New Standard Energy Limited
Annual Report 2017

Plain-text annual report

For personal use onlyCONTENTS Chairman Letter Directors’ Report Director’s Declaration Corporate Governance Statement Auditor’s Independence Declaration Independent Audit Report Consolidated Statement of Profit or Loss and Other Comprehensive Income Consolidated Statement of Financial Position Consolidated Statement of Changes in Equity Consolidated Statement of Cash Flows Notes to the Consolidated Financial Statements Shareholder Information 1 2 16 17 23 24 27 28 29 30 31 54 CORPORATE DIRECTORY BOARD OF DIRECTORS Hui Song Hua Li Ning Han Xiaofeng Liu Dongbo Zhang | Non-Executive Chairman | Managing Director | Non-Executive Director | Non-Executive Director | Non-Executive Director COMPANY SECRETARY Hua Li ASX CODE NSE PLACE OF BUSINESS LEGAL ADVISORS 6 Outram Street West Perth, Western Australia 6005 +61 8 9481 7477 Ph: +61 8 9324 3366 Fax: www.newstandard.com.au Web: Murcia Pestell Hillard Pty Ltd Suite 183, Level 6 , 580 Hay Street Perth, Western Australia 6000 AUDITORS SHARE REGISTRY BDO Audit (WA) Pty Ltd 38 Station Street Subiaco, Western Australia 6008 Computershare Investor Services Pty Ltd Level 11, 172 St Georges Terrace Perth, Western Australia, 6000 For personal use onlyCHAIRMAN’S LETTER Dear Shareholders During the 2016/2017 financial year your Board has maintained focus on resolving legacy issues and reducing costs to stabilise New Standard Energy Limited (New Standard or Company). We are making progress in these areas. To show leadership with regards costs, the directors agreed to forgo all forms of remuneration during the financial year. The Board also made the decision to relinquish two granted exploration permits and withdraw four applications for new permits. We remain very determined to make New Standard a success for shareholders however we must be realistic and acknowledge it will take more time, money and expertise to build a solid platform for the future. We also remain open minded about pursuing new opportunities in the energy sector and other sectors if the proposal adds value for shareholders. There are however two important issues that need to be resolved if New Standard is to ‘go forward’ in the future. Both issues are contained within wholly owned subsidiary company New Standard Onshore Pty Ltd (NSO). NSO is the registered holder of the exploration permits EP481 and EP 482 in the Canning Basin. Prior to the involvement of the current Board, NSO drilled several exploration wells testing oil and gas targets as part of the Goldwyer Joint Venture. Areas disturbed by the exploration activities must be rehabilitated. Representatives of NSO are in communication with the Department of Mines and Petroleum to vary the current work programs and meet rehabilitation obligations. NSO is also the defendant in proceedings initiated in the Supreme Court of Western Australia in 2013. The plaintiff went into liquidation in May 2016 and in May 2017 the liquidators brought the matter back before the Court. The claim relates to alleged breaches of a contract between NSO and the plaintiff for the supply, installation, rental and catering of a camp for the Goldwyer Joint Venture and a related alleged demobilisation agreement. NSO will defend the claim and considers them to be without merit. The matter is expected to be listed for trial in 2017. During the year the Board of New Standard has been completely refreshed. Messrs Arthur Dixon, Phil Thick and Sam Willis resigned as directors during the 1st Quarter of the 2016/2017 financial year. Around the same time Mr Song Hui was appointed Chairman of the Board, Mr (Bruce) Li Hua was appointed Managing Director and Mr Zhang Dongbo was appointed Non- Executive Director. In November 2016, New Standard completed a non-renounceable rights issued that raised $0.96M to provide working capital, fund exploration and review new opportunities. More than 80% of these funds were contributed by major shareholder China International Economic Hui Zhou Energy Investment (Beijing) Co., Ltd and we thank them for their valuable support. I thank all involved for their considerable and tireless efforts through another very trying twelve-month period and we look forward to continuing to pursue opportunities to rebuild the company and rebuild shareholder value. Yours sincerely Hui Song Non-Executive Chairman NEW STANDARD ENERGY LTD 2017 ANNUAL REPORT | 1 For personal use only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 2017. OPERATIONAL AND FINANCIAL REVIEW PROJECTS WESTERN AUSTRALIA PROJECTS New Standard has retained 100% of EP481 and EP482 and relinquished EP451 and EP456, all of which are located in the Canning Basin. New Standard has continued discussion with the Department of Mines and Petroleum (DMP) and the Company over the remaining two permits to agree variations and extensions to existing work programs to make the activity and expenditure more achievable. During the year, New Standard withdrew four applications for new permits within the Canning Basin. CORPORATE & FINANCE In November 2016, New Standard completed a non-renounceable rights issued that raised $0.96M to provide working capital, fund exploration and review new opportunities. More than 80% of these funds were contributed by major shareholder China International Economic Hui Zhou Energy Investment (Beijing) Co., Ltd pursuant to an underwriting agreement. New Standard continues to review and reduce overheads wherever possible. Directors’ fees remain suspended and no Directors’ fees have been paid since February 2015. New Standard ended the financial year with a cash position of $460,000. At the end of the period the Company held 2,128,000 shares in Sundance Energy Australia Limited (ASX: SEA), of which 1,528,000 are held in escrow, with a market value of approximately $132,000. The Company has no debt. New Standard has also continued to review other opportunities for the Company to recover and grow both in the oil and gas sectors and in other sectors. 2 | NEW STANDARD ENERGY LTD 2017 ANNUAL REPORT For personal use only DIRECTORS’ REPORT 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. Mr Hui Song Mr Ning Han Non-Executive Chairman (Appointed 12 September 2016, originally appointed Non-Executive Director on 16 December 2015) Age 47 Qualifications Nil Experience Mr Song is the founding director of Huizhou Energy Investment (Beijing) Co., Ltd. He brings 23 years’ experience in capital markets, business administration, investment banking, mergers and corporate restructures. Mr Song has over seven years of experience in oil exploration and development. Current and Former Directorships in listed entities in the last 3 years Nil Relevant interests in shares and options Fully paid ordinary shares 291,197,025 Options over fully paid ordinary shares Nil Non-Executive Director (Appointed 12 November 2015) Age 35 Qualifications Nil Experience Mr Xiaofeng Liu Non-Executive Director (Appointed 16 December 2015) Age 51 Qualifications Nil Experience Mr Han is an electrical engineer and studied at Beijing University of Technology, China, Inha University, Korea and Stevens Institute of Technology, USA. He is presently the co- founder and Chief Operating Officer of Shanghai Insight Information Technology Co. Ltd and has experience in corporate transactions and capital markets. Current and Former Directorships in listed entities in the last 3 years Nil Relevant interests in shares and options Mr Liu is the Chief Geologist of Huizhou Energy Investment (Beijing) Co., Ltd and a resident of Beijing. He has 26 years’ experience in the oil field including extensive experience in seismic interpretation, reservoir description and prediction and well deployment. He was previously the Director of the Oil and Gas Centre at Beijing Orion Energy Technology & Development Co., Ltd and Technical Director of Beijing Oriental Cisco Reservoir Technology Co., Ltd. Current and Former Directorships in listed entities in the last 3 years 65,650,000 Nil Fully paid ordinary shares Options over fully paid ordinary shares Nil Mr Hua Li Mr Dongbo Zhang Managing Director and Company Secretary (Appointed 12 September 2016) Non-Executive Director (Appointed 12 September 2016) Age 46 Qualifications LLB, M.A.Sc (UNSW) Experience Mr Li has significant experience in business management and international trade with many large enterprises in China. Most recently, Mr Li was General Manager of Beijing Hanrende Trade Co., Ltd, a company which trades silicon steel, other metal materials and power products within China. Current and Former Directorships in listed entities in the last 3 years Nil Relevant interests in shares and options Fully paid ordinary shares Options over fully paid ordinary shares Nil Nil Age 50 Qualifications B.E., Master of Marketing (UNSW) Experience Mr Zhang specialises in international trading and has experience in investment and project management in China, Hong Kong, Australia and New Zealand. Mr Zhang is currently a director of Top Education Group, Fortune City Development Ltd and Tristar United Investment Ltd. Current and Former Directorships in listed entities in the last 3 years Nil Relevant interests in shares and options Fully paid ordinary shares Options over fully paid ordinary shares Nil Nil Relevant interests in shares and options Fully paid ordinary shares Options over fully paid ordinary shares Nil Nil NEW STANDARD ENERGY LTD 2017 ANNUAL REPORT | 3 For personal use only DIRECTORS’ REPORT Mr Phil Thick Non-Executive Director (Originally appointed Non-Executive Director on 16 July 2012, became Managing Director on 2 April 2013, resigned as Managing Director on 31 July 2016 became Non-Executive Director on 6 July 2016 announced resignation on 23 September 2016) Age 58 Qualifications B.E. (Hons), FAICD Experience Phil has extensive experience in the downstream oil sector and particularly in the areas of logistics, terminals and transport through his experience at Coogee Chemicals and Shell. Phil also brings a valuable understanding of the WA energy market as a result of his most recent role as Managing Director at Coogee Chemicals – a company that remains a significant end user of energy in the WA market. Phil is a Civil Engineer from the University of Western Australia and a Fellow of the Australian Institute of Company Directors. He commenced his career in Perth with Alcoa before joining Shell in 1986. A 20-year career with Shell saw stints in London and in most cities around Australia, culminating in 8 years in Melbourne, where Phil was on the Board of Shell Australia Limited. He was also Chairman of Shell Fiji Limited and a Director of the Australian Institute of Petroleum. Current and Former Directorships in listed entities in the last 3 years Discovery Africa Ltd (ASX:DAF) (until April 2014) Argosy Minerals Ltd (ASX:AGY) (until April 2014) Relevant interests in shares and options at date of resignation Fully paid ordinary shares Options over fully paid ordinary shares Incentive rights 2,999,096 Nil 3,700,000 performance rights with vesting based on absolute TSR and measurement date 14 September 2017 Mr Arthur Dixon AM Non-Executive Chairman (Originally appointed 1 May 2011, resigned 12 September 2016) Age 75 Qualifications B.E. (Chem) Experience Arthur Dixon graduated from Melbourne University as a Chemical Engineer. Arthur is a 40 year oil and gas 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 was also formerly 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 at date of resignation Fully paid ordinary shares Options over fully paid ordinary shares 389,212 Nil Mr Sam Willis Director (Originally appointed Managing Director on 28 July 2008, became Non-Executive Director on 1 July 2013 resigned 5 August 2016) Age 45 Qualifications B.Com Experience Mr Willis is an experienced company director in the resources and energy sectors and previously served as Managing Director of New Standard for 7 years as part of his 10 year involvement with the company. Mr Willis provides New Standard with in excess of 15 years’ experience and expertise in capital markets, corporate finance and executive board involvement with emerging small and mid-cap companies. Mr Willis has also held previous roles as a private client advisor with Hartleys and investment analyst at both Deutsche Bank and Schroders Investment Management in London. Current and Former Directorships in listed entities in the last 3 years Base Resources Ltd (ASX:BSE) Elixir Petroleum Ltd (ASX:EXR) Relevant interests in shares and options at date of resignation Fully paid ordinary shares Options over fully paid ordinary shares Incentive rights 10,700,000 Nil 1,200,000 performance rights with vesting based on absolute TSR and measurement date 14 September 2017 Mr Mark Clements Company Secretary (Appointed 28 July 2008 resigned 12 September 2016) Qualifications B.Com, FCA, MAICD Experience 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 20 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. Mark previously worked for an international accounting firm. 4 | NEW STANDARD ENERGY LTD 2017 ANNUAL REPORT For personal use only DIRECTORS’ REPORT PRINCIPAL ACTIVITIES The principal activities of the Company during the course of the year were the exploration for oil and gas in the Canning Basin in Western Australia. OPERATING RESULTS The consolidated entity’s net loss attributable to members of New Standard for the year ended 30 June 2017 after applicable income tax was $909,235 (2016: loss of $4.5 million). FUTURE DEVELOPMENTS The Company will complete a strategic review to thoroughly assess the potential value in the onshore Carnavon Basins in Western Australia, to underpin additional corporate activity. Following a technical review by Huizhou Energy on the Company’s onshore Canning Basin permits, EP451 and EP445, a decision has been made not to proceed with new work programs or renew these permits when they fall due. 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. FINANCIAL SUMMARY The Group reported a loss after tax of $909,235 for the year ended 30 June 2017. This is significantly lower than the $4.5 million loss after tax for the previous year due to an impairment assessment carried out last year with a total $4.8 million capitalised exploration and development expenditure impaired and the gain recognised on sale of subsidiary for the previous year with a total of $3.2 million. A total of $433,699 (2016: $472,450) exploration and evaluation costs were invested in the year ended 30 June 2017 relating to New Standard’s Australian assets. The Company did not lodge a research and development claim for the year. The net assets of the Group have increased by $43,009 from $427,040 at 30 June 2016 to $470,049 as at 30 June 2017. This net increase is due to reduction of expenses and the successful rights issued carried out during the year. Year ended 30 June from continuing and discontinued operations Revenue Depreciation Operating loss before tax from continuing operations Operating loss after tax from continuing operations Operating gain after tax from discontinued operations Net assets 2017 $ 1,032 (35,602) (892,881) (892,881) – 470,049 2016 $ 38,057 (59,180) (7,680,264) (7,680,264) 3,192,790 427,040 NEW STANDARD ENERGY LTD 2017 ANNUAL REPORT | 5 For personal use only DIRECTORS’ REPORT SHARES UNDER OPTION There were no unissued ordinary shares in the Company under option at the date of this report. During the year and up to the date of the report no options were exercised prior to expiry. Refer to the note 23 to the financial statements for details of options granted. No options were granted during the year ended 30 June 2017. ENVIRONMENTAL REGULATIONS The New Standard group is subject to environmental regulations under relevant Australian legislation in relation to its oil and gas exploration activities, particularly with the Western Australian Department of Mines and Petroleum and the Western Australian Department of Environment and Conservation. The Directors actively monitor compliance with the regulations and as the date of this report, the Directors are not aware of any material breaches in respect of the regulations. GREENHOUSE GAS AND ENERGY DATA REPORTING REQUIREMENTS Given the nature and location of the Group’s operations in Australia, both the Energy Efficiency Opportunities Act 2006 and the National Greenhouse and Energy Reporting Act 2007 are not expected to have a material impact. PROCEEDINGS ON BEHALF OF THE COMPANY No person has applied for leave of the Court under Section 237 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 purposes 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 During 2013 New Standard Onshore Pty Ltd (NSO) (a wholly owned subsidiary of NSE) was served with a Writ issued out of the Supreme Court of Western Australia by Precision Catering & Equipment Pty Ltd (Precision). The Writ claimed damages, interest and costs in respect of alleged breaches of a contract between NSO and Precision in relation to the supply, installation, rental and catering of a camp for the Goldwyer Joint Venture and a related alleged demobilisation agreement (Claim). The total estimated value of the Claim (inclusive of costs and interest) is $1.2 million. NSO denies liability for the Claim. Precision went into liquidation in May 2016 and in May 2017 Precision liquidators brought the matter back to Court for mediation on 18 July 2017. The mediation conference concluded without the parties reaching a settlement. The matter will now be listed for a case evaluation conference on 4 October 2017 and will proceed in accordance with Court practice and procedure. Other than the above, there has been no other matter or circumstance that has arisen since the end of the year that requires disclosure. 6 | NEW STANDARD ENERGY LTD 2017 ANNUAL REPORT For personal use only DIRECTORS’ REPORT 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. Directors Mr Hui Song (i) Mr Hua Li (i) Mr Ning Han Mr Xiofeng Liu Mr Dongbo Zhang (i) Mr A Dixon AM (ii) Mr P Thick (iii) Board meetings Held while director Attended Circular resolution passed 1 – 1 1 – 1 1 1 – 1 1 – 1 1 7 6 7 7 6 – 2 Total 8 6 8 8 6 1 3 Mr S Willis (iv) – Mr Song, Mr Li and Mr Zhang was appointed as Non-Executive Chairman, Managing Director and Non-Executive Director respectively on 12 September 2016. Mr Dixon resigned as Non-Executive Chairman on 12 September 2016. Mr Thick resigned as the Managing Director and was appointed a Non-Executive Director of the Company effective 31 July 2016. Mr Thick resigned as a Non-Executive Director effective 23 September 2016. Mr Willis resigned as a Non-Executive Director on 5 August 2016. – – – (i) (ii) (iii) (iv) There were no formal Audit or Remuneration committees held during the year. The Board attended to these committee responsibilities when required. Whilst there is currently no formal nomination committee established, when required a sub-committee of the Board is delegated the responsibility for identifying suitable candidates for Board appointments. The sub-committee will engage independent external recruitment consultants as required. INDEMNIFICATION OF OFFICERS AND AUDITORS During and 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 was extended to cover the Group’s activities in the USA until the sale of Sundance occurred. 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. 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 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. During the year no fees were paid or payable to the auditor or its related entities for any non-audit services. AUDITOR’S INDEPENDENCE DECELERATION A copy of the auditor’s independences declaration under s.307C of the Corporations Act 2001 in relation to the audit of the full year is included on page 23. NEW STANDARD ENERGY LTD 2017 ANNUAL REPORT | 7 For personal use onlyDIRECTORS’ REPORT REMUNERATION REPORT (AUDITED) This remuneration report sets out the remuneration arrangements for New Standard Energy Limited (New Standard) for the year ended 30 June 2017. This Remuneration Report forms part of the Directors’ Report and has been audited in accordance with the Corporations Act 2001. REMUNERATION POLICY New Standard is committed to the close alignment of executive remuneration to shareholder return. To this end, the Company’s remuneration system is designed to attract, motivate and retain people by identifying and rewarding high performers and recognising their contribution to the continued growth and success of the Company. Key objectives of the Company’s remuneration policy are to ensure that remuneration practices:      facilitate the achievement of the Company’s objectives; provide strong linkage between executive incentive rewards and creation of value for shareholders; attract, retain and motivate employees of the required capabilities; are simple to understand and implement, openly communicated and are equitable across the Company; and comply with applicable legal requirements and appropriate standards of governance. The Company’s remuneration policy and structure reflects the following broad remuneration practices to ensure policy target remuneration package positioning:    a performance based remuneration system; a Short-Term Incentive Plan (STIP) with performance criteria assigned for both individual and Company performance; and a Long-Term Incentive Plan (LTIP) utilising Quantum Rights consisting of Performance Rights with performance hurdles linked to absolute total shareholder return (TSR) and Retention Rights linked to tenure. REMUNERATION COMMITTEE New Standard has adopted a Remuneration Committee as a sub-committee of the Board and does not include Directors that are either Executive or not Independent. The Remuneration Committee is responsible for oversight of the remuneration policy and system and reporting of such to the Board. It is also responsible for evaluating the performance of the Executive Directors and monitoring performance of the executive management team. The Board, upon recommendation of the Remuneration Committee, determines the remuneration of the Executive Directors and approves the remuneration of the executive management team. The objective of the Remuneration Committee is to ensure that remuneration policies and systems attract and retain executives and directors who will create value for shareholders. In determining competitive remuneration rates, the Remuneration Committee seeks independent advice on local and international trends among comparative companies and industry generally. It examines terms and conditions for employee incentive schemes, benefit plans and share plans. Independent advice is obtained to confirm that executive remuneration is in line with market practice and is reasonable in the context of Australian executive reward practices. There was no Remuneration Committee during the year due to the size and nature of the Company. BOARD REMUNERATION Shareholders approve the maximum aggregate remuneration for non-executive directors. The board determines actual payments to directors and reviews their remuneration annually, based on independent external advice with regard to market practice, relativities, and the duties and accountabilities of directors. A review of directors’ remuneration is conducted annually to benchmark overall remuneration including retirement benefits. KEY PRINCIPLES OF EXECUTIVE REMUNERATION Remuneration for the executive management team comprises fixed remuneration, and variable (or ’at-risk‘) remuneration, which is determined by individual and Company performance. The Company targets total fixed remuneration (TFR) at the 50th market percentile and total remuneration package (TRP), including ’at target’ variable remuneration, at the 75th market percentile, for the executive management team. As a consequence, the Company’s executives have a higher proportion of remuneration at risk than industry averages. If target at-risk remuneration is earned, the proportion of total remuneration represented by fixed and at-risk remuneration would be: Role Managing Director Direct Reports Fixed remuneration (TFR) Variable remuneration (at risk) 50% 59% 50% 41% Total 100% 100% 8 | NEW STANDARD ENERGY LTD 2017 ANNUAL REPORT For personal use only DIRECTORS’ REPORT TFR is reviewed annually. Any adjustments to the TFR for the Executive Directors must be approved by the Board after recommendation by the Remuneration Committee. Any adjustments to the TFR for other senior executives must be approved by the Remuneration Committee after recommendation by the Managing Director within guidelines approved by the Board. The Company seeks to position the fixed remuneration at the 50th percentile of salaries for comparable companies within the energy industry, utilising datasets and specific advice provided by independent remuneration consultants. SHORT TERM INCENTIVE PLAN (STIP) The STIP is the cash component of the at-risk remuneration, payable based on a mix of Company and individual annual performance standards. At-risk remuneration strengthens the link between pay and executive performance. The purpose of these programs is to reward executives for annual performance relative to expectations of their role accountabilities, required behaviours and KPI’s as well as the delivery of annual business plans. A reward structure that provides at-risk remuneration is also necessary as a competitive remuneration package in the Australian and global marketplace for executives. Performance criteria are assigned for both individual and Company performance and may vary from year to year. Reflecting the importance attached to role clarity within New Standard, individual performance criteria will be drawn directly from the role accountabilities in the participant’s role description and demonstrated adherence to New Standard’s values. The performance criteria for the Managing Director are set by the Board and for other executives are set by the Managing Director and reviewed by the Board. Corporate performance criteria are set by the Board at the commencement of each financial year and may vary from time to time to include other aspects of performance for which there is shared accountability and which the Company wishes to emphasise. Each performance criterion may be allocated a weighting for each year that reflects the relative importance of each performance criterion for the year. LONG TERM INCENTIVE PLAN (LTIP) The LTIP is the equity component of at-risk remuneration and is linked to the Company’s TSR performance over a 3 year period. The LTIP aims to reward participants for New Standard’s TSR performance in absolute terms such that LTI awards only become valuable to the recipient upon achievement of absolute TSR hurdles as set by the Remuneration Committee. The proportion of Absolute TSR Performance Rights which vest will be determined on the basis of New Standard’s TSR on the following scale: Increase in TSR over 3 year period Percentage of absolute TSR performance rights that vest Less than 33% 33% Between 33% and 52% 52% Between 52% and 73% 73% or greater Nil 25% Pro rata between 25% and 50% 50% Pro rata between 50% and 100% 100% The LTIP operates on the basis of a series of cycles. Each cycle commences on 15 September and is followed by a 3 year performance period, with a test date on the 3rd anniversary of the commencement of the cycle. As a result, the LTIP awards may occur annually and the first cycle of the LTIP began on 15 September 2012. Under the LTIP Performance Rights may be granted to the Managing Director and other key employees as a percentage of TFR. In addition key employees also may be granted Retention Rights as an encouragement to stay with the Company for the longer term, as it is viewed as important for a relatively new company to maintain continuity of key management personnel where possible. Details of Performance and Retention Rights are outlined in the table below. Role Managing Director Direct Reports Target retention LTI (% of TFR) Target performance LTI (% of TFR) 0% 20% 90% 40% Total 90% 60% All rights are a right granted to acquire one share in New Standard, subject to satisfying either performance or retention criteria that will be established and agreed from time to time. The Company uses absolute TSR as the sole LTIP performance criteria to determine the proportion of Performance Rights which vest. NEW STANDARD ENERGY LTD 2017 ANNUAL REPORT | 9 For personal use only DIRECTORS’ REPORT The Board considers that absolute TSR is an appropriate performance hurdle because it ensures that a proportion of each participant’s remuneration is linked to shareholder value and ensures that participants only receive a benefit where there is a corresponding direct and positive benefit to shareholders. The Company uses a retention period of 3 years as the standard benchmark for vesting of Retention Rights. USE OF INDEPENDENT REMUNERATION CONSULTANTS To ensure the Remuneration Committee is fully informed when making remuneration decisions, it may seek external remuneration advice. Any such advice is usually from independent sources with some expertise in their relevant field and that are sufficiently independent to allow independent and un-biased advice to be provided to the Remuneration Committee. VOTING AND COMMENTS MADE AT THE COMPANY’S 2016 ANNUAL GENERAL MEETING The Company received 92% of “yes” votes on its remuneration report for the 2016 financial year. The Company did not receive any specific feedback at the AGM or throughout the year on its remuneration practices. DETAILS OF KEY MANAGEMENT PERSONNEL The remuneration report details the remuneration arrangements for key management personnel (‘KMPs’) who are defined as those persons having authority and responsibility for planning, directing and controlling the major activities of the Group, and comprise the Directors (whether executive or otherwise) of the Company and other executives. Details of KMP are set out below: Name Executives H Li P Thick S Willis Non-Executives N Han H Song X Liu D Zhang A Dixon Position Director Director Director Director Director Director Director Chairman EXECUTIVE REMUNERATION OUTCOME FOR 2017 Overview Appointed*/resigned during the year Appointed as Managing Director 12 Sep 2016* Resigned as Managing Director 31 Jul 2016 Announced resignation as Director on 23 Sep 2016 Resigned 5 Aug 2016 Appointed 12 Nov 2015 Appointed 16 Dec 2015 Appointed 16 Dec 2015 Appointed 12 Sep 2016* Resigned 12 Sep 2016 During the year, the Company’s growth plans continues to be severely impacted by the decline in world oil prices and associated effect on the oil industry’s commercial landscape. The Company continues to focus on reducing operational and corporate costs and overheads. The Company’s retained its workforce to a total of two employees as at 30 June 2017. During the year, the Company’s non-executive directors agreed to continue suspending all fees until market conditions improve. The Company did not engage an independent remuneration consultant to review the structure of the Company’s remuneration components in 2017. The Remuneration Committee considers the present policy remains appropriate for the financial year ended 30 June 2017. Base Package Salaries There were no increment in base salary packages during the 2016/17 financial year for KMP given market conditions. 10 | NEW STANDARD ENERGY LTD 2017 ANNUAL REPORT For personal use only DIRECTORS’ REPORT Short Term Incentives There have been no STIP entitlements earned or accrued for performance in the year ended 30 June 2017. The STIP entitlements earned in the year ended 30 June 2016 have been reflected in the remuneration table below. For the year ended 30 June 2017, the KPIs linked to the STIP were based on capital management, partner, contractor and stakeholder relations, operational, environmental and safety performance in the field, 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. The size of any payment is linked to the extent of achievement. Levels of performance required for target levels of STI are set such that they are challenging but achievable. Required performance levels for each performance criteria are set at three levels being:    Threshold – a performance level that is below optimal but nevertheless acceptable. It is the minimum for which a small STIP award would be payable. The STIP is designed such that there is an 80% probability the executive will achieve or exceed this level of achievement. Target – a performance level that represents a challenging but achievable level of performance. The STIP is designed such that there is a 50% to 60% probability the executive will achieve of exceed this level of achievement. Stretch – a performance level that is clearly at the upper limit of what may be achievable. The STIP is designed such that there is a 10% to 20% probability the executive will achieve or exceed this level of achievement. The Managing Director and other executives have a target STIP opportunity of 10% of TFR, with a minimum opportunity (if only threshold level is met) of 5% and a maximum opportunity (if the stretch targets are achieved) of 20% of TFR. These percentages are based on external advice to achieve the remuneration policy intent of 75% percentile total remuneration package market positioning. The Remuneration Committee is responsible for assessing whether the KPIs are met. The STIP target annual payment is reviewed annually. The Remuneration Committee has the discretion to adjust STI’s downwards in light of unexpected or unintended circumstances. Long Term Incentives The Incentive Rights granted under the LTIP have a 3 year measurement period. Performance Rights are measured against New Standard’s share price performance and will vest on a sliding scale against pre-determined absolute TSR targets after a 3 year measurement period. Retention Rights are linked to tenure and will vest if a 3 year continuous period of service is completed. Any Performance Rights or Retention Rights that do not vest after the measurement period will immediately lapse. Absolute TSR is calculated by reference to share price growth over the measurement period. New Standard believes that absolute TSR is an appropriate performance hurdle because it ensures that a proportion of each participant’s remuneration is linked to shareholder value and ensures that participants only receive a benefit where there is a corresponding direct and positive benefit to shareholders. Of the Incentive Rights that were tested against their vesting conditions during the year ended 30 June 2016, all Retention Rights vested and all Performance Rights lapsed. Options are issued to provide long term incentives for KMP to deliver long term shareholder returns. KMP are granted options which only vest if certain tenure requirements are met. Company Performance The table below sets out summary information about the Company’s continuing business assets, profitability and share price movements for the 5 years to 30 June 2017: Share price Total assets Net profit/(loss) before tax 30 June 2017 30 June 2016 30 June 2015 30 June 2014 30 June 2013 $ 0.004 726,226 (892,881) $ 0.004 686,766 $ 0.012 7,675,891 (7,680,264) (38,793,185) $ 0.140 117,371,505 (6,116,652) $ 0.120 83,675,665 30,308,167 NEW STANDARD ENERGY LTD 2017 ANNUAL REPORT | 11 For personal use onlyDIRECTORS’ REPORT % d e t a l e r n o i t r o p o r P e c n a m r o f r e p % 0 % 1 6 % 0 0 1 % 2 5 % 6 2 % 1 2 % 4 2 $ l a t o T 9 1 8 , 1 6 5 9 2 , 1 0 1 3 3 0 , 3 2 7 4 1 , 6 8 1 7 3 7 , 6 2 3 2 9 7 , 6 9 1 9 2 5 , 3 2 5 2 72 7 e v i t n e c n I ) i i ( s t h g R i s n o i t p O s t n e m y a p d e s a b e r a h S – I T L t s o P s t i f e n e b t n e m y o p m e l - r e p u S n o i t a u n n a s t i f e n e b m r e t g n o L t n e m y o p m e l s t i f e n e b t n e m y o p m e m r e t l t r o h S ) i ( e v a e l l a u n n A r e h t O s u n o b h s a C y r a a S l $ – 4 7 2 , 2 6 3 3 0 , 3 2 7 0 3 , 5 8 7 3 2 , 4 8 9 7 9 , 0 4 6 1 2 , 5 2 1 $ – – – – – – – $ $ – 1 1 0 , 5 3 5 7 , 1 4 6 7 , 6 9 3 0 , 1 2 – 9 3 0 , 1 2 8 5 0 , 4 3 1 8 , 8 1 – 1 7 8 , 2 2 – – – $ – – – – – – – $ – – – – – – – $ – 0 5 7 , 2 5 5 5 4 , 8 1 5 0 2 , 1 7 1 6 4 , 1 2 2 3 1 8 , 5 5 1 4 7 2 , 7 7 3 . r a e y e h t g n i r u d i d a p d n a r a e y e h t g n i r u d n e k a t , d e u r c c a e v a e l l a u n n a ) y n a f i ( t i f e n e b e h t f o e v i t a c d n i i r o o t d e t a e r l t o n s i n o i t a r e n u m e r s a d e d u c n l i t n u o m a e h T . 7 1 0 2 e n u J 0 3 d e d n e r a e y e h t n i s t h g i r e v i t n e c n i e s e h t f o l e u a v a t a r - o r p e h t s i d e s o c s d l i e u a v l e h T . d o i r e p ) g n i t s e v ( t n e m e r u s a e m e h t r e v o i d e s n g o c e r d n a i . e v e c e r y a m l e d o m n o i t a u m S l i l i a u d v d n i i e h t t a h t o l r a C e t n o M e h t g n s u i t n a r g f o e t a d e h t t a l d e t a u c a c l s i s t h g i r e v i t n e c n i f o e u a v l r i a f e h T . n a P l I T L e h t h t i w e c n a d r o c c a n i , 5 1 0 2 e n u J 0 3 d e d n e s r a e y e h t n i d e t n a r g e r e w s t h g i r e v i t n e c n I . 7 1 0 2 e n u J 0 3 d e d n e r a e y e h t n i d e t n a r g s t h g i r e v i t n e c n i o n s a w e r e h T . 6 1 0 2 r e b m e t p e S 2 1 e v i t c e f f e y n a p m o C e h t f o r o t c e r i i D g n g a n a M e h t s a i d e t n o p p a s a w i L r M . 6 1 0 2 r e b m e t p e S 3 2 e v i t c e f f e r o t c e r i D e v i t u c e x E - n o N a s a d e n g s e r i i k c h T r M . 6 1 0 2 l y u J 1 3 e v i t c e f f e y n a p m o C e h t f o r o t c e r i D e v t i u c e x E - n o N a i d e t n o p p a s a w d n a r o t c e r i i D g n g a n a M e h t s a d e n g s e r i i k c h T r M . 6 1 0 2 t s u g u A 5 e v i t c e f f e y n a p m o C e h t f o r o t c e r i D e h t s a d e n g s e r i s i l l i W r M e d u c n l i t i f e n e b e v a e l l a u n n A r o t c e r i D e v i t u c e x E ) v i ( i k c h T P r M ) v ( s i l l i W S r M ) i i i ( i L H r M l a t o T 6 1 0 2 r o t c e r i D e v i t u c e x E i k c h T P r M s i l l i W S r M e m a N 7 1 0 2 l a t o T s e t o N ) i ( ) i i ( ) i i i ( ) v i ( ) v ( : l w o e b d e t a t s s a s a w 6 1 0 2 e n u J 0 3 d n a 7 1 0 2 e n u J 0 3 d e d n e s r a e y e h t r o f y n a p m o C e h t f o P M K d n a r o t c e r i D e v i t u c e x E h c a e r o f n o i t a r e n u m e r e h T s e l b a T n o i t a r e n u m e R 12 | NEW STANDARD ENERGY LTD 2017 ANNUAL REPORT For personal use only DIRECTORS’ REPORT NON-EXECUTIVE REMUNERATION 2017 Shareholders approve the maximum aggregate remuneration for non-executive directors. Fees paid to non-executive directors are recommended by the Remuneration Committee and the Board is responsible for ratifying any recommendations, if appropriate. As approved at the Annual General Meeting on 26 November 2010, the aggregate limit of fees payable per annum is $400,000 in total. All directors have their indemnity insurance paid by the Company. Non-executive directors’ receive a fixed fee remuneration consisting of a cash fee and statutory superannuation contributions made by the company and additional fees for committee roles as set out below: Base fee Chairman Other non-executive directors Additional fees Company secretarial services 2017 – – – 2016 66,000 60,000 41,000 In response to the falling oil price environment, Mr Song and the Non-Executive Directors have agreed to suspend all Non-Executive Chairman and Non- Executive Directors’ fees until market conditions improved starting from 1 February 2015 and remain suspended to date. As a result the 2017 remuneration outlined below reflects no Non-Executive Chairman and Non-Executive Directors fee paid in 2016/17. Non-executive remuneration for the year ended 30 June 2017 and comparative 2016 remuneration: Salary and fees Superannuation Options (i) Total 2017 Mr H Song (i) Mr N Han Mr X Liu Mr D Zhang (i) Mr A Dixon (ii) Total 2016 Mr A Dixon Mr H Song Mr N Han Mr X Liu Mr K Ferguson III Mr J Swanson Total Notes (i) (ii) $ – – – – – – – – – – – – – $ – – – – – – – – – – – – – $ – – – – – – – – – – – – – $ – – – – – – – – – – – – – Mr Song and Mr Zhang were appointed Non-Executive Chairman and Non-Executive Director respectively on 12 September 2016. Mr Dixon resigned as the Non-Executive Chairman effective 12 September 2016. In accordance with the Company’s remuneration policy, non-executive directors are not eligible for any performance based remuneration and as such no shares or incentive rights were issued. NEW STANDARD ENERGY LTD 2017 ANNUAL REPORT | 13 For personal use onlyDIRECTORS’ REPORT EQUITY INSTRUMENTS OPTIONS There were no grant of options affecting remuneration in the current or future reporting periods. INCENTIVE RIGHTS During the year ended 30 June 2017, no Performance Rights and Retention Rights were granted to executives as part of their remuneration packages. The fair value of the rights is determined based on the market price of the company’s shares at the grant date, with an adjustment made to take into account the vesting conditions and expected dividends during that period that will not be received by the directors and key management personnel. Type of incentive rights Performance rights (A) (iii) Performance rights (B) (iii) Performance rights (C) (iii) Grant date 14 Feb 2014 14 Feb 2014 16 Dec 2014 Minimum vesting hurdles (i) $0.2920 $0.2920 $0.1820 Vesting date (ii) 14 Sep 2016 14 Sep 2016 14 Sep 2017 Fair value of each incentive rights $0.080 $0.088 $0.050 Note (i) On the vesting date the performance rights will be tested against the absolute TSR criteria, and the retention rights tested against tenure criteria. Only those rights that satisfy the criteria will vest, and the remainder will immediately lapse. (ii) The minimum vesting hurdle for Performance Rights is 10% compound average growth rate (CAGR) in the NSE share price, which represents 33% absolute total shareholder return (TSR) over a 3 year measurement period. Should this minimum hurdle be achieved only 25% of the Performance Rights will vest. (iii) Performance rights lapsed without being exercise on 14 September 2016 and 14 September 2017 respectively. The table below outlines movements in Incentive Rights during the year and the balance held by each executive as at 30 June 2017. Type of incentive rights Balance at start of year No. Granted Vested Lapsed During the year Balance at end of year(i) No. Maximum value yet to vest $ Name and Grant date Mr P Thick (ii) 14 Feb 2014 Performance rights (A) 1,800,000 16 Dec 2014 Performance rights (C) 3,700,000 Mr S Willis (ii) 14 Feb 2014 Performance rights (B) 1,000,000 16 Dec 2014 Performance rights (C) 1,200,000 7,700,000 TOTAL Note – – – – – – – – – – (1,800,000) – – 3,700,000 (1,000,000) – – – 1,200,000 7,700,000 n/a n/a n/a n/a – (i) Mr Thick and Mr Willis resigned during the year and the balance reflects the rights held at time of resignation. (ii) Mr Thick resigned as the Managing Director and was appointed Non-Executive Director of the Company effective 31 July 2016. Mr Thick resigned as a Non-Executive Director effective 23 September 2016. (iii) Mr Willis resigned as the Director of the Company effective 5 August 2016. EQUITY INSTRUMENTS HELD BY KEY MANAGEMENT PERSONNEL The table below shows the number of options, rights, and shares held in the Company during the financial year by Key Management Personnel, including their close family members and entities related to them. Name Mr H Song (i) Unlisted options Balance at start of year – Ordinary shares 91,442,400 Mr H Li (i) Unlisted options Ordinary shares Mr N Han Unlisted options – – – Ordinary shares 65,650,000 During the year Balance at end of year Granted Vested Lapsed Others TOTAL Vested Unvested – – – – – – – n/a – n/a – n/a – – – n/a 199,754,625 291,197,025 – n/a – n/a – – – – – – – 65,650,000 – n/a – n/a – n/a – n/a – n/a – n/a 14 | NEW STANDARD ENERGY LTD 2017 ANNUAL REPORT For personal use only Balance at start of year During the year Balance at end of year Granted Vested Lapsed Others TOTAL Vested Unvested DIRECTORS’ REPORT Name Mr X Liu Unlisted options Ordinary shares Mr D Zhang (i) Unlisted options Ordinary shares Mr A Dixon (ii) Unlisted options – – – – – Ordinary shares 389,212 Mr P Thick (iii) Unlisted options – Performance rights 5,500,000 Ordinary shares 2,999,096 Mr S Willis (iv) Unlisted options – Performance rights 2,200,000 Ordinary shares 10,700,000 – – – – – – – – – – – – – n/a – n/a – n/a – – n/a – – n/a – n/a – n/a – n/a – (1,800,000) n/a – (1,000,000) – – – – – – – – – – – – – n/a – 3,700,000 – 2,999,096 – – – 1,200,000 n/a – 10,700,000 – n/a – n/a – n/a – n/a n/a – n/a n/a – n/a – n/a – n/a – n/a n/a – n/a n/a Note (i) Mr Song, Mr Li and Mr Zhang was appointed as Non-Executive Chairman, Managing Director and Non-Executive Director respectively on 12 September 2016. (ii) Mr Dixon resigned as the Non-Executive Chairman effective 12 September 2016. (iii) Mr Thick resigned as the Managing Director and was appointed Non-Executive Director of the Company effective 31 July 2016. Mr Thick resigned as a Non-Executive Director effective 23 September 2016. The balance reflects the rights held at time of resignation. (iv) Mr Willis resigned as the Director of the Company effective 5 August 2016. The balance reflects the rights held at time of resignation. OTHER TRANSACTIONS WITH KEY MANAGEMENT PERSONNEL China International Economic Huizhou Energy Investment (Beijng) Co., Ltd. (Huizhou), of which Mr Hui Song is a Director, fully underwrote the rights issue completed on 23 November 2016. Pursuant to the Underwriting Agreement, the Company agreed to pay Huizhou an underwriting fee of 4% of the value of the underwritten shares which amounted to $38,209 which was owing to Huizhou at 30 June 2017 (2016: Nil). EMPLOYMENT ARRANGEMENTS FOR KEY MANAGEMENT PERSONNEL The employment arrangements of the KMPs are formalised in standard employment agreements. Details for the termination provisions contained in the agreements that were in place at 30 June 2017 are provided below. Name Mr H Li (i) Mr H Song (i) Mr N Han Mr X Liu Mr D Zhang (i) Engagement Term of contract Notice period by either party Employee Ongoing 4 weeks No notice required for termination by Company for cause Employee Employee Employee Employee Ongoing Ongoing Ongoing Ongoing None None None None Termination benefit 4 weeks None None None None Note (i) Mr Li, Mr Song and Mr Zhang were appointed Managing Director, Non-Executive Chairman and Non-Executive Director respectively on 12 September 2016. End of Audited Remuneration Report This Report of Directors, incorporating the Remuneration Report is signed in accordance with a resolution of the Board of Directors. Hua Li Managing Director 27 September 2017 NEW STANDARD ENERGY LTD 2017 ANNUAL REPORT | 15 For personal use onlyDIRECTORS’ DECLARATION In the directors’ opinion: (a) the financial statements and notes are in accordance with the Corporations Act 2001, including (i) (ii) complying with Accounting Standards, the Corporations Regulations 2001 and other mandatory professional reporting requirements; and giving a true and fair view of the consolidated entity’s financial position as at 30 June 2017 and of its performance for the financial year ended on that date; and there are reasonable grounds to believe that the Company will be able to pay its debts as and when they become due and payable; and the consolidated entity has included in the notes to the financial statements an explicit and unreserved statement of compliance with International Financial Reporting Standards; and the directors have been given the declarations by Mr Li who performs both the Chief Executive Officer and the Chief Financial Officer functions as required by section 295A of the Corporations Act 2001. (b) (c) (d) This declaration is made in accordance with a resolution of the directors. Hua Li Managing Director 27 September 2017 16 | NEW STANDARD ENERGY LTD 2017 ANNUAL REPORT For personal use onlyCORPORATE GOVERNANCE STATEMENT 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” (Recommendations) where considered appropriate for a company of New Standard’s size and complexity. The 3rd edition of the ASX Corporate Governance Principles and Recommendations was introduced on 27 March 2014 and took effect for a listed entity’s first full financial year ending on or after 1 July 2014. Accordingly this Corporate Governance Statement has been prepared on the basis of disclosure under the 3rd edition of these principles with a table included at the back of this statement detailing the Company’s compliance with these principles during the period. This statement describes how New Standard has addressed the Council’s guidelines and eight corporate governance principles and where the Company’s corporate governance practices depart from a recommendation, the Company discloses the reason for adoption of its own practices on an “if not, why not” basis. Given the size and stage of development of the Company and the cost of strict compliance with all the recommendations, the Board has adopted a range of modified procedures and practices which it considers appropriate to enable it to meet the principles of good corporate governance. At the end of this statement is a checklist setting out the recommendations with which the Company does or does not comply. The information in this statement is current as at 27 September 2017. The following governance-related documents can be found on the Company’s website at www.newstandard.com.au under the section marked “Governance”. CHARTERS     Board Audit Committee Nominee Committee Remuneration Committee POLICIES AND PROCEDURES            Board Performance Evaluation Code of Conduct Shareholder Communications Continuous Disclosure Policy Securities Trading Policy Diversity Policy Donation and Sponsorship Policy Risk Management Policy Health & Safety Policy Environment Policy Indigenous and Community Policy Principle 1: Lay solid foundations for management and oversight Role and Responsibilities of the Board and Management Role of the Board The main function of the Board is to lead and oversee the management and strategic direction of the Company. The Board regularly measures the performance of Management in implementation of the strategy through regular Board meetings. 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 responsibilities are as follows:  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 Managing Director with the appropriate skills to help the Company in the pursuit of its objectives; Determining the remuneration policy for the Board and Key Management Personnel; Controlling and approving financial reporting, capital structures and material contracts; Ensuring that a sound system of risk management and internal controls is in place; NEW STANDARD ENERGY LTD 2017 ANNUAL REPORT | 17 For personal use onlyCORPORATE GOVERNANCE STATEMENT Principle 1: Lay solid foundations for management and oversight (cont’d) Role of the Board (cont’d) Setting the Company’s values and standards; Terms of appointment Non-Executive Directors Undertaking a formal and rigorous review of the Corporate Governance policies to ensure adherence to the ASX Corporate Governance Council principles; To facilitate a clear understanding of roles and responsibilities all non- executive directors have signed letter of appointment. This letter of appointment letter includes acknowledgement of:             director responsibilities under the Corporations Act, Listing Rules, the Company’s Constitution and other applicable laws; corporate governance processes and Company policies; board and board committee meeting obligations; conflicts and confidentiality procedures; securities trading and required disclosures; access to independent advice and employees; confidentiality obligations; directors fees; expenses reimbursement; directors and officers insurance arrangements; other directorships and time commitments; and board performance review. Managing Director The Managing Director has a signed executive services agreement. For further information refer to the audited Remuneration Report. Role of Company Secretary The Company Secretary is accountable to the Board for:     advising the Board and committees on corporate governance matters; the completion and distribution of board and committee papers; completion of board and committee minutes; and the facilitation of director induction processes and ongoing professional development of directors. All directors have access to the Company Secretary who has a direct reporting line to the Chairman.       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. Establishing a diversity policy and setting objectives for achieving diversity. Delegation to Management Other than matters specifically reserved for the Board, responsibility for the operation and administration of the Company has been delegated to the Managing Director. This responsibility is subject to an approved delegation of authority which is reviewed regularly and at least annually. Internal control processes are designed to allow management to operate within the parameters approved by the Board and the Managing Director cannot commit the Company to additional activities or obligations in excess of these delegated authorities without specific approval of the Board. Election of Directors The Board is responsible for overseeing the selection process of new directors, and will undertake appropriate checks before appointing a new director, or putting forward a candidate for election as a director. All relevant information is to be provided in the Notice of Meeting seeking the election or re-election of a director including:       biographical details including qualifications and experience; other directorships and material interests; term of office; statement by the board on independence of the director; statement by the board as to whether it supports the election or re- election; and any other material information. 18 | NEW STANDARD ENERGY LTD 2017 ANNUAL REPORT For personal use onlyCORPORATE GOVERNANCE STATEMENT Principle 1: Lay solid foundations for management and oversight (cont’d) Diversity Retirement and rotation of directors The Board values diversity in all aspects of its business and is committed to creating a working environment that recognises and utilizes the contribution of its employees. The purpose of this is to provide diversity and equality relating to all employment matters. The Company’s policy is to recruit and manage on the basis of ability and qualification for the position and performance, irrespective of gender, age, marital status, sexuality, nationality, race/cultural background, religious or political opinions, family responsibilities or disability. The company opposes all forms of unlawful and unfair discrimination. The Board acknowledges the absence of female participation on the Board of Directors. However, the Board has determined that the composition of the current Board represents the best mix of Directors that have an appropriate range of qualifications and expertise, can understand and competently deal with current and emerging business issues and can effectively review and challenge the performance of management. The Company has not set or disclosed measurable objectives for achieving gender diversity. Due to the size of the Company, the Board does not deem it practical to limit the Company to specific targets for gender diversity as it operates in a very competitive labour market where positions are sometimes difficult to fill. However, every candidate suitably qualified for a position has an equal opportunity of appointment regardless of gender, age, ethnicity or cultural background. The Company currently only has one full-time employee, being the Managing Director who is male. The Company contracts four consultants, two of whom are female and two of whom are male. Performance review Board and board committees A review of the Board’s performance and effectiveness is conducted annually and the performance of individual directors is undertaken regularly. The Board has the discretion for these reviews to be conducted either independently or on a self-assessment basis. The review focuses on:      strategic alignment and engagement; board composition and structure; processes and practices; culture and dynamics; Relationship with management; and personal effectiveness. A formal review of the Board’s performance and effectiveness in respect of the financial year ended 30 June 2017 did not occur. Managing Director and senior executives Performance evaluation of the Managing Director, senior executives and employees is undertaken annually through a performance appraisal process which involves reviewing and assessment of performance against agreed corporate and individual key performance indicators and deliverables. For further information refer to the audited Remuneration Report. Retirement and rotation of directors are governed by the Corporations Act 2001 and the Constitution of the Company. Each year, one third of directors must retire and may offer themselves for re-election. Any casual vacancy filled will be subject to shareholder vote at the next Annual General Meeting. There were one director appointed during the year and was elected as director in the 2016 Annual General Meeting. It is intended that Mr Han will stand for re-election by rotation at the Company’s 2017 Annual General Meeting. Independent Professional Advice Each director of the Company or a controlled entity has the right to seek independent professional advice at the expense of the Company or the controlled entity; however prior approval of the Chairman is required which will not be unreasonably withheld. Access to employees Directors have the right of access to any employee. Any employee shall report any breach of corporate governance principles or Company policies to the Managing Director who shall remedy the breach. If the breach is not rectified to the satisfaction of the employee, they shall have the right to report any breach to an independent director without further reference to senior executives of the Company. Directors’ and officers’ liability insurance Directors’ and officers’ liability insurance is maintained by the Company for the Directors and senior executives at the Company’s expense. Board meetings The frequency of board meetings and the extent of reporting from management at board meetings are as follows:   a minimum of four scheduled meetings are to be held per year; other meetings will be held as required;  meetings can be held where practicable by electronic means;    information provided to the Board includes all material information related to the operations of the Company including exploration, development and production operations, budgets, forecasts, cash flows, funding requirements, investment and divestment proposals, business development activities, investor relations, financial accounts, taxation, external audits, internal controls, risk assessments, people and health, safety and environmental reports and statistics; the Chairman of the appropriate board committee reports to the next subsequent board meeting the outcomes of that meeting and the minutes of those committee meetings are also tabled. The number of directors’ meetings (including meetings of committees of directors) and the number of meetings attended by each of the directors of the Company during the financial year are set out in the Directors’ Report. NEW STANDARD ENERGY LTD 2017 ANNUAL REPORT | 19 For personal use only CORPORATE GOVERNANCE STATEMENT Principle 2: Structure the Board to add value Composition of the Board Composition of the Board (cont’d) The names of the directors of the Company and their qualifications are set out in the section headed “Information on Directors” in the current financial year’s Directors’ Report. Given the significant transformation the Company has recently undergone the Board composition is under review to better align with the new direction of the Company. The composition of the Board has been structured so as to provide New Standard with an adequate mix of directors with industry knowledge, technical, commercial and financial skills together with integrity and judgment considered necessary to represent shareholders and fulfil the business objectives 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 the Board should constitute of a majority of independent directors and that the Chairperson should be independent. The Board currently consists of five (5) directors of whom one (1) is considered independent, being Mr Dongbo Zhang, Non-Executive Director appointed on 12 September 2016. Mr Han was appointed as Director on 12 November 2015 and is not considered independent due to his association with Jara Resources Pty Ltd, the Company’s second largest shareholder (9.16%). On 16 December 2016 Mr Song and Mr Liu were appointed as Directors and are not considered independent due to their association with Huizhou Energy Investment (Beijing) Co., Ltd, the Company’s largest shareholder (40.65%). Mr Hua Li served in an executive roles from 12 September 2016 and therefore does not meet the criteria for an independent director. The detailed skills matrix of the Board for a company of New Standard’s size and complexity is not considered necessary. The principal business of the Company at present is exploration and new business opportunities, therefore requiring a skillset of geological and geophysical expertise, executive management, financial and commercial skills. Principle 3: Act ethically and responsibly Code of Conduct Directors, officers, employees and consultants to the Company are required to observe high standards of behavior and business ethics in conducting business on behalf of the Company and they are required to maintain a reputation of integrity on the part of both the Company and themselves. The Company does not contract with or otherwise engage any person or party where it considers integrity may be compromised. New Standard’s ethical rules demands high standards of integrity, fairness, equity and honesty from all Directors and Key Management Personnel 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 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; 20 | NEW STANDARD ENERGY LTD 2017 ANNUAL REPORT Independence of Chair of the Board The Current Chair of the Company, Mr Song, is not an independent director however the Board considers Mr Song’s role as Non-Executive Chairman essential to the success of the Group in its current stage, wherein the Group continues to refind its focus on the strategic development of the business. Over time, it is proposed that the Chair position will transition to an independent non-executive director. Nomination of other Board Members Membership of the Board of Directors is reviewed on an on-going basis by the Chairperson of the Board to determine if additional core strengths are required to be added to the Board in light of the nature of the Company’s businesses and its objectives. The Board does not have a separate Nomination Committee and does believe it is necessary in a Company of New Standard’s size. Director induction and ongoing professional development The Company does not have a formal induction program for Directors but does provide Directors with information pack detailing policies, corporate governance and various other corporate requirements of being a director of an ASX Listed company. Due to the size and nature of the business, Directors are expected to already possess a level of both industry and commercial expertise before being considered for a directorship of the Company. Directors are provided with the opportunity to access employees of the business and any information as they require about the business including being given access to regular news articles and publications where considered relevant.   Encouraging the reporting of illegal and unethical behavior; Provide a framework for the Company to achieve a diverse and skilled workforce. Conflicts of Interest Directors are required to disclose to the Board actual or potential conflicts of interest that may or might reasonably be thought to exist between the interests of the director or the interests of any other party in so far as it affects the activities of the Company and to act in accordance with the Corporations Act if conflict cannot be removed or if it persists. That involves taking no part in the decision making process or discussions where that conflict does arise. Trading in Company Securities Directors are required to make disclosure of any share trading. The Company policy in relation to share trading is that officers are prohibited to trade whilst in possession of unpublished price sensitive information concerning the Company or within a period of the release of results i.e. the blackout period. That is information which a reasonable person would expect to have a material affect on the price or value of the Company’s shares. An officer must receive authority to acquire or sell shares with the directors or the Company Secretary prior to doing so to ensure that there is no price sensitive information of which that officer might not be aware. The undertaking of any trading in shares must be notified to the ASX. For personal use onlyCORPORATE GOVERNANCE STATEMENT Principle 4: Safeguard integrity in 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 Managing Director 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 Audit Committee has been developed as per the guidelines of good corporate governance and its 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 engage independent counsel and other advisers as it determines necessary to carry out its duties. Principle 5: Make timely and balanced disclosure 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. Principle 6: Respect the rights of shareholders The Board’s fundamental responsibility to shareholders is to work towards meeting the Company’s objectives so as to add value for them. The Board maintains an investor relation program which will inform shareholders of all major developments affecting the Company by:   preparing half yearly and yearly financial reports; preparing quarterly cash flow reports and reports as to activities;  making announcement in accordance with the listing rules and the continuous disclosure obligations;    posting all of the above on the Company’s website; annually, and more regularly if required, holding a general meeting of shareholders and forwarding to them the annual report, if requested, together with notice of meeting and proxy form; and voluntarily releasing other information which it believes is in the interest of shareholders. The Company has established procedures for the selection, appointment and rotation of its external auditor. The Board is responsible for the initial appointment of the external auditor and the appointment of a new external auditor when any vacancy arises, as recommended by the Audit Committee. Candidates for the position of external auditor must demonstrate complete independence from the Company through the engagement period. The Board may otherwise select an external auditor based on criteria relevant to the Company’s business and circumstances. The performance of the external auditor is reviewed on an annual basis by the Audit Committee and any recommendations are made to the Board. The Company’s external auditor attends each Annual General meeting and is available to answer questions from shareholders relevant to the conduct of the external audit, the preparation and content of the Auditor’s Report, the accounting policies adopted by the Company and the independence of the auditor. 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 and Company Secretary. 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. The Annual General Meeting enables shareholders to discuss the annual report and participate in the meetings either by attendance or by written communication. The Company provides all shareholders with a Notice of Meeting so they can be fully informed and be able to vote on all resolutions at the Annual General Meeting. Shareholders are able to discuss any matter with the directors and/or the auditor of the Company who is also invited to attend the Annual General Meeting. Shareholders have the option to receive all Company and share registry communications electronically, and may also communicate with the Company by emailing the Company via its website. All shareholders have the ability to request copies of ASX releases, all of which are published and available on the Company’s website immediately after they are released to ASX. The Company regularly reviews its stakeholder communication policy and endeavours to maintain a program appropriate for a company of its size and complexity. NEW STANDARD ENERGY LTD 2017 ANNUAL REPORT | 21 For personal use only CORPORATE GOVERNANCE STATEMENT Principle 7: Recognise and manage risk The Board has adopted a Risk Management Policy, which sets out the Company’s risk profile. Under the policy, the Board is responsible for approving the Company’s policies on risk oversight and management and satisfying itself that management has developed and implemented a sound system of risk management and internal control. Under the policy, the Board delegate’s day-to-day management of risk to the Managing Director, who is responsible for identifying, assessing, monitoring and managing risks. The Managing Director is also responsible for updating the Company’s material business risks to reflect any material changes, with the approval of the Board. In fulfilling the duties of risk management, the Managing Director may have unrestricted access to Company employees, contractors and records and may obtain independent expert advice on any matter they believe appropriate, with the prior approval of the Board. The Board does not have a separate Risk Management Committee but has mandated the Audit Committee to monitor and review the integrity of financial reporting and the Company’s internal financial control systems. A report by management on the effectiveness of the internal financial control is provided to the Audit Committee on an annual basis. In addition, the following risk management measures have been adopted by the Board to manage the Company’s material business risks:  Establishment of financial control procedures and authority limits for management;  Approval of an annual budget;  Adoption of a compliance procedure for the purpose of ensuring compliance with the Company’s continuous disclosure obligations; and  Adoption of a corporate governance manual which contains other policies to assist the Company to establish and maintain its governance practices.  Maintenance and review of a risk register to identify the Company’s material business risks and risk management strategies for these risks. The risk register is reviewed half yearly and updated as required. Management reports to the Board on material business risks at each Board meeting. Principle 8: Remunerate fairly and responsibly The Company has a Remuneration Committee that is currently made up of two members, Mr Zhang, independent Director and Mr Li (Company Secretary). Mr Li is in an executive role and therefore is not considered independent. Details of remuneration, including the Company’s policy on remuneration, are contained in the “Remuneration Report” which forms part of the Directors’ Report. The Company’s policy is to remunerate non-executive directors at a fixed fee for time, commitment and responsibilities. Remuneration for non-executive directors is not linked to individual performance. From time-to-time the Company may grant options to non-executive directors. The grant of options is designed to recognise and reward efforts as well as to provide non-executive directors with additional incentive to continue those efforts for the benefit of the Company. The maximum aggregate amount of fees (including superannuation payments) that can be paid to non-executive directors is subject to approval by the shareholders at general meeting. Pay and rewards for executive directors and senior executives consists of a base salary and performance incentives. Long term performance incentives may include options and/or performance rights granted at 22 | NEW STANDARD ENERGY LTD 2017 ANNUAL REPORT The Board has required management to design, implement and maintain risk management and internal control systems to manage the material business risks of the Company. The Board also requires management to report to it confirming that those risks are being managed effectively. The Board has received a report from management as to the effectiveness of the Company’s management of its material business risks for the Reporting Period. The Managing Director has provided a declaration to the Board in accordance with section 295A of the Corporations Act and has assured the Board that such declaration 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 risks. Internal Audit The Company does not have an internal audit function as the Board believes the business is neither the size nor complexity that requires such a function. The Audit Committee meets at least twice a year and is responsible for monitoring the effectiveness of internal controls, risk management procedures and governance. Sustainability Risks The Company has a detailed risk matrix which it regularly reviews and which highlights critical risk factors the Company faces at any particular time. The principal risks highlighted are what would typically be expected for a small listed exploration company and include:  Reliance on key executives  Inability to access new exploration capital  Volatility in oil prices and applicable exchange rates (mainly USD)  Unsuccessful exploration results  Exposure to other operators, be it through Joint Venture agreements or actions of those operators in an operational sense  Legislature changes in jurisdictions the Company operates in (e.g. hydraulic fracturing ban in France) As the Company expands its activities either within existing projects or with the addition of new projects, it is expected that the sustainability risks will change accordingly. These Board reviews the overall sustainability of both the oil and gas exploration business and more specifically, the Company, in its normal course of business and therefore does not produce a separate sustainability report. the discretion of the Remuneration Committee and subject to obtaining the relevant approvals. The grant of options and/or performance rights is designed to recognise and reward efforts as well as to provide additional incentive and may be subject to the successful completion of performance hurdles. Executives are offered a competitive level of base pay at market rates (for comparable companies) and are reviewed annually to ensure market competitiveness. There are no termination or retirement benefits for non-executive directors (other than for superannuation). The Company’s Remuneration Committee Charter includes a statement regarding the Company’s policy on prohibiting transactions in associated products which limit the risk of participating in unvested elements under any equity based remuneration schemes. New Standard is committed in providing the right remuneration structure so that Board and Key Management Personnel are not unaware to shareholder value. The structure provides long and short term incentives designed to retain and motivate Board and Key Management Personnel in bringing more value to the Company. For personal use only AUDITORS’ INDEPENDENCE DECLARATION NEW STANDARD ENERGY LTD 2017 ANNUAL REPORT | 23 For personal use onlyINDEPENDENCE AUDIT REPORT 24 | NEW STANDARD ENERGY LTD 2017 ANNUAL REPORT For personal use onlyNEW STANDARD ENERGY LTD 2017 ANNUAL REPORT | 25 For personal use only26 | NEW STANDARD ENERGY LTD 2017 ANNUAL REPORT For personal use onlyCONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME for the year ended 30 June 2017 Continuing operations Other revenue Total revenue and other income Depreciation expenses Administrative expenses Share based payments Foreign exchange gain Impairment of exploration and evaluation and development expenditure Gain/(Loss) on investment in available-for-sale Fair value loss on available-for-sale financial assets Loss before income tax expense Income tax benefit Loss after income tax for the year from continuing operations Discontinued operations Loss on sale of subsidiary Loss attributable to owners of the Parent entity Other comprehensive income Items that may be reclassified subsequently to profit or loss Exchange differences on translation of foreign operations Other comprehensive (loss)/income for the year Total comprehensive loss for the year Total comprehensive loss for the year is attributable to: Owners of the Company Loss per share for loss from Continuing operations attributable to the ordinary shareholders of the Company Basic loss per share (cents per share) Diluted loss per share (cents per share) Discontinued operations attributable to the ordinary shareholders of the Company Basic earnings per share (cents per share) Diluted earnings per share (cents per share) Note 2 3 3 23 8 4 22 14 14 14 14 2017 $ 1,032 1,032 (35,602) (300,117) (85,307) (823) (433,699) 42,500 (80,865) (892,881) – (892,881) (16,354) (909,235) 16,354 16,354 (892,881) 2016 $ 38,057 38,057 (59,180) (1,203,373) (221,855) (1,151) (4,726,476) (464,536) (1,041,750) (7,680,264) – (7,680,264) 3,192,790 (4,487,474) (3,229,051) (3,229,051) (7,716,525) (892,881) (7,716,525) Cents Per Share Cents Per Share (0.15) (0.15) – – (1.75) (1.75) 0.73 0.73 The above consolidated statement of profit or loss and other comprehensive income should be read in conjunction with the accompanying notes. NEW STANDARD ENERGY LTD 2017 ANNUAL REPORT | 27 For personal use onlyCONSOLIDATED STATEMENT OF FINANCIAL POSITION as at 30 June 2017 Current Assets Cash and cash equivalents Trade and other receivables Available-for-sale financial asset Total Current Assets Non-Current Assets Available-for-sale financial asset Exploration and evaluation and development expenditure Property, plant and equipment Total Non-Current Assets Total Assets Current Liabilities Trade and other payables Total Current Liabilities Non-Current Liabilities Total Non-Current Liabilities Total Liabilities Net Assets Equity Issued capital Reserves Accumulated losses Total Equity Note 19(a) 6 7 7 8 9 10 11 12 13 2017 $ 460,157 22,099 37,200 519,456 94,736 – 112,034 206,770 726,226 256,177 256,177 – 256,177 2016 $ 233,268 28,062 125,000 386,330 152,800 – 147,636 300,436 686,766 259,726 259,726 – 259,726 470,049 427,040 68,737,842 (99,911) (68,167,882) 470,049 67,887,259 233,184 (67,693,403) 427,040 The above consolidated statement of financial position should be read in conjunction with the accompanying notes. 28 | NEW STANDARD ENERGY LTD 2017 ANNUAL REPORT For personal use only CONSOLIDATED STATEMENT OF CHANGES IN EQUITY for the year ended 30 June 2017 Issued Capital Accumulated Losses Share Based Payment Reserve Foreign Currency Translation Reserve $ $ $ $ 67,887,259 (67,693,403) 637,876 (404,692) 2017 Equity as at 1 July 2016 Loss for the year Realised profit on translation of foreign operations Total comprehensive loss Transactions with owners in their capacity as owners; – – – (892,881) (16,354) (909,235) – 434,756 – – – – – (434,756) 85,307 288,427 Issue of shares, net of transaction costs 850,583 Other comprehensive loss Share based payments – – Equity as at 30 June 2017 68,737,842 (68,167,882) – 16,354 16,354 – – – (388,338) Foreign Currency Translation Reserve 2016 Equity as at 1 July 2015 Loss for the year Realised profit on translation of foreign operations Total comprehensive loss Transactions with owners in their capacity as owners; Issued Capital Accumulated Losses Share Based Payment Reserve $ $ $ $ 67,011,182 (63,394,210) 604,302 2,824,359 – – – (4,487,474) – (4,487,474) – – – – (188,281) 221,855 637,876 – (3,229,051) (3,229,051) – – – (404,692) Issue of shares, net of transaction costs 876,077 Other comprehensive loss Share based payments – – – 188,281 – Equity as at 30 June 2016 67,887,259 (67,693,403) Total $ 427,040 (892,881) – (892,881) 850,583 – 85,307 470,049 Total $ 7,045,633 (4,487,474) (3,229,051) (7,716,525) 876,077 – 221,855 427,040 The above consolidated statement of changes of equity should be read in conjunction with the accompanying notes. NEW STANDARD ENERGY LTD 2017 ANNUAL REPORT | 29 For personal use only CONSOLIDATED STATEMENT OF CASH FLOWS for the year ended 30 June 2017 Cash Flows From Operating Activities Payments to suppliers and employees Interest received Interest Paid Cash flows from operating activities of discontinued operations Net cash (used in) operating activities Cash Flows From Investing Activities Reimbursement of exploration expenditure Payment for exploration, evaluation and development Proceeds from sale of plant and equipment Proceeds from sale of available-for-sale financial instrument Cash flows from investing activities of discontinued operations Net cash provided by/(used in) investing activities Cash Flows From Financing Activities Proceeds from issue of shares Cash flows from financing activities of discontinued operations Net cash flows provided by/(used in) financing activities Note 22(a) 19(b) 22(a) 22(a) 2017 $ (337,956) 1,032 – – 2016 $ (1,935,475) 10,329 – (36,260) (336,924) (1,961,406) – (432,479) – 107,500 – 245,974 (472,450) 39,253 1,064,696 – (324,979) 877,473 888,792 – 888,792 876,077 – 876,077 Net increase/(decrease) in cash and cash equivalents 226,889 (207,856) Cash and cash equivalents at beginning of the financial period Exchange rate adjustments Cash and cash equivalents at the end of the financial period 19(a) 233,268 – 460,157 440,894 230 233,268 The above consolidated statement of cash flows should be read in conjunction with the accompanying notes. 30 | NEW STANDARD ENERGY LTD 2017 ANNUAL REPORT For personal use only NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS for the financial year ended 30 June 2017 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. The address of the Company’s registered office and principal place of business is 6 Outram Street, West Perth WA 6005. 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. The financial statements and notes of the Group comply with International Financial Reporting Standards (‘IFRS’). The financial statements were authorised for issue by the Directors on 27 September 2017. 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. New Standard Energy Limited is a for-profit entity for the purpose of preparing the financial statements. The accounting policies set out below have been applied in preparing the financial statements for the year ended 30 June 2017. GOING CONCERN During the year the consolidated entity incurred a net loss after income tax from continuing operations for the year ended 30 June 2017 of $909,235 (2016: $4,487,474), incurred net cash outflows from operating and investing activities of $661,903 (2016: outflow $1,083,933) for continuing operations, and had net working capital of $263,279 at 30 June 2017. The ability of the consolidated entity to continue as a going concern is dependent on securing additional funding through capital raisings as and when required to continue to meet its working capital requirements in the next 12 months. These conditions indicate a material uncertainty that may cast significant doubt about the consolidated entity’s ability to continue as a going concern and, therefore, that it may be unable to realise its assets and discharge its liabilities in the normal course of business. The Directors believe that they will be able to raise additional capital as required and that the Group will continue as a going concern and as a result the financial report has been prepared on a going concern basis. In arriving at this position the Directors have considered the following pertinent matters:  The Company holds 2.13 million fully paid ordinary Sundance Energy (ASX:SEA) shares, including escrowed shares, which can be used by  the Group as a future funding source; In response to the falling oil price environment and to reserve the Company’s cash flow, the Non-Executive Chairman and all Non-Executive Directors have agreed to suspend the Non-Executive Chairman and all Non-Executive Directors’ fees until market conditions improve starting from 1 February 2015 and remain suspended to date and until the consolidated entity has the financial capacity to pay the Non- Executive Chairman and Non-Executive Directors’ fees.  Huizhou Energy Investment (Beijing) Co., Ltd have agreed that they will provide financial support to the consolidated entity in the event that the Company does not have the financial capacity to meet any liabilities that become due and payable; and  Should it be required the Directors are satisfied that they will be able to raise additional funds by either a form of equity rasing, implementing strategic joint ventures or by asset sale to fund ongoing exploration commitments and for working capital. However, should the consolidated entity not be able to continue as a going concern, it may be required to realise its assets and discharge its liabilities other than in the ordinary course of business, and at amounts that different from those stated in the financial statements. The financial report does not include any adjustments relating to the recoverability and classification of recorded asset amounts or liabilities that might be necessary should the consolidated entity not continue as a going concern. PRINCIPALS OF CONSOLIDATION (a) Subsidiaries Subsidiaries are all entities (including structured entities) over which the group has control. The group controls an entity when the group is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power to direct the activities of the entity. Subsidiaries are fully consolidated from the date on which control is transferred to the group. They are deconsolidated from the date that control ceases. Intercompany transactions, balances and unrealised gains on transactions between group companies are eliminated. Unrealised losses are also eliminated unless the transaction provides evidence of an impairment of the transferred asset. Accounting policies of subsidiaries have been changed where necessary to ensure consistency with the policies adopted by the group. Non-controlling interests in the results and equity of subsidiaries are shown separately in the consolidated statement of profit or loss and other comprehensive income, statement of changes in equity and statement of financial position respectively. NEW STANDARD ENERGY LTD 2017 ANNUAL REPORT | 31 For personal use only NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS for the financial year ended 30 June 2017 1. Summary of accounting policies (cont’d) (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 and other 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 cash flows 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 Consolidated Statement of Profit or Loss and Other Comprehensive Income. (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. 32 | NEW STANDARD ENERGY LTD 2017 ANNUAL REPORT For personal use only NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS for the financial year ended 30 June 2017 1. Summary of accounting policies (cont’d) 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) (b) The rights to tenure of the area of interest are current; and 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. (h) Non-current assets (or disposal groups) held for sale and discontinued operations Non-current assets (or disposal groups) are classified as held for sale if their carrying amount will be recovered principally through a sale transaction rather than through continuing use and a sale is considered highly probable. They are measured at the lower of their carrying amount and fair value less costs to sell, except for assets such as deferred tax assets, assets arising from employee benefits, financial assets and investment property that are carried at fair value and contractual rights under insurance contracts, which are specifically exempt from this requirement. An impairment loss is recognised for any initial or subsequent write-down of the asset (or disposal group) to fair value less costs to sell. A gain is recognised for any subsequent increases in fair value less costs to sell of an asset (or disposal group), but not in excess of any cumulative impairment loss previously recognised. A gain or loss not previously recognised by the date of the sale of the non-current asset (or disposal group) is recognised at the date of derecognition. Non-current assets (including those that are part of a disposal group) are not depreciated or amortised while they are classified as held for sale. Interest and other expenses attributable to the liabilities of a disposal group classified as held for sale continue to be recognised. NEW STANDARD ENERGY LTD 2017 ANNUAL REPORT | 33 For personal use only NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS for the financial year ended 30 June 2017 1. Summary of accounting policies (cont’d) (h) Non-current assets (or disposal groups) held for sale and discontinued operations (cont’d) Non-current assets classified as held for sale and the assets of a disposal group classified as held for sale are presented separately from the other assets in the consolidated statement of financial position. The liabilities of a disposal group classified as held for sale are presented separately from other liabilities in the consolidated statement of financial position. A discontinued operation is a component of the entity that has been disposed of or is classified as held for sale and that represents a separate major line of business or geographical area of operations, is part of a single co-ordinated plan to dispose of such a line of business or area of operations, or is a subsidiary acquired exclusively with a view to resale. The results of discontinued operations are presented separately in the consolidated statement of profit or loss and other comprehensive income. (i) 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. Available-for-sale financial assets Available-for-sale financial assets, comprising principally of 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 financial 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. (j) 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 with a corresponding increase in equity. The total amount to be expensed is determined by reference to the fair value of the options granted, which includes any market performance conditions and the impact of any non-vesting conditions but excludes the impact of any service and non-market performance vesting conditions. 34 | NEW STANDARD ENERGY LTD 2017 ANNUAL REPORT For personal use only NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS for the financial year ended 30 June 2017 1. Summary of accounting policies (cont’d) (j) Share-based payments (cont’d) Non-market vesting conditions are included in assumptions about the number of options that are expected to vest. The total expense is recognised over the vesting period, which is the period over which all of the specified vesting conditions are to be satisfied. At the end of each period, the entity revises its estimates of the number of options that are expected to vest based on the non-market vesting conditions. The above policy is applied to all equity-settled share-based payments. (k) Revenue recognition Revenue from the sale of oil and gas related products are recognised when the significant risks and rewards of ownership has transferred to the buyer and can be measured reliably. In the case of oil, this is usually at the time of lifting. Interest income is recognised in profit or loss as it accrues and takes into account 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. (l) Property, plant and equipment Owned assets Items of property, plant and equipment are recognised at cost less accumulated depreciation (see below) and impairment losses (where applicable).. 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 useful life and depreciation method applied to an asset are reassessed at least annually. The estimated useful lives for each class of assets in the current and comparative periods are as follows: Class of fixed asset Motor Vehicles Plant and equipment Estimated useful live 4-5 years 1-15 years depending on the nature of the asset Leasehold improvements 3-10 years depending on the nature of the asset The useful life and depreciation method applied to an asset are reassessed at least annually. (m) 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. (n) 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. (o) 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. NEW STANDARD ENERGY LTD 2017 ANNUAL REPORT | 35 For personal use only NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS for the financial year ended 30 June 2017 1. Summary of accounting policies (cont’d) (p) 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. (q) Foreign currency translation 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. 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 recognised in other comprehensive income. 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) (ii) assets and liabilities for each statement of financial position presented are translated at the closing rate at reporting date income and expenses for each item in the statement of profit or loss and other 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 all resulting exchange differences are recognised in other comprehensive income. (iii) 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. (r) 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. (s) Adoption of new and revised accounting standards The accounting policies adopted in the preparation of the consolidated financial statements are consistent with those following in the preparation of the Group’s annual consolidated financial statements for the year ended 30 June 2015, except for the adoption of new standards and interpretations effective was of 1 July 2015 detailed below: AASB 2015-3 Amendments to Australian Accounting Standards arising from the Withdrawal of AASB 1031 Materiality AASB 1031 will be withdrawn when references to AASB 1031 in all Standards and Interpretations have been removed. AASB 2014-1 Part C issued in June 2014 makes amendments to eight Australian Accounting Standards to delete their references to AASB 1031. The adoption of these new and revised standards has not resulted in any significant changes to the Group’s accounting policies or to the amounts reported for the current or prior periods. 36 | NEW STANDARD ENERGY LTD 2017 ANNUAL REPORT For personal use only NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS for the financial year ended 30 June 2017 1. Summary of accounting policies (cont’d) (t) Standards and interpretations issued not yet effective Accounting Standards issued by the AASB that are not yet mandatorily applicable to the Group, together with an assessment of the potential impact of such pronouncements on the Group when adopted in future periods, are discussed below: Application date of standard 1 January 2018 Application date for Group 1 July 2018 1 January 2018 1 July 2018 Reference / Title Summary AASB 9 Financial Instruments and associated Amending Standards AASB 15 Revenue from Contracts with Customers The Standard will be applicable retrospectively (subject to the provisions on hedge accounting outlined below) and includes revised requirements for the classification and measurement of financial instruments, revised recognition and derecognition requirements for financial instruments and simplified requirements for hedge accounting. The key changes that may affect the Group on initial application include certain simplifications to the classification of financial assets, simplifications to the accounting of embedded derivatives, upfront accounting for expected credit loss, and the irrevocable election to recognise gains and losses on investments in equity instruments that are not held for trading in other comprehensive income. AASB 9 also introduces a new model for hedge accounting that will allow greater flexibility in the ability to hedge risk, particularly with respect to hedges of non-financial items. Although the directors anticipate that the adoption of AASB 9 may have a non- material impact on the Group’s financial instruments. It is impractical at this stage to provide a reasonable estimate of such impact. When effective, this Standard will replace the current accounting requirements applicable to revenue with a single, principles-based model. Except for a limited number of exceptions, including leases, the new revenue model in AASB 15 will apply to all contracts with customers as well as non-monetary exchanges between entities in the same line of business to facilitate sales to customers and potential customers. The core principle of the Standard is that an entity will recognise revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for the goods or services. To achieve this objective, AASB 15 provides the following five-step process:     identify the contract(s) with a customer; identify the performance obligations in the contract(s); determine the transaction price; allocate the transaction price to the performance obligations in the contract(s); and  recognise revenue when (or as) the performance obligations are satisfied. The transitional provisions of this Standard permit an entity to either: restate the contracts that existed in each prior period presented per AASB 108: Accounting Policies, Changes in Accounting Estimates and Errors (subject to certain practical expedients in AASB 15); or recognise the cumulative effect of retrospective application to incomplete contracts on the date of initial application. There are also enhanced disclosure requirements regarding revenue. Although the directors anticipate that the adoption of AASB 15 may have a non-material impact on the Group's financial statements. It is impractical at this stage to provide a reasonable estimate of such impact. NEW STANDARD ENERGY LTD 2017 ANNUAL REPORT | 37 For personal use only NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS for the financial year ended 30 June 2017 1. Summary of accounting policies (cont’d) (bb) Standards and interpretations issued not yet effective (cont’d) Reference / Title Summary AASB 16 Leases this Standard will When effective, the current accounting requirements applicable to leases in AASB 117: Leases and related Interpretations. AASB 16 introduces a single lessee accounting model that eliminates the requirement for leases to be classified as operating or finance leases. replace Application date of standard 1 January 2019 Application date for Group 1 July 2019 The main changes introduced by the new Standard includes:     recognition of a right-to-use asset and liability for all leases (excluding short-term leases with less than 12 months of tenure and leases relating to low-value assets); depreciation of right-to-use assets in line with AASB 116: Property, Plant and Equipment in profit or loss and unwinding of the liability in principal and interest components; variable lease payments that depend on an index or a rate are included in the initial measurement of the lease liability using the index or rate at the commencement date; by applying a practical expedient, a lessee is permitted to elect not to separate non-lease components and instead account for all components as a lease; and additional disclosure requirements. transitional provisions of AASB 16 allow a  The to either retrospectively apply the Standard to comparatives in line with AASB 108 or recognise the cumulative effect of retrospective application as an adjustment to opening equity on the date of initial application. Although the directors anticipate that the adoption of AASB 16 will have a non-material impact the Group's financial statements. It is impractical at this stage to provide a reasonable estimate of such impact lessee 1 July 2018 1 January 2018 as deferred by AASB 2015- 10: Amendments to Australian Accounting Standards – Effective Date of Amendments to AASB 10 and AASB 128 AASB 2014-10 Amendments to Australian Accounting Standards – Sale or Contribution of Assets between an Investor and its Associate or Joint Venture This Standard amends AASB 10: Consolidated Financial Statements with regards to a parent losing control over a subsidiary that is not a "business" as defined in AASB 3 to an associate or joint venture, and requires that:    a gain or loss (including any amounts in other comprehensive income (OCI)) be recognised only to the extent of the unrelated investor's interest in that associate or joint venture; the remaining gain or loss be eliminated against the carrying amount of the investment in that associate or joint venture; and any gain or loss from remeasuring the remaining investment in the former subsidiary at fair value also be recognised only to the extent of the unrelated investor's interest in the associate or joint venture. The remaining gain or loss should be eliminated against the carrying amount of the remaining investment. The application of AASB 2014-10 will result in a change in accounting policies for transactions of loss of control over subsidiaries (involving an associate or joint venture) that are businesses per AASB 3 for which gains or losses were previously recognised only to the extent of the unrelated investor's interest. The transitional provisions require that the Standard should be applied prospectively to sales or contributions of subsidiaries to associates or joint ventures occurring on or after 1 January 2018. Although the directors anticipate that the adoption of AASB 2014-10 may have an impact on the Group's financial statements, it is impracticable at this stage to provide a reasonable estimate of such impact. There are no other standards that are not yet effective and that are expected to have a material impact on the entity in the current or future reporting periods and on foreseeable future transactions. 38 | NEW STANDARD ENERGY LTD 2017 ANNUAL REPORT For personal use only NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS for the financial year ended 30 June 2017 1. Summary of accounting policies (cont’d) CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS 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. 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 and development 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 Company has taken a conservative view taking into consideration the market condition and that no exploration expenditure, other than rental and incidental land costs were incurred during the year with no expenditure budgeted for the financial year ended 30 June 2017 that the carrying amount of exploration and evaluation expenditure be fully impaired for all projects at 30 June 2017. The ultimate recoupment of costs carried forward for exploration and evaluation assets is dependent either upon the successful development and commercial exploitation, or sale, of the respective areas of interest. If the asset is successfully developed it will be transferred and reclassified as a production asset. The production asset will then be accounted within Oil and Gas properties to which its carrying value will be depleted as production value is extracted from the asset. Rehabilitation The Company is continuing to assess its potential rehabilitation obligations and associated costs with respect to its historical drilling activities. Given that the likely outflow of economic benefits is currently not clear, the matter has been considered a contingent liability and a provision in relation to the potential rehabilitation obligations has not been recognised. The timing of recognition of a provision related to potential rehabilitation obligations is considered a significant judgement. Deferred tax balances The Group has carried forward losses which have been recognised as deferred tax assets as it is probable that the company will derive future assessable income of a nature and amount sufficient to enable the benefit to be realised. 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. Impairment The carrying amounts of the Group’s assets are reviewed at the end of the reporting period to determine whether there is any indication of impairment. If any such indication exists, the assets recoverable amount is estimated. An impairment loss is recognised whenever the carrying amount of an assets or its cash-generating unit exceeds its recoverable amount. The recoverable amount of an asset is the greater of its fair value less cost to sell and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a post-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. For an asset that does not generate independent cash inflows, the recoverable amount is determined for the cash generating unit to which the assets belong. 2. Revenue Revenue: Interest revenue Other income consisted of the following items: Other income Total Revenue 2017 $ 1,032 – 1,032 2016 $ 10,421 27,636 38,057 NEW STANDARD ENERGY LTD 2017 ANNUAL REPORT | 39 For personal use only 2017 $ 2016 $ 35,602 59,180 130,631 54,049 30,912 84,525 300,117 466,706 395,171 196,729 144,767 1,203,373 – – – – – – – (909,235) (272,771) 25,592 – – – – 4,906 (242,273) 242,273 – – – – – – – – (4,487,474) (1,346,242) 66,557 10,140 147 (220,230) – (957,837) (2,447,465) 2,447,465 – NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS for the financial year ended 30 June 2017 3. Expenses Depreciation expenses Administrative expenses Employee benefit expenses Professional fees Occupancy expenses Other administrative expenses Total administrative expenses Income tax expenses The components of tax expense comprise: 4. (a) Current tax Deferred tax (Unders)/overs Deferred tax expense/(benefit) included in income tax expense comprises: Decrease in deferred tax assets Increase in deferred tax liabilities (b) The prima facie tax from ordinary activities before income tax is reconciled to the income tax expense as follows: Loss before tax Tax benefit calculated at 30% Tax effect of amount which are not deductible/(taxable) in calculating taxable income: Share based payments Other permanent difference Entertainment Difference in overseas tax rate Deferred tax asset not previously recognised Permanent differences arising for discontinued operations Tax losses and timing differences not recognised Income tax benefit The Company will have no tax payable due to prior year losses carried forward and tax deductible exploration expenditure. New Standard Energy Limited and its wholly owned Australian controlled entities elected to enter into the tax consolidation legislation from 1 July 2008. On adoption of the tax consolidation legislation, the entities in the tax consolidated group entered into a tax sharing agreement which, in the opinion of the Directors, limits the joint and several liability of the wholly owned entities in the case of a default by the head entity, New Standard Energy Limited. 40 | NEW STANDARD ENERGY LTD 2017 ANNUAL REPORT For personal use only NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS for the financial year ended 30 June 2017 4. (c) Income tax expenses (cont’d) Unrecognised temporary differences Deferred tax assets Deferred tax liabilities Unrecognised net deferred tax asset 5. Auditors’ remuneration Auditor of the parent entity BDO Audit (WA) Pty Ltd 6. Trade and other receivables Current Trade receivables Other receivables 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 20 for the Group’s risk management objectives and policies. 7. Available-for-sale financial investments Listed securities Current Sundance Energy Australia Ltd (i) Carrying amount at the end of period Non-current Sundance Energy Australia Ltd (i) Carrying amount at the end of period (i) The Company held 600,000 freely tradable fully paid ordinary SEA shares and 1.53 million SEA shares on escrow pursuant to the share sale agreement as at 30 June 2017. 8. Exploration and evaluation expenditure Balance at beginning of the year Expenditure incurred Expenditure impaired (i) Expenditure recovered (ii) 2017 $ 2016 $ 6,506,419 – 6,506,419 9,764,579 (28) 9,764,551 38,376 38,376 – 22,099 22,099 37,200 37,200 94,736 94,736 – 433,699 (433,699) – 48,961 48,961 – 28,062 28,062 125,000 125,000 152,800 152,800 4,500,000 472,450 (4,726,476) (245,974) Balance at end of the year (i) During the year the Company recognised a full non-cash impairment charge of $433,699 relating to the carried forward capitalised exploration expenditure associated with its exploration assets based in Western Australia. The impairment of the exploration, evaluation and development expenditure has arisen as a result of the relinquishment of licences and applications for exemptions of minimum expenditure requirements that have yet to be approved. The Company has taken a conservative view of the carrying value for the projects at 30 June 2017 considering no exploration expenditure, other than rental and incidental land costs, has been budgeted for the financial year ended 30 June 2018. This charge reflects the steps and measures followed pursuant to the Australian Accounting Standards (AASB6) when testing for impairment indicators. This charge has been recognised in the consolidated statement of profit or loss and other comprehensive income. – – (ii) The Company received a Research & Development Tax Concession claim for $245,974 relating to applicable works undertaken in the year ended 30 June 2015 in the Canning and Carnarvon Basins. The Company did not submit claims for 30 June 2016. NEW STANDARD ENERGY LTD 2017 ANNUAL REPORT | 41 For personal use only NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS for the financial year ended 30 June 2017 8. Exploration and evaluation expenditure (cont’d) The Board assess impairment of all exploration expenditure at each reporting date by evaluating the conditions specific to the Company and the particular asset. These include if substantive expenditure has been incurred on exploration and evaluation of resources and this has not led to the discovery of commercially 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 of by sale. The Company is currently in discussion with the Department of Mines and Petroleum (DMP) and has submitted an application for variations and exemptions on the exploration work commitments for the existing permits which allows the Company to renew the permits at the end of 2017. In the event the application is not approved the Company will have to reassess the existing permits, including potential relinquishment of all or part of the permits. The Company has taken a conservative view and have fully impaired the capitalised exploration and evaluation expenditure of the carrying value for the projects at 30 June 2017 considering no exploration expenditure, other than rental and incidental land costs, has been budgeted for the financial year ended 30 June 2018. The ultimate recoupment of exploration expenditure carried forward is dependent on successful development and exploitation, or alternatively sale, of the respective area of interest. The Consolidated Entity has interests in the following wholly-owned and non-wholly owned oil and gas exploration and development assets: Operator: New Standard Onshore Pty Ltd Principal activity: Exploration, of hydrocarbons Country: Australia Area Carnarvon Basin Asset EP481 EP482 Percentage Interest 100% 100% 9. Property, plant and equipment Property, plant and equipment Accumulated depreciation Closing net book amount 2016 Balance at 1 July 2015 Additions Disposals Depreciation expense Balance at 30 June 2016 2017 Additions Disposals Depreciation expense Balance at 30 June 2017 2017 $ 341,582 (229,548) 112,034 Furniture and equipment $ Leasehold improvements $ 221,787 – (14,971) (59,180) 147,636 – – (35,602) 112,034 80,950 – (80,950) – – – – – – 2016 $ 341,582 (193,946) 147,636 Total $ 302,737 – (95,921) (59,180) 147,636 – – (35,602) 112,034 42 | NEW STANDARD ENERGY LTD 2017 ANNUAL REPORT For personal use only NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS for the financial year ended 30 June 2017 10. Trade and other payables Current Trade payables Sundry payables and accrued expenses 2017 $ 49,462 206,715 256,177 2016 $ 19,678 240,048 259,726 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 20 for the Group’s risk management objectives and policies. 11. Issued capital 716,418,005 fully paid ordinary shares (2016: 477,612,003) 68,737,842 67,887,259 (a) Fully paid ordinary shares 2016 Balance at 1 July 2015 On 1 December 2015, issue of shares to Huizhou Energy Investments (Beijing) Co Ltd On 3 June 2016, consideration for forfeited shares held by the Company Less: Transaction costs arising from issue of shares Balance at 30 June 2016 2017 Balance at 1 July 2016 On 29 December 2016, issue of shares to shareholders for Right Issue 2-for-1 On 30 December 2016, issue of shares to Huizhou Energy Investments Less: Transaction costs arising from issue of shares Balance at 30 June 2017 (b) Terms and conditions of Issue Capital No. $ 386,169,603 91,442,400 – 477,612,003 477,612,003 39,051,377 199,754,625 716,418,005 67,011,182 914,424 1,855 67,927,461 (40,202) 67,887,259 67,887,259 156,206 799,018 68,842,483 (104,641) 68,737,842 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 and incentive rights Information on options and incentive rights granted to Directors and employees as remuneration during the period including the Long Term Incentive Plan (LTIP) are disclosed in note 18 of the consolidated financial statements. NEW STANDARD ENERGY LTD 2017 ANNUAL REPORT | 43 For personal use only NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS for the financial year ended 30 June 2017 2017 $ 288,427 (388,338) (99,911) 2016 $ 637,876 (404,692) 233,184 637,876 604,302 85,307 – (434,756) 288,427 125,216 96,639 (188,281) 637,876 (404,692) 2,824,359 – – (404,692) – (3,229,051) (404,692) (67,693,403) (909,235) (63,394,210) (4,487,474) 434,756 – 188,281 – (68,167,882) (67,693,403) 2017 Cents per share 2016 Cents per share (0.15) – (0.15) – (1.75) 0.73 (1.75) 0.73 12. Reserves Share based payments reserve Foreign currency translation reserve (a) Movements in share based payments reserve Balance at the beginning of the year Add: Issue of options Directors Employees Less: Options and/or rights expired and lapsed Balance at the end of year Nature and purpose of reserve The share based payments reserve represents the value of shares and options issued to employees and directors. (b) Movements in foreign currency translation reserve Balance at the beginning of the year Unrealised profit on translation of foreign operation Realised profit from discontinued operations Balance at the end of the year 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. 13. Accumulated losses Balance at the beginning of the year Net loss attributable to members of the Company Items of other comprehensive income recognised directly in retained earnings Expired options / rights in prior periods Realised foreign exchange gain from discontinued operations in prior periods Balance at the end of the year 14. Loss per share Basic earnings/(loss) per share Continuing operations Discontinued operations Diluted earnings/(loss) per share Continuing operations Discontinued operations The earnings and weighted average number of ordinary shares used in the calculation of basic and diluted earnings per share are as follows: 44 | NEW STANDARD ENERGY LTD 2017 ANNUAL REPORT For personal use only NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS for the financial year ended 30 June 2017 14. Loss per share (cont’d) (Loss)/profit for the year Continuing operations Discontinued operations Weighted average number of ordinary shares used in the calculation of basic EPS Weighted average number of ordinary shares used in the calculation of diluted EPS 15. Dividends There have been no dividends paid or proposed in the 2017 or 2016 financial years. 16. Commitments for expenditure $ $ (892,881) (16,354) No. 596,794,863 596,794,863 (7,680,264) 3,192,790 No. 439,136,239 439,136,239 Exploration Permits and Oil and Gas Leases – Commitments for Expenditure 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 year Longer than 5 years In order to maintain current rights of tenure to Australian exploration permits and tenements, the Group is required to meet the minimum expenditure requirements established with the Western Australian Department of Mines and Petroleum (DMP). The above commitments reflect the minimum work programs and costs as required by the DMP and total $10 million. The rights of tenure to the exploration permits and tenements may be reduced by sale, farm-out, renegotiation or relinquishment. In the event the Company does not meet the minimum expenditure requirements the rights to tenure will be relinquished and the Company will have no further obligation to the DMP to meet the minimum expenditure requirements. Leases The Company entered into an operating lease agreement effective 13 July 2015 for the corporate head offices at 6 Outram 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 year Longer than 5 years 2017 $ – 10,000,000 – 2016 $ 14,000,000 10,000,000 – 10,000,000 24,000,000 8,226 – – 8,226 8,723 – – 8,723 NEW STANDARD ENERGY LTD 2017 ANNUAL REPORT | 45 For personal use only NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS for the financial year ended 30 June 2017 17. Segment reporting The segment information provided to the Managing Director for the reportable segments for the year ended 30 June 2017 are as follows: Australia The Group currently operates within the Carnavon geological basins. United States On 10 August 2015 the Group completed the sale of assets including NSE Texas LLC, which held the producing Eagleford asset located within the Atascosa and Colorado counties and NSE PEL 570 Pty Ltd which held the Copper Basin asset to Sundance Energy Australia Ltd. In accordance with AASB 5 the revenue, expenses, assets and liabilities of New Standard Energy Texas LLC (United States) and New Standard Energy PEL 570 Pty Ltd (Australia) are disclosed as discontinued operations. Refer to note 22 for further information. Australia United States Total 30 Jun 2017 30 Jun 2016 30 Jun 2017 30 Jun 2016 30 Jun 2017 30 Jun 2016 Administration and employment expenses (448,848) (1,334,912) 81,850 (71,141) (366,998) (1,406,053) Depreciation (35,602) (59,180) Impairment expenses (433,699) (4,726,476) Loss on available-for- sale financial assets 42,500 (464,536) Fair value adjustment (80,865) (1,041,750) – – – – – – – – (35,602) (59,180) (433,699) (4,726,476) 42,500 (464,536) (80,865) (1,041,750) Reportable loss Other income Other expenses (956,514) (7,626,854) 81,850 (71,141) (874,664) (7,697,995) 1,032 (35,603) 38,057 (20,326) – – – – 1,032 (35,603) 38,057 (20,326) Net loss before tax (991,085) (7,609,123) 81,850 (71,141) (909,235) (7,680,264) 30 Jun 2017 30 Jun 2016 30 Jun 2017 30 Jun 2016 30 Jun 2017 30 Jun 2016 Segment assets Exploration assets Available for sale financial assets Other assets Total assets Segment liabilities Other liabilities Total liabilities Net assets – 131,936 466,312 598,248 256,177 256,177 342,071 – – 686,764 686,764 – 259,726 259,726 427,038 – – 127,978 127,978 – – 127,978 18. Related party disclosure (a) Key Management Personnel compensation Short term employee benefits Post-employment benefits Share based payments – – 2 2 – – – 2 – 131,936 594,290 726,226 256,177 256,177 470,049 2017 $ 94,076 6,764 85,307 186,147 – – 686,766 686,766 – 259,726 259,726 427,040 2016 $ 377,274 21,039 125,216 523,529 Detailed remuneration disclosures are provided in the remuneration report included in the Directors’ Report. (b) Transactions with related parties China International Economic Huizhou Energy Investment (Beijng) Co., Ltd. (Huizhou), of which Mr Hui Song is a Director, fully underwrote the rights issue completed on 23 November 2017. Pursuant to the Underwriting Agreement, the Company agreed to pay Huizhou an underwriting fee of 4% of the value of the underwritten shares which amounted to $38,209 which was owing to Huizhou at 30 June 2017 (2016: Nil). 46 | NEW STANDARD ENERGY LTD 2017 ANNUAL REPORT For personal use only NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS for the financial year ended 30 June 2017 19. Notes to the Statement of Cash Flow For the purposes of the statement of cash flows, cash includes cash on hand and in banks less un-presented cheques 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: (a) Reconciliation of cash and cash equivalents Cash and cash equivalents (b) Reconciliation of net loss after tax to net cash flow from operating activities Loss after income tax Non-cash expenditure: Share based payments Depreciation expense Impairment of exploration and development expenditure Gain on disposal of property, plant and equipment Loss on disposal of property, plant and equipment Loss on investment in available-for-sale asset Fair value gain/(loss) on available-for-sale financial assets through profit or loss Gain/(loss) on foreign exchange Net effect from discontinued operations (Increase)/decrease in assets: Current receivables Increase/(decrease) in liabilities: Current payables Net cash used in operating activities 2017 $ 2016 $ 460,157 233,268 (909,235) (4,487,474) 85,307 35,602 433,699 – – (42,500) 80,865 16,354 – 221,855 59,180 4,726,476 (39,253) 95,921 464,536 1,041,750 1,151 (3,711,324) 5,963 36,308 (42,979) (336,924) (370,532) (1,961,406) (c) Reconciliation of net loss after tax to net cash flow from operating activities There were no non-cash investing and financing activities during the year ended 30 June 2017 and 30 June 2016. 20. Financial risk management (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 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 profit or loss and other comprehensive income. Financial assets Cash at bank Note 19(a) Float interest rate Total carrying amount 2017 $ 460,157 460,157 2016 $ 233,268 233,268 2017 $ 460,157 460,157 2016 $ 233,268 233,268 NEW STANDARD ENERGY LTD 2017 ANNUAL REPORT | 47 For personal use only NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS for the financial year ended 30 June 2017 20. Financial risk management (cont’d) (b) Liquidity risk The table below analyses the Group’s financial liabilities into relevant maturity groupings based on their contractual maturities as at 30 June 2017. The amounts disclosed in the table are the contractual undiscounted cash flows. Less than 1 year $ Between 1 and 2 years $ Between 2 and 5 years $ Total contractual cash flow $ Carrying amount of liabilities $ 2017 Trade payables 2016 Trade payables (c) Currency risk 256,177 256,177 259,726 259,726 – – – – – – – – 256,177 256,177 259,726 259,726 256,177 256,177 259,726 259,726 During the year the Group has operations located in the United States where minimal expenditures are recorded. Foreign exchange risk arises from commercial transactions and recognised assets and liabilities denominated in a currency that is not the Group's functional currency. The Group’s exposure to foreign exchange risk at the reporting date is limited to the transfer of funding from the Australian head office to US operations that is provided in US dollars. During the year, the Group was not involved in joint venture with third parties and has no expenditure commitments or liabilities outstanding as at 30 June 2017. The Group announced the disposal of Outback Energy Hunter Pty Ltd, NSE PEL570 Pty Ltd, NSE Texas LLC and the Colorado Asset. The transaction was approved by shareholders on 4 August 2015 and the sale completed on 10 August 2015. In accordance with AASB 5 the revenue of New Standard Energy Texas LLC and New Standard Energy PEL 570 Pty Ltd are disclosed as discontinued operations. Refer to note 22 for further information. As operational activity has since decreased significantly in the United States, foreign exchange exposure was negligible, no foreign exchange hedge contracts were in place at year end. The Group is in the process of dissolving all its US entities. As such, no sensitivity analysis is required or provided. (d) Fair value The fair value of financial assets and liabilities must be estimated for recognition and measurement or for disclosure purposes. The fair value of financial instruments traded in active markets is based on quoted market prices at the reporting date and represent fair value. The fair value of investment in associates is equal to the carrying value, and accounts for the Group’s share in the net profit or loss of the associate. The fair value of financial instruments that are not traded in an active market is determined using valuation techniques. The Group makes a number of assumptions based upon observable market data existing at each reporting period. The fair value of current financial assets and liabilities settled within 12 months approximate fair value due to their short term nature. The following tables classify financial instruments recognised in the statement of financial position of the Group, according to the hierarchy stipulated in AASB 13 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). 2017 Available for sale investments (i) Total 2016 Available for sale investments (i) Total Level 1 $ 131,936 131,936 277,800 277,800 Level 2 $ Level 3 $ – – – – – – – – Total $ 131,936 131,936 277,800 277,800 (i) The fair value of the available-for-sale financial assets is derived from quoted market prices in an active market. 48 | NEW STANDARD ENERGY LTD 2017 ANNUAL REPORT For personal use only NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS for the financial year ended 30 June 2017 20. Financial risk management (cont’d) (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 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. The Group has apportioned cash reserves amongst several financial institutions and 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) (f) Price risk 2017 $ 332,179 127,978 460,157 2016 $ 233,266 2 233,268 On 26 June 2015 the Group announced the disposal of assets to Sundance Resources Ltd. The transaction was approved by shareholders on 4 August 2015 and the sale completed on 10 August 2015. Sundance Resources Ltd assumed all debt and liabilities associated with the asset. A sensitivity analysis is not included because based on the disposal of asset as at 30 June 2016 the sensitivity analysis is deemed not to have a material impact on the Consolidated Profit or Loss and other Comprehensive Income. 21. Subsidiaries Name of entity Parent entity Country of incorporation Nature of activities Ownership interest 2017 2016 New Standard Energy Limited Australia Exploration, development & production of hydrocarbons 100 100 Subsidiaries New Standard Onshore Pty Ltd Australia Exploration of hydrocarbons New Standard Energy Inc New Standard Energy Colorado LLC (i) New Standard Energy Ventures LLC (i) USA USA USA Exploration, development of hydrocarbons Exploration, development & production of hydrocarbons Exploration, development & production of hydrocarbons 100 100 – – 100 100 100 100 (i) The companies initiated a voluntary dissolution during the year. The Certificate of Termination for the companies were received on 2 September 2017. 22. Disposal of subsidiary – gain on sale of subsidiary 2016 On 10 August 2015 the Group completed the sale of assets including NSE Texas LLC, which held the producing Eagleford asset located within the Atascosa and Colorado counties and NSE PEL 570 Pty Ltd which held the Copper Basin asset to Sundance Energy Australia Ltd (Sundance). The following were the results of the business for the year. (a) Financial performance and cash flow information Revenue Operating expenses Foreign exchange impact during the period Impairment of asset held for sale Loss before income tax Income tax expense /(credit) Loss after income tax 1 month ended 31 Jul 2015 $ 12 months ended 30 Jun 2015 $ 180,555 (633,571) 112,865 – (340,151) – 5,821,128 (8,080,509) – (44,960,603) (47,219,984) – (340,151) (47,219,984) NEW STANDARD ENERGY LTD 2017 ANNUAL REPORT | 49 For personal use only NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS for the financial year ended 30 June 2017 22. Disposal of subsidiary – gain on sale of subsidiary (cont’d) The following were the net cash outflow for the period Net cash outflow from operating activities Net cash inflow from investing activities Net cash outflow from financing activities Total Consideration (b) Details of the sale of the subsidiaries 1 month ended 31 Jul 2015 $ 12 months ended 30 Jun 2015 $ (36,260) – – (36,260) (1,005,446) 10,202,901 (7,970,155) 1,227,300 The net assets of NSE Texas LLC and New Standard Energy PEL570 Pty Ltd at the date of disposal were as follows: Consideration Less: Carrying value of net assets disposed Reclassification of foreign exchange reserve Revenue Operating expenses Foreign exchange impact during the period Gain on sale of subsidiary 10 Aug 2015 $ 2,850,000 (2,546,109) 3,229,050 3,532,941 180,555 (633,571) 112,865 3,192,790 22. Disposal of subsidiary – gain on sale of subsidiary (cont’d) A gain of $3,192,790 was recognised on the disposal of NSE Texas LLC and New Standard Energy PEL570 Pty Ltd, no tax charge or credit arose on the transaction. The sales proceed for the net assets above is 6,000,000 Sundance Energy Australia Limited's ordinary shares, the majority of which will be freely tradable. Based on the share price of 47.5 cents as at 10 August 2015, the scrip component of the consideration is valued at A$2,850,000 was transferred to available-for-sale financial assets (refer to note 7). 23. Share based payments Expenses arising from share-based payment transactions Options issued to directors Incentive rights issued to directors Options issued to employees Incentive rights issued to employees Unlisted options 2017 $ – 85,307 – – 85,307 2016 $ – 125,216 7,218 89,421 221,855 The Employee Share Option Plan (ESOP) was approved by shareholders at the 2011 annual general meeting. The ESOP is designed to provide long-term incentives for senior managers and executives to deliver long-term shareholder returns. Under the Plan, participants are granted Options which only vest if certain tenure requirements are met. Participation in the ESOP is at the Board's discretion and no individual has a contractual right to participate in the Plan or to receive any guaranteed benefits. Options are granted under the Plan for no consideration, and carry no dividend or voting rights. 50 | NEW STANDARD ENERGY LTD 2017 ANNUAL REPORT For personal use only NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS for the financial year ended 30 June 2017 23. Share based payments (cont’d) Grant date Expiry date 2017 13 Feb 14 13 Feb 14 12 Dec 16 12 Dec 16 27 May 14 26 May 17 27 May 14 26 May 17 6 Aug 14 6 Aug 14 5 Aug 17 5 Aug 17 Weighted average exercise price 2016 12 Dec 12 12 Dec 12 12 Dec 13 12 Dec 13 12 Dec 13 12 Dec 13 13 Feb 14 13 Feb 14 12 Dec 15 12 Dec 15 1 Apr 16 1 Apr 16 1 Apr 16 1 Apr 16 12 Dec 16 12 Dec 16 27 May 14 26 May 17 27 May 14 26 May 17 6 Aug 14 6 Aug 14 5 Aug 17 5 Aug 17 Weighted average exercise price Exercise price $ Balance at start of year No. Granted No. Exercised No. Lapsed No. During the year Balance at end of year No. Vested and exercisable at end of year No. 0.519 0.581 0.224 0.248 0.167 0.187 0.390 0.440 0.400 0.400 0.500 0.500 0.519 0.581 0.224 0.248 0.167 0.187 100,000 100,000 75,000 75,000 500,000 500,000 1,350,000 0.24 300,000 300,000 500,000 500,000 500,000 500,000 100,000 100,000 75,000 75,000 500,000 500,000 3,950,000 0.37 – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – (100,000) (100,000) (75,000) (75,000) – – – – – – – – – – 500,000 500,000 500,000 500,000 (350,000) 1,000,000 1,000,000 0.42 0.18 0.18 (300,000) (300,000) (500,000) (500,000) (500,000) (500,000) – – – – – – – – – – – – 100,000 100,000 75,000 75,000 500,000 500,000 – – – – – – 100,000 100,000 75,000 75,000 500,000 500,000 (2,600,000) 1,350,000 1,350,000 0.44 0.24 0.24 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 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. 2017 There were no share options granted during the 2017 financial year. 2016 There were no share options granted during the 2016 financial year. 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. NEW STANDARD ENERGY LTD 2017 ANNUAL REPORT | 51 For personal use only NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS for the financial year ended 30 June 2017 23. Share based payments (cont’d) Incentive rights The LTIP was introduced during the 2013 financial year with effect from 15 September 2012. Under the plan, the Board may offer Incentive Rights in the form of Performance Rights and Retention Rights. There were no Performance Rights and Retention Rights granted during the 2017 financial year. During the 2015 financial year Performance Rights and Retention Rights were granted to executives as part of their remuneration packages. On the vesting date the performance rights will be tested against the absolute TSR criteria, and the retention rights tested against tenure criteria. Only those rights that satisfy the criteria will vest, and the remainder will immediately lapse. Refer to the Director's Report for further details on the structure of the LTIP. The table below outlines movements in Incentive Rights during the 2017 and 2016 financial year and the balance held as at 30 June 2017 and 30 June 2016. Date Grant Expiry FV of each rights $ Balance at start of year No. During the year Granted No. Vested No. Lapsed No. Balance at end of year No. Type of incentive rights 2017 Performance Rights 14 Feb 14 14 Sep 16 0.080 1,800,000 Performance Rights 14 Feb 14 14 Sep 16 0.088 1,000,000 Performance Rights 14 Feb 14 14 Sep 16 0.081 300,000 Performance Rights 14 Feb 14 14 Sep 16 0.076 1,400,000 Retention Rights 14 Feb 14 14 Sep 16 0.105 Retention Rights 14 Feb 14 14 Sep 16 0.101 225,000 500,000 Performance Rights 16 Dec 14 14 Sep 17 0.029 4,900,000 Performance Rights 16 Dec 14 14 Sep 17 0.015 2,960,000 Retention Rights 16 Dec 14 14 Sep 17 0.038 890,000 2016 Performance Rights 28 Jun 13 14 Sep 15 0.014 Retention Rights 28 Jun 13 14 Sep 15 0.120 13,975,000 552,000 138,000 Performance Rights 14 Feb 14 14 Sep 16 0.080 1,800,000 Performance Rights 14 Feb 14 14 Sep 16 0.088 1,000,000 Performance Rights 14 Feb 14 14 Sep 16 0.081 300,000 Performance Rights 14 Feb 14 14 Sep 16 0.076 1,400,000 Retention Rights 14 Feb 14 14 Sep 16 0.105 Retention Rights 14 Feb 14 14 Sep 16 0.101 225,000 500,000 Performance Rights 16 Dec 14 14 Sep 17 0.029 4,900,000 Performance Rights 16 Dec 14 14 Sep 17 0.015 2,960,000 Retention Rights 16 Dec 14 14 Sep 17 0.038 Performance Rights 9 Jan 15 31 Dec 15 0.013 Retention Rights 9 Jan 15 31 Dec 15 0.032 890,000 750,000 500,000 15,915,000 – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – (1,800,000) (1,000,000) (300,000) (1,400,000) (225,000) (500,000) – – – – – – – – – 4,900,000 2,960,000 890,000 (5,225,000) 8,750,000 (552,000) (138,000) – – – – – – – – – (750,000) (500,000) – – 1,800,000 1,000,000 300,000 1,400,000 225,000 500,000 4,900,000 2,960,000 890,000 – – (1,940,000) 13,975,000 24. Contingencies As disclosed in note 23, on 10 August 2015 the Group completed the sale of assets including NSE Texas LLC, which held the producing Eagleford asset located within the Atascosa and Colorado counties and NSE PEL 570 Pty Ltd which held the Copper Basin asset to Sundance Energy Australia Ltd (Sundance). In accordance with the Share and Asset Sale Agreement Sundance made a claim in relation to Due Diligence Defects (DD Defects) associated with the Eagleford asset. There is a potential liability associated with the DD Defects which will be covered partially or wholly by escrowed SEA shares which formed part of consideration of the sale as disclosed in note 7. Whilst the maximum exposure to the Group is approximately $500k, certain claims made by Sundance have been disputed by the Group and the likely outflow of economic benefits is currently not clear and as such a provision has not been recognised in relation to the claim. 52 | NEW STANDARD ENERGY LTD 2017 ANNUAL REPORT For personal use only NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS for the financial year ended 30 June 2017 24. Contingencies (cont’d) During 2013 New Standard Onshore Pty Ltd (NSO) (a wholly owned subsidiary of NSE) was served with a Writ issued out of the Supreme Court of Western Australia by Precision Catering & Equipment Pty Ltd (Precision). The Writ claimed damages, interest and costs in respect of alleged breaches of a contract between NSO and Precision in relation to the supply, installation, rental and catering of a camp for the Goldwyer Joint Venture and a related alleged demobilisation agreement (Claim). The total estimated value of the Claim (inclusive of costs and interest) is $1.2 million. NSO denies liability for the Claim. Precision went into liquidation in May 2016 and in May 2017 Precision liquidators brought the matter back to Court for mediation on 18 July 2017. The mediation conference concluded without the parties reaching a settlement. The matter will now be listed for a case evaluation conference on 4 October 2017 and will proceed in accordance with Court practice and procedure. The Company continues to assess the Company’s rehabilitation obligations and associated costs with respect to its historic drilling activities on EP 450, EP 451, EP 456 and EP 481 and is part of a continuing dialogue with the Department of Mines and Petroleum. The likely outflow of economic benefits is currently not clear and as such a provision has not been recognised in relation to the rehabilitation obligations. There were no other material contingent liabilities or contingent assets for the Group as at 30 June 2017 or as at the date of the report other than the above. 25. Parent entity information The following details information related to the parent entity, New Standard Energy Limited, as at 30 June 2017. 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)/retained earnings Reserves Total equity Loss for the year Other comprehensive income for the year Total comprehensive loss for the year 2017 $ 477,468 112,034 589,502 256,353 – 256,353 77,897,674 (77,852,952) 288,427 333,149 (1,029,719) 434,754 (594,965) 2016 $ 539,070 147,636 686,706 259,726 – 259,726 77,047,091 (77,257,987) 637,876 426,980 (4,543,842) 188,281 (4,355,561) 26. Events occurring after the reporting date (a) During 2013 New Standard Onshore Pty Ltd (NSO) (a wholly owned subsidiary of NSE) was served with a Writ issued out of the Supreme Court of Western Australia by Precision Catering & Equipment Pty Ltd (Precision). The Writ claimed damages, interest and costs in respect of alleged breaches of a contract between NSO and Precision in relation to the supply, installation, rental and catering of a camp for the Goldwyer Joint Venture and a related alleged demobilisation agreement (Claim). The total estimated value of the Claim (inclusive of costs and interest) is $1.2 million. NSO denies liability for the Claim. Precision went into liquidation in May 2016 and in May 2017 Precision liquidators brought the matter back to Court for mediation on 18 July 2017. The mediation conference concluded without the parties reaching a settlement. The matter will now be listed for a case evaluation conference on 4 October 2017 and will proceed in accordance with Court practice and procedure. There has been no other matter or circumstance that has arisen since the end of the year that requires disclosure other than the above. NEW STANDARD ENERGY LTD 2017 ANNUAL REPORT | 53 For personal use only ASX ADDITIONAL INFORMATION The shareholder information set out below was applicable as at 25 September 2017. 1. Distribution of shareholders (a) Analysis of number of shareholder by size of holding. Category of holding Holders Number of shares % of capital 1 – 1,000 1,001 – 5,000 5,001 – 10,000 10,001 – 100,000 100,001 and over Total 197 361 292 883 370 2,103 50,147 1,165,080 2,449,357 35,004,188 677,749,233 716,418,005 0.01 0.16 0.34 4.89 94.60 100.00 (b) There are 1,848 shareholders with less than a marketable parcel of ordinary shares (minimum $500 parcel at $0.003 per unit). 2. Twenty largest shareholders The names of the twenty largest holders by account holding of quoted ordinary shares are listed below: Rank Name of shareholder 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 China International Economic Huizhou Energy Investment (Beijing) Co Ltd Jara Resources Pty Ltd Chembank Pty Limited J P Morgan Nominees Australia Limited Mr Chi Zhang Citicorp Nominees Pty Limited Buru Energy Limited Mr Alan Young Pershing Australia Nominees Pty Ltd Phoenix Properties Int Pty Ltd Kensington Capital Management Pty Ltd TC Investments Pte Ltd Mr Xin Zheng Abingdon Nominees Pty Ltd One Managed Invt Funds Ltd <1 A/C> Mr Richard James Harris + Mrs Susan Elizabeth Harris Merrill Lynch (Australia) Nominees Pty Limited BNP Paribas Noms Pty Ltd Abingdon Nominees Pty Ltd Venus Bay Pty Ltd Total 3. Substantial shareholders As at 25 September 2017, the Company has received substantial notices from the following shareholders: Holding % 91,442,400 40.65 65,650,000 20,000,000 17,938,658 15,491,658 14,838,109 13,057,930 9,405,252 9,320,794 8,508,453 7,000,000 6,660,000 5,816,624 5,775,000 5,587,385 5,560,834 4,997,659 4,483,590 3,725,000 3,627,539 9.16 2.79 2.50 2.16 2.07 1.82 1.31 1.30 1.19 0.98 0.93 0.81 0.81 0.78 0.78 0.70 0.63 0.52 0.51 518,641,510 72.39 Name of shareholder Huizhou Energy Investment (Beijing) Co Ltd Jara Resources Pty Ltd 4. Unquoted securities There were no unquoted securities on issue as at 25 September 2017. 5. Voting rights At a general meeting of shareholders: No of shares % of issued capital 291,197,025 65,650,000 40.65 9.16 (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. 54 | NEW STANDARD ENERGY LTD 2017 ANNUAL REPORT For personal use only For personal use only 

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