.
.
OCTANEX LIMITED
ABN 61 005 632 315
ANNUAL REPORT
FOR THE YEAR ENDED
30 JUNE 2018
.
OCTANEX LIMITED
ABN 61 005 632 315
CORPORATE DIRECTORY
Directors
Mr Geoffrey Albers
Chairman & Chief Executive Officer
Ms Raewyn Clark
Executive Director
Datuk Kevin Kow How
Non-Executive Director
Mr James Willis
Independent Non-Executive Director
Company Secretary
Mr Robert Wright
Registered Office
Level 21, 500 Collins Street
Melbourne, Victoria 3000, Australia
+61 (03) 8610 4702
Telephone:
+61 (03) 8610 4799
Facsimile:
admin@octanex.com.au
E-mail:
Auditor
Grant Thornton Audit Pty Ltd
GPO Box 4736
Melbourne, Victoria 3001 Australia
Website:
www.octanex.com.au
Share Registry
Automic Pty Ltd
Level 3, 50 Holt Street
Surry Hills, NSW 2010, Australia
Telephone: 1300 288 664 (within Australia)
Telephone: +61 (2) 9698 5414 (outside
Australia)
Website: www.automic.com.au
Stock Exchange
ASX Limited
Level 45, South Tower, Rialto,
525 Collins Street,
Melbourne Victoria 3000 Australia
ASX Code: OXX
Incorporated in Victoria on 13 March 1980
CONTENTS
Corporate Directory…………………………2
Chairman’s Letter ......................................... .3
Operations Report…………...………………5
Auditor’s Independence Declaration ............. 7
Directors’ Report ........................................... 8
Corporate Governance ................................. 10
Remuneration Report ................................... 11
Directors’ Declaration.................................. 13
Audit Report ................................................ 14
Statement of Profit or Loss and Other
Comprehensive Income ............................... 18
Statement of Financial Position ................... 19
Statement of Changes in Equity ................... 20
Statement of Cash Flows ............................. 22
Notes to the Financial Statements ................ 23
Shareholder and Other Information……..…50
Octanex Annual Report - Page | 2
OCTANEX LIMITED
ABN 61 005 632 315
Chairman’s Letter
Dear Shareholders,
2017/18 evolved into a most difficult and disappointing year. A major focus for the year was on the Ophir
field development where we held a 50% participating joint venture interest through Ophir Production Sdn
Bhd (OPSB), the joint venture contractor to PETRONAS for the Ophir development. We commenced the
year anticipating production from the Ophir field. The Ophir development was successfully completed
(subsurface, wells, facilities, and production operations) on time and significantly under-budget, through
the most challenging oil price environment. However, contrary to our expectations, production was short-
lived, with the development thus proving to be uneconomic.
The Ophir field had been promoted by PETRONAS as a discovered oil field and offered by PETRONAS under
Malaysia’s Risk Service Contract (RSC) regime on the basis of a guaranteed return of the contractor’s capital
and operating costs, together with incentive-based remuneration linked to time, capital cost and
production performance. As a result of the fall in oil price, PETRONAS twice adjusted the development
timetable, with the time incentive then removed. The RSC contractor’s ability to achieve any income was
reliant upon the fulfillment of the performance indicators. PETRONAS’ undertaking to reimburse operating
and capital costs, irrespective of the availability of revenue, went hand-in-hand with the contractor
accepting a performance-only based remuneration. This risk/reward principle with regard to the
contractor’s reimbursement and remuneration is a fundamental tenet of the RSC.
Key achievements of the Ophir development included:
Zero Lost Time Incidents incurred over 1.5 million hours (facilities and drilling);
45% capex saving against initial field development plan (US$74.9M vs US$135M) setting the
benchmark for low cost development offshore Peninsular Malaysia;
FPSO facilities daily OPEX rate 25% below agreed budget and one of the lowest in the world
(US$31.7k/day);
First Suction Pile Technology platform offshore Peninsular Malaysia - installed and welded out in 72
hrs, thereby significantly reducing offshore costs and risks, and.
Malaysian content exceeding 99%
Octanex had intended its 50% participation in OPSB to be a country-entry. Our lack of success at leveraging
from these achievements to secure additional projects from PETRONAS has compounded the disappointing
result of the Ophir development.
Upon the field meeting the contractual “economic cut-off” criteria, termination of the RSC was effected by
OPSB. Negotiations between OPSB and PETRONAS are still underway in respect to handover to PETRONAS,
which arrangements are clearly described in the contract. Such arrangements include keeping Ophir whole
in respect to operating and capital costs for the development and the assumption by PETRONAS, by way of
novation, of any contracts entered into by OPSB in relation to the project.
Octanex largely facilitated its capital contributions to OPSB through a Sabah International Petroleum Ltd
(SIP) Convertible Note facility. Octanex’s ability to repay SIP (assuming that SIP seek to redeem rather than
convert the Notes), is linked to the outcome of negotiations with PETRONAS, not only with respect to the
Octanex Annual Report - Page | 3
OCTANEX LIMITED
ABN 61 005 632 315
costs to be reimbursed, but also the novation to PETRONAS of outstanding contracts. Octanex is working
closely with OPSB and SIP in an effort to bring about a resolution of these matters.
During the year we divested a number of exploration permits. In January Octanex joined with Eni Australia
Limited in withdrawing from WA-362-P and WA-363-P. In June the Winchester Joint Venture (Santos 75% /
Octanex 25%) applied for consent to surrender WA-330-P and also decided not to lodge the earlier
anticipated application for Retention Lease in respect of the Winchester gas discovery in WA-323-P. The
permit, which was in year 5 and not eligible for a further renewal, has therefore expired.
We are continuing evaluation activities in relation to our 100% interest in the Ascalon gas field, held via two
exploration permits, particularly focusing on leveraging learnings from southern North Sea Permian tight
gas discoveries that have been developed through offshore stimulation in recent years.
The Cornea Retention Lease was granted in 2014 following the significant new information gained from the
Cornea – 3 well in which Octanex actively participated. The work program was formulated to address
technical challenges to development; with the ability to achieve threshold production identified as the key
barrier to commercialisation of Cornea and a production test well, designed to achieve such economic
production, as a key means of moving Cornea towards development.
The parameters of a Cornea production test well have changed considerably since the Retention Lease was
granted as a result of the reduced oil price environment. The Cornea Joint Venture has accordingly applied
to the authorities to vary the conditions of WA-54-R work programme.
During the year David Coombes, Tino Guglielmo and Suhnylla Kler resigned from the board of Octanex, and
Jack Tuohy resigned as a secretary. I thank each of them for their service.
I extend my thanks to Sabah International Petroleum for their support of Octanex and the Ophir project, as
well as to our staff and contractors. I thank my co-directors and shareholders for their ongoing support of
Octanex.
E.G. Albers
Chairman
27 September 2018
Octanex Annual Report - Page | 4
OCTANEX LIMITED
ABN 61 005 632 315
Operational Review
Ophir Oil Development Project, Malaysia
The Ophir field was developed by Ophir Production
Sdn Bhd (OPSB) under a Risk Service Contract
(RSC), entered into by OPSB as Contractor, with
PETRONAS, the resource owner, as Principal.
Octanex holds a 50% shareholding interest in
OPSB.
Production from the Ophir field commenced and
ended during the year, with the development
proving not to be economic. On 6 June 2018 OPSB
exercised its right to terminate the RSC, providing
PETRONAS with 90 days written Notice of
Termination.
RSC Termination matters are presently being
negotiated by OPSB with PETRONAS. The RSC
provides that following Termination, PETRONAS
shall assume responsibility for the field, accept
novation of contracts and reimburse to OPSB
capital and operating costs met by OPSB and not
previously reimbursed.
funded
OPSB
the Ophir development via
syndicated term loan facilities (Project Financing
Facilities), with the balance of expenditure funded
by OPSB’s shareholders in proportion to their
equity interest in OPSB (50% in Octanex’s case).
Octanex’s contributions to OPSB were largely
funded by a Convertible Note facility (drawn to
US$8Million) with Sabah International Petroleum
(SIP). It was structured for the purpose of meeting
Octanex’s contributions to OPSB and for working
capital requirements.
Advances made to OPSB by Octanex and other
OPSB shareholders are subordinated to OPSB’s
Project Financing Facilities. As a result, payments
from OPSB to Octanex can only follow repayment
of OPSB’s Project Financing Facilities.
The amounts to be repaid by OPSB to Octanex will
be required to enable the redemption of the SIP
Convertible Note facility, unless SIP elects to
convert the Convertible Notes into Octanex shares
(the drawn facility is comprised of two equal
tranches of convertible notes, with conversion
prices of $0.15 and $0.20).
Octanex does not anticipate that it will achieve a
surplus of funds following a full redemption of the
SIP Convertible Note facility.
Greater Cornea Fields, Browse Basin
Octanex has an 18.75% interest in the Greater
Cornea Fields (being the Cornea, Focus and Sparkle
Oil Fields and the Cornea North (Tear) Gas Field),
located in the Browse Basin and held via a
Retention Lease (WA- 54-R).
Greater Cornea Field retention lease location map
The Greater Cornea Fields present a large in-place
oil resource contained in a challenging reservoir. At
the time the Retention Lease was applied for and
granted, production uncertainty was identified as
the primary constraint to development. A successful
production
to demonstrate
threshold productivity for development initiation is
required to commercialise Cornea.
test well designed
Given the favourable prevailing oil price when the
Retention Lease was applied for (October 2013),
numerous field development concepts were then
considered to be potentially economic (subject to
achieving
threshold production volumes) and
assuming sufficient recoveries.
However, the current oil price environment presents
the Cornea field’s
a significant challenge
commerciality, having rendered as non-viable the
to
Octanex Annual Report - Page | 5
OCTANEX LIMITED
ABN 61 005 632 315
field development concepts previously considered
as potentially viable.
reduced oil price
Reflecting our markedly
expectations, new development concept screening
the objective of
has been undertaken with
identifying a development concept with
the
potential to be commercial at current oil prices.
Following this screening, a development concept
predicated on the use of a Mobile Offshore
Production Unit (MOPU) with a subsea holding
tank and single point mooring has been selected for
further investigation. This concept is significantly
different to earlier concepts, with potential for
significant cost reductions.
Integrated
reservoir modelling work was
undertaken during the year to support design of a
production test well capable of delivering threshold
productivity using this development concept. The
Cornea Joint Venture has applied to vary the
Ascalon Gas, Bonaparte Basin
The Ascalon gas accumulation is located mostly
within exploration permit WA-407-P and extends
into the adjacent WA-420-P.
Ascalon has an aerial extent of 320 km2, a proven
source/charge, trap, seal and a high reservoir
pressure (10,500 psi), which is 3,500 psi over
normally pressured and may be due to a much
deeper closing contour and greater gas in place.
to existing
Proximity
infrastructure and gas
resources, presents several opportunities for the
future develop of Ascalon options. Located in
shallow water (68 m), wells can be drilled using a
jack-up rig while unmanned wellhead platform
development options reduce potential CAPEX and
OPEX.
Ascalon proximity to gas infrastructure
Ascalon-1A, drilled in 1995 by Mobil encountered
155m TVD gross section in the same Permian
and Tern. However,
formation
approximately 60% of the shallower reservoir was
not flow tested due to mechanical issues.
as Petrel
tight gas
Since 2010, a number of Permian
discoveries in the southern North Sea (SNS) have
been developed
through offshore stimulation.
During the financial year, Octanex undertook
reservoir studies including stimulation and pore
pressure studies with a view to leveraging learnings
from SNS tight gas analogues and exploiting
Ascalon’s apparent high reservoir pressure.
Octanex is seeking a joint venture party to join it in
appraising Ascalon.
Octanex Annual Report - Page | 6
conditions of WA-54-R to facilitate this work.
Ascalon gas accumulation location map
Collins Square, Tower 1
727 Collins Street
Melbourne VIC 3008
Correspondence to:
GPO Box 4736
Melbourne VIC 3001
T +61 3 8320 2222
F +61 3 8320 2200
E info.vic@au.gt.com
W www.grantthornton.com.au
Auditor’s Independence Declaration
To the Directors of Octanex Limited
In accordance with the requirements of section 307C of the Corporations Act 2001, as lead auditor for the audit of Octanex
Limited for the year ended 30 June 2018, I declare that, to the best of my knowledge and belief, there have been:
a
b
no contraventions of the auditor independence requirements of the Corporations Act 2001 in relation to the audit; and
no contraventions of any applicable code of professional conduct in relation to the audit.
Grant Thornton Audit Pty Ltd
Chartered Accountants
B L Taylor
Partner – Audit & Assurance
Melbourne, 27 September 2018
Grant Thornton Audit Pty Ltd ACN 130 913 594
a subsidiary or related entity of Grant Thornton Australia Ltd ABN 41 127 556 389
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Liability limited by a scheme approved under Professional Standards Legislation.
OCTANEX LIMITED
ABN 61 005 632 315
Annual Financial
Statements
Directors’ Report
Directors
Mr Geoff Albers LL.B, FAICD
Executive Chairman
Appointed 2 October 1984
Mr Albers has over thirty five years oil and gas
industry experience, having first became involved
in oil exploration in 1977. Mr Albers is a law
graduate of the University of Melbourne and has
had extensive experience as a director and
administrator
law, petroleum
corporate
exploration and resource sector investment.
in
Mr Albers founded Octanex Limited and is a
substantial shareholder in the company. He is also a
director and substantial shareholder in the ASX
listed Peako Limited (ASX: PKO) and Enegex
Limited (ASX: ENX).
Ms Rae Clark
B.Bus(dist), CA, MAICD, AGIA, ACIS
Executive Director
Appointed 17 October 2014
Ms Clark has more than twenty years experience
focussed primarily on the natural resource sector.
She has wide operational, commercial and project
development knowledge and her experience
includes
financial
modelling and analysis, capital raising and mergers
and acquisitions, as well as managing joint venture
partners, government,
investor
relations.
regulator and
development,
business
Ms Clark was previously Commercial Manager of
Octanex. Having commenced her career with
Deloitte in 1997, Ms Clark has worked with oil
and gas companies since 2005. She is also a
Director of Peako Limited (ASX: PKO) and
Enegex Limited (ASX: ENX).
Ms Clark holds a Bachelor of Business (with
distinction), a Graduate Diploma (ICAA) and
Graduate Diploma
in Applied Corporate
Governance.
Datuk Kevin Kow How FCA
Non-Executive director
Appointed 18 December 2014
the
Datuk Kevin How Kow is a director of Sabah
Development Bank. He is a member of the
Malaysian Institute of Accountants, the Malaysian
Institute of Certified Public Accountants and a
the Institute of Singapore
fellow member of
Chartered Accountants and
Institute of
Chartered Accountants in England & Wales. He
was made a partner of Ernst & Young (“EY”),
Malaysia in 1984 and served as the partner-in-
and
offices
charge
Sarawak. Later, from 1996 onwards, he was the
partner-in-charge of EY’s practice in Sabah and
Labuan until his retirement at the end of 2003. He
also serves as a Director of Cahya Mata Sarawak
Berhad, K&N Kenanga Holdings Berhad, Kenanga
Investment Bank Berhad, Saham Sabah Berhad,
Sarawak Cable Berhad, M3nergy Berhad and
several private limited companies.
in Sabah
of EY’s
Mr James Willis LL.M (Hons), Dip Acc
Independent Non-Executive Director
Appointed 18 August 2009
Previously an executive director of Octanex (2009-
2011) Mr Willis
is an upstream petroleum
consultant who has held governance positions with
and consulted to various participants in the oil and
gas exploration sector. Mr Willis is a former partner
in the leading New Zealand law firm of Bell Gully
where his practice speciality was in the upstream oil
issues
and gas area, particularly relating
concerning gas contracting and the development of
oil and gas reserves, joint ventures and upstream
petroleum related acquisitions.
to
Mr Willis is a director of New Zealand Energy
Corp, a company with New Zealand operations and
listed on the TSX Venture exchange.
Mr David Coombes
Appointed 15 May 2012 – resigned 25 May 2018
Mr Tino Guglielmo
Appointed 18 December 2014 –resigned 17 July
2018
Octanex Annual Report - Page | 8
OCTANEX LIMITED
ABN 61 005 632 315
Ms Suhnylla Kler
A
2018
ppointed 18 December 2014 – resigned 18 July
Company Secretary
Mr Robert Wright B Bus, CPA
Mr Wright is a senior financial professional with
over 25 years commercial experience in the
resource, energy and manufacturing industries
gained at various companies and
locations,
including 14 years at BHP.
He is the Chief Financial Officer (CFO) and the
Company Secretary of Octanex and CFO and
company secretary of the listed companies, Enegex
Limited and Peako Limited. Mr Wright is a
member of CPA Australia.
Mr Jack Tuohy BCA, CA – resigned 14
December 2017
Principal Activities
The principal activities of the consolidated entity
during the year were petroleum exploration and
development and investment in that sector.
Financial Results
The net loss of the consolidated entity for the
financial year was $21,501,847 (2017: loss of
$4,800,071).
Dividends
No dividend was declared or paid during the year
and to the date of this report.
Review of Operations
A review of the consolidated entity’s Operations
during the financial year is provided in the
Operational Review.
Surrendered
interests
and
expired
exploration
In January 2018 Octanex joined with Eni Australia
Limited in withdrawing from exploration permits
WA-362-P and WA-363-P.
In June 2018 the Winchester Joint Venture (Santos
75% / Octanex 25%) applied for consent to
surrender WA-330-P and also decided not to lodge
an application for Retention Lease in respect of the
Winchester gas discovery in WA-323-P. The
Permit, which was in year 5 and not eligible for a
further renewal, has therefore expired.
Change in State of Affairs
Other than as described in these annual financial
statements there have been no changes in the state
of affairs of the company.
Subsequent Events
Since the end of the financial year there have been
no subsequent events.
Future Developments
Future developments in the company’s operations
and the expected result from those operations are
dependent on exploration and development success
in the permit areas in which the group holds
interests.
Directors’ Meetings
The following table sets out the number of meetings
held during the year and the number of those
meetings that were attended by each director. Other
matters that required formal Board resolutions
were dealt with via written circular resolutions. In
addition, the directors met and corresponded at
numerous times throughout the financial year to
discuss the Group’s affairs.
Board Meetings
Audit Committee
Meetings
Eligible
2
2
2
2
2
2
2
Attended
2
2
2
2
-
1
2
Eligible
2
EG Albers
RL Clark
2
DC Coombes 2
G Guglielmo 2
2
KK How
2
S Kler
2
JMD Willis
Attended
2
2
2
2
1
-
2
Share Capital
Ordinary Shares
Nomination &
Remuneration
Committee
Meetings
Eligible
1
1
1
Attende
d
1
1
-
share capital
The Company’s
consists of
242,823,840 ordinary fully paid shares (excluding
29,889,107 shares held by the Trustee of the
Octanex Trustee Share Scheme).
Trustee Stock Scheme
As at 30 June 2018 and to the date of this report,
29,889,107 ordinary shares, previously issued to
the Trustee pursuant to the Scheme, remain unsold.
The Trustee does not exercise voting rights in
respect of the shares held pursuant to the Scheme.
Octanex Annual Report - Page | 9
OCTANEX LIMITED
ABN 61 005 632 315
Unlisted Options
Remuneration report
The following options were granted and remained
on issue at 30 June 2018 to Octanex directors, staff
and other individuals.
This remuneration report is set out on pages 11 to
12 and forms part of the Directors’ Report for the
financial year ended 30 June 2018.
Number
Expiry Date
Exercise
6,600,000
7,170,000
15 October 2018
24 November 2019
Vesting
criteria
price
$0.1534 No
No
$0.08
2017
2018
Unlisted Options
Balance at beginning of year
Options granted
Options cancelled
Options expired
Balance at end of year
Convertible Notes
21,270,000 15,100,000
-
-
(7,500,000) -
13,770,000 21,270,000
7,170,000
(1,000,000)
Octanex has a US$12Million convertible note
facility (Notes) with Sabah International Petroleum
(SIP), a company ultimately wholly owned by
Ministry of Finance of the Malaysian state of
Sabah. The facility consists of three US$4million
tranches with rights of conversion into fully paid
ordinary shares of the Company at prices of 15, 20
and 25 cents per share for each of the tranches.
The facility was established to fund Octanex’s
contributions to the Ophir development. As at 30
June 2018, and at the date of this report, two
tranches aggregating US$8Million have been
drawn down under the facility.
The Notes have a maturity date of 30 June 2019
and may be redeemed or converted at SIP’s
election.
Indemnification
Officeholders
of
Directors
and
During the year and to the date of this report, the
company did not pay premiums in respect of
contracts insuring officers or auditors of the
company against liabilities arising from their
position of officers or auditor of the company.
The Company has entered into Deeds of Access
and Indemnity with each of the Directors referred
to in this report who held office during the year
indemnifying each against all liabilities incurred in
their capacity as directors of the Company to the
full extent permitted by law.
Corporate Governance
the Company,
The Board is responsible for the strategic
direction
and
the
of
implementation of corporate policies and goals,
and the monitoring of the business and affairs of
the Company on behalf of its shareholders.
identification
The Board delegates responsibility for the day-to-
day management of Octanex
the Chief
Executive Officer. All Directors have unrestricted
access to Company records
and information and
receive detailed financial
and operational reports.
to
The Board is currently comprised of two Non-
Executive Directors and two Executive Directors.
DC Coombes resigned 25 May 2018. G Guglielmo
resigned 17 July 2018. S Kler resigned 18 July
2018. All three directors have not been replaced.
In accordance with the Company’s Constitution
and the ASX Listing Rules, the Directors (other
than the Chief Executive Officer) are subject to re-
election by shareholders every three years.
The Board meets regularly throughout the year.
Where appropriate, presentations are given to the
Board from management who may be questioned
directly by Board members on
technical,
operational and commercial issues.
Details of the Company’s corporate governance
practices are included in the Corporate Governance
statement found on the Company’s website.
Octanex Annual Report - Page | 10
OCTANEX LIMITED
ABN 61 005 632 315
Auditor
services
independence
and
non–audit
A copy of the auditor’s independence declaration,
the
required under Section 307C of
as
Corporations Act 2001, is attached and forms part
of this Directors’ Report for the year ended 30
June 2018.
No fees were paid to the auditor for non-audit
services.
This Directors’ Report is made in accordance with
a resolution of the directors and forms part of the
financial statements.
On behalf of the Directors:
E.G. Albers
Director
27 September 2018
Remuneration
Report
This Remuneration Report for the year ended 30
June 2018 outlines the key management personnel
remuneration arrangements of the Company in
accordance with
the
Corporations Act 2001 (Act) and its regulations.
The disclosures in this Remuneration Report have
been audited as required by section 308(3C) of the
Act.
requirements of
the
Key Management Personnel
For the purpose of this report, Key Management
Personnel (KMPs) of the Company are defined as
those persons having authority and responsibility
for planning, directing and controlling the major
activities of the Company directly or indirectly.
The following have been identified as KMPs at 30
June 2018 for the purpose of this Remuneration
Report:
Executive Directors
EG Albers
RL Clark
Chairman & Chief Executive
Officer
Executive Director & Chief
Operating Officer
Non-executive Directors
Director
Director
Director
Director
JMD Willis
KK How
SK Kler*
G Guglielmo**
* resigned 18 July 2018
** resigned 17 July 2018
David Coombes resigned as a director 25 May
2018
is
and
reviewing
responsible
for
The board of directors
determining
compensation
arrangements for the directors and executives.
The board assesses the appropriateness of the
nature and amount of emoluments on a periodic
basis by reference to relevant employment market
conditions, with the overall objective of ensuring
maximum stakeholder benefit from the retention
of a high quality board and executives.
Remuneration levels for directors and executives of
the company are competitively set to attract and
retain appropriately qualified and experienced
directors and executives.
The remuneration
structures explained below are designed to attract
suitably
the
achievement of strategic objectives and achieve the
broader outcome of creation of value
for
shareholders. The remuneration structure takes
into account:
candidates,
qualified
reward
•
•
•
The capability and experience of the directors
and executives;
The ability of directors and executives to
control the entity’s performance; and
The requirement
that directors apply a
portion of their remuneration to the purchase
of shares in the company, at market price, so
as to align the interests of directors with that
of shareholders.
non-executive
In accordance with the company’s constitution,
remuneration was
directors’
approved by shareholders on 28 November 2014
at $250,000 per annum. During the year, non-
executive director remuneration of $nil was paid
Total director
or payable (2017: $60,822).
remuneration (exclusive of consulting fees which
are included at note 21) of $225,570 was paid and
payable during the year (2017: $311,043).
Octanex Annual Report - Page | 11
OCTANEX LIMITED
ABN 61 005 632 315
There is no performance related remuneration for
directors. Remuneration paid to directors covers all
board activities, including serving on committees.
Apart from a retirement benefit for the chairman
and four weeks annual leave for RL Clark, the other
directors do not receive employee benefits such as
leave, but
long
annual
leave and
service
remuneration may include the grant of options over
shares of the company to align directors’ interests
with that of the shareholders. There is no direct
the
and
relationship between
company’s performance for the last five years.
remuneration
Components of directors’ compensation paid are
disclosed below.
Short Term
Post Employment
EG Albers
DC Coombes
JMD Willis
RL Clark
S K Kler
K K How
G Guglielmo
TOTAL
2018
2017
2018
2017
2018
2017
2018
2017
2018
2017
2018
2017
2018
2017
2018
2017
Directors Fees
Salary
$
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Super-
annuation
Retirement
Benefits
Total
Equity
Settled
Options
$
-
-
-
-
-
-
206,000
202,666
-
-
-
-
-
-
206,000
202,666
$
-
-
-
-
-
-
19,570
19,190
-
-
-
-
-
-
19,570
19,190
$
$
$
-
-
-
-
-
-
-
-
-
11,490
- 11,490
-
-
-
15,611
- 15,611
-
- 225,570
- 28,725 250,581
-
-
-
10,990
- 10,990
-
-
-
10,990
- 10,990
-
-
-
- 11,741
11,741
- 225,570
-
89,547 311,403
-
Interests in Equity Instruments
The disclosures relating to equity instruments of directors includes equity instruments of personally related
entities, being relatives and the spouses of relatives of the director and any entity under the joint or several
control or significant influence of the director. All equity transactions with directors, other than options granted
as remuneration, have been entered into under terms and conditions, applicable to all shareholders.
Interests in fully paid ordinary shares
Net Change
Balance
Balance
Held at
Net
30/6/2018
1/7/2017
149,247,634
-
57,551 4,300,000
- 1,420,000
940,000
880,000
880,000
3,117,382 1,750,000
3,120,000
50,000
50,000
EG Albers
RL Clark
DC Coombes (1)
G Guglielmo
KK How
SK Kler
JMD Willis
1/7/2017
149,247,634
57,551
189,900
3,120,000
50,000
50,000
3,117,382
-
-
-
(189,000)
-
-
-
-
(1) DC Coombes resigned 25 May 2018.
End of Remuneration Report.
Interests in unlisted options
Change
30/6/2018
30/6/2018
Held at
Vested and
exerciseable
-
-
(1,420,000)
-
-
-
-
-
4,300,000
-
940,000
880,000
880,000
1,750,000
-
4,300,000
-
940,000
880,000
880,000
1,750,000
Octanex Annual Report - Page | 12
OCTANEX LIMITED
ABN 61 005 632 315
Directors Declaration
The directors of the company declare that:
1.
The financial statements, comprising the statement of profit or loss and other comprehensive income,
statement of financial position, statement of cash flows, statement of changes in equity, and accompanying
notes, are in accordance with the Corporations Act 2001 and:
(a)
(b)
(c)
comply with Australian Accounting Standards and the Corporations Regulations 2001; and
give a true and fair view of the consolidated entity’s financial position as at 30 June 2018
and of its performance for the year ended on that date.
the financial report also complies with International Financial Reporting Standards as
disclosed in Note 1(a).
In the directors’ opinion, there are reasonable grounds to believe that the company will be able to pay
2.
its debts as and when they become due and payable.
The remuneration disclosures included in pages 11 to 12 of the directors’ report, (as part of audited
3.
Remuneration Report), for the year ended 30 June 2018, comply with section 300A of the Corporations Act
2001.
The directors have been given the declarations by the chief executive officer and chief financial officer
4.
required by section 295A.
This declaration is made in accordance with a resolution of the Board of Directors and is signed for and on
behalf of the directors by:
E.G. Albers
Director
Melbourne
27 September 2018
Octanex Annual Report - Page | 13
Collins Square, Tower 1
727 Collins Street
Melbourne Victoria 3008
Correspondence to:
GPO Box 4736
Melbourne Victoria 3001
T 61 3 8320 2222
F 61 3 8320 2200
E info.vic@au.gt.com
W www.grantthornton.com.au
Independent Auditor’s Report
To the Members of Octanex Limited
Report on the audit of the financial report
Opinion
We have audited the financial report of Octanex Limited (the Company) and its subsidiaries (the Group), which comprises
the consolidated statement of financial position as at 30 June 2018, the consolidated statement of profit or loss and other
comprehensive income, consolidated statement of changes in equity and consolidated statement of cash flows for the
year then ended, and notes to the consolidated financial statements, including a summary of significant accounting
policies, and the Directors’ declaration.
In our opinion, the accompanying financial report of the Group is in accordance with the Corporations Act 2001, including:
a giving a true and fair view of the Group’s financial position as at 30 June 2018 and of its performance for the year
ended on that date; and
b complying with Australian Accounting Standards and the Corporations Regulations 2001.
Basis for opinion
We conducted our audit in accordance with Australian Auditing Standards. Our responsibilities under those standards are
further described in the Auditor’s Responsibilities for the Audit of the Financial Report section of our report. We are
independent of the Group in accordance with the auditor independence requirements of the Corporations Act 2001 and
the ethical requirements of the Accounting Professional and Ethical Standards Board’s APES 110 Code of Ethics for
Professional Accountants (the Code) that are relevant to our audit of the financial report in Australia. We have also fulfilled
our other ethical responsibilities in accordance with the Code.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Grant Thornton Audit Pty Ltd ACN 130 913 594
a subsidiary or related entity of Grant Thornton Australia Ltd ABN 41 127 556 389
www.grantthornton.com.au
‘Grant Thornton’ refers to the brand under which the Grant Thornton member firms provide assurance, tax and advisory services to their clients
and/or refers to one or more member firms, as the context requires. Grant Thornton Australia Ltd is a member firm of Grant Thornton International
Ltd (GTIL). GTIL and the member firms are not a worldwide partnership. GTIL and each member firm is a separate legal entity. Services are
delivered by the member firms. GTIL does not provide services to clients. GTIL and its member firms are not agents of, and do not obligate one
another and are not liable for one another’s acts or omissions. In the Australian context only, the use of the term ‘Grant Thornton’ may refer to
Grant Thornton Australia Limited ABN 41 127 556 389 and its Australian subsidiaries and related entities. GTIL is not an Australian related entity to
Grant Thornton Australia Limited.
Liability limited by a scheme approved under Professional Standards Legislation.
Emphasis of matter – Recoverability of Exploration and Evaluation Asset
We draw your attention to Note 10 of the financial statements and the exploration and evaluation asset of $7,241,291 relating
to petroleum retention lease WA-54-R. We note the Joint Venture has applied to vary certain conditions of the petroleum
retention lease. Whilst the Directors are involved in ongoing discussions with the Authority in respect to these variations, the
Authority has not currently agreed to make the requested variations. These circumstances give rise to uncertainty in respect
to the recoverability of the carrying value of the exploration and evaluation asset. Our opinion is not further modified in respect
of this matter.
Material Uncertainty Related to Going Concern
We draw attention to Note 1 in the financial statements, which indicates that the Group incurred a net loss of $21,501,846
during the year ended 30 June 2018 and has net current liabilities of $210,638. With the termination of Ophir, the Group has
lost a significant source of funding for its Australian based exploration activities. As stated in Note 1, these events or
conditions, indicate that a material uncertainty exists that may cast significant doubt on the Group’s ability to continue as a
going concern. Our opinion is not modified in respect of this matter.
Key audit matters
Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the financial
report of the current period. These matters were addressed in the context of our audit of the financial report as a whole, and in
forming our opinion thereon, and we do not provide a separate opinion on these matters.
In addition to the matters described in the Emphasis of Matter - Recoverability of Exploration and Evaluation Asset and the
Material Uncertainty Related to Going Concern section, we have determined the matters described below to be the key audit
matters to be communicated in our report.
Key audit matter
How our audit addressed the key audit matter
Exploration and Evaluation Assets Valuation (Note 10)
The tenements held by Octanex Limited and its subsidiaries
are in the exploration stage and exploration expenditure is
capitalised in accordance with Australian Accounting Standard
AASB 6 Exploration for and Evaluation of Mineral Resources.
The Group is required to assess at each reporting date if there
are any triggers for impairment which may suggest the
carrying value is in excess of the recoverable value. Any
impairment losses are then measured in accordance with
AASB 136 Impairment of Assets.
AASB 6 Exploration for and Evaluation of Mineral Resources
requires exploration and evaluation asset to be assessed for
impairment when there are indicators of impairment. AASB 6
provides a list of 4 indicators, however that list is not
exhaustive and therefore subjectivity is involved in the
assessment.
This area is a key audit matter as significant judgement is
required in determining whether the facts and circumstances
suggest that the carrying amount of an exploration and
evaluation asset may exceed its recoverable amount, and
then consequently in measuring any impairment loss.
Our procedures included, amongst others:
• Obtaining the management prepared reconciliation of
capitalised exploration and evaluation expenditure and
agreeing to the general ledger;
• Selecting a sample of capitalised exploration and
evaluation expenditure and obtaining documentation to
support the amount capitalised in line with AASB 6;
• Critically reviewing management's assessment of
impairment indicators for the Group’s capitalised
exploration assets under AASB 6 by:
Assessing the period for the right to explore the
areas of interest had not expired or will not expire in
the near future without an expectation of renewal;
Enquiring of management regarding their intentions
to carry out exploration and evaluation activity in the
relevant exploration area, including review of
managements’ budgeted expenditure;
Understanding whether any data exists that indicates
the carrying value of exploration and evaluation
assets is unlikely to be recovered from successful
development or by sale; and
Considering any other available evidence of
impairment.
• Assessing management's consequent determination of
impairment loss (if any); and
• Reviewing related financial statement disclosures.
Key audit matter
How our audit addressed the key audit matter
Recoverability of investment in and receivable from
associate (Note 6)
Octanex Limited have a receivable from associates amounting
to $10,300,698 as at 30 June 2018. The Group’s assessment
of the recoverability of receivables and the related impairment
provision requires judgment in determining when debt shows
evidence of non-recoverability.
The Group is required to assess at each reporting date if there
are any triggers for impairment which may suggest the
carrying value is in excess of the recoverable value. Any
impairment losses are then measured in accordance with
AASB 136 Impairment of Assets.
This area is a key audit matter as significant judgement is
required in determining whether the facts and circumstances
suggest that the carrying amount of the receivable may
exceed its recoverable amount, and then consequently in
measuring any impairment loss.
Our procedures included, amongst others:
• Obtaining management’s evaluation of the recoverable
amount expected from the associate;
• Critically reviewing management's assessment of
impairment indicators by:
Reviewing the terms of the advance to the associate
to determine requirement to repay;
Reviewing forecasts of the joint venture with the
associate to determine capacity to repay the debt;
Understanding whether any data exists that indicates
the carrying value of the receivable is unlikely to be
recovered from the associate; and
Considering any other available evidence of
impairment.
• Assessing management's consequent determination of
impairment loss (if any).
• Reviewing related financial statement disclosures.
Information other than the financial report and auditor’s report thereon
The Directors are responsible for the other information. The other information comprises the information included in the
Group’s annual report for the year ended 30 June 2018, but does not include the financial report and our auditor’s report
thereon.
Our opinion on the financial report does not cover the other information and we do not express any form of assurance
conclusion thereon.
In connection with our audit of the financial report, our responsibility is to read the other information and, in doing so, consider
whether the other information is materially inconsistent with the financial report or our knowledge obtained in the audit or
otherwise appears to be materially misstated.
If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are
required to report that fact. We have nothing to report in this regard.
Responsibilities of the Directors for the financial report
The Directors of the Group are responsible for the preparation of the financial report that gives a true and fair view in
accordance with Australian Accounting Standards and the Corporations Act 2001 and for such internal control as the Directors
determine is necessary to enable the preparation of the financial report that gives a true and fair view and is free from material
misstatement, whether due to fraud or error.
In preparing the financial report, the Directors are responsible for assessing the Group’s ability to continue as a going concern,
disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the
Directors either intend to liquidate the Group or to cease operations, or have no realistic alternative but to do so.
Auditor’s responsibilities for the audit of the financial report
Our objectives are to obtain reasonable assurance about whether the financial report as a whole is free from material
misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance
is a high level of assurance, but is not a guarantee that an audit conducted in accordance with the Australian Auditing
Standards will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are
considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions
of users taken on the basis of this financial report.
A further description of our responsibilities for the audit of the financial report is located at the Auditing and Assurance
Standards Board website at: http://www.auasb.gov.au/auditors_responsibilities/ar1.pdf. This description forms part of our
auditor’s report.
Report on the remuneration report
Opinion on the remuneration report
We have audited the Remuneration Report included in pages 11 to 12 of the Directors’ report for the year ended 30 June
2018.
In our opinion, the Remuneration Report of Octanex Limited, for the year ended 30 June 2018 complies with section
300A of the Corporations Act 2001.
Responsibilities
The Directors of the Group are responsible for the preparation and presentation of the Remuneration Report in accordance
with section 300A of the Corporations Act 2001. Our responsibility is to express an opinion on the Remuneration Report,
based on our audit conducted in accordance with Australian Auditing Standards.
Grant Thornton Audit Pty Ltd
Chartered Accountants
B L Taylor
Partner – Audit & Assurance
Melbourne, 27 September 2018
OCTANEX LIMITED
ABN 61 005 632 315
Consolidated Statement of Profit or Loss and Other Comprehensive Income
Year Ended 30 June 2018
Revenue - interest received
Other income
Interest and finance costs
Expenses
NOTE
2
3
2018
$
2,061
54,800
2017
$
2,555
79,649
(616,419)
(410,667)
(1,968,269)
(1,001,490)
Impairment of exploration assets
10,29
(23,652,138)
(1,745,165)
Share of loss of Ophir Production Sdn Bhd
Share of loss of Peako Limited
Impairment of investment in Peako Limited
Loss before tax
Income tax benefit
Net Loss after tax
Other comprehensive income
Items that may be reclassified subsequently to profit or loss
Exchange differences on translation of foreign operation
Income tax effect
Items that will not be reclassified subsequently to profit or loss
Changes in financial assets at fair value through other
comprehensive income
Income tax on items of comprehensive income
Other comprehensive income for the year net of tax
Total comprehensive income for the year
Basic loss per share (cents per share)
Diluted loss per share (cents per share)
8
9
4
17
17
17
26
26
(2,973,794)
(2,520,364)
(11,054)
-
(24,884)
(39,218)
(29,164,813)
(5,659,584)
7,662,966
859,513
(21,501,847)
(4,800,071)
636,368
-
(409,472)
-
(15,923)
17,693
4,776
(5,307)
625,221
(397,086)
(20,876,626)
(5,197,157)
(8.857)
(8.857)
(2.202)
(2.202)
The above Statement of Profit or Loss and Other Comprehensive Income is to be read in conjunction with the
accompanying notes.
Octanex Annual Report - Page | 18
OCTANEX LIMITED
ABN 61 005 632 315
Consolidated Statement of Financial Position
As at 30 June 2018
CURRENT ASSETS
Cash and cash equivalents
Trade and other receivables
Advance to Ophir Production Sdn Bhd
TOTAL CURRENT ASSETS
NON-CURRENT ASSETS
Advance to Ophir Production Sdn Bhd
Financial assets at fair value through other
comprehensive income
Investments in an associate and a joint venture
Exploration and evaluation assets
TOTAL NON-CURRENT ASSETS
TOTAL ASSETS
CURRENT LIABILITIES
Trade and other payables
Provisions
Derivative financial liability
Borrowings
TOTAL CURRENT LIABILITIES
NON-CURRENT LIABILITIES
Borrowings
Deferred tax liabilities
TOTAL NON-CURRENT LIABILITIES
TOTAL LIABILITIES
NET ASSETS
EQUITY
Issue capital
Reserves
Accumulated losses
TOTAL EQUITY
NOTE
2018
$
2017
$
5
6
6
6
7
8,9
10
11
12
14
13
13
15
16
17
1,331,845
140,798
10,300,698
5,666,779
308,007
-
11,773,341
5,974,786
-
10,040,613
23,004
-
38,928
78,347
16,399,197
39,657,763
16,422,201
49,815,651
28,195,542
55,790,437
1,289,241
131,886
109
10,562,743
11,983,979
359,284
138,008
386,596
-
883,888
-
-
-
10,162,204
7,667,744
17,829,948
11,983,979
18,713,836
16,211,563
37,076,601
68,867,927
68,856,339
1,890,331
1,265,110
(54,546,695)
(33,044,848)
16,211,563
37,076,601
The above Statement of Financial Position is to be read in conjunction with the accompanying notes
Octanex Annual Report - Page | 19
OCTANEX LIMITED
ABN 61 005 632 315
Consolidated Statement of Changes in Equity
Year Ended 30 June 2018
CONSOLIDATED ENTITY
At 1 July 2017
Loss after tax
Other comprehensive income
Contributed
equity
Accumulated
losses
Financial
assets at fair
value through
other
comprehensive
income
Foreign
currency
translation
reserve
Option
reserve
Total
$
$
$
$
$
$
68,856,339
(33,044,848)
(814,978)
1,042,525
1,037,563
37,076,601
-
(21,501,847)
-
-
-
(21,501,847)
Exchange differences of translation of foreign operations
net of tax
Changes in fair value on financial assets at fair value
through other comprehensive income net of tax
Total other comprehensive income
Total comprehensive income for the year
Transactions with owners in their capacity as owners
-
-
-
-
-
-
636,368
-
636,368
-
(11,147)
-
-
(11,147)
-
(21,501,847)
(11,147)
(11,147)
636,368
636,368
12,071
(483)
-
-
-
-
-
-
-
-
-
-
625,221
(20,876,626)
12,071
(483)
68,867,927
(54,546,695)
(826,125)
1,678,893
1,037,563
16,211,563
Trustee Share sale
Cost of sale
At 30 June 2018
The above Statement of Changes in Equity is to be read in conjunction with the accompanying notes.
Octanex Annual Report - Page | 20
OCTANEX LIMITED
ABN 61 005 632 315
Consolidated Statement of Changes in Equity
Year Ended 30 June 2017
Contributed
equity
Accumulated
losses
Financial
assets at fair
value through
other
comprehensive
income
Foreign
currency
translation
reserve
Option
reserve
Total
$
$
$
$
$
$
CONSOLIDATED ENTITY
At 1 July 2016
Loss after tax
Other comprehensive income
Exchange differences of translation of foreign operations
net of tax
Changes in fair value on financial assets at fair value
through other comprehensive income net of tax
Total other comprehensive income
Total comprehensive income for the year
Transactions with owners in their capacity as owners
Share-based payments expense
At 30 June 2017
68,856,339
(28,244,777)
(827,364)
1,451,997
948,016
42,184,211
-
(4,800,071)
-
-
-
(4,800,071)
-
-
-
-
-
-
-
(409,472)
-
(409,472)
-
12,386
-
-
12,386
-
(4,800,071)
12,386
12,386
(409,472)
(409,472)
-
-
(397,086)
(5,197,157)
-
-
-
89,547
89,547
68,856,339
(33,044,848)
(814,978)
1,042,525
1,037,563
37,076,601
Octanex Annual Report - Page | 21
OCTANEX LIMITED
ABN 61 005 632 315
Consolidated Statement of Cash Flows
Year Ended 30 June 2018
CASH FLOWS FROM OPERATING ACTIVITIES
Administration fees received
Interest received
Payments to suppliers
Interest paid
Net cash outflow from operating activities
CASH FLOWS FROM INVESTING ACTIVITIES
Payments to suppliers - exploration
Loans to Ophir Production Sdn Bhd
Proceeds from sale of investments
Net cash outflow from investing activities
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from borrowing
Proceeds from share issue
Cost of share issue
Net inflow from financing activities
NOTE
2018
$
2017
$
55,836
2,061
(1,091,117)
-
(1,033,220)
61,007
2,555
(1,137,904)
(208,008)
(1,282,350)
(371,310)
(3,197,351)
106,302
(3,462,359)
(194,137)
(6,391,207)
-
(6,585,344)
-
12,071
(483)
11,588
10,583,788
-
-
10,583,788
(i)
13
16
16
Net increase / (decrease) in cash and cash equivalents
Exchange (losses) / gains
Cash and cash equivalents at beginning of the year
CASH AND CASH EQUIVALENTS AT 30 JUNE
5
(4,483,991)
149,057
5,666,779
1,331,845
2,716,094
(196,609)
3,147,294
5,666,779
(21,501,847)
54,275
2,659
126,333
266,425
(i) RECONCILIATION OF NET CASH FROM OPERATING ACTIVITIES WITH LOSS AFTER INCOME TAX
(4,800,071)
Loss after income tax
Non cash items:
Borrowing Costs
Exchange rate changes on the balances held in a foreign
currency
Employee Provisions expense
Gain on sale of shares
Share based payments expense
Share of loss and impairment of Peako Limited
Share of loss of Ophir Production Sdn Bhd
Finance costs
Impairment of exploration assets
Impairment of OPSB advance
Changes in assets and liabilities:
Decrease in receivables
Decrease in tax liabilities
Increase in payables
Net Cash outflow from Operating Activities
(6,122)
(39,009)
-
11,054
2,973,794
490,086
23,652,138
607,917
7,832
-
89,547
64,103
2,520,364
356,392
1,745,165
-
40,878
(7,662,969)
8,102
(1,033,220)
20,040
(483,143)
(859,513)
(1,282,350)
29
15
8
The above Statement of Cash Flows is to be read in conjunction with the accompanying notes
Octanex Annual Report - Page | 22
OCTANEX LIMITED
ABN 61 005 632 315
Notes to the Financial Statement
30 June 2018
NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Octanex Limited (“Octanex” or “the company”) is a
for-profit company incorporated and domiciled in
Australia with its registered office and principal place
of business located at Level 21, 500 Collins Street,
Melbourne, Victoria 3000. The consolidated financial
report of the company for the year ended 30 June
2018 comprises the company and its subsidiaries
(together referred to as the “consolidated entity” or
“the group”) and the consolidated entity’s interest in
joint operations. Financial information for Octanex
Limited as an individual entity is included in Note 27.
The financial report was authorised by the directors
for issue on 27 September 2018.
(a) Statement of compliance
financial report
is a general
The consolidated
purpose financial report which has been prepared in
accordance with Australian Accounting Standards,
including the Accounting Interpretations issued by
the Australian Accounting Standards Board (‘AASB’)
and the Corporations Act 2001 . The consolidated
financial
comply with
International Financial Reporting Standards and
Interpretations
International
Accounting Standards Board.
statements and notes
issued
the
by
The preparation of a financial report in conformity
with Australian Accounting Standards requires
management to make judgements, estimates and
assumptions that affect the application of policies and
reported amounts of assets and liabilities, income
and expenses.
The estimates and associated
assumptions are based on historical experience and
various other
factors that are believed to be
reasonable under the circumstances, the results of
which form the basis of making the judgements about
carrying values of assets and liabilities that are not
readily apparent from other sources. Actual results
may differ from these estimates. The estimates and
underlying assumptions are reviewed on an ongoing
basis. Revisions
to accounting estimates are
recognised in the period in which the estimate is
revised if the revision affects only that period, or in
the period of the revision and future periods if the
revision affects both current and future periods.
Judgements made by management in the application
of Australian Accounting Standards that have a
significant effect on the financial report and estimates
with a significant risk of material adjustment in the
next year are discussed in note 1(q). The accounting
policies set out below have been applied consistently
to all periods presented in the financial report.
(b) Basis of preparation
(c) Early adoption of standards
The financial report is presented in Australian
dollars, which is the consolidated group’s functional
currency, rounded to the nearest dollar. It has been
prepared under the historical cost convention as
modified by the revaluation of the available for sale
investments at fair value.
Going concern
For the year ended 30 June 2018 the Group incurred
a net cash outflow from operating and investing
activities of $4,495,579 (2017: $7,867,694) and a net
loss after tax of $21,501,847 (2017: $4,800,071). As
at 30 June 2018, the Group has negative working
capital of $210,638 (2017: positive working capital
$5,090,898). The financial report has been prepared
on a going concern basis. Directors expect that the
Group will be able to successfully raise sufficient
funding to enable it to continue as a going concern for
at least 12 months from the signing of the annual
financial report.
From 1 July 2010 the group has elected to apply
AASB 9 Financial Instruments (as issued in December
2009) and AASB 2009-11 Amendments to Australian
Accounting Standards arising from AASB 9 from 1
July 2010, because the new accounting policies
provide more reliable and relevant information for
users to assess the amounts, timing and uncertainty
of future cash flows. Refer Note 1(k) for further
details on the impact of the change in accounting
policy. As permitted under
transitional
provisions, the group has elected not to adopt the
December 2010 revised version of AASB 9, which
addresses the accounting for financial liabilities and
derecognition of financial assets and liabilities.
the
(d) Principles of consolidation
consolidated
statements
The
consolidate those of the company and all of its
subsidiaries as at year end.
financial
entity
Octanex Annual Report - Page | 23
OCTANEX LIMITED
ABN 61 005 632 315
Notes to the Financial Statement
30 June 2018
NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
(i) Subsidiaries
The company controls a subsidiary if it is exposed, or
has rights, to variable returns from its involvement
with the subsidiary and has the ability to affect those
returns through its power over the subsidiary. The
financial statements of the subsidiaries are prepared
for the same reporting period as the parent company
using consistent accounting policies.
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 parent entity note.
All transactions and balances between companies
within the consolidated entity are eliminated on
consolidation, including unrealised gains and losses
on transactions between group companies. Where
unrealised losses on intra-group asset sales are
reversed on consolidation, the underlying asset is
also tested for impairment from a consolidated entity
perspective.
Amounts reported in the financial
statements of subsidiaries have been adjusted where
necessary to ensure consistency with the accounting
policies adopted by the consolidated entity. Profit or
loss and other comprehensive income of subsidiaries
acquired or disposed of during the year are
recognised from the effective date of acquisition, or
up to the effective date of disposal, as applicable.
(ii) Investments in associates and joint ventures
those entities over which
the
Associates are
consolidated entity
is able to exert significant
influence but which are not subsidiaries. Peako
Limited was an associate of Octanex in the prior year.
that
joint venture
is an arrangement
A
the
consolidated entity controls jointly with one or more
other investors, and over which the consolidated
entity has rights to a share of the arrangement’s net
assets rather than direct rights to underlying assets
and obligations for underlying liabilities. A joint
arrangement in which the consolidated entity has
direct rights to underlying assets and obligations for
underlying liabilities is classified as a joint operation.
Ophir Production Sdn Bhd is treated as a joint
venture company for the purposes of these accounts.
Investments in associates and joint ventures are
accounted for using the equity method. Interests in
joint operations are accounted for by recognising the
consolidated entity’s assets and liabilities (including
its share of any assets and liabilities held jointly), its
revenue from the sale of its share of the output
arising from the joint operation, and its expenses
(including its share of any expenses incurred jointly).
Any goodwill or fair value adjustment attributable to
the consolidated entity’s share in the associate or
joint venture is not recognised separately and is
included in the amount recognised as investment.
The carrying amount of the investment in associates
and joint ventures is increased or decreased to
recognise the consolidated entity’s share of the profit
or loss and other comprehensive income of the
associate and
joint venture, adjusted where
necessary to ensure consistency with the accounting
policies of the consolidated entity.
When the consolidated entity’s share of
losses
exceeds its interest in the associate or joint venture
the entity discontinues recognising its share of
further losses. The interest in an associate or joint
venture is the carrying amount of the investment in
the associate or joint venture (refer Notes 8 and 9)
together with long-term interests that in substance
form part of the entity’s net investment in the
associate or joint venture (refer Note 6). Unrealised
losses on transactions between the
gains and
consolidated entity and its associates and joint
ventures are eliminated to the extent of the
consolidated entity’s interest in those entities. Where
unrealised losses are eliminated, the underlying asset
is also tested for impairment.
(iii) Joint operations
Jointly controlled operations and assets
The interest of the company and of the consolidated
entity in unincorporated joint operations and jointly
controlled assets are brought
to account by
recognising in its financial statements 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 operation.
The financial statements of the jointly controlled
operations and assets are prepared for the same
reporting period as the parent company using
consistent accounting policies.
Octanex Annual Report - Page | 24
OCTANEX LIMITED
ABN 61 005 632 315
Notes to the Financial Statement
30 June 2018
NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
(iv) Transactions eliminated on consolidation
income and expenses arising
Intragroup balances and any unrealised gains and
from
losses or
intragroup transactions, are eliminated in preparing
the consolidated financial statements. Unrealised
gains arising from transactions with associates are
eliminated to the extent of the consolidated entity’s
interest in the entity with adjustments made to the
‘Investment in associates’ and ‘Share of associates’
net profit accounts. 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 or, if not
consumed or sold by the associate, when the
consolidated entity’s interest in such entities is
disposed of.
(e) Taxes
Income Tax
Income
comprehensive balance
whereby:
taxes are accounted
sheet
for using
the
liability method
The tax consequences of recovering (settling) all
assets (liabilities) are reflected in the financial
statements;
Current and deferred tax is recognised as income or
expense except to the extent that the tax related to
equity items or to a business combination;
A deferred tax asset is recognised to the extent
that it is probable that future taxable profit will
be available to realise the asset;
Deferred tax asset and liabilities are measured
at the tax rates that are expected to apply to the
period where the asset is realised or the liability
settled.
Goods and Services Tax (GST)
Revenues, expenses and assets are recognised net of
the amount of GST, except where the amount of GST
from the taxation
incurred
authority.
is
recognised as part of the cost of acquisition of the
asset or as part of the expense. Receivables and
is not recoverable
In these circumstances, the GST
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. 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. Commitments
and contingencies are disclosed net of the amount of
GST recoverable from, or payable to, the taxation
authority.
Tax Consolidation
The company and its wholly owned resident entities
are part of a
tax-consolidated group. As a
consequence, all members of the tax-consolidated
group are taxed as a single entity. The head entity
within the tax-consolidated group is Octanex Limited.
Current tax expense / income, deferred tax liabilities
and deferred tax assets arising from temporary
differences of the members of the tax-consolidated
in the separate financial
group are recognised
statements of the members of the tax-consolidated
group using the ‘separate taxpayer within group’
approach by reference to the carrying amounts of the
financial
assets and
statements of each entity and the tax values applying
under tax consolidation. Any current tax liabilities (or
assets) and deferred tax assets arising from unused
tax losses of the subsidiaries are assumed by the head
tax-consolidated group and are
entity
recognised by the Company as amounts payable
(receivable) to / (from) other entities in the tax-
consolidated group in conjunction with any tax
funding arrangement amounts..
in the separate
liabilities
the
in
The Company recognises deferred tax assets arising
from unused tax losses of the tax-consolidated group
to the extent that is probable that future taxable
profits of the tax-consolidated group will be available
against which the asset can be utilised. Any
subsequent period adjustments to deferred tax assets
arising from unused tax losses as a result of revised
assessments of the probability of recoverability is
recognised by the head entity only.
(f) Foreign Currency Translation
The functional and presentation currency of Octanex
Limited and its Australian subsidiaries is Australian
dollars (A$).
Octanex Annual Report - Page | 25
OCTANEX LIMITED
ABN 61 005 632 315
Notes to the Financial Statement
30 June 2018
NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
from restating
Foreign currency transactions are translated into the
functional currency using the exchange rates ruling
at the date of the transaction. Monetary assets and
liabilities denominated in foreign currencies are
retranslated at the rate of exchange ruling at the
reporting date. Foreign exchange gains and losses
resulting from settling foreign currency transactions,
foreign currency
as well as
denominated monetary assets and liabilities, are
recognised in the Statement of Profit or Loss and
Other Comprehensive Income, except when they are
deferred in equity as qualifying cash flow hedges or
where they relate to differences on foreign currency
borrowings that provide a hedge against a net
investment in a foreign entity. Non-monetary items
measured at fair value in a foreign currency are
translated using the exchange rates at the date when
fair value was determined.
or Loss
of Profit
Group companies
On consolidation, the assets and liabilities of foreign
operations are translated into dollars at the rate of
exchange prevailing at the reporting date and their
Statements
and Other
Comprehensive Income are translated at exchange
rates prevailing at the dates of the transactions. The
exchange differences arising on translation for
consolidation
other
comprehensive income. On disposal of a foreign
operation, the component of other comprehensive
income relating to that particular foreign operation
is recognised in profit or loss.
recognised
are
in
(g) Receivables
Trade receivables are recognised at original invoice
amounts less an allowance for uncollectible amounts
and have repayment terms between 30 and 90 days.
Collectability of trade receivables is assessed on an
ongoing basis. Debts which are known to be
uncollectible are written off. An allowance is made
for doubtful debts where there is objective evidence
(such as significant financial difficulties on the part
of the counterparty or default) that the company will
not be able to collect all amounts due according to
the original terms.
(j) Assets Held for sale
When the group intends to sell a non-current asset
or a group of assets (a disposal group), and if sale
within 12 months is highly probable, the asset or
disposal group is classified as ‘held for sale’ and
presented separately in the statement of financial
position. Liabilities are classified as ‘held for sale’
and presented as such in the statement of financial
position if they are directly associated with a
disposal group
Assets classified as ‘held for sale’ are measured at
the lower of their carrying amounts immediately
prior to their classification as held for sale and their
fair value less costs to sell. However, some ‘held for
sale’ assets such as financial assets or deferred tax
assets, continue to be measured in accordance with
the group's accounting policy for those assets.
(h)Cash and cash equivalents
(k) Equity investments
Cash and cash equivalents comprise cash balances
and at call bank deposits. Bank overdrafts that are
repayable on demand and form an integral part of
the company’s cash management are included as a
component of cash and cash equivalents for the
purpose of the cash flow statement.
(i) Payables
Trade, accruals and other payables are recorded
initially at fair value and subsequently at amortised
cost. Trade and other payables are non-interest
bearing and are normally settled on 60-day terms.
All equity investments are measured at fair value.
Equity investments that are held for trading are
measured at fair value through profit or loss. For all
other equity investments, the group can make an
irrevocable election at initial recognition of each
investment to recognise changes in fair value
through other comprehensive income (“OCI”) rather
than profit or loss. At initial recognition, the group
measures a financial asset at its fair value plus, in
the case of a financial asset not at fair value through
profit or loss, transaction costs that are directly
attributable to the acquisition of the financial asset.
Octanex Annual Report - Page | 26
OCTANEX LIMITED
ABN 61 005 632 315
Notes to the Financial Statement
30 June 2018
NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Transaction costs of financial assets carried at fair
value through profit or loss are expensed as profit or
loss. The group subsequently measures all equity
investments at fair value. The directors have elected
to present fair value gains and losses on equity
investments
is no subsequent
reclassification of fair value gains and losses to profit
or loss. Dividends from such investments continue to
be recognised in profit or loss as other revenue when
the group’s right to receive payments is established
and as long as they represent a return on investment.
in OCI. There
(l) Property, plant and equipment
Computer and other equipment
Computer and other equipment (comprising fittings
and furniture) are initially recognised at acquisition
cost or manufacturing cost, including any costs
directly attributable to bringing the assets to the
location and condition necessary for it to be capable
of operating in the manner intended by the Group’s
management.. Depreciation
is recognised on a
straight-line basis to write down the cost less
estimated residual value of computer equipment and
other equipment. The following useful lives are
applied:
Computer equipment:
Other equipment:
4 years
10 years
associated with the acquisition of a business are
included as part of the purchase consideration
(n) Impairment
At each reporting date the Group assesses whether
there is any indication that individual assets are
indicators exist,
impairment
impaired. Where
recoverable amount is determined and impairment
losses are recognised in the profit or loss where the
asset's carrying value exceeds
its recoverable
amount.
(i) Calculation of recoverable amount
Recoverable amount is the greater of fair value less
costs to sell and value in use. It is determined for an
individual asset, unless the asset’s value in use cannot
be estimated to be close to its fair value less costs to
sell and it does not generate cash inflows that are
largely independent of those from other groups or
assets, in which case, the recoverable amount is
determined for the class of assets to which the asset
belongs.
(ii) Reversals of impairment
Impairment losses are reversed when there is an
indication that the impairment loss may no longer
exist and there has been a change in the estimate
used to determine the recoverable amount.
Gains or losses arising on the disposal of property,
plant and equipment are determined as
the
difference between the disposal proceeds and the
carrying amount of the assets and are recognised in
profit or loss within other income or other expenses.
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.
(m) Share capital
Ordinary share capital is recognised at the fair value
of the consideration received by the company.
Transactions costs arising on the issue of ordinary
in equity as a
shares are recognised directly
reduction of the consideration received, net of any
income tax benefit. Ordinary shares are classified as
equity.
Costs directly attributable to the issue of new shares
or options are shown as a deduction from the equity
proceeds, net of any income tax benefit. Costs directly
attributable to the issue of new shares or options
(o) Restoration, rehabilitation and environment
expenditure
Restoration, rehabilitation and environmental costs
necessitated by exploration and evaluation activities
are provided for as part of the cost of those activities.
Costs are estimated on the basis of current legal
requirements, anticipated technology and future
costs that have been discounted to their present
value. Estimates of future costs are reassessed at
each reporting date.
Octanex Annual Report - Page | 27
OCTANEX LIMITED
ABN 61 005 632 315
Notes to the Financial Statement
30 JUNE 2018
NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
(p) Exploration and evaluation assets
Farmouts in the exploration and evaluation phase
Exploration and evaluation assets, including the
costs of acquiring permits or licences, are capitalised
as exploration and evaluation assets on an area of
interest basis. Exploration and evaluation assets are
only recognised if the rights to tenure of the area of
interest are current and either:
i.
ii.
the expenditures are expected to be recouped
through
and
exploitation of
interest, or
alternatively, by its sale or partial sale: or
the area of
development
successful
activities in the area of interest have not at the
reporting date, reached a stage which permits a
reasonable assessment of the existence or
otherwise of economically recoverable reserves
and active and significant operations in, or in
relation to, the area of interest are continuing.
he tests contained in AASB6.20 are applied to
determine whether exploration and evaluation
assets are assessed for impairment:
i. the exploration and evaluation tenure right has
expired or are expected to expire in the near
future, and is not expected to be renewed.
ii. substantive expenditure on further exploration
for and evaluation of mineral resources in the
specific area is neither budgeted nor planned.
iii. exploration
for and evaluation of mineral
resources in the specific area have not led to the
discovery of commercially viable quantities of
mineral resources and the entity has decided to
discontinue such activities in the specific area.
iv. sufficient data exist to indicate that, although a
development in the specific area is likely to
proceed, the carrying amount of the exploration
and evaluation asset is unlikely to be recovered
in full from successful development or by sale
Proceeds from the sale of exploration permits or
recoupment of exploration costs
farmin
arrangements are credited against exploration costs
previously capitalised. Any excess of the proceeds
overs costs recouped are accounted for as a gain on
disposal.
from
The group does not record any expenditure made by
the farminee on its account. It also does not
recognise any gain or loss on its exploration and
evaluation farmout arrangements, but redesignates
any costs previously capitalised in relation to the
whole interest as relating to the partial interest
retained. Any additional cash consideration received
directly from the farminee is credited against costs
previously capitalised in relation to the whole
interest, with any excess accounted for as a gain on
disposal.
(q) Accounting estimates and judgements
Management determine the development, selection
and disclosure of the company’s critical accounting
policies and estimates and the application of these
policies and estimates.
Other than as disclosed in these notes, there are no
estimates and judgements that are considered to
have a significant risk of causing a material
adjustment to the carrying amounts of assets and
liabilities within the next financial year. There is,
however, a risk that actual expenditure to achieve
minimum work obligations could differ
from
estimates disclosed in the notes to the financial
statements (see Note 18).
requirements
TWork
farm-ins
materially reduce the level of expenditure incurred
by the company to comply with work program
commitments.
achieved
by
Per Note 1(p), management exercises judgement as
to the recoverability of exploration expenditure. Any
judgment may change as new information becomes
available. If, after having capitalised exploration and
evaluation expenditure, management concludes,
once activities in the area of interest have reached a
stage which permits a reasonable assessment of
technical feasibility and commercial viability, that
the capitalised expenditure
to be
recovered by future sale or exploitation, then the
relevant capitalised amount will be written off
through the statement of profit or loss and other
comprehensive income.
is unlikely
Octanex Annual Report - Page | 28
.
.
Notes to the Financial Statement
30 JUNE 2018
NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Management have considered whether there are
impairment indicators for the capitalised exploration
and evaluation expenditure relating to WA-54-R
(note 10) applying the tests contained in AASB 6.20,
in particular on the basis that the Cornea Joint
Venture continues to undertake work to address
Cornea’s key barriers to commercialisation. The
objective of the current work activities is to support
design of a production test well to achieve economic
production. The Joint Venture has applied to the
regulator to vary the conditions of the Retention
Lease to move the timing for a production test well so
that integrated reservoir modelling and facilities
in order to design a
work can be completed
production test well capable of delivering sufficient
threshold productivity to demonstrate economic
viability. Management notes that the outcome of this
application is significant to the Joint Venture’s future
activities and tenure of the Lease. A negative decision
by the regulator may impact on the Joint Venture’s
ability to renew the Lease and result in a material
adjustment to the carrying amount of capitalised
exploration and evaluation expenditure.
The consolidated entity is subject to income taxes in
numerous jurisdictions. The determination of the
consolidated entity's provision for current income tax
as well as deferred tax assets and liabilities involves
significant judgements and estimates on certain
matters and transactions, for which the ultimate
outcome may be uncertain. If the final outcome
differs from the consolidated entity's estimates, such
differences will impact the current and deferred
income tax assets and liabilities in the period in
which such determination is made.
Management has assessed the company’s investment
in Ophir Production Sdn Bhd (OPSB) and concluded
that OPSB is a joint venture company. AASB 128
requires the use of equity accounting for investment
joint venture companies. Management has
in
assessed recoverability of the advance to Ophir
Production Sdn Bhd (“OPSB’) having consideration to
the status of termination of RSC. (Refer Note 6).
(r) Revenue
Revenue
fair value of
consideration received or receivable. Amounts
is recognised at
the
disclosed as revenue are net of returns, trade
allowances and duties and taxes paid. The following
specific recognition criteria must also be met before
revenue is recognised:
Interest
Revenue is recognised as interest accrues using the
effective
interest
interest method. The effective
method uses the effective interest rate which is the
rate that exactly discounts the estimated future cash
receipts over the expected life of the financial asset.
The fair value of options granted are recognised as an
expense with a corresponding increase in equity. The
fair value is measured at grant date and recognised
over the period during which the grantee become
unconditionally entitled to the options. The fair value
at grant date is independently determined using an
option pricing model that takes into account the
exercise price, the term of the option, the impact of
dilution, the share price at grant date and expected
price volatility of the underlying share, the expected
dividend yield and the risk free interest rate for the
term of the option.
(s) Share-based payment transactions
Equity settled transactions
The fair value of options granted are recognised as an
expense with a corresponding increase in equity. The
fair value is measured at grant date and recognised
over the period during which the grantee become
unconditionally entitled to the options. The fair value
at grant date is independently determined using an
option pricing model that takes into account the
exercise price, the term of the option, the impact of
dilution, the share price at grant date and expected
price volatility of the underlying share, the expected
dividend yield and the risk free interest rate for the
term of the option.
(s) Share-based payment transactions
Equity settled transactions
The fair value of options granted are recognised as an
expense with a corresponding increase in equity. The
fair value is measured at grant date and recognised
over the period during which the grantee become
unconditionally entitled to the options.
Octanex Annual Report - Page | 29
OCTANEX LIMITED
ABN 61 005 632 315
Notes to the Financial Statement
30 JUNE 2018
NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
The fair value at grant date is independently
determined using an option pricing model that
takes into account the exercise price, the term of the
option, the impact of dilution, the share price at
grant date and expected price volatility of the
underlying share, the expected dividend yield and
the risk free interest rate for the term of the option.
The fair value of the options granted is adjusted to
reflect market vesting conditions, but excludes the
impact of any non-market vesting conditions (for
example, profitability and sales growth targets).
Non-market vesting conditions are included in
assumptions about the number of options that are
expected to become exercisable. At each reporting
date, the entity revises its estimate of the number of
options that are expected to become exercisable.
The expense recognised each period takes into
account the most recent estimate. The impact of the
revision to original estimates, if any, is recognised in
loss and other
the statement of profit or
comprehensive
income with a corresponding
adjustment to equity.
(t) Fair value
Fair values may be used for financial asset and
liability measurement as well as
for sundry
disclosures.
Fair values for financial instruments traded in
active markets are based on quoted market prices
at reporting date. The quoted market price for
financial assets is the current bid price and the
quoted market price.The fair value of financial
instruments that are not traded in an active market
are determined using valuation
techniques.
Assumptions used are based on observable market
prices and rates at reporting date.
Estimated
discounted cash flows are used to determine fair
value of the remaining financial instruments.
The carrying value less impairment provision of
trade receivables and payables are assumed to
approximate their fair values due to their short-
term nature. The fair value of financial liabilities for
disclosure purposes is estimated by discounting the
future contractual cash flows at the current market
interest rate that is available to the company for
similar financial instruments.
(u) Borrowing Costs
Borrowing costs incurred for the construction of a
qualifying asset are capitalised during the period of
time that it is required to complete and prepare the
asset for its intended use or sale. Other borrowing
costs are expensed when incurred.
(v) Convertible Notes
The conversion feature of the convertible notes
represents an embedded derivative (Note 14) in a
host liability (Note 13). The embedded derivative is
recognised separately from the host liability. On
initial recognition the derivative was measured at
fair value, with the residual face value of the
convertible notes assigned to the host liability.
Subsequently, the embedded derivative is measured
at fair value through profit and loss, and the host
liability is measured at amortised cost using the
effective interest rate method.
(w) Earnings per Share
Basic earnings per share
Basic earnings per share is calculated by dividing
the profit attributable to members of Octanex by the
weighted average number of ordinary shares
outstanding during the financial year, adjusted for
bonus elements in ordinary shares during the year.
In calculating the weighted average number of
ordinary shares outstanding, the partly paid shares
are accounted for on a pro-rata basis according to
the amount of call outstanding in relation thereto.
Diluted earnings per share
Earnings used to calculate diluted earnings per
share are calculated by adjusting the basic earnings
by the after-tax effect of dividends and interest
associated with dilutive potential ordinary shares.
The weighted average number of shares used is
adjusted for the weighted average number of
ordinary shares that would be issued on the
conversion of all the dilutive potential ordinary
shares into ordinary shares.
Octanex Annual Report - Page | 30
OCTANEX LIMITED
ABN 61 005 632 315
Notes to the Financial Statement
30 JUNE 2018
NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
(x) New and revised accounting standards issued
not yet effective
The company has adopted all of the new and revised
issued by the Australian
Accounting Standards
Accounting Standards Board (AASB) that are relevant
to its operations and effective for annual reporting
periods beginning on 1 July 2017.
The Directors do not believe that new and revised
standards issued by AASB (that are not as yet
effective), AASB 15 Revenue from Contracts with
Customers and AASB 16 Leases, will have any
material financial impact on the financial statements
as the Group has no revenue from contracts with
customers or Leases. AASB 9 has been early adopted
1(c)).
(Note
NOTE 2 OTHER INCOME
Sundry income – director related
Net foreign exchange gain
Total income
NOTE
21
NOTE 3 EXPENSES INCLUDING IMPAIRMENTS
Audit fees
Consulting
Directors’ remuneration
Foreign Exchange Loss
Management fees
Reporting, registry and stock exchange
Office expenses
Other expenses
Project costs
Salaries
Share based payments: fair value of directors’ options at grant
date
Impairment of OPSB Advance
Total expenses
23
20
16
6
NOTE 4 INCOME TAX
Components of income tax benefit
Current tax expense
Current period
Deferred tax expense
Origination and reversal of temporary differences
Total
2018
$
54,800
-
54,800
62,004
37,058
-
343,269
23,000
36,692
220,657
168,279
89,006
380,387
-
2017
$
52,830
26,819
79,649
62,128
44,207
-
-
(16,397)
32,567
222,117
192,590
34,515
340,216
89,547
607,917
1,968,269
-
1,001,490
(7,662,966)
(859,513)
-
(7,662,966)
-
(859,513)
Tax losses do not expire under current tax legislation.
Deferred tax assets have not been recognised in respect of tax losses because there is presently no
expectation of future taxable profit against which the Group could utilise such benefits.
Octanex Annual Report - Page | 31
OCTANEX LIMITED
ABN 61 005 632 315
Notes to the Financial Statement
30 JUNE 2018
NOTE 4 INCOME TAX (CONTINUED)
Reconciliation between tax benefit and pre-tax loss
Loss before tax
Income tax benefit using statutory income tax rate of 30%
Tax effect of adjustment recognised in the period for:
Prospectus costs
Adjustment for prior periods
Non-assessable income
Equity accounted loss – non deductible
Impairment of OPSB advance – non deductible
Other non–deductible expenses
Income tax benefit
Franking credit balance:
NOTE
2018
$
2017
$
(29,164,813)
(8,749,444)
(5,659,584)
(1,697,875)
(3,005)
(282,682)
(4,237)
892,138
182,375
301,889
(7,662,966)
(3,005)
-
(7,812)
756,109
-
93,070
(859,513)
Franking account balance as at end of year
1,741,532
1,741,532
NOTE 5 CASH AND CASH EQUIVALENTS
Cash at bank and on hand
1,331,845
5,666,779
Cash at bank and on hand includes $458,019 held with the OCBC Bank in Singapore (2017:
$5,142,101). As required by the financing arrangement with Sabah International Petroleum Ltd
(“SIP”), there are restrictions on the use of these funds such that they are primarily to be used to fund
cash calls for the Ophir project.
Cash and cash equivalents are subject to interest rate risk as they earn floating rates. In the year to 30
June 2018 the average floating rate for the consolidated entity was 0.12% (2017: 0.05%). Details of
interest rate risk and sensitivity can be found in Note 22. At 30 June 2018 all bank deposits are at call.
NOTE 6 TRADE AND OTHER RECEIVABLES
Current
Other receivables
Director-related entities - other receivables
Advance to Ophir Production Sdn Bhd
21
Non current
Advance to Ophir Production Sdn Bhd
126,526
14,272
10,300,698
295,973
12,034
-
110,441,496
308,007
1-
10,040,613
The carrying amount of all receivables is equal to their fair value as they are short term.
Octanex Annual Report - Page | 32
OCTANEX LIMITED
ABN 61 005 632 315
Notes to the Financial Statement
30 JUNE 2018
NOTE
Consolidated
2018
$
2017
$
NOTE 6 TRADE AND OTHER RECEIVABLES (CONTINUED)
At 30 June 2018 no receivables are impaired or past due except for the impairment of the current advance to
OPSB.
The advance to OPSB represents total advances made by the company to OPSB less a share of OPSB’s losses to
date and less an impairment value. OPSB losses represent costs that are specifically not reimbursable from
PETRONAS, such as financing costs. All OPSB expenditure eligible for reimbursement from PETRONAS is
capitalised by OPSB as amounts receivable from PETRONAS.
The application of Octanex’s share of OPSB losses to the OPSB Advance is in accordance with the accounting
standards which require the company to apply its 50% share of OPSB’s losses firstly against the carrying value of
the equity investment in OPSB and then against the Advance made to OPSB
Reconciliation of Advance to OPSB
Octanex’s share of OPSB losses, after first applying such
losses against Octanex’s equity investment in OPSB
8
(7,034,962)
(4,061,168)
Advance to OPSB
Share of equity accounted loss applied
Impairment of Advance
Carrying amount of Advance
17,943,577
14,101,781
(7,034,962)
(4,061,168)
(607,917)
-
21
10,300,698
10,040,613
Repayments of shareholders advances by OPSB will be from surplus funds available following reimbursement of
capital and operating costs from PETRONAS pursuant to the Risk Service Contract and after repayment of OPSB’s
Project Financing Facilities (refer Note 8). The advance has been impaired to reflect management’s current
estimate of the carrying amount of the Advance expected to be recovered from OPSB.
ll receivables are non-interest bearing.
NOTE 7 OTHER FINANCIAL ASSETS (NON-CURRENT)
Financial Assets at fair value through other comprehensive income
Investment in director-related equities
At cost:
Shares in controlled entities
7(a)(b)
7(c)
(a) Director-related Entities:
Enegex Limited
Principal activity is oil and gas exploration (Note 21)
23,003
1
23,004
23,003
38,927
1
38,928
38,927
Octanex Annual Report - Page | 33
OCTANEX LIMITED
ABN 61 005 632 315
Notes to the Financial Statement
30 JUNE 2018
NOTE
Consolidated
2018
$
2017
$
NOTE 7 OTHER FINANCIAL ASSETS (NON-CURRENT) (CONTINUED)
(b) Reconciliation of the carrying amount of Financial
Assets at fair value through other comprehensive income
Balance at beginning of year
Net revaluation increment (decrement)
Details of market price risk and sensitivity can be found in Note 22.
(c) Shares in Controlled Entities
United Oil & Gas Pty Ltd
38,927
(15,924)
23,003
21,234
17,693
38,927
1
1
United Oil & Gas Pty Ltd, a company incorporated in Australia, is owned 50% by Octanex and 50% by a fully
owned subsidiary of Octanex, Strata Resources Pty Ltd.
The consolidated entity did not consolidate United Oil & Gas Pty Ltd on the grounds that balances were not
considered material.
NOTE 8 INVESTMENT IN A JOINT VENTURE COMPANY
The consolidated entity has a 50% (2017: 50%) interest in Ophir Production Sdn Bhd (OPSB), a joint venture
company, incorporated in Malaysia and previously involved with offshore oilfield development in Malaysia.
The consolidated entity’s interest in OPSB is accounted for using the equity method in the consolidated financial
statements. Summarised financial information in the joint venture, based on Malaysian accounting standards
(which follow IFRS), is set out in this note together with a reconciliation with the carrying amount of the
investment in the consolidated financial statements.
OPSB Summarised Statement of Financial Position
Current Assets (including cash $12,591,904 (2017: $3,475,937))
Non-Current Assets
Current liabilities
Non-Current Liabilities
Equity
30,004,845
90,572,143
(38,441,211)
(63,921,061)
18,214,716
8,775,542
68,232,939
(21,744,304)
(37,645,983)
17,618,194
OPSB Summarised Statement of Profit or Loss
Revenue
Expenses
Loss before tax
Income tax benefit
Loss after tax
Consolidated entity’s share of loss for the year
37,466,324
(43,414,253)
(5,947,929)
-
(5,947,929)
(2,973,794)
43,633,943
(48,674,672)
(5,040,729)
-
(5,040,729)
(2,520,364)
PSB has syndicated term loan facilities drawn to US$71 million which were used to fund the development of the
Ophir field. Pursuant to the terms of the loan facilities, repayments will be sourced from the PETRONAS cost
reimbursements, which are expected to commence following conclusion of RSC termination arrangements with
PETRONAS.
Octanex has provided a proportionate corporate guarantee to OPSB’s lenders for undertaking in respect of
OPSB’s term loan facilities.
Octanex Annual Report - Page | 34
OCTANEX LIMITED
ABN 61 005 632 315
Notes to the Financial Statement
30 JUNE 2018
NOTE
Consolidated
2018
$
2017
$
NOTE 8 INVESTMENT IN A JOINT VENTURE COMPANY (CONTINUED)
OPSB has no known contingent liabilities.
Reconciliation of Equity Investment in OPSB
The equity investment in OPSB is carried at nil cost at 30 June 2018 following the application of accounting
standards which require the company to apply its 50% share of OPSB’s losses firstly to the carrying value of the
equity investment in OPSB.
Octanex cumulated share of OPSB losses at end of year (50%
share of cumulative loss equity accounted as required by
accounting standards)
Cost of OPSB equity investment
Carrying amount of OPSB equity investment
Octanex’s share of OPSB losses, net of application Octanex’s
equity investment in OPSB
(8,493,882)
(5,601,972)
1,458,920
-
(7,034,962)
1,458,920
-
(4,061,168)
OPSB – Commitments
OPSB’s capital and operating expenditure commitments are as follows:
Payable not later than one year
Payable later than one year but not later than three years
9,507,709
-
9,507,709
23,639,482
27,158,035
50,797,517
On 6 June 2018 OPSB exercised its right to terminate the RSC, providing PETRONAS with 90 days written Notice
of Termination. The RSC provides that following Termination, PETRONAS shall assume responsibility for the
field, accept novation of contracts and reimburse to OPSB approved capital and operating costs met by OPSB and
not previously reimbursed.
NOTE 9 INVESTMENT IN AN ASSOCIATE
The company sold all of its interest in Peako Limited, an Australian Securities Exchange listed company involved
with natural resources exploration, in December 2017. The company’s interest in Peako was previously
accounted for using the equity method in the consolidated financial statements.
Cost of the investment
Octanex’s share of Peako’s losses (equity accounted as
required by accounting standards)
Impairment of investment
Carrying amount of the investment
There were no contingent liabilities in the associate
Exploration commitments:
Payable not later than one year
Payable later than one year but not later than three years
-
-
-
-
-
-
-
1,335,305
(861,897)
(395,061)
78,347
20,000
60,000
80,000
Octanex Annual Report - Page | 35
OCTANEX LIMITED
ABN 61 005 632 315
Notes to the Financial Statement
30 JUNE 2018
NOTE 10 EXPLORATION AND EVALUATION ASSETS
Carrying amount at beginning of year
Impairment of exploration assets
Cost incurred during the year
Carrying amount at end of year
NOTE
29
Consolidated
2018
$
2017
$
39,657,763
(23,652,138)
393,572
16,399,197
41,208,791
(1,745,165)
194,137
39,657,763
Ultimate recovery of exploration and evaluation assets is dependent upon exploration success and/or the
company maintaining appropriate funding to support continued exploration activities. Exploration and
evaluation assets relate to the areas of interest in the exploration and evaluation phase for petroleum
exploration permits and a retention lease as shown in the table below:
On 21 June 2018 Octanex
30/06/2018 30/06/2017 Notes
Exploration Permits
WA-407-P
WA-420-P
WA-387-P
-
-
-
-
WA-407-P Held by wholly-owned subsidiary, Octanex Bonaparte Pty Ltd
WA-420-P
WA-387-P Fully impaired at 30 June 2017
WA-362-P
WA-363-P
WA-323-P
WA-330-P
In January 2018 Octanex joined with Eni Australia Limited in withdrawing
from exploration permits WA-362-P and WA-363-P. Fully impaired at June
2018.
In June 2018 the Winchester Joint Venture (Santos 75% / Octanex 25%)
applied for consent to surrender WA-330-P and also decided not to lodge an
application for Retention Lease in respect of the Winchester gas discovery in
WA-323-P. The Permit, which was in year 5, was not eligible for a further
renewal and expired. Fully impaired at 30 June 2018
Retention Lease
WA-54-R
WA-54-R Held via joint operations, details of the interests held can be found in Note 19.
NOTE 11 TRADE AND OTHER PAYABLES
Financial liabilities at amortised cost
Current
Trade creditors and accruals
Director-related entities - other payables
21
998,814
290,427
1,289,241
109,081
250,203
359,284
Trade and other payables are current liabilities of which the fair value is equal to the current carrying amount.
Information about the company’s exposure to foreign exchange risk in relation to trade payables, including
sensitivities to changes in foreign exchange rates, is provided in Note 22.
Octanex Annual Report - Page | 36
OCTANEX LIMITED
ABN 61 005 632 315
Notes to the Financial Statement
30 JUNE 2018
NOTE 12 PROVISIONS
Current
Annual Leave
Directors’ retirement benefit (1)
Long service leave
NOTE
Consolidated
2018
$
2017
$
9,503
82,125
40,258
131,886
19,480
82,125
36,403
138,008
(1) On the 29th October 1997 a Deed of Appointment was signed by EG Albers. The Deed detailed terms of
continuation of his appointment as chairman of Octanex Limited. Amongst other things, it provides for a
payment of a retirement benefit to EG Albers as chairman. A deed of variation was signed 16 August 2016, and
effective 30 June 2016, that varied the terms of calculation of the Retirement Benefit under the original Deed.
The amount reflects the 25 years of service EG Albers has provided to the company.
NOTE 13 CURRENT BORROWINGS
Sabah International Petroleum Ltd subscribed to the Company for 4,000,000 US$1.00 Tranche A convertible
notes (Tranche A Notes) on 7 December 2016 and 4,000,000 US$1.00 Tranche B convertible notes (Tranche B
Notes) on 30 June 2017 pursuant to a convertible note subscription agreement approved by shareholders in
February 2015.
The notes have a maturity date of 30 June 2019, attracting 8% interest per annum, payable at maturity or
redemption. The Tranche A notes may be converted into 31,746,032 ordinary shares at any time, based on an
agreed conversion price of A$0.15 (US$0.126). The Tranche B notes may be converted into 23,809,524 ordinary
shares at any time, based on an agreed conversion price of A$0.20 (US$0.168) or redeemed at maturity for
repayment of principal plus a 12% IRR.
Repayment of the convertible notes which were issued by the Company is supported by way of a charge over the
Company’s shares in Octanex Pte Ltd pursuant to a share charge between the Company and Sabah International
Petroleum dated 4 December 2014.
Current estimates of the carrying value of Octanex’s advance to OPSB (refer Note 6) indicate that there may be
insufficient funds available to enable SIP to fully redeem the Convertible notes issued by the Company. SIP is
considering proposed amendments to the convertible note terms made by Octanex to SIP in order to maximise
and bolster the chain of forward recoupment of funds from PETRONAS to OPSB, OPSB to Octanex Pte Ltd,
Octanex Pte Ltd to Octanex and Octanex to SIP. In this regard, Datuk Kevin How, a director of SIP, has joined the
board of OPSB as a director nominated by Octanex.
Convertible notes
Carrying amount at beginning of year
Drawdown of convertible notes
Movements in exchange rates
Less embedded derivative liability
Effective Interest expense
Less interest paid / accrued
Carrying amount at end of year
10,162,204
-
423,559
-
876,573
(899,593)
10,562,743
-
10,583,788
(183,372)
(264,564)
234,360
(208,008)
10,162,204
Interest expense is calculated by applying the effective rate of interest of 8% to the host liability component.
Octanex Annual Report - Page | 37
OCTANEX LIMITED
ABN 61 005 632 315
Notes to the Financial Statement
30 JUNE 2018
NOTE 14 DERIVATIVE FINANCIAL LIABILITY
Convertible notes
At inception
Changes in fair value
Balance at end of year
Consolidated
2018
$
2017
$
264,564
(264,455)
109
264,564
122,032
386,596
The embedded derivative liability is valued using a binomial option valuation model. The following inputs were
used:
Exercise price:
Market price:
Expected volatility:
Risk free interest rate:
Tranche A
A$0.15
A$0.014
70.3%
2.05%
Tranche B
A$0.20
A$0.014
70.3%
2.05%
NOTE 15 DEFERRED TAX LIABILITIES
Consolidated
Investment revaluations
Exploration costs
Borrowing costs
Accrued expenses
Provisions
Deferred Tax Assets
Deferred Tax Liabilities
2018
$
(1,062)
-
-
(9,150)
(39,566)
2017
$
-
-
-
(8,250)
(41,402)
2018
$
-
4,919,759
34,695
-
-
2017
$
3,715
12,290,125
72,593
-
-
Carried forward tax losses
(4,904,676)
(4,954,454)
(4,649,037)
-
-
(4,698,689)
4,954,454
12,366,433
Net Deferred Tax
Liabilities (Assets)
2017
2018
$
$
(1,062)
4,919,759
34,695
(9,150)
(39,566)
3,715
12,290,12
72,593
(8,250)
(41,402)
(4,904,676)
-
(4,649,037)
7,667,744
Investment revaluations
Exploration costs
Borrowing costs
Accrued expenses
Provision
Carried forward tax losses
Opening
Balance at 1
July 2017
$
3,715
12,290,125
72,593
(8,250)
(41,402)
(4,649,037)
7,667,744
Charged /
(credited) to
Income
Statement
$
-
(7,370,366)
(37,898)
(900)
1,836
(255,639)
(7,662,967)
Charged /
(credited)
directly to
Equity
$
(4,777)
-
-
-
-
-
(4,777)
Closing
Balance at 30
June 2018
$
(1,062)
4,919,759
34,695
(9,150)
(39,566)
(4,904,676)
-
Octanex Annual Report - Page | 38
OCTANEX LIMITED
ABN 61 005 632 315
Notes to the Financial Statement
30 JUNE 2018
NOTE 15 DEFERRED TAX LIABILITIES (CONTINUED)
Opening
Balance at 1
July 2016
$
(1,593)
12,755,433
88,878
(9,000)
(39,053)
(4,272,716)
8,521,949
Charged /
(credited) to
Income
Statement
$
Charged /
(credited)
directly to
Equity
$
-
(465,308)
(16,285)
750
(2,349)
(376,321)
(859,513)
5,308
-
-
-
-
-
5,308
Closing
Balance at 30
June 2017
$
3,715
12,290,125
72,593
(8,250)
(41,402)
(4,649,037)
7,667,744
Consolidated
Investment revaluations
Exploration costs
Borrowing costs
Accrued expenses
Provision
Carried forward tax losses
NOTE 16 CONTRIBUTED EQUITY
Issued Capital
Ordinary shares fully paid (a)
Ordinary shares issued pursuant to trustee
stock scheme(b)
Balance at end of year
2018
Shares
242,823,840
29,889,107
2017
Shares
242,712,947
30,000,000
2018
$
68,867,927
-
2017
$
68,856,339
-
272,712,947
272,712,947
68,867,927
68,856,339
(a) Ordinary shares fully paid
Balance at beginning of year
Trustee shares sold
Issue costs
Share cancellation and consolidation
Balance at end of year
(b) Ordinary Shares Issued Pursuant to Trustee Stock Scheme
Balance at beginning of year
Trustee shares sold
Balance at end of year
242,712,947
110,893
-
-
242,823,840
202,465,561
-
-
40,247,386
242,712,947
68,856,339
12,071
(483)
-
68,867,927
58,894,364
-
-
9,961,975
68,856,339
30,000,000
(110,893)
29,889,107
30,000,000
-
30,000,000
-
-
-
-
-
-
In November 2015, the members of Octanex voted to extend the existing trustee stock scheme by five years to 30
November 2020.
The company has unlimited authorised capital with no par value.
Terms and Conditions of Contributed Equity
Ordinary shares confer on the holder the right to receive dividends as declared and, in the event of winding up
the company, to participate in the proceeds from the sale of all surplus assets in proportion to the number of
(irrespective of the amounts paid up on) shares held. Ordinary shares entitle their holder to one vote, either in
person or by proxy, at a meeting of the company.
Octanex Annual Report - Page | 39
OCTANEX LIMITED
ABN 61 005 632 315
Notes to the Financial Statement
30 JUNE 2018
NOTE 16 CONTRIBUTED EQUITY (CONTINUED)
Trustee Stock Scheme
Octanex is party to a Trustee Stock Scheme, pursuant to which ordinary shares ranking equally with other
ordinary shares on issue were issued to a trustee. When those shares are sold by the trustee the net proceeds
are paid to the Company by way of subscription moneys. The trustee does not exercise voting rights in respect of
shares held pursuant to the scheme.
Unlisted Options - (Share Based Payment)
Existing options are
Number
Expiry Date
6,600,000 15 October 2018
7,170,000 24 November 2019
Exercise price
$0.1534
$0.08
Vesting criteria
No
No
Unlisted Options
Balance at beginning of year
Options granted
Options expired / cancelled
Balance at end of year
NOTE 17 RESERVES
Financial assets at fair value through other comprehensive
income reserve
Option reserve
Foreign currency translation reserve
fair
value
Financial assets at
comprehensive income reserve
Balance at beginning of financial year
Changes in fair value on financial assets at fair value
through other comprehensive income
Income tax on other comprehensive income
through other
2018
Options
2017
Options
21,270,000
-
(7,500,000)
13,770,000
15,100,000
7,170,000
(1,000,000)
21,270,000
NOTE
Consolidated
2018
$
2017
$
(826,125)
(814,978)
1,037,563
1,678,893
1,890,331
1,037,563
1,042,525
1,265,110
(814,978)
(15,923)
(827,364)
17,694
4,776
(826,125)
(5,308)
(814,978)
The financial assets at fair value through other comprehensive income reserve represents the changes in fair
value on the group’s equity instruments including realised gains or losses on those investments. Further
information on the investments is set out in Notes 7 and 22.
Octanex Annual Report - Page | 40
OCTANEX LIMITED
ABN 61 005 632 315
Notes to the Financial Statement
30 JUNE 2018
NOTE 17 RESERVES (CONTINUED)
Option reserve
Balance at beginning of financial year
Share based payment expense
NOTE
Consolidated
2018
$
2017
$
1,037,563
-
1,037,563
948,016
89,547
1,037,563
The options reserve relates to share options granted to the company secretary, the directors and individuals
(Note 16).
Foreign currency translation reserve
Balance at beginning of financial year
Movement for the year
1,042,525
636,368
1,678,893
1,451,997
(409,472)
1,042,525
The foreign currency translation reserve relates to the consolidation of foreign currency denominated fully
owned subsidiary entities. At 30 June 2018 the following companies and currencies held in those companies
were consolidated: Octanex Pte Ltd – United States Dollars
NOTE 18 EXPLORATION AND EVALUATION EXPENDITURE COMMITMENTS
The consolidated entity share of minimum work requirements in exploration permit and retention lease
interests held by the consolidated entity or in joint operations is estimated at reporting date:
Payable not later than one year
Payable later than one year but not later than three years
193,750
-
193,750
196,875
7,687,500
7,884,375
The Cornea Joint Venture has applied to the regulator to vary the conditions of the WA-54-R Retention Lease to
move the production test well to the next term of the Lease (Note 1(q)).
Estimated expenditure, arising from retention lease work programme which, may, subject to negotiation and
approval, be varied. They may also be satisfied by farmout, sale, relinquishment or surrender.
NOTE 19 INTEREST IN UNINCORPORATED JOINT OPERATIONS
The consolidated entity has an interest in the assets, liabilities and output of joint operations for the exploration
and development of petroleum in Australia. The consolidated entity has taken up its share of joint operations
transactions based on its contributions to the joint operations. The consolidated entity’s interests in the joint
operations:
Joint Operation
Winchester Project (see Note 10)
Northern Deeps (see Note 10)
Cornea
2018
Interest
-
-
18.75%
2017
Interest
25%
33.33%
18.75%
Permits
WA-323-P & WA-330-P
WA-362-P & WA-363-P
WA-54-R
Octanex Annual Report - Page | 41
OCTANEX LIMITED
ABN 61 005 632 315
Notes to the Financial Statement
30 JUNE 2018
NOTE
Consolidated
2018
$
2017
$
NOTE 19 INTEREST IN UNINCORPORATED JOINT OPERATIONS (CONTINUED)
Assets and liabilities of the joint operations are included in the financial statements as follows:
CURRENT ASSETS
Cash and cash equivalents
Receivables
NON-CURRENT ASSETS
Exploration and evaluation assets
CURRENT LIABILITIES
Payables
Payables – director-related entity
6
10
4,477
492
1,730
1,410
7,241,291
30,789,438
11
11, 21
248
5,078
209
9,762
There are no contingent liabilities in any of the joint operations. Minimum work requirements in exploration
permit and retention lease interests held in joint operations is estimated at reporting date:
Payable not later than one year
Payable later than one year but not later than three years
93,750
-
93,750
46,875
7,687,500
7,734,375
NOTE 20 KEY MANAGEMENT PERSONNEL
Executive Directors Non-Executive Directors
EG Albers
RL Clark
G Guglielmo*
KK How
SK Kler**
JMD Willis
DC Coombes resigned 25 May 2018. * resigned 17 July 2018. ** resigned 18 July 2018.
Individual compensation disclosures
Information regarding individual director’s compensation is provided in the remuneration report section of the
directors’ report. There are no employees who meet the definition of key management personnel other than the
executive directors of the company. A summary of the remuneration report is shown below.
Short Term
Post Employment
Equity Settled
Total
Directors
Fees
Salary
Superannuation
Retirement
Benefits
Options
TOTAL
2018
2017
$
-
-
$
206,000
202,666
$
19,570
19,190
$
-
-
$
-
$
225,570
89,547
311,403
Octanex Annual Report - Page | 42
OCTANEX LIMITED
ABN 61 005 632 315
Notes to the Financial Statement
30 JUNE 2018
NOTE 21 RELATED PARTY DISCLOSURES
The consolidated financial statements of the Group include:
Name
United Oil & Gas Pty Ltd
Goldsborough Pty Ltd
Octanex Bonaparte Pty Ltd
Braveheart Energy Pty Ltd
Octanex Cornea Pty Ltd
Octanex Winchester Pty Ltd
Winchester Exploration Pty Ltd
Octanex Pte Ltd
Octanex Malaysia Sdn Bhd (1)
Octanex Operations Pty Ltd
Strata Resources Pty Ltd
Octanex Exmouth Pty Ltd
(1) Deregistered December 2017
Director-related Entities
2018
Interest
100%
100%
100%
100%
100%
100%
100%
100%
-
100%
100%
100%
2017
Interest
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
Country
of
Incorporation
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Singapore
Malaysia
Australia
Australia
Australia
Companies in which an Octanex director controls or significantly influences, that provide services to the group or
to a joint operation in which the group has an interest, or that also hold an interest in those joint operations or in
which the group holds an investment.
(i)Providers of Services by Related Party
During the year services and/or facilities were provided under normal commercial terms and conditions by
director-related entities as disclosed below together with amounts payable to related parties including those
under joint operation arrangements*:
Entity
Exoil Pty Ltd
Service
Related
director
EG Albers Office services and amenities
in
Melbourne
Amounts paid
2018
Payable at
2017
30/06/18
30/06/17
$
$
222,176 222,459 58,378
$
$
50,172
Natural Resources
Group Pty Ltd
Upstream
Consulting Limited
Petroleum
Advisors
Samika Pty Ltd
EG Albers Management
and
administration
46,750 122,665 231,924
199,906
services
JMD Willis Management
services
to Ophir
6,500
10,305
project
G Guglielmo Management
services
to Ophir
16,700
3,000
-
-
-
-
RL Clark
project
Management of retention lease
2,962
125
295,008 361,096 290,427
2,667
125
250,203
As a participant of the Cornea Joint Venture the group holds interests in petroleum joint operations with
director-related entities As a participant of the Cornea Joint Venture with Cornea Petroleum Pty Ltd, Cornea Oil &
Gas Pty Ltd, Coldron Pty Ltd, Octanex Cornea Pty Ltd, Moby Oil & Gas Pty Ltd, Enegex Limited, Cornea Resources
Pty Ltd and Auralandia Pty Ltd, all director-related entities of EG Albers.
Octanex Annual Report - Page | 43
OCTANEX LIMITED
ABN 61 005 632 315
Notes to the Financial Statement
30 JUNE 2018
NOTE 21 RELATED PARTY DISCLOSURES (Continued)
(ii)Providers of Services to Related Party
During the year accounting services were provided under normal commercial terms and conditions as disclosed
below:
Entity
Related director
Enegex Limited
Cornea Resources Pty Ltd
Ophir Production Sdn Bhd
Peako Limited
EG Albers
EG Albers
(Note 21 (iii))
EG Albers (Note 21 (iv))
(iii) Advance to OPSB
Sundry Revenue
2018
Receivables
2017
$
11,010
13,125
$
9,380
510
122,050 28,350
18,615 14,590
30/06/18
30/06/17
$
5,043
770
8,459
554,800 52,830 14,272
$
4,301
561
7,172
12,034
As at 30 June 2018, the company had made advances to OPSB totalling $17,943,517 (2017 $14,101,781). After
application of the company’s share of OPSB losses and an impairment value, the carrying value of the advance is
$10,300,698 (2017 $10,040,613) (Note 6).
(iv) Investments in director-related companies
At 30 June 2018, the company carried an investment in an ASX listed company Enegex Limited, (Note 7), which is
a director-related entity of EG Albers.
NOTE 22 FINANCIAL INSTRUMENTS
Categories of Financial Instruments
Financial Assets
Cash & cash equivalents
At fair value through other comprehensive income
Trade and other receivables – current ex prepayments
NOTE
2018
$
2017
$
1,331,845
5,666,779
23,004
25,145
38,928
66,023
Trade and other receivables – non current
6
10,300,698
10,040,613
11,680,692
15,812,343
Financial Liabilities
Financial Liabilities at amortised cost
Trade and other payables
Convertible Notes
At fair value through profit and loss
1,289,241
359,284
13
10,562,743
10,162,204
109
386,596
11,852,093
10,908,084
Octanex Annual Report - Page | 44
OCTANEX LIMITED
ABN 61 005 632 315
Notes to the Financial Statement
30 JUNE 2018
NOTE 22 FINANCIAL INSTRUMENT (Continued)
30 JUNE 201Recognition and derecognition
Purchases and sales of financial assets and financial liabilities are recognised on trade date which is the date on
which the consolidated entity commits to purchase or sell the financial assets or financial liabilities. Financial
assets are derecognised when the rights to receive cash flows from the financial assets have expired or have been
transferred and the group has transferred substantially all the risks and rewards of ownership. Exposure to
credit, interest rate, liquidity, foreign currency, market price and currency risks arises in the normal course of
the consolidated entity’s business. The consolidated entity’s overall risk management approach is to identify the
risks and implement safeguards which seek to minimise potential adverse effects on the financial performance of
the consolidated entity’s business.
The board of directors are responsible for monitoring and managing the financial risks of the consolidated entity.
Fair value
The fair value of financial assets and financial liabilities must be estimated for recognition and measurement or
for disclosure purposes.
AASB 13 requires disclosure of fair value measurements by level of the fair value hierarchy, as follows:
Level 1 : quoted prices (unadjusted) in active markets for identical assets or liabilities
Level 2: inputs other than quoted prices included within Level 1 that are observable for the asset or liability,
either directly (i.e. as prices) or indirectly (i.e. derived from prices)
Level 3: inputs for the asset or liability that are not based on observable market data (unobservable inputs).
The consolidated entity’s financial assets measured and recognised at fair value at 30 June 2018 and 30 June
2017 on a recurring basis are as follows:
30 June 2018
Assets
Listed securities and debentures
Liabilities
Derivative financial liability
Net fair value
30 June 2017
Assets
Listed securities and debentures
Liabilities
Derivative financial liability
Net fair value
Credit risk
Level 1
$
23,004
-
23,004
Level 1
$
38,928
-
38,928
Level 2
$
Level 3
$
Total
$
-
-
-
-
23,004
(109)
(109)
(109)
22,895
Level 2
$
Level 3
$
Total
$
-
-
-
-
38,928
(386,589)
(386,589)
(386,589)
(347,661)
Credit risk is the risk of financial loss to the company if a customer or counterparty to a financial instrument fails
to meet its contractual obligations. At the reporting date there were is no credit risk as the consolidated entity
has no trade sales or trade receivables.
Octanex Annual Report - Page | 45
OCTANEX LIMITED
ABN 61 005 632 315
Notes to the Financial Statement
30 JUNE 2018
NOTE 22 FINANCIAL INSTRUMENTS (Continued)
Interest rate risk
All financial liabilities and financial assets at floating rates expose the company to cash flow interest rate risk The
consolidated entity has no exposure to interest rate risk at reporting date, other than in relation to cash and cash
equivalents which attract an interest rate. Convertible notes are at a fixed rate of interest.
Sensitivity Analysis
At reporting date a 1% (100 basis point) increase/decrease in the interest rate would increase/decrease the
consolidated entity loss by $9,323 (2017: $39,667).
Liquidity risk
LLiquidity risk is monitored to ensure sufficient monies are available to meet contractual obligations as and
when they fall due.
The following are the contractual maturities of the financial liabilities, including interest payments. Contractual
amounts have not been discounted.
Consolidated
30 June 2018
Non-derivative Financial Liabilities
Trade and other payables
Convertible notes
30 June 2017
Non-derivative Financial Liabilities
Trade and other payables
Convertible notes
Foreign currency risk
Carrying
Amount
$
Contractual
cash flows
$
0-12
months
$
1-2 years
$
2-10
years
$
1,289,241
10,562,743
11,851,984
1,289,241
11,428,661
12,717,902
1,289,241
11,428,661
12,717,902
-
-
-
Carrying
Amount
$
Contractual
cash flows
$
0-12
months
$
1-2 years
$
2-10
years
$
359,284
10,162,204
10,521,488
359,284
11,362,204
11,721,488
359,284
800,000
1,159,284
-
10,562,204
10,562,204
-
-
-
-
-
-
The consolidated entity is exposed to foreign currency risk arising from purchases of goods and services that are
denominated in a currency other than the Australian dollar functional currency. Seismic and well drillings costs
are usually denominated in US dollars. To this extent, the consolidated entity is exposed to exchange rate
fluctuations between the Australian and US dollar. At 30 June 2018 the consolidated entity has a foreign currency
exposure by holding US dollars in bank accounts totalling US$878,656 (2017: $4,221,978) and an advance to
Ophir Production Sdn Bhd of US$13,262,098 (2017: US$10,847,090) which is offset by borrowings of
US$8,000,000 (2017: US$8,000,000). A one cent movement in the USD/AUD exchange rate would move
consolidated equity by AUD$77,638 (2017: $82,560). Loans to Ophir Production Sdn Bhd are in USD.
Octanex Annual Report - Page | 46
OCTANEX LIMITED
ABN 61 005 632 315
Notes to the Financial Statement
30 JUNE 2018
NOTE 22 FINANCIAL INSTRUMENTS (Continued)
Equity price risks
Equity price risk applies at fair value through other comprehensive income investments. The investments are
subject to movements in prices of the investment markets.
Financial Assets at fair value through other comprehensive income
Investments in listed equities
Enegex Limited
2018
$
2017
$
23,004
38,928
The consolidated entity and company investments in listed equities are listed on the Australian Securities
Exchange. A 10% increase / decrease at the reporting date in closing share price of each share held would have
increased/decreased consolidated equity by $2,300 (2017: $3,893). There would have been no effect on profit.
Capital Management
When managing capital, the directors’ objective is to ensure the entity continues as a going concern as well as to
maintain optimal returns to shareholders and benefits for other stakeholders.
It is the company’s plan that capital, as and when required, further, will be raised by any one or a combination of
the following manners: placement of shares to excluded offerees, pro-rata issue to shareholders, the exercise of
outstanding options, and/or a further issue of shares. Should these methods not be considered to be viable, or in
the best interests of shareholders, then it would be the consolidated entity’s intention to meet its exploration
obligations by either partial sale of its interests or farmout.
No company in the consolidated entity is subject to any externally imposed capital requirements.
NOTE 23 AUDITOR’S REMUNERATION
Amounts received or due and receivable by:
Grant Thornton Audit Pty Ltd - Auditor of the
consolidated entity and company
Related practices of the parent company auditor
Audit and review of the financial reports
Grant Thornton Singapore – Auditor of Octanex Pte Ltd
NOTE 24 SEGMENT INFORMATION
2018
$
2017
$
52,000
53,000
8,631
60,631
9,128
62,128
Under AASB 8 Operating Segments, segment information is presented using a 'management approach', i.e.
segment information is provided on the same basis as information used for internal reporting purposes by the
board of directors
At regular intervals the board is provided management information at a group level for the group’s cash position,
the carrying values of exploration permits and a group cash forecast for the next twelve months of operation. On
this basis, no segment information is included in these financial statements.
All interest received has been derived in Australia. All exploration and evaluation assets are held in Australia.
Octanex Annual Report - Page | 47
OCTANEX LIMITED
ABN 61 005 632 315
Notes to the Financial Statement
30 JUNE 2018
NOTE 25 EVENTS AFTER THE END OF THE REPORTING PERIOD
There are no significant after balance date events to the date of signing of this report.
NOTE 26 LOSS PER SHARE
The following reflects the income and share data used in the calculations of basic and diluted earnings per share:
Net loss
Weighted average number of shares
2018
$
2017
$
(21,501,847)
(4,800,071)
Number of
Shares
242,766,870
Number of
Shares
217,945,331
Unlisted options outstanding during the year (Refer Note 16) are not dilutive at the 30th June 2018 as the
exercise price is higher than the average share price for the year then ended.
NOTE 27 PARENT ENTITY INFORMATION
The following details information related to the parent entity, Octanex Limited at 30 June 2018. The information
presented here has been prepared using consistent accounting policies as presented in Note 1, except for the use
of the cost method for investment in subsidiary companies by the parent.
Current assets
Non-current assets
Total assets
Current liabilities
Non-current liabilities
Total liabilities
Contributed equity
Options reserve
Financial assets at fair value through other comprehensive income
reserve
Accumulated losses
Total equity
Loss for the year
Other comprehensive income for the year
Total comprehensive income for the year
No dividends were paid by the parent entity in 2018 (2017: Nil).
11,771,085
27,670,938
39,442,023
11,946,597
12,447,135
24,393,732
68,867,927
1,037,563
(639,113)
5,973,359
73,728,737
79,702,096
819,591
22,943,718
23,763,309
68,856,339
1,037,563
(639,113)
(54,218,066)
15,048,311
(13,316,002)
55,938,787
(40,902,064)
-
(40,902,064)
(1,470,571)
-
(1,470,571)
Octanex Annual Report - Page | 48
OCTANEX LIMITED
ABN 61 005 632 315
Notes to the Financial Statement
30 JUNE 2018
NOTE 27 PARENT ENTITY INFORMATION (Continued)
2018
$
2017
$
The company’s share of minimum work requirements contracted for under exploration permit interests held in
joint operation is estimated at reporting date:
Payable not later than one year
Payable later than one year but not later than three years
51,250
-
51,250
25,625
4,202,500
4,228,125
NOTE 28 CONTINGENT LIABILITIES
Corporate Guarantee
Octanex has provided a proportionate corporate guarantee to OPSB’s lenders in connection with OPSB’s term
loan facilities. The facilities are held with a syndicate of three banks (Malayan Banking Berhad (Maybank), RHB
Bank (L) Ltd and United Overseas Bank Limited Offer) (Note 8).
NOTE 29 IMPAIRMENT OF EXPLORATION AND EVALUATION ASSET
n January 2018 Octanex joined with Eni Australia Limited in withdrawing from exploration permits WA-362-P
and WA-363-P, resulting in an impairment of $9,264,930.
In June 2018 the Winchester Joint Venture (Santos 75% / Octanex 25%) applied for consent to surrender WA-
330-P and also decided not to lodge an application for Retention Lease in respect of the Winchester gas
discovery in WA-323-P (which was in year 5 and not eligible for a further renewal and has now expired),
resulting in an impairment of $14,387,208.
Octanex Annual Report - Page | 49
OCTANEX LIMITED
ABN 61 005 632 315
Additional Information (unaudited)
As at 26 September 2018 Octanex holds the following interests in Petroleum Tenements:
Octanex Licences
Permit
Ophir SFRSC Malay
Location
Basin. Offshore
Octanex interest %
50% (via Octanex Pte Ltd)
WA-54-R
WA-420-P
WA-407-P
Peninsular Malaysia
Browse Basin, Offshore
Western Australia
Bonaparte Basin, Offshore
Western Australia
Bonaparte Basin, Offshore
Western Australia
18.75% comprised of:
10.25% Octanex Limited
8.50%Octanex Cornea Pty Ltd
100% via Octanex Bonaparte Pty Ltd Octanex
100% via Octanex Bonaparte Pty Ltd Octanex
Bonaparte Pty Ltd
Bonaparte Pty Ltd
Operator
Ophir Production
Sdn Bhd
Cornea Resources
Pty Ltd
Shareholder Information (compiled as at 26 September 2018)
Ordinary share capital
As at 26 September 2018 the company had on issue the following shares:
Fully Paid Ordinary Shares
272,712,947 held by 1,396 holders
All issued fully paid ordinary shares
carry one vote per share
Trustee Shares
29,889,107 held by Doravale Enterprises Pty Ltd (the
Trustee)1
Other than in extremely limited circumstances, the Trustee
has bound itself by the deed of covenant entered into in
association with the Scheme not to vote at the meetings of
members of Octanex.
Options
As at 26 September 2018 the company had on issue 13,770,000 options held by 16 option holders. Options do
not carry any voting right or rights to dividends.
Distribution of holders
Holding Ranges
1 - 1,000
1,001 - 5,000
5,001 - 10,000
10,001 - 100,000
Over 100,000
Totals
* Based on the price per security, number of holders with an unmarketable holding: 1,116
Holders
Total Units
% Issued
Share Capital
172
629
135
349
111
1,396
54,476
1,598,324
1,071,962
12,563,786
257,424,399
272,712,947
0.02%
0.59%
0.39%
4.61%
94.39%
100.00%
1 These ordinary shares were issued to the Trustee on trust for sale in accordance with a scheme of arrangement
approved by the Supreme Court of Victoria on 17 November 2010 in Matter SCI 210 04962 (the Scheme). As
previously advised to the ASX and to members, those shares are ordinary shares held on trust for sale by the trustee on
the basis that the net proceeds of sale will present the subsection moneys thereof. The shares may be sold as fully paid
up or as partly paid up. Until sold, by the terms of the Scheme, the Trustee will not participate in dividends or
distributions are to the account of the members of Octanex pro rata their respective shareholdings.
Octanex Annual Report - Page | 50
OCTANEX LIMITED
ABN 61 005 632 315
Substantial shareholders
Substantial shareholders as disclosed in substantial shareholding notices given to the Company are as follows:
Shareholder
Interest in voting
rights
%
of Voting Rights
The Albers Group
Sabah International Petroleum
152,260,730
40,332,663
55.83
14.79
Twenty largest shareholders as at 26th September 2018*
Holder
Number of shares
Sabah International Petroleum Ltd
Gascorp Australia Pty Ltd
Mr Ernest Geoffrey Albers & Mrs Pamela Joy Albers
Mr Ernest Geoffrey Albers
Sacrosanct Pty Ltd
Great Missenden Holdings Pty Ltd
National Gas Australia Pty Ltd
Great Australia Corporation Pty Ltd
Bass Strait Group Pty Ltd
Cue Petroleum Pty Ltd
The Albers Companies Incorporated Pty Ltd
Australis Finance Pty Ltd
Fugro Exploration Pty Ltd
Mrs Pamela Joy Albers
Miller Anderson Pty Ltd
Bond Street Custodians Limited
Great Missenden Group Pty Ltd
Albers Family Custodian Pty Ltd
Seaquest Petroleum Pty Ltd
Wilstermere Corporation Pty Ltd
Total Top 20
* Excluding 29,889,107 Trustee Shares held by Doravale Enterprise Pty Ltd
40,332,663
35,200,014
25,868,034
14,436,081
14,172,354
12,946,004
7,200,000
6,291,000
6,059,049
5,763,357
3,780,491
3,773,188
3,691,721
3,062,500
3,000,000
2,819,512
2,765,060
2,542,875
2,248,000
2,106,500
198,058,403
% of Fully
Paid Shares
14.79%
12.91%
9.49%
5.29%
5.20%
4.75%
2.64%
2.31%
2.22%
2.11%
1.39%
1.38%
1.35%
1.12%
1.10%
1.03%
1.01%
0.93%
0.82%
0.77%
72.63%
Octanex Annual Report - Page | 51