.225 – $0.275 90% 2.25 years 0% 5.75% the fair value of services received in return for share options have been fair valued based upon the fair value of equity securities granted, measured using a Black Scholes model. the fair value of the options issued has been used as the fair value of the services cannot be reliably measured. 2010 fair value of share options and assumptions for the year ended 30 June 2010: fair value at grant date of $0.225 and $0.275 options Share price exercise price expected volatility (expressed as a weighted average volatility used in the modelling under Black Scholes model) option life (expressed as weighted average life used in the modelling under Black Scholes model) expected dividends risk-free interest rate (based on government bonds) fair value at grant date of $0.125 and $0.15 options Share price exercise price expected volatility (expressed as a weighted average volatility used in the modelling under Black Scholes model) option life (expressed as weighted average life used in the modelling under Black Scholes model) expected dividends risk-free interest rate (based on government bonds) $0.058 – $0.062 $0.110 $0.225 – $0.275 120% 2.60 years 0% 5.75% $0.039 - $0.042 $0.086 $0.125 – $0.15 120% 1.61 years 0% 5.75% the fair value of services received in return for share options have been fair valued based upon the fair value of equity securities granted, measured using a Black Scholes model. the fair value of the options issued has been used as the fair value of the services cannot be reliably measured. 27. CONTINGENCIES there were no material contingent liabilities or contingent assets for the company or the Group as at 30 June 2011 or as at the date of the report other than those disclosed at note 18 commitments for expenditure. annual financial report 2011 67 28. PARENT ENTITY INFORMATION the following details information related to the parent entity, new Standard energy limited, as at 30 June 2011. the information presented here has been prepared using consistent accounting policies as presented in note 1. current assets non-current assets Total assets current liabilities non-current liabilities Total liabilities contributed equity accumulated losses reserves Total equity profit/(loss) for the year other comprehensive income for the year total comprehensive income for the year 29. EVENTS AFTER THE REPORTING DATE 2011 $ 29,824,786 99,818 29,924,604 408,016 26,172 434,188 33,545,738 (13,291,876) 9,236,554 29,490,416 (1,320,279) 3,675,000 2,354,721 2010 $ 19,392,650 35,293 19,427,943 189,074 - 189,074 25,531,314 (11,971,596) 5,679,151 19,238,869 2,757,121 3,600,000 6,357,121 on 13 July 2011, the company announced that it had entered into a non-binding Heads of agreement (Heads of agreement) and exclusive negotiating period with conocophillips australia SH4 pty ltd (conocophillips), an affiliate of global energy company conocophillips [nySe:cop]. the Heads of agreement sets the framework for conocophillips to farm-in and jointly explore, new Standard’s flagship Goldwyer project in the canning Basin, Western australia. the project comprises the following permit interests in Western australia’s canning Basin: Granted exploration permits (eps) 443, 450, 451 and 456; and application areas 1/09-0, 2/09-0 and 5/09-0.it also contains an agreed set of core commercial principles which will form the basis for negotiating and completing binding and definitive agreements. these core commercial principles envisage conocophillips funding up to uS$109.5MM over four phases of unconventional hydrocarbon exploration work, including the drilling, coring and evaluation of multiple wells. in return for funding the phased work program conocophillips will have the right to earn up to a 75% working interest in the Goldwyer project which would reduce new Standard’s working interest from 100% to 25%. conocophillips must complete all four phases of work to earn and retain the 75% working interest. in the event that conocophillips elects not to complete all four proposed phases of work a 100% operated working interest in the Goldwyer project will revert to new Standard. conocophillips will also make an upfront payment of a$1M to new Standard in consideration of prior costs. the phased nature of the exploration program provides for initial drilling, coring and evaluation of multiple wells to be undertaken following which conocophillips will be required to decide if it wishes to proceed with further exploration, appraisal and pilot development work in subsequent phases. this structure provides conocophillips with the option to withdraw at the completion of each phase of work on the basis that any working interest (or associated rights) is returned to new Standard. the timing of the proposed work programs will be consistent with permit and work commitment revisions to be sought and agreed with the government. new Standard envisages that phase 1 work would be carried out in 2012 assuming binding agreements are successfully executed. the Heads of agreement contemplates that new Standard will remain as operator, although conocophillips would have the right to assume operatorship of the Goldwyer project at its election. an integral part of the proposed farm-in arrangement is the proposed provision of technical support by conocophillips to new Standard to enhance the operating arrangement. new Standard believes that conocophillips’ participation will inject invaluable and world class technical knowledge and resources to ensure the Goldwyer project is explored and appraised in conjunction with a world leader in global shale plays. Both parties have committed to an exclusive period to negotiate the proposed transaction with a target of executing binding agreements as soon as possible, but no later than 30 September 2011. the binding agreements will also be subject to any outstanding government approvals. new Standard has agreed to notify conocophillips of any approaches in relation to its interest in the Goldwyer project during this exclusivity period, and to provide conocophillips with a right to match any offers that relate to new Standard’s interest in the Goldwyer project. on 20 July 2011 1,000,000 unlisted $0.20 options were exercised raising a total of $200,000. other than the above, there has been no other matter or circumstance that has arisen since the end of the year that requires disclosure. 68 neW StanDarD enerGy liMiteD SHAREHOLDER INFORMATION the shareholder information set out below was applicable as at 30 September 2011. 1. Distribution of Shareholders (a) analysis of number of shareholders by size of holding. Category of Holding 1 – 1,000 1,001 – 5,000 5,001 – 10,000 10,001 – 100,000 100,001 and over Total Holders 77 154 140 680 240 1291 Number of Shares 4,166 507,037 1,254,195 28,451,944 169,757,827 199,975,169 % of capital 0.00% 0.25% 0.63% 14.23% 84.89% 100% (b) there are 89 shareholders with less than a marketable parcel of ordinary shares. 2. Twenty Largest Shareholders the names of the twenty largest shareholders by account holding of quoted ordinary shares are listed below: Shareholder Buru energy ltd Deck chair Holdings pl phoenix properties international pl richard J and S e Harris tc investments pte ltd alan young robert young Mahsor Holdings pl Samuel J c and c M Willis tilpa pl carossa Holdings pl William taylor noM pl Bayrunner pl Jakana pl teston investments pl Xanadu Wa pl Dennis M and a n Deniz Venus Bay pl Sodell investments pl christopher and J S Murphy Total Holding 18,057,930 11,800,000 9,508,453 8,855,000 8,250,000 6,905,252 4,524,081 4,400,000 4,150,000 3,800,000 3,775,000 2,800,000 2,769,000 2,400,000 2,200,000 2,081,752 1,764,000 1,650,000 1,600,000 1,578,069 % 9.03 5.90 4.75 4.43 4.13 3.45 2.26 2.20 2.08 1.90 1.89 1.40 1.38 1.20 1.10 1.04 0.88 0.83 0.80 0.79 102,868,537 51.44 3. Substantial Shareholders as at 30 September 2011, the company has received substantial notices from the following shareholders: Name of Shareholder Buru energy ltd Deck chair Holdings pty ltd No of Shares % of Issued Capital at the Time of Notice 9.71 5.93 13,749,999 11,800,000 Note: The above details may not reconcile to the information in the Twenty Largest Shareholders list as revised substantial shareholders notices had not been received by the Company as at 30 September 2011. 4. Voting Rights at a general meeting of shareholders: (a) on a show of hands, each person who is a member or sole proxy has one vote. (b) on a poll, each shareholder is entitled to one vote for each fully paid share. annual financial report 2011 69 NEW STANDARD ENERGY LIMITED ACN 119 323 385 ANNUAL FINANCIAL REPORT 2011 For the Financial Year Ended 30 June 2011 Level 3 33 Richardson Street WEST PERTH WA 6005 Ph: +61 (8) 9481 7477 Fax: +61 (8) 9486 7670 Web: www.newstandard.com.au NEW STANDARD ENERGY LIMITED ACN 119 323 385 ANNUAL FINANCIAL REPORT For the Financial Year Ended 30 June 2011 

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