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Registered Office
Level 2, 6 Thelma Street
West Perth Western Australia 6005
Telephone: +61 8 9227 3240
Facsimile: +61 8 9227 3211
Email: info@norwestenergy.com.au
www.norwestenergy.com.au
2015 ANNUAL REPORT
NORWEST ENERGY NL
65 078 301 505
ABN
078 301 505
ACN
DIRECTORS
Mr Michael John Fry
(Non-Executive Chairman)
Mr Henry David Kennedy
(Non-Executive Director)
Mr Peter Lawson Munachen
(Executive Director, CEO)
COMPANY SECRETARY
John Douglas Annand
INTERNET ADDRESS
www.norwestenergy.com.au
EMAIL ENQUIRIES
info@norwestenergy.com.au
CORPORATE DIRECTORY
REGISTERED OFFICE
Level 2, 6 Thelma Street
West Perth WA 6005
Tel:
Fax:
+ 61 8 9227 3240
+ 61 8 9227 3211
SHARE REGISTER
Computershare Investor Services Pty Ltd
GPO Box D182
Perth WA 6840
Level 11, 172 St Georges Terrace
Perth WA 6000
Telephone: 1300 850 505
AUDITORS
Rothsay Chartered Accountants
Level 1, Lincoln House
4 Ventnor Avenue
West Perth WA 6005
AUSTRALIAN SECURITIES EXCHANGE
NWE
FRANKFURT STOCK EXCHANGE
NUX
CONTENTS
Chairman’s Letter
Chief Executive Officer’s Report
Permit Summary
Project Review
Directors’ Report
Lead Auditor’s Independence Declaration
Corporate Governance Statement
Statement of Profit and Loss and other Comprehensive Income
Statement of Financial Position
Statement of Changes in Equity
Statement of Cash Flows
Notes to the Financial Statements
Directors’ Declaration
Independent Audit Report
Additional ASX Information
3
5
7
8
17
25
26
31
32
33
34
35
53
54
56
2
Dear Shareholders,
CHAIRMAN’S LETTER
It is my pleasure to present the Norwest Energy NL Annual Report for the year ended 30 June 2015.
Norwest is an active participant holding some of the most prospective acreage in the northern Perth Basin, with
net acreage of approximately 3,100km2 that includes both conventional and unconventional opportunities in oil
and gas.
In the year, Norwest continued to drive an active exploration and appraisal program at its numerous permits
within the Basin that are being assessed for future exploration potential, including completing and progressing a
number of important initiatives to add value to these projects. This included the successful completion of the
EP413 Arrowsmith 3D seismic survey acquisition, the identification of the Lockyer Deep prospect in EP368, the
identification of and ongoing discussions with potential farm-in partners into TP/15, and increasing our
footprint in the southern part of the Basin by being awarded EP492 and by acquiring the rights over Special
Prospecting Authority SPA-16 AO. Internationally, in late CY2014 Norwest was awarded P2265 in the Wessex
Basin, in the southern United Kingdom.
Importantly, Norwest also continues to actively engage with industry, Government bodies and regulators,
relevant stakeholders and the local communities in which we operate to ensure we foster positive relationships
and drive transparent, two-way communication.
Notwithstanding depressed oil and gas prices throughout the year, your Board strongly believes in the
underlying fundamentals of the energy market and the economic drivers underpinning Norwest’s suite of
projects, including Norwest’s close position to existing natural gas transportation pipelines and the ability to
supply domestic markets that have strong demand.
This is supported by increased activity and interest in the Perth Basin throughout FY2015, which has continued
early in FY2016. For example, Norwest is very encouraged by the recent drilling success within the Basin, such
as results achieved by AWE at Senecio-3, Waitsia-1 and 2, and Irwin-1, which are all located on acreage in close
proximity to Norwest’s permits. In addition, Transerv has achieved recent drilling success at their Warro gas
field. Significant results from these and future drilling campaigns will continue to bring greater focus to the
Basin and should see an increased interest from potential new entrants, service providers and investors.
Looking ahead to FY2016, Norwest remains focussed on delivering the strategic initiatives at our suite of
projects to meet our objectives, including:
Drilling the Arrowsmith-3 well within EP413, which is anticipated to be drilled in CY2016;
Drilling the Lockyer Deep well within EP368, which is anticipated to be drilled in CY2016;
Securing a farm-in partner for the drilling of Xanadu-1 within TP/15;
Unlocking value for shareholders at our other projects in both the Perth Basin and the Wessex Basin in
the UK; and
Continuing to consult with local stakeholders and regulators as part of our ongoing stakeholder
consultation program to ensure we implement best practice and are transparent.
I would like to thank my fellow directors for their contributions throughout the year as well as the dedicated
management team and staff of Norwest in progressing the Company’s initiatives. I would also like to thank the
Company’s joint venture partners.
3
Lastly, I would like to thank our shareholders for their ongoing support of Norwest. The Company’s directors
and management believe that Norwest is well placed to capitalise on the recent exploration success achieved in
the Basin, and we look forward to delivering on these opportunities that will best position Norwest to generate
shareholder value during FY2016 and beyond.
Michael Fry
Non-Executive Chairman
4
CHIEF EXECUTIVE OFFICER’S REPORT
Norwest Energy fulfilled a number of important objectives throughout the year as it moved closer to unlocking
the potential of our northern Perth Basin acreage.
Norwest successfully completed the EP413 Arrowsmith 3D seismic survey acquisition, participated in the
identification of the Lockyer Deep prospect in EP368, progressed discussions with potential farm-in partners
into TP/15, and increased its footprint in the southern part of the Basin through the award of EP492 and the
acquisition of the rights over Special Prospecting Authority SPA-16 AO. In addition, Norwest was awarded
P2265, situated in the Wessex Basin in the southern United Kingdom.
At a corporate level, Norwest’s operations continue to be constantly reviewed in order to drive cost efficiencies
and the effective deployment of resources. These operational and corporate initiatives will best position
Norwest to deliver value on the Company’s objectives and provide value to shareholders.
Operations
Norwest remained focussed on our most advanced project, the Arrowsmith shale gas discovery within EP413.
During Q2 CY2015, Norwest successfully completed the EP413 Arrowsmith 3D seismic acquisition survey on
behalf of the EP413 Joint Venture. The survey was designed to assess the extent of the resource surrounding
Arrowsmith-2, and to assist in defining the optimal location and target formation for Norwest’s first horizontal
well, Arrowsmith-3.
Preliminary results from the seismic data processing indicate a substantial improvement in structural definition.
Preliminary planning with the co-venturers has commenced for Arrowsmith-3, planned for the 2015/16 permit
year, with timing dependent upon equipment availability and the regulatory approvals process.
The final decision on surface location, target formation and lateral extent will be made once the 3D seismic
survey processing and interpretation cycle is completed in Q4 CY2015, as a clear understanding of the
subsurface geology is essential to this process.
Norwest remains committed to progressing the opportunities on our other projects in the Perth Basin.
The 100 per cent owned TP/15 offshore conventional oil exploration permit remains a key focus for Norwest,
particularly with the 160 million barrel recoverable oil potential of prime prospect Xanadu. Norwest continues
to progress discussions with interested parties to join in the exploration program for this block.
The operator of EP368, Empire Oil and Gas NL, has advised Norwest that following the successful completion of
the “Black Swan” airborne geophysical survey it has identified a high impact, near-term drilling prospect named
Lockyer Deep. This prospect will be targeting the Kingia reservoir fairway identified following the recent drilling
success by AWE at Senecio-3, Waitsia-1 and 2, and Irwin-1, all located in acreage immediately adjacent and to
the west of EP368.
Elsewhere in the Perth Basin, Norwest increased its acreage footprint via the award of EP492 and by acquiring
the rights over Special Prospecting Authority SPA-16 AO (SPA). The combined acquisition of EP492 and the SPA
adds a further 1,665 km2 to the area controlled by Norwest in the Perth Basin, taking the total area net to
Norwest to 3,100km2.
Internationally, Norwest was awarded P2265, situated in the Wessex Basin in the southern United Kingdom.
Norwest holds 65% of the permit and since the award was granted, reprocessing of the historical 3D seismic
data has commenced and is anticipated to be finalised during Q4 CY2015. Immediately to the west of P2265 and
straddling this permit is the Colter Prospect (operated by InfraStrata plc) which is estimated to have 50 mmbbls
5
oil in place. The reprocessing of the historical 3D seismic data will further assist in determining how far this
prospect extends into P2265.
Outlook
Norwest has successfully demonstrated its ability to build up a prominent acreage position in the northern
Perth Basin and has continued to deliver on the initiatives required to drive value from this suite of assets. The
northern Perth Basin has strong underlying economic fundamentals and we are encouraged by the renewed
focus and increased activity in the region from other parties, as this interest provides further avenues for
Norwest to leverage off our strong acreage position in the region.
With the recent drilling success achieved in the Basin at both the Waitsia and Warro gas fields, and with further
exploration planned by both Norwest and a number of other operators, there is no doubt that further
exploration success will continue to bring greater focus to the Basin.
With the potential to participate in the drilling of three wells during CY2016 (Arrowsmith-3, Lockyer Deep and
Xanadu-1), Norwest will have a very active exploration program over the short to medium term. And even
though Norwest only have a minor interest in the Jingemia oil field (under abandonment review), the field is in
a hydrocarbon producing province and it would not take much to re-activate it given the right circumstances.
We remain cognisant that our exploration programs will require additional funding to carry forward and
develop, however there are a range of options under consideration. With the increased interest in the Perth
Basin from other parties there are various avenues to explore with the objective of delivering the best possible
value for shareholders.
Finally, I would like to thank the Norwest team for their dedication throughout the year in delivering on the
Company’s strategic initiatives. I look forward to the opportunities and dynamic work program planned for the
year ahead, with Norwest taking the next steps along the development pathway for each of its projects.
Peter L Munachen
Chief Executive Officer
6
PERMIT SUMMARY
Permit
Location
Type of Permit
Area (100%) Norwest (%)
NORTHERN PERTH BASIN
EP368
EP426
EP413
L14
TP/15
EP492
SPA-016 AO
TIMOR SEA
AC/L6 (ROYALTY)
UNITED KINGDOM
P2265
Perth Basin, WA
Perth Basin, WA
Perth Basin, WA
Perth Basin, WA
Perth Basin, WA
Perth Basin, WA
Perth Basin, WA
Onshore
Onshore
Onshore
Onshore
Offshore
Onshore
Onshore
600.3 km2
2360.0 km2
508.3 km2
39.8 km2
645.8 km2
860.0 km2
805.0 km2
20%
22.22%
27.945%
6.278%
100%
100%
100%
TOTAL AREA NET TO NORWEST 3,100.1 KM2 (766,261.4 ACRES)
Vulcan Sub-Basin, NT
Offshore
252.1 km2
1.25% ORRI
Wessex Basin, UK
Offshore
225 km2
65%
Table 1. Norwest Permit Schedule
interests
Norwest Energy is a junior exploration
company with
in seven
tenements
in the northern Perth
Basin, Western Australia, and one
permit in the offshore Wessex Basin,
United Kingdom.
Company Strategy
To maintain a strong focus on the
northern Perth Basin, with a diverse
portfolio
significant
providing
exploration potential and exciting
opportunities for development and
growth.
in a
To conduct all operations
sustainable manner by focusing on
health, safety and environmental
outcomes and by maintaining positive
and open communications with local
communities, stakeholders and our
company shareholders.
Figure 1. Norwest - Northern Perth Basin Acreage
7
PROJECT REVIEW
AUSTRALIA – NORTHERN PERTH BASIN
Natural gas exploration is vital to Western Australia, both in unlocking new sources of energy and for providing
local jobs and economic opportunities for regional communities. The northern Perth Basin is a proven
hydrocarbon province, in close proximity to infrastructure servicing the domestic gas market. The industry has
been operating safely in the region for over 50 years, with more than 200 wells safely drilled.
Recent northern Perth Basin gas discoveries by AWE Limited (Waitsia discovery), and Transerv Energy (Warro
discovery) reinforce the potential for ongoing exploration discoveries within the basin.
Norwest’s projects in the basin are all in prime locations, surrounded by commercially producing fields and
recent discoveries, and with excellent access to infrastructure.
2015/16 is shaping up to be one of the most exciting periods of exploration activity in the history of the
northern Perth Basin, and likewise for Norwest Energy. The past year has been a period of consolidation and
planning for Norwest, in preparation for the potential drilling of three wells on Norwest-held interests within
the next twelve to eighteen months (EP413, TP/15 and EP368).
EP413 (Norwest 27.945%, Operator)
EP413 is located approximately 300km north of Perth, predominantly to the western side of the Brand Highway
between Eneabba and Dongara.
The EP413 Arrowsmith 3D seismic survey
acquisition was completed in mid-2015.
The processing of the large volume of
data generated
from the acquisition
program has been ongoing, with final
results expected early in CY Q42015.
Norwest has been closely liaising with the
specialist US company completing the
processing, with preliminary
results
demonstrating a substantial improvement
in structural definition.
Once this interpretation is complete, the
EP413 JV will make a decision on the
surface location and target formation for
Arrowsmith 3, the next well to be drilled
in exploring
this highly prospective
permit.
Figure 2. EP413 Permit Location Map
8
Figure 3. EP413 3D Seismic Survey Acquisition, Arrowsmith Location, April 2015
Environmental Baseline Studies
Since Q3 2014, Norwest has been involved with AWE Limited, Transerv Energy and the Seismology Research
Centre in a baseline passive seismic recording research study. The purpose of the study is to develop a
comprehensive understanding of the baseline natural background seismicity within the region. As part of this
process, a seismometer was installed at the Arrowsmith location to capture any background seismic events,
with results being compiled into a database for further analysis.
During 2015, Norwest also signed an agreement to participate in a CSIRO led program - ‘Baseline
Characterisation and Monitoring Protocols for Development of Shale and Tight Gas Resources, Perth Basin’.
Along with several other operators, Norwest is sponsoring and contributing data to this research program, the
aim of which is to provide better understanding of suitable methods and protocols for establishing
environmental baselines associated with tight gas development.
Permit Status
The permit was renewed in August 2013 for a further five years. The five year work program for EP413 included
the 3D seismic acquisition program (now complete) and the future drilling of two wells in Years 3 and 5 of the
program.
Due to the protracted approvals process for the 3D acquisition program, Norwest applied for a six month
suspension of the work program, and in March 2015 this suspension was granted. The Year 3 work program
commitment involves the drilling of one exploration well, which is currently in the early planning stages,
pending results from the 3D seismic survey data processing.
EP413 Joint Venture
Norwest Energy
AWE Limited
Bharat PetroResources Ltd
27.945% (Operator)
44.252% (via subsidiaries)
27.803%
9
TP/15 (Norwest 100%, Operator)
Exploration Permit TP/15 is a conventional oil play located offshore northern Perth Basin in close proximity to
the Cliff Head, Jingemia and Eremia oil fields and the Dongara gas field.
The permit occupies the 3 nautical mile wide state
territorial waters offshore Western Australia
adjacent to the township of Port Denison and
covers an area of 645.8km2.
The prime prospect is Xanadu, with a P50 un-risked
prospective recoverable resource of 160mmbbls of
oil, as detailed in the ASX announcement dated
29/10/2014.
The intention of Norwest is to secure a farm-in
partner to provide free-carry through the drilling of
to progress
Xanadu-1.
discussions in this regard with Rey Resources to
agree on the terms and conditions under which Rey
may earn an interest in TP/15.
Norwest continues
Figure 4. TP/15 Prospect Location Map
The Xanadu Prospect
Structurally, the Xanadu Prospect is a prominent horst block lying parallel to the coastline in very shallow water.
Xanadu-1 will target Permian sands from a depth of approximately 800 metres. Near-shore sands of the
Dongara Sandstone represent the primary target, with secondary targets in the fluvio-deltaic Irwin River Coal
Measures and the regressive marine sands of the High Cliff Sandstone.
and mapping
Retrieval
of
additional 2D marine seismic data
has provided a comprehensive
regional
interpretation of the
structural setting and charge
the Xanadu oil
history
prospect.
for
The structural mapping, which is
based on good quality 2D seismic
data, as well as high resolution
gravity data resulting from a 2009
airborne
Tensor
Gradiometry Survey indicates the
Xanadu Prospect is geologically
similar to both the Cliff Head and
Hovea structures.
Full
3D
Figure 5. Seismically derived structural definition at the top of the Permian
reservoir sequence (Dongara/Wagina – IRCM – Kingia/High Cliff Sandstone)
10
In estimating the recoverable oil volumes summarised in Table 2 below, a 50 per cent recovery factor has been
assumed.
Table 2. Xanadu Prospect Volumetrics
*The estimated quantities of petroleum that may potentially be recovered by the application of a future
development project(s) relate to undiscovered accumulations. These estimates have both an associated risk of
discovery and a risk of development. Further exploration appraisal and evaluation is required to determine the
existence of a significant quantity of potentially moveable hydrocarbons.
Xanadu-1 Drilling Program
Figure 6. Schematic of Xanadu-1 well trajectory
Health, Safety and Environmental
Xanadu-1 presents a unique opportunity to drill a
relatively low cost offshore play from onshore.
Since 2001 this play has resulted in four oilfield
discoveries in the vicinity, namely Cliff Head, Jingemia,
Hovea and Eremia.
The timing of drilling Xanadu-1 is scheduled for the
2015/16 permit year, dependent upon a range of
factors including government approvals process, rig
availability and securing a farm-in partner.
Norwest has been managing the rehabilitation of the
Red Hill South-1 (RHS-1) onshore well location since
2011.
A weeding and re-seeding program was implemented
during the year to assist with the rehabilitation
process, and excellent progress has been achieved
(refer Figure 7).
Norwest has completed annual spring monitoring
surveys over the past 3 years, with the next survey
scheduled for October 2015.
Figure 7. Rehabilitation progress at RHS-1 location
11
EP368 and EP426 (Norwest – EP368- 20%, EP426- 22.22%)
EP368 and EP426 are situated at the northern end of the hydrocarbon fairway running through the northern
Perth Basin, and lie directly to the east of AWE’s recent significant Waitsia and Irwin gas discoveries.
Earlier
in 2015, the operator of
EP368/426 Empire Oil and Gas NL
successfully completed the
‘Black
Swan’ airborne geophysical survey.
The survey identified a new prospect
Lockyer Deep, which targets the
Kingia reservoir fairway associated
with the Waitsia play immediately to
the west.
The extent of the play into EP368
remains to be confirmed but the
results of the recent AWE Irwin-1
well suggest that the Kingia reservoir
fairway increases in thickness to the
east and thus potentially into EP368.
The proposed Lockyer Deep well is a
medium risk well, targeting between
25 and 134 BCF, with a best case
estimate of 58 BCF1.
Figure 8. EP368 / EP426 Permit Location Map
Lockyer Deep will also be used to appraise an attractive secondary oil target from the previously discovered oil
in both the Lockyer-1 and North Erregulla-1 historic wells where oil was encountered in the Dongara/Wagina
sandstone in tight reservoir. The deep gas potential of the Kingia Sandstone was not reached by these wells and
as such remains untested.
The reprocessing of more than 400km of historic 2D seismic data in the vicinity of Lockyer 1 and North Erregulla
1 is nearing completion, with encouraging results which can be expected to greatly reduce structural risk. The
improvement in data quality is substantial and offers the potential of providing a significant improvement in the
definition of the subsurface structure, and improving confidence in selecting future drilling locations.
The operator has a contingent rig slot secured for the drilling of Lockyer Deep in mid-2016 subject to funding
and government approvals.
Should Lockyer Deep be successful, there is immediate follow up potential at the North Erregulla prospect,
located to the south west of Lockyer Deep.
1Refer Empire Oil and Gas NL (ASX: EGO) Investor Presentation released to ASX on 2nd September 2015
12
Lockyer Deep Prospective
Resources:
Kingia / High Cliff
Sandstones
Secondary targets:
Hovea Member;
Dongara Sandstone;
Carynginia Formation
Figure 9. Lockyer Deep Prospect
The estimated quantities of petroleum that may potentially be recovered by the application of a future
development project(s) relate to undiscovered accumulations. These estimates have both an associated risk of
discovery and a risk of development. Further exploration appraisal and evaluation is required to determine the
existence of a significant quantity of potentially moveable hydrocarbons.
EP492 (Norwest 100%)
EP492 is a compilation of 21 onshore blocks in the northern Perth Basin, covering 860km2 and is located
between Lancelin and Green Head.
In October 2014, Norwest received
notification of the award of the
petroleum
permit,
following a successful negotiation
with the Yued People, the Native Title
claimants for the permit area.
exploration
Since award of the block, Norwest has
been engaged in data retrieval and
interpretation of the structural and
depositional history of EP492 to assist
the hydrocarbon
with evaluating
prospectivity of the region.
Figure 10. EP492 and SPA-16 AO permit location map
13
Permit Status
EP492 has a six year term, with Year One of the work program requiring desktop geological studies of the
permit area. The Year Two work program includes acquisition of 2D seismic data, planning for which is now
underway.
In December 2014 Norwest hosted a
signing ceremony celebration to give
thanks to the Yued People.
Norwest looks forward to a long a
prosperous relationship with both the
Yued People and the communities
within the region.
Figure 11. EP492 Signing Ceremony with Yued People, December 2014
SPA-16 AO (Norwest 100%)
SPA-16 AO (SPA) is located at the southern end of the northern Perth Basin and adjoins Norwest’s 100% owned
EP492 (Refer Figure 10 for SPA location).
The SPA also adjoins EP447 that contains the Walyering gas/condensate field, and EP432 containing both the
Cooljarloo and Woolka oil prospects and the Cataby-1 oil discovery.
Data retrieval and preliminary seismic interpretation of historic data has been undertaken on the permit to
further assist with the evaluation of hydrocarbon prospectivity.
Norwest has applied to the Department of Mines and Petroleum to convert the SPA to an Exploration Permit
and has submitted a proposed six year minimum work program for consideration.
L14 - JINGEMIA OIL FIELD (Norwest 6.278%)
The L14 production licence contains the Origin Energy operated Jingemia oil field. The Jingemia project has
now come to the end of its commercial life and has now been placed under care and maintenance, leading to
eventual abandonment and rehabilitation. Jingemia is estimated to have initially contained 12 million barrels of
oil in place, with 4.6 million barrels produced to date.
L14 Joint Venture
Origin Energy
AWE Limited
Norwest Energy NL
Roc Oil (WA) Pty Ltd
J Geary
49.189% (Operator)
44.141% (via subsidiaries)
6.278%
0.250%
0.142%
14
TIMOR SEA - PUFFIN FIELD (Norwest 1.25% ORRI)
The Puffin Field, which is located within AC/P22 and governed by Production Licence AC/L6, covers a combined
area of approximately 900km2, and is situated in the Commonwealth waters of the southern Timor Sea. The
Puffin Field is operated by Chinese major Sinopec Limited (60% interest) with AED Oil Limited (Subject to Deed
of Company Arrangement) (AED - 40%).
Oil production from the Puffin Field ceased in 2009. Norwest still holds a 1.25% ORRI on any future production
generated by Sinopec and AED from the AC/P22 permit area however any future royalty payments are highly
unlikely given AC/P22 was surrendered by the operator in Q3 CY2014 and the AC/L6 petroleum production
licence ceased to be in force with effect from 21 April 2015.
UNITED KINGDOM
P2265 (Blocks 98/7b, 98/8a and 98/12a) – Offshore Wessex Basin (Norwest 65%)
Permit P2265 lies to the east of the
in
producing Wytch Farm oil field
Bournemouth Bay in southern England
and includes conventional oil targets,
with
for nearshore
conventional targets to be drilled from
onshore.
ability
the
Figure 12. P2265 Permit Location Map
The Joint Venture holds a significant
dataset over the area including 2D and
3D seismic, reprocessing of which is
currently being carried out
in the
United States.
Time processing has been completed
and depth processing is continuing. It
is anticipated that this reprocessing
will be finalised before the end of Q4
CY2015.
Immediately to the west of P2265 and straddling this permit is the Colter Prospect (operated by InfraStrata plc)
which is estimated to have 50 MMbbls oil in place. The reprocessing of the historical 3D seismic data will further
assist in determining how far this prospect extends into P2265.
Norwest and HALO have two years to reprocess the historical 3D seismic data, select a drillable target and find a
suitable farm-in partner. At the end of this two year period, a commitment must be given to drill a well in the
subsequent two years or relinquish the Licence.
P2265 Joint Venture
NWE Mirrabooka (UK) Pty Ltd
Hague and London Oil (HALO)
65%
35% (Administrator)
15
CORPORATE
Community Relations
Norwest has an ongoing policy of liaising with all relevant stakeholders, local community groups and the general
public in ensuring transparency on project related matters.
During Q3 CY2015, Norwest participated in the Oil and Gas Expo, an event hosted by the Shire of Irwin to
provide an opportunity for the local community to liaise directly with companies operating in the region. The
event was well attended by companies, state and local government representatives, interest groups, service
providers and members of the public.
Norwest continues to sponsor local community events, and is an active member of various committees and
industry groups involved in communicating with relevant stakeholders, in order to earn the ongoing support
and trust of our local communities.
16
Directors' Report
The Directors of Norwest Energy NL present their report consisting of Norwest Energy NL (“Norwest” or “the Company”), and its
subsidiaries (“Consolidated entity” or “Group”), for the financial year ended 30 June 2015.
1. DIRECTORS AND OFFICERS
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 this entire period unless otherwise stated.
Names, qualifications, experience and special responsibilities
Mr Michael John Fry (Independent Non-Executive Chairman), BCom, FFin
Mr Fry, 57, became a Director of Norwest on 8 June 2009 and Chairman on 18 September 2009. Mr Fry has extensive experience in
capital markets and corporate treasury, specialising in risk management. Mr Fry is the Non-Executive Chairman of Brookside Energy Ltd
(previously Red Fork Energy Limited) (since April 2004) and Challenger Energy Limited (since January 2007). Past directorships
include Killara Resources Limited (July 2008 to October 2012).
Mr Peter Lawson Munachen (Executive Director, CEO), FCA, FAICD
Mr Munachen, 69, became a Director of Norwest on 26 November 2003 and CEO on 3 December 2008. Mr Munachen is a Chartered
Accountant and former partner in an international accounting practice and has considerable experience in the resources industry. Past
directorships include Currie Rose Resources Inc. (March 2005 to December 2012) and East Africa Resources Limited (March 2010 to
April 2015).
Mr Henry David Kennedy (Non-Executive Director), MA (Geology), SEG
Mr Kennedy, 79, became a Director of Norwest on 14 April 1997. Mr Kennedy has had a long association with Australian and New
Zealand resource companies and as a technical director has been instrumental in the formation and or development of a number of
successful listed companies, including Pan Pacific Petroleum NL, New Zealand Oil and Gas Limited (NZOG), Mineral Resources (NZ)
Ltd and Otter Exploration NL. During his term as Executive Director of Otter, Pan Pacific and NZOG, these companies were involved in
the discovery of the Tubridgi and South Pepper gas fields, North Herald and Chervil oil fields in Western Australia and the Kupe South
and Rua oil/gas condensate fields in New Zealand. Mr Kennedy is also a Director of Pancontinental Oil & Gas NL (since August 1999).
Past directorships include East Africa Resources Limited (March 2013 to April 2015).
Mr John Douglas Annand, (Company Secretary) B.Bus, CA, AGIA
Mr Annand was appointed to the position of Company Secretary on 30 June 2014. Mr Annand previously worked at Woodside Energy for
16 years, where he held a number of commercial and financial roles, most recently within the North West Shelf Venture. Mr Annand also
previously worked at PricewaterhouseCoopers, KPMG, and NAB, and is a qualified Chartered Accountant and a Chartered Secretary.
2. DIRECTORS INTERESTS
As at the date of this report, the Director’s interests in the securities of the Company are as follows:
Mr Michael John Fry (Non-Executive Chairman)
Mr Peter Lawson Munachen (Executive Director, CEO)
Mr Henry David Kennedy (Non-Executive Director)
9,966,067
20,105,084
40,949,262
4,000,000
8,000,000
4,000,000
Ordinary Shares
Options over Ordinary Shares
3. EARNINGS PER SHARE
Basic earnings per share
Diluted earnings per share
4. CORPORATE INFORMATION
2015
(0.27)
(0.27)
2014
(0.21)
(0.21)
Corporate Structure
Norwest Energy NL is a no liability Company that is incorporated and domiciled in Australia.
Nature of Operations and Principal Activities
The principal activity of the Consolidated entity during the course of the financial year was exploration for hydrocarbon resources.
Norwest is operator of the EP413 Joint Venture. There have been no significant changes in the nature of those activities during the year,
other than as disclosed above.
17
Directors' Report
4. CORPORATE INFORMATION (continued)
Objectives
Objectives of the Group include:
continued exploration on the Company’s current permits;
seek new ventures suitable for inclusion in the Group’s assets;
manage risks involved in the exploration industry; and
maintain liquidity.
The Group’s targets and strategies for meeting the above objectives include:
prepare work programmes best suited for exploration success;
consider strategic alliances through joint ventures to minimise risks to the Group;
focus on cost cutting in all non-essential areas; and
review appropriate fundraising proposals.
Employees
The Consolidated Entity had five employees as at 30 June 2015 (2014: four employees).
5. OPERATING AND FINANCIAL REVIEW
Operations Summary
Review of Operations
In Australia, the Norwest Group holds the following interests:
27.945% in EP 413 (as operator);
20% in EP 368;
22.22% in EP 426;
6.278% in L14 Jingemia Oilfield;
100% of TP/15;
100% in EP492; and
100% in Special Prospecting Authority SPA-16 AO.
EP 413
During the year, Norwest successfully completed the Arrowsmith 3D seismic acquisition survey on behalf of the EP413 Joint Venture.
The survey was designed to assess the extent of the resource surrounding the Arrowsmith-2 well, and to assist in defining the optimal
location and target formation for Norwest’s first horizontal well, Arrowsmith-3. The final decision on surface location, target formation
and lateral extent will be made once the 3D seismic survey processing and interpretation cycle is complete, as a clear understanding of
the subsurface geology is essential to this process.
TP/15
Norwest intends to farm-out TP/15 by seeking a “carry” through the exploration drilling phase whilst retaining a material interest in the
permit. The Company is progressing discussions with Rey Resources Ltd and negotiations are underway to agree on the terms and
conditions under which they may earn an interest in TP/15. Norwest has commenced the planning phase for drilling of Xanadu-1, located
at the southern end of the permit. Independent interpretation conducted during the year combined with third-party research findings,
supports the drilling of Xanadu-1.The timing of drilling Xanadu-1 is dependent upon a range of factors including government approvals
process, rig availability and securing a suitable farm-out partner.
EP 368 / EP 426
An airborne geophysical survey was completed during the year by Empire Oil and Gas NL on behalf of the Joint Venture. The survey
involved the acquisition of airborne gradiometric gravity data and will be used to identity exploration leads and prospects for drilling
within both permits with final interpretation expected to be available by December 2015. Reprocessing of existing 2D seismic data was
also conducted to ascertain if any improvement in seismic quality can be achieved, and if so the reprocessing will be extended to assist in
maturing a drilling location(s).
EP492 (previously STP-EPA-00064)
The Western Australian Department of Mines and Petroleum (“DMP”) awarded Exploration Permit EP492 to Norwest in November
2014. It has a six year term, with year one of the work program requiring geological studies, followed in year two with a 2D seismic
survey. Data retrieval and interpretation of structural and depository history of the permit has been undertaken to assist with the
evaluation of hydrocarbon prospectivity. The preliminary geological review of a geological lead suggests the potential for oil rather than
gas.
SPA-16 AO
Norwest has applied to the DMP to convert the SPA to an Exploration Permit and has submitted a proposed six year minimum work
program for consideration.
18
Directors' Report
Operations Summary (continued)
L14 Jingemia Oilfield
The L14 production licence contains the Origin Energy operated Jingemia oil field. The Jingemia project has been placed under care and
maintenance, leading to eventual abandonment and rehabilitation. Jingemia is estimated to have initially contained 12 million barrels of
oil in place, with 4.6 million barrels produced to date.
United Kingdom
65% in P2265 – Offshore Wessex Basin
In November 2014, the UK Department of Energy and Climate Change awarded a Promote Licence over the offshore blocks within
P2265. Norwest and Hague and London Oil Plc have two years to reprocess the historical 3D seismic data, select a drillable target and
find a suitable farm-in partner. At the end of this two year period, a commitment must be given to drill a well in the subsequent two years
or relinquish the licence.
Performance Indicators
Management and the Board monitor the Group's overall performance by:
evaluating whether exploration activity and expenditure is adding value to the asset portfolio;
analysis of financial budgets versus actual results; and
the Company’s share price.
The underlying drivers which contribute to the Company’s performance and can be managed internally include a disciplined approach to
reducing the Group’s non-essential costs and allocating funds to those activities which will add shareholder value. The Company’s share
price is often influenced by factors outside the control of management and the Board, such as market conditions, however through
effective communication between the Company and all of its stakeholders the Company can provide assurance that there are regular
reviews in place to determine actions which should be implemented to increase Company performance.
Dynamics of the Business
The Board are focussed on Norwest developing its interests in existing acreage in Western Australia and the UK. Norwest seeks to farm
out its interests where appropriate to de-risk its exposures and facilitate successful exploration and development.
Results of Operations
The net loss of the Consolidated entity for the year ended 30 June 2015 of $3,157,781 was higher than the loss of the prior year of
$2,254,467. The main contributing factors were;
exploration expenditure written off was substantially higher in the year ended 30 June 2015; $1,347,654 compared to $468,615
during the year ended 30 June 2014; and
the Research and Development rebate received was lower in the year ended 30 June 2015; $426,462 compared to $818,565
received during the year ended 30 June 2014.
Financial Position
At 30 June 2015, the Group had cash reserves of $1.41m (2014: $3.34m) and no debt. Fundraising during the financial year raised
$1.58m (before costs) from a share purchase plan and a placement. The proceeds were used to fund the Group’s exploration activities and
also to supplement working capital.
At 30 June 2015, the Group had net assets of $4.8m (2014: $6.5m) a decrease of $1.7m. This is largely attributable to:
a decrease in cash and cash equivalents from $3.4 million to $1.4m primarily due to funds used during the year in relation to
operating activities of $3.1m relating to exploration, evaluation, production, and administrative costs; and
an increase in deferred exploration and evaluation asset from $3.8m to $4.7m due to expenditure incurred in conducting the 3D
seismic acquisition survey over EP 413.
6. SIGNIFICANT CHANGES IN THE STATE OF AFFAIRS
In the opinion of Directors there were no significant changes in the state of affairs of the Group that occurred during the financial year
under review.
7. SIGNIFICANT EVENTS AFTER THE BALANCE DATE
In the interval between the end of the financial year and the date of this report, there has not arisen any item, transaction or event of a
material and unusual nature likely, in the opinion of the Directors of the Company, to affect significantly the operations of the Group, the
results of those operations, or the state of affairs of the Group, in future financial years.
19
Directors' Report
8. LIKELY DEVELOPMENTS AND EXPECTED RESULTS
Likely developments in the operations of the Group that were not finalised at the date of this report included:
Farm-out process with Rey Resources by seeking a “carry” through the exploration drilling phase for the Xanadu-1 campaign
within TP/15.
Further information on likely developments in the operations of the Consolidated entity and the expected results of operations have not
been included in this financial report because the Directors believe it would be likely to result in unreasonable prejudice to the
Consolidated entity.
9. ENVIRONMENTAL REGULATION AND PERFORMANCE
Norwest has as one of its central tenets, a policy of fully complying with and surpassing the requirements for environmental management
in whatever country/jurisdiction that it operates in. To this end Norwest has developed and implemented where appropriate the following:
•
•
corporate environment policies and procedures that are communicated to and adhered to by all employees;
environmental management systems and programmes relevant to each level of organisation based on but surpassing the level of
standards applying in each jurisdiction;
annual budgets for environmental systems implementation;
plans for continuous monitoring and improvement;
•
•
• workforce training on environmental issues including assignment of management representatives and facilitators to monitor
environmental systems;
a set of quantitative objectives and targets aimed at continuous improvements which exceed legal compliance;
continuous reviews of performance at different levels in the organisation and projects hierarchy; and
a strategy for conducting impact-assessment surveys and periodic audits.
•
•
•
Native Title
There is the risk that native title, as established by the High Court of Australia’s decision in the Mabo case, exists over the land on which
the Consolidated entity holds exploration permits. It is impossible at this stage to quantify the impact (if any), which native title may
have on the operations of the Consolidated entity.
Past History
Norwest has historically met all environmental requirements through third parties and its partner companies. Accordingly, Norwest is
conversant with environmental requirements and has developed a corporate environmental policy based on:
•
•
•
government regulation and requirements;
experience from past projects; and
assistance from expert consulting groups.
10. INDEMNIFICATION AND INSURANCE OF DIRECTORS AND OFFICERS
The Constitution of the Company requires the Company, to the extent permitted by law, to indemnify any person who has been an officer
of the Company or Group for any liability caused as such by an officer and any legal costs incurred in defending an action for any
liability.
During or since the end of the financial year, no amounts have been paid by the Company or Group in relation to the above indemnities.
During the financial year, an annualised insurance premium was paid to provide adequate insurance cover for Directors and officers
against any potential liability and the associated legal expenses of a proceeding.
11. DIVIDENDS
No dividends were paid or declared since the start of the financial year. No recommendation for payment of dividends has been made.
20
Directors' Report
12. REMUNERATION REPORT - Audited
This Remuneration Report, which forms part of the Directors’ Report, outlines the remuneration of the Key Management Personnel
(“KMP”) of Norwest. For the purposes of this report, the KMP are the Directors and the CFO/Commercial Manager/Company Secretary.
Remuneration Policy
The Group’s remuneration policy for its KMP has been developed by taking into account the size of the management team for the Group,
the nature and stage of development of the current operations and market conditions and comparable salary levels for companies of a
similar size and operating in a similar sector.
In addition, the Board in determining the remuneration policy for KMP places emphasis on the following: the Group is currently only
undertaking exploration, appraisal and development activities, risks associated whilst undertaking these activities and other than profit
from asset sales, the Company does not expect any profitable operations until sometime in the future.
Executive Remuneration
The Group’s remuneration policy for its executive officers is to provide a fixed component and a performance based component (short
and long term incentives). The Company aims to:
reward executives with a level and mix of remuneration commensurate with their position and responsibilities within the
Company;
align the interests of executives with those of shareholders and business objectives; and
ensure total remuneration is competitive by market standards.
Fixed remuneration is reviewed regularly by the Board. The process consists of a review of Company and individual performance,
relevant comparative remuneration externally and internally and, where appropriate external advice on policies and practices. It also
takes into account any change to the scope of the role performed by the executive and any other relevant factors of influence.
The Group has chosen to provide Incentive Options to KMP as part of their remuneration and incentive arrangements in order to attract
and retain their services and to provide incentive linked to performance of the Group. The Incentive Options have exercise prices at or
above market share price (at the time of agreement/grant). As such, the Incentive Options granted are generally only of benefit if the
KMP perform to the level whereby the value of the Group increases sufficiently to warrant exercising the Incentive Options granted.
The Company prohibits executives entering into arrangements to limit their exposure to Incentive Options granted as part of their
remuneration package.
Employment Contracts with Executives
Mr Munachen, Chief Executive Officer, has an employment agreement with the Group which specifies the duties and obligations to be
fulfilled by Mr Munachen in his role as Chief Executive Officer. The contract may be terminated by either party by giving three months’
notice. No amount is payable in the event of negligence or incompetence in regard to the performance of duties. Mr Munachen receives a
fixed remuneration component of $396,000 per annum.
Mr Annand, CFO, Commercial Manager, and Company Secretary, has an employment contract which specifies the duties and obligations
to be fulfilled in his role. The contract may be terminated by either party by giving three months’ notice. No amount is payable in the
event of negligence or incompetence in regard to the performance of duties. Mr Annand receives a fixed remuneration component of
$320,000 (including superannuation) per annum.
Non-Executive Director Remuneration
The Board’s policy is for fees to Non-Executive Directors to be no greater than market rates for comparable companies for time,
commitment and responsibilities and seeks to set remuneration at a level which provides the Company with the ability to attract and
retain directors of the highest calibre, whist incurring a cost which is acceptable to shareholders. The Board determines payments to the
Non-Executive Directors and reviews their remuneration annually, based on market practice, duties and accountability. Independent
external advice is sought when required.
The non-executive directors receive a fixed fee for their services. The maximum aggregate amount of fees that can be paid to
Non-Executive Directors is subject to approval by shareholders at a General Meeting (this is currently $400,000 per annum). Fees for
Non-Executive Directors are not linked to the performance of the Group. However to align Directors’ interests with shareholder
interests, the Directors are encouraged to hold shares in the Company and given the current size, nature and opportunities of the
Company, Non-Executive Directors may receive Incentive Options in order to secure their initial or ongoing holding and to retain their
services.
Fees for the Chairman are presently $60,000 per annum (2014: $60,000) and fees for Non-Executive Directors are presently set at
$50,000 per annum (2014: $50,000). These fees cover main board activities and Non-Executive Directors may receive additional
remuneration for other services provided to the Company, including but not limited to, membership of committees.
The Company prohibits Non-Executives entering into arrangements to limit their exposure to Incentive Options granted as part of their
remuneration package.
21
Directors' Report
Relationship between Remuneration of KMP and Shareholder Wealth
During the Company’s exploration and development phases, the Board anticipates that the Company will retain earnings (if any) and
other cash resources for the exploration and development of its projects. Accordingly the Group does not have a policy with respect to
the payment of dividends and returns of capital and thus there was no relationship between the Board’s policy for determining the
nature and amount of remuneration of KMP and dividends paid and returns of capital by the Company.
The Board did not determine the nature and amount of remuneration of the KMP by reference to changes in the Company’s shares traded
between the beginning and end of the financial years. However, as noted above certain KMP are granted Incentive Options which
generally will be of greater value to KMP if the value of the Company’s share price increases.
Relationship between Remuneration of KMP and earnings
As discussed above, the Company is currently undertaking exploration and development activities, and does not expect to be
undertaking profitable operations until sometime in the future. Accordingly the Board does not consider earnings during the current and
previous financial years when determining, and in relation to, the nature and amount of remuneration of KMP.
Emoluments of Directors and Other KMP
Short term Salary
& Fees
$
Post-Employment
Superannuation
$
Share-based Payments
Options
$
Total
$
Performance
related
%
Directors
Michael J Fry
2015
2014
Peter L Munachen
2015
2014
Henry D Kennedy
2015
2014
Other KMP
John D Annand
2015
2014
TOTAL 2015
TOTAL 2014
60,000
60,000
396,000
396,000
50,000
50,000
299,550
269,725
805,550
775,725
-
-
-
18,784
17,775
18,784
-
17,775
-
-
-
-
85,000
-
85,000
60,000
60,000
396,000
396,000
50,000
50,000
318,334
372,500
824,334
878,500
-
-
-
-
-
-
-
24
-
Options and rights granted to KMP
There were no options issued during this financial year. During the financial year ended 30 June 2014, the Company granted options for no
consideration over unissued ordinary shares in the Company to the following executives as part of their remuneration.
Number granted
Grant date
Fair value per
option at grant
date ($)
Exercise price
per option ($)
Expiry date
5,000,000
29 Jul 13
$0.017
$0.1155
28 Nov 16
Number of
options
vested
during 2014
5,000,000
John D Annand
Annand
22
Directors' Report
Details of the values of options granted, exercised or lapsed for each KMP of the Group during the past two financial years are as
follows:
Value of Options
granted (A)
$
Value of Options
exercised (B)
$
Value of Options
lapsed (C)
$
Value of Options included
in remuneration report
$
Remuneration that
consists of Options
%
2015
Michael J Fry
Peter L Munachen
Henry D Kennedy
2014
John D Annand
-
-
-
85,000
-
-
-
-
96,000
159,999
96,000
-
-
-
-
85,000
-
-
-
24
A. The value of options granted in the year is the fair value of the options calculated at grant date using an appropriate option pricing
model.
B. The value of options exercised during the year (if any) is calculated as the market price of the shares of the Company on the
Australian Securities Exchange at the close of trading on the date the options were exercised after deducting the price paid to exercise
the option.
C. The value of options that lapsed during the year (if any) represents the benefit forgone and is calculated at the date of option issue
using an appropriate option pricing model.
For details on the valuation of the options, including models and assumptions used, please refer to Note 20 to the financial statements.
Option holdings of Key Management Personnel
Held at 1 July
Granted as
Remuneration
Exercised
Net Other Change
Vested and exercisable
at 30 June
2015
Michael J Fry
Peter L Munachen
Henry D Kennedy
John D Annand
2014
Michael J Fry
Peter L Munachen
Henry D Kennedy
John D Annand
Ernest A Myers
7,000,000
13,000,000
7,000,000
5,000,000
7,000,000
13,000,000
7,000,000
-
1,750,000
-
-
-
-
-
-
-
5,000,000
Shareholdings of Key Management Personnel
-
-
-
-
-
-
-
-
(3,000,000)
(5,000,000)
(3,000,000)
-
-
-
-
-
(500,000)
4,000,000
8,000,000
4,000,000
5,000,000
7,000,000
13,000,000
7,000,000
5,000,000
1,250,000
Held at 1 July
Purchases
Sales
Net Other Change
Held at 30 June
2015
Michael J Fry
Peter L Munachen
Henry D Kennedy
John D Annand
2014
Michael J Fry
Peter L Munachen
Henry D Kennedy
John D Annand
Ernest A Myers
6,782,704
10,554,998
37,765,900
1,500,000
5,782,704
8,906,274
37,265,900
-
419,998
3,183,363
9,550,086
3,183,362
20,161,291
1,000,000
1,648,724
500,000
1,500,000
35,000
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
9,966,067
20,105,084
40,949,262
21,661,291
6,782,704
10,554,998
37,765,900
1,500,000
454,998
Loans with KMP
No loans were provided to or received from Key Management Personnel during the year ended 30 June 2015 (2014: nil).
Other Transactions with KMP
Resource Services International (Aust) Pty. Ltd, a company of which Mr Munachen and Mr Myers are directors and beneficial
shareholders, was paid $20,148 (2014: 333,302) for the provision of accounting, administration, secretarial and office services during the
year, which was fully paid as of the reporting date. The services provided by Resource Services International (Aust) Pty Ltd were
terminated with effect from 30 June 2014 and were instead performed by staff directly employed by Norwest Energy.
End of Remuneration Report.
23
Directors' Report
13. SHARE OPTIONS
At 30 June 2015 unissued ordinary shares under options were:
Expiry date
Exercise price
Number of options
25 August 2015
26 May 2016
28 November 2016
Total outstanding as at 30 June 2015
$0.036
$0.065
$0.1155
1,650,000
1,000,000
39,000,000
41,650,000
14. DIRECTORS’ MEETINGS
The number of meetings of Directors held during the year and the number of meetings attended by each Director was as follows:
Mr Michael John Fry (Non-Executive Chairman)
Mr Peter Lawson Munachen (Executive Director, CEO)
Mr Henry David Kennedy (Non-Executive Director)
Board meetings
Number eligible to attend
1
1
1
Number attended
1
1
1
The directors are of the opinion that it is often more efficient to deal with matters by circular resolutions than by board meetings, as such
five circular resolutions were signed and these resolutions addressed nine different matters.
Committee membership
As at the date of this report, the Company did not have any formal committees.
15. AUDITOR’S INDEPENDENCE DECLARATION
The auditor’s independence declaration is set out on the following page and forms part of the Directors’ Report for the year ended 30
June 2015.
16. NON-AUDIT SERVICES
The Company’s auditor, Rothsay Chartered Accountants, did not provide any non-audit services during the year (2014: nil).
Signed in accordance with a resolution of the Directors.
Mr Michael John Fry
Non-Executive Director and Chairman
Perth 29 September 2015
24
Corporate Governance Statement
This Corporate Governance Statement has been prepared on the basis of disclosure under the 3rd Edition of the ASX Corporate
Governance Council's Corporate Governance Principles and Recommendations (“ASX Principles and Recommendations”).
The Company has followed each recommendation where the Board has considered the recommendation to be an appropriate benchmark
for corporate governance practices, taking into account factors such as the size of the Company and the Board, resources available and
activities of the Company. Where, after due consideration, the Company's corporate governance practices depart from the ASX Principles
and Recommendations, the Board has offered full disclosure of the nature of and reason for the departure.
The Company's website www.norwestenergy.com.au contains a corporate governance section that includes copies of the Company’s
corporate governance policies and practices mentioned in this statement.
Recommendation
Principle 1 – Lay solid foundations for management and oversight
1.1
1.2
1.3
1.4
1.5
1.6
1.7
Disclose the respective roles and responsibilities of the Board and management and disclose those matters
expressly reserved to the Board and those delegated to management.
Undertake appropriate checks before appointing a Director or putting forward for their election and provide
security holders with all material information in its possession relevant to their election or re-election as a
director.
Written agreement with each director and senior executive setting out the terms of their appointment.
The Company Secretary should be accountable to the Board through the Chair, on all matters to do with the
proper functioning of the Board.
Have a diversity policy with the measurable objectives for achieving gender diversity and to assess annually
both the objectives and the entity's progress in achieving them. The proportion of men and woman on the Board,
Senior Management and the whole organisation should be disclosed.
Disclose a process for periodically evaluating the performance of the Board, its committees and individual
directors and disclose whether a performance evaluation was undertaken during the reporting period.
Disclose a process for periodically evaluating the performance of the senior executives and disclose in relation to
each reporting period whether an evaluation took place during the reporting period.
Principle 2 – Structure the Board to add value
2.1
2.2
2.3
2.4
2.5
2.6
If the entity does not have a Nomination Committee disclose that fact and the processes it employs to address
board succession issues and to ensure the Board has the correct mix of directors to enable it to discharge its
duties and responsibilities effectively.
Disclose a Board skills matrix setting out the mix of skills and diversity that the Board has or would like to
achieve.
Disclose the names of the independent Directors, along with the length of service of each director.
A majority of the Board should be independent.
The Chair of a Board should be an independent director, and should not be the same person as the CEO.
Have a program for inducting new directors and provide appropriate professional development opportunities for
directors to develop and maintain the skills and knowledge needed to perform their role as directors effectively.
Principle 3 – Act ethically and responsibly
3.1
Establish a code of conduct for its directors, senior executives and employees.
Principle 4 – Safeguard integrity in corporate reporting
4.1
4.2
4.3
If the entity does not have an Audit Committee disclose that fact and the processes it employs that independently
safeguard the integrity of its corporate reporting, including the processes for the appointment and removal of the
external auditor and the rotation of the audit engagement partner.
Before the Board approves its’ financial statements, it should receive from its CFO and CEO a declaration that
in their opinion the financial records have been maintained properly and that the financial records comply with
the appropriate accounting standards and the opinion has been formed on the basis of a sound system of risk
management and internal control.
Ensure that its external auditor attends its AGM and is able to answer questions from security holders relevant to
the audit.
Principle 5 – Make timely and balanced disclosure
5.1
The entity should have a written policy for complying with its continuous disclosure obligations under the
Listing Rules.
Comply
Yes/No
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
No
Yes
Yes
Yes
Yes
Yes
Yes
Yes
26
Corporate Governance Statement
Principle 6 – Respect the rights of the shareholders
6.1
6.2
6.3
6.4
Provide information about the entity and its governance to investors via its website.
Design and implement an investor relations program to facilitate effective two-way communication.
Disclose the policies and processes to facilitate and encourage participation at meetings of shareholders.
Give shareholders the option to receive and send communications to the entity and it share registry
electronically.
Principle 7 – Recognise and manage risk
7.1
7.2
7.3
7.4
If the entity does not have a Risk Committee disclose that fact and the processes it employs for overseeing the
entity’s risk management framework.
The Board should review the entity's risk management framework at least annually to satisfy itself that it
continues to be sound and disclose when the review is undertaken.
If the entity does not have an internal audit function, disclose that fact and the processes it employs for
evaluating and improving the effectiveness of its risk management and internal control processes.
Disclose whether it has any material exposure to economic, environmental and social sustainability risks and if it
does, how it manages or intends to manage those risks.
Principle 8 – Remunerate fairly and responsibly
8.1
8.2
8.3
If the entity does not have a Remuneration Committee disclose that fact and the processes it employs for setting
the level and composition of remuneration for directors and senior management and ensuring that such
remuneration is appropriate.
Separately disclose its policies and practices regarding the remuneration of non-executive directors, executive
directors and other senior executives.
If the entity has an equity based remuneration scheme, it should have a policy on whether participants are
permitted to enter into derivative or other transactions to limit their risk.
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Further information required and non-compliance explanations
Recommendation 1. 5 - Diversity Policy with measurable objectives
The Company’s primary objectives with regard to diversity are as follows:
the Company’s composition of the Board, executive, management and employees to be as diverse as practicable; and
to provide equal opportunities for all positions within the Company and continue the Company’s commitment to employment
based on merit.
The measurable objectives set by the Company with regard to diversity have been met, as described below:
blend of skills – wide range of backgrounds; geology, engineering, finance and corporate experience;
cultural backgrounds – Australian, American and New Zealander;
gender – both male and female members; and
age – the age range spans over 25 years.
The above points relate to the composition of the Board and full time employees.
The Company’s annual reporting on the percentage of females in the organisation is as follows:
Full Time Employees
Executive Employees & Board Members
Recommendation 1.6 and 1.7 – Performance evaluation
% Female
2015
80%
20%
2014
75%
20%
During the year an evaluation of the Board and its individual directors was not carried out. The Board and management’s suitability,
overall structure and composition to carry out the Company's objectives is however, discussed and reviewed on an as-required basis.
Performance evaluation of the CEO, senior executives and employees is undertaken annually through a performance appraisal process
which involves reviewing and assessment of performance against agreed corporate, industry and individual key performance indicators.
27
Corporate Governance Statement
Recommendation 2.1 – Nomination Committee
The Board does not have a separate Nomination Committee, rather the full Board considers those matters that would usually be the
responsibility of a Nomination Committee. Given the size and composition of the Board, it is not practicable for a separate committee to
be formed.
To assist it in carrying out its function in relation to nomination matters, the Board has adopted a Nomination Committee Charter which
includes the following responsibilities:
board succession planning;
performance evaluation of the Board and individual directors;
director induction and professional development; and
appointment and re-election of directors.
Recommendation 2.2 – Board skills matrix – composition of the Board
The names of the Directors of the Company in office at the date of this statement and information regarding Director’s skills, experience
and expertise are set out in the Directors’ Report. The Company seeks to maintain a Board which brings together a diverse range of skills,
experience, and perspectives to support the strategic direction of the Company and enable effective management oversight and
governance.
The below is the preferred combination of capabilities, skills and experience for the Board:
technical disciplines of upstream oil and gas exploration, development and production;
finance, taxation, treasury and accounting;
company strategy and business planning;
risk and governance knowledge;
business growth and corporate development;
corporate social responsibility including sustainability and community stakeholder;
local and international experience; and
ASX listed public company administration.
Each of these skills are currently represented on the Board and the Board considers that collectively it has the appropriate range of skills
and experience to direct the Company.
Recommendation 2.3– Name of independent Directors and length of service of each Director
In considering the independence of a director, the “Factors relevant to assessing the independence of a director” in Box 2.3 of the ASX
Principles and Recommendations ("Independence Criteria") have been applied. Mr Fry has been considered an independent Director,
whilst Mr Munachen as an executive and Mr Kennedy a substantial shareholder are not considered independent.
The length of service of Messrs Fry, Munachen and Kennedy are six, eleven and seventeen years respectively.
Recommendation 2.4 – Majority of the Board should be independent
With only one of the three Directors considered to be independent, the Board does not have a majority of independent directors.
Given the size and scope of the Company's operations the Board considers that it is appropriately structured to discharge its duties in a
manner that is in the best interests of the Company. Further, mechanisms are in place so that if a director considers it necessary, they may
obtain independent professional advice.
Recommendation 4.1 – Audit Committee
The Board does not have a separate Audit Committee, rather the full board fulfils the function of an audit committee and therefore no
separate audit committee has been formed in accordance with the compositional recommendation. Given the size and composition of the
Board, it is not practicable that a separate audit committee be formed.
To assist it in carrying out its function in relation to audit matters, the Company has adopted an Audit Committee Charter to assist it to
fulfil its role as the Audit Committee, which includes the following responsibilities:
monitor and review the integrity of the financial reporting of the Company;
monitor, review and oversee the external audit function including matters concerning appointment, remuneration, independence
review the Company’s internal financial control system; and
and non-audit services.
The Charter provides that independent directors may meet with the external auditor.
28
Corporate Governance Statement
Recommendation 7.1 – Risk Committee
The Company believes that it is crucial for all Board members to be a part of overseeing the risk management process, and as such the
Board has not established a separate committee to oversee risk. This along with the size and composition of the Board has meant that the
full Board fulfils the function of a risk committee. The Board is responsible for reviewing the Company’s policies on risk oversight and
management and satisfying itself that management has developed a sound system of risk management and internal control.
Recommendation 7.2 – Risk Management Framework review
The Company takes a proactive approach to risk management. The Board is responsible for ensuring that risks and opportunities are
identified on a timely basis and that the Company’s objectives and activities are aligned with the risks and opportunities identified by the
Board. The Company has a risk management policy in place.
The Board is ultimately responsible for risk management, however implementation of the risk management system and day-day
management of risk is the responsibility of the CEO, with the assistance of senior management. Management reports to the Board
annually, or more frequently as required, on the Company’s key risks and the extent to which it believes these risks are being managed.
During 2015, the Board reviewed the overall risk profile for the Company and received input from management on the effectiveness of the
Company’s management of its material business risks.
The Board has a number of active mechanisms in place to ensure that management's objectives and activities are aligned with the business
risks identified. These include the following:
Implementation of approved operating plans and cash flow forecasts and Board monitoring of progress against these plans and
forecasts;
Management reporting on specific business risks, including matters such as environmental issues and occupational health and safety
concerns.
The Company has advised each director, manager and employee that they must comply with a set of ethical standards maintaining
appropriate core company values and objectives. Such standards ensure shareholder value is maintained and developed. Standards
cover legal compliance, conflict resolution, employment best practices, privileged information and fair dealing.
Recommendation 7.3 – Internal Audit function or process for reviewing internal controls
The Company does not have a dedicated internal audit function, however strong internal control policies and procedures are in place to
effectively manage potential risks and detect any control breakdowns. These are reviewed (and if necessary improved) on an annual basis,
as well as when any new risks are identified or changes occur in the business or industry.
The processes for the review are as follows:
External auditors independently evaluating the Company’s internal control environment and its compliance with the International
Financial Reporting Standards on an annual basis;
Ongoing oversight of strategic matters by executive management and of operational matters ensuring that risks identified are assessed
and proactively managed;
Written internal control assurance from the CEO and CFO prior to sign off of financial statements by the Board; and
Monthly reporting and review of financial and budgetary information.
Recommendation 7.4 – Material exposure to economic, environmental and social sustainability risks
The Company has identified a series of business risks (economic, environmental and social sustainability risks) which the Group believes
to be inherent in the industry.
Ability to gain additional funding or a farm-out partner
Economic risks
-
The Company is not in production as yet and the development of its permits will require substantial additional financing. Failure to obtain
sufficient financing may result in delaying or indefinite postponement of exploration and any development or a loss of interest. However,
the Board is experienced in capital markets and financing resource projects as well as having an extensive reach for potential farm-in
partners.
There are various other economic risks including; commodity risk, exchange rate risk and market risk (which are examined in Note 23).
Environmental and social sustainability risks
-
Impact on the environment and community from Company activities
The Board and management are committed to developing and building a sustainable business, ensuring the Company is an active and
responsible member of the communities in which we operate. Corporate environmental policies and procedures are in place and
communicated to and adhered to by all employees.
External impact-assessment surveys and audits are conducted using third-party consultants who are specialists in their field. This was the
case during the 2015 financial year, specifically in relation to the EP413 Arrowsmith 3D seismic survey.
-
Native title risk in relation to claims over the permits held by the Company
Norwest works closely with the respective parties associated with any claim to come to a mutually beneficial agreement.
29
Corporate Governance Statement
Recommendation 8.1 – Remuneration Committee
The Board does not have a separate Remuneration Committee, rather the full Board fulfils the function of a remuneration committee and
therefore no remuneration committee has been formed in accordance with the compositional recommendation. Given the size and
composition of the Board, it is not practicable that a separate remuneration committee be formed.
To assist it in carrying out its function in relation to remuneration matters, the Company has adopted a Remuneration Committee Charter
to assist it to fulfil its role as the Remuneration Committee, which states the function of the committee is to assist the Board in fulfilling its
corporate governance responsibilities with respect to remuneration by reviewing and making appropriate recommendations on:
Remuneration packages of directors and senior executives; and
Employee incentive and equity-based plans.
Recommendation 8.2 – Remuneration policies and practices
The Company’s remuneration policy has been developed by taking into account the size of the management team, the nature and stage of
development of the current operations and market conditions and comparable salary levels for companies of a similar size and operating in
a similar sector.
For details of the Company’s policies and practices regarding the remuneration of directors and senior executives refer to the
Remuneration Committee Charter on the Company’s website as well as the Remuneration Report included within the Directors’ Report
which includes the remuneration paid to Key Management Personnel and other relevant information.
Recommendation 8.3 – Transactions to limit exposure to economic risk from participating in equity-based remuneration schemes
The Company prohibits executives entering into arrangements to limit their exposure to Incentive Options granted as part of their
remuneration package.
30
Consolidated Statement of Profit or Loss and other Comprehensive
Income
FOR THE YEAR ENDED 30 JUNE 2015
Continuing operations
Financing income
Operating costs
Depletion expense
Joint venture management recharges
Research and development rebate
Directors’ remuneration
Personnel expenses
Personnel expenses recovery
Administrative expenses
Audit fees
Corporate advisory and promotion
Non administrative expenses
Depreciation expense
Exploration expenditure impairment
Share based payments expense
Net loss for the year
Other comprehensive income
Exchange differences on translation of foreign operations
Net change in fair value of available-for-sale financial assets
transferred to profit or loss
Total other comprehensive loss for the year, net of tax
Basic earnings per share (cents per share)
Diluted earnings per share (cents per share)
Notes
4
11
5
5
22
10
11
19
21
21
2015
$
2014
$
28,038
(64,988)
(13,937)
149,588
426,462
(506,000)
(1,039,966)
216,563
(598,825)
(46,444)
(247,677)
(155,326)
(15,298)
(1,347,654)
-
(3,215,464)
67,362
(80,132)
-
155,820
818,565
(538,000)
(759,875)
194,926
(955,917)
(41,413)
(253,976)
(319,770)
(19,273)
(468,615)
(85,000)
(2,285,298)
60,016
32,497
(2,333)
(3,157,781)
(1,666)
(2,254,467)
(0.27)
(0.27)
(0.21)
(0.21)
The above Consolidated Statement of Profit or Loss and Comprehensive Income should be read in conjunction with the Notes to the Financial Statements.
31
Consolidated Statement of Financial Position
AS AT 30 JUNE 2015
Current Assets
Cash and cash equivalents
Trade and other receivables
Total Current Assets
Non-Current Assets
Other financial assets
Investments
Property, plant and equipment
Deferred exploration, evaluation and development costs
Total Non-Current Assets
TOTAL ASSETS
Current Liabilities
Trade and other payables
Provisions
Total Current Liabilities
Non-Current Liabilities
Provisions
Total Non-Current Liabilities
TOTAL LIABILITIES
NET ASSETS
Equity
Share capital
Reserves
Accumulated losses
TOTAL EQUITY
Notes
7
8
8
9
10
11, 12, 13
14
15
16
17
18
19
2015
$
2014
$
1,412,191
129,876
1,542,067
3,379,658
138,129
3,517,787
25,000
1,000
36,072
4,749,065
4,811,137
6,353,204
501,915
43,452
545,367
975,222
975,222
1,520,589
3,762
3,333
30,301
3,781,514
3,818,910
7,336,697
377,102
31,070
408,172
408,893
408,893
817,065
4,832,615
6,519,632
54,953,620
1,672,348
(51,793,353)
4,832,615
53,482,856
2,024,347
(48,987,571)
6,519,632
The above Consolidated Statement of Financial Position should be read in conjunction with the Notes to the Financial Statements
32
Consolidated Statement of Changes in Equity
AS AT 30 JUNE 2015
Balance at 1 July 2014
Profit or loss
Other comprehensive loss for the year
Total comprehensive loss for the year
Shares issued (net of costs)
Share options expired / exercised
Balance at 30 June 2015
Balance at 1 July 2013
Profit or loss
Other comprehensive loss for the year
Total comprehensive loss for the year
Share based payments expense
Shares issued (net of costs)
Share options expired / exercised
Balance at 30 June 2014
Share
Capital
$
53,482,856
-
-
-
1,470,764
-
54,953,620
49,717,027
-
-
-
3,765,829
-
53,482,856
Option
Reserve
$
2,024,347
-
-
-
-
(351,999)
1,672,348
2,032,797
-
-
85,000
-
(93,450)
2,024,347
Accumulated
Losses
$
(48,987,571)
(3,215,464)
57,683
(3,157,781)
-
351,999
(51,793,353)
(46,826,556)
(2,285,298)
30,831
(2,254,467)
-
-
93,452
(48,987,571)
Total
Equity
$
6,519,632
(3,215,464)
57,683
(3,157,781)
1,470,764
-
4,832,615
4,923,268
(2,285,298)
30,831
85,000
3,765,829
2
6,519,632
The above Consolidated Statement of Changes in Equity should be read in conjunction with the Notes to the Financial Statements.
33
Consolidated Statement of Cash Flows
Notes
24
FOR THE YEAR ENDED 30 JUNE 2015
Cash Flows from Operating Activities
Payments to suppliers and employees
Interest received
Net Cash Flows from /(used in) Operating Activities
Cash Flows from Investing Activities
Purchase of property, plant and equipment
Expenditure on oil & gas interests
Payments for refundable deposits
Net Cash Flows from /(used in) Investing Activities
Cash Flows from Financing Activities
Proceeds from issues of ordinary shares
Payment of share issue costs
Net Cash Flows from /(used in) Financing Activities
Net Increase/(Decrease) in Cash and Cash Equivalents
Cash and cash equivalents at 1 July
Effects of exchange rate changes on cash held
CASH AND CASH EQUIVALENTS AT 30 JUNE
7
2015
$
2014
$
(1,090,375)
28,038
(1,062,337)
(1,647,830)
66,652
(1,581,178)
(26,249)
(2,370,810)
(25,000)
(2,422,059)
(14,546)
(1,433,626)
-
(1,448,172)
1,580,000
(123,087)
1,456,913
(2,027,483)
3,379,658
60,016
1,412,191
3,863,800
(97,971)
3,765,829
736,479
2,610,682
32,497
3,379,658
The above Consolidated Statement of Cash Flows should be read in conjunction with the Notes to the Financial Statements.
34
Notes to the Consolidated Financial Statements
FOR THE YEAR ENDED 30 JUNE 2015
1. Corporate Information
Norwest Energy NL (“Norwest” or the “Company”) is a Company incorporated and domiciled in Australia whose shares are publicly listed
on the Australian Securities Exchange (“ASX”). The Company’s registered address is Level 2, 6 Thelma Street, West Perth, WA 6005.
The Consolidated financial report for the financial year ended 30 June 2015 comprises the Company and its consolidated entities (together
referred to as the (“Consolidated entity” or “Group”).
2. Significant accounting policies
The significant accounting policies adopted in preparing the financial report of the Group are to assist in a general understanding of the
financial report. The policies have been applied consistently to all years presented in the consolidated financial report. Certain comparative
amounts may have been reclassified to conform to the current year’s presentation.
(a) Basis of Preparation
The financial report is a general purpose financial report which has been prepared in accordance with Australian Accounting Standards
(“AASBs”), including Australian interpretations adopted by the Australian Accounting Standards Board (‘AASB’) and the Corporations Act
2001. The financial report also complies with International Reporting Standards as issued by the International Accounting Standards Board.
The financial report has been prepared on the historical cost basis except for share based payments and available for sale investments which
have been measured at fair value. Share based payments are valued using appropriate option pricing formulas. Investments are valued based
on the quoted closing price of that security at balance date.
The financial report is presented in Australian dollars which is the Company’s functional currency.
The consolidated financial statements have been prepared on a going concern basis which assumes the continuity of normal business activity
and the realisation of assets and the settlement of liabilities in the ordinary course of business.
(b) Statement of Compliance
(i) New and amended standards adopted by the Company
The Company has adopted all of the new and revised Standards and Interpretations issued by the AASB that are relevant to their operations
and effective for the current annual reporting period.
New and revised Standards and amendments thereof and Interpretations effective for the first time for the annual reporting period
commencing 1 July 2014 that are relevant to the Company include:
AASB 2013-3 Amendment to AASB 136 – Recoverable Amount Disclosures for Non-Financial Assets; and
AASB 2014-1 Amendments to Australian Accounting Standards.
The adoption of all the new and revised Standards and Interpretations has not resulted in any changes to the Company’s accounting policies
and has no effect on the amounts reported for the current or prior years. However, the above standards have affected the disclosures in the
notes to the financial statements.
(c) Basis of Consolidation
(i) Subsidiaries
Subsidiaries are entities controlled by the Company. Control exists when the Company has the power, directly or indirectly, to govern the
financial and operating policies of an entity so as to obtain benefits from its activities. In assessing control, potential voting rights that
presently are exercisable or convertible are taken into account. The financial statements of subsidiaries are included in the consolidated
financial statements from the date that control commences until the date that control ceases.
Investments in subsidiaries are carried at their cost of acquisition in the Company’s financial statements.
(ii) Joint ventures
Joint ventures are those entities over whose activities the consolidated entity has joint control, established by contractual agreement and
requiring majority consent for strategic financial and operating decisions.
Jointly controlled operations and assets
The interest of the Company and of the Consolidated entity in unincorporated joint ventures and jointly controlled assets are brought to
account by recognising in its financial statements if material the assets it controls, the liabilities that it incurs, the expenses it incurs and its
share of income that it earns from the sale of goods or services by the joint venture.
35
(iii) Transactions eliminated on consolidation
Intra-group balances and any unrealised gains and losses or income and expenses arising from intra-group transactions, are eliminated in
preparing the consolidated financial statements.
Unrealised losses are eliminated in the same way as unrealised gains, but only to the extent that there is no evidence of impairment. Gains
and losses are recognised as the contributed assets are consumed or sold by the associates and jointly controlled entities or, if not consumed
or sold by the associate or jointly controlled entity, when the consolidated entity’s interest in such entities is disposed of.
(d) Use of estimates and judgements
The preparation of financial statements requires management to make judgements, estimates and assumptions that affect the application of
accounting policies and the reported amounts of assets, liabilities, income and expenses. Actual results may differ from these estimates.
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 and in any future periods affected.
In particular, information about significant areas of estimation, uncertainty and critical judgements in applying accounting policies have been
included in the notes and accounting policies (2) section for the following:
Impairment of exploration and evaluation assets 2(h)(ii)
Site restoration provision 2(i)
Accounting for exploration and evaluation assets 2(r)(i)
Depletion of development assets 2(r)(ii)
Share based transactions 2(j)(iii)
(e) Foreign currencies
(i) Foreign currency translation
Transactions in foreign currencies are translated at the foreign exchange rate prevailing at the date of the transaction. Monetary assets and
liabilities denominated in foreign currencies at the balance sheet date are translated to Australian dollars at the foreign exchange rate
prevailing at that date. Foreign exchange differences arising on translation are recognised in the income statement. Non-monetary assets and
liabilities that are measured in terms of historical cost in a foreign currency are translated using the exchange rate at the date of the
transaction. Non-monetary assets and liabilities denominated in foreign currencies that are stated at fair value are translated to Australian
dollars at foreign exchange rates prevailing at the dates the fair value was determined.
(ii) Functional currency
These consolidated financial statements are presented in Australian dollars, which is the Company’s functional currency and the functional
currency of the majority of the Group.
(f) Financial instruments
(i) Non-derivative financial instruments
Non-derivative financial instruments comprise investments in equity and debt securities, trade and other receivables, cash and cash
equivalents and other trade payables.
Non-derivative financial instruments are recognised initially at fair value plus, for instruments not at fair value through profit or loss, any
directly attributable transaction costs, except as described below. Subsequent to initial recognition non-derivative financial instruments are
measured as described below.
A financial instrument is recognised if the Consolidated entity becomes a party to the contractual provisions of the instrument. Financial
assets are derecognised if the Consolidated entity’s contractual rights to cash flows from the financial assets expire or if the Consolidated
entity transfers the financial assets to another party without retaining control or substantially all risks and rewards of the asset. Regular
purchases and sales of financial assets are accounted for at trade date, i.e., the date that the Consolidated entity commits itself to purchase or
sell the asset. Financial liabilities are derecognised if the Consolidated entity’s obligations specified in the contract expire or are discharged
or cancelled.
Cash and cash equivalents comprise of cash balances at bank and petty cash on hand.
Accounting for finance income and expense are discussed in the notes. Other non-derivative financial instruments are measured at amortised
cost using effective interest method, less any impairment costs.
(ii) Derivative Financial instruments
The Consolidated entity has not used derivative financial instruments to hedge its exposure to foreign exchange and interest rate risks.
(g) Property, plant and equipment
(i) Owned assets
Items of property, plant and equipment are stated at cost or deemed cost less accumulated depreciation (see below) and impairment losses
(see accounting policy (h)). Cost includes expenditures that are directly attributable to the acquisition of the asset. When 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.
36
(ii) Depreciation
Depreciation is provided on a diminishing value basis on all property, plant and equipment.
Major depreciation rates are:
Plant and equipment
2015
30%
2014
30%
(h) Impairment
(i) Financial assets
A financial asset is considered to be impaired if objective evidence indicates that one or more events have a negative effect on the estimated
future cash flows of that asset.
An impairment loss in respect of a financial asset measured at amortised cost is calculated as the difference between its carrying amount and
the present value of the estimated future cash flows discounted at the original effective interest rate.
Individually significant financial assets are tested for impairment on an individual basis. All impairment losses are recognised in the income
statement. The remaining financial assets are assessed collectively in groups that share similar credit risk characteristics. All impairment
losses are recognised in the income statement.
An impairment loss is reversed if the reversal can be related objectively to an event occurring after the impairment loss was recognised.
(ii) Non-financial assets
The carrying amounts of the Consolidated entity’s non-financial assets, other than deferred tax assets are reviewed at each reporting date to
determine whether there is any indication of impairment. If any such indication exists then the asset’s recoverable amount is estimated.
An impairment loss is recognised if the carrying amount of an asset or its cash generating unit exceeds its recoverable amount. A cash
generating unit is the smallest identifiable asset group that generates cash flows that largely are independent from other assets and groups.
Impairment losses recognised in respect of cash generating units are allocated first to reduce the carrying amount of any goodwill allocated to
the units and then to reduce the carrying amount of the other assets in the unit (group of units) on a pro rata basis.
The recoverable amount of an asset or cash generating unit is the greater of its value in use and its fair value less costs to sell. In assessing
value in use, the estimated future cash flows are discounted to their present value using pre-tax discount rate which reflects current market
assessments of the time value of money and risks specific to the asset.
Impairment losses recognised in prior periods are assessed at each reporting date for any indications that the loss has decreased or no longer
exists. An impairment loss is reversed if there has been a change in the estimates used to determine the recoverable amount. An impairment
loss is reversed only to the extent that the asset’s carrying amount does not exceed the carrying amount that would have been determined, net
of depreciation or amortisation, if no impairment loss had been recognised.
The ultimate recoupment of the value of exploration and evaluation assets is dependent on successful development and commercial
exploitation, or alternately, sale, of the underlying mineral exploration properties. The Group undertakes at least on an annual basis, a
comprehensive review for indicators of impairment of these assets. Should an indicator of impairment exist, there is significant estimation
and judgement in determining the inputs and assumptions used in determining the recoverable amounts.
The key areas of estimation and judgement that are considered in this review include: (i) recent drilling results and reserves and resource
estimates; (ii) environmental issues that may impact the underlying tenements; (iii) the estimated market value of assets at the review date;
(iv) independent valuations of underlying assets that may be available; (v) fundamental economic factors such as commodity prices,
exchange rates and current and anticipated operating costs in the industry; and (vi) the Group’s market capitalisation compared to its net
assets.
(i) Share capital
Transaction costs
Transaction costs of an equity transaction are accounted for as a deduction from equity.
(j) Employee benefits
(i) Long-term service benefits
The Consolidated entity’s net obligation in respect of long-term service benefits is the amount of future benefit that employees have earned
in return for their service in the current and prior periods. The obligation is calculated using expected future increases in wage and salary
rates including related on-costs and expected settlement dates, and is discounted using the rates attached to the Commonwealth Government
bonds at the balance sheet date which have maturity dates approximating to the terms of the Consolidated entity’s obligations.
(ii) Wages, salaries, annual leave, sick leave and non-monetary benefits
Liabilities for employee benefits including wages, salaries, annual leave and sick leave that are expected to be settled within 12 months of the
reporting date represent present obligations resulting from employees’ services provided to reporting date, are calculated at undiscounted
amounts based on remuneration wage and salary rates that the Consolidated entity expects to pay as at reporting date including related on-
costs, such as workers compensation insurance and payroll tax. The Consolidated entity does not provide any non-accumulating non-
monetary benefits, such as medical care, housing, cars and free or subsidised goods and services.
37
(iii) Share-based payment transactions
The share option programme allows Consolidated entity directors, employees and key consultants to acquire shares of the Company through
exercising options granted. The fair value of options granted is recognised as an employee expense with a corresponding increase in equity.
The fair value is measured at grant date and spread over the period during which the employees or consultants become unconditionally
entitled to the options. The fair value of the options granted is measured based on an appropriate formula, taking into account the terms and
conditions upon which the options were granted. The amount recognised as an expense is adjusted to reflect the actual number of share
options that vest except where forfeiture is only due to share prices not achieving the threshold for vesting. In addition, a probability factor of
vesting is taken into account when calculating their theoretical fair value using the option pricing model.
(k) Provisions
A provision is recognised in the balance sheet when the Consolidated entity has a present legal or constructive obligation that can be
estimated reliably as a result of a past event, and it is probable that an outflow of economic benefits will be required to settle the obligation.
Provisions are determined by discounting the expected future cash flows at a pre-tax rate that reflects current market assessments of the time
value of money and, where appropriate, the risks specific to the liability.
(i) Site restoration
In accordance with the Consolidated entity’s published environmental policy and applicable legal requirements, a provision for restoration
costs in respect of well abandonment and restoring contaminated land are capitalised and amortised as an expense based on the expected date
of restoration.
The provision is the best estimate of the present value of the expenditure required to settle the restoration obligation at the reporting date,
based on current legal requirements and technology. Future restoration costs are reviewed annually and any changes are reflected in the
present value of the restoration provision at the end of the reporting period.
(l) Revenue
(i) Goods sold
Revenue from the sale of goods is measured at the fair value of the consideration received or receivable, net of returns and allowances, trade
discounts and volume rebates.
(ii) Royalty income
Royalty income is accounted for on an accrual basis based on the pattern in which the Consolidated entity’s right to future economic benefit
from its interests is accumulated and received.
(m) Income tax
Income tax on the profit or loss for the year comprises current and deferred tax. Income tax is recognised in the income statement except to
the extent that it relates to items recognised directly in equity, in which case it is recognised in equity.
Current tax is the expected tax payable on the taxable income for the year, using tax rates enacted or substantively enacted at the balance
sheet date, and any adjustment to tax payable in respect of previous years.
Deferred tax is provided using the balance sheet liability method, providing for temporary differences between the carrying amounts of assets
and liabilities for financial reporting purposes and the amounts used for taxation purposes. The following temporary differences are not
provided for: initial recognition of goodwill, the initial recognition of assets or liabilities that affect neither accounting, nor taxable profit, and
differences relating to investments in subsidiaries to the extent that they will probably not reverse in the foreseeable future. The amount of
deferred tax provided is based on the expected manner of realisation or settlement of the carrying amount of assets and liabilities, using tax
rates enacted or substantively enacted at the balance sheet date.
(n) Finance income and expense
Finance income comprises of interest income on funds invested, (including available-for-sale financial assets) and gains on the disposal of
available-for-sale financial assets. Interest income is recognised as it accrues, using the effective interest method.
Finance expenses comprise interest expense on borrowings, unwinding of the discount on provisions and impairment losses recognised on
financial assets. All borrowing costs are recognised using the effective interest method.
Foreign currency gains and losses are reported on a net basis.
(o) Segment reporting
A segment is a distinguishable component of the Consolidated entity that is engaged in providing products or services within a particular
economic environment (geographical segment), or in providing related products or services (business segments). Each segment is subject to
risks and rewards that are different from those of other segments.
38
(p) Goods and services tax
Revenue, expenses and assets are recognised net of the amount of goods and services tax (GST), except where the amount of GST incurred is
not recoverable from the taxation authority. In these circumstances, the GST is recognised as part of the cost of acquisition of the asset or as
part of the expense.
Receivables and payables are stated with the amount of GST included. The net amount of GST recoverable from, or payable to, the ATO is
included as a current asset or liability in the balance sheet.
Cash flows are included in the statement of cash flows on a gross basis. The GST components of cash flows arising from investing and
financing activities which are recoverable from, or payable to, the ATO are classified as operating cash flows.
(q) Earnings per share
The Consolidated entity presents basic and diluted earnings per share (EPS) data for its ordinary shares. Basic EPS is calculated by dividing
the profit and loss attributable to ordinary shareholders of the Company by the weighted average number of ordinary shares outstanding
during the period. Diluted EPS is determined by adjusting the profit or loss attributable to the ordinary shareholders and the weighted
average number of ordinary shares outstanding for the effects of dilutive potential ordinary shares, which comprise convertible notes and
share options granted.
(r) Critical accounting estimates and judgements
(i) Exploration and evaluation assets
Exploration and evaluation costs, including the costs of acquiring licences, are capitalised as exploration and evaluation assets on an area of
interest basis. Costs incurred before the Consolidated entity has obtained the legal rights to explore an area are recognised in the income
statement.
Exploration and evaluation assets are only recognised if the rights of the area of interest are current and either:
(i)
(ii)
the expenditures are expected to be recouped through successful development and exploitation of the area of interest; or
activities in the area of interest have not at the reporting date, reached a stage which permits a reasonable assessment of the existence
of economically recoverable reserves and active and significant operations in, or in relation to, the area of interest continue.
Exploration and evaluation assets are assessed for impairment if (i) sufficient data exists to determine technical feasibility and commercial
viability, and (ii) facts and circumstances suggest that the carrying amount exceeds the recoverable amount (see impairment accounting
policy (h)). For the purposes of impairment testing, exploration and evaluation assets are allocated to cash-generating units to which the
exploration activity relates. The cash generating unit shall not be larger than the area of interest.
Once the technical feasibility and commercial viability of the extraction of oil and gas resources in an area of interest are demonstrable,
exploration and evaluation assets attributable to that area of interest are first tested for impairment and then reclassified from exploration and
evaluation phase assets to production phase assets within deferred exploration evaluation and development costs. Assessments of impairment
are covered in the notes to the financial statements.
(ii) Depletion of development assets
The Consolidated entity depletes development assets based on continual assessments of future economic benefit and estimated reserves
remaining taking into account quantity/units of commodity extracted in that reporting period. Rates of depletion of production phase assets
are not fixed and vary as estimated reserves figures are recalculated and more accurate information becomes available. Rates of depletion
reflect the rate at which future economic benefit has been extinguished from the asset over that reporting period.
(s) Determination of fair values
A number of the Consolidated entity’s accounting policies and disclosures require the determination of fair value, for both financial and non-
financial assets and liabilities. Fair values have been determined for measurement and/or disclosure purposes based on the following
methods. Where applicable, further information about the assumptions made in determining fair values is disclosed in the notes to the
financial statements specific to that asset or liability.
(t) Trade and other receivables
The fair value of trade and other receivables is estimated as the present value of future cash flows, discounted at the market rate of interest at
reporting date.
(u) Share based payment transactions
The fair value of employee stock and other options is measured using an appropriate option pricing model. Measurement inputs include share
price on measurement date, exercise price of the instrument, expected volatility (based on weighted average historic volatility adjusted for
changes expected due to publicly available information), weighted average expected life of the instruments (based on historical experience
and general option holder behaviour), expected dividends, and the risk free interest rate (based on Government bonds).
Service and non-market performance conditions attached to the transactions are not taken into account in determining fair value.
39
3. Segment reporting
The Group has adopted AASB 8 Operating Segments which requires operating segments to be identified on the basis of internal reports of
the Group that are reviewed by the chief operating decision-maker in order to allocate resources to the segment and to assess its
performance.
The Board of Norwest reviews internal reports prepared as Consolidated financial statements and strategic decisions of the Group are
determined upon analysis of these internal reports. During the period the Group operated predominately in one business segment, being the
oil and gas sector. Accordingly under the management approach outlined only one operating sector has been identified and no further
disclosures are required in the notes to the Consolidated financial statements.
4. Financing income
Interest
5. Expenses
Salary and wages
Superannuation
Payroll tax
Increase /(decrease) in liability for annual leave
Increase /(decrease) in liability for long service leave
2015
$
28,038
28,038
2015
$
(912,681)
(65,625)
(34,887)
(12,382)
(14,391)
2014
$
67,362
67,362
2014
$
(653,408)
(45,185)
(36,469)
(12,884)
(11,929)
The Company received recoveries of $216,563 (2014: $194,926) against the above salaries expense by way of joint venture recharges.
The increase in salary and wages expense during the year has been more than offset by the reduction in fees paid to Resources Services
International (Aust) Pty Ltd, (2015: $20,148, 2014: $333,302) as a result of finance and company secretarial services being performed in-
house from 1 July 2014.
(1,039,966)
(759,875)
6. Income tax expense
(a) The major components of income tax expense are:
Income statement
Current income tax:
Current income tax benefit
Deferred income tax:
Relating to origination and reversal of temporary differences
Unused tax losses not recognised as a DTA
Income tax (expense) /income reported in the income statement
2015
$
2014
$
1,219,156
1,152,880
(149,882)
(1,069,274)
-
(256,470)
(896,410)
-
40
Income tax expense (continued)
6.
The aggregate amount of income tax attributable to the financial period differs from the amount calculated on the operating loss.
The differences are recorded as follows:
Accounting loss
Prima facie tax payable at 30%
Add tax effect of items not brought to account:
Non-deductible and non-assessable permanent items
Tax losses not bought to account
Income tax expense
(b) Deferred income tax
Deferred income tax at 30 June relates to the following:
Deferred tax liabilities
Tax effect of exploration expenses
Set-off against carry forward tax losses
Deferred tax liability balance
Deferred tax assets
Tax value of carry forward losses
Set-off against deferred tax liability
Non-recognition of deferred tax assets
Deferred tax asset balance
(c) Tax losses
Deferred tax assets
Tax losses – revenue
Tax losses - capital
2015
$
(3,157,781)
(947,334)
(121,939)
1,069,273
-
2014
$
(2,254,468)
(676,340)
(220,069)
896,409
-
1,370,515
(1,370,515)
-
1,227,353
(1,227,353)
-
11,144,553
(1,370,515)
(9,774,038)
-
10,567,388
(1,227,353)
(9,340,035)
-
7,853,122
2,123,916
9,977,038
8,443,110
2,124,278
10,567,388
At 30 June 2015, the Consolidated entity has $37,148,511 (2014: $35,224,627) of tax losses that are available indefinitely for offset against
future taxable profits of the Company. With the exception of the amounts recognised above, a net deferred tax asset balance has not been
recognised on the Statement of Financial Position in respect of the amount of these losses.
The recognition and utilisation of losses is subject to the loss recoupment rules being satisfied. The potential deferred tax asset will only be
obtained if:
- assessable income is derived of a nature and of amount sufficient to enable the benefit from the deductions to be realised or the benefit
can be utilised by the Company and/or the Consolidated entity providing that;
- the conditions for deductibility imposed by the law are complied with; and
- no changes in tax legislation adversely affect the realisation of the benefit from the deductions.
(d) Tax consolidation legislation
The Company had not elected to consolidate for tax purposes at balance date.
7. Cash and cash equivalents
Bank balances
Cash on deposit
2015
$
653,901
758,290
1,412,191
2014
$
1,659,217
1,720,441
3,379,658
41
8. Trade and other receivables
Current
Trade and other receivables
Goods and services tax
Prepayments
Non-current
Security bond on leased premises
9. Investments
Non-current
Available for sale investments held at fair value
2015
$
99,226
14,750
15,900
129,876
25,000
25,000
2015
$
1,000
1,000
At 30 June 2015, the Group held 333,333 fully paid ordinary shares in Oil Basins Ltd (ASX: OBL) (2014: 333,333).
10. Property, plant and equipment
Cost
Balance at 1 July 2014
Additions
Balance at 30 June 2015
Balance at 1 July 2013
Sale /Disposal /Write Down of PPE - Cost
Additions
Balance at 30 June 2014
Accumulated depreciation
Balance at 1 July 2014
Depreciation expense per P&L
Balance at 30 June 2015
Balance at 1 July 2013
Sale /Disposal /Write Down of PPE – Acc Depn
Depreciation expense per P&L
Less Book value on Disposal
Balance at 30 June 2014
Carrying amounts
At 30 June 2015
At 30 June 2014
42
2014
$
72,161
34,051
31,917
138,129
3,762
3,762
2014
$
3,333
3,333
$
216,261
21,068
237,329
267,962
(73,987)
22,286
216,261
185,959
15,298
201,257
240,674
(73,207)
19,273
(781)
185,959
36,072
30,301
11. Deferred exploration, evaluation and development costs
Exploration and evaluation assets carried forward in respect of mining areas of interest
Exploration and evaluation phase:
Exploration and evaluation expenditure at 1 July
Capitalised expenditure during the year
Exploration expenditure written off
Recoveries
Balance at 30 June
Production phase:
Development costs at 1 July
Expenditure during the year
Operating costs to P&L
Production expenditure written off
Balance at 30 June
2015
$
2014
$
3,781,514
2,281,431
(1,313,880)
-
4,749,065
-
98,762
(64,988)
(33,774)
-
2,926,613
1,484,516
(599,615)
(30,000)
3,781,514
-
(50,868)
(80,132)
131,000
-
Total
4,749,065
3,781,514
The recoverability of the carrying amounts of exploration and evaluation assets is dependent on the successful development and
commercial exploitation or sale of the respective area of interest. This is assessed at balance date on an annual basis.
12. Joint venture
Permit
EP 368
EP 426
EP 413
L14
TP/15
EP492
P2265
Country
Australia
Australia
Australia
Australia
Australia
Australia
UK
13. Exploration expenditure commitments
Within one year
One year or later and no later than five years
Later than five years
Interest held at balance date
20.00%
22.22%
27.945%
6.278%
100.00%
100.00%
65.00%
2015
$
6,820,770
12,783,321
89,424
19,693,515
2014
$
6,211,323
14,559,390
-
20,770,713
In order to maintain current rights of tenure to exploration permits, the Consolidated entity is required to perform minimum exploration
work to meet the minimum expenditure requirements specified by various Governments. These obligations are subject to renegotiation.
These obligations are not provided for in the financial report.
43
14. Trade and other payables
Trade creditors
Accrued expenses
Goods and services tax
Other payables
15. Provisions - current
Current
Provision for annual leave
16. Provisions – non-current
Balance at 1 July
Movements during the year:
Permit L14 site restoration (1)
Employee benefits – Long service leave
Finder Exploration (2)
Balance at 30 June
2015
$
131,057
339,741
8,259
22,858
501,915
2015
$
43,452
43,452
2015
$
408,893
13,938
14,391
538,000
975,222
2014
$
108,406
209,453
13,006
46,237
377,102
2014
$
31,070
31,070
2014
$
396,964
-
11,929
-
408,893
(1): The provision for site restoration relates to production permit L14 Jingemia. It is reassessed on an annual basis and reflects the
Company’s share of the present value of restoration costs.
(2): The provision in relation to Finder Exploration Pty Ltd (“Finder”) relates to part of the consideration for the purchase from Finder of
Finder No.5 Pty Ltd, the applicant for an Exploration Permit over the SPA-16 AO area. Upon completion of the transaction the Company is
to pay Finder for past costs incurred on SPA-16 AO and for assistance in obtaining the grant of the Exploration Permit.
17. Contributed equity
(a) Issued and Unissued capital
2015
$
2014
$
1,440,454,999 fully paid ordinary shares (30 June 2014: 1,103,140,782)
54,953,620
53,482,856
44
17. Contributed equity (continued)
(b) Movements in Ordinary Shares during the past two years
Details
Opening Balance
Acquisition of controlled entity
Share purchase plan
Share purchase plan - shortfall
Share placement
Share placement
Share placement
Share issue costs
Closing balance
Opening Balance
Share purchase plan
Share purchase plan - shortfall
Share issue costs
Closing balance
Date
01-Jul-14
03-Nov-14
25-Mar-15
25-Mar-15
25-Mar-15
03-June-15
11-Jun-15
30-Jun-15
30-Jun-15
01-Jul-13
02-Sep-13
02-Sep-13
30-Jun-14
30-Jun-14
18. Reserves
Share based payment reserve
No. of Ordinary
Shares
1,103,140,782
2,000,000
156,617,685
55,606,549
16,977,929
53,056,027
53,056,027
-
1,440,454,999
974,347,449
95,460,000
33,333,333
-
1,103,140,782
Issue price $
-
0.001
0.004712
0.004712
0.004712
0.004712
0.004712
-
-
0.03
0.03
-
-
$
53,482,856
20,000
737,982
262,018
80,000
250,000
250,000
(129,236)
54,953,620
49,717,027
2,863,800
1,000,000
(97,971)
53,482,856
2015
$
1,672,348
1,672,348
2014
$
2,024,347
2,024,347
(a) Nature and purpose
The share based payment reserve is used to record the fair value of Incentive Options issued by the Group.
(b) Movements in share-based payments reserve during the past two years
Opening balance
Expired during the period
Exercised during the period
Granted during the period
Closing balance
Number
of options
2015
52,650,000
(11,000,000)
-
-
41,650,000
Number
of options
2014
51,150,000
(3,500,000)
-
5,000,000
52,650,000
$
2015
2,024,347
(351,999)
-
-
1,672,348
2014
2,032,797
(93,450)
85,000
2,024,347
45
The Incentive Options are granted based upon the following terms and conditions:
Grant date
Entitlement
31 Aug 10
27 May 11
Key management
& employees
Key management
& employees
Number of
options
1,650,000
Exercising Conditions
Vest immediately 50% exercisable after 6
months and 50% exercisable after 12 months
Exercise
Price $
0.036
Life of
Options
5 years
1,000,000
Vest immediately 50% exercisable after 6
months and 50% exercisable after 12 months
0.065
5 years
29 Nov 12
Directors
16,000,000 Vest immediately 50% exercisable after 6
0.1155
4 years
months and 50% exercisable after 12 months
from
7 Feb 13
Key management,
employees & consultants
23,000,000 Vest immediately 50% exercisable after 6
0.1155
months and 50% exercisable after 12 months
4 years
and less
41,650,000
19. Accumulated Losses
Balance at 1 July
Net loss for the year attributable to members of Norwest Energy NL
Other comprehensive income
Transfer of reserves due to cancelled incentive options
Balance at 30 June
20. Share-based payments
(a) Recognised Share-based Payments Expense
2015
$
(48,987,571)
(3,215,464)
57,683
351,999
2014
$
(46,826,556)
(2,285,298)
30,831
93,452
(51,793,353)
(48,987,571)
The Group provides Incentive Options to officers, employees and consultants as part of remuneration and incentive arrangements from
time to time. The number of options granted and the terms of the options are determined by the Board. Shareholder approval is sought
where required. During the past two years, the following equity settled share-based payments have been recognised:
Expense arising from equity-settled share-based payment transactions
2015
$
-
-
2014
$
85,000
85,000
(b) Summary of Incentive options granted as Share-based payments
The following table illustrates the number and weighted average exercise prices (“WAEP”) of Incentive Options granted as share-based
payments at the beginning and end of the financial year.
Outstanding at the beginning of year
Expired during the year
Exercised during the year
Granted during the year
Outstanding and exercisable at end of year
Number
2015
52,650,000
(11,000,000)
-
-
41,650,000
WAEP
2015
0.0997
0.0554
-
-
0.1111
Number
2014
51,150,000
(3,500,000)
-
5,000,000
52,650,000
WAEP
2014
0.0950
0.0530
-
0.1155
0.0997
46
(c) Valuation models and key assumptions used
The fair value of the equity-settled share options granted is estimated as at the date of grant using the Binomial option valuation model
taking into account the terms and conditions upon which the options were granted.
The table below lists the inputs to the valuation model used for the share options granted by the Group that are currently on issue and
outstanding at the end of year:
Number of options
Fair value at grant date
Share price at grant date
Exercise price
Expected volatility¹
Expected life²
Dividend yield (%) ³
Risk-free interest rate
2014
5,000,000
$0.017
$0.038
$0.1155
90.00%
4.0 years
Nil
2.8%
2013
34,000,000
$0.044
$0.077
$0.1155
90.00%
4.0 years
Nil
2.8%
2011 plan
1,000,000
$0.0435
$0.039
$0.065
106%
5.0 years
Nil
4.7%
2010 plan
1,650,000
$0.029
$0.032
$0.036
121%
5.0 years
Nil
4.97%
¹: The expected volatility is indicative of future trends, which may not necessarily be the actual outcome.
²: The dividend yield reflects the assumption that the current dividend pay-out will remain unchanged.
³: The expected life of the options is based on the expiry date of the options as there is limited track record of early exercise of options.
(d) Weighted Average Remaining Contractual Life
As 30 June 2015, the weighted average remaining contractual life of Incentive Options on issue that had been granted as share-based
payments was 1.35 years (2014: 1.8 years).
(e) Range of Exercise Prices
At 30 June 2015, the range of exercise prices of Incentive Options granted as share-based payments is $0.036 to $0.1155 (2014: $0.036 to
$0.1155).
(f) Weighted average Fair Value
The weighted average fair value of Incentive Options granted as share-based payments by the Group is $0.1111 (2014: $0.017).
21. Earnings per share
The following reflects the income and share data used in the calculations of the basic and diluted earnings per share:
Loss attributable to ordinary shareholders
Weighted average number of shares at 30 June
2015
$
2014
$
(3,157,781)
(2,254,467)
Number of
Ordinary Shares
Number of
Ordinary Shares
1,170,496,044
1,079,827,248
Diluted earnings per share
There is no material dilutive effect therefore diluted earnings per share is equal to basic earnings per share.
22. Audit fees
Australia – Rothsay Chartered Accountants
Audit and review of Group financial report
United Kingdom – Geoffrey Cole & Co
Preparation of UK subsidiary financial reports
47
20120
2015
$
(36,500)
2014
$
(37,500)
(9,944)
(3,913)
(46,444)
(41,413)
23. Financial risk management
(a) Overview:
The Group’s principal financial instruments comprise receivables, payables, security deposits, cash and short term deposits and shares held
at fair value. The main risks arising from the Group’s financial instruments are credit risk, liquidity risk, interest rate risk, equity price risk
and foreign currency risk. This note presents information about the Group’s exposure to each of the above risks, their objectives, policies
and processes for measuring and managing risk, and the management of capital. Other than disclosed there has been no significant changes
since the previous financial year to the exposure or management of these risks.
The Group manages its exposure to key financial risks in accordance with the Group’s financial risk management policy. Key risks are
monitored and reviewed as circumstances change (eg. acquisition of a new project) and policies are revised as required. The overall
objective is to support the delivery of the Group’s financial targets whilst protecting future financial security.
Due to the nature and size of the business and uncertainty as to the timing and amount of cash inflows and cash outflows, the Group does
not enter into derivative transactions to mitigate the financial risks. In addition, the Group’s policy is that no trading in financial
instruments shall be undertaken for the purposes of making speculative gains. As the Group’s operations change, the Directors will review
this policy periodically going forward.
The Directors have overall responsibility for the establishment and oversight of the risk management framework. Management monitors
and manages the financial risks relating to the operations of the Group through regular reviews of the risks.
(b) Credit risk:
Credit risk is the risk of financial loss to the Consolidated entity if a customer or counterparty to a financial instrument fails to meet its
contractual obligations, and arises principally from the Consolidated entity’s cash equivalents, security deposits and trade and other
receivables.
The carrying amount of the Group’s financial assets represents the maximum credit risk exposure, as represented below:
Trade and other receivables
Cash and cash equivalents
Total exposure
2015
$
129,876
1,412,191
1,542,067
2014
$
138,129
3,379,658
3,517,787
Trade and other receivables comprise trade receivables, GST and VAT refunds due and recharges due from joint venture partners. Where
possible the Consolidated entity trades only with recognised, creditworthy third parties. Receivable balances are monitored on an ongoing
basis with the result that the Group’s exposure to bad debts is not significant. At 30 June 2015, none (2014: Nil) of the Group’s receivables
are past due.
With respect to credit risk arising from cash and cash equivalents, the Group’s exposure to credit risk arise from default of the counter
party, with a maximum exposure equal to the carrying amount of these instruments. Where possible, the Group invests its cash and cash
equivalents with banks that are rated the equivalent of investment grade and above. The Group’s exposure and credit ratings of its
counterparties are continuously monitored.
(c) Liquidity risk:
Liquidity risk is the risk that the Group will not be able to meet its financial obligations as they fall due. The Board’s approach to managing
liquidity is to ensure, as far as possible, that it will always have sufficient liquidity to meet its liabilities when due. At 30 June 2015 and
2014, the Group has sufficient liquid assets to meet its financial obligations.
The following are the contractual maturities of financial liabilities, including estimated interest payments. There are no netting agreements:
Forecast contractual obligations:
Carrying amount
Contractual cash flows
Consolidated 30 June 2015:
Trade and other payables
Consolidated 30 June 2014:
Trade and other payables
$
$
(501,915)
(501,915)
(377,102)
(377,102)
48
6 months or less
$
(501,915)
(377,102)
(d) Foreign Currency risk:
The Group is exposed to the risk of movements in exchange rates as a result of overseas activities. The Group’s exposure to foreign
currency risk during the current and prior year primarily arose from controlled entities whose transactions were denominated in Great
British Pounds (“GBP”). Foreign currency risk arises on translations of the net assets to Australian dollars. The foreign currency, gains or
losses arising from this risk are recorded through the Statement of Profit or Loss.
The Consolidated entity has not entered into any derivative financial instruments to hedge such transactions or anticipated future receipts or
payments that are denominated in a foreign currency.
The Consolidated entity’s exposure to foreign currency risk at balance date was as follows, based on notional amounts:
Cash and equivalents
Trade and other receivables
Trade and other payables
Total exposure
30 June 2015
AUD
GBP
Total Equivalent
AUD
30 June 2014
AUD
GBP
910,098
128,822
(320,000)
502,094
1,054
(181,915)
1,412,191
129,876
(501,915)
2,899,739
133,296
(294,820)
718,920
321,233
1,040,152
2,738,215
479,919
8,595
(82,282)
406,232
Total Equivalent
AUD
3,379,658
138,129
(377,102)
3,140,685
Foreign exchange rate sensitivity analysis
At reporting date, had the Australian dollar appreciated or depreciated against the GBP by 10%, Profit or Loss and Other Comprehensive
Income would have increased/ (decreased) by $35,693 (2014: $45,137). This analysis assumes that all other variables, remain constant. The
analysis is performed on the same basis for 2014.
(e) Commodity Price risk:
The Group is exposed to commodity price risk. These commodity prices can be volatile and are influenced by factors beyond the Group’s
control. As the Group does not currently have any sales of commodities and none are forecast for the next 12 months, no hedging or
derivative transactions have been used to manage commodity risk.
(f) Interest rate risk:
The Group’s exposure to the risk of changes in market interest rates relates primarily to the cash and cash equivalents held within financial
institutions. These financial assets with variable rates expose the Group to cash flow interest rate risk. All other financial assets and
liabilities, in the form of receivables and payables are non-interest bearing.
The interest rate profile of the Group’s interest bearing financial instruments was as follows:
Cash and cash equivalents
30 June 2015
$
1,412,191
30 June 2014
$
3,379,658
The Group’s cash at bank and on hand had a weighted average floating interest rate of 2.00% (2014: 2.45%). The Group does not engage in
any hedging or derivative transactions to manage interest rate risk.
Interest rate sensitivity analysis
A sensitivity of 1% (100 basis points) has been selected as this is considered reasonable given the current level of short term and long term
interest rates. A 1% (100 basis points) movement in interest rates at the reporting date would have increased/decreased Profit or Loss and
Other Comprehensive Income by $14,122 (2014: $33,797). This analysis assumes that all other variables, in particular foreign currency
rates, remain constant.
49
(g) Capital management:
The Group defines its Capital as total equity of the Group, being $4,832,615 for the year ended 30 June 2015 (2014: $6,519,632). The
Group manages its capital to ensure that it is able to continue as a going concern while financing the development of it projects through
primarily equity based financing. The Board’s policy is to maintain a strong capital base so as to maintain investor, creditor and market
confidence and to sustain future development of the business. Given the stage of development of the Group, the Board’s objective is to
minimise debt and to raise funds as required through the issue of new shares.
There were no changes in the Consolidated entity’s approach to capital management during the year. During the next 12 months, the
Group will continue to explore farm-out opportunities and additional issues of equity.
24. Statement of Cash Flows
Reconciliation of Loss after Tax to the Net Cash Flows from Operations
Note
10
10
11
20
Loss for the period
Adjustments for non-cash income and expense items:
Depreciation
Sale /Disposal /Write Down of PPE
Depletion expense
Exploration expenditure written off
Impairment of investment
Equity-settled share-based payment
Operating profit before changes in working capital and provisions
(Increase)/decrease in trade and other receivables
(Increase)/decrease in investments & assets
Increase/(decrease) in provisions
Increase/(decrease) in trade and other payables
Net cash outflow from operating activities
2015
$
2014
$
(3,157,781)
(2,254,467)
15,298
-
13,937
1,347,654
19,998
-
(1,760,894)
8,253
2,333
563,158
124,813
(1,062,337)
19,273
73,207
-
468,615
-
85,000
(1,608,372)
97,305
(1,666)
24,813
(93,258)
(1,581,178)
25. Related parties
(a) Subsidiaries
Name
Westranch Holdings Pty Ltd
Norwest Perth Basin Pty Ltd
Norwest Holdings (UK) Pty Ltd
NWE Mirrabooka (UK) Pty Ltd
NWE Appalachians LLC [de-registered after year end]
(b) Ultimate Parent
Norwest Energy is the ultimate parent of the Group.
(c) (i) Details of Key Management Personnel
Country of incorporation
% Ownership interest
Australia
Australia
UK
UK
USA
2015
100%
100%
100%
100%
100%
2014
100%
-
100%
100%
100%
The Key Management Personnel (“KMP”) of the Consolidated entity at any time during or since the financial year were:
Non-Executive Directors
Michael John Fry
Henry David Kennedy
Executive Directors
Peter Lawson Munachen
Executives
John Douglas Annand
Non-Executive Chairman
Non-Executive Director
Company Secretary, CFO
Executive Director, CEO
Unless otherwise stated, the KMP held their position from 1 July to the date of this report.
50
(c) (ii) Key Management Personnel compensation
Short term salary & fees
Post-employment benefits
Share-based payments
2015
$
805,550
18,784
-
824,334
2014
$
775,725
17,775
85,000
878,500
(d) Loans with Key Management Personnel
No loans were provided to or received from KMP during the year ended 30 June 2015 (2014: nil).
(e) Related Party Transactions with Key Management Personnel
Resource Services International (Aust) Pty. Ltd, a company of which Mr Munachen is a director and shareholder was paid $20,148 for
the provision of accounting, administration, secretarial and office services during the year (2014: 333,302). Amounts were billed based
on normal market rates for such services and were due and payable under normal payment terms. The amount payable at 30 June 2015
was $Nil (2014: $$6,686). The services of Resource Services International (Aust) Pty. Ltd were terminated at 30 June 2014 with the
roles of Company Secretary and Chief Financial Officer remaining in house with Mr John Annand.
The Company also paid Mr David Hedderwick, a director (deceased during 2014 financial year) of the UK subsidiaries for technical
services during the year totalling $Nil (2014: $25,043).
26. Acquisition of Controlled Entity
On 3 November 2014, the Company acquired Finder No.5 Pty Ltd (since renamed Norwest Perth Basin Pty Ltd) which holds the Special
Prospecting Authority SPA – 16 AO (“SPA”). The SPA grants the right to apply to the Western Australian Department of Mines and
Petroleum (“DMP”) to convert the SPA into a six year Exploration Permit. Completion of the acquisition is subject to and conditional upon
the DMP granting the Exploration Permit.
The transaction has been accounted for as an asset acquisition, considering AASB 3 Business Combinations and the nature of the asset
being acquired.
Net assets acquired:
Cash and cash equivalents
Exploration and evaluation asset
Provision – Finder Exploration Pty Ltd (*)
Cost of the acquisition:
2,000,000 fully paid ordinary shares (#)
Right to acquire Exploration Permit
Note
16
3 November
2014
$
2
538,000
(538,000)
2
(20,000)
19,998
(*):The provision in relation to Finder Exploration Pty Ltd (“Finder”) relates to part of the consideration for the purchase from Finder of
Finder No.5 Pty Ltd, the applicant for an Exploration Permit over the SPA-16 AO area. Upon completion of the transaction the Company is
to pay Finder for past costs incurred on SPA-16 AO and for assistance in obtaining the grant of the Exploration Permit.
(#): The fair value of fully paid ordinary shares issued at the acquisition date has been determined based on the closing share price of the
Company as quoted on the ASX on 3 November 2014 being $0.01 per ordinary share.
27. Contingent Assets and Liabilities
(a) Contingent Assets
As at the date of this report, no contingent assets have been identified in relation to the 30 June 2015 financial year, (2014: nil).
(b) Contingent Liabilities
Part of the consideration for the acquisition of SPA-16 AO from Finder Exploration Pty Ltd is an over-riding royalty of 25% of the
Government Royalty that is payable on petroleum production and is only payable if future production from the SPA is achieved . No value
has been recorded in the financial statements for this potential royalty payment to Finder Exploration Pty Ltd.
51
28. Parent information
(a) Financial Position
Assets
Current assets
Non-current assets
TOTAL ASSETS
Liabilities
Current liabilities
Non-current liabilities
TOTAL LIABILITIES
Equity
Contributed equity
Reserves
Accumulated losses
TOTAL EQUITY
(b) Financial Performance
Profit/(loss) for the year
Other comprehensive income/(loss)
Total comprehensive income/(loss)
29. Commitments
2015
$
2014
$
952,165
4,823,884
5,776,049
2,458,108
4,728,345
7,186,453
318,530
437,222
755,752
257,824
408,894
666,718
54,953,620
1,672,348
(51,605,671)
5,020,297
53,482,856
2,024,347
(48,987,468)
6,519,735
(2,970,201)
-
(2,970,201)
(2,161,017)
-
(2,161,017)
Management have identified the following material commitments (excluding the exploration commitments disclosed in note 13) for the
Consolidated entity as at 30 June 2015 and 30 June 2014:
2015
Operating Lease
Payable within 1
year
$
113,172
Payable within 1 year
less than 5 years
$
195,818
Total
$
308,990
During the 2014 financial year, the Group’s commercial lease reached the end of its term and the balance was immaterial. During the
current financial year, the Group entered into a new lease for a term of 3 years.
30. Subsequent events
There has not arisen in the interval between the end of the financial year and the date of this report any item, transaction or event of a
material and unusual nature likely, in the opinion of the directors of the Company, to affect significantly the operations of the Group, the
results of those operations, or the state of affairs of the Group, in future financial years.
52
Directors' Declaration
1
In the opinion of the Directors of Norwest Energy NL (‘the Company’):
(a)
(i)
(ii)
(b)
(c)
the financial statements and notes, and the Remuneration Report set out in section 12 in the Directors’ Report, are in
accordance with the Corporations Act 2001, including:
giving a true and fair view of the Company’s and the Group’s financial position as at 30 June 2015 and of their
performance, for the financial year ended on that date; and
complying with the Australian Accounting Standards (including the Australian Accounting Interpretations) and the
Corporations Regulations 2001;
the financial report also complies with International Financial Reporting Standards as disclosed in Note 2(a); 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.
2
3
There are reasonable grounds to believe that the Company and the Group entities identified in Note 25(a) will be able to meet any
obligations or liabilities to which they are or may become subject to by virtue of the Deed of Cross Guarantee between the
Company and those Group entities pursuant to ASIC Class Order 98/1418.
The Directors have been given the declarations required by Section 295A of the Corporations Act 2001 from the Chairman for the
financial year ended 30 June 2015.
Signed in accordance with a Resolution of Directors:
Dated in Perth on this 29 day of September 2015.
Michael John Fry
Non-Executive Director and Chairman
53
ASX Additional Information
Additional information required by the ASX and not shown elsewhere in this report is as follows. The information is current as at 30
September 2015.
(a) Distribution of equity securities
The number of shareholders, by size of holding, in each class of share and option are:
1
1,001
5,001
- 1,000
- 5,000
- 10,000
10,001
- 100,000
100,001
and over
The number of shareholders holding less than a
marketable parcel of shares are:
Ordinary shares
Number of holders Number of shares
166
243
388
1,826
1,516
4,139
2,729
33,645
818,950
3,300,791
83,510,087
1,352,791,526
1,440,454,999
99,581,806
(b) Twenty largest shareholders
The names of the twenty largest holders of listed securities are listed below:
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
REY CATTAMARRA PTY LTD
HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED
MR ROBERT ANTHONY HUTCHFIELD
MR ANDREW TROTT HOPKINS & MRS ADRIENNE JANET HOPKINS
MR JOHN DOUGLAS ANNAND
AFM PERSEUS FUND LIMITED
CRESCENT NOMINEES LIMITED
AQUATIC RESOURCES LIMITED
MR VERNON REGINALD PARROTT
MR MINGCAI WANG
SUNDOWNER INTERNATIONAL LIMITED
MR KEVIN MARK JOHNSON
CORRALLINE PTY LTD
T T NICHOLLS PTY LTD
CITICORP NOMINEES PTY LIMITED
MR CONRAN JAMES SMITH
MR REGINALD STANLEY ORMOND HOLT
CUSTODIAL SERVICES LIMITED
BOOKMAN PTY LTD
MS CLAIRE ELIZABETH SEALS
Listed ordinary shares
Number of shares
53,056,027
31,953,597
28,000,000
25,000,001
21,661,291
20,000,000
18,183,362
14,134,666
13,633,276
13,484,142
12,941,727
12,500,000
12,183,362
11,598,048
10,527,338
9,079,143
8,530,561
8,077,881
8,040,000
7,668,004
340,252,426
Percentage of
ordinary shares
3.68
2.22
1.94
1.74
1.50
1.39
1.26
0.98
0.95
0.94
0.90
0.87
0.85
0.81
0.73
0.63
0.59
0.56
0.56
0.53
23.62
(c) Voting rights
All ordinary shares (whether fully paid or not) carry one vote per share without restriction.
(d) Substantial Shareholders
There were no substantial shareholders notifications to the Company in accordance with section 671B of the Corporations Act 2001 from 1
July 2014.
56
ASX Additional Information
(e) Options
The names of the security holders holding more than 20% or more of an unlisted class are listed below:
Holder
Mr Peter Munachen
Mr John Annand
$0.006 share options
Expiring 30-Jun-2020
-
4,000,000
$0.1155 share options
Expiring 28-Nov-16
8,000,000
5,000,000
$0.065 share options
Expiring 26-May-16
-
-
Mrs Shelley Robertson
4,000,000
Aztech Well Construction Pty Ltd
Others (less than 20%)
-
-
Total
8,000,000
1,250,000
11,400,000
8,500,000
34,150,000
500,000
-
-
500,000
Total
8,000,000
9,000,000
5,750,000
11,400,000
8,500,000
42,650,000
(f) Restricted Securities
There are currently no restricted securities of the Company’s securities.
(g) On-Market Buy Back
There are currently no on-market buy-back of the Company’s securities.
57
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5
Registered Office
Level 2, 6 Thelma Street
West Perth Western Australia 6005
Telephone: +61 8 9227 3240
Facsimile: +61 8 9227 3211
Email: info@norwestenergy.com.au
www.norwestenergy.com.au
2015 ANNUAL REPORT