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
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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
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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
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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
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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
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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
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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%
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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
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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
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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